I believe that now is a good time to start buying silver (or to buy more if you already have some).
From around 2000 to 2008, silver had a huge run up in price. Then, in mid-2008, the price fell until the end of the year, when it started to rebound. From late 2008 until 2011, it had a huge run up, going from around $10 to nearly $50. But from May 2011 until the present, the price has fallen again to about $20.
It seems like a silver bubble has burst. However, there are reasons why silver should outperform other investments in the future.
Right now, the price of silver is at a "support level". This is a price which was hard to break through on the way up, and is also hard to break through on the way down. I don't believe that it will go down (substantially) from here. Instead, I think that it will be pretty much all up. (This price increase may start next month or later, but it will occur.) Why do I think so?
Mining prices have been increasing, and silver has been getting scarcer just over the past decade. On top of this, through "quantitative easing", the Federal Reserve is pumping tons of money into the economy. And then there is the next crash that is inevitable and which I'm pretty certain will happen either this year or next year. I'll explain some more.
When more money is created, that causes inflation...not immediately, but over time as it circulates. It won't be too long until the money from "quantitative easing" (money printing) shows up in prices. Below is one conservative measure of the money supply, published by the Federal Reserve itself:
http://research.stlouisfed.org/fred2/data/M1SL_Max_630_378.png
As you can see, the money stock has almost doubled...just from 2008 levels! That means that prices will rise a lot over the next few years. However, this also means that the average price of gold and silver (notwithstanding price swings) will also increase over the next few years. (Silver seems to have declined since 2011 partially because some major investors trusted that an economic recovery was underway and wanted to put that money into stocks instead, and partly due to suppression by large banks - such as "naked short selling"...selling something you don't even own to drop the price of it...but that only works for a while.)
Exhibit B is the stock market. Here is a chart of the Dow Jones Industrial Average from 1974.
https://www.google.com/finance?chdnp=0&chdd=1&chds=1&chdv=1&chvs=Linear&chdeh=0&chfdeh=0&chdet=1375128000000&chddm=484058&chls=IntervalBasedLine&q=INDEXDJX:.DJI&ntsp=0&ei=m5r2UcClMsKakgWnRQ
You might notice the three big bubbles near the end. The first is the "Dot-Com Bubble". The second is the "Housing Bubble". The third is our current bubble, the "Bond and Derivatives Bubble" based on Quantitative Easing. The Federal Reserve is currently in a tough spot. They can't continue quantitative easing at this rate forever. If they do, it will eventually (meaning within one decade) cause "hyperinflation" (inflation that's so bad that your savings in dollars are pretty much wiped out). In that situation, gasoline could be $20 per gallon. However, silver would also be sky-high for two reasons. One reason is that the price of it would rise along with everything else. The other reason is the lots of people (from investors to just normal people who want to keep their savings) would scramble to buy silver, making it rise even faster than most other commodities.
So, if the Fed keeps printing money, that will be the outcome. But even if they stop, silver will gain. If they stop printing money, the current stock market bubble will burst. It is this created money which is powering the "recovery". Take that away, and it's over. This was demonstrated recently when Ben Bernanke (the Fed Chairman) hinted that QE (quantitative easing - money creation) might start to be tapered off (meaning just slowed down) soon. The markets convulsed and he quickly reversed his position. Also hit were bonds.
Interest rates are kept low by easy money (through QE). If interest rates rise (that is, if the easy money slows or stops), then people don't buy houses and the housing market falls again. When you buy a house, more than half of what you pay over a 30-year mortgage is actually interest. If interest rates rise even by just a small percentage, monthly rents will increase by hundreds of dollars. Even more scary is that the United States is so far in debt that its interest payments on that debt are very high. In 2012, the percentage of the budget going to pay off debt was 6% of the budget.
http://en.wikipedia.org/wiki/File:U.S._Federal_Spending_-_FY_2011.png
However, with interest rates increasing just a few percentage points, that could easily double to 12% of the budget or go even higher...perhaps much higher. Note that defense spending (which is too large and which dwarfs any other country's spending) is 19% of the budget, so interest rates rising substantially (just to percentages they were a few years back) could make interest payments get too large to even dwarf defense spending, and force the United States into bankruptcy. Interest rates were at 14% in 1981, and now they're somewhere around 1%, I believe. Here is a chart up to 2008.
