May 3, 2019
The Miles Franklin Newsletter
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From The Desk Of David Schectman

David's Commentary (In Blue):

I started working in the precious metals industry in the fall of 1983, and it is shocking just how much the industry has changed in 2018. 
How so?
The largest firms, IRI and Blanchard for example, primarily sold numismatic coins and not much bullion. The coins were sold as investments with profit as the major selling point. Bullion as a hedge against inflation, or as a form of financial crisis insurance was secondary.
The personal computer was just entering the marketplace. Apple’s “mouse” made it easy to use for idiots like me. I bought my first computer in late 1989, when I formed Miles Franklin. I used it primarily for word processing, to store my data base and for order entry. 
There was no Internet.  Anyone born in this century has never known a day without a cell phone and the Internet. I started Miles Franklin when neither even existed. 
No one published a daily newsletter. Newsletters and reports were distributed by US mail. The mailing cost to send out a report five days a week was prohibitive. 
I looked forward to receiving my favorite quarterly and monthly newsletters. That was often enough. In those pre-Internet days, I had to pay for all of the newsletters and reports; it was not free.
I read every word of every article that I received from the preeminent writers of the time - Richard Russell, Jim Dines, the Aden Sisters, Vern Meyers, Gary North, Doug Casey, Future Economic Trends, Howard Ruff, Mark Skousen, Jerome Smith, Martin Weiss and Don McAlvany. No one told me I had to read these newsletters, but I was determined to know more about my industry than anyone I worked with or spoke to. 
Trust me, 35 years ago it was most uncommon for a precious metals broker to dig as deeply as I did into the “why” (own gold or silver). Everyone else sold the “what.” They sold “product.” I sold “need.” From the day I went to work selling precious metals I decided THE most important thing for me to understand was why people needed these shiny bars and coins. Profit alone was not a good enough answer for me. And so – I took a different path and started a company that was based on educating its clients, not just selling its clients. This was not the way business was done when I started Miles Franklin. The big firms were just telemarketing firms, and boiler room operations. What is fairly common today did not exist when I set the template for how to do business in Precious Metals.
If you were serious about learning what was really happening with the economy and precious metals, you would attend the hard asset conferences sponsored by Howard Ruff or Blanchard and others. You could rub shoulders with and hear all of the “experts” in a weekend. 
By the mid-eighties I was a featured speaker at these events. It was exhilarating because the audience thirsted for the kind of information that we were presenting. It was not to be found in the main stream media. Remember, in those days there was no Internet, no cable or satellite TV, no financial TV channels, nowhere to go for information on precious metals.
It may seem strange today, but we all got along fine without an iPhone or Emails or Texts or Facebook or Twitter or financial news networks. As a point of interest, I was speaking at a financial conference in Hong Kong in 1987 when I saw my first fax machine. It was so revolutionary that I wondered who would use such a device? We got all we needed, by mail, once a month. 
By the way, my wife Susan, who spent decades in sales and marketing, said the Fax machine was the death of being able to reach a buyer on the phone to set up an appointment. They stopped answering their phones and you could only reach them by fax or by leaving a voice mail. Try getting an appointment to present a new product to a buyer at Target or JB Hudsons under these conditions. But, if you were good enough, you survived the new technologies.
The problem as I see it with today’s up-to-the-minute barrage of information is that people are conditioned to think “short-term.” The focus now is on the “trees” and people are forgetting about the ‘forest.” When it comes to precious metals, the short-term, for-profit approach does not work very well. Too bad the younger folks don’t understand this.
The average person has been programmed to think as an “investor.” It never used to be that way unless you were very wealthy, and those folks were few and far between. As I was growing up if you had any extra money your choices were pretty much between buying a savings bond or maybe even a mutual fund. They were long-term hold investments. 
My generation (the Baby Boomers) was still close enough to the memories of the Great Depression that we were more concerned with return of investment rather than return on investment. My wife’s grandparents lost their home in St. Paul, MN to the bank owing just a few hundred dollars on it. They never recovered from that experience.
Now, anyone who is Middle Class or above has “an investor” mentality. Most people jump from stock to stock, from asset class to asset class, without a long-term view or big picture perspective. An interesting example of this is Doug Casey. He used to promote hard assets and was one of the loudest voices in the gold and silver industry. I spoke at several financial seminars where he was also featured including Orlando and Las Vegas and in Hong Kong. What is Casey promoting now? Pot stocks and Cryptocurrencies.  Where ever the action is. Investors are fickle. I understand that. Gotta keep recycling the money. 
Ruff turned his back on gold and silver in the 90s and started touting stocks. A big mistake. 
There are only a couple of names from the list I presented above that are still writing about the metals today. 
Why is that? Because most of the writers in my industry focus on “profit” as a reason to own gold and silver. I have always maintained that they are an insurance policy to protect against the unknown or deflation or inflation. That’s boring. But it is also the only proper way to sell physical precious metals. If you want to “invest” in gold and silver, check out the mining shares. They can be bought and sold for profit whereas the physical core should be kept for an emergency or passed along to your children.
Writers who rely on paid for subscriptions in the gold and silver industry are, to put it mildly, struggling. We have never charged for our newsletter. It is one of the pillars that I build Miles Franklin on: Education - First-Class Service – with Fair Pricing. 
The education goes beyond our newsletter. All our brokers are all very experienced. Bob, Michael and Kathie all started with me in the precious metals’ industry in the early 80s. My son Andy was just 20 years old when he joined me in 1990 when I launched Miles Franklin. You will be hard pressed to ask anyone at Miles Franklin a question about our business and industry that they cannot answer.
Today, if you are not a baby boomer, you probably have no experience with gold and silver. Anyone younger than 50 more than likely does not own any or has an inkling why they need it. That is where education comes in. The day is coming when anyone who doesn’t own some gold and silver will regret it, and wonder how did they miss it?
As for “service” – if you purchase based solely on price on the Internet you will never receive a call from your personal broker. There will be no one to tell you your portfolio is weighted too high in gold or silver and that it is time to switch things around. No one will tell you when certain products, like junk silver or semi-numismatic double eagles are a must buy.  Profits can be had in a core position by REPOSITIONING the ounces. As an example, with the silver to gold ratio currently sitting at an incredible 84.74 to 1, you should be moving some of your gold core into silver. When the balance returns to normal, some say 16 to 1 but I believe 50 to 1 is not a wild number, the value of your core holdings will increase dramatically. Does it really make sense to save a percent or two on a purchase from an order-taking firm and bypass the benefits of having a professional on hand to notify you when there are specials available or unique buying opportunities, and or that your portfolio needs re-balancing? Eric Angeli, my Sprott broker, calls me whenever he comes up with an idea that he thinks will benefit me and makes suggestions on what to buy or sell in my mining share portfolio. I appreciate that he stays on top of my mining shares portfolio. That’s what a professional broker is supposed to do. He earns his commissions. That’s the business model we expect our brokers follow here at Miles Franklin. They are one of the benefits that comes with doing business here as apposed to ordering from an impersonal order desk on the Internet.

