Supply and Demand states that Silver must rise in the long term?

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I find it much more credible to assume that the large investors are acting rationally and in their own best interest. It is not credible to me to assume that they are irrational speculators, criminal manipulators, or just stupid as is popular in some circles. And since the price of silver is up 6X over the past dozen years or so, the idea that the paper market is supressing the physical just doesn't cut it.

 

Are you saying your company takes physical delivery of CME futures? I have always veiwed this as a rare circumstance.

 

Yes, you understand what I am getting at. But think about it. If you were a wealthy private investor, trustee for an old family fortune, or a market maker like JPM with a foreign government agency client that held a large quantity of physical silver, would you publicize it more than the minimum required by law? And wouldn't you expect the money manager to try to earn an income stream off of the physical by basis trading that will look to all the world like naked shorting? David Morgan has a newsletter to write and a target audience that wants to hear about shortages, manipulation and prices-to-the-moon stories. He gives them what they want and uses whatever information is publically available to make his job easier. He isn't going to tell them that the whole thing is just a bunch of rational investors acting in their own best interest in a market where supplies have been growing slower than demand. His customers would quickly get bored.

 

Exactly. Remember that people CAN take delivery if they pay all up front and specify it. IF silver were really worth $100 an ounce, if industry really wish to pay that for it because they cannot get it elsewhere, then there would be a mad rush to buy contracts for delivery from the market. There isn't. If the price on the market was true manipulation, then physically there would not be enough silver to go around at the market price. People would start buying delivery contracts and this would force the price up. If someone truly believes the price is too low on the market, vote with your pocket. Buy a contract for delivery and call their bluff.

 

No, we take delivery from markets that occur daily. This market price is then used to price the entire market, even though only 1/10th of 1 percent of it is traded on the market.

 

Even though the processes of "futures", contracts, margins, "for delivery", shorts/longs, physical/paper, options, SLV/GLD, and more have been explained so many times here, many people still prefer to believe in "manipulators, banksters, and the death of paper money".

 

On your first point I would say that ANY investor, regardless of size, should be acting rationally in their best interest. This doesn't affect what I said. As for the price of silver being up 6X over the past dozen years, without true price discovery, i.e. no naked shorting, there is no way to know if 6X is acceptable or not. This is why naked shorting is not allowed.

Finally you argue that it is not credible to assume there are irrational speculators, criminal manipulators, or just plain stupid people in the market. I can't imagine that anyone would believe this. We know the banks have committed crimes. Even in this very lax environment of regulation, they have been convicted of fraud more than once. MF Global is a huge example. Irrational & stupid. I won't comment on this except to say that even on this normally well educated group of forumers we have both just based on the comments.

This is a matter of observation and opinion. I've not been swayed by this. Maybe others will be.

 

There will always be fraud this side of the pearly gates, but what you are proposing is ongoing decade's long systemic fraud and price fixing by at least several of the largest players in the market and multiple regulatory administrations, and this I find not to be credible. Moreover, if the price was artificially low for this long, there would be physical shortages of silver and none have appeared. I won't deny that a small market like silver with some large investors playing in it is prone to higher volitility than larger markets, but that is normal, not criminal.

It's okay for you to continue your belief in manipulation and fraud. I hope my comments might sway some others - particularly the younger investors so that they might not be frightened out of the public markets by tall tales.

 

You make a good point about people not wanting delivery. That's the whole point of hedging. Still, in my mind this should not impact the price, but then I didn't design the market and I don't participate in it other than buying physical metal so my frame of reference may not be the best.

I would add though that regarding inflation, the government numbers are 2%, but back in the 70's when they used to calculate these numbers honestly it would come out to 9% today. I do not consider that mild inflation, and with another 2 years of zero % interest rates and no sign of letting up on money printing we could see that number go much higher. I do agree that the price today has nothing to do with supply and demand, at least not of the physical metal, but if and when the physical metal does not meed demand that will change very abruptly.

