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Revisiting Silver


By iwog   Follow   Mon, 2 Jul 2012, 4:12am PDT   32,611 views   268 comments
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Although it didn't crash as quickly as I expected, the chart is pure bubble crash at this point.

1. well defined parabolic peak
2. well defined bull trap
3. lower highs, lower lows
4. bear market trend that isn't anywhere close to capitulation

I wouldn't touch the stuff under any circumstances unless it drops near $10 an ounce.

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errc   Sat, 27 Oct 2012, 3:49am PDT   Share   Quote   Permalink   Like   Dislike     Comment 29

From your chart, mine production is 761.6 (2011) vs 594.5 (2002) which is a 28% increase for 10 years and is a 2.8% yearly increase only. In 10 years, the industry has only been able to increase production 2.8%/year even given the technological advances. This is something Eric Sprott keeps pointing out.

"Compound interest is the eighth wonder of the world. He who understands this, earns it,,,,he who doesn't,,,pays it"

iwog   Sat, 27 Oct 2012, 4:12am PDT   Share   Quote   Permalink   Like   Dislike     Comment 30

underwaterman says

Iwog, where are you getting this number (20%)? I'm looking at your silver institute data and am not sure how you are calculating this number.

It comes from "net implied investment" which is nothing more than "this silver isn't being consumed so someone somewhere is hoarding it"

iwog   Sat, 27 Oct 2012, 5:30am PDT   Share   Quote   Permalink   Like   Dislike     Comment 31

underwaterman says

Also, I'm curious what factors lead you to buy silver in the first place in 2002 because silver was sitting a $5/oz for so many years before that and didn't take off until 2004? The chart from 2002 and 2003 that you give from the silver institute doesn't show any particularly good reason to buy in 2002.

I had an extremely good reason to buy in 2002. I had money then.

I was broke during the 1990's. My silver purchases in the late 1990s were limited to a few silver rounds or eagles twice a year at a coin show.

B.A.C.A.H.   Sat, 27 Oct 2012, 8:45am PDT   Share   Quote   Permalink   Like   Dislike     Comment 32

underwater, i skimmed over most of your posts, read word for word some of them.

I remember in the late 1970's, my Safety Ed/classroom driver Ed teacher in public high school in San Jose telling us kids he was hoarding silver so he could retire early. He was not my driving instructor, but was for some of my friends. They told about him having the place on his route, where he could get out and buy some more silver during the lesson.

Back in the classroom where he would discuss the merits of silver to the rest of us, well his apologetics sounds a lot like yours. "Good luck", because luck is what it will be if you do well on it.

everything   Mon, 5 Nov 2012, 9:17am PST   Share   Quote   Permalink   Like   Dislike     Comment 33

I hang on a couple of silver forums myself. Some of these guys don't just buy a couple ounces or even a hundred at a time, they buy a thousand. I have never seen such investor demand for silver. Imagine the demand of the rich, probably creating underground vaults. I even know of one person, not rich but who had to build vault in their basements for the silver inheritance.

I'm not a metals expert but I think we are in a bull trap. I'm seeing silver miners start back up, same for gold miners, even the small operations, it's profitable now. My only advice for underwaterman is wait until the next recession hits and maybe then you'll agree a little bit more with Iwog, keep your dry powder ready for it.

That's what I'm waiting for. Silver is the patient man's game. That is why I started buying in 10-20 oz. chunks/dips learning more and more as years go by.

Some of these silver estimates are based on declines in fossil fuels, well, we've still got enough oil to fry ourselves, look at the tar sands. We keep coming up with better technology to get to the stuff. Yes, we've taken the easiest stuff first but their is plenty more where that came from.

Only higher fossil fuel costs, green revolution, or solar parring with electric costs will send silver prices skyrocketing, but that's just what I think.

Blindweb   Mon, 5 Nov 2012, 9:31pm PST   Share   Quote   Permalink   Like (1)   Dislike     Comment 34

Short term (now-3 years):
Silver has consolidated for a year and a half. If you look at the 10 year chart 1 1/2 - 2 1/2 years is pretty much par before the next move up. This crisis is an order of magnitude bigger than the 70's crisis, yet silver hasn't come close to the inflation adjusted high...I don't understand why anyone would think it's over. Even if the fundamentals are bad it should still rise do to bubble greed mentality.

Medium term (5-10 years):
Gold 5k-10k? Silver $300-$1000?

Long term:
Pure silver has the highest electrical and thermal conductivity of all metals. Silver possesses the lowest contact resistance of all metals. Add to that its strong antibacterial properties.
If you understand anything about peak oil you understand how important silver is going to be. My biggest worry would be silver being declared a strategic metal by the government or military.

