SILVER - NONE TO BE HAD - ANYWHERE AT ANY PRICE

by Il_Bagattel, Sunday, August 17, 2008, 10:49

Murphy just put out a rare short Sunday Midas report.

August 16 - Gold $786 - Silver $12.81

Emails On Retail Physical Silver Shortage Astounding

"Many shall be restored that now are fallen and many Shall fall that now are in honor." … HORACE - Ars Poetica

It is fascinating to receive so many emails regarding the retail physical shortage. I thought you might like to read some of them; therefore this impromptu MIDAS, with little commentary from me except to say this is quite extraordinary. Never seen anything like it to this degree before. It makes no sense to see silver where it is and it is hard for me to imagine the price staying anywhere near these levels. I would think there will be an inordinant amount of investors/traders standing for delivery of the September silver contract should the price not rise sharply from present levels.

Silver…
Bill,
Anybody going to the Kitco site to buy silver must be scratching their heads in disbelief. First they have to look at this dreadful chart:

Change -1.28 -9.05%
30DayChg -5.91 -31.49%

Next they get the privilege of getting berated by Jon Nadler for being so stupid as to think gold or silver is a hedge against crisis and inflationary times. Then, if they are really persistent, they must wade through this disclaimer (in bright red no less) contradicting all Kitco editorial content:

IMPORTANT:Due to the volatility of the market, we are experiencing a significant increase in the volume of shipments going out. Although Kitco and our depositories are working hard to stay on top of this, you may experience a delay in your order being processed by our vault, and sent out to you. We apologize for any inconvenience this may cause, and appreciate your patience and understanding.

And lastly, if they are STILL going to buy some Silver Eagles from this "fine" establishment just to be a contrarian they find this:

*Silver Eagle 1 oz (Currently out of Stock)

The convoluted message from Kitco: silver is a stupid idea, it's practically worthless, and getting more worthless every day. However orders are overwhelming our business, therefore you'll get your stuff when we're damn well ready, which may be a hell of a long time. And by the way,. forget about Silver Eagles, there's none available at ANY price.

Buying into Kitco's lunacy TRULY requires the tin-foil hat. It's amazing how Rube Goldberg couldn't have dreamed up a more complicated explanation for the most simple thought: PAPER GOLD AND SILVER ARE RIGGED, AND THE END GAME IS HERE. If there were gold medals for extreme morons Jon Nadler would be shattering Michael Phelps' Olympic run.
James Mc

Bill
Jon Nadler is quoted in this marketwatch article.

http://www.marketwatch.com/news/story/golds-resilient-properties-lie-question/story.aspx?guid=%7B9119A72C%2D0727%2D4413%2D8BBB%2D631D324E4CE6%7D

QUOTE

"The speculative allure [gold] had presented to index and hedge funds has all but dissipated," said Jon Nadler, a senior analyst at Kitco Bullion Dealers. Oil, wheat, rice and a host of base and precious metals had climbed "clearly beyond the scope of their fundamentals and reached distorted levels," said Nadler. And "many were well aware that when the oil surge ... would come to a halt or reverse course, that it would carry with it part or all of the group," he said. "This, in fact, has happened -- however, it unfolded a lot quicker than conventional wisdom expected."

Nadler likens the event to someone piercing a balloon with a pin and expecting a "slow, orderly deflation."

END

Now isn't that interesting? Precious metals prices had risen "clearly beyond the scope of their fundamentals and reached distorted levels".!! In the face of collapsing metals prices the US mint first of all suspends minting of silver eagles and then yesterday suspends minting of gold eagles. And Kitco itself last night posted this notice

QUOTE

IMPORTANT NEW NOTICE: Due to market volatility and higher demand in the entire industry, we are anticipating delays in supply of all bullion products. Please note that you can continue to place orders and prices will be guaranteed; however, cancellation fees will still be applicable regardless of the length of the delay. Consequently once inventory is received there may also be delays in processing and shipping by our vaults.

