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I
apologize in advance that this essay is entirely without humor, completely
sober, and deadly serious.
As I write on Sunday evening, Feb. 20th, silver prices are up another 40
cents to $33.10, another 30 year high, going back to the previous high of $50
from Jan. 1980. In the last two trading days, last Thursday and Friday,
silver prices increased about a dollar per day.
What's
going on?
As I
read on the blogs, about 53,000 silver contracts for 5000 oz. each are
nearing the first delivery day on Feb. 28th. At that time, each
contract must be fully funded to await delivery in the following 30 days, or
sold before then. By the way, 53k x 5k = 265 million oz.
http://tfmetalsreport.blogspot.com/2011/02/wow.html
The
crazy thing is that the four COMEX approved warehouses have only about 100
million oz. of silver in them. So, in essence, a default looms.
Will
this be it? If so, what will happen?
Usually,
all but a very few contracts roll over to the next months. The futures
contract holders rarely stand for delivery, as in their view it is too
difficult, and too costly; they are in this game for the leverage. They
usually only put down 10% of the money, so that if silver gains another 10%
in price, they double their investment quickly. And if silver moves
down 10%, they lose everything!
But
here's the kicker. COMEX just raised margin requirements 50% on Friday,
meaning that the longs had to put up something probably like 15% instead of
the usual 10%. (I have no idea of the real figures, as I have never
traded futures, I have never had a futures broker, and don't know where to go
for that data.) This means that the longs were not scared out of their
positions, as the silver price went up, not down, as the manipulators had
intended.
What
I do know is that usually, the majority of futures contracts stand about 3
months away from delivery. But not now.
Tonight,
53,000 contracts are looming for either close out, or they will stand for
delivery. Out of about 150,000 to 200,000 contracts!
Harvey
says 150,000 contracts in open interest.
http://harveyorgan.blogspot.com/
321gold.com
says 200,000 contracts in open interest.
http://www.321gold.com/cot_silver.html
The current situation will be resolved in 8 days, and again, in another
30 days after that. Both deadlines are worth watching closely.
Either
way, this situation presents several problems.
Clearly,
if the longs stand for delivery of 265 million oz., when there are only 100
million oz. in the warehouses, there will be a short squeeze, and the price
can go ballistic to the upside, perhaps prices could go up by 5 times higher
in a few days.
However
the longs don't seem to realize that the shorts can cap the price by several
other manipulative methods. They can deliver paper cash, or SLV shares
as well. The shorts and COMEX can also limit total physical silver
deliveries to as little as 1.5 million ounces to any individual, or 7.5
million ounces total, if my memory of the rules serves. If they do
that, the shorts can delay a short squeeze at the COMEX.
But
this would create another problem.
A
cash settlement, or settlement in SLV shares, or a limit on physical silver
deliveries, would be recognized as a default, or a "failure to
deliver".
If
any such kind of default would take place, it could cause a run on any
remaining silver at any other location, such as directly at the refineries,
or bullion wholesalers, or bullion dealers like myself.
I
hope no such default takes place, as I don't want to go out of business for a
few days, or a few weeks, or a few months, while I wait for my suppliers to
get re-stocked.
In
any event, I think it's important to realize several fundamentals.
1.
The dollar itself -- is fraud.
2. Silver futures contracts -- are fraud.
3. Fractional reserve banking -- is fraud.
4. Fractional reserve silver selling -- is fraud.
5. The nature of paper money and all frauds is that they tend to
collapse rather suddenly, with little warning, especially when their ability
to pay debts is called into question.
6. Argentina maintained a peg of their peso to the dollar, and it
lasted until they could no longer make interest payments in dollars.
Then, their peso collapsed in value nearly 75% overnight. Even
Americans, with American dollars, in American banks (in Argentina) had
their dollars forcibly converted into pesos, and their ability to withdraw
money severely limited.
7. The same thing can happen to the dollar.
8. Silver prices must be seen to have the potential to explode by about
a factor of 4-10, literally overnight. This means we might see silver
prices at about $33/oz. on one day, and silver prices from $130 to $330/oz.
the next day.
If
that happens, I might close up the JH MINT for anywhere from an hour to a day
or so, until I can guarantee a source of silver from my suppliers.
I
will likely be able to remain in business though, because if there is a price
quote, it means silver is available at such prices.
