Is It Time To Sell Silver?

silver_1_year_o_usd

You can notice that silver price has been on down trend since October 2012. So, is it time to sell silver now to cut your lost? The short answer is, NO.

David Morgan has a great saying about a market like this, “it will either scare you out or wear you out.” (Note: “wear you out” means making you tired). When you have a narrow view by focusing on a short period of time, you will get tired of chasing the pricing and afraid the price might continue drop lower. All you will see is negativity. Consider taking a longer period to see a bigger picture:

silver_5_year_o_usd

$26 is an extremely critical point. It has been a strong support for many times. It has been reported physical silver mining cost is between $26 to $28. Can silver price drop lower than this? POSSIBLE, but NOT LIKELY to stay lower than this for a long time.

About two-thirds of silver is used in industry and jewelry. If silver spot price dropped below $26, there are 2 possibilities could happen:

  1. Some miners will be forced to scale back / close down. Simply because no one wants to spend RM1.00 to produce a product to sell for only RM0.80. The industrial manufacturers will run out of silver once the current supply is dried out. Silver price will shoot back up drastically.
  2. The gap between physical silver price and paper silver price continues to get wider. The paper traders could short paper silver price to as low as $1 but no one will be able to buy any physical silver at $1 (as no one wants to sell at that price). Anyone who owns physical silver would be holding tightly to their silver and not willing to sell unless the buyer is offering a fair price.

Silver miner with nugget

The fact is there is 5 times less above ground available silver than there is gold (3 to 5 billion oz gold vs. 1 billion oz silver). Silver has thousands of application usages while gold has little. When we look at new supply including mined and recycled, new silver is only being added by about 10 ounces for every 1 ounce of gold. Yet investors are buying 50 times more silver for every 1 ounce of gold purchased.

This is totally unsustainable. The above scenario is like saying a manufacturer is selling 50 products a day but he could only produce 10 products a day. Where did the remaining 40 come from? It could be the old products that he has not sold previously, but sooner or later the old products will run out and that is when silver market gets REALLY interesting. By then, I would rather be gladly holding to my physical silver, than rushing to buy silver.

Since silver is both precious metal and industrial metal, silver price rises when

  • The economy improves and industrial demand grows, OR
  • The world’s major currencies continue to be debased (high inflation),

Remember, silver is an industrial metal first, precious metal second. But regardless which scenario happens, silver price rises. What if a robust economy and high inflation? Well, that is as good as you are getting a promotion (with increment) and bonus at the same time.

Personally, I do not think robust economy and high inflation are both happening together. World economy did not improve. Euro zone is still in trouble and US unemployment is still high. However high inflation is on its way. Few months back, US has launched Quantitative Easing Forever (they will be printing money without any limit, forever printing); while Japan announced their attention to double Japan’s monetary base to $3 trillion by the end of 2014. The direct consequence of such actions are high inflation. Precious metal is often a good hedge against high inflation. Robust economy? No. High inflation? Yes.

The most basic lesson in successful investment is Buy Low, Sell High. Simple theory, but many failed to truly understand it. In order to sell high, you need to buy low first. Unfortunately, when the price is low, investors are afraid that price might go even lower and then miss the opportunity to buy low.

So, what if you have already bought some silver at higher price, let’s say $35.00? Right now, when price is low, you can consider practicing Dollar Cost Average to lower your effective purchase price.

silver_1_year_o_usd

For example: Assuming exchange rate for USD and MYR is 3.15 and for simplicity sake, we remove the premium calculation in this example.

During this downtrend of silver price, if each time you bought the same amount of silver silver (let’s say 1 oz) at:

  • $35.00 (RM110.25)
  • $33.75 (RM106.31)
  • $32.15 (RM101.27)
  • $29.00 (RM91.35)
  • $27.00 (RM85.05)

Your effective purchase price (average cost) is ONLY RM98.85/oz. You do not have to wait until silver price go back up to $35.00 (RM110.25) before selling it just to break even. You can break even when silver price is merely $31.38 (RM98.85). Everything moves in cycle. When price move up to $32, although you bought some silver higher price at $35.00 (RM110.25), you can sell all your silver at $32 (RM100.80) each and already making some profit.

