Category Archives: U.S. Economy

The Next Move For Silver And Gold

It’s obvious that the Fed, along with its bullion bank market emissaries, has been working hard to keep a lid on the price of gold. From the vertical “zip lines” in the chart over the past two  weeks, the price management team is also making every effort to shake out long positions in Comex paper gold ahead of the December deliver period, which begins next Friday afternoon (first notice officially is November 30th, but notices can be issues starting next Friday afternoon).

The willingness of Comex longs to stand for delivery this year in historic amounts is putting enormous pressure on the Comex/LBMA fractional reserve bullion system. While I do not believe the December delivery period will “break” the Comex, as some suggest, if a large portion of the entities “safe” keeping their gold in Comex vaults decide to move their gold bars out of Comex vault custody and into non-Comex safekeeping, the Comex will implode.

Chris (Arcadia Economics) and I discuss where it looks like gold and silver are headed over the next 6-12 months along with the factors that will drive the precious metals sector higher, not the least of which is the next round of money printing by the Fed:

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The mining stocks have been in a much-needed corrective pullback from the feeding frenzy this summer. But the enormous amount of institutional money funding mining company stock financings signals to us that the bull market in precious metals/mining stocks has a long way to go.

I focus on junior “venture capital” exploration stocks with 5-10x upside potential. I also sprinkle in some large cap mining stock ideas. The next move higher will take many by surprise. For information about my Mining Stock Journal, follow this link:   Mining Stock Journal information.

I am not sponsored by, nor do I take any promotional fees of any nature from, any mining companies. I do my own research and due diligence and invest in many of the ideas I present.

The Economy, Gold, Silver and Mining Stocks

As of last week, the Federal Reserve now owns 16.5% of the total amount of Treasuries outstanding and 18.5% of the total amount of mortgage-backed bonds outstanding. With out this massive amount of Fed intervention,  interest rates would be significantly higher and the housing market would be in shambles.

The Fed’s balance sheet nearly doubled since March.  While the stock market has rallied to all-time highs since March, there’s still well more than 20 million people receiving unemployment benefits on a weekly basis. The economic bounce-back from the shut-down of the economy in March and April appears to have peaked in July.  By many measures, the economy is starting to contract in again in many sectors.

Silver Liberties and I discussed the reasons why it looks like the Fed is prepping the country for another big round of money printing, which means another big move higher in the gold, silver and mining stocks:

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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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Gold And Silver Under The Biden Government

Despite the pervasive and omnipresent manipulation of the gold price implemented in the paper derivatives gold market – which in no way reflects the true supply/demand characteristics of the underlying market for physical gold and silver – gold has been the best performing asset over the last 20 years. Silver has been the third best performing asset. Sandwiched in between is U.S. REITs.

The economic, financial and geopolitical factors driving gold’s performance are now strengthening at an increasing rate.  Driving all three variables is the ongoing and escalating money printing by the Central Banks, led by the Federal Reserve.  It is highly likely that the recent violent attack on the gold price is a precursor to another round of money printing. This scenario is unavoidable regardless of whom or what Party occupies the Oval Office.

This in turn should catapult gold over $2,000 – for good this time.  Silver will quickly head over $30.  The mining stocks will soar.

In this week’s podcast, Chris (Arcadia Economics) and I discuss the prospects for the precious metals under a Biden Presidency:

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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.

Recent Economic Data: More Fiction Than Fact

The advance estimate of Q3 GDP was released on Thursday, October 29th. The headline number was 33.1% (annualized rate) vs 31% expected and negative 31.4% for Q2. This was John Williams’ (Shadowstats.com) comment on the headline number: “ShadowStats contends that the headline BEA estimates understated the 2q2020 quarterly plunge and have overstated the 3q2020 rebound.” On a quarterly basis, the reported GDP growth from Q2 was roughly 10%. To get back to the GDP level reported in Q1 prior to the virus shutdown, Q4 GDP will need to increase roughly 15% annualized. This is highly improbable.

I don’t want to dissect the GDP report for areas in which the estimates differ from actual real world numbers reported by companies. But keep in mind the jump in GDP in Q3 was largely generated by the momentum of businesses reopening, furloughed employees rehired and the stimulus provided by the $1.8 trillion CARES Act, which was signed just before the end of Q2.

As I’ve been detailing on a weekly basis, it appears that most of the sugar high from the Fed’s money printing and the CARES Act has worn off. While weekly jobless claims have dropped to an average of 787,000 over the last four weeks, down from a peak of 7 million at the end of April, the weekly number of new claims is still 3.7x higher than the weekly claims right before the lockdown period began.

