Ted Butler: Why the Silver Users will Panic

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WHY THE SILVER USERS WILL PANIC

By Theodore Butler

An integral component of my analysis has been that, as the inevitable shortage of wholesale silver became apparent, the industrial users would panic and attempt to build inventories of physical metal. Faced with prolonged delays of a material that threatened to shut down their production lines, the users would rush to buy enough physical silver to prevent those shut downs. This would provide a bullish price thrust that few comprehend.

Recently, I had an experience that may drive home why the silver users will panic and why that will cause the price of silver to explode. About a month ago, I drove home to Florida from Maine. Normally, I take a slightly longer, but more scenic route, than the straight run down I-95. This year, because I was sensitive to reports of gasoline shortages along the route I normally take, I swung over to I-95 further north than I usually do, to avoid any problems getting fuel. It seemed that Hurricane Ike and pipeline problems were causing gas shortages throughout the Southeast U.S.

Having navigated successfully over to I-95 (over much pouting and resistance from my wife, a strong proponent for the scenic route), I thought I was headed home gas-worry free. However, at a rest stop in South Carolina, a traveler approached me with the warning that gas was now a problem on I-95. He related to me that he just came from a gas station that was sold out and had heard that there "was no gasoline at all in Georgia." Georgia was still 100 miles ahead, and there is no other way to get to Florida.

Since I had less than half a tank of gas, I decided to fill up at the next gas station. Sure enough, that station had long lines and the dreaded plastic bags over many of the fuel nozzles, indicating empty tanks for premium and mid-grade gas. Fortunately, my car only requires regular gas, so I was able to fill up with no great difficulty.

I must tell you that such an experience wakes you up and focuses your attention on something you normally take for granted. I confess that 75 miles down the road, in stopping at a hotel for the evening, I pulled into an empty gas station and topped off my tank with 2 gallons. I wanted to get home.

It occurred to me that it didn’t matter if your vehicle was worth $1000 or a hundred times that amount; without fuel, it was of no use. You need fuel to run your car. Same thing with silver for an industrial consumer - your $100 million factory could grind to a halt without silver.

I related to my wife that the price of a gallon of gas was no longer a concern, only its availability. If there was a way to insure a guaranteed supply of gas for the next year or so, I would sign up. But that’s impossible, as the problem was that there was no practical way of storing such a supply, as we are all limited by the capacity of our vehicles’ fuel tanks. Where would you put 1000 gallons of gasoline?

It occurred to me that there was no practical way for anyone to hedge against a shortage of fuel, save build your own tanks to store the fuel. Even those that had successfully hedged the price of fuel in the past, like Southwest Airlines and others, were hedging against just the price and couldn’t guarantee themselves actual supply in a shortage. For fuel and many other commodities, there was no practical protection against a shortage of the commodity.

That’s when it dawned on me to write this article. Silver is a lot different than fuel in that not only is it a lot easier and less dangerous to store, it is more likely to go into a shortage, given silver’s investment demand. Not only could the silver industrial consumers hedge themselves against the giant silver price increases ahead (buying futures), they could easily guarantee actual supplies before the coming inevitable shortage. All the users have to do is buy actual silver, not paper contracts, but real silver. Just like you do. The users buying actual silver to protect against both price increases and availability is as easy as falling off a log. Plus, it is a very rational act.

The silver industrial users have yet to initiate any type of buying protection program, either with paper contracts or with the actual metal. But, the users are run by people who are human. When they can’t get timely delivery of actual silver, like what has occurred to investors for the past months, they will do what I did in North Carolina; they will top off, and keep topping off. Only they won’t be limited by a 15-gallon gas tank. Because of the physical nature of silver and its ease of storage, the users will be able to buy as much silver as they care to, price permitting. They will buy more silver than they need because they will fear not being able to get it, once the delays in shipments start. This will set off a chain reaction, exacerbating the shortage and causing more silver users to do the same thing. This chain reaction will set off a price spiral that will shock the world.

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Hugo Salinas Price: New policy on purchase and sale of silver 'Libertad' coins

Oct 28, 2008

Banco Azteca, with over 800 branches in Mexico, informs us that it will apply a new policy to the purchase and sale of silver "Libertad" ounces at all its branches.

In response to the restriction on supply of silver "Libertad" coins applied last week by the Bank of Mexico, Banco Azteca will proceed as follows:

Banco Azteca will seek to attract the re-sale of silver ounces in order to satisfy, as much as possible, the strong demand forecast for the year-end.

Therefore, Banco Azteca will raise the re-purchase price of silver from the public to where the re-purchased quantities equal the quantities sold to the public, always maintaining the necessary margin to cover costs.

If the price of re-purchased silver is too high, the supply from the selling public will surpass the demand of the silver-purchasing public.

If the price of the re-purchased silver is too low, the supply from the selling public will not be sufficient to cover the demand from the purchasing public.

Banco Azteca will seek to discover the intermediate point, which will balance the supply from the selling public with the demand from the purchasing public.

Banco Azteca had been looking forward to selling 250,000 silver ounces during the Holiday season. With the cutback in supply, current policy would cause Banco Azteca's inventory to fall to zero in the course of next week.

Sales will be much reduced, from here on, but at least the program adopted will have the virtue of demonstrating what the actual market price of silver ounces is in Mexico , independent of any relation to Comex silver prices.

Banco Azteca was informed by a source at Banco de Mexico, that the restriction of supply was due to a "very large foreign order for silver ounces".

***

The Mexican Civic Association Pro Silver does not accept this excuse, even if it were true, because in any case providing the Mexican people with silver ounces would have to be its Number One priority, and not supplying a foreign buyer while depriving Mexicans of silver ounces.

Furthermore, this Association was told years ago by an officer of Banco de Mexico that the Mexican Mint was capable of minting up to 10 million ounces of silver coins a year.

We believe the restriction of supply in silver ounces is meant to deprive the Mexican population of the possibility of seeking refuge in silver as a protection against financial and economic carnage, and to force Mexicans into depositing their savings in the Banking System, with its risks.

Oct 27, 2008
Hugo Salinas Price, President
Asociación Cívica Mexicana Pro Plata, A.C.
Mexico City
email: 254hsp@elektra.com.mx
website: http://www.plata.com.mx

Ted Butler: The Masters of Destruction

On Friday, October 10, the price of silver crashed, falling almost 25% from its price level 24 hours earlier. It is down roughly 50% from where it traded a few months ago. While a broad array of markets fell sharply in price that day and over the past few months, from oil to gold to grain to just about every commodity, none fell as sharply as silver. As regular market observers know, this is usually the case. I intend to explore why this is usually the case and what I think readers should do about it.

Does the sharp price decline mean that conditions have changed and that silver is no longer a great investment? I know it is human nature to assume that when the price of a commodity drops sharply in price, that there must be more of that commodity coming to market, or less demand. This is what we have all learned. But the facts in silver suggest something else entirely.

In my opinion, if conditions have changed, they have become more compelling and silver is an even better investment as a result of the price markdown. There is no great current or prospective increase in the supply of real metal coming to market. And if industrial demand does fall in the future due to deteriorating world economic conditions, it will be accompanied with falling production at current prices. Certainly, there is no evidence of anything but phenomenal investment demand.

