Price of silver continues to climb to extraordinary levels

[michaelbsc]

Well, this was the problem with Kodak's model and that of just about every other film company. Large countries like Brazil and China as well as parts of Africa just jumped into digital and bypassed analog. The Kodak model said B&W analog -> color analog -> digital, but the analog was bypassed due to the huge drop in prices of digital items.

PE

My conjecture was based on watching plants implement control systems. A "new" roll out in an existing plant is likely to use legacy technology. But a new plant is likely to use new technology. Likewise I expect new markets are likely to embrace new technology unless the new technology is prohibitively priced.

This is pure conjecture in my part. I have no research to back it up.

 

[keithwms]

I have no research to back it up.

For the record, me neither. I am curious to hear from those inside China and India whether they are really going straight to digital. Last I hear, i thought fuji was doing quite well there with instant film.

 

[keithwms]

Yesterday I saw an ad for a report that China was behind the surge in the price of silver...

Hmm, I wonder why that'd be. I know that it is still widely used in electronics and currency and of course jewelry. And they don't really have much of a photographic industry, do they? I thought industrial use of silver was in sharp decline. Something like a third of all mined silver used to go to the photography sector.

I wonder if it's just being bought up as an inflation hedge... I thought most of that hedge buying was for gold.

My uninformed guess is that the Chinese are worried about their currency in the long term; it's not really got a firm basis and they are still quite reliant on the dollar as a benchmark. My understanding is that they don't even have a treasury and central bank structure and so the renminbi's value is still set by some sort of group of old guys sitting around a card table. If that's true then they'd be wise to use their cash to buy up gold and silver. Previously they'd just stash dollars, but with recent events and the threat of big inflation in the US, gold and silver make a lot of sense.

 

[dfoo]

For the record, me neither. I am curious to hear from those inside China and India whether they are really going straight to digital. Last I hear, i thought fuji was doing quite well there with instant film.

I lived in Shanghai for 4 years. The vast vast majority had some digital form of camera. Most simply used their cell phones.

 

[michaelbsc]

For the record, me neither. I am curious to hear from those inside China and India whether they are really going straight to digital. Last I hear, i thought fuji was doing quite well there with instant film.

I lived in Shanghai for 4 years. The vast vast majority had some digital form of camera. Most simply used their cell phones.

How about smalle places?

How many towns are 10K-30K people with older infrastructure?

 

[Photo Engineer]

My conjecture was based on watching plants implement control systems. A "new" roll out in an existing plant is likely to use legacy technology. But a new plant is likely to use new technology. Likewise I expect new markets are likely to embrace new technology unless the new technology is prohibitively priced.

This is pure conjecture in my part. I have no research to back it up.

Michael;

I have to state that prices on digital items dropped so fast that a plant was obsolete before built. A case in point is the Kodak DVD and CD plant in Ireland. I left EK when it was just starting and one of my guys went to work on the project. He said that the price per unit was X but by the time the plant was built and on-line the price was 1/10 X and therefore the plant had to be redesigned at great cost. Finally, I believe that it went out of production. Now, you might argue that this was bad planning - well, I agree, but it illustrates the problem with the market. Prices drop so fast in digital that plants can become obsolete and the smaller players (read EK perhaps in this case - or maybe their model was off? ) can be burned badly.

PE

 

[Tim Gray]

How about smalle places?

How many towns are 10K-30K people with older infrastructure?

Are there that many small towns in China of only 20k people?

When I was in China in 2005, before I started shooting film, I had absolutely no problems finding photo places (with Kodak branding all over them) that would dump my memory cards to CD for me. Of course this was in a small city of about 3,000,000 people, but it's one that most westerners probably haven't heard of.

 

[Aristophanes]

China was and remains a huge market for digital kiosks due to the fact that many people have no phones or computers.

The vast majority of the developing world has no access to a PC, period. Photos are processed digitally via kiosk or on the cloud (Flickr). Printing is an exceedingly rare afterthought.

I lived in West and Southern Africa in the 1990's, pre-digital, and I could get film and batteries in many places. People did not have landline telephones, but they were into film for decades. When celphones came out they made the leap and those have now become their cameras and PC's. Absent landlines and cableTV high speed broadband is not a fixture of the developing world (that and horrendous telecom monopolies). The internet cafe has been the workaround.

Most DSLR's have in-camera processing precisely because the majority of the new market will not use a PC to process. Nor do they have mini-labs for film anymore as digital is far more cost-effective and scales better.

IMO film will exist, both colour and B&W, as an artisan product. My understanding of the economics of the motion picture industry is that film is a decade away from obsolescence as the sunk cost of emulsion and Digital ICE is still cost-effective and substantially high-quality.

The real danger for film manufacturing is not the price of silver or petrochemicals, but whether SLR or RF cameras will continue to be designed and manufactured, including critical source components like Seiko shutters. The world can only coast along for a limited time with no new product to house 135 and 120 production runs. As much as I am annoyed by the hipsterism of lomography, they've wittingly stumbled on the economic conundrum facing analog photography. Without the economy-of-scale of 135 in particular, emulsion films are at risk.

 

[Photo Engineer]

Aristophanes;

There was a migration of used analog 35mm and MF cameras to Africa in the early 90s as the photo enthusiasts bought the less expensive used older generation cameras. This also took place in SA and thus Kodak built the plant in Brazil to "feed" the need for analog products in the southern hemisphere. Unfortunately, the model overlooked the fact that prices would drop rapidly on digital goods.

Kodak's experience in China was that quite a few people there wanted color prints due to the lack of computers and so the photos were transmitted to a hub kiosk, optional CDs were burned, and prints were made. A lot of film was shot in China to be digitized and then sent all around the country to show extended family what was going on.

