Midas yesterday - Bill H. on silver

To all; I mentioned last week that I would write about Silver and why I perceive it has greater leverage than Gold bullion. Here are a few thoughts. First, Silver is trading at a historically very low level versus Gold, ie. it takes about 75 ounces of silver to purchase 1 ounce of Gold. When the Constitution was penned, our founders wrote about a 15-1 ratio. Obviously many things have changed in 200 plus years, but since then the ratio has traded between less than 10 and more than 85. For many, many years the ratio traded at 15 to 1 and 30. Even at 30 to 1, Silver will outperform Gold by a better than 2 to 1 margin.

Another plus for Silver is that there are very few "pure Silver mines" in operation today, the bulk of Silver production comes as a byproduct of other industrial metals such as zinc, lead, and copper. I am not a rocket scientist but I do suspect it will be years before the industrial complex rights itself and demand for these base metals regains a strong footing again. The point here is this, Silver supply should begin to decrease because demand for the base metals has dried up and production has slowed, thus less Silver will be produced as a byproduct.

Gold will surely in my opinion be bid to levels where only banks or central banks will be able to buy in any size [if available]. The next best thing, and actually the only "affordable life boat" will be Silver. Yes I know, Silver is very heavy and cumbersome to lug around, but that is because it is under priced by multiples even if the banking system were to hold together and we have blue skies to eternity. I have read many great pieces by Ted Butler, David Morgan, and Jason Hommel as to the merits of Silver, and they all include the above reasons plus the short position, new medical and industrial uses etc.. I agree with it all, however, I think the bottom line will boil down to sheer numbers.

The biggest plus for Silver in my opinion is this, Silver is "poor man's Gold". Not an earth shattering concept, but one that I think will explode Silver exponentially because of demand from the common man. As you all know, I think the banking system worldwide has a roughly 100% chance of collapsing, the next logical step if I am correct is a form of "barter" for a short period until the monetary system is revamped. Leading up to and during this time period is when I believe Silver will explode because the "commoners" will seek safe haven in metal. The bulk of the world's labor force cannot afford even one ounce of Gold, while I believe the many may be able to afford 1, 10, 20, or even maybe even 50 Silver ounces. That's a lot of ounces given there are roughly 6 billion souls on earth!

The fact that there are roughly 6 billion people on earth whom in my opinion will shortly be scurrying to safety, cannot possibly have their demand satisfied by the production of less than 1 billion ounces of Silver per year. Talk about a loaded game of musical chairs! 1 chair for every 6 players? Pretty poor odds. I know that not everyone on earth can even come close to having the ability to purchase even one ounce, however, how many of these 6 billion people can afford to buy 10, 100, or 1,000, not to mention 10,000 ounces or more? Maybe it would be better to grab a "musical" lawn chair and hunker down before the game even begins. Or maybe it would be better to buy a whole bunch of musical lawn chairs since we already know there aren't enough to go around while the music is still playing. Can you imagine how much lawn chairs will be worth to those without one when the music stops? The greatest transfer of wealth in history is about to take place, best to view this while sitting down! Regards, Bill H.