$35+ an ounce! $50+ soon??

Threads like this are always amusing. There is no person alive we know of who can consistently predict the future. We do not know what will happen with certainty until it actually happens. You can draw upon statistics, past behavior, etc., etc., all you want, but it still will not give you certainty.

Look at some recent examples. Did any baseball expert give the Cardinals any chance of winning the World Series this year when the playoffs began? No. Hurricane experts predicted an active Atlantic season this year because of a number of factors that were different than last year. Did we have an active season? No. Experts are valuable, but only to explain what has already happened, not to predict what will happen.

The only benefit of predicting is it provides cheap entertainment. Predict all you want, but remember the old saying, "Opinions are like a-holes; everybody has 1 and they all stink."

We will know the future price of silver in the future. It may be $7.00 an ounce or it may be $70.00 an ounce. Regardless of what we may think or what we may know or what we may think we know, either is a possibility.

 

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All investing is about probabilities. Investors should seek out situations where the probability of gain is greater than the probability of loss. Using your example, I think the probability of silver going to $70 far exceeds the probability that it will go to $7. You are correct that nothing is certain, but it doesn't have to be when you diversify among several high probability events.

 

A big +1 to that. If we really did know the answers to these questions we would all be driving around smokin' big cigars with pretty girls on our laps. I have been playing this game a long time and a good dose of humility can be your friend.
The best we can do is take a guess, pays your money, and takes your chances.


BTW, my intemediate term (3-5 years) guess is short on PM's, long on equities, long on real estate.

We will see.........

Mike

 

But all of life takes place in the grey area between "absolute certainty" and "complete unpredictability". You can't be absolutely certain that tomorrow's sunrise will happen at the predicted time, but you'd be quite the fool to bet against it.

Really, now? With 17 named storms already, and the season not yet over? That puts it in the top 10, out of the last 160 years.

When evaluating predictions, like everything else, you're entitled to your own opinions, but not your own facts.

 

Damn you, Jeff. I thought I could sneak that in without anybody noticing. Of course, you are correct. I still stand by my point, though, that the future behavior of silver can proceed in any direction and for any reason.

 

This isn't a binary situation.

Sure, nobody can predict for certain the future as the unexpected can always happen. Does this mean that because of this lack of 100% certainty that one shouldn't plan for the future? I don't think so. It's usually folly to plan for the unexpected, but it's irresponsible to ignore reasonable expectations of future events based on observations of the present and experience.

 

Of course, I agree with what you say, but I was not even addressing that. We have a saying on the coast of Florida during hurricane season, "Hope for the best and prepare for the worst." Ignoring reasonable expectations is not something we do down here. I was speaking to the fact anything can happen, regardless of what we think.

A few years ago, Enron and MCI were 2 thriving companies. The next day, they didn't exist. Who would have thought that? A couple of years ago, Lehman Brothers was a thriving company. The next day it didn't exist. Rather than try to predict what silver will be worth at some point in the future, I prefer to determine if I like the general outlook for it in the long run and then dollar cost-average along the way. That way, its moving up or down is not that unnerving.

 

Enron and MCI both had huge debt loads. In the case of Enron, there were several analysts at the time questioning their accounting practices and issuing sell ratings, but it was too much fun watching the stock price go up for many people, and who needs all of that thinking anyway. With MCI, I recall industry analysts being puzzled at how they could deliver services for a price that no other company could come close to while being profitable. Turns out they couldn't. With Lehman, I doubt many conservative invesors owned it, or should of owned it given their high debt level and derivative exposure. When others cut off their access to financing, they went under, of course. It would be like owning Morgan Stanley or Bank of America today and not seeing the risk. My only point is that situations like this are very easy to avoid by just choosing companies with low debt levels, earnings, and positive cash flow. I know folks here like to cherry pick the investment disasters to prove a point, but it was very easy to see at the time that these were high risk enterprises even if their sudden bankruptcy was not predictable.

