New silver catalyst for diesel emissions should pump demand

As reported yesterday Mitsui Mining and Smelting claims to have developed a new form of catalytic converter that would use silver instead of Platinum.

Should this technology be proven it's obvious car manufacturers would flock to a technology using a silver which is currently less than 1% the price of Platinum.

Mitsui Mining new autocatalyst uses silver, not platinum
Wed Apr 23, 2008 3:47am EDT TOKYO, April 23 (Reuters) -

Mitsui Mining and Smelting Co Ltd (5706.T: Quote, Profile, Research) said on Wednesday it has developed a new catalyst for diesel engine cars that replaces the use of platinum with silver, a less conventional but much cheaper metal.

"Silver will totally replace platinum in this new autocatalyst that we've developed," a company spokesman said.

By substituting platinum with silver, the cost of precious metals in the production of autocatalysts, which clean car exhaust fumes, would be cut by more than 90 percent, the company said.

Spot silver is currently trading at around $17.70 an ounce, compared with platinum at around $2,030.

The spokesman said Japan, Europe and the United States are all planning to impose tighter rules on exhaust emissions for heavy-duty vehicles, such as those used in construction and farming, from 2012.

"We hope that this catalyst will be used in diesel engines for those vehicles, and this is the market we are targeting," he said.

Platinum specialist Johnson Matthey Plc said last November that platinum demand from automakers for catalytic converters would climb 2.3 percent to 4.24 million ounces in 2007 on the back of robust sales of light-duty diesel vehicles in Europe.

Platinum and its sister metal palladium are employed in varying amounts in autocatalysts to filter out carbon monoxide and particulate emissions.

I have a couple of questions about this technology

1. When will we see this go commercial?
2. How much silver vs. Platinum is needed?
3. Will the cheaper price encourage poorer countries to adopt emission controls?
4. After the useful life of the device will the silver recoverable if so how much?

Yet again we have another potential industrial use for silver and with the current cost for platinum there will be a huge incentive for substitution. If this technology if brought to market in a timely manner (before oil runs out) it has the potential to add a couple million ounces a year to silver demand, Good news in a month where prices continue to get the shit kicked out of them.

I was expecting another run up before the summer doldrums set in but unless investors catch on that the dollar can't improve for any fundamental reason, we could be facing a long sideways trading season.

Today's break below $17 and $900 does not look to be a good short term signal, but does give us some extra time to accumulate, make use of your opportunties!

This might also be a sign to take profits on Platinum if you have any,

Nightmares, Dreams, and Reality

Nightmares

Ever have one of those nights where you have really weird disturbing nightmares, it's been an entire week of it for me. Last night for example I was apparently surfing financial sites (from a room that has not held a computer for a good 10 years) only to find that silver was at $4 and gold was at $600, WTF? a 150:1 silver to gold ratio, I was not sure if I should panic or salivate,(mind you, it rarely occurs to me to panic in dreams if only my waking hours were so calm.)

As I moved away from the computer I found my long dead Grandfather who was neither an investor nor had ever been in my home in my living room with a door to door Kitco sales lady, a rather pretty one at that. After making his purchase I had to spend a great deal of time trying to convince my mother that I had not cajoled slightly senile Gramps into blowing his savings on little bits of shiny metal. While I was professing my innocence the Kitco lady somehow slipped away and I spend quite some time trying to find her again so I could double down and take advantage of what were obviously great prices. I never did find her:(

Ok, so what does this all mean, do the lower prices represent my fear I've been wrong or was it my regret I did not get in much earlier and much more aggressively? Maybe something was just a little off with the lamb last night, or a small bit of ergot got into my bread. All I know it was damn disturbing and after a week of this and other weird ass nightmares I've been very tired and rather negligent in posting. Sorry!

I have however made the effort to rely to my mail and comments, thanks for the interest in my site, hell I finally qualified for my first meagre cheque from the ads that are running.

Dreams

On one of the threads I've been chatting with Joe about some of the pie in the sky long term predictions we see from various writers. I think we agree that silver shortages are the key in our pan to get rich and that we are probably both unsure what to make of all the various methods different writers use to make a long term prediction on silver's high price.

Some writers think a price between the natural and historical silver/gold ratio which would us between 10 and 16:1 is a reasonable place to call the high. Others think that the silver gold ratio could actually approach 1:1 on extreme shortages and the revelation that there is less silver above ground than gold. While this should shake things up I believe palladium is also less abundant than gold but normally trades at near half gold’s level.

Joe was interested in a claim by one writer that a silver ratio to the Dow of 10:1 would be the peak price which at today's Dow would put us in the $1200+ per oz range. This writer also alluded to a 5:1 silver to gold ratio.