Premiums on virtually every form of real silver have been sky-rocketing recently, especially on Friday’s price collapse. These premiums are the highest they have been in history, reaching 60% for certain items, like Silver Eagles. This is the clearest proof there is no developing glut of silver, as the price declines on the COMEX might otherwise suggest to some. At a minimum, the premiums dictate that none of this silver will be melted into bullion.

The purpose of this article is not primarily intended to encourage you to buy real silver, as it seems obvious to me that you understand that already. I’d rather explain the price decline, and what you can do about it (aside from continuing to buy silver).

The recent price decline was all about forcibly liquidating as many leveraged silver holders as possible, so the big shorts could buy back their short contracts. That is always the cause for major price declines. It has become almost impossible to force those who hold silver on a non-margined basis to sell on these price declines. Instead, investors buy real silver on the declines. The growing premiums prove that. All that’s left for the big shorts is to force those holding silver on margin to sell. That is done by rigging sharp price drops unexpectedly. This is the heart of the manipulation.

Never has there been as wide a disconnect between the price of a commodity traded on a licensed exchange and the products of that commodity in the real world. This raises the issue that no true price discovery is occurring, and that paper trading is setting prices. This violates basic commodity law. All that remains is a contract delivery default and/or disorderly pricing to the upside.

It is one thing to claim manipulation, and quite another to prove it. But the proof in this case lies in common sense and in the government’s own public data. The simplest proof of manipulation is in asking the question, what would the price have been absent the manipulators’ actions? What would the price of silver have been if one or two U.S. banks hadn’t sold a massive amount short in July? The only answer is that the price would be much higher absent that concentrated selling.

Coincident with Friday’s big price smash was the release of the October Bank Participation Report from the CFTC http://www.cftc.gov/marketreports/bankparticipation/index.htm

This is the report I wrote about in "The Smoking Gun" back on August 22, which documented that one or two U.S. banks sold short the equivalent of 20% of the world annual production of silver (and 10% of world gold production) during July, followed by a severe price decline.

The new data indicates that the big US bank(s), over the past two months, bought back 10,500 contracts of the 27,600 sold in July. Since the report was as of Oct 7, more contracts were most likely bought back on Friday. Calculating that the big bank(s) made a $6 oz profit per contract on the closeouts, indicates it realized more than a $315 million profit on the closed sales. In addition, at Friday’s closing price, further realized and unrealized profits on the remaining silver short position, amount to another $600 million for the big bank(s). To those who claim that they see no motive in why someone would manipulate the price of silver lower, here are 900 million reasons. Similar numbers apply to gold.

Since futures trading is a zero-sum equation, this means that the $900+ million made by the big US bank(s) has come from long futures traders’ pockets, dollar for dollar. Whatever some futures traders make, other futures traders must lose. No exceptions. Of course, just because someone makes what someone else loses does not necessarily constitute manipulation, no matter how large the amounts involved. What constitutes manipulation is concentration, intent and control.

That the big U.S. bank(s) had, and has, a concentrated silver short position is beyond question. In fact, the silver short position has been the largest concentrated position in history, by every reasonable measure. The data proves this. It is this concentration and control that is solely responsible for the severe price decline in silver. It is absurd to assume there was no intent to manipulate, not with a billion dollars’ worth of motivation.

There is nothing wrong with an entity making a huge profit, as long as that entity has done it fair and square. But the $900 million profit by the big U.S. bank(s) was not earned fairly or legally. It was theft through market control and dominance. If this wasn’t so obvious and proven by their own data, the CFTC would not be actively investigating a manipulation in silver. But a deliberate and thorough investigation is not enough with a crime in progress.

I have never publicly advocated that anyone buy silver on margin, futures or otherwise, although I do understand the attraction and it is my background. I have been clear that real silver should be bought on a cash basis. If you buy silver (or anything) on margin, you must be prepared for unexpected trouble in the form of sharp sell-offs requiring additional funds. Still, it is not right that margined silver holders should be cheated, by a crooked U.S. bank or anyone else, out of $900 million or any amount. Unfortunately, the problem goes much deeper than futures traders being cheated.

As large as the $900 million that the U.S. bank extracted from COMEX long silver futures holders may be, it is small compared to the total damage inflicted, as a result of this manipulation. After all, it wasn’t just long silver futures holders who were damaged. Far from it. When the total damage is tallied, it should become clear why I would refer to the big U.S. bank(s) that shorted COMEX silver in July, as the Masters of Destruction.

Since there are one billion ounces of silver bullion equivalent in existence, the value of that bullion was approximately $19 billion in July, when the big U.S bank shorted COMEX silver in massive quantities. As a result of that shorting and all the bullying and corrupt market dirty tricks since then, the value of total silver bullion was $10 billion on Friday, down $9 billion in little more than two months. That’s ten times the amount that the Masters of Destruction stole from long futures traders. Talk about collateral damage.

Yes, it’s true that the manipulation has created an incredible further buying opportunity in silver. And it’s also true that those holding silver on a fully paid for basis, still hold their silver and will profit from the certain price gains in the future. But that does not excuse the manipulation, nor minimize the loss of value. Who the heck does this big U.S. bank think it is, that it can inflict that kind of damage on innocent investors in silver?

The collateral damage is not limited to silver bullion investors. Shareholders in silver mining equities have suffered, at least, an additional $10 billion in losses over the past couple of months, as a direct result of the manipulated 50% decline in silver prices by one or two U.S. banks. We’re now up to 20 times the $900 million gained by the futures manipulators so far. Bear with me, as I’m just getting warmed up.

(I’m confining my remarks to silver here, but let me assure you that the equivalent total damage in gold is much greater. Quite literally, where the losses to silver bullion and mining stock investors run to tens of billions of dollars, the losses to gold bullion investors and mining shareholders runs into the many hundreds of billions of dollars. All courtesy of the Masters of Destruction.)

Aside from the damage to shareholders in silver mining stocks, the companies themselves, as ongoing concerns, have been severely damaged. The manipulation has driven the price well below the cost of production for just about all the primary silver producers. Just look at their stock prices. In addition, low base metal prices has meant that the current price of silver is now below the cost of production on a by-product basis as well. This guarantees that if silver prices don’t rise dramatically and soon, significant silver production will be eliminated. I don’t understand how mine management can sit by and tolerate this without fighting back.

Further, the collateral damage being inflicted on silver mining and exploration companies will curtail not only current production. Given the long lead times required to bring a silver mining prospect to production, the artificial low prices are causing unknown delay to future production. Thus, the manipulation promises long-term damage to the production of a vital industrial resource. It may be bullish for prices long term, but it is wrong.

While the industrial silver consumers may be reaping some small advantage in buying silver cheaper today than they would if silver prices weren’t artificially depressed, they stand to lose even more than the miners in the long run. Artificially depressed prices in anything must cause a shortage at some point. That’s supply/demand 101. This can be seen on the retail side of silver presently. When this shortage becomes obvious on the wholesale side, it will be the industrial silver consumers who will feel pain beyond what the producers currently are experiencing. It will be the user panic to buy inventory and keep production lines running that will cause prices to soar beyond reason.

