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Precious Metals

Silver Is Poised to Outperform Gold – Extreme Ratios Point to Price Readjustments

Kicking the can down the road is the new national pastime. Every time the government’s bills come due, officials at the Treasury Department find creative…



Kicking the can down the road is the new national pastime. Every time the government’s bills come due, officials at the Treasury Department find creative ways of paying them with money they don’t have.

One measure of just how overextended the United States has become financially is the debt to GDP ratio. For most of the country’s history, excluding temporary wartime blips, net general government debt tended to be less than 50% of the economy.

As recently as the early 1970s, debt as a percentage of GDP came in at under 25%. By the early 1980s, it grew to over 30% and fiscal hawks became concerned. In the 1990s, it climbed to over 40% and concern started morphing into alarm.

Last year, the U.S. official debt to GDP ratio topped 100% (1:1). In other words, taxpayers owe more than the value of everything they produce.

That spells doom for most countries. The International Monetary Fund issues dire warnings to Third World countries whenever they exceed a threshold of 70% of GDP.

The U.S. is different, apparently, thanks to the status afforded to the Federal Reserve Note as world reserve currency. Up until 1971, that status was backed by a promise to redeem dollars held by foreign governments in gold.

Gold also served to restrain spending and borrowing at the federal level.

But ever since President Richard Nixon rescinded gold redeemability, politicians have been given a green light to run up debt without limit.

If the Joe Biden White House gets all its spending proposals pushed through, an additional $9 trillion will be added to the national debt. Barring a miraculous corresponding surge in GDP, the debt ratio can be expected to continue trending in the wrong direction.

How long officials in Washington can keep kicking the can down the road before kicking it off a cliff is unknown. These are, after all, unprecedented times in which the “lender of last resort” Federal Reserve has virtually unlimited powers.

But the central bank can’t bail out Uncle Sam perpetually without unintended consequences. Staving off a debt crisis may mean triggering a currency crisis.

Gold Is Poised to Outperform the Stock Market

During major financial crises in history, gold has vastly outperformed paper assets.

For example, both the deflationary Great Depression and the inflationary late 1970s saw the gold price reach a 1:1 ratio versus the Dow Jones Industrial Average.

The Dow trades at over 35,000 today, about 20 times the gold price.

DOW / Gold Price Chart (October 19, 2021)

Dow:gold ratio, 2000-present.

Were the Dow:gold ratio to revert toward 1:1, either stocks would have to crash, gold would have to launch into a super-spike, or some combination of both.

Given the tremendous inflation pressures currently exerting themselves in the economy, the late 1970s may be the best model for what to expect going forward.

It would mean rising price levels combined with a weak economy (stagflation).

And given that our debt load today is more than four times greater as a share of the economy than it was in the 1970s, investors should brace for the potential of a far greater financial crisis.

In the event that plays out in the form a crash in the value of the U.S. dollar, gold will obviously serve as a premier safe-haven asset.

Silver Is Poised to Outperform Gold

But silver could perform even better as an inflation hedge. It did during the late 1970s leading up to its January 1980 super-spike high of nearly $50/oz.

Some dismiss that move as artificially induced by the Hunt brothers, who tried to corner the silver market. They shouldn’t dismiss the potential for another mad scramble for scarce supplies of silver, however, fueled by broad and deep global demand rather than a handful of futures market speculators.

This time around it could be Tesla or a solar panel manufacturer, for example, that try to “corner” the silver market by accumulating strategic stockpiles.

Or it could be large numbers of individual investors mobilized in internet forums to collectively “corner” the market for physical silver. Crowdsourced campaigns spearheaded by silver enthusiasts are already afoot to try to force the hand of paper futures traders who engage in naked short selling that artificially suppresses spot prices.

For now, silver remains relatively cheap versus not only most financial assets, but also versus other hard assets. In March 2020, silver became historically cheap versus gold – at one point sending the gold:silver price ratio to a record 130:1.

Gold / Silver Price Chart (October 19, 2021)

Gold:silver ratio, 1990-present.

The gold:silver ratio currently checks in at about 76:1. It still has a lot more room to narrow in favor of silver during a precious metals bull market.

At the 1980 peak, the ratio came close to hitting 16:1, which is often referred to as the “classic ratio” observed going back to ancient times.

