silvercomments
New Member
Don't sell your silver. Here I want to give you some reasons.
First reason for the price increase is - as we all know - the obvious - the fiscal cliff and the printing press.
Currently the FED is somewhat halting the print - because it's been like 10 months or so without the QE.
Did it stop the money flowing into the economy? NO. Let's look at it:
http://research.stlouisfed.org/fred2/series/CURRENCY?cid=25
As you can see - the amount of paper in peoples' pockets keeps raising exponentially.
Second reason is the amount of silver available for investment out there.
Let's just consider the current production level and the surplus left for investors every year.
I think there is approximately 200 millions of ounces of silver available per year to investors.
The rest is consumed by industry. So it makes 2 billions of ounces available within next 10 years.
It's nothing. If people panic and start converting a fraction of their wealth into silver - then you know what happens.
Another reason is technical.
I think we are witnessing some sort of accumulation in silver.
Here you can see amounts cleared through LBMA:
http://www.lbma.org.uk/pages/index.cfm?page_id=50&title=clearing_-_statistical_table
Now this is interesting, because it was long thought the volumes there are somewhat 3x higher than the given number.
So just calculate 3x the number to get the physical volume and you can see something is happening there.
Volumes are dropping. Price not falling. Accumulation.
Another reason - leverage.
Without going into details - there are bullion banks out there that are significantly leveraged.
Nobody knows how much, but it seems 20x is reasonable estimation in my opinion.
So once we realize the leverage - there may be less silver out there to support all claims should any occur in the future.
Now shouldn't we start asking whether there will be claims like that?
I think we need to better understand the economy in order to answer that.
I don't believe China will keep building empty cities and I don't believe we will see continued growth out there.
Reasons are simple. We are all very rich. Consider just few decades back - when an average family had just acquired a TV.
Today we all have TVs, PCs, laptops, cars, washing machines, homes, condos and more stereo equipment than ever before.
The market is overloaded with crap and we trash stuff like we had no conscious.
People don't need more stuff. This is why the economy is slowing. The activity out there is slowing down over long term.
FED can print all they want - but the resulting money stream will only pump up the food rather than giving us an opportunity to buy another car.
There will be no more jobs out there as we don't need to produce more stuff.
Right now China is building reserves of coal, copper, zinc, lead, steel and whatever you can think of.
There are mountains of copper out there actually. What can possibly happen to the prices of unwanted stuff?
Do you really think a slowdown will cause copper to increase in prices?
So here we arrive at another reason to buy silver - a copper price crash.
The net profit margin of a major copper producer - FCX - is only 9%.
If copper price falls down to a long term trend-line which is at ~$1.7 - then most of the copper producers will lose money and will limit their output.
All we need is -10% to start seeing that. We are at $3.5 per pound and we could easily see $2.8 which is sufficient to close a chunk of world silver output.
The same applies to lead and zinc. Technically they all seem to want to fall down. We just need more time to get there.
No level of manipulation will keep prices of lead, zinc and copper up in the air during slowdown.
If you believe in slow down - those will crash.
All we need to believe is that printed money don't pump up all sectors.
This is why we see both inflation and deflation simultaneously.
Bottom line - a global slowdown will cut off significant amount of silver output.
But there is one more reason to buy silver - the coming bailout and interest rates derivatives.
Most people don't even think about possible consequences of interest raise change.
Most of us think - the low interest rates can go on forever. WRONG.
There is one fundamental flaw with Keynesians - they think they can stimulate the economy and keep the banking world going.
But in real life we know cycles are more powerful than humans. Nothing can stop the long cycle.
As I said above - we are too rich - so the cycle will eventually end and that will shrink the governments.
Tax collections will drop and credit activity will go down inevitably.
That is when the central banks will keep printing to keep the governments going and that will cause the interest rates to go up.
It will start when some banks will lose their shirts on the interest derivatives - they will need a bailout and that will require trillions of dollars within a month or so.
This will break the financial system and silver will go up crazy.
At the end of all this - there will be bank runs and people will take the money out of banks, because the money will lose value faster than you can think of.
People will want to convert ALL their paper money to something safe. It is NOT HAPPENING right now. But it will happen. Just wait.
