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Revisiting Silver

By iwog   2012 Jul 2, 4:12am   65,781 views   253 comments   watch (0)   quote      

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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14   everything     2012 Oct 19, 2:21am  ↑ like (2)   ↓ dislike   quote    

I doubt silver will ever go below $25 again, paper money is just to dirt cheap and it's piling up fast. Interest rates would have to go up considerably for the money piles to dry up. I do agree with you regarding the business cycle ramping up, if they go in ten year cycles we've got quite a number of years to go before the prices relax, the glut comes, and the cycle goes bust. Likely they will collude like the housing market, and put it off as long as possible, then when it comes, it should be fast and furious. I like physical vs. paper but have learned to only buy during recessions.

15   Goatkick     2012 Oct 19, 2:47am  ↑ like   ↓ dislike   quote    

Good trade Iwog

It sure took it's sweet time and gave anyone who wanted to short it their price for the last several weeks no chasing involved.

Looks like the market is pricing in a Romney victory and his re election in 2016.. But I could be wrong :P

16   E-man   5/5 = 100% civil   2012 Oct 19, 9:34am  ↑ like (1)   ↓ dislike   quote    

Goatkick says

Good trade Iwog

Same here. Congrats on the trade.

Goatkick says

Looks like the market is pricing in a Romney victory and his re election in 2016.. But I could be wrong :P

Goatkick, I got a good laugh out of that knowing what Iwog thinks about the election's outcome.

Thanks for the laugh though.

17   Goatkick     2012 Oct 19, 10:13am  ↑ like   ↓ dislike   quote    

E-man says

Goatkick says

Good trade Iwog

Same here. Congrats on the trade.

Goatkick says

Looks like the market is pricing in a Romney victory and his re election in 2016.. But I could be wrong :P

Goatkick, I got a good laugh out of that knowing what Iwog thinks about the election's outcome.

Thanks for the laugh though.

Hey ur welcome !
I'm pretty sure Iwog got a chuckle also.
Trade smart guys !

18   B.A.C.A.H.     2012 Oct 20, 5:38am  ↑ like   ↓ dislike   quote    

Goatkick says

Looks like the market is pricing in a Romney victory and his re election in 2016

I see. So that's why it's down.

19   Scagnetti     2012 Oct 20, 8:12am  ↑ like (1)   ↓ dislike   quote    

E-man says

If you like bottom fishing, this is where you accumulate CIM.

That's disgusting! You should be ashamed of yourself!

http://www.urbandictionary.com/define.php?term=cim

20   E-man   5/5 = 100% civil   2012 Oct 20, 12:42pm  ↑ like (1)   ↓ dislike   quote    

Scagnetti says

E-man says

If you like bottom fishing, this is where you accumulate CIM.

That's disgusting! You should be ashamed of yourself!

http://www.urbandictionary.com/define.php?term=cim

LOL! Not sure where your mind was at today, but that's some tight ass you got there. We were talking about dividend stocks, and you came up with this?

Thanks for the laugh though.

21   Michinaga     2012 Oct 24, 6:53am  ↑ like   ↓ dislike   quote    

exponential phase yet so don't expect prices to go back to $10/oz. You should expect prices of $120-$3000/oz going forward

Three thousand dollars!?

That's roughly 500 hours of a minimum wage laborer's work.

I don't think human labor has ever been that cheap, denominated in a precious metal, in all of human history. That would work out to two tenths of a cent per hour back when an ounce of silver was a silver dollar -- and a day at Henry FOrd's factory got you five such ounces. Not even on slave plantations; not even in prisons did anyone ever work that cheaply.

Are you pricing in a hyperinflationary event in the US that destroys the dollar utterly and sends every saver to financial ruin?

22   Michinaga     2012 Oct 25, 3:58am  ↑ like   ↓ dislike   quote    

underwaterman says

I'm using Mike Mahoney's work. He has calculated before the recent QE3 the
M3 money supply when they have to reset to a gold standard will give you
$20,000 gold price given the gold supply (which is now higher because of QE3).

While I agree (and hope) that money will eventually be reset to some kind of non-fiat standard, I wouldn't be so sure that it'll be based solely on gold. The money supply has expanded so far in excess of the gold supply that I suspect that ultimately there will be a multi-metallic, or even metal-plus-other-real-property (oil? land?) standard that encompasses more of the real wealth of the world.

