Silver News

The Mission Of The Silver News Surfer Has Always Been & Will Always Be - To Preserve Your Wealth, Protect Your Purchasing Power and Create Generational Wealth!

May Health Wealth And Success Be Yours!


The Ridiculously Simple Reason to Be Bullish on Silver

February 6, 2016 7:41 am est

The Mission Of The Silver News Surfer Has Always Been & Will Always Be – To Preserve Your Wealth, Protect Your Purchasing Power and Create Generational Wealth!

May Health Wealth And Success Be Yours!

Here’s why nothing makes sense anymore guys… Did you know that a bucket of KFC (that’s right, Kentucky Fried Chicken) is about the same price as a barrel of crude oil? Granted, with KFC you also get a couple sides and a biscuit. Also, did you know that It takes about 2 ounces of silver to buy a barrel of crude oil… 2 ounces!

Here’s my point – Oil is the number 1 commodity used in the world and silver is the number 2 commodity used in the world.

Search for value my friends and remember, when investing, don’t try to get rich quick; invest for long term and stay true to your convictions. In other words, if it doesn’t make logical sense that silver is only $14 +/- an ounce when we are breaking records for the demand of the metal and its the 2nd most used commodity on the planet, you’re right, it doesn’t make sense and there you’ve found value. Also remember to find assets that people need and are use regularly and you will experience the success you seek in you’re investments.

This Ticking Time-Bomb Now Threatens The Entire Global Financial System – There has been a big change at the Federal Reserve, Eric, time-bomband it is one that has profound implications for the US dollar. Unfortunately, it is not a change for the better… This change worsens the outlook for the dollar, and it has received little if any attention in the mainstream media. Take a look at this remarkable chart – It’s no wonder gold & silver are having a good start to the new year!

Read More Here

Stock Market Crash Is a Dire Warning for Americans Everywhere – After eight years of manipulating interest rates and pouring trillions of dollars into the economy, with no exit plan I might add, stocks are getting their due. In the first three weeks of 2016, the global stock market crash has wiped out $15.0 trillion of investor wealth. That’s more than the global central banks poured into the economy to get it going. And the downturn is just getting warmed up!

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Is Gold Part Of Your Retirement Plan? Maybe It Should Be – Billionaire investor Warren Buffett highlighted this critical point in his 2014 letter to Berkshire Hathaway shareholders.  He wrote about how over the past 50 years, the purchasing power of the U.S. dollar decreased by 87%. That means it now takes $1 to buy something that could be purchased for 13 cents in 1965, as measured by the Consumer Price Index.

Another factor in favor of gold as part of your retirement portfolio is inflation. Gold is a hedge against inflation. While inflation is low now, again markets and economies move in cycles. In the 1980’s inflation levels hit 14% in the United States. Inflation is a wealth killer. A priority on your retirement funds should be getting it back and preserving your wealth, your purchasing power and protection against inflation.

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Bloomberg: Gold Is Back In Fashion After $15 Trillion Global Selloff – Hedge funds and other large speculators more than doubled their net-long position in bullion last week, just three weeks after they were the most-bearish ever. Investor holdings of gold through exchange-traded products are expanding at the fastest pace in a year, and the value of the ETPs has jumped by $3 billion in 2016.

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Gold prices and holdings have surged in January, amid increased volatility in markets and new geopolitical risks. Could the new rise in prices save Russia’s finances, long rumored to be increasingly gold-based?

“People have become complacent about risks, whether it’s macroeconomic and geopolitical. What’s out of fashion may be coming back,” George Milling-Stanley, head of gold investments at Boston based State Street Global Advisors, told Bloomberg.

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Silver Prices: The Ridiculously Simple Reason to Be Bullish on Silver – Often, silver is called an industrial metal. Over the past few years, we have noticed a significant amount of investor demand. We see this as a game-changer for the silver market. Even with all the fears of the global economy slowdown and industrial demand slowing down, investor demand could really give silver prices a boost.

To provide some perspective, just look at the table below. It shows the total number of silver American Eagle coins sold each year from 2009 to 2015.

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Breaking: COMEX Registered Gold Inventories Plummet 73% In One Day – Looks like something big is about to take place on the Comex as Registered Gold inventories declined a whopping 73% in one day.  Which makes the leverage ratio a staggering 542:1 This is a very surprising update as Comex Gold inventories haven’t experienced much movement over the past few months.

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And the WTF story of the week goes to…

IT BEGINS… Primary Silver Mining Company To Cut Production 25% In 2016 – The low price of silver has finally claimed is first victim.  Endeavour Silver announced that it will cut silver production by 25% in 2016.  The company has three mines working in Mexico and will produce 7.2 million oz (Moz) of silver in 2015.  However, Endeavour plans to shut down production of one of their mines by the end of 2016 and put it on care and maintenance.

