Now Is NOT The Time To Lose Hope For Gold And Silver

August 22, 2021

All is well with the stock market, as per the Dow Jones’ BEV chart below.  Exactly like every other daily closing since November 4th of last year, where the Dow Jones has closed either at a new all-time high (BEV Zero) or in scoring position of making one (within 5% of its last BEV Zero).  At Friday’s close the Dow Jones closed only 1.42% from its last all-time high, which was on Monday of this week, the Dow Jones’ 42nd BEV Zero since November 4th.

The Dow Jones’ current relentless advance won’t continue forever.  A day is coming when it will close outside of scoring position, a day when we’ll see the Dow Jones with a BEV of -5.00% or more.  But this could go on for many months to come, as it did during President Trump’s first two years in office (2017-18), as seen below.

Looking at the major market indexes BEV values below, Monday saw six of these indexes close at new all-time highs, then for the rest of the week they deflated a bit before bouncing back at Friday’s close.

The exception to this is the XAU, the index for gold and silver miners; they lost almost 4% this week.  That plus their last BEV Zero happened in April 2011, and since then they’ve carried a BEV value of something well below a -50% BEV for most of the past decade.

Let’s take a closer look at the precious metal miners in their price and BEV charts below, containing every daily closing since the XAU first traded in Philadelphia.  The first thing to note in the charts, is since 1983, precious metals mining has never been a must own – glamor market sector.  But before 1983, that wasn’t true.

Here’s a table from the old, but now discontinued Barron’s Stock Averages (1938 to 1988).  For the four decades spanning the 1940s to the first year of the 1980s, the Barron’s Gold Mining Index (BGMI) was #2 in performance.  Office equipment was #1 because that was where Barron’s placed computers in their data set; as office equipment, along with pencil and stapler manufactures. 

How the world has changed since 1980.

The point to take from the table above is, gold and silver mining were once top performers in the stock market, and that was true for many decades.  Had Barron’s published this data in the 1930s, their BGMI would have left everything else far behind during the depressing 1930s.  But during the Roaring 1920s’ Bull Market on Wall Street, the BGMI did little for investors, exactly as has happened to the XAU since 1983.

Here’s the lesson to take away from market history; during those times when bulls run wild and free on Wall Street, maybe it’s best to keep away from gold and silver mining and run with the bulls.  But when the world is going to hell in a hand basket, investors just may find safety deep inside a gold mine. 

In our world of overvalued financial assets, gold mining shares, as seen below, at present certainly aren’t one of them.  At the XAU’s January 2016 bottom, it had deflated by 84% from its last BEV Zero of April 2011.  That’s the stuff of a great depression market crash, and the precious metal miners have yet to recover.  For those who like to buy at deep discounts, this is an important point to keep in mind.

One method to gauge whether the stock market is expensive or cheap, overvalued or undervalued, is to follow NYSE Margin Debt; how many billions of dollars the banking system has lent to speculators who purchase shares on margin.

The upper chart (below) plots the Dow Jones (Blue Plot / Left Scale) and NYSE margin debt (Red Plot / Right Scale) during the Roaring 1920s Bull Market and the market collapse that followed.

We see how the Federal Reserve inflated stock-market valuations in the 1920s, by extending credit to leveraged speculators via their brokers; aka margin debt.  Before the crash, the banks would allow speculators to purchase shares with only 10% down, with credit from the Federal Reserve supplying the other 90% of these purchases.

Then came the crash, and the Dow Jones deflated as the banking system withdrew its “liquidity” (NYSE margin debt) from the market.

Looking at NYSE margin debt for today (latest data as of July 2021), I can see a big problem for the bulls, but first let’s study this data.

From 1979 to 1999, these plots were coupled, almost to a 1:1 basis.  Then the market topped in early 2000, almost a year after margin debt began declining.  In October 2002 the Dow Jones fell 38% from its highs of 2000.

In the sub-prime mortgage bull market (October 2002 to October 2007), these plots decoupled.  The stock market received much more demand for stocks in the form of margin debt, but the Dow Jones didn’t fully benefit from it as it had in previous years.  That plus, when the Dow Jones did bottom during this bear market, it had deflated by 54% from its bull market highs of October 2007.  That was the second deepest percentage decline the Dow Jones has seen since 1885, exceeded only by the Great Depression Crash’s 89% decline.

