The Morgan Report Blog

Fed Chair Now Faces No Opposition to Money Printing Agenda

 
China’s Central Bank Touts Gold; Exclusive Interview with David Smith.

Transcript:

Mike: It is my privilege now to be joined again by David Smith, Senior Analyst at the Morgan Report and regular contributor to MoneyMetals.com. David, welcome back. How are you today?

David: I’m very good today, Mike. How are you?

Mike: Well, David, I wanted to have you on this week because you’ve always maintained such a level headed approach to the markets, which is so important right now. First off, what’s going on in silver? Are we in a danger zone now that we’ve taken out some key support levels and fallen below the 2013 low, in the low $18 range?

David: Well, we certainly have dropped down below that $20 to $18.50 range. We’re now in the $17.50s level. From a technical standpoint, it looks kind of on a negative side but, but the thing is, silver does like to take out supposed charge support levels and then turn around. We may be down here for awhile, but the point is we’re still in a band of support that goes down quite a ways further than what we are.

Mike: What do you have to say to the precious metals investor who may be getting pretty worn out by the market action over the last 2 or 3 years?

David: It’s been difficult, for sure. We’ve been in what I believe is a cyclical bear market within the larger secular bull market. That has a tendency to either “scare people out or wear people out” as David Morgan likes to say. It’s been hard for anyone with a position. But what’s kind of interesting is the people that kind of understand this and can go against their emotion, are continuing to add to their positions, especially the physical at the price level that we’re in now.

I was just noticing yesterday the sales of American Silver Eagles has moved up sharply in the last couple of weeks. The SLV ETF continues to add silver and gold sales in Europe are picking up substantially. The people that are adding to their positions either on a dollar cost averaging basis, especially the physical, or on a monthly basis or simply when they have some extra money, still are showing a lot of support in their belief that this bull market is in a pause rather than being over.

Mike: Last I checked the fundamentals for why you want to own gold and silver in the first place have not changed. I think we’ve still got governments spending beyond their means, central banks printing lots of paper dollars out of thin air. Unless I’m missing something, I mean, is that how you’re kind of looking at things, too?

David: Definitely. I can’t think of a single thing that’s gotten better from the standpoint of the fundamentals that will drive the metals higher. What we have now is a situation of poor sentiment and that’s when a lot of people are bearish. The sentiment can override fundamentals, it can override seasonals and then it can cause things to turn around in a substantial way. The charts don’t show that too well. They can show the level of sentiment, but they can’t say just when that sentiment will change and suddenly turn in the opposite direction and cause prices to move substantially higher.

Mike: We’ve talked before about investor psychology and talking about the mindset of say the market timer, for instance. I wanted to talk to you about bitcoin depression. I’ve heard you mention that recently. What is that and how might it relate to the metals market today because I think it’s a good little example of what could happen.

David: Bitcoin, of course, as you know, is an e-currency. It’s a virtual currency. When it first came out a few years ago, you could buy bitcoins for less than a dollar. I was reading an interesting article on bitcoin depression where this individual had spent around — I think he paid around $0.40 for his bitcoins or $0.80, I guess that was it. When it got up to $4, he sold them all for about a 500% profit, which, in just about anyone’s book, would be a good profit. Then he proceeded to watch bitcoins go from the from the $4 level where he had sold because he figured that was a blow-off top, to go up to almost $1,000 an ounce. Now the bitcoins still trade around $450 an ounce. That’s a pretty hard thing to overcome if you no longer have a position.

This is what happens if you think you can outsmart the market. It will also happen if you don’t take a long enough view and you sell into rallies and then, at some point, the market goes kind of where you thought it would go or even a lot higher. But meanwhile, you’ve taken a profit on your entire position on the way up. You either no longer have a position or it’s small enough that it isn’t affected by much even if the price goes much, much higher than you had anticipated.

Mike: Relating, I guess, a similar story to the precious metals here, you and I have talked a lot about palladium in the past, going back to early last year when you accurately predicted that this lesser known metal would outperform the other PMs. Of course it’s been a bit of a roller coaster ride over the last 10 to 15 years but, it’s been a great investment at the same time but, only if you stuck with it. Despite the recent pullback, palladium is still up a fair bit for the year. What is the palladium chart telling you? Then also give us some history of what’s transpired with this metal over the last decade or so.

David: You know Mike, I didn’t fully realize just how interesting the palladium chart was until last week when I took another look at the 25-year chart. I had kind of correlated this with the anecdote that I gave in one of my talks about an individual who bought palladium in 2005 at around $170 an ounce and it was a $50 premium, so he was into it for about $220, was his net cost for physical ounce. Palladium proceeded to go to $350 and then down to $180 again and then up to $600 and down. It proceeded over the last 7 or 8 years to go up and down to his point of entry several times on a monthly basis.

You could have found places where he could have market-timed and sold some or all of his position in there but the reality is if he had followed virtually any kind of technical analysis, he would have been out of the market long before $600 an ounce and then it dropped down again. We hit $920 an ounce here just a few weeks ago and it’s now around $800. Palladium kind of puts the matter to rest that technical analysis can always predict where things are going to go because all of those bullish signals turned bearish at that point. Yet here palladium is, even with the retracement that we’ve had of about $100 an ounce, it’s still almost 4 times higher than where this individual bought. This particular person did not get out of the markets, has most of the palladium that they had purchased and is still holding on.

Indications are that over the next few years, that that price may go much, much higher than it is. I think that has something to tell us about silver, which looks kind of poor from a technical standpoint by now, but if you believe, as we do, that all of the fundamental reasons are still here for much higher price, then you kind of turn off that mental computer and just don’t look at it on a daily basis. Wait for the fundamentals and the actual sentiment on the part of the markets to turn in the direction that you feel strongly will eventually happen.

Mike: We’re in the business of buying and selling physical metal here and we’re just as happy to buy metal back from customers as we are to sell it to them. Right now, of course, we’re getting a lot more buy orders than sell orders but, every time I hear about customers that are selling big portions of their position, if not their whole position, at these levels, I just cringe a little bit. This is not the time to be selling, in my eyes anyway. I think we’re seeing a fantastic buying opportunity over the long term. I would not want be that guy that’s selling at $17-$18 silver and looking back 3-4 years from now when it’s $50+ an ounce and just kicking himself because he just couldn’t hang in there. You’ve seen that obviously a lot in your travels, haven’t you?

David: It really is true. It’s so hard to go against your emotions but your emotions tend to steer you in the wrong direction, especially at market turns. As you mentioned, that person that sells out or sells a portion, the reason one is afraid to begin adding or to add more if they have the financial wherewithal to do it, needs to go against those emotions. All the great traders, and I’ve studied it for many years, have been able to do that. They’ve been able to buy when it was very, very difficult emotionally and hold on until prices went into a much higher overpriced zone and then sell some when the sentiment was overly, overly bullish. This is really how you make and hold onto significant profits. It’s not easy to do but, it’s also not impossible. You study how the great traders have done it and then you try to emulate them in that regard.

I think, Mike, one of the things that really keeps me up in this is that in spite of all the bearish talk that I see today and the looks of the charts is that we have not had a public blow-off yet. When this happens, I believe it’s going to be a global phenomenon with the Chinese and the Indians participating, as well as the Western countries. It’s going to be really something to see because the endemic problems that we have in this country of overspending and debt creation and excess money creation, is really going on in many other areas of the world, too. Those items that lead us to believe that the supply/demand situation is getting really out of kilter for the metals, these are things that affect other countries, too. It’s not just the United States and a short few European participants like it was during the more sedate 1980 bull run in gold and silver.

Mike: Given everything we’ve seen here and where we are in the precious metals markets today, mainly silver and gold, give us your assessment of things and then what kind of risk is there right now?

David: You can put together a risk/reward scenario, and no one can predict the future, but I look at the balance of support for silver down into the $15 range and even a little below that. But, if you assume that the risk, for example, is $2.50 or $3 from in here down into that level versus where you think it’s going to go and I think a case can be made that the risk/reward is probably 1 in 7 or 1 in 10 because once silver turns around and moves back up into the low $20s again, it has that potential to go up and challenge the all-time highs around $48 or $50.

