America’s DAYS OF DESTINY
December 11-18, 2012
Due to the massive financial dangers now threatening your wealth, we are interrupting our normal editorial schedule to bring you a crucial series of articles designed to help you shore up your financial defenses before the new year begins. We will return to our regular publishing schedule on Wednesday, December 19. — The Editors
With the fiscal cliff deadline just two short weeks away, there’s no time to waste in preparing for what comes next — whether it’s economic fallout or a series of semi-heroic measures our legislators adopt to keep us (temporarily) afloat.
Members of my Asian Century service know that the best way to make money right now with U.S. stocks is to invest in those that do big business in Asia. But what are Asia’s investors — most notably, its government — buying? Precious metals.
And not just that, but China is encouraging its citizens to load up as well!
It’s no wonder, really. To preserve your prosperity during times of market instability and economic uncertainty — and right now certainly qualifies — there’s no better protection than owning physical metals as part of your overall global wealth-building strategy.
When most people think of precious metals, the shiny yellow kind comes immediately to mind. But all that glitters isn’t (just) gold. Silver offers a compelling investment opportunity — one that can even outshine gold.
In fact, the Lloyds TSB Private Banking Commodities Monitor recently named silver the best-performing commodity of the decade, thanks to a 572% rise between 2002 and 2012. And it’s got plenty more room to run!
Just like when you’re buying stocks, you have every right (and opportunity) to get the most bang for your buck. But that’s not the only reason why I’m a fan of silver. In fact, I’ve got five more reasons why this often-overlooked precious metal can produce some spectacular returns in even the ugliest economic environments.
Speaking of ugly economies …
Inflation or Catastrophe Ahead?
How to Get Ready for Both!
Once we see some resolution to the cliff crisis and everyone shifts their attention back to Europe, I believe they will be quite surprised by just how much uglier things have become there.
The European debt crisis is a serious problem — one that could plague Western stock and bond markets for a long, long time.
Or it could end abruptly, with massive and painful economic disruptions that would rival our Great Depression.
I believe there are only two possible outcomes to the European debt crisis:
• The European Central Bank spends (prints) trillions to buy Italy, Greece, Portugal and other spendthrift countries’ semi-worthless bonds. The problem is that the amount is just too big. The cost of the Italian debt is US$2.7 trillion alone. Add in Greece, Portugal, Belgium, France and the like, and you could be talking about US$6 trillion or more. That is a lot of money to print.
• The European financial union breaks up in a chaotic manner and creates massive financial panic. European countries are forced to go back to their old (now new) currencies, and banks collapse and close.
The first outcome is extremely inflationary and the second is simply catastrophic. But neither is out of the realm of possibility.
And if you think the headlines to date about Europe have rocked the global markets up until now, imagine the effect either of these scenarios would have on your wealth!
That’s why you should always have a store of wealth that isn’t tied to the financial markets … but one that’s good in every country.
Metals: Your Best Protection from
a Global Economic Meltdown
Even now, billions of dollars are fleeing Europe, and those dollars have to go somewhere. That “somewhere” has been the U.S. dollar, U.S. stocks and U.S. bonds … but this won’t last for long.
We’re only a few rungs lower on the ladder of a soaring debt burden, and our forced austerity measures are on their way.
It may not happen next month, but I cannot see any other long-term destination from what is becoming a global debt crisis other than precious metals.
Silver often gets ignored in the precious-metals investment discussion. But it has some unique characteristics that, in my opinion, make it a better investment than gold. In fact, there are six major factors pushing silver into the investment spotlight in a big way:
6 Reasons Silver Can Make Your Portfolio Shine
1. It’s Money: Paper money has no intrinsic value and is simply a creation of government fiat. Both gold and silver have been used for centuries as a medium of exchange and are still alternatives to paper currencies. Therefore, they largely trade based upon that monetary component.
Many countries, including China, have long used silver as a medium of exchange. The use of silver in China can be traced back as far as the Han Dynasty (206 B.C.-220 A.D.) and has been used by Chinese royalty as a medium of hoarding wealth.
2. Industry Relies On It: Gold is used extensively for jewelry but it has no industrial use and trades almost purely as a reserve currency. Silver, however, has many industrial uses
Silver is strong, malleable and ductile, and an excellent electricity conductor. That makes silver extremely useful in industry, medicine, photography and of course jewelry. Silver has properties that cannot be duplicated for other metals.
