The Ag Bubble Pop and the Au/Ag Ratio

[Lemon Thrower]

here is a report which has some data.

http://www.scribd.com/doc/124925838

as for this time is different, it sort of depends on your perspective. Nassim Taleb gives a good story in his book, Fooled by Randomness. Picture a farmer who feeds a turkey every monring for 3 years, and weighs him each evening. If you plot the turykey's weight over time, there would be an almost perfect linear relationship. If you are the turkey, and you take this perspective, you will be very happy to see the farmer right up until Thanksgiving morning when he chops your head off. The point is the time frame of your sample is not sufficiently broad.

if you look at the GSR and only look back to a starting point after the US demonetized silver in 1871, you will come away with an impression that a 'normal' GSR is one thing, whereas if you look back to earlier periods you will have a very different view. Which is corret? I don't know, i dont' have a crystal ball. But if you think that the only relevant data is data from the government paper era, then you might as well go long the stock market and forget pm's. On the other hand, silver was actually used as money for most of the pre-1871 data, so to some extent those 4 milennia of data are distinguishable. But i do think the GSR is compressing, and will continue to do so over the next 5-10 years.

Another way to think about this is that after the U.S. civil war, which was won by the north with greenbacks, fiat paper money began to ascend across the world. At the same time, gold and silver gradually stopped being used as money. Recently, sometime since 2000, the trend has reversed. Its a trickle right now. i'm not saying that the gov is going to replace clad quarters with silver ones. but people have begun to look at pms as money again. central banks are buying. so this is what makes me believe that that GSR will compress. In fact, less than 2 years ago it broke long term support at 38, and reached about 32.

[img]http://goldprice.org/charts/history/gold_5_year_silver.png[\img]

Ray, I view silver as money, just like gold. The world views silver as slightly less good than gold. But the demand for silver at current prices is outstripping demand. ASE sales now consume 100% of domestic mine production. as prices of both gold and silver rise, people are going to buy silver dollars and eagles when they can't afford gold eagles. Right now, the mint sells about an equal amount in dollar terms of gold and silver. When gold is $5,000 an oz, they will be selling much less of it. You also have Carlos Salinas Price lobbying for the remonetization of silver in Mexico.

let me say it differently if you don't like thinking of it in terms of substitution. I understand that is hard to see because few central banks hold silver.

what is happening is central banks and private citizens went from disinvesting pms to investing in pms. Primarily this has been in gold, but increasingly in silver. the more gold is seen as money, the more people will view silver as money. I don't subscribe to the full Butler theory that silver will reach parity with gold. its more a derivative of gold. But everytime a hedge fund buys real gold, they are saying FRNs are not money. and the more that this idea gains currency, the more that silver is viewed as superior to FRNs.

in other words, the GSR has fallen to 50, and yet almost no hedge funds are buying and taking delivery of silver, while a few are buying and taking delievery of gold. soon they will be buying and taking deliver of silver, and that is when the GSR will really compress. Unlike Butler, I think the long term target is 16, and it may overshoot it a bit. That said, i'm taking my chips off well before that.

[neilgin1]

..and you might think i'm huffing solvents,

This is funny. Thought I was going to bust a vessel when I read it. Heck, I'm still smiling.

but i see silver at 500 an ounce....

Be rest assured, I'm not laughing at this. Keep talking neil, many of us are listening intently and find value in your words.

(they need to invent a "bow of respect" smiley face)

My dear brother John,
i read your kind words, at a time, right now, this second, when i'm doing some real soul searching, and what you wrote, just HIT me.

