July 2, 2019
The Miles Franklin Newsletter
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From The Desk Of David Schectman
The bottom line is that as long as GLD and GDX maintain support over their respective pivots, I will continue looking immediately higher as shown on the daily charts, and I think it is only going to be a matter of time before silver follows. However, if a pivot support does break in the coming two weeks, then I will look for another consolidation before we continue higher. But, the weight of evidence suggests that the bull market has returned and I will predominately be looking higher over the coming year. Yet, that does not mean we throw caution to the wind, and maintain a blindly bullish stance, especially until silver is able to catch up in a meaningful way. But, once silver gets with the program, that will be the final piece to complete this puzzle.  – Avi Gilburt

My buddy Terry Anderson is in the hospital awaiting a heart procedure.  He always reads my comments.  Hey Terry, get this behind you quickly.  You, of all people, need to be here to see if your two-decade-long “prepper” plans were actually necessary.  On this one, I hope you are wrong.  But if you aren’t, can Susan and I please come visit”

Gold rose to far too fast.  A consolidation was to be expected.  This kind of rise is simply not sustainable.  As long as gold hold above $1,365 the bull market is alive and well. Gold will be back above $1,400 in the near future.

In the blink of an eye, the markets are giving Trump the benefit of a doubt that he will denuclearize the Korean peninsula and put an end to the trade war with China.  I say that’s a risky bet as best.  My money says it won’t happen.  Was that the reason gold was taken down – or just the “excuse,” the “cover” JPMorgan and friends needed to do the dirty?
O.K.  Here it is 24 hours later and as I figured, nothing was resolved in the much-anticipated meeting between the U.S. and China.

Authored by Chetan Ahya, Morgan Stanley Chief Economist
And so it has come to pass: The much-anticipated meeting between the U.S. and China is over. While we await further details, here are our reactions and takeaways, as we parse the initial readouts.
This is an uncertain pause - no immediate escalation, but still no clear path towards a comprehensive deal. The U.S. administration has indicated that it will hold off on 25% tariffs on the remaining US$300 billion imports from China. There was also an agreement that both parties will roll back some non-tariff barriers (i.e., restrictions on high-tech exports by US companies) and that China would continue to purchase agricultural products from the U.S. However, as things stand, we lack clarity on whether real progress was achieved on the sticking points that caused talks to break down in the first place.
Hence, our overarching conclusion is that the developments over the weekend on their own don't do enough to remove the uncertainty created by trade tensions, which began over a year ago and remain an overhang on corporate confidence and the macro outlook.
Heading into the meeting, it was clear that the global capex  cycle had ground to a halt. Capital goods imports, a capex proxy, began their descent in mid-2018, when trade tensions first re-emerged. In July 2018, they were tracking at 18%Y on a three-month moving average basis but plummeted to 2%Y in January 2019 and an estimated -3%Y in May 2019. In aggregate, private fixed capital formation (investments in fixed assets) in the G4 and BRIC economies fell from a peak of 4.7%Y in 1Q18 to just 2.8%Y in 1Q19.

Corporate sentiment has also declined to multi-year lows. Global PMIs for May fell in broad-based fashion, with only about one-third of the countries we track reporting a PMI above the 50 expansion threshold. In the US, our Morgan Stanley Business Conditions Index recorded its largest one-month decline ever, plunging to a level not seen since June 2008. Other business sentiment gauges, such as the regional Fed and German Ifo and ZEW surveys for the month of June, paint a fairly bleak picture too. What's more, consumer sentiment is also starting to sour, with the Conference Board's Consumer Confidence Index for June falling to the lowest point since September 2017.
As if the China tariff fiasco isn’t enough, Trump decided it was time to throw $4 billion more at Europe.  You see the ridiculous reason the funds decided it’s o.k. to go back in the water, and remove their “risk on” trades, is absurd.

As one U.S. trade war - that with China - enters a fragile truce, another trade war is about to make a dramatic return.

A little under three months after the U.S. announced in early April that it would seek tariffs on roughly $21 billion of European goods over E.U. subsidies to Airbus aircraft, and which in turn was followed almost immediately by European threats of $12 billion in retaliatory tariffs on U.S. products such as Ketchup, Orange Juice and Tobacco, moments ago the U.S. trade representative proposed a supplemental list of products that could potentially be subject to additional duties in order to enforce U.S. rights in the WTO dispute against the European subsidies airplane

This supplemental list adds 89 "tariff subheadings" with a trade value of $4 billion to the initial list published on April 12, which had an approximate trade value of $21 billion. USTR is adding to the initial list with the supplemental list in response to public comments and additional analysis.

