Our two main topics today are silver and oil. Silver is a precious metal, but much more. It is in almost every electronic piece of equipment produced in the world. Oil is in everything produced in the world, period. Energy, without it, you would need a horse walking in a circle. I have called crude oil the trade of the year. We may be facing a soft period ahead for a week or two, who cares. Quite watching your screen like a mother hen hatching eggs!
Silver has been jumping like a thoroughbred at the starting gate for the last two months. Would you rather own silver and oil, or some biotech company that is one FDA letter away from oblivion? Nobody said investing was easy. Like I used to say in the construction business, “If you want a friend, get a dog.”
George Kengott sent a note with a few important points to keep in mind (I have added a few of my own):
* Silver is a by-product of mining in many copper and other industrial ore mines. Industrial metals are under pricing pressure, reducing the amount mined, which means less silver.
* Silver mining has not met demand for the last 16 years.
* Silver is an industrial metal and a precious metal.
* Silver is consumed, almost all the gold ever mined is still in existence.
* Silver is cheap compared to gold. 900/13=69 ratio
* Historically this ratio should be between 16 and 30
* Silver increased in price almost three times as fast as Gold from 4/17 thru 6/2. Gold = 13% vs. Silver 34.8%
* California is going bankrupt in July!
Buy Silver to own, or trade. Capitalize when the price reflects the money being printed in Washington.
Exxon was the high bidder for one of Iraq’s oil fields offering to increase production tenfold to over two million barrels per day. Exxon bid a concession of $ 4 per barrel, Iraq offered $ 1.90 and gave them 45 minutes to consider modifying their bid. Exxon rejected the lower concession structure, so the Chinese were given the option of accepting $ 1.90 per barrel. The Chinese rejected the price also. Iraq opened bids for eight oil fields, accepting one. A consortium of British Petroleum and China National Petroleum won the sole contract awarded. Iraq will assess the political willingness to deal with the multinational oil companies and viability of long term contracts. There is political opposition to letting the international oil companies participate in the 20-year contracts. Keep your position in crude oil! Oil may get cheaper for a short time, but it is still the trade of the year.