first majestic silver

“Crazy” Prudent Investors

February 13, 2015

For 13 years, I have watched one of North America’s largest bullion dealers – with unquestionably, the most viewed website – spew anti-gold propaganda day in and day out, going out of its way to bring every imaginable negative viewpoint to bearing. And not only fundamentally, but technically as well – including, to the delight of Cartel traders no doubt, daily commentary of where COMEX “stops” reside. Moreover, their equivalents of myself and Bill Holter have consistently denigrated not only the outlook for Precious Metals, but those who believe in their virtue. To a man, it is nearly impossible for anyone of sound mind to not wonder why they would do this; when not only have they been decidedly wrong in their decade long negative outlook for their own product, but perpetually alienated their own clients. In my 25 years in the business world, I have never seen anyone make such counterintuitive statements to their own best interests; much less, when such statements are so obviously erroneous. After all, we are living in a world where gold and silver demand is not just rising, but surging to record levels; with seemingly each passing day, new, dramatically PM-positive developments emerging.

However, even in a financial world gone mad, in all conceivable ways, even I wasn’t prepared for one of its top executives calling 25% of all physical gold buyers “crazy.” Of course, the fact that MSM lackey CNN – record low ratings and all – interviewed him doesn’t surprise me at all. That said, it’s almost as if Lloyd Blankfein, Ben Bernanke, and Warren Buffett collaborated to pen his answers – like “these (‘crazies’) buy the metal and it just disappears under their mattress. They want to use it when the world ends.” And by the way, I’m not writing this article to “denigrate the competition” – even if this particular competition’s history is less than stellar, objectively speaking. Instead, I’m just pointing out that in an unregulated business like bullion dealership (other than in, oddly, our home state of Minnesota), Miles Franklin not only distinguishes itself with a spotless customer service record; competitive pricing; and a tireless commitment to financial education; but its principals “put their money where their mouth is,” and treat its clients – and our product – with the respect that they – and it – deserves.

That said, no word better describes what the “markets” and “economy” have devolved into than “crazy” – as a small group of “1%” sociopaths attempt the impossible task of usurping “Economic Mother Nature” by printing endless amounts of money; manipulating every market with computer algorithms (including recent, blatant efforts to “save” crude oil); and spewing relentless, Goebbels-esque propaganda. Heck, “NIRP” and “QE” announcements – like Sweden’s “one-two punch” yesterday – are actually becoming commonplace; as seemingly each day, the “final currency war” intensifies.

Fortunately, economic reality is causing fewer and fewer people to watch, and pay heed to, such manipulations with each passing day. However, at this unique snapshot of time, the algorithm-bearing manipulators have the upper hand; at least, regarding their ability to maintain a semblance of market “calm” amidst a violently stormy political, economic, and financial environment. That is, in “last to go” markets like Cartel-suppressed paper gold and silver; PPT-supported equity indices like the “Dow Jones Propaganda Average“; and of course, QE-supported sovereign bonds. Elsewhere, “TPTB” are decidedly losing to the “unstoppable tsunami of reality“; as global economic activity is objectively in freefall, whilst commodity and currency markets have collapsed, and social and geopolitical unrest surged to post-War highs.

Yes, as I write Friday morning, it’s utterly “crazy” to see Greek stocks and bonds surging on the prospect of a bailout resolution before Monday’s Euro Group ultimatum – despite comments from both sides citing a gaping chasm between Europe’s and Greece’s demands. Yes, I know – said “powers that be” always come up with something to “kick the can” one more mile; and likely, in true “Sunday Night Special” fashion, will do so again, despite the angry rhetoric. Not to mention, the passionate promises of Alexis Tsipras and Yanis Varoufakis – who, just two weeks ago, were elected on a platform of repealing austerity and writing off Greece’s debt.

In fact, none other than Syriza’s “Chief Economist” yesterday proposed perhaps the most ludicrous “solution” to the European debt issue imaginable – which is probably why it just might happen. Which is, if you can believe this, for the ECB to buy all Euro Zone debt of one to five years maturity. Yes, to monetize EVERY bond issued by EVERY Euro Group member; which – no problem – will be “recouped” through “profit retention” by the year 2040! Frankly, I don’t even know how to “analyze” such lunacy; particularly as, if the assumption is that the European economy will recovery by then, interest rates will likely be much, much higher than today’s record low levels – yielding massive ECB bond portfolio losses!

That said, nothing would be more bullish for gold – and bearish for Europe – than such a can-kicking deal; as essentially, all it would “accomplish” would be a more clearly defined path of explosive debt accumulation and monetization; which ultimately, must come crashing down. Such world-destroying decisions by the world’s “leading” bankers are politicians, whilst temporarily putting off the day of reckoning, could not be more favorable for those supporting the virtues of real money.

And yes, we must be “crazy” for worrying that the world’s second most dangerous geopolitical hotspot, the Crimean Peninsula, threatens to destabilize the delicate diplomatic balance between the Russian-led “Eastern Bloc” and the U.S.-led “NATO Bloc.” To that end, why anyone would believe yesterday’s suspiciously negotiated “cease-fire” would be any more successful than previous, failed attempts is beyond me – particularly because, as I write, fighting ahead of said “cease-fire” is as intense as it has been since the Ukrainian conflict commenced last year. Better yet, in watching on CNBC Europe this morning an EU official claiming Europe doesn’t trust Vladimir Putin – he, who holds the key to their natural gas supplies; one can only wonder if an actual “deal” was negotiated at all, other than cosmetically.

