The Miles Franklin Newsletter
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From The Desk Of David Schectman
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A gold
price close above $1,420 would suggest a spike to $1,520, which was briefly touched this afternoon. This is a significant resistance area, but a break above $1,520-22 on a close basis, indicates $1,600 will happen in quick order. We were also bullish silver suggesting a gold break would usher in at least a $17 print on silver. Silver has some resistance at $17.20, briefly flirted with today, but a break here would suggest $18.50, with a gold move to our first breakout target.
- Peter Hug
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David's Commentary (In Blue):
Monday
Someone with deep pockets and a desire to keep the price of gold above $1,500 is cranking the price UP as the markets move from Asia to the West. Check out the green line below. Note how gold was taken down to below $1,490 and then, all of a sudden it powered back up to $1,505. This is very unusual. Have the commercials finally met their match? This will be fascinating to watch.
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Warren Buffet is not a fan of gold. I wonder why? Sure, it doesn’t pay any dividends, but the following chart is an eye-opener.
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Gold vs. Berkshire Hathaway
Returns over Last 20 Years… Berkshire Hathaway: +387% Gold: +488% (see below).
Gold Is Outperforming Berkshire Hathaway Over The Last 20 Years
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I’ve been warning our readers that this could happen for over a year now. Try and keep interest rates from rising if this happens?
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"The US is being contained by China with China’s holding of its sovereign bonds...
The U.S. is not completely without weakness."
Currency Wars Have Entered the Next Phase, Gold and Silver Will Move Higher
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On Monday, an audio acquaintance of mine told me that gold will outperform silver and we should tell all of our readers to sell their silver and buy gold. He said,
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Gold / Silver ratio indicating very real silver price manipulation is happening, I feel sorry for anyone who sold their gold and replaced with silver and lost all their investment potential.
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This, from a man who 25 years ago crafted a turntable mat out of raw pigskin, which he soaked in Aloe because he said “It’s made from God’s material” so it will sound better. (isn’t everything?) I tried it one time to pacify him. Actually, it sounded pretty good – but the aloe-soaked pig flesh shed all over the surface of the record and ruined it. He has always been full of ridiculous ideas. I still laugh about it. His comments today on silver are just as ridiculous. He should be reading Ted Butler.
Monday night the silver/gold ratio dropped back into the
87:1
range. It’s down from its high of 93.44. Silver could be on the cusp of a big move (relative to gold) as we forecasted it would. Just nine years ago it was as low as 31.68 to 1. Moving back to the 60:1 range is a reasonable expectation.
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Nick Giambruno
Why We’re About to See a “Crisis-Driven Mania” Into Silver
By Nick Giambruno, chief analyst, Crisis Investing
Even Tiffany & Co., the famous jewelry company, vilified them in a full-page advertisement in The New York Times, calling them “unconscionable.”
Big Business, numerous federal agencies, and politicians of all stripes hated them too.
The villains everyone loved to hate were the Hunt brothers. They were critics of the fiat money system and advocated for hard money based on commodities.
At the time, private ownership of most gold was illegal in the US. So the Hunt brothers turned to the next best thing: silver.
From the late 1970s to 1980, they stockpiled silver. And unlike other investors who settled their silver trades in cash, the Hunts took physical delivery. This often meant flying the silver to Switzerland for storage.
It squeezed the supply… and helped push the silver price up. Its price went from around $6 in the late ’70s to around $50 in 1980.
Even Tiffany & Co., the famous jewelry company, vilified them in a full-page advertisement in The New York Times, calling them “unconscionable.”
The villains everyone loved to hate were the Hunt brothers. They were critics of the fiat money system and advocated for hard money based on commodities.
At the time, private ownership of most gold was illegal in the US. So the Hunt brothers turned to the next best thing: silver.
From the late 1970s to 1980, they stockpiled silver. And unlike other investors who settled their silver trades in cash, the Hunts took physical delivery. This often meant flying the silver to Switzerland for storage.
It squeezed the supply… and helped push the silver price up. Its price went from around $6 in the late ’70s to around $50 in 1980.
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Longtime readers will recall President Nixon severed the US dollar’s last link to gold in 1971. Without the discipline of gold, there was nothing to stop the US government from printing as many dollars as it pleased. The dollar was now a purely fiat currency.