PE

 

[cmacd123]

Globe and Mail reports a new high for silver again today ;(

 

[michaelbsc]

Globe and Mail reports a new high for silver again today ;(

Man my freezer must be valuable.

 

[cmacd123]

I know that it is still widely used in electronics and currency and of course jewelry. ..... I thought industrial use of silver was in sharp decline. Something like a third of all mined silver used to go to the photography sector.

This articel today

http://www.theglobeandmail.com/glob...source=Report On Business&utm_content=1998024

or http://bit.ly/hLooZj
has some background.

 

[Moopheus]

My understanding is that they don't even have a treasury and central bank structure and so the renminbi's value is still set by some sort of group of old guys sitting around a card table.

I think these guys might be surprised to hear that.

 

[keithwms]

I don't know. These analysts' predictions tend to rely a bit too much on rational behavior: "if this happens, then investors should do this or that." But there may well be some irrational behavior and/or currency speculation at the root of this. If you believe that the there will be another round of quantitative easing and the dollar is going to hell and the US debt limit will be held hostage to petty politics and the US sovereign debt rating will fall and the FY 12 budget will be gridlocked from one continuing resolution to the next, well then precious metals are about to get a lot more precious. But that kind of thinking also packs a lot of innocent lambs into a very small corral...

These are curious times.

 

[Moopheus]

If you believe that the there will be another round of quantitative easing and the dollar is going to hell and the US debt limit will be held hostage to petty politics and the US sovereign debt rating will fall and the FY 12 budget will be gridlocked from one continuing resolution to the next, well then precious metals are about to get a lot more precious. But that kind of thinking also packs a lot of innocent lambs into a very small corral...

Yes, but there some wolves out there willing to fleece those lambs. I for one would not bet on another round of QE. The US debt rating is irrelevant. I mean, we're supposed to believe the folks who said junk mortgage bonds were AAA and are now saying Treasuries might not be? They've cut Japan's debt rating several times and Japan's debt position is way worse than ours and yet Japan can still borrow very cheaply. In the short, term, sure, it'll be a political football, but a US default will never actually happen; the Fed won't let it happen, no matter what.

 

[Poisson Du Jour]

I take the view that a sluggish US economy / recovery is responsible for rampaging overseas currencies, at least — most obvious with the Australian dollar now heading for $1.10 after blind-siding the US greenback. The Australian dollar appears as a "safe haven" in currencies, but so too, is demand in, and investment for, precious metals. Our high dollar rate is here to stay for as long as the US economy stutters.

Commodities speculators are driving precious metal price volatilities. Speculators are behind the sky-high $/oz of gold and silver. It's not that silver, oil, gold etc is more difficult to mine than it once was, just that with Libya up the creek, oil is no longer the "flavour of the month" for plea-bargaining, and the bigwigs who mine it know the public will buy less of it at astronomical prices (not quite that level at the moment due to our strong currency).

Not sure of the relevance of the US debt (but surely there must be a limit to it somewhere, rather than constantly raising the ladder rungs a trillion at a time??), just it's slow pace of recovery. If it balloons along snappily, the scales will be tipped, but probably, by many forward thinkers, not for a year or two.

 

[walbergb]

Sorry for the typo was intending approx 40% but was multitasking and didn't pay attention to the keys. The "0" didn't get pressed hard enough before I hit reply.

Maybe that's the same reason why gas and silver are the prices they are

 

[keithwms]

Not sure of the relevance of the US debt

US debt problems could set off a cascade of events. In an extreme default, the Treasury would be forced to print money, which would of course spike inflation. And many important commodities and equities are effectively valued in dollars, meaning that they tend to move in opposite directions e.g. oil.... or stocks. If you see your currency inflating rapidly then the first thing you do is run out and buy something that will retain value, right, but you also want to be able to dump that quickly back into cash once the situation stabilizes. So you don't buy a house; you buy stocks. So we could see a really big pop in commodities futures and stocks. Arguably we are already seeing that. It is of course highly speculative buying.

Anyway just a digression.

Silver... like I said, lambs to the slaughter. The big drop the other day was just a little warning of things to come. But there could be a really big bubble still to come. The scary thing is that this is how investors are acting when we are still at basically zero core inflation and with the quantitative easing program put on ice. How will they act when a healthy dose of real inflation comes back...

 

[cmacd123]

Speculation is behind a lot of it.

China has been buying up commodities to keep up their stock piles. Copper is also up.

The EU now requires that most electronic things use Lead Free Solder, pure tin can grow "wiskers" and act up so most solder now has some silver in it. With one world market, this applies to many electronic items which will never see the EU.

Would not be surprised if Ipads now use more silver then film ever did.

 

[Dennis S]

Maybe some good news:
http://www.marketwatch.com/story/si...n-abrupt-end-2011-04-29?link=MW_story_popular :

 

[Jim Noel]

We all survived silver at nearly $40 when the Hunt brothers attempted to corner the market. I think we will survive this one. However, I am glad that I have over 15 troy ounces on hand for my alternative processes.

 

[cmacd123]

Maybe some good news:
http://www.marketwatch.com/story/si...n-abrupt-end-2011-04-29?link=MW_story_popular :

Even more:

http://www.theglobeandmail.com/repo...source=Report On Business&utm_content=2010183

or
http://bit.ly/kK4PRx

 

[GeoffHill]

Silver has now dropped to less than $38, from a high of $50 a few days ago

 

[Moopheus]

$36! That's still pretty high but better going down than further up. Broad sell off across all commodity markets today. Be interesting to see how far this goes.