Strawboss' Notes and Analysis on Silver

[gold-finger]

If gold went to Sinclair's model price NOW ($13,000) and silver went to 1:20 NOW, then we'd have $650 silver NOW.

[Strawboss]

A good article... http://www.forbes.com/2009/11/03/buf...old-china.html

And another... http://www.marketwatch.com/story/con...igh-2009-11-04

[FunnyMoney]

In the 2nd marketwatch link, Mark Hulbert says, "The bottom line is the same as what I reported in the October issue of the Hulbert Financial Digest: The "easiest money in gold's rally is now behind us.""

I think he's pretty much crazy here, the number of wealthy people with more than 5% of their wealth in gold is probably a tiny minority.

[Strawboss]

If you assume we are in a major upleg having broken to the upside of the iH&S pattern and have already backtested it, Hulberts comment about the previous high being 95% bullish is the point I keyed in on. We are only at about 55% currently. That tells me we have much farther to go as we climb the wall of worry.

For example, if you take the action in the mining shares, they are catatonic considering what gold/silver have done. Its like everyone is waiting...waiting for the other shoe to drop.

You have China telling its citizens to buy gold/silver, you have the Indian central bank buying, you have the Indonesian central bank buying, you have the Russian central bank buying, you have the EU central bank buying...

What more confirmation do you require that we are going up, up up?

Wake up people.

If you dont have all (or most) of your assets in precious metals, you are going to be hurting...

You are expecting the market to crash. You are expecting gold and silver (and the mining shares) to crash right along with them.

Maybe you are right.

Somehow I dont think so.

I think China was blindsided when the markets crashed last year. I dont think they were prepared for that. Neither was India.

That WONT happen a second time.

They know whats going on now. They know the US is pot committed (to borrow a poker expression). The name of the game now is inflate or die.

Oh, I almost forgot. The investment banks know it too. They know they are too big to fail, and they will spend whatever money they have to in preserving that status quo. Barney Frank is bought and paid for. Paul Volcker has been emasculated and propped up for photo ops. Chris Dodd is a buffoon. Ron Paul is a shining example of why the US is screwed. Even though he gets a vast majority of the members of the house to sponsor legislation putting some teeth into the enforcement of oversight of the Fed, it cant even get to the floor...

The signs are all around you.

Wake up!

[xinkid]

One thing I have to clarify is China is not actively telling its citizens to buy gold or silver. I asked people who lived in China the last 6 months if there were TV commercials about gold and silver. They said no.

There are news reports about new gold and silver bullion investment becoming available but that's far from TV commercials and "telling people to buy gold and silver."

Sometimes, the internet can be far from reality.

[Strawboss]

Martin Armstrong's latest missive concludes with his recommendation that the debt should be monetized.

http://www.scribd.com/doc/21767800/I...-Goldman-Sachs

[Strawboss]

Ted Butlers latest...

The Bomb Squad

In a speech yesterday, CFTC Commissioner Bart Chilton outlined his thinking on the all-important showdown coming on the issue of position limits and hedge exemptions to those limits. In a related interview he reaffirmed the timeline of the showdown, said by him to be by late November. He expressed a fear that the Commission might set position limits too low and this might cause big traders to migrate away from regulated exchanges. This is a recurring, if ill-founded fear. In the interview (by Dow Jones), the CME Group added that it was “dismayed” that statements from the CFTC are, “already driving liquidity away.” (If there is one thing I think I know, it is that whenever a commodity exchange is dismayed, it is when the public’s interest is about to be served.) Here’s the actual speech

Click Here



Contrast Commissioner Chilton’s remarks to a speech made by Chairman Gary Gensler to the Futures Industry Association on the same day. Chairman Gensler doesn’t seem particularly afraid of trading moving overseas and for good reason – it isn’t going to happen. He has much experience on Wall Street, being made a partner of Goldman Sachs at age 30. Many would hold that against him, but in my experience, such an achievement is not bestowed without legitimacy. In this speech, his words are clear and convincing, as usual. Chairman Gensler speaks of his deep concern for the American public and how we were harmed by the financial crisis. As an architect of the deregulation that created the problems we face today, he knows he will be judged by his resolve to bring about much needed reform to the commodity markets. He has admitted that deregulation went too far, and appears sincere when he says he has learned from the experience. While I’m allowed to be wrong, I believe he means what he says.

Click Here

Commissioner Chilton is correct in that care must be taken so that position limits are not set so low as to impede legitimate trading and restrict liquidity. But he should also have mentioned that limits must not be set so high as to become ineffective against manipulation and concentration (my old 100 mph speed limit in a school zone example). After all, preventing manipulation and concentration is the primary purpose for having position limits in the first place. The fact is that the current levels of accountability limits in energy and metals contracts do not appear to be a problem, with one glaring example – COMEX silver. Set the level of hard position limits in energy and metal contracts at whatever level the Commission deems appropriate, the sooner the better. Just be sure that those levels are set, in the words of Chairman Gensler, “in a manner fair and consistent across all commodities of finite supply.” That’s the problem, namely, there is no obvious concern with the level of position limits in most commodities, just the level of silver position limits. That, and the phony exemptions to position limits. While the phony exemptions to position limits are a problem in all markets, in silver they also take the award, where one US bank, JPMorgan, holds the largest concentrated short position ever.

Let me try to convey what I see in a different way. I’m going to ask for your indulgence for a few moments, and ask you to engage in a bit of fantasy. I want you to play along with me in this imaginary exercise, as I think it will help me explain the real world silver situation. First, the imaginary circumstance.

It is learned that a great population and financial center has been rigged with a series of powerful explosives by terrorists of unknown background. The explosives have been set in such a sophisticated and destructive manner that it is quickly determined that it is impossible to disarm them all completely. There is going to be a certain number of detonations and great damage will result in the best of potential outcomes. The difficult question of whether to inform the public is but one complication. All that can be hoped for is that all the weapons are not set off and damage is kept to the minimum possible. That hope rests on the right choices being made as to which bombs to disarm first and the skill of those who will do the defusing. Any miscalculation and all the explosives will detonate. After the best plan for disarming is determined, enter the Bomb Squad.

