Today acclaimed money manager Stephen Leeb spoke with King World News about gold, silver and natural gas. Here is what Leeb had to say: “I noticed that natural gas is trading somewhere around $3.75. What’s significant is that the price of natural gas today is about what it has averaged over the past four years. The reason four years is important is because it marks the time when unconventional or fracking gas came into its own.”
Stephen Leeb continues:
“That’s when we started seeing this huge pickup in natural gas. We have had all of this talk about all of these additional gas supplies, and yet you still have natural gas sitting at $3.75. We also still have every dedicated fracker, whether you are talking oil or natural gas, basically losing money once you subtract out capital expenditures.
“So in order to continue increasing production you have to keep adding more and more rigs. That’s why you see these capital expenditures going through the roof. Rigs take a lot of money to build and it takes a lot of people to run rigs. The late Matt Simmons once told me that you really needed something like $8 natural gas in order for the energy that you put into a well to equal what you get out. We are nowhere near $8 right now on natural gas.
The fact that natural gas is now heading higher is beginning to make people realize that fracking has its problems. So the US is telling people that our new energy policy is this fantastic new technology called, ‘fracking.’ Yes, it does produce a lot more gas and a lot more oil, but at a cost, and right now the cost is higher than current market prices.
This is no way to become energy independent. We are not creating policies that are going to sustain growth in this country. Nobody is even talking about growth in this country. Taxing and reducing expenditures, that’s not a recipe for growth. That’s a recipe for further catastrophe.
When I watch what is happening I keep wondering, how much money is the Fed going to print? And when does inflation really start to take hold? It’s just a matter of time, Eric. The endgame here is just more money printing to keep the economy going.
As the world really begins to look seriously at the energy problems we face going forward, governments will start to realize the strategic importance of silver. Silver is a better buy than gold. Silver is going to play a vital role in producing energy around the globe. Japan is turning to solar. Saudi Arabia is turning to solar. Virtually every major country in the world is turning to solar. There is not going to be enough silver to satisfy the demand for solar energy.
Silver has not broken $50 yet, but when I say silver is going to be a 3-digit commodity, it will be. These small silver stocks, they are the ones that are really going to be a big hit. What really worries me about silver, Milton Friedman said silver was the first monetary metal. Silver will benefit from the monetary catastrophe that is in front of us because it is a monetary metal. But silver is also needed for cell phones, energy, computers, automobiles and so on.
A Stanford professor, Mark Jacobson, wrote a cover story in Scientific American in late 2009. He said that in order for the world to ween itself from hydrocarbons, we are going to need four or five terawatts of electricity. The amount of silver that would be needed for that is more than exists in the ground.
So in the future when silver is well above $100 an ounce, you are likely to see governments saying to people, ‘You can’t buy silver anymore.’ The price of silver will be going ballistic, but the mines will continue to produce because the governments will continue to need every ounce of silver they can get.