Ted Speaks

Silver is "time tested" as a commodity/money (The Bible and US Constitution both name it). Today's fiat currency is the most manipulation money that I know of. History shows fiat money becomes worthless after too much printing. PM’s gold/silver coin money have never lost all their value. In the US, twice fiat paper money has lost everything. Continental Bank Note 1776 "Not worth a Continental" fiat money and the South’s Confederate paper money.

The World’s financial system has gotten too large (using paper/electrons) and you just can’t print more PM’s or key stroke more Silver! Both are great selling points to me. It’s also taking more resources to get more PM’s (more $$$ oil, deeper into the ground).

I also like that I can give it to my kids/grandkids without going thru Wall Street or the Gov’t like paper stocks. silver has an indefinite shelf life.

I am no expert in silver, but I am new to learning it has great tangible aspects about it that my fiat currency in my wallet will never have.

 

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I agree Libor is a huge issue, and I would also be upset if no one gets charged with MF Global. THings like that usually just take some time to put together.

Talk to me in a year, and if nothing is announced I will probably be as upset as you Fatima. I do not disagree with your position, just understand it may take time to prosecute. To me, the letter you posted was from the CME who is also a victim in the MF Global mess, just as they are in that PF mess in Cedar Rapids, IA.

 

On this one point and only this point, I have to agree with Inflexion, There appears to be a very strong correlation between Silver and Gold. A few deviations along the way, but fairly close. Here SLV overlaid on GLD

http://finance.yahoo.com/q/ta?s=GLD&t=5y&l=on&z=l&q=l&p=&a=&c=SLV

Mike

 

There is a relationship with of Gold and Silver, but not directly, and not exclusive to other factors, more inclusive with the whole commodity relationship and currency of basis. Medoraman was correct to add the factors of extraction and even oil as a commodity, as it affects the cost of gold and silver extraction, whereas currency relationships affect the price of oil and precious metals. If you plot gold, silver, and $USD vs. Euro on a minute plot, you will have seen the last few days that the USD/Eur ratio changes first, then gold reacts inversely to the USD$ ( while following the inverse Euro) and then silver. I still haven't figured the lag between gold and silver, except the obvious, gold is higher priced and will be traded with less stop points than silver, so silver floats a short while , and then reacts.

So my conclusion as it has been for months is that PM reacts mainly or entirely to currency, and not the reverse. Find thousands of tons of gold will not change the USD/Eur unless it is a government that use PM backing, and as we know, no government does, or will change to it (IMO). But change the value of the USD/Eur down 1 cent and you will see a good movement in PM.

IMO.
Jim

 

Gold rises significantly when the central bank increases the base money supply as they have done several times in the last 4 years. It also rises for other reasons. Silver maybe, maybe not. Silver does not seem to track events such as QE though many people think that it does.

I'm not convinced the USD/EUR ratio is always an indicator.

As a side note to this, HongKong is getting ready to open a 1000 ton gold vault.

 

Ben Bernanke who heads the most powerful central bank in the world claims he does NOT know why anyone would want gold as it not money. See his interview to Congress. At the same time most of the World Cental Banks are buying 10% of the Worlds known gold supply.

I learn to notice what they DO, not what they say!

 

Neither am I as I didn't use or infer the use of the word "always". I am convinced it is currently a strong indicator. Later, if and when the same financial concerns drive down the Asian markets ( including China and Japan), then it may be the USD/Yen, or USD/CNY, but the USD will always be a factor as long as the commody is traded in USD.

I truly want to see how the HK exchange does. I wonder if they will accept trades valued in Chinese currency.

But are they buying off of the open market or just from each other? If a world central bank sells, do they sell it on the market or deal for currency. Most of the large gold "buys/Sells" that I see are really just transfers form on CB to another CB. However, people who make their money in bullion can note it on their website depending on whether they want to sell gold or if they wish to buy gold." CB sells GOLD, you should also" or " CB buys gold, prices going up! Buy now!"

 

Why beyond my knowledge. I bet open market as insurance as they know more than us how bad ALL the fiat currencies are?

 

With few exceptions, I'm not aware of any world central bank openly making significant sales of gold. In the case of the Federal Reserve, it officially holds no gold. If does hold gold certificates backed by the US Treasury's gold in Ft. Knox and other depositories.

On the other hand, if a country was short of gold and wanted gold then it really has no choice to head to the open market and then make discrete buys as to not worry the market. In the case of Asian countries the rumor is that whenever a hit takes place on the Comex, they take advantage of it and stand for delivery of gold contracts. China has imported over 500 tons this year, and IMO, some of it came from this avenue.

