dynamiteIt is said that history doesn’t repeat itself, but in the case of silver, I don’t see how that can be avoided. In more ways than not, silver today reminds me of the time when it traded under $5 per ounce.
As was the case back then, the thought that it might eventually climb more than ten times in value was widely disbelieved and openly scoffed at. That’s because silver was the most undervalued asset in the world, both then and now. If you didn’t catch the first run, you’ve just been given a second chance.
And it is also interesting that silver is registering as the most undervalued investment asset precisely at the same time when there is more total investment net worth and buying power in the world than ever before
. The assets in hedge funds alone are now at a record $2.7 trillion; 1 percent of which ($27 billion) is more than the value of all the silver bullion in the world (if it could be bought).
The 100 million oz of new silver available for investment annually would take only one-tenth of one percent ($2.7 billion) of hedge fund assets. Unless hedge funds have stopped looking for undervalued assets, I can’t help but feel that’s a set up akin to a lit match and a barrel of dynamite.



By Ted Butler, Butler Research:

First off, it is pretty audacious to label any investment asset as the world’s cheapest when you consider the implications of that claim. Most of the world’s investors are value oriented, always on the prowl to find undervaluation and if they could identify the single most undervalued investment opportunity, it would only be a matter of time before they descended upon it. Simply put, if you could identify the most undervalued investment asset in the world that would be another way of saying you had identified the world’s best investment opportunity.

 

The next step would be to back up any such claim with straight forward reasoning and facts to substantiate any claim of extreme undervaluation. That’s the purpose of this article, namely, to show why I believe silver is the cheapest investment asset to own and that it is likely destined, therefore, to be the best investment opportunity over time. The only caveat is one of time. It would be unrealistic to assume that if you were able to identify the cheapest investment asset in the world and purchased it that you would be instantly rewarded. If the whole world mispriced something, it is unlikely the undervaluation would be corrected the instant you bought it; give it time, say five to ten years.

 

I’m not going to speak today about silver’s undervaluation in the ways unique to silver, such as it being at or below its primary cost of mine production or of how scare and rare it is, particularly in dollar terms, or how much it has dropped from its price highpoint of three years ago. Certainly, one could establish whether silver was undervalued by such measures, but that would not be the way to determine if silver was the most undervalued investment asset in the world. The only way to determine what the world’s most undervalued asset might be is by comparing all assets to each other. In other words, you can only declare any asset to be the most undervalued by relative price comparison.

 

Fortunately, a relative comparison by price is not a difficult thing to do. Instead, trying to figure out why I didn’t see this sooner is more difficult to answer. But in my defense, I discuss silver’s relative valuation to gold on a non-stop basis. After all, silver and gold are as connected as love and marriage or a horse and carriage; it’s hard to conceive of a better relative comparison. So let’s start with gold and silver. It is said that a picture is worth a thousand words, so let me see if I can spare you some unnecessary verbiage. For the sake of uniformity, let me present silver’s relative valuation as it is usually depicted, namely, by dividing silver’s price into gold’s price and stick to that format in the examples that follow. Remember, the higher the ratio, the more undervalued silver is to the item depicted. These charts cover the last three years or so.

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Here’s silver compared to platinum;

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Silver compared to palladium;

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Silver compared to copper;

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Silver compared to crude oil (West Texas Intermediate);

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Silver compared to the Dow Jones Industrial Average;

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Silver compared to the US dollar Index;

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Silver compared to the 10 year US Treasury note (interest rates);

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Remember, the higher the relative price ratio, the more undervalued is silver. I’m not intentionally leaving out any other comparisons and would include real estate if I knew of a chart. I believe silver would show up as generally the most undervalued if you included all other commodities. My point is simple – on a relative basis, silver is the cheapest asset of all. And to my mind that makes it the asset offering the highest prospective gains for the future.

