smart-money-report.com Blog

You can learn a lot from a star poker player.

There have been too many stock market bulls. Now Mark Hulbert says there are too many bond bulls.

Richard Russell on gold, silver, and the dollar. The man still has a way with words.

The often insightful and always entertaining Mogambo Guru (Richard Daughty) on silver:

– I feel it is time for me to leap atop my soapbox, and deliver yet another Stirring Mogambo Exhortation (SME) for you to buy silver, all you can, immediately, and how if you don’t, then you are an idiot, because silver is going to go so up dramatically high in price (audience shouts out “How high, Mogambo?”) that you will be able, for the first time ever, to literally buy your way into heaven! Religious scholars all agree that this is a very rare occurrence, and probably pretty blasphemous, too.

But, though I offer the promise of passage to paradise, people are yelling “Shut up, you stupid, blasphemous Mogambo creep (SBMC)! We’re sick and tired of hearing about it, and we’re sick and tired of you, too!”

Hurt and insulted, I turn the podium over to Ted Butler, writing at Jim Cook’s InvestmentRarities.com site, and then I sit down in my chair, sulking and sullen.

Anyway, I’m actually glad it worked out this way, as I learn that he has some interesting ideas on how much actual silver exists in the world. He says that the highest estimate that he has seen for world-wide existing silver bullion is one billion ounces, but that most estimates vary “in the mid hundred million-ounce range.”

Now, keeping that in mind, check this out: He goes on to write that inventories of silver have, since the end of WWII, fallen from 10 billion ounces to 1 billion. So, if WWII ended in 1945, which was 61 years ago, then this works out to 9 billion ounces of inventories of silver consumed in 61 years! Or, roughly, a billion ounces every seven years!

But no matter if existing above-ground silver is 200 million ounces or a billion, it is still a “lot less silver in existence than 30 to 60 years ago”, and Superman could easily pick it up with one hand by this time, whereas lifting the whole erstwhile hoard of 10 billion ounces of silver in 1945 would probably have made him grunt like a pig, which is, I am sure you will agree, very telling.

Now we are down to our last 7 years of excess supply of silver, even assuming the best-case scenario, and you don’t think silver is going to explode to the upside? Is there something seriously wrong with you or what?

Jim Pulpava writes:

Talk to your neighbor. Is he buying sugar futures, cashing in the family silverware, or hoarding bullion coins? I doubt it. He may own an oil stock or two, but it is doubtful he is invested in commodities in the same way he owned tech stocks in 1999. He may have mortgaged the family castle to the hilt, but I don’t believe he is day trading currencies or commodities. The only participants in this commodity bull market have been institutions like hedge funds and pension funds. Because the commodity markets are infinitesimally small in comparison to the financial markets, any influx of funds—albeit a hedge fund or pension fund—has a large impact on such a small market. Therefore by leveraging or concentrating its investment, any institution of size can have a huge impact on a commodity’s price whether sugar, copper, or natural gas. Money coming in drives prices up precipitously and conversely in the opposite direction when hot money exits a trade.

From Mark Hulbert:

The bottom line is neatly summarized by Michael Burke, editor of Investors Intelligence. Based on his reading of newsletter sentiment, he recently concluded: “The sentiment readings are now bearish. Although they don’t signal an imminent decline, the increased optimism say’s it’s a good idea to start planning an exit strategy. We are in the seasonally strong six-month and three-month periods of the year and there is no reason why stocks can’t go higher for a while, but the handwriting is on the wall.”

Steve Saville looks at the relationship between gold and long-term interest rates.

A good article on the supply/demand situation in silver.

Freeport-McMoRan (FCX) has agreed to buy rival copper producer Phelps Dodge (PD) in a $25.9 billion cash-and-stock transaction to create North America’s largest copper company.

Jason Hamlin writes that a dollar breadkdown is about to ignite the gold market.