The Hunts bought silver because they figured the US government’s actions would lead to inflation. And they were right…
The ’70s saw the highest levels of inflation in living memory – even according to the government’s own crooked statistics. See for yourself:
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And today, the stage is set for an explosion in inflation. I expect it to kick off a crisis-driven mania into silver like what happened in 1980.
Adjusted for today’s prices, that means silver soaring above $160 an ounce… almost 10 times the current price.
So let’s look at why silver could be on the verge of a big rally…
The Next Crisis
The same kind of wrongheaded domestic and foreign policies that caused the panic into silver in the ’70s and early ’80s are not only present today, but stronger.
Let’s look at domestic ones first.
In the late ’60s and early ’70s, the US was still on a form of the gold standard that tied gold to the dollar at $35 an ounce.
But runaway deficit spending on welfare and the Vietnam War caused the US government to print more dollars than it could back with gold at the promised price.
By the late ’60s, the number of dollars circulating had drastically increased relative to the amount of gold backing them. This encouraged foreign countries to exchange their dollars for gold, draining the US gold supply at an alarming rate.
To plug the drain, President Nixon severed the dollar’s last link to gold in 1971. Recall this was the event that caused the Hunt brothers to become concerned about the value of the dollar and make their first moves in the silver market.
Today, the financial wastefulness is much worse.
Analysts expect the deficit to hit $1.5 trillion in 2019. And that figure assumes there’s no economic recession.
If there’s even a mild recession, a $2 trillion deficit is a real possibility. (A recession would reduce tax revenue and drive the deficit higher.)
Either way, trillion-dollar deficits are the new normal. That means an avalanche of new government debt to finance them. This will make the federal debt grow faster and faster. Even the government predicts that within 10 years, it will hit nearly $35 trillion, up from $22 trillion today.
A Predictable Pattern
Once the dollar starts to lose its value in earnest – which I expect could be sometime before the 2020 election – the next “Hunt brothers” will emerge.
As the dollar is debased, people will panic into precious metals… just like they did in the ’70s and ’80s, but likely on a much bigger scale today.
And much of that money will make its way into the tiny silver market. This will cause the price to spike. It’s a predictable pattern…
Financial Wastefulness → Currency Debasement → A Panic Into Silver → Price Spike
Bottom line, the stars are aligned for a silver price spike for the record books. And now is the perfect time to get in…
The current bear market in silver has been running for more than eight years. It’s the longest bear market in living memory – and one of the deepest ones.
You can see below that silver is down by about 65% from its peak in 2011.
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Silver is overdue for a bull market. And as silver prices head higher, select silver mining stocks could offer some of the best crisis investing returns in the months and years ahead.
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Just because I believe silver is a far better buy than gold now, doesn’t dampen my belief in gold. My portfolio balance now is about one-third gold, and two-thirds silver. I have traded a majority of my bullion gold coins (US Buffalos, Gold Eagles and Maple Leafs) for uncirculated and certified MS/63 and MS/64 semi-numismatic $20 Gold Liberties and Saint Gaudens. Under normal circumstances I would not have done this, but recently, for the first time in decades, the premium on these Double Eagles collapsed and they could be purchased for nearly the same price as the bullion coins. This is a no-brainer since when the bull market kicks in and the price of gold rises fast, the premiums will come back with a vengeance and these items should be worth hundreds an ounce more than their bullion content (nearly a full ounce per coin). You should check with your Miles Franklin broker and see if any remain at these once-in-a-lifetime prices.
I often talk about my love for music (and hi fi) and there is a verse that appears in many songs. It goes like this – “The Eagle Flies On Friday.” It’s part of several rock and blues standards. Have you ever heard the phrase? Do you know what it means? Well, a $20 Gold Piece is called a Double Eagle. A half ounce gold coin, one with a $10 face value, is called an Eagle. 100+ years ago, when gold was the preferred form of money, people would work a full week for a $10 wage and would be paid in gold coin, or an Eagle. So, at the end of a hard week at work, they would head off to the corner bar and spend their wages on booze – hence, The Eagle Flies On Friday.
The early part of this century, Goldman Sachs was THE main negative force in the gold market. Bill Murphy used to call them The Vampire Squid. They are in the shadows now with JPMorgan taking the lead in suppressing the price. So, when GS speaks kindly about gold, I pay attention.
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Gold Prices To Hit $1,575 In 3 Months, $1,600 In 6 Months - Goldman Sachs
(
Kitco News
) - Goldman Sachs Group upgraded its gold forecast for the first time this year, upping its 3-month and 6-month projections to $1,575 and $1,600 an ounce in light of escalating trade war tensions.
