The Miles Franklin Newsletter
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From The Desk Of David Schectman
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David's Commentary (In Blue):
I was curious to see how gold and silver would open the week. They opened a few eyes last week, as gold closed at a six-year high and silver added a buck, which was silver’s highest price in a year. The silver to gold ratio headed down from 93:1 to 87:1. As the ratio was rising, it was by very small amounts over time but on the way down, the fall was fast and large. Ted Butler pointed out that prior to the start of the silver manipulation on COMEX, which started around 1982, the average ratio was no more than 45:1. If the ratio was the same now, silver would be selling for $31.70. Such is the power of the manipulations on COMEX. In addition, since 1982 we now have twice as much gold and half as much silver as we did then.
The evidence all leads back to JPMorgan. Their manipulation of the price has allowed them to accumulate 153 million ounces in their own COMEX warehouse plus an additional 50-100 million ounces it holds in other COMEX warehouses.
A recent trend I’ve noticed is that a majority of the traders and newsletter writers have become cautiously bullish and there are very few “Harry - $350 - Gold Dent” voices out there. The investment environment favors precious metals now. The dollar is falling, interest rates are falling, Trump’s tariff war is gaining steam and the Middle East is one mistake away from lighting a fire beneath the price of oil. Of course, there are experts who believe that money will continue to pour into our stock and bond markets (islands of safety in an increasingly unsafe world) so we could actually have a market where precious metals and stocks rise at the same time. At least for a while. But as soon as the stock market starts to pull back, all things being equal, gold and silver should move dramatically higher. I would not be surprised to see it happen in the second half of this year.
Sprott says gold continues its bullish consolidation.
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Last week, gold bullion continued its bullish consolidation ($1,380 support, $1,440 resistance), and gold equities recovered to touch new 52-week highs as Federal Reserve Chairman Jerome Powell reaffirmed the likelihood of a July 31 interest rate cut.
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Rick Ackerman asks why does this gold rally feel different?
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For years, gold’s corrections have been brutal, and that is why many erstwhile bulls have not rushed to buy this rally. They have instead been waiting for a nasty pullback in order to load up at bargain prices. But Mr. Market has not obliged. Instead, retracements have been shallow and rallies steep. The later have often occurred after-hours, but in one recent instance via a trampoline bottom that came early in the day.
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Egon von Greyerz just issued a dire forecast as we approach panic in the global markets. He says people will not believe his predictions because they are too dire. The economic bubble is coming to an end. This time it will not only involve the biggest wealth destruction in history, but also lead to major problems in society with mass unemployment, no social security, no pensions, breakdown in law and order, social unrest, civil war and geopolitical conflict. The problem is: Truth is only recognized after the fact.
How bad will it be this time? He says,
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“When the secular bull market turns down, the world will experience unprecedented market behavior as asset bubbles burst. Investors will find that there are no buyers at any price. And for gold, there will be no sellers at any price.”
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(Jim Sinclair and Bill Holter have made the same predictions)
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Stock will go NO BID
Bond will go NO BID
Derivatives will go NO BID
Gold will go NO OFFER
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“That at some point during the downturn stocks will fall precipitously with no buyers to be seen. Computer trading programs accounting for 70-80% of volumes will issue massive sell orders and the price will just drop into a black hole since there will be no bid. The general investment public will naturally panic and sell at any price. But the problem is that there will be no market because there will be no buyers. This is how stocks quickly can drop 50% or more in a couple of days due to a total lack of liquidity and buyers.”
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He says the Fed will take QE "To Infinity and Beyond"
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It will be the same with the bond market. Investors will want to get out of government or corporate bonds, which are unlikely to pay the interest, and many will simply default. With no buyers, the bond market will collapse and bond rates will go to infinity. Rates above 50% might sound attractive, but it will be meaningless if neither interest nor capital will be paid.
This will create total panic in credit markets as global debt of $250 trillion implodes. In the meantime, central banks around the world will print additional $100s of trillions in a futile attempt to save the world.
But it will be the $1.5 quadrillion derivatives market that will totally kill financial markets. This is a totally false market that only works in bull markets when there is liquidity and counterparties pay up. In the coming implosion of asset values, there will no liquidity and no buyers of worthless derivatives as counterparties default. In retrospect, this incredibly profitable activity for all the major investment banks will be judged as fraudulent with severe consequences for management and regulators as well as for the world.
