Caput Lupinum said:
I'm convinced there is no "longterm" systematic manipulation of the gold and silver market. Traders may scalp profits on short-term trades, but that's about the extent of it.
Agree.
Here is my opinion, for what it's worth.
Hopefully it may induce some thinking and reflection... and discussion. But I have my flame-suit on anyway. :lol:
From my personal observations, most stackers do so with their eye on the main prize, the final end-point.... the to da' moon scenario. For a huge proportion, this is the reason they started buying physical. It is a simple, yet relatively unknown (by the masses) theory surrounding monetisation of debt by governments that leads to skyrocketing PM prices.
The rhetoric by self-proclaimed experts is so well presented that it seems there can be no other outcome. It is a given. It is not a matter of "if", but just a matter of "when".
This rhetoric appeals to some for a number of reasons. One commonly observed reason (by me) is it is so simple to understand, it is obvious - this appeals to non-sophisticated investors. This reason also has the added appeal of the chance of being part of a very clever minority (club) at the end-point. And, of-course, the guaranteed (?) financial bonanza waiting at the end.
Problem is, this expert-rhetoric isolates PM's into the "real money" category
ONLY, and fails to address the bigger economic complexities surrounding PM prices which include commodities markets and the complex economics surrounding commodity prices, as well as the complexities of money markets, debt markets, central banking policies etc.
If you study investor psychology, stacking plays out as a pretty good text-book example. Once investors are convinced, and become committed stackers, the text-book examples of the top investor psychology/behavioural concepts start to appear consistently. Human beings are great at rationalising our fears. This includes the fear of being wrong. There is no more repugnant feeling in investing than making a wrong decision - especially when that decision was based on such obviously simple and correct logic. No matter how crazy a feeling is, we are able to create a logical sounding argument which reinforces our own decision. This especially happens to those that become emotionally attached to the investment or theory. Here are a few:
Overconfidence may be the most obvious behavioural concept. This is when you place too much confidence in your ability to predict the outcomes of your investment decisions. Overconfident investors are often underdiversified and thus more susceptible to volatility.
Anchoring is related to overconfidence. For example, you make your initial investment decision based on the information available to you at the time. Later, you get news that materially affects any forecasts you initially made. But rather than conduct new analysis, you just revise your old analysis. Because you are anchored, your revised analysis won't fully reflect the new information.
Loss aversion, or the reluctance to accept a loss, can be deadly. For example, one of your investments may be down 20% for good reason. The best decision may be to just book the loss and move on. However, you can't help but think that the investment might comeback. This latter thinking is dangerous because it often results in you increasing your position in the money losing investment. This behaviour is similar to the gambler who makes a series of larger bets in hopes of breaking even.
Frame dependence is a concept that refers to the tendency to change risk tolerance based on the direction of the market. For example, your willingness to tolerate risk may fall when markets are falling. Alternatively, your risk tolerance may rise when markets are rising. This often causes the investor to buy high and sell low.
Sometimes your investments lose money. Of course, it's not your fault, right? defence mechanisms in the form of
excuses are related to overconfidence. Here are some common excuses:
I'm right, it's just the market that's wrong.
This entire fall/rally is all Fed-induced.
Our strategy is not popular with the masses right now.
We're not wrong, we're just early.
Judge me over the full business cycle.
It's the high frequency trading.
This is just a minor aberration.
The market isn't recognizing fundamentals.
The market is rigged.
I'm a contrarian.
I blame the short-sellers.
Valuations are detached from economic reality.
Central bank currency manipulation, plain and simple.
Thanks a lot Obama.
Bernanke/Yellen/Draghi don't know what they're doing.
Hyperinflation is right around the corner.
We're preparing for a depression-like scenario.
I'm in this for the long-haul.
And the number one excuse that comes up over-and-over again......
Stacking is just a method of saving for me.
Why anyone would risk
saving in such a volatile market, I do not know.... unless that is not really their motive
(in which case go back up to the point about rhetoric and "real money"
).
Cheers
