Tuesday, February 22, 2011


Silver has had an incredible run over the past year or
so... Where do you think it's headed in 2011? Might touch $49/ounce

Silver has definitely been very exciting. The price has
basically more than doubled [ 83% in 2010] and many of the stocks have done much
better than that... Silver has already touched $33/ounce [first in 31 years] on 21 Feb, 2011. Its in backwardation phase, which is common in commodities but rare in precious metals. But its happening...... [what’s Backwardation: When spot price is higher than future price] So you could be forgiven for asking how long that
can continue. I think the bullish case for silver going forward comes down to three main factors.

FIRST is industrial demand. Everyone knows industrial use is much
greater for silver than gold, and that does make it more susceptible
to an economic slowdown. But what's interesting is these industrial
uses are growing rapidly. But this silver investment could be one of the cheapest ways to protect your money from the decline of the U.S. dollar.

For example, all of the following uses for silver are increasing:
medical, apple i-phone, plasma tv, electronics, food processing, water treatment, paper,building materials, wood preservation, textiles, consumer products...
the list goes on and on. Every bandage-maker, for example, now offers
a silver-based product. You can buy silver-laced toothbrushes,
hairbrushes, combs, and make-up applicators. In England, you can buy silver-based soap.

The takeaway is that all these uses are on the rise, so even in an
economic slowdown, there is a higher level of base demand. The demand
for any individual application could decline, but the total number of
applications for silver is increasing. Over time, I think we'll see
increasing levels of demand.

SECOND major factor is investment demand. Investment demand is
soaring and can't be ignored. The U.S. mint sold more one-ounce Silver
Eagles in January than in any other month since they began creating
them in 1986. China's net imports of silver quadrupled in 2010.
Against all this you have the fact that most Americans don't own any
gold or especially silver. So even though there's already incredible
investment demand, the potential for it to increase is still

THIRD factor is supply. Ask yourself what's wrong with this
picture: Total global demand for silver is about 897 million ounces a
year. Total global supply is about 729 million ounces a year.

Deutsche Bank
Credit Suisse
JP Morgan
Goldman Sachs
China Construction Bank

Scrap currently makes up the difference, but I think the crucial point
to recognize is that producers can't dig up enough silver to meet
current demand.

So what happens if industrial uses continue to rise? What happens if
investment demand continues growing? What happens if we do get some
type of currency collapse?
Vietnam has already devalued its currency Dong [ 8.5%] on 20th Feb-2011 to boost exports, which is not the solution to her problem. Moody’s downgraded Vietnam and Japan in recent reports. More to come from advance economies whose policy makers are still in the reactive mood. Europe is shivering with fiscal profligacy.

There were few bottleneck issues with physical supply in 2008, where mints
across the world couldn't keep up with orders. A lot of it was due to
them being unprepared for the rush, and they've since improved some of
their operations. That's great.

But even with all the improvements, even after adding equipment, even
after adding staff, even after adding work shifts... they're still
having issues. Over the past three or four months we've been hearing
about mints having delays, temporarily running out of stock, etc. So
it's still a problem.

And if all the factors I just mentioned come into play, then I think
you could say "bottleneck, meet desperation." Regardless of how well
prepared a manufacturer might be, demand at some point could
legitimately overwhelm the system, and I think that's a very real
possibility. Anything could happen. But the scary thing is, we may not
have enough supply to meet demand if we get a mania.

So based on these factors, my view is that silver can continue rising
for quite some time. I don't think it stops until SLV, the silver ETF,
is a favorite of the fund managers... until Silver Wheaton is a market
darling of the masses... until Pan American Silver is Wall Street's
top pick for the year... That's when I'll be looking for the end of
this silver bull market.

Many people don't realize this, but silver rose 3,647% in the
1970s, from its November '71 low to its January 1980 high. If you were
to apply the same percentage rise to our current bull market, silver
would climb another 500% from here, and the price would hit $160 an
ounce. Those are just numbers, but it shows that we have an established
precedent for the price to go much higher.

It's the fundamentals, of course, that will determine how high the
price ultimately goes. Show me a healthy dollar, show me no threat of
inflation, show me a responsible government that stops printing
money... Show me a repentant Iran and North Korea...Show me that Middle East is at peace with rulers[ Jordan, Egypt, Tunisia, Bahrain, Morocco, Saudi Arabia, Kuwait] acting normally and not running from the country. Show me that the
sovereign debt issues in Europe are resolved... Show me positive real
interest rates... Show me that unemployment is plummeting, that bank
closures have stopped, that real estate is recovering...Show me all that and I'll talk about the gold and silver run being over... But until those things start changing in a big way, I'm still buying.

