You know, there's a very specific kind of fantasy
that I think lives in the back of a lot of people's
minds. It's the apocalypse portfolio, right?
The idea that when the stock market breaks and
inflation eats your savings and the whole digital
world just goes dark. You'll be okay. You'll
be the one person who is absolutely fine because
you have that. heavy, iron -clad safe, full of
precious metals. It's a really primal financial
instinct, that flight to tangible assets. When
the numbers on a screen stop making sense, we
want something we can actually hold. Right. And
gold usually gets all the glory there. It's the
king. But then people, you know, they look at
the price of gold per ounce. They wince a little.
And they look at its cheaper cousin, silver.
Yeah. And the assumption is, well, it's just
gold on a budget. A safe haven. more affordable.
That's the impression, yeah, that they're basically
the same asset class, just at different price
points. But that's the traditional narrative.
And if you really dig into the data and specifically
the research we're covering today, that narrative
is, well, it's actually quite dangerous. How
so? Because treating silver like gold light is
a really great way to lose a lot of money very,
very quickly. And that is exactly why we are
doing this deep dive. We're looking at a report
titled Assessing Volatility and Hazard in silver
markets. Right. It's by a researcher named Doug
Young. So before we get into all the scary stuff,
we should probably establish who this guy is.
Like, why are we listening to him? Credibility
is so key here. The precious metals market is,
frankly, it's full of hype men and, you know.
do -mongers. Oh, for sure. Doug Young is the
opposite. He's a financial markets researcher
with over two decades of experience. He's a former
financial director written over 500 articles.
He isn't trying to sell you coins. He's analyzing
the market mechanics. OK, so he's a technician,
not a salesman. That's a really important distinction.
Exactly. He's just looking at the gears turning
behind the price. So the vision for this deep
dive isn't to tell you to buy or sell. We are
not financial advisors. And neither is the source.
Not in this context. Right. The goal is to look
at the fine print that usually gets glossed over.
We're going to talk about why silver is kind
of bipolar, why a recession might actually crush
your silver holdings, which is totally counterintuitive,
and the absolute nightmare of trying to turn
a bar of silver back into cash. It's all about
understanding that silver has a completely different
risk profile than gold. It's not just a store
of value. It's an industrial commodity. And that
one fact changes everything. OK, let's start
right there. with that personality disorder.
Doug Young flags market volatility as the number
one hazard. Right at the top. Now, I think most
people get that crypto is volatile or tech stocks
are volatile, but isn't the whole point of a
metal that it just sits there and is stable?
It's a rock. It shouldn't move that much. In
theory, yes, but Young introduces this concept
of the dual role. If you want to understand silver,
you have to understand this. The dual role. Gold
is almost purely a monetary metal. It sits in
vaults. It hangs around people's necks as jewelry.
It isn't consumed. Once gold is mined, it stays
in the world. Right. We don't build bridges out
of it. We don't put it in disposable items. Exactly.
But silver. Silver has a day job. It is a critical
industrial component. They day job. It's in your
iPhone. It's in solar panels. It's in batteries,
medical devices. It is consumed by industry.
So it's a commodity. like oil or copper or wheat.
It's both, and that's the problem. It's trying
to serve two masters. On one hand, you have investors
buying it as a hedge against inflation. Treating
it like money. Treating it like money. On the
other hand, you have these massive manufacturing
sectors buying it to melt it down and put it
into products. But hang on, why does that create
volatility? Shouldn't that double demand make
it more stable? You know, if investors stop buying,
the factories are still buying. Shouldn't that
create a price floor? You would think so, and
that's a logical assumption. But the source argues
that it exposes silver to double the variable.
Gold mostly reacts to currency strength and fear.
Silver reacts to those things plus the entire
industrial cycle. Can you give me an example
of how that plays out? Sure. Imagine a scenario
where inflation is high. Theoretically, silver
prices should go up. People want that hedge.
But at the exact same time, let's say a major
manufacturing sector like electronics slows down.
Now you have a massive drop in industrial orders.
So the investors are pushing the price up, but
the factories are pulling the price down. Precisely.
