Tuesday, June 18, 2013

Silver Gets AAA Rating

By Dr. Jeffrey Lewis

If bullion or any hard asset were to be compared to a debt security there is no reason it wouldn’t be triple-A.  Consider that a bet on bullion is essentially a bet on a future payoff.  This future payoff, which is hopefully more than the current purchase price, is cemented by indirect future cash flows.  Future inflation should give lift to any hard asset.

If the ratings agencies can comfortably assign a triple-A rating to any printing press, it should be clear that theoretically this rating should extend to hard assets.  Not only are hard assets tangible, always valuable, and historically understood to keep pace with inflation, but they’re also guaranteed to be deliverable.  There’s no risk in turning over fifteen, twenty dollar bills for a stack of silver bullion.  On the contrary, there is significant risk to turning over the same $300 for slightly more than $300 in the future.

This basic tenant of investing should not be lost for the purposes of greater sophistication.  Investors who want to realize a future outcome today with the greatest possible safety should turn to silver.
Hmmm, I wonder how these Ratings Agencies get paid in the first place?   BK