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EJ
06-04-08, 03:47 PM
http://www.itulip.com/images/PlatinumEagle1999.gifInflation in America - Part II: Pondering Platinum

Conundrum of the Century: Inflation versus Credit Crunch

The relative simplicity of the platinum market as compared to oil, gold, or silver, makes platinum an ideal context to review commodity prices in general since prices began to rise in 2001 after the post bubble collapse global reflation. Platinum brings currency, inflation, and demand dynamics for all commodities into focus. This review will also inform our opinion on where we are in the Ka-Poom disinflation-reflation cycle, and we'll wrap an update to Ka-Poom Theory around it.

The oft neglected step-child among the precious metals (PM), platinum gets far less attention than its more popular PM cousins gold and silver. It trades differently, too. Gold and silver typically move in lock step while platinum follows its own path.

Platinum, unlike silver and gold, has never had a role as a monetary metal. It has only ever been an industrial metal. Nor is platinum supply influenced by geopolitical or security factors as is oil. More than 90% of platinum production is in Russia and South Africa, nations on more or less friendly terms with the US.

Platinum supply and demand market characteristics are relatively clear: Platinum is the most precious of the precious metals, more than 30 times more rare than gold yet trades at only slightly more than twice the price of gold. While platinum is rare, a little bit goes a long way. Its primary industrial use is in catalytic converters but is also used in pace makers and jewelry.

http://www.itulip.com/images/plat1992_2008.gifI bought 100 ounces of platinum in 2001 when the price was $425. The purchase was part of my execution of iTulip Ka-Poom Theory post-bubble investment thesis, along with purchases of silver and gold, as explained in Questioning Fashionable Financial Advice, Gold - September 2001 (http://www.itulip.com/gold.htm).

As an side, I'm often asked why I purchased physical metals then. The answer is simple: no alternatives existed at the time. Gold and silver ETFs were not yet available. Not until PM investment interest grew after several years of price increases did ETFs become viable, and since then ETFs have created their own demand for gold and silver, which explains why gold and silver prices tend to move in lock step: hedge fund trades tied to ETFs. Part of the recent increase in platinum prices was driven by new investor demand created by platinum ETFs, such as PHPT (http://finance.google.com/finance?q=LON%3APHPT), launched in 2007. ETFs makes commodities available to investors who would never own physical metal, who are more comfortable purchasing PMs as they do stocks out of their brokerage account.

Why not PM mining stocks? I concluded a decade ago, as Jim Rogers and others have, that you cannot get exposure to the value of PMs as a dollar hedge by buying mining company stocks. Stocks expose you to management risk and stock market risk, and long term no one gets it right. I was looking to "buy and forget" for the entire period of dollar depreciation, seven years and counting, not stocks in mining companies that I'd have to actively track.

If I were buying now, would I purchase a gold or silver ETF instead of physical? I'd buy ETFs for the portion of PMs I hold as a hedge against dollar depreciation and physical for the portion of PMs I own to hedge less likely yet more dire potential outcomes of systemic financial system failure.

As of this writing, platinum is trading $1,992, more than four times what I, or anyone following the thesis, paid for it. Should we sell? If we can answer that question then we have answered a lot of questions about commodity prices. To answer this question, let's step through the five distinct pricing periods since 1992 shown as A through E in the chart below and see what we find.

http://www.itulip.com/images/plat1992-2008NOTES.gifPeriod A shows a seven year stretch of stable platinum prices around $400 between 1992 and 1999. Then between 1999 and 2000, during stock market bubble Period B, prices rose more than 30% only to collapse with the stock bubble in the 2000 to 2001 post bubble asset price deflation, recession, and disinflationary Period C. Then starting at the end of 2001, reflation Period D, fed primarily by dollar depreciation, platinum prices shot up to $1,530 by the end of 2007. Finally, the current era Period E saw prices leap to over $2,273 on March 4, 2008. Since then they have settled back to just under $2,000.

The most controversial and confusing period is the current one, Period E. What drove platinum prices so high so quickly? Clearly not industrial demand. We believe the answer is that sustained weakness in the dollar and the out-sized influence of rising costs of imported energy on all goods prices starting in 2004 led to steadily rising inflation expectations, in turn leading to ever increasing investment demand by funds for an ever widening range of commodities in various forms to protect the purchasing power of wealth. The emergence of platinum ETFs facilitated fund buying of platinum.

Unfortunately, purchases of commodities by funds to hedge inflation caused by a weak currency is self-reinforcing as demand for commodities as a hedge drives up demand for the commodities themselves.

Also complicating the picture, as we cover in detail this week in Anatomy of a collapsing oil anti-bubble: Is oil “too expensive” now or was it “too cheap” before? is the impact of rising energy prices as an input to commodity prices: growing, mining, shipping and otherwise bringing commodities to market is a function of the cost of energy needed to extract, process, and move it. On top of that we have the credit crunch beginning to limit access to capital to fund mining operations, including energy projects. (We were recently invited to an energy conference that featured a seminar on the growing impact of the credit crunch on energy projects; these are mostly debt not equity financed.) It all adds up to one monumental mess of inflation and credit contraction in a feedback loop of falling dollar value, rising prices, falling purchasing power, debt deflation, credit contraction, and a weakening economy, with no clear way out.

While 1999 Ka-Poom Theory served us well to time the purchase of our PM dollar depreciation hedges, it did not take into account six developments we were not able to foresee nine years ago.

Ka-Poom Theory Revisited

The six unexpected developments for the current cycle are:


As we mention in our About page when we re-launched iTulip March 2006, we did not foresee the housing bubble, believing wrongly that the Fed would never allow one to develop because collapsing property bubbles invariably bring down economies and banking systems. We did begin to write about the bubble in August 2002 (http://www.itulip.com/index_old.html#Today) and described the collapse dynamics in detail in 2004 (http://www.itulip.com/housingnotlikeequities.htm) and 2005 (http://www.itulip.com/housingbubblecorrection.htm). These forecasts are still holding up, and we will update them in the future. With respect to Ka-Poom Theory, the dynamic of the disinflationary impact of a collapsing housing bubble is a characterized by a gradual versus rapid mark to market of declining property assets. The resulting graduated negative wealth effect and loss of value of collateral against loans allows the Fed to compensate in broader and more varies terms, and less dramatically, than during the 2001 period when the crashing assets were stocks not houses. That caused a near instantaneous and simultaneous mark to market of stock portfolios. This time the effect is more broad and we believe will be far more severe.

As I explained to my publisher at Penguin, if the crashing stock market in 2000 was a monetary 500 pound wrecking ball stopped by emergency rate cuts, the collapsing housing market is a 20 ton steam roller running down everything in its path until it heads for the bottom of the FIRE Economy hill. The process is but slow but inexorable.


We knew from our readings of Fed intentions as noted in No Deflation! Disinflation then Lots of Inflation (http://www.itulip.com/forums/showthread.php?p=2795#post2795) years before the credit crisis, and from conference calls such as with Goldman Sachs during the crisis, such as Goldman Sachs Client Call - Analysis (http://www.itulip.com/forums/showthread.php?t=1776), that the Fed was prepared to be "creative" in its effort to avert a self-reinforcing debt and monetary deflation. What we could not have known in 1999 was that the Bernanke Fed was willing to, in the words of Paul Volcker, overstep its legal authority to provide funds, permanently, to financial institutions that the Fed is not chartered to support. This has, so far, prevented a sudden and wholesale collapse of the exogenous credit markets, but also makes them less exogenous and more directly tied to government credit and money creation.


Currency depreciation is discussed in the central banking theory literature as a short term policy tool to be used in combination with other reflation policies, such as rate cuts, to ward off a deflationary spillover into the real economy of crashing asset prices after the collapse of an asset price bubble. After more than four years of dollar decline, it is apparent that dollar depreciation is the primary tool on which the Fed has come to depend to prevent asset price deflation from spilling over into the Production/Consumption Economy from the financial sectors of the FIRE Economy.

