One of our family stories is about my great-great grandfather who moved to Oklahoma at the edge of civilization after the Civil War. He learned that a railroad line was planned to pass through their region (insider info?). Of course such things took time, but he got busy. He planted alfalfa and started growing and baling as much as he could. The neighbors thought he was crazy and laughed at him. He kept storing it away and before too long, here came the railroad with its work horses and mules. The railroad procurement folks were buying alfalfa in a big way, but most farmers in that area grew other crops. They said, ”Yeah, there is one guy outside of town who has some” and sent them over to the Bartlett farm. He demanded 6x what alfalfa should have cost. They walked away and found other sources — for a while. After exhausting all other sources, the railroad company came back and signed a contract with him at his price.
He became very wealthy.
After the railroad was built, he took his profits and eventually helped found the Bartlett-Collins Glass Company. Bartlett took a risk. The railroad could have been delayed and his alfalfa gone moldy. But he saw the opportunity and seized it.
Don’t success stories of others stir your heart and make you look around for something, hoping to find that “deal” and cash in, changing your family’s fortunes forever?
Physical silver offers a similar that same opportunity today. In my view, I can obtain this commodity cheap when nobody wants it. I am persuaded that soon it will be in short supply and high demand.
Very few people want silver and very few are buying. The price has been pushed down from the 2011 highs of $49 per ounce to the $15 range today. But even with few buyers, supplies seem to be getting thin, according to a growing body of anecdotal evidence. Such evidence will cross a threshold into generalizable empirical evidence as the individual stories of tightness become the norm and not the exception. For now, buyers like us can still find as much silver as we can buy — for less than the cost to mine it.
How soon will silver gain value? Nobody can be sure. Probably not until the world economies collapse and after the rebuilding begins. In the meantime, it will fluctuate up and down in price within a prescribed range. Silver is not an “investment” where you can see an annualized return like in your mutual fund account. We live in unique times, with increasing government debt fueled by a system of central banks and their market makers that profit from increased debt, interest rates and inflation. This flood of debt has distorted markets and placed a millstone around the neck of the global economy. Our currency system is fluid, ever-changing, and can be easily shaped by this system of central banks, who continually tweak it to their advantage and profit. Unfortunately, that means inflation for us worker bees.
As a boy, I collected coins and had a number of pre-65 silver. But I did not understand money or fiat and was blissfully unaware of the changes of our monetary system in 1971. I was too busy being a kid. Then my coin collection was stolen (by a close relative and used for bus fares as I later learned in a confession) and I became discouraged and stopped collecting altogether. I still didn’t understand money.
I began my recent odyssey into silver ownership in late 2010 at age 51 as the price ran from sub $20 to nearly $50 per ounce. I went crazy — just like great, great grandpa — buying every sub-spot ounce I could find at pawn shops, antique stores and eBay. As those sources of metal dried up, I began large purchases from online dealers and looked like a financial genius until May 1, 2011. The rest is history. But my silver is not going moldy as I await the building of the railroad. It is just delayed. Paper losses of 50%? Yes. Wiped out? No! (Unless my relative comes to visit for a week...)
In late April of 2011, I was trading ProShares Ultra Silver (NYSE:AGQ) options — a paper derivative of silver. We lost a very nice paper profit the day they allegedly got public enemy #1. I have only dabbled in paper trading since then, each time earning losses as my bullish enthusiasm refused to give way to the reality of the manipulated metals markets. In 2014 I opened a trading account for futures and traded silver and gold futures options to hedge my metal. But metals turned bullish, briefly, I got overexcited and jumped in the long side. Got burned again in an overnight session when I could not exit the trade. “Missed it by that much” as Maxwell Smart would say
And that is the difference between holding physical metal and trading paper derivatives of metals.
My employee retirement fund is locked down until I retire or quit (10 years away) and only allows me to invest in Wall Street products. So I cautiously trade paper derivatives of metals with a core position of 70% in SGDM (Sprott’s Mining Fund) with a fairly tight stop. I day trade the other 30% in Direxion Daily Junior Gold Miners Bear 3X Shares (NYSE:JDST) and Direxion Daily Gold Miners Bull 3X Shares (NYSE:NUGT) as the metal manipulators push them up or down. My bias is to the down side. I have done OK this year — not great.
If Bartlett had been holding futures contracts on alfalfa to sell to the railroad, they would have laughed and moved on. Horses won’t eat paper promises, and paper promises will not convert into alfalfa if there is none for sale in the marketplace.
Can you believe this situation we are in?
Silver prices are at $16 per ounce, but it costs more than that for most mines to produce it — let alone profit. The price is pushed around by a huge derivatives market of futures contracts traded on margin. But the dealers will sell to you at this centrally-planned price. I continually educate myself to stay encouraged that holding physical WILL one day pay off. I have a plan to sell out systematically, depending on the state of the economy and the value of metals. You should draw up a plan also.
I hold metals (70% silver and 30% gold) for the future of my family — to start over after whatever kind of collapse hits this world. I also wish to pass something on to my descendants. If I am fortunate, we will profit and perhaps start a glass company or something.