# Silver Dropping!!



## Domeguy

FWIW, Silver has dropped to $31 on ounce!! That's way down from a high of almost $50 about May and 40 just a few days ago.


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## BillS

Gold has dropped too. I expect them both to rebound. I wish I had the money to buy more.


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## Immolatus

Yeah I saw this, I'll buy some more silver this week, I want to see what happens.


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## tac803

Don't panic, and don't think that silver is a bad investment. When the markets start to fluctuate, it's predictable that silver and gold will too. IMHO, the long term and relative short term outlook for silver is still excellent, especially if the dollar tanks.


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## Domeguy

No Panic, the lower it goes the more i can buy. Hope it drops more!


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## BillM

*The US Dollar*

The US dollar looks a little stronger due to the euro sucking wind this week.

This caused silver and gold to fall, reflecting the increased intrest in US bonds as opposed to other forign currencys

However, It is kind of like dateing the best looking girl in the home for ugly girls. They are all ugly.

We are on the brink of a world wide depression.

It will strike Europe first and is happening as we watch.


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## partdeux

Why is silver dropping? Why did it run up? I think there is some commercial manipulation going on.


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## ssbn642blue

I'd say it's time to back up the truck and fill it up.


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## The_Blob

I think China is about to unload a ton of silver they've been hoarding, it's the only strategy they have to sustain their current economic model (besides intentionally starving rural populations by 'redistributing'(the wealth?) their food)

the collusion/backroom deals between govts to prop the $$$ up until election time is going to see a very short term 'false recovery' in the USA that will pretty much be on paper only as the average citizen will still be struggling to pay the increased taxes, interest payments & utilities

look for $15-$20/oz silver in 2012 then skyrocketing again (awfully convenient timing)

I trust my gut (along with a minimum of research), & it hasn't let me down so far (that Ford stock buy is still paying off  ) ... :dunno:


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## BillS

China can help their citizens by no longer keeping the value of their currency artificially low. I think they're doing that as a form of economic warfare against the West.

I don't see how selling silver would help China. They've been reducing their holdings of currency and buying gold and silver. There's reason to believe that China wants to go to a currency backed by gold. Having a fixed trading ratio of silver to gold would help them too.


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## The_Blob

BillS said:


> China can help their citizens by no longer keeping the value of their currency artificially low. I think they're doing that as a form of economic warfare against the West.
> 
> I don't see how selling silver would help China. They've been reducing their holdings of currency and buying gold and silver. There's reason to believe that China wants to go to a currency backed by gold. Having a fixed trading ratio of silver to gold would help them too.


won't they have to 'break the world' as it were first -- to accomplish that? :dunno:


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## partdeux

The_Blob said:


> the collusion/backroom deals between govts to prop the $$$ up until election time is going to see a very short term 'false recovery' in the USA that will pretty much be on paper only as the average citizen will still be struggling to pay the increased taxes, interest payments & utilities
> 
> I trust my gut (along with a minimum of research), & it hasn't let me down so far (that Ford stock buy is still paying off  ) ... :dunno:


Long term (several months long) dead cat bounce... as long as the global economic systems doesn't implode before the fed can feed the system.
Five Banks Account For 96% Of The $250 Trillion In Outstanding US Derivative Exposure; Is Morgan Stanley Sitting On An FX Derivative Time Bomb? | ZeroHedge

I'm not sure I would continue holding on to the Ford stock


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## Onebigelf

BillM said:


> The US dollar looks a little stronger due to the euro sucking wind this week.
> 
> This caused silver and gold to fall, reflecting the increased intrest in US bonds as opposed to other forign currencys
> .


