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Jim Cook



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
November 22, 2010
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I have decided to include interviews that have been done on the RuffonomicsU teleconferences. There is valuable fundamental information that you should either have as new information or as a review.

Jim Cook, owner of Investment Rarities was a guest on June 8, 2010. I was out of town, so David Wolf did the interview.

HJR INTRO: I have recommended Investment Rarities since the late ‘70s. Like me, Jim Cook has had his business ups and downs, but he has been very dependable in delivering metals to Ruff Times subscribers. He has one of the biggest coin and bullion dealerships in America, and has written a fascinating novel called “Full Faith and Credit.” I recommend him because I know he is trustworthy. He isn’t the cheapest coin dealer around, but runs his business on a sound basis and will be there if you need him. If honesty and dependability is what you are looking for, Investment Rarities is a good place to go.

DW: Investment Rarities, Inc. began business in the early ‘70s, as Howard mentioned, as a precious metals company. At that time there was very little interest in gold and silver. Within a few years the company’s timing and advice proved to be accurate, and a long period of dramatic growth ensued. They are now one of the dominant gold and silver companies in America. IRI (Investment Rarities, Inc.) adheres to the principle of physical delivery. Service, quality and integrity underlie the company’s operating philosophy. Consequence, the company has sold and delivered over $2 billion in coins and bullion. Welcome Jim.

JC: Thank you for those kind words.

DW: Investment Rarities has always believed in physical delivery, which is a concept of no leverage. When you invest in precious metals, why is it so important to actually take physical delivery vs. looking at alternatives such as ETFs, etc.

JC: The record of people who purchase silver on margin, or leverage, is not good at all. Over the long term, they lose the money they have put into silver. When you buy the physical metal and take it into your possession (store it in a home safe or a bank safety-deposit box), you are far less likely to sell it on a short-term price move. In other words, it lends itself to a long-term hold. For the last ten years, long-term has worked to people’s benefit. I suspect that will be the case in the future; I think we have a pretty good chance of a pretty good bump up soon.

DW: If someone were to buy shares of an ETF rather than taking actual delivery of the metal. What is the relationship of the ETF shares to the actual shares of the asset?

JC: You are supposed to have one ounce of silver for each share. However, there is a pretty good likelihood that right now they are short 10 to 20 million ounces. Also the silver is stored overseas; not within the U.S. There are a lot of disadvantages to not holding silver. I have personally owned ETFs. I got a $1.50 move, and got out. The tendency is to short-term trade with a vehicle like the ETF.

You usually lose your shirt with margin. I could just relate one horrible scenario after another with financial bloodbaths for so many people over the years. You can’t beat physical silver, holding it in your possession. It lends itself to the “humble approach.” You aren’t trying to outsmart the market by trading in and out, you are holding for a long term gain. To be honest with you, the things I’ve made money on in my life are things I held for a long time.

DW: We have an email question from Frank: Our SLV, PPLT, and GDXJ (all ETFs). Are they safe? Mr. Cook just confirmed that he likes the physical possession, long-term hold of the metals.

JC: I have so many calls over the years with sob-stories about the money they lost buying silver on margin. In the futures market on the COMEX, you are up against the big boys who have the ability to maneuver the market. Ninety percent of the trades by small investors turn out to be a loss. You just don’t have a chance against the sharp shooters.

DW: I thought it would be useful to take a technical look at gold and silver from a logical entry point and look forward from there. How would you characterize the trend of supply and demand of gold and silver over the next 20 or 30 years?

JC: I need to contrast for you the difference between gold and silver in terms of supply and demand. All the gold that has ever been mined in history, including the last 20 years, is still with us, above ground. In other words, it has been mined and it hasn’t been used up.

With silver, it’s the dead opposite. Almost all the silver mined in history has been used up by industry. In the last 20 years, I would say that most of the silver mined has gone to investment or industrial demand. Now we have both pressures on the supply – a huge increase in investment demand and a steady and growing demand for silver for industrial purposes.

DW: Is there a way to get a handle on the time frame? Is there a trend that you can identify over a 20 or 30 year period.

