July 16, 2019
The Miles Franklin Newsletter
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From The Desk Of David Schectman
“The signatories will continue to coordinate their gold transactions so as to avoid market disturbances.”  - European Central Banks in fourth Central Bank Gold Agreement

Will the Fed cut rates in July or will it not? Does it even matter? Could the U.S. possibly escape the carnage if the world enters a recession? – Phoenix Capital
David's Commentary (In Blue):

My daughter had us over for a brunch on Sunday. I offered a bit of advice to my son in law, knowing full well that most people do not take advice. I said you guys have done very well with your stock portfolio. But at your age (57) perhaps you should consider moving your money out of the stock market and into cash or short-term government bonds. I said why risk your nest egg now. Going forward, the potential gain is minuscule compared to the risk of a large correction. You have it made now, so why risk what you already have just to make a bit “more”? Doesn’t it make more sense to protect what you already have? Will he take my advice? Probably not. He will let his stockbroker make those decisions for him. It is wise to remember that you do not have a profit until you sell your investment. Holding on for too long is a big mistake. I speak from experience having waited far to long to sell my mining shares after 2011, believing “it’s just a correction and they will rebound.” I’m still waiting for the rebound. 
In the mid 80s I sold a small amount of gold and silver to very wealthy and successful investor.  He lived in Minneapolis and I knew him. His family had sold a wholesale food business for a lot of money and his new “job” was managing his family’s portfolio of stocks that were purchased with the proceeds from the sale. I told him about a mining share that had recently gone up a lot. He said he was not interested in buying something that had already gone up a lot. He was more interested in buying stocks that had not, and were undervalued. He refused to chase a rising price. I never forgot that conversation. It is a simple truth that most investors do not take to heart. The “herd” tends to follow a rising trend. In today’s market, what is the herd buying? Stocks. Stocks have been going up for a very long time and are very overvalued, or at least not a bargain. It is also a fact that gold, and especially silver are very undervalued and off the radar screen now. What do you think he would buy today? Certainly not stocks - and most likely silver.
How undervalued is silver?
There have been 11,186 trading days on the Comex since the prohibition of owning gold was lifted in January 1975. The ratio traded at 93 – its present level – or higher on only 82 days. And most of those days were in the early 1990s when silver was under $3 per ounce and at the end of a 10-year bear market. Of course these results do not guarantee anything, but it does highlight how undervalued silver is relative to gold. – James Turk

Kitco News
Legendary Investor Jim Rogers Chooses Silver Over Gold at Today’s Prices
( Kitco News ) - Silver is currently better priced than gold, but price levels are not sufficiently low enough to entice legendary investor Jim Rogers, chairman of Rogers Holdings, to buy either precious metal.
“If I had to buy one, silver or gold, I’d rather buy silver. Silver is more depressed on a historic basis than gold. I’m not buying either in any serious way,” Rogers told Kitco News.
Rogers said that he maintains his gold holdings, and although prices are not attractive enough at the moment to buy, he is not selling unless a major crisis hits.
“If and when a bubble develops, and it probably will because the world is facing gigantic problems in the next few years, if that happens then I will have to sell my gold because you cannot, well you can but you’d be crazy to, hold any asset through a bubble,” he said.
He warns that the next bear market is going to be “horrible, compounded by too much debt and a trade war.”
Rogers said that the longest bull market in American history will be short lived, as macroeconomic problems will surface soon.
“Later, this year or next year when the economies around the world are getting bad, Mr. Trump is going to blame everything on the foreigners, the Chinese, the Germans, the Japanese, everybody, and then the trade war will come back and then it’s all over,” Rogers said.
Rogers added that trade war tensions may escalate as the Trump administration is determined to win.
“Mr. Trump is going to come back. Mr. Trump believes in his soul and his brain that trade wars are good and that he can win trade wars. Mr. Trump knows that he is smarter than everybody else so he knows that he can win a trade war, and it will come back strong. When the American economy gets bad eventually, he’s going to blame it on trade and the trade war and it’s going to be terrible,” he said.
On recessions, Rogers said that it usually takes multiple failures on the industry or even country level before people start taking notice.
“The way these things have always worked, in 2007, Iceland went bankrupt, and most people had no clue about that and didn’t know or care, and then later though, Ireland went bankrupt. Few more people noticed. A little while later after that, Bear Stearns went bankrupt. A few more people started noticing. A few weeks later, Northern Rock went bankrupt, then people started catching on.
Eventually, Lehman Bros. went bankrupt and by then it was on the evening news all over the world,” he said.
By the time we notice the next recession, it will be too late, Rogers added.
Unless you follow the gold market very carefully, you would not be aware that the gold market is changing. It is a subtle change, but a very important one. Gold is quietly breaking out of an eight-year base.
LeMetropole Cafe

After six years of being in the doldrums, the gold price has caught fire these past many weeks. We have spoke ad nauseam of late about gold breaking out of its massive base, formed over all that time. What has been spoken of very little is the dramatic change in the gold price action right now versus all those years. It is an over the top change.

