BEST OF JIM COOK

January 10, 2006

Still a Steal?

One of the first considerations in owning any asset should be liquidity. Silver compares favorably with stocks and bonds, and its liquidity appears superior to real estate, commodities, art and collectors items. When you sell you can get your money out of silver within a few days. This liquidity should hold up under market extremes, including volatility or depressed conditions. It’s an asset that’s traded worldwide.

In terms of value, silver really shines when compared to other assets. Although stock prices have fallen, the equity market still appears richly valued. An epic boom took place in real estate where some prices are still setting records. Collectors items have appreciated ten-fold over silver in the past couple of decades. Commodities like oil and copper have outdone silver.

Although silver has begun to march upward in value, compared to most other assets, it has shown modest appreciation. Everything else seems pricey in comparison. In fact, silver is still so low that it’s primary producers can’t make a profit mining it.

It also seems to us that no other asset has so many solid attributes. You have high demand that seems destined to increase. You have new investment buying to go along with aggressive industrial demand in Asia. You have an asset that’s absolutely indispensable for modern civilization. You have large industries where silver is so necessary they will fail without it. You have all the substitutes for silver being too expensive. You have a world supply that’s been dramatically drawn down and depleted. You have a gap every year between what’s produced and what’s used. You have a crucial metal with less of it left to be mined from the earth than any other major metal. You have the most bullish factor for a commodity – the price of silver trading close to the cost of mining it.

On top of all this, you have a shocking amount of silver sold short. You have large quantities of silver leased out by central banks who expect to have it returned someday. You have silver sold forward by mining companies who haven’t produced it yet. You have silver certificates for huge quantities of silver in the hands of investors who believe the silver is there when it absolutely isn’t. You also have large financial entities who have sold more silver on paper than exists in the world. You have a growing awareness that this bizarre situation exists. This recognition has profound consequences for the future as more and more people act on what may be the most bullish set of circumstances to ever exist. You, and a few others, are reading this before anyone else. That’s a tremendous edge and advantage. When this knowledge becomes widespread and goes mainstream, how high do you think the price might be?