Newscentral and Your Dead Meat, Both of you have focus. Both of you belong in the Yahoo Hall of Fame. Newscentral your logic is the best that I have ever studied. Your Dead Meat, you are absolute, consisting with frankness.
The time will come, when China will recognize the 11T of debt is offset by the 11T it holds in gold and silver, and no longer accept fart currency.
The 11T in dollars will go to 1T, and the gold and silver held will go to 110T. The arbitrage is too attractive to not to happen.
For now, the status quo. But as the dime our dollar was in 1971 to 2011 sinks to a penny by 2021, watch the fur fly in short order. About five to six years.
To the original poster.
The "price of silver" as determined by the spot market is an thinly traded, opaque, and leveraged market made to "run" by professional traders, huge banks, and a variety of large and small speculators. Silver pricing goes way beyond simple supply and demand.
The stock market is somewhat more understandable, and silver mining stocks respond to both the price of spot but moreso to the market as a whole.
To gain some understanding of what moves the metals complex, you need to understand "risk on" and "risk off" sentiment and trades, and also the USD index.
If I had to pick 2 things to follow in determining how the precious metal stocks behave, those would be it.
The only other comment I care to make is that the silver in particular can be volatile, and undergo tremendous pops and drops.
Mel: From Jubak:
"So much depends on China. And the ability of its economy to escape a hard landing that crushes growth.
This may be the biggest immediate legacy of the euro debt crisis. With the EuroZone projected to grow by just 0.7%–or less– next year and the U.S. economy projected to chug along at 2% growth or less, China will be the make or break story for a huge number of companies in 2012.
Investors are used to this by now for the shares of companies like Freeport McMoRan Copper & Gold (FCX) or Vale (VALE) or Peabody Energy (BTU). Worries that growth in China might be slowing drives down shares of the companies that supply the commodities that feed China’s manufacturing machine slump. Growth looks stronger than expected, on the other hand, and these shares climb.
But China’s influence has been growing and it now extends well outside the commodity and materials sectors to stocks that don’t immediately seem to have a China connection. The China risk in many of these stocks isn’t well recognized by investors. And I’d argue that’s likely to be especially dangerous over the next six months or so because of the way that many of these stocks are increasingly dependent on China for growth."
From me: He continues on about how a China slow down will hurt many US stocks and how it is a big danger to Europe and the Globe. A slow down in China would cause a world recession and serious problems for both Europe and the US.
Mel: We had a great "pass it on" today between the two of us. I was posting in a quick matter, because I was trading currencies.
From your last post.
"I just look at the scale and risk of the EU problem and worry about that more than China personally, especially in the near term. I do appreciate your feedback though."
So yes, this is our difference. To me, it is not about China personally with the same reasons. If China has a slowdown, imports of materials and metals (copper) will be less. They will import less. If one piece of the puzzle is missing, then the puzzle is not complete. China's buying our T's and their worldwide investments will slow. I mentioned a day or two ago that China is slowing down on silver purchases. Silver is also an industrial metal. JPM knows this - so it is part of the reason as to what happened today with PM stocks.
Last though by me about China. I speak Chinese. I go to their boards and I know some Chinese economic college level teachers very well. One point from them is that China is increasing export prices on plastics, etc, by a few percent. The Walmart's will have to pay more, but still less than what we can produce the items for. I was also told that they plan to lower prices for internal goods within China.
It is all very fragile - the "World Order" and some countries in Europe would fit into just a few cities in China.
China keeps information hidden. The truth is not on the web, but it is on China speaking boards.
I enjoy your posting.
I don't understand my own comment? Ummm, okay. I don't disagree that inflation is a global problem. The contagion I'm referring to is a function of financial institution interconnectedness. Wouldn't you agree that the level of "cooperation" between US & European central banks and commercial banks is much tighter than with China, which is an important trade partner but also lines up competitively against the US moreso than EU? The lack of US manufacturing jobs and US exports is constantly attributed to artificially devalued currency in China (something we do with impunity as well, but we are still the world reserve). If China continues their easy money policies and create a huge bubble (which they've been doing for the better part of 20 years) it will surely affect us, but not in completely negative ways. This is the point I'm trying to make. If Europe goes down, I think there will be much more correlation between their problems and ours. I could be underestimating or oversimplifying the integration of US/China financially. I just look at the scale and risk of the EU problem and worry about that more than China personally, especially in the near term. I do appreciate your feedback though.
Two other central thoughts that need to be added to the big picture.
First is China's investment in our debt. They own more than T's. Bonds and a lot of indirect business interests. Much of this money is invested in American companies that trade in Europe. This would kill both Europe and the US, if a slowdown in China continues. Add to that trade agreements. I also think that you do not understand your last comment to my comment. Inflation is going to become a problem worldwide. China is very involved with the straw that can break the camel's back.
This is information to support my case in point.
"China's new salary system under the market-direct economy has been established, but the wage gap is widening too fast, Yang Liming, vice-director of the labor and salary research institute of China's Ministry of Human Resources and Social Security said in a report."
"The statistics indicate the finance industry had the highest annual salary of 70, 146 yuan in 2010 ($10,430), while the lowest was in the farming industry with an annual salary of 16,717 yuan. The gap ratio is 4.2:1, while the average ratio in most countries is between 1.5:1 and 2.1:1."
"There is also a staggering difference between people's pay in cities, rich regions and top posts."
"For example, in Shanghai, people working in banks had an average annual income of 357,500 yuan in 2010, tens times that of the average urban worker in China.
The report also shows rural families had an average income of 5,919 yuan in 2010, compared with 19,109 yuan at urban level."
"The region where workers were best paid in 2010 was Shanghai, with an average level of 66,115 yuan, while the lowest paid received was in Heilongjiang province with 27,735 yuan."
"Managers at listed companies earned on average 668,000 yuan in 2010, 18 times that of the average annual salary in China."
"Shen Yuan, a junior stock business consultant in Beijing said "only mangers get fat pay, I don't think I earn that much than people of other industries, maybe a little more."
One needs to factor that 20% of China's projected growth will be from the Starbuck's of America. American base companies. If growth slows in China due to a two tier class level - they will honor their own tea houses, not ours. This is their culture mindset and is often discussed on their boards.
Sorry meant to ask if you believe China's GDP is significantly understated what the effects of that are on world economy. In a global market it seems to me that competitive pressures on China will simply accrue to the betterment of the West, since international banks are not as involved in the Chinese markets, the contagion risk is reduced vs. Euro zone.
Wouldn't the CIA in their analysis account for that? Of course, another way to measure GDP is national income. The two should be equal. There's no way to measure that accurately in a command state with a big agrarian base, but in principle it should work out. So is your argument that the GDP figures being relied up for China are significantly understated?