|
|
I'm called upon by my regular readers
to refute, rebut, and rebuke this bad article on silver from the Wall Street
Journal.
Price of Silver Soaring
Investor-Fueled 74% Gains Dwarf Gold; Race to
Open Mines
By
CAROLYN CUI And ROBERT GUY MATTHEWS
DECEMBER 26, 2010
Regarding (RE) the WSJ comment: "unexpected surge in investor
demand."
Really? Unexpected, you
say? But precious metals bulls have been predicting explosions in
the price for ten years based on irrefutable fundamentals and unsustainable
market manipulation!
How can investor demand be unexpected when the price of precious
metals has been going up continuously for ten years now since the year
2000? Don't investors like to buy things that are rising in
price? Don't investors also try to predict things that will rise in
price, and buy them before they really rise? Does the WSJ know anything
at all about investing?
Unexpected? Really? When the
numbers of silver Eagle 1 oz. coins produced by the US Mint has been
increasing steadily for the past 3-4 years, up from 10 million oz. to nearly
40 million oz. this year? How can a single year's investor
demand be unexpected, when its increase is already a steady
trend?
Regarding the WSJ comment:
"Prices are rising despite oversupply."
What oversupply? What do you even
mean by oversupply?
Here is the dictionary definition of
oversupply:
http://www.thefreedictionary.com/oversupply
"A supply in excess of what is appropriate or required."
Ah, the WSJ is no longer reporting
fact, but throwing out opinion now.
There is no oversupply, and can never
be any oversupply of things such as gold and silver, since they have the
least diminishing marginal utility of all things on earth, since they are
money. Nobody ever complained that they had too much money.
But what does the WSJ mean by oversupply?
The supply & demand numbers produced by such surveys as http://www.silverinstitute.org/ who the WSJ quotes as a
source, have "sum up" categories called "Implied Net
Disinvestment" and "Implied Net Investment".
http://www.silverinstitute.org/supply_demand.php
When investors are buying, this is
often called a surplus, or as the WSJ says, an "oversupply", and
when investors are selling, that is called a deficit.
So, apparently, the WSJ is saying that
when investors are buying silver that's "oversupply". And thus,
when they describe that action as an "oversupply", they are
really saying that silver purchases by investors are
"inappropriate". Thus, they reveal their bias, with one word.
RE: "Many analysts expected
those factors would keep a lid on prices in 2010."
But most silver analysts are employed
by LBMA bullion banks who have a vested interest in manipulating silver
prices downward, since silver is the Achilles heel, or arch enemy, of the
banking system. Thus, "mainstream" silver analysts have never
gotten a single year's prediction correct in the last ten years of the bull
market in silver and gold. They always "predict" prices for
next year that are within about 5% of current prices, and never any
higher. Meanwhile, silver prices have risen from $4.15/oz. in 2003 to
$30.60 now in 2010, which is a cumulative return of 637%, which, over 7
years, is an average annual gain of 33%. They never come close to
predicting such gains.
Check my math, here:
http://www.smartmoney.com/compoundcalc/
Have any of the mainstream analysts
predicted a silver price gain of 33%, for the following year, or even close,
in the last 7 years? Never. Thus, they are worse than useless, they are
purposefully deceiving, or willfully ignorant, as is this WSJ article.
That should be no surprise, and neither should silver's price rise.
RE: "What they didn't expect
was an overwhelming flow of money into the market from investors eager to
ride a commodities rally."
Overwhelming flow of money into
silver? Really? Let's see, there is $14,000 billion to $18,000
billion of paper dollars in the US banking system, which does not count
dollars in overseas banks, and the rest of the world is printing up paper
money like crazy for competitive devaluations. Meanwhile, the US
government has an annual deficit of $1500 billion or more, depending on how
you count, if you count off budget items, it could be as high as $3000
billion depending on who you read. Meanwhile, a tiny $3 billion pours
into silver, which is a paltry 2% of 1% of the money in the US banking
system, and a mere 10% of 1% (or 1/1000th) of new US money
creation.
I wouldn't call that an overwhelming
flow of money into silver. I'd say that's only a tiny trickle, wouldn't
you say?
RE: "This is a story almost
entirely about investment," says Stephen Briggs, senior metals
strategist at BNP Paribas.
