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Silver Took the Stairs to $21 in 2008, Took the Escalator to $29 in 2010. Is Silver on the Elevator to the 120th floor today?

Commodities / Gold & Silver 2020 Aug 13, 2020 - 02:34 PM GMT

By: Robert_Singer

Commodities

Disclaimer: The following is my opinion and is not intended as investment advice. I don’t know anything about bulls, bears, cycles, resistance, daily, weekly, monthly charting, micro or macro fundamentals and especially indicators like the EROI.

I have been waiting for Silver to take off since 2005 when I was sure the economy and the dollar were going to collapse. [1]

The economy should have gone south in 1980 when the Twins showed up. The twin deficits is a phenomenon wherein both the federal government’s balance and that country’s trade balance nosedive into negative territory.


Up until 1980 Americans enjoyed the highest standard of living in the Western world because of our ability to import cheap, raw materials (thanks to the CIA) and export refrigerators, cars, airplanes and military hardware to the rest of the world (finished goods).

When the world figured out the game, the Reagan administration embarked upon the greatest export of all: OUR DEBT.

We have been getting away with exporting our debt for over 40 years, but with the reappearance of the Twins and a national debt that since 2010 has been mathematically impossible to pay off, we might be witnessing the final death march of the dollar as the reserve currency of the world. [2]

The recovery when the S&P 500 erased its losses for 2020, accentuating a remarkable stock market comeback, had nothing to do with the expectation of a V-shaped recovery or Trump’s claim:

The “America’s economy is coming back much stronger than ever anticipated by most people, almost all people, because these numbers were – even the most optimistic people, these numbers are being doubled and tripled over what they thought would be possible,”

The Stock Market in 2018

84 percent of all stocks owned by Americans belong to the wealthiest 10 percent of households. And that includes everyone’s stakes in pension plans, 401(k)’s and individual retirement accounts, as well as trust funds, mutual funds and college savings programs like 529 plans.

The Stock Market in 2020

87 percent of all stocks are owned by Blackrock and the Hedge Funds.

Negative-yielding debt, 3.6 trillion dollar fiscal stimulus, eviction moratoriums, riots, chaos and the Covid-19 pandemic; we are entering a time that cannot be compared to any financial crisis in history.

Blackrock in 2019

The firm (ticker: BLK) now manages $7.4 trillion, up nearly $1.5 trillion from last year, according to its latest earnings report, released on Wednesday. More money flowed into BlackRock funds as stocks rose, boosting the value of existing investments. The S&P 500 Index returned more than 30% in 2019, and the MSCI ACWI, an index that represents the world stock market, gained nearly 27%. [3]

There is significant evidence of price manipulation by Blackrock and Hedge funds at the stock level on critical reporting dates. [4]

The S&P and Dow remarkable recovery has everything to do with Blackrock and the hedge funds that own 87% of all equities.

There is significant evidence, but not proof, of price manipulation by Blackrock and Hedge funds at the stock level to buy the stocks the 13% were selling during the Covid-19 pandemic.

The market was about to collapse, manipulation for Blackrock was the only option.

The U.S. has two alternatives to solve our National debt problem: 1) issue our own currency and pay off the debt or 2) repudiate (default) on the debt. [5]

Either alternative will end the reign of the dollar as the reserve currency of the world and launch the Precious Metals to the Moon. The only vehicle for a store of value is Gold and Silver, not a cryptic currency.

The recent rally, that the Gold and Silver Bulls have been predicting for the last 20 years, was the start of something really big and then on Thursday both Silver and Gold took a dive.

I knew something was wrong before the crash/correction because I got a text from a Dow Joneser, and a Never Precious Metaler, “Congratulations, I see that Silver is up over 27/ounce I am very happy for you.”

I did some research and then was convinced the rally had to end when I saw that the New York Times published Gold Goes Mainstream, on July 30

New Gold Rush Pushes Price to Record Highs, something shiny and bright is beckoning investors accustomed to the gloomy days of 2020: gold. The pandemic has pushed the global economy into one of the sharpest downturns on record. The International Monetary Fund predicts that this year, the world economy will shrink by nearly 5 percent. The plunge prompted central banks everywhere, most importantly the Federal Reserve, to pump hundreds of billions of dollars into financial markets, with the goal of propping up flailing economies.

