Sell the Cutlery: Why This Silver Bull Market Won't Last Forever

I found myself at a very VIP event last night at the home of a well-known politician. There was a heck of lot of money, age and experience in the room. I felt like I’d gone back in time to the City of the 1980s.

I got talking to an old boy who, it turned out, had made his money in mining. He had worked at one point for the Hunt Brothers (who famously tried to corner the silver market in 1980). He had speculated in Australian’s Poseidon bubble (1969-70), one of the mothers of all speculative mining frenzies. He recalled a stock he had bought at 10c, offloading his final shares at A$120, only to watch it go to A$280. (50 years on, he was still cross with himself for selling too soon, even though it soon went all the way back to 10c).

“Are we in a secular bull market for mining stocks now?” I asked him.

He didn’t seem to think we are.

“What about gold and silver?”

“Silver’s at $53,” he smiled.

“$58,” I corrected him.

“$58!” he said. “Gosh. I must go home and sell the cutlery.”

There was a photograph in a large silver frame on the sideboard. We discussed the merits of selling that.

I tell this story for a reason. Bull markets like this one in silver do not come along very often. The old boy know that - and he knew what to do. Because silver bull markets don’t last forever.

And when they end, they really end.

You can make informed and educated guesses where the top will be. Getting out at the absolute top can be done but it requires so much good fortune that it is near impossible.

In the Poseidon bubble, the old boy was selling on the way up, only to see his stock double and more again after he’d unloaded his final tranche. He made money. A lot of money. He didn’t make as much as he could have made - and is still, more than fifty years on, cross with himself.

Yet he also didn’t lose anything when the bubble popped.

Is that not more important?

Yet, bizarre thing the human mind is, we seem to get more cross with ourselves for selling too early than we do for overstaying our welcome and riding the collapse all the way down.

If you live in the Third World Country such as the UK, I urge you to own gold or silver. The pound is going to be further devalued. The bullion dealer I recommend is The Pure Gold Company. Pricing is competitive, quality of service is high. They deliver to the UK, the US, Canada and Europe or you can store your gold with them. More here.

That amazing cup and handle

Silver has now broken out of that incredible cup-and-handle formation that has been building since the 1970s. We have spoken about it before. The standard view is that, in a cup-and-handle pattern, the distance from the rim to the bottom of the cup will be your target to the upside. In this case, $3.50 was the low in the early 1990s. The distance from $50 to $3.50 is $46.50, giving us a target of $96 or thereabouts.

$96.50 then. It could get there. I don’t say it will, but it could.

You can argue that based on logarithmic charts and percentage falls, the targets should be even higher. I’ve read some as high as $700/oz. It’s possible. $50 in 1980 was a similarly elevated figure.