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.
As usual – please visit wallstreetsilver on Reddit and #silversqueeze on Twitter!
One of my close friends, who I recently converted to a semi-silverbug, asked this question overnight in our group chat. It is a legit question to ask, first of all. Are we just continuing to agree with each other?
Every fundamental lines up with the gold/silver move to go much higher. What I’m finding, and realizing, is troubling me.
A year ago I was all in on this – still am – and will always be. But a year later, the price of silver and gold are up, as predicted. I doubled my pile of federal fiat notes (thanks James Anderson) with my investments. But what is troubling me was how I felt this should happen – did not happen. It should have been where Q2 numbers came in for 2020, and things should have gone sideways. What WAS right about that prediction, was pretty much months earlier I predicted the move of this within a week or two higher. OK – maybe some of it was beginner’s luck, but while gold and silver went straight up – and the miners mostly followed – I didn’t see the markets get punished like I thought they were supposed to.
So in review, you look at markets continue to go higher. People now on my feed are once again talking about market corrections. Many feel now that gold and silver may have yet another “correction” before a move up – this time. And you see this….
And you look – and see things like “40% of all dollars created in history were created in the last year”. I don’t think that’s accurate – but assume it is.
What I uncovered about the silver market shocked me to the bone. The level of open manipulation in the silver markets pushing prices down unnerved me. But what if they were doing it everywhere? How?
Concept – push gold and silver down to hide inflation. Have the Fed “rescue” the stock markets by printing federal fiat notes and giving them to people. People have $1,000 and every one of them wants to be a Bitcoin millionaire so they put it into the stock market. And – you can see – the Dow is the most bought in to it’s ever been in my life.
I also heard elected officials saying things like, “we will never have a recession again”. And they measure this with the markets.
What I’m seeing is danger signs all over the place. And – Mike Maloney also worried about all of the tinkering with his “hidden secrets of money” series where he shows a cartoon Ben Bernanke playing with dials and buttons to “save” the economy. But – with this, are unintended consequences.
The melt up.
What this means is stocks that have no business moving up, do, and by a lot. This is Venezuela’s stock market before they went to hyper inflation.
You have Tesla – which I love by the way – having a PE Ratio the last time I saw at 1749x. Newmont, my favorite large gold producer, has a PE ratio around 15x.
They then tell us we have an “inflation deficit” and we must target 2% inflation. Take a look at the Velocity of Money chart – and this shows you how money that goes into the economy is not moving around like it should. Note – what this is also telling you is that there is massive, massive, massive, massive cash flows sitting on the sidelines – and this, I believe, will kick off inflation that will be severe, and swift.
My conclusions are these:
- With gold and silver being suppressed, it is hiding REAL inflationary forces. Many just look at the price of gold and silver and go “meh” because they did a double just buying the SPY index last year. Massive hidden of inflationary forces are the root cause of income disparity in this country. This has led to those with means getting much richer with inflated stocks and real estate, and those without means seeing an eroding value of a dollar with increasing costs of goods – leading them to take on insurmountable debt.
- One way to address this income disparity it to tax the rich more, take wealth from them in the form of wealth taxes, and distribute to the less well off with Universal Basic Income (or as you now like to call them, “stimmy checks”. Another way to address this is to allow the free market to correct and let inflation run hot. The REAL solution is to reveal what TRUE inflation is, then have interest rates TRAIL the REAL inflation rate. This will HURT. It will be PAINFUL. But this is the only way in a capitalist society to correct the problem. Any other way to try and solve this leads to soviet-style planned economies and heavy socialist policies to provide tokens of fiat to those not able to meet basic living standards.
- When gold and silver suppression are broken up, it will reveal TRUE inflation. The problem is, this suppression is how they have hidden inflation for years and once revealed, it will be a scramble out of the USD into real assets like you have never seen before.
- First silver falls, then gold, then the USD. This could be 2-4 months away. The “melt up” of silver will happen and “unleash 40 years of gains in 4 months”.
- We are not in an echo chamber, we just understand the mechanics of what the real problem is better than most. Silver manipulation at its root, is a form of hiding inflation from the public. This allowed 40 years of interest rates to fall and allowed us to borrow more at lower rates.
