Thursday, December 18, 2014

Silver in 2015: You Asked Why

Silver use to be present in our currency, but as citizens became aware of the economic policies of our government and the Federal Reserve, it disappeared. You see, people began to horde dimes, quarters and half dollars for their silver content. Today, the old coins are called "junk" silver. In one aspect the government is glad that they are no longer present because they will remind all citizens in the value of money, especially related to our standard of living. For example, today a fifty-cent piece is worth one ounce of silver or around $16. bucks.
When you contemplate that aspect and consider an ounce of silver was worth over $40. bucks at one time, you realize that silver and precious metals are not going down in value, but up. I will not get into the philosophical debate of precious metals backing our currency for this piece. I believe by now, dear reader that you know where I stand. After all silver and gold is in our constitution not fiat worthless paper money.
Losing Battle
The powers to be run the show. They write the laws and they will rewrite the laws to make them look good and to give the appearance that everything is kosher and above board. There is no point to make because they will not give it a voice or present the view in a fair forum. With that said let us turn to silver in 2015.
do not horde. I still believe in holding precious metals, but one only has so much money. I'm working under that guideline. As stated in previous blogs, I favor Silver Wheaton mining company. They are a streaming company which means that they lent money to miners because banks won't and they receive silver and or gold in repayment for the loan. In addition, the company pays you a 1% dividend that you should use to accumulate more stock not cash. There are many other reasons for silver in 2015 and I will now state them.
Before I progress, let me digress. Silver and mining companies trade in a range. This is what I mean by trade. Buy your favorite at the low end of its range, wait and sell as it approaches the high end. Don't be greedy and hold for the low and top just be in the range and you can do this over and over again and have a good year in trading. The days of buy and hold are over. Like Rodney Dangerfield use to say, "Look out for number one, but don't step in number two."
by that I mean fiat paper is still being printed above the GDP to the tune of 5-6% a year. This is devaluing of the currency. We have not seen it for two reasons. Every other nation is doing the same thing and QE is a digital mark on banks ledger. When it comes into play, inflation will show up in spades. By the way, speaking of the Fed and printing money, do you know what capital ratio means for a bank? It is the ratio of assets to debt. The Fed is down to 1.26%. If the value of the Fed's loans decrease by that amount, the Fed would be bankrupt. Of course, we know that this cannot happen because they will rewrite the laws and print more to cover their asses.
just rewrote its laws. They will now charge you to hold your money. It is not a tax only a fee. Yeah, right! The crooks got banks to charge you to hold your precious metals, back in the day, which is one reason why so few have some and now, they will put a fee on your deposits. One today, all tomorrow!
Basic Economics
the law of supply and demand will effect the price of silver in 2015. Miners have cut production due to low prices. With less production coupled with a rising demand, silver is golden. You can see this already in Canada, one of the world's leading resource nations. For the first nine months of 2013 Canadian producers had 510 million ounces and during the same period in 2014, down to 373 million ounces of silver. It is the same for South American, Australian, Mexican and Chinese producers. This is the supply side and you ask, what about the demand side?
U.S. Mint
had its best year in selling American Eagle coins. They sold a record 42.86 million ounces. Demand has returned in India and two other classifications.
use for silver will grow at 5-7% in 2015. I see a big future demand with water purification and jewelry will add another 3-4% which only adds to the price because supply will decline with the miners cutbacks in production.
There is one other aspect and that is the buying of gold by central banks. China leads the parade, and then there is Russia. Even though the ruble is down 45% to the dollar, it does has some value as 6.2% of the fiat ruble is backed by gold. I mention this because there has always been a ratio of gold to silver. From 1970 until recently, the ratio has been 55 to 1 and today, it is 73 to one. There is a big upside just to close the historical ratio, especially when both were currencies the ratio was 16 to one. Keep this in mind, a stock like Silver Wheaton does not cost you anything to hold. It is secure with the broker and it pays you a dividend. Case closed as to the latest fee orientated banking industry.
silver has a top resistance at $22. per ounce, but if it breaks through, it goes to $33. non-stop. Watch the volume and price spread at that point because this story has a silver lining.