Prepare for Price Spike

[Rubberchicken]

http://www.tfmetalsreport.com/blog/4511/guest-post-byzantium-prepares-silver-spike

Readying Oneself For A Potential Price Spike In Silver

Most of us have experienced one of the two historic modern age silver price-spikes. Some (like me) played the 2011 spike up very badly, and want to be smarter next time. Each of us will have his or her own understanding of the context within which a silver spike sits. Do you have your plans ready as to what to do, if/when we get a third spike up?

First, here are the two spikes, from 1980 and 2011, unadjusted for inflation. These particular spikes up, crashed back down each time. Fortunes were made and lost on these spikes. The losers did not expect such a violent collapse in the price. Will we be third time lucky, or might the bulls be punished yet again?

Same again; it fell $6 in minutes! And that was just for starters. Many silver-bugs were paralyzed with shock. Hardly any PM bugs, no matter how clever we thought we were, took advantage of the $49 price to take profits, a level which was obvious historic resistance. Just as the gold or silver-bug mindset was thinking ‘the cartel is losing control, we are getting ready for blast off,’ the price instead collapsed, and blew a hole a mile wide, into what we thought were our superior insights.

Let us now distinguish between those of a trading mindset (which will de-facto include traders, but also many non-traders who are prepared to sell at the right price) and stackers (who will not part with their silver at any fiat price, till after a financial re-set). For stackers, thus defined, this presentation is likely not for you.

The table below sums up the outcome matrix of the next spike up. Naturally, if/when such a spike arises, there will be very emotive and even vitriolic argument in the trading community, as to the nature and sustainability of the spike. You may or may not agree with my classification of winners and losers inside the matrix, but I think it encapsulates the 8 scenarios of interest.

This presentation will focus on the last of the personality options, as highlighted in green below.

Continue reading at link above-

[osoab]

Got to love Turd's enthusiasm.

[Sparky]

Interesting read. But this person is still a student who is trying to be a teacher. A couple of points:

First, he called himself a stacker who bought into the 2011 spike. Now, if you're really a stacker, you're doing one of two things, neither of which is buying into a spike: 1) You buy regularly, regardless of price, or 2) you buy every time the price eases. Only a panic buyer would buy a spike, which is not the characteristic of a true stacker.

Second, he makes the mistake of treating the 1980 and 2011 spikes as similar, when they are completely different. 1980 was a generational blowoff spike, followed by an 80% drop, and a peak price that would not be seen again for 30 years, so there was no "second-chance" opportunity. The 2011 spike was actually more similar to the 2006 spike, with both experiencing 50% falls and then a resumption of increase. They are silver's way of re-tracing violently within a continuing bull.

Finally, don't expect any silver spike to establish a new floor at the spike price. Even in a financial collapse, there will be an overshoot of price, whether it be $75 settling to $50, or $200 settling to $100. In order to spike, you have to exhaust the source of buyers, which means some type of significant pullback. If there were to be a new post-fiat paradigm, expect gold to hold closer to its spike price than silver, since it is more a pure monetary metal than is silver.

Interesting and thoughtful essay though.