Category Archives: U.S. Economy

The Next Flight To Safety Rush Into Gold, Silver And Mining Stocks

Another round of “QE” money printing, another round of the flight-to-safety rush into gold, silver and mining stock…

For as insanely overvalued as are many of the “tech/unicorn” bubble stocks (SHOP, W, TSLA, CVNA, etc), the precious metals sector, especially silver and silver mining stocks, are just as undervalued. With multiple Fed speeches per day everyday for the last few weeks, the Fed is priming expectations for another big round of money printing in order to monetize the deteriorating credit quality of bank balance sheets and to fund the next round of Government stimulus payments as well as the massive spending deficit.

An eventual, inevitable stock market “accident” like the one in March will likely take everything with it, including the precious metals. However, like in 2008 and March, I expect an event like that to create a buying opportunity because a lot of the money that is pulled out of general risk assets will find its way into gold, silver and mining stocks. At that point the precious metals sector will head higher while the stock market continues to head south.

Silver Bullion TV invited back onto its podcast to discuss the precious metals market in the context of the next shoe to drop in the global financial system:

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Buying physical gold and silver – not GLD or SLV – should be your first priority in seeking shelter from the eventual fate of the dollar.  But mining stocks offer the potential wealth enhancement as well “optionality” upside to the prices of gold and silver. If you would like some ideas for investing in mining stocks, take a look at my  Mining Stock Journal.

The Next Bull Move In Mining Stocks

The big rally in Q2 continued into Q3 until early August. At that point, all of the technical and sentiment indicators I monitor were registering levels which indicated that the speculative frenzy that developed in July had reached the point of “boiling over.” I see the decline in the sector that began in early August as a healthy “corrective” pullback that will set-up the next move higher.

The precious metals sector made a big run since mid-March, outperforming every asset class with the exception of a handful of insanely overvalued tech stocks. When a market makes a big run like we experienced in Q2, it’s not unusual to run into some interference while it consolidates and percolates for the next move higher.

Contrary to popular myth, it’s impossible to time a market top or bottom unless complete luck is involved. It’s always good to keep cash on hand to take advantage of opportunities in your favorite holdings or new ideas when the market creates those opportunities.

Bill Powers invited me back onto his Mining Stock Education podcast to discuss the precious metals sector and specifically the junior mining stocks:

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Buying physical gold and silver – not GLD or SLV – should be your first priority in seeking shelter from the eventual fate of the dollar.  But mining stocks offer the potential wealth enhancement as well “optionality” upside to the prices of gold and silver. If you would like some ideas for investing in mining stocks, take a look at my  Mining Stock Journal.

Why Gold, Silver And Mining Stocks Are Going Much Higher

I’m the most disconnected from politics as I’ve ever been. It’s a waste of time. Capitol Hill is one big Kabuki Theatre performance space. The country is completely screwed and the elitists know it. Everyone who is in a position to grab wealth and power is scrambling to grab what they can by any means necessary. Think about the dysfunctionality of a system that allows the head of its Central Bank to make the effort to convince the populace that price inflation is good for the economy. It’s Orwell on hallucinogenics.

Craig Hemke (TF Metals Report) invited me onto this weekly podcast to discuss the systemic corruption, precious metals market manipulation and where gold, silver and the mining stocks are headed over the next 12-18 months:

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Buying physical gold and silver – not GLD or SLV – should be your first priority in seeking shelter from the eventual fate of the dollar.  But mining stocks offer the potential wealth enhancement as well “optionality” upside to the prices of gold and silver. In the next issue I’ll be featuring a junior silver explorer with 10-20x potential upside. For more information:  Mining Stock Journal.

We No Longer Have Markets – Only Interventions

The actual quote is:  “There are no markets anymore,  just interventions – GATA.”  The only people who deny that Central Banks and Governments prop up the financial markets are those who are completely ignorant of the facts, tragically naive or those who stand to benefit from some way from the market manipulation.  Et tu, Bill Fleckenstein?

Of course, a populace which enables and allows the head Central Banker to stand in public and convince everyone that creating inflation is good for the economy – when in fact price inflation of necessities is running around 10% across the country (Chapwood Index), far out-pacing income growth,  can probably be convinced of anything.

