At the risk of being chastised on this forum, I have been inspired by another thread regarding futures contracts to put my opinion out there for any comments. There is a lot of discussion regarding traders of paper silver, and their astonishing and absolutely delusional ability to actually believe in such things as futures contracts. I am a trader. I do not favour paper contracts over physical metal. If that were the case, I wouldn't stack. But I am probably neutral in my view, based on my observations. Both paper and physical serve different purposes, and I believe are both credible in that respect. It must be remembered that futures contracts are not used to stack for wealth preservation, nor are they intended to be used that way. This analogy is like buying a truckload of BHP shares and expecting to put part of their mine in your front yard. Yet their are plenty of shareholders who are also stackers. It's easy to sledge JP Morgan for their smackdowns, for every JP Morgan smackdown of "diabolical proportions", there is a buyer(s) taking the other side of the trade in diabolical proportions as well. There is so much banter on this forum about the the "not real", "imaginary", "fairy", "paper" silver. It seems like wishful thinking. At the present time, simple observation indicates this is simply not true. If it were true, there would not be so much emphasis on spot price by stackers. So much anguish at a spot dip. So much elation at a spot spike. So much discussion regarding where spot will be by the end of XXXX month (sounds like speculation and futures talk?). There is (IMO) not currently disconnect between physical and spot price. Until that disconnect occurs, and I have no doubt that day will come, paper is as good as physical if it is used as intended. And while a trader is getting dollar-for-dollar paper-for-physical, at no premium, and deliverable if required, there is no reason for them to consider it "make believe". Meanwhile, the permabulls keep pushing the line at this unscrupulous form of financial instrument is imaginary and on the brink of failure..... (crickets) .......soon........ well, any moment now ....... (crickets) Just my humble opinion. I welcome all to either set me straight, comment, or just shoot me down in flames. End of Rant.
You got most of my terms right, but you missed another of my descriptions of futures contracts - economic pornography. See, I got a new computer so I can "p" now. You are right wrc, I got no idea what I'm talking about. The point in the other thread was, why would a futures trader sell gold to buy USD if the world was going to shit. Because futures traders don't care about the commodity they purchase - it is just a trade. Unlike primary producers who lock in future prices for grain or beef in order to plan for the future, the buyers of futures in precious metals, oil etc don't actually want physical delivery. They are not buying physical gold to hedge, they are buying paper gold in order to make more USD. They are speculators who wish to take advantage of the daily fluctuations in the market in order to make a profit.
Edit to add: actually that wasn't the point. The point was, why is the USD viewed as a safe haven and gold (and other commodities) is not.Ooops, I quoted myself. Narcissism.
I thought the issue with paper silver that people had was that theres 100x more silver on paper than there actually physically exists. Correct me if im wrong, im still new to this.
I wasn't particularly aiming this at you mmm....shiney! It just seems to be the general opinion, and I am always open to considering different opinions - that's what forums are for.
Well... your point is kinda null cause you can say the exact same thing with physical gold. You buy gold to make more USD and we are all essentially speculators who are speculating on the price of gold moving up since tomorrow comes after today. Essentially, all derivatives are is an exposure to the price, not to the physical commodity or whatever it is you bought. It only becomes an exposure to the physical commodity when delivery is actually demanded (but since physical delivery is less than 2% for all derivatives, you know ). The hatred that the permabulls have with derivatives seem sound to me since they have a vested interest in it. Currently the size of the paper market vastly outweighs that of the physical market which helps drive down the price of their PMs, the only way their prediction can come true is when the promise of physical delivery is enforced and it can't be kept by the other side. So yes, the permabulls are right in that the two biggest influences on whether or not they all become billionaires is both quantitative easing which weakens the value of fiat money against commodities and the derivatives market which affects the present day spot price through volatility and "manipulation". Though considering the size of the paper market, if enough hedge funds demanded physical delivery, spot prices will go parabolic in an instant. From the way he's written up his post. I doubt he's a trader. Anyway his entire argument against the permabulls' five or ten year view is with a three month view. Its like saying, "you're wrong that Greece will default from all its debt and leave the Euro eventually because its hasn't defaulted from all its debt today and its still in the Euro today!" If you really are a trader though, I'm honestly surprised because all the bankers that I know always use figures in their discussion so to see someone involved in the finance industry make a big claim with no actual proof other than "well, it hasn't happened yet so you PMbugs are all wrong!" is an eye-opener.
