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“When you see that men get richer by graft and by pull than by work, and your laws don’t protect you against them, but protect them against you–when you see corruption being rewarded and honesty becoming a self-sacrifice–you may know that your society is doomed.”  – Francisco d’Aconia “Money Speech” from “Atlas Shrugged”

The surest sign that a country has become a Banana Republic is the extreme redistribution of wealth. The wealth skew between the upper 1% and the rest started to accelerate in 2008, when the Fed began to slowly hyperinflate the money supply.  Mayer Rothschild famously proclaimed “give me control of a country’s money supply and I care not who makes the rules.”  That is the proclamation not only of someone who understands and knows how to apply monetary theory but of a misanthropic dictator characteristic of the attributes of a Banana Republic.

The United States has become the biggest Banana Republic in history. Blatant, unabashed corruption and an unimaginable degree of wealth redistribution effected by those who have control of the money supply. Moreover, those who were elected or appointed to protect the public from the greed and corruption of corporate America, specifically and especially the Too Big Too Fail Banks and the Military Industrial Complex, have been well paid off to look the other way. That is the definition of a Banana Republic. And this commentary is not addressing the highly problematic, yet covered up, dealings of the current “President” and his son.

I bring this up because Wall Street On Parade has presented more evidence that the U.S. has devolved into a corrupt, self-dealing Banana Republic: “The Fed Is Subsidizing the Money Market Funds Operated by Larry Fink’s BlackRock as BlackRock Manages a Big Part of Jerome Powell’s Wealth:”

Last year, during the financial crisis, Fed Chairman Jerome Powell held five confidential phone calls with BlackRock’s Chairman and CEO Larry Fink. The first call on March 19 lasted 30 minutes; there were two calls in April, one on April 3 and one on April 9, both lasting 15 minutes. A phone call between Powell and Fink on May 13 lasted 30 minutes; and one on November 20 lasted 10 minutes.

That’s a total of 100 minutes that the Chairman of the central bank of the United States spent on the phone with the man who heads the company that is also managing a large portion of Powell’s wealth through its iShares Exchange Traded Funds. The dates and times of the phone calls come from Powell’s publicly-released daily calendars.

Powell’s phone calls with Fink continued this year. On February 5, Powell held a 30-minute phone call with Fink. On March 1 of this year, there was a bizarre hour-long virtual meeting between Fink and the Board of Governors of the Federal Reserve and Fed staff. (Powell’s daily calendars are only currently available through August of this year.)

There is the growing impression that Fink is functioning in a consultant capacity to the Federal Reserve while his company, BlackRock, also manages a significant part of Powell’s wealth. See this report: BlackRock Authored the Bailout Plan Before There Was a Crisis – Now It’s Been Hired by three Central Banks to Implement the Plan

But wait, there’s more:

The Fed also gave BlackRock three no-bid contracts in 2020 to manage the Fed’s corporate bond buying programs. Under those contracts, BlackRock was allowed to buy up its own Exchange Traded Funds.

Now we are learning from Crane Repo Data, that a big chunk of the Fed’s overly-generous Reverse Repo operations have landed in BlackRock money market funds. Crane Repo Data reports that as of September 30, BlackRock Liquid FedFund money market held $84 billion of the Fed’s Reverse Repos while its BlackRock Liquid T-Fund held $65 billion.

This is now the United States.  A bastion of corruption and elitist self-dealing that signals a  hyperbolic wealth-grab ahead of an epic collapse. You can read the rest of the Martens’ report here:  LINK

Robinhood Markets: Robbing From Retail And Giving To Citadel

“Robinhood is the poster boy for the craziest, most unregulated stock market era since 1929. That one ended in tears. This one will also.” – WallStreetOnParade.com

HOOD operates a commission-free trading app that became popular in March 2020 with Millennials and Gen-Z’ers who fancy themselves as day-trading geniuses. The Company went public in July 2021 at $38/share. Aside from the fact that HOOD is symbolic of the biggest stock bubble in history, the corporate suite is riddled with fraud and corruption.

