Can Reddit’s Silver “Monkeys” Beat the Market?
LONDON, July 9 (Reuters) – (The seventh paragraph contains language that may offend some readers)
Kerry Kraker, 56, has worked in kitchens her entire life. Since March, he has spent around $ 100 a week – half of his available money – on silver coins. He is part of a growing social media movement that claims to buy bullion and coins to protect against an era of inflation to come.
Thanks to a community of like-minded money “stackers” on social media platform Reddit Inc., Seattle-based Kraker says he also feels empowered.
“They are so encouraging and convinced of the changes they can bring about,” Kraker, who lost her home in the financial crisis, told Reuters.
Inspired by the Reddit WallStreetBets forum, some of the 122,000 community members are hoping to corner the market and bring down what they say is an unfair banking system.
Market professionals say this is unlikely to be successful – there is a lot of money, and central bankers in the US and Europe expect inflation to stay in single digits.
But bankers fail to this group.
“There’s a little bit of anger, like ‘fuck the system’. If there’s a backdoor to wealth, I could take that door because the front door is closed,” Kraker said. “Bankers and the like have basically closed this door to anyone who is not themselves.”
The heart of the movement is a Reddit community called Wall Street Silver, formed in January when WallStreetBets organized an uprising of ordinary people against financial elites, through coordinated buyouts of company shares.
Reuters spoke to more than 20 members, who call themselves “silverbacks” and “apes,” have a homepage featuring an image of a marching primate army from the movie “Planet of the Apes” , and say things like “Ape like brilliant.” They organize “raids” – days when everyone buys together.
Group founder Ivan Bayoukhi is a 24-year-old former car salesman living with his parents in Alberta, Canada. “NOW IS THE TIME TO WAKE UP AND TAKE BACK POWER IN THE HANDS OF THE PEOPLE” said one of its characteristic positions.
Silver costs around $ 26 an ounce. Stackers believe the price will rise as inflation erodes the value of currencies, the demand for silver increases, and the supply runs out. Some say that by buying bullion and coins, they can drive prices up 100% or even 1000%, to the point where they can get the upper hand against the so-called investment banks, the big institutions. financial institutions that direct the trade in precious metals. .
A walk Publish in the photo silver coins arranged to spell a message to the director of JPMorgan Chase & Co, a US investment bank that dominates the gold business: “KISS MY ASS JAMIE DIMON.” JPMorgan (JPM.N) declined to comment.
“In a year or two, we will have millions of people on the move,” Bayoukhi told Reuters. “And then it will be over for the bullion banks.”
“THE MARKET CORNER”
The prices of silver and gold, which are traditionally considered to be safe stores of wealth, have increased since 2019: gold has risen by around 40% and silver by around 70% since then. Money stackers join millions of people around the world who think currencies are vulnerable – a fear that grew as governments borrowed and printed money during the pandemic.
“It scares me every day when this bomb goes off,” said Tim Hack, a 23-year-old stacker in Germany. “Silver and gold do have an intrinsic physical value that you can even sense when you hold it in your hand.”
Posters on Reddit joined the silver fray on January 27, when posts appeared on WallStreetBets saying that if enough people bought the metal, they could push prices to the moon.
“Around the corner from the market,” said one of them.
An argument on Reddit added to the momentum that big banks are trading huge amounts of paper contracts for money they don’t have in their possession, keeping prices lower than they should. being.
In some ways, this is correct.
Contracts worth around 800 million ounces of silver are active in the New York City futures market alone – more than double the amount, according to the exchange, is in its registered vaults, not all of which are available for purchase. delivery. Much of the money banks buy and sell in London, another major shopping center, is borrowed, according to bankers and traders.
If all professionals who have money on paper paid their dues immediately, there would not be enough metal on hand, they agree. The system works because most of the people who have contracts don’t want real metal, they would have to pay to store and insure it. They are speculators, or miners and jewelers, who cover their risks.
After the posts on WallStreetBets, around $ 3 billion rushed into a fund managed by Blackrock Asset Managers (BLK.N) that stores money for investors. Blackrock said it added more than 100 million ounces of silver to its inventory in three days. The wholesale price of silver has jumped nearly 20%.
Much of the money stored for Blackrock is in London. The London Bullion Market Association (LBMA), an industry body, later said there had been “concerns that London was running out of money”.
Blackrock told Reuters he did not know where the money was coming from.
The founder of the Reddit group, Bayoukhi, said he watched with increasing excitement, turned to his father and said, “Why don’t I create a money community on Wall Street?”
There is also some truth in Redditors’ claims that big players can influence the money market. One of the tactics of traders is identity theft: sending bogus buy or sell orders to change prices before completing the actual transaction.
In 2020, JPMorgan paid US authorities $ 920 million to settle accusations that its staff sent “hundreds of thousands” of bogus orders to the precious metals and treasury markets. The bank said at the time that officials were gone and it had improved its compliance systems. He declined to comment further on this story.
But the impact of identity theft lasts only seconds or minutes, said Ross Norman, a former London-based precious metals trader.
The January tightening lasted three days. Then, WallStreetBets focused on the stock markets; the money has calmed down. Since the beginning of February, the price of silver has fallen by one dollar.
Undeterred, Wall Street Silver publishes a deluge of advice, analysis, memes, photos and encouragement. It’s only the 3,783rd largest community on Reddit, but it’s frequently in the top 20 for daily post volume.
When a new member posts, Bayoukhi has often answer saying, “You are now a family forever.”
“A TIME FROM HELL”
Reddit buyers are sitting at the end of a big money pipeline. Only about a quarter of the billion ounces produced each year is used to make the bullion and coins that most of them buy, analysts say. Most of the rest is used for jewelry and industrial applications.
Michael Mesaric, who runs the world’s largest gold and silver refiner – Valcambi SA, Switzerland – says 1000-ounce silver bars used in the wholesale market are plentiful: for small investors, to think that they can corner the market is “completely wrong”.
“They can design a squeeze on the products,” he said. “But the money in total? They’re going to have a hell of a time.”
Investors will be storing a lot of money this year, but less than in 2020, according to consultants Metals Focus. Demand in the West is strong, but in India, one of the biggest money-consuming countries, the pandemic is reducing people’s ability to buy, they say.
Funds like Blackrock’s stored 331 million ounces – the most ever – in 2020, Metals Focus said in a report for the Silver Institute; bullion and coin buyers won an additional 200 million ounces. This year, the advisory firm expects funds to raise 150 million ounces – the second highest level on record – and buyers of bullion and coins 253 million ounces.
Silver coins and bars can certainly hold their value. Higher inflation is expected to push prices up, as is growing demand from manufacturers of products like electronics and solar panels, said Rhona O’Connell, analyst at StoneX traders and brokers.
But she, and others at companies that trade the metal, think the $ 1,000-an-ounce forecast is out of this world.
Of 39 analysts and traders polled by Reuters in April, only seven believed silver prices would average $ 30 or more in 2022. The highest average they forecast was $ 44.
The editors are not moved. Kraker, the restaurant worker, began to obsessively read about inflation, money supply, and other economic data. “There is a monster around the corner,” he said. “I’m trying to sharpen my stick.”
(This story has been corrected to add the deleted word “million” in section 2)
Peter Hobson reported from London; Edited by Veronica Brown and Sara Ledwith
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