Your kind words, i recieve in abase humility, as i hardly deserve them. That is not fake humility, as i am all too aware of my many shortcomings. i have failed my calling in life...i took the easy path. again, i dont wish to derail, but this forum is a place where i feel i can speak freely, with brothers, so let me unburden my sorrow.

i always have been a patriotic American, and would happily give my life for a country my kin, were able to build a new life in, having been persecuted , as Jews , in czarist russia. Even as a child, i knew one day i would return to the Land of my forefathers, and my Faith, to be one of the few, a defender, a leader. Thats not turning my back on this Land, America i love, but to help rebuild and protect a Jewish State...it was a Call to me from age 7, and i never fulfilled it, much to my shame. i dont say this arrogantly, but i was always a leader in everything i did....not to "boss" people around, but to take the first bullet if need be, to speak truth when truth hurt, to have a code and hold on to it, no matter the price......to embrace fidelity, honor, sacrifice, in a leadership role, not seeking wealth nor power, and i failed...instead of immediately flying to Israel at age 21, after completing my US naval service, i just HAD to spent a summer chasing my younger sisters girl friends around the beach.....and then, take the easy course, the fun course, and ignore my call.

i just got done reading a biography of Golda Meir, who was one of my heroes...and this has been gnawing at me, you're kind words, just underlines my feeling of having failed, because i do believe one person can make a difference, but i will never know.

t realize many of my brothers who are not Jews, might think me overwrought and just plain silly.....but that call that beckons to Israel is a powerful one...forgive me if this all seems strange and out of place, but i have to be real in recognizing my failure to seize the giftings God gives, and to serve. Would it be me instead of Bibi?...we'll never know...so instead i sit on a ranch in he Upper Midwest, limp and impotent....you honor me too much, though your words are well meant. There is nothing so sad, as talent and gifts squandered. God bless you John and all you dear people on this wonderful forum. My prayer is , that you and your families weather the coming storm in peace and protection of God, neil (natan)

[OtusLotus]

Thank you Lemon Thrower for that explanation... it was truly factual and insightful.

There is that thought that you should be careful what you wish for!

I always imagine what would happen IF silver were to go to $100 or gold to $5000.. it is either going to be because there is none left in the ground or the US has totally crapped out and China is ruling the world!

There is always the thought that if silver goes up in a logical and consistent way, then it CAN increase. What I DON'T want to see is the price of silver going from $30ish to $50ish overnight! The last time it did that, didn't the CME & COMEX raise their margin requirements and silver plummetted right back down to earth?

[knibloe]

I just wish it would hurry up!) Ten years ago, Ted Butler had me convinced silver would go to $500 an ounce. Now I just wish it would hurry up and hit $50!!!

Amen!

[Lemon Thrower]

Thank you Lemon Thrower for that explanation... it was truly factual and insightful.

There is that thought that you should be careful what you wish for!

I always imagine what would happen IF silver were to go to $100 or gold to $5000.. it is either going to be because there is none left in the ground or the US has totally crapped out and China is ruling the world!

There is always the thought that if silver goes up in a logical and consistent way, then it CAN increase. What I DON'T want to see is the price of silver going from $30ish to $50ish overnight! The last time it did that, didn't the CME & COMEX raise their margin requirements and silver plummetted right back down to earth?

when silver hit 50 2 years ago after a rapid acceleration i was more scared than pleased.

there is nothing magical about 50 or 200. it will get there when folks understand that FRNs are not money but money substitutes. at that point we will have a different set of problems, namely inflation and the prospect of hyperinflation.

[beauanderos]

it is possible that we could experience $50 or $200 silver on its own merits alone, if true price discovery was ever permitted... although it is more likely that it might be accompanied by some degree or another by hyperinflation. Sure wish we could (someday) enjoy some wealth without it all being needed just to buy gas and groceries

[neilgin1]

it is possible that we could experience $50 or $200 silver on its own merits alone, if true price discovery was ever permitted... although it is more likely that it might be accompanied by some degree or another by hyperinflation. Sure wish we could (someday) enjoy some wealth without it all being needed just to buy gas and groceries

yeh, i hear ya......you know what i'd want?...here, i'll show you, and then you tell me what you'd want in the way of a luxury item.

me?........a C-47 (DC-3) Montego Bay, here i come, mon! thats all i'd want....shoot, i'd just bunk in that bad boy.

[beauanderos]

that is pretty nice. me? I wouldn't mind owning one of those converted missile silo homes on a nice big isolated (protected) patch of land

[Thogey]

that is pretty nice. me? I wouldn't mind owning one of those converted missile silo homes on a nice big isolated (protected) patch of land

I spent 234 days in one of those homes (only the missles were still attached), and still have nightmares about it