About Me

Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!

Sunday, November 17, 2013

Silver

Yes, I have been guilty of calling the silver price "the great American crash dummy" from
time to time, and for those who know the history of the metal's price going back to the
latter 1800s, well then you know that the appellation has been well deserved. But, the
silver buffs are a colorful  and interesting lot and do not share the turgid sanctimony of the
gold bugs. There may be nothing interesting here immediately, but if continued efforts by
the major monetary policy chieftains to re-inflate their economies ever bear fruit, silver
could be interesting, as its ups and downs in price nicely mirror the cycle pressure gauges
I have used profitably over the years. What silver needs to get some positive interest going
is evidence of faster industrial output growth coupled with upturns in sensitive materials
prices, and rising commodities and inflation. Cooler economic activity and a decline in
the US CPI from 3.9% in Q '3 2011 down to 1.2% yr/yr recently have been killers for
the silver price. Silver Weekly Chart

I need to say straightaway my cycle pressure gauges have been quiet by and large this year
save for the purchasing manager business strength measures in recent months. The chart
link above does reveal that this pocket of strength has not gone unnoticed by the PM players.

I do have an industry pricing model for silver which I have upgraded recently to reflect
the higher costs of retrieving ores in general, and I put a price of about $18.25 per oz. as
representing a reasonable value for silver. So, at $20.77 oz. silver is hardly bloated in
price as it was when it traded near $50 in the spring of 2011.

From a technical perspective, a little caution is in order with silver. The price is still
trending down and the summer lows under $20 may still be subject to a retest. Even so,
I'll keep an eye on it. I have done no more than a handful of silver trades over the years,
but have been treated very well.




No comments: