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Jim Cook

 

RUNAWAY SOCIAL SYMPATHY

Every once in a while I switch the TV channel from Fox to CNBC to see what the liberals are saying.  After listening awhile I get a deep sense of hopelessness and foreboding for our country.  The most important thing for the left is giving money to people.  They are happy to see the growth of food stamps, disability payments, housing subsidies, free healthcare and all the other welfare benefits.  They utterly fail to see the damage it is doing to the recipients.  Whole cities that once flourished have deteriorated into rotting eyesores populated with shambling hulks of chemically dependent drones.  These people are no longer employable.  They have become incompetent and helpless and the liberals can’t see that it’s their doing.

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The Best of Jim Cook Archive

 
Best of Howard Ruff
April 26, 2011
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People will understand the upside of silver, especially compared to gold.

The average person can’t afford to buy gold, so it is most suitable for wealthy people for investment and central banks. With silver being so much cheaper, the average person can go to his local coin dealer and buy some.

The advantages of silver over gold as an inflation hedge are numerous and need to be
considered:

1) The silver market is much smaller, and it doesn’t take as much money moving into silver as an investment to move the market up. Silver has outperformed gold dramatically over the last few years, going from $3 an ounce to over $40 an ounce.
2) Silver is also a very important industrial metal with over 3,000 industrial uses.
3) The government has never seized silver, although they have seized gold. If that worries you (it doesn’t worry me much), you would feel safer with silver rather than gold.
4) The government actually has no stockpile of silver to unload. There is now more gold above ground than silver because of the silver industrial usage.
5) I look upon silver as money. Throughout history more silver has been used more for money than gold. Historically, silver coins became the  common denominator for money in more places and more times than gold.

If you are wealthy and can afford to buy some gold, be my guest. I think you will do just fine.
However, silver will outperform gold about three to one. When I receive income from my business, I set aside enough cash to take care of my normal business affairs because paper money is still a means of exchange, although it is no longer a store of value. As a means of exchange, you can conduct your normal affairs. If I have any left over, I go to my local coin dealer and buy silver.

What kind of silver should you buy? There are American silver eagles, junk silver, and
foreign silver coins that can be bought from any coin dealer, and they are also easy to sell. The price fluctuates not only daily, but hourly. So there is always a place you could sell it.

But why would you want to sell it if the government is still inflating the currency? Hang on to
your silver.

How far will silver go? Darned if I know; that’s above my pay grade. All I know is that we are in a bull market, and we ain’t seen nothin yet. I don’t expect it to retreat. When I buy silver, I
am just buying another form of money that I believe will prevail over paper.

Where will you keep it? Any place that thieves won’t be able to find it or get to it. Concealment is probably the best strategy. I wouldn’t keep it in my bank safe-deposit box, just in case the government decided to change its position on silver. Right now, silver is just treated as another commodity. The government is even manufacturing and selling silver 54 coins. But they have no stockpile, so they have to buy on the open market just like you do.

There are more people in the world who can afford to buy some silver than can afford to buy gold; thus, smaller volume will move the market up and up, and up.

Who cares about that? I don’t care if it goes up. I won’t sell it any time soon. This bull market will not end until the world changes its attitudes towards paper money. There is no sign of that.

Some day you might want to give it to your children or build your estate for them to inherit it.
They will thank you and call your name blessed.

Silver is a ubiquitous and essential industrial metal with literally thousands of uses, many of which are irreplaceable. This, plus sagging production, largely explains much of the reason for the disappearing inventories. Jim Cook, president of Investment Rarities (one of our recommended coin dealers, 1-800-328-1800), recently listed just a few of silver’s thousands of modern uses--many of which are counted in infinitesimal amounts per unit, but
multiplied by many millions of units, it’s thousands of tons of silver.

* Both rechargeable and disposable batteries are manufactured with silver alloys. Billions of silver oxide-zinc batteries are supplied to the world’s market yearly, including batteries for watches, cameras and small electronic devices, tools, and TV cameras.

* Steel bearings are often electroplated with high purity silver.

* Silver solder facilitates the joining of materials. Silver-brazing alloys are used in air conditioning, refrigeration, power distribution, automobiles and airplanes.

* Silver is of first importance to plumbers, appliance manufacturers, and electronics.

* Some chemical reactions use silver as a catalyst. Approximately 700 tons of silver are in
continuous use in the production of plastics, for example.

* Silver is necessary for producing soft plastics used in polyester and textiles. It is essential for producing adhesives, laminated resins for construction, plywood, and particleboard finishes.

* Silver is necessary for producing paper and electronic equipment, surface coatings, dinnerware, buttons, casings for appliances, handles and knobs, packaging materials, automotive parts, and electrical insulation materials.

* Silver is used for molded items, insulating handles for stoves, computers, electrical control
knobs, Mylar tape, and antifreeze.

* Silver is used in commemorative and proof coins, silverware, jewelry, and the decorative arts.

* Silver is the best electrical conductor of all metals and is used in fuses and ordinary household wall switches.

* The use of silver for motor controls is universal in the home, and is even a better conductor of electricity than copper. Every time you turn on a microwave oven, a dishwasher, washing machine, dryer or TV set, you activate a switch with silver contacts. All electrical appliances, timers, thermostats, and some pumps, use silver contacts. Silver is also used for circuit breakers. A typical washing machine requires 16 silver contacts. A fully-equipped automobile may have more than 40 silver-tipped switches.

* A transparent coating of silver is used on double-paned thermal windows.

* Silver ions in house frames help resist mold and mildew.

* Silver relays are used in automobile accessories, vacuum cleaners, electric drills, elevators, escalators, machine tools, locomotives, marine diesel engines and oil drilling motors. It is widely used for electrically-heated automobile windows and
conductive adhesives.

* The majority of computers use silver membrane switches. They are used for cable
television, telephones, microwave ovens, computer keyboards, and in prepaid-toll gizmos. Silver containing radio-frequency-identification devices will soon make an appearance embedded in credit cards and passports.

* Silver is used in circuit boards and is essential to electronics to control the operation of aircraft, car engines, electrical appliances, security systems, telecommunication networks, mobile telephones and TV receivers.

* Silver is used in windshields in General Motors all-purpose vehicles because it reflects some 70 percent of the solar energy. Every automobile produced in America has a silver ceramic line in the rear window to clear the frost and ice.

* Silver plating is used in Christmas tree ornaments, cutlery and hollow ware. Because it is
virtually 100 percent-reflective after polishing, it is used in mirrors and coating for glass, cellophane, and metals.

* Silver has a variety of uses in pharmaceuticals and is widely employed as a bactericide and algaecide. Silver sulfadiazine is the most powerful compound for burn treatment worldwide. Catheters impregnated with silver diazine eliminate bacteria. Silver is
increasingly being tapped for its bactericidal properties - from severe burns to wound-dressings to treating Legionnaire’s Disease.

* Silver compounds are providing doctors with powerful clinical treatments against antibiotic resistant bacteria. Silver ions have been used to purify drinking water and swimming pools for generations.

* One out of every seven pairs of prescription sunglasses incorporates silver.

* Silver-based photography has superior definition and low cost. Photography is still the
biggest consumer of silver. But is this changing with digital photography?

* Digital photography was considered by many to be a threat to old-fashioned film photography, as digital cameras became the camera of choice for millions of people. Ergo, physical silver use would supposedly decline in the film business, and be a
bearish factor for silver. At one time, Kodak was the world’s largest user of silver in manufacturing film. Their use of silver in every roll of film was touted as one reason for the
silver bull market of the ‘70s. There is a counterargument, and a counter counter argument.

* Much of the silver used in film is recycled and used again by the film companies. That is also true of the silver in medical x-rays.

* More than offsetting the above is the fact that silver is also used in glossy photographic print paper at Wal-Mart, Kmart, Costco, and other supermarkets for people to print out their digital photos. That paper is never recycled. One of my daughters informed me that with her digital camera, she takes 12 times as many pictures of her boys as she did with her old fashioned film camera, and she usually prints them.

* Regardless of the prevalence of digital cameras, the film companies will still sell one-billion rolls of film this year. I could go on and on, and I guess I already did, but these are all good reasons why our silver inventory is under assault. Silver could be turning into the supply/demand investment of the century.

Will the growing assault on silver inventories trigger a switch to some as-yet-unknown substitutes? In some cases, probably yes. Copper can do many of the things silver can do, but copper is rocketing up in price in a solid bull market and is becoming an increasingly expensive substitute.

 Usually, the amount of silver is so small in each individual unit that incorporated it, that it is only a small part of the cost of manufacturing all the units. Therefore, there is not enough incentive to substitute raw materials at these prices, and collectively, they add up to thousands of tons of silver.

