Silver at $200 to $400 makes little sense in 2015 but it is far more plausible if global central banks paper over multiple trillions in defaults and derivative implosions.
The above comments, and those below, have been edited by Lorimer Wilson, editor of munKNEE.com (Your Key to Making Money!) and the FREE Market Intelligence Report newsletter (see sample here) for the sake of clarity ([ ]) and brevity (…) to provide a fast and easy read. The contents of this post have been excerpted from an article* by Gary Christenson (deviantinvestor.com) originally entitled Outrageous Silver Speculation which can be read in its unabridged entirety HERE. (This paragraph must be included in any article re-posting to avoid copyright infringement.)
$200 to $400 silver prices are outrageous and unlikely … as unlikely as the following seemed before they happened:
- Two jets taking down 3 buildings on 9-11.
- Assassination of a sitting president (JFK) by an organized conspiracy.
- Gold rallying from $42 to $850 in a little over 8 years.
- The hyperinflation in Weimar Germany in the early 1920s.
- Central banks printing Trillions of dollars in “funny money” since 2008 while maintaining near zero interest rates – for which they are applauded.
Given the above unlikely events, consider extreme these silver possibilities!
- The 80/20 “rule” states, for example, that 20% of the workers do 80% of the work, 80% of the price move in a market bubble occurs in 20% of the time, and so on. It is a rough guideline.
Phase 1 of a big market move:
The time from the beginning of the rally to a substantial new high, the inevitable correction, and the rally back to that new high.
Phase 2 of a big market move:
The time from when the market exceeds the substantial new high (end of phase 1) to the ultimate bubble high. For example:
- Silver rallied from (approximate prices and dates) $1.50 in August 1971 to $6.24 in May 1974, corrected, and rallied again to $6.24 in October 1978. (Phase 1)
- Silver rallied from $6.24 in October 1978 to about $50 in January 1980. (Phase 2)
In that silver bubble, phase 1 took 86% of the time and represented 10% of the price change. Phase 2 took 14% of the time and represented 90% of the price change. This was an extreme bubble.
- Our most recent silver example is the move from November 2001 at $4.01 to April 2011 at about $48.50. Phase 1 took 93% of the time from November 2001 to Sept. 2010 when silver again reached the March 2008 high near $21. Phase 2 took 7% of the time but covered only 62% of the price move up from $4.01 to about $48.50. Silver was overextended but not in a bubble, in my opinion, based on the above percentages.
But Just Suppose:
- Silver rallies from the July 2015 low of about $14.30 back to its August 2011 high of $48.50 in late 2016 – 2017 to complete phase 1,
- the ratios from November 2001 are similar to the bubble move in the late 1970s.
- Then, there is a possibility (possibility #1) that:
- Phase 1 would see silver move upward in price from the period from Nov. 2001 at $4.01 to $48.50 in January 2017 (80% time and 20% price.).
- Phase 2, from Jan. 2017 at $48.50 would move up to about $225 in Nov. 2020 (20% time and 80% price, i.e. the 80/20 principal).
- and there is a more extreme possibility (possibility #2) that:
- Phase 2 would see silver move upward in price from the period from Nov. 2001 at $4.01 to $48.50 in January 2017 (80% time and 10% price.).
- Phase 2, from Jan. 2017 at $48.50 would move up to about $450 in Nov. 2020 (20% [10%?] time and 90% price, i.e. the 80/20 principal in extreme).
$200 or $400 silver is outrageous when we think in terms of today’s dollars, euros, and yen but what if:
- current deflationary forces overwhelm markets and currencies,
- debts are defaulted, and
- central banks panic and, rather than accepting crushing deflation, massively “print” to boost asset prices and thereby create a huge inflation…
[Under such circumstances] commodity and consumer prices would become considerably higher and people and funds would be desperate to own something that would retain purchasing power. [I such an economic environment,] gold and silver come to mind!
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