Poor information in the space
I’m going to start this off by discussing the amount of poor information we have in the space. Bare with me here, as this subject sets up the rest of the piece.
I listen to 2-3 hours of videos a day. This does not make me a metals expert. It does, however, keep me abreast of all of the latest news as to what’s going on, and how things are being seen in our community. For many of you that might see a video every other day or the like, I try and consume a lot of this, then boil it down so newer people can understand it.
I had this crisis internally when I was asked to do the Palisades Radio show. If you look at his all star line up, you have impressive names up and down the list. Why would I do that and put my face and name out there? I wanted to do it to reach out to a lot of the newer investors in the space. Create excitement for possibilities. Convey to you, the viewer what I’m seeing by putting all of these pieces together. There’s a lot of complex information being disseminated, but many of these presenters are talking to a sophisticated audience and perhaps bypassing the newer investors altogether. It’s not their fault. Someone like David Morgan should not have to spend 10 minutes of every interview discussing why silver is important. Let some idiot like me collect all of the material I can find and summarize and present to you, in writing, so you can later refer to it. Let me try and decipher the COMEX reports, COT reports – and collect everyone’s thoughts on these things, to present to you some form of consensus of information.
I looked at it like this – I used to watch a LOT of sports. I mean, a LOT. You’d have the broadcasts with the former point guard as the analyst, then the broadcasters giving the play by play. But then – you had the sideline analysts added later, then the after game interviews. Then the coverage on drafts and trade season.. Then – you’d have the newspaper columnists who may have never played the sport a day in their lives, but may dissect coaching strategies, trades, or what they see that could be happening. What I aimed to be was more of a sideline reporter or newspaper columnist who is observing the games going on and provide you some highlight reels of what actually happened. You can listen to a 53 minute interview with someone, or perhaps I might be able to listen to that 53 min interview and someone like me could pull out the important notes for you. I can do the legwork to decipher what 10 second snippet you might need from that interview.
Having been new to the PM space in 2019, there was a world out there I didn’t know. I absorbed all I could. I did have 4 years of an MBA, so I at least understand a great deal of the academic side of the economics and finance here. I still am like a sponge learning this as it is an extremely fascinating field to me. One thing you learn the first week of college, let alone graduate school, is your research is only as good as the sources you use. And, it’s VERY important to give credit, where due – and then take others’ ideas to then form your own contribution to the space. To me, high school was just remembering things and spitting it back out. It was boring. They test you on how well you can be a puppet. In college, you have some papers, but again, it’s about remembering a lot of stuff – but then perhaps applying it to hypothetical situations.
Where I exceeded my previous schooling was graduate school, where I found a lot of research – but then could come up with my own take on things and support my hypotheses with others’ research and data. I remember doing a lot of my cyber papers referencing the NYT article on Stuxnet and Operation Shady RAT. I remember a lot of my grad school with my MBA focused on measurement tools. The point is – you can find bedrocks of research in a lot of different topics. For me, it was the Hidden Secrets of Money. Maloney was not a Wharton Grad. In fact, he was not a graduate of anything if I recall – yet he was able to provide a valuable utility by taking massive amounts of research and providing you a history of money. While he had a business to run actually selling you gold, he was genius in the sense of making an extremely compelling case to buy his product. I cannot fault the man for being an incredible salesman. In fact, I think most people who believe in their product will be extremely successful. You aren’t selling a lie to take from someone. You are selling truth to provide for someone.
In the land of academia, there’s no shortage of scholarly journals and resources on the most inane of subjects. The first thing you learn upon completion of your second graduate degree is how little you ACTUALLY know. What graduate school does, more than anything, is to train someone to understand subjects by chasing down complicated subjects and researching the best possible information, and then applying it to how you may see something developing.
In the world of precious metals, there’s no real such thing as double blind studies or peer reviewed articles. There are a lot of pieces of research that are costly and not necessarily available to the common folk. You have one group in an isolated ecosystem making millions a year in bonuses alone, and the rest of us outside that closed ecosystem trying to understand, in reality, what is going on. It has become adversarial, because those in the know seem to continuously win a rigged game, with rule changes made at the last minute to benefit them alone. Any sense of fairness appears to be fleeting. And this lack of faith in institutions is one of the thing Maloney discusses in his series – which has now been leading towards a lot of anger towards institutions like the CTFC and SEC. Information given to us is poor, at best. Opaque. Confusing. Errant. Misleading. Then you see regulators going after a group of nobodies on Reddit and feel further isolated from the country we once knew that went after the corrupt Railroads. If this is a world of the fourth turning – at some point politicians may rise up to go after the Boss Tweeds of the world. Could be be closer to a Sherman Antitrust Act of 1890? Or, are we closer to the days of Railroads taking peoples’ land with imminent domain? We have to rely on experts who are somewhat in the system to provide us information, and some of that is via paid services – because these guys need to make a living too.
