A Gift: The Silver Play of the Century
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Silver miners have faced significant challenges in recent years due to a combination of factors that have diverted investor attention and capital away from the sector.
Firstly, tech stocks have experienced a prolonged period of overvaluation, with investors flocking to high-growth companies and pushing their valuations to extreme levels. This trend has been particularly pronounced in small-cap tech stocks, which have shown a strong correlation with cryptocurrency markets.
Secondly, the cryptocurrency boom has further siphoned investment away from traditional commodities like silver. But bitcoin and all crypto is at extreme risk because:
- Crypto has never gone through a recession
- All technology has built in obsolescence
- All future wars are cyber wars meaning online assets are eliminated
- Crypto can be seized, hacked or otherwise compromised
- Quantum computing will render blockchain obsolete
- power outages means when the lights go out you have no money while silver shines in the candlelight
This shift reflects changing investor perceptions and a growing acceptance of digital assets as stores of value.
Thirdly, the past two decades have seen a general lack of investment in commodities, with capital flowing into more financialized assets. This trend has been exaggerated by the media's focus on easily tradable financial instruments that generate higher commissions.
Despite these headwinds, silver is currently in its fifth year of deficit, indicating a fundamental supply-demand imbalance. Moreover, silver plays a crucial role in various growing industries, including solar energy, electric vehicles, robotics, and aerospace applications
The disconnect between silver miners' stock performance and the metal's underlying fundamentals is striking. The PHLX Gold/Silver Index (XAU) is trading below its levels from three years ago, despite the increasing industrial demand for silver.
This means that the Philadelphia Gold/Silver Index (XAU), which tracks 30 gold and silver mining companies, has a lower value now than it did in February 2022. This indicates underperformance in the precious metals mining sector compared to three years ago
This underperformance suggests that silver mining stocks are poised for a significant correction as the market eventually recognizes the metal's strategic importance and supply constraints.
Fund managers prefer financialized assets over physical commodities like silver because they can generate more frequent trading activity, leading to higher commissions and fees.
So BUY the other side of that thinking