© Thunder Road Report - 6 September 2010
on to rare earths, China (which supplies more than 95% of world production) has slashed export quotas.
Rare earths elements are used in iPods, mobile phones, laptops and clean technology (e.g. wind turbines
and hybrid cars) as well as being critical to the US military. This could set the scene for a very serious tradewar between China and US, but the potential implications remain poorly appreciated. Rare earth prices
have spiked and the share prices of rare earth mining companies are responding. I’ve added Great WesternMinerals and a few shares in Avalon Rare Metals since the last TRR.
Silver – the Call to Arms
The Achilles Heel of the Cartel in the gold and silver markets (i.e. the US government, Federal Reserve andtheir bullion banking agents) is almost certainly PHYSICAL SILVER BULLION. Just like gold, silver is money(as well as being a vital industrial metal) - which scares the Cartel to death and is behind its attempts tosuppress the price going back more than a decade. Gold and silver not only compete with at currency but
also against Government bonds – the market for which is developing into one of the biggest bubbles in the
history of nance. That assertion is refuted by the majority, which is another classic indication of a bubble.
But back to silver:
Unlike gold, silver is no longer held as part of central bank reserves to any signicant extent;
76% of newly mined silver is consumed in non-investment applications (industrial, photography, etc)
thus further depleting above ground bullion stocks,
US banks (primarily the one whose name begins with the letter between i and k) are short 21.8% of allof the outstanding contracts on the COMEX exchange in New York. These 26,855 contracts amount to134.3m oz of silver or 4,176 tonnes. This is equivalent to 19% of all the silver mined in 2009 and 15%of total silver production if we include the recycling of scrap. Let’s think about that a different way. If
one or two banks were long the entire annual oil output of Saudi Arabia and Norway combined, it would
be equivalent to 15% of the world’s 2009 oil production. Can you imagine the outcry from the public
and politicians about market rigging, greedy speculators pushing up the price of gasoline, etc? In terms
of wheat, it would be the same as a position in 100 MILLION tonnes, equal to the entire aggregateproduction of agricultural giants the US and France;
Silver forms little or none of the Yamashita hoard of treasure which is hidden/protected in the Philippines
to the best of my knowledge; and
Because silver is such a small market, if “big money” started to accumulate physical silver in an aggressive
way, the Cartel could get into serious trouble. This seems to be what’s happening.The silver price is just under US$20/oz so almost everybody (“tramps like us”) can afford at least a smallamount. I’ve bought a bit more physical silver from ATS Bullion which has an ofce next to the Savoy Hotelin London (you can just phone them up and take some id when you go to pick up your silver). I even had topay more than a 20% premium to spot plus VAT, but that’s going to be irrelevant if I’m right and the silverprice goes to US$50-100/oz (note: I deliberately avoid silver and gold ETFs). This is part of my “CascadingDefensive Strategy” in gold and silver, i.e. have a bit of physical CLOSE BY, buy some ALLOCATED bullionat closer to the screen price (e.g. from the likes of BullionVault or goldmoney.com – which can also storeit overseas) and have some exposure to the EQUITIES, both the MAJOR producers and a few JUNIOR
exploration plays.Buying some physical silver is an opportunity to send a powerful message to the corrupt interventionists
in the Cartel.