Which then circles me back – our information in this space is not up to the rigors of “legitimate” research. We rely on consuming bits of information from hundreds and thousands of interviews. Finding that one bombshell change in a prospectus. But we do NOT have the type of information that is either scientifically approved nor peer reviewed to any real extent.
When I write things – I will try to give you my best understanding of subjects. If I do not know, I will not lie to you. I will tell you, “I don’t know”. And these could be the best words you will see, because people like me WANT to know, and we will try and get those answers for you.
This leads me to a discussion I had heard this week, which I don’t want to give specifics on because I highly respect the guy who has 100 more years in the business than me. So, my goal here is not to start a beef, but present some feedback from someone not in the industry when he hears things. I just want to discuss some terms how he presents them versus how I hear them. And there’s a disconnect there.
In this conversation, the concept was that there’s no “shortage” of silver, but there’s “tightness”. There appeared to be a gradient of sorts, where there was a difference. Where there is a tightness before a “true shortage”. He painted a picture that there is no shortage at the refineries. I would point out there’s never a shortage of silver – as there’s about 6 billion ounces above ground, perhaps 2 billion in investment grade. I need to clearly look at what a shortage is, and what tightness is.
Now, I need to preface this again by saying I’m not in any of these industries. But I need to point this out.
If a bike is $100 for my son I see online, and I go to Dick’s sporting goods to buy the bike for his birthday, and there’s no bike there, I start asking the manager about it. He says, “we almost always have tons of bikes in stock. However, we can’t get them now, and there’s a 3-4 week wait due to delays in getting the metal to make the bike”. To me, the readily available inventory is non-existent. Furthermore, he then tells me that the bike is normally $100, but because there’s “tightness”, we will have to charge you $110 for the bike because there’s such a high demand.
Let me also state that if had $400 in my pocket, I could not get that bike from Dick’s sporting goods, today. However, someone who just paid $110 for it, if I offered them $400 for it, they would gladly give it to me. Meaning – there’s a readily available supply of those bikes, but AT A DIFFERENT PRICE POINT.
What you appear to be hearing is people spinning things you completely understand as a 5 year old, and making them out to be overly complicated.
For example, if I wanted to buy silver on the spot market at $26 at size, it appears that I would have to wait 3-5 weeks or so and pay a premium of $1. This is normally readily available but isn’t now. It seems they are waiting on NEW inventory from refineries to then sell that product, at $26 plus $1 premium, However, if I said, “hey, guys, I got $40 per ounce, hook me up” – you would have offers to sell you you from all over.
What you have is a SHORTAGE AT THIS SPOT PRICE, not SHORTAGE of SUPPLY. In the simplest of terms in microeconomics 101, you have a price point where demand is outstripping supply, and thus should push the price up. But…it’s not. And, instead, you are told there’s “tightness”.
Translated = tightness equals shortage of supply, AT THIS PRICE POINT. In any other industry, this leads to higher prices. In silver, this leads to higher premiums. Makes sense? Yeah, I didn’t think so. This is where the futures price will eventually break. Not today, but it will, at one point, get baptized.
Furthermore, when you really look at the futures market, it is completely set up for supply-side squeezes to occur for this very reason. Why? Because you are setting the price of a commodity where people who are selling it, don’t have it or don’t actually want to part with it and you have the buyers who don’t actually want it or take delivery of it. Essentially, you are determining the super bowl winner not by the play on the field (supply and demand) but the betting line. In this situation, the price point appears to hover just over cost of production, with some profit baked in. These markets are set for efficiency. That is, if Hecla can produce silver as a byproduct of Zinc at $8 per ounce, but a primary silver producer like First Majestic needs $13 to produce it, the futures market is meant to drive First Majestic out of business. Let that sink in. They don’t care about primary or secondary production. They care about efficiencies of production.
What you have now is selling exhaustion. And that, my friends, leads us to where we are….today.
In this scenario, any time silver has a monetary value realized, it then re-prices the commodity from an industrial good with a little profit baked in to a form of money with a much higher perceived value. In this case, those who had continuously shorted, eventually will be blown out on a price re-rate. We last saw this with palladium a few years ago.
