muses of the moment

April 21, 2011

Silver short-term update

Filed under: Gold and Silver Investing, Precious metals — totallygroovygirlfriday @ 11:58 am

Click here for an excellent article from Eric Sprott about the recent run up in silver and the lame predictions from most analysts for that market in 2011. Eric believes silver has much farther to go this year and thereafter.

Click here for Jesse’s take on the silver market with references and links to Harvey Organ. A must read!

Groovygirl shares Jesse’s concern, not sure what is going on in this market. But something is going on. We will need to keep an eye on it to determine how it will affect the short-term silver price moving forward.

Groovygirl is preparing for a small correction in the price of silver, but she is NOT shorting silver. She is just not buying the entire year’s worth of silver investment right now. GG holds long-term physical precious metals. She is not shorting because the fundamentals in the silver market are too serious….large short position, government and COMEX helping short position covers, lack of physical silver available for delivery, recent rumors about the COMEX.

Because of these issues, it is possible that the silver price will break high at any time in the next 3 years. Or, the government and investment banks can play games to cover their suppression of the silver price for a while longer. They can not do this forever, but we do not know the timing.

Groovygirl is currently working from a silver trading range of $24-$46 for 2011 (closing prices, not intra-day trading). We have already reached the low in January 2011, actually is was closer to $21. An gg would not be one bit surprised at a $52 price.

She is not surprised at the run up in silver, as Harvey Organ predicted that February-May would be very good for silver because of the large short positions that needed covering during this time. The COMEX was offering almost 100% cash return to roll over silver long positions instead of taking physical delivery. Why? Because the physical delivery would have BROKEN the silver market. Until all investors think they will never get their physical metal, they will take a 100% cash return on investment. Why not make some money and buy more silver? But when they lose confidence in delivery and want only the physical, that is when the gig is up.

So, could silver go higher this year? Yes. Could silver correct? Yes. GG is waiting to see what trend the silver market is telling us into June and July to make that decision. It could just hover around $40 for the rest of 2011.

If you want to purchase some silver right now to hold long-term; split the difference, buy some silver now, and wait to buy the rest in a few months.

DO NOT TRADE SILVER IN THIS ENVIRONMENT.

It is too unstable and too rigged. Rumors are flying and no real, confirmed information is available. Groovgirl is only posting her concerns about silver for those that are planning to purchase physical silver in the next 2 months to hold long-term. These suggestions are not for any other purpose.

Long term, silver is going much, much higher. So even if you buy at this very moment, you will make money on your investment during this long-term bull market in precious metals.

Update: Jesse’s conclusion the recent movement in silver and change of hands. Click here. It’s a physical delivery or seller’s change of mind. The fundamentals are still the same, over leverage in the silver market. But, as Jesse says, they can still jack with the market and spin whatever they want. So, where the short-term price might go is anyones’ guess, but the long-term price? To the moon.

GG is still planning on doing what she suggested above, buy some now, buy some later and hold long-term.

Housing Market Update

Filed under: Housing Market, Martin Armstrong — totallygroovygirlfriday @ 5:11 am

The 100-year Case Shiller chart has been updated by Steve Barry. A picture is worth a thousand words. Click here.

From this chart you can conclude that Martin Armstrong is right in his predictions regarding the US real estate market.

  1. The real estate market has ended its 52-year wave up that began in the late 1950’s.
  2. The real estate market is heading to 1950’s prices for housing (average) or below (over-correction) before we end this current wave down in real estate.
  3. When looking at the long-term housing market cycle, 1950’s prices are the average, not the low.
  4. We have much further to fall in housing prices.

Note: this chart is adjusted for inflation, but gg is unsure of which inflation rate they are using (the official one or the real one). It could be that the housing market, in real inflation-adjusted dollars, is much lower right now that this chart would lead you to believe.

Now is not the best time to purchase real estate, it will lose value.

The Danger of ETFs

Filed under: 401K and IRAs, ETF, Gold and Silver Investing, Precious metals — totallygroovygirlfriday @ 1:37 am

Click here for an article about the systemic risks of the exchange-traded fund industry to the global financial markets.

Make no mistake: the authorities are worried. The BIS report, for instance, has an unflattering comparison on its first page, noting that now ETFs seem to be serving the same function for institutional investors now as structured credit products did in 2002-2003, with dealers pushing the envelope as far as “innovation” is concerned. The Financial Stability Board was more straightforward, flagging its concerns that ETFs could pose a threat to stability in its report title.

And we all remember how well structured credit products held up in a debt crisis.

groovygirl has long issued warnings to investors: understand the exchange traded fund industry and read the prospectus.

Exchange traded funds were designed to be a short-term exposure or short of a particular index or natural resource market. They are not designed to be held long-term. Most of them close out and reissue every month, you can lose profits when that happens long-term.

Groovygirl suggests only holding exchange traded funds for gold, silver, and oil if that is the only investment vehicle available, such as with in a 401k investment where you are prohibited to hold physical gold and silver. Even in that situation, hold no more than 10-20%.

If there is a run on the precious metals exchange traded funds, you may not get your cash back in a timely manner, for the sell price you asked for, or at all. This is not as safe or as liquid an investment as physical gold and silver held in a private vault.

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