END

Kitco can not meet demand!! Jason Hommel noted in a release yesterday that most of the major bullion dealers are completely out of stock. North America can not supply bullion to the market. Yet Nadler laughingly claims the price of gold had reached "distorted levels"! Gold and silver are about the only commodities that have not yet surpassed their previous all time highs on an inflation adjusted basis. That is very strange for the two metals that are the classical inflation barometers! Silver hasn't even come close to its nominal all time high! And now we find that demand is so high that all stocks of dealers have been depleted. Miners keep reporting losses because the price of the metal has not risen as fast as their costs. When something becomes scarce that is in high demand its price should go sky high not crater well below a recent high that is barley 1/3 of its all time inflation adjusted high price.

There are only two things that are distorted…Jon Nadler's thinking and the ridiculously low manipulated price.

The physical market is about to call the Cartel's bluff.
Cheers
Adrian
Dave from Denver…

Just got off the phone with a good friend of mine who works with a private investor who looks to invest in small banks. He said Bank United in south Florida has a high likelihood of being taken over by the FDIC in the next couple of weeks.
I took the liberty of looking at BKUNA's lastest SEC filings. Interestingly, two days ago they filed a 10QNT, which is a notice that they won't be filing their 10Q for 6/30/08 anytime soon.
It gets better. As of 3/31/08 BKUNA has $10.5 billion in mortgages. 30% of that is in south FLA, the rest of the mortgages are in the rest of FLA, CA, AZ, Ill, NJ and VA. 75% of their mortgages are either stated income, verified assets OR non-document. Hmmm....of the $10.5 billion in mortgage, 1 billion are pay option ARMs and another 6.3 billion are monthly reset ARMs....recall, the monthy reset ARMs were used by people who couldn't make payments under a regular ARM and were hoping to use home appreciation to refi their way to bliss.
Based on write-offs, BKUNA as of the end of March had its entire mortgage portfolio marked at 98 cents on the dollar. Based on the above mortgage profile, I think it's safe to say that maybe a fair market to market would take that portfolio down to 70 cents, which would necessitate $3 billion in write-offs.
Given that, as of 3/31/08, BKUNA's book value was $708 million, and given that BKUNA has delayed its latest 10Q, it's safe to say BKUNA is insolvent. Be interesting to see if they become another casualty of Bank Failure Friday.

***

Bill H:

To all; 5 months ago a shortage in silver began. It was explained that there was so much buying at $20 by the public that the shelves were emptying. Now under $13 an ounce we have evidence that the shortages are intensifying. Something is wrong here. Silver has dropped like a rock for 4 weeks now. Shouldn't that mean that there has been huge selling and the market should be flooded with silver? Physical Gold and Silver have gone into hiding for the time being. Physical supply has dried up and won't be for sale until we see much higher prices. This is the "two tier" market I wrote about last year. It has arrived. The government sponsored "cabal" has sold and sold and sold paper contracts for both Gold and Silver. This has depressed the prices artificially. The result is less supply. I believe many mining companies may be slowing deliveries and individuals are not selling to dealers because they deem the prices to low. Funny result we are getting here. The COMEX [paper futures market] is portraying a panic out of Gold and Silver while in the physical market, supply of any real size cannot be found at these prices. In a "real" market, a selling panic would result in a glut of product. We clearly don't have that now! This has the potential of destroying the credibility of the US futures markets plain and simple. The way I learned economics, when there is a shortage of something, anything, the price rises to ration remaining supply. But since we are living Alice in Wonderland, I guess I have my glasses on backwards. Below are a some thoughts by Jason Hommel on the shortages. Regards, Bill H.

http://silverstockreport.com/2008/shortagesmean.html

Bill,
Just got back from the local coin merchant - only 1/2 bag of junk available... They had not yet heard about the gold Eagle sales suspension. It seems that there is a growing disconnect between paper and physical markets - something you have noted for a while.

It seem to be an ideal time for the "small" buyers out there to get as much physical as possible (coins, take delivery, etc) at these fire-sale prices and finally fracture the paper markets.

If 10,000 contracts stood for delivery in the near month, that's about all it would take. I am moving my liquid assets into contracts with the intent of taking delivery. Jim Sinclair has the right idea - time to take them on..!
JB in TN

In the 8/15 Midas, Ed Wener had a question about silver availability and pricing. This has been my experience purchasing physical silver and gold.