JC: Starting about 2000, we started to see some movement in gold and silver. Silver was around $4 and is now over $20. Gold was down to about $270 an ounce, and it’s about $1250 now (June 8, 2010). So there has been a dramatic increase in the price of both gold and silver, as well as other precious metals in the past ten years. It has been a tremendous ride. Here again, people who have held for the long term have done better holding precious metals than any other asset I am aware of. It certainly beat real estate or stocks.

DW: Are their particular indexes that correlate closely with the price of metals?

JC: One thing they talk about is whether the dollar has a bearing on gold and silver. Lately I think that has proven not to be the case. You can’t necessarily see a correlation between the gold and silver and the dollar.
There are a phenomenal number of bullish factors that have come to play in silver in the last few years. They are pressuring it upward in price. For me personally I try to operate on the basis of the securities law. If I say something is going to go up, I have to say in the same breath, it could go down. So I will talk about me personally. I see silver, in the fairly near term, to have the potential of being a real fortune builder. I believe it can make me a wealthy man. To that end, I have invested heavily in silver. That’s where I’m coming from. I think silver has a spectacular future and a litany of bullish factors that are really quite remarkable.

DW: Many say the price of silver is indeed headed higher, and there are many factors coming together to create this perfect storm. Pending short covering and the shortage of the metal, give us the flavor for this perfect storm; the key forces that will continue to drive the price upward.

JC: The first and most important thing is the huge short position that is held by one or more major banks. This dwarfs anything that has ever occurred in any other commodity. It is a short position of hundreds of millions that has to be resolved. In other words, it has to be covered – first of all because the Federal Commodities Trading Commission is taking under consideration the possibility of putting position limits which would mean that no entity could hold that large a position. In fact, it would be much less. I believe there is a strong likelihood that those limits will be invoked. If they are not, which would be a remote possibility, then an actual, physical shortage of silver would be close at hand.

Bear in mind I have Ted Butler, the world’s foremost silver analyst, as a paid consultant. I don’t think anyone who follows silver would disagree that Ted knows more about silver than anyone else on earth. These things I’m talking about, most of them I learned from him.

We have the short position that has to be resolved. We’ve got physical demand that is increasing and quite possibly we are on the eve of a shortage. I just mentioned the silver that is owed by the ETFs.

Another example is the Central Fund of Canada. I don’t have this first hand, but rumor has it that they have to wait four to six months to get the nine-million ounces they just purchased. We are seeing silver go in and out of the COMEX at a rate that is probably unprecedented.

Mind you, most of the silver, the 100-and-some million ounces in the COMEX is owned by people.  Investors own it and are not willing to sell it. The portion of it that is not owned by people seems to be going in and out of the COMEX faster than ever. That tells me the demand for silver is great.

In my business we had some periods of shortage. For example, American Eagles were difficult to get. The mints are making silver coins, but the demand, from time to time, seems to overwhelm them.

Throw in the huge population in Asia. Every refrigerator, automobile, TV, cell phone, computer – you name it – has got silver as a component. Everyone in those parts of the world, want to have a living standard on par with the U.S. That will take a lot of silver.

Add all these things up, and it’s pretty phenomenal. As I said, our company has moved a large percentage of our assets into silver.

DW: Give us a sense of the supply-side of the silver. What does the mining activity look like?

JC: Just recently the silver mines have started to make a profit. The profit is still quite meager, but there are a couple of things here.

One is that most of the silver is mined as a byproduct – 75 to 80 percent of it comes as a byproduct of lead, copper, zinc, and gold mining.

There are not a lot of mines that deal exclusively in silver. There are a number in South America and Mexico; they are some of the biggest silver producers. There are a number of silver mining companies that do exist, and are producing two to three to four million ounces per year.

These mining companies are starting to make a little money. As the price goes up, we will see more mining of silver. To ramp up big production of silver really takes a lot of time. I don’t think it is a negative factor for the price of silver. In 1980, we had a lot of scrap that was melted, so I don’t think there is that much scrap left out there. If we get $50, or $60 silver again, some will be melted, but it won’t fill the pipeline.

(I will continue this interview with Jim Cook in the next Ruff Times.)