How often have you heard people waxing nostalgic over what prices were fifty, thirty, even just ten years ago? When you hear things like “I remember when gas was a quarter!“, it’s a little skewed because you have to take into account what the current incomes were at the time and a host of other factors. Sure, they were making around $6,000 a year in 1964 when gas was indeed around a quarter (Google seems to suggest around $.27/gal), but there’s a lot of sites out there that can better illustrate the decline of the dollar. What I think would be more interesting is to illustrate the rise of silver relative to purchasing power. Stodgy minds in the media like Jon Nadler, Kitco’s omnipresent bearish mouthpiece, love to suggest that metals ownership is only worth a small place in your portfolio to preserve wealth. Looking back through 1964, though, paints a different story. As you know,1964 was the last time the US minted 90% silver coinage. Had you hung on to more of that face-value silver back then, your wealth would have increased substantially:
In 1964, ten dimes could often buy you 10 McDonald’s hamburgers on a promotion. ($.15/e or 10/$1)
If you kept those dimes in your drawer, they’d be able to buy you 20 hamburgers today.
(Silver value: ~$23 . Burgers: $.99/e)
To fill up a 12 gallon tank of gas, you’d have to fork over thirteen 1964 quarters to do it. ( $.27/gal)
If you left those quarters in the back seat and found them today, you could get 20 gallons for it.
(Silver value: ~ $75. Gas: $3.70/gal)
To buy a new car in 1964 you’d need a massive stack of 3,500 old silver dollars. (avg $3,500/car)
If you saved that stack, you’d only need 1,281 of them to buy a new car today.
(Silver value: ~ 86,625. New car avg: $30,700)
With the left over silver, you could fill it up 986 times even with gas rising to avg $4.50/gal.
To purchase a new house in 1964, you’d need to lug fifteen 1,000 oz bars of silver to the bank.
(avg home cost: $19,000, silver @ $1.30/oz).
If you did a mortgage instead and kept those bars to buy a new home today, you’d just have to bring nine of them and get back a lot of change.
(avg home cost: $263,000, silver @ $32/oz valued at $480,000, leaving $242,000 left ).
You could use the remaining silver to:
1 Send your two kids through a four year college, AND:
2 Buy a year worth of groceries, AND:
3 Take your husband or wife to Hawaii, AND:
4 Prepay 5 years average healthcare costs for your family of 4, AND:
5 Donate 10x the national average to a charity of your choice, AND:
6 Hire a personal trainer for 6 months to get you eating right, AND:
7 Buy 128 hamburgers to throw a party after you’re sick of eating right!
1(avg $23k/year per kid = $184,000, leaving $58,000 left).
2 (avg $236/week for family of 4, leaving $45,728 left).
3 (avg $5,000, leaving $40,728 left).
4(avg $3,200/year, leaving $21,528).
5 (avg $1,100/yr donations, leaving $10,528).
6 (avg $100/hr x 4hrs/week x 26 weeks, leaving $128).
7 (avg $.99 x 129 = $126.72)
Wouldn’t you say that family that can afford to pay cash for a new home, go on vacation, pay for college, pay for groceries, pay for healthcare, make a big charitable donation, hire a personal trainer, and still have money left over for plenty of all-beef patties is pretty wealthy? Absolutely. To be fair, you can’t ignore that in the example above the person lugging 15 1,000 oz bars of silver to the bank to buy a house in 1964 was certainly doing well. That stable of silver was worth about 3X the average yearly income of an American, and I suspect most people did not have that kind of reserve. That said, if you look at 3X the average income of an American in 2012, you get somewhere around $150,000, which as we’ve demonstrated, does not even come close to buying an average home. Silver has not only bridged the gap of inflation, it covers it multiple times over. It’s clear that one holding as much physical silver as possible will not only preserve their buying power, they will increase it by a substantial degree. Banks are manipulating the stock market (and silver market, too), government bonds are tenuous at best, and dumping money into savings bears only a fractional percent of interest. Those looking ahead to the next fifty years would be foolish to ignore the value and wealth-creating properties of silver.
