In Part 1 of this series we looked at why one might need to hold Silver, we dealt with likely “unpleasant” scenarios and circumstances that could lead to one wanting to hold it.
Today we unpack the concept of “holding silver” and take a look at the practical applications of doing so.
What do I know about the topic?
I’m fortunate (or unfortunate if you prefer) enough to live in area which isn’t very stable, neither economically nor politically. I have spent a fair amount of effort drafting contingency plans for myself, plans which include evacuating the country at short notice. No, it’s not nearly as simple as “hop on a plane and go”, in sufficiently bad scenarios I would actively be avoiding major airports.
My Silver investing is built around a combination of the survivalist scenarios mentioned in Part 1:
· I am expecting that I will have to endure a large economic crash (or perhaps a few of them).
· I am already dealing with inflation (as are we all).
· I consider major future internal unrest to be a near-certainty where I stay, it’s really only a matter of time.
· The chance of war in my region is substantially lower than that of most other countries (Hooray! A silver lining!), I’m not specifically planning for a war scenario, though my plans could easily be adjusted to accommodate it.
The unfortunate reality is that there is a significantly large chance that I will end up being forced to flee my home country at relatively short notice. I estimate that the chance of that happening is greater than 50%. So here is my plan - here is what I am doing in terms of Silver investing:
What to hold?
This article is about Silver because Silver is absolutely key to the escape process. Silver is NOT the only asset I hold, and it’s also not where the majority of my wealth lies, but as you will see, Silver offers advantages which other assets simply do not.
In the scenario where one is forced into a Venezuela-style run for the borders, the thing you will need most is hard currency. You need something that you can use for trading. In such a scenario we must assume that the government has already messed up to the point that local fiat money is nearly worthless - and may not even be accepted at all.
Chances of your credit card working are near zero. It is highly likely that you will not even have access to the internet, let alone electricity. I know that Venezuelans have transferred a lot of Bitcoin via SMS, but that only works if
1. The other party accepts Bitcoin, and
2. You have power to charge your phone, and
3. You have a working mobile phone network in the area.
That’s potentially a tall order in a survivalist scenario.
Unlike fiat currencies which will probably never recover their former value after a major economic meltdown, Bitcoin (and other cryptocurrencies) is absolutely valuable to the survivalist, probably more so than anything else. The problem with Bitcoin is that it won’t help much during the initial escape and evasion phase. Before you can settle down somewhere safe and use your Bitcoin to start a new life, you first have to escape the immediate danger zone. In order to prosper later, you first have to survive!
Without internet connections, electricity, or working mobile phone transceivers, computers and phones will have all the crypto transaction abilities of the average paperweight. I also don’t want to miss a car ride to the border because the car owner does not accept BTC (90% of people have still probably never owned crypto in their lives), I’d rather have something solid in hand with which to pay my way if the opportunity arises.
Gold is great for carrying a large amount of value in a compact format. Chances of it devaluing rapidly are near zero, and even if it does, it will always bounce back. The problem with Gold was discussed yesterday, it’s impractical to carry because it is too valuable. I’m not saying don’t hold Gold, I’m merely pointing out that it has practical limitations. You can’t trade a 1 oz Gold coin for a full tank of gasoline - you could - but that would be a crazy price in almost any scenario. You’re not going to trade 1 oz of Gold for a bag of oranges either, or a first aid kit, or a small tent. Such large monetary denominations become almost useless to you. In addition to that, they make you a target. Surrounded by hordes of desperate people (and there will be desperate people!) with nothing to lose, flashing Gold around is a seriously bad idea! Unless being mugged is your idea of having a good time, keep any Gold you have well hidden - with the idea of using it to rebuild your life at a later stage.
You can see how this is naturally leading us towards Silver.
I can’t think of anything as useful as Silver in a survivalist escape scenario. Other things have value - such as food or water - but Silver is a wonderfully compact means of exchange, one which doesn’t hold an uncomfortably large amount of value. Silver is readily accepted because, unlike a fiat coin, a Silver coin always has its bullion value.
By now you have probably deduced that in order to be useful to you, you will have to have the Silver in hand. It is for this reason that I store my Silver myself, in a place where I can quickly access it if need be.
Silver locked in a safety deposit box is useless to you if you need to escape in a hurry. Imagine trying to get into a bank to access your safety deposit box during a financial panic that triggers a bank run! The bank will probably not even be open for business! What if it is on a Sunday and your bank is closed for business? Similarly, your share certificates for all those nice Silver mining companies you invested in are now probably more valuable as notepaper than as anything else. Those Silver mines now lie dormant, and the international investors have already tanked the share prices.