 

If my goal was maximum profits then no I would not publicize it, but that's not my goal for one, so no I would not do that because I find it morally reprehensible. For another the laws have been changed by these very institutions that benefit from the changes. The repealing of Glass-steagle was a huge blunder that could only have happened out of the need for secrecy of deception IMO. Also, I find it extremely hard to believe that rational investors can cause a 10% drop in 1 hour in a commodity that has no inherent volatility in the physical market. But, we can agree to disagree, variety is the spice of life =) Personally I think David Morgan does a very coherent job of explaining his reasoning and allows people to see his thought process and make their own decisions.

 

There are some, including myself, that believe this describes the fiat banking system, i.e. private bankers are put in charge of the money supply will do exactly as you suggest. That is they are motivated to use this power to look out for themselves. They have to. There isn't any other course. They create money to lookout for themselves, they create money to cover their mistakes, they create money to keep their power. They create money to keep down silver & gold because silver & gold is the anti-fiat currency. One can choose to believe it or not, but if they do, then they put themselves in the position of believing that bankers will do what is best for others first when it comes to money. It doesn't make sense.

The vast majority of market analysis, economists, and the belief of what constitutes "normal" never takes this folly into consideration. It's exposed itself for what it is in the past few years, but it's going to take more financial destruction before the point is driven home.

 

I would take it a step further. Thing is, when you can create currency (because currency is not money, gold and silver are), you don't need currency. What this essentially is for is not to make them rich, because they are already so rich there's nothing they can't buy, but rather to ensure that everyone else is poor and in perpetual debt servitude. That is why the USD has lost 98% of its purchasing power over the last century since the Federal Reserve Act was passed. It's about power and control, not money (currency), even though that is the means to such an end. A return to feudalism is the de facto result once there is no middle class, and that has always been the goal of the fractional reserve banking system. Fiat currency is just the weapon, and precious metals are the shield, the real money.

Yes, they need to keep this hidden and keep people away from it (hence the silver takedowns to frighten people away) in order to maintain their control, but that era is coming to a close as more and more people awaken to the necessity of sound money to prevent thievery of purchasing power, the ever expanding debt bubbles, and out of control spending that the military industrial complex requires to function so as to preserve the petro-dollar hegemony which is necessary to support a currency that is backed by nothing. It's all tied together and once the transition away from the petro-dollar is complete, and it is well underway, those holding tangible assets will be the ones in a position to retain their wealth.

This is why precious metals must rise, because there is no other way to sustain the path we are on than to keep printing more money, the result of which is loss of purchasing power and the gain of value in all finite resources due to inflation. If this is not done then the method of funding the mechanism which is propping up the currency is no longer in place, in which case inflation will just be that much greater by not being able to export it to the world if they are no longer forced to buy and sell oil in US dollars. It is a vicious circle that only has one potential outcome regardless of which direction is chosen, and the direction being chosen is the one that takes the longest to reach that end. That is unless they will embrace a gold and/or silver standard to put a stop to wealth erosion, which doesn't seem to be on the table since that doesn't fit the game plan, but you never know. We should be thankful for the extra time and the opportunity to prepare accordingly.

 

From 1900 to 2010 the US population has grown from under 100 million to over 300 million. The world's population has grown from 1.6 billion to almost 7 billion. Under a gold standard just to maintain the US money supply on par with 1900 levels the US gold reserve would have to be 3 times as large as it was in 1900 and the world's gold reserves would have to be over 4 times as large. A gold standard is not sustainable. It would result in nothing but economic stagnation, deflation and a massive concentration of wealth.

 

I know it's a lot of fun to believe that you know more than market analysts, economists, the Fed, etc... and to imagine that they wake up every morning with the thought of doing battle against gold and silver real money, and to be on the inside of this big secret regarding money and banking. But real life is a bit more prosaic. The world throughout most of history has operated on credit, even in the days when gold and silver were the currency of the land and this will continue to be true, probably until the end of time [or December 21st, 2012 ].

 

That's what my view of precious metals all boils down to.

