The Case for Silver

Peter Boockvar on what looks to become the next It trade on the internet…

For some reason the Reddit crowd is chattering about silver. There is this belief that for years the big banks, particularly JP Morgan, have been artificially suppressing its price when all I think their positioning reflected was the other side of their customers. There is not a large short position that I’m aware of but that said, it is my favorite asset. It holds a unique position of having half its demand from investment and jewelry as a precious metal and money and the other half as an industrial metal. That industrial usage is becoming more ‘new age’ as silver is a raw material needed for solar panels, wind turbines and electric vehicles. Also, according to the Silver Institute, “Almost every computer, mobile phone, automobile and appliance contains silver.” From a price perspective, it still is almost 50% below its 2011 peak. I’m not aware of ANY asset that is that far from its high and consider what’s happened since 2011. Central banks discovered negative rates and a level of QE that our minds could never have imagined and the growth in renewables is only accelerating.

The related stocks are tiny and there are only a handful of silver pure-plays. Historically these have been very low quality companies subject to massive commodity boom / bust cycles. Their share prices are as wild as the futures prices are for the underlying metal. Not for the faint of heart. I won’t list them here, but I hope if you’re short these things you’re being careful. Who knows what the crowd is capable of these days?

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