What does a 1978 movie about “Silver Bears” have to do with the silver market today? A great deal as you will find out. Nothing today is as it seems anymore. The present financial and economic system is so weak, it only survives by the wholesale packaging of lies.
The market has been so cleverly indoctrinated by these lies, it can no longer discern from right or wrong. The truth or fundamentals have no place in a corrupt financial system that is so rigged, because if it did… there will be very little standing after the smoke cleared.
There is a huge disconnect today on the subject of real wealth. Investors mistake the paper assets they have acquired and the digits in their accounts as real wealth. Unfortunately, these supposed assets are mostly derivatives that derive their value from an underlying asset. And these underlying assets are not really assets per say, but rather liabilities.
So, what we really have today is a market that is nothing more than layers upon layers of derivatives that obtain their value from a huge pile of liabilities masquerading as assets. It is by far, the biggest Ponzi scheme in the history of mankind.
The funny thing is, no one seems to notice and no one seems to care. So the charade continues as I wake up everyday to read the same mundane, boring, outdated and totally useless analysis from individuals who no longer are able to see the forest for the trees. The real art and science of analyzing has died and along with it the ability to properly forecast the future and to assist investors for what is to come.
In 1978 an interesting movie was released called the “Silver Bears.” It starred Michael Caine as a financial wizard called “Doc” Fletcher who persuades his mobster boss to buy a small Swiss bank to help launder their ill-gotten gains. Once they purchased the bank, they realize that it was nothing more than a small shabby office above a pizza restaurant with assets of only $900.
An impoverished Italian Prince who put the lousy deal together and acts as the chairman of the board at the bank makes up for this by suggesting that they invest in a silver mine located in Iran, owned by his distant cousins. The mine contained hundreds of millions of dollars worth of untapped silver. Doc (Michael Caine) is able to obtain $5 million from one of the cousins as a security for a larger $20 million loan so he can acquire much more lavish and professional banking premises that will attract wealthier clients.
Soon, silver from the Iranian mine is flooding the market which leads to a drop in its value on the London Metal Exchange. A leading figure in the silver market and one of the richest men in the world, played by Charles Gray, believes the only way to stop the plunge in the metal is to buy the bank responsible for the mine.. and promptly shut it down.
The plot thickens including an affair and other tidbits, but the important outcome is what takes place concerning the mine. Doc takes a trip with the Italian Prince (bank chairman) to meet his cousins, (owners of the mine) in Dubai where the silver is being stored in a warehouse. Once they get to the warehouse they see that it is full to the brim with silver bars.
Doc wants the cousins to buy the bank (details why are found in the link below), but when they tell them that they can’t he threatens to call in the earlier $20 million loan and seize the mine. It’s at this point the cousins drop the bombshell…. there is no mine. The cousins are nothing more than smugglers who have obtained all their silver from India. Basically, they used the silver mine as a cover for their smuggling operations.
The movie continues and you can read all about the details at the link below.
The reason why I bring up this movie is due to the amazing parallel for what is taking place today. Coincidentally, the movie was a joint British and American produced comedy-thriller released at the very same time the price of silver moved from a high of $6.31 in 1978 to $34.45 in 1979.
In addition, silver supply was in a severe deficit during the 1970’s decade.
According to the Silver Institute:
Fabricating demand rose sharply in the early 1970s, from 414.4 million ounces in 1971 to 545.0 million ounces in 1973. Demand fell to 497.9 million ounces in 1974 and 437.9 million ounces in 1975. Use rebounded the next year, to 511.0 million ounces, before stabilizing between 488.6 million ounces and 491.3 million ounces in 1977 and 1978.
Total new silver supplies fell far short of meeting these requirements. From 1971 through 1978 there was a cumulative deficit of new supply over demand of 415.8 million ounces. The silver that filled this gap came from the 620.5 million ounces of silver inventories – many held by investors – built up during the previous seven years. By becoming net sellers of silver, investors replaced the U.S. Treasury as the source of silver to make up for a major, ongoing shortage of silver.
