"Things Must Be Really Bad Here If A Mexican Has To Come To The U.S. To Talk About Money And Silver"

The Reality Detached American

Eric Sprott: The Case For Silver

Follow the Money

By: Eric Sprott & Andrew Morris

You know silver’s doing well when the commentators start giving it the ‘gold’ treatment. Silver’s recent rise has been so spectacular that it’s caught many investors off guard. It’s natural to be sceptical when you don’t know the fundamentals driving strong performance, and many pundits and commentators have been quick to downplay it as a result - much like they do towards gold when it enjoys a run. Silver is also an awkward metal for them to categorize. Is it a commodity, a monetary metal, or both? And which side is driving demand? If it’s industrial demand, that’s ok, because that’s bullish. But if it’s investment demand for silver as ‘money’, well then that’s sort of bearish, isn’t it? The fact remains that most commentators have failed to grasp the monetary shifts that silver is signaling today, and in doing so they’ve failed to appreciate just how high it could actually go.

The financial media’s failure to grasp the benefits of precious metals ownership continues to perplex us, and it’s not just the commentators who are prone to perpetual disbelief. The sell side analysts are equally as irresolute. According to Bloomberg, the ‘expert’ consensus silver price forecast for 2011 is $29.50, representing a 31% discount from the current spot price. This same group of analysts also predicts prices will decline another 25% in 2012 and a further 9% in 2013 to $20 an ounce. When you consider that the silver price has appreciated by over 21% annually over the past 10 years, these forecasts suggest a very dramatic change in the long-term trend. Will this reversal come true? Probably not. These were the same analysts who predicted that spot silver prices would average $18.65 this year - so they’ve missed the mark by over 100% thus far.

We don’t mean to bash the silver analyst community, and there are several whom we highly respect, but it is important for silver investors to appreciate that these price forecasts are being plugged into financial models that dictate equity valuations. These models are used by traders, bankers, analysts, and portfolio managers to derive valuations for silver stocks and create asset allocations for portfolios. To anyone questioning current silver equity valuations, we would ask: what price assumptions are you using? Of course we as allocators of capital are thankful for this phenomenon, as it allows us to buy our favourite silver stocks on the cheap, knowing full well that the herd will be following behind in due course as those backward-looking forecasts get ratcheted higher.

How can we be so confident that the price of silver will continue on its upward trajectory? Our thesis is premised on the most rudimentary of economic principles – supply and demand.

One of the key indicators that we’ve been monitoring is the gold/silver ratio. Much has been written about the ratio of late, and we won’t go into great detail on the subject, other than to note that the last time money was synonymous with defined amounts of gold and silver, the ratio was set at 16-to-one. In fact, for most of the past millennium, one ounce of gold would have been convertible to somewhere between 10 and 16 ounces of silver - an amount roughly in line with the relative occurrence of each mineral within the earth’s crust.¹ For the better part of the past century, due to the world’s abandonment of bimetallism and then the gold standard, the gold/silver ratio has fluctuated widely, twice reaching lows near the 15-to-one mark and a high of 100-to-one back in the early 1990’s. The most recent high reached in the latter part of 2009 was nearly 80-to-one. Since then the ratio has been tumbling to where it stands now at 35-to-one – which reflects the incredible outperformance of silver over that time period. In our opinion, this ratio will continue to move lower, driven by nothing more than basic supply/demand fundamentals.

The US Mint, which is the world’s largest silver and gold coin manufacturer, recently reported that it had sold 13 million ounces of silver coins and 370 thousand ounces of gold coins on a year-to-date basis.² This means that the US Mint is now selling roughly equal amounts of silver and gold in dollars so far this year. Furthermore, bullion dealers like Sprott Money and GoldMoney have confirmed with us that they are now selling moresilver than gold in dollar terms. For additional confirmation of this investment trend, just look at the flows for the two largest gold and silver ETFs. Investors have withdrawn approximately $3 billion from the GLD so far this year while the SLV has seen net inflows of $370 million over the same period. Dollar for dollar, investors are allocating as much if not more money to silver than to gold. And why shouldn’t they? Silver is much more of a "precious" metal than the current ratio of 35-to-one would suggest.

To explain, we must first address mine supply. In 2010, the world mined approximately 736 million ounces of silver and 85 million ounces of gold.³ The world also produced an additional 215 million ounces of silver and 53 million ounces of gold from recycled scrap.⁴ Adding both together brings us 951 million ounces of silver and 139 million ounces of gold supply, for a ratio of nine ounces of silver to one ounce of gold.

