Silver in a bubble?

Well considering no Central Bank in the world would agree to a metal standard currency, I simply disagree. The last bull ended easily enough without such a currency standard, and back then there still was significant inflation. Maybe I am simple, but I simply believe at some point people will wish to invest in another asset class besides commodities. The last time the PM bull ended high rates of return from bonds helped end it, and then good equity returns ensured it would not start up again, in my view of course.

Chris

 

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I kinda agree with the dollar cost averaging as well as the "sometimes you shouldn't buy it or trim the stash". I started buying around $8 and have been buying ever since. I made up my mind that I would sell some when it reached $20, and I did - mostly junk. I waited a bit (as in a couple weeks) and saw that it wasn't stopping so I bought more. I made up my mind to sell some at $30, and I did - again mostly junk and bars that I bought, but I kept the Eagles and nicer coins. I did the same thing around $48 (probably just got lucky with that one). But yes, I bought smaller amounts in more frequent batches...every few weeks. So I rode the ride all the way up and took some profits during the way. When It went to the high 40's I sold about 20 or 25% of what I had left at $48ish, and I hadn't bought anything in a few weeks. Its like anything else...you just have to pay attention to it and don't go all in or out at once. The way I see it out of the 240 oz or so I currently have, half was purchased around $22 on average, and the other half was basically free since it was bought with profits on the ride from 8 to 48. I began studying silver in 2008 and it just made sense that it was going to go up. It still makes sense to me, and I once again began buying a few weeks back...a couple oz every few weeks.

 

No central bank will agree to a metal standard simply because it puts them out of business. Central banks are created by politicians to take full advantage of fiat currency. They will hold onto this standard no matter how absurd their actions become and no matter how much it destroys economies and starts wars because once it's gone, they lose control.

This is no cycle we are in now. It's the endgame. There are no rules of thumb to investing now because the ones in control are breaking all the established rules and there is no leadership in government that is willing to stop it. The central bankers only know one thing and that is to flood the markets with capital and hope something works. Just this week, the Federal Reserve went beyond it's mandate and offered relief to Europe. An outrage but nothing will be done about it until it collapses. Gold & Silver are attractive in this scenario because it takes one's wealth out of this rotten system.

 

You are probably right that no central bank would agree to a metal standard, but it's just as probable that they would not agree to contracting the money supply or raising interest rates. So then why would the bull market ever end? Debt is growing exponentially, the money supply is growing exponetially, and growth levels are dependent upon this. They killed the productive economy with the game of favortism they're playing, so I don't see how it's supposed to get to a level that can support non-zero % interest rates. High interest rates were the driving force behind the recovery in the early 80's. The bond market is the biggest bubble besides derivatives. Foreign outflows out of bonds in the US and the Eurozone are at record levels, so the central banks are the only thing supporting it at this point. I don't see how that can be relied upon as a saving grace. I would contend that a central bank is not necessary for a gold standard, so it's not that it can't happen. It just won't happen on their watch. If and when we return to a Constitutional standard of money, which does not require central banking and never did, that's when I see this bull market being over.

 

I understand sir, but things were pretty dire in the early 80's as well. Most of what you mentioned was happening then also, as well as high inflation. I am not saying they are the same, but one should look at similar periods if at least to understand the differences.

No offense to anyone here, but the PM folks really stuck their heads in the sand from 1980-1986. Every single time I talked to one they would simply reiterate how everyone would come back to PM, how PM was going to soar, how this is a buying opportunity, etc etc. This went on year after year, all the while PM kept going lower and lower due to less and less public interest. Some of the PM commentators today were back then, all the while telling everyone to "stock up, PM is going up any day, you will be happy you listened to me". Nowadays they crow about how they were right 10 years ago, but they never mention how WRONG they were before that, for decades.

The only reason I am writing this is to not offend anyone, but don't dwell on PM so much that you become wrapped up in it, only talk to other PM believers, and behave like so many people I met did in the 80's while the PM market continually fell. Their reasons were almost word for word what I hear today, "evil of the Fed", "CME manipulation", "need for hard money", "running out of PM in the ground". None of these thoughts are new at all. Maybe they are all correct, yet the market has demonstrated handily it can care less, and it CAN price PM at any price it chooses. Believe it or not, the majority of the world STILL has no real desire to own PM, absent the wealth it represents. Most people, given a choice of $10,000 cash or $10,000 in gold, will choose the cash every time. The fact WE are different does not change that fact, but it sure influences how we feel the investment prospects of PM are.

Just an opinion.

Chris

 

I like the idea of trading around a core position the way you did it. To me, that makes a lot more sense than DCA. Just remember that someday [nobody knows when] it will make sense to sell all or almost all of it. Those with the mental toughness to do so will keep most of their gains. The rest will join the shoulda coulda woulda crowd.

 

Agreed. See Cloud I am not a DCA slave.

I would say, though, that many or most small investors would have the tendency to sell when it dropped to $9, but load up when it spiked about $45. It is simply that tendency that I say DCA does well in helping prevent.

Chris

 

Even with a PM standard you'll still have a central bank and you'll still have fractional reserve banking. The only money backed by the PM would be the base money supply. The commercial banks' reserves would be held in the form of some type of PM certificate.

 

I think that anybody with the psychological fortitude to buy when prices are dropping and everything looks terrible can learn to reverse the process and develop some simple method to sell a % of holdings after every significant rise and buy a % of holdings after every significant drop. To me, this is emotionally easier than DCA and probably more profitable.

 

Agreed, and how many small investors do you really think that is? Those who do have the fortitude profit off the backs of the many who rush to the exit on bad news, but load on euphorically on bullish news. I am talking about the small town barber, the office secretary, and the average factory worker who don't have the inclination for further financial training.

 

There's no reason that there has to be a central bank. The USA wasn't founded with one, so the founding fathers deemed it unnecessary when declaring their independence, and they started off with a bimetal standard.

 

A central bank serves no purpose on a PM standard that isn't already covered by the US Treasury.

 

People without financial training aren't going to be saved by DCA. If they use it for a few years, and the market tanks, most will be shocked by the magnitude of the loss and will lose faith in DCA. There is no substitute for knowledge.