Silver vs CPI vs Stock Market

The Fed chairman’s remarks today really jerked back the stock market. Got plenty of dry powder in my corner — but one day does not a market make.

 

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Well now you need some cash also, but I like any kind of silver for a hedge against fiat. JPM sells so many silver contracts there is no way for people to redeem for silver, if you don't hold it you don't own it. What about the the JPM whistle-blower who had to tell the truth the other day? His superiors told to short silver contracts to drop the price and rebuy at a lower price. It' like musical chairs there's say 1ox. silver for 10 people, one person wins 9 are out.

 

When you buy or sell a silver contract, you are not touching a single silver oz. UNLESS you buy a contract for physical delivery on a set date ready or not. or a contract to sell physical silver at a set date. The CASH is put up for deliver on the date of the TRANSACTION, so you pay the full price and the storage and transportation costs for the bars.

If JPM or any investor thinks the price is going to fall, they can sell contracts at a slightly lower value that are not delivery of silver and then use the cash to buy contract to receive silver in the future at a lower price. If instead silver stays at the same price, JPM will lose. Actually although these contracts are based on silver, very little silver actually moves from JPM ( except for manufacturers who use large amounts, jewelers, bullion makers, etc. ) the rest is done in cash transactions both ways.

"1ox. silver for 10 people, one person wins 9 are out"

The total amount of silver "contracted" to go both ways is much higher than the amount available, but this is true in both directions , Only delivery contracts are handled in silver if demanded, all others are handled in cash.

If you wish to contract for 1000 oz of silver for delivery , you pay the actual contract price of the silver plus transaction fees and storage rental and delivery upfront, and on the demand date, it becomes available to the contract holder.

If you buy the contract for the future delivery, you pay the cash value of the contract plus fees. Obviously if silver jumps, you sell the contract anytime for cash or hang to the end and get it for the contract price plus fees ( Exchanges make their money on fees and their own possessions of silver.

The exchange by law doesn't have to have silver to pay off a contract. Their prospectus ( which I have read and so should anyone believing the internet gossip sayd they can pay it off in cash if they don't have enough silver as cash is still legal~ you paid in cash and so can receive cash in return.

I sometimes play the paper game and made and lost cash at various times, but it was my good or my bad when it happened. It's not fixed, just designed for silver dealers, not the average stacker.

Unfortunately it is an easy attention getting for "Stacker" publications to twist the facts a little to make it appear that you better buy physical silver for stacking and not paper because some day they may not have any silver available to sell to you.....Guess who are big players in the silver paper game....Yep. the bullion suppliers who pay/support for such publications. They adjust their winnings/losings with their costs over melt depending on whether they are winning or losing their paper bets.

Lastly it is stackers ( IMHO) that change the price of silver much more than any other industry as they increase the supply if they sell, or deplete the supply when buying. So heavy buying will raise the price. An article such ones on exchanges can "scare" stackers so the buy more silver, more ammo,more guns.....and the prices go up to do so because of it. They are their own worse enemies by misguidance. But please read about the commodity market! IMO. Jim

 

Well you win, but I still like silver in this kind of crazy market fluctuations

 

I wasn't looking at it as a win/loss, just educational perhaps. I prefer to play the commodities when the gains are through usage/consumption rather than panic or induced fear of the unknown. It is too crazy to buy or sell when stability is questionable either way ( and each person has their own level of that). If silver keeps going up, I would favor playing the down side by using straddles , as you can leverage it more and don't have to pay shipping either way for electronic cash.
Jim

 

With the start of the new decade, I thought it was a good time to update the various investment categories from last year (2019). It was a really good year for most investments. The Dow Jones gained 22.3%, the S&P 500 28.9%, and the Nasdaq 35.2%. Silver recovered in 2019 and up by 15.2%. Other investments were also OK in 2019 including most of my bond funds (8-11%) and Euro Pacific funds (15-16%). I continued to make modest gains in my safe investments including Met Life Stable Value fund (2.78%) and I-bonds (3.07%). My Money Market was not particularly great in 2019 at about 2.2%. Overall, my rather risky portfolio was up about 21%, which was the 5th best performance in the past 27 years. The inflation rate remained low in 2019 at 2.0%, which may rise a little depending on the CPI from December. Thus, my total gain is 19% (21% minus the 2% inflation), which doesn't include the capital gains taxes on my non-tax deferred investments. As I near retirement, I've moved the first five years of needs into safer investments but I'm still highly invested in equities (US and Euro Pacific). I sold my silver ETF's at 17.13 and used the proceeds on a down payment for a condo in Florida. Happy New Years!