Obviously, central banks will panic, print unlimited amounts of money, lower rates to zero or negative, halt trading in markets for extended periods, and manipulate markets in every possible fashion. But they will fail since they will be totally bankrupt, having issued unlimited amount of worthless bonds that they can never repay.
As panic in markets begins and investors quickly turn from the stock market euphoria of the past to total fear, some investors will rush to buy wealth preservation assets. Some part of whatever liquidity they have left will go into precious metals — gold, silver and platinum. The only precious metal of size is gold and initially there will be gold available, albeit at much, much higher prices than what is being quoted today.
Initially there will be some willing sellers and gold will rise to multiples of the current price. But as the paper gold market collapses, there will be panic and at that point gold will go “no offer.” No offer means that there will be no gold offered at any price since there will be no physical gold available to be bought. Eventually there will probably be a price where some sellers are prepared to part with a small portion of their gold but that price is likely to be at such a high level that it will be difficult to fathom today. Due to high inflation or hyperinflation, no gold seller is likely to accept paper money as payment, but more likely other assets, whether it will be property or commercial assets such as businesses.
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Ray Dalio, founder of the world’s largest hedge fund, says gold will be a top investment. As economies slow, he says, "central banks will increase the money supply hoping to keep the cheap-money bull markets humming while the dollar devalues. The investments that will do best in this economic environment
will be those that do well when the value of money is being depreciated and domestic and international conflicts are significant, such as gold."
In his June 6 Trend Alert, when gold was $1,322 per ounce, forecasted that a series of converging trend lines, including “weakening economic fundamentals and how central banks will address them – from Australia cutting interest rates to new lows, to China inventing money pumping schemes to artificially inflate falling equities and its sagging economies with cheap money” – would ignite the net gold bull run.
Here is a portion of what Celente had to say:
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AND THEN THERE’S THE DEBT BOMB
Global debt exploded by $3 trillion in the first quarter of 2019 to reach $246.5 trillion. This sharp increase has brought global debt to 320 percent of the world’s Gross Domestic Product.
And converging with economic and market trends lines are American war drums loudly beating against Iran and Venezuela. At stake, in addition to the potential of massive loss of life and property, is the price of oil.
Should the conflict escalate, and oil prices spike above the $100 per barrel mark, it will crash both equity markets and economies worldwide.
TREND FORECAST: More monetary central bank stimulus, more economic indicators reflecting sustained downward growth worldwide, diminished currency values and rising prospects for war are the ingredients for gold to shine. We maintain our six-year forecast, that once gold, now hovering around $1,410, sustains value above $1,450 per ounce it will move to $2,000 plus range.
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Bubba Horwitz told Kitco News:
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“Silver has caught a bid and it looks like it wants to go higher. If this breakout can continue, we’re on our way to $17 and then if we can get through there then I think you’re on your way to $20,”
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Now that silver has cleared the $16.20 hurdle, the path is clear toward $17 and higher. That is not an unreasonable expectation. A decade ago, silver was able to remain above $25 an ounce for a considerable amount of time.
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Ed Steer
As I've been mentioning on many occasions over the last few weeks, the headwinds that the powers-that-be are fighting in all markets is becoming more powerful with each passing day. The big gusts in the developing hurricane this week were...a] a recommendation by Deutsche Bank that buying gold would be a good idea...b] followed soon after by Ray Dalio's comments in a similar vein... c] two Fed governors on consecutive days calling for a rate cut at the next FOMC meeting -- and d] Trumps plaintive tweets about a lower U.S. dollar.
And there were more straws in the wind than those...starting with the three stories bunched together in today's Critical Reads section...two of which were from top people at the World Gold Council. And not to be forgotten is that Willem Middelkoop piece in Friday's column from the prestigious OMFIF website headlined "
Towards a new 'de facto' gold standard
".
And not to be forgotten is the further 600,000 troy ounces of gold that Russia's central bank squirreled away in June, plus heaven only knows how much they've already purchased in July. And what about the 44.9 million troy ounces of silver that have vanished into all known depositories, ETFs and mutual funds over the last four weeks -- and the 1.55 million troy ounces of gold over the same time period?
Then there's this Iran thingy...
'Da Boyz' have been able to prevent a price explosion in the paper precious metal market, at least for the moment...but the physical market is telling the true tale. The run to hard assets is now on in earnest.
