Silver Lining for Nervous Investors
by Robert Kiyosaki
mess is widespread, and it seems to be getting worse. It's
certainly worse if you're about to lose your home.
The stock market is schizoid -- up one day and down the next.
If you're a day trader, this volatility is pure heaven; if
you're getting ready to retire, it's likely to give you a
As for commercial real estate, it's a great market. I just
bought a 350-unit apartment house in Tulsa with an assumable
loan at a 4.9 percent interest rate. Rents are low, the oil
business is creating jobs, and demand for apartments is high.
As with any market, the real estate business is terrible
for some people and couldn't be better for others (like me).
But as much as I love real estate, I believe the biggest
opportunity today is in silver. I think this precious metal
is about to become the most spectacular investment in recent
history -- bigger than oil, even bigger than Google.
All That Glitters
Let me give you some reasons why:
Silver is a consumable industrial commodity.
It's used in computers, cells phones, and electrical relays.
This means that as countries like China, India, and Vietnam,
and regions like Eastern Europe, become more modernized, the
demand for silver will increase.
Silver is also applied in medicine. One little-known use
is as a bactericide, a role silver has filled throughout history.
Today, medical devices such as catheters and stethoscopes
use silver, and every hospital in the western world uses silver
sulfadiazine to prevent infections.
Silver is scarcer than gold.
Gold is hoarded. It's estimated that 95 percent of all gold
ever mined is still around. The exact opposite is true of
silver: An estimated 95 percent of all silver ever mined has
Forty-five percent of all silver mined is burned up in industrial
uses. Jewelry accounts for 28 percent, and 20 percent has
been consumed in photography. Only 5 percent is in coins.
Silver supplies are down.
In 1900, it was estimated that the world had 12 billion ounces
of silver. By 1990 it had dropped to 2.2 billion ounces. By
2007, the supply was down to 300 million ounces.
Some of the more pessimistic forecasts estimate that the
world will be out of silver in about 10 years. This could
be catastrophic to the world economy. In 10 years, silver
might have as much of an impact on the world economy as $200-a-barrel
A Safe Haven?
As a precious metal, silver is also money. And as the U.S.
dollar drops, gold and silver are seen as a hedge against
a loss of value. As more and more people wake up to the reality
that their cash is trash, real estate is a gamble, and the
stock market is too volatile, silver may be a great safe haven.
As I write, silver is approximately $13 an ounce. If industrial
consumption continues and monetary panic sets in, who knows
how high the price will go? Between 1979 and 1980, silver
went to $48 an ounce. In today's dollars, that would be the
same as $80 an ounce.
And recently, exchange traded funds in silver have been added
as a way for investors to hold silver. The reason I find the
silver ETF so intriguing is because an ETF represents real
money -- not fake money like the U.S. dollar.
The ETF Solution
Prior to 1963, a U.S. dollar was real money that could conceivably
be exchanged for silver. After 1963, it became a Federal Reserve
note that was no longer backed by silver. A silver ETF is
similar to old-time money, then, and as the U.S. dollar continues
to drop in purchasing power these new ETFs may become the
"new old money."
The significance of the new silver ETF is that it makes owning
silver simple and convenient for the general public. Owning
silver ETFs is easier than owning physical silver, which is
heavy and requires security such as a safe. And owning silver
ETFs is safer than buying a silver mining stock, which can
Silver ETFs are also pretty straightforward: If silver is
$13 an ounce, you buy so many ounces at that price. If the
price of silver goes up, you make money; if the price goes
down, you lose money. The risk is minimized because you're
buying physical silver -- you aren't buying a share of a silver
company, which can go bust. As long as the ETF is honorable
and protects your silver, your investment is secure. (A caveat:
Silver ETFs haven't proven reliable yet, so use caution if
you take this route.)
A Rich Find for Investors
My prediction is that the industrial demand for silver will
continue to go up as the wider world becomes more modernized.
At the same time, as the dollar drops in purchasing power,
the average investor will wake up to the convenience of owning
silver ETFs and start to buy them.
Consequently, the ETF side will dry up the silver supply
for the industrial side. Someday in the near future, then
-- maybe in two to five years from now -- these two forces
will collide and the price of silver will go up faster than
anything on the market today.
The Birth of a Silver Bug
I personally became interested in silver in 1957 as a 10-year-old
boy, when I began collecting coins. I became a true silver
bug when, in 1965, the federal government took silver coins
out of circulation and reduced the silver content of a silver
dollar from 90 percent to 40 percent. I immediately began
getting bags of coins from my local bank and scratching through
them looking for real silver coins.
Little did I know that I was simply behaving according to
Gresham's Law, which states that good money goes into hiding
when bad money enters the system. Today, I still have the
silver coins I socked away as a kid.
While it's true that I could've profited more by putting
my money into investments other than coins, my love of silver
caused me to watch and understand the silver market. After
five decades of doing so, I'm quite certain that silver will
soon emerge as not just a good investment, but a spectacular
one -- maybe even a once-in-a-lifetime investment. Of course,
I've been saying that for 50 years now, so take my advice
with a shot of tequila.
Anyway, there are three ways to play silver:
Buy coins from a coin dealer
Buy shares in silver mining companies
Cautiously buy silver ETFs through your stockbroker
Yahoo Fiance News Posted on Monday, August 20, 2007, 12:00AM