People should remember, too, that in 1980 when silver topped out at around $50, if you adjust just for inflation, even if as government reports it, which is much lower than the actual real inflation that goes on, you’re going to have a situation of anywhere from $125 to $200 an ounce in inflation adjusted dollars where silver would be today at the equivalent purchasing power as it was in 1980. I would say 1 to 7 or 1 to 10 in terms of risk/reward. I think for gold, a minimum of 1 to 4 or 1 to 6. It takes a while for these things to work themselves out, but when they really get underway, I think that’s the potential that we’re looking at.

The thing is, with people today that are not able to go against their emotions and either hold their position or add to them, and of course without margin, once prices turn around, it will be impossible to know early on whether this is just a rally, that it’s destined to turn lower once again or whether the real thing is getting going and we’re seeing the early stages of a massive bull run to the top. By the time that becomes obvious to most people, most of the profit position will be past and you will now have a much higher risk position. Instead of the 1 to 7 or 1 to 10 risk/reward we’re talking about now, it might be 3 to 2. Or even money. Those are not good odds.

It’s hard to buy now but if you buy carefully and over, whether it’s dollar cost averaging or monthly basis or as you have extra funds, then remember it’s not like you’re buying something that is going to go away. You’re buying what’s been money for thousands of years. You’re actually exchanging what David Morgan calls, “paper promises”, the currency in your wallet, for physical reality which is money that you can spend and that can be traded in at the market price of any given day, anywhere in the world, and has been the money of final resort for thousands of years.

Mike: Very well put, indeed. Patience is definitely a key virtue right now. Hopefully people can maintain that in this sort of rough environment. Well David, we appreciate your guidance at frustrating times like those that precious metal owners are experiencing right now. Thanks for coming on and we’ll catch up again with you soon.

David: You bet, Mike. It’s been enjoyable speaking with you.

That will do it for this week. Thanks again to David Smith. Check back next Friday for our next weekly market wrap podcast. Until then, this has been Mike Gleason with Money Metals Exchange, thanks for listening and have a great weekend everybody.

 

David Morgan is a precious metals aficionado armed with degrees in finance and economics as well as engineering, he created the Silver-Investor.com website and originated The Morgan Report, a monthly that covers economic news, overall financial health of the global economy, currency problems, and the key reasons for investing in precious metals.

As publisher of The Morgan Report, he has appeared on CNBC, Fox Business, and BNN in Canada. He has been interviewed by The Wall Street Journal, Futures Magazine, The Gold Report and numerous other publications. If there is only one thing to teach you about this silver bull market it is this… 90% of the move comes in the last 10% of the time! Where will you be when this happens?

 

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The Criteria For Investing

 
Ellis Martin and David Morgan discuss criteria for considering investment in an online video gaming startup that is generating revenue and heading toward potential profitability. If a company is trading at or near book value with possible strong upside, what else do we need to look for before owning the company?

 

David Morgan is a precious metals aficionado armed with degrees in finance and economics as well as engineering, he created the Silver-Investor.com website and originated The Morgan Report, a monthly that covers economic news, overall financial health of the global economy, currency problems, and the key reasons for investing in precious metals.

As publisher of The Morgan Report, he has appeared on CNBC, Fox Business, and BNN in Canada. He has been interviewed by The Wall Street Journal, Futures Magazine, The Gold Report and numerous other publications. If there is only one thing to teach you about this silver bull market it is this… 90% of the move comes in the last 10% of the time! Where will you be when this happens?

 

Join The Morgan Report Free for 30 Days *
* 30 Day Trial applies to new user sign ups only!
Offer does not apply to Premium Memberships.
  

US Dollar is the Last Stop Before Gold & Silver Spike

 
On the recent strength of the U.S. dollar, David Morgan of Silver-Investor.com, says, “John Exter’s upside down pyramid explains it very well. The derivative markets blow up and you go down the pyramid of liquidity. The step above the run to gold is the U.S. dollar. Most people who are under educated about money think if you have physical dollars under your mattress, you are in the safest position you could possibly be in. If you have all of your savings in physical greenback, you don’t have to worry about a bank failure. That is the most important step until that doesn’t work. When that doesn’t work, faith in the dollar is lost or being lost, then where do you go? The answer is you go to money that has lasted for 5,000 years. So, to see the dollar have all this strength and look good, that’s just the step before you go to the last step, which is a run to gold. So, it (the strength of the dollar) doesn’t surprise me. It’s part of the process . . . and the run to the dollar is a precursor that is absolutely necessary before the next step down the pyramid. . . . This is the big picture, and I see how things narrow down and why precious metals are so important in today’s financial system.”

This interview went into several areas but specifically that the U.S. dollar “strength” is to be expected prior to the BIG run to gold. This theme is extremely important and because it means so much it was also discussed on the Butler on Business interview. This interview has been transcribed below so you can get a visual on just what to expect as investments move down into safer and safer categories.

Butler on Business interview transcribe:

Alan: Silver has been under pressure. We saw a little bit of a pop when Mario Draghi did his thing last week. This is an environment where precious metals should be off to the races and yet it’s been down for gold… they are taking gold out to the woodshed.

David: As far as I’m concerned, and this is not about being right, or being stubborn, this is about my analysis, right or wrong. I really think this is the month where we are going to turn around, meaning that the bottoms for both metals could be tested. Silver broke below the $18.17 low that I have been talking about for a long time. The next level of support is the $17.50 area.

Coming back to finding the bottom—At times the powers that be will do their best to find it. So for example when the bullion banks want to determine where the bottom is, just like back in the Rothschild days – read Jesse Livermore’s book or do some market studies and verify this, you don’t have to take my word for it. You will sell into whatever you want to buy. In other words, you may want to do some short covering in the silver market, the silver market open interest being quite large right now. Which means all the bets – silver going lower are open.

And so right now, the bottom I think is being sold into, in order to pressure it down, to see how much it can take, how much it can be forced lower. When it can’t be forced down any more – and that point will be reached- then the open interest will decline and the short positions closed.

Again we’ve already seen it once, at the $18.17 level, we got that huge inter day turnaround, which is known as a Key Reversal! You’ll see that the smart money, the boys that really run this thing, will start to cover. But once they start to cover, they know that the momentum changes. The momentum changes from going down to going up. And I really think, Alan that we are going to see that happen this month. Then will the price jump significantly? Probably not.

Significant enough in that we’ll see silver at the end of October at perhaps $20 or so, maybe something like that. Percentage-wise from current levels it will be significant.

Whether I am correct – or not- no one knows with absolute certainty,–the question is how much more downside pressure can the market take before there aren’t any more people to sell to at these prices? We’ll just have to wait and see.

Alan: David, I had a contributor, Andy Hoffman over at Miles Franklin and he’d given them a shout out a couple of weeks ago as a good place to buy gold. Andy was saying there’s been a total disconnect between the paper gold and silver, and the actual physical stuff-so much so that there’s far more paper than there is metal to cover it.

David: It’s always been that way. Percentage-wise it’s probably greater now than it’s been at other times in history but that’s true of all the markets. I mean, I want to be objective and fair, but although the basic commodities hedging system that was originated I think was done with good intent, over time it has actually brought about unintended consequences.

Because now all the markets have become nothing more that big speculative casinos. But the cover ratio in all the commodities is greater than the physical reality — and that’s true of wheat, corn, soy beans, soy bean oil, etc. But for silver, as far as a coverage ratio goes, it’s extraordinarily high. I mean, it’s off-the-charts high relative to the other commodities. So Andy’s right, and Andy and I have been at several conferences where he and I have been speaking about this to the audience.

But I just want to be clear that this is true of the paper market – I mean, let’s look at the big, big picture. Let’s get away from metals for a minute, let’s look at the overall derivatives. The derivatives market dwarfs everything else. Most derivatives revolve around interest rate structures and the interest rate structures are tied in with the zero interest rate policy which furthers the exponential problem that we have.

I was looking at Chris Martenson’s crash course last night. Repetition is the mother of learning. I don’t know everything and I like to review the facts from time to time. I forget the person that wrote this quote, so I’m going to paraphrase because I’m not going to quote it exactly. He said, “one of the greatest fallacies of the human race is not to understand the exponential function”. What that means is that compounding is the eighth wonder of the world. Once you get to a certain point, the compounding appears to accelerate and that’s the problem. The system is set up to fail due to the exponential function.