The result of this depreciation has been Poom-like inflation albeit without the large scale sales of dollar denominated assets or a rise in bond yields we expected – at least not yet.


Willingness of foreign central banks to step in to provide funds sufficient to maintain low Treasury bond yields to compensate for decreased demand from private markets.


Peak Cheap Oil, that is, the peak, most likely around 2006, of global supply of easily accessible, high grade crude that global refineries are geared to process and that are used for transportation. Combined with the dollar depreciation that we did anticipate and the oil subsidies provided by oil producing and Asian governments, rapidly rising energy prices are also feeding "Poom" inflation. In the current Ka-Poom cycle, we are getting the inflationary result we expected but not from the precise set of causes and processes we anticipated.


The first "preemptive war" with Iraq War was unimaginable. The result is threefold with respect to Ka-Poom Theory. First, the war reduced US political power in the region such that the quid pro quo exchange of military protection of oil exporting regimes for oil below market prices is less effectual. Second, the global central banking dollar cartel that created artificial demand for dollars has weakened due to competition from the euro and loss of political support from US allies that help support the dollar by purchases of dollar denominated assets and depreciation of their own currencies. Third, the cost of the war has meant that borrowing for unproductive purposes has crowded out productive borrowing by both public and private sectors. This invariable shows up as inflation and lower productivity, as occurred years after the end of the Vietnam War.

Conundrum of the Century

Here's where we are in our updated Ka-Poom cycle in the context of platinum prices:
Period A: Normal industrial demand market – commodity supply and demand dominates

Period B: Asset and goods price inflation – commodity prices respond to inflation

Period C: Asset price deflation and goods price disinflation – commodity prices respond to disinflation

Period D: Dollar depreciated to reflate the economy – commodity prices respond to dollar weakness

Period E: Rising import prices feeds inflation cycle - commodity prices respond to currency hedging investment demand
This does not mean that "Poom" as originally conceived, with a large scale sell-off of dollar denominated assets and spiking interest rates, cannot still happen. At a recent meeting we were told by a hedge fund manager with over $1 billion in his fund and 30 years of experience under his belt that "now" is when Treasuries finally buckle. But the current post-housing bubble disinflationary "Ka" period will continue to be managed via Fed policy to attempt to prevent the transmission of asset price deflation into the real economy. The inflation that results reduces the likelihood of a sustained decline of all-goods and commodities prices. In fact, the ongoing reliance on currency depreciation as the primary policy tool to maintain flagging GDP growth means that inflation may continue to be fed into the system even as the recession progresses.

We expect a leveling off or even a decline in commodity prices in the months ahead as the US credit crunch and recession impact global demand. Declines in some commodity prices over the past few months indicate that the recession is beginning to lower inflation expectations among investors. However, the conundrum of the century remains: inflation expectations cannot be lowered as they were in the early 1980 unless the root cause, a weak dollar pushing up import prices, is addressed dramatically with rate hikes to cause the dollar to appreciate, yet the over-leveraged US financial system is struggling with interest rates near 30 year lows as debt deflation and credit contraction grip the economy and intensify. The one action that the Fed can take to slow inflation is the one action it cannot take without pushing the staggering economy off a cliff into the kind of self-reinforcing debt deflation abyss as the US experienced in the 1930s.

There is no obvious resolution to this conundrum. The most likely event that moves commodity prices is a next step in the financial crisis that forces the Fed to cut rates again. This, it seems to us, is far more probable than a resolution of the dollar crisis by rate hikes that will invariably deepen the recession, especially in an election year when 28 million Americans are already on food stamps, the highest number on record. For this reason, even though platinum prices are showing all the signs of a blow-off top driven by investor fears of further dollar weakness and more inflation, and the recent spike looks precarious, I cannot convince myself that selling is prudent at this time. If indeed more crises events are coming, dollar sentiment is likely to get worse before it gets better. It will pay to stay close to the funds that have been driving the PM market this year to make sure we know what they are thinking, hopefully before they act.

See: Inflation in America - Part I: Five signs of inflation (http://www.itulip.com/forums/showthread.php?p=34140#post34140)

iTulip Select (http://www.itulip.com/forums/showthread.php?t=1032): The Investment Thesis for the Next Cycle™
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Aerius
06-04-08, 08:16 PM
I think you mean South Africa instead of South America. For platinum in particular, supply concerns have caused a bit of a run up as of late. However, since all PMs have increased in price, it probably has more to do what your thesis than physical fundamentals.

Thanks for the insight as usual.

FRED
06-04-08, 09:36 PM
Energy inflation charts from the St. Louis Fed look a lot like the platinum charts, no?


http://www.itulip.com/images/CPIENGNS_Max_630_378.gif


http://www.itulip.com/images/PPIIEG_Max_630_378.gif

Jim Nickerson
06-04-08, 11:27 PM
Energy inflation charts from the St. Louis Fed look a lot like the platinum charts, no?


http://www.itulip.com/images/CPIENGNS_Max_630_378.gif




http://www.itulip.com/images/PPIIEG_Max_630_378.gif





I think since March, they don't look so much alike. http://stockcharts.com/h-sc/ui?s=$plat&p=D&yr=2&mn=0&dy=0&id=p10985514168

metalman
06-05-08, 12:46 AM
I think since March, they don't look so much alike. http://stockcharts.com/h-sc/ui?s=$plat&p=D&yr=2&mn=0&dy=0&id=p10985514168


from 1992 the platinum chart is the fed energy chart...

http://www.kitco.com/LFgif/pt92-pres.gif

http://research.stlouisfed.org/fred2/fredgraphfile/?height=378&width=630&bgcolor=%23B3CDE7&txtcolor=%23000000&recession_bars=On&s%5B1%5D%5Bid%5D=PPIFEG&s%5B1%5D%5Btransformation%5D=lin&s%5B1%5D%5Bscale%5D=Left&s%5B1%5D%5Bline_color%5D=%230000FF&s%5B1%5D%5Brange%5D=Custom&s%5B1%5D%5Bcosd%5D=1992-01-01&s%5B1%5D%5Bcoed%5D=2008-04-01&s%5B1%5D%5Brevision_date%5D=&s%5B1%5D%5Bvintage_date%5D=2008-06-04

what are you saying? yes for 16 years but not since march 2008? if so, any bright ideas why? that'd be good to know...

akrowne
06-05-08, 02:03 AM
I think something of a false dichotomy is set up in this essay. What if the Fed raises rates, but it lags far behind inflation? That would be the worst of both words: negative real interest rates stoking commodities buying, while increases hammer the real economy. And it would be quite bullish for precious metals.

But the Fed will raise rates, because the market is already trading at higher interest rates (even Treasuries). I suspect they will drag their feet on the way up, as they did on the way down, creating the above scenario.

Really, the Fed is not in the driver's seat. They now lack control over most debt pricing that touches the real economy. The complacent illusion they had created since the last major recession is now shattering. All they can do is slow down the process of reckoning a tiny bit by continuing to pretend they're in control and everything's OK (of course, direct interventions like the JP Morgan bailout are more substantial... and destructive).

By the way, I would switch some (most?) of my platinum holdings into silver:

http://www.reuters.com/article/rbssIndustryMaterialsUtilitiesNews/idUST26231020080423

Contemptuous
06-05-08, 02:38 AM
What if the Fed raises rates, but it lags far behind inflation? That would be the worst of both words: negative real interest rates stoking commodities buying, while increases hammer the real economy.
By the way, I would switch some (most?) of my platinum holdings into silver [ ed. - due to the catalyst story ] .

Aaron - As to the first point, I think you are spot on. Fed must embark at some point on a raising cycle, and they will trail real inflation all the way up. Rising rates, with permanently negative real rate as part of the picture is perhaps the most sustainably friendly environment for the PM's to carry on their bull market. Soon we may see a rising USD vs. the Euro, right alongside a robustly upwards trending PM's price. Euro, dollar and everything else beginning to fall more steeply vs. gold.