Hi SE.
Great article.
Have not heard from you in a while…
Silver has only recently been rallying to such high levels. If you had looked at cashing in your silver back in the ’60s, early ’70s, late80s, ’90s, or even earlier than about 6 years ago, the investment story on silver would have been much bleaker. There are countless people who lost money on silver by buying in 1979/1980 and giving up in the 1990s.
Hindsight is always 20/20. I can show you how you COULD have been a billionaire by investing in tech stocks in the 1990s. That doesn’t mean that the same strategy would work today.
You’ve written a nice article but as always “past performance does not always guarantee future results”. Don’t get me wrong, I’m bullish long term on silver and I own quite a bit of it. However, I think many of the bulls are going to be very surprised in the next 5 years when silver hits $20 again and stays near there for quite a while.
That’s a fair comment, but in the late 70s you had the Hunt brothers trying to corner the market. Sure silver will ebb and flow, but back then it was a concerted, manipulative event to push silver higher. That’s a lot different than today. Never in US history have we had the debt load and *experimental* monetary policies that we have right now, not to mention what’s going on with Europe. It really is a ‘race to the bottom’. Don’t forget that silver ownership is amazingly small among the populace and the market for silver (energy, technology, medical) is much more broad than from the 60s-80s.
Excellent look at silver’s potential. Even currently, if a person was to do the same thing as back in 1964, then look at it 40 years later, we would probably see the same thing. So, stock pile now, reap the rewards later!!
Thanks for the great article and information!
Silver could drop to $5 an oz again due to margin requirements and deflation. However, if anything like that happens, I’m not going to be shaken out of the silver tree. Such low prices would encourage me to buy more, a LOT more. BTW Bernanke hates deflation, so he will do everything possible to keep us on an inflationary path.
This mean that Silver in 1964 was cheap and now is explensive.
With some amount of money today U can do a lot of things.
JohnnyB: You say “bulls will be surprised with silver returns to $20 per ounce in five years and stays there for quite awhile”
You don’t give a reason for this incredible pullback and facts to back it up…which makes your comment irrelevant and frankly, stupid.
Let’s look at some of the driving forces in place for owning physical silver.
World reserves are all but, depleted. Nearly 10 Billion ounces have been used up in the past sixty years and are unrecoverable.
Silver is CONSUMED more now than at any other time in history.
Ore grades have fallen drastically, while fuel costs, used to extract silver, have risen.
The world (Most of it) are intentionally debasing their currencies.
We have consumed more silver every year than we have mined for the past fifty years.
The list applications for silver just continues to grow and grow.
More above ground gold exists than silver yet, silvers’ industrial demand dwarfs golds’.
Where will silvers’ price eventually go when it costs us One hundred or One thousand dollars to mine a single ounce?
To be fair, if you’d invested that money in broad stock market indexes like the S&P 500 and reinvested all dividend payments you would be far wealthier than just having sat on silver, even with the recent spike in silver.
Wrong! If you take 13 quarters to a gas station, $3.25 would not even buy one gallon of gas. To get $75 for it, you have to sell it to a third party. Why would someone pay $75 for 13 quarters. Because they have been convinced that it has more value than the face value of the coin. If i could go back to 1964 and load up at face value i would. Paying 20 times face value is very risky. What if nobody wants to buy it from you? What if the value goes down? Inflation will cause the price to go down not up. People will have no money to buy silver or gold. Their entire paycheck will go to food, gas, and other essentials. Then the selling starts. People will sell coins and jewelery for whatever they can get for it. You can’t eat gold or silver. The price will fall. If you want to invest in metals, a better idea is to collect pre 1981 cents. You can still get them at face value. The metal value is 2 times the face value. In the future, someone might be willing to pay more than face. If you can’t sell for metal value, then take it back to the bank.You can’t loose. It’s 1964 all over again.
