Be pepared for Historic Gold and Silver Run

By David Smith* –  Money Metals News Service

The Bigger the Base, the Greater the Upside Case. This saying among technical analysts/chartists helps define where we are today in the precious metals – and where we’ll soon be headed.

It means that when prices “base” in a relatively narrow sideways range for an extended period, they will at some point break out. Before the action gets underway, bears and bulls alike will get “sandpapered” as they take positions, trying to guess whether or not the price is getting ready to decline further or move upward into a new bull phase.

If you consider that time spent in sideways consolidation represents a build-up in stored energy, then a valid upside breakout will be propelled by a lot of buying fuel as old shorts who bet on lower prices offset their losing positions and new longs jump in to get onboard the change in trend.

2017 Feb. Silver - Continuous Contract

Chart by Gary Savage, Editor, Smart Money Tracker.

 

This frustrating sideways movement is not taking place in a vacuum.

Bankster manipulation, algo-trading, “fat finger” futures markets’ whip-saw behavior, and price chasing in both directions becomes a regular feature of the trading landscape. A long time goes by with neither side having enough trading power to break out of congestion.

This takes place concomitant with the central banks’ war on cash, currency and trade manipulation, and geo-political brushfires stacking up around the globe. Ongoing strife in Syria, possible war with North Korea and flash points in the South China sea may be classed as severe “low-probability events, but as Jim Rickards says, when taken in total, it becomes highly probable that at least one of them will ignite a crisis, possibly starting a chain-reaction with the others.

At some point prices jump the rails, catching most by surprise. By the time the picture clears and Mr. Market decides to provide us with some answers, it’s usually too late to climb aboard.

Gold Chart - Red Line in the Sand

$1300 Gold’s “red line in the sand”
Courtesy Nick Laird

 

Given the powerful seven-month rally during the first half of 2016 notwithstanding (followed by a more than 50% give-back over the past year), a lot of gold and silver bugs can be forgiven for coming to believe that they will never see a meaningful, sustained resumption of the exciting days of 2005-6, 2009-11 and early 2016.

The feeling of being either “worn out or scared out” – as David Morgan likes to characterize the patience-testing during an extended cyclical bear market wave – has caused more than a few people to sell back their insurance and investment positions in the metals. I believe this is a decision that – sooner rather than later – they will come to seriously regret.

Make no mistake. The government is not here to help you.

Steward Dougherty, in the essay, Currecide: The Globalists’ Planned Annihilation of Your Savings and Freedom states:

Its (gold) going ballistic, is probably better set-up right now than at any other time in history, for a large number of reasons… I continue to think that cash elimination is the biggest story out there. It is a fraud of epic proportions, and its implications are dark and deeply disturbing… Sometimes, you have to say something five times before people say, “Wow. This is important. I better do something about it.” If people decide to “do something about it,” they are going to find that their options are limited. Gold being one of the few of them.

Gold demand would go nuts if only the people could finally understand why they need to buy it right now… I think the dam of realization is coming very close to breaking, and that there could be an outright flood of new, popular awareness and action (my underline).

A Greek financial golden age? Looking at the pathetic financial state of Greece today, it’s hard to imagine that there was ever a time when financial acumen was a trait of which they could be proud. Does the following sound even remotely like what we’ve got going on now – just about anywhere around the globe?

When the Athenian treasury was audited in 440 B.C., it showed a surplus of over 9700 talents – a common unit of measurement for gold and silver during those times. Using current precious metals’ values, aligned with the 14:1 silver/gold ratio favored by the ancient Greeks, those 9700 talents would be the equivalent today of around $700 million!

Says Simon Black, writing in Sovereign Man, “At the time, Athens boasted a population of around 43,000 citizens and 28,500 foreign residents… so on a ‘per capita’ basis, the ancient Athenian surplus amounted to just under $10,000 per person in today’s money. If you compare this figure to our modern world, it’s pretty extraordinary.”

Of the 5 classifications of estimated metals’ holdings for a given project or property tallied for a formal NI-43 101 Report, the most reliable are found in the “Reserve” category, the subsets of which are “Proven” and “Probable”. Everything else being equal, these two listings show what management believes – backed by a variety of exploration methods – have the highest probability of being economically feasible.

Average Number of Years Between Discovery and Production

Source: SNL Metals & Mining, U.S. Global Investors, IAMGOLD.

Discoveries, reserves, and grades (grams/tonne) are in steady decline.

For well over a decade, the grade (grams/tonne) of gold produced has been steadily declining. Since 2013 listed reserves, as well as absolute production itself looks to have peaked. And now it’s taking years longer just to bring a new discovery into operation. Toss increasing demand into the mix, and the math points in only one direction – higher prices.

It’s not easy to buy metals when they’re trading sideways to down.

It’s taken a lot longer for us to reach “the promised land” of sustainably higher gold and silver prices than most anticipated. Yes, the herd is throwing money at the DOW and the S&P, assuming they will grow indefinitely to the sky. Yes, with all these things considered, it’s difficult to start or continue accumulating precious metals. And the charts have only recently begun to suggest a change. But…

When things look this way and you feel like going with the herd and maybe stepping in what it leaves behind, recall once again Rick Rule’s famous (and profitable) investment cautionary, “You can either be a contrarian… or road kill.” Could his “investing rule” make your decision to “keep on stackin'” a bit easier?

Warren Buffet has without a doubt, been one of the pre-eminent investors of the modern era. As you read the following quote, replace the term “stocks” with “precious metals.”

“To refer to a personal taste of mine, I’m going to buy hamburgers the rest of my life. When hamburgers go down in price, we sing the ‘Hallelujah Chorus’ in the Buffett household. When hamburgers go up in price, we weep. For most people, it’s the same with everything in life they will be buying – except buying stocks. When stocks go down and you can get more for your money, people don’t like them anymore.” – Fortune Magazine: “The Wit and Wisdom of Warren Buffett.”

