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(There are no dumb
questions!)
Which is better, gold or silver?
I like silver better because it's being consumed by industry.
It's a much smaller market, by far, and thus, will move up far more than
gold.
If the silver to gold ratio returns to the historic value ratio of 15
oz. of silver for every 1 oz. of gold, you'd make far more on silver, since
the current ratio is about 53:1.
But I think silver might exceed the historic ratio, since that ratio
was last seen nearly 100 years ago, except for briefly in 1980.
Over the last 100 years, two major things have happened to
silver. First, silver was demonetized, meaning, no nations on earth are
using silver as money, or as a circulating currency today. Second,
since the age of electronics began at the end of WWII, developed nations have
been consuming about 6/10ths of an oz. of silver per person, per year, which
has consumed most of the silver ever mined in history.
In contrast, only 5% of the annual gold market production is consumed
by industry.
So if the silver to gold ratio just returns to historic norms, you'd
make over 3 times as much in silver than in gold.
But silver should dramatically outperform gold as the bull market in
precious metals continues.
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How do I keep my purchases and sales anonymous? After all, I don't
want the government to know what I'm doing.
Well, your bank account will keep a record of you taking out cash, but
they won't know what you spend it on. They also track cash deposits,
but won't know the source.
But if you try to sell precious metals for US money, and end up
depositing that cash into the bank, and if you want to borrow money to buy a
home, you will likely have to declare the source of that cash, by providing
the sales receipt of the bullion you sold. We have had quite a few
people run into that problem already.
It may be illegal for me to even tell you what the exact reporting
requirements on cash transactions are! However, it might not yet be
illegal for me to direct you to the government website itself!
If you would like to look up the reporting limit requirements for
cash, you can find it at fincen.gov, specifically, click on "Statutes
and Regulations". Posted clearly, there is a daily transaction
limit of $10,000 on physical paper cash, among other regulations.
It's sad that in the land of the free and the home of the brave that
the government expects businesses to work for the government and fill out
paperwork for free, and only under threat of punishment for
non-compliance. Sounds a bit like slavery to me.
There is no reporting by us if you do a wire transfer, and thus, no
limit to what you can buy via wire transfers.
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What is the tax on gold and silver?
There is sales tax in California if you buy less than $1500; over
that, there is no tax.
But people are often wondering if they will have to pay taxes when
they sell it. And this question is often asked right on the heels of
the previous question about reporting requirements.
Well, in the land of the free today, it is also illegal for me to give
tax advice since I'm not a licensed tax attorney. It is also illegal
for Suze Orman; but it
does not seem to stop her.
So let me play it on the safe side, and talk philosophy, instead of
taxes. So, I'll tell you about a debate I learned in college. The
question is, "If a tree falls in the forest, and if nobody is around to
hear it, does it make a sound?" And more importantly, is that a
taxable event, and does the tree have to file a
1040? Well, of course not, trees don't have filing
requirements.
In other nations, they'd just shoot the tree. Here in America,
we are still allowed (in some places) to turn the fallen tree into firewood,
but then you have to declare the "income" of wood if you want to be
insanely and overly compliant with how they apply tax laws. But if you
didn't tell the government that you turned a tree into firewood, how would
they know that for income purposes?
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Why can't I buy gold or silver at spot, instead of over spot?
Almost all of the products that we sell have a manufacturing cost to
them. We typically have to buy raw bullion over spot, and then pay an
additional cost to manufacture it into coins or bars. We sell 20 times
more bullion to the public than we buy, in recent weeks!
So, you can buy bullion under spot if you spend the money to start up
a coin shop, and wait for gold and silver to be sold to you. But
customers only sell us 1/20th of the metals that we are selling.
All markets have a bid and an ask. The
bid is the price a potential buyer is bidding. The
ask is the price that a seller is asking.
Those bids and asks are from the large COMEX paper market that trade
in lots of 5000 oz. of silver, and rarely result in any real delivery,
because most of the buyers are only buying to gamble on short term price
changes, and pay only a small deposit.