Silver bears often suggest that a large part of the rally in the
last bull market was due to the Hunt brothers, who were accused of
trying to corner the market. What is my take on that?

I'm skeptical that the reason silver went as high as it
did was primarily due to the Hunt brothers' activity in the market.
It's interesting to note that they bought silver primarily because
they mistrusted the government, and because they thought silver was
going to be confiscated. Remember... gold ownership was illegal when
they first started buying silver in the early '70s.

Yes, they [ Hunt brother] bought a lot of silver... But if you look at the
correlation, you'll notice the price didn't necessarily move up when
they bought. In fact, when the rumors that they were trying to
"corner" the silver market really started going mainstream, which was
in the spring of 1974, the silver price dropped solidly for the next
two years. One would think that the price would've risen not fallen if
silver was being "cornered."

Secondly, if you look at price charts, silver moved in lockstep with
gold back then. They rose and fell pretty much together. They both
peaked on the very same day, January 21, 1980. So unless the gold
market was equally spooked by what the Hunt brothers were doing with
silver, it seems a stretch to assume they were the primary cause of
the rise.

Lastly, you have to consider that it was the mainstream media that largely promoted this idea the Hunts were "cornering" the market. With that in mind, one has to be suspicious that was, in fact, the case.

To be clear, I'm sure they had some effect, but to suggest they were
the main impetus behind silver's tremendous rise doesn't seem wholly
accurate. And look at the price today... It's outperforming gold in
our current bull market, just as it did in the '70s, and there's no
Nelson Bunker Hunt around. Besides... who's to say that we won't see other "Hunts" come along today and try to buy up large quantities of the metal? I wouldn't rule it out.

So again, I think it's more important to look at silver's fundamentals
for any kind of price projection than a one-off event. And those
fundamentals are very bullish.


I elaborated this earlier... but if the economy crashes, silver is likely to suffer more than gold due to its large industrial use component. Another factor is that silver is not bought by central banks, so one source of demand for gold is not present with silver.
But I think the bigger trend of a currency crisis is going to dwarf
those concerns. I see lot of currency intervention in the global financial markets. Chinese yuan would be under pressure from USA. However, Yuan/Renminbi would appreciate 4-5% in 2011 against US dollar with GDP touching 9.6%

Prudent approach

Silver is more volatile than gold, but that just means you get better
opportunities to buy it cheaper, and probably make more money on it if
you sell near the top. So yes, there are bearish arguments for silver, and one has to be prudent in buying it – you don't want it to be the only asset you own,
for example. But it would be equally a mistake to not own a meaningful

Good time to buy…

There's your answer. If you have minimal or no exposure, I suggest
buying. Don't rush out and spend all your available cash, because
there will always be corrections, but the less you own, the more you
want to make a plan to add a meaningful amount to your portfolio.

Remember...silver is a currency replacement just like gold. It's
money... and therefore you want to make sure you own enough for both
protection and profit. If you don't own enough, I suggest going into
"accumulation" mode... buying some on a regular basis, like
dollar-cost averaging.

My recommendation which is a conservative by the way – is that approximately one-third of your strategic valued assets be devoted to the precious metals market. That includes gold, silver, and precious metal stocks. That may sound
extreme to some, but I think the risk to currencies right now is
extreme. Chinese government has already communicated to her people to increase their Gold and Silver holding in their asset portfolios. Therefore, being overweight precious metals is justified. Obviously, each individual investor has to be comfortable with what they do.

I generally recommend you hold more gold than silver. I suggest approximately 70%-80% in gold versus 20%-30% in silver. Depending on your situation and risk tolerance, you may wish to have more or less in silver, but again the point is to have meaningful or market focused exposure.

Silver purchased method:

The options are becoming more and more mainstream, so it's
getting easier to buy both metals. The alternatives are growing, and
they're also improving. You basically have two choices: You can either
buy and store it yourself, or you can buy and have someone else store
it for you. Ideally, you want to do both... you want to DIVERSIFY YOUR RISK AND ASSET CLASS.

There are risks to storing metals yourself, such as theft, loss, or
fire. You can put it in a safe deposit box, but then it's in the
financial system and it's subject to banking hours and could even be
susceptible to confiscation, though I'm skeptical that will actually
happen. But I do think everyone should have some physical silver
handy, at least a couple months worth of expenses.

So the short answer is to diversify what you buy and how you store it.
For physical silver, I would stick to buying the popular one-ounce
bullion coins – Eagles, Maple Leafs, etc.

Silver Stocks.

It's pretty clear the go-to stock in the silver industry
– in my opinion at least – is Silver Wheaton. It's definitely been a
sweetheart the past two years. It's given us everything we could want
in a silver stock.