First reason for the price increase is - as we all know - the obvious - the fiscal cliff and the printing press.
Currently the FED is somewhat halting the print - because it's been like 10 months or so without the QE.
Did it stop the money flowing into the economy? NO. Let's look at it:
http://research.stlouisfed.org/fred2/series/CURRENCY?cid=25
As you can see - the amount of paper in peoples' pockets keeps raising exponentially.
Second reason is the amount of silver available for investment out there.
Let's just consider the current production level and the surplus left for investors every year.
I think there is approximately 200 millions of ounces of silver available per year to investors.
The rest is consumed by industry. So it makes 2 billions of ounces available within next 10 years.
It's nothing. If people panic and start converting a fraction of their wealth into silver - then you know what happens.
Another reason is technical.
I think we are witnessing some sort of accumulation in silver.
Here you can see amounts cleared through LBMA:
http://www.lbma.org.uk/pages/index.cfm?page_id=50&title=clearing_-_statistical_table
Now this is interesting, because it was long thought the volumes there are somewhat 3x higher than the given number.
So just calculate 3x the number to get the physical volume and you can see something is happening there.
Volumes are dropping. Price not falling. Accumulation.
Another reason - leverage.
Without going into details - there are bullion banks out there that are significantly leveraged.
Nobody knows how much, but it seems 20x is reasonable estimation in my opinion.
So once we realize the leverage - there may be less silver out there to support all claims should any occur in the future.
Now shouldn't we start asking whether there will be claims like that?
I think we need to better understand the economy in order to answer that.
I don't believe China will keep building empty cities and I don't believe we will see continued growth out there.
Reasons are simple. We are all very rich. Consider just few decades back - when an average family had just acquired a TV.
Today we all have TVs, PCs, laptops, cars, washing machines, homes, condos and more stereo equipment than ever before.
The market is overloaded with crap and we trash stuff like we had no conscious.
People don't need more stuff. This is why the economy is slowing. The activity out there is slowing down over long term.
FED can print all they want - but the resulting money stream will only pump up the food rather than giving us an opportunity to buy another car.
There will be no more jobs out there as we don't need to produce more stuff.
Right now China is building reserves of coal, copper, zinc, lead, steel and whatever you can think of.
There are mountains of copper out there actually. What can possibly happen to the prices of unwanted stuff?
Do you really think a slowdown will cause copper to increase in prices?
So here we arrive at another reason to buy silver - a copper price crash.
The net profit margin of a major copper producer - FCX - is only 9%.
If copper price falls down to a long term trend-line which is at ~$1.7 - then most of the copper producers will lose money and will limit their output.
All we need is -10% to start seeing that. We are at $3.5 per pound and we could easily see $2.8 which is sufficient to close a chunk of world silver output.
The same applies to lead and zinc. Technically they all seem to want to fall down. We just need more time to get there.
No level of manipulation will keep prices of lead, zinc and copper up in the air during slowdown.
If you believe in slow down - those will crash.
All we need to believe is that printed money don't pump up all sectors.
This is why we see both inflation and deflation simultaneously.
Bottom line - a global slowdown will cut off significant amount of silver output.
But there is one more reason to buy silver - the coming bailout and interest rates derivatives.
Most people don't even think about possible consequences of interest raise change.
Most of us think - the low interest rates can go on forever. WRONG.
There is one fundamental flaw with Keynesians - they think they can stimulate the economy and keep the banking world going.
But in real life we know cycles are more powerful than humans. Nothing can stop the long cycle.
As I said above - we are too rich - so the cycle will eventually end and that will shrink the governments.
Tax collections will drop and credit activity will go down inevitably.
That is when the central banks will keep printing to keep the governments going and that will cause the interest rates to go up.
It will start when some banks will lose their shirts on the interest derivatives - they will need a bailout and that will require trillions of dollars within a month or so.
This will break the financial system and silver will go up crazy.
At the end of all this - there will be bank runs and people will take the money out of banks, because the money will lose value faster than you can think of.
People will want to convert ALL their paper money to something safe. It is NOT HAPPENING right now. But it will happen. Just wait.