The clock is ticking. The ducks are lining up. Are you paying attention? Do you have a plan? Are you working your plan…?

* About the Author:

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Will Gold and Silver Pull Back or March Ahead?

By Stefan Gleason*

Either way, long-term gold bulls shouldn’t sweat this particular technical level. Major bull markets need to pull back and reconsolidate periodically.

Whether that starts happening this week, or later on at higher price levels, a downturn of some magnitude is inevitable.

One indicator that may be pointing toward a pullback sooner rather than later is the negative divergence in gold mining stocks which are often leading indicators for the yellow metal.

Gold Price Chart

Despite gold spot prices rallying along with the broader U.S. equity market last week, the HUI Gold BUGS (Basket of Unhedged Gold Stocks) Index fell by 3.8%. That suggests that some big institutional speculators are turning bearish on gold near term.

If you’re looking to accumulate bullion, a pullback should be welcomed as an opportunity to get in at lower levels. Long-term bulls will not want to see anything as severe as the drawdown that occurred in the second half of 2016, however. They will be looking for any coming correction to bottom out above the $1,125/oz low hit in December.

Higher highs and higher lows characterize a major bull market. The December 2016 low was a higher low than the one from 2015. A higher high will occur when gold prices can move above $1,375. At that point, the public might start taking notice of precious metals markets – which so far this year have been overshadowed by the series of record highs in the U.S. stock market.

President Donald Trump has taken credit for the rally in stocks. His vows to cut taxes and regulations have, no doubt, driven buying by investors.

Over the weekend, Trump sent out this tweet: “Great optimism for future of U.S. business, AND JOBS, with the DOW having an 11th straight record close. Big tax & regulation cuts coming!”

Great optimism for future of U.S. business, AND JOBS, with the DOW having an 11th straight record close. Big tax & regulation cuts coming!

Trump also wants a weaker dollar to help boost U.S. manufacturing. That could put him in conflict with the Janet Yellen Fed if it moves to raise interest rates.

Trump will have the opportunity to appoint multiple new members to the Federal Reserve Board. It’s one of the reasons why top financial and geopolitical analyst Jim Rickards is so bullish on gold.

“If Trump follows through on the logic of the cheaper dollar, he’s going to appoint doves to the Board. The market’s going to get the signal immediately and the price of gold is going to soar,” Rickards said in a recent Money Metals podcast interview. “We’ve got some very short run headwinds, maybe between now and April, but for certainly the second half, even the last three quarters of the year, I’m extremely bullish on gold.”

There will be some bumps along the way. But those who hang on tight for the ride in gold and silver markets stand to be rewarded.

Gold and silver acting strong – David Morgan

Mike Gleason* interviews David Morgan about the recent consolidation in gold and silver prices.  Interestingly David felt there was some strength in the pattern we had seen which could kick in after the Labor Day holiday – a pattern which has already come about.  The interview was conducted last week, ahead of the G20 meeting and the weak economic data which propelled gold and silver upwards before and immediately after, the U.S. holiday.

Mike Gleason: Coming up we’ll hear from David Morgan of The Morgan Report and co-author of the book The Silver Manifesto. David tells us how long he thinks the correction in the metals will last, why he believes this November’s election is less important than you might think and also talks about a key event coming up that could put a lot of pressure on the U.S. dollar. Don’t miss a wonderful interview with our good friend David Morgan.

Well now, for more on the importance of sound money and what’s ahead for the markets, let’s get right to this week’s exclusive interview with the man they call the Silver Guru.

David Morgan

Mike Gleason: It is my privilege now to be joined by our good friend David Morgan of The Morgan Report. David, I hope you’ve been having a good summer and welcome back. It’s always a pleasure to talk to you.

David Morgan: Thank you very much, and yes, I have been having a wonderful summer. Thank you.

Mike Gleason: Well, as we begin here, David, please give us your thoughts on the recent pullback in the metals. We’ve maybe been overdue for a correction for a while now. I know in following your work, you’ve been calling for one, and we’re getting it here. And after a fantastic first six or seven months of the year for gold and silver, we’re finally starting to see some real selling pressure emerge. What is your take… what have you noticed during this mini-correction, and what are some of the reasons for the pullback?

David Morgan: Well, I’ll start with the reasons. In any market, even in a non-manipulated market, which there is probably none. The stock market, bond market, metals markets, futures markets, options… just about everything out there is geared and leveraged and pretty much manipulated by the trading algorithms, and other means, but regardless of that, all markets move up and down. Nothing goes straight up or straight down, and so there are periods where there’s profit-taking, there’s periods where there’s consolidation, that type of thing. So regardless of manipulated or not, all markets ebb and flow.

So the metals markets are no different in that aspect. What we saw in the silver market was over the last two months’ time frame, we peaked out in the spot month around the $20.50 area a couple times, and now we’ve dropped as far as about $18.50, so we’ve had about a $2 drop over the last couple of months. Specifically, the most recent drop’s really over a one month period. I want to be correct on that.

The idea that I’ve had is similar to many others, and we’re kind of overdue for correction as you stated, Mike. So this is actually a healthy thing. The metals stocks certainly have leveraged both directions, so anybody that’s invested in the resource sector, particularly gold and silver stocks, is going to see a multiple percentage-wise on the drop. And some of these stocks actually gave us a clue that the consolidation or the correction was coming, because some of these sold off before the metals actually had started to sell off. What’s interesting, Mike, is that the selloff, even though it’s been a fairly good drop, $2 on a $20 commodity, you’re looking at about 12% or so, hasn’t dropped the commitment of traders… or the open interest, I should say, on the commitment of traders… very much, which means that the bulls and bears are still pretty equal. There’s still a very strongly held commitments to the silver and gold paper paradigm that futures markets more than I would’ve seen in a very, very long time for this kind of a price drop.