I’ll leave it up to you to finish the imaginary bomb crisis situation. Since I’m an optimist, I’ll choose an imaginary happy ending. Likewise, I’m going to root for a happy ending in the real world situation that I’m about to describe. The real world powder keg that is destined to explode is the COMEX silver manipulation. The imaginary city is the real-world silver market. The terrorist who rigged the explosives is JPMorgan. The Bomb Squad is led by Gary Gensler, chairman of the Commodity Futures Trading Commission (CFTC). I don’t see how the situation can be completely defused with no damage. But I believe, if enough care and skill are employed, much damage can be contained. Any serious miscalculation, however, will make matters very bad indeed.

Why do I liken the silver market to a city beset with explosives that can’t be completely disarmed? That’s because, no matter what occurs in the future, this baby is going to blow up. Nothing and nobody can prevent that. The only question is of timing and consequence. It all comes down to the concentrated short position in COMEX silver. Nothing else really matters at this point. Any analysis of silver in which this isn’t the prime focus is missing the mark, in my opinion. You can’t have any trading market, where one (or two) participant controls 40% of that market and pretend that is a free market. (Based upon the most recent Bank Participation Report and adjusting for spread positions). With that level of control, manipulation is the only possible conclusion.

The clearest proof that the concentrated COMEX short position is manipulative to the price of silver is that it can’t be dissolved without a major silver price event. Otherwise, it would have been made to go away by now. Far from being dissolved, the concentrated short position has actually grown more extreme over time. It is so extreme that it can’t just go away without a large price impact. Forget about being dissolved quietly, it can’t even be explained away. If the CFTC or the COMEX or the CME or the analytical community could have explained it away persuasively, they would have done so. Instead, we are presented with silence or never ending investigations to specific questions about concentration and the level of silver position limits. Let me state it as simple as I can – if JPMorgan were not short 190 million ounces of COMEX silver futures and other traders were needed to replace them, it would take a hell of a lot higher price. That’s always the clearest question to ask in a manipulation – what would the price be if the alleged manipulator’s position didn’t exist?

So intertwined is the concentrated short position with the future course of the functioning of the exchange, that the possibility that it may cause the demise of the COMEX is something of which I increasingly think. More and more, I have the thought that the situation is so extreme, that the actual closing of the exchange is a real option. At the least, it would get the paper short sellers off the hook in a hurry. (However, it would also open a Pandora’s Box of litigation.) And I’m not so sure a closing of the COMEX would be an entirely bad thing. As I have written previously, it certainly wouldn’t be detrimental to the price of silver, as one key mechanism behind the manipulation, the ability to short unlimited futures contracts, would be destroyed. But due to my long futures background and my concern about what has been an important institution, I’m not quite ready to actually endorse that. I’d like to think the silver manipulation can be terminated without shutting the COMEX. But maybe I’m hopelessly naïve and optimistic.

I’ve labeled JPMorgan as the terrorist in my bomb-rigging analogy. My intent is not to defame them, but to end a market manipulation. While JPMorgan has always played a major role in OTC silver derivatives, past Bank Participation Report data does not indicate they played a dominant role in COMEX silver trading prior to 2008. With the financial failure and take-over of Bear Stearns, JPMorgan inherited Bear Stearns concentrated silver (and gold) COMEX short position, along with Bear’s giant OTC positions, probably at the government’s request. Those were dangerous times for the financial system and I can understand the government not wanting to see silver and gold prices soar in an unrestrained short covering panic. Further, I don’t think JPMorgan woke one morning and decided to manipulate the price of silver with an outsized and concentrated short position on the COMEX and OTC markets. I’m inclined to give them the benefit of the doubt and grant that they even may have been acting somewhat patriotically, in ceding to government requests.

But the Bear Stearns’ take-over took place more than a year and a half ago. That is too long to qualify as a near-term emergency. We are long past the point at which this should have been resolved. The dramatic increase in JPMorgan’s short position in the October Bank Participation Report dispels any notion that they are not controlling the price of silver. Without that short selling, the price would have been much higher. The US is a nation governed by the rule of law. It is perhaps our greatest quality. That means no one is above the law; not JPMorgan, not the COMEX, not the US Government itself. Whoever is responsible for the maintenance of this concentrated short position is undermining the best interests of our country. That makes them terrorists in my book.

That leaves the Bomb Squad. In my mind, the Bomb Squad is composed of one key member, CFTC Chairman Gary Gensler. That’s not meant to disparage the other commissioners or staff, just that it will be Gensler who determines how the agency deals with silver problem. Or even if it will be addressed in an open manner. I have been consistent in my praise of him and in my optimism that he will do the right thing in silver, not only in public, but also in my private conversations. I will either be dead right or dead wrong in my assessment of him. I freely admit to the possibility that I may have misjudged him. Since I don’t know of anyone who agrees with me, perhaps I should say the “probability” that I will be wrong. Time will tell.

It won’t be the end of the world if I have misjudged Chairman Gensler’s future actions in silver. The situation in silver is so clear that it is inevitable that it will be resolved with much attention and fanfare regardless of what he, or I, or anyone else may do in the future. The manipulation has lasted for so long that the time for any easy resolution is long gone. Still, there are certain actions that can be taken that are better than others in a city loaded with explosives. In the best interest of our country and markets, let me offer some unsolicited, but well-intended advice to Chairman Gensler.

I know that the CFTC has been negligent for more than 20 years in failing to recognize and terminate the silver manipulation, but Chairman Gensler has been in office for 5 months. He is not responsible for the long-term negligence of the agency. And while the CFTC has been negligent, the agency did not actually manipulate the silver market itself. The actual perpetrators are the concentrated short sellers. These are distinctions that should be kept in mind. Let me explain why.

When the silver market blows up, it won’t be the end of the world financially. No one will die, nor will it result in mass unemployment or in the weeping or gnashing of teeth (except among the short sellers). It will be a big deal for me and silver investors, but not for the world as a whole. That’s because, fortunately, the silver market is so small. The amount of money that would be lost by the big shorts on a sharp silver price move won’t be catastrophic in systemic risk terms. For instance, if JPMorgan closed out its entire short position of 190 million ounces (assuming it wasn’t hedged elsewhere) with an average loss of $20 per ounce, meaning it caused prices to jump to $50 or more, it would sustain a loss of less than $4 billion. That’s not a small amount of money, but it is also about what JPMorgan earned in the last quarter. Such a loss wouldn’t bankrupt them. Neither would the avalanche of lawsuits sure to follow.

