Written by Andrew Hoffman
on May 17 2013
Physical vs Paper PM’s – CASE CLOSED!
Read the Thursday Afternoon Wrap-Up for 5/16/2013 and the Friday Morning Commentary for 5/17/2013
Sometimes pictures tell more than words; so I’m going to show you some graphics that prove TPTB may have won the recent “battle”; but are MASSIVELY losing their “war” against REAL MONEY – a war, I might add, they have ALWAYS lost…
Research shows ALL Paper Money Systems Failed
Whilst PAPER PM prices were violently attacked during mid-April’s “ALTERNATIVE CURRENCIES DESTRUCTION”…
…in both gold and silver…
U.S. Mint retail demand was soaring; again, for both gold…
…and silver…
Meanwhile, as the “Commercials” (i.e., the U.S. GOVERNMENT) were covering PAPER shorts – in both gold and silver…
…to the point that both metals have net positions dangerously close to going long…
…and international citizens were buying PHYSICAL PMs in a frenzied manner…
Gold Buying Frenzy continues: China, Japan, and Australia Scramble for Physical
India’s Response to the Gold Sell Off: A Massive Buying Frenzy
…with the Chinese essentially consuming ALL of the world’s production – as has been the case for the past year…
…Miles Franklin enjoyed its most profitable month EVER –40% more than its second most profitable month; which, ironically, was September 2011, when “DOLLAR-PRICED GOLD” reached its ALL-TIME HIGH of $1,920/oz…
Thus, when you see THIS chart of exploding PHYSICAL demand against “plunging” PAPER demand, who are you going to believe – TRUTH-TELLING “shadow worlders” like me; or LYING government, Wall Street, and MSM shills?
Who got the 10 million ounces of gold that left GLD?
The three-headed monster. That’s what you get, here at Miles Franklin. You get the commentary from David Schectman, founder; Ranting Andy Hoffman, Marketing Director; and Bill Holter, Cowboy, ex-Wall Street brokerage executive. We all follow the same industry icons (including John Williams, Jim Willie, Bill Murphy, Jim Sinclair, Richard Russell, Eric Sprott, Ted Butler, Gerald Celente and others). But we re-package it in our own styles and with our own beliefs. All three of us have our own “following.” We are all giving you the same message, but presented with a different writing style and flavor. You get a lot of fabulous input here, and the cost to you is only your “time,” not your pocket book.
We hope that after you get to know us, you will at least give us a try to earn your business – as your precious metals broker and friend. You will love our brokers, with their caring and assistance. We are competitive with the “order takers” who sell you product and give you nothing else for your dollars. We give you a lot more, and yet still find a way to be competitive. That’s the way I wanted it when I formed Miles Franklin in 1990. Our business model has never changed. Give the client more than anyone else in pricing, service, education coupled with personal relationships with a small group of the finest brokers in the business. Most of them have been with me since 1983. All of them have at least three years of industry experience, and most have three decades. Remember, it doesn’t cost you any more to have a friend helping you out on the other end of the line. I insist on only hiring the cream of the crop, and I’m not talking about “salesmanship,” I’m talking about an ethical, friendly, caring and educated staff. This is not “fluff,” it’s the truth.
It has been my experience that the people who are the most troubled by the gold and silver takedown are the ones who own the ETFs, GLD and SLV. If these people understood what gold is really all about, and looked at it as “money” and “financial life insurance,” they would not be complaining. But complain they do. In their mind, they are losing money. In our mind, we are being given a unique opportunity to buy, what will soon become the most desired assets of all – gold and silver at a massive discount. Why worry? Take advantage of an illogical situation.
Ted Butler’s most recent newsletter may be one of his best, ever. He asks the question, “Who got the 10 million ounces of gold that left GLD?” Most people assume it went to China. Butler’s digging around led him to a different conclusion. He says it went to JPMorgan! He isn’t saying this is illegal, but there is something grossly wrong with a system that allows JPMorgan and their bullion bank buddies, GS et el, to move the market South with their press releases and shorting practices. After the prices begin to collapse, there was JPMorgan to buy up the “spoils.” As I recall, a decade ago Jim Sinclair said that when the gold market really takes off, the banks that are short gold and silver now (GS and JPM) will be long. It looks like JPM is moving long. If they can unload enough of the silver shorts to the hedge funds, maybe this time they will “allow” gold and silver to rise rapidly, unopposed, which is what we have all been waiting for. If they can’t milk the pull back anymore, they will be the ones long, making more billions off the funds who will be caught in a gigantic short-squeeze. It was just such a short-squeeze that sent Bear Sterns into bankruptcy in 2008 (they were short a reported 40,000 silver contracts and 80,000 gold contracts and their margin call would have been at least $2 billion.) Just remember, all of these short gold and silver contracts will have to be covered on the way back up. The fuel for the next bond-fire is there, waiting for the spark to ignite it.