Meanwhile, the current mining ratio is only about 7:1, according to First Majestic Silver CEO Keith Neumeyer. That is to say, mines worldwide are producing 7 ounces of silver for every one ounce of gold they bring to market.

With so many ratios seemingly out of whack, investors would be wise to reconsider the ratio of hard assets to paper assets in their portfolios. And those who already have a prudent allocation to gold bullion should be sure they also have an adequate ratio of silver holdings.


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Precious Metals

First Majestic Silver Sees BMO Resume Coverage With $13.25 Price Target

On November 30th, First Majestic Silver Corp. (TSX: FR) priced their convertible senior notes due in 2027. The company announced
The post First Majestic…

On November 30th, First Majestic Silver Corp. (TSX: FR) priced their convertible senior notes due in 2027. The company announced that it will be issuing US$200 million in notes. The notes will bear a cash interest semi-annually at 0.375% per annum and the conversion will be 60.3865 common shares per US$100 principal. The company said it intends to use C$164.9 million to repurchase $125.2 million aggregate principal of its 1.875% convertible senior note.

First Majestic Silver currently has 5 analysts covering the stock with an average 12-month price target of C$20.34, or a 46% upside to the current stock price. Out of the 5 analysts, 2 analysts have to buy ratings and 3 have hold ratings. The street high sits at C$31.27 from H.C Wainwright while the lowest price target sits at C$13.25.

After the news, BMO Capital Markets resumed their coverage of First Majestic Silver with a C$13.25 price target, lowering it from the C$13.75 they had on the company beforehand. They also reiterated their market performance rating on the stock.

BMO says that they had a period of research restriction due to the senior note offering but since the deal has been priced they are now able to resume. They add that after using $164.9 million of the proceeds to repurchase the existing 1.875% notes, those notes will have roughly $31.1 million remaining and expect the remaining to be converted into 3.3 million shares.

Below you can see the updated BMO’s updated.

Information for this briefing was found via Sedar and Refinitiv. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

The post First Majestic Silver Sees BMO Resume Coverage With $13.25 Price Target appeared first on the deep dive.

Author: Justin Young

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Precious Metals

“Gold Can Do Things That Bitcoin Cannot, I’m Still A Fan,” Says Ethereum Co-Founder

Cryptocurrencies exist because of the deficiencies of financial institutions and government currencies…

“Gold Can Do Things That Bitcoin Cannot, I’m Still A Fan,” Says Ethereum Co-Founder

Submitted By Daniela Cambone via Stansberry Research

Cryptocurrencies exist because of the deficiencies of financial institutions and government currencies. Blockchain is a technological, philosophical, and principled and solution to a problem that’s existed and been questioned for a long time. They came with the inadequacies of printing money “instead of having sound money,” according to Anthony Di Iorio, the co-founder of Ethereum. 

In this exclusive interview with Daniela Cambone of Stansberry Research, Di Iorio navigates viewers through the founding days of Ethereum and the instrumental steps taken for the platform to succeed long before any garnered attention. Di Iorio found his calling during the early days of Bitcoin and the founding years of Ethereum by primarily focusing his efforts on building digital wallets, realizing that they would be the interface for blockchain technologies. 

Joining forces with Vitalik Buterin, the founder of Ethereum, he tells Cambone, “it was a no-brainer for me to get behind the project and get the initial capital to get it off the ground.” Almost a decade later, the blockchain network is seeing forecasts from institutions like Goldman Sachs as high as $8,000 by year’s end, Zero Hedge reported in late October. 

“Seeking freedom” was a founding principle of Ethereum, according to Di Iorio, and now is playing out real-time with its double-edged purpose it serves when rising up to conventional institutions. “Bitcoin is all about empowerment, Ethereum is all about empowerment,” he says, alongside having sound value, where fiat currencies are currently facing troublesome outlooks. 

“Everything can have value for somebody in certain circumstances,” Di Iorio states when asked about the soundness of the value of precious metals such as gold. He says, “I’m a gold fan too.” 

Constantly questioning the way money works is one reason why he deems the period we are in as the Age of Value, where he concludes, “better business models can be achieved by finding ways of creating value for the number of stakeholders in the mix.” Di Iorio says he is taking his “problem-solving models to other sectors to solve larger problems” with the model he created called the Perfect Formula.

Click the play button below to listen to Cambone’s full interview with Ethereum’s co-founder Anthony Di Iorio. 


