Tuesday, February 22, 2011

Why Gold & Silver are Better for the Future

Yesterday, I had a good friend argue with me (once again) about gold and silver. My friend is a firm believer in stocks and equities. I am a firm believer in precious metals. Especially silver.

Our government is completely in debt up to over its neck. Japan currently runs a debt that is over 200% of GDP. This cannot continue. There is even talk of a massive yen devaluation coming along.

But, as Mish Shedlock points out, there are still opportunities for us!

A yen devaluation will increase the value of equities, commodities and gold and silver. But how much gold and silver should you own? Charles Goyette, author of the Dollar Meltdown says,

To combat the wealth-destroying effects of runaway inflation, Goyette recommends you put 25% of your portfolio into gold and silver, ideally physically held."

But no matter how well silver and gold are doing, I still get people making snide remarks like, "How are you doing with a non-appreciating asset?" Actually, I'm doing quite fine, thank you. Silver is up over 90% in one year.

But still, even with this sort of performance that blows away equities, some people are not convinced. One of my friends still thinks stocks are better than precious metals.

Yesterday, one good friend pointed out to me that "...stocks have gone up 40% since 2008!" Of course he conveniently forgets to mention that stocks are still 30% lower than they were at the peak before the crash of 2008.

In fact, stocks today, adjusted for inflation, are at the same price they were in 1990.

Silver closes at $33.91 on Feb. 21, 2011

We can argue for hours on end if you should or shouldn't buy stocks or own gold or silver. But here's the one good solid reason why you should save at least 25% of your wealth in silver and gold and the question that I asked him that finally got him to decide to buy:

Let's imagine that you are leaving a treasure chest of wealth for your children and their children. The treasure chest shall be sealed and cannot be unopened until, say, 2057. Which would you rather leave in that chest: Certificates for stocks or equities in dollar or yen denominations (or any other fiat currency) or would you rather leave silver and gold bars?

He said, "Oh? Well, when you put it that way, I'd rather have the treasure chest of gold and silver."

Isn't he right? Shouldn't you be doing the same?

Gold and silver will protect your wealth. They always have. They have been recognized as money for over 1000 years. Governments and government issued currencies come and go... Precious metals are forever.


Andy "In Japan" said...

Beautifully written. Notice how Mike is careful to say that gold and silver are a means to save or protect wealth. They are NOT investments, especially gold. Silver gets used to a great extent in things like catalytic converters, so it is an investment of sorts if more demand arises for industrial needs.

Anonymous said...

My heart goes out to the people of Northern Japan, and everywhere in Japan. May an international outpouring of help ensue, to the Japanese people, who survived the earthquake/tsunami/nuclear disaster...