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  I See a Silver Moon Rising
by Edgar J. Steele

April 2, 2006

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I see a bad moon rising
I see trouble on the way
I see earthquakes and lightnin'
I see bad times today

  --- Creedence Clearwater Revival, Bad Moon Rising (circa 1969)

On January 28th, here is how I responded on a public forum to someone who wondered aloud as to whether silver might break through the $10 price level by the end of 2006:  "This year!?! How about this next week? $20 silver by year end, perhaps even summer, is looking more and more likely to me. And just think, if it goes there then you will be able to say to yourself: 'I did know what would happen!'  If it does dip back down at any point, back up the truck because you won't get another chance.  History will show today's price to have been a bargain and last year's price as a ridiculous aberration, a result of illegal government market rigging. Mark my words well."

Y'know, when your investments are going your way, it is easy to make the mistake of believing you are a financial wizard.  I harbor no such illusions, despite my BA in Finance, MBA in Accounting, law degree and the fact that, at one time, I aspired to become a Specialist (stock exchange market maker) on Wall Street.  I've lost way too much money over the past decade.

What is happening today has been obvious for over ten years - that was just about the time that the Plunge Protection Team heaved into action, a response to the Reagan and Bush excesses, all of which continued in spades under Clinton.   For the next eight years or so, all my accounting and financial analyst training and experience told me one thing while the markets did exactly the opposite.  I lost a lot of money during that time; first in S&P futures, but more recently in contrarian funds like BEARX.  For that, I have mightily damned Clinton, Bush and, especially, Greenspan. 

Now, however, market forces have grown too large for even the mighty central banking oligopoly to control...except the general level of the stock market, of course.  Inflate the money supply as Easy Al and WhirlyBen have done and you guarantee the market never has to decline, regardless of what may be going on elsewhere.  Of course, you end up destroying the value of your currency, but nobody ever got fired for doing that.

I give up.  Now I expect the stock market never again to decline, at least not for long.  However, an 11,000-plus Dow in the future's dog dollars is...how much, again?  And your house - suppose its price never goes down, but the purchasing power of today's dollar goes to 10 cents due to WhirlyBen's helicopter-based monetary policy...doesn't that look a lot like the 90% real estate price declines of Depression I?

About that Jan 28 forum posting:  Silver actually took two weeks to hit $10.  Last week, Silver vaulted over $11, then hit a high spot bid close of $11.54.  At the end of the week, though other metals got hammered in the PPT's predictable fashion, silver dipped only a nickel. 

Do I smell a correction in the air?  Maybe.  Or, maybe this is the big wave, at last.  We will see.  But, this isn't day trading.  You've got to be in the game to play the game, so think twice before taking profits.  As for myself, I think silver is a no-brainer long-term hold.  And gold, platinum, palladium and all the base metals.  All commodities, in fact.  But, especially, silver.

If the economy goes south, silver goes up as people retreat to it as a hedge.

If the economy goes up or sideways, silver goes up due to industrial demand and the new ETFs.

If we go to war against Iran, silver goes up.  If we don't go to war, silver goes up.

If Bush gets impeached (be still, my beating heart), silver goes up.  If Bush continues as the Clown-in-Chief, silver goes up.

If the dollar crashes, silver launches Moonward.

Only if the dollar strengthens in the face of both the massive debt buildup that has been occurring and foreign rejection of the dollar's role as the world's reserve currency, does silver maybe decline some...and, in the immortal words of Clint Eastwood, that ain't gonna happen.  WhirlyBen Bernanke said so, loud and clear.  A stronger dollar will require higher interest rates - much higher interest rates - and economic pain unlike anything ever imagined by anybody alive today in America whose first language is English.  Pain which will cause a rush to silver, among other things.

As I said:  a no-brainer.

When I wrote the chapter entitled "Money's End Game: Depression II," for my book, Defensive Racism, I made a strong pitch for silver, even over gold.  Silver then was at about $4.50 an ounce and gold was hovering around $300 per ounce.  In that chapter, I summarized my detailed analysis as to why I thought gold would skyrocket, saying "I believe gold will spike to as much as 3 or 4 thousand dollars per ounce in terms of today's (2004) dollar, no later than 2010 and probably much sooner, then settle in at around $1500."  You see, I was hedging my bet, at the behest of one early proofreader - I actually thought (and still do) gold would/will spike to $10,000, then settle in at around $3,000 to $5,000 in 2004 dollars (not tomorrow's dog dollars, either).

Two years ago, in that same chapter, I said the following about silver:  "Silver, in particular, seems poised for a serious breakout once the rigging stops, as stop it inevitably must.  Though bulky to store and handle, silver actually is a much better bet than gold." 

Last fall, on October 7, once again I pitched silver, via "Peak Silver," in which I stated:  "Silver's relative scarcity is a vitally-important concept that simply has yet to sink into the minds of almost everybody in the world today.  Else, why does silver trade for only $7 and change per ounce, versus nearly $470 per ounce of gold?  Stand by, because all that is about to change."  At that point, I traded my gold for silver and recommended that others do the same.  Since then, gold has climbed 24%, a remarkable performance, while silver has shot up an astounding 60%.  I concluded my article with the following observation:  "To the Moon, Alice.  That's where the price of silver is headed, now that we have hit Peak Silver.  To the Moon."

How high is the Silver Moon?  We barely have attained low orbit, folks - well below the deadly Van Allen radiation belt.  We still are retracing the steps of silver held back by artificial government manipulation.  Next comes the increase due to rarity, vis-a-vis gold, not to mention industrial shortages.  Finally, when Depression II really takes hold (unemployment will go from the current real 12% to beyond last century's Depression I mark of 25%), the premium of silver as a refuge will go into effect, thus the relevance of the song snippet recited at the outset of this piece. 

People who spoke of $100 silver (again, not in tomorrow's dog dollars, either) used to be seen as loons.  No more.  Well, at least, not so much.

On January 28, in "Paper Bad - Metal Good," once again I recommended silver, as its spot price closed at $9.57 bid, up about a dollar from a month earlier.  Last week, of course, it closed up almost another $2 per ounce since the end of January.  That's a 2006 "run-rate" of a buck a month.  Lessee now, December 31 price of $8.50 plus $1 times 12 months ......hmmmmm....why....that's $20 and change!  Hey - am I psychotic, or what?

If you haven't yet bought silver with every spare dollar you can scrape up, I can only ask when you're going to trust the force, Luke.  Last summer, despite the worried look in my wife's eyes, I refinanced our house mortgage, taking out $100,000, all of which I invested in gold, silver and palladium stocks.  That $100,000 has become $250,000 today.  I expect it to pay off the mortgage altogether before summer's end.  Once again, I am her knight in shining armor.

Under WhirlyBen, the dollar easily could slip to half its current purchasing power by this time next year.  Guess what happens to silver in that case?

Another clear tip:  most analysts are, as always, calling for a major correction in precious metals and screaming, "Sell, sell, sell..."  Lessee now, they're the same ones who always get us to buy high and sell low, now, aren't they?  The ones who get paid to shovel us that dreck.  I must be doing God's work here, because there is no way I get paid for what I tell you. 

If there is another correction, that is all that it will be.  Remember that the word correction implies an eventual, if not quick, recovery, usually to higher levels.  Don't try to day trade metals.  This is a loooonnnnnng bull market for metals that we just recently entered, make no mistake.  So long, in fact, that I doubt I will outlive it.

I'll say it again: $20 per ounce silver by year's end.  Mark my words well. I'm willing to be wrong, but I don't think that will happen.

-ed

Copyright 2006, Edgar J. Steele

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