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Thread: Warning Fools! Silver Will Fall by 66%

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    Default Warning Fools! Silver Will Fall by 66%

    The silver bubble took on a new dimension this month, with the price of the metal rising nearly 30%. Last Monday, share volume in the iShares Silver Trust ETF (NYSE: SLV ) was five times its daily average in the first quarter. While many investors may cite capital preservation as a reason to buy silver, an analysis of the historical data suggests that those who pay nearly $50 an ounce will eventually suffer massive losses.

    Gold's real return: aero
    Like gold, silver has lived up to its billing as a store of value -- if you measure your holding period on a geological timescale. Using data from precious-metal dealer Kitco, I constructed a series of inflation-adjusted silver prices going back to 1800, according to which the metal generated a historical average return of 0.4% per annum. (Much of that small premium over inflation is due to price appreciation over the past 10 months. If we use the price of silver in mid-2010, the average annual return falls to 0.1%).

    There is no reason for investors to expect anything more from silver: Why would a metal -- a commodity with no yield -- accrete value? But silver's price volatility disqualifies it even as a stable store of value. For proof, just take a look at 10-year trailing real returns since 1810 (based on average annual prices):

    The silver bubble took on a new dimension this month, with the price of the metal rising nearly 30%. Last Monday, share volume in the iShares Silver Trust ETF (NYSE: SLV ) was five times its daily average in the first quarter. While many investors may cite capital preservation as a reason to buy silver, an analysis of the historical data suggests that those who pay nearly $50 an ounce will eventually suffer massive losses.

    Gold's real return: aero
    Like gold, silver has lived up to its billing as a store of value -- if you measure your holding period on a geological timescale. Using data from precious-metal dealer Kitco, I constructed a series of inflation-adjusted silver prices going back to 1800, according to which the metal generated a historical average return of 0.4% per annum. (Much of that small premium over inflation is due to price appreciation over the past 10 months. If we use the price of silver in mid-2010, the average annual return falls to 0.1%).

    There is no reason for investors to expect anything more from silver: Why would a metal -- a commodity with no yield -- accrete value? But silver's price volatility disqualifies it even as a stable store of value. For proof, just take a look at 10-year trailing real returns since 1810 (based on average annual prices):

    The silver bubble took on a new dimension this month, with the price of the metal rising nearly 30%. Last Monday, share volume in the iShares Silver Trust ETF (NYSE: SLV ) was five times its daily average in the first quarter. While many investors may cite capital preservation as a reason to buy silver, an analysis of the historical data suggests that those who pay nearly $50 an ounce will eventually suffer massive losses.

    Gold's real return: aero
    Like gold, silver has lived up to its billing as a store of value -- if you measure your holding period on a geological timescale. Using data from precious-metal dealer Kitco, I constructed a series of inflation-adjusted silver prices going back to 1800, according to which the metal generated a historical average return of 0.4% per annum. (Much of that small premium over inflation is due to price appreciation over the past 10 months. If we use the price of silver in mid-2010, the average annual return falls to 0.1%).

    There is no reason for investors to expect anything more from silver: Why would a metal -- a commodity with no yield -- accrete value? But silver's price volatility disqualifies it even as a stable store of value. For proof, just take a look at 10-year trailing real returns since 1810 (based on average annual prices):

    http://www.fool.com/investing/genera...all-by-66.aspx



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    Member Bruno's Avatar
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    People said that at $25, $30, and $40 also. Time will tell.

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    Member Bruno's Avatar
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    Dupe post

  6. #5

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    Quote Originally Posted by bobbyw24 View Post
    ... Why would a metal -- a commodity with no yield -- accrete value? ...
    In that question, the author announces his complete ignorance of the issue. It's not that metals are "accreting value". It's that the measuring stick you are using to measure value is changing. The author has a fundamental misunderstanding of what money is and a complete lack of historical perspective on the "great" Keynesian experiment that's in it's dying days. Everyone loves the returns on a Ponzi scheme until it collapses.
    I compiled a "brief" history of events since October 2008 that are defining the global currency war and the role that gold is playing:

    Tin Foil Hats, Economic Reality and the Total Perspective Vortex

    Also, have you contacted your Congressional Rep and asked them co-sponsor Ron Paul's Rep. Paul Broun Jr.'s HR 1098 77: Free Competition in Currencies Act?

