It's been a while since my last post, sick kids and a week in the bush attempting to kill Bambi has kept me too busy to write. I'm just working on learning a few missing survival skills but it's apparent I'd be better off gardening as I'd never feed myself hunting. Personally I think a week in the bush hunting Central Bankers would have been more productive, more satisfying and better off for the environment (at least the financial environment).
The Christmas insanity is on us and it looks that no one is taking heed of the warnings of recession and over indebtedness. The malls are still packed and the people I hear talking seem to be melting the plastic at a fantastic pace in an attempt to buy happiness.
Canadian trade figures are well off due to lower energy prices and a major (16%) reduction in cross border auto sales. The impending U.S. recession will further curtail our exports as we still are too dependant on that one market for the vast majority of our international trade. A fundamental change in the western life style is about to rammed down our throats, as debt, both personal and government will soon destroy our ability to continually over consume resources. While not falling yet, I suspect a softening of housing prices in Canada by spring as manufacturing layoffs increase and as availability of liquidity suffers from a stock market slide.
Inflation, an immoral tax on our savings by government is still too high. Government numbers are too high even after being massaged and the real numbers I see on my monthly household bills are much higher than the government claims they are. The only investments that have kept pace or outpaced inflation for the last 5 years are commodities and I don’t see that trend changing any time soon. Of course silver and gold are both money and commodities and you can own them physically rather than a paper contract or certificate, near perfect with the exception they do not generate interest.
Things don't look good and the more I read, the more I fear the crashing end of the paper pyramid that today’s economy is based on and the more convinced I become that metals will be my means to protect my wealth in the coming chaos. I've had this blog up for about 6 months and I hope I've been able to help someone else escape the pain I see coming. I hope this site has at least made you ask questions and look to other sources than the Feds to get your economic truths.
It seems my call for end of year $14 dollar silver is going to come up short. We came close in the last couple of weeks only to get thrashed Friday by nearly a dollar and today a further .50 by noon.
Am I disappointed?, not greatly. Money being such as it is, I was unable to take part in the bottom feeding frenzy during the last correction and would like to increase my stake now. If this correction continues I suspect it would bottom out no lower than $11.50-12.00. I could be wrong but my current buy is any point below $12, with a 100 oz bar being my likely purchase. Long term I still believe in 100 dollar silver but it makes no sense to pay more than you need to and I see no need to may more than $12 right now. Unfortunately the Canadian dollar has weakened so $12 dollar silver is not as cheap as it should be.
Of course as the New Year approaches, it means the 2007 maple leafs are now available and I'm interested in seeing what if anything replaces the 2006 1/2 ounce wolf. These both have a high premium as an investment but I will pick some of these coins as the pretty things portion of my hoard or to give out as gifts.
Happy Solstice silver bugs.
My Christmas/New Year advice, if you can't afford it don't buy it.
Monday, December 18, 2006
Monday, November 20, 2006
Silver Bells, Silver Bells,... mmmm silver
Christmas shopping season is upon us once again, let the depression and desperation begin!
If you are an average Canadian, I suspect you have between 12 and 20 people to shower with useless gifts this year. Each one of those gifts. depending on your closeness or means will range from a token $20 dollar gift, to the “I don’t want to be in the dog house again this year” gift that ranges into hundreds of dollars. So what do you buy?
First look at who you are shopping for and remember what you bought them last year. Did you buy them something they actually used or was it something they will hide, return, or re-gift? Were you satisfied with what you gave them or did you buy something out of desperation that neither you nor the recipient liked?
Now consider silver and how it could make a really great gift. Now I’m not suggesting you give everyone a bar or a coin. Some of you might want to get lucky some time soon and bullion will not enamour your wife as much as a tennis bracelet would. (Why is it called a tennis bracelet, one would be nuts to play tennis wearing expensive jewellery you might break or lose?)
What I am suggesting, is that you find people on your list who would appreciate silver and would not immediately try to pawn it. I think valued employees might appreciate a 2006 silver maple leaf marking another of year servitude, oops I meant service ;) A Silver maple would make a nice token gift for a paperboys Christmas tip, A first Christmas gift for an infant and then you could then give one each year as an easy gift, think about your list someone will be appropriate. In every family or group of friends there are those who have a tendency to be pack rats or collectors, I’m just suggesting that you move to encourage such collecting into a useful and value generating direction. This is collecting theme is very prevalent in preteen males who will collect almost anything. Rather than give them a junky toy or something of no real value, start them on a nice collection of silver maples or fractional gold coins or something nice from the Canadian mint.
I’ve said before I’m not a big fan of collectable coins because of the premium you pay for them; however, in a gift situation they are certainly an attractive choice that has more intrinsic value than a pile of crap from Wal-Mart will ever have. Collectable coins with real gold or silver content are a great educational tool to teach the young or uniformed the true nature of money. Explain to them that it’s not a promissory note backed by nothing but a real asset that has intrinsic value that cannot be devalued away.
Royal Canadian mint coins have themes including animals, natural sites, butterflies (these are really beautiful coins that a young women or grandmother would appreciate ), the Victoria cross, the Canadian space arm all in silver. They also have more expensive gold coins ranging from the 1/25oz cowboy (I got one for fathers day) to much larger and pricy coins, they even have Platinum and Palladium coins which will certainly have novelty appeal. Just match the theme to the person and the size and expense to your price limit and they are sure to be a hit.
There are a number of online stores where you could get silver ounces from different countries, the Silver Maples, Silver Eagles, Libertads, Panda’s and Kookaburras, are all very nice looking silver products, that would make a nice silver coins of the world display for a young person. If you can't find a coin with an appropriate theme there are many art bars on the market, also don't forget historical coins that might mark an important time period in a persons life or a keen interest.
For savvier recipients or for larger purchases you could give a 5 or 10 ounce bar and a good silver book like Get the Skinny on Silver by David Morgan, (it’s one of books on the side bar of the site). The idea is to give something of real value that will continue to appreciate rather than a tie or a singing fish. If your gift turns out to be a hook to catch their interest in metals and investing, then you’ve given a gift that will be far more valuable than the gift itself. Even before I started actively buying silver I still would have appreciated gold or silver simply as a novelty and would have kept it. Other than a few silver dollars here and there, most people have never held anything close to pure silver or gold. Sterling earrings and 14 k. rings are a far cry from the wonder of holding a pure ounce of gold or a slab of silver.
I know for a fact that most wives will not be satisfied with this kind of gift so stick to gold or silver jewellery. There is a huge mark up over the bullion price on jewellery but when gold/silver are $2000 and $200 respectively you wife will appreciate the gift that much more. Beauty and real value outshines a gift that will be out of style next season. Women, while men are more likely to like a coin as a gift some may not. Men like shiney things too, consider a nice heavy chain.
Giving silver will give those you care for a real asset, give you a hook to educate them on real money, and will tighten the supply increasing the value of all the silver you have already bought. Of course, don’t forget to tell those who are buying for you that silver is a perfectly acceptable gift. As for me, you can send me a bucket of Pan American or Northwest Territorial rounds, I'll hug them and squeeze them and name them George.
If you are an average Canadian, I suspect you have between 12 and 20 people to shower with useless gifts this year. Each one of those gifts. depending on your closeness or means will range from a token $20 dollar gift, to the “I don’t want to be in the dog house again this year” gift that ranges into hundreds of dollars. So what do you buy?
First look at who you are shopping for and remember what you bought them last year. Did you buy them something they actually used or was it something they will hide, return, or re-gift? Were you satisfied with what you gave them or did you buy something out of desperation that neither you nor the recipient liked?
Now consider silver and how it could make a really great gift. Now I’m not suggesting you give everyone a bar or a coin. Some of you might want to get lucky some time soon and bullion will not enamour your wife as much as a tennis bracelet would. (Why is it called a tennis bracelet, one would be nuts to play tennis wearing expensive jewellery you might break or lose?)
What I am suggesting, is that you find people on your list who would appreciate silver and would not immediately try to pawn it. I think valued employees might appreciate a 2006 silver maple leaf marking another of year servitude, oops I meant service ;) A Silver maple would make a nice token gift for a paperboys Christmas tip, A first Christmas gift for an infant and then you could then give one each year as an easy gift, think about your list someone will be appropriate. In every family or group of friends there are those who have a tendency to be pack rats or collectors, I’m just suggesting that you move to encourage such collecting into a useful and value generating direction. This is collecting theme is very prevalent in preteen males who will collect almost anything. Rather than give them a junky toy or something of no real value, start them on a nice collection of silver maples or fractional gold coins or something nice from the Canadian mint.
I’ve said before I’m not a big fan of collectable coins because of the premium you pay for them; however, in a gift situation they are certainly an attractive choice that has more intrinsic value than a pile of crap from Wal-Mart will ever have. Collectable coins with real gold or silver content are a great educational tool to teach the young or uniformed the true nature of money. Explain to them that it’s not a promissory note backed by nothing but a real asset that has intrinsic value that cannot be devalued away.
Royal Canadian mint coins have themes including animals, natural sites, butterflies (these are really beautiful coins that a young women or grandmother would appreciate ), the Victoria cross, the Canadian space arm all in silver. They also have more expensive gold coins ranging from the 1/25oz cowboy (I got one for fathers day) to much larger and pricy coins, they even have Platinum and Palladium coins which will certainly have novelty appeal. Just match the theme to the person and the size and expense to your price limit and they are sure to be a hit.
There are a number of online stores where you could get silver ounces from different countries, the Silver Maples, Silver Eagles, Libertads, Panda’s and Kookaburras, are all very nice looking silver products, that would make a nice silver coins of the world display for a young person. If you can't find a coin with an appropriate theme there are many art bars on the market, also don't forget historical coins that might mark an important time period in a persons life or a keen interest.
For savvier recipients or for larger purchases you could give a 5 or 10 ounce bar and a good silver book like Get the Skinny on Silver by David Morgan, (it’s one of books on the side bar of the site). The idea is to give something of real value that will continue to appreciate rather than a tie or a singing fish. If your gift turns out to be a hook to catch their interest in metals and investing, then you’ve given a gift that will be far more valuable than the gift itself. Even before I started actively buying silver I still would have appreciated gold or silver simply as a novelty and would have kept it. Other than a few silver dollars here and there, most people have never held anything close to pure silver or gold. Sterling earrings and 14 k. rings are a far cry from the wonder of holding a pure ounce of gold or a slab of silver.
I know for a fact that most wives will not be satisfied with this kind of gift so stick to gold or silver jewellery. There is a huge mark up over the bullion price on jewellery but when gold/silver are $2000 and $200 respectively you wife will appreciate the gift that much more. Beauty and real value outshines a gift that will be out of style next season. Women, while men are more likely to like a coin as a gift some may not. Men like shiney things too, consider a nice heavy chain.
Giving silver will give those you care for a real asset, give you a hook to educate them on real money, and will tighten the supply increasing the value of all the silver you have already bought. Of course, don’t forget to tell those who are buying for you that silver is a perfectly acceptable gift. As for me, you can send me a bucket of Pan American or Northwest Territorial rounds, I'll hug them and squeeze them and name them George.
Tuesday, November 14, 2006
Where is silver going: Expert Quotes
Below is a series of quotes from some of the biggest voices in the pro silver camp on the peak silver price. I don’t expect you to accept anyone of these predictions as fact, they are just predictions. They are however useful in realizing just how much exuberance there is in the market. Silver once ignored is becoming a contrarians dream, an essential commodity that can be owned physically, is in supply deficit, has growing demand, and has a history of real money and retention of wealth, ideal in a time of inflation, and possible fiscal crisis. Silver is being ignored by most main steam investors and is still a very good buy if you can hold for up to 3 years.
Doug Casey, Chairman Casey Research
“Will silver hit its previous 1980 high? It was $48.70 then, but that's $120 in today's dollars-almost 10 times the current price. Given that just below the surface, the threats to the U.S. economy are even greater today than in the late 1970s, we can easily envision silver closing in on its previous high and even going way beyond it.
When will this come to pass? No telling. But, periodic and inevitable corrections aside, it's going to happen, of that we are confident. And, more to the point of our service, when it does, the silver stocks we follow on behalf of our readers won't just go to the moon, they'll leave the solar system. “
Howard Ruff of the Ruff Times Newsletter and author of one of the books you’ll find on my sidebar from Amazon.
“The worst financial decision you could make in 2006 is to ignore gold and silver. This one mistake will cost you more than all the dumb financial decisions you can make put together.
Gold and silver are now early in a historic bull market that will dwarf the 500-1700% profits we made in the 70's.