And that tug -of -war is what creates these violent
price swings. Young notes that silver prices
can swing significantly within a single trading
day. It's much more spiky than gold. If you're
looking for a calm asset to preserve wealth,
silver's industrial tether makes it a much, much
bumpier ride. That sounds like it's suffering
from an identity crisis. It doesn't know if it's
money or if it's a toaster part. That's actually
a perfect way to put it. And that identity crisis
leads directly to the second major hazard, which
I think is the most misunderstood part of this
entire report. And you're talking about the recession
paradox. Yes. This is where most casual investors
get completely caught out. This was the part
that made me stop and re -read the notes. Yeah.
Because the standard advice, the stuff your uncle
tells you at Thanksgiving, is always, economy
bad, metals good. Right. If we hit a recession,
stocks crash, the dollar gets shaky, so everyone
will flee to silver and the price will skyrocket.
That's the playbook. That is the safe haven theory.
And for gold, it often holds true. But Doug Young's
analysis says, Not so fast for silver. In fact,
a recession could be the worst thing for your
silver investment. Yeah, walk me through the
mechanics of that. Why would a recession hurt
silver? It all goes back to that day job. Think
about what defines a recession, what happens
in the real economy. People stop spending, businesses
start making stuff, construction slows way down.
Correct. Industrial production contracts, factories
shut down lines, solar projects get put on hold
because financing is too expensive. And when
that happens, the industrial demand for silver
which is a huge chunk of the market, roughly
half of all demand, it just falls off a cliff.
So even if investors are scared and buying up
silver coins, the factories stopping their orders
might actually outweigh all of that. It often
does, or at the very least it creates a massive
drag on the price. Young explicitly highlights
that reduced industrial demand during recessions
can lower silver prices. So you're buying silver
to hedge against a recession, but the recession
itself is the very thing killing the value of
the asset. That is wild. You're betting on the
lifeboat, but the lifeboat has a hole in it that
only opens up when the ship starts to sink. That's
a vivid image, but it's pretty accurate. It explains
why silver often dips initially during a market
crash, unlike gold, which might spike immediately.
Silver gets dragged down by the deflationary
pressure of the collapsing economy. So if I'm
holding silver or thinking about it, what should
I be watching? Because just checking the stock
market clearly isn't enough. If I just look at
the Dow, I'm missing half the story. Young suggests
looking at leading economic indicators specifically
tied to output. Don't just look at the S &P 500.
Look at GDP growth. OK. Look at industrial production
rates. So if I see a headline that says manufacturing
output down for third quarter, that is a big
red flag for silver. Huge red flag. It means
the commodity side of silver is about to take
a beating. Even if the precious metal side is
trying to hold up, you have to watch the factories,
not just the banks. OK. So we've established
the price is a roller coaster. And it might tank
when the economy tanks. But let's say I'm stubborn.
I accept the volatility. I go out and buy a silver.
I now own, what, 500 ounces of silver bars? Congratulations.
Now you have a logistics problem. This is the
heavy metal segment of our dive. Yeah. Because
in the digital age, we forget that wealth usually
doesn't have a physical footprint. I can own
a million dollars in Apple stock, and it just
fits in my pocket. It's just pixels. Right. But
$50 ,000 of silver is heavy. It's bulky. It physically
takes up space. And Doug highlights this as a
genuine investment hazard. He does, specifically
regarding physical storage. Because once you
take possession, you have two main options, and
neither one is perfect. Option A, you store it
at home. Which is the classic move, right? You
get a safe, or you bury it in the backyard like
a pirate. Which brings up the security risk.
If you store it at home, you have to keep it
a secret. If people know you have it, you immediately
become a target. Right. And let's talk about
insurance. If your house burns down or you get
robbed, standard homeowners insurance often has
really strict caps on precious metals. We're
talking maybe $1 ,000 or $2 ,000 of coverage.
Oh, wow. So if I have $20 ,000 in silver in a
sock drawer and it gets stolen, I'm just at $18
,000. Likely, yes. Unless you buy a specific
rider or a whole separate policy, which, of course,
costs money. OK, so home storage is risky. So
I go with option B. I pay a professional, a depository
or a bank safety deposit box. Which is safer,
obviously. You've got armed guards and thick
vaults, but it's expensive. And this brings us
to a concept called negative yield. Negative
yield. That sounds like bankers speak for losing
money. Essentially. See, stocks might pay dividends.
Bonds pay interest. Real estate can pay rent.
Gold and silver do not pay you anything. They
just sit there. It's a rock. It's lazy. Exactly.