Perhaps the worst collateral damage of the manipulation by the big U.S. bank(s) is not to futures traders, innocent bullion or mining share investors, the miners themselves, or the industrial users. The worst damage inflicted by the Masters of Destruction is to our important institutions, like our licensed exchanges and regulatory institutions, and to our confidence in our markets. Trust is hard to earn and easy to lose.

The CME Group, owners of the Chicago Board of Trade, the Chicago Mercantile Exchange, and now the NYMEX/COMEX, is the largest and most important futures exchange in the world. They stand to lose the most of all in the silver manipulation. If there is any silver delivery default or disorderly pricing event, they would appear to be responsible. Especially since they have been repeatedly warned. They have their reputation and potential massive litigation costs at risk. They are the frontline regulator, as dictated by law. Yet they refuse to respond to public allegations of manipulation in the COMEX silver market, in spite of hundreds of us contacting them. That is deplorable.

The CFTC has bowed to public pressure and has initiated an investigation by their Enforcement Division. Obviously, the Commission sees sufficient evidence to investigate, otherwise they would not waste taxpayer money on a useless investigation. Yet the evidence is their own data, which they and the CME Group refuse to explain. That the alleged manipulation is very much a crime in progress inflicting great collateral damage and neither regulator acts against it results in a loss of confidence in our regulators and markets. It diminishes us all.

That a crooked U.S. bank, in the quest to illegally generate a profit, would poison the water for so many unrelated and innocent parties is unconscionable. We have enough financial problems in the world presently with declining asset values. There is no room for the intentional destruction of values and markets. This blatant silver manipulation must not be allowed to stand.

The great financial crisis that currently impacts us all is the direct result of a regulatory failure to restrain a few wheeler dealers on Wall Street, who went hog wild in concocting crazy derivatives for personal profit. Now, we are left to clean up their mess, at great collective cost, both monetarily and to our faith in our institutions. Admittedly, silver is a much smaller market than the mortgage and credit markets, but the same principle applies, namely, many being damaged by a few. Plus, the damage has already been done in mortgages, while silver is ongoing.

In the great financial credit crisis in which we are presently engulfed, there are no simple solutions. In silver, there is a simple and effective solution. We must pressure the regulators to enforce the law and eliminate what remains of the concentrated short position in silver, never to return. Then we must insist that the short manipulator(s) be punished for the full extent of the damage it has inflicted on everyone.

When the CFTC finally admits what is already common knowledge to most observers, that is, that there has been an ongoing manipulation in silver, it will not be sufficient to base any resultant fines on just the damage in the futures market. All collateral damage must be considered. Don’t fine the big U.S. bank $1 billion for their ill-gotten futures market gains, fine them $20 billion or more for all the collateral damage they caused. And the CFTC shouldn’t remit any fines collected to the Treasury. A special fund should be established to compensate actual victims.

The only reason the CFTC is investigating silver, at all, is because you took the time to write to them. You must write to them again. And keep on writing. I assure you it does have an impact. In addition to the usual addresses of the Commissioners, the Inspector General, and the Chief Regulatory official of the CME Group, I am adding the address of the Acting Director of the Enforcement Division, Mr. Stephen J. Obie. It’s important that you let them know how you feel.

Wlukken@cftc.gov

Mdunn@cftc.goc

Bchilton@cftc.gov

Jsommers@cftc.gov

Alavik@cftc.gov

Sobie@cftc.gov

Dean.payton@cmegroup.com

CFTC relents and probes silver market

Persistent Complaints of Foul Play Draw the Still-Skeptical Agency to Investigate

By Carolyn Cui
The Wall Street Journal
Thursday, September 25, 2008

With silver prices falling this past summer, silver bugs worldwide set out to prove that their metal was in short supply and market manipulation was at work. They bombarded federal regulators with hundreds of emails crying foul play and demanded answers.

Though such pleas proved futile in the past, this time the rousing chorus grabbed regulators' attention. On Wednesday the Commodity Futures Trading Commission confirmed that there's an investigation into the silver market.

The CFTC isn't yet convinced there's systemic wrongdoing and in May published a report saying as much. But the agency decided to take a fresh look, in part to show critics that it checks out complaints, and also to make sure there isn't something new to uncover.

"We take the threat of manipulation in the futures and options markets very seriously and employ a number of measures to prevent, identify and prosecute it," said Stephen Obie, acting director of the agency's division of enforcement.

Silver investors have argued that a handful of U.S. banks have been controlling a large portion of silver's short positions -- or bets that prices will decline -- on Comex division of the New York Mercantile Exchange. Official data from the CFTC showed that two U.S. banks had increased short positions in the silver futures market between July and August by 450% and controlled 25% of the total open interest.

"The proof that this selloff was criminal lies in public data," wrote Theodore Butler of Cape Elizabeth, Maine, in August in a silver newsletter. "The concentrated sale of such quantities in such a short time" caused silver's fall, wrote Mr. Butler, who for many years has been vocal about purported silver-market manipulation. In September he reiterated to readers that they should email the CFTC.

The CFTC had argued in May that the large banks that people assailed for manipulating the market were instead acting appropriately as market makers, who take on futures positions to offset their exposure in over-the-counter markets. Therefore, these traders aren't "naked shorts" and won't benefit from long-term depressed silver prices. Many analysts agree with the agency's conclusion.

Silver stalwarts weren't persuaded. Jason Hommel, a newsletter writer based in Penn Valley, Calif., directed readers to visit their local coin shops at 2 p.m. on Sept. 2 to size up for themselves whether there was a silver shortage. From Michigan to North Carolina and beyond, he says, investors trekked to coin shops. Many reported no silver for sale.

Bart Chilton, one of the CFTC commissioners, said he has received about 700 emails from silver investors since August, far more than the estimated 100 he received from May to July. Mr. Chilton, a Democrat who has criticized the CFTC as doing a poor job communicating with consumers, says he has spent nights and weekends personally answering emails.

Historically, silver has been a volatile market. This year it saw a near-50% drop and remains down 9.5% on the year. Gold is up 6.5%. The agency has long heard from frustrated silver investors. In 2004, it published an open letter by Michael Gorham, then the agency's director of market oversight, after receiving more than 500 letters and emails from silver investors.

That the enforcement rather than oversight division is taking on the issue marks a difference from the CFTC's previous efforts regarding the silver market. The oversight division performs overall market surveillance. The enforcement division looks at activities in a specific time period.

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Jason Hommel: The World Needs a Free Market in Silver

The World Needs a Free Market in Silver

(Functioning Markets Solve the Problem and Free Markets Work Best)

Silver Stock Report by Jason Hommel,
September 7th, 2008

This may be the most important article that I will ever write in my lifetime, and it may be the most important you will ever read. I don't know if things will ever be as crucial on the world stage as they are today. The world has a choice to head towards increased freedom and prosperity, or towards shortages and misery.

Typically, stories of inflation and hyperinflation are accompanied by stories of food shortages, misery and pain. During some hyperinflations, people are reported to be so desperate to save their currency that they will buy bed pans or piles of horse manure to preserve the value of their wealth. Thank God we can still buy silver, instead!