There are one of two things that can happen here:
- Continued manipulation. All stocks go vertical over the next few weeks, months, years. Everyone gets in on the stock market because they see their digits increase. Meanwhile, the purchasing power of your dollar is decelerating at a rate you aren’t able to comprehend.
- The overwhelming physical demand of silver breaks the manipulation of the commodity. Gold is next. Ultimately, gold could see $40,000-$100,000 in the next 9 years if all manipulation is concluded. US Dollar would collapse. US Government cannot allow this and extreme measures will be taken to attack gold. Gold will go up, and by a lot, but it has to be a controlled ascent or the US Dollar is done.
The international pressures right now against the USD as the reserve currency of the world, are overwhelming. Everyone is now seeing the ponzi scheme we have been running – but they can’t get out of the dollar. 150 countries right now want a “new Bretton woods” in which they go off of the USD as the world’s currency.
And I can tell you, the world is not going to stand for number 1 above.
I can also tell you, silver is a worldwide commodity, and number 2 can be done de-centralized, all over the world, and is in process now. From cleaning out bullion dealers everywhere – to seeing $1.00-$1.40 premium on 1,000 oz bars, to James Anderson reporting less than 100m oz of free float silver in LBMA.
So – do I think investing in silver at $27 spot price is going to get you rich? No. Never did. But what may happen over the next few months or years is that people will start bringing their dollars from across the world back to the US. The dollar will flood our markets and try to extract our gold and silver to them. Our goods. Anything not nailed down is about to go vertical. Including our stock market – because these are shares of businesses.
Whenever we are on the other end of this dollar, I believe gold and/or silver will play a part in the new monetary system. In 2019 the Bank of International Settlements made gold a tier 1 asset, and I believe this will be used at the national levels with crypto to have countries service each others’ debts.
So are we in an echo chamber? Perhaps. But I have to tell you, if you look at how these metals have been manipulated for 40 years, and then look at the original inflation formulas found at shadow stats, you see a $49 silver price in 1980 is the equivalent of $611 today. Banks had incentive to manipulate in the form of making tons of profits on shaking people out of markets constantly. The countries had incentive because they could mask inflation, and thus continuously decrease interest rates – therefore re-financing debt cheaper, taxing a higher asset base, and spending massive amounts of money.
It is clear to me now, more than ever, we need to lean on the Constitution. In it, it mentions gold and silver as the only form of money. And now I see why. The collapse of any civilization is inevitable with a system that has debt that is spiraling out of control. You cannot exceed expenses in a gold-backed system and thus “sound money” is indeed what the forefathers wanted. We never changed this in the constitution, nor did we pass an amendment to invalidate this.
Ultimately, #silversqueeze, to me, is the end of hiding inflation. And that also terrifies me with downstream consequences. But, either the people vote with their wallet to demand a fair system, or other countries band together and vote the dollar out. In either scenario, it is apparent a lot of bad stuff is coming. In both scenarios, precious metals appear to be the solution.
What price should silver actually be?
If you look at the shadowstats numbers, the $49 silver price in 1980 was actually $611 in today’s numbers. Does that mean silver should be $611 now? Absolutely not. It suggests that silver is not at 50% of it’s all time high, but at 4.4% of its all time high. If you had indeed removed this suppression over 40 years – people then feel it should be $611 tomorrow. That’s not accurate either – but – may get there again.
Ultimately, this doesn’t mean that silver is halfway to its max, and then it is done moving. It means silver can move about 20x to get back to its all time high. If it moves 20x in a year, that is also indicative we are in full out Weimar hyperinflation. What is more likely is that we are in 1972 in the move of gold and silver from 1971-1980. That decade was marred with serious inflation. We had gone off of the gold standard in 1971, and gold/silver kept pace with that inflation – and they inflated so much, that in 1980, we could have gone back on the gold standard with the then price of gold. And I see us going that route again. Except this time, the world will force us there. Our dollar will, indeed, go in the tank. Countries right now are trying to “de-dollar”. And as these dollars start hitting us, WHILE WE ARE PRINTING TRILLIONS, this velocity of money in our system over years, MAY REVEAL and PRODUCE the high levels of inflation we saw in the 1970s.