The point is, we are witnessing a SHORTAGE AT A PRICE POINT – which ultimately, forces the price point to move up. The tightness you are talking about is coming with weeks of delays and high premiums. This, is a shortage at price. Not shortage. It is easily fixed by moving prices up higher to shake supply loose. What will happen is this time thing will need to remediate itself, and the only way to remediate the time delay is…to force price higher for those supplying it.
Let me also be extremely clear for those reading. THERE IS NO SHORTAGE OF SILVER. THERE IS A SHORTAGE AT THIS PRICE POINT. And, the powers that be, eventually will run out of product on the assembly line OR price will go up. As Rick Rule said about Uranium, “either the price goes up or the lights go out”. Something extremely similar is brewing with silver. And, the banks that are shorting this appear to be doing this to protect their bond prices.
David Brady, my new favorite analyst, just posted this. This could be a possible explanation why so many dumped bonds recently. I mean, there’s a lot of other reasons, but if banks had to square their books, this is something of interest. Taking this one step further – IF they are to buy these bonds, it lowers rates, but Yield Curve Control, if enacted, should preserve the bond prices? If that’s the case, there’s no reason to short silver or gold to protect your bond prices. Meaning – the fed is your backstop for bond prices. I.e, it would appear that the unwinding of the short positions in metals could happen because you no longer need to short metals to protect bond prices. Uncle Fed is now your insurance on bond prices.
And this…is a mechanism to allow rising prices in metals. By a lot.
Which also coincides with what Andrew Maguire talks about with Basel 3 compliance for the NSFR by June 28th, that he said should start in March.
All of this paints to the picture I was suggesting where the second half of March could be absolutely explosive for metals. We got smacked by the 10 year, but in my pieces writing about this – I did mention the 10 yr could creep up, temporarily halting metals rallying, but ultimately this would introduce Yield Curve Control which would be gasoline on top of a bonfire.
On top of this, you now have all of the major players now talking that a bottom has been in for gold and silver. So – I don’t think my SLV $50 call options will be worth a shit by the end of this month, BUT I had also mentioned to the readers that I’m heavily invested in AG and SILJ options so even $35 silver makes me EXTREMELY happy and covers my lottery ticket losses 25-50x over.
This leads me to what I have been watching unfold this month. I had reported in my big piece in early February, what I noticed in September and December that major deliveries happened the very beginning of the month, and then it seemed that those who had sold the contracts that still had Open Interest (OI) did not want to hand over what they had, but rather would go to the spot market to get it. I have now been tracking this daily for March, and this is exactly what I’m seeing.
You can also see the “shadow” contracts are picking up.
What you saw yesterday was 106 deliveries – but 74 of them appeared to have shown up that day in Open Interest. I have some questions in with several high profile people where I’m trying to get to the bottom of this. Let me explain….
Camp A – these things are called “shadow contracts” and the numbers don’t add up. The columns are not accounting for new open interest that seems to be appearing out of thin air.
Camp B – these things are same day deliveries, and this is allowed by the bylaws. Not a big deal.
Camp C – Camp A and B are confused.
Overall, I tend to lead towards Camp B here – as I have no explanation as to why OI increases during the delivery month. Hell, all months are “delivery months” to an extent, so I’ve been told. It’s just these months are the popular months that are called delivery months. Camp C has only told me that Camp A and B are confused, but did not provide me how they are confused, nor have they provided me how this OI increases. I would not think that inflows to the COMEX are recorded on OI. Rather, they would be recorded with the registrar reports.
That being said, this shows 497,000 oz increase into registered, but this also shows 497,000 out of eligible. This tells me one of the entities with a long held silver position put stuff into the registered category. Let’s just say an HSBC has tried to source 100 contracts in spot market and has been unsuccessful. They may then have to go into their long term storage at registered and move to eligible, and then perhaps at some point in the next few weeks if they cannot source on spot, they will then complete the sale from registered. This is just my understanding of this.
The point is, overall, you see the deliveries fall off of a cliff. The earlier deliveries were made when bond prices were falling, rates were rising – and they could smash silver to try and keep their bond prices from falling through the floor. However, yesterday silver at one point dipped $.70 and you could only see OI reduced by 32. It means, their smashes became less and less effective on buying in the spot market, and it appears some of these guys might be preparing to hand over metals. Ultimately, when less metal is there, it’s less they can short, which is stronger for silver.
With this – I was trying to understand better about this same day futures stuff. I’ll admit. I am confused. Some of you have been futures traders, and might be able to explain this to me like I’m a 5 year old.
