Presentation on theme: "A Case for Gold and Silver By Jason Tillberg July 2008."— Presentation transcript:
A Case for Gold and Silver By Jason Tillberg July 2008
We have gold because we cannot trust governments Herbert Hoover to President Roosevelt, 1933
Gold Unlike any other element on Earth, almost all the gold mined is still around. Found in museums, buried beneath central banks, in bars, on statues, on furniture, on fingers, around necks, in teeth, etc. Approximately 120,000 tons of gold have been mined (32,000 ounces per ton) 3.84 billion ounces at $900/oz = $3.456 Trillion dollars Total Assets in US as of Q12008: $ Trillion dollars
US Gold: Fort Knox Early 1933, as part of new deal, all gold in circulation was seized by the government Gold was exchanged for dollars at a fixed rate of $20.67 per ounce. Current holdings at Fort Knox are approximately million per ounces. $900/ oz = $132 billion dollars.
Silver Demand In 2007, 895 million ounces were demanded. 455 million for industrial applications (approx. 50%). Batteries Solders Electronics Medical applications Mirrors Solar Cells Water Purification Photography: 128 million Jewelry: 163 million Silverware: 58 million Coins and medals: 37.8 million
Solar Silver paste is used in 90 percent of all crystalline silicon photovoltaic cells, which are the most common solar cell. Source: Photovoltaic Technology Division of the U.S. Department of Energy Silver is the best reflector of thermal energy (after gold). Silver plays yet another role in the collection of solar energy: efficient reflection of solar heat.
Silver Cont billion ounces of silver has been mined various sources. Net supply of silver from above-ground stocks dropped by 8 percent in 2007 to million ounces Source: Silver Institute
Silver Inventories Above Ground
Where are we now? Supply of silver is low. Investment demand for hording silver is picking up.
Where are we now? Supply of silver is low. Investment demand for hording silver is picking up. Warren Buffett, Billionaire Investor quoted on July 26, 2008: United States was experiencing "exploding" inflation amid a slowing economy.
How can the Fed fight Inflation? Raise interest rates to slow economy and strengthen dollar??? I Disagree and I will tell you why…
Debt Bubble Year Median US house price Median Household Income Ratio 1980 $47,200 $17, $79,100 $29, $119,600 $41, $196,300 $48,
Equity Nightmare In 1999, the total value of residential real estate in America was $ Trillion. Today, there is total of $ Trillion in home mortgages outstanding. Source: Federal Flow of Funds
My forecast for 2010 If Household income rose 3% from household income: $52,671 Ratio of median house price back to mean of 2.7 would make median house price $142,213 or a decline of 28% from 2007 $ Trillion – 28% = $14.2 Trillion
Uh Oh.. $10.6 Trillion in Mortgages Total Residential Real Estate Falls to $14.2 Trillion. Homeowners Equity would become 25%
Conclusions Lots more write downs from over leveraged borrowers. Fed is not in a position to raise rates as that would lead to higher mortgage rates. Negative Real Rates of Return could be here for a while.