Solar and EVs. There. End of article.

****************************************************************

Edit 12/24 0330 – Added more research on solar to bolster the projections of demand upcoming.

OK. Not end of article. We are going deep on this one, so get a pot of coffee on and dig in.

What I wanted to do is arm you to the teeth with some AKs and AR15s to blast out some knowledge when called upon. My friends hate me. “Nate, you said silver was going to moonshot”. Yes. I did. I still do. What many of us did NOT see coming was a bank somehow telling us that they indeed added 110m of silver to a trust everyone bought – but actually, did not, which when then found in an “accounting error” a month later. HAD they actually went on the market to buy what they said they had actually bought, silver would have moonshot as expected. Problem is, they changed the prospectus in the middle of the night DURING silversqueeze because they realized what it would do – then LIED to people saying they indeed sourced it. Here’s the full accounting of it.

I mention all of the above because the futures market was…”tamped down” and a very large trust seemed to lie to the people – those two items allowed the villains in this story to escape, and make me and others look like clowns. For now. I don’t really give a shit what my friends think, however. All of them can hate me now for all I care, and in 5-10 years when their silver goes 5-10x from what they paid, they will buy me a beer and be done with it. I help them pay off their house and I get grief for 5 years and then a beer at the end of it. Seems fair.

What do I want? A long awaited and beautiful move up in silver that STAYS there. Not this $50 bullshit for a weekend. IF you are buying stacks of thousands of ounces of silver at $20-$25 to sell at $50 over a weekend, you are doing it wrong son. Let me entice you into a story of Bitcoin-like moves to come, and why. This is not your typical silver moonshot fodder. This is a story of demand shock coming to the system it’s not prepared for. Actually, hopelessly unprepared for.

And how we get there is not the futures market and a very large ETF playing shell games to prevent imminent doom. We get there when they go to open the vault doors to send Samsung their 40,000 oz of silver shipment this month and there’s a slip of paper in there with an IOU on it.

I’ve gotten into some tussles with my Twitter friends on supply/demand numbers. I don’t have any reason to doubt the CPM group on their numbers, as goldsilver.com published the same info. Here’s the cliff’s notes….

  • 60b oz on the planet, above ground
  • 30b oz of this consumed in electronics, band aids, stretchy pants. To RECYCLE this supply, it is not economic and runs about $75 an oz to get. I want to invest in these companies soon because I feel the day is coming inside 10-20 years where this will be needed. A LOT. Want to get in on Amazon.com at $3? Find the best of these companies.
  • 25b of the 60 is in tea sets, silver jewelry, and silverware. Most don’t realize silver was like $1.50 an ounce and tea sets here in the states were pretty common and cheap. If you want to SCRAP this (called recycling on the silver institute report, but different from the recycling mentioned above)
  • 5b in bars, coins, rounds. Of this, about 2b is in ETFs/vaults and the rest are in 1,000 oz bars in vaults for industrial usage/investment, coins, at home, etc.

Basically, I get attacked for citing the CPM group on the 60b oz and being a defender of Jeff Christian’s research (love his shit talking, by the way), but the point is – we are looking at 5b oz in silver supply in front of us. The CPM group is NOT saying you can go to the dumps and just get that silver, nor are they saying the supply of “jewelry, decorative, and religious” is for sale at this price. But you need to account for what is above ground to understand the whole damn thing. The degree to it being available is also discussed below.

A portion of this, about 350m oz, is sitting in the COMEX warehouse for sale. 90m of this is REGISTERED and available IMMEDIATELY at spot for anyone who wants it from a futures contract that they can purchase today and turn around in a few days. NOW. Taking it off of the COMEX is another story, but we are seeing a lot leave the registered. The ELIGIBLE is sitting there – READY – but not for sale. It COULD be, but it’s not. Meaning, you might need a higher price point for some of that to move.

If you look at the silver institute numbers, you get a decent breakdown of supply and demand. These also are questioned by people, but if you look at their full 60 page document, it’s rather thorough and the best resource we have for this at the moment.

And yes – the recycling listed above is “scrap”, and easy enough to get by surveying large refineries. When you look at the big one by me in Philly, look how you are welcomed on their page. These guys have been in business for 129 years and are not obviously to be confused with the “recycling” companies trying to get silver out of circuit boards and stretchy pants at the cost of $75 per ounce to retrieve.

