In my business, there is a great deal of travel, be it to
properties in the Peruvian Andes or the Canadian Yukon or to the investment
conferences in New Orleans or San Francisco or London, so I get a full
psychographic cross section of every type of investor imaginable. First of all,
the audiences I have encountered at the "Sound Money" conferences
in Nassau or Bermuda are usually quite conservative and usually well-dressed
and well-groomed. When the topic is gold and it is a controversial speaker
looking for "the end of Western civilization," the audiences tend
to be a tad different with hair length and dress code noticeably more
avant-garde.
However, when the topic is confined to silver, while the
speakers tend to be "evangelical," the audiences appear to be
(operative word being "appear") simply stark-raving madmen of the
first order. They usually dress in military fatigues, the males are all in
ponytails, the women weigh more than the men, and the T-shirts and baseball
caps on both males and females carry logos from either the WWF or the Monster
Truck conventions. However, they are usually quite erudite when discussing
"survival techniques"; they are usually extremely well educated and
they are all able to rhyme off the silver production numbers for the past 20
years BY COUNTRY; and most importantly, they carry high distain for anyone
who fails to know these facts.
These are simply goldbugs amped up on argentine steroids,
and I happen to have an extremely high regard for them, as they represent the
fringe of the movement. The silver bugs would charge the Federal
Reserve Building in a New York minute; they would canonize WikiLeaks founder
Julian Assange if allowed; they would vote for Ron Paul 40 years after his
passing; and they wear Edward Snowdon T-shirts around the local shopping
mart. They can usually recite the Declaration of Independence in its entirety
and consider themselves true patriots. They view silver as the only
"real money" on the planet and normally hold over half of their net
worth outside of the banking system in the form of silver, while residing in
remote parts of Idaho or Wyoming, usually in the mountains. When I have given
speeches or lectures over the years, I can usually pick them out in a crowd;
they rarely smile and NEVER laugh at anything I have said (which may or may
not be seen as abnormal). Now, you will of course forgive the stereotyping,
but that is simply and purely my blanket view of silver bugs.
Irrespective of whether the silver aficionados laugh or not (and they
don't), they are certainly SMILING lately, as am I, as there is something
immensely gratifying about a prediction that turns out to be both correct and
timely (usually it is difficult to pick the right direction, let alone the
right timing). Thankfully, my decision to buy silver immediately rather than
wait for the inevitable correction in the HUI (NYSE Arca Gold BUGS Index) has
worked well as it has moved from $15.20 on March 31 to today's high of
$17.11, a gain of 12.5% in just under three weeks. It surely did not hurt
that Deutsche Bank was forced to settle a massive price-rigging conspiracy
and implicate Scotiabank and HSBC in the process, but silver looked like it
was going to "pop" long before the massive silver fraud was
revealed. (See chart above.)
As we discussed back in late March, shorting the GTSR (Gold-to-Silver
Ratio) at 80 looked like it could turn out to be the 2016 Trade-of-the-Year,
but little did I expect that the move would occur without a breakout (or
breakdown) move in gold. As it stands, gold is still locked in that $1,210-$1,287
range that has shackled it since the 1st of April, but silver by
contrast has been a standout performer since that day. The new recovery high
seen today in silver is a big positive over the near term and bodes well for
the ultimate test of $18.50, with a strong likelihood that silver is leading
gold to what will be an upside resolution to this sideways correction.
The GTSR was
originally recommended north of 80
To coin a phrase, "There's no fever like GOLD fever," but even
better is "There's no mania like silver mania," and now that silver
appears to have finally shed the bullion bank shackles, it could easily see
the low $20s within a few months. I was thinking of buying a fistful of
long-dated calls on Pan American Silver Corp. (PAA:TSX; PAAS:NASDAQ), but I
decided to buy only a few while instead putting more of the cash into a
private junior silver company called Santa Rosa Silver Mining Corp. (at $.05
per share). In that time frame, Pan American Silver had advanced from $10.82
to $14.00 with the July $10 calls advancing from $1.65 to $4.00, so as much
as I fashion myself as a metals expert, I should have opened up the wallet
and bought the Pan American calls as well. Leaving better than a double on
the table hurts despite the fact that the GDXJ (Market Vectors Junior Gold
Miners) position has better than doubled since Jan. 19.
The GDXJ has been on one wicked tear since mid-January and, while we all
know how ridiculously undervalued the miners became in the latter half of
2015 and early 2016, RSI (Relative Strength Index) readings above 70 have
always been associated with tops in any and all markets that I have followed.
Accordingly, I should be taking profits in the GDXJ, but I have decided to
refrain and ride the trend instead. It may be madness and it may be greed,
but I simply MUST hang on for dear life and pray that the golden bull doesn't
throw me into the ditch and my net worth with it.
With silver up another 1.17% this morning, I feel like Robert Duval in
"Apocalypse Now" because "I just LOVE the smell of incinerated
silver shorts in the morning. . ." As I wrote about back in December
with gold starting to rally, it feels different these days and silver feels
as though it will be in the $20s sooner than one might imagine.
Originally trained during the inflationary 1970s, Michael Ballanger is a graduate of Saint Louis University
where he earned a Bachelor of Science in finance and a Bachelor of Art in
marketing before completing post-graduate work at the Wharton School of
Finance. With more than 30 years of experience as a junior mining and
exploration specialist, as well as a solid background in corporate finance,
Ballanger's adherence to the concept of "Hard Assets" allows him to
focus the practice on selecting opportunities in the global resource sector
with emphasis on the precious metals exploration and development sector.
Ballanger takes great pleasure in visiting mineral properties around the
globe in the never-ending hunt for early-stage opportunities.
All charts courtesy of Michael Ballanger
