Sunday, February 20, 2011

Silver Bullion Lease rates about to go parabolic

Backwardation + Blythe + lease rates = parabolic...Paging Blythe to the OFFICE, Blythe, the principal would like to see you again...


  1. I just hope we see a huge pop between now and may 1. another words Silver to 150..00 or more.

  2. Be aware, that overall markets may sell off causing a selling shit storm for our SLV and GLD...this may be even worse for Blythe now that I think about it, as people will line up at lower prices to find no physical left...hummmm, maybe I would welcome a market sell off? Opinions?

  3. LMBA SIFO rates also imploded into even greater negative territory on the 18th:

    18-Feb-11 -0.36000 -0.37000 -0.37000 -0.39600 -0.36800

  4. I think we are on a verge of a complete paper market meltdown. Anything that went up artificially due to the fed pimping and pumping will crash. Any quality stock that was naked shorted due the Fed's bullshit (ie, quality miners) will find their true value. Physical PM's will rocket. You will not be able to purchase any anywhere. Do not try to trade this. You will be traded out of your positions. Sit on your physical and your quality miners.

  5. Gentlemen, anything paper related will be in capitulation. If you don't have it in physical, quite frankly you don't have shit.

  6. I take it a potential sell off wouldn't happen until after Mar futures are settled. If this is focused short squeeze those doing the squeezing (WB?) would have to defend the price?

  7. Silver backwardation growing even as price rises: speculative targets based on 2008 LBMA backwardation: $37-42

    Dec 2008 LBMA backwardation:
    + Initial partial backwardation for 13 days.
    + Then no backwardation for 16 days. (rest?)
    + Then primary backwardation for 46 days.
    + The primary backwardation included full backwardation of 11 days with a max depth of -0.182 in the middle of the 11 days. Silver was up 5.6% at that point.
    + Price rose a total of 27% during the primary backwardation, including 14 days after the 12 month SIFO exited backwardation.
    January 2011 LBMA backwardation:
    + Initial partial backwardation for 8 days.
    + Then no backwardation for 6 days. (rest?)
    + Then primary(?) backwardation for 22 days so far.
    + The primary backwardation includes full backwardation of 6 days with a max depth of -0.386 so far. IF 2011 is a fractal of 2008, one could construe the current backwardation to be a higher frequency and amplitude. So far, there is 60% more price appreciation to date than 2008.
    + Price has risen 9% so far during the this (speculative) “primary backwardation”. A 27% rise implies $37/oz.
    + 27% + 60% more = 43% = $42/oz.

    + 2008′s 12 month SIFO line was above the all other months most of the time. Yet 2011′s 12 month SIFO line has been AT OR BELOW ALL OTHER MONTHS FOR THE PAST 6 DAYS.
    + Backwardation is occurring even though price is around 150% higher than 2008.


  8. Reading this superior blog here and other commentators have convinced me that when Silver blows up, and financial system collapses goes KABOOM along with it.

    I said when, not if.

    With a shaky bond market, real estate slowly collapsing like a balloon letting out air, debt at record levels, states in trouble, protests on the street...yeah we may be here.

    As we wonder what America was like on the day before Pearl Harbor, our children may look back on this next week the same way.

  9. if hedge funds start coming into silver then a sell off ain't coming. They will commit billions of dollars to this market. Then you have the Industrial users panic with billions more to stockpile silver to keep factories open.
    SGS.. we may not get a pullback.

  10. Well I just bothered to understand the above chart...nobody wants to lease metal to help Blythe make deliveries? So rates have to climb skyward....right?

  11. sierra_hpbt
    Silver panic scramble for metal with the general public and industry wanting at the same moment is a scary thought.....very...I would love to hear SGS's thoughts on this.

  12. "Silver panic scramble for metal with the general public and industry wanting at the same moment is a scary thought"

    I'm a silver bull. I tell my friends about it. My friends dont do shit about it. They want to see it go to $350 first before they buy (remember back to tech buuble). This is heard mentality. The sheep by the tops. When you hear of your bosses daughter, or your grandmothers crib partner, or your former dog walkers ex boyfriend buying, its time to sell.