There is LOTS of silver out there. MY stance is….AT WHAT PRICE???? My arguments with friends on Twitter is that they believe the vaults are empty and nothing is there. I have never said that, nor will I. The silver is there. The problem is…AT WHAT PRICE. This is simple economics 101 that I invite anyone to look into. The SUPPLY IS THERE – BUT NOT THE SUPPLY AT THIS PRICE. My contention all along was that the silver AT $27 was SCARCE. At $35, you get more supply added to the market from stores. The BOTTLENECK is getting it from home (jewelry, silverware) to refinery to 1,000 oz bars. PRICE may increase to entice more supply on the market, but refineries have max capabilities they are running at now. You can see this on 2012 recylcing numbers above. Price was much higher than now, but they have a limit to how much they can process. I don’t have 2011 numbers, but my guess is even with $40-$50 silver, the recycling number didn’t deviate much from 200m oz. The stories were they stopped taking scrap because they were backed up. So even if you want to entice a LOT more to market with higher prices – the REFINERIES are your bottleneck that don’t care if it’s $30 or $200. They cannot produce more. And this is essentially WHY the paper games are being played. If you do NOT have this pushing down the price, demand would be even more for investment. It is a doom loop of prices rising. I think I’ll pop out Visio sometime to create a nice chart to show WHY we have futures and if not, shit would go sideways quickly. The problem is, the banks abused the futures which is why it’s going to snap. It has gone too far out of whack.

See the source image

AT ISSUE is the deficits for the past few years. You mine so much, you use so much. Where is that delta being source? As you can see above, you are getting about 200m oz per year from scrap (they list as recycling). This is coming from that 25b pile. However, the demand for these items then re-stock the 25b oz pile. If you look above, jewelry demand was 184m and silverware was 43m.

We can look at Jeff Clark’s chart for mining supply found here….

Changes in Annual Silver Mine Supply: As Negative As Its Every Been

You get about 800m out of the mines every year. Total demand is over 1b oz, but that delta is being made up from the 25b pile. Likewise, as shown above, we are putting back that delta into jewelry and silverware. Taking back the old, recasting into new. However, when this deficit increases – you will need to draw more from the 25b jewelry pile to then produce goods going into the 30b pile of manufactured goods (like solar panels). This means higher and higher prices to entice more and more of that supply over time.

The point of this article is to talk about the demand shock that is at the underbelly of the silver market coming – getting there in a second. Yes, the stackers are amazing, but you have a problem with trying to crush the paper market with retail – the big players only allow a trickle of this supply to get to the mints/refineries for you to stack as coins.

You can hear people on YouTube making villains out of the bullion dealers, but I am certainly not one of them. Currently, I want you to take a look at the car market in this country. Recently, I have been trying to shop for a new car (lease) for my wife. She only puts on about 3,000-4,000 miles a year, so it makes sense for us. There is no real inventory, ANYWHERE. Chip problems. We just bought out her lease, and the car is worth about $12,000 more than our buyout price. We just can’t seem to find a damn car to lease. LOTS are empty.

Question for you. If you sell cars for a living, what happens when there is no inventory? You cannot sell shit. You do not get commissions. Cars that come on to the lot get paid a premium as dealers need inventory, and new cars/used cars are sold at a premium due to lack of supply. With coin dealers, it’s sort of the same issue. IF they charge you regular premiums, they can get wiped out in an entire afternoon. THIS CAN PUT THEM OUT OF BUSINESS. Then, their shelves are bare for weeks or months while they wait for more to come in. What they NEED to do is charge higher premiums BECAUSE they do not have ready supply to come in behind them. In a sense, high premiums also cool off the stackers – which sort of acts as a braking mechanism to slow the market. For THIS reason, I think it’s important for the guys out there who are pulling 1,000 oz bars off and selling slices at a time to get a lot more love – THESE GUYS can also help source the big bullion companies, if they so choose. If you are a silver miner and think $22 is too low, make your own rounds and sell for $26-$27 which would sell out in a day.

I digress. Enough about the supply and demand overall. Now we get into what you have been waiting for.

Demand shock and awe

The first part of this I wanted to talk about is EVs. I’m reading stats that show that EVs sold about 5m units the past year – and adoption will have us getting to 50+% of new vehicles will be electric by 2040, and by 2030 100% of passenger vehicles in China and India being electric. What does all of this say for the silver needed in them?

