Silver as an investment

YOUR DRIVING YOURSELF CRAZY

Shelby.....I normally don't come in here much and read your blog....but I did spend a little time reading this thread. I must say.....as being OBJECTIVE, mind you, YOU ARE DRIVING YOURSELF ABSOLUTELY MAD with all this CONFLICTING TECHNICAL STUFF. Believe me you....I have been there, and the INFORMATION OVERLOAD will only do more HARM than GOOD.

For every BULL there is a BEAR. For every DEFLATIONIST, there is an INFLATIONIST. For every ANAL-LIST who says its a TOP...another one says its a BOTTOM. This can drive a person totally INSANE.

I am putting together an article as I have said in the SILVERSTOCKREPORT and here, that might bring SOME FACTS and understanding where this ECONOMIC WORLD is heading.

To me, SHORT TERM MOVES are for KICKS and GIGGLES....but the LONG TERM TREND is VERY BULLISH for GOLD and SILVER. You bring up MARTIN ARMSTRONG quite a bit. His most recent article is on what he terms a PHASE TRANSISTION in the MONETARY SYSTEM...which means it could COLLAPSE quite quickly.

Regardless.......things are FAR WORSE than people REALIZE. I would be surprised if the FEDERAL GOVT will be answering the phone in the next 20 years.

Steve, you are very welcome here. Thanks for taking the time to post. We appreciate hearing your thoughts. I will not censor you, nor try to stop you from dominating the forum here if you wish (I am nearly certain that the time I have to devote to this forum would soon diminish, so it would help if someone else can keep it alive). But I will try to correct any misunderstandings of my logic and of what I have written.

SRSrocco wrote:YOUR DRIVING YOURSELF CRAZY

Shelby.....I normally don't come in here much and read your blog....but I did spend a little time reading this thread. I must say.....as being OBJECTIVE, mind you, YOU ARE DRIVING YOURSELF ABSOLUTELY MAD with all this CONFLICTING TECHNICAL STUFF. Believe me you....I have been there, and the INFORMATION OVERLOAD will only do more HARM than GOOD...

Absolutely not, I have a very clear picture of where we are headed medium and long-term, and have made money short-term by looking at market sentiment and capturing the middle of it, then being contrarian on the greed and fear ends of short-term market sentiment. That is what the successful trader does-- he plays sentiment. I did miss the current rise from $12.50, because I wasn't prepared (details omitted).

Medium-term silver and stock market will crash, dollar will rise. The silver crash is easy to understand, as it is still more of an industrial commodity than a monetary one (not forever though), which is evident by a topping of the yearly culmulative average price:

http://goldwetrust.up-with.com/precious-metals-f6/silver-as-an-investment-t33-120.htm#1723

Long-term dollar will die, PMs go to moon, social chaos, heading to a new world order at some point after that.

Short-term I am expecting the opposite of the medium-term prediction, for a few more weeks or months. I have to watch carefully the public sentiment. Silver and Masdaq could possibly be an early predictor of the S&P crash.

SRSrocco wrote:...For every BULL there is a BEAR. For every DEFLATIONIST, there is an INFLATIONIST. For every ANAL-LIST who says its a TOP...another one says its a BOTTOM. This can drive a person totally INSANE...

One need not be insane if they have a mathematical certainty. I clearly understand that until a significant portion of the world population moves out of the current fiat system (not just the dollar), then we are in Hyper-Deflation. The more govts provide liquidity, the worse the Hyper-Deflation will get (with short-term speculative inflations then crashes along the way).

When there is a generalized exodus from fiat system, then PMs go to moon, that will be the blowoff top of Hyper-Deflation, transistioning into Hyper-Inflation. Then we get social chaos, wars, etc.., leading into a new world order.

The Peak ________ is caused by the Hyper-Deflation math:

http://goldwetrust.up-with.com/economics-f4/inflation-or-deflation-t9-210.htm#1726

SRSrocco wrote:...I am putting together an article as I have said in the SILVERSTOCKREPORT and here, that might bring SOME FACTS and understanding where this ECONOMIC WORLD is heading.

To me, SHORT TERM MOVES are for KICKS and GIGGLES....but the LONG TERM TREND is VERY BULLISH for GOLD and SILVER. You bring up MARTIN ARMSTRONG quite a bit. His most recent article is on what he terms a PHASE TRANSISTION in the MONETARY SYSTEM...which means it could COLLAPSE quite quickly.

Regardless.......things are FAR WORSE than people REALIZE. I would be surprised if the FEDERAL GOVT will be answering the phone in the next 20 years.

