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Strategies & Market Trends : Strictly: Drilling II -- Ignore unavailable to you. Want to Upgrade?

To: Davy Crockett who wrote (5248)	12/12/2001 7:21:35 PM
From: pater tenebrarum	Read Replies (1) \| Respond to of 36161

i agree that a Japan type scenario with multiple recessions interrupted by anemic recoveries is a highly likely outcome. with a few added twists however, some with positive, some with negative connotations. the volatility in the debt instruments is due to 'dynamic hedging' strategies imo. note btw. that in 1931, the US bond market collapsed, in spite of a deflationary recession being underway. that was the final push that led to a plunge in industrial production back to the levels of 1886 by mid 1932. the bankers panicked into gold at the time... staying with the historical perspective, buying silver at the '32 depression trough would have been a most excellent trade, and it may be an even better trade this time around. the reason is that the bulk of today's silver production doesn't come from primary silver mines anymore, but as a by-product of copper and zinc mining. the decline in capacities in these two sectors over the past year has been the most incisive and stunning series of shutdowns i can remember. hundreds of thousands of tons of copper and zinc production have been taken out of production ( PD and Billiton alone have e.g. cut over 400,000 tons of copper production between them so far). what's more, many more low margin polymetallic orebodies (specifically porphyry orebodies that rely on economies of scale, i.e. huge milling volumes for their viability) are set to close down next year. there's already a big primary supply/demand deficit in silver that has persisted for over a decade and has eaten up the once huge inventories. and while there clearly will be a fall in industrial demand, the fall in primary supply is almost certain to be far greater. if one considers that investment demand is currently nil, there certainly is potential for a substantial price increase down the road. note also that silver demand is scarcely price elastic - there are many applications that rely on the metal's unique properties as the best reflector, heat conductor and electrical conductor, but they all use only small quantities of it. in short , i give the silver bear market far better odds as being close to ending than i give the stock bear market.