Silver the Best Buy Among Depression Bargains

It is a matter of almost holy writ with us here in the Whiskey Bar that “the poor man’s gold” is something we should be buying with every spare non-silver dime we have.  We believe!  We believe!

We believe on fundamentals, technicals, and common sense.

We even believe all this in the face of the recent gyrations in the market.

In May silver shot up dramatically, so why is it falling dismally in June?  Beats me, Babes, it truly does.  By every standard I can devise silver is still the investment of choice:

  • For sixteen years straight mining has not kept up with demand.
  • Almost all the gold ever mined is still in existence, barring bits that were hidden from various totalitarian governments and forgotten, or lost, or sunk beneath the briny sea transporting treasure from the New World to Spain.
  • Silver is consumed, other than for jewelry and tableware; again, supply is unequal to demand.
  • Silver has multitudinous industrial uses, even now that the vast amount once used for photographic film has been reduced to very little.
  • Silver has been running less than half of the least classic ratio with gold and slightly over four times the highest one!  That varies, historically, between 16:1 and 30:1.  At recent levels of 65:1 silver is so wildly undervalued that it is almost insanity not to buy it.
  • Only recently has silver become available at spot or close to it; last year those who had wouldn’t sell.
  • Mints can’t keep up with demand.
  • To really ice the cake, silver is down well over ten per cent. below last month’s highs.

So…why did it fall again today?  Quite frankly, I have no idea, and I don’t really care.  I like $13.85 silver a lot better than I did $15.50 silver last month so long as I’m purchasing, as I expect to be for some years to come!  I chortled happily today when I bought over eighty ounces at $10.85 or $11.32, depending upon whether the weight was in Troy or Avoirdupois.  Either way, I did well.  I picked up another forty-odd ounces for $500.

Those who are familiar with my “TOIS” (Traynham’s Own Investment System,” pronounced “toys,” because that’s what I buy) know that I read the market via complex technical, psychological, and analytical market runes (otherwise known as Craig’s List and e-Bay.)  The torrent of silver available through such markets has reached flood level as 20% joblessness (no matter what the government says) and a minimum of 6% inflation (again, no matter what Obama says) devastate the land.

The short-sighted are turning loose of family treasures and luxury items rather than tightening their belts, and they will regret it bitterly sometime in the next five years.

Never before has the market been so advantageous for the buyer of used vehicles, fine china and other luxury goods, farm machinery, and livestock.  As I noted below yesterday’s article on Morning Whiskey, we just bought a pair of very fine horses for a quarter of what they would have cost last year.  We want a diesel truck (for reasons covered in past articles), and made a short list quickly and easily of two dozen that would have done splendidly, the most expensive of which was $2,000.  MDC (My Darling Charles) chose a Big Bubba that has been in use as a repo truck, meaning it comes with what is virtually a small crane and heavy chains worth a quarter of the price we’re paying.

This country is in big trouble economically from crashing stock and real estate prices.  We expect the bond market and commercial real estate to totter next.  Taxes are rising, income is falling, hours are being cut, the USA is averaging 625,000 lost jobs a month, and Congress intends to tax our cattle for emitting methane.  BRIC is maneuvering to replace the dollar as the standard currency.  Nobody more significant than Sri Lanka is discussing a gold standard.  The far left is dismembering the carcass of business and distributing the bleeding hunks to favored voter blocks.

MDC and I spent our usual luxurious three hours sitting on the terrace watching the sun go down over the lake and laughing at the antics of the animals.  We came up with one slight possibility of an explanation.  Remember the Hunt Brothers?  Back in the late Seventies they almost cornered the market in silver, and after that splendid idea failed went back to running one of the nation’s biggest trucking companies.  It could just be that the increasing costs of trucking and the possibilities of a breakout in silver made surviving Hunts think May was a good time to turn loose of some of their glittering hoard.  A look at volumn for the year might be enlightening, along with speculation about whence came genuine Ag, although it may be the rise was promulgated through mining stocks.  I still say it doesn’t matter, buy it when the price is advantageous.

I expect the day to come when I have to admit that I erred in not paying what silver cost when I had the chance at current levels.  That has happened to far better than I.  Silver is particularly vulnerable to this error because there is usually a limited amount of the physical metal to be had at any time.  Don’t say that you weren’t warned that my gleeful hand-rubbing today over buying at twenty and thirty per cent. under spot won’t give way to mourning that I didn’t buy much more even though it was $15-20/ounce.

I miss the good old days of the Eighties when I hunted for cyclicals and charted happily every day, but I think we have a better chance to make really big gains now than have been possible for ordinary, sensible people since the Great Depression.  I love reading the market suggestions the big guns of Agora Financial offer us regularly, but day in and day out you can protect yourself and your future through small, common sense purchases.  Food, fuel, trade goods, sterling you can hold in your hand, ammunition (if you can find it!), tobacco, alcohol, and soap…those will be the daily hard money in the future I see coming.

Why is silver falling?  Who cares!  Just go buy all you can get your hands on.

Warm regards and happy shopping,
Linda Brady Traynham

June, 30, 2009

P.S.: Afterthought.  Writing is how I pull out the conclusions my mind has reached, and even I didn’t know until I typed the words above that my inner Cassandra has started to say, “Stop looking for bottoms and bargains.  Pay what it costs to accumulate while the opportunities are there.”  Cassandra is right:  it is very satisfying to purchase goods at 20% below market, unless six months from now you look at spot and wail, “I could have bought thousands of ounces at the going rate and would have a 35% ‘profit’ on it right now.”

Many hours later:  I went and practiced what I preached and contracted for a thousand ounces of sterling, my idea of Really Big Money (RBM, as the Mogambu Guru would say.)  Pain, shame, disgrace, some of it I paid as much as $15/ounce for.  Unlike the Stock Market, e-Bay is functioning at two a.m.

My thrifty instincts are utterly outraged and I have probably lost all claim to being one of the world’s greatest shoppers, but Cassandra went back to sleep after muttering, “Good, smart girl.  Keep doing it until you run out of cash allocated to spend on metal.”

The Daily Reckoning