Gold or Silver? How to prepare for what comes next

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By Andrew Sleigh, Sprott Money

Special to Financial Independence Hub

When people ask me whether they should start with gold or silver, my answer depends largely on where they are financially. If you’re dealing with tens or hundreds of millions of dollars, you’re generally going to come in heavily with gold, although I still think you need silver.

For the average Canadian or American with less than one or two million dollars in assets, I would establish a position in silver coins first and then supplement that with gold. There’s no perfect percentage. You can fine-tune your gold and silver allocation as you become more educated and understand what each metal is supposed to accomplish. The important thing is building the position before everybody suddenly decides they want physical precious metals at the same time.
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Why I would Start with Silver Coins

People ask why I recommend silver coins instead of 100-ounce silver bars, especially when bars can have lower premiums. My answer is transactability. If all you own are large bars, how are you going to handle smaller transactions if silver ever needs to function as money? I made this mistake myself. When I started buying physical silver, I bought seven 100-ounce bars. I knew I wanted physical metal, but I didn’t yet understand which products made the most sense. After listening to people who had been stacking for decades, I exchanged those bars for coins.

My basic approach for somebody starting today would be:

  • Establish a position in recognizable silver coins first.
  • Add physical gold as the overall position becomes larger.
  • Move into 10-ounce or 100-ounce silver bars after you’ve accumulated enough coins.
  • Don’t concentrate everything into denominations that could be difficult to transact with. The objective isn’t simply getting the most ounces for the lowest premium. It’s owning precious metals in forms that could actually be useful when you need them.

Not every Ounce of Silver is Equal in the Real World

I used to believe an ounce was an ounce and bought whichever silver product was cheapest. Then I realized it’s not only about what I understand about silver. It’s about what the person on the other side of the transaction understands. I’ve encountered people who were only comfortable with Canadian Silver Maple Leafs because they recognized and trusted them. An experienced precious metals owner may happily accept a generic one-ounce round, while somebody less familiar with silver may want a Maple or, in the United States, a Silver Eagle.

That’s why I want a mixture that gives me options:

• Recognizable sovereign silver coins for people who want something familiar.
• Generic rounds for people who understand silver and simply care about weight and purity.
• Larger bars only after I’ve established enough smaller denominations. If precious metals ever become more commonly used for barter, recognizability could become almost as important as the silver itself.
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Why I’m concerned about the Financial System

I see substantial risk in the conventional financial system, particularly in currencies and long-duration bonds. As interest rates rise, older bonds paying much lower yields become less attractive and can lose significant market value if they need to be sold. At the same time, governments across the West continue running enormous fiscal deficits. Canada has this problem, the United States has it, and Europe has it. To me, we’re watching currencies compete in a race to the bottom.

When gold and silver rise in dollar terms, I don’t necessarily look at that as the metals suddenly becoming more valuable. I also look at what is happening to the currency they’re measured in. You can see declining purchasing power every time you go grocery shopping. If governments continue expanding deficits and pursuing inflationary policies, I believe protecting purchasing power becomes increasingly important. That’s a major reason I want physical gold and silver rather than relying entirely on paper assets and currency.
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Why Silver Demand could become Enormous

Silver is particularly interesting because it has both monetary and industrial demand. There are already numerous industries competing for physical silver, including

• Electrification and renewable energy.
• Electronics and advanced technology.
• Automation and robotics.
• Global manufacturing.
• Defense and military applications.

Then you add investors who want physical metal because they’re increasingly concerned about the financial system. It doesn’t take the entire population buying silver to create shortages. If even a relatively small additional percentage of people suddenly wants physical bullion, retail inventories can tighten very quickly. We’ve already experienced periods when dealers struggled to source products such as Silver Maples and 100-ounce bars. The public tends to assume they’ll always be able to buy physical metal whenever they decide they need it. I don’t make that assumption. I’d rather accumulate gradually while it’s readily available.
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Physical Metal isn’t a Short-term Trade for me

If your objective is trading gold and silver price movements, physical bullion probably isn’t the most efficient vehicle. Premiums and spreads can eat into short-term trades. That’s not why I own physical metal. For me, physical gold and silver are first and foremost about wealth preservation.