If Central Banks lose control all bets are off. I would hedge with something you think is good during a greatest depression, and The Long Emergency. Also one should hedge hyperinflation/WWIII/'Free Gold' by holding some gold past the expected bubble peak. If gold goes to 5k-10k it will likely settle at 2.5k-5k long term, so still a great buy.

iwog   Tue, 6 Nov 2012, 12:52am PST   Share   Quote   Permalink   Like   Dislike     Comment 35

everything says

I'm not a metals expert but I think we are in a bull trap.

Several bull traps. The chart is unusual, that I admit. However a series of lower highs and lower lows is NEVER an indication of a healthy bull market.

The failure of silver to exceed the previous peak should be a huge warning sign.

Blindweb   Tue, 6 Nov 2012, 1:23am PST   Share   Quote   Permalink   Like   Dislike     Comment 36

-We are just now entering the timing band for silver to break the previous peak. Since it had the largest run up and correction so far obviously it wasn't going to break out any earlier than the 3 previous moves and corrections (04,06,08)

-Gold made a series of lower highs and lower lows in 2008 and then went on to exceed the previous top by 85%

-Benny still had more tricks up his sleeves like nominal GDP targeting

everything   Tue, 6 Nov 2012, 8:05am PST   Share   Quote   Permalink   Like   Dislike     Comment 37

Underwaterman: Your conspiracy theories are somewhat deluding reality.
The business model goes in ten year cycles, I would say that business cycle is ramping up, I see silver production is still peaking, but so is investor demand which is pushing between 15-20%! I like to compare the silver chart to the gasoline chart, they are quite similar, but for me, gas is easier to understand. Still, if you think silver is going up when the next recession hits then good for you, buy more now, but I'm waiting until people are desperate for cash to back my truck up.

B.A.C.A.H.   Sat, 17 Nov 2012, 2:51am PST   Share   Quote   Permalink   Like   Dislike     Comment 38

I dunno about what the nominal dollar price for silver oughta be right now. But for the extreme inflation scenario it may be a safer bet for joe sixpax like me than gold.

Besides the 1934 precedent with the gold for Americans, there's other problems with it if the price is too high. Like, I could see a scenario for any legal sale of gold having a 1099 form being issued for every trade. Or, a sophisticated counterfeiting with plating of tungsten pieces. Sure, a bullion dealer may have the resources to authenticate it but not a Joe Sixpak like me. And, anything physical with a high value density per milligram becomes a theft/robbery target, like on your way from your hidden stash to the place where you trade it for cash.

Probably silver is the "safer" one.

iwog   Sat, 17 Nov 2012, 4:23am PST   Share   Quote   Permalink   Like   Dislike (1)     Comment 39

Silver costs around $10 to take out of the ground. As long as the price remains high, silver production will continue to increase until there's a glut. It's the natural progression of any market.

B.A.C.A.H.   Sat, 17 Nov 2012, 4:27am PST   Share   Quote   Permalink   Like   Dislike     Comment 40

iwog says

Silver costs around $10 to take out of the ground. As long as the price remains high, silver production will continue to increase until there's a glut. It's the natural progression of any market.

Could be. I don't doubt it because I dunno. The overall cost basis of my position which I haven't added to since early 2007 is something like around $7-8.

My point is, if I'z gonna be a paranoid inflationist Joe Sixpack then physical silver might be safer to work with than physical gold.

iwog   Sat, 17 Nov 2012, 4:27pm PST   Share   Quote   Permalink   Like   Dislike (1)     Comment 41

underwaterman says

The true cost of pulling silver out of the ground is around $27/oz as I posted in the article above. Production can't just increase to meet demand because 70% of silver comes from mining other metals and there is essentially no above ground supplies of silver to draw from

I simply don't accept the assumptions contained in your article. Silver was produced when the price was $4 an ounce so obviously something is seriously wrong with any estimate at $27.

There are massive above ground supplies of silver to draw from. When the price goes up, it all heads to the assay office. I personally melted $35,000 worth of holloware and flatware when it was over $40. I packed it up in a big box and mailed it in.

iwog   Sun, 18 Nov 2012, 5:45am PST   Share   Quote   Permalink   Like   Dislike     Comment 42

underwaterman says

source:

http://www.goldstockbull.com/articles/silver-supply-shortage-2/

I'm trying to hone my investment thesis but I can't improve it unless I know which assumption is wrong to analyze.

That source is over 18 months old. Yes silver went nuts after this article was written and then crashed. I was long until September and then sold off and went short. I wrote about it real time on this board.

