Maurice Jackson: Joining us for a conversation is Andy Schectman,
the president of Miles
Franklin Precious Metals Investments.
We have some important topics to address today regarding physical,
precious metals. Before we begin, for first time listeners, who is Miles
Franklin, and what type of services do we provide?
Andy Schectman: Miles Franklin is a precious metals company that's
been in business in Minneapolis since 1990. We've operated almost 29 years
without a customer complaint, ever. We have an A Plus rating with the Better
Business Bureau, and are one of fewer than 30 companies in America to ever be
approved by United States Mint as an authorized reseller of its product. And
more than anything, in a federally non-regulated industry, Maurice, that
stands for something.
We've seen so much fraud in this industry, typically centered around the
low-priced online retailers. In fact, we've never had a customer
complaint is something we're very proud of. But the state of Minnesota takes
it one step further. We're the only state in America that regulates the
precious metals industry. We are beholden to the Commissioner of Commerce
with the surety and background checks annually of every single one of our employees.
That continuing education, compliance, surety bond is enough to make the
majority of our competitors throughout the country boycott the state of
Minnesota, as they too would be subservient to the same set of regulations
that we are. And what it basically means is anyone buying precious metals
from a company domiciled in Minnesota would have arguably the safest, most
secure transaction in the country, because the state regulations all but
guarantee it.
Maurice Jackson: You and I had an offline discussion regarding the
opportunity of a lifetime that you see in silver. Let's discuss the value
proposition before us regarding silver. Please share, what has your attention
at the moment, and why.
Andy Schectman: When I look back over the years and try to identify
the moments or the trends that have shaped our success, and the calls that we
have made as a company that have panned out, they typically center around
anomalies or distortions in the price market. We can take a look at the
position of the most sophisticated, well-funded, well-informed traders in the
globe, the commercial banks, and in particular JP Morgan, and see something
very illuminating.
First off, JP Morgan has amassed over 800 million ounces of physical
silver in its house account. That is eight times what the Hunt Brothers tried
to accumulate in 1980. It is, in fact, the largest physical position the
world has ever seen at one time. And more significantly, it has used the
suppressed paper price to accumulate the physical. Since it inherited Bear
Stearns' short position in 2008, JP Morgan has been net short. And the
largest short position on the COMEX market. And believe it or not, have never
had one losing day. Not one losing trade, ever, in its short book since 2008.
It's almost mathematically impossible.
A lot of investors wonder about this short position, and think that this
could go on forever. JP Morgan has proven, with the success of it shorting
the paper market, that it does not need to accumulate 800 million ounces of
physical silver in order to manipulate the price. Quite to the contrary. I
think it manipulated the paper price in order to accumulate 800 million
ounces of physical silver.
And what has really gotten my attention is that for the first time since
JP Morgan inherited Bear Stearns short position in 2008, and for only the
third time in the last 45 years, the commercial banks have gone long in the
futures market. Including JP Morgan. It has reversed course, and has gone
long on the COMEX markets. So the combination of reverse course in the most
sophisticated, well-influenced, well-funded traders on the globe, going long
on paper, you see the world's largest ever accumulation of physical silver in
its house account.
I think the two combined are really very, very intriguing to me. If
nothing else, people should stand up and take notice of what the big boys are
doing right now.
Maurice Jackson: Andy, just to clarify, because sometimes there's a
lot of ambiguity regarding the actions of JP Morgan. Talk to us, is the
relationship between the proxy SLV (iShares Silver Trust) and JP Morgan?
Andy Schectman: Yes, it is. JP Morgan has the ability to pull
silver out of SLV, and take possession of it. But by doing so, it allows it
to take possession of silver without it being recorded. So Ted Butler would
tell you that's one of the ways that it has accumulated vast amounts of
physical silver, sort of off the books. So yes, I think the ability for JP
Morgan to take possession of silver out of SLV is one of the vehicles that it
has used to accumulate vast amounts of silver without it being recorded
through the normal channels of taking metal off the COMEX Exchange.
Maurice Jackson: Now for the individual investor, Mr. Schectman,
let's talk about what actions they can and should do regarding silver prices
currently.
Andy Schectman: I think you don't have to look any further than the
ratio between gold and silver right now. If you go back literally 45 years,
there's been but one brief moment, and that was in 1993, where trading your
gold and silver would've netted you more silver. In fact, what's interesting
now, Maurice, if you look at the last 50-years worth of price action, pretty
much the average ratio between gold and silver has been about 40 or 45 to 1.
Right now, we find that world ratio north of 80 to 1.
So when you put it all together, other than a brief moment in 1993, in the
last five decades there's never been a better time to trade gold for silver.
