Here is a list of NIA's top 10 most important new NIAnswers that we recently added into our database:1) I am feeling a little worried about the huge drop in silver after it hit a new all time high of nearly $50 per ounce. What do you think is causing it?
We never expected silver to rise to almost $50 per ounce so quickly. Silver simply rose too far too fast and was due for a correction. The correction appears to be almost over with silver showing signs of forming a strong support level. After silver nearly hit $50 per ounce, the CME rose margin requirements substantially. This caused a forced liquidation of hedge funds that were buying silver using leverage. The CME's actions were pure manipulation and done to help their banker friends at JP Morgan who were short 122.5 million ounces of silver. This same thing happened in 1980 after silver first hit $49.45 per ounce and it was later proven that 9 of the 23 COMEX board members were short 38 million ounces of silver. JP Morgan is losing billions of dollars on their short position and without the CME's actions, JP Morgan would have been forced to cover its short position, which would have sent silver to $100 per ounce in just weeks. NIA is pleased that the new Hong Kong Mercantile Exchange will end the COMEX monopoly and make them a lot less likely to manipulate precious metals prices in the future.
NIA is 99.9% sure silver will rise well above $100 per ounce this decade. Based on the current price of gold, a return in the gold/silver ratio to 16 would mean a silver price of $94 per ounce, but we are sure gold will rise many times higher than its current level of $1,508.90 per ounce. In NIA's opinion, the currency crisis won't be over until the Dow Jones/gold ratio returns to 1. The Dow Jones is currently 12,512. Even if gold meets the Dow Jones mid-way at 7,010, it would mean $438 per ounce silver based on a gold/silver ratio of 16.
2) Do you feel now is a good time to trade a good portion of gold for silver?
Yes, with the gold/silver ratio back up to 43, those who exchange their gold for silver now will at a very minimum see their purchasing power increase by 2.6875 times during the next 2 to 3 years if NIA is right and the gold/silver ratio declines to 16 or lower. Silver has dipped enough where we now feel comfortable to start buying it once again using money that we currently have in gold. We are very happy that silver has dipped, because the more time NIA members have to accumulate cheap silver, the more wealth NIA members will gain when hyperinflation hits the U.S.
3) What if Bernanke decides to raise interest rates so high that hyperinflation can be avoided? What happens to silver then?
If Bernanke rose interest rates to let's say 20%, the interest payments on our national debt will soar to approximately $2 trillion per year. Instead of a $1.645 trillion budget deficit we will have a $3.44 trillion budget deficit. The U.S. government will only be able to fund the deficit by having the Fed print the money to buy U.S. treasuries, which would cause hyperinflation. Bernanke is in a very bad position. Even raising interest rates dramatically won't prevent hyperinflation at this point. In NIA's opinion, silver will rise over the long-term no matter what Bernanke does.
Silver may have dipped after reaching a new all time nominal high of near $50 per ounce a few weeks ago, but adjusted for real inflation, when silver hit $49.45 per ounce in 1980 that would equal about $400 per ounce in today's dollars. Silver has not seen its high, we can promise you that. This is a buying opportunity that won't last for long.
4) Would it be more profitable now to buy silver mining shares rather than silver metal?
When silver broke $40 per ounce and made a move to almost $50 per ounce, silver stocks did not make any gains during that $10 rise in silver. It is almost as if the stocks knew silver was running too far too fast and would need to correct. From their highs on April 28th to their closing prices last week, physical silver has declined 29% while silver stocks have only declined 18%. Silver stocks appear to be at a bottom and when the price of physical silver begins to rebound, we believe silver stocks will likely rise 2 to 3 times faster, with a select few small-cap silver stocks rising 4 to 5 times faster than the silver bullion itself.
It is always safer to buy physical silver because mining shares have many different factors affecting them, such as geopolitical risks and the experience of management. However, if you do your homework and spend a lot of time researching silver stocks, there is a lot more money to be made owning the right silver stocks than owning physical silver. Just keep in mind that not all silver stocks will be winners. Some silver mining companies will fail and eventually go out of business.
5) What do you think of the leveraged silver ETF, ProShares Ultra Silver?
ProShares Ultra Silver is designed to make double the daily gains or losses of silver. Silver prices are volatile enough as it is and this ETF isn't suitable for most investors. What especially makes it risky is that leveraged ETFs decay over time. At the end of 2010, ProShares Ultra Silver closed at $158.59 and the regular silver ETF closed at $30.18. Today, the regular silver ETF is $34.18 up 13%, but ProShares Ultra Silver is only $171.94 up just 8%. Therefore, while this leveraged silver ETF may double the regular silver ETF's gains on a daily basis, over longer periods of time the leveraged ETF decays and may not perform as well. ProShares Ultra Silver is only good as a short-term trading vehicle for experienced risk tolerant investors.
6) Will I be able to use my gold and silver coins as money instead of it being taxed as a commodity?
NIA will be supporting Ron Paul for President in the 2012 election, because he will eliminate all taxes on gold and silver. When gold and silver prices go up, it isn't the value of gold and silver that is increasing, but it is the U.S. dollar that is losing its purchasing power. Almost nobody in Washington wants to end taxes on precious metals, because it forces people to continue using U.S. dollars as money.
