by Bill Holter, MilesFranklin.com:
The piece I wrote last Friday was apparently quite controversial to say the least. I have received a slew of e-mails telling me that I’m either nuts or outright wrong. Well, let’s first look at the math. COMEX deliverable inventories are, say 40 million ounces of Silver, at $28 per ounce this is just over $1 billion. Yes, I know, the world doesn’t revolve around the COMEX and there are supposedly a total of above ground inventories of 500-600 million ounces. Are ALL of these ounces deliverable? Probably not, but let’s assume just for yuks that they are. 600 million ounce at $28 per ounce is worth a whopping $17 billion. This amount is equal to about what the government needs to borrow every 5 days just to keep the doors open. This amount is less than many corporations have just sitting in cash balances. The global inventory of Silver is less than the market cap of scores of U.S. companies, and scores more of foreign companies. My point is that in today’s world, $17 billion is minuscule.
Several people wrote me saying that I was flat out wrong. They asked why, if I was correct about a mere $1 billion needed to blow the lid off of Silver, wouldn’t an Eric Sprott or Carlos Slim not just pony up $1 billion and drain COMEX of their Silver? I can think of several reasons, the first and most obvious being “position limits”. While the shorts can pile as much as they’d like on the short side, there are limits to total long contracts and long front month contracts (deliverable) that any one person or entity can hold. Also, the COMEX can and has in the past simply “changed the rules” and screwed anyone they like (just ask the Hunt brothers). Another issue is a “dark one”. If you had the wherewithal to purchase 100 million ounces of Silver, knowing what you know would happen to ALL markets (not just Silver) wouldn’t you be looking over your shoulder and under your car before you started it every day for the rest of life?