Today In Silver

Antal Fekete describes why silver is in fact a monetary metal is why it is second only to gold in these excerpts from his previous articles.

The point: Monetary metals depend on the OPPPOSITE of scarcity and a large stocks-to-flow ratio as defining characteristics.

In this light, Sinclair’s points are pretty much irrelevant.

*****

from What Gold and Silver Analysts Overlook

In picking a monetary commodity the market will make its marginal utility decline at a rate more slowly than that of any other. There is always such a commodity, no matter what the government says. It can be recognized by the fact that its above-the-ground supply is a large multiple of annual output, whereas that for a non-monetary commodity is a small fraction. We shall express this by saying that the stocks-to-flows ratio is the largest for the monetary commodity. For this reason, once it has been picked, it is virtually impossible to change. Such a change would involve the dispersion of the large existing hoards of the old, and the accumulation of similarly large hoards of the new monetary commodity. That would take centuries to complete, longer than the week-end declaration of a default-prone government.

…the stocks-to-flows ratio for a monetary metal is a large multiple (it is estimated to be greater than 50 for gold), whereas the same number for a non-monetary commodity is a small fraction (it is estimated to be less than 0.25 for copper). The large stocks-to-flows ratio reveals the willingness of people to carry the monetary metal, in spite of carrying charges, and defying government propaganda.

from EXPLODING THE MYTH OF SILVER SHORTAGE

Making price predictions for the silver price on the basis that it is allegedly scarcer than gold does not make sense. Silver has been, is, and will continue to be cheaper than gold for a monetary reason that is just the opposite of the scarcity argument. The monetary stockpiles of gold are much larger than that of silver. Therefore there is less of a threat for the value to drop on account of new additions to the stockpile in the case of gold than in the case of silver. It is not the absolute change in mine output, for example, that has an impact on the value of a monetary metal, but the relative change as a percentage of existing stockpiles. For this reason gold is more valuable than silver: the huge stockpiles of gold make the impact of a change smaller. Ergo the value of gold is more stable. In technical language, the marginal utility of gold declines more slowly than that of silver.

from GOLD, INTEREST, BASIS

The monetary metals are characterized by great stores above ground. The stock-to-flows ratio is a large multiple for gold. Silver analysts deny that the same holds for silver. They are at a loss to account for the disappearance of huge stockpiles of U.S. official silver in any other way but assuming that it has been dissipated through consumption. There is no hard evidence that this is indeed the case. We can account for the disappearance of monetary silver through a more plausible hypothesis, namely, that most of it has gone into hiding. It shall resurface at the right time and right price, as indeed some of it already has after the silver price hit a high of 15 dollars per ounce.

We need only look back to the 1890’s era, to William Jennings
Bryant and the “free Silver” movement to give a hint of the
status of silver during the great depression. You may recall
the “Crucified on a Cross of Gold” slogan used to lobby for
the massive coining of silver to put purchasing power into
the hands of the working man.

This was before the time of the Fed…the coining of the massive
surplus of silver bullion was the dejour preferred method of
“reflating”…that’s right, circulating coined silver was actually
considered inflationary!. This is because of the massive quantities
of silver from the Comstock Lode that had disrupted centuries
of normal Gold/Silver supply ratios.

The government, under pressure from “silver interests” was
buying up every ounce, at above free market price, that
the mines produced and could not sell on the free market.
The glut of the 1890s continued right through the 20’s…it resulted in a massive stockpile of silver in government stockpiles.

Until WW2, there was little use for silver beside traditional
coinage, photography, jewelery and tableware.
The war, the electronics industry, etc, changed all that.
In the past 60 years, “indispensable” uses of silver in
various processes have mushroomed; so much so that
all annual new production in the ensuing years in addition to
the governement stockpiles (2 billion + ounces?) have been
used.

Today is a different world that it was in 1929. First, there’s
about 4 times the world population. There’s all those
vital industrial needs for silver. There are no Comstock
Lodes feeding annual production…in fact only 30% of
new silver comes from primary mines..70% is secondary
product of copper, lead, or zinc mines. A recession
or depression would curtail most new silver production
along with the base metals from which it comes as
a secondary product. It would curtail it a lot!
If prices drop, new uses of silver would come to light
as manufacturers use silver in place of inferior materials
they used when the silver price was high. Quality
tends to go up when recession tightens competition.

There are about 1 billion ounces of silver above ground…that
compares to about 5 billion ounces of Gold. In 1929
world population was about 1.5 billion people. A US
government hoard of 2 Billion ounces was enough at the time
to provide 1.33 ounces of silver for every soul on Earth. That’s
not counting the rest of the above ground silver extant at the
time. Today’s estimated 1 billion ounces world supply
would give 1/6 ounce per capita…there’s enough Gold to
give everyone nearly an ounce!

From whatever angle I look at the Silver fundamentals, it
looks a sure thing. Barring some startling development
in the ancient art of Alchemy, a newfound capability
to turn dirt into Silver…(rather than Gold), I have
to conclude that Sinclair is dead wrong in his outlook
for Silver.

AND let’s not forget that GOLD started this whole central bank fiasco in the first place!!!

Speaking of who’s buying gold, the ECB is.

http://sdw.ecb.int/quickview.do?SERIES_KEY=123.ILM.W.U2.C.A010.Z5.Z0Z&

That’s $12 000 000 000 Euros worth. Or at $565euros/oz = 21 million oz OR 600 tons in one week. Now I am not sure what this represents, as I doubt they would just buy 600 tons for the fun of it. Still it shows that no matter what anyone says, the CB’s think a lot of gold.

To determine why the US Government had all those billions of silver ounces, one needs to return to the “Crime of ‘73′”; that ‘73′ means 1873 when the “official” dollar went from being a silver one to a gold one. Silver was made only legal tender for amounts of $5 or less. Actually, the Constitutional Dollar of Silver is still valid as it has never been recended by any act of the Executive or Legislators in Congress.

Now with silver as the “Constitution money”, but limited to legal tender amounts, the western states legislators (in the US Congress) got their pork portion in that and later legislations that required the US Mint to purchase so many millions of silver ounces per year from the mines, to in essence subsidise the mining interests. These silver ounces were made into “Cartwheels” (silver Dollars - which is why there are so many of them still around today - thank goodness we have real Constitutional money we can still aquire in the “free” market) and stored in the government’s warehouses…to hang over the market price of silver for decades.

Also at the same time frame, the British were busy in their world wide empire eliminating the silver coinage used by their conquered peoples, replacing it with the requirement to use gold. The result is the cascading of silver into the market place for nearly 100 years. Silver that had been the primary money for the masses for centuries. Of course the price of the white metal fell and stayed down for generations. Once the silver was out then the bankers could turn their attention to removing gold as a money and their centuries old plan to have the entire world on a fiat money system finally came to pass.

Such rich irony to finally have fiat money rule the world, only in a few short years to have that rule collapse in a relatively short order…to be replaced with? Gold and silver of course! That is why the banking cartel has been busy over these last 100 years collecting the precious metals into their hands. Look, you don’t set up a money counterfiting operation just so you can stuff your mattresses with paper money. No, you counterfit so that you can pass off the bogus money to the masses of fools who you convence it is of worth and they can trade in their “heavy” metal for this lite weight paper that is so much more convenient.

Now that the banker’s fiat money world is failing, they stand ready to base another round of the same with gold and silver that is already to hand. Now they will not actually make the metal itself avaliable, rather they will base another paper money upon the metal and repeat what we have just spent the last century doing…working to keep the powers that be in their positions…nice “work” if you can get it.

