Table of Contents:
1. Gold & Silver vs The US Dollar
3. The Large Short Position in History
5. Economic Realities of the US Economy
1. Gold & Silver vs The US Dollar
Let us compare gold and silver investments to the U.S. dollar from the beginning… to more importantly 9/11 2001.
Gold, as you can see by this simple yet visual truth – gold has been money since Genesis, where God speaks of the land being rich in Gold. Fast forwarding to Revelations, you see where Jesus says in 3:18, “I counsel you to buy from Me gold refined in the fire, that you may be rich!” This clearly states that we will see it as the most important form of money until the end time. Understanding the truth of the historic timeline of gold, it is essential to know why your net worth is dramatically shrinking and your retirement will never look the same unless your holdings are positioned to protect a portion of your retirement reserve with physical gold or precious metal positions.
PUT IT SIMPLY!
Let’s look at it like this:
Take a paper dollar from the past, like this one:
There was a time when you could take this paper dollar to the bank and they would redeem it to just shy of an ounce of silver. Back in the 1950’s, you could buy 5 gallons of gas with that paper dollar bill. That means you could also buy five gallons of gas with the ounce of silver.
Fast forwarding to 2012, silver is no longer on the dollar or redeemable by dollars. Your paper dollar is now an IOU from the Federal Reserve, which remember the Federal Reserve is neither Federal nor does it have any reserves.
Trading in the same ounce of silver in 2012 as in the 1950’s, you can roughly get $28.00 per ounce, which would buy you not 5 gallons of gas as it did back then, but almost 9. Not only can you buy the same as in the 1950’s but you can now buy over 80% MORE! Now take that same dollar paper bill… how many gallons can you buy now?… right, not even 1 gallon!
» Contact Cornerstone Asset Metals today to learn more about inflation protection through precious metals investing.
2. Why You Should Invest in the Silver Market
Quite simply, silver is in a bull market. The price has risen sharply over the past few years, from $5 in 2002 to almost $28 today. The history of silver shows that, like gold, it is money. The big difference is that while silver is money, it is also an industrial metal. Did you know that in over 14 languages the word for ‘silver’ and ‘money’ are the same? You’ve heard of the gold standard, but it actually replaced the silver standard in the 1800’s. Unlike gold, whereas most of the mined stock is still in existence, most of the mined silver has been used up and is in relatively short supply!
However, new uses for silver are being invented and applied every day! The superior properties of silver have been apparent in several applications for many years, while new technologies are discovering silver’s superior qualities.
In 2006, 39.8 million ounces of silver were produced as coins. Silver has been used as money as far back as 550 B.C. and continues to be used to this day in some countries including Mexico. Since silver was more plentiful and of less value than gold, it served as a practical means of exchange. Today most of the silver produced is consumed in one form or another with only 64 million ounces per year set aside for investment purposes. With such a small amount of produced silver actually making it to market, the price of silver will see some spectacular gains when even a relatively small amount of silver is sought for investment.
It comes down to simple supply and demand fundamentals. The long bear market for gold and silver has led to a lack of investment in discovering new silver mines worldwide and now that investment and industrial uses for silver are skyrocketing, the price has no choice but to go up.
In 2006 the supply and demand of silver reached 911.8 million ounces. As demand increases for both investment and industrial application, this figure will become skewed, needing more supply to meet the demand needs. The only remedy for this will be higher prices.
Exploration for silver is definitely picking up but it takes from seven to ten years to bring a mine on stream. Exploration was at just $2 billion worldwide in 2002 and picked up steadily to over $5 billion in 2005. These figures are just a small portion of the total worldwide exploration budget being spent this year. Many new companies are beginning to explore as they see this as a new frontier with a long and sustainable life.
Recently, the physical silver and paper (futures) prices have begun to diverge. While futures contracts can be manipulated without any actual silver changing hands, the physical market cannot. Demand for silver as an investment has recently picked up pace, and there are stories of lack of physical silver from dealers throughout the world.
This divergence will continue and retail investment in silver will become increasingly difficult to obtain. In my and many experts’ opinions, silver will be well over $100 an ounce by the time this bull market nears its end.
» Contact Cornerstone Asset Metals today to learn more about inflation protection through precious metals investing.
3. The Largest Short Position in History and the Coming Squeeze
Just what is a short? In essence, shorting is the opposite of holding a ‘long’ position on something. Thus, as a ‘short’, one anticipates a certain stock or commodity to perform poorly. A more thorough definition for shorting reads as follows: the selling of a security that the seller does not own, or any sale that is completed by the delivery of a security borrowed by the seller. Short sellers assume that they will be able to buy the stock at a lower amount than the price at which they sold short.