Gold prices were solidly above $1,500 an ounce on Monday — a level that was hit last week for the first time since 2013.
After rising nearly 4% last week, gold’s rally is far from over, according to analysts at Goldman, who see more upside in the yellow metal.
“Gold prices have increased further as a weaker CNY sparked substantial U.S. and global growth fears. With growth worries likely to persist, gold could rise further, driven by an increased ETF allocation from portfolio managers, who continue to under-own gold. We raise our 3, 6, 12 month gold price forecasts from $1,450, $1,475, $1,475/toz to $1,575, $1,600 and $1,600/toz, respectively,” Goldman analysts said in a note.
The U.S.-China trade war has entered stage two this summer as U.S. President Donald Trump announced a 10% tariff on the remaining $300 billion worth of Chinese imports starting September 1, the note said.
“With the U.S. and China taking a harder line on trade, our economists no longer expect a trade deal before the 2020 president election—a fundamental change in view,” the analysts including Sabine Schels wrote on Wednesday.
A currency war with depreciating CNY plays a key role in trade war tensions and Goldman’s outlook for the precious metals.
“Previously, China opted for stability and defended its currency in order to facilitate the ongoing trade negotiations in the background. Now, FX appears to be playing an increasingly central role in the trade tensions,” the analysts said. “We estimate that a 10% depreciation of CNY vs USD would spell as much as 13% downside to the S&P GSCI industrial metals sub-index.”
Weaker CNY, in this case, means higher gold prices due to increased global growth fears, added Goldman.
“The depreciation of the CNY led to an increase in ‘fear’, lower long term U.S. rates, and thus a higher gold price. Thus, a substantial depreciation of the CNY could lead to more ‘fear’ regarding U.S. and global growth akin to early 2016 and should be bullish gold,” the analysts stated.
Gold’s ETF demand is also on a strong uptrend, with Goldman upping its 2019 forecast from 300 tonnes to 600 tonnes.
“Now with the DM CAI persistently low, the trade war escalating, global equities selling off and volatility spiking, it looks like our risk scenario is playing out. Indeed, gold ETFs have recently built momentum almost as strong as in 2016 and we believe that can be maintained in the short term,” the analysts said.
Doug Casey on Why Gold Is the Best Money
By Doug Casey, founder, Casey Research
It’s an unfortunate historical anomaly that people think about the paper in their wallets as money. The dollar is, technically, a currency. A currency is a government substitute for money. But gold is money.
Now, why do I say that?
Historically, many things have been used as money. Cattle have been used as money in many societies, including Roman society. That’s where we get the word “pecuniary” from: the Latin word for a single head of cattle is pecus. Salt has been used as money, also in ancient Rome, and that’s where the word “salary” comes from; the Latin for salt is sal (or salis). The North American Indians used seashells. Cigarettes were used during WWII. So, money is simply a medium of exchange and a store of value.
By that definition, almost anything could be used as money, but obviously, some things work better than others; it’s hard to exchange things people don’t want, and some things don’t store value well. Over thousands of years, the precious metals have emerged as the best form of money. Gold and silver both, though primarily gold.
There’s nothing magical about gold. It’s just uniquely well suited among the 92 naturally occurring elements for use as money… in the same way aluminum is good for airplanes or uranium is good for nuclear power.
There are very good reasons for this, and they are not new reasons. Aristotle defined five reasons why gold is money in the 4th century BCE (which may only have been the first time it was put down on paper). Those five reasons are as valid today as they were then.
When I give a speech, I often offer a prize to the audience member who can tell me the five classical reasons gold is the best money. Quickly now – what are they? Can’t recall them? Read on, and this time, burn them into your memory.
Money
If you can’t define a word precisely, clearly and quickly, that’s proof you don’t understand what you’re talking about as well as you might. The proper definition of money is as something that functions as a store of value and a medium of exchange.
Government fiat currencies can, and currently do, function as money. But they are far from ideal. What, then, are the characteristics of a good money? Aristotle listed them in the 4th century BCE. A good money must be all of the following:
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Durable: A good money shouldn’t fall apart in your pocket nor evaporate when you aren’t looking. It should be indestructible. This is why we don’t use fruit for money. It can rot, be eaten by insects, and so on. It doesn’t last.
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Divisible: A good money needs to be convertible into larger and smaller pieces without losing its value, to fit a transaction of any size. This is why we don’t use things like porcelain for money – half a Ming vase isn’t worth much.
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Consistent: A good money is something that always looks the same, so that it’s easy to recognize, each piece identical to the next. This is why we don’t use things like oil paintings for money; each painting, even by the same artist, of the same size and composed of the same materials is unique. It’s also why we don’t use real estate as money. One piece is always different from another piece.
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Convenient: A good money packs a lot of value into a small package and is highly portable. This is why we don’t use water for money, as essential as it is – just imagine how much you’d have to deliver to pay for a new house, not to mention all the problems you’d have with the escrow. It’s also why we don’t use other metals like lead, or even copper. The coins would have to be too huge to handle easily to be of sufficient value.
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Intrinsically valuable: A good money is something many people want or can use. This is critical to money functioning as a means of exchange; even if I’m not a jeweler, I know that someone, somewhere wants gold and will take it in exchange for something else of value to me. This is why we don’t – or shouldn’t – use things like scraps of paper for money, no matter how impressive the inscriptions upon them might be.
Actually, there’s a sixth reason Aristotle should have mentioned, but it wasn’t relevant in his age, because nobody would have thought of it… It can’t be created out of thin air.
Not even the kings and emperors who clipped and diluted coins would have dared imagine that they could get away with trying to use something essentially worthless as money.
These are the reasons why gold is the best money. It’s not a gold bug religion, nor a barbaric superstition. It’s simply common sense. Gold is particularly good for use as money, just as aluminum is particularly good for making aircraft, steel is good for the structures of buildings, uranium is good for fueling nuclear power plants, and paper is good for making books. Not money. If you try to make airplanes out of lead, or money out of paper, you’re in for a crash.
That gold is money is simply the result of the market process, seeking optimum means of storing value and making exchanges.
Chris’ note: As we’ve said before, to take advantage of this gold surge, your first step should be to buy physical gold.
But you shouldn’t stop there. Owning gold stocks in your portfolio is a great way to juice your returns. Even just a small run-up in gold can send these stocks soaring… and now’s the time to stake your position
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Ed Steer
The feds can fool some of the people some of the time, and they can fool stock market investors almost all the time. But they can't fool gold.
Gold is real money. Yes, it gets overexcited once in a while... and it tends to exaggerate. But over time, it faithfully records what things are worth. And right now, it's telling us that the stock market is worth less than half of what it was worth 20 years ago.
We will pause to let you absorb that info-grenade.
If we're right about this, it tells us what we've long suspected... that from an economic perspective, the whole 21st century has been a bust.
America's most precious capital - its leading industrial companies - has lost half its capital value. Whizz-bang technology has gained these companies nothing.
Wall Street has been unable to add a single penny. The feds, the manipulators with PhDs at the Federal Reserve, and the genius elite have totally failed to produce a richer society. Instead, they've produced a poorer one.
Could it be? Could that be right? What are we missing?
This commentary from Bill showed up on the
bonnerandpartners.com
Internet site early on Tuesday morning EDT sometime -- and another link to it is
here
.
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Here is one more “must read” articles on gold. Everything Egon writes he knocks out of the park. The theme of his article is one echoed by Miles Franklin and is the basis of fully understanding what gold is all about.
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“It is not prices that are going up but the value of money which is declining rapidly.”
As I discussed in last week's article, central banks are now panicking. They know that the world economy and the financial system is standing on a foundation of quicksand. The effects of quicksand is that the harder you try to get out, the deeper you sink. And this will be the next phase for the world economy. Central banks only have two pills at their disposal. One is called money printing and the other is interest rate manipulation.
Since Nixon closed the gold window in 1971, central banks have overdosed these two medicines with ever increasing frequency. The consequences for the world have been disastrous but virtually no one has noticed. For example, the average house in the U.K. cost £4,700 in 1971. Today the price is £230,000 even though you would only get a shed for that money in South East England. Still, the average price has gone up almost 50x or 4,800%. Let's say that instead of buying a house, the person put £4,500 in the bank earning 4% per annum for 48 years between 1971 and 2019. Today he would have £30,000 in total, including the interest. So his money in the bank went up 6x whilst the house went up 50x. Obviously, he can't now afford to buy a house with his savings having lost most of their purchasing power.
This is how savers have been crushed by government’s irresponsible destruction of the value of money. Credit expansion and money printing have totally demolished the value of money and also the incentive to save. Today it is even worse for savers since it is no longer possible to earn an annual interest return of 4%. In most European countries, you earn nothing or negative interest. Currently savers thus have to pay a penalty to the government for being thrifty. This is totally outrageous and will soon lead to the destruction of the financial system. As anyone who understands the basics of economics knows, real investment returns come from savings. To achieve real growth and a stable currency, total investments must equal savings.
Most people don't understand that the value of their money in the pocket is deteriorating all the time. They live under the illusion that prices are going up which is totally erroneous. It is not prices that are going up but the value of money, which is declining rapidly. The example of the house above going up 50x in 48 years is a good illustration. In real terms, the house has not gone up in value at all. It is the value of the money that has collapsed in all countries since Nixon closed the gold window.
This
interesting and worthwhile
commentary from Egon was posted on the
goldswitzerland.com
Internet site on Thursday sometime -- and I thank Phil Manuel for pointing it out. Another link to it is
here
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Ron Paul is a Libertarian and a Gold Bug. My beliefs are very similar to his. In this case, all I can say is: From His Mouth To God’s Ears.
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Ron Paul: We Are Witnessing the Final Days of the Fed
The author of a book called “End the Fed,” Ron Paul is certainly no fan of the Federal Reserve.
And in his latest weekly column, Paul says we are nearing the end of days for the U.S. central bank.
The Federal Reserve, responding to concerns about the economy and the stock market, and perhaps to criticisms by President Trump, recently changed course on interest rates by cutting its “benchmark” rate from 2.25% to 2%. President Trump responded to the cut in already historically low rates by attacking the Fed for not committing to future rate cuts.
The Fed’s action is an example of a popular definition of insanity: doing the same action over and over again and expecting different results. After the 2008 market meltdown, the Fed launched an unprecedented policy of near-zero interest rates and
“quantitative easing.”
Both failed to produce real economic growth. The latest rate cut is unlikely to increase growth or avert a major economic crisis.
It is not a coincidence that the Fed’s rate cut came along with Congress passing a two-year budget deal that increases our already $22-trillion-dollars national debt and suspends the debt ceiling. The increase in government debt increases the pressure on the Fed to keep interest rates artificially low so the federal government’s interest payments do not increase to unsustainable levels.
President Trump’s tax and regulatory policies have had some positive effects on economic growth and job creation. However, these gains are going to be short-lived because they cannot offset the damage caused by the explosion in deficit spending and the Federal Reserve’s resulting monetization of the debt. President Trump has also endangered the global economy by imposing tariffs on imports from the US’s largest trading partners including China. This has resulted in a trade war that is hurting export-driven industries such as agriculture.
President Trump recently imposed more tariffs on Chinese imports, and China responded to the tariffs by devaluing its currency. The devaluation lowers the price consumers pay for Chinese goods, partly offsetting the effect of the tariffs. The US government responded by labeling China a currency manipulator, a charge dripping with hypocrisy since, thanks to the dollar’s world reserve currency status, the US is history’s greatest currency manipulator. Another irony is that China’s action mirrors President Trump’s continuous calls for the Federal Reserve to lower interest rates.
While no one can predict when or how the next economic crisis will occur, we do know the crisis is coming unless, as seems unlikely, the Fed stops distorting the economy by manipulating interest rates (which are the price of money), Congress cuts spending and debt, and President Trump declares a ceasefire in the trade war.
The Federal Reserve’s rate cut failed to stop a drastic fall in the stock market. This is actually good news as it shows that even Wall Street is losing faith in the Federal Reserve’s ability to manage the unmanageable — a monetary system based solely on fiat currency. The erosion of trust in and respect for the Fed is also shown by the interest in cryptocurrency and the momentum behind two initiatives spearheaded by my Campaign for Liberty — passing the Audit the Fed bill and passing state laws re-legalizing gold and silver as legal tender. There is no doubt we are witnessing the last days of not just the Federal Reserve but the entire welfare-warfare system. Those who know the truth must do all they can to ensure that the crisis results in a return to a constitutional republic, true free markets, sound money and a foreign policy of peace and free trade.
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Private Safe Deposit Boxes
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Unencumbered / Segregated Storage
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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.
For your protection, we are licensed, regulated, bonded and background checked droppable-1564579585984per Minnesota State law.
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Miles Franklin
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Wayzata, MN 55391
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