Good article on silver

[jim4silver]

Although it is a somewhat long article, it is very good in my opinion.

http://www.financialsense.com/contributors/steve-angelo/the-coming-paradigm-shift-in-silver

Jim

 

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[Marchas45]

Although it is a somewhat long article, it is very good in my opinion.

http://www.financialsense.com/contributors/steve-angelo/the-coming-paradigm-shift-in-silver

Jim

Great article Jim, makes me understand a lot better what's happening around us. Silver is my number one soarce and I will be buying a lot more.

 

[mts]

Interesting article. But if I see one more so called expert predict the future price of silver based on the high of 1980 I'm going to scream.

 

[jim4silver]

Interesting article. But if I see one more so called expert predict the future price of silver based on the high of 1980 I'm going to scream.

Don't scream just yet MTS, but some well known pundits feel there is something to the fact that gold has surpassed its 1980 high by a lot (in nominal terms only, not in inflation adjusted dollars) yet silver has not (thus it still has much more to go). Maybe there is something to the psychological effect of that number $50 for silver. As you know, when silver was on the rampage up till last spring it stopped right before it hit its old 1980 high. I don't think that is mere coincidence.

I believe that if/when we ever break through the $50 level, it is off to the races. Getting back to $50 and beyond it though may take a while. I think it will happen this year but I am biased.

Jim

 

[Marchas45]

Interesting article. But if I see one more so called expert predict the future price of silver based on the high of 1980 I'm going to scream.

Go get em MTS.

 

[mts]

Interesting article. But if I see one more so called expert predict the future price of silver based on the high of 1980 I'm going to scream.

Don't scream just yet MTS, but some well known pundits feel there is something to the fact that gold has surpassed its 1980 high by a lot (in nominal terms only, not in inflation adjusted dollars) yet silver has not (thus it still has much more to go). Maybe there is something to the psychological effect of that number $50 for silver. As you know, when silver was on the rampage up till last spring it stopped right before it hit its old 1980 high. I don't think that is mere coincidence.

I believe that if/when we ever break through the $50 level, it is off to the races. Getting back to $50 and beyond it though may take a while. I think it will happen this year but I am biased.

Jim

I don't disagree with the psychological effect of $50 silver. You see the same thing with gold and stocks. Any time you are flirting with an all time high it takes a while to eventually break that threshold. It's the $150 silver price based on inflation adjusted pricing from some very short term anomaly back in 1980 that gets me.

Inflation adjusted prices for silver:
1964 => 8.97
1976 => 16.43
1978 => 19.60
1980 => 130.55
1982 => 23.58
1984 => 13.85
1986 => 10.51
1988 => 11.10
1990 => 6.69
1992 => 5.69
1994 => 6.91
1996 => 6.50
1998 => 7.37
2000 => 6.20
2002 => 5.54
2004 => 7.63
2006 => 12.46
2008 => 15.16

Is it any wonder they choose to use 1980 as their data point? Looking at this chart, does it make any sense whatsoever to choose that point over the other 17 listed above? I guess it does if your desire is to pull the wool over people's eyes.

If I wasn't a silver bull I'd swear that a reasonable price for silver should be about $10-$20 right now. I guess that just tells us that inflation adjusted prices don't mean squat.

 

[Marchas45]

Just love you two guys always a discussion never an argument. Best on the forum.

 

[jim4silver]

Interesting article. But if I see one more so called expert predict the future price of silver based on the high of 1980 I'm going to scream.

Don't scream just yet MTS, but some well known pundits feel there is something to the fact that gold has surpassed its 1980 high by a lot (in nominal terms only, not in inflation adjusted dollars) yet silver has not (thus it still has much more to go). Maybe there is something to the psychological effect of that number $50 for silver. As you know, when silver was on the rampage up till last spring it stopped right before it hit its old 1980 high. I don't think that is mere coincidence.

I believe that if/when we ever break through the $50 level, it is off to the races. Getting back to $50 and beyond it though may take a while. I think it will happen this year but I am biased.

Jim

I don't disagree with the psychological effect of $50 silver. You see the same thing with gold and stocks. Any time you are flirting with an all time high it takes a while to eventually break that threshold. It's the $150 silver price based on inflation adjusted pricing from some very short term anomaly back in 1980 that gets me.

Inflation adjusted prices for silver:
1964 => 8.97
1976 => 16.43
1978 => 19.60
1980 => 130.55
1982 => 23.58
1984 => 13.85
1986 => 10.51
1988 => 11.10
1990 => 6.69
1992 => 5.69
1994 => 6.91
1996 => 6.50
1998 => 7.37
2000 => 6.20
2002 => 5.54
2004 => 7.63
2006 => 12.46
2008 => 15.16

Is it any wonder they choose to use 1980 as their data point? Looking at this chart, does it make any sense whatsoever to choose that point over the other 17 listed above? I guess it does if your desire is to pull the wool over people's eyes.

If I wasn't a silver bull I'd swear that a reasonable price for silver should be about $10-$20 right now. I guess that just tells us that inflation adjusted prices don't mean squat.

MTS,

I don't understand where the numbers come from on chart you listed other than the 1980 figure you post (which is accurate).

To properly compute inflation adjusted numbers, you need at least 2 different points in time. I have included a link below which actually uses the CPI numbers, to show what is required today to equal a dollar from 1980. You can use any two years to compare, but for sake of argument I used 1980 and 2011. The computation shows a value of over $130 (what something would cost today that cost $50 in 1980 dollars based on the CPI).

