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ANDY HOFFMAN:  Hi, this is Andy Hoffman, Marketing Director of Miles Franklin Precious Metals, in our 26th year in business.  It’s Thursday night, August 27th; and given the extreme volatility of global markets – or should I say, the historically undefeated forces of “Economic Mother Nature” taking on the manipulative forces of crumbling Central banks head on – I figured it was the perfect time for another special podcast with Miles Franklin’s President and co-founder, Andy Schectman.

Given the Cartel’s maniacal efforts to suppress gold and silver prices – in light of historically PM-bullish events, from the Chinese Yuan devaluation; to collapsing global equities and commodities; and the pending closure of dozens of gold and silver mines, we are again faced with a potentially dangerous shortage situation.  Not so much in gold – not yet – but certainly in silver, where supply shortages always develop first, as global inventories are far, far smaller.  In fact, it has essentially become “common knowledge” that no more than two billion ounces of above ground inventories exist in the entire world – worth a measly $29 billion at current prices, nearly all of it in very strong hands, such as mine.  Back in October of last year, I hosted Miles Franklin’s “Silver All-Star Panel” webinar to discuss such topics, which you can access for free at our website.

As for physical silver bullion, back in 2008 we saw the first signs of what was to come – when the Cartel viciously attacked Precious Metal prices in the early stages of the financial crisis.  However, by October 2008, essentially all silver products sold out worldwide, with all major Mints suspending sales.  Delivery times stretched out to months; and believe it or not, physical premiums rose to nearly 100% over the fraudulent paper prices derived on the New York COMEX.   Gold, too, sold out, with premiums closer to 30%.  However, it was the shortage of physical silver that exposed the Achilles Heel of a price suppression scheme destined to end spectacularly, just as the London Gold Pool did in 1968.

Fast forward to 2011, when the Cartel nearly lost control again – as silver prices rose to their 1980 spike top high of $50/oz.  Only a blatant paper attack in the wee hours of Sunday night, May 1th, 2011 – when China was closed for a holiday; enabled the Cartel to escape that episode intact – as, like in 2008, supplies were close to – or in some cases completely, sold out.

In the ensuing four years, we have seen multiple situations in which temporary silver shortages broke out – such as in April 2013, after the April 12th and 15th, 2013 “alternative currency destruction” paper raids; and last month, when the U.S. Mint suspended silver Eagle sales for two weeks due to surging demand.   Irrespective, demand has continued to grow, with 2014 U.S. Mint and Royal Canadian Mint silver sales setting new records, and 2015 on a pace to set new records again. Worldwide, the demand picture is even stronger – particularly in the Eastern Hemisphere.  And given that roughly half of all silver production is byproduct from lead, zinc, and copper mines – which, due to collapsing prices are likely to start closing en masse in the coming months, the outlook for silver supply has never been bleaker.  Let alone for the world’s primary silver miners, nearly all of which are hemorrhaging money – with massive write-offs and production and capital expenditure-reducing mergers likely in the coming months.

Which brings us to today; when after six years of relentless post-2008 money printing and market manipulation, the historic bubbles in global stocks, high yield bonds, and commodities are serially collapsing – fostering not only an economic environment weaker than any since the Depression, but an unprecedented debt edifice that can only be repaid via equally unprecedented Central bank monetization.  The average currency has fallen by more than 50% in the past four years alone; and now that the “final currency war” has gone nuclear – care of the People’s Bank of China – the only possible outcome is dramatically debased currencies, zero interest rate policy, and “QE to Infinity.”

As discussed in recent articles, we at Miles Franklin – from both clients and blog readers alike – have never witnessed a level of cumulative fear so acute; at least, not since late 2008.  And thus, the current silver shortage situation appears far more like 2008 than the others.  Not to mention, as global demand – if the U.S. Mint and Royal Canadian Mint are any indication – is more than double what it was in 2008.  And with the world’s largest silver buyers – India and China – clearly experiencing record demand as well, the odds of a debilitating physical shortage – which could prevent you from protecting yourself against relentless, accelerating Central bank money printing – have never been higher.

To that end, I have once again brought in Andy Schectman to update you on what he sees – just as he did in July’s “State of the Bullion Industry” podcast – as well as supplying information for my August 13th article, “silver supply a 1.5 or 2.0 out of 10.”  Andy was selling Precious Metals before the bull market commenced at the turn of the century; and given Miles Franklin’s position as one of the nation’s largest bullion dealers – and a primary dealer to the U.S. Mint – he has as good information of how the real-time supply/demand situation looks as anyone in our industry.  Andy, how are you doing tonight?