Reviewing the article, almost none of the things it mentions are true anymore. The mint is not sold out of silver eagles. 100 ounce bars are plentiful. Investment demand is down, not up. Fabrication demand continues to slide. Silver production as a byproduct of gold, tin, copper, and other metals continues to rise. (remember silver would be produced from these sources if it was $2 an ounce)

About the ONLY thing that would cause me concern right now is the graph doesn't have the right characteristics of a bubble resolution. In my book, this is offset by an almost textbook perfect 5-year bubble market peak which has been present in every bubble from the Nasdaq to Platinum to oil.

You might be right and we might see $50 silver again, but I think the odds are against it and I'm betting the other direction.

uomo_senza_nome   Mon, 19 Nov 2012, 4:59am PST   Share   Quote   Permalink   Like   Dislike     Comment 43

underwaterman says

It may drive people to safe havens like silver or it could seriously throw the whole economy into a recession immediately if it goes bad and silver could take a dive like in 2008 crises for awhile

LOL, silver = safe haven?

140 years of silver volatility

A safe asset should not be THAT volatile.

And also, a global recession would crash silver prices below $15. This is because silver's industrial demand will falter big time and silver's monetary demand is dubious.

StillLooking   Mon, 19 Nov 2012, 5:55am PST   Share   Quote   Permalink   Like   Dislike     Comment 44

iwog says

Silver costs around $10 to take out of the ground. As long as the price remains high, silver production will continue to increase until there's a glut. It's the natural progression of any market.

This must explain why the mining companies are all making huge profits. Oops. The mining companies are not doing all that well.

Well how can that be with the cost to mine silver at $10?

uomo_senza_nome   Mon, 19 Nov 2012, 11:13pm PST   Share   Quote   Permalink   Like   Dislike     Comment 45

underwaterman says

He created PSLV because of the fraud of the SLV (doesn't settle in metal and is non-transparent) and if you read the prospectus, puts the investers at the last of the line for reimbursements for the 100 pieces of paper encumbered on each ounce of silver sitting there.

hehe, the SLV price manipulation meme. You do realize that SLV and GLD have the bars that they claim right?

http://screwtapefiles.blogspot.com/p/bullion-bars-database.html

http://screwtapefiles.blogspot.com/2012/10/desperately-trying-to-force-silver.html

The Prof. is correct in pointing out that Sprott is a smart man, trying to sell paper at 25% markup.

Sure, if you want to get fleeced on those premiums.

iwog   Wed, 21 Nov 2012, 7:03am PST   Share   Quote   Permalink   Like   Dislike     Comment 46

It's not different this time. It's the same.

dunnross   Wed, 21 Nov 2012, 7:27am PST   Share   Quote   Permalink   Like   Dislike     Comment 47

iwog says

It's not different this time. It's the same.

Is it different this time? You be the judge.

iwog   Wed, 21 Nov 2012, 8:04am PST   Share   Quote   Permalink   Like (1)   Dislike (1)     Comment 48

dunnross says

Is it different this time? You be the judge.

1980??? Seriously??? You're going to counter a chart that shows 200 years worth of trends with a chart that shows 29?

You posted the wrong chart anyway. The money represented on your chart is sitting at the federal reserve doing mostly nothing. Not one penny of that newly created cash is being spent on gold and silver, in fact right now it's going into mortgages.

You should be looking for a new bubble in real estate, not metals.

Bellingham Bill   Wed, 21 Nov 2012, 9:02am PST   Share   Quote   Permalink   Like   Dislike     Comment 49

iwog   Wed, 21 Nov 2012, 11:32am PST   Share   Quote   Permalink   Like   Dislike     Comment 50

underwaterman says

1) worldwide concurrent massive money printing and
2) gold and silver are assuming their 5000 year old role of money again after this 40+ year experiment of taking the dollar off of gold.

Speculative forces trump everything else.

Printing of money isn't anything new. Japan did it in the 1990s and blew up their debt to twice our levels. Reagan tripled the deficit in the 1980s and Nixon closed the gold window in the 1970s.

So silver can be used as money. So can cars. So can computers. So can homes and dogs and cans of beans. There is nothing exotic or special about silver other than its use in industry, which is dictated by economic forces and currently consuming far less than is being produced.

I think $10-15 is supportable however what we have today is a sliver glut. A LARGE silver glut with millions of ounces being stockpiled in vaults for no purpose whatsoever.

Make no mistake here. A billionaire can crush the silver market on a whim in either direction. Those coins that you and I put away are meaningless next to contracts that exceed the world's total silver supply by an order of magnitude.

