September 26, 2019
The Miles Franklin Newsletter
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From The Desk Of David Schectman
I have written many times that virtually all prices are being manipulated and there is really no price discovery anywhere because of the central banks “printing and buying” schemes.

The only thing I can feel reasonably assured of is that, at some point, all of this will end. At that time, we will get price discovery. I believe that those who are holding assets that were artificially propped up will be surprised to find out the REAL value of what they are holding.

On the other hand, those assets being held down will likely provide a welcome respite from most other assets that are adjusting far lower.

I have said many times that as long as paper asset prices are rising there is no problem. Once that reverses however, there may not be many, if any, buyers to provide the exit door that so many may be looking for. This would be especially true if liquidity does indeed dry up as the overnight funding markets are hinting at as we speak.

To anyone who thinks that “all is well” because we hear it said over and over again and the “market is up” ask yourself these questions.

  • Why would the Fed lower rates if the economy was really ok?
  • Why did the Fed have to provide $200 billion in liquidity (Conjured up money) in just 3 days?
  •  Why is shipping collapsing globally AND here in the USA?
  •  Why have we already set a new record for retail store closures in a year for 2019?
  •  Why are layoffs being announced virtually non-stop?
  •  Why are PMI (manufacturing Indexes) cratering here and globally?
  •  Why are $17 TRILLION in bonds trading at negative interest rates (never happened before in 5000 years of history)
  •  IF QE worked why are we still waiting for it to work in Japan (30 years) and across the globe for the last 10 years?
  •  If “printing money” creates wealth why are Zimbabwe, Venezuela, Argentina and other places not the richest countries on the planet?
  •  Why did the stock markets collapse 20% in December 2018 when the Fed (and only the Fed at that time) pulled back on stimulus?
  • Why is real estate contracting even though rates have been falling significantly?
  • Why is the Nikkei Stock Index DOWN 40% since 1989 despite the fact that the Japanese Central Bank has bought trillions of yen worth of that index- mostly in the past 5 years?

These are just a few questions you should be asking yourself as you try to maneuver through what may be coming next. – Mike Savage
 
E.B. Tucker, director of Metalla Royalty & Streaming, doubled down on his bet earlier this year that gold would eventually rise to $1,500, an now he’s betting that silver will hit $20 in the next two months. 

“Right now, we want to trade silver up to $20. We think gold is going to stabilize at $1,500 and we see silver moving to $20, so that’s a 12% move we think we can capture in the next probably eight weeks. We see that as pretty much a certainty, and we’re willing to bet on that,” Tucker told Kitco News on the sidelines of the Denver Gold Forum.   (75 to 1 g/s ratio)

Gold could rally another 50% due to the enormous amount of debt hanging around the world, this according to E.B. Tucker, Director of Metalla Royalty & Streaming. 

“The amount of debt is growing tremendously, with the U.S. government’s growing by billions and billions of dollars a day. Corporations have to borrow more and more just to function. Interest rates are negative, so they’re being paid to borrow, so debt is growing really quickly.  – E.B. Tucker
 
There's less than a week left in the September delivery month -- and there are only a small handful of gold and silver contracts that remain undelivered. As Ted pointed out in his weekly review on Saturday..."JPMorgan has apparently stopped an even 1,600 silver contracts (8 million oz.), as well as 650 gold contracts (65,000 oz.) in its own name, making it the largest stopper for the month in both markets." – Ed Steer
 
Today’s sharp selloff in silver and gold prices, while not particularly welcome, can hardly be called surprising. Moreover, the sharp selloff can be laid directly on the existence of the super concentrated short positions on the COMEX. The 7 big COMEX silver and gold shorts (excluding JPMorgan) have had their backs up against the wall of late, incurring their largest open and unrealized losses in history. It must be expected that these big shorts will make a stand and fight to drive prices lower. It’s either rig prices sharply lower to save their skins or be consumed, like Bear Stearns, if they lose control on higher prices. – Ted Butler
How Much Gold Is Enough?