So let me restate that. The $2 drop in silver and a correspondingly percentage-wise drop in gold, normally, you would see a pretty good sell off in the open interest. In other words, the shorts would be winning the battle. That is not what I’m seeing at this point in time. We could see something different after the Labor Day holiday. I’m not sure, but right now, these metals for the whole year, and even during this correction, are acting extremely strong.

Mike Gleason: So in your view, it sounds like the correction might not be terribly long lasting. Is that what I’m hearing?

David Morgan: Yes, not long lasting. Maybe another month. There’s a lot of things happening this month, as we’ll talk about later. The August low is habitually seasonality-wise very accurate for gold. You usually get the lowest price in gold in August. We’re doing this in the 1st of September, and September is usually a rebound month, but the seasonalities haven’t worked very well in the metals markets for quite some time, so I don’t put as much credence in them as I used to. However, in the end of the year, you’ve got a rise in the metals, and we haven’t seen that in a while either. I’m just going to let the market dictate, but here’s what I’ll say. The main support on the silver price is around the $17.50 to 17.60 level, so we might see another drop, and I really think that that level, another dollar down, is about as far as these guys are going to be able to push it down.

On the gold side, it’s holding above $1,300 which has fairly good support. Not really strong support, because time-wise, it hasn’t been above that level for a long time during this rally of the last six months. So I believe we’re going to see a huge effort to push gold below the $1,300 level, and we have to just see how it reacts, if it rebounds quickly or not. And of course, more important than that, pretty much at the volume that takes place. In other words, if that causes a large selloff and the algorithms start to move with the shorts and the longs decide to throw in the towel and starts a waterfall decline, then of course, I’ll do an update for The Morgan Report members, show that to them. Right now, it’s too hard to call that. I don’t see that. In fact, my suspicion is that that’s not going to happen. In other words, they’ll push it down below $1,300, but it will pop back up fairly quickly. So it’s very interesting to watch the metals this year.

Mike Gleason: Talking about some of those key events that are coming here over the next month. We’ve got the G20 Meeting coming up. I know you want to comment on that. Also, China’s going to be part of the IMF Special Drawing Rights. I believe it’s October 1st. Comment on those two international events there.

David Morgan: Certainly. I think it’s very important, and this is the big news of the month of September. One is that, I think it’s the 4th and 5th of September, China will be hosting the G20 Meeting for the first time in China. And I think they will be running the meeting pretty much. And at the same time, at the end of the month, I think it’s the 30th of September, the yuan will be weighted at about, I think it’s 10% of the SDR, Special Drawing Rights. So the international currency system run by the IMF, which is really run by the United States and International Monetary Fund, will be embracing the yuan as part of the SDR. And also, you will see a lot of settlement that will take place outside the U.S. dollar.

For example, petroleum historically has been settled in U.S. dollars only, and this has caused a great deal of the banking system throughout the globe to hold dollars so they could make settlements, because everybody buys oil. And now, you’re going to see settlement directly in yuan, which means that this is going to put downward pressure on the dollar, which could be a reason to raise interest rates. This thing about the economy’s great, we need to raise interest rates like we used to have back ten, twenty years ago, is preposterous. Anyone who takes just a cursory look at the real numbers and understands what’s really going on with shows like yours, mine, and many, many others, knows that there’s no way that the recovery has really ever taken place in any substantial way since the 2008 financial crisis. Sure, there’s been pockets here and there, but the overall economic picture’s really just gone sideways or gotten worse.

However, if there’s pressure on the dollar, they could use that meme, that idea, that propaganda, that, “Oh, look at the unemployment. Look at how good we’re doing,” and this type of nonsense, “Well jeez, we really have to raise interest rates,” when actually the reality is that because there is a further weakening of the dollar and there’s negative interest rates throughout the bond market on sovereign debt, but not in the U.S. yet, that it could happen. I’m not saying it will happen, but my thinking is a little different than almost anybody that’s in my peer group on this matter, Mike. Again, I could be wrong, I could be right, but I certainly want to voice it because I want to get people to think, and the only way to keep the dollar strong, let’s say “strong”, would be that it’s got a positive rate of return when all these other sovereign nations with the euro, et cetera, have negative rates, there’s going to be a move for people to hold dollars.

And because China’s coming into the fore, there’s a move to not want to hold dollars, so you’ve got these two forces, sort of bullish the dollar and bearish the dollar. Very interesting times. Lots is happening, and I want to make one more comment and that is, as much as China has taken on the gold market in fiscal form for many, many years and built their reserves probably far higher than what the official report, I do not believe that China is ready to pull the gold card yet. They are just now entering into the global currency system in a meaningful way. They’re very patient and I think they’re more willing just to continue with this paper paradigm. They certainly caught the Keynesian disease years ago that have done the money printing to build out their infrastructure and to certainly boost their economic picture, which is of course distorted at this point just like everywhere else that’s based on the Keynesian model. But nonetheless, I don’t think they’re ready to switch horses to a gold-backed yuan or anything like that any time in the very near future.

Mike Gleason: Certainly going to be interesting to see that push-pull play out there with the dollar. You bring up some good points there about strong dollar versus weak dollar. And I also want to get your thoughts on the election here. We’ve got the election season kicking into high gear. We’ll have the debates here pretty soon. We’re about two months away now from election day. What do you think a Trump victory would mean this November for the markets, primarily the metals since that’s what we’re focusing on here, and also what do you think a Hillary victory would mean?

David Morgan: Well my view is different than a lot of people, but you want my view, my view is it doesn’t matter. My view is that it’s changing captains on the Titanic. My view is that Trump seems to resonate with a lot of conservative thinkers and I think there’s many, many Americans that are just absolutely, totally, and completely disgusted with the political class. I do think that you can make arguments either way, who gets in could move the price and we might get a blip one way or the other depending on who’s elected or should I say, “selected”.

But regardless, I think in the longer term macro picture, it really means very, very little. I think we’re way too far gone on the debt paradigm overall that any one person no matter how well meaning they are, can really turn the boat, turn the ship. The Titanic has hit the iceberg. It’s taking on water, and you might get somebody stronger at the wheel and you might veer off, but it doesn’t really matter. The ship’s going down. That’s my view.

Mike Gleason: Switching gears here a little bit, you’ve always had great advice for people when it comes to getting into precious metals. You’ve written your ten rules of investing in the sector and I know owning the physical metal is first and foremost in your view. So before we get into discussion about mining stocks, which I’ll ask you about in a moment, talk about why you recommend owning the physical bullion before you do anything else.

David Morgan: Well almost anyone that’s in this sector, and that could go from anybody that’s a prepper or as extreme as a survivalist or someone that’s familiar with financial markets and monetary history, everyone understands that we’re at risk at all times, and especially now. We’re in a situation on a global basis we’ve never been in before, which is that the reserve currency of the world is failing, which means you need something outside of the system. You need something that’s not electronic-based, you need something that has no counterparty risk, you need something that’s universally recognized, and you need something of high value that could be used anytime, anywhere by anyone. That of course is gold and/or silver. This has been the case.

So if there were, let’s say, a problem with the banking system where we go to the report that’s for free on TheMorganReport.com, you might go there, give me an email, and a first name. You’ll get the “Riches and Resources Report,” which shows you what happened during the currency crisis of 2000-2001 in Argentina. The film’s name is The Empty ATM, and they did not take your bank accounts. They just basically sealed them, where the money in the bank was held by the bank and they allotted you so much you could take out on a weekly basis no matter who you were, no matter what your account size was, and then they devalued the currency, which is basically stealing from you. So this is what took place.

I say all that to state how emphatic I am, how important it is for people to have real money outside of the system. Those people in Argentina that held some of their wealth in gold and silver circumvented the devaluation and also had readily available, recognizable and cherished real money that they could barter with, which took place all over the country in Argentina during that currency crisis that I just mentioned. So I really, really believe that this could take place in other areas of the world, certainly if you were in Venezuela right now and you had some precious metals, you might not have a smile on your face, but you certainly would be better off than the people that didn’t.

So these are really interesting times and we are in a paradigm that is failing and the powers that be are propaganda, propaganda, propaganda saying and telling everyone through the mainstream media that everything’s fine, go back to sleep, we’ve got it under control, things are wonderful, and that type of thing. When the reality of course, most people can just look out their window and drive down their main street of their town, take a look around and say, “You know, things don’t look as good as they did a decade or two ago.”

Mike Gleason: Are there any products that you prefer over others? For instance, in silver, do you generally recommend coins versus bars or coins over rounds? Does it even matter, or is it just about getting the most ounces for the money, or do you want variety? Give us your thoughts there.

David Morgan: Yeah, in the “Ten Rules of Silver Investing,” I said you should strive to get the most ounces per dollar you want, or whatever currency you have invested, which means first of all, small units. You definitely want to start with small units. You don’t want to have one 100-ounce bar, and that’s your silver holdings, because now you’re in a fix. You’ve got to make one absolutely correct decision when to turn it back into fiat currency or barter with it, whatever. So you want small coins if you have rounds, but if you’re particularly interested in recognizability, for example, and you want a government-stamped coin, you’re willing to pay a slightly higher premium, I have nothing against that.

Also, the constitutional silver or what’s known in the trade as “junk silver”, I think that’s still a good way to go. The bag market is actually fairly tight. So much has been smelted down into bars, there isn’t a lot of it around, actually. Small units. Rounds or recognizable coins are the way to go. I think you can start with silver if you’re modest means. If you have better means than that, I think you certainly should have some gold. You should actually have both if you can afford it.

And I also think moderation’s the key. I think a 10% holding in physical metal is probably more than is sufficient for most people. There are people like me that have a great deal more than that involved, but this is my life’s work. This is something I understand and I understand the risks, and I’ve been with that type of risk environment for a very, very long time. For most people, just a 10% amount in physical, and for those that really want to gain leverage and maybe triple their gains, certainly that’s available, but it’s a situation that demands study and work. And that would be through the Resources Sector, which is what we’ve specialized in for a long time.

Mike Gleason: Leading me right into my next question here, turning to the mining stocks. It’s been an outstanding year for the miners, the recent pullback notwithstanding. Now, if you look at the silver spot price, it’s up more than 35% since the first of the year, but if you look at the mining sector, gosh, David, we’ve got the HUI Gold Stock Index up nearly 100% for the year and the GDX is up over 120% year-to-date even with the big pullback in the last few weeks.

So things are finally starting to look up after a rough very few years for everyone in the Sector with many stocks down 80% of more since the 2011 peak, assuming they even stayed in business, but talk about the miners. What are you looking for here in the second half of the year after a great first half?

David Morgan: I’m actually looking for further gains by the end of the year. I think we’ve still got more work to do in the downside, and as I said earlier in your show, Mike, I think probably another month. I think by the time that the SDR takes place and people, the markets, I should say, understand how much dollar damage is done or not. We’ll have to wait and see. With the yuan being more accepted not only by the SDR but in final settlement rather than having to go to the dollar directly.

As that settles out, I think you’ll see more and more consolidation into the precious metals and more push for them to go to the upside. So it’s a situation that most of the large funds money managers, pensions even, that missed the 2008 bottom in the precious metals during the currency crisis, have woken up early this time and have moved into the paper paradigm of the gold and silver markets, which means that the open interest, as I said earlier on your show, is very, very high relative to what it’s been historically, and these are strong hands.

On top of that, the Shanghai Gold Exchange has a very, very large open interest themselves, and they’re trading from the long side vis-a-vis the commercials or the banking system that trades historically from the short side on the COMEX. So you’ve got big money that got in relatively early in both gold and silver, because they understand that the stock market is too high and they want to be hedged. They have no real philosophical reason to own gold like we just outlined in the last question, but they manage money and they need exposure. And the best way for them to get exposure is to buy it on a leveraged basis on the paper markets. So that’s what’s taking place. With the addition of the Shanghai Gold Exchange ramping up the amount they’ve purchased on paper, and of course, that’s much more physical marked than the COMEX is.