ANDY SCHECTMAN:  I’m alright, Andy.  Thank you.  A little weary, though.  Tired, but hanging in there.

ANDY HOFFMAN:  Yes, he’s weary, from Miles Franklin receiving so many calls from people asking silver.

OK, let’s start, generally speaking, with your view of how this silver shortage situation “feels” compared to 2008; as well as 2011, when supply dried up due to rising prices.  In other words, what are clients telling you today vs. then, and how are you responding?

ANDY SCHECTMAN:  First, I think it’s very important to get it out there that right away, first and foremost.  This is not about trying to entice people to hurry up and buy…and twist their arm, and force people into making a decision, based upon something that isn’t true.  However, in 26 years of business, I’ve never experienced anything quite like this, on many, many levels.  If we look at the difference, really, between now and 2008, they’re similar in some respects, but very different in others.

In 2008, you had several years of increasing gold and silver prices behind you.  And so, when we saw the correction that led to all the product disappearing, it was a different environment.  We had more optimism that prices would continue to move higher; and thus, people were buying gold and silver at that point, I think, more for profit than safety.  And so, there were a lot of people back then there were a lot of people jumping on the bandwagon.

We were getting at the high point, leading up until 2011 – at that point, it had been 12 or 13 years of rising prices, we were getting up to 200 calls a day, with a lot of people placing very small orders, of people buying gold and silver for what I would have thought to believe, basically, the wrong reasons…doing it to profit, and capture a rising bull market.

Whereas now, we see a similar environment, in which product is beginning to disappear – just as in 2008 – but this time, what I see is vastly different.  In all of the years I have done this, I have never seen, cumulatively, so much concern from so many different levels of clients, and people, and classes, and backgrounds.  And just about everyone I talk to, from Wall Street financial advisors to the most diehard goldbugs, people are very concerned right now.  Now you throw into the mix what I would tell you is the beginning of a really, really, really difficult silver market, in terms of supply – and you have the makings of a very interesting market.

As of tonight, American Silver Eagles are four weeks backordered.  At least for us – one of 27 companies on the United States Mint website, so we do have the ability to straight to the top, we are 3-4 weeks backordered, at best – with premiums as high as I’ve seen them in a very long time.  The Royal Canadian Mint…at this point, we are not taking any orders on silver Maple Leafs.  They are minimum 6-8 weeks back ordered.  Again, rising premiums.  The Austrian Mint, which sells silver Philharmonics – we sold somewhere in the neighborhood of 155,000 ounces to two clients last week, and we cannot get any more Philharmonics from the Austrian Mint.  The only place that we have had any success in getting product is the Perth Mint in Australia.  They are producing the one ounce Funnel Web Spider, which is a fantastic coin – and we have been having pretty decent luck getting supply of.  Short of that, and some 100 ounce bars, just about anything else I would aspire to get, is either back-ordered or really, really delayed, with rising premiums.  And so, the only similarity between now and 2008 – or leading up to 2008, setting aside the real panic that ensued when markets collapse, the one real similarity is that in 2008, product started to disappear.

It started with the U.S. Mint (in 2008), just as we recently saw here, when it shut down in July…and preceded to just about everywhere else, where silver disappeared completely and totally.  We’re not there yet (today)…but if we do, in the backdrop of extreme anxiety in the people I talk to – perhaps, rightfully so, and justified if nothing else – very quickly you will see (silver) become impossible to get.  And I say that with 100% sincerity, as I am not trying to get people to buy based on a perceived fear that (silver) is disappearing – as they are disappearing in silver, which is becoming very challenging for us to get.  That to me is my biggest concern as a company.  How do we get product, in an environment where it is very difficult to get?

ANDY HOFFMAN:  OK, I was going to ask about those products secondarily…so why don’t I just go to what I was going to initially talk about, junk silver – which I have long described as the “ultimate fear asset,” given its potential for use as a bartering tool under the worst case scenario of hyper-inflation.   From what I see, the industry is essentially sold out, with no certainty that material supply will ever return.   Andy, what do you see, and how does the junk market differ from 2008 and other times of significant supply stress?

ANDY SCHECTMAN:  Well, you really can’t get junk silver now.  It’s all but impossible to find.  You know, the term “junk silver” referred to the fact that there was never any extra premium on top of the silver…it was just dimes, quarters, and half dollars for their melt value.  In fact, I used to be able to buy bags of junk silver for under melt value, and sell them to clients at melt value or just a few cents above…and it was always the easiest product to get.  And now, it’s anything but junk.  In fact, if I were able to source it now, you’d pay more for a few bags of junk silver than you would for a brand new Mint Box of silver Eagles.  I don’t know that I’ve ever seen that…ever, as a matter of fact…thinking out loud, of all the years I’ve done this.

