Silver Threads
By Gordon Philips, Director of Trading and Research
Institute of Higher Earning
Today we offer a plan to help make you and your children potentially
financially self-sufficient on $1 a day. The plan is simplicity itself and
takes advantage of a natural phenomenon in the market that is as sure to
happen as the rising of tomorrow's sun. We speak of the current and future
rise of the metal silver.
China will shortly reach $1 trillion in holdings of U.S. paper debt. The
U.S. federal deficit is out of control, the perpetual War Against Terror is
costing Uncle Sam an additional $1 billion a day and an attack on Iran
appears almost inevitable.
As worldwide anxiety over potential financial instabilities continues to
rise, savvy investors continue to move their money from equities into
commodities.
The central banks of both China and Russia have recently announced their
intentions to increase their reserve holdings of gold. If they do, all of
the gold mined and refined over the past several years will be removed from
available above ground supplies
All of the above and much more virtually guarantee a further decline in the
dollar and a continuing surge in commodities, in particular precious metals
(gold, silver, platinum, palladium, rhodium) which many leading analysts
expect to rise for at least four more years, perhaps as long as another
decade or more.
With all the emphasis on gold these days, why buy silver? There are many
reasons:
1. Silver is more volatile than gold and tends to rise faster when the
precious metals are rising as a class.
2. Silver is less expensive than gold and can be accumulated more quickly,
and in smaller units of coinage.
3. Silver has historically traded at a ratio of roughly 1:16 to gold and is
currently far diverged from that ratio, a factor that will eventually cause
a 'snap back' to its traditional balance, causing silver to rise more
quickly and proportionately higher than gold
4. Silver has never been confiscated by the U.S. government and is unlikely
ever to be. President Franklin Roosevelt confiscated gold in 1933, declaring
it illegal for citizens to own. Failure to turn in your gold could result in
stiff fines and a ten-year jail sentence.
Article 1, Section 1, Clause of the federal Constitution grants all law
making powers to the Congress, and therefore none (as in zero, nada, squat)
to the executive branch. FDR's Executive Order banning the ownership of gold
had no lawful force or effect upon citizens with the union states.
Unfortunately, America was already so dumbed down by then that most citizens
dutifully turned in their gold for the government's paper money. And there
is far less reason to doubt that most would do so again today.
5. Silver can be bought on a child's budget!
Here's the plan. Determine not to spend $1 a day for each person in your
family. Note that there is a difference between saving and not spending.
Many families strive to 'pay themselves first' by saving 5%-10% of their
gross income and putting it away in a savings retirement plan before they
can touch it.
This is an excellent idea, however what we are proposing goes a step beyond.
We are adding the stipulation that the family NOT SPEND $1 per person per
day on top of whatever savings plan already may be in place. Doing so
involves a degree of personal sacrifice that most people are not accustomed
to making.
To effect this plan, you simply commit not to spend $1 each day on things
that you don't really need: sodas, chewing gum, baubles, trinkets, Dunkin
Donuts coffee, etc. It is remarkable how much money the average family
wastes each month on trivial cash expenditures that will do nothing to move
their retirement planning forward.
Silver is currently trading at just under $12 per ounce. Daily price
fluctuations can be monitored at http://www.kitco.com. This means that each
12 days' worth formerly wasted discretionary cash expenditures is available
to purchase one new ounce of silver.
There are may ways to buy silver, including collectible numismatic and
semi-numismatic coinage from the 19th and 20th centuries, however it is not
our purpose today to provide a treatise on coin collecting. If you are not
already an avid collector thoroughly versed in rarities and grading systems,
we suggest that you consider buying ordinary bullion silver coins of the
type currently minted by various governments, including the one-ounce Silver
Eagle coin that is issued each year by the U.S. Mint.
A good likeness and description of one can be found here.
As we write, gold is currently trading at $602.70; silver is trading at
$11.65. The ratio between the two is therefore 51.7. Were silver currently
priced at its historical 1/16th the price of gold, it would be sitting at
$37.67 an ounce, or 223% higher.
During the last precious metals bull market of the late 1970's, a result of
President Richard Nixon ordering the gold window closed and removing all
financial moorings from the dollar which immediately began to fall, silver
started out trading far below its traditional ratio to gold.
Gold and silver peaked in 1980, with gold hitting an all-time high of $850
an ounce and silver reaching an all-time high of $49.45 per ounce. The ratio
between the two therefore hit approximately 17:1 before prices began to
collapse, the precise point at which the public rushed in to begin buying.
Not spending $1 a day and thereby being able to acquire one ounce of silver
every 12 days (at current prices) would increase the jingle in your pocket
by 30 coins per family member per year at current prices.
Those coins could easily be worth $100 each before the ultimate severe
economic correction that many expect is over. If gold reaches $2,000 an
ounce as many experts expect it will, silver could reach $117 for a
potential 875% return on investment.
A family of four that manages not to spend $4 a day could buy a new $12
silver coin every 3 days; a rate of 30 coins per month or 360 in one year.
In January of 1976 silver was trading at $3.70 an ounce. Had you begun this
plan in 1976 and acquired 360 ounces of silver at that price and then sold
at the top in 1980 at $49.45 you would have pocketed $17,802. which today
could buy you 1,528 ounces at current prices. If silver reaches $117 an
ounce, those 1,528 ounces could one day soon be worth $178,784.
And all on $1 a day.
Of course the best part of all this is the opportunity its presents for
private financial planning, especially when your silver has been acquired,
shall we say,
discreetly.
When you are ready to bequeath your silver to your children you invite them
to dinner (they will pick up the tab), shove the briefcase across the table
and say, 'Here you go, kids.'
We recommend not doing this until they are at least 50.
