What is “junk” silver?  Actually, it’s not junk at all.  These are US constitutional coins that were made with silver 50 years or so and back.  For example:

  • US quarters, dimes, and half dollars made prior to 1965 are 90% silver
  • Half dollars between 1965 and 1976. These are 40% silver.  You have a year (1975) that has no silver in it.
  • “War nickels” between 1942 and 1945.  The 1942 started during the year and these have a mint mark on the top back of them.  These are 35% silver.

 

Now that we know WHAT junk silver is – why do we need it?

In a previous post, I went into why this is a good time to buy silver.  Don’t really fret on price with this, mostly look at the gold to silver ratio – at an all time high.  Why is this important?

You look at gold at $1400 some an ounce, and you say, “it’s a rare precious earth metal used for a lot of things”.  Because of it’s rarity and demand, this has the price set at that level.  But many people don’t know that silver comes out of the ground at about 9 times that of gold.  Meaning, it’s still pretty rare.  It’s usually the byproduct of mining for other metals due to it seeming to bond with all kinds of fun things in the earth like zinc and lead.

But that leads to the question, why if it’s only 9 times more abundant than gold is it valued 85 times less than gold, per ounce.  That’s a good question.  If we did simple maths on this, we’d see that:

If gold is $1,457 per ounce today, that based on rarity, silver should be at $161 per ounce.

Or, rather, if Silver is $17 today per ounce, that gold should be $153 per ounce.

Today, instead, you can buy 85 ounces of silver for the price of one ounce of gold.  Furthermore, a lot of gold can be recycled, whereas silver is lost in the production process.

These numbers just seem way off.  And, to be fair, the gold to silver ratio does fluctuate often, but usually has it in the course of history at around 50:1.  Meaning, 85:1 is way out of whack.

So, silver itself is a pretty good means of storing wealth, as it is.

 

The list:

  1. High gold to silver ratio.  Covered above.  This is SCREAMING to be corrected soon.  Buy gold when the ratio is 40:1 or 45:1 and sell gold at 80:1 to convert to silver.  Likewise, buy silver at 80:1 and sell at 45:1 to convert to gold.
  2. Wealth preservation.  If you look at historical trends, when the stock market begins major sell offs, people convert their stock cash to metals until another bull market happens.  An indicator of recession is when metal prices start climbing.  If you take a look at the silver price in other currencies than the US dollar, you start to see the silver prices rising over the last 6 months.  Take a look at the Australian dollar, Euro, and Yen.  All three of them have sharp upward curves indicating that all of their economics have begun a recession.  The US GDP has taken a dip recently, and interest rates were lowered with the idea of lessening an impact of a recession.  This can also increase inflation, which makes your cash on hand have less spending power.  Buying metals at the beginning of a recession is the best way to preserve your cash wealth, today.
  3. Low premiums.  When you buy silver, you are also paying for premiums.  Of all of the ways to buy silver, this is amongst the lowest in premiums.   For example, if you buy “junk” silver at $.25 over spot, and the price jumps – you stand to make a good profit if you were going to try and flip quick.
  4. Numismatic.  Imagine if you buy $100 face value of mercury dimes today for about $1200 through one of the big metal dealers.  These are OLD dimes.  Reports say that up to 90% of all “junk” silver has been melted.  This means these coins not only have melt value, but some of these coins in really good condition with really low mintage can also have value.  Imagine if you hold on to a bag of these coins for another 20-30 years and more and more of those older coins have been melted?  You may be holding on to a fortune in numismatic value.
  5. When Shit Hits The Fan – SHTF.  This is the major benefit of junk silver.  People really can tune you out when you discuss this, as they think it’s more likely that aliens will visit than this type of thing.  I’m going to spend the rest of this post addressing this topic.

 

mad-max-fury-road-image-tom-hardy-josh-helman

The movie above was Mad Max – the earlier version with Mel Gibson may actually be the poster child for dystopian future movies.  My brother hates these kind of movie, but I always found them interesting from a study perspective.  My first exposure to this type of movie was “The Day After” when I was a kid, which dealt with the aftermath of a nuclear war.  Then there were movies like “Red Dawn” which calls to the prepper in all of us.  Then there’s Tom Cruise in “War of the Worlds”.  Or, perhaps Viggo Mortenson in “The Road”.  These types of themes also exist in minimalistic endeavors like “Gilligan’s Island” or “Lost” where modern conveniences don’t exist.  Let’s not forget the zombie apocalypse movies and TV shows like “The Walking Dead”.  OK – maybe zombies aren’t happening anytime soon either.  Let’s not forget about meteor movies or volcano earthquake movies.  This list is rather endless, but there’s usually some themes.