- IF you can take a same day futures contract for $.05-$.10 over spot, and if they have 127m oz registered, why would a company looking for silver not buy it then? From what I hear, the “spot” price of these 1,000oz bars has a premium of $.80-$1.40 depending on who is relaying this on what day. IF there’s tightness on the spot market which could result in a 3-4 week delay, then it would stand to reason with 2 weeks left in this month that those owing the last 5.5m oz in these contracts would not be able to get spot orders in time – and thus may have to hand over silver or force cash settlements – OR offer higher prices than spot+premium to get things shaken loose to deliver.
Edit – I just got confirmation you can buy futures contracts during the month, with the delivery by the end of the month. So now my question is – what is the premium on this for 1,000 oz bars? I heard it’s normally $.05-$.10. If spot silver bars are $1.00 over for premium, why would you not buy in the futures market for $1 less per ounce and get your deliveries by the end of the delivery month in 10 days, rather than in the spot market for $1 more and wait 4 weeks?
10 oz of silver to retire in Venezuela
I’m fascinated and terrified by hyper inflation at the same time. While I have my house at a fixed cost, the idea is inflation will take effect and my wages may significantly inflate as well. Or rents I charge on properties with fixed cost loans as leverage. The idea there is maybe my stocks melt up, and I can cash out at a good point in time and pay off all debt. This is appealing.
On the same end of this spectrum, what happens when you own your house outright by your property taxes go up 40,000% in a year and your house is taken by the government because you cannot pay the taxes? This is the downside of hyperinflation. There’s a lot more…but I saw this and it was really scary…
I know deep in my bones that the only way out of this $30 trillion mess is to inflate our way out of debt. And, perhaps only .01% of the population actually understands this. Worse, is by the time 1% realize it, it will be too late, and by the time 50% realize this I have no idea how bad this country will look.
Those that feel we can just print our way out of this are trying to pave the way for a socialist paradise. I heard something pretty damning – that the only 2 candidates than can then exist in 2024 are socialist and socialist lite – because we will be in such a poor predicament, the only way anyone can get elected is to promise more stuff than the other. I just saw one of the squad talk about not paying any mortgages or rent until 2022. Behind those renters are people like me who own the houses – and you are telling me that it’s ok they don’t pay me. However, I have a binding contract with them that I provide a service to them, and they provide a good to me in exchange. And the government is interfering with my contracts.
I then saw some comments to that picture above, which then gave you an idea where many fear this is going…
With this kind of thing in mind, I think it’s very responsible to try and acquire 50-100oz of silver for every member of your household. Even if it’s 2oz a week. You do not need shiny stacks. I would never buy silver to get rich. I buy silver stocks for that. I would buy silver as your insurance plan against hyper inflation. Many people that exude great confidence will tell you it will never happen here. I want you to look at Venezuela’s stock charts the last few years…
Then, you look at a TSLA or BTC chart and this is sort of what you see….
And…you look at prices rising quickly, as an indication inflation is now raging.
And if Yield Curve Control is put in place to peg the 10yr at 1.5%, but inflation is indeed at 6%, 8%, or 20% – you can picture a situation where the negative yields start to rise in a parabola. Which, then, has gold and silver melting up.
I saw this on Reddit a few weeks ago and this is what it’s like with some of the people on my daily email list I write. They see Bitcoin doing a 15x in the past year, and when I discuss some of the miners my analysts are hot on, they buy, and in a month when they don’t have a 10x, they start getting on me.
Do you remember the times of Napoleon when mutual funds would give an 8% yield and people were ecstatic? I’m joking of course about Napoleonic times, but I used to work at the Vanguard Group of Mutual Funds outside of Philly. Worked there for 4 years. At the time, they were second largest to Fidelity and managed $500 billion in assets. Now, if you aren’t getting 50% returns a month, you must be some sort of idiot.
I am all in on PM and PM miners. “Where Lambo” is coming for me, someday. If the FOMC meeting plays out with YCC control and banks are allowed to continue to buy bonds, then my Lambo time could be a matter of weeks. But these things don’t work on my timeline, or yours. In fact, many said I was foolish putting timelines on my predictions. They are probably right. I wasn’t using a technical chart – but I was using about 10 different tools to conjure up spirits on a ouji board. I was right, and will be right, as are many of you. Could I have been early? Sure. By days, weeks, months…even years. I will not regret it, however, because it got a lot of you to understand the underbelly of what is going on. You looked deep at the inner workings of how price works with the COMEX and how this interacts with the DXY, the 10yr, supply and demand, mining shortages, refinery backups, high premiums, ETFs buying 1,000 oz bars, Sprott’s PSLV versus SLV, silver has a hedge against inflation. The list goes on….