At the top of the gold bull phases silver has reached a 1:1 ratio with gold but a lot of people use the natural ratio out of the ground something like 10 to 15 to one.

Historically that sounds more realistic than today's ratio. 16 to 1 was William Jennings Bryan's rallying cry, wasn't it?

He and Ted Butler calculate the real unsurpressed price of silver today is
$120/oz. Picking a number like $3000 is based on a ratio of 6:1 at $20000:3000 assuming $20000 gold.

If they take (money supply) / (gold supply) when reverting to the Old Dollar, that will happen, but the question is whether there will be a stage of hyperinflation to get us there. I sincerely hope not.

As John Embry says, people are going to be shocked at how fast silver ascends in price since
there is no supply and everyone will want eagles. In 2008, when the 1st financial crises hit, silver was $15/oz but silver eagles went for $30 (a $15 premium). The $3000 number is not as extreme as the Chris Duane gives in his Sons of the Liberty videos and work.

If people were paying a 100% premium for eagles, they were being foolish. If the dollar collapses, an ounce of silver with a .999 Fine stamp on it from a reputable assayer will be just as good as one with the US government's engravings on it. I'll gladly take two boring rectangular bars over one round coin!

23   errc   430/437 = 98% civil   2012 Oct 25, 4:09am  ↑ like   ↓ dislike   quote    

As John Embry says, people are going to be shocked at howfastsilver ascendsinprice since there is no supply and everyone will want eagles. In 2008, when the1stfinancial criseshit, silver was $15/oz but silver eagles went for $30 (a $15 premium). The $3000 number isnotas extreme as the ChrisDuane gives inhisSonsof theLiberty videosandwork.

This is bullshit. Back when Ag was 12-14$ per ounce (four years ago), the premium for eagles wasn't much over 1$

The PM ship has sailed. Sure, prices may buoy up and down some, but people buying at these levels won't realize any significant gains, especially when you factor in total (opportunity) cost of the trade

24   edvard2     2012 Oct 25, 5:25am  ↑ like   ↓ dislike   quote    

How about investing in driveway gravel? Maybe we could start bringing our " Unwanted" gravel to dealers and make big buxs. I heard about this on some right-wing radio show. Buy gravel now to save for doomsday. That's right... buy gravel now!!!!

25   everything     2012 Oct 25, 9:31am  ↑ like   ↓ dislike   quote    

Over in the middle east gravel is a commodity and hard to come by. When our military is done with a road they scrape that gravel back up and move it again to where they need it.

26   errc   430/437 = 98% civil   2012 Oct 25, 3:05pm  ↑ like   ↓ dislike   quote    

Reading these ramblings makes my head spin

You are going to take a bath relative to your expectations for these PMs.

this ship has sailed

27   iwog   1468/1469 = 99% civil   2012 Oct 25, 5:07pm  ↑ like (1)   ↓ dislike   quote    

The cost of taking silver out of the ground is too low and is in the $10-15 per ounce range. Production will increase until demand is saturated and there will be significant overshoot to the down side as is always the case.

Right now silver production is well in excess of industrial demand and the balance is being stored by investors. The ONLY road to new highs in silver is accelerated demand by investors. Not flat line increase in demand, accelerating demand.

This is a dynamic market with industrial use far exceeding investor demand. People who buy silver for investment purposes are the small fry. They are insignificant to the larger market. For example industrial consumption of silver by the electronics and medical industries were 500 million ounces in 2010. ALL of those pretty coins minted for collectors and investors totaled 100 million ounces. Even jewelry use was larger at 167 million.

The bottom line is that unlike gold, the silver market cares much more about how many iphones get produced than it does about hyperinflation. A 20% decrease in industrial demand could DESTROY the silver market and swamp smaller investment demand with a flood of excess and unused metal.

I was a big believer in silver and gold and for years I touted them on this board. I'm not so sure about gold, but I am continuing to short silver through writing call options and I can't imagine another run to $50 like happened last year.

Much more likely we go under $20.

http://www.silverinstitute.org/site/supply-demand/

28   iwog   1468/1469 = 99% civil   2012 Oct 26, 3:16am  ↑ like (3)   ↓ dislike (1)   quote    

underwaterman says

Iwog, I think you need to take a look at the cost of silver to pull it out of the ground in the future and currently. The number is now $29/oz when all costs are accounted for.

