Economics & Investing For Preppers

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Here are the latest news items and commentary on current economics news, market trends, stocks, investing opportunities, and the precious metals markets. We also cover hedges, derivatives, and obscura. Most of these items are from the “tangibles heavy” contrarian perspective of SurvivalBlog’s Founder and Senior Editor, JWR. Today, we look at both the supply and demand sides of the silver market. (See the Precious Metals section.)

Precious Metals:

The demand side for physical silver is off the charts. But meanwhile, the supply side of the silver market equation is downright grim. Consider these factors and some recent news:

  • In the United States, Newmont has temporarily closed some mines.
  • In Canada, many mines–in all sectors, not just silver–have been put on hiatus.
  • Ditto for mines in Peru.
  • Mexico’s Ministry of Health announced that all silver mines in Mexico will be shut down until at least the end of April, because of the Wu Flu pandemic.
  • About 30% of silver production worldwide is a by-product of copper, zinc, and lead mining production. But all of those industrial commodities have had depressed prices for many months, and some mines have therefore shut down, or shifted to very limited production.
  • Global silver production had already been in a gradual decline, since 2017.
  • Silver refining production, particularly in Nevada’s Carlin region is slowing, or in some cases stopping.

Although the official spot and futures prices of silver are still depressed because of fallout from the stock market crash (read: traders liquidating assets, for margin covering), the real world physical market is red hot. Dealers are charging as much as $19 over spot as a premium, for 1-ounce Silver American Eagles.

I expect the spot price of silver to rebound, by the end of June. And, as I’ve mentioned several times, I expect the silver-to-gold price ratio to get back closer to normal.  For that reason alone, I prefer buying silver rather than gold. Silver will gain, relative to gold. So, if you can find any silver, then stack it deep!

Economy & Finance:

Reader DSV sent this: “There Are Basically No Sales”: U.S. Auto Industry Enters Total Collapse From Nationwide Lockdown

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Simon Black, over at Zero Hedge: There’s a major sovereign debt crisis looming

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At Wolf Street: Week Two: How COVID-19 Lockdowns Impact US Housing Market. Mortgages Give Clues: It Gets Uglier

Home-Based Businesses

The many weeks of pandemic “self-Isolation” have taught Americans a lot.  Among other things, many families have learned that they enjoy homeschooling and enjoy working from home. Also, witnessing the spike in corporate and retail layoffs has also taught people the value of having a second stream of income. Even in the early days of SurvivalBlog, I emphasized the importance of having a home-based business, to provide a second income stream — and possibly your “ticket” to move to a more lightly-populated region.

Please seriously study and pray about different possibilities for starting one or more home-based businesses. I generally shy away from franchise businesses, since those have higher overhead. And with the COVID-19 panic likely to continue in waves for many months to come, you should probably also avoid businesses that require any significant face-to-face contact with customers, clients, or charges. (No daycare for those little vectors!) But this still leaves many options — including a web-based mail order business, freelance writing, web-based tutoring, tele-medicine consulting, Internet forum moderation, software writing, phone tech support/help desk (as a “Native English speaker”), and web page design. You’ve probably noticed that I took some of my own advice and started a web-based antique gun business. I was able to set that up very quickly, using the the e-commerce services of Make Ready Arms. I recommend them, especially if what you’ll be selling is firearms-related.  I’ve found that their customer service is very personal and responsive. They are great guys.

Commodities:

Weekly Pricing Pulse: Commodities sell off as the shut-downs continue

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OilPrice News reports: $1 Oil: Saudi Arabia’s Attempt To Crush U.S. Shale

Equities and Forex:

Market reactions to COVID-19: Stocks end the week in decline

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BofA: “QE vs Unemployment” Means Soaring Inflation Will Crush The Dollar, JWR’s Comment:  The Bank Of America’s gloomy position on the USD should be tempered by the recognition that all FOREX moves are based on relative strengths of currencies.  If foreign governments attempt simliar massive bailouts, then some of the relative strength of their currencies (versus the USD) will disappear.  So don’t write off the Dollar, quite yet.

