It was only 6 years ago that I was touring Austin, TX in search of bargain real estate properties. I came into a precious metals shop, and there were 6 people forming a line ahead of me.
I wanted to get to know the people in the neighborhood before I began to make offers on rental properties, so I asked them if any of them were selling silver in order to buy cheap foreclosures, like I was.
They laughed at me and said that “the real estate market isn’t coming back” and that “there’s shadow inventory and trillions in mortgage derivatives that are going to send prices lower.”
In fact, they said, “you should do what we do: buy silver now at $42, because it’s going to hit $65 soon.”
Silver has never gone past $49, and the production cost is about $15. The prices they were shouting out felt imaginary, so I told them that “no commodity sells for a 300%-400% premium to its production cost.”
They almost became violent because I attacked their notion of silver.
Today, I called that same shop and inquired about how business is going. He said that since Trump’s election, new people have stopped showing up and regular customers either come less often or visit him in order to sell.
He even jokingly told me that “they’re probably shopping for a new home now that prices have more than doubled, while you’re asking me about silver for a 60% discount to 2011 prices.”
Remember the most important rule of investing: never get emotional or fall in love with any asset.
Today, investors hate silver. Not only that, but you don’t see the people who were willing to shave their heads if silver doesn’t reach $100 “in 3 months” – they’re not around, but their hair is surely intact.
Silver never reached $65 or $100, but it doesn’t have to for us to make a fortune with mining shares.
Study the supply chain of silver and you’ll see that it is mostly mined as a byproduct of zinc, copper, or gold.
It’s so cheap that building a profitable mine is increasingly difficult, but because zinc and copper are only just now snapping out of multiyear bear markets and no one is able to discover zinc for 2 decades, the supply aspect of industrial metals and silver, which is a precious metal with thousands of industrial uses, is looking tight.
As you can see above, people are spending again. Consumer confidence is close to its high in 1999, and I see it heading higher, especially if tax cuts come into play.
After 9 years of slow growth, the world is consuming again and looking to grow quickly.
Between 2000 and 2007, China was in growth mode and commodities were on fire.
After 10 years, the cycle is ready to begin again.
Copper will lead the pack, as always.
Keep your eyes on $20 silver because that will mark the birthday of a new commodities super-cycle.
Silver is going for the kill.