Silver Malaysia eBookDollar Cost Average is a strategy designed to protect investor from huge price fluctuation / changes. Dollar Cost Average is 1 of the 4 strategies I discussed in the eBook: Practical Guide For Investing Silver In Malaysia on the approaches to invest in silver. The preview chapter can be found here.

Malaya “Banana Money”

Last week, Cyprus banks opened for the first time in almost 2 weeks of “forced-close holiday“. The Central Bank of Cyprus imposed a €300/day limit withdraw limit and restriction of transferring money outside the country. If you have no idea what is happening in Cyprus, visit here (a simple explanation of the situation).

The previous proposed tax was 3% tax on deposits below €100k, 6.75% on those €100 – €500k and 15% on those more than €500k. In my previous article, I mentioned:

…The reality is, the government can steal as much as they want….

In the latest discussion in Cyprus, bank accounts exceeding €100,000 ($128,000 or RM397,000) will be taxed at 60% with the reason of saving the country from bankrupt. The remaining 40% amount of cash will be frozen to ensure the liquidity of the country. For example, if you have RM400,000 in Cyprus, RM240,000 (60%) will be taken away by the government while RM160,000 (40%) will be frozen until further notice.

Cyprus Bank

Instead of as earlier proposed STEALING 15%, the government decided to ROB 60% of the deposit money and then said, you can’t touch the remaining 40% because the government said so. Sorry, you don’t have an option to disagree, you only accept it. Depressing? Unfortunately, this is the reality in Cyprus.

This is an extremely important financial event in the history. Never in the financial history such “legal robbery” has happened to the people. It is a matter of time, the people  will wake up and riot at streets and tell the government “who the hell you think you are to rob us?!”

What’s next? Cyprus very likely will continue restricting transferring money outside the country. Cypriots will be withdrawing the fiat currency and spend within the country like crazy with the mentality “If I don’t spend it, government is going to take it“. Hyperinflation is on it’s way hitting Cyprus.

Similar event has happened to Germany after World War 1. Hyperinflation hit Germany between 1921 and 1924. Due to war spending, Germany has printed massive amount of fiat currency that caused hyperinflation. The effect started to hit the middle class and everyone spent as fast as they could. Hyperinflation is never a funny matter. It is not about Nasi Ayam increased from RM4 to RM5. To put hyperinflation into Malaysian perspective, 2 years back if we could buy a bread with RM0.50 and then in the next 3-4 years, the same bread will cost RM201 Billion.

German Mark

Germany was fighting a war with weapons; while Cyprus is fighting a war with financial instruments. Unfortunately the financial war is now invisible and most people do not even realize it is here.

Too drastic to happen in Malaysia? 70 years ago, Malaysia have it’s own version of hyperinflation through “Banana Money” issued by the Japanese during their occupation of Malaya between 1942 and 1944. In order to supply the ruling authorities with money whenever needed, they simply kept printing more and more banana notes.

banana-money

During time of financial uncertainty, gold and silver remain as the best option to store one’s wealth. Not only gold and silver price will shoot up during such crisis time, but also the government cannot steal your gold and silver. (Remember, if you don’t hold it, you don’t own it) Between gold and silver, silver has much better potential than gold. Apart from the precious metal status (like gold), silver has an additional demand in industry usages. Computer, smartphone, air-cond, TV, battery, RFID, and much, much more. Almost every electronic devices uses silver as silver is the best electrical conductor in the world. The anti-bacteria element also made silver highly demanded in medical usage. To discover more silver industry usages, please visit here.