I think people need to separate two completely different objectives:

• Trading precious metals: Trying to profit from short-term movements in gold and silver prices.
• Owning physical precious metals: Protecting purchasing power and keeping tangible wealth under your control.
If silver substantially outperforms and you sell everything to lock your gains back into dollars, you’ve put yourself back into the currency you were trying to protect yourself from. Physical metal gives me wealth already in my possession or under my control. I don’t have to sell a financial product, receive currency, and then hope I can convert that currency into something tangible during a crisis.
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Gold and Silver still have Monetary Value

I’ve talked to people who have already used precious metals for barter in private transactions. I once asked a gentleman shining my shoes at the Toronto airport whether he would accept silver as payment. He immediately said yes. One silver coin represented too much value for the shoe shine, but the point was that he recognized the value and was willing to accept it.

You’re probably not walking into a major grocery chain today and paying for groceries with Silver Maples. But that doesn’t mean precious metals have lost their monetary characteristics. If confidence in conventional currencies or payment systems deteriorates significantly, I think recognizable gold and silver could play a much larger role in private transactions. That’s another reason I want smaller-denomination silver rather than having everything concentrated in large bars.
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How I would prepare with Gold and Silver today

Physical precious metals aren’t completely risk-free. Prices fluctuate, premiums matter, and bullion needs to be stored securely. That’s why I believe in nibbling away rather than trying to perfectly time one enormous purchase.
If I were building a position today, my priorities would be:

• Build a foundation of recognizable physical silver coins.
• Gradually add gold as the amount of wealth being protected increases.
• Add larger silver bars once enough smaller denominations are already owned.
• Keep some physical cash available for immediate expenses.
• Think carefully about secure storage.
• Don’t advertise what you own or where you keep it.

I’m not trying to perfectly trade every move in gold and silver. I’m trying to preserve purchasing power and maintain tangible wealth under my control. Financial problems can develop inch by inch and then seemingly happen all at once. I’d rather prepare incrementally while gold and silver are available than wait until everybody else reaches the same conclusion at the same time.

Andrew Sleigh is a Sales Representative at Sprott Money with over 32 years of financial industry experience. After beginning his career as an insurance broker in 1991, he became an independent financial broker, providing financial planning, investment, insurance, and benefit solutions. In 2017, Andrew shifted his focus to bullion and precious metals, helping individuals and businesses understand how hard assets can play a role in wealth preservation.

Time for Core (Plus) Bond Portfolios Again?

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By Christy Tan and Lukasz Labedzki, Franklin Templeton Institute

(Sponsor Blog) 

Investment Implications

We see growing evidence suggesting that investors should consider moving from a short-duration bias toward core (plus) bond portfolios. This is largely predicated on the fact that valuations have become more attractive across fixed-income sectors, with all-in yields approaching compelling levels. Our guidepost remains 10-year Treasury yields near the upper end of their recent range. We continue to believe that this is a market for an active, selective approach.

Please see our sector views below.

Central banks: We have a new Federal Reserve (Fed) chair, and if we take him at his word, it feels
like a new environment has begun. The rhetoric is hawkish, reinforcing that the 2% inflation target is
by no means soft. Importantly, there’s also a strong push for no forward guidance, with the market
invited to react to incoming data as it sees fit. That likely means a higher-volatility environment and,
all else equal, a higher risk premium demanded by bond investors. As a result, all eyes are now on
the data. If the data fails to confirm moderating inflation, the market will demand Fed action. If the
data does confirm it, the market can justify a pause. In both cases, longer duration can perform
well. The risk is the Fed policymakers talking but not acting when needed: that would make the
bond market angry. We see the risk-reward of extending duration as improving and are happy to do
so at certain yield levels.

US Treasuries: Our view is that 10-year Treasury yields will remain broadly range-bound, which
means the closer they get to 4.75%, the more attractive it becomes to move into intermediate
duration. We believe it is reasonable to begin extending duration around those yield levels.

