Silver Stock Report
Speech presented on September 21, 2006
(I wrote out my speech, and followed it closely, but not exactly. So, my speech went someting like this:)
Welcome. Thank you all for coming to the Silver Summit. They say the smart money is in gold, and the smartest money is in silver! That means this group is the smartest group of investors on the planet, and recent performance of silver prices since 2003 is beginning to prove it. So, give yourselves a hand! (mild applause)
I find it intimidating to speak to such a wise group, and I’ve struggled to find the most useful and important things that I can say.
I’m very honored to be here. I’m Jason Hommel. I’m the Editor of the Silver Stock Report that is sent to about 30,000 email addresses. I’ve been accused of two things. First, people say I’m a pump and dumper, stock tout, stock promoter. I admit to promoting stocks, legally.
Second, people accuse me of writing too much on religion. But people want to know about what stocks to buy, and people continually thank me for writing about the Lord. At my best, I’m a religious evangelist with a focus on silver. And I have very little respect for organized religion. Disorganized religion is far less dangerous.
So, since people think that I’m either a stock promoter, or a religious nut, I’m really honored to be here.
(Audience applauded enthusiastically.)
My speech today is on why silver is money, even though no nation on earth uses silver as money.
David Morgan has pointed out that the words used for money, and silver are the same in most Romance languages. Silver is the only real money that there is. Gold, historically, is just too valuable to use as money if an ounce of gold is worth a year’s salary, or a modest home. Even at today’s prices, as you know, it’s hard to get $500 bills!
Throughout history, Silver has been used as money in more times in more places than gold.
Silver is just not used much as money today.
Most people don’t want to know about silver, or dollars, as much as they want to know about the ratio between silver and dollars. In other words, the dollar price of silver–but most don’t even care about that.
People just want to MAKE MONEY.
I’ve been a success in numerous things, and a failure too. One thing I’ve learned is that if you study hard, and know your subject, you are much more likely to be a success. It may take longer, but it pays off, too.
So, if you want to make money, you’d better first understand the subject, and know what money actually is!
I’ve listened to many experts; and they are nearly unanimous on one thing. Don’t try to predict the dollar price of silver; because you will look like an idiot, you will most likely be wrong. And it will damage your credibility. And if silver is going past $1000/oz., why bother to say it before it happens. Just grow wealthy, and be happy.
But first, it makes me happy to help people. Second, if I don’t have any credibility, or if I don’t care if I have any credibility, then I have nothing to lose!
So, here it is–the opinion I have that everyone wants to know, and what some experts are uncomfortable in saying:
I think silver will head beyond $8000/oz., in less than 15 years. And I’ll tell you why.
There are many, many fundamental reasons why silver will go up in value. 10,000 reasons, since there are probably 10,000 industrial applications that use silver.
But it’s my job to focus, and help you focus, on the big reasons, or biggest reasons.
Some of the big reasons are the story put out by GATA, the Gold Anti-Trust Action Committee. They have shown that the central banks of the world have loaned or leased about 15,000 tonnes of gold, out of about 33,000 tonnes. Gold is counted as “on the books”, but it is no longer in the vault. It’s an unsustainable manipulation or deception, and when it ends, gold will skyrocket.
Ted Butler has also written great things about the excessive short position in the futures markets. When that manipulation or deception ends, silver will skyrocket.
And I mostly agree.
But I want to talk about the biggest fraud of all, the biggest deception out there.
The biggest deception is so big, it has warped the thinking of most everyone in this room, even myself.
This deception of what money is, is so dangerous, it can cost you your life’s savings, or even your life.
If you think money is a mark, or image, it can cost you your life.
Revelation 13 speaks on the mark of the beast, which is needed to buy and sell. Now is not the time to speak on this in detail, but on Sunday, I will give a presentation for 2 hours on the religious issues here.
There is nothing more dangerous than an ignorant religious zealot who wants to force his views on other people. I’m devoted to God, and I’m ignorant about a lot of things. But I’m getting to know money fairly well; because I’ve studied it, and I’m good at managing it.