The total physical silver owned by ETP Silver Holdings continue to go up:

etf

For individual silver investors, I highly recommend you start buying some silver coins, bars or even rounds. There will be short term fluctuation of silver price, which I call them as “market noise”. For most people, it’s NOT worth the effort to pay too much attention to.

silver-eagle

American Silver Eagle coin is one of the favorite coins I keep (a lot!). Beside the beautiful design and low premium, I like the constant reminder of ONE DOLLAR minted on the coin, where right now the market is selling the coin for about $30 (RM100 – RM120, depending on the quantity and which dealer you buy from). This coin could once be bought at merely $1. It’s a perfect example / effect of inflation that pushed silver price up to such height.

Typically, investment grade silver in Malaysia can be categorized into coin, bar and round. For beginner, I highly recommend you start with American Silver Eagle which has many advantages over the other silver items in the market. The size is reasonably small where most middle class can afford to buy / invest. The premium is relatively low compared to other numismatic coin (which means you get more silver for every Ringgit spent), yet the coin has an impressive design. It is one of the most common and most demanded silver coin in Malaysia, in fact it is the best selling coin the world!

Silver Malaysia eBookPractical Guide For Investing Silver In Malaysia is an eBook specifically written with a Malaysian’s context for silver investment. You will learn different strategies and tricks you never thought of in silver market. Please click here to find out more.

 

Malaysia EPF

Manulife Asset Management published a report on Malaysia population “aging” issue.

  • In 2010, only 5% of Malaysian population are above 65 years old.
  • By 2050, there will be 15% of Malaysian population above age 65.

Malaysia population is getting older. As each year passes us, there will be more elderly seniors compared to the previous years:

  • In 2010, every 100 working person are supporting 7 retired elderly seniors.
  • By 2050, every 100 working person will be supporting 23 retired elderly seniors.

When comes to retirement age and financial support upon retirement, the 1st thought Malaysians think about is EPF. Taking a deeper look, there are LESS THAN 40% of working age Malaysians have an EPF account.

EPF

There are a couple of issue with our EPF:

  1. It is a one-for-everyone solution in retirement planning. Undeniably, EPF is safe and stable by consistently giving 4.x% to 6.x% dividend (in the past 15 years). Last year (2012), the dividend payout from EPF was 6.15%, which can be considered reasonably. Unfortunately, this return is merely slightly above FD (fixed deposit) rate. This might be an okay plan for someone above age 50 and have a family with wife and kids. He cannot afford to take high risk due to his age and dependencies. However we have other groups of working class such as someone who is below 30 and have no dependencies (no wife, no kids and parents are still healthy). They can take much higher risk in order to make higher return. Their money in EPF earning merely 4.x% to 6.x% dividend is doing a relatively poor job for their money. This group of working class need to consider an alternate option to grow their wealth quickly.
  2. Most people finished spending their EPF savings within 3-5 years. Firstly, as of end 2011, 86.5% of the active EPF contributors have LESS THAN RM100,000. If an elder spends RM1667/month (for food, medical attentions and other daily necessities), his fund will run out in LESS THAN 5 years. Secondly, most retired folks are not prepared to handle such large amount of money. They have been receiving salary all their life and only managing their salary of few thousands Ringgit (perhaps RM3000, RM5000, RM8000, etc), but they are not prepared to handle RM100,000 or sometimes even more. They are not intellectually prepared due to insufficient financial education and they are not emotionally prepared with that large amount of money. Their financial blueprint will immediately bring them back to the level where they do NOT have so much money. This is the same reason why most lottery winners that became millionaires overnight became broke again (or in worse financial situation) within 3-5 years.

Apart from better money management skill, we should consider taking a little risk and grow our personal retirement fund (not purely relying on EPF). In my opinion, the most potential  investment in this decade is silver investment. Silver is known as the largest wealth transfer in human history in this decade. Just like Energy, wealth is never destroyed, it is merely transferred from one pocket to another. The challenge with our modern generation is, the money / wealth have gone invisible. If you are not trained or educated in this subject, you won’t even realize “the transfer” has happened.

