A very simple answer to this question would be...... if you have to ask this question, the answer is probably yes.... it is a bad investment for you. (for the assumption that you probably do not have much knowledge about silver.... and thus may cause problems for you).
Now.... for me..... I think silver is a GREAT investment.... but that is for me with my risk tolerance, expectations, etc.
If you are interested in silver as an investment, I highly encourage you to read all related posts, pro and con, and check out some of the links provided. Then one must make up their own minds....
Kareemofwheat, if you took offense at what I posted, I can assure that was not my intent. If I were God..... or had a clear crystal ball in front of myself..... then I certainly could have given you the definitive answer that you were probably looking for.
The problem is.... there just is no clear definitive answer on these types of questions, as many of the other posters will attest to.
So, if you did not like my answer, just ignore it. I'm sure there are others that will give whatever answer you wish to hear.
Silver did fine for the Hunts. It was the FEDs changing the rules that was bad for Bunker. It had nothing to do with silver being bad. Wrong place at wrong time to take on the commercials. If all of a sudden the govt decided that 401K's could not be tapped until your 75th birthday wouldn't than bother you a bit? Rule change in mid-stream. Expect some as well with silver and gold down the road.
I thought a contributing factor to the Hunt downfall was that they severely underestimated the volume of silver available if the prices went as high as they did. People were melting everything including massive quantities of silverware, jewelry, etc. I think $25/ounce will again bring out massive quantities of bars, rounds, etc. and drop prices, then the cycle starts again.
"Intrinsic value" is a badly outmoded concept. Everything in the world derives its value from the net supply and demand of people. Even though many items have value as part of their nature they can be replaced by something else. We need to eat but we don't have to eat any specific food. We need water but there are usually ample sources of water in modern times.
This same concept applies to the dollar or to gold and silver. It is human psycho- logy which drives the prices of these. When people think gold is undervalued then there will be more buying than selling and it will take higher prices to get holders to sell. When bakers and millers put more buying pressure on wheat than there is grain available the price goes up. If there's a bumper crop and it has to go in storage the price will likely drop. Much of the buying and selling of things is done by speculators who have no direct "need" for the things they trade.
All of us tend to operate largely through inertia. Things are the way they are much more through default than because it was initially tried or thought out. The first person to eat blue cheese probably did so more through desperation than as an experiment. Even civilization is largely mere inertia. It is a compounding of what has been which was initially mere chance and the changes are caused by what might work in the here and now.
But it is concept that drives much demand. People value gold more highly than silver because gold is found in the Earth less than silver by about a ten to one ratio histor- ically. The concept of the value of gold was formed not only on this basis but also because gold served as money for more than two and a half millinea. Silver usually worked right alongside as more usable denominations with copper as small change.
Gold is still thought of as a very important and strategic metal. This is really unlikely to change in the near term because there are simply far too many people who would buy if the price went down and too few who would sell. But it's not an "intrinsic value" of gold that causes it to be worth $800 per ounce, it is the belief that it's worth this price. It's the demand placed on it by the untold number of individuals who believe it is worth $800. Gold has no real intrinsic value. Almost anything it can do something else could do if people believed it.
Silver isn't really any different to a large extent Except there are numerous industrial applications. Some of these could be taken over by other metals but many of them can't. The products that contain silver don't have to be made or could usually be sup- planted by something else but the simple fact is that the demand is real. The cost of the silver tends to be very low relative the cost of the product. People view silver as cheap so collectively we treat it as cheap. When we want to invest we tend to buy gold. When there's a choice we usually opt for gold rather than silver. This means that gold has maintained and even increasing its premium to silver even as the silver has been disappearing into a vast black hole. This wouldn't be so important except for one simple fact; by all appearances silver consumption appears to be enterring a geometric increase. While current mining shortfalls are mostly inconsequential compared to the amount of metal available, future shortfalls would becpome enormous.
At what point do we collectively wake up and ask where are we going to get the silver to keep the products on the shelves? It is this change in psychology that might be a once in a lifetime opportunity to profit in the metal. Even if this doesn't occur. Even if people simply choose to side with inertia and value it as we always have, the day is always ap- proaching that there is no more silver available. It is simply impossible to continue to use more of something than is made indefinitely.
If you buy silver as an investment it is wise to consider it a long term investment. It could be decades until the silver actually runs out and it can't be sooner than ten or fifteen years if current trends prevail. One should also consider that silver is an industrial com- modity at the current time. In the event of a recession silver could be hurt badly. There is no sure thing except, perhaps, that silver will one day be at a far higher level.
<< <i>I thought a contributing factor to the Hunt downfall was that they severely underestimated the volume of silver available if the prices went as high as they did. People were melting everything including massive quantities of silverware, jewelry, etc. I think $25/ounce will again bring out massive quantities of bars, rounds, etc. and drop prices, then the cycle starts again. >>
They had the financial werewithall to buy all the silver for a lot longer than they did. It was the change in the rules that triggered thwe downfall. One should remember that they only accunumlated about three months produc- tion and there's a lot less silver in the world now than there was then.