With regard to your second point, the auto catalyst story for silver? That's a marginal input to the silver price going forwards. We are also looking at the emergence of the largest production increase in silver this year of the past 15 years. I would suggest that the really big trigger for silver is investment demand, if inflation keeps hotting up. In gold, correct me if you think I'm wrong, but the great majority of it's existing demand is already pure investment demand - 90% or more. In silver, a whisper thin 7% of it's consumption today is in fact investment demand, all the rest being industrial consumption that is inching up rather than shrinking annually. No "give" there. And I've read that real silver production is only around 650 million ounces annually.

Silver presents a "niagara falls squeezing through a fire hose" effect if investment interest in silver picks up just a fraction, as the entire stock of above ground silver in the world is something like .05 of the global pool of capital. It's just not there for any serious investment demand, as a single billionaire could suck up the entire global stock, and even there that global stock is now largely dispersed into myriad small investor hands.

In this environment, as gold heads to $2000, if even just a slight uptick of interest in silver occurs, such as investment demand in silver inching up from 7% of it's annual mined supply to something like 15%-20% of it's annual mined supply this is virtually a lock to cause a hopeless run on physical silver stores. "Silver is cheap to Gold", and "Cheap is Good Because it Has Lower Price Risk". That's all the investing public needs to get a notion about, and the present 7% investment quota in silver will start to inch up. Then the price action feeds the interest, which feeds the price action, and it's off to the races for silver.

Silver catalytic converters would in this scenario be a small corollary of any up-tic in investment demand.

ASH
06-05-08, 03:58 AM
By the way, I would switch some (most?) of my platinum holdings into silver:

I wonder if palladium might make a comeback. No reaction to this news has showed up in the spot price:

Arata-Zhang LENR Demonstration (http://newenergytimes.com/news/2008/29img/Arata-Demo.htm)

Given the sad history of Pons and Fleischmann, I hate to toss a cold fusion story into the fray -- but unless this "demonstration" was an intentional hoax, or incorrectly reported, the basic evidence of a nuclear reaction sounds fairly solid.

Evolution of heat alone is not overly convincing because it is known that chemical processes can liberate heat when hydrogen is absorbed onto ZrO[2]/Pd nanoparticles. However, Professor Takahashi -- quoted in the article -- says production of helium was demonstrated. Provided that this is not a hoax, and helium was measured well above the noise floor of the instrumentation, that would seem to prove that nuclear fusion was taking place. Since helium is an element, there is no non-nuclear process that could liberate helium from materials that did not already contain helium.

Elsewhere (http://physicsworld.com/blog/2008/05/coldfusion_demonstration_a_suc_1.html) I have read an account of a control experiment that shows no long-lasting evolution of heat when regular hydrogen (as opposed to deuterium) was used. This is fairly good evidence that some of the heat generated was from something other than a chemical reaction, but it is not conclusive. The vibrational energy levels and chemical behavior of heavy hydrogen (deuterium) molecules is different from regular hydrogen molecules, even though the chemical valence of the two isotopes of hydrogen is the same. Broadly speaking, the chemistry of H[2] and D[2] should be similar, but things like heat capacity and reaction rates are not the same, so this demonstration is not iron clad.

I do know that "first principles" calculations based upon the Pons and Fleischmann experiment concluded that deuterium atoms adsorbed in palladium were unlikely to get close enough for a low-temperature fusion reaction to take place. Also, when I was an undergrad at Caltech, my freshman chemistry professor was one of the scientists who had attempted to reproduce the results of Pons and Fleischmann, and who contributed to discrediting their claims. Thus, I am naturally skeptical of "fusion in a beaker." That said, significant production of helium would be pretty ironclad evidence -- and science is fundamentally an empirical discipline.

For those interested, This (http://en.wikipedia.org/wiki/Muon-catalyzed_fusion) Wikipedia article describes a type of cold fusion which is uncontroversial -- but also not particularly useful. Muon-catalyzed cold fusion has been well-studied, but is not an efficient means of producing energy.

Anyway, since the iTulip community seems to combine interest in precious metals AND alternative energy, I thought I'd pass this along. Consider it a rumor until you see articles published in peer-reviewed journals and reports of other labs reproducing the results. There are a number of "fringe" science publications which run articles on weird phenomena all the time. I'm not sure how reliable the publications I linked are because I am not a frequent reader of them. Still... it is interesting, no?

GRG55
06-05-08, 04:15 AM
Aaron - As to the first point, I think you are spot on. Fed must embark at some point on a raising cycle, and they will trail real inflation all the way up. Rising rates, with permanently negative real rate as part of the picture is perhaps the most sustainably friendly environment for the PM's to carry on their bull market. Soon we may see a rising USD vs. the Euro, right alongside a robustly upwards trending PM's price. Euro, dollar and everything else beginning to fall more steeply vs. gold.

With regard to your second point, the auto catalyst story for silver? That's a marginal input to the silver price going forwards. We are also looking at the emergence of the largest production increase in silver this year of the past 15 years. I would suggest that the really big trigger for silver is investment demand, if inflation keeps hotting up. In gold, correct me if you think I'm wrong, but the great majority of it's existing demand is already pure investment demand - 90% or more. In silver, a whisper thin 7% of it's consumption today is in fact investment demand, all the rest being industrial consumption that is inching up rather than shrinking annually. No "give" there. And I've read that real silver production is only around 650 million ounces annually.

Silver presents a "niagara falls squeezing through a fire hose" effect if investment interest in silver picks up just a fraction, as the entire stock of above ground silver in the world is something like .05 of the global pool of capital. It's just not there for any serious investment demand, as a single billionaire could suck up the entire global stock, and even there that global stock is now largely dispersed into myriad small investor hands.

In this environment, as gold heads to $2000, if even just a slight uptick of interest in silver occurs, such as investment demand in silver inching up from 7% of it's annual mined supply to something like 15%-20% of it's annual mined supply this is virtually a lock to cause a hopeless run on physical silver stores. "Silver is cheap to Gold", and "Cheap is Good Because it Has Lower Price Risk". That's all the investing public needs to get a notion about, and the present 7% investment quota in silver will start to inch up. Then the price action feeds the interest, which feeds the price action, and it's off to the races for silver.

Silver catalytic converters would in this scenario be a small corollary of any up-tic in investment demand.

That's why I like Oil [compared to gold and silver]. No arguments about "investment demand" versus industrial demand (unless you're a clueless US politician blaming speculators), nobody wears it as jewelry, nobody gives it to anyone as a wedding gift (not even in Arabia :D ), nobody worries if it's really there locked up in a Central Bank vault instead of being lent out to bullion banks, and there's no photographic use or arguments whether that recycled scrap is really new supply or not.

Finally, once you burn that barrel she's gone baby, and nobody questions that another barrel needs to be found, produced and refined to replace it (well, nobody but select US Congresspersons)...;)

raja
06-05-08, 09:06 AM
That's why I like Oil [compared to gold and silver]. No arguments about "investment demand" versus industrial demand (unless you're a clueless US politician blaming speculators), nobody wears it as jewelry, nobody gives it to anyone as a wedding gift (not even in Arabia :D ), nobody worries if it's really there locked up in a Central Bank vault instead of being lent out to bullion banks, and there's no photographic use or arguments whether that recycled scrap is really new supply or not.

Finally, once you burn that barrel she's gone baby, and nobody questions that another barrel needs to be found, produced and refined to replace it (well, nobody but select US Congresspersons)...;)
GRG55, do you have any suggestions about good ways to invest in oil for someone in the U.S.?

Thanks

metalman
06-05-08, 09:51 AM
I think something of a false dichotomy is set up in this essay. What if the Fed raises rates, but it lags far behind inflation? That would be the worst of both words: negative real interest rates stoking commodities buying, while increases hammer the real economy. And it would be quite bullish for precious metals.

