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One of our clients sent me an email and I will paraphrase it and then offer my comments.  He wanted to know where are the silver “shortages” that we write about and he wondered why we do not recommend mining shares at these low prices, since it makes sense to buy low and sell high.

Let me work backwards here.  The gist of the email was why are we recommending physicals when the mining shares are so underpriced.  Well, he is comparing apples and oranges.  

Physical gold (more so than silver) is not an investment, it is money.  It is not to be bought and sold; it is to be set-aside for a very rainy day or to pass on to your kids.

Mining shares are a very volatile and speculative investment.  They are NOT the same thing.  It depends on what you are trying to do – are you interested in the ultimate financial insurance and a solid nest egg, or a speculative investment?  There is room for both in a portfolio.  I made a lot of money in silver, gold and rare earth mining shares up until 2008.  Then they cratered and although I gave back a chunk of my “winnings,” I was wise enough to sell out quickly and put the funds into physicals, which have done reasonably well since the crash in 2008.  The physicals are UP whereas all of the mining shares were crushed.

People like Rick Rule, who I respect and like (in fact, his firm is MY personal brokerage and Susan and Andy Schectman’s too) urge their readers to buy mining shares now, while they are cheap, and he may be right.  But remember, that is what he SELLS.   And yes, we SELL physicals, so you could build a case that we promote our product just as the brokerages and newsletter services promote their products.  But I hasten to add that Andy Schectman, Andy Hoffman and I have virtually all of OUR own money in physicals.  Bill Holter has a more balanced portfolio with both physicals and a larger mining share component.

What I can tell you is that EVERY single mining company I still own, or did own, is dramatically DOWN from the 2008 peak.  Physical gold is UP $600 an ounce (60%) and physical silver is up over $10 an ounce.  There is absolutely NO question that the physicals were the place to be for the last five years.

No one knows what the future has in store for us, and if you happen to own the RIGHT mining shares, I have no doubt you will be justly rewarded.  But we are talking about a speculative and volatile INVESTMENT, not a CORE position.  I’ll take my chances with a sure fire winner and if you want to gamble with the shares, go for it. There definitely will be a time and place for the mining shares.  I just don’t know if that time is now.  Let gold pass $1800 and silver pass $32 and the shares could well come to life.  I’ll take my chances with the stocks and wait until the move up is well-defined.  I don’t need to catch the bottom, because the shares could still be headed down.  So could physical gold and silver, but I seriously doubt it, at this point.