December 23, 2007

Silver stock dwindling?

I know Silver Bugs have been sitting on their hands for the past few months or so, but it might well be this inactivity will soon come to an end.
Why so?
If you've tried to buy silver bullion coins (Maples or Eagles) lately from Kitco (one of the largest sources of bullion e-trade) you'll pretty much know the answer...
There aint' any silver bullion coins for sale! They are out of stock!
I don't know how bad this silver shortage is going to be or if it's going to be hastily met with scrap or even China dumping metal into the market but it does surely point to price increases ahead.
So keep buying on dips because The Crunch is coming!

October 10, 2007

Ted Butler: A Picture Worth A Thousand Words

A Picture Worth A Thousand Words

By: Theodore Butler

This chart depicts the current condition of the concentrated short position for every applicable physical world commodity, in terms of days world production, from data published by the CFTC. (Chart courtesy of sharelynx.net)

click for magnification

I know of no legitimate economic reason why silver would have such a large concentrated short position, when compared to every other physical commodity. I conclude that the abberation in silver (and, to a lesser extent, gold) can only be explained by manipulation. This is the point that the CFTC and the NYMEX continue to evade

October 2, 2007

Silver content nightwear to launch in UK to protect from superbug

Here's another interesting newsitem about silver's  industrial usage that increases the drain upon whatever metal quantities are left in stock (source: Mineweb)

Silver content nightwear to launch in UK to protect from superbug

A big UK chain store is putting a range of nightwear on the market incorporating silver thread as a biocide to help prevent hospital acquired infections.

by Lawrence Williams

LONDON -

One of the biggest UK clothing chain stores, Marks & Spencer (M&S), is to launch a line of pyjamas containing silver thread to protect against hospital superbugs like MRSA in two weeks time.

As reported in Mineweb some months ago - see article Esoteric uses keep silver demand flying high, it is silver's bivalency which is perhaps the key, which makes the metal highly reactive to the extent that, among other things, it is a natural biocide which means growing medical usage - and it is being used in clothing too for people in arduous occupations - like the military. It has uses in combating many viruses like legionella - and in the UK perhaps in the fight against hospital borne diseases like MRSA.

According to a report on The Telegraph website Sunday, M&S will market a range of nightwear under the "Sleep Safe" banner and the first item in the line will be a men's pyjamas set to be sold at a cost of £45 (about US$90).

MRSA, a superbug which has hit many UK hospitals, is a major concern among many patients undergoing surgery. Again, according to The Telegraph, Katherine Murphy, a spokesperson from the Patients Association, said: "Superbugs are the number one concern of every patient going into hospital...We welcome the fact these are going on sale, but it shows how desperate the public is", while Dr Mark Enright, a microbiologist at Imperial College London, said the pyjamas would reduce the risk of a patient getting a skin infection that could infect a wound.

MRSA is linked to over 1500 deaths a year in the UK.

July 13, 2007

Historic Bolivian silver mine at risk of collapse

By Monica Machicao
Reuters
Thursday, July 12, 2007


POTOSI, Bolivia -- High silver prices are drawing a frenzy of miners to a colonial-era mine at Potosi in Bolivia, but the mine has become so dangerous that authorities fear the mine, part of a World Heritage Site, could collapse.

Cerro Rico (Rich Mountain) rises majestically above the town of Potosi, a symbol of a colonial past where Inca slaves died by the thousand extracting silver to enrich their Spanish masters.

Nearly five centuries later, thousands of ill-equipped and untrained miners are turning its graceful cone into a sponge of flimsy tunnels that threaten to cave in on miners working below, prompting Bolivian officials to consider partial closure.

"It's a very important symbol for the people of Potosi and for the people of Bolivia," said German Elias, mining director at Potosi's local government. "The Cerro Rico is a monument that virtually sums up the history of mining."

Miners have already protested the possibility that parts of the Cerro could be closed, sending a warning to leftist President Evo Morales, who has clashed with the country's notoriously rebellious miners over a number of issues in recent months.

The miners -- who work in small cooperatives -- would rather take their chances with danger than earn less money elsewhere or face unemployment.

"This is the only way we have to make a living and we have to risk our lives to work here in the mine," said 23-year-old Julio Mamani. He earns less than $20 per day, relatively good for South America's poorest country, where the average monthly wage is about $115.

He pushed a wheel-barrow heaped with rubble to be loaded onto a cart and carried out to the daylight above. A 13-year-old boy worked nearby.

... Bridge of silver

Legend has it that enough metal was extracted from Cerro Rico to build a bridge of silver from South America to Europe, and the mine has left an indelible mark on Bolivian culture due to the cruel toll it took on indigenous slaves.

Its vast reserves turned the nearby city of Potosi into the most populous in the Americas in the 17th century, with some 120,000 inhabitants -- more than London, Paris or Madrid at the time.

A slump in silver prices threw its elaborate colonial churches and mansions into a long decline and, while the recent metals boom has brought a little prosperity back to Potosi, the chilly highland region is still one of Bolivia's poorest.

"Mining started in the Cerro Rico in 1545, and it hasn't stopped since," said Manuel Farfan, the regional head of Bolivia's state mining company Comibol. "Production's increased today because of the prices," he said.

Today about 15,000 miners work the site every day in round-the-clock shifts, and conditions have not changed much since Spanish conquerors brought slaves to work here nearly 500 years ago.

The centuries of mining mean rich seams of silver are harder to find so greater risks are being taken.

"There are few places with a lot of silver so the danger is that miners are excavating the natural pillars that act like internal beams inside the Cerro," said Samuel Rosales, a former miner and sociologist who does research for Care International, a nongovernmental organization.

Potosi's mining director, Elias, said irresponsible removal of the natural beams meant more and more pressure was building up inside the mountain.

"The exploitation has caused a kind of sinking to take place in some parts of the sides of the Cerro Potosi in the recent past," he said.

Regional and national mining officials and experts from the state geology service, Sergeotecmin, are about to start work on a survey of the site.

Converting the site into an open-pit mine would cut the risks.

But local people have fought past proposals that would change forever the graceful silhouette of the mountain, which stands behind the chilly Andean city that lies nearly 4,000 meters (13,125 feet).

"The people of Potosi wouldn't allow it because the Cerro Rico is precious to all Bolivians," Elias said.

* * *

June 20, 2007

Oikonomika Blog: Unprecedented dishoarding by central banks fails to push gold down

Neal Ryan's daily gold market note for the Blanchard Economic Research Unit today added up the desperation of the world's central banks to prop up the U.S. dollar system by rigging markets. Ryan finds central bank gold sales of more than 240 tonnes in just the last four months, dishoarding at an unprecedented rate. "Seeing the gold price hold above the $640 level during this period of increased sales should be the best demonstration of just how robust the physical demand side of the market is at present," Ryan writes...
Read the entire erticle here:
Unprecedented dishoarding by central banks fails to push gold down

Ted Butler: The raptors rule

Silver market analyst Ted Butler's new commentary, "The Raptors Rule" analyzes the latest commitment of traders report and finds more evidence that the gold and silver shorts are starting to lose money to more nimble longs. You can find Butler's commentary at GoldSeek's companion site SilverSeek, HERE

June 14, 2007

Ted Butler: Concentration foretells silver explosion

Jim Cook Interviews Theodore Butler

Cook: You’ve been consistently bullish on silver from close to $4 an ounce. How bullish are you these days?

Butler: As bullish as I’ve ever been. Which, incidentally, surprises me.

Cook: Why?

Butler: Well, I always thought that after silver doubled or tripled, I would tone down. I never imagined that the market structure would remain so bullish and that new factors would be impacting the silver market.

Cook: What’s making the market structure look so bullish?

Butler: The level of the concentrated short position at this late stage of the game. It’s the one thing that tells me we have a long way to go before this move is over. I’ve talked many times about the big short position in silver. Others are beginning to take notice.

Cook: So, what’s happening?

Butler: We’re seeing more aggressive players taking on the big shorts.

Cook: Is it your current view that the four or less big dealers who are short so much silver may be losing control?

Butler: Yes, they may be a lot closer to losing control. They are facing competition from other commercial interests for the very first time.

Cook: You claim this short selling is a manipulation. If that’s true, why couldn’t the big dealers keep things under control for years to come?

Butler: It is becoming more and more obvious the level of concentration they hold in the market.

Cook: What level is that?

Butler: A recent COT report showed the big four or less traders were net short more than the entire total commercial net short position. There’s no rigid number that translates into concentration equaling manipulation, but if 100% doesn’t set off warning alarms, I don’t know what would.

Cook: Where do you get that information?

Butler: It comes straight from the government. They are the ones who acknowledge that concentration is a requisite for manipulation, and that’s why they publish the data.

Cook: What data?

Butler: The concentration data in the long-form Concentration of Traders report, which is published every week for every commodity.

Cook: These big dealers may be able to overcome the things you mention. They have a lot at stake.

Butler: Remember, there’s the law of the physical realm. Just like the kids’ game, rock, paper, scissors, the big shorts can sell all the paper they want and temporarily control the price, but the day of reckoning will arrive because those paper contracts represent a physical delivery requirement. That’s the guaranteed check-mate.

Cook: So, it has to end.

Butler: At some point. If you ask me when, my answer is that no one can know that.

Cook: Let’s talk about the new factors, the small dealers. You call them raptors. Who are they?

Butler: Like the big traders, their specific identity is protected by law. Why their anonymity is protected today is a mystery to me, but that’s a different issue. We can’t know their names, but we can know some things about them.

Cook: Like what?

Butler: They are most likely broker-dealers and financial firms, as opposed to hedge funds, who are not classified as commercials. We also know these firms are not likely to be mining firms or other hedgers, even though many assume that.

Cook: Why don’t you think these could be mining companies?

Butler: Because mining companies have been reporting that they have been buying back forward sales. The changes in the COT bear no relation to the quarterly reports from the miners.

Cook: What are the raptors doing now that’s got your attention?

Butler: As I’ve written, they have built up an impressive net long position against the dealers.

Cook: How do they do that?

Butler: By outmaneuvering the largest commercial traders, which I dubbed the T. Rexs. I speculated that the T. Rex looked increasingly trapped in their massive concentrated net short position.

Cook: That’s a startling development. What does it portend?

Butler: The long-term manipulation in silver might be on its last legs.

Cook: Can you give us more details?

