Seeking Alpha

Hyperinflation's  Instablog

Hyperinflation
Send Message
Analyst & Contributor @ The Morgan Report ( Silver-investor.com) ,
My company:
Stone Investment Group
View Hyperinflation's Instablogs on:
  • Why Silver Is Head Higher..Much HIgher

     

    Like Gold, most people dismiss silver mostly because their is a stigma among the mainstream that label those who embrace this metal as having some type of fetish. This comes out of sheer ignorance - as silver is the metal of the future. Silver plays two roles, of which both are of great importance. To avoid the much talked about inflationary hedge aspect, I will write just a few sentences for those unaware of this characteristic.

        Silver as a store of value - Like Gold, Silver is seen to be a store of value and for good reason. It too has been used as a worldwide currency for well over 5,000 years. This is because it has always been chosen by the people as an ideal medium of exchange. (Gold for larger purchases and Silver for smaller denomination transactions). This was due the physical characteristics of these metals i.e durability , inability to replicate , a adequate level of scarcity, etc. So as we embark into the era a unprecedented inflation, silver will be right next to gold as the ideal protectors of REAL WEALTH.

        Silver For Industrial Use- Now and In the Future - what most people don't realize is that silver has become an essential metal in our everyday lives. This trend will continue but at an increasing rate rate. Most people think of the common industrial uses, photographic uses, silverware, jewelry and coinage as capturing all that is silver and these uses will see little to no impact in the demand for them. On the Contrary, as silver has recently caught the attention of the medical community for its ability to fight off bacteria growth and promote healing. Without getting into in depth terminologysilver interrupts bacteria's to form chemical bonds, without which the bacteria has no choice but to die. To avoid going off on a whole discussion about the numerous other applications that are being looked into amongst the medical community, I will leave it at that.

     

           Before I get to the important development and the biggest catalyst for silver going forward, it is also worth mentioning silver lenses have proved superior in fighting off harmful rays in addition to conducting light transmission in such a way that people don't need to change glasses when moving from outdoors to indoors or vice versa. This is a rather new trend but is being used more and more, currently just under 15% of total production. One last note before I get into the really exciting applications, is silvers use as a component in solar panels ( which I believe is bogus, but the green movement will have solar at the forefront).

           Silver is starting to become a necessity in water purification, much for the same reason mentioned above (the ability to fight off bacteria). Silver is replacing harsh chemicals i.e. Bromine, Chlorine which are inferior for obvious reasons. Although the previously mentioned chemicals will continue to be used, the shift has slowly begun favoring silver, especially in building new water supply systemsSilver destroys legionnaires disease, which is cause via a buildup of bacteria in the piping of these systems. Not to mention the superiority it will have in personal water filters which currently used charcoal among other things.

    Now for what I believe will be the an enormous catalyst for Silver. I am referring to the new Silver-Oxide batteries (which have been developed and tested already) and will soon hit the market, most likely in Q4 09'. 

    Duracell has already developed basic everyday batteries while companies such as Intel capital have developed those batteries used in laptops. Anyone who uses the computer hours a day have likely noticed the vast shortcoming in the currently used lithium-ion batteries. For example, they tend not to hold a charge as the life of the battery increases which even in my personal experience has led to the complete death of the battery. The Silver- Oxide batteries, however, do not share these characteristics and last 40% longer. They are also recyclable, which should draw attention of the green fanatics out there

    Imagine the implications of this fact, as they are incredibly telling for the future prices ( more on the supply later). One just needs to imagine the widespread use it will have, especially as those society's in emerging countries begin to use battery intensive electronics such as laptops or just your everyday cheap and simple electronics.

    The Supply Side: Instead of going into an in depth analysis, I will instead just briefly summarize the results of a US geological survey concerning silver. Well first off, no one knows how much silver is below ground! But there is a huge deficit when they measured the amount that would be feasible to sell at $15/oz. When I say huge, I mean a quantity that will prove unsustainable for the immediate future. Of course this does not take into account the stockpiles above ground, but that has been dwindling as silver mining has been negligible the last 1.5 years. Now don't get confused with me saying we are running out of silver or something absurd like that. The previously mentioned survey determined there was ample amounts of silver but one big problem. This silver lie so far down in the earth, that even conservative estimates are projecting a selling price of $30/oz for this to be feasible. ( This is not a well hidden fact, as it is very to easy to find numerous surveys like this from a number of credible sources). I have also seen estimates nearly double that of the conservative projections.

    Conclusion: Silver should not only be looked as an inflationary hedge rather through fundamental supply and demand measures. The non-inflationist can merely look at this as a bonus and focus on the fundamentals, which is something you can't do with goldAs for The Silver Miners, I think they are possible the best way to play this, should you believe in the silver story (barring futures). 