So that’s why you should sit on a small horde of your own Silver coins, but be careful! Not all coins are created equal! Silver coins generally come in two varieties: numismatic coins for collectors and bullion coins for investors. As beautiful as they may be, numismatic coins are not going to hold their value during a crisis. Pretty proof coins are a nice-to-have, nobody is going to want them during a period of financial panic! They will still be worth something of course - their bullion value - which is why you’re much better off just buying bullion coins in the first place.
When I buy any precious metal, I always buy bullion. The desirability factor of bullion doesn’t wane during a crisis, so it just makes sense to stack it. Even during “normal” periods it makes sense to hold bullion. I know coin collectors who bought many commemorative numismatic coins in the past (on the advice of unscrupulous coin dealers) , and who now sit with many coins that nobody wants, coins which have lost an appreciable percentage of their value.
I strongly suggest sticking to well-known 1 oz Silver coins. The two coins which I think you can never go wrong with are the 1 oz versions of the American Silver Eagle and the Canadian Silver Maple. My reasoning is simple: no other silver coins have such universal appeal. No matter where you go in the world, those coins should be accepted as a form of payment at their bullion value.
There are several valid alternatives to those two, especially if the country you reside in manufactures its own Silver bullion coins. Local bullion coins may be a little cheaper and still be readily accepted on the local market. So if you live in Mexico, you may want to get a few Silver Libertads. They aren’t quite as universally accepted as Maples and Eagles, but they are still well respected coins and you shouldn’t have any trouble getting a decent price for them. Similarly, Australians may want to get Kangaroo or Kookaburra coins, South Africans may want to get Krugerrands, Austrians may want to get Philharmonic Orchestra coins, UK residents could get Britannias. All of those coins are accepted internationally and are manufactured by respected mints. What I would avoid doing is buying less well-known coins, ones which will struggle to be recognised and which people will be reluctant to accept as a form of payment.
Bullion also comes in other shapes and sizes. I prefer coins to bars, and various sources seem to indicate that it is not just me who feels this way. Larger coins are becoming popular. I see ever increasing numbers of 2 oz coins e.g. in the UK “Queen’s Beasts” series, 5 oz coins, 10 oz coins and even 1 kg coins. The size of a 2 oz coin is still manageable, but as coins increase in size, so they become less practical and less likely to be accepted. I’d rather have 10 of your 1 oz Canadian Silver Maples than your single 10 oz Canadian Silver Maple. Because they are less popular, larger coins are also more likely to attract a price premium when buying them (and may be harder to sell under normal conditions), never desirable with bullion.
Another advantage of 1 oz Silver coins is that their specifications are well known. Bullion coins seldom come with certificates of authenticity. Instead their authenticity is governed by their exact weight, diameter, thickness and (of course) what is printed on them. You can even download phone apps that tell you the composition of a coin by the sound it makes when you spin it on the phone screen. That’s not something you can do with a 1 kg coin! Armed with a vernier calliper, a scale and (optionally) a phone, you can test coins all by yourself with an extremely high degree of confidence.
Access to your Silver when you need it
I own a couple of shares in mining companies, not many, just enough to have a foot in the door. If the proverbial brown stuff hits the fan, I am NOT counting on those shares to get me out of trouble! In fact, I would expect a possible stock-exchange collapse and huge labour issues in the mining sector. I would write those shares off. In a survival scenario, I want my Silver in my own hands! It must be in my pockets/my wallet/my rucksack. If I don’t have direct access to it, it’s useless to me.
Many Silver dealers/producers/mints offer safe-keeping options for their customers. For a small fee, I know that the Silver dealer I buy from can safely secure my Silver for me. But in a crisis scenario, that becomes useless to me. Silver stored that way is about as useful in a crisis as my mining shares are. I can’t have my Silver sitting in a vault hundreds of kilometres away when I need it. There is no way that a reliable courier will get it to me on time during a crisis. The courier will probably never even arrive, or may well just steal the Silver for him/herself! For this reason I insist on holding my own precious metals. There is a cost to this: to guard against theft, fires, etc I have to insure my precious metals. It’s a bit of a pain both logistically and financially, but it works out similar to what I would have to pay to keep it in a vault, and I have the added benefit of having instant access to it. It is my opinion that a survivalist should always have direct control over their own precious metals and not entrust them to a third party. It’s exactly the same principle that applies in the cryptocurrency world: “Not your private keys, not your crypto” - “Not in your own safe, not your Silver”.
Practical limitations of physical Silver
I’ve seen it said that one should hold Silver and Gold in a 3:1 ratio (based on rarity, relative price etc). I’ve seen other similar arguments. I say “nope” to such blanket statements. They may prove to be highly impractical!
Below is a picture of what is known as a “Monster Box”. Such boxes are commonly used for the shipping of Silver coins.
A box like this holds 500 Silver 1 oz coins. I’m not interested in buying a box like this, and I have very good reasons for saying that.