Gold will hit at least $2,172, and $100 silver is inevitable. Is it unreasonable to expect such returns? Those are not unprecedented numbers. In 1980, gold hit $850 and silver hit $50. If you adjust those numbers for inflation since then, the metals will not make new highs until $2,172 (gold) and $125 (silver).”
Jack Weber, Pres
Golden Eagle Enterprises
“In projecting the future prices of gold and silver, we believe that the foregoing factors have given us the basis for anticipating that between 2005 and 2010, the price of silver could very possibly exceed the price of gold. This is not an idle wish, but a carefully calculated "staking-our-reputation" conclusion, based upon the foregoing factors. We hope this essay has helped you to make a beneficial financial decision - to GET SOME SILVER!”
Israel Friedman,
Long time silver bug and occasion contributor to Butler’s Commentary.
“In stage one, pre-shortage, I think investors will be willing to sell 50 million ounces at a price between $20 to $30. Stage two, shortage, investors will sell 200 million ounces between $30 and $100. And the remaining 150 million ounces will be sold in stage three, super shortage and the prices will be truly shocking.”
Jason Hommel of the Silver Stock Report
“There is no need to fear a price spike in silver, or a drastic drop. The bigger fear ought to be that even though you know all of this, silver prices will rise swiftly past $100/oz., before you decide to buy all that you want, and will continue to grind ever higher, for decades to come”
“I like silver better than gold for a number of reasons. Mainly they can all be summed up in the ratio, which is about 52 to 1. You can buy 52 ounces of silver for the same price as 1 ounce of gold. I think this ratio will easily return to the historic ratio of 15 to 1 very easily, and as silver does that, it will outperform gold by about a factor of just over 3. You will make three times as much money owning silver, than gold by the time the ratio hits 15:1.
I think silver will do better than 15:1. It may hit 5:1, or even 1:1. If that happens, you will make far, far more money in silver than gold”
I think silver will head beyond $8000/oz., in less than 15 years.
I can’t help but comment on this site and the message. Under no circumstances do I believe that investing in silver because GOD said so, is a rational basis for investment. While the site agrees with the basics of silver supply deficit GOD is not an investment banker, to buy silver for that reason is as irrational as believing fiat currency is money. The silver story is one of manipulation, demand, supply and necessity; not burning bushes.
David Zurcuchen of Silver in Scripture
“Without serious dollar dilution, which seems unlikely, I expect silver to peak at around $200/ounce and gold at around $5,000/ounce.”
Similar to the above in some cases but most of the articles keep religion and investing separate. I can live with that.
Ted Butler , writer of Butler's Commentary
Butler is one of the most prolific and well written of all the silver bugs out there. Butler’s articles are well rounded and informative with the intent of showing investors that silver is manipulated and undervalued. There are mentions of silver price explosions but he never sets an actual price. So while I cannot give you a price quote, I could not mention silver bulls without mentioning the work of Ted Butler.
I respect actually Butler's unwillingness to set a price more than others who claim $8000/oz silver. Butler shows you the facts and let’s you set your own investment goals. Those claiming the highest prices would seem to be more intent on keeping demand high enough long enough to make sure they can sell their stakes without selling the price down. Butler gives his research and an opinion freely, never asks for subscriptions and never flogs stocks. While I did not find a target silver price from Butler’s articles, I have to say that his opinion carries a great deal of weight with me and was instrumental in my decision to buy silver. It’s too bad however that he never warned me about the stigma a metals bugs can generate. Are there people in his family who thinks he's nuts, like mine do?
Anyone who believes in the silver story usually believes that a return to the highs of 1980 adjusted to inflation is a reasonable goal. Many think it that a panic or fiscal crisis could force silver to go much higher but I don’t bank on that. I firmly think that a goal of $100-120/oz. is nothing to snicker at and it does not take $500/oz. silver to make this a good buy now. Prices beyond $120 would be gravy but why would you need more than 1000% increase to convince you silver would be a good investment. Personally, I’m usually quite happy to get into a stock, make 30% and get the hell out before greed makes me lose some of my gains. Supply and demand says silver will go up; 300% profits have already been made without any appreciable substitution effect, no great increase in production, recycling, or scrap. In the silver story we’ve only seen the trailer, the full feature is yet to be released.
The books I have listed for sale all tell the tale of the end of days for the U.S. dollar, weakness in the total economy, and the potential for metals as a safe haven investment. Silver is a twofer, you get an industrial metal that is a deficit situation and you get a form of real money that can not be inflated and devalued. I'm not making this stuff up, this real, it may be hidden by bankers, government and brokers, but then again they have a stake in the status quo. Don't get caught without at least a little piece of financial security, buy some silver.
Doug Casey, Chairman Casey Research
“Will silver hit its previous 1980 high? It was $48.70 then, but that's $120 in today's dollars-almost 10 times the current price. Given that just below the surface, the threats to the U.S. economy are even greater today than in the late 1970s, we can easily envision silver closing in on its previous high and even going way beyond it.
When will this come to pass? No telling. But, periodic and inevitable corrections aside, it's going to happen, of that we are confident. And, more to the point of our service, when it does, the silver stocks we follow on behalf of our readers won't just go to the moon, they'll leave the solar system. “
Howard Ruff of the Ruff Times Newsletter and author of one of the books you’ll find on my sidebar from Amazon.
“The worst financial decision you could make in 2006 is to ignore gold and silver. This one mistake will cost you more than all the dumb financial decisions you can make put together.
Gold and silver are now early in a historic bull market that will dwarf the 500-1700% profits we made in the 70's.
Gold will hit at least $2,172, and $100 silver is inevitable. Is it unreasonable to expect such returns? Those are not unprecedented numbers. In 1980, gold hit $850 and silver hit $50. If you adjust those numbers for inflation since then, the metals will not make new highs until $2,172 (gold) and $125 (silver).”
Jack Weber, Pres
Golden Eagle Enterprises
“In projecting the future prices of gold and silver, we believe that the foregoing factors have given us the basis for anticipating that between 2005 and 2010, the price of silver could very possibly exceed the price of gold. This is not an idle wish, but a carefully calculated "staking-our-reputation" conclusion, based upon the foregoing factors. We hope this essay has helped you to make a beneficial financial decision - to GET SOME SILVER!”
Israel Friedman,
Long time silver bug and occasion contributor to Butler’s Commentary.
“In stage one, pre-shortage, I think investors will be willing to sell 50 million ounces at a price between $20 to $30. Stage two, shortage, investors will sell 200 million ounces between $30 and $100. And the remaining 150 million ounces will be sold in stage three, super shortage and the prices will be truly shocking.”
Jason Hommel of the Silver Stock Report
“There is no need to fear a price spike in silver, or a drastic drop. The bigger fear ought to be that even though you know all of this, silver prices will rise swiftly past $100/oz., before you decide to buy all that you want, and will continue to grind ever higher, for decades to come”
“I like silver better than gold for a number of reasons. Mainly they can all be summed up in the ratio, which is about 52 to 1. You can buy 52 ounces of silver for the same price as 1 ounce of gold. I think this ratio will easily return to the historic ratio of 15 to 1 very easily, and as silver does that, it will outperform gold by about a factor of just over 3. You will make three times as much money owning silver, than gold by the time the ratio hits 15:1.
I think silver will do better than 15:1. It may hit 5:1, or even 1:1. If that happens, you will make far, far more money in silver than gold”
I think silver will head beyond $8000/oz., in less than 15 years.
I can’t help but comment on this site and the message. Under no circumstances do I believe that investing in silver because GOD said so, is a rational basis for investment. While the site agrees with the basics of silver supply deficit GOD is not an investment banker, to buy silver for that reason is as irrational as believing fiat currency is money. The silver story is one of manipulation, demand, supply and necessity; not burning bushes.
David Zurcuchen of Silver in Scripture
“Without serious dollar dilution, which seems unlikely, I expect silver to peak at around $200/ounce and gold at around $5,000/ounce.”
Similar to the above in some cases but most of the articles keep religion and investing separate. I can live with that.
Ted Butler , writer of Butler's Commentary
Butler is one of the most prolific and well written of all the silver bugs out there. Butler’s articles are well rounded and informative with the intent of showing investors that silver is manipulated and undervalued. There are mentions of silver price explosions but he never sets an actual price. So while I cannot give you a price quote, I could not mention silver bulls without mentioning the work of Ted Butler.
I respect actually Butler's unwillingness to set a price more than others who claim $8000/oz silver. Butler shows you the facts and let’s you set your own investment goals. Those claiming the highest prices would seem to be more intent on keeping demand high enough long enough to make sure they can sell their stakes without selling the price down. Butler gives his research and an opinion freely, never asks for subscriptions and never flogs stocks. While I did not find a target silver price from Butler’s articles, I have to say that his opinion carries a great deal of weight with me and was instrumental in my decision to buy silver. It’s too bad however that he never warned me about the stigma a metals bugs can generate. Are there people in his family who thinks he's nuts, like mine do?
Anyone who believes in the silver story usually believes that a return to the highs of 1980 adjusted to inflation is a reasonable goal. Many think it that a panic or fiscal crisis could force silver to go much higher but I don’t bank on that. I firmly think that a goal of $100-120/oz. is nothing to snicker at and it does not take $500/oz. silver to make this a good buy now. Prices beyond $120 would be gravy but why would you need more than 1000% increase to convince you silver would be a good investment. Personally, I’m usually quite happy to get into a stock, make 30% and get the hell out before greed makes me lose some of my gains. Supply and demand says silver will go up; 300% profits have already been made without any appreciable substitution effect, no great increase in production, recycling, or scrap. In the silver story we’ve only seen the trailer, the full feature is yet to be released.
The books I have listed for sale all tell the tale of the end of days for the U.S. dollar, weakness in the total economy, and the potential for metals as a safe haven investment. Silver is a twofer, you get an industrial metal that is a deficit situation and you get a form of real money that can not be inflated and devalued. I'm not making this stuff up, this real, it may be hidden by bankers, government and brokers, but then again they have a stake in the status quo. Don't get caught without at least a little piece of financial security, buy some silver.
Thursday, November 02, 2006
Silver shortage in the forseeable future.
Previously, I mentioned that there is no more than 800 million ounces of investment grade, above ground silver. For perspective 800 million ounces is only 8% of the 10 billion ounces once held in world stockpiles and less than a years worth of demand. Further I have shown that current supply deficit is made up with government sales supplementing mine production and recycling to meet world silver demand. The question is how much long will the remaining 800 million ounces last?
Before we can estimate how long 800 million ounces will last we need to find the location and availability of this silver.
Locating all the worlds silver is impossible, there are numerous private hoards hidden in attics and safety deposit boxes, various investment bankers and bullion traders have supply, a few governments such as China likely have some silver left but China does not publish this kind of information. A quick scan of the web allowed me to identify approximately 42% of estimated 800 million ounces.
104 million ounces Barclay’s silver ETF
105 million ounces NYMEX (New York Mercantile exchange)
33 million ounces Central fund of Canada
96 million ounces - estimated remaining government stockpiles
338 million ounces total or 42.25%
The silver in the Barclay’s and Central fund of Canada is effectively off the market backing these investment vehicles for a reduction from 800 million, to 663 million ounces of silver available to industry and physical investment. That’s not to say that the principals of the ETF would not pull silver out of the fund if it suited their interests but for the time being and at this price and supply level there is no need.
NYMEX silver is available to the market but under conditions limiting the physical delivery per trader to 1.5 million ounces per month. This is in an effort to stop one big buyer from sweeping up all the silver in one fell swoop. Considering the small size of the silver market at this time and the low 1 billion dollar value of all remaining silver this is a real risk. There is also the fact that you can’t go up to NYMEX and buy 100 oz for your personal hoarding. NYMEX stocks are in nominal 1000 oz bars traded on future contracts of 5000 ounces. There is no way for a small investor to cash and carry from NYMEX; this is the playground of the industrials and big money.
So if 663 million ounces remain for purchase how long will this supply last?
First we have to assume the trend of deficits continue for the immediate future. A continued deficit is an easy assumption to make considering that projected demand is growing faster than projected supply at least for the next couple of years. The level of deficit is difficult to pin down as several methods seem to be used to calculate it. A leading silver miner Pan American states the 2005 silver deficit as being 35.5 million ounces by leaving out investment buying, while others estimate a 80-100 million ounce shortfall. Ted Butler of Investment rarities, who is the most prolific of the silver commentators, believes there is a 50 million ounce deficit which seems a reasonable number to accept that also fall in the average of other estimates.
