Warning! Silver Will Fall by 66%

The silver bubble took on a new dimension this month, with the price of the metal rising nearly 30%. Last Monday, share volume in the iShares Silver Trust ETF (NYSE: SLV  ) was five times its daily average in the first quarter. While many investors may cite capital preservation as a reason to buy silver, an analysis of the historical data suggests that those who pay nearly $50 an ounce will eventually suffer massive losses.

Gold's real return: aero
Like gold, silver has lived up to its billing as a store of value -- if you measure your holding period on a geological timescale. Using data from precious-metal dealer Kitco, I constructed a series of inflation-adjusted silver prices going back to 1800, according to which the metal generated a historical average return of 0.4% per annum. (Much of that small premium over inflation is due to price appreciation over the past 10 months. If we use the price of silver in mid-2010, the average annual return falls to 0.1%).

There is no reason for investors to expect anything more from silver: Why would a metal -- a commodity with no yield -- accrete value? But silver's price volatility disqualifies it even as a stable store of value. For proof, just take a look at 10-year trailing real returns since 1810 (based on average annual prices):

Source: Kitco, Federal Reserve Bank of Minneapolis.

Recent gains will reverse
Beyond the volatility, the graph also shows that silver returns are mean-reverting. The alternating peaks and valleys in the graph illustrate the fact that periods of higher-than-average returns tend to usher in periods of lower-than-average returns, and vice versa. That's not surprising, as this property shows up across many different assets, including stocks, bonds and gold.

Investors who have owned silver over the past 10 years have earned spectacular returns, rivaled only by those earned during the 1970s, a decade which ended with a huge spike in silver prices resulting from the Hunt brothers' attempt to corner the market. Silver then performed disastrously during the following decade, losing more than four-fifths of its inflation-adjusted value. Both the previous chart and the inflation-adjusted price chart below suggest that we are on the eve of a similar period of horrific losses.

Source: Kitco, Federal Reserve Bank of Minneapolis.

Silver could fall by two-thirds!
Silver prices are now well ahead of their historical average (the red line). The chart doesn't do justice to the extent of the gap that has opened up with respect to a fair price since it ends on the average price of silver during the first quarter of this year (roughly $32), whereas daily prices are now close to $50. In fact, the price of silver would need to fall by nearly two-thirds to get back to its long-term average of $18/ ounce -- not to mention that markets typically overshoot.

Two-thirds is roughly the same size decline I expect to witness in gold prices (see the associated article on gold here). Both precious metals are in a bubble and, with silver's most recent price surge, the two bubbles are of similar magnitude, which is consistent with a gold-to-silver price ratio (31.5) that is close to its long-term historical average (36.7).

How many angels can dance on a silver ingot?
Silver is in a bubble, but I'm not predicting an imminent fall in its price. With silver at $50, who is to say it can't reach $100? I can certainly imagine that scenario. Once irrationality and speculative mania take hold of a market, there is no measuring how far the excess will run (except post-facto). It's impossible to time the bursting of a bubble; it could happen several months from now, just as it could take several years. My best guess is that silver prices will decline significantly by the end of 2012, with multiple interest rate hikes by the Fed as the catalyst. But that is nothing more than guesswork; the only thing I am reasonably confident of is that the price will ultimately decline by roughly two-thirds.

Silver investors: Check yourself before you wreck yourself
In that context, owners of silver bullion and the iShares Silver Trust should accept that they are playing with fire. Shareholders of silver miners Coeur d'Alene Mines (NYSE: CDE  ) , Silver Wheaton (NYSE: SLW  ) , or Pan American Silver (Nasdaq: PAAS  ) , or the Global X Silver Miners ETF (NYSE: SIL  ) should review the assumptions regarding silver prices that are implicit in the miners' valuations. Do I need to mention that silver owners shouldn't seek an alternative in gold bullion or the SPDR Gold Shares?

A superior alternative to precious metals
For reliable protection and growth of the purchasing power of your savings, I recommend high-quality dividend stocks, purchased at reasonable valuations. Readers can take a look at Eli Lilly (NYSE: LLY  ) or Lockheed Martin (Nasdaq: LMT  ) , for example. Both stocks look like they fit the bill (to track these stocks by adding them to your watchlist, click here.)

With gold prices at historic highs, one little-known company is making a fortune. Find out the name of "The Tiny Gold Stock Digging Up Massive Profits" by clicking the link.

Fool contributor Alex Dumortier, CFA, has no beneficial interest in any of the stocks mentioned in this article. You can follow him on Twitter. The Fool owns shares of Lockheed Martin. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (107) | Recommend This Article (81)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 29, 2011, at 3:04 PM, catoismymotor wrote:

    +1 Rec for sticking to your guns. I don't happen to share your point of view on this but I respect it.

    Have a great weekend.

  • Report this Comment On April 29, 2011, at 3:15 PM, catoismymotor wrote:

    I misread part of the article, commented too quickly. How about a do over?

    +1 Rec for sticking to your guns. I agree that the rate of growth seen with silver will be impossible to keep up. I think silver is at the beginning stage of a bubble, just like oil not too long ago. If you got in early when the prices were low and have a reasonable exist strategy you should do very well.

    Thanks again for the article.

  • Report this Comment On April 29, 2011, at 3:20 PM, stokboy74 wrote:

    You could only be blissfully ignorant to sleep at night with thinking like this. Silver is not going up in value nor is gold. Since our $ is worth .74 that is how much of the minerals people will give us for our crippled U.S. dollar. Smell the Fool's coffee!

  • Report this Comment On April 29, 2011, at 3:27 PM, rfaramir wrote:

    Do you even look at your own research? You've proven that the price of silver reacts to increases in the money supply, and you know that Bernanke is committed to increasing the money supply.

    You're right to recommend companies that pay dividends. The amount of gold or silver you should hold depends on your desire to hold cash, roughly. It's not an investment per se, it's a store of value that isn't negatively affected by paper bill printing. Above that amount (different for every person, so I won't suggest percentages) would be speculating, but you've got to admit, with the current policy of the Fed, speculation is being fed if not force-fed to us.

  • Report this Comment On April 29, 2011, at 3:34 PM, TMFAleph1 wrote:

    <<Do you even look at your own research? You've proven that the price of silver reacts to increases in the money supply, and you know that Bernanke is committed to increasing the money supply.>>

    Maybe you missed this week's press conference by the Fed, but there is no such commitment from Bernanke. Quite the opposite, in fact: QE2 will end according to the original schedule and there are no plans for further quantitative easing.

    I prefer to focus on facts, not fantasy.

  • Report this Comment On April 29, 2011, at 3:40 PM, jimmy4040 wrote:

    Damn should have bought MSFT and lost money relative to the S&P. How dumb could I have been making money in silver!

  • Report this Comment On April 29, 2011, at 3:46 PM, TMFAleph1 wrote:

    <<Damn should have bought MSFT and lost money relative to the S&P. How dumb could I have been making money in silver!>>

    I'm afraid one of the shortcomings of this analysis is that it is forward-looking, i.e. it focuses on what one should do with one's money over the next ten years. However, for those who have the means to travel back through time, I have numerous investment recommendations for the past ten years.

    Alex Dumortier

  • Report this Comment On April 29, 2011, at 3:48 PM, Gonzhouse wrote:

    I'm not disputing the charts but this time it REALLY is different: at no point in recorded history has the readily available suppy of precious metal commodity (silver) been unfavorable to the overall world population and the demand associated with it. Your assumption that silver's price will eventually come back to the norm is based on supply-demand returning to norm.

    Are you serious?

  • Report this Comment On April 29, 2011, at 3:52 PM, whereaminow wrote:

    Facts:

    1. http://research.stlouisfed.org/fred2/series/BASE

    Base money has tripled in 3 years.

    2. M1 has continued to increase to its highest level in history.

    http://research.stlouisfed.org/fred2/series/M1

    3. Same goes for M2

    http://research.stlouisfed.org/fred2/series/M2

    Alex says, "Quite the opposite, in fact: QE2 will end according to the original schedule and there are no plans for further quantitative easing."

    That statement shows your hand.

    You see, rfarmir didn't ask you about QE. He claimed that Bernanke is committed to expanding the money supply. These are not mutually inclusive concepts. One can expand the money supply without QE. QE is simply a tool for that purpose, and a sketchy one at that. (See the $1.47 Trillion in excess reserves as evidence of its sketchiness.)

    So, nice try with this article, but just like your last one, it falls way short of economic analysis, and instead relies on a faulty premise.

    http://caps.fool.com/Blogs/rebuttal-to-alex-dumortier/580363

    There is no mean price silver. There is no mean price of anything. Keep looking for them, but regression to the mean is about fixed relationships.

    When you flip a coin, long run reversion runs to 50% heads because the relationship between heads and tails is fixed.

    If the supply of tails was not fixed, if it could float up or down on the whim of a central planner, you could flip the coin trillions of times and never see a regression to the mean.

    This isn't a difficult concept to grasp. Put away your econometrics. They're not helping you.

    One half of every transaction in America involves dollars. If the supply of dollars is not fixed, the price in dollars does not revert to the mean.

    Anyway, good luck with your reality. The rest of us will continue to operate from the fantasy land where regression to the mean is actually understood.

    http://en.wikipedia.org/wiki/Regression_to_the_mean

    David in Qatar

  • Report this Comment On April 29, 2011, at 3:52 PM, kurtdabear wrote:

    One thing to keep in mind about silver's history is that the Hunt Bros.' attempt to control the market was met by a gigantic attack by the government and the commodity exchanges. They essentially changed all the rules and stacked the deck to defeat the Hunts. This led to a reaction equal and opposite the hyperbolic rise the brothers had created.

