Silver Investments—Investing In Silver Futures 101

By Barry Murray

Out of the headlines of today —
sixty-four years after the promised end of the war to end all wars.

Please allow me a moment to compete with the scare tactic literary style of big media covering over the truth of “breaking, news a eleven” events in a long developing situation. Independent, bottom up, Internet publishers may not have the resources to pay Entertainment Tonight news reporter's million dollar salaries, but we also are not pressured to try to explain how it is to the viewer that big TV “sponsors” as drug companies, thanks to the the laws of “supply and free market demand” were able to run the price of a generic Ampicillian 500 mg tablet from being free traded in Mexican boarder-towns for 5¢, while the insurance-less sub-prime homeless of Loss Vegas are blackmailed by big business to pay $1, per, if they want to live.

I am very angry that an out of control union of “professionals,” liscenced to do no harm to the American worker, has selfishly distorted their own worth to the point that insurance companies in denial of paying out, what was paid in, hide behind the emotional shield of the American Way. Or pretending to be a tweedle-dee PAC controlled Democrat, or Republicans. Label me a “hard money socialist,” or a “pinko small businessman,” if you will, or any other malapropisms of flapping lip experts on TV and talk radio, but please don’t call me —a still living middle of the road activist getting hit by cars coming both ways— a yet-another non-thinking couch potatoes. I am an individual whose vote doesn't seem to count for anything in an orchestrated shouting matches, but I am concerned about a total system breakdown.

Oh, I am sorry to have frightened you. My network TV style of distracting your attention from what is really happening, wasn’t fair. I was not reporting on the catrosphic failure of our health care system. I was really making a statement that the financial cartel of multinational bankers (New York’s Wall Street, and London’s Financial District), underwriters, stockbrokers, securities lawyers, certified public accounts, self serving government agency leaders, insurance companies “too big to fail,” and their big media support, really is an Industrial Age oligarchy needing rebuilding under the watchful eyes of an (uncontrolled) Information Age public.

My credentials of being a valid observer of things effecting the pay checks of Main Street America (i.e.: talking head expert) is that I am from Nowhere, Alaska (with my closest neighbors 50 miles away in Farewell, Alaska). By being a triple dropout —high school, college, and a English art school— I was free enough of student loans and out of date biz school ideas to be, for four years, to be the editor the editor of a very respected gloss, four-color, print publication — Economic Currents.

What is probably more threatening to the top down aristocrats, “giving back” by tinkling wealth on the unwashed masses, is I actually have visited Wall Street, from the supply side, in search of capital investment to build a basic business. Many of the firms I visited, looking for $3 million for a geologist recommended diamond drill program to prove up $200 million (see SilverMiningClaims.com), have gone bankrupt. No wonder. Authur Anderson seemed to have had problems understanding accounting. I was asked to put $3 million upfront, to fund an IPO, and 395,000 ounces of silver in surface deposits, to raise $6, or, 8, or ten, or more million to fund the already costed-out $3 drill program.

As an out-of-towner mugged by white collar criminals as the inside trader named Merrill, who should be Lynched, I suggest to the NYSE your residual worth as a tourist attraction has increased by adding a statue of a bear alongside your bull, and hog, and dragon —signifing you eventually will qualify to trade on the Shanghai exchange. However, I feel from the mining investment point of view, the futures market elephant blocking exchange traffic needs to be explained.

The full story of how I ended up depending on a British Columbia “junior” listed on the Canadian TSX exchange as CAF to raise $3 million from an unsuspecting public for funding drill program, only to see the stock fall from 45ç a share to .001¢, as the president who “took-over” control decided African coal, then gold, then diamonds was a better way to eventually take it to .011¢, is online elsewhere. I apologize to any mineral investors readers for my brief explination who thought I was in control of the situation, what happened to their money.

Finally, the point of my seemingly random rambling!