I have made most of my physical silver and gold purchases from Blanchard & Co. out of New Orleans. I believe that Blanchard is in the top 2 for being the largest bullion and rare coin dealer in the US. The bulk of my physical purchases were around the lows in silver and gold around 2001 and 2002.

In 2007, I made a couple purchases from a local dealer in the Chicago area. When the local dealer completely ran out of silver around March of 2008, I contacted Blanchard again. The local dealer did not have any 100 oz bars and did not know when he would receive any.

On 3/24/08, I purchased a 100 oz bar from Blanchard when the price of silver was $16.80/oz. My total cost including shipping, handling, and insurance was $1,803.54. I received the bar within 2 weeks or so of placing the order. On 5/28/08, I bought some 1 oz American Eagles with the price of silver at $17.30/oz. My total cost including shipping, handling, and insurance was $19.95/oz which was a premium of $2.65/oz. I received my silver in 2 weeks or so and Blanchard offered so sell me as much silver as I wanted. This was during the time when many people were having a hard time finding physical silver. I can't say enough good things about Blanchard.

The availability of silver and gold has recently changed - drastically. I had been waiting for the bad guys to completely pummel silver, so I could place a bigger than normal order to purchase physical silver. The manipulators did not let me down. On Aug. 15, I called Blanchard to place an order to purchase 1 oz silver American Eagles. I was initially told they were out. My response - how can you be out when the last time I called I could purchase as much silver as I wanted? I resigned myself to purchasing silver in bar form. When talking to another representative at Blanchard, I advised that I really wanted to purchase the 1 oz silver American Eagles. Blanchard advised that they could sell 1 oz silver Eagles to me for a total price of $3.01/oz over spot, but it would take 4 to 6 weeks to get the silver. I placed my order on Friday. As the silver shortage intensifies, I agree with Ted Butler that the US mint may stop producing these 1 oz silver American Eagles and the premium for these coins will eventually be much higher than $3.00/oz.

To answer Ed Wener's question - Yes, the spread between paper and physical is increasing and the time for delivery is increasing. Welcome to the intensifying silver shortage.

Maybe we could have a contest for cafe members. The contest would be to guess the date the US mint permanently stops making 1 oz silver American Eagles. Temporary suspensions don't count. Maybe the sponsor of the contest could be Sprott Asset Management who was just featured in Barron's. Eric Sprott indicated that his funds contain 25% gold and silver bullion. All that silver bullion has got to be weighing him down.
Take Care,
Paul

Hi Bill,
Hope you're having a restful weekend wherever you are. As Friday's Midas came off the presses, I was at my local coin shop having a long conversation with the owner. He's been in business for 30 years and I've known him for ten. I feel that he shared more private info with me than he would with the average Joe, so I'm not going to name his business out of respect for his privacy.
He had just learned about the Mint ceasing production of Eagles, which he heard was because blanks weren't available. And the decision he made may telegraph what will be unfolding in the markets next... who knows?

This guy has no bullion for sale, but he DOES have inventory. Hundreds of ounces of Au, and substantial Ag in bars. However, he decided to cease all sales indefinitely, until he knows that he'll be able to re-order what he sells.

-He has no idea when that will be, of course. He confirmed what so many of your contributors have also said, that wholesalers will take an order and accept the money, but will not give a date for delivery in full, because of backlogs and BS and gods know what else. This dealer will not place an order under those conditions as he will not let his cash be used to enable more short-term paper manipulation of the physical market.

-He told me that for the first time in 30 years, if a customer walked in with $100k to spend on bullion, he'd have to spend a few days working the phones and buying 'five or ten' coins here and there until he could fill the order. In other words, he's trying to talk other people into selling a little, because he will not sell from his own tranche.

-He had one mint box of silver eagles left, which he won't split, and it's $5 over spot, which equalled $18/oz. yesterday afternoon. He has no other silver for sale save for a little 90% coin.

