The Daily Reckoning October 15th


Okay, Grandma’, It’s Your Turn in the Pokey

Proponents of liberty argue over what parts of the economy or society government should not touch. Government should get out the education business, stay out of health care, and even leave roads and infrastructure to the private sector.

But when it comes to criminal justice, even many libertarians think government should supply the police and court system. And truly, government controls the criminal justice system. The results are tragic.


The government determines who is a criminal and who is not. The rate of violent crime has fallen, but some commentators guess that each of us commits three felonies a day. Mothers, fathers and grandmothers are being locked away for decades because they bought too much Sudafed in too short a period of time.

For instance, Diane Avera of Meridian Mississippi a 45-year-old grandmother must serve a year in jail unless she wins her appeal.

Diane was arrested and sentenced to jail in Alabama for buying cold medicine because authorities believed she was going to use it to make methamphetamine.

Being needlessly snared in the nation’s drug war has been a nightmare for Ms. Avera, a woman who does personal care for the sick, disabled, and elderly. “I keep thinking I’m going to wake up, but I never do.”

This wasn’t against the law until the second Bush administration made it so.

Richard Nixon’s “War on Drugs” kicked off in 1971, and four decades later, America is the world’s most prolific jailer. There are 2.3 million Americans behind bars, the result of a trillion tax dollars spent and 45 million drug arrests made. The results: plenty of drug use, plenty of drugs, and a criminal justice system dependent on an increasing number of lawbreakers to pay salaries and benefits.

And their results are predictable.

Public safety is no longer the issue. The incentive at city hall is to lock up nonviolent offenders to make arrest quotas. Catching violent criminals is too time-consuming and costly. What has grown is the criminal justice industrial complex: a huge law enforcement and judicial system leviathan that feeds on an ever increasing crop of petty laws and legislation.

What’s worse is that in the information age, criminal justice has become a spectator sport. The public can watch real cops in action on reality TV or live courtroom drama on cable. Hollywood can barely compete with footage of real people being snared in America’s criminal justice dragnet. Society’s squeaky clean can sit back, relax and sneer in judgment at their neighbors who can’t quite seem to play by society’s ever-changing rules.

In our small city, a biweekly paper called The Jailbird is being sold around town. Yes, for a buck, the reader can ogle mug shots of local people who have been arrested in the surrounding three counties. “Drunk Drivers — Drug Pushers — Deadbeat Dads” it shouts from the tippy-top of the cover.

For $58, you can even have The Jailbird sent to your home. After all, as the back cover asks, “Who do you know in this week’s copy of The Jailbird?” You wouldn’t want to miss it if a neighbor of co-worker made an appearance.

With everyone tripping over laws they can’t see, it’s just a matter of time before we all take a turn in the pokey. For instance, if you are stopped for a having a few too many and driving home (or walking home, for that matter), guess what? Not only will you likely make the local paper, but now, at least in our small Southern town, there is paper (all 16 pages of it) devoted to providing visual proof that the state is tough on crime.

So what kind of heinous crimes are represented on the front page of “the Bird” Year 1,Issue 9? Possession of methamphetamine, possession of cocaine, forgery, possession of oxycodone, shoplifting. Not exactly John Dillinger-level stuff.


Inside, it’s more of the same: writing bad checks, bail jumping, DUI, running a red light, failure to pay child support, commercial gambling, no driver’s license, no car insurance, speeding, possession of marijuana, public intoxication, carrying false ID, violation of unemployment compensation law, sale of a short-barreled gun, possession of illegal ammunition and hunting doves over bait.

Whew, it’s a relief to have these hardened criminals off the streets.

In numerous places, the Bird cautions us that “Suspects pictured are innocent until proven guilty.” We’re told this on both the “Hotties & Hunks” page and the “Crazy Captions” page, where the Bird prints what it calls “funny arrest photos” and includes clever captions. For instance, a picture of a bald gentlemen with a particularly menacing look is provided the caption “Moe and Curly called, they said you could come pick up your stuff on the front doorstep next Monday….”

Or “Pepito’s pork tamales with habanero sauce, the day after…” is the caption under the picture of a serious looking young Hispanic man biting his lip.

