Five years ago this week, a cave-in trapped 33 miners in the 120-year-old San José copper and gold mine in Copiapó, Chile; where they were trapped 2,300 feet below the surface, 16,000 feet from the mine’s entrance, for an incredible 69 days – before being rescued by when a makeshift mine shaft was drilled, and a temporary “elevator” installed. Below is a picture I took with the elevator’s one-man “car” at the PDAC mining conference in March 2011, when I worked as an investor relations consultant to mining companies, with the good people of Torrey Hills Capital. Notice the happy, confident smile on my face – as the photo was taken a month before silver reached $50/oz, coincident with the TSX-Venture (a/k/a Vancouver) stock exchange’s secondary peak at roughly 2,400. FYI, its primary peak, at roughly 3,300, occurred four years earlier, in March 2007.
Less than two months later after this photo was taken, nearly every bullion dealer sold out of silver, causing the Cartel to execute the heinous “Sunday Night Paper Silver Massacre” on a thinly traded Sunday night, in which China was closed for a holiday. Which, by the way, looked eerily like last month’s “Sunday Night Paper Massacre II” – only this time, the Cartel’s primary target was gold. Today, the TSX-Venture sits at an all-time low of 593 – having just breached 2008’s spike bottom low of roughly 600 – and the only reasons it is not significantly lower are 1) dozens of miners have since gone bankrupt, causing their stocks to be delisted; and 2) the “new” TSX-Venture houses a significant amount of non-mining stocks – which, by the way, have been artificially “goosed” by historic Central bank easing and PPT support, both overt and covert. Frankly, on an “apples-to-apples” basis with the TSX-Venture’s 2008 composition, I’d guess it’s trading closer to 200 than 593, down roughly 95% from its 2007 high.
Fortunately, I saw the post-2011 mining share carnage coming, as a mere four months after that photo was taken, I sold my last mining stock. Frankly, I could not believe how poorly they were acting before the aforementioned “massacre”; or, for that matter, the entire four years following the TSX-V’s primary peak. After all, when the TSX-V peaked in April 2007 at 3,300, gold and silver were trading at $675/oz and $14/oz, respectively – compared to $1,425/oz and $39/oz, respectively, when it peaked in March 2011 at 2,400 (when the photo was taken). In other words, I knew something was terribly wrong – and acted accordingly, in not only shedding my mining shares by July 2011 (using the proceeds to buy physical gold and silver), but leaving Torrey Hills Capital in October 2011 to join Miles Franklin.
In fact, I felt so strongly about what was “afoot,” I started warning of the risks of the mining industry while still with Torrey Hills, in a series of articles between July and September 2011 that were often heavily edited or entirely nixed. To that end, since joining Miles Franklin in October 2011, I have been as vehement in my warnings about miners as supportive of physical gold and silver; as in 13+ years of being “all in” precious metals – both personally and professionally – I have not only morphed from an “offensive” investor attempting to “make money” to a “defensive” investor seeking to protect it, but realized that, without doubt, the mining industry has been “marked for death” in every imaginable form.
And frankly, no singular event emphasizes just how impossible the situation has become than last month’s “out of left field” decision by the Canadian tax authorities to not only nullify Silver Wheaton’s preferential tax treatment, but bill them for $200 million of back taxes and penalties. In other words, destroying one of the few remaining financing vehicles for an industry already on the verge of collapse – via the arbitrary decree of one of the world’s most “mining-friendly” governments! And thus, yet again, I can only emphasize the “moral of the story” – as learned over 13 difficult years in the “belly of the beast” – that if your aim is to protect yourself from the ongoing, soon-to-accelerate economic collapse, mining shares will most likely not serve your purpose – even when the “inevitable precious metals shortage” arrives. Conversely, they may well destroy your finances entirely, as they have for countless thousands already
Why do I bring this up – starting with the Peruvian miner anniversary? Because the story I wrote of yesterday, of a union representing 30% of all South African gold miners being on the verge of calling an industry-crippling strike, heightened my long-standing awareness of just how difficult mining is – particularly in South Africa, or as I call it the “shale oil of gold mining” due to the massive production costs entailed by mining miles below the surface. Not to mention, South Africa is an historically unstable country, constantly dealing with crippling electricity shortages.