In fact, at this ratio, one could expect to trade gold for silver right now,
and then in a few years' time or less, if the ratio just simply finds its way
back to the mean, to the average, double the amount of gold.
In other words, you trade at 80 to 1, hope it goes back to the mean or to
the average if not below, of 40 to 1. Convert back into gold and double the
amount of gold that you started with.
When I look at a ratio that is this far out of wack, over 80 to 1, double
what it's been on average for the past 50 years. Plus the positioning of the
most sophisticated traders on the globe, going long for really the third time
in 45 years. The first time that I can remember. Along with accumulating the
largest physical position of silver the world has ever seen at one time. And
coupled with the fact that you don't hear about any of this through any
mainstream channels. It really makes me think that silver is probably one of,
if not the buying opportunity of a generation.
I try to say that, Maurice, with all sincerity and objectivity. I can't
see a better investment when you're able to buy something right now, that is
a third of what it was in 1980, and costs more to pull it out of the ground
right now. And you're seeing the most sophisticated traders on the globe
amass huge amounts of it. If I were a gambling man, I'd like to say that's a
bet I'd like to take.
Maurice Jackson: Andy, I appreciate your veracity. I know you
personally, and you're a man of integrity. One of the things I noticed here
in all of your comments is that you're not making a specific statement
regarding the price of silver, will reach price X. You're focused more on
ratios. And that's very important for our audience to understand, to use the
ratios to your advantage.
Now let's switch gears on to platinum. Talk to us about the enormous
potential here. What can you share with us?
Andy Schectman: I love the way you phrase that, Maurice. Ratios and
the law of averages are very, very important tools. In fact, I would say,
it's probably the most important gauge that I've used in the past 30 years to
direct me, as it pertains to exploiting and identifying anomalies and market
distortions that typically don't last.
And you could say the exact same thing right now between the gold and
platinum ratio. In fact, you can go back 45 years or more. On my data right
now that I'm looking at goes back 43 years. But there was one little spike in
1981 or 82, where the gold to platinum ratio was maybe where we are right
now, or slightly higher by a tick. Right now, we are 1.45. In other words,
you can trade one ounce of gold for 1.45 ounces of platinum based upon the
spot prices.
The average over the past 50 years has been closer to, 0.7 instead of
1.45. In other words, you trade an ounce of gold, you'd be lucky to get three
quarters of an ounce of platinum. For most of the last 50 years, platinum has
been priced much higher than gold, always at a premium. And a few times I can
remember, 2011 or so, where one ounce of gold was $800 or $900. And platinum
was $2,300.
So bottom line is here we go again. We have a ratio. We are at the highest
level, or almost the highest level in the last 50 years. And it's almost
identical to the gold to silver ratio. Where here again, you could trade gold
for platinum, and have nothing other than the average price between the two
is reached, you can double the amount of gold that you traded into.
You can say the same thing about the platinum to palladium ratio. There
has never been a time where you could trade palladium and get more
platinum. Typically, you would get 4 ounces of palladium for 1 ounce of platinum.
And right now, you get three-quarters of an ounce of palladium for one ounce
of platinum. These are ridiculously skewed ratios. You're not talking a small
sampling of time here. You're talking four, five decades of data, where all
of a sudden things are upside down.
Now I'm not here to tell you why things are upside down. Simply to tell
you that they are upside down. And when you look at the law of averages, to
me it is a very, very, very powerful tool. Mathematical ratios are there for
a reason. They're time tested and true. And so when we talk about
opportunities, there are tremendous opportunities. If I own palladium right
now, I would run as fast as I can to trade it to platinum. If I were looking
to acquire platinum, the first place I might consider is trading some gold
for it, rather than writing a check for it.
If there's the ability to trade some gold or some palladium for platinum,
to play the law of averages, to consider trading it back when that law comes
back or those numbers come back to the mean, which they will, you'll double
the amount of gold you started with. Whether it be trading gold to platinum,
palladium to platinum, or gold to silver. Again we are exploiting a
disconnection or an anomaly in the ratios that go back 50 years.
Is there an opportunity? I'd say, heck yes. And I would say this with all
sincerity; these opportunities are as good as I've ever seen in the 30 years
nearly that I've owned Miles Franklin.
Maurice Jackson: About two years ago, you shared with me,
"Maurice, watch out for platinum here. The price is going to go
down." And you shared the very same sentiments right here. Look at
reducing your positions in gold and palladium. We did exactly that. And the
ratios were tighter at that time. But here's the difference as well. You have
to be fundamentally and educationally prepared that what you just shared,
that the price may even go lower. And as the price of platinum has gone
lower, we've actually added more and more positions to our platinum because
we understand exactly what you're sharing, that we would get more ounces of
palladium and or gold. We're just using the ratios to our advantage.