Here is the dataset from 1980 to present including a chart:


Investments since 1980 (Nasdaq is King)

Investments since 1990 (Nasdaq is King)


Investments since 2000 (Silver and Nasdaq are Kings)


Investments since 2010 (Nasdaq is King; Silver is a Dud)

 

.as a retired IT guy i invest in what i know w/ some diversification: apple,intel,microsoft,alphabet,cisco, home depot, avita medical (RCEL), VANGUARD admiral S&P index fund (VFIAX) RCEL was my best performer in 2019. Will sell cisco when i get home

 

Haven't looked at my gold or silver coins as investment vehicles in years.

 

One point I would say about your "Nasdaq is King" comment. You can substitute for "risky is king". Riskier investments will always, over long timeframes, return higher yields. They have to, or else they would not attract capital.

Great points. Too many people heading into retirement get it wrong IMHO, either putting everything into bonds and money markets, or keeping everything in equities. My rule of thumb is that the day you retire you should be 50-50, after you count your home equity, pm, and rental homes or land as bond assets. On average a 65 year old retiree has 20 years to worry about, (more if female or married), the paltry bond returns won't get it done unless you have millions put away. Of course, every year lower your equity exposure a little more, unless you have money earmarked to give your descendents.

 

All my bullion and coins are an Investment period.. when sold all profit for the sleeve full of granddaughters (5).

 

Supply/Demand isn't trending well. The use of silver as a biocide is promising, but doesn't require great quantities to be effective.

 

The charts above go to 2009. Here are the stats for the past ten (10) years. The Supply/Demand seems more level now.

 

That's the old quick and easy way to figure out asset allocation. It's not a bad approximation but Monte Carlo Simulations and proper financial planning and analysis are much better.

 

What has upended the age-old asset allocation guidelines has been the collapse in bond yields.

In effect, with the 10-year Treasury bond at (under) 2%, you are paying a 50 P/E multiple for that instrument. That makes buying equities at 20-25X look cheap by comparision.

Diversification is more important today than ever.

 

All of them...you have to spread it around today more than ever because of negative and ZIRP rate policies.

Preferred stocks and CEFs (closed-end funds) are also a must. Play the capital structure and let low rates work FOR YOU instead of AGAINST YOU.

It mitigates the risk. The F&F portfolios I manage are very conservatively invested (because of no or tiny pensions and Social Security) but they yield 4-5% (including the cash component) with minimal risk which means the market does nothing and they still get $40,000 or $80,000 in income which is all they need.

 

You are confusing a holding agent or custodian for "market manipulation."

If you think JP Morgan Chase is tying up precious Tier 1 capital in a non-interest earning asset......

 

Good post overall, but there is NO "official" market marker for silver.

None.

Never has been, never was.

Central bank selling and state-influenced oligopolies can influence (temporarily) gold, platinum, and palladium plus other rare PMs and metals.

Not silver...too many sources of supply.

 

That's a concentrated stock portfolio, with fairly high P/E and tech-heavy components.

Was fairly cheap a year ago....and dirt cheap years ago (esp. MSFT and AAPL). But no more.

 

The only caveat to your excellent post is that now the "safe" asset can be considered risky.

Bonds no longer yield 5-7%, they give you 2-4%.

 

@Phil Ham yes, I've put money into a Nasdaq index for years now.
My one HY Bond Fund managed 14+% in 2019, another Capital/Income went 18+%
My SemiConductor fund went up 64+% ... wow .. just wow
Everything else was at best in the 30s% range which is still fantastic.

now to see what 2020 has. I sold a bunch of individual equities and rolled a good chunk in to Military/Defense funds at the end of the year which happened to pay off 4% the other day. I might just throw short term my safe Treasury fund monies into that Fund considering ....