  13. Jack
    and I think the banks will be overwhelmed on the paper side too.

  14. Also something to consider is the banks jumping to the long side to recoup what they lost on the short side.

  15. I don't think we can go down the road of QE2, 3 etc and simultaneously have a stock market crash. Not with the ongoing multi-billion weekly POMO. The Obama administration, and specifically Ben & Timmy can not possibly let the markets go down or they will get crussified by congress and the sheeple. So it's inflation at the cost of currency depreciation. The Fed's mandate is to fight deflation with every tool he has, and every other non-existant tool he can possibly imagine! The triggers for a market crash would not originate from the USA. They would originate from either a China inflationary collapse or a European debt collapse. China is currently propping up the small European countries from failing (i.e. recent Portugal bond purchase), and Europe won't crash so fast for other reasons - maybe in 1 or 2 or 3 years. China however, is in serious shit in 2011. The inflation is rising faster than they can increase interest rates. This is EXTREMELY positive for precious metals as evidenced by the recent Financial Times article.

    I am not suggesting there are no risks, on the contrary all the risks are getting MUCH bigger and accelerating (just look at what's happening in the middle east). 2 years ago we had internal US housing problems, leading to a financial crisis, leading to a banking crisis, which is now translating into sovereign crisis (small countries failing), which will soon turn into bigger countries failing, and eventually very large countries and even entire continents (i.e. Euro-zone).

    Silver and Gold rising, is the beginning of evidence of a global currency crisis. Note that while 8+ countries are protesting and experiencing civil revolutions, there was no fleeing into the US dollar for safety - THIS IS A FIRST!

    Also, I don't buy into the idea that silver will explode to $150 anytime soon, nor that COMEX running out of silver will result in any form of economic collapse. Central Banks don't view silver as a currency and currencies aren't currently backed by Silver, so silver simply can't cause that kind of catastrophy. If this event even comes to pass (and I'm highly skeptical that it would - simply because the powers that be can change the rules of the game overnight as they have been doing for the past few years), it would not be the first metal to have been drained out of Mercantile Exchanges. Read your history. Yes prices would skyrocket temporarily, but it wouldn't cause a broader market crash - sorry, I just don't see the links. If you do, maybe you can explain it in detail so I can connect the dots.

    PS. I'm long silver and have more than 50% of my portfolio in Silver, but let's keep it real folks.

  16. Silver surfer you raise a good point. Martin Armstrong says the same exact thing. great point.

  17. Silver is an industry-wide consumable resource. eg, ipods, computers, lights, photo, tools, medicine etc. Just the fact that in 1990 there was around 2 Billion ounces, and today there are about 2 million ounces is enough to send silver to the moon considering the ongoing uses required for all the rapid developing technology.
    Take that into consideration with the amount of exposure that the Banks are susceptible to (through derivatives/etf's) and you have your case for catastrophe.
    Additionally, Silver is a by-product of mining Gold, Copper etc.

    And for Benny, he is just postponing the inevitable; raise interest rates to prevent hyperinflation = fucked economy
    Keep printing to prolong the inevitable = fucked economy a little later.
    At least with the latter, there is still opportunity for people to prepare, and a chance for you to help someone help themselves.


    P.s I still find Blythe strangely attractive

  18. Silver Surfer: Good post.

    I am referring to the financial anaysis of Harvey Organ from yesterday and other days regarding silver. In the comments section of the link are more details over his equations. Here is the link:

    The huge rise in silver price has caught the silver bankers totally offside on the silver banking. The BIS data released in November ( shows that the G 10 bankers have collectively sold forwards and swaps to the tune of 4 billion oz and short naked calls for another 3 billion oz. The total, 7 billion oz represents 10 years of production. If you just do the forwards, then it is 7 years of annual silver production. Let us say the average cost of acquiring these derivatives and forwards equate to $15.00 for silver. Thus collectively the entire G10 bankers are feeling massive pain (losses) to the tune of:

    7 billion oz of silver( 32.30-12.00) = 7 billion x $17.30 = 121.1 billion dollars of losses.

    This is in a market of only 14 billion dollars. It begs the question to what economic need was this done.This is still off balance sheet.
    If you include only the forwards or swaps (the lending of actual metal to which nothing has come back yet) then the losses are:
    4 billion x 17.30 or 69 billion dollars.

