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<p>[QUOTE=&quot;Rono, post: 1158304, member: 6492&quot;]Howdy folks,</p><p><br /></p><p>Wonderful discussion as usual.&nbsp;&nbsp; So many good minds around here.&nbsp; A pleasure.</p><p><br /></p><p>Great silver demand stats from the silverinstitute by medoraman.&nbsp; Note that with the surge in investment demand there was also a surge in coinage demand.&nbsp; </p><p><br /></p><p>Recall back a couple years when there was a shortage of bullion available?&nbsp; &nbsp; You could get this and that but you might have to wait for delivery and the premiums were very high.&nbsp;&nbsp; It reminded me of the supply/demand curves from Econ 101 when there is an artificial price imposed on the market and supply dries up.&nbsp; Remember the gas price controls under Nixon?&nbsp; All of a sudden we had supply shortages.&nbsp;&nbsp; hmmmm.&nbsp; I know that if I had some silver I believed was worth $50 an ounce and you told me the spot price was $40 and you&#039;d give me $45, I&#039;m not selling.&nbsp; &nbsp; </p><p><br /></p><p>There was a divergence between the paper price of silver and the street price.&nbsp;&nbsp; It was reflected in higher premiums.&nbsp;&nbsp; Now all the kings men tell me the market is pure and the final authority - and without badmouthing the good Captain Price, because over the longer run he IS the final authority - I know that in the short run I can sell silver futures contracts on the market for silver that I don&#039;t own (naked short sales).&nbsp; I can do this with enormous leverage [what, 5% - 10% down] and if I have any kind of real money involved, I can seriously depress the spot price of silver on the open market.&nbsp; Basic Jesse Livermore.&nbsp;&nbsp; </p><p><br /></p><p>And please, I&#039;m not endorsing any sort of conspiracy theory that JPM and GS, et al are rigging the market.&nbsp;&nbsp; Not hardly.&nbsp; As parties of interest, they are always going to do anything they can to move the price in a direction that&#039;s favorable to them.&nbsp;&nbsp; It&#039;s human nature and we would all do it if we could.&nbsp; That&#039;s not a conspiracy - it&#039;s the way the bloody game is played.&nbsp; &nbsp; </p><p><br /></p><p>Pretty much the same goes for a lot of the statistics they tell me.&nbsp; [Anyone that believes inflation on the street is at 2% raise their hand.]&nbsp; As an interested party, I am going to react and behave based upon my view of things.&nbsp; If I believe that silver is more dear than the current price of $43 an ounce, I&#039;m a buyer.&nbsp; If not, I&#039;m a seller.&nbsp; </p><p><br /></p><p>People make the markets and that&#039;s another reason why I&#039;m leery of going by statistics and facts.&nbsp; People do weird things for weird reasons that don&#039;t always make sense.&nbsp; Extraordinary Popular Delusions and the Madness of Crowds.&nbsp;&nbsp; Cloud and others are correct that the gold/silver ratio doesn&#039;t have any basis.&nbsp; I would posit that the 50 and 200 Day Moving Aveages used by Technical Analysts in buying and selling stocks don&#039;t have any basis.&nbsp; 50 and 200 have no more importance than 37 and 148.&nbsp; And for that matter, Santa Claus isn&#039;t real but how many letters get mailed to the North Pole and how much money is involved in what kids believe?&nbsp; </p><p><br /></p><p>What gives meaning to the gold/silver ratio and 50 &amp; 200 DMAs and Santa is that sufficient numbers of people believe in them and give them life.&nbsp; If everyone believes a lie and behaves as if it was true - it might as well be true.&nbsp; If folks buy and sell silver and gold based upon the gold/silver ratio, it becomes meaningful.&nbsp; How much?&nbsp; Who knows.&nbsp; We&#039;re talking market psychology and that&#039;s all a variation of gray.</p><p><br /></p><p>To me, this all means that I have to just follow the good Captain Price in a fundamental trending sort of way and ignore the noise and day to day fluctuations.&nbsp;&nbsp; I&#039;m a momentum investor and try to overweight some sector or segment or region that is outperforming the rest of the market.&nbsp;&nbsp; Over the long run things even out (revert to the mean) but in the short run they can diverge enormously and if you simply overweight the trending sector, you can increase your returns relative to those of the overall market.</p><p><br /></p><p>The current gold/silver bull market began in 2001/2002 and because I&#039;ve collected coins for 50 years, I was able to spot it early and begin overweighting it in my investments.&nbsp;&nbsp; The nice thing about smooth long running trends like this, is that you can get in late and out early and still make money.&nbsp; &nbsp; When to sell?&nbsp; I&#039;d would start to sell paper silver and gold if the price broke down 10% or more.&nbsp; If it broke down more, I&#039;d reduce my paper investments more.&nbsp;&nbsp; And if it continued to break down, I&#039;d reduce my position further until I reached my base level of 5% or my portfolio.&nbsp;&nbsp; [and between us weasels, while I was selling paper gold and silver, I&#039;d be buying real gold and silver.]&nbsp; </p><p><br /></p><p>Here&#039;s a nice paper about the various uses for silver.</p><p><br /></p><p><a href="http://www.silverinstitute.org/silver_uses.php" target="_blank" class="externalLink ProxyLink" data-proxy-href="http://www.silverinstitute.org/silver_uses.php" rel="nofollow">http://www.silverinstitute.org/silver_uses.php</a></p><p><br /></p><p>Oh and with regard to any CBs buying silver, I know of nothing factual but do know that there has been a movement in Mexico for several years to go back on a silver standard.&nbsp;&nbsp; Price owns the Elektra change and they actually sell Libertads over the counter.&nbsp;&nbsp; I bought some in Puerto Vallarta a couple of years ago.&nbsp; But are CBs buying?&nbsp; Who knows.&nbsp;&nbsp; I wouldn&#039;t surprise me in the same vein as why investment demand has surged over the past couple of years - Silver - the poor man&#039;s gold. </p><p><br /></p><p><br /></p><p>and so it goes,</p><p><br /></p><p>peace,</p><p><br /></p><p>rono[/QUOTE]</p><p><br /></p>

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