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Silver Wheaton Corp. Message Board

  • tomg86402 tomg86402 Mar 26, 2008 6:19 PM Flag

    Can Silver make your rich?

    Can Silver make me rich?

    I think most indicators point to the fed inflating and inflating and inflating. Monopoly money will be everywhere. Helicopter Ben may be looking down at us as he drops more and more, but might not be able to see the ground for all the dollars in the air.

    I have read many financial gurus say get ready for bad times by paying off as much debt as you can. Buy silver and gold to protect against inflation.
    The trouble with that advice is buying Silver and Gold may transfer today’s buying power into the future, but it wont make your rich, Or at least no richer then you are today.

    For example, I buy 1000 oz. Of silver today at $19,000.00, or the price of a low end new car. Ten years from now silver is at $ 75.00 oz. I sell and take my $75,000.00 and head to the New car dealership….WOW…talk about sticker shock, the low end new cars are now selling for about $75,000.00.
    All I have done is transfer my buying power from today to ten years down the road.

    Don’t get me wrong, It was a wise move to buy the Silver ten years ago, It protected me from inflation, but it did not make me rich.

    The real money in Silver and Gold will be made by NOT PAYING OFF YOUR DEBT TODAY. Instead, take that money and buy Silver and Gold. If a credit Card company offers you fixed rate loan at 2.99, 3.99, or 4.99% till paid, and you can service the monthly payments, take the loan and buy Silver and Gold. As time goes on, you pay back the loan with (worth less) Dollars as you watch the price of your Gold and silver increase in Value.

    If you have money in a savings account paying 2 to 4 percent, dump it for Silver and Gold.
    If your are making extra payments to pay down your mortgage, forget it, use the extra money to buy Silver and Gold.

    The bottom line, you must borrow as much of the “Funny Money” as you feel comfortable with and use that Funny Money to buy Silver and Gold.

    Do not barrow on MARGIN, You can get better rates from Banks and Credit Card offers and no margin call if Silver and Gold corrects. Good luck to all Silver and Gold longs.
    Remember, this is just my opinion, do your own research and run your own numbers. tomg86402

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    • You may some excellent points. I concur with you statement that paying off debt is not necessarily the smart thing to do. As investors or speculators, and it is not always easy to tell the difference, we do not have to be "long" in everything. Also, we need to differentiate between good debt and bad debt. Consumer debt is bad, particularly if you are paying it off on high interest rate credit cards. Investment debt is a different animal altogether.

      I live in the Dallas area. My house, since 1989, has appreciated at 2.7%/year and I bought fairly smart at the bottom of a real estate bust. The point is, housing in Dallas, where there is ample land for new homes, is not keeping up with inflation. What to do?

      Here's what I did and I got the idea from Dan Amerman who posts at I took out a 30-year home equity loan, reduced my mortgage payment significantly (I had a 10-year mortgage), "shorted" the dollar--I will buy them back as I pay off the mortgage, and have reinvested in higher returns elsewhere. I am also certain that I will I will be paying the mortage off with "cheaper" dollars in the future as inflation steadily erodes the real cost of this debt and I will bet the long rates will eventually go higher. Second, the invested money is paying all the interest expense on the borrowed money and a good portion related to the original unpaid principal. I am guessing that my "borrowed" money will fully fund my entire mortgage payment including principal in a few years. I do not to get real fancy because my hurdle rate is under 6%.

      Keep in mind that the people who will do best in an inflationary environment are those who are leveraged and have low-interest rate investment debt, the ability to service this debt (having a job and getting cost of living raises helps), and hard assets that will rise as the value of the dollar falls. Whether I own my house outright or not, I will fully participate in any appreciation and I have cheap money locked up for 30 years. If I had opted to continue to pay off my old mortgage, I would have had to shell out my own money to pay interest. Also, if mortgage rates move higher, as I suspect they will, and if I ever wanted to tap my equity in my house, the cost is going to be pretty expensive.

      Was this smart? I think so. I have been very careful how I invested the money when I refinanced. I have emphasized higher-quality, dividend paying stocks, including some of the Canadian oil royalty trust and have invested smaller amounts in gold and silver.
      It is all a gamble. I reduced my house payment. I shorted the dollar and have investments that should do at least as well as what my house. Just my thoughts.

      • 2 Replies to gumbo_slik
      • I did almost the same thing Slik. I got the idea from Peter Schiff in his Crash Proof book, but it's bascially the exact same thing. We're using the (still available) equity in our houses and setting up a carry trade. As long as our after-tax take on investments keeps above the 6% mortgage we're alright.

        I especially like the foreign dividend yielding stock play since not only are the dividends of these relatively conservative companies paying quite a bit above 6%, but they're paid in the local currency which are all pretty much rising against the dollar.

