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Monday, April 22, 2013

Get Some, If Ya Can

Marinate in this for a second -
“Perhaps more to the point for TBTF [Too Big To Fail], if a SIFI [Systematically Important Financial Institution]  does fail, I have little doubt that private investors will in fact bear the losses [emphasis added.  ed.]–even if this leads to an outcome that is messier and more costly to society than we would ideally like,” Stein said in remarks prepared for a conference sponsored by the International Monetary Fund. “Dodd-Frank is very clear in saying that the Federal Reserve and other regulators cannot use their emergency authorities to bail out an individual failing institution. And as a member of the Board, I am committed to following both the letter and the spirit of the law.”
Ok, who is this Stein fella, and why should I give a damn what he thinks.  Well, he's a governor for the Federal Reserve Bank.  You know, that group of shot-callers when it comes to our financial well-being.

In non-banker speak, he's saying that if an large American bank goes teats-up, the depositors will be footing the bill for the bailout.

What?  You didn't know that when you make a deposit in your bank, you are an investor (creditor) of that bank?  Yep. Your deposit amount is an asset on your personal balance sheet, and it's a liability on the bank's balance sheet.  An unsecured liability, by the way.

So, when the National Bank of TooBigToFailville crashes and burns, you'll be the one holding the flaming bag of dog dung.  Rest assured, though, that the friends and family members of the banksters will have already pulled their cash from the collapsing hulk.

Just like what happened in Cypress.  Hmm.  Hey, it all kinda sounds like Cypress now that you mention it.  Who'd a-thunk it?

At least in Cypress, the Little People got to keep the government guaranteed portion of their money (the equivalent of our FDIC protection).  Are we going to get the same "protections" or is Mr. Stein giving us a heads-up to the contrary with his, "messier and more costly to society" comment?

I've noted here in the recent past that there have been shortages of product to sell in our precious metals store.  For the past couple of months, getting our hands on silver, in particular, has been very difficult.

Now, it's damned near impossible.  Unless a customer comes in my store selling stuff, I've got no other avenues to obtain product for my buying customers.

Here's a screen print from a recent email from one of our regional wholesale suppliers.  These guys do half a billion dollars a year in business -

But wait, there's more!  Here's a screen print from an email I received from a national supplier we use, NTR metals.

The three products listed on top are for bars that they produce in-house!  They can't get enough raw materials to even make the stuff themselves.

At the bottom of the message, they list the other silver they're no longer making available.  Like Silver Eagle produced by our government, and Silver Maples produced by Canada.

Hey, no biggee.  It's just a blip in the market, right?

Not so much.

When this shortage first started showing its ugly head, the premium paid over the spot price for an ounce of silver stayed pretty constant.  Roughly $5 per ounce for Silver Eagles, $4 for Silver Maples, $2 for generic silver rounds (or bars) and $1.75 for junk silver (pre-1965 halves, quarters and dimes).

Folks figured this was just a market correction, and supply would re-emerge.  That's not happening.  This is a real, Honest-to-God, demand exceeding supply situation!  Premiums are going through the roof.  $9-$11 for Silver Eagles and Maples, $7-$8 for generic silver rounds, and (holy crap) upwards of $9 for junk silver and $22 for non-collectible Morgan Silver dollars (you're just buying these for their silver content).

[VERY brief tutorial on determining the equivalent spot price when buying Junk silver - which is sold by "per dollar face".  Each $1 in face amount - two halves, 4 quarters or 10 dimes, contains the same amount of silver.  0.715 of an ounce.  Mix and match any way you like - one half and two quarters, two quarters and five dimes - it doesn't matter, as long as it equals $1 face amount.

If you take the cost for $1 face, and divide it by 0.715, you'll get the dollar amount you're paying per full ounce of silver.  So, right this second, on, junk silver is selling for $23.32 per dollar face.  Divide that by 0.715 and you get $32.62.  That's what you're paying per ounce.  If you subtract the current spot price - $23.43 - you get a premium of $9.19 per ounce over spot.  You can do the same thing with the Morgan and Peace dollars, only divide by the 0.773 of pure silver per coin.

Back now, to our regularly scheduled rant.]

As you can see from the snippet taken from our regional supplier, this is now going into the gold market.  Right now, the only way I can get gold Eagles, Maples or Krugerrands is if they come through our door, or I pay retail prices from the large Internet sellers.  Not a lot of profit in that for the store!

Accept The Challenge

So, am I suggesting you go withdraw your life savings from your TBTF bank account and buy silver and gold at whatever price you can find it?

For goodness sake, no.  But open your eyes if they've been closed to what's going on.  It's REALLY time to maintain a defensive mindset with regards to money and finance.

What I AM saying is, if you've done your own personal family financial analysis, and you have a couple of bucks laying around that don't have a future purchase tied to them, get some gold and silver.  Stick it in a safe or in a can in the backyard, and don't plan on spending it for the next 5 years - minimum.

What I am saying is that if you've followed my advice and have developed new, multiple streams of income, put that money into gold and silver.

What I am saying is that if you've got some crap laying around the garage you might be able to convert into cash via a garage sale or Craigslist, put that money into gold and silver.

I probably should say that if you don't think our currency will be horribly debased by all of the Quantitative Easing good old Uncle Ben has been serving up, and by the mounds of debt being piled on by Republicans and Democrats alike, and that our government would never-ever take your money (say, via a Trading With The Enemy Act and the Emergency Banking Relief Act, Part II) then don't buy gold and silver.

But you should get that bump looked at, because clearly, you've fallen and hit your head....

Copyright 2013 Bison Risk Management Associates. All rights reserved. Please note that in addition to owning Bison Risk Management, Chief Instructor is also a partner in a precious metals business. You are encouraged to repost this information so long as it is credited to Bison Risk Management Associates.

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