Market Analysis by covering: Silver Spot US Dollar, BlackBerry Ltd, Silver Futures, GameStop Corp. Read 's Market Analysis on Investing.com
Citi upgrades near-term Brent outlook to $70/bbl on rising geopolitical riskshas been on a tear, rising fourfold in the last few years. The price is driven by the narrative of dollar debasement. Furthermore, there are indications that limited supply, along with growing industrial demand for silver, warrants higher prices.
), we do not believe the dollar is being debased. Furthermore, while the silver supply-demand imbalance is intriguing, we do not believe it warrants the excessive price increases we have recently seen.To help silver investors assess whether silver is in a bubble, we take a new approach by examining a recent phenomenon: The graph below is a good depiction of the typical price pattern and sentiment transitions of a bubble. Since the massive liquidity injections during the Pandemic, financial markets have experienced a series of rolling microbubble cycles. Unlike the feared macro bubbles, such as the 2008 financial crisis or the dot-com bubble of 2000, micro bubbles are isolated and have little impact on broader financial markets. Supporting micro- and macro-bubbles are narratives. While narratives often begin with some degree of truth, they tend to become larger-than-life as the bubble expands. These micro-bubbles can be highly profitable for those who spot them early and for those spreading the narratives. However, they are extremely costly for latecomers who buy fully into the underlying narrative.To provide context for the recent spate of micro-bubbles, we present several examples. As you read about recent micro-bubble instances, compare the narratives and themes with those currently unfolding in silver. Bear in mind that the narratives we present may seem silly today, but many investors bought them hook, line, and sinker at the time.The combination of easy monetary policy, new retail investor inflows, social media narratives, and “fear of missing out ” led to parabolic price gains for thousands of altcoins and Non-Fungible Tokens . This occurred despite the securities having nearly worthless valuations and, in almost all cases, no utility. The narrative behind the gargantuan price gains was that crypto, in all its forms, was reinventing the financial system. Moreover, altcoins and NFTs were pitched as “,” promising to disrupt traditional banking, payments, gaming, cloud computing, social media, and even fiat currencies. Many promoters stated that their utility would arrive later, thereby justifying extreme valuations.Meme Stocks The meme stock bubble centered on heavily shorted stocks of fundamentally challenged companies, such as the three shown below- GameStop , shown below, saw their equity prices increasingly driven not by revenues, operating performance, or even their financial outlooks, but byDoing so created a reflexive loop in which rising crypto prices boosted stock prices, enabling further capital raises to purchase even more crypto. Underlying the tremendous stock performance was a false narrative that investors would permanently reward companies with Bitcoin exposure. When crypto prices fell, the story unraveled.) were in high demand. Their stock prices surged as investors extrapolated the temporary demand shock into a permanent structural economic shift. They assigned valuations to these companies as if pandemic-era growth and recent consumer behaviors would persist indefinitely. When normal economic activity and more typical consumption behaviors resumed, revenues slowed, margins compressed, and their stock prices retraced sharply. Investors were told that these companies were “essential infrastructure” for a post-pandemic world, thereby justifying extreme multiples on the belief they would eventually deliver massive profits.During the pandemic, Special Purpose Acquisition Companies became a popular investment vehicle. SPACs allow retail investors to invest in early-stage companies before they go public. Hundreds of SPACs raised capital without an underlying operating business, relying on the promise of investing in high-growth companies that might otherwise remain private. Many of these “high-growth companies” were valued by SPACs at levels comparable to those of mature public companies. As projections ultimately fell short, many SPACs traded well below their $10 issue price. It became clear that those creating and managing SPACs favored deal completion and their personal bank accounts over underlying fundamentals. Sponsors were rewarded for closing transactions rather than for creating durable shareholder value. Investors were persuaded by the thesis that SPACs “democratized access” to venture-style investments, allowing public-market investors to participate in the next Tesla before traditional IPO processes would permit it. Management teams and sponsors were marketed as elite capital allocators whose reputations substituted for proper due diligence.The narrative driving silver prices is twofold, stemming from its dual identity as both a precious and an industrial metal.with leverage, or as high-beta gold. Simply put, these investors view silver, like gold, as a hedge against currency debasement and its perceived causes, such as rising deficits, unsustainable debt issuance, and loss of confidence in the dollar. Unlike gold, silver is also promoted as a critical industrial metal, with demand recently increasing due to solar panels, electrification, AI data centers, and power grid expansion. There is some belief that demand is growing much more rapidly than supply, which is constrained and is likely to remain so for some time. We have refuted the debasement argument, as we linked at the outset. While the supply-demand imbalance is promising, it doesn’t justify the surge in silver prices in our opinion. We ask you: Does the graph below resemble the left side of the bubble graphs we shared earlier, or does it accurately reflect fundamentals and the possibility of a debased dollar?The one theme that holds true for the micro bubbles we discuss, and for others, is that narratives drew in investors and pushed prices well beyond any realistic economic value. When momentum gave out, the narratives collapsed, exposing the truth:Can we classify Silver as a microbubble? The answer depends on your belief in the underlying narratives. However, even if the narrative contains some truth, the bubble may still burst if the price greatly exceeds its fair value.Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks. Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes.and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website. It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
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