Gold is not money (but it might be a good investment)

chucky

Housebear51 wrote: »

Because the modern world needs silver for industry.

Its far from useless the world is running out of it and it cant be replaced by any other element.

youtube.com /watch?v=XaIKgXrpf6Y&playnext_from=TL&videos=PJ-zxPjzxrg[/url]

Rich Dad says here there is less silver than gold on planet Earth right now.

"Silver is unusual, almost all of the available silver has been mined the rest is just coming as a by-product of mining other metals.

Silver is consumed in everything, its in your phone PC filters etc etc.

Silver is depleting is going down at high speed right now".

Very interesting.

so why is it much cheaper than Gold then....

Bullfighter

chucky wrote: »

so why is it much cheaper than Gold then....

Simple. Silver has a violent carry trade against it.

Banks borrow (metals leasing) Silver @ ~1% and buy a high yield assets (eg Aussie $) @ ~3% and hedge the trade at ~1% = a net 1% riskless profit. In fact it will be more like 15% profit since they are leveraged at least x15 when they borrow the silver.

Therefore the Silver price is pushed down.

When the carry trades unwind it will be spectacular.

chucky

Bullfighter wrote: »

Simple. Silver has a violent carry trade against it.

Banks borrow (metals leasing) Silver @ ~1% and buy a high yield assets (eg Aussie $) @ ~3% and hedge the trade at ~1% = a net 1% riskless profit. In fact it will be more like 15% profit since they are leveraged at least x15 when they borrow the silver.

Therefore the Silver price is pushed down.

When the carry trades unwind it will be spectacular.

what dividend does it pay until it does unwind?

Bullfighter

chucky wrote: »

what dividend does it pay until it does unwind?

Zero, of course.

I'm not a silverbull in the sense of medium term investment, neither am I making a case for au/ag to be investment vehicles.

I don't speculate.

I hold gold & silver as a hedge against catastrophe.
I hold it as I would any insurance policy.

Inflation, deflation, indeflation, or stagflation, all words used to describe the fickleness of fiat.

The ups and downs of paper don't concern me.
I will buy whatever currency is needed at the moment, be it present or future.
Existing, or not yet issued.

Every fiat currency in history has failed eventually.

Generali

Bullfighter wrote: »

Simple. Silver has a violent carry trade against it.

Banks borrow (metals leasing) Silver @ ~1% and buy a high yield assets (eg Aussie $) @ ~3% and hedge the trade at ~1% = a net 1% riskless profit. In fact it will be more like 15% profit since they are leveraged at least x15 when they borrow the silver.

Therefore the Silver price is pushed down.

When the carry trades unwind it will be spectacular.

It's not riskless, far from it. It's not possible to short any asset, buy another, perfectly hedge and still make profit. The perfect hedge needs to take the other side of the bet you're making so you have the spread plus transaction fees going against you. At certain points in time there are arbitrage opportunities but these are traded away very quickly these days as there are hundreds of billions of dollars chasing them.

Plus you can never eliminate counterparty risk (the risk that the person you're trading against goes bust) or operational risk (the risk that your operations people screw up).

StevieJ

Generali wrote: »

It's not riskless, far from it. It's not possible to short any asset, buy another, perfectly hedge and still make profit. The perfect hedge needs to take the other side of the bet you're making so you have the spread plus transaction fees going against you. At certain points in time there are arbitrage opportunities but these are traded away very quickly these days as there are hundreds of billions of dollars chasing them.

Plus you can never eliminate counterparty risk (the risk that the person you're trading against goes bust) or operational risk (the risk that your operations people screw up).

The oil price contango was a good example of that, which lasted a good while (over a year?) for those that could take advantage.

Generali

StevieJ wrote: »

The oil price contango was a good example of that, which lasted a good while (over a year?) for those that could take advantage.

For those that don't know, a contango is when you can buy and hold an asset today and make a profit by doing that and selling the same asset for forward delivery. In this instance it would mean buying oil today for delivery in a couple of days and selling the same oil at the same time for delivery in 3 months time and being able to make a profit, even when taking into account the costs involved.

The difference between arbitrage and contango is time. Arbitrage means you can make a profit by buying and selling an asset at the same time in different markets. Contango has a time factor.

Presumably the reason that trade was available for so long was due to limited storage facilities for oil.

StevieJ

I think Singapore harbour was chocked up with storage vessels for quite a while, I should imagine that those oil traders made some tidy bonuses for little risk in 2009.

Harry_Powell

Bullfighter wrote: »

I'm not a silverbull in the sense of medium term investment, neither am I making a case for au/ag to be investment vehicles.

I don't speculate.

I hold gold & silver as a hedge against catastrophe.
I hold it as I would any insurance policy.

Do you invest in bonds, shares, funds, property, etc?

Generali

StevieJ wrote: »

I think Singapore harbour was chocked up with storage vessels for quite a while, I should imagine that those oil traders made some tidy bonuses for little risk in 2009.

Oh yes. Arbitrage and its family rock - they oil the wheels of the economy by making markets price better and it's a great way to make a profit.

I've spotted an eBay-scale arbitrage opportunity over here. Bwaa ha-haha-haaaaaa.