But the Fed will raise rates, because the market is already trading at higher interest rates (even Treasuries). I suspect they will drag their feet on the way up, as they did on the way down, creating the above scenario.

Really, the Fed is not in the driver's seat. They now lack control over most debt pricing that touches the real economy. The complacent illusion they had created since the last major recession is now shattering. All they can do is slow down the process of reckoning a tiny bit by continuing to pretend they're in control and everything's OK (of course, direct interventions like the JP Morgan bailout are more substantial... and destructive).

By the way, I would switch some (most?) of my platinum holdings into silver:

http://www.reuters.com/article/rbssIndustryMaterialsUtilitiesNews/idUST26231020080423

aaron, think the intention of this was to highlight stuff that's changed since ka-poom theory 1999. where does this article say the fed is leading? the fed chasing inflation down then up is a part of the original ka-poom theory that's still holding up. you probably learned that idea here 9 years ago... so long ago you forgot. happens to me all the time.

where does he say the fed won't raise interest rates? he says it's not imminent and, reading between the lines, will use contacts in the funds to decide when everyone else thinks they will and it's time to bail.

question: gold and silver sales incur a 'collectibles' 35% capital gains tax rate on profits. does platinum? can't imagine it does. may be a reason to hang onto it vs switching to a high tax rate metal that the government doesn't mind you owning...

akrowne
06-05-08, 10:40 AM
I pretty much agree, but I wouldn't play down the platinum->silver catalystic conversion story. When you can eliminate all platinum and replace it with a metal that costs 1/100th as much, there is a pretty unambiguous case for substitution.

However checking up on the demand numbers it looks like total platinum catalytic converter demand is only about 7 million oz/yr. Platinum supplies are a bit lower than this. So assuming all of that is converted to silver ounce-to-ounce, it'd have a much larger deleterious effect on the platinum price than boost to the silver price (silver does indeed have a supply of about 650 million oz/yr).

I definitely agree that rising investor demand is the biggest factor. But the above dynamics look scary enough for me to probably stay out of platinum ;)

Actually some of the reading I did suggested gold alloys are being explored for replacing platinum as well. What we are getting here is the classic free market substitution effect from too-high prices (of platinum)!

metalman
06-05-08, 11:08 AM
I pretty much agree, but I wouldn't play down the platinum->silver catalystic conversion story. When you can eliminate all platinum and replace it with a metal that costs 1/100th as much, there is a pretty unambiguous case for substitution.

However checking up on the demand numbers it looks like total platinum catalytic converter demand is only about 7 million oz/yr. Platinum supplies are a bit lower than this. So assuming all of that is converted to silver ounce-to-ounce, it'd have a much larger deleterious effect on the platinum price than boost to the silver price (silver does indeed have a supply of about 650 million oz/yr).

I definitely agree that rising investor demand is the biggest factor. But the above dynamics look scary enough for me to probably stay out of platinum ;)

Actually some of the reading I did suggested gold alloys are being explored for replacing platinum as well. What we are getting here is the classic free market substitution effect from too-high prices (of platinum)!

good point. you can bet manufacturers are looking for ways around platinum at $2k. happened with copper... got too expensive so manufacturers said 'screw this' and switched to aluminum where they were able. then the price of aluminum went up. then copper again.

ej does not say if he'd be a buyer at $2K. kinda dodged that one... assuming everyone reading has been following along since 2001?

c1ue
06-05-08, 12:12 PM
Don't forget the other important part of physical PMs: portability.

$100K in silver is a serious 150 lbs - not easy to run with that strapped on your back.

In gold, it can be hidden in a pocket as a couple of rolls of quarters.

For platinum, it can be hidden in even more ways - a la the watch in 'Pulp Fiction'.

If you really think things are going to get ugly...

metalman
06-05-08, 01:00 PM
For platinum, it can be hidden in even more ways - a la the watch in 'Pulp Fiction'.

if for some reason i ever buy platinum from you, pls remind me to wash it :D

Contemptuous
06-05-08, 01:25 PM
Don't forget the other important part of physical PMs: portability. $100K in silver is a serious 150 lbs - not easy to run with that strapped on your back. ...


GRG55 wrote he likes oil because it is all irrevocably consumed, but 90% of all the silver produced in history has been consumed as well, and is no longer recuperable as it's consumed in minute quantities in such a broad range of products it is well and truly "gone". It is easy to conceive of it as just "sitting there" in vaults, like Gold but actually almost the entire annual mine production is consumed yearly, with only a small percentage making it's way into investment stores. What happens if investment demand perks up just a little bit? In fact there is still something like a 200 million ounce annual deficit which is made up entirely from recycling and the assumption seems to be that "recycling will always be available".

Meanwhile, 90%++ of the silver is used in industrial applications where it is "non-discretionary".

When CPM or other analysts refer to it "going into surplus" they count the recycling as part of it's perennial, "organic" supply. If global production is only 650 million ounces, and there is a 200 million ounce shortfall made up from recycling, that means there is a one third structural shortfall in annual silver production, in a world where it's current investment demand is only 7%.

Compare this investment demand to gold's 90%++ existing pure investment demand for potential. One of these two is heavily undersubscribed as an investment. This means for example, that in any environment where there is a sharp drop in investment demand for precious metals, silver is in the medium term 90% less susceptible to dis-hoarding than is gold, as only 7% of it's present demand is due to safe haven buying. This is very counter-intuitive. People think silver will "fall much more than gold" in a sharp drop in inflation expectations, but those investment demand numbers suggest this probably has a good deal less basis than people assume.

Silver has more, and faster growing industrial applications than any other metal, by far. A bet on silver, just as much as a bet on oil, is all about global economic growth. It's "Safe Haven" monetary attribute is in fact by far it's minor present component. Pure investment demand for silver is tiny 7% of it's present overall demand.

Silver is first and foremost an industrial metal, a strategic, and critical industrial metal second only to Uranium. It is irreplaceable in any and all critical electronics, worldwide. People think it's some sort of second fiddle to gold for the doom and gloom crowd - not at all, it's a play on inexorable global growth, the premier metal (and commodity) to leverage the entire commodities boom. Investment demand will follow, and all it takes is a rise to 20% investment demand to turn silver into a pressure cooker in terms of price action. At prsent day value, silver is outrageously cheap relative to oil.

Check out this price action. Silver looking like it's got some real "moxy"

395

396

metalman
06-05-08, 01:30 PM
GRG55 wrote he likes oil because it is all irrevocably consumed, but 90% of all the silver produced in history has been consumed as well, and is no longer recuperable as it's consumed in minute quantities in such a broad range of products it is well and truly "gone". It is easy to conceive of it as just "sitting there" in vaults, like Gold but actually almost the entire annual mine production is consumed yearly, with only a small percentage making it's way into investment stores. What happens if investment demand perks up just a little bit? In fact there is still something like a 200 million ounce annual deficit which is made up entirely from recycling and the assumption seems to be that "recycling will always be available".

Meanwhile, 90%++ of the silver is used in industrial applications where it is "non-discretionary".

When CPM or other analysts refer to it "going into surplus" they count the recycling as part of it's perennial, "organic" supply. If global production is only 650 million ounces, and there is a 200 million ounce shortfall made up from recycling, that means there is a one third structural shortfall in annual silver production, in a world where it's current investment demand is only 7%.

Compare this investment demand to gold's 90%++ existing pure investment demand for potential. One of these two is heavily undersubscribed as an investment. This means for example, that in any environment where there is a sharp drop in investment demand for precious metals, silver is in the medium term 90% less susceptible to dis-hoarding than is gold, as only 7% of it's present demand is due to safe haven buying. This is very counter-intuitive. People think silver will "fall much more than gold" in a sharp drop in inflation expectations, but those investment demand numbers suggest this probably has a good deal less basis than people assume.

Silver has more, and faster growing industrial applications than any other metal, by far. A bet on silver, just as much as a bet on oil, is all about global economic growth. It's "Safe Haven" monetary attribute is in fact by far it's minor present component. Pure investment demand for silver is tiny 7% of it's present overall demand.

