Silver as part of the 25% Cash Allocation in PP

[smurff]

I read in HB's book ("Why the best laid investment plans...") that in the 1970s he recommended silver for the precious metals allocation in the PP, but he changed his view and realized that all of the precious metals allocation should be gold.

But he also said that it was a good idea to keep some pre-1964 silver coins ("junk" silver) in the CASH allocation of the PP.  Back when he wrote that in the 1980s, silver was probably selling in the mid single digits.  Now that it has gone above $40 per ounce, does anyone know how these coins should be valued in the portfolio?  Silver is volatile, so whatever price they are today, it could be half of that next year--or three times that price.

Are "junk" silver coins in the cash portion of the PP valued at their face value, where a 1963 dime equals 10 cents in  2011 money, or at their market value, where the same 1963 dime is worth more than $2.80 in 2011 money?

[MediumTex]

I would definitely value silver at its market value, regardless of its form (junk silver or otherwise).

As for what part of a PP can or should be silver, I would say that treating silver like you treat international stocks in the equity piece is probably a good rule of thumb.

For me, I think an international equity index should be no more an 15% of the equity piece of the PP, and thus no more than 15% of my precious metals holdings in silver seems about right.

Of course, holding NO silver in the PP is unlikely to lead to future regret, but if you have to own some the approach described above seems reasonable.

[dualstow]

I'm starting to feel sorry for cash, or rather cash in the form of a treasury money market fund. It seems to be as unloved here as midcaps are unloved in the boglehead forum.

I think Harry also brought up the junk silver coins when someone asked about them on the "Money Talk" radio show. If I come across the conversation in the mp3 archives, I'll mention the show date. Problem is, I usually listen at night when I'm drifting off to sleep.

[smurff]

As for what part of a PP can or should be silver, I would say that treating silver like you treat international stocks in the equity piece is probably a good rule of thumb.

For me, I think an international equity index should be no more an 15% of the equity piece of the PP, and thus no more than 15% of my precious metals holdings in silver seems about right.

MediumTex, are you saying that silver should be considered like an international equity index (if one has it) held in the equity allocation of the PP--or that it should be considered part of the cash (or precious metals) allocation of the PP, but like the international equity index (if one has it as part of the PP), should make up no more than 15% of the cash (or PM) allocation? 

Please clarify.  And thanks, as always.

[MediumTex]

I just mean that if you must hold silver as part of the PP gold/precious metals asset class, I wouldn't do more than 15% of the overall gold/precious metals holdings in silver.

Compare this approach to PRPFX, which holds 20% of its PM holdings in silver (5% of the whole fund), which seems high to me.

I don't have any silver in my PP (other than my PRPFX holdings).  I'm just offering a framework for how one might think about working silver into the PP.

***

Note that I am not talking about the cash piece of the PP at all, even though that was the context of the OP.

Check coinflation.com for the silver weight in each pre-65 coin.  This makes it easy to keep up with how much silver you own and its current value.

[HB Reader]

I'm pretty sure HB intended that any silver held in the PP should be considered part of the gold component.  I recall toward the end of a chapter on cash and cash equivalents in his 1987 book he did discuss holding $100 or $200 in silver coins, along with some physical bank notes, in your possession for emergency purchasing power in the event of a banking holiday or some other disruption, but I don't think by that he meant that silver was supposed to be part of the cash component.  I think he subsequently clarified that in either his newsletter or one of his radio shows.  I could be wrong though.  I'll see if I have any old newsletters after 1987 that clarify it.  Does anyone recall if he discussed it in any of his radio shows or his 1999 book?     

[MediumTex]

I'm sure HB meant for any silver to be part of the PP gold holdings.

[l82start]

i hold a small amount of silver and i count it as VP,  i don't see any advantage in changing the way i am counting it, but i will keep reading maybe someone will convince me..

[smurff]

Thanks, guys.  HBReader, if you find that radio program by HB where he updated his recommendation, please post.  I think it was the 1987 edition of his book I was reading where he talked about holding junk silver coins in the PP for SHTF-style emergencies.

Meanwhile, I'll keep some of my junk silver with the gold portion of the PP and keep the rest in the VP.

[murphy_p_t]

i have silver, but only in the VP. none has been bought over $19/oz. it seems that if you have significant silver in the PP, you will have to look @ re-balancing more than once per year!

about junk silver (pre 1964 US coins), there are 715 oz of silver in $1000 face value. the coins are 90% silver.

[Tortoise]

FWIW, Harry Browne mentioned silver a couple of times in his 1989 book The Economic Time Bomb.  I quoted the two relevant passages in the following thread:

http://gyroscopicinvesting.com/forum/in ... 91.msg3575