A Word From Andy Schectman

Interview Hosted By Kerry Lutz of FSN-Five Unusual Precious Metals Opportunities

Andy Schectman, President of Miles Franklin Precious Metals Investments joined us today. For those of you not aware, Miles Franklin is a major bullion dealer, the only one licensed and regulated by the State of Minnesota. Andy sees 5 opportunities right now in precious metals that haven’t been in a long time. First Platinum is selling less than 75 percent of gold’s per ounce price. The silver to gold ratio is nearly 75 to 1. A number of numismatic coins are selling at the same price as standard bullion coins. Junk silver or pre-1965 silver coins are selling at an extremely low premium to their silver content. And Platinum is nearly at par with Palladium. This means that there are opportunities in precious metals that haven’t been seen in a long time. Get ready!

David’s Favorite Articles

Today, I’m only suggesting one article today, but it is very interesting and absolutely worth your time to check out.
 
LeMetropole Café
 
 
The Ultimate Consequence
The Equedia Letter June 2017 Edition
Dear Readers,

You might not get it now, but you will because you’ll be living it.
I want to share with you the inevitable direction of not just our global economy, but the master plan that’s already in place to decide our future.
If you’re not prepared, you, your kids and your kids’ kids will suffer the consequences.
Believe me, this is very real and it’s much bigger than just stocks.
Today, I am going to explain why our current financial bubble has more room to grow and what will happen when it pops. 
 
A Means to an End

Despite the word “bubble” popping up everywhere, no one seems to care. As long as the market keeps climbing, investors (or at least retail investors) will keep buying stocks.
Which is rather ironic when you think about it.

When stock prices are low, investors perceive risk to be high – they feel there must be a reason why stocks are trading so low. On the other hand, when stock prices are high, investors perceive risk to be low – they believe that stock prices are high because things are getting better.

Yet, this couldn’t be further from the truth.
When valuations are low, risks are generally lower; when valuations are high, risks are generally higher.

Take 2008 for example. Valuations were high, the word “bubble” was popping up everywhere, yet retail investors kept pouring money into the market.
Post-2008, when valuations were low, retail investors didn’t invest because they perceived risk as being too high.

You know how hard it was to convince people that stocks were cheap post-2008? Believe me, I tried.

Today, stocks are at record highs, which means the risks are significantly higher than they were post-2008.

There’s more debt across the board, which means more is required to facilitate it.
There are more geopolitical risks and civil unrest in nations all around the world – including the world’s most powerful and prosperous nation, the United States of America.
Yet, investors continue to pour money into stocks.

While this may seem like a bad idea, can we blame them?

Having potentially missed the boat on the spectacular gains over the past near-decade, investors are racing to keep their money afloat against the rising costs of living and housing prices. They’re also racing to keep pace with the mass amounts of money the rich have accumulated over the past years.

Of course, this was all engineered by the Powers That Be to fuel our civilization into a new age of modern day slavery.

No, I am not exaggerating.

Once you read this Letter, you will grasp the severity of what I am trying to say.
And it all begins with the creation, growth, and popping of history’s greatest bubble.
Credit and Leverage

All asset bubbles are created through leverage and credit.

As I mentioned in my Letter, How Money Works:

“Every economic boom over the last few centuries was created as a result of credit expansion. Every economic bust was also created as a result of credit expansion. …When the 2008 financial crisis hit (as a result of rapid credit expansion), the world tumbled. Today, we’re in an even bigger financial bubble than we were in 2008 because all of the dollars printed to fix the 2008 bubble has exponentially grown the global money supply and fueled an even bigger credit expansion worldwide. Asset prices and the global economy are being held up by the rapid expansion of credit and low-interest rates around the world. If, and when, interest rates rise, asset prices will crash and the economy will likely sink into a very deep recession.”

In short, if credit dries up, the bubble pops.

But to understand the ramifications, it’s important to understand how this bubble got so big in the first place.

Driving Asset Prices Higher

Over the past years, I talked about how the Fed would drive our markets higher by fueling money into the financial system through low-interest rates and Quantitative Easing (QE).
 