The price of Rat Meat in Cambodia has increased 400% as investors flee from inflation!

http://news.yahoo.com/s/nm/20080827/od_uk_nm/oukoe_uk_cambodia_rats

Today, there is a world emergency, a world crisis that is being ignored, because silver is a neglected and forgotten metal and industry, and more eyes are on the banking crisis and on the election than on silver.

The silver markets are failing and breaking down. The COMEX fraud of allowing the sale of excessive and unbacked paper futures contracts is destroying the silver market. Too many silver dealers, refiners, and coin shops have relied on the COMEX price to set their own prices, although nothing was for sale and no silver came to market when those prices were set, and so they mostly all ran out of inventory.

If we do not solve the problem of the broken COMEX market, the world will continue to be plagued with shortages that will extend much further than the silver market, and into all other markets. We could end up with desperate food shortages, as investors who cannot find silver may end up purchasing food to protect their money, instead of silver, and if that happens, starvation on a world-wide scale could result. In fact, it has already begun with rising food prices worldwide as investors pour into grains as a result of inflation driving speculators into all commodities.

Price increases push US soy beyond reach of poor:
http://money.aol.com/news/articles/_a/bbdp/price-increases-push-us-soy-beyond-reach/163191

That is the danger of allowing COMEX fraud to continue unopposed. The best way to oppose COMEX fraud and end it, is not through letter writing campaigns to the CFTC, and not through police crackdowns from the SEC, nor from new regulation by Congress.

We don't need to use force to stop evil. We can overcome evil with good. Where the spirit of the Lord is, there is Liberty! We just need to understand, embrace, and create freedom.

And so, rather, the best way to oppose COMEX fraud and end it is to create an alternative free marketplace or free markets where silver can always be more and more freely bought and sold.

An alternative free market will end the fraud faster than you can imagine, much faster than any CFTC investigation, through the profit incentive to buy from one market to sell into another.

Have no fear. The profit incentive, and the ease of the use of the internet, will create the incentives to create that alternative market where our silver will be fairly valued, and freely traded.

Traders rightfully point out that if the COMEX price is fraudulently too low, then people would buy bars at COMEX, and sell into the free market, and make a killing.

After all, you can make much, much more on a 20% mark-up by quickly flipping silver and selling to investors than you can with a 100% mark up selling jewelry, because the jewelry market has slower turnover of product.

Example: If you can make 20% per transaction, and make 12 such transactions per year, only once a month, you can make 792% in a year!

See
http://www.smartmoney.com/compoundcalc/
for the math.

I might not be willing to risk my money to stand for delivery of a COMEX contract, but others will, if there is another market for them to easily sell into.

You could make even more money, 1200% per year, making a 5% profit spread if you bought in one liquid market and sold into another liquid high volume market once a week. Liquidity is key. Liquidity is crucial to the speed of trading, which aids turnover. Silver, by its nature, should always be extremely liquid.

At COMEX, liquidity in silver is thwarted by having a "delivery month" of an unreliable time frame, and not every month is a major delivery month. The Post Office, as dreaded as it is, is far more reliable than COMEX. COMEX also does not ship out silver, but makes you go there to get it.

Given that silver coins are selling at a $3-4 per ounce premium over the spot price, which is about a 30% premium or profit, then makers of silver coins and bars should be able to make huge profits, if they can find silver bars at COMEX prices to turn into coins!

This is how we know 1000 oz. silver bars are in short supply! Perhaps the recent shortage is at least partly a result of this month, September, being a delivery month.

But there's a bigger problem. A free market in silver with high volumes and low spreads does not exist. So, you can't go and buy silver from COMEX, to sell into a non-existent market.

Today, maybe neither market exists!

There are alternatives to COMEX, but none of them has the capacity to pick up the slack and carry the huge volumes of trade, and allow a trusted and reliable form of price discovery to take place.

For example, Fresnillo, the silver refinery in Mexico that refines about 90% of the silver in Mexico, which produces about 80 million ounces of silver per year, ships out 600,000 ounces of silver at a time, in 1000 oz. bars, 30,000 oz. per pallet at a time.

The world needs a market that can handle and service the needs of refiners such as Fresnillo, so they will ship to the free market or at free market prices; instead of to COMEX or to other places at COMEX prices.

Yes, there are the coin shops and online bullion dealers. But investors typically do not want 1000 oz. bars because they are ugly, not standard size, and too heavy at around 70 pounds. APMEX recently had more than 20 for sale for a few days, and they sold out, but that's not a very large volume, and they didn't sell at a much of a premium, only about 35 cents over spot.

Ebay is good because they only allow people to sell what they have, and there is a rating system in place to allow feedback on sellers reputations, and ebay allows competitive bidding to allow an odd form of price discovery to take place.

But ebay is not useful because we often do not see the final auction price at the last minute. And ebay is bad because fees are excessive with fees ranging from 10-15%! That's not a "free market", it's a rather costly market! Also, it is difficult to buy in volume, because there is limited product available. And fraud levels are still too high, and there are additional penalties on sellers. Another drawback to ebay is that there is no aggregation ability to place large orders over multiple auctions of standardized fungible products that are similar enough to be interchangeable. Nor can you use ebay to sell into anyone's standing bid for a standardized form of product. So ebay is mostly a one way market, not a two way market, like an exchange should be.

There is bulliondirect.com. But it, too, suffers from low volume, lack of product availability, product delivery delays, and difficulty of use.

There is craigslist.com. The advantage is that you can connect with people in your local area anonymously for cash to silver transactions, but there is no volume at all.

Goldmoney.com is another site where you can trade. But there is a restrictive trading limit of 1500 ounces of silver per day.
http://support.goldmoney.com/article.php?id=098

And there are other futures markets and exchanges in Tocom, Dubai, Shanghi, and elsewhere, but their volumes are much lower than at the COMEX, and like the COMEX, futures contracts can be created and sold to excess.

In any reasonable money exchange marketplace, gold should also be able to be traded for silver, and silver for gold, without having to move into fiat currencies. So, although my personal focus is on silver, I'm really talking about a new kind of silver and gold market exchange.

The world desperately needs a better silver market, in multiple locations around the world that cannot be shut down by desperate and dying governments that rely on paper money fraud, if the world is to survive the implosion and end of fraudulent futures contract trading.

I strongly believe that the most important features of a free market are to end fraudulent transactions of promises to deliver silver in the future that may not exist.

The fraud must end. That is the most important.

But also, perhaps next most important is to encourage high volumes by providing the best market structure at the lowest possible cost?

Readers, the world needs your help!

There are people who know how to make things happen, who can design specs, set up markets, hire programmers, set up verification systems, set up storage locations, and handle the logistics much better than I can. I'm merely a thinker, a theorist, and a writer. And I have a family, and I'm located in a small town, far away. I'm a horrible manager, and I don't like working with people as I have little patience for those who cannot understand right away, even though it sometimes takes me years to "get it". Anyone who has ever emailed me probably knows I'm "short tempered" that way.

Please give me feedback and share your thoughts, and I'll collect your emails and share your suggestions to inspire those people who are more people oriented and action oriented who can make this happen. What other features are important in the design of the most optimal and most free, free market for silver?

