This is Why NO $50 Silver

Just to clarify: As of today at 2:52pm EDT, I'm now completely out of silver, including miners.

 

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Interesting. I know you are a professional trader, and you may not want to comment ( and I respect and understand completely), but was there a specific reason other than the near high of the day that you might want to share? I found it interesting that when the S&P report was issued, that silver dropped about a $1.30 fast and then recovered most by day's end. I suspect this was due to margin calls on equity stocks, so those needing margin cash sold their PM holdings rather than equities. This was interesting because it did emphasized the amount of "all in " speculation that exists to me, as this was the perfect scenario for a leap in silver due to credible rating reports, but it didn't occur.

jim

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The irony of it... that was when I woke up. I actually intended to place the order when the market opened, but I was in bed with the flu.

 

Wow! An honest man!

 

Oh yeah, and how old were you then, 12? The great pre-teen precious metals trader! Medoraman, you've demonstrated you don't know what "money" is, nor the difference between "saving" and "investing", and have spouted off such nonsense as "peak gas". I think your MBA from 20 years ago is a bit rusty. You gave surface indication of having evaluated my calculator, but all of your objections were already accounted for, indicating that you either didn't actually look at it or didn't understand it. But instead of asking for help, you threw mud. You don't understand how people value things into the future and have erroneously stated that it is impossible, even though this is a basic function of finance. Nonetheless, you've also admitted I'm right and agreed that, "$130 silver is assured, I will agree with you." I think you should stick to cheese and ancient coin collecting, as your analysis of macroeconomics is extremely wanting. You said that "you remind me of someone in the mid 90's who just started making money in dot com stocks and were on the Yahoo and America Online boards then, boldly predicting that Ebay will trade at $400 shortly and 'its different this time.'" Project much? I'd bet dollars to donuts that person you're reminded of was YOU! Just because you made foolish bets on poor analysis does not mean that everyone does or that all financial forecasting is wrong. Your holier than thou attitude is unwarranted and laughable.

Cloudsweeper99, you certainly have made predictions, including that "gold and silver will reach their climax" and that "people will never invest more than 1% in precious metals" and that "the trend will end someday", and most laughably, that my end would be the same as late '90s tech bubble apologists, among which I was NOT one. You've actually made almost no posts indicating any level of facts or reasoning contrary to mine, but stated your opinions as fact, and immediately took to attacking me personally. You assert, without any proof or reasoning, that my comments are "factually incorrect" and "display no knowledge". But where you've actually attempted to argue, you've instead demonstrated that you do not understand how inflation works and how it impacts the economy. It seems to me that, having admitted your "first venture into the PM area was in 1977", you're probably one of those old-timers who got burned and never forgave the shiny metals for their insolence. Then you have the gall to pretend that you're protecting people from me! You who does not understand the monetary system and its inflationary effects, want to "protect" people from the idea that they need protection from the falling Dollar. You who would leave them exposed to the ravages of hyperinflation, are the protector? Get over yourself. You've admitted that you're averse to reading any bullish case which would make you reconsider your preconceived BS, such as the analysis from Zero Hedge or Turd Ferguson. Your head is stuck in the sand if not some other dark unspeakable place, so don't talk to me about "mental flexibility" or "reading comprehension". BTW, in this century, "probability and human nature" are also scientific disciplines, but I wouldn't expect you to know that given your posts so far.

If you're lucky, it will pull back to lower than here this summer. If you're smart, you'll buy then. I would never be so careless and rash as to be exposed completely to the fall of the Dollar. Much safer would be to own a core position and buy protection against it falling rather than selling completely. Good luck.

LOL! "All in" speculation, are you serious? 99% of the investment community hates precious metals and is short. It's always amusing to me how people want to explain the reason for this or that minor move in any particular market.