Developed markets credit: Historically elevated investment-grade bond issuance that the market
needed to absorb widened spreads from their tights to levels closer to fair value, while the broader
fundamental backdrop remains healthy. Supply should also slow in the second half of the year. In
the high-yield space, spreads have also widened somewhat. We remain biased toward higher-rated
issuers in high yield. All-in yields are attractive and provide resilience across a range of scenarios.

Emerging market (EM) debt: While it has been the best-performing fixed-income sector
year-to- date, we think it’s time to be more selective. In local-currency EM debt, Latin America
has been the top performer (as we highlighted), and we expect this to continue. As a stronger US
dollar remains a risk, in our view allocations should be balanced with US dollar-denominated EM
debt, which is less sensitive to currency moves.

Euro bonds: As mentioned previously, we believe German Bund yields (Europe’s benchmark
government bond yields) will remain broadly range-bound. They closely track expected mone-
tary policy, which has recently been driven largely by gas prices. With Bund yields above 3.1%, we
find them attractive for medium-term investors. Hedged yields for US dollar-based investors are
on par with US Treasuries, meaning there is little opportunity cost to global diversification.

Performance Snapshot

Global fixed-income performance has remained largely uninspiring this year, with the Bloomberg
Global Aggregate Index still slightly underwater. Relative performance has been stronger in
emerging market debt, particularly US dollar-denominated debt. The picture is more nuanced in
local-currency EM debt, which we discuss later. US high yield has also outperformed. Within
higher-quality fixed income, US short-duration strategies have also held up relatively well. These
are essentially the sectors we have been highlighting throughout the year.


US Treasuries

We believe benchmark 10-year Treasury yields will remain broadly range-bound, and investors should take advantage when yields are close to the upper end of that range (~4.75%). Recent history (Exhibit 2) suggests this strategy has worked well and remains our playbook for the second half of 2026.


Of course, yields could move higher, but at these levels we view the risk-reward as favorable and do not see a high risk of yields moving significantly above the recent range over the coming months. The main reason is that a lot is already priced in: the market expects more than two Fed hikes over the next 12 months,1 while the current term premium (the risk premium in bond jargon) is close to 70 basis points (bps),2 versus a recent high of around 90 bps. A meaningful move above 5% in 10-year Treasury yields would likely require a further significant repricing of both monetary policy expectations and the term premium.

The major risk is that the Fed turns more hawkish than in our base case. We acknowledge this risk, but we also think that realized hikes could, in fact, cause longer-duration bonds to catch a bid, as they would demonstrate a strong commitment to fighting inflation and could lead to a repricing of growth expectations.

For conservative mandates, we continue to view short-duration bonds as a portfolio pillar. They are highly resilient across scenarios: two-year Treasury yields would need to rise above 9% before investors started losing money, assuming a one-year investment horizon (Exhibit 3).

Developed Markets Credit

The major story in credit markets lately has been investment-grade (IG) bond supply, driven in part by hyperscaler borrowing. More than US$1.2 trillion3 of IG issuance came to market through the first six months of the year: well above historical norms (Exhibit 4). Continue Reading…

Canadian Kids picking up on their Parents’ Money Stress, new Vanguard Survey finds

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Even when parents try to shield their children from financial worries, a new study suggests kids are hearing more than parents realize.

As the cost of living continues to squeeze Canadian households, a new survey from Vanguard Canada suggests the strain isn’t confined to parents’ bank accounts; it’s also shaping how their children think and feel about money too.

The survey of just over 1,000 Canadian parents of children under 18 found that households that talk openly about money raise more financially literate kids, while households that avoid the subject may be doing more harm than good.

The Instinct to Protect backfires

Many parents try to keep financial stress away from their kids. Among parents who describe themselves as financially stressed, more than two thirds said they feel pressure to hide their worries from their children, and roughly a third said they avoid discussing money at home altogether.

But the survey suggests that instinct doesn’t work the way parents hope. Seven in ten financially stressed parents said their children overhear money conversations anyway. In fact, those children were found to be nearly five times more likely to feel anxious about money than their peers.

