Ok. End of article, we can wrap it up here.
Wait. Maybe we should dig into this more. Nate, how can you call for $100 silver and NOT think we will run out? Well – let’s look into that more.
I did a MASSIVE article on this before, but some new comments came out the last few days and I needed to comment on this. I also did an article for a new silver investor and something many of you can pass on to those who want to invest in silver here.
A few days ago when I did a Palisades interview, I tried to cover the overall thinking of ABOVE ground silver. Basically, the CPM report came out and showed there were 60b oz above ground. At first, people want to balk at this number.
With the Don Durrett interview with 10 baggers, his $100 silver thesis has us “running out of above ground silver”. More on that below – but I believe he is referring to “readily available stocks, AT THIS PRICE”. I don’t wan to put words in his mouth, but I’ll describe the numbers below.
Steve St. Angelo came out in a Twitter discussion with me and said “maybe 5-6b oz”. He then later conceded that there may be more out there, but you needed ENERGY TOOTH FAIRIES to then actually access it. That was kind of funny, but somewhat accurate.
Steve doesn’t know how important his free YouTube videos he did for years with the SRSRocco report influenced my interest in the sector. One of the most important ones had him discussing the decreasing silver ore grades that were being recovered.
Some others chimed in to the discussion basically saying I smoked crack. I don’t smoke crack, but the occasional scotch is nice! There was a lively discussion with me getting beaten up for citing the CPM group numbers.
What the research says
So with this, I want to quickly break down what the CPM group says, in a sentence or so. Basically, you have 5b or so ounces in investment grade (bars, coins, rounds, constitutional), 25b or so ounces in jewelry, tea sets, and silverware, and 30b oz perhaps lost to dumps and waste over the years.
In a nutshell, most everyone first of all wanted to attack Jeff Christian and the tea sets. That number seemed way too high. When this was also cited on Mike Maloney’s page, it then turned to:
- No way you get these priceless treasures melted down
- Even if they would want to melt them down, there’s no energy in the world to do so.
Let’s first look at the research. Jeff worked for Goldman for a lot of years before spinning off. His job is to tell people how to hedge with futures, in a sense, and therefore he feeds the beast with shorts. So to the silver crowd, he plays Dr. Evil. I find his shit talking funny, and a guy like this who worked for Goldman is wicked smart and has intimate knowledge of the industry. So they attacked the character – and then insisted he could not go door to door asking for surveys on tea sets.
I have 6 years of graduate school, so when I write here – I write with opinion AND research. My research is also multiple layers in depth. You may not find double blind scholarly studies on silver. But, you may find many sources out there. What most average Joes do NOT understand is the level of knowledge out there you and I cannot possibly grasp. Meaning, you ASSUME because something happened 100 years ago with tea sets, you cannot get this information today. And that is the first mistake.
What most people do not realize in the world of academia is how goddamn nuanced some of the PhDs they give out – and what their thesis may have been on. I once had a philosophy professor who had a PhD – it was in the migration patterns of religions across Europe from 1300-1600. Essentially, he had these detailed maps of all religions and where their influences were and when.
When I read Gary Taubes book “The case against sugar”, he went back several hundred years with shipping manifests regarding sugar with a lot of these old companies to show how many tons of sugar per year, per person, were consumed in the known world.
Many of these old Mexican mines have been mining for hundreds of years. Some of these british tea sets and silverware companies may have been around for hundreds of years. Refineries may have records dating back 50 years how much Constitutional silver they melted down as required by law then.
My point is, if Goldman wanted to approximate the answer on all silver ever extracted from the earth, and it came out of the earth at about 15:1 gold, and 97% of all gold ever mined is still above ground and secured, then they can reasonably determine how much silver was ever mined.
This is estimated at about 60b. From there, my bet is Goldman bought a lot of research reports you and I do NOT have access to. This is that PhD that spent 10 years of his life understanding Mexican silver mining, and he provides a detailed report of what mine produced what grades from what years – all for a cost of $20,000. Goldman might buy this. You and I would not. If you have to look for more than 18 seconds on Google, you get goldfish and move on. These people at goldman are paid 7 figures a year to be RIGHT. You might not like them, but I do not doubt that research.
Where I disagree with Jeff is that 25b that is “available” in jewelry or tea sets is not available AT THIS PRICE. My contention is, that at higher prices, SOME of this supply will be knocked loose. If we mine at 800m oz per year and use 1b oz per year, and normally 200m oz is recycled, this meets demand.
What got everyone in a tizzy was I have been writing about solar and batteries the last few days, and immediately the thought is “we don’t have enough silver”. They talk about ore grades and lack of discovery. I told them to not focus underground, but above ground.
I have also done a lot of research on ICE versus EV silver usage. Neumeyer in an interview with Daniela at Kitco in Sept 2019, said EVs use “3 kg of silver”. This was wrong. I went back to First Majestic to get this fact checked. They said Keith meant to say “3x silver”. So you need to then understand how many cars are made and the silver market for them. It turned out it was about 90 million ounces for 78m cars. This is just over an ounce per car. Some of my research then said this was 20-60g per car. Some cars that were more advanced might use more.
