Sunday, July 31, 2011

My First Tai Chi Article

will be something of a cop-out as I feel that I cannot write a proper article on it and I have been unable to convince anyone else who knows Tai Chi better than I do to write one.  Instead of explaining it, I will give a link to a good reference and tell you of my experience (very positive -- readers in hurry can stop here!).

Thus, I send you off to Wikipedia, which actually does a pretty good job:

I will expound on this other important part of my life and how it meshes into my life.  Some of you already know (occasional comments at Zero Hedge, family members and friends) that I have been doing Tai Chi for over seven years.  That makes me JUST above a rank beginner, a "Private First Class" for those of you familiar with military ranks here in the USA.  It takes a LONG TIME to get good at Tai Chi, the forms are best done exactly right...  Many, many details.  Patience and humility are required.  That humility part comes in handy, as our instructor is very demanding and not shy about correcting posture and movement.

I took up Tai Chi after I injured myself a little over eight years ago, a herniated disc in my neck that required spinal fusion surgery.  I now have in my neck a titanium plate (approx. 18 mm long), 4 titanium screws, a DEAD GUY'S piece of cadaver bone and "cement matrix".  Fortunately the surgery worked out just fine.  Some four months after my surgery I was at my doctor's office for a check up on how I was doing.  He then told me that I needed to do "something for internal strength", he tossed out the idea of doing yoga...  I told him to forget about that "as I was NOT a yoga kind of guy".  (author's O/T note: SINGLE guys of any age should consider taking yoga classes...)  But recognizing what he said about internal strength I then told him that I had read good things about Tai Chi.

THAT got a response!  He told me that he was taking Tai Chi from right then.  He said he LOVED Tai Chi...

Soon after I went to my first class.  It is my hunch that all you need is ONE class to know if you will like it or not.  It will be clear if it is for you or no.  For me, I was hooked right away, that first night.

Being the "new person" in a continuing class of students is often hard, and it was for me.  The movements are not intuitive or easy.  I was behind everyone, and learning was slow.  But, I stayed with it.  Eventually another "new student" came along, then others.

So what has Tai Chi done for me?  I am convinced that my life is better since taking it up.  I get sick much less (from one to two colds per year to just 3 (total) in the seven years I have been doing it.  I have confidence that scrawny Robert might actually have a chance in an ugly street encounter.  I get lots of gentle exercise of a sort I never had done before.  It has helped my joints from deteriorating...  My sense of balance is much better.

As we do not have a video camera here in the house, I will send links to various videos of people who are VERY GOOD at Tai Chi.  (I also have no fear from embarrassing myself by showing how beginner-like my forms are).

Now that this article has gone up, those of you who have read my two articles on our Peruvian business and now this article on Tai Chi now know something about two important parts of my life.

NOTE BENE!  The below videos are long (two of them are 10 minutes long, maybe more).


This first video shows the "Yang Style 24 Posture Form", the most commonly performed form worldwide (the Chinese government in the 1950s, I believe, forced their Tai Chi groups to make this "short form" so that it would not take YEARS for beginners to learn).  It took me 9 - 12 months before I was reasonably happy with my ability to do this form.  There are minor stylistic differences that the same form as practiced in our class.  Such minor stylistic differences are very common in the Tai Chi world.  NOTE to self-styled badasses: Don't mess with a girl who can do this, she will kick your ass so hard your digestion process will go COMPLETELY into reverse if you catch my drift...

Tai Chi 24-form

Tai Chi 24-form... It's a great martial art style. You should try it.

The below video is Part 3 (of 3) of the Yang Long (108) Form.  I could not find a clean, acceptable and complete Yang 108 Form there at Youtube (perhaps because it takes too long, Youtube does impose time limits on videos).  This guy is very good.  Again, there are slight stylistic differences than in the Form the way our class practices it.  The Yang 108 is my FAVORITE form.

The below video is very old (1970s) and shows Chen Xiao-Wang performing the Chen Xia Jia (New Frame) Form.  Mr. Chen continues to teach up to the present day.  Watch what happens when he stomps his feet, and listen for the echo in the gym...  He has immense strength.  Our instructor has studied under him as well as others in the Chen family.  I myself have been to three seminars with Grandmaster Chen (there were always lots of people there).  Master Chen's version is the "classic" (clean) version (his family invented Chen style Tai Chi), this is essentially what he has taught us.

