Entrevista a Ted Butler

[Paciente]

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.