David's Commentary (In Blue)

One of the most common questions we get from our clients is, “How much gold is enough?” There is no one-size-fits-all answer to this question. Age and one’s financial situation play into this. But I can give a general answer that will at least focus you on a good way to understand how much gold is right for you.

First, let me state my “basic premise,” which is necessary to be able to answer this question. My “basic premise” is that gold is an insurance policy to protect you against a catastrophic loss in your dollar-based investments. Like a stock market collapse, real estate collapse, bond market collapse or potentially all three at once! Also you can add in the loss of purchasing power in the U.S. dollar. Do you think insuring against that severe scenario is extreme and not worth taking out an insurance position to cover it? Do you not also think the chances of your house burning down or having a catastrophic illness is also remote? Yet most people don’t think twice about buying insurance to protect for these events. The thing about insuring against financial loss is that there is essentially no cost to insure against these events. If you never have to use this insurance you can always sell your gold and get money back – and over time, most likely even more than you paid.

Now let’s ask the question again: How much gold is enough?

In 1987 I was a speaker at a financial seminar in Hong Kong. There were many interesting speakers on the program including James Dale Davidson and Doug Casey. There was another speaker who I was not familiar with. As I recall, his name was Frank Bauman, President of the Swiss FOCO bank. He told an interesting story. He said, when he was a young man every month he bought and stashed away one ounce of gold. When he was ready to retire, every month he would sell one ounce of gold and he would never have to live on a park bench or be broke. That is as fine an example of what gold is meant to do.

For those of you who think the DOW (proxy for stocks in general) could never collapse, you may recall that some of our biggest and most successful stocks have gone by the wayside. As an example, the following four companies have been delisted from the Dow.
 
General Electric
Bethlehem Steel
Citigroup
Sears

Stocks can lose all of their value, or most of it. Gold cannot. 

Let’s put that philosophy into terms that are meaningful. Most of us expect to receive, or are already receiving our Social Security check every month. In a worst-case scenario, many people will have to live on that monthly check. Let’s say it averages $2,000/month. Mine is a bit higher. Let’s also generalize and say that an ounce of gold is worth $2,000/month. I realize it is less now, but I expect gold to sell for $2,000 or more in the relatively near future.  So let’s say that one-ounce of gold is equal to a one month Social Security check. Of course, that assumes that Social Security will even exist in a Depression or worse. Gold will, since it can’t default, as long as it is in physical form in your possession or in a safe offshore storage facility like Brinks or in a domestic vault like Dakota Depository. 

Using this most minimal and basic formula, you have to make an assumption – how long will I live? If you are 75 now and hope/expect to live to 90 you will need 15 years of Social Security (15 x 12 months equals 180). Therefore you need 180 ounces of gold. If you think you need two or three times the amount you would get from Social Security you will need two or three times as many ounces of gold. If you think you should “insure” your well being for more than 15 years, add more ounces. You can change the variables: more money needed for a longer life expectancy.

You, of course, have the ability to withdraw more or less ounces per month depending on your needs. But we are talking about hard times here, like the 30s or much worse. Just imagine all of your stocks and bonds are worth a fraction of today’s value. Can’t happen, you say?  Well, my wife’s grandparents lost their house in St. Paul in the early 30s because they couldn’t come up with a few hundred dollars that they owed on their mortgage. They never fully recovered (emotionally) from that experience.

This way of looking at “how much gold is enough” is viewed from the position that the worst has happened and how would you survive it for a year or several years? That is what insurance is for, not for normal times.

In a best case scenario, you will never need your insurance gold portfolio and you can sell it for a profit, or pass it on quietly to your children or their children. We do hope that is how it ends, but looking realistically at the incomprehensible amount of debt and currency all over the globe, is it not realistic to conclude that yes, a collapse of that magnitude is absolutely possible, perhaps even inevitable.

If you only consider gold as an asset to own for profit, you may as well buy ETFs or mining shares. As for me, I own physicals for insurance and mining shares, during a bull market, for profit, which in the past, I have used to buy more physicals, for free.