We’re in that acceleration phase right now. The money supplies are going to continue to grow because the debt continues to grow. And this can’t go on, it might be another seven years, another five years, I doubt it can go for another three. So we’re going to see the debt problem accelerate, meaning that it’s already built into the system, it’s part of the system, it cannot be changed, that’s just the way it’s structured.

The quote from Chris Martenson’s presentation is correct–so few people know why compounding the debt is so dangerous. There has been something like, three thousand eight hundred paper currency experiments that have failed. To think that this one won’t fail in some manner is preposterous.

Now will it fail to where you can’t get anything for a bushel of dollars? No. Will there be hyper-inflation? I doubt it. But it will be a life-changing event where your middle class lifestyle is gone. That’s what I’m trying to get across and unfortunately it’s falling on deaf ears again. It reminds me of when I was “shouting” at the bottom of the silver market around the 1998, ’99, 2000 time frame. I just felt like I was shouting to the wind. Very, very few people were paying attention. Again, it’s not about being right, it is about human nature.

History repeats. The facts are that this debt problem is a worldwide global phenomena, everyone is tied together, as the dollar goes so goes everyone. Whether or not the BRICS can circumvent the dollar and extricate themselves from the monetary system when this thing blows up and be sovereign in and of themselves… perhaps. I don’t know, that remains to be determined and obviously they are trying very hard to make that happen or at least it appears that way. But in the long run, as I said, it used to be the adage, “As General Motors goes, so goes America,” well, look at what happened to General Motors, take a look at Detroit. And I say the bigger analogy now is “As the US dollar goes, so goes the world”.

Alan: Great analogy. I always say if you want to see what happens to a country when it loses its manufacturing base just look north to Detroit. When I first started in the gutter guard business, Detroit was a vibrant city with a lot of business, and now it really is a ghost town.

Alan: David, what would it take in your view to begin what the Austrian economists referred to as the crack up boom? They’ve printed so much money, you know that the dollar will not be the lone fiat currency to survive. We may have a currency called the dollar twenty years from now but it certainly won’t resemble, at least in terms of purchasing power the dollar that we have today. But the Austrians believe in what they call “the crack up boom” where in just a short order of time everybody loses confidence in the currency and it basically collapses. Do you predict that is going to happen to the US dollar?

David: I think so… I think that’s the essence of it–it’s a trust or confidence game. But I don’t think it will come from the public. I think it will come from some other entity. In other words it could be a hedge fund, it could be a nation state, it could be a sovereign wealth fund, it could be a very large investor, but it will be something along the lines of an exit out of the bond market (U.S. dollar obligations) where the system is caught off-guard. The Chinese have just about ended buying new US debt; it’s been that way for quite some time. And to a large degree, they have switched from buying debt to buying gold. That’s been going on for quite some time. And they’re doing it slowly; they are doing it the way a professional does. They are moving the market slowly over time so that they can continue to buy at the same price and not rock the market. That’s what I’m talking about, rocking the market. Where there’s such a large sale that all of the psychology changes from everybody wanting to buy the US debt to wanting to sell the US debt.

Again, to use an old analogy I’ve used before, it’s like a flock of birds flying along very happily going one direction, They are all in formation, everything’s great and all of a sudden out of nowhere, for no apparent reason they take a hard left and all of them follow – they just make this abrupt change. That abrupt change is what I’m talking about. I think that will happen. When, I don’t know. It will probably be someone that is trying to exit the U.S. dollar market,– where they are trying to just get out but it’s still a larger volume than normal or something along those lines. Or maybe there’s a computer glitch that triggers a nation state releasing money, or to a bank or computer hack by some entity. Or else it may be some, quote unquote “terrorist group” spooking the market, so the hedge funds say “Oh my God, if we have an electronic failure here I’m getting out of the U.S. Bond.” And they sell, sell it all at the market. we see these big market sell orders going through that could trigger others to see it. Then that selling begets more selling as massive offsetting builds extremely quickly. It could be that simple, and I think something like that could take place.

Alan: Ever since Mario Draghi made his announcement last week, the dollar has been off to the races on the upside when compared to the Euro, but it’s difficult to say it’s just against the Euro because of what we’ve seen with the precious metals. I’m perplexed. We made a 52 week high last week because Mario Draghi cut interest rates one tenth of one per cent, and then increased the size of the negative interest rate depositors have to pay?

David: That’s what I’ve been explaining, as you go back to John Exeter, who was President of the Federal Reserve of New York. The New York Fed and he had an upside down pyramid, and I was probably one of the first to bring this to the attention of the investing public years ago. It’s been updated by Trace Mayer of runtogold.com. Look at Trace’s updated chart., It’s actually a better analogy than John Exeter’s because in John’s day we didn’t have the derivatives problem that we have now. In fact there were some, but relatively few options out there.

But if you start looking for liquidity and people get scared, they move to safer and safer investments. So they get out of the riskiest ones, and then they move down toward the inverted base. Moving down the pyramid, the one step before reaching gold and silver is the dollar. But basically you go to safer and safer investments.

The safest thing for most people is dollar bills in your hand. If there was going to be a bank failure and they’ve got $4,812 in the bank- they had it all in cash under the mattress, in a safe or buried in their back yard, they’d feel a lot safer because if there is a bank failure they’ve got a tangible thing, a greenback, that they can go out and spend. Right now everyone’s accepting that, in fact it is being more accepted: the dollar is strengthening, as you just said. So this is the step before their loss of confidence in that piece of paper. Once there’s loss of confidence in the future value of that piece of paper -that’s when there’s the big run to gold, as Trace Mayer’s website says in its title, runtogold.com.

That’s just the way it works. I can’t change it, but I think it’s important to know this. Since you’ve asked this question, the reality is that we haven’t taken the discussion to this level- this amount of depth before. It’s complicated because basically, for the public, it’s a matter of perception. The perception is, “I’m safe because I’m in dollars.” And that’s probably 99% of the population. There’s probably only one or two per cent who would say “I’m safest in gold.” But it doesn’t take a lot of people who get educated in a hurry once the dollar starts to fail to say, “Oh my goodness, what do I do?” Then they look at things again, they lose confidence in the “paper promises” in their wallet, and they literally “run to gold”. So I think we’re getting closer. If you look at that upside down pyramid, you’ll get a better feel for what I’m talking about. Again, it’s simply part of the process. You really can’t skip that step.

So I’m not that perplexed by it. I understand and accept it, but do I like it? No. I really would feel a lot more comfortable right now if silver was in the $30’s and gold was in the $1600-$1700 range. That’s actually where I think the precious metals should be, minimally at this point in time. With all that’s going on in the geopolitical realm, with the war factions going back and forth, these sanctions against each other, the euro basically under pressure, the trust factor, who’s trusting who, this NSA thing… all these things are still out there, and nothing’s gotten any better.

Look at how much more difficult it is in world affairs today than it was during the 2008 financial crisis. Things have become more difficult and complex. In reality the stock market has gotten better and better and the propaganda machine has gotten stronger and stronger. If you believe the propaganda out there, people who hold views like mine are ridiculous. Why would you listen to me? – sounds like a broken record doesn’t it, I’ve heard it before and on and on. The boy who cried wolf, you know. I do feel that way sometimes. I feel why should I waste my time because maybe this is going to take place further out than I ever dreamed, maybe this isn’t going to happen in my lifetime. But I really doubt it’s going to hold together for all that much longer. Again, coming back to the reality, why? Because an exponential function is at work and as such it simply cannot be stopped.

Chris Martenson does a great job on his latest Crash Course video series. He states something along the lines of… if you take a drop of water and let it double every second. If you walled off Yankee stadium, and put that drop of water in there, how long would it be before you were in the top seat and you were flooded out? Well, if I recall correctly, it would take 50 minutes.

But even at 45 minutes, you’d only have the depth of a couple of feet of water inside the whole Yankee stadium. So with only five minutes left, it would still look like you were pretty safe. You’re thinking, “There’s the whole stadium down there, the water’s only a couple of feet deep, and I’m way up here in the top bleacher…” But then it accelerates (due to this being an exponential function) and over the last five minutes, the depth goes from being a couple of feet of water, to completely filling the whole stadium. That’s the power of an exponential curve- that’s the power of speeding up. That’s what I’m talking about, and again that’s built into the system. See: https://www.youtube.com/watch?v=iIwyMif5EOg

It cannot be changed, it won’t be changed, and no matter what the propaganda machine throws at you, that is the reality. It will accelerate. It is accelerating as we speak. I have no doubt that we are going to see this thing take place in the next couple of years, at the longest. I really don’t see this thing going on for five, six, or seven years longer. It just can’t. The exponential function is what it i. We’re 17 trillion dollars in the hole. Look, it took all the presidencies from the Founding Fathers to Bush to get us to like 8 trillion in debt, and then it doubled from 8 to 17 trillion under Barack. This shows you clearly that things ARE accelerating. Is it Barack’s fault? No, I’m not blaming him; I’m just saying that regardless of under which administration it happened, that’s the power of the exponential function. So when it goes from 17 to 34 trillion, where does it stop? At some point the people holding US debts say, “This is never going to stop, I must do something, I will go to cash.”

