(A Handy Reference Guide for Journalists)
Silver Stock Report
by Jason Hommel, October 5th, 2008
Here’s my summary of the silver story in 154 words:
Over 100 years ago, nations began stopping using silver as money, creating excess, cheap, silver. That trend ended between 1964, the last year the U.S. minted silver coinage, and around 2000, when the U.S. government ran out of silver. A new trend started around 1945, as silver was used in electronics and 10,000 other industrial uses, including photography. Of the 43 billion oz. of silver mined throughout human history, over half has been consumed and lost, and 95% of the rest is in forms inconvenient to recover, such as jewelry and tableware. Of the 1 billion ounces of silver remaining, most is held by long term investors, leaving nothing left for new investors, as industry continues to consume more than is mined each year. The long term price trend will now reverse, as people discover that silver has use as money, as silver will now prove to be an excellent store of value, and later, as a medium of exchange.
Discernment is the ability to distinguish between truth and what is false, what is good and what is bad. You increase your discernment through experience.
I have a lot of experience with silver. I share my experience with you on a regular basis, usually by refuting the many arguments against silver, and presenting the bullish case for silver in various ways.
Today, I figured I’d try something different. Here are “arguments” against silver. Whether they are truthful and rational or not, you decide. If you think about these, you will help to exercise and strengthen your discernment.
You will discover that you know more about silver than you thought you knew, if you can discover why these are all lies, or why, if they do contain a bit of truth, why it is misapplied, exaggerated, or unimportant.
For some reason, when the arguments against silver are all on one place, (especially when presented after the summary of the silver story) they seem rather ridiculous, but I’ve read and heard each one of these, and many more, over the years.
1. Silver is old and outdated, and nobody uses it as money anymore, and never will.
2. Silver tarnishes and rusts and is unpleasant to touch and handle because it makes your hands dirty.
3. You cannot verify whether silver is real without high assaying costs.
4. Silver too expensive to store at home, the safe and home security system are just too expensive.
5. Silver is too heavy, too bulky, too inconvenient, and too expensive to transport and ship, to ever use as money as a medium of exchange.
6. Silver has wide spreads between when you go to buy it, and when you sell it, and thus, it will never be money, and cannot be money, and does not thus have the attributes of money.
7. Silver bars are bulky and impractical, because you cannot easily divide them, so silver is not easily divisible, like paper money.
8. They manipulate silver prices, they have been manipulating silver prices for over 100 years, and they will always be successful at manipulating silver prices, so what’s the point of trying to buy silver?
9. Silver is too volatile with prices that change too much, so it’s not stable enough to be money anymore.
10. My Elliot wave chart analysis tells me that the formation now showing shows that silver will go down, short term, although long term, it’s clearly headed up.
11. Before silver takes off and goes up 100% to 200% to 10,000% or more, you should wait for it to go down 10% first.
12. Even though silver just went up 10%, you should wait for it to pullback a bit, before buying.
13. Silver is merely an industrial commodity now, no different than copper, zinc, lead, molybdenum, nickel, platinum or palladium.
14. There will be deflation, and silver does not perform well during deflation, and did not perform well during the depression of the 1930’s when silver was 25 cents per ounce.
15. There will be inflation, and silver does not do well during inflation, we had inflation from 1980 to now, and silver did horrible during that time.
16. There is not enough silver to use it as money.
17. Most major coin shops are frauds, they will take your money and not deliver silver for months, so you are likely risking losing your money when you go to buy silver, if they go bankrupt.
18. You can’t even get silver anywhere, so what’s the point?
19. There is a surplus of silver these days.
20. There are no silver shortages, you can buy all you want.
21. I can buy all the silver I want, so there is no silver shortage.
22. This one coin shop I know can buy all the silver I want, so there is no silver shortage.
23. Bonds are the safest place you can put your money.
24. Who would want silver when you can buy inflation indexed bonds instead?
25. Who would want silver when you can buy silver futures contracts instead?
26. Who would want silver when you can buy silver certificates instead?
27. Who would want silver, when you can buy the SLV instead?
28. Who would want silver, when you can buy a leveraged account at MONEX, or GOLDLINE, instead?
29. Who would want silver, when you can buy options on a silver futures contract, instead?
30. Who would want silver, when you can buy a silver mining stock, or exploration stock, instead?
31. Who would want silver, when you can buy rare coins, that carry so much more value, in such a smaller package, instead.
32. Who would want silver when you can buy silver in your brokerage account instead?
33. Silver has counter party risk; your brokerage house or storage company can go bankrupt.
34. If you store silver at home, the thieves will just come into your home and threaten to cut your toes off one by one unless you give them the combination to the safe, so you can’t store silver at home.
35. You can’t eat silver.
36. Silver does not pay interest.
37. Silver’s totally useless.
38. Silver’s inert.
39. You can’t use silver for anything, you can’t spend it anywhere, no stores will take it.
40. The banks won’t take silver, so it’s useless.
41. The Federal Reserve is all powerful, so silver is useless.
42. The government would never lie to us about inflation, so we don’t need silver anymore.
43. A private central bank would never ruin their own money-printing franchise with too much inflation, so we have nothing to worry about, and thus have no need for silver.
44. People are too poor to buy silver, because they are in debt.
45. Silver investors are just religious freaks, hoping for the world to end, they are stupid.
46. If silver prices ever rise, it will be a financial Armageddon, and you won’t want to be alive when that happens.
47. If silver prices ever rise, they will confiscate your silver, and steal your silver.
48. It makes no sense to dig up silver out of the ground, just to bury it back underground in some vault somewhere.
49. There is no inflation, the dollar will get stronger.
50. What would you actually do with silver anyway?
So, as you can see, I’ve heard plenty of arguments against silver. I’ve just not ever heard any rational and persuasive arguments against owning silver.
Over the next few years, as you follow the silver market, watch the news stories coming out about silver. I typically see at least 3-5 of these types of inane comments in each one.