Including the supplemental jobless benefits that were rolled out as part of the stimulus bill, over 23 million people are still filing weekly claims. Moreover, several large companies have announced 10’s of thousands of more layoffs, including Disney, Boeing and Exxon. If the Government does not soon pass another stimulus bill that includes bailing out States and local governments, there will be a large-scale layoffs of teachers, firemen and police.

ADP employment report vs Government employment report – The employment report released by the BLS on Friday purports that the economy added 638k new jobs in October. Wall St. expected 600k. The manipulative “button” pushed by the BLS this time was the Birth/Death model. The BLS estimates the number of new businesses started less businesses shut down during the month and derives a guesstimate of the net new number of jobs from this. It’s entirely based on flawed modeling theory. For October the BLS added 344k jobs based on its B/D model. Of course, this chart completely discredits the BLS B/D model(chart sourced from @soberlook):

The small business jobs index suggests that business “deaths” currently exceed “births” by a considerable margin. Data on business closures since March reinforce this.

It’s just amazing how the BLS seems to find jobs in the private sector that ADP, the payroll processing business, is unable to detect. ADP’s jobs report, released two days ahead of the Government report, showed 365k new employees were added to payrolls in October (note, this reflects hirings only, not cuts). Also note that the announced layoffs by big companies during Oct also escaped BLS detection. Finally, as John Williams points out on his Shadowstats.com website, “the BLS acknowledged continuing misclassification of some ‘unemployed’ persons as ’employed.'”

In all likelihood, the economy is much weaker that it would appear from stimulus-juiced economic reports that emerged over the summer. Auto and new home sales are already starting to roll over precipitously. With the stock market historically overvalued.  The upward movement since May was largely driven by hedge fund and newly minted retail “expert” momentum-chasing.  These two factors have set-up the potential for breath-taking market sell-off sometime in the next 3-6 months.

 

Did The Tech Bubble Pop On September 2nd?

For me it doesn’t not matter who wins the election. The person in the Oval Office is not in control of the monetary policies that form the fundamental basis for owning physical gold and silver. Regardless of which party sits in the Oval Office and Congress, the budget deficit and debt load will accelerate and thereby money printing will accelerate. The dollar will start to decline at a more rapid pace than it has declined since mid-March. Gold and Silver will climb over $2,000 and continue moving higher. At some point the stock markets will buckle under the pressure of a falling dollar and rising interest rates.

The chart above (from Crescat Capital) shows an analog that compares the Dow between 1919-1932 and 2009 to the present. The key underlying factors that drove the the stock market in both time periods to an insanely overvalued top and subsequent descent are worse now than back in the 1920’s/early 1930’s: currently stocks have higher multiples, the global economy is more leveraged and Central Banks have created a far bigger systemic imbalance now vs. then.

Also, derivatives were not yet invented and thus not a factor in creating a far bigger “leverage factor” that is impossible to quantify but that will ultimately be lethal to the financial system. This chart illustrates this point using  the volume for exchange-traded options – the OTC derivatives market is far larger in nominal value than the stock market (data from Bloomberg, Artemis Capital):

The light blue line shows total stock market volume plotted against the yellow line which shows total options volume. The proverbial tail is wagging the dog and the Fed and the Government regulators are to blame. The unwind will be ugly for stock market bulls.

That said, I expect the Fed will juice the money supply after a Presidential winner is declared. This may or may not push the stock market higher. I think we can expect a brief move higher in stocks after the election. But soon thereafter the fundamental realities will sink in and have a negative effect on the stock market.

Did the tech bubble pop on September 2nd? –  “Bubbles tend to topple under their own weight. Everybody is in. The last short has covered. The last buyer has bought (or bought massive amounts of weekly calls). The decline starts and the psychology shifts from greed to complacency to worry to panic. Our working hypothesis, which might be disproven, is that September 2, 2020 was the top and the bubble has already popped.” – David Einhorn, Greenlight Capital

 

We won’t know the answer to that question for at least a few months.  In the chart above I sketched in loosely the uptrend line followed by the Nasdaq to an all-time high since the March bottom. The Nasdaq broke below the 50 dma in September (yellow line), then rallied to retest the uptrend line. It bounced off the uptrend line and headed lower almost immediately to form a lower high, after which it fell back below the 50 dma.

At some point I expect the Fed to step in with more money-printing but not until some point after an election winner has been declared. That money will directed at injecting more liquidity into the TBTF banks and funding another big wave of Treasury issuance after the election. But for now the path of least resistance in the stock market is down punctuated with bouts of high two-way volatility.

The commentary above is an excerpt from the Short Seller’s Journal, a weekly newsletter that dissects the latest economic reports and presents ideas for short seller’s. You can learn about it here:  Short Seller’s Journal information.

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.