Tyler Durden Sat, 11/20/2021 – 13:30

Author: Tyler Durden

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Michael Saylor: “Bitcoin Is The Oxygen Mask”

Michael Saylor: "Bitcoin Is The Oxygen Mask"

"So what is bitcoin, exactly?" Tucker Carlson asks.

To explain it, Tucker notes that they scoured…

Michael Saylor: “Bitcoin Is The Oxygen Mask”

“So what is bitcoin, exactly?” Tucker Carlson asks.

To explain it, Tucker notes that they scoured the world for someone to explain it that had “skin in the game” and Michael Saylor fits that bill perfectly with billions of his firm MicroStrategy’s balance sheet invested in the cryptocurrency space.

Saylor begins: “Bitcoin is the first engineered monetary system in the history of the human race…full stop!”

And to explain it, “the first question is ‘whats money?’; the second question is ‘whats the problem?’; and the third question is ‘whats the solution?’.”

And so the Microstrategy CEO begins by explaining what is money…

“Money is social, economic energy… it is monetary energy.”

Wending his way from African’s glass beads to gold and on to the present day, the bitcoin advocate notes that “money is that shared ledger of who owes what to whom,” explaining the difference between “weak money and strong money” in terms of being able to manufacture glass beads and dump them on Africa-past (glass beads are weak money) analogizing to the dollar (being able to ‘manufacture’ dollars and dump them on the world).

Because of the inflationary impact on goods of this ‘manufacturing’ of dollars, you’re never going to catch up because you are being paid the currency: “the only way you can actually stay ahead is to grow your cashflows faster than the rate of monetary inflation… and that’s why the rate of expansion of the money supply is so critical.”

Saylor makes the prescient point that while CPI dominates inflation discussions, “the government gets to pick what’s in that basket of goods and how it is weighted.”

The last decade has seen monetary inflation rise at around 14% per year… and the S&P has risen around 14% per year.

The best inflation rate for an investor, Saylor explains, or for anyone who wants to stay wealthy or be wealthy – if you’re concerned about maintaining your economic purchasing power – “it’s the monetary inflation rate – the rate at which the supply of money is expanding.”

Then Saylor takes us on a journey:

“…the currency is to the economy what your blood is to your body… and economic energy or money is to the currency what oxygen is to your blood.”

“So, common sense says that, if I keep sucking the oxygen out of the room, you’re going either suffocate or freeze to death…”

“…and if I keep sucking the economic energy out of the currency, the economy collapses… and in the extreme you get ripped back to stone-age barter.

“…when the money doesn’t work anymore, I have trade you cigarettes for bullets… and the problem with that is the economy becomes a million times less efficient.”

“…how many countries in the world have a collapsed currency…66 of the dollarized [ZH: have an inflation problem]… there’s about 130 floating currencies and all of them are weaker than the dollar.”

“The US dollar is the world’s reserve currency and the US dollar is expanding… it was expanding 10% a year for a decade… it’s now expanding at 14% a year and expanded 34% over the past 12 months…”

Saylor is discussing the expansion of the US money supply (in a TMS – True Money Supply or Rothbard-Salerno Measure)…

Saylor continues, “…thus the dollar is weakening… it’s like the oxygen is getting sucked out of the room…”

Saylor turns to Tucker and asks “..if I told you the oxygen is getting sucked out of the room… but there’s an oxygen mask dropped out of the ceiling over there, what would you do?”

Tucker exclaims “I’d run for it!”

Saylor replies “yeah, put the oxygen mask on…” concluding his analogy by explaining that “Bitcoin is the oxygen mask.”

As Tucker adds, Saylor has made the most compelling case I’ve ever heard for the need something like bitcoin:

“the whole point of bitcoin is to escape the inflation vortex that has consumed all these previous empires.”

Saylor clarifies further:

“…the point of bitcoin is to fix the money… and money is energy… and energy is life… and if I keep sucking the energy out of the economy, I’m sucking the oxygen out of your system…”

“…under the best case, you perform poorly. Under the worst case, I suffocate you to death, or freeze you to death.”

“That’s the problem. That’s why economies collapse… and that’s why empire’s collapse.”

Watch the full-length interview below:

Tyler Durden
Sat, 12/04/2021 – 09:55

Author: Tyler Durden

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