The Risk of Being a Conservative Investor (part 2 of 2)

A few days ago I wrote about how the manipulation and fraud from the US government and the banking sector has turned investing upside down.

The government with their “zero interest rate policy” (ZIRP) has turned “Conservative Investors” into the high-risk gamblers of 2011.

I want to finish my thoughts about how the risk of being a conservative investor has never been so high, which I talked about in my Tuesday’s posting last week.

All the investors who have purchased municipal bond [funds] because they were told a municipal bond is one of the safest investments in the world are unfortunately getting hurt badly right now.

Just in the last month I have talked to four very smart business owners who didn’t know what to do with their investment money so they kept much of it in cash and municipal bonds all because they were being ‘conservative’ in protecting their wealth.

Every single one of them self-identified themselves as being “conservative”.

Of which I told them, I don’t really know what that word means.

I said, ‘I know, how you are using that word,’ but being in cash for the past eight years (two of them had this approach) with the dollar down 34% is not conservative, it’s dangerous.

I showed them they have lost 1/3rd of their purchasing power with that cash. And that is just against other fiat currencies that are also printing trillions of paper money units (Yen, Euro, Pound, etc.).

Below is a price chart of the US dollar over the past nine years. It is down 34.21% since the peak in 2002 against other paper currencies.

I went on to show them that the US Dollar has lost 80% of its purchasing power against gold and silver over the past ten years.

Below is price chart of the equivalent of 50% silver/50% gold compared to the US dollar. Notice how the 50% silver/50% gold investment is up 466% against the US dollar over the past eleven years.

You see it’s not just the municipal bond market that is giving up its secrets, gold and silver have been burdened with this job for a decade now.

Are investors listening?

————-

The definition of a revolution is when things get turn upside down. What was once on the bottom is now on the top. And what once was on the top is now on the bottom.

That is what we are seeing right now.

Safe has become dangerous. And dangerous has become safe(r).

Safe “conservative” assets like municipal bonds and cash are extremely risky places to put your money today (the loss of capital has never been so high in this sector). And “risky” investments like stocks are getting propped up by the US congress, the Treasury and the Central Banks of the world.

What was once safe and risk-less is now toxic and dangerous. And what was once risky is now being heavily promoted by the powers that be as the place to invest.

Something bad is happening and only appears to be getting worse.

I advised my clients to buy into gold and silver in 2004 when it was considered a fringe investment. I warned my clients to avoid real estate in 2006 and then bank stocks in 2007. And then in 2008 on January 15th I told them to move to cash, thus avoiding a 50% fall in the stock market. I’ve since advised them to move back into the market on August 7th 2010.

I reference these points because I think what is happening today is even bigger.

So what can investors do today?

There is one asset that has a near perfect relationship to government stupidity. As government stupidity increases so does this asset. And when government stupidity decreases so does this asset.

When we look back in five years at the best investments from 2011 to 2015 we will see that it is in fact this one asset.

The asset I’m speaking about is silver.

And even know silver is in a much needed correction after moving up 102% from February to December of 2010 you have to seriously consider what the price chart of municipal bonds is telling investors.

All is not alright.

Below is a picture comparing Silver and the municipal bond market over the past two years but specifically over the past 120 days since Bernanke and Co. announced another $900 billion in money printing.

Let’s be clear here dear reader,

Ben Bernanke has not fixed anything.
Timmy Geithner has not fixed anything.
Hank Paulson did not fix anything.
The 111th congress did not fix anything.
And the 112th congress will not fix anything.

It is up to you to protect your family’s money.

And one way to do that is to position a part of your portfolio alongside one of the few asset classes that the government is literally guaranteeing will go up.

This is better than FDIC insured. This is the Central Bank Deposit Insurance Program or CBDIP.

So how can investors buy silver?

Investors can buy
1) silver coins
2) Silver ETFs
3) Silver closed-end funds
4) Silver mining companies.

My personal preference is a closed-end fund called, Sprott Physical Silver Trust (PSLV).

PSLV is in fact selling at a premium because of the policies at JP Morgan, who is the custodian of SLV (the largest silver ETF in the world). Basically, JP Morgan might not have all the silver they are stating they have to support their Silver ETF.

Why would the company (JP Morgan) that is the custodian to the largest silver ETF in the world also have the world’s largest short position against the metal they have been put in charge of to manage for their share holders?

There is a better way to position your portfolio than even buying PSLV. A way that when silver goes up this investment will go up twice as fast or maybe even more. I’ll be talking about this North American based investment company that has grown 500% faster than silver at my next Insiders Club meeting.

If you are at all curious how the conventional (Wall Street) approach is killing millions of futures then you can learn more by upgrading your investment peer group.

Together, we are protecting and growing your wealth,

RC

PS – There are four algorithms that my clients have been using to avoid Wall Street’s toxic actions for the past decade.  From signaling investors to buy gold and silver in 2004 to signaling 401(k)s to go to cash before the market plummeted in 2008. Curious about a different way to grow your money?

If so check out Algorithms that beat the market.

1 Comment