Investment Research Products
Powered by Kranzler Research
Articles
Why Gold And Silver?
To paraphrase JP Morgan’s (the man) 1912 testimony to Congress: “Gold is money, everything else is credit.” JP Morgan, 1912
The question you’ll need to answer for yourself is “what alternatives are there for big investments right now?” The stock market, residential real estate market and bond markets have been inflated into bubbles of historic proportions. The Fed has created a financial market Frankenstein of Biblical proportions.
Commodity inflation is raging now, and eventually this will transmit into soaring food, energy and capital/consumer goods price inflation. This dynamic is just getting started. It will soon get worse, as the Treasury earlier this month released its plan to flood the financial system with cash by reducing its balance on its general account at the Fed by $1.229 trillion. This was money printed by the Fed and transferred to the Treasury via “QE.” Yesterday, Fed Chairman Powell reiterated the Fed’s commitment to continue printing money for the foreseeable future.
The Fed is preparing the public for another big round of money printing after the Treasury cash is absorbed into the banking system, where it will be used to service delinquent/defaulted commercial, residential and corporate debt in an effort to prevent a banking system collapse similar to 2008.
The banking system began unraveling again in August 2019 as evidenced by the Fed’s reimplementation of QE/money printing disguised as “term repos.” With the term repos rapidly increasing in size and duration by February 202, the stock market crash and virus crisis gave the Fed the proper cover to attempt a “kill shot” at the problem attacking the Too Big To Fail bank balance sheets.
The recent jump in the size of the Fed’s balance sheet indicates that the “kill shot” didn’t work. And the non-performing loan problem will get worse after Biden just extended the foreclosure/eviction moratoriums – again – and with rising corporate and personal bankruptcy filings. More money will be printed to keep the banks “insulated” from the deteriorating assets on their balance sheet.
The precious metals sector has performed remarkably well over the last 12 months despite the overt and obvious efforts of the Fed, in conjunction with the Treasury’s Working Group on Financial Markets, to hold down the prices of gold and silver. The current effort of the “Plunge Protection Team” to cap the rise of the precious metals is destined to fail.
The Fed’s inability to hold down yields at the long end of the Treasury curve, despite being by far the largest owner of the 10yr bond issue and buying Treasury bonds on a daily basis, signals that the Fed is starting to lose its grip on controlling the markets. Rising yields and a falling dollar will be the double-tipped “pin” that pops the asset bubbles.
As this process unfolds, there will be immense damage inflicted on dollar-based financial assets. Those lucky enough to get out of the door before the herd tries all at once to exit will look to gold and silver as the best alternative to preserve wealth. This will trigger another big bull move in the precious metals sector. Gold and silver currently embody both positive investment potential and wealth preservation. But your motive to buying them should be more heavily weighted on the latter.
A Modest Proposal For Price Discovery In The Silver Market
We know that price discovery is impossible until the paper exchanges in NYC and London blow up. Or is it?
There’s plenty of above-ground silver around the world. Yes most of it is “spoken for” by the owners of that silver. Silver producers can’t produce enough silver to satisfy demand at the current price. Just ask the SLV sponsor, who quietly implemented provisions in the Prospectus which are harmful to SLV investors because it is unable to source enough silver to back the shares issue from recent demand.
Price discovery is the process by which a free market uses price to balance supply and demand. But price discovery has been absent from the gold and silver markets for decades. This is why a shortage in physical gold developed in March 2020 and why an even more severe shortage in silver has developed currently.
I believe a push to impose price discovery on the entire market will come from the authorized purchasers pushing the various mints to raise significantly the price the mints will pay the refiners for silver.
Refiners can then turn around and give purchase orders to mining companies at much higher prices. This will require a very aggressive push from the APs to hammer on the mints. Perhaps even cc:’ing the refiners in the effort to make refiners aware that the market will bear a much higher price for silver.