In years past when gold was getting stuffed by the cabal … the day, week, or month was over. A good deal of time needed to pass before gold was able to show any signs of life again. Not the case anymore. Many weeks ago gold began to exhibit a new trading pattern or life. After The Gold Cartel attacked, the price came right back.

Of late, that sort of pattern has been making the scene on a daily basis, and during the day … over and over. Never seen anything like it since 2011.

Is it a BIG deal? Yes in my book. Gold has been beaten down after forming a double top at the $1440 area. Each time it has rallied the past two weeks, it has been knocked back … working off an overbought technical situation in the process.

Meanwhile, The Gold Cartel continues to go all out to prevent gold from going from where it should have been some time ago. The gold open interest is way up there as THEY continue to do their thing. What is most interesting is that many of the smartest pundits out there have exited from the long side of the precious metals markets because of the enormous position of the commercials, observed in the COT report. Their outlook is very understandable, having watched The Gold Cartel trash the spec longs so many times over the past years, a wash and rinse cycle, win one win after another.

If there is to be the upset of upsets in the gold market it all has to do with a resurgent physical market and whether the cabal forces can mobilize enough physical gold to overcome that demand. Part of the equation has to do with Deutsche Bank and whether its restructuring is quietly setting off a chain reaction over so many paper claims on the same physical gold. If that development has been set in motion, the cabal is in big trouble. Only time will tell on that score.
When the interest rate on Ten-Year Treasuries drops below 1% and heads into negative territory in 2020, the jig is up. You best be out of US paper by September or risk losing half the value of your stock portfolio.
Rick Ackerman

The U.S. is not an economic island, and GDP growth is certain to slow as America’s major trading partners sink into recession. It seems predictable nonetheless that U.S. stocks will continue to move higher, at least for a while, for the reasons noted above. This will occur with further softening in interest rates and GDP falling. Wall Street may be able to pretend for yet another few months that the U.S. will skirt recession. But when rates on Ten-Year Treasurys drop below 1% and head into negative territory sometime in 2020, the jig will be up. At that point there will be no denying that America’s economy has fallen into the same liquidity trap that has long vexed Japan and which has spread to Europe, if not yet China. The resulting epiphany will cut the Dow in half so swiftly that anyone still in stocks when they begin to fall will be trapped. U.S. Treasury paper is where you will want to be by no later than September, even if it means missing the potentially spectacular last gasp of the ten-year-old bull market.
Egon von Greyerz says,
The biggest investment profits are normally made by investing long term. The key is to buy when an investment is undervalued and unloved. That reduces the risk substantially and thus increases the potential return.” 
His advice is similar to the advice I was given in the mid 80s example I mentioned in the beginning of today’s daily. He warns that the two most likely areas that the global economy face today are derivatives and debt Deutsche Bank could very well have already lit the fuse that sets everything ablaze.

As for buying “undervalued assets,” adjusted for inflation, gold at $1,400 is at a historically low price and adjusted for real inflation (not BLS numbers) should be priced at $18,160. If you adjust the gold price to the increase in the U.S. money supply, gold is as cheap today as it was in 2000 at $280 or in 1970 at $35. By any standard, gold is an absolute bargain. Imagine then just how big a bargain silver is.
Egon von Greyerz
Gold Is For Freedom And Benefit

Lemmings have a herd mentality. But following the crowd, can have grave consequences like falling off a cliff and drowning in the ocean. Many investors have the same instinct. They follow the crowd and buy or sell when other people do. This probably won’t end in the same disaster as the lemmings, but following the crowd virtually never leads to a successful long-term investment performance.

The biggest investment profits are normally made by investing long term. The key is to buy when an investment is undervalued and unloved. That reduces the risk substantially and thus increases the potential return.
Ted Butler disagrees with Alasdair Macloed’s analysis of who is behind the silver manipulation on the Comex. Macleod says it’s China. Butler says it’s the wrong whale. Read the following two commentaries and make up your own mind.
Alasdair Macleod
A Whale is accumulating silver futures

Silver’s recent price performance has been disappointing. Normally, it is almost twice as volatile as gold, so when the gold price rises 11%, as it has since last December, you would expect silver to rise about 20%. Instead it has fallen marginally.
When we dig into the weekly Commitment of Traders’ Reports covering Comex futures, we see something very odd indeed. The largest four traders, normally bullion banks or major producers hedging future output, almost always run short positions against speculators’ longs. The more bullish speculators are, the more shorts are carried by the big four to accommodate them. Equally, they only go net long when the speculators are extremely bearish and are collectively marginally long or exceptionally net short. Not now, as the following chart of the Largest Four Traders net positions shows.

