I’m going to start this off by begging people within the industries mentioned here to comment on this and/or the Twitter post this is sent out on. I have a lot of questions on my feed, and I also have a lot of questions about what this looks like. I never pretend or aim to be an industry expert – but write on a lot of this about my observations. I have an incomplete picture, and most people do. We try and collectively “guess” at what is coming. Sometimes we are dead on, sometimes we are just…dead wrong.
I have two numbers I play with below I would request fact checked. One is that people are claiming there are 500 claims to every physical ounce of silver. How can people KNOW this? I know Chris Marcus has asked dozens of people, and this is around the number most say. The second number I use is 10:1, which I am using as a fractional reserve ratio. Those in the PM unallocated industry – what reserve ratio do you use?
The setup here is this….
Fire and brimstone may be coming?
Let’s quickly review where we are.
- For each ounce of silver, it is said there are 500 owners. Much, much more on this below as this is the focus of this article.
- Overview – I have been maintaining where I think we are with the Silver Squeeze metrics here. To ME, it appears we are at the bottom of the 8th inning with 2 outs if we are using a baseball analogy. I called this downturn Weds afternoon as I noticed the pattern of the last 8 months having a strong pullback as the banks need to shake people out of their positions every month to convince them to settle or roll over. This upcoming delivery month may be the top of the 9th – and it’s possible it’s game over after this. I don’t know. But the metrics I’ve been tracking continue to get more and more bleak for those betting against silver.
- SLV losing interest – PSLV gaining steam. Seems people aren’t trusting this as a vehicle and interest is waning. And – PSLV has gained 70+m ounces. In my February article that got me semi-famous for 8 minutes, I said that in order for ANY squeeze to work, PSLV would need to add 50m oz by end of March. They told me to hold their beer. My crystal ball was merely delayed by the 10yr move up, but on cue, the CPI numbers came in to lower real rates. I had mentioned they can change the rules or something like the 10yr can move up – but this would be met with yield curve control. Actually – “yield curve management” is actively being done with $120b of bonds being bought monthly, and I read somewhere one month it was $180b. And – this three week stretch may have more sales upcoming bought by the fed.
- Unallocated games seem to be folding? John Adams is on a quest to burn it all down, no matter who gets scorched in the process. I most definitely applaud the passion – but…I’ll leave it there. He feels he has helped move many tons of silver from unallocated to either allocated or physical. In a tight market, to move 14+ tons (as of like 2 weeks ago) is a lot to move from paper to real.
- Bob Coleman discussing tightness. He had been more of a prudent hawk – which was absolutely needed to keep everyone grounded and pragmatic. However, recently, he had discussed how premiums were up on wholesalers. I didn’t hear in that video if he mentioned a premium on 1,000 oz bars or just wholesaling for things like Eagles – but he seemed to indicate there was more tightness than he had seen previously. Bob is an industry insider who does this for a living so it adds a lot of credence to when idiots like me say there’s a squeeze happening.
- Comex down 34m oz since I’ve been tracking on 22 Feb. Others report it a little higher, but they may be going back to 2 Feb. This is something of interest. David Morgan has said in an interview recently that he had once seen the registered at 35m oz. However, I think this was far before the COMEX became a legit delivery mechanism. I’m seeing 119m in registered today, but you have to understand. This is silver “for sale” that they actually don’t want to hand over. Morgan has also called this “show room floor” silver. You see it every month where the silver is there, but they seem to make deliveries by going into the spot market. An important note here that a reader pointed out to me is that a delivery may not have to leave the COMEX at all. So you may have 65m in deliveries for May, but only 20m might leave. Some of this can stay in registered and just change owners. Others may move to eligible. Eligible does NOT mean for sale, but it COULD come up for sale.
- Just about every analyst you see is talking about some flavor of Armageddon coming. Whether it is a David Hunter 80% bust that rips your face off or a Michael Oliver arm wrestle you down over a year – mostly all debates I’m seeing now is what level of shit storm we are facing, and when, and if we have a deflationary or inflationary blow up. I need you to ask yourselves this question. If you had millions of dollars, or perhaps billions….are you waiting for the dollar to die or have you amassed a fortress of precious metals, artwork, diamonds, years of food, and an armory that would make Seal team 6 jealous? I think this system is intact until all of these guys are prepared and the hatch is buttoned down. So I ask you this…if you know this is coming…and I know this is coming – don’t you think all of these rich guys have been making a run on the “bank” prior to the media broadcasting it?
- Basel 3 coming up at end of June, and supposedly this will take gold to $2500 per Andrew Maguire. Basel 3 talks about the whole balance sheet, so it seems silver would be included in this. He talks about $40-$45 silver as part of this. I don’t know if this will happen how he says it will play out, but assume for one moment this is true. This means the deadline is 2 months from now. And there are now 172,000 contracts of open interest on the COMEX. That’s 860m oz, or over one year of mine supply is supposedly for sale. Yeah. So something tells me this OI is going to have to come back down to earth with Basel 3.
Bank run? What does that mean?