The March 2020 flash crash, where the Dow Jones deflated 38% in only twenty-seven NYSE trading sessions, also happened in the context of a build up and decline of margin debt.  Since then, NYSE margin debt increased almost vertically in the chart above.  What is worse is the degree of separation between these two plots.  Leveraged speculators are taking huge positions in the market, but market valuations aren’t responding to this inflow of funds, as it had in the past.

Come the next bout of deflation in the market, when the Dow Jones closes somewhere deep below its BEV -10% line, these leveraged speculators are going to have to sell.  Either that or their brokers will provide that service for them, with or without their permission.

I expect the next major market decline will be brutal when the leverage seen above is unwound.  To many sellers asking prices no one, except maybe the FOMC, will be willing to pay.

But that will be then; as for now I remain short-term bullish.  First, and I think most important, the Dow Jones isn’t seeing any 2% days.  Then looking at the Dow Jones in its daily bar chart below, the Dow Jones has closed the week above 35,000 for the third week in a row.  As things are today (no 2% days), I’m expecting the Dow Jones to make a move to its 36,000 level in the weeks to come.

I admit I can change my market opinion in a New-York Minute, but right now, there is nothing happening in the market that places this sixteen-month advance at risk of terminating.  Should we see a big pick up in daily volatility, and or NYSE Margin Debt begins to gap down, the market becomes a different place.

This week the FOMC “injected” an additional $98.71 billion into the financial system (chart below).  This chart gives me the heebies jeebies.  Since the FOMC terminated its quantitative tightening (QT) in October 2019, six months before the March 2020 flash crash, the idiot savants at the FOMC have “injected” massive amounts of “liquidity” into the economy.

And for the first time in decades, significant amounts of this “liquidity” is spilling over into the real economy; flowing into consumer prices instead of financial asset valuations, where the idiots want their “liquidity” to go. 

Go back up and look at the NYSE market debt and the Dow Jones.  Since March 2020, $403 billion has been “injected” into the stock market via margin debt, and market valuations haven’t benefitted as they once would have.  As this market advance began in August 1982, when the Dow Jones first closed above 1,000, and then stayed above 1,000, this advance has become geriatric in nature.  Now, thirty-nine years later, the venerable Dow is closing above 35,000.  Much like me, this old-tired bull is getting a bad attitude and doesn’t cooperate as it once did with the “policy makers.”

Be-that-as-it-may-be, the activity of the FOMC, since the termination of their QT in October 2019, as seen below, is proof positive the “policy makers” are having huge problems maintaining “market stability.”

https://www.youtube.com/watch?v=Db_qXKBle08

Looking at the Fed’s balance sheet below, it becomes obvious that everyone associated with the Federal Reserve’s “policy making” is either a quack or a swindler.  I look at this data every week, and it’s never comforting.  Actually, it’s quite frightening.  I should add a second line to this chart’s title, something like “Be Afraid – Be Very Afraid.”

Does anyone in the mainstream financial media ever report what’s going on with the Fed’s balance sheet?  Maybe they do, but I doubt the producers of CNBC will ever allow this chart to air during their programing.  Following the mainstream financial media is a total waste of time.  They really are a willing tool-of-“policy”, and enemy of we-the-people.

Time for something good to look at, something like gold’s BEV chart.  Lots of people are upset by the market action of both gold and silver, and for darn good reasons!  I don’t blame them for their views on the old monetary metals, but investors have to keep in mind what is plotted above in the Fed’s balance sheet; the pending demise of the US dollar as an economic asset of global standing.

The dollar is doomed, and with it will be the demise of financial assets, such as stocks and bonds that are denominated in dollars.  Maybe not next week, but sometime well within the lifetime of most of my readers, possibly beginning sometime in 2022.  Gold and silver have no counter-party risk, that plus they have a 5,000 history of being money.

Gold and silver mining companies do have significantly greater risks than do gold and silver bullion.  But in a general selling panic of the type I see coming, no one is going to care about that as they flee deflation in the financial markets, and seek shelter in real assets, such as commodities or the old monetary metals.  This is precisely what happened in the depressing 1930s.

So don’t get to upset about the crummy market action in the precious metals markets, because the “policy makers” are making it possible for you to purchase gold and silver far below their true market values.  If you’re buying, the idiot savants at the FOMC are doing you a great favor.