Agreed on the 10 - 20 year long-term scenario. However in the short-term, you need to understand that Armstrong's waterfall phase shift is totally consistent with the Hyper-Deflationary math, and the public will stay in the dollar fraud and negative marginal utility of debt until they can't eat:

http://goldwetrust.up-with.com/economics-f4/inflation-or-deflation-t9-210.htm#1726

So medium-term, it is what I wrote above. I think you should understand now, that I have a very clear understanding. Perhaps you just didn't see how I was tying it all together.

Go back to my post where I showed that S&P500 stock market and gold have similar inverse H&S pattern:

http://goldwetrust.up-with.com/precious-metals-f6/silver-as-an-investment-t33-120.htm#1713

Now see this proof that gold is now correlating to SPX (S&P) more:

http://www.kitco.com/ind/hamilton/aug072009.html

...Over these long time frames (17 years or so), persistent stock-market weakness gradually ramped up gold investment demand. But over the past year, we’ve seen something quite different from this precedent.

Rather than moving in opposition to the stock markets strategically, gold has often moved with them tactically. On a day-to-day basis, there has actually been a high positive correlation between the stock markets and gold! This peculiar tendency was driven by the sheer craziness of the stock panic. And even though it is gradually abating today, gold traders can only ignore it at their own peril...

This is consistent with Pretcher's (EWI) theory that all stock and asset markets now move as one market.



So it appears on major selloffs of S&P, the deleveraging drags gold down (dollar up), then gold rises (dollar down) with the S&P again.

So be forewarned about lower gold and silver prices when S&P crashes. This is the Hyper-Deflation effect I am writing about in the Inflation Deflation thread (Economics forum). Until the public exits fiat money system, then liquidity crisis on each deflation wave will be the overriding factor for our investments (forcing the sale of the most liquid assets, e.g. PMs).

http://www.gold-eagle.com/editorials_08/maund080909.html

Silver is a little bit muddy, and any renewed drop in dollar along with continued blowoff top in stocks, could take silver higher, but I doubt higher than $16. This week could see a quick blowoff top in silver, but it is also likely that silver has topped for this run and the dollar is turning up.

The one thing that is bothering me is that it seems a bit early in the season (summer doldrums) for the stock market to make a mass euphoria top. I would lean towards one wiggle down, and then one more blowoff move in late August or Sept. But there is no assurance that silver and dollar will follow up, except for the correlation in "All One Markets" prior post.

Another possibility is a significant consolidation now, then a much later blowoff top in fall.

In any case, I think this week is a near-term top for silver. I could be wrong, except it sure seems the dollar has no more sellers. Everyone that was going to emerging markets already went and are coming back now that those markets are toppy.

The March 2008 71 dollar was a mass fear misinterpretation that deflation of USA would cause immediate destruction of the dollar and uncoupling by rest of world. Thus is makes sense that dollar will make higher lows now that people are starting to understand that the world can not decouple from the dollar, unless they kill their own economies (move to gold).

And that mass misinterpretation lead to another mass misinterpretation, which I believes proves this is a double-top in gold:

http://www.kitco.com/ind/hamilton/aug072009.html


Notice that the 2nd top (what forms the right shoulder of what some people think is inverse H&S), is gold rising at same time dollar did. This was an incorrection mass reaction that based on the former mass fear which took dollar too low (thus gold too high), thought that gold had to be back at that level in spite of rising dollar, due to expectation of imminent destruction of the dollar (re-fall back to 70 again soon).

Gold has been performing illogically, because the dollar initially performed illogically, because the world can not exit the dollar without crashing itself and moving to gold. But the world isn't going to do that by choice, only by force of nature, after trying everything possible to re-flate (squander) in a controlled deflation.

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ADD: on Maund's link above, note that the silver COT large specs are just 5,000 below former high in June, which is the difference in the open interest from former high. Whereas for Gold the open interest is at same level as former higher in June. Thus I say silver is near the same level short on a % basis, and adding 5,000 to open interest and short Large specs will put silver back at a top. So the point is silver is not too far from being in a most bearish COT structure as well.

China Encourages Silver Bullion for Investment!!!

http://news.silverseek.com/SilverSeek/1249958982.php

Hi Folks,

Apologies in advance for the long post.