Well, the silver story, in the future,
will be almost entirely about investment, but today, investors are still
buying only a tiny fraction of new silver mine supply, with the rest being
consumed by industrial applications of all sorts, from fabrication, to
photography, to jewelry, silverware, and coins and medals.
From the silverinstitute.org:
2009 mine production: 709.6 million oz.
2009 Implied Net Investment: 136.9 million oz. (oversupply, or investor
buying)
But let's pause here, and examine the
numbers more closely.
Sprott wrote an excellent silver report
that reveals that ETF silver demand is not counted in the "demand"
numbers for silver!!!
http://www.industrymailout.com/Industry/View....6678qz%3D3f9465
Fraudulent supply/demand numbers,
omitting investor demand, or calling it a "surplus", is part of the
manipulation of silver prices.
But this implies a few other things,
too.
Either the exchange traded funds are
not actually going out into the market to buy silver which means they are
mostly all fraudulent, or, their net purchases are more than offset by
investors or refiners dumping 1000 oz. silver bars (the only acceptable form
of ETF silver) to dealers who sell it directly to LBMA banks.
We've never had to dump any silver bars in the last 2 years of our precious
metals business.
RE: Investors from the U.S. to
China turned to "hard" assets such as copper and other commodities
in part as a hedge against inflation worries.
No, copper has never been a key
inflation hedge. Gold and silver are. In fact, recent reports
show that JP Morgan has been buying all the world's warehouse copper, up to
90% of it. So, JP Morgan owns the copper, not investors, so this
statement is just a bald faced lie.
RE: Exchange-traded funds backed
with silver have enabled investors to invest in a market that traditionally
was harder to participate in.
I don't know what's so hard about
buying $15,000 worth of silver at $30/oz. It's only 500 troy ounces,
which only weighs 35 pounds, and comes in a box the size of 9 inches by 9
inches by 3 inches high. Even 60 year old ladies carry such boxes out
of our store all the time. That's one of the world's easiest
commodities to buy. Contrast with WSJ's beloved copper, at $4.40/pound,
which means $15,000 of it would weigh a staggering 3409 pounds! That's
why copper is not remotely a viable inflation hedge, and has never been used
as commodity money, but only as token money. Even 1 troy oz. of copper,
at $4.40/oz. divided by 14.8 troy oz/pound is only worth 29 cents per troy
oz., but would cost you about $4 each for minting costs and distribution, and
perhaps $5-10 each for widespread marketing via MLM plans.
RE: In recent months, concerns
about inflation, the European debt crisis and the U.S. Federal Reserve's
recent moves to boost the economy have driven investors to hard assets, also
benefiting silver prices.
Really? I agree. But then,
why was silver's move so "unexpected" as the WSJ first wrote, to
most analysts? Shouldn't this have been easily foreseen?
RE: The craze has reached the coin
market.
Craze? Craze you say? What
do you mean, craze?
http://www.thefreedictionary.com/craze
1. A short-lived popular fashion; a fad.
2. A fine crack in a surface or glaze.
Ah, only two definitions for the noun
form. Clearly, they don't mean the second. Ah, they imply silver
demand by investors is not only inappropriate, but will be short lived, and
that it's now popular.
Wait, when only 1/1000th of new money
is moving into silver, why and how is that popular? When only 2%
of 1% of actual money in the banks, or, less than $2 out of every $10,000
sitting in banks is being invested into silver, how can that be accurately
described as popular? No, silver is very unpopular now, still.
Let's be honest. If even 1% of
paper money in US only banks, were to be invested into silver, it would be 50
times greater than the investment demand today, which would be as much as
$180 billion dollars, moving into the silver market that only produces 700
million new oz. by the mines each year. $180 billion divided
by 700 million implies no silver buying from anywhere else in the entire
world, and no silver buying from any kind of industrial application, which
implies a lowest possible price of $257/oz., at this "1% demand"
level, which would still be, long, long before silver ever gets to be
"popular".
That's a shamefully inaccurate
description, calling silver coin buying a "craze", which also
implies things such as:
verb: 1. To cause to become mentally
deranged or obsessed; make insane.
verb, intr. 1. To become mentally deranged or obsessed; go insane.
The reason why that word
"craze" is particularly objectionable to me is that silver
buyers are returning to rational thought. People who think used, dirty,
printed paper is valuable are the ones who have lost their minds.
RE: "Silver's reliance on
investors to prop up the price could cause it to tumble suddenly."
