My thoughts on silver

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daveyboy
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My thoughts on silver

The more I look at silver, the more I realise just how hyped it has become and the more hyped it becomes, the more I get gold feet about it. I have silver, quite a substantial amount of it, but recently I have been trading that silver too, I want to lower my cost base, but more so, I want to get some of that fiat back.

So upon analysing this more, or at least my own take on things and listening to the contrarian views too of course, my first thought is why silver? We all know the line that is being touted and that's the western world is coming to an all out collapse and that's obvious, this has been engineered and it indeed very scary, the thinking is of course that in a hyper inflationary environment silver and gold do wonderfully well. However is this really true? I need to look at the charts more to scertain that so I am not going to confirm or deny that, I am leaving it as an open question, so please, if you have this info I would be interested in knowing.

Okay. so if we look at the meteoric rise of silver, we can see that from 2004 it has shot up, from approximately 8 dollars to a high of 49 dollars just before May and of course we all know what happened then. However we do need to look at what happened prior to this, why this was so and why silver began rising. If we look at pre 2004, we don't need to  know exactly what stocks, but we do know that investors are interested in one thing, returns, by 2004, the bubbles in the housing market were obvious to see, the effects of repealing glass steagalz very apparent. So up steps gold and silver, you have those holding the physical, but in reality, those holding aren't driving the price, the market is driving the price. That is to say the trading, so why silver? silver offered tremendous returns because of the extremely low margins, the rise in industrial demand particularly from India and China and you have reason to see why people would suggest the value of silver was about to rise.

I have been caught by this silver euphoria, I have been sold on this line that if you don't get it now, it will be too late. I let me emotions dominate my decisions and for that, this is definitely a lesson learned. We do indeed see some obvious examples of how the price can be suppressed, the leasing of metals for instance is an excellent example. However I want to focus for now on the the market, it is interesting to see how many people insist that the price of silver will be x, I hope so, I think there is a good chance that the price of silver will markedly increase, but having now understood a little bit more about how these markets work, i have to say that it's so damn difficult to say which way the markets will move. We have those who are bullish hedging, we have 10 minute trading, 5 minute trading, those trading for a few weeks, those dipping in and out dependent on the news, depending on reports. We have this constant wave of buying and selling and that is why it is so difficult to pinpoint where the price is going.

It is interesting how Turd keeps repeating this line that long term he is still very bullish silver, it leads me to suggest that he is admitting that silver could stay in this price range, or even below this for quite some time. That admission only underlines just how unpredictable this market is, or for that matter any market is. Going back to my previous point, the low margin calls have enticed this market to explode into life, whilst we rail against unscrupulous speculators, the reality is that real price discovery is speculation, the value of this metal, or for that matter anything is driven by speculation. In order for these speculators to compete either on the long or short, they have to bring to the table a certain amount in order to trade a 5000 ounce contract, approximately 8%, the fact that it's 8% now, after so many margin calls, underlines just how the margins were before the beginning of May and furthermore points to just how rampant the long speculation was.

Now of course there are those that say that what the CME did was criminal, they introduced 5 margin hikes in the space of 9 days, and point to the fact that JPM and HSBC likely drove the price into parabolic terrirtory, jeff nielson amongst others states this. What is telling about this is the fact that it's an admission that JPM plays both the short side and long side of the market. So while people decry JPM for sparking the margin hikes, they want to ignore the part such an institution played in driving price too. However that said, the question was asked why were margin hikes introduced while price was falling, but it was falling with great volatility, which would spark more margin hikes, again though the fact this shook out so many longs only goes to show just how much the longs were short.

Now on that point, stellaconcepts did a very effective job of illustrating why this notion that there is only one physical silver ounce for every paper ounce is just a falsehood. I heard something from a permabull a few months ago in which he was talking about how many contracts were traded during the last month compared to how much silver was in the inventory. This is just utterly false, again I will go back to the buying and selling, yes, lets suppose a billion contracts were traded last month, that does ot mean I can say to you, see the ratio of silver to paper silver is almost 60/1. It's a falsehood because those contracts have exchanged hands, they have been bought and sold, those that sold can't suddenly claim they want the silver, they sold it, it's not in their hands anymore. So instead if we take the current contracts, divide by the inventory then we get about 17/1. In addition to this, this 100 plus /1 is attempted to be proven by alluding to the various silver bets, but if I have bet big on silver price and someone has bet against it, it has nothing to do with the physical because there is not the expectation of delivery, it is entirely a paper bet.

