How Should Investors Handle Silver Miners Now?
Contributed Opinion

1. Stewart Thomson: I, or members of my immediate household or family, own securities of: SILJ. My company has a financial relationship with: None. My company has purchased stocks mentioned in this article for my management clients: None. I determined which companies would be included in this article based on my research and understanding of the sector.
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Are You Prepared?

As the new year begins, silver is in the spotlight, and there are some questions of importance:

What's the difference between this market and that of the 1970s? Can the current futures market margin hikes create a fiat money rally and silver price crash? Can the U.S. central banks raise rates to the 20% area like they did then, or would doing so cause the government to collapse?

These are all important questions … and some of the answers may surprise a lot of investors.

For rates, yes, the Fed can indeed hike rates to 20% and will if inflation gets out of control. Faced with significant rate hikes now, unlike the 1970s/early 1980s, this time the US government would be forced to cut spending as drastically as Elon Musk wanted to cut it (and more), or the government would collapse.

There is no significant private sector inflation right now, and robotics may prevent it from arising. The big problems are government size, weaponization of the fiat dollar, and debt. 

That's causing loss of confidence in anything related to the government, be it trade deals, bonds, or the currency itself.

Ironically, it's possible that government bond rates begin to rise while private sector rates fall (and it's already starting, with long bond rates rising even as the Fed chops the Fed Funds rate).

The rise of electric cars and solar power is creating demand for silver that is almost certainly going to be much more sustained than the speculative inflation-oriented buying of the 1970s and the QE-oriented buying in 2009-2011.

The current margin hikes on the futures markets are creating simple dips in the price rather than a big wave finale, and that's helping make many junior silver miners the hottest buys in town.

Having said that, here's a look at the SILJ junior silver stocks ETF: 

Not only is there a possible H&S top of significance developing on the chart…

It can also be argued that silver stocks are at or near the end of a significant "Elliott Wave A," while silver itself is at or near the end of a "C wave." How is this possible?

It's possible (and arguably probable) because of the change in the silver price versus the cost of mining. That gap is widening and thus creating a quasi-permanent floor for silver and for massive mine stock profits.

Wave B declines can definitely be nasty, but the Wave C upside action that follows is almost. In that regard, I'll draw investor attention to the C wave action in gold over the past several years, and that of silver bullion more recently.

Imagine leveraging that with a time delay. That's likely the status of silver miners (and especially juniors) today.

Company in focus: Bayhorse Silver Inc. (BHS:TSX.V)

Here's a look at the monthly chart:

A massive base pattern is in play.

Here's an exciting look at the daily chart:

While silver and the larger silver companies are struggling a bit right now, CDNX stocks like Bayhorse are performing like bull era champs!

For the average investor, my mantra is that no price is too high to buy a grub stake in a CDNX or OTC-listed miner, but all prices are too high to back up the truck if a failure of the stock would emotionally batter the investor. Oregon operator Bayhorse fits the "grub stake it now" bill, and as the year begins, there's only one thing left to say, which of course is, Hi Ho Silver!

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