Riding the Silver Bull: Worry If It Gets to Triple Digits This Year

I had quite a few questions on this topic of when to sell silver this evening, based on a comment I made with the normal gold and silver charts. I indicated we could see a pullback and consolidation, and it might be 'impressive.' I was thinking of support around 40, maybe 38.

Unless there is a liquidation panic as we saw in 2008 then I do not believe it will be much more profound than that.

Someone brought this interview on this very topic to my attention, and I include it here for your knowledge.

I have a lot of respect for Jimmy Rogers. He is an intelligent man and a real gentleman. I think there is wisdom and experience in what he says.

I own gold and silver in various forms, but have no plans to sell any bullion for the foreseeable future. I may hedge a little for short term trading corrections, but not actually sell it until the fundamentals change, because there is too much 'friction' is buying and selling bullion.

And even with non-bullion holdings, there is the bigger problem that once you have sold and lost your position in a bull market, it is often very hard psychologically to buy back in. It is natural to wish your decision to sell to have been 'right,' and sometimes so badly that your emotions will tend to distort your perception of the market, causing you to make mistakes.

Too often we see people who have sold their positions early making all sorts of foolish comments and dire predictions, trying to get other people to join them and sell, because misery loves company. I will listen to anyone's reasoned opinion, but too often these fellows just talk nonsense and are nothing more than a distraction.

There might be quite a bit more upside in silver, and that $100 is a respectable longer term target if the dollar does not 'turn into confetti' as Jimmy Rogers says.

Gold and silver are heavily tied to the fate of the dollar in some ways, and I do not yet see a clear path for the US to reform its financial house yet. The dollar denominated debt is the last of the great credit bubbles, and that means the bonds and the currency itself.

And yet the dollar is not the be all and the end all, and this is the sea change that so many are missing. Even without inflation the price of gold and silver would likely increase because of the growing demand in the developing world, which demands its own stores of value.

No, the US will not default per se. But they can sure engineer a de facto default through monetary inflation, which is what they are doing now. And they will never admit it, and take all sorts of pains to disguise it, because that is the whole point of it, to gracefully extinguish the debt without a formal devaluation or crashing the system.

I also think that gold and silver are making up for lost time, for the twenty year bear market during which their price was beaten down, held artificially low through central bank shenanigans.

Most institutions and individual investor are underweight precious metals, at a time when they are probably needed the most as insurance against currency and financial default risks.

I began trading stocks, bonds, and options in the stagflation of the latter 1970's in the aftermath of the great bear market, and vividly remember what it was like, and how people viewed inflation hedges like gold and silver, collectibles, coins, income averaging your tax returns for inflation effects. And this is not it, not even close yet.

When the inflation concerns catch some wind in their sails, there is nothing like it. The bulk of the people and unsophisticated investors are convinced that deflation is either here or imminent. So Bernanke has smooth sailing for some time yet.

Here is what Jimmy Rogers has to say.

• Eventually everybody's going to own gold, and then we'll have to sell our gold, but that's a long way from now.
• If triple digit silver happens this year then we'll have a parabolic move and we'll have to sell, and all parabolic moves end badly. I hope it doesn't happen, because I own silver and want to buy more.
• My hope for silver and gold and all commodities will go up for ten years in an orderly manner.

Survey Says: The Western Financial Institution that Jim Rogers Is Shorting = JP Morgan

Earlier today Clusterstock carried a story that said that Jim Rogers Is Now Shorting A Major Western Financial Firm That Everyone Thinks Is Sound

So, Le Café Américain polled its customers all day, to find out what financial firm that you thought Jimmy Rogers was shorting.

The results are below. The actual results as they appeared in our window are on the left, with a rank ordering of the results on the right.



I have to admit a little surprise to see J. P. Morgan listed as the clear favorite.

If JPM were to fail, I think the NY Fed would have to formalize their relationship and take them over, if it can afford it. (lol). If JPM rolls over, I might be less interested in owning puts and inverse ETFs, and more interested in food, guns, gold, and a bible.