So for arguments sake we settle on 17/1 as being the true picture, that is then cited as the reason why the paper market will break, after all, people will demand the physical. This is also nonsense and why? well, bearing in mind many trading accounts couldn't cope with bringing 8% of a 5000 ounce contract, so how do you suppose those remaining can afford the extra 92%? They can't, they aren't interested in receiving, they want to bet with the the possibility of low capital and big returns.

However some people are stuck on this idea that paper silver is the great evil, it is the cause of keeping the price down, but if that is true, then why is it that prior to paper silver, the price didn't explode? In fact the permabulls in the last 30 years, have lost if they kept hold of their silver. This idea that buying and selling physical silver is stupid or short sighted is absolute nonsense. If you anticipate a big fall off, then you take a risk, if you decide to stay in, then you take a risk. Only the individual can weigh up which is the more risky of the two decisions.

Which leads to these campaigns, campaigns like buy and hold physical silver and thus collapsing J P Morgan. I have always found this to be one of the more puzzling campaigns. This struck home to me when I first contacted bullionvault, when I asked the question of who supplied the silver, lo and behold the answer was JPM. When I go onto the APMEX website, I see that the transactions are facilitated through JPM. You, me, we, are aiding JPM when we take delivery of silver, directly we are. Now of course, we can cite how during times of increased demand for silver premiums charged by the dealers are rising, it's a combination of increased demand which can place a strain upon supply. However I recall exactly what happened in May, the premiums rose substantially, the price began settling, the premiums halved.

I really don't know where the price is heading, I suspect that we could well see a subdued price for quite some time, followed by more moves, both up and down. There is nothing wrong with keeping gold, or silver, whichever if you see it as a haven, a last resort in this crazy days, there is nothing wrong with buying silver, to sell silver, but there is something wrong with consciously propogating bullshit and there are some on the long side just as guilty of that as anyone else.

Edited by admin on 11/08/2014 - 06:08
lilbromarky1
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You made some valid points in

You made some valid points in here.  Very curious to see where this goes, debate-wise. 

My only comment is that these types of self-doubting posts only seem to surface around the times when the price tanks.  Its tougher to make this type of argument 3 weeks ago when we saw 44 for a moment in Ag.  Your ideas seem to represent all of the doubts that a holder of physical might encounter in his own mind.  Interesting stuff and like I said well delivered in terms of getting your ideas out in a clear concise manner.

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lilbromarky1
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I'll add some more since

I'll add some more since you've got me thinking.  The whole argument hinges almost entirely on one your first arguments.  Will we see hyperinflation here?  I consider this every day while I'm musing about Econ and the markets. 

The ideal silver rising price environment would be a slow steady inflation where interest rates are rising but not enough to outweigh the inflation.  So you get the Central Banks chasing the inflation instead of getting out ahead of it.

Can we get to that place in america?  Let look at some of the factors that might say yes:

Bernanke tripled M1 in 2008:

http://img175.imageshack.us/img175/3871/basey.png

1.6 Trillion in new aggregate reserves since the 2008 bailouts waiting to be unleashed through fractional reserve: 

http://www.federalreserve.gov/releases/H3/Current/

For the first time I've ever seen in years US Treasuries held by foreign nations is decreasing:

http://www.treasury.gov/resource-center/data-chart-center/tic/Documents/mfh.txt

Bernanke has guaranteed interest rates at 0 until at least 2013:

http://www.treasury.gov/resource-center/data-chart-center/tic/Documents/mfh.txt

Do these seem like enough factors to add up to a hyperinflation for you?  That's the question.