Rather than trust hearsay from me or GATA, how about from the horse’s mouth – the former White House Chief of Staff just 5 days ago:

It’s hard to label those who make an effort to expose the truth as “conspiracy theorists” when in fact those “conspiracies” are confirmed to be “conspiracy truths” by those who are involved with the activity being labeled a “conspiracy.”

The entire economic, financial and political system in the U.S. (and in most of the rest of the world) is skating on thin ice.  I said 17 years ago that the corporate, billionaire and political elitists who are pulling the strings on our system will print money and manipulate the markets until they’ve wiped every last crumb of middle class wealth off the table. And then they’ll let the Comex default and the dollar collapse.

The money printing by the Fed enables these people to prop up the market s AND transfer wealth from your pocket to their’s.  That the purpose of a fiat currency based system and that’s what is happening now.  It’s also why I convert a meaningful percentage of my earnings into physical gold and silver (emphatically not GLD or SLV).   The devaluative effect of the money printing on the dollar is the reason gold has risen in price from $35 to $1900 since 1971, with the majority of that rise in the value of gold occurring after 2000.

That end game is growing closer.

The Price Of Gold When The Dollar Index Hits 70

There’s been a lot of media/Wall St/blog noise about the relative strength or weakness with the U.S. dollar.  With respect to gold, the daily vicissitudes of the gold price are associated with the daily price variations of the dollar index. This is incorrect analysis.

To be sure, over longer periods of time, there will be a high inverse correlation between the gold price and the dollar index. But prior to the run-up over $1900 in the current period, the last time the gold price was trading above $1900 was in September 2011.  At the time the dollar index was trading in the 70’s.

The investment value of gold – My thesis for devoting the last 20 years to researching, analyzing, trading and investing in gold has been twofold. First and foremost to protect my savings from the ravages of eventual catastrophic policies implemented by the Federal Reserve and the Government. But secondarily, both gold and silver are extraordinarily undervalued relative to the quantity of fiat currency AND fiat currency derived debt circulating globally.  As such, both gold and silver have extraordinary investment value.

The graphic above compares the price path of gold and the USDX over the last 12 months. Without question there’s an inverse correlation – over an extended period of time.  But from mid-March thru June, gold and the dollar traded almost perfectly in tandem.  Since June, gold has risen as much as $400 while the dollar index in the same time is only 300 basis points lower.

In fact, between their respective lows in March and now,  gold has soared 31.7% while the dollar index is largely flat.

This latter occurrence is what I call “the investment value of gold.”  Gold (and silver) functions both as a wealth preservation asset and a wealth enhancement vehicle.  Both metals are singularly unique with these attributes.

Let’s face it. The U.S. technically is insolvent. The only factor preventing collapse, for now, is the willingness of our trade counterparties to continue accepting the dollar for trade settlement. With the continued deterioration in the economic, financial and fiscal condition of the United States and the accompanying escalation in money printing by the Fed, the global acceptance of the dollar will diminish more than it already has over the last 20 years.

At some point the dollar index will quickly revisit the 70 level it tested in 2008.  When that event occurs I expect the gold price to be at least double its current level and silver to be pushing $100 (gold/silver ratio below 40 from its current 80).

Buying physical gold and silver – not GLD or SLV – should be your first priority in seeking shelter from the eventual fate of the dollar.  But mining stocks offer the potential wealth enhancement as well “optionality” upside to the prices of gold and silver. If you would like some ideas for investing in mining stocks, take a look at my  Mining Stock Journal.

Silver: 2011 Was A Preview Of What’s Coming

The precious metals sector is getting primed for big move higher. The rally that started in March was nothing more than engine revving.  Physically deliverable gold and silver are becoming scarce.  That is making it problematic for the gold/silver market manipulators to keep a lid on the prices of gold and silver.  Rising U.S. domestic and global geopolitical tensions will help serve as rocket fuel for the precious metals sector.

All of the above factors lead me to conclude that there’s a high probability that the precious metals sector will stage a big move between now and the end of the year.