Silver is first and foremost an industrial metal, a strategic, and critical industrial metal second only to Uranium. It is irreplaceable in any and all critical electronics, worldwide. People think it's some sort of second fiddle to gold for the doom and gloom crowd - not at all, it's a play on inexorable global growth, the premier metal (and commodity) to leverage the entire commodities boom. Investment demand will follow, and all it takes is a rise to 20% investment demand to turn silver into a pressure cooker in terms of price action. At prsent day value, silver is outrageously cheap relative to oil.

Check out this price action. Silver looking like it's got some real "moxy"

395

396

silver bug! i bought a pile in 2001.

compared to platinum, 'looks' cheap.

http://www.kitco.com/LFgif/ag00-pres.gif

http://www.kitco.com/LFgif/pt92-pres.gif

so does gold...

http://www.kitco.com/LFgif/au00-pres.gif

i'd be lightening my load of platinum and buying silver with it.

Contemptuous
06-05-08, 01:34 PM
silver bug! i bought a pile in 2001. compared to platinum, 'looks' cheap. i'd be lightening my load of platinum and buying silver with it.

Yessir, I am an unabashed silver bug. She's lookin' mighty cheap relative to just about everything. "Cheap is Good"! Poor little Rodney Dangerfield-ette. She just cain't get no respect! And if I try to stuff any more AG in my pockets, I'll probably bust my britches. With silver you are either "early to the party", or you are "left behind".

DrYB/C
06-05-08, 02:57 PM
We expect a leveling off or even a decline in commodity prices in the months ahead as the US credit crunch and recession impact global demand.

While a short-term "leveling off or even a decline in commodity prices" may occur, in the mid- to long-term, they are going higher,

1. http://www.nytimes.com/2008/06/05/business/05farm.html?_r=1&hp&oref=slogin

2. http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/06/05/ccwater105.xml

Consequently, as the prices of basic foodstuffs and water continue their rise

(rises that are not the result of any true current economic resource scarcity, but are the result of purposeful past [and current] fiat currency hyperinflation; the investment channeling of the hyper-inflated fiat currencies; and of other morally-questionable behaviors on the part of extremely intelligent and powerful persons and the individuals in their employ)

during a punishing (inflationary) debt-deflation, resource conflicts will begin to occur. Said conflicts will eventually become international in scale. Before, during, and after said conflicts arise, governments will become more totalitarian in nature, for obvious reasons, and eventually, to resolve these deadly conflicts, "neutral" third-party organizations will be placed in charge of "scarce" economic resources to assure their appropriate and sustainable distribution.

The synergy of an inflationary debt-deflation, price increases of basic foodstuffs and water, war, the necessary totalitarian evolution of governments under conditions of synthetic resource scarcity, and the eventual “benevolent” resource-allocating dictates of “neutral” third-party organizations, will, in the mid- to long-term, force human depopulation and the creation of an international green, sustainable economic order.

metalman
06-05-08, 03:16 PM
While a short-term "leveling off or even a decline in commodity prices" may occur, in the mid- to long-term, they are going higher,

1. http://www.nytimes.com/2008/06/05/business/05farm.html?_r=1&hp&oref=slogin

2. http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/06/05/ccwater105.xml

Consequently, as the prices of basic foodstuffs and water continue their rise

(rises that are not the result of any true current economic resource scarcity, but are the result of purposeful past [and current] fiat currency hyperinflation; the investment channeling of the hyper-inflated fiat currencies; and of other morally-questionable behaviors on the part of extremely intelligent and powerful persons and the individuals in their employ)

during a punishing (inflationary) debt-deflation, resource conflicts will begin to occur. Said conflicts will eventually become international in scale. Before, during, and after said conflicts arise, governments will become more totalitarian in nature, for obvious reasons, and eventually, to resolve these deadly conflicts, "neutral" third-party organizations will be placed in charge of "scarce" economic resources to assure their appropriate and sustainable distribution.

The synergy of an inflationary debt-deflation, price increases of basic foodstuffs and water, war, the necessary totalitarian evolution of governments under conditions of synthetic resource scarcity, and the eventual “benevolent” resource-allocating dictates of “neutral” third-party organizations, will, in the mid- to long-term, force human depopulation and the creation of an international green, sustainable economic order.

that's the cheeriest prognostication i've read all day.

the inflationary debt deflation... can anything stop it?

Finster
06-05-08, 04:09 PM
... (rises that are not the result of any true current economic resource scarcity, but are the result of purposeful past [and current] fiat currency hyperinflation; the investment channeling of the hyper-inflated fiat currencies; and of other morally-questionable behaviors on the part of extremely intelligent and powerful persons and the individuals in their employ) ... during a punishing (inflationary) debt-deflation, resource conflicts will begin to occur...

Much agreed. How this happens is explored in detail in How Inflation Causes Shortages (http://www.itulip.com/forums/showthread.php?t=4086).

ocelotl
06-06-08, 01:13 AM
Yessir, I am an unabashed silver bug. She's lookin' mighty cheap relative to just about everything. "Cheap is Good"! Poor little Rodney Dangerfield-ette. She just cain't get no respect! And if I try to stuff any more AG in my pockets, I'll probably bust my britches. With silver you are either "early to the party", or you are "left behind".

Add me to the silver bug gang, I've considered silver as a part of my portfolio since I'm working, not only because of me being mexican (ok, its part of our heritage and culture), also because of its interest to me as electronics engineer (I've seen how it is used and is a fundamental part of electronics, to the level of silicon, aluminum, copper, boron, indium, gallium and arsenic) and its monetary history.

The extra option I've took for the last 10 months (since the low of last july-august) is acquiring silver to around the level of the monthly payment of a financed car... I think that the day I stop thinking of my stack in ounces and begin counting it on kilograms will be the day I stop buying. Or maybe i'll consider an strategy change.

As of the subject of the main article, how a non investment commodity has followed inflation for the last decade, and has overshoot from the moment it began to be invested in, somehow reflects how we human beings tend to react to what we consider exchange means, the attribution of value to specific things is one of the bases of human culture. Not only scarcity of a desirable item makes it more valued. In that way there are things that are scarce, but as they are not extendedly used by humans, they aren't valued as such.

As we will keep giving value to things we need or use, it is mostly a safe bet the one to consider investing on durable commodities, and of those, the preferred ones are the ones that have an special appeal to us (gold, silver) or that are some of the pillars of our technological development (silver, platinum, palladium...).

Although in my opinion the future regarding human situation seems very difficult, at least until we do stabilize the population of the globe to a manageable number or begin colonizing asteroids or the moon (ok I'm dreaming on this, but the idea of harvesting a carboniferous rock, or a bunch of them can be considered as a possibility if we don't fall in a global war, also using the aluminum and titanium that is on the moon doesn't seem a very bad idea).

As it has been said. The game is not over, is at a third of its length, and it's better to be prepared for it instead of being sorry.

If there are no substantial changes, I'm thinking on a full kilogram (32 ounces and around a sixth) for tommorrow.

GRG55
06-06-08, 01:17 AM
GRG55, do you have any suggestions about good ways to invest in oil for someone in the U.S.?

Thanks

Just as for gold, now more difficult to invest in oil compared to just a few years ago. All my "black oil" equities I have held for years. However, nothing remains static. Stealing a page from BMO's Don Coxe, look for companies with long-life reserves, unhedged, and in politically safe jurisdictions (that last is a tough one these days!).

I have largely stayed with companies holding assets in Canada, USA, North Sea and select SE Asia locations. Natural gas in North America and Northern Europe (France & Holland). I suggested some exposure to the higher quality, then badly beaten down Canadian nat gas producers and gas sector service companies a couple times in the second half of 2007. They have had nice rebounds ytd. Right now, with prices across the board for producers up significantly anyone looking for petroleum exposure has to get more creative.

