Avery Goodman

Silver Prices Are About to Fall

Silver is likely to go up in price over the very long term. I have very clearly stated, many times, in this article and others, that silver is an excellent very long term investment. It is better to buy it when it is cheaper, however, rather than when it is more expensive.

As a long term silver investor, you will need to grit your teeth as it gets periodically clobbered. The reason for the volatility is a topic for a book, or, at minimum, an article, because historically silver and gold are the most stable commodities. Not anymore. Without a long explanation of why, we can simply say that lack of effective regulation of the futures markets casino clearly has something to do with it.

Decent men do what they can to make the world a fairer place. But, practical men will also deal with the world as it is. Practical men will not engage in swordfights against windmills. It is not always pleasant to deal with reality.

One reality that an author on seekingalpha must deal with is the requirement of disclosing long or short positioning, I DO NOT endorse the idea of people taking short positions in silver. Generally, that should be left to people who have the knowledge to do it without putting themselves at risk. One can be both hedge existing silver investments, or become overtly short silver in many ways, including buying puts.

The essence of this article is simply an explanation of why I reversed my opinion, temporarily, on a bullish speculative trade suggested in an article I wrote in early March. Nothing more.

Silver Prices Are About to Fall

This piece was intended as presenting some thoughts on a speculative trade. It was never intended as a primer on investing strategy. A very limited part of anyone's portfolio, in relation to overall wealth, can be devoted to speculative trades. The risk of being wiped out is too high to devote a large part of your portfolio to this type of activity. Remember, your family must eat, regardless of whether you win or lose in the market.

A long term "core" position is very different. Long term, you may choose to hold stocks, bonds, metals, and so on. You've determined that the long term positions are worth sticking to for a very long time, regardless of whether they move up and down a bit, while you are holding them. Income can be generated from long term holdings in the form of dividends, and/or by selling covered calls at appropriate times.

In contrast, speculative trades are short-term ones that have a reasonable likelihood of resulting in a spectacular gain. You take a big chance, and are willing to lose the value of the entire investment in exchange for the prospect of a big gain. You should not bet any more money than you can afford to lose on speculative trades.

Acting on the opinion that silver was going to soar, back in March, and, now, acting on the opinion that silver is about to go down substantially, are both examples of speculative trades.