I just received this email from one of my friends who runs Greenridge Funding. I first met Taylor at a Christian Entrepreneurs Conference and was very impressed with his economic knowledge, both past and present. At age 30 Taylor became a millionaire. By age 34 he had made his first 10 million dollars. He is now 38 and is a college professor and private investor. His primary goal is to help others create wealth so they can help him fund more orphanages as well as several other humanitarian projects.
From time to time Taylor will send out an email with market advice. I just received this one and thought I would post it for all to read.
Hi everyone,
People keep asking me about investing in silver versus gold… so I’ve put together a little information with some answers. I hope its helpful.
1. Silver and Gold exist in the earth’s crust, at about a 17.5:1 ratio, respectively.
2. From the dawn of humanity, up until about 30 years ago, some money somewhere was always linked to precious metals.
3. During those times, Silver and Gold traded at about a 14:1 – 17:1 ratio.
4. Since the US “floated” the dollar in 1971, this ratio has gone from 14:1 – 90:1.
5. Today it is about 48.7:1 (January 21, 2011)
6. You can open a gold mine, you cannot open a silver mine. While gold can be sought by itself, silver is a byproduct of lead, copper, and other metal mining operations, and only a smaller part of that. Increased demand for gold can result in more gold production. Increased demand for silver usually does not result in an increased supply.
7. Most gold mined since history is in vaults and jewelry.
8. Silver is consumed by industry… consumed.
9. China and Russia are buying gold.
10. Land, Oil, and Gold have all traded in relation to each other somewhat flatly, from 200 years ago to today.For your safe, buy silver. Silver should comprise about 80% of your precious metals inventory, with gold being the other 20% as a safety hedge. Other metals may expose you to more risk and are not of the same calibre. You should NEVER take “paper gold” or “paper silver.” ALWAYS take possession of your silver, NEVER leave it with your dealer. From looking at the charts, I believe the silver market has been manipulated to lower silver prices (as well as gold). Market manipulations are often the most violent swings when they correct themselves.
On Wall Street, buy gold. Because silver is generally a by product of other mines, “silver stocks” are mainly industries that serve the silver industry. They operate on a margin– much like the farmer who doesn’t make any more money when corn prices rise because his rent, fertilizer, and seed prices rise too. For a short-term (3 year) stock market play, you can buy call options on non-US Dollar denominated gold companies in the form of L.E.A.P.S, maturing in 2013 and at a strike price equal to today’s trade price. Be sure to guy companies that trade at a P/E ratio of LESS than 18. Do this in a margin account, and if gold prices hit $3000 per ounce, these margined options will result in upward of a tenfold gain, conservatively speaking. In the event that there is a collapse of the dollar resulting in gold prices hitting $5000 per ounce, the resulting run on gold stocks will push them up to P/E ratios similar to Google, resulting in hundredfold gains– but if gold doesn’t go up at all within the next three years, you will be forced to sell the options at a loss.
After the gold goes up, you should sell. When the gold is trading at $5,000 per ounce, you should sell your options (cashing you out totally), and buy new 3 year options all back with the new strike price equalling the current price. This way, you cash-out, and stay-in at the same time, for cheap. At that time, you should invest in farmland, which should then gradually rise in price (as commodities rise with gold) to match the decline of the dollar. At this price, farmland should be estimated to cost such that the equivalent rent yield is 6%— or $25,000 per acre in Wright County Iowa which is some of the most productive land in America.
After silver goes up, you should sell. When the silver hits the 15:1 price ratio in relation to gold, which was the peak in the 70′s, you should sell no matter what the price. If gold is still cheap, buy it. If gold is already expensive, buy farmland that you can rent out.
When you buy land, use debt. The land you buy should cash-flow (or come close to cash-flowing). But by using debt, you can leverage your gain and get even more. Remember, if everything I’m saying about the dollar collapsing is true, then I’m right, and the land is going to go up next, so don’t worry about the debt, it will shrink away under your “appreciating” land value as the dollar erodes. You will know the dollar is collapsing by seeing gas prices “rise”… when its not really gas prices rising, its the dollar falling.
Try to get out of Wall Street when you sell. With the dollar falling, everything that is denominated in US dollars will be subject to inflation. I’m targeting oil at $200 per barrel, and I expect the dollar to fall in direct proportion to the rise in the price of oil. The GDP is presently 3.7 trillion, and the National debt is North of 14 Trillion… but that’s not the half of it. GDP includes imports, foreigners doing business in the US, and so many cooked-book methods to inflate it that its sickening– plus the National debt does NOT include Social Security, Retirement benefits for postal workers, federal workers,… et cetera, and numerous other obligations. Look it up and do the math yourself. The US is a bloated debt-bubble ready to explode, which means you will probably live to see the dollar dumped by Opec. All the gold in Fort Knox won’t matter when the government can’t service its debt. The numbers just don’t work not matter which way you look at it. Shorting stocks in the US isn’t going to work either, because you’ll get paid in US Dollars. Wall Street is going to be a bloodbath so after you ride the gold/oil wave, get ready to take your chips away from the table and run for it.
God bless,
Taylor
515-210-4410–
“Aut viam inveniam aut faciam.”Taylor Moffitt of Holydean
Founding Partner, Greenridge Capital
www.GreenridgeCapitalOnline.comThis is not a solicitation to offer securities for sale. Any comments are opinion only, and are never to be taken as permission or instruction. Sender has no fiduciary duty to the recipient, and assumes no liability for any investment decisions made by anyone. Sender does not give legal, tax, or investment advice. If you are not an accredited investor, please disregard this email and notify Sender.
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August 1, 2011 @ 10:34 am
Necessary investing only in gold, especially after the recent crisis