Ok, we’ve had a recent sell off in metals and now the price has bounced back to some level of stability. However, we definitely have noticed a very reduced level in people being interested in purchasing metals for their self directed ira, and in fact we’ve seen a increase in people liquidating their metals holdings in their self directed IRAs.
So, we have to ask… What has changed in the last 6 months to make metals a less attractive choice for investors? Let’s go through a simple checklist of key economic drivers and size up the changes, if any.
- Has unemployment improved? NO
- Has Europe become stable? NO
- Has Europe Improved? NO
- Has China shown improvements? NO
- Has the US reduced is deficit? NO
- Has the US swore off printing money? NO
- Has inflation deceased or likely to decrease? NO
- Are taxes going lower? NO
- Has any one metric regarding our economy improved over the last 6-12 months? NO
We recognize that this may not be an all inclusive, exhaustive list or key economic drivers, but it does a good job of capturing the major, macro economic issues of the day. So, as a general statement we have seen ZERO change or measurable improvement in the global or national economic picture. So, why are people still trying to declare that precious metals are dead and that only a fool or uncivilized person invest in metals (from our friend the oracle of Omaha – Warren Buffett)?
We really think that there may be a major inflection point building for a significant increase in metals. Take the previous checklist of macro economic issues and couple them with the following factoids:
- The entire worldwide value of all gold exchange-traded products (ETPs) currently represents just 2.1% of the cash and short-term investments held by S&P 500 corporations. If 20% of these companies decided to put a mere 5% of their available holdings into these precious metals vehicles, their value would more than double.
- If just 1% of the physical currency (M1) floating around the system were used to buy gold Eagles, it would be 13 times more than the entire value of all coins purchased last year.
- If corporations chose to invest 1% of their cash in silver ETFs, it would surpass the total current value of all such ETFs.
- If corporations moved 5% of their “short-term investments” evenly into gold stocks, the market cap of every gold company would increase by 20%. If they chose silver stocks, they’d each grow by a factor of six.
- Five percent of M1 would increase the market cap of gold producers by 14%. The same fraction would be 3.4 times bigger than the entire current value of all primary silver producers.
So, when you look at how small metals holdings are in the entire scheme of investments, and you couple that with the fact that we’ve seen a cooling or sell off in metals, but yet not one thing has changed. Then you just have to ask yourself — does the market really have it figured out? We believe the answer is NO! its clear that the economy is not getting better. The global picture is not getting better. We do have inflation and at much higher levels that the government will tell you. This sounds like a ideal and fantastic time to be moving in precious metals with you self directed IRA.
The information provided is for educational purposes only and are not a solicitation or offering of an investment, investment advice, or tax advice. You should consult with your tax, legal or financial advisor to determine the suitability of any investments made with a self directed IRA account.