Silver Stock Report
Life is unfair. We are all being tested, all the time, on things that
"are not on the curriculum" that nobody may have taught us. How
unfair! Often we are tested on things that we have no way of
knowing! Scary, but true. But the sooner we realize those facts
of life, the better off we will be!
The results of the tests in life are not merely
whether you get an A, B or C in school. In life, the tests will have
far more significant consequences, and may determine if you become wealthy
enough to effectively help others, or go bankrupt and have to start all over
again, or worse.
Today, everyone in the world who has any money or
wealth is being tested on their own knowledge of the nature and value of
paper money, and on how much paper money there might be; and on the nature
and value of silver and gold as money, and on how much silver and gold there
might be.
We are being tested on things that nobody teaches,
and on things that are, frankly, impossible to know, although estimates
exist, and I do try to share some of the professionally compiled estimates on
those subjects.
Here's a bit of the curriculum on money:
Archive: http://silverstockreport.com/ssrarchive.htm
The Money Chart:
The Fundamentals of Gold & Silver Feb 25, 2006
Speech given at
the Silver Summit September 26, 2006
Why Silver Will
Soar May 23, 2007
Today, I'd like to talk a little bit about the facts
of hyperinflation. Everyone will be tested on this in this market, so
pay attention, because these facts are not widely taught. If you
understand this, you can get a serious advantage over other people.
Back in 2003, I wrote:
Inflation &
Deflation During Hyperinflation Nov 6, 2003
Back when I was selling individual essays, that was a best seller.
I identified a monumental sea change situation that
changed in 2001. In 2001, an amazing thing happened.
Hyperinflation started in the U.S.,
and has continued ever since, and gotten worse.
In 2001, the purchasing power of money in the banks
(the gold value) peaked, and then started going down faster than the rate of
increase of new dollars. Whereas before 2001, both the number and the value
of dollars increased at the same time.
June 1998: M3 5,711 billion /
gold price $296/oz. = 19.3 (billion oz. gold value)
June 1999: M3 6,221 billion / gold price $260/oz. = 23.9
(billion oz. gold value)
June 2000: M3 6,809 billion / gold price $288/oz. = 23.6
(billion oz. gold value)
June 2001: M3 7,628 billion / gold price $270/oz. = 28.2
(billion oz. gold value)
June 2002: M3 8,178 billion / gold price $318/oz. = 25.7
(billion oz. gold value)
June 2003: M3 8,761 billion / gold price $345/oz. = 25.4
(billion oz. gold value)
Sept 2003: M3 8,909 billion / gold price $390/oz. = 22.8
(billion oz. gold value)
Money value peaked in 2001, with M3 being worth 28.2
billion ounces of gold. That's a fact that "paper money
value" peaked in terms of the amount of gold it could theoretically buy.
But hey, you know what? Experts claim there
are only about 5 billion ounces of gold ever mined in the history of
humanity! This shows that there are probably a few too many fraudulent
dollars out there.
Today, the value of M3 is still bloated and terribly
over valued, and M3 is still increasing in number, while shrinking in value.
Nowandfutures shows that M3
is $14 trillion. What a vast increase over $7.6 trillion in 2001!
Nearly double in 7 years!
http://www.nowandfutures.com/key_stats.html
The gold price today is $912/oz.
So, for April, 2008: M3 14,000 billion / gold price
$912/oz. = 15.3 (billion oz. gold value)!
That's 15.3 billion oz. of gold, in theory, that all
U.S.
money in the banks can buy.
U.S. dollars (Fed notes) are very over valued still,
and going down in value, still!
And hyperinflation continues, as inflation of the
money supply is now 19%!
INFLATION IS 19.5%! (Inflation of the money
supply!)
What's inflation? The U.S. is
diluting the value of the dollar by making too many.
It's like adding an extra can of water to the juice.
It's like adding a bunch of cold water to the hot
bath.
It's like trying to make Jello
with too much water.
The inflation rate is the amount of extra dollars
that they are adding each year, that are destroying the value of the dollar.
But since 2001, the value of the dollar is being
destroyed FASTER than the inflation rate--that's the hyperinflation that
started in 2001.
You are being tested on your knowledge of that,
right now.
To pass the test, you need to own physical silver or
physical gold.
If you fail the test, you are happy to own paper
money, paper bonds, or paper silver and gold certificates.
The Consumer Price Index, (CPI) inflation rate is
said to be 4%.
http://www.bls.gov/cpi/
The CPI is under counting, as it uses hedonic
adjustments, and excludes "unimportant" things like gold, silver,
food, housing, and energy (what else is there?!), and the true inflation rate
must be higher. Experts seem to suggest that the true consumer
inflation rate is between 8-12%, but a housewife who pays attention to
grocery prices might know more. This is another unknowable part we all
get tested on.
Now, the difference between what bonds pay you
(2-4%?), and what inflation takes from you (12-19-22%?), is the cost of
owning bonds, and while I don't know exact numbers, as nobody can, what I do
know, and I guarantee you, is that this is a negative number. What the
number is, who knows. Let's say it's negative
15% or so. That's the price you pay, the money you lose each year, for
owning bonds, now days, and this has been the penalty since about 2001.
Don't pay attention to people who claim there is deflation, or worry about
deflation. There is inflation, a lot of inflation, so much inflation
that we have hyperinflation. The thing that is deflating is the
value of money, because there is hyperinflation.
