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Published: October 7, 2009
The global economy is in a lull right now. Some
expect a recovery sooner, rather than later. Others, like us,
think that we could see a second downturn. Either way, there’s
one investment you need to own right now: Silver.
Silver is the most flexible metal on earth. We’re not talking
about its malleability. We’re talking about how it is used.
Let’s take the point of view of those expecting a quick,
painless recovery. In that case, silver is a great investment.
It has many industrial uses other precious metals don’t. As the
global economy kicks back into gear, we’ll see more demand from
electronics manufacturers, battery makers and solar cell
producers -- all of which use silver in their products.
There are thousands of uses for
silver in industry. It is used in
water purification, medical
machinery and, of course, jewelry.
All of these industries will begin
to pump out products again, which
will put a strain on our limited
aboveground silver reserves. Now
take a look at the world through the eyes of those thinking we
are going to see a second collapse. The best place to store
wealth is in precious metals. Of course, gold is the most common
place to store cash, but silver is no slouch.
From 2006 until now, the physical holdings of silver funds have
jumped 11-fold. That’s because more people than ever are
interested in holding silver -- or at least a fund that holds
silver.
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Silver is both a way to safely store your wealth and to spend
it. Over the past several centuries, silver has been used as
currency. In fact, our own U.S. dollar was once backed by
silver. For those expecting the worst, silver is a must-own.
These ETF holdings don’t even take into account how many people
are stocking up on personal physical holdings.
There’s no shortage of demand. Everything is in place for
another massive run-up. Gold already broke the $1,000 per ounce
threshold last month. And it busted through its 2006 highs this
week. Even so, silver is still lagging around $16.50.
David Morgan from Silver-Investor.com notes that when gold
breaks through $1,000 and stays there for a length of time,
silver will shoot up. He even went as far as to say silver will
break through last year’s $21 high and hit $25 per ounce
sometime in 2010.
Are we suggesting you buy silver? Well, yes. But we have a much
better way for you to make money off this rise...
Buying shares of a major primary silver miner like Silver
Wheaton (NYSE: SLW) would do the trick. It’ll certainly
leverage its massive reserves and production against silver’s
rise and return larger profits to shareholders than simply
buying silver will. But even these gains will be miniscule
compared with what you could see with small-caps.
We have an opportunity to get option-sized gains on silver’s
rally without the downside or expiration hassles of actually
buying options. By buying shares in a junior silver miner, like
Hecla Mining (NYSE: HL) or Mag Silver (AMEX: MVG),
we can take advantage of huge price swings without worrying
about it expiring worthless, as options often do.
In just the last week, Hecla is up +15%, and Mag is up another
+5%. As I write, these stocks are continually pushing into new
2009 highs ever day. When the silver boom gets traction in the
market, expect small players like these to rocket as a result.
-- Jim Nelson
Managing Editor
Penny Sleuth Editor's Note: This
article originally appeared in
Penny Sleuth. |