For everyone who is selling, going short, or worried about their precious metals positions as a result of any of the misinformation and paranoia mentioned in this forum, here are two must-read articles:

Debunking the Gold Bubble Myth, by Eric Sprott & Andrew Morris

Debunking Anti-Gold Propaganda, by Doug Casey

 

Standard and Poor's issued a negative outlook on U.S. sovereign debt yesterday -- what do you think will happen to interest rates, the Dollar, and precious metals if/when S&P and other ratings agencies actually downgrade U.S. debt ratings? What happens when the Treasury bubble pops? Might this happen when Congress fails to enforce the debt ceiling in a few weeks? Is this why billionaires have been getting out of Treasuries and into precious metals lately?

 

I recently sold a small mount at $32, some more at $43, but since I aquired at $15 and at $30, I am up a bit. I don't know anything at all about economic theory, I am only interested in turning a profit.

gary

 

Passant. I'm not "exposed completely to the fall of the dollar" though I am considering taking a play long the dollar. I just haven't decided on the most logical course of action for that or the proper entry point.

 

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Well since inputting "Bernanke's Assumptions" results in a lower value for silver than today's, it's pretty obvious that your criticism is unfounded. The calculator doesn't presuppose anything, but simply weights your own assumptions. But like I thought, you have no interest in actually understanding my calculator or how it could help you to value silver according to your own assumptions. And that, I think, is foolish. You like to think you know everything, but fall well short on each and every point.

Ooo, more feathers in your cap. Look in the mirror, bully.

Who is the paranoid one? I'm just having a discussion, but you and Cloud seem to need to deride those who make strong points of opposition to your tenaciously held misconceptions. I'm sorry you have such a weak sense of self-worth.

 

A recent report released from The Silver Institute titled "The Future of Silver Industrial Demand" estimates that the amount of silver used for industrial purposes is estimated to rise to 665.9 million troy ounces by 2015, which would be a 36 percent increase from the 487 million used in 2010.

Not that I think industrial usage is what's going to be driving the price in the next 4-5 years, this does speak against the OP's case nonetheless.

 

Geithner has already said that they have Republican votes locked up to ensure the debt ceiling is raised. (There were a ton of excellent links on thebulliondesk.com yesterday!) So it looks like more sailing toward the edge of the ocean for the time being instead of flipping a u'ey and tipping half of the rum overboard. The most likely scenario IMO (based on what I've read) is that QE2 is the supposed end, Fed interest rates will rise in 2012, and the US credit rating will be downgraded, the last of which would also likely cause additional interest rate hikes at which point the economy will face a serious stress test (potentially popping the treasury bubble), and more than likely QE3 will ensue by popular demand. The metals outlook doesn't look any different to me than it did when I dove in.

 

I also keep hearing that the Fed is supposed to stop quantitative easing in June, but I don't see how they possibly can. The current interest rate on Treasury bonds averages just under 3%. The total national debt is roughly $14.3 trillion. $14.3 trillion * 0.03 = $429 billion in annual interest. If the interest rate merely rises to 5%, which is still on the LOW side, and the government runs another $1.7 trillion deficit in 2011, then by next year, the annual interest will be $16 trillion * 0.05 = $800 billion. Now it's true that the prevailing rate won't apply to the entire debt all at once, but since the average maturity is around 4 years, with almost all new debt on the shorter end, somewhere between 30% and 50% has to be rolled over, in addition to new borrowing, so something close to half of it will be at the higher rate inside of a year. But the point is, whether the new annual debt service is $600 billion or $800 billion or more, where are they going to get the money to pay it?

They could barely even pass a budget that cut $38 billion (and which the CBO says actually doesn't cut even $1 billion), so where are they going to free up an extra $200-$400 billion? Paul Ryan's budget plan -- which would be very optimistic to anticipate being passed -- only cuts around $400 billion, and that's meant to take us in a direction which reduces deficits. Imagine if we actually passed a $400 billion budget cut... and it was entirely swallowed by increased interest payments! Seeing as it's highly unlikely we'll even see $100 billion in cuts anytime soon, the Fed absolutely cannot stop printing money and buying Treasuries on the open market, either directly or through primary dealers (e.g. Goldman Sachs, JPMorgan, et al), or some more convoluted laundered path, in order to try to suppress rates as long and as much as possible. Of course if the U.S. ratings were downgraded, that would make the Fed's job even harder!