On a simple calculation 663 million ounces divided by 50 million per year should give us a 13 year supply but this is very misleading. The Barclay’s silver ETF has applied to enlarge the fund by another 152 million ounces. If this amount was ever filled it would represent 35% of today’s silver. While I’m pretty certain they will not be able to source this much silver in a short period of time without driving the price to the brink, some silver will certainly be bought and this new demand will remove million of ounces from the market place. This new demand will keep prices rising slowly and attracting attention to the silver market and silver fundamentals.
Also it’s quite likely that depleted government holdings will end the practice of government selling into the market. The average government sales for the last 10 years have been 55 million ounces per year. The removal of this supply will double the rate of depletion and shorten the timeline by half.
Technologies are being announced everyday that will strengthen silver demand, silver/zinc matrix batteries, anti bacterial/fungal fabrics using silver, silver embedded plastic storage containers for fresher food. Asian growth in demand for cell phones, washing machines, computers all add demand for silver. In India a trend towards substitution of silver jewellery for gold allows women to have more pieces and more variety for the same investment dollar. Indians are also turning towards bullion rather than jewellery as an investment. Bullion’s much lower price premium over jewellery allows the purchase of more gold or silver for the same expenditure, increasing demand.
The devaluation of fiat currencies vs. the value of bullion gold or silver is very evident over the last 5 years. Despite being considered an industrial metal, silver still retains some of the spill over from its monetary history and is still considered the poor man’s gold. This monetary connection is obvious upon seeing the increasing investment demand in both bullion and coinage. Add to this the movement to remonetize silver though the use of the Mexican Libertad and it’s obvious that demand for a safe haven from paper money is growing.
The biggest factor that will bring shortages and huge profits for the enlightened is fear and panic. Industries that require silver to operate their day to day operations cannot and will not let themselves be cut off from their supply. When the fear of shortages makes its way to industries, panic will set in and purchasing and hording will take place. In the modern just in time delivery system companies may only buy a week or a month’s supply of silver at one time, however with the chance of shortages companies will step up their purchases and could try to purchase their whole years supply while they can. The first ones in will get the best price and bid up the value of the remaining silver and shrink the supply. Other industries will see the price hike and supply drop and a new wave of panic will take place, this panic could quickly gobble up all physical supplies. Even a shift from an average of 1 month supply to a 2 month supply would take 70 million ounces off the market and be well on the way to cleaning NYMEX out.
Rather than the possible 13 years a simple division of the supply vs. the deficit would give us, I believe a 4 year or less timeline is more appropriate. With or without the second filing by Barclay’s, the silver ETF will reach 130 million ounces by early 2007 pulling 26 million more ounces off the market. I believe that the amount of silver diverted to investments will increase significantly this year as will the coinage allotment; this trend will continue increasing the yearly deficit speeding the future shortage.
This shortage will happen it’s just a matter of when. The two factors that could start a run on silver and shortages early are risk tolerance by silver users and fiscal instability. The tolerance of companies to the risk of material shortage cannot be known, each company will decide at some point that it fears for its own production and will step up its buying schedule. Companies might come in dribs and drabs to the market buying extra stocks of silver, or they might see others moving and stampede the market in a very short time. Financial instability could also start a run on silver, and gold too for that matter. The U.S. dollar is in a very precarious situation having lost a great deal of it’s value in the last few years, should Asian creditors pull the plug on new credit or begin selling off U.S. debt the dollar will fall and a great deal of money will run to hide in bullion in an attempt to maintain its value. Eventually all fiat money has failed but bullion throughout history has never been worthless.
With electronic trading and the big money available in the market, very little silver will be available for the small investor if this kind of shortage develops quickly. If you don’t have it before panic sets in you won’t ever have it. Don’t mortgage your house or sell your car or do anything else rash, rather consider diverting $1500 from your RRSP this year, forgo buying a bond or taking that cruise and buy 100 ounces for a start. I truly believe that a 500-700 percent profit is not only possible but probable. Even if it takes 5 years, where else are you going to get 100% per year growth?
Before we can estimate how long 800 million ounces will last we need to find the location and availability of this silver.
Locating all the worlds silver is impossible, there are numerous private hoards hidden in attics and safety deposit boxes, various investment bankers and bullion traders have supply, a few governments such as China likely have some silver left but China does not publish this kind of information. A quick scan of the web allowed me to identify approximately 42% of estimated 800 million ounces.
104 million ounces Barclay’s silver ETF
105 million ounces NYMEX (New York Mercantile exchange)
33 million ounces Central fund of Canada
96 million ounces - estimated remaining government stockpiles
338 million ounces total or 42.25%
The silver in the Barclay’s and Central fund of Canada is effectively off the market backing these investment vehicles for a reduction from 800 million, to 663 million ounces of silver available to industry and physical investment. That’s not to say that the principals of the ETF would not pull silver out of the fund if it suited their interests but for the time being and at this price and supply level there is no need.
NYMEX silver is available to the market but under conditions limiting the physical delivery per trader to 1.5 million ounces per month. This is in an effort to stop one big buyer from sweeping up all the silver in one fell swoop. Considering the small size of the silver market at this time and the low 1 billion dollar value of all remaining silver this is a real risk. There is also the fact that you can’t go up to NYMEX and buy 100 oz for your personal hoarding. NYMEX stocks are in nominal 1000 oz bars traded on future contracts of 5000 ounces. There is no way for a small investor to cash and carry from NYMEX; this is the playground of the industrials and big money.
So if 663 million ounces remain for purchase how long will this supply last?
First we have to assume the trend of deficits continue for the immediate future. A continued deficit is an easy assumption to make considering that projected demand is growing faster than projected supply at least for the next couple of years. The level of deficit is difficult to pin down as several methods seem to be used to calculate it. A leading silver miner Pan American states the 2005 silver deficit as being 35.5 million ounces by leaving out investment buying, while others estimate a 80-100 million ounce shortfall. Ted Butler of Investment rarities, who is the most prolific of the silver commentators, believes there is a 50 million ounce deficit which seems a reasonable number to accept that also fall in the average of other estimates.
On a simple calculation 663 million ounces divided by 50 million per year should give us a 13 year supply but this is very misleading. The Barclay’s silver ETF has applied to enlarge the fund by another 152 million ounces. If this amount was ever filled it would represent 35% of today’s silver. While I’m pretty certain they will not be able to source this much silver in a short period of time without driving the price to the brink, some silver will certainly be bought and this new demand will remove million of ounces from the market place. This new demand will keep prices rising slowly and attracting attention to the silver market and silver fundamentals.
Also it’s quite likely that depleted government holdings will end the practice of government selling into the market. The average government sales for the last 10 years have been 55 million ounces per year. The removal of this supply will double the rate of depletion and shorten the timeline by half.
Technologies are being announced everyday that will strengthen silver demand, silver/zinc matrix batteries, anti bacterial/fungal fabrics using silver, silver embedded plastic storage containers for fresher food. Asian growth in demand for cell phones, washing machines, computers all add demand for silver. In India a trend towards substitution of silver jewellery for gold allows women to have more pieces and more variety for the same investment dollar. Indians are also turning towards bullion rather than jewellery as an investment. Bullion’s much lower price premium over jewellery allows the purchase of more gold or silver for the same expenditure, increasing demand.
The devaluation of fiat currencies vs. the value of bullion gold or silver is very evident over the last 5 years. Despite being considered an industrial metal, silver still retains some of the spill over from its monetary history and is still considered the poor man’s gold. This monetary connection is obvious upon seeing the increasing investment demand in both bullion and coinage. Add to this the movement to remonetize silver though the use of the Mexican Libertad and it’s obvious that demand for a safe haven from paper money is growing.
The biggest factor that will bring shortages and huge profits for the enlightened is fear and panic. Industries that require silver to operate their day to day operations cannot and will not let themselves be cut off from their supply. When the fear of shortages makes its way to industries, panic will set in and purchasing and hording will take place. In the modern just in time delivery system companies may only buy a week or a month’s supply of silver at one time, however with the chance of shortages companies will step up their purchases and could try to purchase their whole years supply while they can. The first ones in will get the best price and bid up the value of the remaining silver and shrink the supply. Other industries will see the price hike and supply drop and a new wave of panic will take place, this panic could quickly gobble up all physical supplies. Even a shift from an average of 1 month supply to a 2 month supply would take 70 million ounces off the market and be well on the way to cleaning NYMEX out.
Rather than the possible 13 years a simple division of the supply vs. the deficit would give us, I believe a 4 year or less timeline is more appropriate. With or without the second filing by Barclay’s, the silver ETF will reach 130 million ounces by early 2007 pulling 26 million more ounces off the market. I believe that the amount of silver diverted to investments will increase significantly this year as will the coinage allotment; this trend will continue increasing the yearly deficit speeding the future shortage.
This shortage will happen it’s just a matter of when. The two factors that could start a run on silver and shortages early are risk tolerance by silver users and fiscal instability. The tolerance of companies to the risk of material shortage cannot be known, each company will decide at some point that it fears for its own production and will step up its buying schedule. Companies might come in dribs and drabs to the market buying extra stocks of silver, or they might see others moving and stampede the market in a very short time. Financial instability could also start a run on silver, and gold too for that matter. The U.S. dollar is in a very precarious situation having lost a great deal of it’s value in the last few years, should Asian creditors pull the plug on new credit or begin selling off U.S. debt the dollar will fall and a great deal of money will run to hide in bullion in an attempt to maintain its value. Eventually all fiat money has failed but bullion throughout history has never been worthless.
With electronic trading and the big money available in the market, very little silver will be available for the small investor if this kind of shortage develops quickly. If you don’t have it before panic sets in you won’t ever have it. Don’t mortgage your house or sell your car or do anything else rash, rather consider diverting $1500 from your RRSP this year, forgo buying a bond or taking that cruise and buy 100 ounces for a start. I truly believe that a 500-700 percent profit is not only possible but probable. Even if it takes 5 years, where else are you going to get 100% per year growth?
Tuesday, October 17, 2006
Silver Fundamentals
How much silver is there?
This is a question often asked by silver investors; the answer is no one really knows. I’ve seen widely differing estimates but the majority seem to be in the range of 600-800 million ounces. Most stockpiles in government or commodity brokers vaults are quantified but there are issues such as hidden hoards, variables of jewellery recycle rates at any particular price, and the true amount of remaining junk silver coin all cloud the real number. With this in mind, I’m going to go with the high end of the average range and state there are appox. 800 million ounces of silver above ground.
How much is 800 million ounces?
800 million ounces is a drop in the bucket considering that at its peak in 1950 the world’s stockpile of silver was estimated at 10 billion ounces. 800 million ounces represents less than 1 year’s supply at current usage levels. In 2005 864.4 million ounces of silver were used in fabrication and a further 47.5 million were purchased as investments.
This sets 2005 silver demand at 911.9 million ounces.
How much is supplied to the market each year?
The silver institute states that the total supply for 2005 was 911.9 million ounces broken down as follows:
Mine production 641.6 million ounces
Net Government sales 68 million ounces
Recycled scrap silver 187.3 million ounces
Producer hedging 15.1 million ounces
The most important thing to note in these figures is the net government sales of 68 million ounces. For decades governments have been supporting the artificially low price of silver by making sure that there is sufficient supply to meet industrial demand from their own stockpiles. Production and recycling have not been able to meet demand for most of the last 40 years so governments have allowed their private stashes to be used up for the benefit of industry. This will soon come to an end as government stockpiles of silver have been largely used up. Smart holders of silver now see the shortages coming and refuse to sell at today’s unrealistic low price, meanwhile silver investors who were nearly invisible for decades have absorbed 47 millions of ounces in 2005 alone The greatest sign of imminent shortage is the U.S. government who once had the largest bullion reserves in the world had to buy silver to produce the Silver Eagle coin in 2005.
So if it took 68 million ounces of government sales to meet 2005 demand than this amount of silver represents a reduction in stockpiles. In the last 10 years 557.2 million ounces of silver has been sold by governments around the world. These constant government silver sales are not sustainable, the slush fund has nearly run dry and soon there will be no stockpiles to make up the difference betweens supply and demand.
A great deal of silver is consumed by industry. In 2005 570 million ounces were used in industry and photography, in the same year only 187 million ounces was recycled for a net loss of 383 million ounces of silver consumed or lost forever. This destruction is the reason silver is becoming scarce.
Jewellery and silver ware have added costs attributed to the labour and marketing of these products. This means that at current prices these items, unless broken are not likely to enter the supply chain as recycled silver. I’ve seen estimates that it would take $50 silver or higher to move any significant amount of scrap from these sources. Additionaly these items often hold sentimental value making them not for sale or would be even more desirable to keep should they appreciate in price. I do not think an increase in scrap rates will fix the supply/demand shortage.