So again, there’s that really strong bull/bear back and forth and so, just to close out, I really don’t see these metals coming down a whole lot more or a whole lot longer, and I think this year is going to be one that people look back on and say, “Jeez, I’m sure glad I bought my metal or bought my mining shares during 2016.” By the way, The Morgan Report comes out this weekend right before the G20 Meeting, and on top of that, we’ve got another company that will be probably putting out mid-month, mid-September, an updated analysis, an appraisal on the mid-tier producers in the gold complex. And this is after it’s made two transformational acquisitions in 2016.

This is the kind of research we do. If you go back another month, we had like four or five speculative situations that are going to show up in these other newsletters that cost like three or four times what ours does. We see that all the time. Not that we certainly haven’t gotten ideas from others, because we have, but it seems that whatever we do our research on seems to be picked up by let’s say a lot of people in the industry. I’ll just leave it at that.

Mike Gleason: Well it’s great stuff as usual, David. We always appreciate hearing your thoughtful analysis here on our podcast, and I’m sure we’ll talk to you again very soon. Now, before we let you go, please tell folks how they can get involved with The Morgan Report, because this is a fantastic time for people to dive deeper into the metals and miners. I think they understood that by listening to our conversation here… it’s especially a good time after this recent pullback and this pause in the upward movement we’ve been having. Please let people know how they can get on your email list and also about some of the other things going on there at The Morgan Report or about the book, The Silver Manifesto.

David Morgan: Certainly. On the book, we’ve gotten great feedback from people. It’s probably one of the best $30 investments that you can make. You can get it on Amazon, you can go toTheSilverManifesto.com and read one chapter for free and get kind of an overview, you can read the reviews on Amazon. There’s a whole chapter on how to pick a mining stock, and we actually spill the beans and show you exactly how we do it. And again, we’ve gotten feedback that’s been extremely positive for those types of people that have the time, energy, and motivation to do their own analysis. We take you through step-by-step, so that’s something you can get out of the book along with a lot of other material.

As far as The Morgan Report, what I actually urge everybody to do is to just go to the website,TheMorganReport.com, and get on our free email list, and get our free “Riches and Resources Report.” In that report, you’re going to get two movies to watch for free. One is The Empty ATM I mentioned earlier and the other one is The Four Horsemen film, which is the end of The Age of Empire, and it’s very, very good thought-provoking types that are interviewed during that paradigm with some solutions to the problems at the end of the film. And that’s just two things you get in that report. You also get ways to accumulate silver and gold over time, you get some insights, and of course, once you’re on the list, you will be appraised of an update every weekend by yours truly, myself and or one of my staff.

Mike Gleason: Yeah, it’s great stuff. I’ve been on your list for an awfully long time. Always enjoy it every weekend we get an email from you, and it’s excellent information. The Silver Manifesto, as you mentioned, is another great resource. We’ve sold about 1,500 on our website, MoneyMetals.com. A lot of people are really enjoying that book and I know you’re doing very well with that in a number of different places and we wish you continued success there.

Well thanks so much. We really appreciate it, and I hope you have a great weekend, enjoy the rest of your summer, and we’ll talk to you again soon. Thanks, David, and take care.

David Morgan: My pleasure. Thank you.

Mike Gleason: Well that will do it for this week. Thanks again to David Morgan, publisher of The Morgan Report. To follow David, just visit TheMorganReport.com. We urge everyone to sign up for the free email list to get his great commentary on a regular basis, and if you haven’t already done so, be sure to pick up a copy of The Silver Manifesto, available at MoneyMetals.com, Amazon, other places where books are sold. It’s almost certainly the best resource on all things silver that you will find anywhere, so be sure to check that out.

And check back here next Friday for our next Weekly Market Wrap Podcast. Until then, this has been Mike Gleason with Money Metals Exchange. Thanks for listening, and have a great weekend, everybody

 

Silver: The Rip Van Winkle metal – Chris Martenson

Mike Gleason* of Moneymetals.com interviews Chris Martenson

Chris comments on geo-politics, geo-economics and on whether one should invest in gold and silver.

Chris Martenson

Mike Gleason: It is my privilege now to be joined by Dr. Chris Martenson of PeakProsperity.com and author of the book, Prosper: How to Prepare for the Future and Create a World Worth Inheriting.

Chris is a commentator on a range of important topics such as global economics, financial markets, governmental policy, precious metals, and the importance of preparedness, among other things. It’s great, as always, to have him with us. Chris, welcome back, and thanks for joining us again.

Chris Martenson: Mike, it’s a real pleasure to be here with you and your listeners.

Mike Gleason: Well it’s been a number of months since we’ve had you on last, far too long by the way, and there has been a ton of things going on in the financial world of late. I’ll get right to it here. For starters, what did you make of the Brexit decision last month? Is this potentially the beginning of some meaningful opposition to the ongoing drive for a world government? Or was this just a one-off event?

Chris Martenson: No, this was not a one-off event, this was a continuation of a pattern that we’ve been talking about at Peak Prosperity for a while. We thought that there were three scenarios for the future. One of them we called fragmentation. I think this is the beginning of it, and fragmentation has its roots in a growing wealth gap. It happens when you have a stagnant to shrinking economic pie that is increasingly seized by the elites who are tone deaf.

And when they do that, people get cranky, and this is the first form of crankiness we’ve seen break out. Austria is next, we are going to see the sweep across Europe, I believe. People have seen that austerity is just a punishment by the bankers upon the average people for the sins of the banker. It feels unfair because it is.

I think Brexit as a political statement is just the beginning, and of course the powers that be are going to do everything they can to paint this as a mistake and punish the wrong people again.

