Note: This is not financial advice.  I’m not a financial advisor and I’m wrong 100% of the time.  Investments are risky and nothing mentioned here should be considered financial advice.  Invest at your own risk.

“Either the price of silver goes up, or they shut down making Teslas” – quote by me..but there’s a back story.

Rick Rule is like a new hero of mine.  Never heard of the guy before 6 months ago, but that’s mostly because I haven’t been involved in the resource sector at all.  I wrote about him once here, but I’m now taking what he said and developing my own hypothesis from him.

rick_rule-2

He made his billions on the below thesis:

“Either the price of uranium goes up, or the light goes out”.   He said he was early to the game, but it all seemed to work out for him.

He then says, “the answer to low prices is…low prices”.

The big picture was this:

  • Uranium cost miner $50 to produce
  • Uranium spot price was $8

You need to ask yourself, what happens when there’s a market price far lower than the cost of good to produce?  Looking back on my economics days, you start to have consolidation in companies going out of business.  The first things that happen are layoffs.  Then efficiencies are introduced.  Then more layoffs.  Then selling of properties.  More efficiencies.  Maybe bankruptcy protection?

Eventually – companies fold and leave the market.  If there’s still a market for those goods, what then happens over time (weeks, months, years) – is that there were a lot of companies producing a product and now the “shelves” are bare.  Suddenly, there are supply issues.  When supply issues happen, and demand is there – prices go up.

In the case of mining, it takes about 10 years to start a mine, from start to first pour.  Mines that were closed, may take 1-2 years to get back online.  You just don’t turn the key and the next day supply is back.

You get an overshoot.

So in Rick’s case, he saw $8 spot price and cost to produce was $50.  Eventually…..price hit $150 per pound, far overshooting the $50.  Again – there’s an accordion effect due to how long it takes to get these mines up and running.

 

As Rick Rule likes to say…(I’m paraphrasing)

“I like to invest where a situation is inevitable.  It might not be imminent, but it is inevitable.  The timing is not important.  The event will happen, it’s just a matter of when.”  

With uranium, he knew the price had to go up or the lights would go out.  I am seeing a price that needs to go up or Musk is not making Teslas.  He says he was wrong, until he was right – meaning he was early in on the uranium play.

Furthermore, he invested in 5 of the best uranium junior miners.  He said, “of these, the WORST performing of them were a 22x”.  He made billions from this resource play.

The chips are set up for inevitable.  The charts are there.  The market cycle has begun.  Even if the S&P shits the bed, the March sell off in both gold and silver recovered – and if something like that happens again – supposedly it will not be as bad.

 

With silver at $17.  I saw the same problem.

Now, I just watched an amazing video that might help some of you see the technical side of this.  The article I wrote a few days ago from John Howell also showed the psychology of a market cycle, and how silver was about to form the upside of the cup.  (for those not familiar, look up the cup and handle formation, which an extremely bullish technical indicator)

While he showed that the “regular” stocks are at a point where there’s a bottom going to fall out…pointing that we are in complacency with regular stocks:

Psychology-of-Market-Cycles1

He also points out the last 9 years or so have been on the bottom right of this and we are breaking out into a true bull market for gold and silver now.  He overlaid the last gold and silver bull run through 2011 and it matched IDENTICAL with the chart above.  SCARY!!

So we have silver prices that have been “depressed” for almost a decade.  When you look REALLY closely at silver mining, which I have done…you find this:

  • most primary silver producers went out of business because their all in sustaining costs were much higher than spot (sound familiar).
  • All of the “easy” silver has been found near the surface.  You have some more recent companies coming online that have “cheap” silver, but these will be a drop in the bucket for supply.  50 years ago, gold was $35 per ounce and miners were making money on it.  Then, suddenly, the easy gold was no longer there.  Gold is now $800 or so per ounce to pull out of the ground, and silver isn’t far behind.
  • No real silver exploration has been done due to cost cutbacks over the last decade
  • Silver miners like first majestic may say “$12 all in sustaining costs”, but this doesn’t take into account 5 of their 8 mines they had to close because their operating expenses had $25-$30 AISC.
  • Ore grades are becoming worse, and setting up for a period over the next 10 years where silver is going to cost a hell of a lot more than $17 to get it out of the ground, and this is coupled with significant tech supply needs coming.  More on that below.