The stock suffered badly in the meltdown of '08, and things did get a
little dicey at the time, but I remember thinking that unless the
world comes to an end and the silver price never recovers, this
company is going to survive and bounce back – in part because of
management and in part because of the business model. They have no
exposure to mining costs, for example.

Shares back then were around $3... If you bought at the time, they're
now a ten-bagger. So it's been an incredible run. The question, of course, is going forward: Since the stock is already at $35, can it be another ten-bagger from here? The company expects to increase "production" by 70% by 2013. And
their costs will basically stay stagnant. Meanwhile, imagine where the
silver price could be in the next two to three years, and you can see
this company can make enormous amounts of cash. Some of that is
probably priced into the stock already, but you can't deny where this
company is headed over the next few years.

Could it have a big correction? Recently dropped as much as
28%, but sure... it could easily fall more than that in a major
correction. But if that happened, I'd consider it a big buying
opportunity. In my opinion, the bigger the correction, the bigger the buying
opportunity, because I really believe the future is very bright for
the company.

If you're bullish on gold, I think you need to be bullish on
silver, unless you think inflation will never come to pass. Regardless
of the short-term fluctuations in the market, it's only a matter of
time before the currency issues punch us in the gut and inflation
really takes off.

Second, remember that silver will be volatile, but focus on the
fundamentals and use sell offs as buying opportunities. Until the
fundamentals driving the bull market change, buy.

Bottom line, the bull market is far from over. I think it's going to
go much longer and much stronger... So buying on dips is the best
advice I could give anyone.

DISCLAIMER: This is just a research piece and not an investment advice. Investors are encouraged to execute their own due diligence before making any strategic investment or strategy implemmentation.

Friday, February 18, 2011

Incredible Geothermal Green Energy Potential --By Shan Saeed

Green energy can change the global energy mix moving forward. By Shan Saeed

It is estimated that huge EGS geothermal resource potential lies beneath the western United States. This is approximately half of the current installed electric power generating capacity in the United States. China is moving into electric cars aggressively. USA could be producing 32 million times more geothermal electrical power than it does at present. I am bullish on Oil, Natural Gas, Ethanol and Geothermal.....

Expert speak about energy

This year's forum in Russia was just as entertaining, and while it didn't have quite a distinguished audience, it did feature Marc Faber and Nassim Taleb in a discussion of whether Russia is the best or worst BRIC. That said, trust both Faber and Taleb not to stick to the script and go off on wild tangents. Sure enough, the line of the night as usual belonged to Faber: "We have a big debate in the world whether we will have a deflationary collapse or an inflationary boom...usually after a period of very heavy money printing war follows." That is the philosophical gist of it. As for Faber's recommendation, it is precisely the asset which has become a short-seller's nightmare in the current geopolitically fragile environment: Oil.


"Whether you are very bullish or very bearish you should invest in oil."



The U.S. produces more than 100,000 gigawatt-hours per year of geothermal electricity already, but it could produce as much as 3.2 trillion gigawatt-hours. This green energy has UNBELIEVABLE potential globally. The U.S. could be producing 32 million times more geothermal electrical power than it does at present.


The Earth's heat never stops—meaning a geothermal power plant can produce electricity as regularly as a nuclear power plant can. And it also has nearly no emissions of the greenhouse gases causing climate change. Geothermal power plants are currently located in areas with natural hot springs and geysers, such as this planned 15MW plant in the US state Nevada.
Enhanced geothermal will be a whole new ballgame. That is where the lion's share of geothermal power can be tapped, but it will require expensive deep drilling technology which has not yet been perfected for this purpose. It will also require new forms of ultra-deep fracking of hot rock, to enhance deep crustal heat exchange for energy extraction.

The hazard of earthquake-triggering is routinely hyped and inflated, as is natural whenever a genuinely revolutionary energy technology is considered. But deep geothermal drilling cannot create new seismic faults where none exist, nor will the technology increase tension on pre-existing faults. Enhanced geothermal can either drill in seismically active -- or seismically inactive regions. In the inactive regions, there is no problem. For seismically active locations, the technology of enhanced geothermal is more likely to prevent large earthquakes, by facilitating smaller tension-relieving quakes. Study of HAARP is important. What happen in 1942 in England? It can provide you valuable insight for future decisions.

The potential is certainly there. But the technology and the economics needs to catch up to the potential. That will take time and investment. By transferring all investment away from wasteful and ineffectual energy mix over to technologies with solid 24 hour / 365 day baseload potential, society would be taking a big step forward. We are surely moving towards clean and environment friendly energy for the future requirement. You bet.

Disclaimer: This is just a research piece and not an investment advice. Investors are encouraged to execute their own due diligence before making any strategic investment or moving into implementation phase.

