Don’t ask for whom the silver bell tolls. It tolls for thee.
Okay, I need to brush up on my Hemingway—maybe a trip to Key West to get away from the snow would do the trick—but you get the picture.
Silver is an appealing commodity these days. As Bloomberg.com noted yesterday, silver is posting its biggest discount to gold in 13 years, making it the "poor man’s gold." That’s something that caught my eye because we all feel like poor men these days. So I figured it’s high time we gave silver the Cramer treatment.
Why silver? Ever since silver was discovered near Acapulco in 1524 (only three years after Cortez brutalized the Aztecs in 1521, and helped himself to their gold), the shiny stuff has triggered limited but enthusiastic appeal among investors.
Like I’ve said before, investors turn to commodities like silver and gold when the stock market goes south.
That’s been the case so far in 2009. As the figures below indicate, silver has risen in trading value by almost 15%, compared to 6.3% for gold (which gets all the headlines) and -22.4% for the S&P 500, which continues to plummet in the aftermath of the federal government’s $1 trillion porkulus plan.
Dec. 31, 2008: 869.75
March 2, 2009: 925.00
Change: 55.25 (6.35%)
Dec. 31: 10.79
March 2: 12.40
Change: 1.61 (14.92%)
Dec. 31: 898.00
March 2: 1,053.00
Change: 155.00 (17.26%)
Dec. 31: 903.25
March 2: 700.82
Change: -202.43 (-22.41%)
Also, since last October, when the pork hit the fan, so to speak, silver has also outperformed gold as measured by the two commodities’ main exchange-traded funds, Gold SPDR Gold Trust ETF (Stock Quote: GLD) and I-Shares Silver ETF (Stock Quote: SLV). GLD has been up about 15% since mid-October, 2008, while silver has risen by roughly 25%—not a bad bet for silver investors.
I’m just warming up. If you invested in silver in 2000, at the vortex of the last big bear market, by the end of 2008 you'd have earned a 240% return on your investment, compared to 190% for gold investors and just 35% for the Standard & Poor’s over the same time period.
Let’s be fair. Gold has continued an uninterrupted eight-year run of steady growth, while silver can’t say the same. But the rampant interest in gold has left some wiggle room for investors looking to cash in on silver, hence the discount to historical levels not seen for 13 years.
So I like silver. It can’t hurt to consider some for your portfolio. Why? Well, besides the upside in performance, we’re in a commodities bull market and I think silver has more room for growth than gold. There’s a lot of steam left in the precious metals market, so that scenario shouldn’t change anytime soon. That’s especially pertinent given the spenda-palooza going on in Washington. With all the bailouts and stimulus cash being flung around, mostly to political special interest groups, inflation is soon to follow. Silver, like gold, is a great hedge against inflation, so the opportunity to get in on silver while there is still room for growth is a pretty good deal.