Another interesting fact about the 1978 Silver Bears movie, is the author who wrote the original novel. It was written by American born Paul Erdman, who received his PhD in Basel, Switzerland and later became an economist in the states.
He then returned to Switzerland and became the founder and president of a Swiss bank that later collapsed due to huge losses speculating in the cocoa market. Erdman and other board members were convicted of fraud and spent time in a Swiss jail. This is when Erdman starting writing novels. His novel the “Silver Bears” was written in 1974, but wasn’t made into a movie until 1978.
What is very fascinating about the historic value of this movie, is the parallel of the wealthy silver investor in the movie to that of none other than Bunker Hunt, one of the richest men in the world at the time who was supposedly trying to corner the silver market. Actually Bunker’s intentions were not to corner the silver market, but rather to protect his Libyan oil profits from the ravishes of inflation by hedging with paper and physical silver.
I find it very ironic that the 1978 Silver Bears movie depicting a wealthy silver investor who was trying to KEEP THE VALUE OF SILVER FROM FALLING, due to this supposed huge inflow of silver from a fictitious mine. Of course, it was a British & American joint production right at the very time the price of gold and silver was skyrocketing and threatening the safe-haven status of the U.S. Dollar.
As described above, there was a severe silver deficit taking place in the market at this time. While it may just seem like a mere coincidence that a movie making a parody of about SILVER BEARS was released at the exact same time real events were getting very serious in the silver market, it certainly parallels nicely with the theatrics taking place today.
In the 1978 Silver Bears movie, the result was a dumping of a supposed silver supply from an Iranian mine that depressed the price, whereas today we have the dumping of naked short paper contracts on the market with the same intent — to smash the price of silver.
The two leading roles in the MODERN SILVER BEARS EPIC are a bank, JP MorganChase and an analyst who runs the CPM Group, Jeff Christian. There are additional smaller players, but these are the two most well-known sources which everyone in the precious metal community are familiar.
JP Morgan is well known for its manipulation of the silver market via the excellent work done by Ted Butler. By the way, I started investing in silver bullion back in 2002 due to reading Ted Butler’s analysis of the silver market. Anyhow, Butler’s critique on JP Morgan silver manipulation can be summarized by passages from the following article:
In COMEX silver, JPMorgan has behaved differently. Instead of selling short silver at declining prices, as it did in the London Whale case, JPMorgan has only sold short additional quantities of silver on increasing prices. After these additional short sales have satiated all new buying interest, JPMorgan then causes prices to decline (through the manipulative device of HFT) and buys back its short sales at lower prices and great profit.
JPMorgan’s real crime resides in its ability to sell unlimited quantities of COMEX silver contracts short on the way up in price to the point of creating unprecedented levels of market share and concentration. In December 2009, JPMorgan held more than 40% of the entire short side of COMEX silver and close to that market share on other occasions. To my knowledge, there has never been a greater market share or corner in any major market in history. These unlimited short sales by JPM inevitably satisfy technical buying interest and then that technical buying turns to selling at some point, with JPMorgan then working to induce the tech funds into selling. The buying back by JPMorgan is the illegal ringing of the cash register and closing out of the manipulative silver short positions sold at higher prices.
If you have followed the JP Morgan manipulation story for years, you will realize that it is part and parcel of the overall market rigging by the Fed and member banks of the entire financial system. Once the official authorities go down the path of market manipulation, they cannot stop or the system collapses.
Another important aspect of market rigging is the control of precious metal market sentiment. This has been done by the banks themselves as well as a leading analyst in the metal community. Jeff Christian who runs the CPM Group has been very outspoken against the notion of silver manipulation and has even tried to slander one of the very individuals who has been producing actual data and evidence to uncover it.
At the Silver Summit in October this year, Christian ended his presentation by releasing what he thought was damaging personal information that would discredit this “Silver Whistleblower” who is known as Andrew Maguire. Not only did Christian share this with the audience, word spread to various financial and precious metal websites.