They will do anything to keep the Treasury bubble inflated. Anything. Letting it pop -- as it eventually must do -- will be armageddon. Rates on our sovereign debt will go to Greek range, at the least, which is to say 18% for 3-year bonds. $16 trillion * 0.18 = $2.88 trillion in interest, which is about $700 billion more than total U.S. government income, leaving zero for military, entitlements, or anything else. And at that point, short of shutting down the government and repudiating the debt, what is left but yet more monetization?

If anyone sees a remotely probable way that we don't end up with hyperinflation (i.e. the condition in which monetization leads to greater deficits which requires yet more monetization, in a self-reinforcing feedback loop), I would truly love to hear it.

 

I won't quote your post, but very well thought out. I have seen people talk about trillion dollar cuts being necessary on the news, so we're not beyond the point of no return yet, although many of us saw this as inevitable. I have not seen any evidence of a commitment to QE2 being the end by the Fed, merely outsiders alluding to it which doesn't mean much. Of course they would never commit earlier than necessary. There has never been a shortage of ideas, but a lack of carrying them out, or maybe more correctly, a fervor for carrying out a particular agenda. My solution would be enforce the Constitution, get on a gold standard, and abandon all international (pick your favorite acronym) and market coercion. There's no reason the US can't be an independently regulated nation given adequate and intentional competency. It's a bit of a catch 22 considering the current paradigm, but it would provide stability after the shake out.

 

What they're talking about is trillion dollar cuts over a span of 10 or 20 years, not an annual cut of anywhere near a trillion. Even Senator Rand Paul's proposal, the most "extreme" of all, only cuts $4 trillion in 5 years, i.e. $800 billion a year. That's less than half the deficit. So still there is the problem of maintaining super-low interest rates in order to prevent the deficit from exploding.

That would be my solution as well, if I were king. However, is that remotely probable? No. Our Congress, President, and Federal Reserve will not take that path. I can say that with 99.9999999% assuredness. And even a one-in-a-billion shot might be giving them too much credit. Is there anything they could reasonably be expected to do that could lead us out of this? I can't think of a thing.

 

Yep that's pertty much how I see it as well. The only thing I interpret differently is the timing of a downgrade. If the debt ceiling is increased (very likely) and we go into QE3 (very likely) then I think the downgrade would follow.

Bluesboy65

 

The interest rate on Treasury debt is fixed. A general rise in interest rates does not increase the cost of debt service on the entire balance of the US Government debt.

 

Do people pushing for the gold standard realize the US is not the worlds largest producer of gold? In fact the US ranks somewhere between 4th to 6th place in this category. South Africa, China, Australia are the top 3. Do you really want these governments controlling the US money supply - the world's money supply? Seems most of the gold standard advocates express serious concern about the US Dollar losing reserve status. Convert to a gold standard and the US Dollar by default loses reserve status.

 

The Boogie Man is coming

 

In this forum, I have freely shared my personal expectations and observations to counter some of the nonsense that a small number of folks like you spread. I have never made price predictions in the sense that you constantly do. Do you think gold and silver prices will not reach a top? Do you think that silver could ever become more than 1% of global investment assets when it is such a small physical market? Do you believe the present trends in PM prices will never end? If so, I would caution everyone to think about what you say and protect themselves from you. It is obvious that you are just restating some of the extreme nonsense that is prevalent on various end-of-the-world-as-we-know-it internet sites. I've seen your type many times over the years, and I've seen people hurt by the snake oil salesmen. My word of caution to them is to tune you out and do a little real thinking and analysis for themselves. You and I both know you don't know what you are talking about. I just want a few others to realize it too.

Have a nice day!