As Ted has been pointing out for many years now, JPMorgan has now amassed enough physical silver and gold to ride out any storm -- and cover whatever short positions they currently hold, plus come out of this smelling like that proverbial rose. However, that doesn't hold true for the remaining Big 7...of which Citigroup and HSBC USA are card-carrying members -- and maybe Canada's Scotiabank as well.
But as Ted has also pointed out, his concern is for the solvency of the remaining four or so members of the Big 8 who don't have the financial wherewithal to continue going short against all comers indefinitely. At some point, one or more of them will hit the wall and rush to cover. Then what?
To tell you the truth, I don't know, as my imagination just doesn't go further than that. But that's the direction this market is heading. Another engineered price decline may be in the cards, but that won't last. All it will do is delay the inevitable.
Then you have to ask yourself this question, dear reader...what will the powers-that-be do when they're finally face-to-face with checkmate?
At some point in the not-very-distant future, we're going to find out.
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According to Jim Rickards, Gold’s recent performance is a reaction to Trump’s currency war declaration. This is the beginning of a multi-year gold rally. He says in retrospect, it’s clear that the bear market ended in December 2015 at $1,050 per ounce and a new bull market, now in its fourth year, is solidly intact.
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Daily Reckoning
Rickards: Trump's Currency War Declaration Has Sparked A Multi-Year Gold Rally
Trump has had it!
He is apparently declaring a currency war on the rest of the world.
Trump resents China and Europe cheapening the yuan and the euro against the dollar in order to help their exports and hurt ours.
He says it’s time for the U.S. to cheapen the dollar also. Trump has a point. If you put a 25% tariff on many Chinese exports to the U.S. (as Trump has done) or a 25% tariff on German cars exported to the U.S. (as Trump has threatened to do), it can be a powerful way to reduce the U.S. trade deficit and generate revenue for the U.S. Treasury.
But a trading partner can undo the effect of the tariff just by cheapening its currency.
Let’s say a Chinese-made cellphone costs $500 in the U.S. If you slap a 25% tariff on the imported phone, the immediate effect is to raise the price by $125.
A simple solution to tariffs is to devalue your currency by 20% against the dollar.
Local currency costs do not change, but the cellphone now costs $400 when the local currency price is converted to U.S. dollars.
A 25% tariff on $400 results in a total cost of $500 — exactly the same as before the tariffs were imposed. Tariff costs have been converted into lower production costs through currency manipulation.
There’s only one problem with Trump’s currency war plan. There’s nothing new about it. The currency wars started in 2010 as described in my 2011 book, Currency Wars.
India & Russia Will Use Their National Currencies For Defense Deals To Bypass US Sanctions – Report
July 15, 2019
Russia and one of the biggest importers of its weapons, India, have decided to use their national currencies to transfer payments for massive defense deals in order to skirt possible US sanctions, according to Bloomberg.
Moscow and New Delhi have been boosting their arms trade in recent months, with Russia selling submarines, ships, tanks and jets to its Indian partners and set to supply S-400 air defense systems to the country. India’s procurement of S-400s, with a contract worth more than $5 billion, has triggered anger from one of the its largest trade partners, the US, which has warned India of possible consequences of the move.
The new payment method through the ruble and the rupee, agreed by the central banks of Russia and India, may avoid Washington’s sanctions threat. It would enable India to make the first payment for two warships built by Russia, Bloomberg said, citing sources. It is not clear what vessels were implicated in this, but last year the two parties inked a deal for four Russian guided-missile frigates for the Indian Navy, two of which are being built in Russia’s Kaliningrad region.
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Adam Taggart, writing for Peak Prosperity says,
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The Fed and its central banking brethren are now hostage to rock-bottom interest rates. They can’t raise them, less they asphyxiate the remaining shreds of GDP growth around the world. Especially now, when so much of the global economy is fast sliding into recession. Rate hikes at this point would simply crash the system.
So we can expect more unnatural and desperate measures from here. Fed rate cuts while the stock market is at all-time highs and employment at all-time lows? Sure. Negative interest rates on high yield (i.e. junk) bonds? It’s already happening in Europe.
But we shouldn’t expect these to work. The system has reached a point of debt exhaustion where each new $trillion stimulates much more weakly than the previous one, and causes the system to become exponentially more unstable.
Yet politically, there’s no appetite for anything other than “More liquidity!” to keep the status quo alive for as long as possible.