Silver investment is really simple. All you need to do is buy low, sell high. Unfortunately, most people are doing the exact opposite. When the price is going higher, they came in and  bought during the high price then soon found the price started crashing down. When silver price did come down, that’s the time they should buy but now they are conquered by their fear that silver price might drop further and paralyzed them from taking any action.

Remember this, if you want to sell high, you need to buy low. Price fluctuation (ups and downs) for silver will always be there. Price moving in straight line NEVER exists. At the point of writing this, silver price is $29. I would not call this as the rock bottom price, but this is definitely a good price to buy some cheap silver. It is always better to buy at a good price, than waiting for the best price that might never come.

For more of my work, please take a look at the eBook: Practical Guide For Investing Silver In Malaysia (3rd Edition).  

Silver Price Dropped, Now What?

Last week (20th Feb), silver price has a drastic drop of almost $1 within 6 hours:

In the past 30 days, silver price felt from $32 to $28.

Take a look at the longer term for silver chart from September 2012 to February 2013, we can observe the following:

Lower High

This chart shows a lower high pattern. Lower high means each of following high is lower than the previous high. High 1 peak is about $35, High 2 peak is about $34.40, High 3 peak is $32.25. In other words, High 3 is lower than High 2, and High 2 is lower than High 1. Let me repeat this, a lower high pattern where each of the following High is lower than the previous High.

Lower high is a pattern that signals market is losing strength. Does it mean silver price will continue falling? I can’t be sure as market tends to always surprise us. I won’t call the current price as a rock bottom price but it certainly is a good buying opportunity. Remember, in order to sell high, you need to buy low; unfortunately most people are afraid at that point that price might drop even further.

Throughout the last 10 years, there are many good buying opportunities. If you missed out the previous opportunity, you might not want to miss out this time. Remember my previous  question on when is the best time to plant a tree? The first best answer is 10 years ago. The second best answer is now!

If you are wondering whether you should cut lost now, I will share with you a simple guideline when to continue holding to an investment and when to consider let go. The solution is to refer back what were the fundamental factors that made silver a great investment. If the fundamentals have not change, keep holding. Remember, an arrow can only shoot forward by pulling backward first.

When comes to investing silver, you have to mentally overcome your own emotions, step back and look at the fundamentals silver. The world has limited supply of silver, rising costs of mining, growing investment demand and industrial demand, and an active currency war where the winner is the central bank with their paper money (fiat currencies).

Since about 75% of new silver supply came from mining, it is important to keep an eye on the mining cost. In Mid 2012, Pan American Silver (PAAS) claimed mining cost for silver is $13.87 per ounce. Many experts think the number is totally illogical and the actual mining cost for silver is $26.54. This would make perfect sense as why silver price has been strongly supported at $26 since 2011 until 2013 because that is exactly where the mining cost is. It cannot go lower than!

Strong Support

Is the price currently going to $26? If it reaches there can it be supported at $26? Most importantly, when is the best time to buy?

In Malaysia Silver Investor Membership, I showed a simple yet effective formula to the members on when is a good time to buy and sell silver. At the point of writing this ($28.76), the indicator shows it is a good time to buy some silver. You could wait till silver price touches $26 (the very strong support), but if silver price doesn’t go there and re-bounce to $30 range, you might have just missed a good buying opportunity. In silver investment, you would rather be 1 year too early and not 1 day too late!

On 20th Feb 2013, Eric Sprott (silver expert and billionaire fund manager) said he still believes silver is the investment of the decade. Eric stated silver should be $100 today, and he expects silver to massively outperform gold. He conservatively expects the metal to reach $200/oz, however $200 is not be considered as the top. He said, “When you trade 1 year’s silver production in a day- matter of fact I think we traded one year’s worth of gold production yesterday, which is absolutely ridiculous!“. All we know is that the price should be up massively, he added.