While the Hunt Brothers are blamed for “cornering the market” in silver – who cornered the market in gold? Silver ran up 29x in the decade, but gold ran up 24x. Who cornered gold, if we are to believe someone cornering the silver market was responsible for the move? They saw the dangers of inflation, and wanted to preserve as much of their wealth as they could. And…big money is doing that today with their family offices, they just aren’t letting you know about it because the prices right now are being subsidized. When the all out run happens for metals, and it may be soon, you will be standing in line for hours to get a roll of silver dimes at $80 per ounce.
Do I think silver should be $611 tomorrow? No. But true price discovery has mostly been suppressed, with the exception of 2011 running up – and then being smacked down by JP Morgan – according to Chris Markus in his incredible book, “The Big Silver Short“. Had this NOT occurred – silver may have continued to rise over $50. Maybe to $60? $100?
See – with the “free markets”, price discovery is a beautiful, and sometimes painful thing. It is necessary to create efficiencies with the markets. And, as I’ve heard Rick Rule say, “the solution to low prices is low prices”.
With a free market system, those who are most efficient, win. But – this is what happens. More people enter into a crowded market. There are only so many dollars to go around. Prices fall with oversupply. Those who then find more efficient solutions become the most profitable. Those who do not adapt, leave the market place. Eventually, undersupply happens, and the whole thing repeats over and over. It’s a “market cycle” and gold and silver run through these.
However, through artificial price suppression, this has all but a few primary silver producers on the planet out of business. We are in a structural decline of silver mining. Productivity is down. Grades are worse, meaning it costs more to produce. Less surface silver exists, meaning you have to dig deeper at higher costs. Governments over 100 years have emptied their vaults of billions of ounces of silver – which have been gobbled up by the markets and put into mirrors, band aids, stretchy pants, electronics – etc. As a side effect of this process – those silver miners left had to mostly abandon exploration to find new resources. Those found, could not be developed for hundreds of millions because their cost to produce were in the $20s, $30s, and $40s whereas the spot price was pinned in the teens.
And now – with “green everything”, we expect solar and EVs to take over the world. But the supplies demanded do not exist at the current prices. Investment demand now is the game changer – and we are all front-running the industrial users. The industrial users, in my opinion, are late to the party and may have to end up paying ridiculous amounts for 1,000 oz bars in the very near term.
Here’s how I see price shaking out….
- By end of March – the squeeze is real, and price gets north of $50.
- In the last run up in 2011, everyone melted down silverware and junk silver. Refineries were backed up for 2+ months. It takes a LONG TIME for home silver to come off of the market and get to refineries to then supply more 1,000 oz bars.
- This delay in getting home users’ silver, coupled with the continued suppression of prices, will lead to a 2-6 week spike none of us have ever seen, perhaps over $100-$150. The idea here is they need to shake out 1,000 oz bars held by wealthy investors. Many of these see this at their doomsday pile and you aren’t getting that for any price.
- With the run up of perhaps $100 by end of March deliveries, I see the price coming down as home supply is making its way through the refineries.
- At the same time this is going on, you have ETFs, industrial users, Hedge Funds all buying 1,000 oz bars – but the commercial shorts of 400 million ounces are now going to have to cover. Will they give up the metals they are covered short on? How will they but the 100m or so oz naked short they are reported to be? This is where I see that stupid upside happening of a spike for a few days over $100-$150.
- Supply will come free as price ticks down and many scramble to cash out. I see the new floor around $50 once the commercial shorts are out of the game.
- While this is now far short of $611, this is the base that can now trade freely. And – without a massive commercial short constantly shorting into price rises, you may see a gradual move up to $150-$200 over the next 10 years.
- I do not believe, after 2011, that the amount of silverware or junk silver exists like it did. I feel that this blow off top at $100 or so will get a LOT of supply back in the market. This could even bring it back down to $30 rapidly to stop people from bringing it in.
