Tuesday, January 22, 2013

Realities Of The Physical Silver Market And The Economy

Printed money is like heroin, the patient needs bigger and bigger doses until it finally kills him or makes him totally dysfunctional. And this is what is happening to the world economy. Government benefits are increasing and the people are in need of even greater stimulus as unemployment escalates.  - Egon Von Greyerz, Matterhorn Asset Management
We are starting to see the unmistakable signs of the law of supply and demand gripping the market for physical silver.  By this I mean the endless of supplies of paper fiat currency chasing after the relatively fixed supply of physical silver.  Last week the U.S. Mint announced that it had run out of its initial production of 2013 Silver Eagles and that new shipments would not be available until late January.  This is just one of many examples.

What this means is that we are going to see a much higher price for silver over the next several months, as the Comex paper market bullion bank manipulators begrudgingly retreat in order to allow a higher market price to possibly induce some supply from existing holders how bought at lower levels.

I discussed this topic in an article over the weekend published by Seekingalpha:  LINK

On another topic, it looks like the economic numbers are starting to reflect the economic downturn that I've been expecting and have been forecasting on this blog.  The not widely followed/reported Chicago Fed National Activity Index came in at .02,  significantly below the expected reading of .28.  Uglier, the 3-month moving average was -.11.  This index is a weighted average of 85 monthly indicators of national economic activity.

In addition, the more widely watched/reported Richmond Fed business activity index literally plunged to -12 in January from an expected reading of 5 and a December reading of 5.  It was the biggest miss vs. expectations since September 2009:  LINK

Finally, existing home sales dropped 1% in December.  This is based on a seasonally adjusted annualized number, so theoretically December's seasonal effect is washed out of the calculation.  I haven't had a chance to run through the actual numbers to see what the real number looks like, but no doubt they are not good.  The excuse being given is a lack of inventory, especially at the lower end.  All that means is that big investment funds have stopped buying blocks of crappy low end homes because the rental market is starting to saturate.   I know this is for a bona fide fact in Denver.  More on housing soon, as I'm working on a big report about it.  Soon the music will stop and a lot of the "speculators" who have appeared this year buying and flipping will be left holding homes they can't sell. 

What all this means is that we can expect a continued increase in the supply of printed paper money as the Fed/Government policy makers desperately try to artificially stimulate/revive demand.  The paper money will continue chasing the dwindling availability of physical gold/silver to higher price levels.  Don't blame me if you are left holding bundles of paper dollars and are having a hard time finding physical gold/silver to buy with it at some point down the road.


  1. SEC Bars Egan-Jones From Rating The US And Other Governments For 18 Months

    From the SEC: "EJR and Egan made a settlement offer that the Commission determined to accept. Under the settlement, EJR and Egan agreed to be barred for at least 18 months from rating asset-backed and government securities issuers as an NRSRO. EJR and Egan also agreed to correct the deficiencies found by SEC examiners in 2012, and submit a report – signed by Egan under penalty of perjury — detailing steps the firm has taken."


  2. Hey Dave, I noticed that Allied Nevada Gold (ANV) is down over 2% today in reaction to disappointing quarterly results and guidance, at the same time that gold and other mining stocks are rising today. At under $25, would you be buying ANV on the dip? I remember you liked it at one time. Any elaboration of why you have your opinion on it would be helpful.

    1. ANV's numbers were released Friday morning. What part of "record production" do you think was disappointing. Mining is a "lumpy" business. ANV is an easy company to analyze. I still like it. Don't have time do an in-depth analysis here unless someone wants to pay me for my time.

  3. From your SeekingAlpha link:

    "Keep in mind that, technically, the U.S. Mint is required by law to produce enough silver eagles to meet demand."

    This is incorrect. The law was changed in 2010. It is now “quantities and qualities that the Secretary determines are sufficient to meet public demand.”


  4. What makes the 2013 Silver Dollar so special (or 2012 ones that got sold out in mid-december)? At Ampex, you can still get silver dollars in random years or in canadian coins. Why the big rush for people to buy out the 2012-2013 coin and not wipe out the inventory on the other coins? (sorry but I'm not an expert in Gold/Silver like everyone else is here).

  5. Do you know how many times in the past few years I've read that supply is tight and the price is going to go up? What makes this time different?

  6. GOP Moves to Suspend Debt Ceiling Until May

    http://www.cnbc.com/id/100399157]GOP Moves to Suspend Debt Ceiling Until May

    [QUOTE]House Speaker John Boehner indicated Tuesday that Republicans will vote on an extension of the federal debt ceiling to allow Treasury to borrow money until mid-May. The move would reverse the order of a series of expected debt and spending fights in Washington, an effort designed to put the GOP on more sound political footing.