    About that same time, Pres. Reagan put Paul Volcker in charge at Treasury; interest rates were allowed to run free; and after a severe economic downdraft; the U.S. $ regained its value, leading to a long period of decline in both silver and gold. Why hold precious metals when the government will pay you 15% interest to borrow your money?

    So you had the double whammy of a strengthening $ and historically high interest rates suppressing precious metals.

    Today, however, the government is suppressing interest rates and printing money as fast as its presses will turn, so gold and silver are still rising and will continue to do so (with a few ups and downs along the way), until our government develops enough backbone to rein in its spending and strengthen its currency.

    There was another country that, in the early 1980's, had a dollar a bit stronger than the U.S. Then it got into a bit of financial trouble and began doing a bit of "quantitative easing." After about 100 rounds of quantitative easing, an ounce of silver was worth approximately one quadrillion Zimbabwe $$. So it's not so much a matter of what a metal is worth as it is a question of how much your currency isn't worth.

    We're not that badly off (yet), but if your mother had given you 4 quarters to buy your school lunch in 1963 and had given your sister a paper $, you could still buy yourself a decent lunch today for the value of your silver money, while your sister would be begging a free glass of water at McDonald's to help her wash down the small order of fries she could buy with her paper money.

    So silver might not have made you a fortune over the last half century or so, but it certainly would have maintained your purchasing power.

    Finally, another possible reason silver may be appealing to people today is that no U.S. president has ever confiscated the people's silver at gunpoint as Barack Obama's idol did with American's gold.

  • Report this Comment On April 29, 2011, at 3:53 PM, jesusfreakinco wrote:

    Alex / BullnBear,

    Leave PMs to TMFSinchy... You guys look like fools (pun intended) making calls for lower silver at this juncture in the market. Commercial Default Failure is imminent in perhaps both silver and gold and demand overwhelming supply.

    Not that Chris needs any help making the case, but I'd suggesting reading Harvey Organ on a regular basis. http://harveyorgan.blogspot.com/

    JFC

  • Report this Comment On April 29, 2011, at 3:56 PM, bomer777 wrote:

    From the caption, I know it is from fool, Whatever fool said, just reverse the direction.

  • Report this Comment On April 29, 2011, at 3:57 PM, rfaramir wrote:

    "I prefer to focus on facts, not fantasy."

    The fact is, he is continuing with QE2 which increases the money supply by about $4Billion daily. He also says this is consistent with a strong dollar policy to which he says he is absolutely committed.

    It is a fantasy to think that his pronouncements mean anything but continued debasement of our money. The gold market agrees, going up during his speech and rising to $1559.77 as I write.

    The only speculation is how long after QE2 ends will QE3 start. I have heard nothing to convince me that there will not be further 'easing'. And when the easing stops some day, what will silver and gold do? Adjust to the 'final' quantity of money, probably downward a bit, as people will have expected further printing and taken it into account when purchasing PMs. But the already-printed money will still be there. Worse, a whole lot of it is in excess bank reserves, i.e., NOT being lent out. So we can expect about 9x more increase in the money supply (9x of the size of excess reserves, not total supply) once the banks start lending again.

  • Report this Comment On April 29, 2011, at 4:05 PM, TMFAleph1 wrote:

    <<+1 Rec for sticking to your guns.>>

    Thanks for your kind words, catoismymotor, but I don't think sticking to one's guns is laudable in and of itself. In this game, being a flip-flopper is an advantage if it is based on a considered examination of one's prior analysis or new information.

    I'm grateful to Dave in Qatar for providing me with the opportunity to re-examine my initial thesis on gold and to consider an opposing view. On completion of this process, I didn't feel it was necessary to alter my position, but I'm willing to do this at any time.

    I will admit that the nature of the heated discussions surrounding gold tends to push one to retrench on one's original position and corrupt one's capacity for rational analysis -- I try to guard against this.

    I'm ready to entertain all respectful criticisms and some that is disrespectful if it is sufficiently cogent (although I find that the level of rudeness displayed in a post is usually inversely related to its quality.) I hope this article will generate some discussion that will help me refine (or even completely re-evaluate) my thinking on gold.

    Alex Dumortier

  • Report this Comment On April 29, 2011, at 4:11 PM, whereaminow wrote:

    Alex,

    I have tried being as respectful to you as you are to us.

    So I ask,

    What is the mean price of wheat?

    What is the mean price of one share of Exxon?

    What is the mean price of a Samsung 47" widescreen TV?

    What is the mean price of a pencil?

    What was the mean price of gold in rubles from 1920-1989?

    What is the mean price of .........

    Your analysis is faulty on a theoretical level.

    In a coin flip, the supply of heads is 1. The supply of tails is 1.

    What happens if the supply of tails can be changed arbitrarily? Will you see a regression to the mean?

    You are only looking at one side of the transaction. You are looking at "heads" without examining what is being done to "tails."

    David in Qatar

  • Report this Comment On April 29, 2011, at 4:17 PM, Gonzhouse wrote:

    TMFBullnBear,

    I agree that personal attacks and over-the-top criticism is counter-productive: even passionately held positions (and silver investors are definitely passionate!) need to be cognizant of confirmation-bias. So while I don't agree and see a major macro-analysis miss in your position we need opposing views.

  • Report this Comment On April 29, 2011, at 4:21 PM, TMFAleph1 wrote:

    @whereaminow, @rfaramir

    As I wrote in the associated article on gold, there is no sense in focusing on a proximate cause (the money supply) when the relevant variable (inflation) is measurable.

    http://www.fool.com/investing/general/2011/04/29/gold-is-now...

    David, regression to the mean applies to the real prices of gold and silver, not nominal prices. It may be rational to pay three times the fair price for gold or silver expressed in today's dollars if you believe hyperinflation is highly likely. However, since I regard that scenario as EXTREMELY unlikely, I strongly recommend against paying that sort of premium over the fair price.

    Alex Dumortier

  • Report this Comment On April 29, 2011, at 4:24 PM, TMFAleph1 wrote:

    <<I have tried being as respectful to you as you are to us.>>

    I wasn't targeting you with my remark regarding the tone of the discussion. I have found your contributions useful.

  • Report this Comment On April 29, 2011, at 4:27 PM, rfaramir wrote:

    Keynes may have been terrible as an economist, but he was charismatic and quotable at times: "When the facts change, I change my mind. What do you do, sir?"

    I can only answer: Austrians base their opinions on logically proven principles, so they don't have to change them. The news on which we opine can be inaccurate, so the opinions were correspondingly inappropriate, applying as they were to mere phantoms.

    To change one's 'mind' is to admit that one is wrong. Far from a weakness, we should all be able to do that when we learn more about any subject. None of us is master of all subjects. I know I'm not, having learned more in the last 3 years than I did in the previous 20. Being open to education on this subject shows excellence in you, Alex.

  • Report this Comment On April 29, 2011, at 4:28 PM, catoismymotor wrote:

    "I don't think sticking to one's guns is laudable in and of itself."

    I do. You could pander to the PM bulls, choose to stay mum on the subject or do what you are doing. Sticking to your principles is not always easy. And it is twice as hard if you live your life like it is a popularity contest. Maybe having a hard head and thick skin is needed when you write for TMF? :)

    I know I catch my share of flack for voicing my opinions. I don't know why I keep it up. It's not like I get paid for the trouble.

    Anyway, thanks for your efforts. I hope the weather is as beautiful there as it is here.

  • Report this Comment On April 29, 2011, at 4:29 PM, arbyh wrote:

    Bullion in your hands is not on anyone else's debit sheet. The link between you and your wealth is you, and your personal security. Silver and Gold convert to any other FIAT paper currency in the world, as you wish. It is the store of value that Govts prefer in their vaults, so why not you?

  • Report this Comment On April 29, 2011, at 4:34 PM, whereaminow wrote:

    Alex,

    Everyone knows that I can be the biggest jerk around, so I don't mind either way.

    Regression to the mean, properly understood, is powerful and I make no claim otherwise.

    But it does not apply to prices, period. This is not because the CPI is bunk or because I don't believe econometrics is useful or any hyperinflationary scenario. (I have never predicted hyperfinlation. I think it is unlikely. I have consistently argued that we are suffering stagflation today and will continue to do so.)

    It's because the supply of dollars is not fixed to anything but the Fed's whim. It's not fixed to the CPI, gold, silver, or carrots. It's truly floating... anywhere he wants it to go... which is up.

    One more thing, only a side note to this discussion. Bernanke's writings would be a good place to go if you want to know what he is going to do. His academic writings, that is. He views the Fed as a superhero that can make any accommodation not only to fix a crisis, but to prevent them. His biggest fear is deflation, despite no empirical evidence that deflation is linked to Depressions. He will do anything to avoid deflation.

    It's not hyperinflation that worries me. It's Bernanke.

    But that's not relevant to this analysis. Our analysis only concerns the supply and demand of dollars in relation to the supply and demand of silver. (A smart economist would note that supply constitutes demand, but that is another discussion.) This is how prices are formed.

    With one side of the coin subject to manipulation, there is no mean price.

    David in Qatar

  • Report this Comment On April 29, 2011, at 4:38 PM, tonyd14 wrote:

    I hate sensational headlines ' silver WILL fall by 66%', I didn't know that the Fool is in possession of a crystal ball. I would expect this type of sensationalist article to arrive unsolicited in my mailbox not from a service that I sadly subscribe to.

  • Report this Comment On April 29, 2011, at 4:45 PM, 15deltawhiskey wrote:

    I HAVE BEEN WITH YOU FOR 9 YEARS, BUT WHEN YOU MAKE THE FOLLOWING:

    Warning! Silver Will Fall by 66%

    When you headline with the above and then write the following, I believe you are indeed a fool.

    You fooled me and many more to panic and get out. NOW! I READ THIS AT 15:55 WITH NO TIME TO RESEARCH.