    Regardless how you look at it, the bankers are in serious trouble with this huge rise in silver prices. I hope you understand the severity of the situation.

    He reports this will take the banks UNDER in his opinion. This would of course, destroy the banking system as we know it.

  19. SGS,
    I am enjoying your blog, with all its informed participants, and check it several times a day.

  20. "it would not be the first metal to have been drained out of Mercantile Exchanges"

    Agreed. But realize this. the Chinese now can buy metal. Indians now can buy Metal. Brazil now can buy metal. Add in half the world now realizes the shortages coming and can buy metal from a click of the mouse. It wasn't like that before, times have changed. Add in the fact as silver and gold escape velocity accelerates, remember the ramifications of the inverse correlation of the $US collapse.

    I dont think a broader market collapse is coming, but I am keeping a close eye on it, for if it does come, we will see more divergence of spot price vs. physical supply...EITHER WAY WE WILL PREVAIL

  21. An excellent point SGS. Online supplies of Gold and Silver could vanish over a weekend.

    What interesting times we live in.


    We never see the HYPERINFLATION PARBAOLIC MOVE when it finally comes upon us. The Romans didn't realize their empire was collapsing around them. They just felt all these different problems coming at them at one time.

    When the FIAT SYSTEM crumbles....I believe it will be like JOHN GAULTS, "THE DAY THE DOLLAR DIED". It will happen within a few days...and it will be over.

    When things head into an EXPONENTIAL continues and each passing day it moves even more exponentially. All of a sudden...its over and we are in a new world.

    I don't think this system has much time for all the NIMWITS like my friends who are holding dear to their 4.1K's....GOOD FRICKEN LUCK.

  23. Rising silver price will equate to more physical showing up. Back in 1980 people were lined up to sell their silver dining wares, coins and jewelry. There is a price level that will induce a similiar scenario it is probably $50+

  24. Will review your replies a bit later. I'm watching the educational 2008 financial crisis documentary "Inside Job" right now...


    DL it here:

  25. I was talking to a colleague in the US History department at IU and she made a great comment: "Do you think the people in 1932 would have said they were in a great depression? No, they didn't cal it that" Point taken: most people don't recognize the times they are in and have to be told what happened later.

    David Weidemer says in in his book "Aftershock" that the collapse begins with a failed Treasury auction. Did ZH say a few days ago that he Fed buys 70% of the auction now? But if the Fed is already the main buyer, then can there be an auction fail?

    I would love for someone to point me to a good explanation of POMO, Fed auctions, T-bills so I can understand how Ben is creating all this money and how it is pumping the markets.

  26. Agree with Silver Surfer.

  27. "Rising silver price will equate to more physical showing up. Back in 1980 people were lined up to sell their silver dining wares, coins and jewelry. There is a price level that will induce a similiar scenario it is probably $50+ "

    Please explain what $50 1980 silver supply has anything to do with our current situation when people line up with sterling forks and shit, thanks.

  28. Since the markets are closed tomorrow, what kind of pm activity do you think we will see? The LBMA will be open, but won't trading be thin and give Blythe some time to "influence" the market?

  29. Silverwood,
    Read Ted Butlers answer to physical silver coming out when the price hits 50.00. Yes there will be some uninformed idiots who will sell at 50.00. But I think silver will scream In price that some may say, I think I'll wait and see what the market will bare.. Problem is, there is really not much silver in the hands of the idiots. Most of it is with people like us and those in the know. Yea we might see a 100,000,000 million ounces come out but it will be bought up quickly.

  30. "Yes there will be some uninformed idiots who will sell at 50.00"
    There are many,many, many uninformed people out there. You can chaulk it up to a wildly successful dumbing down campaign. We are a small minority, but our numbers are growing. I have been bullish on silver since the 1970!!! OK I'm an old fart, haha. In 2003,2004 I was begging people to invest in silver, including my family only response I got was I was looked upon as weird. Believe me there are millions of people with silver objects in their homes and are tired of keeping the stuff polished, they will sell when the Media calls silver $50 price a bubble. It may not be a game changer but there will be increased supply that will show ultimately as good delivery bars.

  31. Gov't of Libya...rumors it has fallen are unconfirmed. Threats of oil shutdown if gov't does not fall.

    Any ideas of a Safe Haven in times of trouble guys?