Sal D’Angelo, Head of Vanguard Investments Canada, said children pick up on far more than parents assume, even when adults try to keep financial matters private. He framed early financial education as key to helping the next generation build healthy money habits.

 A Literacy Gap that starts early and closes late

The survey also points to a timing problem. Households where money is discussed regularly produce children with markedly stronger grasp of core concepts like banking, debit and credit, which is nearly three times higher comprehension according to the findings.

Yet the majority of parents said substantive money conversations don’t begin until their child is between 15 and 18 years old, well after attitudes toward money have already started to form. Continue Reading…

How to tell what a Stock is actually Worth: A Beginner’s Value Checklist

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Run this checklist automatically on any stock at travisvaluation.ca

By Curtis Travis

Special to the Financial Independence Hub

Nearly a century ago, Benjamin Graham — the man who taught Warren Buffett — put the whole game in one sentence: “Price is what you pay; value is what you get.”

The trouble is that your brokerage app shows you the price in giant letters and says nothing at all about the value. So, most of us end up buying the number that’s flashing, not the business behind it.

The good news is that estimating what a business is worth doesn’t require a finance degree, a Bloomberg terminal, or a spreadsheet the size of a bedsheet. Graham built his reputation on a handful of simple, repeatable checks that any patient investor can run. What follows is a beginner’s version of that checklist: six questions to ask before you buy. To keep the math clean I’ll use one example company with rounded figures: a fictional-but-typical Canadian retailer trading at $60 a share. (Real numbers move daily, so when you do this for keeps, pull the current figures first.)

Price is what you pay; value is what you’re hunting for

Before the checks, one mindset shift. A $500 stock isn’t “expensive,” and a $5 stock isn’t “cheap.” Cheap and expensive only mean something relative to what you get: the earnings, the assets, and the safety behind the share. Every check below is really the same question asked five different ways: am I paying less than this business is worth?

Check 1: Is it cheap relative to its earnings? (the P/E)

The price-to-earnings ratio is the first thing to look at. Take the share price and divide by earnings per share (EPS). Our retailer earns $5 a share, so at $60 its P/E is 12.

Graham liked to see a P/E under 15. A P/E of 12 means you’re paying $12 for every $1 of annual profit: or, flipped around, an “earnings yield” of about 8%. That’s a reasonable starting point. Anything north of 25–30 means the market is pricing in a lot of future growth, and you’re paying today for profits that may or may not show up.

Check 2: Is it cheap relative to what it owns? (the P/B)

Earnings can be lumpy, so Graham cross-checked price against the company’s book value:  roughly, what would be left for shareholders if the company sold its assets and paid off its debts. Divide price by book value per share. Our company’s book value is $40 a share, so its price-to-book is 1.5.

Graham considered 1.5 a sensible ceiling for a defensive investor. Below 1 means you’re buying the assets for less than their stated worth: rare, and worth a closer look. Well above 3 means little of what you’re paying is backed by tangible assets; you’re buying expectations.

Check 3: Can it actually pay its bills? (interest coverage)

A cheap stock that can’t service its debt isn’t a bargain:  it’s a trap. Interest coverage tells you how comfortably a company covers its loan payments: take operating earnings (EBIT) and divide by annual interest expense. Our retailer covers its interest 8 times over.

As a rule of thumb, above 5x is comfortable, and below 2x is a flashing yellow light: a bad year could put the company in a squeeze. This one check quietly eliminates a lot of “value traps” that look cheap only because they’re fragile.

Check 4: How close is it to trouble? (the Altman Z-Score)

In the 1960s, professor Edward Altman combined five financial ratios into a single distress-predictor called the Z-Score. You don’t need to compute it by hand, but you should know how to read it:

Above 3.0 — financially healthy. 1.8 to 3.0 — a grey zone; tread carefully. Below 1.8 : elevated risk of serious financial distress.

Our example lands around 3.2: solid. The Z-Score is a wonderful “sniff test” precisely because it’s hard to fool: a company can dress up one ratio, but rarely all five at once.

