Early this week, I told readers of my Extreme Value advisory a solution to a big problem investors are facing right now…
My solution will sound crazy to you… But if you hear me out, you could save yourself a fortune in the coming years.
The problem is how to protect your investment capital from yourself. And the solution to the problem is silver bullion.
[ad#Google Adsense 336×280-IA]I’ve been telling investors to hold a large amount of cash since April. Since then, the S&P 500 is down about 16%. I continue to recommend you hold plenty of cash. While some stocks I follow are cheap enough to buy, we’re not seeing lots of stock bargains pop up… And holding plenty of cash is the easiest way to reduce risk in an equity portfolio.
What most folks who say “hold cash” don’t acknowledge is that simply hanging on to a large sum of cash is the single most difficult thing to do with money.
Whenever you have large sums of cash on hand, you’re vulnerable to spending it. Even the world’s best investor, Warren Buffett, will tell you he’s most likely to make a big mistake whenever he’s had large sums of cash on hand.
Truth is, we don’t actually want large amounts of money. We want the things money can buy. We want nice homes, cars, clothes, medical care, and good food. So you have to make a conscious effort to oppose the natural tendency to spend your cash… and thus, rid yourself of investment capital.
One way to avoid this problem right now is to put a chunk of your cash into silver bullion. Buying silver gives you something to buy, which might help quench your need to do something. It also takes more work to sell your silver. You’re less prone to spend or waste your wealth on a whim by owing silver, instead of paper dollars. Even better, it’s a good time to buy silver…
Over time, the ratio of silver to gold prices has averaged around 16-to-1. If that ratio held today, with gold at $1,860 per ounce, silver would be $116 an ounce, instead of just $42. The ratio is around 43-to-1 right now.
Gold has soared recently, and is clearly the fear trade of choice. People are waking up to its role as a monetary asset… And they’ve pushed up the dollar price of gold by 18% in just two months. Everyone wants gold.
Silver remains unrecognized as a monetary asset. That’s a mistake. Silver has always been a monetary asset, just like gold. So silver is a better bet by comparison. I’ve seen reports that precious metals guru and billionaire Eric Sprott is selling gold and buying silver. I wouldn’t sell my gold (ever!). But I’m not adding to it these days, either.
I’m buying silver, in the form of one-ounce silver rounds. (They’re called rounds because the government has hijacked the word “coins.”) But my silver rounds are every bit as pure and valuable as the government’s “coins.” I noticed the premiums are high (7%). But since I’m not planning to sell (ever!), I don’t mind paying a premium.
I also recommend buying so-called “junk” silver. There’s not really anything junky about it. It consists of coins with varying silver contents, like U.S. silver dimes, for example (which my coin guy tells me are worth about $3 each today). Next time I head to the coin shop, I’ll buy some junk silver. If the excrement really hits the fan and you need to use an alternative to U.S. dollars just to buy a loaf of bread, junk silver will help with small denominations.
You should be able to buy both rounds and junk silver from your local coin dealer. Just ask for the coin with the lowest premium. I walk in, buy my coins, and take them home. I avoid paying for shipping. And I like the immediacy of getting the coins in my hands instantly.
As long as stocks aren’t great values… as long as there’s such a thing as government-issued fiat currency… as long as the financial system is just one big pile of debt… and as long as you need to protect your purchasing power, keeping a big portion of your wealth in silver is one of the world’s greatest ideas.
Most financial advisors will tell you this advice is crazy. But remember… those are the same guys that told you to buy stocks in 2000. They are the same guys who have been dead wrong about gold and silver for a decade… And they’ll continue to stay that way.
Good investing,
— Dan Ferris
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Source: Daily Wealth