Chen Tai Chi Chuan Xin Jia First Form

Here is another version of the Chen Style Xin Jia, performed by an amazing older guy.  This is NOT what we have been taught, he as added a lot of smaller, quicker moves.  We have been told that when we are "good" (twenty years?) that we can do this too, modify the forms as long as Tai Chi principles are adhered to.

Ma Hong Chen Style Taijiquan (Xin Jia Yi Lu)‏ - YouTube

My grief has overwhelmed me tonight...

My "new" friend Serge (died one year ago) and my the recent loss of my long time ago college roommate Dave Thompson have me left in a state of grief tonight, very hard...  At least this has eliminated some toxic salt from me.

Nothing like for their immediate families, Naydu and whomever of David Thompson's loved ones, please accept my prayers and best wishes for God's comfort for you in the days and months to come...  Please spread the word that I cared...

Death is part of life, but is so hard to accept sometimes...

(::...>...(...:   That loss is so hard to take, even though I have lost FEW of my closest loved ones.  What awaits me when the closest of my loved ones go...  Oh...  Will be very hard, I only hope that births will compensate...

Please excuse the excess sentiment from your host, I just cannot write anymore through my tears...  Perhaps I am just weak at heart......   I sign off as a fractured heart, yet knowing that many of you have suffered FAR WORSE...  Go with God my friends.......

Saturday, July 30, 2011

"Don't Bet on a Plunge in Gold"

Says Tatyana Shumsky in the "Commodities Corner" in this weekend's edition of Barron's.  Before I get to the main points of her article, it is important to understand that Barron's is owned by Dow Jones (owned by News Corp.) so is about as mainstream Wall Street as they come.

Update: 6:30 PM ET Sunday, sure enough gold just dove $15.00 in Asian trading, hahaha!  I guess they like our Debt Ceiling Deal, LOL...

High points of the article:

-- Gold is up almost 15% this year, she sees a fall back to $1500 where it will stay in orbit, but will not likely go lower.
-- Chinese investors are buying gold to shield themselves against food inflation, Germans are buying gold to shield themselves form the European debt crisis and many Americans are buying because of the slow growing economy and the corrosive impact of monetary easing.
-- She goes on to say that last year gold was up 28%, and that we are half way there this year, and that if the US$ gets weaker up we go.
-- A FOFOA style remark I quote in full: "Market wisdom says record prices should undermine investor enthusiasm for gold, but there is little evidence of this so far.  Even emerging-market buyers, who are typically more price-sensitive than their wealthier Western counterparts, remain committed to buying more gold."
-- Chinese buyers have eclipsed Indians as the top buyers of gold (25% vs. 23%, acording to the World Gold Council.
-- "A commodity-market Cassandra, Goldman Sachs (ed. note: ?), expects gold to reach $1,730 in the next 12 months, but the firm believes prices will peak next year as U.S. growth picks up and leads to tighter monetary policy and higher interest rates."
-- "But for many analysts, higher rates are unlikely until the end of 2013, almost a year later than initially expected."

So, there you have it.  Wall Street's take on gold.

But, wait there's more!  

On the same page (your edition may vary), there is a snippet of an article ("Silver Linings and Debt Ceilings" (from  Gold/Silver Weekly by International Strategy) with a bullish plug on silver, namely that gold price leads silver up.  Writer Ashraf Laidi says this is GOOD for silver.

My Nephew Got A Tattoo

My nephew Jim P, who plays college football, got a tattoo recently.  My wife just saw it in on Facebook.

When I was that age, tattoos were kind of rare.  Mostly renegades and bilkers for the most part.  Not even the hippies (who I hung around with briefly)!  My wife and I shared a brief "WTF Now" moment...

Nowadays "everybody and his mother" is getting "tatted".  My wife brought me in to see a picture there at Facebook of his tattoo.  With a design of an angel holding a man (or something like that) there was written across that design:

Isaiah 1:7

To save you the trouble:

  7  Your country is desolate, your cities are burned with fire: your land, strangers devour it in your presence, and it is desolate, as overthrown by strangers.  (KJV)

Wow Jim!  If you are going to get a tattoo, THAT is a damn good choice!  Looks like Jim gets it...

Borders, In Pace Recquiescat

Continuing my somber theme this weekend, yesterday and the day before I went to Borders (the big box bookstore chain) that is now going bankrupt.

