Minyan Mailbag: Physical Silver
Thought I'd chime in from Down Under!
Editor's note: The original email was written to Prof. McGuirk on December 8th.
Silver is up 30% from the late August low, an impressive move in such a short period of time. Is there more leverage (upside) in the mining stocks versus the commodity at this point?
Sorry it took so long back to you but, many balls are being juggled at present and you slipped through to the wicketkeeper. I was just hunting back for something and found the red flagged mail. Sorry mate.
I'll write a silver paper early in the New Year. $8.50 silver has plenty of leverage but I think the shares have more at current levels. Think free cashflow increases.
Shares will only outperform the metal when people are comfy with the silver price at these higher levels. Many people are looking at 30 year charts and looking for back to $5 or 6. It doesn't look like they (share investors) are looking for continuing higher silver prices due to their "lethargy" in recent weeks. Sudden price spikes in silver are scary for people to jump on the equities, as they have seen too many nasty declines/reversals... just like last week! The shares will go nuts, way faster than the silver price, as the production of silver is so concentrated.
The question is when? I don't really care because I'm in no rush, but I think silver could justifiably be trading today at $12-15. Silver could double in a few months and I still wouldn't sell an ounce of my personal physical metal. The metal equities are an entirely different bag of prawns and should be actively traded.
I wouldn't have my money in property, bonds or any paper money so I guess you can call me a perennial silver metal and equity holder in the current market environment. I'm unconcerned which has greater leverage as everything comes down to timing. Someone buying Newmont (NEM) in Jan 2004 has just broken even ($50) whilst gold has risen 15% in price. They have made the right call on gold but have seen no reward, and at one stage had a minus 35% reval! Hmmm.
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