"Destroyers seize gold and leave to its owners a counterfeit pile
of paper." —Ayn Rand
The baby-boom generation, of which I am a less-than-proud member, blew it.
There was a time long, long ago when the mention of the words "baby
boomer" evoked a sense of pride of membership. Amid the prosperity of
the post-WWII era, birth rates in North America soared while the sons and
daughters of many men and women that fought in the war became the dominant
demographic force by the year 1966.
When I was in grade 10, I wrote an essay that pointed to the defining
moment, where the excitement and unbridled optimism of the Space Race,
advances in modern medicine and unparalleled economic growth was snuffed out
forever by an assassin's bullet in Dallas in the autumn of 1963. With the end
of Camelot, the boomer generation suddenly began to question things. They
threw away the Beach Boys "Surfin' Nirvana" lifestyle for the
darker messages of Bob Dylan, CSNY, the Doors and Hendrix, and they watched
while the Vietnam war claimed over 58,000 U.S. servicemen and caused massive
civil unrest to permeate the inner cities and the campuses of America.
Through the unwillingness of the baby boomers to accept the garbage spewed
out by the radio and print media, as well as the fledgling television
industry, young people rose defiantly to implement an end to a war that had
become a national embarassment and political nightmare. I arrived in Saint
Louis in the fall of 1971, a mere four years before Saigon fell, and by then,
the historically conservative (pro-war) city of Saint Louis had seen a
demographic shift in camps, as the campuses and high schools were filled with
long-haired radicals heavily recruiting the youth of the era to "tear it
all down" in order to effect the much-needed political and social
changes that were so overdue by then. On the other side of the demarcation
line were the rednecks, the police, the National Guard and, of course, the
military.
The sidebar to all of this is that the boomers also took down a president,
in the form of Richard Nixon, so to say that the boomers had serious
"stroke" is an understatement. The mediums were FM radio, Rolling
Stone magazine and weed, and that was all that was needed to effect
change—it mattered not where. We, as a generation, were a force.
However, and very sadly, ending the war in Vietnam by nonviolent protest
and by their sheer numbers (it was nothing to see 20,000 young people at
anti-war rallies)—that was just about where the great metamorphosis ended.
We, as a generation, as we had done with the Beach Boys, threw away the old
protest albums of the '60s and '70s and opted instead for a different type of
optimism from that which empowered our parents in the '50s.
A former movie star arrived on the scene in the form of Republican Ronald
Reagan (nicknamed "Ronald Ray-Gun" by Country Joe at Woodstock) in
1980, and despite the non-violent, intellectual approach of opponent Democrat
Jimmy Carter, the boomers swept Reagan into power with the largest popular
vote in history. From that moment on, my generation shifted focus from
morality to money and with that shift, the largest voting demographic in
world history has continued to act in a self-serving, sycophantic mode of
behavior most foul to those who dare try to recall the ethical bravery of the
1960s. Famous cofounder of the Students for a Democratic Society (SDS), Jerry
Rubin, went from bell-bottomed blue jeans to blue pinstripes by taking a job
on Wall Street, and that punctuated the generational sentence of the boomer
tribe.
We boomers now look at our offspring and we cry for their future. We don't
lament for how they are voting or why they are voting or even if
they are voting because deep down, we all know—every one of us—that their
decisions are the ones crafted for them by their forebearers. The parents of
we boomers were indelibly etched by the Great Depression of 1930–1933. I
recall my father's tales of delivering "day-old bread" to houses up
in Rosedale for "a penny a loaf" in 1931, and what hit me was that
after he passed at the grand age of 89, as I was sorting his affairs out,
there were countless cubbyholes and bookshelves filled with all sorts of
coins and currency. They might have totaled perhaps $1,500, but the fact they
were stashed away, insulated from the thievery of Depression-era desperation,
was a testimonial to the imprint it left upon that generation.
