Note: This is not financial advice. I’m not a financial advisor and I’m wrong 100% of the time. Investments are risky and nothing mentioned here should be considered financial advice. Invest at your own risk.
I’m going to lay out a thesis here. Many of you aren’t really understanding REALLY what’s going on right now. I get it. The presidential politics are a mess. Bitcoin is $41,000 and Tesla went up like 10x this past year. Stock market on fire!
But you are all missing it. And by the time you really see the headlines, people will be standing in line around the corner for their local coin dealer. People will not completely grasp why they must get metals, only that they NEED to, as soon as possible, to get rid of any and all useless paper currency to exchange for a real piece of money. The problem is, many will not be able to get it because no one will want to exchange their real money for useless paper.
I believe, quite possibly, silver will do in the entire financial system in the next few months. Between March and end of June, there’s a lot about to happen that many do not understand. I’m going to lay out the below.
- The looming problem
- How are metals valued
- The perfect storm
- Putting it all together
The looming problem
Imagine if you made $40,000 per year, but had a credit card balance at $40,000 with 26% interest. Your revolving debt to income is 1:1 to measure it. The interest payments are killing you. Costs of living go up, so you have no choice but to:
- Try and refinance debt at lower rates. When doing this, you reduce your monthly payments. This frees up more capital to spend
- Add more debt to credit cards at lower rates to continue spending
This is essentially the ponzi scheme our country has been doing for a LONG time. When we “officially” went off of the gold standard in 1971, it was to be “temporary”. The 1970s had massive amounts of inflation. Only senior citizens at this point really remember this. I was born in 1975 and was too young to remember – but there was a big campaign in the 1970s to fight inflation. Faith in the US dollar was waning. During this decade, gold went up 24x and silver went up 29x. Gas shortages had people lined up for blocks at the pump.
In the 1970s, interest rates went up. This is a signal of inflation. To fight inflation, rates go up. This get you a “REAL RATE”. For example.
If your bank account 25 years ago paid you 5% interest, but inflation was 3%, this means your savings grew at a fast rate of inflation. This gave you a 2% REAL RATE. (5-3).
Today, savings accounts give you less than 1% interest and inflation is supposed to be 2%. Meaning, this is a REAL RATE of -1%.
Gold gives you 0% yield. So, if a condition existed where the REAL RATES you are given are POSITIVE, you put your cash into savings. If the rate is negative, you put it in gold to preserve your wealth.
Interest rates in the 1970s went up, but so did gold. This is because inflation was outpacing interest rates.
Then, with the gold price taking off – Paul Voelker had no other choice but to make interest rates 20%. Inflation was 15%. This immediately had people getting out of gold and going to savings and treasuries.
The net effect of this?
- This will destroy your housing market, immediately. No one wants to buy a new house at 20% interest. My mom was a realtor then and this stopped ALL house buying, immediately.
- You now have to pay high interest rates on your credit card. If you cannot make the monthly payments, you default
An INTERESTING thing happened in 1980. At the time of us making the 20% interest hike – gold increased by 24x. That means, at THAT moment, we could have gone back to a gold standard. Meaning – we could service the debt, as painful as it had to be, by selling gold.
What has happened since 1980?
- We took on debt to finance the war on communism. Added $5 trillion by using fractional reserve banking to outspend the commies.
- War on Iraq
- War on Iraq, part 2
- War on Afghanistan
- Continued deficit spending
The reality is, since Bush 1, no president will essentially EVER get elected by cutting spending. Whether it is spending for the military or illegal immigrants – it means no difference. So – no matter who we vote for, you can expect more deficits.
Because they continue to consolidate the credit cards. Take a look at interest rates since 1980.
What this shows you is 40 years of running up the credit card, then refinancing at lower rates.
If higher interest rates are signaling inflation, does that mean lower rates signal deflation? Yes – in a manner of speaking. Inflation and deflation you think of as prices, yes, but it has a lot to do with the velocity of money for GDP.
Think of you tipping a bartender $10. He takes that $10 and spends it on a cab. The cab driver takes the $10 and spends it at the gas pump. This is 3x velocity and inflationary because at each stop, taxes are to come out of it. This is how Keynsian economics works. However, sometimes instead of tipping the bartender $10, maybe the government simply gives the bartender $10 to stimulate the economy. The falsity here is that if times are extremely tough, the bartender may not use the cab to go downtown to a concert, but take that $10 and put it in his pocket for later to buy groceries.