Despite the disclaimer, in the court of public opinion, these citizens have already been convicted, served up to be humiliated by their sanctimonious neighbors and the town’s bluenoses.

Sure, a few folks pictured in the Bird are accused of violent offenses. But most are not. In fact most are accused of things that wouldn’t be a crime in a free society. This only makes sense. Half the inmates in federal prisons are there for drug offenses. In state prisons, which have a much higher inmate population, over 20% of prisoners are serving time for drug offenses.

Laissez Faire Club author Lysander Spooner wrote a wonderful piece called “Vices Are Not Crimes” in 1875. Spooner pointed out that vices are acts in which someone hurts himself, while crimes constitute harming another person.

If there is no criminal intent, there can be no crime. In the case of vices, “the very essence of crime — that is, the design to injure the person or property of another — is wanting,” explains Spooner.

“For a government to declare a vice to be a crime,” Spooner wrote, “and to punish it as such, is an attempt to falsify the very nature of things.” But for its own purposes, the state has turned nature on its head to feed its criminal justice apparatus. And sadly, ordinary people whose only crime was to make a transaction with another consenting adult rot in jail as tribute to the system.

The old saying among judges is, “Hang ’em high so the voters remember you on Election Day.” Tough, hard-nosed judges continue to be elected around the country, enforcing draconian three strikes laws and the like, enacted by legislators pandering to a busybody citizenry that believes that laws can make them safe and absolve them of any responsibility for their own well-being.

As the U.S. economy continues to be regulated and inflated into oblivion, breaking bad may be the only way to put food on the table. A frightening prospect, with the police state lurking around every corner. When the state controls criminal justice, it considers all of us criminals.

Just a few weeks ago, the FBI and the Joint Terrorism Task Force arrest three young people in Seattle for now reason on than that they are self described anarchists. They have not been formally accused of any crimes. They have been held in solitary confinement and treated as terrorists — again without any evidence. One of them, Leah-Lynn Plante, made a video that you should watch to get a sense of the new criminal class.

Douglas E. French

Original article posted on Laissez-Faire Today

Okay, Grandma’, It’s Your Turn in the Pokey appeared in the Daily Reckoning. Subscribe to The Daily Reckoning by visiting signup for an Agora Financial newsletter.

Misconduct Prevention Workshop

“I was scared to death,” says Paul Brown. “I felt like a hostage.”

On Sept. 14, 2012, Mr. Brown was working on his own computer… in his home… in Beach Park, Ill. Suddenly, a gang of thugs smashed in his front door, pointed guns at him and several family members — including his 77-year-old mother-in-law — handcuffed them and ransacked his house.

Wayward drug lords?


Nah. The local SWAT team. Yes, they were looking for drugs. But they didn’t find any. Nor did they make any arrests.

WTF: Plywood takes the place of lead and stained glass in Paul Brown’s front door…

“The authorities had burst in immediately after a postal worker delivered a package to the home that they said contained marijuana,” the Chicago Tribune reports. Brown’s son-in-law accepted the package. It was addressed to someone named “Oscar.” No one by that name lives there.

The cops aren’t saying much. They believe they had the right house and the target of their investigation wasn’t home at the time. They are not going to repair the door… or help with the $3,000 in damages.

It was “just another day in the war on drugs,” excuses the Trib, unwittingly kicking off a disturbing episode of the 5 in which we try to highlight and detail what we’ve been affectionately referring to as the War on You.

Like the troubling collapse of municipal services, the increased militarization of domestic life in the U.S. is a visceral symptom of the collapse of a wayward empire. It’s not a topic we take up lightly.

Back in 2008, in a now infamous example in these parts, a SWAT team raided the home of Cheye Calvo, the mayor of Berwyn Heights, Md.

“The raid,” Wikipedia recalls, “was the culmination of an investigation that began in Arizona, where a package containing 32 pounds of marijuana was intercepted in a FedEx warehouse, addressed to the mayor’s residence.

“In spite of intercepting the package in transit, the police allowed the package to be delivered, and once the package arrived at the house, a SWAT team raided and held the mayor and his mother-in-law at gunpoint, and shot and killed his two Labrador retrievers, one while it attempted to run away.”