Silver has an important monetary role, according to economic history.
Silver has been consistently used as money throughout history, even more than gold, but as I have said several times before, whenever paper money fails (every 70 years or so), the world is subsequently littered with useless paper currencies. That’s when silver is resurrected as money and comes back into its own.

For example, when the Chinese government fell at the end of World War II, they inflated the paper currency until it became distrusted, but almost like magic, silver and gold coins became the currency of choice all across that huge, primitive country. Everyone knew what an American silver dime was worth. This held true until the Communists imposed a
new fiat paper currency and enforced it with the heavy hand of totalitarian government.

You need some silver for insurance purposes because the dollar’s fate seems to be sealed and delivered by our present rate of internal monetary inflation. Whether it takes one year 10 years or 30 years, eventually the world will be littered with worthless paper dollars, and governments will be dragged kicking and screaming to a metals standard to back a new currency.

At some future time, silver coins will be minted again in massive quantities, and silver and gold will both reign triumphant over the world’s monetary system. I don’t know exactly how it will work, and probably nobody else does either. But for that reason, you should buy up to one-half bag of junk silver (pre- 1965 American dimes, quarters, and halves) for your
family, just for the silver content.

Silver always rises during gold bull markets, usually twice as far and fast as gold, but the
supply/demand situation (ETFs and jewelry and industrial usage) dwarfs all other reasons why silver will soar in price, perhaps much more than twice as
much as gold.

The government coffers are now empty. In the ‘70s, Jimmy Carter announced they would be dumping some of the gold at Fort Knox into the market to depress the price, because rising gold was considered an embarrassment to the government. This time, Uncle Sam can’t dump silver on the market to try to manipulate the price, or use their own inventory
to make silver coins, because they don’t have any. And they don’t have a good reason to do so.

One other supply/demand factor that really matters is that COMEX, (The New York Commodity Exchange) has a monster silver futures exposure. And trust me on this–for every “long” contract there is a “short” contract. Many of the longs have bought a
silver contract in the hopes that silver will be rising, and so will their contract. It can be settled either with a cash payment or by delivery of the physical metal. But a lot of the longs are silver users who need the metal. They have only bought the contracts for delivery and won’t settle for cash, because they need the metal.

Warren Buffet, the legendary investor, bought 139-million ounces of silver via futures contracts some years ago, and he demanded physical delivery. He had to sue to get it. When he sold it, and admitted he “sold too soon.” The shorts have sold silver they don’t have, assuming they will be able to buy it back at a lower price in the future and thereby profit handsomely.  They are pure speculators, betting that the price will
go down so they can buy it cheap. Steadily rising prices are their worst nightmare, and that’s just what they got.

The “longs” needing delivery are more dangerous than the shorts. Remember, for every long contract, there is a corresponding short. As silver has soared, shorting losses have mounted to billions of dollars.

I guess the short speculators never learn. Back in the 70’s, the zillionaire Hunt brothers tried to corner the silver market and drove the price from less than $2 to $50. Most of the governors of the COMEX were short, in effect betting against the Hunts. Their losses
mounted day by day, and as they became more and more insolvent, their need to cover their shorts was far beyond their financial means. Technically the COMEX should have been shut down (as many of the shorts were governors of the COMEX) but shutting
down the world’s most important commodity exchange was unthinkable.

Eventually they won the battle with the Hunts by, among other things, changing the rules to “liquidation only.” That’s when I decided to tell my subscribers to sell their silver at $35 an ounce, two weeks before the $50 top. When the elephants are fighting, we mice should scurry into the underbrush. Yes, it went to $50 for a few hours two weeks later, but close is good enough.

This is similar to where COMEX finds itself today. But this time, they are short so much silver that if they had to buy enough to cover all their shorts it could soak up as much as or more than 100 percent of all this year’s silver production.

Especially since many of the longs are users who need the physical silver for their industries and can’t just accept a cash settlement. Also, the short cash position is so dire, since their paper losses have mounted as silver has risen, that they may not have
enough money for a cash settlement.

Sooner or later, they will have to buy silver, and the stability price of silver could soon be above $100 an ounce (my best guess) in order to induce holders (you) to give up yours.
Silver is the investment of the century. It will move with gold, but much further, as I have already demonstrated. Over the last couple of years gold is up about 400 percent, and silver is up more than 1,300 percent. We will eventually look back at $40 silver as the bargain of the century.