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The Mining Stock Journal is a bi-weekly mining stock newsletter that focuses primarily on the junior exploration stocks. The latest issue includes a review of a junior silver mining company with huge silver optionality. You can learn more about  this newsletter by following this link:  Mining Stock Journal subscription information

Note:  I do not receive any promotion or sponsor payments in any form from the mining stock companies I present in my newsletter. Furthermore, I invest in many of the ideas personally or in my fund.

Gold, Silver And The “Shit-Show”

“I’m just gonna say it like it is – that was a shit-show.”  Dana Bash, CNN in reference to the “Presidential” debate.   “The debate was a national mortification – ‘shit-show’ was an understatement” – Chris Powell, GATA.

Last night’s debate was nothing short of a complete tragedy:  the tragedy of a collapsing empire.  I saw an ad on one of the financial propaganda cable channels that billed the debate as “The Main Event”  as if it were to be promoted like a championship boxing match.

Politicians and the political environment are nothing more than a reflection of the surrounding system and populace at large.  The entire U.S. system is a shit-show.  The financial markets have become so disconnected from the underlying economic and fiscal reality that it takes several trillion dollars in monetary intervention from the Central Bank to keep them from collapsing.

The stock market’s complete dysfunctionality is represented by the dozens of tech-related “unicorn” type companies that collectively burn billions in cash every quarter and yet have market caps in the tens of billions of dollars.  If anything, Tesla is emblematic of the degree to which the entire U.S. financial and political system is a complete fraud.

And then there’s gold and silver. The mainstream financial media dismissively reported the $920 million dollar fine to be paid by JP Morgan for manipulating the gold market – “it was just some rogue employees ‘spoofing’ the market.”  Spoofing is not the issue.

The gold market  is, and has been for several decades, manipulated systematically at the direction of the BIS to prevent the price of gold rising to a price level vs the dollar that reflects and embodies everything described above. “Spoofing” is nothing. A $920 million fine is the cost of doing business for JP Morgan. The Fed has injected billions into JP Morgan since March. $920 million is not a deterrent – it’s an odd-lot.

The source of the manipulation is, among other devices, the creation of derivatives with a notional value in the trillions to be used in large quantities to push the price of gold lower.  Here’s an example:

Part of the problem is that the mainstream financial media has become nothing more than hand-puppets for the Wall Street operators who pay their compensation by sponsoring their media abortion. They merely print the words fed to them. You’ll note that Investing.com is attributing the sell-off in gold this morning to a “weak dollar.”  Yet yesterday Investing.com told us that the big move higher in gold was attributable to a “weak dollar.”  See what I mean?  Zombie hand-puppets.

That price plunge in the graphic above has nothing to do with the trading action in physical gold. Or with spoofing.  It’s a product of the gold market manipulators like JP Morgan unloading  massive quantities of paper gold onto the Comex and  triggering stop-loss orders set by hedge fund black box trading systems just as gold was about to launch through $1900 again.

The Central Banks, with the help of their bullion bank phalanges, are desperate to keep the gold price in check in order to maintain the credibility of the dollar-based fiat currency monetary system – a monetary system in which trillions worth of currency can be created with a computer keystroke.  A monetary system that is 100% fraudulent.

Who benefits the most?  The primary target of the $3-plus trillion printed since mid-March are the big banks, which started to collapse last summer.  The phony “repo” operation implemented in mid-September is the evidence of that fact.  But the Government’s fiscal “shit-show,” a financial system held up by an electronic currency printing press and an economy largely in a depression will lead to trillions more in Federal Reserve intervention.

The implication of the shit-show described above is that eventually the price of gold is going to move considerably higher in relation to all fiat currencies and, specifically, the U.S. dollar. You’ll never see Investing.com or financial TV report that the dollar has lost 98.2% of its value vs. gold since 1971.  But do the math – it’s a fact.  The loss of the remaining 1.8% vs gold is the what the western Central Banks are fighting to prevent. It’s their Maginot Line.  And it’s the eventual loss of that 1.8% that will send the price of gold measured in fiat currencies into orbit.

The short term gold chart looks as bullish as it has looked all year, including in mid-March at the bottom of the last manipulated take-down in the metals.  Last week’s sell-off was a gift to those who understand what is happening, why it’s happening and what can be done to protect wealth.