Good call. It's not that PMs are dropping, it's that the value of the dollar is rising, resulting in the dollar buying more. This isn't because of sound fiscal policy resulting in an earned strengthening of our currency, but rather because it's less scary than the alternatives. Most of the commodities dropped at the same time, which is the key to understanding that that is the correct interpretation of the market. It won't last unless there are real changes in the way our country handles it's fiscal responsibilities. We aren't going in a different direction from the European collapse, we're just a touch behind them on the timeline. When NONE of the currencies are safe, that is when you will see tremendous increases in PMs. Also, silver never did catch up to the 1/40th valuation vs gold that it should, historically, hold. Watch the next run up. Silver should lag even further, then catch up spectacularly.

John

PS. Oh, Hey! First post. Hi, guys!


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## tac803

Onebigelf said:


> Good call. It's not that PMs are dropping, it's that the value of the dollar is rising, resulting in the dollar buying more. This isn't because of sound fiscal policy resulting in an earned strengthening of our currency, but rather because it's less scary than the alternatives. Most of the commodities dropped at the same time, which is the key to understanding that that is the correct interpretation of the market. It won't last unless there are real changes in the way our country handles it's fiscal responsibilities. We aren't going in a different direction from the European collapse, we're just a touch behind them on the timeline. When NONE of the currencies are safe, that is when you will see tremendous increases in PMs. Also, silver never did catch up to the 1/40th valuation vs gold that it should, historically, hold. Watch the next run up. Silver should lag even further, then catch up spectacularly.
> 
> John
> 
> PS. Oh, Hey! First post. Hi, guys!


Welcome! You're absolutely right in your observation (IMHO), the dollar has strengthened. Unfortunately, it's only the perception of the dollar that has strengthened, not the actual dollar. As soon as the world figures out that it's essentially a fiat currency....all bets are gonna be off.


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## Immolatus

I have to agree with the guy with the pointy ears. 

PD: My degree is in econ and I barely understood half of that article. :scratch
I guess its the bottom line thats important, that these guys have tons of exposure to the risk, but hey, thats what bailouts are for!

LEts see where this goes, I cant see $15-$20 for silver, but if it does I will be buying. And it will prove my father right, that its all just a huge bubble.


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## partdeux

Immolatus said:


> PD: My degree is in econ and I barely understood half of that article. :scratch
> I guess its the bottom line thats important, that these guys have tons of exposure to the risk, but hey, thats what bailouts are for!


I recently completed my MBA, and my finance instructor was a retired Fed Reserve VP... we talked a LOT about derivatives and global macro economics. The system is essentially built on trust, and expanded by derivatives. The near collapse in '08 was a sudden loss of trust. If you understand the fractional banking system, and how the fiat banking system build upon itself and why even the slightest loss in capital asset value has such a huge impact on the fractional side of the equation. Derivative market is supposed to protect against individual failure, not entire markets or countries.


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## The_Blob

partdeux said:


> I'm not sure I would continue holding on to the Ford stock


meh, I've made so much from it, it could goto $0.01 for all I care

granted, that's NOT what I want, but if it drops again, I WILL buy again... and wait

all those people that had bought gold in 2000 who then panicked in 2003 and I bought from them told me I was a moron...


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## sailaway

I believe gold and silver are bubbles that will eventually burst. I remember when the Hunt brothers ran the price of silver up, back then it had alot more industrial uses. ie photographic chemicals & fillings for teeth. Make a little money at it if you can. Farm land has been falling around here, the goobermint is cutting out not to grow subsidies. I'm thinking about a little piece of that.


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## tac803

sailaway said:


> I believe gold and silver are bubbles that will eventually burst. I remember when the Hunt brothers ran the price of silver up, back then it had alot more industrial uses. ie photographic chemicals & fillings for teeth. Make a little money at it if you can. Farm land has been falling around here, the goobermint is cutting out not to grow subsidies. I'm thinking about a little piece of that.