As a real shop, with real silver, we have real expenses; rent, ads,
workers, electricity, phone, internet, insurance. And all of that must
be paid monthly, regardless of if we make any sales.
The physical market is also very tiny, with low volume, only about
$2.5 billion per year. With 1% average profit after all expenses,
that's barely $25 million for all physical silver sellers, worldwide.
With 4000 coin shops nationwide, if that $25 million were divided equally,
that's $6,250 profit per shop, per year, on silver sales. (We do a
bit better than average, but still!)
We also have risks; default risk from our suppliers, theft risk from
workers, theft risk from the public. Risks
must be offset by potential profits.
We also have trading volatility risk; we might sell silver to someone
early in the day, and later in the day, if the price moves up, we might end
up buying back that silver from our wholesalers at a loss, and thus, losing
money.
We also have inventory composition risk and losses: we must keep
cash to run the shop, and cash loses value in terms of silver as silver goes
up; the cash always buys less and less silver.
We also have replacement delay risk and loss. Cash can't be used
immediately to buy back silver, there is always a delay between when it can
be deposited into the bank.
We also have cash deposit charges that range from 1/2 of 1% to 1% on
cash, because we deposit high volumes of cash; the bank charges us this just
for counting the cash.
We also have a risk that the silver that we re-order gets delayed, and
then, we risk running out of inventory sooner. If that happens, we must
raise prices to ration product availability. It does no good to
have low prices if we are sold out.
I've said numerous times that there is only about $1-2 out of every
$10,000 that is in the banking system that is going into silver on an annual
basis. As that increases, it will cause enormous pressure on everyone
in the trade: miners, concentrators, refiners, mints, dealers, and coin
shops. My goal is to make sure that bullion is available, at some
price, because when no bullion is available, that's much worse; that's what
happens under communism, and price fixing.
Sometimes, we can negotiate lower prices for larger orders. But
not always. It never hurts to ask.
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Where do you think silver prices are going in the next 3-6 months?
Generally, I tend to think silver prices are too volatile, changing,
and unpredictable to make any guesses for the short term. Nevertheless,
my gut tells me that silver is headed to about $35/oz. within this time
frame, by July, 2011. That guess is based on my observation of the
Fibonacci number sequence for silver's peak prices in this bull market.
Silver started at around $5/oz. Then, the successive peak prices were
right on the Fibonacci sequence, 8, 13, 21, and the next number is 34.
Each number is the additive of the prior two, which shows an average increase
of about 66% over the prior peak. I would not bet on that kind of
prediction though, and I would not buy any options on that either. The
reason is that it might also take as long as 2 years to get there, because we
have a manipulated market, whereby 99% of silver buyers are content with
paper silver and don't know they are being deceived, primarily by JP
Morgan.
Also, with options, price increases are built in. Generally,
since silver is expected to go up by about 30% per year, since that's the
trend, silver has to do significantly better than that in order for you to
make money on options, so they are generally a waste of money. Just buy
physical silver, and earn the 30% or more per year continually over the next
few decades. Remember, the world cannot make 30% per year on paper
phantom silver that does not exist -- so all of that will default during this
bull market, and you have to get out of that kind of bad silver before this
bull market finishes if you ever hope to have any major gains at all.
Also the options market is very illiquid and very small beyond 6 months away,
so the entire paper game seems quite ridiculous to me.
Think of it like this. Let's say there were two silver shops
right next door to each other. Mine, and the
"paper market" next door. You go into my shop, see all the
bullion, and see my prices. Then, you go next door to the paper shop,
and they have no bullion available, only a bunch of traders standing around
holding paper tickets. You read up on their open interest, and you can
instantly see that they are bankrupt, having sold up to 800 million ounces
while their published warehouse inventories are a mere 50 million
ounces. You see that they only offer silver for delivery "in a
month" and the delivery day can be any day in the entire month.
And, the only product you can buy, and the minimum order size is 5 large 1000
oz. bars that nearly nobody wants. Where would you shop? Hint,
not even our largest wholesaler shops there; instead, they buy directly from
refiners, or mints, as do we. Please note, not
all refiners are honorable or have good products. Be careful out there.