I brought up all of the supply and demand stuff above because they could control the paper price as long as the overall supply/demand balance was relatively close. As the supply deficit chasm forms, the paper charade gets destroyed. The paper pushes down are simply a mechanism to starve out inefficient silver producers. Meaning – IF this price continues and the supply/demand gap widens, this WILL push up the paper price. This isn’t opinion. It’s fact.

At issue here is the futures markets don’t give a shit if you are a primary silver producer or a byproduct silver producer, and that is the lesson the primary silver producers are learning, as we speak, and why all of them have essentially switched to primary gold companies with silver then as their largest byproduct metal. Because – if LARGE base metal companies can produce silver as a “bonus” metal, these prices on the future CAN be driven down. Take Newmont – they produce 54m silver ounces, which I believe is larger than the largest primary silver producer. But it is a BYPRODUCT of gold. Newmont pays the bills with gold, and silver is a nice upside. Same with zinc producers. Lead producers.

What you now have seen are Fortuna Silver Mines (27%), Pan American (26%), and First Majestic (listed as 55%, but have seen 50%) all significantly reduce their silver percent of their mining BECAUSE futures prices saw they can still short into this market and get the scrap supply they needed to fill the gaps. They HAVE to, as the paper prices made being a primary silver producer uneconomic. Again, futures don’t care about your feelings. Futures market does not care if the silver came from a primary or secondary silver producer. They just don’t. If a zinc miner doesn’t care if silver is $20 or $30, then the paper market will indeed seek the $20 offering. This puts the First Majestics at a disadvantage. And why Jerritt Canyon was a big deal.

But NOW….NOW my friends, we are looking at potentially many years of demand shock. Why? Well, let’s look at the green way of doing things. First up – EVs.

When looking at the above from the silver institute, you see something like 500m oz are industrial. I have seen reports that drill down here where autos made up 90m or so of this, and this was producing about 77m autos worldwide. This comes out to be something like 20-40g per auto. I have seen reports where Keith Neumeyer has said that EVs use 3kg of silver – but this was later corrected to be 3x silver of ICE cars. In a recent interview with WallStreetSilver, Keith listed that each EV uses 5 oz of silver. DING DING DING!! We now have a number we can use as a source.

At face value, that doesn’t seem like a ton. But when you scale this up, Keith mentioned there were 5m EV vehicles produced last year, for 25m oz implied to be used by EVs. The IDEA here is over 10-20 years, they want to replace all ICE cars with EVs. This really isn’t possible anytime soon, but what I’m looking at now is that all car manufacturers are starting to produce more EVs. It’s not JUST Tesla now. I have my eye on the Ford F150 lightning for next year. Ford MAY produce 250,000-500,000 EVs next year. This would then perhaps lessen the ICE cars they make. Who knows the exact number – but ALL of the manufacturers below are working towards their own versions of EVs.

See the source image

The above shows about 60m just using the top 10 or so. I think it’s then a legit number for 77m cars a year. And, IF we are to have to replace a lot of ICE with EVs, I can see a “catch up” where for a period of time 100m will need to be sold – but this volume may not be until in the 2030s-2040 or so.

//SIDE NOTE: To prepare for this article, I also listened to Jeff Christian’s recent interview on Kitco. He agrees with me and disagrees with me, at the same time. He stated that EV’s aren’t “5 times as much silver, but only 1.5-2x”. He then seemed to talk about silver prices receding for 2022 and talk about “people who bought at $28 silver getting bad advice with silver going to $100”. Perhaps that it is true, or perhaps he didn’t see my article above where we should have gone over $50. However, he still admits that more silver will be needed in EVs. Up for debate now, is how many more EVs do we think might be produced each year for the next decade? First, take a look at all of the new models coming in 2022. It’s not just Tesla and cyber truck. Lots of good stuff.

This chart seems to back what KN said about 5m EVs produced last year. Seems like China leading this.

Let’s just say rules of ungodly high MPG pass through governments – as most of these are now leftist socialists today. ICE cars may not be able to get to where they want, and this forces a migration to EVs. For argument’s sake, let’s say we need 100m EVs a year to replace the ICE fleets out there. If we did 5m last year….maybe we do 8m this year? 10m in 2 years? 15m in 3 years? Perhaps it could take 5-10 years to ramp up this production. Meanwhile, we are still producing ICE vehicles which seem to use 1.5 oz each or so. All of this adds up. A car company gives zero shits if silver is $20 or $100 when you are talking about using 1-5 oz per car to the total price of $40,000.

