The Wallace Street Journal
Wallace, Idaho – A well-educated friend approached us the other day. A friend of his had decided to give up cigarettes and put the $250 a month he was saving in to silver, but hadn't a clue how to do it?
At first blush such a question uttered here in North America's greatest silver-mining district might be as silly as someone from Detroit asking what a car is. But perhaps not. Silver-mining isn't taught in our local schools anymore, and probably not a single schoolteacher within 600 miles who could tell you the difference between the Fabian Society and Austrian School thinking on monetary policy.
(CliffsNotes hint: The Fabians are non-Marxist socialists who've been gradually nudging western economies off the gold standard with the goal of empowering, by printing paper money at will, governments to delve ever deeper into our personal lives to impose their vision of happiness and equality upon all of us; the Austrians think gold-backed money is necessary to impose discipline upon those same governments by making it harder for them to conduct wars and meddle in our lives.)
But we digress. By deciding to accumulate a precious metal like silver, our friend's friend has already made his initial escape from the Fabians' mental slavery. But how, exactly? And should one wager that silver and gold are going to increase in value and thus leverage his or her investment?
Firstly, silver and gold are going nowhere up or down in value: their values are absolutes. The variable here is the paper currency in which they're priced. Don't think of silver going “up” in value. What's really happening is that the ability of the U.S. Dollar as configured by the consortium Federal Reserve banks is, over time, steadily diminishing in its ability to purchase a set quantity of silver (or gold). The dollar's shrinking value relative to precious metals or even a loaf of bread will go parabolic, probably before this decade's end, when demand for “petro-dollars” evaporates.
There are very few ways to safely leverage one's silver investment. The junior gold-silver exploration companies boomed in the last decade but all the capital has been sucked out of that market, no matter how lush the moose pasture. Investors want mature producers now.
Another way to leverage silver is to buy shares of an exchange-traded silver fund (ETF) such as offered by Barclay's. These track the price of silver quite accurately and so long as you don't mind the fact that you're not buying silver, just a paper bet on silver, have at it. Their chief advantage is that you don't have the hassle of owning physical silver. That's also their chief disadvantage. Silver ETF shares are NOT exchangeable for actual metal, nor are they backed by same, widespread belief to the contrary. Read the fine print: you're at the mercy of that particular fund's solvency and integrity, and it's most likely run by one of the same banks that brought us the Big Meltdown of 2008. Caveat emptor.
The best advice? Buy the physical metal and find a safe place to keep it. Safe places do not include “safe deposit” boxes at one of Jamie Dimon's or Lloyd Blankfein's banks, which can be looted from within by crooked banksters (forgive the redundancy) or from without by any number of alphabet-soup government agencies.
It's not difficult to stash a quarter-million dollars worth of silver. Consider a lowly carboard box measuring one-foot-by-one-foot-by-one-foot. A single cubic foot, about half the size of a box of spuds, holds nearly 10,000 ounces – or just under $200,000 worth – of .999-fine silver. We've also heard of folks who use thousand-ounce silver bars, spray-painted black, for doorstops over which some low-life would trip on his way to snatch your $300 flat-screen.
Next, figure out what you're going to do with that silver when your paper dollars are worthless. You'll need gas and groceries more than a yacht, so think small. You're not likely to get change back from a 1,000-ounce silver bar at the gas station. There are two ways to go small: bullion .999-fine one-ounce silver rounds issued by the U.S. and Royal Canadian Mints – respectively, American Eagles or Canadian Maple Leafs. (The former has a “face value” of one dollar; the latter, five dollars). These can be acquired for about $2.20 to $3.50 per ounce over the “spot” price at places like Apmex in Omaha.
Avoid buying from any outfit hawking gold and silver on television. Reputable sellers don't need to advertise. The TV hucksters will have attractive come-right-in pricing schemes but then try to up-sell you into rare coins and collectibles. Unless numismatics has been a life-long study, you're likelier to beat the old Turf Club regulars at three-handed crib than you are to come out ahead trading rare coins.
The mark-up on Eagles and Maple Leafs is steep, but you'll get at least spot price should you convert them back to paper. Generic silver rounds and industrial silver shot can be acquired at less of a premium, but unless they are approved for federally designated investment retirement accounts (IRAs) they're harder to unload. It's the old “pay me now or pay me later” syndrome. Might as well take the hit up front and be done with it.
The absolute cheapest and, many say, the best way to acquire small batches of silver is just to buy “junk bags” 1964 and earlier U.S. silver coins in dime, quarter and half-dollar denominations. Prior to 1965 those coins were 90 percent silver and a dollar's worth weighed just under a troy ounce. Ergo, each dollar's face value of pre-1965 coins yields 0.715 of pure silver. You can buy bags of those coins for less than $2 over spot. And, like Maple Leafs and American Eagles, they're legal tender. You can buy $1 face value of pre-1965 U.S. silver coins for a mere $16. (Need any more be said about the U.S. Dollar's diminishing value?)
There endeth the lecture, except to wish our new ex-smoker good luck and admonish him or her not to neglect the other three precious metals: lead, brass, and Winchester blue.
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