What you are left with is 5 straight years of decreasing mine production coupled with more and more “industrial uses” for silver.

Some people who are not exactly in the silver camp may say things like, “silver isn’t money, it’s an industrial metal”.  To this, I would first point out I have quite a bit of “junk” silver which are silver dimes, quarters, and half dollars from before 1965…which are money…but something else I have to add to this argument:

Another interview I heard stated, “silver isn’t an industrial metal, it’s a technology metal“.

Wow!  Here are some of the recent LARGE uses for silver that are accelerating at neck breaking speeds:

  • Electric vehicles – each supposedly use 1-5kg, depending on the source
  • solar panels
  • cell phones and computers – and almost all electronics
  • 5G

This is why it sometimes tanks with the S&P 500.  Most stats have silver usage somewhere around 60% “industrial” – but I’d switch that now with “technological”.  However, the last few years had 20% investment demand.  So this is not insignificant.  20% during BEAR MARKETS.  I’d like to present to you the year 2020, and how for a good portion of this year, you could not find gold or silver bullion anywhere, and if you did, the premiums were jacked up so bad it’s insane.

“But spot price is $18”.  That’s cute.  Really, it is.  Below is a view of APMEX inventory on American Silver Eagles, which appear at this moment to have about a $6 premium, or 33% on top of spot.  If you can get silver at $18, it’s not silver.  It’s Chinese knock offs of silver they are trying to sell you on facebook ads.  Not silver, sorry.

ASE

On top of everything, this is going on:

  • mines worldwide had to shut down.  Peru and Mexico, 40% of the world’s silver, had to shut down their mines and they recently are coming back to production
  • something like 70% of the world’s silver is produced as a BYPRODUCT of mining other metals.  Meaning, there are less and less silver miners.  Fresnillo and Newmont are some of the largest silver producers, but they are actually gold companies.  So when recessions happen today – and less and less base metal demand is there, silver SUPPLY is negatively affected.  But not really by much.  Base metals like iron, copper, lead, and zinc are FAR more sensitive to this.

 

So now we come back to Tesla.  Tesla just recently became the largest market cap car producer, and their shares hit $1100.  One quick look at their books and you realize they aren’t profitable.  But most people have a STRONG feeling this is the future (like the Amazon.com flu for a decade).  They are invested on faith, not financial principles.  The concept is, at some point, that this will be a $2000 stock in a company that makes a lot of money.  I don’t disagree with them, but there’s going to be more market corrections over time to get them closer to their book value.  Too much profit there to take at the moment, and in a giant sell off, this goes down to $300-$400 a share.  I’m a buyer there.  Not at FOMO $1100.

In reality, I have heard this company referred to as a technology company first, and an auto maker second.  Why?  They aren’t dealing with the ICE (internal combustible engines).  Their problems are engineering – getting the most battery life out of their batteries by trying all kinds of materials.  Using software to model.  Using software and AI to build out a self-driving car.

One thing I have heard Keith Neumeyer say is that each electric car uses “3-5 kg” of silver.  This caught my attention.  I did hours of research on this, and in another interview, I heard “1 kg” of silver.  Auto makers don’t publish this kind of stuff, as it’s strategic.  But I can tell you this….1 kg is approximately 33 troy ounces of silver.  Let’s do some quick math, which I know ALL of you love.

I read that today, there are 3 million electric vehicles on the road.  The concept is, that over the next 10 years, it is projected that there will be 125-150 million EVs on the road.  This is REALLY good for Tesla shareholders.  Even with a recession looming, people have to buy cars.  During the great depression, you had 25% unemployment – meaning 75% were employed.  Just recently, our labor numbers had us at 11% unemployment.  89% still employed.  They all need cars.

