Silver
Soaring By Howard Ruff
The Ruff Times - Jun 8 2009 9:54AM
I
have recommended gold and silver for a few years. In September/October,
2008, we went through a difficult period for all when gold
managed to hold its own, and stocks crashed up to 60 percent.
Now the stock market is still down, even after a 30 percent
rally. Silver took a beating.
Now silver is nearing a new high. It went as low as a little
over $9, and is now almost $16. It’s a long ways from being
too late to buy in.
Some of you are asking me about storing metals with the seller
or buying ETFs. No! No! No! That’s paper metal, and there
is no way to ensure they are actually putting aside the metal.
One of my recommended companies, Investment Rarities (www.investmentrarities.com)
works with a bonded storage company that will store 1,000
oz. bars of the metal for you. They will give you actual serial
numbers on the bars, and you can take possession of it on
demand.
But if you have a 1,000-ounce gold bar, how would you use
some of it to buy groceries? The best way is gold and silver
coins. Silver coins will be the most useful for the quantities
in which most people buy things.
I also prefer silver because it is less likely to be seized
by Government. Government will probably not even want to seize
gold as Roosevelt did. At that time, gold represented government
wealth and Roosevelt wanted to repair the government’s balance
sheet. Right now, the government is treating gold as just
another commodity, and they are making gold coins and selling
them. So it is possible, but not likely.
There is very little likelihood that they will ever want
your silver because the silver market is so tiny it will not
make one bit of difference to them. So seizure is less likely.
Fake-outs Continued
In the last Ruff Times, I wrote about stock market fake-outs
– false rallies that raise false hopes. Now more financial
advisors are telling everyone the market seems to be recovering.
Don’t believe it!
During the big stock market crash from 1929 through the 30’s,
the market had a huge one-day drop in 1929, then rallied dramatically
into 1932, and then plunged to its eventual low of the Dow.
I believe we will see more fake-outs, and we’re seeing one
right now. This market rally has no legs. Short-term speculators
will probably make some money if they time it right, but that’s
not my game. Stay with investments that have the best long-term
trend ahead of them.
Someone once asked, “Howard, you have always said ‘buy low
and sell high.’ The stock market is low, shouldn’t I buy now
then sell high?”
No, the market is not low as measured by its high PE (Price
Earnings ratio) and its sagging earnings, which will get worse
as time goes on. The market cannot withstand the major inflation
we will see towards the end of 2009. Don’t listen if some-one
tries to suck you into it. They will try to get you to play
the short-term trader’s game, and that is a loser’s game.
Eventually the market will win.
If you are a speculator and can afford to lose the money,
then go ahead and lose it or stick with the long-term trends.
My job is to ferret out the trend of the future and that trend
is inflation. Remember Will Rogers said, “Invest in inflation,
it’s the only thing that’s going up.”
The most money to be made by betting on inflation will be
doing it while the fundamentals are clearly being laid. Prices
have not yet reflected it, but they will.
When I do speaking engagements, the brokers in the audience
won’t like what I have to say. Wall Street has never approved
of me, but I am still here, and most of them have left the
brokerage business.
I will go out in a blaze of glory and bet my future (with
less of it left) that I’m right. All you need to make money
is guts.
Subscriber Question
Dear Howard,
Please make a statement about an exit strategy from gold
stocks, if they have a huge increase. What if a gold stock
goes from $30 to $80? Do I cash out and go to a weaker dollar
again within my brokerage account? Convert to another currency?
Thanks,
Jason
Dear Jason,
What you suggest is a short-term strategy where you juggle
your money to try to take advantage of short-term moves.
If you sell your gold or silver, you will be hit with a 28
percent tax on your gain as a collectible. We are working
with two senators and one congressman to change that tax rule
so it could be ordinary capital gains. But why should you
reward the government with any amount of taxes for your perspicacity
in buying silver or gold stocks.
Don’t jump from one train to the other. You could fall on
the tracks, if your timing isn’t perfect.
My recommendations are for the long-term only, and I will
not try to out-guess short-term moves, even if we have spectacular
moves which tempt you to take profits and find a cheaper place
to put your money. It’s up to you, but you’ll have to do it
without my help.
Another Query
Several subscribers have asked me about investing in the
Swiss franc in place of gold. The Swiss franc is backed by
gold.
Back in the ‘70s, when I was on Wall Street Week, one guest
host chewed me out for not recommending Swiss francs because
they had done so well. My defense was to point out that gold
and silver I had recommended were doing even better. Nevertheless,
a lot of people made money in the Swiss franc as it was a
very strong currency versus the dollar and served as an adequate
inflation hedge. The franc was not as good, but still pretty
good.
Build your portfolio around precious metals bullion and coins,
but if you wish to put some of your money into the Swiss franc,
that’s fine. You can open a Swiss bank account and put the
cash into any currency you want, or even put your Swiss bank
account into gold or silver.
I will write more about this later, but in the meantime,
I don’t object to buying the Swiss franc, I just don’t think
it is as good a hedge bullion.
The franc is fine as a hedge against the dollar as it weakens
against other currencies.