This past week was a rough one for investors long silver and gold. Silver in particular underwent a severe pullback from recent highs above $19, falling through support levels to its current range of $15 plus or minus a quarter. If you're like me - in it for the long haul - and don't employ stop-loss strategies, the recent plunge been a time of soul-searching and gut-wrenching turmoil. So what's causing the correction? The fundamentals haven't changed. Manipulation by the shorts? Check out what Ted Butler has to say, and listen to the man. He knows what he's talking about.
If this is a case of the bullion banks, led by the usual cast of shady characters like JPMorgan, shorting the market massively again then, at some point, they'll have to fill their shorts and that should bouy the market back to its previous levels. Silver will recover, in time, to surpass its earlier highs. Of that I'm confident. But will it wallow in the short term? Possibly drifting even lower? It could, according to J.Derek Blain, who feels that silver is currently overvalued. http://www.kitco.com/ind/Blain/jan132010.html
I happen to disagree with him, but my rationale is tainted by my long positions in bullion and mining equities. I want silver to outperform, so my perceptions are colored by my bias, shoring up my own rationale. Although I feel that hyperinflation is imminent, and that silver will surge farther and faster than gold, a more cautious investor might prefer to sit in cash and wait to see if we might first enter a depressionary phase, with concomitant cheaper entry points in to precious metals. Robert Prechter is a leading proponent espousing this viewpoint.
Nearly anything can happen in the short term. Technical analysis can be misconstrued and that distortion misinterpreted to buttress arguments that are polar opposites. In the long run, our nations debt binge ensures that hyperinflation will eventuate, but that could be a few years off. I believe that precious metals will ultimately be the place to be to survive and thrive under that scenario, but in the interim anything could happen. The bull will try its best to buck market-timing opportunists.
Since predicting the direction of the markets at this point seems to be nothing more than crystal ball gazing, I'm going to depart a bit from my usual rants. About the merits of investing in copper bullion. That by accumulating copper pennies minted before 1982, one can begin to take a small position in copper bullion. Copper is quite likely to gradually appreciate in value, even in the absence of inflation. Most heads are turned by silver and gold, but someday tongues will wag about what copper has done. Nor am I going to go off on one of my raves.
About how the economy is sliding into an abyss, like how California slides into the Pacific Ocean in 2012. The movie, that is. I'm not quite sure that will literally be their fate. But figuratively speaking, if Arnold doesn't hurry up and do something quick, he'll be remembered for something else than his memorable line in Terminator. If things don't improve soon, Governor Schwartzennegger's "I'll be bach," will refer to his futile begging - for bailout funds for the state - at the steps of the Capitol.
No, today I'm going to use our time to share what can happen if you're not careful. If, despite your best intentions to purchase bullion for its content and its recognized role in wealth preservation, you become seduced by its secondary nature. The real purpose of buying silver and gold, and taking physical possession of it, is not to admire those baubles. It is to maintain your purchasing power. And silver and gold's track record indicates its excellence at that task. They have increased far more in worth, since this century began, than the toll inflicted by inflation.
Unfortunately, you don't see the glitter for the gold, nor the shimmer for the silver. I know, I know... it's supposed to be the forest for the trees, but give me a little license here, okay? Those who own bullion will soon learn what numismatists have known all along. Hold some of those little fellers in your hands, and if it doesn't stimulate the collector impulse in you, there's something wrong with your wiring. Once you get started, there's no turning back. You can easily empty your wallet on one coin. Here's where you can go outside. Make sure you're alone. Then scream "Aaaaaccckkk!"
As bullion investors, we're supposed to be getting the most for our money. That means buying used, worn, silver coins. Dimes, quarters, halves, dollars. Anything before 1965. Doesn't matter what denomination. Doesn't matter what design. Roosevelt, Mercury, or Barber dimes. Washington, Standing Liberty, or Barber Quarters. Kennedy, Franklin, Walking Liberty, or Barber halves. Lump 'em all into one category, and call them junk silver. Circulated coins. You buy junk silver for its usefulness in barter should their be a TSHTF meltdown. And its recognized value as bullion.
You want to get as much as can. Think Jack Lalanne as you make your buck stretch for all its worth. What you don't want to do is get suckered into paying exorbitant premiums for scarce high-grade, top quality, brilliant uncirculated coins. Do not, and I repeat do not fall in love with a gem, choice coin of any type. I don't care if it is without blemish. I don't care if it has an astounding luster. I don't care if it has scintillating fields, nor captivating reliefs. It doesn't matter if it's an MS67, and PCGS has only slabbed three. You're not listening, are you?
I know I didn't. I fell head over heels. After I began accumulating junk silver, I soon became enamored of certain designs. The majesty of the Walking Liberty half dollar. The grace of the Winged Liberty dime. The poise of the Standing Liberty quarter. And a personal favorite, the Grecian-sculpture-like dignity of the Barber series of dimes, quarters, and halves. Designed by Charles Barber - the sixth Chief Engraver of the United States Mint - they were placed into circulation in 1892 and produced until 1916.
In 1893, people used them to gain admission at the Chicago's World Fair - the Columbian Exposition - held to commemorate the 400th Anniversary of Christopher Columbus's arrival in the New World. People spent them - as Teddy Roosevelt and his Roughriders charged gallantly, on thundering steeds, up San Juan Hill in 1898 - during the Spanish-American War. They were still using them as change in 1917 when America abandoned isolationism and took arms to assist the Triple Entente, fighting The War To End All Wars.
They spent their Barbers. Not me, I'm hanging onto mine. They are a wonderful collectible, with a fascinating history. They may not be as popular as the Morgan Dollar among hobbyists, but they still represent a good investment. They are increasing in value as the years pass. And if hyperinflation does occur, if there's any buyers left after the repercussions, an exquisite collection of Barber coins ought to fetch a good deal. There have been periods of time over which investments in rare coins had returns that rivalled or exceeded most other asset classes.
And the title? I do need a good Barber. But not because I need a close shave. I'm as bald as a baby's butt. But I still have a few slots to fill in my album, and I'm always on the lookout for a good scarce date Barber dime in extra fine condition. Wanna make a buck? Keep an eye on your change, or go rifle through Gramma's coffee tin. If you find an 1894-S, or an 1895-O, or heck, even an 1893-S, and it looks real shiny, like no one has ever touched it? Send it to me and I'll zip a check off to you for ten dollars, right away. As long as it doesn't say copy on the back side, in Chinese.
Buy Silver. Buy Gold. Save Copper. Start Now.