The feeling is, over time, more and more of Gen X, Y, and millennials will be moving to these as prices drop even more.  In a production cycle, the more and more units you make, the lower your costs will be.  Why?  Scale of economies.  Also – if you want to buy 1 million pounds of something from a supplier, it might be a lot cheaper to buy 100 million pounds.  You become more efficient.  Processes become streamlined.  Cost of goods sold decreases.

This improves profits.

So with the math, I’m going to show you that mine yearly production is somewhere now like 800 million ounces per year.  Just because they want to make more EVs and use more silver, doesn’t mean people will just “make more silver”.   It also doesn’t mean just because some arbitrary computer program says spot is $17 that silver investors will part with their silver for $17.  So – supply might be around, but not necessarily available at that price point.   It has to be mined, and if the cost to mine all of this is going up yearly, so must the price.

world-silver-mine-production-2007-2018

Now, there are newer charts out there, but I didn’t want to poke around for an hour.  The more recent ones show the same decline in supply.  And – with mines shut down this year and investment demand ripping every ounce out of vaults and off the shelves, let’s just say 2020 is going to be brutal for anyone trying to get supply from an industrial sense.  Suffice it to say, let’s just give it a 1.5% reduction per year in mine production (at current prices).  Remember, if price doubles, there are ores out there that can then be mined at those price points which they cannot today.

So, let’s assume that EVs use somewhere between 1-5kg of silver, per EV.  Given there are 3 million on the road today, that means in the history of making electric cars the last 10-20 years, they have used maybe between 100mm and 500mm ounces of silver.

What happens when car production continues to ramp up over the next 10 years to meet that 150 million car demand worldwide?

1A supply

What you see is that sometime between 2023 and 2032, ALL MINE SUPPLY IS EXHAUSTED FROM EVs ALONE (again, at $17 price point silver).

Re-read that statement.  This indicates, to me, that in order to meet increasing demand, prices MUST RISE in order to not hit a deficit.

Here’s the chart (above).  This isn’t perfect, because I put 3 million in for this year.  This might be several hundred thousand in the early years and then ramp up to 10 million a year near the end.  I tried to put in a 20% year over year growth to approximate this.  The point is not that silver will run out in 2023, but to point out the dynamic of a diminishing silver mine production  (at current price point) coupled with intense new “industrial” demand in the tech sector.

What this is telling me is this….

  • There’s been a ROARING demand of silver building for tech over the last decade that is ever-increasing with EVs and solar going into this next decade.
  • “Cheap” silver is almost gone.  It costs more and more to mine silver every year, and may run into the EXACT same issue with gold where it was once plentiful at the surface, but now expensive mining needs to be done to get more supply.  The silver IS THERE, it’s just NOT ECONOMICAL at $17.
  • At current prices, primary silver mines may continue to have increasing costs and decreasing production.  This will have them all going out of business, further negatively affecting supply and putting additional pressures on diminishing supplies.
  • Eventually, supply will be extinguished at the $17 price point.

Therefore….silver price point MUST move higher than $17, and I’d suspect in the next 12 months this will need to move up, a lot.  This will have the same slingshot effect of uranium in 2007.

Mysteriously…this seems to coincide with the beginning of the next market cycle.  Amazing.

Now – I ONLY used EVs here.  Over the next 2-3 years, we will most likely be in a recession and see gold prices hit $2000 in the next year and $3000 within 2 years.  Silver is not only a “tech” metal, but also has a dual identity as a store of wealth.  When common Joe Sixpack wants to get gold, and realizes 1 ounce is $2000 and is not taking up much of his palm, then sees he can get 4 giant tubes of silver for the same price – he moves to silver.  This investment demand will skyrocket once gold hits all time highs within 6 months.  It’s at $1800 now, and $1900 is the all time high.

Oh…gold is AT all time highs in every currency but the US dollar – keep the world view in mind with this.  That’s going to change inside of 6 months.  Meaning, inside of a year, silver INVESTMENT demand will skyrocket even more.  In the DOWN bear market years, silver investment demand is 200 million ounces.  I’ve heard investment demand this year is projected to have doubled to an estimated 400 million ounces.

