A Silver Shortage is rearing it's ugly head

you sell when EVERYBODY is buying and talking about silver and gold ... (just like the internet stock bubble in 1999/2000 or the housing bubble in 2006)

When you hear your hair stylist, your cab driver, your plumber, your mailman, and people at parties talking about great gold and silver are and how much money they are making then sell and run

right now ... too high of a percentage of the people that actually own silver and gold are selling and/or think it's a bubble ... that is not a sign of the top

not to say there won't be corrections ... silver dropped from $31 down to $25 in january ... that's a good 20% decline ... just make sure if you accumulating PM's you buy the dips

 

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This is a good rule but there are exceptions. At the beginning of 2008, not everyone was buying stocks, but the market dropped by half anyway. The exceptions are the things that really hurt a portfolio, and they are very difficult to forecast. If it was easy, everyone would be rich.

 

I totally agree that investing is HARD! I have made tons and tons of mistakes believe me. However what you forget is in 2008 the vast majority of Americans WERE BUYING STOCKS ... The masses of Americans with 401ks and IRAs were in the stock market (in their retirement accounts), which for most people is one of their greatest remaining stores of wealth) or buying stocks with their payroll deductions into said accounts. That is why the crash of 2008 hurt so many regular people ... When the masses noticed that their retirement accounts (401ks 403bs IRAs) lost 1/2 their value in a few months most freaked out and sold (right at the bottom) ... since the crash most regular people have been putting their retirement money in bonds ... this has only just begun to reverse as in the past few months the inflows into stocks has started to rise.


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Well Winged, how do you explain that silver used to have a production/usage deficiency due to industrial usage as recently as 2007, but nowadays industrial usage is down but what is creating a deficiency is "investment". I do not consider "investment" a usage but rather product that can return to the market at any time, unlike true usage like industrial applications.

I am with Cloud, that these boards are sounding a lot like AOL or other boards in the late 90's. Yes, PM's can climb much higher, there is no real limit. However, even "smart" buyers of tech stocks in the late 90's, buying on dips, got creamed. Regarding physical shortages, this happens every time there is a PM runup. There isn't enough stock to go around when many new participants buy, physical PM has always been a thin market. And speaking of how much press silver is getting, a B&M dealer friend told me he has not ever seen, (he opened in the 80's), so many new people reading about silver and wanting to buy in his shop. There are tons of stories about silver, tons of new people buying, and shortages are to be expected. I still say all of this purchasing is being counted as "investment usage", and will create a large overhang that can put tremendous downward pressure on this market if average people decide they want to sell.

I am not trying to say anything about the price silver will go, just agreeing with Cloud on his points and adding a couple of my own to think about.

 

Most investing is a lot more complicated with more moving parts than one might analyze ... there are always external event risks that just cannot be anticipated. The best one can do is try to invest in something or a scenerio that makes sense to them ... even then one can be so wrong (and that gets expensive).

The way I see it ... the targets are $50 silver this year ... and $75 silver in 2012 or 2013 ... then again who the heck am i ... just another one of the masses trying make good guesses in an attempt to accumulate enough wealth to live comfortably in retirement.

One thing I do know, the money I have in my bank is earnig 0.0000000000001% interest ... and 1/3 of that windfall goes to the IRS.

And with "The Bernank" printing money and wanting to devalue the dollar, i have no faith that my dollars will hold their value over the next 10 years ... so I am trying to find investment vehicles that I think will rise in value over the next 10 years ... things like Grains, Food Stuffs, Oil (Energy), Silver, Gold ... Yes, I could be wrong, but for now that is how I am playing my future. Who knows I might be seeing you all in the poor house in 10 years!

What kind of things are you guys investing in?

 

I agree - there is no real shortage of silver - there is enough raw silver sitting in warehouse supporting ETFs, futures trading, sitting in safe deposit boxes in the form of ASEs by the millions and etc. to support true industrial demand for years to come. Once the market hits its peak - the silver shortage will transform into a giant surplus in the blink of an eye. Then JPM and all the other institutional traders that are kiting their current short positions using zero lease rates will come out smelling like a rose.

 

I agree that the automatic pilot crowd putting money into 401ks were hurt, but 2008 was nothing like the condition you described with vast participation by the public as there was in the late 90s and at other market tops. The market was barely higher than a decade before, and the NASDAQ was much lower. In fact, it looked a lot like the silver market today, with enthusiastic participation by some but with the majority ignoring it completely because of the memory of the tech stock crash. The point is you don't need a raging bull market to have large price declines. It just makes it more memorable.

 

My long time love is the stock market. I'm heavily weighted toward PMs and oil stocks. But I'm holding more cash and short term bonds than in prior years. If the market drops, say, 30% and the cash is used to buy stocks, the result is similar to a 30% increase in the purchasing power of the cash once the market recovers, so I'm trying to prevent myself from doing something stupid this far into the bull market just because the rate on cash is close to zero. And I've also started to sell the PM and energy stocks over the past 4 months, and I'll continue to sell if the price continues to rise. The coins will go last. Hope for the best. Good luck to all.