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Some excellent points. I

Some excellent points. I appreciate your input and hope that you don't get flamed for providing an alternative outlook. I also hope that your viewpoint doesn't get discredited as hysteria due to the recent drop. I have thought along these lines as well and think that doing so is healthy. I feel drops like this allow an opportunity to reflect. It's always good to have doubt and caution and to never take something at face value.

I personally don't stack physical. I feel that guns, ammo, food, supplies, land, etc are far more valuable and will be much more valuable in times of panic than several ounces of silver and gold. If I had "wealth" to protect I would hold some physical but only after ample amounts of the before mentioned are accumulated.

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@daveyboy, Very good

@daveyboy,

Very good post--all interesting points. While I think there are good arguments for its long-term value, I am agnostic as a trader.

The only point I would make to address any criticism of big price moves (not that you are criticizing, but some do) is that these kinds of moves happen in all sorts of assets, and nobody utters a peep.  Apple, anyone?  Green Mountain Coffee? They don't pay dividends, either, and your "ownership" of the company consists of pieces of paper that your broker supposedly knows the location of.  It's all just price speculation--what's the big deal?  But, for some reason, PMs just press people's buttons, and bring out the loonies.

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Getting away from specualtive ideas about manipulation

I think anyone looking to INVEST in ANY commodity needs to get away from all the talk of manipulated markets and do thier own research on the fundamentals. That's certainly what the likes of Sprott, Butler, Morgan and many others have done. Ultimately all markets are "manipulated" that's the very nature of markets! To me personally the debate about most asset classes seems to have got completely lost in a malstrom of not just investor ignorance, but a failure to recognise that there is a systemic failure in price discovery in the markets of ALL asset classes.

At some point in the not too distant past the banking world turned the markets into a casino. Im not sure whether this was as a result of conscious plan or just simply a mistake on the part of law makers and regulators. What I do no is that the clearest manifestation of this mistake is the concept that we can go "short" ANYTHING.  To me personally this one single element of the current trading rules of the markets symbolises everything that has gone wrong with them. If someone can anwer the most basic question "Since when was betting on the failure of a company, or the fall in price of ANYTHING an INVESTMENT? The answer is never, and that's the point. The moment regualtion allowed this idea loose onto the markets they turned the markets into a casino.

That for me is why now I have started using all my fiat to by REAL assets, such as land, buildings, artwork, and yes PMs....ultimately a casino is not a place to build wealth, unless your lucky enough to own the casino (A real asset).

The sooner governments wake up to the con trick big banks have pulled on thier own people, I for one am out of the MARKETS....oops sorry I meant casino.

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it is curious that all of a

it is curious that all of a sudden the entire structure of the deflationary/hyperinflationary endgame argument comes into question at the precise moment that the greatest drop in short positions in silver has just occurred. Not to mention the chicanery being played by Benny and the Inkjets. One thing is for sure: I do agree with Hand, if all one has is several ounces of silver (or anything really), it won't be enough to survive.

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Hello Rufanuf, Regarding

Hello Rufanuf,

Regarding going short on a stock.  This is actually a manifestation of free market.  Its not a sign of corruption.  The fact that so many people make fortunes on shorting is a testament to america's decline.

Shorting would arise in any free market.  A trader who knew something was going to fall would naturally, through scheming on his own, borrow shares from a friend with a contract established to hand the same number of shares back to his friend at a later date.  Once the trader has his buddy's shares in hand, he would execute a short by selling his buddies shares and buying someone else's back.

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I think it comes down

to personal beliefs. Nothing changed for me when PM's were in the head wind and nothing has changed since the dollar bounce took away that wind.

The only thing I am sure of is the debt increasing, never will it be paid back in the amount owed.

One small rise in interest rates will start a house of cards collapse.........how long Big Ben can keep the rates down is key in how long PM's can be suppressed IMO. Once this can no longer be done then PM;s will gain the rightful place that is needed now.

I read an article not to long ago , but forgot who wrote it. In regards to PM's , it was stated that we would see Gold with swings of 50-150  and silver with 2-5-8 dollar swings as the norm, it went further to state that this will be the warning that we are on the downhill slope and sliding fast.

