Invasive species: Any kind of living organism—an amphibian (like
the cane toad), plant, insect, fish, fungus, bacteria, or even an organism's
seeds or eggs—that is not native to an ecosystem and causes harm. They can
harm the environment, the economy, or even human health.
In the 1830s, a creature called the "sea lamprey" was first
detected in Lake Ontario after it was able to migrate from the Finger Lakes
of upstate New York by way of the Erie Canal, which was constructed in 1825.
In the 1800s the Great Lakes fishing industry harvested over 100 million
pounds of fish for both domestic consumption and export before this
incredibly creepy creature laid virtual waste to the fishery stock. Within
one hundred years, the harvest had dwindled to approximately one-third of its
peak as the absence of natural predators allowed it to feast on the Great
Lakes fisheries with reckless abandon and unopposed execution.
As ugly a species as it was, the sea lamprey was especially efficient in
its mission, as tens of millions of pounds of succulent freshwater nutrients
was eliminated from the Great Lakes yield because of its unchallenged status
as a free-range aggressor.
The first time I saw the famous illustration of Rolling Stone magazine's
famous "vampire squid," with "its blood funnel attached to the
face of humanity" (in reference to Goldman Sachs), I thought of the sea
lamprey, attached to the sides of Lake Ontario trout and further thought of
the Canadian and American banking cartel, whose influence over Canadian
government policy is indisputable.
Then there is the case of the "zebra mussel," another of the
invasive species that are now covering a massive portion of the Great Lakes
floors, and that filter most of the phytoplankton from the water. As well as
starving the fisheries from the oh-so-vital nutrients that have lived in
microscopic freedom since the vast saltwaters dissipated thirty million years
ago, they spawned another new form of invader in the form of the
"goby," a fish that was equipped to crack shells of the zebra and
quagga mussels, thus enabling a natural predator to arrive. The problem is
that both goby and quagga are foreign,and they simply do not belong in
these lakes, the largest natural source of fresh water in the world.
It is not only ecosystems that find themselves endangered by invasive
species. The global system of finance, commerce and trade used to function
largely unencumbered by government policy, which tolerated and, in fact, promoted
interference in the ebb and flow if the free market system. The Working Group
on Capital Markets, established during the Reagan-Greenspan regime, has
metastasized into a massive interventionalist tumor spreading its cancerous
reach into all markets foreign and domestic. This is the zebra mussel of the
late twentieth century, and its presence continues to be an entity "that
is not native to an ecosystem and causes harm." What began as a
mechanism to prevent stocks from crashing is today an invasive instrument of
flawed policies, fiscal, monetary and foreign.
Lastly, we have the case of the infamous Asian carp, a bottom-feeding fish
that is supplanting the finest-eating food fish in the world, the mighty
Canadian pickerel (or walleye, as the Americans would have it). Most of the
invasive species that come flooding into our western lakes and rivers did so
without the assistance of Mother Nature but rather the ill-planned actions of
mariners arriving from Eastern European and Asian locales.
As I was discussing the plight of the Great Lakes fisheries with a learned
local lad from a small Canadian town located some fifty miles south of the
Sudbury, the site of the largest nickel deposit in the world, I was
immediately drawn to his love of home, of his surroundings, of his
environment. He explained that his father and grandfather had been raised in
the Ontario Northlands and had a deep and unfaltering love for the land
which, if treated properly, could and would provide all that was needed for
them to live a full, healthy life—albeit one that was absent any form of
fanciful accoutrements or lavish touches. He also explained that it was the
arrival of foreign cultures that caused disruptive change, and was quick to
add that his choice of the term "foreign cultures" meant no
disparagement to anyone of ethnic designation. His reference to
"foreign" was meant to address those "not from around
here," but unfortunately (or fortunately), it describes a world
ill-equipped to deal with the insertion of invasive people, whose
assumptions, expectations and behaviors are, quite simply,
"foreign."
I descend upon this delicate region of debate because it is deeply
troubling for those who dwell in places that have had families (or tribes)
dominating the landscape for centuries, always in perfect harmony and
effortlessly synchronized with the environment. I have been writing for years
about the risks that face Canadian (and North American) society, but as the
years have passed, and conservative attitudes have been replaced with
overbearing liberalism and entitlementism, I have to soften the entry into
this hair-trigger debate with allegories and anecdotes that get my point
across without offending any person or group that senses anything vaguely
resembling an ethnocentric bent.
Forty years of trading in commodities, stocks and bonds have left me with
angst far harder to convey than I would ever have imagined possible. The
reason is that the investment environment in which I was trained is now
dominated by numerous invasive species that plunder and pillage every nook,
cranny, and sector, leaving nothing in their wake worthy of effort.