It turns out drug runners frequently address packages to innocent homeowners, figuring FedEx will leave the package on the doorstep when no one’s home… and the traffickers can retrieve it before anyone who lives there shows up.

That turned out to be the case in the Calvo incident. As a result, the Prince George’s County Sheriff’s Office fired several officers, implemented new procedures and conducted workshops with other police agencies from around the country to prevent innocent people from ever being terrorized again – like Mr. Brown in Illinois.

Just kidding: An internal investigation found the raid was justified. No one was punished. Prince George’s County Sheriff Michael Jackson, running for reelection in 2010, said, “We′ve apologized for the incident, but we will never apologize for taking drugs off our streets… Quite frankly, we′d do it again. Tonight.”

They must have been conferring with the Billings, Mont., police department Tuesday morning of last week. During an early morning raid, a SWAT team, looking for a meth lab, broke into the home of the Fasching family.

The cops found no meth lab and made no arrests… but they did set off a “flash-bang” grenade that aims to disorient the people inside before the officers storm the house. The grenade was tossed through the window of a bedroom where Jackie Fasching’s 12-year-old daughter was asleep. The girl suffered first- and second-degree burns in the attack.

“A simple knock on the door and I would’ve let them in,” says Jackie.

As in the suburban Chicago case, the Billings Police aren’t backing down. “If we’re wrong or made a mistake,” Chief Rich St. John says, “then we’re going to take care of it,” he said. “But if [the department's claims process] determines we’re not, then we’ll go with that.”

Chicago… Billings… suburban D.C.… we mentioned the family in Delaware last week. There’s another case this month in Salt Lake City.

“I saw them crashing through the door,” recalled Paul Fracasso. “There were guns and flashlights going everywhere [and police] telling them: ‘Get down. Get down. Get down.’”

Fracasso was lucky: He’s the next-door neighbor.

Once police burst inside, the only person they saw was a 76-year-old woman. Her son says she was asked if she had a gun or drugs. “She was petrified,” Raymond Zaelit told the Salt Lake Tribune. “She didn’t know what to think. This was traumatizing for her.” At least in this case the police apologized.

By the way, USA Today has followed up on the research we cited last week on the number of SWAT raids that take place nationwide. From a mere 3,000 per year in the early 1980s, the number has exploded to as many as 80,000. That’s an average of 228 per day.


Here in Maryland, a study commissioned by the governor found that a full one-third of those raids don’t even result in an arrest.

Addison Wiggin

Misconduct Prevention Workshop appeared in the Daily Reckoning. Subscribe to The Daily Reckoning by visiting signup for an Agora Financial newsletter.

Jobless Claims Manipulation?

Good day… Gold has really been sold off this past week and especially last night and this morning. I pretty much told you to expect it to be taken down again by the price manipulators, when the short positions were being added to by the truckload. But the other thing going against the shiny metal, this morning, is that the dollar seems to have a bias to buy, going for it. Wonder of wonders, eh? Friday, I told you that there seemed to be a return to risk sentiment on the drop in Weekly Jobless Claims. And then the U. of Michigan Consumer Confidence really surprised on the upside. And the markets decided that it was time to reward the dollar for these things.

I had it brought to my attention by more than a few dozen readers, that there was a state missing in the Weekly Jobless Claims data, which accounted for the 30,000 drop in claims that the government tried to float past us. The games people play now, every night and every day now… Most of the readers believed that the state that was missing was California. Now, doesn’t that all tie together in a neat bow? Just leave the largest state off the head count of jobless claims, and then wave the recovery flag for the drop in claims. I’m to where I don’t believe one report that comes from the US government. Isn’t that sad? My country resorts to these games.

OK. Move along, Chuck, you don’t want to go too far down that road, it leads to wrists getting slapped and visits to the red carpet!

So… As I said above, the markets changed on a dime Friday, and decided to reward the dollar, and the bias to buy dollars is weak, and looking like it has run its course, this morning. For instance, the euro (EUR), which fell nearly 1-cent from Friday, has rebounded 1/2-cent this morning. The Aussie dollar (AUD) is flat on the day, and the rest of the currencies are trying to get out of the dumps, as the weak dollar bias looks very vulnerable as I type away with my fat fingers.


