Thursday, September 27, 2012

Short Silver Says Queen Anne Gate Capital Management

I think in the not too distant future the call by Queen Anne's Gate Capital Management CIO Kathleen Kelley to short silver will come back to haunt her and the company, as she said she sees commodities as a "supply-demand play," when talking on CNBC's Fast Money.

She said, "When we look at demand -- supply is adequate in most of these commodities -- when we look at demand, including coming from China, in a lot of these sectors it's just not there.

"For example, copper demand is actually holding up OK in China because it's tied to the power grid and the infrastructure spending. The infrastructure budget in China hasn't really been used and probably will as we change leadership there, there'll be more of a potential to use that."

Most people wouldn't argue with supply/demand assertion for most commodities, but silver isn't simply an industrial metal, as most investors know, so to treat it as such in a way that doesn't take into account its value as an investing alternative to gold in a quantitative easing environment which will push down the value of the U.S. dollar and boost inflation, makes no sense whatsoever.

It's like saying they're going to pretend silver isn't considered a place of safety and a hedge in economic environments like this.

Silver must be analyzed with both sides of the equation in place as just a starting point, let alone the more complex side of industrial supply and demand.

You simply can't legitimately analyze the white metal from only one half of the impetus affecting the price movement of silver.

It's like looking at one half of a baseball team and determining how the overall team will perform against an opponent. You must include all members of the team to make an assessment that is even close to being accurate.

Silver must be treated the same, and to only look at the industrial supply/demand is to leave out a major catalyst for the price of silver, and the consequences will be a skewed result.

That's where Queen Anne's Gate Capital Management CIO Kathleen Kelley is at, and it doesn't speak well to her limited thinking in the matter.

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