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Simon Black Answers The Question Du Jour: "Should I Sell My Silver?"
From Sovereign Man, Simon Black
Should I Sell My Silver?
Silver's rise (in US$ terms, at least) over the past several weeks has been nothing short of phenomenal.
The chart has effectively "gone parabolic," and people I've never met have started to e-mail me (in my capacity as a registered investment advisor) for advice on silver.
It doesn't matter whether it's silver, tech stocks, emerging markets currencies, or pork belly futures... any time these two events coincide (a parabolic chart pattern, and strangers asking me for advice), it sets off ALARM BELLS in my head.
I'm going to go out on a limb and say that right now, the fundamentals for silver DON'T matter. Many of the latest crop of silver "investors" have no clue about the fundamentals.
To try and divine what comes next, it's more useful to use a general framework for understanding financial markets than to look at the supply and demand characteristics of silver. Because, right now, the market is being driven chiefly by investor psychology.
It's a cliché to say it, but ultimately, all financial markets are driven by fear and greed. Actually, I'd argue that they're driven almost exclusively by fear. Let me explain...
In the initial stages of a bull market, it's the fear of the unknown that keep the masses out of an asset class.
They think to themselves, "Yes. I can see it's cheap. I can see the fundamentals stack up. But what if, blah blah blah. Why is no one buying it? There must be something wrong with it. Best to steer clear."
For those who overcome this initial fear, or skepticism, and do get into the market, once it starts going up and they have a profit, once again their primary, over-riding emotion is fear... fear of losing their profits. Or, even worse. The fear of a profit turning into a loss.
So, what do most of them do? They sell out for a small profit. That's why it is said that bull markets are constantly climbing a "wall of worry." And that's why ALL markets have corrections. Corrections happen when enough people are FEARFUL of losing the gains they've made so far, and start to sell out in large enough numbers to temporarily reverse the trend.
Near the top of a bull market, when most have finally overcome their skepticism, and the savvier participants have taken advantage of one of the numerous corrections to buy into the market, fear again comes to the fore. For those not in the market yet, even at this late stage, what finally pushes them in is the FEAR OF MISSING OUT.
All their friends and colleagues are cleaning up in the market. How stupid they would look if they don't get a slice of the "easy money" too. And so, they pile in like lambs to the slaughter.
I don't think we're at that point -- yet -- with silver. But we are at the stage where many people who are already in the market are FEARFUL of losing their profits.
On this basis, as a student of market psychology, I suspect a correction is overdue. Again, I don't claim to have any specific fundamental insight into the silver market. I am speaking from a general standpoint.
So what should you do?
If you own physical silver, the logistics of taking profits on your stash are probably quite complicated.
Shipping, and converting a large amount of physical silver to cash temporarily, may not be straightforward.
But there are other ways to soothe your "fear of losing your profits." You can buy temporary insurance against a correction. Or, if don't actually own any silver at the present time, you can speculate on a correction.
Long-term ETF positions are risky, but you may consider a short-term position in the ProShares UltraShort Silver ETF (ZSL on the New York Stock Exchange). This instrument is designed to move TWICE as much as silver bullion, but in the OPPOSITE direction.
For example, if silver falls 5% in a day, this security should GAIN 10%. Of course, it works both ways. If silver keeps on rising, then the price of ZSL will lose twice the amount silver rises by.
During this bull market, silver has already seen one "correction," during the financial crisis, of more than 60%. That was an anomaly. But, a typical 10% or 20% correction would not be surprising to see at some stage -- quite possibly soon.
Any time any market has gone parabolic, it has played out that way. (Indeed, a correction may already be underway as I write. I've just checked and I see silver is off by more than 3% in Asian trade).
Just so you know, my own money is where my mouth is. I've personally bought some call options on ZSL which will make me a tidy gain if silver suffers even a modest pull-back-- I put the trade on early in the day on Monday with silver above $48.
I'll have much more to say on silver, and other precious metals, in future missives, as we see how events unfold.
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Tmosley and akthefuckingak say sell silver buy guns and ammo.
What are you even talking about?
No, just you should buy the gun.
And make sure to look directly down the barrel while cleaning the trigger.
PS: Funny, is it not, how all the PM-bashing trolls here have memberships in the range of only a few weeks to a month or two, before inevitably disappearing (and being reincarnated with a new alias)?
+ Right on!
+ LOL!
Exactly, fundamentals will prevail and the precious metals market is most honest market now despite the huge manipulations. The dealers I buy from a happy to see me sell any of my silver because they are usually low our out of silver. Ignore the toilet paper dollar "price." outthe only are preval
I don't recall the CNBS crowd rally for a bubble in GOOG when it was at $300...APPL?
