Silver Prices and the Russian Connection

Silver prices nearly reached $50.00 in April of 2011. They crashed to a low under $14 in December of 2015 and currently (December 2016) sit at about $16.

Silver prices, in our increasingly unreal debt based fiat currency world, streak higher and subsequently crash to unbelievable lows.

Option One: Silver prices are near the end of their correction and will rally substantially higher. Why? Exponential increases in debt and total currency in circulation lift the prices for nearly everything, including college tuition, cigarettes, the S&P, housing, health care, silver and gold. We have heard this before and we see the consequences of using our “fake money” every day.

Option Two: Silver prices reached a generational high in 2011 and will collapse even further in coming years. Why? Supposedly the crushing deflation will rule the world for several years and prices for stocks, bonds, real estate, gold and silver will crash to unbelievable lows. We have heard this before. Some prices will probably crash, but silver and gold should rise because they are real money and independent of (surging) counter-party risk.

The Silver to S&P 500 Ratio: This ratio shows the relative valuation of silver compared to stocks in the U.S. See the chart below for the ratio since 1990.

Silver is currently too low compared to the S&P 500 Index. We live in an exponential world – exponentially increasing debt, banker profits, silver prices, monetary nonsense and more. Examine the increase in U.S. national debt and the – more or less – parallel increase in silver prices – both on log scales.

 

Silver prices increase exponentially along with debt, currency in circulation, and consumer prices. However, if the world had cast aside economic delusions and returned to a world without central banks, fiat money, fractional reserve lending, unpayable debts … but I digress.

Assume that debt will continue to increase (it will as long as politicians and the Fed are “on the job”) and that the last 17 years of silver prices tell the story…

 

This chart uses a log scale and shows exponentially increasing prices. A green line connects highs since 2001 and another green line connects lows since 2001. The purple line is the geometric mean between the high and low boundary lines.

Prices are propelled higher above the purple line and then crash lower. Assume the purple line is an equilibrium line which suggests we will see the next multi-year move surge above the purple line.

Examine the deviation of the monthly price of silver as a percentage above or below the purple equilibrium line. Silver prices oscillate around the equilibrium line of zero on the following chart.

Silver is far below the equilibrium line and too low compared to its own exponential price history as well as compared to the S&P. The next major move should be UP!

 

WHY?

 

Ted Butler: (Subscription service and here.)

“The big theme, as I see it, is JPMorgan becoming more aggressive in acquiring physical silver and gold while at the same time reducing its COMEX short position in each almost as aggressively. It’s hard to imagine a more bullish backdrop for futures prices.”

Bill Holter: (Subscription service)

“I believe deflation will destroy financial assets and not stop until fiat currencies (including and specifically the dollar) themselves are destroyed. The coming credit event will wipe out currencies … and what is the result of grossly lower or worthless currencies? Hyperinflation.”

Currencies are created by increasing debt and are backed by nothing but hope, faith and confidence. Exponentially increasing debt is not sustainable. How long before the dollar, pound, yen and euro begin to resemble the Venezuelan and Argentinian currencies?

It is more sensible to own physical silver, knowing it is grossly undervalued compared to the S&P, national debt, total sovereign debt, and more.

 

THE RUSSIAN CONNECTION:

 

In accordance with the current blame-game promoted by the “fake news” diversions: We can blame Russia for HRC losing the election, releasing scandalous emails that the Democratic National Committee desperately wishes had remained private, the election of Trump, NSA spying on everyone, global terrorism, excess debt in the western world, the failure of hope and change, Federal Reserve monetary policy, unemployment, weak silver prices, strong stock markets, global bond market correction, the coming recession, derivatives disasters, slowing retail sales, Italian banking, cold weather, one brutally assassinated reindeer no longer able to pull Santa’s sleigh and a tardy delivery of goodies from the Easter Bunny next year…

Well … maybe Russia should not be blamed for all the above …

Gary Christenson

The Deviant Investor

16 thoughts on “Silver Prices and the Russian Connection


  1. Have been thinking about this thread, which started with Gary’s yeoman-like work on the stats, then shifted sideways to the wisdom of Harry Dent.

    I don’t doubt that we can have another serious recession or mis-described depression, since I’m not at all sure that we are out of the one that began in 2007-2008, or even 2000. Unlike Gary, my strength is not in technical matters.

    But I have been around long enough (started investing in 1967) to have seen that
    not all things go up or down in price together. A good part of the 1970s could be characterized as having been an inflationary recession of serious magnitude. Prices of a great many stocks went down, while prices of everything that I recall having needed to buy, went up. But so did gold, though quite erratically.