"Silver's reliance on investors"? No, Investors rely on
silver!
But seriously, I agree, silver's price
is increasingly reliant upon investors who sell paper money for silver, and
at some point that will ultimately halt completely. For example,
after silver hits $1 million per ounce, the price could suddenly tumble to either
$900,000 per oz., or it could simply stop trading in terms of paper money
altogether, as paper money might just not buy anything at all at some
point. It is far more true to say that paper money's value relies more
on confidence than silver.
But really, the main point with silver
is that today's value is certainly not dependent on investors, but rather,
industrial demand, which is far larger, and more stable. As China alone
continues to develop and surpass the total consumption level of
Western nations, their population will consume silver as does the western
world. That would be 6 tenths of an oz. of silver, per year, per
person, because silver is an essential part of switches in electronic
devices. If China consumed that much silver, times 1.3 billion people,
that's 780 million ounces, which is more silver than is currently produced
annually by all silver mines in the world. If the world is going
to ever run out of things like cheap oil, or copper, it will certainly run
out of cheap silver, first.
RE: "He forecasts an average
price of $30.10 per troy ounce next year "
Yes, the analysts never predict a price
33% greater, which, as I calculated above, is the average annual gain in
silver so far in this bull market. Next year's "average" is
always today's price, and always paired with a warning about silver moving
down. In less than two days, next year's average price was exceeded
this year!
RE: "But he cautions,
"The number is only going to be achievable as long as fresh money keeps
moving in."
And why wouldn't it? We know that
the USA alone will print from $3000 billion to $4000 billion next year.
So why wouldn't at least $4.5 billion move into silver next year?
Perhaps it's more likely that $400 billion will move into silver next year,
and silver's price will be $1000/oz.? Well, maybe not, but a more
conservative estimate might be about $10-20 billion, which could drive silver
to $50-100/oz., as that's how this trend is developing.
RE: "Silver's all-time high
was set in January 1980 at $48.70 an ounce, or $129.32 when adjusted for
inflation."
Perhaps the worst lies of all.
What do they mean by "inflation"? The CPI index that does not
count food, fuel, housing, tuition, or medical expenses? What
does CPI count these days? What's left? Imported clothing,
goods made in China, and computers?
Instead, if we count inflation as the
monetary base, as M3, which is no longer published, we might observe that M3
was $1.8 trillion in 1980, and nearly $18 trillion today, an increase of ten
times as much, thus, the true inflation adjusted high is not $129.32/oz., but
rather $500/oz.!!!
See, another part of the lie is the
false specificity of that .32 at the end of their $129.32, to make it sound
so official and supremely accurate, but it's not remotely accurate.
And neither is my estimate of
$500/oz. That's a low ball figure. Is money M3? What is
M3? M3 included short term bonds. Well most of the bond market is
now all "short term" bonds, given that they stopped selling the 30
year bond, and given that interest rates are all so low, all bonds are priced
at the near equivalent of actual dollars. And the bond market is far
larger than the $18 trillion estimate of M3. The bond market could be
$25 trillion to $35 trillion, who knows? Data on that is hard to find.
Much of the bond market is as
fraudulent as the paper promises in the silver market. A lot of people
don't buy bonds anymore, they just place bets on the direction of interest
rates, by buying futures on bonds, or options on bonds, which is an even more
fixed and rigged game than the silver price.
Which brings us to derivatives, the
bets on bonds, called "interest rate derivatives", which are
estimated to be as high as $400 trillion or more.
If that is money, then the inflation
that has taken place since 1980 is just off the charts, and will ultimately
drive silver prices to far higher than $500/oz.
RE: "This year investors are
expected to pile a record $4.5 billion into the silver market, accounting for
24% of the world's total demand, says GFMS Ltd., a metals consulting firm in
London. That's the highest level, in dollar terms, in decades. Silver's
relatively small market size�$19 billion compared with
$170 billion for gold�has also played a role in
amplifying the impact of investors, according to GFMS."
Silver's price is moving so fast, it
was up nearly $1/oz. in the few days since this WSJ article. Silver's
market size, at 700 million oz., times $30/oz., is already $21 billion, not
$19 billion, but this is a tiny quibble of a fact.