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Where do you think silver prices are going in the next year then?
On average, over the last ten years of this bull market in precious
metals, silver has gone from a low of $4.15/oz in the spring of 2003, to $29
or so last week. Over seven years, that's an average of 32% per
year. But I think silver will tend to go up in greater percentage
numbers per year, on average, as the bull market continues. The trouble
with averages, is that they can be misleading.
In 2008, silver hit $21.50 or so, and bottomed
around $9.50 or so in 2009. That's a loss of 55% in one year,
which led many to speculate that silver prices had "crashed" and
that the bull market was over. Of course, such "advisors" did
not tell anyone to buy silver at $9.50 in 2009 either.
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How much will I get for my silver or gold when I sell it? Or,
what is the spread, the cost, to buy and sell?
Look at our price board at the top of www.jhmint.com.
We are now publishing both prices, our cost when we
sell, and our buy back prices. Generally, physical bullion has about a
10% spread on all items, on both gold and silver. This does not mean we
earn 10%! We try to earn about 4% per trade, gross, and after expenses,
it's much less. Typically, for bullion that is cheaper to buy, you get
less when you sell it. These days, our bids are very good, since most
people are buying silver and gold, and we can easily re-sell almost
everything except very odd weight or unique products, which we buy at about
7% under spot for gold, and 15% under spot for silver.
There is a floor price, or lowest possible price, for nearly
all gold and silver, since we can always put it into the melting pot by
sending it to a refinery, which is the bullion buyer of last resort.
So, if we had more people selling to us than buying, most everything would go
to the refiners. But if the refiners are backed up and giving delayed
payments, then we'd have to offer a bit less than the floor prices mentioned
above for "odd" products.
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How long do I have to hold silver to break even on the spread and
start making money?
Well, on average, silver's going up about 30% per year. So, to
break even on a 10% spread, you need to hold silver for about 4-5 months to
break even. But that's an average. In the last 90 days, since
silver has increased from about $18 to $27/oz., it's been an unusually short
time for most people to make money on the silver they bought. But if
you look at the peak price in the spring of 2008 of $21/oz., it's taken
about two and a half years just to break even. So, it
varies. Your expected hold time should be about 2 years, minimum.
If you can't wait that long, perhaps consider buying more gold, or simply
holding most of your cash. You always need cash for life's unexpected
emergencies like car repairs and losing your job or other
opportunities. Don't buy so much bullion, and end up with so little
cash that you get caught being forced to sell bullion that you bought in the
last 6 months because you were hoping to strike it rich.
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What's a typical trade size that you can handle?
For the last three weeks, we've done about $600,000 in transactions
per week, which is record sales volumes. We
can handle much larger trades than that, however, because we work with up to
10 major suppliers, and we can contact all the largest suppliers in the
industry. Things seem to be getting a bit tighter, as delivery times
are about 1 week right now from each of our top three suppliers. There
is also talk of increasing prices at the wholesale level across all three
suppliers. Also, quite a few products are beginning to be sold
out. We're surprised that one of our wholesalers is out of 1 oz. silver
rounds, for example, yet we have 3000 in stock, thousands more in the mail on
the way to us, and we can get more from three other sources. All trades
over $100,000 must wait a week for delivery if you want a discount,
otherwise there is no negotiation below our prices on our price board.
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Can you lock me a price right now?
No. We are not in the business of giving free price
options. We don't do futures contracts, we
deal in the spot market, the "here and now". We cannot move heaven
and earth and stop time for you. How can we "lock" anything
until after your money arrives? I cannot place an order for you, until
after I receive your money. The problem is that too many potential
customers are simply flakes with no honor to honor their commitments, and
there are too many problems and delays even with bank wires. And I
cannot cause your bank to honor their commitment to you to get your wire out
in a timely way. If your bank delays your wire, that's not my
fault.
All I can say is that if you wanted to buy at this morning's prices,
perhaps you should have initiated your wire transfer yesterday?