Silver did fine for the Hunts. It was the FEDs changing the rules that was bad for Bunker. It had nothing to do with silver being bad. Wrong place at wrong time to take on the commercials. If all of a sudden the govt decided that 401K's could not be tapped until your 75th birthday wouldn't than bother you a bit? Rule change in mid-stream. Expect some as well with silver and gold down the road.
roadrunner >>
That was my understanding also of what took place. It seemed that the Hunt's were well on the way to significantly cornering the market... and I seem to recall from some references that they still had money to continue (or sources for it). The problem was the FEDs and regulators..... they decided they could not let the Hunts succeed, and so changed the rules in the middle of the game. Something about.... limiting the amount of trading that could take place, or perhaps the size of the trades.... perhaps they closed the market down if a certain amount of increase occured. Effectively crippled the Hunt's efforts, and eventually they suffered hugh losses.
And absolutely.... the rules can be changed again for us. You mentioned 401k changes.... that has/ and is being looked at. During the last presidential election, it was one of the items being seriously looked at. Also..... they were looking at taxing home equity. NOT for when you sold your house.... but just the amount that they determined that it's value increased.... they would have considered that to be real income, whether realized or not.
<< <i>I thought a contributing factor to the Hunt downfall was that they severely underestimated the volume of silver available if the prices went as high as they did. >>
No, the Hunts had a Saudi investor in the background. They had the $$ they needed. They had a simple plan, buy up all the physical silver they could, which they showed they could do, and then buy up all the futures and demand physical delivery. That was what caused the massive run up in prices and the lines that went around blocks all over the country as people were selling everything from their homes that contained silver.
They did it. They would have bankrupted Wall Street. It was the big money boys, the famous banking and investment house names that went to their bought and paid for politicians and cried that they had been outfoxed. So the Federal Government changed the rules to save their worthless, manipulating rears and bankrupted the Hunts. Otherwise, the Hunt brothers would have ended up owning most of Wall Street, Chase Manhattan, etc.
There is a great book on this subject called "Beyond Greed" by Stephen Fay. It's out of print now but it can be found easily with an internet search. After all these years there have been so many misunderstandings about that time. The common lore seems to paint the Hunts in a bad light, but in truth it was just the other way around.
It would be the same thing if the Feds decided to pass a law that said you, Leon, and only you were subject to outrageous new laws passed with the sole intention of destroying you. That's a wide and rough analogy, but that's essentially what happened to the Hunts. It's a great example of the problems behind professional politicians who use laws to help their buddies at the expense of others.
Bill Gates had a similar experience. He built an empire and he didn't grease the wheels by giving tons of money to politicians along the way. Janet Reno's federal lawsuit against Microsoft is generally regarded today as nothing more than extortion. The Clintons helped their huge money backers go after Microsoft using a ridiculous lawsuit which Microsoft won easily on appeal. But by choosing a pliable judge who had no concept of IT, he ruled against Microsoft as he had been instructed to do. Anyone who read his ruling and that had even a simple concept of Operating Systems couldn't get past the first few lines without breaking out in laughter. Still, it served it's purpose, today Microsoft gives a lot of $$ to both sides since they've never taken a political position. Gates had the audacity to think he could proceed in a free market without paying off the politicos.
The Hunts did nothing wrong but figure out a way to beat the system using their very own manipulative tactics against them.
"Lenin is certainly right. There is no subtler or more severe means of overturning the existing basis of society(destroy capitalism) than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and it does it in a manner which not one man in a million is able to diagnose." John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
using microsoft as an example is not really wise. they truly did and still do use their monopoly in the home desktop OS arena to shut down and ruin other companies.
they would actually make changes to the OS that would stop other products from working. they bundled a web browser with the OS and killed netscape. they are doing it with anti-virus software now.
imagine, designing a insecure OS and then having the cajones to design an anti-virus software for it... defective by design comes to mind.
if they cannot compete, they buy out the little guy. they have truly stiffled competition. they use fud about their NEW products to hurt others who just released something new.
just look at vista and you are finally seeing the house of cards crumble. they yanked out everything that was new and unique because it was buggy and crap.
they cause other people constant damage through their insecure OS. can you say spam?
anyway, i work at an ISP. have been for many years now. microsoft was a blessing and a curse at the same time. very frustrating.
"United States v. Microsoft, 87 F. Supp. 2d 30 (D.D.C. 2000) was a set of consolidated civil actions filed against Microsoft Corporation on May 18, 1998 by the United States Department of Justice (DOJ) and twenty U.S. states. Joel I. Klein was the lead prosecutor. The plaintiffs alleged that Microsoft abused monopoly power in its handling of operating system sales and web browser sales. The issue central to the case was whether Microsoft was allowed to bundle its flagship Internet Explorer (IE) web browser software with its Microsoft Windows operating system. Bundling them together is alleged to have been responsible for Microsoft's victory in the browser wars as every Windows user had a copy of Internet Explorer. It was further alleged that this unfairly restricted the market for competing web browsers (such as Netscape Navigator or Opera) that were slow to download over a modem or had to be purchased at a store. Underlying these disputes were questions over whether Microsoft altered or manipulated its application programming interfaces (APIs) to favor Internet Explorer over third party web browsers, Microsoft's conduct in forming restrictive licensing agreements with OEM computer manufacturers, and Microsoft's intent in its course of conduct."
also, the european union sued them to. did bill not pay them off also? fact of the matter is that a monopoly is not good for competition. they abuse it.
