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Guest Post: What Form Of Silver Should You Hold?
Submitted by Simon Black of Sovereign Man blog,
Along with gold, silver has been considered money for thousands of years. In ancient Rome, for example, the silver Denarius coin was first minted in the third century BC. It contained about 4.5 grams of silver and would have a metal value worth roughly $5 in today’s money.
We talk a lot in this column about the importance of owning precious metals… and often for the sake of convenience, I lump gold and silver together in the same category. But while the two share similar characteristics as excellent inflation hedges and stores of value, silver has unique fundamentals worth considering.
For starters, while the entire gold market is small, the silver market is even smaller. It’s tiny. As such, silver is highly volatile and even more susceptible to wild price swings than gold.
This means that, in a boom, silver is going to rise more rapidly than gold. In a bust, silver is going to drop more rapidly. We saw this a few year ago after the Lehman collapse, silver dropped to $8, then subsequently reached a peak of $40. Gold’s roller coaster ride was nowhere near as severe.
This gives silver an interesting edge as a speculation. And one way to play this is to buy specific types of silver whose premiums soar during financial panics.
Last week, you heard from my friend Jake Lawless; he’s something of an expert when it comes to gaming the system, and I asked him to weigh in on this topic of ‘silver premium arbitrage.’ From Jake:
It’s true that not all silver is created equal. Every type of refined silver is going to sell for the spot price (melt value) plus an additional markup. This markup is called the premium… and premiums vary dramatically from one form of silver to another.
As I wrote last week, my preferred form of physical silver is pre-1965 US dimes, quarters, and half dollars… known in the industry as “junk”. Junk silver as an investment. It has a nice ring to it.
In a financial panic, people who procrastinated about buying real money (precious metals) all try to rectify the situation with predictable results. Suddenly, they want gold and silver, and junk silver is quite popular.
First, it’s easy to buy. Everyone in the US knows what a dime or quarter looks like, and all you really have to do is make sure that the date is before 1965.
It’s also easy to buy in small amounts. At $30 an ounce, a silver quarter costs $5.36 and a dime $2.13. More people can afford that than the hernia-causing 1,000 ounce bar at $30,000+. This affordability factor is a huge reason why demand surges for junk silver during panics.
When demand surges, the premiums go up. During the last panic in 2008, premiums on junk went from 29 cents to $4 almost overnight.
At the time, I went to my coin dealer and sold some physical silver for cash. The spot price was $25, so I received $25 + the $4 premium, or $29 per ounce.
Then I called my commodities broker and bought a 1000 ounce futures contract priced at spot, or $25. In this way, I pocketed the $4 premium, but I still had exposure to silver.
As expected, the world didn’t come to an end, and the panic subsided. Silver premiums returned to normal, and I soon took delivery of an ugly 1000 ounce bar. My coin dealer then swapped me for 1000 ounces of junk silver again.
So essentially, I swapped junk silver for cash, cash for a futures contract, the futures contract for a 1,000 ounce bar, and the bar for junk silver. It didn’t matter if the price of silver went up or down in the meantime… I ended up right back where I started, except that I put the huge premium in my pocket.
That’s the basic strategy, and you can do the same. Again, I use junk silver because I have not seen this kind of premium spike in any other form.
If you can, I recommend having at least $500 face value in these coins stored somewhere safe yet easy to access. At Thursday’s close, my dealer was selling junk at 35 cents over spot (or $34.45) with free shipping. A bag of $500 face contains 357.5 ounces and costs $12,315.88.
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I'm happy when I get pre '83 copper pennies for change. In the special jar they go.
My daughter was looking at the change out of her piggy bank the other day and I told her to look for coins older then 65 and she found some old nickles and I was about to tell her not to bother with them when I remembered the War Nickels. I asked what years were they and they were 1943s. Woot she hit the jackpot lol.
I prefer to keep mine in Tungsten bars.
Heck, I might even get lucky and pawn them off to some unsuspecting buyer as gold!
Ok buttmunch, swapping physical for paper : FAIL
Where I buy silver.
http://bullion.nwtmint.com/silver.php
The premiums are a bit high, but they are straight up.
They may be straight up, but how long does it take for you to get delivery? And the premiums are much better at other "straight up" places, like gainseville coins, for example, where you can expect to get your order within a few days rather than a few weeks if not a couple of months.
Sounds like a giant circle jerk to me--wonder if he'd been money ahead just sitting with cash during the so-called 'panic.'
In the end, the small premium you pay, even the $2 or $3 over spot for Eagles, is not going to matter. In the final mania phase of this bull market, the appreciation in nominal value will far exceed these premiums. Take delivery in 10 oz. bars or smaller, preferably government-minted coins (junk or bullion). This will make liquidation easier, when it's time to sell to the suckers at the top. If you're big-time, maybe... maybe... kilo bars.