You want your money to grow. You invest in something, you want a return. That is interest. That is..inflationary. So – inflation, in moderation, can be really good.
But the government measures inflation differently than you and I. Get this. When you and I see higher prices at the supermarket – that is inflationary for you and I, but the government doesn’t count that as part of the CPI.
Why? Think of it this way. If the government was really honest about inflation, this means they might have to adjust cost of living payments for social security higher every year. They don’t want that. They want to pay out as little to these programs as possible.
What happens is you and I see rising healthcare costs, food costs, energy costs – perhaps 8%-10% per year in rising costs, but the government is telling you it is actually 2%.
Our budgets have gotten tighter over the past 20 years. This forces us to….put more on credit. And the banks continue to lend us money at lower rates. So we consolidate our loans just like the government has.
Meanwhile, the last 20 years, gold has been the best performing asset on the planet. It was $250 in 2000 and $2088 this past summer. Why did gold do a 10x over the last 20 years when it earns no interest?
Because big money who don’t trust our systems have been pocketing that $10 tip and putting it into assets and not the real economy. That is your deflationary pressure.
Take a look at the velocity of money by the Fed.
So how do you combat this deflationary situation? Stimulus, of course! Using Keynsian economics – if we directly give money to the people, they will spend in the real economy!!
Except that’s not what’s happening. All of this money is being exchanged for shares in companies and highly speculative assets.
Take a look at the Buffet indicator:
What this is telling me is that people are chasing over valued stocks. The main culprit is Tesla. Most companies on the S&P 500 trade about 15x P/E ratio. That is, they trade at about 15 times their earnings. One that is lower than that is of good value, but may be sliding under the radar. One that is higher, the investors are then telling the company they want expansion.
This is telling me TSLA is just………………….a little overvalued. I’d put them at about $80 share price now, at best, based on their earnings. Trading at 1,743x P/E ratio. WHO IN THE HELL IS CHASING THIS PRICE?
So we have:
- decreased velocity of money
- Exponentially rising gold prices
- People throwing stupid money at overvalued assets
- REAL inflation crushing Americans and not being reflected in the interest rates
If our economy truly worked, interest rates would have gone up a LONG time ago. However, when you take out measures of inflation that would actually catch inflation, you can continue to ring up the credit cards, not pay out increases to old people on social security, and continuously claim there’s no inflation – and we must then helicopter drop money. And….lower rates.
Jerome Powell has said, “we are not thinking of thinking about raising rates until 2023″. And…”we are going to let inflation run hot to average at 2%”. Meanwhile, you and I have already seen inflation at 5-10% at the grocery store.
If they are letting inflation run hot, that also means they should be letting rates increase, right? No. They are buying bonds from the treasury to artificially keep interest rates of the 10 year below 1%.
Until this week.
And BOOM. It’s over now.
See…Friday, gold and silver got crushed. The narrative (on no other news) was that the 10 year interest rate was higher, and this meant people were switching from gold to the 10 year. Perhaps they did not see inflation as much as they expected. So if inflation was 0% and the 10 year hit 1.12%, that means a REAL RATE of 1.12% is greater than 0% of gold, so ok. I buy that.
But inflation has not been 0%. That is the problem with the narrative.
Gold and silver have been manipulated highly. The idea is if you see gold and silver prices launching into orbit, people get scared and lose faith in the currency. Here are a few interesting articles.
You can find many other articles on this type of thing over the last 2 years from just about every major bank. It is no longer “tinfoil hat”. It is a matter of fact that these markets are not free markets.
Of issue, the game is now over. You cannot manipulate these forever. Eventually, the demand for physical metals outstrips the paper market to suppress. And…there it goes.
See – the banking system is a fractional reserve system. You deposit $100 in a bank account, that is now the bank’s asset, and they can lend out $1000 on that $100. If you take your $100 out, and so does everyone else, nothing good comes from this. At issue in 2008, were banks may have been lending out $30 for every $1 they had. Laws were put in to place to prevent a 30:1 again. At least in this country.
In other countries, laws may have popped up, but in the EU, something called BASEL III came about to accomplish this.
With metals, no one actually knows what the fractional reserve is.
David Hunter is calling for a major “Bust” this year, at end of Q1 or in Q2 based off of the crazy amounts of leverage and debt adding up to $400 trillion. How many people just simply bypass buying a stock and just buy the options? That is a derivative.
