Why Silver is better than Oil as an Investment
(Silver's cheaper, more rare, and not nearly as dirty, or heavy!)
Silver Stock Report
by Jason Hommel, March 15, 2008
1. There is a 40-year supply of oil in the ground. There is a 14-year supply of silver in the ground. Therefore, silver is the better investment.
If "peak oil" is true, then every peak oil nutcase out there ought to be several times more worried about "peak silver", since silver reserves will run out sooner.
If oil is used in more kinds of products than any other commodity on earth, then silver is the second most used commodity, used in electronics of all kinds. And if silver is used up first, then we won't have all the electronic machines needed to go and get the oil!
But the "peak oilers" are not so worried about silver. Why not? I can only guess, but it is an educated guess based on extensive reading of their works over the years. I suspect it is because they are ignorant of silver, ignorant of economics (Biblical Capitalism), irrationally fearful, and worship government and "mother earth" instead of God.
2. In 1970, there was a 10-year supply of oil in the ground. We did not run out in 1980. We explored, and found oil. Mankind has explored for oil and produced oil only for 150 years or so, which creates extra fear of uncertainty (unlike silver and gold's 5000 year history). Since we did not run out in 1980, then we will not run out in 2050, over 40 years from now.
3. If it's not about "running out" but rather, running out of the "cheap stuff", fine, I agree! If we run out of "cheap oil", we will run out of "cheap silver" far, far sooner, so silver is the better investment, and will outperform oil.
4. The silver to oil ratio: In 1980, at the former peak prices for oil and silver, oil cost $43/barrel and silver was $50/oz. An oz. of silver was worth more than a barrel! At the bottom of the market around 2000, oil was $10/barrel and silver was around $5/oz. This implies a price for silver of somewhere between $55-110/oz., with oil prices remaining stable. If oil doubles from here, then silver will go up (from $21/oz.) ten times, to $220. Therefore, silver is the better investment.
5. The public will never buy 100 barrels of oil to store on their front lawn, at $110 each, to save $10,900 worth of wealth. The public will buy a $15,000 bag of silver to store in the closet, or home safe.
6. The silver market is orders of magnitude smaller than the oil market, and will move far higher with a smaller amount of money moving into silver.
World oil supply is 85 million barrels of oil per day x $109 = $9.2 billion/day, or 31 billion barrels/year, which is $3.4 trillion per year.
World silver mine supply is 650 million ounces per year x $21 = $13.6 billion/year.
In the long run, if paper money fails, the world might have to pay for oil with silver. (Gold would be used for everything else). In that case, that implies that an ounce of silver would buy 47 barrels of oil (31,000 / 650 = 47), which implies a price for silver of $109 x 47 = $5200/oz.
Interestingly, even gold is a much, much better investment than oil, because all the gold ever mined in all of human history is about 5 billion ounces, which, at $1000/oz., is $5 trillion, which would barely pay for the world's annual oil consumption of $3.4 trillion. But as you all know by now, silver is much better than gold.
7. About 70% of the world's oil is supplied by national governments that have confiscated private oil discoveries. Therefore, oil is a risky investment. National governments generally do not spend money on exploration or development; they spend nationalized oil profits on wasteful social programs to maintain the power of the government thieves.
Of the other 30% of the world's oil, the "free world's" oil, about 9 cents per gallon of gas goes to the oil companies as profit, and about 51 cents per gallon goes to governments in taxes. Thus, 51 out of 60 cents, or 85% of the "free world's" oil has been nationalized, too. Therefore, oil is an extremely risky investment. Not only is the price of oil too high, but governments steal most profits that exist in the industry, world-wide. Investors ought to worry far more about governments stealing an oil discovery, than a silver discovery.
While oil prices moved up over ten times from $10/barrel to $110/barrel since 2000, Exxon Mobile stock barely doubled from $40 to $85. This shows that the "big oil" companies are not "getting rich" off of high oil prices, due to excessive government taxation. (Chevron has also gone from $40 to $85 since 2000, and BP has done much worse, going from $60 to $64 since 2000!)
If only 1% of gross world oil profits were spent on silver, instead of being stolen by governments, that would be: 31,000 million barrels x $110 x .01 = $34 billion. Since total annual investment demand for silver is about $1 billion, then I estimate that much money would move the silver price up to well over $200/oz.
Yes, 1% of gross world oil costs would probably drive up silver prices over ten times!
8. I believe "Peak Oil" is a fraud. If the world does hit a "Peak Oil" temporary mini trend sometime in the next 50 years, it will be due to worsening government theft, nationalizations, confiscations, taxes, and wars, not lack of oil in the ground in the world, and all of those things would be very bad for investors in oil.
9. I have never seen a peak oil proponent advocate free market solutions; nor do they invest their own money into alternatives (some of them are broke!); they always call for more government power, and more government controls, and more government "solutions". Therefore, their entire argument is as fraudulent as government itself.
10. I believe "Manmade Global Warming" is a fraud, designed to increase government control, or even "justify" the "global solution" of world government. We may be in a mini warming cycle, but 30 years ago the world was in a cooling cycle and the fear of the day was of an impending Ice Age. If "manmade global warming" is true (and it is not), there should be more of it; we would save on heating bills; and be able to plant more crops, and enjoy a wider variety of good wines from all the vineyards that could be planted farther north, like several hundred years ago.
11. Silver is not a fraud, and is the antidote to the fraud of the dollar, and the antidote to excess government power, and government theft, which is the real problem in the world, not "peak oil" or "global warming".
12. Silver is not confiscable. This is why silver is money; it is private ownership of wealth, it is true wealth, it is owned annonnymously, and is the antidote to theft through inflation or confiscation. There is not enough silver to confiscate, because the silver market is too small. All the silver in the world is worth perhaps $20 billion, which is infinitesimally small compared to the budget of the U.S. government. If the government confiscated silver, because it was "worth it" for them, it would imply that silver was worth about $10,000 per ounce.
13. There is no "oil problem". It is an energy problem. If oil prices get too high, the free market will provide energy through other means; wind, or solar, or nuclear, or coal liquefaction, or geothermal, or further oil exploration. I suspect the U.S. hit peak oil in 1970 because we abandoned silver coinage in 1964, and abandoned gold in 1971, driving up all domestic prices and severely distoring world econimcs. And with paper money, it became cheaper to buy foreign oil with fraudulent paper, rather than explore and produce it at home.
14. There is a 300+ year supply of coal. Coal liquefaction technology can make liquid fuel from coal. This is old, reliable technology, and dates from before World War II, both in Japan and Germany.
15. Most solar energy that comes to the earth is wasted. Look at the amount of solar space available in the deserts of the world. The Sahara is a very big place. All of the world's energy needs could probably be satisfied with a solar panel that covered 1/4 of the Sahara.
16. Yes, I know about the Hunt brothers. Do you know the full story? They tried to protect their oil profits in silver. Their oil was stolen by Libya. I believe that the mistake of Nelson Bunker Hunt, who is alive today, is that he tried to borrow money to buy more silver than they could afford, so they lost money when it went down from $50/oz. Don't make the same mistake. Don't buy silver on leverage, and don't let other people hold your silver for you.
Finally, if you know enough math to rationally evaluate stocks, you might want to consider where I've invested my money.
For $49.95/month, you can look at my silver stock portfolio. Once a month, at the end/beginning of the month, around the 31st or 1st, for paying subscribers, I update the stocks I own and the percent of my portfolio.
It's very simple. Very revealing. Very useful. It's not trading advice.
It's not a model portfolio. It's my portfolio.