  7. #6

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    Quote Originally Posted by Bern View Post
    In that question, the author announces his complete ignorance of the issue. It's not that metals are "accreting value". It's that the measuring stick you are using to measure value is changing. The author has a fundamental misunderstanding of what money is and a complete lack of historical perspective on the "great" Keynesian experiment that's in it's dying days. Everyone loves the returns on a Ponzi scheme until it collapses.
    Lol yup.

    Same thing could be said for anything:

    "Why would oil, a commodity with no yield -- accrete value?"

    Some people are so ignorant of economics and prices, its so sad.

  8. #7
    Member Gideon's Avatar
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    Quote Originally Posted by Bern View Post
    In that question, the author announces his complete ignorance of the issue. It's not that metals are "accreting value". It's that the measuring stick you are using to measure value is changing. The author has a fundamental misunderstanding of what money is and a complete lack of historical perspective on the "great" Keynesian experiment that's in it's dying days. Everyone loves the returns on a Ponzi scheme until it collapses.
    I would argue that the author is not ignorant, but seeking to deceive and prepare ETF investors to exit the market at the first sign of weakness.

    Ironically, a decent downward correction in the FRN price of Ag would be great for the many folks who are waiting for an opportunity to buy, so that when a significant price correction does occur, we will experience a phenomenal rush into physical PM purchases.

    I hate to patronize this tool for more than he is worth, but keep in mind that it is not the price of silver, gold, fuel and food which are rising.

    Rather, it is faith in the FRN which is waning on a global scale, and therefore we can expect rampant fiat devaluation to further drive demand for physical metals and other tangible commodities.

    The FRN is fr*ckin doomed!
    Peacefully Engaged in Domestic Economic Terrorism Since 2004.

    Audit Fort Knox so we will know how much Tungsten backs the FRN!

  9. #8

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    Quote Originally Posted by Bern View Post
    In that question, the author announces his complete ignorance of the issue. It's not that metals are "accreting value". It's that the measuring stick you are using to measure value is changing. The author has a fundamental misunderstanding of what money is and a complete lack of historical perspective on the "great" Keynesian experiment that's in it's dying days. Everyone loves the returns on a Ponzi scheme until it collapses.
    Exactly. The author is accepting the view that this time isn't different. Most silver investors are buying silver because they think this time is different. Of course, "this time isn't different" crowd has a better track record seeing as 99.9999% of the time this time isn't different. However, maybe the silver bugs are right this time in that it is different, and they'll reap the rewards if they're right. So too will the silver shorts. This is like having a priest and atheist argue; each would argue a reality that they've created within their own belief. At the end of the day, neither will understand the other, since an assumption (acceptance of their own truth) was made at the most basic level of their thought process.

    Also, I've started to come to the understanding that silver price could go up forever, simply because there are so many people who see it as the ultimate asset class. Ever seen Kitco's forum? LOL. It would be interesting to do a study on libertarians and metal holdings. If libertarians can send a politician many millions of dollars, one has to wonder how much gold and silver these same libertarians can buy. I'm almost convinced that a small minority of investors who are buying gold and silver like there is no tomorrow can control the buy-side of the equation, and push the price higher and higher and higher. There aren't many sellers in this group of investors, and should they continue to accumulate, the price of gold and silver could go up forever...err, at least until they start selling.

    On a side note, anyone remember that JP Morgan story? The one where JP Morgan was allowing investors to open trading accounts denominated in gold? Has there been any recent news about it?

    Not sure how popular the program actually was, but I have a feeling that JPM is making a mint writing calls on the holdings. Sure, you're looking at like $3 per month per ounce, or ~2% per year, but even at that rate cash flow is cash flow. They have to be loving the idea that gold is negative carry, seeing as they pay 0% interest on the gold and generate yield with it.

