A reader asked me about Silver Wheaton (SLW) on the pull-back today, so I figured I’d take a second to show you why I like silver here for the “secular bear run.” Let’s start out with an interesting chart {$SILVER:$SPX} which plots silver against the S&P 500 since the start of the dot-com meltdown:
As you can see, silver has been on a bull run since about April of 2002, when it crossed over the 200-week moving average. Even through the subsequent four year bull cycle of 2003-2007, it continued to outperform the S&P 500 on a trending basis. What’s more, this ratio has never become oversold on an RSI basis (below 30), with only two trips in that period below 40. The ratio is also showing a possible turn (vs. the $SPX) on the slow stochastic as well. Silver is also cheap compared to gold, with gold currently priced at 73 times the price of silver (as of 3:00 today). The traditional “classic” gold/silver ratio was that held from the 17th to the 19th centuries was 16 times, and in 1980 the ratio at their respective heights was about 17 x, when silver spiked to $48 an oz, and gold to $850. Inflation adjusted, we’d need to get back to $129 and $2,200 an oz. respectively to re-acquire those heights. At double the 16 ratio (ie, 32x), however silver would still trade at almost $28 an oz. even with gold remaining at it’s current price!
Now to a silver mining stock dear to my heart. Let’s face it, most publicly traded silver mining companies are run by inbred families of feuding Romanian dwarves more interested in “Friday Night Rasslin'” and trading silver shaving for Natural Light 30-packs than they are those boring “balance sheets” and “income statements.” As a result most silver mining companies tend to frustrate investors even in good times for precious metals.
Silver Wheaton is different. It’s run by the same cockney Canuckistanian cads that brought us Wheaton River Gold, the successful gold startup that eventually took over Goldcorp (GG). The Wheaton River Gold guys have done what they’ve said they’d do now for almost ten years running, which in precious metal mining circles is the equivalent of a weekend full of “36, Winnah!”s on the roulette wheel in Vegas. It so much doesn’t happen that I’m researching the theory that they are in fact, Raelians sent to make those of us worthy enough (and who purchase the proper sneakers), rich. Ack! Ack! Ack-Ack!
See the annotated chart below — where SLW has finally filled that gap that’s been driving me crazy for weeks:
CAUTION! Investing in Precious metal miners is NOT for the faint of heart. While I think that SLW and PAAS are two of the best out there, that’s like saying I find the Phillipino black mamba and the South Rhodesian Stuttering Asp the most appealing of deadly poisonous snakes. I recommend a basket of miners in both gold and silver, as well as a core position in SLV and GLD, and the “fizzical” metals themselves. These are shelters in the storm, but they must also be watched. Build positions judiciously, and sloooowly. I will go over additional miners as we move forward with the Silver Surfer. Best to you all.
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Noice! post
Damn, you read fast Bruce!
Nice TA!
Cheers
And if Fly is right about a deflationary vortex?
At the risk of being redundant, I will repeat a comment here. (It slips in nicely with the precious metal theme, I think).
Jake, I thought you might be interested:
I spent this morning trying to find a vendor that would sell some gold ingots for $880/oz. The best I could do: A single 1/2 oz Canadian Maple Leaf for 538 USD(retail). COMEX theme song: “Put it together and what have you got? Bibbity-bobbity-boo!”
http://www.youtube.com/watch?v=8Gac_7neimY Smart kid.
Jakey,
Good post and good TA. Makes me feel a bit better about my recent SLW purchase. Fortunately I also got a $7.50 put for “insurance” so I am okay anyway.
good post Jake..alot of the GG guys are gone, when GG did big secondary of SLW. (they actually are in a new play Gold Wheaton..GLW on TSX.Giustra Telfer etc..the guys running it are A+…Silverstone deal is very nice and accretive to SLW..held in relatively well as PM plays getting smoked…another play with good management is ANV..Bob Buchan who founded Kinross is behind it..another quality guy
Still haven’t figured out clickable charts, ey, old man?
Got some GLD calls today. Terrible trade, so far, if I say so myself.
And if Fly is right about a deflationary vortex?
As I’ve mentioned, the precious metals went up in the face of one of our greatest deflationary periods, and they’ve stayed up relatively well over the last year or so, when the markets crumbled.
I think we saw real deflation at the end of the nineties, when earl was $11 a barrell and gold $250 an oz.
I just don’t see deflation like that coming, not with a fiat currency that requires only ink and paper (metaphorically, at least) to breed like a bunny.
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Caveman — Look forward to using your site for blogging material when it’s ready!
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Goin — responded to your post on the last thread. That kid needs to trade in a Maple Leaf for a decent couch.
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We can both be right, during separate time frames.
Got some GLD calls today. Terrible trade, so far, if I say so myself.
I would not recommend options, save perhaps LEAPs or as hedges. These Jacksonian Core Holdings are for your long term port, if you have one.
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Still haven’t figured out clickable charts, ey, old man?
Vincenzo tells me I don’t need them, as the voodoo he just put in sizes them automatically. Are you still having trouble reading them?
Might I suggest an opthamalogist, “old man?” 😉
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RHILL — thanks for the updates! I actually have a ton of ANV as well.
That made some noise on the PPT recently, as well, I think.
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Jake, if you follow the instructions I gave you in a previous post, using the default settings, your charts will look exactly as they display now, and they will be clickable. There is nothing extra to be done to make them clickable.
Vincenzo tells me I don’t need them, as the voodoo he just put in sizes them automatically.
LOL. Ah yes, the standard, “I can’t/won’t/don’t have time to figure this out right now, so stop bothering me!” IT answer. Used it a few times myself back when I was working it in the ‘Bat Cave’.
Are you still having trouble reading them?
Indeed.
If I squint just right I can make sense of them (the annotations), but that’s way too much effort, esp. when I could just click to make them full-size.
This works well for everyone else…how did you get stuck with the gimpy tab?
Might I suggest an opthamalogist[sic], “old man?”
Went there once and got weird things done to me with scopey things and puffs of air. Never again. Rather be blind. Scarred for life.
Jake, if you follow the instructions I gave you in a previous post, using the default settings, your charts will look exactly as they display now, and they will be clickable. There is nothing extra to be done to make them clickable.
That’s odd… I’m pretty sure I am using the default settings… maybe I’ll email you.
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This works well for everyone else…how did you get stuck with the gimpy tab?
My tab is made up of leftover spare parts from Woody’s blog, I think.
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cockney Canuckistanian cads
That makes no sense whatsoever.
Cockney is from dear olde Britain.
Are you implying that this company is Anglo-Canadian?
My friend Larry Blanford, is the Director of Photography for Rise of the Silver Surfer.
I’ll tell him of your poetic license in using his work 😉
Thanks for the extensive work in ‘splaining SLW.
Razen — Send Larry my compliments. I was especially fond of the work he did with Jessica Alba on that film.
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