This inflation calculator is actually a creation of the US Bureau of Labor Statistics (according the site I found it on). Some pundits actually believe the CPI inflation numbers are less than what inflation really is because they claim the core CPI excludes certain items like energy and food. I don't know if the calculator here includes those energy or food inflation figures, but it is safe to say the amounts this calculator produces are not overstating the amount of inflation in any way.

http://inflationdata.com/Inflation/Inflation_Calculators/Inflation_Rate_Calculator.asp

I don't think the past price of silver has anything to do with why I feel silver is going to rise in the future. But I do think current and future inflation is an important factor in why it will rise, and I believe it makes sense to base future projections on past price points, and if those past points are far back in time it is not a bad idea to adjust for inflation just as one tool in your analysis.

I agree with you though that the $50 price back then was a "flash in the pan" sort of spike and the price did not remain there for long. But the fact that it did hit that number will play into investors' psychology and if/when we get past that number there will be a huge run up in my opinion, much like when gold broke $850 (which was also a "flash in the pan" sort of price from 1980).

Just my opinion.

Jim

 

[mts]

Jim, it is highly possible that my numbers are off. I used the average yearly historical prices from kitco along with the following web site to calculate inflation adjusted prices: http://www.westegg.com/inflation/

Note that this calculator only goes up to 2010. I should have stated that in my original post. So the numbers I calculated are the inflation adjusted prices in 2010 instead of today. I would think that they would be close enough to show my point. But if they are way off let me know.

I'm getting up on my soap box here. I don't disagree with anything you've said. And other than this one point, I think the article is spot on. There is a LOT of really good information in that article. The author was really doing well right up to the point where he quoted the price from 1980. That's when I had to roll my eyes.

Other than that the rest of the article is very good. Everyone should read it. I've just made it my mission to bust the myth that the inflation adjusted price of silver should be $150. I hear this way too often from people getting into silver and it is a dangerous notion if people don't understand the tricks being played to come up with that number.

 

[jim4silver]

Jim, it is highly possible that my numbers are off. I used the average yearly historical prices from kitco along with the following web site to calculate inflation adjusted prices: http://www.westegg.com/inflation/

Note that this calculator only goes up to 2010. I should have stated that in my original post. So the numbers I calculated are the inflation adjusted prices in 2010 instead of today. I would think that they would be close enough to show my point. But if they are way off let me know.

I'm getting up on my soap box here. I don't disagree with anything you've said. And other than this one point, I think the article is spot on. There is a LOT of really good information in that article. The author was really doing well right up to the point where he quoted the price from 1980. That's when I had to roll my eyes.

Other than that the rest of the article is very good. Everyone should read it. I've just made it my mission to bust the myth that the inflation adjusted price of silver should be $150. I hear this way too often from people getting into silver and it is a dangerous notion if people don't understand the tricks being played to come up with that number.

MTS,

I hear what you are saying. It always used to bug me when I was reading an article and the author would say "right now, silver should be worth $xxx" or something to that effect. I believe the old saying that the market is never wrong, the price is what it is. Even with the alleged manipulation, I believe that when and if physical silver demand becomes great, the price will really take off. Paper can be manipulated but physical cannot (at least not where the owner takes actual possession of his/her metals).

From what I am reading more and more large buyers like hedge funds and such are going into PM investments where they own actual metals vs. playing futures and other paper plays. With such a small percentage of investment money in metals now, it would not take much more moving into PMs to cause a lack of physical supply at current price levels if physical metals are demanded.

There is much talk now of more money printing, QE, etc, in both the euro zone and here to keep things going and I believe you will see both the stock market and PMs rallying this year. I have been thinking about this lately, and perhaps the PM bull market will finally end when the "printing, QE, etc" finally ends someday and things come crashing down. They cannot keep doing it forever-there has to be some level where the fed debt becomes so high they cannot pay the interest on it (default), but I don't know what that is. I think they will keep doing what they can do to keep funds rolling because when/if the money flow stops, you will see TSHF in a financial sense. That would knock down PMs and everything else I think. Maybe a few years left before that happens? We might sooner see how the euro zone handles their sovereign debt default situations or tries to stop them from happening.

Just my guesses on all this.

Jim

 

[mts]

Jim, as usual, I think your "guesses" are better than most people's "truths". Until I read your posts about physical prices differing from paper I never really gave it much thought. But the current premiums over spot for physicals implies that your theories are correct. Right now, Provident Metals and APMEX are charging 7-9% over spot for 1 ozt. generic silver bars and 10-13% over spot for ASE's. That is in stark contrast to premiums of less than 5% just a year ago. This "proves" to me that demand for physical is way up over last year. The paper and physical price are diverging rapidly. If there were no paper price to keep physical prices in check, one has to wonder what the current physical price would be.

I'm coming around to your views on the current fiat currency situation in the US. However, I think that being the world's reserve currency system is what will make this a long drawn out process. Just like the resistance seen in silver prices when trying to pass an "all time high of $50", there is resistance to dethroning the world's reserve currency. The US can always try to sweeten the deal politically, financially, and militarily so that other countries do not "lose faith" in our currency. That doesn't mean that we aren't potentially in trouble. It just means that we will be given a lot more wiggle room than everyone else when it comes to debt ceilings, devaluing our currency, and defaults. So I could see us limping along for another 20 years before this thing really comes to a head. But what do I know?