Presently my best idea for petroleum exposure is the US based heavy oil refinery capacity owners, and I suggested Frontier and Valero in a post a few weeks back (look up the exchange on iTulip, as well as bill's post on Hyperion yesterday).

I also think Suncor and Canadian Oil Sands are worth tracking for purchase in the event we have a significant sell off in oil and oil stocks. Talisman Energy is also worth a look as a diversified play in oil and gas, North America and international. The company has not participated compared to its peers. All three trade in Toronto and in New York.

Once again, please do your own due diligence. I am not a financial advisor, professional investor, etc.

Edit Added: Also there are several oil (and other petroleum) commodity ETFs now available which expand options beyond trying to pick the best producers/refiners.

Another Edit Added: I would suggest you stay away from Big Oil (Chevron, Exxon, BP, etc) as I view them having unsustainable business models.

Contemptuous
06-06-08, 03:12 AM
Add me to the silver bug gang, I've considered silver as a part of my portfolio since I'm working ... I'm thinking on a full kilogram (32 ounces and around a sixth) for tommorrow.

Hola Ocelotl,

He notado que usted es un seguidor fiel de Sr. Hugo Salinas Price, a uno de los autores más claros para la plata. Usted sabe, México puede ahora tener menos petróleo para las exportaciones, y eso es una perspectiva difícil. ¿Pero qué sus exportaciones de plata valdrán cuando la plata es en $300 por onza? Esto es potencialmente una nueva bonanza para su país.

A propósito, estoy pensando en buscar un pequeño hogar abajo en el Lago de Chapala en Guadalajara. No es muy lejana volar, de San Diego. No pienso que tendré que esperar muchos más años, antes de terminar ese plan. ¡Las cantidades algo inmodestas de plata que he comprado en los últimos años en $8 por onza pagarán mi boleto - y mi nuevo hogar en el Lago, también! ¡Pienso que el metal de plata tiene un futuro notable brillante en los diez años próximos! Y mientras que sabemos ya, la plata es México, y México es plata!

Respetos, Lucas ( Silver bugs of the world unite! :D )

p.s. - A propósito, mi mejor consejo es comprar agresivamente su asignación prevista completa este verano. He notado que los problemas con petróleo consiguen cada año peores para el mundo, y la inflación seguirá para cada uno. En esta situación, si usted cree esto es una protección confiable de la inflación históricamente, y usted cree que la inflación debe seguir el precio del petróleo, después la compra en etapas grandes dará recompensas. Pero ésa es apenas mi preferencia personal.

ocelotl
06-06-08, 08:07 AM
Hola Ocelotl,

He notado que usted es un seguidor fiel de Sr. Hugo Salinas Price, a uno de los autores más claros para la plata. Usted sabe, México puede ahora tener menos petróleo para las exportaciones, y eso es una perspectiva difícil. ¿Pero qué sus exportaciones de plata valdrán cuando la plata es en $300 por onza? Esto es potencialmente una nueva bonanza para su país.

A propósito, estoy pensando en buscar un pequeño hogar abajo en el Lago de Chapala en Guadalajara. No es muy lejana volar, de San Diego. No pienso que tendré que esperar muchos más años, antes de terminar ese plan. ¡Las cantidades algo inmodestas de plata que he comprado en los últimos años en $8 por onza pagarán mi boleto - y mi nuevo hogar en el Lago, también! ¡Pienso que el metal de plata tiene un futuro notable brillante en los diez años próximos! Y mientras que sabemos ya, la plata es México, y México es plata!

Respetos, Lucas ( Silver bugs of the world unite! :D )

p.s. - A propósito, mi mejor consejo es comprar agresivamente su asignación prevista completa este verano. He notado que los problemas con petróleo consiguen cada año peores para el mundo, y la inflación seguirá para cada uno. En esta situación, si usted cree esto es una protección confiable de la inflación históricamente, y usted cree que la inflación debe seguir el precio del petróleo, después la compra en etapas grandes dará recompensas. Pero ésa es apenas mi preferencia personal.

Agradezco el esfuerzo de responder en español. Aunque mi línea de pensamiento respecto a la plata ha sido, como indica usted, la de un seguidor del padre del dueño de la televisora del Ajusco, a lo cual uno el hecho de que la fuente más abundante y omnipresente de plata amonedada en este país es precisamente en la cadena de establecimientos de grupo Elektra, también de Hugo Salinas Pliego, no he sido un lector asiduo de sus libros, aunque conozco de su existencia.

Parte de mi interes en la plata se originó, en forma incipiente, a fines de la década de los 70's, aún siendo un niño. La emisión durante el gobierno de López Portillo de los "Morelos (http://worldcoingallery.com/countries/coin.php?image=img5/121-483&desc=Mexico%20km483.2%20100%20Pesos%20%281977-1979%29%20Jose%20Maria%20Morelos%20y%20Pavon)" (1977-79, 100 pesos, 20 gramos de plata pura) fué la causa para que mis padres me instruyeran sobre la historia reciente de la numismática mexicana, incluso salieron los comentarios sobre la adquisición de "olímpicas (http://worldcoingallery.com/countries/coin.php?image=img5/121-479&desc=Mexico%20km479.1%2025%20Pesos%20%281968%29%20 XIX%20Olympics%20in%20Mexico)" a raíz del nacimiento de nosotros. Una mayor formalidad en el interes se originó a partir de la reintroducción de la plata en el cono monetario nacional en 1992 (10 (http://worldcoingallery.com/countries/coin.php?image=img5/121-553&desc=Mexico%20km553%2010%20New%20Pesos%20%281992-1995%29%20Tonatiuh%20Aztec%20Sun) y 20 (http://worldcoingallery.com/countries/coin.php?image=img5/121-561&desc=Mexico%20km561%2020%20New%20Pesos%20%281993-1995%29) nuevos pesos) y su posterior retiro debido a la combinación de la devaluación de diciembre de 1994 y el posterior despegue del precio internacional del argentino metal.

El Sr. Hugo Salinas Price ha sido el grán difusor del uso de la plata mexicana como fuente de ahorro para la grán mayoría del pueblo mexicano, pero también la familia de muchos de nosotros, con sólo comentarnos sobre la importancia y variedad de nuestra historia monetaria ha resultado en la base del interes de invertir en plata de muchos de nosotros. De hecho siempre he encontrado interesante la visita a las casas numismáticas.

Respecto a la posibilidad de que se mude usted a las cercanías del Lago de Chapala, no tengo porque disuadirlo, ni replicar ante ello, Estar a una hora o dos de la segunda ciudad de este país en un punto con grán potencial acuífero no parece mala idea.

kingcopper
06-06-08, 08:33 AM
I'm an unabashed silver bug only because of it's underrated industrial future. Between photovoltaics, future use in portable battery systems, and catalytic converters; I'll keep buying while it's cheap. I've heard that nearly all new laptop and cordless powertool batteries will use silver as soon as 2010. These batteries do not overheat or catch fire, have great memory, and hold more and longer charges than conventional portable batteries. I think silver will be the big winner in the near future in regards to precious metals.

Also, in regards to transporting precious metals for use as currency; gold is great when crossing the border and silver is great for buying daily needs. And in our future, unfortunately, one morgan could theoretically buy the grocery store.;)

NerdyBoy99
06-06-08, 06:40 PM
Newbie question. Is it worth paying a premium for Maple Leaf coins or Morgans? I intend to buy a significant amount to keep handy. You know, just in case...

Contemptuous
06-06-08, 08:04 PM
Ocelotl -

He pasado los últimos cuatro años comprando plata (casi por instinto), porque la mayoría de los consejeros recomendarán el oro. Pero en el año pasado especialmente estoy leyendo a mucha gente que sugiere claramente que una crisis monetaria internacional es inevitable ahora, en el plazo de los cinco años próximos. Usted mira el oro, y puede ir fácilmente encima de cuatro a seis veces. Pero cuando sucede eso, es casi imposible imaginarse que el mundo no mueve atrás hacia un "re-monetizacion" de los metales.