    Oct 19 10:15 PM | Link | Comment!
  • The Dead Cat Is Done Bouncing
                                       
     I don't see how the current rally in the major U.S. Market indices can continue for much longer, which I indirectly referred to in a recent article. By this, I mean an ensuing wave or potentially waves of further financial crisis seems inevitable, whether it be the much talked about commercial real estate bubble or continued bank failures via loan losses as ARMS reset and the US economy sinks further into recession ( despite whatever the doctored government statistics are telling you). This being said I think the rally in the Dow may have legs to make it back to 10,500 or so, but not much if any further past that. 

    I come to this conclusion for a number of reasons, but mainly due to my conviction this will be a double dip recession caused by the previously mentioned financial crisis as well as rich valuations, especially when compared to those around the world. Of course there are several exceptions ( referring to the entire commodity complex - most notably Oil, Gas, Base Metals, Precious Metals and the Entire Agriculture arena) but those industries that require high capital costs other than commodity producing entities are in for a rough road. But ultimately It comes down once again to ridiculous valuations on almost the entire financial sector. I mean how many investors who own large money center banks even understand their balance sheet. I know I have stayed away from the financial industry my entire investing life solely due to that reason. I mean I don't understand why people invest in those entities which have negative cash flows. But the fact is they do and I think it is more likely than not there is a lot of this going on as reflected in the current market prices. 

    Even if I'm off base here, there is still limited upside in the U.S market. I would much rather be invested in the Canadian Markets, Australian Markets, Honk Kong, New Zealand and if forced to speculate, I would most definitely focus on Brazil or even Russia as opposed to any U.S financial company. I want to be invested in Canadian miners, natural gas,  Canadian Oil Sands and Agriculture or Australian and New Zealand Mining and their respective agriculture industry. Honk Kong, though many Indices there have doubled from their lows, still offer bargains left and right if you look in the right place. I think I made my point.... The U.S market, even if it manages to avoid another financial crisis, still leaves investors with very mediocre returns.

    Just my 2 cents - 

    Sep 29 11:00 PM | Link | Comment!
  • Liquidity Crisis Increasing: Actions Speak Louder Than Words


     The recent release of the weekly monetary aggregates by the Federal Reserve Indicate an Intensifying Liquidity Crisis & another potential round of bank failures this fall/winter. The Narrowest measure of the money supply (Base Money Supply) reached record high's as of Sept 25, surpassing that seen back in March of 2009. This constitutes an annualized growth rate of 121%! Currency in Circulation increased, but the disturbing is seen through the record reserves in the system. 



     The mainstream argument would go as follows: The dramatic spike in bank reserves is not indicative of potential crisis in the near future but rather our attempt to promote bank lending in an attempt to get commerce back to normal in all aspects of the economy. This, however, is in direct contradiction to the FED's decision to pay banks interest on the reserves they have recently injected into the system, or in other words an incentive to not lend that money. Only one logical conclusion can be drawn from this, The Fed is aware of and prepared for a combination of the following: Another substantial banking crisis (this time likely due to a spike in loan losses rather than toxic assets) , The inevitable fallout of the commercial real estate market (which again would mean substantial loan losses).

    This comes ahead of the unemployment numbers (which may show the economy crossing the threshold of double digit unemployment, but only if the temporary effects of the stimulus have faded). My intuition tells me it is either a pre-emptive move to ensure to the public that the banking system is adequately capitalized should either unemployment be higher than expected, pay-roll numbers lower than expected or the GDP revision worse than expected (all of which would spur the public to question whether the banking system could withstand more economic turbulence. In other words the FED's attempt to instill an artificial sense of confidence into the market in hopes that they will continue to increase spending, and give the illusion Big Ben has indeed saved the day. Unfortunately, as time will tell, the end-game is a currency crisis that could potentially break the USD.

    Peter Schiff made an excellent point that supports my aforementioned argument. Bernanke claims the economy is back on a path of growth ( the degree to which is not important) , yet the fed minutes say they will hold rates at 0% indefinitely! Even with the emergency rate cuts in 2001 by our former (just a reckless FED chairmen) , the short end of the curve still bottomed out at 1%. So why can't we have 1-2% rates (which are very low to begin with)? Well I think I indirectly answered that in the above paragraphs... We have only seen the tip of iceberg and the FED knows it.

    Gold & Silver Reign Supreme
    -My 2 Cents 


    Sep 25 8:10 PM | Link | 5 Comments
Full index of posts »
Latest Followers

Latest Comments


Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.