Logistics of Silver
(How to acquire and move heavy silver!)
Silver Stock Report
by Jason Hommel, May 2, 2009
Today we had two customers who wanted to buy a lot of silver. One wanted $500,000, and another wanted $3,000,000. This article is for them, and anyone else who may want such amounts. In the future, if paper money collapses, and economies are threatened, and when people might begin starving, such amounts will be able to sustain the economy, and the lives of the people, of a small city of perhaps up to 10,000 to 50,000 people.
David Morgan of www.silver-investor.com made the effective point this week that not everyone can own even "a little" silver, since 50 oz. of silver x 300 million people = 15 billion ounces of silver, which is about all that is left of all the silver that was mined in the entire history of the world, and most of that is consumed in other forms. The best estimates for what remains is perhaps less than half of one billion oz., worth about $4-5 billion, which remains for investors to buy, and most of that is at the COMEX, or other large banks, and that silver provides the backing for their silver debts that they owe, which is about $190 billion in silver in paper contracts to their ignorant multi million dollar clients who have no concept of the logistics of silver, and who have no idea that they are being defrauded because they refuse to undertake the task of actually being responsible for the logistical movement of their silver.
A tiny half a million dollar order is more than just about any of even the largest national bullion dealers will carry today. But they can tap into the major wholesalers who do have access to up to a half billion in precious metals. At the Rocklin Coin Shop, our largest walk in order in the last month was for 2500 ounces of silver, or about $32,000. From our shipping facility, our largest order in the last few months was just under $100,000, or about 7,500 oz.
At our coin shop, we inventory about 10,000 oz. of silver, and at our shipping facility, we inventory about 50,000 ounces, and we have about 20-30,000 oz. on account at the mints we use, and we order about 5000 to 10,000 oz. at a time. The coin shop really only needs about 5000 oz., or less, to run most efficiently.
There are no multi-millionaires who made their millions in physical silver today, except perhaps a refiner or two. Why hasn't any big money made their millions in silver? Because silver is too cheap.
Therefore, almost none of the 3 to16 million millionaires in today's world have any idea of the logistical considerations of moving a million dollars worth of silver.
There are perhaps only 25-50 organizations in the USA who really know what I'm about to share with you--perhaps only some of the top national bullion traders, mints, and refineries in the USA.
Basic facts of weights and measures of silver:
There are 12 troy ounces in a troy pound.
There are 16 avoirdupois (regular) ounces in a regular pound.
But since society uses regular pounds, we need to know how many troy ounces are in a regular pound, for the sake of planning and logistics.
1 regular pound = 14.5833 troy ounces
A single 100 oz. silver bar weighs 6.8 pounds. (100/14.58333 = 6.857)
A 1000 oz. silver bar weighs about 68 pounds, (+/- 10%).
10,000 ounces of silver weighs 680 pounds.
100,000 ounces of silver is 6,800 pounds, or just over 3 metric tonnes.
1 metric tonne = 32,150.7 troy ounces
1 short ton = 29,166.6 troy ounces
We ship silver in boxes of 500 ounces. The boxes weigh about 35 pounds, which is a managable and convenient amount. The boxes are double thick walled boxes, with dimensions of 9 inches by 9 inches by 3 inches high.
100 of these 35 lb. boxes hold 50,000 ounces of silver. (at $14/oz. that is $700,000).
We ship these boxes via UPS and the Post Office. Most postal and UPS workers start to complain if they have to move more than 10-20 of these boxes in a day, which is from 5000 to 10,000 ounces.
A Ford Excursion, one of the most heavy duty private vehicles, has a gross weight carrying capacity of just under 2000 pounds, (more than a Hummer), which will comfortably carry about 20,000 troy ounces, which is actually 1360 pounds.
To effectively and efficiently store, manage, and move this much silver, you need a walk in vault with a smooth threshhold for the vault door, and a packaging facility. Extra security concerns would include cameras, a recording system, door alarms, and motion detectors.