If mints offer refiners considerably more than the current “market” price, refiners will divert production to the higher bidding mints and away from selling production of bars to the Comex and LBMA. This will force the players on each exchange to at least match the new market price for silver.
At the very least, the current holders of silver will sell some or all of their holdings if the price rises enough to induce selling. Proper price discovery will find the level that creates enough supply to fill demand. As an example, at a high enough price, I would sell some of my silver eagles back to bullion dealers.
JM Bullion is advertising an ASE “sale” but the 2020’s in stock are still more than $9 over spot. It’s unconscionable that there’s a $9+ dollar spread between the “spot” price per the March silver contract and the price the public is willing to pay for large quantities of silver. This means there’s plenty of room for APs to raise the ante with the mints and plenty of room for the mints to raise the bid shown to refiners.
Technically the US Mint is required legally to produce as many Silver Eagles as is demanded by the public. Yet, the Mint is on allocation for the foreseeable future. This specifically and unequivocally means that the “market” price for silver is far too low.
It’s up to the various large mints around the world (U.S., Canadian, Perth, etc) to make an effort to provide enough supply to meet demand. In the U.S. it’s a legal obligation.
The iShares Silver “Trust” Is Likely A Fraud $SLV
Those of us who read the original filings for both GLD and SLV were shocked that the Prospectus for each was certified by the SEC. The legal loopholes embedded in the legalese were wide enough to drive a fleet of Class-8 trucks through lined-up side-by-side. For just one example out of many, see this for instance: Can We Trust The Silver ETF.
It’s been suspected by many truth-seekers since the respective inception of GLD and SLV that each Trust was set-up as a mechanism to divert institutional cash flows into the respective Trusts that might otherwise flow in actual physical gold and silver.
As has been verified by recent actions taken by the SLV sponsor, BlackRock, these trusts are nothing more than gold and silver derivatives and thus are embedded with the same risks as investing in futures and options. In the end-game, most investors in GLD and SLV will end up losing most, if not all, of their “investment” in these fraud-riddled securities.
Through the meticulous sleuthing of BullionStar’s Ronan Manly, it was revealed that SLV stealthily slipped into the the SLV prospectus “cover your ass” language that acknowledged that the shares were not fully-backed by silver bars:
“The demand for silver may temporarily exceed available supply that is acceptable for delivery to the Trust, which may adversely affect an investment in the Shares.
To the extent that demand for silver exceeds the available supply at that time, Authorized Participants may not be able to readily acquire sufficient amounts of silver necessary for the creation of a Basket.” (see page 7: SLV amended Prospectus as of February 5, 2021)
Notwithstanding all of the other issues with this disclosure in particular, and the entire set-up of the Trust generally, that particular disclosure – furtively slipped into the the Prospectus – reveals the extent to which SLV is not in any way an investment in silver or an investment in a security that indexes the price movement of silver. Rather, SLV is a rat’s nest of fraud and deception – a covert tool used in the Central Banking and bullion banking effort to control the price of silver (just like GLD).
That disclosure alone reveals the extent to which an effort is being made by the big banks – backed by the Central Banks – to prevent bona fide price discovery in the precious metals market.
The sponsor of SLV is, at best, disingenuous in its effort to manage SLV properly. If Black Rock were to issue an offer-wanted-in-comp for the amount of silver bars that it needs to back the new shares created, at a high enough price it would be able to purchase enough silver. This is how price discovery is supposed to work. SLV’s failure to embark on this price discovery exercise therefore reveals that the Trust is a total fraud.
When I traded junk bonds and we needed to find where offers in scarce bonds would come out, we would either start bidding up the price in “the Street” until offers appeared or we would issue an “offer-in-comp wanted” to accounts that held that bonds in order to draw out offers. At the very least we would be able to “discover” the real offer price for the bonds we needed.
