Thanks for the reply. I believe it is only mentioned once. If you need a wheelbarrow when gold is at over $1,600 per oz congratulations on your financial success, but how many wheelbarrows would you need to haul around that debt based money we call federal reserve notes?
That's an interesting theory, which I've heard before, but I have a couple questions I would like to pose to you.
Assuming silver was at say $5,000 same as gold. 1) What would be the industrial demand for silver at $5,000 per oz? 2) Would silver still be the money of the masses at $5,000? 3) Would silver be at fair value relative to gold when silver is at least 15x more common below ground than gold? 4) Would it make any sense to have a bi-metal monetary system when both metals trade at the same price, with gold having more above ground investable ounces? 5) Would governments support this new monetary system, when silver is extremely concentrated in several countries, while gold is found everywhere? 6) Silver was set as a 16:1 ratio with gold because it was part of the official monetary system, but it no long is part, and the system is moving away from silver and to gold.
Most Important: Many people will buy silver as a way to protect themselves from currency turmoil, which will driver the ratio down, but once there is a stable monetary system in place, which points to gold, all those people will have no need for silver anymore since they have a stable monetary system. At that point a huge portion of the monetary premium silver once held will be removed from its price. I am of course referring to silver at a much higher price than it currently trades at. It is not currently valued as money in a major capacity.
A couple points of contention. 1) Many monetary systems have failed in one form or another. Do you remember the saying "sound as the pound?" 2) All official reports I have seen by the world gold council and several others say 2 billion ounces of investable gold vs. 1 billion investable ounces of silver, not 7:1.
Well it opened at $44.05 and is currently at $31.50 in just one week. Unfortunately earnings really do matter, and its not the retail investors who ultimately determine the price, but the institutional buyers of size. Yahoo, AOL, NFLX, KKD, CROX, GMCR it always ends the same, and unfortunately too often it is the retail investor who is left holding the bag. You can be the sheep, or grab a pair of shears. Personally I'd rather be the farmer. Best of luck on your investment.
Lots of people have given up on silver with the price action. If you have some good analysis I'd love to hear it. I'm always looking for different views. Small suggestion though....you might want to change that profile pic if that is how you feel, considering it has Scrooge McDuck sitting on a pile of gold.
I agree silver will outperform under the current system. No one can predict the timing, which is not what I'm trying to do. I do believe there is a lot less certainty than you think when you look at how the global chessboard is being positioned. Silver is a very special metal with great demand dynamics, but the demand for money is everyone. If and when this happens it will probably be very fast, and leave investors with little to no time to act. My point is that even the biggest silver bulls cannot afford to ignore what is going on with gold.
Silver Wheaton: Valuing The Silver Giant (Part 1) [View article]
Thanks for the comment. I agree future silver acquisition costs will increase significantly, which is why In Part II I am including multiple valuations, that will include a DCF assuming no future production is acquired, and the current contracts are allowed to run off, as well as a 5 yr forecast with a stable growth calculation. This will allow readers to get a real perspective on what the company's current contracts are worth, and what future deals could bring to the table.
Silver Wheaton: Future Prospects Are Dimming, But Not Dark [View article]
I understand most people are unable to accept anything but a glowing article with zero mention of any possible negatives when it comes to a stock they've fallen head over heels for. Like being in love where your partner couldn't possibly do any wrong. Any comment board about a passionate stock that isn't just a cheerleader piece will have some people acting like the sky is falling. Half of the comments here are from shareholders who though it was an excellent piece, and a few upset people who just wanted to see another puff piece. It is pretty clear you haven't read any of my articles about the miners being extremely undervalued, or silver forming a major bottom. Instead it is much easier to just write someone off to being a pessimist. I guess no acquisitions in 28 months is not even slightly dimming for their external growth prospects, even if it is still a great company that offers solid value (I know it is pessimistic to be a bit less bullish than I was 6 months ago about external acquisitions). That 5mm ounce hypothetical acquisition may very well happen, but to put things in perspective it would only be just over 10% growth coming from external acquisition in 3 years, and at what price. Silver Wheaton is making money hand over first with silver under 30, and they will be making a lot more when silver goes to 50, and then beyond, but that wasn't the topic of the article. Don't forget that 52mm ounces of production in 2013, because that is both of your estimates now. You should know though that they did 25,374 ounces in 2011 and 6,716 ounces in Q1 2012.
If you are a saver (as 95% of people are), as opposed to an investor, and I'm guessing quite risk adverse based on your comment. I think you should be in gold due its lower volatility. One of the major problems with the current system is that it forces saves to become investors in an attempt to preserve purchasing power. I believe ultimately this will change eventually, and with that change will come a lot less volatility in the gold market (not expecting this anytime soon). Feel free to send me an email, so we can discuss your situation, and some possible solutions in more detail if you feel like it might be helpful.
