Welcome to this week’s Market Wrap Podcast, I’m Mike Gleason.
Coming up we’ll hear an explosive interview Bill Holter of JSmineset.com and the Holter-Sinclair collaboration. Bill shares his insights on the key drivers for higher gold and silver prices moving forward, talks about how Trump will ultimately preside over a bankruptcy and has a stern warning for those who are considering getting out of their precious metals positions. Don’t miss a must-hear interview with Bill Holter, coming up after this week’s market update.
Well, holiday cheer continues to keep the stock market aloft even as precious metals investors see their gains being seemingly stolen by the Grinch. Given the recent gold and silver market manipulation schemes carried out by powerful international banks, it’s not unreasonable for metals owners to wonder whether the strong rally through the first six months of the year was deliberately sabotaged.
Bankers and bigwigs on Wall Street seem to take great delight in toying with markets with their massively leveraged trades. When they collude to move markets, they can cause billions of dollars in paper wealth to change hands in a matter of minutes, or even seconds. To them, the risk of getting caught cheating is tantamount to the risk of a getting a speeding ticket.
On Wednesday, the Commodity Futures Trading Commission ordered Goldman Sachs to pay $120 million to settle federal charges of market manipulation. Traders at the investment bank rigged a global interest rate derivative market.
Nightly Business Report: Goldman Sachs will pay $120 million dollars to resolve charges of market manipulation. Regulators allege that the bank deliberately moved a global benchmark for interest rate products to its advantage. The case is the latest in a series of broad investigations into manipulation by some of the world's biggest banks.
The $120 million penalty Goldman Sachs will have to pay may sound severe, but Goldman is a $100 billion company that generates billions in profits from its derivatives book. Paying occasional penalties in the millions for manipulation is just the cost of doing business.
Goldman Sachs wields tremendous influence within the U.S. government, backing both Republicans and Democrats with financial support. “Government Sachs,” as some call it, also grooms candidates for Treasury Secretary – the latest being Donald Trump’s pick of Steven Mnuchin.
Wall Street seems to love Trump’s cabinet picks. He will ride into office on a wave of optimism that his tax, trade, and regulatory policies could boost the economy. A report released on Tuesday by Gallup shows confidence in the economy surging since the election. Gallup’s U.S. Economic Confidence Index hit multi-year highs along with the stock market.
The Dow nearly reached the much talked about 20,000 level earlier this week before backing off on some light technical selling. The tremendous optimism fueling the stock market in recent weeks has put downward pressure on gold and silver. They tend to thrive more on pessimism.
Gold prices currently come in at $1,134 per ounce, down just $3 or 0.2% on the week. Silver is down more for a weekly decline of 2.5% to bring spot prices to $15.79 an ounce. As for the platinum group metals, we’re looking at bigger weekly declines, with platinum down 3.1% to trade at $902 and palladium is down 5.9% to $658 an ounce as of this Friday morning recording.
Frustrated metals investors are asking: When will prices reach a bottom? The answer to that question may depend on when optimism in the stock market reaches a top. Sentiment is now at an unsustainable extreme.
At some point it will reverse. It could happen at the turn of the New Year, which often serves as a catalyst for trend changes. Those who didn’t want to book profits toward the end of the year and incur a 2016 tax liability may be inclined to do so come January. For precious metals markets, any tax loss selling pressure will be immediately lifted when the new tax year begins.
Inauguration Day on January 20th could be another potential inflection point. Stock investors may decide to sell the reality of a Trump presidency after buying the hope. Or, perhaps Wall Street will give the new president a Honeymoon rally for a few weeks.
Rather than speculate on the exact timing, we’re better off preparing now for an eventual cyclical top in the stock market and bottom in precious metals. U.S. stocks are expensive by virtually any valuation measure you can think of. Hard assets, by contrast, are cheap.
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Well now, without further delay, let’s get right to this week’s exclusive interview.
Mike Gleason: It is my privilege now to be joined by Bill Holter of the Holter-Sinclair collaboration and JSMineset.com. Since leaving Wall Street a decade ago, Bill has made a name for himself as an astute and highly respected market commentator, and recently teamed up with Jim Sinclair to help others discover the inherent dangers of our debt based economy and how to protect yourself against it.
Bill, it's a real honor to have you back and I want to thank you for joining us today. Welcome.
Bill Holter: Thanks for having me back.
Mike Gleason: Well, to start out here Bill, I want to get your thoughts on your the equities markets because as our audience may or may not know, you were a long time Wall Street insider in a former life, so all the talk here in recent weeks has been about the Dow and when it will take out 20,000 and just how high it will go. What do you make of this unprecedented streak since the November the 8th election? Because on election night, when it became clear that Donald Trump was going to win, the Dow futures were down huge, but they reversed big time the next day and then they've been on a tear ever since, so what do you think is driving all the euphoria?
