For those of you that have followed my raves and rants over the years, you
are undisputedly aware of all of my biases when it comes to almost
everything: bankers, politicians, invasive species, free market suppression,
entitled Millennials, and finally, the utility of precious metals in a
"financial order gone wild," which is precisely where we reside
today.
I sat on the stern platform of my boat looking at the moon you see rising
in the photo above and over a number of well-oiled glasses of Pinot Grigio, I
snapped the photo thinking that soon the sound of lamenting loons would be
replaced by the torturous howl of timber wolves, a sound vivid in my memories
from boyhood excursions in Algonquin Park. It is said that the most beautiful
sound in all of nature is the final wail of the black swan in its dying
moments, a sound so powerful that the ultra-famous rock band "Led Zeppelin"
named their "Swan Song" record label after it.
Well, while financial events do not normally involve sounds, the haunting
specter of seeing over 65% of all bonds issued around the world paying a
negative return evokes memories of a "bad moon rising" of which
ancient folklore of the lunar omen has filtered down through generation after
generation. The problem here in 2019 is that NO generation has EVER
encountered a financial instrument paying a negative yield because if you buy
one, you have to pay the issuer to hold it. This absolute insanity is the
nuclear torpedo in that is heading for the starboard side of the Good Ship
"Modern Monetary Theory" as she steams headlong into the abyss
becoming rapidly known as the "Japanification" of all things
financial.
It began in Japan, where the deification of the American system of finance
began shortly after Hiroshima and Nagasaki, whereby the lesson thereof taught
a generation of Japanese investors that, when it comes to the Yanks, copy
whatever they do but do it in triplicate. When the stock market crashed in
1987 and was rescued by the U.S. Fed and Treasury, those actions were
absolutely revered by the Japanese such that five years later, they embarked
on a market-rescue campaign that put the Greenspan/Reagan Working Group on
Capital Markets to shame. In 2008, the Great Financial Crisis – er – bank
bailout – sanctioned by the U.S. Congress had such an astoundingly positive
superficial effect that not only the Japanese took notice, but another
lurking leviathan called the People's Republic of China took the baton,
increased its size by ten feet, weaponized it with a laser beam, and not only
ran with it, they strapped jet engine turbines to their backs and rocketed
into the ionosphere of unprecedented credit creation and monetary reflation.
So today, we not only have the Great American Military Machine kept alive
by life support mechanisms designed to keep the U.S. dollar strong and in
demand as the world's reserve currency, we have the major global economic
regions all run by governments that have a coordinated and comingled
commitment to total currency debasement and the complete annihilation of the
purchasing power of their respective currencies. Saving money is archaic and
reckless; debt management is avant-garde and prudent. The beguiling dying
moan of the swan is the sound reverberating through the walls of central
banks and houses of parliament or congress because the global financial
system is drowning, choking, asphyxiating on its regurgitant debt load and there
is absolutely nothing that anyone can do to prevent its mortal demise. And
you wonder why gold just hit a six-year high?
The gold miners smell better times ahead and for those of you too young
(or too old) to remember the gold old days of 2002–2011, the HUI (NYSE Arca
Gold BUGS Index)-to-gold ratio peaked in the 0.55–0.60 range in the 2006–2008
period, and that was with gold bullion under $1,000. Today at $1,548, the
ratio is one quarter of that level, having risen since the late 2015 lows at
0.091 to the current 0.15 level. The point I make is that the gold miners
that choose to live or die by the sword of unhedged production carry enormous
leverage to rising gold (and silver) prices. Secondly, the gold miners as
represented by the HUI, are leading, not lagging, indicators for gold and
silver prices and are confirming indicators for the major trend in gold.
Looking to silver (the "divorcee-maker"), it is much the same
story with silver stocks still well below the highs of August 2016. What is
compelling is that the gold-to-silver ratio (GSR)(I used to call it the
"GTSR" but have since shortened it because the really important
gurus use only three letters…), it now carries an 83 handle down from 93
where I shorted it last July after taking profits (prematurely would be an
understatement) on my leveraged gold miner ETFs, both Senior (NUGT [Direxion
Daily Gold Miners]) and Junior (JNUG [Direxion Daily Junior Gold Miners]).