Butler: The COT, dated May 22, indicates, in the clearest terms, just how powerful a force the raptors have become. In both silver and gold, the raptors accounted for the lion’s share of the week’s dealer net buying. While the biggest traders in gold and silver still have sizable concentrated net short positions, the raptors have sizable net long positions. In fact, the raptors in silver moved to their largest net long position in history according to this report – almost 14,000 contracts (70 million ounces).

Cook: How much are the big boys short?

Butler: That particular COT showed that the largest eight or less traders had more than 131% of the total net dealer short position. Incredibly, the four largest traders in silver had a net short position slightly larger than 100% of the total net commercial short position.

Cook: What exactly does that mean?

Butler: Without the four largest traders in silver, there would be no commercial short position at all.

Cook: Where would we be if they weren’t short that much?

Butler: Without these super-concentrated short positions, the price would be shockingly higher.

Cook: They’re holding the price down?

Butler: You will never see clearer public documentation of manipulation than this. Make no mistake that this situation in silver, which has been allowed to persist, is the single greatest regulatory failure in the history of financial markets.

Cook: Greater than Enron?

Butler: Sure. The regulators didn’t have years of clear warning about Enron. As you know, many hundreds of people have been petitioning the regulators about the silver manipulation for years. It’s that prior notice, based upon their own documented information, which renders this the greatest regulatory failure.

Cook: Whose culpable, the COMEX or the FCTC?

Butler: Both. We have a self-regulatory structure, which means the NYMEX/COMEX is supposed to be the first line of regulatory protection, overseen by the CFTC. Therefore, both have dropped the ball. What makes matters worse is that the NYMEX is now a publicly traded institution, which should make them more sensitive to this issue.

Cook: Let’s say a price explosion did happen in the silver market as you suggest to be likely. Won’t the exchange whitewash it and find a way to let the big shorts off the hook?

Butler: Many people seem resigned to that outcome, but I’m not so sure. There is too much awareness on this issue to sweep it under the rug.

Cook: A lot of these guys move from government to the private side and vice versa. If they are of one mind, it may explain why they have ignored your warnings.

Butler: I accept that. And, I further agree that they don’t want to see a scandal develop in silver. But, the factors concerning silver suggest to me that it will play out differently than what they desire.

Cook: You’ve certainly been a voice in the wilderness. Why do you think you are so alone in this analysis?

Butler: There are not many analysts who have 35 years of hands-on futures and options trading experience and have been personally involved in a major manipulation case as I was in orange juice 20 years ago. We all look at things in life through the prism of our own unique background and experiences, and I’m no different.

Cook: I found your last couple of articles about the commercial shorts in silver as dinosaurs to be interesting. But I can’t help but notice that you are alone in this type of analysis. Why do you think that is?

Butler: I think people have a natural aversion to the idea that a market may be manipulated, no matter how compelling the evidence may be. Mention manipulation and people automatically assume you are a conspiracy nut.

Cook: Okay. But not one analyst at the major financial firms ever mentions it. How come?

Butler: There’s a very practical barrier to admitting the silver market may be manipulated for those analysts employed by large firms.

Cook: Like what?

Butler: Like you don’t work here anymore.

Cook: Well, they ignored you when you warned about Barrick and other mining company hedging. You were right and they lost billions. I just keep thinking that in the case of the concentrated short sellers, the responsible parties will slip the noose.

Butler: It’s not going to be possible to escape the bullish consequence of the silver manipulation as it unwinds.

Cook: Okay. In spite of the concentrated short position, the silver market looks healthy. Any comment?

Butler: To be sure, the recent sell-offs in gold and silver have improved the market structure. It’s flashing all green. We are in the best COT structure in silver in seven months. It’s indicating low risk and high reward. Further sell-offs will only improve the market structure. This is not a time to be timid, in my opinion.

Cook: When the rally commences, how far will it carry?

Butler: That will depend on the selling behavior of the big dealers. If they sell short aggressively on the way up, the rally will eventually be capped. But even then, it could run two dollars or more in silver. If they don’t sell aggressively, then the rally will carry much further, perhaps morphing into the big one, which ultimately is inevitable.

Cook: What if the raptors get even more aggressive in their buying?

Butler: It injects a new dimension. Previously, it was always the tech funds versus the dealers. In that match up, the dealers always won. Now, we’re talking about something else – dealers versus dealers. This match up is different, and potentially very profound. The main point is that conditions are definitely changing in COMEX trading patterns.

Cook: In what way?

Butler: The terrible performance and loss of assets of some of the technical trading funds. Not all of them, and certainly not hedge funds in general, just some of the super-mechanical funds that the dealers have been snookering for years on the COMEX. Like the one I usually mention, John W. Henry.

Cook: Anything new with them?

Butler: Just this week there were published reports in the Wall Street Journal that John Henry’s biggest investor, Merrill Lynch, was pulling out $600 million due to poor performances. This would knock Henry’s trading assets down close to $500 million from where it was two years ago, or $3.2 billion. That’s an 85% decline in trading assets, and with it, a commensurate decline in trading positions.

Cook: What does that mean for silver?

Butler: It means the food supply for the dinosaurs is shrinking. The dealers knew how to play the mechanical tech funds and lived off them for many years. But, now that these tech funds are disappearing, the T. Rexs and the raptors have to hunt differently.

Cook: So, how will it play out?

Butler: No one knows for sure, but it will be a different pattern than we’ve seen. It is the prospect of change that encourages me. We’ve had ironclad control by the dealers for the past 20 years in silver because they preyed on the tech funds. That period encompassed the silver manipulation and provided the reason for the manipulation – profits to the dealers supplied by the tech funds. That era appears to be ending, and with it, hopefully, the long-term manipulation.

Cook: The Silver Institute just came out with its 2007 Silver Report. Any comment?

Butler: The world is still not generating a surplus of silver in spite of the sharp rise in price. While this is true in most industrial commodities, it is particularly important in silver.

Cook: Why?

Butler: Silver is unique among industrial commodities because it’s also an investment. It’s this potent combo, industrial demand plus investment demand that gives silver the moonshot possibility. And, considering the amount of investable wealth being created in the world, it’s hard to imagine some of that wealth not spilling into silver. It’s a booster rocket in silver is just waiting for ignition.

Cook: Can you sum up the current situation?

Butler: After 60 years of deficit consumption, the amount of silver available per capita is the lowest in history. At precisely the same time the amount of investment buying power is the highest in history. Throw in the manipulation, the short position, the unrelenting demand from China and India, and the obstacles to increased mining production and I need to lie down and be calm to tone down my long-term bullish feelings.

May 24, 2007

Jason Hommel: Why Silver will Soar

Silver Institute Survey
Silver Stock Report
by Jason Hommel, May 23, 2007


On May 14th, the CPM group issued their "CPM Silver Yearbook 2007", and I commented on it in my report, http://www.silverstockreport.com/2007/230.html

Today, the Silver Institute issued their annual "Silver Survey" of supply and demand. http://www.silverinstitute.org/news/pr23may07.html

A notable difference between the surveys is the estimated annual mine supply.

The Silver Institute lists mine production for 2006 at 646.1 million ounces.

The CPM group estimated 2007 mine supply to increase 3% to 520 million ounces.

Maybe I don't understand the nuances of how they are counting, but that's a big difference.

Nevertheless, both surveys put net investment demand for 2006 at about 60 million ounces.

The Silver Institute put 2006 net investment demand slighly lower than in 2005, while the CPM group listed net investment demand up in 2006.

The Silver Institute put net government sales at 77 million ounces, more than net investor demand.

In sum, both surveys show that the silver market is very small, and very tight. Silver consumption vastly exceeds annual silver mine supply, and the difference is largely met by silver recycling.

I'd like to make two big main points. First, people are unaware of the fundamentals, and second, the fundamentals are fantastic.

First, despite the different numbers, I think the surveys are mostly correct. They are sponsored by both silver producing companies and silver using companies, so the sponsorship bias should be neutral. But these are industry surveys mostly produced for people in the industry. The CPM group and Silver Institute are not marketers, nor do they have large marketing budgets. They do survey work.

Therefore, most silver investors are not familiar with these surveys, nor who produces them. But I think they should be. (But I'm biased as a silver investor.) I've polled silver investors at the mining shows who have come to hear the guy from "silverstockreport" speak, and perhaps less than 5% of silver investors have heard of the CPM group or the Silver Institute, by a show of hands. This is a very bullish signal. The silver fundamentals as presented by these two silver surveys are fantastic. If silver investors are unaware, then likely most of the world is unaware of the fundamentals for silver.

Second, the fundamentals clearly show that there is no room in the silver market for any significant investor demand. Net investor demand was listed by the Silver Institute as 64 million ounces. At an average 2006 price of $11.55, 64 million ounces was $739 million of net silver investment demand.

M3 is calculated to be $11.5 trillion. Source: http://www.nowandfutures.com/key_stats.html

World Net Silver demand in 2006, as a function of U.S. money in the banks, is ($739/$11,500,000), which is 0.006% of U.S. money.

If the wider public became aware of the silver fundamentals, net silver investment would be much higher, and so would silver prices. With a market this tight, and the world this unaware, the silver price will probably rise much higher than anyone can predict.

Silver prices were up 58% in 2006 at $11.55 per ounce, up from an average 2005 price of $7.31 per ounce. Prices in 2007 now seem cheap on the charts having recently dipped to about $13.04 today.

And given that investors tend to buy more of things that show positive investment returns, net silver investment demand can continue to increase for a long time, helping to cause the very returns that investors seek.

May 20, 2007

Hugo Salinas Price: The silver bridge

Hugo Salinas Price, president of the Mexican Civic Association for Silver, elaborates on his proposal to put silver back to work as a regular currency in the world's foremost silver-producing nation. His essay is titled "The Silver Bridge" and you can find it at Jim Puplava's Financial Sense

May 18, 2007

Mineweb: Esoteric uses keep silver demand flying high

Mineweb: Esoteric uses keep silver demand flying high

Although some traditional uses for silver are declining, a number of newer ones are taking their place and hold out great promise for contributing to good demand in the future.
Author: Lawrence Williams
Posted: Friday , 18 May 2007


LONDON - In an address to the World Mining Investment Congress in London, Silver Standard President and CEO, Robert Quartermain, who also is the Vice President of the Silver Institute, devoted most of his address to factors affecting silver supply and demand rather than promoting his own company - which indeed has much going for it - to the audience of bankers, brokers, fund managers, mining company executives and investors.

