(and Nothing is Safe but Silver and Gold! !)
Silver Stock Report
by Jason Hommel, March 5th, 2009
How can Oil be Money, when there’s no place to store it?
As recession saps demand, a world awash in oil
Money is money, because it is a great STORE OF VALUE.
Oil cannot be money, because it costs $75,000 to store oil in a supertanker for ONE DAY!
Paper is NOT money either, because it CANNOT be a store of value when it is being printed to excess, to bail out so many Banker’s unpayable debts.
Many people think OIL was the new money. Generations have thought this, and have taught this.
They think oil is money because of the total value of oil; let’s look at that compared to gold and silver.
The world consumes 85 million barrels of oil per day, as of 2006, according to
That, times 365 days/year x $40/barrel = million dollars spent on oil per year.
$1,241,000 million dollars = $1.2 trillion spent on oil in a year.
That’s close to the world annual oil production, because in oil, production and consumption are always nearly equal, because there’s no place to store oil.
World annual gold production is 80 million oz./year.
That, times $900 = million dollars worth of gold per year.
$72,000 million dollars of gold = $72 billion of gold produced in a year.
A rational mind, say, from a visitor from outer space, would conclude that the people of Earth had gone crazy for paper money, and forgotten the value of real money, gold.
All the gold produced in a year should be able to buy far more than all the oil produced in a year, not the other way around.
As paper money continues to crash, and as oil proves to be a horrible store of value in a dying socialist oriented world economy, the gold to oil ratio is in need of a severe change.
Silver, of course, will fare even better, due to the scarcity of silver, in my opinion.
Today, I read that Richard Russell thought that the value of the Dow has been cut in half from about 14000 to 7000. But the dollar is a horrible measure.
If we use gold, we see that the Dow/Gold ratio peaked at about 50, and is now at about 7, and is likely headed to about 1. So far, from 50 to 7, the DOW is down about 86%. To further go from 7 to 1, the DOW would have to lose about another 85% in the future, for a total loss of about 98% vs. gold.
Historically, the Dow/Gold ratio returns to about 1.
So, when the Dow was about 12,000, and gold was about $250, the ratio peaked at 50. Now, at 7000 Dow, and $900 gold, it’s been quite a change. But wait until we hit 3000/3000, or maybe 2000 or maybe 4000 for each.
Amazing. I wrote that last night. Today, I just read Miles Franklin. He just said the same thing. My respect for Miles Franklin grows more and more, and I’ve never heard any complaints about them.
I just read that the Dow will never go to zero. (“Never go to zero” is said of silver and gold). That may be true of the DOW, because as companies go bankrupt, they get replaced! Stocks can still lose 98% to 100% of their value, and yes, “go to zero” as they go bankrupt.
Are stocks over valued compared to silver? Many bank stocks remain valued in far in excess of $1 billion dollars, which is the annual investor demand for silver. Just wait until most banks will be worth far less than the annual investor demand for silver. Silver will have to go up a lot compared to bank stocks still.
Oil is not safe. Stocks are not safe. Gold and silver are safe.
Housing is not safe.
Make the trade of a lifetime. Sell the house, and buy silver!
Total real estate in the U.S. is still valued at about $30 trillion, if down from $40 trillion. Total value of the world annual gold production is $72 billion, and total size of the silver investment market is $1 to $1.5 billion, maybe up to 100 million oz./year.
People thus cannot hope to sell silver to pay off a home mortgage. Individually maybe so. All of society? No.
Society cannot sell $1 billion to pay down $35 trillion in mortgages, just like I cannot sell an asset worth $1 to pay down a credit card debt of $35,000!
People ought to sell some of that real estate, for some real assets, like silver.
But oh, what a hard trade! So many obstacles!
People will complain, and say:
I can’t sell my house, it just went down!
I can’t buy silver, it just went up!
(As if they planned to catch the trade of all of human history right at the exact top and bottom all along!)
I can’t sell my house, I live in it! Where would I live?
(As if renting is not an option?!)
I can’t sell my house, I have no equity left!
(As if they are going to wait until they owe far more than they do today?!)
I can’t sell my house, I’d have to pay capital gains taxes!
(At least the people with no equity won’t have to pay taxes on non-gains, but which is it going to be?!)
I can’t sell my house, my wife won’t let me!
(Who is in charge again?)
I can’t sell my house, it’s been on the market for over a year!
(And that means it will go up, or down?)
I can’t sell my house, nobody will buy it!
(Well, are you asking too much?)
I can’t sell my house, the market is dead!
(A real dead market is silver. Look at silver! Often 1-5 dealers in a large city?! What if there were that few real estate agents? Let me predict, when there are more coin shops than realtors in the phone book, then sell your silver for real estate!)
I can’t buy silver, where would I buy it, and where would I store it?
(Hey, anyone can buy at www.seekbullion.com, and you can buy a safe anywhere!)
I can’t buy silver, they will just confiscate it anyway.
(Not if it’s in the safe!)
I can’t buy silver, the CFTC ignores the manipulation!
(That’s why it’s cheap, and a good investment!)
I can’t buy silver, the ETF probably does not have any silver!
(Please don’t buy the ETF.)
I can’t buy silver, none of the dealers have any! Wait. Oh. I see. I better sell that ?*&*! house!
Just so you know, I rented for a few years, in two different locations, when I could have bought a house, and I finally did buy a house as I had a child on the way, yes, an emotional reason. Yes, we had to move the silver a few times while renting. It was a bit of a pain. It was well worth it. And that was from when silver moved from $6 to $18. Imagine what’s coming. It will be well worth it.