Then, when cash doesn’t work, they head for the bottom of Exeter’s and Meyer’s pyramid and literally “Run to Gold”. At that point, the problem for the majority of people, is that there will simply not be nearly enough gold – silver to go around. At least at anything close to what we’ve come to think of now as a reasonable price.

David Morgan
Founder: Silver-Investor.com

 

David Morgan is a precious metals aficionado armed with degrees in finance and economics as well as engineering, he created the Silver-Investor.com website and originated The Morgan Report, a monthly that covers economic news, overall financial health of the global economy, currency problems, and the key reasons for investing in precious metals.

As publisher of The Morgan Report, he has appeared on CNBC, Fox Business, and BNN in Canada. He has been interviewed by The Wall Street Journal, Futures Magazine, The Gold Report and numerous other publications. If there is only one thing to teach you about this silver bull market it is this… 90% of the move comes in the last 10% of the time! Where will you be when this happens?

 

Join The Morgan Report Free for 30 Days *
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Leading Sectors Breaking Down – Internet & Social Stocks

 
In July I showed talked about the Russell 2K index and how it was underperforming the broad market. I went on to explain what it likely meant was in store for the US stock market this fall. The outlook was negative, just in case you were wondering…

This week I want to talk about two different sectors that have often lead the broad market in rallies and corrections over the years. These sectors have underperformed the broad market much like that of small cap stocks, and this does not bode well for investors going into fall.

In the analysis below I use Bollinger bands and trendlines. Using only these tools keeps the charts clean and easy to understand. In short, once a trenline has been broken that is the first early warning that a trend may be coming to an end. The second is the break of a Bollinger band.

A combination of these can be taken as a trend reversal and likely the start of a multi week or month correction. This will depend on the chart time frame you are reviewing though. I use a similar method to identify trends with my automated futures trading system.

INTERNET INDEX FUND ANALYSIS



SOCIAL MEDIA INDEX FUND ANALYSIS

If you are wondering what exactly these two charts are pointing to… let me share my outlook.
Because we have seen the support trend lines broken to the downside this month, and the fact that price has pushed more than 2 standard deviations from its norm, the odds favor more downside is to come.

From years of experience trading price patterns and breakouts I know that when price breaks to the downs side and triggers fear among its investors it is typically your best time to sell short so you can profit from the falling prices. Fear is the most powerful force in the stock market and it must be traded much differently than when prices are rising.

Although I feel the broad market is still within its uptrend, these two underperforming sectors may just continue to sell lower. Obviously once the broad market rolls over, these sectors should fall even faster to the downside but until then, they could chop around and grind their way down.

Like My Simple Analysis & Tips? Join My Free Newsletter at www.GoldAndOilGuy.com

Want My Trades Automatically Trade for You? www.AlgoTrades.net

Chris Vermeulen

 

David Morgan is a precious metals aficionado armed with degrees in finance and economics as well as engineering, he created the Silver-Investor.com website and originated The Morgan Report, a monthly that covers economic news, overall financial health of the global economy, currency problems, and the key reasons for investing in precious metals.

As publisher of The Morgan Report, he has appeared on CNBC, Fox Business, and BNN in Canada. He has been interviewed by The Wall Street Journal, Futures Magazine, The Gold Report and numerous other publications. If there is only one thing to teach you about this silver bull market it is this… 90% of the move comes in the last 10% of the time! Where will you be when this happens?

 

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A Run to Silver and Gold unlike Anything in History of Mankind



A Run to Silver and Gold unlike Anything in History of Mankind-David Morgan
By Greg Hunter On September 22, 2014

Silver guru, David Morgan, says forget about the manipulated price suppression of the yellow and white metals. It’s only a matter of time before the debt and derivative markets crash, catapulting precious metals prices exponentially higher. Morgan explains, “The bigger problem all exists in the debt markets, and the debt markets is where the problem is really. When that problem blows up, there’s going to be a run to gold unlike anything in the history of mankind…. The spillover into silver will be phenomenal, as well, because once it (debt markets) starts down, everyone that understands what’s going on, which will be very few, will be running to gold. They will try to get gold in any form that they can, and again, a huge spillover into the silver market. All of a sudden, even at the retail level, and at the wholesale level or commercial level, or the futures market or bar level—it’s over. A big ETF type or silver holding company will call up and say I want to buy $50 million of silver, or $150 million or $200 million, which is peanuts compared to the bond market. . . . The answer is going to be ‘we don’t have it.’ When that happens, it’s over.”

Morgan goes on to say, “These types of events are anomalies. . . . Few people see them coming, and with the silver price being so low the last three years, a lot of people who once believed us are going to say that these guys just can’t be right. The paper manipulators are going to keep prices under control forever, but they won’t. It will be an event that will be unlike anything we have seen.”

On the recent strength of the U.S. dollar, Morgan says, “John Exter’s upside down pyramid explains it very well. The derivative markets blow up, and you go down the pyramid of liquidity. The step above the run to gold is the U.S. dollar. Most people who are under educated about money think if you have physical dollars under your mattress, you are in the safest position you could possibly be in. If you have all of your savings in physical greenback, you don’t have to worry about a bank failure. That is the most important step until that doesn’t work. When that doesn’t work, faith in the dollar is lost or being lost, then where do you go? The answer is you go to money that has lasted for 5,000 years. So, to see the dollar have all this strength and look good, that’s just the step before you go to the last step, which is a run to gold. So, it (the strength of the dollar) doesn’t surprise me. It’s part of the process . . . and the run to the dollar is a precursor that is absolutely necessary before the next step down the pyramid. . . . This is the big picture, and I see how things narrow down and why precious metals are so important in today’s financial system.”

Morgan admits that his low of $18.17 silver did not hold and now thinks that the next “price spike” for silver “will be going lower.” Morgan explains, “This means we would get a spike down of maybe a dollar or something like that, from $18 to $17 or maybe even in the $16 range. I think that would be a spike that would be a dramatic drop. . . . It would be primarily a paper driven situation, and it would take place in a short duration.” Morgan goes on to predict, “Silver will be back in the $20 per ounce range, and the high $1,300 per ounce range for gold by the end of the year. That just presupposes that the system, as it is, continues, and the paper markets continue, and the derivative markets continue, and the powers that be are able to manage this price as they see fit with the derivatives. In the event that something happens, that whole scenario could go away very, very rapidly. That’s why you really want to be 6 months too early than 6 minutes too late.”

Join Greg Hunter as he goes One-on-One with David Morgan of Silver-Investor.com.

(There is much more in the video interview.)

 

David Morgan is a precious metals aficionado armed with degrees in finance and economics as well as engineering, he created the Silver-Investor.com website and originated The Morgan Report, a monthly that covers economic news, overall financial health of the global economy, currency problems, and the key reasons for investing in precious metals.

As publisher of The Morgan Report, he has appeared on CNBC, Fox Business, and BNN in Canada. He has been interviewed by The Wall Street Journal, Futures Magazine, The Gold Report and numerous other publications. If there is only one thing to teach you about this silver bull market it is this… 90% of the move comes in the last 10% of the time! Where will you be when this happens?

 

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Offer does not apply to Premium Memberships.
  

Swissmetal Inc News: The China / Russia Connection

Welcome to the September Edition of your Swissmetal Inc. newsletter.

You might have noticed we didn’t have a newsletter in August. But, starting this month, we are stepping up our editorial calendar to two emails per month.

This edition of the newsletter will discuss how the connection between China and Russia will almost certainly drive the price of strategic metals higher, and why. This is in addition to the normal factors of supply and demand.