Here’s where bankers and any PM guys can help out. We have a fractional reserve system with cash, right? Let’s say there’s 10,000 customers of a local bank and each one deposited $1,000. There’s $10m in the bank, right? No. Maybe at any given time they have like $50g in the vaults. If you want to take out more sizable amounts, you have to call ahead first to “order” the money. And, then if it’s too much, you have to fill out forms and tell them what YOU want to do with YOUR cash. Personally, someday I’d love to be in this situation and write about the most obscene thing I can think of to mess with everyone. Like it’s any of their business? OK. Maybe I won’t write something obscene down, but that sounds like a topic for my YouTube channel show (did a test video and edit today, fun stuff!). So maybe I won’t pull a Scrooge McDuck with it. I can think of about a dozen things that would crack me up to write that I can’t even think of writing here. Craig Hemke made some funny comments on this topic I cannot repeat here 🙂
So we have now understood that if all 10,000 people went to the bank, only the first 50 people could get their $1,000 out before the bank was out of cash. And, they’d have to order more cash from another bank. In the case of cash, that might be a few hours or a day. With silver, it could be weeks or months, if not longer.
How does this work with unallocated silver and gold?
I posted something a few weeks ago which said on the Perth Mint website (circa 2011) that their unallocated silver was like buying water or something like that. Where it was in the pipeline. While you might sip from a fountain, it takes water up from in front of you, but there’s more fed into the pipes at the back end. It then has to traverse the pipeline to get to the fountain and that can take time.
So imagine for a moment, 10,000 people all thought they owned 1,000 ounces of silver. Or, 10m oz. Imagine the same situation – maybe they only have 50,000 on hand and as people take that, they bring in more to replace. What seems to have happened is the 50,000 oz disappeared, quickly, and a lot of people then were told it would be months until they could make the donuts. John Adams has been working to get those unallocated people to allocated. Or, perhaps trying to take what’s in the vaults.
It’s ALSO possible (unconfirmed) that the Perth Mint has been helping the COMEX with meeting their delivery needs – at the expense of their unallocated customers by delaying them to shuffle metal to the COMEX. This is something I heard Bix talk about, but again – I’m NOT in the industry and CANNOT confirm this.
But this all brings up something cooking in my head…..and this is what happens in the near future…
Now I ask you this….
If each ounce of physical silver has 500 owners, what is that doing when the physical silver in the unallocated AND the 34m oz on the COMEX disappear into thin air? Seriously. What happens?
14 tons of unallocated silver is half a million ounces. Just at Perth Mint, 2 weeks ago. What if the last month, John has been successful in making 5 million ounces (10x that 14 tons) move from unallocated to allocated or be taken into physical custody? What if the harassment of Peter Schiff on every single tweet he makes has spooked a lot of his investors out of unallocated?
If you take this 5 million and add it to the 34 million I saw that came off of the COMEX, you are looking at roughly 40m ounces. Others had 37m since Feb 2nd, so 40m is a nice round number to compromise.
This 40 million ounces WAS ACTUALLY 20 BILLION OUNCES in the system that people “own” on paper and have no “base” silver that it was fractional against. (40m oz x 500 owners per ounce = 20B oz).
What this REALLY did was weaken the fractional reserve system FAR more than I could have thought. Meaning, the owners of 20 BILLION OUNCES in the system, now are re-hypothecated to OTHER physical silver. Remember when Jeff Currie talked about a 25 billion ounce silver market? I wrote about that as well, but is it possible he’s talking about the paper silver as well as the physical investment silver? Very likely. If true, and accurate, this means that the 500:1 is FAR smaller than this number.
So could that now mean that each ounce has 600 owners? 700? 1000? 200?
No one knows. But this MIGHT add another wrinkle to the whole silver squeeze calculus.
The thinking here is that NO ONE has any idea how many of these items are out there that are derivatives of silver. No one knows. Options on this. House funds on that. Futures over there. Re-hypothecation. Leasing out leased silver to someone who leased it to you, who then leased it out somewhere else who then sells it 50x over on unallocated. Some of those unallocated owners create derivative products of that which they think THEY own. You get the idea. The problem is if the silver that is ACTUALLY in the vault leaves, that stresses the market exponentially, not in a linear fashion. I’m not sure people put that graph in their head yet. It’s a parabola up.
And now 40m oz in the last month that this Ponzi scheme was founded on goes missing. To me, this seems to be putting even more risks on banks?
Please, someone explain to me like I’m a 5 year old what I’m missing? It stands to reason that if every analyst on YouTube THINKS there will be a FIAT CURRENCY crisis….AND…we are ALL seeing inflation….AND silver is an excellent hedge against inflation WHILE we are seeing massive inflation (sorry, transitory) – AND we have a pro-“green” government in the USA that wants solar panels and electric cars…..and wants to print money for “free”…….
Can someone please explain to me how a bank can offer a product where they have this level of risk of default?
There’s one of three explanations here, IF pressed for silver:
- If they don’t have the silver, they will pull a Perth mint and give you a timeline of weeks, months, or years out – their product is then “ordering it from the mine” to deliver, at some point. This would not default on the product, but in a timely fashion. IF this is as screwed as this sounds, and everyone went for their silver, you might legitimately have delays of 40 years.