And I don't mean Chapter 11, where they can reorganize and become viable again.  These guys are GONE!  Yesterday and the day before I went to two different ones, EVERYTHING is 20% - 40% off (I went to buy books for cheap).  Yesterday I heard employees talking...  They were not Borders employees, they were LIQUIDATORS.  Even the fixtures are for sale.  There will be nothing left.

I always liked Borders better than Barnes & Noble (close though).  Borders, back in the crazy .com days, had a better selection of computer books...


Anyone telling you that the economy is getting better is wrong.  New revisions of data were released yesterday, all marked DOWNWARD.  Read Alan Abelson (Barron's) today: Main St. is not getting better.  Alan Abelson's article is titled: "Dire Omen".  He is the first guy you read when starting in on Barrons.

I hope Barnes & Noble can hang in there.  Lounging for hours at a bookstore is one of my favorite things.

Death Of An Amigo From Long Ago

I was advised by a Facebook group who are friends with each other that an old friend, and for a semester my college roommate had just died.

Over the past couple of years I have had a fair number of people I know who have died, now a second one who was roughly my age.  Some of these deaths have really stung...

David Thompson was starting his first year at Rice U., and that first semester we were roommates.  David and I would on occasion have conversations, after we had agreed to go to bed and turned the lights out, there in the dark.  Many of these conversations would be about religion and related topics.  Dave was from Tennessee, had not gotten out much before coming to Rice (Houston, TX) and was trying to integrate his views with the wider ranging reality he came to see in the big city, away from home.  He was in many ways a perfect gentleman.  He was enthusiastic and participated in many things (most of which I did not).

Dave had a tougher life after I lost touch with him.  Pretty bad.  He was unable to finish getting a degree or being able to hold down a steady job, through no fault of his own.  He died while being cared for in a special home...

After Ron C there at Facebook (whom I do not know) confirmed that it was indeed "our" David Thompson, I shared my thoughts with the group.  Lately, I have taken up a new way to remember people, and to help others remember or better know that person by sharing anecdotes about my friend(s) that no one else knows...  I shared the below (snippet, my anecdote is the second paragraph) with the Facebook group:

He was, in essence, a perfect gentleman.  I regret hearing about his difficult and challenging life later on.  But, while I knew him, his enthusiasm and good heart made me happy in his company.  "Happiness in someone's company" is the best definition of a friend I have encountered.

Let me share an anecdote.  Some of you may know I was terrible at winning the the affection of any girls there at Rice, "I couldn't even get a girl to break my heart" (stolen from Sean Hannity).  Well, one evening down in the Pub, I was talking with two Rice girls.  The three of us happened to like Pink Floyd, and I had most of their records and had a cheapie stereo there at our room.  I invited them to come up and "listen to Pink Floyd in the dark."  They accepted, and we went to my room.  I opened the door, and there was Dave, studying...  I sort-of pulled rank on him and asked if he would like to abandon whatever it was he was doing and join us in listening to Pink Floyd, which I imagine he was familiar with as I played their music often.  He said OK, and so for maybe an hour or so we, the four of us, listened to Pink Floyd.  The Rice ladies then went along their way, and not much became of that (a little, at a later time, but not much).

I once told my friend Mike Connell (also not graduated from Rice, would have been 1978, Will Rice) that story.  He laughed and LOVED it!  He thought that was a great line: "Hey, baby, want to come up to my room and listen to Pink Floyd in the dark?"

David Thompson!  In pace recquiescat.  Those of us who knew you will always remember you with fondness.  RIP, my old friend, and to apparently many of us as well.

R A Mix

Indeed Dave, although it has been a long time, I am remembering you today...  Indeed In Pace Recquiescat...  I use the Latin, not to be a snob, but because Latin is OLD, old ideas are the ones that endure...  "There is nothing new under the sun." -- Ecclesiastes

Below song is sung by Amber Rae, it is Jerry Jeff Walker's song.  Some of you saw J.J.W. at the plantation there in SC when my brother brought him in for that charity event several years ago.  "Little Bird" is probably my favorite of his songs...

"Picture of my face on the window pane,
Is it tears I see or is it rain?"

Little Bird ~ by Amber Rae

Originally performed by Jerry Jeff Walker. This one's for daddy.

Friday, July 29, 2011

$1626 And $14 Trillion Plus And a New FOFOA Article

I have been following with dismay that the Tea Party Republicans were not able to stop what looks like will result in a BAD DEAL for the American people re extending the Debt Ceiling and not making any spending cuts.  I am unable to comment on the machinations in Washington, but I doubt that many of us are going to like what we see perhaps on Monday

There is a nice image three articles down on what $15 trillion in $100 bills looks like.