The point is that $20 billion, or even
$4.5 billion, in a world where $3000 billion of new money is being printed
annually by the USA alone, and perhaps as high as $8000 billion worldwide, is
really, really, really small, even if it's a record number. But the WSJ
article never makes comparisons like this, it just warns that $4.5 billion is
a lot, "the highest level in decades", and the word billion is a
lot, in terms of real things, but it's not a lot in terms of dollars, which
are not real things.
RE: "The strength in silver
prices has prompted a flurry of development around the globe and pushed
anticipated production in 2010 to 733.2 million ounces, up 3.3% from 2009
levels, and up 14% since 2006."
Ah, did you think they said that new
silver mine supply will increase 3.3%? No, that's anticipated
production. It may be less! They write as if this 3.3%
increase is a lot and will act to reduce prices. However, new paper
money in the USA alone is about 3 Trillion / 15 Trillion, or 20%! And
world population growth is about 1.1%.
RE: "The market is set to
see a surplus of 64.4 million ounces in 2010, says Barclays Capital, which
could curb prices."
Wait, wait, wait.
Silverinstitute.org says the 2009 "surplus" is 137 million oz. of
implied net investment, while Barclays says the 2010 surplus will be 64.4
million oz.? Ok, if investors were buying 137 million oz. in 2009, and
even more in 2010 to explain the current rise, how will 64.4 million be
enough to satisfy them, without the price moving up?
Less silver certainly won't curb prices, unless, by using the word
"curb" Barclays is implying a chart formation that looks like a
straight line up before leveling off, somewhat like a curb on the side of a
road. But Barclays is not implying that, for sure.
The article notes that a few silver
mines will be increasing production. No mention is made of any mines
that will be decreasing production, or closing altogether, which, of course,
happens all the time in the mining business. Mines are depleting
assets, and run dry.
That sums up what I needed to refute in
the article.
The article makes no mention of any of
the following of this year's major news items in silver:
THE YEAR IN REVIEW
1. No mention of the fact that JP
Morgan was sued by at least 25 firms for manipulating the silver
market. (A new lawsuit against JP Morgan on behalf of SLV investors was
just filed, two days after the WSJ article). http://news.silverseek.com/SilverSeek/1293546686.php
2. No mention of the BIS reports showing that world banks have a net
derivatives exposure of $137 billion of "over the counter"
"other preciouse metals" liability, which is a short position,
mostly in silver. Links:
http://www.bis.org/statistics/derstats.htm
http://www.bis.org/statistics/otcder/dt21c22a.pdf
3. No mention that the BIS changed their own reports, reducing the number for
June, 2009, from $203 billion, down $100 billion, to $93 billion, after the
US Justice department said it was investigating JP Morgan for silver
manipulation.
4. No mention that JP Morgan admitted to being short silver, and wanted
to placate internet criticism by attempting to cover their silver.
http://silverstockreport.com/2010/jp-morgan-silver-short.html
5. No mention that the CFTC's Bart Chilton admitted that one large
trader had 40% of the silver market at the COMEX.
6. No mention that the CFTC has been investigating silver manipulation
for over two years.
7. No mention that the CFTC just delayed imposing position limits on
silver.
http://silverstockreport.com/2010/cftc-delay.html
8. No mention of the recent rumor that JP Morgan has two of the CFTC
commissioners on their payroll.
http://www.youtube.com/watch?v=uPg4qTNTP-E&sns=fb
9. No
mention of Andrew McGuire's CFTC testimony of a prediction in advance of a JP
Morgan silver manipulation.
10. No mention of Jeff Christion's CFTC admission that the LBMA is
leveraged 100 to one with nearly zero actual physical metal backing up most
"physical" accounts.
http://www.bullionbullscanada.com/index.ph...&Itemid=131
MY PRICE PREDICTION FOR SILVER:
At least a high of $40/oz. by next year, 33% higher than $30 this year.
If the past seven years is any guide, silver's price should continue at
pace, if not outperform, the past seven year's average gains of 33% per
year. Someday, silver could really blow up much faster than that.
Frauds do collapse suddenly. The dollar is fraud. Fractional reserve
banking is fraud. Fractional reserve banking in silver is fraud.
Most of the financial world is fraud today. Silver is not a fraud and
is the opposite of fraud. Silver is not a promise to pay, silver in your
hand is evidence that you have been paid in full.
=====
But let's assume, for the benefit of
the doubt, that Carolyn Cui is just a very bad researcher on silver, and was
not intentionally omitting all the major news items on silver in the past
year.