I also cannot prevent other traders showing up with cash and cleaning
us out prior to when you wire us money (at which point you are not yet a
paying customer, while they are), and that can happen in the bullion trade,
in which case, your order might be delayed by a day or so. We
"pull inventory", setting it aside, and lock prices for most mail
orders under about $100,000, right when we note when the wire comes in.
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OK, I'm ready. How do I buy from you? Cash, check, credit
cards?
We only take cash, or wire transfers. The reason is that we earn
too little of a spread on bullion. We need irrevocable payment.
Checks can bounce, or people can put a hold on them, and they take too long
to clear. People can put charge backs on their credit cards for as long
as 6 months after a purchase, and credit cards often have a 2-10% cost built
in that the merchant must pay.
If you are buying over the internet, you need to call Kerri. She
will email you our wire transfer information. We lock a spot price only
after a wire has arrived. Until then, our price board at www.jhmint.com is
a good indication of our prices. Prices can change at any time however,
based on ever-changing market conditions. Since silver prices can move
by 5%-10% in a day, then if you want a specific product, such as a sealed
monster box, consider wiring an extra 5-10% to be more sure
that we don't end up having to sell you 95% of a sealed box, in which case,
we'd have to break it open. We reimburse all such extra amounts in
silver, or cash, as you prefer.
If you are nervous about making a trade, may I suggest placing a smaller
trade first, as many customers do. The good
thing about money is that it is divisible. You should never feel
pressured to move all of your money at once.
If you have any questions, try email, but I'm not always able to
respond. If you've seen the movie "Bruce Almighty", my email
inbox looks like that, the emails come in faster than I can respond.
I'm also sometimes available by phone if you call the JH MINT between 10AM to
5PM M-F Pacific time, if I'm not busy with other customers.
To the Top Ten Institutional Shareholders and Top Ten Mutual Fund Shareholders
of JP Morgan:
It's news that JP Morgan is being sued for
manipulating the silver market by maintaining a large concentrated naked
short position in futures contracts on the CME's COMEX metals exchange.
http://www.marketwatch.com/story/jp-morgan-hsbc-sued-for-silver-manipulation-2010-10-27
The lawsuits were announced just days after a brave man in government,
Bart Chilton, Commissioner of the CFTC (http://www.cftc.gov/),
the Commodities Futures Trading Commission, made a statement that
acknowledged silver price manipulation.
http://www.gold-speculator.com/editors-picks/41121-cftc-chairman-bart-chilton-silver-has-been-subject-attempted-manipulation.html
The lawsuits mean that very intelligent lawyers believe that JP
Morgan's short position is so obvious and provable that there is a case to be
made, and money to be won from JP Morgan, and they feel that perhaps they
will get help even from those in government, such as Judges. Blood is
in the water, and JP Morgan is the one bleeding.
The news articles of the lawsuits don't tell the full story.
See, I know the men who helped expose JP Morgan as the silver short, and I
help to inform those men, and promote their work. I was the first to
file an antitrust complaint to the US Justice Department against JP Morgan
for silver manipulation in April of 2010. http://silverstockreport.com/2010/doj.html
JP Morgan is also the custodian of the silver ETF, SLV, which also does
not likely have all the silver, which would be another short position.
JP Morgan's third short position in silver is likely a much larger
naked short position in silver than the other two combined, and it's through
the "over the counter" silver market, which has been up to $200
billion in size according to the BIS, the Bank of International
Settlements.
http://www.bis.org/statistics/derstats.htm
http://www.bis.org/statistics/otcder/dt21c22a.pdf
See the second link, above, the pdf file,
the second table, Table 22A:, under the category
"other precious metals". The "Notional Amounts
Outstanding" in June 2009, were $203 billion.
Jeffrey Christian, bullion bank apologist, at the CFTC hearing on
silver on March, 25th, 2010, admitted that silver was traded and leveraged
"over 100 to 1" in the London market.
JP Morgan also holds the largest derivatives positions of any banks,
at $69 Trillion, according to the US OCC. Thus, it is likely that JP
Morgan also holds the largest short position in silver derivatives, too, as a
matter of course, since they dominate derivatives trading in general.