Like virtually all the base and precious metals, low prices for many years meant that exploration and new mine openings have been rare and silver supply has been falling short of demand - even though its monetary element has diminished, as has the main industrial usage in the photographic sector. Pure silver mining operations are relatively rare in any case and the metal often is produced as a byproduct to gold, copper or lead and zinc - all of which suffered from the exploration malaise from low metal prices - or with one or more of these metals as a co-product, or at least as a significant revenue contributor. Only now are significant new silver producing operations beginning to come on stream, but these are hardly replacing the declining output from many older and declining producers.

Although the photography market may be diminishing, this was also notable for a substantial recycling element, which brought a high proportion of the photographic supply back to the market as ‘scrap'. As the photographic usage dies, then so will the recycling.

But it is silver's bivalency which is perhaps the key, which makes the metal highly reactive to the extent that, among other things, it is a natural biocide which means growing medical usage - and it is being used in clothing too for people in arduous occupations - like the military. It has uses in combating many viruses like legionella - and in the UK perhaps in the fight against hospital borne diseases like MRSA.

In electronics silver is the most efficient conductor of electricity so is finding increasing usage in this sector. Meanwhile legislation in some countries to remove lead from solders is opening up another big cumulative usage area in terms fo silver-tin solders.

So, Quartermain makes an excellent case for continuing strong demand for silver. He feels that any balanced portfolio should contain an element of silver - either as physical metal, ETF or silver mining stocks, and as far as the latter is concerned he would not argue against Silver Standard being a key part of this.

Although the company has existed for many years without mining metal, the big Pirquitas deposit in Argentina is ready to move to the production phase, while there are then a succession of projects in Peru, Mexico Argentina again and Canada waiting for production decisions.

All are primarily silver deposits except Snowfield in British Columbia, Canada, which is a gold deposit which looks to have potential as a big open pit gold operation with decent grades. So far exploration is in the relatively early stages here, but it looks to have the potential to be a major gold resource should big tonnages be proved up which could be of interest to one of the gold majors - which in turn could make it a finance source to be used to continue development of Silver Standard's silver prime targets.

Jason Hommel: Fraud vs. Truth

Posted at Oikonomika Blog:
Jason Hommel: Fraud vs. Truth, Major Frauds of the U.S. Monetary System.

May 9, 2007

Why the Silver Price is Set to Soar

Precious metals remain the most undervalued of all the asset classes. Precious metals, and particularly silver, remain the most undervalued of all the commodities. Silver is even more undervalued than gold and is undervalued when compared to other strategic commodities such as oil and uranium.
Silver is currently trading at just below $14 per ounce. Gold Investments continue to believe that silver will surpass $20 per ounce in 2007, its non inflation adjusted high of $48.70 per ounce before 2012 and its inflation adjusted high of some $130 per ounce in the next 8 years.

The fundamentals reasons for our very bullish outlook on silver is due to continuing and increasing global macroeconomic and geopolitical risks; silver’s historic role as money and a store of value; the declining and very small supply of silver; significant industrial demand and most importantly significant and increasing investment demand.

Silver price: global macroeconomic and geopolitical risks

Property markets and equity markets in the western world are near or at all time record highs. There is increasing macroeconomic and geopolitical uncertainty in the form of the sharp slowdown in the US housing market, increasing trade friction between the US and one of their prime creditors China (the negative impact of the introduction of US trade tariffs on Chinese paper products and the US’ WTO piracy claim may not have been fully realised by and priced into the financial media and the markets) and the continuing geopolitical tensions with Russia, Venezuela and in Iraq, Iran and the wider Middle East. These factors look set to at least curb returns in most property and equity markets.

Indeed these and other significant risks such as record debt levels in the western world, the huge and unprecedented US trade, budget and current account deficits and the massive fiscal profligacy of the Bush administration are not subsiding. These factors have ramifications for the predominant global reserve currency of recent times – the US dollar.

The IMF, World Bank and OECD have warned that the global economy faces increasing "downside risks" including rising oil prices, falling stock markets and trade imbalances. The IMF’s semi-annual World Economic Outlook (released April 5th 2007) said an economic slowdown in the US would have only a modest global impact if it were confined to the property sector.

The IMF report warned, however, that the shock to the global economy could be more significant if the property downturn spread to consumer spending and business investment. This seems likely as the US consumer is more indebted now since 1933 with little or no savings whatsoever. The Comptroller Auditor General of the US, David Walker stated “last year (2006) was the first year since 1933 that Americans spent more money than they took home and, as you probably recall, 1933 was not a good year for the United States.”

The US’ national gross debt is $8,883,212,488,519 trillion ($8.8 trillion) and growing. When George Bush came to power US’ national gross debt was $5.7 trillion. Even the most sanguine, tunnel-visioned bull would have to admit that the fundamentals of the US economy are bad and deteriorating.

Other long term risks and challenges facing the global economy come in the form of the threats posed by a bird flu pandemic, peak oil and global warming.

Silver price: historic role as a store of value

Thus the monetary metals and safe haven assets of gold and silver are likely to continue to outperform other asset classes. Also they are likely to outperform other commodities such as the base metals, oil and uranium. These commodities would be likely to experience a fall in price were there to be a significant slowdown in the global economy which would create demand destruction.

Because of their historic and continuing role as monetary or currency metals and as safe haven assets gold and especially silver are likely to outperform. This is because they are not simply commodities but also currencies which cannot be debased like our modern fiat paper and electronic currencies.

Gold and silver has been used as money in more regions and countries and for longer periods of time than the relatively modern use of paper currencies. Interestingly, silver has been used in more regions and countries and for longer periods of time as money than gold. Nobel Laureate Milton Friedman, said of silver "The major monetary metal in history is silver, not gold.” In Mexico today, there is a movement to return to using silver as money with a bill being put before by the Mexican Congress by Hugo Salinas. The currency of India is the rupee and it comes from the Sanskrit word ‘raupya’ which meant silver or coin of silver. The French word for money is ‘argent’ which came form the Latin argentum meaning silver. The franc was established as the national currency by the French Revolutionary Convention in 1795 as a decimal unit (1 franc = 10 decimes = 100 centimes) of 4.5 g of fine silver.

Most countries in the world used silver for smaller denomination coins in the 19th Century and through the 20th Century up until the 1950’s, 1960’s and 1970’s when currencies were gradually debased. Debase means to degrade, dilute or devalue. For instance, in the US up until 1965, silver dimes and quarters were made of 90% pure silver. In 1965, the US government debased and devalued the currency and reduced the silver content to 40% pure silver. These legal tender silver bags are still bought today by savvy investors.

Silver price: declining supply

Before looking at the demand side of the silver equation it is important to consider the supply side.

In 1900 there were 12 billion oz of silver in the world. By 1990, the internationally respected commodities-research firm CPM Group say that figure had been reduced to around 2.2 billion ounces of silver. Today, that figure has fallen to about 300 million ounces in above ground refined silver. It is estimated that 95% of the silver ever mined has been consumed by the global photography, technology, medical, defence and electronic industries. This silver is gone forever.

CBS Marketwatch published an article in March 2007 entitled ‘Silver may shine brightest among metals’, in which Kevin Kerr wrote that “Due to current supply/demand trends, the amount of silver above ground is projected to shrink to a critically low level in 2010. As supply shrinks, prices will keep rising steadily to new highs. Many in the investment world are unaware of this part of silver's story. Industrial demand has been outstripping mining supply for the past 15 years, driving above ground supply to historically low levels.”

Silver production was flat this year and is expected to be flat again next year. Incredibly, the amount of mined silver has been less than its demand every single year for the last 15 years. This hasn't resulted in significantly higher prices yet because the world has been able to fill the gap from inventories and official government stockpiles.

However, today the U.S. government's stockpile is all but gone, and sales from other official sources, such as China, Russia and India, are declining, too. The decline in refined silver stocks, from around 2.2 billion ounces in 1990 to around 300 million ounces today means that silver stocks are near an all time low.

The supply of silver is inelastic. Silver production will not ramp up significantly if the silver price goes up. Supply didn't increase in the 1970’s when silver rose 35 fold in price – from $1.40/oz in 1971 to a high of nearly $50/oz in 1980. Importantly, silver is a byproduct metal and some 80% of mined silver is a byproduct of base metals. Higher prices for silver will not cause copper, nickel, zinc, lead or other base metal miners to increase their production. In the event of a global deflationary slowdown demand for base metals would likely fall thus further decreasing the supply of silver.

There are only a handful of pure silver mines remaining. This inflexible supply means that we cannot expect significant mine supply to depress the price after silver rises in price. It is extremely rare to find a good, service, investment or commodity that is price inelastic in both supply and demand. This is another powerfully bullish aspect unique to silver.

Silver price: significant and increasing industrial demand

Another important factor as to why silver is likely to outperform other asset classes and commodities besides the declining silver supply is increasing industrial demand.

Why is this indispensable metal in such demand? The reasons are simple. Silver has a number of unique properties including its strength, excellent malleability and ductility, its unparalleled electrical and thermal conductivity, its sensitivity to and high reflectance of light and the ability to endure extreme temperature ranges.

Silver has the highest electrical conductivity of all metals, even higher than copper. It was used in the electromagnets used for enriching uranium during World War II (mainly because of the wartime shortage of copper). Silver has the highest thermal conductivity and optical reflectivity of all metals. Silver’s unique properties restrict its substitution in most applications.

Non investment demand for silver is based primarily on industrial demand including electrical, medical and photography and also in jewellery and silverware. Together, these categories represent more than 95 percent of annual silver consumption. In 2005, 409.3 million ounces of silver were used for industrial applications, while over 164.8 million ounces of silver were committed to the photographic sector, and 249.6 million ounces were consumed in the jewellery and silverware (‘don’t sell the family silver’) markets. Jewellery and silverware are traditionally made from sterling silver. Sterling silver is 92.5 % silver, alloyed usually with copper.

Industrial applications for silver have always been significant but have increased significantly in recent years. Industrial applications for silver have increased since 2001 to a record in 2005, according to London-based researcher GFMS Ltd. In their most recent report, they predict a 6% growth rate in industrial applications of silver in 2007. Silver is used in film, mirrors, batteries, medical devices, electrical appliances such as fridges, toasters, washing machines and uses have expanded to include cell phones, flat-screen televisions and many other modern high tech devices.

Increasing industrial demand for silver is forecast due to strong economic growth in China, India, Vietnam, Russia, Brazil and other emerging economies in Eastern Europe, Asia and the world. Growing middle classes are now demanding the quality of life and standard of living enjoyed by many in the West and thus the demand for silver will increase.

