Another View On Silver - Coin Community Forum

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Author	Replies: 16 / Views: 2,610	Page: of 2
biggfredd Rest in Peace United States 9104 Posts	Posted 06/25/2011 10:14 am Silver Is Hated. Time to Buy. Here's the Best Way... -- By Dr. Steve Sjuggerud It's official... Silver is hated... A couple months ago, silver was loved... more than any time in recent years. Back in April of this year, "Silver Fever" was in full swing. I've never seen such optimism about silver. And the price of silver peaked right along with investor optimism. Silver is notoriously volatile... The last peak in investor optimism about silver was back in early 2008. At that time, silver had just poked its head above $20 an ounce. In late 2008, investor sentiment in silver bottomed, and the price of silver bottomed below $10 -- a fall of over 50%. Silver then soared to near $50 in early 2011. By May, it had dropped below $34 -- a fall of about 30%. Today, it sits around $36 an ounce. Once again, investors have given up on silver. Astoundingly, investors are as pessimistic as they were back at the end of 2008. After that pessimistic bottom, silver soared fivefold in less than three years. Could it happen again? Yes. While silver is notoriously volatile, shares of silver stocks are even more volatile than the price of silver... Shares of Silver Wheaton fell from $20 a share in early 2008 to around $2.50 a share in late 2008 -- nearly 90%. Then the shares soared from $2.50 to peak around $47 in April 2011. Said another way, $2,500 invested in Silver Wheaton at its bottom in 2008 would have turned into $47,000 at its 2011 peak. That's when I told subscribers that I expected a severe fall in the price silver... and that shares of Silver Wheaton would get hurt... but that we would continue holding. The correction in both silver and Silver Wheaton was more than I expected. But now, shares of Silver Wheaton are incredibly cheap relative to the price of silver. Take a look at this chart... It's my valuation indicator for Silver Wheaton. When the blue line is below the green one, Silver Wheaton is cheap. And when the blue line is above the red one, Silver Wheaton is expensive. Right now, Silver Wheaton is extremely undervalued. It's my favorite way to own silver. This next chart shows my "fair value" indicator (in gray) versus the stock market value of Silver Wheaton. This indicator is simple... It's 20 times Silver Wheaton's net cash flow from silver production. Silver Wheaton forecasts it will produce 43 million ounces of silver in 2015. Multiply that times the net silver price per ounce of $32 ($36 per ounce market price -- $4 per ounce cost to Silver Wheaton = $32) and you get net cash flow of $1.376 billion. Multiply that by 20, and you get a fair value in 2015 of $27.5 billion for Silver Wheaton. So if silver stays at $36 an ounce, Silver Wheaton's fair value in 2015 will be $27.5 billion Meanwhile, Silver Wheaton is currently valued at $12 billion. From current prices, Silver Wheaton is a double in waiting... Of course, if the price of silver goes up... which it very well could... you could make more than 100% on your money between now and 2015 in shares of Silver Wheaton. In my True Wealth newsletter, we own shares of Silver Wheaton with a wide 50% trailing stop. If you buy Silver Wheaton, I strongly suggest you use the same wide stop. One thing is certain with silver and silver stocks: The ride higher will be volatile. But at these prices, you must check out Silver Wheaton. Good investing, Steve This article was brought to you by the Daily Wealth. Report this Post to the Staff

mitchhailey Pillar of the Community United States 1150 Posts	Posted 06/25/2011 12:35 pm Good article, BiggFredd. Definitely time to buy. Market manipulation by JP Morgan and others is key to the current low price. They can only suppress it for so long. Report this Post to the Staff
reupman Pillar of the Community United States 597 Posts	Posted 06/25/2011 3:42 pm wait 100% by 2015 umm at 10% for lets say mutual funds per year plus dividends you'd make really close to that without the worry of falling silver prices or the loss of the barrick mines in Peru in 4 years is the loss of those mines going to make people like me sell just before you take profits? Report this Post to the Staff
biggfredd Rest in Peace United States 9104 Posts	Posted 06/25/2011 4:19 pm If mutual funds paid anywhere near 10% a year, I'd be in them. Report this Post to the Staff
chasinva69 Valued Member United States 259 Posts	Posted 06/25/2011 4:32 pm Sjuggerud doesn't really express "a view on silver" -- unless you could consider the obvious observation that it could go up to $49 again the expression of a view. He's touting a stock, Silver Wheaton. SLW has a p/e ratio of 30. That's cheap? No thanks. I can see buying the metal itself, but there are too many variables that go into a mining stock's price for me to jump in based on the possibility it could go back to $49 sometime by 2015. Edited by chasinva69 06/25/2011 4:33 pm Report this Post to the Staff
GoThunder Pillar of the Community United States 830 Posts	Posted 06/25/2011 4:37 pm Yeah, I like what Gartman http://www.thegartmanletter.com/ says about it...if you're bullish on silver buy the metal not the mining stock. Edited by GoThunder 06/25/2011 4:50 pm Report this Post to the Staff
chasinva69 Valued Member United States 259 Posts	Posted 06/25/2011 4:41 pm Quote: Yeah, I like what Gartman http://www.thegartmanletter.com/ says about it...if your bullish on silver buy the metal not the mining stock. Do you have to be a subscriber to read that? What does he say? Report this Post to the Staff
