Tech Was the Enemy
Everyone is familiar with the boy who cried wolf. For the best part of 11 years, silver bulls have argued the case for the precious/industrial metal even while its price performance has been horrific if not embarrassing.
Buying and holding silver has been less than stellar UNLESS one stocked up when its price fell below its global median production price of $14/ounce.
Silver is one of the most important industrial metals in the world, and it is simultaneously used in jewelry and for investment purposes in the form of bullion.
Silver is a proxy – a very volatile and leveraged one – to dollar strength and globalization.
In the era of the 2010s, when disinflation and globalization prevailed, as well as a clear disregard for investment in infrastructure, silver suffered badly.
In the coming decade, the emphasis on infrastructure projects cannot be overstated.
I want to explain why we are moving into a world of silver prices in the $30s and perhaps the $40s, and it has to do with shoring up reserves.
It all has to do with this chart:
As you can see, the global economy has entered uncharted territory, creating an excess in the tech industry.
Trillions were raised to create new technologies with the promise that the upfront investment would be worthwhile when all of the research and development finally came to fruition.
It was logical to fund disruptive niches when capital was cheap and it kept flowing in, but this isn’t the case today.
The world doesn’t care about the disruption of the future but rather the uncertainty of today.
Governments, institutions, corporations, and households are cautious and pessimistic. They only want to do what promises a guaranteed result and profit.
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In the absence of trust, when nations can’t trust their suppliers and trade partners, countries and companies must build buffers and cushions to stomach the blows.
For 35 years now, Americans have allowed China to supply them with many types of finished products, and it no longer can. This means that instead of increasing efficiency and letting the cheapest source of quality goods possess monopoly-like dominance, governments would rather diversify the way they source materials since there are no fears of power abuse.
Courtesy: Zerohedge.com, Bloomberg
When we couple the major themes that are clearly shaping in front of our eyes, which are persistent inflation and wartime economics, we realize that, for the first time in 40 years, the dollar’s role is being put to the test.
Countries want to lessen their dependence on a centralized means of exchange that’s outside of their control, and that plays right into the hands of precious metals.
All countries are in a mad rush to beef up infrastructure and make sure that what the eurozone is currently undergoing, which is a stranglehold on their energy sources, will not happen to them.
We expect the global economy to focus on infrastructure, and that isn’t America’s strength at all.
A weak dollar is coming, and perhaps silver could finally trade for over $50 when this is all said and done.
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