Mon

13

Dec

2010

Oliver's blog

Silver

Silver has broken out of its (50-year logarithmic chart) triangle and is still accelerating. It is possible that silver will now go into a blow off top and reach $50 (slightly above its old all time high from 1980). It would be inline with the 30-year cycle in commodities and in interest rates. Every time interest rates reach a turning point it leads to a reallocation of liquidity into other asset classes such as commodities until a new trend has emerged. However, be careful as the risk increases with the exponential move. It could be over in a month or two. 

Bond versus Stock yield

 

In the following chart I highlighted the US treasury bond yield versus the stock market yield (1/ market P/E) to get the following ratio. Whenever it is in the green territory then stocks are cheaper than bonds, when it is in the red bonds are cheaper. Right now stocks are much cheaper but the momentum is changing. Whenever the momentum picks up then you can usually count on a continuation of that trade (highlighted by the arrows), i.e. an outperformance of stocks. 

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Comments: 2

  • #1

    Colin (Thursday, 13 January 2011 21:33)

    silver had quite a sell off today. any comments

  • #2

    Jeanice (Wednesday, 08 February 2012 15:21)

    Oliver: could you comment on the dangerous situation between Iran and Israel?

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