Gold Will Outperform Stocks, Bonds, And Real Estate [View article]
High real interest rates are ultimately gold and commodities negative, but if you look at the 70's gold was making new highs at the same time rates were going up due to inflation. I don't think we are going to get high enough interest rates to break the gold bull market for a couple reasons. 1) The economy would get clobbered 2) The U.S. would have a lot of problems servicing its debt 3) The Fed has proven it wants a weak dollar, and stands ready to print huge sums of money. I would guess we are more likely to see inflation start to become a real problem, and or the dollar have a crisis of confidence as the sovereign debt concerns move westward, which would be bullish for gold.
Is Your Dividend Safe? How To Analyze Dividend Paying Stocks [View article]
Here you go: OCF = Cash Flow From Operations FCF = Free Cash Flow (Operating Cash Flow - CAPEX) CAPEX = Capital Expenditures NI = Net Income Dividend Coverage = Dividend / NI Current Ratio = Current Assets / Current Liabilities Quick Ratio = (Current Assets - Inventories) / Current Liabilities D/E = Debt to Equity Interest Coverage = EBIT / Interest Expense EBIT = Earnings Before Interest and Taxes
Silver Wheaton: Valuing The Silver Giant (Part 1) [View article]
Silver Wheaton's acquisition costs consists of 2 parts: 1) Upfront payment, and 2) Approximately $4 per Oz of Ag upon delivery. I don't estimate there will be any major increases in their back end costs, as it is determined by the cost of extracting the silver byproduct from the ore, but I think it would be incorrect to assume upfront costs won't go up since they are based on the long-term expected silver price discounted back to the present. The long-term expected silver price has increased significantly since their previous acquisitions, so future acquisition costs should increase, but that isn't to say future acquisitions will not provide a huge amount of value to investors.
Silver Wheaton: Valuing The Silver Giant (Part 1) [View article]
Good question, lets take a look at what the 10-K says:
"Based on information available to management at March 22, 2012, the outstanding legal and tax matters are not expected to have a material adverse effect on the company."
Here is the full disclosure: "Due to the size, complexity and nature of the Company’s operations, various legal and tax matters are outstanding from time to time, including an audit by the canada Revenue agency of the company’s international transactions covering the 2005 to 2010 taxation years. By their nature, contingencies will only be resolved when one or more future events occur or fail to occur. The assessment of contingencies inherently involves the exercise of significant judgment and estimates of the outcome of future events. Based on information available to management at March 22, 2012, the outstanding legal and tax matters are not expected to have a material adverse effect on the company. However, if the company is unable to resolve any of these matters favorably, there may be a material adverse impact on the Company’s financial performance, cash flows or results of operations. In the event that management’s estimate of the future resolution of these matters changes, the company will recognize the effects of the changes in its consolidated financial statements in the period that such changes occur."
Silver Wheaton: Future Prospects Are Dimming, But Not Dark [View article]
I agree precious metals are and will continue to be provide an alternative to dollars, euros, yen, and just about every other currency out there. Silver is forming a major bottom, and the company needs to increase their streams, as opposed to accumulating cash while prices are down. At the end of 2013 they lose three of their Barrick streams that accounted for approximately 3mm ounces of production in 2011. Even at $15 in upfront consideration they will have a nice arbitrage profit, and increase their leverage to silver even further. My concern is that if silver goes on another big run, and it could happen quickly deals will become unreasonably expensive, like they were when silver went to nearly $50 per oz in 2011. Accumulate more streams, and increase leverage to silver, even if it is expensive by historical standards, because that's what will benefit investors the most in the long term.
Barrick: Valuing The Golden Giant (Part II) [View article]
Some undergraduate programs offer a bit of valuation, but I haven't seen any that go into real detail.
Here are a few ideas to consider: 1) Financial modeling boot camps like those offered by Wall Street Prep. Starting ibankers are often sent to these to learn how to value and model a company. 2) A lot of people have been entering the CFA program. It is rigorous, but will give you an excellent foundation. 3) Advanced courses and books on security analysis. If you haven't read Graham's Security Analysis or The Intelligent Investor I would start there. Read them both slowly cover to cover, then reread them. 4) Read..Read more..Then read some more. A library card is free and most of the good books are available. 5) Start reading through 10-Ks, then try to value the company. 6) There are numerous online sites dedicated to fundamental valuation that can be found with a simple Google search. Aswath Damodaran has some great free info on his NYU website for example.
Silver Vs. Gold: Let's Settle This [View article]
Silver Vs. Gold: Let's Settle This [View article]
Assuming silver was at say $5,000 same as gold.