Ted Butler’ Comments
Wrong Whale
The 4 big concentrated silver longs, which I have been writing about for nearly a month, further reduced their net long position by 3882 contracts to 62,707 contracts. The only reporting category to have liquidated enough (or any real) number of contracts in the reporting week were managed money traders, proving conclusively that managed money traders held a significant percentage of the very strange concentrated net long position in COMEX silver. How else could I have expected managed money long liquidation by the 4 concentrated longs on Monday?
This is in direct conflict with the new article by Alasdair Macleod, of which many of you asked my opinion. As I think most of you know, it is not my custom to critique others’ work, as that strikes me as unprofessional. Let everyone present what they wish to present. But there is enough factually incorrect in Macleod’s article that it would be a disservice not to address those very serious errors.
Since I’ve been writing about the highly unusual and unprecedented concentrated long position in COMEX silver futures for weeks, I thought at first Alasdair picked it up from me (certainly, I didn’t pick it up from him). Macleod holds, among other things, that the concentrated long position is mostly (or exclusively held) by commercials and not managed money traders. That’s false on its face.
Since May 28 (all COT dates) the concentrated silver long position grew by nearly 18,000 contracts from 49,614 contracts to 67,328 contracts on June 25 (to coincide with Macleod’s article). Over that time the managed money traders bought a total of 59,930 net silver contracts. Over that same period, the commercials SOLD 53,678 net silver contracts. Unless there’s a new math being deployed here, the sharp increase in the concentrated long position was very unlikely to have been caused by commercials.
I have stipulated all along that there might be a commercial trader in the ranks of the concentrated long, but clearly at least two and most likely three of the four big silver longs are managed money traders. Plus this week’s exclusive long liquidation by the managed money traders and the concurrent reduction in the concentrated long position (nearly matching contract for contract) further confirms that Macleod’s basic premise is fundamentally incorrect. In addition, the concentrated long position grew the most when silver penetrated its moving averages to the upside and shrank when the moving averages were penetrated to the downside.
Even after the liquidation by the managed money traders and the big concentrated longs, over the past two reporting week, the managed money category is still slightly more long (on a gross basis) than the combined commercial gross long position (Producer/Merchant and Swap Dealers combined). That’s not evidence that the commercials are holding the majority of the concentrated long position – just the opposite.
And here’s an amended note based upon input from a subscriber after I published Saturday’s review. Alex pointed out that Macleod stated that the big commercial silver long held 50,000 of the 62,000 to 66,000 contracts held by the 4 big longs. That’s preposterous on a mathematical basis for two reasons. One, it would leave too few remaining contracts to be assigned to the three remaining longs. Second, the only commercial category for a big long to exist would be the Swap Dealer category and the total gross long position in that category has barely been above 50,000 contracts over the past few months – making it impossible for one trader to hold that many net contracts.
Since the basic math in the article as to who holds the unusual concentrated long position in silver is so flawed, the speculation that follows is just as flawed. I found that all the speculation about a commercial trader (a user nonetheless) being the big long and further that it was China to be off the rails. Ditto with the convoluted discussion that the commercial sellers on the COMEX were largely mining companies. There are no mining companies hedging on the COMEX, otherwise they would have to publicly report such hedging according to the Financial Accounting Standard Board (FASB).
And I had to laugh at the explanation that mining companies hedged dore and that accounted for big swings in COMEX short positions. First, there is no reporting by public companies of COMEX hedging and even if there was, the same amount of ore is taken out of the ground and converted into metal every single day. Mining is not like growing crops when the harvest comes in at once, it’s a 24/7, 365 day operation, meaning if Dore’ was being hedged the hedges would be lifted when metal was produced, which takes weeks

I’m sick and tired about hearing how JPMorgan is acting on China’s behalf, a favorite of the whack- job tin-foil hat conspiracists. For one thing, would that make the manipulation run by JPMorgan any less illegal? Even if JPMorgan was manipulating prices in its role as the big silver and gold COMEX short for the benefit of a large client, how would that make the manipulation kosher? All it would add are charges of treason against JPM for benefitting a foreign nation over the US. But the real proof that JPMorgan is in it for its own benefit is because that’s how these boyz roll. JPMorgan putting the interests of its clients (any client) above its own has to be a joke. When has that ever occurred?
Finally, I would have preferred Macleod use a different term than “whale” because the last time that was used in connection with JPM was in the case of the London Whale, which as I recall didn’t end so peachy for JPMorgan. About the only redeeming feature of the article is that it correctly portrayed JPMorgan as the big silver kingpin (but for all the wrong reasons). You asked, I answered. The purpose here was not to flame anyone, but to set the record straight.
Ted Butler
July 15, 2019
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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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