The debt widget above shows we are soon to crack the debt per taxpayer to $119,000.


So, gold continues up a bit, to $1626 now.

As you all know, I do not see an easy way out of our mess.  The main question is how the pain will come down on us, and who will suffer the most.

I would also like to know Cui bene (Who benefits)...


FOFOA has a new article up at his blog:

Thursday, July 28, 2011

News So Popping Fast and Furious Now

that I will have to deal with it very soon.

I am wondering if Boehner's failure to pass HIS bill might be a GOOD thing.

Tricky and scary times ahead.  Your congenial host will try to keep on top of things, FWIW.

GOLD still looks good in this kind of really uncertain environment.  Do not worry if Au comes down in price over the next few days or weeks...  They cannot print more of gold.

Even buying bearings for Peru looks better than leaving US$ hostage to the vagaries of DC politicians and NYC banksters...  My in-laws said that Obama (excuse me, Ollanta) Humala said nothing scary today as new President of Peru.  Well, we will see re that...

Tuesday, July 26, 2011

A Silver Article! By An Expert No Less!

At long last, an expert contributes an article on silver!  Don Durrett was kind enough to allow me to paste in his chapter from his book (minor edit for clarity re his book title).

Much of this piece is historical in nature, when I mentioned that to him, he wrote back that nothing has really changed, the facts are still the same.  I would still have liked to see comments on the price of silver having gotten so much higher than his 2010 numbers.  On the other hand, since he wrote his Chapter, everything has come true (at least the rise in price), so he called it right!

***  I seem to have lost his footnotes.  ***

So, please consider this article as "Still Under Construction" until I can get this right...

Non-Expert Junior Blogger Robert is not capable of passing judgement on this article for accuracy nor conclusions.  But, I am VERY INTERESTED in your comments about silver.

(Obnoxious cheer: Peru is No. 1!)

Another article soon, it may be a link because of all the graphics, but maybe I can squeeze it all in to an article here.

Below is courtesy of Mr. Durrett:

Here it is. You can post it. Just put a link to my book: How to Invest in Gold & Silver by Don Durrett

Chapter 1 – Why Invest in Silver?

Silver presents an amazing investment opportunity (although the entry price is very important). Why? Because there isn’t much left! In 1945, there were approximately 10 billion ounces (bullion and coins) of silver worldwide.[1] Today, there are approximately 1.5 billion ounces (bullion and coins).
Where did it all go? Mostly into landfills. Silver is used in such small quantities in manufactured goods that most silver is not recycled. Thus, it is used and discarded.
Silver is used in thousands of products: appliances, TVs, computers, phones, radios, transportation (ships, trains, planes, and automobiles), jewelry, silverware, medical equipment, electrical connectors, mirrors, door handles, CD-ROMs, DVDs, film, batteries, solar power, water purification, anti-bacterial products, etc. It is the second most used ingredient for manufactured items after oil. Moreover, its usage is expanding. Every year, companies are finding new ways to use this versatile metal. For instance, they recently started putting silver in clothing to keep them smelling fresh.[2]
In 2008, fabrication/product demand was 833 million ounces.[3] Most of this was used in the list of products cited above. And since most of these products will never be recycled, this silver is gone forever. This is where the billions of ounces of silver have gone.
Total mine production in 2008 was only 681 million ounces.[4] Fortunately, a significant amount of silver is recycled every year (mostly from industrial waste, old jewelry, photography, and X-rays). Without this recycled silver, there would be a large shortage.
However, even with recycled silver, there is an annual deficit. This deficit is overcome with government sales, from government inventory. In 2008, the deficit was 30 million ounces (see chart below).[5] Without these government sales, there would have been a shortage.

