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Silver Market Update - Clive Maund
Spooly
Posts: 2,107 ✭✭✭
Si vis pacem, para bellum
In God We Trust.... all others pay in Gold and Silver!
In God We Trust.... all others pay in Gold and Silver!
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Spooly
Posts: 2,107 ✭✭✭
Spooly
Posts: 2,107 ✭✭✭
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Eric Sprott just filed a 6-K in Canada so that he can buy an additional $1.5 BILLION in silver (PSLV was $500 million). This may be approved in as little as 2 weeks from now.
TORONTO, November 16, 2011 — Sprott Asset Management LP announces that it has filed a preliminary short form base shelf prospectus containing information relating to units of the Trust with securities commissions or similar authorities in all provinces and territories of Canada. Under the shelf prospectus, the Trust may offer from time to time during the 25 month period after a final receipt is received for the prospectus up to US$1.5 billion of units of the Trust.
Note that the accumulation of 22 MILL ounces of silver for PSLV helped to push silver from $17 to $49. This latest deal would require approx 40-47 MILL ounces of silver. You certainly
can't get that from the Comex.
roadrunner
<< <i>Have you read this?
Silver Market >>
Yes, and I also read junk mail..... just for snicks.
<< <i>Maybe this can help turn Clive back towards the bullish camp eventually. He's been jumping from bull to bear to bull to bear to.....? Very hard to keep track of.
Eric Sprott just filed a 6-K in Canada so that he can buy an additional $1.5 BILLION in silver (PSLV was $500 million). This may be approved in as little as 2 weeks from now.
TORONTO, November 16, 2011 — Sprott Asset Management LP announces that it has filed a preliminary short form base shelf prospectus containing information relating to units of the Trust with securities commissions or similar authorities in all provinces and territories of Canada. Under the shelf prospectus, the Trust may offer from time to time during the 25 month period after a final receipt is received for the prospectus up to US$1.5 billion of units of the Trust.
Note that the accumulation of 22 MILL ounces of silver for PSLV helped to push silver from $17 to $49. This latest deal would require approx 40-47 MILL ounces of silver. You certainly
can't get that from the Comex.
roadrunner >>
Thanks RR for the post. If Sprott actually makes the purchase or a significant percentage of the $1.5 billion, silver will be off to the races again.
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If $500 million more than doubles the price of the asset, then right there lies your conspiracy and manipulation theories. And places silver in no more a "vaunted" asset class than a pump and dump penny stock in my opinion.
Knowledge is the enemy of fear
In God We Trust.... all others pay in Gold and Silver!
<< <i>Note that the accumulation of 22 MILL ounces of silver for PSLV helped to push silver from $17 to $49. This latest deal would require approx 40-47 MILL ounces of silver. You certainly
If $500 million more than doubles the price of the asset, then right there lies your conspiracy and manipulation theories. And places silver in no more a "vaunted" asset class than a pump and dump penny stock in my opinion. >>
I don't think so. Sprott mentioned numerous times that trying to find that intial 22 MILL ounces took 3 months to accomplish. He basically had to buy 50% of it from producing mines
as it became available. Buffet was able to squirrel away 120 MILL ounces back in the late 1990's but that's when no one but him cared. And in doing so he helped increase the price by
something like 50%. But that was when silver was back in the mid to low single digits. The entire PM sector of the stock market has a cap around $200 BILL. It's really not a lot
of money when compared to say an Apple with a market cap of $350 BILL by itself. So the silver portion of that market cap is probably only around $20 BILL. Peanuts really, esp if
you consider how much of that production is locked up or promised well into the future.
Does the fact that Apple increased by 5X over the past 3 yrs also make it a pump and dump penny stock operation too? Most of the gold and silver is spoken for out there. Those
that have the real stuff (not paper) are not so willing to give it up. Considering that paper trading accounts for 95-99% of gold's and silver's volume, then the 1-5% physcial that actually
changes hands is an important part of the story. Sprott wasn't out looking for 22 MILL ounces of paper. He was after the real thing. Rather interesting considering that annual world
silver production is around 700-800 MILL ounces.
Interesting interview with CEO of First Majestic silver corporation (AG)
roadrunner
Thats not even close to being a similar event. AAPL trades $8 BILLION worth of stock EVERY day. A more accurate example would be NEM, which trades about $500 million worth every day, yet the price does not triple.
Silver is taken out of the ground at a rate of 700 million oz per year. Surely Sprott didnt look very hard. 22 million oz is just 2 weeks production. If 2 weeks worth of silver could make the price nearly triple, then something is very wrong and demonstrates the incredible risk people are taking in having an inordinate amount of their net worth in this metal. Thats probably why silver has suffered 2 heartbreaking 30+% collapses in just 4-5 days over the past 6 months. SIlver is a dangerous metal.
