Exposing Silver Mythology: Opinion, Part 3 (Correct)

(Corrects story to excise personal attacks against Kitco's Jon Nadler. TheStreet, in encouraging civil debate, regrets the remarks.)

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK ( Bullion Bulls Canada ) -- In parts one and two, we were presented with a shocking perspective on the silver market. The principal record-keepers for the silver sector, and the largest single regulator of the silver market both display not only an abysmal level of ignorance concerning the silver market, but the seeming incapacity to even understand basic arithmetic operations.

The result of this display of ineptitude is that the mainstream data and analysis which reaches the market from these official and quasi-official sources has absolutely no basis in reality. It is precisely this sort of vacuous nonsense which is relied upon by mainstream silver bears when they spew their negative drivel.

Kitco's Jon Nadler has gone through a 10-year-plus bull market for gold without acknowledging it. He was particularly dour on silver in a recent article on silver. First the context:

Some market watchers are warning that silver faces a vicious bear market that could eventually take the price to the mid-teens...

What clearly identifies this as misguided is the following passage:

...the problem with the bullish case for silver, at least over the near term, is the threat of growing supplies.

A key industry figure highlights the problem. According to the trade association the Silver Institute, the average cash costs at silver mines...worked out to a mere $5.27 an ounce in 2010...

Note that the article talks about "the threat of growing supplies" without data about actual growing supplies. The implication that the current profitability of silver mining will thus flood the market with silver "over the near term" is the precise opposite of reality.

1) Despite a 10-fold increase in the price of silver off of its 600-year low (spread over a 10-year-plus period), we have seen no more than a 1% to 2% annual increase in silver production throughout that period. This means there is absolutely zero empirical evidence to support Nadler's assertion.

2) The approximate time to bring a new mine into production typically falls into the range of five to 10 years. Thus the profitability of silver mining today couldn't possibly have a significant impact on silver production until (at least) the middle of this decade. This means that the ridiculous assertion of a surge in supply "over the near term" isn't even theoretically possible.