Eventually the price containment of gold and silver will fail under its own weight. The Law of Supply and Demand dictates that imbalances in supply and demand can be fixed by price. In this case the price of silver needs to rise to a level that balances out the supply and demand for SLV shares – if SLV is truly a physical silver Trust. As such, SLV technically should be soliciting large offers-in-comp. That disclosure above – under no uncertain terms – reveals for all to see that the market price of silver is too low – that demand exceeds supply by a considerable amount.
The solution to this economic problem is for the sponsor of SLV to bid up the price of physical silver to a level that solicits enough offers to fulfill the obligation of the Trust to back the share baskets with the appropriate amount of silver bars. Anything short of this reveals SLV to be a fraud. After all, “sophisticated” investors in SLV have been led to believe that SLV is a de facto investment in silver. And now we know that SLV is an “investment” in paper securities fractionally backed by silver bars. In technical parlance, SLV is a derivative, and a fraudulent one at that.
Goldman’s Jeff Currie On SLV: Either Ignorant Or Willfully Mendacious
CNBC interviewed Goldman Sachs’ Jeff Currie – the head of global commodity research at GS – regarding the potential for the silver market to be squeezed. In the segment Currie made the argument that on the Comex: “the shorts are the ETFs – the ETFs buy the physical they turn around and they sell on the Comex to be able to hedge that physical position like any other corporate” (the quote begins at the 1:24 mark):
As with my good friend and colleague, Chris Marcus, I had to replay Currie’s assertions several times, after falling off my chair laughing the first time I heard his words. Currie’s motive for making this assertion is unclear to me. However, he is either completely incompetent as a research analyst or intentionally lying to the public on this matter.
I’ve read the GLD and SLV prospectuses a couple times front to back in the past. I knew when Chris told me about the interview that Currie was full of shit. But, just in case the SLV prospectus was revised since the last time I perused it and the Sponsor inserted a provision to enable SLV to trade silver futures, I pulled the latest SLV prospectus from the iShares website. Here’s the provision dealing with the silver futures:
SLV is specifically forbidden from transacting in futures. Regardless, there would never be any reason for SLV to sell futures as a hedge. SLV is not hedge fund. It’s an ETF that enables investors to index the price action of silver.
None of the above has anything to do with the issue of whether or not SLV actually holds title to all of the bars it lists as being held by the Trust. I’ll have more on that topic when I have time to put together a proper analysis. I’ll just say that it is almost 100% certain that SLV is not even close to being fully backed by silver for which SLV holds title.
L.A. Times: Musk’s Real Motive With Bitcoin (Misdirect From Reality)
Tesla’s dabbling in Bitcoin is a perfect distraction from its real-world problems
By MICHAEL HILTZIK BUSINESS COLUMNIST
FEB. 10, 2021
Whoever rewrote the saw about where there’s smoke there’s fire into “where there’s smoke, there’s often a smoke-making machine” (John F. Kennedy often gets the credit), there’s little question that one of the prime smoke-making machines in American life right now is Elon Musk.
Consider Musk’s latest vaporous cloud — the announcement on Feb. 8 that his Tesla electric car company had made a $1.5-billion investment in the cryptocurrency Bitcoin starting in January. That’s more than Tesla has spent on research and development in any of the past three years.
The announcement helped send the price of Bitcoin up by as much as 25% in a day, though it seemed to have the opposite effect on Tesla shares, which have lost about 4% since then. Bitcoin reached a record $47,698 on Feb. 8 before falling back to about $45,000 by midweek, according to Coinbase.
The whole episode adds just more muddle to the enduring question of whether Tesla is grossly overvalued, especially since it has yet to turn a net profit from selling cars.
The company’s market capitalization of $780 billion far outstrips the combined valuation of General Motors and Ford (about $125 billion), even though Tesla sold 500,000 vehicles last year and the other two companies more than 10 million, combined.
Tesla’s Bitcoin announcement happened to coincide with a couple of doses of bad news for the company. One was a Feb. 6 report in the Global Times, an English-language publication of the Chinese Communist Party, that the Chinese government had upbraided Tesla for lapses in quality control and consumer relations in China. That’s a concern because Tesla has enjoyed a very favorable relationship with the Chinese government, so far.
