The Miles Franklin Newsletter
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From The Desk Of David Schectman
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David's Commentary (In Blue):
One needs to remember that day-to-day price predictions are just “noise.” The elephant in the room is JPMorgan. They are holding 850 million oz of physical silver and 25 million oz of physical gold at a current combined open profit of more than $7.5 billion, and they have raked in at least $5 billion in cumulative trading profits in COMEX gold and silver since acquiring Bear Stearns in 2008.
Everyone has an opinion on where the prices of gold and silver are headed. They are all just opinions. In the end, all that counts is how JPMorgan wants it to play out. Price is not determined by supply and demand, it is determined by paper contracts on COMEX. JPMorgan can issue shorts till the cats comes home because they have such a huge cache of physical gold and silver to back their paper short positions up with.
According to Ted Butler,
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While there is no doubt in my mind that COMEX positioning is what sets price and that was shown to be the case again this week, the macroeconomic backdrop still points to much higher silver prices, whether the selloff is over, nearly over or will be over in a time period longer than that.
1. There was record two day trading volume in COMEX gold and silver (and in SLV) on the sharp sell-off Thursday and Friday.
2. On every big price drop in history, the managed money traders have
always
sold big and the commercials have
always
bought big.
3. If that occurred this time, as appears likely, because the managed money traders sold way above their average purchase price -- and well above the key moving averages, any sales were closed out with big realized profits. Likewise, any commercial buy backs involved the booking of large realized losses. Both occurrences would be unprecedented.
4. If the managed money traders did sell as expected, the most dominant commercial buyer was likely JPMorgan, which was the only commercial short seller into the very top of the price move. It's possible JPM bought back its entire COMEX gold and silver short position -- an event that Ted feels is beyond bullish and would cap off JPM's double cross of the other commercial shorts.
5. JPMorgan appears to have done the same in SLV -- shorting as many as 15 to 20 million shares into the price top -- and then buying back all those short sales on the two day price drop...eliminating the need to deposit metal that was "owed" to the trust.
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Did you notice that the silver to gold ratio rose last week? I suspect this is just a short-term blip in an otherwise falling ratio. Ted Butler mentioned it last week too.
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A massive selloff on Thursday and Friday ($45 in gold and $1.50 in silver) from what were fresh six-year highs in gold and three-years highs in silver, caused gold to close $15 (1%) lower for the week and silver to close 30 cents (1.6%) lower. The slight relative weakness in silver caused the silver/gold price ratio to widen out a bit for the week to 83.3 to 1, but at the price highs earlier in the week the ratio had dropped below 80 to 1 for the first time in more than a year.
My only reason for pointing that out is as a reminder that where the silver/gold ratio goes is almost exclusively a function of what silver does. Because there’s no question in my mind that silver will vastly outperform gold in the long term, that’s the same as saying the ratio must come down sharply from current levels. But what about the short term? Ask someone else (although no one really knows).
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This week is going to be very interesting. Here are the COT numbers…
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The short position in SLV
blew out in the current report from 11.23 million shares/troy ounces, to 21.19 million shares/troy ounces, for the two week reporting period ending on August 30. That's an eye-watering 88.69 percent increase...so it's obvious that they've been shorting the shares, because the physical silver is just not available to deposit. That engineered price decline by JPMorgan last week allowed them to cover most, if not all of that short position during those two days.
The
short position in GLD
fell from 1,872,000 troy ounces, down to 1,266,000 troy ounces during that same two week reporting period. That's a decline of 32.35 percent -- and erasing just about all the increase from the report two weeks prior to this one.”
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Mario Draghi will diddle with interest rates once again on Thursday -- and it's expected that he will lower them again...further into negative territory. That will certain draw a Tweet-storm from Trump.
This week the FOMC meets, and so do Japan and Switzerland's central banks. Watch and see what they do to their respective interest rates. Germany is already signaling that it will provide fiscal stimulus.
David Stockman wrote,
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Bolton gone. Powell next. Folks, when it comes to blithering monetary lunacy it doesn’t come any riper than the Donald’s latest tweet on the subject.
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The world is rapidly moving toward an Inflate-or-die trap. Does the phrase sound familiar? It should. Richard Russell coined it several decades ago. This makes the case for owning gold and silver stronger.
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What goes around and comes around.
Specifically, on Monday, we were looking at how the "Inflate-or-Die" trap has moved from Germany to Zimbabwe to Venezuela... with many stops along the way... and where it will show up next.
"Almost everywhere" is our guess. All the world's major economies are now trying to inflate their economies with fake money.
"Everybody's doing it," says the U.S. president. And since everyone is doing it - lower rates, quantitative easing, deficits, etc. - everyone HAS to do it to keep up.
Mr. Trump wants the U.S. to do more of it (more on that tomorrow). Which puts the whole world in an Inflate-or-Die trap.
