Anny asked,

“I would like to know what is Mike’s opinion on Chinese silver Panda & their extra premium…sign of futures economical relation with Chinese?”

Continuing from our mastermind meeting, Michael Maloney answers question #5:

“Any coin that has a premium you get back when you sell it back to a dealer is fine. Gold and silver Eagles, that is the case. Chinese Pandas, you’re going to lose some of that premium when a dealer buys it back.

I believe in buying gold and silver as close to spot as possible with the exception of the extra premium you pay for some government coins because they have another “desirability” factor and that’s something called, 1099-B reporting. I don’t want to get into that on this video, but because of that they’re more highly sought after.

When silver fell from 21 bucks in March 2008 all the way down to about $9.50 in November, there was a big shortage that happened. During that shortage, the Eagles developed a premium beyond the premium the U.S. Mint charges. They were on eBay when silver was just $9.50 spot price, Eagles were selling for $35 bucks an ounce. 100 ounce bars were selling for $18 an ounce. So, you’re talking double the premium for 100 ounce bars.

So, I like Eagles because I do think they are going to develop a premium when there’s a rush on gold and silver, and when everybody wants it. They’re going to go for more and you’re going to get even more. The extra premium you’re spending, you’re not just going to get it back, but it’s going to grow with the price of the precious metals when you’re talking about gold and silver Eagles.

As for the Pandas go, they’re really pretty. Go ahead and buy them because you like them…but, unless a dealer is offering you the same amount of premium above the cost of other items he is purchasing (you can check this online), then I don’t recommend them.

So, thank you very much for your question. I hope that answers it.”

Michael Maloney of www.GoldSilver.com

To Your Success,

Larry Corbi

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Marla asked,

“Someone whose opinion I respect says they personally hold their gold, and do not have it in a safe deposit. Is that wise? How could one possibly secure it in that way and feel that they had done a good job?”

Continuing from our mastermind meeting, Michael Maloney answers question #4:

“Well, I don’t recommend doing one thing or another. What I do is tell everybody to do their own due diligence and do some research on these things and come to their own conclusion.

For me, I do not use a safe deposit box.

I hold the bulk of my precious metals at a third party depository that specializes in doing that and it’s fully insured…and, that’s Brinks Security. The rest I hold myself. You can do a whole lot of creative things. You can hide it creatively. You can put it in a floor safe or a wall safe or something like that. I don’t recommend one particular thing over another.

I do know that during 911 the banks were closed for an entire week. I also know after gold was nationalized in 1933, the government posted Federal agents at the banks to observe people taking things out of their safe deposit boxes. I also know that when you put it in a safe deposit box it is not insured. FDIC insurance only applies to deposits in checking accounts and savings accounts. It does not cover anything in a safe deposit box. So, you need to add that to your homeowners insurance, it’s a rider on your homeowners insurance.

And, I also know some horror stories…

After a certain number of years, if you don’t have contact with the bank, the bank is supposed to turn the contents of safe deposit boxes over to the state. The state liquidates those and adds it to the general fund to help offset the deficit.

There was a newspaper article about a lady up in the Bay area in California. Her husband was dying, he told her to go to the safe deposit box to get the will, and when she went to the bank the contents were turned over to the state a few years earlier…and this was at her bank where her checking account was. She was paying the bills on that safety deposit box every month. They turned it over to the state. In there was also a bunch of her grandmother’s jewelry that was left to her that had been appraised about $80,000 before she put it in the safe deposit box years earlier. When she got back, when she tracked all of this down, the papers had all been shredded and she got a $1,800 check from the state for the contents.

My office manager and her safe deposit box…her branch closed, they moved the safe deposit box, and the bank basically lost her safe deposit box for a month. They couldn’t find what branch it was transferred to. And so, I don’t really trust safe deposit boxes that much myself.

So, I don’t use them.

You have to decide what’s best for you, though. If you’ve got a decent quantity of precious metals, if it’s more than $25,000 or $50,000, then I do suggest having some of it at a storage facility, a depository.

Thank you very much, Marla, for the question. I hope that answers it.”

Michael Maloney of www.GoldSilver.com

To Your Success,

Larry Corbi

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Jason B asked,

“What do you think silver’s real price would be right now if it was allowed to trade purely on supply and demand fundamentals and not heavily manipulated? Is the possibility of 4 digit silver in a few years realistic?”

Continuing from our mastermind meeting, Michael Maloney answers question #3:

“Yeah, the possibility is realistic, but it’s really the wrong question. The question should be ‘how much more stuff can silver buy me?’ The dollar is this moving target…it’s a smoke screen. Before 1934, the dollar was worth 1/20th the ounce of gold. After 1934, it was worth 1/35th of an ounce of gold.

Gold became free trading in 1971 and it’s value went up. It was actually the dollar’s value falling. Right now, the dollar’s value is 1/1,000th of an ounce of gold and it’s value is going to continue falling. Soon, it will be 1/10,000th of an ounce of gold.