As it turns out, the trading service is not exactly free. The bulk of HOOD’s revenues comes from routing its order flow to third-party trading firms rather than the stock exchanges. This increases the execution cost, unknowingly, for HOOD’s retail, stool-pigeon accounts. In Q2 HOOD routed 34% of its order flow Citadel (hedge fund and brokerage) and 21% to Susquehanna (options order flow).

As a former Wall Street junk bond traderl, I can guarantee that Citadel and Susquehanna “front run” the order flow by taking positions, with buy orders for instance, in the stock/options being routed to each firm before executing the HOOD orders. The HOOD orders drive up the price of stocks/call options like AMC and GME. Citadel or Susquehanna then unload their front-running position for a profit that exceeds what was paid for the order flow. The mechanics of this may be akin to “scaling fish” for profits but aggregated over $10’s of billions of orders it’s huge, free money for Citadel and Susquehanna. It’s also easy to hide and hard for regulators to prove (if they bothered trying).  But this is one of the ways in which Wall Street skims money from investors.

HOOD is not the only brokerage that does this but HOOD has built its business model on order flow payments, as 80% of HOOD’s revenues is derived from order flow revenues. It was announced this past week (late September) by the SEC Chairman that banning payments for order flow was “on the table.” If this occurs, HOOD’s stock price will get destroyed.

In June 2020, HOOD was fined $57 million by FINRA and ordered to pay $13 million in restitution to clients affected by app outages and misleading communications in March 2020. It was the largest FINRA penalty in the history of the organization.

In December 2020, the SEC brought charges against HOOD for repeated misstatements that failed to disclose the firm’s receipt of payments from trading firms for routing orders to them and with failing to satisfy its duty to seek the best reasonable available terms to execute customer orders. HOOD settled the charges by paying a $65 million fine.

The day before this, the Massachusetts securities regulatory agency brought an enforcement action against HOOD for several regulatory violations, including aggressive tactics to attract new, often inexperienced investors and breach of the fiduciary conduct.

And there’s more. This past week (late September) it was revealed that the SEC was looking into whether or not HOOD President/COO, James Swartout, violated securities laws by selling out his position in AMC shares just ahead of HOOD placing a restriction on the trading of AMC.

Where’s there’s the “smoke” of fraud and corruption, there’s usually a “fire”. In HOOD’s case, it’s pretty obvious and there’s multiple wildfires burning. But this is just one aspect that makes HOOD a great short. HOOD’s share price is extraordinarily overvalued based on fundamental metrics and it looks like its business activity may be starting to slide.

For the first six months of 2021, after adding back a $2 billion non-cash charge for the change in the fair value of convertible notes and warrants liability (I normally would include non-cash charges but this particular charge is not a function of HOOD’s operating business) HOOD’s operating income was just $123 million. Giving the Company the benefit of annualizing that number – and there’s good reason to believe it will decline – HOOD’s operating income could be $246 million. After the provision for income taxes ($49.2 million in the 1H 2021, or $98.4 million for the full-year), HOOD might generate net income of $148 million.

On this basis, based on Friday’s closing stock price (October 1st), HOOD’s market cap is $36.6 billion. It’s thus valued at a P/E of 247x and 16x revenues (assuming revenues in 2H 2021 are equal to the 1H). It’s beyond comprehension that anyone would pay those kind of multiples for a cock-roach infested motel like HOOD. But, such is the nature of extreme stock bubbles.

Away from the potential regulatory and legal issues that HOOD faces and likely will face, there’s plenty of reason to believe that its operating business activity will begin to deteriorate. Keep in mind that HOOD is 100% retail-based. Its business activity soared when the stock market crashed during the peak of the virus crisis as Millennials and Gen-Z’ers flocked to HOOD’s app with dreams of getting rich by day-trading meme and tech stocks from their parent’s couch. And HOOD also added the ability to trade cryptos, which also is heavily retail-based.