Many people estimate there are 500 claims for each ounce of gold in existence. With silver, I would suspect it’s far worse. I watch the COMEX daily, and yearly mine production of silver is 800 million ounces. On Friday, 1 billion paper ounces traded.
The futures market is meant for people to hedge production. If you produce wheat, and expect a nice crop, you bet AGAINST yourself and short the market. If you have the good crop, you get your money in, minus your loss on the futures. That reveals a premium. If you produce less than expected, you have a loss on your income but win the futures bet. However, this market has been perverted by big banks for 40+ years and have exploited rules to their benefit.
So the looming problem is this:
BASEL III rules are to take effect this year requiring 85% reserve on metals trades.
Ultimately, that means you just can’t have banks naked shorting all the time to suppress price. Why would they suppress price?
You see silver at $25. You buy, since it is in an uptrend. It gets to $27. You buy more. You set your stop loss at $26.50. The banks know where your stop loss is. So, the banks “sell” naked short positions and paper the market to “push” everyone’s stops. When the price hits $24.50, the banks then buy back what they just sold. YOU are out thousands of dollars. The banks just used you as a piggy bank. And they have been convicted of doing this thousands of times just this past decade.
The problem now is this:
- With 85% reserves required, no naked shorting.
- More and more want physical delivery
- Less shorting will happen
- Gold and silver price will launch
- All of the short positions out there cannot be filled due to the metal not existing
- Banks will have to buy back short positions at massively inflated prices, perhaps leading some to insolvency.
At issue here, I believe, is the David Hunter prophecy will come true due to the highly over-levered metals futures markets. If you think you have gold in vaults in unallocated metals, you may find out very quickly that you share that same ounce of gold with 500 other people.
To me, this leads to a worldwide bank run on metals. Instantly. And…what’s about to happen when all of these people who think they have gold find out they don’t? What the absolute hell is about to happen to these banks?
But…Nate…you are assuming metals will go up. Weren’t they just smashed on Friday?
How metals are valued
I’ve gone over this a few times here, but here’s a quick rundown of how metals move. For more, take a look at my previous article explaining this here:
- Real rates. The more negative the real rate, the more gold is valued. If you look at the rates above, you saw in the 1970s rates went up with inflation they could not control. This is because inflation rate was greater than the interest rate.
- Supply/Demand. Some say you cannot go to a gold standard due to not enough gold. Not true. At its current price, true. This means price will go up if we are to go back on a gold standard. Jim Rickards is calling for $15,000 gold now due to this.
- Inflation – I’m about to unleash my Kraken below, but we just saw rates go up and gold go down.
- Debasement of currency – any stimulus package makes gold go up
- Times of uncertainty – think of shooting missiles into Iran
So what I saw Friday amazed me. The thinking I’ve been programmed to hear was “rates went up, so people moved from gold”. Nice try.
I see this going up, yes.
So…that’s the excuse given to the public.
What many of you do NOT see is that fractional reserve system with the banks.
Remember what I said above with fractional banking and metals? This shows there are 356,000 contracts open in gold (100 ounces each) for February delivery – about 2 weeks out. With metals prices increasing through December, precious metals are the type of investment that more and more people come to it as the price increases. You’d think you’d be like me and buy it when no one wants it ahead of time. No. Most of you people only care about this when it is about to pop off the charts.
The idea here was that at 8AM London time on Friday, they shorted the hell out of this. At the exact same time there were bad jobs numbers coming out of the US, which would have been bullish for gold. So – they use the higher interest rates argument to create a narrative.
SD Bullion had a great video on this.
So with 2 trading weeks left, they have to knock down this open interest as much as possible – and have to open up the flood gates of paper metals to do so. BASEL III rules will prevent this down the road, potentially, and apparently there are new NSFR rules coming to the US to have higher reserve amounts as well.
Why is this is big deal? In December, it took until the LAST DAY of trading in the month to fulfill the contracts. Many of these, they take a loss on and “roll over” to the next delivery month. But as there is growing uncertainty in the world, and growing distrust in the value of the US dollar, more and more people want to take their metals off of the market.
Think of this as billion-dollar musical chairs. The big boys are sitting down now and the rest of you are running around in circles waiting for the music to stop. That’s the shell game being played.
The other narrative was – “the strength of the US dollar”. And “the dollar rebound”.
In the red circle, this was gold at $2088. In the green circle, this is gold knocked down Friday to $1848.