In the event the Arbitrator issues its decision prior to completion of the public comment process on the supplemental list, the USTR may immediately impose increased duties on the products included in the initial list, and take further possible actions with respect to products on the supplemental list.

The supplemental list, as well as the schedule for a public hearing and written comments, are set out in a notice that will be published shortly in the Federal Register.

And now we wait as Europe counters with its own expanded list of tariffs on U.S. imports, sending the market surging on "hopes of an imminent trade war deal/ceasefire" between the U.S. and Europe.

Entering the market on Tuesday morning, gold has recovered somewhat, up over $8 to $1,391.90.  

Markets rotate through the three basic phases. They are consolidation, breakout to the trend and blow-off.  Last Tuesday, we experienced the blow-off pattern, pushing  gold to $1,442.

After Tuesday’s blow-off and key reversal,  gold is currently at $1,394.50.  G old is back in a consolidation phase as it prepares for the next big move up.

Gold’s overall trend is higher.  There is a good chance that gold will trade to $1,500 before any “major” sell-off occurs. The key level is a pullback to $1,380-$1,390 range, which is an excellent entry level for new money to come into these markets. The longer gold can stay in the consolidation pattern, the more bullish the next move will be.

Rick Ackerman called the pullback.  Don’t be concerned about the recent correction in gold.  That’s what markets do – they go up and correct and then go up some more.  By the end of the year gold will shine.

Rick Ackerman

August Gold’s attempt to reverse from a morning sell-off prompted a subscriber to ask in the Rick’s Picks trading room whether bullion is already getting second wind. I doubt it, since June’s sensational run-up was too steep to sustain and will likely require a breather of perhaps 2-3 weeks to recharge. But I do expect the uptrend to resume after a proper pullback because this month’s surge decisively exceeded clear Hidden Pivot resistances at 1412 and 1432. This is usually a reliable sign that the dominant trend will continue, and it is quite clear in this instance. Because the pattern took ten months to play out, it would be surprising — and quite bullish — if the futures do a ‘180’ and blow past the 1432.70 peak within the next few days. Anything’s possible, so we’ll simply wait for gold to do its thing to tell us what’s on its mind
The current gold to silver ratio is at 91.87 to 1, which means silver is the cheapest relative to gold than at any time in the last 25 years. Silver  is the most undervalued and cheapest it has been, relative to gold, in my investment lifetime. 
Six months ago the silver to gold price ratio was 82 to 1.  It was the cheapest silver had been, relative to gold, since I formed Miles Franklin.  Andy and I felt that silver was way too cheap relative to gold and switching from gold to silver was a no-brainer, especially considering the actual supply/demand fundamentals. 
Quite to our surprise, the silver/gold price ration didn’t continue to move down, it moved up.  I mean, how could gold advance $110, while silver was falling 35 cents?  That makes absolutely no sense.  Could silver get even cheaper?  Sure, but that is a short-term possibility only.  Once gold takes off, silver will follow, and catch up and the ratio will move back toward the 60 to 1 level or lower.

Nothing has changed.  The correction in gold is not a big deal.  Just another opportunity to buy more for less.

Lobo Tiggre

I have to ask if any of the trends I’m betting on have changed…

My answer is no.
In part, this is because the US could reverse itself in a heartbeat and slap the new tariffs on China after all. The stay of execution is good, but it may not last. The hope that the trade war will end soon is too optimistic. A bit of a reprieve is not a game-changer. An actual deal with China will take time, and the trade war could easily take a turn for the worse—potentially much worse.
Meanwhile, the fragility of the US recovery and the deteriorating global economy are still with us.

This all makes the Fed—by far—the more important factor.

The next FOMC meeting isn’t until the end of the month. Investors may not have forgotten the Fed, but the expected rate cut was less imminent than the expected tariff increase. This seems to have Mr. Market focused more on the trade war for now, but what the Fed does is ultimately more impactful. As the Fed decision gets closer, I expect the “good news is bad news and bad news is good news” trading pattern to resume and strengthen.
The bottom line here is that nothing fundamental has changed in the world or in global markets.
I therefore remain extremely bullish on precious metals and neither surprised nor alarmed by this correction.
I warned that some form of correction after gold’s rapid rise was likely. Nothing goes up in a straight line. I was right.

Bill Holter

Slowly but surely the ship sinks. Gold bear phase over.

