Jeff Clark, Senior Analyst, GoldSilver
APR 25, 2019
I wrote to silver last week, and she answered back. I'd like to share our correspondence with you…
I’m a big fan. You offer so many important benefits to an investor, and at such a low price. You’re a permanent store of value. You’re nobody else’s liability, so I know when I buy you, I’m not relying on anyone else to live up to their end of the bargain in a crisis. You are available in sizes that make you affordable for everyone and have been used as money for thousands of years.
You’re the history and you’re the future. Which is why it’s amazing to me you’re so unappreciated in the present.
I’m incredibly excited that I get the opportunity to acquire all your powerful attributes at a 70% discount from your record high, set this day 8 years ago, especially when all the reasons I bought you at $40 are even more relevant today than back then. I fully understand the explosive potential you hold, but I have to admit, the wait can sometimes be frustrating.
Is your price weakness almost over, or is it here to stay?
Jeff Clark, devoted silver investor
Here's her polite response:
Dear Mr. Clark,
I understand your frustration. The past eight years have not been fun.
But I have good news for you and your fellow investors. Things will soon change – and when they do I can assure you that you will be very happy with me.
There are five things I would like you to know…
Buy me in physical form and you get benefits most other assets don’t offer.
I am also more practical than gold.
And let’s not forget that monetary history equates me with money.
You automatically get all these advantages with me, many of which could be critical in the next crisis. And as you rightly noted, you currently get them for 70% less than you could have just eight years ago.
I am the most undervalued asset you can buy today.
Here’s proof. First, in relation to the stock market, I am actually cheaper to buy now, relative to the S&P 500, than I was during the depths of the Great Recession.
To simply match my price relative to the stock market in 2011, it would have to trade nearly eight times higher.
And look at my price relative to my cousin gold. I am cheaper now than I have been in past 26 years. Remember, the higher the gold/silver ratio, the cheaper I am compared to gold.
This is more significant than you may realize. Check out how I outperform gold once the gold/silver ratio (GSR) falls from the 80+ range.
Since 1995, the GSR has hit or exceeded 80 on five occasions. In the four prior instances, I outgained gold by a wide margin as the ratio fell. In some instances my outperformance was by a factor of three or four.
You’ll also see that the current GSR (as of 4/5/19) is higher now than the prior four occasions, meaning any reversion-to-the-mean behavior could lead to bigger percentage gains than I’ve logged in the past.
Finally, notice that once the ratio reserved, in every instance except one it fell below the average, sending my price significantly higher, and took multiple years to fully play out.
This is all to say that:
My advice to you and your friends is to continue accumulating me while I’m still cheap. Someday, I promise you, I won’t be.
My price doesn’t always shoot up when gold starts a new bull market, in spite of the fact that I almost always gain more than gold before the uptrend is over.
Here are gold’s five biggest bull markets, along with my performance. You’ll see that I usually trail gold in the beginning stages of a bull market – then surpass it. Take a look.
In three of gold’s five biggest bull markets, I trailed the gold price in the beginning stages. I caught up and eventually passed gold’s total return, but it is perfectly normal for me to get off to a slower start than gold.
In other words, what’s happening now is very similar behavior to three of the bull markets shown above.
But you can also see this lag in performance is only temporary: As history shows, I have outperformed gold in every major modern-day precious metals bull market.
Here are a couple good examples of how my greater volatility will hand you more profits… check out how much more I gained than gold in the two biggest precious metals bull markets of the modern era:
Because my market is smaller than gold’s, this kind of outperformance is very likely to repeat in the upcoming bull market.
I know it’s frustrating to watch my price, along with many other assets, be manipulated.
But there’s something important you should know about this. History unequivocally shows that:
They end for different reasons, depending on the nature of the manipulations at the time, and there are a couple specific reasons they’ll end this time around, too.
First, even though conspirators today use fraudulent paper forms of me to carry out their manipulations, some physical metal is always required to put on these trades. And at some point in the not too distant future, there won’t be enough of me to go around. My supply is disappearing as we speak, and this will diminish the number, and effect, of the manipulations that can take place.
Second, while the manipulators have some control today, the next crisis will overwhelm them. That’s because it will be of epic proportions. We’re in the middle of the Everything Bubble, and once it breaks down, there will be millions more investors and trillions more currency chasing after me than there were in the 1970s.
Not only will everybody want a piece of me, there will be many entities that could engulf my market, just like in the past.
In other words, the manipulators will run out of physical silver to play their games with, and the effects of the next crisis will overrun them, especially once inflation kicks in. Everything changes at that point, and anyone trying to manipulate my price will be destroyed. Remember, I’ve been around a lot longer than them.
In all honesty, it will be quite fun to watch. And highly profitable for you and your friends.
There are numerous catalysts that can and will ignite my price. And as you showed in your presentation, once the next bull market gets underway, the tiny size of my market will cause my price to explode. It won’t take much cash flooding in to send my price to the moon.
Here’s a fun example. Warren’s Buffett’s company Berkshire Hathaway could use its cash to gobble up every registered ounce of me at the COMEX – as the tiniest appetizer!
Yes, this graph is to scale. And this is just one company out of thousands with enough cash on hand to easily gobble me up – imagine the hundreds of hedge funds, thousands of institutions, billions of investors, and trillions of currency units wanting a piece of me. The subsequent rise in my price will take your breath away.
All you have to do is hold on, and make sure you own enough of me. When demand skyrockets again like it has in the past, and when my role as money reasserts itself, I will trade at MUCH higher levels.
My advice is to not fret about my lackadaisical price behavior.
In fact, I offered to bet my cousin gold that I’ll outperform him before this cycle is over. He declined, because he knows what my price can do in the right kind of environment… the very kind we’ll see ahead.
The clock is ticking. Don't set yourself up for regret when my price leaves $15 in the dust. Make sure you own enough of me to both weather the coming storm as well as log massive profits. Sooner or later, it’s coming.