Knowledge is the enemy of fear
<< <i>Does the fact that Apple increased by 5X over the past 3 yrs also make it a pump and dump penny stock operation too
Thats not even close to being a similar event. AAPL trades $8 BILLION worth of stock EVERY day. A more accurate example would be NEM, which trades about $500 million worth every day, yet the price does not triple.
Silver is taken out of the ground at a rate of 700 million oz per year. Surely Sprott didnt look very hard. 22 million oz is just 2 weeks production. If 2 weeks worth of silver could make the price nearly triple, then something is very wrong and demonstrates the incredible risk people are taking in having an inordinate amount of their net worth in this metal. Thats probably why silver has suffered 2 heartbreaking 30+% collapses in just 4-5 days over the past 6 months. Silver is a dangerous metal. >>
I think what you meant was that paper silver is a dangerous item. Eventually the paper scam will come to light and separate from the physical market.
It really doesn't matter how much Apple stock trades per day as most of those transactions are purely digi-key strokes without real shares trading hands...just like paper silver.
Much of that volume is probably taking place in the HF millisecond spectrum...not by real owners looking to acquire and hold the stock. Even with 700 MILL ounces coming out of
the ground, the issue is that most of that is spoken for. China for instance continues to cut back on all its gold and silver exports. At some point in time those might become zero.
Other nations will follow suit. What is very wrong with the silver market is the huge short % carried by just a couple of banks parading as "hedging commercial producers." Even
worse yet is the paper silver derivatives game. During the July 2008 smack down JPM and Co. doubled up on silver derivatives from $90 BILL to $190 BILL dollars worth. Based on the
silver price at the time, that was over 10 yrs of annual production being bet upon with unbacked paper. Pure insanity! That's the problem with silver and why it can be a dangerous
metal as this charade continues. That doubling of derivative's in one month initiated the 60% collapse in 2008. Never could that have been done with contracts backed by real silver.
Imagine if the big banks decided to short Apple stock with derivatives to the tune of 10X the # of shares in existance? That would be equivalent to what was done with silver.
I think people are taking far more risks with their money if they have an inordinate amount of their investments in stocks, bonds, and even cash....or any mixture of those three.
At least for now cash is somewhat safe. Down the road it won't be. Did apple's net income or profit increase by 5X as well over the past 2 yrs? The London gold exchange trades the
annual world production of gold within a few days or weeks. That could not be done if physical metal actually had to technically change hands. The CEO of Silver Majestic has it right
when he says the paper silver market is basically a sham. It's only a matter of time before it completely unravels and sends it to >$100/oz.
roadrunner
<< <i>Does the fact that Apple increased by 5X over the past 3 yrs also make it a pump and dump penny stock operation too
Thats not even close to being a similar event. AAPL trades $8 BILLION worth of stock EVERY day. A more accurate example would be NEM, which trades about $500 million worth every day, yet the price does not triple.
Silver is taken out of the ground at a rate of 700 million oz per year. Surely Sprott didnt look very hard. 22 million oz is just 2 weeks production. If 2 weeks worth of silver could make the price nearly triple, then something is very wrong and demonstrates the incredible risk people are taking in having an inordinate amount of their net worth in this metal. Thats probably why silver has suffered 2 heartbreaking 30+% collapses in just 4-5 days over the past 6 months. SIlver is a dangerous metal. >>
Why exactly is owning physical silver dahgerous if one has the means to do so and sit on it as an inflation hedge or currency collapse insurance policy?
I would argue that one of the main reasons the stock market is going up is interest rates near 0% forcing people to invest in stocks, also the massive amounts of money the fed is pumping into the economy. Of course much of that money sits in the banks and rather than lend out the money to people the banks "invest" taxpayers money in naked shorting silver and gold. Of course these banks are to big to fail so if they continue to make poor "investments" the taxpayers will have to bail them out again.
Yukon, I dont view silver as a hedge against inflation or against currency collapse. Ask the Australians or Canadians how their silver investments have fared over the last few months as their currencies have dropped 10-15%. Not only has the dollar value of silver dropped, but also their currency. They've been taking in the arse twice. I'll agree with you that there is too much money in the system. I differ in that I think that money will be destroyed, just as excess always gets destroyed.
Did apple's net income or profit increase by 5X as well over the past 2 yrs
Almost. Up 3x in 2 yrs and 6x in 5yr. Did silver's profit increase?
