Silver Stackers

The Silver Story

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I have been interested in the “Silver Story” for over 35 years. What I have learned about silver has come mainly from Ted Butler, Ed Steer and a few others. I do not have any “new” facts to say about silver, but I do want to present some silver “philosophy”. Why? First and foremost is how relatively few people know and understand ANY of the silver story. If you have coherent opinions (in agreement or disagreement) about what I am saying I would guess you are one of a very small population that knows something about silver. I don’t have anything against gold and I think gold will do well in the foreseeable future, but I think as an investment silver will do much better, at least until after the current silver price manipulation ends. Why? Mainly because silver is such a small market both in readily available above ground silver (in 1000 oz. bars) and the relatively small amount of money that it would take to push silver prices to new highs. I do believe that every bubble bursts and every manipulation must end.

I follow the daily silver price on www.kitco.com. Kitco has links to videos with interviews “movers and shakers” in gold and silver. So, often in these videos the interviewees will make predictions on gold prices rising and then as almost an afterthought they will say “and I think silver prices will do better”. I don’t understand why the “experts” don’t focus more on silver especially when they seem to know that it will do better than gold. The math is simple. Historically, when gold and silver prices rise the silver/gold ratio tightens. So, currently the silver/gold ratio is over 80 to 1, meaning it takes 80 ozs. of silver to buy 1 oz. of gold. The average of this ratio in the 20th century was 47:1 and was 31.5:1 the last time silver hit a high.

Following represents the facts as I think they are:

  • Silver prices have long been and are being manipulated. I will expand on how this has been done later in this article.
  • Annual production- mining and recycling- of silver is about 1 billion ounces.
  • Annual industrial and fabrication use of silver is about 750 Moz.
  • Much of the industrial use of silver is fairly price insensitive. I have read that there is about 1 ounce of silver in the parts in a new car. If the price of silver doubles, triples or more the car manufactures aren’t going to cut back on production because they have to pay extra for silver. Their main concern is going to be getting the parts with silver in them, not that those parts cost them a little more. Same with computers, cell phones, etc. A rise in price is not going to have much impact on consumption, at least for a period of time until the part manufactures can find cheaper substitute materials to use.
  • This leaves about 260 Moz./year of new silver (9 year average) available for investment purchases such as the ETFs and/or investment in silver bullion.
  • All manipulations must end at some point.
  • Silver and Gold have historically been used as money and a store of wealth.
  • Because of the facts above I believe that silver will be the best investment over the next few years.
  • I don’t have anything against gold and I think gold will do well in the foreseeable future, but I think as an investment silver will do much better, at least until after the current silver price manipulation ends.
  • Notice that I am not predicting the collapse of the economy or major turmoil. Those things could happen and probably will happen at some point and if/when they do the price of precious metals will go up as people invest as a “hedge” against inflation or turmoil.
  • Keep in mind that as the price of gold & silver goes up typically the silver/gold ratio goes down. In other words the price of silver goes up faster than gold.

Assumptions, Risks & Disadvantages

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Assumptions:

  1. JP Morgan (JPM) and other large commercial banks have been manipulating the silver price to the downside for at least 10 years.
  2. JPM has acquired 650 – 700 Moz. of physical silver per Butler over the last 9 years.

Risks & Disadvantages:

  • I think the risks of investing in physical silver are minimal, but should be noted and watched for.
  • 30 years ago silver was under $5/oz for quite a while. It went up to just under $50/oz. in 1980 when the Hunt Brothers tried to corner the market, then crashed when they were stopped. It went up to almost $50/oz. again in the months before May 1st of 2011 due to physical tightness. Then manipulators took the price down . They have worked it down and it has been in the current trading range ($15 – $20/oz.) pretty much ever since, until in July 2020 when it spiked up over $28/oz.
  • There is a small chance of the government or governments declaring silver a “strategic metal” and trying to confiscate it. I don’t think that it is likely or would likely be successful and wouldn’t happen until there was an actual physical shortage. But it is something to watch out for.
    • Gold and silver are traded internationally and if USG tries to confiscate it will just make these commodities more valuable.
    • I think if there is confiscation it will be mainly to get silver. Silver could be declared a “strategic metal” which it is and is needed for electronics and military equipment.
    • I think physical metal under your control would still be relatively safe, but if the USG wants/needs it hopefully they will at least pay a fair price.
  • Having physical silver under your direct control is the safest, but other methods may produce better returns and probably more risks and volatility.
  • There is an Exchange Traded Fund (ETF) for silver with the symbol SLV. Basically, a share of this is an ounce of silver (less accumulated fees). Currently, there are 326M oz. in this ETF.
    • Advantages of SLV are:
      • Can be traded thru most any brokerage account including most retirement accounts (you may have to sign additional notifications)
      • Has physical silver backing most shares. There has been some shorting of the stock, but that has been fairly minimal and consistent for the last few years.
    • Potential Risks of SLV are:
      • You don’t have the silver under your direct control.
      • BlackRock, Inc. is the SLV sponsor, JPM is the SLV custodian. I’ve seen many comments and questions about JPM being the custodian and the potential for them to somehow use that position to their trading advantage. I haven’t seen any reported abuses, but something to keep an eye on.
  • Physical silver typically does have a fairly large premium. At your local coin shop you can pay $2 -$4 premium on a Silver Eagle. A 10 or 100 oz. bar may have a smaller premium. While this premium is definitely a deterrent to trading silver as a short term investment, I don’t think it is for long term investment.
  • At some point the price could get into a bubble situation, but I don’t think that will happen until $100/oz. or more.
  • If the COMEX trading got too wild, I could see COMEX halting trading on silver. Hopefully, we would get some prior indication that might happen, but if it does it should be bullish for physical silver and could be very negative for “paper” silver.