So how is that narrative going now, chief? The dollar is down 6 full points from July, and it went up a quarter of a point Friday and it justifies $240 less than July?
Remember what I said about ponzi schemes?
The perfect storm
Now, we get to the meat and the potatoes. The perfect storm has now formed:
- Runaway moves downward in the dollar. A lower dollar value means it takes more of these to buy things, like wood, copper, silver, and gold. All of the other commodities have gone up during this period – except gold and silver. Hmmm. Money printing – to infinity. We now have a dem president and congress. This means more stimulus, and more, and more, and then infrastructure. Debasement of currency means lower dollar.
- Interest rates moving up. The fed cannot allow interest rates on the 10 year to move much more. Why? Because it will destroy the housing market and prevent them from servicing the debt. In the VERY short term, it might dissuade casual gold investors – but if you see the chart above, you see how gold went up 24x in the 1970s despite rising interest rates. It’s because inflation was running much hotter than interest rates. The fed MUST STOP interest rates. They can do this by buying more bonds, or implementing “Yield Curve Control”.
- Supply/Demand. The COMEX is putting an end to the paper games. Higher reserves needed to short means less shorting, down the road. This means prices will rise. Central banks around the globe for 10 years have been acquiring gold. In 2019, gold was declared a Tier 1 asset (not unallocated gold, only allocated gold). This can be a push for central banks to destroy the banks who have been shorting metals for 40 years. By eliminating the short pressure, this allows a price rise to find real market prices. This could have a 2-10x in gold, for all we know. No one knows due to how suppressed metals have been. If you are a central bank and have $500 billion in gold, by simply changing the reserve requirements you are eliminating the fractional reserve of the banks whilst also potentially changing the value of your gold from $500 billion to $5 trillion or more – simply by eliminating the short pressure. This is good for nation states to pay debt in a “reset” scenario.
- Inflation moving up, hot. We are all seeing it in the grocery stores. The fed keeps saying “no inflation”. This distrust of the system will continue to see rise in food prices. The fed will say “no inflation” but people will see it – leading to flight to gold and silver – making prices rise despite the Fed’s narrative.
- Times of uncertainty increasing. David Hunter talks about a “crack up boom” this quarter followed by a global “bust” which will unwind a lot of the leverage. These times of uncertainty I believe will show the dollar falling and people spending dollars on tangible assets. Stocks are tangible, to an extent, because after a reset you will still own the same portion of the stock. The question is, what is the company worth in the new system?
This was the trigger for me to write this. THIS is the point of inflection.
To me – this will start running away, and it needs attention, ASAP.
Putting it all together
David Hunter is calling for all stocks to drop 65-80% this year. Check out the video here. It is a hard interview to hear, but I’ve heard this now a few times over the last year. He calls for these terrible things to happen with the depth of a depression, but in the time of a recession.
What he doesn’t mention is the pin. I think the pin for all of this is either gold or silver derivatives unwinding. Bix Weir talks about silver taking down the whole system, but he says it in a manner that is somewhat tinfoil hat. I can’t give this guy much academic credit these days, as he’s a little off the reservation – but he has snippets of entirely useful and incredible information interspersed with cabal and conspiracy theories – with a hit psychic to help him find gold in the grand canyon.
That being said…..
This is all culminating to a point. Most of you never heard of a cup and handle pattern, but it’s one of the most powerful trading patterns out there.
You see where the ideal buying point is….right?
Now…let’s take a look at where gold is.
See anything interesting? As gold goes up this month and next, it will trigger mass buying on all of the computer based computer algos. This has a target range up to about $3000 for the move, but I feel it may be $2200-$2400 before David Hunter’s bust comes to fruition. They will have to take down everything as this is moving up.
This just happens to coincide with Bank of America’s prediction in April 2020 that in 18 months, gold will hit $3,000. Check it out here.
So David Hunter right now is calling for a “crack up boom” where he has the high end for Down Jones at 36,000. Nasdaq at 15,000. S&P at 4400 I think.
He says this is by end of Q1 (end of March) or sometime in Q2 (by end of June). This indicates perhaps another 15% run up in everything, if not more.
But, at the same time – we will see the dollar imploding.
The trigger…of all triggers…was this. Interest rates moving up on the 10 year.