To wit, whilst the large South African gold miners – who I have practically screamed are near-term bankruptcy candidates – are offering 13%-15% raises, the mining union wants 80%-100%. Which, given that the average South African miner earns just $5,000 per year or so – payable in Rand, a currency that has fallen 20% in the last 12 months alone, and 87% in the past four years – appears to be a “low ball” offer. Of course, given the broad collapse of South African mining operations in general – not just now, but over the past three years – it would appear a strike-averting agreement isn’t likely, particularly as a whopping 55% of South African mining costs are already attributed to labor. In other words, a major, supply-destroying strike in the world’s fifth largest gold-producing nation (and leading platinum producing nation, I might add) appears imminent, adding further to the “rapidly mounting evidence of the inevitable precious metals shortage” that has appeared in spurts during 2008, 2011, 2013, 2014, and earlier this month (when, despite the U.S. Mint suspending silver Eagle sales for two weeks, it still sold more ounces than during any other July in history).
Heck, just yesterday alone, we learned that COMEX gold inventories plunged to an all-time low of just 351,000 ounces, worth a measly $390 million at current prices – yielding an all-time high of 124 ounces of paper claimsper inventoried physical ounce. Honestly, the chart depicting this phenomenon is about as revealing of the Cartel’s desperation as anything I’ve ever seen – particularly as during July, the U.S. Mint had its fifth biggest month of gold Eagle sales ever. Moreover, the GLD ETF lost another 1% of its physical inventory yesterday alone – whilst the Cartel viciously attacked paper gold amidst massively gold-bullish news flow – taking its inventory down to just 672 tonnes, 51% below its March 2013 peak. You know, just before the April 2013 “alternative currencies destruction” raids, the day after the infamous “closed door meeting” between Obama and the leading TBTF bank CEOs.
And don’t forget the world’s largest buyers – India and China; who together, continue to purchase nearly all the world’s gold production, as evidenced by this week’s massive 73 tonne withdrawal from the Shanghai gold exchange (an amount equal to 11% of GLD’s remaining “inventory”); and the fact that Indian imports were up an astounding 61% in April and May from a year ago, on a pace to absorb (onerous import tariffs and all) a whopping 35% of global gold production.
And all this, as miners, amidst exploding losses and collapsing stock prices, slash spending and (likely) prepare for massive write-downs and mergers, further validating my contention that “peak gold” has arrived, with “peak silver” right behind it. In other words, said “mounting evidence of the inevitable precious metals shortage” has reached a fever pitch. To wit, Miles Franklin’s President, Andy Schectman, has long claimed that pervasive shortages will mark the end game for the global bullion industry – which is why, with history’s largest fiat Ponzi scheme on the verge of collapse, you must act to PROTECT YOURSELF, and do it NOW!
As an addendum, I’m going to simply list some of the “horrible headlines” of the past 24 hours alone, given I simply don’t have enough “space” within my daily limit to address each item individually. Not that any such topic hasn’t been discussed already; but frankly, it’s no less shocking to read in “list form” – particularly when each and every items has significantly worsened in recent months.
1. The CRB Commodity Index closed at 199 yesterday – led by a nearly 4% collapse in oil prices, taking WTI as low as $45.20/bbl (within a stone’s throw of March’s low of $42.35/bbl) and Brent crude below $50/bbl. Why is 199 significant? Because the “key round number” of 200 represented the low print of the 2008 financial crisis. And by the way, for those that still think the Fed will “raise rates,” take a look at this horrifying chart of the impact of plunging oil prices on corporate earnings – validating what I wrote nearly a year ago, in “crashing oil prices portend unspeakable horrors.”