Silver is known as the healthy metal and has many and increasing medical applications. While silver's importance as a bactericide has been documented only since the late 1800s, its use in purification has been known throughout the ages. "Born with a silver spoon in his mouth" is also a reference to health as well as wealth. In the early 18th century, babies who were fed with silver spoons were healthier than those fed with spoons made from other metals, and silver pacifiers found wide use in America because of their beneficial health effects.

Today silver is used in many health-care products. Specifically, the ‘silver bullet’ is used by nearly every hospital in the world to prevent bacterial infections in burn victims and allow the body to restore naturally the burnt tissue. Increasingly, wound dressings and other wound care products incorporate a layer of fabric containing silver for prevention of secondary infections. Surgical gowns and draperies also include silver to prevent microbial transmission. Other medical products containing silver are catheters and stethoscope diaphragms.
In a world that is showing increasing concern about the spread of diseases and pandemics such as bird flu, silver is being increasingly tapped for its biocidal properties. Research is ongoing on the use of silver and its compounds for therapeutic uses and on its potential use as a disinfectant in hospitals and other medical facilities.

Silver has many unique properties which make it ideal and indeed essential in global industry – especially in the global photography, technology, medical, defence and electronic industries. Yet, silver is a finite resource and the supply of silver is increasing only very incrementally.

Silver price: significant and increasing investment demand

According to the CPM Group, there are some 300 million ounces of refined silver in the world. That means that with silver priced at $14/oz., there is about $4.2 billion (300 million oz x $14) dollars worth of silver in the world. This means that the total silver market capitalisation is a very small $4.2 billion.

The increasing demand caused by investment demand is very compelling. Especially due to a number of key investment factors - the introduction of the iShares Silver ETF, the huge short position, the global liquidity bubble, the significant growth in the global money supply, the proliferation of millionaires, ultra high net worth individuals and billionaires, the proliferation of hedge funds and the exponential growth in derivatives.

ETFs

Investment demand for silver has also been rising rapidly the past few years with investors hedging themselves against rising inflation, possible currency devaluations and geopolitical and macroeconomic risk.

The silver market is currently in a transitional period where investment demand is starting to have a real impact on silver prices. Much of the new demand comes from iShares Silver ETF launched in April 2006. The fund has so far attracted 120 million ounces of silver investment. It is up nearly 30 million ounces since the start of 2007. It's important to remember that the silver market is very small - only some 300 million ounces.That means the ETF alone now accounts for more than one-third of the global silver market, and growing investment into the iShares ETF should drive prices much higher. If even a small amount of money flows into the silver market from investors, ultra high net worth individuals (ultra-HNWIs), hedge funds, pension funds and institutions around the world, silver will almost certainly reach the nominal non inflation adjusted high it reached in 1980 of nearly $50 per ounce.
Huge short position

Perhaps the foremost analyst of the silver market today is Mr Theodore Butler. He believes that gold and particularly silver are the laggards in the commodity complex due to price manipulation. At over 300 million ounces, the largest 8 traders on the COMEX are short more silver bullion than exists in total known world inventories, including total SLV holdings and total COMEX inventories.

Butler sums it up succinctly, ”If there is one thing that separates silver from any other asset class, or any other item in any asset class, it is the presence of an unprecedented concentrated short position in COMEX silver futures. It is the existence of this concentrated short position that will, at some point, launch the silver price to the heavens. This short position has grown so large, and is held by so few entities, that it no longer matters how it will be resolved. It must be resolved and, whether that resolution involves default or buying by short covering, it will have the same bullish impact on price. You don’t have to look any further than the concentrated COMEX short position as to why silver has not outperformed every other commodity. Just as it explains price under performance, it is telling you why there must be overperformance in the future. At some point, the price of silver must accelerate upward to price levels that are truly shocking.”

Money Supply

There is some $50 trillion worth of bonds and $40 trillion worth of paper money in the world.
Money supply is increasing at extremely high levels globally. The annualised growth of some national broad money supplies are United States M3 up 10%, Eurozone M3 up 9.0%, UK M4 up 13%, China M2 up 15.9%, South Korea up 10.6%, Australia M3 up 13%, Russia M2 up a staggering 48%.

This has given rise to increasing inflationary pressures, a huge liquidity bubble and to ripe valuations in many stock and property markets.

Huge Increase in Billionaires, Multi Millionaires and High Net Worth Individuals

There has been an unprecedented increase in wealth amongst a tiny segment of the population in recent years. The number of millionaires in the world is multiplying very rapidly and there are now approximately 9 million millionaires in the world. There are approximately 70,000 ultra-HNWIs who have a net worth of more than $30 million.

Forbes recently estimated that there are now a record 946 billionaires in the world. In 2006, there were 178 new billionaires. These included 19 Russians, 14 Indians, 13 Chinese and 10 Spaniards, as well as the first billionaires from Cyprus, Oman, Romania and Serbia. Bill Gates and Warren Buffet are worth some $51 billion and $40 billion respectively. One man’s net worth increased in one year by multiples of the total value of all silver in the world. Carlos Slim Helo, is a Mexican of Lebanese origin whose net worth increased from $20 billion in 2006 to almost $50 billion in 2007 or by some $30 billion.

All the billionaires' combined net worth increased by $900 billion to reach $3.5 trillion. There are a total of 8.7 million millionaires around the world, representing a total wealth of a mind boggling $33.3 trillion. A trillion is an extremely large number and difficult for most to comprehend. It is one million million or 10 to the power of 12. It is an absolutely huge number and it is important to remain conscious of the sheer size of this number.

Conversely, the total value of all above ground stock of silver is a very small $4.2 billion.

If only a tiny fraction of these millionaires, ultra-HNWIs and billionaires decided to diversify out of their extensive property and stock portfolios and invest even a very small amount of their portfolios in silver it would result in the silver price increasing in price exponentially. Given the extremely strong investment fundamentals of silver this seems likely.

Hedge Funds

Globally, hedge fund’s speculative capital have doubled to more than $2 trillion (or two thousand billion) in the last three years. Some hedge funds have started moving into the silver market. Charles Supapodok of Artemis Capital Management is seeking to raise a $300 million hedge fund to invest mainly in silver. Artemis Silver Fund, advised by Artemis Capital Management, will put 80 percent of the fund's holdings in silver.

Again due to the incredibly small size of the global silver market if even only a percentage of the roughly 9,000 to 10,000 hedge funds in the world decide to take positions in the silver market the price will increase in value by multiples.

Derivatives

The Bank for International Settlements has estimated that the total value of derivatives contracts was $450 trillion at the end of 2006 (up from $260 trillion in June 2006) and is increasing exponentially.

There is still a debate as to whether derivatives are a good or a bad thing. Ben Bernanke and most in the financial industry believes they are good as they create liquidity and help spread risk throughout the system. Greenspan was a little more sceptical and warned that they could create ‘moral hazard’ as they did when LTCM collapsed in 1998 sending shockwaves through the financial system. He also warned that they could lead to "cascading cross defaults."

Warren Buffett is similarly not as sanguine: “Charlie [Munger] and I believe, however, that the macro picture is dangerous and getting more so. Large amounts of risk, particularly credit risk, have become concentrated in the hands of relatively few derivatives dealers, who in addition trade extensively with one other. The troubles of one could quickly infect the others. . . . Linkage, when it suddenly surfaces, can trigger serious systemic problems.”

“The derivatives genie is now well out of the bottle, and these instruments will almost certainly multiply in variety and number until some event makes their toxicity clear. Knowledge of how dangerous they are has already permeated the electricity and gas businesses, in which the eruption of major troubles caused the use of derivatives to diminish dramatically. Elsewhere, however, the derivatives business continues to expand unchecked. Central banks and governments have so far found no effective way to control, or even monitor, the risks posed by these contracts.”

For this reason Buffett has called derivatives “financial weapons of mass destruction.”
The systemic risk posed by the near infinite creation of hundreds of trillions of dollars of derivatives means that the finite currencies and safe haven assets of gold and silver are likely to be diversified into increasingly.

If only a tiny fraction of the humongous derivatives market was to reallocated into the silver market, silver would increase in value exponentially.

Silver's price history

Silver remains historically undervalued. Despite the incredibly bullish fundamentals outlined silver has so far underperformed nearly all the other commodities. Silver has gone from below $5 to some $14 and is up some 190% in the last 7 years.

This seems like a lot but when compared to other commodities and metals it is very little:

Oil is up from $10 to $63 or 600% and more than 6 fold.

Zinc from $.35 to a high of $2.00,. now $1.50/lb or nearly 5 fold.

Copper, from $.75 to a high of $4.00, now $3.58/lb or nearly 5 fold.

Lead from $.20 to $.90/lb or nearly 5 fold.

Nickel from $3 to $22/lb or more than 7 fold.

Indium, Molybdenum, Selenium, Cobalt are all up 1000% or 10 fold and more.

Uranium is up a phenomenal 1300% or 13 fold.

Many commodities are up between 5 and 13 fold.
Silver is not even up 3 fold. If silver were to catch up with these other less rare and less precious metals, it would have to increase in value by some 500%. From the bottom at some $5/oz in 2001, that would result in silver being valued $25.

Silver reached $50 briefly in 1980 when just one billionaire Bunker Hunt (one of a handful of billionaires in the 1970’s) attempted to corner the silver market causing the price to surge (in conjunction with many investors seeking to hedge themselves from the stagflationary 1970’s). A lot of technical orientated analysts, investors and hedge funds are looking at this figure and as nearly all the other asset classes and commodities are all at near all time records there is every reason that silver will do likewise in the coming years.

Silver is priced at some $14/oz today. The average price of silver in 1979 and 1980 was $21.80/oz and $16.39/oz respectively. In today’s dollars and adjusted for inflation that would equate to an inflation adjusted average price of some $60 and $44. It is for this reason that we believe silver will be valued at over $50 in the next 3 to 5 years.

Why silver is the investment opportunity of a lifetime

Finally, it is important to put today’s total value of all above ground refined silver in the world - $4.2 billion – in context.

$4 billion worth of Boeing planes was bought by Ryanair in 2005. $4 billion was the cost of stamp duty tax on Irish property in 2006. €8 billion worth of overseas commercial property was bought by Irish investors in 2006. Scottish Ministers are in charge of £2 billion (some $4 billion) of tax revenues. Macquarie, the Australian bank, recently acquired the O2 Airwave police radio business for £2 billion. The 2006 Sunday Times Rich List UK estimated that there were 20 people with a minimum wealth of £2 billion (some $4 billion) residing in the UK.