Interestingly, this 9-to-one ratio is very similar to the ratio of available in-situ silver and gold reserves. The U.S. Geological Survey estimates that there are current in-situ reserves of approximately 16.4 billion ounces of silver versus 1.6 billion ounces for gold, or about a 10-to-one ratio.⁵

The case for silver is even more compelling when one considers the ramifications of its dual role as both an investment and industrial metal. Last year, non-investment demand for silver (which includes industrial, photographic, and silverware demand) totaled approximately 610 million ounces.⁶ This represents approximately 64% of primary supply, leaving approximately 341 million ounces to satisfy investment demand.⁷ On the gold side, industrial usage totaled 13 million ounces, or about 10% of primary supply, leaving approximately 125 million ounces left over for investment demand.⁸ So, after netting out the industrial usage the primary supply left over for investment demand is about 2.7 times that for gold. However, if we convert those ounces to dollars at current prices, we’re left with $15 billion worth of silver available for investment versus $186 billion worth of gold, or a one-to-13 ratio of silver to gold! This means that in terms of primary supply, silver only has 8% of the capacity for investment that gold does despite having equal if not more dollars flowing into it.

Now, it’s true that another potential source of supply is the very silver that investors already own - and at the right silver price these inventories of silver and gold bullion may be sold into the market to supplement any supply shortfalls. As we’ve noted previously, however, due to decades of underinvestment, the amount of silver bullion inventories are actually extremely small, even compared to those of gold.⁹ Recent estimates suggest that reported silver bullion inventories stand at roughly 1.2 billion ounces versus 2.2 billion ounces of gold bullion, or roughly a 0.5-to-one ratio.¹⁰ To put that amount in perspective, consider that at present there is only $52 billion worth of silver bullion/coins and over $3.3 trillion worth of gold in inventory which could potentially be recirculated into the market. Converting this to a ratio, you get a one-to-63 ratio of silver to gold inventories. So how is silver still priced at 35-to-one?!

All indications lead us to believe that there is now roughly an equal amount of investment flowing into silver and gold on a dollar-for-dollar basis. And although the price ratio of silver to gold has fallen substantially since the highs of 2009, our analysis strongly suggests that this ratio must move lower to restore a fundamental balance between supply and demand. Only time will tell how much lower it will go, but we would not be surprised to see it hit single digits before settling into a more sustainable equilibrium.

What the so-called silver ‘experts’ neglect to account for in their models and projections is that the fiat money experiment has failed. And in this context, we believe the Market has assigned world reserve currency status to gold - not USD, not EUR, and not JPY. In our opinion, gold’s continued appreciation vis-à-vis every currency is assured because the great flight from fiat has only just begun. Like gold, silver also has a long monetary history, and as such, investors are now also buying silver as protection from the ravages of fiat currency debasement. Yet, when compared to gold, it is silver that offers the most attractive value proposition by virtue of the gross mispricing of its scarcity, which, we might add, has existed for many years. Thus, in our opinion, as this new bimetallic standard takes root, silver investors will continue to be justly rewarded with marked outperformance. We truly believe that this is the investment opportunity of a lifetime, and increasingly so, others are taking heed. What is clear to us is that with equal investment dollars now flowing into silver and gold, the current 35-to-one ratio is unsustainable and has only one direction to go: lower.

---

^{1 Farchy, Jack and Meyer, Gregory. "Americans feather nests with silver Eagles." (March 29, 2011). Retrieved on April 12, 2011 from: http://www.ft.com/cms/s/0/fe701e4e-5a1f-11e0-86d3-00144feab49a.html# 2 Unser, Mike. "US Mint Sales: American Eagle Bullion Coins Take Lead." (April 6, 2011). Retrieved on April 12, 2011 from http://www.coinnews.net/2011/03/30/us-mint-sales-american-eagle-bullion-coins-take-lead/ 3 [Silver:] "Silver Investment the Dominant Driver of a Remarkable 2010." The Silver Institute (April 7, 2011). Retrieved on April 12, 2011 from: http://www.silverinstitute.org/pr07apr2011.php. [Gold:] "Gold Demand Trends, Full Year 2010." World Gold Council (February 2011). Retrieved on Apri 12, 2011 from:http://www.gold.org/about_gold/market_intelligence/gold_demand/gold_demand_trends/4 Ibid.5 "Mineral Commodity Summaries 2011." US Geological Survey (2011). Pg. 66-67, 146-147 6 "Silver Investment the Dominant Driver of a Remarkable 2010." The Silver Institute (April 7, 2011). Retrieved on April 12, 2011 from: http://www.silverinstitute.org/pr07apr2011.php.7 In our view jewellery demand is considered a component of investment demand8 "Gold Demand Trends, Full Year 2010." World Gold Council (February 2011). Retrieved on April 12, 2011 from: http://www.gold.org/about_gold/market_intelligence/gold_demand/gold_demand_trends/9 See "The Double-Barreled Silver Issue" from November 2010 10 "Sprott Physical Silver Trust Prospectus" (October 28, 2010) Pg. 38}