Thursday, February 10, 2011

How High Will Gold / Silver Go In 2011? by Shan Saeed

Price Outlook and Forecast for Gold and Silver in 2011. How High Will Gold Go In 2011? By Shan Saeed

We are talking about REAL ASSETS over here. We cant devalue or multiply these real assets out of thin air. After stellar years for both gold and silver, what prices will precious metals hit in 2011? Here's an in-depth analysis based strictly on their price behavior in the current bull market.

Strategic Analysis of Prices for Gold:

Look at the annual percentage gains that Gold has registered since 2001 [based on London PM Fix closings]:

Year % Gain
2001 0.7
2002 25.6
2003 19.9
2004 4.6
2005 17.8
2006 23.2
2007 31.9
2008 4.3
2009 25.0
2010 30.7


Excluding 2001, the average gain is 20.4%. Tossing out the additional weak years of '04 and '08, the average advance is 24.8%.

So to make some projections based on what it's done over the past 10 years. From the 12-31-10 closing price of $1,421.60, if gold matched…

• The average rise this decade, the price would hit $1,711.60
• The average rise excluding the three weak years = $1,774.15
• Last year's gain = $1,858.03
• The largest advance to date (2007) = $1,875.09

But what if global economic circumstances continue to deteriorate? What if worldwide price inflation kicks in? And what if government efforts at currency debasement get more abusive? A mania in all things gold lies ahead – what if that begins in 2011? Here's what price levels could be reached based on the following percentage gains.
• 35% = $1,919.16
• 40% = $1,990.24
• 45% = $2,061.32
• 50% = $2,132.40
• 1979's gain of 125.7% = $3,208.55

It thus seems reasonable to expect gold to surpass $1,500 this year [Conservative estimate], as well as reach a potentially higher level since the factors pushing on the price could become more pronounced.

SILVER PRICES: Look at the annual percentage gains that Silver has registered since 2001 [based on London PM Fix closings]:

Here's a look at silver.

Year % Gain
2001 -1.2
2002 3.2
2003 27.9
2004 14.2
2005 29.6
2006 46.1
2007 14.4
2008 -26.9
2009 58.5
2010 83.9


As you can see, silver had its biggest advance in 2010. The average of the decade, again excluding 2001, was 27.5%. And also tossing out the '08 decline, the average gain is 34.3%. So, from the 12-31-10 closing price of $30.91, if silver matched...
• The average rise this decade, the price would hit $39.41
• The average gain excluding 2008 = $41.51
• Last year's advance = $56.22
• The 1979 gain of 267.5% = $113.59

So, $49 silver seems perfectly attainable this year. And that's without monetary conditions worsening.

It's titillating to ponder these advances for gold and silver, especially when you consider we might be getting close to the mania. And if we are, that should do wonderful things to our gold and silver stocks, too.

I would add one caveat: the odds are high that there will be a significant correction before gold begins its march to these price levels. In every year but two ['02 and '06], gold fell below its prior-year close before heading higher. And here's something to watch for: in every year but one ('08), those lows occurred by May.

In other words, a buying opportunity may be dead ahead. And if you buy on the next correction, your gains on the year could be higher than the annual advance. Are you satisfied with the amount of bullion you own if monetary and fiscal circumstances deteriorate? Are you prepared to profit from the mania in precious metals is ahead? If not, start the year right with a RIGHT RISK APPETITE to profit from the ongoing bull market…

Although the silver price has declined by 11% over the past three weeks at the start of 2011 and Gold has lost 7% in value, tightness in the physical market continues as the metal is again in backwardation, i.e. the spot price is higher than the futures price. Silver is in backwardation which is an extremely important development. Backwardation happens regularly in most commodities, but it is rare in the precious metals.
Silver is in backwardation not just in the short-term, this time it is extending twelve months forward! The last time this happened was in January of 2009. Over the next few weeks silver rose from about $10.50 to $14.50, a roughly a 40% move higher. The key to understanding backwardation is that the price must rise to entice holders of physical metal to sell and accept a national currency in return. I think we can expect a similar event to repeat over the next few weeks. A similar type of move would clearly put silver well above its previous high. What this backwardation illustrates is there is a great disconnect between the physical and the paper markets in silver. As I said previously, the silver shorts simply cannot hold the paper price down here any longer without seriously discredit the paper silver market as a price discovery mechanism.”

Some positive development in the silver market, reporting a massive increase in silver bullion demand from China, with the country’s imports surging fourfold in 2010As on so many other fronts, China is turning out to be a game changer. The heat is on in the precious metal market.

Disclaimer: This is just a research piece and not an investment advice. Investors are encouraged to execute their own due diligence when making any strategic investment or implementation.