Bill Holter: Yeah, they were down 900 points in I don't know, maybe an hour or so, hour, two hours. I think that caught the Plunge Protection Team by surprise because everybody thought that Hillary would win and they did not believe that they would need to come in and support the market like that. I'm on the record as saying all markets are rigged. I mean, the markets are rigged via derivatives and I think what you're seeing here is the move after they stabilized it and the market started going higher from there, this I believe is strictly the Plunge Protection Team, the Exchange Stabilization Fund, whatever you want to call it, trying to push markets up to put a smiley face on the Obama administration, and what worries me is if Trump does follow through with the rule of law and does not continue the manipulation, you also have to wonder if Wall Street's the machine will work for Trump.
I mean, the machine worked under Obama, probably would have worked under Clinton, but will it work for Trump? And my worry is you're going to see, as we get closer and closer to Inauguration Day, I think you could very well see the equity markets truly implode.
Mike Gleason: The setup does seem to be a lot like last year. We had a Fed rate hike in December last year, we had one this year, the only one of the year in both cases, and precious metals seemed to bottom at that point, and then had a very good first half of the year as the equities sold off. Do you see a similar setup maybe happening here as 2016 ushers in 2017?
Bill Holter: Well yeah, similar setup and even more to the point, rates are going higher, the Fed is tightening into a weak economy. It's a weak global economy. Just look at trade. Trade will tell you the story, and the story is we don't have growth. The world does not have growth and that's a problem when you have the amount of debt in the system that we have now.
Mike Gleason: Furthering the point here a little bit, I know you're a big advocate of holding real and hard assets instead of paper which of course is what Wall Street is selling to most people and lately, the markets have been making paper look good, the dollar appears strong, stocks are outperforming metals. How do you respond to people – people in the mainstream – who expect these conventional financial assets to continue outperforming hard assets?
Bill Holter: I'd be very careful because when this game ends, you're going to have what you have, that's all you're going to have and you won't be able to change horses in midstream. So you need to look out and think are the paper markets on a real foundation or is it a foundation of sand? And if it's a foundation of sand, and we have market closures, you're not going to be able to get out of your position and you'll end up being wiped out.
Mike Gleason: Yeah, certainly a very scary situation. It does seem like we've got such an overvalued equities market that the time might be right to proceed with caution there.
Now, you alluded to market rigging earlier and I wanted to get into this with you here. One event, we've got the Deutsche Bank situation, they've provided evidence as part of a settlement over market rigging and gold and silver. They turned over 350,000 pages of documents and about 75 audio recordings. Already we see class action complaints being amended to include more banks and more evidence of wrongdoing. Do you think this is a breakthrough in terms of finally holding some of these cheaters accountable? And is there any chance those of us who are involved in these markets are going to see all this lead to more honest price discovery, Bill, or is this much ado about nothing like usual?
Bill Holter: I think it's a two part answer. First off, it's no longer conspiracy theory. It's conspiracy fact. The markets have been rigged, the markets are rigged. If you look, there's been admissions of guilt, there's been fines paid for every market you can think of. LIBOR, municipal bonds, treasury bonds, stocks, gold and silver, you name it, there have been fines paid. Banks are not in the business of just giving money away. The reason banks settle and pay fines is so that the discovery phase doesn't get opened. This Deutsche Bank situation is a little bit different because Deutsche Bank apparently has turned state's evidence, and I'm sure you've seen the emails back and forth. They're very damning, and it shows intent, it shows collusion, so no, it's not going to be business as usual.
The second part to the answer, and I'm going to write about this I think next week. I think I'm just going to write one time between Christmas and New Year’s, as an end of the year piece. My thought process is 2017 is going to be the year of truth bombs, meaning many of the things that we have talked about over time have slowly been proven correct this last what you're talking about here, the market rigging. We talked about this for years and years and we were called crazy lunatics with tinfoil hats on, and it turns out, no, we weren't crazy. We were right, we were correct. And I can only hope that if Donald Trump follows through on his promise of reinstating the rule of law that we will see some truth bombs. It's my opinion that he's laying back right now until the inauguration, softening up and backing away from draining, you know, he's going to drain the swamp and put Hillary in jail, et cetera, et cetera.
I think he's backing away and soft-peddling it for now until he's in office, and it would not surprise me one bit if you also saw after he comes into office, I think Russia will dump a lot of information that they have on wrongdoings. So, like I said, I think 2017 is going to be the year of truth bombs.
