In Ted Butler's Archive


All too often, investors rush into investments based on the most recent price performance. This crowd behavior means getting caught up in group emotion and forgetting about historical lessons. When deciding what to invest in, the best alternative is an asset with the lowest risk and the highest possible profit. There are ways of minimizing the risk of loss, such as insured bank deposits, but the tradeoff is that returns are virtually non-existent. In order to increase the profit potential of an investment, some risk is necessary. The trick is in finding the investment that offer the best risk/reward ratio – the one that holds the lowest potential risk and the highest potential profit.

There are ways to find such investments. One way involves an age-old maxim – buy low and sell high. The key to selling high, of course, is in first buying low. Currently, buying low would seem impossible in stocks, bonds or real estate. I’m not saying such assets can’t go higher; just that they are closer to all-time highs than historical lows. It’s possible to profit by buying high and selling even higher, but that’s very different from buying low because the risk of loss is greater in higher priced assets.

The asset that best fits the buy low/sell high profile right now is silver. No metal can go bankrupt or get caught up in an accounting scandal or simply disappear by edict, certainly not one as needed for modern life as silver. The only risk to holding silver is that the price could move lower. But because the price of silver has already declined precipitously over the last six years, it is already low – down more than 60% from its highs in 2011.

Not only is silver down sharply in price against gains in stocks, bonds and real estate, it is down relative to gold, its most comparable asset. This is reflected in the historically high silver/gold price ratio where it takes more than 70 ounces of silver to equal the price of one ounce of gold, despite there being, effectively, more gold in the world than silver. On every conceivable measure, both on an absolute and relative basis, silver is the most undervalued asset in the world, unquestionably qualifying it as the premier investment.

There’s a wealth of data explaining why silver is priced as low as it is. It has to do with my research pointing to an ongoing price manipulation on the leading futures exchange, the COMEX. This manipulation is largely orchestrated by JPMorgan which has been accumulating massive quantities of actual silver – some 550 million ounces – over the past six years at the depressed prices the bank itself created. Not only is silver priced (artificially) low, there’s a darn good reason why it is priced so low.

But buying low is only half the equation. Even better than silver’s unquestionable low price and low risk is its enormous profit potential. Whether looking backward or forward, it’s impossible to deny silver’s profit potential. Just getting back to its price peaks of six years ago indicates a 200% profit from current levels. And history has demonstrated that when silver does move, it moves big and it moves fast – the 200% gain into 2011 took little more than eight months. What are the odds that stocks, bonds or real estate could triple in that time frame?

I don’t believe silver should be bought based primarily upon past performance, even though history should never be ignored. The real reasons for buying silver are the current facts. Those facts include the near-certainty of a physical shortage whenever a relatively small number of world investors take a shine to the metal and attempt to position themselves in the best risk/reward equation in existence. Any such investment interest will clash with the industrial users of silver and set off a scramble for available metal which will cause prices to melt up.

This silver scramble for actual metal is unavoidable, with only the timing in question. Because the actual available supply of metal is so small, it will take only a relative handful of investors to set off the buying competition with the industrial users. It is impossible for large numbers of investors to acquire actual metal simply because large amounts of metal don’t exist to accommodate them. You can be sure that this is why JPMorgan has painstakingly acquired the largest privately-held physical stockpile of silver in history. It has positioned itself for a price move in silver well beyond any gains seen in the past, including the tripling of prices into 2011. Back then, JPMorgan wasn’t positioned for a large price rise; today it is.

It’s an understatement to say that silver has the best risk/reward circumstance of any other asset currently. You won’t find this assessment bandied about in the daily news flow, but if you step back and dig into the facts, I believe that you will be able to grasp not only the current low risk in buying silver, but the incredible profits to be made. If you don’t want to risk a lot and, at the same time, position yourself to make a potential windfall, then keep it simple and buy physical silver.

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