We’re already seeing the cracks appear. Gold, which serves as a mirror (or at least is supposed to when not intentionally suppressed) to reflect fiat currency devaluation, has decisively broken above its six-year ceiling price of $1,350/oz (trading as high as $1,450/oz last night)
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Peak Prosperity
We’ve Arrived At The End Of The Road
Decades of central bank intervention have left us with an unavoidable insolvency crisis
When Richard Nixon closed the gold window in August 1971, fully severing the US dollar from its gold standard, the Federal Reserve and other world central banks found themselves liberated. No longer was their ability to provide liquidity constrained by the physical limitations of the gold supply.
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I try to avoid political discussions. They don’t accomplish anything. When is the last time you succeeded in changing someone’s views? Or when is the last time someone else changed your views? How about NEVER. But in today’s world, people are eager to offer up their opinions. Do you love Trump or hate him? There are very few people without an opinion on Trump. I’ll give him that – he is on most people’s minds. Most of the people I know who voted for Trump were actually voting against Hillary Clinton, not for Donald Trump. But a vote is a vote. Many Trump supporters believe his policies are very good, but they hate his image and feel that his image is not “Presidential.” Would they vote for him again? A friend of mine just sent me the following article. I thought it was well written and represents the way many Trump supporters feel now, after nearly half his first term is in the rear-view mirror.
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Written by George S. Bardmesser, an attorney in private practice in Washington, DC:
I am a middle-of-the-road Republican who voted for Trump with the utmost reluctance in 2016. He sure wasn’t perfect. He was no Cicero, either ––though he can give a decent speech when the chips are down. He had a few extra skeletons rattling in his closet, especially compared to colorless non-entities like Jeb. So yeah, I was queasy about voting for an ex-registered-Democrat-from-New-York-and-possible-liberal-now-turned-Republican.
Was I worried? Hell, yeah! Was I depressed? You bet. But, really, what options were there? Hillary? Jill Stein? Seriously? Trump wasn’t my first choice or my second choice or my third choice, but by the time November 2016 rolled around, Trump was the only choice on the menu. So I swallowed hard, took a leap of faith, and pulled the lever for the Donald. And let me tell ya, every time one of these newly minted Democratic “stars” opens their mouth, the same thought goes through my mind: Thank God for Trump. Trump is my last line of defense. Trump is the only thing that stands between me and these hallucinogenic socialist nut jobs. Trump is what’s keeping chaos and left-wing insanity at bay.
Maybe I am not a gettable voter for the Democrats. Certainly not easily gettable, but had Trump turned out to be a closet Nelson Rockefeller, and the Democrats were to nominate a genuine centrist, who knows what could’ve happened? Isn’t that what politicians running for president are supposed to do –– spend a few months promoting themselves as the reasonable choice, and the other guy as unacceptable?
But today, every single Democrat I can name is working overtime to make damn certain that I will pull the lever for Trump again, and with both hands this time. Trump need not worry about locking down my vote; the Democrats are doing all the heavy lifting.
Every time the Democrats and their media allies peddle yet another “end of the Trump presidency bombshell,” I laugh hysterically. If I laughed any harder, people would think I was having an epileptic seizure.
I can’t even keep track of half the revelations that were supposed to bring Trump to an ignominious end. Even the Democrats forget most of them within days. Remember Papadopoulos? Flynn? Gates? Roger Stone?
Stormy Daniels? Right. you say? Yeah, okay. He probably did. Oh, hell, who are we kidding here? I am certain that he did. And I care about all this why? I can see why Melania would care, but why do I care?
Heck, I’ll go even further––it wouldn’t surprise me if Trump paid off a bunch of other women over the years. In fact, and here I am really going out on a limb, there was some reason to suspect, even before the election, that Trump hasn’t always been a faithful husband to his various wives. But, dear Democrats: I just checked my Vanguard and Fidelity account balances,
Michael who, you say? Michael Cohen? Oh, yeah, the sleazeball who took Trump’s money for years and years, and then, once his taxicab schemes and assorted other shenanigans fell apart and prison time loomed, suddenly had an epiphany about Trump? The guy who plead guilty to lying to Congress? The guy who begged Trump for a pardon? That Michael Cohen? If Democrats think Michael Cohen’s pathetic drooling before some congressional committee will change my mind, they are beyond delusional.
Trump Organization, you say? Something about possible non-compliance with New York State health insurance purchasing regulations? Congress will investigate, you say? Uh huh. I am fatigued out with these investigations. You want me to vote for some Democrat because Andrew Cuomo says Trump didn’t follow his insurance regulations? Are you people for real?