But if you are paying storage fees and insurance
premiums to a depository, the asset actually
has a negative yield. You are bleeding cash every
single month just to hold it. Young notes that
these costs eat into your investment returns.
Can we put some numbers on that? Well, think
about it. If silver goes up 3 % this year, which
is a decent year, but you paid 1 .5 % of the
value in storage fees and insurance, well, you
didn't make 3%. You barely beat inflation. You
barely beat inflation. You have to subtract the
rent you pay for the metal from your profits.
That changes the math significantly. Yeah. It's
like buying a stock that charges you a rental
fee every month just to keep it in your portfolio.
And that friction is something a lot of first
-time buyers just ignore until they get that
first monthly bill. They see the spot price go
up and think they're rich, completely ignoring
the overhead. OK, speaking of seeing the price
go up and thinking you're rich. Yeah. Let's look
at the exit strategy. Because this is the part
of the report that gave me the most anxiety,
the liquidity trap. Yes. This is a term that
gets thrown around a lot in finance. But in the
context of physical silver, it's visceral. It's
painful. Define it for us in this context. What
does Doug Young mean by liquidity challenges?
Liquidity is simply the speed and ease with which
you can convert an asset into cash without losing
value. Cash is the ultimate liquid asset. Right.
Stocks are highly liquid. You click sell on your
app and seconds later the transaction is done
and the money is yours. And silver. Silver is
sluggish. It has friction. Young flags this as
a major risk factor. Think about the process.
You have those bars and you're safe. You need
cash for an emergency. What do you actually do?
I guess I drive them to a coin shop. Or a pawn
shop. or maybe I mail them to an online dealer.
Okay, so first you have to physically transport
them. That's risked in time right there. Then
you have to find a buyer who is actually buying.
And here is the real kicker, the spread. The
spread. I've heard this term. Explain it like
I'm five. Okay. When you look up the price of
silver on the news, that is the spot price. That's
the global wholesale price. But you, the regular
person, You can't buy at spot price. You pay
spot plus a premium to the dealer so they can
make a profit. OK, so if spot is $25, I might
pay $28. Right. But when you turn around to sell
it back to them, they aren't going to give you
$28. They might not even give you $25. They need
to resell it so they might offer you $24. So
I lose money on the buy and I lose money on the
sell. That gap is the spread. And in physical
silver, that spread can be really wide. You might
need the price to go up 10 % just to break even
on the transaction costs. That is brutal. So
it's not just buy low, sell high. It's buy low,
wait for it to go really high to cover the dealer's
profit, and then sell. Exactly. And it gets worse.
Young points out what he calls a contextual risk.
When are you most likely to need to sell your
emergency stash? When the economy tanks. When
I lose my job. When there's a crisis. Exactly.
But in a crisis, liquidity can dry up. Imagine
it's 2008 again. Everyone is scared. Everyone
is trying to sell things to raise cash. If you
walk into a coin shop and 10 other people are
also trying to sell silver, the dealer is going
to be overstocked. So he might just say, I'm
not buying today. Or he might say, I'll take
it, but only at 20 % below spot price because
he knows you're desperate and he knows he can't
resell it quickly. So the asset that was supposed
to save me in a crisis. becomes an anchor I can't
get rid of without taking a massive loss. That
is the trap. You have wealth, technically, but
you can't access it efficiently. It's locked
in the metal. So does Young offer a solution?
Or are we just doomed to have safes full of heavy,
unsellable metal? No. This solution is sensible,
even if it's a little boring. It's diversification.
Young emphasizes that you just cannot hold all
your wealth in illiquid assets. You need a mix.
Right. You need cash. You need stocks. Things
you can liquidate in five minutes so that you
are never forced to sell your silver at a bad
price. So silver is the break in case of a purgency
glass, but you better have a different emergency
fund for all the small fires. Precisely. Silver
is a long game asset. If you try to use it for
short term liquidity, the fees and the spread
will just eat you alive. You need to be able
to hold it through the bad times, not sell it
during them. That makes sense. Don't back yourself
into a corner where you have to sell the family
silver to pay the rent. Exactly. Let's pivot
to the future for a minute. Because despite all
these headaches, the storage, the volatility,
the spreads, people are still buying. And a big
reason is the narrative around technology. The
green energy boom. The tech factor. This is a
huge driver of the current market psychology.