Recently, something interesting has been observed.  Since people could not actually GET physical bullion, they invested in SLV and PSLV ETFs, and their demands have added several HUNDRED MILLION OUNCES over the last FEW MONTHS.  This also happened when bullion was not on the shelves.  This has further taken vaulted investment bullion and appropriated this away from the tech sector and into the vaults of the big banks.

So….

You are Elon musk.  You have production lines all over the world.  You are about to do your yearly orders for silver, and you look and see $18 silver prices and know you have a BIG year ahead.  You write up the futures contracts, and BAM.  You are expecting delivery.

“Sorry, we don’t have your silver.  Want to settle for a little cash?”

“No..I want my silver because my $100 billion company needs it to make cars.”

“Sorry, we told you we could sell it to you at $17, but we just really actually didn’t have the supply.  We told you we did, but that was because we thought if we offered enough on the open market, it might make silver look like it’s very plentiful in supply in vaults for you.  We only actually have a tenth of what we say we have, you know, that whole fractional reserve thing.  In reality, we’ve been playing a shell game to make it look like this for years and really weren’t expecting a run on the bank.  Sorry.  Do you want a rain check?”

So…this is what’s happening, as we speak.

The problem is, the pricing mechanism is….paper driven, not free market driven.  This is run by the COMEX, and all indications are this fake pricing mechanism has failed.  The problem is – naked shorts.  It’s one thing for people to hedge their positions.  Its another for a bank to naked short millions of ounces of silver they don’t have.  That’s what’s been going on.  And now people want their metals.  And…they don’t have it…and they now have to hit the spot market this month to try and find…250 mm ounce of silver.  In a market with severe supply disruptions.

Remember Rick Rule above?  In this case, “paper” silver has been keeping the price down, but the last few months has had a LOTTTTTT of people wanting physical delivery of the metals.  Whether it is mints, Tesla, etc, they want their silver.  Well, many banks were doing “naked shorts” and “selling” paper contracts on silver they didn’t have.  This kept the price down….but that is coming to an end.  I read somewhere that 51,000 contracts have stood for delivery for the June contract, which means July these orders need to get filled and delivered.  51,000 contracts is – 51,000 x 5,000 = 255 million ounces.   So in a situation where no one can find supply, the naked shorts are somehow to come up with 30% of mine supply in a year, in less than a month, when many mines have been closed for months?

Oh….and apparently the mines that have come back online cannot get product made due to refineries being backed up and processing gold first.  So…that happened.

Other reports now have JP Morgan as a net long then intending to “lease” silver to the shorts, which Ted Butler stated lost about $9 billion between them last quarter due to this shorting business.

So…..

All of this is adding up to a lot of buying pressure for July.  In the short term, the naked shorts have taken it on the chin and like Scotia Bank, HSBC, and CIBC of last quarter with gold, many banks are now hit with silver short losses.  This has the net effect of reducing the resistance upward.   The shorts now have to go long to find supply in the open market, multiplying the effect of the longs on price pressure upward.

Gold-to-Silver-Ratio-Long-Term

Gold is expected to have a little bit of a pause in July, and have a strong August and September.  Last July, silver went over $19.  I can’t help but wonder if these price movements around delivery months are correlated, but get this – the contracts that stood for delivery this past month are TEN TIMES normal for silver.  If I didn’t know any better, this smells like some hedge funds making a run on the bank to break the price.  THE ENTIRE WORLDWIDE SILVER MARKET IS $40 BILLION.  

So – when there are strong entrants to the silver market, it can move price, and quickly.  Hedge funds that want to spend a few billion can make the price of silver move a dollar or two.  But – this can break the short’s resistance levels and force them into long positions.  

So is it out of reach to see silver hit $20-$21 this month?  If gold is PAUSING and silver is INCREASING, this then has the effect of tightening the gold to silver ratio.  It hit a peak of 125:1 a few months ago, and is around 98 today.  The chart above is a little old, but shows you how these metals oscillate in relative value to each other.  There are undershoots and overshoots.  If you look at 1980 and 2011, you can see silver went to 10:1 in 1980 and 30:1 in 2011.  Could it hit 20:1 in this peak?  Don’t know, but when gold hits its high, it lifts silver to then outperform gold.  So if gold really does hit $3000, and we do hit 20:1 in this cycle, that is $150 silver.  What is outrageous about this?  $3000 gold?  20:1 ratio?  Do the division, and the price is there.