Sailaway, I'd agree with you about the bubble IF the principal banks and countries around the world weren't teetering on the edge of disaster. If the Germans balk and Greece can't find funding for a bailout, all bets are off IMO. One of the reasons that gold and silver have risen exponentially is due to the weak dollar, and since the fed has been printing money non-stop for years, it's just making every dollar bill in circulation worth less. I believe that the strong showing of gold and silver is due, in part, to investors wanting to have something tangible that will retain a measure of value no matter what happens. I think that silver and gold were due for a correction, as happened earlier this week, but I don't see them bottoming out. If that happens, we're gonna have much worse things to deal with. JMHO.

Tac


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## oldvet

partdeux said:


> I recently completed my MBA, and my finance instructor was a retired Fed Reserve VP... we talked a LOT about derivatives and global macro economics. The system is essentially built on trust, and expanded by derivatives. The near collapse in '08 was a sudden loss of trust. If you understand the fractional banking system, and how the fiat banking system build upon itself and why even the slightest loss in capital asset value has such a huge impact on the fractional side of the equation. Derivative market is supposed to protect against individual failure, not entire markets or countries.


Say what? :scratch You are speaking english aren't you?

Could you explain in plain terms what you just posted so that us folks without MBA'S, SST'S, PBR'S, or PBJ'S  can ubderstand what you just posted.

Thanks from an EDA (extreem dumb a$$).

DM


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## TheAnt

tac803 said:


> Originally Posted by sailaway
> I believe gold and silver are bubbles that will eventually burst. I remember when the Hunt brothers ran the price of silver up, back then it had alot more industrial uses. ie photographic chemicals & fillings for teeth. Make a little money at it if you can. Farm land has been falling around here, the goobermint is cutting out not to grow subsidies. I'm thinking about a little piece of that.
> 
> 
> 
> Sailaway, I'd agree with you about the bubble IF the principal banks and countries around the world weren't teetering on the edge of disaster. If the Germans balk and Greece can't find funding for a bailout, all bets are off IMO. One of the reasons that gold and silver have risen exponentially is due to the weak dollar, and since the fed has been printing money non-stop for years, it's just making every dollar bill in circulation worth less. I believe that the strong showing of gold and silver is due, in part, to investors wanting to have something tangible that will retain a measure of value no matter what happens. I think that silver and gold were due for a correction, as happened earlier this week, but I don't see them bottoming out. If that happens, we're gonna have much worse things to deal with. JMHO.
> 
> Tac
Click to expand...

The ONLY way that gold and silver WONT continue to rise is if we get a new government in place that severely tightens our national financial belt. This COULD cause the trust in the dollar to strengthen overnight which would cause the dollar to rise. It also might take other severe actions like a total revamp of our tax system and entitlements.

Imagine if Herman Cain or Ron Paul got his way on everything economy related. Literally in a matter of months the dollar would skyrocket and gold and silvers value in dollars would drop like a stone. This would be good for all of us (even if we have big savings in gold/silver) because our economy would start humming again.

Now I give it about a 15% chance that things will progress in that direction. If Herman Cain or Ron Paul were actually elected as President I would still probably only give that a 50% chance of happening. Fact is as Tac put it. We are circling the drain financially and gold and silver will only rise. I expect to see 2000 an ounce before the year is out.


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## partdeux

oldvet said:


> Could you explain in plain terms what you just posted so that us folks without MBA'S, SST'S, PBR'S, or PBJ'S  can ubderstand what you just posted.
> 
> Thanks from an EDA (extreem dumb a$$).
> 
> DM


DM, you're not a dumb a$$, especially since the people that do this as a living don't understand it.

I'll use the mortgages as an example.

your local bank sells you a mortgage, and then sells the note to someone else. Than someone else packages all the mortgages they bought and puts them together in one large package. They then sell the profit from the mortgages as an investment package, and then turn around and sell the insurance on the profit of the investment package... Have I lost you yet? Considering that 99.9999% of the people dealing in this stuff don't understand it, there's little chance of the rest of us to get it.

Now, I'll try and draw an analogy. Big level 5 hurricane is coming, you sell insurance on everybody's property in the way of the hurricane, what are the odds you won't have enough money to pay everybody off... pretty good!