My point is that it isn’t the financial consequence to the shorts that is the only concern in the inevitable silver market blow-up. A bigger concern to me is what it will do to the perception of the American public of its institutions. And what will a silver scandal do to the image of the US in the world? This is the basis for my advice to Chairman Gensler. In fact, I think he may already appreciate it. If it turns out that the silver market blows up and the CFTC tries to do what government agencies typically do, namely, feebly try to react to the developing crisis by putting out fires, the agency will be heaped with scorn. And, rightly so. That is the worst possible outcome, as more blame will be placed on the CFTC and not on the manipulators, where it belongs. The loss of confidence would be incalculable.

Therefore, my advice to Chairman Gensler is to take the bull by the horns and get ahead of the coming silver scandal. Take preemptive action before the price explosion occurs. Be upfront with the public and explain to them that it was time to deal effectively with a crime in progress, a crime not of your making. Don’t apologize for soaring silver prices, as very few would be hurt, and many helped financially. Don’t defend the manipulators in the hope of managing the market in an orderly manner. You were not responsible for the manipulation, so don’t allow anyone to push you into that role. You are responsible for ending the manipulation. Your responsibility is to the American people and our markets and to uphold the law, not to protect a small number of market bullies. Tell those harmed by the manipulation for years that your agency will help them to recover damages from the manipulators. You didn’t set the bombs, but you are responsible for disarming them. Don’t allow the silver manipulation to undermine the public’s confidence in our regulatory system. By taking forceful and proactive action you will best serve the public.

Silver is a unique situation, both from an investment and regulatory perspective. The short concentration in silver, in terms of the futures market, world production and above ground inventories has no equal. It must be dealt with in a unique regulatory manner. Anything less will prove futile.

For subscription information, please go to www.butlerresearch.com

This article was previously released to subscribers. For information on how to subscribe, please go to www.butlerresearch.com

http://www.investmentrarities.com/te...11-03-09.shtml

[Strawboss]

Israel Friedman is Ted Butlers mentor...

THE SILVER SHORTAGE WILL COME
By Israel Friedman
Late September 2009

(Israel Friedman is a friend and mentor to Theodore Butler. He has followed silver for many decades. He has written articles for us in the past. Investment Rarities does not necessarily endorse these views.)

Based on the supply and demand situation of silver, it's only a question of time when a silver shortage will come. Nobody can predict exactly when this is going to happen, but we have more and more signs that those who control the price of silver are sweating to balance the supply.

The biggest question I have is, will the shorts be successful to cover their short position on time? Right now the CFTC seems to want to force all the manipulators to get in line by making them obey new rules of position limits, but I feel that the banks who are the big shorts will be exempt. Mr. Butler thinks that the CFTC will do the right thing, but I am skeptical. We argue about this a lot, as we both have strong opinions.

If the banks will not be forced to cover their short positions, only a true shortage in silver will bring the right price. Be prepared for that to happen. How much will silver be worth in a shortage situation? It's tricky to calculate, because a real shortage has never happened in silver history. But it is how you must think. My own thoughts go back to what some things cost during and after World War II in Europe. When there is not enough of something is when you see real crazy prices.

So I will give you my calculation. It will be a gradual explosion of prices and slowly the users and the new investors will eat up the world visible silver, which today is around 500 million ounces. In my calculation the first 100 million ounces of visible silver will disappear at a price of $60 to
$100 an ounce. The second 100 million ounces will disappear by $250, and the third 100 million ounces will disappear between $250 and the price of gold ounce for ounce.

We will be left with 200 million ounces of silver which the owners will be not taking profits on at any price. The bullion in private hands I calculate will be the first to take profits, but Silver Eagle holders will hold for the long run. I still believe that Silver Eagles will do the best investment-wise and I will not be surprised that at one point the Eagle price will trade much higher than the price of silver in a bubble mania.

I am a fanatic silver believer and what I write is only my private belief. There are not many believers in silver. Just look at CNBC, the newspapers, other media, and gold investors. Hardly ever a good word on silver. Silver for them is a forgotten metal. One day they will be shocked when the shortage of silver will come and the price will go up and then gold will be a forgotten sister. There is more gold in the world than silver, so parity in prices is a must.

I think Ted Butler spoke the truth in a recent speech he gave: “The supply/demand set up in silver, which has evolved over an incredibly long period of time, has been one continuous process promising to culminate in an explosion in price at some point. Quite simply, we are rapidly approaching that defining moment when there just won’t be enough physical material to go around at anything but rapidly escalating prices. Those escalating prices will encourage and drive others, including industrial consumers, to enter what should become a buying frenzy. Superimpose upon that the sudden destruction of a decades-old downward price manipulation and you have all the necessary ingredients for a price event that will be referred to forever.”

I would like to congratulate my friend Mr. Butler for releasing a newsletter on silver, and I hope it will become the No. 1 newsletter for the metal market.

A DANGER TO ALL
By Theodore Butler

(This essay was written by silver analyst Theodore Butler, an independent consultant. Investment Rarities does not necessarily endorse these views, which may or may not prove to be correct.)

The current COMEX market structure in gold and silver is extreme and a danger to all. We are witnessing something that is not allowed under commodity law. Prices are being set for gold and silver by COMEX trading rather than production, consumption and investment. Trading in commodity futures is supposed to follow developments in the real world of supply and demand. This is called price “discovery.” Commodity regulation dictates that futures trading discover prices, not set prices. Commodity futures are derivatives. Their existence is based upon, and derived from, the underlying real market. Arriving at prices by trading in derivatives is the tail wagging the dog. It’s completely upside down.

From the lows of mid-July, the price of gold has rallied an impressive $100 per ounce, or more than 10%. Silver has rallied a spectacular $4.50 over the same period, or around 35%. Speculative and technical fund buying on the COMEX drove the rallies. More than 100,000 net gold contracts were bought by long speculators, or the equivalent of 10 million ounces. In silver, more than 25,000 net contracts were bought by speculators, or the equivalent of 125 million ounces.

