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Storm has Passed!

By: Jason Hommel, Silver Stock Report

-- Posted 1 March, 2011 | | Discuss This Article - Comments: Source:

(Electricity, email, flushing toilets, yay!)

Silver Stock Report

I've been without power and email access since Thursday, 3pm, last week, until just now.  We left the JH MINT early that day, because a record snow storm was just beginning to fall.  The JH MINT has power again, but not my house, which is minutes away. 

Trees, bent under the heavy wet snow, have fallen across the roads and powerlines. 

Going without power is not too unusual for me, as I grew up alpine ski racing, always near the mountains.  I kind of like it, as no power means no TV, and greater time for conversations, thinking, and reflection on life.

We live in a unique time period in human history.  Only 150 years ago, things were not all that much different than they were 2000 years earlier.  With the discovery of oil, the machine age and industrial age began to really change things.  Previously, over 90% of humanity was farming, barely making a living, with starvation always a looming danger.  With oil and machine parts came the mechanical harvester, which could do the work of ten men, which gave mankind the freedom from subsistence living.

I sometimes wonder how far society's advances may collapse backwards again, but I think that the world will never collapse to that point again.

While it's always good to prepare, it's certainly possible to overdo it.  We have a generator that powers part of the house, but I don't need a generator to power everything in an emergency.  The fireplace heats up most of the house, but not the master bedroom, which can be heated by the electricity off the generator.

Last year, we upgraded our well, adding a holding tank, so that we would be much less likely to run low on water.  Works great!  Unfortunately, the installers took the well pump off of the generator back up system.  I remember asking them to re-do it, but they said we could always do it later.  I remember saying to them, "no, now", because by the time later comes, the power will be off, and it will be too late.  Well, too late came about a year later.

I forgot to call out an electrician to fix things.  Without the generator hooked up to the well, we have no water to flush toilets or take showers.  So, we melted snow on the stove in large pots to make do, and make the poopies go away.  (Yes, I'm a dad.)  It worked, but it's kind of lame.  I'll have to get that pump put back on the generator back up electrical lines.  Also, I'm now considering getting a diesel fuel tank, and a better diesel generator, but maybe that's excessive; certainly it's expensive, and maybe overdoing it a bit.

I suppose I was too busy always thinking of arguments and things I can write to help my readers to prepare for financial collapse by buying silver.  Perhaps I'm a savant that way, because helping my readers is my all consuming focus.

Interestingly, the financial system, and the silver world, began to change with dawn of the age of oil.  It was about that same 150 years ago, that modern banking first began to eliminate silver coinage by moving to a gold only standard, which ultimately led to paper only, and the abandonment of gold and silver as circulating money entirely throughout the world.

I love comparing oil to silver, as oil always makes silver look so very much better as an investment in so many ways. 

Convenience:  Silver wins! (It's lighter)

$10,000 worth of silver is now about 279 troy ounces., that weighs about 19 pounds, or 8.6 kilos. = easy for  granny to transport in her bare hands.

$10,000 worth of oil, at $98/barrel, = 102 barrels = 1/2 of an oil tanker truck load.

Market Size:  Silver wins! (It's smaller)

The world produces about 700 million oz. of silver per year.
That, times $34/oz. = $24 billion.

The world produces about 85 million barrels of oil per day.
That, times $98/barrel, times 365 days/year = $3,040 billion.

The oil market is over 100 times larger than the silver market!

Implication:  Silver prices would have to rise over 100 times for there to be enough silver to pay for current oil consumption!

There is a coming financial storm.

Prepare.  Get silver.

It costs you nothing, as buying silver is simply a monetary conversion from the fake to the real, and doing so will earn you everything!

A man asked me this morning, "What's driving silver prices?" 

He reads daily like I do, so he's about as well informed as it gets.

I replied, "The systemic rot that has built up over the last 100 years."

There's no way they can prevent silver prices from moving up, long term.

Recently, I've been hammering the point that there are two major reasons why silver is headed to $500/oz.

First, silver hit $50/oz. in 1980, and money creation has increased 10 times since then, so the true inflation adjusted price of silver will be $500.

Second, when 1% of money in US banks buys silver, it will be 1% of about $18 trillion, which is $180 billion.  If you divide that by 700 million, you'd get $257/oz., which would leave no silver for industry or the rest of the world, which implies a silver price of at least about $500.

