SILVER INVESTORS: Take off your Tin Foil Hats!

[Ghost of Cutten]

Quote from Larson:

Well it was a magnificent operation was it not? raising margin 5 times in 9 days........lol. Like throwing gasoline on a brush fire. Somebody made out like a bandit. It is a small market and they'll do it again.

Part of the preparation work of a trader is anticipating predictable contingencies such as exchanges raising margins after a >150% rise in the price of a commodity in tandem with rising retail speculation, and what the likely consequences will be for the market. It's not like this hasn't happened before in other commodity bull markets.

If a trader does not properly prepare, and thus misses some obvious potential implications of a familiar set of exchange behaviours, then that is their fault for being too lazy to do their homework.

One characteristic successful traders usually identify as important is the willingness to take responsibility for market outcomes - after all, the trader freely chooses to take risk, in the pursuit of profit. If you ignored a possible outcome, that's your fault, not the exchanges or the regulators'. It is clear from the widespread moaning that many people do not have the willingness to take individual responsibility for their trading results, and are thus unlikely to be very successful in their trading endeavours.

 

[Larson]

Quote from Ghost of Cutten:

Part of the preparation work of a trader is anticipating predictable contingencies such as exchanges raising margins after a >150% rise in the price of a commodity in tandem with rising retail speculation, and what the likely consequences will be for the market. It's not like this hasn't happened before in other commodity bull markets.

If a trader does not properly prepare, and thus misses some obvious potential implications of a familiar set of exchange behaviours, then that is their fault for being too lazy to do their homework.

Agree completely. I suspect even you were surprised at the magnitude and ferocity of this move, biggest drop in 30 years. Just don't underestimate the "powers that be" ability to "pile" on when they smell a "rout" coming, especially in a small market as silver. It reminds one of some of the illiquid tech stocks of the late 90's, running up to 50/60 and collapsing back to 20 in a week or less,smashing the shorts on the upside. I have seen this tape before. Clearly, those guys got bailed out, this time. I am waiting to get back in, soon.

 

[athlonmank8]

lol great thread.

Quote from Chicago_CTA:

Blackbison,
are you really serious?! I'm not interested in being an ET shot-caller. It comes with no reward, in case you haven't noticed

Unfortunately he is serious. He's so grounded outside of reality it's not even funny along with the rest of these nut balls.

They're probably still taking potassium iodide tablets.

 

[athlonmank8]

Quote from denner:

lol, the true hallmark of a cocksucker. You lose the argument (in a big bad fucking way) and then come back with your pithy little comments about once being a market maker.

Like it's a big deal.

You remind me of that giant douchebag, Landis.

Everything Hydroblunt has said is accurate. You're too busy stroking yourself to do any due diligence.

Unreal. I've come across so many threads spewed with your absurd bullshit it's not even funny.

Remember the tulip bulb craze? It's now the precious metal craze. And you wack-jobs are right in the middle of it.

Quote from peilthetraveler:

Yeah trading options...

Option #1 Work at mcdonalds

Option #2 Collect unemployment

Option #3 Collect welfare.


Basically trading those 3 options for over a decade,huh?

not everyone follows in your family's footsteps.

Quote from Hydroblunt:

Oh so you're collecting unemployment now? Congrats.

Spoken by a guys whos name is "Hydroblunt". Grow up. Get off the boards. I don't think you're old enough to play with adults yet.

 

[Syprik]

Some food for thought for those complaining about the evil margin increases:

CME SI Silver Stats

Data pulled from here: http://www.cmegroup.com/clearing/risk-management/historical-margins.html

4/30/2010 – Price $18.5, $5737 margin
12/17/2010 – Price $29.14, $10462 margin
Price Increase: 57.5%
Margin Increase: 82%

12/17/2010 – $29.14, $10462
5/2/2011 - $48, $14513
Price Increase: 64.7%
Margin Increase: 38.7%

The 8 preceding sessions to 5/2/2011 included a ~20% appreciation in price of SI. Clearinghouse/exchange collateral model has elasticity built into it so it doesn't adjust too quickly on one-off events. Over the past 10 years, all margin increases have lead to immediate price "appreciation" (immediate 10 sessions post adjustment) 76% of the time. Of those that did not appreciate, roughly 17% of remainder events dropped less than 2%.

The above margin stats were likely based off only price (leverage ratio). The closely followed adjustments on and after May 2 were based on spike to historical intra-day volatility (Hit 80+ I believe?). Nearly $4 move in 4hrs for ex. That is insane on a contract worth 5000oz.

This "margin increase" story was just a media/precious metal marketing machine scapegoat to cover the true identity what has occurred: a far over-heated market that appreciated 90% in 3 months built on the back of hugely speculative investor demand.

Total 2010 investor demand accounted for approximately 142MM oz of total 950MM oz demand (15%). This segment can drive it a great length on a reasonably tight S&D curve, but only so far until it snaps back to reality.

 

[olias]

Quote from olias:

It sounds like you're saying it became harder to buy, but would it not also become harder to sell? A net neutral effect?

I think I spelled out my question pretty simply: why would a margin hike affect the longs more than the shorts? Please someone answer this in plain English for me.

I think I might have an answer to my own question. I'm open to feedback on this.

Basically I couldn't understand how increasing margins would necessarily cool the hot Silver market. The basic argument was that increased margins would force some of the Longs to close out. I argued that the increase should affect open Shorts as well.

As I've thought about it more....if you consider who the Long players are vs who the short players are (like a COT report)....if it turns out that the longs are comprised of mostly smaller mom and pop-type speculators, then they might feel more affected by the increase in margins, therefore the longs would feel a greater need to offset. It makes sense to me now.

It appears that raising the margins was a pretty effective way for the exchanges to address the politician attacks that speculators were driving up price.

 

[olias]

snippet from Reuters piece http://www.reuters.com/article/2011/05/12/us-metals-precious-silver-idUSTRE74B3PI20110512

"Silver's fall was long predicted by precious metals traders, who said its rally to a record $49.51 an ounce on April 28 was unjustified by fundamentals. As a small and relatively illiquid market, silver tends to be more volatile than gold.

Analysts said its strong price performance attracted more speculators to the market, who were easily scared off when the metal's correction first started gathering steam.

"The price increase we have seen over the last few months has been exaggerated by speculative interest, and the shaky hands now need to be pushed out of the market," said Commerzbank analyst Daniel Briesemann."

 

[peilthetraveler]

Yep, for a long time silver bears have been saying silver is overpriced....ever since $7 per oz if I remember right.

Its amazing how silver can go down fast in a week and people think its over for silver. Give it another month and see where silver is at. Then all those article writers will get very quiet until the next drop.

I mean, why did we hear next to nothing on mainstream media when silver was going from $20 to $50? but it drops from $50 to $42 and 10,000 articles are written in 24 hours.

 

[olias]

Quote from peilthetraveler:


I mean, why did we hear next to nothing on mainstream media when silver was going from $20 to $50? but it drops from $50 to $42 and 10,000 articles are written in 24 hours.

I'm not debating you on that point. I posted those articles to address the general phenomenon of how increased margins can turn a market around

 

[Chicago_CTA]

Perhaps a better reason to be long silver right now is not the end of the US dollar, or of the world, but a nice "Inverted Head & Shoulders" on both the Daily and Hourly charts:

5/6/11 LOW: $33.035

5/12/11 LOW: $32.30

5/17//11 LOW: $32.96


Upside target should be resistance near $39.57, basis July futures.


Thoughts?