The Madness Of A Lost Society

Protecting the purchasing power of your savings is important.  Today, the purchasing power of all forms of paper wealth, including your money, is being threatened.  The global financial crisis has exposed the flaws in the most dangerous monetary experiment ever undertaken.

Since 1971, when the United States cut its final tie to gold as a means to back our money, we have been living in a world dominated by paper money.  The problem is paper money (also known as “fiat" money) derives its purchasing power by nothing more than confidence in the ability of each nation to maintain a “prudent fiscal policy,” i.e. refraining from the temptation to create too much money and credit.  

They were not able to do it. 

Fast forward to today.  The response to the financial crisis of 2008/2009 was to “solve” the problems caused by their failure to avoid temptation and create too much money and credit - by creating more money and credit!  This has shaken the confidence of the world’s markets in the 40 year experiment of a world using nothing but fiat money.  

Today, the eroding confidence in the world’s fiat monetary system is threatening the value of all paper assets.  It threatens the savings of every individual whose assets are denominated in any form of paper, including and especially fiat money.  This simply should not be the case.

"If you are like most investors, you are pleading for some real answers:
• Why isn't my stock portfolio and/or 401K performing like it used to with the market screaming past me?
• Where do I go, and where do I invest in silver without being an expert?

You don't know where to go. so you stand still, afraid..
• What's safe? Does that word MEAN anything, anymore?

You don't know so you hold cash, AND even that keeps losing value!
• You know you have to wake up.

I want you to do yourself a favor. Visit Silver Saver and take a Silver Position and hold on for the ride. Each month you can stash away as little or as much as you like, with a solid, experienced silver investing approach that I recommend. As I have shared for years — silver in your portfolio are not only smart in the short term, silver is one of the best bets for your future, and your children's." -- David Morgan

The SilverSaver Advantage:

• Automatically save in silver and gold for as little as $25 a week or $50 a month.
• Easy to buy and sell.
• Secured and insured storage or quick delivery.
• Start saving.

The Chinese Silver Bullet

Gold To $36,000

Protecting the purchasing power of your savings is important.  Today, the purchasing power of all forms of paper wealth, including your money, is being threatened.  The global financial crisis has exposed the flaws in the most dangerous monetary experiment ever undertaken.

Since 1971, when the United States cut its final tie to gold as a means to back our money, we have been living in a world dominated by paper money.  The problem is paper money (also known as “fiat" money) derives its purchasing power by nothing more than confidence in the ability of each nation to maintain a “prudent fiscal policy,” i.e. refraining from the temptation to create too much money and credit.  

They were not able to do it. 

Fast forward to today.  The response to the financial crisis of 2008/2009 was to “solve” the problems caused by their failure to avoid temptation and create too much money and credit - by creating more money and credit!  This has shaken the confidence of the world’s markets in the 40 year experiment of a world using nothing but fiat money.  

Today, the eroding confidence in the world’s fiat monetary system is threatening the value of all paper assets.  It threatens the savings of every individual whose assets are denominated in any form of paper, including and especially fiat money.  This simply should not be the case.

"If you are like most investors, you are pleading for some real answers:
• Why isn't my stock portfolio and/or 401K performing like it used to with the market screaming past me?
• Where do I go, and where do I invest in silver without being an expert?

You don't know where to go. so you stand still, afraid..
• What's safe? Does that word MEAN anything, anymore?

You don't know so you hold cash, AND even that keeps losing value!
• You know you have to wake up.

I want you to do yourself a favor. Visit Silver Saver and take a Silver Position and hold on for the ride. Each month you can stash away as little or as much as you like, with a solid, experienced silver investing approach that I recommend. As I have shared for years — silver in your portfolio are not only smart in the short term, silver is one of the best bets for your future, and your children's." -- David Morgan

The SilverSaver Advantage:

• Automatically save in silver and gold for as little as $25 a week or $50 a month.
• Easy to buy and sell.
• Secured and insured storage or quick delivery.
• Generous rewards program given in silver and gold.
• Start saving. Open your FREE account today by clicking here.