That said, this week gold once again closed above its BEV -15% line in its BEV chart below.  That is good.  But what if gold once again drops below its BEV -20% or even its BEV -25% lines; what should you do?  Do what I do; I have the chart of the Fed’s balance sheet above taped on the door to my liquor cabinet, and I give it a good look, just before I pour myself a stout glass of cheer.  A 90, or 100 proof bourbon is my personal preference.  But a nice 80 proof brandy or scotch works just as well.

But one doesn’t need liquor to get beyond this trying time.  Just get your precious metals positions in, and stop watching the mainstream media, especially their financial media, and go away for a year or so, as this too shall pass.

Gold’s step sum chart remains very positive.  In time, gold and its step sum will again advance into history in the chart below.  I’d say more.  But as with gold’s BEV chart above, for weeks now nothing exciting, on either the up or down side is happening. 

So, like myself, my readers have to look at gold’s blue plot in the charts above and below and decide what is gold’s primary trend in August 2021.  Is it gold’s advance off its December 2015 bottom, which would make its current decline from last August’s all-time high simply a correction in the bullish primary trend?  Or is the decline from last August’s all-time high, its new and bearish primary trend.

I continue believing the current decline off last August’s all-time high is a correction in gold’s continuing bullish-primary trend.  When gold once again advances, and breaks above the high of last August, we should see some real excitement in the precious metal markets.

The Silver to Gold Ratio (SGR), or how many ounces of silver one ounce of gold can purchase is approaching 80.  In precious metal bull markets, the SGR tends to decline, as with bear markets in gold and silver the SGR increases.

The current advance in the SGR is no more than a correction in the ratio.  Once the bull market resumes, the SGR should once again decline below 40.

I’m going to skip the Dow Jones’ step sum chart this week, as it’s another chart that’s stagnating from one week to the next, and move on to the step sum table below.

Nothing much happening on gold’s side of the table.  What gold and silver need now is a big jump in their daily volatility’s 200-day M/A.  Life for us gold and silver bulls will be much better when this 200-day M/A increases to something above 1.00%.  Its current 0.68% is the real reason everybody is so grumpy in the trenches.

The Dow Jones made a new BEV Zero on Monday this week, and its daily volatility’s 200-day M/A declined to a very bullish 0.60% at the close of the week.  What’s there to say but Go Bulls Go, because in the stock market, that’s what the bulls are doing.  Be patient, as with time I’ll be able to say the same for gold and silver.

Stupidity at the highest levels of “policy making” can explain much, but not everything.  I’ll give you two examples:

Example A:  The Biden mis-administration withdrew our armed services from Afghanistan before pulling out 15,000 American civilians.  This was also done while keeping our allies, who accompanied the US into Afghanistan, ignorant of specific details of the withdrawal.  So, its not just American citizens who were abandoned in Afghanistan to the Taliban. 

This debacle in Afghanistan is a huge loss of face for American diplomacy, and a source of comfort for the CCP, and others who shout “death to America” in the streets.  The damage done may take generations to repair, if ever.

I’ve seen it said this was done so they could put a period on September 11th, close the books exactly twenty years to the day the United States entered Afghanistan in response to 9/11.  I don’t doubt it.

Anyone that stupid couldn’t make corporal in the Marine Corps, yet Washington’s political class, as well as the Generals in the Pentagon didn’t see this one coming; that the Taliban would take Afghanistan in a matter of days following the removal of the US Army and USMC?

Example B:  King World News has a terrific interview with Alasdair Macleod.  I especially like the quote below:

https://kingworldnews.com/shadow-banking-nightmare-massive-debt-and-whats-next-for-the-us-dollar-and-gold/

With both examples; A, where the guys with the guns needed to be the last to leave a chaotic situation, such as Afghanistan.  Or with example B, where one simply doesn’t allow central banks to issue money, or create credit without some restraint, as with the Bretton Woods’ $35 gold peg, have been common knowledge for centuries.

So, why in August 2021 are 15,000 American civilians left behind in Afghanistan, at the mercy of the Taliban, and the global financial system on the verge of collapse due to the excesses of currency and credit creation by the FOMC, absent a gold standard?

The fake news would have you believe example A, was from the incompetence of the Biden Mis-Administration, the presidential candidate * THEY PROMOTED * over President Trump in 2020.  As far as example B goes, the coming collapse of the global financial system; the mainstream media remains clueless of this runaway freight train coming down the track at us all.