So this meant an EV might use 3x the modern cars. On a low end, this is 100g. For argument’s sake, let’s use 5oz or about 150g.
This past year, Tesla delivered 1.2m EVs. That’s not moving the needle, my friends.
IF we are at a place where 10 years from now, ICE vehicles are gone by some law or massive tax, and we ONLY have EVs. That then takes our silver usage from 90m oz to 450m oz. This is a deficit that is big then, but grows every year leading up until then.
My contention is this:
IF you have a 100m oz deficit, the Tesla lines are not stopping for 5oz of silver in a car. What will happen is price will go up to shake available above ground supply. If we need 100m oz in 2023 to meet this shortfall, then we are looking at trying to get 3% of tea sets, bars, coins, silverware, and jewelry to be melted.
How do you do this? Please, please, for the love of god, take economics. As the demand increases, this makes the price point of supply to go up. Here’s something you can see from a 101 class.
Meaning, price moves up until equilibrium found.
Now, CAN we shake 3% loose with a $35 price? Maybe not. $50? Maybe. If you look at ALL of my writings going back forever, I do NOT think we will “run out” of silver. My moonshot thesis is about the work it will take to cover the deficits that we plan to see for the next 2 decades coming. MY thesis is that we will have declining ore grades as St. Angelo says, BUT I contend we need higher prices to unlock that supply.
On top of the EV, is the solar stuff. THIS I believe is what is about to move the dial, and QUICKLY. I just wrote a 5 part series on solar. I’m getting a solar system and 2 powerwalls installed. The solar panels each use about 20g of silver, and I have 32 being installed. So generally speaking, each house that installs these are installing about 20 ounces on their roof.
In California, all new houses need solar. My contention is the energy issues we see developing over the next 10-15 years will shoot prices of electric and gas sky high. What I just did was lock in today’s energy price for the next 40 years for my home. While the rest of you poor bastards see a 3x electric bill and a 4x gas bill in the next year, I’ll be toasty in the winter and artic in the summer.
And THIS is what will drive more to solar. When energy costs today are LESS than solar costs, you need government enticements. However, when energy goes up a TON, no government enticements needed. So solar costs will go up when the tax credit stuff ends, but not right now. Solar is 100m oz per year, and this could massively increase in the years to come.
Now, about that available supply.
When my readers think of tea sets and silverware, they think of this:
In reality, most don’t realize that silver was $3 and $4 in the 1980s and a lot of this was made cheaply. Yes, there are silver plated things out there, but there’s a massive amount of stuff out there that was made when silver was $4. My mom was a foreign exchange student in Peru in 1969, and I inherited her silver. Before you break in, it’s an ash tray and some silver llama pieces of jewelry. All in all, maybe 3-4 oz. I have some silverware I also inherited from her. You have to look at the markings – some are silver plated, and some are sterling (92% silver). Again, maybe 10 oz. Nothing to end your life over.
The point is, many think of all of this 25b oz on the sideline as this precious elitist trinkets that have been in royal families for hundreds of years.
The reality in the United States of Murica is that a vast majority of us are paycheck to paycheck and when grandma dies, we have an estate firm come in and give us a few hundred bucks for everything. Then you go to these events and there are bargain hunters trying to find treasures on the margins and find these things at auctions for cheap. Meaning – 95% of our country is blue collar, rural, suburban, and doesn’t have $26,000 tea sets. We have a box of shit left to us with some shiny stuff next to a box of carnival glass shit next to a box of clothing shit next to a box of rhinestone shit. We take the box of shiny stuff to someone to tell us how much it is worth, and they more or less lie to us, give us pennies on the dollar, and we are happy with a few hundred bucks.
IF the headlines come out that silver is $75 to $100 per ounce, my guess is a lot more people will pay closer attention to the shiny stuff in the attic grandma left to you. It may not be $4000 in candlesticks, but you might find some old jewelry that comes out to be about 5-6 ounces. If times are tough, and silver is $75 an ounce, you might get a family a month of groceries.
Do NOT underestimate how poor half of my country is, and how quickly grandma’s tea sets are cashed in. This is a picture I stole off of the internet, but this is most likely what you find in a box like I did:
So on Twitter yesterday, on main argument was essentially not one goddamn piece of silver in the attic will ever make the market at god knows what price. Yeah. You are delusional. After I was laid off in 2002 with 90 others, and spent 15 months unemployed, I sold my coin collection to make rent. I sold my silver trumpet to make rent and car payments. Most of you reading this have never seen a recession, and do not know what that looks like. I have lost my job 3 times due to recession, and I can tell you that grandma’s tea set would have been the first thing to go. Sorry.