Check 5: The rare, deep bargain (net-net / net current asset value)

This is Graham’s most famous trick, and his most demanding. Add up only a company’s current assets — cash, receivables, inventory — then subtract all its liabilities. Divide by shares outstanding. If the stock trades below that “net current asset value,” you’re theoretically buying the ongoing business for less than nothing. Continue Reading…

A different take on the Active vs Passive Debate: Can’t we all just get along?

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Image via Outcome/Shutterstock

By Noah Solomon,

Special to Financial Independence Hub

There’s something happening here
What it is ain’t exactly clear

I think it’s time we stop
Children, what’s that sound?
Everybody look what’s going down

  • For What It’s Worth, by Buffalo Springfield

 

Over the past two decades, the asset management industry has witnessed a massive transformation during which assets have migrated from active to passive approaches.

Notwithstanding the obvious appeal of passive investing, I believe that most of the debate between active vs. passive management misses some critical points. This month, I discuss why active vs. passive is not an either/or proposition and how the two approaches are not mutually exclusive. I will also discuss what I refer to as the three pillars of active management: the characteristics that determine whether an active manager can add value to investors’ portfolios.

The Trend is your Friend …. Until the End when it Bends

In 16 of the past 35 years, the majority of active large-cap U.S. managers outperformed their benchmark. However, there have been environments when active managers clearly dominated passive portfolios,  such as the period from 2000 to 2009, when more than 50% of active large-cap U.S. managers outperformed the index in nine out of ten years.

Passive investing is not a panacea. Capitalization-weighted indexes are price momentum-based strategies that are forced buyers of overpriced assets during bubble scenarios. As a result, they tend to do well in rising markets dominated by a few sectors or individual securities. However, this concentration can be very costly during market downturns. There is no built-in buffer or margin of safety and no risk management: just full participation, up or down.

By contrast, active managers are often constrained by individual stock and sector weighting constraints and/or valuation discipline. It is not coincidental that the majority of active managers outperformed during the post tech-bubble bear market of the early 2000s when unreasonably valued technology stocks which were heavily weighted in indexes suffered severe price declines.

Pillar #1: Dare to be Different

Many so-called active funds closely mirror their benchmark indices. These “closet indexers” offer no real value. The math is cruelly straightforward: if an active manager holds a portfolio that is not materially different from their benchmark, then their performance will approximate that of the index less fees (near-guaranteed underperformance). Moreover, such portfolios are almost perfectly correlated to their benchmarks, which renders them utterly incapable of providing diversification vs. benchmark indexes. and providing downside protection in bear markets.

Academic studies have shown that funds which differ materially from their benchmark indexes were more likely to outperform. Make no mistake: holding a portfolio that differs materially from the benchmark doesn’t guarantee outperformance, but it shows that at least you’re trying!

The issue of closet indexing has been particularly pervasive in Canada. A 2013 paper titled “The Mutual Fund Industry Worldwide: Explicit and Closet Indexing, Fees, and Performance” analyzed the prevalence of closet indexing in different countries. Out of the 20 countries which the study analyzed, Canada ranked highest in terms of the percentage of its actively managed funds that were not truly active, with over 40% identified as closet indexers. This is not surprising given the relatively small size of the Canadian markets and the associated scarcity of highly liquid stocks. Once a fund gets to a certain size, it has little choice but to hug the index unless the manager is willing to sacrifice liquidity and flexibility.

Pillar #2: Downside Protection

From a long-term investing perspective, avoiding losses is more powerful than capturing every last basis point of upside. It takes a 43% gain to recover from a 30% loss. In the past 25 years, the S&P 500 has fallen 30% or more three times. Preserving capital in such environments makes it easier to recover and better compound wealth over the long term. All outperformance is not created equal: outperformance in bear markets is of greater value than outperformance in bull markets. Active managers who can preserve capital in bear markets offer significant value for their clients.

Pillar #3: Consistency

Assessing a manager’s performance across a full market cycle is imperative for understanding the advantage of their approach and their ability to navigate challenging markets. Consistency is essential: a manager who almost always lands in the top half of their peer group offers better long-term results than one who places in the top quintile in one year and falls to the bottom the next. Importantly, managers who consistently protect on the downside are better positioned to deliver outperformance over the long term. Continue Reading…