- There will be a window to cash out of silver miners upcoming, to then buy back much cheaper 6 months later. However, as the USD collapses, it may be of interest to watch gold and silver demand come back up more quickly. Therefore, I may cash out of half of my miners, and all of my options, and then reload on dips all the way until 2030.
My mining stocks break down
As a disclaimer here, I have 4 pay services I use and pick some from each I really like. Some or many of these pay services recommend the same miners, and they get higher weight for me. I am NOT a mining stock expert, I just play one on TV. I pay experts for their knowledge, then I do my own reseatch
I have a mix of many types of miners. Many don’t realize there are a lot of types. See my full write up on this. Here, I just would like to summarize where I am. I mostly have producers and junior producers, with a smaller portion on near term producers, streamers, explorers – and now some battery metals and uranium.
DO NOT replicate my results, as yours may vary a
|Labrador||exploration – HR/HR||gold||NKOSF|
|Precipitate gold||exploration – HR/HR||gold||PREIF|
|Fury||exploration – HR/HR||gold||FURY|
|Sombrero Resources||exploration – HR/HR||both gold and copper|
|Tier one metals||exploration – HR/HR||silver|
|Reyna Silver||exploration – HR/HR (silver)||silver||RSNVF|
|Blackrock||exploration – HR/HR (silver)||both gold and silver||BKRRF|
|US Gold||Exploration – less risk||gold||USAU|
|MedGold||Exploration – less risk||gold||MGLDF|
|Discovery Metals – silver||Exploration – less risk (silver)||silver||DSVMF|
|Bear Creek Mining||Exploration – less risk (silver)||silver||BCEKF|
|GR Silver||Exploration – less risk (silver)||silver||GRSLF|
|Bluestone||Pre-producer > 1 yr (silver)||gold||BBSRF|
|Silver One||Pre-producer > 1 yr (silver)||Silver||SLVRF|
|Integra||Pre-producer > 1 yr (gold)||gold||ITRG|
|Pure gold||Pre-producers <1 yr||gold||LRTNF|
|Minera Alamos||Pre-producers <1 yr||gold||MAIFF|
|Golden Minerals||Pre-producers <1 yr (gold and silver)||both gold and silver||AUMN|
|Alexco Resources||Pre-producers <1 yr (silver)||Silver||AXU|
|Sprott gold miners||Producer (gold)||gold||SGDM|
|Newmont (options)||Producer (gold)||both gold and silver||NEM|
|First Majestic (options)||Producer (silver)||both gold and silver||AG|
|Endeavor Silver||Producer (silver)||both gold and silver||EXK|
|Americas Golds and Silver||Producer-Jr (gold and silver)||both gold and silver||USAS|
|Impact Silver||Producer-Jr (silver)||silver||ISVLF|
|Nova Royalties||Streaming||battery metals||NOVRF|
|Wheaton Precious Metals||Streaming||silver||WPM|
|Sprott Silver trust||Physical metals||silver||PSLV|
nd lose you money. The point of this was to educate you how I diversify. Any one of these miners can have labor disputes, problems with national governments, etc.
I tend to play 3 different types of options…..
- Long term – these are usually bought on a really down day for a stock, I see the options getting smashed, and I buy then. I bought $10 strike price for AG when the stock dipped to $9.50 for $3.16. Had a LOT more of them a few weeks ago, and decided to trim my position to mitigate risk. Yeah, a week later, AG goes on a tear. Figures. These are ways I play the stock price without owning shares. I usually find options for about a year out that are valued at about 1/3 the current stock price. This is how I get more torque for my dollars. Warning – OPTIONS CAN GO TO ZERO
- Mid term speculations – These are usually 6-12 weeks out and just OTM on down days I buy. I’m getting eaten alive on some of my GDX options I bought on the last breakout. Point is, if I FEEL a rip your face off run coming, I buy these when cheap, and usually try and sell at a 40-100% profit. Been pretty good with these over 6 months. Now I need gold to make a solid move in the next 30 days and I’m golden. Some calling for more pain. I hate them.