    The Speaker said the measure would be tied to a provision that would suspend the pay of lawmakers if they do not agree to a budget by April 15th. A vote is expected Wednesday.[/QUOTE]

  7. Of all the talk about how much gold is, silver will get estronomical levels yet I have heard no one say what the value of the precious metals will have when the sovereign put a price on its value? That is what I want to know. Does anybody know whqt these bastards will set its price?. I do not care how high both go gold and silver go the $1000000. fiatquestion is --what will the governments price be?

    1. China could well set the price. Think about what price it would take if could get an honest accounting of all the gold held by Central Banks in order to achieve a 100% backing of the global money supply...

    2. The latest # for gold to back existing printed US dollars is somewhere around 6500.00 an oz. I have seen worldwide numbers in excess of 10k.

      At the old and usual 15-1 ratio, before HSBC and JPM decided to manipulate silver, silver would be trading around...oh...a shitload higher than it does now.

      It is the white metals that I find intriguing. One palladium platinum miner in the US. That shit is really rare.

    3. Would a 100% backing be necessary. I've heard analysts, like Jim Rickards, state that a 40% gold backing of the monetary supply would be sufficient to regain the confidence of the public. I think that worked out to about $5,000/oz., but that was before QE4.

    4. @Roger And Rickards is likely right that that might be the level it settles at, but when the 15-18% range it's currently being held in fails, it will create a firestorm of short-covering that will likley take it all the way to near 100% like last time. This is Sinclair's argument and he also doesn't use the more conservative M2 valuation model that Rickards does.

      Me? I'm somewhere in between.

  8. MUST SEE TV: The Untouchables

    FRONTLINE investigates why Wall Street’s leaders have escaped prosecution for any fraud related to the sale of bad mortgages.


    1. Lanny Breuer, Justice Department criminal division chief, is stepping down


      now he moves on to collect...read the comments...everyone's disgusted.

  9. Central Banks Repatriate Gold: How Will This Affect Investors?

    “Germany is saying that gold is money,” says Jim Rickards, author of Currency Wars: The Making of the Next Global Crisis. Otherwise, says Rickards, they would just leave the gold where it currently is stored.

    And Germany isn’t alone. There’s talk that the Netherlands and Azerbaijan will also repatriate gold reserves.

    China, the second largest global economy but the sixth largest holder of gold, according to the World Gold Council, is increasing its gold reserves, Rickards tells The Daily Ticker.

    “If the Chinese repeat their pattern I expect late this year or early 2014 the Chinese will announce, ‘We’ve got 3,000 tons or maybe 4,000 tons.’ That will be a shock because suddenly the world will wake up and say why is China buying all this gold?" says Rickards.

    He says the the reason is obvious: “Gold is the real base money.”


  10. A major consideration in gold loans/leases was that the arranging gold bank undertook a guaranteed rollover on most commitments.

    The announcement of German repatriation of gold will over time impact the tendency and ability for gold loans/leases to be renewed. The net result of this is a significant amount of gold that will have to be purchased in order to pay down the loans/leases starting now and accelerating in 2015-2017

    CIGA Luis

    Banks in trouble over outstanding gold loans
    Updated : Wed, January 23, 2013,12:26 PM (GMT+0700)

    While gold owners are no longer able to store their precious metal at banks for safety and interest, the credit institutions themselves are in trouble over a huge amount of outstanding long-term loans in gold.

    Banks must settle all of their gold bullion deposits by June 30, while most of the lending in gold is under a term of five to ten years, they said at a meeting on Tuesday.

    “Customers cannot repay their five-year loans in gold with us from now to June,” said Do Minh Toan, CEO of ACB.

    Toan said it may take a bank three to four years to fully settle the outstanding loan.

    “Hence, banks may have to ask their gold borrowers to convert their loan into Vietnamese dong, or earmark money to buy back the gold,” he added.

    The State Bank of Vietnam should provide advice on this issue soon, he urged, adding that ACB’s outstanding gold loans are over 100,000 taels.

    Dong A Bank CEO Tran Phuong Binh also said his bank has considered negotiating with borrowers to change from gold loans to VND loans.



  11. How crazy?

    Last week, I delved a little deeper into the thesis that the current bubble phase is uniquely precarious, specifically because bubble effects have turned so systemic and, ironically, also much less conspicuous. I was reminded by Bernanke's comments that I had failed to address a key analytical point: the government finance bubble these days inflates largely outside of the private lending markets - outside the purview of traditional bank supervision and regulation. And while I would contend that the Fed remains uninformed in the nature of bubble dynamics, it is also clear that when it comes to bubbles the Fed is at best fighting the last war.

    From my point of view, the Federal Reserve System has essentially made no progress on the bubble issue. Largely absolving itself of responsibility, the Fed explains the "housing bubble" as predominantly a failure in mortgage lending supervision and regulation. There is no recognition that Fed monetary policy had a profound impact on the pricing and trading of mortgage-related debt instruments - and that accommodation of a securities market speculative bubble was a prevailing force behind the mortgage finance bubble episode.