I have silver stored in my teeth. Burglars try to find THAT when I'm not home.
Health insurance subsidized gold crowns, FTW!
$4 above the spot?! Wow where can I get a price like that? all dealers that I know sell at +10% and buy at -10%(at best), not that I am looking to sell but if I was forced to I would get a very bad deal(here in Europe). I guess it's different in the US or other places where gold/silver are still viewed as money not just jewelry
"US or other places where gold/silver are still viewed as money "
Don't tell the Berskank that, he may get confused
Of course, you could always buy nickel. That one is easy. The melt value of the metal in a nickle that you can get in change is $0.0518113. In otherwords, a nickle trades "over the counter" at a discount to its melt value. Not exactly the easiest to store in large quantities, but no premium either. Not a good speculative vehicle, but something that retains intrinsic value because people use nickle to build shit. 90% junk small demomination coinage probably has the least markup of coinage. Silver dollars, probably the highest. US Mint bullion is a ripoff. Another source that some folks I know have used with success: http://www.providentmetals.com/
It's only worth what you can sell it for… good luck getting anyone to pay more than 5¢ a nickle before the Mint changes the formulation.
And when it does, there goes a significant user of nickel, and the price with it.
A nickel is 75% copper...
Oddly ~ They've been talking about changing the nickle makeup for years now... Still ~ no action...
Kyle Bass & francis_sawyer bitchez... (I'm guessing his ARMY could kick my ass though)...
If you are talking about hyperinflation, the US Mint will stop churning out nickles. Oh, they will look the same, but the back will say "Good for $5,000,000,000 Bennie Bux".
just buy the shit...that is all
ps: what a fucking joke the paper price movement has been over the last 2 week/ years....
FUCK YOU BERNANKE.....
Bullets.
Wonder when the first tungsten silver 10 ounce bar will be found after a boating....
You won't get spot back for junk. Unless $500 bag and wholesaler is in short supply which is never.
"I ended up right back where I started, except that I put the huge premium in my pocket."
Unless the futures broker goes MFG...
Privately minted coins. Less premium but still attractive.
Reefer rounds, bitchez!
http://www.libertyleaf.com
My tenants love doing home improvement for these things. Gotta spread the wealth to friends and tradesmen. Once given, silver rounds become "a splinter in the mind", as Morpheus would say.
Junk is junk. If we are talking after shtf then do you really want to play: "my nickel is better than your nickel" w/ ur ignorant neighbors? Getting silver accepted as money will be tricky enough w/out charts/calculators/scales. Get yourself some clearly marked 1, 1/2, 1/4 oz coins/rounds.
Also, Jake's 'Game the system story' don't pass the smell test.... And you don't buy physical silver to make a quick buck either, but yea...silverBitchez.
Canadian money is at least lawful money, issued by Bank of Canada. Unlike those FRNs. For example, I wager that most Ron Paul supporters care whose image was on US money as long as it was lawful.
whatever is .999 and cheapest over spot at your local dealer or wherever you get it from, I could care less what the stamp is, don't want big and heavy, prefer coins
I agree. I have Buffalo rounds, Liberty rounds, philharmonics, silver eagles, maples, anything different I can get. Variety is one of the best parts of collecting silver.
My favorite junk silver is 1892 to 1916 Liberty head (Barber design) because they are not much more than other junk silver but at 100 years old would be least likely to be called in by the government in a crisis.
I stopped thinking of silver in USD terms a long time ago. Seriously. Ultra wealthy people who own signifigant gold think of how much weight they control and not how much of it is valued in a certain currency. More of the little people should think like this and they could not contol us so easily through their stupid clown bucks.
This guy is so full of shit, who is buying his "junk" for a $4 prem. over spot?????
Yaaaa...Simon Black, I should have known.
Simon is a Fuc'n Doosh!
Cheap chisling mooch that I am I just buy silver rounds of one or one half ounce. They say the weight and purity and people today think they are "coins" anyhoo.
This is probably going to get me junked (a lot), because it begins with the insane notion of paying $92/oz for silver.
http://www.apmex.com/Product/69575/2012_1_4_oz_Silver_Canadian_20_Queens_Diamond_Jubilee_Coin.aspx
What makes them interesting to me is they have a $20 CAD face value, so you've got downside protection and you get a little bit of the price over face back in currency exchange. I expect the CAD to continue to outperform the USD too.
You buy physical for about $35 today, but say silver gets another smackdown (to say $25) and you need to sell some, you're going to take a 30% hit. If you have these coins, you will never take more that a 15% hit, even if premium over face gets obliterated (and I think that's unlikely).