Think I’m blowing smoke?  I put my money where my mouth is.  Last week, all week long as the gold and silver were pushed lower in price vs the dollar, I bought gold and silver bullion coins for the first time since early 2017 when gold was near $1100 and silver was around $16. On a relative scale, in which the “scale” is the severity of the shit-show,  gold and silver are cheaper now than in 2017. That’s why I converted more fiat currency into real money.

This chart is coup de grace:

The Central Banks are starting to lose their grip on that final 1.8%.  The value of gold relative to the U.S. dollar is beginning to accelerate along with the amount of systemic corruption, fraud and general perversion.

The Stock Market Could Be In Trouble – Buy The Dip In Gold / Silver

The price take-down in gold and silver is 100% a product of the trading activity – aided and abetted by the bullion banks in NY and London, who manipulate the price in the paper derivative market. All of the trading activity dictating this sell-off is occurring in the paper derivative markets – it has nothing to do with the economics of the physical gold and silver markets.

How do I know this? Consider that 404,000 Comex December paper gold contracts contracts traded on Wednesday. That’s equivalent to 1,262.5 tonnes of gold. That’s roughly 42% of the total amount of gold that will be mined in 2020. In other words nearly half a year’s worth of physically mined gold traded in one day in just one contract month.

The ONLY physical gold and silver that is transacting is at the London price fix. And it’s dubious as to whether or not physical gold and silver is actually changing hands. Most of the “settlement” occurs digitally and gold and silver do not physically change possession. It’s a bigger scam than pet rocks.

At some point the coming market, economic and political turmoil will trigger a big bid for gold and silver which in turn will translate into a big move higher for the mining stocks.

Silver Liberties invited me on to it’s podcast to discuss the imminent stock market crash, the popping of the housing bubble 2.0 and precious metals:

Carvana: Financial Fraud Pays Well

CVNA’s valuation vs competitors like CarMax (KMX), Autonation (AN) etc is completely irrational. I was a CEO of a subprime company in this space. CVNA’s valuation is a crime of capitalism.” – @beaconstagezero

Ernest Garcia II was convicted on felony charges in connection with his involvement in the Charles Keating S&L Ponzi scheme which stole billions from innocent bystanders.  Garcia is the founder and Chairman of Carvana (CVNA).   His son, a chip off the old block, is the CEO.

This morning CVNA released a terse “preview” of its expected Q3 results in which it said the Company will achieve record revenues, units sold and gross profit per vehicle plus it said its EBITDA would “approximately” breakeven.

In the same breath it announced another $500 million bond financing. YTD including this deal, CVNA will have had to tap the capital markets for $1.7 billion.  Why?  Because it’s operations burn cash like a home furnace in Weimar Germany in the early 1920’s and because the founder/Chairman and his CEO son use CVNA as their personal piggy-bank.

The press release tandem can be read like this:  “Hey suckers, our results in Q3 will be ‘great’ so give us another $500 million loan because we can’t seem to make any money.”

Carvana’s Q2 2020 showed 15.3% YoY revenue growth vs Q2 2019. But the gross margin dropped 100 basis points from 16% last year to 15% in this year’s Q2. No wonder CVNA is generating revenue growth – just like every other overvalued “unicorn” company hatched in Silicon Valley, CVNA charges a price for its product that does not cover the cost of its business model.

How do we know this? Its operating loss soared 66.4% to $106 million of red ink from $64 million in Q2/19. The cash burned (used) in operations fell to just $7 million from $168 million in Q1/20. But this was attributable to a $215 million run-off of inventory from Q1. As I’ve discussed previously, CVNA does not price the cars it sells at a price high enough to cover the full cost of the business model. This is why it issues debt and stock quite frequently.

A big red flag for me is the fact that has had to issue stock three times raising $1.3 billion subsequent to going public in 2017 plus another $700 million in two separate junk bond deals in 2018 and 2019. Two of the three stock financings occurred in Q2 2020, yet the cash balance between Q1 and Q2 increased by just $76 million dollars, part of which is restricted cash.