By contrast, the newly empowered millennial generation has no compassion
nor comprehension as to why any human being would need to store anything;
they are most comfortable in storing all of their net worth in the digital
vault of the cyber-world. That may (or may not) be sound thinking, but the
point remains that the boomer generation had a chance to restore fiscal
sanity by bringing Bretton Woods back with a vengeance. We didn't. We opted
for the status quo. We voted for our short term wealth and voted against our
long-term health. We sold out.
There has never been a time when "hoarding cash" ever resulted
in an enhanced lifestyle. Theoretically, had you gone to cash in 1928, you at
least had a few years to activate that cash as asset prices collapsed, so
perhaps the Great Depression might serve as a one-off. However, I urge you
all to join me in celebrating the legacy of what we boomers have bequeathed
upon you all. Your savings (if you have any) are going to have minimal
purchasing power as time passes, and your expectations of the same are going
to be worth the same as the paper one finds in public lavatories.
However, the financial media celebrates and rejoices every time one of the
averages hits a new high, and the astounding fact remains that they cannot
see the forest for the trees. Stocks are rising because their replacement
value is running for its life from debasement and while it would appear to be
a "good thing," it is not. Wealth gravitates to proper treatment;
it flees abuse. Wealth is gravitating to gold and silver; it is fleeing cash.
"Historically, the Zimbabwe Stock Market reached an all-time high
of 773.06 in June of 2019 and a record low of 93.39 in June of
2016."—Bloomberg
When you think of places to invest, Zimbabwe is certainly not one of them.
Once heralded as "the bread basket of Africa," it is now a net
importer of grains as the prolific immigrant European farmers had their land
expropriated by the Mugabe regime in an effort to restore tribal ownership to
the native inhabitants.
Forgetting the moral argument for a moment, the point here is that
Zimbabwe stocks are screaming to all-time highs despite an inflation rate
exceeding 175% per annum. This is the example of what happens when societies
distrust and, in fact, detest cash. Zimbabwe citizens will jettison cash as
soon as it arrives in their hands, providing a prime example of the
"replacement power of equities within an inflationary spiral."
We are seeing stock markets around the world print new highs with
increasing regularity and the mainstream media would suggest that the stock
markets are barometers of impending economic expansion and financial
well-being. The problem with that is that it is the $14 trillion in new
wet-ink debt that "rescued the financial system" (read: bailed out
the criminal banks that blew it up) that is now surfacing in the form of
excess liquidity sloshing around the world markets and chasing equities
higher.
Some 65% of global bonds now yielding negative returns is also shepherding
cash to equities but the media would have us believe that it is a policy
"miracle" that is creating the boom. It is not. It is Modern
Monetary Theory debasing the purchasing power of cash. In currency terms,
stocks are rising because the value of savings is crashing. Prudence in
personal money management is being punished by central bank profligacy, and
just as the Zimbabwe markets convey a false message of prosperity, the middle
and working-class citizens of Europe and North America are certainly not
feeling the warmth that a 3,019 S&P 500 level should be instilling.
Until recently, investors largely ignored the precious metals, the
historical defense mechanism against debasement because of the countless and
incessant interventions and interference capping any and all advances. But
here in the summer of 2019, investors appeared to have warmed up to the
notion of owning a little gold and silver, and given the relatively puny size
of those markets, even the slightest of attention can drive prices higher.
When gold penetrated the $1,400 barrier in June, it altered the configuration
of asset allocations around the world, and as can be seen in the HUI's
breathtaking advance off the lows and silver's abrupt about-face after months
(if not years) of underperformance, the utility of precious metals ownership
is gathering both popularity and momentum. It is a most welcome occurrence
for the grizzled metals enthusiast and comes at a most opportune moment in
history.
