In Ted Butler's Archive


Market bubbles are rare events, occurring once in a generation. True financial bubbles were the dot-com stock bubble that peaked in 2000, the U.S. housing market in 2005-2006 and today’s stock market in China. Based upon what has transpired in silver over the past four years, I believe that what has been created is a reverse price bubble – the opposite and mirror image of a financial bubble. A financial bubble involves vastly overvalued prices; a reverse bubble features a shockingly undervalued price. A financial bubble involves vast numbers of participants and reckless leverage, the reverse bubble in silver features only a handful of market participants and little borrowing. Most importantly, it’s just a matter of time before a regular bubble bursts with crashing prices, while in a reverse bubble it is inevitable that prices will explode.

Reverse bubbles are rare. Instead of many investors pushing prices too high, too few investors have allowed prices to collapse. All that matters in a regular bubble is getting out before the crash. In silver’s reverse bubble, all that matters is getting in before the price explosion. And when you hold fully paid-for silver, getting in too early should not prove paramount: better to be years early than a day late.

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