According to Apptopia data, the number of new Robinhood app downloads in Q3 (a proxy for account openings) is down -78% from 2Q21. This compares with a drop of around 50% for Bitcoin, Coinbase and other crypto apps that rode the retail trading trend. In addition, Q3 daily active users (a proxy for activity levels) have declined -40% from 2Q21. This compares with a 23% decline for crypo peers and 30% for Schwab.

As stock bubbles start to pop (see 1999/2000 and 2007/2008) retail stock speculators start to lose interest in the market or try to buy the dip until they destroy their account. Most ultimately get wiped out.

When HOOD reported its Q2 numbers on August 18th, it warned that it expected lower trading activity and lower revenue in Q3 as well as “considerably fewer funded accounts” compared to Q2. The Company also has warned twice of a slowdown in crypto trading revenue.

HOOD IPO’d on July 29th so there’s only a little over two months of trading data. The chart above (through 10/1/21) is an hourly chart that goes back to the IPO date. Technically, it looks like continued market turbulence could knock the stock down to $30 this quarter. If the stock market suffers and “accident” this month, HOOD will go below $30. And there’s the constant threat of regulatory torpedoes being launched at the share price.

Of the 875 million shares outstanding, insiders have dumped 464 million. In addition, 98.7 million shares connected to a convertible note owned by insiders will be dumped once the S-1 registration becomes effective. Finally, another 567.9 million shares will become available to sell by insiders as lock-up restrictions expire. Oh, and let’s not overlook the fact that ARKK owns 5.5 million shares and has been adding more shares recently.  ARKK’s endorsement of HOOD alone makes it a fabulous short without knowing the long list of fundamental negatives.

Robinhood to me seems like a no-brainer short. If the stock market falls into a bear market, HOOD will go below $10 and probably below $5. For now, the shares are hard to borrow. I have a big position in December $30 puts. I may also throw on some May 2022 $35’s. Shorting the longer-dated OTM calls is like taking candy from a baby. Once the above-mentioned lock-up expires, the stock will take another leg down and shorting OTM calls will pay off handsomely. 

HOOD will report Q3 numbers in mid-November (it reported Q2 numbers on August 18th). I think there’s a good chance it will miss estimates.  I’m guessing it will report Q3 either the Wednesday or Thursday before the November 19th option series expires. I may buy a small amount of November $40’s or $38’s.

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The post above is from the October 3rd issue of my Short Seller’s Journal, a weekly subscription newsletter that employs fundamental analysis to identify high probability short sale ideas.  Each issue features analysis of the the past week’s stock market action and economic plus, of course, current short ideas and a weekly update on TSLA. Recent shorts include PENN (at $100 and $120), LEN ($98 and $109) and MU (weekly since it was in the $80s). I also put my money where my mouth is on many of my short ideas. You can learn more here: Short Seller’s Journal

Gold And Silver Are Set To Take Off – The Mining Stocks Are Highly Undervalued

A massive financial system crisis is building.  Evergrande is a small part of the cause but it may have been the “black swan” trigger. The move into the dollar is likely a reflexive flight to safety by professional investors globally and foreign banks. While it’s easy to define Evergrand’s on-balance-sheet debt, there’s no way to know what lurks off-balance-sheet in the form of OTC derivatives and contingent liabilities. Not just for EG but also for the big banks that make wrath of God money underwriting and selling credit default swaps etc.

As evidence that the Fed/Central Banks knew that a financial hurricane was brewing, recall that the Fed quietly announced the establishment of a $500 billion repo facility at the FOMC meeting in July. Why do this when currently the Fed has been keeping over $1 trillion of liquidity circulating in the banking system in a sort of “suspended animation” via the Reverse Repo mechanism?

Gold (and silver) is likely being pummeled by the paper gold price management team in order to disconnect the warning signal of an impending crisis that would be transmitted to the markets if gold continued to move higher in correlation with the USD (remove the canary from the coal mine before it dies).