Now imagine this. You buy these uglies for $23 and silver drops to $25, but the premium isn't destroyed. Cash 'em in and buy bullion.
Still gets you out of the USD and fractional reserve banking system.
I'm not saying this should be your only silver investment, but I see some merit in the downside protection.
Have I lost it?
Yes you have lost it. For real.
You are limiting your downside, but at the same time crippling your upside. You are almost guaranteed a 15% loss.
Dude, even if silver doubles in price to 70, you still will only be able to get 20 bucks for your coin?!? If silver triples you will have broken even.
Absolutely insane.
Reread my post. I never said I wanted to hold these ugly coins for ever and ever.
If the CAD goes to $1.15, the premium I paid is taken care of.
These coins are more liquid than a 100 oz. bar (and will be even more so when the IRS starts sitting outside bullion dealers).
And ugly as they are, these coins will likely always carry a premium.
I see, it's a non-USD cash based deflation hedge.
At first I was thinking "why not just keep some cash sitting in an envelope waiting to BTFD, but you also want to do some FX arb too. But since your silver upside is so far off, why not just keep some Canadian cash on hand? It's less premium?
But in any case, maybe not totally insane as a niche play.
I figure the premium over face is pretty safe.
http://www.apmex.com/Product/66419/2011_1_4_oz_Silver_Canadian_20_Canoe_Coin__COA_Card.aspx
This $20 sells for $30.
You can't even get the polar bear one...
http://www.apmex.com/Product/67713/2012_1_4_oz_Silver_Canadian_20_Polar_Bear_Coin_in_COA_Card.aspx
All three had production runs of 250,000.
So it's got a numismatic element to it. When the old bat kicks the premium might go up.
LOL. So many things that are seriously wrong here, I don't know where to start..
For starters, when selling back to the dealer you can't expect any premium whatsoever on these coins, you will get spot or less.
In terms of silver content, the coins are worth 8 bucks each. In terms of fiat they are worth 20. If you pay 23 you are fucked either way, lol.
You are guaranteeing yourself a loss, even if silver soars in value, yet you don't seem to comprehend this?
My bad.
I knew I was dealing with a logically-challenged silver noob after your first post. Glad you got a laugh.
Party on
LOL, so it is noobish to try to minimize the premium cost when investing in physical precious metals?!? You really are a twat.
But then again, only a twat would not recognize the obvious insanity of paying a 200% premium when investing in silver.
LOL, so it is noobish to try to minimize the premium cost when investing in physical precious metals?!?
LOL...Yes. Go buy some Santa Claus rounds from Twat's mint then and see if you can find a greater fool, dipshit. You'll start learning.
Then again, only a twat wouldn't realize that when you buy an ASE you pay a 3500% premium to face value, so if you take it to the local bank they will give you one (and only one, FRN). Take four pre-1965 quarters and you will also get 1 FRN They will give you nothing for your santa round (which you got below spot!!!)
You see fucktard, there's only so much protection you need against any one scenario (like hyperinflation). Other possibilities (like deflation or confiscation) have obviously not crossed your puny mind yet. Because you're a fucking noob.
But hey, if you're sure you're right, max out all your CC's and buy all the "Englebert's" silver bars you can!!!
The 'noobish' shit is where all you MF'ers don't realize (where I stated EARLY in this thread), is that one of the best premium UNDER spot deals you can get is to just buy SILVER SOLDER at a local hardware store... (instead ~ I just got idiot remarks from nazi building inspectors)...
Carry on jerkwads...
Lighten up, Francis
You can think it's a steal all you want, but if you come to me looking to sell an ASE and a 1oz. roll, I'll buy the eagle and tell you to find someone else to buy the solder.
You don't "sell" $20 Face value coins to a dealer, you spend them like $20 bills, or take em to the bank. That's the point, it's legal tender. Instead of holding bills, your holding hard currency that happens to have a quarter ounce of silver, just like the old days when fractional silver was the money. If silver goes to $80, then fine, you've got silver break even plus likely 4 times your original premium, but it's limiting the downside of your rapidly depreciating currency. Better than keeping flammmable FRNs in your mattress. An excellent long-term liquidity play out of US control.
An even better idea along the same lines is to buy the Calgary Winter Olympic Commemoratives - 1 ounce troy pure (in sterling) with a $20 face value CAD. The RCM minted so many of them the premium is pretty low, just a little more than a Maple with a FV of $5 or ASE with a FV of only $1. Now you've got bullion with a $20 FV floor + premium. Plus they are a stunning proof coin. And the Queen wasn't a hag back then!
http://www.apmex.com/Product/40587/Canada_20_Olympic_1_oz_Silver_Coins_Proof.aspx
Thanks, Dimeboy. I needed that.