Bill
Bill – If I offered you a bunch of silver eagles at 20x face (or $20/each), you would decline? How about a $50 gold piece (1 oz) for $1,000 (20x face). That too? Face really means nothing. Face value declines all the time because you get less and less for what’s stamped into the coin. Research what you could buy for a dollar in 1964 and let us know if you can still buy it for a dollar today.
If you took $3500 in 1964 and invested it for 48 years with 8% interest you would have 160,000 in 2012. You could buy that $30,000 car, fill up 986 times, and still have almost $80,000. You tell me which is better…
Bill, What’s next?…Hoarding Aluminum? In Precious Metals, you have a large amount of value stored in a small amount of space. Even if pennies were promising for the future, you would need a housefull. Plus, the precious metals are undervalued today, when adjusted for inflation…they should be 3-4 times what they are now. So I’ll take the undervalued silver that fits nicely in my shoebox/safe and you take your pennies and try to explain to your wife why she has to squeeze through the hallway. By the way, if you hold them and return them to the bank, they will have LOST value due to inflation!
Good point BIll about the pre1982 pennies. Their copper value is actually noteable. I have a ryedale sorter and love hoarding these coins. I have even sold some on eBay – already cashing in.
Who would pay for $3.25 face value of silver? I myself walked into a coin shop today and bought exactly that – guess its cost? It was 25.50x face = $82.88. WOW. Where was I in 1964? O wait I wasn’t born yet… the government is stripping away our generations wealth before we even had a chance to get any of the money. O well what can you do? Prepare now.
This article is on the mark. I send my congrats to the author for his research. I have been writing about this very subject for many years. The latest was published in July at http://www.dansdepot.com/blog/a-lesson-in-savings/#more-878 For those adding their comments that point to a crash in the silver/gold market, I have also written, as have others, about the disinformation campaign underway to discourage gold and silver owners.
That disinformation has been effective, as shown by the low % of Americans who do not have a clue. However, when you leave our shores, you find that most of the rest of the planet gets the silver/gold story. For instance, how would silver drop to $5 when 3 billion customers with plenty of money in China/India are clamoring for metals? Silver at the moment is the most undervalued, most dynamic investment possibility anyone has seen in decades. You just can’t do much for folks who refuse to see that.
@David: You didn’t give any reasons why silver should be at $35 today either. Does that make your comments “stupid”? Not really. It is all just opinion. However, I’ve done my research and can confidently say that the average inflation adjusted price for silver since 1964 is actually only about $15. Not the $100+ that so many people cling to. The $100+ price is based on inflating a one time clearly manipulated price (Hunt brothers) from 1980. It has virtually no meaning to the current price of silver.
With all of that said, I feel that we are currently experiencing something similar to what we saw back in the late ’70s and early ’80s. Many of the same concerns existed back then. If that is true and we follow a similar pattern, the price of both silver and gold will experience a very significant pullback to the low $20′s and possibly even less.
Do the research yourself and be skeptical of anyone who wants to quote inflation adjusted prices since 1980 or mystical 16:1 gold to silver ratios. Many of the claims made by the silver bulls do not hold any water. Unfortunately, those that have not researched it themselves are quick to jump on the bandwagon and accept these fallacies as “facts”. Meanwhile, anyone who speaks to the contrary is labeled as “stupid”. Well, if we see the early ’80s pattern all over again, many of you will be feeling pretty stupid when you’ve lost 50% or more of you investment simply because you believed whatever “facts” suited your fancy.
Johnny – here’s another mystical 16:1 ratio: In 1980 we had something like $1T in national debt, and today, we’ve got $16T. With estimates ranging from $18-22T (http://usdebtclock.org/cbo-omb-gop-budget-estimates.html) forecasted for 2016, what other option is there? This is uncharted territory. I understand the trading aspect of metals and nothing is wrong at looking for short term trends. The long term trend, though, is crystal clear. More US dollar printing, more debt, more inflation, and higher prices for tangible assets such as silver.
