In the biggest stock bear markets over the past nine decades, there was an initial crash… followed by a big bounce… and then a more severe selloff, a “second leg down” if you will. Could it happen again?
Having a positive frame of mind is important in times like this, but neither do we want to be blindly optimistic. Sticking your head in the proverbial sand might feel good for a while, but it could be financially devastating if you leave it there.
There are a few times in an investor’s life where, as Jim Rogers once put it, you see a pile of money sitting in a corner and you can go pick it up. In other words, an investment opportunity that’s not just obvious, but has a high reward-to-risk ratio.
It came almost out of nowhere, a black swan event that engulfed the world. As everyone from citizens to governments scrambled to deal with Covid-19, the gold industry was impacted in unprecedented ways as well.
As many of our readers know, silver supply from mining operations has been in decline. That decline has just sped up. In a big way. As you might know, a plethora of mining companies around the world have announced they suspended part or all of their operations. It’s probably worse than we know, as I suspect other miners have curtailed activities even if they haven’t announced it.
Given what’s happening in the markets, it’s time to look at the history of crashes in gold and silver. And just as important, to see what message we can glean about their recoveries. Despite the scary market activity, what’s happening to gold and silver, believe it or not, is not new. There have been many periods in history where they have crashed. The reasons vary, as does the severity and duration.
Silver can move 5% or more in a single day. Unfortunately, it cuts both ways. The silver price has been falling. Watching it reminds me of that commercial, “Help, I’ve fallen and I can’t get up.” But silver is not a weak and elderly grandmother. It’s one of mankind’s oldest forms of money… it’s a core industrial element with widespread use in our society... and it is a long-standing monetary asset, a fact that will resurface when monetary issues take center stage.
Gold has been a safe haven for literally thousands of years.
But how effective is it as a “hedge”? A hedge is an asset that tends to rise when others fall. For example, an investor holding common stocks might find it advantageous to hold some gold too, since it has historically been strong during the worst stock market crashes.
Let’s have some fun… I grew up in the Johnny Carson era, and saw lots of funny episodes and comedians over the years.
One of my favorite things was when he’d say something like “She is so fat…” and the audience would scream out “how fat is she?”
The Millennial or Gen-Z crowd may hear that setup from other comedians today, but Johnny Carson’s show was the father of it.
And by most measures, he has been wildly successful. Tesla orders hit a record 97,000 vehicles globally in the third quarter (not to mention 250,000 preorders for the new CyberTruck). The stock has more than doubled since May 1. And you might recall Mike Maloney is a big fan of Tesla cars. But there’s something you may not know about Elon Musk. He won't admit it publicly. Neither will most “green” company CEOs. But it’s a reality for all of them. They desperately need silver.