Or how about the record high level of the German stock market, despite the potential for the Euro to collapse, amidst the worst economic environment of our lifetimes? To wit, today’s Euro Zone 4Q GDP growth of 0.3% continues a long line of economic misery; and yet, care of ECB QE, PPT-support, and some of the most ridiculous “recovery” propaganda ever, the DAX surges day after day. Incredulously, Germany’s 0.7% GDP result – by far the Euro Zone’s best, but pitiful by objective standards – was lauded by the MSM as if it were 7.0% – with Reuters calling Germany’s GDP result a “thunderbolt,” marking a “return to solid expansion.” Huh? 0.7% is solid expansion?

Here in the States, yesterday alone we saw a massive, 0.9% plunge in January retail sales – which was not only double the projected decline, but represented the largest two month plunge since late 2008! Not only that, jobless claims “unexpectedly” surged; the Bloomberg Consumer Comfort Index plunged; and business inventories rose at their slowest rate in nearly two years, yielding the highest inventory-to-sales ratio since, yep, late 2008; thus, threatening to decimate GDP and employment. Not to mention, this weekend, a potentially economy-crippling strike of West Coast dockworkers is set to commence, with the Baltic Dry Index already at a record low. In other words, real U.S. economic data has plunged toward levels last seen in 2009; which, if it weren’t for said (unsustainable) market manipulation, would yield plunging equity markets and surging gold and silver prices. Let alone, a ten-year Treasury yield closer to Japan and Germany-like readings of 0.3% than today’s Fed-goosed war at the key round number of 2.0%.

Of course, the combined impact of the aforementioned events – again, from yesterday alone – don’t hold a candle to the “crazy” comment of Tesla CEO Elon Musk, in claiming Tesla’s market cap could reach Apple’s record high level of $700 billion within just ten years. Frankly, even I’m speechless at this idiocy; as not only is Tesla’s product far behind the practical capability of your everyday Chevy; but with gasoline prices plunging, no one will even consider buying hybrid cars for the foreseeable future. Let alone, the fact that without a massive, multi-billion dollar network of recharging stations, Tesla’s have as much use as plane without jet fuel.   And trust me, I know as much as anyone about the issues with hybrid cars, having worked for nearly three years as head of Investor Relations for a mining company attempting to develop a massive Cobalt deposit in Cameroon, Africa (cobalt being a primary component of the lithium-ion batteries used in hybrid cars). No Elon, Tesla is not going to be the next Apple; and despite your technical brilliance, it won’t be long before the bloom is entirely off the ill-fated hybrid rose; just as it will shortly be off the ill-fated fiat currency “rose,” in lieu of time-honored real money.

And speaking of real money, recall that in last week’s “PM Mining Armageddon” Audioblog, I predicted utterly cataclysmic fourth quarter mining results – and, more importantly, 2015 expectations. Earlier this week, I wrote of how Kinross, the world’s fifth largest gold miner, kicked off the horror-fest with an appalling write-down of 20% of its reserves (despite no change in its $1,200 gold price assumption, and re-classifying of some reserves to the lesser resources category, utilizing a ridiculous $1,400/oz assumption) – as well as expectations of a 4%-11% plunge in 2015 production; which by the way, resulted in KGC stock plunging 8%, to a new all-time low. Well, yesterday it was the turn “at the woodshed” for the world’s seventh largest producer, Goldfields – which hasn’t yet released updated reserves, but expects a roughly 1% decline in 2015 production. And wouldn’t you know it, GFI stock plunged 8% as well, to a level nearly 80% below its 2006 high.

Next week, said “mining Armageddon” will really heat up, when the world’s four largest gold producers report on Tuesday and Wednesday – with the remainder of leading PM producers staggered in the ensuing two weeks or so. And thus, as highlighted in yesterday’s “tale of two commodity markets” Audioblog, the supply/demand outlook for gold and silver will not only continue to diverge from essentially all other commodities – in that demand is rising, whilst supply is falling; but will likely do so, in both aspects, dramatically so.

And thus, to all you “crazies” that simply seek to protect your hard-earned savings with the only assets that have proven to maintain their value over time, we salute you – and hope that if you decide to act in such manner, you’ll give Miles Franklin the chance to earn your business.


Courtesy of

Andrew ("Andy") Hoffman, CFA joined Miles Franklin, one of America's oldest, largest bullion dealers, as Media Director in October 2011. For a decade, he was a US-based buy-side and sell-side analyst, most notably as an II-ranked oil service analyst at Salomon Smith Barney from 1999 through 2005. Since 2002, his focus has been entirely on precious metals, and since 2006 has written free missives regarding gold, silver and macroeconomics. Prior to joining the company he spent five years working as an investor relations officer or consultant to numerous junior mining companies.

Nearly 40 percent of all gold ever mined was recovered from South African rocks.
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