I would be much smarter than I am, if it were not for all of the stupidity in the world; especially my own.
(I failed to use proper tone and/or beat, and was looking at my notes when delivering that line. The audience was silent, and did not laugh as I had hoped, and I had to move on.)
PEOPLE TODAY DO NOT KNOW WHAT MONEY IS. I’ve struggled to define it; over several years!
Some say what you spend is money, or that you buy things with money. Or that currency is money. Others say the dollar is defined as a certain amount of silver in the constitution, and that’s it; nothing more.
The definition of words changes over time. But essential concepts and truths do not.
Remember, the words for silver and money are the same in many languages.
Please give me your attention while I talk about the Desirable features of money, my definition that I’ve been working on.
To function as money, a monetary item should possess a number of features:
To be a medium of exchange:
* It should have liquidity, and be easily tradable, with a low spread between the prices to buy and sell, in other words, a low transaction cost.
* It should be easily transportable; precious metals have a high value to weight ratio. This is why oil, coal, or water are not suitable as money even though they are valuable.
* It should be durable. Gold or silver coins are often mixed with 10% copper to improve durability, and coins are made with ridges around the rim to prevent coin shaving or debasement.
To be a unit of account:
* It should be divisible into small units without destroying its value; precious metals can be coined from bars, or melted down into bars again, with a low percentage cost. This is why leather, or live animals are not suitable as money.
* It should be fungible: that is, one unit or piece must be equivalent to another, which is why diamonds, works of art or real estate are not suitable as money.
* It must be a specific weight, or measure, or size to be verifiably countable. You must be able to weigh, measure, and count, your unit of account!
To be a store of value:
* It should be long lasting, durable, it must not be perishable or subject to decay. This is why food items, expensive spices, or even fine silks or oriental rugs, are not generally suitable as money.
* It should have a stable value.
* It should be difficult to counterfeit, and the genuine must be easily recognizable.
To be anonymous:
* Money should not be subject to government tracking
* It should be useable for purchases in a black market
* It should not require equipment, tools or electricity to use
* It should not require a mark, or image, to be valuable, but rather, be a just weight, and measure.
So, if you want to “MAKE MONEY”, YOU SHOULD TRY TO ACQUIRE THINGS THAT HAVE THE ABOVE CHARACTERISTICS! I think silver is best, especially because silver is cheap, and will be a great store of value.
When I compare things, I compare fundamentals.
There are two ways to approach the fundamentals: first, the supply and demand: and second, the nature of the thing.
So, for two items, silver and dollars, that’s 4 areas of study (in addition to the study of money that we just went over): supply and demand of silver, and of dollars, and the nature of silver, and of dollars.
1. Let’s look at the nature of silver. Like gold, silver has all the properties of money, that we just examined and defined, above.
SILVER, SINCE 2003, HAS BEEN A GREAT STORE OF VALUE; actually increasing in value at a much faster rate than the stock market or bonds.
2. What is the nature of dollars?
Dollars are failing as a store of value. Look at commodity prices skyrocketing.
Are dollars liquid? Yes, you can make change for zero cost, and exchange a $10 for two $5 bills. But there are banking hold times as long as 3 weeks on checks. And you cannot convert dollars to silver very easily; especially if no silver is available at your local coin shop.
There is about a 7% spread for silver between the cost to buy and sell it. But is the 7% a spread on silver, or is it really a spread on dollars? There is a VAT of 17% on silver in most of Europe. Is that a tax on silver, or is it a disincentive or penalty on selling the Euro?
Durable? Cash can go up in flames, or go to zero value.
Stable value? No; the ratio of silver in dollars is changing.
Dollars are not rare; not difficult to obtain; & are going down in value.
Dollars are easy to counterfeit; and $100 bills are not always accepted overseas. Even Starbuck’s will not take a $100 bill. (Audience laughed at this joke, which my wife suggested I include.)
Dollars are traceable. There are numbers all over the place; both on the money, and on your account.
In essence: dollars are fraud. They were a promise to pay in silver. The promise was broken. They are not a just weight and measure.
Dollars are a unit of account, with no accounting!