- Lottery tickets – I will usually buy some wayyyyy OTM options for a weekend in Atlantic City money. Most recently, I bought 20 SLV $54 strike calls for March 30th. Price went way down. Going to get 50 more of them Monday. 99% chance this goes to zero. I’m usually buying these with half of my profits from the mid term speculations above, so these are “free money”. Let me explain the SLV one to you, quickly.
I bought 20 of these for about $1,000 or $.50 each. I think the last time I checked the price was now $.20. For the sake of argument here, let’s assume they are now $.20. I buy 50 more of them for another $1,000. Remember, I just sold some AG options on the run up 🙂
So I have 70 options, or 7,000 shares for $54 strike price for $2,000. Going to use ballpark figures here for sake of illustration. That’s about $.285 per share controlled as a cost basis.
If silver does what I think it MIGHT do, and get to $100, and this is a BIG IF, this is how this plays out.
Strike price $54, or about $46 per share profit (I know SLV isn’t exactly silver price, just bare with me)
7000 shares x $46 per share = $322,000 revenue on $2000 spent.
7000 shares x $6 profit = $42,000 revenue on $2,000 spent.
Point is – I have a MUCH better chance of using this lottery money to hit $300k than I do winning anything in Atlantic City.
I also have a rule, that once I hit a double, I cash half in to get a free ride. Let’s assume silver goes ballistic this week and the next. Maybe the premiums on my options go up. IT is highly more likely I score a double on my premiums than a $100 silver price is hit.
So…take half off the table with the double. Get my $2000 initial investment back and let the rest run. This then gives an upside of $21,000 on $60 silver or $150,000 on $100 silver. But – this gets my initial payoff back.
IF I wake up one day to $35 silver, perhaps I do NOT do half. Maybe I sell 1/3 at a triple or 1/4 at a 4x. This is more likely where I’m going with this, but I can set trailing stops to capture a lot of the upside.
Anyway – I felt the lottery ticket aspect is something that is NOT investment advice, but another way that people can play this casino to favor them with the POSSIBILITY of silver breaking out any week now.
Now, if you are convinced that this is going to happen in 2021, and it will go crazy, you can play this type of long shot every month as a portion of your short term swing trade profits. So you are not digging into the college funds to do this, but using a portion of winnings to get a massive upside.
February 8, 2021 at 1:54 am
Recently found your site and I really enjoy your writing. I also use a handful of subscription services. My number one site is goldstockdata.com. The amount of information about mining companies is enormous and the community is fantastic, all for $149 per year. Check it out. Thanks.
February 19, 2021 at 11:05 am
I’ve been listening today to Cathie Wood of ARK describe the total capitalization of the three genomics stocks they hold is a mere $20B US. She continues to elaborate on the exponential growth potential of those and other innovative groups. The thought occurred to me that your gravy used for options might be deployed there instead. Also, earlier I was listening to Nassim Nicholas Taleb’s videos on anti-fragility and convexity vs concavity; yet another reason to allot 7-10% into such ideas. Lastly, have you read James Rickard’s latest book?
February 19, 2021 at 2:36 pm
I have Rickard’s new book on my desk and am looking at it. Time to read is an issue. My problem is that I am pretty jaded on where a lot of the economy is going and I’d have to say my position is defensive in nature. There are thousands of stocks out there that have stories attached to them. All I am feeling is that at some point, this big bubble is going to pop, and when it does, at some point, there will be a flight out of fiat into gold/silver. That hypothesis alone has me staying out of traditional equities until some sort of major bubble correction happens. Meaning – these stocks may all be the greatest thing ever – but if I presume most of these are already overcrowded and artificially inflated, I’d best be suited to buy them after they are deflated. If David Hunter is correct and there is a global bust about to happen – a lot of this stuff I’m buying a year or two from now when markets are terrible and my mining stocks are then in a bubble and I rotate profits out of them into the best of the best that survived. I listen a lot to Rick Rule who discusses “anti-fragile”, and I applaud the concepts – but I have not read his work yet – and again, I don’t have a lot of time to read these days. 10 years in college and hundreds of textbooks were great and all, but now with lack of time I need to listen to videos with trusted individuals that can get me the highlight reel. If any of these concepts strike a chord, I then go further down the rabbit holes.