Leading world economies pressed the United States
on Sunday to act decisively to avert a rush of spending cuts and tax
hikes, warning that the so-called fiscal cliff is the biggest short-term
threat to global growth.
"If the United States fails to resolve the fiscal cliff it would hit the
US economy hard as well as the world and the Japanese economy, so each
G20 country will urge the United States
to firmly deal with it," Bank of Japan Governor Masaaki Shirakawa said
before a meeting of Group of 20 finance ministers and central bankers.
Unless a fractious Congress can move swiftly to reach a deal after the US elections
on Tuesday, about $600 billion in government spending cuts and higher
taxes are set to kick in from Jan. 1 and could push the US economy back into recession.
With a close US presidential vote looming on Tuesday, as well as
Congressional elections, there has been a delay in action to avert the
fiscal cliff and there is uncertainty about whether Congress can reach a
deal.
European delegates at the G20 meeting in Mexico City were particularly keen for details on the US plan, according to those present at preparatory talks.
Canadian Finance Minister Jim Flaherty said that in terms of short-term
risks to the global economic outlook, the US fiscal cliff outweighed Europe's debt crisis.
"They may not deal with it until the 11th hour and the 55th minute but I
expect that they'll do it just as they dealt with their banks in 2008,"
he told reporters.
South Korean Finance Minister Bahk Jae-wan
forecast the global economy could suffer during the first quarter of
2013 because of uncertainty about the fiscal cliff. Nonetheless, he too was counting on Congress being able to find some
kind of fix, telling Reuters: "I think compared to the euro zone crisis
the fiscal cliff issue is much easier to solve."
A draft communique being readied for the G20 policymakers said there
were elevated risks facing the global economy, including Europe's crisis
and potential problems in Japan.
"Global growth remains modest
and risks remain elevated, including due to possible delays in the
complex implementation of recent policy announcements in Europe, a
potential sharp fiscal tightening in the United States and Japan, weaker
growth in some emerging markets and additional supply shocks in some
commodity markets," the draft said, according to a G20 source.
Sunday 11 November 2012
Tuesday 30 October 2012
An Investment In Silver Is A Golden Opportunity Right Now
Whether a third round of quantitative easing and European central bank
bond buying actually happens is still in question, but both are becoming
ever more likely as both high unemployment in the United States and the
eurozone crisis persist. While it seems that many stocks
in the S&P 500 have been pricing in possible stimulus, other asset
classes such as gold, as measured by the (GLD) and (IAU), have yet to see such moves. In recent articles I have suggested that gold prices could have some tailwinds in the form of inflationary pressures and have recommended picking up the gold miners
as a way to play it. Now that we are in a situation where the stock
market has already begun aggressively pricing in more stimulus, I would
like to highlight three ways to invest in silver given that I have
stated that it could outperform gold in the next few months.There are three ways investors can get exposure to silver and I recommend them all as buys right now at current prices.
Stocks: Finally there are the silver companies/miners to consider for exposure to silver. The best way to gain exposure to silver miners as a whole is through the silver mining ETF (SIL). For those willing to take on more risk and do the necessary homework an individual silver company or miner could be considered in place of SIL potentially offering better returns. A few of my favorite silver companies are:Silver Wheaton (SLW): SLW operates as a worldwide silver streaming company. Silver streaming is basically a process by which the company purchases a mining firm's silver production in order to distribute that silver in the market. SLW has contracts to purchase silver in bulk at prices well below market value and then proceeds to sell the silver at a higher prices. The company has "14 long-term silver purchase agreements and two long-term precious metal purchase agreements whereby it acquires silver and gold production from companies located in Mexico, the United States, Greece, Sweden, Peru, Chile, Argentina, and Portugal." SLW currently trades at $33.40 and has a 52 week trading range of $22.94-$42.50. On average about 4.2 million shares exchange hands daily. The company trades at a 21 multiple but only a 0.84 PEG ratio and currently yields 1.1%.
Central Fund of Canada Limited (CEF): CEF is a closed-ended commodity mutual fund launched and managed by Central Group Alberta, Ltd. It "invests in the precious metals commodity markets. The fund primarily invests in silver and gold. The Company provides an alternative for investors in holding marketable silver related investments. It invests its assets in holdings of unencumbered, allocated and segregated silver bullion and holds its assets in international bar form. CEF's nominal holdings of bullion certificates are deposited with Canadian Imperial Bank of Commerce." Shares of the company currently trade at $20.52 with a 52 week range of $18.44 to $26.40.
Silver ETFs: One option for those who do not feel comfortable with purchasing physical silver is through an ETF. The iShares silver trust (SLV) is a popular investment that seeks "to reflect the price of silver owned by the trust, less the trust's expenses and liabilities. The fund is intended to constitute a simple and cost-effective means of making an investment similar to an investment in silver. Although the fund is not the exact equivalent of an investment in silver, they provide investors with an alternative that allows a level of participation in the silver market through the securities market." The fund has $8.8 billion in assets with an annual expense ratio of approximately 0.5%. Shares in SLV currently trade at $28.37 and have a 52 week range of $25.34-$42.77.
There are other ETFS that invest in silver and I consider them riskier than the aforementioned SLV and SIVR.
Powershares DB Silver (DBS): This investment fund seeks to "track the price and yield performance, before fees and expenses, of the Deutsche Bank liquid commodity index optimum yield silver excess return. The index is a rules based index composed of futures contracts on silver and is intended to reflect the performance of silver." It currently trades at $50.35 with a 52 week range of $45.06 to $76.98.