Is it time to BTFD yet? Hmm is it done dipping? Hmm
Good luck buying any physical at a reasonable premium. I got the last of the scratch and dent industrial Silver at Apmex because that's all they had left for immediate delivery. Everything else was going to be weeks, months, or Silver delivery not possible.
Can anyone suggest an online broker or any dealer where i Can buy call or put on silver? Thanks
Yep... Silver is in a bubble but Apple, Google, NTFLX... are not? SUUUUUUUURE. Even the US dollar at the level it is is a bubble.
isnt all theis derivative BS what destroyed the econ in the 1st place? yeah lets go bet on shit that if it fails the end payer goes bankrupt and thre gov can bail us all out
wheee this investing is easy.
Taking advice from someone dumb enough to buy call options on ZSL is a bad idea. Taking advice from someone who says fundamentals didn't lead to this price rise and they don't matter is also a bad idea. And I am sure the Hell not shorting into the artifical paper supply caused by an OPEX raid and a CME margin raise.
simon's not an avid trader, so he makes the investor call. +++
vigilante journalism of the online PM leadership & community, the CFTC hearings, and the charges from the Commodity Futures Trading Comm., part of the US gov't, that there was price-manipulation in silver. GATA, ditto, in gold/FED. and, a sordid tale it is, maties, keeping the REAL money nice and cheap for us, while playing with their malificent invention: the printing press. and, some angelic, Constitutional force gets the EAGLES started, and we can own gold, again. of course, it could all be part of a conspiricy to have us get all the PMs, and then rob us. again!
the $50 dollar number is the psychological number unvolved. it freaking worked just like a G/Sachs paint job, too, didn't it? now, we're in for some action! the options expire today; the futures last trade tomorrow. there's plenty of silver. the big online coin dealers are out b/c everyone goes online and deals with the biggest, like amazon, and they just got cleaned out. somebody posted scotia mocatta had re-stocked about everything. smaller local dealers have US gold and silver coinage. they may not have silver eagles, or not the 2011's.
blythe's book? the hottest woman in banking's customers have been taking delivery; 20 of them, today! DJ Comex Silver Delivery Intentions Breakdown - Apr 26
and, i haven't seen the morgue stopping a lot of deliveries, either.
so, the big sharks and the little sharks go for the scraps in the water for another day.
the PMs prices "magically" came to The City, this morning, too, did you notice? (london was closed, yest, and Good Friday):
last thurs, 4.21, the AM fix was (USD) 1507 and the PM 1504. today? the AM was 1505 (!) and the PM 1497.50.
freaking rembrandts!
I hold physical but hedged my position by going short one 500 oz spot contract in the Forex market with a stop at break even.
I started posting late last week that the technicals and fundamentals did not look good for silver.
I strongly believe the Fed has no choice but to start withdrawing liquidity and the markets will actually rally on this news because inflation is starting to reduce profir margins. Unofortunately the PM markets will not rally. The so called smart money is ahead of the herd.
I will hold my hedged physical and when the correction is over I will use the profit from the short to purchase additional physical.
My analysis of the technicals of prior corrections looks like silver will correct about 40% to the 28-30 range.
All portfolios should have some physical silver but betting on the end of the world as we know is a bet that only happens once and betting against the Fed and bashing the Fed for too long is also a bad bet.
In my opinion Bernanke is not the Satan you all make him out to be. He is an economic scholar that uses empirical data to make decisions about how much money to make available to the economy. If you take the time to read and understand the equation is it quite simple. The productive output of the nation is based upon a ratio of the monetary base to GDP.
Bernanke had to inject liquidity ie ramp up the monetary base to prevent a collapse of the banks and the economic system. Now that the banks appear to be in better shape and their reserves have been increased and the banks will be able to purchase government debt from the government and the Fed. It's simple when you think about it the government bails the banks out and now the banks will bail the government out.
I may be wrong but for the moment my silver position is hedged based on withdrawal of liquidity.
No benny is not satan, but he is one of his facebook buddies.
You are a moron to think benny is anything more than a banking cartel puppet, with no real power.
An economic scholar who follows instructions.
What you just described is classic (attempted) economic central planning a la the USSR or the old, diehard communist China --- and that worked out SO well, didn't it?
The hubris and sociopathic idiocy of ANY one man or committee presuming to be able to arbitrarily set such a fundamental factor as the rate of interest for an entire economy of hundreds of millions of people, and to believe that their decision can override that of the market, is mind-boggling in its destructive scope and criminality.
