The Tiny Silver Market, Part IV

(So Tiny, it does not exist, unless you touch it!)

Silver Stock Report

by Jason Hommel, October 8th, 2009

The BIS complained about us sharing their own explanations for their own numbers, showing a $111 billion notional value of over the counter "other precious metal" derivatives yesterday.  I guess we hit a nerve.

The notional derivatives market ($111 billion) dwarfs the physical investment silver market ($1 billion).

It is important to continue to put the $1 billion annual PHYSICAL silver investment market into perspective, This time, I'll break it down by time, and across people.

$1 billion per year divided by 52 weeks per year is $19 million per week. 

52 weeks with 5 trading days per week is 260 trading days per year.

$1 billion / 260 trading days per year = $3.8 million per day, spent on physical silver investments, worldwide, across all dealers in all nations.

So if a person wants to buy $1 million worth of silver, that would be about a quarter of the overall investment demand of the entire world silver market! 

Clearly, a $1 million order in silver, can move the price.

Thus, there is no reason to look at "macro" "societal" forces for moving the silver price, when it can be dominated by one or two very small traders who decide to "wake up" that day and protect their assets and buy physical silver, since no macro forces can predict that.

A mere $400,000 order is 1/10th of the entire silver investment market, for that day.

A second way to look at the small size of the silver market is by distributing the regularly purchased worldwide available investable silver ($1 billion/year) across this tiny email list.  There are 80,000 readers on this email distribution list. 

$4 million/day divided by 80,000 = $50 each.  In other words, if everyone on my email list tried to buy silver at once, in one day, there would barely be enough silver in the entire world, for everyone to order $50 worth of silver per day!

A third to put it into perspective is by looking at the net worth of the average American.  The average net worth is $100,000.

Those who read investment newsletters probably have a higher net worth than average.

Multiplying the average net worth by 80,000 readers, is $8 billion.

$8 billion simply cannot fit into the $1 billion annual silver market, without driving up the price by many multiples.

This is how I know that my readers are only "somewhat" taking my advice.  My readers, collectively, are 8 times the size of the annual silver market. 

The good news is that each of my emails is only opened or read by about 15,000 at a time. 

And typically a single link within my email will be clicked on by only about 800 to 5000 people, showing a smaller level of interaction by active readers.

For 2500 people, $4,000,000 worth of silver available per day means that each person could order up to $1600 worth of silver per day.