The derivative bet would have worked, except, all those toxic mortgages all started simultaneously imploding, and there was insufficient money to cover all the losses, and the entire monetary system was collapsing, hence the emergency money pumped into the system by Bush. Without it, TSHTH.

Now the fractional banking system...

your bank loans out 200,000, carry's the house asset at 200,000, and must maintain 20,000 in cash. Except now they can loan out the 20,000 in cash on a car, and must keep 2,000 in cash, but now have 220,000 in "book" assets. Multiply this times hundreds of thousands of loans, and all is good, right up until one homeowner refuses to pay their mortgage, suddenly the bank is not only short on cash, but now short on assets, with no place to get the cash to maintain their required cash levels. Multiply that times several hundred thousand bad loans, and now you have a serious cash shortage.

That was 2008 in a nutshell, a bit over simplified, but this really a complex issue that I barely have a cursory understand of.

Fast forward to today, suddenly you have sovereign nations, like Greece, who have been paying out more money then they have been taking in, and now the bankers (Germany) are saying no more. There are several more nations in the same predicament. The US is no better, but they are the world's currency reserve and we can print as much as our little hearts desire... or so we think.

Two other factors at play here, as these nations cut back, the people will have less and less money to spend, which further drives down the GDP and increases the issue, literally a financial death spiral. The other factor, the US govt has been directly and indirectly subsidizing govts all over the world. Now we can't afford to maintain the entire worlds standard of living, and guess what, those countries are toppling like dominoes. Scary part is going to be when it cascades right back here. I'm still forecasting after the 2012 elections, TSHTF.

One other global issue to watch very closely. Peak oil... If in fact there is such a thing as peak oil, forget it, the cost of oil will increase exponentially overnight. As it is, the cost of getting oil out of the ground is getting more and more expensive. Instead of sinking a pipe in the ground and having crude bubble up, we have to drill through miles of ocean and rock.

I'll end the book here


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## HozayBuck

oldvet said:


> Say what? :scratch You are speaking english aren't you?
> 
> Could you explain in plain terms what you just posted so that us folks without MBA'S, SST'S, PBR'S, or PBJ'S  can ubderstand what you just posted.
> 
> Thanks from an EDA (extreem dumb a$$).
> 
> DM


OldVet... hell Bud us old Vets have our own language ...FN/FAL..M1..M14..m16.. AK47 SKS... see ? wez gotz edumokatin !.. wenz aint dum.. :beercheer:


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## partdeux

HozayBuck said:


> OldVet... hell Bud us old Vets have our own language ...FN/FAL..M1..M14..m16.. AK47 SKS... see ? wez gotz edumokatin !.. wenz aint dum.. :beercheer:


and your education will serve you much better than the NY types that think they understand Derivatives...

Me, I'm trying to hedge my bets with the degrees and the 9mm


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## oldvet

partdeux:

Thank you, for once I do believe I honestly understand what is really going on with the economy. I knew we and a lot of other countries were in trouble, but I never really understood completely why. 

Those were excelent analogies and easy to understand even for old farts like me.

Thanks again for simpiflying things. :2thumb:

DM


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## oldvet

HozayBuck:

Do you mean stuff like; "most riki tik, Charlie, strac, zippo raid, puff the magic dragon, this piece of s**t rifle jammed again, get some", and last but not least (and my favorite while I was in country) "what are they gonna to do to us send us to Vietnam?". 

DM


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## partdeux

Here's an interesting tidbit I found on the web

Why the US was downgraded...