Getting ‘Rich’ Or Avoiding Poverty?
Read the Wednesday After Wrap-Up for 5/15/2013 and the Thursday Morning Commentary for 5/16/2013
Watching the Silver Circle movie, a key theme I have long written of was in full focus; as Pasha Roberts depicted what a hyperinflationary 2019 America might look like. That is, that PHYSICAL gold and silver are not purchased to “get rich”; but instead, to insure against the inevitable destruction of fiat currencies…
Research Shows ALL Paper Money Systems Failed
This is because the “HOLY GRAIL OF THE FINANCIAL WORLD” is that only PHYSICAL gold and silver are REAL MONEY; and all other “currencies” are worthless. Once you realize PHYSICAL gold and silver are savings – NOT investments; you will sleep the “SLEEP OF THE JUST,” knowing your net worth is held in the only assets to have maintained their value through 5,000 years of history…
In Silver Circle, few people are “rich” in a world where beer costs $100/glass, bread $5/loaf, and gasoline $15/gallon; particularly as the Federal Reserve governs ALL aspects of society – utilizing vicious police to enforce its draconian policies. Those who own “silver circles” are not getting rich; but instead, avoiding poverty.
In that world, vendors don’t want PAPER dollars; and will take enormous discounts to be paid in REAL MONEY; which is EXACTLY why one shouldn’t worry about potential “confiscation” decrees. Silver is in fact “illegal” in the movie; but that doesn’t stop “rebel groups” from establishing a vibrant black market – as has occurred in ALL instances of hyperinflation throughout history…
The Nightmare German Inflation – One day everything was fine. The next day hell was unleashed.
Confiscation is the singular topic I am asked of most – and to it, I simply answer with a question; under such a scenario, would you rather own “PRICELESS PRECIOUS METALS OR WORTHLESS DOLLARS?” Such actions wouldn’t even be considered until the dollar had already crashed; and thus, the key is to PROTECT yourself before this occurs.
Coming from New York – and having worked 20 years on Wall Street – NO ONE understands the concept of “getting rich” better than I. “Investing” in PAPER securities was both my career and passion – until I realized the government had permanently broken that mechanism; at least, for “the 99%” without access to their FREE MONEY, COMPUTER ALGORITHMS, and INSIDE INFORMATION…
The Story of Inequality in the US: Past, Present and Future
Thankfully, my cumulative experiences have taught me that the time to focus on “getting rich” is decidedly OVER. I have held precious metals for eleven years; but have NEVER been so scared of the direction the world is taking as today. Consequently, my ENTIRE focus has switched to avoiding poverty – whether or not the “worst-case scenario” emerges; and yours should be, too.
The Inflation vs Deflation Debate
A debate has raged for several years amongst “scholars” whether we will “crack up” via deflation or inflation. I used the term “scholars” because at least these people had the foresight to see that something is definitely wrong, really wrong and will end badly. The “others” (95% or more), sheeple who are still sleeping (some beginning to wake and recently in larger numbers) and don’t even care because it doesn’t matter, as both words end in “flation.”
I have written several pieces explaining the concept of inflation in the things we need and deflation in the things we have. This has pretty much been true up until 6 months ago when financial assets began to “inflate.” From a textbook standpoint we have lived through a massive inflation as money supplies (and by extension in a fiat world, debt) have exploded even though many asset prices have dropped. All you need to do is look at what it costs you each month to live and it’s pretty clear that inflation is definitely present.