“…(As a result of QE, banks) have had to lend record amounts of money out.   And since many consumers no longer qualify to buy houses or take out other loans, the majority of this lending has gone to big corporations.   …This means companies aren’t borrowing money to hire new workers, they’re borrowing record amounts of money just to give away to shareholders (and buy back their own stock).   And of course…the majority of these shareholders are the richest 5% of Americans who own directly 82% of U.S. publicly traded stocks.”

In other words, the stock market has mostly climbed because of low-interest rates and QE, which gave big corporations and funds the ability to buy massive amounts of stock, which drove the market higher.

But the Fed is now on a path to raise interest rates and reverse QE, while corporations have stopped share buybacks.

So now that the two primary drivers of the market are gone, what will keep this market going?

Remember, in almost every financial cycle, it’s the little guys that lose.

A Losing Bet

Right now, outside of euphoria, the market is marching forward because investors are betting that future income will rise faster than the cost of servicing debt.
Unfortunately, we’ve already lost that bet.

Real wage growth has not only stalled but is now shrinking in many parts of the world.
In Japan, March real wages fell at the fastest pace in almost two years, while real wage growth in the U.K. turned negative in the first quarter of this year.

In the U.S., real wage growth has stalled, while in Canada it’s downright awful and hasn’t been this bad since 1998.

Yet debt has climbed to extreme new highs all around the world.
And it’s not just government debt.

It’s household debt – the money you, your friends and your family owe. The money the little guys owe.

Record Debt Levels Continue

In Canada, household debt levels continue to hit record highs.
In the U.S., it just hit a record of $12.73 trillion, surpassing the 2008 peak.
What does this mean?

It means the majority of the money we earn through income is now going toward servicing debt when it should be going toward the life force behind every major economy: consumer spending.

In fact, according to a survey by Ipsos, more than half of Canadians say they are just $200 away from financial insolvency at the end of each month, and nearly as many regret how much debt they’ve taken on.

That’s no surprise considering Canadians now owe more than $171 dollars for every $100 they have in disposable income.

Without income growth, what’s going to keep corporate earnings afloat and prevent this market from crashing?

Here’s an idea – one that’s eerily reminiscent of 2008…

The Great Swap: Cycling Hard Assets for Cash
According to the S&P/Case-Shiller Home Price Index, housing prices in the U.S. are hitting new multi-year highs.

In major Canadian cities, such as Vancouver and Toronto, housing prices have not only hit new record highs but have become some of the highest real estate prices relative to income in the world.
 
In March 2012, the average price of a home in Toronto was $553,536.
By March 2017, the average climbed to $899,452.

That’s a net increase of $345,916 in five years or an additional $69,183 of wealth per year!
This rapid wealth creation through asset inflation is currently the support for the lack of real wage growth because homeowners will convert this equity into cash. It is one of the primary reasons why consumer spending will stay afloat.
 
According to WSJ, Americans refinancing their mortgages are taking cash out in the process at levels not seen since the financial crisis.

Via WSJ:

“Nearly half of borrowers who refinanced their homes in the first quarter chose the cash-out option, according to data released this week by Freddie Mac. That is the highest level since the fourth quarter of 2008. The cash-out level is still well below the almost 90% peak hit in the run-up to the housing meltdown. But it is up sharply from the post-crisis nadir of 12% in the second quarter of 2012.”

That means homeowners are once again using their homes as ATMs – just as they did before the mortgage crisis. The problem with this type of wealth creation is that it’s not actually wealth creation. It’s debt creation because homeowners are simply converting equity into debt. Unfortunately, being that we’re not at the whopping 90% cash-out peak yet, it’s likely this bubble is going to get even bigger. And it most certainly will because debt is about to get more help, thanks to the Powers That Be. 
More Debt Coming

Despite record high household debt levels, levels that have now surpassed 2008, the Fed apparently found a silver lining to fuel more debt to consumers.