So thank you for those words of wisdom, because I think what happens
sometimes is the thesis makes sense for something, but then the price
continues to drop and two years pass, and we get discouraged and we give up.
And this is the time where individuals like yourself and those that have been
serially successful in this industry, this is what they do. They buy low, and
they will sell high.
Andy, before we leave, last question. What did I forget to ask?
Andy Schectman: Bottom line is this: there are opportunities to be
found. You don't have to write a check out to find opportunities. I will
honestly say to you that one of the keys if you're in this for the long run,
if you see the reasoning to hold precious metals. You see that a trillion
seconds ago was 31,688 years ago. You see a $22 trillion debt, and $150
trillion unfunded liabilities and a world that's getting somewhat crazier by
the day probably isn't long-term sustainable. And you want to hold some
metals for these reasons.
Then it's imperative to realize the legitimacy of playing these ratios. Of
moving in and out. And physical metals sometimes are not the best vehicle for
doing so. Because you have to pack it up and send it. It doesn't diminish the
importance of exploiting and taking advantage of them. If you can get past
the inconvenience, boxing things up and sending, which we're very adept at
helping people with, then I think these are really truly opportunities of a
generation that I've never seen before, these types of distortions. And if we
do nothing other than come back into focus with reality, with what we've seen
for the past 40, 50 years, these are opportunities where we're talking of
doubling a position. That's not something that you hear very often in this
industry.
So I think the only thing that I would add to what we've talked about is
that if we exploit these ratios of trading palladium for platinum, or trading
gold for platinum, or trading gold for silver, we also have to keep in the
back of our mind the possibility of going back to gold. Or going back to
palladium, perhaps. And that's kind of what I'm getting at here. Is that
there have been times in the past 29 years where we have made these switches
and switched back. The one thing that's different this time, and it's kind of
been the central theme for the past year, and we talked about this before, is
that there are more of these happening simultaneously than I can ever
remember.
I can think of two or three or four instances in 30 years where we had
price anomalies that we took advantage of. And they are few and far between.
But to see three or four of them right now, at the exact same time, just like
we talked before about the numismatic market anomalies all over the place. To
see them happening at the same time is what is vastly different. And to the
extended degree that we see things is even more startling. And I guess I'd
leave your listeners with one piece of, I don't know, solace or
commiseration. And that is simply that, yes, it has been frustrating. There
hasn't been a correlation between logic and outcome. But in the end, I can
tell you looking back on the last 30 years that mathematics and economics
have a way of playing themselves out. It takes longer than people would like.
This is a high stakes game.
Don't lose faith, have strong fingertips. Be able to hang on, and see the
importance of a position in physical precious metals, and see the relevance
in maneuvering them to take advantage of these anomalies and these
opportunities. Which for me to say to someone this is as good an opportunity
I've seen in 30 years, takes a lot for me to say that. But I do honestly
believe it. Trading gold for silver right now is as good of an opportunity as
I have ever seen in the 29 years I've owned Miles Franklin. And I would say
the same thing about palladium to platinum. Right now if you own palladium,
you're out of your mind if you don't trade it for platinum.
So again, these are interesting times, and we are here to help people
navigate it, and maximize their holdings in precious metals. I can't tell you
how much I appreciate you helping get the word out there. Because that's just
as important, too. Letting people know, and for everyone out there reading,
Maurice Jackson, is as honorable as a man I've ever met in all my years at
Miles Franklin. He does as he says, and so for what it's worth, Maurice, we
appreciate you very much as well.
Maurice Jackson: Well I'm honored to hear that, sir. Thank you so
much. Mr. Schectman, thank you for sharing your wisdom and insights. For
someone that wants to get more information regarding Miles Franklin, please
share the website and phone number.
Andy Schectman: MilesFranklin.com, 1-800-822-8080. And I can be reached
by email at Andy@MilesFranklin.com.
Maurice Jackson: As a reminder for our audience, we are licensed
brokers to buy and sell gold, silver, platinum, palladium and rhodium. That's
correct, rhodium. Offshore storage accounts and Precious Metals IRAs. If you
wish to have a conversation with me, please email Maurice@MilesFranklin.com, or
call 919-274-5680. And last but not least, please visit our website ProvenandProbable.com,
where we interview the most respected names in the natural resource space.
You may reach us at contact@provenandprobable.com.
Andy Schectman of Miles Franklin Precious Metals Investments, thank you
for joining us today on Proven and Probable.
[NLINSERT]
Disclosure:
1) Andy Schectman is the owner of Miles Franklin Precious Metals Investments.
2) Maurice Jackson is a licensed representative of Miles Franklin Precious
Metals Investments. Proven and Probable disclosures are listed below.
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