Eyes Wide Shut
The comments below are an edited and abridged synopsis of an article by Ted Butler
When presented with silver’s extreme undervaluation compared to its fundamentals, a reasonable person would conclude that something is wrong, but the vast majority of reasonable people are not looking, because of the deeply imbedded collective sense that current market prices can’t be that far off from where they should be.
Most eyes and minds are closed when it comes to the possibility that silver is not where it should be, but the low price is a result of ongoing manipulation by certain large traders on the COMEX, says Butler.
If any market is mispriced, as silver is to the downside, it’s only a matter of time before the mispricing must come to an end. Just as housing’s overvaluation was rectified starting in 2006, so too will silver’s undervaluation be rectified. Just as a few market participants profited from the housing bust by going against the majority who didn’t comprehend the extent of the inevitable housing collapse, a similar circumstance is likely to be experienced in silver – with a special twist.
Those who profited in the housing bust did so by dealing in complex mortgage derivatives securities way beyond the capacity of the regular investor to understand or have access to, but capturing the coming upward adjustment in silver will be as easy as falling off a log. There are many simple ways of buying silver; no need for anything complicated. A bigger plus factor and advantage would be hard to find.
Before real estate prices began falling after 2006 and derivatives bets against housing began to pay off, many holders of short derivatives bets were against the wall, struggling to maintain their short bets and having to meet increasing margin calls to hold on to the positions. Many silver investors, after years of waiting for the fundamentals to kick in and bring about higher prices, must have similar feelings as the margined holders of what turned out to be the spectacularly profitable results of those that bet on a housing collapse.
But here’s the real beauty of buying and holding silver, as opposed to betting against housing in 2006: No margin or leverage is required. Sure, there are opportunities for those going on margin and using leverage when buying silver, but that is not required by those looking to take advantage of the best investment opportunity available. In fact, Butler advises against buying silver on anything but a cash basis. Silver is going to explode in price to such an extent that leverage is not required. All that is required is open eyes and an open mind.