Stop Complaining About Silver Moving Higher!

Learn to Hedge Like a Pro Instead!

Tue, Apr 26, 2011 - 12:36pm

I am tired of reading all of these, “Is Silver in a bubble?” stories!

The majority of the people writing these articles do not understand how close to End Game the US Dollar is, how Silver is being re-monetized, Silver’s real supply/demand fundamentals, etc.

If they do understand the REAL Silver story, then they are letting their emotions get the best of them by selling out of their positions now right before another major move higher could take place in the not too distant future.

The fact of the matter is that Silver prices are finally catching up to the massive growth in base money supply that has been created for well over a decade. Notice how the Austrian School Total Money Supply figures (TMS) chart here has gone vertical (light grey shading on the top graph).

Silver prices have basically tripled from the mid teens since they rebounded after their massive 2008 crash and are finally starting to track more closely the increases in the base money figures like M1 and M2 and the Austrian TMS which I featured above in the stats and graph above.

If one were to compare the long term Silver chart or SLV chart over the last few years to the charts of M1 and M2 base money supply growth or the Austrian School TMS money supply figures, they are now starting to look very similar in pattern.

Basically all of those charts have gone vertical.

Silver and Gold are supposed to track base money supply growth as barometers of inflation and the health of paper, fiat currencies.

Silver is now (finally!) doing exactly what it is supposed to be doing.

In my humble opinion, the price action in Silver is the market finally starting to revalue and re-monetize Silver as money.

I believe this is the beginning of (another) big move in Silver many of us have been waiting for. We are conclusively in Phase II of Silver’s bull market and over the next few years I think we are going a lot higher in price to somewhere in the triple digits after we take out Silver’s last remaining past psychological, overhead resistance hurdle.

Silver is going to take out its old, nominal, and non inflation adjusted Hunt Bros high of /oz and it will move higher from there some time in the near future.

Will there be corrections along the way? Yes.

Will there be higher volatility along the way? Most likely.

But, that doesn’t mean people should sell all of their physical Silver and silver mining stock positions now to wait to buy back after a large correction.

I think there’s a smarter way to handle things.

The smarter way, and the one many pro investors and traders should be using, is to not try to time the market perfectly and move in and out of the market and risk missing “the move.”

I saw quite a number of Silver investors give up around the -30 levels and sell out and now even more are debating selling out completely at these price levels despite the fact that on a valuation basis, many Silver miners are not even pricing in /oz Silver yet.

Why would self proclaimed Silverbugs bail out so early? Isn’t this the move everyone has been waiting years for?

Instead, people need to calm down their emotions, think rationally again and educate themselves and become familiar with options.

They were designed for the exact purpose of protecting investors and traders against volatility as well as for hedging strategies.

Most specifically, they need to learn how to use puts as insurance as part of a hedging strategy.

The best time to buy insurance is when it is cheap and when you don’t really need it. You buy insurance and hope you don’t have to ever have to use it. No one else thinks they need it as the Silver price is still rising, but that’s the exact right time to be buying the insurance as that’s when it should be cheapest.

Well that’s what buying put protection or insurance puts allow precious metals investors to do and still maintain their long positions in their mining shares.


That’s the rational way to do things as an investor or trader.

But, everyone gives in to their emotions of greed and fear no matter how well they train themselves to think otherwise.

Hedging with options, if you educate yourself or get education from someone who is a good teacher and learn to know what you are doing, can help protect yourself from yourself.

People should look at married puts, puts on some of the larger Silver companies if they are buying individual stocks or consider buying out of the money puts on indexes like the GDX, GDXJ, SIL, or even the SLV rather than selling lots of their long positions.

I don’t want to miss the move higher because I think if we take out $50/oz convincingly, we could move to $66/oz rather quickly (it’s one 32% Fibonacci move up from $50).

It is too difficult to try and time the market perfectly and much smarter to hedge, especially if you have the knowledge and capital to do so.

About the Author

Private Investor, Co-Founder of Wall St for Main St, LLC
wallstformainst [at] gmail [dot] com ()