At some point the demand for the wealth preservation/inflation-shield attributes of physical gold and silver will overwhelm the ability of the banks to cap the price. And the mining stocks are historically undervalued relative to the S&P 500 and to the price of gold. I would argue that the mining stocks represent a generational value investment opportunity.

Bill Powers of Mining Stock Education invited me back on to his podcast to discuss the above issues as well as present a some stock ideas I find particularly compelling:

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The mining stocks are once again historically cheap.  At some point this year I will be raising the subscription price, though existing subscribers will be grandfathered at the current monthly rate.   If you would like some ideas for investing in mining stocks, take a look at my  Mining Stock Journal.

If Energy Prices Go Parabolic, Gold and Silver Will Go Parabolic x 3

Commodities are historically cheap to the S&P 500. This is after the monster move over the last 18 months ignited by the Fed more than doubling its balance sheet over the next same time period. Funny thing about looking at a chart of commodities. That rally largely has not included gold and silver. But that is likely going to change:

The chart above shows gold vs the M2 measure of money supply from 2016 to present (the 4 1/2-year bear market in the sector ended late December 2015). The chart suggests that at some point the gold price will correct “up” to the M2 line. Even if the Fed were to start tapering its monthly money printing, the money supply will not decline unless the Fed engages in “quantitative tightening” (permanent reverse repos to remove  money from the system).

To be sure, the current effort by the banks and western Central Banks to cap the gold price is one of the most aggressive I’ve witnessed in 20 years. They are in a fight to maintain their last shred of credibility with the markets in a bid to keep the current fiat currency monetary system intact. It’s a battle they will eventually lose.

Wall Street Silver hosted myself along with David Morgan (silver-investor.com) and Andrew Pollard, CEO of Blackrock Silver ($BKRRF, $BRC.V) to discuss the the energy and precious metals markets:

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The mining stocks are once again historically cheap.  Find out why I have Blackrock Silver as one of my top junior exploration plays.  At some point this year I will be raising the subscription price, though existing subscribers will be grandfathered at the current monthly rate.   If you would like some ideas for investing in mining stocks, take a look at my  Mining Stock Journal.

Will Price Inflation Prick The Stock Bubble?

“There was a complete rout of net favorable views of buying conditions: household durables fell to the lowest level since 1980, vehicles fell to the lowest level since 1974, and homes to the lowest level since 1982. These record drops were all due to complaints about high prices: homes had the highest negative ratings of home prices ever recorded, vehicles had the most negative price references since 1974 (in response to the first oil embargo), and durables had the worst price rating since 1980.” – Richard Curtain, director of the U of Michigan Consumer Sentiment Survey


The graphic above does a great job of conveying the non-transitory nature of price inflation – price inflation resulting from the substantial and continuous devaluation of the dollar from the Fed’s money printing and the Government’s debt issuance. The graphs show prices paid and received for manufacturing companies in DC, Virginia, North/South Carolina, Maryland and Virginia. The price inflation at the production level will show up at the retail level over the next 3-6 months. This in turn will cause a further slowdown in consumer spending.

The graphic above shows consumer perception of the buying conditions for large household durables from the UMich consumer sentiment survey released Friday. The view is that the conditions are the worst since 1980. The reason is price inflation. Average household incomes are not even coming close to keeping up with price inflation. This is especially true for retired households dependent on Social Security. This is going to reverberate through the entire economy and cause a severe economic contraction – a contraction that will be masked in the headline numbers by price inflation.

When adjusted for inflation and annualized, the cost of food is higher than nearly anytime in the past six decades, according to United Nations Food and Agriculture Organization data. Alastair Smith, senior teaching fellow in global sustainable development at Warwick University in the United Kingdom, recently noted: “Food is more expensive today than it has been for the vast majority of modern recorded history.” In the U.S. instead of raising prices many food processors are making packages smaller.