That’s what currency does, it loses value. REAL MONEY retains its value. But, the question should be ‘how much stuff will silver buy.’ And, I know from studying past history that gold should probably one day buy 4-5 times more stuff than it does today. Silver is under valued compared to gold.

For the first time in human history there’s less silver available for investors to buy than there is gold.

This is never happened before. Currently, there’s about 5 times more gold on all of the exchanges available for investors to buy than there is silver. In the free markets, when it comes to supply and demand, and something called the ‘price discovery mechanism’ the free markets are marvelously efficient at balancing supply and demand. They do that through price.

In a gold and silver rush, when the world finds out silver is actually more rare than gold you could see silver just explode and it’s entirely possible that silver can trade at a higher price than gold. That sounds crazy. It sounds unrealistic. Google ‘tulip mania’ and take a look what happened in the year 1637. You’ll see that dumber stuff has happened and silver actually selling for a higher price than gold.

Right now it’s more rare than gold, therefore the possibility exists that in a rush when a whole bunch of investors try and buy this stuff all at once then you can see it go to prices that are higher than gold…but the real question is

‘How much stuff will it buy?’

If gold should buy somewhere between 4-5 times more real estate some day in the future say and silver is 1/60th of the price (currently), in a peak you should see silver go to at least 1/10th of gold’s price. Possibly as high as gold, but I’m thinking 1/10th is good target right now, so that means it will outperform gold by 6 fold. So, if gold can buy 4-5 times more real estate, then that means silver can buy 30 times more real estate some day in the future.

THAT IS HUGE!

…and I’m not passing that one up. I’m buying all of the silver I can.

So, thank you very much, Jason, for your question.”

Michael Maloney of www.GoldSilver.com

To Your Success,

Larry Corbi

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Matthew Ung asked question #2:

“Have you ever traded your gold or silver for significant value-items?
(Car, appliances, services, etc.)”

Continuing from our mastermind meeting, Michael Maloney answers question #2:

“No, I’m still buying gold and silver, but I do watch some of these things. Right now, I’m watching the gold/Maserati ratio. Haha!

I intend on accumulating a lot of cash flow real estate with my precious metals. I know that right now, gold & silver are outperforming all of these other assets. If you accumulate the asset class that is rising the fastest, what will happen is you will be able to buy more of those other assets when it peaks.

Up until just a couple of years ago, we had everything rising. Back in 2007, the stock market was rising, real estate was rising and commodities/precious metals/bonds were all rising.

Well, what’s going on there? If you invest the one that’s rising the least, when you sell it, you can’t buy as much as the other two…it’s actually going down in value even though it’s going up in price. If you’re investing in the top performing one, when you sell it, you can buy more of the other two investments…so, it’s actually rising in value.

What’s happening is they’re probably printing currency at about the rate as the second (middle) investment. So, if you take the currency out of the equation and you measure how much stuff you can buy with your other stuff (for example, you measure how much your house is worth in ounces of gold, barrels of oil, tons of iron, pounds of copper, bushels of wheat, etc) what you discover is everything goes through this valuation, where it’s over valued or under valued. I try to invest in the most under valued asset class, the one that has the biggest potential of buying more of one of the other asset classes. It doesn’t matter whether everything is rising in price, it’s ‘what is the value?’

Right now, gold and silver are tremendously under valued…I don’t sell them for anything yet. I know I’m going to be able to get somewhere between 5 and 25 times more stuff for every dollar I put into precious metals today. I’m not guaranteeing this for anybody else, it’s just what I’m certain of for myself. So, thank you very much for your question Matthew.”

Michael Maloney of www.GoldSilver.com

To Your Success,

Larry Corbi

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Matthew Ung asked,
“What effect will the rise of oil have on gold and silver prices?”

On October 28th, 2009, I attended a Mastermind meeting at the Gold & Silver, Inc headquarters. Michael Maloney went over today’s precious metals market, tomorrow’s economic downturn, the transfer of wealth that we are about to embark upon in the ensuing years and what to do NOW to prepare for it. This was an exclusive group brainstorming on how to educate the world and the best means for communication.

I happened to pull Michael aside to see if he would answer some questions asked by those who submitted from the previous post. He kindly agreed and decided he wanted to answer them through a video. Here’s his answer from the first question:

“Typically they are somewhat connected, something called the gold/oil ratio and they tend to track each other. But there’s another aspect of this…mining costs are very heavily dependent on energy (60% of your mining costs is the cost of energy).

So, as the price of oil goes up, the floor underneath your investment (especially if you’re investing in silver) rises. Silver is currently below mining costs for most mining companies…there are a few that can make a profit at this price, but very, very few. On the average, most silver mining companies lose money currently.