Practical Guide For Investing Silver In Malaysia (3rd Edition) is updated with latest information for silver investment. NEW chapters are added to provide quality content to readers. You will also receive FREE Special Report: Maybank Silver Investment Account

When Is The Best Time To Plant A Tree

When is the best time to plant a tree?

The 1st best answer is 10 years ago. The 2nd best answer would be NOW! If you have invested in silver 10 years ago, you would have bought silver below $5 and you could sell your silver now for about $30. That is almost 600% increase in value in 10 years! If you did not buy any silver 10 years ago, now probably is the 2nd best time to buy some silver.

Interesting, there are so little people know about the value of silver. Last week, I showed a video to test how much people know about gold price, this week, the video is to show how little people know about silver price. Although silver price is traded for around USD30, most people would NOT even buy it for 1 dollar. When come to investing, many people don’t make money simply because they don’t truly understand buy low, sell high. They might have heard of the terms, but they never truly understand and practice “buy low, sell high”. Well, the reality is, when they don’t even know the true value of something, how could they buy low and sell high?

This video is the best example:

2 precious metal gurus – David Morgan and Mike Maloney are discussing silver in their car. They discussed the role of gold and silver. If gold suddenly disappeared from the world, nothing is going to change. Everything will still be the same because gold has very little industrial application. However, if our modern life do not have silver, no modern technology would ever exist and we will be living in stone age!

For the first time, if we take all the gold and silver available in the world, there are 5 times more gold than silver for investment. Investment grade gold & silver are those that have at least 99.9% purity. There are about 3-5 billion oz of gold available for investment but there are only 1 billion oz of silver available for investment.

Below are one of the conversations we have in Malaysia Silver Investor Membership. One of the member asked me some questions which I think it could benefit more people if I post it in this blog. For privacy concern, I have blurred the name of the members.

Member

In the membership platform, we have members coming from different level of investment experience. Not only myself ready to answer any question raise by members, many other experienced members are also generously sharing information, advice, and news updates to the rest of the members.

I have written Practical Guide For Investing Silver In Malaysiaan eBook specifically written for Malaysian in silver investment. You will learn different silver investment strategies and I will show you how to invest silver below market price! Click here to find out more.

Gold Price

One of the members in Malaysia Silver Investor Membership has shared the following video (with the rest of the members) to show how ignorant people are on gold price.

We can’t entirely blame the people how ignorant they are on gold, because for the past 42 years, we are living in a world that uses fiat currency (paper money) for daily transaction.  In 1971, Richard Nixon, the president of United State back then took US Dollar off the gold standard. Before 1971, each Dollar is backed by certain amount of gold. After 1971, the  Dollar is just paper as the Dollar is no longer backed by gold. Since every country currencies  (including Ringgit Malaysia) is backed by US Dollar as reserve currency, from that point onward all the “money” in the world has become paper currency that the central government can print anytime and any quantity they like. While we as middle class are working hard everyday for that? How ironic?!

Most of us in this generation are brainwashed to believe that the paper currency printed by government (which is just some paper not backed by any gold) is actually money. We never have a proper / official education on the value of gold. Most of us buy gold for cultural reasons. It is just a wisdom passed from the previous generations. We never question or fully understand the fundamental of precious metals (gold & silver). This is exactly the reason why I started this silver blog to share more information on silver.

If there are so little people understand gold, there are even less people understand silver.

The potential for silver is extremely positive. Last 2 months, silver coins were sold out in US Mint for twice! Canadian Mint faced the similar shortage problem. Silver, apart from being a monetary metal, it is also one of the most highly sought after industrial metal that being used up in large quantity. China being the 3rd largest silver producer in the world still does not have enough silver and they have to import more from other countries.