A few days later, Maguire responded to the false allegations by providing the following information via the TFmetalsReport:
Last week, an attempted attack on me was made based upon unreliable and misinformation. The most important question to ask from it is why? This is extremely easy to answer. I am exposing the imminent default of the LBMA unallocated bullion banking system. Ever since JC of CPM Group made the mistake of admitting that a 100/1 leverage was routinely employed by the LBMA Bullion banks, it would appear his credibility with regard to his industry peers, was brought into question by exposing a default vulnerability of the entire LMBA unallocated Bullion banking system. My work in telegraphing and publicising this information has put him on the defence to try put negative spin on my highly successful trading career.
It mystifies me as to why my 35+ years of trading and banking history is of such importance when I am recognised by my peers as an international and respected trade and investment advisor providing over 20 years of service to institutions and accredited investors.
Maguire goes on to further provide personal information and data that totally destroys Christian’s allegations. You see this is a typical tactic of the SILVER BEAR crowd as they try to go after the messenger instead of debating the message.
Another peculiar aspect of this modern Silver Bears story has to with the movement of silver warehouse stocks at the COMEX and Shanghai Futures Exchange. Since the beginning of 2013, the COMEX has added approximately 22 million ounces of silver to its warehouse stocks shown in the chart below:
The overall gains at the COMEX in 2013 have been in the Eligible (customer) category as its inventory has grown from 107 million ounce in January to 125 million oz presently (18 mil oz), while the Registered (dealer) stocks have only added an additional 4 million oz in the same time period.
However, the Chinese Shanghai Silver Stocks have fallen precipitously while the COMEX added silver to their warehouses. As we can see from the chart below, the Shanghai Silver Stocks have declined a whopping 65% since April 12th (silver take-down):
The Shanghai Future Exchange held 1,120 metric tons (mt) of silver in its warehouses on April 12th, but as the price of silver declined to a low in the $18 range at the end of June, the stocks declined 45% to reach 614 mt in the beginning of July.
At its last update, the Shanghai silver stocks have hit all-time new low of 391 mt. It is very interesting that as the price of silver was smashed during the April-June raid, the Shanghai Exchange has lost nearly 730 metric tons of silver while the COMEX has seen a 5 million oz build.
Moreover, JP Morgan who is the banking institution that represents the overwhelming force in the manipulation of silver, holds less than 9 million ounces of silver in its Registered stocks while the remaining 30 million oz is in the hands of its clients (Eligible category).
As the situation in the silver market rigging scheme becomes more dire, the players have to resort to more devious tactics to keep the game going. Jeff Christian’s attempt at discrediting Andrew Maquire (silver whistleblower) is only one method in his bag of tricks.
Christian also uses his company, the CPM Group to put out bearish forecasts for the price of silver. According to CPM Group’s most recent forecast:
Silver To Consolidate Until 2016 and Move up to New Highs By the Latter Half of The Next 10 Years:
After rising at a compounded annual average rate of 23.2% between 2002 and 2011, silver prices have declined since 2011. In 2012, prices fell 11.7% to average $31.17 an ounce. Through September, prices this year averaged 20% less than in the same period of 2012.
This declining trend is expected to persist in the medium term, with prices consolidating through 2016, CPM Group said in the study.
“After a couple of years of price consolidation, we do expect investors to come back into the market with renewed interest,” she said. “That is influenced in part by an (expected) acceleration of economic growth in the last half of the next 10 years. We do expect the economy to grow at a little bit quicker of a pace…and that will boost industrial demand, which will be positive for silver.”
Basically, CPM Group is betting that prices will recover at the latter half of their 10 year study due to “Accelerated economic growth” which will boost industrial demand. While they touch on investment demand to appear politically correct, the CPM Group never discusses the BRONTOSAURUS IN THE LIVING ROOM… and that is the ongoing collapse of the world’s fiat monetary system.
To the CPM Group, everything is about providing analysis as it has been done for decades. And that is the regurgitation of the typical supply and demand forces. Unfortunately, for the CPM Group and the countless other bank and brokerage houses’ (over-priced) long-term forecasts, their days are numbered.