    After selling, the market closed, I went to read the following on your article:

    It's impossible to time the bursting of a bubble; it could happen several months from now, just as it could take several years. My best guess is that silver prices will decline significantly by the end of

    2012.

    So what is with your cheap headline?

    How about this?

    "Silver will probably fall in the 2012s by around 66%?"

    Would'nt that have been better?

    This is cheap talk and trash. You have downgraded Fools and show that you are not very professional.

    Sadly Bye-Bye

    Hope no others got hurt by your amature way.

  • Report this Comment On April 29, 2011, at 4:59 PM, gee9er wrote:

    Hi Alex,

    I certainly respect your opinion and appreciate the article.

    It doesn't seem like the Fed will raise rates this year. Do you think they'd risk raising rates in an election year?

  • Report this Comment On April 29, 2011, at 5:07 PM, Margret2 wrote:

    Why do so many people feel the need to warn of a bubble and try to pick a top?

    Remember when palladium was $60 an oz.?

    That was a reasonable price until they found a good use for it in cars. Now palladium is $790 an oz. Do you think palladium MUST go back to $60 an oz.? Same with platinum, osmium, and other rare elements.

    Silver is being consumed in a massive way 878.8 million oz a year in 2010 and growing.

    http://www.silverinstitute.org/pr07apr2011.php

    The billions of oz. government stockpiles have been depleted. That table is misleading because it shows supply exactly equal to demand. It doesn't show the demand that doesn't get filled like the mint not being able to produce more coins because of insufficient silver.

    When a precious metal is used in mass consumption this is the eventual result.

    All precious metals have risen permanently. When you take something rare and then deplete it with mass consumption the result is inevitable.

    Silver is the last one to go up.

  • Report this Comment On April 29, 2011, at 5:08 PM, majestictony wrote:

    Can money be in a bubble? Gold is real money right. Like Peter Schiff said on CNBC the other day: Gasoline is the cheapest its ever been. You can buy a gallon of gasoline for a dime minted in 1965 or earlier. That is how much inflation has occurred in the fiat US dollar. Right?

  • Report this Comment On April 29, 2011, at 5:13 PM, CacaPasa wrote:

    Many people know silver will crash: it's just a matter of when, how high the price will be and how far it will fall. The only thing the author is certain of is that it will fall by two thirds "the only thing I am reasonably confident of is that the price will ultimately decline by roughly two-thirds." If it fell 66% from today's prices it would be at the price where I stopped buying it. If it falls two thirds from $150/ounce it will still be triple from the highest prices I paid.

    Ride the silver bull, just don't get thrown off.

    I don't have an opinion on how high it will go or how far it will fall but I am guessing that the flight from silver will likely begin when the economy starts significantly improving.

    In 1964 a gallon of gas cost 3 silver dimes. Today a '64 Roosevelt has $3.45 worth of silver, almost enough for a gallon of gas in California and maybe enough in some other state. So if silver crashed right now by two thirds it would take 3 silver dimes again to buy that gallon of gas.

    Caca pasa.

  • Report this Comment On April 29, 2011, at 5:16 PM, majestictony wrote:

    GOLD IS MONEY.

    MONEY CANNOT NOT BE IN A BUBBLE.

  • Report this Comment On April 29, 2011, at 5:17 PM, majestictony wrote:

    GOLD IS MONEY.

    MONEY CAN NOT BE IN A BUBBLE.****

  • Report this Comment On April 29, 2011, at 5:18 PM, majestictony wrote:

    NO ONE CAN PRINT GOLD. ONLY DOLLARS.

  • Report this Comment On April 29, 2011, at 5:24 PM, majestictony wrote:

    3 silver dimes for a gallon if silver falls 66% today. Thanks Caca Pasa. Gasoline is so cheap:)

  • Report this Comment On April 29, 2011, at 5:27 PM, TMFAleph1 wrote:

    @15deltawhiskey

    <<You fooled me and many more to panic and get out. NOW! I READ THIS AT 15:55 WITH NO TIME TO RESEARCH.

    After selling, the market closed, I went to read the following on your article:>>

    You read the article AFTER you closed your position? If you're willing to wager part of your financial security based on glancing at single headline, your problems are more serious than you are willing to admit. Recommend you stop managing your own money IMMEDIATELY.

    Alex Dumortier

  • Report this Comment On April 29, 2011, at 5:30 PM, TMFAleph1 wrote:

    <<GOLD IS MONEY.

    MONEY CANNOT NOT BE IN A BUBBLE.>>

    Not sure where to start to rebut this syllogism, but I'll simply say that anything with a market price determined through supply and demand has the potential to become a bubble.

    Alex Dumortier

  • Report this Comment On April 29, 2011, at 5:33 PM, TMFAleph1 wrote:

    <<All precious metals have risen permanently.>>

    On a nominal basis, perhaps; however, the historical data for gold and silver show that this is patently false if we are reasoning in terms of inflation-adjusted prices.

    Alex Dumortier

  • Report this Comment On April 29, 2011, at 5:37 PM, skyzer wrote:

    Keep freaking out.. Poor Fed did pre-paid for Massive Internet-TV media hysteria campaign: "Silver will lose 75% of it's value? Ohh, please, keep dreaming. We are not even at 1/3 of 1980 inflation and money supply adjusted target anywhere from $138 to $300/oz.. In mean while US Dollar facing 10% short term decline and possibly another 20% of the Long Term.. QE2 ENDs??? Ha-ha-ha.. Right.. Who's going to buy US paper then? Maybe Japanese? or Chinese again? Nobody else left on entire Planet to buy this Junk, they can only hope for aliens.. Maybe it's not going to be "QE3" by something like "i-QE2.5", but they will continue print and print and print.. What else they left to do with 3 active WARS going on non-stop and new ones possibly started,

    as Pentagon getting addicted for money supply from US.Gov . You want to cut Budget Deficit? Stop All illegal wars now and cut Pentagon budget by 75%- DONE. Easy no BS solution.. If they have cravings for WAR, then let them do so for $3/hour.. Bunch of criminal Bums!.

    Unless USA cut it's Debt in Half, Silver will continue it's course.. Target $100 in 2 years or sooner.. Period. Gold $3000 then $5000.

    Those who missed the train, keep buying treasuries and hope for the end of "QE2", cause this USD Pyramid Schema will end up like Madoff scam operation.. It not going to take long.. 2-3 years Tops..

    Good luck Shorting Silver, fools: JP Morgan and Glodman s*cks including..

  • Report this Comment On April 29, 2011, at 5:47 PM, Margret2 wrote:

    ----------

    <<All precious metals have risen permanently.>>

    On a nominal basis, perhaps; however, the historical data for gold and silver show that this is patently false if we are reasoning in terms of inflation-adjusted prices.

    Alex Dumortier

    ----------

    That statement means that silver will not go back to $4 an oz. just like palladium will not go back to $60 an oz. Not even close to those prices.

    What is your reason for choosing the title:

    "Warning! Silver Will Fall by 66%"

    Sounds like it was chosen to cause a panic selloff.

    Do you have some financial interest in the price of silver dropping?

  • Report this Comment On April 29, 2011, at 5:48 PM, TMFAleph1 wrote:

    <<Anyway, thanks for your efforts. I hope the weather is as beautiful there as it is here.>>

    I'm lucky enough to live in L.A., so the weather today is beautiful, as it has been this entire week.

  • Report this Comment On April 29, 2011, at 5:52 PM, skyzer wrote:

    Alex Dumortier, "however, the historical data for gold and silver show "

    I don't think you get it.. There is no Historical

    example for today Events.. Please point me for

    the

    times in History, when USA got 67 Trillion Dollars

    in

    Debt,

    which will NEVER be repaid.

    then we'll talk about Silver prices.. Actually Silver

    price is too cheap for now, but little correction is

    welcome, perhaps 5-10$/oz at most..

  • Report this Comment On April 29, 2011, at 5:58 PM, MoneyWorksforMe wrote:

    I didn't even read the article; based on recent history the comments made by other fools, are far more enlightening. I also wanted to rec this article just for the valuable commentary, but then caught another glimpse of this ridiculous title, and remembered how wrong the author has been about gold and silver thus far, and so decided strongly against it.

    This guy is apparently starved for attention. His record and knowledge on precious metals and the like, pales in comparison to TMFSinchurina, and yet he still somehow has the audacity to make even bolder predictions.

    By 2012, if Ben Bernanke's massive experiment hasn't already failed by then, there will be bubbles everywhere, not just in silver and gold.

    Do expect also that if our next crisis is severe -equivalent or worse than the financial crisis--as I anticipate, that there will be a major push towards using gold and/or silver as a means to stabilize fiat currencies.

  • Report this Comment On April 29, 2011, at 5:59 PM, skyzer wrote:

    Let's talk about USD and DEBT super Bubble, which is REAL. Everything else are rising in terms of $USD accordingly..

  • Report this Comment On April 29, 2011, at 5:59 PM, TMFAleph1 wrote:

    @Margret2

    <<That statement means that silver will not go back to $4 an oz. just like palladium will not go back to $60 an oz. Not even close to those prices.>>

    The statement you are referring to implies no such thing.

    <<"Warning! Silver Will Fall by 66%"

    Sounds like it was chosen to cause a panic selloff.

    Do you have some financial interest in the price of silver dropping?>>

    I'm not delusional enough to think that my article would have any price impact and I find your innuendo insulting. The disclosure statement at the bottom of the article is clear enough.

    I wonder how you would treat someone who came into your place of business and insinuated that you are acting dishonestly in a manner that harms your customers -- without the slightest shred of evidence?

    Alex Dumortier

  • Report this Comment On April 29, 2011, at 6:05 PM, Munchies101 wrote:

    "....an analysis of the historical data suggests that those who pay nearly $50 an ounce will eventually suffer massive losses."

    This is where you lost 90% of PM investors since it doesn't agree with their thesis.