Even though I am 70-years old, it looks as if I will have to go back to the basics, making money the old fashioned way. True wealth is not created by the magic of sly thought. It takes hard work, harvesting corn and other grown crops, trees, fish, or pumping oil, or sifting through soil to unearth gold and silver.

If you follow the silver mining claim link on the previous page, you will find an economic geologist’s proposal, approved by the unfunded U.S. Office of Mineral Exploration, to drive an adit into known high-grade ore, to bootstrap the drill program I have had such little success getting funded. In ways, this simple solution could be accomplished underground, in an Alaskan winter by a few tough men, snowmobiles, a medium sized cat, compressor, jack legs and drill steel, and mucker. I already have a Chinese buyer for concentrates that could be hauled by cat-train to the Kuskowkim River for barging to Nanking, China, which is actually closer —thanks to the polar route — than Los Angeles, which does not have a smelter anyhow.

However, in developing my DYI biz plan, I have run into one small problem. That is, given the volatility of the futures market driven price of silver for no apparent reason at all, how does one forecast a profitable return a year or two away? Fortunately my ore is galena, containing zinc, lead, copper. Over the years these almost ignored, politically, and big city environmentally incorrect commodities, have been slowly raising in value to the point the Win Group of Claims should almost be called a zinc/lead mine. This fact should alarm users concerned with above ground supplies of AG (silver), but for someone who is supposed to be benefitting from the futures supply side of the silver market, I am grateful to have a long term base metal position to cover the hard costs of infrastructure (air strip and access road) and mine and mill concentration equipment.

In the past, individual American future traders have known through US government agencies such as the CFTC (Commodities Futures Trading Commission) and the COMEX (US Commodities Exchange) published statistics reporting that the total "short" positions in silver amounted to twice the amount of the yearly production shortfall. Apparently this was accepted as an incentive for prospectors /miners to get busy, and that “sophisticated” futures traders knew that at closing, one party of the transaction would win; the other loose. Sort of like flipping a silver coin. For background read the futuristic article “Nuclear Silver” by Alex Wallenwein, published on-line originally in 2002, when silver was at $5.

With a growing number of  Baby Boomer investors looking to build a retirement fund, that have never experienced financial hardships, it has been difficult to compete for the funding of rock solid capital being thrown away by “lip flapping, cut and paste, tap dancing, financial experts” who have been supporting all sorts of high return Ponzi schemes through spin-doctoring on media controlled by the multinational corporations proving they are too big of school yard bullies to be slapped across the face.

I think those investment advisors who helped create the mess we are in today, with thousands of homeless children on the streets, wondering if they will really be left behind for a lack of schooling, should be handed a history book, and then tested to see if they want to keep their license, before a jury of those who have lost big on their 401Ks retirement program.

My first on-the-job training in the mining business in 1955 was to contribute to a strategic stockpile on minerals President Eisenhower felt we needed to defend our financial way of life. My experience of learning by living, rather than reading an academically acclaimed explanation as to what happened during the “Uranium Rush,” is online at www.TheProspector.com/moab.

My WW II memories of silver —thanks in part to my “hard money” mining attorney lawyer father— was that while FDR , through executive order L 208 had closed down gold mines, which meant that hard rock gold miners, unlike in WW I when they we considered too important to fight in the trenches, were no longer exempt from the draft— the United States government backed silver dollar paper certificates with nothing less than 6 billion ounces of silver. Besides silver being of a vital industrial use, there was a solid financial value. The silver dimes I used to buy stamps to save in a book where $18.70 was bought a War Bond, cashed in 10-years later for $25.00, were also worth something in FDR’s March of Dimes that found a cure for polio.

When silver started it's rise out of the Bunker Hunt “corner the market” fiasco in 1980, by keeping up with the number of ounces it took to buy other commodities, as oil, pork bellies, lumber, it was announced by Clinton’s smoke-and-mirrors anti-mining administration, that the staggering amount of silver that had backed our "in God We Trust" dollars was gone forever.