But first… As you may know, SMI just released it’s new E-Basket in early July. As part of that launch, we purchased 200 baskets. A few of these baskets remain, and as of tomorrow (Sept. 18th), we are offering them with 5 years of free storage. You can find more information by clicking the link here. Note, the presentation mentions the baskets are available at the pre-launch price. That deal is only available for existing customers, so when you talk to an account representative, be sure to let them know if you are an existing client. The free storage is available to all our subscribers and customers. Only a couple remain, so you’ll need to act fast. Click the link here for more details.

Next, I want to let you know about a conference we’ll be at in November in the beautiful Grand Cayman Marriot Beach Resort. If you value your liberty, this is definitely a conference you might be interested in visiting.

THE GRAND CAYMAN LIBERTY FORUM
Grand Cayman Marriot Beach Resort, Grand Cayman
November 16-20, 2014

The Grand Cayman Liberty Forum unites independent and establishment luminaries from Europe and North America to discuss and debate, first, today’s critical global financial issues, and subsequently, alternative global investment opportunities and challenges.

Mainstream and contrarian thinkers will help a maximum of 120 investors think through their own conclusions and strategies on topics ranging from The Future of Key Political Economiesto Specific Investment to Asset Protection Opportunities. Asset classes of particular focus include currencies, rare and precious metals, resource investments, lifestyle, income, agricultural property, and leading-edge technology opportunities.

In addition, onsite experts in International Law & Reporting Requirements, Property Investment, Physical Asset Acquisition and Storage, Residency and Passports, Offshore Financial Services, Contrarian Investments & Strategies, and other important asset protection services will be available for discussion, consultation, and personal inquiries.

For our full forum website and to sign up for the conference: click here.

I hope you enjoy the newsletter, and as always, if you have any topics you would like discussed, please email me at
glen@swissmetal.net.

Glen.

Glen Kowalski

Marketing Manager
Swissmetal Inc.
glen@swissmetal.net

Why Russia and China’s Cozy Relationship Will Raise the Price on Rare Strategic Metals

As an investor, it’s not your job to stop the war machine. Nor is it your responsibility to change how the U.S. handles foreign policy. It is however your duty to protect your family.  And understand how global conditions move the price of various assets so you can affect the things you can control.

To make good investment and wealth protection decisions, it’s imperative you understand what different investment options are available. And how current events intermingle with them. The world may have never seen a time free from crisis.  But if you’ve watched the news lately, it’s impossible to ignore the global level changes raining down on us.

The crisis in the Ukraine is only one of one countless conflicts shaping our world. However, because of the cooperation between Russia and China, it might be one of the most important. In addition, while the coming conflicts could be deadly for the U.S. dollar, there are asset classes that could benefit their owners immensely. If added to your portfolio before it’s too late. One of these is a new asset class known as Rare Strategic Metals.

If you’ve never heard of Strategic Metals, you’re not alone. This strategically chosen group of elements is used in 95% of all products manufactured today. But because of the vast quantities normally traded, they were outside the scope of individual investors until recently.

A full discussion of rare metals is outside the scope of this article. But it’s enough to understand they’re vital in military equipment, LCD monitors, pharmaceuticals, air, sea, and land craft, cell phones, computers, clothing, and more. You should also know, most of the supply is controlled by China.

China and Russia Are Working Together – Against the U.S.

It’s no longer a secret China and Russia are becoming powerful allies. This was made even more obvious recently; Thanks to a new natural gas deal between the two countries. This 400 Billion dollar agreement has been in the works for decades…  But its signing indicates a major disruption to the value of Petro-Dollar.

The catastrophe in Ukraine is heating up tensions between the U.S. and Russia. And it’s naive to think it couldn’t lead to yet another war. Or, at least a new Cold War. One in which Russia is in a better position to win.

If you doubt Russia’s attitude to the West is hostile, consider this… Alexander Dugin, who’s better known as “Putin’s Brain” calls America, the “kingdom of the Antichrist.” He goes on to say, “The American Empire should be destroyed. And at one point, it will be.”

Many in Russia feel war with the U.S. in inevitable. But Mr. Dugin isn’t just a random citizen. He’s a professor at Moscow State University. And head of the Center for Conservative Study. He’s also one of Russia’s most visible personalities…  Indicating Putin agrees with his strong sentiments.

Make no mistake, China and Russia aim to destroy the U.S. dollar. Regardless of whether or not they’re successful, it’s my opinion the price of strategic metals will increase due to their attempts.

The War Machine is Growing by Leaps and Bounds

For starters, Strategic Metals are critical in almost every type of military device used today. From jet engines to armaments…  From the coatings on armor piercing bullets to night vision scopes, computers, and communication gear.

Even if we ignore the Ukraine / Crimean crisis, the U.S. war machine ramps up yearly. President Obama has sworn to pull troops out of Afghanistan… But with the increase in sectarian violence in Iraq, moving back there seems likely. Not to mention Syria and a host of other countries the U.S. is making waves in due to the war on terror.

Crimea however, takes the threat of world conflict to an entirely new level. What may have started out as peaceful protests quickly escalated when on the 21st of February President Victor Yanukovych fled. And the interim government was declared illegitimate by Russia. Now, Ukraine has asked the U.S. and NATO for assistance in this crisis.

If NATO takes military action against Russia, and Russia get supported by China, over 35 countries could be spending billions of dollars, and countless lives, on yet another war.

The fact is, the higher the demand for military equipment, the more demand there is on metals needed for manufacturing.

China Controls the World’s Rare Metal Supply

There’s more than just the demand of rare metals causing the price to skyrocket though. There’s also an extremely tight supply, approximately 90% of which is controlled by China. In the last few years, China has already squeezed supply several times.

Even though Miao Wei, the Minister of Industry and Information Technology told the Xinhua News agency its policy on exports doesn’t target any specific country, there’s reason for concern. With such a powerful tool at their fingertips, it’s likely they’ll use supply control as a tool in an economic war with the West. The U.S., European Union, and Japan have already complained to the World Trade organization over “unfair” price controls.

Cozying up to Russia puts a massive wrench in the United States’ ability to secure the metals needed for both military and civilian applications.

In the past, China relied on the U.S. as the world’s largest economy, but that strength is fading. China will soon surpass the U.S. in GDP, and Russia is becoming an economic powerhouse. This allows China the luxury to ramp up more brazen attacks on the U.S. Economy.

They’ve recently created a new organization called the Rare Earth Association. The association is going to have powerful control over whom mines can sell to, how much metal they can release, and other quotas. It’s naive to think the operation of that organization won’t be affected by the new economic war.

The U.S. Dollar Position as the World’s Reserve Currency is in Peril

If the U.S. dollar loses its status as the world’s reserve currency, the value of the dollar will plummet. There’s no doubt, that’s China and Russia’s end goal. In a very public speech, Putin recently said the U.S. is, “… living like parasites off the global economy and their monopoly of the dollar.”

According to financial analyst Keven Freemen, Russia and China are in a position to completely cripple the U.S. financial system. He should know, he was the analyst hired by the Pentagon to investigate the 2008 recession… He believes that disaster was a purposeful attack.

He told the Blaze, Russia is preparing to fight World War 3 by attacking the U.S. dollar. The U.S. defeated the U.S.S.R. by nearly bankrupting them. China and Russia appear to be mounting, and winning, the same type of attack.

Anyone who thinks these are idle threats or saber rattling needs to take a hard look at some of the statements made by Sergei Glazev, the Kremlins Economic aide. He stated firmly if the U.S. imposes sanctions on Russia, it would end in a crash of the United States financial system. He called it an end of domination for the United States.

He threatened to stop using the U.S. dollar.  And create their own payment system.

China hasn’t been shy about admitting their desire to take down the U.S. as the world’s reserve currency either. They’re mounting an assault by loosening controls and internationalizing the Yuan, also known as the renminbi, in an attempt to compete with the dollar.

The 400 billion dollar natural gas deal between Russia and China mentioned earlier is a massive step in that direction. So is a recent deal between China and Japan, the world’s number 2 and 3 economies.

If other countries continue joining the movement, which countries like Singapore and England already have, it will be devastating to the U.S. dollar. It would be prudent for any investor to diversify out of U.S. cash and securities. And into solid assets.

