No. I'm not trying to be a wise guy. I've been kind of unnerved that silver has been steadily increasing. A price change implies that the market was wrong about the previous price. So the market's been systematically wrong for like the last 2 years. How does such error persist?
Obviously there are asymmetries in the market leading to this outcome, but people who undervalue silver sell it, and are no longer in the market. But I don't believe this can really persist for TWO years because anyone who valued silver (correctly) at $35/oz would have just bought all the silver they could below that price. I'm just confused. EMH isn't working. I don't buy Keyne's line that "Markets can remain irrational far longer than you or I can remain solvent". Hurr durr financial groups with very deep pockets exist partially for this reason. Thoughts? Why can't we iron out the price of silver? ><
Because they've foregone immense profit opportunity by routinely underpredicting the silver price.
How do you know that? What if someone sold part of their silver stock in order to invest in something else? The decision to sell or buy something is done within the framework of utility scales. I'm still not sure why you think people are "erring" in their decisionmaking.
But changing fundamentals is not a sufficient condition to produce a continuous price change.
Err, what? Of course they are.
But the idea is that entrepreneurs are rewarded by and attempt to predict changing fundamentals. If they correctly predict them, they make money, and the price is bid up even before the fundamentals change.
I'm not sure what you're saying here. Prices don't change by means of magic. Entrepreneurs may predict a change in price, but the profit comes out of their accurate prediction; i.e. buying low and selling high.
But we don't have to wait for the fed to print money. Expectation of inflation is enough to cause inflation.
It depends on what you mean by inflation. Expectation of inflation cannot cause a general increase in prices.
But entrepreneurs compete by trying to forecast uncertainty. I don't see any reason why regime uncertainty is any different from natural disasters, which are routinely factored into prices/economic decisions.
A natural disaster can only be "routinely" factored into a decision if it's expected. Otherwise, the statement is nonsense.
Entrepreneurs make mistakes - that's understandable. But I'm hung up because their mistakes have all been in the same direction. Why would all the marginal buyers/sellers all make the same mistake over and over again?
You're really missing the point. Nobody is making a mistake in the sense that you mean it.
I really don't understand what the continued confusion is here.
JMFC:How do you know that? What if someone sold part of their silver stock in order to invest in something else? The decision to sell or buy something is done within the framework of utility scales. I'm still not sure why you think people are "erring" in their decisionmaking.
JMFC:Err, what? Of course they are.
JMFC:I'm not sure what you're saying here. Prices don't change by means of magic. Entrepreneurs may predict a change in price, but the profit comes out of their accurate prediction; i.e. buying low and selling high.
JMFC:It depends on what you mean by inflation. Expectation of inflation cannot cause a general increase in prices.
JMFC:A natural disaster can only be "routinely" factored into a decision if it's expected. Otherwise, the statement is nonsense.
JMFC:You're really missing the point. Nobody is making a mistake in the sense that you mean it.
I deal heavily in silver. If the silver market is confusing you, it's because the silver market is confusing.
Silver is heavily manipulated. The range of consipiricies about who/what/when/where/why are broad, but the truth is that there is a great deal of naked paper floating around--particularly from JP Morgan. Due to this, many of the big players are demanding physical, and there simply isn't enough. Comex is in peril for this very reason.
Some people say that there are about 100 oz. of paper silver chasing 1 oz. of physical silver. I don't set that ratio quite so high, but it isn't drastically far off in my opinion. Even with whispers of a rout ahead, I will still be buying. To me, the Austrian school teaches stability, temperence, and long-term profitability versus the boom or bust mentality that grips investors today. Even with a rout once QE II stops, I expect silver to truely erupt within the next 18 to 24 months. Soon I'll be investing (what would be considered a pitance) in some junior mining stocks that might even allow me to retire at...25.
We'll see. Hold on to your horses!
Wait, silver is traded on fractional reserve?
It appears to be:
If a price is the objective manifestation of our individual subjective value scales then the only thing that can change a price is a change in the underlying subjective valuations of individuals. As our circumstances are constantly changing so are our valuations and so are prices.
If equilibrium is ever achieved it would imply that no exchanges of that good would take place; trading would stop. While equlibrium is a possibility the same constantly changing circumstances and value scales of the individual actors are working against equilibrium.
Sieben,
I believe the answer you are looking for is risk. The risk profile for underestimating the gain (not making as much profit as you could have) and overestimating the gain (losing your initial capital) are really different. Since the actual final price is uncertain, it makes more sense to be conservative in your estimates, which is why rational actors tend to underestimate instead of being evenly distributed around the actual future price.
I'm just going to start asking obvious questions to see where you're coming from, because I can't really see any basis to your arguments.
But from the perspective of medium/long term investment, this has been a failure for marginal sellers of silver.
Why has it been a failure?
Continuous one-way change in price implies that entrepreneurs are failing to predict it over and over again.
Why does it imply failure?
But if they forecast that the price of silver will be high, they will be willing to pay almost that much *right now* to buy silver. So expectation of price change is enough to cause price change right now.
Only at the expense of the fall in price of something else.
So if the money supply were to double a week from now, would prices stay the same for 7 days, or would they approximately double before then?
This is incorrect. The degree by which they would increase depends entirely on the quantity of money bid towards them at that point in time.
You can factor regime uncertainty into economic decisions if you expect it. I guess I'm operating under the assumption that financial groups know what the federal reserve is.
Even if they operated under that assumption it makes absolutely no sense to assume that they know exactly what the Federal Reserve and government will do, or the consequences of those actions.
I'm saying "mistake" in the sense that they're forgoing profit.
What profit are they foregoing? I don't understand what you're saying. It's easy in retrospect to decide what is a mistake and what isn't. Decisions aren't made in retrospect.