Sunday, October 23, 2011

Q&A With The Doc: I Bought Silver Near $42- What Now-Where Does Silver Go from Here?

Vikas writes:
Hello! I have been follower of yours for some time and I have seen all your updates . I have bought silver at $42, and that also in bulk . I have been waiting to know when I can see that price again and what should I do now.
Thank you.

$42 silver will be seen again, probably as soon as QE3 is officially announced.  If you have been paying attention to this week's FedSpeak, clearly the Fed members are beginning to verbally prepare the way for QE3.  This week we also saw the Fed shift $75 TRILLION of Bank of America's worthless derivatives from its Merrill investment banking unit to its depository arm- meaning $75 Trillion in worthless derivatives are now backstopped by US taxpayers courtesy of the FDIC.  Reports have indicated that JP Morgan has done the same with $79 Trillion of their own worthless derivatives. When BOA and or JPM go down, can you even imagine what a $75 Trillion derivative bailout would do to the fiat price of gold and silver?
The problems in Europe are even more immediate.  There is a real risk that Europe could collapse as soon as next week if the ECB cannot reach an agreement on further massive bailouts.  Either Europe will reach an 11th hour compromise (massive additional QE) or else the entire fiat system will undergo a domino like collapse triggered by a hard Greek default.
Massive additional QE is coming, and when it does, gold and silver will reflect the debasement of fiat currencies.
We also personally bought physical silver in the $40 area after a 20% correction from $50, but are not concerned at all over the purchase or the fact that silver fell further.  We view the continued price weakness as a discount/gift and have purchased even more silver INTO PRICE WEAKNESS at $36, $32, and $28.
Long term, the trend is your friend, and will rescue you from bad timing- provided you hold onto your positions. (I am assuming you bought physical silver).  Those who purchased silver near the $21 high in early 2008 saw silver collapse down to $8, but 3 years later their $21 purchase looks like a bargain.  We expect a silver purchased near $42 (or even a purchase at the high of $50) to look the same several years down the road.
The biggest thing to realize is that NOTHING HAS CHANGED since silver was $50 in early May. 
The $1,250 TRILLION in worthless derivatives have not disappeared, they have grown.
The Federal budget has not been balanced, it remains nearly a $1.5 Trillion ANNUAL deficit, with total official debt scheduled to pass 100% of GDP next Monday on 10/31 (Samhain/ Holoween- the Illuminati/ Occult's highest holy day- rather fitting!)
The systemic problems with the Euro have not suddenly resolved- rather they are quickly coming to a head.
No one has suddenly figured out to print silver, or turn sh*t into silver (or gold).  The point is, silver's supply and demand fundamentals have only improved since silver was trading at $50 in early May.  Demand is massively up, with no significant increase in supply.
Silver's weekly MACD has just bottomed at its lowest point since 1995, and the latest COT report indicates that the commercial net short position is now lower than the 2008 panic low of $8, which is INCREDIBLY BULLISH!
Combine all these things with the fact that there appears to be a strong possibility that the CFTC will actually enforce position limits in The Morgue's naked short position on Jan 1st 2012, meaning the 15 year short manipulation in silver may soon be ending.  Silver would continue to increase even with massive short manipulation (which has been well over 200 million ounces at its peaks), but remove the cartel's manipulative interest in silver, and the price moves in silver will light your hair on fire as the free market rockets silver towards true supply/demand equilibrium price.
To succeed in investing (or anything in life), one must have patience.  Since 1999, there have been several multi-year corrections where silver did not feel like it was still in a bull market, or would soon break to new highs.  Only those with conviction and patience benefited and held silver during and through the corrections and consolidations to see the massive gains achieved on its parabolic moves.
The hardest thing in investing is to Be Right, and Sit Tight.  Many are right, but few have the stomach, patience, conviction, and willpower to SIT TIGHT.
Those who are Right, and are also able to SIT TIGHT will be among the few richly rewarded by the end of this massive secular bull market in gold and silver.