The commercials sold an equivalent and reciprocal amount of futures contracts aggressively and collusively, preventing prices from climbing even higher. However, according to my analysis, the biggest short, JPMorgan, is still not increasing its short position. Despite the sharp increase in both the silver total commercial short position (a record for gold) the concentrated short position that I complain about so much has shrunk to the lowest level in a year. Since JPMorgan has ceased selling more I am not surprised that this is occurring. It forced other commercials to step in causing higher prices.

I think many of the commercial shorts in silver and gold are crooks and manipulators. But it takes two to tango, and I believe many of the speculative and technical hedge fund buyers play an important role in the silver and gold manipulation. So many contracts are bought and sold by the technical hedge funds collectively, that prices are artificially impacted, first up when they buy, then down when they sell. A case in point: in the big price rally from mid-July, where 10 million ounces of paper gold and 125 million ounces of paper silver were bought on the COMEX, there was no evidence of anything close to that being bought in the real market. That’s $10 billion of paper gold and $2 billion of paper silver. The COMEX paper buying was responsible for the price rise in gold and silver. That’s not discovering prices, that’s price setting. It’s not just that commodity law is being violated; it’s more that the market is not functioning as a free market. The market is being dictated by buyers who are influencing the market by their collective behavior and sellers collusively preying on that collective buying behavior. The bets on both sides have become so large as to threaten innocent participants and the market itself.

The solution is remarkably simple. In fact, it was raised during the recent public hearings on position limits by Michael Masters, a hedge fund manager. In addition to legitimate position limits for individual traders (including a reduction in silver position limits), a further limit should be placed upon overall categories of types of traders. In the context of the hearings, the additional category limits were suggested for some of the big ETFs and swap dealers who aggregate and deal in futures contracts. That’s reasonable.

The point is that many large technical funds are following the exact same trading signals (mostly moving averages), even though they are separately owned and unrelated trading entities. By their identical mechanical approach to buying and selling, they are, in effect, operating as one single trader. They all do the same thing at the same time. Their intent may not be to manipulate the market (unlike the commercial shorts), but the collective buying and selling has the same effect. Of the 100,000 net gold contracts bought since July 14 the large reporting technical traders accounted for roughly 65,000 contracts bought. In silver, of the 25,000 net contracts bought, roughly 22,000 were bought by large technical funds. That is super-concentrated buying that is almost as wrong as concentrated short selling. But I did say almost. All the net selling in gold and silver since July 14, was by large reporting commercials. With no apparent legitimate reason to sell (other than to trick the tech funds), the large commercials sold 10 million ounces of paper gold and 125 million ounces of paper silver on the COMEX. Because there was no legitimate hedging purpose behind this selling, the CFTC is derelict in allowing these commercials to be classified as commercials, and not in the non-commercial category. Such a proper category change would make it easier to subject them to legitimate position limits.

What’s good for the goose should be good for the gander. Just because paper short sellers have been manipulating prices, doesn’t excuse the actions of buyers who may be artificially influencing prices as well. Two wrongs don’t make a right. Remarkably, the solution is the same in each case – legitimate position limits and an end to phony exemptions to those limits. Throw in category limits and manipulation becomes impossible.
In my opinion, no individual trader should be allowed to have more than a 1% to 2% share of the total open interest of any futures market. No category of trader involved in identical trading strategies should be allowed to hold more than a 20% share of total open interest. That goes for technical funds and the commercial shorts that prey on them. We need to eliminate all the trading tricks and gimmicks that have depressed the silver price for so long. They are mostly on the short side, but also on the long side. These technical fund traders don’t give a hoot about silver or gold or anything that they trade. They are not interested in the long term merits of anything. They buy and sell based only upon price movement. They are not our allies, just fair weather friends. I know we would be better off without them. The CFTC should let them trade, but not let them influence prices to the extent they do. That’s not just my opinion, that’s the law.
(Mr. Butler is now offering his own private subscription service. He will still provide his research to our customers via our twice-monthly printed newsletter. If you are interested in subscribing please go to www.butlerresearch.com)

BARRICK’S BUNGLE
By James R. Cook

Here’s another example of Ted Butler’s amazing insight. Reuters recently reported “Barrick Gold will issue $3 billion in stock to eliminate all of its fixed-price gold hedges and a portion of its floating hedges, taking a $5.6 billion hit.”

In 1999 Mr. Butler wrote, “Barrick considers its forward selling an integral part of their corporate strategy . . . . They even go so far as flatly stating that regardless of what the price of gold does, it’s good for them. If it goes up, it’s good and if it goes down it’s good.

“This is patently absurd. There has never been, nor will there ever be, a financial vehicle that makes money no matter what happens. Your common sense should tell you that. It is simply amazing that Barrick could make such a misleading statement, or characterize what they are really doing (short selling massive amounts of gold) in such a grade school primer fashion.”

Ted Butler warned Barrick about this trade numerous times all the way back to 1997. In January of 2006, while Barrick’s hedge book losses were mounting, he wrote, “What makes the Barrick record derivatives trading loss even more shocking and remarkable is that the company was given ample time and repeated warnings about its outsized gold short position. I know this to be true because I personally warned them. Actually, I did a lot more than warn the company personally; I also warned them publicly. And I did it when gold was below $275 an ounce. In addition, I also contacted and warned their auditors, the New York Stock Exchange (where Barrick trades as ABX), the US Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).

“My main reason for attacking Barrick’s short position then was because I felt it was manipulative to gold (and silver) prices.”

THEY CAN’T HANDLE THE TRUTH
By James R. Cook

The Associated Press carried this recent story.
“On just a single day this year on the Red Lake Reservation in northern Minnesota, police and investigators received emergency calls about a suicide, a murder, three stabbings, two shootings and multiple incidents of domestic violence.”

I received a solicitation in the mail recently for donations to a Native American charity that claims the rate of alcoholism on Minnesota reservations is 90%. How could people who were once the most self-sufficient on earth be afflicted to this extent?

It’s what happens when you subsidize people and excuse them from the requirement to make their own way. Without any need to work, people atrophy. Give them money they don’t earn and soon the boredom of doing nothing will coarsen their behavior.