    And with due allowance for Mr. Dent’s predictions, I don’t rule out deflation in ur future, with some influence from demographics (think Japan since 1989). But the probability of a serious (30% to 50%) drop in Dow and S&P type stocks is not to be discounted (read John Hussman, among other sensible people). After some of us have made all that is to be garnered on the short side, more than a few people will be looking for an asset to go long. Whatever better than gold and silver (and their miners)? During the 1930s Homestake Mining earned enormous sums, and paid high dividends on a very strong stock price.

    As observed by Mark Twain (or maybe John the Baptist), history doesn’t repeat, but it rhymes (maybe not JTB, he didn’t have a head for rhymes).

    Robert B. Eckhardt




  2. Today on this site I have seen several mentions of what is said to be Harry Dent’s prediction of gold at $700 per ounce. I was thinking of making a serious offer, that I would buy a quantity of gold from him at that price, $700 per ounce. Then I decided that it would be more sporting if I allowed him some room for greater profit, so here is my entirely serious proposal: I will pay Mr. Dent $800 each for 50 commonly available one ounce geenuine gold coins in decent condition (U.S. Eagles, Canadian Maple Leafs, or Krugerrands ), i.e. a total transaction amount of $40,000, with the cost of shipping and insurance split between us 50:50. This is intended as a good faith offer for the next ten days. If Mr. Dent’s prediction is serious, this exchange will give him a cushion of $100 per ounce, so he could enter into a forward transaction to sell gold at $700 per ounce, thereby locking in a profit of $100 per ounce that will be realized when his $700 price objective is reached. I am willing to have Gary Christenson handle the transaction in a fair manner, if he is willing.

    If unwilling to do such an actual deal in real time, perhaps Mr. Dent could agree to stop making calls that frighten the sheep?
    Robert B. Eckhardt




      • Fantastic, Elliot.
        My hunch is that one of these days Harry Dent will scoop up all our bids, in an unofficial version of running the stops. I have no difficulty with you profiting first, though, and to a greater extent. I had been thinking of offering to buy 100 ounces, anyway. But I’m easy.

        And of course anything can happen. I remember one dump in 2013 that took gold down about $300 in one day. Interestingly, my holdings still were profitable since most of myt buying was in the 2004 to 2009 time range.

        Robert B. Eckhardt


  3. Hi Gary,
    Enjoy reading your articles…very objective. In your studied opinion, why is Dent wrong about gold? What is he missing?

    I gather he views gold as just another commodity, and not real money (per JP Morgan).

    Thanks very much!


    • Based on my reading of his stuff, and my memory, he sees gold as a commodity and thinks all commodities will be “killed” in the coming deflation. He does not see gold as money. He thinks the commodity cycle peaked several years ago and will not peak again until the 2030s.

      I think he misses the point about fiat currencies devaluing more and more.
      The Deviant Investor


  4. Once again, Gary has done the hard work of plotting past records and future prospects, for which I offer my sincere appreciation.

    I marvel over the extent to which daily, weekly, monthly, or even yearly trends affect the moods of people with regard to asset ownership. Over the course of the last five years or so, silver prices are down from the vicinity of $40 per ounce to about $16 per ounce.

    Mean reversion (in the general sense; Gary might call it “trend reversion”) is a powerful factor, one which should not be ignored.

    My work brings me into contact with many young (college age) people who are trying to build savings and capital as a foundation for their futures. In a time of ever-expanding supplies of fiat “money” for those who are serious about such endeavors, buying assets that are lower in price (relatively and absolutely) is preferable to chasing the fads of the moment.

    A sum of $100 per month is enough to buy five to six ounces of silver in one or another form. Several years from now that accumulation is more likely to be valued higher than lower in fiat terms.

    For those with more fiat capital to turn into potentially more enduring assets, gold also is attractive. For such assets with tangible value, as long as one has income, averaging down can be a powerful strategy over the longer term.

    Taking action nearly always is a better strategy than simply watching changes in numbers and becoming discouraged.

    Robert B. Eckhardt


  5. Gary, As has been noted by many others before me, “being right too early, can be as bad as being wrong”, and unfortunately I am experiencing the negative effects of that at this time. I believe, as you apparently do, that our system of fiat money will ultimately blow up. So several years ago I began accumulating gold & silver, and much of my savings are in that form. However , I am now retired and find myself having to dip into my small stash much too frequently. I do not wish for anything bad for the country, or others in general, but if it doesn’t happen in the next few years, it will be too late for me! CL.




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