The Silver Loon
(Market Update 06-5)
by Edgar J. Steele

Note:  This article was posted to the ConspiracyPenPal web site on a Saturday.  The very next trading day, May 14, precious metals came under assault by the market manipulators, forcing serious declines all across the board.  Here is the squib I posted on the site that night (and what I would have emailed you then if I had a functional list management system in place):  May 15 - Back up the truck again:  Silver closed in New York at $13.32 per ounce today.  In the extended markets (Asia), it is down another 20 cents as of 5:30 pm PDT.  This is a gift, folks.  It is down about $2 from where it wants to be right now.  All precious metals have been pounded down today and it isn't because of free market action.  Those who are so desperately short silver derivatives have done it and will be in there very soon, covering some of their shorts again.  This will happen again and again until they have eliminated their exposure.  Most people buy when something is rising.  Most people make very little money (actually, they lose it when you factor in lost purchasing power).  Tomorrow morning would be an excellent time to visit your silver supplier and make a buy...or, go on line and invest in the silver EFT (SLV), then liquidate it and use the proceeds to buy real silver after the price goes back up again.  If I had a functional list manager, I would send out an email to everyone, but this is the best I can do for now.

May 16 - I have just signed on to a new list management system and will endeavor to send this out now to at least that portion of the list that reconfirmed on my latest, not-so-great list manager that bowed to Internet censorship (Constant Contact, just so you know).  All metals are bouncing back today, but silver has recovered only 26 cents, so still time to jump in...do it.

May 13, 2006

From a NY Times article entitled "Finding Comfort (and New Friends) in Gold" (May 7, 2006) comes the following: "With their missionary zeal and weakness for conspiracy theories, gold lovers can seem a touch afflicted. They also collect and pass around offbeat, brain-teasing findings. One is that the dollar has lost 98 percent of its value since 1913, when the Federal Reserve System was established."

Hmmmmm...guess I'm a goldbug, then...or a silverbug, certainly. Note the conjoining of the phrase "conspiracy theory" with the simple truth about what the Fed has done to the dollar. Now, if you are smart enough to suffer the NYT every day, aren't you smart enough to see through that sort of reporting? You'd think so, but then why don't I see any evidence of that fact?

Is it possible that I am a loon, after all, for having worn that sandwich board that says "The Sky is Falling!" on the front and "Buy Gold and Silver (take delivery)" on the back for the last ten years?

Puts me in mind of the immortal Ogden Nash couplet: "See the happy moron. He doesn't give a damn. I wish I were a moron. My God...perhaps I am!"

If so, then it must be my imagination that sees a trebling in the value of the very first silver I put aside so many years ago; a doubling since I started galloping my horse through the streets last September, screaming, "The dollar is crashing, the dollar is crashing - buy Silver now!"

The big news this week is that Warren Buffet apparently sold his huge silver store. So, apparently, the rumors a couple of months ago that he was going to sell it to Barclay's ETF were false.  Or, were they? Hmmmmmm.....Barclay's did just open its ETF (SLV) for business a couple of weeks ago.  Is that why the ETF seems to have had so little impact on the price of silver (contrary to what all the analysts are claiming, by the way) - Barclay's simply acquired Buffet's holdings and didn't draw them from the marketplace? If so, what will the price of silver do when the new ETF has to start buying in competition with the rest of us?

If not, and Buffet simply fed his hoard into the marketplace recently, then can you imagine what the price of silver might otherwise have been doing? What do you suppose silver's price will do, now that he isn't feeding silver into the marketplace anymore?

If Buffet simply sold out to Barclay's ETF, how do we get confirmation of what they now hold? Again, once Barclay's digests Buffet's disgorgement, what do you suppose will happen to silver's price?

I've got a problem with this ETF thing, by the way, quite aside from the fact that one of the major market manipulators in the past (Barclay's Bank) is running it: just how do you keep them from selling more markers than they have silver? They have lied, cheated and stolen in the past, so what keeps them honest with us now with this ETF? For that matter, what keeps any ETF or its functional equivalent honest?

When the huge existing American financial derivatives pyramid, built upside down, inevitably collapses, what happens to an ETF if it can't prove up its holdings? Can you imagine what happens to the price of silver in that event?

