– AN INVESTMENT MANAGER’S PERSPECTIVE:
Firstly, congratulations on the timing of your
interest in silver, this is a good low-risk entry-point
in terms of the long term Precious Metals Bull market.
What do I
look for in an Investment for my clients?
all Investment Managers I primarily look for value (buy low sell high) and
growth potential in the investments I look at. Silver comes up smelling of
roses in this respect as the fundamentals are compelling. For example, the
Chinese are currently using 1/90th of the silver per person in
comparison to what we consume in the west.
this requirement to buy low and sell high I also require PROTECTION for my
clients. When I say ‘Protection’ I mean protection against the
asymmetric risks that lie under the surface of the geopolitical and
geo-economic background. I will briefly highlight some areas that concern me
in this respect, things which all lead me to seek monetary protection for my
Monetary and Price Inflation.
The $330 Trillion Global Derivative market
Twin US Deficits
The bubble in consumer credit and housing (UK housing
divided by average income is more than 4 standard deviations above its mean)
GSEs in the US not filing financial
Central Bank Gold Swapping and Leasing
High Energy Prices
US State of National Emergency
Intervention by the
Working Group on Financial Markets and Investor complacency
Kakistocratic Government (Government
by the least qualified and /or most unprincipled citizens) ! !
these issues don’t overly concern the mainstream investment community
however personally I like Silver as an investment because it straddles both
the Monetary Protection story and Growth potential.
If the Asian growth story
continues one is well placed to benefit but also if macro stresses manifest
as they appear likely to, the investor is placed in a ‘flight to
safety’ asset class.
USES BY METALLIC CHARACTERISTIC:
As is often stated, more patents are filed annually
for silver than all the other metals combined. Food for thought.
Electrical & Thermal Conductivity
- Car window
- RFID tags
Brazing and Solder alloys (Growth area due to the Non Hazardous Waste
Directive) - New Zinc/Silver batteries for laptops etc
and Rhodium are slowly eating into silver’s dominance in this area
Windows (for reflecting sunlight)
has PERMANENT germicidal qualities, hence why for example the London Underground are looking at replacing handrails
with a nano-silver coated material to stop the spread of germs –
this application can be extended to public loos, kitchen surfaces etc
germicidal nature of silver is something we are reconnecting with –
before 1940s silver was one of the only known anti-bacterial medicines.
Silver is not patentable by big pharma….draw your own conclusions.
with a silver spoon in his mouth’ is a reference to health rather than
wealth and the frontiersmen of the US used to keep water and milk for longer
by putting silver dollars in the storage containers.
Water Treatment (Swiss municipal buildings use colloidal silver filters and
chlorine in swimming pools can also be replaced with silver)
Treatment (Huge potential here, replacing use of arsenic in stopping mould an
‘B.O’ Bashing textiles (!)
White Goods (linings for fridges, dishwashers etc – see Siemens)
and Critical Usage
Military and Industry rely greatly on the supply of silver for the critical
parts of many products (Examples – each missile uses 1 kilo of silver
in the back-up battery alone) – which are then consumed and removed
from the market.
this reason silver is extremely
Price Inelastic (it can take very significantly higher prices without being
replaced by users) and for this very reason we come across the Silver
Users Association (there is no users association in ANY other commodity)
who have for nearly a century controlled the physical market in order to
secure cheap silver for its members (GE/Dow/Dupont/Tiffany etc). The SUA
recently opposed the launch of the BGI Silver ETF because
A sudden enormous purchase of silver would be a severe strain on the
the good news is that the ETF was approved an
in fact just applied for another 150million ounces of physical, so the SUA
must be reeling by now thanks to even more extreme illiquidity in physical
covered the main body of silver usage (except as money and jewellery) let us
now briefly focus in on some extra fundamental arguments:
There has been a continuous 30 year supply gap that
is now at the point of exhausting remaining above-ground stockpiles.
This gap cannot be easily filled due to the fact that that 90% of silver is
mined as a by-product and there are no easily-available stockpiles to feed a
that were at around 3billion ounces in 1980 are now somewhere between 150 and
400 million ounces.
There is an oversized short position on Futures exchanges (over a year of
global production held in hands of only 4 shorts)
- The m/cap
of physical silver (above ground) is 0.5% of Gold. Unlike Gold, Silver is
absolutely critical to the continued growth of technology and consumerism, as
well as being, like Gold, money.
reiterate, Silver provides the investor with a natural straddle – the
outstanding growth potential that silver shows in terms of fundamentals but
also a hedge against the big-picture instability and imbalances that loom
dangerously in the background.
& Williamson Investment Management
Moorgate, London, EC2R 6AY