Via Market Watch:

“…(in the context of record-high household debt)…The Fed did find some good news, though.   Largely because of tougher underwriting standards for mortgages, the Americans holding debt have higher credit scores than in the past.   As of 2016, 41.3% of Americans’ total debt is held by people with high credit scores, above 760. That’s compared with 33.9% in 2008 and 23.7% in 2003. And a smaller share is held by those with lower scores, below 620. Some 13.2% of debt in the fourth quarter of 2016 was held by those with scores below 620, compared with 19% in 2008 and 16.6% in 2003.”

In other words, as the credit scores of Americans get better, the more they will be able to borrow.

And like clockwork, the financial institutions are going to give debt a helping hand. 
Starting in just a few weeks, millions of Americans are about to receive an artificial boost in their credit scores.

Via WSJ:

“Many tax liens and civil judgments soon will be removed from people’s credit reports, the latest in a series of moves to omit negative information from these financial scorecards. The development could help boost credit scores for millions of consumers, but could pose risks for lenders.   The three major credit-reporting firms – Equifax, Experian and TransUnion – recently decided to remove tax-lien and civil-judgment data starting around July 1, according to the Consumer Data Industry Association, a trade group that represents them. The firms will do so if that data (doesn’t) include a complete list of a person’s name, address, as well as a social security number or date of birth.   …Removing this information from credit reports, also will lead to changes in people’s credit scores.   Roughly 12 million U.S. consumers, or about 6% of the total U.S. population that has credit scores, will see increases in their FICO score as a result of this change, according to the company that created the FICO scores, which are used by lenders in most U.S. consumer underwriting decisions.”

In other words, a simple change from the credit bureaus – and not borrower habits – will boost the credit scores of 12 million Americans overnight.

The effects of this boost are already taking place and is about to set off a new wave of consumer credit.  
Via Dow Jones:

“Credit scores for U.S. consumers reached a record high this spring while the share of Americans deemed to be some of the riskiest borrowers hit a record low — a potential boon for lending and economic activity.   … In ever-growing numbers, the worst personal financial setbacks, namely foreclosures and bankruptcies, are falling off Americans’ credit reports.   More than six million U.S. adults will have personal bankruptcies disappear over the next five years, according to a recent Barclays PLC report.   … Wiping away such negative events also helps boost consumers’ credit scores.   …”Higher scores lead to more available credit,” said Cris deRitis, senior director in the economics group at Moody’s Analytics. “We’d see more activity in terms of loan approvals and credit-card approvals, more spending and that would have a ripple effect across the economy, increasing aggregate demand for goods and services.” …As credit scores rise, banks and other lenders are likely to make credit more widely available to consumers, and at cheaper cost.”

That means millions of Americans are now going to qualify for more and bigger loans.
“…Fresh starts for credit reports are likely to help boost originations of large-dollar loans for cars and homes. Consumers have a greater chance of getting approved for financing if they apply for loans after negative events fall off their reports, in particular from large banks that have stuck to strict underwriting criteria, says Morgan Whitacre, who oversees consumer-loan underwriting at Bank of America Corp. Credit-card lending, already on the rise, could increase further as a result of fresh starts. Consumers who have one type of bankruptcy filing removed from their credit report experience a roughly $1,500 increase in spending limits and rack up $800 more in credit-card debt within three years, according to the Federal Reserve Bank of New York.”

Consumers – including past delinquent borrowers – can once again borrow large sums of money.

And it couldn’t come at a better or more “coincidental” time.
Losses on the subprime car loan market are already surging and the U.S. is taking massive student loan losses.  
Via Bloomberg:

“U.S. subprime auto lenders are losing money on car loans at the highest rate since the aftermath of the 2008 financial crisis as more borrowers fall behind on payments, according to S&P Global Ratings.”

Bonds associated with these loans may end up being the worst on record.

Via Bloomberg:

“Subprime auto bonds issued in 2015 are by one key measure on track to become the worst performing in the history of car-loan securitizations, according to Fitch Ratings.   This group of securities is experiencing cumulative net losses at a rate projected to reach 15 percent, which is higher even than for bonds in the 2007, Fitch analysts Hylton Heard and John Bella Jr. wrote in a report Thursday.”