<< <i>Silver isn't really any different to a large extent Except there are numerous industrial applications. Some of these could be taken over by other metals but many of them can't. The products that contain silver don't have to be made or could usually be sup- planted by something else but the simple fact is that the demand is real. >>
I agree with your statements for the most part except that silver is unique in several areas. In some it is used as it is still cheaper than other metals that could do the job, however there are some applications where silver and only silver will do the job. Rarer metals are only used when they have to be. How many know that each USB connector and port are done with gold? Silver won't do it, or it would be used instead.
The medical field comes to mind quickly. Few people know that before refrigeration was available, milk was kept fresh by putting a silver dollar or some equivalent amount of silver into each gallon. The same was done with other perishable foods. The rare anti-bacterial qualities of silver are still being explored. There is no other replacement for silver when it comes to the treatment of burn victims.
More new uses are being discovered all the time. All the while, the amount of silver on the planet continues to decline and it's obvious production can't replace that which is being used. More often than not, when silver is used it is just that, used up, as in gone. Not recoverable. Only in jewelry is it easily recoverable.
"Lenin is certainly right. There is no subtler or more severe means of overturning the existing basis of society(destroy capitalism) than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and it does it in a manner which not one man in a million is able to diagnose." John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
If it cannot be recovered, why not? Where is it going? Into atomic particles that get lost somehow? Even electrical connectors should be recycleable. Where's it going? Is it a matter of economics? What is the roadblock?
Q: Are You Printing Money? Bernanke: Not Literally
<< <i>using microsoft as an example is not really wise. they truly did and still do use their monopoly in the home desktop OS arena to shut down and ruin other companies. >>
I only used it as an example of how the Government works to help their buddies and the laws be damned. They can change them whenever it pleases them.
I understand MS pretty well. I'm an MS engineer myself. The fact is, that original lawsuit was little more than extortion pushed for in the background by Oracle's Larry Ellison and Sun Microsystems. Larry and the Clintons are good buddies and he has given them probably far more than is legal. When thinking of sleazy politicians like what happened to the Hunts, it was any easy jump to the Clintons.
"Lenin is certainly right. There is no subtler or more severe means of overturning the existing basis of society(destroy capitalism) than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and it does it in a manner which not one man in a million is able to diagnose." John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
<< <i>If it cannot be recovered, why not? Where is it going? Into atomic particles that get lost somehow? Even electrical connectors should be recycleable. Where's it going? Is it a matter of economics? What is the roadblock? >>
It's used in tiny amounts that are simply unrecoverable.
Don't forget that silver objects and silver artefacts are subject to the same laws of attrition that everything else is. They get lost or placed in the garbage stream. They burn in fires or are lost in floods. Gold sits in warehouses protected by state of the art technology and armed guards while silver is consumed in processes that are very fast or very slow.
There doesn't appear to be any direct relationship between the magnitudes of gold and silver price movements. The erratic swings in the gold/silver ratio defy traditional technical analysis, and there is nothing to suggest that there is any one proper ratio.
Well there's a correlation, but no direct relationship (between the two metals). Both would likely go up, but not by the same percentage amount. It's just symantics, the point is, people pointing to a historical ratio as evidence that silver has more upside than gold should probably fall back onto a different line of argument. Increased demand due to industrial usage works for me.
Silver used to enjoy a worldwide collector/investor base. But now, we have the EU which taxes all silver bullion transactions at the country's VAT rate (minimum 15%). So don't expect Europe to join in any modern days silver investment activity. Ain't gonna have Europe involved any more. PS. no VAT tax on gold.
The EU treaty was 1992, note the downward trend on the gold/silver ratio chart since 1992. COINcidence?
"Lenin is certainly right. There is no subtler or more severe means of overturning the existing basis of society(destroy capitalism) than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and it does it in a manner which not one man in a million is able to diagnose." John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
<< <i>If it cannot be recovered, why not? Where is it going? Into atomic particles that get lost somehow? Even electrical connectors should be recycleable. Where's it going? Is it a matter of economics? What is the roadblock? >>
Most of it is simply not economical at this time. Hospitals use it up and it is destroyed as medical waste. In many cases is is simply converted into heat, there's your atomic particles, during it's usage.
Also, for medical uses it is absorbed and used by the body. Again, never reclaimable. Hospitals also line their ventilating ductwork and all the air filtering systems are coated in silver. That is never reclaimed either. It's destroyed as hazardous medical waste.
How many keyboards are there in landfills all over the world? We go through dozens of them in my small office every year. Several years ago I read that each keyboard contained about 15 cents worth of silver but it wasn't worth the cost of trying to recycle it. The cost of silver has gone up quite a bit since I read that article but still, keyboards aren't being recycled. At least not to my knowledge.
"Lenin is certainly right. There is no subtler or more severe means of overturning the existing basis of society(destroy capitalism) than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and it does it in a manner which not one man in a million is able to diagnose." John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
Deadhorse, your link only confirms what I said, just supported with more evidence. You have to keep in mind the time component, this guy's looking at multi-year, even decades-long trends. I would bet that many on the forum are thinking within a much shorter timeframe. Weeks or months. According to his analysis, silver could be dead money long into a gold bull run. He characterized silver trading as long periods of boredom with short spasms of pops. "Silver truly does have incredible potential to soar, but its gains are much less linear than gold’s." If they had a 'direct' relationship, their gains would both be linear. I like silver as much as anybody, but I think it would be a mistake to make the gold/silver ratio the foundation for a bullish case, particularly if you're considering making silver a major component of your investment portfolio.