  • Report this Comment On April 29, 2011, at 6:14 PM, skyzer wrote:

    Besides should you name your article:

    "Silver COULD Fall by 66%"

    Instead of

    "Silver Will Fall by 66%"

    "Will" fall, hah, you wanna BET???

    it's about 99.9999% that you are Wrong, unless

    some aliens dump extra supply of Silver on planet Earth and Bernanke Stop printing presses in the basement of Fed Reserve.

  • Report this Comment On April 29, 2011, at 6:20 PM, skyzer wrote:

    1 OZ of Silver or Gold not only just Metal, it's also contains: Man working hours, Fuel, Other Energy usage, Heavy machinery usage, Insurances, Storage, Delivery costs, political instability risks..

    And everything above keep rising in price..

  • Report this Comment On April 29, 2011, at 6:23 PM, rfaramir wrote:

    <<All precious metals have risen permanently.>>

    Alex wrote: "On a nominal basis, perhaps; however, the historical data for gold and silver show that this is patently false if we are reasoning in terms of inflation-adjusted prices."

    "On a nominal basis, perhaps" is the best admission you've made yet. You may be attempting to reason "in terms of inflation-adjusted prices", but you don't have inflation-adjusted dollars to spend at the store, do you? The whole argument for precious metals versus fiat currency is what government does to the (nominal) quantity of it. I wouldn't mind QE2 if my dollars (and income) were inflation-adjusted.

    To argue in inflation-adjusted terms is to accept the theft of our purchasing power by the Fed as 'normal' in both the 'acceptable' and 'factual' senses. I acknowledge the fact but reject the notion that it is acceptable.

    Regarding your predicted 66% drop. Is that in nominal or inflation-adjusted terms? After all, "it could take several years", and at the current rate of money creation, a drop to $18/oz in constant 2010 dollars may mean a lot less than a 66% drop from here ($47.88), nominally. Note that a mere 1.5% increase in the base money supply by the Fed, multiplied by 9 by fractional reserve banking is 13.5%, which in 4 years is a 66% increase.

    [Also, you have a chart with "(Constant 2011 dollars)" written on it. 2011 dollars are still being printed as we speak, so there aren't a constant number of them, yet. Are you from the future? :-)]

  • Report this Comment On April 29, 2011, at 6:32 PM, rfaramir wrote:

    Oh, and I didn't mean to imply that a 66% increase would negate a 66% drop. They aren't equal. 18 * 1.66 is about $24, still about half the current price.

    But neither do I believe the Fed will limit their money creation to 1.5% per year. It will be bigger, so scale up my 66% increase accordingly (and not linearly, we're talking exponential, with the number of years away as the exponent).

  • Report this Comment On April 29, 2011, at 6:33 PM, rfaramir wrote:

    Excuse me again, LOL! 1.66 * 18 is about 30, not 24 (that was adding one third, not two). Yeesh, I'm low on blood sugar and should go home and eat dinner.

    Nite!

  • Report this Comment On April 29, 2011, at 7:04 PM, TMFAleph1 wrote:

    <<Regarding your predicted 66% drop. Is that in nominal or inflation-adjusted terms? After all, "it could take several years", and at the current rate of money creation, a drop to $18/oz in constant 2010 dollars may mean a lot less than a 66% drop from here ($47.88), nominally.>>

    The roughly two-thirds drop from $48.70 to $17.84 refers to a decline in today's dollars. You are correct that the size of the required decline diminishes with the passage of time (assuming positive inflation). That's why I wrote above that paying a huge premium to the current fair price (i.e. 2-3x) may be a rational speculation if you think hyperinflation.

    <<Also, you have a chart with "(Constant 2011 dollars)" written on it. 2011 dollars are still being printed as we speak, so there aren't a constant number of them, yet. Are you from the future?>>

    The constant dollar series is based on the average CPI during the first quarter of 2011.

    Alex Dumortier

  • Report this Comment On April 29, 2011, at 7:06 PM, BonusCash wrote:

    Yes, clearly silver is in the bubble. Not the FRN. FRN's are the strongest, non-diluted store of wealth in the world.

    This seems like just another shill for being part of the status quo and going down with the FRN ship. Stocks generally do not outperform precious metals during a currency collapse.

    At least we can have pity down the road when his clients ask him why they lost most of their purchasing power investing with him. He will just feed them another bill of goods that no one saw this coming and just to stick with the plan(I'm sure they bought that in fall 2008, too).

  • Report this Comment On April 29, 2011, at 7:07 PM, majestictony wrote:

    Maybe we should listen to the Chinese. They are our creditors and they have done well for themselves. The Chinese are advising their 1,331,460,000 citizens to buy gold and silver.

    A lot of Chinese citizens are going to be pretty upset at their government if your article turns out to be true.

  • Report this Comment On April 29, 2011, at 7:13 PM, cooperbry wrote:

    Looks like there's another $30 or so per ounce to go...

  • Report this Comment On April 29, 2011, at 8:30 PM, SilverDoctors wrote:

    Pure BS. How much does JP Morgan pay you to write this uninformed crap?

    Let me know when Bernanke stops QE. QE can stop when congress balances its budget.

    Yeah, I didnt think so.

    Isnt it interesting that articles like these appear out of the woodwork when silver is within hours of reaching $50.

    silverdoctors. com

  • Report this Comment On April 29, 2011, at 8:39 PM, jimmy4040 wrote:

    Alex:

    A philosphical point, investors who characerize themselves as "forward looking" always base their outlook on past data performance.

    This is a contradiction. for instance where do you take into account the actual current/future usage of silver as an industrial metal? Also if you have future GDP projections I missed them. Finally, I don't see anything about future production rates and whether the mining companies like Goldcorp and Barrick have given any indications of expansion plans. That kind of research would indeed be "forward looking" not just charting past prices.

  • Report this Comment On April 29, 2011, at 8:48 PM, Margret2 wrote:

    I'm not delusional enough to think that my article would have any price impact and I find your innuendo insulting. The disclosure statement at the bottom of the article is clear enough.

    I wonder how you would treat someone who came into your place of business and insinuated that you are acting dishonestly in a manner that harms your customers -- without the slightest shred of evidence?

    Alex Dumortier

    -------

    When you use the terms "playing with fire" and "Check yourself before you wreck yourself" and then warn of a particular list of stock names, it sure looks suspicious. If the price of silver drops 66% ALL silver stocks would get hit, not just those companies.

    These Fool articles and Seeking Alpha articles appear on the news list of popular websites like Yahoo. People regularly check these news lists for company news. From all the comments it is obvious a lot of people read your article.

    At the very least your title of "Warning! Silver Will Fall by 66%" is sensationalistic. Using the word WILL fall an exact percentage like it is absolute certainty.

  • Report this Comment On April 29, 2011, at 9:04 PM, TMFAleph1 wrote:

    <<At the very least your title of "Warning! Silver Will Fall by 66%" is sensationalistic. Using the word WILL fall an exact percentage like it is absolute certainty.>>

    I don't disagree with that, but my attitude towards titles and subtitles is that they have one principal purpose: Getting people to read the article, which is the proper place to develop your thesis with the appropriate degree of nuance.

    I know that we live in a culture in which you're supposed to reduce everything to 140 characters, but I'm afraid I'm not writing for people who expect to be able to extract all the meaning and nuance contained in a dense 850-word article that covers a complex topic from just 6 words.

    Finally, I discovered from one of the comments that some readers even make trades based purely on a glance at an article title without actually reading the article. Do I need to comment on the lack of common sense and the irresponsibility this betrays?

    Alex Dumortier

  • Report this Comment On April 29, 2011, at 9:13 PM, HarryCaraysGhost wrote:

    Alex-

    I think your article would be better served to just simply warn people that there might be a pullback and if you've made huge profits it might be a good idea to take some off the table. (Which you were a few days late on btw)

    That's what I did and my Silver investments are completely free to me.

    That being said talk to you at $100 pr/oz.

    Cheers.

  • Report this Comment On April 29, 2011, at 9:24 PM, tornado63 wrote:

    Alex you have to improve your analisis!

  • Report this Comment On April 29, 2011, at 9:26 PM, whereaminow wrote:

    Alex,

    I'm going to drop you one last comment today, and then I'll save the rest for my rebuttal.

    You are a big fan of the inflation-adjusted metric. Did you know that the CPI in 1800 registered the same price level as the CPI in 1900.

    Now look back at your charts.

    Why, the constant 2011 dollars chart shows the same inflation-adjusted price of silver in 1800 as it does in 1900.

    We can conclude one of two things:

    1. Investors were far more intelligent in the 19th century. There are no silver bubbles. There are no wild swings in price. No matter how you judge silver prices (real or nominal), holders of silver got it right. And they did all this without Alex's sage advice :)

    OR

    2. There is something more to the story. Since as I noted on my last reply, the supply of dollars was regulated during that century, perhaps we could look there......

    Well, that's it for now. Till next time.

    David in Qatar

  • Report this Comment On April 29, 2011, at 10:01 PM, WhodaThunkit2011 wrote:

    Consider:

    1) In 1980 ... “huge spike in silver prices resulting from the Hunt brothers' attempt to corner the market" …

    Don't forget the +14.8% inflation, run on the Dollar, the U.S.S.R. invasion of Afghanistan and the consequential U.S. set-up of Osama Bin Laden et al.

    2) “Once irrationality and speculative mania take hold of a market, there is no measuring how far the excess will run.” ...

    It’s funny that sentiment was never discussed as housing prices went ballistic recently. Housing prices from 1890 to 2000 went up only +26.3%, after inflation. That translates to a +.2% average increase per year, after inflation. Then, from 2000 to 2006, housing prices shot up +102.5%, after inflation. That translates to a +17.1% average increase per year, after inflation. Not a peep was made. Regulators looked the other way. It was a sin to consider regulation. (Data source: Prof. Robert Schiller). Greenspan, Rubin, and Summers were on TIME’s Feb. 15, 1999 cover with the caption “THE COMMITTEE TO SAVE THE WORLD”. Ah ha ...