As a side note, some still believe that gold cannot do well in a deflation, in fact gold actually does better in deflation vs. other goods because gold IS money and gains in purchasing power. The basic definition of deflation is that money itself is scarce or there is not enough of it to support the economy. In the current scenario, a “deflation” would amount to the U.S. defaulting on its debt. Not through debasement but through nonpayment. Were this to occur then you must ask yourself what would 1 ounce of gold be worth if dollars became worthless because the issuer was bankrupt? By definition the answer is infinity. Since the U.S. has borrowed in dollars and can create dollars at will, a true deflation theoretically is impossible. But this is not what I want to talk about. The question in my mind is, “Will we have inflation or deflation AFTER we hit the wall (my earlier piece) in terms of whatever new currencies are introduced?” Along that same train of thought, will it be inflation or deflation in terms of gold?
I can tell you that Germany after the Weimar hyperinflation experienced immediate deflation in terms of gold marks and an even greater deflation in terms of gold. This only makes sense because there was very little “money on the streets” and money became “dear.” I would expect some type of similar action after new currencies are introduced and “reset.” At first I would think that unless the exchange rate is set high enough, not enough gold will come out of hiding and create a shortage of “money.” Of course this is only a guess on my part. The part about “new currencies introduced” is in my opinion a very educated guess and one with a very high (100%?) probability.
I guess the easiest way to explain the future “inflation/deflation” debate depends on where the price of gold is set or trades at versus whatever new currencies come out. Set the price too low and very little gold will be pried loose, set it too high and gold will flood the streets. My guess is that the price will be set too low initially and not enough gold will flow for maybe 6 months or a year. New paper will seek gold until the “right level” (whatever that may be) is reached… and then we start the entire process all over again. The “process” being governments slowly at first and then more rapidly issuing more currency than there is gold (at the then current prices) would allow. Please understand that in gold terms, if the price is set too high then gold will flow and thus an inflation in “goods” will occur as people will spend. If it is set too low then people will hang on to their gold and goods “prices” will come down until they are sold, a deflation.
As for now, central banks are pedal to the metal printing to keep the current system alive. This is necessary so that their sovereign treasury has a buyer for critical debt issuance to keep the doors open. The debate between “is it inflation or deflation” is moot since either way, in the end a fiat currency won’t spend. Either because there are far too many units of them or because the issuer (the sovereign treasury and or central bank) is bankrupt. Does it matter? An un-spendable nor acceptable currency is worth zero no matter how it technically happened.
This is No Time to Throw in the Towel
Yesterday I received two emails from readers who are worried that the Fed will cut back on QE and they wondered if the bull market in gold is over. They have read all the reasons we present why this isn’t so, but this is a tough market to ride out. Oh, the Wall of Worry – it gets to people when their portfolio is losing value. I have personally spent a lot of time and energy explaining the basics to these two but obviously I am not getting through. But as prices continue to retreat, they really don’t want to hear why it’s happening, they have lost faith. I finally said, “Well, if that’s how you feel, you should bail out now and find greener pastures elsewhere!” This is what happens when people look at gold and silver as “investments,” and discount the “insurance” value gold has, as a hedge against a litany of Black Swans that are ready to come forth, unexpected of course, that will re-ignite the bull market. Gold is money. Gold is insurance. Gold is for portfolio diversification. It is a necessary asset class regardless of price. This really is a time to “think in ounces, not in dollars.” The lower the price, the more ounces you can accumulate. Payday is not that far off!
Like it or not, the price of gold and silver are still being controlled by the bullion banks and the hedge funds, who act like a group of destructive locust, leaving a barren waste land behind, as they move from asset class to asset class with every new Fed pronouncement or headline.
You will never convince me that the bull market is over. It’s re-grouping to make a run on new all-time highs. This should play itself out by the fall and meanwhile, for those of you with the inclination, you are getting a chance to buy gold and silver at really attractive prices.
It was disappointing to see that Bo Polny’s “the bottom is in” charts presented in JSMineset were wrong. Technical Analysis works as long as JPMorgan and friends allow it to. There are no working crystal balls in these markets. As long as naked-shorting, huge leverage and friends in high places (CFTC, Comex, JPM, LBMA) are part of the landscape, short-term moves will defy logic. You either understand that the physical off take will ultimately dictate prices – or you don’t. Regardless of what you think, the physicals WILL dictate the price, especially with the central banks on the buy side, as they are now. Hardly a day goes by without another article on the insatiable appetite for gold in India and China.