 

I’m not trying to trick anyone in any way – this is as straight forward as it gets. As I indicated earlier, I’m kind of mad at myself for not writing about this before now. And just because it’s as simple as pie that doesn’t invalidate the approach. About the only thing I haven’t addressed is how silver got to be the most undervalued investment asset in the world. I suppose, if there were some obvious and compelling legitimate explanation for why silver should be so undervalued relative to everything else, perhaps the undervaluation would be widely understood and justified. But there is no such justification.

 

The best thing about silver’s extreme undervaluation is that the reason for it is as clear as is the undervaluation itself; not in terms of legitimacy, but certainly in terms of clarity. As I have reported recently and for years, COMEX silver has the largest concentrated short position of any traded commodity. Eight traders, led by JPMorgan, are responsible for silver being the most undervalued asset in the world. The world’s largest concentrated short position should logically result in the world’s most undervalued asset. I think this is good news because it would be impossible for me to show conclusively that silver was the cheapest investment asset of all without providing a definitive explanation for the unprecedented undervaluation.

 

Of course, I suppose a rejoinder to silver’s compelling undervaluation leading to eventual outstanding investment performance might be if JPMorgan and the other commercial crooks on the COMEX were able to continue to manipulate the price indefinitely thru additional short contracts. While this can extend silver’s undervaluation in terms of time, it cannot last forever. Additional paper short sales by JPM and the crooks will blow up in their faces at some point or the COMEX will shut down. That’s because selling additional paper contracts short will not satisfy physical demand in excess of physical supply. That day must come, for no other reason than silver is the cheapest asset in the world.

 

That is not to say that silver can’t get even more undervalued in the short term, but isn’t this what investment is all about? Is it not the universal goal of all investors to seek out the most undervalued assets and try to avoid the most overvalued sectors?

 

As must be expected, silver didn’t get to be the cheapest investment asset in the world without price pain and suffering. It is guaranteed that whatever might be the world’s most undervalued asset only got to that point because it was overlooked and unappreciated or loathed or manipulated. There is no way the world’s most undervalued asset could achieve that status through positive investment returns. By definition, the cheapest investment asset in the world had to have horrid price performance to get to that point. It’s good news that the reason in silver’s case was due to deliberate price manipulation because that manipulation must end at some point.

 

Also good news is the fact that silver is no stranger to being the best performing asset in the world, as was the case most recently up through the price highs of 2011. The reason silver was the very best investment asset was because it had formerly been incredibly undervalued before that price run. It is said that history doesn’t repeat itself, but in the case of silver, I don’t see how that can be avoided. In more ways than not, silver today reminds me of the time when it traded under $5 per ounce. As was the case back then, the thought that it might eventually climb more than ten times in value was widely disbelieved and openly scoffed at. That’s because silver was the most undervalued asset in the world, both then and now. If you didn’t catch the first run, you’ve just been given a second chance.

 

And it is also interesting that silver is registering as the most undervalued investment asset precisely at the same time when there is more total investment net worth and buying power in the world than ever before. The assets in hedge funds alone are now at a record $2.7 trillion; 1 percent of which ($27 billion) is more than the value of all the silver bullion in the world (if it could be bought). The 100 million oz of new silver available for investment annually would take only one-tenth of one percent ($2.7 billion) of hedge fund assets. Unless hedge funds have stopped looking for undervalued assets, I can’t help but feel that’s a set up akin to a lit match and a barrel of dynamite.

 

Don’t be confused by the simplicity of this presentation. Comparing the relative price of all investment assets is the only objective way to determine which is the most undervalued. Right now, on that objective basis, silver is the cheapest investment asset in the world. I feel fortunate to have made this observation and even more fortunate that it doesn’t conflict in any way with anything I’ve written previously. I’ll probably make this article public (sometime next week) after subscribers have had a chance to digest it. To me, it’s a big deal.

 

Ted Butler

For subscription info, please see www.butlerresearch.com


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  1. There is only one commodity used in more products than silver- crude oil. Silver prevented the financial takeover of the world until 1872/3 when it was demonetized by the ancestors of the same villains we are dealing with today.
    We can’t know when it will fall apart, bit this is one paper scheme that cannot last. They drive prices down for political and financial reasons, slowing the production as the real world needs an increasing supply of this metal.
    Be right and sit tight. Yes, it is frustrating. Yes, you look foolish to the ignorant, blobbed up masses. 
    They will know the folly of their ways when the banks take a holiday and their debit cards don’t work.
     