One more consideration that is significant – is now a good time to buy more gold to beef up my ounces? 

Do not think about gold in terms of PRICE. Think about gold in NUMBER OF OUNCES and in relation to other financial assets. The most commonly used asset is the DOW. The relationship between the “price” of gold and the DOW.

As of today, the gold/DOW ratio is 18 to 1. It takes 18 ounces of gold to “buy” the DOW. It has been as high as 40 to 1 in Feb 2001 and as low at 1.4 to 1 in Feb 1980 and 2.15 in May 1932. It was 6.21 in Aug 2011. So, 18 to 1 is right in the middle. In other words, compared to the stock market, gold is not overvalued. Truth be told, it is the stock market that is overvalued.

In the 1980s and 90s I paid very close attention to Richard Russell (Dow Theory Letters). He always made sense and was very aware of gold’s role as money and it’s relationship to the DOW. He wrote that the gold/DOW ratio would hit one to one or two to one in late 2000 as the ratio was peaking out at 40 to 1. Ten years later he was proved to be spot on as the ratio fell to 6.21 to 1. Will his 2 to 1 ever happen? Well, if gold hits $5,000 and the stock market falls to 10,000 then yes. These are not pie in the sky numbers.

Greg Hunter interviews Egon von Greyerz. In Egon’s view of where we are headed, gold will be the “ultimate” financial insurance policy as paper assets lose most of their value. The scenario where gold is that highly valued is not an extreme view, at least not in von Greyerz’ view. Listen to why he believes this will happen and rather soon too.
Greg Hunter
 

Financial and precious metals expert Egon von Greyerz (EvG) says the signs abound that we are nearing the end of this global fiat money experiment while central bankers are befuddled. EvG explains, “The central banks are panicking. They don’t know what to do anymore. They are just starting to print money and with the euro on a daily basis. . . .

Europe is starting QE again with $20 billion a month, but that’s nothing compared to what is coming. . . . The panic that started with central banks in the summer in late July and August was, to me, the first step towards total chaos in the world that we will be seeing in the months and years to come. They (central bankers) see it clearly. They know the banking system is absolutely on the verge of collapse. They know Deutsche Bank (DB) and CommerzBank, too, are down 95%.  If you show this chart to a child and ask where is that likely to go, it is likely to go to zero. DB, with their $50 trillion in derivatives, there is no chance they will survive. Of course, Germany and the ECB is panicking because that will affect the whole banking system worldwide. This is why they have started to print money now because there is a massive liquidity problem, and that’s Germany, which is the best country in the EU from the point of economics. Then you take Italy, Spain, France and Greece and they are in a real mess. This is why the whole system is on the verge of disappearing into a black hole. . . . With the U.S., there is massive liquidity pressure there too.”

The massive amount of money printing to keep the fiat system afloat is just starting. EvG contends, “This is just a practice round. This is just more money at this point. The balance sheet . . . of the Fed is going to go from around $4 trillion to $40 trillion. It is going to go to $100 trillion before this is over. So, right now, they are just practicing a bit because they are going to put the pedal down to the bottom very soon. . . . There is no other way to save this system, it has gone too far. I am not a pessimist. I don’t want to see the end of the world, but you can see their actions. You can see that now there is absolutely no way out. The only thing they know is to print money. They have already reduced rates to zero or negative, which is a disaster in and of itself.”
Here are two other ways to answer the question, “How much gold is enough?” These are not based on a worst-case scenario like von Greyerz take or on the ultimate financial insurance position I have outlined for you.

Ibbotson Associates, a registered investment advisor published data on how much gold is necessary as insurance to balance losses in the rest of a portfolio. As I recall, they suggested 7% to 12% in gold would be sufficient.

Dalio’s All Weather Portfolio suggests 7.5% in gold will be sufficient. 
Are we already on the road to the mother of all gold bull markets? Well, gold is certainly giving us some strong signals that it has awakened from a long slumber.
 
