In Jim Cook's Archive


Most people with a lot of assets have a money manager doing their investing for them. It’s hard to find fault with that strategy. Professional managers have done well for their clients investing in the stock market. Only twice in the past twenty years have losses been severe. So, why should affluent investors bother with gold or silver?

For one thing, we think silver has the potential to make a run that results in a fantastic return. We rely on the opinions of silver analyst Theodore Butler who is considered to be the foremost expert on silver. He argues forcefully that silver will soon explode in price. If you familiarize yourself with his research and analysis, you will find it hard to disagree. So at a time when stocks and tangible assets trade at their highs and silver trades at its lows, a switch of up to ten percent of your net worth into silver seems prudent. We agree with Mr. Butler who claims that silver is the greatest money making opportunity of the decade. He’s not talking about hedging against inflation or protecting yourself against a financial crisis, he’s talking about making a lot of money.

We’re certainly on board with the idea of profits, but we also believe that it makes sense to own gold and silver to offset financial losses because of market crashes, runaway inflation, economic collapse or a falling dollar. The idea of holding gold or silver is foreign to most investors. Nevertheless, the pervasive failure of fiat currencies argues forcefully for protecting against this eventuality. Our bedrock advice has always been to put 10% of your assets into precious metals. At least 1% to 2% of your gold and silver allotment should be in your physical possession, stored in a home safe or safe deposit box. This is your insurance against a black swan event or the worst of all financial worlds. Larger amounts can be stored safely in your name at Brink’s or at our bank in Minnesota. You get a lot of silver for the money and since it is heavy, it’s reasonable to store it. You can always have it delivered to you in the future or easily sell it back to us.

A few years ago we had a client who had 1,000 ounce bars stored at Brink’s. He also had bars stored with Morgan Stanley. We advised him to get the serial numbers of his bars at Morgan Stanley just as he had on his bars at Brink’s. After a number of requests he became so frustrated he sued Morgan Stanley. They admitted in court they were charging storage on bars that didn’t exist. Their defense was that everybody does it. That means many brokers, banks, dealers, mints and pool accounts are short silver. That’s a lot of silver to have to buy if the price explodes as silver analyst Theodore Butler predicts. That’s why we are so insistent that you get the silver and gold in your hands or in a storage plan that gives you serial numbers or a receipt for what you have stored. If the storage plan is through a dealer and the dealer fails, that’s equally dangerous.

Think of the potential price implications if investors increase their buying of silver, and a shortage hits the industrial users who must have silver or shut their door. On top of these fireworks, all the short sellers from the COMEX on down to small coin dealers will be scrambling to get silver. Mr. Butler claims the price will have to burn itself out at a level we can’t imagine today.

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