The thing that appears to have turned the tide on the dollar bias was the surprisingly strong trade figures from China. Chinese exports rose 9.9% in September versus one year ago. The trade surplus rose by a large figure and the foreign reserves also gained ground. It appears that the Asian country economic growth that I’ve been talking about is showing its muscles as the Chinese exports were dominated by the Asian countries. This all looks good from my perspective, for global growth, even if that global growth is regional to Asia.

And that means the Aussie dollar and New Zealand dollar/kiwi (NZD), get to enjoy the sunshine, too! Now, China will be printing their third quarter GDP report on Wednesday this week. Look for a print of +7.7% versus last year. And then the forecast for the fourth quarter will be announced, and that will probably come in at +7.8%… So, the collapse of the Chinese economy has been greatly exaggerated, by many an economist. Moderating? Yes! Just like I said would happen. Not that I knew anything that the respected University-trained economists didn’t know. I just didn’t get caught up in all that hype. And, I recognized that China was a Communist country with a treasure chest of money to use to keep their economy afloat.

Oh… And Chinese inflation is falling back into line, rising only 1.9% from a year earlier in September. This is what gets the “China is going to introduce more stimulus crowd” all lathered up, folks. With inflation falling like this (earlier this year, it was rising at a +6% clip) the thoughts that more stimulus could be injected into the Chinese economy from the treasure chest of reserves, begin to get very loud. I hope the Chinese government doesn’t disappoint them.

Well, the US posted its fourth consecutive year of plus-trillion deficits. The final figures are in for the fiscal year that ended September, 30th. The 2012 budget deficit was $1.089 trillion, which is narrower from the $1.297 trillion posted the previous year. The deficit was equal to 7% of US economic output. Remember that back in 2001 we hit 4.5% and I said then that the dollar would enter into a multi-year decline, based on that 4.5% figure, which historically had indicated a country would experience a currency crisis. Economists, for some reason, believe that budget gaps versus GDP that are greater than 3% are unsustainable in the long term. Well, let’s see, we, as a country, are now on year 11 of the greater-than-3% gaps versus GDP.

But the country, and its citizens (for the most part… not you, me and the others that understand what’s going on) don’t understand these debts and deficits; and the numbers are so large that they have no comprehension as to what they mean. I’m not saying they’re not smart, I’m just saying that the numbers get so large, that people just don’t relate to them. And so, we become Comfortably Numb.

That’s why I always show a slide in my presentations that talks about a person/family, and use the same numbers as the US but take out a lot of zeroes. This way, each person can see just what an awful shape this family is (fiscal-wise). And then show them the numbers for the US by just adding those zeroes. So, don’t let yourself become “Comfortably Numb”!

The US data cupboard has September retail sales for us today, and the “experts” believe that the number will be a blowout +0.8%… I would have to think that this number is bloated by cars and gas, for when you take them out, the number will probably be +0.4%, which is more in line with what I’ve seen the Butler Household Index indicate. Nevertheless, retail sales are indicating that people are spending money again. Or least what they consider to be money. Could be running up the debt on the credit card.

The price of oil has been stuck around $91 for the past four trading days; and that’s fine with me! I just have to wonder how long we have to wait for the $40 for a barrel of oil that I heard guaranteed at our Global Currency Expo in May of 2011… Oh, that’s right, it was supposed to be within a year. Look, I would love for oil to be that cheap. It would make driving my car less expensive, not to mention everything else that is touched by oil (plastics, gas for trucks to deliver feed, etc.) But until the cost of getting the oil out of the ground becomes cheaper, I don’t see how the price of oil can drop like that… Even when the US economy was on the brink of collapse a couple of years ago, the demand for oil dropped, here in the US, but picked up somewhere else in the world.

With the price of oil stuck around $91, the support for the petrol currencies, including, Norway (NOK), Canada (CAD), Russia (RUB), Brazil (BRL), Mexico (MXN), and the UK (GBP) remains strong. The Russian ruble has seen the most support from the strong oil price. The Brazilian real, doesn’t really get to bask in the sun that the strong price of oil provides, because the Brazilian government is intervening to sell reals nearly every day.

