Tan Kin Lian's Blog: Silver - safe haven asset

Tuesday, May 17, 2011

Silver - safe haven asset

Silver, a safe haven asset, plummeted 28% in a week. This is the danger of chasing any asset bubble. When an asset price goes up too high, above its real value, it is in danger of a large fall. This may happen to property prices as well.

7 comments:

Freedom Achiever said...: One should avoid speculation at all times.; May 17, 2011 10:08 AM
Singapore's 5 Minute Investment Diary said...: Any "safe asset" will become a liability at some pricing point.

It all depends on your buying and selling price. And your skill and attitude towards change (i.e. risk).

A 5-room HDB flat at $350K may be an asset. At $550K, well, may be not so much of an asset.

I have a friend who bought silver (using an ETF, SLV) at US$22.40.

He sold off his bullish position at $45, just before the top.

He then turned bearish the next day by buying 15 "put" options ($30 Oct 2011 expiry) at $0.59.

The put options are now worth $2.66.

Are options "risky"?
Absolutely.

Were the put options "safe" when he bought them?
Absolutely.
Silver was going up and nobody wanted to buy insurance (put options).

Investments is like life and love.
Timing is everything.

PS:
There is no real difference between an investment and a speculation. You are risking money to make more money in both instances.

I prefer to regard all my "investments" as speculations.
It keeps me suspicious and worried all the time.
And this attitude keeps my money safe.; May 17, 2011 1:25 PM
Spur said...: Silver is not really a safe haven. There is too much speculation and is easily cornered by big banks and hedge funds. +-40% moves in silver prices are not uncommon, even if you believe that over the next 10 years the trend will go up.

Silver is more of a trader's asset becoz of its volatility. E.g. good for those who managed to buy back in at the recent lows.; May 17, 2011 2:44 PM
Redstar said...: Ha! Before the housing bubble collapse, the banks look like world beater giants in their sector.

After the financial crisis, some disappeared like Bear Sterns, get the tax-payers to pay for their bailouts. Even had to resort to devalue their currency (QE2) and accounting gimmicks like not marking troubled assets to market.

Are OCBC and DBS really safe?; May 17, 2011 5:21 PM
yujuan said...: Could vouch OCBC is ten times safer than DBS. OCBC never risk their clients money haphazardly in high risk structured investments. When they do risk analysis for clients, they take it seriously and advise investment according to clients risk appetite.
Not so for DBS Bank, and this stupid bank never get their foreign CEOs right. They always buy into assets at over the top prices and always got in at the wrong end of timing. Look at how much the bank paid for HK Dao Heng Bank, paying for the mistake and never really making money for decade or more in HK. before Dao heng, they again made the mistake
of going in too early in Thailand
during the Asian Financial crisis
of 1998.
Let's see whether this Indian CEO
would make this Bank look respectable again.
Coming to silver as investment, study how the Hunt Bros lost their fortune speculating in this metal in the early 80s of last century.
The metal also topped and turned downwards abruptly, all the way down until Gold starts bullrun early this century. History repeating itself? Or just correction?
It's everyone's bet now.; May 17, 2011 10:14 PM
michael13 said...: All investments carry certain degree of risks. Speculation's risk is only next to gambling. Many do not ask themselves one simple important question before investing or speculating: "What if I go wrong?"

Some depend on fundamentals analysis, others rely on technical charts/indicators(the best guess) to time their entries. But again, all investment products come with a cycle of constant price movement. The big fish has 'a last laugh' always!

A calculative risk is essential for any investment's decision. Unfortunately, according to some statistics shown, the 95% of the people do not really practise that.; May 18, 2011 8:13 PM
silverybay said...: Speculators get burn.

Investors get more.

Traders get even.

Watchers get nothing. They just get to say "I told you so." and "You are just lucky."

Which type are you?; May 18, 2011 8:32 PM