    There has been no recognition of the profound role the Fed plays in distorting risk perceptions throughout the marketplace, in the process encouraging risk-taking and leveraged speculation. There is no appreciation for how "activist" monetary policy has so impacted incentives (hence behavior) throughout the securities markets and financial industry overall.

    Apparently, the Bernanke Fed fails to recognize that its policies to this day foment even greater market distortions and bubble excesses. And, clearly, "supervision and regulation" have not - and will not - protect the system from market-based excesses, whether it be over-issuance of suspect marketable debt instruments, speculative excess or destabilizing financial leveraging.


  12. Squatting in style: 23-year-old occupies empty $2.5 million Boca home

    Boca Raton —
    Andre Barbosa is squatting in style.

    The 23-year-old has moved into an empty $2.5 million mansion in a posh Boca Raton neighborhood, using an obscure Florida real estate law to stake his claim on the foreclosed waterside property.

    The police can't move him. No one saw him breaking into the 5-bedroom house, so it's a civil matter. And the real owner, Bank of America, isn't responding to questions about the home.

    It's driving his wealthy neighbors crazy.

    Barbosa also posted a notice in the front window naming him as a "living beneficiary to the Divine Estate being superior of commerce and usury."

    Sunrise real estate lawyer Gary Singer said Barbosa is invoking a state law called "adverse possession," which allows someone to move into a property and claim the title — if they can stay there seven years.

    It's the most valuable grab since the adverse possession law started being used in a handful of cases that have popped up in the Palm Beach County Property Appraiser's Office over the past three years. Soon after Bank of America foreclosed on the property in July, Barbosa notified the Palm Beach County Property Appraiser's Office that he was moving in.

    Police were called the day after Christmas to the home at 580 Golden Harbour Drive, but did not remove him. He presented cops with the "adverse possession" paperwork, according to the police report.

    Houston said that the home had been empty for about 18 months. Property records show it was sold to a family in 2005 for $3.1 million. The deed is currently valued at $2.5 million, according to county records. The county appraiser's office lists the total market value of the 7,522-square-foot house at $2.1 million.


  13. Breuer Identifies Real Clients on Frontline then Quits

    Lanny Breuer is out as head of the Criminal Division of the Department of Justice, according to the Washington Post. After his ratlike performance on Frontline (transcript here) it won’t be long before we find him at some creepy New York or DC law firm defending his best friends, the banks and their sleazy employees. His legacy is simple: too big to fail banks can’t possibly commit crimes, so minor civil fines and false promises of reform are punishment enough. Jamie Dimon couldn’t have put it better.

    The persistent questioning exposes Breuer’s idea of a hard look: he and his crack prosecutors read the offering documents and let the lawyers for the crooks explain why they make it just fine. They don’t need to issue subpoenas for e-mails that drive the civil cases filed by retirement funds and hedge funds that got screwed by the megabanks. They don’t need to haul the clerks and the functionaries into Grand Juries and find out what they knew and who they told. They don’t need to work up the chain to their bosses and on to the top. They don’t need to identify the lawyers from those white shoe firms that wrote those weasel words into the documents, haul them into the Grand Jury room and find out exactly what they knew and what those words meant. And most important, there is no need to let a jury decide their guilt. Breuer does all that for us.
    Breuer is sleazy. But remember, he takes his orders from Attorney General Eric Holder and President Barack Obama. This administration refuses to prosecute.


  14. Physical silver is especially attractive relative to Golden Minerals wallpaper.

  15. The president is going to announce that Mary Jo White will be the new chairman of the SEC. Here is a little background info on Ms. White:

    She is currently chair of the litigation department at Debevoise & Plimpton.

    Of which lists the following as clients: AIG, American Airlines, American Express, AXA, BNP Paribas, The Carlyle Group, Clayton, Dubilier & Rice, The Coca-Cola Company, CNN, Delta Air Lines, Deutsche Bank, Gap, Goldman Sachs, Hasbro, International Paper, JPMorgan Chase, Kelso & Company, MetLife, National Football League, National Hockey League, NBC, The New York Times Company, Providence Equity Partners, Prudential Financial, Polyus Gold, Siemens, Shell Oil Company, SONY, Universal Music Group, Verizon, Yahoo!.

    The more things change, the more they stay the same.


  16. MaRY Jo WHiTe:


    from prosecuting to protecting

  17. Bernanke's Hammer: When You Have a Printing Press, Everything Looks Like a Monetary Transaction

    This turning of things upside down is what has been called Rubinomics, the principle that by supporting the buying of certain select instruments such as SP futures ahead of a crisis, one can more efficiently avert a financial problem than by allowing the markets to reflect the fundamentals, and then to clean up the mess afterwards. It's cheaper and easier he observed.