To be fair demand in some sectors like photography demand has been dropping but overall industrial use, total fabrication and total demand are still trending higher as more industrial uses for silver are discovered. As prices have risen over the last few years supply from mining has increased but it has not been able to offset the need for government sales or the strong new investment demand. Additionally 168 million ounces of silver have been taken off the market to back the Barclay’s silver ETF
What does all this mean?
Silver is a bargain at today’s prices. Silver stocks are dwindling and we may be staring at the beginning of the strongest bull market of your lifetime. At today’s supply there is only 24 ounces of silver available for each Canadian or 1/10 of an ounce for each person on the world. Silver is in such short supply that at this moment 5x more gold exists in vaults than silver. That's right! A $13 Can. metal is rarer than a $670 Can. metal. Do you honestly think the price will stay this way once the market notices the real rarity of silver? I Don't.
Silver will never be in this price range again once the truth about silver supply becomes commonly known. I am comfortable estimating $100 silver and I will not sell any of mine until it hits this price. I will buy until it hits $20 and I would take a loan to buy at $10 dollars. The current $13 dollar Canadian range is certainly a buy. $1300 dollars will buy you a nice 100 oz bar which I firmly believe will be worth $10,000 in less than 5 years and unlike paper money or stocks, silver has never had zero value. Start smaller if that fit's your finances but don't ignore this rare opportunity, an opportunity rarer than gold!
This is a question often asked by silver investors; the answer is no one really knows. I’ve seen widely differing estimates but the majority seem to be in the range of 600-800 million ounces. Most stockpiles in government or commodity brokers vaults are quantified but there are issues such as hidden hoards, variables of jewellery recycle rates at any particular price, and the true amount of remaining junk silver coin all cloud the real number. With this in mind, I’m going to go with the high end of the average range and state there are appox. 800 million ounces of silver above ground.
How much is 800 million ounces?
800 million ounces is a drop in the bucket considering that at its peak in 1950 the world’s stockpile of silver was estimated at 10 billion ounces. 800 million ounces represents less than 1 year’s supply at current usage levels. In 2005 864.4 million ounces of silver were used in fabrication and a further 47.5 million were purchased as investments.
This sets 2005 silver demand at 911.9 million ounces.
How much is supplied to the market each year?
The silver institute states that the total supply for 2005 was 911.9 million ounces broken down as follows:
Mine production 641.6 million ounces
Net Government sales 68 million ounces
Recycled scrap silver 187.3 million ounces
Producer hedging 15.1 million ounces
The most important thing to note in these figures is the net government sales of 68 million ounces. For decades governments have been supporting the artificially low price of silver by making sure that there is sufficient supply to meet industrial demand from their own stockpiles. Production and recycling have not been able to meet demand for most of the last 40 years so governments have allowed their private stashes to be used up for the benefit of industry. This will soon come to an end as government stockpiles of silver have been largely used up. Smart holders of silver now see the shortages coming and refuse to sell at today’s unrealistic low price, meanwhile silver investors who were nearly invisible for decades have absorbed 47 millions of ounces in 2005 alone The greatest sign of imminent shortage is the U.S. government who once had the largest bullion reserves in the world had to buy silver to produce the Silver Eagle coin in 2005.
So if it took 68 million ounces of government sales to meet 2005 demand than this amount of silver represents a reduction in stockpiles. In the last 10 years 557.2 million ounces of silver has been sold by governments around the world. These constant government silver sales are not sustainable, the slush fund has nearly run dry and soon there will be no stockpiles to make up the difference betweens supply and demand.
A great deal of silver is consumed by industry. In 2005 570 million ounces were used in industry and photography, in the same year only 187 million ounces was recycled for a net loss of 383 million ounces of silver consumed or lost forever. This destruction is the reason silver is becoming scarce.
Jewellery and silver ware have added costs attributed to the labour and marketing of these products. This means that at current prices these items, unless broken are not likely to enter the supply chain as recycled silver. I’ve seen estimates that it would take $50 silver or higher to move any significant amount of scrap from these sources. Additionaly these items often hold sentimental value making them not for sale or would be even more desirable to keep should they appreciate in price. I do not think an increase in scrap rates will fix the supply/demand shortage.
To be fair demand in some sectors like photography demand has been dropping but overall industrial use, total fabrication and total demand are still trending higher as more industrial uses for silver are discovered. As prices have risen over the last few years supply from mining has increased but it has not been able to offset the need for government sales or the strong new investment demand. Additionally 168 million ounces of silver have been taken off the market to back the Barclay’s silver ETF
What does all this mean?
Silver is a bargain at today’s prices. Silver stocks are dwindling and we may be staring at the beginning of the strongest bull market of your lifetime. At today’s supply there is only 24 ounces of silver available for each Canadian or 1/10 of an ounce for each person on the world. Silver is in such short supply that at this moment 5x more gold exists in vaults than silver. That's right! A $13 Can. metal is rarer than a $670 Can. metal. Do you honestly think the price will stay this way once the market notices the real rarity of silver? I Don't.
Silver will never be in this price range again once the truth about silver supply becomes commonly known. I am comfortable estimating $100 silver and I will not sell any of mine until it hits this price. I will buy until it hits $20 and I would take a loan to buy at $10 dollars. The current $13 dollar Canadian range is certainly a buy. $1300 dollars will buy you a nice 100 oz bar which I firmly believe will be worth $10,000 in less than 5 years and unlike paper money or stocks, silver has never had zero value. Start smaller if that fit's your finances but don't ignore this rare opportunity, an opportunity rarer than gold!
Monday, October 02, 2006
Silver Talk October
A year ago silver was in the $8.00 range and by May it was near $15 until we got nuked soundly, falling back to a $10 range in June. Since then silver has climbed to $13 in early Sept only to fall back to about $10.70 mid month with a quick bounce back to $11.60ish today. It appears that each time we get a correction on silver the drop is less dramatic in both time and depth and then the prices start back up again. I believe this is a sign that the market is becoming adjusted to a new normal in silver value. Big investors are still buying and selling for the trade giving us the some volatility but as the trend continues the trading range is narrowing and new support prices are being built. I think these new support levels are a sign we are getting ready for a new upward leg that will likely bring us back into the May range of $14-$15 silver for the end of year.
On the demand side anecdotal evidence shows that the small physical buyer is not cashing in his hoard, the coin stores I frequent seem to have little in stock. At the Scotia Bank metals and currency counter I’ve been told that sales are not as strong as in May but still constant with buyers greatly outnumbering sellers and people on Ebay are over bidding in a bullish sentiment.
Industrially there have been a number of new products being announced in the last few months using silver. These products should add new and growing demand for our shiny friend. Silver is being woven into hospital curtain fabric and will act as anti microbial agent aiding hospitals in controlling the spread of infections. This is in addition to a number of other consumer products like band aids to fight infection and socks that eliminate odour by using silver. Also new, are plastic food storage containers that are impregnated with small silver particles that will keep food fresher longer. These products all use very small amounts of silver but have great potential in increase demand for silver by their pure volume.
Finally and the most bullish for silver is the announcement by Zinc Matrix Power that they have developed a safer, longer lasting, more environmentally friendly rechargeable battery. These new batteries are made of a zinc silver matrix, have no memory, and are claimed to last twice as long as Lithium Ion batteries. Considering the bad press exploding laptops and recalls have given the Lithium Ion technology, I think companies will be beating down the doors to access these batteries. Once scaled up in size Zinc Matrix should also make a big impact on the feasibility of plug in cars or at least plug in hybrid cars. I’ve yet to find out how much silver is used in these batteries but it is certainly more than none and once again the volume of lithium Ion batteries to replace bodes well for silver demand.
Advice for the day, If you can afford some silver today, don’t wait. Buy when you can, especially after a correction, you never know when big move will happen
On the demand side anecdotal evidence shows that the small physical buyer is not cashing in his hoard, the coin stores I frequent seem to have little in stock. At the Scotia Bank metals and currency counter I’ve been told that sales are not as strong as in May but still constant with buyers greatly outnumbering sellers and people on Ebay are over bidding in a bullish sentiment.
Industrially there have been a number of new products being announced in the last few months using silver. These products should add new and growing demand for our shiny friend. Silver is being woven into hospital curtain fabric and will act as anti microbial agent aiding hospitals in controlling the spread of infections. This is in addition to a number of other consumer products like band aids to fight infection and socks that eliminate odour by using silver. Also new, are plastic food storage containers that are impregnated with small silver particles that will keep food fresher longer. These products all use very small amounts of silver but have great potential in increase demand for silver by their pure volume.
Finally and the most bullish for silver is the announcement by Zinc Matrix Power that they have developed a safer, longer lasting, more environmentally friendly rechargeable battery. These new batteries are made of a zinc silver matrix, have no memory, and are claimed to last twice as long as Lithium Ion batteries. Considering the bad press exploding laptops and recalls have given the Lithium Ion technology, I think companies will be beating down the doors to access these batteries. Once scaled up in size Zinc Matrix should also make a big impact on the feasibility of plug in cars or at least plug in hybrid cars. I’ve yet to find out how much silver is used in these batteries but it is certainly more than none and once again the volume of lithium Ion batteries to replace bodes well for silver demand.
Advice for the day, If you can afford some silver today, don’t wait. Buy when you can, especially after a correction, you never know when big move will happen
Sunday, September 24, 2006
The Mogambo Guru speaks
The Mogambo Guru speaks
Several weeks ago on a whim I thought I would ask the Mogambo Guru a question and thought I would share my correspondence with you.
Mr Daughty
Any chance you could talk about how the coming crash will affect your largest trading partner, Canada. If you guys crash and burn I assume you’re taking us with you. What would be our best defense? Is it still gold, silver, oil?
What would be your CMPOFAD ? (Canadian Mogambo Plan of Fear and Desperation) After all you did come to Vancouver and not all of us PMW (Poor Mogambo Wanabees) could afford to fly in and see you.
Thanks for your informative and entertaining articles, (Your wife and family must be very good sports)
ACMF (a Canadian Mogambo fan)
Thanks for asking, but I never thought about it, but now that I am, I find I suddenly have a headache from continuously scratching my head in puzzlement. But, pressed for an answer, with Canada's massive resources, I assume that you will be fine, as you will have exports out the wazoo, while all we Americans seem to export is weapons, dollars, stupidity and hatred.
And whither gold and oil? Always a good idea! And silver? Always a better idea! File that under "CMPOFAD" with the subhead "Emergency Last Ditch Clutching-At-Straws Plan From A Real Moron, To Be Used In Case Advice From Competent Professionals Proves Somehow Inadequate."
And I am sorry that you did not get to see my speech in Vancouver, but, if it makes you feel any better, the consensus of opinion about my stupid speech was "What an idiot!", and I, of course, agreed with them, not telling them, of course, that I was secretly laughing at them for expecting anything different! Jerks!
And besides, they had enough people angrily demanding their money back and wanting to beat some sense into me without YOU adding to the hubbub!
-Mogambo
Mr Daughty,
Thanks for the answer, I didn't think I'd actually get one.
What complicates the situation is the U.S. takes up 80% of our exports,
with a possible devaluation(collapse) of the U.S. Dollar, you won't be
spending much on things you can't produce. What foreign currency you can get will be used just for Oil, leaving many of our industries floundering.
In 5 years will we have Americans sneaking across our border to work
illegally and send cash home to Alabama?
Who says we won't be spending money? Hahaha! Hell, that is the whole point of the Federal Reserve!
-Mogambo
So while not a long and detailed analysis by either of us, it would seem that the Guru is both bullish on Oil, Gold and especially Silver(as all right thinking people should be) even from the Canadians perspective. I was however a bit surprised at his bullishness for Canada in general. Should the U.S. dollar suffer a devaluation crisis I doubt the U.S. will be able to afford to import as much as it does presently. Yes they will be able to print as much paper as they want, but will our industry accept it in payment. Other considerations would be, what kind currency restrictions the U.S. invokes to buffer the dollar?, will they refuse to sell us fixed assets as happened with the port sales to Dubai? Will we be able to pass off U.S. paper into the world market to purchase our imports?
Assuming the dollar devaluate across all currencies equally we would not loose any competitive edge against other currencies except the dollar. However, since the U.S. is our biggest trading partner it would be an important consideration should they loose 50-80% of their buying power in weeks or months. I believe in such a situation the U.S. would have to import at what ever cost for a time, but eventually that will change. The U.S. will outlaw unions, close the EPA, repudiate most other environmental laws, and remove any other impediments to development. The President might even use Executive order 11000 to send people off to work camps in order to allocate needed labour at controlled prices, also expect the congress to enact stiff tarrifs and break many trade agreements.