And now, a look back at an essay by Andy Hoffman – that makes the point, whatever the government does, it will be the worst for America and the best for precious metals. It is still relevant. This is in regard to the new proposed Sales Tax on Internet and telemarketing sales that has passed the Senate and is up before the House for approval. John Boehner says, “No new taxes,” and let’s hope he can muster the votes to shoot this stupid and harmful legislation down, but if not…
Andy Hoffman with the Republic Broadcasting Network
Andy Hoffman joins the Republic Broadcasting Network once again to discuss the metals market and the current state of the economy. Click on the link below to download the full audio.
Republic Broadcasting Network – May 14 2013: Andy Hoffman
Killer Tax!
Read the Tuesday Afternoon Wrap-Up for 5/14/2013 and the Wednesday Morning Commentary for 5/15/2013
In the Bizarro World we live in, the day is ruled – for now – by MONEY PRINTING, MARKET MANIPULATION, and PROPAGANDA. Thus, the gross capital misallocations caused by four decades of central planning are exponentially worsening; care of “record stock prices,” largely ignored by the media and public…
Does a strong market mean a recovering economy?
In other words, the BLARING SIRENS of warning have been discounted by the majority; such as – for example – the PIIGS crisis; MF Global; Cyprus; “Abenomics”; “QE to Infinity”; the fiscal cliff and debt ceiling; and, of course, a dramatically worsening, GLOBAL economic meltdown.
Are we in a Global Recession? More than Half say Yes
Thus, it didn’t surprise me in the slightest when the following news emerged last week, without even a whimper from the media or markets; i.e., a potentially “KILLER TAX” to be imposed amidst an already horrific economic environment. It’s only a matter of time before it becomes law; and from what I hear, it will NOT just incorporate “online sales”; but potentially, ALL retail sales currently exempt from taxation…
Senate Passes Online Sales Tax Bill
U.S. online sales were estimated at $262 billion in 2012; anticipated to rise to $370 billion by 2017, according to internet consultant Forrester Research. Adding an 8% sales tax would reduce consumer purchases by $20-$30 billion over this period; sending said money directly into government coffers – where it will promptly be wasted away. It will further cripple an already dying economy, and deliver a potentially MORTAL BLOW to the burgeoning online retail business; in turn, making the economy less efficient and raising overall infrastructure costs – which, of course, will be passed on to consumers…
According to Forrester, U.S. Online Retail Sales to Rise 10 Percent Annually
Some Congressman say this bill promotes “fairness” in business; when in fact, it simply raises the costs of doing it; and in turn, patronizing it. This “KILLER TAX!” will simply be another nail in the coffin that is collapsing U.S. economy; as usual, hammered in by the government!
Headed Toward a Brick Wall
The global economy(s) has decidedly slowed down everywhere you look and at best is treading water. The GDP calculations of course are bolstered by trillions of dollars of new debt so without the “debt growth” we would be in full-fledged depression. Yet, stock markets nearly everywhere are ebullient and making either all time or multi year highs. A disconnect for sure, but is explained because of central bank easy money. Some have even looked at this phenomenon (myself included) and concluded that rising stock markets are a result of easy monetary policy… which hasn’t/won’t kick start the real economies. This is a classic sign that hyperinflation is in the cards. This conclusion is based not on opinion, but on history.
The current situation sees stock markets making new highs, interest rates historically and unjustifiably low, central bank and treasury balance sheets bloated and exponentially expanding… and yes of course “pressure” on paper precious metal prices. If you break this “combo” of pricing down into its parts, something (many/all things) doesn’t make sense. First, if “easy money” has not worked in the 5 years since 2008, why will it work now? If easy money (designed to create inflation and thus avoid deflation) is “good” for stocks because of the inflationary implications… then how do zero percent interest rates make sense if inflation will rise? Who in their right mind would tie up capital at very low fixed rates if they know that inflation will rise? And of course, how does easy money mean anything “bad” to real monies, gold and silver?
What we have here is a bubble. In fact we have a series of bubbles. The world is sitting on more bubbles, bigger bubbles than ever before. If you added together ALL of the bubbles (South Sea, Tulip, 1929, Japan 1980′s, Oil a couple of times, etc. …ALL of them prior) in the history of mankind, they would be a percentage, a VERY small percentage of the bubble(s) we have blown and are living with today. The central banks of course don’t see them (liars, liars pantalones on fire) because they ARE the bubble (or a big part if you don’t include the $1.4 quadrillion derivatives market)!