Re: RobRoy's post
> China Encourages Silver Bullion for Investment!!!<

From The Wall Street Transcript:

"TWST: What is the silver production industry today in China? What are the risks and some of the advantages?
Mr. Hazout: For the first time, in September 2008, China became a net importer of silver as opposed to a net exporter of silver. Historically, China produced enough silver to feed its own internal demand, but from what we understand, there's approximately 24,000 tons of silver reserve that remains in China. That country is now consuming 4,000 tons per year, so in the next several years, China will be running out of silver."

Link to interview here at http://archive.twst.com/notes/articles/amx612.html

I saw reference to these numbers on silver consumption and stockpiles at one of the sites I visit regularly (and view as a credible source). In trying to search for the original piece I found the article excerpted above. I don't know if TWST is kosher.

China's local production of gold has risen from under 100 tons to over 290 tons in recent years. I recall reading in a commentary by (I think) David Morgan that local silver mine extraction has increased by a similar percentage. I don't think it is controversial to say that China is the No 1 silver refiner in the world, so you would have to think they know something about the silver market.

Professor Fekete, Ted Butler and others have suggested that there is silver aboveground which is not accounted for in industry statistics and both Fekete and Butler have speculated that it is in China.

Soooo! A few questions:
1. Why ramp up retail supply/demand in China if they are facing deficits for industry?
2. Who provides the metal that stiffens the spines of the bullion bank traders who are so consistently and aggressively short in the silver futures markets?

When I connect the dots the word that appears is "misdirection" as used by magicians to focus the attention of the audience away from what they are doing elsewhere to set up their magic trick.

I would also like to make an observation about the recent(ish) announcement that China's "official" gold reserves increased from around 650 tons to around 1040 tons. It surprised me that most people commenting on this seemed to focus on the patient, stealthy acquisition.

The thing that struck me was that the Chinese simply took 400 tons from one Government owned entity and transferred it to another, to add to "official" reserves. Since around 70% plus of their commercial sector is Government owned or controlled I think the real issue is: How many other hollow logs do they have holding "unofficial" reserves, if any?

(If you believe the archive of the Thoughts Of Another articles linked from http://fofoa.blogspot.com/ the Chinese gold accumulation started in earnest in the late 1990s.)

Another example of this Chinese strategy is evident in the rare earth metals segment. China has the "Saudi Arabia" of undeveloped rare earth deposits. (One of the reasons Tibet will never be relinquished is because they are reputed to have huge lithium deposits.) Through manipulating the supply and price, by some reports, the Chinese control as much as 90% of this market.

Any large resource that is discovered elsewhere attracts Chinese interest despite their huge local deposits. I understand that in a recent deal in Australia the junior miner had to have a deal with the Chinese in order to develop the resource because no-one else would fund their share of the development cost of the project if they did not have the Chinese on board. (I can post the specifics if anyone wants them.)

Again, apologies for the long post. I hope you find some of it of interest.

Cheers!

angophera wrote:
Soooo! A few questions:
1. Why ramp up retail supply/demand in China if they are facing deficits for industry?
2. Who provides the metal that stiffens the spines of the bullion bank traders who are so consistently and aggressively short in the silver futures markets?

When I connect the dots the word that appears is "misdirection" as used by magicians to focus the attention of the audience away from what they are doing elsewhere to set up their magic trick.

Any large resource that is discovered elsewhere attracts Chinese interest despite their huge local deposits.

I think the answer to your first question is the Chinese know that there are huge deposits elsewhere in the world and would rather spend there dollars acquiring PM's in other countries like Australia, Africa, Mexico and Canada.
Why not buy now when the Dollar is still worth something and knowing that inflation is not too far off. Then, when inflation does hit, China can ramp up production using cheep labor.

As for your second question.. well... Deceit will prosper.

http://finance.yahoo.com/tech-ticker/article/298957/Dollars-Hit-a-%22Major-Bottom%2C%22-Prechter-Says%3A-Why-Thats-Not-Such-Good-News

http://finance.yahoo.com/tech-ticker/article/298981/Inflation-Not-a-Problem-%22Deflationary-Depression%22-in-Our-Future-Prechter-Says

I find it useful to listen to Pretcher present the logic.

Shelby do you see the same as Prechter concerning the PM's and PM stocks? I don't think I wil be selling my stocks but just buy more on lows but I will liquidate half of my Sprotts PM fund and buy back later this year or early next year. I invested 10% of my portfolio 5 Dec. 2008 and now up nicely. Over 100%.

If what im seeing is correct, then it's time to sell...