The rational for these changes will be to return jobs and production to America. The delay in the issuing of mining permits, long environmental studies, zoning fights and labour cost all encourage the import of raw material and the exportation of jobs abroad to the detriment of the country. Eventually when the dollar no longer maintains enough of its purchasing power, previously exported jobs and primary industries will be repatriated decreasing Canadian exports to the U.S. A monetary crash is also likely to result in a prolonged depression in the U.S. which will also cut demand for our goods. It’s simple, we are far too reliant on this one market absorbing our economic output. The world will quake if the U.S. dollar implodes, and far from being immune, we could be more shaken due to our dependancy on the U.S. market.
Not that I have credentials to match Mr. Daughty but this was my take on it.
Be wary, be informed , invest safely, shed debt, buy silver or gold and be prepared for a world of pain. If I might quote the Guru, "We're freaking doomed!"
Several weeks ago on a whim I thought I would ask the Mogambo Guru a question and thought I would share my correspondence with you.
Mr Daughty
Any chance you could talk about how the coming crash will affect your largest trading partner, Canada. If you guys crash and burn I assume you’re taking us with you. What would be our best defense? Is it still gold, silver, oil?
What would be your CMPOFAD ? (Canadian Mogambo Plan of Fear and Desperation) After all you did come to Vancouver and not all of us PMW (Poor Mogambo Wanabees) could afford to fly in and see you.
Thanks for your informative and entertaining articles, (Your wife and family must be very good sports)
ACMF (a Canadian Mogambo fan)
Thanks for asking, but I never thought about it, but now that I am, I find I suddenly have a headache from continuously scratching my head in puzzlement. But, pressed for an answer, with Canada's massive resources, I assume that you will be fine, as you will have exports out the wazoo, while all we Americans seem to export is weapons, dollars, stupidity and hatred.
And whither gold and oil? Always a good idea! And silver? Always a better idea! File that under "CMPOFAD" with the subhead "Emergency Last Ditch Clutching-At-Straws Plan From A Real Moron, To Be Used In Case Advice From Competent Professionals Proves Somehow Inadequate."
And I am sorry that you did not get to see my speech in Vancouver, but, if it makes you feel any better, the consensus of opinion about my stupid speech was "What an idiot!", and I, of course, agreed with them, not telling them, of course, that I was secretly laughing at them for expecting anything different! Jerks!
And besides, they had enough people angrily demanding their money back and wanting to beat some sense into me without YOU adding to the hubbub!
-Mogambo
Mr Daughty,
Thanks for the answer, I didn't think I'd actually get one.
What complicates the situation is the U.S. takes up 80% of our exports,
with a possible devaluation(collapse) of the U.S. Dollar, you won't be
spending much on things you can't produce. What foreign currency you can get will be used just for Oil, leaving many of our industries floundering.
In 5 years will we have Americans sneaking across our border to work
illegally and send cash home to Alabama?
Who says we won't be spending money? Hahaha! Hell, that is the whole point of the Federal Reserve!
-Mogambo
So while not a long and detailed analysis by either of us, it would seem that the Guru is both bullish on Oil, Gold and especially Silver(as all right thinking people should be) even from the Canadians perspective. I was however a bit surprised at his bullishness for Canada in general. Should the U.S. dollar suffer a devaluation crisis I doubt the U.S. will be able to afford to import as much as it does presently. Yes they will be able to print as much paper as they want, but will our industry accept it in payment. Other considerations would be, what kind currency restrictions the U.S. invokes to buffer the dollar?, will they refuse to sell us fixed assets as happened with the port sales to Dubai? Will we be able to pass off U.S. paper into the world market to purchase our imports?
Assuming the dollar devaluate across all currencies equally we would not loose any competitive edge against other currencies except the dollar. However, since the U.S. is our biggest trading partner it would be an important consideration should they loose 50-80% of their buying power in weeks or months. I believe in such a situation the U.S. would have to import at what ever cost for a time, but eventually that will change. The U.S. will outlaw unions, close the EPA, repudiate most other environmental laws, and remove any other impediments to development. The President might even use Executive order 11000 to send people off to work camps in order to allocate needed labour at controlled prices, also expect the congress to enact stiff tarrifs and break many trade agreements.
The rational for these changes will be to return jobs and production to America. The delay in the issuing of mining permits, long environmental studies, zoning fights and labour cost all encourage the import of raw material and the exportation of jobs abroad to the detriment of the country. Eventually when the dollar no longer maintains enough of its purchasing power, previously exported jobs and primary industries will be repatriated decreasing Canadian exports to the U.S. A monetary crash is also likely to result in a prolonged depression in the U.S. which will also cut demand for our goods. It’s simple, we are far too reliant on this one market absorbing our economic output. The world will quake if the U.S. dollar implodes, and far from being immune, we could be more shaken due to our dependancy on the U.S. market.
Not that I have credentials to match Mr. Daughty but this was my take on it.
Be wary, be informed , invest safely, shed debt, buy silver or gold and be prepared for a world of pain. If I might quote the Guru, "We're freaking doomed!"
Thursday, September 14, 2006
Gold and silver slump irrational
To say that gold and silver have taken a beating the last week or two is an understatement. Further, I can't from any reasonable stand point understand why they have fallen so far so fast.
Both South Africa and Australia have posted lower year to year Gold production, South Africa, the worlds largest producer has been following a downward production trend for 5 years. This trend is world wide as more and more of the old, easy and cheap mines are exhausted and are replaced by smaller, poorer grade and harder to mine deposits. At the same time energy which is a major component in mining costs is rising drastically. The third component to the supply side is the political/labour instability and nationalism in many producing countries. The trend in many developing countries is to change the laws and void contracts in a bid to take a larger share of mining profits for the host countries, miners are also demanding a larger share of the pie and labour disputes are becoming more frequent. Silver while showing some growth in production is matched by new industrial uses and a renewed interest in silver as an investment. All of these facts should be supporting the price if not giving it strength.
The claim is that the Gold fell on U.S. dollar strength, this sounds awfully convenient especially when there is no logical reason the U.S. dollar would gain in value.
1. the U.S. is still creating money at a breakneck pace adding just short of 5 billion dollars to the money supply last week.
2.. Consumer debt levels are still climbing, 2005 disposable income rose 1.2% while personal debt rose 11.7
3. U.S deficit spending is not slowing
4. Housing collapse, estimates range from a 5-40% housing market correction, losses already taken in Florida make the 5% look ridiculously optimistic.
5. Ford and GM are on the brink of insolvency and could destroy 300 billion + of investor value.
6. Misreporting of inflation is being noticed and some estimates such as those at International Forcaster put it over 10%
All these facts are disturbing and mean a great deal of pain for the average citizen and doubly so for investors. It is unclear at this point how this will play out but both hyper inflation and deflation can be argued for. It is also possible that a wave of one could be followed by a wave of the other and as bad as inflation and deflation could be there is even a more devastating possibility on the horizon that of a total monetary crisis.
The devaluation over the last few years of the U.S. dollar is a warning sign of a possible implosion of the dollar. Each day billions of dollars are borrowed to float the current government debt and the continuing deficit spending. Each time the dollar weakens in value it becomes that much harder for new debt to be sold and that much more likely that countries already heavily invested in U.S. debt will attempt to sell their debt in an attempt to cut their loses. If the debt cannot sold externally the only option for the Fed is too create money and internalize the debt. This creation of money will put further downward pressure on the value of the dollar creating a virtual currency death spiral, much like Argentina in the 90s
So why has silver and gold been hit so hard recently?
There are several possibilities that immediately rear their heads some simply technical others pure manipulation.
1. The market was over sold. Many who do not believe that gold and silver have any special value beyond it's rarity as a commodity will say that the commodity run is complete and gold and silver will fall in value like all other metals, oil, houses. If most investors don't credit these metals as monetary metals but rather a simple commodity than this is reasonable. These investors are convinced in the long term survivability of fiat currencies and are most likely very wrong. History shows paper currency is not real money and eventually fails.
2. Simple profit taking by hedge funds and institutional investors. These groups buy for the trade and jump in and out of investments when they have made their targeted margin often at the whim of automated trading programs. These investors are not interested in long term retention of wealth but rather the creation of false paper wealth.
3. Manipulation of futures. Both gold and silver have huge concentrated short positions that have undo control of the market pricing. When you can sell huge quantities of a commodity you don't actually own it's very easy to drive the prices down. Despite this control, fundamentals have allowed the creation of newer and higher support levels for gold and silver over the last several years. I have no doubt that in the long term this trend will continue.
4. Government sales. For those who believe (rightly so) that gold and silver have monetary value and not just it's use in industry and for trinkets, these metals show an important reflection of money's true value. As paper currency devalues people will turn to real assets to protect their wealth. Gold and silver have a long and honoured history as real money, which can't be forged, arbitrarily created. The government knows this and when metals look too strong , it makes paper look to weak. To counter this Central banks flood the market with bullion driving the prices down, simple supply and demand.
All this does nothing to change the fact the the U.S. dollar is in real danger of imploding, but for the time being it does lessen the perception that the U.S. dollar is in danger. With elections approaching in Nov there is no chance the government will allow the dollar to slide, interest to rise or the true value of the government debt to be accounted.
This current "correction" is perhaps the last chance to get a bargain in gold and silver. Should there be a melt down of the dollar, money will flood into the precious metals market as people try to protect what value is left in their currency. This influx of cash will raise the value of gold and especially silver due to it's tighter supply issues. Gold and silver are monetary metals despite nay sayers, these metals have survived with real value through out the ages and in an enviroment like todays when bad paper is becoming more prevalent it is perhaps the only safe haven for your wealth.
Both South Africa and Australia have posted lower year to year Gold production, South Africa, the worlds largest producer has been following a downward production trend for 5 years. This trend is world wide as more and more of the old, easy and cheap mines are exhausted and are replaced by smaller, poorer grade and harder to mine deposits. At the same time energy which is a major component in mining costs is rising drastically. The third component to the supply side is the political/labour instability and nationalism in many producing countries. The trend in many developing countries is to change the laws and void contracts in a bid to take a larger share of mining profits for the host countries, miners are also demanding a larger share of the pie and labour disputes are becoming more frequent. Silver while showing some growth in production is matched by new industrial uses and a renewed interest in silver as an investment. All of these facts should be supporting the price if not giving it strength.
The claim is that the Gold fell on U.S. dollar strength, this sounds awfully convenient especially when there is no logical reason the U.S. dollar would gain in value.
1. the U.S. is still creating money at a breakneck pace adding just short of 5 billion dollars to the money supply last week.
2.. Consumer debt levels are still climbing, 2005 disposable income rose 1.2% while personal debt rose 11.7
3. U.S deficit spending is not slowing
4. Housing collapse, estimates range from a 5-40% housing market correction, losses already taken in Florida make the 5% look ridiculously optimistic.
5. Ford and GM are on the brink of insolvency and could destroy 300 billion + of investor value.
6. Misreporting of inflation is being noticed and some estimates such as those at International Forcaster put it over 10%
All these facts are disturbing and mean a great deal of pain for the average citizen and doubly so for investors. It is unclear at this point how this will play out but both hyper inflation and deflation can be argued for. It is also possible that a wave of one could be followed by a wave of the other and as bad as inflation and deflation could be there is even a more devastating possibility on the horizon that of a total monetary crisis.
The devaluation over the last few years of the U.S. dollar is a warning sign of a possible implosion of the dollar. Each day billions of dollars are borrowed to float the current government debt and the continuing deficit spending. Each time the dollar weakens in value it becomes that much harder for new debt to be sold and that much more likely that countries already heavily invested in U.S. debt will attempt to sell their debt in an attempt to cut their loses. If the debt cannot sold externally the only option for the Fed is too create money and internalize the debt. This creation of money will put further downward pressure on the value of the dollar creating a virtual currency death spiral, much like Argentina in the 90s
So why has silver and gold been hit so hard recently?
There are several possibilities that immediately rear their heads some simply technical others pure manipulation.
1. The market was over sold. Many who do not believe that gold and silver have any special value beyond it's rarity as a commodity will say that the commodity run is complete and gold and silver will fall in value like all other metals, oil, houses. If most investors don't credit these metals as monetary metals but rather a simple commodity than this is reasonable. These investors are convinced in the long term survivability of fiat currencies and are most likely very wrong. History shows paper currency is not real money and eventually fails.
