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"I
don't see a role for silver as money."
Exclusive
Interview with Ted Butler
by Silberinfo.de
January 30, 2005
Theodore
Butler, leading independent silver analyst, gave silberinfo.de the
first German speaking monthly Investment Letter & Online Platform
that specializes on the silver market, the following exclusive
interview:
silberinfo:
Mr. Butler, an exciting silver-year has just come to an end.
Which was in your opinion the most prominent event in 2004 regarding
silver?
Ted
Butler:
If I had to pick just one event, it would be the price action itself.
Not only did we hit 16-year highs (in US Dollar terms), we did it with
tremendous volatility, moving above the $8 mark twice. You have to
remember just how dull the silver price had been for so many years to
appreciate the price volatility of 2004.
silberinfo:
Where do you reckon we are standing - at the beginning or
rather at the end of a silver bull market?
Ted
Butler:
We are just taking the first baby steps in a very long-term
price odyssey.
silberinfo:
Would it be possible to recognize the date when the silver
price will decouple from currencies? If yes, how?
Ted
Butler:
I don’t know how an analyst could tell in advance, unless he was a
prophet, which I’m not. But there will come a time when the price
action in silver will be so dramatic and independent of anything else,
that it will be easily recognizable by all that silver is running by
itself.
silberinfo:
You are observing the silver market for some 20 years now and
since quite a long time you predict increasing silver prices. Is the
silver price just because of market manipulation on the Futures market
(COMEX) with "paper silver" so low, or do you see other
reasons as well?
Ted
Butler:
The manipulative paper trading is only half the reason. The other half
has been the dumping of various governments’ silver treasury stocks
via leasing.
silberinfo:
Would you say that the manipulations of the silver price at
the COMEX tend to increase, decrease or stay the same?
Ted
Butler:
Good question. I think it has changed in that I think some of the big
players have changed, but the game has basically remained the same. But
the price volatility is telling me there are stresses that undermine the
manipulation continuing for much longer.
silberinfo:
Should the silver price explode, is there in your opinion the
possibility that the COMEX will change their regulations to their own
benefit like what happened on 18th January
1981?
Ted
Butler:
One of my main objectives on writing so much about the manipulation is
to prevent the COMEX from introducing rule changes designed to protect
the shorts and punish the longs. I’m hopeful that my efforts have
contributed to preventing such arbitrary rule changes.
silberinfo:
How do you explain the fact that the CFTC still does not see
any call for action on the matter of (potentially not naked) short
positions of some few major dealers?
Ted
Butler:
That’s just how the world works and always has worked. They’re
stuck. When have you seen any government agency admit they messed up,
before it was absolutely necessary?
silberinfo:
In which form does Warren Buffett hold his silver? Physical
stock?
Ted
Butler:
While Mr. Buffett has carefully avoided any comment on this issue, I
have long maintained that I believe that he owns silver in paper form
only, having leased out his physical silver many years ago. Therefore,
this silver can not be dumped on the market.
silberinfo:
How do you explain that till now no "big player",
no big investor besides Warren Buffett, had the idea to acquire so much
physical silver until the Commercials are forced to cover their short
positions and trigger a price explosion?
Ted
Butler:
Bad things seem to befall those who challenge the dealers, most notably
the Hunt Brothers. Since the world silver market is the COMEX, in
essence, any big buyer would eventually have to pass through there in
order to buy silver. I believe there is close scrutiny and behind the
scenes discouragement for big buyers of silver. But I don’t think
that’s bad for silver investors. I’d rather see an army of ants
buying silver, rather than one big buyer. Ants are stronger in the
long-run.
silberinfo:
How do you assess the increasing industrial demand for silver
(especially against the background of the still ongoing
industrialization in Asia)? How do you account the role of China on the
silver market, which kept on adjusting shortfalls in the production
throughout the last years?
Ted
Butler:
This is the heart of the story. Silver has the most industrial
applications of any metal, due to its properties of being the best
conductor of electricity and heat, reflector of light and biocide agent
extraordinaire. Throw billions of people increasing their standards of
living (don’t forget India and other countries) into the demand mix,
and that’s a powerful story.
silberinfo:
The U.S. Government – as widely known – owns the most
gold worldwide and didn't participate in the Washington Agreement. What
do you think about the theory that the USA, after 20 years of huge
foreign indebtedness, consciously devaluates the Dollar to pay the debt
back after the gold price exploded and after the gold standard has been
reestablished? Would that not have been a conspiracy of the USA against
the rest of the World?
Ted
Butler:
I try to stay away from conspiracy theories, and while history does
point to government involvement in gold and silver, the gold
fundamentals are more cloudy than silver, at least to me.
silberinfo:
History teaches us that Gold as such has been prohibited in
the past. Do you consider that it is possible - under certain
circumstances - for silver as well?
And would that be feasible after all?
