...and down she goes!

I have a little disagreement here, I do not respect all people and all opinions equally. Chris, folks as yourself, will admit, and have admitted when they were wrong. These folks, I put in a higher class of respect. They seem to be more willing to accept responsibility for their words and actions. To me, they deserve a bit more respect.

In addition, their opinions will carry more weight since these folks seem more interested in truth and facts, as opposed to just being right at all costs. These opinions I do rate with more value as their source is derived truth seeking instead of arrogance.

Now some may think I am being hypocritical, as many here believe I am a real Richard Cranium, as so much as two folks asked not to post here any longer. I understand why, I have called people silly, stupid, and tin hat wearers, I have tried to be their friend, their enemy, whatever it took to get their attention. I did my best to spread my belief.

 

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Actually, if you study markets, you will find markets that employ leverage are usually MORE in line with ultimate fair value than one that forbids it. Its a common misconception, but "paper markets" were actually created to be MORE FAIR than physical markets. They actually do work much better than physical markets.

For proof of this, I deal with a certain commodity a lot, and that commodity has two markets. One a physical, and second a futures. On any given day the physical can go up or down 5%, and 10% swings have not been unheard of. Its simply a function of "who shows up" that day, and if a typical day trades 120,000 pounds but someone shows up with 800,000 to sell they can literally punk the market. HOWEVER, the futures market is completely different. Because of leverage on all sides, no one, not even an unnamed multibillion dollar user of this commodity, can manipulate it. There simply are way too many other players in the paper market, and this depth allows the market to not be blatantly manipulated at will.

I would be willing to bet anyone every single ounce of silver I own that a purely physical silver market would be extremely volatile and much more manipulatable than the paper markets. Paper markets were not invented to rob you of your hard earned silver profits, they were invented to solve really BAD aspects of physical markets.

Paper markets to me are like democracy, the very worst design for a market except for every other design.

 

[QUOT o rE=PeacePeople;1721138]So I have to ask 2 very simple questions.

1) What do you do when the crowd is telling you the "best direction", or right now the crowd clamoring that PMs are the worst direction?
2) What does the saying "Buy right and sit tight" mean to you right now?[/QUOTE]

What will the crowd do when following
the bouncing memes no longer works
because the ones spewing them have lost
credibility?
"Landrew guide us..."

 

That's actually exactly what it means, if you make a determination that something is over valued, or undervalued, you have made some attempt to determine its value and have come to some conclusion. There is nothing to argue here.

 

You can justify it however you want but the fact of the matter is when people are allowed to influence buying and selling with money that they don't actually have it is not a real market because that is false buying and selling. Now maybe that false buying and selling makes the price of an asset closer to fair value than if we were to have completely free markets where any big fish could corner it, but you can still prevent cornering without leverage. These are 2 separate dynamics and they are not co-dependent.

 

Actually no. Just because it's not possible to pinpoint precisely what fair value is doesn't mean I can't tell it should be somewhere higher than it currently is. You know the sky is up, but do you know how many feet it is from here to the nearest cloud? Should we say that the sky is down because we can't measure the distance? Nonsense.

 

"With money they don't actually have"? Every contract has to be settled. I GUARANTEE YOU every contract is settled of offset, this is why the markets hold assets of these firms, because the market is guaranteeing settlement. There has never been a case of a contract not being settled on the CME/COMEX.

Like I said, I never thought this market is perfect, and would I LIKE a market more like you would like it? Yes, if all of the MAJOR, HORRIBLE flaws of a cash only market could be fixed. They have been trying for centuries to come up with a better system. If someone could invent one, he would be rich.

 

You can see the sky. You can orient your body to prove it has to be above you. To say the "fair value" of a good FOR EVERYONE is much higher than today's market price, but not having a clue of what its "fair value" is, to me sounds much more like an act of faith than an economic argument.

Always remember the value TO YOU of any good is personal TO YOU. A market price is the sum total of all of these personal demand curves, intersecting with the sum total of all supply curves. So again, not having any idea of what these numbers are/should be/will be, yet blindly asserting its much lower than what it should be, to me is simply a religious statement.

Not trying to insult you man, but that is how its coming across. I think every investor should have a basis of what price something is worth. Could be as simple as taking the value of silver in 1933 and indexing for inflation. That calc gives you a mid 20's price. In my mind, that is why I do not believe today's price is very far out of line, and why I am more likely to buy a little right now than I was 4 months ago. Whatever your methodology you choose is fine, and we can discuss pros and cons to that, but you should have some kind of number, and not blindly assert today's price is just way too low.

Just my opinion. Like I said, no offense meant.

 

Now you are saying "cannot pinpoint precisely" Give me a break, you are twisting your own words depending on the point you would like to make. Here is your exact quote. "There is no way to know fair value in these markets, so price comparisons in recent history are moot" There is nothing even slightly suggesting you cannot pinpoint precisely, here. The jist of this statemest is there is no way to even tell fair value so why even try. That suited your point at that time when your were trying to have us believe the paper markets distort real price. Now when you point is that silver is undervalued, you say that do DO know fair value, you just cannot pinpoint it precisely.

We are all wrong from time to time so I have a suggestion for you, instead of trying wiggle out of you owns words, maybe a little self reflection is in order here. An admission of error would would go a long way to help your credibility here. YMMV

 

Btw, I just want to say one thing publicly. I really do appreciate your posts Inflexion. I have said it before, but at least you are still here. Where are all of the other PM pundits that used to spend weeks convincing everyone how brilliant they were for buying PM, saying its going up forever, etc?