10 Years Silver Chart

According to Christenson from Deviant Investor, the highs in 2004, 2006, 2008, and 2011 were at or above that trend line. A price of $15 in 2006 was just as extreme as a nearly $50 price in 2011 and a possible $100 price within the next two years. The ten year chart of silver prices is plotted on a logarithmic scale and shows a highly volatile exponential increase in prices over that ten year period. The higher trend line extends to approximately $100 by the end of 2013. Prediction – Certainly Not! Possibility – Yes!

If you are interested to find out more about silver, I highly recommend you to read the following book.

I have written Practical Guide For Investing Silver In Malaysiaan eBook specifically written for Malaysian in silver investment. You will learn different silver investment strategies and I will show you how to invest silver below market price! Click here to find out more.

Crocodile Silver Investment

CrocodileCrocodiles are by far the most successful animals that has ever lived. They have been around for about 200 million years and have out-lived the Dinosaurs. Crocodiles patiently learn the behavior of their victims and wait for long periods of time (sometimes to the point of starving). Then when the time is right, they snatch their victim with confidence and precision!

Crocodile is big, fat, long and needs A LOT of protein in his diet to survive, to swim and to hunt. Is his energy best spent going around all day eating little fish which are easy to catch? Imagine how much energy he would need trying to catch a high quantity of low-quality victim like that all day. The strategy for crocodile is to strike less but each strike take a big gain.

When comes to physical silver investment, we have to invest like a crocodile. Crocodile does not waste time on the small fish; as a silver investors, we do not waste time in the small price fluctuation. Silver price fluctuate between 2% to 3% in a day is very common, do not be overly concern about it and do not waste time chasing the price.

If a person goes in and out during small silver price fluctuation, he might end up like this guy. First, he tries to analyze when is a good time to buy silver. Second, once he is in the game, he monitor silver price closely. He buys when silver price shooting up, sells when silver price coming down (well, sound familiar?). Thirdly, he found out he has been losing money and soon, he is out of money and out of luck. Game over!

guy

If you buy and sell silver within a short period of time, you tend to end up like the guy above. For physical silver investment, do not waste your time chasing the price every day. In fact, looking at the silver price chart multiple times a day is a bad choice for physical silver investment.

Take a look at this chart that many silver investors refer to:

What does this chart tells you? Frankly, it tells very little except the current silver spot price. It is a light weighted line chart that can tell what is the current spot price but nothing more. The chart does not tell any trend and pattern, the chart does not show support and resistance. It is a quick and simple method to know current silver spot price, but sometimes what seems to be simple could complicate your life. On the other hand, if you are willing to spend a little time to learn silver investment, what seems to be complicated could simplify your life.

Personally, I only look at 8 hours chart, daily chart and weekly chart. Why? The longer the time frame, the clearer the trend is. On the other hand, the shorter the time frame, the more “noise” in the chart. The following is silver weekly chart since Oct 2011 till January 2013, there is a very clear wave and obvious range the price is traded for.

silver range

A crocodile investor patiently learns the silver price pattern and waits for the opportunity. When the time is right, he buys silver at bottom and sell silver at top with confidence and precision! A crocodile investor would have benefited from his silver investment in the following manner:

silver wave

In Trade 1, the crocodile investor had 14 days to buy his silver at price $29 then 21 days to sell his silver for $35.

In Trade 2, the crocodile investor had 28 days to buy his silver at price $28 then 14 days to sell his silver for $35.50.

In Trade 3, the crocodile investor had 98 days to buy his silver at price $27.50 then 28 days to sell his silver for $34.50.

If the crocodile investor had put in RM10,000 initially, after 1 year, his investment capital would have been rolled into RM19,208.75. You see, crocodile investor  only made 3 trades in a year to profit almost 100% return. He does not chase the small price changes every day or worry about the price fluctuation everyday. It is a total waste of energy. He looks at the big picture, learns the game and have a plan before investing in silver. Investing in silver without a plan is hunting in the jungle at night and hopefully kill a tiger. Common sense would tell us that is a joke. Come on, he would be lucky if he didn’t killed by the tiger instead.