Currency Volatility is Almost Certain

The potential crippling of the U.S. dollar, the never-ending war machine, and China’s monopolistic control over rare metals all indicate enormous price increases for rare strategic metals. Russia and China may not be successful in their threats to collapse the U.S. financial system. However, they’re certainly poised to disrupt the value of the dollar. Volatility is one more reason to consider rare metals in your portfolio, since you can liquidate them in any currency worldwide.

Even if the Chinese government moves away from Russia, it is still in their economic best interest to control rare metal supply and raise prices. So values are certain to increase.

Strategic Metals Offer Many Investors a Way Out of Fiat Currency into Solid, Inflation Proof Assets

The cuddly relationship of China and Russia is just one of the driving forces making Strategic Metals a powerful wealth preservation tool. But it would be irresponsible to say it’s an instrument for everyone. Or every investor. While there are both conservative diversified options, and more aggressive single metal plays available, every individual’s asset protection needs are different. You need to do your own due diligence to determine if strategic metals have a fit in your portfolio.

The prospect of World War 3 with China and Russia is terrifying. And everyone hopes for a quick resolution to the war on terror. Unfortunately, hope is often misplaced. And none of us has any control over the seemingly never-ending war machine… Or foreign policy.

All we can do is watch what’s happening in the world… And make the right decision to protect our family through any crisis thrust in our direction.

 

David Morgan is a precious metals aficionado armed with degrees in finance and economics as well as engineering, he created the Silver-Investor.com website and originated The Morgan Report, a monthly that covers economic news, overall financial health of the global economy, currency problems, and the key reasons for investing in precious metals.

As publisher of The Morgan Report, he has appeared on CNBC, Fox Business, and BNN in Canada. He has been interviewed by The Wall Street Journal, Futures Magazine, The Gold Report and numerous other publications. If there is only one thing to teach you about this silver bull market it is this… 90% of the move comes in the last 10% of the time! Where will you be when this happens?

 

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A Dog’s Life

 
A Dog’s Life

Richard (Rick) Mills
Ahead of the Herd

As a general rule, the most successful man in life is the man who has the best information

Disregard disease (Ebola), rising sea levels, simmering religious tensions, the potential for wars over resources. Disregard financial calamity, malfunctioning governments and lying sleazebag politicians leading us down the garden path. Is Europe going to be Balkanized? Is it to be inflation, disinflation, deflation or stagflation?

Nothing important, to me anyway, seems to matter much anymore. The herd’s got other things on its mind.

Justin Bieber got thrown into jail, Oprah’s fat, Jennifer and Angie had a catfight over Brad, there’s a new iphone coming and America’s supposedly Got Talent.

Maybe the following will wake the herd up. It’s only the best reason any of us has ever heard for owning some gold and silver bullion in an easily accessible stash. It’s something so devastating, so cataclysmic, so life changing, so unstoppable that the only way to survive the resulting wasteland would be to own precious metals and guns. Something so indefensible against, something so game changing that I’m talking about each and everyone one of us on this planet taking a forced trip back in time.

“Extreme solar storms pose a threat to all forms of high-technology. They begin with an explosion–a “solar flare”—in the magnetic canopy of a sunspot. X-rays and extreme UV radiation reach Earth at light speed, ionizing the upper layers of our atmosphere; side-effects of this “solar EMP” include radio blackouts and GPS navigation errors. Minutes to hours later, the energetic particles arrive. Moving only slightly slower than light itself, electrons and protons accelerated by the blast can electrify satellites and damage their electronics. Then come the CMEs, billion-ton clouds of magnetized plasma that take a day or more to cross the Sun-Earth divide.“ NASA Science

On July 23 2012, the sun unleashed a massive cloud of plasma. The plasma cloud, known as a coronal mass ejection (CME), comprised a solar storm thought to be the most powerful in at least 150 years. This plasma cloud exploded from the sun and headed straight through Earth’s orbit – and missed us by a week! Yep, if it had happened just a week before the plasma cloud would of had a catastrophic encounter with Earth’s atmosphere.

“The consequences could be devastating for commerce, transportation, agriculture and food stocks, fuel and water supplies, human health and medical facilities, national security, and daily life in general.” Steve Tracton, Capital Weather Gang

The event on July 23 2012 was a ‘perfect storm.’ A couple of much smaller previous solar storms had cleared the way, no interference would of weakened it’s power, it was lined up exactly opposite the orientation of Earth’s protector, our magnetic field. All that power would of had not only a cleared out path straight at us but would of slammed into us with our defenses out of alignment to the storm and not giving us anywhere near maximum protection.

Fortunately, the point of eruption on the sun wasn’t Earth-facing.

“I have come away from our recent studies more convinced than ever that Earth and its inhabitants were incredibly fortunate that the 2012 eruption happened when it did. If the eruption had occurred only one week earlier, Earth would have been in the line of fire.” physicist Daniel Baker, University of Colorado.

SEVERE SPACE WEATHER EVENTS—UNDERSTANDING SOCIETAL AND ECONOMIC IMPACTS

According to a study by the National Academy of Sciences, the cloud could have knocked out electrical and communication grids causing more than $2 trillion in damage globally. NASA said anything that plugs into a wall socket or electrical outlet could of been disabled – and since everything we use is, somewhere along the line of its existence, eventually plugged in…well you get the idea.

Maybe we’re without our electrical and communications grids for years – think about that, think about facing, think about living without electricity for an extended indefinite period of time. You’ve just been knocked back to a pre-electric age and your ticket ‘back to the future’ does not have a departure time/date stamp.

Is this science fiction? Perhaps some chicken-littleism on my part?

Sorry but no, solar physicists have compared the 2012 storm that missed us to the Carrington solar storm of September 1859, a storm that didn’t miss us and was named after Richard Carrington who documented the event.

A space storm’s impact is measured in nano-Teslas (nT) – the lower the figure, the more powerful the storm. A moderate storm is around -100 nT; extreme storms log in around -300 nT. The Carrington solar storm was three times more powerful than the strongest space storm in modern memory – the one that cut power to an entire Canadian province, Quebec, in 1989.

The 1989 coronal mass ejection that centered on Quebec measured -589 nT.

Carrington’s 1859 solar storm was estimated to have been -1,760 nT.

In the 1859 event global telegraph lines sparked and shorted out, setting fire to telegraph offices in Europe and the U.S. knocking out the entire existing global communication network.

We’re as completely unprepared, and our much more delicate electronics are even more exposed and unprotected today then the wiring of our early communication grid 155 years ago. It doesn’t take much of an imagination to figure out what would happen to today’s modern electronics if an event of such magnitude were to hit us again.

“An extreme space weather storm — a solar superstorm — is a low-probability, high-consequence event that poses severe threats to critical infrastructures of the modern society. The cost of an extreme space weather event, if it hits Earth, could reach trillions of dollars with a potential recovery time of 4-10 years. Therefore, it is paramount to the security and economic interest of the modern society to understand solar superstorms.” research physicist Ying D. Liu, China’s State Key Laboratory of Space

What’s the chances of a Carrington magnitude event hitting us over the next decade or so? I’m going to leave you with the following…

“In February 2014, physicist Pete Riley of Predictive Science Inc. published a paper in Space Weather entitled “On the probability of occurrence of extreme space weather events.” In it, he analyzed records of solar storms going back 50+ years. By extrapolating the frequency of ordinary storms to the extreme, he calculated the odds that a Carrington-class storm would hit Earth in the next ten years. The answer: 12%.” Pete Riley, Predictive Science, ‘On the probability of occurrence of extreme space weather events’

Herd, I want a divorce, you go live your little doggie life – if you can’t eat it, piss on it or screw it ignore it. I’m a boy scout, I believe in being prepared. Frightening odds, consequences, a little common sense preparation and precious metals are all on my radar screen. You need to put them on yours. Are they?

If not, they should be.

Richard (Rick) Mills

Richard lives with his family on a 160 acre ranch in northern British Columbia. He invests in the resource and biotechnology/pharmaceutical sectors and is the owner of Aheadoftheherd.com. His articles have been published on over 400 websites, including:



WallStreetJournal, USAToday, NationalPost, Lewrockwell, MontrealGazette, VancouverSun, CBSnews, HuffingtonPost, Beforeitsnews, Londonthenews, Wealthwire, CalgaryHerald, Forbes, Dallasnews, SGTreport, Vantagewire, Indiatimes, Ninemsn, Ibtimes, Businessweek, HongKongHerald, Moneytalks, SeekingAlpha, BusinessInsider, Investing.com and the Association of Mining Analysts.

