(Oh, the Irony!)
Silver Stock Report
by Jason Hommel, November 15, 2008
I have listed a tiny amount of 10,000 ounces of silver for sale at www.seekbullion.com. 100 Engelhard 100 oz. bars.
These are the nicest bars in my collection, with the best Hallmark available. They stopped making these bars about 20 years ago! Engelhard was one of the first to make a 100 oz. bar in the 1970’s and stopped making them in the 1980’s.
Auction closes Wednesday, 6pm Pacific time, 9pm Eastern. I decided to let this auction end in the evening, so people can bid after work.
I’m auctioning silver to buy more silver. I’ll try to use the proceeds to buy more silver in the form of the cheaper 1000 oz. bars, while they last, and have it fabricated into more 1 oz. rounds or bars. The 100 oz. bars command a high premium at ebay.com or elsewhere.
Price Indication: 100 oz. Bar Premiums average about 40-50% over spot prices:
Think of the irony of the following:
The businesses who scream the loudest that there is no such thing as a silver shortage are the ones who have the longest lead times and delays in shipping silver, with delays of up to several months.
Meanwhile, I, who have well documented the shortage of silver at many of such businesses through feedback and testimonials from hundreds of reports from my readers, I have silver available for immediate delivery, as I can ship silver the same day that it is paid for through the auction site at seekbullion.com.
Think about that. Which business is operating in an honorable and free market way? Thus, which business is telling the truth?
The truth is that the silver shortage exists! And yes, shortages appear in forms of retail silver because the public started buying silver ten times more than usual, with very few of the public as sellers, in the spring of 2008, when silver crossed $20/oz. Then, as silver dipped, people bought even more silver.
The truth is that the silver shortage has shown up the most at those businesses who are operating on the verge of bankruptcy and who have short positions that went sour during this new bull market in silver that started 5 short years ago in 2003.
Many dealers and mints tell me the same thing. They all know who the guys in this business are who are in trouble, the same ones that I’ve already identified time and time again.
And those who have been in business over 20 years tell the same tale. The honest dealers always have to compete with others who spend the most money on advertising and who have the lowest prices who always end up going bankrupt sooner or later.
The primary trouble with recommending silver in today’s world is this: If I merely tell you to buy silver, but don’t tell you where to get it or how, there is a much greater than 50% chance that you will get scammed and buy silver from businesses who are bankrupt or who are about to go bankrupt or that you will buy a paper silver promise from a bankrupt institution that is worth nothing.
The overall systemic “silver shortage” is much, much, much, much, much, much, much, much, much, much, much, much, much, much, much, much, much, bigger than the lack of retail items.
I wrote the word “much” 17 times, because the size of market of the paper silver market, which shows the systemic silver shortage is about 17 times bigger than the retail silver market!
I estimate that there is about $17 billion worth of “paper silver” out there in the world in the form of silver futures contracts, unbacked unallocated accounts, and ETFs. That’s about $7 billion in futures contracts, and I’d estimate an equal amount of another $7 billion in unallocated “bullion” accounts at various LBMA member banks, $2.2 billion in the SLV ETF, and $1.5 billion in paper certificates with the Perth Mint.
The 2008 Perth Mint annual report is out:
If any of my readers still hold Perth Mint certificates or unallocated accounts, you will want to read that report to see if you can discover where your metal went.
I repeat: LBMA banks ADMIT that unallocated accounts are merely a dollar priced liability and do not need to have any real metal behind them. Read their own description and disclaimer of unallocated accounts here:
“This is an account where specific bars are not set aside“
“the balance represents the indebtedness between the two parties.”
“The client is an unsecured creditor.”
In contrast to the approximate $17 billion of silver liabilites and “indebtedness”, there is probably less than $1 billion worth of physical silver available to buy.
And meanwhile, the government prints up $700 billion in a bailout, that is really more like $3,000 billion to $10,000 billion.
So, if I say to buy silver, to protect yourself from the paper money scammers, and if you get paper silver instead, which is about 17 times as likely to happen, then you are likely to get scammed by the scammers that you are trying to protect yourself from.
That’s why there are “position limits” that apply to longs in the futures markets, but not to the shorts.
The position limits prove there is a shortage of the 1000 oz. bars that they are afraid they cannot obtain to deliver to meet the terms on their unlimited numbers of short sale contracts.
Nevertheless, it is possible to buy 1000 oz. bars in small quantities of only a few hundred at a time, but that does not disprove the broader and greater silver shortage worldwide, because it’s a matter of scale.
The mines produce 650 million ounces of silver per year, but the futures contracts often exceed 800 million ounces, while only 130 million ounces sit at the COMEX warehouses, and only about 75 million ounces of silver back up the LBMA member bank “unallocated” accounts.
So, in that context, 300,000 ounces of available silver which can, indeed, be purchased from Penoles (minimim order size) is nothing, and not even remotely capable of backing up the institutional and systemic shortage of silver that exceeds $17 billion, or about 1,700,000,000 ounces.
Further, silver investors are only buying about 75 to 100 million ounces per year. That’s a paltry 2 million ounces per week, or less. Any significant increase in investor demand will cause further shortages of investment silver products such as 100 oz. bars and rounds, and will put a further strain on the limited 1000 oz. bar supply as well.
Silver investors are the strongest buyers in the silver market. They are willing to “pay any price” to obtain one of two major monetary elements that are available on earth to protect their wealth. They can potentially outbid most all other buyers for other uses, and yet, most other uses can also bid silver prices extremely high, because such small amounts of silver are used in industrial applications, and most often, there are no substitutes.
The big change to silver in 2008 was the dramatic increase in investor buying, and the dramatic decrease in investor selling. At this point, investor buying will likely continue to increase.
Gold Shortage news stories:
Gold Runs Out In Germany
London Evening Standard
October 12, 2008
Gold Runs Out In Dubai
October 27, 2008
India likely to face gold shortage in future: experts
Silver Shortage news stories:
Gold Holds its Ground, Despite Gold and Silver Shortage
October 27, 2008
Quote: “The Canadian Mint, Austrian Mint, and other World Mints are waiting for 1,000 ounce Gold and Silver Bars so they can mint coins and fulfill backorders. Even bars are in extremely short supply. “
More Signs Of A Silver Shortage
4 November, 2008
Unfortunately, I cannot ship bars into Canada. Fortunately, I found a source for my Canadian readers: Last week, they got in 50 of the 100 oz. silver bars.
They are charging $1695 Canadian, as of last week, for 100 oz. silver bars.
Western Coin and Stamp
2-6380 No. 3 Road
Richmond, BC V6Y 2B3