Why is there hyperinflation? Because there is
"never enough money" to avoid bankruptcy of the major institutions,
because they are printing money for the war in Iraq, and for too much
government. The money printers are fearing deflation because other
people might be taking money out of the banks (which is said to be
deflationary) to hold it in the mattress, spend it overseas, or use it to buy
silver and gold. But that's not deflation,
it's the result of hyperinflation.
Hyperinflation makes people take their money out of
the banks, and spend it as fast as possible.
The point is that there is no monetary incentive for
people to hold cash or bonds right now; as they are losing money because of
the high money creation rate, and the gold rate increases.
Another main point that follows is that gold will
continue to go up as long as current conditions exist, as they have, since
2001. Since 2001, gold has been going up by about 22% per year. That's
from $250 to a high of $1000, over 7 years.
Now then. Where are the economic incentives
today when owning gold pays 22% per year, and owning bonds costs 15% per
year?
The incentive is to sell bonds and buy gold. The
world economic conditions are paying people to move into gold.
There is no reason to think that anything will
change, until it does.
The required change is for bonds to pay more than
the annual gold value increases.
Until bonds pay more than owning gold, then gold
will continue to rise.
How far will this process be likely to go? How
long? Until when?
Until bonds pay more than owning gold, then gold
will continue to rise.
That's not a misprint; it's a repeat of the main point.
Here's another clue:
The size of the U.S. Bond market might be about $25
trillion, and the world bond market might be $50 trillion.
The size of the world gold market might be about $5 trillion.
Right now, an extremely tiny portion of the $50
trillion market is trying to buy into the $5 trillion market.
I think about $0.115 trillion is going into gold
annually right about now. (4000 tonnes x $900/oz.)
That's about 1/5th of 1% of the money is going into gold. And yet 91%
of the people are now concerned about inflation. Selling gold to people
should be the easiest job in the world right now, the easiest pitch
ever. Everyone should want it, yet virtually nobody is buying it, the
demand has barely started, and the demand for silver is like 100 times less.
This might be another clue as to how long the gold
market will go, but is no guarantee:
Jan. 1980: M3 1,822 billion / gold price $850/oz. =
2.1 (billion oz. gold value)
Gold will go up at least until the gold value of
paper money is 2 billion gold ounces, or significantly less, as that was the
condition in 1980, and it should probably continue further than that. After
all, the U.S.
government does not have 2 billion ounces of gold; it only has 0.261 billion
ounces of gold.
Be prepared for gold prices to continue to rise
about 22% per year or more, at least until bond interest payments rise to
over 22% per year, or whatever the gold price increases might be at the time.
Now, I want to address people who will inevitably ask me, "What will
happen if there is deflation". I will respond, "There isn't
any deflation". They will respond, "But so-and-so thinks there is
deflation." I will respond, "Well, so-and-so is
wrong." They will respond, "But what if things change, and we actually have deflation?" OK,
there's a real question. I will respond, first of all, there is no
deflation, the money supply is soaring. Before the money supply can
actually shrink, it has to slow down growing, and we'd see that first. Then,
the money supply would have to be stable. Then, the money supply would
have to actually stop. Bankruptcies would vastly increase. Bankruptices are one of the only things that can actually
cause deflation, as that destroys credit and money in the banks when banks go
belly up. When banks start going bankrupt, how confident will people be
to let their money sit in bonds in the banks? Not very. They
will start to buy gold even faster than they do today, since gold is not
anyone's liability. If that happens, gold will go up until bonds start
paying more than gold is going up each year, AND until banks stop going
bankrupt. So, if there is deflation, gold will go up more, and for
longer, until people trust banks again, which could be a very long time.
This is why the Fed is doomed. Printing more will not work. Printing
less will not work. Printing nothing will not work. All the
inflation of all the years from 1913 until now is beginning to crash down on
our heads, and it will keep crashing until it stops. And when will that
be? Until bonds start paying more each year than gold is going up each
year.
As always, silver trumps gold, in my opinion, since
so much silver has been consumed in jewelry and
flatware and industry. If the silver to gold ratio returns to the
historic 15:1, we will make 3 times as much money in
silver, than in gold. But due to the rarity of silver, because it has
been used up, because it is hard to find, and because only about 8 times as much silver is mined than gold each year,
silver will probably exceed the value of the historic 15:1.
To get an A+ on one of the tests of life today is
real simple. You don't need to know any of what I just said, but it
might help. All you need to do is buy silver.
A Brief Guide to Buying Silver:
What kind of silver, and where to get it.
http://find-your-local-coin-shop.com/
Jason
Hommel
Silver Stock Report
I have 2 major resources on mining
stocks to offer to you.
First, look at www.miningpedia.com
It is a FREE comprehensive database of mining stocks. Anyone can update
or enter data, it's like wikipedia.com. Miningpedia
has replaced the "silver stock report" in that it is doing the
legwork on individual stock analysis that I used to do manually. This
frees me up to do what I like best, which is to write commentary. My commentary retains the name, "Silver Stock Report", but
for individual stocks, please see miningpedia.com.
Second, I offer a "look at my
portfolio" for $50/month; where I share a peek at which stocks I own,
once a month. You can log in at any time, repeatedly, and also see all
my prior months
Please
visit Silver Stock Report for specific stock picks.
| 