- Silver conducts heat better than any other metal.
- Silver conducts electricity better than copper.
- Silver is one of the best reflectors and is a critical component in most solar applications.
- Silver is a biocide that inhibits bacteria growth and is used in products that treat wounds, protect food, and for anti-odor textiles.
Industrial use is why the demand equation for silver is superior to gold. Since the Silver Institute began keeping track in 1990, silver consumption has outpaced silver production by an average of 1 BILLION ounces EACH YEAR.
The supply dynamics are also better for silver. Just about all the gold that has ever been mined in history is still available in jewelry, bars and coins. Silver is similar to a commodity like copper or oil in that it often vanishes after it is used for an industrial purpose.
That is why 87% of gold production goes into coins, bars and jewelry while only 35% of silver production goes into the wealth storehouse purposes. Sliver is much more dependent on industrial demand,
3. China Is Scooping Up Silver. The outlook for sliver is heavily dependent on Asia in general and China in particular. China had been a net exporter of silver in the past but that changed in 2007 and China is now a net importer of silver.
China produced/bought 21% of world total silver production in 2010.
Over the last five years, China’s demand has grown by 11% a year. At this pace, its demand will grow from the current 163 million ounces to 251 million ounces by 2015.
Asians (especially the Chinese) have a love affair with precious metals. Gold and silver coins, bars and figurines are given as gifts at many special occasions — weddings, births, graduations and birthdays — and many families keep a substantial portion of their savings in precious metals.
Both the wedding season and the Chinese New Year are right around the corner. So, there is a strong season effect thanks to a demand bulge from Asia.
4. Today’s Monetary Policy Is Tomorrow’s Inflation. As we discussed earlier, I see precious metals as the only winner from the European debt crisis.
It isn’t just Italy and Greece, though. All over the globe, governments are creating irreversible deficits that are funded by central banks printing cash like crazy.
The U.S. is part of that spend-too-much group. Thanks to the Federal Reserve and our spend-a-holic Congress, our national debt has jumped to more than $16 trillion … and grows bigger by the month. Standard & Poor’s already downgraded U.S. government debt.
Between the threats of inflation and the debt bubble, silver may be your best financial haywire insurance.
5. It Provides Big Value at an Affordable Price. Historically, one ounce of gold typically bought 15 or 16 ounces of silver. Today, that ratio stands at 50 times and I believe you will gradually see silver fall back toward its long-term mean.
Silver isn’t just the “poor man’s gold” — it offers investors the opportunity to build a substantial position without paying a king’s ransom. It simply provides a better value than gold today.
Plus, if I’m right about precious metals, silver will give you a lot more bang for your buck. Over the last four decades, a 1% move in gold is matched by a 1.75% move in silver — both up and down.
If gold goes up … silver will go up even more.
6. Big Brother Says “Buy.” The Chinese interest in silver is accelerating as the government urges its citizens to invest in silver.
The advertisements for precious metals are plastered all over the television and radio airwaves these days. However, it is one thing for companies to advertise their wares but it is quite another for a government to officially push specific types of investments to its citizens.
The Chinese government, though its state-owned TV channels, is actively urging people to buy gold and silver bullion.
Here is a link to a one-minute YouTube video of the launch of a campaign to encourage the purchase of silver bullion:
China’s Central Television, the primary state-owned and -controlled television station, recently reported on the ease of precious-metals investing.
What it had to say about silver caught my attention, and should be on your radar, too.
“China has introduced its first-ever investment opportunity for silver bullion. The bars are available in 500 grams and 1, 2 and 5 kilograms, with a purity of 99.9%.
“Figures show that gold was 50 times more expensive than silver in 2007, but now that figure has reached over 70 times. Analysts say that silver has been undervalued in recent years. They add that the metal is the right investment for individual investors and could be a good way to cash in.”
The Chinese government would not lead its 1.3 billion people to financial slaughter if it too was not accumulating silver and gold. I think it is highly likely that these advertisements were precursors to the Chinese Central Bank shifting a significant proportion of the country’s cash reserves into precious metals.
Most precious metals overlook the less-sexy silver market but that is a big mistake because silver very well could outperform them all.
If silver sounds appealing, you’ll have to make the decision whether to invest in the stocks of silver miners or in the physical silver itself. Both have their advantages but I believe that everyone should have a small cache of both gold and silver bullion/coins.