What’s that? Russia? Mueller? Collusion? I am sick of Russia and I am sick of Mueller. I am sick of Comey, Rosenstein, Ohr, McCabe, Yates, Strzok, Page, Baker, and the rest of the gang. I am beyond sick of them. I am vomit-inducingly sick of them. (And, for the record, I was born in Russia, so I know Russia like these Democrat clowns can’t even imagine.) After years of nonstop investigations, all they actually have on the collusion front is Manafort’s tax evasion from 10 years ago. That’s it?
Remember that New York Times monster 15,000-word article about Trump’s inheritance taxes 30 years ago? Ask me if I care, Jared Kushner? Next! Ivanka’s shoe line? Whatever. Trump Hotel in DC? Yawn. The Emoluments
Clause? Puuuuhhhhlease. Obstruction? Here, I agree. Trump made a mistake. He should have fired Comey’s ass on day one instead of waiting two months to do it.
But then, this is all yesterday’s news. Who needs last year’s bombshells when we have today’s contestants! The Donkey Party has a new leader: someone called Alexandria Ocasio-Cortez. Every time her bright red lips form a sentence, I hear a clarion call: Must Vote For Trump! Unlike AOC, I actually know firsthand what socialism is. I don’t need to imagine the future that AOC is trying to shove down my throat. I lived in that future and I pray I’ll never have to live in that future again
Every time AOC proposes to build trains to Europe, or wants butt plugs for cows to control their flatulence, or wants to spend $93 trillion on fairyland, I really, really want to vote for Trump. So make Ocasio-Cortez more visible! Make Ocasio-Cortez speaker of the House! Make her the keynote speaker at the convention!
All the CNN talking heads agree that Trump is an idiot? Maybe, but at least he isn’t planning to ban my car. Trump lies? Maybe, but with Trump, we’ll still have airplanes - and my 401(k) plan has been doing great since his election.
This gets us to the next installment of “Friday the 13th,” a.k.a. the Democratic presidential candidates. Kamala Harris, you say? You seriously want me to vote for Kamala Harris? And you say that Cory “Spartacus” Booker is just like Kamala, only better and balder? Are you kidding me? Pete Buttigieg? Ask me again when I stop laughing.
Bernie? Really? This grumpy near-octogenarian “public service” millionaire with three mansions is running for the presidency of the wrong country. All his best ideas have already been put into practice --- in Venezuela.
This is a guy who pseudo-honeymooned in the USSR (two years before it collapsed!), and didn’t notice that people were waiting in mile-long lines for literally everything. This is a guy who has never met a paleo-Stalinist dictator he couldn’t be best pals with. Bernie doesn’t need to pretend he is a complete crank; he is a complete crank.
I will personally call every one of my friends, neighbors, and acquaintances, and beg them to vote for Trump.
Did someone say Warren? Warren, the first Cherokee candidate — that Warren? Doesn’t she now want reparations not just for African-Americans, but also for Native Americans? Where, oh where, is that lever to pull for Trump.
Biden? The creepy old guy who likes to massage women and 13-year-old girls in public? That guy? I have a 19-year-old daughter, and I sure hope he never goes anywhere near her. But I do hope he runs. It feels like he’s been running for president in every election since Eisenhower. Can he lurch far enough to the left this time, to satisfy the woke police? I doubt it, but it will be fun to watch him try.
Ilhan Omar? Maybe she should run for president too. Nancy suggests that Omar is a good person who is simply too ignorant to understand what her words mean. I disagree. Omar is only saying what all the other Democrats are thinking. Yes, she is an anti-Semite. Yes, she is totally mainstream within the Democratic Party.
Throw that toxic Tlaib person into the mix, and we’ve got the triumvirate that truly runs the Democratic Party now –– Ocasio-Cortez, Omar, and Tlaib. I see this nutterfest, and let me tell you, dear Democrats: I am motivated as hell. If ever given a choice (in this election or in other ones) between Ocasio-Cortez, Omar, Tlaib, Pelosi, Warren, Harris, Booker, Biden, Sanders, or Trump, I will take Trump any day of the week.
I am a highly motivated Trump voter because the Democrats have motivated me up to my eyeballs. I have never been more motivated in my life because the Democrats are terrifying me. I am locked, cocked, and ready to rock in that voting booth. I just wish I didn’t have to wait 20 months.
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Private Safe Deposit Boxes
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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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