Agreed the Olympic coin's a beauty! Are you sure they're one troy pure in sterling, not one troy sterling? I'm not looking to add to the stack at today's prices (that's a big part of the reason I was considering the 1/4's), but if there's another meltdown, those baby's are mine.
Nice thought but it's been tried. And failed. TPTB won't let us serfs walk away with their seniorage that easily.
http://www.thestar.com/business/article/1221621--coin-collector-learns-the-difference-between-legal-tender-and-spending-money-the-hard-way
Not as liquid as I thought.....
Very useful info. Thanks.
Better to do the same thing with ordinary nickels. Downside deflation protection due to face value, plus they will track inflation due to not currently having a premium above their metal content. During a Mad Max scenario, nobody will care about rare numistmatics.
by the way, fellow ZH'ers. I bought a bunch of junk silver at far below spot when I invested in BitCoins last Dec. went from $3.00 to the current $12.00 yes! u can buy PM's with BC from Coinabul. Huge mark'ups, but I don't give a fuck. 3 timed my money when BC went up. smarter than u! got more than u! fuck u! have a nice life............
OK, you can go back to popping your zits now.
EEUU, there goes another one. Ick! All over the mirror! Save the pus for u. Your mommie can make u a yummie omlet.
Reputable silver dealers? I read Provident. I've used Gainsville. Any other recommendations? Thanks.
i can' find anybody w/ lessor premiums than the guys in Florida (Gains.) there c-service is super too.....
Always check your pocket change. After 2 years of diligently looking for pre-65 coins I finally got a 1959 Canadian dime amongst the change I received after buying a pack of condems (XXXL ribbed in case you're wondering)...
Seriously though, I stick with CAD wildlife series 1oz rounds. The wolf that came out in 2010 is getting near double the price of a regular maple at current prices. My coin dealer won't even buy them unless he can find somebody selling them in the $50+ range. I'm sure you can still find them cheap(er) on eBay but I would personally rather buy silver and have it in my fat hands immediately.
Regular maples are fine but they don't appreciate numismatically like the limited edition series do. Their value is limited to the daily spot + premium. Same with eagles and other run-of-the-mill silver rounds from mints anywhere. Might as well buy silver blanks directly from a miner, but selling those would be more difficult without any recognizable mint markings on them.
Just keep fucking stacking no matter what your pleasure is. I'm off to buy another 30 antelopes tomorrow (just released newest animal in the CAD series).
Almost forgot to add BiTcHeZ!
I got the $100 bill replicas in sliver from Bullion Direct a few years ago. I paid $80 for them. I told my friends to buy them because they would reach $100 in value soon. They thought I was nuts. Well here we are now and 4 oz. of silver is over $120. They are really neat to look at and they come in a velvet lined box. Some people never learn.
I found a 1964 silver dime in a parking lot the other day (I always pick up change). First time since I got into silver in 2008. Maybe it was a kid who had raided dad's stash, not knowing the value of silver.
Thinking down the road, if SHTF, "numismatic value" will not exist.
Purty n' shiny won't matter much.
Easily identifiable and trustworthy coins, perferably from your own country, will save time, effort, and money down the road.
That guy who wants an ounce of silver for the only pair of Danner boots you've seen in the past year might not know exactly what a "Silver marmoset" is...
RELEASE THE MARMOSETS!
I own it in all forms. But my favorite is Libertads. Get one and you will understand.
Go to TJ all the time and buy'em. Just a 25 minute drive from downtwn SD. Their banks are in appliance stores. Have magaritias and tacos when there. Park our cars on US side and walk across. Long lines to get back into US (immigration, yea know). We pay a guy that is a Mexican bus driver that goes across border. He gets us up-front in the line. Adios ZH'ers.....................................
Great grandpa told his boys, if any one of you can pick it up, you can have it. No single one ever did. There are lots of old holes on that old farm, and you will see a new one from time to time. If y'all find it, be sure to let me know.
I have only been buying silver for a couple years and I cannot figure out why anyone would trade silver or gold for dollars. The only way I would get rid of mine is barter for quality items I need.
void of constestation the mestizo 1949 scale and press be the best coin ever struck'd followed by the sacred war nickel. this numismatic hooey be nothing but varmint putang.
It seems to me a little something left out.
From article:
"At the time, I went to my coin dealer and sold some physical silver for cash. The spot was $25, so I received $25 + $4 premium, or $29 per ounce.
Then I called my commodities broker and bought 1000 ounce futures contract priced at spot, or $25. In this way, I pocketed the $4 premium, but I still had exposure to silver"
My comment. The article left out the cost of the broker's commission which may have exceed the $4 premium. And we are not simply talking exposure with commodities, we are talking risk. I've dealt with commodities for decades. There is huge difference between holding physical, as opposed to paper. Paper is all about leverage - thus much higher risk.