<< <i>Deadhorse, your link only confirms what I said, just supported with more evidence. You have to keep in mind the time component, this guy's looking at multi-year, even decades-long trends. I would bet that many on the forum are thinking within a much shorter timeframe. Weeks or months. According to his analysis, silver could be dead money long into a gold bull run. He characterized silver trading as long periods of boredom with short spasms of pops. "Silver truly does have incredible potential to soar, but its gains are much less linear than gold’s." If they had a 'direct' relationship, their gains would both be linear. I like silver as much as anybody, but I think it would be a mistake to make the gold/silver ratio the foundation for a bullish case, particularly if you're considering making silver a major component of your investment portfolio. >>
I guess it's all in how you look at it. It seemed to make the case to me that once Gold reaches a solid floor, silver then spikes sharply and actually outperforms it percentage wise. I view that as a direct relationship.
I'm not just considering silver, I've been putting it away for a long time now. Probably at a ratio of around three quarters in silver, one quarter in gold. That would be a ratio based on FRNs.
"Lenin is certainly right. There is no subtler or more severe means of overturning the existing basis of society(destroy capitalism) than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and it does it in a manner which not one man in a million is able to diagnose." John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
Overall good article, and I hope you're right about silver going up more but the point about the 17 to 1 ratio is questionable. You are taking just one point on the graph (850/50) to get that 17 to 1 ratio. If you compare the price of silver to gold over the last 45 years where its been legal to own gold, you will see that the true ratio is closer to the 50 to 1 that it is now. You cant just take 1 abhoration and assume that is where everything should be. In fact silver hasnt been anywhere near that 17 to 1 ratio ever again since the mid 80's bust where both metals fell down to like $5/$250 an ounce. So anyone who is waiting for that 17 to 1 ratio to reappear has already been waiting over 20 years. The 17 to 1 ratio is certainly not a historic ratio. But other than that, I agree that silver has room to grow still since the economies of the world are exploding right now thus using silver and if you think about it, the $15 an ounce is merely keeping up with inflation and the devaluation of the dollar. The metal hasnt even realized any real appreciation over its $6 price of say 1995. I mean I would say $15 today is about equal to $6 13 years ago especially when you consider the recent devaluation of the dollar. Also, the war on terror isnt close to being over and will continue to be very costly and the worlds economies are going to continue to boom. So, I think or at least hope silver will reach $25 to $30 anyway.
<< <i>There's less silver in the world than gold and EVERY day there is more gold and less silver.
There's little chance that this can change even if their prices change dramatically. The rate of depletion of the silver stock is increasing. The rate of increase in gold is slowing slightly.
None of these trends are likely to change in the foreseeable future. >>
I have seen this before about there being less silver than gold. THat seems impossible, but I have heard it many times before. Is this actually true ? Every time I go to the coin shops they have TONS of silver and like NO GOLD. Maybe they dont want to keep a lot of gold on hand but they have so many morgans, peace dollars, 90% coins you wouldnt believe it. One guy said he had numerous $1000 90% silver bags for sell at 10.5 X face.
That chart doesn't go back far enough. Now we all know that most of the 20th century that gold/silver was a 20 to 1 ratio since it was fixed. A silver dollar or a $20 gold piece take your pick when our currency was backed.
people wont get scared and start selling off all their silver just because its at $15 an ounce now. Gotta realize the stock market is 13000 + now and it was like 3000 in 1990. Over the long haul prices only go one way and that is up. There isn't that much of a difference in $5 1990 silver and $15 2007 silver. The price level is about the same when adjusted for inflation, global economy, and devalued dollar.
Now we all know that most of the 20th century that gold/silver was a 20 to 1 ratio since it was fixed. A silver dollar or a $20 gold piece take your pick when our currency was backed.
The theoretical ratio was 16:1. However, this works only if gold is fixed at $20.67/oz and silver is $1.29/oz. But for most of the 19th and early 20th century, the market price ratio was far different – often closer to 30:1 to 70:1. After the United States devalued gold to $35/oz it attempted to achieve a 4:1 ratio within the US Treasury. That never happened, in part because gold continued to flow into the US after 1933 faster than the Treasury could buy silver.
PS: 20:1 is the ratio of gin to vermouth in a really dry martini.)
<< <i>There's less silver in the world than gold and EVERY day there is more gold and less silver.
There's little chance that this can change even if their prices change dramatically. The rate of depletion of the silver stock is increasing. The rate of increase in gold is slowing slightly.
None of these trends are likely to change in the foreseeable future. >>
I have seen this before about there being less silver than gold. THat seems impossible, but I have heard it many times before. Is this actually true ? Every time I go to the coin shops they have TONS of silver and like NO GOLD. Maybe they dont want to keep a lot of gold on hand but they have so many morgans, peace dollars, 90% coins you wouldnt believe it. One guy said he had numerous $1000 90% silver bags for sell at 10.5 X face. >>
Most of the gold sits in vast stockpiles and isn't seen.
Because of gold's high value coin shops no one can afford or need to set out large amounts for sale. Even if a dealer did enough business to war- rant having large amounts of gold he'd still need layers of security to do it.
If silver were worth $800 per ounce you wouldn't see shops full of it either.
And there still wouldn't be any vast hoards of the metal.