Even 2008, when things went crazy, and absolutely disappeared, the premiums on Silver Eagles and Silver Maple Leafs at the height of drought of product was basically 100%.  We had $9 silver, it had fallen from $21.  Eagles and Maple Leafs, when they finally came back online for us to sell, were trading at 90%-100% premiums.  However, junk silver at that point was about a $4-$5/oz premium, or roughly 50%.  So at the peak of things being impossible to get in 2008, the premiums on junk silver were just half of what they were on silver Eagles and Maple Leafs.  And now, the premium on junk silver is more than that of Eagles and Maple Leafs.  And perhaps that is a function of the fact you just can’t get it, because it just isn’t made – and hasn’t been since 1964.

So it’s very much indicative of where I think things are going.  You know, when people buy gold and silver for these type of preparations…these types of events…they aren’t apt to sell them, to go back into dollars.

ANDY HOFFMAN:  Andy, can I cut you off here?  As what you’re saying, goes right into what I was going to ask you next – not just about junk silver, but bullion in general.  Because what you’re saying is that junk silver is not only the ultimate fear asset, but it’s developing a numismatic value as well.  Which even a few years ago, people didn’t even think of.  But as I see it, everything is becoming a numismatic – because my next question was, even 2013, 2012, 2011 silver Eagles and Maples now have high premiums.  Can you tell us about the (diminishing) secondary market – which, frankly, you have been warning of for years?

ANDY SCHECTMAN: I think the term numismatic in this case is misleading…because for me, a numismatic is a coin with historical significance, or value in and above its melt content – for significant reasons, like it’s an old coin or an old historical piece.  So in this case, the disconnection if you will, or what you call numismatic, to me is more of a disconnection.  And that disconnection is between the paper price and the real price.

So yeah, I guess you could call it numismatic – but I think the more appropriate way to look at it, or to view it as a whole, is that the paper price that is engineered and manipulated relentlessly on the markets is becoming more and more detached from just about anything.  It’s one thing when you talk about junk silver, where people are really afraid.  I mean, I haven’t been offered a bag of junk silver to buy in probably over a year.  So I think we’re heading into a period of time where everything will become “numismatic” simply because it is completely and totally detached from the paper price.  In other words, what is something worth when you can’t get it?  What is something worth when you need it, and can’t get it?  And that’s what we’re really getting at here, as I think the prices will further detach, and move away from the paper price, based on peoples’ need for protection.

ANDY HOFFMAN:  And this dovetails with what you were saying from essentially the first conference I went to you with, when you spoke of a lack of a secondary market.  Which, just a few years later, you’re seeing.  I see all of these coins, across the bullion industry websites – where a 2011 is much more expensive than a 2012; and a 2012 more expensive than a 2013.  And it shows you, there really is no secondary market.

ANDY SCHECTMAN:  Well, it’s interesting, because leading up to when we started speaking around the country…about six or seven years ago…and the three or four years after that, until recently.  Before the last three years, anyway.  The price of gold and silver continued to rise.  And it was a situation where people were confident prices would continue to rise, and they were buying gold and silver because it was the next great place to make money.  But what has happened over the last three years, interestingly enough – and it’s very difficult for most people to understand – is that the last three years of carnage in this industry…the price carnage…the relentless drubbing of the price…has I think, shook so many people that in the first three months of this year (2015), we had more stuff sold back to us than I can remember in the entire preceding ten-year bull market run.

And so, what’s interesting, what so many people find hard to grasp, is that there is a whole segment of the populace…most of the mainstream, who view stocks and bonds as the path to retirement…who only notice the fact that gold and silver have been down.  And not as a good place to be.  In fact, just about everyone I talk to that doesn’t understand gold – other than that I sell it – will say to me, “gold’s been down a lot lately, hasn’t it?”  In other words, what I’m getting at is that most people in this country, the only thing they notice about gold – if anything – is that it’s been down for the last three years…and thus, not a particularly attractive investment.  And in such an environment, we can’t just about anything (silver related), without a long delivery delay.

If you go back to 2008, everyone said to me “boy what a great run you’ve had.” People noticed gold was up, and was climbing, and became difficult to get.  But what happens now, is no one notices it, other than to consider it has been a bad place to have had one’s money for the past few years, compared to the stock market.  And if it’s that difficult to get now, when most people don’t look at it…and those that do, view it as a bad place to be…what happens when everyone wants it.  So, I think we are really on the cusp of something that could turn ugly very quickly, in terms of getting product.  Really, really ugly.

