In Jim Cook's Archive


A proven method for making a lot of money is to buy an asset when it’s being neglected by most investors.  That’s the case with silver today.  Money now pours into high priced stocks while silver rests at a cyclical low.  According to silver analyst Theodore Butler, you have a solid chance of seeing silver go up ten times from here.  Under any definition, that’s a fabulous run.

Unfortunately, the hardest thing for investors to do is to buy something at its lows.  It’s equally hard to sell a stock that has run up in price and generated a big profit. The ability to buy low and sell high escapes most people.  Every stock investor can look at their history and see innumerable times when they should have sold. I once bought a stock that went to $95 a share and watched it go back to zero.  Most of the time, the sale of an asset that has a big gain proves to be a smart move.

Why then didn’t we tell our clients to sell their silver at $45 an ounce? It would have been a big profit for most.  For one thing, we thought silver was going to go much higher.  Was that a mistake? We don’t think so.  There are circumstances so unique to silver that no matter what the price silver should not be sold until these issues are resolved.  We have relied on Mr. Butler’s bullish silver advice for a dozen years and we have confidence that his analysis will once again prove accurate.  His grasp of the factors that impact silver can only be described as phenomenal.  In the realm of silver, he is a genius.  He makes a solid case that silver must rise to levels that will be written about for centuries.

Central to Mr. Butler’s argument that silver prices must explode upward is his claim that silver has not traded in a free market for decades.  He has presented ironclad proof in data from the government’s Bank Participation Report and the CFTC’s weekly Traders Report that the price of silver has been artificially held down.  Because of these low prices the world’s silver supply has been used up by industry while new supplies from mining have been discouraged.  The outcome of these two trends means an inevitable shortage of one of the world’s most crucial metals.  Mr. Butler predicts a buying panic in silver as industrial users fight for supply.

Another factor unique to silver is that for years it has had an exorbitant short position when compared to any other commodity.  We know from Mr. Butler’s analysis that JPMorgan plays a huge role in silver pricing through this short position.  Pressure is currently ramping up against this big bank to close out its silver position. This short covering or buying should exert enormous upward pressure on the price.  Mr. Butler’s new book, How JPMorgan Manipulates and Controls the Gold and Silver Market, will help turn up the heat.  In addition, the Commodity Futures Trading Commission has just approved position limits which, when enforced, will eliminate the excessive short selling that suppresses the silver price.  Furthermore, the Volcker Rule in the Dodd-Frank law would bar the big banks from trading and speculating in the futures market.

When the day comes that big banks can no longer have a stranglehold on silver the price will be free.  Mr. Butler claims this will drive the price up a long way.  He further predicts that short covering on the part of pool accounts and big banks that have no real silver will further drive up prices. (Morgan Stanley once admitted in a court case they held no real silver in their vaults, even though they charged their customers storage fees.  Their defense was “everybody does it.”)

In addition to these powerful attributes unique to silver, there are numerous other bullish aspects. More industrial uses for silver are discovered every year.  No metal has such widespread usefulness and amazing characteristics mandatory in electronics, plastics and a multitude of industries. Its conductivity, reflectivity and malleability make it a superior element absolutely necessary to modern civilization.

Furthermore, silver’s low price has impaired mining of the metal.  In some cases production costs exceed the current price.  Exploration for new silver mines is essentially on hold and mid-sized producers are threatened with closure.  Low prices mean the supply of silver from mining will be reduced.  Only a much higher price will reinvigorate the silver miners.

If you need more reasons why selling silver could be a mistake then look at the potential for a collapse in the dollar’s purchasing power.  The Federal Reserve has piled monetary kindling to the sky and then poured gasoline on it.  If world markets throw a match on this hazard then an inflationary firestorm is assured.  However, Ted Butler says we don’t need an economic crisis to have silver go through the roof.   He claims that by holding the price of silver below free market levels for thirty years the silver supply has shrunk to perilously low levels. That in itself will cause a firestorm in silver.

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