Wonder what Ike —the CEO of a “happy days” USA who pushed through the construction of our Interstate Highway copy of Hitler’s autobahn highway system for defense reasons— would have to say about the sorry fact today that while the U.S. has enough gold for 1,000 years of future defense needs, there is not one day’s worth of strategically important silver.
(www.silverbearcafe.com/private/07.09/lasttime.html )

The last U.S. general to have actually won a war, Eisenhower with his Office of Mineral Exploration in support of maintaining a peace through a stockpile of strategic minerals, was also the last U.S. President to understand that since the time of the Pharaohs, and the City States of Greece, and Rome, wars were were underwritten by the mined wealth of gold and silver.

Think that not true, then consider it took both California gold, and Nevada silver to win the Civil War for the North, and to pay for Imperial Russian to maintain a fleet in New York Harbor, to counter the English breaking through the blockade of cotton bales from the South. That was the $7.2 million usually referred to Seward’s Folly, for services rendered. Also think that not true, then tell me where the last shot of the war was fired?

Alaska recently has overtaken Nevada to be the largest silver state in the Union. Before the USA went off a silver standard where a solid one ounce coin was also worth a silver certificate paper dollar, Americans were the number one silver producer in the world. Now, after Presidents Johnson, Nixon, did away with “hard money” silver fighting inflation, and Reagan undoing Teddy Roosevelt’s protection from monopolies, and peace loving Carter’s free trading the Panama Canal off for absolutely nothing in return... well there I go again... multinational mining corporations, supported by a vocal environmental / PAC voice in Congress, have free traded American know-how to Mexico, Chile, and Peru, chasing relaxed air quality standards, and cheap labor. Now we are ranked 8th in silver production, behind Mexico, Chile, and Peru. Oh have you heard, Bankrupt, California, that has only mined an estimated three percent of all it’s reserves, that China has become the largest gold producer in the world!

Alaska vs New York & London & LA

One of the problems surviving U.S. mineral producers have to contend with is a shortage miners who know what they are doing. Friends put out of work at the height of a season in the late 80’s through a well timed injunction by the Sierra Club fighting for a Wild River status, went back to school to retrain for financial industry positions, “to mine investor gold.”

Last summer, over an Alaskan Pale Ale, “Dan” outlined his “illertate Alaskan” theory to me that the vocal militant environmentalists, the ones seen on big brother TV, were funded by multinational corporations following the Enron-Exxon resource management of curtailing production to “make more, by selling less.” His very convincing argument was to ask how in the world could the “holier than thou” fighting, in the name of Global Warming, trash Alaskans so for wanting to build a parallel Alaskan natural gas pipeline to tap into the 250-year supply National Geographic Magazine suggests burns 40 percent cleaner than Kentucky King Coal; and a source of energy to propel commuters automobiles already delivered to households cooking with “gas.”

A victim of the zeal to protect an already “wild river”, he also questions how the concrned organizations members in Los Angles, Phoenix, ‘Loss’ Vegas, have not protected their Colorado River from pollution, and being drained dry before being passed on to Mexico. And how it is that network reporters overlooked the story of the Hopi Native Americans in Arizona having to buy back water stolen from their religious right to grow blue corn. And, 100 year old historical Nevada ranches giving up the fight over allowable grazing AUMs to raise healthy calfs for unnatural mad cow feed lot finishing, by selling their water via a 250 mile long pipeline to feed the fountains along, “The Strip.”

We ended the evening drinking hot coffee to be legal to drive, knowing we did not have the political clout of Exxon ducking Alaskan DUI laws, and Alaskan jury punitive damage awards

Perhaps Dan is right in suggesting voters give up trying to “follow the money,” by thinking about “motive,” instead. For example: after the U.S. Bureau of Mines started recording a deficit in silver production over twenty years ago in their Mineral Commodity Summaries, this very helpful government agency — from the mining industry point of view—was done away with. Then the totally respected U.S. Geological Survey came under attack as “superfluous.”

