Spot Silver prices eased back on Wednesday reports Market Moves.
A general improvement in economic data, seen in Europe, the US, China, India and Australia spurred the white metal’s advances, as it once again puts it’s more expensive cousin, gold in the shade.
But Silver’s value is far from a sure thing according to Edward Lotterman.
“Silver or gold can serve as a hedge against inflation, but be wary if anyone tells you they are sure fire investments” says Lotterman.
“The problem is that anything, whether bread, a haircut or a house, has value only because it meets peoples’ needs or wants. It has no absolute value in itself. The same is true for gold and silver, even though these often are described as having “intrinsic value.”
Because they are scarce and durable, gold and silver can perform the classic functions of money as “a medium of exchange and a store of value.” Yet, these metals’ “values” are not given from on high. They depend on relative scarcity, which varies over time, and on people’s preferences. Their prices yo-yo relative to each other and to quantities of various sets of goods and services.
Jeffrey Lewis also warns about Silver value investing with a financial system that is off the rails.
In a recent interview, John Bogle commented on the current global financial system, noting that while the amount of money in the financial industry expands, so does active trading. Mutual funds, a savings vehicle of choice, were once turning over only 18% of their holdings each year. Today, Bogle says, funds have turnover as high as 100% – the funds move enough investments that they’re virtually replacing each holding in less than one year.
Bogle backs a view that other fund managers also embrace: trading is not a substitute for economic activity. Warren Buffett backs this view. As does Charlie Munger, Warren Buffett’s right hand man, who says in many interviews that Wall Street would be better if it focused on investment and not trading. Wall Street’s millionaires and billionaires are made by short-term transactions of buying and selling hot investments. They’re not making money in the long-term, just making money off many short-term “holdings”.
