Silver Investment: The Lowest Risk, Highest Return Potential vs Stocks & Real Estate
The comments above & below is an edited and abridged synopsis of an article by SRSRocco Report
Silver will be one of the best investments as leverage in the stock and real estate markets evaporates. Unfortunately, investors are no longer capable of recognizing when an asset displays high or low risk. Thus, fundamental indicators are ignored as investors continue the insane strategy of buying the dip.
You don’t need to be a financial or technical analyst to spot the high versus low-risk assets. All markets behave in cycles, and asset prices will peak and decline. Both real estate and stock asset values are near their top, while the silver price is closer to its bottom.
While US median home prices are 52% higher than their low in 2009, the Dow is a staggering 220% higher during the same period. If US real estate values are high risk, then the Dow must be extremely risky.
We see a much different setup with the silver price. Not only is it way off the highs set back in 2011, it is also just 40 cents above its 200-day moving average.
With silver at 2% above the 200-day moving average, it is clearly the lowest-risk asset compared to the Dow or real estate values. Furthermore, the Commitment of Traders (COT) Report suggests that the very low net commercial silver short position also indicates that the silver price is bottoming.
The Commercials’ present net short position in silver is back to its cycle lows. While the Commercials could continue to liquidate more short contracts, as the silver price falls a bit lower, we are closer to forming a bottom than a top. So silver is the low-risk asset to purchase and hold while US residential real estate and stocks are high-risk assets to sell.
It will take time for these markets to correct, but nothing goes up or down forever. However, the horrible irony of how the markets will play out in the future is watching investors get wiped out because they are unable to distinguish between high-risk and low-risk assets.
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Well I’ve heard it over and over and over again and again – “Silver lowest risk, highest opportunity for return.”
But it just doesn’t appear to be happening.
While we understand, and can fully relate to your sentiment, we also know that investing should never be based on emotions. It must be based in fact with mean reversion and empirical evidence as the guiding light. As for timing, please allow me to reiterate a famous quote from the Fed’s most (in)famous Chairman, Alan Greenspan, “The markets can remain irrational longer than you can remain solvent.”
The fact that the US dollar is still defined as a specific weight of silver (371.25 grains of pure silver) should give you a clue as to its monetary role, not to mention that the word for silver is the same word for ‘money’ in 22 languages. The multi-millennial historic relationship between silver to gold has averaged ~16 to 1. The silver to gold ratio currently sits somewhere around 80 to 1. Most of the silver produced annually is actually consumed, meaning the stockpiles of silver never seem to really grow. Yet, new uses for silver (due to its antibacterial, reflective and conductive nature) continue to increase the demand on supply.
Owning physical precious metals is both a speculative trade on the future price and disaster insurance in a monetary system that is unsustainable long term. No one expects their insurance policies to grow in nominal value, yet this sentiment is pervasive when it comes to the monetary metals. Holding physical metals should be just one part of an investment strategy that includes all seven asset classes. Expecting the price of silver (or gold) to rise or fall based solely on fundamentals is a very long term strategy that must consider the massive distortions created by direct intervention by central banks and bullion banks in the market, the myriad of derivatives (like futures, swaps, leases, ETFs and certificates) and the fact that the largest contributing factor holding the price down being the unsuspecting investors participating in a game they simply don’t understand.
In summary, we encourage you to not be too focussed on the short term price action of the metals. Be a casual ‘watcher’ of the price. Most importantly, be confident that the current distortions are based on factors outside of any average investor’s control. The game being played is a reflection of multiple schemes to suppress the price that have existed throughout the ages. None of them lasted forever. They all failed. Sometimes they failed spectacularly, as we suspect this one will as well.
As with most investing, be patient and you will be rewarded. Giving up is a sure fire way to regret… and potentially, much worse than simple regret; wealth destruction.