AS this is going on, the manufacturing needs will continue to move higher for silver. Where autos are now 90m oz, in 5-7 years this could be closer to 200-230m for 25-30m EVs.

  • 30m EVs at 5oz = 150m oz
  • 50m ICE at 1.3oz = 65m

Total 215m oz

This will create a bigger chasm and deficit that needs to be filled. Where it’s now 200m of a deficit, this can perhaps translate out to a 430m deficit by 2026 by adding EV demand? Remember – refining can ONLY supply us 200m oz currently. So where is that deficit coming from in the SHORT term? My guess is buying out COMEX, buying into ETFs like SLV then redeeming the silver immediately – but buying COMEX and ETFs in size WILL drive up prices substantially. COMEX has 90m eligible and the ETFs have about a billion or so. To me, this might provide 2-3 years of buffer. AS this is going on, the deficit will be very apparent which might then seriously increase the paper price – but that will only do two things:

  1. Increase those wanting to turn in for scrap – will be refused at capacity
  2. Increase investment demand – further creating deficits

It gets better…let’s look at solar.

With photovoltaics above, you see a 105m oz usage for 2020. This has doubled in just 5 years. If this were to double again in 5 years, you are adding another 100m oz to the deficit. However, I think we may be in for significantly higher demand with solar panels. MUCH HIGHER. MUCH SOONER. Why? I bought them. This means something, to me, because 6 months ago there wasn’t a chance in hell I’d be buying them. Now I’m in on them. And based on my case, many more may be following, very soon.

Image

I’m not a far left tree hugger. I’m more of a libertarian than anything in the center, but this is the free market now pushing people there, along with green incentives and laws – as well as shitty energy policies. This is a perfect storm forming to thus create shortages with solar. This is why I pulled the trigger now. Look at the nat gas price in the UK, which is similar to Germany and power prices there as well.

Each solar panel has about 20g of silver, and my home installation will have 32 panels. Overall, let’s just say the average home uses 20oz of silver as a rough estimate to make math easy for all of us. In California, they made it law that new homes need to have solar. This source says California is building about 80,000 new homes per year, but needs 180,000 per year. Let’s say that moving forward, California alone will need 80,000 homes. You can also see the permitting numbers for California at 80,000. Maybe I’m on the low end, but I’m trying to use some rough math here to make a point. This means California alone will need 1.6m oz a year in silver just to put solar on new homes.

//Edit 12/24 0330

I wanted to get comments on this from others and I woke up early and wanted to bolster my solar analysis. It might not be a 3-4x from here – but it sure does seem like there’s a lot of growth coming in the residential sector. Take a look at who makes up the photovoltaic market now. Sourced here.

The report discusses a CAGR (compound annual growth rate of 6.9% from 2021 to 2026).

This is what it looks like when you add the Silver institute numbers.

This only takes you to about 1.5x of current usage today, not 3-4x. My thinking here is what has been going on with energy this year may create an unforeseen DEMAND SHOCK that was not seen.

The problem someone like ME has is getting the best data. This is what I run into a lot…

When I was in grad school (for 6 years over 2 degrees) you could access a ton of reports like this for free. Not so much as a civvy.

I wanted to add that the MOST CONSERVATIVE case out there essentially has 50m more oz in silver needed by 2026 – this it to try and ground my analysis with a base case, if you will.

However, the 2021 silver institute’s report showed a 14% increase in PV installs (in USA) which I believe may have more relevant information on my case of a “demand shock” not projected with the above reports. If you take that 14% and use THAT number forward – given all of our potential high energy costs ahead with inflation, you might get the more aggressive number I was looking at…this puts you at 262m oz by 2028, or a 2.5x from now. Am I THAT overstretched with a 3x projection below?

Let’s look at a few global items that happened this year that can further accelerate the PV story:

  1. China cracking down on bitcoin over power generation concerns and coal. Global energy usage is now at the forefront
  2. Germany standing down coal and getting power from France’s nukes and Russia’s LNG. Disaster.
  3. UK power prices at 10x.
  4. US cut all kinds of domestic fossil fuel production
  5. Increase in popularity of EVs will lead to at home PV generation
  6. BTC conversations about “dirty” energy to generate BTC.
  7. “Surprise” inflation is making the costs of everything rise – including power generation. THIS is a catalyst to then switch to fully-financed solar installations.
  8. Americans see dangers of energy scarcity and have the means (for now) to borrow to get solar to replace their electric bills – thus protecting from energy price increases.

