December 10, 2019
The Miles Franklin Newsletter
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From The Desk Of David Schectman

David's Comments in Blue

Yahoo Finance is reporting that the world’s super-rich are hoarding physical gold — a sure sign that elite insiders are preparing for the worst.

Silver’s Overall Open Interest remains elevated and will do so till they run out of the physicals with the count now at 204,660 Overnighters proving a reduction of 2,019 short positions showing how precarious the short trade is really in. Once the physicals are drained from this system of delivery, we will see real price gains like those a few years ago when Venezuela, Argentina, and Turkey all reduced their currencies against the value of ours.
We must ask what things would be like if there was a fair playing field within the Futures/FX currency markets. Our fiat is being artificially supported by a market basket of other currencies. These other nations, that lift the value of our currency higher than it should be, are doing so they can keep the costs of their labor cheaper than ours. These same nations have also applied tariffs to our products and have been doing so for years. Now that Trump is doing the same to those that tariffed us first, it seems to be frustrating that basket of manipulators.
This market basket has become an oversized Weimar Cart, filled with over printed – not earned fiat, which has grown to the size of a wagon, with an ass pulling it. This ass drawn cart should be called The International Money Laundering Cart of Suppression, and maybe it will in the future, now that the  Ukraine/Biden/Burisma is now front and center . The problem with Deep State is that their antics are being exposed on multiple playing fields to the point that Deep State is being cut, slashed, and crushed, by its own malfeasance, and with its own creation, the fiats. This is not a left/right fight, this is a fight we are all involved in whether we like it or not!
There is no escaping a fiat failure! The value of all currencies printed yet not earned, will devalue to zero PERIOD! It always has and it always will, because printing trillions of dollars on a regular basis, by those that always seem to always need it when their control of the markets goes awry, is coming to an end. The written history of mankind, even with all the BS by the “victor”, proves that HARD money (Silver and Gold) is the real money and everything else called money, is fake.
So, get the real while you can and keep in it in hand! No one knows when the fiats will finish the race at the Zero Hero Finish Line, but they always end there. Those that have Silver and Gold in hand will not suffer like those who hold the promise of a fiat. Have a great day no matter what, keep that smile your face and that attitude as positive as possible, and as always….  – J Johnson

What the Hell happened to gold yesterday morning? It got Trumped.

As Ed Steer so aptly put it,  The Trump Tweet gave 'da boyz'/the PPT license to do whatever they wished in the financial markets -- and they went about their duty with relish...with only platinum and palladium escaping relatively unscathed. The equity markets, the dollar index, gold and silver...they didn't miss anything. However, Mr. Bond wasn't too happy about it.

Never has there even been a more appropriate time to mention that Chris Powell quote that..." There are no markets anymore, only interventions ."

Gold lost its 1% daily gain as prices sold off after U.S. President Donald Trump tweeted that a trade deal with China is "very close."

"Getting VERY close to a BIG DEAL with China. They want it, and so do we!" Trump tweeted Thursday morning.

February gold futures immediately began to drop from $1,490 an ounce back to just above the $1,470-an-ounce level. At the time of writing, gold was trading at $1,472.90, down 0.14% on the day.

Trump's tweet boosted investors' risk appetite, TD Securities head of global strategy Bart Melek told Kitco News on Thursday.

"The tweet from U.S. President got risk appetite hopping here. The S&P 500 was up 0.9%. We had yields jumping higher; the U.S. dollar strengthened. All the elements that typically work for or against gold, worked against it today," Melek said.

What bulls hit that is, dear reader. The Tweet had only one purpose -- and that was to act as cover for the Plunge Protection Team to rig every market in sight...some up, some down. This brings a whole new meaning to the word "blatant". The link to it is  here .

My very good friend, Jim Cook sent me the following from his next newsletter.  Jim is very concerned that the repo market is set up for a crash in the next few weeks. He is not one to get overly “excited.” Read this and think about it over the weekend.  It is some pretty heavy stuff…  After this article, I have added a couple more on the very important topic of REPOS.

By ZeroHedge

For the past decade, the name of Zoltan Pozsar has been among the most admired and respected on Wall Street. The Hungarian laid the groundwork for our current understanding of the painfully complex repo markets. He was also instrumental during his tenure at both the U.S. Treasury and the New York Fed in laying the foundations of the modern repo market, orchestrating the response to the global financial crisis and serving as point person on market developments for Fed, Treasury and White House officials throughout the crisis. When Pozsar speaks, people listen.

Pozsar delivers a scathing assessment of the Fed’s latest intervention to stabilize repo markets since the September 16 repocalypse that sent overnight repo rates as high as 10% in what was previously seen as an impossible event. In his latest note, titled ominously "Countdown to QE4" is explain why the Fed's interventions to date have failed to reverse the underlying issues in the banking system.

The already thin liquidity at year end could get worse as a result of the Fed’s inability to properly address the reserves (cash) shortage plaguing the bank.  “At least one large U.S. bank” [he mentions JPMorgan] appears to be gearing for a collapse in the FX swap market, with a very specific intention: to force a market crisis in the coming days and force the Fed to launch full blown QE 4, not just a monetization of T-Bills. Pozsar explains,  “FX swaps could end up as the orphaned asset class without an obvious backstop, and that may force banks in some parts of the world to the edge of the proverbial abyss.” This dire warning comes from the man who probably knows the nuances of the U.S. repo market better than anyone else in the world.