Here’s how this plays out for gold and silver:
- They are both WAY oversold. I was watching this price Friday and when it touched the 50 dma I bought a ton of AG options and the silver price bounced off of it. Check out the last time silver got to this RSI (relative strength index). Both times previous it led to a major rally. Note it also touched the 50% fib retracement. This was a bank takedown on no real news that changed any fundamentals. Buyers coming back in, as silver recovered nearly $1 of the smack down.
And gold’s RSI isn’t as bad as silver, but you can see what happens with low RSIs.
My expectation here is a very large buy in to gold and silver at stupidly cheap prices. Remember, India is a gorilla in the room and will snap their fingers and make everything scream. Due to COVID last year, it essentially crushed their wedding season. This meant lack of jewelry bought. That’s not the case now. Get ready.
2. CPI – they use 1.6% as the CPI inflation rate overall. The concept is you didn’t have to spend as much on gas, so all is well. They use the “all items less food and energy” which is 1.6%. The overall was 1.2%. Still not the 2%. So – we must money print more!!!!
What you are going to see this first quarter is massive price increases at the supermarket. With the dollar going down, this simply means we need to use more of them to import goods from other countries. Ever notice anything from Walmart is imported from China? Half of your produce is imported.
So expect inflation to pick up as the dollar falls. This will make the CPI creep up.
3. Interest rates will need to get capped. They cannot let this run hot, as they are trying to get negative real rates to keep inflation going. Once they announce some form of Yield Curve Control in the next few weeks or months, that will make gold and silver scream. YCC in the FOMC minutes is what made gold scream to $2088 in July. They backed off of that, for then, which then led to a 4 month retracement. If we see any sort Fed announcement trying to rein in the 10 year, it’s game on.
4. COMEX delivery problems. I’m expecting another smash before February. They have to hit it with all they have. All I’m doing is reloading at these dips. And I’m sure the hedge funds are too if I am. All these smashes are doing is tightening the noose. Whether it is gold February issues which lead to destruction of derivatives in early March which pops the balloon or March silver deliveries which pop the balloon in early April – my thoughts are the new reserve rules which I heard take effect in March cannot really have the COMEX playing their games past June. So this COULD be the pin to trigger David Hunter’s vision. What does this look like? First – the unwinding of ridiculous derivatives. 500 paper contracts for one owned ounce of gold?
What this unwinding is, is a lot of these derivative items will go to zero. The above is Exter’s pyramid, and you can see that the base money system that all currencies always get reset to is gold and/or silver.
Here’s another way of looking at it:
5. Global BUST, to use Hunter’s words. This is going to undo a LOT of the derivative problems we have. Many people will lose “paper fortunes”. There will be a MASSIVE flight to cash. This WILL take the dollar to 110-130. This will take down the stock market by 80%, but it will also deflate gold and silver to perhaps $1600 and $30 respectively from their recent highs of $2400 and $50.
Prior to this bust, I am getting out of all options I have. Taking some doubles and moving on, some I’ll take triples on. I plan on getting out of a lot and in to cash by end of Q1, but will probably sell off in chunks. For example, get out of all options, then maybe sell 10% of my positions weekly depending on how it’s going. Maybe leave 25% in which are my longer term juniors which may be closer to first pour.
For 12 months or so, be in cash and have some precious metals if your cash goes to zero in a reset. Watch the deflation happen. Own some stocks for the re-inflation.
6. Re-invest. Hunter feels that the bust will correct a lot of the problems of the last 40 years, it seems, in a short time – but have the depth of a depression. The rush to invest in commodities will most likely be a form of infrastructure bill to re-build. I think of FDR-like programs. Bridges, roads, green power, electrification, nuclear, battery, 5G, electric vehicles, wood – he seems a commodities boom. What then happens is everyone sees everything is OK. Out comes the spending. Which then creates inflation. And, naturally occurring higher interest rates. Now – think of the 1970s with massive inflation and the gold price rising. Hunter sees $10,000 gold and $300 silver by 2030. Most are now projecting between $5000-$20,000 gold and $100-$300 silver by 2030.
The next 2-4 months may be the most important time in all of human history to capitalize on this move.
You have a history of 5,000 years with gold and silver. 10 years with bitcoin. 1700 P/E ratio with Tesla, or 21 with Newmont and a nice dividend to go with it and a rising gold price.
How you invest in the next 4 months might affect the next 40 years of your life.
Watch the interest rates. Watch the messaging with this. They need to cap it, and soon. And when this happens, gold will climb and continue to put pressure on the COMEX.