Monday, April 27, 2015

How Low Can It Go?

Normally, the answer is zero.

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I just blogged about relooking at Silver to add to my portfolio, but I don't think people realize what an amazing opportunity Silver is right now.

Tiho from ASSOL has came up with a fantastic fantastic analouge of the previous silver bear markets.


His main points are that:
  1. The 1987-1993 silver bear market looks the longest, but the actual maximum drawdown was in 1991, and silver stayed in the dumps for the next 2 years
  2. This makes the current bear market in silver the longest bear market since silver has been freely traded and priced by the market
The only time in history when silver corrected deeper was during the Hunt Brothers fiasco back in the 1970s, which caused the epic bubble bursting from 1980 to 1982.

So, apart from that one-off occasion of the market trying to be cornered, this current bear market is the deepest and longest of all the silver bear markets that we have ever seen in recent modern history.

This is clearly a situation where there is blood on the streets. Not a single soul is trying to sell anyone any precious metals. Buy what is out of favour and what is cheap? Tick and tick.

On top of being in a perfect situation (in my opinion) for investing, silver itself as a precious metal has many attractive properties. Personally, the most important property is the fact that it is a monetary metal and it has intrinsic value to it. This means that silver can never go to zero. It has value as an industrial metal, for jewellery and as money.

Understanding about fiat money and the amount of credit floating around in the world makes me extremely uneasy. If you knew too, you'd be uneasy as well.

I recently read an article about one of those traditional investment superstars (for the life of me, I can't remember who. Maybe it was Howard Marks?) and he was saying that he likes to manage his downside risk and let the upside take care of itself. He allocates his money based on how much money that investment could possibly lose, and he puts most of his money is whatever he thinks is the least likely to lose money.

I will continue to accumulate Silver. At this price, it is hella attractive to me. If it goes lower, fuck yeah. I accumulate through Vault Grams with BullionStar. That's just how I do it anyway.

Silver has been a shitty investment for the past 5 years, that's for sure. But just how long will it continue to stay like that? Forever? How low can it go?

Definitely not zero.


Full disclosure: If you enter BullionStar through my site, and you buy anything, I get a small commission.

This is my main source of blog revenue. I prefer this to asking for "donations" because I rather you get something that you want as well, instead of a tip.

Whether you buy at BullionStar directly or enter from my site, the price you pay does not change.

My personal precious metals investments are stored with BullionStar and I pay the same fees as any other regular customer.

6 comments:

  1. Hi,

    What is the difference between buying a silver etf such as iShares Silver Trust and buying from bullion star?

    KC

    ReplyDelete
    Replies
    1. Hi KC,

      Buying a silver ETF involves currency conversion cost, brokerage costs and currency risks. This means that you need to have a broker with access to the market which the ETF is traded on, as well as the correct currency to buy it in. Personally, I find that too troublesome and I rather work with something more tangible to me. I have gone down to the BullionStar shop, I have seen their CEO on TV and the newspapers. I have shiny bullion in my safe at home.

      A silver ETF also should have weird tax implications. Gains from the sale of something like SLV is treated as income from "collectibles", so it would be treated differently, if I am not wrong. I really can't be bothered navigating and figuring out the US tax code.

      Bullion grade investments approved by MAS are free from tax, like capital gains tax and GST. Basically in Singapore, you only pay the price of the metal, a premium for physical and a spread for the dealer.

      The most important thing about buying bullion from BullionStar is that when you are buying physical bullion for delivery, there is zero counterparty risk. You keep the bullion in your own home. There can never be a computer error where your holdings disappear, a scam where the company runs away with your holdings or any risks if the company goes bankrupt. Your holdings belong to you and are at your own home (or safety deposit box, or buried under a tree)!

      The only risks you would have to worry about then is if someone breaks into your house and steal your bullion, or if the bullion you receive is fake.

      If you are not talking about physical bullion for delivery, BullionStar also has counterparty risks, which is up to you to assess how risky they are and if those risks are worth the convenience and ease of working with them. Perhaps going down to look at their vault might help you sleep better at night if you do business with them.

      All the best!

      Delete
  2. Thanks for the reply. I enjoy reading your blog. Keep up the good work.

    KC

    ReplyDelete
    Replies
    1. Np KC, I hope I helped you by sharing what I understand!

      Delete
  3. i am one who prefers investing into companies that mine silver directly - HL, SSRI, CDE amongst others.

    ReplyDelete
    Replies
    1. Hi Jason,

      I have done that as well, but my exposure is not through individual names, but through a unit trust that also has gold mining exposure.

      Hopefully the mining indexes can reverse as well. They have been in a long bear market as well.

      Delete

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