The
most likely course is that the paper traders continue their game of
"chicken". Both sides will swerve at the last moment and
avoid a collision. Prices will likely go up to about $35 to maybe as
high as $40 next month.
We
will likely have another record sales of silver bars and coins.
The
US mint will likely have another record of sales of 1 oz. American Eagle
silver coins. They might run out for a week at a time, again.
We
will likely have plenty of silver available at about 6% over spot, while
all the physical silver ETF's trade at about a 8-12% premium over
"spot" prices.
But
then again, you never know. I can predict that the busses will likely
run on time, and I will likely be right, until they don't. Better
order silver now, while you still can.
My greatest fear is that silver will run out. When silver runs out,
people will buy other things to protect the value of their dollars, such as
food. If people start buying up food, in amounts of up to $100,000,
food prices will soar, and that will cause food prices to exceed the values
that most people can afford, and then, most people will begin to
starve. The beauty of gold and silver is that you cannot eat them, and
thus, there is no such thing as a price that is "too high" of
a price for gold and silver. My wife and I stocked up on food this
weekend at COSTCO. We spent only $700, the least we have spent in
months. We filled up the back of our Ford Excursion. You can
see what problems would be created if wealthy people begain to buy 50 to 100
truckloads of food at a time, in the event that silver became unavailable.
Further
links for further study:
The
Silver Institute -- for silver statistics
www.silverinstitute.org
Eric
Sprott (a billionaire) is very well informed. The 3 men he listed, Ted
Butler, Dave Morgan and Jason Hommel are among the smartest guys in the room
when it comes to silver.
http://marcfaberchannel.blogspot.com/2011/01/david-morgan-interviews-eric-sprott-1.html
ECB
emergency lending jump persists
Traders ponder whether spike is result of bank error or renewed stress
http://www.marketwatch.com/story/ecb-emergency-overnight-lending-jump-persists-2011-02-18?dist=beforebell
CPM
Validates Imminent Comprehensive Silver Shortage Predictions
http://blog.ml-implode.com/2011/02/cpm-validates-imminent-comprehensive-silver-shortage-predictions/
$500
Silver, Max Keiser Explains His Price Target -- 19 February 2011
http://www.youtube.com/watch?v=Ab5u2rysOfQ
Bill
Murphy: "Silver can double in a week, the price is held down with
derivatives!"
May 11, 2010 (When silver was priced at $20/oz.)
http://www.youtube.com/watch?v=4J7x3xcToeQ
Why
no talk of $32,567/oz ? by Jason Hommel, Jan 2, 2003
http://www.silverstockreport.com/essays/Why_no_talk_of_32567_oz_-.html
Disclaimer:
I am a bullion dealer. I sell silver and gold for a living. I'm
not trying to cause any sort of panic buying. I believe it is rational
and logical to purchase silver, and I have advocated buying silver since
2003. I have predicted a default in gold and silver metals futures
contracts since 2002, after the palladium default of 2001, and it has not yet
happened. I believe in God, honest weights and measures, and honest
money. I believe men will prosper far more when they follow God's laws
to use honest money in commerce, and avoid all kinds of futures
contracts.
I'm
proud to say that my teachings from the Bible on avoiding futures contracts
have inspired a world-class programmer to create a new computer programming
language that avoids the mistake of making futures contracts, which avoids
creating problems in the programming world.
http://copute.com/dev/docs/Copute/ref/intro.html
Further,
http://www.oneoverspot.com/ continues to
thrive as a place to buy and sell silver and gold.
=====
I strongly advise you to take possession of real gold and silver, at anywhere
near today's prices, while you still can. The fundamentals indicate
rising prices for decades to come, and a major price spike can happen at any
time.
Follow me on facebook!
http://www.facebook.com/jason.hommel
Or Youtube!
http://www.youtube.com/user/bibleprophesy
JH MINT & Coin Shop, Grass Valley, CA -- minimum order $5000 for free
shipping, USA shipping only.
Open 10AM to 5PM Pacific Time, Monday to Friday, closed weekends and bank
holidays. (Also Closed from Dec. 25th to Jan 1st)
www.jhmint.com
(530) 273-8175
Kerri handles internet phone orders:
kerri.jhmint@yahoo.com
(530) 273-8822
Sincerely,
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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