  32. silverwood,
    too funny. I am glad you are here. your experience and wisdom come from being around a bit longer then some of us. I am 47. I love listening to those a bit older. That wisdom is priceless.

  33. but but but, $50 1980 collapse wasn't from people turning in their silver pots and pans to sell for fiat...anyhow I will be releasing my middle east views around 8 pm article time. This should shake the tree a bit...

  34. As the price of silver rises expect to start seeing "WE BUY SILVER" ads rather than gold. Remember though, $50 in the 80s is well north of $100 today, so there won't be any concerted effort to start these campaigns until it gets closer to a real all time high.

  35. @Anonymous 4:41PM said: "Take that into consideration with the amount of exposure that the Banks are susceptible to (through derivatives/etf's) and you have your case for catastrophe."

    You are making the assumption the [investment] banks are trading for themselves and specifically that any losses incurred will hit their books. The reality is that the "prop desks" of IB's (investment banks) were supposed to be shut down in Q3/Q4 2010 under the Volcker Rule as part of the Frank-Dodd Act (summary only, real Act is 2000+ pages). What's really happened is that JPMorgan in order to align to the new rule simply moved the prop desk department into a separate 'asset management unit' and will need *several years* to setup a separate working group (sub-company). They could have just as easily moved the prop desk off-shore. But I am digressing, I just haven't yet seen any evidence that JPM is the one holding the bag of shorts even if the transactions may flow through them. For all we know it could be governments around (i.e. China) the world who can just print their own currency to backstop any losses and perpetuate additional naked shorts to suppress the price while they simultaneously take long positions for delivery of the physical silver. My point is we have no concrete evidence either way, and even if JPM or some other IB was left holding the bag, they are too big to fail and may get bailed out; it's happened before.

  36. Flaunt,
    There's a shop that was doing payday loans, that suddenly became a gold buying shop. Guy walking up and down with a placard with the spot price and waving at passing cars...
    Last week drove by and he wasn't out there....but there was a banner..."WE BUY SILVER"....

    I'm in Las Cruces

  37. As a Jew, i have to say that the most dangerous people on Earth are Zionists and bankers, the worst of all being both. Anyone that doesn't see this is a liar or an ideologue.

  38. Seriously, the Jews/Zionists control US foreign policy? First, the State dept is and has been anti-Israel since 1948 and does everything in its power to weaken Israel and help create a "Jew" free ME. If Israel runs the US foreign policy, why is the State dept so anti-Israel? Shouldn't they be able to control foreign policy a little better than that? Based on foreign aide, Israel gets the same amount as Egypt. Why don't you believe Egypt runs US foreign policy? America is spilling blood in the ME because they want to protect their main source of OIL, period. HELLO!!!! It has almost nothing to do with Israel. The land giveaways, the settlement freezes, the endless concessions without reciprocity...all of these show how Israel controls US foreign policy? You think Israel is a terrorist state? What war did Israel ever start in its history. Even the war of Independence was started by Israel's enemies who vowed to wipe them off the face of the earth because they reclaimed a small piece of land they turned from a swamp into a paradise, most of which they BOUGHT, not conquered. The great Zionist plot to control the world is just another re-hash of The Protocols of Zion. And yes, you are an anti-semite. What you don't get is that all Israel's wars are based on only one premise...religion. The fundamentalist Muslims (at least 10% of 1.5 billion people...probably a lot more) believe Mohammed was the last prophet. He said that wherever a Muslim steps foot is part of the Ummah and that once a population is conquered they will never regain their independence form Islamic rule again. If Israel exists, Mohammed is a false prophet...ergo, Israel cannot exist. This has nothing to do with Zionism or the "Israel lobby" in Washington. The fact is Israel would never have attacked its Arab neighbors after independence and only acted defensively or offensively when her existence was threatened. Israelis just want to be left alone, but Islamic law will not allow this. There will be no peace anywhere until the world sees the end of Islamic imperialism. Don't you hear what Khomeni and Acmenadinejad (sic) are saying? Do you think they are kidding? Do you think they are "victims"? The Great Satan has no idea what's coming her way from the peace loving Muslim Caliphate. Wake up and smell the hummis, your liberty is at stake. Bob in NY