4 Fundamentals of the Silver Price
(The essential nature and supply/demand of both silver and dollars)
Silver Stock Report
by Jason Hommel, June 5th, 2008
I've been writing a lot of articles lately on the
supply shortage of silver from various mints and coin dealers, but I
wanted to take a step back from focusing on that specific issue,
and present an overview of the major fundamantals again.
is a difficult task, because I need to explain why silver is money, even
though no nation on earth uses silver as money!
In many languages,
the words used for "money" and "silver" are the same, they mean the same
thing. 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, itís hard to get $1000 bills!
Throughout history, Silver
has been used as money in more times in more places than gold.
Silver is just not used as money today.
Most people are not nearly
as interested in knowing 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, or get richer.
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,
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 on silver and gold and money; 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
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.
Future Gold & Silver Prices Dec
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, why
silver will increase in value.
Some of the big reasons are
the issues brought to light 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 concentrated short position in the futures
markets. When that manipulation or deception ends, silver will
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.
speaks on the mark of the beast, which is needed to buy and sell. I
will not elaborate on that now, you can read more on that here:
money is not a mark or image, or if it is, that's Satan's
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 must be defined as a certain amount of
silver as in the constitution or the Coinage Act of 1792,
regardless of the changes since then.
The definition of words
changes over time. But essential concepts and truths do
Remember, the words for silver and money are the same in many
Please give me your attention while I talk about the
Desirable features of money, my definition that I've been working
To function as money, a monetary item should possess a number
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
* 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
To be a unit of
* 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
* 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!
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
* It should be difficult to
counterfeit, and the genuine must be easily recognizable.
* Money should not be subject to
* 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 kinds of fundamentals: first,
the essential nature of the thing, and second, the supply
and demand. The first is much easier to determine.
two items, silver and dollars, that's 4 areas of study (in addition to the
study of money that we just went over): the study of the nature of
silver, and of dollars, and the study of the supply and demand of
silver, and of dollars.
1. Letís look at the nature of
silver. Like gold, silver has all the properties of money, that we
just examined and defined, above.
Most importantly, silver has been
a great store of value since 2003 since it has been actually
increasing in value at a much faster rate than the stock market or bonds.
It is ok that silver is not the common medium of
exchange at this time; that only proves it has less demand than is
reasonable; which proves that now is a good time to buy it, and use it as
a store of value!
2. What is the nature of
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, and if delivery of silver is 6-8
weeks, which shows that dollars are not liquid.
There is about a 7%
spread for silver between the cost to buy and sell silver. 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 getting out of the Euro? Depends on your perspective, I
Durable? Cash can go up in flames, or be devalued to
zero value through inflation.
Stable value? No; the
ratio of silver in dollars is changing.
Dollars are not
rare; not difficult to obtain; & are going down in
Dollars are easy to counterfeit; and $100 bills are not
always accepted overseas. Even Starbuck's will not take a $100
Dollars are traceable. There are numbers all
over the place; both on the money, and on your account.
dollars are fraud. They used to be a promise to pay in
silver. The promise was broken. They are not a just weight and
Dollars are a unit of account, with no
Dollars are essentially not 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
Paper money is actually a failed promise to pay
real money which is silver. They are like gift certificates issued
by a bankrupt restaurant who claims they are ok as long as other
restaurants will accept them!
It's so obvious that I fear that I'm
being condescending for pointing it out, but paper dollars are not
But I must point it out because 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 that they do
not even know what they worship; that they worship false images
printed on paper and the lies of the dollar system.
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 -- because it is not really used as a
currency anywhere in the world.
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, and by a few
issuers of silver certificates and pool account programs, and by
investment banks who offer to hold your silver for you.)
now a small, but rapidly growing demand for silver as a store of
value. In 2007, it was about 20 to 60 million ounces, depending
on if you trust the statistics of the Silver Institute, or the CPM
groups, respectively. This year, investment demand is perhaps up to
150 million oz/year since the introduction of the new Silver ETF, or the
raging physical demand of silver as seen by the doubling of production of
Silver Eagles by the U.S. Mint, and respective shortages of that
silver product and others such as scarce 100 oz bars.
using silver as my store of value, and as my unit of account. If I
acquire more silver, I consider myself to be successful.
the demand for silver today is for industry, jewelry, &
More than is produced each year.
That does not
leave much room for investment, or monetary demand, (which is termed a
"surplus" by the groups who publish statistics on silver).
Silver ETF has acquired 179 million oz. That was surprising.
But silver shot up from $7.76 to a peak of $21/oz since the silver users
feared, in 2005, that the ETF would cause a silver
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
4. Finally. Letís look at the supply
and demand of dollars.
$50 trillion world bond market.
trillion world paper money supply.
That's $100 trillion of paper
The world derivatives market is worth $700 trillion
$700 trillion is a million times larger than 700 million
ounces of silver.
It is impossible to exchange all the promises for
But, like in a game of musical chairs, 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?
think it's a "once in human history" opportunity, with no prior historic
examples. Never before have conditions like today ever
1. We have consumed nearly all the silver in the
2. We continue to consume more than we mine.
The entire world has totally abandoned silver as money.
you know it, or can accept it, silver is money. And nothing else
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 who read my
letters, 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 $500 to
$50,000 worth of silver on hand, and many investors can easily buy all
they have. Go to the bank, get your cash, and get your silver.
And get a safe at Wal-Mart or a Gun store, and bolt it to your garage
floor, or put it in your closet.
(This essay is a re-write of my Speech given at the Silver Summit
September 26, 2006).
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feel free to copy, translate, improve, re-write, re-post, any and all
of my works to promote your own services. (It generally works best
for you if you give credit, such as a web link, or reference to my
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