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Commentary

The Moriarty Factor


March 27, 2011

By David Bond, Editor
Silverminers.com

Wallace, Idaho " The recent skirmish between the publishers of “Don't Tread on Me” (Chris Duane) and 321 Gold's Bob Moriarty highlights again the latter's utter ignorance of the dynamics of the silver market and its potential.

Thankfully, the former has published this email exchange with Moriarty, whose arrogant, vicious, crude, personal and uninformed comments resemble more a psychotic episode than a mere temper tantrum. You can read the Zipperhead's toned-down version of it here, sans the expletives.

It's disheartening such level of discourse could emit from the owner of a Cayman Islands website whose sheeple follow this guy for advice even as he shorts into their 18-hour post-recommendation buying spree and shakes down his latest fair-haired company for free stock and advertising revenue. Moriarty's disclaimer at the end of each of his blow-jobs, to wit: “We own shares, they advertise with us, and we are prejudiced” hardly dismisses his duty to perform objective analysis. Admitting you're crooked doesn't absolve you of being a crook.

It's also reminiscent of the putrid, personal and vicious attacks Moriarty has launched against movers and shakers in the Coeur d'Alene Mining District of northern Idaho, where he has spent, to our knowledge, the sum of about 6 hours but claims expertise far beyond those who live, work and invest here " or, one suspects, any other mining district he elects to bash or pump.

So, how does a guy whose every major “call” in the silver sector has been wrong since he discovered it six years ago get on? Good question. He'll sure never speak at the Silver Summit; we'd take Thom Calandra pumping Ivanhoe first, and that ain't going to happen, either.

The young Turks in this game, like Moriarty, who in the 1970s didn't know silver from galena or gold from porphyry copper, and never studied Aristotle or Descartes, can be forgiven their grotesque misapprehension of the dynamics forming up in silver. But until the markets have slammed them up against the wall a few times they ought to proceed with curiosity and humility, not bombast and threats. A newby's innocence can be forgiven. A newby's aggressive, belligerent ignorance is another matter.

There are silver zealots, to be sure, bristling with Biblical exhortations and end-of-the-world humdiddlin', and there are even people who like Coeur d'Alene Mines, but we don't see any zealotry in what Kaiser wrote about the white metal.

To which we'll add some immutable truths:

  1. The death of the silver price in the early 1980s was, in fact, a political act, not a market correction. Bunker Hunt spoke out of class to National Geographic in 1980, saying the Hunts ought to issue Silver Certificates since the U$ Dollar was no good anymore. Carter's Fed and Treasury had to protect the U$D, and broke dollar-fears over the back of silver;
  2. Event No. (1) cannot happen again, because the billion-plus ounce “surplus” silver in the U.S.
    Strategic stockpile used to crash the price has all been sold. There is no physical metal with which the Fed can ever again crush silver;
  3. Back in the late 1970s and early 1980s, whenever silver showed a pulse, we had an office pool at the newspaper as to how quickly Eastman-Kodak would issue a press release saying it was near to discovering a substitute for silver in silver-halide photo film. Kodak hated $5 silver. That ephemeral “discovery” momentarily depressed the price, but guess what? They never found one. It took digital imagery to get silver out of the photo business, but guess what again? That turned out to be a zero-sum game: for all those ounces of silver not going into the manufacture of photo film, there were an equal number of ounces of silver not being recovered in the film-developing process to be returned to the market as “scrap”;
  4. Silver disappears. Its use in cell phones, computers, autos, medicine, as a flux or a reflector, while ubiquitous, is no threat to the supply chain. Silver would have to cost as much as gold (i.e. 40-x or so) to render it economic to recover;
  5. Primary silver mining is a small part of the supply equation. Most newly-mined silver is a byproduct of copper, lead, zinc and even gold mining. So yes, at $35, you'll see some ratcheting-up of new silver from primary mines. But 70 percent of silver production on the planet is not driven by the silver price. So there's no chance that $35 silver (or $50 or $100 or even $200) silver will significantly boost new production " at least not in the next few decades;
  6. There are substitutes for silver in some critical industrial applications. They are gold, currently $1,425 an ounce, and palladium, currently $746 an ounce. Until there is a price parity with either of those other two metals, silver remains the economic choice.

No religion here, just cold, hard facts. And we didn't even get into the area that is most important: that silver as money predates gold. It's a means of commerce and exchange, a store of value, and a hedge against the hegemony of dishonest magistrates. Moriarty may periodically proclaim silver to be in bubble-shape, but he neglects millennia of monetary history to the contrary.

We're defensive of our little primary-silver mining district here in the mountains of northern Idaho, especially when it is under attack by ignorant slatterns. So we were a tad amused when, in the aftermath of Moriarty's latest attack upon us two years ago, we offered our defence up to a senior manager at Sprott Asset Management and we were confronted with a dumb stare.

“Bob who?” he asked.