Personally, it made sense more than anything I see in todays markets which is why I wont try to compete against the house when I know the dice are loaded.

Silver and Gold are a LONG term position for me regardless of price in any for of fiat.....I still am not where I want to be in the holdings, but I sure like the price action we have now regardless of the cause as I would like to wrap up my necessity buying and convert to my want buying.

If silver or Gold goes up, so be it. If it goes down, so be it.......I could care less if it hit 5 bucks or 60...600 or 6000. I just hope I never have to use it, those will be scary times indeed.

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@libromarky1

You see thats the problem in the worlds markets today. You have been sold this crappy idea, by modern day thinkers of how markets should work that happen to be mostly banking goons, pinstipe boys. Going short is a BET. Its not an investment. The markets should be about INVESTMENT, a free market should mean you can choose to be in it or out of it, but not BET against it. Their should be no "borrowing of shares" you need to borrow money to buy shares. Shares should not be transferrable thru anything but the market, otherwise underhanded games can go on, as they do millions of times a day.

To illustrate the point clearly you really only need to read all the posts throughout this blog about manipulation in silver. If there was no such thing as going "short" it would be a non discussion, because big players would not be able to manipulate the market with shorts. they would simply have to buy their silver or sell it, rather than shuffle bits of paper around on "card table" Simple as that.

I don't want to direct this phrase at you specifically but all the same its a phrase that comes to mind. Never argue with an idiot, he will drag you down to his level and beat you with experience, thats the state of the markets we trade in today and I would say the vast majority of its participants at present.  UNDERSTAND that shorting a stock or commodity (naked or other wise) is a BET it has nothing to do with a free market and everything to do with a casino. Once the general public start to realise they are being "gamed" out of their life savings and investment money, knowone will want to play by those rules any more and the big boys who have convinced the regulators and millions of investors like you that "its part of a free market" in order to to rig the system in their favour will have fewer and fewer people to tempt into their casino. The trouble is becuase their are genuine underlying assets being manipulated here, and those assets represent the productivity of millions of people...it can only be a continued death spiral of all econmic activity until the rules of the market are reset back to common sense. Shares et al cannot be "BORROWED, LEASED, LOANED, OFFSET, SHORTED" or what ever other baloney people wish to use to describe manipulation. They can only be BOUGHT or SOLD. end of story...then markets will start to reflect real values once again, and true price discovery will return.

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For those who doubt the

For those who doubt the importance of silver.

 

First and foremost, remember there is an overwhelming amount of paper that controls the market, we all know that, and have been warned that prices would be volatile, but not forever. As stated by many of the top analysts, the fact that gold and silver have been suppressed is the direct reason why they believe a shortage will be immanent. Prices being suppressed over the years have kept mining companies from investing in more projects, equipment and infrastructure, which results in lower output supply. Big investors don't look at prices, they go long-term and look at what's available compared to future demand. 

In my view, we have just completed the first phase with bond rates at historical lows while they continue to fall. There is no other place for money to flow and the only asset that is capable (and willing) to accept that money is precious metals, no limits attached.

 

If you purchased silver because of the JPM story, sorry but you’re fool and have not researched enough on the importance of silver. I hate to say this but I find many Americans very ignorant in regards to their understanding of the world. I don’t blame them because for all these years they were on top of the world and the largest consumers in the world. Well, that seems to be changing as Asia (yes that means China and India) are the new players on the map, and I will remind everyone that there is 2.5 billion people (that’s five times the U.S.) that have been saving all that Walmart money you Americans spent.

Forget investment demand for a moment and ask yourself; what’s going to happen in the coming years when they consume as Americans did during the past few decades? Cars, TVs, electronics, batteries, water purification*, medical applications, jewelry, military weapons, solar power* and more. I’ll say it again, 2.5 billion people, five times the U.S.

 

To put things into prospective, there will be five times the consumption (I’m estimating) coming on to the market while the output supply is only sufficient for current demand. Remember it will take many years for new mining companies to produce the amount needed for mid-term demand, that will leave a 3-5 year short gap for supply to catch up. Imagine that, silver going up for a few years steady. It’s possible and very likely to happen.