Silver Supply

Supply 2008

Mine Production                              680.9
Government Sales                              30.9
Recycled Scrap                                176.6
Total Supply                                     888.4

Demand 2008

Manufacturing                                 447.2
Imaging/Photography                      104.8
Jewelry                                             158.3
Silverware                                          57.3
Coins & Medals                                 64.9
Total Fabrication                              832.6

Investors                                            55.8
Total Demand                                  888.4

            Notice that tiny amount in the Investors column: 55 million ounces. That is all the bullion that investors purchased. Less than $1 billion dollars! What happens if they want more? I’ll have more to say about that later.
Since 1945, there has been a consistent annual deficit of supply (mining plus recycled) versus demand (manufacturing, jewelry, investment, etc.). In 2008, silver demand was 888 million ounces, and supply was 858. This created a deficit of 30 million ounces. The deficit was made up by using existing government inventory. Thus, the global inventory continues to wither away, and it’s almost gone.
In 1945, the U.S. Government held 4 billion ounces of silver bullion.[6] Today, they have none. Where did it go? They sold it to manufacturers, because of production deficits. Without these sales, the economy would have suffered from a shortage and the price of silver would have soared.
Today, China and India are the only two countries with a significant silver inventory.China has been selling it to their manufacturers, but this won’t last much longer. Soon, they, too, will be out.
The total dollar value of the 4 billion ounces of above ground gold is approximately $6 trillion (at $1,500/oz.). The estimated 1.5 billion ounces of above ground silver bullion has a value of $60 billion (at $40/oz.). Thus, there is more than 100 times more gold – in dollar terms – than silver.
In fact, the discrepancy is much worse than that. The silver supply available for delivery is actually only about 5% of the total, or about $2 billion. The rest of the silver is not for sale. Thus, the physical silver supply is a tiny market with huge potential for explosive price escalation.
For full disclosure, you should know that there are more than 15 billion ounces of silver in silverware, jewelry, and art works that can be recycled into bullion and coins.[7] Once silver reaches heady values, people will be exchanging their silver items for dollars. How much of an impact this will have on the price is unknown. Personally, I think if a recycling wave occurs, demand will likely soak it up and prices will still go higher. Annual investment demand for silver is approximately 15% of total silver demand (in 2008 it was 13.5%). That number could easily increase and soak up recycling.

Silver Shortage Possibility

The main difference between gold and silver is that you can never have a shortage in gold, because it is not industrially consumed in significant quantity. The price of gold can go higher, of course, but not because of a shortage (only demand can drive up the price). Silver, precisely because it is an industrial commodity (in addition to being money), will likely one day go into a shortage (considering the disappearing inventories and increasing demand).
In 1997, the precious metal palladium (used in automobile catalytic converters) was $100 an ounce. Then it suddenly started rising, and kept rising all the way to $1,100 by 2001. This breakout occurred when manufacturers began hoarding the metal from fear of a shortage. This scenario could happen again with silver. If you are a manufacturer, and silver inventories begin to shrink at the COMEX (New York Commodity Exchange), you are likely going to begin creating your own inventory. Manufacturers won’t have a choice. Without inventory, they will have to stop production. Note that this includes just about all of the large international manufacturing corporations.
The question I like to ask is, how high will the price of silver go if we have a shortage? Moreover, since there is no cheap alternative for silver, how desperate will manufacturers like Apple, Sony, Panasonic, Samsung, GE, Nokia, etc., become? Desperation plus shortages always mean rising prices.
As mentioned earlier, most of the silver bullion above ground is not for sale. Perhaps less than 25 million ounces are available for purchase globally for physical delivery on any given day. These 25 million ounces are spread out to retailers and wholesalers throughout the world. In 1997, Warren Buffett accumulated 130 million ounces at approximately $5 per ounce. (He sold at a nice profit, but regrets selling early.) It would be very difficult to accumulate that much silver today in a short period of time.
Of the approximate 1.5 billion ounces of silver bullion and coins in existence worldwide, one third exists in private holdings and another third is held by ETFs. This silver is not for sale.
In January 2010, estimates of the remaining distribution showed:

Silver Inventory

Silver Coins and Bullion

Private Holdings                                  500 million oz.
Silver ETFs                                          500 million oz.
Governments                                       200 million oz.
COMEX Silver Exchange                    115 million oz.
Private Dealers                                    100 million oz.
Other                                                   100 million oz.
Total                                                    1.5 billion oz.[8]

As you can see, very little silver inventory is available for sale. Moreover, the exchanges that do have a silver inventory do not necessarily have any for purchase. For instance, the largest exchange – COMEX – has warned customers that they may have to take ETF shares instead of actual silver. Actual inventory available for purchase is quite limited.
These numbers are mind numbing. There simply is not that much silver available for physical delivery to investors. In dollar terms, we are talking about small amounts of money on a daily basis. In other words, it doesn’t matter if you have the money – and are willing to pay above market prices – the silver is just not available.
For this reason, hedge funds and large investors have been forced to focus on gold. If you have a billion dollars that you want to invest in physical silver by taking delivery, it’s not going to happen overnight. It could take months to find that much silver.