Knowledge is the enemy of fear
In God We Trust.... all others pay in Gold and Silver!
<< <i>Roadrunner, my thought is if the paper silver market disappeared then physical silver would be less than $10 oz. Without paper, the physical is too illiquid to garner any real investment interest. No matter how "rare" something may be, if the buyers are even more rare, then prices will suffer. Sure there are J6P like all of us who like and want to own silver, but all of us combined dont stack up against one large bank or Warren Buffet. Take the big guys out of the market and you have no market.
Yukon, I dont view silver as a hedge against inflation or against currency collapse. Ask the Australians or Canadians how their silver investments have fared over the last few months as their currencies have dropped 10-15%. Not only has the dollar value of silver dropped, but also their currency. They've been taking in the arse twice. I'll agree with you that there is too much money in the system. I differ in that I think that money will be destroyed, just as excess always gets destroyed.
Did apple's net income or profit increase by 5X as well over the past 2 yrs
Almost. Up 3x in 2 yrs and 6x in 5yr. Did silver's profit increase? >>
Well I know silver doesn't earn a profit because it is not a company but let me ask you one simple question how has silver done for people who invested in it the past 10-12 years? It has worked perfectly as a store of value ion uncertain times and I would argue that the price would be at least 2-3 times higher if the so called to big to fail banks didn't have their rediculous illegal naked short positions on.
Now I do agree with you that there are sometimes incredible bargains to be had in the stock market but my idea of an incredible bargain is not a high flying stock selling at 50-100 times earnings, 5-10 times book value with no dividend. Now give me a great company who has a unique business advantage selling at or below book value which pays a sustainable 5% or higher dividend and I will be an enthusiastic buyer.
and Joe Lunch Bucket and Sally Kitchen will always have more to worry about than the POG or POS
There is no arguement that silver has done well over the past 10 years. The stock market did very well for 10 years also. I would argue that the price of silver would be 50% less if not for the shenanigans of the banks. Expectations for the end of the world and the end of fiat currency are very high. Those expectations had better be met.
Now give me a great company who has a unique business advantage selling at or below book value which pays a sustainable 5% or higher dividend and I will be an enthusiastic buyer.
Find such an investment and you will find underperformance.
cohodk, How do you plan on protecting yourself financially in deflationary environment? .
I maintain a highly liquid position. I guess that means I own dollars. Because I am liquid I can move my money easily when opportunity presents itself. If I feel I am wrong and that inflation will start to rip, then I can simply buy gold at that time. This could be in the form of physical, GLD, or miners. Or I could buy oil, silver, corn or any other commodity. The world of opportunity is endless if you are liquid. Silver is up only a few % this year, while taking people on an emotional rollcoaster of euphoria and depression. I dont need that kind of excitement and would rather collect 0.25% interest. And im not alone, as billions is pumped into treasuries everyday.
Im sure you know gold is up about 17% this year, but did you know the 30yr US Treasury bond has returned about 23%? I'll also note it interesting that both bonds and gold have been up this decade. I wonder what will happen if bonds ever drop?
Now I do own some gold (physical), but this position is dwarfed by my cash positions.
The term "Cash is King" was coined for a reason.
Knowledge is the enemy of fear
<< <i>Ask the Australians or Canadians how their silver investments have fared over the last few months as their currencies have dropped 10-15%. Not only has the dollar value of silver dropped, but also their currency. They've been taking in the arse twice. >>
I would have to disagree. Silver has fallen in relation to the dollar but if the Canadian currency has fallen too then they would have seen no drop in value in Canadian dollars. They would be no different holding Currency or silver , they stayed the same relative to each other. After all when we see the price fall at Kitco or the CME it is expressed in US dollars and often this is a result of a rising dollar, not a falling silver price.
As far as J6P no being the buyer for silver, true. But the poor man never was a holder of wealth anytime in history. The wealthy will always have goods to trade for metals even when the paper no longer holds value. For the most part, the wealthy have been playing the paper shuffle. If that ends they will run for metals real fast.
From my perspective, in 2005 I had a third of my value in real estate, a third in equities and about a third in metals. I am better off now than I was then and I can tell you the percentages have changed dramatically. I don't think those with real estate and equities only in 2005 can say the same.
I think the price of silver would be much higher than what it is now if not for the shenanigans of the big banks. And both gold & silver would have hit $1800 and $45 a lot sooner.
