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Q: Why
did you create this website?
A: I've been studying and discussing the silver market for years and
wanted to share what I've learned with others. Approach the ideas
presented here with an open mind and use what I write as a guide to
discovery and not a website containing definitive answers. I see
minimal downside to owning physical silver (due to it's inability
devalue to zero like the paper U.S. dollar), and potential wealth
maintenance and possible gains in the coming years.
Q: What is the difference between
monetary inflation and price inflation?
A: Monetary
inflation is the increase in the money supply relative to goods and
services. Price inflation is the increase in prices of goods
and services.
Q:
Does it matter in what form I purchase my silver? Is one form or
another more desirable?
A: I would
generally want to receive as much silver as possible for my paper
dollars. Therefore, you may ask to buy silver in 1 oz., 10 oz., 100
oz., or a bag ($1000 face value) pre-1965 U.S. dimes, quarters or
half-dollars. The 55 pound bag of coins is known as "junk" silver and
each coin contains 90% silver. Each bag holds 712-720 ounces of real
silver, depending on the wear of the coins.
The coins have a stamped value that has
nothing to do with their silver content value. And the amount of silver
in the coins is not equal to the overall weight of the coin as it is an
alloy with other metals.
Please make sure you are buying from a
reputable dealer who has been in business for a long time. Rocky
Mountain Coin has been in business for many years and are honest and
reliable in my past dealings. CLICK HERE to see their excellent page of every type
of silver you can buy. Or you may buy from flea markets, scrap metal
dealers and in some cases even from small miners who have found some
very rich pocket silver. I also like Miles Franklin in Wayzata,
Minnesota.
CLICK HERE for their website.
Q: Isn't gold more valuable? Why should I buy silver instead?
A: The saying is, "Smart money is buying gold. But the REALLY smart
money is buying silver." Gold is certainly a good investment and it's
certainly better than holding worthless (fiat) currency. For example,
it's much easier for $18.00 silver to double in value than $1000 gold.
If you wish, buy gold, platinum or palladium. They are all still
precious metals and their value will never go to zero. However, keep in
mind that Warren Buffet bought silver, not gold.
Q:
What is this 'fiat' currency your mention?
A: Fiat currency is an arbitrary (fiat) process where banks make legal
tender using laws created by politicians to enforce its use. It is said
to have no intrinsic value because it takes little work to create it
and because it is not linked to silver or gold reserves. There is no
limit as to how much fiat currency can be created. As history has shown
since the Roman Empire, it always inflates and becomes worthless over
time.
Q:
Where should I store my physical precious metals?
A: This is a
personal preference. It is not advisable to store any precious metals
on your property. If you must, multiple immovable safes bolted to the
floor in various locations would be a good idea. I once heard of a
woman storing her gold coins in a jar of peanut butter in her fridge.
That would make one expensive peanut butter sandwich!
Q: Should I invest in silver stocks instead of physical silver?
A: Many in the industry suggest buying much physical silver (gold,
platinum, palladium) wealth before investing in any silver mining
stocks. However, given that 80 silver stocks were up 314% in 2003,
stocks can be quite attractive to the investor, especially given that
many in the silver mining industry are exploring and even restarting
their mining operations in anticipation of an increase in silver
prices. At current prices it's not entirely cost effective for them to
bring silver to market. However it seems that they understand that
silver prices may soon make their operations quite profitable.
Q: Can
you recommend some stock newsletters in the precious metals industry?
A: Jason Hommel
writes a weekly Email newsletter with in-depth silver mining company
reviews and a look at his extensive portfolio. CLICK HERE
for his FREE Silver Stock Report. Just remember that these types of
investments can be volatile. Do your research and due diligence.
Q:
What is a private placement?
A: private
placement is a contract between an accredited investor and a company to
buy a given number of shares at a given price, usually at well below
the market price per share. A private placement is valuable because a)
the investor is able to a large number of shares at a lower price b)
buy large quantities without driving the share price up while
purchasing and c) avoid large broker commissions.
For example: OT Mining issued a private
placement for USD $1.25/share when the stock was trading on the open
market for $3.00/share. The minimum amount to invest was USD $25,000
with a 2 year hold time (time during which you cannot sell your shares).
A hold time of 4 months, however, is more
common. That hold time is only one of the few drawbacks. One other
issue is that you also need to be an accredited investor to engage in
private placements.
Q:
What is an accredited investor?
A: Partial
listing of the definition and it applies to individual readers is:
1. a natural person
who has individual net worth, or joint net worth with the person’s
spouse, that exceeds $1 million at the time of the purchase;
2. a natural person
with income exceeding $200,000 in each of the two most recent years or
joint income with a spouse exceeding $300,000 for those years and a
reasonable expectation of the same income level in the current year. CLICK HERE
to read the U.S. government's definition.
Q:
What is a warrant?
A: A warrant
is an agreement between the investor and the company to issue more
shares in the future, again at a reduced price. Often, a warrant is
issued in conjunction with a private placement. The investor, however,
can let the warrant expire without purchasing more shares.
