(Bar Premiums Reveal U.S. is a Banana Republic)
Silver Stock Report
by Jason Hommel, October 2nd, 2008
The most important and most neglected news item of the last week is the increasing premiums for 100 oz. silver bars.
There are several reasons why this is the most important news item:
1. The profit opportunity, as mentioned in the title above.
2. The potential to destroy the silver manipulation once and for all, by bankrupting COMEX of silver.
3. This reveals the “two tier” structure of a US dollar exchange rate; the official dollar rate at COMEX silver, and the unofficial rate in the physical bullion market. This two tier structure is telegraphing and predicting and signaling that the dollar can lose about 40%-50% of its value fairly quickly; in perhaps about a year or so.
Here’s the indisputable facts:
As of 2pm Thursday afternoon, Kitco.com silver price (reflective of COMEX 1000 oz. bar prices) is:
As of 2pm Thursday afternoon, Amark.com 100 oz. silver bar price is:
That’s a $4.84 premium per ounce!
What a premium! How much? Let’s see: Go to:
That’s a 44.53% premium! (In the last 2 days, it’s been rising. And AMARK is reported to be out of silver!)
But AMARK is the largest bullion distributor in the U.S., or they were, before they ran out of silver, as they were Johnson Matthey’s primary distributor.
What does this mean? It means that if a person can buy 1000 oz. bars, and turn them into 100 oz. bars in a week, (at no cost) they can make 44.53% on their money! That’s a fairly high rate of return, isn’t it?
Annualized, given 52 weeks in a year, that’s a return of 4,758,150,000% per year!
In a mere 20 weeks, a person could turn $1/2 million into a billion dollars!
There are a few problems, of course.
1. Can you even get the 1000 oz. bars?
2. What is the actual manufacturing capital cost?
3. What is the actual per-bar manufacturing cost?
I’ve gotten estimates on these things over the last month. Capital costs range from $100,000 to $500,000. Manufacturing costs range from $.50/oz. to $.75/oz.
With a manufacturing cost of $.75/oz., subtracted from $4.84, leaves $4.09/oz. profit, which is a 37.6% premium.
That leaves a return of only 454,672,000% per year.
And finally, what is the size of the market to sell into? The potential buyers are spending about $1 billion on silver per year, and 100 oz. bars are probably only about 1/10th of the overall silver market. Therefore, the current maximum market is about $100 million per year right now, but rapidly growing, of course.
Thus, about $100 million worth of silver consuming buying power, buying 100 oz. bars at a significant premium of 44%, is predicting that the dollar will fall by about 40-50% in the next year.
There are several other conclusions to make from this: One or more of the following, might be true.
1. There are no 1000 oz. bars for sale, or if they are, they are in a desperate short supply. This is not 100% true. You can clearly tap into the 1000 oz. bar market from refiners and producers.
2. All the 100 oz. bar manufacturers are being bankrupted by rising silver prices driven by investor demand that they don’t want to facilitate, or they are swamped and cannot meet market demand.
3. Amark is merely price gouging.
We can eliminate Amark price gouging, because 100 oz. silver bars are selling at ebay.com now for:
$1615 selling in 15 minutes; 6 bids
$1600 selling in 1 hour; 15 bids
$1550 selling in 2 hours; 17 bids
$1525 selling in 2 hours; 11 bids.
I’ve never seen so many 100 oz. bars being sold at ebay. More bars sold, yet the price is at record premiums. This validates the market price, and/or that the market demand is far greater than the world’s manufacturing capacity for 100 oz. bars.
I spoke to one dealer today who sold a rather large lot of 100 oz. bars at $1700 each.
Finally, all of this validates that the silver market price at COMEX is manipulated.
The CFTC earlier this week announced they would re-investigate. This is like a willfully blind man saying he will begin to think about maybe trying to open his eyes.
CFTC Relents and Probes Silver Market
Persistent Complaints of Foul Play Draw the Still-Skeptical Agency to Investigate
SEPTEMBER 25, 2008
Send your letters of indignation to:
Ted Butler rightly points out that there is no need to investigate, since the facts are so clear.
Meet The New Boss, Same As The Old Boss?
