Where is investment money currently flowing to? Silver, Silver, and Silver

The Price of Commodities
In our last blog, we talked about the value of the US dollar as compared to the price of commodities. Somehow economists and people are not relating the relentless increase in the price of pretty well all commodities to the fall in the US dollar.

If you listen to some of the rhetoric in the US, some people there are starting to wake up. You just can’t keep printing money around the world, without the value of money falling.

This is a very difficult situation. One big bump in a large economy, for example China, could set the world in an economic tailspin, that would set economies back as much as a decade.

On the other hand, it is obvious that the value of money is falling and the rate of fall could be escalating.

Now if there is another blow to the economy the price of commodities could also take a big hit. There is an old adage – “What goes up, must come down!”

So What Are We Doing?
We try to examine the situation and take the least risky of the alternatives. Right now, we are fully vested in stocks with a large preference to commodity stocks.

If the economic shock comes, hopefully we will be nimble enough to react quickly.

The Value of Silver
There are several metrics here. The world is recognizing silver because not only is it a precious metal that supposedly holds it value, but it is also an industrial metal used for many processes. I would note, that if the economy falls, as it will inevitably fall, silver could retreat to a place to where no-one is interested in it.

It wasn’t so long ago that the price was $5 and under.

You Must be Nimble
In times of long ago, when economic cycles took much longer to evolve, there was a belief that Buy & Hold worked best. I hope that every reader now understands that being nimble works best in these times.

Silver as Compared to Gold
Historically that was a ratio of value comparison where 16 ozs of silver were equivalent to 1 oz of gold. The 16:1 ratio.

This ratio was in effect in stable times where prices remained mostly flat. Many people are harking back to that ratio now and believing now that if gold is worth $1,500, silver must rise to $93 per oz.

Maybe this will happen. Probably not. There are too many other factors involved in these times. But silver does look as if it has legs and will continue rising.

Just remember that you have to be nimble and not complacent.

Senior v Junior Stocks
Should you buy Kinross, Goldcorp, Barrick, Newmont and the rest of the senior gold producers? Obviously if the price of the commodity goes up, these companies will make more money because essentially all they do is dig gold out of the ground, separate gold from impurities, and sell the gold. and therefore their share prices should increase, making it a good investment.

I feel that this will happen.

But I also urge you to look at the charts of every senior gold producer over the last four years while gold went up 4 times in value. The share price of most of these companies, with exceptions, is remarkably similar to the value of 4 years ago.

As a comparison, do a filter on any of the popular stock web sites and pick a bunch of junior explorers and developers for gold. What you will find is that if the company had any reasonable chance of success, the share price has escalated dramatically.

I will delay the rationalization of why this is happening to another time. Suffice it to say, that it is a fact.

Next we will examine the current demand for silver, the reports that are being published regarding silver, and the mad rush that is escalating to get on the bandwagon.

In closing, let me repeat a statistic that I hear quite often.

The Value of Precious Metal Companies is less than 1% of all investments
If you added up the value of all of the shares of all of the precious metal companies, listed on all of the major stock exchanges, it would amount to less than 1% of the investment in companies.

Just a shift of 1% in peoples investing perspective, could send the price of these companies zooming, and the price of the precious metals themselves zooming.

This is an interesting statistic and one that is continually repeated. I think it more a folk tale than reality. However, we do expect the price of commodities to continue increasing in the near future.

By Larry Cyna

Mr. Cyna is an accomplished investor in the Canadian public markets for over 20 years, and has managed significant portfolios. He is a financing specialist for private and public companies, and has expertise in real estate and debt obligations. He has assisted private companies accessing the public markets, has been a founding director of public companies and continues as a strategic consultant to selected clientele. He is and has been a director, a senior officer and on the Advisory Board of a number of TSX and TSXV public companies in the mining, resource, technology and telecommunications sectors, and the Founding Director of two CPC’s with qualifying transactions in mining and minerals. He was an honorary director of the Rotman School of Management MBA IMC program, has completed the Canadian Securities Institute Canadian Securities Course & Institute Conduct and Practices Handbook Course, was a former Manager under contract to an Investment Manager at BMO Nesbitt Burns, a roster mediator under the Ontario Mandatory Mediation Program, Toronto, a member of the Institute of Corporate Directors of Ontario, a member of the Upper Canada Dispute Resolution Group, and the Ontario Bar Association, Alternate Dispute Resolution section. He obtained his designation as a Chartered Accountant in Ontario in 1971 and was the recipient of the Founder’s Prize for academic achievement together with a cash reward. He became a CPA in the State of Illinois, USA in 1999 under IQEX with a grade of 92%. He is a Member of the Institute of Chartered Accountants of Ontario and the Canadian Institute of Chartered Accountants. He holds certificates in Advanced ADR & in Civil Justice in Ontario, Faculty of Law, University of Windsor, certificate in Dispute Resolution from the Ontario Institute of Chartered Accountants. Previous accomplishments are Manager of Cymor Risk Consultants LP specializing in Risk Management Assessment; CEO of Cyna & Associates specializing in mediation and ADR; Founder & Senior Partner of Cyna & Co, Chartered Accountants, a fully licensed and accredited public accountancy firm with international affiliations; and was a partner in a large public accountancy firm. Mr. Cyna is well known in the Canadian Investing community. He is invited to, and attends presentations given by public companies usually 3 or 4 times each week. These presentations are intended by the various hosting companies to present their inside story to sophisticated parties and Investment Managers for the purpose of attracting funding, or of making parties more interested in acquiring shares of those companies. Being a part of this keeps Mr. Cyna deeply involved in the current market and leads to numerous investment opportunities.