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ChrisGraley (30.25)

For those investors I've turned into Silverbugs

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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

10 Comments – Post Your Own

#1) On May 26, 2009 at 1:42 AM, awallejr (82.72) wrote:

Just curious, why not invest in silver coins since you get a double value for it, namely price of silver plus numismatic value?

While I am not inclined to think silver will hit your projected highs, in the foreseeable future anyway, I still could see it going higher from current quotes.

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#2) On May 26, 2009 at 1:46 AM, awallejr (82.72) wrote:

P.S., as for DOW 4800, unless you are predicting continued GDP contractions of -7 or worse, you are simply stating a random number and nothing more. 

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#3) On May 26, 2009 at 5:38 AM, FleaBagger (29.37) wrote:

Why avoid coins?

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#4) On May 26, 2009 at 8:54 AM, AllStarPortfolio (38.77) wrote:

Sorry Chris, i'm having trouble reading your meaning clearly.

   Don't buy ETFs, or coins..  Do buy Silver stocks, and physical possession of bullion?

solaris

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#5) On May 26, 2009 at 9:13 AM, ChrisGraley (30.25) wrote:

Buy Silver bullion, avoid all other risks. (Numismatic, stock risks, and above all ETF's!) If you have a good knowledge of rare coins, then you can go that route, but keep in mind that during peak silver, when you want to sell, a lot of collectors that may have been holding these coins for a long period of time will be flooding the market. You pay a premium for coins that you probably won't recover during peak silver.

awallejr, I'll follow up with how I came up with 4800 in another blog post. Although I didn't focus on GDP specifically, I think that -7 may be conservative.

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#6) On May 26, 2009 at 9:18 AM, ChrisGraley (30.25) wrote:

I should also add that some people buy those bags of junk silver. For those coins, you should be OK, because the silver is sold at melt value. You may have a storage problem however.

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#7) On May 26, 2009 at 11:49 AM, AllStarPortfolio (38.77) wrote:

Physical possession of Bullion? or would paper possession of Bullion do?

-solaris

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#8) On May 26, 2009 at 12:05 PM, ChrisGraley (30.25) wrote:

Solaris,

If you trust the backing of the paper, yes. Also, there is one ETF that I would trust. It's ZDK out of Switzerland. Another thing about paper silver is that you'll lose money waiting for delivery if we have hyperinflation.

For those of you who think you don't have the means to purchase silver, I suggest Goldmoney.com

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#9) On May 26, 2009 at 7:20 PM, binve (< 20) wrote:

Chris, Excellent post! I too am a huge fan of (and investor in) silver. As well as gold, oil and commodities. Thanks!

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#10) On June 02, 2009 at 2:14 AM, AdirondackFund (< 20) wrote:

This is stupid.  The metals are done for now.  I just closed a 3 year old position in Gold and Gold Mining Companies in real life and I won't be back until the next deflation wave is finished.  This is a dollar high and a day late.  Your time has passed.

Where were you three years ago when this was THE TRADE to make? 

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