By: Theodore Butler
29 September, 2008
I fully expect that the CFTC will find no evidence of manipulation, once again. How can they? If the one doing the manipulating is the U.S. government, or owners of the U.S. government, such as large banks such as JP Morgan who might be an owner of the Federal Reserve, then the CFTC are merely the employees of the manipulators! They must find nothing wrong!
Next, people are acting to help silver investors and potential 100 oz. bar manufacturers, by creating new bullion auction and trading websites. Here are two; neither is yet operable, it seems:
New Gold & Silver Auction Trading Websites:
For all those who said there is no shortage, the shortage just got worse, and in gold again:
US Mint suspends sale of 24-karat gold coins
US Mint forced to suspend sales of American Buffalo 24-karat gold coins due to heavy demand
Friday September 26
In other neglected news, there was a loud protest of about 500 to 1000 people outside Wall Street.
The people in the protest in the video below are saying:
“You broke it, you bought it, the bail out is bull shit!”
NYC Wall St. Bailout Protest 25 September 2008
Finally, let’s get to that $700 billion bail out being debated. It Is bull shit. (Please excuse my language, but that is clearly common vernacular now.) Why it is bull shit!?
Because the Fed just loaned $1.3 trillion dollars, which is $1300 billion, to the banks last week!
Fed keeps banks afloat as money market crisis deepens
Thu Sep 25, 2008
NEW YORK/LONDON (Reuters) – U.S. banks and money managers borrowed a record amount from the Federal Reserve in the latest week, nearly $188 billion a day on average, showing the central bank went to extremes to keep the banking system afloat amid the biggest financial crisis since the Great Depression.
$188 billion per day times 7 = $1316 billion!
Therefore, discussion in congress of $700 billion is totally unimportant, except as window dressing and public relations as a publicity stunt.
Yet people are protesting and debating $700 billion. They are so deceived.
What is even more neglected in being mentioned in the news is that the bail out or rescue will cost a lot more than $1316 billion, or $1.3 trillion.
If the housing market is a $30 trillion market, and if that is down 30%, then the bail out could cost $9 trillion.
And if the housing market is $40 trillion, and if housing goes down 50%, then try more like $20 trillion.
In case you care to put $1316 billion into perspective, that was actually loaned, that is going to add to the gold price. How much? Let’s divide by the U.S. “official gold hoard” of 261 million oz. of gold shall we?
$1,316,000 million / $261 million = $5042. In other words, the Fed just added a potential $5042 per ounce to the gold price!
No wonder they are sold out of gold!!!
If the people had any brains at all, and if there was no delay between money creation and inflation of the gold price, then the gold price would be more than $6000/oz. just today.
The ongoing bail outs are inflationary, which is great for silver, as it is now rising 40-50% higher than the official manipulated silver price.
James Turk explains why this is inflationary, and not deflationary:
We Are in the Sixth Inning
(1 October 2008)
There are still a few odd people who are scared of deflation, and/or who think that deflation will cause silver prices to drop, as they did during the depression in the 1930’s. Silver prices hit $.25/oz. during the depression, in part, due to a glut of silver on the world market because nations like India stopped using silver as coinage. The reduced demand for silver as a medium of exchange is what reduced the silver price.
But today, with no nation on earth using silver as money, monetary demand cannot go down, it can only change and go up.
I predict that we will have a world monetary return to using silver as money, using the silver one ounce coin as the basis. Already, many nations are making .999 fine 1 ounce silver coins, so there is already a world standard, as follows:
The US. — the silver Eagle.
Canada — the silver Maple.
Mexico — the Libertad.
Austria — the Philharmonic.
Australia — the Loony.
For those who are interested in getting 1000 oz. silver bars, while you still can, here are precise instructions:
“How to Take Delivery of a Futures Contract”
Precious Metals in the Physical Realm
By David Morgan
September 25, 2008
As always, visit your local coin shop:
If you live in the Northern California area, visit my favorite coin shop; Roger at Rocklin Coin.
(I just got back from a relaxing one week vacation, and so, this is my summary of the week’s events. Also, I should have the “look at my portfolio” updated later this evening.)