Facts (as I see it)

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  • Ted Butler (https://www.butlerresearch.com/) provides the most comprehensive and accurate information on silver that I have found.
    • I highly recommend subscribing to his newsletter $34.95/month) to be able to see his twice weekly reports.
    • On his website there is a section “Free Archive” that has some of the articles he has publically published and which would be a good start to learning more about silver.
    • I first became aware of Ted Butler in the early 1990s when I would get a monthly newsletter from Investment Rarities. Many of the articles were written by Butler. Many of his articles are archived on their website at http://www.investmentrarities.com/tbarchives.shtml This is another good place to research the history of the silver market.
    • For years Butler has called the commercial banks that seem to control this manipulation criminals/crooks. That includes JP Morgan (JPM) that seems to be the “ring leader” and the CME Group (owner of the COMEX) that allow the manipulation to continue. The fact that none of these entities have threatened to sue Butler tells me that they know they don’t want to go to court and fight against the truth.
  • The silver price is and has been manipulated to the downside for 20 years and more.
    • Butler does a great job of explaining how this manipulation works and its effects.
    • Every manipulation must end at some point and historically the price of the manipulated commodity takes off in the opposite direction once it is ended. In most cases that we know about the manipulation is to the upside and then when ended the commodity crashes. In this case once the manipulation ends the price will explode to the upside.
  • The Commodity Futures Trading Commission (CFTC), a government agency, publishes a weekly report called the Commitments of Traders (COT) that Butler analyzes weekly.
    • This report on its face shows that silver is being manipulated by speculators using COMEX silver future contracts.
    • This report shows huge volumes of silver contracts being traded.
  • There are only 2 – 2.5 billion ounces of above ground silver currently available in 1000 oz. bars.
  • According to the following link to The Silver Institute the average production of silver for the last 9 years was right at 1 billion oz. Including mining and recycling (140M oz.)
    • https://www.silverinstitute.org/
    • According to the linked report there is only an average of 260 Mozs. per year of silver left for investment demand after taking out the Industrial, Jewelry and Silverware average demand.
  • All manipulations must end and when they do the price of the manipulated item (silver in this case) will move strongly in the opposite direction of the manipulation (thru the roof in this case). We are most used to things being manipulated higher in price and then the price crashing when the manipulation ends. With silver the price has been manipulated to the downside and when the manipulation ends I think silver will skyrocket

The Silver Story 2

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In my opinion, the price of silver is going to explode and we are getting closer to that explosion day by day. Silver is currently at a low point and as I will explain it will go up from here. The two big questions (as with any investment) is when and how high it will rise. Everything that I say on this site is my opinion; I am not a financial advisor or a silver “expert”. What I am is somebody that has watched and studied silver for over 35 years. I am a computer tech and always try to use logic to help me process information and make decisions. I have gotten much of my knowledge about silver from Ted Butler and highly recommend his newsletter for anyone who wants to learn more about the silver story.

What I have been looking for is a website that tells the Silver Story as I believe it is. One that would help a nubee to silver understand where it is at and where it is going. A website that would also give the veteran silver watcher good current information and resources to help make investment decisions. A website that would provide information for as deep as you want to go.

If you are a Goldbug- I think gold will do fine and has a good outlook as a store of wealth in these turbulent times. But, I think silver will do much better than gold.

I think that anyone interested in making a good investment or protecting their wealth or both should buy silver. I assume people landing on this page will range from those who just want some info and ideas on why they should invest in silver to those who will want to investigate and research silver. I hope that the information provided below will help all gain useful more knowledge about silver. Please leave comments and questions.

If you don’t know the Silver Story and you hear “silver manipulation” you may just want to write it off as another “conspiracy theory”. I don’t think it is and I believe that logic proves that the silver price has been and is being manipulated to the downside. (see Facts)