“Tesla has shown respect for the potential of the Chinese market, but not the same level of respect is given to Chinese consumers,” the publication reported, citing “analysts.”
The second was a report from German sources that the company’s German car and battery factories were facing months of construction delays, as well as reduced government subsidies for the battery plant.
Musk, who has been accustomed to investors’ buying into his enthusiasms and raising Tesla’s stock price, may have appreciated the extent to which commentary about Tesla focused on its Bitcoin adventure rather than its ground-level issues with Chinese regulators and European construction.
When things are going well, Musk promotes the good news relentlessly. When they’re going not so well, there are plenty of sideshows in the offing to distract followers from Tesla’s bottom line.
In recent years, these sideshows have included Musk’s public toying with taking Tesla private, an adventure that yielded a punitive response from the Securities and Exchange Commission; Musk’s war with short-sellers; his marketing of flamethrowers; and his public spat with a rescue expert who had dismissed Musk’s effort to help save a group of Thai students trapped in a cave.
Elon Musk says the subsidies for two of his companies, Tesla and SolarCity, are “a pittance” compared with government support of the oil and gas industry.
The most consistent misdirection Tesla engages in applies to its disclosures of profits. On the surface, these have been a bright spot.
In reality, in almost every quarter and throughout 2020, Tesla’s profits have been dependent on the sales of regulatory credits to other companies — without them, Tesla would have been in the red. Last year, for example, Tesla reported $721 million in net income and sales of regulatory credits, which are pure profit, of $1.6 billion.
The most bewildering aspect of Tesla’s Bitcoin investment is the threat it poses to Tesla’s profit-and-loss statement. In disclosing the investment, Tesla said its Bitcoin would be carried on its books as “indefinite-lived intangible assets.”
According to accounting rules, those assets must be evaluated every quarter; Tesla will have to report a loss any time the value of its Bitcoin falls below its purchase price. But Tesla isn’t permitted to recognize a gain, even if the price rises, unless and until it sells its Bitcoin.
Obviously, this unbalances the Bitcoin accounting toward a loss. If Bitcoin rises, Tesla could sell its Bitcoin at any time and recognize the gain.
But given how much Bitcoin rose on the news that Elon Musk had bought in, can you imagine how much it might fall on the news that “Elon Musk is selling his Bitcoin”? To put it another way, Tesla’s investment may be almost as much of a risk for Bitcoin holders as it is for Tesla; Bitcoin fans better pray that Musk doesn’t cool on the crypto.
The other aspect of Tesla’s announcement that helped fuel Bitcoin’s rise was the suggestion that Tesla might start accepting Bitcoin as payment for its cars “in the near future,” albeit “initially on a limited basis.”
That spurred a surge of speculation about whether Tesla’s decision might set the stage for wider commercial acceptance of Bitcoin as payment for goods and services. The general conclusion among experts is that it won’t, for several reasons.
For one thing, transaction fees for converting currencies into and out of Bitcoin can be steep, making the cryptocurrency uneconomical for small purchases.
Moreover, Bitcoin is so hellishly volatile that merchants can’t be sure from one moment to the next what it’s worth, and therefore how much they’ve sold their products for — Bitcoin can fall or rise by 20% in a matter of hours.
Tesla acknowledged that reality by disclosing that the Bitcoin it received for its cars “we may or may not liquidate upon receipt.” That also suggests that the company doesn’t necessarily plan to build up its hoard of Bitcoin by holding onto whatever it receives from customers.
Musk’s apparent fascination with Bitcoin is also perplexing. As my colleague Russ Mitchell pointed out following the company’s investment disclosure, Bitcoin is an odd investment for a company that presents itself as an ecological hero because the cryptocurrency is the antithesis of a “green” commodity.
