“How to Buy U.S. Government Backed Silver for $1.25, and get a Free Retirement Loan”

By Travis Johnson, Stock Gumshoe, July 21, 2009

This ad sounds a little bit like a very popular one we looked at a few months back — then, it was for $1 “Silver Shots”, and it was a teaser for a leveraged derivative trade on silver futures (or, in plainer speak, it was for long-term call options on the SLV ETF).

If you invested in those so-called “silver shots” when I wrote about them, you would have seen your investment come close to doubling, then fall apart. I estimated that Zachary Scheidt back then was teasing January 2010 SLV call options at about a dollar, they were $1.15 when I wrote about it and are now about 55 cents thanks to the decline in silver prices and the time decay on the options. If you were to try a similar strategy now you might look at the $15 strike price for a bit under a dollar, or, for a somewhat larger speculation, the January 2011 options. That’s not a recommendation, of course, just an update.

But that’s not what we’re talking about today — what’s being teased is a different way to invest in silver, something else you can buy for a very low price if you believe silver prices will spike, without the same kind of “bet it all” leverage that you get with one of those options trades.

And this tease is for the Retirement Millionaire newsletter, which is an interesting letter from Dr. David Eifrig that doesn’t necessarily focus on investing all the time — he writes about finding special deals and freebies and living well in retirement. You may have seen his ads before, it’s published by Stansberry so it gets quite a bit of exposure.

Today he’s teasing two things: First is the cheap silver that I noted above, second is the “Free Retirement Loan from the U.S. Government”. To take the second thing first, I can tell you that the “free retirement loan” must be the same thing that we’ve seen teased by several newsletters before, taking social security early, banking those payments, then repaying them after a few years to “reset” your social security for a higher payout — it does end up being an “interest-free loan” as far as I can tell, but of course, you also have to be in a position where you’re taking the money but you don’t necessarily need it, and there are lots of details that I don’t know about. I wrote about this last Fall, so you can see the details and the long discussion here.

So now, the point of our note today, dear friends — silver and gold have been on a bit of a recovery slope in recent days, so what is this “U.S. Government Backed Silver for $1.25?”

What could this be? The letter includes a nice, long argument that the price of silver will spike in the years to come, and that it will outpace any gains from gold. The rationale is the same stuff we’ve probably all seen before: Silver is “real money” and should rise with inflation; unlike gold, it has real uses as well and is largely consumed by industry, including healthcare and lots of new electrical and green technologies that demand silver; government stockpiles are either gone or historically very low, and silver coin demand has spiked to remarkable levels; there are a limited number of “primary silver” mines and it doesn’t get the same mining attention as gold; and silver is historically very cheap right now relative to gold (that’s the “gold/silver ratio” that you’ll probably hear a lot about as long as it’s below historical averages).

So if you buy all that (and many people do), what’s the way to play silver here?

Here’s the spiel to get us going …

“Created by and Courtesy of the U.S. Government…

“Well, you could buy silver stocks.

“But, mining and silver stocks depend on a lot of variables beyond the price or even fundamentals of silver itself.

“You could buy into a silver ETF, but no one can say with any certainty how reliable this will be as prices take off. After all, they are fairly new investments and have no real track record.

“You could buy ordinary bullion, but you’ll need to pay 25% OVER the price of silver to buy these investments.

“You could buy newly minted silver coins, but expect to pay premiums of 30% or more.

“In fact, I just looked up a newly minted 1 oz Silver Eagle Coin on E-bay. They are selling for $21.95… that’s a 50% premium above the current price of silver.

“That’s why I believe the absolute best way to buy real silver is through a U.S. government-created vehicle that will act as a store of value and give you a chance to own real silver and reap a hundred, even thousands of percent gains… for as little as $1.25.”

So, that’s interesing, no? How about some more specific clues?

“The U.S. government ceased production of this silver in 1965 because people were hoarding it and not circulating like the government had planned.

“Since that time, it has quietly changed hands from one investor to another and no one knows for certain how much is available.

“There are 3 unique properties of this U.S. government – backed Silver that make it such an ideal investment:

* “This silver is widely recognized and therefore liquid. It has always had an eager market for owners who want to sell it.

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* “It is easily divisible should you need to “cash-in” a portion of your investment or use it to buy goods and services in the future.

* “It is already “pre-certified” and should not need independent verification of purity and value like silver bars, silver rounds, o