How to Get Into Silver, for Billionaires
(The difficulty of being rich!)
Silver Stock Report
by Jason Hommel, February 27, 2008
According to Forbes, there are only about 900 billionaires. However, there are also hundreds, if not thousands, of funds with many billions of dollars under management. There are also many companies with many billions of dollars in "cash"; and they might not know what to do with it. This article is for all the billionaires in the world.
Who am I? I'm a steward of a relatively tiny $12 million, and I've been studying and writing about silver and Bible Prophecy for 9 years now. I know my subject, and my market. I send my reports to 70,000 email readers. Over the years, tens of thousands of people have written me to give me advice, or to seek it, and so I'm very well connected to what is going on in silver.
I have about 35% of my net worth in physical silver, and about 50% in about 50 junior exploration mining stocks. I co-developed www.miningpedia.com which is a very excellent web site for discovering value among publically traded mining stocks.
I believe that Billionaires have unique challenges to growing their money. So, I will start off by presenting some of the same information I share with beginning investors.
Smaller Things Grow Faster June 19, 2006
18 Biblical Guidelines on how to Manage Money (and your time).
I don't know what your goals are as a steward of billions of dollars worth of businesses or property or assets, but my goals are to manage my capital more wisely than others, and to help humanity as much as I can.
I feel that both of these goals can be best accomplished by buying silver (and writing my reports).
Here, in sum, is why I think silver is the best investment opportunity in the history of mankind:
1. Silver has been consumed by industry ever since the age of electronics began at the end of World War II, when per capita consumption of silver increased in the industrial world by a factor of ten, to 7/10ths per oz. of silver per person, per year. This has consumed about 95% of all the silver ever mined in the history of mankind, which is about 45 billion ounces of silver.
Silver was available for industrial consumption for the past 63 years due to one factor; the removal of silver from the world's monetary system, which was a trend that started over 100 years ago in the late 1880's in Germany. This trend is now ending, as the bull market in gold and silver has resumed, and which started in 2001.
2. Paper money creation has never increased to the scale that it has, not in the history of the world, and new money creation rates have never been faster rate than now.
U.S money in the banks, (M3) is $13.5 trillion, and now growing at 19%
The combination of these two factors, silver running out, and paper money proliferating and failing, will cause silver to exceed the money-creation, inflation-adjusted high, of $50/oz. in 1980, when M3 was $1.8 trillion (M3 is 7.5 times as much today), which means that silver will go over $350/oz. in 2008 dollars, at some point in the near future.
Here are more of my essays that explain the bullish case for silver:
Silver Keeping Pace with Gold; Set to Outpace
Gold January 9, 2008
Now, assuming you want to buy silver, here's how to get it: (Shhh! Quietly.)!
Silver is a very small market, and if you enter it, you will likely be the only billionaire in the world trying to get some at this point, and thus, one of the richest billionaires in the world when silver runs up in price.
You will also help to cause silver to run up by at least double in price or more as you buy $1 billion worth of silver, and this action will reveal the fraud of the dollar, fraud that you likely did not help to create. You bear no responsibility for continuing that fraud.
Ending the fraud of the dollar would help make the entire world economy more efficient; and nothing could help humanity more than by helping to end monetary fraud that robs from everyone.
See my article:
But buying silver will be difficult.
Let me warn you. If you are going to try to "out trade" your other fellow billionaires, you must know that you cannot trust them. You cannot trust any of the major banks in the business who will, all of them, offer to store your silver for you. Or, they will try to talk you out of investing in silver. Or, they will tell you that they can give you "all the silver you want". Or, they will try to talk you into buying options or futures contracts for silver.
Don't trust me. Test me on this. Order silver from any major brokerage or bank. See what they say. Listen to them sqirm, or bluff.
Any silver that they say they can hold for you is "phantom" silver. Even allocated silver is not safe. I know. Morgan Stanley recently admitted in a lawsuit that is "standard business practice" in the industry.
I attended many trade shows. People tell me things. I would name more names, but that opens me up to libel claims.
I would not trust any of the major institutions, nor do I trust five of the most well known sellers of gold and silver in this industry. Their prices are too high, or they offer leveraged programs on terms worse than futures contracts, or they offer to hold your gold and silver for you.
One time, a man spoke to me at dinner and told me that he had purchased 10,000 ounces of silver from a mint; this mint is supposedly "government backed" with a AAA credit rating. In this case, the mint was storing his silver, in allocated form, and charging the nominal 1-2% storage fee. But when the man wanted to take delivery of this silver, it took 5 months to finally get it. Five months! This is a serious problem! In this case, this man also didn't want to reveal the name of this mint, because he didn't want the mint to have any financial problems of customers making a run on the mint, and potentially causing the mint to close down, because this mint is one of the primary ones serving a large portion of Asia!
Futures contracts are not safe. There are position limits at NYMEX, that are all well under your potential buying thresh-hold:
$75,000,000: Limit 7.5 mil oz. of silver @ $10/oz. (limit of 1500
contracts per trader) at NYMEX
One of the largest mints in the U.S. told me that a fund manager of some $200 billion discovered that he lived in the same city of this large mint, and decided to pay him a visit. He said that their research department decided to allocate 4% of their portfolio to silver, and he came to see how to go about doing that. Well, 4% would be $8 billion, and not that much silver exists. So the fund manager left. I don't know what he concluded. The man who related this to me, related to me other stories of difficulty in fulfilling orders. For example, sometimes, he may carry a large inventory of 100 ounce silver bars, but the client wants $300,000 of 1 oz. rounds. Not having the rounds, he may try to persuade the client to take the bars, instead. Given such numbers, you can see the difficulty that an order of $8 billion would pose.