Ted
Butler:
I think any attempt confiscating or outlawing ownership of silver would
be very counterproductive in silver, seeing as how it is a vital
industrial material. The way to eliminate a commodity deficit is through
the free law of supply and demand via price.
silberinfo:
If the gold standard would be reestablished worldwide, would
you expect silver to regain an official monetary function as well?
Ted
Butler:
I don’t see a role for silver as money, mainly because it is too vital
and valuable to be used as money. Besides, if silver was introduced as
money, no one would spend it, they would just hoard it.
silberinfo:
Do you see the oil price rising in the next years as well? If
yes, what do you reckon will rise more in the next 5 years, oil or gold?
Ted
Butler:
I don’t know. But if you included silver in that choice, I would say
silver would beat both oil and gold by very wide margins.
silberinfo:
At around what price would you start to sell the silver you
allotted in the last 20 years? Is there a possibility that you would
lease your physical silver, if the price is high enough?
Ted
Butler:
There will come a time and price and circumstance to sell silver, but I
can’t answer that here. It’s hard to imagine any circumstances in
which silver should be leased. That’s because metals leasing is a
fraudulent transaction, in my opinion.
silberinfo:
How much silver is there currently still in stock with the
banks of issue? Is that silver being leased out? How does the yearly
sales rate develop?
Ted
Butler:
No one knows how much silver is left in unknown and government owned
inventories. But the visible inventory statistics and production and
consumption data suggest very little remaining. It is this source of
supply that has been satisfying the deficit.
silberinfo:
How high do you value the probability that the remonetization
in Mexico will be achieved? What will be the position of the U.S.A. in
your opinion? Do you have further information concerning this matter and
if this project will be realized?
Ted
Butler:
I don’t want to discourage anyone from what they believe in and as I
have indicated, I don’t see a role for silver as money. But I would
welcome anything that gets silver into the hands of as many citizens as
possible, because it is such a great prospective investment.
silberinfo:
The GFMS predicts some 1% increase of mine production for
2005. Will we experience first shortages in the next months already due
to the higher deficit and a significantly boost of the silver price?
Ted
Butler:
The silver price explosion could come at any time.
silberinfo:
How far can you trust the GFMS figures anyway, because there
are plans to reopen some closed silver mines and/or explicitly increase
productivity, and thus expect far more than just the mentioned 1%
increase of mine production in 2005/2006?
Ted
Butler:
No one has perfect silver statistics, so you should look at all sources
to get a balanced picture. Always you must remain skeptical and use
common sense. It takes many years to open a silver mine. It’s
not like flipping a light switch.
silberinfo:
The disposition of the GOLD-ETF in the USA was a complete
success (even though it's just a paper-gold form that is only partially
covered by physical Gold). There have been contemplations to issue a
Silver-ETF as well (but with a 100% physical silver-cover) like the
Central Fund of Canada. Is there more to come?
Ted
Butler:
I don’t think we will see a silver ETF, as there is not enough silver
to back one. If one did come to market, and was truly backed by real
silver, the price would explode even more violently than it would have
otherwise.
silberinfo:
Your analysis "The
Real Gold" led to a very motivated discussion among silver-bugs
in Germany, because you pointed out the dramatically declining
silver-stock. How do you see this development for 2005?
Ted
Butler:
It’s not something that’s going to change or be confined to 2005.
It’s something that will be with us for all our lifetimes, as that is
the nature of silver and gold. One is an industrial item that is
consumed, the other isn’t.
silberinfo:
Mahendra is tempered exceedingly bullish concerning silver
for 2005 and trusts in his first prognosis that silver (also in
comparison with gold) will take a leading role in 2005. Do you follow
his prognosis and what do you think about something like this?
Ted
Butler:
Like most people, I tend to agree with people who share my feelings.
That’s human nature. As an analyst, I read everything I possibly can
about silver, but if I don’t understand the reasoning behind the
opinion, I tend to be more skeptical.
silberinfo:
If the world would go back to the gold standard and the
Fiat-heads have rolled, would you go into politics if you'd been asked
from the top?
Ted
Butler:
I don’t think the world is going to a gold standard and I know I
won’t be asked to go into politics.
silberinfo:
What does your wife prefer, gold or silver jewellery?
Ted
Butler:
Good thing you asked about my wife, as I neither wear nor own a single
jewelry item, not even a watch. My wife likes both (too much in my
opinion) and wears either depending on what outfit she’s wearing. Let
me be quick to add that she has much better taste and style than I do.
silberinfo:
What's your message for all the silverbugs back in Europe for
2005? What can we expect in the "Year of Silver?"
Ted
Butler:
I think everything is aligned for silver to shine this year and this
decade. There are just not many investments you can buy and hold with
the certainty with which silver can be bought and held. Believe me,
I’ve looked, but I can’t find a better investment, all things
considered.
Mr
Butler, thanks for expertise and keep up the work on enlightening the
depressed silver market. The silberinfo team wishes you, your family and
friends a healthy and peaceful year 2005.
Theodore
Butler’s Homepage: http://www.butlerresearch.com
© 2005 Silberinfo Team
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