    Gold and silver, when owned in more "financialized" instruments, is actually positive carry, but the yields are pretty low. However, when money is cheap, those who can borrow at low rates can buy gold and silver--or any commodity, for that matter--and generate a positive yield greater than their carry costs.
    Last edited by Jordan; 04-30-2011 at 12:49 PM.

  10. #9

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    What point is he trying to make? In the very long run, gold maintains its purchasing power--that is what he established and everyone knows that. But I myself will sell gold when the market is much higher from here. My holding period on gold is only several years, as is most people's. If you bought gold in the early 1970's and still have it today, you are doing pretty good. But if you sold the gold in the 1980's, invested in the stock market instead and eventually dot coms in the 1990's then sold, then repurchased gold in 2000, then you'd do much better than just outright ownership of gold from the 1970's until now.

    The same is true if you bought stocks in the 1980's but held them until today..You made a big bull run, but now you've been stuck in a bearish slump for a decade when you could've amplified all those gains in 1998-2000 by plowing them into undervalued assets like commodities.

    In 5-8 years, the same will be true only in reverse..probably by then, bonds will be much more lucrative than owning expensive precious metals. It'd be prudent to switch out asset classes, but again, if you plan on owning gold from now until you die, you'll weather some bad storms, but you'll make it through a couple or so bull markets.

  11. #10

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    I've been thinking this is very little to do with the value of silver or gold but more a thing to do with the value of the dollar.



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  12. #11

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    Quote Originally Posted by Gideon View Post
    I would argue that the author is not ignorant, but seeking to deceive and prepare ETF investors to exit the market at the first sign of weakness.

    Ironically, a decent downward correction in the FRN price of Ag would be great for the many folks who are waiting for an opportunity to buy, so that when a significant price correction does occur, we will experience a phenomenal rush into physical PM purchases.

    I hate to patronize this tool for more than he is worth, but keep in mind that it is not the price of silver, gold, fuel and food which are rising.

    Rather, it is faith in the FRN which is waning on a global scale, and therefore we can expect rampant fiat devaluation to further drive demand for physical metals and other tangible commodities.

    The FRN is fr*ckin doomed!
    I agree, he seems to be some kind of a FED shill.

  13. #12

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    The author plays that Caps game on that site and his accuracy at picking stocks is 50%. I think of monkeys and dart boards... just sayin

    http://my.fool.com/profile/TMFBullnBear/activity.aspx
    Ron Paul: "Do you think gold is money?"
    Ben Bernanke: "No"
    ~July 7th, 2011

  14. #13

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    WOWOWOWOWOW! Warning, don't listen to anything ANYONE has to say from that site EVER. When I was about 16 I was really into pharmaceutical companies and I posted a comment on the site about one particular company. I said this stock will "sky rocket to the moon one their drug is FDA approved!". Haha, they posted my comment in an article claiming that it was actually some sort of legitimate investment advice, and the stock shot up in the next week from about .75 to over 2.50.

    The drug was rejected by the FDA and the stock has since dropped to .34. CTIC check it out.
    Tu ne cede malis sed contra audentior ito

  15. #14

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    If silver drops by 66%, I'll look at it as a great buying opportunity! Bring it on!!

  16. #15

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    ^^^ No doubt. Drop baby drop!
    "Everyone who believes in freedom must work diligently for sound money, fully redeemable. Nothing else is compatible with the humanitarian goals of peace and prosperity." -- Ron Paul

    Brother Jonathan

  17. #16

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    No chance. It didn't even drop that much during the 08 crash & we won't see the dollar strengthen like that again. Flight to safety is now Gold.
    Ron Paul: "Do you think gold is money?"
    Ben Bernanke: "No"
    ~July 7th, 2011

  18. #17

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    I took it in the teeth on this forum because I had the courage to say: "Gold will plummet, the dollar will strengthen"

