Don’t Buy Gold… Buy This

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Too big to fail. It’s become more of a way of life than a question that people ask. Instead of letting companies or banks fail, if they are big enough, and have enough politicians in their pockets – letting them go bankrupt isn’t viewed as an option. The 2008 financial crisis triggered by housing loans is a sector of the market being revisited with policies again becoming more and more risky, with lower interest and lower requirements for buyers.

Questions should be asked about where you are putting your money. When you put it in the bank, it’s no longer your money, it becomes the banks money, and you are a person with a loose claim to receive it again. Try and withdraw too much cash and the bank will complain and ask questions about why you want your money from them. The stock market is in a prolonged bullish cycle with companies gaining value year over years and a proliferation of companies with valuations over $1 billion named “unicorns” despite their earnings and their valuations being completely out of wack. Where is your money safe, and where is your money working for you?

People who realize that paper money issued by the Federal Reserve is potentially worthless as it is isn’t tied to anything of value have opted to invest their money in gold as a time tested commodity that has had an exchange value which has gained consistent returns over time. Something which is paid much less attention to is silver. People who invest in physical gold are proud of the fact that their gold can be exchanged for real products. Practically speaking though since a single coin with a weight of one gold ounce is worth over $1,250 dollars today how will you go about practically changing it for goods? Silver is trading at slightly over $17 per ounce, making it much easier to trade for goods and services.

Silver is positioned to have potentially massive returns with the price in 2012 exceeding $30 per ounce. Here’s a primary consideration for silver, which is a much lesser paid attention to commodity in comparison to gold. The gold silver ratio. Historically over the last few decades the ratio of one ounce of gold to one ounce of silver has been a ratio ranging from 1:40-1:80. The ratio right now is over 70 ounces of silver to one ounce of gold. This ratio tells us that gold is overpriced while silver is underpriced. Both the price of silver directly exchanged for paper money and the price as it relates to its ratio to gold indicates that now is a time to buy.

For perspective here are gold to silver ratios throughout history:

Over 4,000 years ago during Sargon the Great’s reign of the Akkadian Empire, it took 8 units of silver to buy one unit of gold.

During the time of Hamurabbi in ancient Babylon, the ratio was roughly 6:1.

In ancient Egypt, it varied wildly, from 13:1 all the way to 2:1.

In Rome, around 12:1 (though Roman emperors routinely manipulated the ratio to suit their needs).

In the United States, the ratio between silver and gold was fixed at 15:1 in 1792. And throughout the 20th century it averaged about 50:1.

But given that gold is still traditionally seen as a safe haven, the ratio tends to rise dramatically in times of crisis, panic, and economic slowdown.

Just prior to World War II as Hitler rolled into Poland, the gold/silver ratio hit 98:1.

In January 1991 as the first Gulf War kicked off, the ratio once again reached 100:1, twice its normal level.

In nearly every single major recession and panic of the last century, there was a sharp rise in the gold/silver ratio.

The crash of 1987. The Dot-Com bust in the late 1990s. The 2008 financial crisis.


Silver has been the best performing commodity in 2016 thus far. Gold is much more subject to volatility right now with silver unlikely to take a hit in its valuation. When you leave your money in the bank you receive .1% interest while they make exponentially more lending your money out. Simultaneously, with the stock market in a bullish cycle your money is prone to take a big hit without any warning.

In other words, today you can trade 1 ounce of gold for 70+ ounces of silver.

But perhaps, say, over the next two years the gold/silver ratio returns to a more historic norm of 55. (Remember, it was as low as 30 in 2011)

This means that in the future you’ll be able to trade the 80 ounces of silver you acquired today for 1.45 ounces of gold.

The final result is that, in gold terms, you earn a 45% “profit”. Essentially you end up with 45% more gold than you started with today.

If you feel reluctant to make a decision, try buying a few different coins online.  After you get a few ounces in the mail and are able to hold in your hand something that has actual value you may be inclined to start investing. Financial responsibility is a trait that isn’t looked on as a virtue anymore, however slight curbs in our behavior and where we spend money on leisure can free up some cash every month to start adding a steady amount to your silver stores. You aren’t going to become an overnight gazillionare as many advertisements claim and fail to produce, however you will put yourself in a much better financial mindset and position.

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