- If they don’t have the silver, they may pay you back they money you paid them. The problem is, I cannot see a possibility they can pay you back market rates, as probably with turnover, most of the paper silver they sold over the years were are far lower prices they are now. IF this is a 500:1 scheme, and only 5% show up for their silver, this means they are 25:1 oversold. If this number was applied to the entire system you are looking at overnight price rises well into the $100s – or many up limit days in a row if people still believed the COMEX at that point.
- The bank will suffer losses on these of hundreds of billions – if not trillions. This cannot be bailed out as “too big to fail” as some of these losses might eclipse a good portion of our entire country’s GDP for a year. It is said that the derivative system is over a quadrillion dollars. As in 1,000 trillion. USA GDP I think is like $19 trillion? This essentially would leave any holder broke and without the money they put in. The moment this is realized by those holding these accounts, the moment this bank run starts. And I think this is why they are doing everything they can to manage the price of silver. If this gets loose, there’s nothing that can save these banks.
So my thinking here is this…
All of us are focused on the COMEX deliveries. But I think we need to understand that when silver leaves the system this IS the bank run happening by the rich, behind closed doors – taking it out now, before anyone realizes what the actual F is going on.
While we are grabbing retail – awesome – the big dogs are grabbing millions a day.
And this is why stage 4 of the silver squeeze has begun. If we are seeing half a million ounces leaving the COMEX daily, this to me is THE sign we have been waiting for.
There is no “failure on delivery” with the COMEX, they will just eventually settle for cash. The 800 million ounces that are in the futures are interesting and all, but IF the rumors are true that there are 500 claims on every ounce in the system, then what the hell REAL damage is 40m ounces coming out in the last 8 weeks?
Those 40m ounces that just left the building are thus tied to 20 billion ounces that banks sold people in products that sometime soon are about to come looking for their silver. And it’s possible John Adams’ reporting is the tip of the iceberg.
There is a day coming where one of the below may happen in the next month:
- A major news outlet covers this, probably because some high profile people went to get their silver and were denied. This would cause them to go to a lawyer and potentially threaten press conferences. IF and I mean IF this situation IS this bad, then this run going on right now is about to piss off the wrong person, somewhere, with the right news connections.
- A major manufacturer will be delaying production. At first, it might be blamed on the supply chain. New COVID shut downs happening worldwide COULD make attempts to mask this issue by providing the supply chain cover needed. This, despite the vaccine pretty much available to most people in the world, as we speak.
- Price shoots up over $30 in the beginning of May. With Basel 3 requirements coming – the price gouge that I predicted would happen yesterday (that happened) and will continue through Weds the 28th, will be met with strong buying as many may start to square the books, as Andrew calls it. There are many cover stories they use to knock things down every month, but if this is indeed a 500:1 ratio – I can see why they would do this.
Now, no friend to the silver community – Jeff Christian – said many years ago silver was at 200:1 I believe. Someone correct me on that, if I’m wrong. Even at 200:1, the 40m oz that were just sold off affected the holdings of 8 billion ounces of paper products people think they own as real silver.
So the main event is the COMEX – where we wait for shorts to cover and see the pressure that the beginning of month buying puts on it – month after month.
But is the REAL event what happens after this? See – I have a hard time believing this 500:1 number. My mother worked as one of 8 compliance officers out of a major bank in NYC. There’s no way in hell a compliance officer would allow THAT MUCH RISK. NO WAY. So I cannot believe this number. I can’t.
Let’s just say it is 10:1, a VERY, VERY conservative number apparently. But perhaps in line with fractional reserve ratios.
That 40m just pulled off thus took the metal supporting 400m oz of “paper” products.
With perhaps 60m coming off in the next 30 days, this then means that’s another 600m oz of paper products with no metals to back them. This then exposes major banks to 1b short on paper derivatives into a rising price during a potential currency crisis coming amongst rampant inflation.
Risk departments. Do I have your attention now? Good. If you have never seen the movie “Margin Call”, I would suggest you add it to your weekend viewing pleasure. Because I think 10:1 is a stupid ridiculously low number I just made up to scare the hell out of you and the problem could be 50 times worse than that. Or 100.
It’s time to get your bosses on the phone.
And if you are a manufacturer who needs silver to make your products? Now might be a really good time to get a year’s worth into your possession ASAP, because this isn’t looking so good for you soon.
I need someone in banking to refute this 500:1. Or even 100:1. Please – help me understand Jeff Currie’s 25b oz number. Please explain to me how every industry insider talks 500:1 paper to physical ownership. Please go on the record and explain to me how they are wrong. You would make a GREAT guest on my new YouTube show to tell the silver people HOW they are wrong.
It already happened, I just don’t think many heard it yet. Think of the idea of the sun exploding. It’s 92 million miles away and if it exploded, it would take 8 minutes for that light to get here. I believe this has been broken for a year, and all of the rich people are taking their bricks of silver and gold and putting them in their bunkers before they pull the plug. That exec who just left with the golden parachute is off to an island somewhere for you to deal with the mess.
It exploded…the light just hasn’t reached your eyes yet. Now, we wait.