//End Edit

California may be our most populous state – true, but we have 49 others – and another 230 countries in the world outside of our borders. Then think of the industrial sized solar farms they create for many millions of dollars. Also, there are many in CA that will opt to buy them and not be forced to. Then, you have someone like me buy them. What? I went over my experience in a 5 part series on my blog about the whole thing. But what I’m seeing is…

  1. Domestic energy policies of making coal an enemy, destroying fracking, and making it difficult to impossible to drill oil domestically.
  2. We do not have nuke plants being built, that I’m aware of.
  3. My country has 350 years of coal here in reserves, and I live in one of the greatest coal areas on earth. We are looking to move past coal to cleaner energies.
  4. We have a lot of hydro dams here. A lot.
  5. California is notorious here for lots of rolling black outs. The lack of energy then forces people to vote for higher budgets for solar and wind to prevent rolling blackouts. OR, they could just use coal. They won’t.
  6. Many have seen this blueprint to force energy prices higher to make solar “more affordable”. By me getting solar with batteries, I can prevent the rolling blackouts I see in California.
  7. With incentives, solar on the roof with batteries can about equal your current power bills. This insures you against significantly higher energy prices that could come under these regimes.
  8. It is possible that higher power prices gets people voted out and we all go back to coal, but that isn’t likely anytime soon – and even with that, EVs are still likely to continue in trending as range gets better and prices come down. It then becomes better to own an EV if it’s cheaper than owning an ICE. With a push for the next few years, that can become a reality.

California new construction alone will account for 1.5% of WORLDWIDE solar panel needs – not taking into account existing homes that want it. Now, imagine a concept of 10, 15, or 20 other blue-leaning states adopting policies such as this. IF you are in the UK or Germany right now and seeing stupid high energy bills at 5-10x normal, aren’t you considering solar for your roof?

And the floodgates open.

I believe by 2026 we won’t be looking at another double in solar, but perhaps a 3-4x from here. This is the world creating hostilities towards coal, nuclear, and gas to force blackouts and 10x energy prices to step on your neck to force you to buy solar or go without heat/electricity. At the same time, a lot of these incentive programs are ending, coincidentally. My guess is some of the largest solar producers are about to make mint.

But then we have the China issue as well. I won’t speak to much of this, but from what I understand, a lot of these solar panels are made in China. If we have to produce these more domestically, prices will surely be higher. Many may see this squeeze coming and try to get in sooner rather than later.

But looking at 2026, it is REASONABLE to think silver needs from solar panels are roughly 300-400m oz. I showed with a chart above how a 14% increase could lead to 260m oz. How about a 20% per year increase? It’s crazy talk – until you also then realize a lot of these EVs need to be charged. We could move from 5m sold last year to 25-30m by the end of the decade. This requires a LOT of electricity to charge them, as we are swapping energy at the pump for energy from the electrical socket.

Do we then power all from the grid? Are you buying an EV to then pay 3-10x the costs of charging it? No. You will probably get a battery like me for your solar to then charge from your solar (I’m getting 2 powerwalls). This then removes your gas/petrol bill every month for driving. Not to mention all of this has a copper upside, but don’t have the space to get into that here. My point is that not only are we seeing a shock of the threat of high power bills driving people to solar (like me) – but you then have massive growth in EVs through this decade and beyond. And – people like me who might buy that Ford F150 are not paying $$$$ to power it from the grid, if possible. If I’m getting an EV, I just don’t want to then pay stupid high costs per KwH. I’m going to use home solar to do so.

I think solar on homes, today, is a wise choice – IF you can finance it all at cheap rates and essentially replace your existing power bill. For ME, I will produce 116% of my power needs (excess can help with EVs), I sell extra back into the grid, and I’m locked into these prices for 30+ years and avoid energy inflation prices. I believe many people will independently come to that conclusion as well and feel that while it took 6 years for solar to go from 50m to 100m, the leap from 100m-200m could be in only 2 years (or less). I believe this shock may be the first to hit in 2022. Look around now with Russia cutting off gas to Germany? Germany getting cut off from power from France? If I’m a German citizen right now, I’m considering that I need solar, lots of it, and batteries and heat pumps to protect me from my government’s dumb ass decisions to shut down all of my domestic power capabilities.