U.S. non-discretionary spending (SS, Medicare, Medicaid, interest on the debt) is currently 86% of total tax revenues ... and growing. Military spending, even cut to the bone, would take up the rest. SS went into the red seven years before they said it would. The baby-boomer demographic will put increasing pressure on non-discretionary spending.

Deficits are $1+ trillion per year.

The next President and Congress will not address the problem in any significant manner. In fact, from what I'm seeing, even their best policy proposals "increase" spending significantly.

Even a small increase in the interest rate would have a devastating effect on the budget. A 5% increase (back to the "normal" rate of interest) will increase interest on the debt by almost $800 billion per year, or 27% of current tax revenues.

There's no evidence that we can "grow" our way out of the problem. The earnings forecasts are a farce, 35% of the increase being attributed to "currency revaluation." Europe is collapsing, China is slowing, Japan is stagnant, who exactly are these companies selling stuff to? I wouldn't doubt if most of the other 65% is accounting gimmickry, such as GM's stuffing of dealer channels to show sales that really aren't sales.

What other outcome can be imagined besides "printing"?

However, I do think we'll go through a period of crisis-invoked deflation before inflation.

 

Just a couple of points where I disagree sir. I am sure this disagreement leads us to differing opinions on things. Currency is in fact money. What is the primary definition of money? It is the "thing" in which goods and services are exchanged. What is the one thing that you pay for everything with? What do you get paid with? That will answer what is "money".

Regarding the dollar losing 98% of its value, that is only nominally. Anyone holding cash under their mattress are simply doing it wrong. Put your cash in a government or corporate bond and how much did the dollar decline? None? The measure of the stablity of a currency is measured assuming the cash is placed in a safe bond. Trying to assume someone is so stupid as to put cash under a mattress is never a consideration. Put that same dollar from 100 years ago in a government bond and you do not see any loss of purchasing power sir. Its just another "half truth" people like to throw out there to scare people. I find the financial field full of them, not just talking about PM's, but everywhere.

Chris

 

I disagree. You can have a gold standard with 1 oz of gold. It's just a matter of ounces of gold divided by dollars in circulation and pegging them to each other so that the money supply cannot be arbitrarily expanded. The amount of gold available merely dictates the value of the currency.

 

Currency does not constitute all 4 definitions of money, specifically durability and divisibility. Just because you can break a dollar (meaning FRN by today's standards) doesn't mean you can cut it in half and retain its value like gold and silver. If you don't believe that, you might want to read the Coinage Act of 1792 instead which is clear about what money is. It's not a half truth to say the dollars we use today have 98% less purchasing power than the dollars we used a century ago. It is an undisputable fact. The definition of a dollar in the Coinage Act is clear about how many grains of silver it is supposed to be, and it does not include FRN's or treasury bonds. Words have changed, and so has enforcement of the law, but the law itself has not in this regard.

People should not be penalized for keeping their dollars under a mattress. If the suggested method of not having your wealth stolen is to give your money to the people who are stealing your wealth through inflation if you don't give it to them for safe keeping, then something is wrong here. This is how war is waged against savers, and people are encougared to spend their money while it still has value. Supposedly that helps the economy by stimulating spending, but all it really does is make people poorer. I am personally quite encouraged to do so, but on silver primarily. Anybody who bought gold back at $20/oz or silver at under a buck would be doing quite well I'd say and wouldn't have to be worried about where they kept it.

 

I simply do not understand those who say gold and silver is money today, sorry. You go to Walmart, and what is your bill in? Ounces of silver? Does your pay stub say you got paid 500 ounces last year? Will the IRS accept it if you show up with 150 ounces of silver for taxes? I find dollars highly divisible, I can take a $100 bill and get 2 $50's, or 5 $20's, or 10,000 pennies.

Regarding the "safety" of owning PM, tell that to all of the robbery victims every yeaar how "safe" their PM is to hold. Yeah, having a bank account balance or bond is much more dangerous than having $100,000 of PM in my home........