The problem with all these predictions is that they are too far out and always rely on a measurement vs. some other equity, commodity or even currency that will also change value in the interval years.

This makes it very hard to guess how much profit we will make and it also makes it very difficult to call top and bail. Just remember many people still hold silver from the hunt fiasco because they jumped in late, did not monitor the markets adequately, or kept waiting for that next bounce. These wild predictions are fleeting dreams that cannot be measured because we can't know the value of a dollar, the level of the Dow or even the price of gold in 5 years, yet we all hope they are at least close to the truth and that dreams do come true

Reality

I cannot predict what gold/silver or even a currency will be worth in 5 years, It's still to be seen if I can be reasonable accurate for the second year in a row on a year to year basis, so I don't even venture a guess on the final high price.

What I do know is the fundamentals of high monetary inflation, flight from risk and impending dollar meltdown still point towards a bright future for metals, since every move to save the economy perpetuates cheap money or the Government monetization of debt. It is my belief the deflationists are losing the argument and that pending hyperinflation and an eventual return to sound money will be ultra bullish for commodities and monetary metals in particular. Add some upside for silver shortages and whooeee! We will come out ahead big time in the end.

The big problem with this reality is picking a exit point and how to gauge when and how much to sell. wWhile there are many options and possiblities this is my plan so far.

First I expect a move to at least the natural ratio in conjunction to a much higher gold price, the silver/gold ratio may not get to the 5:1 or the lofty 1:1 but certainly 15:1-10:1 is a reasonable goal to set.

Secondly I would like at some point to get all or most my seed money out so that however this unfolds I will not take a loss, not that I expect to, but shit happens and I'm a tad paranoid.

With these two factors in mind I have the intention of selling 10% of my stake the moment silver prices hit 10X my buying price no matter how much further potential I see. I think this would put my selling price around $150oz, I bought some of my silver much lower than $15oz that but since the Canadian dollar was much weaker when it all averages with more recent buys.

Should the ratio be lower than 15:1 when I hit my $150 goal I would probably take another 10% off the table as profits. From that point on it’s all gravy and I'd watch closely for a top.

Somewhere along silver's climb I will also have to consider if gold is fully monetized yet. If the dollar is still not destroyed and silver makes 10:1 or lower, it might be a good option to trade some silver out for gold. The lower the ratio goes the more likely I'd consider a swap after all who would not want to trade 100oz silver for 20, 50 or a 100 oz gold.

There could also be fear that private ownership could be banned, silver seized or that prices could be fixed to curb speculation once a silver shortage occurs. Making this call will take close watching of Government sentiment, with today's media it's doubtful such a thing could happen without some whiff of it on the internet first so keep watch to make the trade if Government meddling looks likely. While at this point Silver has higher potential for profit don't neglect the idea of eventually swapping for gold .

Ultimately I'm in silver to acquire land. The ultimate survival strategy is not holding metal to buy what you NEED but rather buying the means to create those things you need. If at any point silver approaches a value where 1/2 my holdings will get me the farm I want with all the extras I will be selling enough to become self sufficient. In a world of peak oil and impending famine, providing food and shelter for my family would be more important than the metals themselves that said I think I'll hold a couple hundred ounces till the bitter end for emergencies.

In the end it comes down to know your goals, protect your original investment, take some profits and pay attention.

Enjoy your weekend and ignore the market today, you don't want to know

Market and societal fragility

It's time for the end of week wrap up of news and commentary, good and bad, unfortunately there is little good to mention.

This article by Llewellny Rockwell of the Ludwig von Mises Institute is a decent look at the issue of rising inflation.

Also Paul Volker the last capable Fed Chairman that reigned in the inflation of the 1980s has been speaking out on today's issues. Volker has recently been vocal on America's need to curb consumption to a level that meets their production and his disagreement with the Fed's involvement in the Bear Stearns bail out. His critique of today's financial engineering perhaps says it all.

a demonstrably fragile financial system that has produced unimaginable wealth for some, while repeatedly risking a cascading breakdown of the system as a whole.

The wagons are certainly forming a circle as other learned people are poping out of the woodwork to blame Greenspan and Bernanke for today's mess.

Now I have no doubt that U.S. monetary policy is certainly a key to the current dilemma, but there is also enough guilt around to blame Government overspending, reckless banks, hedge funds, and the absolutely moronic people who believed they deserved a caviar house on pop tart budget.


There are more and more analysts admitting that as distaste full as the Bear Stearns deal was, failure to intervene could have brought a system wide crash. The question is how many Bear Stearns are there waiting to go off? Will someone get to them and intervene before their contagion brings it all down?

These fears and the obvious inflationary means being used to cushion the U.S. economy is oh so bullish for metals that I implore you to ignore claims that Silver and Gold have peaked and the bull is over.