2. Following the Greek stock market’s re-opening yesterday, Greek bank stocks have collapsed into oblivion. Bellwether stock National Bank of Greece plunged another 15% today alone, to a new all-time low. With each passing day, the “Grexit” I all but guaranteed appears more likely, perhaps even by year-end. Remember, Greece’s real debt load is closer to €650 billion than the “reported” €350 – which in my mind, must eventually default.
3. Just as Puerto Rico did last night, representing the first such “commonwealth” to do so. With $72 billion of un-payable debt – in a tiny, inconsequential island with essentially no economy other than tourism – you can bet they, too, will default on most or all of it.
4. Better late than never, Standard & Poor’s revised the European Union’s financial outlook from “stable” to “negative.” Methinks its ridiculously undeserved AA+ rating is, to paraphrase Jack Nicholson from A Few Good Men, in “grave danger.” As is every nation in the insolvent, soon-to-collapse European “union.”
5. It looks like everyone from Turkey to Russia to the U.S. is itching for a war in Syria; which one day is our “anti-ISIS” ally, and the next our “chemical weapons spraying” enemy.
6. Hallelujah! Chinese stocks actually rose last night – following the de facto banning of the covering of short sales. Let’s see how long that lasts – LOL.
7. Gallup’s U.S. Economic Confidence Index plunged from -8 in June to -12 in July, representing its third straight monthly decline, and fifth in seven months. And this, whilst factory orders plunged 6% year-over-year in June, representing the longest streak of year-over-year declines (eight, and counting) in a “non-recessionary” period. Thank god for a ridiculous 21% increase in U.S. military aircraft orders, or the number would have been much, much worse. Just as would be the case with “Government Motors” – whose “massive jump” in July automobile sales came despite a 20% decline in deliveries to private citizens, offset by a ridiculous 38% increase in deliveries to printing press-funded government agencies!
8. Interest rates plunged yesterday to three month lows; but don’t worry, the Fed will “raise rates” next month. Just ask its comical “mouthpiece,” Jon Hilsenrath, at the Wall Street Journal – who just a week after an extremely dovish post-FOMC article, claimed Friday’s horrifying news of the lowest wage growth in U.S. history will not be a factor in the Fed’s decision making process.
9. Last but not least, the stock of the company I despise most on Earth, Twitter (actually, it’s tied with JP Morgan and Goldman Sachs), and have vociferously railed against since the day it went public two years ago, collapsed to a new record low, under the weight of plunging usage and profitability. Nothing would please me more if this brain-destroying, society-killing cancer disappeared forever. And heck, even the great Apple is in freefall mode, taking it below its 200 DMA, to the edge of – dare I say it – bear market territory.
Well, that’s enough for one day. Time to get some well-needed rest, before doing it again tomorrow.
Thank you so much for another very timely and valuable update.
The old “market can remain irrational…” idiom certainly is true, but after years of figuring the sky would fall, I think we’re finally here.
I’m still struggling with removing what is left of my RRSP locked in one of Canada’s finest but this week I think I can finally force myself to do it.
Despite the pain I’ve gone through the last 4 years ( I STARTED buying silver about a month after it’s fal from 49 bucks) I have never felt more secure. Buying every month all the way down.
Keep up the good work because without guys like you, guys like me would still be locked in with the pre-sunglasses “they live” crowd.
Pity. All my silver was lost in a canoeing accident.
Silver has a number of industrial uses, albeit the required amounts for industry are falling somewhat due to a faltering economy(ies). Most references are to our everyday electronics, medical, etc. But I never hear quoted how much silver the military requires, considering that the guidance systems and seekers used for smart bombs, missiles, Tomahawks, drone delivered ordnance etc., are all electronic. There must be a lot of silver used seeing how we are bombing the hell out of the Middle East. Not to mention, upon detonation, the guidance systems are blown asunder, resulting in non-recoverable silver.
Silver is the most indispensable industrial metal in the world, and only crude oil has more uses among commodities. Demand will be flattish even in the worst economic scenario.
However, what makes silver MOVE is (aside from manipulative suppression) INVESTMENT DEMAND, which will only rise.