But those billions aren’t coming from a storehouse; rather, central banks are creating fresh currency. The increase in money supply lowers interest rates and raises the amount of a particular currency, such as the dollar, in circulation. And over time, these moves can both increase inflation (lower interest rates typically spur economic activity) and weaken the value of a currency.

Right now, investors are taking all of that into account and determining that buying gold – which is traditionally considered an investment that holds its value over time – is the best thing they can do to shield themselves from inflation and weakening of so-called fiat, or paper, currencies. As a result, money flows into gold investments have surged in recent months as central banks have stepped up their fight against the downturn.

Ney’s first law of financial markets

You don’t need a degree from an Austrian school of economics to predict the crash correction of Gold and Silver and the solid rebound of the U.S. dollar index from its two-year low, all you need to know Ney’s first law of financial markets:

Richard Ney wrote two best-selling books published in 1973. Making it in the Market and The Wall Street Jungle, Ney’s first law of financial markets: A stock, or in this case, gold and silver do not move up or down in price because you buy or sell; You buy or sell because the price of gold or silver moves up or down.

In other words greed motivates people to buy on the euphoria of the price of gold and silver rising and panic causes them to sell. In the case of silver the low price discourages an investment in silver.

Jim Wyckoff’s article, August 07, 2020 at Kitco News, Gold price loses altitude on profit taking headline into the weekend summarizes the situation without Richard Ney or my belief that everything changed in 2015.

(Kitco News) – Remember that bigger upside price moves in up-trending markets tend to see bigger downside corrections. Price corrections in uptrends are actually healthy for the extension of the uptrends. A markets that goes “parabolic” in trading terms (nearly straight up) tends to see the price uptrend in its very late stages, and then a market top is formed. The fact that gold and silver are seeing price corrections in their strong uptrends is healthy for the continuation of the price uptrends.

Of course, it’s natural for the bulls to get a bit queasy when the big downside corrections occur. What is important is that any big downside price corrections do not violate and negate the price uptrend on the chart.

Everything changed in 2015

Ted Butler, one of the foremost experts on Silver had this to say about the last quarter of 2015:

  • August 2015 – Market bubbles are rare events, occurring once in a generation. True financial bubbles were the dot-com stock bubble that peaked in 2000, the U.S. housing market in 2005-2006 and today’s stock market in China. Based upon what has transpired in silver over the past four years, I believe that what has been created is a reverse price bubble – the opposite and mirror image of a financial bubble.
  • December 30, 2015 -It’s natural to look both back and ahead as the year draws to an end and since I haven’t done a formal year-end review in some time, I’ll do so today for silver and gold. The only difference for this review is that because this year’s price performance and its cause are indistinguishable from silver and gold price performance for the past few years, it is more appropriate to consider this a multi-year review.
  • December 23, 2015 – Past and Future – Butler Research Not for a minute am I suggesting that the complete price history of gold and silver dates from 2011; but since the period of time since did represent about the worst price decline ever, it cries out for a full explanation. After all, in many ways the epic decline seemed most unusual given all the circumstances.[Appendix A]

The qualified financial analysts

Financial analysts who study the charts and the recent 6 year trading range, without a 2015 perspective, saw the bull trend off the March low, but the analysis suggested the resistance was still $21:

  • Silver price could top out at any point between $18.50 and $20, maybe reach $19.30 before weakening and correcting.
  • Silver tends to underperform Gold during most of the precious metal bull markets, and tends to outperform towards the end of powerful bull runs when retail investors start waking up and jumping on board, hence expected a series of spikes higher through resistance levels over the coming years, but not this year.

Their conclusion would have been correct if not for what happened in 2015 that turned the World upside down, and it wasn’t the 2016 election of “The Donald.” Put another way if they had concluded that it was the year of the spikes, then I would be sure I was wrong about 2015.

Stay tuned and if Silver continues without a correction under $21 then I will tell you what happened in 2015 that changed the precious metals and mankind’s destiny.

Disclaimer: The preceding was my opinion and was not intended as investment advice. I am not selling my Silver no matter what happens next week, but again I don’t know anything about bulls, bears, cycles, resistance, daily, weekly, monthly charting, micro or macro fundamentals and especially indicators like the EROI.

Footnotes

[1] Nixon Ends Convertibility of US Dollars to Gold and Announces Wage/Price Controls

August 1971. With inflation on the rise and a gold run looming, President Richard Nixon’s team enacted a plan that ended dollar convertibility to gold and implemented wage and price controls, which soon brought an end to the Bretton Woods System.

