Kodak's Nickel's Worth (and mine), beer, and haberdashery
David Bond

Wallace, Idaho - If you're ever Silver Valley-style Sleepless and want to amuse yourself in some down time, look up a few prices from 1970 of common necessities. I refer here to beer, silver, digs, groceries and gas - not necessarily in Abraham Maslow's hierarchical order of needs - but close enough for government work.

The Provincially-set price of beer in 1970 where I grew up was fixed at 20 cents for a 12-ounce (Imperial ounces, mind you, not them wimpy American ounces) schooner. We returned to Vancouver, B.C. this January, and the best we could do was $2 for the same quantity of suds.

The price of oil was $3 per barrel in 1970. It is well past $30, closer to $40, per bbl, today.

Don't care for beer? OK, the Wayback Machine takes us back to 1970 to hunt for coffee beans, which low and behold, were selling for the magical bean price of 75 cents a pound. Run-of-the-mill whole-bean coffee nowadays fetches $7.50 an elbow.

The average price of a new single-family home in 1970 was $23,000; it is now nearly $200,000, according to the federal HUD agency.

Are we beginning to see a pattern here? That whatever cost X in 1970 now costs 10 times X in 2004.

So where was silver in 1980? No, you don't have to look it up. We do these things in our Sleep here in the Silver Valley. The 1970 price of silver - just two years after LBJ and the United Snakes Government reneged on their promise to redeem silver certificates for silver - hovered at $2 per troy ounce.

So I listen to these guys and gurus at these silver and gold shows around the country who are prognosticating $8 or even $9 silver and can only wonder, Are they nuts?

For silver to merely catch up to the price of beer, coffee, shelter and gas, it would have to be 10 times its 1970 price, or $20 per troy ozzie. Then, at $20, and only at $20, would we be legally qualified to categorize and continued rise in price as a "bull market."

Hang with me whilst I digress into gold for a moment - not my cuppa but playing with numbers, like playing with scissors or plastic explosives, is a great way to while away the time with any commodity - and you come up with pretty much the same values. However, in this context, $440 gold is one hell of a lot saner than $7-whatever silver.

What LBJ did to silver, Nixon did to gold. By "floating" the dollar in 1971 (What else floats, students? Pond scum? Merdre?) Tricky Dick and his cabinet of criminals had to chase around the markets periodically "fixing" the price of gold in Federal Reserve "Nots" until the entire endeavour was abandoned for the folly that it was, the Fed folded, and we traded Fort Knox in for Sri Lankan rupees and Saigon scrip. But for mindless consistency's sake let's play this out.

Nixon set the "official" gold price at $38/oz in 1972, then had to boost it to $42.22/oz a year later. The first official fix, coming on the heels of 1971's flotation creation, sucked 8 percent of the value of the US dollar out overnight.

Paul Van Eeeden is thrashing about with the question of what the "real" price of gold should be in true market terms - I commend him for his long-suffering. But at minimum, gold's price should be 10x-plus the phony Nixonian fix of $42.22, or $420, which is about where it's hovering these days.

Let's digress further. The USGS gives an interesting analogy, not relevant to us dungaree- and sandal-suited Silver Valley Sleepless style-slugs but germane perhaps to city slickers, oft repeated in the inner circles these days but hung here on the clothes-line for the first time, comparing the price of gold to the price of a decent set of threads:

From Shakespearean times through the late 1980s, reflects USGS at http://minerals.usgs.gov/minerals/pubs/commodity/gold/300798.pdf an ounce of gold could buy a decently tailored man's business suit. Imagine that! An economic indicator that withstood the test of four centuries' time. And there were no dips and valleys in this half-millennial straight-line. The Shakespearean ounce-per-suit equation stood still during Beethoven's times, during the Jefferson Administration, through the Great Depression, into the 1980s, when suddenly ingots and Armanis parted company. Now, in 2004, a decent off-the-rack set of threads will set you back 1 large or two - in other words 3 to 5 ounces of gold, and the bastards don't even throw in a vest anymore!

So is two large too much to expect of gold? If you think $400 gold is rational, better go back to your nickel comic books and candy bars.