But there is a chance that this simple plan could go wrong and blow up the whole effort of the bankers. What if the banking cartel has a “shoot out” over who is going to be in charge after the demise of the current fiat system? As there is no honor amoung theives, there might be an effort of a small faction within the banksters organization that will try to grab control of the power for themselves. Now that would be interesting don’t your think? Could produce what George Orwell hinted at in his 1984. That factional fighting might break apart the solidarity of the banksters from the inside…then the rest of us masses can make a break for freedom.

I’d like to see that happen as it would fracture the political structure as well and break apart the national structure. That means that the Federal Thugs would become disenfranchised and the local State and County Thugs would dominate, but I think that local thugs would be more “flexable” to the demands of their citizens…just on the principle that said thugs would be physically close enough that any one of us could put a bullet through their brain if we felt like they deserved it.

If you doubt that the local thugs would dare depart from the cover of the Feds, just you wait till the Fed’s money is worthless and the local thugs check becomes worthless, and you will quickly see their “loyalty” to the Fed evaporate. What will they then use for money, which is what they will have to have to collect in their taxes…remember with out taxes they are unemployed thugs? They will create their own version of fiat money of course, which will go the way of the Fed fiat money, in spite of all the draconian measures that will be tried to make the sheapole comply with the “law”. Then finally after all that trouble we as a people may finally give up on the attraction of the something for nothing and start to use gold and silver as money. See, I am an optimist after all; all this may take another century to end up in the right place but to those who get to see that day of freedom it will be worth it.

Hello there

You people have to lighten up. SLIVER makes an excellent doorstop. Step 1 Expose it to air and it turns black. Step 2 use as doorstop. Just the right weight or is it mass?? Who is going to steal a doorstop? TU NE CEDE MALIS Have a lovely day!

So what is the next price target for silver? $4? $2?

Based on its price action lately, I see no cause for optimism. The manipulators have unlimited funds, your trading data, and the power to move the market to wherever they want it.

So why enter the rigged game? By continuing to play in their little wading pool, you are only aiding and abetting them by confirming their grip on what they call a metals “market”.

If I let my imagination run, I might start to think all the gold-bug and silver-bug websites are really Trojan horse/false flag operations designed and paid for by the manipulators to steer more retail sheeple into their shearing pens. How else to explain all the clueless “experts” who keep telling you to buy all the way down.

Your time might be better spent campaigning for the abolition of COMEX etc., while trading some other markets, not this controlled sham parody of a free market. “Investing” and “Precious Metals” shouldn’t be used in the same sentence by serious traders, only reckless gamblers. If you want to gamble, go to Vegas, the odds are probably much better, and at least you can understand how the “house” maintains its edge.

The US Dollar Index is making a beautiful rounded top @ 82.65 as I write and appears set to sink like a stone, so be of good cheer this weekend.

CanadaMetal….you do not realize just how CORRUPT these markets have become. I suggest you read Jim Willie’s most recent article:

WALL STREET MONSTERS & MEAT (YOU)

http://www.gold-eagle.com/editorials_08/willie101608.html

You not need worry about the COMEX….physical buying is taking care of that ROTTEN EGG. What people who live in the United States should be worried about….is not the decline of PAPER GOLD and SILVER….but the collapse of our US DOLLAR and FINANCIAL SYSTEM.

We have been a LEECH SOCIETY building STARBUCKS, SUBURBS and STRIP MALLS as a PRODUCTIVE ECONOMY?? Come on folks…the game is over…..our way of life is coming to an end….we are entering a THIRD WORLD STATUS. As soon as the FOREIGN COUNTIRES realize that we are DEADBEAT CONSUMERS who can’t pay….the US DOLLAR HEDGEMONY is over.

If you think we can afford to buy OIL in the near future from FOREIGNERS with MONOPOLY MONEY and TOXIC FINANCIAL INSTRUMENTS, you will be sadly mistaken. And what are we going to trade OIL FOR NOW?? STARBUCKS COFFEE, WORTHLESS OVERVALUED REAL ESTATE, or SUV’s??

Come on people…wake up….stop COMPLAINING about the PRICE OF SILVER and GOLD in PAPER FORM…..people of the world realize AMERICA has been BLOWING SMOKE UP the WORLDS ASS for quite sometime, and now they are going to PULL the RUG right from underneath us.

Last few Paragraphs from JIM’s ARTICLE:

GOLD & SILVER AWAIT THEIR EXALTED STATUS

We are witnessing the disintegration cited in my recent forecasts. It is a systemic failure, marred by lost confidence and trust in the entire financial system. Expect foreigners soon to pull the rug from under the American syndicates in control. Several key meetings have already concluded, totally unreported in the US press, which occurred in BerlinGermany. Consider it the Anti-G7 Meeting. Implications are profound, and involved the Shanghai Coop Org tangentially, since its member nations possess so much new commodity supply. Consider it the Anti-NATO group. An important and powerful alternative financial system is soon to spring into action, including high-level bilateral barter. Those who expect the current US Regime to continue their financial terror are in for a big surprise.

Expect defaults in the COMEX with gold & silver, whose prices for paper vastly diverge from physical, to the anger of foreigners watching. They hold massive precious metals assets. Disparities now contribute to powerful forces, sure to break the current system. Grand systemic changes come. THE RESULT WILL BE A BREATH-TAKING DISCONTINUITY EVENT.

Ironically, the more inner anguish felt on the falling gold & silver prices, the closer we are to a new financial framework, with the USDollar relegated to a Third World role. A REPLACEMENT GLOBAL RESERVE CURRENCY HAS ALREADY BEEN DECIDED UPON. Its launch awaits the proper moment. The Americans are last to know, as usual. The US leaders are under the illusion of being in control!

Kipling: That is an hourly chart that you are looking at. You should define what a stone drop on an hourly basis is - 0.5 points on Dollar index?

Hey guys can you add 2 & 2.

1) Central banks not leasing gold
2) ECB not interested in further gold sales
3) Trichet urging for a new monetary order & “the disclipline of Bretton Woods”
http://www.bloomberg.com/apps/news?pid=20601086&sid=aq2lp4hW487g&refer=news

2+2 = return of the gold standard or what? Can I borrow tom’s flag “I was too early” on this one?

SRSrocco - if CAPITALS were good DEBATING points, you MIGHT have an ARGUMENT.

Read what I said above - boil it down to - the metals markets are so corrupt that I can’t see any point in trading them, up or down, as by doing so you are merely supporting the manipulators who own the market.

You, like most metal bugs (I used to be one), are still waiting for the fabled “explosion” of metal prices, which never happens now or next month, it’s always “next year” or “several years”. Keep on waiting, and dreaming.

If that ever happens, I won’t have any horse in that race, as by then I will have made multiples of whatever profit will be made in metals, by day-trading stock options in the meantime.

I like to make money now, not dream of maybe making some next year or the year after. The odds of the manipulators allowing the price to explode are very low, IMHO, they are very solidly entrenched, own the exchanges and control the actions of the major traders in their small crony circle.

I will hold onto the physical metals I have as a a geo-political risk hedge. But I certainly plan on not buying any more, as I see money tied up in manipulated artificially priced metals as a waste of time. Even if metals go up 50% or 100% from where they are now, I will still have made more money in other markets.

You have to make a choice where to deploy time, capital and energy. I cannot trade every market, nor want to. To each his own.

If all traders simply abandon COMEX, it will collapse under the weight of its own bullshit, which would be the ideal outcome for everyone involved except the present operators of the rigged game who propagate the fiction it is a real market. A more deserved fate I cannot think of.

CanadaMetal,
I agree totally…….. better to trade JPMorgan stock.

The other thing about Silver is that it has been decimated by long term Industrial use. Silver is now more rare than Gold. As such, I believe it will go below it’s historical ratio to Gold of 16 to 1. I do not think it will reach par but a 5-10 to 1 ration is possible.