    Here’s a great read for those bored of silver market screeds.

    http://www.people.com/people/

    • Yes sir! The banksters have the populace by the short hairs through electronic transactions. I hardly ever see people using cash to purchase anything. If/when the cards/banks stop paying out, martial law will take it’s full effect to quell the starving freezing masses who cannot purchase anything without it. People should at the very least hold some cash in a safe and accessible location so you are not caught in that same boat. It would not be pretty, that’s for sure! If you don’t hold it in your hand, you can’t spend it.

    • Strongly agree @SilverSlicker.   A bank holiday or bail-in is not impossible.  While both may be unlikely, so is a car wreck and we all buy auto insurance.  Having some cash on hand will be of great value to anyone during financial problems.  It doesn’t have to be a complete collapse to be a right royal pain in the arse.  Having some cash, as well as some silver and gold, will be just the ticket.  While others are going nuts, we will be getting the things that we need, thanks to having a bit of forethought.

  2. Most peeps don’t realize our very own outrageous Ted Butler is possibly the world’s most quoted expert on silver. Yes. And Ted’s explanation/proof as to why silver is the least expensive asset on the planet is outrageously simple. There is also another outrageously simple fact that points to silver being horribly underpriced. For a few thousand years the salary of a working man has been 1/10 of an ounce of silver for a day’s pay. So if a working man makes $100/ day today silver should be $1000.00 per ounce. Silver is underpriced by a factor of 50. How is this possible? I’ve hated Fed parasites since before I knew about the Fed parasites. Everyday of my life, 68 years, Fed parasites have price fixed the price of silver down. Actually Rword Fed parasites have price fixed silver down much longer than 68 years, probably closer to 168 years. Why? Rword Fed parasites have never been able to own a monopoly on silver. Like an angry child the lame Rword Fed parasites have tried to solve the fact they don’t have a monopoly on silver ownership by trying to destroy silver. Humorous because the Rword cure for their not having a monopoly in silver makes their  hated silver much more valuable, one day. One can go to the bank knowing Fed parasites will try to make silver ownership illegal by everyone except them, parasites. Pundits love to predict silver price movement. Its impossible. The parasites even rigged the 2011 price move up. So when are we going to know Rword Fed parasites have lost control of their hated silver? We will know. Since I love Jesus and know the Rword Fed parasites hate Jesus more than the Rword ees’ hate silver so I’ll say the day the Rword ees’ lose control of silver Is found in the Book of Revelations Chapter 18 “‘Fallen! Fallen is Babylon the Great!’[a] She has become a dwelling for demons… Where is today’s Babylon? NYC, DC, Hollywood, London, Tel Aviv Take your pick. Rword=Rothschild Some Peeps are offended by the use of the Rword=Nword? So try to remember not to use it.

    • 50x undervalued?
      Ever considered the (mining) cost rose slower than for other commodities due to upscaling of operations? More so than was possible with others. Gold needs to be hand dug from a kilometer down. Rise is still hand-grown by people standing in water terrasses.
      Mine cost for silver is just around or below spot currently. Which commodity is EVER 50x the cost without being grossly overpriced?
      Was the mine cost $1 in 1980? That would make the $50 top a fairly valued commodity. For a split second.
      I am open to consider mining cost to double the next 5-7 years. I am ready see a 5x appreciation relation to cost/inflation. That makes 10x. How is a faily valued silver $950?

    • I agree that if this wasn’t so incredibly sad, it WOULD be funny.  However, having lived in Oregon for several years and having studied the place and how it works, I find this entire fiasco entirely understandable.  Oregon is an incredibly beautiful place, with mountains, forests, rocky sea coast, and high deserts galore.  The problem is, when Oregonians gather into groups, such as legislative bodies, they completely lose their f**king minds.  As individuals, many are the most wonderful people you’d ever want to meet but once they collectivize anything, LOOK OUT!
       
