silver .. this is from butler

Back To the Start

Ted Butler

http://www.silverbearcafe.com/private/8.08/start.html


This is an extract from the full article -

...Silver is a very unique investment asset. By that I mean that silver is an age-old investment asset that can't possibly become worthless or go bankrupt. It is an asset that is no one else's liability. It will always have worldwide recognition and ready liquidation value. There are not many other investment assets you can say that about. Any common stock or bond can become worthless. Silver can't. The closest practical example to this uniqueness of silver is gold. No knock on gold, but silver is more rare in terms of investment supply and less than 2% of the price of gold. Now there are strong indications that silver is becoming scarce, in addition to being rare. Holding gold may make sense, but holding gold and not also holding silver is silly, in my opinion. If there were no such substance as silver in existence, then I would be attracted to gold. But silver does exist, even though only a very small amount remains and it is incredibly low-priced compared to gold.

So, if silver (and gold) can't possible go bankrupt or go to zero due to its very nature and essence, should we apply standard risk/reward measurements to it? Common stocks (even silver mining stocks) can and do become worthless, while silver can't. That protection and guarantee against an investment becoming worthless should be worth a heck of a lot to an investor relying on common sense in an uncertain and illogical world. This is precisely the true meaning of "dimes to the downside, dollars to the upside." In other words, the real return to an investor who bought silver at $5 several years ago is not just triple his money over several years (at $15), but more than 30 times the amount he actually risked (say 30 cents compared to a $10 gain, so far).

Likewise, a new investor at current price levels, or an existing silver holder, should not realistically consider the full current price of silver ($15) to be at risk, as silver can't possibly fall to zero, as many other investment items can. Let's face it, it's not so much about how much you invest, because you either have the money to invest or you don't. If you do have the money to invest, then you must invest it in something, even if you leave it in the bank. The real question is how much of your invested money is actually at risk?

In the case of silver, the real risk is not the full amount of your investment, but some small portion of that, assuming you buy at low-risk times, like now, and buy the right kind of silver. Therefore, since only a portion of one's investment capital is actually at risk, I believe it is proper to view potential future returns against that risk, in addition to the total amount invested. Doing that, I would calculate the real risk/reward ratio in silver presently is 10, 20, 30 times, or more, to one. In other words, for every dollar truly at risk at current price levels, there will be long-term rewards many times that. Just as it was for silver bought at $5. ...

That seems sensible enough for mine.

dub