The 3 Stages of the Coming Silver Shortage

 Ted Butler’s friend and mentor Izzy takes the soapbox on “The 3 Stages of the Coming Silver Shortage”. 

Editor’s note: Izzy’s article was originally published a few years back, when silver was at $9+/oz and before the recent run-up in silver to $16. True then, moreso today. Consider this: we have already experienced Izzy’s STAGE ONE scenario (last year), get ready for STAGE TWO.

By Israel Friedman

(This very bullish opinion was written by silver enthusiast Israel Friedman, age 73, a friend and mentor to Theodore Butler. Mr. Friedman has owned and studied silver for 30 years.)

I hope that the sell-off in the metals made you think about the way you perceive gold and silver as investments. This wasn’t just a correction, this was a slaughter by the paper short sharks who call themselves commercials.

Yes, COMEX Is Rigged
gold vs silver bars_100x108Mr. Butler wrote to the authorities in detail and asked why these so-called commercials can break the law. But up to now, he has not received any answers. I am in the camp that believes you can’t change the paper market to be honest. But that doesn’t mean you can’t do anything about it, because you can.

To those people who speculate in the paper market, I say you’d be better off giving your money to charity than give it to the paper sharks.

This sell-off brings two conclusions. One, that gold and silver don’t have monetary value, because money value doesn’t change so much in value in such a short period of time. Gold and silver aren’t insurance for anything, not for inflation, not for a collapsing dollar and they are simply controlled metals. Two, the naked short sellers aren’t afraid of anybody. The users are also controlled by the commercials and aren’t buying at dumping prices. They will regret not buying at the low prices, as they need silver to live.

So, the conclusion is that paper trading is dictating the prices, and if you think for one moment that they will not take your money when you trade paper, forget it.

Should You Buy Precious Metals?
Not to lose your investment money and participate in the future bull market in silver is the most important thing, and you have to choose the right course to achieve that. What kind of decision do you have to make to buy metals? You have to ask yourself some questions.

One, will any of the metals be in short supply?

Two, if I invest money can I make a minimum of 5 times my investment?

Three, can I hold for the long term?

Lastly, do I have extra cash to buy with?

gold vs silver v2_100x125If you can answer yes on all four questions, in my opinion you can buy. After you answer yes, the question then becomes should you buy gold or silver? I am a silver sympathizer, and in my opinion, only in silver can you have a shortage situation.

Gold no.

Only a shortage in physicals can bring high prices and defeat the paper market and force the naked short sellers into bankruptcy.

Price Points and the Coming Silver Squeeze
To define what I mean by shortage in silver, I say categorically that I’m not interested in the level of world inventories of silver, COMEX inventories and the guru’s stories. I am only interested to know if the users are receiving their shipments of silver on time. When a delay of silver shipments occurs, and affects most the users, I will consider this as a shortage.

Let’s see the stages of a shortage. 
1) Pre-shortage – the users will have to wait 3 to 6 weeks extra for shipments. Then the prices can rise to $20-30/oz.
2) Shortage – the users will wait an extra 6 weeks to 4 months for silver. Then the prices can rise above the old all-time highs of $50/oz.
3) Super shortage – the users have to wait more than 4 months for their silver shipments. The price will range from $100 to prices you won’t believe.

If this last scenario occurs, and gold has plenty of supply, the price of silver, at a minimum, will equal the price of gold. And my crystal ball tells me that silver can exceed the price of gold by a great deal.

You should be asking, how did I calculate the prices for the different stages?

silver 1000oz Comex Bar Stack_100x128My calculation is very conservative. I only take into consideration the future deficits between the producers and users, which is running currently at around 50 million ounces annually. I also take into consideration that private investors have 400 million ounces in bullion and coins that they will sell in some stages.

-In stage one, pre-shortage, I think investors will be willing to sell 50 million ounces at a price between $20 to $30.
-Stage two, shortage, investors will sell 200 million ounces between $30 and $100.
-And the remaining 150 million ounces will be sold in stage three, super shortage and the prices will be truly shocking.

These prices are very conservative, in my opinion, because they don’t take into consideration the naked shorts, new investments, or those banks worldwide that sold silver certificates without real silver backing, only derivatives backing.

Commercial Silver Users (Manufacturers)
The users will be the key for the future price of silver. No user wants to stop production, and will pay any price for silver if that means staying in business. For you the investor, who wants to know when stage one will start, my answer is simple – not me or anyone will know in advance when it will start. No one will ring a bell.

In my opinion, all of these stages will happen in silver, and super stage three will take years to develop. I ask you, do you believe that, when stage three comes, you will benefit if you hold a paper-leveraged contract? The Exchange will change the rules; including changing margins, and maybe by canceling the delivery process, and you will be left with a paper only contract.

The conclusion is, if you believe in a shortage situation, you will be secure only if you buy physical.

The Best Kind of Silver to Own for Stage 3
The only question is what to buy? Because I believe that at some point we will arrive at stage three, super shortage, when prices will be over the old all-time highs and will fluctuate by dollars per day, no investor will have the money to buy 100 or 1000 ounce bars.

coin-silver-eagle-wht-back_70x70For the small to medium investor, I say buy U.S. Silver Eagles.