These ratios of gold and silver stocks to their underlying metal prices as
well as the GSR's dramatic plunge to 83.64 are compelling testimonials to the
power of this bull. GATA's co-founder Bill Murphy and I are both in undaunted
agreement that the action in the silver market is finally, after six years in
the dentist's chair undergoing root canal surgery sans Novocain, the kind of
action that resembles, at the very least, a "normal" market, and at
best, a very young but raging baby bull. I should point out that
lemetropolecafe.com is my "GO-TO" site still after over ten years
as a paid subscriber.
This morning I tweeted out a trading idea whereby, in total contradiction
to the words printed above, I took profits on half of the SLV (iShares Sliver
Trust) October $15.50 calls at $1.80 having paid $0.48 on July 23rd.
3.75 times your money is not to be sneezed at and far too many times have I
failed to turn ring the register while in the throes of self-adulation and
believing one's own bullshit. I am also still sitting on only ½ positions in
the GDX (VanEck Vectors Gold Miners ETF) and GDXJ (VanEck Vectors Junior Gold
Miners ETF), having erred in not buying them back late last week when they
were $2 and $4 lower into the pullback.
I also am delighted with the action in Aftermath Silver recommended here
and on Twitter in the $0.095-$0.10 range on July 11th. That it has
absolutely exploded to $0.28 is not surprising to me in the slightest; what
is surprising is how quickly it has reacted, proving once again that those
companies sitting on a gold or silver resource are perfectly correlated to
any movement in the underlying commodity versus the grass roots explorcos
that have yet to establish any type of resource. For those that acted on my
suggestion back around July 11th, good on you. $30 per ounce
silver by year-end could easily see AAG at $0.50 so trade smartly. Silver
bull markets are ridiculous with the silver juniors acting like weed and
cryptostocks a few years back; ten-baggers are not uncommon…
Lastly, I put out a point-and-figure diagram a few weeks ago (July 17th)
and as the chart below displays, that $16.50 print did actually occur a day
or two after it was posted and sure enough, you can see how silver popped
almost as if shot out of a cannon. The P&F says "$21 is coming, then
$37!" BUT, you have to understand that P&F's involve rudimentary
price analysis and have zero utility as to timing. So trade accordingly. (No
short-term call options advised based on this study…)
Finally, as we move forward into the final months of 2019, there will be
corrections and there will be surprises but I am taking the approach that we
are now officially ensconced in the biggest, wildest, scariest bull market
EVER in the precious metals. If gold and silver prices were viewed as
monetary beach balls being held underwater by the invisible hand of covert
government suppression, they did so with the waters of monetary debasement
rising around them such that by last June the waters were fifty meters deep
and the upward pressure on those hands was at once both excruciating and
unstoppable. At no time in history have so many invisible hands, operating in
tandem and in urgency conspired to suppress the prices of gold and silver
while at the same time through inverted yield curves, spiraling debt clocks,
and negative yield financial instruments allowing the tidewaters of
government and central bank incompetence to rise. This precious metals beach
ball is exploding toward the surface with unparalleled force and momentum and
when it finally reaches escape velocity, the public will be screaming to
switch quadrillions of dollars of paper (stocks and bonds) into billions of
dollars of physical gold and silver and the associated mining shares in a
cacophony of panic and greed. And the sad thing for them and the wondrous
thing for us is that there just won't be enough "product" to go
around when that occurs.
Too bad, so sad.
[NLINSERT]
Disclosure:
1) Michael J. Ballanger: I, or members of my immediate household or family,
own securities of the following companies mentioned in this article: Great
Bear Resources, Aftermath Silver, Stakeholder Gold, Western Uranium &
Vanadium, Getchell Gold. My company has a financial relationship with the
following companies referred to in this article: Western Uranium &
Vanadium, Getchell Gold. My firm no longer does consulting work for
Stakeholder Gold. I determined which companies would be included in this
article based on my research and understanding of the sector. Additional
disclosures are below.
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Charts provided by the author.
Michael Ballanger Disclaimer:
This letter makes no guarantee or warranty on the accuracy or completeness of
the data provided. Nothing contained herein is intended or shall be deemed to
be investment advice, implied or otherwise. This letter represents my views
and replicates trades that I am making but nothing more than that. Always consult
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liability for any loss arising from the use of the data contained on this
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