Metal Mania: "Heavily Overbought" Gold & Silver Due for a Major Fall, Prechter Says

""Even though people are one-sidedly bullish on precious metals, they're not making any progress at all," says the legendary market watcher. "I would not be loading up on gold at this point, you'll get a better opportunity later."

http://finance.yahoo.com/tech-ticker/article/299368/Metal-Mania-%22Heavily-Overbought%22-Gold-&-Silver-Due-for-a-Major-Fall-Prechter-Says?tickers=GLD,SLV,GDX,FCX,NEM,PSAU,ABX

Absolutely as I have been saying for past days, I would sell all and move into cash (especially if you are up 100% you take some profits). The caveat is the timing, we might get one more bounce up from here in metals and down in dollar, but it will be minimal. As for the stock market, I am not yet confident it will crash now, rather I think it will correct only, then go higher and crash later in year. So I think PTB may make Pretcher look like a short-term fool, before proving him correct, so him being on national media in such a big way today, makes me think we have a short-term bounce coming first to trick all those who follow Pretcher now. So I expect the metals to move down to $12, then back up a little, before making the big crash later in year back down to $9 for silver.

I was mentioning Pretcher's view in this thread, several days ago before he was brought on Yahoo Finance today.

I have sold 80% of my silver and gold, and sold all my stocks. I am waiting to short the stock market. I am contemplating shorting the metals if I see the dollar has indeed broken out. If the dollar breaks higher with silver making one more highly oversold gasp for $15s, then I will probably short it. I am still wary about shorting the S&P yet, because I think many investors have been away for summer and haven't yet jumped on the bankwagon.

The main reason I support Pretchers view over the medium-term, is that everyone seems to bearish on dollar thinking there is too much supply of Tbonds (huge govt borrowings), but people fail to realize that there is a quadrillion of derivative dollar obligations that can create demand for dollars on the next credit squeeze around the corner. And this credit squeeze will drive capital back into Tbonds again, make specutacular profits for those buying Tbonds now. Thus, I think Goldman Sachs wanted to create the appearance that China was bailing on Tbonds, so the interest rates would pop up, Goldman buys, then they will make huge profits when the credit squeeze returns in a few months. When China announces something, then that is propoganda. I don't know why people think the Chinese PTB is not connected to the Western PTB.

With respect to silver specifically, note how the dollar moved lower than when silver was at $16, but silver only reached $15. This plus $16 being lower than $21, with the H&S top pattern I showed in silver ($16 in 2006, $21 in 2008, $16 in 2009), indicates a major fall coming. This would agree with a collapsing world economy as silver is still primarily an industrial commodity (until the world runs from fiat). It makes sense as silver was only de-monetized fully in 1965 (actually 1971 for 40% kennedys), the $50 price in 1980 was the blowoff reaction to this de-monetization, and now silver is trending downwards to find it's ultimate low, before returning as money when fiat society reaches rock bottom. It is possible silver comes back to $8s again before 2012, making it's final bottom before headed into a long glorious secular bull as real money returns to the world.

...by setting new position limits. Ted Butler thinks the silver shorts may be forced to liquidate until they comply with those limits. Anyone know a possible timetable? This wild card could cause a permanent shift to a higher trading range for gold and silver. I don't see a runaway pricing situation yet, since the environment is still deflationary. Why wouldn't the PTB allow this upward price shift in the trading range? They can point to a reasonable explanation for it while still keeping prices under control.

dz20854 wrote:...by setting new position limits. Ted Butler thinks the silver shorts may be forced to liquidate until they comply with those limits. Anyone know a possible timetable? This wild card could cause a permanent shift to a higher trading range for gold and silver. I don't see a runaway pricing situation yet, since the environment is still deflationary. Why wouldn't the PTB allow this upward price shift in the trading range? They can point to a reasonable explanation for it while still keeping prices under control.

I think Butler is delusional. Why would the crooks want to set position limits on the very thing they must control to keep people in dollar. And the last thing PTB want is PMs rising when both stock market is falling and dollar is rising, they prefer to let them run when stocks or dollar (or both) are on trend.

The new head of CFTC is from Goldman Sucks (19 year career). Do you really think they will cut off the arms of their friends over at Godmen Sacrifices and JPeter Morgrins? Gressler is just posturing and will throw up a few changes for some other commodity. The inquiry was not for PMs specifically but for all the commodities.

And why did Gressler throw this bait to Butler? Precisely to lock in all the fools into their PMs, when they tank the price. They used Hommel at $21 to screem "buy now!", by attacking his ego with Nadler.

Ok if I am wrong, I still have 3000 oz for the unexpected rocket shot.