2. Simple profit taking by hedge funds and institutional investors. These groups buy for the trade and jump in and out of investments when they have made their targeted margin often at the whim of automated trading programs. These investors are not interested in long term retention of wealth but rather the creation of false paper wealth.
3. Manipulation of futures. Both gold and silver have huge concentrated short positions that have undo control of the market pricing. When you can sell huge quantities of a commodity you don't actually own it's very easy to drive the prices down. Despite this control, fundamentals have allowed the creation of newer and higher support levels for gold and silver over the last several years. I have no doubt that in the long term this trend will continue.
4. Government sales. For those who believe (rightly so) that gold and silver have monetary value and not just it's use in industry and for trinkets, these metals show an important reflection of money's true value. As paper currency devalues people will turn to real assets to protect their wealth. Gold and silver have a long and honoured history as real money, which can't be forged, arbitrarily created. The government knows this and when metals look too strong , it makes paper look to weak. To counter this Central banks flood the market with bullion driving the prices down, simple supply and demand.
All this does nothing to change the fact the the U.S. dollar is in real danger of imploding, but for the time being it does lessen the perception that the U.S. dollar is in danger. With elections approaching in Nov there is no chance the government will allow the dollar to slide, interest to rise or the true value of the government debt to be accounted.
This current "correction" is perhaps the last chance to get a bargain in gold and silver. Should there be a melt down of the dollar, money will flood into the precious metals market as people try to protect what value is left in their currency. This influx of cash will raise the value of gold and especially silver due to it's tighter supply issues. Gold and silver are monetary metals despite nay sayers, these metals have survived with real value through out the ages and in an enviroment like todays when bad paper is becoming more prevalent it is perhaps the only safe haven for your wealth.
Tuesday, September 05, 2006
Where can I buy silver in Canada?
It's not my intention to promote any particular business (unless of course they want to pay me, preferably in silver) but rather to enlarge the knowledge base of Canadian silver bugs on potential vendors. I will mention the few vendors I have dealt with and my perception of them and their service. I hope you will add to the conversation with insights on different vendors and those previously mentioned by myself or others.
Scotia bank- Scotia bank is a major bank and the largest bullion vendor in Canada with over 950 branches. I'm told it's possible to buy bullion from any of these branches so long as don't want it that day. Bullion is ordered from the main vault in Toronto and shipped via Brinks to local branches at your expense. I've asked at the main branch for a breakdown of these shipping fees but I was told the that only the local branches could inform me. I happen to be near the main Toronto branch so I've done all my business with Scotia in a walk up and carry away manner.
Business at Scotia is done at the bullion and currency exchange counter which can have quite long wait especially in high travel seasons. At the counter they have real time silver quotes and exchange rates which is important as metals trade in U.S. dollars. You book your order, they send the order down to the vault and you wait. I've spend from 10 to 45 minutes in line and waiting for my silver to be brought out. Scotia has silver bars and maple leafs, gold in bars, Maple leaf coins, English Sovereigns, Mexian 50 peso coins, Krugerrands, and American Eagles. Overall I've been satisfied with service but I would like to see some bullion in local branches rather than penalize everyone who does not frequent downtown Toronto, I think they are missing many potential buyers. Also why can't I watch the prices from my computer, book my own order and then just go pick it up? If I can trade stocks or buy RRSPs online why not silver?
Note: I do not know if it's a sign of total demand or just having the wrong sizes in stock but in early May I was told they were almost out of 100 oz bars and in early August they had no 5 oz or 10 oz bars.
Colonial Acres Coins of Waterloo Ontario, is primarily a store for Numismatics but they do advertise silver bars up to 100 oz and coins from the Royal Canadian Mint and various foreign mints. They sell a variety of gold collector coins including Maple Leaf in full ounces and fractional ounces, 1/2 oz, 1/4 oz, 1/10 oz, and 1/20 oz. and 1 oz bars. Colonial also has some U.S. and Canadian junk silver. I have made purchases of Junk silver, maple leafs, and some protective containers from Colonial's web site with no problem. For the last while however, Colonial has shown "sold out" on silver bars and is often behind in correcting the web site prices. If silver suddenly starts to run, check them out you might get a deal on the last stock of Maple Leafs. Is the sold out status another sign of tightening supply? I understand many small dealers out west were empty in the spring 2006.
I follow the pricing on Border Gold , out of Surrey B.C. but have never used them. I'd like some feedback from someone on these folks. Border Gold lists Silver Maples and 10 oz and 100 oz bars of silver. They also sell various collectors coins, gold, platinum and palladium. Unlike Colonial there is little chance of getting a tricky discount purchases here, final quotes and orders are done by phone.
Note: Some provinces like Ontario charge PST on Numismatics (junk silver, Maple leafs, Royal mint stuff etc) while others like B.C. do not, nor are they required to charge you if they ship to a PST province. Keep this in mind for easy savings.
I know of many U.S. operations but the added joy of cross border shipping, duty, customs has not yet convinced me of the need. I would like a pile of rounds and a few Libertads so I still might take the plunge, but not just yet.
Ebay.ca - manic buyers often push prices too high and each vendor is a new adventure. Avoid U.S. customers as shipping and duty can kill you, especially when fools label your silver rounds as coins rather than bullion and you get charged PST. I also panic when things take 4 weeks to arrive. Look at the adds closely, I often see padded shipping and insurance. I've even seen one vendor in western Canada quoting shipping in English Pounds in order to slide over priced shipping past inattentive buyers.
Please add your vendors and insights as comments
Additional vendors added 2012
My go to place for the last 3 years has been First Majestic Silver a mining company that has made a wise choice in direct marketing a portion of their silver to the public. This creates market recognition of their company which must help the stock price and their bottom since they probably have a higher margin on the bullion vs the bulk refined silver. They supply a nice selection of very pretty 1/2 oz, 1 oz, rounds, 5 and 10 oz struck bars, a nice molded 1kg bar and a 50oz rough poured job that fits poorly with their other products. Service has been quick, accurate and pleasant after a slight problem when they first opened up for business. I this is place I recommend and wish they had an associate program of some kind.
Great Panther Silver should receive much of the same praise I give First Majestic but I cannot recommend a company that is consistently around $3 an oz more expensive than their peer. I love the look of their product and I would buy it but only at a comparable price.
Speaking of prices that are way off, the day I checked a posters recommendation for Peracto they were a full $7 dollars an ounce pricier than Border Gold, a company I use for my fair value pricing comparison.
The comments section has had a bit of a flame war about Precious Metals House I've not used them yet but I will with my next purchase just to get a feel for the validity of the comments I've blocked. What I can say is they have a very nice selection of products including Scottsdale stacker bars and Mexican Libertads, both very lovely products that I count among my favorite silver. They are also not readily available in Canada so the small premium on the Libertads far out ways trying to order them from the states or directly from Mexico. They also have a bunch of high premium stuff like Pandas that I refuse to purchase because of their price.
Silver Gold Bull also gets a lot of plugs from my commentators and I found it had a very nice selection but with slightly elevated prices compared to a few other places. I've never seen silver from Fiji before and somehow missed the addition of 1/10 and 1/4 ounce walking Liberties which might well be a good purchase for SHTF money. So far most of my small stuff is 1 and 1/2 oz rounds from First Majestic but a few rolls of 1/10ths might be a good addition. Silver Gold Bull like Precious Metals House looks set up for larger purchases too something few Canadian Vendors could do when I started this blog.
Bullion Exchange in BC offers free shipping over 500 oz of silver had decent prices but a smaller selection than some companies.
MRCS in Edmonton has been suggested for local buyers but they don't appear to do online sales
I received a lot of Bullion Mart span in the comments over the last couple years and checking today I still find them moderately overpriced but no where near the obscene prices at Peracto
While I try to keep to Canadian vendors to avoid the occasional over zealous customs asshole who doesn't know the difference between coins and bullion, or pure vs sterling I do hear good things about APMEX. Amazing selection of silver and the small gold pieces I occasionally buy like sovereigns or 2, 2.5 and 5 peso coins.
I'll probably add some more vendors as I come across them, thx for dropping by.
Scotia bank- Scotia bank is a major bank and the largest bullion vendor in Canada with over 950 branches. I'm told it's possible to buy bullion from any of these branches so long as don't want it that day. Bullion is ordered from the main vault in Toronto and shipped via Brinks to local branches at your expense. I've asked at the main branch for a breakdown of these shipping fees but I was told the that only the local branches could inform me. I happen to be near the main Toronto branch so I've done all my business with Scotia in a walk up and carry away manner.
Business at Scotia is done at the bullion and currency exchange counter which can have quite long wait especially in high travel seasons. At the counter they have real time silver quotes and exchange rates which is important as metals trade in U.S. dollars. You book your order, they send the order down to the vault and you wait. I've spend from 10 to 45 minutes in line and waiting for my silver to be brought out. Scotia has silver bars and maple leafs, gold in bars, Maple leaf coins, English Sovereigns, Mexian 50 peso coins, Krugerrands, and American Eagles. Overall I've been satisfied with service but I would like to see some bullion in local branches rather than penalize everyone who does not frequent downtown Toronto, I think they are missing many potential buyers. Also why can't I watch the prices from my computer, book my own order and then just go pick it up? If I can trade stocks or buy RRSPs online why not silver?
Note: I do not know if it's a sign of total demand or just having the wrong sizes in stock but in early May I was told they were almost out of 100 oz bars and in early August they had no 5 oz or 10 oz bars.
Colonial Acres Coins of Waterloo Ontario, is primarily a store for Numismatics but they do advertise silver bars up to 100 oz and coins from the Royal Canadian Mint and various foreign mints. They sell a variety of gold collector coins including Maple Leaf in full ounces and fractional ounces, 1/2 oz, 1/4 oz, 1/10 oz, and 1/20 oz. and 1 oz bars. Colonial also has some U.S. and Canadian junk silver. I have made purchases of Junk silver, maple leafs, and some protective containers from Colonial's web site with no problem. For the last while however, Colonial has shown "sold out" on silver bars and is often behind in correcting the web site prices. If silver suddenly starts to run, check them out you might get a deal on the last stock of Maple Leafs. Is the sold out status another sign of tightening supply? I understand many small dealers out west were empty in the spring 2006.
I follow the pricing on Border Gold , out of Surrey B.C. but have never used them. I'd like some feedback from someone on these folks. Border Gold lists Silver Maples and 10 oz and 100 oz bars of silver. They also sell various collectors coins, gold, platinum and palladium. Unlike Colonial there is little chance of getting a tricky discount purchases here, final quotes and orders are done by phone.
Note: Some provinces like Ontario charge PST on Numismatics (junk silver, Maple leafs, Royal mint stuff etc) while others like B.C. do not, nor are they required to charge you if they ship to a PST province. Keep this in mind for easy savings.
I know of many U.S. operations but the added joy of cross border shipping, duty, customs has not yet convinced me of the need. I would like a pile of rounds and a few Libertads so I still might take the plunge, but not just yet.
Ebay.ca - manic buyers often push prices too high and each vendor is a new adventure. Avoid U.S. customers as shipping and duty can kill you, especially when fools label your silver rounds as coins rather than bullion and you get charged PST. I also panic when things take 4 weeks to arrive. Look at the adds closely, I often see padded shipping and insurance. I've even seen one vendor in western Canada quoting shipping in English Pounds in order to slide over priced shipping past inattentive buyers.
Please add your vendors and insights as comments
Additional vendors added 2012
My go to place for the last 3 years has been First Majestic Silver a mining company that has made a wise choice in direct marketing a portion of their silver to the public. This creates market recognition of their company which must help the stock price and their bottom since they probably have a higher margin on the bullion vs the bulk refined silver. They supply a nice selection of very pretty 1/2 oz, 1 oz, rounds, 5 and 10 oz struck bars, a nice molded 1kg bar and a 50oz rough poured job that fits poorly with their other products. Service has been quick, accurate and pleasant after a slight problem when they first opened up for business. I this is place I recommend and wish they had an associate program of some kind.
Great Panther Silver should receive much of the same praise I give First Majestic but I cannot recommend a company that is consistently around $3 an oz more expensive than their peer. I love the look of their product and I would buy it but only at a comparable price.
Speaking of prices that are way off, the day I checked a posters recommendation for Peracto they were a full $7 dollars an ounce pricier than Border Gold, a company I use for my fair value pricing comparison.