“Price Inflation” is a product of currency devaluation from money printing in excess of systemic wealth output. By the time end user prices are rising, the currency devaluation has already taken place. The Fed is printing money and devaluing the currency on a weekly basis, the currency devaluation “nuclear bomb” was dropped in March 2020 when the Fed printed $3 trillion to bail out the banks and to continue funding Government spending without causing a big spike-up in interest rates. As long as the Fed continues to print more money, inflation is unequivocally non-transitory.  In fact, the price inflation we’re seeing now is in the early stages of a much larger escalation.

This is not going to end well. Eventually price inflation is going to sink the economy as households are forced for budgetary considerations to stop spending money anything other than absolute essentials. And the ESG movement is going to send price of energy to Pluto and beyond.

At some point, as was experienced in a similar set-up with the German stock market in November 1923, the money printing and resultant price inflation will undermine the stock market. As legendary investor, Jeremy Grantham, recently commented: “I believe this event will be recorded as one of the great bubbles of financial history,” Grantham wrote, “right along with the South Sea bubble, 1929, and 2000.”

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Most of the above commentary is from the September 19th issue of the Short Seller’s Journal. Recently subscribers who played the recommendations have made small fortunes on ideas like Toll Brothers (TOL), Microstrategy (MSTR) and Penn Gaming (PENN), among others. The learn more about this newsletter, follow this link: SHORT SELLER’S JOURNAL

In The Golden Age Of Fraud – The Biggest Is The Fed

“The unsustainable will not be sustained, except through ever-increasing force and fraud.” – “Jesse,” Jesse’s Cafe Americain

“The culture of Wall Street has now completely engulfed the Fed: it’s legal if you can get away with it.” – Pam/Russ Martens, Wall Street On Parade

The United States has descended into history’s biggest Banana Republic. Open corruption oozes from every nook and cranny in Washington, DC, Wall Street and Corporate America.  While Tesla and Elon Musk, for me, are emblematic of this, every aspect of America’s society is fraudulent, down to the fraudulent idea of a “deady virus.”  Even the US dollar fiat currency created out of thin air by the Fed’s digital printing press is a fraud.

The latest exposure of Federal Reserve Bank Presidents who were sitting in their offices and trading on inside information is just the tip of the iceberg.  While both criminals – Dallas Fed head, Robert Kaplan and Boston Fed El Hefe, Eric Rosengren, suspiciously resigned shortly after being exposed, they can rest assured that there will never be any consequences because the Government officials put in charge of enforcing the laws will happily look the other way, likely with the help of cash-filled brief cases…

Wall Street on Parade has written a must-read essay on the probable illegalities committed by Kaplan and Rosengren:

For more than five years the President of the Dallas Fed, Robert Kaplan, was trading like a hedge fund kingpin in “over $1 million” transactions in S&P 500 futures while refusing to follow the requirements of the Fed’s financial disclosure form and list the specific dates of his purchases and sells so that the transactions could be examined for whether he had inside information from the Fed at the time. That information is now as much as five years overdue to the American people and we have asked the Dallas Fed to provide it promptly.

The Dallas Fed further hampered the free press in America from doing its job by refusing to answer our simple question as to whether Kaplan was shorting stocks or S&P 500 futures during the pandemic crisis in 2020

Here’s the rest: Was Boston Fed President Rosengren Trading with Citigroup’s Money?

When you see that men get richer by graft and by pull than by work, and your laws don’t protect you against them, but protect them against you–when you see corruption being rewarded and honesty becoming a self-sacrifice–you may know that your society is doomed.” – Francisco’s “Money Speech” from “Atlas Shrugged”

Fed changed nothing but gold was smashed anyway — Any questions?