You think you have me pegged by the way I type my post? :lol: Oh contraire. Maybe it is the way I've written up my post? My argument is the permabulls veiw of imminent implosion, while paper keeps plodding along - quote:"Meanwhile, the permabulls keep pushing the line at this unscrupulous form of financial instrument is imaginary and on the brink of failure..." No, I said I believe the day will come, but until it does, to claim a total dissociation between paper and physical is IMO innaccurate. quote: "Until that disconnect occurs, and I have no doubt that day will come...." I am surprised you assume I am involved in the financial industry? I thought you doubt I am a trader? My proof is that the system is still intact and functioning, though probably too well for the paper-haters liking. Even stackers are tied to the spot "paper price", and adjust their sales threads accordingly when dealing in physical, so my observation is: there is no disconnect, implying that currently paper commodities are not imaginary.
The futures markets allow one to get long or short exposure to a variety of commodities including gold & silver. Some futures brokers allow for physical delivery.
Paper silver is a sham. They trade more paper silver in a couple of days than there is pysical silver mined in a year. Buying and selling something that does not exist like that is clearly outrageous and non comparable to holding the asset in you hands. They have all sorts of fine print in the ETPMAG type paper silver, it's a game of musical chairs, if you hold your silver you are safely sitting down enjoying the music. Paper holders will get burned when the music stops.
OK. I can fully accept this point of view given the reasoning of volume of paper traded. But this also highlights my point. What I would like to know is, given it is such a sham, why is the price of physical is dependent on this paper trade of non-existance. And, given this dependance, why is it so easily dismissed as outrageously non-comparible to holding the physical?
1) Yes I do actually. The comparison I'm bringing up is like my friends who buy an expensive camera and takes pictures, then they put up in their facebook professional profile that they are a photographer. When you were born and travel back and forth from an economy thats essentially all-in on financial gambling like Singapore, its not that difficult to pick it out. 2) There's a good quote I have for this argument I hear from the critics, "beauty is in the eye of the beholder". Now if you think silver should go to $100 by the conservative guys, then the permabulls are correct because it wouldn't matter 2 months ago if you bought silver at 33 an ounce or if you bought it in 2008 at 18 an ounce, you're still making a return on your money so its a good investment. Also, their timeframe of imminent implosion might be different to your's. Surely, the value of fiat money has weakened against PMs every year since the GFC, that's an irrefutable fact. Maybe the value of fiat money hasn't gone down enough in value enough for you, I'm guessing you were one of the ones assuming imminent implosion to mean $100 SILVER IN 2012, NO CORRECTIONS, NON-STOP PARABOLIC MOVE TO INFINITY. Facts are, they haven't been proven wrong yet since everything is still going their way, the only things that the critics can really point out is that individual bulls have gotten price calls wrong. 3) Its already disassociated, I've already pointed out the difference between the paper and physical market. What is your opinion even based on? To claim that there is no disassociation is equivalent to saying that there is enough physical silver to cover the contracts. There isn't. I'll say it again, where are your figures that the disassociation isn't' there already. 4) Your main point is moot because it does nothing to contradict the permabull's point. Actually, considering how all permabull paper-haters who have invested in PMs are making profits every year on their investments, I would think they are pretty happy. They might be displeased that their predictions can't come sooner, so I guess maybe you should send them an email criticizing their greed. And your example of somehow stackers tying their silver to spot prices on sales threads being anything remotely close to proof that there is no disconnect between paper and physical markets is kinda dumb. If the silver prices really are being supressed, who the heck would want to buy silver at its real price, obviously you'll charge right into the spot price since its undervalued. Of course, if there are others like you who believe that the silver futures market isn't imaginary. I guess there's a great business opportunity in funding secure caves in mountains since there is statistically 50 billion ounces of silver. You'd make a good business selling secure storage facilities to JP Morgan since they'd need somewhere to keep all of it. Think about it, its better than investing in home properties since storage fees give a better return than domestic rent. Maybe buying a bunch of dynamite sticks and going to the Blue Mountains would be a pretty safe investment. Its pretty secluded and its easy to bribe state governments to lease you that land.