Because of that article, and many others like it, we have helped get 40,000 people involved in WallStreetSilver. This led to an army of memes. Getting physical insurance in silver at your homes to protect you. It has also served most of you in understanding some complexities of this that you can then use to educate YOUR friends and family to join the cause.
See, silver for many of us isn’t about getting rich. It’s about protecting our families. IF silver overshoots, as these things do, do you take some profits? Maybe convert some of those profits to pay off debt or real estate? Could we see $300 or $2300 silver by the end of the decade? Maybe.
I always tell friends and family this….
If you had 2 silver dimes in 1964, you could buy a gallon of gas. If you had those exact two silver dimes today, you could buy a gallon of gas. Those prices may fluctuate up and down a bit, but you get the idea.
For the meme folks out there, I want to leave you with this. I made an update to this meme, but I think you guys with much better skills than me should update this and make it go viral. Everyone talks about upping the minimum wage. What if we just kept the minimum wage at 90% the price of one ounce of silver?
All of that being said, I’m not in the camp of destroying the Fed. Because of the fed, lots of lending is possible. What I have a problem with is overleverage and our government continuing to spend at will. You cannot get elected today if you do not outspend the other guy. This needs to change, at the root levels. I DO believe in sound money. I DO believe we can have some form of a gold standard, again. I see it something like a fractional reserve with 10% backing by gold. This might end up in a $10,000-$20,000 gold price in the next few years. This could then lead to a $300-$600 silver price based on 33:1 GSR or perhaps a $600-$1200 silver price at a 15:1 GSR.
I did a write up on this the other day and never hit publish. I’m torn on it, overall, on the direction of it. There were three catalysts for this discussion
- Steve St. Angelo and the energy cliff talks. I felt he focuses a lot on petroleum energy, which he’s smart to do so, but when we do hit peak oil and are on the other side of it, what happens? My contention is that our energy solutions are solved more with nuclear and batteries for green tech. I worked at a hydro electric dam company for 5 years, and one big issue that you have is you have to turn down the electric generation at times. You cannot harvest extra energy.
- Texas and disasters with windmills and solar. Had there been massive batteries to capture weeks or months worth of excess energy, then if solar/wind goes down for a time, energy to the household never stops, as it switches over to battery back up. Sort of like we have with data centers and UPSs. Why would you not have a UPS for your house or city? Yes – this stuff is quite expensive, now, but could 10 more years of research lead to breakthroughs? I heard silver has been a breakthrough recently with batteries.
- Tesla creating a battery for Texas. Started getting me thinking that Tesla needs to spin off their battery tech into a separate SpinCo. I believe the value of Tesla now is in their batteries, and not the cars. If you have a separate SpinCo, these batteries can then be sold to other car companies as a standard part. They can sell batteries to the Tesla car company. They can create industrial batteries. Home batteries. Batteries to store excess energy from solar/uranium. What if you had the technology to store years of energy into batteries? It may sound silly, but what if we had a situation like a super volcano erupted and put an ash cloud over the earth for years, and killed all crops? Solar could not be produced. People would die of starvation. If we could at least keep energy stored for situations like that, you might be able to produce a lot of crops with hydroponics. Beyond Meat or fake meat types of things could become survival food after lots of mammals die or the meat becomes too expensive.
I bring that all up because this energy cliff thing is real, if we don’t get ahead of the oil issues. I think the fortunes of the 2030s and 2040s will be in battery metals and production. Tesla at 1100 PE ratio as a car company is a joke. However, if Tesla spun off their batteries into another company, that might take the CAR company to a 20x PE ratio quickly and the BATTERY company could end up being one of the largest and most profound companies in the history of man kind.
The big issue with things like “green” tech is it takes a lot of dirty processes and diesel to make it. What if these mining trucks were run on batteries and not diesel? To melt the metals and pay, you used electricity from batteries? The point is that sourcing materials in 2030, 2040, and 2050 might involve armies of AI, robotics, and batteries with significant amount of Amp Hours to run high horse power equipment for long durations of times. Then, like my Roomba, would send itself back to a charging station to then repeat all over again 3 hours later.
Harnessing the power of the sun, water, and heat is amazing – but storing it is next level crazy shit. If you want to be a billionaire in 2050, this is how you get there. And that’s where I’m looking after this next leg up of metals.