The Dollars will come home one day.
Russia, China Sign Agreement on Payments in National Currencies in Blow to Dollar – Reports

MOSCOW (Sputnik) – Russian Finance Minister Anton Siluanov and Chinese People’s Bank Governor Yi Gang signed on 5 June an intergovernmental agreement to switch to national currencies in mutual payments, the Izvestiya newspaper reported on Friday, citing a letter from the Russian Finance Ministry.
According to the newspaper, the information about the accord is contained in the letter of Deputy Finance Minister Sergey Storchak to the chairman of the Russian lower house’s Committee on Financial Market, Anatoly Aksakov. The letter was a reply to Aksakov’s inquiry about the ministry’s efforts to intensify work on settlements with economic partners in national currencies and thereby “strengthen the country’s economic security.”
The letter also notes that new mechanisms for payments in national currencies between Russia and Chinese businesses were already under development.
Aksakov, in turn, told the newspaper that one of the options could be creating “gateways” between the Russian and Chinese analogues of the SWIFT payment system. An increase in payments in national currencies however will also require creating a market of ruble and yuan financial instruments, the senior lawmaker stressed. This, according to Aksakov, will let the two nations hedge risks of exchange rate fluctuations in bilateral trade. As a result, the share of ruble payments with China may rise from the current 10 percent to 50 percent in the coming years, the lawmaker estimated.

Ed Steer

Friday’sprice action certainly took some steam out of the current rally in gold -- and in silver as well...such as it was. It remains to be seen where prices are headed from here. Certainly up as the year progresses, but in the short term now, it's hard to say. However, the bearish flags are flying for gold now.

The next FOMC meeting is a bit over a month away -- and the consensus on Wall Street is that the Fed will cut interest rates by 50 basis points at that meeting. The continuing decline in economic activity in the U.S...plus interest rates abroad...certainly indicates that this is what the Fed will do. But I suspect that they'll keep the markets guessing right up until the big announcement on Wednesday, July 31. So, in the interim, what happens in the precious metals world until then, is a big unknown -- and I'm certainly not about to speculate.

It was the second time this past week that a major rally in gold [and silver] in morning trading in the Far East was snuffed out by JPMorgan et al before it could develop into something far more serious...which it certainly would have done if left to its own devices.

Silver is still lagging -- and it's certainly doing that because 'da boyz' aren't allowing it to go anywhere in the COMEX futures market, where the prices of all of the Big 6 commodities, plus others are set. They're set by the dos-à-dos between the Managed Money traders on one side -- and the commercial traders on the other. And in the case of the precious metals, it's '4 or less' U.S. banks that have them on that proverbial short leash.

As to when that situation might change, I don't know. But as Ted pointed out on the phone yesterday, those charges brought against Merrill and the Bank of America, were certainly a pointed warning to JPMorgan et al. Whether or not that makes in any difference in the short or long term, remains to be seen.

The ongoing sniping between President Trump and Jay Powell over at the Fed is getting more serious and obvious with each passing exchange.  At some point the U.S. dollar will become a casualty in all this... whether by Trump's doing, or that 50 basis points rate cut that Wall Street and all say is coming at the end of the next FOMC meeting. And if not then, then certainly long before the year is out.

As far as I'm concerned, the dollar is already a dead man walking -- and has been for some time.  If you follow my daily comments on the U.S. dollar index, you'll note the increasing frequency in the appearance of the usual 'gentle hands' that keep preventing it from seeking its intrinsic value. What its true value is, isn't known -- and the powers-that-be are ever vigilant in ensuring that free market forces never are allowed to discover it...just like in the precious metals. Right now it's the cleanest dirty shirt in the laundry hamper. But that won't last.

As far as the current price management scheme in the precious metals is concerned, that fact is known far an wide, not only by us investors, but the miners themselves -- and world governments. That knowledge now permeates the trading in the COMEX futures market, because as Ted pointed out on the phone yesterday, spoofing has vanished from the scene. So it's obvious that the conviction of that JPMorgan trader -- and now the deferred judgement against Merrill/BAC for the same practice, has had the desired effect.

Of course, if all convicted parties are cooperating as they say they are to avoid jail or fines...or both...then all fingers will be pointing at JPMorgan. Then one has to wonder if the DoJ is now nosing around the trading records of Citigroup, plus others as well.

When it all ends, it will be obvious in the price -- and as Ted stated in his closing paragraphs of his now-public essay " Stranger Than Fiction "...