    I only made my claim because the Gefiltes at the top have a proven track record. What makes you think they will change their game?
    "..and on Earth anguish of nations, not knowing the way out...while men become faint out of fear and expectation of the things coming upon the inhabited Earth." -- Jesus of Nazareth

  19. #18

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    Quote Originally Posted by YumYum View Post
    I took it in the teeth on this forum because I had the courage to say: "Gold will plummet, the dollar will strengthen"

    I only made my claim because the Gefiltes at the top have a proven track record. What makes you think they will change their game?
    The key here is that governments and special interests cannot, no matter how hard they try, print gold. So in the long run, the value of gold will go up substantially.
    Last edited by low preference guy; 04-30-2011 at 09:10 PM.

  20. #19

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    Come on guys. Look at the dollar index. Dollar is down 20% in the past year. PM's are up WAY more than 20%. You're speculating on future inflation, which IS likely, but it's speculation nonetheless. As of yet, nothing justifies PM's being so high; it's not their true value in today's dollars.
    "It is not enough these days to simply question authority. You must speak with it, too."
    -Taylor Mali


    "It does not take a majority to prevail, but rather an irate, tireless minority keen on setting brushfires of freedom in the minds of men."
    -Samuel Adams

  21. #20

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    Quote Originally Posted by kah13176 View Post
    Come on guys. Look at the dollar index. Dollar is down 20% in the past year. PM's are up WAY more than 20%. You're speculating on future inflation, which IS likely, but it's speculation nonetheless. As of yet, nothing justifies PM's being so high; it's not their true value in today's dollars.
    Since when has the true value of the metals been known? There has been so much manipulation in the prices for so many decades, no one knows the exact true price of the metals.

  22. #21

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    Quote Originally Posted by Dr.3D View Post
    Since when has the true value of the metals been known? There has been so much manipulation in the prices for so many decades, no one knows the exact true price of the metals.
    Good point, but then you could say that about any commodity. Perhaps wheat prices are still equilibrating after a negative supply shock caused by Australian floods, for example. Markets are complex and semi-chaotic, you never know.
    "It is not enough these days to simply question authority. You must speak with it, too."
    -Taylor Mali


    "It does not take a majority to prevail, but rather an irate, tireless minority keen on setting brushfires of freedom in the minds of men."
    -Samuel Adams

  23. #22

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    Quote Originally Posted by kah13176 View Post
    As of yet, nothing justifies PM's being so high; it's not their true value in today's dollars.
    How about Utah's move toward honest money? Also, many people around the world are beginning to understand that "Inflation is the increase in the money supply", and fiat inflation is theft. Silver's return to use as a monetary instrument is an important development.
    "Everyone who believes in freedom must work diligently for sound money, fully redeemable. Nothing else is compatible with the humanitarian goals of peace and prosperity." -- Ron Paul

    Brother Jonathan

  24. #23

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    Quote Originally Posted by kah13176 View Post
    Good point, but then you could say that about any commodity. Perhaps wheat prices are still equilibrating after a negative supply shock caused by Australian floods, for example. Markets are complex and semi-chaotic, you never know.
    Not necessarily. Wheat doesn't keep around like silver and gold. I'm pretty sure the Federal Reserve isn't worried about people checking the price of wheat to see how the dollar is doing.

    There were vast stockpiles of silver for a long time, and then the government decided to liquidate those stockpiles and sold them into the market. That constant selling of those stockpiled metals drove down the price for decades. Couple that with the paper market, it is easy to see how the price of silver has been suppressed to make the dollar look better than it really is.

  25. #24

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    At some point, this statement, "Silver Falls by 66%", will be true;
    How long will it take? 1,2,5, or 10 more years?
    • The Bear market in Silver lasted over 20 years.
    • What if the 66% drop happens (for example) after you sell your silver for $401/OZ?
    • Negativity is ignorance, and ignorance is your own personal tyranny. It tells you how to act, how to talk, how to think, and what to feel. You will never see a world without tyrants until you release your own. ~Honored to be Among You

    How does Ron stay so calm?

    $$$$$$$$$$$$$$$$$$

  26. #25

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    I'm thinkin' that I'll sell my silver when it's no less than $100/oz.

