One of my favorite investment stories is about Will Rogers. He used to say that few people have ever lost as much money as he and his pal Wiley Post had lost with their investments. As the story goes Will Rogers was eating breakfast in the hotel dining room one morning when Wiley Post ran downstairs and said he had just talked with his broker on the phone. He told Will that this time his broker promised him they could make it all up on this one oil deal and that they would get they biggest return on their investment ever! Mr. Rogers calmly swallowed his scrambled eggs, slowly looked Wiley in the eye and said, "At this point in my life I am more concerned with the return of my money than the return on my money."
I believe that there are many people as this same junction in their life. They are not interested in knocking one out of the park anymore, they just want to come through this downturn with what they have left intact. A money market fund (where many are sitting now) is a guaranteed way to loose with currency devaluation. Read history, inflation is coming and there is no way to stop it.
So what's a confused investor to do?
What about an investment that is guaranteed not to go down more than 32% by the U.S. Government but still has an unlimited upside potential? It has all the upside potential of Enron five years ago but with a guaranteed floor of 68% of your initial investment. It also has 5000 years of momentum going for it as well.
I am talking about 40% silver junk bags. These bags consist of 2000 Kennedy half dollars. They are sometimes called clads because they only have silver on the outside with a non-silver core. A bag of these coins has approximately 295 oz. of silver in each bag. Currently these bags sell for about $1,472 more or less including shipping to your door.
While the buy/sell or bid/ask spread is fairly high (about $.74/oz compared to other silver investments that run from $.28 to $.55 per oz.) there is one advantage. IF THE PRICE OF SILVER DROPS 32% YOU CAN JUST TAKE YOUR SILVER CLADS TO YOUR NEIGHBORHOOD BANK AND TURN THEM IN FOR FACE VALUE ($1,000) IN FEDERAL RESERVE NOTES. There is your guaranteed floor on 40% junk silver bags. That's it that's as bad as it gets. On the other hand if silver doubles in the next few years you get a +75% return on your original investment. The higher silver goes the better the investment looks. What else can offer this little downside with an unlimited upside potential as well as act as a hedge against inflation?
At roughly 55 pounds a bag, a $10,300 investment will purchase 7 bags with a total weight of almost 400 pounds. While this much bulk (remember there is 60% base metal along for the ride) is hard to store it is also hard to carry off while you are not looking. A single bag is a little bigger than a bowling ball. Imagine a thief trying to run down the street with 7 bowling balls that weigh 400 pounds.
My personal favorite is 100 oz bars and 1 oz rounds. They are easier to store and easier to trade. They also have a smaller spread between the bid/ask or buy/sell price which means you pay less of your profits to dealers and UPS for shipping. However, if you are still afraid silver or gold may fall much further before it starts its predestined climb upward then maybe the 40% junk silver bag is for you. Only 32% to loose and everything to gain!
Don't be scared. Come on in boys, the water's just fine! You'll be glad you did.
Larry LaBorde
July 24, 2003
www.silvertrading.net
Remember that we are not investment advisors and that any opinion offered in this article is just that opinion. (Just in case there are any lawyers out there).
Larry and his wife Puddy operate the Silver Trading Company in the Deep South with their two semi-adult children and Haley the wonder dog. You can email Larry at llabord@aol.com or visit the website.