Archive for Buying Silver

How Not to Buy Silver

How Not to Purchase Silver

Hey All-
Quick note for you.  Sorry I’ve been away, but it’s the last week before school starts and I wanted to spend a little extra time with the family before things get crazy again.
I recently wrote an article that will soon be posted on the Freedom Bunker website that talks about my brother’s interest in making his first precious metals purchase.  There’s nothing new or revolutionary about the information in the article – there’s nothing in it that isn’t posted at least a couple of times around this site, but as you know, my goal is to assist others in acquainting themselves with these markets.  I wanted to post a little extra something on my brother’s experience as a reminder to you about how not to purchase silver.
My brother’s in a bit of a rush to make this purchase.  He’s excited about the new venture, and he sees that prices are starting to pop a little bit.  Right there is a state of mind that we need to be aware of.  Whenever we find ourselves thinking that we’re going to be missing out on something and we believe we need to act quickly, we get distracted and our thinking gets unclear.  As I’ve written several times already, we never want to chase price in these markets.  We never need to because they’ll come back to us… almost always.  My brother is not a trader.  He wanted to make his purchase and hold it for a while.  He holds no silver or gold right now, and he’s not going to worry about purchasing at the exact bottom.  Even though we’ve had a nice rise off of the June bottoms, I think we’re close enough to them to establish an opening position.  He’s got about $10,000 to invest.  I’m not an “all in” kind of guy, so if it was me, I might do half now and wait for the next correction.  That next correction, though, could come $50 higher, maybe much higher.  We could see price blast off.  That’s the greatest danger in a bull market such as this – being out of it when price takes off. Take a look at the left side of the price chart below.  If we had waited for the pullback in 2010-11, we’d have missed out on a $30 move – ouch.
buy silver

We don’t want to buy into an uptrend… usually…

As I mentioned in my Cheap Gold article (when gold was cheaper!), as soon as you make your purchase, the price is going to drop anyway.  There’s some sort of metaphysical law at work here. I’m just kidding, of course, but it seems like that’s the way it often happens.  The bottom line is that though we never want to buy into price rises, I think now is still a good time to get your feet wet here.  There’s more to this story though…

Wheelers & Dealers

I just got off the phone with my brother.  During our last conversation, I recommended that he do some online research and find some local dealers near him.  I suggested that he check prices and reviews for several dealers, and that’s just what he did.  He’s a Glen Beck fan, and if you follow Mr. Beck, you know that Goldline is one of his advertisers.  Just for kicks, my brother gave Goldline a call and here is what happened:
My brother described the Goldline representative as “a used car salesman;” fast talking, fast moving, ambiguous and dubious.  He was quoting 1 ounce gold bars/coins in the $1600 range (that’s $200 above current spot!), he was attempting to sign my brother up for an account (not sure what for) and he told my brother to FedEx his check the next morning in order to take advantage of the excellent offer.  This is classic.  This is very similar to what happens when these companies call you with these “unbelievable” offers. You never want to do business like this.  You need to know current prices for the items that you’re interested in purchasing and you never want to be rushed into signing or sending anything.  You want to be able to look over any agreements.  If anyone is trying to convince you that you need to do it “right now,” it’s because they are a salesperson who knows that their best chance for making the sale is “right now.” These guys and gals are experts at what they do and they’ll have you standing on your head if you’re not careful. They prey on the uninformed and the meek.  Fortunately, my brother is neither.  He got caught up in the sales pitch, though.  He stated that before he knew it, he bought some gold that was too high in price and that he didn’t really want.  He did not send them a check though and does not plan to.  He is expecting some nasty phone calls from them because of it.  I’ll let you know what happens.
We don’t have to get into situations like this.  There is too much information available to us.  We can prepare ourselves to make wise and timely purchases.
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So silver and gold are continuing their beautiful moves.  We’ve got a nice little rhino horn forming on the weekly chart, but that horn could grow longer and higher… or not.  There are dozens of sites offering multiples of forecasts out there.  Block out the noise and keep stacking.  More soon.  J.

Physical Silver vs. Paper Silver


Should You Buy Physical Silver Only?

