October 19 2018
The Miles Franklin Newsletter
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From The Desk Of David Schectman
David's Commentary:

Many of our readers send me Emails. Most of them share a few common themes. 

They are frustrated with the lackluster performance of gold and silver, while the stock market piles up gain after gain

That’s not the reality. On January 18 th , the Dow peaked at 26,149 . Yesterday the Dow closed at 25,379 . It moves up and down, but for all intent and purpose it has gone nowhere this year. The fact is, you are not missing out. Yes, in the last six years, the stock market gains have been wonderful, but the big gains are now in the rear-view mirror. Plus, a growing body of evidence suggests that the Dow is currently very over-priced and in dangerous territory and is facing a steep correction. It is also true that gold and silver have been in a multi-year lock-down mode as well. The upside is that it has presented us with the opportunity to buy gold and silver at prices that are lower than they should be. I have personally taken advantage of the manipulation and twice in the last 30 days I added gold and silver to my portfolio. So, have many of our clients. So far this year, our business is strong, better in fact than it was in 2017. 

When will the manipulation will come to an end?    

No one can answer this for you, but what is certain is that it will end, and most likely when the stock market is falling like a rock. Any of the following events could provide the spark that will ignite the precious metals -- Trump’s tariffs should result in a trade war (especially with China) and result in rising prices. That could topple the stock market. The Fed’s policy of raising interest rates is also enough to short-circuit the economy and the stock market. The Trump tax cuts have given a boost to the economy, but that is a one-year phenomenon. Once the dollar starts to fall in earnest, it would be foolhardy to try and continue to suppress gold and silver. Watch the moving averages for gold and silver. They influence the buying and selling by the hedge funds. When they are buying the price rises; when they are selling the price falls. For gold, the next important number is the 200-day MA, which stands at $ 1,279.77 . For silver the first number is the 50-day MA at $14.56 and the 200-day MA at $15.99.
David's Commentary:

Can JPMorgan keep a lid on the prices forever?  

Well, if profit has anything to do with it, then it benefits JPMorgan to let the price of gold and silver soar, since they have eliminated their massive short positions in paper on the Comex and they have accumulated a massive position in physical silver and gold. 

According to Ted Butler’s research, over the past seven and a half years JPMorgan has accumulated at least 775 million oz of silver and 20 million oz of physical gold. That’s over $30 billion worth of physical gold and silver. I see no way that prices can’t at least double from their current level and a triple for silver seems conservative. They are sitting on a future profit of up to, or more than $100 billion. So why would they sit on the price forever?  

They already accomplished what they started out to do; force the price lower by shorting and then accumulate as much gold and silver as possible - without pushing the price up. Goal accomplished! The only reason they would continue the suppression is if they are taking orders from the Fed or White House to keep a lid on gold and silver. That is certainly a possibility. Still, they were unable to hold down the prices during the 11-year bull market that took silver to $50 and gold to $1900. Richard Russell often wrote that the markets are bigger than any government or central bank. Once the bull takes center stage, it will trample anyone who gets in its way. 

The following article by Egon von Greyerz is a must read. It is my “article of the week.” In it he warns,

Risk is at a maximum and we are very near the start of one of the biggest secular bear markets in history. Now is the time to be safe rather than sorry.”

And isn’t that why most of us buy gold and silver? Being early is o.k. Being late is not. Don’t follow the majority of stock market investors to the bottom. Stepping aside, and taking a profit is good advice in any market that has advanced too far. Don’t assume that this will be just a “normal 20% correction” before the stock reverses and heads back up. Those of us who held onto our gold and silver all the way down from the peak in 2011 learned the hard way – just as the stock market crowd will learn their lesson too. As Greyerz says,

The time of easy gains in markets is now over. With the Fed and other central banks tightening and with the 35-year interest cycle having turned up, the party is over.” 

“Any savings in silver or gold will within the next few years be extremely valuable. Just look at the Venezuelans. The very few who bought precious metals a few years ago now have a fortune in Bolivars, after 1 million percent inflation just in 2018.

The only remedy central banks have when a country runs out of money is to print unlimited amounts of it. The current tightening by the Fed and other central banks will last for a limited period. At some point, when market has crashed, and the economy is collapsing, they will again resort to printing vast amounts of money. As always, they will be behind the curve and thus much too late. So, the money printing will have no beneficial effect on the economy but will make currencies worthless and most people destitute.”

There is still time to act but remember we are now on the cusp of a flood of destruction, which will make the world as we know it unrecognizable.
Egon von Greyerz

THE PARTY IS OVER

What a difference a year makes”! Well we didn’t get the sun and the flowers like in Dinah Washington’s song but more like storm and showers. For the ones who don’t remember Dinah, Amy Winehouse made a more recent version of the song. Last week I warned investors again, in the strongest tone possible, of the risks in markets. So, what triggered it? Was it the Fed’s interest rise? Or was it the trade war with China? Or maybe it was Kavanaugh? READ MORE HERE
Jim Sinclair

Jim/Bill,
The problem is that asset values will fall when you get an implosion of your asset values, though your debt values don¹t fall, they stay nominally the same! This might seem logical, until you take a couple of minutes to think it through.

So, on the way up the values of assets and debt (in terms of size) go up in tandem, whilst on the way down — NOT! Hence why you get huge deflation and wealth destruction! And don¹t forget that because of these yearlong ultra-low interest rates, companies that wouldn¹t be financeable with normal interest rates of say 4%-6% got loans, and thus will be destroyed with much higher interest rates (because of their weak financials). READ MORE HERE
Zero Hedge

Relative Scarcity Of Physical Gold Prompts Large Drawdowns From Funds, ETFs
 
 
"It appears that there is a  dwindling and overleveraged supply  heading towards an  unmanageable and relentless source of demand ."
 
It is interesting to watch the ongoing management of physical gold holdings in the West.
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About Miles Franklin

Miles Franklin was founded in January, 1990 by David MILES Schectman. David's son, Andy Schectman, our CEO, joined Miles Franklin in 1991. Miles Franklin's primary focus from 1990 through 1998 was the Swiss Annuity and we were one of the two top firms in the industry. In November, 2000, we decided to de-emphasize our focus on off-shore investing and moved primarily into gold and silver, which we felt were about to enter into a long-term bull market cycle. Our timing and our new direction proved to be the right thing to do.

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