David Morgan: Silver, Liberty, CFTC Limits & The Rule Of Law

The Day The Dollar Died - Final Warnings Before Hyperinflation

Protecting the purchasing power of your savings is important.  Today, the purchasing power of all forms of paper wealth, including your money, is being threatened.  The global financial crisis has exposed the flaws in the most dangerous monetary experiment ever undertaken.

Since 1971, when the United States cut its final tie to gold as a means to back our money, we have been living in a world dominated by paper money.  The problem is paper money (also known as “fiat" money) derives its purchasing power by nothing more than confidence in the ability of each nation to maintain a “prudent fiscal policy,” i.e. refraining from the temptation to create too much money and credit.  

They were not able to do it. 

Fast forward to today.  The response to the financial crisis of 2008/2009 was to “solve” the problems caused by their failure to avoid temptation and create too much money and credit - by creating more money and credit!  This has shaken the confidence of the world’s markets in the 40 year experiment of a world using nothing but fiat money.  

Today, the eroding confidence in the world’s fiat monetary system is threatening the value of all paper assets.  It threatens the savings of every individual whose assets are denominated in any form of paper, including and especially fiat money.  This simply should not be the case.

"If you are like most investors, you are pleading for some real answers:
• Why isn't my stock portfolio and/or 401K performing like it used to with the market screaming past me?
• Where do I go, and where do I invest in silver without being an expert?

You don't know where to go. so you stand still, afraid..
• What's safe? Does that word MEAN anything, anymore?

You don't know so you hold cash, AND even that keeps losing value!
• You know you have to wake up.

I want you to do yourself a favor. Visit Silver Saver and take a Silver Position and hold on for the ride. Each month you can stash away as little or as much as you like, with a solid, experienced silver investing approach that I recommend. As I have shared for years — silver in your portfolio are not only smart in the short term, silver is one of the best bets for your future, and your children's." -- David Morgan

The SilverSaver Advantage:

• Automatically save in silver and gold for as little as $25 a week or $50 a month.
• Easy to buy and sell.
• Secured and insured storage or quick delivery.
• Generous rewards program given in silver and gold.
• Start saving. Open your FREE account today by clicking here.

David Morgan: Where Silver Is Going This Decade

$45 silver AND $1500 gold?!?

JP Morgan Silver Manipulation Explained 1-5

See part 2 here

20 Reasons To Sell Your Physical Silver

In order of current importance:

1) The removal of the gigantic concentrated short position on the COMEX Silver market as reported in the CFTC Commitment of Traders and Bank Participation Reports.

2) The announcement of charges filed by both the CFTC and the FBI in the pending investigations of Silver market manipulation by JP Morgan.

3) The shut down of the iShares Silver ETF (SLV) and the subsequent attempt by SLV investors to transfer into physical silver in their own possession.

4) The implementation of COMEX Position Limits in Silver of no more than 1,500 contracts and the enforcement of the Disruptive Trading Practices law.

5) The winding down of the outrageous and manipulative Silver derivative positions held by both JP Morgan and HSBC as reported by the Bank for International Settlements.

6) The mass redemption of paper Silver currently held in Pooled Silver Accounts and Silver Certificate Programs into physical silver held in the possession of the owner.

7) The Silver to Gold Price Ratio reflects the true physical relationship between above ground gold and above ground silver that is available for sale on a free and open market.

8) The realization by industrial users of silver that the supply of physical silver is rapidly depleting and with the future of producing their products in jeopardy they begin stockpiling physical silver.

9) The reversal of Silver's ever increasing use in industrial applications due to either high prices or the discovery of a viable substitute with similar physical properties and attributes.

10) The realization by the remaining 99.9% of the investing public that does not currently own any physical that Silver is extremely undervalued and should be held by all investors interested in portfolio safety and value appreciation.

11) Acknowledgment by the Bullion Banks and US Government that they have been involved in the price suppression of Silver for over 50 years in order to support and extend the global confidence in un-backed fiat US Dollar.

12) All Silver statistical reporting companies have completely revised their historical numbers to reflect the true supply/demand realities of the past and admit to the massive annual physical silver deficit going forward.

13) The USGS alerts the world to the reality that at the REAL current Silver consumption rates there is less than 10 years of known below ground Silver reserves remaining in the world.

14) The realization by investors that significant increases in the price of Silver would not curtail industrial demand as silver is mostly used in very small amounts in each product produced.

15) The mainstream media highlights that the investment drivers for Silver far out weight the investment drivers for Gold.