Looks like the Fed just signalled that it will kill the stock market by Oct, and is thus able to get a pre-emptive rise in dollar sympathetic to that promise:

http://market-ticker.denninger.net/archives/1325-Prognostication-FOMC-In-An-Hour-UPDATED.html

...We'll see if you get to laugh at me in an hour or not!

Updated: NAILED IT. Q/E to be exited in October, NO INCREASE IN SIZE. The Dollar sported wood immediately.

This is strong evidence that we are in Hyper-deflation. The Fed will chose to telegraph a reduction of liquidity in Oct in order to prop up the dollar. Actually Derringer misses the probable outcome that 30 & 10 year TBonds will fall on the crash and Fed wants the rate to rise interim to give Goldmud Sucks the chance to buy them now at high interest rates, to make killing on selling bonds when the next crash comes Oct or so.

http://www.finviz.com/insidertrading.ashx?or=-10&tv=100000&tc=7&o=-transactionValue

Even, Bill Gates dumped 1% of his shares (in one week!) for a cool $165 million. How much will he sell next week?

I been writing since over a week ago to expect this.

S&P500 sold below 992 so for sure it will go into at least a dip into the 950 range, if not the big selloff down below 666. However, I think this will not be the big sell off.

I am trying to decide if jump in now short or wait for a slight bounce back tomorrow, then go short. Or to stay in cash and be glad I sold to fiat before the dip started. Then wait for a more extreme condition to short a bit later on. Thoughts?

Never copy the rash emotion of what the herd is doing (unless you are a day momentum trader).

SRScocco continues to attack me in Hommel forum where he knows I have no right to post:

http://jasonhommelforum.com/forums/showthread.php?p=52201#post52201

...I have been reading what Shelby has been posting on his blog. I wish he was posting back in here as I could have someone to BOUNCE DEBATES against. But, I would say this. Shelby has fallen victim to the WAVE-ISTS, like Bob Prechter. Prechter and his ELLIOT WAVE THEORY has been wrong almost everytime except once...

Steve is trying to change the facts to fit his vision of what he wants. I am not following Pretcher, rather I became convinced of depression (even Steve is admitting depression and defaults) and I became aware that this creates a demand for dollars. Pretcher recognizes this also, but I am not following his wave nonsense, because the waves are not known until after the fact. Pretcher has been many times correct about the direction of gold. He said in late 1970s that it would peak and come back down for a long time. Well he was correct. Pretcher gets critized for expecting deflation since late 1990s and he was beaten by Alan Greenspan and 9/11-- lowering interest rates to near 0 to ignite the real estate bubble after the dot.com bubble.

I think the Central Banks can not ignite a sustained bubble because the marginal utility of debt has gone negative. The main difference between Steve and my predictions now, is I expect dollar to stay strong until we reach the bottom of the drop in equities into 2010 or 2011. When the DJIA gets below 3000, then I will start getting worried about the dollar:

http://finance.yahoo.com/tech-ticker/article/304172/Is-That-Finally-It-for-the-Sucker%27s-Rally?tickers=^dji,^gspc&sec=topStories&pos=9&asset=&ccode=



Note the above chart may be distorted because it may be using operating earnings instead of actual earnings net of all write-downs and costs. So I expect we still have a longer way to go down in stocks than the chart above indicates.

I don't place my trust in men (e.g. Bob Chapman, Jim Sinclair, Peter Schiff, Jim Willy), because they can be fooled (they have been consistently wrong also), but rather in my own logic after studying the facts.

The crux of the point these guys are making for a quick dollar fall is that the derelict 3rd world nations will somehow suddenly stop their servitude (master-slave) role and be great shining societies that embrace the people's money system of gold. Ludicrous! The 3rd world is a bee hive for political control and corruption, and they certainly are not going to embrace a money system that hands the power back to the people. The Chinese kill off even gaming money systems, they are so paranoid! No we only get to gold money when the govts all over the world have failed and the people are wallowing in misery. Then the people assert their individual right to use what ever will feed them for money.

The interest rate delusion is supported by the delusion that the dollar will fall precipitiously because the derelict third world nations will suddenly stop their corrupt political systems of impoverishing their own people, and suddenly return to the gold money that empowers individuals. Nonsense! The global fiat system is a symbiotic plutocracy political system that funnels wealth to the rich in each nation. The gold bugs follow these delusional fairytales, because they want to believe that China can be their friend, but it makes no sense. This is why I think the guys mentioned above are either fooled or being paid off by the plutocracy to spread this nonsense.