Why is this important?  Some people don’t think it is anymore, but the big picture is this.  Gold and silver have been money for 5,000 years, until some government bureaucrats decided to try and convince people “it’s not money” – while central banks have thousands of tons of gold (we supposedly have 8800 tons).  Well, the people aren’t idiots.  Some are.  But from 1971 on, it’s the first time in world history that we are on a 100% fiat money based system.  And things are broken.  And many people think we are headed back to a metals-backed currency of some form.

The GSR is important because silver is found in the earth 8 times more than gold.  So, the natural supply is….8:1.  The demand for gold as a store of wealth by kings and nations and central banks have that demand side pressure.  This is what takes it to 125:1.  It may suprise you, but platinum is 30 times rarer than gold, but less than half of it’s value.

So those of you thinking silver is just not as rare as gold are right, but only by a factor of 8 – not 125.  And, with platinum, you can see just the rarity in the earth doesn’t determine price.

And now we have silver being used at a rate of 100 million ounces a year just for solar panels.  What, maybe 1 out of 100 have solar panels today?  A recent California law mandated new houses be built with them.  Each panel is about 1 ounce, and a house might need 20 panels.  Are we expecting more demand from solar and green energy?  What is going to happen with solar panels over the next 5 years?  Lots more silver needed for “green”?  You….betcha.

One thing that was going for silver to depress the prices was how cheap it was to extract from the earth, which I suppose is what affected price so much.  Remember platinum and rarity?  Well, gold takes about $800 per ounce to pull it from the ground.  Silver, today, may take $25.  Actually, given that “cheap” silver is mostly gone (check out SRSRocco report) – this number means then that you go from shallow silver to deep mining, and maybe the cost per ounce for that goes to $50-$80 per ounce or $100.  Remember, gold was $35 once.

I’m telling you this, there’s a confluence of items happening that are accelerating.  Whether this is next week or next year, there’s a supply and demand crisis hitting silver.

What do you think will happen when Tesla is forecasted to produce 3 million EVs in the upcoming year, and they try to make an order for 100 million ounces of silver, and the metal isn’t there?  What happens when California laws of requiring solar panels cannot be fulfilling because silver is not available to the manufacturer?

Parabolic move up.

The interesting thing that happened in 2011 was there was a paper short that destroyed prices almost overnight.  Chris Markus goes over this in his book “the big silver short” in a series of 15 interviews.  One of them was with the then-commissioner of the CFTC (the regulating body) which discussed the concentrated short position that JP Morgan inherited from Bear Sterns.  JP Morgan then used this short position over the last 8 years with moves called “spoofing” to knock down the price of silver.  They would issue paper short contracts, and the stop losses would get triggered by everyone, with a cascading effect of knocking down price $.40 in minutes.  This then allowed their trading desk to buy up silver cheaper, and they would pull the short contracts back.  JP Morgan had 6 people arrested and convicted of spoofing, and they are turning states evidence on JP Morgan for price rigging under a RICO statute.  All the while JP Morgan did this, they have now amassed 1 BILLION OUNCES and are no longer short.  These guys are now picking up the bank requests for silver by – LEASING them silver.

One big issue with all of this has been a concept called re-hypothecation.  Long story short, a bank uses fractional reserves for things like cash.  You deposit $10, they can lend out 9 of those $10 to other people.  If you want to go to the bank and get your $10, they will give it to you.  But what happens when everyone wants to get their $10?  It’s not there.  They have been doing the same thing with these metals ETFs and derivative type of instruments for years.  The problem is – that 51,000 contracts?  This is now the equivalent of a “bank run” in silver.

From what it sounds like, the next few months could be very interesting for silver.

 

That all being said…..

This week or the next, or the next, or the next – the stock market can melt down again.  More shut downs.  More money printing.  Delivery of metals expected.