So, to them, a $100 billion short position in silver would be "chump
change" compared to their other derivatives positions, and may, in
actual fact, be a part of a larger overall strategy to maintain the value of
their other derivatives, (including the US dollar) to keep interest rates low.
http://www.occ.gov/topics/capital-markets/financial-markets/trading/derivatives/derivatives-quarterly-report.html
http://www.occ.gov/topics/capital-markets/financial-markets/trading/derivatives/dq210.pdf
See the last page of the second link, the pdf
link, above. The OCC sometimes changes the location of these links, so
if the link breaks, you might want to ask one of your junior researchers to
locate them for you, or look around the occ.gov page for a few minutes to
find it yourself, or simply contact the OCC as ask them for a copy of their
"Quarterly Report on Bank Trading and Derivatives Activities"
Second Quarter 2010
So, the problem is simple to understand, but complex to solve, because
JP Morgan's market influencing positions cannot be closed without massive
losses that will bankrupt JP Morgan, and perhaps also significantly devalue
the US dollar.
The world's annual silver production is estimated at between about 550
million ounces of silver to about 650 million ounces. At 600 million
oz., at $25/oz., that's a tiny $15 billion market. The investment side
of the silver market is even smaller, at only 100 million oz annually, which,
at today's silver prices, is a much smaller $2.5 billion market.
Key problem: How can the world's leading banks, (probably mostly
JP Morgan) sell $100 billion worth of silver in 6 months, which is 6.66 times
the entire world's annual production of only $15 billion worth of silver, and
about 50 times the actual physical silver investment market, and it not be
fraudulent silver, not real silver, which creates this problem?
But the problem is much bigger than how it might appear from just that.
See, in 1980, silver prices hit $50/oz. That was when M3, the money
supply in the US, was a tiny $1.8 trillion. Today, it's
$18 trillion, and growing at a rate of about $2 trillion per year, which is
the what the US government must print to pay their bills. So, the
inflation-adjusted price of silver could be ten times higher, or up to
$500/oz., if only 1% of the population of the USA began to buy silver.
See, 1% of $18 trillion is $180 billion. How can $180 billion
pour into the real and actual physical tiny silver market of $15 billion (or
the tinier silver investment market of $2.5 billion) without driving the
silver price to $500/oz.?
See, the problem is that the silver price will hit $500/oz. just for
starters, by the time only 1% of people in the USA alone try to protect their
wealth from inflation by buying silver and gold, and the way things are going
in government, that's nearly a given by now.
If my reading of the OCC report is any indication, then JP Morgan's
short position in silver could be as high as 25% to 50% of the entire world
banking system's short position of $200 billion in silver (and that was when
silver was $15/oz.)!
JP Morgan's short position in silver could thus be as high as 3.3
billion ounces if we are conservative, and estimate their position at only
25% of the BIS report numbers. By $500/oz., JP Morgan's short
position could be worth a negative $1.5 trillion, and that's just for starters.
It could grow worse if they add to their short position, in a misguided
attempt to manipulate a market that is clearly moving against them.
That kind of activity by a rogue trader brought down Barrings Bank, as showcased by the 1999 movie,
"Rogue Trader".
http://www.amazon.com/Rogue-Trader-Ewan-McGre...8877&sr=8-3
The other problem is that silver is mostly consumed by industry, as
it's the greatest conductor of electricity in the world, and is used up in
10,000 applications. Only oil has more applications, but oil can't be
used as money. It's just way too hard for the average person to store
$8000 worth of oil in 100 barrels on their front lawn, and apartment dwellers
never could. Gold is also unsuitable as money for most people, because
a tiny tenth ounce piece is just too valuable if it became worth about a
month's salary, a historic norm.
I submit the problem is bigger than what your brightest minds, your
brightest economists, and brightest students in today's world can solve.
See, there is no central bank of silver. There is no lender of last
resort for silver. And you can't print silver to solve this problem,
because at the end of the day, real silver is needed by industry.
Developed nations, such as the USA, consume, in industry, about
6/10ths of an oz. of silver per year, per person. As the world economy
grows, that will increase.