Computerized trading utilizing sophisticated algorithmic software is now the
Asian carp of order execution, growing in number and size, and forcing historically
dominant species (such as human traders) to extinction. The advent of
exchange-traded funds (ETFs) inserted quagga mussels across the broad expanse
of equity exchanges the world over, such that no trade in any ETF is allowed
without the accompaniment of a half-a-penny fee.
However, the singular most insidious event has been the complete and total
dominance of the banks in their insatiable appetite for control of all things
related to money. In particular, the bullion banks are the "lamprey
eel" of global precious metals trading, attaching themselves to all
facets of the bullion markets extending to bonds, currencies and, of course,
stocks.
Since the enactment of the Federal Reserve Act of 1913, the banks have
been granted unprecedented power over all things related to money and, more
importantly, credit. Their debasement policies, designed to aid and abet all
things related to banking, have been the sole reason for the reserve currency
status of the U.S. dollar. By layering massive tranches of credit on top of
one another over the years, they have succeeded in forcing over 65% of all
issued credit to be negative-yielding instruments whose practical utility is
not only absent, is also insane.
However, just as dark are the skies moments before sunrise, it was in the
late 1960s that Canadian and American scientists responded to massive
domestic outrage and set out to rid the lakes of these parasites. They first
cross-bred brook and lake trout in an effort to control the roe of the
lamprey, but after proving unsuccessful (the females could only produce male
splake), the researchers developed a lampricide chemical that retarded
the development of the hatchlings and was so successful that it reduced the
lamprey population by 90% by 1990. Public outrage was so intense that
progress came on the backs of the politicians. Votes motivated action and
change was the result.
Similarly, after nearly eight years of interference, intervention and
suppression, this lamprey of government-condoned management of precious
metals prices has finally met with its own chemical predator which is best
described in one word: mistrust.
Now, it is my belief that after nearly forty years of government intervention
and fictitious reporting of inflation and purchasing power figures, public mistrust
is going to trigger political action that will rid the financial ecosystem of
parasites of all kinds. Assuming the role of a bankricide" designed
to reduce the growth of financial system parasites such as JPMorgan or
Goldman, mistrust would yield dramatic changes in savings rates, purchasing
power and living standards as the number and size of the blood funnels are
reduced. It is long overdue and badly needed.
However, for the immediate term, it is no surprise to followers of my work
that gold and silver are now in full bull market bloom—and are taking the
gold and silver miners up with them in what has been a breathtaking ascent.
So that you have no doubts, let it be known that I detest those bloggers or
commentators that are constantly in need of performance reinforcement by
reposting (sometimes multiple times during a day via Twitter or Instagram or
Facebook) how "brilliant" they have been. My record is out there and
I happily declare that I exited my leveraged ETFs when the RSI (relative
strength index) for gold first punched through into the mid-70s, which
represented a $26 NUGT at $20 (paid $15) and JNUG at $45, or $9 pre-split
(paid $32.50 or $6.50 pre-split). Since the major breakout at $1,375, the RSI
for gold has remained elevated, spiking to nearly 90 in June, correcting in
July, and now surging to the mid-70s again here in August.
I remain 100% long in the GGMA portfolio, which contains equal parts
physical gold (up 38.45% year to date [YTD]); physical silver (up 16.93%
YTD); GDX (up 29.36% YTD) and GDXJ (up 41.84% YTD). There is also a 28% cash
position from trading profits in GLD and SLV calls, NUGT and JNUG ETFs. The
only non-gold holding in the trading account is a 100% position in volatility
via the TVIX, bought in July for an ACB (adjusted cost basis) of $14.84 as a
proxy for August-September seasonal weakness. It closed at $18.84, up 26.7%
in less than a month.
The bad news is that the Commercials are once again going all-out to cap
the advances in gold and silver, such that the aggregate short position is
now approaching a record 325,000 contracts. The danger lies in the DSI (daily
sentiment index) number, now at 95% bulls with managed money and retail
piling on.
I am taking 50% positions in GDX and GDXJ off the table this week by
selling 25% of both on the opening Monday, and then offering the additional
25% at GDX $30 and GDXJ $43 good through Friday.
It is my lifelong dream that the invasive species of government
interventions, price management and Atlas Shrugged-style favoritism is
vanquished once and for all by a global mistrust that serves to level
the playing field. Whether it is lamprey, goby, zebra mussel or Asian carp,
these organisms do not belong in our North American waters and behaviors most
foreign to the long-term health and sanctity of free markets can no long be
tolerated. Mistrust is the financial and political pesticide of the
day, and the larger it grows, the better off we, as a society, will be.
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.
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Charts provided by the author.
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
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