http://www.ritholtz.com/blog/wp-content/uploads/2012/01/Long-Term.png
If interest rates ever climbed back up to even 10%, the US would be bankrupt (or it would go into even worse hyperinflation). This is not a hypothetical situation. This is what will happen. On July 19th, 2013, Detroit became the largest city in U.S. history to ever declare bankruptcy. The people living and working there (and investing in their bonds) might only get 10% of what was promised to them (in pension, benefits, etc). If the national (U.S.) government declares bankruptcy, then we will be FAR worse off than Greece. It will be a world-shaking event. And silver will still be a good investment then. It might drop a bit at the start of a bad economy, but then it will quickly rise and become a "safe haven". (Note that this works for the U.S. but other countries also have to worry about the same problems.)
Now add to all of this the problems of "Peak Oil" and "Peak Silver". These refer to the maximum output per year possible. Over decades, we've been producing (meaning finding and obtaining from the earth) oil and silver at increasing rates. However, even with the very dirty "shale oil" and "tar sands", it is getting harder and harder to get more of these resources from the earth. The major finds are already played out. Now, people have to drill offshore and in the arctic...and get oil from shale and tar sands. This increases the price and the rate of production can still decline. Definitely, sometime in the next 10 years or so, the peak will come, meaning we will not be able to get those resources out of the ground at faster and faster rates anymore. Rates will decline.
Even if rates remained the same or slowly increased, world demand is outstripping it. As countries "develop", they need more resources. So not only does production need to rise forever, but it has to rise at a pace which is at least as fast as growing demand. A huge depression can push demand down for a short time, but it will get back up there. After all, most people don't start riding bicycles to work in a depression. Oil isn't a luxury good that most people can do without. It's something that people need to survive...even to keep modern agriculture afloat. "Peak Oil" and "Peak Silver" will push up the prices of these resources. In the end, over the long term (the start of which will be easily recognizable in 10 years or less) resource scarcity will probably be the most important factor in driving up silver prices.
In fact, I think that these days are a very bad time to have children. Children born now will definitely not be self-sufficient by the time a major economic disaster unfolds. This disaster will be much worse than the Great Depression...and it will be pretty much worldwide. Of course, some people want children, but I would not recommend having a child in this environment...especially if you don't have protection in the form of precious metals. And even if you do, life might be hard. In 10 years, I'm pretty sure that the living standards of most Americans (and others) will be quite a lot lower than now, not higher. Without insurance in the form of precious metals, people's lives will be even worse.
Far from silver being merely a speculative investment, silver is a necessity. It's needed. And those who get it early will have a much easier time living than those who don't get it in time. Now, prices are low. I recommend buying now. You can split your purchases up into chunks that you buy monthly, say, over the next year or until you see a real spike in prices (which I think will come pretty soon). But you really need some. It could really save you in the future.
I'd recommend buying some from a dealer (like APMEX: http://www.apmex.com/) and storing some in a vault where the metals are legally yours (like BullionVault: http://www.bullionvault.com/). I opened a BullionVault account and so far it's a great site and very easy to use. If you want to open one too and also give me a few free bucks, you can contact me and I'll give you a different link that shows that I sent you there...and I'll make a few bucks without you paying any more. But that's completely up to you. The regular link is above. (Note that there is a small monthly fee for storage.)
So, here's some advice. Even if you don't take it, I can show others this in a few years and hopefully brag about it. Again, I expect another increase in gold and silver prices, as well as a major stock market sell-off either this year or next year (2013-2014).
Of course, I can't be held responsible for any of my "advice". These are opinions and can be wrong, and if you lose any money or are negatively impacted in any way by the actions you take based on what I wrote, then you can't say it's my fault. It's up to you to make your own choices.
At the time of publishing this, the price of silver was around $19.91 per ounce, and the silver ETF "SLV" was at $19.20.