My point is this; every market is going in the wrong direction in preparation for what is coming. Yes I know, this is always how it works when bubble are being blown. Money is pouring into bonds in particular, stocks are being propped up and margin balances swollen, people are also being prodded into “selling” their gold (paper obligations). As I see it, we are headed directly into a brick wall where everything just stops. “Just stops” as in all markets are closed and you have what you have which will either be marked up… or down on the day that the music starts again.
You can argue many things, what you cannot argue is that the world, including and especially sovereign treasuries, are heavily indebted (more so now than ever in history) while at the same time their central banks increase the size of their balance sheets (print) unlike ever before. In what world does it make any sense at all to own the debt of a bankrupt debtor? In what world does it make sense to hold the currency issued from a central bank that openly admits to monetizing? In what world does it make any sense at all to participate in a Ponzi scheme AFTER the promoters have already spelled out exactly what it is? It doesn’t, but no one (very few) will see this until after the fact. After the markets are closed, after the “bail ins” occur, after currencies don’t and won’t spend.
Yes I know, some (probably many) will say that I’m nuts and none of this will ever happen. I would say that it has ALWAYS happened, ALWAYS. History is rife with examples. Examples of bank runs, examples of hyperinflations, examples of asset bubble and examples of governments that could not “pay their bill” because they borrowed too much. These examples were scattered throughout time and geographical location. Now it is everywhere and all at the same time… so why will “now” be any different from all of the previous historical examples? It won’t be, it will only be worse, affect many more and be concentrated into one hideous financial and societal event all at one time.
So, the crowd is pouring into bonds, stocks, real estate and counting their values in “chits” of colored paper. They are doing this with the “push” from sovereign administrations, central banks, financial institutions and the media. People are also looking toward an exit door with a sign over it that says “scary, SCARY… do not go here” placed there by the above collection. The “brick wall” is out there. You can say that it isn’t but history, math, logic and just plain 3rd grade common sense says that it is. Think this one through, it’s not hard but life after “the wall” will be!
Can Gold Rise During Deflation?
The view that we are in deflation because the money the Fed pours into the banks isn’t making its way out the door in the form of business loans seems logical. Robert Martin-Williams believes that to be the case and I urge you to read his excellent article titled Staring Into the Abyss. But, that viewpoint assumes that inflation has to be caused by increased demand. It’s referred to as demand-driven inflation. Therefore, low demand, no inflation.
There is another viewpoint to consider – it’s called the currency-induced-cost-push inflation. That is what Jim Sinclair says will power gold up in the next two to three years. The fate of the dollar is the issue here. Sinclair says the dollar will lose its petro-dollar, reserve currency status and plunge below .72 (on the USDX). This will push up the price of our imports. “Demand” and strength of our economy will not be what pulls up prices; it will be the loss of the dollar’s purchasing power. The yuan will move front and center and will partly back their currency with gold. A new reserve currency will be implemented, and it will prominently feature the (gold backed) yuan and physical gold will be part of the new currency too.
Remember, we don’t need a strong economy to have inflation. John Williams would be the first to point out that our economy is weak and getting worse and yet he is still resolute that hyperinflation is only a year and a half down the road. This is an interesting debate – you get to choose which way you think it will go. You can embrace Jim Sinclair’s “currency-induced-cost-push-inflation,” or you can go with Martin-Williams’ “demand-pull-inflation,” which in this case will turn out to be deflation. But Martin-Williams is still pro gold in spite of the deflation, and concludes, “Rising inflation would force capital out of equities, junk bonds and government bonds (all of which are at all-time highs) and ultimately into precious metals and commodities.”
In April, a friend of mine in Miami asked me if I thought the yen would fall to 100.00. It was in the low 90s at the time. I said absolutely. As of today, the yen has fallen another 3% against the dollar to 102.195. If you think the dollar is rising, think again. The yen is (deliberately) falling and that makes the dollar LOOK like its rising. The fashionable trade is short-yen, long dollar! The Euro and the Swiss franc are holding up reasonably well – it’s all about the yen. Could it be that the Fed convinced Japan to devalue the yen to keep the dollar rising – which supports our bond market and helps to hold back gold and silver? This is not a stretch of the imagination. Imagine what will happen when this short-yen, long dollar trade reverses and the hedge funds have to sell dollars to buy yen to close out their positions. It will happen, you know.
