Rebuilding The Case For Silver
Silver got to $50. So what?
I wrote after the price collapse on MayDay 2011 an article I entitled “The Sorrow of the 49er.” It looked into those who had come into the silver story, as we all know now, late. The price tumbled, and many middle classers were left underwater.
Oftentimes, these individuals never had a chance to consult anyone other than a shop owner, who had no problem moving product.
The silver market has been battered by the psychological warfare of command-and-control economics. This economic warfare has been psychologically exhausting for the silver investor as silver remains a no-news market with short-term bearish price movements. Over the last year, however, the silver investor has become hardened or acclimated to a market without new buyers or new sellers and little legitimate price action. Instead, they’ve watched as banks colloquially known as “commercial hedgers” bluff a long, long position in physical silver with shorts exceeding three-times the yearly supply at any given time. What’s likely is these banks do not own any a position of physical silver anywhere near this amount.
For the 49er (those who bought silver in the 40s), who entered into the market in March-April of 2011, the price of silver has been a source of discomfort if not inner-turmoil. Retail bullion shops across the country started to provide services outside their previous jurisdiction of bullion slinging, working for several weeks after the May Drive-By Shooting as therapists and counselors. That price action in the Spring of 2011 was such to entice a whole new breed of silver investors – the 49er – into the market, only to subsequently discourage them and break their confidence that, perhaps this once, they made the correct investment decision.
Let’s not even discuss opportunity cost. Opportunity cost is the cost of having not invested otherwise. This exist as an economic indicator. By pointing this out, I am merely underscoring how dominant institutions and information centers led even counter-culture types into the wrong place at the wrong time. Bitcoin offered greater return, going from about .05 cents to $266 in four years. Bitcoin had no historical precedent and thus was not even considered by many of those whom wished to overthrow historical precedent.
Of course, there is inherent risk investing in the Internet. But, there is inherent risk to being born. I think the Internet is here to stay in one of various forms.
That silver crashed on May 1st is significant, and I recognize this now in retrospect. MayDay is international workers day. Regardless of its origins, it is a symbol of opposition to dominant forces.
Silver, on the other hand, represents something not only to those who buy it today, but also those who saved in it yesterday. Silver is the worker’s money, and always has been. It is the Poor Man’s Gold. This is a truism.
So, how do we rebuild the case for silver?
In terms of price, silver now could be a falling knife or an excellent investment. But, buying silver and measuring it in USD is a hypocritical act. It doesn’t make logical sense, for the purpose of buying silver is to insure oneself against USD volatility.
You have fiat insurance. Better yet, it is a decentralized insurance plan. Presuming you can access you silver and gold, you can thus insure yourself from not only fiat devaluation, but also any sort of unexpected occurrence that might undermine your financial stability in this volatile socio-economic context.
But, is this enough to rebuild the case for silver?
For the middle-classer and below, yes. This is definitely enough to continue stacking silver.
But, for the institutional investor, now is not the time. Especially considering that the dollar just had its worst day in 2 years. We could be heading into another market sellloff, in which, yes, silver and gold seem likely candidates to fall.
Once this correction is in, no matter what happens to silver and gold, demand on the buy side will spike.
And thus the case for silver will be strong.
That is not to say that currently the case for silver is not strong. But, it is at this juncture stronger for the poor or middle class individual to accumulate than a multinational or hedge fund with millions in assets on the book.
So, why silver, why now?
First of all: It does not bare interest for large international banks.
Second: It acts as plastic life insurance: can be used for anything when/if the time comes.
Moreover, buy over time.