Read More Here

IMPORTANT

Now, as I’ve promissed and delivered, here is a message from Mr. Bill Murphy. Mr. Murphy has 30 years experience as a Financial Advisor and Retirement Planner – He is objective and conservative in his approach and I beleive we could all learn from what he shares with us today…

Physical or paper ounces? 

For some time, those of us in the physical precious metals market have been extremely aware of the diminishing supply of physical gold and silver versus its demand.

The US Mint (the largest mint in the world) halted production 3 times since January of 2013 of their 1 ounce American Silver Eagle because they cannot keep up with demand and are having trouble sourcing silver blanks to meet this increased demand.

As professionals we follow what is called the paper to physical ratio. This is the ratio of how many ounces of a precious metal to its paper counterpart (ETFs, Options, Futures, Mutual Funds, etc.). In 2009 silver was at an 8/1 paper to physical ration; meaning there was only 1 ounce of silver to back 8 paper ounces. In 2010 the ratio went to 33/1; now 33 people thought they owned that same ounce.

In 2010 the ratio went over 100/1 this is insane. Think of this as a game of musical chairs you and I are standing in a room with 98 other we all hold a piece of “paper silver” and there is one physical ounce in the middle of the floor. Everything is fine, we are all friends as long as the music is playing, but what happens when the music stops? 1 person wins out and there are 99 people whose investment is now worthless and they stand in line as unsecured creditors in bankruptcy court!

Paper silver is created out of thin air similar to the dollars created by our “fractional reserve” banking system. The fractional reserve banking system allows a bank to lend, for example, 90 cents for every dollar that you deposit in your account. Those funds in turn when deposited with another institution are loaned out again and so on. This only works because only a few depositors ever withdraw 100% of their money at one time.

However, when a bank run occurs, that bank is shut down and depositors must wait for their funds to become available after an FDIC audit and then only up to certain amount.  As a test contact your bank and say you want to come in and withdraw $20k from your account in cash. I assure you that 99% of you will find out that it will take them at least 1 day to fulfill your request.  They do not have it!

In the precious metals market, a bank, brokerage firm, or bullion bank can lease the gold or silver in its vaults to another entity and still have that gold or silver as an asset on their balance sheet. Let’s say Bank 1 leases 50 tons of silver to Bank 2. That 50 tons is still shown as an asset on Bank 1’s balance sheet though it was sent to Bank 2. Bank 2 can in turn sell or lease the silver to Bank 3 and this cycle goes on and on.  Now, each entity that leased the silver holds 50 TONS OF PAPER METAL and the PHYSICAL METAL is in possession of only the one who has custody.

Now what happens when everyone begins asking for delivery of their physical silver?  It’s happening in the gold market as we speak with the majority of central banks repatriating their gold held by the US. 

Here is just one example, the COMEX is the largest Silver Futures market in the world and they are trading on average 100 million ounces of silver per day. When we see a hiccup in the delivery chain or a company has to suspend production of their product because no silver is available for purchase; in the paper market HFT computer algorithms kick in, investors panic, and everyone will head for the exits.

People that shorted silver futures on the COMEX will have to cover their positions because the price of silver is now rising. As the price rises those shorts will get margin calls and they must meet the margin call or their account gets wiped out. (Net losses after margin is closed still must be covered and the clearing firm must cover the loss – can you say MF Global).

Now we have motivated buyers coming into the market and buying silver not because they want to but because they have to if not their account is wiped out. When the registered ounces that can set for delivery at the COMEX run out, these speculators must enter the open market for physical silver. Now no purchaser or seller of silver is accepting anything but physical delivery versus payment.

Panic spreads to the paper market and the investors that purchased ETFs are now selling. When net selling occurs with an ETF they must sell part of their physical silver supply to meet the NET REDEMPTIONS. When the ETFs call the custodian of their precious metals to sell many will find that there is no silver in the vault! Because it is leased/pledged silver the shares are only pieces of paper! Trading will halt with most ETFs.

This is unlike the flash crash with Apple where trading resumed 15 minutes later because iPads & iPods are still being produced. Trading ceases, as the fundamental reason a person purchases a precious metals ETF is they are under the impression that they own that precious metal share for share. Now the shareholder stands in line with all the other creditors of the ETF to see if they have anything left. Similar to what clients of MF Global are still facing today.

When we see the divergence between the price of physical silver versus paper major wealth will be created.  We may have seen a precursor to this split last week January 28, 2016 London Silver Fix.

Bill Murphy