Debt Ceiling ‘Suspension’ Expires May 19th
Read the Monday Afternoon Wrap-Up for 5/13/2013 and the Tuesday Morning Commentary for 5/14/2013
The old saying is that “things don’t matter – until they do”; which is EXACTLY what we’re dealing with in regards to the soaring, parabolic debt growth the ENTIRE WORLD has endured since Nixon closed the “gold window” in August 1971. Think I’m exaggerating? Then feast your eyes on this!
For those that think such a TOWERING EDIFICE is sustainable, think of how much interest is required to service it. Each 1% increase in Treasury yields adds $170 billion of annual interest expense at the current debt level of $16.84 trillion; excluding roughly $5 trillion of “off-balance sheet” debt owed by government-owned parasites Fannie Mae and Freddie Mac. Thus, for anyone that actually believes the PROPAGANDA of a potential “end to QE”; all I can say is, ROFLMAO…
If you recall August 2011’s Global Meltdown II; when S&P stripped the U.S. of its AAA rating – as its debt surged through the then $14.294 trillion debt ceiling…
S&P downgrades U.S. credit rating for first time – 8/5/11
…Congress’ makeshift solution was the ill-fated Budget Control Act of 2011; in which, the debt ceiling was raised to $16.394 trillion in exchange for just $185 billion of “sequestration” cuts in January 2013. Those cuts have since been whittled below $80 billion – back-end weighted, of course – and the “debt ceiling” was BLOWN AWAY just 16 months later…
It’s official: U.S. hits $16.394 trillion debt ceiling – 1/2/13
…causing the government to form a rare bipartisan coalition to “suspend” the debt ceiling until May 19th; ironically titled “No Budget, No Pay”…
Obama signs debt ceiling suspension, ‘No Budget, No Pay’ into law
…as we still don’t have a signed budget – after four years (but don’t worry, Congress is discussing it over golf)…
Chambliss’ Hole-in-One Puts Obama in Play on Budget Talks
So here we are on May 14th – with U.S. debt up to $16.84 trillion, and rising rapidly…
…to the point it’s becoming a farce…
Debt Ceiling visualized – Demonocracy
…and – of course – the government will try to further delay the ceiling with shady “extraordinary measures”…
It’s Debt-Ceiling Madness Again. Why You Should Stay Calm (Sort Of)
…perhaps until Labor Day (but WAIT, how can you “delay” a debt ceiling from being hit when you’re already $500 BILLION above it?!?!)…
U.S. won’t hit debt ceiling until at least Labor Day, says Treasury secretary
However, they ultimately will be forced to make a decision; to either implement the 16th “debt ceiling” increase since 1996…
…or eliminate it altogether…
Amazingly, the ENTIRE WORLD is ignoring this gargantuan issue; just like EVERY OTHER issue, care of the massive stock and bond market gains generated by the most shocking MONEY PRINTING and MARKET MANIPULATION scheme of all time. I.e., no one currently cares that other rating agencies are likely to downgrade the U.S. as well…
Moody’s May Cut U.S. Rating in Absence of Budget Deal – 9/11/12
Fitch warns U.S. risks losing AAA debt rating – 2/27/13
…and that according to S&P’s own language in its August 2011 downgrade, it is essentially guaranteed to do so…
“We could lower the long-term rating to ‘AA’ within the next two years if we see less
reduction in spending than agreed to; higher interest rates; or new fiscal pressures resulting in a higher general government debt trajectory than we currently assume in our base case.”
…that is, unless it kowtows to government strong-arming…
S&P Lawsuit: U.S. Accuses Ratings Agency of Fraud in lead up to Financial Crisis
I ASSURE you that every effort imaginable – legal and illegal – will be utilized to “kick the can” further down the road. However, it is a mathematical certainty that U.S. debt will rise parabolically – and eventually, hyper-parabolically, Thus, no matter how much money is PRINTED to keep rates low – yielding accelerating INFLATION, of course; the debt ceiling issue WILL eventually matter; likely, much sooner than you can imagine…
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PLATINUM PRICE
