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ROB-TV interviews Sprott Asset Management President John Embry
By Theodore Butler
Tuesday, September 7, 2004
www.InvestmentRarities.com
As foretold by the COTs and the market structure,
the buying orgy by the technical hedge funds
appears to be leading to indiscriminate tech fund
selling. The dealers appear to be harvesting the
tech funds once again. While it is difficult to
fathom the self-inflicted beating the tech funds
bring on themselves, it does create opportunity
and, ultimately, a low-risk buy point in silver.
What will be interesting to see is if the silver
mining companies take advantage of the
developing selloff and buy some real silver. My
feeling is that they will fail to take advantage,
once again, of a wonderful opportunity. In the
long run, of course, the price of silver will do
what it is destined to do, with or without the
support of the miners. But at least we will all be
able to look back and reflect on who did, or did
not, attempt to end the silver manipulation.
Hopefully, real silver investors will take
advantage of the developing selloff, even if the
miners don't step up to the plate.
I dodged Hurricane Frances by fleeing south to
the Florida Keys to stay with relatives. It proved
to be a good move. The eye of the hurricane passed
close to my residence in Jupiter. Meanwhile, the
Keys remained largely untouched.
I spent time talking over matters with my
brother-in-law, and we agreed, as long-time Florida
residents, that it was just a matter of time before we
were slammed with the "big one." Natural disasters,
particularly hurricanes, which come with some
warning, are emotional and force you to contemplate
the future. They test your preparedness and reaction
to difficult and changing circumstances. There is a
heavy responsibility when other family members
depend on your choices and preparedness.
I can't help but see the strong connection between
silver and hurricanes.
I thought I was prepared for Frances, having secured
hurricane shutters years ago. I had food and water
supplies, a full tank of gas, and a logical escape plan.
I felt I had things under control. But I was dumbfounded
by the complete lack of readiness by some of those
around me. Had not Mother Nature let us off fairly
gently, many thousand could have been overwhelmed.
The one lesson from the hurricane that rings loudly is
how quickly vital supplies can become unavailable.
Things that we take for granted and are always available
in abundant supply; gasoline, electricity, ice, food, and
even water disappear in the relative blink of an eye. One
storm and your daily existence is turned upside down.
Commodities and vital services that have never been
denied are suddenly unavailable.
It makes me think how silver could be much like gasoline
or ice or electricity after a major storm. It too could go
from relative abundance to no longer available in a jolt.
We could wake up one day and be without silver.
There are great similarities as to how things like ice and
gasoline suddenly become unavailable, and to how silver
could become unavailable. In our modern society, the
supply and distribution lines are thin. Most goods today
are produced and distributed in a just-in-time manner,
as opposed to holding big inventories, which protect
you in the event of an unforeseen emergency.
Since capital is tied up in those inventories, it's
advantageous to the bottom line to hold minimal
inventories.
The downside to this kind of distribution is that it
can be overwhelmed by disruptions and sudden surges
in demand. Then just-in-time breaks down and fails
miserably. A distribution interruption in gasoline
deliveries, coupled with a sudden desire by everyone
to fill up or top off their gas tanks results in long
lines and shortages. Panic can ensue.
While silver may not be needed by the average person
to sustain daily life, it is certainly needed by many
thousands of industrial consumers, whose corporate
life will suffer and die without a continuous supply. It
is these industrial consumers who will panic at the first
sign of supply disruption. Perhaps not all of them, but
certainly some of them. They will be just like the
people who panic when they can't get gasoline. Then,
as some users rush to secure adequate supplies of
silver to prevent shutting down their assembly lines,
other users will be further denied, causing the silver
panic to rapidly expand.
Nothing comes close to silver, as both a vital industrial
commodity and a precious metal recognized by the
masses. As the price escalates in an inventory panic,
people will be attracted by the price action to participate
in the price rally. This will add fuel to the fire. All that's
needed is a catalyst to get the move rolling. That's
where the analogy between silver and other vital
commodities really gets interesting. It doesn't take
a national catastrophe to cause a buying panic in
silver. That's because, unlike other vital commodities,
silver is already in a structural, ongoing deficit. Nothing
unforeseen need loom in silver, since what we already
can see is sufficient to set off the panic. With a
hurricane it is always "if," but with silver it is "when."
A buying panic in silver must eventually occur,
according to the law of supply and demand. That law
is right up there with Mother Nature in terms of being
an overpowering force. More demand than supply
means higher prices. If those higher prices are denied
due to an artificial manipulation, as they have been,
then the price reaction will be that much greater when
that manipulation is terminated.