The Company used $781 million to pay down a short-term revolver used to finance inventory. This also explains the run-off in  inventory.  Including the inventory run-off in Q2, the Company has raised $2.7 billion in funding since going public, including the $500 million bond deal announced today. This is essentially the amount of cash burned by CVNA’s operations since its April 2017 IPO.

This Company does not make money and it never will unless it charges a much higher price for the vehicles it sells, in which case its sales volume will plummet. CVNA is 60% owned by Chairman/founder, Ernest Garcia (a convicted felon), and 40% owned by the public. Garcia sucks money out of Carvana via a series of “related party” arrangements which include the leasing of office space and other facilities, paying a Garcia-owned business for used car reconditioning services and selling usage time on a corporate aircraft indirectly owned by Garcia. A Garcia-owned company also gets paid for servicing CVNA’s finance receivables. The conflict of interest and self-dealing between CVNA and Ernest Garcia II (Chairman) plus Ernest Garcia III (CEO) is mind-boggling.

The bottom line is that CVNA is functions as a vehicle (so to speak) that Ernest Garcia and his son use to raise money in the public capital markets and suck that money out of CVNA for personal gain.  It’s the epitome of fraud and corruption.

The short interest represents 30% of the share float, which explains the ridiculous run-up in the share price after the Company’s announcement today. Clearly I’m not the only one who has dissected the footnotes to the financials and determined that CVNA is to a large degree Ponzi scheme with an absurd market valuation.

Quite frankly I would bet that the asset value of the Company is not a lot greater than the amount of debt outstanding. The tangible assets – finance receivables (i.e. subprime loans extended to customers), inventory and unrestricted cash – are carried at $1.2 billion. The finance receivables ballooned in Q2 to $358 million from $199 million in Q1. This tells us that the Company lends aggressively to subprime borrowers.

There’s no way the market value of that crap is worth $358 million. PP&E is carried at $704 million. Thus, CVNA’s “hard” assets total $1.9 billion giving full value to receivables. Total debt plus payables was $1.4 billion at the end of Q2. Subtracting the debt from the tangible assets leaves $500 million of asset value. Beyond that, what is the value of a business that burns several hundred million in cash on an annual basis?

CVNA’s market cap at Friday’s close was $30 billion. If you laid out the numbers in the paragraph above and told me that the business described was valued this high, I would have thought you were hallucinating.

CVNA is an example of the type of business model, along with the operational and financial fraud crawling like cock-roaches beneath the surface, that has been enabled by 13 years of money printing by the Fed.  Thirty years ago when the financial regulator still maintained some independence from the big Wall Street banks, CVNA would not have survived very long.

The commentary above is from the August 9th issue of my Short Seller’s Journal. You can learn more about this newsletter here:  Short Seller’s Journal information.

A Matter Of Time Before Stocks Collapse And Gold Soars

“Look at the underlying fundamentals that are driving it [gold and silver prices]. The financial condition of the country that hosts the reserve currency deteriorates more everyday and the Central Bankers are trying to kick the can down the road on an inevitable financial system and monetary system reset by printing more money.”

The economy continues to show signs that the “sugar high” from the Fed’s and Government’s multi-trillion dollar money printing and stimulus spending is wearing off. The latest economic reports – notwithstanding the moronic homebuilders “sentiment” metric – reflect a renewed downturn in economic activity plus the numbers reported in July are being revised lower (see today’s retail sales report, for instance).

As long as the Fed continues to devalue the dollar by printing money and as long as Treasury debt continues to increase at an increasing rate, the fundamentals are in place for a monster move in gold, silver and mining stock.

Michelle Holiday of Portfolio Wealth Global invited me on to her podcast to discuss the factors that I believe will lead to a stock market avalanche and soaring values in the precious metals sector:

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You can learn more about  Investment Research Dynamics newsletters by following these links (note: a minimum subscription period beyond the 1st month is not required):  Short Seller’s Journal subscription information   –   Mining Stock Journal subscription information

Note:  I do not receive any promotion or sponsor payments in any form from the mining stock companies I present in my newsletter. Furthermore, I invest in many of the ideas personally or in my fund.

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