So, here then is the problem.

How will they prevent silver from going to $500/oz.?  They can't.  They can only slow down the rise, or let it rise fast. (while increasing volatility, and creating temporary price dips)  And how will they prevent the implications of such a massive rise to $500?

See, the problem is twofold.

If they let silver run fast to $500, say over 6 months, the dollar will be perceived as collapsing, and could continue to collapse to zero.

But if they let silver continue to go up "slowly" at only 30% per year, for the next ten years to take us to $500, this would create a worse problem.  See, after nearly 20 years of precious metals only going up, people will begin to notice -- more than notice.  They will begin to say, "precious metals only go up, they never go down".  And that's how price bubbles begin to form, making silver go from fair value to over valued. 

And if silver were to become over valued, that would drive the price from $500 to $5000, and could continue and ultimately collapse the dollar to zero value. 

So that is quite the problem for the people who are trying to prevent the silver price from rising.

The silver storm is coming.  Prepare.

People ask some interesting questions when I point out that silver is headed to $500.  They ask, "Gee, who will buy it when it's that expensive?"  Did they not comprehend the argument?  Only 1% of people will be buying silver when silver is $500/oz., (a hundred times more than today, when only 1% of 1% of people are buying silver) but yet, 99% of people won't have bought any silver in the recent year, at $500/oz.

Some analysts today say that silver is going to go down, because "everybody loves silver".  Such analysts don't know anything about the fundamentals, which trump any kind of other analysis!  Silver might hit the news due to new highs, but the facts are clear.  Only about 1% of 1% of money is buying silver each year.  That's one dollar out of 10,000! 

Silver's not a popular investment.  Not yet.  But it will be.  IT WILL BE!  Prepare for it.  Get it now.  Anywhere below $50 to $100/oz is cheap.  



There are rumors of government confiscation again.  Sigh.  Not likely.  Why not?  Because of the fundamentals.  Only 1 person in about 10,000 is buying silver.  It makes no sense to confiscate!!!!

The entire world annual silver market is barely $21 billion.  The government budget is $3500 billion, with the deficit at $1500 billion.  $21 billion cannot actually be confiscated without the USA declaring war on the entire world!  Makes no sense!!!

Think, why would the USA confiscate silver, when it is minting, and selling about 40 million oz. of silver Eagle coins?

Why would the USA confiscate silver, and make it "contraband" like marijuana, and thus, help drive up the price, when the US government (via JP Morgan) is desperately trying to keep the price down?

Hey, the war on drugs is a miserable failure.  And if they can't get drugs out of the hands of lazy teenagers, what makes you think they will be able to get silver out of the hands of sober, anxious, gun-toting, 50 year olds, many with former military backgrounds who would be willing to fight to the death over their freedom and basic property rights?

Why would the USA confiscate silver, and jeapordize the franchise of the US Dollar, which it is gleefully using to print up the budget gap of $1500 billion? 

If the USA confiscated silver, they would only get about 1% of the people's silver anyway, or less than $200 million, that's how much was voluntarily turned in during the last confiscation.

The US government can't confiscate silver!   Why not?  Because the people are not using silver as units of account in their bank accounts!

Confiscation makes no sense today.

Rumors of confiscation make sense.  If they float rumors of confiscation, maybe people won't buy any.  Maybe they can get people to think that it would be useless to buy silver, as it would just be confiscated anyway.

Hello!  Silver has moved up from $5/oz. to $34 now.  Has not been confiscated yet!  But the dollar's value?  Confiscated! 

At every level, there were rumors of silver confiscation.  Every year, this is my most popular question asked and answered.  And it has never made any sense, except in the sense of a deliberate disinformation campaign to keep people away from silver.  And if you know the fundamentals, you know that confiscation makes zero sense.

Confiscation makes sense only after silver hits $10,000/oz.!


I strongly advise you to take possession of real gold and silver, at anywhere near today's prices, while you still can.   The fundamentals indicate rising prices for decades to come, and a major price spike can happen at any time.


Jason Hommel

-- Posted 1 March, 2011 | | Discuss This Article - Comments:

Last Three Articles by Jason Hommel, Silver Stock Report

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