Monday, January 24, 2011

Rationalization of the Day?

The following post is rated 5 stars out of 5.

Re: Margin calls, gentlemen

The big difference is silver is spread out in many hands this time and I am sure the big players (Chinese, Hedge funds, etc.) have plenty of cash this time and will meet the margin calls.

1. Spreading the risk does not necessarily reduce the risk. This is especially true during bubbles.

2. If the big players had to resort to using margin loans to buy silver, then I would argue that they probably don't have plenty of cash.

12 comments:

Anonymous said...

ETFs like SLV are great on the way up when the fund managers create more shares to meet demand and buy the bullion to support them--but on the way down the same fund managers destroy shares and dump the silver on the market if they can't find buyers for the shares. Thus ETFs exaggerate moves up and down.

Anonymous said...

SLV Outstanding shares:

12-15-09 311,400,000
12-15-10 360,600,000
1-21-11 342,000,000

http://us.ishares.com/product_info/fund/overview/SLV.htm

Stagflationary Mark said...

Anonymous,

That's quite a pullback in outstanding shares.

They sure are talking up inflation on CNBC today. Hard assets this, hard assets that.

Reminds me a bit of 2008.

Anonymous said...

They sure are talking up inflation on CNBC today. Hard assets this, hard assets that.<<

I hope CNBC goes away--just leave the ticker and reruns of the Muppets would be fine.

Anonymous said...

>>In the meantime, the financial shenanigans taking place in the precious metals sector are offering investors a temporary gift of artificially suppressed prices. As (?) some point, the gig (?) will be up and there will be a massive upward revision to the prices for gold and silver. So by all means, we should be using this current correction as another buying opportunity handed to us by Jamie Dimon and company. They may be able to buy off the CFTC and change the rules of the game to their advantage in the short term, but you can avoid this trap by simply rejecting all paper forms of gold and silver in favor of buying the actual physical metal and keeping it in your possession. I'm not sure if this approach will Crash JPMorgan but it will certainly make their manipulation more difficult, while providing true protection for your wealth. Go here to get started now! - https://www.goldstockbull.com/members/signup.php
<<

Bet there will be some bargains as the banksters dump all that SLV silver on the market!! By the way i think there may have been beverages involved in the writing of the above (?)

Stagflationary Mark said...

Anonymous,

I love that silver has been in a bull market for 10 years, the price is far and above its average inflation adjusted price going back 100 years, it is roughly 2.5x more expensive than it was when I sold for a profit in 2006, and Jamie Dimon is somehow responsible for suppressing it.

I need to start making aluminum hats with my aluminum foil hoard and begin distribution, lol.

getyourselfconnected said...

"If the big players had to resort to using margin loans to buy silver, then I would argue that they probably don't have plenty of cash."

Hard to argue with that!

Stagflationary Mark said...

GYSC,

The poster could be right for the wrong reasons. I'm simply heckling the reasoning.

For example, perhaps the big players aren't using leverage. If that's the case then there would be no margin call and it wouldn't even matter if they had cash or not.

It seems most likely to me that 10 years into a bull market the temptation to use leverage would be very high though, and the price action in silver would be supportive of that theory.

getyourselfconnected said...

I cringe when I hear leverage.

Stagflationary Mark said...

GYSC,

Me too.

I cringe just using "Lever" bar soap. Damn you Costco for giving me a coupon for it! ;)

getyourselfconnected said...

Holy Crap!

My mom bought lever soap years ago (yes GYSC was once a child!) when it first came out and I got a severe allergic reaction to it and had to down 4 benadryl due to hives. Hate that stuff.

Stagflationary Mark said...

GYSC,

I know it is just anecdotal evidence, but it would seem that levering up to clean up can lead to a rash panic!