Seriously, I thought Morgan Stanley is the best pick of the better known names. If the PIIGS go under more than half their Tier 1 capital will be obliterated and they will have to be acquired by some larger bank, either Goldman or JP Morgan. What would their new name be, JP Morgan^2?

But it might be a lesser known candidate not even listed here, such as Banco Santander. Or even quixotically, the US Treasury. Who can say, except for the man himself.

Mais, les clients ont parlé.

Jimmy, feel free to email me with the actual name if you wish.

Jim Rogers On the Economy and the Obama Administration

It was interesting to see Jimmy's gloom being cast into the relatively mainstream media. BusinessWeek is like Time Magazine for those who have discovered that the money fairy does not fill their wallets each evening.

Pithy excerpts only. Clink the link for the full interview and Maria's questions.


BusinessWeek
Jim Rogers Doesn't Mince Words About the Crisis
By Maria Bartiromo

...It's pretty embarrassing for President Obama, who doesn't seem to have a clue what's going on—which would make sense from his background. And he has hired people who are part of the problem. ...These are people [Geithner and Summers] who think the only solution is to save their friends on Wall Street rather than to save 300 million Americans.

...What would I like to see happen? I'd like to see them let these people go bankrupt, let the bankrupt go bankrupt, stop bailing them out. There are plenty of banks in America that saw this coming, that kept their powder dry and have been waiting for the opportunity to go in and take over the assets of the incompetent. Likewise, many, many homeowners didn't go out and buy five homes with no income. Many homeowners have been waiting for this, and now all of a sudden the government is saying: "Well, too bad for you. We don't care if you did it right or not, we're going to bail out the 100,000 or 200,000 who did it wrong." I mean, this is outrageous economics, and it's terrible morality.

...Well, if Long-Term Capital Management had been allowed to fail, Lehman and the rest of them would've lost a huge amount of money, their capital would've been impaired, and it would've put a terrible crimp on Wall Street. It would've slowed them down for years. Instead of losing capital, losing assets, and losing incompetent people, they hired more incompetent people.

... banks and investment banks and insurance companies have been failing for hundreds of years. Yes, we would've had a terrible two years. But you're dragging out the pain. We had 10 years of the worst credit excesses in world history. You don't wipe out something like that in six months or a year by saying: "Oh, now let's wake up and start over again."

...They [Citigroup and the car companies] should be allowed to go bankrupt. Why should American taxpayers put up billions to save a few car companies? They made the mistakes! We didn't make the mistakes! I'm sure they'll give them the money, but I'm telling you, it's a mistake. It's a horrible mistake.

...They [the Wall Street Banks] all took huge, huge profits. Who was the head of Citigroup? Chuck Prince? I mean, how many hundreds of millions of dollars did Prince take out of the company? How many hundreds of millions of dollars did other Citibank execs take out of the company? Wall Street has paid something like $40 billion or $50 billion in bonuses in the past decade. Who was that guy who was the head of Merrill Lynch (MERR)?

.....Stan O'Neal. He got $150 million for leaving, even though he ruined the company. Look at the guy at Fannie Mae (FNM), Franklin Raines. He did worse accounting than Enron. Fannie Mae and Freddie Mac (FRE) alone did nothing but pure fraudulent accounting year after year, and yet that guy's walking around with millions of dollars. What the hell kind of system is this?

...We're going to have social unrest in much of the world. America won't be immune.

...Always in the past, when people have printed huge amounts of money or spent money they didn't have, it has led to higher inflation and higher prices. In my view, that's certainly going to happen again this time. Oil prices are down at the moment, but that's temporary. And you're going to see higher prices, especially of commodities, because the fundamentals of commodities are enhanced by what's happening.

... I really think agriculture is going to be the best place to be. Agriculture's been a horrible business for 30 years. For decades the money shufflers, the paper shufflers, have been the captains of the universe. That is now changing. The people who produce real things [will be on top]. You're going to see stockbrokers driving taxis. The smart ones will learn to drive tractors, because they'll be working for the farmers.

It's going to be the 29-year-old farmers who have the Lamborghinis. So you should find yourself a nice farmer and hook up with him or her, because that's where the money's going to be in the next couple of decades.