Tangibles Investing:

The current nationwide rush to buy ammunition and subsequent shortages look as if they will rival The Great Ammo Drought of 2008-2013. I’ve heard that a lot of calibers are sold out at the disributor level! My advice is simple: Stock up. There will be more profound ammo shortages by June. I predict that the current shortage will soon expand to include .22 rimfire ammo and some reloading components–especially primers. So stack them deep. By the time that prices might subside in a few years, currency inflation will probably be in full swing. Thus, ammo and primers–if properly stored in waterproof mil-spec cans or Tupperware will be better than money in the bank. Common caliber ammunition can be an effective hedge on inflation.

Provisos:

SurvivalBlog and its Editors are not paid investment counselors or advisers. Please see our Provisos page for our detailed disclaimers.

News Tips:

Please send your economics and investing news tips to JWR. (Either via e-mail of via our Contact form.) These are often especially relevant, because they come from folks who closely watch specific markets. If you spot any news that would be of interest to SurvivalBlog readers, then please send it in. News from local news outlets that is missed by the news wire services is especially appreciated. And it need not be only about commodities and precious metals. Thanks!


16 Comments

  1. Guns and ammo may fall into the “non essential” category as deemed by states. I just heard more and more states in lockdown are prohibiting “essential” businesses from selling”non essential” items. This includes agriculture (seeds), home repairs, camping supplies, and likely ammo. Stock up immediately. This is the 11th hour and then some.

    1. Thank you, Smalltown85 for the encouragement to do so. Many already have, but your urgent admonishment will bless many. I will follow your advice, too. This just keeps getting more absurd.
      Blessings to you and yours!!!

  4. There is a very real possibility we’ll see the underlying paper value of silver rise to meet the price currently charged by dealers including inflated premiums. It’s going to take months for supply issues to resolve assuming both mines and minting facilities resume production in late April or May. By then I expect the markets will have a better handle on the real cost and effect of the stimulus packages plus reduced tax receipts, cost of debt, unemployment, a brewing oil war, etc.

    My personal price target for buying silver is $17.50-$18.00 including the premium. Right now I’m focused on gold as it’s setting up to have a strong year and premiums are more reasonable. I am selling off collectible silver as some mint products are selling for $25-$30 per troy oz such as Libertads, Canadian Wildlife series, etc. Plus some older silver eagles that were never removed from tubes (true BU condition) are selling for a significant premium over 2019-2020 dated eagles. That might present a good option for people to convert older products to current stuff if your interest is accumulation and not collector value. Some dealers will pay higher prices for older BU coins and some won’t. Search around. Selling directly to the end buyer and cutting out middlemen has always worked well for me.

    1. Hi Chris. One of the problems with the dealer coin market is that we can see the sell price, but their buy price is not as easily discernible. You mention you are selling collectible silver, how does the dealer buy price compare to their sell price at the time of the transaction?

      1. JSW – I don’t know as I don’t sell collectibles back to dealers. When I buy collectible silver I am almost always doing with the intent of selling to a private buyer down the road. Dealers will almost always offer you the lowest price possible, sometimes at spot values or even under spot. A great example is NTM’s Get Out of Dodge divisible silver 1 oz bars. A dealer will pay at spot (or in this market slightly above) but if I advertise them locally I’m going to get significantly more – $23-$25 each. A sheet of 10 might bring up to $30 each. Same goes for older Chinese Pandas, Libertads/Onzas, etc. I’ve found that collectibles from national mints preserve their value well above soot and in many cases petmiums go up 5-7% annually for a 4-5 years before plateauing. Plus I just personally enjoy looking at them – mints are capable of some truly stunning work these days.

        Anyway, while I will buy collectibles it does get tedious to sell them off so I also buy larger quantities of same type like tubes of silver eagles or 10/50/100 oz bars. Those are strictly a buy low, sell high approach through dealers so I wait for lower premiums and spot prices.

        I don’t know the best way – it’s just what works for me.