        Silver is a great place to be too as a hedge against the dollar, but mainly since it remains so wickedly undervalued and capped by the concentrated short positions. We've got a long way to go before the correct silver price is found and we're all in at the bottom as far as I'm concerned. SLW is probably the PREMIERE stock play to leverage the climbs ahead for silver.

        That's why silver is going to make us rich.

      • I just posted a new topic about buying a silver futures contract because of the 10 to 1 leverage.

        I've never had any experience with futures but I'd like to learn.

        Any comments?

    • 1. Have no debt.
      2. Have physical bullion.
      3. Have stocks in gold or silver.
      4. Start making a stock pile of food good for several months - year would be nice.
      5. Live where you can grow some food and hopefully close to fresh source of water or know of clean water wells where water can be pulled from when needed.

      If you get a loan and buy bullion, it's a good idea but what could happen is there could be a market crash and everything will get dumped including PMs as we've seen many times before during major downturns. If this is prolonged and banks call in their loans - I don't know if they can or in what time frame - then you might have to sell your bullion at depressed prices to pay back your loan if you don't have cash to cover.

      Also I prefer having majority in gold as it's easier to transport if one needs to move. It's fine to have silver but if you have emergency and need to move it's easier to move 30oz of gold than 1500oz of silver -1:50 ratio.

      Also just because FED interest rates are heading lower doesn't mean they will continue to be lower for the public as the public isn't borrowing money from the FED but from the banks which are in financial crises and are tightening the money supply by making it harder to qualify for loans and they don't necessarily need to lower lending rates in sync with the FED, in fact they can leave rates as they are or even raise them.

      It's also a good idea to have some cash savings on hand because if there is a market crash there will be great buying opportunities and it wouldn't be advisable to sell bullion to buy stocks as no one knows the true bottom and bullion held as safety hedge shouldn't be used on stock market which is slightly better than gambling.

      At this point it's better to prepare for the worst and hope for the best but it looks like hyper-inflation is the only way USA can payoff their debt and this doesn't speak well for the rest of the global economies. Europe is run by the same bankers as here so they will work their magic on the public there too - isn't Ireland struggling with recession but can't do nothing about rates as they're under the might EURO bank?

      Euroland masters are destroying middle class just as they've done with USA. But instead of sending manufacturing to China they let people from poorer country take jobs away from people in western countries - England and Germany are prime examples of that. Poland lacking skilled labor due to exodus to the west will hire Ukrainians or Romanians who will work for less and thus we have middle class degradation.

      Jim Sinclair doesn't think North American currency will occur but lets look at reality of things. Canadians will need passports to travel to USA??? Well maybe know as new drivers licenses are being introduced with biometrics so that one will be able to drive to US with drivers license just like in the past. For globalist cartel it would be a benefit to join Mexico, Canada and USA and make one currency. Cheap Mexican labor and natural resources from Canada is a win win situation for the ultra rich. And looking at laws past under Bush - all that is needed is another 9/11 and freedoms will be gone and protesters will be labeled terrorists and off to the camps they go. We're living in different time not seen by any other generation.

      I guess I went way off topic here and maybe too negative - all the best ;)

    • My brother and I was talking about this just today. One thing you forgot in the equation is the tax benefit. Get loans that are tax deductable. The bigger the better. Big Ben is giving money away at negative interest rates. take the loan, get the deduction and pay it back over time with depriciated dollars. I know this is really what a guy should do but there is risk. I have everything paid off and I'm afraid if the bottom falls out of everything I wouldn't even have a place to live...In the future we will have very high interest rates. The going can get rough.


      • 1 Reply to newguytrading
      • Hey, I agree, you have to be able to sleep at night. My home is paid for and I will not put it at risk. However, I have about 50k on loan from low interest rate credit cards all invested in silver over the last 3 years. I was at the Las Vegas Coin show about a year ago and picked up a 100 oz .999 fine Handy & Harman Silver bar @ spot. I am sure glad I spent that $1287.00 on the silver instead of paying down my 3.99% Credit card loan.
        Cost of interest paid for one year was about $52.00.
        Price increase of my 100oz bar over the year...$558.00
        And, I sleep just fine at night with my $50,000.00 in credit card debt knowing I have the Silver to back it up.
        We all have to hold somthing, Federal Reservd Notes cost about 6 cents to create. $1 or $100 notes, still about 6 cents. I would rather hold Silver and owe FRN'S

    • Intersting thought but I must say your choice of a car going up some 350% would mean the car makers would not be selling many. Better choice would be a years worth of food at 20K today costing 75K in 10 years. Even the cost of food Vrs gold/silver is not good because IF the cost of goods goes up 35% a year for 10 years I dont think the USA would make it past the 2-3 year mark before the place was a burnt out cinder of a country. What our silver and gold are worth would be the last thing we really would care about at price increases like that. Haveing enough of anything to do with food/water and a safe place would be all that would matter

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