Crocodile investment strategy is suitable for aggressive investors who have time and energy (although very little). There are other strategy such as dollar cost average that is for passive investors and other types of strategy where I discussed in eBook Practical Guide For Investing Silver In Malaysia.

There is no one size that fits all investor in silver investment. In the eBook, you would learn different options for investing silver in Malaysia. You need to understand different options so that you can choose one suitable for yourself. Click here to find out more.

American Eagle Silver – Sold Out!

American Silver Eagle 2012

American Silver Eagle (ASE) is one of my favourite silver bullion coins. Apart from the beautiful design, ASE also has relatively low premium and high liquidity (easy to be sold off), which makes it an excellent option for silver investment in Malaysia.

Last week (17th December 2012), US Mint informed authorized purchasers that ASE 2012 had sold out and no additional ASE 2012 would be struck. The new ASE 2013 will only be available for order in 7th January 2013.

Well, this does NOT necessary means silver shortage has begun. It merely means US Mint has finished selling their ready inventory. Today in Malaysia, you can still buy ASE from many different dealers for a price from RM110 to RM136 depending which dealers and the quantity you are buying from. The good news is, ASE is still very affordable for many people to buy as silver investment.

Two advice for you when you invest in ASE:

  1. Do not rush to buy the “newest” ASE 2013 when it is available in Malaysia silver market. Regardless which coins, the 1st or the early batch of the coins are more expensive than when it is few weeks or months later. Few years down the road, your “1st batch coin” or the few months later batch make no difference. So, why pay more? The additional premium you paid for getting the early batch means nothing except that you get to hold a new ASE 2013 coin earlier than everyone else. That’s it.
  2. ASE premium does not appreciate itself like other collectible silver items. ASE truly walks the talk of “1 oz of silver is 1 oz of silver”. Regardless how old your ASE coin is, your ASE coins always worth the same with ASE coins of other years. Some investors see this as a form of disadvantage for ASE coins. If you are looking for coins that appreciate in value regardless of spot price, you should consider numismatic coins or semi-numismatic such as Panda coin.

In my eBook Practical Guide For Investing Silver In Malaysia, I have given the following rating for American Silver Eagle coins:

American Silver Eagle Malaysia Rating

In the eBook, you will learn many other silver coins, silver round and silver bar. I also discuss in detailed what are the factors that you should consider before investing in any particular silver. In fact, there are some silver items you should totally avoid!

Practical Guide For Investing Silver In Malaysia is an eBook specifically written with a Malaysian’s context for silver investment. You will learn different strategies, tips and tricks you never thought of in silver market. Please click here to find out more.

Abu & En. Jamal – QE Four-ever

Fed Chair Ben Bernanke Holds News Conference

QE4 (Quantitative Easing 4) is officially announced by Ben Bernanke, The Chairman of Federal Reserve on 12th December 2012, which is only 3 months after QE3 is announced in September 2012. This “money printing” will be adding 1 trillion dollar (USD 1,000,000,000,000) into financial market in 2013.

Silver price fluctuate in an (almost) exact mirror the day before and after the announcement of QE4. It is obvious that the traders are systematically trading silver on paper using previous day as an opposite reference.

silver-mirror

Creating inflation is the main objective of quantitative easing. Throughout history, government that “print money” will eventually collapse their own economy. Germany (in the 1920s), Zimbabwe (in the 2000s) and Japan (2001-2006) have all done quantitative easing and the efforts are all FAILURE.

Why do they have to print money? Why create inflation? What is the real problem here?

The problem here is really simple: The economy is not growing. The people are not spending enough money to stimulate the economy. Hence, the government “print” more money for the people to spend. Federal Reserve will “print” as much money as possible until the economy recovers, which is IMPOSSIBLE.

jackie-chan-impossible

I will show you a simple explanation why this is impossible.