[2] The U.S. National Debt in 2010 at 13,561,623,030,891.79 was mathematically impossible to pay off, at the end of March 2020 the debt is $23.7 trillion.

[3] But working behind the scenes, it is much more than that. BlackRock has been called “the most powerful institution in the financial system,” “the most powerful company in the world” and the “secret power.” It is the world’s largest asset manager and “shadow bank,” larger than the world’s largest bank (which is in China), with over $7 trillion in assets under direct management and another $20 trillion managed through its Aladdin risk-monitoring software. BlackRock has also been called “the fourth branch of government” and “almost a shadow government”, but no part of it actually belongs to the government. Despite its size and global power, BlackRock is not even regulated as a “Systemically Important Financial Institution” under the Dodd-Frank Act, thanks to pressure from its CEO Larry Fink, who has long had “cozy” relationships with government officials.

https://www.sott.net/article/436963-Meet-BlackRock-The-New-Great-Vampire-Squid

Net inflows of money were strong, at about $129 billion for the quarter and $429 billion for the year. BlackRock’s fourth-quarter earnings per share rose 43% to an unadjusted $8.29, much higher than the $7.75 analysts had expected, from revenue of $3.98 billion. For the full year, BlackRock earned net income of $4.5 billion, or $28.43 a share, for a 7% gain in EPS from 2018.

[4] https://www.tse-fr.eu/publications/do-hedge-funds-manipulate-stock-prices

We find evidence of significant price manipulation at the stock level by hedge funds on critical reporting dates. Stocks in the top quartile by hedge fund holdings exhibit abnormal returns of 30 basis points in the last day of the month and a reversal of 25 basis points in the following day. Using intraday data, we show that a significant part of the return is earned during the last minutes of the last day of the month, at an increasing rate towards the closing bell. This evidence is consistent with hedge funds’ incentive to inflate their monthly performance by buying stocks that they hold in their portfolios. Higher manipulations occur with funds that have higher incentives to improve their ranking relative to their peers and a lower cost of doing so.

[5] REPUDIATE THE DEBT NOW! http://4brevard.com/tyranny/repudiate.htm

Appendix A

August 2015: Market bubbles are rare events, occurring once in a generation. True financial bubbles were the dot-com stock bubble that peaked in 2000, the U.S. housing market in 2005-2006 and today’s stock market in China. Based upon what has transpired in silver over the past four years, I believe that what has been created is a reverse price bubble – the opposite and mirror image of a financial bubble. A financial bubble involves vastly overvalued prices; a reverse bubble features a shockingly undervalued price. A financial bubble involves vast numbers of participants and reckless leverage, the reverse bubble in silver features only a handful of market participants and little borrowing. Most importantly, it’s just a matter of time before a regular bubble bursts with crashing prices, while in a reverse bubble it is inevitable that prices will explode

December 30, 2015 – Review and Outlook

Review and Outlook, It’s natural to look both back and ahead as the year draws to an end and since I haven’t done a formal year-end review in some time, I’ll do so today for silver and gold. The only difference for this review is that because this year’s price performance and its cause are indistinguishable from silver and gold price performance for the past few years, it is more appropriate to consider this a multi-year review.

December 23, 2015 – Past and Future – Butler Research

The first demand we must all make when considering whether an explanation or a prediction for what may unfold in the future is plausible or not, is whether that same explanation is consistent and in conformity with what occurred in the past. In other words, if someone gives you a price target on gold or silver based on a premise that bears no connection with past price history, skepticism would be in order. The future is always unknown, but the past is there for all to see.

Therefore, if a premise of the future is not compatible with the past, such a premise would be lacking in substance. In the case of gold and silver, any plausible prediction for what lies ahead must also explain what occurred over the past four and a half years, in which gold and silver prices fell 40% and 70%, respectively, from the price highs set in 2011. Not for a minute am I suggesting that the complete price history of gold and silver dates from 2011; but since the period of time since did represent about the worst price decline ever, it cries out for a full explanation. After all, in many ways the epic decline seemed most unusual given all the circumstances.

By Robert Singer

Robert Singer writes about Secrets, Sentient Creatures and The Federal Reserve at The Peoples Voice and The Market Oracle (rds2301@gmail.com)

Robert Singer is an Entrepreneur and the author of a forthcoming book on the Federal Reserve. His articles cover politics and the financial and environmental implications of our consumer society. 

© 2020 Copyright Robert Singer - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


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