Topics for thought:

Ease of use? - OR - Verification of users?
Elimination of fraud? - OR - A Reliable and successful transaction history?
Standardization of bars? - OR - Verification of bars?
Bid/Ask trading at all hours? - OR - Once per day auction price setting?
Reduced speculation & Reduced leverage? - OR - Fully paid for trading?
Ability to handle small transaction sizes - OR - ability to handle large volumes through high minimum transaction sizes?
There is also the issue of cross border shipping logistics.

I'm doing my best to end world poverty by educating investors.

There may be limited silver, but there is unlimited wealth in silver. It just needs to be unlocked by a higher price that can be discovered by a functioning and honest free market in silver.


Sincerely,

Jason Hommel
www.find-your-local-coin-shop.com
www.silverstockreport.com
www.miningpedia.com
www.bibleprophesy.org

Jason Hommel: Where's the Abundance of Perth Mint Rounds?

Where's the Abundance of Perth Mint Rounds?

(No wonder you can't find any!)

Silver Stock Report
by Jason Hommel, September 6, 2008

If the Perth Mint has $880 million worth of silver and gold in inventory from their certificate program, to use as working inventory to make coins, then why aren't they producing many Australian coins that should be flooding the marketplace and available everywhere at close to spot prices?

Let me explain why I hammer Perth so mercilessly. The Perth Mint has issued silver certificates. Investors trust them. Perth has issued those silver certificates for a reason, a reason that silver investors should love.

As they are a mint, they need an "operating pool" of physical metal to use as inventory for operations, to be able to make silver coins to sell to the public in the form of one ounce rounds. This is a fantastic reason, and I would support that 100%, especially if they buy more silver as needed, buying one ounce for every ounce sold. In theory, that would mean that there could never be a silver shortage at the Perth Mint. There is especially no reason for a silver shortage to exist at Perth, given that Australia exports over 400 tonnes of silver each year! The Perth Mint could never run out of silver to sell if that program was run honestly, in stark contrast to the U.S. mint, which is suffering a shortage of blanks.

In fact, the current world-wide shortage of investment silver, such as one ounce coins, means that the world desperately needs a functional mint with plenty of silver for operations.

But Perth does not produce one ounce rounds for the public in bulk form at just above spot prices, as other mints do. Why not? Why can't they?

For example, the Canadian Mint produces silver Maples 3-5 million per year, and the U.S. Mint produces silver Eagles, about 10-20 million per year, and Austria is now producing silver Philharmonics, and France, I hear, may also start producing silver again, too.

http://www.monnaiedeparis.fr/actualite/eurosOrArgent.htm

And all of these are available at between $2-3 per ounce over the spot price, and sometimes now at over $4/oz., due to the shortages of silver.

In stark contrast, Perth produces much less, and they sell their 1 ounce coins at an average price of $61 per ounce!

ttp://www.perthmint.com.au/catalogue/discover-australia-landmarks-silver-coins.aspx

That's $48 over the spot price for Perth 1 oz. rounds! Isn't that a 369% premium over the spot price?!

What's the problem here? Shouldn't they be able to produce silver coins like the U.S., Canada, and Austria? Perhaps Perth doesn't have enough silver in their "working inventory" to produce more?

But they have issued $880 million worth of gold and silver certificates to the public, and therefore, should have plenty of working inventory. In fact, it is so much working inventory, that it amounts to an entire year's worth of investment demand for silver.

Net investment demand for silver is estimated at 60 million oz. by the CPM group, which, at $13/oz. is only $780 million!

Perth has is so much working inventory, that even if the Perth Mint had to wait for a 1 year hold time for delivery to replace their inventory, they would still be able to supply nearly 100% of the silver that the investment world needs, and they could supply it with no delays to the public whatsoever!

It is so much working inventory, that if the Perth Mint had to wait 1 month for supplies of all new silver, they could provide 12 times the world's annual silver demand, and all silver investors everywhere would be buying nothing but Perth Mint Australian one ounce coins, and no other forms of silver whatsoever.

If only 1/10th of the $880 million of gold and silver certificates is in silver (and they don't reveal what percentage it is), then that would be $88 million. Divide by $13 = 6.8 million ounces of silver. If that much were minted monthly, that would come out to 81 million one ounce rounds, which would be 4 times as many coins minted by the U.S. Mint.

Therefore, one would think that if the Perth Mint was honorable, that the Perth Mint should be producing far more silver ounces than the U.S. Mint each year, at a lower cost, and that we would see those in abundance in the marketplace.

But Perth does not issue coins like that. You cannot buy Australian bullion coins in bulk at APMEX, Tulving or any other major wholesaler. Why is that? I think the answer is obvious.

Where is the abundance of Perth Mint rounds? There is no abundance. They are scarce.

It appears to me that Perth's silver in their certificate program, "used for operations" was used to cover unprofitable operations, for years, and that in actual fact, they have no working inventory, or they have less than 1% of the $880 million worth of inventory, barely enough to meet some redemptions and orders on occasion.

Over 50 people have continually complained to me of shortages of silver from the Perth Mint, in my prior emails exposing them. Why are these people complaining to me? Do I have the words "Perth Mint Customer Service Rep" tattooed on my forehead, or in my disclaimer? No.

Sell or redeem your Perth Mint certificates, quickly

Nadler, Kitco, Perth, Matthey; Sold Out! September 3, 2008

Perth Mint Crisis Watch 5 June 6, 2008

Perth Mint Crisis Watch May 23, 2008

Perth Mint Crisis: Solutions and Ramifications May 23, 2008

To the largest newspapers in Australia May 22, 2008

To the government of Western Australia May 21, 2008

Poor Prospects for Kitco/Perth/Matthey May 19, 2008

Kitco / Perth Mint / AGR Matthey / Bullion Bank Connections May 17, 2008

Will Kitco Sue me?! May 16, 2008

Silver Shortage Drives Men Nuts March 31, 2008

Perth Mint and Kitco Scheme Exposed March 26, 2008

See what others are saying about the Nadler/Kitco/Perth/Matthey issues, here:

https://www.kitcomm.com/showpost.php?p=343129&postcount=33

https://www.kitcomm.com/showthread.php?t=22303&page=4

http://goldchat.blogspot.com/2008/09/reply-to-reply.html

http://www.ausbullion.com.au/

Sincerely,

Jason Hommel

www.find-your-local-coin-shop.com

www.silverstockreport.com

www.miningpedia.com

www.bibleprophesy.org

My offer:

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http://silverstockreport.com/customerservice.htm

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Two competing silver prices in Never-Never Land

Once-upon-a-time, in ‘never-never’ land,
There were two competing silver prices

Peter Degraaf

These two silver prices were at loggerheads with each other. Every time the ‘real’ silver price began to rise, a ‘paper’ silver price would show up in large quantities and scare some of the holders of real silver to dump and run.

Silver miners and coin dealers with ‘real silver’ in inventory, instead of being organized, and using supply and demand to determine the price of silver, would look at a computer screen, check to see what ‘paper silver’ was doing and meekly accept that as the price at which to sell silver.