The Canadian dollar/loonie continues its position above $1.02. One would think that the Chinese trade figures that printed this past weekend would carry over to the loonie and provide some breathing room on the global growth concerns that have held a grip on the loonie for the past few weeks. But, if the traders want to hold the loonie steady-Eddie above $1.02, that’s fine with me. I think that somewhere between parity and $1.05 is about where the Canadian dollar should be, and $1.02 is in that range! At least the last time I checked by statistics! HA!

Did you see the latest move by Singapore? This is pretty interesting stuff, folks. But before we start here, long time readers know my feelings toward Singapore, and how they use their currency’s strength to fight their inflation. Well, they have already become a hub for Chinese renminbi (CNY). And now they look to become the Asian metals hub. Here’s the skinny. Singapore repealed their 7% tax on investment grade gold and other precious metals, in hopes that repealing the tax would lure bullion refiners/mining companies to the country and that would lead to metals trading houses moving to Singapore, thus transforming Singapore to a metals pricing hub. Pretty forward thinking, don’t you think? Any questions on why Singapore continues to be on my hit parade?

A reader sent me a note this past weekend that was very telling on the economy, and not with all the fluff that the government adds. Here’s his take on this data… “If you look closely at the shipping numbers, the biggest decline is in the Eastern United States where a larger percentage of manufactured goods originate. Western shipments are either imports (loaded containers down 4%) or commodities (grain, coal, fertilizer, etc.).

“Here’s the scary number: Weekly carload volume on Eastern railroads was down 7.9 percent.

“Last time I saw such a huge plunge in rail shipments was in October 2008.”

Then There Was This… My friends over that The 5-Minute Forecast, had a great, short article on Friday…

“In his latest shareholder letter, Tocqueville Gold Fund chieftain John Hathaway bases that forecast on continued negative real interest rates: That is, as long as central banks push interest rates below the rate of inflation, gold performs well.

“‘Some suggest,’ Hathaway writes by way of answering the reader’s question, ‘that a Republican victory in November would be a game changer for gold. It could bring about the dismissal of Bernanke, the taming of fiscal deficits, the painless elimination of excess liquidity from bloated central bank balance sheets and the restoration of robust economic growth.’

“‘All of this,’ Mr. Hathaway goes on, ‘would need to occur within the four years allotted to a new administration while voters patiently awaited the magic to take effect. While this rosy scenario is possible, we believe it would be a long shot.

“‘Therefore, we regard any possible pre-election weakness in gold and mining stocks based on such a possibility as a buying opportunity.’”

Chuck again. You can look at the charts until your eyes are all watery and your sight blurry, but they all tell you the same thing. The prospects of a higher price of gold are good. But that’s the charts. You know me, I’m more of a fundamentalist, and for once the fundamentals and charts are singing from the same song sheet…

To recap. The Weekly Jobless Claims on Friday, and consumer optimism reaching a 5-year high, finally broke the bias to sell dollars. But that bias is weak this morning, and looks vulnerable to a reversal. Were games played with the Jobless Claims? I think so! China’s trade figures were better than expected, and we look to Wednesday’s print of third quarter GDP, which should be around 7.8%… And US retail sales dominate the data prints today.

Chuck Butler
for The Daily Reckoning

Jobless Claims Manipulation? appeared in the Daily Reckoning. Subscribe to The Daily Reckoning by visiting signup for an Agora Financial newsletter.

Depression-Proof Banks

Not every banker succumbed to the insanity of the housing bubble. Some saw what was happening and dodged it. These are the guys you want to stick with as an investor.

Marc Stefanski is one of them. He is the CEO of Third Federal Savings & Loan (TFSL on the Nasdaq). It is a Cleveland-based thrift founded by Marc’s parents in 1938.

“We were founded during the Great Depression,” Stefanski wrote in a letter in 2009, “so my parents built our company to be Depression-proof.” And so it is. Today, TFSL is one of the best-capitalized banks in the US. (More on that below.) But TFSL had to walk a lonely road to get here.

