Thursday, March 31, 2011

2x Silver and 150$/oz

AGQ
Today, while listening to Peter Schiff a 30yo caller asked about "diversifying" in silver.  This 30yo's version of diversifying was own 50% physical silver in the form of American Eagles and 50% paper silver.  The paper silver is the ETF AGQ.  Here's how AGQ compares to the paper silver ETF SLV.


After checking out AGQ, I'm interested.  Not sure I'm going to buy, but I probably will.  Not sure if AGQ is backed by physical silver or not, but the caller's rationale was that he can ride up the paper silver gains and if there is no counter-party fraud (ie if the silver ETFs are indeed backed by physical silver) then the paper silver WON'T go to zero.  If there is counter-party fraud then the physical silver will shoot up as the paper silver crumbles (I have no idea if that will be a net gain or net loss).


$150/oz
It's surprising to me that Jim Cramer buys physical silver too (video).  I thought buying physical silver is just for whackos.  There he mentions an article in the Financial Times (aka "FT") which I thought was interesting.  In the article (available once for free and the after that you need a subscription to read) a banker predicts a price of 150$/oz for silver, which reminded me of the Stansburry fear-mongering video that's been making the rounds.

Imagine what happens if silver goes to 150$/oz and AGQ is legit. What happens to AGQ?  Wow.

Here's a graphic from the Financial Times article: