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Price of Silver Climbing to All Time High of US $1,012

There are signs of stupidity and panicky desperation everywhere, such as the Dow Jones Industrial Average index going up last week when earnings fell to $132.14 from $146.15! Earnings went down, but the shares went up because there were more buyers than sellers! Hahaha!

If you think that the fall in earnings to $132.14 from $146.15 is a lot, then congratulations! You are right! It is a huge loss of 9.6%!

So, earnings fell almost ten-freaking-percent, yet the underlying stocks went up? Hahaha!

I know what you are thinking, as I am thinking the same thing; we can use this to show our supervisors that we are valuable employees because in producing losses, we make the company more valuable! Therefore, we deserve a raise! A big raise, instead of being placed on Probationary Status!

And we, as valuable employees, are sick of having to park on the other side of the parking lot, and want nice spots right up front, too!

Deep down, you know this is not going to work, but stocks astonishingly rising after they start making less money is a fact. And so faced with such a paradox, you look around to see if you are in a bar somewhere, which would explain why you are so drunk out of your mind that you have misunderstood something important. But you are not, and immediately you then think, “I have had another medication error, or a stroke or something, because nothing makes sense anymore! Stocks are going up when their earnings fall!”

In case you are not impressed with a 10% fall in earnings, maybe you will be impressed that as a result of earnings falling and prices going up, the price-to-earnings ratio is now a stunning 87, when the long- term average P/E for stocks is about 12, and where stocks usually top out at a P/E of about 21! Hahahaha! Who are these idiots buying these stocks?

Of course, a little of this buying had to do with some panicked short- covering as lots of guys looked around and saw that the government’s frantic search for a scapegoat for our economic troubles are, with some justification, looking at the flagrant abuses in short sales, and being short could mean A Bad Day at Black Rock.

Perhaps as a result of all of this corruption and stupidity, I never seem to tire of thinking about the price of silver, and thinking about ways to get some more silver, and how I don’t have any money to buy any silver unless I cut back on the food that I feed the kids (I can’t eat that cheap, nasty crap myself; it makes me sick. But it’s obviously okay for them! I mean, they’re still alive, right?), or get them jobs in some illegal sweatshop by making them pose as illegal immigrants willing to work for less than minimum wage. Or both!

But the wife says “no” to that fabulous plan, and to many MORE other Mogambo Good Ideas (MGI), too. And that kind of constant negativity is why I would love to just get the hell away from all of them and their ceaseless, selfish, suffocating demands, like, “Please come to my birthday party, daddy!” and, “Just tell us that you love us, daddy!” Ha! All I need is some silver, so when it finally explodes to the upside, it’s “Sayonara, chumps!”

And while I don’t know when that will happen, I do have an idea how high the price of silver will go. The historical high for silver was set 531 years ago in 1477, topping at (using the purchasing power of 1998 dollars) a princely $806 an ounce. By comparison, the price of silver less than $19 an ounce today, and was only about $5 an ounce in 1998, after having bottomed at under $4 an ounce in 1992.

Now, fast-forward to today as our 2008 dollars, which have fallen 50% in purchasing power since 1998, means that the all-time high price of silver, set in 1477, now stands at $1,012 an ounce, measured in the buying power of 2008 dollars! Over a thousand dollars an ounce! For silver! Whee!

In case you ain’t noticed, we’re unmistakably coming off the lows of a 530-year bear market in silver and, theoretically, entering a long bull market, which ought to be exciting to people who have a lot riding on silver gaining so much in price (me), or even just keep up with this kind of thing, like, for instance, Israel Friedman, writing at InvestmentRarities.com, who notes that there are 5 billion ounces of gold sitting around someplace in the world, but that there are only 2.5 billion ounces of silver, even though 5 times as much silver is mined every year than gold.

Therefore, silver is being consumed at prodigious rates, which is why Mr. Friedman says, “Silver is needed to maintain and improve future standards of living. Gold is needed for luxury and emotional reasons. Silver is for the optimist, gold for the pessimist.”

In that optimistic vein, Mr. Friedman says, “I honestly believe that silver must eventually sell for five to ten times what the price of gold may be.”

And that is just the kind of profit that I need! Whee!

The Mogambo Guru
for The Daily Reckoning Australia

13 Comments

  1. it seems the world is going for a shit in a handbasket thou we are bieng told china is goingto bail us all out do you believe china to be that dumb passing by a chance to take over bayling out the usaand giving power back to the mighty dollarbut maybe black has become white and 1+1=3 and normal old fashion thinking has been replaced by new hi tec but whatdo i know

  2. JOHNNY O says:

    I LOVE THE MOGAMBO GURU!
    JUST KEEP ON KEEPIN’ ON AND
    HEAP ALL THE DISRESPECT YOU
    CAN ON ALL THEM SORRY BASTARDS.

    SERIOUSLY,

    JOHNNY O

  3. Curt says:

    Sound good to me. Maybe I can just sell my kids for some Silver.

  4. charles says:

    Take a little care, one of the markets for silver has recently dried up, silver nitrate was used for film, my guess is you took your last photo with a digital camera. Further back in 1477 there still people who believed money should be backed by the supply and demand curve of a precious metal, another market that has gone. You seem to have some writers here that believe in that rather quaint idea, but I don’t think it is going to get up.

  5. Budvar says:

    Charles said..Take a little care, one of the markets for silver has recently dried up, silver nitrate was used for film.

    It’s actually silver halide used in film, and I can assure you that the largest users of silver halide film, Hollywood, hospitals (x-rays) and high end professional photography don’t use digital images, and neither do all the up and coming BRIC nations for family snaps.

    There was a lot of silver used in the production of film, but there was an awful lot of silver recovered in the processing of film too.

  6. Ashley Delavane says:

    Actually about 70% of Hospitals in the USA are now TOTALLY digital. I know because I manage one of the largest companies that helps to recover silver from film and sub-contract for Kodak. Moreover Europe is going through the same process and is about 50% digital. Agreed that Africa,India and the emerging nations still heavily use silver halide- however modern film contains about 60% less silver compared to 10 years ago. This is a practical response to higher silver prices and higher fuel prices since oil is the other major component in manufacturing the polyester base for film. Furthermore-hospitals are much larger users than Hollywood ever has been in modern times. As the price of silver has increased from the standard $5 US for so many years- then more and more silver mines have found it profitable to re-open- some of the effects will be seen soon. not that it is cut and dry mind you- the emerging nations are increasing their silver consumption due to having a higher standard of living. Speculation also has a major effect on Silver prices especially when currency is low and oil is high of course-but how much is speculation and how much supply and demand when considering silver price? Difficult to say right now. My sincere belief is that despite dipping 25% in the last month-silver is generally on an upward trend and when looking at the longer view-5 or more years in the future- it will always be a minimum of 20% higher than it would have been 5 years previous. Good options to leave for our grandkids!!!

  7. Benno says:

    As silver is the best conductor of electricity, there is no chance of the price dropping to a dangerous low. also, the amount of silver that is above ground has dropped by over 500% in under 100 years… it’s a sound investment

  8. Jim says:

    The amount has “dropped by 500%” ?? I’m no maths professor, but how is that calculated ?

  9. David says:

    Another advantage, if the Aussie $ should happen to drop as it has before, all of us with Physical Silver will see the price rise. The AU$ has kept it cheap for us to buy. $700 a Kilo March 2009, $680 April 2010.

    Considering how much rock has to be crushed, fuel / refining etc, $19 to $20 per Oz from the dealer is still Cheap, I WANT MORE.

  10. Thomas Seifert says:

    The interesting point here is the theoretical all time high of 1477 at 1012 $. Thank you for this idea. I’ve done a similar estimate of the “true” value of silver based on money supply and existing reserves of gold and silver. I arrived at a minimum value of 8400 $ per troy ounce of gold and 550 $ for silver. The maximum was 61000 $ for gold and 4000 $ for silver. Huge gap here since nobody really knows how big global money supply really is, but both values (min/max) are substantially above current spot prices. One might think, with a conservative leverage to ride out manipulation dips, one should be able to make a nice cut of the cake.

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