02/07/11 Tampa, Florida – James Cook of InvestmentRarities.com reminds us, in his “Market Update” newsletter, that the silver inventory held above ground totals 1.4 billion ounces, and that annual industrial use of silver is 900 million ounces, so that a year and half’s worth of silver exists, “although a third of it is destined for industrial consumption,” which has been increasing its use of silver by 18% in 2010.
And it surely will be used in industrial consumption, because as Mr. Cook says, “it’s hard to fathom all the bullish aspects credited to silver. You have a rare metal used in so many important industrial applications as to be termed miraculous,” so much so that “the billions of ounces mined over 2,000 years are gone forever.”
In fact, I am considering raising money to launch a Discovery Channel special, which will be a revealing new documentary that blows the lid off the explosive situation in silver, beginning with how things would have been worse a long time ago if the Neanderthals had invented electrical generation and a distribution network, both silver-consuming, 100,000 years ago.
And ditto those Renaissance hotshots who everybody thinks are so hot, but couldn’t even come up with a good cell-phone, or how Thomas Edison can invent a light bulb and the phonograph, but not take the logical next step of inventing the CD and CD player, which would have produced much better sound quality than those stupid, scratchy, tinny wax cylinders of his.
Now, as interesting as all this is, it is not enough to enthrall us because we have such short attention spans, but as soon as we say, “Bah! Show me how to make money on it!” and reach for the remote control with which to change channels, our ears prick up in sudden rapt attention when he says, “The disappearance of this hoard should have sent the price to much higher levels. It didn’t.”
This seemed so odd that Theodore Butler went to “track down the reason” and, as I understand it, discovered the gigantic short futures position in silver, and all of that slimy, illegal rigging of the silver futures markets, and by extension, all the rigged markets, and all of it made possible only because the foul Federal Reserve created the excess money to finance it all! Hahahaha!
Of course, rigged markets are nothing new, and again our interest wanes, and soon we are beginning to think of pizza, and our stomachs gurgle, “BurrRRRrrRRrrRRp!”
This was unfortunate, because while we were distracted, we almost missed the whole point, which is making a lot of money without working. And on that subject, the aforementioned Theodore Butler writes that JP Morgan, apparently the biggest naked short-seller of silver futures and thus the biggest price suppressor, looks like it has decided to get out of the business of depressing the price of silver by creating and selling so much “paper silver” futures out of thin air, and has unexpectedly “covered roughly 4,000 contracts in the past month and 8,000 contracts in the last two months, the equivalent of 40 million ounces” of silver.
Familiar with the explosive results of suppressed prices that stop being suppressed, I am beside myself in Greedy Mogambo Glee (GMG) in anticipation of silver shooting to the moon, and I am humming the tune “We’re in the money! We’re in the money! We got a lot of what it takes to get along!”
Mr. Butler, who is much more professional than I, calmly and cautiously opines that “This holds profoundly bullish implications for the future of silver prices,” which may have something to do with the fact that covering a naked short position when the price of silver is rising means taking a loss, and, “In the history of the silver manipulation going back to 1983, never has the big concentrated silver short ever covered shorts on rising silver prices.”
I am always impressed with the use of the word “never,” probably because of that time when I was young and full of hormones, when I asked Debra Sue, the hottest girl in the tenth grade and who knew it, too, to go out with me, but she pretended not to hear me, but who told her friend Jessica, who told her friend Mary, who told her boyfriend Bob, who was my friend, who told me that Debra Sue said she would never – never! – go out with me because she thinks I am “icky.”
Sure enough, she never did go out with me! Or even acknowledge my existence, for that matter, except to once say to me, in the hallway outside of the chemistry lab, “Get out of my way, creep!”
That girls think I was creepy is not interesting, not surprising to anybody, but probably the most interesting fact about silver is that it is “used in tiny amounts in its multitude of applications. This makes much of its usage insensitive to price.”
If you are not sure what being “insensitive to price” means, imagine that you are the CEO of a company manufacturing Mogambo Hair-Growing Machines (MHGM) under license from Mogambo Interstellar Enterprises (MIE).
In the course of production, you use one ten-thousandth of a cent of silver per unit, meaning that you use 10 cents worth of silver a day to make a full day’s run of 100,000 units, most of which are defective because my design is bad and I insist that you use the cheapest and shoddiest of materials and labor so as to keep profit margins high enough to make the most money on the front-end before people find out what a worthless rip-off my stupid hair-growing machine really is, and people stop buying the damned things because word gets around that they don’t work.
In my defense, the business plan looked good on paper, but my lack of ethics as the price of greed is neither here nor there, and the point is that you are “insensitive to price” if the price of silver doubles to 20 cents a day. “Ho-hum,” you would say, unconcerned about such a trifle.
And you don’t care if the price triples to 30 cents a day, either, as would be evidenced by another bored “ho-hum” were you even told of this trifling news.
Ditto if the price quadruples to 40 cents a day, or quintuples to 50 cents a day.
And you don’t even care if the price of silver goes up by a thousand-fold to cost you $100 per day, even though there will plenty of people who will care if the price of silver is $29,000 an ounce!
And now with China, a third of the world’s population is going to want electrical and electronic things that all must have silver in them, insensitive to price as those things are, the upper end on the price of silver is so hard to imagine that I don’t even try, and I just buy it now while the price is still ludicrously low.
Whee! This investing stuff is easy!
The Mogambo Guru
for The Daily Reckoning
The Mogambo Guru
Richard Daughty (Mogambo Guru) is general partner and COO for Smith Consultant Group, serving the financial and medical communities, and the writer/publisher of the Mogambo Guru economic newsletter, an avocational exercise to better heap disrespect on those who desperately deserve it. The Mogambo Guru is quoted frequently in Barron's, The Daily Reckoning , and other fine publications. For podcasts featuring the Mogambo, click here.
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Thank you Mogambo, for giving us a simple explanation of what “insensitive to price” means as far as its relation to manufacturers/producers and the price of silver.
JMRs worldwide gain wisdom each and every passing day from the teachings of The Magnificent Marvel Mogambo.
All Hail Mogambo!
i like silver, too. but when i read about how much silver is above ground, i ALWAYz think: how do they know???
plus, he may be RIGHT, but he doesn’t KNOW he’s right, about the 1.4 billion.
next time you’re out staggering around on the weekend, or in the morning on the way to work, mogambo, try this: stagger into a bookstore or a library and look at a copy of the “redbook” which is a numismatic publication which lists the wt. and # of all coins ever issued by the US, except for the current year. MINT figures.
for example: 1899 dimes: 846 proof; 19, 580,000 p mint; 2,650,000 O mint; and 5, 168,000 outa san fran. total: 27,398,848 @ .o7234 oz silver/ coin =1,982,032 oz. now most barbers are worn badly, so take off 20% = abt 1.6 million ounces. now up and down we go. 1963, over 2 billion dimes issued. i think if you spend an hour or two with this book, you will see for yourself how close his est. is, and this is only ONE country which used silver. still, we hafta estimate, b/c many of the coins have been re-melted. i think there is abt 3x ted’s est. many countries + tableware + jewelry.
not to mention bullets.
however, he does NOT know how much silver is “above ground”. mr. cook makes vague statements, too. they may be true also, but there is no way to know, like we know how many houses sold in a town last month.
frankly, i’m not sure it matters. i think it is important to know how many ounces one has, and why.
i think if you spend a few hours trying to “do the math” you will get a ‘feeling’ about these figures. try it and see what happens? i HOPE there’s a lot more! b/c then, it would make decent money.
$33 and rising fast. Technicals are pointing to $50 soon and new all-time highs.