Stefanski’s bank pays its loan officers no commissions. They are paid salaries only. Hence, there is no pressure to make loans. His bank also keeps most of the loans it makes. So there is no slicing and dicing of mortgages and passing them off to investors. And finally, TFSL did not make no-money-down loans. It stuck to plain vanilla loans even as competitors offered snazzy new takes on the old mortgage loan. TFSL began making adjustable-rate mortgages only in 2010. It avoided all the junk that went into making the financial sausages that wound up giving the banking system such indigestion.

But it was costly. TFSL had a market share of 30% in northeastern Ohio. Its refusal to play ball meant that its market share dwindled to 11% by 2001. How many CEOs could survive such a decision?

Yet today, TFSL has worked its market share back up to 24%. It has done so because it has lots of capital while many of its peers have leaky loan books. It is still sticking to its conservative approach. For instance, for more-risky borrowers, TFSL requires borrowers take classes that show how their loans will work and what the consequences are of not paying. Such strategies have earned TFSL praise from community activists.

Stefanski is blunt about it all. “The whole system was based on raping the public,” he says in a New York Times article. “Not everyone should own a home — just those who can afford it.”

There is an old saying that there are more banks than bankers. Most of the people running banks have no business doing so. Banking as a corporate art requires a careful approach and a willingness to stick to conservative principles even during the good times. Stefanski has earned the title of banker in the best sense.

His institution is, as I noted, one of the best-capitalized banks in the US. It never took TARP money or any other handout. TFSL today has capital ratios far in excess of what’s required. For example, the rules require Tier 1 capital of at least 6% of assets for a thrift to be considered “well capitalized.” TFSL’s figure is 21%. It has enough excess capital to buy back all of the public shares outstanding at today’s price of $9.50 per share.

Ironically, TFSL works under a memorandum of understanding (MOU) issued in June 2010 by the OCC, which regulates TFSL. Among other things, the OCC said TFSL’s percentage of home equity lines was too high. What this meant was that TFSL cannot pay a dividend or buy back stock until the OCC lifts the MOU.

It’s a weird tale, but the short of it is that TFSL has now met the requirements of the MOU. Now TFSL is just in a waiting game. I expect the OCC will lift the MOU by the end of the year. Then TFSL should start to pay dividends and buy back shares as it did before. That is a nice catalyst for the stock, which was $12-$13 per share before the MOU.


There is another important part of this to know: TFSL is owned by a mutual holding company (MHC). There are about 81 million shares public. But there are 227 million shares in the hands of the MHC. The usual course of these things is to undergo a “second-step conversion.” The second step sells the MHC shares to the public. If done at 80% of book value, TFSL would raise $2.3 billion in cash — all of which goes to the bank. Add this cash — net of estimated friction costs of 12% — to the existing equity in the business and TFSL’s fully converted book value comes to about $12.50 per share. The stock as I write is only $9.50. While there are no plans for a second step, it’s another embedded catalyst in the shares.

At today’s price, you get a thrift with an awful lot of capital to buy back stock and/or pay a big dividend. Once the OCC lifts the MOU, I believe TFSL will start to do both of these things — and because it trades for under fully converted book, these transactions are accretive (read: value-adding) for shareholders.

I should tell you, as an aside, that I love converted thrifts. Carefully chosen, they are cash-rich, trouble-free and simple lending institutions. And they have a long history of producing winners for patient investors. I have about 40% of my personal account in just such cash-rich thrifts.

And in my Mayer’s Special Situations newsletter, I have recommended five such thrifts. I recommended three of them in January 2011, and they are up 20% or more. The two I recommended last summer are also up double digits. Slow, but steady. I’ve never lost money on a single one.

Back to TFSL. I did not formally add it the portfolio of my investment letter, Capital & Crisis. But I do believe this stick is a solid idea and that it clearly illustrates the kind of banking institution that investors should seek to own.

If US housing has bottomed and will only improve, as I believe is the case, so too should the stocks of cash-rich banks, especially those that sidestepped the worst of the housing bubble — such as Stefanski’s TFSL.


Chris Mayer
for The Daily Reckoning

Depression-Proof Banks appeared in the Daily Reckoning. Subscribe to The Daily Reckoning by visiting signup for an Agora Financial newsletter.