Mike Gleason: Switching gears here a little bit but alluding to Trump and maybe some of the things that he'll do, one for the poster boys for Keynesian economics, Paul Krugman, just accused Donald Trump of putting a bunch of "gold bugs" on his economic team. Now, that sounds like a bit of a stretch, but we'd certainly be glad if it were true. One of the people Krugman was referring to was Mick Mulvaney who has been tapped to run the Office of Management and Budget. He apparently spoke at a John Birch Society meeting once and that organization supports sound money issues, plus he may even be personally investing in gold. Do you have any thoughts about the people Trump is appointing? Are they likely to advocate for sound money issues, reigning in the Fed and forcing federal borrowing limits, that sort of thing?
Bill Holter: Yeah, I would not call them gold bugs but I would say that they're definitely gold friendly, and I can tell you one of, as I understand it, one of Trump's advisors has been Judy Shelton, and Judy, I wrote this two or three or maybe longer weeks ago, dig in and find out who Judy Shelton is because I think she has Trump's ear and she's definitely gold positive. I also believe, by the way, just by a short comment that Trump made prior to the election, he made reference to "the gold's gone." It was very short and that wasn't the point, but he ended his point by saying, "And the gold is gone away" or something like that. So, I believe he understands and fully knows that Fort Knox has cobwebs.
Mike Gleason: Talking about the differences between the paper market for gold and silver and the physical market, I know you've had a lot to say about this over the years. You've said that we're going to see separate markets and the two are going to diverge from one another. Are we starting to see that, and what's the future there?
Bill Holter: Yeah, absolutely. I said it for years and then just a month and a half, two months ago, we started to see the spread begin to widen on the Shanghai Exchange over COMEX. We actually got as high as I think $2.07 an ounce higher in Shanghai for silver than on COMEX. That's well over 10%. Now you're approaching 15% difference between paper and real physical, so we are beginning to see two tier markets, and this is something that Jim (Sinclair) and I have talked, I think, over our last three weekly interviews for subscribers, this is the mechanism to freeing gold, to freeing the gold price. The physical markets are going to price gold, not the paper markets, and the reason being is simple, arbitrage. The inventories in the West will be arbitraged completely away until they're gone.
Mike Gleason: I know we talked about that last year when we had you on. You spoke about how when the West runs out of gold to sell to the East, it's game over. The jig is up, they no longer have what they need to manipulate the market. Is that still what you're thinking?
Bill Holter: Yeah, exactly. I mean, it's taken a while. This has been a long slog, but the theory of a two tier market is definitely right in your face.
Mike Gleason: Well, we're approaching the end of the year here and starting to look ahead to 2017. You spoke a little bit about what you're looking for there, but what do you think the key events were for metals this past year, if we look back for a moment? And then, looking ahead, what are a couple of the items you think precious metals investors should be watching for in the coming year? Two part question there.
Bill Holter: You're asking for the key events? This past year, from January, month by month by month by month, the fundamentals got better and better and better for owning gold and silver. So forget about the metals peaked in June or July and fell off the second half of the year. The reasons to own gold, the reasons to own silver only got better as the year progressed. So there were not events that came up that were negatives for gold or silver, and actually, Trump being elected, I mean, just look at what he's talking about doing… it's obviously going to blow the budget apart even further. Hillary would have done the same thing, but you will see much higher deficits and just look at the Obama administration. What did they pile on? 9 or 10 trillion dollars’ worth of debt in eight years. So in essence, in eight years, the U.S. borrowed more than all the gold that's been mined since the beginning of time at current prices, in just eight years.
Mike Gleason: Looking ahead to 2017, what are some of the key things that people should be looking for as we go into the New Year, that may drive metals prices?
Bill Holter: Well, obviously watch the spread. Watch the spread between the Eastern physical markets and the Western paper markets. As they widen, that gives more and more incentive to arbitrage and the inventories are laughable. I mean, look at the COMEX inventories. It's a total joke. A couple, three billion dollars could... Billion with a B, to wipe out the inventory, so I would certainly watch the spread. I also think that the proposed border tax that Trump is talking about that very well could cause a trade war, and if that were to happen, I think you'll see the Chinese are going to have to devalue a huge amount. I'm not sure the number, 15, 20, maybe even 30% and that would bring their gold card and maybe (they’d) have to put that on the table.
I'm on the record from a year ago, saying on a back of a napkin I can show you how they've accumulated probably 20,000 tons of gold. So, I think they are the biggest gold holder in the world and if they threw the gold card on the table, and for instance, if they put all their gold in the middle of an Olympic stadium, they took pictures and videos and said, "Here's ours. We've shown you ours, now show us yours," that could be a huge problem. You could see gold go to numbers unthought of.