Further context is provided in the fact that the actor Will Smith has had a worldwide career box office of $4.4 billion. Microsoft is growing revenues at over $4 billion a year. In March and April of 2007, just two months, one man’s wealth increased by $4 billion. Since Forbes calculated its 2007 wealth rankings, they recalculated that in two months the Mexican tycoon Carlos Slim’s fortune rose $4 billion to $53.1 billion.

Rarely are there 'no brainers' in life and very rarely are there ‘no brainer’ investment opportunities. Invariably, ‘too good to be true’ investments turn out to be just that.

However, this is not the case with silver. It remains the investment opportunity of a life time.

Silver is unique in terms of being both a monetary and an industrial metal and having the highest optical reflectivity and the highest thermal and electrical conductivity amongst all metals. Silver industrial and investment demand is increasing very significantly and meanwhile supply is falling. The fact that the huge majority of the investment public and financial services industry remains ignorant of the fundamentals in silver means that the bull market in silver remains in it’s early stages. Silver remains probably the most undervalued asset class.

How to Speculate in Silver

• Silver options and futures
• Silver ETF
• Silver mining stocks
• Spread bet silver

How to Invest in Silver

• Perth Mint Government Silver Certificates
• Allocated and unallocated silver accounts
• 1000 troy oz bars – (weigh some 31 kgs) These bars are COMEX good delivery bars.
• 100 troy oz bars – (weigh some 3.11 kgs) These bars are among the most popular with retail investors. Popular brands are Engelhard and Johnson Matthey.
• 90% Silver Bags
• 40% Silver Bags
(Pre-1970 U.S. legal tender 90% and 40% silver coins, which were used as money until they were replaced by the precious metal free coinage introduced in 1970 and used today. Bags of U.S. dimes, quarters, half-dollars containing 90% silver or 40% silver are traded based on their precious metal silver weight.)

Silver bars and silver bags can be taken delivery of but due to the volume, weight, difficulty to store securely and cost of insured delivery most investors buying silver in volume opt for unallocated and allocated silver accounts or government silver certificates due to their being no annual and ongoing storage/ insurance fees.
Mark O'Byrne is the Managing Director of Gold and Silver Investments Limited, Ireland's Asset Diversification and Wealth Preservation Specialist ( www.gold.ie ). He is regularly quoted and writes in the financial media and was awarded Ireland’s prestigious Money Mate and Investor Magazine Financial Analyst of 2006.

May 3, 2007

Silver Bullish: New Solar Cells See the Light

New Solar Cells See the Light

By John Simpson
ScienceNOW Daily News
24 April 2007

A team of Australian researchers has cleared an important hurdle in the development of cheap solar power. The scientists have devised a new manufacturing technique that could boost the efficiency of an inexpensive type of solar cell by up to 50%, making the technology an economically feasible alternative to fossil fuels in the search for sustainable energy.

The high cost of solar cells means that the energy they generate is about five times more expensive than conventional power, keeping the technology off the roofs of the average citizen. Much of the expense comes from the silicon in the wafers that make up the cells. As a result, researchers have focused on improving so-called thin-film cells, which minimize the use of silicon. The downside to these one- or two-micron-thick films is that they can only convert about 5% to 10% of incoming sunlight into electricity, versus up to 25% for thicker silicon wafers. That's because a process called etching, which is used to maximize light absorption by the cell, reduces the cell's current, voltage, and overall output.

So researchers led by doctoral candidate Supriya Pillai of the University of New South Wales in Sydney, Australia, took etching out of the equation. Their new approach involves depositing a thin film of silver (measuring about 10 nanometers thick) onto a solar cell surface and heating it to 200° Celsius. That breaks the film into flattened spheres, called islands, which are about 100 nanometers in diameter. When struck by light, these islands achieve the same feat as etching by a natural but complex process. Incoming light, as an oscillating electric and magnetic field, strikes the silver nanoparticles, which also oscillates the metal's free electrons back and forth. These oscillating electrons, known as surface plasmons, reradiate light into the underlying silicon, which increases light absorption into the cell. Plasmons have been used in wafer-type cells, but Pillai's group is the first to experiment with them in thin films.

Most thin-film solar cells are about 8% to 10% efficient, says Kylie Catchpole, a co-author of the study, but this technique could increase the value to between 13% and 15%. That's an important advance, she says: "If they're below 10% efficient, then you can't really afford to install them, because it would take up too much of your roof area, for example, to power your house." Once the technology approaches 15% efficiency, says Catchpole, it becomes commercially viable. An average house could be powered for a one-time investment of $10,000, including installation of panels that cover eight square meters, she says. Further research and development should bring prices even lower, the team reports in an upcoming issue of the Journal of Applied Physics.

The use of plasmons to enhance solar cell technology is promising, says materials scientist Mark Brongersma of Stanford University in California. "There's a huge opportunity ... to manipulate light in ways that semiconductors and insulators never have been able to do," he says.

April 28, 2007

Just Say No to the Silver ETF

Rube Goldberg Strikes Again

I just read the recent Rubino/Turk article on SLV, the silver-backed ETF.
So it seems that the SLV Investor(1) owns the iShares(2), which are issued by the Trust (Bank of New York)(3), which hires a Custodian (JPM Chase Bank)(4), which can have any number of Sub-Custodians, Agents or Depositories(5), where the silver(6) might be held. Compare this schematic with the true silver owner(1), who owns and controls his own silver(2).

JP Morgan Chase, as I'm sure we all know, was implicated in the Enron accounting fraud, the Blanchard/Barrick lawsuit, and many other high-finance scams too numerous to recount. I guess that makes them a perfect choice for this assignment.

You might have innocently thought that all this 100+ million ounces of silver is sitting quietly in one place in a New York vault. Maybe it is.

But, if there should ever be an audit, JPMC has TEN DAYS to round up enough silver to satisfy the auditors. Even then they don't actually have to have it on hand for inspection by the auditors, or anything as tedious as that. This is the 21st Century! All they have to do is to say it is located at one of those Sub Custodians and it would be too much trouble and expense to move it.

This is just custom-made to allow real silver to do double and triple duty. If the auditor wants to get snotty and insist on seeing all the silver assembled in one place, JPMC has to be assured of payment by "somebody" for the trouble and expense of doing so.

Never happen.

On the other hand, the auditor could just accept a document swearing that a certain amount of silver located in a certain place is part of the SLV hoard. It might even be "true", on that particular day.

And to top it off, the Custodian (JPMC) is absolved in advance for erroneous accounting entries and has the explicit right to make and reverse provisional entries and to back-date any necessary corrections. So no matter how much their records may differ from reality, it can all be fixed later on with no penalty. With this kind of accounting, the question of who owns what silver on any particular day becomes extremely hypothetical.

Gosh, this kind of thing makes the CRIMEX start to look good.

Now add to this the recent publicity by Patrick Byrne of the very widespread epidemic of naked short selling of stocks. So widespread and epidemic, in fact, that the stockbroker industry has tacitly admitted that they have no hope of ever cleaning out all those counterfeit shares known as FTDs (failures to deliver the promised stock). So, just live with it. Since SLV is nothing more than another share, I’m sure it is entirely possible to naked-short the exchange traded fund as part of a program to hold down the price of silver.

ANOTHER “WALL OF SEPARATION”

The net result of all this is that precious metals are to remain stored away in vaults and under centralized control as usual, while those interested in owning precious metals are systematically separated from those metals by elaborate financial structures subject to behind-the-scenes manipulation. The whole scheme is being sold to the retail investor on the basis of Convenience, and they are taking the bait. Come to think of it, Convenience has been used as bait to sell a long list of Centrist initiatives. Even slavery could be pitched as Convenient, since you’d have no responsibility for anything ever again, and all your food, clothing and housing would be provided to you for free.

The irony is that the SLV buyer is really only interested in convenience and FRN price appreciation. But by allowing control of the metals to remain in centralized hands, they are creating the conditions for more price manipulation, which will NOT be to the upside. At the same time, they increase their exposure to accounting swindles, bankruptcy, market closings, confiscation, rule changes, special taxes and what-have-you when the Emergency arrives.

I'm not telling you anything new, but the price suppression in precious metals is aimed at people who just want to see their stuff go up - people who, essentially, just want more FRNs. If it doesn't go up, they get antsy. If it goes down, they dump it. Unfortunately, this speculator/trader mind-set is extremely easy to manipulate and control.

On the other hand, the wise investor understands the value of his assets whether they "go up" this month or not. These are the people who add to their holdings on price weakness and wait for the fundamentals to make themselves felt - people who accumulate real wealth, and look beyond the ephemeral FRN price tag on that wealth to something more like true value.

CONCENTRATED OWNERSHIP THREATENS LIBERTY

I conclude that gold and silver can only be fairly valued to the extent that physical control is decentralized. That creates the conditions for a true free market in precious metals. This is the logic of our Constitution in requiring the US Mint to provide free coinage of circulating silver and gold money.

The distribution of precious metals into retail hands seems to be happening in spite of the CRIMEX, SLV and similar pseudo-metallic schemes, but they are certainly slowing it down. Unfortunately for America, too many of those hands reside on the other side of the world. Americans have the freedom to own precious metals and thereby undo monetary centralization; they just don't yet have the understanding or the will to do so. As in so many other things, the power to break our chains lies unused in our own hands.

Or as Bob Dylan once put it:

Freedom? "Just around the corner" from you.
But with Truth so far off, what good will it do?

It is reported that in the Persian Empire, in the days before Alexander the Great, all gold and silver resided in it’s rightful place in the King's treasuries, not even guarded, while the serfs had to invent their own worthless scrip to use for exchanging their daily necessities.

Stephen Kovaka
Corydon, IN

April 21, 2007

Jason Hommel: How to Buy Silver & Avoid Getting Scammed

How to Buy Silver, & Avoid Getting Scammed

Silver Stock Report

by Jason Hommel, April 20, 2007


People continually ask me about all kinds of physical silver investments. I have avoided writing this article for years because people are always telling me to not say anything bad about anyone, or your competition. But I don't need to name names, and liars are not my competitors. So, here's how to avoid getting ripped off.