Ed’s Critical Reads

Money manager Peter Schiff says all the money printing and debt explosion since the Great Recession comes with a huge downside. Schiff says, "All sorts of bad policies basically took place thanks to the monetary excesses applied by the world central banks, but now we are at a point where all these inflation chickens are going to come home to roost. It will not be in stock prices or real estate prices or bond prices, but in good old fashion consumer prices. Food, energy and all the things that we need to live are going to get a lot more expensive."

Schiff says the Fed is overlooking some big problems coming. Schiff says, "They (Fed) did not stress an environment where we have more inflation or where we have stagflation, where we not only have a rise in unemployment and a recession, but consumer prices and long term interest rates that go up at the same time. They (Fed) are not even thinking that's possible, but that's actually probable. The real problem is when real inflation rears its head, there is nothing the central bankers can do about it. If they try to fight the inflation by tightening up on monetary policy, it's like slamming on the brakes. They are going to have to jack interest rates very high, and everything is going to start imploding. The whole credit bubble is going to collapse. We are going to see stock markets tumble. Bonds are going to go into default. There will be bankruptcies, layoffs, bank failures and the governments will have to start defaulting on their obligations and payments on social programs, or even interest on principal. You have a massive crisis coming if the Fed fights inflation, but you have an even worse crisis if they don't. I am betting on this initially. As inflation gets worse and worse, the central bankers are going to say it is a good thing."

Schiff predicts, "Inflation is going to run out of control...This is why people need to buy gold. Paper currencies are going to lose a tremendous amount of value. So, if you want to preserve your purchasing power of your savings, you better be saving real money and not all this funny money the central banks create....Once the market perceives that there is no light at the end of the tunnel, that we are never going back to normal, that interest rates are going to stay negative in real terms forever, that the Fed has no ability to raise rates, that all the new money that has been created will never be destroyed, that the Fed balance sheet will grow in perpetuity so liquidity will never be removed, then the dollar will fall through the floor. Then we are going to get all that inflation."

This 35-minute video interview with host Greg Hunter, showed up on the  usawatchdog.com Internet site on Wednesday sometime -- and I thank Brad Robertson for sending it our way. I listened to the whole thing -- and Peter really gets wound up in the last half of the interview. Another link to it is  here .

Instead of revisiting the peak, yesterday, the Dow took a few steps back down the mountain. What happens next is anybody's guess.

But the picture we've been sketching out is a doozy. It shows that no matter what the Dow does... no matter what the headlines or the pollsters tell us... the deeper cycle is on a downward slope. It has been since 1999.

And it will probably continue until it finally reaches its rendezvous with destiny. That's when fear reigns supreme... and hope, optimism, and faith in the future have been crushed down to historic lows.

We'll know when that moment comes by watching our Greed/Fear gauge, which measures the relationship between stock prices and gold. People invest in stocks when they think everything is hunky dory (greed). They go for gold when they worry that things aren't so hunky or so dory (fear).

When the Greed/Fear gauge goes below five (when you can buy all the Dow stocks for less than five ounces of gold)... the point of maximum anxiety - Peak Fear - will be at hand.

Then, you'll be able to buy almost any stock you want for only about a quarter (we're talking in real money terms... measured in gold) of what you would pay now.

Houses, too, should be only about half what they cost today. And bonds? Don't be surprised to find that most of them will be worthless by then.

That's what inflation does to bonds. It wreaks havoc.

This  interesting  commentary from Bill, filed from  Portlaw  in Ireland, put in an appearance on the  bonnerandpartners.com  Internet site early on Wednesday morning EDT -- and another link to it is  here .

President Donald Trump wants a weaker dollar to help boost exports, and is counting on the Federal Reserve to help make that happen. But the central bank's chairman, Jerome Powell, has made clear it's not his job.

It's a new twist in the broader pressure campaign the president has brought to bear on Powell to cut interest rates to energize the stock market and fuel growth.

Trump's focus on the dollar surfaced last week after the European Central Bank said it might ease policy, prompting the euro to drop against the dollar. Trump seized on the move to say on June 18 that the Fed's failure to lower rates was putting U.S. exporters at a competitive disadvantage. He later mused on June 26 he'd rather have ECB President Mario Draghi running the Fed.

Powell, once again, is finding himself on the defensive, trying to shield the Fed from political influence. He deflected Trump's calls back at the administration.

"The Treasury Department -- the administration -- is responsible for exchange rate policy -- full stop," Powell said June 25 in response to a question from the audience after a speech in New York. "We don't comment on the level of the dollar. We certainly don't target the level of the dollar. We target domestic economic and financial conditions as other central banks do."

