Real Money Vs. “paper Pm Investments”

Another day passed, and another day closer to the cataclysmic end of hope that a return to “normalcy” as we have known it can be regained; not in this generation, and not until the cancerous fiat currency Ponzi scheme that caused the world’s economic demise is destroyed.

Just this weekend, I discussed the “seminal events, in a collapsing global economy” that have taken center stage this week – like the impending bankruptcies of Petrobras and Glencore; the terrifying implications of the Catalonian secession movement; imploding global currencies – “emerging market” and “first world” alike; the resignation of the House Speaker, mere days before a potential government shutdown.  And of course, the incalculable impact on Europe’s supposedly “strongest economy,” Germany, due to “Diesel-gate.”  Regarding the latter; heck, we’re just a few days past learning that one of the world’s oldest, most trusted brands – Volkswagen – is a borderline criminal operation.  And yet, they have already become synonymous with fraud.

I mean, we’re talking about some seriously terrible news – politically, economically, and otherwise – regarding both the short- and long-term.  And this, amidst a backdrop of freefalling commodities – to nearly a 40-year low; currencies – to an all-time low; high-yield bonds; and of course, stocks of all kinds, from “emerging markets” to “last to go’s” like the PPT-supported “Dow Jones Propaganda Average.”  Which sadly, are all historically overvalued due to the unprecedented, toxic cocktail of 24/7 money printing, market manipulation and propaganda that has been milked by the world’s “powers that be” to their final curdling drop – to the benefit of less than 1% of the population, and detriment of the remaining 99%-plus.

In the past 24 hours alone, the so-called strongest economy in the world – the United States of Present and Future Destruction – reported weaker than expected personal income; a dramatic, “unexpected” decline in the “pending home sale index”; the ninth straight monthly decline of the Dallas Fed manufacturing index; an “unexpected” decline in the Case-Shiller Home Price Index; and a shockingly ugly August trade deficit of $67 billion, compared to expectations of “just” $59 billion.  Consequently, Chicago Fed President Charles Evans called for a “later lift-off” of the Fed Funds rate from zero, and an “extra-patient approach” to tightening credit – prompting market-based “odds” of an October rate hike to plunge to a record low 16%, enroute to zero.  Yet again, validating my steadfast belief that “the Fed, and Janet Yellen, are faltering” – as the “end of belief Central banks can save us” has arrived, never to be undone.  Or, more aptly put, the beginning of the (global) realization Central banks have destroyed us.

In the aftermath, Monday’s markets – extending to Tuesday’s Asian trading – were a veritable bloodbath; with most stock markets down 3+%; collapsing commodities and currencies – the latter of which, ominously, traded with the “lowest liquidity since the Lehman bankruptcy.”  Meanwhile, real money, i.e. physical gold and silver, traded as “liquidly” as could be imagined; with investors – or should I say, savers – the world round clamoring for not just the historically best store of value, but the most liquid asset class imaginable.

“Andy, I have written to you from time to time. My friend just sent me an email telling me the two major FRENCH newspapers both have the same headline, French people are rushing to buy gold.”

Meanwhile, the odds of Glencore’s bankruptcy surged above 50% – portending ominously for all things commodity-related; as the PPT-supported NASDAQ “death-crossed” for the first time in three years – when its 50 DMA crossed below its 200 DMA; and Moody’s warned of the potential implosion of the “shadow” – or unregulated – banking system that has become the dominant source of Chinese financing, amidst the all-out collapse of the Chinese economy.  Not to mention, as Swiss banking giant UBS agreed to rat out its peers in an expanding European gold manipulation probe, whilst Citigroup miraculously “unwound” its $50 billion “silver derivatives position.”  In other words, “red flags” for the entire world to see, from sea to toxic sea.

Speaking of wildly PM-bullish news, how about this morning’s “unexpected” 50 basis point rate cut by the Reserve Bank of India – which only one of 52 polled analysts anticipated.  I.e., yet another example of Central bank lunacy; and this, in the most fiat currency hating, gold and silver loving nation on the planet – in dramatically lowering rates when your currency is already at an all-time low!  I mean, I know one theoretically “wins” the “final currency war” by destroying their currency.  But at what point does “destroy” become “annihilate?”  And at what point do 1.5 billion Indians, who already are on a pace to break their all-time record for gold and silver importation, sell out every ounce of available metal?  Let alone, when China, too, is on a pace to break its PM importation record – on a pace with India for “top exportation dog,” at a cumulative pace greater than all the gold and silver produced worldwide.

Clearly, the sum total of these events has led to a Precious Metals optimism not experienced in several years.  Albeit, a cautious one; as despite relentless, prototypical Cartel raids, gold and silver’s “paper prices” refuse to materially decline.  Heck, silver has stubbornly held above last November’s post-“Save Our Swiss Gold” referendum lows, whilst essentially all other commodities have collapsed.  And of course, physical demand has exploded from all corners of the globe – to the point that physical silver is becoming extremely difficult to source.  Throw in collapsing inventories everywhere from the COMEX, to the GLD ETF, to the Shanghai Exchange; the all-out implosion of the mining sector, as symbolized by Glencore; an unprecedented explosion of hyperinflationary monetary policy; secession movements; geopolitical tensions; pending bond defaults; and countless other reasons for billions of global denizens to fear fiat currency, and it becomes more and more “comfortable” to own physical gold and silver.