ETFS Physical Silver Trust (SIVR): This is another less popular ETF that tracks the price of silver. SIVR is "an investment trust. The trust holds silver bullion and issues shares in exchange for deposits of silver and distributes silver in connection with the redemption of baskets. The investment objective of the trust is for the shares to reflect the performance of the price of silver, less the Trust's expenses and liabilities. The trust is designed to provide an individual owner in the shares an opportunity to participate in the silver market through an investment in securities." SIVR has about $600 million in assets, far less than the $8.8 billion in assets of SLV. In contrast SIVR has an expense ratio of 0.3% which is 20 basis points lower than the expense ratio of SLV. Over recent months the performance of SLV has been superior to SIVR. SIVR currently trades at $29.04 with a 52 week range of $25.92-$43.62.ProShares Ultra Silver (AGQ): This ETF applies a 2X exposure leverage to silver using forward contracts and futures. The investment seeks "to provide daily investment results (before fees and expenses) that correspond to twice the daily performance of silver bullion as measured by the United States dollar fixing price for delivery in London. The fund invests in any one of or combinations of financial instruments (swap agreements, futures contracts, forward contracts and option contracts)." AGQ currently trades at $42.74 and has a 52 week trading range of $34.45-$127.08.
The bottom line: Precious metals stand to gain significantly from balance sheet expansion at central banks. While gold is certainly an excellent play off of the possible stimulus, I believe silver and silver companies may outperform gold in the next few months. While this list is not exhaustive it represents my preferred ways to gain exposure to silver. At current levels I believe silver and silver companies are a strong buy.
Stocks: Finally there are the silver companies/miners to consider for exposure to silver. The best way to gain exposure to silver miners as a whole is through the silver mining ETF (SIL). For those willing to take on more risk and do the necessary homework an individual silver company or miner could be considered in place of SIL potentially offering better returns. A few of my favorite silver companies are:Silver Wheaton (SLW): SLW operates as a worldwide silver streaming company. Silver streaming is basically a process by which the company purchases a mining firm's silver production in order to distribute that silver in the market. SLW has contracts to purchase silver in bulk at prices well below market value and then proceeds to sell the silver at a higher prices. The company has "14 long-term silver purchase agreements and two long-term precious metal purchase agreements whereby it acquires silver and gold production from companies located in Mexico, the United States, Greece, Sweden, Peru, Chile, Argentina, and Portugal." SLW currently trades at $33.40 and has a 52 week trading range of $22.94-$42.50. On average about 4.2 million shares exchange hands daily. The company trades at a 21 multiple but only a 0.84 PEG ratio and currently yields 1.1%.
Central Fund of Canada Limited (CEF): CEF is a closed-ended commodity mutual fund launched and managed by Central Group Alberta, Ltd. It "invests in the precious metals commodity markets. The fund primarily invests in silver and gold. The Company provides an alternative for investors in holding marketable silver related investments. It invests its assets in holdings of unencumbered, allocated and segregated silver bullion and holds its assets in international bar form. CEF's nominal holdings of bullion certificates are deposited with Canadian Imperial Bank of Commerce." Shares of the company currently trade at $20.52 with a 52 week range of $18.44 to $26.40.
Silver ETFs: One option for those who do not feel comfortable with purchasing physical silver is through an ETF. The iShares silver trust (SLV) is a popular investment that seeks "to reflect the price of silver owned by the trust, less the trust's expenses and liabilities. The fund is intended to constitute a simple and cost-effective means of making an investment similar to an investment in silver. Although the fund is not the exact equivalent of an investment in silver, they provide investors with an alternative that allows a level of participation in the silver market through the securities market." The fund has $8.8 billion in assets with an annual expense ratio of approximately 0.5%. Shares in SLV currently trade at $28.37 and have a 52 week range of $25.34-$42.77.
There are other ETFS that invest in silver and I consider them riskier than the aforementioned SLV and SIVR.
Powershares DB Silver (DBS): This investment fund seeks to "track the price and yield performance, before fees and expenses, of the Deutsche Bank liquid commodity index optimum yield silver excess return. The index is a rules based index composed of futures contracts on silver and is intended to reflect the performance of silver." It currently trades at $50.35 with a 52 week range of $45.06 to $76.98.
ETFS Physical Silver Trust (SIVR): This is another less popular ETF that tracks the price of silver. SIVR is "an investment trust. The trust holds silver bullion and issues shares in exchange for deposits of silver and distributes silver in connection with the redemption of baskets. The investment objective of the trust is for the shares to reflect the performance of the price of silver, less the Trust's expenses and liabilities. The trust is designed to provide an individual owner in the shares an opportunity to participate in the silver market through an investment in securities." SIVR has about $600 million in assets, far less than the $8.8 billion in assets of SLV. In contrast SIVR has an expense ratio of 0.3% which is 20 basis points lower than the expense ratio of SLV. Over recent months the performance of SLV has been superior to SIVR. SIVR currently trades at $29.04 with a 52 week range of $25.92-$43.62.ProShares Ultra Silver (AGQ): This ETF applies a 2X exposure leverage to silver using forward contracts and futures. The investment seeks "to provide daily investment results (before fees and expenses) that correspond to twice the daily performance of silver bullion as measured by the United States dollar fixing price for delivery in London. The fund invests in any one of or combinations of financial instruments (swap agreements, futures contracts, forward contracts and option contracts)." AGQ currently trades at $42.74 and has a 52 week trading range of $34.45-$127.08.
The bottom line: Precious metals stand to gain significantly from balance sheet expansion at central banks. While gold is certainly an excellent play off of the possible stimulus, I believe silver and silver companies may outperform gold in the next few months. While this list is not exhaustive it represents my preferred ways to gain exposure to silver. At current levels I believe silver and silver companies are a strong buy.
Thursday 14 June 2012
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