But with both examples A&B, it’s beginning to become apparent, to me anyway, that both of them are just too stupid to be that dumb.  In other words; both examples A&B may ultimately prove to be historical events going according to a plan.  

Here is a short six-minute video from the TFI Group, a news organization based in India.  Whether or not I’m correct in my above assumption on example A (Afghanistan), the TFI Group believes this to be true, and they make a better case for believing this than I do. 

https://www.youtube.com/watch?v=8fvwGMDY9S4

India, as well as all of our allies confronting expansionist China fear the United States will betray them in their moment of need.   Think of what Taiwan is dealing with following this debacle.  The prospects of mainland China invading Taiwan has just increased exponentially.

How many other of our foreign allies also believe this to be true?  The impact on global stability could be huge, as current allies become former allies, distancing themselves from the mad house known as Washington DC.

It would take some really evil Sons-of-Bitches to intentionally inflict wicked schemes such as these; examples A&B, on a trusting humanity.  Unfortunately, in our current world, evil Sons-of-Bitches is one commodity we’ll never run short of.

Here’s a photo of Earth from space.  Edwin Hubble first gazed at the Andromeda Galaxy in the 1920s, through the 100 inch Hooker telescope, discovering it was an entirely different galaxy, distinct and far from our Milky Way galaxy.   Science has since pushed back the frontiers of the cosmos, to inconceivable distances from our Earth.  Yet for all of that, science has yet to discover anything like the Earth, as the Earth is a living thing.  While everywhere else in the cosmos, so far as we can see, is sterile and lifeless.

There are two ways of understanding the Earth.  Let’s call them:  Inter-Galactic Understanding A, and Inter-Galactic Understanding B.

Inter-Galactic Understanding A:  as a follower of Jesus Christ, I base my perceptions of the universe and Earth from the Bible.  For example, the following passage from Isaiah.

In other words; God created everything, including the universe.  The Earth he created for you and me to live on.

But there are those who vigorously dispute this, you know the “policy makers”, whose world view is based on “science” rather than “biblical mythology.”  Let’s call this, Inter-Galactic Understanding B; which absolutely rules out any possibility of a Creator.

This understanding of the universe chooses to look to the inter-play of the laws of physics, the periodic table, and pure-random chance to explain all we see in the universe, as well as life on Earth.

For we Earthlings, there is a huge difference between understanding A and B.  Understanding A types (people like me), by necessity accepts a moral code of conduct.  We don’t always follow it, but it’s always there, as is our God.  Understanding B types (people like Carl Sagan) recognize a moral code of conduct as a matter of choice, as something they can put on or take off as a situation demands.

I liked Carl Sagan, and really enjoyed his Cosmos programs from the 1980s.  But people like Bill Gates and Doctor Fauci, and all too many people at the “policy level” see the world much as Carl Sagan did, and that is not good.

Much of astronomical speculation has to do with life in outer space.  It just does, with the general population as well as with astronomers.  I find it humorous how a degree in astrobiology, whether a master’s or doctoral degree, comes from a scientific discipline with absolutely nothing to study.  “Science” is painfully aware of this; how up to this time, all non-theoretical studies of life, by necessity, are restricted to planet Earth.

The understanding B types find themselves in a vast universe with a critical shortage of life – there is nowhere for them to go.  So, they are stuck with tiny little planet Earth.  This is the only planet they’ve yet discovered capable of sustaining life, as they very much enjoy it, infested with over seven billion Useless Eaters, or “consumers” as economists like to call them.  People who do nothing more than consume Earth’s precious resources, polluting the atmosphere with CO2, as they recklessly reproduce like bacteria in a petri dish.

* What’s a “policy maker” to do? *

I believe the answer to the above question is: whatever it takes.

Neutering the United States, diplomatically and militarily, as well as engineering a total collapse in the global economy via monetary abuses by the global central banking cabal, would solve many “policy issues” our elites wrestle with daily.  New, and more drastic covid lockdowns won’t hurt this effort to “save the planet.”

Oh, but that is just a conspiracy theory you say.  A few years ago, that’s what I would have thought of the above.  Today I’m not so sure.

Here’s another short video by TFI Group.  How long will it take for Washington and London to recognize the Taliban as the legitimate government of Afghanistan?  They believe not long.

https://www.youtube.com/watch?v=-at4OE81YZ0

Mark J. Lundeen

[email protected]

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The periodic symbol for gold is AU which come from the Latin for gold aurum.

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