Está en el contexto de eso, que el precio presente, muy bajo la plata comienza a mirar un pedacito asombrosamente. Es posible que este metal puede levantarse diez veces a veinte veces en esta clase de desarrollo. Esta clase de desarrollo no sucede comúnmente. Es quizás " una vez en cien anos" en probabilidad, y estos acontecimientos del tiempo largo crean mucho movimiento muy grande en clases relacionadas. Y por eso es probable ahora que la plata va definitivamente a hacer algo significativo.

Respeto.

bart
06-06-08, 08:16 PM
Newbie question. Is it worth paying a premium for Maple Leaf coins or Morgans? I intend to buy a significant amount to keep handy. You know, just in case...

In my opinion, yes for Maple Leafs since they're 24k and no for common date Morgans. If a real SHTF scenario, I don't think Morgans will make a difference over regular silver dollars.

grapejelly
06-06-08, 08:30 PM
I like 24kt gold because it is hard to fake.

NerdyBoy99
06-07-08, 11:51 AM
Thanks for the input guys.

raja
06-07-08, 04:34 PM
Lukester:
You said that only 7% of Ag is speculation. This makes me think that in the coming recession, Ag is more susceptible to a dramatic price drop caused by demand destruction for its use in electronics, etc. I believe gold would be different in this respect, and would not suffer the same level of decline due to demand destruction.

GRG55:
Thanks for your comments on oil investments!

Contemptuous
06-07-08, 05:33 PM
Raja - Here's a great interview with Jeff Christian, a veteran commodities analyst (former Goldman Sachs lead analyst in commodities back in the late '80's or early '90's I think). He writes the CPM yearbook on gold and silver and is considered a sober "institutional" adviser on the metals. Listen in on his report on silver 2008. I see you've been voicing much the same misgivings about the entire commodities complex for the past year to eighteen months. Your stance is "wait until the big washout" - but the washout is not obliging you by arriving. In the meantime, the fundamentals for the precious metals have not been this bullish in any preceding year.

http://www.netcastdaily.com/broadcast/fsn2008-0531-2.ram

Silver will likely not be this cheap again, even less likely in nominal dollars. An alert buyer could have scooped some up just last week at $16.60, just a hair off it's 200 MA. Hesitate, or choose to wait for the washout before you trust this segment, and you'll more likely be buying silver at a $25. I've read everything I could get my hands on about silver the last two years, and the more I read, the more misconceptions about it I read about. Meantime silver is apparently not waiting for any of us! It's 200 day moving average is moving smartly up past $16 and it's hugging close to it's 200 day average right now. Great time to add a "non-trivial" amount to one's portfolio.

The 200 day average does not break trend easily unless a secular trend is changing and that trend is looking more "secular" every day now, due to Peak Cheap Oil, if nothing else. That event will be massively inflationary (as if central banks were not enough), and geological events are one category which cannot be described as "passing fads". I think you have 10%-15% max downside in silver (and after the recent washout I doubt even that much), and 500%-800% upside in comparison. Meantime I think every last bond in the world today is a toxic idea for the next decade. To each his own. I also think "Sell in May and Go Away" for precious metals is a bad idea this year. Cheers.

necron99
06-07-08, 10:05 PM
A propósito, estoy pensando en buscar un pequeño hogar abajo en el Lago de Chapala en Guadalajara. No es muy lejana volar, de San Diego. No pienso que tendré que esperar muchos más años, antes de terminar ese plan.

No soy hombre de inversiones, sin embargo, les escribo de la ciudad de Tepic, dos horas al Oeste de Guadalajara. (No he realizado la "ubicación" en mi perfíl por mucho tiempo.) Puedo decir que vivir en ésta region se vale la pena! Guadalajara es una ciudad grandote, como Los Angeles, con la tecnología y entretenemiento de una ciudad de los EE.UU. Pero el estres sigue quizás la mitad. La ciudad es verde, la clima agradable, con el energía de los jovenes de varias universidades, y la gente simpatica generalmente.

Ésta region es muy chida. Puerto Vallarta es demasiado turistico en mi opinión, pero me gustan mucho las playas de Nayarit y sur (Guerrero, etcétera). Si investigas lugares cerca Guadalajara, que me mandes un PM, quizás nos veremos aquí! Hasta pronto, güey!

Contemptuous
06-08-08, 03:36 AM
Necron99 -

Gracias por la oferta. Tepic aparece interesante y en un cierto punto estaría interesado explorar las ciudades costeras adelante allí. ¡Ahora todo lo que necesito hacer es persuadir a mi patrón alemán de mover nuestra (pequeña) oficina americana entera así que puedo moverme allí y traer a mi compañía entera conmigo! Este dueño de la compañía de ingeniería en Frankfurt (Alemania) tiene gusto de explorar el mundo, y él ha hecho cosas más locas en el pasado. ¿Es posible nosotros comprará Ocelotl una cerveza fría, eh?

necron99
06-08-08, 01:48 PM
Necron99 -

¿Es posible nosotros comprará Ocelotl una cerveza fría, eh?


Tengo ganas hacerlo! Estaremos en contacto.

ocelotl
06-15-08, 01:20 PM
Ocelotl -

He pasado los últimos cuatro años comprando plata (casi por instinto), porque la mayoría de los consejeros recomendarán el oro. Pero en el año pasado especialmente estoy leyendo a mucha gente que sugiere claramente que una crisis monetaria internacional es inevitable ahora, en el plazo de los cinco años próximos. Usted mira el oro, y puede ir fácilmente encima de cuatro a seis veces. Pero cuando sucede eso, es casi imposible imaginarse que el mundo no mueve atrás hacia un "re-monetizacion" de los metales.

Está en el contexto de eso, que el precio presente, muy bajo la plata comienza a mirar un pedacito asombrosamente. Es posible que este metal puede levantarse diez veces a veinte veces en esta clase de desarrollo. Esta clase de desarrollo no sucede comúnmente. Es quizás " una vez en cien anos" en probabilidad, y estos acontecimientos del tiempo largo crean mucho movimiento muy grande en clases relacionadas. Y por eso es probable ahora que la plata va definitivamente a hacer algo significativo.

Respeto.

Una revaloración de la plata respecto del oro al doble de su valor actual relativo no parece estar fuera de consideración tomando en cuenta tanto la abundancia relativa de ambos metales como su uso en el mundo actual. Si a esto añadimos la reciente viabilidad práctica del reciclaje de ambos metales de fuentes no consideradas anteriormente (la electrónica y fotografía desechadas), parece que aún tenemos un poco de tiempo extra con precios "comodos" de la plata en comparación con el oro.

Con respecto a lo de las cervezas, supongo que podremos organizarlo.

Contemptuous
06-15-08, 06:11 PM
Una revaloración de la plata respecto del oro al doble de su valor actual relativo no parece estar fuera de consideración tomando en cuenta tanto la abundancia relativa de ambos metales como su uso en el mundo actual. Si a esto añadimos la reciente viabilidad práctica del reciclaje de ambos metales de fuentes no consideradas anteriormente (la electrónica y fotografía desechadas), parece que aún tenemos un poco de tiempo extra con precios "comodos" de la plata en comparación con el oro.

Con respecto a lo de las cervezas, supongo que podremos organizarlo.