ANDY HOFFMAN:  Well, I’ll say that in my 26 years in financial markets – including 15 on Wall Street itself – I’ve never seen anything that’s been more of a “contrary” play…where everything is going against it sentiment wise, when the fundamentals have never been better; including the fact, that we can’t get silver supply.  Just to consider that silver is a market at a six-year low, where you can’t get supply – which is essentially what happened in 2008 all over again, except the world is a far different place.  By the way, seven years later, the global demand for silver is twice what it was in 2008.  So that should give people some food for thought.

Now, Andy, my next questions is what about larger sized bars – such as 10 ounce and 100 ounce bars – the latter of which tend to be more associated with institutional buying?

ANDY SCHECTMAN: I really don’t like 100 oz bars much at all, to be honest with you.  I’d by them only as a last resort, and that’s kind of what I believe will be all that’s left.  We have 100 oz bars in stock, but the one and ten ounce silver bars are all but impossible to get.  Most of the refiners are making one ounce rounds and 10 oz bars, are back-ordered two to four weeks…at least, those I consider reputable.

Sunshine Mint is the mint that produces blanks for the U.S. Mint.  All of their products are suspended right now, and to me they are the most respected company that produces generic rounds.  And everything I’d ever buy from them is suspended.  Right now, I have a halfway decent supply of Perth Mint and Royal Canadian Mint 100 oz bars.  But to me, that is the second choice to one ounce coins.  Whether you are playing poker, or driving on a crowded highway, or investing, you can never be too flexible, or too liquid.  And I believe liquidity is compromised considerably with 100 oz bars.  I’d much rather pay a few hundred bucks more for the same amount of silver, but in 100 one ounce pieces, rather than one 100 oz bar.

So 100 oz bars are available, but the 10 oz bars are lumped in with the one ounce rounds, where delivery delays abound.  I mean, I can get all of this stuff, but the wait is 3-4 weeks, based upon a promise from someone to deliver.  Is this the beginning of silver becoming impossible to get?  I don’t know, but all I can tell you is in all of the years I have done this, I have never seen a more crazy demand market.  We have done roughly 3½ to four months of business in the past six weeks.  And thus, it’s an environment in which, if all you did was listen to the mainstream, you’d have absolutely no clue that gold and silver are flying off the shelves.  But you can talk to anyone in this industry, and they’ll tell you that they have never, ever seen anything like this.

ANDY HOFFMAN:  And finally, what does the physical gold market currently look like?  Are there any areas of particular tightness, or is gold for the large part still available?

ANDY SCHECTMAN: For the most part, it’s still pretty good.  But if silver disappears, the next thing in line is gold.  And it’s pretty decent right now, ironically enough; albeit, we’re starting to see the Mint sales drastically pick up on the gold Eagles, and anything coming out of the Royal Canadian Mint right now is difficult – as for the most part, they are a mess, and back ordered on lots of stuff.

Gold Maple leafs are still available.  We prefer, as you know, the Wildlife Series, and the “Cougar” is a coin we have been focusing on for the past year.  They are available, but running at a week to ten days back ordered.

In general, gold is still OK.  Silver is the primary concern.  And if you’re thinking of buying silver, people who are listening to this, I urge you, if you want one ounce pieces – and more importantly, if you want possession of it in a timely fashion, I would urge you to act.  If you don’t mind waiting, it’s really not that big of a deal.  But the interesting thing is, that all the business we have been doing lately is tied to one central theme.  Which is, a concern as to where we are headed this fall.  And whether it be prophecy – like the Shemitah; or the IMF meeting; or elections; or what’s happening around the world – like the Ukraine, or the South China Sea, or Greece, or Puerto Rico, or the Middle East.  People are as concerned as I have ever seen them, and there is a universal thread of concern…and really, an inability to really articulate what it is that’s bothering them – but all tied to this fall, which is really strange – eerie, actually, that everyone I talk to wants possession before mid-September, when all these things start to happen.

So it could be a few real interesting weeks.  I think we should all prepare, and buckle up…as never, in all the years I’ve done this, have I seen more people, more concerned, about what’s coming in a very, very short period of time.  For different reasons, but nonetheless concerned enough to act in ways I’ve never seen.

ANDY HOFFMAN: Thanks so much, Andy, this is great – and timely – information. And to those listening, if you have any questions, please give Miles Franklin a call at 800-822-8080. And remember, each and every day Miles Franklin posts free content on our blog, from both myself and Andy’s father David, who co-founded the firm with him back in 1989.  Thanks very much.