 

I was investing in silver for years until this latest boom. I personally can't see silver maintaining its current trend forever. There will be a point where the silver market will become saturated, and as prices start falling, people will start selling in herds. Then watch the 1929 of the silver market. Guess who will be buying silver once again?

 

Nothing lasts forever!

From 1962 to 1980 ... We had an 18 year bull market where silver ran up from $1 to $50 ... and gold from $40 to $800

From 1980 to 2001 .... We had a 21 year bear market where prices dropped like a stone ... Gold dropped from $800 to $240 ... Silver dropped from $50 to $4

This current bull market started in 2001 (right around 9/11) ... so we are 10 years into this current bull market ... maybe another 10 years to go in this cycle???? who knows

I sort of wonder if we are going to have a dollar "crisis" sometime in the next 10 years where inflation reaches a crisis level ... then maybe the Fed changes their ways to start strengthening the dollar? Sort of like the hyperinflation we suffered through in the late 1970s ... leading into the stock market boom of the 1980s. Everything is cyclical.

 

It seems like only yesterday that the Hunt brothers were pushing silver to $50/Oz. Back then, folks didn't seem as concerned about the economy as they are now...or maybe I was just younger and didn't notice.

What I did notice was, that when Silver got to those prices, Grandma's silver was turned in for melt. There's way more silver in private hands now and there WILL be a point where the scales tip.

Here's an article that seems (to me) to make a more "reasoned" argument for what may be happening in the marketplace...

http://opinionator.blogs.nytimes.co...a-silver-lining/?nl=todaysheadlines&emc=thab1

 

I used to think like that. But look at the tech stock boom of the 90s. It was pronounced close to over in the middle of the decade, but it continued for another 4 years. So I agree that silver will crash someday, but it might be from prices undreamed of. I would also question the strategy of buying something after a crash since it may not recover for a generation. The NASDAQ is little more than half the level of 11 years ago. But to each his own.

 

That's a good point that everyone should think about. Silver is a relatively small market by global standards and it does not take a lot of money to make it move. So the collective action by the new buyers can drive the price up [by a lot] for a pretty long time and the shortage becomes a self-fulfilling prophecy. And the inventory overhang it creates becomes the catalyst for the next crash. Personally, I think there is a lot more money to be made on the way up, but it isn't going to be easy to hang on to it. People will buy the dips, and someday the dip will just keep falling and take most people down with it. Anyway, that's what usually happens.

 

I am sure that some day, people will ask why couldn't everyone see that a crash was coming

Jim

 

I think when this whole Libyian crisis is resolved you'll see silver take a downturn. I also think when silver hits $40, you'll see a lot of people sell like when it first hit $30.

I decided to cash out this week.

 

I would not describe the markets the way you have. I would say (for silver), a flat market from 1962 to 1977, then a overly dramatic runup culminating in 1980 by someone trying to corner a market. The prices fell for the 1980's, and then was flat again for a decade before starting a 10 year bull run. I bought silver in 1977 for $1 an ounce, so I didn't see a change from 1962 to 1977 to indicate a bull market. Also, I bought a ton of silver in the early 90's for $4 an ounce, so I do not see a bear market from 1990 to 2000. Just posting for clarity. Gold was a little different, having a runup in the early 70's after it was relegalized.

As to what I invest in, I go where others aren't excited usually. I have bought US financials on lows, gaming, and primary mining stocks. I find PM stocks usually too pricey due to their being used for portfolio balancing purposes.

 

And anyone lucky enough to guess it right will have made a mint. People, (especially people involved in a market, like coin collectors in PM's), always have a hard time seeing what in hindsight looks clear. I see a couple clues, but nothing convincing me yet that lower prices are imminent, just signs that when it happens it could happen quickly.

 

when will the stock market crash again? (i wonder ... )

 

I agree. It will be the folks who sincerely believe in the "PMs to the moon" and dollar collapse stories who will be hurt the most, and frequently it is the collector base who has the most difficult time selling. I don't see any signs of an end to the bull market yet. We are still in the phase where the market is training folks to buy the dips so that as many people as possible will be hurt. That's what markets do. The one bright spot is that the cost of silver and gold production have risen a lot so that the next low might be closer to $20 [silver} and $1,000 [gold]. I don't see a return to the old lows unless the world is prepared to do without new production. It is difficult to see this happening, especially in silver.

 

A crash is a low probability event. If it was expected, it probably wouldn't happen. Same with the dollar. A dollar crash is so widely expected that it is difficult to see it happening because market prices would have discounted it already. Time will tell.

Edit: I could see a bond market crash happening before a stock market crash. But we might just get a long, slow, painful decline instead.