“Mining” Bitcoin — the strictly controlled process by which the supply of Bitcoin is augmented — requires electricity on an enormous scale to run the computers involved. As Mitchell reported, cryptocurrency mining produced emissions of carbon dioxide equivalent to that produced by more than 4 million gas-powered cars a year.
In other words, what Elon Musk is giving the world by producing electric vehicles, he’s helping to take away by participating in the Bitcoin ecosystem.
The remaining mystery is what Musk really thinks about Bitcoin and other cryptocurrency. He has often portrayed himself as an enthusiast of the concept, which tracks with his persona as an entrepreneurial iconoclast.
But he has also been dismissive, as he was as recently as Dec. 20, when he tweeted, “Bitcoin is almost as bs as fiat money.” His reference was to central-bank-linked currencies, which Bitcoin fans typically denigrate as fiat money because their supply can be expanded or shrunk as governments wish.
Barely a month later, Tesla was jumping into the pool.
Game Over For Gamestop?
“If you can’t spot the sucker in the first half hour at the poker table, then you are the sucker.” – a quote attributable to several sources.
Well, easy come, easy go for the Reddit retail traders who rode their GME shares and call options up and then back down. Since hitting $483 last Thursday, GME has lost over $29 billion in market cap. That money didn’t just disappear. It was transferred from those sold out their shares while GME was trading at much higher levels. More than likely, most of the entities that reaped big profits were sophisticated traders and hedge funds. The biggest losers were the new retail traders spawned in March/ April 2020 that opened up accounts at zero-commission trading apps like Robinhood.
As a matter of fact, the Wall Street Journal featured an article about Senvest, a hedge fund that started buying GME in September and sold their shares when the stock went above $400, netting nearly $700 million. However, around the time Senvest began accumulating GME shares is about the time the original “short burn of the century” appeared on Reddit. There’s speculation that Senvest was behind that Reddit post. The post contained an explanation of how a short-squeeze is orchestrated. That’s the type of information harbored by sophisticated Wall Street trading veterans – not zero-commission-based retail odd-lot traders.
A bona fide short-squeeze occurs when a group of entities, with a decent-sized long position that has been lent out to short-sellers in a high short-interest stock collectively at the same time, issues a recall on the shares that were lent out to be shorted. The share borrower has three days to return the shares, which means if it can’t secure more shares to borrow, it has to buy shares in the market and return them to the lender. If the recalled short is not returned in three days, the entity that lent the shares has the right to “buy-in” the shares in the market at any price. The borrower is required to pay the amount that it cost to for the lender to repurchase the shares.
An orchestrated short-squeeze causes the chart formation seen in stocks like GME that have been squeezed. In this case the Reddit Wallstreetbets chat room added gasoline the short-squeeze fire by seducing an “army” of retail buyers to chase the shares higher with share purchases and OTM call purchases. The massive volume of OTM calls purchased also created a “gamma squeeze,” as options market makers shorting the calls also buy shares to “delta hedge” the calls they were shorting.
The short-squeeze is pretty much over now. It’s estimated that the short interest in GME is now well below 100%. Volume in GME shares on three of the five days this past week was well below 10-day average volume. The implied volatility of the options has declined by more than 50%, depending on the strike and expiration. The big upside “wick” on Friday’s green candle in the chart above was formed by a big jump in GME’s price at Friday’s open which was triggered when Robinhood and a few other retail trading platforms removed trading restrictions on stocks like GME and AMC. That alone tells us the short-squeeze has subsided.
At this point GME will likely experience high two-way volatility but ultimately will head lower from here. There’s many retail bag-holders who bought shares and calls at much higher prices. Once again Wall Street and sophisticated hedge funds have taken advantage of retail suckers who, since last Friday, have been “waiting for the stock to bounce back close to my cost” before selling. Good luck with that.