And as far as student loan losses go, more than 3000 Americans default on their student loans EVERY DAY.

Via CNBC:

  “…Roughly 44 million Americans owe more than $1.4 trillion in federal student loans. More than 4.2 million borrowers were in default as of the end of 2016, up from 3.6 million in 2015. In all, 1.1 million more borrowers went into or re-entered default last year. On average, more than 3,000 borrowers default on their federal student loans every day. Student loans are considered in default if you fail to make a monthly payment for 270 days.”

I am not even done.

What about credit cards?

Not only has credit card debt topped $1 trillion
 for the first time since the 2008 crisis, but those who can’t make their minimum credit card payments are increasing.  
Via Moody’s:

“Over the last several quarters, credit card charge-offs have increased materially for some US lenders, exceeding expectations of a more modest rise, Moody’s Investors Service says in a new report. The steep increase, which is the largest jump since 2009, is credit negative for US credit card lenders.”

Despite all of this, the Fed tells us that things aren’t so bad because people have better credit scores.

Meanwhile, as these people pile on more debt, the Fed is looking to raise interest rates on them.

Late Cycle 
So where does this all leave us?

We’re certainly late in the cycle of a financial bubble.
The earnings of S&P 500 companies have gone back to 2011 levels, yet the market is up 70%. Furthermore, over the last three years, debt accumulation has outpaced both EBITDA growth and cash generation.

That makes U.S. equities one of the most expensive asset classes in the world.
In terms of a bubble, we’ve certainly reached the euphoria stage.
While this bubble still has room to grow because of the new consumer credit boom, we’re already witnessing signs of the next stage of a financial bubble: profit taking.
Corporations are no longer buying back stock and insiders are now selling more stock than they’re buying. Meanwhile, the smart money continues to take profits.
The problem is that this market euphoria is pushing the debt envelope further as consumers take on even more credit during a time when interest rates are likely to rise.
In the past year and a half, the Fed has raised interest rates three times and is expected to raise them three more times before this year is over.

In addition, the Fed is expected to reverse QE by reducing its balance sheet and contract the money supply.

As I mentioned earlier, when credit dries up, the bubble pops.
When it does, it will be the biggest economic reset the world has ever seen.
But that’s not all.

This time, anyone caught on the wrong side of the bubble will become modern day slaves.
Rich Become Richer and Poor Become Slaves
 
We know this financial bubble will pop – that’s for certain. It doesn’t help that consumer debt is surging during a time where interest rates are rising./div 
And while it appears that a lot of wealth has been created via asset inflation, this recent financial boom has made the world’s biggest companies and the richest people even bigger and richer than before.

We already know that all over the world, the wealth gap is increasing and reaching historic new records everywhere: Hong Kongthe UK, Europe, Canada, the U.S. – the list goes on.
But on the corporate front, that gap is also getting bigger. While analysts boast about the record $1.9 trillion of cash on S&P 500 non-financial balance sheets (Bank of America) in Q1, it doesn’t paint the real picture.

That is, most if this cash belongs to the top 1% of companies.

Via Barrons:

“Some of the same dynamics that separate the top 1% wealthiest individuals from the other 99% are evident in corporations, too.   A new study from S&P Global Ratings finds that the non-financial companies held $1.9 trillion in cash in 2016, up 10% from 2015. But most of it is held by the top 1% of companies.   The lower 99% have just $875 billion in cash and $5.1 trillion in debt, says credit analyst Andrew Chang. That puts their cash-to-debt ratio at just 17% — the lowest since the 16% seen in 2008.”

What’s worse is that if you remove the top 25 cash holders – the top 1% – “you’ll find that for most of Corporate America, cash on hand is declining even as these companies rack up more and more debt at historic rates.”

And as I mentioned in How to Invest in 2017, these sky-high stock prices and record cash piles will allow the biggest corporations to buy out the little ones.