    It is the belief that rather than an instrument of price discovery within the real economy, the financial markets ARE the economy, and will lead rather than follow. And it has become a form of financial totalitarianism through the manipulation of policy and money.

    It should also be noted that Robert Rubin articulated this while he was the Secretary of the Treasury, and he somehow persuaded Greenspan, then the Chairman of the Fed, to go along with it, shortly after the Maestro had made his famous 'irrational exuberance' speech. Although it should be noted that Greenspan had already found that tool, and used it. He merely took it to another level, not as a response to be used to a crisis as in the case of the Crash of 1987, but as a proactive tool of financial engineering.

    And this was the genesis of the principles of Modern Monetary Theory, which in fact is a concept as old as the hills, appearing over again with different names, and the source of much recent misfortune through several Presidencies.

    "Notwithstanding anything said or done by the Congress this year, operating through trained surrogates such as Geithner, Summers and others, Robert Rubin is still pulling the economic and financial strings in Washington. The fact that there is a Democrat in the White House almost does not seem to matter. President Obama arguably has a subordinate position to Rubin because of considerations of money."

    Chris Whalen, The World According to Robert Rubin

    And this is the problem I have with this Modern Monetary Theory that would save the system by placing the ability to simply create money in the hands of the Treasury, to be wielded such titans of sound judgement as Robert Rubin, Hank Paulson, and Tim Geithner, with oversight perhaps by those incorruptibles and paragons in the Congress.


  18. When SP500 starts correction, HUI will drop to 300, see you there...

  19. Wo ist das Gold?

    Gold-Initiative bereitet der SNB Kopfzerbrechen
    von Lukas Hässig - Muss die Schweiz ihr Gold aus dem Ausland heimholen? Der SVP-Initiative, die das fordert, fehlen nur noch 10'000 Unterschriften. Die SNB könnte in Teufels Küche kommen.

    Where is the gold?

    24th January 2013 09:18;

    Switzerland has to get home to her gold from abroad? The SVP initiative calling for the missing, only 10,000 signatures. The SNB could get into trouble.

    Where are the 1,040 tonnes of gold the Swiss National Bank? The question is now being seriously discussed with us. The response of the SNB remains nebulous. Most of it is here, but some lie abroad, said the central bank. "We do not want to be precise," says SNB spokeswoman Silvia Oppliger. "Maybe we will express more precisely, should the gold initiative come about."

    German gold repatriation provides in USA for red heads

    The German Bundesbank initially thought that she needed to accept the emotional issue any further. But so are a growing number of applied citizens and politicians were not satisfied. They put the central bank so long under pressure until it gave way recently. Now bring the Germans back 674 tonnes of gold from the U.S. and from France to England. This corresponds to a value of 27 billion euros currently.

    The large gold repatriation of our northern neighbor provides worldwide headlines. «Germany Moving Its Gold Back Home To Satisfy The Paranoid", headlines the U.S. Internet newspaper Huffington Post; pure populism to appease a population that is seeing ghosts. In Germany, had previously taken hold doubt the actual existence of the gold that is stored in the gold vaults of the Americans. The bars may indeed be covered with a thin layer of gold and otherwise consist of inexpensive iron was feared.

    SNB would have to buy up to 100 billion gold

    Interestingly, Switzerland has been a long time before the Germans and taken without public vertebral the topic. Circles from the People's Party launched 16 months ago, the gold initiative. Because the project in parliament remained chance would just started as the last remaining means an initiative, the initiators said then. By referendum, they want to force the SNB to store all the gold in Switzerland and sell no single ton more. In addition to the SNB within 5 years after voting to increase their gold holdings massively so that it accounts for a fifth of the minimum in the whole balance.

    At current prices, the rest would go into the money. Currently, the share of gold in all the assets of the National Bank is only at 10 percent. If the SNB reduced its balance sheet is not strong, then it remains a possible adoption of the initiative no other choice than double its gold reserves to 2000 tonnes.

    A ton of gold currently costs about $ 55 million. Now can be expected: 2000 tons came to 110 billion dollars, equivalent to about 100 billion francs. By comparison, the SNB now has a capital of 62 billion francs. This does not include higher gold prices that could arise due to the demand of the SNB.

    Headache at the guardian of the currency

    Where did all that money to come for gold purchases is not clear. It would be nice to reduce the mountain of about 170 billion euros in order to buy gold bars. Only it would take for the many Euros first buyer, and the single currency would yet remain so stable that billion-sales of the SNB would not immediately strengthen the franc against the euro again. This consideration alone makes it clear that the gold initiative although many Swiss arrives, but whose implementation the responsible persons would cause big headaches.

  20. Theirs going to be two types of money available gold and paper money. I believe gold will become illegal.