The Silver Users of America (SUA), is the only ‘user cartel’ in existence. (Cartels are usually comprised of suppliers – OPEC comes to mind). For years the SUA and their willing accomplices have been able to spook the people who deal in ‘real silver’ into coughing up silver at low prices, simply by dumping ‘paper silver’ onto the markets. While there are no manuals available detailing how they do this, we will have to make some assumptions based on observations regarding market action.

Here is my assumption: Assume that I am a member of the SUA, and it is in my interest to keep the price of silver as low as possible. Along with my fellow SUA members, I go about engaging half a dozen large bullion banks that are active in the futures markets. I mention to them that my fellow SUA members and I would like to cap a rally that has just driven silver to a new high. Would it be possible, I ask them, as soon as we see that buying is drying up because of resistance at this new price, for you and your fellow bankers to start selling a large number of futures contracts and options using ‘paper silver’?

Let’s pick a time when there are not too many people active in the marketplace, and volume has slowed right down.

My fellow SUA members and I will do the same, and as soon as we create some momentum, the hedge funds will dump their ‘long’ contracts and join us, since they like to chase a trend. Then, the small and large investors who have bought silver on margin will have to sell, and they will also become our helpmates.

By any chance, do any of you bankers have an inside track to any of the central banks? It would be very helpful if one or more central banker could raise the value of the US dollar at the same time as we start our selling campaign.

It would also be very helpful if you people used your influence with the governing body at the various futures exchanges to tell them that what we are doing is simply ‘normal market behavior.’

If we all work together, then you and your fellow bankers will be able to buy back the contracts you sold high, at a lower price, and my fellow SUA members and I will be able to buy ‘real silver’ cheaply from the mining industry, since these people still have not figured out our game and have not yet banded together to form a suppliers cartel.

A funny thing happened last week. The SUA and its fellow travelers may have pushed ‘paper silver’ too low. Shortages in ‘real silver’ began to appear, and more and more people now are beginning to understand what is happening. My advice to those among you who think you are buying ‘real silver’ when you are trading ‘paper silver’ is this: Make sure you buy ‘real silver’ with the profits you make in ‘paper silver’, just in case it turns out there is a shortage of ‘real silver’ to back the ‘paper silver.’

Featured is the daily silver chart. The blue arrows point to times when the silver price fell below the 200DMA (red line on the chart). Two years ago, at the seasonal low in September, price fell to 2% below the 200D. A year ago during the August seasonal low, price fell to 3.5% below the 200DMA. Last week during the presumed 2008 seasonal lows the price was pushed 37% below the 200D!! Think of this as the sellers of ‘paper silver’ having pushed a beach ball well below the surface of the water in a pool. Think of how rapidly the beach ball can rise when it is released, then go buy some ‘real silver’, just as I have been doing.

Notice the RSI at the top of the chart is already turning positive, and the MACD at the bottom of the chart is also ready to turn up again.

The positive aspect that is impressive about the rise in today’s silver price (Tuesday 08/26)), is the fact that the US dollar is also rising. In 2005, silver, gold and the US dollar all rose in tandem.

Therefore, a decoupling (separating the metals from the movements in the US dollar), would not be unique. The main driver for silver and gold is the fact that ‘real interest rates’ (T-bills less CPI) are currently negative. Whenever rates are negative, silver and gold usually rise, as money in bank accounts is punished.

This is ‘real silver’. It does not fold, crumple or burn, you cannot create it on a computer.

DISCLAIMER:

Please do your own due diligence. I am NOT responsible for your trading decisions.

Peter Degraaf is an online stock trader with over 50 years of investing experience. He issues a weekly alert to his many subscribers. For a free 60 day trial, just send him an E-mail at itiswell@cogeco.net, or visit his website www.pdegraaf.com

Gene Arensberg: Silver sucker-punched by two U.S. banks

Resource Investor today posted a special "Got Gold Report" by Gene Arensberg in which he credits silver market analyst Ted Butler for exposing the recent vast downward manipulation of the silver market by two unidentified U.S. banks. Arensberg expects the Commodity Futures Trading Commission to take action against these banks. He writes:

"It will not be surprising at all if we learn that these two U.S. banks are taken to task by regulators for their actions. It will be even less surprising to learn that they have become the target of multi-billion-dollar class-action lawsuits by hungry lawyers representing silver investors everywhere."

Maybe U.S. financial market regulators will do their job right for once, but we'd find it easier to believe in the tooth fairy.

You can find Arensberg's commentary, headlined "Silver Investors Sucker-Punched by Two U.S. Banks" complete with some nice charts, at Resource Investor HERE

Jason Hommel: Silver has Run Out, Now!

Silver has Run Out, Now!

(Just try to find some!)

Silver Stock Report

by Jason Hommel, August 20th, 2008

For a long time, people have been asking me, "When will silver run out?". They know that the world uses up more silver each year (about 850 million ounces) than the world mines (about 600 million ounces), and that existing demand can only be met by selling existing inventory (such as recycling 200 million ounces, or goverments selling 50 million ounces), so it's a natural question to ask. The question is not implying that mankind will be unable to mine any more. Rumor is that there remains at least about 14-16 years of silver in the ground at "current" prices; while at much higher prices, silver mining becomes more economic, and more deposits can be added to that "in ground" reserve number.

So, the question is really just asking, "When will we run out of "excess" above ground silver that can meet the supply/demand gap, so that the price will begin to really take off upwards?" Clearly, the world has silver in supplies above ground, and such silver supplies are dwindling in order to meet the supply/demand gap. About two years ago, the world started adding to above ground silver supplies as silver investors started buying, (and the silver surveys label investor buying as a "surplus". However, silver recycling was still greater than new stockpiling, which continued to deplete overall silver supplies.

Such a question as "When will silver run out?" cannot really be answered in advance, since nobody really knows how much silver there is, and who owns it, and at what price they are willing to sell it. Again, that brings us back to the nature of silver; it's inherantly private wealth, held anonymously. Estimates on "above ground" silver, in refined, deliverable form have ranged from 300 million ounces to 1 billion ounces, to about a high of 4 billion ounces if you include jewelry and flatware, up to 20 billion ounces if you include all forms of silver that have not ended up in landfills, out of the total of 43 billion ounces of silver estimated to have been mined in all of human history. Furthermore, nobody is arguing that the last bit of silver that exists needs to be consumed before the price rises substantially. The question is really about when will all the unwanted silver, in so-called "weak" hands of holders who don't really want it, be sold, to allow the price to rise to meet the majority of the expectations of the remaining wise investors who have planned in advance to actually store up some of the rare stuff.

But finally, I think the answer has arrived. The answer is "NOW!" Silver has run out, now! Or, in other words, most of the cheap silver has run out.


There are two excellent articles on the shortage of Silver that I'd like to bring to your attention if you have not already seen them:

This one is by "seekingalpha", and is very excellent, and very comprehensive.

The Disconnect Between Supply and Demand in Gold & Silver Markets
(August 18th)
http://seekingalpha.com/article/91357-the-disconnect-between-supply-and-demand-in-gold-silver-markets

The article goes over how the silver shortage is also affecting India.
He also covers the paper silver fraud that is commonplace and "standard business practice" in Wall Street brokerage houses.