The feud between Trump and the Fed is getting nastier by the day. But Powell will find out in a hurry who really controls the value of the U.S. dollar if they cut interest rates by 50 basis points at the next FOMC meeting. But he knows that already. This  Bloomberg  article showed up on their Internet site at 1:00 a.m. Pacific Daylight Time on Friday morning -- and I found it embedded in a  GATA  dispatch. Another link to it is  here . A parallel story to this is this  Bloomberg/Yahoo  article from Thursday headlined " U.S. Is Heading to a Future of Zero Interest Rates Forever " -- and I thank Jim Gullo for that one.

We see the pattern often – silver lags gold, then catches up.  This isn’t rocket science. It’s also not conjecture.  This is historical fact: silver tends to lag and then soar.

We are still in the “lag” stage

Louis James

Silver didn’t lag long in early 2009, but it did.

Then silver went on to triple the gains gold made by 2011.

If we pull back to look at the bigger picture of the precious metals boom from 2001 to 2011, we see the same pattern several times: silver lags gold, then more than catches up.

In fact, silver outperformed gold by a wide margin at its peak.
And this is not the first time. If we look at the last major precious metals bull market in the late 1970s, we see the same pattern. Here’s the long-term chart showing that silver spike and its performance up to the present day.

This isn’t rocket science. It’s also not conjecture.
This is historical fact: silver tends to lag and then soar.

Best of all is that, as you can see, the alligator jaws at the right of the chart have opened wide. That’s a major historical anomaly that can’t last forever. The data tell us that when they close, the alligator jaws will snap shut with astonishing speed.

Of course, that could happen by gold prices dropping just as easily as silver prices rising. As I’ve written before, the  gold-silver ratio doesn’t predict which metal will rise or fall when it gets out of whack. It just tells us that one or the other is likely to move toward the other.

If you’re a gold bear, you’re probably not reading this article, so let’s just stipulate that the fundamentals and technicals are very bullish for precious metals right now. That being the case, gold is not likely to fall compared to silver. Silver is likely to rise to catch up to gold.

Hence my claim that silver’s day is coming—in spades.

Are you ready for it?

Because the data tell us that silver’s rise, whenever it’s triggered, will be spectacular.

My granddaughter’s fiancé  sent me this article.  Robert Kiyosaki sees what is happening very clearly.  He says, 

‘Gold is God’s money... The Fed has destroyed the monetary system of the world along with its central banks. It has manipulated the market. In my opinion they went criminal... So when I watch Wall Street, I watch the price of stocks and I watch what the Fed is doing — I just get nauseous. I just buy more gold.’

Rich Dad, Poor Dad’ Robert Kiyosaki on the looming market crash, ‘God’s money,’ and why he’s looking like a genius

I’ve gone through heaven and hell with gold...’

Gold has exploded for an 11% gain over the past month, giving long-suffering gold bugs a chance for some chest-puffery as prices track toward  their highest close in more than six years  on the back of unsettling geopolitical developments. 

Count Robert Kiyosaki, the best-selling author of “Rich Dad, Poor Dad,” among those basking in the yellow glow of gold’s resurgence. 
‘Gold is God’s money... The Fed has destroyed the monetary system of the world along with its central banks. It has manipulated the market. In my opinion they went criminal... So when I watch Wall Street, I watch the price of stocks and I watch what the Fed is doing — I just get nauseous. I just buy more gold.’

That’s from  a recent interview with Kitco News , in which Kiyosaki railed against the “criminal” Federal Reserve and touted gold’s prospects as the stock market bubble continues to inflate. 

“I’ve been on the gold standard since 1972," he said. “So I’ve gone through heaven and hell with gold and silver, and now I look like a genius.”
Kiyosaki, with a net worth reported to be around $80 million, has been calling for the stock market to crash for a while now, which would be a most welcomed development for gold bugs. Back in December, he said investors were  perhaps facing the final stages of the financial bubble

“Now, more than ever, it’s important to focus on value, not price. When prices are low, finding value’s easy,” Kiyosaki  wrote in a blog post at the time . “Now you know why I say, ‘I love market crashes.’”

No crash yet. Since then, the Dow Jones Industrial Average  DJIA,  -0.04%  has moved from about 23,600 to where it stands now at 26,624.

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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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Create a great offer by adding words like "free" "personalized" "complimentary" or "customized." A sense of urgency often helps readers take an action, so think about inserting phrases like "for a limited time only" or "only 7 remaining!"