All of this could have potentially 600m of a deficit by 2025/2026 (we are currently at a 200m oz deficit which is filled by scrap recycling). And while we aren’t going from a 200m to a 600m deficit overnight, it can really accelerate over the next few years. THIS ISN’T ADDRESSING THE INVESTMENT DEMAND SPIKE COMING with the story of inflation and 1970s.

Now – let’s look at that supply. Right now, the price of paper silver appears to be enough to entice 200m oz of scrap this year, perhaps at an average price of maybe $26 this year. At $20 silver price, would we still get that scrap? Look closely above – the silver price at the bottom and eyeball the recycling. It looks to be about 10m oz per dollar of price, capped at 200m oz. In 2012 the price was $30 and recycling was 200m. Last year $27, and 200m. But in the teens, it appears you get the 10m per dollar – roughly. At $50 silver, we are still capped at 200m recycling. Let that sink in. The question is next year when we have 100-200m deficits, the year after 300m, and up to 2026 with 600m per year deficits – WHERE are these deficits being filled? The obvious answer is existing 1,000 oz bars. But you will need to pay for them. Obviously, not all of these are for sale, AT THIS PRICE. ETFs have a lot of them, but if demand goes up with these two items – it’s safe to say silver stackers join in and ETFs are then also sucking up those 1,000 oz bars.

I have my friendly spats with Steve St. Angelo from time to time on Twitter, but I respect the hell out of his research (you should check out his work and subscribe!). He has put together a slide when I first started looking into this talking about mine grades going down, significantly, over the last decade or so. It’s getting harder (and more costly) to pull it from the earth. There’s not been a lot of discovery or drilling. While I may love a Discovery silver with 600m oz, when it starts up it might only pull 20m oz out a year at $20 costs. If silver lingers at this paper price of $22-$23ish, this mine might be delayed in being built, further starving us. But it’s only 20m oz per year, and we are now talking about 800m oz deficits. We also have Bear Creek coming online probably 2024. Maybe SilverOne and GR Silver. MAG is ramping up now and has a lot unexplored. But what I’m talking about here is SUBSTANTIAL MINE SUPPLY NEEDED – JUST with those two items mentioned! It’s just NOT coming online. And, a lot of these silver mines are running low on reserves. The San Jose mine I’ve been dealing with on the FSM trade had only 3 years left, which may be extended, but at what cost per ounce?

The demand shock here may be felt in the next year, to start. I really appreciate these experts talking about $20 silver in 2022. I really do. This might be the dumbest investment article ever written – or blatantly misleading to get you to short as they go long. Who knows. But this idiocy needs to be looked at. The only way this happens is a global accident with stock markets. Have they ACTUALLY looked at solar and EV increases over the next few years?

What’s interesting with this though is this isn’t some cute paper battle where they can short into oblivion. If you are doubling the manufacturing needs this is REAL SILVER that needs to show up on the production lines, not IOUs. It needs to actually be sourced to go into EVs, solar, etc. This will require a gradual step up in price. Let’s look at the deficit – and where we could source this?

  1. A large company buys ETF silver, then when needed, withdraws as an authorized participant. However, them buying into a PSLV takes 1,000 oz bars from somewhere and adds it to the vaults. This drives up price in size. This isn’t from new, it’s paying higher to acquire existing.
  2. Bars/coins/bullion at home – at $30, $35, $40 – you will have some stackers having a 10x and exiting. You will have some that bought at $50 exiting at $50 to be rid of it. As price rises, you WILL see supply from the stackers – but I don’t see this in size, unless you are talking $40-$50. We have 3b oz with them, possibly. Problem is, again – these coins/bars then have to be refined to 1,000 oz bars. Perhaps SOME of the investment demand is satisfied by someone turning in Eagles and someone else buying them. But if price is going to $40, Giffen Good effect – less coming in than being bought.
  3. Jewelry, candlesticks, silverware, etc – at $30, $50, etc I’d expect this 200m of scrap availability to perhaps double at higher prices…..but. At issue, mostly, as I showed above is the refineries may not have the ability to recycle more than 200m oz. If you look above, the number is a steady 150-200m. IF we have massive deficits, we MUST increase refining capacity. No one builds a refinery that can refine 10m but process 1m. It’s costly and inefficient. However, in order to expand – they will need sustained higher prices. THIS IS YOUR BOTTLENECK TO SOURCE YOUR DEFICIT. The answer here – is to try and force down investment demand as much as possible. Which is the nice psy op game they got going. Problem is, 170,000 WSS stackers are getting smarter and now see this as a sale. This might not be accounted into their recent campaign.
  4. Mine production will have to increase – but as I laid out above, primary silver producers are going the way of the dodo. You may get the Discovery, MAGs and Bear Creeks up and running – but the three of them, combined, may only source 10% of that deficit. Where is the other 90% of the deficit coming from? If it takes 10-15 years to explore and build a silver mine needing a few hundred million dollars to construct. They won’t do this at $21 silver if new mines have lower grades.