Well, I have digressed and you have hung with me for long enough. Now onto the essence of this rant. David Morgan of silver-investor.com was up here to visit last Saturday - always a delightful time. Other than me he is the only bright guy writing about silver these days, and one of these days after the charlatans have moved into silver, we'll tote up our collective "I told-ya sos," sell 'em on eBay and retire to Belize or Papua with our guns, families and hangers-on.

We took a putt up to Mullan in Morgan's Dodge pickup to have a look-see at the Lucky Friday and swap war stories. Back in Wallace, we stopped by an eccentric storefront called "Indelible Tidbits" wherein the proprietress archives black and white historical photos (and makes her own) of this mining district, and will also swap a roll of your exposed color Fuji or Kodak film out for fine prints inside of an hour through some unimaginably expensive gadget called a Noritsu for half a sawbuck.

Morgan, being far more intelligent than me, is still capable of asking obvious dumb questions with grace.

"How much silver do you get out of this thing?" he asked her.

The question of course presupposed a knowledge of the chemistry and metallurgy of silver-halide photographic film. You see, you can't buy a photo-processing machine without getting the recycling gadget with it. Silver is useful in film in its halide form because it is light-sensitive. Once the silver has worked its magic on the film in the developing stage, you get rid of it - 100 percent of it - in the fixer stage. If you don't, the film remains light-senstive and your negatives gradually fade to nothing. So recovery is the game. She sells the silver-rich sludge recovered from her machine back to our friends at Rochester.

"I get about a nickel's worth a day," she replied. Five cents worth of $5 silver recovered from an average day's load of 20 rolls of film. You could see the smoke coming out of Morgan's ears. Mine as well. Out came the pencils and the calculators.

We double-checked each others' math. Five cents of $5/oz over 20 rolls of Fuji or Kodachrome works out to be one-fourth of one penny's worth of silver contained in a roll of film.

Which means if that silver doubled its $5/oz price to $10/oz, there would be one-half-cent's worth of silver in a roll of colour film. At $100/oz silver, there would be 5 cents' worth of silver in a roll of colour film. At $1,000/oz silver there would be 50 cents' worth of silver in a roll of colour film.

Are you catching my drift here? That the treacle and drivel issuing from Rochester about the need to find a substitute for silver 'cuz the price is rising is just bollocks. Caveat emptor! When silver finds its $20 finger-hold, the cost to Eastman-Kodak will have increased by exactly one penny per roll of colour film. But watch 'em jack the price $5 a roll and blame it on the greedy silver miners.

Kodak follows the same greed-head folly as the fabricators of sterling silver tableware. They quintupled their prices during the course of the Hunt debacle, but neglected to readjust them when the price came back down. Priced themselves right out of business.

Kodak's silver-shorting greed led to the development of the far-inferior digital photography boom, which is neither archival nor very good, nor, if you're a serious shooter, very handy. And in doing so, they dealt themselves into a tidy little double-bind.

Folks with kilobuck-costing digital cameras are watching their ink-jet prints of the family brood off their fancy CDs and memory sticks fade and fall apart in 6 months - this on the finest ink-jet printer paper - hardly a suitable gift for Grandma. So they come back to places like this little photo shop in Wallace to un-ring the bell that technology hath rung. And the only answer this digitized photo industry can offer is, "Run out your digital images on silver-halide photo paper, and be amazed." And they are. And their pictures will last.

As will silver last.

As will gold last.

As will the fools who think that the bargain-basement prices of $400 gold and $7 silver are unsustainable peaks.

These fools are our lawful prey. See you after school in my new two-piece suit, back behind the church, down by the marketplace. Next week, I will tell you where I place my bets, and they all end with .PK. or .OB. Keyword Silver Valley, and you will find them all.

David Bond

David Bond covers gold and silver mining equities for a number of national and international publishers, including Platts Metals Week, a division of McGraw-Hill. He lives in Wallace, Idaho, heart of the planet's richest silver fields, the Coeur d'Alene Mining District. He is former editor of the Wallace Miner, and holds regional and national firsts in investigative journalism from the Atlantic City Press Club (National Headliner) and from the Society of Professional Journalists (SDX/SPJ) and has edited or written for newspapers on both coasts, Canada and Alaska.