Precious metals expert Michael Ballanger discusses the gold-silver ratio and the state of the precious metals market.
Based on the feedback I received over the weekend, I thought a quick follow-up would be in order on the topic of "deviant conundrum" because it was told to me by a wonderfully gifted retired English teacher that I was on the edges of plagiarizing my hero, Sir Winston Churchill, who once described Russia as "a puzzle wrapped in a mystery inside an enigma." Given that I have been a fanatical fan of that wonderful Englishman since my boyhood, it stands to reason that I might have borrowed a few of his words because I have read virtually everything that man has written AND spoken since the 1960s. Being of English grand-parentage on both sides, it is at once both understandable and reprehensible that I worship Sir Winston; he would have been at the very center of the bull's eye of the "Me Too" movement because of his views and attitudes not toward women, but toward those with inferior intellect and substandard courage. He would say today that those without either intellect or heart would not deserve anything vaguely resembling a "safe space." Had there been a "safe space" movement in 1939, we would all be speaking German today because the rogues like Churchill would never been allowed to run the country.
So perhaps I should I should have referred to silver as "a puzzle wrapped in a mystery inside an enigma" in order to avoid any sort of duplicitous connotations, but the fact of the matter is that silver is, at least for me, ABSOLUTELY, a "puzzle" and an "enigma," but the only "mystery" is how regulators are able to give the banks such an ugly and ignominious "pass" with the rise of "exchange for delivery" notices issued by the banks, which are essentially, in my view, IOUs for FAILED DELIVERIES, which, in the "good OLDE Days, would be "fraud wrapped in a con game inside a conspiracy."
I must sincerely apologize to the grammar master who accused me of plagiarism because he has now pointed out that my last sentence was a "run-on" sentence and that I could easily have separated the two ideas with a period instead of a comma. Well, at the risk of continuing with another even more egregious "run-on" sentence, the silver market is on the verge of a serious upside price advance but when I read of the EFPs that are now the "rage" for the banksters (that were insolvent in 2008 and then once again BILLIONAIRES in 2009 thanks to OUR governments), I want to reach out to the heavens and seek out Sir Winston in order to glean his wisdom. I wish to ask the one politician that essentially saved the Free World from being enslaved by an Aryan dictator what he might think about entities that are allowed to control markets in the absence of any sort of "national emergency." I am of the belief that he might dictate orders that might free the price mechanisms from their external controls on the basis that the economy is strong enough to avoid the need for any type of controls and since we are in a full-blown, late-cycle blow-off in stocks and real estate, it would be a truly Churchillian move to do so. However, we have no Sir Winston in power, and no one out there currently has the same character nor convictions to end the nonsense.
The gold-silver ratio (GTSR) made a new low close for the move off the March-April peak above 83 having closed yesterday's pit session at 76.88 and is today at 76.67 so suffice it to say that it is now in a well-defined downtrend and headed decisively lower first to 65 then 50 and finally under 30 if all of the planets line up correctly.
However, the purpose of this follow-up is to relay to one and all that the plunging GTSR is actually an extremely bullish indicator for the entire precious metals complex and bodes well for the deeply depressed junior explorcos that have all settled down into "survival mode" now that summer has arrived. As you may know, the month of June is seasonally flat-to-weak but that reverses in the July-November period so this may be the month that we get traction in ALL of the metals, and if silver's outperformance is any kind of lead indicator, then purchases of some of the well-positioned names could be quite a timely endeavour.
The greatest short squeeze of the year is now in full regalia as Elon Musk, the greatest stock operator since Bernard Baruch, has once again suckered the shorts into thinking that fundamentals actually matter. That his electric car company, Tesla Motors Inc. (TSLA:NASDAQ), is the most overpriced stock on the board is irrelevant; if you shorted the "technical breakdown" back in March at $330 and failed to cover in the ensuing crash to $247, you are now in serious trouble as TSLA has added $50 per share in the past week and sits at the $345 level. Could Musk take the stock to an all-time high north of $390? Of course he could, but my speculative instincts tell me that the stock is going to be hard pressed to get much above the current level with an RSI reading of plus-70. Now, do I mortgage the farm and bet it all on TSLA crashing to $25 (where it would still be overpriced)? Of course not, but because I am a dinosaur in a world of mutants, I will take a small position in the July $300 puts for $4.50 in an effort to bet against any thoughts of new highs. (At the time of this writing they were offered at $4.50 and traded down to $4.10. We were filled at $4.45 and they closed at $5.50.)
That Bitcoin and all of its cryptocurrency brethren have not seen the light of day anywhere close to the top back in December is particularly enlightening given the official statement of the CME boss shown above next to that now-fateful chart indicating that the "transparency, price discovery, and risk transfer capabilities" were actually the only way the bankers could get their greedy hands on a market that they had completely missed. I ended the December 11 missive (with BTC north of $16,000) with the following paragraph:
"This recent narrative of a digital currency replacing gold as a store of value is as non-sensical as the idea that "dollars" whether from the U.S., Canada, or Zimbabwe will maintain their purchasing power over time. The bankers reeled in gold in 2013; they will reel in the Bitcoin as well. What both have in common is the medium of control. Beware the Ides of December."