 

I’ll leave you with this chart as a reminder for what's to come. Be ready cause it’s on...

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Just imagine JPM, Bank of

Just imagine JPM, Bank of America, Citibank, Wells Fargo selling gold/silver coins on their websites. Not in America! 

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Follow on comments

@ Silverwatchdog.... Your observations are sound, the next few decades are going to be all about massive growth in consumption coming out of the developing world, which bodes well for all commodities. The question is will the stranglehold the manipulators have on these markets be broken? I think the answer is "probably" otheriwse they risk becoming irrelevant. If thier flashing red and green prices simply dont reflect reality anymore.

Thats the point i was trying to make in my previous post. In many ways the manipualtions that go on in the global financial markets, will just make them less and less relevant. And its a very similar argument to hwats gone on in the realm of fiat currencies. In the end if the manipulators carry on with what they are doing stealing a few percentage points erach and every year from the normal hardworking people, in the end the currency in questions relevancce will just wither and die. I think government call that inflation dont they? I think the masses call it a breakdown in trust. Being robbed by stealth over generations is not a very nice prospect when you wake up to it, my response is to by hard assets, get away from intangible assets like fiat currencies, live off as little of fiat as you possibly can. Fiat are our givernments con trick, manipulated markets are the banksters.....take away the influence they have over your economic life....thats the only solution, out of the markets and out of fiat as much as you can.

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What happens when these start

What happens when these start showing up in every corner of China Gold dispensing ATMs arrive in China

Along with these stats:

Bankcard transactions in China during the first half of 2011 reached 178.6 trillion yuan or US$27.9 trillion U.S. dollars.

According to data released by the China Banking Association, banks in China have issued a total of 2.67 billion bankcards as of the end of June, or roughly two cards for every Chinese citizen, according to the association.

The shorts are fleeing and you're worried about a paper sell-off. 

 

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Thanks for the constructive

Thanks for the constructive comments which have been posted and I would like to address the posters remarking on this being raised in the downturn. Well, at moments like this, it is a good time for contemplation, the problem is when the price is rising we (me definitely) lose sight of the anomalies, or we decide to push them to one side in declaring this is what the market wants. Clearly there is a sound reason behind declaring silver a sound investment, but this isn't necessarily reflected within the market. Emotion aside, anyone that knows even the most basic thing about trading knows that often you trade on patterns, certainly not on the long term.

These margin hikes are moving the price down, very often the very same people who suddenly go long, are the very people hedging, causing those weird fluctuations. As I touched upon before, I am not suggesting that cheating/crookery isn't occurring, we know that the major players will be insider dealing. I mentioned this other issue before too, but in trying to market to us, the consumer, there have been some extremely eyebrow raising statements made. These were either deliberately stated knowing they were a lie, or they demonstrate just how little these so called iconic traders know. Brother John for instance for instance disseminated this headline that millions of silver ounces had been dumped onto the market within the space of a few minutes and it had only led to a fall in the market of some $1.50, clearly with the volume that he thought he had seen, the sums just wouldn't have added up. We may have seen a fall close to $15 perhaps, yet nonetheless this was repeated across many boards. When the market sees this, it's not going to do silver any favours (I would speculate) and does undermine the case for more aggressive longs. When the market is subdued like this, it is the ideal time for sobering thought and to question. I was anticipating a barrage of criticism after my first post but it seems events have been a wake up call, in so far as people will now look at the wider aspects of this too.

I just saw the poster above, increased demand for a commodity doesn't necessarily reflect in higher prices when that market is so leveraged was my point. The question is just how highly leveraged are the longs in this market? if the margin hikes become 9% for instance of a 5000 ounce contract, will we see a mass of accounts being margin called again?. If so, we are likely to see another big drop in the price and so whilst demand increases, the paper price is falling. Perhaps I wasn't clear enough in the first post, what I meant simply put with the premiums is dealers buy at one price, if the price then shoots below that price, then they have to cover their asses by increasing their prices, when the market price stabilises, they are able to buy at one price with the confidence that they can make a profit through a much smaller premium. We can make the case about a shortage of silver, perhaps this will come to pass, or perhaps there will be a huge new discovery, perhaps industrial demand will slow down massively. Let us suppose it does come to pass, but it comes to pass in 20 years, still an appealing proposition? suppose we don't have hyper inflation just high inflation, but the leverage in speculation has been curbed, still an appealing proposition?