Last week I ordered four mint boxes of Silver Eagles. I ordered another four boxes today. Is my crystal ball telling me that this is the bottom? No. But here is what I do know. On an absolute basis, relative to gold silver looks like an all-time bargain. Silver has ended the week lower for 14 consecutive weeks, and that is unheard of. This is the cheapest silver has been in the last two plus years. And the silver to gold ratio is the most favorable in the last 20 years as it is just below 85 to 1. With fundamentals like these, who needs a crystal ball?

 “Setting Up For The Next Major Silver Bull Market” lists a number of reasons why this is a perfect time to load up on silver. 

Setting Up For The Next Major Silver Bull Market

While the precious metals are totally off the radar by the majority of investors, silver is setting up for one major bull market. Yes, it’s hard to believe as the gold and silver prices have been trending lower while the broader markets grind up higher, but if we look at the fundamental and technical indicators, the stock market and precious metals are now at extreme opposites.

The situation in the silver market is so much more favorable today than when it was trading at $20 at the peak in 2007. I will go one step further and say that the current silver indicators are even better than when the silver price fell to $9 towards the end of 2008.
If we look at the Dow Jones-Silver Ratio, it is at a much higher level today than what it was in 2007 or 2008:
When the Dow Jones Index reached a high of 14,000 in July 2007, silver was trading at $12.75 an ounce. Thus, we had a 1,100-1 Dow Jones-Silver Ratio. An investor could purchase 1,100 oz of silver for the Dow Jones that month. However, as the price of silver shot up over $20 in 2008, the Dow Jones-Silver Ratio fell to a low of 600-1. Once the markets started to sell off and as the silver price dropped to $9 in October 2008, the Dow Jones-Silver Ratio went back up to 1,100-1.

Now, if you look at the where the Dow Jones-Silver Ratio is today, it’s at a high of 1,823-1. Thus, the Dow Jones-Silver Ratio is 65% higher than it was when silver was trading at $9 in October 2008.  I don’t believe precious metals investors realize just how extreme this indicator has become.

I also wanted to update the long-term Dow Jones and Silver charts. I have spent more time understanding technical analysis, and I can tell you that it does impact the markets when retail and professional investors trade based on technical indicators. Of course, it doesn’t change the fundamental reason to own precious metals due to the ongoing disintegration of the financial system via massive money printing and debt.