  27. #26

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    Quote Originally Posted by youngbuck View Post
    I'm thinkin' that I'll sell my silver when it's no less than $100/oz.
    I'll start thinking about selling when I can buy one ounce of gold with ten ounces of silver. I'll just start thinking about it.

  28. #27

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    Acknowledging that nothing drastic has changed in market fundamentals? ~$45. Believing this claim from a site called Fool.com from a guy named TMFBullnBear and selling your physical.. Priceless.

  29. #28

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    Quote Originally Posted by Jordan View Post
    Exactly. The author is accepting the view that this time isn't different. Most silver investors are buying silver because they think this time is different. Of course, "this time isn't different" crowd has a better track record seeing as 99.9999% of the time this time isn't different. However, maybe the silver bugs are right this time in that it is different, and they'll reap the rewards if they're right. So too will the silver shorts. This is like having a priest and atheist argue; each would argue a reality that they've created within their own belief. At the end of the day, neither will understand the other, since an assumption (acceptance of their own truth) was made at the most basic level of their thought process.

    Also, I've started to come to the understanding that silver price could go up forever, simply because there are so many people who see it as the ultimate asset class. Ever seen Kitco's forum? LOL. It would be interesting to do a study on libertarians and metal holdings. If libertarians can send a politician many millions of dollars, one has to wonder how much gold and silver these same libertarians can buy. I'm almost convinced that a small minority of investors who are buying gold and silver like there is no tomorrow can control the buy-side of the equation, and push the price higher and higher and higher. There aren't many sellers in this group of investors, and should they continue to accumulate, the price of gold and silver could go up forever...err, at least until they start selling.

    On a side note, anyone remember that JP Morgan story? The one where JP Morgan was allowing investors to open trading accounts denominated in gold? Has there been any recent news about it?

    Not sure how popular the program actually was, but I have a feeling that JPM is making a mint writing calls on the holdings. Sure, you're looking at like $3 per month per ounce, or ~2% per year, but even at that rate cash flow is cash flow. They have to be loving the idea that gold is negative carry, seeing as they pay 0% interest on the gold and generate yield with it.

    Gold and silver, when owned in more "financialized" instruments, is actually positive carry, but the yields are pretty low. However, when money is cheap, those who can borrow at low rates can buy gold and silver--or any commodity, for that matter--and generate a positive yield greater than their carry costs.
    Why do you have to be such a radical?

    Why are the only options you comtemplate "silver will go up forever" or "silver will collapse today or tomorrow"? We are in a moment of the cycle that is extremely bullish for commodities and this part of the cycle can go on for years, but it does not mean it will never end. What about the option: "the bull market for commodities will go on at least for two or three years more and the last part of the cycles tend to be the more parabollic ones"?

  30. #29
    Member scrosnoe's Avatar
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    Default Opportunities abound for Life and Liberty -- Keep Looking up folks!

    Quote Originally Posted by KCIndy View Post
    If silver drops by 66%, I'll look at it as a great buying opportunity! Bring it on!!
    Exactly -- buying opportunity!

    It is difficult to make money in the metals market if you are a short term trader or an emotional trader because the peaks are often sharp and the troughs can be extended. But if you are consistent and buy on dips for the purpose of holding the asset you will be fine.

    I must remind everyone here though that our real treasure is not in earthly treasures that can be stolen, but in the priceless idea of liberty. Where the spirit of the Lord is -- there is Liberty. We have what seems to be a dwindling opportunity to bless the next generation with what our forefathers gave us.

    Let us be ever vigilant in our efforts to restore the respect for Life and Liberty in our land.

    Let us ask the Lord God who made us to have mercy on us and guide us in the battle at hand to restore the republic. May we be a people that He would be pleased to bless once again.

    Blessings,
    Sandie

  31. #30

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    As an atheist, I agree with the above sentiment

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