<< <i>Silver used to enjoy a worldwide collector/investor base. But now, we have the EU which taxes all silver bullion transactions at the country's VAT rate (minimum 15%). So don't expect Europe to join in any modern days silver investment activity. Ain't gonna have Europe involved any more. PS. no VAT tax on gold.
The EU treaty was 1992, note the downward trend on the gold/silver ratio chart since 1992. COINcidence? >>
This has put any discussion on ratios between gold and silver out the window. European everyday citizens have had the silver market made off limits to them. There are exemptions and VAT tax exempt areas. But, if you aren't an institution or wealthey or connected enough to travel to the exempt areas, it appears you are out of luck.
This has put any discussion on ratios between gold and silver out the window. European everyday citizens have had the silver market made off limits to them. There are exemptions and VAT tax exempt areas. But, if you aren't an institution or wealthey or connected enough to travel to the exempt areas, it appears you are out of luck.
Jerry >>
They can still buy financial instruments which profit on changes in silver price.
Futures and stocks would be the most obvious but there are many others.
Comments
<< <i>So silver is a bad investment? >>
It was for Bunker Hunt
<< <i>So silver is a bad investment? >>
A very simple answer to this question would be...... if you have to ask this question, the answer is probably yes.... it is a bad investment for you. (for the assumption that you probably do not have much knowledge about silver.... and thus may cause problems for you).
Now.... for me..... I think silver is a GREAT investment.... but that is for me with my risk tolerance, expectations, etc.
If you are interested in silver as an investment, I highly encourage you to read all related posts, pro and con, and check out some of the links provided. Then one must make up their own minds....
<< <i>Sorry God, I will sure do that >>
Kareemofwheat, if you took offense at what I posted, I can assure that was not my intent. If I were God..... or had a clear crystal ball in front of myself..... then I certainly could have given you the definitive answer that you were probably looking for.
The problem is.... there just is no clear definitive answer on these types of questions, as many of the other posters will attest to.
So, if you did not like my answer, just ignore it. I'm sure there are others that will give whatever answer you wish to hear.
It was for Bunker Hunt
Silver did fine for the Hunts. It was the FEDs changing the rules that was bad for Bunker. It had nothing to do with silver being bad.
Wrong place at wrong time to take on the commercials. If all of a sudden the govt decided that 401K's could not be tapped until your 75th birthday wouldn't than bother you a bit? Rule change in mid-stream. Expect some as well with silver and gold down the road.
roadrunner
No body knows for sure...............
You pays your money and you takes
your chances.
Camelot
<< <i>So silver is a bad investment? >>
"Intrinsic value" is a badly outmoded concept. Everything in the world derives
its value from the net supply and demand of people. Even though many items
have value as part of their nature they can be replaced by something else. We
need to eat but we don't have to eat any specific food. We need water but there
are usually ample sources of water in modern times.
This same concept applies to the dollar or to gold and silver. It is human psycho-
logy which drives the prices of these. When people think gold is undervalued
then there will be more buying than selling and it will take higher prices to get
holders to sell. When bakers and millers put more buying pressure on wheat
than there is grain available the price goes up. If there's a bumper crop and it
has to go in storage the price will likely drop. Much of the buying and selling of
things is done by speculators who have no direct "need" for the things they trade.
All of us tend to operate largely through inertia. Things are the way they are much
more through default than because it was initially tried or thought out. The first
person to eat blue cheese probably did so more through desperation than as an
experiment. Even civilization is largely mere inertia. It is a compounding of what
has been which was initially mere chance and the changes are caused by what
might work in the here and now.
But it is concept that drives much demand. People value gold more highly than silver
because gold is found in the Earth less than silver by about a ten to one ratio histor-
ically. The concept of the value of gold was formed not only on this basis but also
because gold served as money for more than two and a half millinea. Silver usually
worked right alongside as more usable denominations with copper as small change.
Gold is still thought of as a very important and strategic metal. This is really unlikely
to change in the near term because there are simply far too many people who would
buy if the price went down and too few who would sell. But it's not an "intrinsic value"
of gold that causes it to be worth $800 per ounce, it is the belief that it's worth this
price. It's the demand placed on it by the untold number of individuals who believe it
is worth $800. Gold has no real intrinsic value. Almost anything it can do something
else could do if people believed it.
Silver isn't really any different to a large extent Except there are numerous industrial
applications. Some of these could be taken over by other metals but many of them
can't. The products that contain silver don't have to be made or could usually be sup-
planted by something else but the simple fact is that the demand is real. The cost of
the silver tends to be very low relative the cost of the product. People view silver as
cheap so collectively we treat it as cheap. When we want to invest we tend to buy gold.
When there's a choice we usually opt for gold rather than silver. This means that gold
has maintained and even increasing its premium to silver even as the silver has been
disappearing into a vast black hole. This wouldn't be so important except for one simple
fact; by all appearances silver consumption appears to be enterring a geometric increase.
While current mining shortfalls are mostly inconsequential compared to the amount of
metal available, future shortfalls would becpome enormous.
At what point do we collectively wake up and ask where are we going to get the silver
to keep the products on the shelves? It is this change in psychology that might be a once
in a lifetime opportunity to profit in the metal. Even if this doesn't occur. Even if people
simply choose to side with inertia and value it as we always have, the day is always ap-
proaching that there is no more silver available. It is simply impossible to continue to
use more of something than is made indefinitely.