    The S&P 500 P-E Ratio hit 44.2 in Dec. 1999, +175% above historic average of 16.3. No talk of “speculative mania” then, either.

    3) “... silver prices will decline significantly by the end of 2012, with multiple interest rate hikes by the Fed” ...

    T’aint like it ‘twas ... Every +1% increase in the $10 Tril. public treasury debt outstanding generates $100 Bil. treasury interest expense. Will the FED raise rates, or, print money?

  • Report this Comment On April 29, 2011, at 10:11 PM, Margret2 wrote:

    Alex I just saw your other article "Gold Is Now 3 Times Overpriced!" another sensationalistic article LOL. You think a fair price for gold is $475/ounce when it costs $800 to pull it out of the ground (cash cost plus capital expenditures plus exploration and operating costs).

    I do think gold has a higher risk in that the central banks have the biggest effect on gold price, holding most of it. When they sold, the price went down. Now that they have stopped selling and are net buyers it is going up. If they all decide to sell again, gold price will go down. But they run the risk of having no reserve to back any future currency. Central banks know that you can't print gold. Gold doesn't have as much industrial use but is useful as currency because it is portable and rare. It's hard to bring 10 chickens to the store to buy a goat.

    Silver is different in that the central banks have almost no silver reserves. I think silver is much more valuable than gold because it is required in everyday life, even though current prices say the opposite. Hundreds of millions of ounces are consumed every year. It is a depleting resource just like oil. At that rate of consumption, there will be a time when silver from mines will run out. As I said before, the rise in silver price is permanent in dollar terms. It can go up and down short term but will continue to rise long term. Most of the silver end up in land fills. If silver reaches $50,000 an oz then it might be economical to recover it from the land fills.

  • Report this Comment On April 29, 2011, at 10:27 PM, TMFAleph1 wrote:

    <<Did you know that the CPI in 1800 registered the same price level as the CPI in 1900>>

    Not according to the CPI series I used for this period, which has the price level falling by half between 1800 and 1900:

    http://www.minneapolisfed.org/community_education/teacher/ca...

    <<We can conclude one of two things:

    1. Investors were far more intelligent in the 19th century. There are no silver bubbles. There are no wild swings in price. No matter how you judge silver prices (real or nominal), holders of silver got it right. And they did all this without Alex's sage advice :)>>

    I definitely agree with you that there is no way to conclude any of those things from the fact that inflation-adjusted silver prices were the same at the beginning and at the end of the 19th century. In fact, both graphs suggest that none of those statements are true.

    I'm not sure what you're getting at, though, or why excluding that first hypothesis somehow invalidates my line of reasoning. I look forward to your detailed argument.

  • Report this Comment On April 29, 2011, at 10:30 PM, TMFAleph1 wrote:

    @Margret2

    <<As I said before, the rise in silver price is permanent in dollar terms.>>

    Are you referring to nominal or real prices here?

  • Report this Comment On April 29, 2011, at 11:45 PM, Margret2 wrote:

    <<As I said before, the rise in silver price is permanent in dollar terms.>>

    Are you referring to nominal or real prices here?

    ----------

    Both. Even if there is zero inflation, the silver is being consumed. Eventually there will be a shorter and shorter supply available. It's simple fundamental economics. Silver mines may be opened to temporarily increase the supply, but even those will run out. Technical charts don't show the fundamental reason behind moves. In the 80's the US government had billions of oz. to dump on the market which helped suppress the silver price. Now they have almost none left.

    Gold isn't consumed (destroyed) as much but with increasing population there is more people to share the pie with.

    I think silver has much better prospects for price appreciation due to the amount of consumption on top of inflation.

  • Report this Comment On April 29, 2011, at 11:51 PM, Margret2 wrote:

    Maybe I should write an opposite article entitled "Warning! Silver Will Gap UP by 66%!"

    LOL

  • Report this Comment On April 30, 2011, at 1:26 AM, arbor99 wrote:

    It would be interesting to see the history of Alex's articles on gold and silver. Many writers have been bearish on precious metals for over a year, and have missed out on one of the greatest bull markets of our time. The history shown only goes back to january, when silver was roughly half where it is now. There doesnt seem to be any buy recommendation during the early months of this year, but the history is not shown for months prior to January. Transparency is a wonderful thing.

  • Report this Comment On April 30, 2011, at 2:02 AM, Darkonium wrote:

    I've thoroughly read about 75% of posts and skimmed over the remaining 25% so my apologies if someone has already brought this up and I missed it.

    Alex, I'm not an expert but it appears to me that there are a few things which you haven't fully considered and which haven't been brought up enough by the previous posts (other than brief mentions):

    J.P Morgan and HSBC being short countless future contracts for silver (this is an article dating back to October 2010 but there are other more recent ones just Google CFTC and silver): http://online.wsj.com/article/SB1000142405270230334190457557...

    Not only is silver a precious metal and a way of preserving one's wealth (as countless Fools have already stated) but it's also an industrial metal used in countless applications: laptop/tables/smartphone batteries (granted they're mostly Lithium but Silver is an intrinsic, albeit less prominent component, i.e. Li-Ag2CrO4 and Li-Ag2V4O11 to name a few of the higher-end batteries that have started being used in some hand-held devices, although until recently they were mostly almost exclusively in medical instruments), solar panels, mirrors, microprocessor components, biotech industry, glass treatment, and the list goes on and on and on. As a matter of fact, even Lockheed Martin (a company you suggested as an alternative investment in this very article) uses silver in numerous applications. Ever wondered how much silver goes in the electronics of a plane and even in missiles? The reason I'm listing all these things here is because most if not almost all of these are applications for which silver was not used back in 1980 and certainly not in the 1800s (unless you know of people that had iPads and using solar panels back then :) You can find more information of the many uses of silver at the silver institute web site: http://www.silverinstitute.org (as it was already suggested, it's also a great site to double-check annual global use). Numbers which by the way can also be corroborated by taking a look at the US Geological Survey in some of their annotations http://www.usgs.gov or at the CME Group web site: http://www.cmegroup.com

    Combine this with the fact that Scotia Mocatta has re-assigned over 5 million oz of silver (which represents roughly 25% of their silver holdings on the COMEX) from registered to eligible status, on April 20th indicates to me that there certainly is a shortage of silver that has just started showing up clearly on the major exchanges http://www.cmegroup.com/tools-information/lookups/advisories... How then are the banks that have shorted silver supposed to cover their naked short future contracts as they feel the pain more and more as silver prices go up? By driving the price ever so higher by buying at pretty much any price they will then be able to find any silver at (this is simply me speculating but it's not completely unlikely to happen). That might actually cause silver to become overvalued (at least temporarily) but I don't think that we're anywhere near the top. Again, I may be completely wrong, I'm not a professional analyst after all.

    Given the amount of money printing that has been going on in recent years, I doubt that gold and silver will see the (artificially-maintained lows) of the 1990s any time soon. If you look at the Thomson Reuters/Jefferies CRB Index (which tracks various commodity prices) you'll note that it has gone up over 30% since 1 year ago: http://www.jefferies.com/cositemgr.pl/html/ProductsServices/... The rise in most of those prices (with the exception of fuel) has been mostly absorbed by the producers (thus far). We have yet to see it been passed along to the costumers, which in my opinion has slowly begun to happen. So even if the Fed would stop the money printing right this very instant; there's a built-up backlog spanning several months of potential inflation in prices just waiting to hit the average Joe. What then will people do in their panicked state in order to avoid any future loss in purchasing power? A good chance is that more and more will turn to precious metals.

    Just a few thoughts. Please correct me if you think that I'm mistaking in my overview of the situation.

    Happy investing,

    Darkonium

  • Report this Comment On April 30, 2011, at 7:43 AM, RadOptimist wrote:

    I think these articles are so interesting but I always wonder why they are so US centric when we are in a world where monetary flows are global. In particular when comparing historical trends which rely on a smaller world GDP and a higher US GDP as proportion of this. In particular around gold and silver, if you look at their gains in valuations, the extreme end of the growth is based on the value to the US dollar which has been noted has undergone significant devaluation. If you compare the values to the Euro, Swiss Franc, Australian dollar or Canadian dollar, the valuation growth is not as high. While I do agree that there is a high probability of some correction, it will probably be a short term one.

    The world has changed and I don’t see that all the countries want to be holding dollars or anyone else’s currencies which leave precious metals as a “store of wealth”.

    The US holds the majority of gold reserves (I think around 80%) and I think countries like China, India, Brazil, and Russia will not want to keep holding fiat currencies which have a high probability of continued devaluation. China right now is propping up the Euro and US dollar/economies as much as they can but as you can see, they are tying themselves up with resource (oil, gas, rare earth, copper, lithium) companies to insure they keep supply and value. Both gold and silver have been used as stores of wealth for thousands of years and in particular in India and China this has been the case.

    I have my money where my mouth is with a significant portion of my investment portfolio in commodities and precious metals. Unfortunately, things are driven by the political and financial cronies with their high frequency trading and greed for the extremely wealthy. That is the real world now.. best to figure out how to invest accordingly.

  • Report this Comment On April 30, 2011, at 9:15 AM, anesthead wrote:

    Hi Alex,

    Could you refresh my memory and remind me when did you recommend buying silver and how much silver do you personally have to sell or you missed the bull completely, but you are so smart now, you'll ride the bear... you are a real smart Prinstone Man, just like the other one... clouns

  • Report this Comment On April 30, 2011, at 11:09 AM, fuzzywzhe wrote:

    What I see is a trivial analysis of a person that doesn't understand what a dollar is.

