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Staunch Austro-Libertarian ( No I'm not Austrian), which has great influence over my investing style. Some other names for this are Anarcho-Capitalist. Morgan Stanley Bachelor's degree in Finance Post-Graduate Degree in Accounting Attending Bond University in Australia for my Master's in Finance
My blog:
The Coming Currency Crisis
  • Silver Unmasked:  7 comments
    Oct 27, 2009 08:05 PM | about stocks: SLW, CDE, SSRI, HL
     Most individuals have no clue about the dynamics of silver, thinking there is an infinite supply of it both above and below ground. But those Savvy investors who incorporate commodity based stocks in their portfolio's likely own the silver etf (SLV) or silver miners with a high degree of leverage to the price of silver. The largest of this group include Silver Wheaton (SLW) , Pan American Silver (PAAS) , Coeur d'Alene Mines (CDE), Silver Standard Resources (SSRI) , Hecla Mining (HL). There are also numerous junior and exploration companies that will provide extraordinary returns over the long term. 

    Silver is often thought to be a metal for and little else. It is often assumed that silver is rather cheap due to the lack of scarcity. But both of these assumptions don't reflect the true underlying dynamics. 

    It is true that silver was mainly used for industrial purposes as well as jewelry, but that fact doesn't hold true today as silver is being used in numerous electronic devices, water filters, piping, batteries, solar panels and more, as this metal has been proven to be extremely versatile. It is highly unlikely it will stop with these as more technological uses for silver are discovered. Many of Silver's newly discovered uses are in the preliminary stages of eventually becoming "the gold standard" in such things as the longer lasting and recyclable silver-oxide batteries that are slowly gaining traction in the industry. This should make a huge splash in the battery industry.    Duracell has already developed basic everyday batteries while companies such as Intel capital have developed first generation silver-oxide laptop batteries. They obviously recognized the shortcoming of the lithium-ion batteries, as the silver-oxide batteries have a 40% longer battery life, hold there charge ( opposed to lithium-ion batteries which begin to lose there charge after just a few months of use. This will likely be wholeheartedly embraced by big businesses, causing computer manufacturers to replace lithium-ions with silver oxide. Silver is also used as a pipe cleaner has is prevents the bacteria that form legionnaires disease from forming. This is and will be increasingly used in water purification systems and pools due to the superior safety profile and the lack of harsh reactions to the skin (as chlorine and bromine have).

    Silver lenses have also gained popularity for uses in lenses as that is still in its preliminary phase. It is superior in fighting harmful rays and conducts light in such a way that people don't need to take off their glasses when going into a house. We have the continuously expanding use of silver in semi conductors and alternative energy units such as solar panels. Then of course there are the uses in photography, coinage, etc. This alone warrants a much higher silver price, especially when the supply-demand dynamics are taken into account.

    Of all the studies I've read, from the conservative to the extreme, they all had one thing in common: Silver is much more scarce than everyone thinks. A finding from the world gold council two years ago concluded that silver would definitely be the first element on the periodic table to become extinct. They also said this would happen in the year 2020. This is not as crazy as it sounds as it refers to the above ground silver and that which can be mined relatively close to the earth's service. It has been proven a significant quantity of silver lies deeper in the earth's crust, but due to the uncertainty of this amount, this study only counted above ground and easily accessible of silver to be mined. 

    After reading over half a dozen studies from such groups as that mentioned previously, another conclusion was universally reached. It is that the silver above ground and which can be mined easily is unsustainable, making it necessary to change the way modern mining operates. Mines that require the producer to dig far below the earths crust will be commonplace in the industry. This holds vast implications to the market prices in the future. It is intuitive that the capital requirements will be many times larger, only making it feasible to engage in these operations with a much higher market price for silver. These estimates range from $30/oz on the conservative side and up to $60/oz for the more aggressive estimates. 

    Aside from the world inflation that is occurring ( as the largest central banks in the world  are very active in the race to debase). I don't want to make any forecasts about the future price, but I can say will a reasonable amount of certainty silver will surpass it record high of $50 oz sometime in the coming decade. I can also say the current market price (around $16.75/oz) does not reflect the intrinsic value of this metal. My conservative estimate would be a long term silver price between $25/oz-$30/oz. On one last note, I would weight silver and silver miners more heavily than gold and gold miners in my portfolio as silver has many more catalysts driving the price aside from being an inflationary hedge. Gold has nearly no industrial uses and much of it can  and has been recycled, at least in relation to silver which is more often thrown out. 