Unfortunately, we are duplicating this dysfunction across the country including a wide swath of our cities. A rapidly growing population of chemically dependent citizens constitutes a problem of such magnitude that it threatens the stability of society. It’s the main reason for crime and a host of other pathologies. It renders a large segment of the populace helpless and unable to function without government money.

What’s most puzzling about this huge predicament is the refusal of people on the left to see the damage that’s done through subsidies. Why don’t they see the human toll it takes? These social welfare programs turn people into drones and derelicts. The evidence is overwhelming. In most big cities you can’t walk the streets after dark without trepidation.

Liberals don’t see it because they are culpable. It’s their social programs that have created this behavioral disaster. If you turn millions of people into alcoholics and addicts it would be terribly inconvenient to have your conscience bother you.

Nevertheless, this atrocity rests on their doorstep. When the left hears this and similar arguments, they seethe in anger. The truth does not set them free, it alienates them further and hardens their position. Not only do they have blood on their hands, they brazenly argue for more of the same. The left is great at claiming intellectual superiority, but this is the mindset of people who aren’t nearly as smart as they think they are.


WE COULDN’T HAVE SAID IT BETTER

“During the next upleg, silver is likely to significantly outperform gold. Silver functions as an industrial metal, but it is also a monetary metal like its big brother. The industrial capacity should help silver outperform gold if the current rally continues as most expect. The monetary capacity has traditionally helped silver outperform gold during periods of inflation. Win-win. Silver bulls such as Ted Butler have long been touting the coming explosion in the silver price, pointing out that silver inventories are declining and getting used up unlike gold. There is also less silver above ground than gold and the gold/silver ratio is currently out of whack, suggesting that silver has some catching up to do. In fact, while gold is 3% off its nominal all-time high of $1,033, silver is a whopping 30% off its 2008 high of $21.44! In other words, silver has some catching up to do and I believe we will see this gap closed in short order.

“The technicals for silver also suggest a bigger move to the upside is in the cards. Silver has been putting in progressively higher highs and higher lows since the price bottomed in November of last year. The metal has bounced off the bottom line of its channel and is breaking out strongly. I don’t anticipate any resistance until the $17 - $18 level. The RSI confirms this forecast and is pointing upwards. All technical signals are very bullish!

“Silver has since put in another ‘higher high’ and if it can break above $17 once more the metal should not face additional resistance until the $19 level. I anticipate an explosive gap up in the silver price over in the next few months. Jason Hamlin

“I think one of the big mistakes people make is to equate inflation with consumer price increases. Inflation is an increase in the quantity of money and credit. It can then manifest itself in many different ways: commodity, house, stock, art, and collectible price increases or in rising wages and consumer prices. This is the easy part to understand. What is more difficult for investors to grasp (and to forecast) is that when the quantity of money and credit increases, different sectors of the economy and of asset markets can become ‘inflated’ at different times and frequently in rapid succession. This makes the successful navigation through inflationary periods a very tricky occupation.” Marc Faber

TEN THOUSAND REASONS
TO BUY SILVER
By James R. Cook

We urge you to own silver, the miraculous metal. If you read carefully about the thousands of uses for this indispensable metal, perhaps you will see the wisdom in buying it. Silver has properties that make it unique and irreplaceable for industry. No other element combines strength with a softness that allows it to be formed and stretched. Nothing conducts electricity as well or is malleable, fatigue resistant or corrosion resistant. Nothing else has such high-tensile strength, is wear resistant, has such a long functional life or is as light sensitive. Silver endures extreme temperatures, conducts heat, reflects light, provides catalytic action, is bactericidal and reduces friction. It alloys and has chemical stability. Due to its many unique properties, there is no substitute for silver.

Look at the seemingly infinite uses of this strategic metal. Virtually all rechargeable and disposable batteries are manufactured with silver alloys. Billions of silver oxide-zinc batteries are supplied to world markets yearly, including miniature sized batteries for watches, cameras, and small electronic devices and larger batteries for tools and TV cameras.

Steel bearings electroplated with high purity silver have great use in hi-tech and heavy-duty applications. Silver coated bearings provide superior performance and safety for jet engines. Silver solder facilitates the joining of materials and produces smooth, leak-tight and corrosion-resistant joints. Silver brazing alloys are used in air-conditioning, refrigeration, power distribution, automobiles and aerospace. Silver is of the first importance for plumbers, appliance manufacturers, electronics and manufacturing industries.

Chemical reactions can be significantly increased by adding silver. Approximately 700 tons of silver are in continuous use in the world’s chemical industry for the production of plastics. Silver is essential for producing adhesives, laminating resins for construction, plywood, particle board, finishes for paper and electronic equipment, textiles, surface coatings, dinnerware, buttons, casings, handles, knobs, packaging materials, automotive parts, thermal and electrical insulating materials and toys. Silver, the miracle metal, is used for molded items such as insulating handles for stoves, key tops for computers, electrical control knobs and appliance components.

Metallurgists have long known the unique affinity of silver with oxygen. Molten silver will hold ten times its volume in oxygen. This property is critical to high temperature superconductors, which will revolutionize the transmission and storage of electrical power and the efficiency of motors and most other electrical equipment. In this application, silver not only prevents the loss of oxygen, but also acts as a source of nascent oxygen, essential to the operation of the superconductor. When silver is combined with superconducting materials, the silver matrix itself displays superconducting properties. The oxidizing powers of silver have wide application in the chemical process industry. The production of polyester fabrics, hydraulic fluids, engine antifreeze, cleaning solvents and most flexible plastics, such as Mylar, are made more efficient by the use of silver. Silver is also used in bullion and coins around the world and is used for silverware, jewelry and decorative arts.

As the best electrical conductor of all metals silver is used in conductors, switches, contacts and fuses. Virtually all switch contacts use silver because it does not corrode, or cause overheating and fires. The use of silver for motor control switches is universal. In the home, all electrical appliances, timers, thermostats and sump pumps use silver contacts. A typical washing machine requires 16 silver contacts to control its electric motor, pump, and gear clutch. A fully-equipped automobile may have over 40 silver-tipped switches to start the engine, activate power steering, brakes, windows, mirrors, locks, and other electrical accessories.