Near-term, I must confess that the power of this advance in gold has
surprised me with its uncanny ability to stay overbought or near-overbought
for what seems like weeks. RSI (relative strength index) readings hit nearly
90 in June on the first ascension through $1,440, with levels not seen since
2010–2011. I am fully invested in the conservative portfolio that has zero
leverage and is evenly split between gold, silver (physical), senior miners
(GDX) and junior miners (GDXJ).
I took a trade on half of the ETFs in late June, and luckily was able to
buy them back a hair below where they were sold. The portfolio is ahead
30.13% year-to-date (YTD), based on all trades. The only leveraged position I
currently hold is the SLV October $15.50, which was purchased with the
proceeds of the triple I made on the SLV August $14 calls on the move from
$0.60 to $1.80. The October $15.50 calls were bought at $0.48 and are now
$0.69.
Would I add to the SLV position? That is a very tough call to make because
despite the new paradigm in which we now reside, I simply cannot buy into the
near-80 RSI level that SLV currently sports. I also learned a lesson from my
early exit from the GLD calls in early July—that RSI can offer a misleading
signal, because while it saved my arse in the range-bound markets of
2017–2019, avoiding nearly $400 of drawdowns in gold, it rocketed to nearly
90 last month and has remained elevated as prices have continued to rally. I
am long SLV calls and very nervous, but am also mindful of its potential to
do a gold RSI repeat (a move to 90), taking silver into the mid-$18 level and
the calls to $3.00. We shall see.
I have also added Aftermath Silver Ltd. (AAG:TSX.V) at the July 11 closing
price of $.095 to the portfolio, joining Great
Bear Resources Ltd. (GBR:TSX.V; GTBDF:OTC) (up 131%), Western
Uranium & Vanadium Corp. (WUC:CSE; WSTRF:OTCQX) (down 36%), Stakeholder
Gold Corp. (SRC:TSX.V) (down 20%) and Getchell
Gold Corp. (GTCH:CSE) (down 22%) (all YTD numbers).
You can see how the market rewards discoveries (GBR) and punishes either
no news or bad news (GTCH/WUC/SRC). I added Aftermath (AAG) because it has an
established silver resource in Chile capable of increases in size through
exploration, so it holds leverage to both the silver price and exploration
results as potential drivers of price.
As we progress further into this rampaging bull, I am going to be far more
attentive to companies that have existing discoveries or ore bodies, which
eliminate the exploration risks that were necessary in the past when the
metal prices were stagnant. With metal prices anything but stagnant, I want
to capture the upside of the move in the metals and avoid being left out of
the spoils of victory because exploration results were less-than-stellar (or
nonexistent).
I leave Sunday for my annual voyage into the "waters unknown" of
northern Georgian Bay, which contains the finest freshwater boating in the
world. I hope to get to the Bad River Channel by next weekend, an anchorage
of immense beauty, great fishing, crystal-clear water and more hidden and
very hazardous rocks than any place on the planet (as I so painfully
discovered two years ago). I leave you all with this YouTube clip of one of
the many dinghy tours we take into the backcountry, includes the mighty
French River (https://www.youtube.com/watch?v=svR9D1Jacvs&t=40s).
I will not be posting another update until after I return mid-August but I
will be providing updates via Twitter so you can follow me at @Miningjunkie
to see how I am navigating the waters and the markets.
[NLINSERT]
Charts courtesy of Michael Ballanger.
Michael Ballanger Disclaimer:
This letter makes no guarantee or warranty on the accuracy or completeness of
the data provided. Nothing contained herein is intended or shall be deemed to
be investment advice, implied or otherwise. This letter represents my views
and replicates trades that I am making but nothing more than that. Always
consult your registered advisor to assist you with your investments. I accept
no liability for any loss arising from the use of the data contained on this
letter. Options and junior mining stocks contain a high level of risk that
may result in the loss of part or all invested capital and therefore are
suitable for experienced and professional investors and traders only. One
should be familiar with the risks involved in junior mining and options
trading and we recommend consulting a financial adviser if you feel you do
not understand the risks involved.