Above, IF we are to see an 500-600m oz deficit inside of 5-10 years (from manufacturing alone, not counting investment), it appears very much so that they will need to entice a higher price for stackers to sell back and people to turn in family heirlooms and jewelry – and again, scrap can only account for 200m of that deficit. But at what price can you potentially source 300-400m oz yearly after scrap? Remember, you will have to expand or build new refineries just to process the extra scrap coming in. Until price runs much higher, you cannot fathom turning in silverware, nor contemplate building very expensive refineries.

Guess what. Even if the demand is 1/2 of what I talk about, the SAME principles take effect. Refineries are STILL the bottleneck at only able to produce 200m oz per year. The immediate answer is buying at higher prices on spot or buying into ETFs and pulling the metal out as you need it. But that will seriously drive prices up!!!

What is also challenging here is the Giffen Good effect. At $16 silver, I BEGGED my friends to buy. Crickets. At $28-$29, every single one of them were asking me about silver and buying some. I didn’t believe it until I saw it. Price now in the $22-$23 range and they are all mad at me. I’m like, “buy fucking more” and they are all like, “you said it would moon”. This is the paper price having fun and doing its thing to discourage new investors. These guys aren’t realizing they just bought Tesla at $8, Bitcoin at $3.50, or Amazon at $5. All they can see is the daily number of paper price go down. Love my friends. None of them are reading this. They want the easy button and 10x overnight. This is a goddamn war.

See the source image

I bring this up because as the demand shock hits, and price goes up – you happen to ALSO be at a time in history where we are seeing a lot of nations going into super/hyper inflation AND an alliance with Russia/China/India to get off SWIFT. You are literally seeing countries’ central banks buying gold. I believe the CONSUMER demand for SILVER INVESTMENT could be off the charts – and if you cannot get physical for less than $10 premiums, my best guess is we may see PSLV and Kinesis start to get a LOT of interest. I can also see perhaps the Samsungs of the world buy massive shares in PSLV so if they need supply, they can get supply with them. SLV might actually be too much of a risk now since they changed their prospectus to say they might not have all of the silver. If you are Samsung, buying that ETF to pull out silver doesn’t give you a warm and fuzzy. PSLV does.

What I do not know – the OTC markets. How big they are. Where are they sourcing. Will Shanghai have an effect on supply? I focus on the COMEX 90m oz, but don’t know much about Andy’s neck of the woods with the wholesaler side of things. He has come out in recent videos and said “there is no silver of size until mid 2022”. Meaning, some of these big banks/hedge funds are gobbling up supply and perhaps front running a squeeze of sorts they see coming? Could that JP Morgan article be trying to get people not looking at silver intentionally? Could things like this actually be tools of the Fed? Remember, the Fed is not part of our government, it is quasi-related, but run by private banks. Why won’t the Fed clearly come out and just list every tool they have, what it is, and when they use it? Because deception and gaslighting are tools. And to me – given the increasing needs for silver, I can’t see how the price would go DOWN. It would, IF, banks could simply conjure up billions of ounces in contracts on a whim to push price down – but again, we are entering crunch time with supply – AT THIS price. Looking at the chart above, where are they getting 200m oz of recycling at $18-19 silver? Meanwhile, if we hit $18 silver, I’m literally selling organs on the black market to buy more. I’m not alone.

Image

Right now, the ONLY tricks the banks have is to dissuade you from buying silver – remove the Giffen Good effect. Like telling you silver will be $20 for the year in 2022. If you consistently beat down the price with paper, eventually you get people to capitulate, right? Well – despite their best efforts to do so, the industrial needs here could be what then pushes the paper price aside, which then raises prices AS the stackers of the world unite to get physical.