Silver relays are used in dryers, vacuum cleaners, electric drills, elevators, escalators, machine tools, on up to railway locomotives, marine diesel engines and oil-well drilling motors whose performance is required to be flawless. For circuit breakers, silver combines the highest heat conductivity and the highest electrical conductivity of all metals, with almost unlimited performance.

Silver is also widely used in electronics, including silk-screened circuit paths, membrane switches, electrically heated automobile windows, and conductive adhesives. The majority of the keyboards of desk-top and lap-top computers use silver membrane switches. These are found behind the buttons of control panels for cable television, telephones, microwave ovens, learning toys and the keyboards of typewriters and computers. Due to their reliability and wide use, the silver-contact membrane switch market in the U.S. is a multi-billion dollar industry.

The ease of electroplating silver accounts for its widespread use in coating. Silver can achieve the most brilliant polish of any metal. This unique optical reflectivity, and its property of being virtually 100% reflective after polishing, allows it to be used in mirrors and in coatings for glass, cellophane or metals. Everyone is accustomed to silvered mirrors. What is new is invisible silver, a transparent coating of silver on double pane thermal windows. This coating not only rejects the hot summer sun, but also reflects inward internal house heat. A new double layer of silver on glass is sweeping the window market, as it reflects away almost 95% of the hot rays of the sun, creating a new level of household energy savings. Over 250 million square feet of silver-coated glass is used for domestic windows in the U.S. yearly, and much more for silver coated polyester sheets for retrofitting windows.

Silver has a variety of uses in pharmaceuticals. In fact, silver sulfadiazine is the most powerful compound for burn treatment. It is used world-wide. In another application catheters impregnated with silver sulfadiazine eliminate bacteria. In a world concerned with the spreading of virus and disease, silver is increasingly being tapped for its bactericidal properties. Silver ions have been used to purify drinking water and swimming pool water for generations. Silver ions in house frames help resist mold and mildew, something that has plagued the building industry for decades.

Silver-based photography has superior definition and low cost. Silver is used worldwide in X-ray, prints and film. One out of every seven pairs of prescription eyeglasses sold in the U.S. incorporates silver. Silver halide crystals, melted into glass can change the light transmission from 96% to 22% in less than 60 seconds and block at least 97% of the sun’s ultraviolet rays. Silver paste is used in 90% of all solar cells. Sunlight striking silicon cells generates electrons, which the silver conductors collect to become a useful electric current. In the collection of solar energy, silver is the best reflector of thermal energy (after gold).

http://www.investmentrarities.com/ma...2009late.shtml

[Strawboss]

Unemployment at 10.2% headline (obviously much higher in reality).

The moment of truth is right here, right now.

Silver has to choose whether to follow the main markets or follow gold.

The mining stocks were flat yesterday, even though the main markets were up big (divergence).

If silver follows gold (instead of the main markets) we will have divergence there as well.

That should bring in a flood of new money seeking protection...

[stateofjefferson]

Gold will lead and silver will follow.

[Strawboss]

Can Sinclair get a little bit of credit?

The first milestone for gold on the way to $1650 is $1089 according to him.

We have been right there most of this week.

Not too shabby.

[Strawboss]

Originally Posted by stateofjefferson

Gold will lead and silver will follow.

That will be a great thing if silver follows gold upwards while the main markets stumble as the Fed trys to keep it all propped up. That would mean that silver is acting more as money than as an industrial metal.



The ratio would agree with you that gold will lead (up and down) for the moment.

[Strawboss]

I am still a bit leery of the negative divergence on the MACD and RSI versus the price. Considering that though, price has held up very, very well.

Any dips in price should be considered a buying opportunity. Once silver breaks through this overhead resistance, it will have some room to run.



On the weekly, we are solidly in an uptrend that is very healthy. Nice steady upward movement.

[gold-finger]

[Strawboss]

What happens when hyperinflation begins...

Hyperinflation: Wiemar, Germany January 1919 to November 1923
[Expressed in German Marks needed to by an oz. of ag. or au.]

Jan. 1919 Silver 12 Gold 170
May. 1919 Silver 17 Gold 267
Sept. 1919 Silver 31 Gold 499
Jan. 1920 Silver 84 Gold 1,340
May 1920 Silver 60 Gold 966
Sept. 1921 Silver 80 Gold 2,175
Jan. 1922 Silver 249 Gold 3,976
May. 1922 Silver 375 Gold 6,012
Sept. 1922 Silver 1899 Gold 30,381
Jan. 1923 Silver 23,277 Gold 372,447
May. 1923 Silver 44,397 Gold 710,355
June 5, 1923 Silver 80,953 Gold 1,295,256
July 3, 1923 Silver 207,239 Gold 3,315,831
Aug. 7, 1923 Silver 4,273,874 Gold 68,382,000
Sept. 4, 1923 Silver 16,839,937 Gold 269,429,000
Oct. 2, 1923 Silver 414,484,000 Gold 6,631,749,000
Oct. 9, 1923 Silver 1,554,309,000 Gold 24,868,950,000
Oct. 16, 1923 Silver 5,319,567,000 Gold 84,969,072,000
Oct. 23, 1923 Silver 7,253,460,000 Gold 1,160,552,662,000
Oct. 30, 1923 Silver 8,419,200,000 Gold 1,347,070,000,000
Nov. 5, 1923 Silver 54,375,000,000 Gold 8,700,000,000,000
Nov. 13, 1923 Silver 108,750,000,000 Gold 17,400,000,000,000
Nov. 30, 1923 Silver 543,750,000,000 Gold 87,000,000,000,000

[gold-finger]

My annotations in bold:

Originally Posted by Strawboss

What happens when hyperinflation begins...

Hyperinflation: Weimar, Germany January 1919 to November 1923
[Expressed in German Marks needed to by an oz. of ag. or au.]