The ECB buying 600 tonnes of Gold tells me the world is about to fix a currency or basket of currencies to Gold. They have a meeting set up next month to create a new financial paradigm to replace Bretton Woods. I agree they are sick of the USD and it is already decided to replace it.

Tom,
I’ve dug up and dusted off some works which i printed back in 2005 article written by Economist Nouriel Roubini:

Bretton Woods:

Consequently, the risk a disorderly unraveling of the Bretton Woods 2 system –
a sharp. correction of the US dollar and of the US bond market.

Here the link folks:
http://www.stern.nyu.edu/~nroubini/papers/BW2-Unraveling-Roubini-Setser.pdf

All i can say is Nouriel is the only economist who kicks a** !

CanadaMetal,

You can easily make money on your physical metal, right now just by arbing. Sell a green box of American Eagles on Ebay for $10,000 or $20/ounce. Turn around and buy back from your local dealer at $9+premium and pocket the difference.

That’s the difference between the paper market and the real on-the-street market. When big money starts to bleed they will pay any price for protection.

I started buying PM’s in 2004 and my combined ROI=28.32% or 5.85% YOY over 4.5 years. PM’s not only preserved my wealth but provided a modest return despite the large take downs we have suffered since March of this year. A stark contrast to the trillions being lost in the paper game.

Joe M:
See first response in this chain. Gold and silver are not valuable due to their scarceness, but rather the opposite.

Also, where is the proof that the billions of ounces of silver that used to be in the U.S. Treasury are now “used up” as opposed to being privately hoarded?

If in fact silver is in such shortage in the world, then it would make a horrible money commodity?it’s value would fluctuate violently due to the low stocks-to-flow ratio.

Which raises the question for everyone here: Are we betting on silver going up because it is a scarce commodity needed for industry, or because it is true money that will soar in value as fiat currencies collapse?

If the former, then in the worse case scenario the industries associated with silver usage may collapse along with the economy, and the demand for silver (and its price) will wither.

I am betting on it to strengthen because it is a money commodity and that there is alot of it in hiding, waiting for the right time to come out.

Time will tell.

Tom….EXCELLENT ARTICLE retorting JIM SINCLAIR. Well Done. For you out there who think there is a DEFLATION coming with DEMAND DESTRUCTION in OIL and COMMODITIES:

THE GREAT DECOY

If you walk around anywhere in the USA, you will hear people say…YEAH, gasoline demand is down….thats why oil prices are dropping. Americans are only as SMART and HONEST as the PRESS which SPOON FEEDS them on a DAILY BASIS.

There has been a great deal of BLABBERING about the END of the COMMODITY BUBBLE and the GREAT DECLINE of OIL DEMAND throughout the world. You can’t wake up without putting the TELEVISION on seeing the TALKING CLOWNS REPEAT the COMMODITY BUBBLE is OVER.

The price of OIL has gone from a HIGH of $147 to $70 in just a few months. And by the look at it….if we have a FEW MORE HURRICANES, allow RUSSIA take over another 1 MILLION BARREL A DAY PIPELINE as they did in GEORGIA, and add a FEW MORE FINANCIAL NETWORKS to the CABLE CHANNELS to keep up the good work SPREADING LIES, we will get $20 oil again.

If that is TRUE…..why does ROB KIRBY state this:

Bald-Faced Lies Regarding Collapsing Global Demand

If I had a nickel for every time I?ve heard how reduced domestic U.S. demand for commodities was going to spell the end for Global Demand ? I?d be rich already. In particular, over the past few months, the main stream financial press has been trumpeting that the real reason for prices of commodities being hammered into the ground is sagging Global Demand.
We can empirically see what a load of crap that?s turning out to be:

China Boosts Oil Imports to Record on Falling Prices

Quote:
Oct. 13 (Bloomberg) — China, the world’s second-largest energy user, increased crude-oil imports to a record last month, taking advantage of falling prices, as domestic refining capacity climbed.

Crude imports surged 46 percent to 20 million metric tons or 4.87 million barrels a day in September from a year earlier, according to Bloomberg’s calculations based on figures provided by the Beijing-based Customs General Administration of China on its Web site today. August purchases were 15.65 million tons.

http://www.bloomberg.com/apps/news?p…d=aku3hyO64O9M

As you see my friends……there are very few WISE PEOPLE out there doing their homework. THE CRAP you get on the FINANCIAL PRESS is to make you believe you are a SHEEP, COW, GOAT or just FOOD for FOODER. We here in American are going to get the biggest FINANCIAL ENEMA in history……bringing the UNITED STATES down to HER KNEES.

Are you prepared??

Any Silveraxis reader who has been following these wise people over the year should not be suprised as to what is unfolding:

Jim Willie at Golden Jackass

Captain Hook at Treasure Chests

Reg Howe& Bob Landis at Goldsexant

Rob Kirby at Kirby Analytics

Nouriel Roubini at RGE Economics

Adam Hamilton at Zeall LLc

Bill Murphy at GATA

Antal Fekete at GSU

and definitely not forgetting Tom Tsabo at SilverAxis.

FreddyKrug…..couldn’t have said it better myself. I remember buying KRUGGERANDS when they were only a few dollars over spot…spot price of $480 at the time.

I have to say….Jim Willie has to be one of the most INFORMATIVE and ENTERTAINING writers I know. For instance:

To expect a top-down solution that actually relieves the housing inventory logjam is insane. That is like feeding a teenager with meals placed inside the human rectum, expecting nutrients to find their way to the rest of the body!

It makes LEARNING FUN….know what I mean..

I am against the paper markets here. I own physical. I hope gold & silver is real money, but so far the paper pushers disagree.

CanadaMetal….we probably agree on many things. The PAPER MONEY MOB is about to get an ENEMA of its LIFETIME…not because I WANT THEM To….or because I am a GOLD or SILVER BUG hoping the price will EXPLODE OVERNIGHT….hardly. It will Happen due to FOREIGN BLOWBACK.

I have been buying SILVER and GOLD when silver was $4.52 an ounce and GOLD was $480. I have time on my side….and I don’t care if it takes years and years….but we must remember…when a system starts to IMPLODE it can do it in days….DO YOU REMEMBER BEAR STEARNS, AIG, FANNIE and FREDDIE?

Foreign Countries are getting ready to SLIT THE DOLLARS NECK when it is in their BEST INTEREST and TIME. Not a moment sooner.

JP MORGAN and GOLDMAN SACHS still have time to DEVOUR the LIVES of PEOPLE through their INVESTMENTS and SAVINGS. The DERIVATIVES MONSTER is LOOSE eating everything in its sight….and there is nothing on earth the US GOVT, FED or TREASURY can do about it.

Just sit back…..hold on to your BULLION…and watch the show.

RIGHT ON…….SrSrocco,

Did most of my gold and silver shopping back in 2004 and 2005 here in the United Kingdom at roughly ?220 British pounds {$450}.

I agree, only Jim Willie and Rob Kirby offer unique twist of humour their articles.

Wonder if TOM follows these guy’s ?

keseri: Looking at the daily US Dollar Index chart, this is the top of a well-defined channel. Connect the recent lows, as well. Beyond that, I am only speculating figuratively.

Freddy Krug……good for you. I wonder if Tom reads these folks as well. I will say this….many of these guys PRACTICE what they preach. For instance….Jim Willie believes MARSHALL LAW is coming in the United States. He believes that so well, he has moved to COSTA RICA…LOL

Jim Sinclair now I believe lives in INDIA. Jim Rodgers has moved to China. These fellas know something most have no CLUE.