Look at Amazon who just entered into the grocery business by buying Whole Foods for $13.7 billion. It should come as no surprise that this transaction is going to be fueled by – you guessed it: debt.

Via Amazon’s filing statement:

“The Company expects to finance the Merger with debt financing, which could include senior unsecured notes issued in capital markets transactions, term loans, bridge loans, or any combination thereof, together with cash on hand.   In connection with entering into the Merger Agreement, the Company has entered into a commitment letter, dated as of June 15, 2017, with Goldman Sachs Bank USA, Goldman Sachs Lending Partners LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, and Bank of America, N.A. (collectively, the “Commitment Parties”), pursuant to which, subject to the terms and conditions set forth therein, the Commitment Parties have committed to provide a 364-day senior unsecured bridge term loan facility in an aggregate principal amount of up to $13.7 billion, to fund the consideration for the Merger.”

This transaction is much more than meets the eye.

As we know, companies like Amazon are already automating much of the work we do, eliminating thousands of jobs in the process.

I have talked about the loss of jobs as a result of robots and artificial intelligence in many previous letters and you may have recently noticed thousands of new articles popping up about robots and artificial intelligence.

That’s because modern industries and jobs of our information age not only need fewer people to make them work but are making other industries far more efficient – think of the assembly line.

The problem is that our population is growing, but job creation is on a steady and rapid downward trend.

The biggest corporations are sitting on record-high share prices and cash balances, so they will begin to eat up the smaller guys.

That means bigger companies, but less work to go around.

Millennial Slaves

How will our next generation survive?

Most Millennials don’t have enough money to buy homes and those who own homes may even lose them as interest rates rise. That means most have not been able to reap the wealth benefits of housing inflation.
What about stocks?
Nope.

Via Business Insider:

“A majority of Millennials, the generation of people who in 2015 were between the ages of 18 and 34, do not invest in the stock market, which includes buying individual company stocks, bundles of stocks through mutual funds or exchange traded funds, and contributing to retirement accounts such as 401(k)s.   According to phone interviews with 1,000 nationally representative adults, results from which were released this week by investment information website Bankrate.com, just 1 in 3 Millennials have money in the stock market.”

In fact, stock ownership overall is at one of the lowest levels in history.

Via Gallup Poll:
“With the Dow Jones industrial average near its record high, slightly more than half of Americans (52%) say they currently have money in the stock market, matching the lowest ownership rate in Gallup’s 19-year trend.   …In 2007, nearly two in three American adults (65%) reported investing in the stock market, the high in Gallup’s selected trend on this question for April of each year.   But this percentage shrank each year from 2008 to 2013 as the effects of the Great Recession and big market losses took their toll on Americans’ sense of job security, confidence in the economy and financial means to invest — as well as their general confidence in stocks as a place to invest their money.   Though the Dow Jones industrial average has made great gains since bottoming out in 2009, Americans’ stock ownership has yet to recover to the level reported prior to the recession.” 
In other words, our next generation is not only going to be poorer, but they’re going to be left with little opportunity to expand their wealth. Think more people, less jobs. 
This is precisely why some of the world’s richest people in tech, including Mark Zuckerberg of Facebook and Tesla’s Elon Musk, are advocating giving away free money.
Universal Basic Income
 
Last year, I told you about the secret government experiments on how we will begin to see free money being given away by the governments of the world, including Canada and Europe./div   
Via Secret Government Experiments:
“…not only did Janet Yellen not raise rates this week, she actually alluded to the fact we could see helicopter money coming: “It is something that one might legitimately consider.” In Europe, lawmakers are already urging the central bank to deploy free money to citizens. …Do not think Canada is out of the question. In fact, basic income experiments are underway – an experiment whereby the government gives people money for free, for nothing. Don’t believe me? Check Trudeau’s pre-budget report, it’s in there.” 
And just as I mentioned, the idea of free money is beginning to spread worldwide. 
Today, many countries in Europe are launching these Basic Income tests.