Did he just use 'economic' and 'scholar' in the same sentance, without giggling?
Bernanke had to inject liquidity ie ramp up the monetary base to prevent a collapse of the banks and the economic system.
Ah yes, the 'banker losses are atributable to a lack of deposits to cover bankers' moronic gambles' school of economics.
Now that the banks appear to be in better shape
Yes, when the FASB lets banks move from mark to market to mark to make-believe, their assets tend to apprecitate.
and their reserves have been increased
Also known as a permanent taxpayer-fund-infused colonic.
and the banks will be able to purchase government debt from the government and the Fed.
Also known as 'Ponzi'
Very well written for a layman (like myself) to understand. I sincerely appreciate the article.
"What is a Phillips Screwdriver?"
obviously, there is a lot of pressure on Bernanke at this point,
to ease up on the accelerator.
and a lot of people anticipating that he will respond.
but the cop in the rear-view mirror is still gaining on all of us ....
Like I told my invesment buddy a few weeks ago who has huge equity and real estate exposure: sell in May or start to pray.
Luckily, for him, he inherited 100# box of coins from his father who got hip to this "inflation" stuff long ago...so he has maybe 100 oz. Not a ton, but 100 oz more than most.
Silver is not an investment for me. I don't care if it's $1000/oz. So what? Those that treat physical as such and put their nuts on the line riding the "wall of worry" deserve to be crushed in the short run.
those with blind belief in the economic good weather deserve to be crushed in the short run.
investment? no, not for me, A_L, nor probably for simon, altho i think he treats it that way, here. i think he may be writing to an audience with some new silver owners sitting in it. i know a few of the new silver owners, myself, and we have little discussions of what we are thinking, at times... a person who is not used to owning silver may be thinking some rather unique thoughts, these daze...
silver = money. keep score in ounces, and "So What?" is right!
Keep score in ounces!? No, no no...pounds! #, lbs, you know...none of this "troy" stuff. Real avoirdupois, yo!
http://www.finviz.com/quote.ashx?t=ZSL
Take a look at the volume at the bottom right corner of this chart...
I'VE GOT STRONG HANDS. I WILL HOLD ALL YOUR PHYSICAL SILVER !
LET'S FORGET THIS CHIT CHAT AND TALK AGAIN IN 2 YEARS. COMMON GUYS WE'RE JUST GETTING STARTED.
Short DXY video here.....
http://youtu.be/wcW_Ygs6hm0
China may start new funds to manage FX reserves -media
http://uk.reuters.com/article/2011/04/25/china-economy-fx-fund-idUKL3E7FP03X20110425
That's my answer, if China's buying, than I'm buying...
Took most of the hit overnight. Tried to trade, but most of the vol was in the morning. Back into most cash and off my 'hold long overnight' until the chairman falls on his face tomorrow.
today, 4-26, both gold & silver Options expire, these 2 always go down into expiry day and reverse back up the next
/
Yep. Probably should buy into the close, but a few more variables to consider this time around.
yeh, like how thin the trade volume is at $45. check some charts and you will see if that breaks $31 is next support level. oh, thats right you will just back your truck up, btfd or stfu etc. so never mind silver will go to a gazillion dollars and you will be able to trade it for food (not) when the end of civilization comes.
I talked about a correction taking silver to 28-30 range last week. And if it does, I will certainly back up the truck and that truck will be a Semi. Probably will have the Semi in reverse at anything below 41-42.
But the underlying silver theses is strong. And long term this is a double from here at least (yes, I said the dreaded triple digits.) Forget the Gold/Silver ratio, look at quantifiable reserves. Look at inflation adjusted highs not yet taken out.
No, my biggest concern is not that silver (and its associated stocks) will go down. I expect/hope they will. My biggest concern is that I will miss a violent and quick move up.
I saw the volume dry up at certain price levels (I trade the stocks) as well. I think buyers are waiting for shorts to shoot their wad. But nobody did anything after 12 or so. I will also be tracking very closely downside volume (which I trust will be very weak below 40.)
I am not simply a buy and hold type, but you'll be surprised how many investors are (regardless of 'end-of-the-world' hyperbole.) And as I related in a post yesterday, I think the 'buy and holds' may have it right and certainly shouldn't worry too much at these levels.
aaaannnddd . . . I should have bought into the weak close. Score for the buy and holds. all silver related up 2% now. What is a correction going to look like? 60 down to 55?
depends on how greedy you want to be and how well you know the market
I think opportunities to get back in heavy are coming. Just did the math and I missed about 20% of the downside. But I'll probably miss 20% of the upside move when that happens. Oh well. The theses is all long, but I am trying to play the vol a bit. I av a feeling this will be a shallow correction.