Silver ETFs

In addition to the low amounts of physical silver available for sale, inventories owned by ETFs are increasing quite rapidly. These are exchange traded funds, such as SLV, SIVR, and CEF, which trade as a stock on the major stock exchanges.
These ETFs are backed by physical silver, which are stored in warehouses. SLV has 300 million ounces, as of today, and it just keeps increasing. These ETFs are popping up all around the world: EnglandCanadaSwitzerlandAustraliaDubai, etc. This will shrink inventory levels significantly. It is my opinion that these ETFs will consume the remaining inventory until a shortage emerges. This is very bullish for the silver price.
And if the ETFs do not force a shortage, then surely investors who are buying more and more bullion and coins will do so. (Ten million Silver Eagle 1 oz. coins were purchased from the U.S. Mint in the first quarter of 2010.)[9] Once this shortage emerges, the price is going to skyrocket. It’s not inconceivable for silver to reach $150 per ounce, and $100 is likely. I used to think that $150 silver was too high a long term target, but now I think it’s possible. If palladium can rise 10x from $100 to $1,000, then so can silver.

Silver Paper

There is another factor that could drive prices substantially higher. Investors have purchased silver paper certificates to the tune of approximately 1 billion ounces of silver. Since banks do not have this much physical silver, they are exposed to huge losses – if silver continues to rise. The only thing they can do to hedge against additional losses is to purchase silver (either physical metal or an ETF) or silver futures contracts. If they begin to hedge, this will also drive prices up.
 There are two types of silver paper certificates. One is backed by silver (and requires storage fees), and the other is paper only and is settled in cash. Most certificates backed by silver are in fact “naked” certificates that are not backed by real silver, but instead by promises made by banks and other financial institutions.
I call this a paper charade, because the banks and institutions do not have enough physical silver to back up their promises. Instead, they use “pooled” silver accounts that hold a small portion of silver inventory for physical settlements (a form of fractional banking). However, what happens if investors get nervous and begin requesting their physical silver? If that happens, we will see huge shortages and silver prices will explode.  
If you’re wondering why banks would sell naked silver certificates, it was free money as long as silver remained cheap and no one redeemed their certificates. Investors gave banks billions of dollars, and all banks had to do was promise to pay them back at the current price of silver. This was a risky gambit that is about to be played out.

Gold/Silver Ratio

Originally, I started out as a gold investor, but I began adding silver investments in 2004 when I learned about the explosive upside potential of silver. I expect silver bullion to increase by a multiple of 20 or 30 before this bull market is finished (starting from $5 per ounce). That would result in a final price of $100 to $150 per ounce. This is not inconceivable. If we have a shortage, there should be a big move into silver by investors. Get ready for another bubble.
Another amazing thing about silver is that, even if we don’t encounter a shortage, the ratio of gold to silver is in our favor. Today the ratio is $1,500 / $35 = 43. The historical average is around 30. However, if you go back to the 18th and 19th centuries, when silver was considered money, the average ratio was 16! Thus, as silver is perceived more and more as money, the ratio will drop substantially. If gold goes to $2,000 and the ratio is squeezed to 25, then silver will rise to $80.
One last note: The true ratio of gold to silver in the ground is 10 to 1. Some people think that because of silver’s usefulness versus that of gold, that the ratio could go as high as 1 to 1. While I don’t expect that to happen, I do think that the ratio will shrink quite a bit. A ratio of 43 is incongruous with the rarity of the metal versus gold.

COMEX Short Contracts

When you look at futures contracts, there is yet another built-in slingshot for the price of silver. Currently, there is a huge short position (i.e. future contracts betting that the price will drop) in silver equal to more than half of annual production. This is an occurrence that does not exist for any other commodity. This huge short position acts as pressure for an imminent explosion in prices.
Once the price rises past $50 per ounce, the huge shorts will be exposed to hundreds of millions of dollars in losses and will be forced to close out their short positions. If you monitor the COMEX short contracts as they recede from the current approximate 100,000 total (each representing 5,000 ounces of silver), this will correlate to an increase in price.
My estimate is that, when these contracts reduce to a normal level, the price of silver will double. Looking at it another way, if silver passes $50, can these companies really keep these contracts open with the upside in silver looking to go even higher?
This is called a short squeeze and I don’t see how it can be avoided.

