Friday, July 25, 2008

Yes we have no silver today- revisited

Months ago just after the price collapsed in silver and we all ran out to stock up , we came to the shocking revelation that despite all the bluster about growing inventories at the Comex there was indeed a retail silver shortage. Since that time we have seen Jason Hommel and his pissing contest with the Perth mint over delivery delays (on straight sales, and redemption of certificates into physical bullion) and if they mean they don’t have the all silver they Claim. Being a mere peasant in the big scheme of things I will take no stance on the issue as I don’t need to get sued. I will however state that we do know is that some companies have made it a practice to sell metal certificates and not back them, not only that they have the cojones to charge their clients storage on these invisible bullion bars. We also know that Morgan Stanely stated that charging storage on nothing is a widespread industry practice.

Next up was Mr Butler's belief that there is a large and growing shortfall in silver backing for the silver ETF based on the amount of short selling in SLV which dilutes the silver backing of the ETF because short sellers don’t contribute silver to the fund. The entire short position can be considered a silver shortage in the ETF and therefore a default in his estimation of 25-50 million ounces. The ETF as envisioned is a great tool for silver investment for those unable or unwilling to buy, carry and store silver but what started as a way to encourage demand is now diverting demand from real silver which would tighten the supply and make us profits. If the markets are allowed short SLV is has become a tool of silver manipulation and a failed experiment.

In the same shortage trend the U.S. mint is rationing Silver Eagles to dealers because after already beating last years sales volume they cannot access a large enough supply of silver blanks to maintain production at today’s level of demand. I’m rather surprised that the mint would not manufacture it’s own blanks and supply private mints rather than depending on outside supply?
What do I know!
At this point collectors, vendors and the Silver Institute have all called on the mint to meet its mandated obligation to fill the markets demand for the coin.

Locally we’ve had a dry spell for Maple Leaf silver coins which at least at Scotia Bank in Toronto has been cleared up with a recent deliver of 6000 ounces. The girl at the counter seemed to think this was an excessive amount but when this is the only silver they have in stock I don’t doubt the cupboard will be bare again within a week. The clerk told me they did have a 100 oz, 3x10 oz and a single old 20 oz on hand first thing in the morning but they were already gone yesterday by 2:00.

On a side note they must also be moving a large amount of small gold in the last couple of years encouraging Scotia to commission brand new Scotia bars in sizes from 1-20 oz as well as ¼, ½ , and 1oz rounds. You usually sell your old stock first so I have to assume that all the old Johnson and Matthey, and the newer Royal Canadian Mint bars they use to flog are gone. I need to get my act in gear and round up a little extra cash, I’ve always wanted a few Sovereigns and it looks like I’d best buy them soon before they too are all gone. Of course I’ll get those mail order form B.C. to avoid Ontario PST.

If you do buy gold for possible future transactions don’t buy 1 big bar, stick to 1 oz, fractionals if you can stomach the premium, Sovereigns or those cute little Mexican 2, 2.5 and 5 peso coins which are probably the cheapest way to get small denomination gold. Eagles, Maples, etc in fractional sizes cost to damn much.

What this comes down to is people are buying heavily into silver when they can find it. Despite all the claims and promises it’s quite obvious that there is no where near enough physical silver to cover all the paper obligations and the time to accumlate is soon to end. If each Silver investor can find just one more person and convince them that silver is the commodity opportunity of the century, we will have the buying power to bring this real but hidden silver shortage to the public’s notice and when that happens all hell will break loose. There may be a problem however, I think small silver is actually being pulled in and converted back to delivery bars. This allows the Comex to show healthy deposits and at the same time it pulls the appropriate sized bars for small investors off the market thwarting our demand and consumption.

It seems all we can do is scramble around and seize what supply we can, place orders, wait and see if they will get filled, but in the end if you cannot find enough silver DO BUY SOMETHING!, add a little gold to the mix. While many (including me) don’t believe gold has the same potential as silver it certainly is better than the fiat toilet paper world Governments are passing off as money.

Wednesday, July 23, 2008

Trying to catch up!

Well it’s been a while but I hope I’ll up to posting a little more often considering the rash of big news that’s broken recently. I’ve had some issues with holidays both mine and people who’s work I have to cover, summer apathy and a sore paw in the form of carpal tunnel that is making several fingers twitch uncontrollably and makes my wrist ache.

I got a couple of letters and facebook notes about my Independence day post but was rather disappointed that I did not attract greater attention or at least a little flame war to liven things up a bit, oh well, next year I’ll be blunter;)

First off I’ll take care of the blog accounting and gloating, not only did my prediction from last Nov of $140 a barrel come true but now that both investment bank Bear Stearns and commercial bank IndyMac have taken the big dirt nap , I can with no reservations say I’ve met that prediction as well. Of course I don’t expect that to be the end of the financial bloodshed for this calendar year.

So what’s next?

As I see it we are assured more bank failures this year and probably a greater number next year. The FDIC which has over 90 banks on its watch list says that 8 banks including IndyMac have failed this year. While both of these numbers are low compared to the tally after the S&L Crisis, the FDIC will be forced to use nearly 20% of it’s $53 Billion insurance fund just on the IndyMac failure. How long before they are maxed out and the Government is left with the job of bailing out the FDIC itself? It's interesting to note that some insiders are saying IndyMac was either not on the watch list or only added just late month, too late to help, so how indepth or accurate is this "watch list" ? I doubt FDIC has had enough staff or time to check a fraction of the banks so expect the endangered list to grow significantly, and more banks not listed to fail.

