Saturday, May 21, 2011

Hot Investment Manic Phase

Since we are a debt-based society, I would argue that there is debt chasing any investment that appears to be a "sure thing".

May 6, 2011
Silver’s Dip will be Brief!

The bubble in stocks in 1929 was caused by debt financing.

The bubble in housing in 2007 was caused by debt financing.

You cannot borrow money to buy silver. Thus, silver is NOT in a bubble.

I disagree. Since you can now buy and sell silver just like you can buy and sell stocks (through SLV), you can now borrow money to buy silver just like you could borrow money to buy dotcom stocks. The mechanism is identical.

The only real debate is whether or not investors have chosen to do this.

May 9, 2011

“If there is one sure way to tell that the Fed has managed to create and nurture a speculative-led rally in the equity market, look no further than what is happening to investor-based leverage growth – it’s exploding off the page. Yes, that’s right. Debit balances at margin accounts skyrocketed $20.7 billion in February. Only two other times historically have we seen leverage rise so much so fast and both times it was during a manic phase – during the tech bubble of the late 1990s and the credit bubble just a short four years ago.

This is by no means proof that investors have borrowed money to buy silver. It is a smoking gun though. They've certainly borrowed money to buy something (perhaps everything since the entire market has been a "sure thing" in recent years).

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