Silver: A Smart Investment

Ted Butler, one of the leading silver analysts, believes that silver will be ten times more profitable than gold over the next few years. When you look at the supply/demand situation, this is entirely possible. He actually recommends selling your gold investments and purchasing silver bullion. I don’t have the confidence to do that, because I still consider gold as a safer investment – even though everything points to silver being the better investment.
Anyone who purchased silver bullion or silver coins when silver was below $10 (any time prior to 2005) is going to do very well on that long term investment. I respect people likeJason Hommel (, who invested more than $1 million in silver bullion, back when silver was cheap.
From 1995 to 2000, the silver price averaged just over $5 per ounce (see chart below).[10] Early investors are going to do incredibly well when this bull market reaches the mania phase over the next few years.

With such a low inventory of silver, it appears to me that investing in silver is a smart investment and a hedge against uncertanity. With the economy in turmoil, U.S. debt exploding, and Peak Oil[11] looming on the horizon, it seems inevitable that investors will seek out precious metals as a hedge. It won’t take much to create a silver shortage and make the price soar. Already it is becoming difficult to obtain physical silver.
I see only two possible outcomes for long-term silver investors, both of which are positive:

1) The economy does not collapse and the above ground silver inventory withers down to nothing, creating severe shortages (although this will take several years).

2) The economy implodes and investors pour into silver as a hedge against  uncertainty. 

I expect high energy costs to impact our economy and our financial system, so the second outcome seems more likely. Our economy will also be facing pressures caused by our level of national debt, and a worldwide shortage of oil.

Silver Producing Countries

Whereas gold is mined all over the world in dozens of countries, silver is primarily mined in only ten countries. Here they are, listed in order of production:


These top ten countries produce approximately 85% of all silver.[12] To give you an idea of production, the top country – Peru – produces about 100 million ounces per year; whileCanada, the last entry, produces about 20 million ounces annually.


Silver as a Byproduct

            One of the things I like about silver is that there are not that many pure silver producers. Only about 20% of silver production comes from companies who are called silver miners. The rest of production comes from companies mining other minerals, such as copper, zinc, or gold. Silver, by and large, is mined as a byproduct.
            What does this mean? Well, if the price of silver ever takes off and there is a mania, there are not that many stocks to choose from. All you have to do is own the good ones and you are going to do very well. Investors will have no choice but to bid up these stocks, and since this market is so tiny, the possibility for upside is tremendous.

The Risk Factor

There are a few risk factors to be aware of when investing in silver. If the economy collapses, the manufacturing sector could grind to a halt and industrial silver demand could crumble. Silver mining would continue due to high silver prices, thereby increasing supply dramatically and eventually depressing prices. On a positive note, if this happens, investor demand could very well exceed the lost industrial demand. Personally, I think silver prices are going to soar, and this supply risk does not bother me (although I will likely convert mostly to gold as a safer haven at some point in time). However, that is my personal opinion, and it does not reduce the risk of investing in silver.
Since silver is not necessarily a monetary metal, it is much more risky than investing in gold. Gold is simple to understand, since it is money and investors want it for that reason. End of story. Also, the gold inventory is very limited, with only about 2,500 tons mined each year. Thus, gold is a rare commodity that is very liquid, and the risk is simple to understand:  if demand goes down, you lose money; and if demand goes up, you make money.
            Silver isn’t so simple. This is both a curse and an opportunity. The upside can be substantial, as well as the downside. The volatility is not for the weak of heart. I have seen silver drop from $21 down to $9 in less than one year! Talk about a roller coaster.
If an excessive silver inventory builds, investors could drop this commodity like a rock. Mining shares could collapse very quickly under this scenario. So you have to have nerves of steel and believe in the long term trend.
When silver dropped to $9, I didn’t get upset. Instead, I kept buying. I treated it as an opportunity. This bull market is not going to end in the next year or two, so buy the dips. Be aware that no market goes up in a straight line, and there will be buying opportunities. Below is the price chart for silver from 2000 to 2010 (see chart below).[13]

The ETF Threat

One last caveat for full disclosure. There is a very small likelihood that governments could appropriate silver from the ETFs and force liquidation. For instance, if the silver price rises past $50 and there is a silver shortage – and investors are competing with manufacturers for physical silver – governments might be tempted to shut down an ETF, such as SLV. This could have the effect of creating a price collapse overnight. So, buyer beware. Silver is a risky investment.