Could silver melt down like in March?  While it’s possible, some analysts I listened to stated “not as much”.  The first time this happened in March, everyone was levered to the hilt.  When the stock market collapsed, people had margin and margin calls swept the land.  Everyone that was levered up needed to liquidate.  This also meant getting rid of your GLD, SLV, and any mining stocks you were levered on.

What many metals analysts today feel is that a great deal of the unwinding of the leverage happened with March, and if the melt down happens again, instead of silver dropping from $18 to $12, it might go from $18-$16 or $18 to $15.  It’s also possible that it’s a very short dip – reason for it being is this.  Remember what I was saying about the supply issues?

How does silver, in any universe, drop back down to $12 again?  It can’t get there because as soon as it becomes available at $17 or $16, there’s buyers there.  A LOT of them.  Yes, “industrial” items are recessing need, but are “technological” and investment demands receding?  Most certainly not.

While some people have called for $100 silver, Keith Neumeyer being one of them, if you look at the Rick Rule uranium model, the supply was so out of whack with spot price, there was a sling shot over spot price by a good amount.  In silver’s case, in order to produce 1.5 billion ounces per year, this may require $30 silver.  I’d say inside the next 10 years, given all technological demand, I think $40-$50 silver could be common.  But……….what is the slingshot effect?  10%?  20%?  In uranium’s case, it went 3x past the target rate.  Let’s just say the equillibrium rate is indeed $30 per ounce – the slingshot effect COULD have a spike up to $90-$100 for a few weeks/months.  This gets more mines opened back up and more silver supply back to the market.  This can then eventually find that happy medium at $35 or so per ounce.

Remember, in nature, silver is found to gold at 8:1.  Some report 10:1.  Money has had silver pegged to gold at 15:1.

So if gold hits $2500 per ounce, is silver at $100 per ounce with the supply issues and demand insane?

Consider this – silver has already hit $49….twice.  But one look under the hood, and you find that the 1980 price of silver at $49 is not inflation adjusted.  Inflation adjusted, was about $150.  Someone else used the CPI and reversed it and it had over $600 per ounce.  The 2011 price of $49 is already inflation-adjusted for over $70 per ounce.  So – in retrospect, hitting $50 today is like hitting $40 in 2011 or $15 in 1980.

So I’m going to suggest that ALL indicators are lined up for $75-$150 silver in the next 2-3 years.  The supply issues, the paper COMEX prices about to break, the incredible amount used in technology increasing, the relative rarity of 8:1 in nature to gold, AND it’s store of value and hedge against inflation in some extraordinary times.  It has not moved on paper yet, due to the COMEX and the concentrated shorts, but now that JP Morgan is long $1 billion ounces…EVERYTHING is set for $100 silver to happen.

Let’s start with $20.  Or $21.

I say this because I need you and others to understand how to profit significantly off of the BIG moves coming.  Can the government somehow smash this down?  I don’t know.  If the stock market somehow melts up, you still have the industrial and technological case of demand not being satisfied.  The insane money printing will take gold up, regardless of how the stock market is doing, and this will pull silver up with it.

But now, I’m going to show you some math on First Majestic.  They are one of the few large primary silver producers in the world, and they are actually only 60% silver and now 40% gold.  If you look at their 2019 earnings, you see $30 million net.  They use “$17 silver” to get these numbers, and they produce about 25 million silver “equivalent” ounces per year.  This is gold, silver, etc which they put into a formula so you can take the ounces and multiply by the $17 avg silver price to get earnings, etc.

So get this…

silver goes from $17 to $21.  You are up $4.  Take the 4 and divide by 17, and you get 24% profit.  These are your silver bullion people.  In order to double your money, you need silver to go from $17 to $34.  Many of us feel this will hit $50 or higher, so the $17 is not bad to anticipate $100 silver and a 7x return.

But if you are First Majestic, and you made $30 million on $17 silver.  What are your earnings on $21 silver?  I put this together for ROUGH NUMBERS ONLY.  I kept their expenses flat, but in reality, as the price of silver goes up – they may re-open some mines that have a higher cost and lower grade ore.