Mike Gleason: What about the banking system, despite some recovery in the past week or two, the European bank stocks have been getting hit hard. We’re seeing that Italian banks need to bailout, and the share price of Deutsche Bank is signaling that the firm is in real trouble. The IMF just named them the riskiest financial institution in the world.

There is a rally here in share prices, Brexit appears largely forgotten, and Wall Street certainly isn’t acting too worried. Is the concern over European banks overdone? Or might we see a firm like Deutsche Bank actually collapse. And what do you see as the ramifications here in the U.S.?

Chris Martenson: The European banks are absolutely in trouble. I think they are insolvent, that is the step that precedes bankruptcy which is a legal action. Insolvency is just when your assets and your liabilities have a big mismatch. We know that’s the case for the European banking shares. It also explains, Mike, why we are seeing this rally, we call it on Wall Street, but it’s global.

We saw two things. First, we saw a big decline, a scary decline in January, and then this miracle, nipple bottom vault back up to the highs that came out of nowhere. To me, that was a liquification event. Somebody put a lot of liquidity into the system. We know that the central banks are coordinating on this because they are scared of the Franken-markets they’ve created. They cannot even tolerate a few percent decline without freaking out. That should freak ordinary people out, because if they are scared, you should be too.

So they re-liquefied like crazy, and then we had just another post Brexit re-liquification. My evidence, stocks at all-time highs, bonds at all-time highs. Listen, you cannot have that unless there is a lot of liquidity coming from somewhere. People cannot be panicking both into negative interest yielding bonds and stocks at the same time for this to make sense through any other lens than the central banks are absolutely pouring money into these markets.

Mike Gleason: Yeah, it’s certainly been a head scratcher to watch these equities markets, the DOW and the S&P making these all-time highs in the wake of what we’ve seen here recently. That’s a good explanation and I don’t see any other potential for why that’s happened. That’s not sustainable forever, they cannot get away with that forever before without the bubble finally bursting, is that fair to say?

Chris Martenson: That is fair to say. And just for your listeners, I just got back from a major wealth conference. These are people, families, institutions that are managing enormous money… they’re all scratching their heads. I watched these poor fund managers and CIOs, that’s investment officers, attempt to explain all of this. They contorted themselves into pretzels. I got up there and just said, “Look, somebody is dumping money in this market.” A lot of heads started nodding. First wealth conference I’ve been to, Mike, in many years where I was no longer the contrarian in the crowd. That makes me nervous.

Mike Gleason: Switching gears here a little bit, what do you make of all of the recent social unrest here in the U.S., Chris? We’ve seen police shootings followed by protests and revenge killings of police officers in a number of cities around the country. Then we’ve got probably the two most polarizing figures ever running for president. The months between now and the November election are sure to be interesting. But there is at least the potential that they could also be very dangerous. What does the recent unrest signal here Chris?

Chris Martenson: I think this is connected to the same factors that I talked about with Brexit. Look, Mike, what’s happening here is that people are getting squeezed. If you believe the inflation numbers go get your head checked or study up on it, because we know we are getting inflation. It’s at least twice as high, maybe three times as high as officially announced. And that’s really hurting people, savers just getting crushed.

We are watching banks get bailed out, we are watching Hillary skate on what are obvious transgressions of the law as it’s written and it’s not a complicated law to understand about mishandling of classified information. She got a pass on that amongst other things. So listen, we’re primates. Fairness and justice are hard wired into us, that’s a thing. People are feeling and seeing the unfairness of this all.

What it comes down to, really, for me, Mike at this stage, is they ran these really interesting experiments back in the 40’s and 50’s. Where they would take a rat and put it in the cage, make it so there is nothing in the cage so it cannot escape, and they shock the floor. The rat hates it but ultimately they figure out how to tolerate it. They curl up in a ball, they’re miserable.

If you put two rats in the cage, what happens is that all of a sudden they are both getting shocked, they are both hated, it’s painful, but now they have somebody to look at and go, “Oh, it’s you.” And they fight. And if they leave them in there long enough, they fight to the death.

What that experiment shows us is that when people – and rats and people are the same this way – if you don’t know where the shocks are coming from, you go to the blame game. That’s what we are starting to see. I believe that police and the people they are policing are actually on the same side of the story, but they don’t know it, so they are looking at each other, they are blaming the wrong parties in the state. The pie is no longer expanding. In fact, the piece of the pie that used to belong to even the upper middle class on down is being rapidly vacuumed out.

All that oxygen is being sucked out of the room by a financial system, not just bankers but a complete financial system that just doesn’t know how to say enough. And it’s vacuuming more and more for itself at ever increasing rates. That’s leaving less and less for everybody else. Guess what? Along comes polarizing figures. One who is representing the status quo, and allows people to default into the denial of saying, “Well, if we just get back to pretending that everything is okay and we shoot for the middle zone and don’t see anything too troubling, things will be okay.” Spoiler alert, they won’t.

And then another guy that’s saying, “Hey, I got an answer for this, and this is troubling and we need to start getting angry about this.” So he’s tapped into the anger side, and I think both of them are missing the mark on this, which is that we have to have a more fundamental substantive discussion about what’s really happening in this country, which is that we have some systems that are run amok and they are going to take us into a really dark territory if we don’t stop them now.

Mike Gleason: For the people who live in these urban areas where there is maybe a little bit more danger in being in an environment where there is a lot of animosity towards police officers. I know you’ve organized your affairs, so you are no longer living in a major metropolitan area, do you have advice for people to maybe consider that type of move given the fact that there could be some real instability in some of these major city centers with all of this violence?

Chris Martenson: Short answer, move. Longer answer, be prepared to move. I do work with people who live in urban areas that they are there for a variety of reasons, they’re not ready to make the move, but they are increasingly having plans for how they would get out of there. Listen, the difficulty of this Mike is this idea of shifting baselines, where if you are a person and you took a person today from my town and you dropped them into Oakland, California they would leave so quickly because it would be like dropping a frog in boiling water. They would jump right out of that.

