Sunday, December 25, 2016

Why is silver ignored as a monetary asset?

Current monetary situation? 

It's easy to see why Governments and in a way certain financial institutions would not want to be tied to a specie (gold or silver hard money asset). Politician are allowed to spend for votes, banks lend with fractional reserve banking. Is this all bad? Our civilization has grown and we have a great standard of living! One might say there is a moral hazard to this system. Savers are key to any economy and they have been forgotten. The forgotten man hard working people who make the economy run many just want to save don't have the time to invest or do adaquete research. These people continue to get squeezed. Low interest rates punish people forcing them to either spend or buy assets or face being taxed by raising prices a hidden tax of inflation. The government has done a great job of changing inflation numbers. 

Now some history of the bimetallic standard.  

Silver use to be part of a bimetallic standard which is defined by Investopedia as A monetary system in which a government recognizes coins composed of gold or silver as legal tender. The bimetallic standard (or bimetallism) backs a unit of currency to a fixed ratio of gold and/or silver. This system was introduced in the United States in 1792 and lasted until the civil war at this time the Resumption Act of 1875 stated that paper money could be converted to gold. The ratio at this time was 15 to 1 silver to gold.  

Why is Gold held by central banks and not Silver? 

The main reason is Gold is held by the central banks of governments is quite simple it is a store of value an asset that man knows is limited and desired. 

Silver is no longer owned by the central banks and demand has to come from industrial use or by individual investors. In any market you need to have strong hands its safe to say gold is in strong hands if it hasn't been hypothecated. These are the holders that will not sell they help sure up the market. At current prices I don't see much selling. It takes time at each level to weed out the weak hands and form a base to move higher. There are other factors such as mining supply new silver on the market that effect supply and demand. Its safe to say investor demand is small most people don't know silver and most investors don't have it in their portfolio. 

The current financial situation is not changing!

Silver in comparison to the money supply is cheap. How cheap one would ask? After researching with sources I trust you can see when Silver was $14 at the end of 2015 it was cheaper than it was when priced at $5 earlier in the 2000's. The dilution from the creation of money doesn't seem like its cheaper but it is to people who understand ratio's and bigger numbers don't mean bigger. Beginners in the stock market always ask how can this stock be higher than that one... It is all based on price and outstanding shares not just the number associated with the price. Today is December 25th 2016 Christmas day and silver is only $15.81. With the Dow Jones the market at all time highs who wants a commodity that doesn't pay a dividend is the argument by many. If you are a value investor or know history and can objectively look at the world... most people are not participating. Countries like China, India know the value of precious metals. I still think the cycle is at the beginning. Assets will be adjusted accordingly. 

As always leave comments and thank you for reading. 

S. Cummings 

Disclaimer: This is a personal weblog. The opinions expressed here are my own. All data and information provided on this site is for informational purposes only. Please do your own research before investing.


Monday, October 10, 2016

Why I like Ford Motor Company

Hi everyone I am working on a new project that will be announced soon. I am looking to get back to making videos and blogging with increased frequency.

Today I am taking about another auto company which I have made purchases! I once read somewhere you don't invest in autos. This was very true as the companies like GM didn't make it through the 2008 collapse without being helped by the government. Ford did make it though the 08 recession but shareholders would of been nervous not to mention the dividend being cut and share price on life support. Now fast forward both these companies have better management teams and are being valued as if they were still in trouble. The P/E ratio and dividend yield of Ford (F) are a couple of reasons I like the company. The P/E ratio is extremely below the market average. The leadership is also making many good moves they have stream lined their car lines, the product is quality, and it is bringing back popular vehicles like the Bronco. The big questions include: Is the dividend safe? If a recession hits the U.S. economy does the company have a conservative balance sheet? Will it survive and keep investing in the future? I have to answer yes, yes and yes. Looking at recent earnings, Ford can take a big reduction on it's sales and still be able to cover all obligations which include the dividend. This is huge as buying at such a discount and low P/E gives a huge cushion compared to other comapnies.

I think buying now is a great time as there could be a repeat of a special dividend at the beginning of the year. Ford management has said in the past it wants to share profits with shareholders. Sells have slipped from all time highs, which is expected but they are still very good.

I am long F shares! I also write cover calls on my shares! Many ways to make money and protect the down side.

Saturday, May 7, 2016

General Motors Company (GM): A Big Dividend! With Tons of Upside!!

Well it took long enough but I have been super busy but that is a good thing as things are going well. The best part I'm making money to put in my investing accounts!! As I continue to look around there are many companies not paying a dividend. I am evaluating current undervalued companies that do pay dividends. I do every now and then invest in a non dividend paying stock but I really don't like to. Now I know it is fun buying a growth company that may or may not be overvalued and I have made tons of money investing in a company like Amazon. I am mainly focused on companies who are actually giving back dividends.

To make money you have to find industries or companies people can't forgive. I am talking right now about General Motors Company (GM). We all know what happen to the auto industry back in 2008. It seems like people are still wanting to avoid these companies. I've been looking at GM and it has been in the financial news lately because of great earnings. The stock has not followed and you might say this is the top of the cycle for this company. I don't know maybe this is true. I like using fastgraphs.com and the PE ratio on adjusted (operating) earnings is only 5.9 with a normal PE of 9.8. That is so far under the valuation of Peter Lynch which is the 15x earnings. I like when you have great upside potential or if earnings fall you could have some cushion on earnings expansion. Now the new GM after the crash is only roughly 7 years old and part of the time was owned by the government which people might not of liked. This company is well capitalized now but debt levels are growing. My favorite part it has a 4.9% dividend yield. The dividend was reinstated in 2014 and in 2015 the company raised it 15% and then raised another 5.5% this year. The next ex-dividend is June 8, 2016 with a payout date of June 23, 2016.

What does worry me is GM's market debt-to-equity ration which was 118% in December of 2015. There needs to be the right balance of debt and equity to grow operations. One other worry is that GM is in a very competitive environment and a lot of money is needed for R&D.

My plan is to build a position and collect dividends I will keep you updated if I decide to sell this company. Let me know your thoughts on GM.

I have a few other companies in the next few days I am also building a position in with current price levels.


New Strategy for investing in Under Armour Inc. (UAA) and Monster Beverage Corp. (MNST)

On March 24, 2017 my blog entry Under Armour Inc. (UAA) Opportunity I talk about my purchase of 100 shares of UAA on 2/6/2017 for $20.55. I...