Silver 200+ to 1
Silver, an undervalued inflation hedge with short squeeze potential
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Silver as an inflation hedge
Historically, silver has acted as a stellar investment when the government is printing money or inflation is high. See the below graph to see how silver performed in the inflationary 70s and how it has performed over the last 20 years while the federal reserve has been expanding its balance sheet.
r/wallstreetbets - Silver, an undervalued inflation hedge with short squeeze potential
Non-inflation Adjusted Silver Prices
I probably don't have to tell you, but I will for those who aren't up to date on the government finances. The government is printing a shit ton of money. Like, the amount of money printing is insane and unprecedented. The M1 money supply went from $4T to $6.7T in 2020 alone. That's a 40% increase in the amount of money! This has never happened in the history of the United States. See graph below.
r/wallstreetbets - Silver, an undervalued inflation hedge with short squeeze potential
M1 Money Stock
Once the vaccines are distributed, which is happening this year, and everyone can start to consume again, inflation will come roaring back. Commodities have already started blowing up which is a preliminary indicator of inflation. See the price of corn, soybeans, and steel below.
r/wallstreetbets - Silver, an undervalued inflation hedge with short squeeze potential
Soybean Prices
r/wallstreetbets - Silver, an undervalued inflation hedge with short squeeze potential
Corn Prices
r/wallstreetbets - Silver, an undervalued inflation hedge with short squeeze potential
Steel Prices
Although the government has printed lots of money in 2020, it is guaranteed they will continue this trend into 2021. The fed is purchasing $120B every month of treasuries and mortgage backed securities, which is equivalent to printing another $1.4T this year. Also, the democrats control all three branches of government and have released a $1.9T covid bill. This is just the covid bill! Biden also has huge plans for infrastructure as well, meaning we will see another multi-trillion dollar bill this year! Because of the expected inflation from these actions, we've seen 10 year interest rates spike over the last month. An increase in interest rates means that big money is expecting increased inflation in the future and demand a higher interest rate to compensate for that. See 10 year interest rate spike below.
r/wallstreetbets - Silver, an undervalued inflation hedge with short squeeze potential
10 Year Treasury Interest Rates
While 10Y interest rates are spiking, the real yield (interest rate - inflation) is falling! See graph below. This means that you are losing more and more money by holding a bond/treasury. There are $20T of US treasuries that are yielding negative interest and the people owning them want to get out! They are losing purchasing power by holding those treasuries!
r/wallstreetbets - Silver, an undervalued inflation hedge with short squeeze potential
Real 10Y Treasury Interest Rates
So where will all the money go from the sold treasuries? Inflation hedges and stocks. What are some popular inflation hedges? Gold and silver. So which horse should we choose? Silver, because it has a much smaller market cap ($1T vs $10T) which means it is more volatile. Just look at what happened in 2020. From March to August, silver rallied 140% vs gold's 40%.
Silver is historically undervalued
There are a few ways to look at the price of silver today vs the historic price. If we look at a current CPI inflation adjusted graph, we will see that the all time high of silver in 1980 was around $120/oz.
r/wallstreetbets - Silver, an undervalued inflation hedge with short squeeze potential
Current CPI Inflation Adjusted Silver Prices
This shows that there is huge upside in the price of silver from where we are now, but that doesn't tell the whole story. After the inflationary 1970s, there were sweeping changes made to the CPI to mask the large amount of inflation that was occurring. You can read more about these here. Shadow Stats, a website devoted to measuring economic indicators with the original methods, has a graph of inflation measured with the old CPI shown below.
r/wallstreetbets - Silver, an undervalued inflation hedge with short squeeze potential
1980 CPI Consumer Inflation
If you've wondered why cost of living, houses, and other assets have gone up a ton over the last twenty years, while reported inflation is very low, this is why. If we use the 1980s CPI to calculate the inflation adjusted price of silver, we get a much different story.
r/wallstreetbets - Silver, an undervalued inflation hedge with short squeeze potential
1980 CPI Inflation Adjusted Silver Prices
This shows that the real all time high of silver is around $700! That's 26x the price of silver today. It's an understatement to say we are a long way from all time highs. What could bring us back to these highs?
Silver supply and demand
Over the past 5 years, silver supply has been drying up. It is becoming harder and harder to get silver! This is due to declining grades at existing projects, a lack of new discoveries, and very few new mines coming online. Below you can see the change in the annual mine supply and the amount of money being invested in finding new mines.
r/wallstreetbets - Silver, an undervalued inflation hedge with short squeeze potential
Changes in Annual Silver Mine Supply
r/wallstreetbets - Silver, an undervalued inflation hedge with short squeeze potential
Annual Additions to Silver Mine Capacity from Development Projects
While silver supply is shrinking, the demand is exploding. Emerging technologies, like solar, exceedingly are in need of silver. We already touched previously on Biden's upcoming infrastructure/green bill, which was one of his largest campaign points. His agenda is to move away from oil and fossil fuels and towards green energies like solar. Many of these green energies use silver, which will create sustained demand into the future! Not only will there be sustained demand, but many banks are short silver leading to a possible short squeeze in the price.
Silver has short squeeze potential
Silver has been heavily shorted and manipulated for years. There are multiple cases about JPMorgan and other banks resulting in over $1B in fines. Also, the paper silver market is over 200 times the physical silver market which means that there is not enough silver to go around if people take delivery! Investors pulled record amounts of silver off the COMEX earlier in 2020 and have started again. There are massive inflows into SLV, around $750M last week and $500M in one day. Look at the chart below to see the massive spike in inflow.
r/wallstreetbets - Silver, an undervalued inflation hedge with short squeeze potential
SLV Inflows
SLV is an ETF that holds its silver in allocated accounts, which means it is taking the silver off the market and contributing to the paper silver squeeze.
How to play this
I have 6/30/2021 $25C on SLV but I have heard PSLV is just as good. Both hold physical silver. Miners, like AG, are leveraged silver, but they will not contribute to a squeeze because they are producing silver, not pulling it off the market. My positions are shown below.
r/wallstreetbets - Silver, an undervalued inflation hedge with short squeeze potential
My Positions
If this is well received, I will release future updates.
TLDR:
Silver is the perfect inflation hedge, supply is shrinking while demand is spiking, and a short squeeze could occur. Silver to the motherfucking moon. 🏄♂️🌕🚀
Obligatory: I am not a qualified licensed investment advisor. I don't know anything. I'm just a software engineer with too much time on his hands.
Edit: It's come to my attention that Robinhood is limiting the purchase of SLV shares. Fuck this app. I'm moving off it if I ever close this position and switching to Fidelity, TD Ameritrade, or Vanguard. I would recommend you all do the same. These people are criminals.
Edit2: To get around Robinhood’s bullshit limits, you can buy deep in the money calls and then exercise them, giving you the shares. (GME post showing how)