Nobody wants his currency to go up - unless he's on a vacation abroad, or shopping for investment bargains.
Nobody wants his economy to go down, either - which is why you can count on more stimulus. Barron's: "It's Time for Massive Government Spending to Avert a Coming Economic Crisis".
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As Trump continues to push the Fed toward zero or negative interest rates, is their evidence that our so-called “strong economy” is really not so strong after all?
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Remember, corporations can do all the buybacks, mergers, and acquisitions they want. But unless they're shipping the goods, the "boom" is phony.
That's why we watch the Dow Jones Transportation Index. It hit a high in October 2018. Since then, despite all the stimulus, Fed talk, and speculative hype, it still has not moved higher.
That leaves our hypothesis - that the stock market topped out a year ago - still standing. And if it is correct, it means the Dow is a dead man walking... waiting to fall over.
And now, when we look at jobs in the shipping sector - trains, planes, and trucks - we see that hours spent on the job are falling fast.
Six months ago, the number of hours worked in transportation and warehousing was rising at a 5% annual rate. Now, it is rising at less than 1%.
And the Cass Freight Index - which measures monthly freight activity in North America - has been signaling a transportation recession for eight straight months. The index is now nearly 6% below where it was a year ago.
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If Trump wins out and the Fed continues to lower interest rates, what does than mean for gold? It’s the way to go, according to Mark Mobius.
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Veteran investor Mark Mobius is bullish on gold as central banks around the world cut interest rates.
"Physical gold is the way to go, in my view, because of the incredible increase in money supply," said Mobius, the founding partner of Mobius Capital Partners.
"All the central banks are trying to get interest rates down, they are pumping money into the system. Then, you have all of the cryptocurrencies coming in, so nobody really knows how much currency is out there," he told CNBC's "Street Signs" on Friday.
Amid expectations of slowing global growth, central banks around the world have been lowering interest rates, as they seek to boost money supply in the economy, stoke demand and provide an impetus to growth.
Mobius recommends that investors hold 10% of their portfolios in physical gold, with the rest invested in dividend yielding equities. That's especially if the dollar gets weaker.
In his view, "the U.S. government, the Trump White House, does not want a strong dollar."
"People are going to finally realize that you got to have gold, because all the currencies will be losing value," he added.
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Will the Fed bow to Trump and lower interest rates? Greg Hunter interviews John Williams and they discuss the Fed and the direction of interest rates and how that will affect Trump in the next election..
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Economist John Williams says the Fed is still not in President Trump’s corner when it comes to the economy. Williams contends, “The Fed was working against him (President Trump) on the economy, and they still are. Their primary concern is the banking system, and that certainly has to be supported, but when you have a weak economy, and this was fueled by the tightening of the Fed, I don’t think Trump is going to get blamed for that. It’s going to go against the Fed, and I don’t think it is going to hurt him that much in the upcoming election.
Williams says the real numbers say the economy is getting worse and not better. Williams thinks, “The Fed is going to feel pressure to cut interest rates .5%” and not .25% that Fed Head Jay Powell has been indicating. Williams also thinks the Fed is going to feel pressure to start a “new round of QE.” Why? Williams says, “First of all, the economy is that weak. I am seeing it in the numbers, and I am sure they (Fed) are too. . . . The headline numbers that you hear are bloated, and they know it. . . . Construction spending is a lot weaker than reported. . . . So, we know the GDP is overstated. . . . They just reduced payroll employment . . . They overestimated payroll growth by 501,000. This eliminates 20% of the employment growth you have seen in the last year. . . . This also will be reflected in the GDP, and it will continue to get weaker. The Fed should be recognizing they have some bad numbers here. I think you are going to see retail sales numbers weaken. They will be out later this week, and also industrial manufacturing numbers will be weaker. They will be out next week. This is all before the FOMC (Federal Open Market Committee) meeting. The economy is weak enough that they’ve got to do something that will stimulate the economy by cutting more than a quarter point. There is a fair shot they go a half point (cut) and if not, they will be easing again soon. As things turn more negative, they are going to have to turn back to quantitative easing (money printing).”
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Back in the 1980s my friend Ken Coleman, who wrote The Fed Tracker, used to say, “Don’t fight the Fed.” These days you could add – And all the other central banks too.”
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How should one position for such an endgame? As is probably evident, any nominal instrument will be devalued in real terms, so the solution is to hold an asset that maintains its real value – an asset that cannot be printed.
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Here is an interesting take on what has changed since I graduated from high school in 1959. Very well done!
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Suppose you are an American. And suppose you spent the last 60 years laying in quiet repose in a freezer chest after expertly injecting yourself with enough glycerin to keep ice crystals from disrupting your cellular membranes. Lord only knows why the heck you did that, but that's all past tense now. Anyhow, now it's 2019 and for some other unfathomable reason your great-grandchildren dig you out of the freezer chest, defrost you, zap you a few times with a cattle prod to get your heart pumping, walk you around for a bit while feeding you strong black coffee and here you are again, good as new and ready for action.