Okay.  Last time we met we were wondering if there were any viable alternatives to having to deal with all that heavy, bulky, beautiful, hard to conceal goodness when you buy physical silver.  We were introduced to a few of them:  Silver ETFs, stock in silver mining companies, and Comex silver futures.  [Click here if you missed that last article on Silver ETFs.]

Right off the bat, I’m going to say that anytime you’re dealing with paper silver, there’s going to be some sort of monkey business involved.  In fact, anytime you’re dealing with paper anything, there’s going to be shenanigans and controversy.  That’s just a reflection of our times and one of the reasons that the current system is on its way out.  I’ve played these games and usually ended up paying a fairly high tuition to the University of Investors in the end.  I’m not going to blame the markets for that, though, I was just a lousy investor.  Let’s look more closely at some of these paper games.

The Comex

The Comex is the House; and the House always wins.  The rules are in their favor and when they’re not, then they change them.  Allegations of impropriety and illegality are omnipresent.  I mentioned last time that buyers on the Comex make their purchases on margin.  How many times during silver’s bull market has the Comex suddenly raised margin rates, thereby requiring “investors” to come up with immediate cash or have their buy physical silveraccounts closed.  I can’t tell you how often… In fact, you can tell me.  Look at a long-term silver chart, and those long red “fishing lines” are exactly when that happened.  Rallies were stopped cold by violent drops in the paper price.  Who decides when to raise margin rates?  Well, you won’t hear it admitted, but it’s probably the large banks who own the enormous short positions in silver.  Price drops, they cover some shorts and make landfills of money.  Investors who own silver contracts have an option to “take delivery” of their silver at the end of their contract, and there is plenty of talk that there is not enough silver in the Comex to cover that eventuality.  We discuss this a bit in the Silver Shortage article.

SLV

The SLV, otherwise known as the iShares Silver Trust, has its own issues.  There, too, are rumors that there is not enough silver in the fund.  (That was the original attractiveness of this fund:  That there would be actual physical silver upon which to base the stock.)  Rumors abound here about the actual amount of silver held or if there is physical silver shortage there.

Miners

We mentioned previously that the silver miners have been hit hard.  The stock prices of many of these mining companies haven’t been this low since the beginning of the bull market.  For this reason, looking at it from a contrarian perspective, the stock of the stronger companies a probably offering incredible value right now.  Check out some of the charts of these miners and see how they performed over the last ten years or so.  Incredible gains are possible here, but timing and research is everything.  Also, Jim Sinclair strongly recommends that you get your stock certificates in paper form from your broker.  Just to be extra safe.  Let me close this paragraph about the miners with this from Mark Twain:

A gold mine is a hole in the ground with a liar standing next to it.

Do your research if you want to invest in the miners.

PSLV

There’s a new kid on the block as far as paper silver is concerned.  It’s the Sprott Physical Silver Trust.  Don Sprott’s been around the block more than a few times and is a pretty sharp and trustworthy fellow.  This physical silver ETF claims that the Trust holds only allocated physical silver.  That’s a pretty strong reason for investing in it.  There are other favorable reasons such as location of storage in Canada and tax advantages for US investors.  You can continue your research at the given link.

Before we go, I want to discuss a little bit about some called the 2X and 3X ETFs.  These are funds that track a particular entity like a regular ETF, but they magnify the moves (up and down) two or three times a typical ETF.  AGQ is one of these 3X ETFs that track the moves of physical silver.  NUGT is a 3X’er that tracks the miners.  They might sound tasty on the surfacing, particularly of you’re convinced that silver or the miners will be heading strongly in a certain direction, but I think these are suckers games.  They might be okay for hedging short-term moves in these markets, but longer term – forget about it.  There’s to much depreciation to these and losses are too common.  If you’re tempted, do your due diligence.

So, that’s paper silver for you.  After all of that, I still encourage you to buy physical silver.  If you want to diversify, then you can maybe look at some miners or get some PSLV.  I read an article once who’s author stated “There will come a time when all paper will burn.”  My gut is speaking again, and it’s telling me to buy more physical silver.

Thanks for reading.  If you liked this article, don’t be shy!  Share your comments and questions, and share the article on your favorite forums.  Sign up for email updates as well!  You can be strange, but don’t be a stranger.  J.