In the last 12 months Gold is up $303.40 and 25.27%. Silver is on the move too. This, dear readers, is what the early stages of a bull market looks like.
Here is some good stuff from Ed Steer. He writes, “ Ask yourself why JPM cornered the silver market? "They" know they can do whatever they want and get away with it.  These guys and gals know full well the dollar and FIAT hegemony will end. That and the nexus of increasing industrial usage of silver makes their move a no brainer.”
 
Here is more information of interest.
 
Ed Steer
 
With the high volumes in both gold and silver yesterday, there was no sign whatsoever that the Big 8 traders are giving up their fight to contain the prices of these two precious metals, That's especially true in gold, as the increase in open interest in yesterday's Preliminary Report was very chunky for the second day in a row. These traders continue to pile in on the short side with abandon.
 
Here are the 6-month charts for the four precious metals, plus copper and WTIC -- and the precious metals continue their quiet march higher. If you check the RSI for both gold and silver, they're quite some distance below being overbought, so there appears to be more room to the upside as far as price is concerned. But it also appears that the Big 8 will continue to be the short sellers of last resort -- and this will continue until one of the smaller of the Big 8 is forced to cover...or we get another engineered price decline.
 
As Ted Butler keeps saying, how this current and ever-expanding short position gets resolved, will determine what direction the major price move will be. If we do get another one of those patented 'wash, rinse, spin' cycles, it's my opinion that it will short, but brutal -- and Ted's opinion is that this will be the last time that the smaller traders in the Big 8 category go this far in the margin call hole again. So we wait some more.
 
Ask yourself why JPM cornered the silver market? "They" know they can do whatever they want and get away with it.  These guys and gals know full well the dollar and FIAT hegemony will end. That and the nexus of increasing industrial usage of silver makes their move a no brainer.
 
" I was taken aback by the revelation that one of the lawyers representing the JPMorgan employee who heads global metals trading is the former CFTC Enforcement Division Director, David Meister. Meister was brought in by Gary Gensler and was the Enforcement chief from November 2010 to October 2013. His tenure overlapped a large portion of the time that a formal Enforcement Division investigation into silver manipulation was active and ongoing (that found nothing wrong in the end). In fact, Meister departed the agency shortly after the silver investigation was ended inconclusively. Many of the charges and trading violations just alleged by the Justice Department occurred when Meister was Enforcement Director. In addition, he was on my regular e-mail list and was sent my articles along with other CFTC officials. How is it possible that Meister can be allowed to represent anyone in this case against the DOJ and CFTC? I may not be well-versed in what constitutes conflict of interest violations and the revolving door between government and industry, but this stinks to high heaven ." --  Silver analyst Ted Butler : 18 September 2019
 
You'll remember those famous paragraphs by British economist Peter Warburton from back in April of 2001. In his now-classic essay..." The debasement of world currency: It's inflation but not as we know it "...Peter had this to say...
 
" What we see at present is a battle between the central banks and the collapse of the financial system fought on two fronts. On one front, the central banks preside over the creation of additional liquidity for the financial system in order to hold back the tide of debt defaults that would otherwise occur. On the other, they incite investment banks and other willing parties to bet against a rise in the prices of gold, oil, base metals, soft commodities or anything else that might be deemed an indicator of inherent value. Their objective is to deprive the independent observer of any reliable benchmark against which to measure the eroding value, not only of the U.S. dollar, but of all fiat currencies. Equally, they seek to deny the investor the opportunity to hedge against the fragility of the financial system by switching into a freely traded market for non-financial assets. 
 
It is important to recognize that the central banks have found the battle on the second front much easier to fight than the first. Last November I estimated the size of the gross stock of global debt instruments at $90 trillion for mid-2000. How much capital would it take to control the combined gold, oil, and commodity markets? Probably, no more than $200 billion, using derivatives. 
 