Ocelotl - I don't know if you noticed, but an even partially re-monetized silver, if this is not an absurd idea, would render Mexico and Peru two of the most formidable "providers of money" to the world. Seems absurd in today's world. Tomorrow? Who knows? China is almost certainly going to be the one of the world's largest economic powers. They were the very last country in the world to demonetize silver (1940's), and they are reputed to have the largest remaining silver stockpiles in the world. In a world where currencies crash and burn, and the one country wth the richest foreign currency reserves is China, and that country also happens to have the world's largest remaining deposits of silver, how outrageous is it to think that silver, along with gold, get's reintroduced as partial backing for a new global monetary standard? Hmmm. Who's got all the silver in the ground thereafter?? :D

phirang
06-15-08, 06:25 PM
China = world's largest exporter of gold. :D

ocelotl
06-16-08, 12:26 AM
Ocelotl - I don't know if you noticed, but an even partially re-monetized silver, if this is not an absurd idea, would render Mexico and Peru two of the most formidable "providers of money" to the world. Seems absurd in today's world. Tomorrow? Who knows? China is almost certainly going to be the one of the world's largest economic powers. They were the very last country in the world to demonetize silver (1940's), and they are reputed to have the largest remaining silver stockpiles in the world. In a world where currencies crash and burn, and the one country wth the richest foreign currency reserves is China, and that country also happens to have the world's largest remaining deposits of silver, how outrageous is it to think that silver, along with gold, get's reintroduced as partial backing for a new global monetary standard? Hmmm. Who's got all the silver in the ground thereafter?? :D

If memory don't fails, and history is a good reference, that's the way it worked since mid 1500's to 1940's Mexico, Perú, Bolivia providing most of the coined silver, and China harnessing it. Even Mexico Mint kept coining the original 24.44 grams of pure silver 0.9027 peso to export to China as payment for imports...

And, adding to that, we in Mexico haven't fully abandoned silver ever, just debased coinage. Last pesos (http://worldcoingallery.com/countries/coin.php?image=img5/121-459&desc=Mexico%20km459%201%20Peso%20%281957-1967%29) with a hint of silver were minted in 1967, after that we have the olímpicas of 1968 (http://worldcoingallery.com/countries/coin.php?image=img5/121-479&desc=Mexico%20km479.1%2025%20Pesos%20%281968%29%20 XIX%20Olympics%20in%20Mexico), the Juarez of 1972 (http://worldcoingallery.com/countries/coin.php?image=nmc1/121-480&desc=Mexico%20km480%2025%20Pesos%20%281972%29%20Be nito%20Juarez), the Morelos of 1977-9 (http://worldcoingallery.com/countries/coin.php?image=img5/121-483&desc=Mexico%20km483.2%20100%20Pesos%20%281977-1979%29%20Jose%20Maria%20Morelos%20y%20Pavon), the 10 nuevos pesos of 1992-5 (http://worldcoingallery.com/countries/coin.php?image=img5/121-553&desc=Mexico%20km553%2010%20New%20Pesos%20%281992-1995%29%20Tonatiuh%20Aztec%20Sun), the 20 nuevos pesos of 1993-5 (http://worldcoingallery.com/countries/coin.php?image=img5/121-561&desc=Mexico%20km561%2020%20New%20Pesos%20%281993-1995%29), the 50 nuevos pesos of 1995 and the actual sets of 100 pesos: states (http://worldcoingallery.com/countries/galleries/Mexican_states.html), Quijote 4th centennial (http://worldcoingallery.com/countries/coin.php?image=img12/121-100pDQ&desc=Mexico%20km705%20100%20Pesos%20%282005%29%20D on%20Quijote), and Mexico Mint 470 anniversary (http://worldcoingallery.com/countries/coin.php?image=img14/121-731&desc=Mexico%20km731%20100%20Pesos%20%282005%29%20M exico%20City%20Mint).

Only time will tell us really how this develops, given not only overground reserves, but also underground reserves. We don't really know how much coined silver is stored as savings of common people that could emerge when remonetization happens. Still, on friday I checked a few coin dealers I know, and they are struggling due to low sales and higher rents... Even I was talked to try to assist a coin dealer congress and was asked if I had a coin store...

sadsack
06-16-08, 06:05 PM
Although in my opinion the future regarding human situation seems very difficult, at least until we do stabilize the population of the globe to a manageable number or begin colonizing asteroids or the moon (ok I'm dreaming on this, but the idea of harvesting a carboniferous rock, or a bunch of them can be considered as a possibility if we don't fall in a global war, also using the aluminum and titanium that is on the moon doesn't seem a very bad idea)

Dream on, as do I and possibly Sapiens does (but DON'T quote me on the latter) . . .

Andreuccio
06-17-08, 12:34 PM
silver bug! i bought a pile in 2001.

compared to platinum, 'looks' cheap.

http://www.kitco.com/LFgif/ag00-pres.gif

http://www.kitco.com/LFgif/pt92-pres.gif

so does gold...

http://www.kitco.com/LFgif/au00-pres.gif

i'd be lightening my load of platinum and buying silver with it.

Silver is cheaper compared to platinum vs. prices earlier in the decade, but not by as much as the graphs make it "look".

Silver from $5 to about $17.5 = 3.5X increase.
Platinum from $400 to $2000 = 5X increase.
Gold from $300 to $900 = 3X increase.

The scale of the graph makes it "look" like silver is relatively much cheaper than it is. Silver's rise only goes about 1/3 of the way up the y-axis, while the rise of gold and platinum both run up the entire length of the graph.

bart
06-17-08, 01:27 PM
The long term picture:

http://www.nowandfutures.com/images/gold_platinum.png

ocelotl
06-17-08, 08:15 PM
Newbie question. Is it worth paying a premium for Maple Leaf coins or Morgans? I intend to buy a significant amount to keep handy. You know, just in case...


IMHO. I've seen pre 1910 pesos at MXN 175 a piece, around USD 17 a piece. If you pay more for a Morgan Dollar, it is robbery. Also Mexican gold pesos (Centenario, Azteca, Hidalgo and similars) are around MXN 230 to 270 pesos per peso (0.75 grams of pure gold per peso), of course with higher prices for the smaller coins. If you are getting pre 1933 gold dollars (1.5 grams of pure gold per dollar) at more than 45 to 52 USD per unit, you are getting ripped.

Contemptuous
06-17-08, 10:47 PM
Ocelotl - from one "silver bug" to another, a friendly reminder. You need to get those grams to ounces conversions ironed out! Come on, Mr. Electrical Engineer. :D

<TABLE><TBODY><TR><TD>http://www.google.com/images/calc_img.gif</TD><TD> </TD><TD noWrap>one ounce = 28.3495231 grams

</TD></TR><TR><TD> </TD><TD> </TD><TD>More about calculator. (http://www.google.com/intl/en/help/features.html#calculator)</TD></TR></TBODY></TABLE>

Other than that, I am squarely in agreement with you - everybody should forget the "rare" or "in-demand", or "special" coin mumbo-jumbo (unless you are a miserable, wretched, nihilistic, metal-hoarding cynic like Metalman, who saw such a black and ugly world seven years ago that he felt compelled to run out and buy a truckful of Morgans that nobody wanted). Starving Steve has the best idea - buy as much CHEAP gold and silver metal as you can afford, and then wait. And wait, and wait, and wait. The rest is all about "waiting".

Rajiv
06-17-08, 10:56 PM
Ocelotl - from one "silver bug" to another, a friendly reminder. You need to get those grams to ounces conversions ironed out! Come on, Mr. Electrical Engineer. :D

<table><tbody><tr><td>http://www.google.com/images/calc_img.gif</td><td>
</td><td nowrap="nowrap">one ounce = 28.3495231 grams</td></tr></tbody></table>


Sorry,
Silver and gold are measured in Troy weight and

<table><tbody><tr><td>http://www.google.com/images/calc_img.gif</td><td>
</td><td nowrap="nowrap">1 troy oz = 31.1034768 grams

</td></tr></tbody></table>

Contemptuous
06-17-08, 10:59 PM
Sorry,
Silver and gold are measured in Troy weight and

<TABLE><TBODY><TR><TD>http://www.google.com/images/calc_img.gif</TD><TD></TD><TD noWrap>1 troy oz = 31.1034768 grams



</TD></TR></TBODY></TABLE>

Ooops! Lukester executes yet another faceplant. Methinks I stumbled on this same error with Rajiv once before too ... [ mutters darkly : "not having a very good f***ing week here" ... ] :rolleyes: