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Bill Holter has penned two thought provoking essays and is über-bullish on the mining shares at their current depressed levels.  Andy Hoffman and I have talked about this and Andy holds Bill in the highest esteem but in this area he flat out disagrees.  These are two very bright guys, yet one of them will be wrong about the mining shares.  Who will it be?  That’s what makes this industry so darn interesting.  There is room for disagreement and there is so much information coming at us from every direction that the challenge becomes to sort it all out.  I am not as bearish on the mining shares as Andy is and have a decent position in Jim Sinclair’s TRX.  But it is a small position, relative to the physical gold I have purchased.  Even Andy agrees that at some point, when the Cartel loses its grip (via naked shorting), the shares will soar.  My advice is to stick with the best of the best, avoid the exploration companies, and make sure your core position of physical metals is sufficient before you move into the mining sector.

Since not all of my readers also read Ranting Andy – I want you to get to know him better.  Here is an excerpt from yesterday’s Commentary:
This morning, I received perhaps the most insulting email in my five-plus years of writing on these topics, so congratulations to “John” for making my day (although he wrote a thoughtful follow-up response later on).  The full message is in the “Mailbox,” but I have excerpted some of the more relevant points below.  The reason I am being so harsh is that nothing angers me more than my comments being distorted – or forecasts maligned – particularly when I have written solely for the purpose of helping people.  It was not “John’s” intention to be offending, but that’s how I read it, per below.

How many times can a layman believe the silver floor looks like it’s in, and then the next day it drops another fifty cents?  

Being a layman is immaterial.  What matters is that buyers understand the risks involved before making investments.  I don’t think I could have been more clear that PHYSICAL PMs are not investments, but savings, while “PAPER PM Investments” are just that – speculations with just as much chance of falling as rising, particularly when the government is illegally attacking them each day.  The fact that John appears to be 100% invested in silver yields my suspicion he does not truly understand why we buy PMs – wealth protection, NOT speculation – and his angst suggests he is holding a significant amount of “PAPER PM Investments” such as ETFs and mining shares – NOT PHYSICAL metal.

The sad thing about silver is it’s hard as a potential buyer to learn true facts. You may say you’re giving facts, but the true fact is you are giving facts mixed with speculation.  Fine from a writer’s standpoint, but when speculation is greater than facts, the outcome is usually what it’s been for months…..good for nuttin!  It sure doesn’t appear that Harry Dent and others that have been calling for the metals to tank with deflation are wrong.

Unlike most financial writers, I clearly delineate fact from opinion, and have ranted at length against “conspiracy theorists” – i.e. those that conclude things they can’t possibly know to be fact.  Frankly, I have presented more facts about this sector than nearly anyone, and the fact that some of those facts – such as blatant Cartel suppression – don’t agree with mainstream MISINFORMATION and PROPAGANDA doesn’t make them any less factual.  I speculate as well, but when I do I tell you so, giving you the option to make your own conclusions.
Better yet, “John” cites Harry Dent and the other “closet bulls” that spend their careers instilling fear in their clients, instead of helping PROTECT them.  I had never heard of Harry Dent or Larry Edelson until joining Miles Franklin seven months ago – but am quite aware of their kind, the most pervasive cancer in our sector.  These so-called “good guys” thrive on churning clients’ portfolios with “trading ideas,” the antithesis of what they should do to PROTECT their assets.  Any time the Cartel breaks PAPER gold below a “key technical level,” these writers state “we are bearish for the short-term, but bullish for the long-term.” Thus, if they turn out to be wrong – which they often are – they just say “see, I told you I was bullish.”  Been watching it for “TEN YEARS OF HEAVEN AND HELL,” and expect to continue seeing it until the great PM bull ends with a GLOBAL gold standard.
As for the so-called “deflation” John champions – causing “tanking metals prices” – where is it?  For one, the definition of deflation is a contraction of the money supply, which doesn’t appear to be occurring ANYWHERE – particularly by the world’s largest Central banks, the Federal Reserve…

…and ECB.

Also, what part of the PM price changes below speaks of “deflation?”  I cannot think of a single item one NEEDS to live on that has declined in price over the past decade.  Conversely, the prices of food, energy, healthcare, and education have EXPLODED, while – care of the PPT – the “DOW JONES PROPAGANDA AVERAGE” is far closer to its highs than lows.  The only things falling in price are the stocks of overleveraged or obsolete companies, the oversupplied real estate and automobile markets (although housing RENTS are rising sharply), and technology gadgets care of new innovation.

Year

Gold

Silver

2001

1%

-3%

2002

26%

5%

2003

17%

23%

2004

7%

18%

2005

17%

29%

2006

25%

47%

2007

34%

18%

2008

1%

-28%

2009

26%

56%

2010

28%

75%

2011

13%

-4%

2012

-1%

0%

CAGR

16%

20%

Good luck.  I know you will say you don’t need it, but with no QE in sight, no regulation, no Pan Asian gold exchange as a game changer :), china growth now on a stall, and the U.S. dollar on a tear….I would accept the best wishes, and pray the metal doesn’t continue to tank back to 2008 numbers.

We all need luck, but when it comes to holding UNMARGINED PHYSICAL gold and silver, “luck” is not necessary.  It has been the Cartel’s Achilles Heel for the past 12 years, and will be more so in the coming years, as billions of the world’s denizens seek to protect wealth from the ravages of hyperinflation.  Furthermore, to say “no QE in sight” is to ignore EXPLOSIVE money supply growth right in front of your eyes – no matter how Central banks “spin” their current operations.
As for no regulation, you’re darn right that’s a major issue, but no more in PMs than all other businesses destroyed by Wall Street, Washington, and London.  All PAPER industries – by the way – including real estate, which has turned into a game of churning property titles.  The PAPER PM sector has been destroyed by lack of regulation, but PHYSICAL supply and demand factors strengthen each day.
Regarding the Pan Asian gold exchange, who cares?  I am still unclear exactly what short-term impact it would have had, but whether or not it exists, the Chinese government has been actively encouraging its population to buy PHYSICAL PMs for years, who have been obliging them en masse.
As for prices “tanking to 2008 numbers,” I’d say the odds of that occurring are close to ZERO.  For one, PHYSICAL prices never fell as much as PAPER prices, with PHYSICAL silver – for example – bottoming closer to $16-$17/oz versus the $9/oz PAPER print the Cartel induced with massive naked shorting.  Secondly, many major equity bourses have already fallen below their 2008-09 lows – such as Spain, Italy, and soon-to-be France, Japan, and China – yet, PAPER gold is $1,550 compared to its 2008 low of $670, and PAPER silver $27.80 compared to its 2008 low of $9.00.  Thirdly, debts, deficits, money printing, bankruptcies, and consumer prices are DRAMATICALLY higher despite the so-called deflation you mention, and I ASSURE you the world’s Central banks will not allow “TBTF” banks and sovereigns themselves fail when the alternative is to “kick the can down the road” with additional MONEY PRINTING.

With the massive mining production that has happened in the last couple years, it would take a long, long time – maybe even a decade – to get people to buy into silver if it tanks back to the low teens.

For one, what “massive mining production” is John speaking of?  Silver has officially been in a PHYSICAL supply deficit for at least 15 years, while gold production peaked in 2002!

Over the last 18 months you have been wrong as have almost all of king world news guests . It looks like that will continue, quite frankly, as we seem headed into deflation.  Saying QE3 is coming day after day, week after month, doesn’t make it come 🙂

Eighteen months ago, gold and silver prices were $1,350/oz and $25/oz, respectively, compared to $1,550/oz and $27.80/oz today.  At that time, I forecast surging PM prices, global economic collapse, and the equivalent of “QE to Infinity,” which were followed by silver surging to $50/oz and gold to $1,920/oz – the latter in the wake of Global Meltdown II ­– and GLOBAL money supply growth putting 2008-09 to shame.
Today, we are in the early stages of Global Meltdown III, with no change in my forecasts.  And by the way, EXACTLY 18 months ago – thanks for the lay-up, John – was “D-DAY”, November 9, 2010.  That was the day the Cartel stepped up its PM suppression efforts, through machinations that I – and I alone – have dutifully documented each and every day.  If not for such desperate efforts, PM prices would be far higher today, but if one holds UNMARGINED PHYSICAL gold and silver, it matters not.  No matter what happens, they will hold their purchasing power better than nearly ALL other assets, and eventually destroy the Cartel’s suppressive PAPER naked shorting.
And if you don’t believe me that PM prices have recently been hit solely due to Cartel PAPER attacks – starting with September’s “OPERATION PM ANNIHILATION,” and accelerating with February’s “LEAP DAY VIOLATION” – take a look at James McShirley’s commentary from yesterday’s GATA website.  Last week, I successfully predicted Tuesday’s PM attack based on the “2%/1%/Flat/Hard Down” algorithm that took shape on Thursday and Friday.  Yesterday, I didn’t realize another such algorithm was forming, as the 2%/1% increases occurred in COMEX trading hours – which James McShirley focuses on – as opposed to the NYSE trading hours I typically observe.  Both approaches tend to yield the same result, per his commentary yesterday.  Remember, yesterday’s “fat finger” WATERFALL DECLINE was catalyzed by NOTHING at all – as no other markets materially changed – suggesting as blatant a Cartel attack as I can recall:

Deja Vu all over again-James McShirley
What a farce the markets have become. In a repeat of last Thursday and Friday’s trading gold was capped at 2% yesterday, and 1% today. This surely must be the most in-your-face manipulation ever. Once again I beg of any technician to show me the significance of $1,573.50, and why that number met a wall of algo sell programs. Maybe someone would like to calculate the probability of a freely traded commodity stopping at 2%, then 1% on consecutive Thursdays and Fridays.
The comatose HUI performance would lead us to believe “steady, down hard” is waiting in the wings for an encore Monday- Tuesday. But hey, stranger things have happened. Hell, stranger things happen EVERY day at the Crimex. In fact the CME is now offering 19-1 leverage on gold contracts. They must be having a JPM celebration sale in honor of The Blythe. “All derivative contracts 15% off”. They’re practically giving paper gold away. As they say though hurry, (physical) supplies are limited.