Once it was agreed that maybe there is SOME above ground silver, then the argument turned to essentially not enough energy in the world to melt it. That’s not really true, by any stretch of the imagination. I agree with St. Angelo that problems are coming with energy – especially oil – but there is plenty of coal out there. I live in Pennsylvania. Also known as “Penn’s woods”. Lots of trees. This is how a lot of people heat their homes here in the winter. I had a wood stove growing up. Two of my great grandfathers were coal miners most of their lives in the PA coal regions and had “black lung”. One died of lukemia at 81. PA has a LOT of coal for heating and this is what primarily powers electric here. Lots of nuclear too – I mentioned in a previous article I currently live 7 miles from Three Mile Island. Yeah. That one. The greatest nuclear accident in the US history in 1979. But I grew up 10 miles from Limerick. Right now we have Peach Bottom and others around. Nuclear and coal has been around us my whole life.
So any issue with power right now is a self-inflicted gunshot wound, NOT the energy cliff. I agree with Steve with the problems coming – but he seems pessimistic it’s game over, where I am optimistic we will have ways out of it. You see in Germany now where the nat gas from Russia was shut off. Remember, they chose to shut down their coal plants. This has nothing to do with them running out of energy, but them wanting a “cleaner” energy. The problem is, there’s not enough “cleaner energy” to go around.
My contention is we are stuck with coal for another 20 years AS we migrate to these better, cleaner energy sources. On the way there, are we going to use coal to melt silver? Yeah.
Now, I am not a physicist nor energy baron, but I can tell you that we are constantly melting steel. I worked at a steel mill in college as a security guard and my dad was a welder in a steel mill. Just ballparking – you are telling me that we have enough energy to melt millions of TONS iron and base metals into everything we need, we just are running out of energy to melt a few hundred million OUNCES of silver?
Sorry. I don’t buy it. Now, can we do this with available green energy today? No. Do we have the coal for it? Ummmm…yeah. We have so much goddamn coal in Pennsylvania, we have had a town on fire for 60 years underground and don’t blink an eye on that supply. Let that sink in. We have thousands of square miles of coal in the coal regions. Perhaps many of you forgot we probably have energy for 1,000 years buried here. But it is not politically correct to burn coal. We’ll see what happens when the lights go off. West Virginia gets almost all of its electricity from coal right next door to us.
So – whether you love or hate Jeff Christian – I think the research he did with his teams was probably extremely well researched and not cheap to do. I would look at this at the gold standard of research for silver supply.
Where I seem to disagree with Jeff is that this 25b is NOT available at THIS price. Where I seem to disagree with the peanut gallery is:
- This supply doesn’t exist
- Not one person on the planet would melt grandma’s silver for $100 per ounce.
Furthermore, even if it WAS acknowledged the silver was there, then I’m fighting an argument that we cannot seem to find the coal to melt silver, but we have coal to melt everything else in the world down.
Look – people seem to want to jedi mind trick you into thinking there’s no silver. No. Not at all. The issue is the supply/demand fundamentals of economics. My bet is that it takes a higher price point than $50 to do so. I AGREE silver price is headed to $100 on these 6 principles:
- In inflationary times, investment demand will be high and many will not part with it anywhere near $50.
- With inflation of energy, we will see higher energy prices, pushing people to solar. EV demand will be higher as gasoline prices go parabolic. This makes industrial demand skyrocket
- The above two factors create a deficit. I believe this then is a rocket to push price up to unlock available supply, whether it is junk silver, tea sets, or jewelry.
- Mine supply is getting lower grade ore and no money has gone into exploration. Most silver produced today is a byproduct of other metals, and it is virtually impossible for a primary silver miner to exist.
- Refinery capacity is about 200m oz to recycle each year. IF we have a much higher deficit, we will need more refinery capacity. Until that happens, we could have an accident to $150 silver until more of these are made.
- Silver recovery now costs about $75 per ounce. While there may be 30b oz lost in dumps, this is not a viable current price to unlock this supply. We could see $40-$80 silver for a decade. Once the grandma tea set supplies are near exhausted at $80, we then base up to $100-$150 to unlock more tea sets and then recovery from waste becomes economical for perhaps 100 more years of supply.
These 4 principles acknowledge supply of silver – and you do not have to be dishonest about available supply to get to $100 silver. You just have to understand that as the silver deficit grows, this forces price up. And THIS is where I was talking about the shorts getting destroyed. Not because we don’t have mine supply. Because a Tesla is going to go to make cars one day and there’s no supply at $30. Once this deficit is reached, higher prices continue higher until the equilibrium is found.
So – hate on Jeff all you want. He can be correct on supply and I can be correct on $100 silver at the same time.
October 31, 2021 at 2:44 pm
Nate; you mentioned the occasional whisky. Do you invest in whisky? I do. I have been buying for 15 years and am starting to sell my investment as they are “hot”. I notice the returns being better than precious metals, which i am also invested in heavily. I was also a gold miner for 25 years.