Moreover, it is not necessary for the central banks to fight the battle themselves, although central bank gold sales and gold leasing have certainly contributed to the cause. Most of the world's large investment banks have over-traded their capital [bases] so flagrantly that if the central banks were to lose the fight on the first front, then the stock of the investment banks would be worthless. Because their fate is intertwined with that of the central banks, investment banks are willing participants in the battle against rising gold, oil, and commodity prices. 
 
Central banks, and particularly the U.S. Federal Reserve, are deploying their heavy artillery in the battle against a systemic collapse. This has been their primary concern for at least seven years  [1994...Ed] . Their immediate objectives are to prevent the private sector bond market from closing its doors to new or refinancing borrowers and to forestall a technical break in the Dow Jones Industrials. Keeping the bond markets open is absolutely vital at a time when corporate profitability is on the ropes. Keeping the equity index on an even keel is essential to protect the wealth of the household sector and to maintain the expectation of future gains. For as long as these objectives can be achieved, the value of the U.S. dollar can also be stabilized in relation to other currencies, despite the extraordinary imbalances in external trade ."
 

The U.S. authorities were aware that three JP Morgan traders were manipulating precious metals markets from the start and intentionally "looked the other way," Max Keiser believes.
 
"Eric Holder, who was attorney general under [former US President Barack] Obama when this first came to light, said that market manipulation and fraud were important for the American economy and that he, as the attorney general, could not prosecute," the host of RT's Keiser Report says, calling the JP Morgan fraudsters and the likes "too big to jail."
 
"And that too-big-to-jail was part of the legal landscape for America, and bankers were getting a green light to commit massive fraud."
 
The fact that precious metals traders at JP Morgan made millions through fraudulent trades, operating a criminal conspiracy to manipulate prices called 'spoofing', has been an open secret for years, with Max himself describing the scheme back in 2011.
 
However, not until this week did the Justice Department charge the traders with fraud, as well as "conspiracy to conduct the affairs of an enterprise involved in interstate or foreign commerce through a pattern of racketeering activity" - a charge normally reserved for members of an organized crime ring. Max Keiser says the near decade of neglect towards this major case has actually been somewhat of an official agenda for the authorities.
 
"That was the message from the Justice Department - commit all the fraud you need as long as you support the U.S. dollar."
 
"If you need to manipulate the markets and break laws, then we're going to look the other way because the Justice Department believes that defrauding the markets is sacrosanct with the American way." Keiser believes the U.S. authorities have always "equated Americanism and capitalism with fraud."
 
"Thanks to Eric Holder, Barack Obama and now Donald Trump - this is the American economy," he states.
 
This news story appeared on the  rt.com  Internet site on Saturday morning Moscow time -- and I thank Kae Lewis for pointing it out. Another link to it is  here .
 
 
When it comes to the "fair value" of stocks, nobody knows it better than insiders, who tend to aggressively offload shares any time they see the price of their equity holdings as generously high. This, however, may be a problem for the broader market because according to research from Smart Insider, the market is now the most overbought since the first dotcom bubble, as "executives across the U.S. are shedding stock in their own companies at the fastest pace in two decades, amid concerns that the long bull market in equities is reaching its final stages."
 
As the FT reports, corporate insiders - typically CEOs, CFOs, and board members, but also venture capital and other early state investors - sold a combined $19BN of stock in their companies through to mid-September. Annualized, this puts them on track to hit $26BN for the year, which would mark the most active year since 2000, when executives sold $37bn of stock amid the giddy highs of the dotcom bubble. That 2019 total would also set a post-crisis high, eclipsing the $25bn of stock sold in 2017.

Here are 8 reasons why gold is riding a huge unstoppable trend. Giambruno concludes:  Here’s the bottom line: The stars have aligned for gold. A bull market of historic proportions is on the menu and likely is already in its early innings.
Casey Daily Dispatch
 
Nick Giambruno
 
Earlier this year, I told you 2019 could be the start of the biggest gold bull market in history. I’m not talking about a typical gold bull market. This gold bull market is riding a huge, unstoppable trend: Gold is being re-monetized and is returning as money. Back in June, I showed you  eight reasons why .
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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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