My wife and I moved to the country in a small town in the foothills of a large mountain with fresh water creek year around. I am not saying this is going to be the end of the WORLD….fer heavens sake no….but those people living in SUBURBIA, thinking the system will continue to SUPPLY them with everyday life and necessities….I wish them all the luck.

Cheap Oil made living the RAT RACE easy…..now the Peaking of CHEAP OIL will make the RAT RACE a LIVING HELL.

Again, for those who did not read my post above:

China Boosts Oil Imports to Record on Falling Prices:

Those who think OIL DEMAND IS DESTRUCTING in the WORLD….better start watching other FOREIGN CHANNELS besides the GARBAGE in the USA. Whatever oil demand is slowing in the OECD countries…will be picked up by the other BRIC countries. It is the BRIC countries who will be calling the SHOTS in the FUTURE.

This will be the FALL of the GREAT UNITED STATES EMPIRE as well as the FALL of the GREAT LONDON FINANCIAL EMPIRE…run in LONDON and NEW YORK.

Get ready to start working with your hands again.

I just read the Jim Willie article linked by SRSrocco, and noticed a bit of hyperbole when Jim mentioned that Congress had been threatened with martial law if the bailout bill wasn’t passed.

When I first heard this allegation, I went looking for verification and found that the martial law being referred to was concerning house rules on introducing new legislation. Congressional critters are supposed to get a minimum of 24 hrs. to view a bill before voting on it. Pelosi suspended these rules forcing a vote on a bill that wasn’t available to be read, thus leading to a congressman’s label of “martial law.” Which Jim repeated.

I also discovered yesterday that his BoA bank holiday rumor is now on snopes.com, with a “false” label. Funny thing is though, they provided no evidence to refute the rumor. They merely gave an opinion on how it wasn’t possible.

On the subject of Jim Sinclair, it seems he got a few folks alarmed with his statements on silver, which he has now restated as “silver will perform with gold.”

Pardon me Tom for posting this cut short essay as even Mr Hamiliton eyes are wide open:

Stock Bear Extremes

Adam Hamilton October 17, 2008

The brutal stock markets have been exceedingly hostile to long-term investors for a couple months now, crushing all stocks regardless of their individual fundamentals and merit. And in the last couple weeks, even speculators have been getting slaughtered. This frenetic hyper-volatile environment is making short-term trading nigh-on impossible to execute successfully, even to the short side.

Everyone involved in the markets, including me, is trying to wrap their minds around so many unprecedented developments coming at us so fast. From a supposedly free-market government incessantly meddling and interfering with healthy corrective processes, to relentlessly negative newsflow, to epic levels of fear and unease, this market is unlike anything ever witnessed.

Although no two bear markets are ever identical, the declines they drive in headline stock indexes usually tend to follow certain tendencies well defined throughout history. While background conditions underlying bears change, the greed and fear dominating traders? hearts never changes. The interplay between these perpetually warring emotions leads to tradable downlegs and bear rallies within every bear.

But this time, many of these tendencies that have held strong through decades of bears are getting unceremoniously blasted out of the water. Even for students of the markets, trying to trade this beast has become a voyage into uncharted seas. We are so far outside the bounds of historical bear precedent that it reminds me of the edges of old seafaring maps that filled unknown territories with the legend ?here there be monsters?.

….MONSTERS! MONSTERS YOU SAY……YES…..JPMorgan MONSTER!

(8?……I heard the same thing about MARSHAL LAW. Did you also hear about the Paper that went around in early may of this year in the CONGRESS and SENATE about the possible FINANCIAL COLLAPSE of the UNITED STATES…..lots of rumors going around.

Do you also realize that when the GOVT announced GAS RATIONING in 1973, the PUMPS were out within 6 hours? A great deal of DISINFORMATION out there to so call “PROTECT THE MOB”.

Our country is right on the VERGE of a COLLAPSE. We need 12 million barrels a day of OIL IMPORTS to survive. If that gets CHOPPED by a third or half because we can no longer afford to pay for it, what do you think is going to happen to SUBURBIA?

Maybe SINCLAIR and WILLIE get a big carried away….but HEY….WILLIE has been DEAD ON FOR YEARS now….same with PETER SCHIFF, TURK, FABER, HOMMEL, PUPLAVA, KUNSTLER, HEINBERG, RUPPERT, SIMMONS, and etc and etc and etc.

And if you don’t believe there are CONTAINMENT CAMPS being built across the NATION…then I guess RON PAUL is a LIER as well.

Folks….Go to a MOVIE, take a TRIP, VACATION or just go to your FAVORITE CHAIN RESTAURANT….but make sure you take pictures or make a mental NOTE…….as this will be the way you can TELL YOUR GRAND CHILDREN how GOOD things used to be.

Word…..

Nitpicking:

It is “martial” law, as in Mars, the God of War.

The gummint are the Martians who will be doing the invading.

Words you never think about much…

Well boys and girls, silver is headed back to where it all basically started back in 2005. When silver broke through $7.00-$7.50 and ran more or less to $21.50 over the next few years, that top was in for sometime. Now we are headed back to where it all started. The hedge funds have many more months of liguidation coming and the PM have many more down days. Anyone who tells you differently (so called silver experts) is feeding you aline of bullshit. Which has been the case for the past year or so. Probably to late to sell, but do not add any additional silver to your inventory or investment. Contrary to popular believe or expert recommendations, silver may very well trade in the sub $10 range for many years as it did in the $4-$6 range for almost 25 years, never say never.

Silver……I will buy all your SILVER for $9 BUCKS an ounce. How bout it? Have you seen the PREMIUMS today. Silver Eagles are 60-70% over spot. Silver and Gold are being WIPED OFF THE SHELVES in the WHOLE WORLD.

Most DEALERS say they have not seen anything like this. You keep looking at the PAPER SILVER and GOLD PRICE. So if you want to BUY MY PHYSICAL SILVER for $14-15 an OUNCE….I will buy your SILVER at the PAPER PRICE of $9.30.

DEAL???

SR,
You are missing my point and yes I am well aware of the disconnect between paper silver and physical silver. The paper price is starting to effect the retail price or mark up, which is starting to come down on a price and percentage basis. Also as I stated it is to late to sell, besides I don’t need to sell. Also I have no need to buy your silver at $14, I can buy all I want for $1.00 over spot. The problem is sooner or later the public will get off the silver band wagon. When that happens, which will probably be soon the physical price will start to come back down to the paper price. All these so called silver experts or analysis think the opposite will happen. Thats BS, the manipulators can hold silver down for many years and wait this buying frenzy out by the retail investors. I believe the silver ETF’s will have the opposite effect on silver and cause the price to possibly collapse. The reason I say this is because silver’s high was reached in march and alot of buying was done in the first 6 months of the year. Not to say people have not been buying all year. However since silver breeched and stayed be $12 the ETF has basically held it own. So most of the shares were bought and considerably higher price. The ETF is down some 50-60% from its high, with no real bottom in sight ($7.00). I believe come late december the tax loss selling in the ETF will be substantial, maybe 25%, which will flood the market with physical bullion. Well the eternal silver bull will say thats great, there will be physical bullion to buy. Problem is with the slowing of industrial demand, hedge fund selling and ETF liquidation. This is probably not a good environment for investing in silver.