    I can't post pictures here, so I can't demonstrate it. What's the point of a comment section that doesn't allow you to demonstrate data?

  • Report this Comment On April 30, 2011, at 11:16 AM, TMFAleph1 wrote:

    <<It would be interesting to see the history of Alex's articles on gold and silver. Many writers have been bearish on precious metals for over a year, and have missed out on one of the greatest bull markets of our time. The history shown only goes back to january, when silver was roughly half where it is now. There doesnt seem to be any buy recommendation during the early months of this year, but the history is not shown for months prior to January. Transparency is a wonderful thing.>>

    There is a search function on Fool.com; nobody's trying to conceal anything. This the first article I have written on silver. I don't have any specific interest in silver, or precious metals in general. However, I am very interested in asset bubbles and asset allocation.

    Alex Dumortier

  • Report this Comment On April 30, 2011, at 11:18 AM, ETFsRule wrote:

    Darkonium: You pointed out that there are other uses for silver. I just want to mention that the silver institute, which you linked to, has a page showing supply and demand for silver:

    http://www.silverinstitute.org/supply_demand.php

    Investment demand has greatly increased over the past couple of years. But the total demand from all other sources (photography, jewelry, industrial, etc) is exactly where it was 10 years ago. I wouldn't expect to see these other sources of demand suddenly start to heat up anytime soon.

  • Report this Comment On April 30, 2011, at 11:28 AM, fuzzywzhe wrote:

    Alex, try doing something interesting.

    Graph national federal tax revenue and national debt. Take the same data and show the revenue as a percentage of the national debt.

    Take the national debt today and in 1971, and put it on a logarithmic scale. Calculate the average growth of the US debt per year, and calculate what the national debt will be in 2020 based off from that growth.

    Express the national debt in terms of troy ounces of gold and silver. Figure out what the average debt is in terms of ounces and gold for this country.

    I've done all these things, but you're pretty insulting and frankly, this freaking interface sucks. I know you're wrong, but I don't have any incentive to help you.

  • Report this Comment On April 30, 2011, at 12:58 PM, Ihack wrote:

    Seems you suggested we hold and sell in the same article. Light research on this one.

  • Report this Comment On April 30, 2011, at 1:43 PM, Darkonium wrote:

    @ ETFsRule

    That is true, according to that dataset it would appear that the use of silver in photography has been going downhill while its use for "implied net investment" has steadily gone up. I have a few issues with that particular data (that's why I also provided the CME Group's web site and the US Geological survey as other sources). Different web sites calculate it differently. The Silver institute unfortunately doesn't break it down as much as I would like into additional sub-categories. It then becomes cleared which sub-sectors are also growing on top of "investment" as a category. None-the-less, all references agree that investment in silver has gone up greatly over the past few years and I won't deny it.

    There's two questions that you should ask yourself: 1) Why was investment in silver almost none-existent in 2001? 2) How come that so many people are investing in silver now? I'm not a big proponent of conspiracy theories but there have been numerous reports that have been submitted to the CFTC over the years alleging manipulation of the price of silver (recently by massive naked short-selling of future contracts as I pointed out in my previous post). Some of those allegations may have been fabrications but just Google CFTC and silver. You will find numerous articles from reputable sources spanning the past few months talking about the implications of J.P. Morgan and others in this whole story. These are facts now and no longer the figments of the imagination of a few bullion traders. So of course, when a commodity such as silver (which is in limited supply and hence can have its price manipulated more easily than that of other commodities) sells at very low prices and hasn't really moved much in years, people will be disinterested. I tend to have a value investment approach with my stocks and to me, silver looks (even with all the buzz that it recently has received) to still be an undervalued commodity whose true potential many people have yet to discover. I just wish I would have had the foresight to buy it back in 2001, when merely a handful of investors were trading silver (at least when compared to what is going on today) and it was selling for around 4.00 $/oz.

    Part of the answer to the second question is that people are starting to realize that silver has always maintained some some kind of value. Sure, it's been overvalued at times and then undervalued for the past two decades. It has merely started to move towards it true value now. How can one figure out its true value? Just read some of the previous posts. I don't see a point in repeating it here yet again. Will silver once more become overvalued at some point in the future? Probably; especially when/if the USD collapses and hyperinflation becomes rampant. There will be one point, when it will be a good idea to sell a large portion of your silver and buy real estate and invest in the stocks of companies that won't have gone bankrupt yet. And as good of an investment as some of the tech companies are or some of the classic blue chips, if I can buy them for P/Es of 1 or 2, I'll be much happier than having to buy those same companies today at P/E multiples of 10 or more (which in many cases are still highly undervalued as is).

    Another reason for which there has been such a high demand for precious metals in recent years is China. It has been barely mentioned in the media but since late 2008 or early 2009 (can't quite recall the precise time right now) the Chinese government has been telling its population of over 1 billion people to buy gold and silver as an investment vehicle. They have been publicizing it quite heavily (and still do in part today). It might interest you to know that China is one of the countries with the highest numbers of savers in the world while the USA tends to have the highest number of spenders. In other words, par of the large increase in demand for precious metals as investment vehicles is coming from the Chinese "consumer/saver". And of course, everyone else has also started investing more in precious metals but we're far from having a silver and gold bubble in my opinion (many of the reasons why silver and gold aren't a bubble yet have been pointed out above by numerous individuals). So although I do agree with you that the amount of investments going into silver is much larger now than it was before, many more people would have to jump on the bandwagon until you should see a real bubble even begin forming.

    Of note is also the fact that "industrial applications has gone up by 137.7 M oz/year. Again, I'm not a great fan of that particular graph because it doesn't break it down more. But if you look at a more detailed view, you'll see there are many small sectors that have virtually exploded in demand. Some of those include the newer technologies which have just very recently started being used in large quantities and whose demand will probably only be seen in a few years. You should also keep in mind that the world stockpile of silver has been steadily being consumed in recent years. Mining barely is capable of keeping pace with consumption (and this is even before excluding silver as an investment vehicle). As those stockpiles (which were gathered over the past 2 decades + of overall disinterest for silver) expect prices to be pushed further up (even if the USD isn't abandoned as the world reserve currency, even if inflation doesn't run rampant and perhaps "evolves" into hyperinflation, and even if the US, and most of the world, doesn't experience another major market crash/recession which will 2008 look like a walk in the park). It's simple supply and demand. Honestly, I hope I am wrong. I really, REALLY wish that Alex is correct and that silver drops 66%. I wouldn't mind doubling my current position on physical at that price. Don't get me wrong, I still hold numerous stocks (after all, maybe I'm wrong with my doom-and-gloom view of things), but as I see it, we've been mostly stuck in a fairy tale which is on the cusp of turning into something much, much uglier.

    If I'm wrong, I'll lose 66% on my silver position and my stocks go up. If I'm right however, I stand to make a very nice profit and I'll probably be able to double or triple my current stock positions as everyone will be flocking out of stocks and into physical by merely selling a small portion of my hard assets. Those are some extreme views I know. But ask yourself this: what's better: Hedge your bets by having silver AND stocks or just by sticking to stocks and potentially having a repeat of 2008? Do your own due diligence by all means, just don't kick silver just yet.

    Darkonium

  • Report this Comment On April 30, 2011, at 3:28 PM, reflector wrote:

    alex,

    i am of the same opinion as skyzer, your article reveals you're not paying attention to what's going on.

    your historical data is from times when the US did not have an out-of-control runaway debt problem.

    two wars, and then the 2008 housing meltdown / bailout of financial institutions, exacerbated what was a substantial problem already: a failed political system, no real leadership, and an instant-gratification culture where american adults act more like children than adults.

    the ship of the US economy was run in to a reef, has a gaping hole on the side, and is sinking.

    lifeboats and life jackets (gold & silver) should be used to save oneself.

    to not use them would be madness.

  • Report this Comment On April 30, 2011, at 6:40 PM, StokeyBob wrote:

    I've been thinking this is very little to do with the value of silver or gold but more a thing to do with the value of the dollar changing.

    No matter how much real money people can put together to build their countries the way they want there are those that can print up what ever it takes to get their way.

    Maybe this will help make the danger of fiat money clear.

    Imagine you and me are setting across from each other. We create enough money to represent all of the world's wealth. Each one of us has one SUPER Dollar in front of him.

    You own half of everything and so do I.

    I'm the government though. I get bribed into creating a Central Bank.

    You're not doing what I want you to be doing so I print up myself eight more SUPER Dollars to manipulate you with.

    All of a sudden your SUPER Dollar only represents one tenth of the wealth of the world!

    That isn't the only thing though. You need to get busy and get to work because YOU'VE BEEN STIFFED with the bill for the money I PRINTED UP to get YOU TO DO what I WANTED.

    That to me represents what has been happening to the economy, and us, and why so many of our occupations just can't keep up with the fake money presses.

  • Report this Comment On April 30, 2011, at 9:29 PM, BelizeBill wrote:

    The idea that silver is in a bubble is ridiculous, Silver has always been money, but has been deflated in value by the fiat currency of the banksters. Not too long ago one silver dime represented a day's wage.

    King Solomon imported his chariots from Egypt for 600 shekels of silver each. (1Kings 10:29) 600 shekels represents about 240 ounces, at a value today of less than $10,000. By comparison a new car today would be a lot more than that.

    Silver is rising to the price per ounce that was first established by God. It will be used as money again as it has throughout history according to his standard of value.

  • Report this Comment On May 01, 2011, at 12:57 AM, ershler wrote:

    BelizeBill,

    Why do you compare a chariot to a car? Also, there are plenty of new cars you can buy under $10,000; you just need to sacrifice speed, size, power, ammenities and safety features. No matter your choice it will still be better then a chariot.

