Originally Posted by
Jordan
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.
Connect With Us