Dollars are not essentially money. At best, they are the current medium of exchange–that’s only 1 out of 4 major things that money needs to be.
A promise is not the same thing as having received what was promised!
If people could be happy with mere promises, I’d never have to spend a dime on my kids! Even kids know the difference!
I feel stupid for having to point it out, but paper dollars are not money.
People will actually argue with me over this; and I can only assume that they are ignorant religious zealots of the worst kind, because they are so ignorant, they do not even know what they worship; that they worship the lies of the dollar.
We may call dollars money; we may think of dollars as money; but we are using the word “money” wrong; or we just do not understand what the word “money” means; as I’ve explained.
For many people in the world, the word “money” means the same thing as silver.
3. So, let examine the supply and demand of silver.
There is Zero demand for silver as a medium of exchange– it is not really used as a currency anywhere in the world. (Liberty dollar maybe, but it’s overvalued in my opinion.)
There is almost Zero demand for silver as a unit of account–it is not used for debt in most of the world. (Except by a few traders in the futures markets.)
There is now a small, but rapidly growing demand for silver as a store of value. Last year, it was 40 million ounces. This year, investment demand is perhaps up to 150 million oz/year since the introduction of the new Silver ETF?
I’m using silver as my store of value, and as my unit of account. If I acquire more silver, I consider myself to be successful.
Most of the demand for silver today is for industry, jewelry, & photography.
More than is produced each year.
That does not leave much room for investment, or monetary demand.
The Silver ETF has acquired 103 million oz. That was surprising. But silver shot up from $7.76 to a peak of $15 since the silver users made a fuss over the Silver ETF!
The amount of actual silver available for investment has been variously estimated as between 60 million to 600 million oz. Or as much as 4 billion oz. if you include all silver jewelry and flatware and tableware.
4. Finally. Let’s look at the supply and demand of dollars.
$50 trillion world bond market.
$50 trillion world paper money supply.
That’s $100 trillion of paper money.
The world derivatives market is worth $400 trillion.
$400 trillion is about a million times larger than 400 million ounces of silver.
It is impossible to exchange all the promises for payment.
But the world tends to try to cash out all at once.
People have asked me, do I think silver is a “once in a lifetime” opportunity?
No, I think it’s a “once in human history” opportunity, with no prior historic examples. Never before have conditions like today ever existed.
1. We have consumed nearly all the silver in the world.
2. We continue to consume more than we mine.
3. The entire world has totally abandoned silver as money.
But whether you know it, or can accept it, silver is money. And nothing else is.
When gold becomes too expensive, and when paper money fails, silver is the only thing left to use as money.
One of the best books ever written on trading, and highly regarded by many traders today, is “Reminiscences of a Stock Market Operator” by Jessie Livermore. In the book, he talks about how the markets totally stopped trading for up to nine months at a time during war in the early 1900’s. I know several millionaires out there, in this audience, who think they will be protected in a monetary collapse, because they have brokerage accounts and silver stocks. But nothing can replace real silver that you may need to spend on food during a time period of a market crisis. Everyone here should have at least $5000 worth of silver. Therefore, I strongly urge you to go to your local coin shop, and clean them out. The coin shop may have only $5000 to $50,000 worth of silver on hand, and most investors here can easily buy all they have. Go to the bank, get your cash, and get your silver. And get a safe at Wal-Mart, and bolt it to your garage floor, or put it in your closet.
(I had time for about 10 questions in about 10 minutes in my 30 minutes of time.)
(At the Silver Summit, I gave 2 speeches, served on 3 panel discussions, and was interviewed twice. The first interview is up at kereport.com,
and the second interview was longer, and was video recorded by monex.com. My speech on Sunday was video recorded, and the panel on Sunday was also video recorded, and I’m not sure when they will be up. I gave the speech above on Thursday, 10:40AM, to a crowd of about 150-250 people, and I don’t think it was recorded.)
(Overall, this speech was very well received–many said it was my best ever. My most favorite compliment came from John Embry, a man whom I greatly respect and who is very bullish on gold and especially silver, who told me that my speech made him realize that he’s not bullish enough on silver.)