Unlike the buying panic of gasoline caused by the
hurricane, the coming buying panic in silver will not be
confined to a state or region; it will be worldwide in
scope. That's because the forces that will cause the
silver price move cover the whole world. It won't be a
matter of shipping extra gasoline supplies to a number
of counties in Florida; it will involve shipping silver to
all corners of the globe.
The biggest difference between the buying panic in
gasoline or ice in Florida and the coming panic in
silver is that you buy gas or ice to consume, not to
profit. You don't make a profit by having your gas tank
full. The industrial users buy silver to consume, not to
profit, while the average person can make a profit by
buying and holding silver. That's the whole point.
Being adequately prepared, as far as gasoline and ice
are concerned, will make life easier in the short run.
Being adequately prepared with silver will make life
better in the long run. There are not many such
opportunities available.
My analogy with the hurricane is meant to show how
supplies of vital commodities can suddenly become
unavailable. Silver hasn't reached that point yet. The
law of supply and demand tells us that it will. A
commodity in a deficit must become unavailable at
some point, unless the price rises enough to slow
demand and increase supply. That is the great allure
and certainty in silver.
I believe you have a wonderful and unique opportunity
to profit from a coming buying panic in silver. That
buying panic will occur whether you buy or not. But
you can only maximize your profit if you are
positioned before that buying panic occurs. I think
a great lesson has been delivered by the events of
this hurricane. It is up to us whether we learn from
this lesson to prepare while we can. What has
always been available can suddenly become
unavailable.
Don't squander the opportunity to buy silver while
it's cheap and available. The silver market can undergo
dramatic changes in a flash.
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RECOMMENDED INTERNET SITES
FOR DAILY MONITORING OF GOLD
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NEWS AND ANALYSIS
Free sites:
http://www.cbs.marketwatch.com
http://www.capitalupdates.com/
http://www.silver-investor.com
http://www.thebulliondesk.com/
http://www.goldismoney.info/index.html
http://www.minersmanual.com/minernews.html
http://www.a1-guide-to-gold-investments.com/euro-vs-dollar.html
http://www.investmentrarities.com
http://www.kuik.com/KH/KH.html
(Korelin Business Report -- audio)
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http://www.plata.com.mx/plata/plata/english.htm
(In English)
Subscription site:
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Eagle Ranch discussion site:
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Ted Butler silver commentary archive:
http://www.investmentrarities.com/
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COIN AND PRECIOUS METALS DEALERS
WHO HAVE SUPPORTED GATA
AND BEEN RECOMMENDED
BY OUR MEMBERS
Blanchard & Co. Inc.
909 Poydras St., Suite 1900
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www.USAGold.com
Michael Kosares, Proprietor
US (800) 869-5115
Canada 1-800-294-9462
European Union 00-800-2760-2760
Australia 0011-800-2760-2760
cpm@usagold.com
Colorado Gold
222 South 5th St.
Montrose, Colorado 81401
www.ColoradoGold.com
Don Stott, Proprietor
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Gold@gwe.net
El Dorado Discount Gold
Box 11296
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Harvey Gordin, President
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Mobile: 602-228-8203
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Investment Rarities Inc.
7850 Metro Parkway
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Greg Westgaard, Sales Manager
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178 West Service Road
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Toll Free:1-877-775-4826
Fax: 518-298-3457
and
620 Cathcart, Suite 900
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Canada
Toll-free:1-800-363-7053
Fax: 514-875-6484
http://www.kitco.com
Lee Certified Coins
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454 Daniel Webster Highway
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Ed Lee, Proprietor
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3015 Ottawa Ave. South
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1-800-822-8080 / 952-929-1129
fax: 952-925-0143
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Contacts: David Schectman,
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Missouri Coin Co.
11742 Manchester Road
St. Louis, MO 63131-4614
info@mocoin.com
314-965-9797
1-800-280-9797
http://www.mocoin.com
Resource Consultants Inc.
6139 South Rural Road
Suite 103
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Pat Gorman, Proprietor
1-800-494-4149, 480-820-5877
Metalguys@aol.com
Swiss America Trading Corp.
15018 North Tatum Blvd.
Phoenix, Arizona 85032
http://www.swissamerica.com
Dr. Fred I. Goldstein, Senior Broker
1-800-BUY-COIN
FiGoldstein@swissamerica.com
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