Never buy silver from TV ads. Ads are expensive. TV ads sell silver for up to $50 or $100/oz., up to ten times more than the silver price. They sell as "rare, limited, collectibles" things that are mass produced, and newly minted. In coin shops, you can buy the same products that were sold on TV ten years ago, right at the cost of the silver itself.

Never buy the Silver ETF. First, they may not own the silver as it is unaudited and unauditable. The nature of silver, and the reason you are buying it, is that silver is "payment in full" not a promise to pay. The ETF is not even a promise; for you can never withdraw your silver, but only sell it for dollars--if the institutions running it don't go bankrupt. See Jame's Turk's recent analysis of the ETF for more on why you probably should not trust the silver ETF:
http://www.dollarcollapse.com/iNP/view.asp?ID=52

Never buy silver "certificates" or any other form of "paper silver"; not even if guaranteed by a government. Goverments are the least trustworthy to back silver certificates. If governments were trustworthy, why would they issue unbacked paper money in the first place? Think about it.

Don't let anyone other than you, store your silver. If someone else is storing your silver, then you own a promise to receive silver, (for a fee), and you don't own silver itself.

Never buy "leveraged" silver products. I don't trust futures contracts; they can default, and I expect them to default. I believe it is a moral failure to gamble with futures contracts, and is not consistent with true Christian conduct. Futures contracts are a major scam. Minor scammers will offer you less leverage, and they will take your money and buy futures contracts for themselves, and keep the difference. Even worse, the minor scammers will talk you out of your orders, delay your orders, refuse your orders, purposefully trade you into losing positions, or confuse you with undisclosed costs and commissions.

Never attempt to buy silver or silver futures from a major brokerage house that may have a short position in futures contracts. They may offer you every excuse in the book to prevent taking your order. They may say that they must speak to a manager, or must wait for the market to open or for the "next price fix" on another day. They may bluff, saying "it's not worth my time", or that "you'd be killed by commission charges" (how contradictory!) or try to scare you with "unknown assay fees". (The assay is free at Brinks in LA.) They may try to get you to buy the ETF, or silver stocks, or futures contracts, instead.

Never buy rare coins or numismatics for investment purposes. I believe that rare coins are like idols. Stay away from idols made from silver! Up to 99% or more of the value can be in the image quality, or rarity, and not the substance of the silver. Further, you can lose up to 50% of what you paid for the item when you sell it back. As little as a $300,000 investment can be enough to unknowingly "corner" a market in certain rare coins, wildly driving up the value, because you are the only buyer, and you will have nobody to sell to. I've bought a few rare coins, a few Roman denari silver pieces for $20 that contained less than a dollar's worth of silver. But I bought them for the novelty, and curiosity, and as gifts, not for investment. Some dealers "push" rare coins because they get a larger commission on rare coins. Rare coins are illiquid and not fungible. Silver is money because it is fungible, and liquid.

Never buy a "pool" account of unallocated silver. Never let others hold your silver, either in allocated or unallocated form. A pool account is unallocated, meaning that no specific bars are yours. But even if it is allocated, and you have the serial numbers of the bars that you "own", your warehouse company can go bankrupt. Maybe you can invest a little bit into allocated silver; as a way to diversify the location of your physical silver. Two companies I would trust (but do not use) are goldmoney.com and the Anglo Far East Bullion Company; they will hold silver for you in allocated form. If you want to trust someone to hold your silver; trust your family first.

Personally, I avoid buying Silver-Eagles. Why? Because they typically cost about $2 over the "spot" price of silver.

Liberty dollars are even more overvalued. $20/oz.?! Ridiculous. And the Liberty dollar paper warehouse receipts? Even worse.

You do not have to pay more than about 7% over the spot price for your silver, in the U.S. Old silver coins are currently being sold for under the spot price of the silver content, which is 72% of an ounce in $1 worth of coins.

Shop around. Prices vary. Refiners manage to buy about 200 million ounces of silver under the spot price every year. Try to buy close to their price. Everything is negotiable. (But remember, the coin dealer also takes a risk just to sell silver, as silver prices can move up 5-10% in a single day, too!)

Beware of long shipping times. Long shipping times are a warning sign. Coin shops have been known to go bankrupt. Never buy more silver at one time than you can afford to lose. Therefore, if you buy silver from a dealer, break up your order over time, or use several different dealers at once. Diversify your investments at every stage.

The safest way to get silver is to buy from a local dealer, with "cash on the barrel". Get cash from your bank. If you plan to spend more than $5000 at once, order your cash from the teller a week in advance. If you withdraw more than $10,000, be prepared to help your bank fill out the CTR or "Cash Transaction Report" Federal form which asks for your social security number and occupation. In the meantime, locate various coin dealers that publish price quotes on the internet. For a start, see here: find-your-local-coin-shop.com

Take cash to a local dealer, negotiate heavily on price; & show the dealer various price quotes from other dealers on the internet! If your local dealer cannot fill your order at a reasonable price (within 1% of the lowest prices), then drive to another dealer, or break up your order, and order online from your sources.

Remember, coin dealers are the "working rich". They take the risk of having a coin shop, which can be robbed, to make money, by serving you. Most are very honest, and earn their commissions. Many have had guns pointed in their face. They are our industry's heros. Treat them with respect; and don't waste their time; they are often too busy to write articles like this one to you; and most could not afford my advertising budget to be able to reach you.

If you want to acquire $1 million in physical bullion, it will take some time, and a lot of work, and you will be one of less than probably 100 people worldwide attempting such a feat. After years of searching, I have found only 5 coin dealers in the entire U.S. that consistently have as much as 100,000 ounces of silver in their own personal inventory. Many dealers who claim to be "the nation's largest dealer" (and there are about 5-10 companies making such a claim) do not have so much in inventory. Many dealers will claim that they can access as much, but that is because they will place your order with a larger dealer, and "drop ship" directly from the other dealer, to you.

Understand the difference between a price "indication" and a price "lock". An indication is only a guess on what the price may be. A "lock" means you are committed to buy at that price, and you have struck a deal, and cannot back out. Be aware of the potential risk to bullion dealers who will give you a price lock, before they get your money, in a bull market. (That is a standard business practice.) Unless they are buying on the futures markets when they take your order with their own excess cash, or unless they have more metal than they want, then bull market conditions can eventually bankrupt them, if that is their standard business practice, and if their order volume is high enough.

This is why it is so important to do a cash for metal purchase in person. It protects both you and your dealer.

The two largest dealers in the United States are Johnson Matthey, a silver refiner, and Amark who is Johnson Matthey's largest dealer.

Johnson Matthey has "run short" of silver several times in the last few years, where delivery times increased substantially, up to 6-8 weeks, and Johnson Matthey does not take orders from the public.

Amark will make you sign all sorts of government forms; and demand your social security number, and so I have never ordered from them directly.

If you live outside the United States, it may be much more difficult for you to find silver. You might want to think about traveling to the U.S. to buy silver, and fly it back with you, or have it shipped.

Do not let yourself be confused by the flow of silver at your local coin shop. In many cases, coin shops buy more silver from the public that continues to sell. The coin shop must then "dump" this silver to another, larger dealer, or the refiners, like Johnson Matthey, who are the biggest buyers in the industry, the buyers of last resort.

It must be this way, given the market structure. The silver mines produce about 700 million ounces of silver, and industry demands about 950 million ounces of silver annually. The difference is largely met by "recycled" silver, about 200 million ounces per year. In other words, investors are selling silver to the coin shops that ends up at the refinery.

Don't let your investment opportunity to buy silver go up in smoke, because if you don't act, it literally will.

And unless you end up with silver in your hands, you don't own silver at all. Phantom silver, or a promise to pay silver, is not the same thing, and I hope you don't realize it when the promise to pay silver also goes up in smoke.

For more on what kinds of silver to buy, and where to get it, see
http://find-your-local-coin-shop.com/

Thank you!

You can comment on this report at the "Hommel Forum" here:

http://hommelforum.com/showthread.php?t=101

April 17, 2007

Ted Butler: The day of reckoning

Silver market analyst Ted Butler's new commentary explains in detail how the silver market is manipulated by one or two short-sellers far beyond the manipulation of any other commodity market. Butler's commentary is headlined "The Day of Reckoning" and you can find it at GoldSeek's companion site, SilverSeek, HERE

April 10, 2007

James Turk: Can we trust the silver ETF?

GoldMoney founder James Turk, editor of the Freemarket Gold & Money Report and consultant to GATA, has studied the SEC filings and prospectus of the silver exchange-traded fund on the American Stock Exchange (SLV) and has discovered that they go out of their way to provide for not actually having allocated silver to back the shares sold in the fund. Turk's research revives the long-simmering question of whether the precious metals ETFs are secure investments or just more mechanisms to be used by the financial powers and the central banks behind them to short the metals.

You can find Turk's new report, "Can We Trust the Silver ETF?" at Dollar Collapse HERE

April 4, 2007

Ted Butler: The excellence of silver

In his new essay, silver market analyst Ted Butler makes the case for the white metal as well as it ever has been made.

Silver has done spectacularly well over the last five years but not as well as some other metals -- because, Butler says, of the huge and concentrated short position in silver on the New York commodities exchange. That short position, Butler writes, "must be resolved, and whether that resolution involves default or buying by short covering, it will have the same bullish impact on price."

(He's betting that the short position in silver will be resolved by default -- with a smile if not a hearty laugh at the commodities exchange's longs.)

You can find Butler's essay, "The Excellence of Silver," at GoldSeek's companion site, SilverSeek, HERE



February 13, 2007

Ted Butler: Time frames

Silver market analyst Ted Butler analyzes the commitment of traders report for the gold and silver futures markets and gets the feeling that the dealers, who are short, are again about to scalp the technical funds, which are long, sending gold and silver spiking down to wonderful new buy points in their steady ascents:

Time Frames

By: Theodore Butler

Investment cycles, like all things in life, run in both short-term and long-term time frames. I’ll define short term as days, weeks and months, and long term as years and decades. For the average investor, the best hope for success lies with a long-approach. Contrary to TV infomercials and other hype, short-term trading won’t and can’t make the masses rich. That’s why I have always counseled a long-term approach to silver and intend to do that again today.

But when you study the markets closely, there are times when the risk of a short-term sell-off becomes more likely than at other times. This does not mean a sell-off must occur, just that the odds may be greater for that to occur than at other times. Most importantly, it is imperative to understand the reasons behind such a potential sell-off, and to determine if those short-term reasons negate the reasoning behind the long-term bullish case for silver. This is important because the biggest mistake an investor can make is to lose a long-term investment for short-term considerations.