 

Just out of curiosity I did a little digging, and according to Wikipedia Enron's outstanding debt was around $23 billion mostly held by Citigroup and JPM. By today's standards that is a small number compared to the debt these TBTF banks have, which absorbed the losses of Enron in the first place and got compensated by our tax dollars. I would agree that these banks and the other 2 you mentioned have a very high risk and would take it even a step further that they are utterly dependent on financial intervention to remain in business. These are the pillars of the banking economy at least in the private sector, which is all the more reason I feel safer holding precious metals.

 

You are correct that bank have enormous liabilities on their balance sheets. It's the nature of the business [and why I tend to avoid them]. But Enron wasn't a bank and $23B was a pretty large number for an energy trading company masquerading as a utility. Even today there are few electric utilities carrying that much debt.

 

Indeed. I don't think many did see the failures coming. Not because they were not paying attention as suggested above, but rather because the executives were committing illegal activities and lying to investors. They were later jailed for it. Normally illegal activities are hidden by the criminals who commit them. I know of a very large fortune 20 company that was building an electronic trading floor for Enron including hiring and training the employees that were to run it. The floor had to be closed just before it was opened because of Enron's failure. The employees had to be fired, the equipment on the floor scrapped, and the new construction abandoned. They certainly didn't see it coming and they usually do the necessary due diligence on these deals this large.

In a similar manner we now have an entire stock market being propped up by constant hopium and enormous debt creation where the liability for it a is being shifted to the taxpayers and savers. This is why metals will continue to rise. Like you, I would not pin a specific number on it on a certain date, but IMO they will continue to outperform almost anything else. And they have the benefit of no third party risk.

 

Silver will bounce off 40 in Nov and consolidate around 38-39,
Will end year around 42.





...or do something completely different

 

I agree with Cloud I saw those disasters coming, but for different reasons. All of those companies listed had opaque finances. If I cannot clearly see where their profits are being made, I stay away from the firm. The laws you say the executives broke all relate to this opacity. I never trust audited financials, when they report "trading income" and the like. Way too easy for financial assumptions to be the basis for this "profit". I want to see customers paying cash for the services being provided, not financial guesses as to asset appreciation. This is the biggest red flag I would tell investors to watch for.

I do own some BOA, and I have looked at their core exposures and do not think they are overleveraged. I do think both companies BOA took over at the governments bequest have damaged the firm, but I simply believe they can work through it and be a decent performer. I have way less than 1% in it, am not advocating anyone else buying it, just explaining that I own it as to explain why I have an opinion on it and for clarity. I own C for the same reason, again small amount. I am not sure I would touch a straight investment bank though, for the opacity reason.

Chris

 

I agree with you. I've looked at, but never purchased GE for the same opacity reason. It's an American icon, but who knows what's going on inside? Good luck with BAC and C. They might turn out okay but probably aren't suitable as part of a core position. It's comical to watch people roll out the old favorites like Enron and Lehman to try to prove all common stocks are bad. For some reason they can't grasp that avoiding high debt companies is pretty simple unless someone is incredible lazy with money. The failures are the exception, and it takes very little work to come up with a list of sound companies. Remarkably, most people put less time into analyzing an investment than they do in buying a TV -- and then they blame Wall St for not making them rich. LOL

 

I very well could be wrong about them, but I simply like having diversity. We talk here about having PM as a contra asset being sound financially, and I support that, yet I also think having contra assets on the positive economic side equally useful.

I am not advocating anyone following what I do, just talking.

Chris

 

Nobody has done this here. Try re-reading what was said if this is what you believe.

 

When you say things like "we now have an entire stock market being propped up by constant hopium" one would think you were trying to prove that investing in common stocks is a bad idea. If this was not your intent, you need to communicate more clearly.

 

I agree. The one thing many people completely overlook is that a new bull market could break out one of these days, and they will be completely unprepared for in from an investment standpoint.

 

Nothing in that about Enron and MCI. You claimed to be comically amused because they were brought into this conversation which basically adds nothing to the conversation and only serves to distract. It doesn't elevate you above others which ironically, is the only purpose for such a thing.

 

I think your condemnation of the "entire stock market" covers Enron and MCI. Rather than distract, it focuses a bright light on the one sided argument against stocks that might otherwise take place.