Firstly: take a look at the size of that thing! It’s BIG! My home safe is small and discreet, I like to be able to hide a safe from view. There is no way in
hell that I would be able to fit a box like this into my safe! Even if I emptied the box out, I would still not have space in my safe for 500 silver coins. Safes themselves are not cheap, if I wanted to store 500 oz (or more)
of Silver in an insurance-approved fashion, I would have to first spend quite a bit of money on safes.
But there’s a bigger problem than storage: by definition - 500 oz of silver weighs 500 oz. For those who prefer not to deal in Troy ounces, that translates into 15.55 kg or 34.2 lbs (avoirdupois). In terms of portability, that’s already a very significant weight to carry. I done multi-day hikes carrying a bag that weighed about that much. Yes I could carry more than that, but the heavier your bag gets, the slower and harder it becomes for you to travel. 500 oz of Silver leaves very little capacity for other survivalist necessities such as water, warm clothing, weapons, food etc!
But what if you carried 200 coins? That’s just over 6 kg or 13 lb and it’s still worth $3500 in bullion value alone (at time of writing). I suggest that $3500 is more than enough to buy your way out of danger, and will get a savvy survivalist into a position where they can take stock and access funds stored in other assets such as Gold or cryptocurrencies.
Hypothetically speaking: I would keep about 10 Silver coins readily available in my pockets - enough to trade for everyday items - and have 100 to 250 coins hidden away in the bags that I or my travel companions are carrying.
Gold DOES have value and can be carried in a much more compact manner than Silver. Just keep it well hidden and don’t count on using it until you have safely exited the danger area. I know a guy who has been mounting Gold coins in his wife’s jewellery for years. I think he wants to be able to get it out of the country in a less obvious fashion, though I’m not sure that he’s considered the amount of attention that his blinged-to-the-max wife may attract! I wouldn’t recommend that strategy...
Other precious metals are worth exploring - Platinum, Palladium etc, but they have downsides to them. I think that Gold and Silver are going to remain the most widely accepted coins and that they are also more likely to retain value during a major market crash. Personally I’m a big Platinum fan, but realistically I’m not counting on it to save me. I consider my Platinum investments to be investments for the good times, not the bad ones.
Living in an unstable region which is only getting worse with time, I have a high chance of having to make the difficult choice of fighting for survival or fleeing to safety. A young and single me would
choose to stay and fight, but the married me has responsibilities to others and must consider their safety too. If I do have to flee, I have to plan for a worst-case scenario where I have to flee rapidly with only as much
as I can carry as luggage. All forms of vehicle transport are likely to be compromised in such a scenario.
For me this may come sooner rather than later. For you, this may never come at all, or it may only occur 20 years from now. Please, as I said yesterday, don’t ever think “this will never happen to me”. You have time to prepare now, I suggest you do so.
The fundamentals of Silver are strong. It’s trading at a low price relative to Gold and demand for it is consistent. Silver has many applications, be it for investment, jewellery or industrial use. Come rain or shine, it’s hard to see how you can go wrong investing in Silver at the moment.
Local laws regrading the purchase and sale of precious metals vary greatly. I strongly suggest becoming well acquainted with them before buying any metals. Taxes play a big role, both in purchase and in sale. Availability of the metal is a factor: if your country has no Silver deposits and has to import it, then you will struggle to get it at a good price. Try to get as close to bullion price as you can.
Do your homework and look at Silver as part of a holistic and resilient investment portfolio. Here’s a good tip: look for second-hand coins. This “secondary market” Silver tend to sell for less, but you can resell it immediately at similar price as what you bought it for - not something you can normally do with newly minted coins!
Remember that tarnished Silver is not bad Silver, only rookies want shiny bullion coins. Just remember that handling Silver without (preferably cotton) gloves is likely to deposit skin oils on it and will cause undesirable blemishes. Never try to wash or polish your coins, chances are that you will scratch or damage them, which can affect their value.
You can also look at buying Silver rounds as opposed to coins. I would be more hesitant to accept rounds as they are not as stringently regulated and are less universally accepted. But rounds are generally cheaper and may be a good investment if you are assured of their authenticity and acceptability.
Once again, I warn you: If you think this post series is a bunch of hype and pessimistic speculation - it’s not. Have a look at this example: A generation ago Zimbabwe was known as “The breadbasket of Africa”. The article below accurately describes it today. Read it, and be shocked at how close to the truth I am (I wrote most of this post, including the entire Part 1, BEFORE I found this article). This could happen to ANY country!
Yours in crypto
"The secret to success: find out where people are going and get there first"
~ Mark Twain
"Crypto does not require institutional investment to succeed; institutions require crypto investments to remain successful"
~ Bit Brain