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In my last article, What
if They Returned to the Gold Standard? December 10, 2008 I noted that
gold should go to $40,750/oz. if the $10.5 trillion of U.S. Bonds were to be
backed by gold. For those who noticed, that was an understatement.
That figure, of
course, would not include the following, which would all, also, need to be
backed by U.S. gold:
1. M3, money in
the US banks. Add $15 trillion.
2. Unfunded liabilities, such as social security obligations. Add
$75 trillion.
3. Corporate bonds and Mortgages. Add $25 trillion.
4. New government bail out give-a-way obligations. Add $8.5 or 10
trillion.
Total: $110 trillion.
This, of course,
would not include all derivative bets, which are like bonds. These
would include futures on bonds, options on bonds, leveraged currency bets,
etc. That would include another $1000 trillion or so, but let's not
include that.
So, gold could go
well beyond $440,000/oz., or $4 million/oz. if you include all derivatives.
But let's be
conservative, and assume that society is not ready for such a drastic change,
and let's be optimistic for our oppressors who print paper dollars, and
assume that the current system will die a slow death that lasts 20 years as
it takes a whole new generation to adapt to change. After all, the gold
bear market lasted 21-28 years, and the new bull market may well last another
20-30.
Most people don't
understand how compounding works.
Let's assume that it
takes 20 years for gold to reach $40,000/oz. from $800. How much of an
increase per year would it take, on average, to get there? The compound
interest calculators answer.
http://www.smartmoney.com/compoundcalc/
All we need to do, is
input the three figures.
Starting amount: $800
Ending amount: $40,000
Duration: 20 years
Out pops the
compounded gains, or interest rate: 21.6%
So, as you can see,
this is not unrealistic.
After all, gold
already rose from $250 in 2001 to $1000 by 2008, over 7 years, which is an
annual increase of 21.9%.
The other problem
would be:
Start with $800
End with $440,000
Duration: 30 years
Annual gain: 23.41%
But here's why I call
this the "invisible grind". Most people assume I'm talking
about a parabolic spike in the price. Yes, on a regular chart, it looks
like that; unless you are looking at a log chart, in which case, it's a
straight line.
But on a daily basis,
you can also break that down, to determine the daily compounded gains!
Note, with gold
trading 5 days/week, there are 261 trading days in a year.
(365 x 5/7 = 260)
So, to determine the
daily gains, again, you only need input 3 numbers:
Initial investment: 1
Final investment: 1.23 (representing the annual interest rate of 23%)
Duration: 260 years (but in this case, the years, stand for days)
The annualized rate
(which is the DAILY GAIN) 0.08%!
So, look. I
will always say, if you ask me, "Jason, which direction will gold (or
silver) go?", I'll guess one way: UP! And the answer
for how much is "A LOT". And the answer for when is
"now".
But the real story is
that the daily gains are almost infinitesimal, unnoticeable, or invisible.
What is a 0.08% gain,
on a daily basis?
$800 x 1.00.08 =
$800.64
Do you understand a
bit more now? There is no need to watch the daily price of gold. You
will not see it move from $800 to $440,000, over a period of 30 years, on a
daily basis.
The gold price could
gain less than 1/10 of 1% per day, and take us there quite easily.
On that basis,
manipulators can move the gold price down on 2/3 of the days, and let it
spike up on 1/3 of the days, and convince most people who have an attention
span of 15 minutes that gold was in a bear market during the entire bull
market!
So, the common
question of the day is, "Jason, if you know gold is headed to $40,000
and beyond, and silver is headed to $8000 and beyond, then why are you
selling out?"
These people have no
comprehension or understanding of compounding gains.
There are two ways to
make it.
A. Hold silver.
B. Deal
silver.
If I deal silver, I
can make more than holding silver, but I need to make more than 0.08% per
day, and I need to avoid default risk.
What if it takes me a
week to replace my silver? Easy problem. Again, 3 numbers on the
compound interest calculator:
Initial investment:
$1000
Rate of return: 0.08%
Years invested (standing for days) = 7
Final amount: 1006.
So, at $10.00/oz., if
it takes me a week to turn my silver, I need to make $.06 per oz., after all
costs, shipping, minting, packaging, labor, taxes, etc. just to break even
with holding silver, but that still does not compensate for the default risk,
which is an unknown quantity!
And if it takes me 14
days, I need to make $.11/oz. (after all costs), minimum, to break even.
If if the turn around
time is 28 days, I need to make $.23/oz.! (after all costs), minimum, to
break even.
And if the turn
around time is 60 days, I need to make $.49/oz.! (after all costs), minimum, to
break even.
And if the mint tells
me it's a 5 month manufacturing time, I need to make $1.27/oz! (after all
costs), minimum, to break even.
(All of that, is with
an assumption of silver at $10/oz. Costs double if silver doubles,
naturally.)
And none of that is
enough compensation for the default risk. Mints with a 5 month delay
should not be trusted.
And again, for people who noticed, there will be a LOT more inflation over
the next 20-30 years, so, again, those are all understatements.
But some people
understand, that a fast turn around time, in a bull market for metals, is
worth quite a lot.
This is why I believe
it is an advantage to you, for me to pre-package, and ship SAME DAY as your
wire comes in, at my silver auctions at www.seekbullion.com. I hope to
encourage you to buy silver from me, and to encourage you to become silver
dealers yourselves.
So many people in
other nations ask me where they can get silver. I usually suggest
a jeweler, who may know some bulk suppliers. But more often, they don't
seem to recognize that the lack of dealers is the gift of a monopoly on a
territory, in a sea of people with no comprehension of money.
My current plan is to
be able to offer silver on an increasingly regular basis, daily, in size, so
that I can become a regular supplier for dealers.
I'm still working on
speeding up my own turn around time, and processing ability, to
facilitate your success in acquiring silver on a timely basis.
After all, time is
money.
Sincerely,
Jason
Hommel
www.find-your-local-coin-shop.com
www.silverstockreport.com
www.miningpedia.com
www.bibleprophesy.org
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