I was talking to a friend the other day and couldn’t help noticing that the sentiments expressed by James Sinclair about silver were exactly the same as those speaking at the Prospectors Convention in Toronto recently….The theme was the same,,,,silver was an industrial commodity and prone to the same forces of deflation as copper or zinc. All this meant to me was that James should have known better for all the reasons you listed in your fine article,,,,and more. I am not a zealot in that I would use the argument about constitutionality as would someone in the US because this is a vastly muted point…People really do not care about such abstractions in their daily lives even if their daily lives are turning to drek. There has never been consensus on this point because it is, to all practical purposes, unknown even to the majority of Americans and has equal import to them if they were informed that their dollars are also unconstitutional…Shrug, in other words. But compare this attitude to an east Indian who is burying his bars out under the chicken coop, this is one who knows the relationship of silver to money, wealth and security,,,,and ironically -and unlike Americans and Canadians - that humble but knowledgeable person would have little knowledge of COMEX paper prices….In other words, perceptions about silver are cultural evolutions in perception and I am betting on the majority of the world’s citizens rather than that of the clique minority of bankers and their media minions. I like the position of that east Indian,,,rather than the decadent but brainwashed “superior” western citizen. Our citizenry will be out voted in the end, just as Paulson’s crooked cronies will be….

But I am getting ahead of myself! I should have said, “Well, done; something on silver worth reading!”

IS silver too heavy? Actually I always considered this the most specious of arguments for some of the reasons you report - although I mistype sliver often enough to know it is a slip of the finger rather than a slip of the mind (smile). And of course he is comparing silver to gold here. If this is true, then we should also consider that heavy is a relative term and the subtext of the concept has to deal with worth/value,,,not lbs or kilos..It is value per unit measure that is important….Yesterday an input from a person in Bill Murphy’s Midas stated that Scotia Mocatta in Toronto was out of gold….Not so according to (strangely enough) to the Nymex web site http://www.nymex.com/media/Gold%20Stocks.xls (scroll down to bottom); there are 484,319.842 oz. there in 100 oz bars. Although we do not know if these are for sale, we do know that there is unlikely to be a run on these because the value for the weight is so high…..and the conventional citizen would say - looking at the COMEX paper prices- that the price is falling because gold is over-valued. He would say the same for silver even as a 1000 oz bar (weighing 10 times as much) is falling in value and is too heavy. We would say it was undervalued because compared to gold, there is NO silver in the Scotia Mocatta vaults and they seem to be unable to put any there….In other words silver should be worth or valued more given 1) shortage and 2) as the price goes up,,,,the problem with weight shrinks accordingly - even for the super ill-liquid 1000 ounce bars - which ARE too heavy. (The latter I see as a ploy to fool those like James Sinclair.) And so one can say that the weight argument against silver is specious and a function of manipulation and price fixing AND SIZE FIXING(!), not value….However, on the retail physical market this value aberration would seem to be adjusting itself more and more by the day.

The results of this, like the east Indian peasant situation, can be seen in the relative differences in value (to weight)(grin) in the Canadian reality as compared to the American. The price per ounce in Canada (even before the exchange rate nonsense that has smitten our loonie) has been $20 -$27, as compared to what seems to be an average per ounce price somewhere in the mid teens of dollars in the USA…. I could be off a bit to either side on these figures (and it would be useful for someone to post some spot per ounce averages for the REAL silver market, not the COMEX one….)

And perhaps the BEST argument for a bimetal commodity money system of gold AND silver was just touched upon by Tom, the ratio of values keeps one metal honest to the other….and denies to the greater extent the chaos of confusions of multiple exchange rates of the metals to various currencies. This is a heavy concept (smile) and since a return of gold AND silver as money would not necessarily involve the physical use of the metals in circulating currencies but underpin circulating currencies in the nations while lying in the vaults,,,,the redeemable currency model of Dr. Feteke,,, the silver as too heavy value to weight argument would not hold here either.

From my view, these are just elaborations of points made by Tom already in a most comprehensive piece of work….Congratulations.
And thanks for the words,

Galearis

Silver…..do you live in the USA?? Do you realize how we have been BUYING THINGS for the past several decades? The GOVT and the MANIPULATORS can keep printing DOLLARS….but they can not PRODUCE BARRELS of OIL.

I really don’t believe people living in the United States understand the GRAVITY of this FINANCIAL TSUNAMI heading our way. We have been going to STARBUCKS, STRIP MALLS, and SUBURBIA because we have been trading MONOPOLY MONEY and TOXIC WORTHLESS FINANCIAL INSTRUMENTS for OIL and GOODS.

Do you really think this will continue?? The CAT is out of the BAG….the SPOUSE has found out the other has CHEATED on THEM….you cannot TURN BACK THE CLOCK. Foreigners are not going to SEND US STUFF for WORTHLESS PAPER.

DEFLATION is the DEATH CURSE to those holding DEBTS…especially the LARGE INSTITUTIONS as BANKS and etc. As their ASSETS deflate, their LEVERAGE to ASSET ratios DROP….thus increasing their Credit Default Swaps…..this increasing DEFAULTS. This is why the are SCARED TO DEATH about DEFLATION….BERNANKE is doing B-52 MONEY DROPS.

People have no CLUE just how bad the situation has become. The PRICE of GOLD and SILVER will be the LEAST of ones worries….even though it will be one of the best ASSETS in the future.

SRS there is hope. don’t give up on the U.S. completely just yet. At least until you answer this:
The Saudi’s and gulf Arabs reinvest their petro $ in exchange for US military protection.

Is the Saudi royal family and dubai etc. willing to go face Russia, Iran, and other radical Islamists without that protection?

I doubt it and if we go bye bye who buys their oil? So they are inextricably linked to the status quo. The rest of the world starting with Japan, Korea, Taiwan and even Europe share the same attachment to the status quo.
Everything will be done to try and keep the U.S. afloat albeit with a much lower $ and standard of living here. Obama’s job will be to keep the people fed esp. in the cities, and the military presence protection racket alive.
I think if the world were ready to abandon us it would have done so already. There’s no place to go except MAD.
I also believe everything is happenning by design and not chance. While I could be wrong I think these guys Bernanke, Paulson etc. are orchestrating this whole meltdown-it couldn’t be working out better than it has for them could it?
They let Lehman go to put fear into everyone so now they can do whatever they want.
Bernanke said he didn’t have the regulatory power to save Lehman. What BS they haven’t had the reg power to do most all of what they’ve already done.
And yes the martial law threat (including refernece to tanks in the streets)was spoken on C-span by rep Brad Sherman (CA) you can probably find it on you-tube.
CDS- an out of control virus that is spreading through the financial system. They are trying to wall it off by saving what they can which now appears to be F&F, BofA/merril, GS, JP, citi and Aig. Maybe I missed somebody but everybody else will probably be left to fend for themselves. That will give them a bankiing center that can cover the commercial paper market and keep the economy afloat, and concentrate complete financial control in the Govt/WS complex.
Before we have anarchy we’ll have more government control over our lives. I’m hoping for the best (which is already pretty bad) and preparing for the worst.
Oh and as for silver being money-I think the people have spoken on that one.
Once the liquidations are over and all this newly created money hits the streets stocks will return to fair value except for gold and silver which will soar. JMHO.

Wow lots of CAPITALS. For anyone to make accurate predictions, specifically with time tables is likely pretty dubious. The world is changing so quickly and drastically.

I will make one prediction:

The Chinese will continue to buy treasuries, and the US will continue to print. Reason: MAD - mutually assured destruction. If the Chinese stop, their economy stops, their people rise up against them. If the US stop, the people get crushed and rise up against the guvment.

2 predictions:

The US will do everything in their power to keep the consumer spending. The Chinese make products, sell it to the US, get paid in IOU’s, buy Treasuries. See? It’s a never ending circle.

er 3 predictions:
If the US consumer stops buying, the Chinese stop being profitable, their trade surplus goes away, they don’t have any more money to buy treasuries, they stop, the dollar plummets, interest rates rocket. At some point, either the Chinese or the US will think they are too close to that point and will make the first move. I say it’s the US who defaults on their treasuries.

