BEST OF JIM COOK

March 8, 2007

MAKING THE MOST OF TED

BUTLER’S PRICE PREDICTIONS

Everyone should strive to acquire and own at least 10,000 ounces of silver. The goal is to make a million dollars. The best place to keep it is in a home safe. A big old business safe or a modern gun safe are both fine. You can get the old style safes for cheap, sometimes just for the cost of moving. Specialty safe movers in every city can get it into your house for a few hundred dollars. This is the best way to hold a large quantity of silver.

A good mix of your 10,000 ounces would be 7 bags of 90% silver coins, 2,000 Silver Eagles, 20 one-hundred ounce bars, 50 ten ounce bars and 500 Morgan and Peace silver dollars. That comes to approximately ten thousand ounces and gives you a good diversification of the most popular silver items. You don’t have to buy it all at once. You can acquire it over a few months, but you shouldn’t wait too long. Ted Butler’s contention that the price will explode whenever short covering begins in earnest means that you want to be early and not late.

When you keep silver at home in your safe, you have numerous advantages. Most importantly, you own it outright. You don’t have to worry about leverage gone haywire and margin calls from big price swings. No company can go bankrupt and cheat you out of it. You have anonymity and secrecy because nobody knows you own it. Furthermore, you’re less tempted to sell when you have it in your possession and have carefully accumulated it. With paper you can rarely resist taking a profit too soon, especially with a broker chewing on your ear urging you to sell. Furthermore, you’re helping your own cause by taking silver off the market.

The hard question becomes, when do you sell? We know that Ted Butler has been right about a lot of things during the past five years. With that kind of record, it’s likely that he will be right about a number of things in the future. He says the current equilibrium price for silver is at least $30 an ounce. Today’s price is held down by an oversized short position and futures paper trading. Were this to change, the price would soar to a high multiple of today’s price. He argues that short sellers will have to cover when physical silver dries up at current low prices. The physical market will overcome the paper market. That could cause the price to rise to $100 an ounce or more. Then a whole series of painful events should unfold. Along with short covering in the futures market will come massive short covering (buying) by bogus storage programs, including big foreign banks, brokerage firms, mints and mining companies, all of whom don’t really own the silver they’ve sold. Mr. Butler also argues that industries that use silver will likely panic in a silver shortage and attempt to hoard big supplies that will ensure their future production. Then there’s the possibility that rising prices will attract an additional army of new investors.