This next article is short and powerful, and written by a coin dealer:

The Disconnect Between The Physical Gold and 'Paper Contract' Markets
(August 19th)
http://www.numismaster.com/ta/numis/Article.jsp?ad=article&ArticleId=5093



What's amazing is that last year, net physical silver investment demand was estimated to be about 30-60 million ounces, or about $1 billion worth.

Today, with 90% of the people in the U.S. being concerned about inflation, and a growing awareness of the danger of banks going bankrupt, there ought to be about 90% of the $14,000 billion of money in the banks that should be seeking to buy either some silver, or gold.

So, where do you think silver prices are headed? How can most of $14,000 billion enter a market of $1 billion that is already suffering a shortage, and prices not go up, a lot?

And oh yes, what about that current low price?

There's a short story that goes something like this. A lady wants to buy sausage. There are two butcher shops next to each other, one advertises $1.99/lb., the other advertises $2.99/lb. She goes to the $1.99/lb. shop first. But there's no sausage, they are out. So, she goes across the street, and sees sausage for $2.99/lb., and promptely complains about the price. "Why don't you sell it for $1.99/lb like the other guy?" Butcher answers, "Lady, when I'm out, mine is $1.99/lb, too!"

Price means nothing if you can't get the product. Many people are still sending money to dealers who will take your money, but have no silver, and no idea when they can get it.

Be very, very careful about ordering silver right now. Demand to know exactly when they can deliver. If they can't guarantee delivery within a week or your full money back, then consider that they probably don't have it!

Here's what I suggest. FIND YOUR LOCAL COIN SHOP and go there, in person. Or visit the dealers who are recommended at:
www.find-your-local-coin-shop.com


In fact, now might be a good time to meet up other Silver Stock Report readers.

I suggest that everyone visit their favorite local coin shop on September 1, at 1PM. That's a Monday.



Sincerely,

Jason Hommel

David Bond: Let's be Hunts

Let's Be Hunts

By: David Bond, Editor The Silver Valley Mining Journal
-- Posted 17 August, 2008

The Wallace Street Journal

Wallace, Idaho – Forgive two rants so close apart, but no sooner had our tirade on the scarcity of retail silver appeared on Goldseek and LeMetropole Cafe – it would have appeared on our own Silverminers.com except we're still rebuilding the site from whoever hacked the hell out of it last month – than the U.S. Mint halted sales of its fabulously popular 1-ounce Gold Eagle coins to the American public.

That was last Thursday night, after we went to bed. Much has happened between Thursday night and this Sunday night. There's no retail 1-ounce silver left on the market; deliveries of 100-ounce Comex-grade bars won't happen until October 15th. The Gold Eagles are gone. GONE!!!!!!!

One would think, as we postulated last Thursday, that the reason the prices for gold and silver were so low was that nobody wanted them. That would be the classic Keynsian explanation. But instead we were told that the reason the prices were so low is that EVERYONE wanted silver and gold 1-ounce coins.

When the market starts talking such gibberish, it's time to start thinking about a Hunt. As in, Nelson Bunker and William Herbert Hunt. We remain amazed, 28 years later, that supposedly sophisticated investors regard the events of 1979 and 1980 as “that time when the Hunts tried to corner the silver market.”

This is one of those monster myths that is so incredible and so false it must be believed by the unwashed masses. Regrettably, detritus of these masses grow up to be Presidents of the United Snakes, or of some branch of the Federal Reserve Bank. Makes them no less idiots, their Ivy League pedigrees notwithstanding.

In 1977, Bunky Hunt surveyed a battlefield much as the one that confronts us: there was paper silver a-plenty for sale, but not a physical ounce in sight. Hunt and his brother, reared in the resource-rich ethic of mid-Texas and Oklahoma, saw a gaping hole in the illusion that is American wealth: a bunch of paper selling a commodity that could not be bought. These things occur from time to time in corn, soybean, and oil commodities, but only temporarily until the market quickly achieves contango – its balance. The only time a gaping imbalance between the paper and the physical market is allowed to persist, the only time the paper price is allowed to be lower, and lower for a long period of time, than the physical price of the commodity, is in the trading of silver and gold.

It is useful for a government like the one that has commandeered the United Snakes, such government and its banks, to permit such an imbalance to exist. If the paper price of silver and gold are severely lower than their actual value, the paper money that the United Snakes and its banks issue is theoretically more valuable – relative to silver and gold – than it really is. Push down the metals, up goes the U$ Dollar. This is our current situation.

And it is profitable for the United Snakes government until some kill-joy comes along and wants delivery. The Brothers Hunt saw that the absurdly-priced silver contract of $3.50 an ounce was a bargain, that $3.50 silver existed nowhere in the real world except in the paper futures pits, but there it was, for sale, on the Comex.

My late friend, Paul Sarnoff, watched the thing unfold from his front-row seat at Paine Weber. The Hunts were a client, as was a Catholic archdiocese and several Arabs, who were getting worried about the quality of the paper they were being paid for their oil. Put yourself back in those times: gas prices were going through the roof; home mortgages, if you could get one and had perfect credit, were going for 18 percent APR; we had a weak President facing unpopular situations in Iran (where there were hostages) and Afghanistan (where the Russians were being adventurous). There was a run on the U.S. dollar in Europe.

And there was no silver. Not since the United Snakes had kicked silver out of the U.S. monetary system had silver been more scarce. Yet there it was, for sale on the Comex, for sale by the likes of the big central banks and bullion banks of the world. But such was no big deal. Between 97 and 99 percent of those 5,000-ounce silver contracts were settled in paper.

But the Hunts and their friends – this was in 1977 – began buying this paper over a period of years. By October 1979, the Hunts and their pals had bought up the bullion dealers' paper positions to the tune of 192 million ounces. Nelson Bunker Hunt owned 79 million ounces of silver – on paper; William Herbert Hunt, another 48 million ounces; their pals, including the Arabs, another 65 million ounces.

Is it too much to ask, if you buy a car from a guy, and you pay him the cash and he signs over the title, that you might get the car? This, ladies and gentlemen, is all the Hunts ever asked. They did not ever “corner” the silver market. All they asked was for the bullion dealers to keep their promises, and deliver.

Chaos ensued. There was then – as there is now – no silver to be had. Not in London or New York warehouses nor in the ground. Not anywhere. And for the simple reason that the Hunts and their pals asked for the delivery of silver they were promised by contract, they were vilified. Driven to ruin. And they provoked their own ruin: Bunky said he'd issue silver certificates in lieu of paper dollars, if people wanted to play. When I was a child, silver certificates were the money of the land.

This writer carries no cross for the Hunts. They were forced to sell the brokerage, Bache, that had carried their contracts but bet against them. But they still have their race-horses in Paris, and I am sure they have not missed a meal.

But there is a monster short position in silver again. It probably exists to prop up the Bush puppetry until the November election. Presidential election years are always hard on metals and easy on mortgage rates, except this year, the mortgage market is done, so new paradigms are in the making. Metals may come back far sooner than is ordered by the Fed and the FDIC. And remember, here is no Jimmy Carter to sell a billion ounces of silver into the market to quiet the Dollar worries. Carter's still around, but those 1 billion ounces are long gone.

