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GOLD – The Ultimate Buy and Hold

by Andy Hoffman, Miles Franklin:

Last night, I was telling my wife of the frustration the past five years has wrought on Precious Metal holders – or, as they call them in the Bitcoin world, “hoddlers.” It’s been far worse, and longer, in the “paper PM investment” world – as the Cartel has not only annihilated mining shares, but the mining industry as well; as not only have reserves been decimated, whilst mine production has – perhaps, permanently – peaked; but share counts and debt burdens have exploded, limiting shares’ upside potential even under the best case scenario – which fortunately, must inevitably arrive.

To that end, since exiting mining shares six years ago, I have consisently said they were amongst the worst reward/risk investments imaginable – but that if timed extremely well (which in hindsight, has proven to be nearly impossible), they could provide outsized trading gains – as they did from late 2015 through mid-2016, for example. Moreover, when the Cartel is inevitably broken – assuming it doesn’t occur due to the type of “black swan” event that shuts down stock exchanges – mining shares could easily generate extraordinary short-term gains; until, equally inevitably, governments nationalize mines and/or enact “windfall” profit taxes. As trust me, when the Cartel is broken, it will result in – or be caused by – plunging confidence in fiat currency. Which in turn, will cause Precious Metals to be viewed as the money they have always been – and consequently, governments to consider Precious Metal mines “national security assets.” In my opinion, of course.

Why do I bring this up today? I mean, I literally haven’t discussed mining stocks in years; partly, because after owning them from 2002 to 2011; and working in the mining sector from 2006 to 2011 – after which, I joined Miles Franklin; I not only “burnt out” on them, but lost all interest in them as investment vehicles. They served that purpose extremely well in the early years – particularly 2004-2006, before the Vancouver Stock Exchange, since renamed the “Venture” exchange peaked. However, in my “older years” – particularly now that I’m a father – I consider tham little more than extremely risky speculations. To the contrary, in my “early middle age,” what matters most is the safety of my principal. Which, after nearly two decades of investing, I have learned, painfully so, is best done by investing not in derivatives – like mining shares, ETFs, and closed-end funds – but the real thing. And the same goes for my crypto-currency investments, as I invest solely in Bitcoin; as opposed to cloud mining schemes, altcoins, and start-up service providers. In other words, not only have I become a lot more risk averse in my “old age,” but I finally realized that, when investing in physical gold and silver, the overall benefits of physical metal ownership – both current and potential – are far greater; including the most important “benefit” of all, the “sleep of the just” I enjoy each night, knowing my investments are, for all intents and purposes, immutable. In other words, gold and silver, unlike “paper PM investments”; and essentially all derivative proxies; are the “ultimate buy and hold.”

I’ll get back to said benefits momentarily, but first I wanted to go over some of the past 24 hours’ incredibly “PiMBEEB” events – which cumulatively, add significantly to the comfort I take in holding physical gold and silver. And I do mean, significantly. Starting with the incredible news, unreported by the MSM of course, that the ECB plans to, I kid you not, securitize the toxic, historically overvalued sovereign bonds on its $4 trillion balance sheet. In other words, the exact same thing Goldman Sachs and others did at the top of the mid-2000s housing bubble – in repackaging toxic mortgage loans; selling them to investors at exorbitant spreads; and as an added “bonus,” creating “synthethic short positions” to benefit on the bonds’ inevitable collapse. Who the ECB believes will invest in such c—p is beyond me, given that the only reason they trade at such ludicrous valuations is relentless ECB monetization – particularly given the precarious, rapidly deteriorating state of the European banking system. However, the mere fact that such a toxic product is even being discussed by Central bankers tells you how desperate they are for “solutions” to the unprecedented problems they created. And consequently, the levels of fraud they will stoop to to offload their problems to taxpayers – as if that will matter a whit, when the system inevitably, spectacularly implodes.

Or how about, as I look at crude oil prices plunging anew today, yesterday’s Macro Tourist article, pondering the identity of the “mystery massive long supporting the oil market” – particularly since early 2016, when oil prices crashed. I mean, just how much more obvious can it be that, as I have espoused for more than a year, an ad hoc “oil PPT” was created when prices plunged below $30/bbl, given the potentially horrifying global ramifications on a massively overleveraged sector featuring more junk debt than perhaps the next ten sectors combined. Not to mention, the risk posed to America’s only remaining Middle East ally, Saudi Arabia – which Donald Trump, in complete contradiction to his campaign rhetoric, embarrassingly, and disgustingly, feted last week. To wit, this weekend’s shocking, bombshell news that Saudi cash reserves are in freefall mode, despite said “oil PPT’s” best efforts, tells you all you need to know of how dire their financial situation is; and consequently, their political position, and the fate of the dying “petrodollar” itself.

To that end, yesterday’s Zero Hedge article discussing Saudi’s “newest strategy to boost oil prices” couldn’t be more telling, of the (blatantly obvious) fraud being attempted; first, in attempting to form an alliance with hedge funds, to ensure “support” in the fraudulent paper oil markets; and secondly, to reduce exports to the U.S., whilst increasing them overseas – hoping that the “transparency” (i.e, fraud) of U.S. inventory data “influences” perceptions of what is today, as I write, the worst energy glut in global history. Which I assure you, isn’t going away anytime soon, as the only reason it hasn’t completely imploded yet is buying by a Chinese regime desperate to avoid perception of the economic collapse decimating its own, historic bubbles.

Read More @ MilesFranklin.com

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