The comments section has had a bit of a flame war about Precious Metals House I've not used them yet but I will with my next purchase just to get a feel for the validity of the comments I've blocked. What I can say is they have a very nice selection of products including Scottsdale stacker bars and Mexican Libertads, both very lovely products that I count among my favorite silver. They are also not readily available in Canada so the small premium on the Libertads far out ways trying to order them from the states or directly from Mexico. They also have a bunch of high premium stuff like Pandas that I refuse to purchase because of their price.
Silver Gold Bull also gets a lot of plugs from my commentators and I found it had a very nice selection but with slightly elevated prices compared to a few other places. I've never seen silver from Fiji before and somehow missed the addition of 1/10 and 1/4 ounce walking Liberties which might well be a good purchase for SHTF money. So far most of my small stuff is 1 and 1/2 oz rounds from First Majestic but a few rolls of 1/10ths might be a good addition. Silver Gold Bull like Precious Metals House looks set up for larger purchases too something few Canadian Vendors could do when I started this blog.
Bullion Exchange in BC offers free shipping over 500 oz of silver had decent prices but a smaller selection than some companies.
MRCS in Edmonton has been suggested for local buyers but they don't appear to do online sales
I received a lot of Bullion Mart span in the comments over the last couple years and checking today I still find them moderately overpriced but no where near the obscene prices at Peracto
While I try to keep to Canadian vendors to avoid the occasional over zealous customs asshole who doesn't know the difference between coins and bullion, or pure vs sterling I do hear good things about APMEX. Amazing selection of silver and the small gold pieces I occasionally buy like sovereigns or 2, 2.5 and 5 peso coins.
I'll probably add some more vendors as I come across them, thx for dropping by.
Saturday, September 02, 2006
In silver, size does matter
So you've finally come to your senses and have decided to invest in silver, now it's decision time.
Assuming you want physical silver rather than some substandard paper product, you must now decide both the form and size of this silver. In making this decision the first thing you must realize is that size does matter with silver, it modifies the price per ounce, it also complicates storage and it reflects your rational for buying the silver in the first place. The following information and personal reflections should help you make your purchasing decisions.
The Bar charge- when you first go to buy silver you expect to pay roughly the price quoted on sites like Kitco, but this is not the case. These prices are based on large purchases made up of nominal 1000 oz bars. These bars are poured, polished, weighed and stamped involving certain labour and handling costs. If you make 10 bars at 100 oz or 100 bars at 10 oz, the total labour and handling cost increases in each case vs. the cost minting a single 1000 oz bar, his added cost is called the bar charge. If you are dealing with Scotiabank, the biggest bullion outfit in Canada the bar charges are as follows
10 cents per oz on 1000 oz bars
30 cents per oz on 100 oz bars
90 cents per oz on 10, 20, and 50 oz bars
2.10 per oz on smaller units. (I believe)
For example a 1000 oz bar at $10.00 per ounce would be $10,100 + $5.00 transaction fee for a total of $10,105
The same amount of silver would cost $10,305 in 100 oz bars
$10,905 in 10 oz bars, and even more in smaller bars --you get the idea.
So size will impact how much silver you can afford to accumulate.
Beyond the normal bullion bars discussed above are also four other categories of physical silver you can invest in.
Numismatics
Art bars
Rounds
Junk silver
Numismatics are collector coins which vary in price on the grounds of age, rarity, and condition. This is a great way of spending money and time, but has limitations as an investment. Coin fans will tell you this is a great investment, but I don't buy into this. Since these coins are sold at very high premiums over their metal content so you are really investing in rarity, age, and condition not silver. During hard times, I can see people selling valuable coins below collector price out of desperation simply for lack of another collector to buy it. You have to figure, if you're desperate enough to sell it's quite likely many others are hurting too. Desperation means, you might not get more than metal value if you rush to sell. Numismatics is hobby that takes a great deal of time and research -- not only what you're buying, but also how to grade coins, how to spot fakes etc. If you like to look at beautiful coins, fine, go buy some, but if you want to invest in silver for silver's sake, don't buy numismatics. The Canadian silver Maple leaf is both coin and bullion, they are very pretty, have a $5 face value and .999 purity, but sell at the highest premium over spot price of any silver bullion. While I do have a few of these but I certainly would not recommend building your hoard with them.
Art bars are small silver bars that have been visually enhanced with pretty stamped images. These are great for gifts and can act as a hook for those unwilling to admit they are Silver Bugs. If you want someone you love to have some silver but they don't understand or believe your rational, art bars are great way of sneaking them some silver. Wait for some occassion, buy them some art bars and they will be forced to hold onto them out of sentiment. After some time admiring them and asking you questions you just might convince them you’re not mad. I see nothing wrong with buying art bars as long as they are marked .999 silver, you can identify the mint, and they are not sold at an unrealistic premium over other silver.
Much like art bars, silver rounds are usually struck by smaller independent mints like Northwest Territorial Mint who make their own rounds and bars and also those for Pan American Silver. As long as rounds are from a reputable mint and are marked .999 these are usually a good buy. Rounds generally have a lower premium than small bars from the big established bullion companies like Johnson Matthey, Engelhard or the Royal Canadian Mint. While rounds are coin like in size and shape they are measured by the weight and have no face value. I rarely see rounds offered often in Canada so a large purchase would likely involve an order from the U.S. and dealing with customs and duty.
Junk silver are old coins that have more metal value than collector value. At one time U.S., Canadian, and other world coins had a sizeable silver content. Those that did not get melted down have been saved by people in small coin collections or huge bags of up to 1000 dollars face value. Depending on country and year of mint these coins range from 40%-90% silver content. A 1000 dollar face value bag of 90% U.S. coin has approximately 712 ounces of silver content but it's not pure or quickly recoverable silver. Junk silver can be a good investment with a low premium over spot price but it is not accepted by all dealers and banks will only give you face value. Junk silver is probably best suited for survival coin in case of finacial crisis.
Junk silver is often sold in $1000 face dollar bags and is currently going for about $8.10 per face dollar. This means a bag is running about $8100.00 plus shipping and handling. Smaller bags are available but they will cost a bit more per face dollar or you could split a big bag with someone you trust. One problem with Junk Silver in Canada is that it's not pure enough to be rated bullion which is tax free, this rule means that gst, and in some provinces pst is charged. I figure buying non collectible coins is simple making change and should be tax free, however I don't make the rules. If you often travel to the states, buy a bag, store it in a safety deposit box and bring some back each trip. You can bring some back in your pockets, some in the ashtray, and some in a souvenir piggy bank the kids are told to fight over at customs. If it gets noticed, play dumb and pay the tax but I suspect 9 out of 20 times you'll get it through. If you are not preparing for fiscal crisis there is no real sense in collecting junk silver, while cheaper per ounce it's much harder to resell.
The various sizes of bars can also complicate the storage of your bullion. Some people may have a small safety deposit box at best, but many don't have one at all. These boxes can range from 1.5"x5"x24" up to 10"x10.75"x24". The smallest box cost $35 a year but the largest was $230. If you do happen to rent a safety deposit box you'll find that many of the older rough bars will only just fit height wise of the smallest boxes available and depending on the shape of your bars you might get only 2-4 100 oz bars in the box. If you did buy a 1000 oz bar I'm not sure a how large a box you would need to hold it or how available these boxes are. The smaller bars or rounds will stack nicely in any sized box, they are also nicely sized for stashing small amounts in hidey holes if that is your decision. Remember, Canadian safety deposit boxes are a tax deduction, don't forget to declare them.
You could also buy a safe or hide your silver, I've seen many discussion on where and how to hide your silver if you don't want to pay the cost of storage, or you simply don't trust the government and banks. I think hiding your hoard is worth a post of it's own at a later date. I've seen suggestions that run from crazy to brilliant, and some are even crazy brilliant.
The next consideration is motive. Why do you wish to own silver? How long do you expect to keep it? Under what conditions would you be willing to or expect to sell your silver?
If you are buying your silver for short term gain, and you expect to sell your entire holding at a certain target price then big is beautiful: buy as much as you can afford in the largest bars. This also simplifies accounting, handling and lowers you average buy price. However, take into account your ability to move 1000 oz of silver -- if you have a hard time carrying acase of beer or a bag of groceries you are in for trouble hiking these monster bars around.
The moster bars could be scaled back to mid sized bars which would allow you to sell a portion of your bullion at one target price and ride the rest knowing you've recouped your some or all of your original capital. 100 oz bars are a happy medium of reasonable premiums, manageable weight, and ease of accounting. For private sales, 100 oz bars are probably the largest you would want, when silver hits $50-$100 per oz the likelihood of selling a 1000 oz bar to anybody but the bank is slim. Note: If you sell to the bank they record the transaction and you had better account for and declare capital gains, lest the bank do it for you and you get nailed with evasion.
If you are buying silver out of fear of some fiscal crisis such as hyper-inflation, massive devaluation or collapse of fiat monies, your buying pattern will be totally different. In this scenario you would want a good part of your investment to be in smaller sized bars, rounds and even junk silver, (sometimes called survival coins). These small, portable and proportioned units of real silver, could once again become accepted currency and would retain their buying power vs. inflation or fiat collapse unlike paper currency. In this situation hoarding would take place and leaving very little bullion on the market, for this reason small is good! If you make a transaction in silver you may find you're unable to get anything you value as money back for change. This is why all gold bugs should have at least some silver in their holdings. Gold while sharing the same strengths of a real asset with silver, will appreciate so much you would be unable to use it in most day to day transactions. If you find it hard to break a 50 dollar bill at a Tim Horton's today you certainly can't expect to pass an ounce of gold during a crisis. The exception for this would be very large and privately held transactions unless for some reason you want to be followed home by thugs after flashing your gold in public. If fiscal crisis is your rational for owning bullion and especially silver, your first purchase should be 1 oz bars/rounds and junk silver which you would then divide and store in small quantities in a variety of locations for security.
Gold is ok in a fiscal crisis if you wish to hoard large amounts of personal wealth in less space than silver or if you have need to smuggle your wealth somewhere else, otherwise it all comes down to how much you are planning to invest. Under 25 thousand I think you should stay in silver only, It's likely a better investment and it will be easier to spend. If you must have a mix of gold, I would suggest that coins in pure gold like the Canadian Maples leaf are a bad choice because they would easily damage if used in day to day commerce. Gold coins with scratches would be sold at a discount based on damage so it's best to avoid softer coins. I would suggest gold Sovereigns, they are alloyed to 22k giving them more durablity to survive in circulation. Each Sovereign is .2354 troy oz making it easier to pass than a full ounce of gold. Other alloyed coins like the Krugerrand or American Eagle are common and can sometimes be found in other sizes like 1/2 oz, 1/10 oz. which would also be easier to spend. More obscure, harder to recognize coins should be avoided. If you do have 1 oz. bars, or any size of Maple leaf please leave them in whatever protective packaging they came with to maitain their value.
I hope this gives you something to think about while you're digging holes in the foundation to hide your stash.
Happy Hoarding
Lord of Wealth.
Assuming you want physical silver rather than some substandard paper product, you must now decide both the form and size of this silver. In making this decision the first thing you must realize is that size does matter with silver, it modifies the price per ounce, it also complicates storage and it reflects your rational for buying the silver in the first place. The following information and personal reflections should help you make your purchasing decisions.
The Bar charge- when you first go to buy silver you expect to pay roughly the price quoted on sites like Kitco, but this is not the case. These prices are based on large purchases made up of nominal 1000 oz bars. These bars are poured, polished, weighed and stamped involving certain labour and handling costs. If you make 10 bars at 100 oz or 100 bars at 10 oz, the total labour and handling cost increases in each case vs. the cost minting a single 1000 oz bar, his added cost is called the bar charge. If you are dealing with Scotiabank, the biggest bullion outfit in Canada the bar charges are as follows
10 cents per oz on 1000 oz bars
30 cents per oz on 100 oz bars
90 cents per oz on 10, 20, and 50 oz bars
2.10 per oz on smaller units. (I believe)
For example a 1000 oz bar at $10.00 per ounce would be $10,100 + $5.00 transaction fee for a total of $10,105
The same amount of silver would cost $10,305 in 100 oz bars
$10,905 in 10 oz bars, and even more in smaller bars --you get the idea.
So size will impact how much silver you can afford to accumulate.
Beyond the normal bullion bars discussed above are also four other categories of physical silver you can invest in.