It is a bit harder for investors to see the real picture of the what has been happening since the Bureau of Mines stopped publishing their 3” thick Year Books, but Bureau of Land Management online stats show that for the past 20-years the ratio between silver consumed by industry has not been met by mining. The United States produced 1,200 tons of silver in 2007, which was only thirty-five percent of the silver we used. The shortfall was made up, in part, by buying above ground supplies from India, and lately, China.

I mention frugal Asians saving the silver user industry from collapse, as dwindling world wide silver production figures, fighting and ever growing usage also show a large, global gap between supply and demand. The worldwide numbers cannot be easily found from a source as reliable as the U.S. Department of Interior. For example, both India and China have been funding the development of new galena mines. They have been secretive as to which nation will become Asia's largest producer. It also should be noted here that India supports their mining industry by imposing a very stiff tax on silver imports.

What can be calculated from reports from a foreign press is, thanks to the old adage of “When galena (also containing zinc, lead, copper) is economical to be mined to replace diminishing stocks of silver the price of industrial zinc, lead, copper will drop through an oversupply of the minerals measures in pounds, instead of ounces.” no longer being true. Check out the slowly raising spot prices of zinc, lead, copper, fueled by the growth of emerging economies, against the loss in daily stock prices of what used to be the icons of American industry.

Where else besides silver reserves above ground in India (“a bank account worn as a shapely ankle bracelet”) or accumulated in China by underpaid “bank” managers (at least when considered against the ‘best that money can buy’ standards of capitalistic CEOs), can stockpiles be defined with any guaranty of accuracy? We all have been bending the laws of supply and demand by using more silver than what is produced, by surviving upon these unknown stockpiles. Without speculation from the unwanted Texas hold-um players bluffing at the silver poker chip table, what is the true non-financial use price for silver today?

Here is where research on the Internet gets really interesting. If you are used to “hearing” the news from a one sided source, as network TV being controlled by multinational big oil, or “dead tree” financial publications that make their money by pleasing their advertisers, you may not be used to judging opposite opinions.

According to Ted Butler, who in the precious metals industry and investing community is widely regarded as the world's foremost expert on silver, the net "short" positions in silver can never be repaid. Then there are a number of full of bull newsletters claiming the run up in spot silver since April 2006, when a new category of silver exchange traded fund (ETF), was established, was a new source to be accounted for. Under the ETF plan above ground physical silver is supposedly held in reserve by a trusted and verifiable investment agency.

Usually those experts on the Bear side of silver make a point of mentioning that as photography has gone digital, one of the great historic uses of silver is no longer a demand. I personally know as a photographer that while some silver was recovered from processing film, perhaps even more silver is consumed with an ink jet printer using photo quality color paper.

The Bullish on silver investor will tell you the demand for silver in industrial applications is increasing. Besides long life, energy efficient light bulbs this includes new uses of silver in bandages for wound care, batteries, brazing and soldering, in cell phone covers to reduce the spread of bacteria, in clothing to minimize odor, in catalytic converters in automobiles, electronics and circuit boards, electroplating, hardening bearings, mirrors, solar cells, wood treatment to resist mold, and water purification and radio frequency identification devices in passports and on packages.

The Hoggish visionaries fantasize of controlling silver used in linear particle accelerators, or electrochemical cold fusion. Their screaming conclusion from all this is that AG has been underpriced so long through manipulation, that when the breakthrough happens silver will go ballistic.

I really don’t know about all of the shouting going on in Internet forums about duplicate bar numbers being used to support the American futures market, and a lack of proof of Britian's Barclay Bank silver reserves.

Back in the 1940’s, England, concerned about their Gold & Dollar Reseverves (gold backed for international use) helped force the U.S. Gold Depositary at Fort Knox to hold an “open door inventory,” so that qualified outside observers could see for themselves that there was the mineral resources backing the value of pieces of paper.

