At this point in the precious
metals cycle, many investors who discover the silver market may think they
have missed most of the move. In fact in some cases they are correct. Our
financial reports focus on “Money, Metals, and Mining,” and quite
frankly, I cannot give you the opportunities we saw and recommended in
2002-2006 . . . but the next leg up will be very worthwhile, especially in
light of the fact that the investing public trusts almost nothing in terms of
“investment” at this time.
Real estate investing is dead, stocks have rallied but for how long, the municipal
bond market looks shaky, and even the sacred U.S. Bond has been shunned to a
great extent by foreign trading partners.
The most important fact about
investing in the precious metals, actually for almost all markets, is simply
that the majority of the move comes in a very compressed timeframe. One way
to think about it is that maybe 90 percent of the entire move comes in the
last ten percent of the time. If this cycle for silver is going to last 15
years, then the majority of the move upward will come during the last year. I
call this the “blow-off” phase, or the “greed-panic”
phase. In my view, this will occur because everyone will be dumping the U.S.
dollar for something/anything, and the most sought-after class is the
Notice I did not state gold, but
precious metals. Certainly gold will be sought, but silver and silver-related
investments would be the star performer at the end of the cycle. There are
two reasons for this. First, silver is more affordable than gold. Those
investors flooding into this market during the panic phase will be looking
for the best alternative to the U.S. dollar possible, and that will be silver
because it costs less per ounce than gold. Secondly, most will do some
cursory investigation and find that silver outperforms gold during
To validate my point, think back
to the dot-com bubble. Every little company with an Internet address was
moving up, and most had very little merit. This is typical of markets-- near
the end the public rushes in and drives prices to unsustainable levels.
First it must be understood that
the universe of true silver stocks is extremely small. My definition of a
true silver stock is a company whose primary revenue stream is based on
silver. This is an unusual creature because approximately 75 percent of all
silver comes from the mining of other metals. Depending upon which study you
examine, about 25 percent of silver mined is a result of copper mining, 33
percent is a result of lead/zinc mining, and even 14 percent of silver comes
out of the ground as a result of gold mining.
The reason an investor wants a
primary silver producer is the fact that the stock price will be leveraged to
the price of silver. If an investor buys a stock that has its primary metal
as copper yet still yields quite a bit of silver, the company is more apt to
move on the price of copper not silver.
Additionally, most miners who are
base-metal miners and have a great deal of silver in the mix really do not
care about the silver price, and they sell it for "peanuts" to use
the proceeds against their primary mining activity. You may find other
information on a huge universe of silver stocks available, but take your time
to study and educate yourself. Just because a company has silver in its name,
or is exploring to find silver, that does not make it a silver company.