Via The Independent:

“The district of Bes=s in Barcelona, Utrecht in the Netherlands and the Finnish city of Helsinki are all reportedly set to trial a universal basic income scheme. Residents will be given money for two years to lift them above the breadline as the scheme looks to investigate “innovative and creative solutions”.

In the U.S., tech moguls are setting their own Basic Income tests.

Via Silicon Valley:

“…(Sam Altman, president of Mountain View-based startup accelerator Y Combinator,) is personally funding a basic income experiment in Oakland as the concept gains momentum in the Bay Area. Policy experts, economists, tech leaders and others convened in San Francisco last month for a workshop on the topic organized by the Economic Security Project, of which Altman is a founding signatory. The project is investing $10 million in basic income projects over the next two years. Stanford University also has created a Basic Income Lab to study the idea, and the San Francisco city treasurer’s office has said it’s designing pilot tests – though the department told this news organization it has no updates on the status of that project.   Proponents say the utopian approach could offer relief to workers in Silicon Valley and beyond who may soon find their jobs threatened by robots, as artificial intelligence keeps getting smarter. Even before the robots take over, some economists say basic income should be used as a tool to combat poverty.” 
And in Canada, these tests are already in motion.

Via Ontario:

“Ontario is launching a pilot project to assess whether a basic income can better support vulnerable workers, improve health and education outcomes for people on low incomes, and help ensure that everyone shares in Ontario’s economic growth.” 
It’s no coincidence that these Basic Income “tests” are being launched all around the world.

I have said for years that we should expect these types of programs because there simply is no way out of our current debt bubble – one that’s getting bigger every day. 
Conclusion

We’re being set up for one of the greatest economic falls in modern day history.
It may not happen tomorrow, it may not happen this year, but when it does, it will be the biggest economic reset this modern world has ever seen.
When the bubble pops, thousands – maybe millions – of jobs will be lost and never regained.

The fall will so big that citizens of the developed world will begin the acceptance of major government intervention into the economy. This will include prioritizing universal basic income to force citizens of these states to become reliant on the government for support.
This will further be fueled by the advent of robots and artificial intelligence whereby those rich enough to invest or create these technologies will become the wealthiest 0.00001% – the Amazons of the world.

Everyone else on the other side – if not prepared – will become modern day slaves. “I believe that banking institutions are more dangerous to our liberties than standing armies…If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around (these banks) will deprive the people of all property until their children wake up homeless on the continent their fathers conquered.” – Thomas Jefferson

hoffmanAndy Hoffman’s Daily Thoughts

Two days after the most suicidal, hubristically arrogant policy statement in FOMC history, by an institution desperate to maintain the dead propaganda meme of “growth”; and with it, the Cartel’s “response” – gold remains less than $20/oz below its 5½ year downtrend line, and $20/oz above its 200 week moving average; whilst silver – in my view, more undervalued than at any time in history – is just a buck below its 200 week moving average, but a full $0.65/oz above its 5½ year downtrend line.  In both cases, despite all the Cartel has thrown at it, in the three days since gold hit a 2017 high of $1,295 – and one week after silver briefly touched $17.75/oz.

Again, it cannot be overstated how ludicrous the Fed’s decision to pretend all’s well was; given that the quarter point rate hike, to a still historically low 1.1% – which neither borrowers nor savers will benefit from – only makes an economy already on the brink of (officially recognized) recession that much more vulnerable; as evidenced, in spades, by the horrific housing starts and permits data published this morning.