At $20 silver, I’m probably sending thousands to Kinesis in 2022 and buying up every ounce on that market I can.

The 600m deficit by 2026 isn’t even taking into account all of those who then want to buy physical. I believe last year we saw 300m oz of demand just in investment demand – with stackers and ETFs and the like. We now have 170,000 on WallStreetSilver. Imagine if we get a push over $30 in Q1? We could be had half a million crazy apes by mid year ready to take every ounce of physical off the market available.

I can most definitely see a lot of stackers who cannot find physical for less than $3-$4 per ounce premiums going to Kinesis and buying in chunks there. To me, this is where most are being pushed. You can have direct access to silver PRICE at PSLV, but unless you are a whale, you cannot redeem. If you want to accumulate ounces at a time and down the road take out your silver Kinesis may be where a lot are going.

Conclusion

Sorry if this went long, but I like to fully analyze a situation and let the ideas flow. Sometimes it runs long. Happens. But big picture take aways are below.

  1. We have massive industrial shock coming with EVs and solar due to “green” policies, domestic policy errors with energy, and eventual energy supply crunch issues. The same people calling for a greener planet are blowing up their voters’ energy bills and costs of gasoline – which economically force them with a gun to their head to EVs/solar.
  2. This inflation of everything will push people towards buying more silver and gold.
  3. We do NOT have the refining capabilities now to handle more than 200m per year of scrap. To the best of my understanding, these cannot be setup as easily as a corner Taco Bell and would require significant investment. If I was a big money guy I’d probably be looking to open one of these, and soon. Business is about to get very good.
  4. By 2026, we may need up to a capacity of 600m per year for scrap if we wanted to meet demand – only taking industrial demand into account
  5. To entice home supply to get to the market, you will need to see significantly higher prices
  6. Mine supply coming online over the next few years is hopelessly behind the demand
  7. Giffen goods theory will have silver moving even stronger with investment demand over the next decade and put further pressure on supply
  8. We HAVE supply, but NOT at this price – and much of it hopelessly locked behind a hose that can only produce at most 200m oz per year
  9. Eventually, we may be mining dumps to recycle silver at $75 per ounce from circuit boards and it could be highly profitable if silver is $100-$300 per ounce.
  10. Geopolitics are heating up, threatening supplies of solar panels/minerals from foreign sources
  11. Mine grades are decreasing and exploration has been mostly abandoned for a decade.

I am in the silver game here, not for a cute run to $50, but as a lifelong investment in a strategic metal that has both industrial/strategic and monetary uses. The recent policies with the green side of things have caused a demand shock about to be felt over the next 5 years.

It is unlikely to be “money” again, but for 5,000 years, silver has been part of a bimetallic standard of money and can be part of a “monetary system”. IF a China and Russia are threatening a possibility of gold backing currencies again, it would stand to reason this would bolster the idea of silver as money to the world’s community at large. It would also stand to reason that silver exploration companies could go hockey stick over 5 years as all of these realities take effect – perhaps taking these 10-100x from current market caps.

My BIG takeaway here is that you wonder at what price you can pry away hundreds of millions of ounces from the home per year and HOW the hell you are going to scrap that and turn that into 1,000 oz bars for industrial supply if you need 2-3x the refining capabilities you have now, without taking into account for investment demand possibly doubling all of that deficit.

All of this above points to much stronger silver prices, perhaps by a lot, structurally. Not a cute paper move. Like as in a new base above $50 for the next 100 years to come. Maybe 2022 has 50m more oz but heading into 2026 we are looking at 600m oz deficits. None of these facts are going to change until the demand picture changes, OR we get significantly higher prices to shake supply loose WHILE creating more refineries.

As Rick Rule likes to say, “either the lights go out, or they pay more. My bet is the lights aren’t going out”. While he is talking about Uranium prices, the same concept is true with silver in an industrial sense. When ETFs are fighting for 1,000 oz bars with Samsung, Ford, Tesla, and the largest solar companies on the spot market – with capped capacity of 200m from refineries with scrap coming in, shit starts to get real, real quick.

This isn’t a matter of opinion. What IS left for opinion is investment demand for 2022. And if you can quash investment demand, you keep the industrials happy, at this price, for another year. But 173,000 of my closest friends aren’t going to let that be the narrative this year, are they? I don’t think so…