I have been noting lately some of the discussion around the short squeezes related to GameStop and certain other stocks. Basically, GameStop short positions exceed the total float of GameStop shares, and a crowd on Reddit decided to bid the share price up so that the shorts would suffer a huge losses. And they succeeded. So then they got the idea to ply their tactics on stocks of other companies such as Bed Bath & Beyond and AMC, with some success with those stocks also.
Flush with the exuberance of inexperienced success, they seem to have lately decided to squeeze the silver shorts. In doing so, they have shown they do not understand the market. It’s one thing to take on the GameStop shorts. Quite another to go up against the silver shorts. Now they are trying to enter the big league. I have very little doubt that the silver price will be energetically headed north, but that process needs no help from the Reddit crowd. Silver tends to be produced largely from mines that are primarily base metal mines, driven by industrial demand. Yes, there are mines that primarily function on account of the silver in them, but a large part of supply is a by-product of mining other minerals. The economic slowdown has reduced such mining activity. In some cases, mines have closed directly as a result of covid. There is a shortage of silver production, just like there is of uranium. Further, the demand for silver as a critical component in several key industrial processes, besides jewellery and investment, is likely to outstrip supply for some years to come so far as I can tell. So yeah, silver doesn’t need Reddit.
The Reddit warriors can’t squeeze the silver shorts anyway. GameStop has a float of less than 50 million shares. If you are short and the price starts getting away, you have to buy stock. You could buy call options to accomplish the same thing, but the short positions were cumulatively so big that buying calls would have driven the options to unreasonable prices. Silver is different. If you are short silver, you can buy futures, options on futures, silver ETFs, and shares in silver mining companies to hedge against losses. You won’t have to get squeezed. Further, I think the main silver shorts have the ability to affect trading rules. These people are powerful. The Hunt brothers, multi-billionaires when a billion was something, found out 40 years ago just how powerful the silver short interests are. If the Hunts could be squished, so can the Reddit mass.
Nothing succeeds like success, but nothing goes to the head like success either.