Tim: We agree and at the same time. MAD the only thing keeping us afloat.
And that is by design. Just like big Al said “you can get further in this world with a kind word and a gun than with a kind word alone”

rob: i was meaning more that the US and China were tied in an economic MAD model, but I agree, if the US didn’t have nukes, this charade would have ended a long time ago.

You Americans should try to read some articles about what is happening in Iceland. Iceland is the TESTCASE. What is happening to Iceland will happen to the United States of America.

Iceland had a problem with its banks, a credit crisis that is ending up in a currency crisis. Call it the Crack-Up Boom of Von Mises.

?There is no means of avoiding the final collapse of a boom brought about by credit expansion. The question is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion,
or later as a final and total catastrophe of the currency system involved.?

Iceland tried to avoid the collapse, the US tries it too. We will see the final capitulation, the end of the current currency system. The Icelandic Krona is becoming WORTHLESS!!

We will see it also around Europe. I live in Belgium, a wealthy country, just as Iceland was a year ago. In Belgium, two MAJOR banks went under in the last month, and we are now as virtually broke as Iceland. Europe is virtually bankrupt now. The US will soon be real bankrupt whenever the same thing happens to them as happened to Iceland.

Iceland went broke because foreign investors ran away. The same thing will confront the USA in coming months… Do not think for a second China will keep on investing in the USA!! Do not think for a second Russia will keep on investing in the USA!! That would be mad. Maybe you can think the Chinese will keep on investing. They were stupid enough to not buy gold. But the Russians did buy gold!!!! The Russians will make their revenge. Do not doubt about that. Russians are trying to help Iceland but they won’t help the US!!!

Tom,

Thank you for your comment on Sinclairs post and the outcomes for silver in Weimar hyperinflation. Do you know what the price of silver versus gold did in the Hungarian hyperinflation?

Tim…Rob…JVd…..all good points. But If I had to throw a DART at one of the three….I believe JVD gets the BULLSEYE. Who on earth would have thought LEHMAN BROTHERS would be bankrupt after surviving the CIVIL WAR. There are a few people out there making WISE ASSESSMENTS of the present situation. I happen to think Jim Willie hits the nail on the head.

Tim….Rob….if you think we will still print DOLLARS….I agree….if you think we can PRINT OIL DRUMS….I would beg to differ. PEAK OIL will destroy the NOTION of GROWTH. Without an increase in ENERGY SUPPLY….you cannot increase your GDP…or WDP for that matter.

The folks here in the land of BASEBALL and APPLE PIE have about 2 years before the MASS EXODUS out of SUBURBIA begins. Now it might occur sooner….but 2010 is a good start date….as Mexico will be a NET IMPORTER of OIL by then…..as it is CRASHING 30% a year in OIL DEPLETION. This is our number 2 source of oil.

Its funny…people think life will continue as usual…maybe with some hardships…and I am all for that….but when you look around and see people walking around BLABBERING with a CELL PHONE Stuck in their HEAD, saying WHAT UP DOG….there is not much hope. Now if you had the type individuals back in the DEPRESSION and DUST BOWL era facing this CALAMITY…I would say….things will be ALRIGHT….but hey….who are you fooling.

Of course we like to believe in FAIRY TALES and the SANT’E CLAUS, but unfortunately…..at some point in time AMERICANS are going to have to wake up and smell the ASPHALT….and hit the road.

The stock markets today are so MANIPULATED it isn’t even FUNNY anymore…..we had another 500 point swing today. J P MORGAN and GOLDMAN SACHS are together SLICING another large SLAB of MEAT off the PUBLIC DOLE.

There will come a time when DEBT is no longer SERVICEABLE….and when that time comes…..best to be prepared…..and stock up on all the McFATS and McRIBS you can.

I am an undergrad at a PAC 10 school that carries a bloomberg subscription. I get on the machine at least once a day to make my way around a number of different pages. During my rounds I visit MMCV4 to look at money rates over time. It will be interesting to continue to watch money rates going forward. I believe various USD money rates will continue to provide some good insight into the asset price movements we have been observing since 2000 (think the deflationary trend). I say deflation and ~40% of the folks reading this get flustered. With additional term money being placed into the financial system (at some rate) to confront tightness related to debt agreement destruction, be it forced or discretionary, any withdrawal of this ‘new’ money will have a negative impact on the real economy so long as the longer term trend (2000) is deflationary. To remove this new term money is downright foolish (from the perspective of monetary authorities) given current and previous actions and various pieces of legislation to date. And so metals will rise in value, but we bulls might have to put up with some bearish forces at least until new term money is sizable enough to confront an ill-structured, debt-ridden financial system that is to debt filled to fail. Then again it could be the other way around or something completely different.

SRSrocco - I agree with what you say, just not necessarily the time frame. I don’t really know what the time frame is. Peak oil, for people that understand it, is here. But I wonder if we don’t have more like 20-30 years. I agree that the Middle East will continue to trade oil for guns, which is why I never mentioned them. I do believe it’s between the Chinese and US. I think that all people, not just Americans, are ready to believe whatever they are told as long as they have food, shelter and a decent quality of life.

In your list I think you should add Mish Shedlock. He’s a deflationist, but has nailed most things correctly. There is also James Kunstler. He has been a long time believer in the death of suburbia. And I would also recommend the website itulip.com. They have a lot of very smart people there that believe in Kapoom, which I do as well. Inflation is on the way.

Silver

Absolutely, ?never say never.?
The most important thing I?ve learned these past few months is that. Everyone should keep his mind open.

The basis of your bearish silver ?price? prediction appears to be the following,

1. Continued fund liquidations
2. Slowing of industrial silver demand
3. Tax-loss selling
4. SLV dumping of silver
5. A decline or shift in retail silver demand

Rather than agree or disagree with you outright, I?d simply like to make a few comments on each point.

1. The last couple weeks of equity market weakness have resulted in less than typical moves in the Yen, the US Dollar and in US treasuries. In other words, it appears there is less liquidation/reversal of the Yen carry trade, less repatriation of foreign holdings into US Dollars and less money flow into the US treasury parking lot. Perhaps there is more behind this but on the surface it looks like we might be seeing the liquidation/de-leveraging sell-off subside and morph into a speculative momentum-based selling.

Another point, if I were a highly levered fund it would not take much of a market move to wipe me out (likely already). Otherwise, if I were still alive, wouldn?t I by definition have pretty much sold down by now - closer to comfort level?

I?ve covered 90% of my equity shorts and am going to wait for one of those short-covering bear market rallies to scale back in short ? if I?m allowed.

2. If one worries about demand destruction for silver (as with oil) then one must also consider the effects of supply destruction.

3. I wonder how many people this year have capital gains or significant income to justify the taking of losses for tax purposes.

4. I resist the notion that much silver will be permitted off the SLV (or COMEX) piles - facilitating the exploitation of a huge arbitrage opportunity. Arbitrage opportunities are inherently unstable and cannot last. They are either exploited to death or not ALLOWED to be exploited. If my bias is correct, that SLV is a silver vacuum that sucks but will not blow, we won?t see much arbitrage permitted. In that case, then this situation persists to the breaking point (default, closings, foreign actions etc.) or the market is allowed to breathe soon and paper prices rise while physical premiums drop.