  • Report this Comment On May 01, 2011, at 1:29 PM, Yourdeadmeat69 wrote:

    Silver and gold backed money until 1933, and were'nt commoditized until 1971 on the open buy sell market at allegedly FMV.

    In English, you can't count the period 1800-1933, because silver WAS money, which is why Jefferson was so in favor of specie, not fiat currency, to keep the bank from owning you and your wealth.

    Which is exactly what the Fed is doing.

    Smooth out the curve using only inflation, and you'll see silver and gold till 2002 have been behind the degradation of the value of printed paper money for decades.

    Silver peaked in 1980 at $50. $50 in 1980 dollars is $136 even using the bogus inflation scales the government touts. And if you compare the debt of $2Trillion circa 1980 with nearly $15Trillion and printing, you have even more pressure on the dollar and upward pressure on all commodities from cotton to silver.

    Silver shorts are so assured however, they can compare apples and gonads, which is what you do when you use historical date before 1933, they jump on the short silver bandwagon.

    And they've found out, that short of popping overnight rates and making fiat paper competitive with silver and gold, even if they pop the margin requirements for futures contracts, all they create is a flurry of shorts trying to cover their butts, and silver, instead of going lower, goes higher still, putting the next group of shorts in peril.

    Think trying to tell someone drowning under water he's not breathing fast enough.

    THAT's why it is too late to think the silver market has run its course.

  • Report this Comment On May 01, 2011, at 7:09 PM, lquadland10 wrote:

    When running a chart do chartists take in the events of the year? Charts are very measurable. You can see the lines and dips and all that. Do you have charts that show what the monetary policy was at that time. What world events were going on at the time. Was China able to buy silver at the time? In the past did the s&p set a warning out against the dollar? Was soros calling for the collapse of the dollar. In England back in the last spike was their sterling silver collapsing? Did this include the Class action law suit against JP Morgan for silver manipulation? Were other Country's coming together to come out with a new basket of currencies to replace the dollar as the reserve currency of the world. I don't understand how charting works so if you can kindly explain it to me.

  • Report this Comment On May 01, 2011, at 8:48 PM, einsteinpfleet wrote:

    As long as Bernanke keeps printing money to buy US Treasuries and thinks inflation is a mere blip, I'll stick with gold and silver. I've been buying them for the last ten years and listening to the bubble scenario, which has yet to materialize. I'm sure that someday it will, but it would require a change in our present monetary policy.

    I'm also inclined to look at the miners like PAAS and SLW. SLV has been rising and they are still trading as if silver was priced at 30 dollars an ounce.

  • Report this Comment On May 01, 2011, at 11:20 PM, radicalaccountin wrote:

    Housing may have gotten into a bubble, but as much as it has fallen it's still will never revert back anywhere near the prices in the late 80's. If there's a dip in silver, because people who don't "get" that it is becoming money start to pull out, it'll be a buying opportunity. In the future, everyone will know the value of a silver dollar, it will be told daily in the newspaper, and you'll be able to use it to buy gas, so you'll do well to buy silver dollars, and pay the premium, because they'll be so easy to trade for goods and services, or sell to your friends, who missed stocking up on the cheap.

  • Report this Comment On May 02, 2011, at 7:52 AM, Bernankonit wrote:

    Every time silver drops overnight some Fool comes out and calls the top for silver. M2 has been going to the moon, paper money backed by nothing is falling out of favor and that trend is not going to magically reverse anytime soon. Remember these are the same Fools that recommended buying Rosetta Stone about 6 months ago, sure glad I didn't listen to them then and I won't be listening to them now. I picked up a few ounces on APMEX last night at $43, already bounced to $45.50. Yes silver may have gone a little too far too fast, but wait until the real mania hits and the average person on the street is legitimately concerned about the value of the paper dollars backed by nothing, the value of that paper is all based on confidence, that confidence is slowly diminishing.

  • Report this Comment On May 02, 2011, at 2:31 PM, number1bigboy wrote:

    What the author and anybody else thinks or says concerning PM's being in a bubble.....The real bubble is the paper currency we have blindly accepter as "MONEY".....it isn't and it's a bubble that has be deflateing for decades......and is now accelerating at an even faster pace. So how can this author or those of you talk PM bubbles...?

    You just don't have a grip with facts and the reality of the issue....!

  • Report this Comment On May 02, 2011, at 3:01 PM, eforio wrote:

    TMFBullnBear

    There are a few things that were clearly missed:

    1) In the 1800s, or even early 1900's Silver did not have over 3,000 industrial uses as it does today. In fact, back in the day, silver was like gold, primary used as money and for jewelry.

    As the uses and demand of silver is higher and more valuable to us here in the 21st century, prices should reflect that. 2,000 years ago the the price of oil was zero, it was considered bad a bad omen to have it on your land and devalued land prices, thus having a negative value. Today, oil is the black gold. I am willing to bet that oil will not go back to having a negative value.

    2) In 1980's the Hunt Brothers tried to corner the market. Since then, Major Banks have been selling naked shorts to suppress the silver price in turn suppressing the gold price. There is a multitude of naked shorts that are keeping the price of silver artificially low. In fact, there are more naked short against silver than there is silver in the world! If the buyers of silver longs every decide to choose silver delivery instead of cash -something that is likely during hyperinflation- it will cause the biggest short squeeze in the history of commodities. In one day, you could see the price of silver go up 5-10 times.

    Now you can choose to disbelief this however can you name anything else that in 2001 traded for the same price range as it did in 1973?

    3) Not the 1980's. During the 1980's bubble in precious metals there was a strong quick spike in prices, now here in the 2000's the price has been far more gradual. In fact, adjusted for inflation, we are no where near the 1980's price for gold or silver.

    4) Not the even close to the 1980's... Its a different world. During the 1980's Americans buying metals caused prices to go up. There was no China, no India etc... Today, China and India are the two major reasons why gold is so high. They are buying it by the truckload. Today, the average American is not invested in gold or silver, yet.

    5) Silver Shortage. There is actually a silver shortage around the world. Little known fact, there is more Gold Bullion in the world today than Silver Bullion and our global silver supply will not last us 10years at the current rate of supply and demand.

    6) Fiat Currency: No Fiat Currency has ever survived, ever! The Romans and Greeks debased their currency for much of the same reasons we do today: maintain a global empire, social programs, deficit spending, debts etc... It is speculated that the only way the US can repay its debts is by devaluing their currency and paying it with cheaper dollars.

    Our Fiat currency has only been around since 1971 when it was taken off of Gold Standard on treat from France that it wanted to turn its Dollars into gold. Today much of the same is happening as Central Banks and Governments around the world are slowing turning their US Treasure Bonds/etc into gold.

    Well that's my 2cents, hope it turns into a dollar.

  • Report this Comment On May 04, 2011, at 9:37 PM, talkoption wrote:

    The obvious question to me is that the coins today are void of silver and mostly copper. Why has this metal with a modest value as the writer has stated been substituted and the old silver coins guardedly held? From 1964 forward the Government has noted the shortage of silver and stopped the use of silver at the treasury. I guess the Government is going to change course and start using silver coinage again based on this article!

    Writer, your logic is faulty and your awareness of reality is myoptic. I wonder if your writing was paid for by some financial institution.

  • Report this Comment On May 05, 2011, at 7:27 AM, TMFAleph1 wrote:

    <<Why has this metal with a modest value as the writer has stated been substituted and the old silver coins guardedly held?>>

    I never stated that silver had a "modest" value. That word is devoid of any meaning in this context.

    <<Writer, your logic is faulty and your awareness of reality is myoptic. I wonder if your writing was paid for by some financial institution.>>

    Do you mean 'myopic'? It is true that my opinion has tremendous influence on global asset prices, but this article was not paid for by anyone other than The Motley Fool.

    Alex Dumortier

  • Report this Comment On May 05, 2011, at 10:39 PM, ppphelan wrote:

    This article follows a logical path but from an invalid premise, hence, it ends up in the illogicalville of "silver is in a bubble". Either it is deliberately self serving to the current power structure else the author is simply ignorant. The faulty premise lies in the inflation adjusted numbers. Use John Williams more rational Shadowstats instead of the deliberately reduced and gamed CPI metrics from the OMB and you'll realize how undervalued silver is even at the lofty price of $50/ounce. The simplest way to realize the value is to compare WAGES in silver money historically, going back to biblical times. The author should try this as a thought experiment...as Dr Zeus said to Taylor in Planet of the Apes "you may not like what you find". Simply put, silver is deliberately being manipulated, is worth much more in US dollar terms, and when that price is realized, will be the proximate event that crashes the US dollar and the whole debt based economy.

  • Report this Comment On May 06, 2011, at 2:30 AM, TMFAleph1 wrote:

    <<Use John Williams more rational Shadowstats instead of the deliberately reduced and gamed CPI metrics from the OMB and you'll realize how undervalued silver is even at the lofty price of $50/ounce.>>

    At $50, it's not that undervalued under those assumptions. Using ShadowStats' CPI series, the historical mean price for silver in 2011 dollars is $58.91. I prefer the BLS CPI series.

    Alex Dumortier

  • Report this Comment On May 06, 2011, at 2:34 AM, TMFAleph1 wrote:

    The name of the Minister of Science and Chief Defender of the Faith in Planet of the Apes isn't Dr. Zeus, by the way. The orangutan's name is Dr. Zaius.

    Alex Dumortier

  • Report this Comment On May 06, 2011, at 10:47 AM, sargonisa wrote:

    Everytime your articles are thrashing a stock (in this case, a commodity, namely silver), I have learned to do the opposite. I think your premises are very very short term and you don't seem to look three or four weeks ahead. Stay tuned!