I'm sorry but I've looked at this issue extensively and this is simply incorrect. Silver would continue to be produced even if it was $4 an ounce because it is the byproduct of so many other mining activities. True costs for silver are similar to true costs of sawdust which is used to construct lumber and the true cost of waste oil which is used for biofuel.

In fact if there wasn't a market for it, silver would have to be discarded after being separated from copper, tin, and gold.

I want to be clear about something. I've been a silver bug since I was 14 years old. I used to buy and sell silver coins in middle school. From 2002 to 2011 I had 10,000 ounces of physical silver stored in a vault and countless shares of SLV. My entire life has been saturated with the love of this metal. I know all there is to know about it. I've read every scrap of data on it.

However you cannot fight a market where production is exceeding consumption by 20%. Investors do not have limitless appetite for a non-performing hard asset, ESPECIALLY when another hard asset like real property earns and income and is at historically low levels.

I've done extremely well buying silver and extremely well selling it too. There is no road for silver to go back to $50 an ounce. None.

29   errc   430/437 = 98% civil   2012 Oct 27, 3:49am  ↑ like   ↓ dislike   quote    

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"

30   iwog   1468/1469 = 99% civil   2012 Oct 27, 4:12am  ↑ like   ↓ dislike   quote    

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"

31   iwog   1468/1469 = 99% civil   2012 Oct 27, 5:30am  ↑ like   ↓ dislike   quote    

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.

32   B.A.C.A.H.     2012 Oct 27, 8:45am  ↑ like   ↓ dislike   quote    

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.

33   everything     2012 Nov 5, 9:17am  ↑ like   ↓ dislike   quote    

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.

34   Blindweb     2012 Nov 5, 9:31pm  ↑ like (1)   ↓ dislike   quote    

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.

35   iwog   1468/1469 = 99% civil   2012 Nov 6, 12:52am  ↑ like   ↓ dislike   quote    

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.

36   Blindweb     2012 Nov 6, 1:23am  ↑ like   ↓ dislike   quote    

-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

37   everything     2012 Nov 6, 8:05am  ↑ like   ↓ dislike   quote    

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.

38   B.A.C.A.H.     2012 Nov 17, 2:51am  ↑ like   ↓ dislike   quote    

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.

39   iwog   1468/1469 = 99% civil   2012 Nov 17, 4:23am  ↑ like   ↓ dislike (1)   quote    

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.

40   B.A.C.A.H.     2012 Nov 17, 4:27am  ↑ like   ↓ dislike   quote    

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.

41   iwog   1468/1469 = 99% civil   2012 Nov 17, 4:27pm  ↑ like   ↓ dislike (1)   quote    

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.

42   iwog   1468/1469 = 99% civil   2012 Nov 18, 5:45am  ↑ like   ↓ dislike   quote    

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.

43   uomo_senza_nome     2012 Nov 19, 4:59am  ↑ like   ↓ dislike   quote    

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.

44   StillLooking     2012 Nov 19, 5:55am  ↑ like   ↓ dislike   quote    

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?

45   uomo_senza_nome     2012 Nov 19, 11:13pm  ↑ like   ↓ dislike   quote    

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.

46   iwog   1468/1469 = 99% civil   2012 Nov 21, 7:03am  ↑ like   ↓ dislike   quote    

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

47   dunnross     2012 Nov 21, 7:27am  ↑ like   ↓ dislike   quote    

iwog says

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

Is it different this time? You be the judge.

48   iwog   1468/1469 = 99% civil   2012 Nov 21, 8:04am  ↑ like (1)   ↓ dislike (1)   quote    

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.

49   Bellingham Bill   70/70 = 100% civil   2012 Nov 21, 9:02am  ↑ like   ↓ dislike   quote    

50   iwog   1468/1469 = 99% civil   2012 Nov 21, 11:32am  ↑ like   ↓ dislike   quote    

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.

51   Bellingham Bill   70/70 = 100% civil   2012 Nov 21, 11:52am  ↑ like   ↓ dislike   quote    

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

52   dunnross     2012 Nov 21, 12:09pm  ↑ like   ↓ dislike   quote    

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.

53   dunnross     2012 Nov 21, 12:12pm  ↑ like   ↓ dislike   quote    

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.

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