Thursday, July 31, 2014 01:20am
North Adams, MA now: 55 °   
Send news, tips, press releases and questions to info@iBerkshires.com
The Berkshires online guide to events, news and Berkshire County community information.
SIGN IN | REGISTER NOW   

Home About Archives RSS Feed
@theMarket: Let Silver Be A Lesson
By: Bill Schmick On: 03:24AM / Saturday May 07, 2011
Important
0
Interesting
0
Funny
0
Awesome
0
Infuriating
0
Ridiculous
0

"You sold silver too soon," grumbled a client. "Look, it's almost $50 an ounce."

That was just one of the conversations I had with disgruntled investors only one week ago. There is no question I felt bad since I had advised readers to sell at least half their silver investments between $36 to $37 an ounce a few weeks ago. Beginning Monday, silver began to drop as the CME hiked margin requirements. By Friday, silver had dropped over 25 percent to as low as $33.05 and ounce.

Parabolic moves such as the kind we have had in silver, and to a lesser extent gold, always revert to the mean. I learned that lesson many times over 30 years of investing in commodities. My strategy is to pick a price level and stick with it, regardless of whether the commodity overshoots my target.

Oil was another commodity where I suggested investors take profits at $100 a barrel. It has subsequently climbed higher, overshooting my target by almost $14 a barrel before it, too, plummeted this week to $99 a barrel. I remain a seller until oil breaks $85 barrel on the downside.

Of course, now that precious metals are in free fall, the knee-jerk reaction from the uninitiated is "at what price do we get back in?"

The easy answer is: whenever investors stop asking that question. When the talking heads and strategists throw in the towel, when precious metals commercials disappear from the airwaves and nobody wants to be bothered with silver, only then will I be willing to reenter the precious metals.

Unfortunately, the sharp correction in silver as well as a bounce in the dollar has impacted the equity markets overall. That is unfortunate and yet for those with steady nerves and grim resolve it is an opportunity.

Most commodities have dropped along with gold and silver. That is understandable given that the majority of traders had purchased commodities on margin (borrowed money). When prices decline substantially (as they have this week) margin calls escalate and notices from lenders flow out through Wall Street like floodwaters through the Mississippi Delta. Margin lenders demand more collateral to maintain their loans to these silver speculators and they want this money immediately.

Speculators, caught with owing huge sums of margin money, did what they always do — sell other investments, usually their winners, to meet the margin call. Oil, gas, base metals, soft commodities — whatever they can sell — which increases the selling pressure on everything and the ripple effect soon reaches high flying stocks and finally equities in general. Welcome to today's markets.

For those of us with cooler heads and steadier nerves, treat this sell off as simply another gift horse in the making. And I'm not about to examine its mouth. I would be buying instead. You see, lower energy as well as other commodity prices are good for the global economy. At some point investors will wake up to that fact. In the meantime, expect more volatility.

"How low can we go?" asked several clients ranging from a doctor in Salisbury, Conn.,  to a retired engineer in Williamstown.

We're almost there, in my opinion. Let's call the low somewhere between 1,305 and 1,325 on the S&P 500 Index (and I may be too negative in my guess). If we dropped as low as 1,300, it would still only be a 5 percent correction from the top. Our last decline was about 7 percent. Since then we have powered as high as 1,370 on the S&P (the intraday high reached on May 2). Remember, you should expect at least three pullbacks a year in the stock market of up to 5 percent. This is simply one of them and the cost of doing business in the stock market.

Bill Schmick is an independent investor with Berkshire Money Management. (See "About" for more information.) None of the information presented in any of these articles is intended to be and should not be construed as an endorsement of BMM or a solicitation to become a client of BMM. The reader should not assume that any strategies, or specific investments discussed are employed, bought, sold or held by BMM. Direct your inquiries to Bill at (toll free) or e-mail him at wschmick@fairpoint.net. Visit www.afewdollarsmore.com for more of Bill's insights.



0 Comments
Tags: metals, oil      
News Headlines
National Grid Meets With Local Officials Over Power Outages
Action Continues at YMCA Long Course Nationals
Murphy, Berkshire Force Win World Series Opener
Mount Greylock Invited to MSBA's Feasibility Stage
Images Cinema Hires New Executive Director
Classical Beat: Concerts Blossom Throughout the Region
Adams Panel Adds Development, Planning to Administrator Duties
Dark Matters; Williamstown Theatre Festival Gets Serious
Williamstown Public Safety Building Committee to Pursue RFP
Weather Service Reports Dalton Hit by Tornado
Bill Schmick is registered as an investment advisor representative and portfolio manager with Berkshire Money Management (BMM), managing over $200 million for investors in the Berkshires. Bill’s forecasts and opinions are purely his own and do not necessarily represent the views of BMM. None of his commentary is or should be considered investment advice. Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of BMM or a solicitation to become a client of BMM. The reader should not assume that any strategies, or specific investments discussed are employed, bought, sold or held by BMM. Direct your inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com Visit www.afewdollarsmore.com for more of Bill’s insights.

