To truly appreciate market crashes, you must have an
ample serving of grey hair.
Over the weekend, I must have received three dozen
"Emergency Email Alert" notifications by newsletter services and
financial intermediaries that got absolutely obliterated Friday morning and
were expecting more of the same on Monday, which they got in spades. This new
generation of "wealth advisors" has, unfortunately, been living off
the largess of Central Bank guarantees and the winks and nudges of the
"Finance Ministers" and "Treasury Secretaries" and
"Chancellors of the Exchequer," where they make investment
decisions based not upon analyses of balance sheets or income statements but
upon the collective wisdom of Champagne Socialists. I have been writing about
this for about thirty-five years and while it has not yet manifested itself
in the advance of the prices of precious metals to levels that would
correspond to the level of coinciding currency debasement, especially in the
United States and Europe, it is going to be the "Talk of the Town"
here in 2016.
Yesterday I heard two commentators on CNBC ask two of the
stupidest questions in history. The first one was when Bob Pisani asked,
"Why is the VIX (Volatility Index) down over 2 points with the S&P
off 40?" The answer, which was even more ludicrous than the question,
implied that traders had purchased volatility prior to the Brexit vote, and
once it spiked after the decision, they were selling "vol," which
was telling you that the selloff was going to be short-lived.
No, Bob, that is incorrect. The only
"traders" selling "vol" yesterday were those at 33
Liberty St. in New York (home of the NY Fed), after instructions were taken
from the "Working Group in Capital Markets" (covert arm of the U.S.
Treasury).
They weren't "lightening positions" taken prior to Brexit,
either—they were bludgeoning the VIX futures in order to drive the algo-bots
into the "long S&P futures" trade, so naturally, since the
market rallied off the lows in late trading in response to the sagging VIX, a
rather obvious wink/nudge was hand-delivered to the masses. Net effect? A
20-point S&P rally arrives, and another 35-point rally follows.
The second "dumb as a bag of hammers" moment was when Kelly
Evans questioned a fund manager about his ownership of gold within his family
of funds: "You are a value manager, so how can you like gold in here
when it offers no cash flow and no yield?"
Well, Kelly, why don't you ask that question to those British investors
who flipped their British pounds into gold last Wednesday? They staved off a
12.5% currency haircut versus the Yankee dollar and they got an 8.5% lift in
gold. Ask that question to a depositor in the Cyprus banks a few years back
when they got sideswiped by the advent of the "Bail-In." It is called
"counter-party risk"—where the guy on the other side of the trade
is unable to settle the transaction—and you can bet there has been a lot of
that being talked about across the pond these days. So THAT, Kelly, is a tad
more important than cash flow or yield—it is called capital preservation.
(See chart above.)
I am giving the markets a few days to bounce but I really do think that
Europe is unraveling and that the ability of the Central Banks to inject
liquidity ("manipulate") is rapidly coming to a close. I therefore
will attempt to buy back the UVXY July $10 calls at $1.45, and since these
were sold for double what I paid, the new adjusted cost on the 60% position
is now $0.725. So when Bob Pisani tells us that the declining VIX is a sure
sign that the selloff in stocks is going to be "short-lived," ask
yourself what he was telling the viewers back from May 31–June 10, when the
VIX traded under 13; it hit 25 on Friday.
As for the miners, they are acting "tired," considering that
gold has traded above $1,300 for three days now. And despite all of this
safe-haven volume, the HUI (Gold Bugs Index) has barely made a new high.
However, the next time Kelly Evans asks a guest what they see in owning gold,
show her the chart posted below.
The big news for me is the performance in the silver market, with it being
rejected once again as it crossed the $18.50 threshold on multiple occasions.
Knowing the cretins as I do, I fully expect them to allow the breakout later
this week and suck all of the technical traders into the long side of the
trade. I am already long the July 15 calls from the March 31 "Long
Silver/Short Gold" options trade, and have about a month left on them
since first mentioned in the March 31 Gold Report: "I will buy 100 SLV
(iShares Silver Trust) July $15 calls for $0.68 (US$6,800) and also 20 GLD
(SPDR Gold Trust) July $115 puts for $2.92 (US$5,840) for a net debit of
US$12,640. I will need to see either $108.68 on the GLD or $16.26 on the SLV
as breakeven points on this trade by the third Friday in July."
The SLV July $15 calls went out today at $2.40, making this a 90-day
return of 89.8%; I haven’t booked the profit but I will offer these calls
tomorrow at $2.40, and wait to see if we can get a solid breakout (I hate
that term) above $18.50. The chart below looks like we are already breaking
out, but the thickness (or lack thereof) of the line can turn you into a bum
pretty fast, so I am going to wait for a solid move through $18.50 and pray
that this time I'm not being set up for yet another classic "false
breakout" in the odious Crimex silver pit.
I'm working on my mid-year review this week, where I provide revisions to
the long, intermediate and short-term forecasts for gold and silver. I'll
give you a hint: The long and intermediate are unchanged, but the short-term
forecast for weakness into the end of July was going to be called into
question until these Central Bankers decided to "rescue" the global
stock markets with their incessant "interventions."
Lastly, remember what I have been saying since the early '80s about owning
stocks when Central Banks are fabricating currency: "NEVER underestimate
the replacement power of equities (stocks) within an inflationary
spiral." The worst thing one can ever hold is a "fat bank
account," because the longer it remains in cash, the less time it takes
to depreciate. The reason that politicians created "central banks"
was to give them a "foil" upon which to defer every time they elect
to trash the purchasing power of the currency unit in which you get paid
every month. Why is it that they all commit to an "anti-inflation"
policy statement with government pensions PROTECTED from it? All of the
politicians and government employees have pensions "indexed to
inflation," and you and I do not. Think about it. Think about it very
hard and email me if you can think of a plausible solution.
How about "Fire them all!"?
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.
Disclosure:
1) Statements and opinions expressed are the opinions of Michael Ballanger
and not of Streetwise Reports or its officers. Michael Ballanger is wholly
responsible for the validity of the statements. Streetwise Reports was not
involved in any aspect of the article preparation or editing so the author
could speak independently about the sector. Michael Ballanger was not paid by
Streetwise Reports LLC for this article. Streetwise Reports was not paid by
the author to publish or syndicate this article.
2) This article does not constitute investment advice. Each reader is
encouraged to consult with his or her individual financial professional and
any action a reader takes as a result of information presented here is his or
her own responsibility. By opening this page, each reader accepts and agrees
to Streetwise Reports' terms of use and full legal disclaimer.
This article is not a solicitation for investment. Streetwise Reports does
not render general or specific investment advice and the information on
Streetwise Reports should not be considered a recommendation to buy or sell
any security. Streetwise Reports does not endorse or recommend the business,
products, services or securities of any company mentioned on Streetwise
Reports.
3) From time to time, Streetwise Reports LLC and its directors, officers,
employees or members of their families, as well as persons interviewed for
articles and interviews on the site, may have a long or short position in
securities mentioned. Directors, officers, employees or members of their
families are prohibited from making purchases and/or sales of those
securities in the open market or otherwise during the up-to-four-week
interval from the time of the interview until after it publishes.
All charts courtesy of Michael Ballanger.