    Silver mining is a great unexploited industry ( due to the current lack of institutional money and common misunderstanding of this industry by retails investors), that I think will provide incredible returns. Of course this requires patience, but the supply-demand disconnect coupled with an impending wave of inflation, should slingshot this metal to record highs. Silver lacks portability, but silver miners are liquid, leveraged to the price of silver and will likely become income producing assets ( Silver Wheaton must start paying a dividend when they can't reinvest cash flows on an economic level ).

    Disclosure: Long SLW, CDE, SSRI CALLS
    Themes: silver, miners, inflation, mining, long idea Stocks: SLW, CDE, SSRI, HL
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This post has 7 comments:

  •  
    Silver seems a no brainer but it just has not taken off yet. It wont take much money to get involved in silver since it is a very small market, to send it through the roof. I am patiently waiting for that day.

    Could be that we will need lead ammo however before silver ever really shines.

    I worry Barry Macquire might be right.

    "We're on the eve of destruction."
    Oct 27 09:55 PM | Link | Reply
  •  
    I think like all previous hyperinflation's in the past, will be characterized by a 2-5 year period ( if this happens at all). The exponential rise in prices, however, does not occur until right before hyperinflation, so you should see it coming if it comes to guns and ammo. But there is a first for everything and the current condition of our capital markets which his built on a house of cards, has already collapsed. So perhaps a collapse of the USD could occur over weeks or months. Nonetheless, it is one of the best things you can buy, given the circumstance. I actually think ammo is the best performing asset class this year. haha
    Oct 27 10:12 PM | Link | Reply
  •  
    I'm a big, big believer in the future of silver as well. The only unknown in my view is whether or not we're going to see a period of deflation first. We know what's comin' after that, but will we see deflation first? I've got a hunch we're going to be a lot more informed, and possibly a lot more shocked after the G-20 meetings next week.

    Here's a chart I put together for my fellow gold and silver fans to take a look at. It's in a "performance" style, which means at the beginning of the chart at the far left, both metals start with 0% change, and we start measuring percentage changes in each, from that point forward. I hope you find it helpful, or at least interesting:

    stockcharts.com/h-sc/u...
    Oct 27 10:35 PM | Link | Reply
  •  
    I'm not a big technical person, but I enjoy hearing peoples forecast based on the charts. It will be interesting to track the prices over the next decade as I expect a crazy looking charts with several parabolic moves.

    As for deflation, I think the world (especially banks loaded up with 925 billion in reserves) will prevent another financial crisis, at least to the naked eye. These reserves are likely in the system to prevent another systemic crisis. I do, however, expect another drop in the DOW and S&P to the tune of 20% or so, which may cause people to flee dollars (like in 2008) , taking money out of commodities. But it is worth noting, Australia, China and Europe are in much better shape then the deflationary episode of 2008, so it should put a floor under these prices. But anything is possible, but the long term story is very much intact, and gaining steam with every additional dollar created.

    Silver here: I'm buy more when it goes up and I buy more when it goes down.
    Oct 27 11:03 PM | Link | Reply
  •  
    On Oct 27 11:03 PM Hyperinflation wrote:

    > Silver here: I'm buy more when it goes up and I buy more when it goes down.<

    Listen to what Peter Schiff had to say only yesterday. I'll bet you'll want to buy more silver tomorrow, than a year from now:
    www.bearishnews.com/po...
    Oct 28 12:23 AM | Link | Reply
  •  
    Yeh I was Kind of joking about that. I had finished my physical silver buying when it first reached 16/oz early this year. Started when it was at $5/oz a while back, so I stick to silver equities and futures now. I bought quite a few long term silver contracts when it was in backwardation, so as silver goes up I actually can buy more due to the leverage.. I'm at the point where it is difficult to store this quantity and have had to resort to bullion storage in Australia.

    But I totally agree with that. Silver under $20/oz is an incredible bargain.


    On Oct 28 12:23 AM Albertarocks wrote:

    > On Oct 27 11:03 PM Hyperinflation wrote:
    Oct 28 12:44 AM | Link | Reply
  •  
    On Oct 28 12:44 AM Hyperinflation wrote:

    > Yeh I was Kind of joking about that. I had finished my physical silver
    > buying when it first reached 16/oz early this year. Started when
    > it was at $5/oz a while back, so I stick to silver equities and futures
    > now. I bought quite a few long term silver contracts when it was
    > in backwardation, so as silver goes up I actually can buy more due
    > to the leverage.. I'm at the point where it is difficult to store
    > this quantity and have had to resort to bullion storage in Australia.
    >
    >
    > But I totally agree with that. Silver under $20/oz is an incredible
    > bargain.<

    I think the smartest thing for you to do would to be to ship to my house.
    Oct 28 01:11 AM | Link | Reply
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