• U.S. Tax revenue: $2,170,000,000,000
• Fed budget: $3,820,000,000,000
• New debt: $ 1,650,000,000,000
• National debt: $14,271,000,000,000
• Recent budget cut: $ 38,500,000,000

Let's remove 8 zeros and pretend it's a household budget:

• Annual family income: $21,700
• Money the family spent: $38,200
• New debt on the credit card: $16,500
• Outstanding balance on the credit card: $142,710
• Total budget cuts: $385


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## BillS

It's actually much worse than that. You could also add this:

• Additional obligations for this year $530,000
• Total additional obligations $6,000,000

That's because there are unfunded liabilities for social security, medicare, medicaid and federal pensions. Those unfunded liabilities are an additional $5.3 trillion for this year alone and are thought to total $60 trillion. Unless they're $210 trillion like I've seen elsewhere.


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## partdeux

The unfunded liabilities are a HUGE problem. Think I wrote her before that the 200T+ numbers may be a bit high, most analysis I've seen falls into the 75-100T range, but whether it's 75 or 200, or even 25, we can't even take care of the 15T on book problem.


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## Immolatus

Well done PD, hurricane insurance is a perfect analogy.

This is how it was explained to me by my buddy's wife who actually works on Wall St (she worked for Lehman and was working for Bear Stearns when they went under and was being paid for weeks, forced to come to the office with literally nothing to do because when they were taken over by JPM their division had become redundant) using insurance as an analogy.
You buy fire insurance on your house. I cannot buy fire insurance on your house.
Read the bold first, then go back and add the italicized parts.
*But in this case the insurer* (_AIG specifically_) *was selling fire insurance* (_credit default swaps, or CDS's on Lehmans corporate bonds_) *on your house, and sold lots of it. When your house burnt down* (Lehman went under) *the insurer* (_AIG_) *owed* *a ton of money to all those who bought the insurance* (_which was every huge financial institution, Citi, BofA, and banks all over the world_). *When the insurer couldnt pay, the gubt stepped in to bail them out, because it wouldve meant that AIG, and all of the companies who bought the insurance wouldve been out a TON of money. AIG wouldve just folded.*
*The same basic thing happened with the mortgage stuff* (_CDO's collateralized debt obligations, which are a bundle of mortgages in some cases all rated AAA, when in reality they were total junk, made up of mortgages that were sure to fail and everyone knew it_). *When these finally went under* (_people couldnt pay their mortgages, so the value of the CDO started to plummet because it was fraudulently overvalued in the first place, which is what made the S&P downgrade of the US somewhat laughable_) *all of the holders of said CDO's* (_which was everyone all over the world, from European banks to state pension funds_) *were left holding the bag of worthless junk.*
To go a little deeper and explain how this got to be an even bigger problem than it already was:
Both sides of the trade, the insurer and the holder of the policy were all using these instruments as assets on their books (an accounting trick because it cant be an asset to both sides) and borrowing against them (using them as leverage). So not only were they holding worthless junk, they were borrowing against it as if it were a real solid asset/investment. The only actual asset was the home, but it was so far removed from this crap at this point as to be meaningless. When it (the CDO in this case) proved to be the junk that it was, everyone was completely screwed. When the homeowner stopped paying the mortgage for whatever reason, the one holding the mortgage was not only out that money, but now had an even bigger problem because they had used it as collateral on a loan. This in turn obviously hurt both them (mortgage holder) and the ones they had borrowed money from (which included the FED). Which also affected their (all parties involved) corporate earnings and share price.

Please correct me if I got any of this wrong.


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## partdeux

IMM,

that was a great and well done follow-up. I was having a tough time wrapping my head around the CDO's and assets, now I understand it.


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## Immolatus

Thanks!

I just went back to work after a two month hiatus so I'm not exactly swimming in money right now, but bought a few more ounces today.


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## The_Blob

they're recovering 240 TONS (7,680,000oz  or $230,400,000)of silver from the Gairsoppa 

after listening to economic #s for so many months that doesn't seem like such a big number anymore...


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## Immolatus

Interesting story about that wreck.
I was just discussing yesterday with my buddy about the logistical issues of transporting tons of pms across the ocean, realing to Chavez wanting his gold from London.
Wonder whats going on with that...


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