In an environment of shortages, futures traders can get into big trouble. That was the situation in 2011.

However that situation has resolved itself. There is plenty of physical metal available and more being added every day. Anyone can buy silver in any amount. These are NOT conditions that lend themselves to a run at new highs.

Bellingham Bill   Wed, 21 Nov 2012, 11:52am PST   Share   Quote   Permalink   Like   Dislike     Comment 51

iwog says

So silver can be used as money. So can cars. So can computers. So can homes and dogs and cans of beans.

http://reason.org/blog/show/sound-money-tide-as-gold-standard

dunnross   Wed, 21 Nov 2012, 12:09pm PST   Share   Quote   Permalink   Like   Dislike     Comment 52

iwog says

Not one penny of that newly created cash is being spent on gold and silver, in fact right now it's going into mortgages.

Bull Shit. In case, you haven't heard, we are in middle of a credit crunch. This money that the FED is printing is going directly into gold and silver, because, the banks are simply not lending to deadbeat fucked borrowers like you.

dunnross   Wed, 21 Nov 2012, 12:12pm PST   Share   Quote   Permalink   Like   Dislike     Comment 53

iwog says

You're going to counter a chart that shows 200 years worth of trends with a chart that shows 29?

Do you think if I extend this graph another 170 years back, you will see anything as spectacular as what you see now? Being a dumbass that you are, you don't even know that we were on a gold standard before 1933, so the money supply remained pretty much constant for 400 years.

iwog   Wed, 21 Nov 2012, 1:47pm PST   Share   Quote   Permalink   Like   Dislike     Comment 54

dunnross says

Bull Shit. In case, you haven't heard, we are in middle of a credit crunch. This money that the FED is printing is going directly into gold and silver, because, the banks are simply not lending to deadbeat fucked borrowers like you.

Wow......it's clear you don't even know what credit crunch means.

During a credit crunch, the money supply is contracting and thus you have the threat of deflation. I have no idea how you got from "credit crunch" to "money is going into gold and silver" but I'm sure it's intelligent and well thought out.

iwog   Wed, 21 Nov 2012, 1:49pm PST   Share   Quote   Permalink   Like   Dislike     Comment 55

dunnross says

Do you think if I extend this graph another 170 years back, you will see anything as spectacular as what you see now? Being a dumbass that you are, you don't even know that we were on a gold standard before 1933, so the money supply remained pretty much constant for 400 years.

What do you consider systemic bank failures in 1929-1933?

Most people would call it a massive credit crunch. LOL

Bellingham Bill   Wed, 21 Nov 2012, 2:33pm PST   Share   Quote   Permalink   Like   Dislike     Comment 56

dunross says

Being a dumbass that you are, you don't even know that we were on a gold standard before 1933, so the money supply remained pretty much constant for 400 years

ouch.

http://en.wikipedia.org/wiki/Panic_of_1819
http://en.wikipedia.org/wiki/Panic_of_1837
http://en.wikipedia.org/wiki/Panic_of_1857
http://en.wikipedia.org/wiki/Panic_of_1873
http://en.wikipedia.org/wiki/Panic_of_1884

Bellingham Bill   Wed, 21 Nov 2012, 2:39pm PST   Share   Quote   Permalink   Like   Dislike     Comment 57

http://en.wikipedia.org/wiki/Panic_of_1893
http://en.wikipedia.org/wiki/Panic_of_1907

dunnross   Wed, 21 Nov 2012, 2:42pm PST   Share   Quote   Permalink   Like   Dislike     Comment 58

iwog says

Most people would call it a massive credit crunch. LOL

Credit crunch, yes. But, the boom which preceded it was not due to FED's money supply expansion, like it was this time.

Bellingham Bill   Wed, 21 Nov 2012, 2:43pm PST   Share   Quote   Permalink   Like   Dislike     Comment 59

Interesting:

http://research.stlouisfed.org/fred2/series/M1444AUSM027SNBR

http://research.stlouisfed.org/fred2/series/A14187USA163NNBR

dunnross   Wed, 21 Nov 2012, 2:49pm PST   Share   Quote   Permalink   Like   Dislike     Comment 60

iwog says

I have no idea how you got from "credit crunch" to "money is going into gold and silver" but I'm sure it's intelligent and well thought out.