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Rufanuf wrote:You see thats

Rufanuf wrote:

You see thats the problem in the worlds markets today. You have been sold this crappy idea, by modern day thinkers of how markets should work that happen to be mostly banking goons, pinstipe boys. Going short is a BET. Its not an investment. The markets should be about INVESTMENT, a free market should mean you can choose to be in it or out of it, but not BET against it. Their should be no "borrowing of shares" you need to borrow money to buy shares. Shares should not be transferrable thru anything but the market, otherwise underhanded games can go on, as they do millions of times a day.

To illustrate the point clearly you really only need to read all the posts throughout this blog about manipulation in silver. If there was no such thing as going "short" it would be a non discussion, because big players would not be able to manipulate the market with shorts. they would simply have to buy their silver or sell it, rather than shuffle bits of paper around on "card table" Simple as that.

I don't want to direct this phrase at you specifically but all the same its a phrase that comes to mind. Never argue with an idiot, he will drag you down to his level and beat you with experience, thats the state of the markets we trade in today and I would say the vast majority of its participants at present.  UNDERSTAND that shorting a stock or commodity (naked or other wise) is a BET it has nothing to do with a free market and everything to do with a casino. Once the general public start to realise they are being "gamed" out of their life savings and investment money, knowone will want to play by those rules any more and the big boys who have convinced the regulators and millions of investors like you that "its part of a free market" in order to to rig the system in their favour will have fewer and fewer people to tempt into their casino. The trouble is becuase their are genuine underlying assets being manipulated here, and those assets represent the productivity of millions of people...it can only be a continued death spiral of all econmic activity until the rules of the market are reset back to common sense. Shares et al cannot be "BORROWED, LEASED, LOANED, OFFSET, SHORTED" or what ever other baloney people wish to use to describe manipulation. They can only be BOUGHT or SOLD. end of story...then markets will start to reflect real values once again, and true price discovery will return.

Trust me I was in your camp at one point regarding shorts.  Some of the words that you wrote sound as if I would have written them 6 months ago.  I can appreciate your frustration with this market but I believe your frustration is misdirected.  The problem isnt shorts or shorting.  The problem is paper silver that can be created until we are sick to our stomachs.  But even then, there's another problem, not only is there a flood of paper out there, there's also a large percentage of the population who is willing to store their wealth in paper.   Now we have arrived at the root of the issue.  The problem we have in these markets is there's too many people willing to participate in the fast buck systems. 

Lets say though, that you still disagree with me for some reason.  What are you going to do about it from a practical standpoint?  How are you going to stop people from borrowing shares from a friend, selling them, and buying them back later in order to pocket the spread?  It doesnt seem feasible to me. 

How are you going to stop people from creating paper derivatives when there is a huge market full of people who are eager to buy them?  I really dont see this changing until everyone who's a paper fan gets burnt bad. 

I also agree with your idea that the stock market in its current state is less about investing and more about speculating.  Its sad.  Just because its sad doesnt mean that we should enact a law to stop it.  Speculation is what happens when an empire is in decline.  The only way for folks to earn a decent return is to speculate because the pie is shrinking and everyone is fighting over the last piece!

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I am not trying to present

I am not trying to present myself as someone that knows everything, so perhaps you can clear this up for me too. I notice above you mention about the creation of more paper silver as being the enemy, but okay, let's say they create more paper which they then short, who is the long on that? every transaction must be a 2 way process.

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daveyboy wrote: let's say

daveyboy wrote:

let's say they create more paper which they then short, who is the long on that? every transaction must be a 2 way process.