And for rich investors buy Eagles and bars. I like Eagles because I think, at some point, the Mint will stop minting them and they will develop a numismatic and scarcity premium. Plus, in my opinion, they are the most beautiful coins in the world, and when I hold one they make me feel good about America.

Dance to the Bank
If my vision comes true, and we arrive at the super shortage stage, the Congress will ask a lot people hard questions, and the questions will be how we came to this situation. And Mr. Butler’s past complaints will be checked.

Physical investment is the safest way to riches, in my opinion. When the naked shorts go to bankruptcy courts, including the big sharks, you will dance to the bank.

Remember, do your homework before you invest. Cover all the angles, but don’t speculate, only invest in physical silver with free cash money. And take in consideration you can buy silver 30% cheaper than a month ago. And this is a fantastic, fantastic, fantastic opportunity.

Good luck and remember the modern gold is silver.
Israel Friedman


June 2009. We’re already through Stage One. See also:
Scared By Silver? (or should it read, “Scared? Buy Silver”)
US Precious Metal Coin Shortage Continues
No Gold, No Silver
Butler: “Silver Blowback”
APMEX Explains Shortage/Outage

14 Responses

  1. Over the last month I’ve seen the price start to flicker upwards again, will we see $30 silver before the summer’s end?

  2. Fast forward to 2014, what stage are we at now? The price is now $21 over double the price of 2009.

  3. very nice article

  4. Silver has been grievously depressed for so many decades by non-free market forces, led by the British and US governments, that when it breaks out for real, the wildly ascending price will be timed to coincide with banshee wails of national emergency and they do intend to repeat the August 9, 1934 action of Roosevelt in stealing silver from Americans—and do so at a price posted way to the downside. One force against this eventuality is that more than ever, silver is a world market, and government action against citizens can’t be hidden from well informed people worldwide. More importantly than this factor is the knowledge that the Anglo-American silver suppressors have a Secret Society always in control of the White House—the “Pilgrims Society.” See linked free access documentary for copious proof.

  5. That is a good point. I have thought about it. If you stash say 1000 dollars in a safe for ten years, by then it will still be 1000 dollars, but with inflation, it will be worth a lot less than 10 years ago. Whereas if you invest in Gold or Silver, you should be able to keep the value of your money.

  6. silver is in the shortage phase and will get squeezed this weekend when JP Morgan has to cover their short positions. Buy it while it is still there :

    Silver and Gold may be the only currencies left in the US that can be used. Of course bartering too.

    good luck!

  7. Good point, Denarius – silver and gold are a way to preserve purchasing power. Unlike the US dollar (which has lost 97% of it’s purchasing power since the Federal Reserve was enacted) An ounce of silver can buy you as much today as it did 1,000 years ago.

  8. I think your wrong. If you have FORCE you can make anything legal tender and have value or set the price on silver. The only way silver will go way up is to destroy those who hold it down. That simple.

  9. Often the cause individuals purchase Precious metal may be the security that the physical metal provides.

  10. Minestein, I think you and Denarius are right (mostly). I’m afraid of the government saying “turn in the gold & silver”, so I want most of my coins to be issued by other governments. I have a nice mix of both gold and silver in eagles, maples, philharmonics, krugerands, pandas. I don’t think they could justify collecting currency issued by another sovereign nation. Just my two cents.

  11. Movin’ on Up


    Silver is up 5.5 percent in 4 hours.
    Gold is at 1084., which I believe is an all time high.

  12. I Agree with Denarius, preservation is the point, and in a hyperinflationary environment when your currency is devalued/revalued almost daily those that own precious metals will be able to maintain a decent lifestyle. I would add though, that in this environment when silver reaches those extreme high levels, any loans that you have taken out will be very easily paid off. Imagine paying off your $300000 house for instance when silver reaches $1000/oz with 300 silver eagles that you bought for $15/oz now, or buying a top of the line $50,000 sports car that from one of the talking heads on CNBC that lost his job, and lost all his money in the stock market by following his own bad advice (i.e Cramer, Kneale, Kudlow etc. etc) and only spending 50 of your shiny Eagles that you spent $15 each for. When you think of it in those terms there may well be a whole lot more good reasons for buying silver :>)

  13. So, will silver reach the price of gold when gold is at $6,000/oz? If so, I’m going to buy me one of the small northeastern states.

    • [b]abraham[/b], you don’t seem to get it. It is not the rising so-called Price
      of Gold and Silver that we follow. It is the falling valuation of the USD.

      When gold / silver = $6,000 then a loaf of bread will be $24-$30 and a
      U.S. Gallon of motor fuel will be $18-$24. The DJIA may also be $6,000
      but that will be only 1/6th of the valuation of today’s DJIA if it was at 6K.

      [b] All [/b] — making profit in $$$ is NOT the point.
      [u] Preservation of Purchasing Power [/u] IS the point.
      Gold and Silver are Insurance Policies against Flaming Federal
      Reserve Notes, and I mean that in both senses of flaming. (8~D)

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