Please visit: www.aheadoftheherd.com

If you are interested in advertising on Richard’s site please contact him for more information, rick@aheadoftheherd.com

***

Legal Notice / Disclaimer

This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment.

Richard Mills has based this document on information obtained from sources he believes to be reliable but which has not been independently verified.

Richard Mills makes no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Richard Mills only and are subject to change without notice. Richard Mills assumes no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission.

Furthermore, I, Richard Mills, assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information provided within this Report.

 

David Morgan is a precious metals aficionado armed with degrees in finance and economics as well as engineering, he created the Silver-Investor.com website and originated The Morgan Report, a monthly that covers economic news, overall financial health of the global economy, currency problems, and the key reasons for investing in precious metals.

As publisher of The Morgan Report, he has appeared on CNBC, Fox Business, and BNN in Canada. He has been interviewed by The Wall Street Journal, Futures Magazine, The Gold Report and numerous other publications. If there is only one thing to teach you about this silver bull market it is this… 90% of the move comes in the last 10% of the time! Where will you be when this happens?

 

Join The Morgan Report Free for 30 Days *
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Offer does not apply to Premium Memberships.
  

The Mining Footprint: An Underappreciated Gold/Silver Price Driver

 

Jim Goddard: My guest is David Smith, Senior Analyst for The Morgan Report which you can find online at Silver-Investor.com. Welcome to the show David.

David Smith: Good morning Jim.

Jim: Today, we’re talking about the high risk of mining – which has now become even riskier for both investors and the miners. We just had that tailings pond collapse in central BC recently.

Thankfully, not much heavy metal contamination, as far as we know right now. The water will be safe for humans but the sediment probably will wipe out fish for years and David, we know environmental concerns are always key for people when they have to develop a mine. You say it used to take eight years lead time to start a gold mine. Now it’s 12-20 – that’s, a whole generation.

David: It can be that long Jim in terms of the discovery to actual production process. Certainly 12 to 15 years is probably becoming the norm now. The topic we’re dealing with today I think is an important one. I think it’s underappreciated by people in the gold and silver market, as well as base metals – what we call the mining footprint.

It’s what effect that a mining operation has from exploration through production and then eventually a restoration of the land, going back to where it was beforehand. Mining is already very heavily regulated today compared to what it was 10 or 15 years ago.

It’s going to become even more so, and can a good thing in a way. In terms of making sure that everybody does the very best they can to mitigate risk and to lessen the likelihood of failures like we saw with this tailings pond collapse.

The point is that the risk will never be eliminated altogether but it is going to mean that it will be one more cost factor that pushes up the price of gold and silver going forward, along with the demand pushing that supply, which will lead higher prices too. So I think investors have to factor that in – as an element that has always been there, but now, it’s going to become even more important as we move forward.

Jim: Take a look at the Pascua-Lama mine on the Chilean-Argentinean border. Environmental concerns there have kept that operation from getting underway. They thought it would cost maybe four billion to start this mine. Now they say it be $11 may be $11 billion before they even start producing.

David Smith: It’s pretty amazing that figure. You just wonder how many ounces of gold and silver they have to dig up break even on that. That internal rate of return could be a long time coming back. I think you’re going to see these questions being raised, and they’re legitimate to a certain extent, on any new operation, anywhere on the globe.

As David Morgan has said for many years, everything we use is either grown or mined. So when people look at these things, they have to try to expect some kind of balance – understand that there is a tradeoff. If we’re going to have the modern conveniences we have come to depend upon for a livelihood, and even to stay alive, we will need to keep mining.

We just need to operate as responsibly as possible. Steve Todoruk, on Sprott’s Thoughts, penned an excellent column where he talked about the tradeoff that you and I have been discussing. Like he said, there are new ways that have been developed, such as a dry stacking process for tailings ponds which make it less likely that what we saw here last week in BC and also down in Sonora State in Mexico – where we had a copper concentrate spilled into a river – where these things will be are less likely to happen and when they do, there will be smaller damage into the environment.

Possibly not everyone who is listening to us knows what a tailings pond is. So it might be appropriate to give a quick definition on that Jim.

Jim: Well, go ahead David.

David: A tailings pond is where the residue from production goes – either from the floatation circuit used for gold and silver, or from open pit mining that puts the product in a leach pad to separate out the minerals.

That’s where the residue is pumped into a predesigned pit that has an impermeable layer on the bottom so that it doesn’t leach into the ground. That liquid over time will evaporate, leaving this residue behind. It’s highly treated, making it not nearly as toxic as it was during the processing phase. It still maintains a certain level of toxicity and of course if the tailings dam breaks, either through a lack of maintenance, due to earth shifting or flood, it can create some pretty serious consequences.

Where I’ve been in some of the hilly parts of Central Mexico, where there isn’t much flat space, some of these tailings ponds which over time have solidified and don’t have any liquid residue left at all, because the water is put back into a stream; in some cases it’s as pure or more so than when it was taken out of the ground.

These flat sections are covered with a bit of earth and used as soccer playing fields. So they can actually serve a positive purpose, but with an operational mill, it’s going to be an ongoing concern. You do have continual liquid residue being pumped into the tailings pond. That’s why it’s important to Skeep an eye on things and make sure that there aren’t any leaks or disruptions.

Jim: David, do we have to use tailings ponds? Can’t they recover the slag or whatever is leftover from the process some other way?

David: For the most part, there’s going to be some residue and some of that residue has to do with simply the non-metal items that were in there in the first place. But it’s going to be really difficult to totally eliminate that consideration, but there are other procedures that are currently being used or tested. Certain bacteria will actually consume metals and can make them much less toxic. There is also a process called “dry stacking” which is showing promise.

So I’m thinking a long term view would be to have a situation where let’s say you had a tailings pond which would be filled up at some point and then allowed to coalesce into solid ground. Then you could start a new one so that you wouldn’t have a pond that is maybe 20, 30, or 40 years old, but rather one that could be reconfigured, say every five or ten years- that would certainly mitigate things.

So the mining sector is continually working to improve what they do to make it more cost-efficient, to make it safer. For example, removing much less waste rock where it’s initially being dug blasted, and bringing out a higher grade of ore. So these things continue to take place, but we’re always going to see the occasional spill and disruption, because by definition, we’re all fallible creatures in our pursuits, regardless of what that activity is.

Jim: What is happening with gold right now?

David: Jim, we’re still in a broad trading range. Actually it has become quite narrow, with a downward slope. There are chart patterns such as triangles, which indicate that we’re going to see some kind of a resolution here fairly soon, one way or the other.

Of course our bias is to the upside. We think the likelihood is that we will see higher gold prices in the breakout pattern rather than lower ones, but we don’t know for sure. Each side has their own view as to what that’s going to look like but I think if you and I are having this discussion even a few weeks down the line, we’re going to see a substantial difference in where gold and silver are trading, from where they are today. Our presumption at this point is that that could well be to the upside.

If it is to the downside, then we will have more work to do in base building before we see that upside movement, but we are entering into a seriously strong period for the metals, so that might be the way to bet.

Jim: Of course there’s the assumption that sometime this fall there’s going to be a major correction in the stock market, but the markets haven’t behaved the way we thought they would for the last two years. Can you comment on that?

David: The broad markets are holding up pretty well as late arrivals continue to pump a lot of money into them. So we will see, but again we’re entering into the September- October period, where traditionally you see a significant stock market correction.

We will just have to watch. We all have our views, but until Mr. Market gives us a definitive answer, it’s best to watch and wait. After we’ve established our positions we shouldn’t keep adding just because something might happen, but literally wait for it to happen. Then add more if the action confirms your analysis.

Jim: Is palladium still going to be hot?

David: It looks like it. It has now made 13-year highs. It punched above $900 briefly, so it would not be surprising to see palladium trade in four digits before the end of the year.

Jim: So there is some hope for metals after all and is palladium is the shining boy right now.

David: Yes it’s leading the charge. It’s up something like 25 percent this year – we’ve been pretty fortunate in our analysis to be correct on that, saying that palladium and then platinum would lead the metals higher. So far, so good. We will just watch and see how our big picture premise plays out.

Jim: Is this mostly due to China’s deciding that they’re going to put catalytic converters on more of their cars now?

David: I believe it’s due to a convergence of elements Jim. We’ve got some very strong auto demand around the world. We have new uses being found for platinum and palladium. We have continued supply concerns coming out of South Africa and Russia, and we have rising demand across the board for the PGMs. So, all of these things are pushing the supply-demand matrix into the direction of continued tight supplies, leading inexorably to higher prices over time.

Jim: Thanks a lot for chatting with us David.

David: You bet Jim.

Jim: My guest has been David Smith, Senior Analyst for The Morgan Report which you can find online at Silver-Investor.com. You’re listening to HoweStreet.com Radio. Find us on Twitter, @TalkDigitalNet. Comments about the show can be sent to info@HoweStreet.com. I’m Jim Goddard.

[Comments made on HoweStreet.com Radio are an expression of opinion only and should not be construed in any matter whatsoever as recommendations to buy or sell any financial instrument at any time. Available online at TalkDigitalNetwork.com, HoweStreet.com Radio is a production of Howe Street Media, Incorporated.]

 

David Morgan is a precious metals aficionado armed with degrees in finance and economics as well as engineering, he created the Silver-Investor.com website and originated The Morgan Report, a monthly that covers economic news, overall financial health of the global economy, currency problems, and the key reasons for investing in precious metals.

As publisher of The Morgan Report, he has appeared on CNBC, Fox Business, and BNN in Canada. He has been interviewed by The Wall Street Journal, Futures Magazine, The Gold Report and numerous other publications. If there is only one thing to teach you about this silver bull market it is this… 90% of the move comes in the last 10% of the time! Where will you be when this happens?

 

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Chinese Stocks Pulling US Stocks Higher?

 
The Chinese Shanghai Composite Index broke to the upside in July and has rallied a good 15% since then. For an Index alone this is quite impressive, equivalent to the Dow Jones rallying 2500 points or so here on a relative basis.

Our opinion is this is Bullish for US stocks as it can only mean commerce is picking up in China after a period of consolidation. We have been bullish on the US listed Chinese stocks all year long and have traded in and out of them successfully at our ATP service.

Below we have the US SP 500 index chugging along bouncing off the weekly trendlines during this Primary Wave 3 upside move. We maintain our 2213 target, which is a 161% relationship to Primary Wave 1 which was 704 points in upside length.

Take a look at the SSEC index charts on an 18 month and 3 year basis and you can spot the strength as well…

Our opinion is this type of Bullish action in the Chinese names is only adding fuel to the fire that is the Elliott Wave Primary Wave 3 pattern we are in. Wave 3′s in Elliott Wave Theory are very bullish in terms of sentiment by investors. All dips are bought, good news is great, bad news is good and so forth. Wars, bombs, bank failures in Europe, deflation and any other pots and pans are deflected as investors feel the euphoria. This should likely continue until we get in the 2200 SP 500 ranges, and once there the fibonacci relationship of Primary Wave 1 to Primary Wave 3 will begin to exert resistance on the uptrend.

At our Trading Service we have simply continued to ride the Primary Wave 3 trend to the upside, and rotate into the stronger sectors as they rotate. We began getting aggressive with the Chinese stock names several months ago as we felt they were bottoming out in May of this year. Companies like JMEI, LEJU, TEDU, YY and so forth have been great trading and growth stock names. Though the Chinese names are a bit extended, the growth rates relative to PE ratios are attractive as compared to their US brethren, and we expect to continue to exploit this until the gap closes or the sentiment exhausts itself.

Join us at The Market Trend Forecast for regular SP 500, Gold, Silver, and other updates.

Check us out at www.MarketTrendForecast.com

David Banister

 

David Morgan is a precious metals aficionado armed with degrees in finance and economics as well as engineering, he created the Silver-Investor.com website and originated The Morgan Report, a monthly that covers economic news, overall financial health of the global economy, currency problems, and the key reasons for investing in precious metals.

As publisher of The Morgan Report, he has appeared on CNBC, Fox Business, and BNN in Canada. He has been interviewed by The Wall Street Journal, Futures Magazine, The Gold Report and numerous other publications. If there is only one thing to teach you about this silver bull market it is this… 90% of the move comes in the last 10% of the time! Where will you be when this happens?

 

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The Truth About Where Gold Price Is Headed



The Truth About Where Gold Price Is Headed
By Chris Vermeulen

I will be honest, it has been a long time since I have been excited about gold, but I am starting to like gold once again. I had grown too bored to care what gold did. With the bull market top in 2011, and four years later price continues to founder can you blame me?

Let me start out by painting a picture for you. This is my technical analysis overlaid on the price of gold. This simply gives you a visual of were the price of gold is trading.

But first, if you have not yet seen this “Gold in the USA” infographic you must check it out… it shows the history of gold in a visual format, and you will likely learn something from it – Click Here

GOLD HOLDS LONG-TERM BEARISH PATTERN

Gold peaked around 1900 in September 2011 and quickly fell to the 1550 area. The metal then consolidated for 18 months before it broke support. The sharp decline triggered a drop in price to $1200 in April 2013. Since then gold has been in another consolidation, which is a bearish continuation pattern.

The lower highs in 2013 and 2014 reflect weakening demand and increasing selling pressure at lower price levels. A break down in price below support would trigger further weakness and a drop to roughly $900 oz. If you want more of a bearish visual; see my August gold report – Click Here

GOLD’S BULLISH OUTLOOK SIGNS OF A BOTTOM

SIGN #1: Gold is technically still in a down trend but it may be quietly forming a bottom. This is how bull markets often start. First it declines in value to a point which breaks the most steadfast bulls. And it does this by relentlessly losing value for an extended period of time. If the market doesn’t shake you out, it will wear you out!

Gold is no longer talked about by the majority of participants, nor is it talked about every day in the media. Simply put, everyone is bored of the low price and sideways trading the past couple of years.

SIGN #2: The key to front running the next rally in gold is to watch the price of gold stocks. They typically lead gold. So when gold stocks start outperforming the price of gold along with the HUI gold stock index we can expect the price of gold to follow a few days or weeks later.

Gold stocks as a whole have not yet started to outperform gold. But if we look at the HUI/Gold ratio it is at extreme levels. This is the same level we saw in 2001 before gold and gold stocks rocketed higher for several years. The ratio is not something you should trade off of, but it’s a good confirmation indicator that gold stocks are priced fairly.

SIGN #3: Looking at what the price of gold has done over the past 40 years 12 months before interest rates have been increased is very interesting and not something many traders know.

With interest rates expected to rise in 2015 this is a statistic that should be reviewed. Numbers do not lie and historical charts show the price of gold rising an average of 20% within the year before interest rates rise. And in case you happen to miss the first 6 months of the move, do not worry. Most of the rally takes place just 6 months before rates go up.

SIGN #4: September is the strongest month for gold each year when looking at the 32 year seasonal chart. The odds favor higher prices this month. Likely not enough to spark a new bull market, but may build a base in the price.

GOLD FORECAST AND CONCLUSION:

One day these weeks gold will breakout down from of this consolidation pattern or breakout and rally from this basing pattern. Which way is the question we are all wondering.

Anyone who clearly states gold has bottomed and to buy is taking a stab as being a hero and to say what the masses want to hear. Sure, it sounds great, but it’s BS.

From a price and technical standpoint gold remains bearish or neutral at best. Until price clearly breaks out from this range you should trade with caution and small position sizes.

However, when/if gold starts to rally it is likely best to jump on the train rather than wait for a pause or pullback in price after the breakout. It may just keep on rising until $1550 is reached.

Watch My Daily Gold Video Analysis at www.TheGoldAndOilGuy.com
Automated Investing System for the Average Trader: www.AlgoTrades.net

Chris Vermeulen

 

David Morgan is a precious metals aficionado armed with degrees in finance and economics as well as engineering, he created the Silver-Investor.com website and originated The Morgan Report, a monthly that covers economic news, overall financial health of the global economy, currency problems, and the key reasons for investing in precious metals.

As publisher of The Morgan Report, he has appeared on CNBC, Fox Business, and BNN in Canada. He has been interviewed by The Wall Street Journal, Futures Magazine, The Gold Report and numerous other publications. If there is only one thing to teach you about this silver bull market it is this… 90% of the move comes in the last 10% of the time! Where will you be when this happens?

 

Join The Morgan Report Free for 30 Days *
* 30 Day Trial applies to new user sign ups only!
Offer does not apply to Premium Memberships.
  

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