Desert Island Stocks: Silver, Silver Burning Bright
And Our Friend Peter Is a "Fed Doubter" For Year's Second Half
[Editor’s Note: As part of our mid-year review, Bill Patalon interviewed friend and silver expert Peter Krauth about 2024 so far — and what comes next. Here’s a transcript of their talk.]
Hi folks, I’m Bill Patalon, co-founder of Stock Picker’s Corner (SPC) … and I’m here with my good friend, Peter Krauth, publisher of the Silver Stock Investor newsletter, and author of the bestseller The Great Silver Bull.
We’re going to have a little fun here …
This is our inaugural “SPC Mid-Year Review.” So I’ve gathered up the experts in the SPC network to talk about 2024 so far to date … AND to ask what they see in the second half … and into 2025.
But I’m throwing in a “wildcard” question.
I’m calling it our “Desert Island Stock Challenge.”
I’m asking about the one stock they’d buy (or the one investment they’d grab) if they knew they would be marooned on a desert island (and out of pocket) for several years.
WPIII (Q): Welcome Peter … nice to have you back.
PK (A): Glad to be here, Bill. Nice to be back again.
WPIII (Q): Peter … it’s been a fascinating first half of the year … in stocks, for sure … but also in commodities – particularly with your specialty … silver.
As we’ve chronicled several times here, you made one hell of a “call” on this.
I gotta do a quick review here … for anyone who missed it … but also because I know we’ll be circling back on this in the “what comes next” part of our program.
You and I sat down in late February … and that interview showed up in my March 6 SPC report:
At the time we published our report, silver was trading at about $23.87. It soared (that’s a fair descriptor) to a 52-week high of $32.51 an ounce on May 19 – for a 36% surge in just 74 days. It’s traded back a bit since then – but in a follow-up issue, you explained that silver was “just taking a breather.” It’s still up near $30 … so folks who listened are still sitting on a nice gain.
Great call, my friend.
PK (A): Thanks, Bill.
WPIII (Q): Let’s talk about the first half of this year …
I’m a “story guy” as you know …
PK (A): … and a “stocks guy.”
WPIII (Q): [Laughing] … AND a stocks guy … that’s right … that’s right.
So here we are … at the midpoint of the year.
Looking back over the first six months … what have the dominant storylines been? What jumps out? Any surprises?
PK (A): I guess, Bill, that if I had to put on my writer’s hat … and craft a headline for that first half … it would probably read: “Problems and Messiness.”
WPIII (Q): Because …
PK (A): Because, in my view, the problems are many – including commercial real estate and banks struggling due to this environment of relatively high interest rates.
Geopolitics are pretty messy in several places — including the recent European parliamentary elections and Indian elections — as well as the Middle Eastern and Ukraine/Russia conflicts.
As risks go … I have to think these remain highly under-appreciated.
Highly …
WPIII (Q): What comes next? Do those “problems and messiness” spill into the year’s second half of 2024? Into 2025?
What are you expecting?
For silver … but also in general.
PK (A): As usual, Bill, you ask very good questions.
To answer, let’s start with the general …
I think the broader markets will start to trend downward … lower … later in the year as the Fed starts rate-cutting — yet another behind-the-curve central bank performance once a recession becomes obvious.
That pivot to a new easing environment is likely to be very supportive of commodities broadly.
I think we will see a renewed commodities bull market ... divided into two equal parts. The first half of the bull will be driven by supply shortages. And the second half will be driven by surplus demand as rate cuts and money printing kick in and launch a new cycle.
WPIII (Q): What does this mean for silver?
PK (A): Bill, I think we could see silver trend towards $28 through the summer as it “digests” those first-half gains you detailed.
It could even drop down to touch $26 as we get a final “capitulation” selloff from the weaker hands.
WPIII (Q): Because?
PK (A): When silver zoomed, and topped out near $32, I believe it was because we had many sellers who bought at $30 way back in August 2020 — and maybe as far back as 2012. Those folks were happy to “break-even” and get their money back. Sadly for them, they just don’t understand this market, will likely miss most of the upside coming, and — thanks to our old friend FOMO – might jump back in at much higher prices.
WPIII (Q): Hmmm …
PK (A): Hmmm is right, Bill.
Try this on for size … by several metrics, silver sentiment is still in the dumpster …
WPIII (Q): Meaning it’s got the potential to run a heck of a lot higher.
PK (A): That’s correct.
In the second half of this year, I’d expect to see silver comfortably above $30 — and possibly trend toward $35.
As for next year? I think we could see silver head towards $40 an ounce.
WPIII (Q): Let’s talk “wild cards.” Are there any?
PK (A): Of course … I think silver is still vastly underappreciated – which holds out the potential for a very big upside. The “wild card” here is investment demand.
Silver benefits from both industrial and investment demand. Until a few years ago, we were looking at a 50/50 split. With the growth of industrial demand to about 60% of the silver market and investment demand now about 40%, there’s simply less silver available when investment demand kicks in.
And it will kick in.
And when it does – and it will – look out. The sparks will fly.
WPIII (Q): Wow … that’s a powerful narrative.
PK (A): It has been … and continues to be, Bill. I know you’re a stocks guy, first … but that you see the possibilities of silver …
WPIII (Q): I do … I hold silver personally. And here, in the framework of SPC, we don’t view it as a “commodity,” per se … but as a “special situation” investment – for the very reasons you’ve outlined.
Let’s turn to our game … the “Desert Island Stocks Challenge” that we’ve been playing over the past week.
Here at the midpoint of the year, it’s a fun way to get folks back into the longer-term, “Wealth Builder” mindset we advocate here at SPC – since this game demands that same long-term view.
Just to quickly review: You know you’re about to be marooned on a “desert island” for two, three or five years – or longer. And you wanted to park SOME (not all) of your money in one stock … or one investment (knowing it would stay invested in that pick for that stretch).
What would that investment be?
And why?
PK (A): Bill, you won’t be surprised by my answer.
But I can say this with a clear conscious.
Hands down, it’s silver for me.
Silver is just so, so cheap as measured by so many metrics; it’s the only metal that’s below its 1980 nominal high … dramatically below its inflation-adjusted 1980 high … abnormally cheap versus numerous assets like gold, real estate and broad stock indices.
I mean, the list just goes on and on.
WPIII (Q): You always present such a great, data-based “investment case” with silver.
So what’s next?
PK (A): Thanks, Bill.
Two to three years from now, I think we’ll see silver double – easily – with good potential even for a triple from current levels
If I were going to pick a stock, it would be Wheaton Precious Metals Corp. WPM 0.00%↑.
The world’s largest royalty company by market cap, it boasts about 45% revenue from silver (most of the rest from gold), a very healthy growth profile and even a 1.16% current yield. That’s in a very sweet spot.
WPIII (Q): Good stuff, Peter. As always … thank you.
PK (A): Always glad to talk with you, Bill.