Q: What's this I hear about the price ratio of silver to gold?
A:
Historically silver has traded at a price ratio of 16:1 to gold,
reflecting the relative ratios of silver to gold found in the earth. So
this means that historically, it took 16 ounces of silver to buy one
ounce of gold. Currently, if you scroll to the top of this page, you'll
see the ratio calculated for you. One could assume that silver may
increase in value to align more with historical price ratios.
Q: I
read that that the Federal Reserve is not a part of the U.S. Government.
A: The Federal
Reserve is an private international banking consortium which was formed
in 1913 to issue paper currency to the population of the United States.
Alan Greenspan, the previous Federal Reserve Chairman, usually spoke
quite cryptically about the Fed intentions in what often appears to be
a government forum. This often leads to the misconception that
the Federal Reserve is a government entity instead of a private bank. CLICK HERE to read an in-depth article about the
Federal Reserve and John F. Kennedy.
Q:
Someone told me that in 1980 a $1000 face bag of 90% (junk) silver
coins could buy a house.
A: Yes and no. A bag of junk silver coins (about 720 ounces) could be
sold for $30,000-$32,000 when an ounce of silver was valued at $45 /
oz. Keep in mind the U.S. dollar has lost much more of it's value
compared to 1980's dollars. Anyway, in some areas of the country you
actually could have purchased a modest house for that price. I suspect
that in the future, the price of silver will increase and the value of
homes will decline.
Q:
Where has silver been coming from during the last 25 years?
A: Almost all silver currently comes to market as a by-product of the
mining of zinc, gold, etc. Without dedicated and active silver mining
during the last 25 years, much of it comes from reclaimed silver
jewelry and photographic and industrial recycling.
Q: I
don't understand why silver hasn't been directly mined for the last 25
years?
A: Mining companies were not motivated to mine silver when they could
sell it only for what it cost to retrieve from the ground. Now,
however, countless silver companies are ramping up production and
exploring in anticipation of much higher silver prices. CLICK HERE
to get the free Silver Stock Report and read about various mining
companies and their activities.
Q: I
read online that the U.S. Mint needs to buy silver on the open market
to mint their silver eagles. Was this website correct?
A: A few
sources have reported that nearly all U.S. Government reserves, and
other above ground silver reserves, have been depleted.
Q: In the event of a financial panic, if the coin dealer
suspected an awful financial mess why would this wise
merchant want to sell more of his precious metals? Or, in the
event of a cash-bank melt-down why would people want to sell
their silver to the coin dealer?
A: I would assume that during hard times a
coin dealer would have a greater potential for profit if he did NOT
give out paper currency in exchange for bullion. Besides, who would
want paper if it's rapidly declining in value? His profit would likely
be made in 'making change' for 100 oz bars, gold coins, etc. so people
could purchase everyday items such as fuel and food.
"Give me your 1 oz. gold coin and I'll give you 80% of its value in
silver coins so you can walk around town without fear of losing too
much in a robbery." I could possibly see conversations like that taking
place.
Q: How liquid is bulk silver and will a coin dealer buy it back from me?
A: Your silver
is likely easily convertible to cash. Almost any coin dealer will
likely give you fiat currency in exchange so he can resell it to the
next person who wants to buy. When purchasing and selling silver, be
sure to deal with a reputable coin dealer who has been in business for
a long time.
Rocky Mtn. Coin
Q: I've read that investment demand (like from Warren Buffet) will
drive up the price of silver more most rapidly. Is this true?
A: Possibly. Recently many articles have attributed the increase in
silver prices to the decline of the value of the U.S. Dollar. Once
investment demand increases drastically, expect a rapid jump in silver
prices. Due to the current bull market, after a 20 year bear market,
demand recently has been far exceeding supply. It is sometimes
difficult for dealers to even find silver buy to sell to customers.
Q:
I understand that Bill Gates owns a silver mine. Which one?
A: He
apparently owned 10% of Pan American Silver (symbol: PAAS)
Q:
I've read that a few mining companies went bankrupt during the last
silver bull market.
A: This is
true. During any bull market companies go bankrupt. Sometimes even
questionable companies become quite popular with investors. As the
saying goes, "Buyer beware." Do your due diligence.
Q: Since silver is used in photographic film, won't the increased use
of digital photography decrease the industrial demand for silver?
A: Doug Kanarowski writes an incredibly comprehensive article refuting
this belief. CLICK
HERE to read his thoughts.
Q:
What if the U.S. Government confiscates precious metals?
A: Given the
relative failure of the Gold Reserve Act of 1933, I doubt something
similar would be tried again. Besides, the limited quantities of all
other precious metals (silver, platinum, palladium, rhodium) would not
be worth any governmental effort to confiscate them. Remember that
banks and local governments can confiscate your house if you miss a few
monthly payments. Which occurs more often in today's world? Regardless,
silver would most likely not be included because it may be needed for
currency.