"'We are pleased to bring Bitcoin futures to market after working closely with the CFTC and market participants to design a regulated offering that will provide investors with transparency, price discovery, and risk transfer capabilities,' said Terry Duffy, CME Group Chairman and Chief Executive Officer."
Since that issue was written and the warning issued, BTC is now down 66.3% from the $19,897 peak proving once and for all that the "regulated offering" provided by the CME, their involvement in Bitcoin should have emphasized the word "REGULATED." Those investors that swallowed the bait of "transparency, price discovery, and risk transfer capabilities" thought it meant that tens of thousands of futures traders would be piling into BTC futures thus driving the cash market higher while delivering the rapture of newfound wealth to their collective doorsteps. Instead, it provided the MEDIUM OF CONTROL by which the bankers could first get short and then slowly feed out ream after ream of phony paper "coins" in order to cap the momentum. Once momentum was under control, the bankers then pulled the pin and the crypto market crashed, taking thousands of wannabe Bitcoin billionaires to the junkpile of faded dreams and obliterated hope. Sound familiar? Well, it should be because the drill was honed to perfection in 2011 and later in 2013 when they reeled in gold and silver. The template they used was a brilliantly crafted manual that crushed massive numbers of precious metals investors in the 2011–2015 bear market so it was a walk in the park to pull it out and dust it off for implementation in the regulation of cryptocurrencies that still today represent the greatest threat to the banking business and its cartel-like domination of the global currency Ponzi scheme.
Lastly, last night I was in a discussion with a dear friend with whom I used to work back in the 1980s during which we were both lamenting the departure of human emotion from the trading pits. We were writing down a few notes regarding the differences in market behavior between the 1990s (arguably the biggest discovery decade in recent history) and today. We note that the junior mining market have never quite recovered from the 1997 Bre-X disaster that wiped $3 billion off the face of the Toronto and New York stock exchanges in a mere 30-day period. The regulations designed to prevent similar frauds in the future were highlighted by National Instrument 43-101, which requires that an independent, "qualified person" (described by five bullet points in the document along with two additional subsections) write a report prior to any public announcements by the company. In the pre-Bre-X days, companies would issue press releases with claims of "million and millions of ounces" and investors and speculators would pile into the stock because the tape was "dancin'" or that "rumors were flyin'" but after Bre-X, company officials could be fined or sanctioned with cease-trade orders if they violated this rule.
Which brought us to the topic of Novo Resources Corp. (NVO:TSX.V; NSRPF:OTCQX), which enjoys a $1 billion market cap and a massive legion of cult-like followers including my friend Bob Moriarty who has just written a truly fascinating commentary on Western Australia's Purdy's Creek "gold occurrence" and I purposely allude to it as an "occurrence" because, as the title of Bob's commentary suggests, "43-101 is a Noose Around Novo's Neck." When I was at the 2017 Beaver Creek conference in Colorado, whenever Purdy's Creek was mentioned, those with stock were the first to opinionize their knowledge and those WITHOUT stock (like me) were stoically and self-preservationally silent. Mickey Fulp and I were having a beer together and I asked him what he R-E-A-L-L-Y thought about the play and he basically said "Before I answer, this is totally OFF THE RECORD" to which I responded "Fair enough but WTF is it with Novo play anyway? Why is everyone so terrified of calling BULLSHIT?"
Bob's well-crafted commentary says that in order to fully understand the Novo "discovery," we all must think "outside the box" and I accept that because I went through that in 1993 through 1996 with the Mountain Province diamond discovery where all of the analysts and newsletter writers refused to accept the data that was being presented because the promoters were total scumbags (and they were). What they missed was that the guy who GENERATED the data was an ex-DeBeers geochemist who was an expert in electron microprobe analysis of the indicator mineral trains and it was HE who was my 1995-version of the "qualified person" that allowed me to carry on because he, too, thought "outside the box."
However, here is where the rubber meets the regulatory road: How is that Quinton Hennigh is allowed to talk of "millions of ounces of gold" and bold-facedly talk of a comparison to the Witswatersrand region of South Africa without the regulators demanding some sort of "inside the box" disclosure? I am not saying that I am anti-Novo; what I AM saying is that these regulators are absolute hypocrites that have been intimidated by the market performance of Novo to the extent that "since it has held up here, it must be true." In other words, the performance of the stock is what keeps the regulators from slamming the door on QH for failing to adhere to the requirements of 43-101. So, MY unadulterated submission to these clueless regulators is this: Neither you nor anyone else truly knows what lies below Purdy's Creek nor any other exploration play around the globe so instead of favoring an Australian company over North American companies in your disclosure demands, just throw the National Instrument 43-101 into the closest waste bin and let highly intelligent investors determine whether or not "it is safe" to invest. If Novo is allowed to talk of comparisons to Witswatersrand without the required "independent report," then rather than shutting them down, just change the rules and make them apply to EVERYONE.
Level playing fields make for great entertainment and bias-free results.
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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All charts and images courtesy of Michael Ballanger.
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 consult your registered advisor to assist you with your investments. I accept no liability for any loss arising from the use of the data contained on this letter. Options and junior mining stocks contain a high level of risk that may result in the loss of part or all invested capital and therefore are suitable for experienced and professional investors and traders only. One should be familiar with the risks involved in junior mining and options trading and we recommend consulting a financial adviser if you feel you do not understand the risks involved.
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