Oh great, another one.
Sovereign Man as top-calling dumbfuck. I didn't know.
Yeah but now we do.
At this point, this seems to be a pretty typical correction for a move from $26 to $49 (paper) in 90 days, to my mellon.
Long and Strong. None of the reasons why I bought physical silver have yet to be addressed rationally, let alone, improved one bit.
Firefighter302
Quinvarius has it right. Nice one mate, well said.
I'm shorting Karl Market-ticker and going long physical silver in my fucking hands.
Who's with me?
"Everyone is asking him about silver?" Then how is it only 1 in a 1000 even knows what silver is trading at?
"Fundamentals dont matter?" Good luck with that.
"How to sell silver and lock in profits?" As in trade silver for dollars? But then I would have dollars, instead of silver. That would be stupid. But I guess when fundamentals dont matter, you can say things like that.
Well, I don't invest in silver to "make" money. I invest in it to save purchasing power of _______? No need to sell, only a need to buy before the collapse of the world we once knew.
a must read from karl denninger on the importance of the $45 level. sorry, no irrational emotions, btfd, stfu etc.
http://market-ticker.org/akcs-www?post=184993
The $50 mark they want to hold on for dear fucking satanic vampiric cephalopodic life.
Everyone knows if it goes over $50 that it's the signal for $100.
I listend to Denninger for the first time on Keiser's site and I couldn't make it though 1 minute. He sounds like Rush Limbaugh to me and doesn't sound like he's the type to ever admit when he's been wrong.
Is it me or does this person sound like Doucheinger with a self-important twang.
Nothing is a "must" and no I have no need to here from a PM super troll or anything
from his twisted cult groupies either.
When did the douche kick you off his blog...7 weeks ago maybe?
APMEX Now Out of Silver Eagles AND MAPLES, Until May 27th!
http://silverdoctors.blogspot.com/2011/04/apmex-now-sold-out-of-silver-e...
I read this and thought it would be a good case study to find out how many people with underwater houses would trade them in for some silver. That is how you know the price of silver is very underpriced right now.
Wealthy Leaving Las Vegas Mansions as Foreclosure Pain Spreadshttp://www.bloomberg.com/news/2011-04-26/wealthy-leaving-las-vegas-mansi...
Toss pots; hear ye hear ye; the trade be not the precious against the pound sterling, euro, usd or the hop sing zinger. The trade for the precious and it's lessor cousin gold be in barrel/s of light sweet crude.
Any proper bloke buys not the precious for digitized gain in the folly of fiat; no no those who own the precious own it for posterity's wealth; be thee 20 or fitty earth years. Capitalism be good for over the age of time it has been weigh'd measur'd and found good; the neocapitalists, well that be a different judgment.
Looks to me the play is long silver. Everything I've read since yesterday says sell because it went to high to fast or because they believe QE2 is ending. The only buy talk I've read is buy the dip.
Nobody in my street owns Gold or Silver, I only know a few others who have a reasonable amount (introduced by me 6mths ago), ergo, there is no bubble. What's driving prices of PMs isn't speculation on PMs, it's speculation on economies...to which the skies are dark and the future grim. That's all that counts, everything else is temporary nonsense.
+++
Yesterday Gil Morales of Virtue of Selfish Investing called a top in silver as well yesterday on Fox.
http://video.foxbusiness.com/#/v/4663042/silver-rally-over-/?playlist_id=87185
This was a classic top in silver with a similar volume signature left by SLV on 11/9/10
I identified the same topping action so I sold my May silver futures prior to the stock market open Monday at $47.80
But I would point out, so far Gold hasn't confirmed a top in silver. (GLD has made a nominal high today) And since smart traders like Gil and Simon's partner Tim Staermose (who wrote this post) identified a classic top, I wonder what happens if Silver closes above the monday morning highs of $49.845 (July contract)?
I have observed that when silver futures were up prior to the opening of SLV trading, the opening gap would frequently fill mid-day, particularly when it wasn't a massive gap. Since silver was up overnight, I was prepared for a mid day sell off in SLV to unch or down a few pennies. When it went negative, I bought July Silver contracts and set a stop a few pennies below yesterday's low. As I type, that stop held, and I have moved up my stop to breakeven.
Disclousure: Long July Silver @ $45.26