Big Silver Drop, Great Time to Buy!

Silver just took a huge drop, this is a great time to get in if you have not already.  Silver touched fifty dollars an ounce this spring and now has dropped down to thirty dollars today from around forty last week.  This is significantly lower than its high this year and many multitudes lower than its inflation adjusted high of 1980.  Many people may think that this is a bad signal for the metals market but, they are completely wrong.  The silver market naturally has huge swings because it is such a small market.  Pullbacks, even large ones, are a healthy sign for a bull market.   It is when bull markets turn into a parabolic increase that they reach bubble levels.  We are still a long ways away from silver or gold being a bubble.

Remember that silver is not just a precious metal, it is an industrial metal as well.  Even if the economy comes back strong, silver should do well in a boom just like oil or copper.  It is the greatest conductor of heat and electricity that occurs naturally in the universe.  This means we use it for everything, especially in the modern electronic age. There are literally hundreds of uses that you can find here.

We are in a totally unprecedented time in history when all the countries in the world have fiat currency.  Every single fiat currency in history has collapsed.  This has happened hundreds of times throughout the world as we look through time.  Hell, hyperinflation occurs in South America every decade or so! Even if you don’t buy everything I have been selling you about silver, you should at least protect yourself and buy a smaller amount of it just in case.  If you think that massive inflation or hyperinflation is a low probability scenario you should still have some capital invested into precious metals because it is such a high impact scenario.  Personally, I am confident this is a high probability, high impact scenario.  Consequently, I’m making a large portion of my portfolio out of silver.  Also, invest in physical metals to start out, don’t have all your gold and silver in paper stocks or shares.

Here is a movie on silver and gold investing by Michael Maloney.


Here is an article with more technical analysis.


Can Gold and Silver Keep Going Up?

Of course they can.  People told me that silver was a bubble at 14 USD an ounce (the same people who never saw the housing bubble or the dot com bubble).  It was at 40 yesterday and dropped to 36 today.  This is a great buying opportunity. Everyone should have at least 10% of their investments in physical precious metals, not stocks.  I have much more than that because I intend to make spectacular profits in the future but, 10% should be a safety net that everyone should have just to protect themselves.

Gold and Silver peaked in 1980 and then there was a bear market for twenty years. The reason that gold and silver dropped was Paul Volcker was able to push interest rates into the stratosphere, stopping the the 1970s inflation in its tracks.  Not only has Ben Bernanke said that he will keep interest rates low for years in the future (making the bust that much worse, see Austrian Business Cycle Theory) but, even if he wanted to bring interest rates up he would send the economy into a depression much worse than the one that Volcker caused in 1981.  This is politically unpalatable, the election losses for both parties would be a blood bath.  Therefore, the Fed tries to keep the unsustainable path of the inflationary boom going through even lower interest rates; simply kicking the can down the road to future politicians.

This is the first time in history that massive inflation and low interest rates have not created an artificial boom.  Alan Greenspan was able to do it after the recession of 1991 and the dot com bust.  But, no longer is this a possibility.  This is a bad sign, it implies that monetary expansion has reached its limit and the depression that the United States has been putting off for more than a decade is coming.  However, instead of it being the small storm that it would have been ten years ago, it is now going to be a hurricane that is going to wipe out the entire middle class, retirees, and anyone trusting in government promises.

Remember that when Volcker pushed interest rates up in 1981, the United States was the largest creditor in the world.  Now it is the largest debtor.  The United States had a strong industrial base but, now it has all been shipped overseas due to the dollar’s reserve status giving it artificial buying power.  Simply put, an interest rate hike, although healthy in the long term, would rock our economy to the very core due to the 20 years of malinvestments that would have to be liquidated and the massive economic structural imbalances that would have to be corrected.

This means that gold and silver have a long way to go before this thing is all sorted out.