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SILVER - Investment Opportunity of the Decade

Richard Greene

The environment for investment opportunities is, right now, in the process of undergoing a radical change that only a relative handful of investors has come to recognize. A vastly greater number of people believe they are going to become wealthy over the next decade by investing in technology stocks, rather than in the areas we have targeted. When all is said and done at the end of the next decade, we believe silver and silver stocks will have been by far the best performing asset classes on the planet.

First, we think it is appropriate to view the historic bear market that has unfolded since (not 1980 as many believe when silver hit $50, but) 1477 when silver hit an equivalent $806 per ounce!

www.goldinfo.net/silver600.html

When one views this stunning chart (see above link), it is most amazing that for one to appreciate the investment merits of silver, it is not even necessary to rely on silver returning to its historic role as money, although that would truly be the icing on the cake.

Silver is an industrial metal whose price has fallen so low that only a handful of primary silver producers are efficient enough to produce silver profitably. Much of the world's silver production today is produced as a byproduct of gold, copper, lead, and zinc. Many market observers are dumbfounded and question why these producers would continue to sell their product into the market at a loss. Some observers, most notably Jason Hommel and Ted Butler have prodded managements to do the opposite, by either withholding their production or using their excess cash to buy silver. In light of the increasingly rapid money creation, this appears to be a brilliant strategy. Silver Standard (SSRI) has lead the way by purchasing silver on the open market, and Nevada Pacific Gold (NPG) - Toronto is another producer that has announced it will withhold some production.

The truth of the matter is that supply is rapidly drying up. The US Government had a 60-year stockpile of silver that has been completely depleted. There has been a supply deficit in silver for 15 years running and this year the deficit could be as high as 50 million ounces. It is uncertain how or if this deficit will be filled. Whereas 95% of the gold that has been mined still exists, estimates run that only between 250 and 650 million ounces of the silver that has been mined is still in existence, excluding silver jewelry. This means that there is probably as much as seven times as much gold still in existence as silver. In addition, silver is incredibly cheap relative to gold. The long run price of gold to price of silver ratio has been about 16 to 1. Currently, the ratio exceeds 60 to 1 which suggests that silver should appreciate several times the rate of appreciation of gold. The reason this could be explosive is there are a multitude of commercial uses for silver that are difficult if not impossible to replace. Much is made of the replacement of traditional photography with digital photography and its bearish implications for silver usage. Realistically, a good portion of the world's population does not own a computer and in the huge population centers such as China and India, it is much more likely that growth will be seen from these countries in the traditional photography area which uses silver. Silver's unusual chemical properties ensure increased demand in high technology and medical markets which make up 40% of demand. Among its most important properties: it is superconductive, highly reflective, malleable, ductile, it endures extreme temperature ranges, and has electrically low contact resistance. While demand from these areas alone are enough to make the silver story an exciting investment theme, the real home run is if silver returns to its more traditional role in history as money. Incredibly, while not given much publicity this is already happening in at least two US states.

We feel strongly that paper