Gamestop’s plight is similar to that of Blockbuster. Its business model is a dinosaur, largely predicated on selling gaming hardware and games via brick/mortar store outlets. The Company been left in the dust by online streaming gaming venues and online retailers of gaming hardware. Competition in the sector is brutal. GME did not try to take advantage of the high stock price to issue $100’s of millions worth of shares because it inevitably would have faced an onslaught of shareholder lawsuits and it’s likely the SEC would not have approved the deal after the Hertz debacle.
There is a reason GME had such a huge short-interest before this short-squeeze episode. Over its last two fiscal years it lost a combined $1.1 billion. Its revenues plunged from $8.2 billion in its FY 2019 to $5.1 billion – 37.8%- on a trailing twelve month basis. The Company is headed for the graveyard. I don’t know if CHWY’s Ryan Cohen will make a bona fide effort to move GME completely online. Hell, Cohen can’t turn CHWY into a profitable business. But I don’t think it will matter if he proceeds to migrate GME to the digital world. GME in my view is a zombie following the retail investors off a cliff. Good luck if you own GME shares, especially at much higher levels.
Silver, SLV And Shell Games
Many of you are familiar with the shell game street-scam, most commonly encountered in NYC, crafted to fleece money from unsuspecting tourists. As it turns out, it’s quite probable that the silver and gold bar custodial business is likely one big shell game.
“If the above 14 ETFs see continued investment inflows, they will all have to compete for the available silver in London which is not already held within these ETFs. And that available silver is at an historic low, some 3000 tonnes or so. A few more days of inflows like the ones seen over 29 January to 2 February would be a major emergency for these ETF providers, particularly the iShares SLV. Because there is just not that much physical silver left in the vaults of JP Morgan, Brinks, Malca-Amit, Loomis and HSBC, which is not already reported as being in these ETFs.
And lets not forget all the unallocated silver positions which are outstanding which are claims against the bullion banks for silver which they have not got. Anyone with deep enough pockets could now cause a serious run on the remaining available silver stored in London that is not currently attributed to the above ETFs.”
The quote above is from a must-read analysis by Ronan Manly on the rising shortage of “free float” silver bars in London and NYC bullion vaults – Houston, we have a problem: 85% of silver in London is already held by ETFs.
As an example, and it’s something I have not considered, 67.4% of the “eligible silver” reported by JPM in its Comex vault belongs to SLV.
More of interest to me is the fact that only 27% of SLV’s claimed silver is held by JP Morgan, the ETF’s silver custodian. This is a problem because the use of sub-custodians for 73% of SLV’s silver makes the reporting of SLV’s bar list even less reliable than it is already.
This is because provisions in the Prospectus for SLV (and GLD, for that matter) make it difficult to conduct a bona fide independent audit of sub-custodians when sub-custodians are used. For anyone who questions this assertion, peruse this document, in particular section 2.8: SLV Custodian Agreement.
This past Friday I was part of a group discussion led by Chris Marcus (Arcadia Economics), who just got off the phone with a representative from iShares, the Sponsor of SLV. Chris commented that his conversation with the rep “did not inspire any confidence” in the reliability of the bar list reports released daily. As it turns out, the last inspection of SLV’s silver was in March 2020, right before the price of silver slammed in the papar market.
Under no uncertain terms, this “inspection letter” is not an independent audit of the bars claimed to be held by JP Morgan as custodian (27% of the alleged bars) and JP Morgan’s sub-custodians (73% of the alleged bars), the latter of whom have little to no direct accountability per the terms of the Prospectus.
As it turns out, Rob Kienz of Goldsilverpros.com, who happens to be a former auditor had nothing good to say about that inspection letter. In his words: “that report doesn’t do much for me, as an auditor.” Here’s his analysis:
It shows they (JPM) have metal, not who ultimately owns it. And I am talking about the silver in their vault, not Brink’s. So they have a bar report and the bars match. Great. Did they audit the transaction receipt for the metal to conclude where it came from, and under what terms?