Are the central banks so scared by accelerating inflation that they have to take down the gold price and dismantle gold as an inflation barometer so as to temporarily fool the market? Or do the central banks know that further market turmoil is imminent and need to take down the gold price so that when the gold price then rises, it will be from a lower level?   – Ronan Manly, Bullion Star

The U.S. dollar index, our friend Dave Kranzler of Investment Research Dynamics writes today, “is back to where it was right before Federal Reserve Chairman Jerome Powell’s press conference yesterday. When Powell said ‘maybe in November we’ll have a taper schedule,’ the dollar shot up and paper gold was slammed. With the dollar back down to its pre-presser level today, gold is still down $36.” Indeed, yesterday the Fed essentially said that it isn’t “tapering” its bond purchases yet, though it might (or might not) do so soon, nor is it raising interest rates, though it might (or might not) do so some time next year.

That is, the Fed offered only a lot of temporizing for the umpteeth time.

But what if the Fed did begin “tapering”? Presumably that would diminish demand for bonds, weakening their prices and making other assets, even gold, more attractive. As for interest rates, real rates are already deeply negative as inflation increases and traditionally gold has risen in price even as interest rates rise when they lag inflation so much. So gold’s latest counterintuitive performance might raise questions about what is going on, and particularly about official but surreptitious intervention in the market.

People in the gold industry might ask certain agencies about the frequent anomalies involving the gold price — agencies like the Fed, U.S. Treasury, U.S. Commodity Futures Trading Commission, the Bank of England, and the Bank for International Settlements, as GATA often has done:

https://www.gata.org/node/21371

But the gold mining industry and the World Gold Council always refuse to ask about intervention, and it must be assumed that, at least for the time being, adversaries of the United States that long have taken a strong interest in gold — particularly China and Russia — are going along with price suppression, in spite of or maybe even because of the gradual implementation of the “Basel 3” banking regulations that seem likely to reduce the gold derivatives positions of bullion banks.

Gold and gold mining investors who would prefer not to wait for central banks to decide the fate of gold can always ask the companies in which they have invested, their elected officials, their investment houses, and news organizations to pursue the market manipulation issue. GATA has made it easy, compiling the major documentation here:

https://gata.org/node/20925

Of course most of the important participants in the markets and news media have been bought off. But even then you can embarrass them with the documents.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
CPowell@GATA.org

With Inflation Raging, Why Is Gold Not Moving Higher?

The gold price ran from $1,265 at the beginning of May 2019 to $2,089 in early August 2020.  That’s a 65% move 15 months.  Over that period of time gold outperformed every financial asset class. To some extent, the move was anticipating the price inflation that’s occurring now which resulted from the devaluation of the U.S. dollar with the Fed more than doubling the size of its balance sheet since March 2020.  Since August the price pulled back technically from an overbought condition and a stampede of fast money speculators chasing the price higher. It looks like it may have bottomed out from the 13 month correction and is getting ready to make another big bull move.

But you can’t have conversation about where the gold price is and where it should be without discussing the official effort to prevent gold from serving its role as the canary in a coal mine with respect to the failure of the Fed’s monetary policy and the Government’s failing fiscal and geopolitical policies.

Kai Hoffman of Soar Financial invited me on to his podcast to discuss the precious metals sector and the potential for a Fed taper. I also named a few mining stocks that I like right now:

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The mining stocks are once again historically cheap.  At some point this year I will be raising the subscription price, though existing subscribers will be grandfathered at the current monthly rate.   If you would like some ideas for investing in mining stocks, take a look at my  Mining Stock Journal.

Money Printing, Inflation, Gold And Silver

It’s my predilection to believe that the Fed not only will not taper but will eventually be forced to increase the amount of money it is printing, I believe we’ll see the mining stocks outperform the general stock market by a wide margin over the next 12 months. Adding fuel to this will be the market’s realization that not only is inflation not “transitory” but that it’s getting a lot worse.

Patrick at SBTV (and silverbullion.com) invited me back on to his podcast to discuss the Fed, inflation, the financial system and gold (recorded September 2nd):

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Some smaller cap/mid-cap producing mining stocks have been sold down levels from which I believe they will double or triple (or more) in the next bull move in the sector. One of the companies I cover and recommend in my Mining Stock Journal is throwing off close to 9% free cash flow yield. That is the definition of value stock.  Many of the junior exploration/development companies I cover, recommend and invest in have the potential to 5-10 baggers from their current down-trodden level. You can learn more about my newsletter here:  Mining Stock Journal information.  I do not take compensation of any type from mining companies and I have been doing my own research in the sector for over 20 years.