16) The US Mint starts to produce US Silver Eagle coins "in quantities sufficient to meet demand" and no longer illegally rations their dwindling supply.

17) When investors stop saying that silver is "too hard to store" and start worrying that silver is "too valuable to leave in a bank's safe deposit box".

18) When Central Bankers around the world stop printing money every time there is a "bump in the road" on their never ending quest to foster perpetual growth and end the extraordinary transfer of wealth from "the many" to "the few".

19) The US Government and the Citizens of the United States recognize and acknowledge that Article I, Sec. 10 of the US Constitution specifies that only gold and silver coin can be legally used as money.
and finally...

20) The price of silver has risen so high that it has fulfilled all my hopes and aspirations as an investor and I can now sit back and enjoy those other pleasures of life that I had put off in pursuit of FREEING THE SILVER MARKET FROM THE CLUTCHES OF MANIPULATION!

---

So there it is. That's the list of events that must take place for the fulfillment of my Silver investing motivations. MAKE NO MISTAKE: The price impact to silver when each one of these events takes place will be STUNNING...and sooner or later they will ALL take place!  Once these are fully addressed and reflected in the real "Fair Market Value" of Silver...I will SELL ALL MY SILVER in search of the NEXT BEST THING.

Bix Weir

Jim Rogers Warns On Owning Silver

Silver More Overvalued Than The Internets Of 1999

The precious metals "secular" rally might actually end sooner than I originally thought. It won't take a few years. It won't even take a year. This is a replay of 1980 for silver. It is now reaching the parabolic blowoff phase, similar to what oil did a few years ago from 100 to 147, and an exact duplicate of what silver did in 1980. Silver rally will probably end at near 50, a 50% upside from here. Will there be some sort of government intervention (resulting in silver's collapse) when it gets up there? Highly likely.

Now, I've looked at the valuation of stocks like SLW just based on the kind of revenue growth they are generating. Revenue for SLW was about $360 million last year, growing at 33% year over year. The impressive thing is their profit margin, which is near 60%, owing to the rise of the silver commodity. In many bull markets, that kind of growth and profit can garner a valuation of $15 billion market cap, as SLW does.

However, unlike many other bull markets, silver is different. For most companies, continued expansion of market cap is normally due to increase product offerings going to more and more people. I don't see that in silver. Growth and income are rather temporary if you think about it.  If the world is running out of silver (or at least most are being hoarded by individuals and investors at this time), where are these silver companies going to find more silver to justify their P/E's?

As such, this makes SLW and its ilk, extremely overvalued. I would say they are even more overvalued than the internets back in 1999. Some Internets then were making money, and they had a lot of future (many years down the line) potential. Even those that weren't making money (like Amazon.com) had lots of future potential expected many years down the line.

However, the current inflated silver and gold  prices are very temporary. As such, this puts their valuations at nosebleed bubble levels only rivaled by the nonsense such as the Tulipmania. SLW's p/e is at 72 right now, but if you consider it has no future (meaning it will never be producing as much silver as its current p/e suggests), you can see what kind of ponzi fume this thing is running on.

50% more upside is what I think will be the ultimate end to the silver bubble. Now, if you knew there's a good chance a $34 stock, any stock, has only $16 upside before it all ends, what would you do? Not such a great investment; perhaps a good trade. If I knew KO (currently trading at $60) has another $30 to it before it all ends, I'd likely start finding myself a new investment. You would too.

It's a good idea to start locking in some silver profits on the way up (if you own silver), never to re-enter with those profits.  I know many will want to sell everything they have and go all-in silver as this bubble inflates more. Be careful out there. It could all end overnight with the government's magic wand.

Eric Sprott: There Is No More Silver

Going All In On Silver And Gold?

I see many bears (or people who are just bearish on our economy and the fed money printing) are putting 100% of their portfolio in gold and silver stocks and ETFs.

First of all, that's bad asset allocation no matter how you look at it or how confident you are on the investment. Secondly, if things are as gruesome as the bears say, gold and silver could get confiscated at any time.

Just a government announcement could easily drop GLD and SLV over 50-80% overnite, in my opinion.

Be careful out there.

Jim Rogers: What To Do During Monetary Crisis

"What you have to do is you have to find things that will protect your assets, real assets: silver, rice, natural gas, something that will hold its value in an inflationary time. I do it two ways: I own gold and silver coins in my hand, in my house, in my box; I also own gold and silver futures that’s another way to do it.”

Jim Rogers

Why Should I Buy Silver?

JP Morgan Silver Manipulation Explained

Is Silver The Greatest Investment Of The Decade?