The big guys created an otc derivatives gold/silver scheme where they are effectively both supplier and end-user. It's not a market in any sense of the term. There are really no other entities playing in that "market." Just 2-4 big banks. They can freely value these derivatives any way they like and create them w/o any backing whatsoever. How much real silver did JPM have to put up to hold that $190 BILL short position in July 2008? Or they did they just "back" that bet with 50-1 leverage using SLV "naked" shorts or some other smoke and mirrors? There's no way they would have had the 200+ MILL ounces of physical silver to back such a bet. No doubt it was completely naked or rebacked with other phony paper. The $900 TRILL or so otc interest rate contract bets are "backed" about the same way the silver bets were....with numerous levels of phony paper. In this way banks have been able to steer interest rates and metal prices when they desire. With JPM getting lots of scrutiny on their silver derivative's scheme they backed away from it last year. That was probably one of the reasons silver went from $17 to $50. But in backing away from it they handed the CME the reigns where successive margin calls are now a primary means for initiating corrections.
Cash is King is probably a termed leftover from the Great Depression when our monetary system was still gold backed, at least internationally. The term has continued to linger
even though it's become quite apparent since 1986 that cash is no longer king. Based on the last 10 yrs one would have to say gold is king. Yes, TBonds have had a good year by
reappearing at nosebleed levels yet another time. You can thank the otc derivative's market for that feat. It could not have happened otherwise. JPMorgan himself stated that
"gold is money and nothing else" back around 1907-1910. The fact that we no longer have gold backing our paper system doesn't make JP's statement any less true imo.
But I do agree that cash comes in handy when market volatility is in full swing. Buying low and selling how is always "king." Our "cash" filled the early Oct gap of 78.65 today. It now
has 3 lower gaps to contend with including a wide whopper from around 75-76. It may wander up to 80 to complete a nice cup formation but a declining handle will probably get added.
Anything that has depreciated 50% over 25 yrs vs. a basket of currencies and also by a factor of 10X over the last 10 yrs against gold (gold to USDX ratio) doesn't deserve to be called the
"king" or even the "prince".....how about just the "pauper?"
roadrunner
"king" or even the "prince".....how about just the "pauper?"
Are you describing gold during the 80's and 90's?
Coyn, when a foreign currency drops in relation to the US dollar, the citizens of that country experience inflation since most commodities are priced in US dollars. It now costs a Canadian more Canadian dollars to buy an ounce of silver which itself buys fews US dollars. A foreign investor gets crushed owning US dollar based commodities when the US dollar goes higher and the commodity drops.
Knowledge is the enemy of fear
I knew it would happen.
<< <i>cohodk, have you considered that the US will survive and probably will prosper, but that the dollar may not? >>
No and I dont think the two would be mutually exclusive. But in any case, I would benefit from being in a position of liquidity. Honestly I dont think your scenerio would ever happen, but if it became apparent I could easily swap my dollars for something else.
Have you considered gold going to 1000 and silver 15 and staying there for the next 10 years? If the housing market or stock markey could rally substantially then sit dormant for a decade, why couldnt PMs. They have in the past.
Knowledge is the enemy of fear
Liberty: Parent of Science & Industry
Im very optimistic about the USA ...but a little insurance never hurts.
If i was a responsible saver living in ( Portugal, Ireland , Italy, Greece, Spain) i would seriously consider having some precious metals.
Groucho Marx
It could happen.
If the housing market or stock markey could rally substantially then sit dormant for a decade, why couldnt PMs.
They could.
In 1980, inflation was running rampant and gold was reacting by rising fast. It could 20% interest rates to shut gold down.
but, but, this time it's different!
Hmmmm. Interest rates are what right now? Inflation is low, by all government accounts. So, if interest rates are low, and inflation is low - wouldn't that be sufficient for business activity to explode through the roof?
Something's different. Can you tell me what that might be?
I knew it would happen.
Terrible global demographics. Rich countries are not growing their populations while the poor ones are.
Knowledge is the enemy of fear
I'm really only concerned about the most recent 10-15 yr trend that is still in progress. Two completely different eras.
1987: world otc derivatives totalled -------- $900,000,000,000 notional.
2008: world otc derivatives totalled $1,140,000,000,000,000 notional.
Interest rates are what right now? Inflation is low, by all government accounts. So, if interest rates are low, and inflation is low - wouldn't that be sufficient for business activity to explode through the roof? Something's different. Can you tell me what that might be?