In fact, I have increasingly attempted to ignore the short-term situation in my public silver analysis, precisely to prevent long-term silver investors from fretting about the short term. But it is possible to be increasingly bullish about the long term, but to be concerned about risk and volatility in the near term. Even if those concerns are not realized, and the long-term fundamentals of silver overpower the short-term considerations, which can and will happen someday, it would be analytically dishonest to not acknowledge such concerns. At the very least, such an acknowledgement might better prepare one emotionally in the event of a sell-off. At the very best, it might assist in positioning for the long-term bull market in silver.

The Short Term

Long-time readers know that my speculation for near term price change is based upon the futures market structure as depicted in the Commitment of Traders Report (COT). It is the current market structure that is the basis for my concern about near term risk. As a way of explanation for newer readers, I’ll offer a brief overview of the COT, but first I must clearly state that this has little importance in the long term. Long-term investment decisions should not be made based upon the COTs, simply because the COTs change much more frequently than do long term supply/demand fundamentals, which I’ll discuss shortly.


The COT is a weekly report, issued by the Commodity Futures Trading Commission (CFTC), on just about all major futures and options contracts traded on US commodity futures markets. As such, it is one of the most dependable and timely of information data sources available. The report breaks down, in great detail, the long and short positions held by certain categories of market participants, including by size of trader and the level of concentration of the largest traders.

The COT is an objective and comprehensive snapshot of the positions different types of traders are holding at any point. That objective data is studied to help predict future price movements. The trick lies in the interpretation of the data, which, by definition, is subjective. Ask ten analysts who study the COT for their opinion and chances are you may get ten different opinions.

Many analysts, including me, who study the COT as it pertains to gold and silver, focus on the interplay between two main categories of traders, the large commercial and non-commercial traders. Usually, the commercials are money-center banks and brokerages and non-commercials are technical futures trading funds, a specific type of hedge fund. The tech funds buy and sell on price signals, buying as prices go up and selling as prices go down, hoping to capture significant price trends and limiting risk. Generally, the commercials, or dealers, take the opposite side of whatever the funds buy or sell.

Whenever the tech funds have established their maximum long or short total position, we have arrived at the "moment of truth", from which point either the tech funds or dealers will have to aggressively liquidate positions. In essence, the dealers have never panicked as a group and liquidated in a disorderly manner. It has always been the tech funds that have liquidated in a panic. That is not to say that it is not possible for the dealers to liquidate in a panic, just that they never have in gold or silver, to my knowledge. This can be seen in the basic chart patterns for the life of the gold and silver bull markets so far. Prices climb over longer periods of time, as trend-following tech funds establish positions, compared to sell-offs, which occur abruptly and feature urgent tech fund selling to limit losses. That’s why we go down faster than we go up.

The key to accurately determining the "moment of truth" is in trying to guess when the tech funds have built up their maximum position and are likely to begin to liquidate. This maximum position is, admittedly, a moving and variable target that can only be known for sure in hindsight. Sometimes the funds put many more contracts on than they have put on before, sometimes less. But there is little practical good in waiting for the benefit of hindsight. After the tech funds establish a maximum long position and have begun to liquidate in earnest, the top in price has come and gone. Therefore, one is forced to guess before the liquidation process has begun, even though you risk looking dumb for a while.

I’m guessing that we are at or very close to the tech funds having a maximum long position in gold and silver futures contracts. We are at, or above, recent high water extremes in tech fund long/dealer short positions in gold and silver, which have resulted in significant sell-offs in the past, even though we are not near the all-time historical maximum levels currently. So the question becomes how likely are we to move from the recent extremes to the all-time historical extremes of a year and a half ago? That question is important because a move from here to the all-time maximum tech fund long position would necessarily involve higher prices. While that can certainly occur, my sense is that it won’t. Let me explain my reasoning.

Many factors go into how much of a position the tech funds can build up to. Price action, margin requirements, volatility, and the perceived risk on a trade (how close are the moving averages) all play an important role in determining the tech funds’ full position. Of basic concern is the actual amount of assets that the funds are controlling. More assets under management equal more of a potential position, all things being equal. Fewer assets indicate a smaller position. It is this basic concern that troubles me at this time. Using the John Henry & Company (www.jwh.com) as a proxy for the tech fund sector, at the time of the historical maximum gold and silver long position in Sep–Dec 2005, the tech funds held more assets under management than at any other time. Since that time, principally due to trading performance (but also due to investor withdrawals), assets under management are down close to 45%. If the assets under management in the tech fund sector mirror those of Henry, this would argue against a much bigger position than currently held.

Since the second week of January, the price of gold has risen more than $60. Using the most recent COT data and extrapolating from Tuesday’s cut-off, the net tech fund long/dealer short futures position on the COMEX and the CBOT has risen by more than 80,000 contracts, in my opinion. That’s the equivalent of 8 million ounces of gold, or 250 tons. (Silver has gone up by almost 15,000 net contracts, or 75 million ounces, as prices rose by $1.50.) This is one of the largest 5-week increases in net gold contracts in history, especially considering the tech funds’ reduced assets under management. It appears obvious to me that gold rose by $60, in that period, precisely because the funds and other speculators bought 8 million ounces of futures contracts. In contrast, during that same period of time, the big gold ETF, GLD, added less than 10 tons, or around 300,000 ounces of gold.

If I am correct and the tech fund buying was the reason gold went up over the past 5 weeks, the market could be at risk of a significant decline if those positions are liquidated. Further, I get the feeling that the tech funds were intentionally lured onto the long side in a big way by the dealers, whose plan it is to trigger a big tech fund long liquidation to enable the dealers to buy back large numbers of gold and silver short positions. If and when this liquidation does occur, it should present a phenomenal buy point once that liquidation is complete. As always, don’t even think about liquidating long-term silver positions because of a one or two dollar temporary sell-off that might not occur, or might occur from higher levels.

If I am wrong about anything, it is likely to be on short-term prognosis. It is entirely possible that the dealers could get over-run or for the tech funds to put more longs on at higher prices before liquidating, or even that the buying was not by tech funds, but some other entity. But if I am not going to report on negative readings in the COT when they occur, I would not consider myself to be objective.


January 28, 2007

Jason Hommel reports on silver

Silver Stock Report editor Jason Hommel reports on silver, particular silver mining companies, the Vancouver conference, and GATA's growing acceptance...

Review on Vancouver & Silver
Silver Stock Report,
by Jason Hommel, January 26, 2007

I just returned from the Vancouver Gold show, attended by about 8000 investors, and 380 resource companies, and 50 speakers. This was the biggest show by Cambridge House by far. I gave 2 speeches, was on a panel discussion, and did two interviews. Having taken a year off from attending most shows, I decided to revise my old speech, and focus on the most important, non-religious reasons to buy silver. In a nutshell, here's what I presented, and learned, from the show.

I write this free newsletter that goes out to 36,500 opt-in subscribers (increasing at a rate of about 100/day, or 100% per year), and I have about 850 subscribers who pay $40/month to look at my portfolio. I spend the subscription money on advertising, to get the word out. I carefully study the feedback from my readers to help me find the best investments in the industry. In 2003, my portfolio was up about 300% in silver stocks. In 2004, I was up another 100%. In 2005, I was up about 40%. In 2006, my portfolio grew another 100%. That track record is about the best in the world for that time period, on par with the best funds in the business of gold, silver, and resource stocks.

My overall view of silver has grown far more bullish since 1999, when I started investing in silver, and here is how my view has changed.

To really understand silver, you have to first understand gold. You don't understand gold unless you know what GATA knows. GATA has done the research to show that about 15,000 tonnes of about 30,000 tonnes of central bank gold has been lent into the gold market, and this has depressed prices. I'm a big GATA supporter, and for more information, you should see the following video, and order the DVD.

http://www.youtube.com/watch?v=ha-j7fH7sAo
Order here:
http://www.goldrush21.com/

I was attracted to silver, because I thought I could make more money in silver than in gold. I have.

At first, I thought silver was merely "cheap" at $5/oz., thinking that the downside was limited, and that we had a good shot at silver repeating the performance in 1980 of $50/oz. But now, I think $50/oz. will just be the start, and here's why.

In 1980, M3, the measure of money in the banks, was about $1.8 trillion, and today, it's closer to $11.5 trillion. So, a comparable price for silver would be 11.5 divided by 1.8 times $50/oz, which is $319/oz.

But that is just the beginning. The reason why is that the bear market for silver did not last 25 years, it was worse than that. In reality, we are still in the bottom of a 600-year bear market for the value of silver.

You can see the 600-year, inflation-adjusted trend in this graph:
http://goldinfo.net/silver600.html

The primary reason for this trend is the declining use of silver as money around the world. But silver is money, it has the properties of money, and the words for silver and money are the same in many languages. As paper money fails, the return of monetary demand for gold, and especially silver, will be astronomical, and will drive the value up tremendously. It's all about monetary demand.

Next, I used to think that the price of silver would rise a lot due to the excessive paper futures market contract short selling on the NYMEX, that would eventually result in runaway short covering. I do believe that selling paper contracts is manipulative in nature. However, today, I believe that paper money that is supposed to be "as good as gold", or "better than gold" is the far greater manipulation, perhaps 100 or even 1000 times greater. Paper money was originally a receipt for gold or silver on deposit at a bank that you could redeem at any time. Futures contracts for gold and silver, that expire, are, by definition, even less honorable. And if the first gold certificates were not honored, how can today's contracts remain honorable? The point is that it is all about monetary demand, and not futures contracts.

Finally, I used to think that silver would be a good investment because of the current supply and demand dynamics, whereby more silver than is mined each year is consumed by industry, jewelry, and photography, which leaves no room for investment demand. But the nuances of current supply and demand say nothing about the upcoming and future monetary demand. The vast portion of the price and value change of silver will mostly be moved by monetary demand.

So, in sum:

First, silver is not going to "spike again" to $50/oz. Instead, silver will roar past $300/oz. due to monetary demand.

Second, silver may well be manipulated due to the NYMEX futures contracts. However, silver is manipulated far more because of the existence of paper money, and as paper money continues to fail, and monetary demand for silver returns, silver's value will skyrocket.

Third, silver will skyrocket not due to current supply and demand fundamentals, but due to the overwhelming monetary demand in the future.

The trouble is that people have a difficulty in understanding how monetary demand for silver can or will return, and have a difficult time envisioning what that would look like, and what it would mean both in terms of prices, and values for silver.

