Source: Michael Ballanger for Streetwise Reports 11/06/2017
Precious metals expert Michael Ballanger examines why gold and silver have been stagnant while bitcoin and blockchains have taken off.
As you all know by now, I have absolutely zero knowledge of anything related to the “blockchain” technology, which translates into “I don’t own Bitcoin and would not touch HIVE Blockchain Technologies Ltd. (HIVE:TSX.V; PRELF:OTC) with a barge pole.” That also means that I am constantly being reminded, primarily by those considerably younger than me, that geriatric anchoring is costing me (and my readers) a great deal of money by avoiding the space which, as you can see from the chart below, has been absolutely true.
Now, in the past 48 hours, the CME has reversed its stance on Bitcoin embracing it with open arms and offering a cash settlement feature as well as a “familiar venue.” Nothing that I have read in the past six years could have ever blown me away more than the quote highlighted in yellow shown below:
“Transparency”? Looking at the chokehold the CME allows in silver implemented by the JP Morgans of the world begs the question, “Is THAT “transparency?”
“Price discovery?” You have the bullion banks selling 75% of annual gold production by way of paper contracts during a ten-minute interval in the middle of the night back in April 2013 and that is “price discovery”???
“Risk transfer capabilities?” Now THAT is easy; the CME allows the cartel members the capability to transfer risk from themselves to the investing public. Beautiful!
Perhaps collusion and corruption are overly strong words to using but it just illustrates the point that if the exchange members think there is a buck to be made in fees and order flow, the validity, veracity and the risk to investors are totally irrelevant.
And how about that new HIVE blockchain deal? HIVE was having a very difficult time raising money in the junior mining space so it reverse-engineered its business plan by implementing a name change that would allow it easier access to capital and MUCH easier access to the wallets of the average retail stock jockey. It will NEVER fail to astound me how incredibly shrewd the Vancouver crowd is when it comes to marketing junior start-up companies—errr—”FAIRY TALES.” Make no mistake—Frank Guistra was a master broker/promoter in his day back in the 1980s and 1990s and remains so today (minus the “broker” role).
What amazes me is that people piling into “the next Bitcoin” story with reckless abandon is reminiscent of the days of “the next Hemlo” or “the next Eskay Creek” or “the next DiaMet,” when fortunes were made in the early-going and lost tenfold in the late-going. The pretenders harvested their bounties on the backs of the greed-infected public. Is this truly the embodiment of “sour grapes” having completely missed the moves in rare earth metals in 2004–2008 and lithium in 2013–2015 and weed and blockchain deals in 2016–2017? The answer is “Absolutely!” because of the next graphic courtesy of The Visual Capitalist, and it is a gripping image of a world so totally broke NOW and even more so considering the legacy issues of Social Security, Medicare and pension deficiencies.
Graphic Courtesy of The Visual Capitalist
What the above graphic really explains is the reason why Bitcoin and HIVE are in play. You see, the psyche of traders has been infected with a Pavlovian virus of incalculable magnitude; they understand what we in the GATA camp have preached since the late 1970s, that Debt = currency debasement = decreased local currency purchasing power = reduced living standards = social unrest. However, just as the barometer of lower standards of living have been historically measured by currency exchange and interest rates, the “New Normal” would have you all believe that because STOCKS are screaming higher and BECAUSE gold and silver are underperforming and BECAUSE cryptocurrencies and marijuana deal are all collectively ON FIRE that we should all follow the accepted mantra that ALL IS OK. It is not “OK” and as the debt chart above would indicate, the largest perpetrator of the debt felony is the mighty U.S.
Investors actually do “GET IT” these days; they know that this global Ponzi Scheme where crushing debt levels have their private “days of reckoning” pushed well out into the future by political coordination amongst these Champagne Socialists, so why worry about it now? As Chuck Prince said so eloquently back in 2007, “But as long as the music is playing, you gotta get up and dance,” and dancing is exactly what they are doing as blockchain, lithium and pot deals are dominating the space while gold and silver are nowhere to be found. Nowhere is that better illustrated than in the TSX Venture Short Report shown below. Not one North American gold or silver company to be found with top place the domain of none other than HIVE.
HIVE now has 15.9% of all issued capital sold short and with the momentum players (including the machines) all jumping on board this Bitcoin “wannabe,” the table was set for a massive squeeze the result of which has been a double as of noon hour Friday but which has now turned into a selling panic as the shorts are pressing hard for an outside reversal day and a subsequent crash. Friday’s wild ride saw an intra-day high of $6.75 punctuated with a trading halt and news release that a “pooling agreement” is to be terminated and 24 million shares held presumably by the insiders is being released early in order to provide “market liquidity.” (As in, the insiders couldn’t stand these prices so they wanted to add “liquidity” to their personal net worth.)
As stated above, this week’s COT Report was a non-event as was the week’s action in gold and silver which encompassed a $16 range for the entire week. Not to beat a proverbial horse or sound like a broken record, but the competition for order flow is fierce right now and just as the Russell 2000 has failed to surpass the 1,515.94 all-time high recorded in early October, not everything out there is technically sound. However, readers of this missive are sick and tired of reading about “big evil banksters” and “corrupt traders” and “interventions” because working day and night to prove the aforementioned conditions simply puts zero dollars in my (or your) pockets. In fact, the most feedback I get is when I fire off a trading idea on the JNUG (Direxion Daily Junior Gold Miners Bull 3X ETF) or the UVXY (ProShares Trust Ultra VIX Short-Term Futures ETF) and/or gold and silver because that actually DOES (or doesn’t) at least provide what we used to call back in my brokerage days an “actionable idea.” What the brokerage house managers used to NOT say was that an “actionable idea” was a “commission-generating idea” and was one that clients would fall over. And we KNOW how brokers love to jam those commissions, don’t we?
Listen, a great many of you out there are feeling rather glum these days. You’re afraid to show your wife the monthly E-Trade statement and you cannot show your face at the country club after you got quite drunk back in August and bragged about shorting Bitcoin at $5,000. Adding insult to injury you bet your boss that stocks were going to crash in October and now you owe him a dinner at the chic-est restaurant in the city. Topping it all is that your Gen-X-er brother-in-law with the 115 I.Q. with the used car lot in Rexdale that bought the marijuana deal at $0.05 and just sold it at $13.50 is now offering his sister (your wife) an all-expenses-paid holiday for her and your kids in Barbados on the condition that you stay behind and mind the dog. I GET IT. Times are tough out there for the true believers in gold and silver we have had our noses rubbed in the proverbial latrine of human folly for far too long now. The financial history of our planet Is RIFE with stories that forecast how this will all end. And NO, I will not give you that “markets can stay irrational longer than. . .” BS but what I WILL say is simply this: Gold and silver are cheap relative to every other asset class on the board and they will have their days in the sun very shortly.
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.