-He didn't quite acknowledge that two separate price tiers are operating in silver, but he fully understands that the paper manipulations have distorted the physical market beyond belief. I think he knows that day may not be far off.

-He was pondering making a big buy in palladium, since the price has come down so much and since just about everything else is sold-out. (Any Midas comments on palladium?)

-He said that his numismatic business is steady and it will carry him until the bullion availability issue resolves.

My head is spinning at the thought of what could come down the pike this week. Is the Big Foot finally going to come off the Big Spring? Or, is the Big Foot going to come down even harder on Our Necks?
Regards,
-Ray

My bullion dealer here in Edmonton did a record day in silver on Friday...only to have to cancel all orders because his suppliers (in both Canada and the US) would no longer take orders for silver because THERE WAS NONE TO BE HAD...anywhere, and at any price!!!

He says that as of Monday, the retail silver market will be at a total stand still all across North America.

Right now he can get gold maple leafs...but that's all. And the Royal Canadian Mint is no longer taking larger order for silver maple leafs.

I note that the US Mint sales in gold eagles have taken a huge jump. We're only half way through August and the mint has already sold 100,000 gold eagles and buffaloes.

Note the notice that just went up at Kitco. At Tulving and A-Mark the cupboards are bare as well.

I hope you have your stash already...because it doesn't sound as if there's going to be any more coming...as the retail pipeline is empty and will be impossible to refill.

My bullion dealer and I discussed this very thing last year, and to see it actually come to pass is truly frightening.

Even if the price of silver dropped to $5 next week, it wouldn't matter, no one is selling and everyone now wants to buy...but the cupboard is bare.

I guess that's why gold sales are skyrocketing.

We live in interesting times.
Ed Steer

Pot Pourri....

Bill,
When you look at these comparisons, you realize just how identical things are. Moreover, every one of these indices/commodities are at their most deeply oversold levels in at least three years. Of course, between May/June 2006 and July/August 2008, the small stocks continued to decline while the larger ones held their own (at least most of them).
Does this mean we are at the bottom? If not, then any semblance of free markets is truly gone, as supply/demand fundamentals in the real world are raging.
Andy
CRB Index:
May/June 2006 -22%
July/August 2008 -21%

HUI:
May/June 2006 -33%
July/August 2008 -35%

XAU:
May/June 2006 -33%
July/August 2008 -36%

Gold:
May/June 2006 -25%
July/August 2008 -25%

Silver:
May/June 2006 -39%
July/August 2008 -42%

TSX-Venture:
May/June 2006 -30%
July/August 2008 -29%
And, the dollar's increase:
May/June 2006 +5%
July/August 2008 +7%

***

Bill
http://www.businessweek.com/bwdaily/dnflash/content/aug2008/db20080815_021990.htm?chan=top+news_top+news+index_news+%2B+analysis

QUOTE

Despite the recent softening of oil prices, the U.S. could be looking at double-digit inflation as early as 2009

by John K. Castle

Growing evidence suggests American consumers, businesspeople, and political leaders should all be bracing for double-digit inflation, probably as early as 2009.

The relative price stability of the past 15 years is giving way to worsening inflation, despite the recent softening of oil prices.

END
Cheers
Adrian

15:35 Pimco's Bill Gross says the rally in the dollar is more due to a weak Europe and the UK

-- CNBC
The rally in the dollar is not attributable to a strong US economy, and Gross is not a believer in the US dollar longer-term. Gross says the US deficit will increase to $700B. Housing prices continue to decline and no one knows where the bottom is. As housing prices decline, financials need to raise more capital, which increases interest rates and stretches risk premiums, perpetuating the cycle.
* * * * *
15:31 Pimco's Bill Gross believes Q3 will be fine -- CNBC
Gross says Q3 will be helped by technical adjustments with inventory and continued strong trade, but that 4Q08 and 1Q09 "do not look good." Gross says a lot depends on housing prices; to the extent housing prices continue to go down the financial system delevers. Gross believes inflation should come down in 6 months and says the economy needs dramatic government action next year.
* * * * *

GATA BE IN IT TO WIN IT!

MIDAS

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