 

http://blogs.wsj.com/economics/2012/06/11/central-banks-back-to-buying-gold/


http://www.blanchardonline.com/investing-news-blog/econ.php?article=4570&title=Gold_buying_by_central_banks_is_a_%22big_deal%2C%22_WSJ_reporter_says

 

If silver goes to 500 and gold to 10,000 an ounce that would be a 1:20 ratio. I like that number just fine.

I think qualifies as a good investment for silver.

 

Good links, thanks. I read the WSJ commentary before, but I heartily agree with it. Best use of gold is as a long term hedge, and personally I would say the same for silver. Platininum is different, its not an investment as a hedge on currency, but an investment in demand for the metal, which is much rarer and much more needed industrially than gold.

 

Sounds as if a big investment house Knight Capital, installed a faulty HFT trading algorithm yesterday that ended up erasing ~ 1/2 Billion of the firm's capital via trades in the market. During this episode the prices of stocks went all over the place and now the NYSE finds that it might have to cancel some trades but let others stand. Knight may also go down the toilet as well if they don't get some sort of bailout.

This is why that confidence in the stock market, as being a true barometer and capital generator for the real economy, is being destroyed. Play in this at your own risk but IMO, the small guy has no chance now in this environment. There is no way to judge risk anymore.

 

Traditional value investing is the best way to evaluate the riskiness of an investment. I think you are correct that the stock market is no longer a barometer for the real economy, but the market is still made up of individual stocks that can be analyzed and valued. If anything, the volitlity created by the mindless moves of the computers presents more bargains for the individual investor willing to do the work to prosper in this sort of environment.

Edit: Regarding confidence, Warren Buffett put it best when he said "You pay a high price for a cheery consensus."

 

I agree day trading and similar in the markets is at an all time high for risk. I would disagree that building a sound portfolio to hold for longer time frames is impossible.

To me, it is government intervention that is the most market distorting. Let those who fail go down the tubes. That is the best thing that could happen to this market. Put the fear of dissolution back into the heads of bankers and others, fear of them losing their cushy jobs and future benefits, and THAT would bring more discipline back into all company decisions. As long as we are playing the "I have government connections I can pull so therefor have no fear of becoming backrupt" game, the market will continue to have higher than ordinary risk.

Not completely disagreeing with you Fatima. The market is not where I would like to see it either, but for slightly different reasons than you.

 

I'm glad you say this. The ultimate power to intervene in financial matters is the printing of fiat currency. It's what the rest of us have said for a very long time.

 

These are all good words, but what is lacking here is a way for the individual to put it into practice. There is no longer a way for anyone to look at any particular stock and make any kind of determination of where that investment will go. When rules and regulations are no longer followed and certain firms are given huge advantages in the way of federal bailouts if they make the wrong bet, the small fry can't make smart decisions except to get out.

 

Well, I've been doing this for a long time and haven't noticed a significant difference between now and the past. The same metricsk that worked in the 70's and 80's and 90's still work in the 00's. It isn't that difficult, and I've taught my sons how to do it and they are now successful investors in their own right. The best way for an individual to put this into practice is to first read Ben Graham's "The Intelligent Investor." For anyone not willing to do any work, and instead intend to wait for money to fall out of the sky and land in their brokerage account, you are probably correct. Bailouts are irrelevant. I never received a bailout in the past, so the fact that I'm not getting one now is no disadvantage.

 

That is not what I mean. You are the one twisting my statement to mean currency. My point is firm risk. Government bailouts, handouts, welfare, whatever you call it distorts company actions. Many of these companies would not have made the dramatically bad choices they did if they didn't believe if all else fails the US will bail them out. Even if they didn't think that, the fact that the US DID bail them out now lets other firms believe they can repeat their errors if they prefer.

I am saying the extreme danger is these CEOs, CFOs, and other senior management aren't scared to death of going bankrupt. As such, they will continue to make too risky of choices, since they have no fear their golden parachutes will be in jeapardy if they make some horrible choices.

Fear of failure is simply not great enough in the market today. That is the government intervention I am referring to. Fiat currency has nothing to do with that topic.

 

You have said before that silver does not track QE, but the 5 year silver chart begs to differ. The uptrend in silver in 2008 began right with the first QE. The uptrend that began a couple months before QE2 was because they were shadowing their hand over that period to lessen the volatility of the impact. Silver may not move for the same reasons gold does, but it will still move because gold does.

The USD index is measured by a basket of currencies, the majority of which is based on the Euro. The dollar index really has nothing to do with the value of gold. The price of gold what actually matters.