If you buy silver as an investment it is wise to consider it a long term investment. It could
be decades until the silver actually runs out and it can't be sooner than ten or fifteen
years if current trends prevail. One should also consider that silver is an industrial com-
modity at the current time. In the event of a recession silver could be hurt badly. There
is no sure thing except, perhaps, that silver will one day be at a far higher level.
<< <i>I thought a contributing factor to the Hunt downfall was that they severely underestimated the volume of silver available if the prices went as high as they did. People were melting everything including massive quantities of silverware, jewelry, etc. I think $25/ounce will again bring out massive quantities of bars, rounds, etc. and drop prices, then the cycle starts again. >>
They had the financial werewithall to buy all the silver for a lot longer than
they did. It was the change in the rules that triggered thwe downfall. One
should remember that they only accunumlated about three months produc-
tion and there's a lot less silver in the world now than there was then.
<< <i><< So silver is a bad investment? >>
It was for Bunker Hunt
Silver did fine for the Hunts. It was the FEDs changing the rules that was bad for Bunker. It had nothing to do with silver being bad.
Wrong place at wrong time to take on the commercials. If all of a sudden the govt decided that 401K's could not be tapped until your 75th birthday wouldn't than bother you a bit? Rule change in mid-stream. Expect some as well with silver and gold down the road.
roadrunner >>
That was my understanding also of what took place. It seemed that the Hunt's were well on the way to significantly cornering the market... and I seem to recall from some references that they still had money to continue (or sources for it). The problem was the FEDs and regulators..... they decided they could not let the Hunts succeed, and so changed the rules in the middle of the game. Something about.... limiting the amount of trading that could take place, or perhaps the size of the trades.... perhaps they closed the market down if a certain amount of increase occured. Effectively crippled the Hunt's efforts, and eventually they suffered hugh losses.
And absolutely.... the rules can be changed again for us. You mentioned 401k changes.... that has/ and is being looked at. During the last presidential election, it was one of the items being seriously looked at. Also..... they were looking at taxing home equity. NOT for when you sold your house.... but just the amount that they determined that it's value increased.... they would have considered that to be real income, whether realized or not.
The rules can be changed on us any time.
<< <i>I thought a contributing factor to the Hunt downfall was that they severely underestimated the volume of silver available if the prices went as high as they did. >>
No, the Hunts had a Saudi investor in the background. They had the $$ they needed. They had a simple plan, buy up all the physical silver they could, which they showed they could do, and then buy up all the futures and demand physical delivery. That was what caused the massive run up in prices and the lines that went around blocks all over the country as people were selling everything from their homes that contained silver.
They did it. They would have bankrupted Wall Street. It was the big money boys, the famous banking and investment house names that went to their bought and paid for politicians and cried that they had been outfoxed. So the Federal Government changed the rules to save their worthless, manipulating rears and bankrupted the Hunts. Otherwise, the Hunt brothers would have ended up owning most of Wall Street, Chase Manhattan, etc.
There is a great book on this subject called "Beyond Greed" by Stephen Fay. It's out of print now but it can be found easily with an internet search. After all these years there have been so many misunderstandings about that time. The common lore seems to paint the Hunts in a bad light, but in truth it was just the other way around.
It would be the same thing if the Feds decided to pass a law that said you, Leon, and only you were subject to outrageous new laws passed with the sole intention of destroying you. That's a wide and rough analogy, but that's essentially what happened to the Hunts. It's a great example of the problems behind professional politicians who use laws to help their buddies at the expense of others.
Bill Gates had a similar experience. He built an empire and he didn't grease the wheels by giving tons of money to politicians along the way. Janet Reno's federal lawsuit against Microsoft is generally regarded today as nothing more than extortion. The Clintons helped their huge money backers go after Microsoft using a ridiculous lawsuit which Microsoft won easily on appeal. But by choosing a pliable judge who had no concept of IT, he ruled against Microsoft as he had been instructed to do. Anyone who read his ruling and that had even a simple concept of Operating Systems couldn't get past the first few lines without breaking out in laughter. Still, it served it's purpose, today Microsoft gives a lot of $$ to both sides since they've never taken a political position. Gates had the audacity to think he could proceed in a free market without paying off the politicos.
The Hunts did nothing wrong but figure out a way to beat the system using their very own manipulative tactics against them.
John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
still do use their monopoly in the home desktop OS arena to shut
down and ruin other companies.
they would actually make changes to the OS that would stop other
products from working. they bundled a web browser with the OS
and killed netscape. they are doing it with anti-virus software now.
imagine, designing a insecure OS and then having the cajones to
design an anti-virus software for it... defective by design comes to mind.
if they cannot compete, they buy out the little guy. they have truly
stiffled competition. they use fud about their NEW products to
hurt others who just released something new.
just look at vista and you are finally seeing the house of cards
crumble. they yanked out everything that was new and unique
because it was buggy and crap.
they cause other people constant damage through their insecure
OS. can you say spam?
anyway, i work at an ISP. have been for many years now. microsoft
was a blessing and a curse at the same time. very frustrating.
