In these recent posts, I’ve been outlining for you several opportunities for alternative investments that we call Momentum. These show you the wide variety of options available to you. I continue these suggestions here.
Purchasing Distressed Businesses
There are plenty of opportunities to buy businesses from struggling owners who don’t know how to make their business profitable. If you have experience, knowledge, and skill in the domain of that business, you may be able to acquire it, raise the value and turn it around within a relatively quick period, and either hand it off to managers or sell it at a profit. Just as homeowners who can’t make payments are willing to sell their homes at steep discounts, distressed business owners do the same.
Creating value is a fundamental goal of all business acquisition. The value of the business creates intrinsic wealth when you increase its value and its multiples. Incorporating this methodology, the earnings before interest, taxes, depreciation and amortization (EBITDA) from the business is multiplied by a multiple. For example: If your business whose EBITDA is at $2 million and its business segment sell in a range of three times multiple, that would suggest a business valuation of $6 million
Gold to Silver Investment Ratio
The Gold-to-Silver Investment Ratio is the amount of silver it takes to purchase one ounce of gold. When the ratio is high and above 40:1, my investment consensus is that silver is the favored metal to buy. When the ratio is low and below 40:1, it’s a signal to sell silver and buy gold bullion.
To formulate the gold-to-silver ratio, simply calculate the price of gold and divide it by the price of silver. Here is an example: $1,343 (gold price) ÷ $21.60 (silver price) = approximately 62.18 (Gold-to-Silver Ratio). In this example, silver is undervalued and primed for acquisition.
As an avid investor in precious metals, I speculate on silver and with the proceeds of any potential profits, I continue to add to my long-term held gold reserves. Both metals can also be used to hedge against inflation. The biblical [323 BC] Gold-to-Silver ratio was 12.5:1. During the height of the Roman Empire, the Gold-to-Silver ratio was 12:1. The historical 2,000 year-old average remains at 16:1.
In conclusion, I want to stress that you should reinvest all proceeds from Momentum investments back into cash flow Optimized Growth investments that pay a steady cash flow. If you strike gold with a Momentum investment or land a unicorn tech startup with a $1 billion valuation, you don’t want to treat it like winning the lottery and spend all that cash on toys and vacations. All liabilities should be purchased using your solid foundation of cash-flowing assets. These assets continually replenish your bank account. Don’t spend down large lump sums of cash. Rather, continue reinvesting your investment proceeds to continue growing your asset base and cash flow.
Next, I’ll address a subject of who you are. That is, helping you understand what we call your Investor DNA.
I’d love to hear from you. Although you might not be a person to speculate in or hold onto precious metals, what do you think of this as an investment strategy? Thank you for sharing.
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