Jan. 1919 Silver 12 Gold 170
May. 1919 Silver 17 Gold 267
Sept. 1919 Silver 31 Gold 499 Trader: "Buy, buy!"
Jan. 1920 Silver 84 Gold 1,340
May 1920 Silver 60 Gold 966 Trader: "Sell, sell, SELL! DEFLATION is coming!!"
Sept. 1921 Silver 80 Gold 2,175 Trader: "Sh00t. But the price will soon correct."
Jan. 1922 Silver 249 Gold 3,976
May. 1922 Silver 375 Gold 6,012 Trader: "Sh00t. But there is going to be DEFLATION soon. People have no money on their hands."
Sept. 1922 Silver 1899 Gold 30,381
Jan. 1923 Silver 23,277 Gold 372,447 Trader: "Sh00t. But NADLER says the price won't stay over 1,000."
May. 1923 Silver 44,397 Gold 710,355
June 5, 1923 Silver 80,953 Gold 1,295,256 Trader: "Sh00t. But there is going to be DEFLATION soon. People have no money on their hands."
July 3, 1923 Silver 207,239 Gold 3,315,831
Aug. 7, 1923 Silver 4,273,874 Gold 68,382,000 Trader: "Sh00t. But ROUBINI said a price over 2,000 is nuts."
Sept. 4, 1923 Silver 16,839,937 Gold 269,429,000
Oct. 2, 1923 Silver 414,484,000 Gold 6,631,749,000 Trader: "Sh00t. But VAN EEDEN said that the fair price is 750."
Oct. 9, 1923 Silver 1,554,309,000 Gold 24,868,950,000
Oct. 16, 1923 Silver 5,319,567,000 Gold 84,969,072,000 Trader: "But, but, but, PRECHTER said the price will go back to 170!"
Oct. 23, 1923 Silver 7,253,460,000 Gold 1,160,552,662,000
Oct. 30, 1923 Silver 8,419,200,000 Gold 1,347,070,000,000
Nov. 5, 1923 Silver 54,375,000,000 Gold 8,700,000,000,000 Trader: "Sh00t. But the price will soon correct."
Nov. 13, 1923 Silver 108,750,000,000 Gold 17,400,000,000,000
Nov. 30, 1923 Silver 543,750,000,000 Gold 87,000,000,000,000 Trader: "Waaahahahahahaaaaa!"

[Strawboss]

Dear Jim,

The FDIC closed another five banks on Friday 11/6/09. I find the details of the closings more interesting than the number of banks closed, though both figures are quite sobering.

The largest bank closed was United Commercial Bank of San Francisco, California, which had (according to the FDIC’s Press Release) 63 branches in California, China and Hong Kong, $11.2 billion in assets and $7.5 billion in deposits. The projected cost to the FDIC is $1.4 billion, plus the FDIC entered into a loss-share arrangement with the acquiring bank on approximately $7.7 billion of United Commercial Banks’ assets. It’s not clear to me whether the $1.4 billion estimated cost to the FDIC includes a projection of the losses it will take under the loss-share arrangement or whether one is in addition to the other. However, the nature of a loss-share arrangement implies the assets in question are so illiquid and hard to value that neither party is willing to assume the full risk of future losses. Therefore, the $1.4 billion needs to be understood as a bare minimum cost to the FDIC.

$1.4 billion is a big hit in absolute terms, particularly to an agency that’s already broke. The fact that this closing will pass with very little press coverage is a testament to how overwhelming this economic disaster has become. We have literally become numb to the enormity of these figures.

What’s even more disturbing, however, is what these numbers say about the terrible condition this bank was in by the time the FDIC got around to closing it. To repeat, the FDIC says the bank had about $7.5 billion in deposits and the FDIC’s projected cost of closing the bank is at least $1.4 billion. That means that about one-fifth of the deposits had effectively disappeared. Also, $7.7 billion of the bank’s assets turn out to be of such questionable value that the acquiring bank will only take them subject to a loss sharing agreement with the FDIC. That implies that in the final analysis, none of the deposits were backed by collateral that could be characterized as being of sound value.

The remainder of the banks closed this week, while much smaller in size, show a similarly alarming loss of value by the time the FDIC got around to closing them.

Gateway Bank of St. Louis, MO, had total deposits of about $28 million, and the FDIC projects it will cost about $9.2 million to close it — about one third of the value of the deposits.

Prosperan Bank of Oakdale, MN, had total deposits of about $176 million, and the FDIC projects it will cost $60.1 million to close it — a bit more than one third of the value of the deposits.

Home Federal Savings Bank of Detroit, MI, had total deposits of about $12.8 million, and the FDIC projects it will cost $5.4 million to close it — a bit more than two-fifths of the value of the deposits.

United Security Bank of Sparta, GA, had total deposits of about $150 million, and the FDIC projects it will cost $58 million to close it — just shy of two-fifths of the value of the deposits.

It’s pretty terrifying to think that institutions directly under the FDIC’s supervision, that are not alleged to have engaged in fraud, were allowed to lose such a large chunk of the value of their customers’ deposits before the FDIC got around to closing them. It’s clear the FDIC is overwhelmed, both practically and financially. It’s also quite likely that the architects of MOPE will continue to try to limit the number of banks that are permitted to fail each week in order to manage peoples’ perceptions of the health of the banking sector. Therefore, it stands to reason that future bank closings will continue to show increasing losses to the FDIC as a percentage of deposits.

This is just one of the many ongoing indicators screaming that this financial crisis is far more serious than anything this country has ever experienced.

Against this background, it is truly incredible that people continue to buy into the MOPE that the situation is under control and that Western governments’ printing tens of trillions of dollars to prop up the banking sector will not have serious negative consequences. It brings to mind Monty’s recent sage advice, one should never underestimate markets’ abilities to behave irrationally over prolonged periods of time.

Respectfully yours,
CIGA Richard B.

http://www.jsmineset.com

[Strawboss]

My Dear Friends,

I have spent this afternoon attempting to formulate an article on the junior gold shares with something new to tell you.

This has not proven easy.

It might be because I have given so much of myself to a project where I have had to fight my way past those who punish builders and reward destruction. Fight past those who would provide funding but destroy the project for a profit. It might be because some investors find it easy to blame management rather than try to understand what has really happened and what the opportunities are.

There are legitimate people, legitimate companies, and legitimate accomplishments that due to organized market operations have been swept under a rug.

Some stockholders blame the management or blame their brokers, but haven’t focused on the bullies that have brought this about.

What the bullies themselves have lost sight of is that many of these situation have real and significant value that is about to be recognized by new investors.

Those that have stayed with their selected issues have had plenty of time to come to know the company and its potential. They are committed or they would not be there.