Much less, once you have actually touched a shiny, heavy, bullion coin – compared to the feather-lite, worthless feel of a nickel, dime, or quarter.  Knowing full well, I might add, that the former is historically priceless; irrefutably scarce; and experiencing record demand – whilst the latter is historically worthless; open-ended in supply; and rapidly being shunned by the world.  Trust me, since I sold my last mining stock in the summer of 2011 – and went 100% physical – I have slept the “sleep of the just” each and every night, knowing full well my gold and silver are not only historically undervalued, but unable to be “taken” by manipulated financial markets.  To wit, here is what I wrote in the aforementioned article from July 2012 – which not only saved me from a lack of sleep, but enabled my financial survival amidst what has become the “New York Gold Pool’s” swan song of Precious Metals suppression.

“My personal experience relates to shifting from mining stocks to PHYSICAL bullion, but everyone has their own story.  Unfortunately, most fall prey to sirens luring them to excessive, and often catastrophic, losses, in the same manner slot machines destroy gamblers.  Frankly – the odds of “beating the house” in Las Vegas appear to now be even with – or perhaps, superior to – “beating” rigged financial markets.

Before selling my remaining stocks last summer, the night entailed a repeating torture of nightmare and regret.  Dreams release our repressed feelings, so make no mistake – if ye have sinned, ye will repent.  Each night, my life passed before my eyes, and each morning the past eight hours’ pain was fresh on my mind.  It’s hard to believe my life was so agonizing, so recently – but that was then, and this is now.  Currently, I sleep with a peace not realized since childhood, as I KNOW my family is protected, and KNOW my decisions – some of them extremely difficult – were wise and true.”

That said, there are still many who believe “Paper PM Investments” – like mining stocks, ETFs, closed-end funds, futures and options – will “save” them from the hyper-inflationary and/or hyper-deflationary cataclysms the world faces.  Frankly, it’s hard to believe they still exist; as since the junior miners peaked in 2007, the senior miners in 2011, and closed-end funds in 2013, nearly every “Paper PM Investment” has either gone bankrupt and/or catastrophically collapsed – with most of the latter enroute to the same fate.  However, there are still countless touters out there – including many “newsletter writers” who claim to be bearish, but are the first ones to tell subscribers to buy this perpetually depreciating asset class every time gold modestly upticks.   Which, essentially 100% of the time, has been a money-losing proposition.  Heck, one of the most respected economists in our business said something so egregiously insensitive – and illogical – this weekend, even I blanched when reading it.

“If you are among those who own gold and gold mining shares, consider yourself a part of a small and fortunate club – a cadre of investors who will be able to maintain their purchasing power and standard of living, while those with complete faith in fiat currencies get summarily remanded to the lower class.”

“Fortunate” to be a part of the “club” owning mining shares?  I.e., the single worst performing asset class of the past decade?  And given how they have decidedly NOT been a proxy for gold and silver prices for years – through market highs and lows; with the vast majority of “Paper PM Investments” having gone bankrupt already, how can anyone in their right mind (let alone, a financial “leader) make such a statement?

Most importantly, even if you could guarantee gold and silver prices will surge, there is no guarantee “Paper PM Investments” will materially appreciate – much less, more so than bullion itself.  Remember, in today’s ugly price environment, with mining balance sheets historically stretched; and “asset” valuations questionable, mining shares have a rapidly diminishing “time value” attached to them.  In other words, if prices don’t surge NOW, many will be destroyed by crippling write-downs, onerous debt, dilutive equity, and decidedly unfriendly corporate takeovers.  And conversely, if prices do surge in the near-term, the so-called “window” to capitalize on “Paper PM Investments” could be exceedingly small.  To that end, I strongly believe the only way PM prices surge – which inevitably, must happen – will be when said “Cartel” is destroyed.  Which, in my view, will decidedly NOT occur in a vacuum.  In other words, when the “powers that be” inevitably lose control of gold and silver, it will likely be simultaneous with a loss of control of a great many things.  Which, in turn, would likely yield a rapid “re-monetization” of gold and silver in the minds of billions – and subsequently, draconian government measures to control them.  Like windfall profit taxes on gold and silver mining, for example – or the nationalization of Precious Metal mines.  And if said “loss of control” includes the worst-case scenario of financial implosion, the closure and/or seizure of the banks and brokers housing your “street name” shares is eminently possible.  And don’t even get me going on the giant targets ETFs like GLD and SLV, and closed end funds like the Central Fund of Canada, have on their backs.  First, to prevent their shares from rising above Net Asset Value; and second, as by far the easiest, and most efficient means of bullion confiscation.

I could go into a full discussion of that topic alone; but in the interest of brevity, I’ll simply say that in my view, private ownership of physical gold and silver – NOT stored in a financial institution – is by far the best way of hedging an increasingly ominous and uncertain future, no matter what risks, real or imagined, one anticipates.  As for “Paper PM Investments,” whilst the “Story of 2016” may well be inevitable collapse of the Precious Metals Cartel, there is no guarantee that mining share or other false proxies will participate – let alone, outperform.  Conversely, the upcoming, acute metal shortage will be historic – and unstoppable.

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