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People have long used tactics to convince others to do what they want. Many great charlatans have been documented, and it is clear their tricks change over time. Saying they evolve would be defeatist and untrue, as the context changes, but the fundamental game does not. As Aldous Huxley famously asserted, human civilization will voluntarily enter slavery. We get closer every day. Technology has ever so clearly evolved from serving consumers to serving those in power. With technology comes the ability to manipulate data, and people’s minds.
This is not to say investors’ brains are plugged into some complex circuit board, but their animal spirits are different from their ancestors’. Still, they are mindless animal spirits. Do you have to think to solve 5×7? Chances are your great great grandparents did. Are you smarter than them? Maybe, but there is absolutely zero correlation to the multiplication question.
Today’s charlatans primarily use technology and numbers to manipulate their marks. With regards to silver, these numbers are so simple and academic that anyone with an elementary education can understand every pseudo-mathematical or technological mantra.
*Silver has been used as money for 5,000 years, initially at a ratio near 10 to 1.
*Silver supply is 10-20x gold.
*Silver has industrial demand in excess of gold and many commodities.
*Money printer go brrrrr.
*Add your own!
Intellectual ego is the best way to explain what today’s charlatans target. Today, everyone thinks they’re smart, much like during less prosperous times everyone thinks they’re tough. To substantially own silver, you have to think that everyone else is dumb, or practicing the wrong religion. The idea that it is entitled to a certain value based on essentially prehistoric data, as this is a digital rather than industrial economy, falls flat. Silver is nothing new, it is not widely recognized as money, and it’s worth what it’s worth. As someone who has traded physical gold and silver in many thousands of transactions and closely observed hundreds of thousands more, I have market data and sentiment readings that are much more telling than marketing data from industry analysts. To silver bugs, however, market data is meaningless, and mantras are the real math and science.
As many precious metals investors know, “paper” markets are easier to manipulate than physical ones. Of course, the latter can be affected and manipulated by the former. What alleged “manipulation” in metals markets does, however, is allow investors to buy lower than they’d otherwise be able to. How is that anything but a gift, if the end game is silver to the moon? If you pulled the trigger and loaded up on paper silver around $12/oz, you bought a panic, well done. If you bought physical silver, then you participated in a buying panic and are flat, as premiums have gone from 80% to 15%. If the market is being manipulated to anyone’s advantage, it’s paper traders in short-term situations rather than buyers or sellers of physical metals. For anyone interested, here’s a great read on silver shortages.
As mantras go, the single most thought-provoking one I’ve heard in a while was coined, and is regularly touted, by food industry CEO Michael Norinsberg: Stag-deflation. He and it are brilliant. Precious metals ownership has gone up steadily since the early 2000s, while the economy has been gutted. So, too, has stock ownership as a percent of household wealth. Sitting on cash has underperformed for so long in so many ways that investors struggle not to be “fully invested.” Access to leverage for retail investors is in uncharted territory. Monetary policy may be designed to accommodate the economy as a whole, but what it has done more clearly is amplify investor sentiment and willingness to take risk.
Silver’s inability to keep up with other assets over the last decade has created an illusion of value and hope that it will “play catch up.” That is not a sound investing strategy, and this is not 1980 or 2011 (or Mesopotamia 5000 years ago).
Why am I writing bearish articles on silver after an extended Seeking Alpha hiatus? Surely to manipulate the market and assist my minuscule short position! I was a full time teacher for 10 years and have an unrelenting desire to teach. I see the same dishonest tactics and mantras used in 2011 to promote silver, but with the twist of having just bounced off a seemingly substantial low. The May-July 2008 analog looks exactly like the action in silver since March 2020, with the twist of higher inflation expectations silver coming off a 10-year low. It’s penny stock price action.
Silver is an industrial component facing demand destruction. It is not a monetary metal on a significant scale. The speculative bubble will burst, both in entitlement and in silver.
Disclosure: I am/we are short SLV. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: Long physical gold and silver.