Numismatics
Art bars
Rounds
Junk silver
Numismatics are collector coins which vary in price on the grounds of age, rarity, and condition. This is a great way of spending money and time, but has limitations as an investment. Coin fans will tell you this is a great investment, but I don't buy into this. Since these coins are sold at very high premiums over their metal content so you are really investing in rarity, age, and condition not silver. During hard times, I can see people selling valuable coins below collector price out of desperation simply for lack of another collector to buy it. You have to figure, if you're desperate enough to sell it's quite likely many others are hurting too. Desperation means, you might not get more than metal value if you rush to sell. Numismatics is hobby that takes a great deal of time and research -- not only what you're buying, but also how to grade coins, how to spot fakes etc. If you like to look at beautiful coins, fine, go buy some, but if you want to invest in silver for silver's sake, don't buy numismatics. The Canadian silver Maple leaf is both coin and bullion, they are very pretty, have a $5 face value and .999 purity, but sell at the highest premium over spot price of any silver bullion. While I do have a few of these but I certainly would not recommend building your hoard with them.
Art bars are small silver bars that have been visually enhanced with pretty stamped images. These are great for gifts and can act as a hook for those unwilling to admit they are Silver Bugs. If you want someone you love to have some silver but they don't understand or believe your rational, art bars are great way of sneaking them some silver. Wait for some occassion, buy them some art bars and they will be forced to hold onto them out of sentiment. After some time admiring them and asking you questions you just might convince them you’re not mad. I see nothing wrong with buying art bars as long as they are marked .999 silver, you can identify the mint, and they are not sold at an unrealistic premium over other silver.
Much like art bars, silver rounds are usually struck by smaller independent mints like Northwest Territorial Mint who make their own rounds and bars and also those for Pan American Silver. As long as rounds are from a reputable mint and are marked .999 these are usually a good buy. Rounds generally have a lower premium than small bars from the big established bullion companies like Johnson Matthey, Engelhard or the Royal Canadian Mint. While rounds are coin like in size and shape they are measured by the weight and have no face value. I rarely see rounds offered often in Canada so a large purchase would likely involve an order from the U.S. and dealing with customs and duty.
Junk silver are old coins that have more metal value than collector value. At one time U.S., Canadian, and other world coins had a sizeable silver content. Those that did not get melted down have been saved by people in small coin collections or huge bags of up to 1000 dollars face value. Depending on country and year of mint these coins range from 40%-90% silver content. A 1000 dollar face value bag of 90% U.S. coin has approximately 712 ounces of silver content but it's not pure or quickly recoverable silver. Junk silver can be a good investment with a low premium over spot price but it is not accepted by all dealers and banks will only give you face value. Junk silver is probably best suited for survival coin in case of finacial crisis.
Junk silver is often sold in $1000 face dollar bags and is currently going for about $8.10 per face dollar. This means a bag is running about $8100.00 plus shipping and handling. Smaller bags are available but they will cost a bit more per face dollar or you could split a big bag with someone you trust. One problem with Junk Silver in Canada is that it's not pure enough to be rated bullion which is tax free, this rule means that gst, and in some provinces pst is charged. I figure buying non collectible coins is simple making change and should be tax free, however I don't make the rules. If you often travel to the states, buy a bag, store it in a safety deposit box and bring some back each trip. You can bring some back in your pockets, some in the ashtray, and some in a souvenir piggy bank the kids are told to fight over at customs. If it gets noticed, play dumb and pay the tax but I suspect 9 out of 20 times you'll get it through. If you are not preparing for fiscal crisis there is no real sense in collecting junk silver, while cheaper per ounce it's much harder to resell.
The various sizes of bars can also complicate the storage of your bullion. Some people may have a small safety deposit box at best, but many don't have one at all. These boxes can range from 1.5"x5"x24" up to 10"x10.75"x24". The smallest box cost $35 a year but the largest was $230. If you do happen to rent a safety deposit box you'll find that many of the older rough bars will only just fit height wise of the smallest boxes available and depending on the shape of your bars you might get only 2-4 100 oz bars in the box. If you did buy a 1000 oz bar I'm not sure a how large a box you would need to hold it or how available these boxes are. The smaller bars or rounds will stack nicely in any sized box, they are also nicely sized for stashing small amounts in hidey holes if that is your decision. Remember, Canadian safety deposit boxes are a tax deduction, don't forget to declare them.
You could also buy a safe or hide your silver, I've seen many discussion on where and how to hide your silver if you don't want to pay the cost of storage, or you simply don't trust the government and banks. I think hiding your hoard is worth a post of it's own at a later date. I've seen suggestions that run from crazy to brilliant, and some are even crazy brilliant.
The next consideration is motive. Why do you wish to own silver? How long do you expect to keep it? Under what conditions would you be willing to or expect to sell your silver?
If you are buying your silver for short term gain, and you expect to sell your entire holding at a certain target price then big is beautiful: buy as much as you can afford in the largest bars. This also simplifies accounting, handling and lowers you average buy price. However, take into account your ability to move 1000 oz of silver -- if you have a hard time carrying acase of beer or a bag of groceries you are in for trouble hiking these monster bars around.
The moster bars could be scaled back to mid sized bars which would allow you to sell a portion of your bullion at one target price and ride the rest knowing you've recouped your some or all of your original capital. 100 oz bars are a happy medium of reasonable premiums, manageable weight, and ease of accounting. For private sales, 100 oz bars are probably the largest you would want, when silver hits $50-$100 per oz the likelihood of selling a 1000 oz bar to anybody but the bank is slim. Note: If you sell to the bank they record the transaction and you had better account for and declare capital gains, lest the bank do it for you and you get nailed with evasion.
If you are buying silver out of fear of some fiscal crisis such as hyper-inflation, massive devaluation or collapse of fiat monies, your buying pattern will be totally different. In this scenario you would want a good part of your investment to be in smaller sized bars, rounds and even junk silver, (sometimes called survival coins). These small, portable and proportioned units of real silver, could once again become accepted currency and would retain their buying power vs. inflation or fiat collapse unlike paper currency. In this situation hoarding would take place and leaving very little bullion on the market, for this reason small is good! If you make a transaction in silver you may find you're unable to get anything you value as money back for change. This is why all gold bugs should have at least some silver in their holdings. Gold while sharing the same strengths of a real asset with silver, will appreciate so much you would be unable to use it in most day to day transactions. If you find it hard to break a 50 dollar bill at a Tim Horton's today you certainly can't expect to pass an ounce of gold during a crisis. The exception for this would be very large and privately held transactions unless for some reason you want to be followed home by thugs after flashing your gold in public. If fiscal crisis is your rational for owning bullion and especially silver, your first purchase should be 1 oz bars/rounds and junk silver which you would then divide and store in small quantities in a variety of locations for security.
Gold is ok in a fiscal crisis if you wish to hoard large amounts of personal wealth in less space than silver or if you have need to smuggle your wealth somewhere else, otherwise it all comes down to how much you are planning to invest. Under 25 thousand I think you should stay in silver only, It's likely a better investment and it will be easier to spend. If you must have a mix of gold, I would suggest that coins in pure gold like the Canadian Maples leaf are a bad choice because they would easily damage if used in day to day commerce. Gold coins with scratches would be sold at a discount based on damage so it's best to avoid softer coins. I would suggest gold Sovereigns, they are alloyed to 22k giving them more durablity to survive in circulation. Each Sovereign is .2354 troy oz making it easier to pass than a full ounce of gold. Other alloyed coins like the Krugerrand or American Eagle are common and can sometimes be found in other sizes like 1/2 oz, 1/10 oz. which would also be easier to spend. More obscure, harder to recognize coins should be avoided. If you do have 1 oz. bars, or any size of Maple leaf please leave them in whatever protective packaging they came with to maitain their value.
I hope this gives you something to think about while you're digging holes in the foundation to hide your stash.
Happy Hoarding
Lord of Wealth.
Tuesday, August 29, 2006
I'M A FOOL FOR SILVER
Greetings silver bugs, gold bugs, bullion bugs and those who are just buggy, as many of my friends and family have tagged me.
Let me start by saying I'm a FOOL for my stance on silver!
2 years ago I looked at and discounted silver as an investment, then after a hiatus and then more research I changed my mind on the issue. So either way I'm a Fool, If Silver hits 50 dollars I'm a fool for not jumping in at $7, if it languishes I'm a fool for jumping in at $11. Sometimes you can't win.
I'm apparently also a fool for even bringing up the subject of silver as an investment, or a hedge against fiscal disaster to my family and friends. My lectures achieved nothing more than getting me labeled as depressed, paranoid, crazy and a survivalist. My attempts were motivated with real concern for the financial well being of others and the hope they would join me in my modest way of absorbing surplus supply and bringing on the inevitable shortage just a little bit sooner.
Yes, I do realize that my Pitiful purchases have next to no impact on the silver market. Despite this, I fell that I'm doing my duty to crush the "Naked shorts" so often mentioned by Ted Butler, of Investment rarities.
See, more proof I'm a fool, I believe I can make a difference
I've also been told I'm a fool for believing in market manipulation. It seems that it's perfectly acceptable to trade futures on commodities that don't exist. Why did nobody tell me of this earlier?, I would just love to sell a couple of houses that don't exist, I could then use the proceeds to buy even more silver and maybe a new shovel to bury it with. Even when I bring up recent market interference resulting from the default of nickel deliveries in London it got me no more credibility then I would get for screaming "I saw a Sasquatch" in my workplace . Don't laugh, I have seen it.
I won't even detail the reaction to my metals vs fiat tirades , people usually find an excuse to leave the room when this topic comes up and since this is my first post I don't want to chase you off with such foolishness ...yet!
You might have notice my welcome to gold bugs. My rational for this is simple, while they don't see eye to eye with me on my preference of silver over gold they can understand my reasons for wanting metals, and have likely suffered some of the indignities of being a "Bug". This is not about silver vs gold but all forms of honest money vs the status quo. Also, I hope a rich gold bug will loan me enough cash for a 1000 oz bar of silver. I could use it to press flowers, weigh down the cookie jar lid to keep my wife and kids away from my treats, or build an elaborate deadfall trap for the racoons in my grabage cans. If I can't make interest from silver I should at least be able to have some fun with it.
The life of the Silver Bug is one filled with insults, odd looks and a fierce desire to hide things in the walls of ones home. I hope you will join me in my quest for credibility and the ability to one day say "I told you so!"
Now go out and buy a brick of silver, hell, buy me one too!
Let me start by saying I'm a FOOL for my stance on silver!
2 years ago I looked at and discounted silver as an investment, then after a hiatus and then more research I changed my mind on the issue. So either way I'm a Fool, If Silver hits 50 dollars I'm a fool for not jumping in at $7, if it languishes I'm a fool for jumping in at $11. Sometimes you can't win.
I'm apparently also a fool for even bringing up the subject of silver as an investment, or a hedge against fiscal disaster to my family and friends. My lectures achieved nothing more than getting me labeled as depressed, paranoid, crazy and a survivalist. My attempts were motivated with real concern for the financial well being of others and the hope they would join me in my modest way of absorbing surplus supply and bringing on the inevitable shortage just a little bit sooner.
Yes, I do realize that my Pitiful purchases have next to no impact on the silver market. Despite this, I fell that I'm doing my duty to crush the "Naked shorts" so often mentioned by Ted Butler, of Investment rarities.
See, more proof I'm a fool, I believe I can make a difference
I've also been told I'm a fool for believing in market manipulation. It seems that it's perfectly acceptable to trade futures on commodities that don't exist. Why did nobody tell me of this earlier?, I would just love to sell a couple of houses that don't exist, I could then use the proceeds to buy even more silver and maybe a new shovel to bury it with. Even when I bring up recent market interference resulting from the default of nickel deliveries in London it got me no more credibility then I would get for screaming "I saw a Sasquatch" in my workplace . Don't laugh, I have seen it.
I won't even detail the reaction to my metals vs fiat tirades , people usually find an excuse to leave the room when this topic comes up and since this is my first post I don't want to chase you off with such foolishness ...yet!
You might have notice my welcome to gold bugs. My rational for this is simple, while they don't see eye to eye with me on my preference of silver over gold they can understand my reasons for wanting metals, and have likely suffered some of the indignities of being a "Bug". This is not about silver vs gold but all forms of honest money vs the status quo. Also, I hope a rich gold bug will loan me enough cash for a 1000 oz bar of silver. I could use it to press flowers, weigh down the cookie jar lid to keep my wife and kids away from my treats, or build an elaborate deadfall trap for the racoons in my grabage cans. If I can't make interest from silver I should at least be able to have some fun with it.
The life of the Silver Bug is one filled with insults, odd looks and a fierce desire to hide things in the walls of ones home. I hope you will join me in my quest for credibility and the ability to one day say "I told you so!"
Now go out and buy a brick of silver, hell, buy me one too!
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