The manipulation of the precious metal markets by the paper monetary authorities of the Fed & member banks will come to an end by a power much greater than thee. Of course, the public has the ability to take away the market rigging capability of these monetary institutions, however Americans have no idea of what is going on. Except for a small percentage of the educated gold and silver investors, the American public is sleep-walking off a cliff.
So what force is going to give the monetary authorities a RUN FOR THEIR MONEY… so to speak. This force can be shown in the simple chart presented below:
This chart shows the past and projected oil production by the United States. The chart is measured by exajoules but can be easily converted to a million barrels a day of oil by dividing the numbers in half. The United States first peaked in 1970 at about 10 million barrels a day, then had a second peak due to Alaska’s Prudhoe Bay and the Gulf of Mexico coming online.
Once these two additional sources peaked at the end of the 1980’s, U.S. oil production continued to decline until the wonders of shale oil came in the picture in 2007-8 time period.
This chart was done back in 2012, and has under-estimated the production coming from the shale oil fields of the Bakken and Eagle Ford. Currently total U.S. crude & condensate production is running at about 7.8 million barrels a day (mbd). Furthermore, production from these shale fields may (depending on the financial system) continue to increase pushing total U.S. production even higher in the next few years.
However, after that…. THERE’S NOTHING LEFT but a huge ride down. And when I mean a ride down, it will be like a roller coaster. As I have mentioned before, the FIAT-MONETARY-US TREASURY-PAPER-PONZI SCHEME gets its power from a rising energy supply. It is this energy supply that has been able to allow them to kick the can down the road.
Not only will the United States peak in oil production, but so will the rest of the world. The U.S. was able to allow its LEECH & SPEND SUBURBAN ECONOMY to prosper for several more decades because it exchanged worthless paper for oil-energy that it needed. This cozy arrangement is coming to an end when the rest of the world realizes that it will need to acquire REAL THINGS for exchange for their goods and services to survive in a peak oil environment.
I had a great conversation with one of the best energy analysts, Bill Powers who wrote the book on the coming “Bursting of the Shale Gas Bubble.” Bill believes natural gas production in the U.S. will decline shortly and many of the shale gas players will probably go bankrupt because their balance sheets are loaded with debt.
You wouldn’t know this was taking place by the skyrocketing rise in many of these energy companies’ share prices as well as the bullish analysis coming from MSM and some of the alternative media. I am actually surprised that a few big names that are well-known in the precious metal community are they very ones putting out bullish forecasts on the shale oil & gas sector when the opposite is the case.
I gather most people reading this article have no idea that four of the U.S. shale gas fields are already in decline. You can read more about this in my article, “MUST READ: The Bursting of the Shale Gas Bubble.”
Below is just one of the four shale gas fields in decline. It is the Barnett field located in Texas that peaked at 6.33 billion cubic feet a day of natural gas in Nov. 2011 and is now down to 4.6 billion cubic feet a day production at last count:
While I realize the typical precious metal investors are not really interested in this energy data… THEY SURE AS HELL SHOULD BE. Because it will impact everything going forward. I will be discussing this in more detail in up coming articles on what I label as “COLLAPSE ECONOMICS.”
If the precious metals investors, public or BRIC countries don’t take away the gold and silver manipulation power from the Western monetary authorities, you can bet your bottom silver dollar that the MOTHER OF ALL OIL PEAKS will certainly do it.
I can honestly say that just about all long-term metal supply and demand forecasts including price projections will become totally meaningless within the next several years and by certain, at the end of this decade.
This may seem like a long time for the frustrated gold and silver investor, but I would kindly like to remind them that we humans live 70-80+ years. So, in the whole scheme of things, it will occur in a very short period of time.
Once the MOTHER OF ALL PEAKS occurs, this will put severe stress on the nearly $100 trillion in global conventional paper assets under management. As investors wake up to this reality, there will be a huge move into the physical assets such as gold and silver. Which means… there is nothing the SILVER BEARS will be able to do about it at this time.
SILVER BEARS… you have been warned.
NOTE: If you enjoyed this article please share it with your friends and colleagues.