What about silver?

July 29, 2011
Belgrade, Serbia

It’s a rainy morning here in Belgrade, one of those days where the gray skies and drizzle sap the spirit and motivation to do much at all. But I have quite a few things to be excited about today.

Most importantly, we’re making great progress in our property acquisition for the resilient community. It’s been a protracted process, but we’re finally reaching the end, and I’ll soon be able to make some significant announcements beyond what I outlined to attendees of our workshop in Panama a few months ago.

Additionally, our annual summer entrepreneurship camp is coming up in just 2-weeks, and I’ll be departing for Lithuania soon for that. More below– first, let’s get to this week’s questions:

First, Adriana in London asks, “Simon, you recently wrote that gold has a lot of room to run, at least in the long-term. You didn’t mention silver. Any reason why?”

I generally write ‘gold’ as shorthand for precious metals in general, and the long-term story of the two metals is similar… though there are important distinctions.

As a speculation, silver likely has more potential for price growth. In a bullish market for precious metals, the gold/silver ratio will continue to fall, meaning that silver’s price appreciation will be much quicker than gold’s.

To give you an example, when gold reaches $2,000, it’s possible that silver may be at $75 or even $100 by then… registering a 25% gain for gold, but a roughly 100%+ gain for silver.

The flip side to having more potential is that there is higher risk. In the event of a correction, silver’s tumble will be steeper and more painful. We saw this a few months ago when our partner Tim perfectly timed the short-term top in silver. Immediately after his call, the metal dropped 30%. Gold hardly budged.

The reason for this is that institutional wealth is flowing into gold right now as a safe haven; banks and money managers are looking to gold as a store of value to protect hundreds of billions of dollars from fiat currency debasement.

The silver market, however, is simply too small to absorb these capital flows. This is why silver is ultimately more speculative, simply because it doesn’t have the capacity to absorb as much institutional capital.

In the long run, the two metals will move together, and the long-term trend is higher… though silver will be more a white knuckle ride, both in its ups and downs.

One of the speakers who attended our recent offshore workshop in Panama represents a highly reputable firm that stores -allocated- gold and silver offshore in one of the most secure locations in the world; they have the capability to ship it to you wherever you are in the world, whenever you want, no questions asked.

For anyone looking to own significant amounts of gold and silver, secure offshore storage like this is definitely the way to go because it eliminates the potential anti-gold sovereign risk that may be coming in the future. More on this in a future letter.

Next, Chris from New Zealand laments, “Your partner Tim recently wrote in a post that he doesn’t have to pay taxes in the Philippines. This does not impress me. It’s ethically and morally unsustainable.”

Let’s get some background facts straight, first.

Tim is an Australian citizen, a country that does not tax non-resident citizens on their worldwide income. He is a Hong Kong permanent resident, another jurisdiction that does not tax residents on their worldwide income. And he lives in the Philippines under an immigration rule that does not tax him on income earned outside of that country.

All told, Tim essentially pays no income tax, and it’s completely legal. We should all be so lucky.

There are, however, some people who believe that they are entitled to their ‘fair share’ of somebody else’s hard work and ingenuity.  They believe that it’s a perfectly just proposition to force another human being to serve their benefit.

They want beautiful parks, they want public schools, they want universal healthcare; they just don’t want to have to pay for it all themselves. So instead they insert politicians in the middle to collect the money at gunpoint, squander most of it on political favors and corruption, and redistribute the crumbs that remain.

This is what is hailed as a free society… though I find very little freedom in a system where a corrupt institution gets to choose at their sole discretion how much of a person’s hard work they feel like taking and redistributing to others.

Tim has managed to beat this system, building a lifestyle where he keeps 100% of what he earns, and it’s all within the letter of the law. I think he’s pretty damn smart for doing so.

Next, Peter asks, “Simon, Is gun ownership legal in Chile?”

Absolutely. Chile is definitely pro-gun, and the application / registration procedures are clear. If you already own firearms, you can import them into Chile (often with no tax thanks to numerous free trade agreements), or you can purchase them in Chile. Concealed carry is also possible, though it’s not too common.

Last, Stephanie asks, “Simon, any news on your upcoming Entrepreneurship Camp?”

Sure. Our 2011 summer camp is just around the corner, less than 2-weeks away. We have 60-students from 31 countries who will be joining us, and I couldn’t be more excited. The week-long curriculum will focus on building real skills in a rapidly changing world with a focus on value creation.

I’m a firm believer that, no matter what happens or how crazy the world gets, there is always an abundance of opportunity to create value and solve problem… and our aim is to help the students develop the ability to spot those opportunities and build a successful business around providing unique solutions that solve big problems.

We’re going to do our best to record the event, and I plan on posting summaries of the days’ lectures during the week.

About the author

Simon Black

About the author

James Hickman (aka Simon Black) is an international investor, entrepreneur, and founder of Sovereign Man. His free daily e-letter Notes from the Field is about using the experiences from his life and travels to help you achieve more freedom, make more money, keep more of it, and protect it all from bankrupt governments.

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