What would be so different about Barclays Bank doing the same to prove they actually bought up enough silver worldwide (when America’s longer established Chicago futures market was already in trouble) to cover their transactions doubling the value of ETF silver. How about it, Bank of England, the “Old Lady of Threadneedle Street,” involved with the mess today by supporting Northern Rock, a sub-prime mortgage lender. Give us a peak darlin’ up the skirts of one of your alleged London prime bank tarts?

Here is where it gets personal

n ways I truthfully wouldn’t care if a pouffy Lord HawHaw dances a do-see-do with NASDAQ Director Maydoff in Hell, if all of this New York/London stuff did not personally give me hartburn as an Alaskan in three separate ways:

1) I also happen to be a small mine claim holder, with my investment of 40-years, and almost $4 million, that has been held hostage by international financial monopolies controlling the laws of supply and demand for silver through their paper dollars. Us wool sock wearing working men don’t want a silk stocking banker style “bailout” anyhow. If our government could just keep the Hogs from stealing our lunch, those of us with “shovel ready” projects can help bring about a hard money economic recovery from the crisis they created. I am not just talking my own interests, but each and every one of the properties my S.O. Bobby Magee is advertising for sale on www.WesternMiner.com.

2) With former Axis Power car makers (Japan, Germany, Italy) and Wall Street backing factories that won World War II by supplying trucks to mobilize Russia troops, and tanks Allied forces used to liberate France — down, crying, to their knees — could it be that the international weapon of mass destruction today is economic?

After all didn’t Reagan solve our national debt problems left over fighting our first paper dollar war, by supposedly outspending the “Evil Empire” in defense? In my research to find any above ground silver support of the Barclay Bank futures scheme I came across a very curious document. Download the JPMorgan Chase Bank, London Branch, Bank of New York silver bullion bar list (that is the title) as a trustee for I-share silver. Scroll to the bottom of the 7137 page PDF document, and then count, from the bottom up if you can stand it, just how many bars backing derivative speculators are actually owned by Russian State Refineries, Yunnan Copper Ind' Ltd China, and Zhuzhou Smelter, China. Are the arrogant “bonus” leaders of Capitalistic America selling us out to the highest real money bidder takes all auction, and Big Brother will be the winner of World War III?

3) I also —though this might be a big surprise to high carbon footprint city dwellers — am very concerned about the environment in my front yard. And the world.

From my wilderness Alaska, point of view I love gazing out from an outhouse that doesn't need a door for privacy. The landscape here is in a harmony that has existed since the last Ice Age retreated. My building a insulated log cabin and depending on solar energy panels for what energy we need these last nine years has not had anywhere the impact of plugging in a hybrid electric car, to a less than efficient Enron style fuel source generated by coal, instead of a burning cleaner Arctic natural gas not owned by the oil and gas companies cartels advertising on CBS as “working on the Global Warming problem!”

My climatic change problem is, past the well know fact that glaciers are disappearing, I have been losing vitally needed airstrip runway length due to permafrost melting. How come no "back East" experts have mentioned the melting of the unseen Alaska ice age that has for eons been protected by a cover of moss, soil, and standing water?

I single out “geographically challenged” CBS news of New York City for showing film to Congressmen, doing their homework, of caribou frolicking over lush green rolling hills 500 miles south of the flat ANWAR tidal muskeg and mosquito swamps that wild beasts, and wilderness loving tourists (or cameramen) just do not visit in the summertime. I also am picking on CBS for having “Catfight” Couric imply that Alaskan’s were not literate enough to read, after an OPEC generated scarcity run-up at the pump, the National Geographic’ article detailed that the multi-national Arctic energy cap also had a 250-year supply of natural gas.

Somehow the Russians found the inexpensive, 40-percent cleaner burning automobile fuel source, where commuters could fill a tank in their own garage, a political force when piping gas to Europe. They sent a submarine to plant a corrosive resistant metal flag under the North Pole. If you did not hear of this through a sound bite on CBS News, then type in a query on Internet search engines that have replaced the monopolistic strangle hold of the Yellow Pages offering answers from those that paid the most. For a Industrial Age geo-political lesson not in any academically supported history book, as yet, try, “Russian + energy + politics” in Google, where advertisers no longer in charge media placement, come to them for Information Age “eyeballs.”