 

 

 



Categories:
@theMarket (140)
Independent Investor (190)
Archives:
July 2014 (2)
June 2014 (6)
May 2014 (9)
April 2014 (8)
March 2014 (6)
February 2014 (6)
January 2014 (7)
December 2013 (8)
November 2013 (7)
October 2013 (6)
September 2013 (6)
August 2013 (8)
Tags:
Jobs Euro Recession Energy Greece Pullback Stocks Housing Federal Reserve Currency Europe Markets Banks Japan Commodities Metals Taxes Fed Crisis Interest Rates Europe Debt Ceiling Fiscal Cliff Election Bailout Retirement Debt Stock Market Selloff Stimulus Rally Deficit Economy Oil Congress
Popular Entries:
The Independent Investor: Understanding the Foreclosure Scandal
The Independent Investor: Don't Fight the Fed
The Independent Investor: Does Cash Mean Currencies?
@theMarket: QE II Supports the Markets
@theMarket: Markets Are Going Higher
The Independent Investor: General Motors — Back to the Future
The Independent Investor: How Will Wall Street II Play on Main Street?
The Independent Investor: Will the Municipal Bond Massacre Continue?
@theMarket: Economy Sputters, Stocks Stutter
The Independent Investor: Why Are Interest Rates Rising?
Recent Entries:
The Independent Investor: How Much Is Too Much to Spend in Retirement?
The Independent Investor: The Fed Turns Off the Spigot
The Independent Investor: Should You Pay Off Mortgage Before Retiring?
The Independent Investor: Retirement should be a part-time job
The Independent Investor: Unhappily Ever After
@theMarket: June Swoon
@theMarket: Europe Is a Good Bet
The Independent Investor: A Road to the Future
The Independent Investor: Holy Cow
@theMarket: Flirting With Record Highs Again


View All
Williamstown Chamber @MadMacs
Attendees at Wednesday's Williamstown Chamber Nite at Mad...
Pittsfield Ethnic Fair 2014
North Street in Pittsfield had a double-dose of block...
LaFesta Baseball 2014
The LaFesta Baseball Exchange, celebrating 24 years, pits...
Adams Polish Picnic 2014
Adams residents enjoyed traditional Polish food and music...
Mingo's Sports Bar & Grill...
Over 50 cars packed into the Mingo's Sports Bar & Grill...
BYP Networking at Naumkeag
The Berkshire Young Professionals met at the historic...
Pittsfield Shakespeare...
Pittsfield's Shakespeare in the Park free performances at...
Lanesborough Kids Fire Camp...
Lanesborough Fire Department held its annual Kids Fire Camp...
Lanesborough Fire Drill
The Lanesborough Fire Department trains on basement fires...
Pittsfield Polish Picnic
Crowds lined up for golabki and kapusta at the annual...
North Adams Kids Emergency...
The North Adams 21st Century Community Learning Center...
Gather-in Festival 2014
The 42nd annual Gather-In festival was held at Pitt Park in...
BFAIR Mini-Golf Fundraiser
Berkshire Family and Individual Resources held its annual...
Lanesborough Seeds of Harmony...
Bradly Farm in...
Hinsdale Block Party
The Hinsdale Fire Department hosted its annual block party...
Arrowhead Country Craft Fair
Arrowhead, Herman Melville's home in Pittsfield, is hosting...
Williamstown Chamber @MadMacs
Attendees at Wednesday's Williamstown Chamber Nite at Mad...
Pittsfield Ethnic Fair 2014
North Street in Pittsfield had a double-dose of block...
LaFesta Baseball 2014
The LaFesta Baseball Exchange, celebrating 24 years, pits...
Adams Polish Picnic 2014
Adams residents enjoyed traditional Polish food and music...
Mingo's Sports Bar & Grill...
Over 50 cars packed into the Mingo's Sports Bar & Grill...
| Home | A & E | Business | Community News | Dining | Real Estate | Schools | Sports & Outdoors | Berkshires Weather | Weddings
Advertise | Recommend This Page | Help Contact Us | Privacy Policy| User Agreement
iBerkshires.com is owned and operated by: Boxcar Media 102 Main Street, North Adams, MA 01247 -- T. 413-663-3384 F.413-664-4251
© 2000 Boxcar Media LLC - All rights reserved