Price and the Fool’s
By Dr. Jeffrey Lewis
The reason why a mirror only switches your
image left to right and not also up and down is an illusive property of
optics. Optically, the image appears as if you somehow walked around to the back
of the mirror to face it again.
But rarely do we ask ourselves questions like
these. Normally we just take it for granted.
To understand price in today’s world is,
ultimately, about understanding price mechanism.
At the heart of all price discovery is the
true darkness where few dare to gaze. The amount of light necessary to reveal
that truth seems physically impossible. Yet it is nothing close to a physical
reality. It is purely an irrational fantasy backed by faith, hope, and fear.
No one knows what the paper price of silver
will be tomorrow; making a prediction is a
fool’s game which illustrates that something is undervalued in the context of
what is true is the potential energy of this market going parabolic.
It can happen any moment. What would be a
likely trigger? There are many, but what if the big investment banks decide the
time is right to remove themselves from their concentrated selling position? If
they publicly announce the departure of the so-called market maker - removing
themselves as a way de-risking or future damage control?
Or, they decide to rig the market in their
favor. And they let silver ride up close to its inflation adjusted - its
monetary adjusted high.
There is plenty of room to run. Plenty of
justification in retrospect. Plenty of reasons waiting to be paraded.
What is the incentive for keeping the cost of
silver artificially low?
1. Profit. If you owned the majority of shares
in any company.
That position - which is illegal of course -
would enable you to move the price in any direction you wanted.
The majority 'share holders' of COMEX silver
futures dictate the direction of prices by using their large position to
influence the behavior (positioning) of technical trading managed money funds.
They induce selling, and buy back or cover
short positions at a profit.
2. Silver has both commodity and investment
demand. Investment demand is less predictable and too close to 'monetary' demand
to 'let it' trade freely or have it reflect actual physical supply and demand.
And so much fuss. Silver is a tiny
market. Wall Street could dictate the perception of the rise in price the entire
Public participation is unnecessary. In fact,
if and when the price begins its return to reality, the public will face a ‘no
What happens when the price goes no bid?
As you know, paper markets for gold and silver
(which currently determine price) are massively leveraged.
The estimates of the amount of paper against
the available physical inventory range from 40 to more than 100x's.
If a tiny percentage of futures traders
"stood" for delivery - then the market would stop as actual deliveries could not
be made. This creates a "no-bid" price environment, where the physical price
Ultimately, this is a paper derivative system
for the banks and by the banks.
Any way you frame it. Every way that could be
imagined — this is baked in the cake.
Consider the obviously bullish macro issues
visible - accessible to all. Add to that the years and years of price control.
Remember the big short, and there you have the
‘coiled spring’ — the beach ball held under water.
Can they keep this up forever? Can they
smother the price indefinitely?
Of course not.
It's a long term play (of course it's a
fragile set up) - accidents happen - so there is always the fear of missing out
on what was clearly articulated and understood.
For more articles like this, including thoughtful precious metals analysis
beyond the mainstream propaganda and basically everything you need to know about
silver, short of outlandish fiat price predictions, check out http://www.silver-coin-investor.com