Am I rambling again? No. Intelligent thought requires more than a few seconds on TV, cut short by time restraints. I have been slowly building by full disclosure, dear reader, to have you accept my arguments as valid, even being a supporter of the bizarre thought that sheepish Americans consumers do not want to be flocked anymore by Wall Street conglomerate big business control of our commodity needs as oil-gas-building materials —food stocks as corn, milk, bacon-and mined metals. I personally think President Obam’s solar panel plan for the US to recover from the folly of the damned few ( “A band of brothers in the name of greed”) by lessening individual household’s dependence on multinational energy corporations is as brilliant as the lighting “to milk a cow” produced by FDR’s rural electrification during the last Great Depression.

Need I remind those reading this as we all have electricity bills to paid, that the classic definition of Recession is where Your Neighbor looses his job, and a Depression is where You get a pink slip. What a “public works” incentive it would be for unemployed GameBoy trained  workers to plug-in to solar panels on rooftops across the country. Bet you we would get a better bang for the American taxpayer buck than people trading in American clunkers to buy foreign made imports.

Sorry. I said the no, no, “big elephant in the room,” phrase. American Made. Solar technology was invented in Switzerland. It is mass manufactured by a Chinese company, with a $200,000 cost saving CEO salary cap, that started out supplying componet parts for low wage third world style American assembly.

Massive stimulus spending for solar energy might just catch us up with other nations also suffering mass unemployment —a historic condition that has always lead to war—while working for less of a dependance on multinational energy “petrodollar” funded corporations. That is if American financial industry gurus and their partners in CEO corporate crime had not sold off our strategic minerals stockpiles.

Yes, yes, yes, and yes. The good news is, following full disclosure rules (and perhaps the Internet is the only media source about, to do so) I admit, through the standards of an honest full disclosure, my ready to be mined at a profit silver-galena ore, shown on the cover of this newsletter, and at www.SilverMiningClaims.com/thebottomline.html, consists of:

A) Silver, or AG, which as a paste inside of a solar cell, has the unique photoelectric ability to generate electricity from the sun, even on an overcast day.

B) Zinc, or ZN, which is able to handle exposure in a corrosive situation of the elements affecting solar panels.

C) Copper, or CU, needed to transmit low voltage current, without the loss experienced on aluminum wires on coal generated power towers.

D) Lead, or PB, the nasty stuff of paint, and pipes, that in deep cycle gold cart batteries has shown itself to be the safe, and economical, way to store solar energy when the sun doesn't shine.

The bad news? Where is the silver going to come from — as the US is already in a 20-year negative consumption / production ratio, and the world not far behind— to build this job producing solar system?

Which brings me to the purpose of this piece;

From my viewpoint as a silver producer, if I have convinced you that America’s future economic health is dependent upon building solar panels out of the Barclay Banks stockpile of silver, please ask your Congressman how an English Bank can get away with selling i-silver shares, for 10 percent down, to Americans? Did not we learn from the Great Depression that the number one cause of the crash of ‘29 was buying on margin?

Perhaps the British Bank, as the British office of AIG, is to big to be chastised. Individually, though, I suggest the readers of this publication avoid any ETF style contract. And, if you do have one that can be cashed out, quietly, request your paper silver values be paid out in bullion.

If your well rewarded expert financial advisor counters with a, “well storing silver bars costs money, and they don’t pay interest,” reply with a suggestion he finds a coin dealer who doesn't charge a 30-40-50 percent over spot premium for hands-on delivery. And that rolling profits in silver contracts to avoid taxes has been debunked by the “financial expert” who was publishing, online, in 2002, that buying a house in la-la-land for no money down, depending on a rolled increase, was a financial time-bomb.

So too is the artificial manipulation of paper silver, over what a hard money silver dollar used to be able to buy. I am betting, from an insiders position, that this commodity is seriously undervalued.

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