Before I get to today’s principal topic – of the “risk/reward profiles” of Precious Metals versus other assets classes, like crypto-currency, stocks, and bonds – I can’t help but list the huge, and diverse, list of PiMBEEB, or Precious-Metal-bullish, everything-else-bearish headlines from the past 24 hours alone.  You know, as the Cartel was attacking PMs following the Fed’s  “hawkish policy statement”; which, I might add, have only caused market-based rates to rise by three basis points from the post-Election low set mere hours before, following the triple-whammy release of contracting retail sales, wholesale inventories, and (government understated) consumer prices.
  1. The NAHB Homebuilder Index – which never declines due to its obvious upward bias – plunged from 70 to 67
  1. Despite collecting record taxes in May, the Federal government still recorded an $88 billion deficit, which won’t be helped any by higher interest rates
  1. Goldman Sachs reported that China’s capital outflows are far larger than reported
  1. The EU agreed to “bail out” Greece yet again – which should last a few more months, before another is required to prevent instantaneous bankruptcy
  1. The Bank of Japan maintained its -0.1% interest rate, 0% target for the benchmark 10-year JGB, and $700 billion annual QE target – with the best propaganda it could muster for the dying Japanese economy, that it “has been turning toward a moderate expansion.”
  1. Despite the “shocking” UK election result, 70% of Britons still support BrExit
  1. The U.S. imposed additional sanctions on Russia – which Germany loudly condemned
  1. Oil prices collapsed to $44.50/bbl – as OPEC’s days of relevance; and perhaps, existence; rapidly approach their ignominious, debt-destroying end
  1. Two days after being downgraded to one notch above junk status, the State of Illinois – unable to pay its bills, and “growing” at a rate less than in the 1930s – halted construction work, and was dumped by the Powerball lottery system
  1. Nike, who’s business never weakens, is laying off 2% of its global workforce
  1. The U.S. is on pace to see nearly 9,000 retail stores close this year, shattering the previous record by more than 20%
  1. To that end, this morning’s Amazon.com purchase of Whole Foods has caused the entire grocery store stock sector to crash – given the massive amount of layoffs they will endure, when Amazon mercilessly destroys this archaic dinosaur of an industry – which for all intents and purposes, is amidst a massive recession – as it has with countless other retail sectors
  1. Canadian home sales crashed nearly 7% in May
  1. The Trump “obstruction of justice” crusade was dramatically stepped up
  1. Chinese debt issuance crashed more rapidly than at any time in history
  1. A draconian “anti-money laundering” bill was introduced by the Senate – which, if passed, would dramatically escalate the ongoing “war on cash”
  1. And finally, the “fun facts” that 1) over the past 20 years, seven of the eleven days in which the VIX Volatility Index has closed below 10.0 have been this month; and 2) just ahead of the economy-killing rate hike; whilst economic data, across-the-board, accelerated its collapse; Wall Street experienced its second largest weekly capital inflow, to stock and bond funds – ever!
But don’t worry, despite horrific across-the-board economic data, Trump claimed “I think this quarter’s GDP numbers are going to be shockingly good, given all the facts we’re seeing“; and “I think some very good numbers are going to be announced in the very near future, as to GDP.”  To which, I can only respond incredulously, given that a) considering that essentially all economic data has been either weak or horrifying, why on Earth would anyone expect this to suddenly change – particularly now that the Fed raised interest rates?; b) does Trump not realize that, if he was indeed in possession of knowledge about “some very good numbers,” he is admitting to having inside information, and selectively disclosing it – in both cases, criminal offenses; and d) what “very good numbers” could he possible be speaking about?

I mean, after today’s horrific housing starts number, the only material economic data scheduled for publication in the foreseeable future are May existing and new home sales, next Wednesday and Friday.  Hardly market moving data to start with, and likely not even calculated yet.  Moreover, given last month’s horrific existing and new home sales declines; today’s equally massive housing starts and permits plunge; an ongoing collapse in mortgage purchase applications; and oh yeah, the fact that the Fed raised rates yesterday, the odds of next week’s housing numbers being “shockingly good” aren’t just slim, but none.  In other words, not only is Trump lying, but doing so in an extremely careless, blatantly obvious manner that will only undermine his Administration – and America’s Banana Republic-like economic data reporting process – further.

OK, now that today’s “housekeeping” is complete, let’s move on to a discussion of the relative risk/reward profiles of Precious Metals versus other asset classes, including “mainstream” investments like stocks and bonds; crypto-currencies; and “paper PM investments” like mining stocks and ETFs.  Which I describe as a “re visitation,” simply because back in March, I did a “special podcast” with Bix Weir discussing this very topic.