Great article! Although I must say that silver sat at $5 for over 20 years, which would make it hard to take profits – it becomes more of a once in a lifetime type of an investment. I know, “but today we have debts” etc etc. We always think that this time it’s different, and we are so much smarter. The truth that we as silver bugs need to admit is that the much better investment in 1960s would have been shares of Exxon Mobil. Not only did the share price went up 45x in nominal terms, it kept paying dividends. Silver doubled your purchasing power, big deal. If you account for taxes you’re supposed to pay when you sell it, the “returns” are paltry by comparison.
Like the article. My two cents (which by 1964 values is likely less than a plug nickle today) – An investment in precious metals is not always a short term investment. Gold was $300/oz in the early 1990s. Yes, if you invested a long time ago (20-40 years), you have amased a sizeable amount in your investment. If silver and gold decline in price, it can only mean that the world currency is stronger. If cash is stronger than PMs, then you are cash rich and PM poor, but if the cash markets continue to decline or are adjusted to account for inflation, then you are PM rich and cash poor. Regardless, PM will hold value for future generations than cash. Think of what value PMs will have to your future generations. This is why I buy PM.
In 1999 we were importing about 6% of our silver needs. Now we import about 60%.
JohnnyB
You make some good points about hindsight being 20/20. I’m sure one could have bought tons of steel or copper and done quite well since 1964. Or just kept the classic cars in the garage since 1964.
As to the discussion on weather silver will pull back (“in the next 5 years when silver hits $20 again and stays near there for quite a while.”) Anything is possible in the short term or on temporary pull back but that is a pretty specific prediction as to price and timeframe . I would say it is as likely that the dollar will experience double digit inflation, hyper inflate and or cease to be the worlds reserve currency in the same timeframe. Of course this probably won’t happen either “within five years” but the big picture is that the dollar’s days ARE numbered and when it’s finished I hope I’m holding metal instead of paper.
Tim, yes i would buy eagles for $20. Then i would sell them on ebay for the current price of $34. This would be a great investment because i am buying at a 60 percent of current price and then selling at that price. This is how coin dealers and pawn shops operate.
Silverstreak, i collect copper cents because i can get them at half the going metal value. I wish i had them stacked to the roof. I would hoard aluminum, if i could get it at half price.
Real estate was also suppose to protect you from inflation. Crash!
The stock market was also suppose to protect you from inflation. Crash! Yes it has come back for now. It will crash again.
Inflation without wage increases will always end in a crash. When the next economic downturn hits, it will take silver with it.
Consider a $3500 investment in the year 1964, which of course was unaffordable for most being that amount was 6 months wages on average. But let’s pretend we had it and invested in…umm…let’s say Coca Cola. With re-invested dividends and multiple stock splits (not including the most recent in July 2012) the market value today would be well north of $10 million.
Really enjoyed your piece. We drafted a post for our blog around your write-up here. Do you think it would be okay if we used your infographic picture there in our post?
Thanks,
Nathan Williams
I’m a bit underwhelmed that, by delaying gratification for 48 years, I can only get 2-3 times what I could get then.
I think I’ll continue consuming now. I don’t even know what I’ll be able to consume when I’m 85 and whatever it is, I won’t need 2-3 times what I consume now.
Rick
PS The Dow Jones has increased 18 fold over the same time.
The article focuses on silver as a creator of wealth in its own right. Certainly there are other investments (like equities), that have outperformed silver since 1964. However, silver has virtually no risk of being worthless in the next sixty years, but there are plenty of companies that will be. See what happened to investors in the Northern Natural Gas company in 1979 (hint, it later became Enron). A lot of mainstream coverage likes to suggest that metals are a purely defensive holding meant to preserve capital. I wanted to show an example where silver not only preserved, but grew capital many times over.