But for people living there, it’s a little bit violent, but it’s four blocks away, and somebody got shot six blocks away. A month later, it’s two blocks away, but that’s okay, the police responded quickly. Over time, people lose their sense of perspective over what’s happening. So my invitation to people is to really look around and actually see what’s happening, ask yourself if the trend is getting better or worse.

And regardless of whether it’s getting better or worse, is that really where you want to live? A lot of people say the answer is no, but they don’t know what to do next. My invitation is, well, start figuring out what that plan is because there really is no time like the present to begin figuring these things out. It takes time, it just takes time.

Mike Gleason: Changing gears again here. I want to get your thoughts on the Fed. The FOMC meets again next week, they have been punching on interest rate increases. We’ve had mixed economic data, growth below expectations and central bankers everywhere are ramping up stimulus. Janet Yellen and company are finding it exceedingly difficult to tighten. Throw into that that this is an election year. What do you see the FOMC doing between now and the election? Could we see some kind of surprise to the dovish side to help boost the markets and keep the status quo going this November? What are your thoughts there?

Chris Martenson: Yeah, that’s the 85% probability. I’m on record as saying that I thought it was more likely that they were going to lower rates instead of raise rates on their next move, whenever that comes. I said that back in December after that first tiny little wiggle hike. And the reason I said that is because look, you can’t have the United States raising rates while the rest of the world’s rates are going down. That just doesn’t make sense from a variety of logical standpoints. But let’s be clear, the Fed follows, it doesn’t lead.

This is not an aggressive, assertive organization ever since Paul Volcker left. These are not people who have the moxie to run against what the markets want. They’re totally captive to the markets, the markets are clearly saying rates are going down. I don’t think this fed has it in them to do anything other than follow the markets. So since the markets are going down, the best the Fed can do is hold pat. But at some point, honestly, I would put a little bit more money on the wager that said the next surprise would be to the downside not the upside. Especially in an election year.

Mike Gleason: Speaking of following and not leading, I don’t know if you have been following Alan Greenspan and his comments, but now all of a sudden late in life after leaving his Fed chairman post, he is now advocating for a gold standard. It’s quite amazing to hear that come out of that man’s mouth after all these years. Maybe it just goes to the fact that when you are in that position, you’re just following and you’re not making any real leading decisions. What have you made of what Alan Greenspan has had to say in these recent days?

Chris Martenson: Yet another extremely disappointing CYA retirement circuit lap. We’ve seen this a lot, Senators who finally on their retirement day say, “Oh, by the way, Washington is really broken, here is all the ways they are.” Eisenhower on the way out, “Hey, watch out for this military industrial complex.” Yeah thank you, would love to have had those insights while you still could have made some decisions that would have shown that you had the personal fortitude and internal authenticity to have stood up and done what was right.

So for Alan to come out afterwards, I agree with a lot of what he is saying, it’s too little, it’s too late. It doesn’t do anything to resurrect or buff his reputation in my eyes. I think he was the architect that will ultimately end so badly, that his name will be mud if you follow the historical reference, for a long time coming.

Mike Gleason: What is your best guess for what to expect in the markets between now and the election… particularly for the metals? We’ve had an excellent first half of the year in gold and silver, although they have struggled a bit here in the last week or two. So do you see this as maybe a short term pause before the next leg higher? Basically can the metals match the performance in the second half of the year that they had in the first half?

Chris Martenson: Well I still think metals of course, particularly gold given the monetary shenanigans, that’s something that has to be in everybody’s portfolio. It’s your insurance policy, get it there. I really thought that Grant Williams about a year ago had made just to me the quintessential, best gold exposition where his summary was, “nobody cares”.

And his thought was that the west is perfectly happy to sell gold, we’re perfectly happy to sell our paper gold on the COMEX. We’re perfectly happy to see about 1,000 to 1,500 tons a year leave western vaults just for Shanghai alone. So we were okay with that because nobody cared. The Treasury didn’t care. He was talking with fed officials, like, “Yeah, if we lose gold, it’s fine.”

The west is starting to care. This hearkens back again to this wealth conference I was at, big money people, of course I’m always testing the gold waters with them. And more and more people are saying, “Yeah, I’m thinking about gold now.” So we’re starting to see this really show up on the western radars. I think that if I was going to mend Grant’s title, it moves from “nobody cares”, to “some are starting to care.” And that’s a very constructive environment for gold, just from that standpoint.

And the other part, of course, has to be how can gold not be constructive in a negative interest rate environment? People used to always say, “Chris, gold doesn’t yield anything.” And now I get to say, “Well at least it doesn’t yield negative something.” So this is a really positive environment for gold. It’s clear somebody has an interest in not allowing gold to go up. We saw that on Friday late night post Brexit. Somebody put 50,000 new open interest contracts to contain gold at the $1,360 mark. And we don’t know who that was, but we can all guess.

Mike Gleason: At some point you have to think that more and more people will recognize it as a safe haven. You talk about the wealth conference you just went to, about how maybe more and more people are starting to wake up to the idea of owning precious metals as a way to hedge against what may come. Obviously, and I’m talking about physical bullion now, there is not a tremendous amount of it. There’s been so much of it going to the east, and the west does not have a whole lot of precious metal left at this point.

If we did see an increase from say 1% of the general public and going to 3% or 5% of the general public, I have to think there is going to be a difficulty getting your hands on the metal if you wait too long. Is that fair to say?

Chris Martenson: That is fair to say, particularly at the retail level. I think the people who have the big, big money, they have access to vaults that you and I don’t normally have access to. There’s a very different structure for the big 400 ounce and 1,000 ounce bars for gold and silver respectively. But for people who want to buy coins, we saw this in ’08, we saw it in 2011 again when there were big price moves, particularly to the down side in silver where people started to want to get into that market.

And those were almost exclusively people who had already bought silver. This wasn’t new people coming into the market, just people looking for better deals. That alone swamped the retail supply chain, the refineries were maxed out, the mints were maxed out, supplies were tight, and the wait times ballooned out to six and eight weeks in some cases.

