November 21st, 2012
In recent years, silver has been an object of nearly constant fascination in financial circles. It enjoyed a manic runup in prices to a top of $50 per ounce in late April 2011, followed by a swift collapse. It was prized in olden days, too, as exemplified by the interest shown in Aztec Silver by Cortes and his invading army, which vanquished Montezuma and the Aztec civilization.
According to an entry in Wikipedia, Montezuma had originally hosted a goodly number of the Spanish army in his palace, a circumstance which eventually inspired the ire of his subjects. There is some question with respect to the manner of Montezuma's death - whether, on the one hand, he was killed by the Spaniards; or whether, on the other hand, he died as the result of having been hit on the head by a rock thrown by one of his own people. He did leave his own bloodline intact, however, because he
"had fathered 100 children (including dozens of sons) and fifty of his wives and concubines were then in some stage of pregnancy, though this estimate may have been exaggerated..."
The wording of the phrase "FIFTY OF his wives and concubines" implies that the total was even more than that. (He may have been a poor Manager - i.e., he obviously was a good mono-tasker, but perhaps was not very good at MULTI-tasking because of the resultant scarcity of time which was available for it. After all, there were only 24 hours in a day, even back then, and a man has to sleep SOMEtime).
"Several lines of descendants exist in Mexico and Spain through (his) sons and daughters...One of them was made Duke of Moctezuma de Tultengo by King Juan Carlos I (in 1992)."
Just imagine the burden which such a large royal household of wives and concubines (and an army of children) imposed upon the people or upon the general economy! How big was that palace, anyway? It must have had its own maternity ward and nursery. He didn't build it; the Government built it.
But back to business. A faithful Subscriber (whom, to my great regret, I have never met, and who did live nearby but now lives far away) has just sent me an article by a prominent perpetual Silver Bull. The general theme of the article is that the "fundamentals," together with the author's observation that Silver is "underperforming Gold on the way down," and, in particular, evidence of strong Silver purchases by a leading physical Silver trust and by the Royal Canadian Mint's new ETF-type product, together prefigure a "staggering" increase in the price of Silver.
In my view, the argument has multiple flaws.
Number One: While I agree that Gold and Silver are commodities, and that the prices of commodities are significantly affected by "fundamentals" such as supply and demand, I argue that the prices of Gold and Silver are now the subject of speculation, at which point they cease acting like commodities and start acting more like stocks. In other words, the "fundamentals" of Gold and of Silver count for little, if anything, now. Gold and Silver have become footballs, toys, speculations - just like Apple and Facebook.
Number Two: It is true that Silver did "outperform Gold on the way up" - 431% for Silver versus 167% for Gold, from their respective Lows in October 2008 to their respective peaks in April 2011 (Silver) and September 2011 (Gold). The argument that Silver is "underperforming Gold on the way down" is based on a misunderstanding of the facts - namely, the supposition that the operative trend in each of them is still Up - which I dispute. I believe that the operative trend in each of them turned Down in April 2011 (Silver) and in September 2011 (Gold). Prices in each of them have declined from their peaks, and in each case there have been several partial retracements of the decline including the most recent, being 61.8% in Gold, but only 38.2% in Silver. (Silver's bounces have been weaker than Gold's). So, Silver is declining faster than Gold. When the charts are viewed from the standpoint of peaks which are history and trends which have switched from Up to Down - that is, "looking down from above, at a declining trend, a bear market" - Silver is not "underperforming" Gold at all; rather, it is outperforming Gold! It is outperforming Gold, to the downside.
Number Three: The fact that the Royal Canadian Mint has started a new ETF-type Silver product now, so late in the day, AFTER Silver's price peak and trend reversal, is typical of a Government (the ultimate Committee) lagging the trend and running for the train at a time when it already has left the station. In my view, this is a very negative signal for Silver.
This is the bottom line with respect to Silver and to Gold: I believe that long-term Tops have already been posted in each of them, that their operative trends have switched from Up to Down, and that predictions of new Highs and "staggering" price increases in Silver are rationalizations, wishful thinking, and fantasies.
About the Author
William Kurtz is the founder and President of CandleWave, LLC. He is a lawyer by background, and has spent a working lifetime in the corporate real estate development business. Among other assignments during his working lifetime in the business world, he founded “JCP Realty, Inc.,” the real estate development arm of J. C. Penney Company, and served as its Executive Vice President for 13 years. During that time, JCP Realty, Inc. partnered with several of the top regional mall developers in the design and development of about 20 marquee regional shopping centers nationwide. He was also instrumental in the acquisition of many properties which are now operated with Walmart as the key tenant.
Mr. Kurtz had traded Options, primarily on Commodities, for many years. After his retirement from the real estate development business, he devoted nearly all of his time to the study and refinement of trading systems, in an effort to discover a means by which Reversals of Trend could be reliably anticipated. This led to a study of the “Elliott Wave” principle, which he has found to be indispensable, but incomplete, in that it is numbers-oriented and lacking in the ability to display in visual form – that is, in Picture form – those instances in which a trend is coming to an end, and likely to reverse.
After years of trial and error, he settled on Genesis Financial Technologies’ “Trade Navigator” platform as being uniquely able to present Trend Reversals in Picture form, so that they are instantly recognized by the eye. “The eye does the work.” The secret lies in displaying groups of Indicators in horizontal “panels,” layered one above the other, and then watching for extreme readings in those Indicators, all occurring at the same time. It became apparent that presenting certain Indicators in ways not usually seen, and extreme readings as between them, is itself a new Indicator – and the best of all of them.
The result is the “Candelaabra” system of technical analysis, which of course uses Japanese Candlesticks as the base – but proceeds from there, “beyond Candlesticks” and “beyond Elliott Wave,” resulting in the best trend-reversal-spotting system available anywhere. CandleWave, LLC uses it every day in all of its work.