How honest is she? Or the WSJ for
that matter?
Here's a WSJ article on silver from
May, 2008.
Fundamentals Begin to Weigh On Silver
New Mines' Output, Economic Weakness Could Crimp Prices
By CAROLYN CUI May, 2008.
http://online.wsj.com/article/SB121098087701600147.html
Ah, not very accurate, and not a very
good warning. The WSJ should have warned that the dollar would fall,
and that people could protect their purchasing power by buying silver.
Did they? Sadly, no. They have never gotten it right on silver in
this entire bull market, and are as woefully wrong today, as they were two
years ago.
Excerpt: Barclays analyst Suki
Cooper, who targets silver's average price at $15.20. "Silver's
fundamentals look less compelling this year and are more likely to push
prices lower," she wrote in a research note.
Laughable! Exactly as I
predicted, these buffoons always predict "same as last year"
prices, and are never bullish.
Excerpt: CPM Group, a New York-based
commodities research firm, expects demand for silver to hold up this year,
and its price to average $18.25.
=====
I've seen better reports on silver from
CAROLYN CUI. I've even written to her a time or two. So I can
conclude that she is not ignorant, but willfully ignorant, or being
misleading on purpose. Perhaps if she does not "toe the line" she
will be out of a job, but if your job involves lying, you should probably
quit.
So, what should we conclude, and what
should we do, in the order of most importance?
1. Buy silver. Buy real
silver that you have carried, lifted, and stored in your own vault.
2. Do not trust the Wall Street Journal, or CAROLYN CUI or ROBERT GUY
MATTHEWS ever again.
3. Cancel your subscriptions to the Wall Street Journal.
4. Write nasty letters to the WSJ's advertisers, and boycott them (just
kidding, don't waste your time).
5. Subscribe to the free newsletter at the Silver Stock Report.
6. Share this report in your own blogs online, or on facebook.
7. Write your own refutations of future mainstream hit pieces on
silver, exposing their intentional lies and misinformation, and lack of
information.
8. Write to Write to Carolyn Cui at carolyn.cui@wsj.com and Robert Guy Matthews at robertguy.matthews@wsj.com and ask them for their
honest answers and justifications to the accurate information presented here,
just for the fun of watching them squirm.
Til next time, Happy New Year, and we will be open again on Jan. 3rd.
=====
I strongly advise you to take possession of real gold and silver,
at anywhere near today's price, while you still can. The fundamentals
indicate rising prices for decades to come.
Our Coin Shops are open 10AM to 5PM Pacific Time, Monday to Friday, closed
weekends.
WE ARE CLOSED UNTIL
MONDAY, JANUARY 3RD
JH MINT & Coin Shop, Grass Valley, CA -- minimum $5000 order for
free shipping, USA shipping only.
Kerri: (530) 273-8822
kerri.jhmint@yahoo.com
(530) 273-8175
www.jhmint.com
See also my Mom's Silver Shop in Sacramento, CA
www.momssilvershop.com
3510 Auburn Blvd., #12
Sacramento, CA 95821
(916) 481 5656
(Mom will ship with no minimum order size, and overseas, and take credit
cards and paypal.)
Sincerely,
Jason Hommel
Silver Stock Report
I
strongly advise you to take possession of real gold and silver, at
anywhere near today's price, while you still can. The fundamentals
indicate rising prices for decades to come.
Price Board:
http://hommel.name/cgi/priceboard?store=jhmint.com
Our Coin Shops are open 10AM to 5PM Pacific Time, Monday to Friday, closed
weekends.
JH MINT & Coin Shop, Grass Valley, CA -- our largest store, minimum $1500
to ship, USA shipping only, free shipping.
(530) 273-8175
Kerri: 530 273 -8822 silver_support3@hotmail.com
www.jhmint.com
Rocklin Coin Shop, CA -- 15 min north of Sacramento on HWY 80
www.rocklincoinshop.com
Mom's Silver Shop, Sacramento, CA
www.momssilvershop.com
3510 Auburn Blvd., #12
Sacramento, CA 95821
(916) 481 5656
(Mom will ship with no minimum order size, and overseas, and take credit
cards and paypal.)
Oakland Silver and Gold
www.oaklandsilverandgold.com
3929 Piedmont Ave.,
Oakland, CA 94611
osg2010@gmail.com
|
|