  1. A great tragedy happened.  Whether it’s a great depression part 2, a major war, alien invasion, or natural disaster.  If you look outside of the US, there are plenty of countries dealing with all kinds of these items today.  Or, possibly, look inside the US at the tragedy of the hurricane a few years back in Puerto Rico.
  2. Power outages.  Do you think any country in the world thinks it can fight our military head to head and win?  There are two real strategies to defeat the US – if conflict were to occur.  Have MAD (mutually assured destruction) with nuclear weapons or asymmetrical warfare with something like cyber, terrorism, or worse – economic disaster.  The last part there, economic disaster is my major concern.  Considering 95% of you are up to debt to your eyeballs and the only ability you have to buy things is either credit card or electronic debit card – what happens to you if the power goes out?  You have no access to your banking information and credit card purchases STOP.  Now, if this happens for 2-3 days, most of us will be fine.  But what if there was a coordinated terrorist attack to take out power grids in the northeast?  Some of the equipment used for this could take a year to replace.  Maybe some places like hospitals will be ok for a bit on generators – but you now have problems with gasoline delivery.  How do you pay for it?  Assuming gas goes into pumps, how are you pumping it and paying for gas? No one can get to work.  No work places have power.  No one is getting paid.
  3. Supply problems.  As mentioned above, power issues cause problems, but what happens when you do have cash and show up at the grocery store to empty shelves?  How are people paying for things with no power?  How are you keeping food from spoiling with no power?  Do you have canned goods on hand?
  4.  Conflict.  Whether you need something you don’t have, or you have something you don’t want to give up – these entertainment vehicles usually have some form of conflict.
  5. Barter/currency – how do you acquire goods?  In these futuristic movies, it always seems like 90-95% of people are dead.  How do you get goods?  In reality, it might seem like a good idea to raid houses, but it is probably very dangerous to do so and it would probably be better to find means of establishing markets and developing relationships with buyers and sellers.  If all you have is chickens, and everyone wants chickens, that might be “currency”.  But you might have wood working skills, but only a few people might need that.  Currency may be something that everyone can agree on.  You can’t really walk around with 10 chickens in a bag all day.

 

So with these themes, a lot of this boils down to how to survive.  Violence in some form may be a way of life, but surviving may mean avoiding as much violence is possible.  The people who “prep with lead” might be extremely well prepared, but when then are out gunned 35:1 in a heated gun battle, there’s no hope for survival.   Therefore, avoiding as much conflict as possible might be a golden ticket in the early days.

It seems that survival, by nature, might mean developing relationships with others. Isolation may mean certain death – if you are in a cabin alone with your go bag, you stand no chance against small groups, let alone large ones.  Think about people back in the day “laying siege”.  If you are isolated, short of being in an expensive, well supplied bunker for 4-5 years – you might be in trouble.  You can’t stay awake 24×7 to stay guard, and being alone just might get you killed.

With this all said, economic alliances may be the best networks to build.  Your chickens can trade for clothing or food.  Or, perhaps your silver can make you a banker or intermediary.  You can buy those chickens for pieces of silver, then turn around and sell those chickens at a market for profit.  This goes back thousands of years.

Think about putting your wealth into gold.  If you want to buy a big house in that scenario, maybe a few big bars of gold work.  But what about that loaf of bread?  If the smallest you have is 1/10th an ounce of gold, that means you are paying $150 for a loaf of bread.

Fractional silver to the rescue.  A silver dime is worth about $1.20 in today’s currency.  War nickels about $.95.  So you could really use the fractional silver to buy daily goods to use in times of strife.

Does it make more sense to buy supplies to hunker down by yourself for 5 years, or perhaps store 1-4 weeks of supplies and 5 years of silver/gold?

 

Those 5 years of supplies – it may come a point where you feel everything is pretty stable and you have all of these supplies.  What do you do with them?  Also – a lot of these things may only last a few years and not 20-30.

So, wouldn’t it maybe make more sense to have maybe 4 weeks of supplies and a few bags of silver change?

Imagine a world where SHTF, but is restored in 3-5 years.  The new currency will most likely be backed by silver or gold, as I doubt fiat will be the means of real currency moving forward.  Copper may also be used for maybe things like a quarter.  In that case, you could take your silver into a windfall of riches.  Your $1.20 dime piece could end up with a relative $10 value.  So you might be able to buy 4 loaves of bread with that one dime.

Numismatic values

Now – let’s assume 30 years from now, nothing happened.  The world did NOT go up in flames.  The year is 2050.  Virtually all of the coins you have are now nearly 100 years old.  There is of course the silver value, but what about the possible numismatic value?  Remember, as of today in 2019, 90% of those silver pieces have been melted.  In 30 years, what percent of what is remaining will be melted?   Today, you can get a roll of Roosevelt dimes for $62 at a local coin shop or a roll of mercury dimes (older) for $63.  Now, the mercury dimes have a lot more wear and tear, and potentially 3 to as much as 7 percent less silver due to wear.  So if you’re ONLY going for weight, Roosevelt dimes are a better investment, but if you plan on holding for 30+ years, Mercs might be a nice addition.  Less silver, but all of them will be over 100 years old in 2050.  When you buy these, look for years with lower mintages.  With the Rosies, you don’t have a lot of “rare” items.