  • Report this Comment On May 06, 2011, at 12:27 PM, TwinMount wrote:

    I didn't read all of the posts, but I fear that the focus here is somewhat skewed toward the "precious metal' side of Ag. Unlike gold, silver actually is a commercial commodity with a number of valuable uses. One of the key demands for silver was photographic film and paper. This demand stopped and supply kept coming, plus there were huge reserves in the world. I understand that these reserves have been depleted and demand exceeds supply. So while the monetary safe haven was a key part of the recent run up on silver it is not the only reason to own this commodity.

    Last but not least, according to the geological consensus, silver is only 11 times more abundant than gold in the earth's crust. With silver being used commercially and with virtually all the gold that has ever been found still in current supply then silver prices should be closer to a tenth of gold prices.

  • Report this Comment On May 06, 2011, at 1:28 PM, TMFAleph1 wrote:

    @sargonisa,

    <<I think your premises are very very short term and you don't seem to look three or four weeks ahead. >>

    Re-read the article; you completely misunderstood it the first time. My focus is very, very LONG term and took great pains to emphasize that I am absolutely incapable of saying anything about price movements in the short-term.

    Alex Dumortier

  • Report this Comment On May 06, 2011, at 2:21 PM, Stu1000 wrote:

    Silver is going up, because around the world people are investing in metals, and not dollars. Paper money is worthless. Paper money is backed by nothing anymore. Silver is going to be $200.00 within 10 years, and the fools who don't buy it will be fools. Gold, Silver, Platinum, and Palladium... Buy what you can, cause the $ will be worth a lot less in the future, with 24/7 printing presses. I believe the dollar will crash, when the world decides the backing will not be our money, but a basket of other currencies. But, anyway, can any of you tell me what is backed by any currency around the world? We are living in times of the worse problems imaginable, and hopefully December 21, 2012 will remedy all our problems..

  • Report this Comment On May 07, 2011, at 2:17 AM, Noexpert2 wrote:

    Ahem... a lot's already been said here... what an emotional topic... I will only add 3 short comments :

    1/ How can we even mention the notion of bubble in precious metals when its ownership is 0.8% of global assets?

    2/ It is a fact that ALL fiat money experiments have failed. Voltaire summarised it as follows: Paper money invariably return to its intrinsic value: zero.

    3/ That being the case, there are no reason why the USD should be an exception to this basic and unavoidable rule.

    In conclusion, may I respectfully suggest to the author of this article to write another piece titled: "Warning! The USD will fall by 30% by the end of 2011 and eventually to zero in the foreseeable future". As a fan of historical data, I am sure the author knows full well that the USD has already fallen by about 97% since the inception of the Federal Reserve, in 1913. Given the current circumstances and state of the US economy, a further drop of 3% seems rather achievable and realistic. Finally, I would like to know what the author recommends we should hold as a store of value... paper money? Real estate? Gold? Silver? Toilet paper? Canned food? Any suggestion???

  • Report this Comment On May 07, 2011, at 11:02 AM, TMFAleph1 wrote:

    @Noexpert2

    <<1/ How can we even mention the notion of bubble in precious metals when its ownership is 0.8% of global assets?>>

    I've remarked on this in the past, but I don't see the contradiction between that figure and the existence of a bubble. All that figure shows, as far as I'm concerned, is that there is still room for the bubble to run.

    <<Finally, I would like to know what the author recommends we should hold as a store of value... paper money? Real estate? Gold? Silver? Toilet paper? Canned food? Any suggestion??? >>

    Please refer to the last paragraph of the article.

    Alex Dumortier

  • Report this Comment On May 07, 2011, at 5:37 PM, snowhawke wrote:

    This sort of article is why I don't give you any of my money or take your company very seriously.

    What do you want me to do, invest in US dollars?

  • Report this Comment On May 07, 2011, at 6:13 PM, TMFAleph1 wrote:

    @snowhawke

    <<What do you want me to do, invest in US dollars?>>

    Did you read the article in its entirety (or even partially) before posting a negative comment? As I wrote to the previous person who commented, please refer to the last paragraph of the article.

    Alex Dumortier

  • Report this Comment On May 30, 2011, at 2:54 PM, tacind wrote:

    Please tell me you didn't just make a price appreciating argument against a commodity that had a FIXED price? The only meaningfull graph of silver price appreciating is from 1964 to date.

    Do a supply demand graph for silver and see what you come up with, you will find an exponential demand curve (population based) and a bell shaped supply curve (finite resource) the price will eventually go parabolic and hold. Check the fundamentals of silver on the atomic level and you will find that silver as far as an element goes is both unique in utility and very rare. As long as the efficient movement of electrons is a part of our physical world, the silver demand will continue and thusly the price will rise faster than the dollar can be devalued.

  • Report this Comment On September 23, 2011, at 4:18 PM, helmsjs wrote:

    With the price of Silver currently down 25% for the week, I can see how there might be some truth to this. My question: Is it still a bad time to buy?

  • Report this Comment On September 28, 2011, at 9:54 AM, SanityChecker wrote:

    Google "silver manipulation". Or, for that matter, Google "gold manipulation". You'll find it enlightening.

  • Report this Comment On December 24, 2011, at 5:40 AM, bcellars wrote:

    10/10 for hitting the nail on the head!! Acting on this advice and selling that day or, if you had known the previous day or two at $48, would have left you happily watching from the sidelines as the price of silver fell to below $34!! He was nearly prophetic!! And anyone who knew in advance that margin requirements were going to be adjusted, clearly had the heads up notice to get out. Hard to beat insider knowledge.

    Sure, it managed to eventually rally back to $42, so buying at the bottom was a good move, but did you sell, or did you ride it down to $28?

    With nearly everyone still crying out for everyone to buy silver, this article is a refreshing and abundantly accurate perspective. Thanks a lot!!

  • Report this Comment On September 20, 2012, at 12:46 AM, pics1234 wrote:

    Well I read this. we are coming to the end part of 2012. 66% you say...no....wrong. The magic eight ball says no. I predict $50 by Christmas, what a gift!

    Fiat currency creates Inflation. Inflation is an artefact of Fiat currency. The only true measure is that of what a currency can purchase in terms of basic living requirements. As of 2012 basic living requirements are around 6% real terms higher than when you wrote this article. Since inflation acts on everything, including silver, then whohoo...I have preserved my wealth for another year, instead of loosing around 4% through some silly saving scheme.

    You could argue that commodities affect prices, but that would only affect a small section of needful things. But as these commodities can be bought and sold in the future as well as the now, then the protection is built into this mechanism should stabilise prices for the now and the near future. as said real terms 6% .....must be Ben and his printing press.

    Helicopter Ben is debasing the American Dollar. QE3 has began and is never going to end. What a man, what a hero. He hates deflation...go Ben go....blow blow blow......what a mighty balloon..good boy Ben....good boy!.....not too fast now...not too hard.....it might go pop....but if you blow it at the right speed, you might be able to make all your Banksters debts disappear.....oh dear...look at all those people out of work....never mind...they are poor.

    Good news, the Fed will not be audited, what a relief. All those missing gold bars that they lent out to other countries, all those "silly" things, that are valueless, never mind...we can use them to depress the value of gold and make the dollar look like a princess, no one will notice that its really a pig with lipstick.

    Now I read a statement saying that anything that can be traded is subject to being in a bubble.

    Fiat Currency is and has been traded freely for quite some time now. Fiat Currency is the Bubble. Tricky Dicky felt the pain in 1971, people will trade the dollar in for anything right now....but what is worth something, I got a great idea, lets all buy Silver, Palladium and Platinum. They are industrially useful and pretty to boot. We can't swap the dollar for Gold, American hasn't got any....unless we buy over prescribed paper gold and silver......GLD anyone (hahahaha).

    The Dollar hasn't been a reserve currency since pre 1971. America has lost its reputation, it will never get it back. Get over it....with great power comes greater responsibility.......if you allow the dollar to inflate through constant debasement, then you have no one to blame but yourselves.

    So where does my British Pound go, why to silver and gold!....with 20% vat on silver!...did you know that a shilling was the nominated price paid for a Cow in Kent....a shilling was a predefined non moveable piece of silver, that you could buy a Cow with......what a refreshing idea.....no inflation there...just a straight swap.

    The Euro....for a United Europe....why?....I just pop a few 1oz silver coins in my pockets, pop through customs, change them for the local currency...and whamo.....no middle men taking my hard earned cash. See....silver is money....and a world wide hedge against world wide inflated prices....just call me Austin Powers....world traveller...big mac please.....do you take silver....that will do nicely.

    1964....the day that America was first run by the free loading rich......1971....the day that the rich couldn't pay their IOU's...the start to this whole debacle......and all because the damn French after WW1 wouldn't let Germany off the hook for the war debts it owed.....lets all blame the French.

    This is just the start, Spain is the touch paper, America is the Bomb.

    Buy silver....you know it makes sense.

  • Report this Comment On January 23, 2013, at 7:48 PM, 9404estee wrote:

    Ok Silver has already dropped 66% so now is the time to buy. Dollar to loose more of its purchasing power soon! Then we go back to $50 Ha Ha!

  • Report this Comment On May 03, 2013, at 11:49 AM, jimmybeaman wrote:

    Well its dam close to 60 percent!!! What if you bought a lot of it for around 32 an ounce...do you sell and change investments or hold long term???

  • Report this Comment On June 10, 2013, at 11:58 AM, chuckno88 wrote:

    The people who sold when this article first came out were ticked off for a week because they saw silver go up, but by May 7 they were probably extremely glad as silver started its downward spiral. I have seen questions on is it time to buy now. The answer is no in my opinion. The cost of mining silver is $12-$14 an ounce and supply is bigger than demand. All those charts showing the opposite are using selected data and leaving data that disagrees. The fools 66% was a conservative estimate on drop. What will most likely happen is another bubble as soon as demand really is greater than supply or the massive inflation waiting for us as soon as all the extra cash released by Fed Reserver trickles out to market place.

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