"United States v. Microsoft, 87 F. Supp. 2d 30 (D.D.C. 2000) was a set of consolidated civil actions filed against Microsoft Corporation on May 18, 1998 by the United States Department of Justice (DOJ) and twenty U.S. states. Joel I. Klein was the lead prosecutor. The plaintiffs alleged that Microsoft abused monopoly power in its handling of operating system sales and web browser sales. The issue central to the case was whether Microsoft was allowed to bundle its flagship Internet Explorer (IE) web browser software with its Microsoft Windows operating system. Bundling them together is alleged to have been responsible for Microsoft's victory in the browser wars as every Windows user had a copy of Internet Explorer. It was further alleged that this unfairly restricted the market for competing web browsers (such as Netscape Navigator or Opera) that were slow to download over a modem or had to be purchased at a store. Underlying these disputes were questions over whether Microsoft altered or manipulated its application programming interfaces (APIs) to favor Internet Explorer over third party web browsers, Microsoft's conduct in forming restrictive licensing agreements with OEM computer manufacturers, and Microsoft's intent in its course of conduct."
also, the european union sued them to. did bill not pay them off also? fact of the matter is that a monopoly is not good for competition. they abuse it.
<< <i>Silver isn't really any different to a large extent Except there are numerous industrial
applications. Some of these could be taken over by other metals but many of them
can't. The products that contain silver don't have to be made or could usually be sup-
planted by something else but the simple fact is that the demand is real. >>
I agree with your statements for the most part except that silver is unique in several areas. In some it is used as it is still cheaper than other metals that could do the job, however there are some applications where silver and only silver will do the job. Rarer metals are only used when they have to be. How many know that each USB connector and port are done with gold? Silver won't do it, or it would be used instead.
The medical field comes to mind quickly. Few people know that before refrigeration was available, milk was kept fresh by putting a silver dollar or some equivalent amount of silver into each gallon. The same was done with other perishable foods. The rare anti-bacterial qualities of silver are still being explored. There is no other replacement for silver when it comes to the treatment of burn victims.
More new uses are being discovered all the time. All the while, the amount of silver on the planet continues to decline and it's obvious production can't replace that which is being used. More often than not, when silver is used it is just that, used up, as in gone. Not recoverable. Only in jewelry is it easily recoverable.
John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
I knew it would happen.
<< <i>using microsoft as an example is not really wise. they truly did and
still do use their monopoly in the home desktop OS arena to shut
down and ruin other companies. >>
I only used it as an example of how the Government works to help their buddies and the laws be damned. They can change them whenever it pleases them.
I understand MS pretty well. I'm an MS engineer myself. The fact is, that original lawsuit was little more than extortion pushed for in the background by Oracle's Larry Ellison and Sun Microsystems. Larry and the Clintons are good buddies and he has given them probably far more than is legal. When thinking of sleazy politicians like what happened to the Hunts, it was any easy jump to the Clintons.
John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
<< <i>If it cannot be recovered, why not? Where is it going? Into atomic particles that get lost somehow? Even electrical connectors should be recycleable. Where's it going? Is it a matter of economics? What is the roadblock? >>
It's used in tiny amounts that are simply unrecoverable.
Don't forget that silver objects and silver artefacts are subject to the
same laws of attrition that everything else is. They get lost or placed
in the garbage stream. They burn in fires or are lost in floods. Gold
sits in warehouses protected by state of the art technology and armed
guards while silver is consumed in processes that are very fast or very
slow.
The erratic swings in the gold/silver ratio defy traditional technical analysis, and there is nothing to suggest that there is any one proper ratio.
">stockcharts
Spring 2006 saw a dramatic shift in the ratio as silver appreciated ~ 40% ahead of gold's ~25%
While there is no direct correlation, there is a relationship - both gold and silver are inversely related to the value of the dollar.
All of this talk about silver is getting me excited about it. I am finding that 90% silver prices are getting more competitive every week on ebay.
I knew it would happen.
Both would likely go up, but not by the same percentage amount.
It's just symantics, the point is, people pointing to a historical ratio as evidence that silver has more upside than gold should probably fall back onto a different line of argument. Increased demand due to industrial usage works for me.
However it is now so scattered and lacking in concentration ,
that its reclamation is no longer economically feasible by any
method known to man.
Camelot
The EU treaty was 1992, note the downward trend on the gold/silver ratio chart since 1992. COINcidence?
Proud recipient of two "You Suck" awards
<< <i>There doesn't appear to be any direct relationship between the magnitudes of gold and silver price movements. >>
Some may disagree.
John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
may be violated for a periods of time, but ultimately, they
again come to the fore , to the financial dismay of many.
Camelot
<< <i>If it cannot be recovered, why not? Where is it going? Into atomic particles that get lost somehow? Even electrical connectors should be recycleable. Where's it going? Is it a matter of economics? What is the roadblock? >>
Most of it is simply not economical at this time. Hospitals use it up and it is destroyed as medical waste. In many cases is is simply converted into heat, there's your atomic particles, during it's usage.
Also, for medical uses it is absorbed and used by the body. Again, never reclaimable. Hospitals also line their ventilating ductwork and all the air filtering systems are coated in silver. That is never reclaimed either. It's destroyed as hazardous medical waste.
How many keyboards are there in landfills all over the world? We go through dozens of them in my small office every year. Several years ago I read that each keyboard contained about 15 cents worth of silver but it wasn't worth the cost of trying to recycle it. The cost of silver has gone up quite a bit since I read that article but still, keyboards aren't being recycled. At least not to my knowledge.
John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
Yep, the ratio is a giant head and shoulders pattern.
Get ready for a big run up in Silver.
cheers, Alan Mendelson
www.BestDealsTVshow.com
www.AlanBestBuys.com
www.VegasBestBuys.com
You have to keep in mind the time component, this guy's looking at multi-year, even decades-long trends.
