December 11th, 2021

Why Silver is the Best Play for Retail Investors Right Now

Dear Retail Investor,

I ain’t selling my silver.

Back in 2011, I bought 160 oz of silver American Eagles.

I paid about $40 per coin.

Since silver’s going for about $24 an ounce right now, that makes it look like I made a big mistake.

But I don’t think so.

And I suspect that anyone who buys silver at today’s prices will be very happy in the months and years ahead.

The reason?

No matter what asset class you compare it to, the “poor man’s gold” offers a better value than almost anything else.

And I mean anything.

I say this is because silver’s one of the few assets that is still wallowing below its 1980 highs.

Back then billionaire Hunt brothers Herbert and Nelson Hunt tried to corner the silver market

They believed that the rampant inflation of the time would make silver a superior way to store wealth.

So they started buying silver commodity contracts hand over fist.

But instead of closing out those contracts at expiration, they took delivery.

Then they stockpiled all their delivered silver and used their billions to buy even more futures contracts.

Those aggressive moves triggered an historic demand for silver, which skyrocketed to $50 an ounce.

Eager to get in on the massive run-up, countless everyday people began pawning silver coins, silverware and silver jewelry.

Unfortunately for the Hunts, the run-up also caught the attention of federal commodities regulators.

They saw the Hunts’ actions as a clear attempt at manipulating the price of silver.

So they passed temporary rules to prevent long positions to be written or sold for silver futures.

Those rules stopped the Hunts from increasing their positions.

And as a result, silver cratered all the way down to $11.

Can silver regain its former glory?

I’m betting on it.

Yes, the Hunts were responsible for silver’s huge run-up back in the 1980s.

But the fact that silver is selling for less than half that 41 years later seems incredible, as all other metals are trading higher than they were at the time.

 

As you can see from this table, most have doubled or tripled since 1980 (with Rhodium up a whopping 1,400.6%).

But silver?

The shiny white metals’ is going for about 53% of its 1980 highs.

It’s the same story when you compare silver to timber, oil, and the stock and real estate markets

Lumber is about three times higher than it was in 1980.

Meanwhile, heating oil has more than doubled.

And while crude oil’s down from its 1980s highs, it’s not down nearly as much as silver.

So how about silver vs. the stock and real estate markets?

Take a look…

 Can you imagine if silver matched the gains these other assets have seen since 1980?

Keith Neumeyer, CEO of First Majestic Silver (NYSE: AG) is calling for $130/oz silver

And he’s not ruling out $1,000 silver, either.

Neumeyer sees triple-digit silver prices in part because he believes the current market mirrors the years of 2000 – 2001.

Remember that period?

It marked the tail end of relentless bidding for virtually any stock ending in “dotcom.”

The meltdown that caused was spectacular – from March 2000 to October 2002, the tech-heavy Nasdaq cratered nearly 80%.

It took nearly 15 years for the Nasdaq to recover those losses.

Neumeyer believes it’s only a matter of time before the market corrects like it did in the early 2000s.

 And when that happens, he expects gold and silver to experience a huge surge in investor interest.

Much of his belief is based heavily on Western governments’ massive money creation and their eagerness to take on massive debt loads.

He believes this monetary craziness will continue because governments have painted themselves into a corner.

If they stop all their fiscal stimulus, they fear the markets will collapse… but if they continue their easy money policies, they’ll make today’s rising inflation far worse.

“This scenario is very supportive for gold, and of course that will drag silver along,” Neumeyer said in a recent interview.

He also said that increased consumer demand for silver can’t help but boost prices.

“We’re consuming, as a human race, over 1 billion ounces of silver annually, and miners are only producing about 800 million ounces a year,” he said, adding that those production numbers have been dropping for three straight years and are now at about 750 million. 

There are two key takeaways to all this

It’s maddening to watch other assets climb while silver continues to wallow.

But there are two key points to consider:

  • Silver is the most undervalued asset an investor can buy right now (a situation that can’t last indefinitely).
  • Silver is a monetary metal, and given the crazy nature of today’s monetary system, the potential upside of holding the metal is huge.

So IMO, it’s definitely a great time to buy physical silver or select silver mining companies.

I like Neumeyer’s First Majestic Silver, which has a market cap of about $2.8 billion.

In my mind, that means it’s  got plenty of room to grow.

And it’s also a consistent producer right now.

In fact, the company expects silver to contribute about 55% of its revenue in 2021.

 That makes this Canada-based company one of the purest plays on silver in the mining sector. Most other companies that focus on mining silver only expect the metal to account for 27% to 45% of their revenues in 2021.

It’s also worth noting that First Majestic focuses on Mexico because that country produces more silver than any other nation.

Right now First Majestic operates three mines in Mexico and has several other silver mines there under development.

So there you have my rationale for silver’s inevitable rise… 

And why there’s no way I’ll let go of my American silver eagles.

Doug Fogel
Contributing Editor, Dear Retail

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