Mike Gleason: It is my privilege now to welcome Craig Hemke of the TF Metals Report. Craig is a well-known call in the metals industry, and runs one of the maximum notably-reputable web sites in our space, and affords some of the satisfactory analysis at the banking schemes, the issues of Keynesian economics, and evidence of manipulation in the gold and silver markets that you’ll find anywhere.
Craig, welcome lower back, and thank you for becoming a member of us. How are you nowadays?
Craig Hemke: Mike, Happy Pet Rock Day. As we file this, it is July 17th; this is the 4th anniversary of the infamous article written by Jason Zweig of the Wall Street Journal wherein he said, “Let’s face it, gold is only a pet rock.” So Happy Pet Rock Day, my friend.
Mike Gleason: Good begin. Craig, I need to talk about silver first off here. Silver is showing some real existence eventually these remaining couple of days. It has been underperforming gold, and that became simply making us a chunk apprehensive. We would instead see silver confirming gold’s pass better. James Turk becomes out with a notable statistic this week speakme approximately how there had been eleven,186 trading days within the COMEX since the prohibition of owning gold was lifted in January 1975. The ratio traded at 93 because it did only some days in the past, or higher, simplest eighty two days. Eighty-two days out of over 11,000, so you get the sensation for the way brilliant the present-day bargain in silver is relative to gold.
What do you’re making of silver’s under-overall performance to date, Craig? And then, what are you looking forward to for the white metal shifting ahead, and is that this bump that we’ve seen here over the last few days in silver the beginning of something, possibly?
Craig Hemke: Mike, it is a question that requires a whole bunch of different solutions that hopefully sort of tie together. First and principal, human beings need to understand that in 2009 to 2011, that maximum recent rate run that took us all of the manners to $49 was first-rate manifestly, but the last part of it from $38 to $ forty-nine become nearly solely what we call a commercial quick squeeze. The CTFC facts, the Commitment of Traders record, the bank participation record all bore that out returned in 2011. And what I always thought was taking place was which you had the tale of JP Morgan had inherited this large quick-position from Bear Stearns and that they had been keeping it in place of getting out of it and accordingly were getting squeezed. They had no bodily silver. Back then, they have been straight away rubber-stamped inside the spring of 2011 to start their personal COMEX silver vault. And within the eight years, that vault now controls greater than 1/2 of the whole vaulted silver at the COMEX, more than one hundred fifty million ounces they have collected. Most of it thru their proprietary house debts, stopping 1,000 contracts or so every unmarried month and taking into transport and holding it in the eligible accounts.
The first thing you’ve got to understand is that JP Morgan has monopolistic management of the pricing structure, as a minimum, because it applies via the COMEX. They’ve labored very toughly within the ultimate several years to color silver into a nook, and you could see that on the weekly chart. Maybe there may be a bodily floor at around $14; the charge continues getting wedged tighter and tighter into a corner underneath some trend strains, the two hundred-week shifting common. Why is silver beneath-performing? I suppose this is it. I assume those banks, JP Morgan and Citi, particularly, make a boatload of cash shorting it on a steady basis, issuing new contracts, taking the hazard of being short against the speculator longs, that they could outwait until the speculator longs rollover after which get lower back out or even pass onto the fast facet.
So, I assume this is the largest component. I’ve been telling parents on my web site that I would in no way be amazed to see the gold/silver ratio go to one hundred to 1 before silver subsequently breaks out just due to that monopolistic control of the pricing scheme by those banks… meaning gold ought to visit $1,600 while silver should nevertheless be at $sixteen. Now recently, right here this week, we’ve seen the silver rally, and there may be a lot of speculation as to what is taking place with that. The aspect I assume is probably most exciting and possibly even maximum valid is that this concept that a few huge establishments were, because of searching on the gold/silver ratio, has been lengthy gold and quicksilver in this method. You can see … Perhaps you can see some of the information … And now they’re taking those trades off, which has maybe been retaining gold returned this week while silver has been rallying.
I do not know; there might be a few validities to that, but let’s watch actual closely here, Mike, because sure it is interesting. Silver’s choosing up, however guy, there is a top-notch quantity of technical, and we’ll name it bank-created resistance among approximately $15.80 and perhaps $17, so permit’s get above $17, and your antique friend Craig goes to start getting sincerely excited. Still, between now after which, it’s nevertheless going to be a hard fight for this next 10% from here.
Mike Gleason: Yeah, still caught in that variety for positive, and till it pops through that one manner or the opposite, it is hard to get too, too excited, but we will be watching. You wrote something on Tuesday that I desired to get into. The cutting-edge interest rate environment is a killer for banks, as a minimum to the extent they may be relying upon banking MO of borrowing at lower hobby charges and lending at a better rate, making a selection. Right now, the margin is pretty low; the Fed finances rate is presently higher than the rate of a 10-12 months Treasury. Banks borrowing on the Fed’s cut-price window are finding it tough to lend profitably.
At least the modern charge environment sooner or later killed the loose-cash scheme with the aid of which banks borrow at zero from the relevant financial institution to then purchase Treasuries, pocketing two or three percent. Deutsche Bank lately announced big layoffs and is restructuring its business. With your remark approximately the tough operating surroundings for banks, it makes us surprised if other casualties are coming. What are you expecting there? Talk about the banks right here, Craig.