To start, let’s look at stocks and bonds.  Not that I’m making any dramatic revelations, as I have discussed for some time their historic overvaluations, on essentially every qualitative and quantitative metric imaginable – culminating in last month’s “dotcom valuations in a Great Depression Era.”  Which, since its publication six weeks ago, have gotten significantly more egregious, given the accelerating collapse of economic data, and yesterday’s ludicrous, economy-killing rate hike.  Not to mention, the Fed’s suggestion that it might allow its $4.5 trillion bond portfolio to start “running off” later this year, putting significant upward pressure on interest rates, at a time when the dying economy – and historically overvalued stock and real estate markets – desperately require the ultra-low interest rates history’s largest, most destructive fiat Ponzi scheme typically produce.

Next, we have crypto-currencies – which whether or not you believe in their long-term outlook, as I strongly do, or not – have had a monstrous, historic run in the past three months.  Nearly all such “assets” are centralized projects with no real use cases; i.e, the equivalent of dotcom stocks with outrageous valuations, relative to unfathomably high risks.  And while I believe with all my being – and a significant investment, to boot – that Bitcoin will dramatically transform the monetary future, it is currently amidst a raging “scaling debate” – potentially, “influenced” by the Chinese government itself – that should last through at least the next few months; and certainly through August 1st, when a potentially disastrous collision between the scheduled “user activated soft fork” and a countering “miner activated hard fork” could cause significant damage to the crypto network; and consequently, heavily inflated crypto-currency prices.  For the record, wild horses couldn’t tear me away from my Bitcoin investment, particularly given the extremely low price I acquired it at.  However, I’d be terrified to invest in it further ahead of August 1st; and significantly more terrified of the second and third tier “investments” known as ICOs, from Ethereum to the most blatantly scammy “altcoin.”

Speaking of second and third tier investments, is there another person in the Precious Metals sector who has spent as much time warning investors of the dangers of “paper PM investments,” like mining shares, ETFs, and closed end funds like the Central Fund of Canada?  This, going all the way back to 2011 – when I sold my last paper PM investment, after having spent nine years owning them, and five years working in the operationally treacherous, historically suppressed mining industry.  To that end, last month’s disastrous rebalancing of the GDXJ junior mining index; and yesterday’s equally catastrophic announcement by the South African government – that going forward, all mines must have at least 30% black ownership; are two glaring examples of how much risk is entailed in holding such investments.  Which, aside from a handful of extremely brief windows of out performance, such as the first half of 2016 – have decidedly NOT been Precious Metal price proxies for the past decade.

Last but not least, we have physical Precious Metals themselves.  Which, while dramatically underperfoming their fundamentals – and rigged stock and bond markets – for some time, have clearly bottomed; and subsequently, are “holding their own” amidst the most egregious suppression in financial market history.  Amidst the most bullish supply/demand, monetary, and “Black Swan” outlook in modern history, global demand is near its all time high; supply is expected to decline for years to come; and above ground, available-for-sale inventories have never been lower.  Moreover, whilst gold is trading at its all-time lowest inflation-adjusted price – and in most non-dollar currencies, at or near its all-time high, both silver and platinum, quantitatively speaking, are more undervalued, relative to gold, than at any time in decades.

In other words, physical Precious Metals are not only dramatically better “values” than any other asset class – care of the aforementioned, historic Cartel suppression; but are so, at a time when the time-tested insurance they provide has never been more necessary.  Only you can decide what your optimal asset allocation is; but as for me, physical Precious Metals – safely stored, outside of the banking system – will continue to remain, by far, my largest investment position.
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Miles Franklin was founded in January, 1990 by David MILES Schectman.  David’s son, Andy Schectman, our CEO, joined Miles Franklin in 1991.  Miles Franklin’s primary focus from 1990 through 1998 was the Swiss Annuity and we were one of the two top firms in the industry.  In November, 2000, we decided to de-emphasize our focus on off-shore investing and moved primarily into gold and silver, which we felt were about to enter into a long-term bull market cycle.  Our timing and our new direction proved to be the right thing to do.

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