For those investors I've turned into Silverbugs
May 26, 2009
– Comments (10)
Ok, it's been pointed out to me that I have gained a following in my rants about silver. Hopefully, if you're investing in silver in real life, you are purchasing the physical metal like I suggested. (That doesn't mean coins, ETF's, etc...)
To be a responsible person I'll give you some early advice on when to sell.
At this time the short answer to that is "I don't know, but I know it's not now!"
I'm predicting $80 silver and a $4800 Dow which would put the perfect DiSoz point to sell at 60. My predictions are worth about as much as you paid for them though, and believe or not, they don't take into account hyper-inflation.
I'll talk about what I do know now.
The gold/silver ratio will give you early clues. Gold tends to rise in value faster in pre-inflation, but once inflation has set in, silver over-corrects. As post-inflation starts to set in, gold drops faster and earlier. Silver will lag gold by the amount of industrial demand. That means that gold should give you an early indicator of when you should sell silver. I wouldn't be surprised to see a 10:1 gold/silver ratio at peak inflation. Which would mean if gold is at $2000 then silver would be at $200.
Look at what got us here! The housing bubble started this mess and when housing prices hit an all time low vs. silver it may be a bullish sign for a rebound. I'm trying to come up my own number for this, but it's difficult given the current government manipulation. "Rich Dad, Poor Dad" author, Robert Kyosaki, says that he'll sell silver when 500 ounces of silver can buy the median priced home. Even if median home prices fall to $100,000, that would suggest $200 silver.
Now back to the DiSoz, my magic number is currently 60, I know your jaw dropped when you heard it the first time, but it has happened. In 1980, the DiSoz was at 18. For that to happen again, silver would be at $267 with the DOW at my predicted 4800.
If looking at those last few things make you feel like I'm being way to conservative, I think I am as well! But I think asking for more than 572% percent in a poor market is just being greedy.
disclaimers...
These are my numbers today and they will change over time. You should only invest in silver, if you understand the risks and rewards using your own data.
I'm obviously invested in silver.
You should understand that in my scenarios, inflation is a given.
Happy investing!
Chris
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