From around 2000 to 2008, silver had a huge run up in price. Then, in mid-2008, the price fell until the end of the year, when it started to rebound. From late 2008 until 2011, it had a huge run up, going from around $10 to nearly $50. But from May 2011 until the present, the price has fallen again to about $20.
It seems like a silver bubble has burst. However, there are reasons why silver should outperform other investments in the future.
Right now, the price of silver is at a "support level". This is a price which was hard to break through on the way up, and is also hard to break through on the way down. I don't believe that it will go down (substantially) from here. Instead, I think that it will be pretty much all up. (This price increase may start next month or later, but it will occur.) Why do I think so?
Mining prices have been increasing, and silver has been getting scarcer just over the past decade. On top of this, through "quantitative easing", the Federal Reserve is pumping tons of money into the economy. And then there is the next crash that is inevitable and which I'm pretty certain will happen either this year or next year. I'll explain some more.
When more money is created, that causes inflation...not immediately, but over time as it circulates. It won't be too long until the money from "quantitative easing" (money printing) shows up in prices. Below is one conservative measure of the money supply, published by the Federal Reserve itself:
http://research.stlouisfed.org/fred2/data/M1SL_Max_630_378.png
As you can see, the money stock has almost doubled...just from 2008 levels! That means that prices will rise a lot over the next few years. However, this also means that the average price of gold and silver (notwithstanding price swings) will also increase over the next few years. (Silver seems to have declined since 2011 partially because some major investors trusted that an economic recovery was underway and wanted to put that money into stocks instead, and partly due to suppression by large banks - such as "naked short selling"...selling something you don't even own to drop the price of it...but that only works for a while.)
Exhibit B is the stock market. Here is a chart of the Dow Jones Industrial Average from 1974.
https://www.google.com/finance?chdnp=0&chdd=1&chds=1&chdv=1&chvs=Linear&chdeh=0&chfdeh=0&chdet=1375128000000&chddm=484058&chls=IntervalBasedLine&q=INDEXDJX:.DJI&ntsp=0&ei=m5r2UcClMsKakgWnRQ
You might notice the three big bubbles near the end. The first is the "Dot-Com Bubble". The second is the "Housing Bubble". The third is our current bubble, the "Bond and Derivatives Bubble" based on Quantitative Easing. The Federal Reserve is currently in a tough spot. They can't continue quantitative easing at this rate forever. If they do, it will eventually (meaning within one decade) cause "hyperinflation" (inflation that's so bad that your savings in dollars are pretty much wiped out). In that situation, gasoline could be $20 per gallon. However, silver would also be sky-high for two reasons. One reason is that the price of it would rise along with everything else. The other reason is the lots of people (from investors to just normal people who want to keep their savings) would scramble to buy silver, making it rise even faster than most other commodities.
So, if the Fed keeps printing money, that will be the outcome. But even if they stop, silver will gain. If they stop printing money, the current stock market bubble will burst. It is this created money which is powering the "recovery". Take that away, and it's over. This was demonstrated recently when Ben Bernanke (the Fed Chairman) hinted that QE (quantitative easing - money creation) might start to be tapered off (meaning just slowed down) soon. The markets convulsed and he quickly reversed his position. Also hit were bonds.
Interest rates are kept low by easy money (through QE). If interest rates rise (that is, if the easy money slows or stops), then people don't buy houses and the housing market falls again. When you buy a house, more than half of what you pay over a 30-year mortgage is actually interest. If interest rates rise even by just a small percentage, monthly rents will increase by hundreds of dollars. Even more scary is that the United States is so far in debt that its interest payments on that debt are very high. In 2012, the percentage of the budget going to pay off debt was 6% of the budget.
http://en.wikipedia.org/wiki/File:U.S._Federal_Spending_-_FY_2011.png
However, with interest rates increasing just a few percentage points, that could easily double to 12% of the budget or go even higher...perhaps much higher. Note that defense spending (which is too large and which dwarfs any other country's spending) is 19% of the budget, so interest rates rising substantially (just to percentages they were a few years back) could make interest payments get too large to even dwarf defense spending, and force the United States into bankruptcy. Interest rates were at 14% in 1981, and now they're somewhere around 1%, I believe. Here is a chart up to 2008.