This risky assumption can lead quickly to a ‘short squeeze’ which happens when the following occurs: the price of a share rises and investors who sold short, rush to buy it to cover their short position and cut their losses. This, in turn, drives the stock price even higher, resulting in many more short sellers feeling compelled to cover their positions. Short positions of this description (perhaps other types as well, such as the infamous ‘naked short’) have existed on New York’s Commodity Exchange, Inc. (COMEX) for the past 20 years.
The extraordinary thing regarding the silver short position is that of all the other commodities listed on COMEX, only in the case of silver has there existed a short position larger than that of the total world production and known world inventories combined. I guess that means silver wins the ‘boobie’ prize? But every coin has two opposing faces, because when shorting something, one runs the risk of having to buy their shares back with limitless losses, that is, when those on the ‘long’ side choose to take physical delivery of their silver.
Thus, when the price of silver really starts to rise, the short players are going to be forced to cover, that is, buy back their shorted shares, which will, in effect, turn this long bearish trend into a stampeding bull of colossal strength as more and more of the doomed shorts fold. They will try to buy back their physical silver, but being in such ‘short’ supply, this will only serve to push the price higher and higher until one day it might finally reach its true free-market price. Upwards of $100 an ounce is not unreasonable, and I look forward to the day as I continue to put my money where my mouth is.
» Contact Cornerstone Asset Metals today to learn more about inflation protection through precious metals investing.
4. Those Foolish ‘Paper Longs’
Amazingly, silver is so cheap, that many find it much too cumbersome to invest in. It really is quite a load for someone who wishes to take ownership of a million dollars worth of physical silver bullion. At $7.80 per oz (10/25/05), that would amount to over 5 tons of silver! Thus, many investors want to invest in silver, but without the hassles of transportation and storage. One way for them to accomplish this is through the purchase of Silver Bank Certificates. But there is one major problem with Silver Certificates: real silver exists to back of these paper contracts.
Reasonable estimates have determined that about 1 billion ounces of silver exist in this paper form. Only about 500 million ounces (at most) of silver is know to exist in above ground refined forms. This means that silver contracts alone represent an estimated 2 times the amount of silver actually in existence. Obviously, these silver contracts will not be able to be redeemed for anywhere near their face value, if anything at all, when the price really does explode.
Also, bear in mind that 1 billion ounces of silver is only worth about $8 billion dollars, so the number of such certificates in existence is likely to be much higher, since over 600 billionaires are currently roaming the earth. With a combined net worth of several trillion dollars, you can bet at least of few of these men and women have a portion of their wealth invested in silver, following Warren Buffet’s lead. Again, let me say that there is no real above ground silver to back up these contracts. Therefore, these certificates are just as bad as the fiat money they were traded for.
How foolish, not only have these ‘paper longs’ traded one broken promise for another one, which happens to be much more expensive, but they consequently have little hope of profiting from a rise in the price of silver as they had otherwise hoped. These longs will be unable to acquire the tangible wealth that they so diligently sought, because they failed to discern that their certificates were empty promises just the same.
Resulting with those who issue the certificates are in effect selling ‘short’ positions (shorting is discussed more here: Short Positions). This is in addition to the already abundant futures and leasing short positions that at COMEX, which may have helped to suppress the price.
If indeed there are a billion of these paper certificates in existence, then for every dollar increase in the price of silver, the issuers (not the holders) stand to lose one billion dollars. At present, silver is continuing its climb, and one day higher prices will force these ‘short sellers’ to limit their losses by buying the physical silver bullion itself, just in case their clientele start to redeem. Come next, will create more panic in the ‘short’ community, which will further simulate the precipitous rise in the price of silver. Do you understand how bullish this is?
This is the anti-bubble of all time, like a black hole reversing itself, finally able to crossover onto the other side of the event horizon. And just as the light would break forth from that pit of darkness, so also will silver, once back in the hands of ordinary men, reveal the truth behind this present system of unjust fiat money.
Free oneself from these chains now!
Don’t wait until it’s too late…
» Contact Cornerstone Asset Metals today to learn more about inflation protection through precious metals investing.
5. Economic Realities of the US Economy
» Contact Cornerstone Asset Metals today to learn more about inflation protection through precious metals investing.
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