5. I don?t think the public has yet climbed aboard the ?silver bandwagon.? It doesn?t take much retail buying to clear shelves of silver. So what would be the motivations for current early physical silver buyers/holders to lose interest and sell? That silver is now barely trickling back into the market at current healthy prices. It will take far higher prices to lure away more ? or a real flood of physical silver to scare it out ? or a dramatic reversal in financial/economic conditions. A ?flood? of new silver into the retail market is unlikely as I speculated in #4. I doubt enough silver will be allowed off the piles to satiate retail/investment demand given current conditions. Besides, what would be the point of banksters letting go of their metal to feed a large public appetite for investment silver - to crush physical prices? More than ever going forward, he who has the metal has the wealth (and power). ?Damn the retail market? I?m sure is the thinking. Why feed it at all other than the necessary trickle to maintain the illusion of a legitimate futures market. If they want to keep the COMEX alive would it not be better and more profitable for the banks to cover shorts and play long in another COMEX paper rally to close the gap with physical?

On the other hand I suppose, if we were to see a sudden revision in the world monetary paradigm with a tie to precious metal(s) then the overnight revaluation of gold/silver relative to US Dollars might cause a COMEX default. Perhaps banksters know this is coming and therefore don?t care about maintaining any perceptions of legitimacy via a usual price rally.

Thoughts about unintended consequences. I agree with SRSrocco that the importance of oil can?t be overstated. If there was any political pressure for the fascists to manipulate any commodity, oil was target number one. The importance of ?affordable energy? to every part of the economy goes without saying. The word that world demand GROWTH estimates are being lowered doesn?t change the fact that demand is still rising as supply dwindles.
Now that the big boys blindly trade commodities as a sector, prices for crops that make up our food supply are below production costs. Supply of the real goods will fall into a black hole for a period of time, similar to what we?ve seen in the retail silver market.

Here?s an interesting blog from a guy over at MSN?”…The lawmakers and regulators may wish to look into the quiet but devastating run on the hedge funds that is occurring right now, that is going to cut that industry in half, and distort the markets until the end of the year.

This will affect key commodities in addition to certain industries, and may temporarily impair some national economies.

The Prime Brokers have a rough idea where the hedge funds, their clients, have their major holdings, and are leading bear raids on them as the funds have to raise liquidity because of redemptions. They are publicly identifying those positions to other players in the industry. A conflict of interest of the first order it appears at first blush. Perhaps not illegal, but certainly destructive and ‘feeding the fire.’

These bear raids on key positions generate more panic and losses for the hedge funds, which in turn generates more forced selling and losses.

The irony of course is that the Prime Brokers are also the biggest banks, and are being bankrolled by the US Treasury and the Fed by about 400 billions per day in rolling capital. They appear to be at a loss so to speak with regard to productive investment opportunities. Thus they turn to speculation.

In addition to the hedge funds, many banks with their own small trading desks are being caught in the cross fire.

We do not think of this as a conspiracy but clearly the unintended consequence of poorly thought out but well intentioned actions taken in haste.

The lawmakers and regulators must create a firebeak to stop the cycle of destruction. They could require any bank accepting Federal funds to adhere to some simple guidelines about the potentially predatory use of those funds, especially banks that are more like large hedge funds themselves in their composition.

This cycle of destruction of assets is exactly why the Congress enacted Glass-Steagall in the 1930’s. Some of the Washington and Fed whiz kids might wish to go back and revisit the raison d’etre for that legislation.

Some likely measures would be an immediate limit on the expansion of short positions in all commodities, with limits based on market size, and the enforcement of laws against naked short selling on all equities immediately.

There should also be disclosure from all recipients of taxpayer money of all net positions to the SEC on a daily and weekly basis. We would also approve of a ban against short selling over certain limits of the size of a market or the shares outstanding by players over a certain size, and all those receiving Fed subsidies.

But this will probably not happen, which is why we may have a political crisis next year.

To put a very fine point on this so no one can miss it, it is not the hedge funds themselves that we care about, or the ‘qualified investors’ that put money into them. What concerns us are the unintended consequences, the malinvestment, the market distortions, the polarization of wealth, and the political blowback that come from interfering with market

Its obvious where the priorities of our fascist leaders lie. Self preservation; they must retain power at all costs. The rest of us are expendable. Physical, in hand, is looking more important each passing week.
One consolation… looks like the crude price is forming a bullish pennant, maybe an indicator of (finally!) a tipping point in this commodities rout.

To continue my babbling, if a commodities rally is permitted to ensure availability of food to the “folks”, money will rush out of the bond market. In the end, I think the government would rather see us starve than have a collapse in the treasury market.

I fully agree, we are headed to a Comex default. The DEC contract is loaded up with big calls from $900 to $1500.

Forwill I agree with you! this is forced liquidation and a bear raid on the hedge funds. totally planned to fleece the hedge funds and other weak holders. Just like they’ve been doing on the comex forever. They Just borrowed from that playbook and ran it in all markets. there will be no regulation of this. The banks that are doing it are now part of the government!!! Ha ha ha. It will end when all the speculators and weak holders are liquidated and there are no more forced sellers. then those with cash will get some incredible deals (think SWVs rushing out of $ into real assets). Just think about how much liquidity (newly Fed created and old safe haven money) is going to be sitting out there. Think it won’t get nervous about; hey everyone is in cash and it’s not like they’re not making anymore. Hang on to your physical for dear life.

Looking at the chart for silver, I feel we may get a bounce. All of the comments letely about getting out of silver may be the confirmation. Any thoughts on this?

Rob were you writing that a default in silver futures would cause a run up or down in price? The way I see it is much like it is going now, paper continues downward, physical upwards. It’s just paper and as we are witnessing, paper of any sort is worthless.

It’s all so incredibly brilliant how the crooks continue to keep the public out of metals. War, oil, financial crisis, public goes for paper. The crooks write more paper. The public abandons paper and goes for physical, the crooks lock up the vaults.

What the crooks may not have thought of is individuals stepping in to fill the void left by corrupt bullion dealers and take down the inventory of big bars.

As for the stock markets, it’s either way too early or way too late for regulation on any scale. Value has been sucked out of the fortune 500 companies already. Let the crash commence.

China, they have a long history of control through indebtedness. Only in the West would ignorance allow us to think the Chinese have not seen this tsunami coming.

Mr Zetetic as well as others here…..the short term prospects of where silver or anything is going is very speculative. You might as well give a monkey a dart and tell him to throw it at a chart of prices…up or down. We are entering a world we have never been before.

But….on the positive note we are seeing GOOD TRENDS. Let me explain:

Back when silver was $18 an ounce, things looked good for the SILVER METAL as well as GOLD. Then all of a sudden, out of the BLUE came the 2 BANKS shorting about 25% of the silver market. Within no time, the price PLUMMETED down to $10. Most EXPERTS stood AGHAST….with JAWS DROPPED to the FLOOR.

But…..something interesting happened…the investment public started buying silver like it was WATER in the DESERT. Soon, the small denomination bars and coins were wiped out.

Then we had ESTEEMED GENTLELMEN, Like Jon Nadler come out and say….there is no shortage….there is plenty of WHOLESALE SILVER out there. And for once in my life….I agreed with the TWIT.

One by one, retail investors who never thought about buying such a LARGE BRICK of SILVER, started to buy. Soon it became apparent LARGE BULLION DEALERS were offering 1,000 SILVER CLUNKERS for sale. These also got WIPED OFF THE SHELVES.

Looking at this in STEPS…..we have this:

STEP 1) As falling paper prices of silver plummeted, physical demand skyrocket driving up premiums and wiping out small denomination silver.

STEP 2) Investors small and large started buying what was left over and that was 1,000 COMEX quality silver bars. The more demand there was for these bars, the more BULLION DEALERS sold them. What we have now is a DRAWDOWN in WHOLESALE SILVER which has never happened before from retail investors.

