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The 3 Big Charts I Watch For Silver
I realized very early on that using the dollar as a measuring stick is trick the Elite use to manipulate the masses. Through the insidious process of inflation, the Elite can shift power from us to them. The more money they print the less the dollar buys. When you understand that prices are not going up as much as the purchasing power of the dollar is declining, then you have made an important leap.
Everyone was crowing that silver reached it’s “bubble top” of $50 back in 1980. The reality is that $50 in 1980 had a ton more purchasing power than it does now. 31 years of debts and money printing has cut the value of that $50 tremendously. If you go by the rigged BLS numbers adjusting for inflation, silver would have to get to $143 to get to it’s inflation adjusted highs from 31 years ago. If you use REAL inflation adjusted numbers, like those of shadowstats.com, then silver needs to get to at least $450. And that is just adjusting for inflation… When you factor in the decades long physical deficits of silver, the unfunded liabilities and a mathematically inevitable, world-wide fiat currency collapse, the case for silver is even better.
In a recent exchange between me and another investor, he made the case that I should sell my silver because I am still up 500% on my silver investment and that I could buy other assets that are cheaper and not in a “bubble.” I first made the case that by any inflation adjusted level, we are so far off the record high, that I can barely see the top. We also have not seen the public buy into the market with the same level of excitement that they did in the housing and stock market bubbles. The biggest argument was, what other asset class is better? So I let him in on the big 3 charts that I have been watching for 6 years now.
The first chart is the one that got me to literally bet the house on silver in 2005. I got out when the ratio was about 42,000 ounces to 1 average house, now it is down to 6552 to 1. Using the ratio, so far the real purchasing power of silver is up over 600%. That’s great and all, but I believe that we have much further to go. As many of you know I have spent the past 2 years working in the Foreclosure education business. I can tell you that from first hand experience that we are no where near the bottom of housing. First, until jobs come back there will never be a recovery in housing. Then there is a huge shadow inventory in housing of either foreclosed homes held off of the market or homes where people have not paid their mortgages in years. Then there is the whole MERS mess that has not been resolved. Think about how many houses were sold with fraudulent documents, I mean would you feel comfortable buying a house with a title that the bank may not even own?
We also have ridiculously low interest rates that are artificially supporting the housing market. I am not that old, but I remember when 4.9% was a pretty good deal on a 60 month finance deal on a car and now we have that for 30 year mortgages? If you are like me, and believe that inflation is running at 10%+ in the real world when you factor in stuff that the Fed does not want to count like food and fuel, we now have NEGATIVE interest rates on housing. Even with this artificial support we are now starting to look at a double dip in the housing market.
Let’s get two steps ahead of the crowd… Say things do go the hell in a hand basket. The dollar crashes, interest rates sky rocket, necessities like food and fuel moonshot, wars, civil unrest, cats and dogs are friends, you know…mass hysteria, what would that do to housing? At the very least it would make it impossible to find financing for your house. What is your house worth without a 30 year mortgage? If you have a house that is worth $250,000 and interest rates are at 4.9% and for argument’s sake say that we did not factor in down payment, taxes or maintenance, your payment would be $1,316 a month. That is maybe something that people could afford right now. What if we go through this SHTF senario and you are lucky to find a couple that can afford that payment and are willing to buy your house, but now interest rates are 10%. You would have to sell that house for $150,000 to get to that payment. You see, people don’t buy homes or cars on the price of the asset, they buy it based off of the monthly payments. What if interest rates went to 20%? That would drop that $250,000 home to $80,000.
I also believe that during this collapse environment that local government would be so desperate and that they will be raising property taxes in a declining environment. We are 3 years into the housing depression and most property taxes are either the same or higher than they were at the bubble. Also what is a McMansion be worth if the cost to run the house goes up? $1,000 a month water or electricity bills would certainly cramp any house value. What if jobs don’t come back and more people go to live at home? What if we go back to multi-generational housing? That would leave a lot of inventory on the market in addition to the huge overhang from the last bubble. One other thing to consider is your safety. What is a property worth in a city during riots or worse?
“The time to buy is when there’s blood in the streets.” Baron Rothschild
So real estate is out in my book. The average home price is about $246,000 and silver is at $36 so we are at 1:6,833 house/silver ratio. Judging by my first chart, we could still see a 400% return still in the house to silver ratio just to get back to the 1980 high when the average house was $72,400 and silver popped to $50 (1:1448). I think a very strong case that we could blow by that because we are in much worse shape as a country than we were in 1980.
The next big one is the stock market, and we are just now getting to the mean average in the Dow to Silver ratio. This is after ten years of silver out performing stocks. At it’s 1980 peak it reached 1:18 that would be almost 2,000% return in real purchasing power of silver if we go to that ratio again. I would argue again that we are in a much worse scenario than we were in 1980. This market in now admittedly being propped up by the Plunge Protection team and high frequency robo-trading. The Greenspan put has turned into the Bernanke put. The average dividend on Dow stocks is 2.6%, which after taxes and inflation, is nothing. The Dow is double what it was in the middle of the crisis of 2008. If we go through the same kind of crisis this time, we will not have the safety nets of savings that we did last time. Add on top of that having my money sitting in some brokerage account in Wall St does not sit well with me at all.
The final big chart is the good ole Gold to Silver ratio. Once again we are just getting past the mean average. If we go to the 1980 high we could see a 200% rise in real purchasing power against gold. The ratio that gold and silver come out of the ground is about 1:10. Gold has been treasured as a precious metal and silver has been trashed as a industrial metal for decades. Add on top of this all of the paper manipulation on Wall St with the Andrew MacGuire testimony and I think we could over shoot the 1980 high of 1:14.
Finally, we have the mathematically inevitable collapse of the dollar. When this happens, all paper assets will get burned. Only real tangible assets will thrive. I cannot find another asset that has the opportunity that silver presents us today. When the day does come where I find another attractive asset class to enter, I will use my tax free strategy to plow my real purchasing power into that new asset. Until then, I will keep my eye on these 3 charts and keep holding on to my physical silver.
Author : Silver Shield
Source : http://dont-tread-on.me/the-3-big-charts-i-watch-f
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