Riding The Gravy Train

Beating the markets is fun and profitable. This is how we do it.

Thursday, March 07, 2013

Silver Update, DJIA on an Inflation-Adjusted Basis is Nowhere Near All-Time Highs


We've realized some massive gains shorting silver per this blog, and we maintain our bearish stance and long-term short position.

On August 11, 2011 we stated: "It's a great time to short silver."  The subsequent high in silver came on August 22nd, and by late September the suggested short position was over 60% higher.  We booked a 62% gain on half of it "to be prudent" and held the rest in keeping with our long-term bearish view against the opinion of all supposed experts.

Silver then rallied significantly and on February 09, 2012 we added to the silver short to bring it back to a full position.  Silver topped later that month and hasn't been higher since.  Our suggested position was 53% higher by mid-May, though unfortunately we were stopped out for a very small loss before it skyrocketed.  We did retain the original 1/2 short position for the long term, as we diarized at the time.

In mid-may of 2012 we presented this chart: Silver May 15 2012.  We wrote: "A bounce could be significant and soon.  We'll stick with our long-standing silver short position."

A massive bounce began the next day, and by September silver was nearly 50% higher. 

February of this year we offered this chart: Silver February 20, 2013

Today we post an update to show that a 4.5-year up-trend in silver is quite possibly over.  This strongly suggests that the low-$20 range will be hit, and we believe silver will go much lower thereafter.  Here's that chart:



The same persons offer e-mockery and abuse every time we write anything bearish about silver or gold. They have no proven track record, other than of being wrong, so we consider their anger a confirmation of our position. Not even one of the world's most celebrated speculators is making money via long positions in precious metals: "Paulson Gold Fund Down 18% as Metal’s Slump Foils Rebound".

Of course the bulls celebrated all across the internet when Paulson bought into gold, but now they're silent just as they ignore another widely-touted buyer selling for a loss.  As we reported here in February, "George Soros Dumps Gold As Prices Sink".  To be fair, Paulson hasn't sold for a loss.  Yet. 

Like Paulson, many are holding on and are now in the red as they bought or averaged-up at the highs. Now as gold and silver continue to drop lower the margin calls will ring out and then it'll get very ugly for those who have yet to learn that what goes up must come down, and that no amount of armchair economists, poor logic based on bogus data, or ridiculous conspiracy theories (naked shorts, GATA, et. al.) will keep the price up.

Bonus chart below, found on Fred's Intelligent Bear site.  It shows that on an inflation-adjusted basis the DJIA is nowhere near all-time highs.  We also note that the DJIA's highs are unconfirmed thus far by the S&P, NASDAQ, and most importantly in our opinion by Goldman Sachs. 





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