STEP 3) This is the step we are entering now. Two things are taking place Many individuals are coming up with INDEPENDENT MARKETS for silver besides the COMEX. Furthermore, many Analysts are now talking about ARBITRAGE of SILVER. And that is….selling the lower denomination to investors at a higher premium and buying 1,000 comex bars at a lower premium allowing the person to actually BUY MORE SILVER with the same money.

This has two implications. One, it allows investors who want to buy SMALL DENOMINATION SILVER a market to do so….because now if you want 100 oz bars or smaller you have to wait months or pay extremely high premiums. This, thus adds more silver into investors hands.

Two, this takes more WHOLESALE silver off the market at LOWER PRICES…….prices many Silver Miners are producing under marginal costs of production. More WHOLESALE SILVER taken off the market, means less silver available for INDUSTRY…and the COMEX INVENTORIES.

STEP 4) Taking the ARBITRAGE to the COMEX EXCHANGE. Most people are buying 1,000 bars from BULLION DEALERS. Jason Hommel has just done an example of this by selling 100 bars and buying 1,000 bars. Now folks like JIM PUPLAVA (Financial Sense Newshour) are recommending people take out CONTRACTS on the COMEX SILVER. Not to speculate on the price, but to purchase with the intent of DELIVERY. Jim recommends for those with less money to buy the MINI CONTRACTS which are 1,000 oz and the regular for more savy investors the 5,000 oz contracts.

Even though the COMEX has been negative about investors taking delivery, it is more often on large PLAYERS who want large amounts of bullion…in the MILLIONS. Jim Puplava states you can take advantage of the REAL LOW PAPER PRICE of $9.50 or so and lock in your contract…. Then take delivery. This would start putting pressure on the COMEX INVENTORIES.

At best guess, 2008 Silver Production should be somewhere about 700 million ounces. 2007 was 670 million. Of course there is recycling of 200 million or so ounces. But using the 700 million mine supply….if this downtown gets out of hand…you might see this production fall. Still, that is about 2 million ounces a day. Minus TOTAL FABRICATION DEMAND (assuming a demand reduction…note 2007 was 843 million) of 800 Million we have this:

700 Million + 200 Million (recycle) = 900 million - 800 million = 100 million

100 million divided by 250 working days = 400,000 ounces a day. This turns out to be 400 1,000 bars a day purchased. And if the price was $11 an ounce that would be $4,400,000 purchased a day to take off the WHOLESALE SUPPLY. Of course these are ROUGH NUMBERS. But if someone wanted to buy all 100 million ounces of silver at $10 an ounce, that would be only $1 BILLION DOLLARS. For heavens sake, WARREN BUFFET just put in BILLIONS into the GOLDMAN SACHS DOG.

And there are TRILLIONS of dollars sitting on the side waiting for the time to come back in.

Regardless….the word is out that the PAPER PRICE of SILVER and GOLD have been pushed lower. Silver is worse than gold, but gold miners can still make good money at the price of GOLD TODAY, whereas SILVER MINERS are below their marginal cost of production….this cannot last.

The Default of the COMEX is on its way…as we move into STEP 4. Either the price of SILVER moves much higer, or increasing numbers of investors are going to go into the COMEX and buy contracts for delivery.

Mike R I would think a default on the comex would cause prices to skyrocket. However I don’t think tghere will be a default on the comex.
I also ascribe to the bull in bears clothing thesis proposed by Antal fekete and I expect the shorts to go long in the not too distant future. thereby avoiding any default and possibly causing such a sharp and quick reversal that the public has no time to get in on the cheap prices. I also would not be surprised to see the ETFs liquidated for fiat. So hold on to your physical.

SRSrocco: I agree with your assessment, and have a long term view of Silver. What I was looking at was a short term trade as a speculation, and just remarking on the fact that we are getting a number of people saying thats it for me in silver. Isn’t that a sign that a trend reversal is ahead?

ITS HAPPENING FOLKS:

Rob Kirby has some excellent articles about the current situation about the Derivative problem. At the end of his article today, he spoke to one of Canada’s largest Retail Bullion Dealers this past Friday. This is what he had to say:

As a long time and valued customer of the Royal Canadian Mint, he has been told that the Mint is not accepting ANY orders for gold or silver coin for at least 3 months ? and no guarantees then either.

Gold:

- There are zero one ounce gold bars in North America at wholesale ? period.

- Same thing for 10 oz gold bars.

- Some kilo gold bars are available at wholesale but in highly limited supply at prices starting at 5% over spot [COMEX price].

- He is currently receiving a couple of hundred calls per day for small gold [one ounce denominations] and has no product to sell.

Silver:

- He told me there are ZERO one thousand ounce bars available at wholesale in the U.S.A and `supply of the same in Canada is HIGHLY limited.

- He laughed when I mentioned that there was supply at COMEX and he told me COMEX was a JOKE. He told me he doesn?t price silver using COMEX [silver futures prices] any more ? he looks at prices being paid on E-Bay instead.

- He is currently getting 50 calls a day for silver and has no product to sell.

http://www.financialsense.com/Market/wrapup.htm

Again….as I said in my previous post, STEP 4 is to BUY CONTRACTS on the COMEX and take DELIVERY. This we put real pressure on the SILVER in their INVENTORY.

According to the CME/NYMEX website the COMEX MiNY silver contract is 2,500 oz and cash settled. The CBOT 1,000oz mini silver contract has been cash settled as well.

What am I missing? What’s all this talk lately about buying 1,000oz COMEX silver contracts and taking delivery? I didn’t think that was possible.

Certainly I’m not the only one who has bothered to check so I suppose I might be missing something..?

By the way, in Japan the TOCOM silver contract is physically delivered. 30kg = 964oz. And interestingly, the public here is not yet clearing the dealers out of PMs. Those who do buy PM have prefered gold and platinum (space conscious? or just too much cash sitting around?). Silver has not been popular here (yet). The dealer I know only sells 30kg silver bars and way-overpriced commemerative silver Philharmonics. Most of the business is in gold and platinum rounds and bars. Despite a tripling in sales in recent months supply is available.
Food prices jumped rather significantly past few months.

Selling in hand physical with intent to replace it with COMEX deliverable physical carries risk. Firstly, those silver bars you had are now gone and COMEX settles your replacement silver in cash. Secondly, if there isn’t a default which cash settlement kinda implies already, COMEX delivers but that can be months and now your silver is gone and your cash is tied up in the black hole of delivery.

Is this really worth the risk and is this risk already priced into the current paper silver price?

The price of silver today is the price I can get for my bars. Currently it is a 50-100% premium to COMEX. My point is this - the greater the premium for physical, the greater the pressure on COMEX through actions by arbitrageurs taking 1000oz bars out of inventories. This may in turn lead to greater premiums for physical as risk premiums for futures default rises.

How does COMEX head off this mess? I don’t know…maybe close down the US Mint. Maybe refuse COMEX deliveries to anyone but those registered as silver users association, those same users that also have it in their best interests to keep silver prices low.

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At that point, doesn’t COMEX then become irrelevant as refiners simply sell the highest bidder, ie the investment crowd? Then silver users have no choice once they deplete the COMEX inventories to compete with the investment crowd to get their silver.

COMEX can delay a run on silver but they can’t stop one.

“In fact, it would not be unreasonable to expect that the reduction in the supply of silver from base metal mining could be many times larger than the reduction in industrial demand for silver.”

Thats a pretty bold statement. Do you have any data to back it up? Production is at all-time highs and we are about to go into an economic depression. Those arent very favorable qualities for the price of silver and even if the above were true there would be up to several years lag in which case investment demand would have to compensate. Even the current unprecedented investment demand is a drop in the bucket compared to industrial demand. It doesnt look good for silver when comparing to gold my friend and this is coming from someone who has quite a bit under his mattress.

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