Abu is born in a rich family. His father En. Jamal is a decent businessman. When Abu at age 21, he got a job with salary RM2,000 a month and he applied a credit card from Maybank with credit limit of RM20,000. Being young and fantasized by the materialistic world, Abu started spending money using the credit card. He soon has reached his credit limit and he could not afford to pay back the debt. En. Jamal (being a loving father), used his personal saving to help Abu to pay off the credit card debt. Abu is happy now and very soon, he started spending on the credit card, again. But this time, he called up Maybank to ask for a larger credit limit of RM50,000 because the smaller and cheaper “toys” could no longer satisfy him. Once he hits his credit limit, the father En. Jamal has to use his personal saving to pay off his son’s debt – only this time a larger debt at RM50,000. Abu knowing his father will always pay off the debt for him, Abu this time ask for RM100,000 credit limit from Maybank. Then… well you know what happen… The credit card debt cycle will grow larger and larger until one day En. Jamal can no longer help his son.

debt

So how does the story relate to Quantitative Easing?

En. Jamal is the government and Abu is the economy. Every time Abu is in financial trouble, En. Jamal has to take out money for Abu to keep Abu going. Each time the amount will be larger and the problem happens more frequent. The money being used to “save” the situation did not really save the situation but encourage the problem to be bigger the next round. QE3 is printing $40 billion every month and QE4 is printing another $45 billion every month. Then, guess what’s next?

If you have problem understanding the story of Abu and En. Jamal. Another example would be a drug addict and his drug. When the drug addict is addicted to a drug, he will need it from time to time, with a heavier dose and more frequently. He will continue need it until he finally collapses. In this case, US economy is the drug addict and QE1, QE2, QE3, QE4 are the drugs.

The interesting part is, QE1 and QE2 have definite period of time and definite amount of money to be “printed”. When it’s over, it’s over. While for QE3 and QE4, they are open-ended. In other words, there is no end to them. Federal Reserve will print as much as they want, that’s why QE3 and QE4 are QE Four-ever.

QE4-ever

The solution is the problem. En. Jamal should have NEVER helped Abu when the 1st time he get into financial trouble. En. Jamal should have let Abu felt on the ground and learn to pay off the debt himself (learn to recover from the financial trouble himself). Similarly, Federal Reserve should have NEVER introduced QE1, QE2 and QE3 at the first place. US should have let the economy crashed in 2008 and recover on it’s own (not by artificially stimulating the economy using QE1). The financial problem will now grow bigger and bigger to a level that beyond recovery. Since US Dollar is the world reserve currency, this financial crisis will grow so big until the whole financial system collapse.

I have no power to change what Federal Reserve has done, but I have the ability to prepare myself for the coming financial crisis. J.P. Morgan (1912) said, gold and silver are money, everything else is credit. I’m preparing myself and keeping my wealth in precious metal (real money) especially silver.

Silver has huge industrial demand (while gold has little, close to none), in fact it is the second most traded commodity in the world (after oil). Silver to gold production ratio is 10 to 1, while current price ratio is 51 to 1. In other words, silver is still way undervalued. Silver price has to increase significantly to match the actual production ratio. Robert Kiyosaki said “Silver is no.1 investment today, silver is biggest thing against inflation, great investment!“.

When comes to money, talk is cheap, action is everything. I have written the eBook Practical Guide For Investing Silver In Malaysia to show Malaysians how to invest in silver. If you are serious about protect yourself against inflation, click here to find out more.

The People’s Metal (Ryan Jordan)

With silver at $50 per ounce in 1980, all of the world’s silver equaled the U.S. monetary base. However, at today’s prices, in order to be equal to the U.S. monetary base, silver would have to trade for over $1,000 per ounce! -FutureMoneyTrends.com, December 2012

 

 

Practical Guide For Investing Silver In Malaysia is the no. 1 eBook to show how Malaysians can make the most return out of silver investment. You will learn the tips and tricks for investing in silver. If you are serious about silver investment, click here to find out more.