Q: Is a bank safety deposit box is the safest place to store my silver?
A: First,
silver is often too bulky to store
in small safety deposit boxes. Second, as long as that bank would not
go out of business, you would be able to retrieve it. If a bank fails
(like the 1200 bankruptcies during the Great Depression), the contents
of every safety deposit box is liable to confiscation. Gold coins are
more easily stored in this manner due to their small size but are
similarly vulnerable to banks opening the boxes and obtaining the
contents.
Q:
How would a bank go BANKrupt?
A: Banks engage in "fractional reserve banking." I believe they are
required by the Federal Reserve to have cash reserves of a ratio of
about 10:1. What could happen when too many customers demand their
savings in cash? The Great Depression - Part 2, perhaps. Cars, and
homes can't be sold easily to put food on the table. Silver can be
traded for almost anything, with junk silver quarters, dimes and halves
being the most liquid. Even stocks may be worth little and difficult to
sell in chaotic financial times. Besides, how would you value a stock
when the dollar collapses?
Q:
What is a Comex silver bar?
A: I once
heard the story of a guy who owned a 1000 oz. (62.5 lbs.) Comex silver
bar. He used it as a door stop for years because nobody knew what it
was, nor could they move it easily if they tried.
Q: I
once heard there are no capital gains taxes on precious metals. Is this
true?
A: It is
recommended that you do your own research on the matter of capital
gains and taxation in the country where you reside. Bullion and
collectible coins may have different liabilities. Taxes, where
required, should always be paid to the appropriate government agencies
so consult a tax professional for the best advice.
Q:
I've asked my investment professional about silver and gold and he told
me that it's not a good investment.
A: In 1970 if
I had told you that the price of gold would reach $850 / oz. by 1980,
after trading at $35 / oz. since 1933, would you have believed it?
Probably not. Many believe that the price can only increase due to
supply and demand. Do your own research on this topic because the
'professionals' likely have not.
Q: So
investment demand will drive up the price of silver?
A: Quite possibly. Recently the increase in silver prices has been
mostly attributed to the decline of the value of the U.S. Dollar. Once
investment demand increases, a rapid jump in silver prices is possible.
Q: I understand that a silver dime was used to pay a day's wages. Is
this true?
A: There has
been some debate about if it was a dime or a quarter. Regardless, this
was before the Federal Reserve was given a license to print fiat
currency at will. Currently a worker receives a paper check to deposit
which can then be converted to paper currency. Wouldn't it be more
beneficial for that man to receive something of real value, something
of true wealth as a wage for a day's hard work?
Q:
How much value has the dollar lost?
A: Since 1913
(the year of the Federal Reserve creation), the U.S. dollar has lost
about 98% of it's value. Blame this on constant, unchecked printing of
paper currency.
Q: I
heard that Federal Reserve Chairman, Alan Greenspan, indirectly
'punished' savers by lowering the interest rates.
A: Sad but
apparently true. Sure a house was easier to buy with lower interest
rates, but many retired folks living off their 30 years of savings
could do so no longer. So then why save when you can spend? With the
U.S. economy previously reportedly based two-thirds on spending, it
appears that Greenspan wanted to prop up this ailing economy. Another
effect seems to have deluded the 'sheeple' into thinking the economy
was improving. We now know that was not true.
Q: Assuming I enjoy gains in my silver stock portfolio, when should I
sell my stock?
A:
Historically in a bull market, mining stocks gain in value much faster
than physical silver. When I think a stock has reached it's peak, I
will likely sell the stock and purchase physical silver, gold or
another undervalued mining stock. I would personally not sell stocks
unless I intended to purchase a large ticket item in full.
Q: How
will I know when the silver bull market is over?
A: I may want
to start selling when too many cocktail party conversation turns to a
discussion about silver, gold and mining company stocks. When it seems
like everyone is an expert on the topic, like before the real estate
meltdown, it may be time to sell.
Q: I
read that Warren Buffet purchased large amounts of silver in 1997. Why
did he buy so much and why?
A: It's known that Warren Buffet seeks excellent long term investments.
From July 1997 to January of 1998, Berkshire Hathaway took
delivery of 129.7 million ounces of physical silver. During this period
of accumulation the price moved from around $4.50 to $7.00 / oz.
Shortly thereafter, the price of silver fell back to $5.00 / oz.
If one investor in 1997 caused the price of
silver to increase in value so dramatically, imagine the potential
price gains a few large investors (or countless small investors) could
cause. Rumors at the time were that Mr. Buffet was actually prevented
from buying more silver when the U.S. government demanded that he halt
further silver purchases. CLICK HERE to read the press release regarding the
Berkshire Hathaway silver purchase.
Some experts believe that Mr. Buffet has since
sold all of his silver reserves, which may have helped make the silver
price artificially low.
Q:
I've read that platinum and palladium once cost the same in U.S.
dollars.
A: This is true. Currently, platinum is worth far more than
palladium... and even gold.
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