A Taper Is Likely Off The Table – Gold, Silver and Mining Stocks Are Ready To Rumble

The chart above shows the gold/HUI ratio going back to 2001. I would have used GDX but I wanted to take the graph back to beginning of the precious metals bull market and GDX didn’t start trading until May 2006. It’s not perfect, but in general when the ratio is below the horizontal red line, mining stocks are expensive relative to gold – note the big selloff in the HUI (bottom panel) in early 2009 – and the miners underperform gold. When the ratio is above the green line, gold is expensive relative to the miners and the miners will at some point outperform gold. The chart tells me that mining stocks are cheap right now.

This chart shows the XAU/SPX ratio going back to 1973:

It shows the degree to which the mining stocks are undervalued relative to the general stock market. The mining stocks are almost as cheap as they were in 2001 (when I started the HUI was trading at 45). This doesn’t mean that they can’t get even cheaper – something that could happen if/when a stock market “accident” hits. This is why I have been trying to emphasize the importance of keeping a lot of cash on hand in case that “accident” happens. There’s no need to try timing a bottom. If we can capture the middle 60-70% of the next move higher, we’ll make multiples of what we have invested now in mining stocks.

Another indicator that the precious metals sector may be starting to form a bottom is the Commitment of Traders report (as of August 10th, published August 13th):

The graphic above is from the August 13th COT report which shows Comex trader categories for paper silver through August 10th. Both commercial segments (producer/hedger and banks) have been reducing their net short position in silver futures. At the end of January this year the net short position for the swap dealers was 21k contracts. At the same time, the hedge funds (managed money) segment has started to reduce its net long position aggressively and pile into the short side.  The most recent COT report from last Friday showed the banks (swap dealers) were net short less than 400 contracts. Based on the change in the open interest in silver contracts (published daily) I would not be surprised to the see banks net long silver – in fact, I expect it. I also expect to see that the hedge funds have further reduced its net long position.

Historically when this pattern has occurred, the precious metals market has bottomed and began a move higher within a couple of months. The next COT report comes out tomorrow (Friday, August 20th). Based on the changes in the daily open interest reports since August 10th, I would not be surprised if the banks are net long silver contracts. The last time I can recall that this happened was in the fall of 2015. The precious metals sector bottomed from the 4 1/2-year bear cycle at the end of 2015.  I’m not saying it’s definitive that the pattern will repeat. But I believe, in conjunction with other indicators, that there’s a decent probability the precious metals sector could begin move higher this fall, absent a stock market accident.

Ultimately I think the precious metals sector is setting up for an eventual big reversal. It may have started today now that the employment report has confirmed my view that the economy is rapidly slowing down, which will take discussions of a Fed taper off the table (not that believed the Fed was going to taper anyway).  The mining stocks have been ruthlessly sold off over the last four months. However, since the sector decline began in August 2020, GDX managed to hold a double-bottom just above the first bottom it hit in March, which it traded down to its lowest level since June 2020. This has not been noticed by mining stock analysts but technically it is important. 

The commentary above is from the August 19th Mining Stock Journal. Some smaller cap/mid-cap producing mining stocks have been sold down levels from which I believe they will double or triple (or more) in the next bull move in the sector. One of the companies I cover and recommend in my Mining Stock Journal is throwing of close to 9% free cash flow yield. That is the definition of value stock.  Many of the junior exploration/development companies I cover, recommend and invest in have the potential to 5-10 baggers from their current down-trodden level. You can learn more about my newsletter here:  Mining Stock Journal information.  I do not take compensation of any type from mining companies and I have been doing my own research in the sector for over 20 years.