Silver Stacking
Metal doesn’t get debased.
Silver is currently undervalued compared to gold, making it an attractive addition to a precious metals portfolio.
Precious metals like silver protect against currency debasement caused by reckless central bank and government policies.
Holding cash has resulted in significant real losses due to inflation, highlighting the need for alternative stores of value.
Starting a silver collection is easy and cost-effective by using an Amazon Prime Visa sign-up bonus to buy silver rounds online.
Following the end of the gold standard, the gold to silver ratio averaged ~65:1. Today, the ratio is ~91:1. Silver needs to rise by ~41% from today’s price to reestablish its average relationship with gold. Another way of looking at it is that the natural abundance ratio of silver to gold in the Earth’s crust is ~19:1. If its rarity in relation to gold set the silver price, it would be worth ~$181 per ounce today, 5x today’s market price. I expect mean reversion over time so I own silver.
One tactic is to short the ProShares UltraShort Silver ETF (ZSL). The constant leverage trap eats away at its value over time. It will probably pay no distributions and have a terminal value of $0.00. You can see its tracking error and how its performance degrades over time. The reference subindex is up ~7% since inception but the -2x fund didn’t return -2x that or -14%; it is down ~36%. It also underperformed over 10-year and 5-year increments. It has only been able to track in shorter increments of 1-year and YTD. If, as I expect, silver rallies by >40% from here, the impact on ZSL will be practically unrecoverable.
The cost of rolling these futures contracts is brutal. The fund structure basically forces them to buy high and sell low then repeat forever until there’s no money left. It is a terrible structure that only exists as a regulatory arbitrage serving retail investors with accounts that are unable to otherwise employ leverage or shorts.
MAG Silver (MAG) is one way to get discounted silver exposure. The ~$0.39 net spread in its cash and stock acquisition by Pan American Silver (PAAS) offers a ~17% IRR if the deal closes by August. The stock election is currently more valuable and will probably be prorarted. The deal requires approvals by Mexico, Canada, and the target’s shareholders. That shareholder vote is scheduled for July 10, 2025.
In addition to buying silver equities, you can simply buy silver such as the 10 oz Lady of Liberty Silver Bar at Costco (COST). Their ~$370 price (as of this writing but subsequently raised to ~$400) was ~3% premium above spot and far better than competitors. Walmart (WMT) charges ~$440 as does Money Metals Exchange. Apmex, which often had the best prices until Costco started selling gold and silver, charges ~$423. So Costco has transformed the process of buying physical gold and silver.
Want an even better price on physical silver? Get two 2 oz silver rounds on Amazon (AMZN). Then pay for them with the $200 gift card that you can get instantly for free with this card. Married? Here’s another 2 oz silver round. Have your spouse/P2 buy two in her account and she can pay for these by getting another $200 gift card with a second card in her name. This $200 offer is temporary and will revert back to $150 soon.
Isn’t the borrow rate on $zsl 40-50%? I get that these are decaying to $0, but that seems a really steep price to pay in a scenario where the silver boom takes longer than expected. Great info nonetheless, always appreciate your out of the box takes.