Will silver ever be cheap again?

Hi Mike!

Sure, playing the Euro short would be easier, but probably unpopular suggestion on this forum. I have used EUO, the double short ETF for the ratio, but if one wanted to do that, it of course produces higher gain or higher losses, because of the leverage, but one could be in and out very quickly. I would be more likely to use SLV or GLD options ( and have in the past) if I was playing the short term PM market.

Although I did say "lately" in my comment, if we look at the Euro low from 2008 to current, it was 1.187 in May 2009, silver was at 12.33 or so ( down from 21 in first quarter 2007 and had been as low as 8.40 in 4th quarter 2007), the high for the Euro was 1.51 in April 2008, and silver was at 19, still below the 2007 high but climbing, and then in 2nd quarter 2010, the Euro was 1.47 peak, and that was when silver hit its peak so far of 49.82. Both have marched similarly downward to present ( with of course minor up and down). So yes, I still believe that the Euro/USD ratio is the main factor in the pricing of silver. IMO.

Jim

 

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I cannot disagree. When I consider that the major banks seem to be the big players right now, it makes a lot of sense that they would hedge the currency bets.

 

Well, playing EUO may be unpopular on this board, but sounds like a smart move to me......

Fair winds,
Mike

 

Jim,

One more thing, I tried to look at it from your point of view, but I am just not seeing a real strong relationship between the strength in the dollar and weakness in silver. I see some relationship, but it is just not that strong. Here is a graph of FXE (Currency Sharers Euro Trust) with SLV overlayed on it. I am sticking to my original premise that there is a lot more going on than just strength and weakness in the green back

Here is the max data chart
http://finance.yahoo.com/echarts?s=...on;ohlcvalues=0;logscale=off;source=undefined;

Here is the 1 year chart

http://finance.yahoo.com/echarts?s=...on;ohlcvalues=0;logscale=off;source=undefined;


Mike

 

Mike, you are obviously much better at charts than I am; here's the two charts I'd like to see -- 5 years, percentage over baseline for 5 different currencies, in 5 colors for easy viewing -- dollar, pound, Euro, Australia Dollar, and Yen, for silver and for gold. In other words, the left-most point on the graph would be all 5 currencies at the same spot in mid-2007, the actual prices of that day, 5 years ago, Then as you move toward 2012, the lines go all over the place, percentage-wise.

If and when I see this, I will have some commentary.

 

Currencies can't be compared separately, because they would always be at own their face value, USD =1dollar, Euro= 1euro, so forth. The ratios of these currencies to another is how they are listed for the exchange of currency. You can compare each to the USD, or each to the Yen, or each to the "basket of currencies" which is domonated % wise by the USD, but when you chart and compare percentages, they should all compare to a specific base currency. So there is no separate chart that shows the strength of the USD or Euro, except to compare it with another currency. Many who wish to show that the USD as "weak" would use the swiss franc before the Swiss pegged it. So someone could set up a chart for comparing the USD to the others, and include the commoditiy prices that are based inthe USD.

I do feel that your time element is inconsistant with the current action. So much happened that is not still the case and other things have that weren't considered then by many. I think 1 or 2 quarters would give a better viewpoint as to where we are currently, but I do understnd some use the long term charts.

Jim

 

The strength of the dollar is most likely represented by the USDX (NYBOTX) It compares the $ to a basket of currencies and was created when Nixon ended the gold standard in the early 1970s. It compares against the Euro, Yen, Pound, Canadian $, Krona, and the Swiss franc. (not in equal amounts)

There is an easier comparison of strength; $ vs barrel of oil.

 

Too many people want to play psychic when it comes to prices and predictions on commodities, markets, stocks, end of world, etc.. The reality of it all is, it's just predictions and no one can truly predict the future, no matter how hard they try. Sure some might hit a few numbers on the mark, but this isn't because they knew by being psychic, it's just pure coincidence. Life is made of coincidences.

So yeah, silver could drop back to $5 an ounce. It could also be worth $5000 an ounce one day. Just buy it if you like it and can afford it, it's that easy instead of worrying about how much it MIGHT cost one day.

 

The trouble with that $5000 would be that it could also take that much to buy a gallon of milk. Or to say it another way, silver isn't a completely untethered commodity, despite its propensity for extremes.

Entirely agree with your final thought.

 

Exactly! Milk will be cheaper though, it's Clean Water that will cost $5000 when silver is $5000 an ounce.

 

Is that not the point? I do not know many stackers that are in it purely on the bet that they will make a profit. They are trying to preserve wealth. they refer to thier stack as an insurance policy. If I can buy around 10 gallons of milk for an ounce of silver today, I will still be able to buy several gallons of milk with my ounce of silver in the future. 30USD sitting in the bank or under your mattress will buy you an eye dropper full if the price were to rise to $5000 a gallon.

 

Fair enough, but at $28 an oz. Is that the BEST way to preserve your wealth?
Also most of us know that money under the mattress in NOT the best way to go, so comparing silver stacking to hoarding cash, is really not a good comparison.

Mike

 

Model77, you are exactly right. I hope I NEVER have to sell the junk silver I've accumulated, and when hyperinflation comes, 2014 or 2015, my retirement savings will have been protected. If I'm wrong, there will still be a LOT of people who are wronger, LOL.

Their fruits of a lifetime of work will have been wiped out; the amount of wealth already LOST in this country just from 2007 to 2012 (due to lower housing prices, most families' primary asset) is in the trillions of dollars. From Marketwatch:

"...$7.38 trillion.That’s the amount of wealth that’s been lost from the bursting of housing bubble, according to the Federal Reserve’s comprehensive Flow of Funds report. It’s how much homeowners lost when housing prices plunged 30% nationwide. The loss for these homeowners was much greater than 30%, however, because they were heavily leveraged."

 

Incidentally, do you know WHY our currency was redesigned over the past five years or so? And colored with pretty purple and green and chock-full of security features? So that "old" cash can be recognized and tracked, and official inquiry made whether income taxes were paid on all that cash, and oh, by the way, where did all that cash come from, Sir?

 

Can you share your logic on hyperinflation coming in 2014 or 2015?

 

Silly me, with all the advances in color printing, I thought it was done to make counterfeting a bit more difficult.

 

The Fed (and European counterparts) have created trillions of dollars out of thin air. Most of this capital is held by banks to boost their reserves; it has not entered the economy yet, particularly since banks are still leery of making loans to anybody anywhere, especially to Main Street.

When all this created-money begins to hit the national economy (no sooner than AFTER the elections), inflation will surge. The price of U.S. imports will rise dramatically. The U.S., the Eurozone, and Japan will have expanded the global money supply substantially with no accompanying net increase in output. This is the key to inflation.

 

So what do you all recommend buying as far as silver? Coins,bullion bars? I always been a big silver fan. I fairly new to coin collecting. Are the bars worth purchasing or should I just stick to coins?

 

I hear people tell me that I missed the boat on silver. I don't believe it for a minute. We might have missed the rowboat if we got in around 30 but I see future silver prices of 100 per oz within the next 7 years. All of the signs point to this. I would love to hear an argument that the value of the dollar is actually going to increase. On top of this you have enough emerging markets in Asia and South America alone to propell demand for silver in the next 30 years.

What about silver substitutes? Not going to happen. 99% of the time even if there is a substitute precious metal and mining companies (the big dogs) buy them out faster than they can lay a stake. Why do you think we don't have any alternative to oil?

I plan on investing heavy in silver.

 

Doug we are in agreement that the cash injections will add to future inflation, but IMHO is has not been enough to cause hyper-inflation. We will see......

Mike