  5. I have to agree with JSW in regard to paying such premiums on silver. Unless the dollar takes a huge plunge into the low 80’s the price isn’t going to get to present levels of market + high premiums. Off course if this is the end all bets are off. As JWR says, buy the dips, do not panic. We buy when we feel silver is a good deal, not when the cat is chasing it’s tail, that is when one might sell off some to improve their position at a later date. The time for panic is over, that is why we are preppers.

  6. In regards to silver, I made my first purchases of several hundred ounces of physical silver when it was around $32 per oz around 2011 or so. I held it even as the price hit $50 oz. When the price dropped to $17 oz I purchased more to lower my average price per ounce. A negative side effect is that my wife feels as though we’ve “lost” money on silver and isn’t quite as trusting of my investing advice. The reality is that we haven’t “lost” a dime because we haven’t sold it. I could have sold it for a tidy profit soon after receiving it but I bought to protect wealth not to profit. Also, when I was 15 yrs old the price hit $49.95 oz, it hit slightly higher than that in my mid 40’s so there is an argument that it will reach that territory again in my lifetime and at that time we may be at a point where we decide to let it go. Obviously it’s always better to buy at low prices but if you truly worry about the complete destruction of the dollar then any silver at any price is better than none. Just my 2 cents, probably worth about half that now.

  7. 1) You can not invest properly if the news media is not giving you the Truth, the Whole Truth, and Nothing but the Truth.
    2) Merriam-Webster has two definitions of “to lie”. One is to tell a falsehood with a deliberate attempt to deceive. A closely related definition 2 is ” to create a false or misleading impression “.
    3) The News Media exists to lie on behalf of the Rich men who own and control it. Re today’s situation, note how the New York Times and Washington Post are lying to you.

    4) With one exception, US containment of this virus has been highly successful compared to the EU.
    a) We have 9653 deaths, Italy has 15,887. Given that we have 5.5 times Italy’s population, we would have 87,379 dead if we were as bad off as Italy.
    b) Spain has 13,055 dead with a population of 47 million. With our 328 million people we would have 91,107 dead if we were as bad off,

    5) New York City and its surrounding suburbs is the MAJOR point of failure in the USA — the result of incompetence by its Democrat Mayor and New York’s Democrat Governor.

    Of our 9653 dead, 3048 are in New York City and many of the rest are in the surrounding area.

    NYC has 8.4 million people — if the rest of the USA was as screwed up, we would have 116,114 dead in the rest of the USA. Instead, we only have 6605.

    The lethal threat to the rest of the USA is posed by infected New Yorkers fleeing the Cuomo Blasio death trap.

    6) The News Media insists on hiding this — on giving a one-sided, deeply dishonest narrative. I.e, on lying.

    So what else have they been lying about?

    7) Public health has always been a local and state responsibility with the federal government providing additional aid. In part because of local conditions — Florida worries about tropical mosquito -borne diseases, North Dakota not so much.

    8) New York City is RICH —in part due to a Wall Street that is a blood-sucking parasite on the workers in the rest of the country. So why was NYC so unprepared for this virus? Why does the News Media putting Cuomo up demanding medical gear while Baltimore , Flint and Camden NJ are left to rot by the Democratic leaders?

  8. I am not qualified to give financial advice but you can lose as much from lost opportunities as by investments. Someone who got out of the stock market in Jan 1 2009 missed out on a big runup in the S&P 500 index to February 2020.

    Similarly, if deployment of widespread testing or a vaccine occurs soon, then that could spark a rally. But obviously we are in a race between stopping the virus vs economic damage from the isolation measure.

    I am also suspicious that the Rich are encouraging massive federal intervention as a Pump and Dump — i.e, giving them the opportunity to gradually sell their stocks at relatively high prices without the crash that a big sudden unloading would provoke.

    We tend to see disasters as something to defend against — but some people see them as opportunities. Including, as Boris Johnson said, the opportunity to create new disasters.

  10. I just received some W Silver Eagles that I purchased. I have always loved Silver & to me they are an extra hedge to my savings plan along with other PM’s .

    Also, I love looking at them, they are truly beautiful to me.

    Rock on

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