      Washington State is better in this regard but we too have our share of nitwits; many of whom absolutely insist in being the parasites that infest the government.  I really have got to continue my research into a spray for these maggots.  Something that would be absolutely deadly to them at trace levels, yet not harm a non-knucklehead, child, infant, or embryo in the slightest.  ;-)
       

  3. “Is it not the universal goal of all investors to seek out the most undervalued assets and try to avoid the most overvalued sectors?”
     
    Yes, it is, but it is also incumbent upon those investors to understand WHY such things are undervalued and how long they are likely to stay that way.  It is pretty clear that silver really is undervalued and that this is due to blatant manipulation / naked shorting that forces the price of physical silver to be lower than it would be in a market that was completely free of manipulation.  What is not so clear, however, is how long this can continue.  It’s already gone on longer than many of us would have thought possible.  It is, indeed, a long dark tunnel and as yet there is no light from the other end of it.  When there is, it is likely to be VERY sudden and brilliant, however.
     
    “Unless hedge funds have stopped looking for undervalued assets, I can’t help but feel that’s a set up akin to a lit match and a barrel of dynamite.”
     
    Of course, most hedge funds are run by billionaires and they know EXACTLY how the gold and silver price manipulation game is being played and by whom.  In spite of the money that could be made via buying a lot of silver, few of them likely want to get into the middle of that game.  They know what happens to people who spoil a bankster manipulation and it ain’t pretty.  Eric Sprott once quipped that he didn’t buy up the silver market because he didn’t want to have to check under his car every time he got into it for the rest of his life.  Yes, he could have been kidding about that… but maybe not.
     

  4. Hopefully some Big Player like India ,China ,Russia will load up on this dip..their Solar Farms are growing fast  I am hoping the luciferians drop the price lower and lower and cause a separation between phyzz and paper.

  5. I know one thing. I am stacking stacking stacking. Alot of my friends think I am nuts. But I will be laughing when they will be crying. Silver is money just as gold. and my research has told me that more above ground gold exist than silver. So do the math.

  6. Would it surprise anyone that Silver and Gold are being used as money/currency right now in Mongolia?

    As reported in WantChinaTimes.com: 4/30/2014.

    “In Ordos, one of the 12 subdivisions of Inner Mongolia, people in the ghost city are bartering to settle their debts.

    Ordos real estate entrepreneur He Jun has gathered many debts since the private loan sector in the city collapsed two years ago. He is just one of the army of debtors in Ordos, once the richest city in China in terms of per capita GDP on the back of its coal reserves but now called the “city of debt,” according to the China Securities Journal.

    Since most of the debtors are also creditors, they started paying debts with objects such as wine and houses that their own debtors had provided to settle their debts, the journal said.

    At first, the most common debt settler was Chinese liquor or baijiu, a favorite of native Inner Mongolian residents. However, the lack of price transparency with the liquor prompted local law enforcement departments to ban settlement with the product.

    He Jun turned to precious metals because of the ban. “I believe gold and silver, which have high market liquidity, are suitable for settling debts,” he noted, adding that “gold can be exchanged for cars and silver for houses.”

    “After the real estate bubble burst, many houses remain uninhabited in Ordos. As a result, no one is willing to exchange houses for gold. Houses can only be exchanged for silver,” He added.

    For example, He use silver objects worth 500,000 yuan (US$80,000) to pay off at least 1 million yuan (US$160,000) in debt.

    According to He’s estimate, the value of private debts in Ordos stands at over 200 billion yuan (US$32 billion). “They can only be settled gradually over time,” he added.”

    • “According to He’s estimate, the value of private debts in Ordos stands at over 200 billion yuan (US$32 billion). “They can only be settled gradually over time,” he added.”
       
      Leave it to the Chinese to have mastered the fine art of understatement.  $32B is a LOT of debt in one city.  That is about 150% of the debt in Detroit and it is seriously fockered up.

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