Steve Sjuggerud's DailyWealth  

August 16, 2006
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The Poor Man’s Gold
by Dr. Steve Sjuggerud

Nine hundred and ninety percent.

That’s how much mint condition silver dollars rose in the great silver bull market from 1976 to 1980.*

Morgan silver dollars – the most popular coin ever struck in the U.S. – reached a price of $100 a coin in 1980, for coins in mint state (MS-65) condition.
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The coins didn’t stop there… by the first quarter of 1986, these mint state Morgan dollars graded MS-65 by PCGS peaked at around $1,000 per coin. (Silver spent much of 1986 at a price of between $5 and $6 an ounce.)

Today – over 20 years later – you can buy those same mint state (MS-65) Morgan dollars for about $200. Yes… the price of mint state silver coins has fallen by 80% over the last 20 years.

Let me recap: In 1986, silver was around $6. And these MS-65 Morgan dollars peaked at around $1,000. In 2006, silver is around $12, twice it’s 1986 value. And these MS-65 Morgan dollars are currently priced around $200.

In short, nobody cares about silver. When it comes to precious metals, gold gets all the press… but silver might be the better play…

With things like these Morgan dollars, silver may be a better investment bargain than gold… And silver has more uses, too. It really is an industrial metal in addition to being a precious metal. There are many ways to play it. Let me share a few good ones:

There are coins, like the one mentioned above (my good friend and coin dealer Van Simmons filled me in on the history of the Morgan dollar above… you can reach him at van@davidhall.com or 800-759-7575).

You can buy silver in paper form. One way is in your brokerage account, through the silver ETF (the symbol is SLV, and it’s simply the price of silver, times ten). Another way is through Perth Mint Certificates, which are an interesting program worth checking out (visit www.assetstrategies.com for the details). And then of course…

You can invest in silver mining companies. Since silver is typically a by-product of mining other metals, there are very few sizable “pure plays” in silver.

The table below, taken from last month’s issue of Sjuggerud Confidential (so it’s not up-to-the-minute accurate) lists three of the market’s large pure silver plays.

Name

Symbol

Stock market value in millions

Oz. of silver
in the ground**

Price per oz.
in the ground

Pan American Silver

PAAS

$1,471

194

$7.58

Silver Standard

SSRI

$1,325

109

$12.16

Silver Wheaton

SLW

$2,068

189

$10.94
**Proven and probable reserves, from the latest Gold Stock Analyst letter

The numbers are a bit deceiving in the table. For example, Silver Standard looks expensive based on proven & probable reserves… but it has “unproven” reserves of in excess of a billion ounces of silver in the ground. So it’s not as expensive as it seems...

I like silver as play on the bull market in precious metals. I like silver so much, I devoted the latest issue of my newsletter Sjuggerud Confidential to my favorite way to play silver.

If you don’t own any silver yet, you should… Fortunately, I’ve trimmed the wide list of options down to the best choices out there in today’s letter.

Check them out, and buy what’s right for you.

Good investing,

Steve

*990% was the price rise of MS-65 condition silver dollars, according to the book A Mercenary’s Guide to the Rare Coin Market by David Hall

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AN EXPERT’S TAKE ON PLUNGING OIL PRICES

The call for a sell-off in crude oil has become almost deafening…

Analysts point out that crude has enjoyed a “Goldilocks” bull market for the past few years… that bullish sentiment is frothy and an overdue decline is on the way.

For a pro’s opinion on plunging oil prices, we asked S&A Oil Report editor Matt Badiali for his take… the gist of his reply is as follows:

“I’m not concerned about a short-term decline in oil prices… no bull market advances without a correction. I’d actually welcome a fall down to $55 or $60 a barrel. It would scare a lot of investors… and give me a chance to pick up some great oil companies at bargain prices.

Is oil due for a correction? Yes. Will that correction create a great long-term buying opportunity? Yes. Act accordingly.”

The Goldilocks bull market in crude oil (3-year chart):

-Brian Hunt


“Three quarters of Americans can correctly identify two of Show White's seven dwarfs while only a quarter can name two Supreme Court Justices, according to a poll on pop culture released on Monday.

Asked what planet Superman was from, 60% named the fictional planet Krypton, while only 37% knew that Mercury is the planet closest to the sun.

Respondents were far more familiar with the Three Stooges - Larry, Curly and Moe - than the three branches of the U.S. government - judicial, executive and legislative… 74% identified the former, 42% the latter.”

-Reuters

“The world may soon pay more than ever for its most abundant food: rice.

A record crop this year in a market anticipating rising production costs will do little to slow the rally for the staple of 3 billion people.

The prospect of reduced production threatens to spur inflation in rice-importing nations from the Philippines to Nigeria, while driving up costs for manufacturers including Anheuser-Busch Cos., the U.S.'s biggest buyer of the grain, and cereal makers such as Kellogg Co.

Rice inventories worldwide are already near a 26-year low and will drop further, according to the U.S. Department of Agriculture in Washington.

The quantity of unsold rice this year will be barely half the level of 2000's surplus, reducing the buffer against a crop failure, the department forecasts. Fertilizer and irrigation costs are rising with energy prices, and farmers are turning to cheaper-to-grow grains, fruits and vegetables.”
-Bloomberg

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