And so, we’re talking about $17 bucks an ounce right now, and they can’t make money. If oil triples, then the floor under your investment goes up by that much also.

So, over the long period of time, silver has to rise then. The world is sort of running out of silver…there’s very little of it. It’s more rare than gold currently as far as the amount investors can buy…what’s on the exchange…what’s available to industry right now.

You can’t have a situation where the world is running out of something and it’s below production costs. That won’t last permenantly…so it means that your “safety net” is going to rise.

Thank you for the question, Matthew.”

-Michael Maloney of www.GoldSilver.com

To Your Success,

Larry Corbi

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When it comes to investing, a large number of people are lazy. They vaguely understand that wise investments are a cornerstone of building long term financial security and abundant wealth. But they really have no idea of how to go about it. They rely on the (often misguided) advice of family, friends and business associates. Or they adopt a “herd” mentality, and follow right along with what everyone else is doing. Unfortunately, the herd resembles a pack of lemmings that follow one another as they plummet off of a cliff somewhere. These people follow traditional strategies that produce traditional results, which is to say marginal ones.

This general lack of understanding about wealth pervades society itself. Several decades ago, then President Richard M. Nixon took the nation off of the gold standard. Up to that point in time, every dollar printed and issued by the federal government was backed by its face value in gold bullion, held at Fort Knox, Kentucky. Nixon changed our system of money to a “fiat” standard where money is worth something because the government says it is, based on law.

Now the gold standard isn’t necessarily perfect. There is only so much gold that can ever be mined on the planet—it’s a finite, fixed supply. This is the very reason the gold standard was adopted in the first place—gold is a precious metal and is therefore intrinsically valuable. You can’t print or manufacture more of it, ever. With paper money though, if the government needs more cash, they simply print it. And therein lies one of the biggest reasons that inflation happens.

Wise investing must include a sound understanding of fundamental investment principles. Any financial advisor will tell you to diversify your portfolio by concentrating on mutual funds. These funds include a pool of stock managed by a “professional money manager.” And everyone who had dutifully followed this advice took a huge hit when the economy tanked. Again, this is the herd mentality, buying investments that are printed on paper, instead of being intrinsically valuable. Herd mentality is following what others do or say to do without doing much homework of your own. If the masses say to invest in investments that are printed on paper instead of something that has intrinsic value, then that’s what they do—unlike the smart investors, who fully analyze the consequences.

If you truly want to build wealth, first obtain the financial education you need to do it. And then start looking for investment strategies that are built on intrinsic value, not on what everybody else happens to be doing at the time. Any precious metals—gold and silver for example—should be considered. Consider real estate as well, because it too has clear intrinsic value—provided that it generates a positive cash flow, particularly important in light of today’s economy.

Become a student of the principles of prudent investing, even if they appear non-conventional. Then take back control of your own wealth—and future.

People often say that their primary residence is their biggest asset. Granted, accrued equity in your home is technically an asset, but only under certain circumstances. Many people have recently learned this lesson the hard way. They purchased more house than they could really afford, and when the real estate market tanked, they wound up owing more on the home than what it was worth. A working asset puts money into your bank account. If an asset costs you money every month to maintain, it’s a liability. It takes thought and planning to ensure that your assets are working for you.

A good example of how an asset can work for you is a nontraditional approach to home ownership. Let’s say that instead of investing in a single family home, you purchased an entire duplex, a fourplex, or even a small apartment building. In a duplex, you would live in one side, and rent out the other. In a fourplex or an apartment building, you would carve out your living quarters, and rent out the other space. The key to this approach is cash flow. If the rent you charge for the other living spaces in the property exceeds your mortgage and other costs, your cash flow is positive, and you will essentially be living rent free. Your primary residence is now a working asset, because even if you merely break even between your rental income and your monthly payments, you are building equity every month, effectively putting cash back in your pocket.

Another example would be when your child goes off to college. Room and board for a college education makes an already steep tuition bill even more expensive. But let’s say your child lives off-campus. By investing the down payment for a property in the college town, you could buy a house. You would rent rooms in the dwelling to other college students—perhaps friends of your son or daughter—at a rate sufficient to cover the mortgage. The author has direct experience with this approach, except from the wrong side of the equation. Living off campus throughout college, rent was paid to a friend and roommate who had purchased the building. Today, the roommate still owns the building—and is still making money off of it—while the author simply racked up a pile of rental payments.

If your child would have spent $500 per month for 10 months out of each year on housing while at school, that equals $5000 per year. Over a four-year college education that’s $20,000. But by renting the other rooms in the dwelling, the mortgage and expenses are covered, and your child effectively lives for free. This saves you $20,000 right off the top over the four years. If upon graduation, you then turn around and sell the home at a profit, you’ll not only have saved $20,000 in living expenses, but you’ll realize a net gain on the house as well.

These are examples of making assets work for you, and it’s an important lesson for anyone interested in building long-term wealth.