A general contractor should be able to construct such a vault for about $20,000 to $30,000 and buy any size vault door for about $2500. Cameras might be about $8000. Security about $5000. You can even buy a modular vault: http://www.customvault.com/
Just because you get a vault, does not mean "they" or anyone will know you have silver; vaults are common. Vaults filled with silver are extremely uncommon.
If you want to ship more than 10,000 oz. of silver at a time, to one customer, you may wish to send it on pallets via standard freight. To do that, you may need a forklift and/or pallet jack, and a 48 inch high loading dock.
Anytime you ship silver, it needs to be insured, and you cannot tell the shipper what the boxes or pallets contain.
Inside the vault, you will need heavy commercial grade steel shelves that can hold the tremendous weight; as it's just back breaking and too dirty to try to store it on the floor.
One of the best tools is a sturdy "lift table" with a smooth flat top which we found at uline.com that can carry about 1760 pounds. We found it so useful, we now have five of them.
Call uline at 1-800-958-5463 and ask for item number H-1783
I only wish I had such a cart when I was originally stacking all my silver myself, before I had help. But now that I'm more efficient, I can help others do it right the first time.
PRICES OF PRODUCTS: Right now:
Silver Eagles are running about 25% to 35% over spot, and are quite expensive. One ounce privately minted rounds, that are easily recognized by 4000 dealers nationwide, cost about $1.75 over spot, or about 14% over spot. 100 oz. bars cost about $1.25 over spot, or about 10% over spot.
Remember, nobody makes 1/10th oz. silver rounds today, and they would be cost prohibitive right now. So my advice is to just get the silver now, in various forms, and plan to mint the smaller amounts of silver later.
TIME TO MAKE PRODUCTS: Right now:
The best mints are mostly caught up now. They can manufacture up to about 50,000 oz/day, but the bottleneck is waiting up to 2 weeks for the 1000 oz. bars, and shipping can take a week, so plan on about 3-4 weeks in the best case scenario, unless you want to buy existing inventory from someone like me.
On occasion, manufacturing time at the best mints can stretch to 1-2 months if they are fully backordered, but if they are backordered any longer than that, they may be floating on customer money, so be careful which mints you choose, and it may be wiser to test out their speed with smaller orders, and order in large chunks of about 10,000 to 20,000 oz. at a time.
The main long term goal of any significant silver investor should be distribution. What I mean is the setting up of coin shops, or "silver trading posts". That's what will add liquidity to your own investment, and drive prices up. After all, not everyone can buy even 50 ounces of silver; there's not nearly enough silver.
At this time, many customers who come to the coin shop are buying $1500 to get over the "sales tax" limit in California, or others will buy $10,000 in cash to avoid the cash transaction reporting limit, which makes their purchase very anonymous. At this time, a larger trader's most important job is to facilitate those kinds of orders. They buy 100 oz. bars, 10 oz. bars, and 1 oz. rounds.
Smaller investors are not "left out"; as they can grow their wealth even faster. If you only have 50 ounces, sell them one at a time for 20 bucks a pop, and you will make a much wider spread, and compound your wealth that much faster.
Be a capitalist. Get more than your fair share. Then start to share the wealth. That kind of win/win will benefit more than just you. You may save an entire city.
Of course, some people may scoff and say that these are all reasons why you should stick with gold; as you can be lazy and avoid the hassles of silver. But a similar dollar amount of gold will never save the lives of the people of an entire city. How can $700,000 or 700 one ounce gold coins at $1000 each do anything to facilitate the real commerce and regular transfer of wealth in a city of 10,000 to 50,000 people? But 50,000 one ounce rounds can save an economy. And in the long run, when silver prices are much, much higher than they are today, it will probably make more sense later to have that silver minted into 1/10th oz. pieces or 1/20th oz. pieces, which would make 500,000 pieces or even 1 million pieces of real silver money. And that's how you become a true millionaire.