Silver value

If you’re buying for the long haul or SHTF, you’re trying to get weight and not pay a lot in premiums.  This means fractional silver is your best buy.  It also looks like when a major recession happens, silver values shoot up.  Do you want to trade this in for fiat at high value?  Or…

Silver to gold ratio

At the time of this writing, it’s about 85:1 – close to it’s top value.  So if you get a pile of silver and then the silver to gold ratio drops to 30:1, you can convert your silver to gold.  When it goes back up to 70-80 to 1, convert it back to gold.  Do not convert to cash to just have cash.  You might want to hold back some of your more numismatic silver like the Mercs for this and use the weight of the Rosies to convert to gold.

Wealth preservation

In 2009 or so, I started working for a company where my boss was having to work another 2 years because a lot of his 401k was wiped out in 2008.  Those of you with 401ks that have been growing for 1-3 decades, I don’t think you have much to worry about.  Your stocks will go up and down and up and down – just don’t cash out at a down cycle.  Those of you with no 401k, and want to invest – the stock market is about to pop.  This is not a good buy time.  This is where you put money in metals, and when the stock market is at it’s low and coming back up, you can then convert metals to cash to invest in stocks.

What it seems a lot of very wealthy people do is sell off stocks and put it into metals when the stocks start to slide.  If you see that many foreign markets have silver prices trending upward for the last 2.5 years, you can see the US isn’t going to be far behind.

 

Silver prices going lower?  Yes – please!!  With the ratios where they are at, I would love silver in the single digits!!  Right now, it’s been around $17 for awhile.  It is clear to me that silver is a huge opportunity at the moment with the stock market cresting coupled with an all time high silver to gold ratio.  Silver production is down every year for the last 5 years.  It only comes out of the earth at 9:1 of gold, yet somehow is at 85:1?

If gold is valued based on rarity, then silver should be closer to the 9:1.  If it’s based on industrial uses, silver as the best conductor with electronics is the better value – and it’s used in the batteries for the electric vehicles as well as in solar panels.

So – what do I predict?

  1. If SHTF – fractional silver will get you the best chance of long term survival
  2. Wealth preservation – in times of hard economies, converting fiat to silver will help preserve your wealth for when the recovery hits.  It is also impervious to inflation.
  3. Long term investing – it seems it is easier to put physical coinage away rather than stare at money in your bank account to buy new things you don’t need.
  4. Speculation – if you buy a lot at $17 and it jumps to $30 or $40, you can double your investment overnight.
  5. Ratio exploitation – this is very interesting to look at.  You can grow your coinage by simply converting it to gold when the ratio dips, and convert it back to coinage when the ratio goes back up.  For example, at 80:1, you have 80 ounces of silver for every ounce of gold.  In 18 months, if it dips to 40:1, you can trade in those 80 ounces of silver for 2 ounces of gold, whereas today it would only be one.  When the ratio goes back to 80:1 2-4 years later, take those two ounces of gold and convert to 160 ounces of silver.  Do that for 30 years and send me a commission check later.
  6. Upside – with the decline in silver mining coupled with increased batteries in electric cars coupled with more solar power usage WITH the already 9:1 rarity of gold…there is a possible EXPLOSION about to happen with silver.  $100 per ounce?  It’s not lunacy.  It’s probably not likely, but there’s a definite path where this could happen.  In poor economies, gold demand can also decrease because people aren’t buying tons of jewelry.
  7. Numismatics – maybe the Mercs you buy in a bag today are worth $10 each in 2050 based on rarity?  Not likely – but some of them in the bag might be in VERY good condition.  Pick them out and put them aside.  It’s possible if you have a few hundred dollars in face value of Mercs that you might have a hidden treasure 30 years from now.

 

A few of my friends are really big on crypto.  I wrote about it in my last post, but it’s interesting to point out that if you compare fractional silver to crypto, the only real benefit crypto might have to fractional silver is speculation.  Imagine Bitcoin when the power goes out or in real SHTF situations where fiat is bunk?  Can you imagine someone pulling out a phone with virtually no battery trying to pay for a loaf of bread at a store with no power with his Bitcoin wallet?

However, I believe that bubble popped already.  There were people that go in at $20 per bitcoin that sold at $15,000 or more.  Imagine buying 100 bitcoin at $20 and selling them all for $15,000 each?  That was GREAT speculation – but a lot of people may have bought at $10,000 or $15,000 and it’s now worth $6,000.  I don’t see it ever really going back up in a frenzy like it did, and quantum computing might blow this all up if you’re able to mine these in a fraction of the time.

If you compare the bubble that just happened with crypto – I believe silver right now is like buying Bitcoin at $20.  I see it going way up in the next 3-5 years and I’d gladly sell it at $100 to you.  Someone bought Bitcoin at $15,000 – there’s always those that will buy silver when it hits $100 – because it could shoot to $200.

There you have it folks.  Fractional silver is where it’s at!!

If you like crypto, buy some crypto.  But for the love of god – buy mostly fractional silver!