I have been in personal contact with about 10 of the largest private coin shops in the U.S. I know from personal experience that they all have difficulty fulfilling orders of up to $300,000. Why? Because all of the large dealers suffered from the 20 year bear market from 1980 to 2000.
Most of the large coin shops try to "drop ship" orders of this size from "the dealer network", by trying to locate a seller in size, or another dealer who has "too much" inventory, and who would have to sell to a refinery.
Not all dealers are honest. Not all will tell you that this is the process when you place an order, and send your money, and lock in a price. Nearly all of the dealers will try to tell you that they can handle orders "of any size". They say this in order to attract business, but the reality is different.
One time, I ordered $200,000 of silver from one of the most honest dealers I know. This dealer, in the past, would take 1-2 days to fill an order of that size. The second time I ordered as much, he had to order from 10 different dealers to fill the order on the second day because it was a rising market.
Another time, I ordered a hundred 100 oz. bars for about $130,000. My very honest local dealer was doing the same routine, ordering from another location. I stressed to my dealer, to ask specifically if this second dealer actually had the physical bars in stock at the moment, and we specified Englehard bars, and not JM bars, and not to drop ship from another dealer. The second dealer, who is one of the largest in the nation, and located in Chicago, said they had the physical bars. But they did not. It took an extra week to get the physical silver, and I suppose the other dealer was lucky that the price dropped that week. Most bars were Englehards, but we received a few JM bars as well, proving that the other dealer lied to get the order.
Don't trust me. Test me on this. Order silver from all ten of the largest coin shops in the nation. Test them. Spread out your orders among dealers, and over time, to see how it works. Order from all of them on a daily basis for up to 10 days in a row. See how much silver you will be able to get. It won't be very much; probably no more than $300,000 worth of silver on average from any of the dealers.
You can find the largest coin shops, and learn more about various
silver products, here:
If you do that, you will discover something very quickly. Many of the dealers order from Amark, or Johnson-Matthey (JM). You can order from JM, too. But they can, and will, run out. Amark is the largest dealer in the U.S. Amark is Johnson-Matthey's largest and primary dealer to deal with the public. You might be able to get about $3 million in silver from Amark. Johnson-Matthey ran out of silver for up to 6 weeks at one point in the last 5 years.
If you regularly buy silver from the coin shops (to hide your identity), a large part of the silver that might flow to Johnson-Matthey will dry up. It will go to you, instead of the refinery, and you will deprive other industrial users of silver, who will be forced to bid up the price of silver, or be forced to go out of business.
But you won't get very much silver. You would be extremely fortunate to get even 100,000 ounces of silver in a day; a paltry $2 million worth, at $20/oz. At that rate, it would take you nearly 2 years to acquire a billion dollars worth of silver, provided that you could get it so cheaply.
Here are other figures to be aware of:
$7,000,000,000: 350 mil oz. of "identifiable" silver bullion left in the entire world, according to GFMS @ $20/oz.
$3,440,000,000: 172 million oz. of silver "owned" by the Barclays Silver ETF, @$20/oz.
$1,760,000,000: 88 mil oz. of "registered" NYMEX silver bullion (1-05-05) @ $20/oz. http://www.nymex.com/warehouse.aspx
$520,000,000: 40 million oz. of silver purchased for investment, in 2006 at $13/oz.
Finally, with so little silver available, forget trying to get a paper promise of silver. Make sure you get the real physical metal. And set up your own storage house, or vault.
Get "The Real Deal", as Ted Butler says.
There are also two industry groups that produce reports, or surveys on silver.
You ought to confirm my research, by reading their reports.
Finally, one of the largest banks with the largest warehouse supplies of silver is HSBC. They are one of the 4 acceptable depositories for NYMEX silver. The three others are Brink's, Scotia Mocatta, and the Delaware Depository.
You can't really get silver from silver miners. Silver mines produce ore. Mines ship ore to refineries. You get silver from refineries such as JM, or from banks such as HSBC. But try to get your silver quietly, and make sure you hire your own guys to store and lift it for you.
Get as much silver as you can pay for, and be responsible for, and no more. Try to get most of your silver on a "cash and carry" basis. Don't use leverage, or borrowed money. Don't follow the failed mistakes of the Hunt Brothers, who, in the late 1970's, bought more silver contracts than they could afford to take delivery on.
The Moral Failures of the Paper Longs Jan 22, 2003
Finally, in case you are a large business, state government, city, county, or small government, you ought to consider the ideas in my Silver Coin Proposal. It details how to introduce silver as money to the people, and how you can pay silver to your employees, in a voluntary way. For silver to enter circulation, which will most increase silver's value, people have to have the option to be able to earn it.
Silver Coin Proposal
May God bless you for being a wise steward of His creation, and may He
empower you to take dominion over it, and reward you for your business