However, technical analysis does provide SOME CLUES on how the market is changing. And when investors rotate out of one sector or industry and into another, then we will see volume and price react in a profound way. Currently, the retail and professional traders (for the most part) are not interested in gold or silver. But, that will change.

In looking at the Dow Jones and Silver chart and their 200 Month Moving Averages, we can see they continue to move in opposite directions:
The Dow Jones Index is now 90% above its 200 Month Moving Average (MMA).   Yes, there is a 200 MMA when we use a “monthly chart.” If I use a daily chart, then we have a 200 Day moving average, and if I use a weekly chart, then we have a 200 Week moving average. Using a monthly chart and a 200 MMA provides us Birds-Eye view of the markets. For the Dow Jones Index to fall back to its 200 MMA, it would need to drop 12,250 points.

On the other hand, the silver price is currently 13% BELOW its 200 MMA :
As I have stated many times, the silver price of $14.18 today is set up much differently than when it was trading at $20 in 2008 before the markets crashed. And if we look at the Commercial hedgers, they are now NET LONG silver for the first time in over 25 years:
The Commercials are now net long silver by 14,613 contracts while the Speculators are net short by 25,000 contacts, another record. What this chart is telling me is that silver is so FAR off the RADAR that Commercials are now becoming bullish while the Speculators are becoming bearish. This is quite a change as the Speculators were net long silver by 50,000 contracts just three months ago.

And if we look at Silver Sentiment, it is also at a record low:
When the silver price fell from $34 down to $19 during at the end of 2012 and to the summer of 2013, silver sentiment reached a record low of “17”, below the 30 level which indicates “extreme pessimism.” Today, the silver sentiment is back down to the 17 level once again, but the difference is that the silver price is $5 lower than it was in 2013.

In looking at these charts, the indicators suggest that silver is both excessively oversold and disliked. When a stock or commodity is in favor, then it moves up towards the “excessive optimism” level. So, not only is the silver price well below its 200 MMA, it’s also at a record low sentiment reading.

However, this doesn’t mean that the silver price can’t trend lower.  Even though the silver price could continue to weaken, it is setting up for a significant positive reversal whereas the markets will turn down negatively. I have to say; this current precious metals-stock market structure is one I have never seen before.  Normally, when the stock markets sell off, so do commodities and the precious metals.

Now, the only time when the precious metals disconnected from the markets was during the 1970’s inflationary period, and commodities such as oil and copper increased along with gold and silver from 1971 to 1980.

Today, investors are focused on the stock market, FANG stocks, Real Estate, Bonds, and what’s left of the Crypto market. But, when the markets finally correct lower, there aren’t too many alternative investments to protect the mighty gains made in the stock market. I believe investors will begin to rotate back into the precious metals sector during the next bear market in stocks and real estate.

However, when the retail and professional investors rotate back into the precious metals sector, the amount of interest and volume will likely be nothing we have witnessed before. Why? Well, it has to do with the over-leveraged and highly indebted financial system that we have today than in any other time in history.

As I mentioned in my previous article, the U.S. public debt continues to surge higher, which is impacting the interest the Treasury has to pay on that debt. The U.S. Government debt service will easily surpass $500 billion this and will likely be over $520 billion. But, what happens when the U.S. Government loses control over the low 2.3% average interest rate it is paying on its debt. If it just doubles to 5%, then the annual interest expense jumps to $1 trillion.

While it has been frustrating to watch the precious metals prices trend lower over the past seven years while seemingly everything else (minus the cryptos) continues to grind higher, patience will finally pay off to investors who understood the reason to purchase and hold gold and silver.

Lastly, to those individuals who believe the precious metals won’t experience another bull market for another decade or two, similar to the 1983-2003 period, we had the energy to drive global economic. However, this time around, we won’t have the energy to pull us out of the next recession-depression. Thus, another excellent reason to protect wealth with gold and silver.

Yes, I love silver, but if you prefer gold, there are reasons to be bullish as well .
For the first time since 2002 the “Commercials” (remember, the guys who never lose) have eliminated all of their short positions on COMEX and they are actually LONG 6500 contracts. The gold market hasn’t looked this bullish in nearly two decades!
Do not underestimate the significance of JPMorgan owning 750 million ounces of physical silver and 20 million ounces of physical gold. They play to win and once they decide to allow the prices to rise, they have every reason to let the move go as high as possible.
Here is an interesting chart from Money and Markets. 
The smart money is moving into gold.
As you can see on the chart above, gold has been in a downtrend since peaking in April. 
But, as the price fell, the “smart” money in the market has been buying. 
The chart above comes from the government's Commitment of Traders (COT) report and shows the smart money as a green line. 
The red line shows large speculators which includes hedge funds.
The last time the smart money was this bullish was in November 2015, right before gold rallied more than 22% in seven months. 
Now is the time to follow the smart money into gold.
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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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