Unlikely, therefore you cannot tell if it is leased gold or taken from someone else’s account on a different bar list. This is something [Nick] Barisheff and I agree on. Chris, ask him about this on your show please as more people need to understand this. Scope of the audit matters a lot.
Another issue is remelt – the metal could have been taken from another account, remelted, and issued a new serial number so it can never be tracked. Same thing happens with gold.
The audit report is very limited in scope and proves only that there is silver in the vault. It also does not prove that they haven’t used it in some other derivative contract and aren’t just storing it in their vault for show.
And again, SLV share holders can’t get it, so it is inconclusive how much utility the shares have, if any. A share on top of metal that cannot be redeemed for it – meaning the share is only worth the silver price cash equivalent, assuming that silver is titled clear to the trust and can be sold.
In truth, while both GLD and SLV purport to be fully-backed by gold and silver, respectively, there is very little in the way of legally mandated accountability. The first step would be an immediate bona fide independent full audit of both Trusts. Short of that, and the legal structure of the Prospectus for both Trusts makes a random independent audit impossible, it’s likely that SLV (and GLD) are little more than common street-level shell games.
Silver Is The Cheapest Investment In The World
“I really did not want the Reddit crowd to get involved in the precious metals like this because I knew there was a risk that it would be short-lived. Silver now [as of Tuesday morning] is down more than it was up yesterday…unfortunately my cynical side is saying Wallstreetbets is a pump-n-dump gig designed to suck in retail money…” – just like in 1999/early 2000.
The precious metals investors do not need a bunch of pump-n-dumpers creating temporary short-squeezes in order to make money in this sector. The precious metals sector is fundamentally extraordinarily undervalued. Silver is probably the cheapest investment asset in the world right now.
Silver Doctors invited me on to its podcast to discuss the attempted short-squeeze in silver and silver stocks and why the precious metals sector is extraordinarily undervalued relative to the money supply and mainstream financial assets:
*********************************
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.
Systemic Collapse: Gradually, Then Suddenly
“How did you go bankrupt?” Bill asked. “Two ways,” Mike said. “Gradually and then suddenly.”
“What brought it on?” “Friends,” said Mike. “I had a lot of friends. False friends. Then I had creditors, too. Probably had more creditors than anybody in England.”
– The Sun Also Rises, Ernest Hemingway
Gold and silver – physical gold and silver in your own possession – is real money and wealth protection. The U.S. is moving into the policy implementation of Modern Monetary Theory. Note “Theory.” The “theory” in a nutshell justifies unlimited currency creation to fund Government spending.
Michelle Holiday invited me onto her Portfolio Wealth Global podcast to discuss the factors leading up to a systemic reset and why precious metals will at least preserve your relative wealth position going into the inevitable systemic reset:
Can The Big Silver Shorts Be Squeezed?
Unfortunately, unless the physical market can be squeezed, at some point the bullion banks like JP Morgan and HSBC – with help from the Central Banks and the BIS – will be able to regain their grip on the pricing of gold and silver using derivatives – paper gold and silver.
I hope this latest move in the silver price is sustainable but I don’t think it is. That said, hopefully it will elevate the awareness of the criminal manipulation of the metals by the big banks and shine a spotlight on the degree to which gold and silver, as well as the mining shares, are extraordinarily undervalued.
That said, the physical market can be squeezed, but it requires that big investors take delivery of gold and silver on the Comex and the LBMA and remove their bars from Comex/LBMA vaults for private safekeeping. Short of that, the Comex and the LBMA can perpetuate the manipulation scheme by continuing to lease gold from Central Banks – gold that the Central Banks obtain via swaps from the BIS – and continue the illusion of “delivery” through hypothecation.
While the paper silver short position of the bullion banks is their Achilles’ Heel, the real squeeze will start when big gold investors remove gold bars from bank custody. With gold and silver, ownership is defined by “possession,” not custodial “safekeeping.”
*********************************
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.