GoThunder Pillar of the Community United States 830 Posts	Posted 06/25/2011 4:49 pm Yeah he has a newsletter that is subscription only but you can get a free trial. He's on CNBC "Fast Money" show all the time, so that's where I get his opinions. Report this Post to the Staff
Ed_B Pillar of the Community United States 4008 Posts	Posted 06/25/2011 8:45 pm Silver Wheaton could be a buy but due diligence would be required before coming to that conclusion. I agree with others who point out the 30+ PE ratio. That is not "cheap", IMHO. Not with the S&P running at a PE of about 12. As to mutual funds not averaging 10%... before the decade of dual recessions (2000-2010), mutual funds that mimicked the market were up over 11% annually for the prior 60+ years. Yes, that can change and it did. The 2nd half of 2002 through 2007 were some very good years for a lot of funds. 2008 pretty much stunk for everything, although there was some PM action then. The 2nd half of 2009 and all of 2010 were pretty good years for most mutual funds. Like a lot of investments, these are things that are good to own but perhaps not good all the time. But then, what is? There have been times when PMs were flat-lined for decades. Stock guys refer to that as "dead money" because it isn't doing anything. Not that I wouldn't want to own some PMs most of the time but let's not kid ourselves that there is ANY investment that works great all the time. There isn't. If there was, I would be in it! Report this Post to the Staff
biggfredd Rest in Peace United States 9104 Posts	Posted 06/25/2011 11:03 pm In fairness, he points out that a drop in the metal can wreak havok with the stock, so the fundemental position is that the metal will rise. SLW is just a recommended way to play that rise, like buying options on the commodity or ASE. Report this Post to the Staff
Silverhawk74 Pillar of the Community United States 3670 Posts	Posted 06/26/2011 01:50 am If you are always buying, you will be in good position when the right time comes to buy.... Edited by Silverhawk74 06/26/2011 01:51 am Report this Post to the Staff
mitchhailey Pillar of the Community United States 1150 Posts	Posted 06/26/2011 03:29 am I do not see silver and gold as an investment. I see silver and gold as money. Cold, hard money. Platinum, palladium and rhodium. Now those are investments. Report this Post to the Staff
angel2004 Pillar of the Community United States 2168 Posts	Posted 06/26/2011 12:10 pm I, too see silver and other metals even nickels as investments. Now even the Greeks are investing in both Silver and Gold to make sure they have real hard cash. It's not even their own currency and the Greeks are doing this. So that tells me something. Report this Post to the Staff
Silverhawk74 Pillar of the Community United States 3670 Posts	Posted 06/26/2011 12:43 pm The Greeks are rallying to do whatever they can to get some fingers plugging those holes, even if it means selling their land. Might be too late for PM's to save them now, but the ones that "weather the storm", may be better off for it in the long run.... Edited by Silverhawk74 06/26/2011 12:44 pm Report this Post to the Staff
Ed_B Pillar of the Community United States 4008 Posts	Posted 06/26/2011 1:52 pm Quote: It's not even their own currency and the Greeks are doing this. So that tells me something. - Angel2004 It's good to watch what the people who are close to a situation are doing. Years ago, Mexican banks were paying 30% interest on passbook savings deposits. My folks had several thousand dollars on deposit there, which was quite a lot of money in those days. One day, I read a Wall Street Journal article on the increasing number of Mexican citizens who were sending their money to Nicaraguan banks for deposit. At that time, there was a civil war going on in Nicaragua, so it made me pause and think about what is it that the Mexicans knew that we here in the US did not? I advised my folks to pull their money out of Mexico, which they did... grudgingly. About 2 months later, Mexico devalued their currency, which would have reduced their deposit significantly. Report this Post to the Staff
biggfredd Rest in Peace United States 9104 Posts	Posted 06/26/2011 5:22 pm Note that those high-interest accounts require thedeposit be denominated in the country's (deficient) currency. As Ed sed, the problem is devaluation. For example, you take $1000 USD and the peso is three to the dollar. Your account is not $1000, it's 3000peso. A year later, you have 3900peso after interest. If you remove it and change back to $, you have $1300, a great return. Odds are, you leave it and make another year's interest. You now have 5070 peso, 69% more than when you started. When you go to remove your money, you have to exchange those pesos back to dollars. There was a 50% drop in the value of the peso, you now need 6 pesos to get one dollar. Your 5070pesos will now give you $845. Two years of 30% interest, compounded, and you now have 15.5% less than you started with. The reason they'd give you 30% is to turn their pesos into dollars, figuring the peso was going to pot. It's very similar to turning dollars into PM, figuring that when you sell the PM, you'll get a lot more dollars than you started with. If you borrow the money to buy PM, you pay it back and now have a bunch more dollars than you started with. Report this Post to the Staff
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