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The Porter Stansberry vision, at least in October 2012, was that silver was an even better investment. Get some gold, he said, but get plenty of silver. And he also said: get it now. This is because, he said, historically, the price of gold has been around 16 times the price of silver. So, based on the historical ratio, with the price of gold around $1,725, the price of silver should be around $108.
Instead, it was not far from $32. So surely, silver was cheap:
“Silver is going higher”
In due course, Stansberry argued, a “money crisis” would emerge, during which he thought silver would be more in demand. I have to say, I fail to grasp this, but I’m merely a reporter. This is what he declared:
I hope you see why silver’s move from around $15 an ounce to over $30 in the last three years is only the very early signs of a money crisis. It’s going much, much higher.
Well, it didn’t. Over the life of my six-month survey, it went much lower. Much lower. Despite some peaks among the troughs, the trend was roughly the same as gold. Again, he had failed to call the top. And, though, of course, he wasn’t alone, he was on the wrong foot, shouting “buy”, when he should have at least been whispering nothing at all.
Porter Stansberry silver
Worse for his theory was his October conviction that silver would do better than gold. This can be measured through the well-known silver-gold ratio, and he reckoned that, on this, silver would rise.
Silver is the best hedge against a money crisis because its price will increase many more times than gold as the gold-to-silver ratio reverts to its historic average. Silver will once again be worth 1/16th the price of gold. It is now worth only around 1/54th.
Sadly, the ratio went the way of the raw price. Silver against gold headed south. Despite the same peaks, as in the chart you see above, the chart below shows that he was wrong. He was wrong, wrong, wrong, wrong, wrong.
Silver-gold ratio
So, there’s my little case study of a Porter prediction, perhaps a measure of Porter’s performance. Maybe in other areas he was doing just fine, and in a basket of advice he might have come out well. But, as I’ve said, my approach was to prospectively set a six-month benchmark. I decided in advance what I’d check.
Was Porter Stansberry just unlucky? Did other tipsters do better? Such imponderables are beyond my brief. Of course, buying and selling also calls for the question “when?”. And on that it certainly seems that he was wrong.
Postscript: On 29 April: one week after the close of my six-month check, Stansberry’s business reported: “Silver is the worst-performing major asset in 2013… prices are down 22% since the start of the year.”
Ooops.