Now that gold has significantly breached $1000 it is becoming an investment vehicle for an entire new class of investor.

These new investors are looking for and will recognize the value of the assets that are underlying the juniors and are unavailable in any other category of gold investment.

Concepts such as each 100,000 on ground ounces economically has the same value as 1,000,000 underground ounces when you consider the cost of mining. 1,000,000 surface mineable ounces can have a market value of one billion dollars less the cost of mining which is definitively the lowest in the best of circumstances.

Those juniors with mineable underground deposits not yet in development are free of the short of gold derivatives that are still a lead weight on the profitability of a producing entity – almost every producing entity.

When properly selected, the junior mining sector offers the best value in gold available.

Old fashioned financial means of growing a mineral prospect still can be undertaken by a junior, but a committed producer has the short of gold derivative with no way out.

These facts have been lost to manipulators mired in their assumed victory, and to stockholders.

Where the facts are not lost is among those seeking bargains that are free of short of gold derivatives existing only in the most depressed yet qualified juniors. It is these new and stronger investors that will turn the tide for the juniors as the legitimate financing window is now opening for the more qualified among the still walking but wounded junior gold situations.

27 years ago in an Alaskan sunset above the Arctic Circle in the Fall of 82, I witnessed a great bull moose in a nearby tundra pond. The picture was so profound and powerful that it has become the symbol of my life. To remind me, I have a bronze wind vane in the form of a bull moose over my office. When push comes to shove I lower my head and move straight ahead. As long as I draw a breath it is my code to plow forward regardless of any opposition. That is determination based in knowledge.

Respectfully yours,
Jim

http://www.jsmineset.com

[Strawboss]

This looks like a great entry point. Blue skies upside, strong support just below.

This stock may go bananas.

[Carver]

SLW reports tomorrow after the close.

Predictions?

Anyone buying tomorrow during hours?

If the metals and/or SLW are down I'll probably nibble.

Gold looks like it's due for a pullback more so than silver.

[xinkid]

Originally Posted by Strawboss

Attachment 81979

This looks like a great entry point. Blue skies upside, strong support just below.

This stock may go bananas.

On a 25 year chart, this stock looks like it finished wave I in 2003, wave II in 2008. wave III can go on for a another couple years.

[millwright]

Originally Posted by xinkid

On a 25 year chart, this stock looks like it finished wave I in 2003, wave II in 2008. wave III can go on for a another couple years.

I am riding this to the top you guys, and i think that top looks like 12 dollars in 6 months.

I am long from 2.11 and am seriously considering adding tommorrow with my gains from cde.

Good luck

[Strawboss]

P&F Price Objective for Hecla is $9.

[gold-finger]

Indian investors dump gold for silver

On a long term basis, the Indians do the right thing since gold is expensive in terms of silver (gold:silver is in the top 25% since 1885, i.e. over 75% of all trading days since 1885 gold was less expensive than at the moment when measured in silver).

[Strawboss]

I wanted to take a moment and share some thoughts with those of you that follow this thread. I started this thread about 4 weeks ago and we are already approaching 5000 views. That validates a couple things for me. Firstly, that there is a genuine desire on the part of people who wish to either educate themselves about what is going on in the silver market, or to seek a knowledgeable source to contrast their own views - views that have been formed as a result of ones own research. Secondly, that the research I have done hasnt been wasted.

I assume that many of you are far more knowledgeable about various things than I am, and you have either been very kind by not criticizing (a trait not common on this site) or you agree with the information I am providing. I imagine the prototypical viewer of this thread as someone who is neither rich nor powerful. Mostly just typical people, just trying to do what they can to live their lives and care for themselves and those around them. People with limited means, but, a strong sense of purpose. You see what is going on in the world around you, and you want to position yourself as best as you can to respond to things which have the power to wreak havoc on your life, but, which provide you with limited options in terms of avoiding or responding. You are just an ordinary man (or woman). You only have so much time to learn...and study...and keep up with everything that is going on around you, but, at the same time, take care of your other responsibilities, your job (if you are lucky enough to have one), your family and loved ones, etc... I hope that my efforts are of assistance to you.

I realize that some of you wont fit the profile I described above. Please dont take offense to that. I am just sharing what I imagine when I contribute to this thread.

A note about todays market...Gold hit the upper rail on the monthly chart today. That usually means a correction is forthcoming. If Sinclair is correct, he doesnt think that upper rail is going to hold and that gold is going to break above it. Whether it does it now or at some point in the coming weeks or months - I do not know. If any of you are using margin, it would be very wise to deleverage at the minimum - perhaps lighten up your position by 1/3 and wait to see if a correction ensues or we break through the upside (that would push silver up and through the resistance it is currently within). I will post more later...

[Zed]

Its not an option open to me but they pointed it out on FSO this week and I think it is the strategy I would use if I was US based. That is buying long dated out of the money options at extremes of price. You can keep your holding but have insurance, if you profit on the options use that to increase your holding. Kinda the same as trading but a little more secure if you are a long term holder.

[jbilprophet123]

USD is just below 75 playing with it.
Euro just at 1.50 and Aud just now above .93 ..

This time around the 75- bottom of last time may not hold.

If not than a nice slide of another % or 2 is possible.

With that scenario and increasing golden appetite and all thefundamental reasons. It may actually zoom out from here.

Atleast correction NOW imvho does not seem like the most probable outcome.
I will be wathcing 1115-7 area closely..

Till the point playing in 1100s i see no reason to even partially trade out at THIS point..

If below 1100 will reconsider partial sell..

Thanks for the great thread!!

[Strawboss]

Here is a weekly gold:silver ratio chart.

[Strawboss]

Silver seems content for the moment to remain within the rising wedge.

Below is a good ratio chart to watch the bond market. LQD:JNK. Junk paper is sold when risk is being wound back in. You watch for spreads blowing out / contracting.

It is sometimes a good forward indicator of what silver is going to do.

[Zed]

FWIW, when we get a serious break in silver (or gold) it will show clearly on the AUD chart. Its a good way to filter noise from a serious move. Until in breaks in strong currencies its all about the dollar, when it breaks in strong currencies its all about Silver. This swing is looking a little tired, next one looks like it could be timed well, this one is still a possible but needs to prove itself.