Right. We touched on this. Solar panels use silver.
We are building solar farms everywhere. EVs use
silver. Therefore, silver demand must go up forever.
It feels like a guaranteed bet. If you believe
in the future, you buy silver. It's a strong
tailwind. Absolutely. The photovoltaic sector
is a massive consumer of silver. But Doug Young
warns us not to get complacent here. He brings
up the risk of technological substitution. Meaning
what? We stop using solar? No, meaning we stop
using silver and solar. You have to remember,
silver is expensive. Industrial engineers are
paid to lower costs. Every single time the price
of silver spikes, there is massive pressure on
engineers to find a cheaper alternative. So if
silver gets too valuable, the industry will actually
try to engineer it out of existence. Exactly.
Young notes that technological advancements could
move away from silver. We've seen this with other
metals. If they can swap silver for copper or
a new carbon -based conductor, or use nanotechnology
to use 90 % less silver per panel, They will.
So the higher the price goes, the more incentive
there is to destroy the demand. It's a paradox.
High prices kill demand. So banking entirely
on solar will save us is risky because the technology
is evolving faster than the mines. You can't
assume a solar panel in 2030 will look anything
like one from 2024. That's a really important
check on the hype. Just because an industry uses
it now doesn't mean they're married to it. Industry
is ruthless. They will cut costs wherever they
possibly can. So taking all of this into account.
The Jekyll and Hyde volatility. The storage costs.
The liquidity trap. The risk that engineers might
just stop using it. What's the verdict? How does
the source suggest we actually use this metal?
It really comes down to your time frame. Young
frames it as long -term versus short -term. Break
that down for me. Long -term, and we're talking
decades, silver does tend to hold its value against
inflation. It preserves purchasing power. If
you want to leave something for your grandkids
that isn't paper money, it works. It survives.
It's the legacy asset. Right. But short -term,
it's a speculative play. Young suggests that
if you have the stomach for it, the volatility
is actually an opportunity. Since it swings so
wildly, you can make money buying the dips and
selling the spikes. But that requires active
management. You can't just buy it and forget
it. No, you have to watch those industrial indicators
we talked about. You have to be a trader, not
just a saver. You have to time the market, which
is notoriously difficult. And again, it comes
back to the portfolio approach. Always. It should
be a seasoning in the portfolio, not the main
course. If you go 100 % into silver, you are
exposing yourself to all these hazards with no
buffer. You need liquid assets to balance out
the... illiquid ones. It's funny, we've spent
almost this entire time deconstructing the myth
of silver, taking away the romance of the pirate
treasure chest. We've exposed the costs, the
risks, the headaches, but... there was one little
detail in the source material tucked away in
the headers that I think we have to mention because
it is essentially the why we do it anyway factor.
Ah, yes, the triple digit forecast. Yeah. Despite
every single risk we just listed, Young mentions
that some analysts are looking at triple digits
over prices. And for context, right now, historically
speaking, silver usually trades in the 20 to
30 dollar range. Sometimes it dips lower, sometimes
it spikes to 50. So triple digits $100 an ounce
or more would be a massive paradigm shift. That
would be a 300, 400 % return. That is the lottery
ticket. It is. And that potential for explosive
growth, specifically because the market is so
much smaller than gold's, is what keeps people
coming back. When silver moves, it moves fast
and it moves hard. Because it's so volatile,
the upside can be just as violent as the downside.
But that brings us back to the central question
I want to leave you, the listener, with today,
is that potential upside worth the friction.
We've outlined the tax you pay on silver, the
storage fees, the insurance, the widespread when
you sell, the sleepless nights watching industrial
production reports. It's the classic risk -reward
calculation. But hopefully now you understand
that the risk isn't just that the price goes
down. The risk is that you can't sell it. or
that the economy turns against you in a way you
didn't expect, or that you just bleed money holding
it. Exactly. Knowledge is the best head. Don't
buy the shiny thing just because it's shiny.
Buy it because you understand the mechanics,
the industrial drag, and the liquidity trap.
Couldn't have said it better. If you're going
to play the game, you've got to know the rules.
Thanks for diving deep with us today. Keep an
eye on those charts. Watch out for the premiums.
And we'll see you on the next one. Goodbye, everyone.