AG earnings

If you look at this, you see the current earnings per share at $.18 in a year, roughly.  If you go from $17 silver to $21 silver, their earnings go up 388%.  Remember, you had a very nice 24% profit, but they performed 12x you.

The net effect of this with mining stocks is a rapid, virulent, obscene, and rip your face off stock price move upwards.

Take a look at how AG stock price went from about $3 to $18 in 2016 over 8 months.  And this was a silver price that went from $14 to $20.

AG stock price 2016 -2png

Remember…at $20 silver, AG stock price was $18?  Today, at $18 silver, AG stock price is…$9.50.  With $2 move in silver, could AG stock price double?  Well, look at the chart above – it shows that with a $2 move from $17 to $19, it’s a 244% move in earnings.  Why wouldn’t stock price move a lot?  Here – this moved down only when the Fed decided they wanted to end QE and started to raise rates.  When rates get raised, it’s not favorable for the metals.  And….Jerome Powell just came out 2 weeks ago and said there will be NO RATE HIKES FOR TWO YEARS.

Add another factor for this.

But the point here is this.  July is setting up to be a big silver month.  While I have paired back my portfolio some, I’m also doing long term options with AG for 2022.  This can have the effect of essentially buyin stock at 1/3 the price or so and getting all of the price action on upward movements.  I can get a little more aggressive with strike prices and the like to make it cheaper, but you get the point.

With all of that above…what happens to AG stock price now at $50 silver?

In 2011, with an inefficient company, at $49 silver, AG traded at $24.

In 2016, with a more efficient company, at $20 silver, AG traded at $18.

Today, with an HIG mill and 9 years of a bear market and running more lean – what could their stock price do with $30-$100 silver?

I would contend this….

Silver to Moon

Lastly – I leave you with this.  One of my friends doesn’t see $50 silver.  He said maybe $30 or $35.  I don’t terribly disagree with this as an intermediate price.  For example, up until 2030, this might be a price point where silver miners can be profitable and keep up with demand.

The x factor here is the uranium sling shot effect.  There is a SERIOUS SERIOUS supply issue at the moment.

While I don’t doubt $35….I could see the sling shot well past this.  $60?  $80?  $120?

I leave you with this.  This is the daily price chart of silver in 2011.  Look at the monthly gains and the price doubling in just a few months.  Yes…given the right conditions (ummmm…we’re in them), why couldn’t this happen in the next year?

silver daily price 2011

Take a look at Uranium’s overshoot?

URNchart2

Does this look like…

Psychology-of-Market-Cycles1

Or the gold bull run showing it in the next run up?

Gold bull run

Now – silver prices….STARTING the next bull run?

silver price chart bull

SD bullion believes we are at the base of another run…The circle is where they think we are currently in this market cycle.

silver1

These market cycles, and the psychology of them are….tied in with supply and demand and businesses entering and exiting the markets.  This affects supply and demand, and rinses and repeats in cycles.  If you look at the chart above, you had favorable prices for silver in 2010 to make money on cheap silver then.

Companies enter the market, but they cannot keep up with demand due to how long it takes to get mines up and running.  DEMAND OVERRUNS SUPPLY.  Eventually, supply catches up after the slingshot.  This is where you see the peak hit.  Then, the markets are flooded with product.  While the demand may still be high, the supply is abundant.

Then, market conditions made demand go weaker for investment purposes.  Over the last 8-9 years, investment hit a low of 20% of mined silver.  Over this 9 years, a lot of the miners that got into the businesses – failed.  Many of the ones that remained, like AG, had lean years where their stock price hit $3.  Look at the effect of mining stock prices on a move from $14 to $20.  AG went up 6x.

What I can tell you now is this.  DEMAND IS OVERRUNING SUPPLY.  This will set up for a virulent year at the moment silver breaks the paper short prices.  It will happen any time now, and some feel this could be July.  Add COVID shut downs, money printing, no bullion available – COMBINED WITH TESLA stock prices moving up and demand for technology not subisiding, and there’s a real supply crunch happening.

Buckle up everyone.  The train is about to take off.  When silver hits $21 and $22 in the upcoming months and you now are looking to get in, I’ll still be here.