http://www.ritholtz.com/blog/wp-content/uploads/2012/01/Long-Term.png
If interest rates ever climbed back up to even 10%, the US would be bankrupt (or it would go into even worse hyperinflation). This is not a hypothetical situation. This is what will happen. On July 19th, 2013, Detroit became the largest city in U.S. history to ever declare bankruptcy. The people living and working there (and investing in their bonds) might only get 10% of what was promised to them (in pension, benefits, etc). If the national (U.S.) government declares bankruptcy, then we will be FAR worse off than Greece. It will be a world-shaking event. And silver will still be a good investment then. It might drop a bit at the start of a bad economy, but then it will quickly rise and become a "safe haven". (Note that this works for the U.S. but other countries also have to worry about the same problems.)
Now add to all of this the problems of "Peak Oil" and "Peak Silver". These refer to the maximum output per year possible. Over decades, we've been producing (meaning finding and obtaining from the earth) oil and silver at increasing rates. However, even with the very dirty "shale oil" and "tar sands", it is getting harder and harder to get more of these resources from the earth. The major finds are already played out. Now, people have to drill offshore and in the arctic...and get oil from shale and tar sands. This increases the price and the rate of production can still decline. Definitely, sometime in the next 10 years or so, the peak will come, meaning we will not be able to get those resources out of the ground at faster and faster rates anymore. Rates will decline.
Even if rates remained the same or slowly increased, world demand is outstripping it. As countries "develop", they need more resources. So not only does production need to rise forever, but it has to rise at a pace which is at least as fast as growing demand. A huge depression can push demand down for a short time, but it will get back up there. After all, most people don't start riding bicycles to work in a depression. Oil isn't a luxury good that most people can do without. It's something that people need to survive...even to keep modern agriculture afloat. "Peak Oil" and "Peak Silver" will push up the prices of these resources. In the end, over the long term (the start of which will be easily recognizable in 10 years or less) resource scarcity will probably be the most important factor in driving up silver prices.
In fact, I think that these days are a very bad time to have children. Children born now will definitely not be self-sufficient by the time a major economic disaster unfolds. This disaster will be much worse than the Great Depression...and it will be pretty much worldwide. Of course, some people want children, but I would not recommend having a child in this environment...especially if you don't have protection in the form of precious metals. And even if you do, life might be hard. In 10 years, I'm pretty sure that the living standards of most Americans (and others) will be quite a lot lower than now, not higher. Without insurance in the form of precious metals, people's lives will be even worse.
Far from silver being merely a speculative investment, silver is a necessity. It's needed. And those who get it early will have a much easier time living than those who don't get it in time. Now, prices are low. I recommend buying now. You can split your purchases up into chunks that you buy monthly, say, over the next year or until you see a real spike in prices (which I think will come pretty soon). But you really need some. It could really save you in the future.
I'd recommend buying some from a dealer (like APMEX: http://www.apmex.com/) and storing some in a vault where the metals are legally yours (like BullionVault: http://www.bullionvault.com/). I opened a BullionVault account and so far it's a great site and very easy to use. If you want to open one too and also give me a few free bucks, you can contact me and I'll give you a different link that shows that I sent you there...and I'll make a few bucks without you paying any more. But that's completely up to you. The regular link is above. (Note that there is a small monthly fee for storage.)
So, here's some advice. Even if you don't take it, I can show others this in a few years and hopefully brag about it. Again, I expect another increase in gold and silver prices, as well as a major stock market sell-off either this year or next year (2013-2014).
Of course, I can't be held responsible for any of my "advice". These are opinions and can be wrong, and if you lose any money or are negatively impacted in any way by the actions you take based on what I wrote, then you can't say it's my fault. It's up to you to make your own choices.
At the time of publishing this, the price of silver was around $19.91 per ounce, and the silver ETF "SLV" was at $19.20.
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