Thanks for your input. In between all your blah, blah, I suppose you reinforced my first line: Didn't think this thread could happen without it getting personal. I suppose it is easier to sit and sling shit rather than intelligently conveying your thoughts on a topic. Apologies for having a point of veiw that differs to the mainstream on this forum. Just one question, given you claim you proved paper commodity prices are dissociated from physical, what market price do you put on silver at the moment?
If you can accept that Paper Silver is a sham the same as much of the derivatives market is a sham, the big problem is that its the derivatives market that is the pricesetter for the physical and yet if it wasn't for physical silver you would not have a market. That to me is crazy. Very much the same as the US Fed printing a Fiat currency without anything physical to back it up. Thats what has got countries in a mess in the first place. No tangible assets with a promise to pay for it in the future. IMO, the physical silver and Gold should have a completely separate pricing mechanism to the derivatives market. As a general note the 9 largest banks collectively have a Derivatives exposure of $228.72 Trillion which is over 3 times the entire global economy. JP Morgan has just over $70 Trillion exposure. The thing i dislike about this type of gambling, the players are producing a casino out of thin air at everyone elses expense if things should go wrong. We the taxpayers will be the longterm sufferers. Wait for the Carbon Trading Derivatives market to get into full swing. You only need to look at the global level of debt to understand that the entire derivatives market is not sustainable. http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2012/03/derivs by bank.jpg http://demonocracy.info/infographics/usa/derivatives/bank_exposure.html Cheers markcoinoz
Ssssshhhhhhhhhh! Don't let anyone find out!!! PS, don't ever change that avatar Shiney, or I'll have to go back to my Libertad's!
I'm willing to retract everything I've said and admit I'm wrong, I just want to see where are the figures you're getting it from. I just find it hard to believe that a trader can make any play without the numbers to back it. Since you have a belief that affects the way to trade in the market, I am interested in where you are getting the figures from since if you're right, then I'm going to lose all my money. To answer your question though, I wouldn't know because I only try to learn about economics and don't bother about intricate specifics. The best place to ask this question though isn't in market and economics section, it would be in the stocks and derivatives section because those guys actually research current mining output and the rate of new mining discoveries. About the actual price, look at it this way. there are 50 billion ounces right now in the futures market world wide (thats a conservative estimate), only 2% of all derivatives contract ever ask for delivery (that's a general round-off of all derivatives). Now 2% of 50 billion is 1 billion ounces. The current supply of silver is only around 1 billion ounces a year. Basically, the entire market doesn't even make sense. So 98% of the entire silver futures market is nothing more than price exposure. Of course, a conman would try to trick someone and say that everyone in that futures market actually wants silver so it should be the current price per ounce multiplied by 50. But basically, the entire market doesn't even care about the metal itself, they are just exposing themselves to the volatility of the price. Also, because there is so much fake silver in the futures market, it distorts price discovery since if there is this much supply and only so little demand, it forces down the price of silver. Its real value should be in triple digits, that's the only thing I'm certain of.
Basically, the stocks and derivatives section is the best place to find out its true price is because you need to know: a) what is the percentage of contracts that demand physical delivery because I'm just using the 2% general rule as a safe guess. I don't know the real percentage. Then you need to know whether or not the people on the other side of the trade even have any of the physical silver. b) then the guys who know about stocks will be the best informed people to go to to research the current amount of mines left, how many ounces they have left, how many new mines do we need to discover per year to match the demand etc Only a PMs trader would be able to find information that in depth, and I'm not one of them.