So that’s our learning which is that when the metals really do begin to move, your chance as a retail investor to get into that are going to be very, very limited if you wait or the percentages move from whatever it happens to be, 1% or 2%, to 3% or 5%. I think that that will swamp the retail availability for quite a while.

And then, you know what, people are going to be stuck with, and they’re going to say, “Oh there’s a six week wait.” When six weeks comes by, they discover that the price has moved a lot at that point in time. So either you put a lot of money on the line in the hopes of being in line somewhere, or you wait and discover that both the prices and availability have scurried away from you in the meantime. It’ll be hard I think psychologically if not practically for people to acquire what they want. So my motto always is I’d rather be a year early than a day late.

Mike Gleason: Very good advice. In terms of gold versus silver, obviously gold is really just monetary demand that drives that market, but silver is both pushed and pulled from both the industrial demand and the monetary demand. Generally speaking, when we see the metals rising, we’ll see silver outperform, but if we have an economic slowdown, perhaps that could hold silver back a little bit as it gets maybe lumped in with copper and oil and other industrial types of commodities. What are your thoughts there on the potential for silver versus gold going forward?

Chris Martenson: They’re very different words to me. A lot of people say, “Gold and silver” like it’s one word. They are two words to me. Gold is my monetary metal, love it, I have it because I think a monetary crisis is happening. If you have a short term horizon, I like gold better because I think we are having a monetary crisis first before we have a big industrial resurgence.

Silver, primarily Mike I love it as the industrial metal, as something who’s known ore grades are vanishing and deposits are depleting, and we know that it’s being used increasingly for more and more industrial applications. Silver is my Rip Van Winkle metal. I love it. If somebody said, “I need to pick one of these two, 20 years I want to be happy when I wake up.” Silver’s it. It’s a volatile metal that goes up and down, I think it could have a run down if we hit a capital “R” recession or depression across the world… if China blows up or something like that. But barring that, I love silver because of its actual supply and demand characteristics going forward. I think it’s heavily underpriced here.

Mike Gleason: Well as we begin to close here, Chris, what would you say are maybe the top three or four actions that people could be taking right now to become more self-reliant and generally more insulated from the chaos that’s on the horizon?

Chris Martenson: Well if I could just plug my own book here for a minute that I wrote with Adam Taggart called Prosper. What we do there is we specifically talk about steps people can take so that they will be more resilient given certain futures that might arrive. But every one of these steps we advise will make your life better today. So there’s really no way to lose in this story.

What we do is we have eight forms of capital that we like people to focus on. Financial capital, which commonly everybody focuses on only. But what we’ve found, and there’s a great quote, it says, “None are so poor as those who only have money.” If you only have financial capital you are not resilient. So there’s seven other forms of capital we talk about. I’ll just go through a couple.

One is social capital. Not just how many people you know, but how well you know them. Have you had experiences with them? Have you seen them operate under a variety of scenarios so you know really who they are at core? Building that social capital is going to be one of the most important things you can do to build you resilience. And guess what? You’ll know more people and connections are proven to make us happier, more fulfilled people.

Emotional capital, also in the mix. This is very important. It doesn’t do any good to be rich in all sorts of other areas if when a crisis comes you basically fold up your mental shop and shut down. Not good. We already see people doing this with increased rates of suicide, drinking, video game playing, other forms of numbing out because the reality is just not appealing. We think there’s lots of ways to rotate your thinking so that you can be positioned to not just be on the wave of change that’s coming, but the surf it.

There’s great opportunities coming here, but not for people who are going to be feeling the loss of the changes instead of the opportunities in the change. So those are just a couple of examples. Living capital is an example, knowledge capital, time (capital). Things like that. And so this book is our collection of stories and personal experiences with each of these forms of capital, from having worked with thousands of people in our seminars, at our website, Peak Prosperity. For people who are consciously and prudently as adults saying, “Hmm, different future coming, how can I be prepared? More importantly, how can I be resilient so I can increase my quality of life today and be more prepared for tomorrow?”

Mike Gleason: Yeah, it’s truly fantastic stuff. Obviously it was years in the making. You and Adam did a fantastic job, so many practical things in there. Now as we begin to close here Chris, why don’t you talk a little bit about the Peak Prosperity site and then also let people know how they can get their hands on that book if they haven’t already done that.

Chris Martenson: Thanks Mike. Yeah, the site is PeakProsperity.com. And we have a lot of free content there, we have a subscription newsletter for people who like to go a little deeper and maybe have more information. Our site is dedicated to two big things. One is educating, we want people to understand the context of what’s happening so they are not one of those rats getting shocked without an understanding of what the shocks are.

Once you know what the shocks are, then you have information that’s really important, that can help you move when other people are paralyzed or confused. So that’s half the site, the other half is about how we can become more prepared, more resilient… (there’s a) wonderful community of people there. They are very thoughtful. If I could identify us with one word, I would say we are all curious.

This is a life to be lived, it isn’t a dress rehearsal, we are not here hunkering down saying, “Woe is us, bad times coming.” We’re saying, “Big changes coming, now what do we do about it?” So it’s very positive while realistic, if I can put those two words together. And Prosper, the book, available on Amazon. You can come to the website and get that. It’s available pretty much everywhere.

Mike Gleason: Well again, excellent stuff. Thanks so much Chris, and I hope you have a great weekend, enjoy the rest of your summer, and we’ll catch up again soon.

Chris Martenson: Thank Mike. You too, and to all your listeners, have a great weekend and summer.

Mike Gleason: Well that will do it for this week, thanks again to Dr. Chris Martenson ofPeakProsperity.com and author of the book, Prosper: How to Prepare for the Future and Create a World Worth Inheriting. For more information, just go to PeakProsperity.com, check out the extensive site there and the great online community. Or check out the book, which is also available on Amazon. You definitely will not be disappointed.

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