The biggest story for the last two weeks has to be rice, with major exporting nations adding taxes or outright bans on exports in order to enlarge local supplies and keep prices down. Inflation and shortages have driven prices to the breaking point for many people in poorer countries, all you have to do is google food riots and you'll see how wide spread this issue is, this has the potential to bring down governments.

One of last weeks comments mentioned the withdraw of trucking services as a trigger that could cause shortages and riots even here in the affluent west. It only took a little looking to find facebook, myspace and news articles referencing a grass roots call for a truckers strike over fuel prices.

Many truckers have signed to haulage contracts that do not account for today's high fuel prices. This leaves them making runs with no profit, attempting to break or renegotiate legal contracts. This can't go on indefinitely and truckers will go out of business if they can't pass the fuel prices along. With today's just in time delivery system and the small volume of warehousing done today, cities only have a couple of days of food on the store shelves at at time. A prolonged strike could cause unrest.

This protest is targeted around May 3rd at this point and may or may not succeed but eventually enough truckers will hear the call and out of pure self preservation take action.

This also links into a couple of articles I read in the New Scientist this month dealing with the fragility of civilization. The premise is that a combination of factors like just in time delivery, interdependancy of systems and high numbers or irreplaceable specialists allows smaller disturbances to shake society more than would have been possible in a simpler age.

Example, during the SARS outbreaks lack of warehousing and just in time delivery cleared out surgical mask manufactures and stretched supplies of oxygen for ventilators. This was a minor event in the big scheme of things a big event would have made hospitals ineffective.

A medical scare like that of 1918 flu would still allow society to keep supplying the basics by curbing less important activities if it only caused absenteeism up to 25%, Models show however that real absenteeism might be as high as 50%. So how does society "keep it together" if essential workers suffer high rates of infection or simply withdraw their services out of fear.

What if refineries shut down, or public transit, ambulance crews don't show up? What if some specially through a statistical fluke gets virtually wiped out in a pandemic, who does whatever they used to do? Who can train their replacements. The inter connectivity of modern life actually transmits these shocks rather than isolating them. The image of cutting off the limb to save the body is no longer possible, if one area suffers or collapses we could all suffer or collapse, much like the financial contagion we are all fearfully watching.

If the theory of peak oil leading to peak food is correct there will be both die offs and a return of labour to the land so people's labour can offset the work done by hydrocarbons. As this happens our current level of job specialization will change, some specialties may be left to wither and our technical level will fall. Certainly an interesting yet depressing discussion.

If you can't rationalize more silver at this time, buy seeds, water purification products, stockpile a little extra food, convince gullible friends to join you in buying a vacant hobby farm so you can all "Camp and Party". The time for frivolous plasma screens and $50k cars is over, get a head start and start preparing for the future.

Fed Looks for Hyperinflation tools

Man I hate when I post to the wrong blog, this was up elsewhere yesterday in a much more timely manner

The Federal Reserve, having used up most of it's own reserves comprised of Treasuries in making recent loans to the banking industry is looking for new creative ways of loaning or injecting more money than it has, as explained in this Wall street Journal article

As the articles explains the FED could just create money but since that would drive down short term interest rates to the mat, something they are not quite desperate enough yet to try.

The other options include having the treasury create excess treasuries and depositing them at the fed creating extra reserves they can use to plug the dikes, changing laws to encourage larger deposits to the Fed by banks, allowing the FED to directly hold Mortgage Backed Securities, or letting the FED directly issue it's own debt.

Should the Fed ever get the power to create it's own debt without the assistance of the Treasury the U.S. government will for all intensive purposes be neutered and powerless to control their own destiny. Control of the currency is the ultimate power and obligation of any state, but the U.S. Gov through the creation of the FED, recent calls for more FED powers and possibility that they will soon be able to create their own debt are working towards the total corproatization the Nation and a loss of sovereignty to a consortium of bankers.

Each one of these options is variation of the "Print ourselves out of trouble" model which will further fan inflation. If you are having second thoughts about metal investing this alone should show you the desperate state the U.S. economy and the dollar find itself.
With M3 already in the mid teens we should be looking 25% by election time if the FED gets it way. So what is the established number for hyperinflation I've seen a couple of definitions?

Why Silver and Gold are better than fiat money, a cautionary tale

While I feel bad for the fellow in this story, I still laughed when I found out that termites had eaten all his fiat money and investment papers. This is an extreme example of why Silver and Gold are much better stores of wealth than mere paper which can be destroyed in fire, flood, and apparently by infestation.

This is also an warning to know your bank, know the limit of safety deposit box liabilities and perhaps that tightly wrapping your documents in tin foil is a better use than wrapping your head.


P.S.
In a fire your metals may melt, may trickle away but they still have a hell of a lot better chance of surviving than paper.