The gorilla in the room driving interest rates for the past 10-15 yrs has been otc derivatives levered up at 30-1 to 100-1. 80% of all otc derivatives are interest rate contracts. This is
what's basically different between the 1970's, 1980's and today other than insolvent major banks and sovereign nations and strung out consumers laden with debt. This artificial
depressing of rates has drastically skewed where investment dollars go and crushed the business cycle. There are only 2 ways to resolve this. Either inflate away all these debts over
many years to decades...... or let the present banking system crumble by forgiving all these debts/contracts and start with a clean slate.
roadrunner
<< <i>Either inflate away all these debts over many years to decades...... or let the present banking system crumble by forgiving all these debts/contracts and start with a clean slate.
>>
Either inflate away all these debts over many years to decades......( bankers keep thier jobs and get filthy richer)
or let the present banking system crumble by forgiving all these debts/contracts and start with a clean slate (bankers lose thier jobs and go broke).
Any idea which one it will be??
<< <i>
<< <i>Either inflate away all these debts over many years to decades...... or let the present banking system crumble by forgiving all these debts/contracts and start with a clean slate.
>>
Either inflate away all these debts over many years to decades......( bankers keep thier jobs and get filthy richer)
or let the present banking system crumble by forgiving all these debts/contracts and start with a clean slate (bankers lose thier jobs and go broke).
Any idea which one it will be?? >>
If I were to bet on it I would pick inflating away the debts, however I think it will be a combination of the two where they try inflating the debt away until the system is so strained they have no choice but to default and start over.
No. Interest rates are always the highest at the top of a business cycle or when the economy is booming. Look at rates in Australia or Brazil or Poland over the past few years--much higher than here or Europe. Interest rates are always very low at the bottom of an economic cycle or in recessions. When rates were rising in the late 70's, the economy was actually quite robust with manufacturing capacity near peak at 85%. Eventually those high rates put a cap on growth, but it took quite a while.
Interest rates can also be a function of risk--higher risk = higher rates. This is why rates are higher in Belgium than in France. And higher in France than Germany--which are higher than the US.
Exceptionally low rates are not conducive to growth as there is no incentive to take on risk. What is to be gained from loaning money at 2%? This is where, IMO, the Fed is screwing up. A more normalized rate environment, perhaps a 5-6% 30yr yield, would increase the velocity of money, inflation and risk. The FED is actually promoting deflation with these low rates.
Knowledge is the enemy of fear
<< <i>So, if interest rates are low, and inflation is low - wouldn't that be sufficient for business activity to explode through the roof >>
It would if there was demand for what was being produced. Interest rates and inflation are low because few are borrowing and few are buying. Interest rates are being kept low to encourage debt/spending (which it isn't) and low inflation is the result.
It is my personal opinion that deflation is being forced and will remain until it serves its intended purpose in deflating wages (and associated labor benefits). Labor costs will be the last to give in, but once they do, the money controllers will let loose with inflation.
Give Me Liberty or Give Me Debt
wonder what would happen to [some] of that hot money if [when] interest rates were to rise again?
Liberty: Parent of Science & Industry
In God We Trust.... all others pay in Gold and Silver!
<< <i>It's duel edge sword...... higher rates will make the Government default. >>
Exactly, the government has so much debt now that they are doing all they can to keep rates down. How can they possibly service the debt if rates were to simply return to a normal range of 6-7%???
This shell game could theoretically continue on for infinity but even the staunchest dollar supporters know this is an impossibility unless the national debt magically starts going down due to a budget surplus.
For that to be able to happen the TBTF US banks have to get most of their otc interest rate contracts wound down (ie approx $250 TRILL notional).
To raise rates while they still hold those contracts would commence a daisy chain of failures essentially bankrupting them. And the fact that
the world banks added $100 TRILL more derivatives from Dec 2010 to July 2011 (+36% yoy) suggests they are far from the "wind down" mode. Until we see these
interest rate contracts being massively reduced, there's not much chance of rising interest rates. The regulators, congress, and Dodd-Frank are not
forcing the big banks to slim down so it's not going to happen on the current watch.
roadrunner
And stuck with de/disinflation we shall be.
Knowledge is the enemy of fear
The inflation vs. dis-inflation camps can both be correct, it is a matter of each dog having its day.
RRs comments regarding the unwinding of the OTC interest rate contracts points to the extended timeframe we are looking at.
I feel we are probably in a long, slow grind down for at least several years. If for no other reason than the US political scene hasnt created a dynamic leader capable of taking on the banking industry as yet.
Excellent observation, and welcome to the PM board.
As the root cause, yes. As the government policy, no.
When I turned off the TV yesterday, they were all acknowledging QE3.
I just looked at Kitco and notice that we've got ourselves a little gold (& silver) rally going on. I haven't looked at any news yet. Maybe I'll just leave the new off today and give myself a treat.
Added: Hi, Highcheese!
I knew it would happen.