While I admit that most troubled banks will be considerably smaller than IndyMac, after seeing Wachovia ( $ 8.9 Billion) and WaMu ( $ 3.3Billion) post such huge losses this weak I have proof that the crisis is not over and that it is not just the little guys who are in danger of collapse. A mess of small banks and one or two more IndyMac size and the FDIC will be out of funds, and guess who will bail them out?


It looks like the legislation to authorize the Treasury Department's right to bail out of Fannie Mae and Freddie Mac is a done deal. While they both claim they don't need a cash infusion I suspect that once the discount window is opened to them they will both be there in line, money bags open. The new legislation also raises the max mortgage size these crippled twins can purchase to 625k or median price +15%. This will allow the banks to pass off more of their bad loans to Fannie and Freddie while putting the feds on the hook for bad mortgages rather than the stupid ass banks that sold them. This could be nothing but will more likely lead to the U.S. picking up most of the bill for the housing collapse while the banks get off easy. However tjhis goes we can be guaranteed that it will cost the public more than the nothing the two lenders claim they need.

SEC to the rescue!!!

I think the biggest joke is the new proposals to stop short selling against the financials! Why should we protect the financials who have been so involved in the destruction of other equities through their manipulations such as the naked short. If the SEC is to curtail short selling it has to be done industry wide or not at all. No one sector should have a mechanism to make money and destroy others unless they too face the same risk. This is just a poorly hidden way to remove the value from your commodity stocks and transfer that wealth to the frauds, cheats and idiots that run rampant in the financial sector. Screw them all and let the banks fail, the sooner we get this collapse over with the sooner we can get on with rebuilding a new monetary system hopefully built on real money.

On the Canadian front,

BoC held interest rates rather than cutting – Good

The U.S. collapse is going to cost us jobs regardless, there is no point devaluing to keep customers who might never pay you. A higher CND will allow us to miss some of the coming wave of inflation and maintain the value of our savings better, I think it is worth losing jobs that peak oil would kill anyway , to keep our currency strong !

0% down mortgages and 40 terms are no longer allowed – Good

Too damn late but at least the next wave of idiots won’t have the option of 0% down and a 40 year term. We have been lucky that this kind of mortgage has not penetrated that deep inot our market and now thankfully people can only be 5% down 35 years stupid .

I still think 35 years is too long ; people graduate, get a job and buy a house usually by late 20s putting them just years from retirement when a 35 year mortgage is paid, that and the years of extra interest will mean less retirement savings.

Job losses in manufacturing, especially automotive are rising weakly- bad/good

bad for the economy but good for the environment and long term oil supplies as people are actually driving less -3% so far, and sales of the biggest, thirstiest vehicles are falling like buffalo chased of a cliff. For those people who actually need a large truck for business there are some amazing deals as the resale on these energy hogs plummets.


The metals are heading down again on bogus strong dollar talk from the U.S. and I’d be buying if I had not just purchased a car recently, Buy if you can.

I’m extremely annoyed and there is absolutely no excuse for what is happening to some of the junior miners, its nothing but deliberate manipulation, sabotage or institutional desperation to raise cash , take Silver Corp (SVM-T) for example; healthy, expanding, profitable, low cost and it has lost over 55% of its value of late without a single bit of bad news to justify it. This is all taken place during an aggressive stock buyback which apparently is having no effect on the price. Today for example every few minutes anonymous sells 500 shares maintaining or lowering the price, sure silver is slipping but zinc is steady and lead is up recently so how the hell can this profitable unhedged company that produces silver at a negative price, lose 8% today.

Golden Tag (GOG-t) is down 10% today! , while still a speculation play they’ve earned the right to 50% of the ECU San Diego mine which is a proven 42 million ounces of silver and growing, Market cap today $11 million. See Bob Moriarty's write up on GOG
This share price does do justice to their 21 million ounce stake in the San Diego mine and especially not on the recent news from the Aquilon project where they hit 376 ounces/ton of gold on a very narrow surface vein. While this might never be a full sized mine if there is any decent length or dept to this vein a small artisan style mine would make a nice profit for them, hell they could buy back 1/3 of their stock with a 10 ton “bulk sample” WTF????
And why are they not doing this???

The stories go on and on and it makes no sense the prices for many of these juniors are lower than they were with $600 gold/ $12 silver (mind you some are crap and deserve a low share price but not many I follow don't deserve this fate). Is someone trying to destroy their viability and their ability to raise capital so the big boys can snap them up for pennies on the dollar? I don’t know what’s going on but this silliness makes you waver between selling the house and taking a 5 % stake in a company like GOG or selling all equities and running from the market. If I won the lottery tonight I’d make a bid for controlling stake tomorrow because deep down I know that fiat money is dying and real hard assests are the only choice, but man it's hard when you see the corruption and manipulaiton and you know your being screwed.

On the topic of manipulation Jim Sinclair apparently has about 60 juniors looking at the Chamber of Mines idea and hopefully we will get some action on outing the short sellers.

Well my paw is sore again so this is all the rant you’ll get from me today, I know I missed stuff but what can you do, I'll be back when I can