I would bet that many on the forum are thinking within a much shorter timeframe. Weeks or months.
According to his analysis, silver could be dead money long into a gold bull run.
He characterized silver trading as long periods of boredom with short spasms of pops.
"Silver truly does have incredible potential to soar, but its gains are much less linear than gold’s."
If they had a 'direct' relationship, their gains would both be linear.
I like silver as much as anybody, but I think it would be a mistake to make the gold/silver ratio the foundation for a bullish case, particularly if you're considering making silver a major component of your investment portfolio.
<< <i>Deadhorse, your link only confirms what I said, just supported with more evidence.
You have to keep in mind the time component, this guy's looking at multi-year, even decades-long trends.
I would bet that many on the forum are thinking within a much shorter timeframe. Weeks or months.
According to his analysis, silver could be dead money long into a gold bull run.
He characterized silver trading as long periods of boredom with short spasms of pops.
"Silver truly does have incredible potential to soar, but its gains are much less linear than gold’s."
If they had a 'direct' relationship, their gains would both be linear.
I like silver as much as anybody, but I think it would be a mistake to make the gold/silver ratio the foundation for a bullish case, particularly if you're considering making silver a major component of your investment portfolio. >>
I guess it's all in how you look at it. It seemed to make the case to me that once Gold reaches a solid floor, silver then spikes sharply and actually outperforms it percentage wise. I view that as a direct relationship.
I'm not just considering silver, I've been putting it away for a long time now. Probably at a ratio of around three quarters in silver, one quarter in gold. That would be a ratio based on FRNs.
John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
<< <i>14.75 in Asia , Gold flat >>
That was just yesterday!!!
<< <i>There's less silver in the world than gold and EVERY day there is more gold and less silver.
There's little chance that this can change even if their prices change dramatically. The rate
of depletion of the silver stock is increasing. The rate of increase in gold is slowing slightly.
None of these trends are likely to change in the foreseeable future. >>
I have seen this before about there being less silver than gold. THat seems impossible, but I have heard it many times before. Is this actually true ? Every time I go to the coin shops they have TONS of silver and like NO GOLD. Maybe they dont want to keep a lot of gold on hand but they have so many morgans, peace dollars, 90% coins you wouldnt believe it. One guy said he had numerous $1000 90% silver bags for sell at 10.5 X face.
<< <i>I found a silver/gold ratio chart at
http://www.goldsheetlinks.com/
Doesn't look like a trend worth playing either way. If anything, from that chart, I would lean towards the ratio expanding. >>
I just read farther and got to this post. Good chart. Where do people keep getting this HISTORIC 16 to 1 ratio they keep talking about ?
The theoretical ratio was 16:1. However, this works only if gold is fixed at $20.67/oz and silver is $1.29/oz. But for most of the 19th and early 20th century, the market price ratio was far different – often closer to 30:1 to 70:1. After the United States devalued gold to $35/oz it attempted to achieve a 4:1 ratio within the US Treasury. That never happened, in part because gold continued to flow into the US after 1933 faster than the Treasury could buy silver.
PS: 20:1 is the ratio of gin to vermouth in a really dry martini.)
<< <i>
<< <i>There's less silver in the world than gold and EVERY day there is more gold and less silver.
There's little chance that this can change even if their prices change dramatically. The rate
of depletion of the silver stock is increasing. The rate of increase in gold is slowing slightly.
None of these trends are likely to change in the foreseeable future. >>
I have seen this before about there being less silver than gold. THat seems impossible, but I have heard it many times before. Is this actually true ? Every time I go to the coin shops they have TONS of silver and like NO GOLD. Maybe they dont want to keep a lot of gold on hand but they have so many morgans, peace dollars, 90% coins you wouldnt believe it. One guy said he had numerous $1000 90% silver bags for sell at 10.5 X face. >>
Most of the gold sits in vast stockpiles and isn't seen.
Because of gold's high value coin shops no one can afford or need to set
out large amounts for sale. Even if a dealer did enough business to war-
rant having large amounts of gold he'd still need layers of security to do it.
If silver were worth $800 per ounce you wouldn't see shops full of it either.
And there still wouldn't be any vast hoards of the metal.
<< <i>Silver used to enjoy a worldwide collector/investor base. But now, we have the EU which taxes all silver bullion transactions at the country's VAT rate (minimum 15%). So don't expect Europe to join in any modern days silver investment activity. Ain't gonna have Europe involved any more. PS. no VAT tax on gold.
The EU treaty was 1992, note the downward trend on the gold/silver ratio chart since 1992. COINcidence? >>
This has put any discussion on ratios between gold and silver out the window. European everyday citizens have had the silver market made
off limits to them. There are exemptions and VAT tax exempt areas. But, if you aren't an institution or wealthey or connected enough to travel
to the exempt areas, it appears you are out of luck.
Jerry
<< <i>
This has put any discussion on ratios between gold and silver out the window. European everyday citizens have had the silver market made
off limits to them. There are exemptions and VAT tax exempt areas. But, if you aren't an institution or wealthey or connected enough to travel
to the exempt areas, it appears you are out of luck.
Jerry >>
They can still buy financial instruments which profit on changes in silver price.
Futures and stocks would be the most obvious but there are many others.
Maybe I should save my greenbacks..........nah!