You have the nerve to still be here, just like I had the nerve to post on the PM forum when it was going up and up and everyone was getting so excited. You will be someone who profits from PM long term, because way too many people buy high and then put their PM in a corner somewhere and stop buying when it has crashed. You have the sense to realize if you liked silver at $30, you should REALLY like it at $22, and maybe ADORE it if it ever goes to $15. That is how you make money, buying when others are bailing.

Anyway, I know at times it might feel we are beating you up man, but I believe its valuable to hear your side of the market as well here, and the "fair weather fans" seem to be all gone mostly.

 

Just because every contract has to be settled doesn't mean it wasn't purchased on margin with funds that the purchaser doesn't actually have to back it up. Leverage allows purchases and sales to occur where they otherwise could not. The contracts being settled is irrelevant.

 

I have detailed my reasons for silver being undervalued ad naseum. People can make their own determinations as to what fair value should be based on the information and need not take my word for it. I'm not blindly asserting anything. Are you really going to make me go link to a bunch of old posts again?

 

Exactly, no way to know fair value. Yet there are ways to tell whether it is undervalued or overvalued such as backwardation, supply and demand, cost of production, exchange inventory trends, technological uses, etc. without knowing fair value, and it is up to each individual to decide which of those have merit or don't. I never said I know fair value, so please don't put words in my mouth.

I'm not wriggling out of anything. I stand by what I've said. The reason price comparisons don't matter is because they were never accurate to begin with.

 

Sorry, but YOU said you didn't know what the fair value for silver should be, yet YOU SAID you "knew" it was undervalued. That is the point. HOW do you know its undervalued if you do not have a value in mind? "Undervalued" versus what? That is all that is being said, the only way to "know" something is undervalued is if its LESS than what your estimate of fair value.

Its like if you go to the store and complain bread is too high. OK, what should it be? If you say you do not know how much it should be, then how can it be too high? Is $3 too much? Should it be $2.99 or $.19? For silver, what if its $40 an ounce. Is that undervalued? $80? $150? Without a value estimate, what good is blindly whining that the price is not correct?

 

There's a certain amount of money chasing the universe of investment options...and silver is just one of those options. Silver's perceived value, relative to all other investments, determines its price (including any real or perceived "market manipulations"). I think we can all agree on that. As InfleXion has said "ad nauseum", there is some fundamental value of Silver, separate from its perceived value, to which it will always gravitate.

In my opinion, that amount is approximately $18/Oz. Can/will it go lower under certain circumstances...or course! Just as it can/will go higher under other circumstances. All this means is that you should be a net "buyer" of Silver below $18/Oz and a net "seller" of Silver above $18/Oz.

Now the only thing left to discuss is whether or not my $18/Oz target is correct. Fair enough...I could be wrong...don't listen to me. Do your own analysis, set your own "fair value" target, then use that as your investment guide.

I think that's all InfleXion is trying to say...and I agree. :thumb:

Edit: Just to be clear, the fair value target price isn't set in cement. The best you can do is forecast out 6-12 months...if that. Fair value isn't simply the cost of pulling the mineral out of the ground. There are factors (e.g. interest rates) that can push fair value way below that...results, mines close. There are also factors (e.g. interest rates) that can push fair value way above that...results, mines open. In other words, fair value can change over time based on a number of factors...interest rates being just one.

 

The CEO of the SLW has said $20/oz, and sure the cost to bring it out of the ground is one good indicator of fair value, but it doesn't take into account our 10 billion ounce government silver stockpile being entirely depleted over the 20th century, nor does it take into account that if mining were to cease today there is only enough available silver for maybe 6 months of demand, nor does it take into account that China has become a net importer of silver in the last few years instead of a net exporter, nor the record levels of physical metal outflows from the metal exchanges, nor the vested interest that the USG has in knocking metals down to make paper look better so they can fund the military industrial complex in order to enforce petro dollar dominance and the ability to service our debt with money printing to perpetuate this process, nor does it take into consideration that metal prices are derived by proxy that does not have most of the metal to back it up, nor that those proxies can be bought and sold without having the money to put down on them, nor that the SEC and CFTC has been unable to do it's job in over 30 years, and the list goes on.

 

Fair enough, yet no estimate of his value target has been given. I am not disagreeing with anyone's price target really, just saying its unfair to say "silver is undervalued", yet say "its impossible to know its fair value". If its impossible to know, then its impossible to know if its over or under valued.

Btw, I would think your value estimate is a touch low Yak personally. Absent any other information, I am starting to think today's price is about its long term fair value. Not a "deal" per se, but not getting hosed either.

 

Then it's equally unfair to say that your car is moving when the speedometer is out of view, or that the Earth is moving because you can't feel it.

 

Nor does it take into account changing tastes in investments, nor does it take into account the large quantity of junk silver generated each each, nor the fact that most demand on the Comex is from people without the money to pay for their purchases, and on and on.

 

No, both of those are provable. You can test and prove those things quite easily. Easily refutable arguments.

What is the correct price for a widget Inflexion? Someone is charging $15 for one, is that a good price or a ripoff? Without knowing what someone believes to be the going market value of a widget, its kind of hard, (short of religious devotion), to answer that question isn't it?

Again, is $40 undervalued? $80? $150? If you have no value estimate, are you saying ANY PRICE is "undervalued"?