When Americans eventually abandon the U.S. dollar, politicians won't be able to have the Fed print the money to fund their deficit spending, because the dollar won't have any purchasing power. The U.S. Constitution states that only gold and silver shall be used as legal tender. NIA believes that fiat U.S. dollars are unconstitutional and we must move back to sound money if our country is going to survive as an industrialized nation. However, don't let taxes persuade you not to purchase gold and silver. When hyperinflation arrives, taxes won't matter because you will be able to sell an old pair of tennis shoes to pay off your entire tax bill. During hyperinflation, the government will fund more than 99% of its spending by printing money and less than 1% through taxation.
7) So reading between the lines in the new Senate bill to adjust the 401K, is this the start of the government trying to control these funds like they stole gold from the population back in the 1930s?
The new Senate bill is the government's attempt to stop Americans from borrowing against their 401K so that less Americans are able to buy gold and silver. NIA has countless members who tell us they are borrowing against their 401K in order to buy gold and silver. This is allowing them to protect their 401K money from hyperinflation, because their 401K doesn't give them the option to invest into gold and silver. 401Ks usually only give Americans very limited investment options, which almost always include U.S. treasuries. This is something the government is OK with because it helps fund their deficit spending.
By Americans borrowing against their 401Ks and buying gold and silver, they are betting against the U.S. dollar and the government wants to prevent this. By forcing Americans to invest into U.S. government bonds and not giving them the opportunity to use their savings to buy gold and silver, they are able to steal the purchasing power of Americans through inflation. If everybody was able to buy gold and silver with their 401K money, the U.S. dollar would immediately collapse and the government would have no way of funding its budget deficits.
8) Since the U.S. has reached its debt ceiling, will hyperinflation occur soon after August if Congress does not raise the debt ceiling and the government is forced to default on its debts?
By the government claiming it will default on its debts to foreigners if they aren't able to borrow more and get more deeply into debt, it is admitting to running a ponzi scheme. The debt ceiling will be raised and even if it wasn't, it doesn't mean the U.S. will have to default on its debts. With our current record low interest rates, the U.S. certainly has enough tax revenues to continue making payments on its debts if it made major cuts in other areas of the budget. If the U.S. did default on its debts, that itself wouldn't cause hyperinflation. What will cause hyperinflation is if we continue printing the money to pay back our debts, which is what NIA is deeply concerned about.
9) I was a supporter of Ron Paul, but was horrified by his comments that he thinks it's a good idea for the U.S. to sell its gold. Some day the U.S. may need its gold to go back on a gold standard. What are your thoughts?
We believe Ron Paul is only saying this because he doesn't believe our gold reserves actually exist at Fort Knox. The last real audit of our gold reserves took place in 1954. In the audit that supposedly took place in 2005, KPMG LLP only audited the mint's fiscal year 2005 financial statements and never saw any physical gold or even went to Fort Knox.
By suggesting we sell our gold reserves to help pay off our national debt, we feel Ron Paul is only trying to get Congress talking about our gold reserves. He wants to make it a mainstream political issue so that the public demands an audit of Fort Knox and our nation's gold reserves. NIA agrees with Ron Paul that we need to audit our gold reserves and find out if the gold we are supposed to have really still exists.
If in 1971 the U.S. government was forced to admit that it couldn't pay the gold it owed to foreigners and defaulted on its gold obligations by ending the gold standard, NIA believes the odds are that our gold reserves either no longer exist or have been compromised in some way. NIA does not support selling our gold reserves and we don't think Ron Paul truly does either. Don't worry, if Ron Paul says that he supports selling our gold reserves, the rest of Congress will automatically want to do the opposite.
10) I would like to gain more knowledge financially. Where should I start? What should I do to gain more advanced knowledge?
The way NIA's co-founders became economic and stock market experts was from a very young age, reading the SEC filings of publicly traded companies. Every single day, they would read the latest annual report called a 10-K of a company they were interested in and had knowledge about.
NIA's co-founders started to do this when they were just kids. They would read the 10-Ks of companies that produced video games, action figures, or other items that they bought as kids. It is amazing just how much financial knowledge you pick up this way. If you don't understand some of the terminology contained inside of a 10-K, then simply go to http://investopedia.com and look up the word in their glossary.
For somebody who is starting from scratch or already has basic financial knowledge and wants to become an expert on the stock market, these simple steps are by far the best way to go. You will learn a lot more this way than by going to any college. If this is something you are truly interested in and have a passion for, you will have a lot of fun and enjoy doing it.
We suggest picking a different company each day from our stock suggestion page and if it is an American company, reading its annual report by going to http://sec.gov and clicking on "Search for Company Filings" and searching for the company's name and pulling up their latest 10-K. If it is a Canadian based company on the TSX you will need to go to http://sedar.com and search for its annual report there.
NIA is not an investment advisor. NIA's NIAnswers are meant for informational and educational purposes only. Never make investment decisions based on any information contained in any of NIA's NIAnswers. Just because many of NIA's previous economic predictions and forecasts were accurate, doesn't mean NIA's future economic predictions and forecasts will be accurate. All of NIA's predictions and forecasts could turn out to be completely wrong.
It is important to spread the word about NIA to as many people as possible, as quickly as possible, if you want America to survive hyperinflation. Please tell everybody you know to become members of NIA for free immediately at: http://inflation.us
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