1) What would be the industrial demand for silver at $5,000 per oz?
2) Would silver still be the money of the masses at $5,000?
3) Would silver be at fair value relative to gold when silver is at least 15x more common below ground than gold?
4) Would it make any sense to have a bi-metal monetary system when both metals trade at the same price, with gold having more above ground investable ounces?
5) Would governments support this new monetary system, when silver is extremely concentrated in several countries, while gold is found everywhere?
6) Silver was set as a 16:1 ratio with gold because it was part of the official monetary system, but it no long is part, and the system is moving away from silver and to gold.
Most Important: Many people will buy silver as a way to protect themselves from currency turmoil, which will driver the ratio down, but once there is a stable monetary system in place, which points to gold, all those people will have no need for silver anymore since they have a stable monetary system. At that point a huge portion of the monetary premium silver once held will be removed from its price. I am of course referring to silver at a much higher price than it currently trades at. It is not currently valued as money in a major capacity.
A couple points of contention.
1) Many monetary systems have failed in one form or another. Do you remember the saying "sound as the pound?"
2) All official reports I have seen by the world gold council and several others say 2 billion ounces of investable gold vs. 1 billion investable ounces of silver, not 7:1.
Facebook Shares: Click Dislike [View article]
Silver Vs. Gold: Let's Settle This [View article]
Silver Vs. Gold: Let's Settle This [View article]
Silver Vs. Gold: Let's Settle This [View article]
Silver Wheaton: Valuing The Silver Giant (Part 1) [View article]
Silver Wheaton: Future Prospects Are Dimming, But Not Dark [View article]
Silver Is Finally Ready To Bottom [View article]
If you are a saver (as 95% of people are), as opposed to an investor, and I'm guessing quite risk adverse based on your comment. I think you should be in gold due its lower volatility. One of the major problems with the current system is that it forces saves to become investors in an attempt to preserve purchasing power. I believe ultimately this will change eventually, and with that change will come a lot less volatility in the gold market (not expecting this anytime soon). Feel free to send me an email, so we can discuss your situation, and some possible solutions in more detail if you feel like it might be helpful.
Gold Will Outperform Stocks, Bonds, And Real Estate [View article]
Is Your Dividend Safe? How To Analyze Dividend Paying Stocks [View article]
OCF = Cash Flow From Operations
FCF = Free Cash Flow (Operating Cash Flow - CAPEX)
CAPEX = Capital Expenditures
NI = Net Income
Dividend Coverage = Dividend / NI
Current Ratio = Current Assets / Current Liabilities
Quick Ratio = (Current Assets - Inventories) / Current Liabilities
D/E = Debt to Equity
Interest Coverage = EBIT / Interest Expense
EBIT = Earnings Before Interest and Taxes
Silver Wheaton: Valuing The Silver Giant (Part 1) [View article]
Silver Wheaton: Valuing The Silver Giant (Part 1) [View article]
"Based on information available to management at
March 22, 2012, the outstanding legal and tax matters are not expected to have a material adverse effect on the
company."
Here is the full disclosure:
"Due to the size, complexity and nature of the Company’s operations, various legal and tax matters are outstanding
from time to time, including an audit by the canada Revenue agency of the company’s international transactions
covering the 2005 to 2010 taxation years. By their nature, contingencies will only be resolved when one or more
future events occur or fail to occur. The assessment of contingencies inherently involves the exercise of significant
judgment and estimates of the outcome of future events. Based on information available to management at
March 22, 2012, the outstanding legal and tax matters are not expected to have a material adverse effect on the
company. However, if the company is unable to resolve any of these matters favorably, there may be a material
adverse impact on the Company’s financial performance, cash flows or results of operations. In the event that
management’s estimate of the future resolution of these matters changes, the company will recognize the effects
of the changes in its consolidated financial statements in the period that such changes occur."
Silver Wheaton: Future Prospects Are Dimming, But Not Dark [View article]
Barrick: Valuing The Golden Giant (Part II) [View article]
Here are a few ideas to consider:
1) Financial modeling boot camps like those offered by Wall Street Prep. Starting ibankers are often sent to these to learn how to value and model a company.
2) A lot of people have been entering the CFA program. It is rigorous, but will give you an excellent foundation.
3) Advanced courses and books on security analysis. If you haven't read Graham's Security Analysis or The Intelligent Investor I would start there. Read them both slowly cover to cover, then reread them.
4) Read..Read more..Then read some more. A library card is free and most of the good books are available.
5) Start reading through 10-Ks, then try to value the company.
6) There are numerous online sites dedicated to fundamental valuation that can be found with a simple Google search. Aswath Damodaran has some great free info on his NYU website for example.