Mike Gleason: We've had calls from a handful of customers who bought precious metals during the Obama years and are now looking to liquidate them and by the way, Money Metals is just as eager to buy precious metals from our customers as we are to sell them, but some customers are really optimistic about Donald Trump and they see less reason to hang on to physical gold and silver as a safe haven. We have some of the same sentiments showing up in other markets. Obviously the Dow has been looking great as we spoke about earlier and investors are dumping bonds. What is your own level of optimism there? What is your thinking about getting rid of precious metals at a time like this?
Bill Holter: I've got a four letter word answer you. Dumb. Fiscally, financially, however you want to look at it, there's never been a better reason to own gold than right now. Donald Trump is not going to come in and solve everything. Donald Trump is acumen is bankruptcy. And that’s what he’s going to preside over, he’s going to preside over a bankruptcy.
Mike Gleason: Yeah, very chilling thoughts there. Obviously, that would be a key driver for gold if we see the debt just explode like many are expecting.
Well, as we begin to close here, Bill, is there anything else you'd like to share with our audience here? Anything about the fed, supply/demand fundamentals?
Bill Holter: Yeah, I do want to mention one thing because we got bombarded with emails. Apparently, a couple of weeks ago, Martin Armstrong came out, piled on with Harry Dent, "Gold's going under $1,000, it's going to $700." Harry Dent says it's going to go to $200, and they base it on deflation. It's very important for your listeners to understand and you can go to our website, it is a public article so you don't have to be a subscriber to read it, although I did expand on it for subscribers. Gold, during deflation, does better than any other condition. Hyperinflation, stability, disinflation, or just regular inflation, gold performs better during deflation than any other time. So, it's a complete misnomer and if you don't believe me, just go back to really the biggest deflation we had and the only real deflation we had other than the brief time in 2008, go back to the 1930's.
Gold was revalued 71% higher in 1934 after the confiscation, and that was in an effort to try to reflate the system. And that's what this is all about. It goes back to Richard Russell's "Inflate or Die." In other words, they have to inflate and if they don't inflate, then we have a deflationary collapse.
In a deflationary collapse, what you want is money and you want liquidity. And the system is based on credit, the whole global financial system is based on credit. All of the currencies are credit based. The only true money, real money that exists is gold. J.P. Morgan said it himself, "Gold is money, everything else is credit." So, what you want in a deflation is you want money and liquidity. Gold is money, and it's always liquid, and that's what you want in a deflation. And I think that's where we're headed first. I think we will have a deflation, the currencies will collapse, and that is your hyperinflation. In other words, the storehouse of value of these currencies approaches zero.
Mike Gleason: Well, very well put. Yeah, we tend to agree with that. I think that's an excellent analysis and we really appreciate your insights, Bill. Always enjoy speaking with you, and I certainly hope we can do it again in the New Year and we really appreciate your time today. Now before we let you go, tell our listeners a little bit more about what you're doing there with Jim Sinclair, with the Holter-Sinclair collaboration and how they can get more information on that.
Bill Holter: Sure. You can go to www.JSMineset.com. It's a two-sided website. We have the free side, the public side, which is pretty much what JS Mineset always was, and then I write two times, sometimes three times a week. That goes out on the private side, that's for subscribers, and Jim and I do a cross interview each week. We have guests on from time to time. Our last guest was fabulous, Ira Harris. Ira is just heads above the rest as far as his knowledge, he's a brilliant guy. It's not cost prohibitive. I think it's $119 a year now, and I think after the first of the year, we're going to move it up to $129 and that's for the year. I've said this many times, just listening to our cross interview and getting to listen to Jim once a week, that's worth the price of admission right there.
Oh, and by the way, Jim did just put out a public article. He doesn't write too much anymore but it's fabulous, so I would urge people, at least go and read Jim's latest. I think he put it out on Monday or Tuesday. It's fairly long, but it's a great piece.
Mike Gleason: Well, excellent. Thanks so much again, Bill. All the best to you and appreciate your time.
Bill Holter: My pleasure.
Mike Gleason: Well, that'll do it for this week. Thanks again to Bill Holter. Again, the site is JSMineset.com, be sure to check that out for all the great commentary that Bill and Jim put out on a regular basis.
And check back here next Friday for our next Weekly Market Wrap Podcast. Until then, this has been Mike Gleason with Money Metals Exchange. Thanks for listening, and from our family to yours, we wish you a wonderful and merry Christmas, and we'll talk to you next Friday for our final show of 2016. Have a great weekend, everybody.
About the Author:
Mike Gleason is a Director with Money Metals Exchange, a precious metals dealer recently named "Best in the USA" by an independent global ratings group. Gleason is a hard money advocate and a strong proponent of personal liberty, limited government and the Austrian School of Economics. A graduate of the University of Florida, Gleason has extensive experience in management, sales and logistics as well as precious metals investing. He also puts his longtime broadcasting background to good use, hosting a weekly precious metals podcast since 2011, a program listened to by tens of thousands each week.