Next thing you know your great-grand kids (or so they say) start telling you about life in America in 2019. They tell you that rent now eats up half of their incomes and that they can't even dream of ever buying a house, never mind hoping to ever own it free and clear. They tell you that their college tuitions will take them a lifetime to repay and will probably eventually come out of their retirement savings (if they ever have any, which they presently don't). They tell you that instead of leaving an inheritance their parents passed away leaving them useless, run-down property encumbered with huge medical debts for their end-of-life palliative medical care. When you wonder where all the children have gone, they patiently explain to you that it is now too expensive to have children, even with both mommy and daddy working full-time, unless mommy is a single mother, in which case the government pays her based on how many children she has with random men who aren't allowed to live with her (and spend most of their time in jail in any case).
All of this unwelcome new information leaves you somewhat bewildered, but having been a man of the world with a wide mental outlook and a head for numbers you decide to zoom out a bit and take in the big picture, to see if you can figure out what the hell happened to your country. And you discover that the US government has gone well over $20 trillion into debt and is on course to continue taking on around $1 trillion in new debt every year just to stay solvent. You discover that something like half of that debt is owned by foreign countries that are actively arguing among themselves about the best way to unload it and stock up on gold instead. You are shocked to discover that federal, state and local governments have taken on some truly ridiculous amount of liabilities, to the tune of hundreds of trillions depending on how you estimate them, with no conceivable way of covering them.
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Jim Dines talks about “
The Liquidity Time Bomb.”
He points out that nearly 10% of the value of stocks are held in ETFs. When the stock market crashes from its current un-sustainable highs, the public will exit in mass. Dines asks, “Who would buy large blocks of stock from ETFs when they sell?” He points out that in 2008 the answer was “Nobody.”
Dines points out that the “Inflate or Die” policy was put into place in the 1930s by the Fed. It was decided to deliberately print enough new money to cause inflation, but it was to be limited to 2% a year. This was an “invisible tax” to wipe out debt. He says…..
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This “invisible tax” of legalized inflation enabled debts to get this high. Trouble is, politicians can’t resist spending more than 2%. All of them – both sides. And as a result the menace of inflation remains. The world has been in an inflation since 1934, and it has evolved into a natural deflation in recent years.”
All inflations end in deflations
, by themselves. That’s the iron law. In our opinion, that deflation briefly surfaced in the 2008 crash. No modern Keynesian economist would agree with us on that, yet we stand our ground. Deflations typically feature low interest rates due to capitalists fearful of putting their money at risk in anticipation of an economy’s decline. These days simplistic government economists keep blindly injecting more printed money into the system, hoping to get higher prices during a deflation, but are baffled that prices do not rise. They are gleeful at the prospect of printing whatever they want without apparent consequences, but they know not what they do.
In the special case of forcing even more printing during an inflation,
there risks a dreaded hyperinflation,
as happened in Germany in 1914-1923. Either way, deflations have always ended sadly, Ironically.
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SRSrocco’s just released an interesting article
Silver Price Manipulation: Setting The Record Straight.
They write
,
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Precious metals investors need to become a bit more sophisticated in understanding the dynamics of the overall market and stop just focusing one aspect of Silver Manipulation and the supposed coming BIG SHORT SQUEEZE. Yes, we could see a short squeeze in silver, but the coming huge revaluation of silver and gold will occur when global Stocks, Bonds, and Real Estate really begin to crumble due to the central banks losing control of the massive debt and leverage.
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SRSrocco
Silver Price Manipulation: Setting The Record Straight
With the silver price now experiencing a correction after running up more than $5 in the past three months, we now see more articles suggesting price manipulation as the bullion banks hammer the metals. There continues to be this notion put forth by many precious metals analysts that the bullion banks, especially JP Morgan, are controlling the gold and silver prices.
While I have no doubt there is an intervention in the precious metals markets, we must remember that the Fed and central banks are manipulating the ENTIRE MARKET with money printing, bond purchases, debt issuance, and zero (or negative) interest rates. However, the current price of gold and silver, even with the supposed market rigging, are still priced higher than their overall average production cost.
Unfortunately, the fact that the prices of most goods and services are based on their cost of production tends to be overlooked by the majority of the analyst community… whether they are from the mainstream or alternative media.
I can assure you that if you consider the price of a standard pair of jeans (not a high-end name), it would be based on the entire cost structure from beginning to end, when it finally shows up on the retail shelf.
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Private Safe Deposit Boxes
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Unencumbered / Segregated Storage
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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.
We are rated A+ by the BBB with zero complaints on our record. We are recommended by many prominent newsletter writers including Doug Casey, Jim Sinclair, David Morgan, Future Money Trends and the SGT Report.
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