Silver also has the smallest number of years of resources in the
ground of nearly any major metal. It's about a 14 year supply.
(This is substantially smaller than the world's 40 year supply of oil.)
But the solution is simple if you can trust in God.
Be honest. Be honest first. Trust that honesty brings
rewards and blessings from God.
May I humbly suggest a few simple solutions to your problems
concerning your positions in JP Morgan, given JP Morgan's major financial
problems with their short position and shortage of physical silver?
1. Buy silver.
2. Sell JP Morgan shares.
Or, well, scratch that, or you can reverse
it. You could sell JP Morgan shares and use the proceeds to buy
physical silver.
Most of all 20 of your institutions own about $2.5 billion worth of
shares, on average, of JP Morgan.
I can guarantee you that the facts dictate that your shares of JP
Morgan will not retain their value nearly as well as will silver.
I can also guarantee you that it's a race to get silver, and you are all
probably not even in the race, given the tiny size of the silver market.
If even one out of 20 of you decided to act, I can guarantee you that
silver prices would double and exceed $50/oz, before any one of you were able
to buy even $1 billion worth of physical silver.
On September 2nd 2010, at the start of this rally in silver prices, I
wrote a simple letter to the top 25 billionaires of the world, declaring that
none of them would be able to buy much silver below $20/oz. Based on
recent silver prices rising to over $29/oz., and holding at $26, it appears I
was right.
Dear Billionaires of the World
http://silverstockreport.com/2010/billion.html
I gave specific advice on how to accumulate large positions in silver,
and who to contact to get it. Of course, you, or anyone else, can also
simply call me or my associates at the JH MINT. www.jhmint.com
It is actually against my best interests to write to you, for several
reasons. See, since I know silver is money, I therefore use silver as
my "unit of accounting" internally as a bullion dealer at the JH
MINT. I count all my assets in terms of dollars, and also in terms of
silver. During the recent rise in silver prices, our assets are
increasing in terms of dollars, of course. But not in terms of
silver. Why not? Because we lose "silver value" on our
small cash positions, and we lose "silver value" on our larger gold
positions. So, even though over 65% of our assets are in the form of
silver, and even though we are having record sales volumes, we are not able
to "accumulate silver value" from operations during this bull
market in silver, because silver prices are simply rising too fast.
Furthermore, by sharing with you this information, I risk creating a
silver shortage at many of my own suppliers, which could literally put my
successful silver dealing business out of business.
I can therefore state with near absolute certainty that if you tried
to value the wealth of your institutions in terms of ounces of silver, you
would do nothing but "lose money" in terms of ounces of silver, no
matter what you do, no matter how great you think your investment decisions will
be, no matter how much silver you accumulate, during the next ten to twenty
years of the continuing bull market in silver.
This is your first and only warning about the facts of silver that I
will ever give you. I will not contact you again, just as we never
pester any of our clients by phone.
God bless.
Jason Hommel
Silver Stock
Report
I strongly advise you to take possession of real gold and
silver, at anywhere near today's price, while you still can. The
fundamentals indicate rising prices for decades to come.
Price Board:
http://hommel.name/cgi/priceboard?store=jhmint.com
Our Coin Shops are open 10AM to 5PM Pacific Time, Monday to Friday, closed
weekends.
JH MINT & Coin Shop, Grass Valley, CA -- our largest store, minimum $1500
to ship, USA shipping only, free shipping.
(530) 273-8175
Kerri: 530 273 -8822 silver_support3@hotmail.com
www.jhmint.com
Rocklin Coin Shop, CA -- 15 min north of Sacramento on HWY 80
www.rocklincoinshop.com
Mom's Silver Shop, Sacramento, CA
www.momssilvershop.com
3510 Auburn Blvd., #12
Sacramento, CA 95821
(916) 481 5656
(Mom will ship with no minimum order size, and overseas, and take credit
cards and paypal.)
Oakland Silver and Gold
www.oaklandsilverandgold.com
3929 Piedmont Ave.,
Oakland, CA 94611
osg2010@gmail.com
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