Silver has come from highs of $8.40 down to $5.53 (as quoted by my CFD provider). Thats a huge percentage fall compared to Gold. I'm not fully in touch with these markets but I'm almost tempted to buy Silver now.
But then on the other hand, I'm pretty confident this fall is related to the reversal of 'carry trades', and my intuition is telling me that there is a whole lot more unwinding to come. For those who don't what the 'carry trade' entail - it is the borring of money at short term rates (which are historically lowest right now) and investing in longer dated, higher yielding investments - which has included, during this time of unsurpassed liquidity, commoditities and financial shares (especially REITS) and currencuies (especially high yielding GBP, and commoditity backed AUD).
In the US, short term borirowing can finance your investing around the 1.5-2% mark. Consider REIT's yielding 5-7% a few weeks ago and commodities soring, you can image hedge funds and anybody else knocking themselves out to employ leverage in such an environment. And those inflated leverage levels are going to decrease as rates rise thereby diminishing the returns of the carry trade. We saw the beginning of it following announcement of that 308k Jobs Report - REITs went through the floor by 5-9% on average over the following 5 trading days.
My feeling is that the path of least resistance is down for equity markets right now. News is about as good as it gets I suspect in terms of earnings, and over the last month or 2 we've experienced a contraction in PE ratios, evidenced by tghe fact prices have'nt moved despite earning growing rapuidly. The market has not responded to good news, and this is because, I believe, investors are looking forward and are not particularly inspired.
Anyone want to help me with Silver - buy, sell, hold
But then on the other hand, I'm pretty confident this fall is related to the reversal of 'carry trades', and my intuition is telling me that there is a whole lot more unwinding to come. For those who don't what the 'carry trade' entail - it is the borring of money at short term rates (which are historically lowest right now) and investing in longer dated, higher yielding investments - which has included, during this time of unsurpassed liquidity, commoditities and financial shares (especially REITS) and currencuies (especially high yielding GBP, and commoditity backed AUD).
In the US, short term borirowing can finance your investing around the 1.5-2% mark. Consider REIT's yielding 5-7% a few weeks ago and commodities soring, you can image hedge funds and anybody else knocking themselves out to employ leverage in such an environment. And those inflated leverage levels are going to decrease as rates rise thereby diminishing the returns of the carry trade. We saw the beginning of it following announcement of that 308k Jobs Report - REITs went through the floor by 5-9% on average over the following 5 trading days.
My feeling is that the path of least resistance is down for equity markets right now. News is about as good as it gets I suspect in terms of earnings, and over the last month or 2 we've experienced a contraction in PE ratios, evidenced by tghe fact prices have'nt moved despite earning growing rapuidly. The market has not responded to good news, and this is because, I believe, investors are looking forward and are not particularly inspired.
Anyone want to help me with Silver - buy, sell, hold