Get A Healthy Dose Of Silver Fever, With This Pure Play…

I was amazed when I looked back to a silver article we posted in late August.

Back then the plan for silver was simple: with silver breaking out above $30, buy the metal AND a few of the best miners.

Since that article, QE3 and other central bank action cracked the whip on the metals market. With the dust settled, investors holding the “poor man’s gold” are up a solid 13%.

But there’s a lot more to the story than that. Including an update on one pure play that jumped 33%, and looks to be headed higher…

First, let’s get a pulse for the silver market.

Back in late August, silver made a breakout move from its $28 trading range. Today, after a summer of printing from central banks the world over, the metal has found a perch near $34.

“But it’s early October, Matt!” you may say. “Isn’t it time for the metal markets to cool off!?”

Cool off? If what I heard this morning is any indication, this metal move is just getting started.

Today I talked to my favorite source for forecasting silver’s next move, Steve Agopian from American Futures Trading. Steve has an uncanny eye for the metals market and always has something valuable to share. Today, his thoughts are timelier than ever…

“In the past nine years between the beginning of October to sometime before the third week of June (when the July options expire), the July Silver futures on average have moved up by 54.5%” Steve says.

Just think about that for a second. Although the market has short-term ups and downs, for the past nine years silver buyers in October, on average, were making 54% by Spring.

“The smallest move on the upside was 17.5%” Steve continues, “and the largest was 125%.”

Better yet, “There were no negative years” Steve tells us.

If you’re looking to get in to the silver market today, history is certainly on your side.

Using Steve’s average estimate (54%) along with his low-end estimate (17%), silver is poised to jump above $40 or even as high as $54, by June.

Add it all up and I like the outlook for silver, a lot. The metal has more sling-shot potential than gold and with central bankers putting the pedal to the metal, silver could head much higher.

As you and I discussed back in late August you can play this move with the metal or the miners…today let’s focus on the two miners we covered back in August.

Unbeknownst to many investors, Goldcorp (GG: NYSE) is one of the world’s top-5 silver producers (No. #4 in 2011 with 28.8Moz produced.) With 20% of its cash coming from silver production, Goldcorp sits in the sweet spot of the precious metals market. A major gold producer with a lot of silver? Sign me up!

Since our August article, Goldcorp is up nearly 10%. Not too shabby for a month and a half’s work – but as you can see, not as profitable as holding just the metal itself.

The real superstar in the silver space was a pure-play miner, Coeur d’Alene Mines Corporation (CDE: NYSE.)

Coeur d’Alene, according to 2011 data, is the world’s No. #8 silver producer, with annual output close to 20moz. Since our August write-up, share prices are up 33% — that’s amazing! Compare that to the appreciation in silver prices over the same time frame (13%) and you’ll see that holding this pure-play silver miner was the way to go.

Here’s what you’re probably thinking “I wish I would’ve bought Coeur d’Alene back then! How obvious!”

If you missed the latest move, don’t worry. Considering the historical data above, there’s lot more in store for the silver market. And a pure play like Coeur d’Alene is still a great way to play it.

Here’s the kicker. In August, while silver prices were on the move higher, Coeur d’Alene initiated a share buyback program. So not only is this miner on tap to produce more silver than it did in 2011 (over 19Moz) it’s also helping to increase shareholder value by buying back $10 million worth of its own shares.

Looking forward the plan is to buy back $100 million in shares total – so we’re only 10% of the way there. Add it up and this is a strong vote of confidence for shareholders.


So with this pure play you’re looking at a company with a proven track record of producing LOTS of silver. And now, at a time when they are raking in cash they have the forethought to stack some of that money in the form of a buyback.

The future is up for silver…and same goes for Coeur d’Alene.

Keep your boots muddy,

Matt Insley

Original article posted on Daily Resource Hunter

Get A Healthy Dose Of Silver Fever, With This Pure Play… appeared in the Daily Reckoning. Subscribe to The Daily Reckoning by visiting signup for an Agora Financial newsletter.

avatarThe Daily Reckoning - The Daily Reckoning posted Monday, October 15th, 2012.

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