To help explain, let me explain compound interest or exponential growth rates and decay rates; especially how they are often a function of size.

Small things can grow fast, but big things cannot grow as fast.

Acorns can grow to big oak trees, but oak trees cannot grow to the moon.

Babies grow fast, but adults stop growing, and will one day die.

Silver is the small market. If there are about 4 billion ounces of silver in the world, meaning that only 10% of the 40 billion ounces estimated to have been mined still remain, then the size of the market is about $50 billion.

The Fed often adds $50 billion to the money supply in one week!

So, in contrast, the world paper money market is about $50 trillion in size, about 1000 times bigger. The paper money market is like the mature oak tree that cannot significantly grow any further, but is dying, as branches rot, and fall off.

When paper money dies, the price of an ounce of silver, or gold, will be beyond infinity dollars per ounce. This does not mean that gold or silver will become infinitely valuable; but rather, the dollars become worthless.

It is impossible for any market to grow exponentially forever, but that is not what happens to the silver price as paper money dies. A very high dollar value for silver is really a reflection of the decay rate of paper money. After paper money fails, silver's value may be up to 100 times or even 1000 times greater than today, but probably not more than that, regardless of whether the last quoted price for silver was a million dollars an ounce or a billion, or a trillion.

And when paper money fails, society will need a substitute, such as gold and silver. Monetary demand will return, and force silver's value much higher.

As silver's dollar price continues to gain 30% to 60% to 100% per year, more and more investors will be forced to take a look at silver to see what they have been missing. They will greedily seek after such rates of return. For capital to survive, it must. And as more and more people invest in gold and especially silver, it will continue to push up the price more and more, until paper money fails completely. People cannot be satisfied with 5% returns in bonds if silver is paying 30% to 100% per year.

How can paper money compete? Will they raise bond rates to 50%? And what happens when 50% more money is being created each year to pay to bond holders, wouldn't that cause enormous inflation that would simply drive metal prices that much higher? High interest rates would also cause a high bankruptcy rate, and in such a time of deflation due to bank bankruptcies, gold and silver, which cannot default, would be highly sought after safe havens.

As silver goes up, people will discover most everything that I discovered about silver. That it hit $50/oz., and that the inflation adjusted price of $50/oz. in 1980 is really over $300/oz.

Is silver money? Can it be money again?

Money is at least three things: a medium of exchange, a unit of account, and a store of value.

Silver is my store of value; I'm storing my value in silver, and silver's been great to me. Not that silver cares about me, or even knows my name; silver is an inanimate object.

But silver has provided me with a good rate of return, and the returns are outside of the banking system, and are largely not really taxable, and not easily found or taken by government. By the time I sell my silver, who knows what government will be in power, and who knows what the capital gains tax rates may be?

So, which should one buy, stocks or silver? I currently have about 11% of my portfolio in silver, and about 85% in stocks; mostly silver stocks. I plan to increase my holdings of silver to about 20% very soon, within the next year, and up to 50% as time goes on. I don't like the thought of having to move and store several tonnes of silver, but I'm lazy, and I like to earn money the easy way.

Recently, silverstrategies.com posted the results and performance of many silver stocks. About half of the stocks under-performed silver, and about half over-performed. I've done better than most, and slightly outperformed silver in the last year.

I disagreed with 3 other panelists on the topic of whether we should buy the stocks of the major silver companies. Over a year ago, I predicted that the major silver companies would not outperform silver prices. I was mostly correct. I don't own any of the 6 major silver companies with market caps higher than $500 million: Silver Standard, Pan American, Apex Silver, Silver Wheaton, Hecla, Couer d'Alene. I think they are all overvalued.

I take profits in the form of silver bullion. Silver is my money; it's my unit of account. I feel I have gained only if the dollar value of my portfolio can buy me more ounces of silver, and I only truly gain if I actually go out and buy those extra ounces of silver.

Silver today is as cheap as it was at $5/oz. about 12 years ago. In 1995, M3 stood at about $4 trillion. Today, silver is at $13/oz., and M3 is at $11.5 trillion. So the silver price over the past 12 years, has, on average, kept up with inflation.

But today, we have price action. Today, silver's gains are outpacing the rate of money creation inflation. Silver gained about 40% in 2006, and M3 went up by about 10%. Silver's gains will likely accelerate even faster, with continued volatility, of course. I expect silver prices to hit $20-25/oz. in 2007. Afterwards, I'd expect maybe a drop to as low as $15, before soaring yet again to new highs past $30 to $50 perhaps in 2008.

I really don't think it matters much what kind of silver you buy. Silver is not produced by anyone in the form of the money of the future, which may be 2 gram coins or 1/10th ounce coins, who knows. Today, it may cost 10% to re-melt and refine silver into new forms. But when silver was money, 100 years ago, smelting and minting costs were 1/2 of 1%. This is not because energy costs more today, it's because the price of silver is at least about 1/20th of what it could be.

Just get silver cheap, get the most silver for your money, at the least price, which is typically 90% junk silver, or silver rounds, or 100 oz. bars, and take physical delivery of your silver, and store it in your own safe, the combination to which only you know. Only then, do you truly control, and own, your silver.

If you can afford to invest in silver, then you can afford to spend 1-10% on protection, whether a safe, or home security system.

To get started buying silver:
http://find-your-local-coin-shop.com/

So, what did I learn at the Vancouver show? Many things.

As my email list has tripled in the past year, I'm more well known than I once was.

I spoke to many friends and company managers, too many to list them all here.

I ran after John McPherson of Canadian Zinc (CZN.TO). He's frustrated with the slow pace of permitting; and looking for acquisitions, since they have $35 million in cash, about half the market cap of the company.

I sought John Versfelt of Cabo, and International Millennium, a company that now has Cabo's Cobalt silver properties, and many other silver properties that may get a listing in February. He was wondering if I was going to sell my shares in International Millennium if it becomes free trading (I own about 3% of the company), and I told him that I originally bought Cabo because I was interested in the silver properties, and that it was up to him to convince me to hold on. (My way of encouraging him to provide value.)

I ran into Don P. the man who spent nearly 4 months convincing me to look into Canadian Zinc back in 2003. We sat to chat, but did not have nearly enough time.

I ran into Gene Larabie of Coronado, (CRD.V) market cap about $15 million. I learned that they have a mining permit, and they are dealing with water in their decline ramp to the high grade zone where they hit 60% copper, the highest grade copper in the world, and may have resources worth about $200 million.

I had dinner with Vance Loeber who has been promoting U.S. Silver, (USA.V) (CHRYSALIS CAPITAL III), market cap about $200 million, which recently acquired the Galena mine in Couer d'Alene, the former flagship mine of Couer d'Alene mining company (CDE).

I had dinner with the men of Arian Silver, (AGQ.V) market cap around $40 million, who are hoping to find up to 100 million ounces of high grade silver in Mexico.

I asked nearly every newsletter writer what they thought of Noront, (NOT.V) a $100 million market cap company, that hit 50-30 ounces per tonne of gold over 15 feet on December 4th, which is the highest grade intercept that I've ever heard of. Most had not heard of it. The two that did, did not yet buy shares.

I also asked my peers what they thought of Pacifica (PAX.V) a $100 million company, and their 100 billion dollars of zinc at 5% grade, which is the largest mining project on earth. Most had not heard of Pacifica either.

I was walking past Cathy Fong of Silvercorp, ($800 million market cap) who invited me to lunch on Tuesday. I learned of New Pacific ($50 million market cap) (NUX.V), another company in development by the same management team, but is not focused on silver.

I made a point to attend the workshop by Dennis Gartman, who appeared to have a free market perspective, yet he has scorned GATA's work. Dennis's main points in his speech were that investors ought to buy things moving up, and sell things moving down. I suppose he is a momentum trader then, and I'm a value trader. His other main point is that the trade deficit does not matter, since the Government measures exports by Microsoft in terms of the price per pound of plastic, and not by the value of the software. We export knowledge, was his theme. Dennis also does not trust the GDP growth numbers of 3%, saying that people pay taxes on what they have actually earned, which shows growth more like 10%. (He did not acknowledge or mention that money creation also stands at about 10%).

This was the first time that I heard John Embry speak at the Cambridge House shows. John Embry runs one of the best performing metals funds in the industry. He was very articulate, as he was at GATA's Gold Rush 21 conference, and endorsed GATA's work. I heard that his fund owns 10% of about 100 resource companies in the industry, a virtual monopoly on resource exploration and emerging production. He read a fact-filled well-organized speech that was well received. I noted that at this conference, there was far more awareness and respect for GATA's work than in prior years. John Embry also ended his speech by noting that he was more bullish on silver than on gold!

On a panel discussion, there was a bit of a debate on whether the China boom will continue, and whether it is sustainable. Frank Veneroso said that he has predicted that many third world booms would collapse, and that he feels that China's boom will collapse -- that China's banks are over extended. On the other hand, China's banks have seen fresh capital infusions from Wall Street, and can draw on China's 1 trillion in foreign reserves. Dennis Gartman, who charges $500/month for his newsletter, had the opposite view, and that the rising middle class in China will make many people millionaires. His view was that one should go to China to open up a plumbing distributorship in the 13th largest city in China, because those were the businesses that made the most money in America's boom times. (Even though he does not know what China's 13th largest city actually was!)

My own view is that China has returned economic freedom in a large degree to its people, who are more free than we in the U.S. in many respects. My view is that freedom is generally quite sustainable. Furthermore, when people are earning $300/year, they can grow such incomes at 10% per year for a long, long time, for far more years than the Dow could grow at such rates, and that this will fuel the commodities boom for perhaps decades to come.

I'm not a doom and gloomer. I believe that mankind is progressing through increased trade and increasing economic freedom, and increasing knowledge. More newsletter writers and investors seemed to understand the GATA story on gold lending, and the specific fundamentals that make silver a much better investment.

Although you now know far more than you need to know, many of you have not yet taken action. It is not the knowledge you have, it is whether you act on it, that is most important. Take action, and get some silver for yourself.

Disclaimer: I own silver, CZN.TO, International Millennium (not yet public), CRD.V, USA.V, AGQ.V, NOT.V, PAX.V, NUX.V, and no company has paid me to send out this article. Please do not email me for specific stock picking advice. Instead, if you would like to see which stocks I own the most of in relation to my holdings of silver, you may purchase the “look at my portfolio”. Thank you.