The Hunts shook the lying bankers to their boots – to the point where intervention by the Fed, Treasury, and the Defense Department were warranted – merely by asking for delivery of the 192 million ounces of silver they'd been promised. This was not a “cornering” of a market; it was the attempt to enforce a contract, same as you've got with your landlord or bank.

So let's all of us be Hunts. Ask delivery of $12.80 silver and $790 gold, today. There are 300 million of us. A single ounce of physical silver for every man, woman and child in the United Snakes would squeeze these rat-bastards harder than the Hunts could ever do. There were two Hunt brothers in 1979. There are 300 million of us in 2008. Even in this country, there aren't enough jail cells to hold us all. And we could take their pants off, once and for all.

Jason Hommel: Silver shortage causes price disconnect

In commentary posted this afternoon Silver Stock Report's Jason Hommel elaborates on the shortage of silver. He writes:

"If you have to wait 30, 60, or 90 days for silver from any seller, it means they are selling what they do not have, and hope to get it from someone else who does not have it today either. That means they are short -- they owe you silver they do not have. And if there is a 'regular' 60-day delay, where they have you pay for it all up front, instead of making a tiny 5-percent deposit as down payment, then they are 'floating' on your money, like you gave them an operating loan."

Hommel's commentary is headlined "Silver Shortage Causes Price Disconnect" and you can find it HERE

Jason Hommel: What the Silver Shortages Mean

Silver Stock Report's Jason Hommel has no doubts or second thoughts regarding the real causes behind the latest silver (and gold, mind you) shortages:

"Silver prices are dropping like a rock, down to $12.50/oz., and yet, none of my trusted, major, regular dealers have any silver to sell...
..So, why are prices crashing when no silver is available?
Manipulation. Lies. Paper games. I've covered this many times before in the last few years..."

Please click HERE to read J. Hommel's missive.

David Bond: Silver Shortage? What, Me Worry?

Silver Shortage? What, Me Worry?

The Wallace Street Journal

By David Bond, Editor
The Silver Valley Mining Journal

Wallace, Idaho – We received a missive yesterday from the American Precious Metals Exchange, an Oklahoma-based company that retails silver and gold bullion – American Eagles, Canadian Maple Leafs, Krugerrands, bars, coin bags and the like, that immediately raised alarms in our cranial area.

The gist of their missive was: There's a silver shortage because the price ($14.35/oz at this writing) is too low. Particularly hard to find are the 2008 American Silver Eagle 1-ounce coins. Here's what APMEX said yesterday:

“You may have noticed a significant number of products on the APMEX.com website are listed as 'Out of Stock' right now. This stock shortage coincides with a low price for the precious metals we provide investors and collectors across the nation. Most, if not all, dealers are experiencing temporary shortages right now. . .

“When the price of silver, or other precious metals, drops to a low position, everyone who has been waiting to purchase comes in and buys. Whatever silver or gold is in inventory is quickly depleted – not just in our reserves, but also in those of our suppliers. Ultimately, this reduction in supply increases demand, and will eventually increase prices.

“This is basic supply and demand. This effect is felt across the marketplace, from suppliers to dealers to the investors.”

Well, we appreciate the lesson in Economics 101. But it had an eerily familiar quality to it, this particular lesson in Econ 101, a deja vu feeling. Had we not heard this same stuff about five months ago, only in reverse? So we dug through our Platts Metals Week archives, and lo and behold, found that we were writing about a silver shortage back in March – under entirely different circumstances.

Here were the same folks, only this time, they were saying there was a silver shortage because the price was too high! Said Metals Week:

“Silver buyers overwhelmed retailers during the third week of March, when silver was trading above $20/oz. (Retailers) stopped taking orders over the Internet, limiting business to telephone orders of no more than $5,000 -- if buyers could get through. 'Demand is incredible; it seems like there are 5 to 10 times as many people wanting to buy [silver] as opposed to selling,'” said one dealer.

Said another: “'We're running out of metals, and silver in small quantities is extremely difficult to find right now. The largest demand is for silver rounds and for small (100 oz or less) silver bars." The early-year price run from $17/oz to $22/oz sucked outfits like APMEX, Northwest Territorial and others dry.

We find this quite curious. It seems that when the price of silver is low, there is a shortage of silver, because people can't get enough of the white metal. When the price of silver is high, there is a shortage of silver, because folks can't get enough of it. Would it be too much of a reach to surmise that there's just a plain shortage of silver?

Mineweb: While silver ETFs outperform relative to gold, miners continue to suffer

While silver ETFs outperform relative to gold, miners continue to suffer

Silver ETFs have decoupled from the depressing price movements of increasingly hammered listed silver stocks.

Author: Barry Sergeant
Posted: Tuesday , 29 Jul 2008
JOHANNESBURG -

Amid the hammering of listed resources stocks over the past two months, and the more recent heavy sell off of commodities, silver exchange traded funds (ETFs), represented mainly by the US-listed iShares Silver Trust, stand out as one of the most resistant commodity-linked securities. An investment in the iShares Silver Trust, which currently holds USD 3.4bn in silver bullion, is an easily accessible proxy investment in silver bullion.

Where an investment in silver ETFs would have returned 33% over the past 12 months, a weighted investment in 43 listed silver stocks is now returning a highly dramatic negative -33% over the same period. Gold ETFs, represented mainly by the US-listed SPRD Gold Trust, have also performed well, with a return of 28%, ranking just behind silver ETFs.

Listed gold stocks, however, have far outperformed listed silver stocks, returning a composite 5% over the past 12 months. The disparities in the returns from listed stocks may at least be partially explained by the declines in spot prices: at USD 919 an ounce, gold bullion is currently 11% off its highs, while at USD 17.23 an ounce, silver bullion has fallen by 19%.

Both gold and silver bullion are favoured by certain specialist investors as high beta investments during times of crisis or trouble. The two metals traded at record highs during March this year, when Wall Street's Bear Stearns crisis peaked. While both gold and silver are ranked as precious metals, along with the platinum family, gold has a demonstrable monetary role, something arguably absent from the rest of the precious metals peer group.

Primary silver producers are far less easy to find than primary gold producers. The silver sub-sector is led by Fresnillo, Pan American Silver, Polymetal, Hochschild, Coeur d'Alene and Hecla, and the fast-rising Silver Wheaton. Most of the world's silver is produced as byproduct, typically by the larger mining names...

...to read the remaining article, please click HERE

Silver FAQs galore!

• What's so special about silver, anyway?
• Why will silver go up in price?
• Where can I buy silver?
• What is a good price for silver, how much should I pay?
• What kind of silver should I buy?
• How much money do I need to buy silver?
• How do you know that the silver you buy is real?
• What about confiscation?....
  

You can find the answers to these and many more frequently asked questions (one of the most complete lists on the web!) about Silver investing at Jason Hommell's Silver Stock Report by clicking HERE

Ted Butler: A hidden silver default?

Silver market analyst Ted Butler reports evidence that the Barclays silver exchanged-traded fund on the American Stock Exchange (SLV) is being short-sold and naked-short-sold in what may be a huge default in the metal. Butler estimates the default at between 25 million and 50 million ounces.
His new commentary is headlined "A Hidden Silver Default?" and you can find it at GoldSeek's companion site, SilverSeek, HERE