Tag Archives: investing

Has Silver Hit Bottom?

Silver today is trading in the $17 an ounce range. Does that make right now the perfect time to buy in?

Silver prices

As far as we can tell it looks like the bubble has popped but is this really the bottom for silver or is there still a lot more potential down side?

A big question to begin with is to ask why does silver have even have any value? The answer to that is two fold, it is used for speculation and it is used for real world purposes (jewelry, machines, and production).

Currently the question to ask is how much does it cost to even produce and acquire new silver. The answer to that is what should set the true bottom price of silver outside of the speculative pressure of buyers.

silver ore yield over time

As you can see in the chart above average yield from mines has continued to decrease while the total amount of processed ore continues to increase.  What’s also occurring is over the past thirty years it costs much more to mine and transport the mined ore around. This also doesn’t count the impact of the degradation of silver veins and the extra time, money, and energy now being taken to refine larger volumes of ore for smaller yields of silver.

However, silver could theoretically go even lower than $17. If this happened the physical mining market would stop mining silver because it would no longer be profitable. This would then force the price to rise up again.

What may be most important though when considering buying into silver is to ask yourself who it is that’s actually trying to sell you the silver. Silver sellers make a living off of selling silver to you, not from buying and holding silver themselves. These silver sellers will try to mislead you and lie to you about the value.

The best indicator of whether silver has hit bottom or not is to actually look at what that bottom is. As can be seen in the chart below:
silver true historic price
As you can see silver’s historic average price is no where near $17 an ounce. It is actually as low as $5 an ounce. Which is also a price it has stayed at for on average the better part of the past 40 years. The only exception being the early 1980’s when the Hunt brothers tried to corner the silver market and drove the price up to $50 an ounce.

When thinking of investing in silver it is also useful to look at gold.

gold and silver prices

To put it in perspective, gold sat between $250-$450 from the early 80’s to early 2000’s before the current “highs”. In the chart above you can also see how the two commodities price trend.

Silver shares a role with gold as a perceived safe commodity that can store value. When the stock market goes down and the economy get’s bad people buy it up to preserve their net-worth and capital. This increased demand ironically raises the price of gold and silver and encourages even more people to start speculating on the price of the commodity further raising the price. This speculation is of course unsustainable as we are witnessing with the latest silver price “market correction.” Based on historic trends it looks like silver will continue to drop and so will gold. $18 doesn’t look like it will be the bottom but when it get’s down to $5 that seems like a good time to buy in.

The Truth About Compound Interest

Saving money is one of the hardest things to get into the habit of doing. It is even harder to enjoy saving when interest rates are so low. However there is something to always check for when investing and saving, look out for compounding. Compound interest occurs when interest is added to the principle. This means that your initial principle grows and now this bigger amount earns interest. This is called compounding.

XKCD Investing Compound Interest

Compounding may seem small and futile like in the hilarious example above by XKCD but it can mean a noticeable difference in savings accounts where compounding occurs quarterly versus daily. Most common bank accounts will only offer quarterly or monthly compounding however some credit unions will offer daily compounding if offered a choice always chose the account with the most frequent compounding.

For example $100 earning 2% interest compounded Yearly, Quarterly, Monthly, and Daily will yield the following amounts after 10 years.

Yearly Compound Interest:
Interest Earned: $21.90
Total Value: $121.90

Quarterly Compound Interest:
Interest Earned: $22.09
Total Value: $122.09

Monthly Compound Interest:
Interest Earned: $22.12
Total Value: $122.12

Daily Compound Interest:
Interest Earned: $22.14
Total Value: $122.14

As you can see after ten years had you gone with the daily compounding interest account you would have $.20 extra cents. With interest rates so low these days it is hard to see the value you in compound interest but if instead we took a $100 which earned 10% a year over the next 100 years we see quite a different story.

Yearly Compound Interest:
Interest Earned: $1,377,961.23
Total Value: $1,378,061.23

Quarterly Compound Interest:
Interest Earned: $1,947,708.05
Total Value: $1,947,808.05

Monthly Compound Interest:
Interest Earned: $2,113,141.46
Total Value: $2,113,241.46

Daily Compound Interest:
Interest Earned: $2,199,531.87
Total Value: $2,199,631.87

As you can see the value of daily compounded interest is extremely important as time goes on. The difference between the $100 yearly compounded and daily compounded is $821,570.64. In closing always be looking at how often your investment compounds when you are saving for the long haul and daily is always the best.

Emerging Trends in Socially Responsible Investing

Common terms for socially responsible investing include green or sustainable investing. Such investments consider both the financial and social good when preparing the investment strategies to implement.

investing

Already, socially responsible investors encourage corporate practices that ensure environmentally friendly products or services are provided, green technologies are used in the production process, consumers are protected, human rights and diversity inclusion is reflected in organizational practice and businesses involved in vice such as tobacco, alcohol, and gambling are avoided.

There are various approaches that are now used to determine which people or organizations are practicing socially responsive investing including:

Shareholders Advocacy

Investors who take a leading role in tackling issues of social, environmental and governance concerns, by talking to companies and filling shareholder resolutions creates investor pressure on company management, attracts media attention, educates the public on social, environmental and labor issues and gets something done.

Shareholders fill shareholder resolutions on various topics not limited to gender or racial discrimination, pollution, labor practices, climate change, political contributions and other issues. These resolution are then presented for a vote by owners of a corporation.

Community Investing

Socially responsible investors can direct capital to communities that remain underserved by traditional financial services institutions. Community investing can provides much needed access to credit, equity and other basic banking services to low income individuals. In addition, some common trends include extending capital supply for small business financing or to provide important community services such as affordable housing and child care.

According to the US SIF Foundation (ussif.org) sustainable and responsible investments continue to grow with more than one out of every nine dollars under professional management invested according to social responsible investing strategies.

Additionally, companies are now cautious about investing in repressive regimes with both institutional asset owners and money managers becoming increasingly critical of governance issues such as political contributions, executive pay, with direct impact on investment.

Additional community related criteria emerging in social responsible investment practices that money managers are now also looking at when considering investments included affordable housing, microenterprise and fair consumer lending, focus on carbon emissions, pollution and toxic handling and sustainable use of natural resources.

As a new emerging trend in the financial sector is the rise of community development credit unions. These are targeted at encouraging investors to move money from financial institutions tarnished in the 2008/9 financial crisis via ‘move your money’ campaigns.