Hmmmmmm...just one conclusion I can reach, and it's the same thing I've been saying for the last four years: buy silver with both hands and take delivery! I was saying the same thing about gold for six or seven years prior, too, and was fond of observing that even a stopped clock is right twice a day. Well, every clock has its day - this clock's day has arrived and it will last for a very long time!

Several months ago, I predicted $20 silver by the end of 2006. That now seems a pretty safe bet, though I was dubbed a loon when first I made the call.  I see a distinct possibility of $50 silver by this time next year. In fact, from this vantage point, anything beyond six months looks like a straight-up moon shot. But, then, that's always the way that hyperbolas look from the bottom.

It gets harder and harder to sound outlandish when speaking of where the prices of precious metals are heading.  Even so, let me push the envelope and say something right out loud that I have mentioned to a few in private:  Before it is all over and the world settles down again into a semblance of normalcy, I believe that the price of silver will exceed that of gold. 

Yep, you heard me right.  Because of worldwide inelastic industrial demand, I do not believe that the amount of above-ground silver ever again will approach that of gold.  Yes, there still is more silver in the ground than gold, but we simply can't get it out fast enough to make a dent in the demand deficit that has been growing ever since we used up those monumental stores of silver that have been sitting around...well, forever.

Now do you see why I'm talking about $15 silver the same way I did when its spot price was $5?  Chances are, I will continue talking like this when $50 silver is but a memory, too. 

There.  That should ensure my title as resident Silver Loon for some time now.

What's Going On?

Conventional analysts and even many of my fellow loons consider precious metals now to be overbought and due for a correction.  Maybe.  I doubt it.  These are not conventional times and that is where conventional analysis fails us.

Something is happening right now that hasn't happened since Confederate money went down the tubes:  An American currency is crashing.  In fact, all fiat currencies throughout the world are sliding into the pit right now, with the dollar leading the way, else the dollar's actual speed of decline would be all the more visible.  Here's the best view on the dollar:  virtually all commodities have doubled in the past 6 months.  Not from speculation and not from some mysterious increase in absolute value.  It's the measuring rod that is changing - the dollar.

It is said that, in time, all money reverts to its inherent value.  Well, take out a dollar bill and look at it.  Now lay a hundred-dollar bill next to it.  What is the inherent value of those two pieces of paper?  That's right, they are the same.  Exactly, precisely the same. 

Did you know that the Zimbabwe dollar today, inch for inch, is worth less than toilet paper? After all, toilet paper serves a useful function.  They simply printed too many of them, the same thing the Confederacy did when on its last legs.  What function is performed by a defunct piece of currency?  Try to buy toilet paper with a Confederate dollar bill.

Like the Zimbabwe dollar, the American dollar is on a one-way trip.  There is no rescuing it now, after all the inflation, the massive pileup of debt, the staggering trade imbalances, the loss of virtually all of America's manufacturing capabilities and the incredible profligacy of the current American Administration.  WhirlyBen's solution?  Print more, of course.  That always is the answer.  Make no mistake:  the dollar is doomed.

And that is why conventional wisdom sucks when applied to today's financial markets.  Conventional wisdom presumes a recovery.  There will be no recovery this time.  And, of course, we are about to have another World War, the time-honored way to revitalize the world's economy.  The bad guys will lose.  Who?  Why, us, of course.  You didn't really think the world would allow America to continue visiting its insanity upon small, defenseless countries, did you?

We Americans stand on the edge of an economic abyss, the likes of which we never before have seen.

Meanwhile, WhirlyBen Bernanke keeps printing it and Truly Insane ("God tells me to kill") George W. Bush keeps spending it.  They know, of course, that the end is near, which is why they keep doing what they're doing. 

Head for the hills.  Hunker down.  Trade your dollars for something that will survive the coming debacle.  Have priorities and ensure your family's safety and relative comfort, first and foremost.  Then put away something that will endure.  I like silver, for so many reasons, but any commodity will do.  Then, if you have anything left and like to play in traffic, try some mining stocks on for size.  Their leverage can make some impressive profits, but only if you have enough sense to pull those profits out and put them into something other than dollars before it all comes crashing down.

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Copyright 2006, Edgar J. Steele

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