The longs are everybody that bought paper or physical silver in the 40s. Dealers, customers, speculators, idiots. Most of those positions have puked. That's why a lot of the big shorts are showing closed now on the COT from Tuesday's COMEX close. Notice how stable the paper price has been since Tuesday after 1:30 pm? We've been in a range of 30-32. That's pretty tight for silver.

There is much more still to be covered though, so volatility is not gone from the market. If you were waiting to buy cheap silver in the 30s a month ago...why aren't you?

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Rufanuf wrote: To illustrate

Rufanuf wrote:

To illustrate the point clearly you really only need to read all the posts throughout this blog about manipulation in silver. If there was no such thing as going "short" it would be a non discussion, because big players would not be able to manipulate the market with shorts. they would simply have to buy their silver or sell it, rather than shuffle bits of paper around on "card table" Simple as that.

I don't want to direct this phrase at you specifically but all the same its a phrase that comes to mind. Never argue with an idiot, he will drag you down to his level and beat you with experience, that's the state of the markets we trade in today and I would say the vast majority of its participants at present.  UNDERSTAND that shorting a stock or commodity (naked or other wise) is a BET it has nothing to do with a free market and everything to do with a casino.

This is an exceptionally simple and naive view you hold. Stop focusing on the trading market and think about what "short" really means. It means transacting (or trading) with something you don't own to acquire something else (which may or may not be owned outright either). That's it. No great mystery. It also describes how almost every transaction in the world occurs.

If you have or ever had an auto loan, home loan, student loan, credit card purchase, payment plan, layaway plan, ...you went short dollars to purchase whatever you got in return. If you ever signed a lease rental agreement and didn't pre-pay the lease in full at that point or opened a business and took out a business line of credit from a bank or arranged with your suppliers to be billed "net 30" etc...you went short dollars to purchase whatever you got in return. If you ever worked for somebody but only got paid at the end of the week or bi-weekly, your employer shorted you! They got the benefit of you labor in advance of having to pay you for it. You are perpetuating this system every time you pay in cash (note of credit), write a check, use a credit card, or work for pay not immediately rendered. Only a mutually agreed upon exchange (without inducement) of wholly owned real goods/services for real goods/services is a long for long exchange. Everything else is short in some manner.

The problem isn't being short (or borrowing or whatever term you use), it's being too short or having too great a credit line. That's the problem with big silver shorts. They don't have a (short) credit limit. Their positions represent more silver than could be reasonably delivered on demand (any/every delivery month). The physical silver exists, but the price to gather all of it, without cash settlement recourse, would likely bankrupt the short party squeeze victim/s. This is kind of like getting a credit card line at $15 million when the most you've ever made is $35k/yr. There is really no way you could every repay the full amount in your lifetime (even projecting forward reasonably for raises/bonuses/continuing education, etc). Your life expectancy just isn't that long. So either you'd default (settlement/bankruptcy) or be bailed out (roll the loan to another institution or pool all your family/friends assets to get out from under).

Prudent short selling keeps the markets of everything more active and liquid and helps market discovery of the near-future risk/reward price of the economy. Take on too much risk, whoever/whatever you are, and you will likely be badly burned or have to be bailed out. That's casino.

So are you still against all short-selling? Do you still want legislation to enforce it and force all transaction to occur in a transparent marketplace? Good luck getting your employer to pay you in food hourly for whatever you give them in return. Better eat it fast too unless you have your own desk refrigerator and a lot of space! Sounds too much like a totalitarian utopia to me :)

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Silver_Watchdog
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What amazes me the most is

What amazes me the most is the opposite psychology from east to the west. When prices get hit, the western world complains about losses while the east takes advantage by going on a PM shopping spree.

pailin
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Silver_Watchdog wrote: What

Silver_Watchdog wrote:

What amazes me the most is the opposite psychology from east to the west. When prices get hit, the western world complains about losses while the east takes advantage by going on a PM shopping spree.

Not I. I've been prudently shopping silver for two weeks straight. And not with credit cards either. Of course I am East Coast :)

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To the intelligent man or woman, life appears infinitely mysterious, but the stupid have an answer for everything. -Edward Abbey

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