WEEKLY COMMENTARY

July 27, 2005

Rather than an article written by Ted Butler, we’re running an article about Ted Butler.

SILVER SAVANT

By James R. Cook

In the summer of 2000 the gold business was slow. I was searching for something new that my customers could make money on. I needed a product that would reenergize the company and make us profitable again. A stockbroker told me about a guy in Florida who wrote about silver. His name was Ted Butler. I called him on the phone. He’d heard of my company. He pointed me to a website where his essays were listed. I read them all and felt the guy had some interesting and fresh insights. Maybe I could do something with him.

I needed to check him out. We began to talk on the phone daily, and as we did my confidence grew. I was concerned that he might be a nut. He talked about manipulation in the market, which can be a tip-off to a kook. I’ve had my share of screwballs call me in the past thirty years. It appeared that Butler was sane. I doubted what he said, but he made his claims in a legitimate way and they were somewhat believable.

At the time, I was a hard core gloom and doom guy that believed gold was the ultimate asset. I’d given up on silver in 1984 and switched the company’s emphasis to selling gold coins. The thing that impressed me about Butler was the thoroughness of his knowledge about silver. He knew the industrial story cold. He read Eastman Kodak’s annual statement cover to cover. He knew all the statistics on Penoles, the Mexican silver producer. From his intensive research, and years of experience in the futures market, he’d theorized a raft of startling conclusions about what was going on behind the scenes in the silver market.

I came to see he was a serious, conceptual thinker. He made sense and he wasn’t a loose cannon. More importantly, I decided he wasn’t a con man. Once I was certain about his character, I could move on to the next stage, which was testing the credibility of his silver thesis.

I questioned and challenged him a hundred times over the phone. He had a solid answer for everything. Some of what he said I couldn’t understand. When he talked about the leasing of silver, it was Greek to me. However, I finally decided to pay him a small sum for an article in our newsletter that talked about leasing. After it was mailed, a woman called me from a big eastern bank. She was in charge of precious metals leasing. She scorned me and the article. A few days later I arranged a conference call between her, Butler and myself. It sounded to me like he buried her.

Leasing was a big thing at the time, but nobody had ever focused any criticism on it. Ted Butler called leasing fraudulent, stupid and dangerous. Subsequently, it began to unravel. Mining companies scurried to unwind their hedges, and leasing began to peter out. These days you don’t hear much about it. Apparently Ted Butler was right on the money.

I started thinking more and more about switching the company’s sales emphasis to silver. The metal was absolutely dead in the physical market. At around four dollars an ounce, nobody wanted it. Bags of coins were being melted every day because there weren’t any retail buyers. All the bars or coins we bought back from customers who had purchased in the 1980 period, we were selling directly to the refinery.

Butler talked repeatedly of how we were using up silver and not replacing it. One of his most convincing arguments was the pending exhaustion of the U.S. government’s multi-billion ounce store of silver. It sounded reasonable and I was about half convinced. Then the government put out an announcement that they were totally out of silver and the U.S. mint would have to go into the open market to procure the metal for minting silver Eagles.

I began to discuss a permanent relationship. He wanted to remain independent, so we started talking about him working as a consultant for a monthly fee. We agreed on a sum and he began writing for our newsletter. It certainly seemed that silver had an interesting future. If our customers could profit with it, then we would prosper. It was a bit of a gamble, but Butler had convinced me that the profit opportunity in silver was substantial. He mentioned numbers that dazzled me. Still, I had my doubts.

Ted began to take potshots at the big banks and financial companies whose large short sales on the futures market depressed the price of silver. He claimed they were illegitimately making markets through outsized short sales. He started a letter writing campaign and a petition to the regulators. He turned the heat up on major short sellers. When he named AIG as the biggest silver manipulator, they seemed to rapidly exit the silver futures market. The hole they left may well have been the event that sparked silver’s rise from $4.00 to $8.00 an ounce. By closing out a massive short position through large purchases to cover, the price would certainly have gone up.

Ted moved on to pioneer other new, bullish information on silver. He debunked the story that digital cameras would eliminate silver usage in photography. He disclosed that the government’s geological data indicated there was less silver underground than any other metal. He focused attention on the Commitment of Traders reports as a reliable indicator of price movements in silver. He continued to ask how the price of silver could remain so cheap when the world was running low on it. He pointed fingers at the culprits responsible for negating the law of supply and demand. He showed clearly why silver had enormous potential.

As the years rolled by, I became convinced that he was indeed a silver guru. I started to accept his arguments and I began to believe in silver as never before. Ted didn’t base his case for silver on any of the reasons I used to endorse gold. He didn’t talk about the economy, inflation or gloom and doom. None of these reasons were going to be responsible for the silver price explosion he predicted.

I’ve come to see silver as an undervalued asset that must appreciate for a number of reasons outlined by Ted Butler. He predicts its price performance will be talked about for years to come. That’s great, but I also think it’s a mistake not to stress inflation as a reason to buy silver. The dollar is worth less than 10% of what it was worth 75 years ago. Inflation is clearly worsening. Everyone needs an asset to offset that loss of purchasing power in the dollar. To me, silver is the perfect long-term holding to make sure your retirement money doesn’t evaporate. Most people believe in stocks and real estate. But they are high in price. Silver looks cheap at today’s levels. Mr. Butler has convinced me that today’s bargain basement levels will not last, and silver will become more expensive. I buy it every month and wish I could buy more.

With Mr. Butler, we have someone who has made one brilliant call after another about future events in the silver market. He’s a seminal thinker on the metal. People who follow the precious metals are talking about him. He has developed a big following. He’s widely plagiarized and often quoted. His influence is widespread and growing by leaps and bounds. More and more people are buying silver because of him.

Now this soothsayer and analyst with a near flawless record of market calls argues that the price of silver must explode. He has suggested numbers so high they take your breath away. Mr. Butler, who clearly knows more about silver and the way the silver market works than anyone on earth, predicts price levels that can turn a small holding of silver into a fortune. Mr. Butler’s silver advice could be the best chance you’ll ever have for making a lot of money. His record stands on its own. He says buy physical silver and hold on to it for the long term. You can’t find a more powerful argument to own any other asset on earth.