Because this high-powered money from the FED has to find an outlet. It's not going into mortgages and getting multiplied by banks using these reserves to create even more money out of thin air, like they did, before. So the money is going into the carry trades, since interest rates overseas are higher than the "artificially low" ones which the banks are getting from the FED. The inflation is not here, but it's being exported overseas, and turning up in terms of bread prices and energy prices in places like Egypt and Libya. Citizens of these countries are buying gold, because, they want to protect themselves against inflation exported by our FED. Foreign central banks are also buying gold with the money they get from our banks. Herein lies the source. Of course midget brains like you and roberto cannot begin to comprehend this reality. By the time you do, it will be too late.

Bellingham Bill   Wed, 21 Nov 2012, 2:56pm PST   Share   Quote   Permalink   Like   Dislike     Comment 61

dunnross says

But, the boom which preceded it was not due to FED's money supply expansion, like it was this time.

The erstwhile Bush Boom required speculative overextension in housing to gain the "traction" that it needed to turn into a bust.

Granted, money supply increased, but the reason the economy crashed in 2008 was because the money flow (via anything-goes mortgage lending) from the world's savers to the US consumer was coming to a close.

http://research.stlouisfed.org/fred2/graph/?g=d2b

is quarterly expansion of consumer debt.

http://research.stlouisfed.org/fred2/graph/?g=d2c

same graph with Case-Shiller in red.

http://research.stlouisfed.org/fred2/series/M3

is, admittedly, an important piece of the puzzle. It was the fuel that found the hole that was our poorly-policed mortgage sector.

2002-2006 the fumes collected, then the explosion of February 2008! First of many.

iwog   Thu, 22 Nov 2012, 1:54am PST   Share   Quote   Permalink   Like   Dislike     Comment 62

dunnross says

Because this high-powered money from the FED

High powered money?

dunnross says

has to find an outlet. It's not going into mortgages

You have no idea whatsoever how QE3 works do you.

dunnross says

and getting multiplied by banks using these reserves to create even more money out of thin air, like they did, before.

Sooooo.......we're not in a credit crunch? We're in a historical credit expansion?

dunnross   Thu, 22 Nov 2012, 2:30am PST   Share   Quote   Permalink   Like   Dislike     Comment 63

iwog says

High powered money?

If you don't even know what "High Powered Money" even is, I don't even think I should continue talking to you. You are a true arrogant SOB.

iwog   Thu, 22 Nov 2012, 2:35am PST   Share   Quote   Permalink   Like   Dislike     Comment 64

dunnross says

iwog says

High powered money?

If you don't even know what "High Powered Money" even is, I don't even think I should continue talking to you. You are a true arrogant SOB.

I know exactly what high powered money is and it's all sitting at the federal reserve doing absolutely nothing.

What I'm trying to figure out is why you think new money sitting in a computer at the federal reserve is being used to buy silver, or even more insanely multiplied and lent out through banks?

dunnross   Thu, 22 Nov 2012, 2:46am PST   Share   Quote   Permalink   Like   Dislike     Comment 65

iwog says

even more insanely multiplied and lent out through banks?

You are so self-righteous that you can't even read other people's comments. Why don't you go back and re-read them, again, more carefully.

dunnross   Thu, 22 Nov 2012, 2:52am PST   Share   Quote   Permalink   Like   Dislike     Comment 66

iwog says

I know exactly what high powered money is and it's all sitting at the federal reserve doing absolutely nothing.

Nominated! Federal reserve is holding "crap", not actually something which is worth anything.

iwog   Thu, 22 Nov 2012, 3:11am PST   Share   Quote   Permalink   Like (1)   Dislike     Comment 67

dunnross says

iwog says

even more insanely multiplied and lent out through banks?

You are so self-righteous that you can't even read other people's comments. Why don't you go back and re-read them, again, more carefully.

Excellent job pretending to have a point but not actually saying anything. If I didn't read your comments, please clarify where my misunderstanding is.

dunnross says

Nominated! Federal reserve is holding "crap", not actually something which is worth anything.

Ahhhh......so your precious high powered money turns into crap when it is put back on deposit at the fed because banks have no one to lend to. Brilliant.

dunnross says

You are a true arrogant SOB.

I'll agree with you that the more intellectually dishonest a person is, the more hostile and condescending I become. It's a character flaw that I fully acknowledge and would like to work on. People who are honest and sincere get along great with me, I suppose that's why I have 51 friends and you have 6 aliases.

Bellingham Bill   Thu, 22 Nov 2012, 3:35am PST   Share   Quote   Permalink   Like   Dislike     Comment 68

iwog says

Sooooo.......we're not in a credit crunch? We're in a historical credit expansion?

fwiw:

http://research.stlouisfed.org/fred2/graph/?g=d2N

yellow is finance, blue is household, and red is corporate debt

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