The dismal liquidity situation within the U.S. commercial bank sector is so dire, that the shortage of reserves will start a cascade of liquidations beginning in the FX swap market, progressing to Treasury’s, and culminating in stocks and a full-blown market crash. Pozsar repeats his devastating conclusion: “Year-end in the FX swap market is thus shaping up to be the worst in recent memory, and the markets are not pricing any of this.”

By Theodore Butler

A new thought occurred to me about the extraordinary Federal Reserve accommodation in the repurchase (repo) market that erupted in mid-September. I’d be lying if I claimed to understand exactly what’s going on, except to know that truly astounding amounts of money (many hundreds of billions of dollars) are involved and that certain facts seem clear. Most reports point to JPMorgan as being at the heart of the expanding repo drama. What follows is unadorned speculation about a possible connection between JPM’s role in gold and silver and the developing repo saga.

The Justice Department investigation into precious metals price manipulation by JPMorgan traders must be considered mature at this point. The first guilty plea was secured more than a year ago and has been followed by another guilty plea and indictments of enough JPM traders to raise the question of whether there were any precious metals traders at the bank operating legitimately.  The Justice Department has gone out of its way to label the precious metals desk at JPMorgan as a criminal enterprise and has used the RICO statute in bringing charges  – virtually unprecedented actions.  The DOJ has left unanswered the question of whether its allegations of a criminal enterprise apply to the traders or also to the bank itself. The answer to that question is beyond monumental

I had come to the opinion that the Justice Department doesn’t have the chutzpa to charge JPMorgan as a criminal enterprise, not because the charge wouldn’t be fitting, but because of the widespread financial and economic damage that would result from the most systemically important financial institution in the US possibly being put out of business by such a serious charge. Any decision not to charge the bank itself still seems to me to be rooted in the fear of the unintended consequences for society in general that might result should the DOJ lower the boom on JPMorgan.

But perhaps I’m wrong and the Justice Department has been acting tough with JPMorgan behind the scenes. Certainly, it’s virtually impossible that senior management at JPM could not have been aware of the widespread allegations of price manipulation in precious metals that have persisted since the bank took over Bear Stearns in 2008. After all, the protection of JPMorgan’s reputation is an integral function of management, right up the Board of Directors level. In addition, I’ve personally sent the bank’s CEO and board at least 1000 of my articles, which explain JPM’s illegalities. Therefore, it is impossible that senior management at JPMorgan were unaware of the ongoing precious metals manipulation at the hands of its traders. 

It is also certain that the Justice Department has been in close and constant negotiation with JPMorgan about the very serious charges of precious metals manipulation and whether to charge the bank’s senior management as being aware or complicit in the crimes alleged and from which guilty pleas have been secured.  This puts senior management in the crosshairs, potentially liable for having their employment terminated or worse (ending up in the Big House). 

Up until this point, I believe I have objectively described the situation that has developed over the past year and longer, without many, if any subjective embellishments. I’ve just tried to connect the dots from the public record and what I know to be facts (like sending JPMorgan at least a thousand of my articles). Here comes the speculation. What if the DOJ, contrary to my take, has been much tougher on JPMorgan behind the scenes and has insisted on the dismissal or worse for high-placed senior management for overseeing the criminal enterprise on the precious metals desk? What possible counteraction could senior management take when faced with dismissal, the loss of personal reputation or worse (jail time)? 

One of the few ways JPM senior management could fight back is by demonstrating just how important the bank is to the financial system and the economy and that the DOJ better tread lightly before charging the bank or its senior management as being complicit in the precious metals manipulation. What better way to do that than by throwing a monkey wrench into the repo market? Charge us and we’ll bring down the entire system. In other words, I believe the whole repo crisis was deliberately initiated by JPMorgan as a means to persuade the Justice Department to back off in charging the bank or its senior management in the precious metals manipulation. While this is, admittedly, unadorned speculation on my part, it is also simply the connection of several factual dots. Furthermore, Experts are predicting the repo market crisis is going to get much worse.

This means that by mid-January,  the Fed's balance sheet will surpass its all time high of $4.5 trillion!

Here is some more information on the Repo madness that is unfolding before your eyes. Like in 2008, the Fed is taking care of the buddies at the TBTF banks and thumbing their nose at the struggling average American who is trying to retire with interest rates hovering above nothing.

One week after the Fed's second 42-day term repo which allowed dealers to lock in funding into the new year and which was again oversubscribed, confirming a growing scramble for year-end funding, traders were looking ahead to the result from today's third "year-end" repo, this time with a 28-day term maturing on January 6. And, as we noted last week, year-end liquidity fears remain front and center as the $25 billion - which the Fed expanded from $15 billion late last week - proved to again be roughly 40% below the required size to satisfy all liquidity demands.
Dealers submitted $43 BN in bids for the 28-day op ($29.80 BN in Treasurys, $0.1BN in Agency, $13.1BN in MBS paper), resulting in an over-subscription of the $25BN in available repo, and confirming that the Fed may have to add additional "year-end" repos to satisfy all dealer liquidity demand as we enter 2020.
This was modestly above the $42.550 billion submitted last week in the second 42-day repo operation conducted on December 2.
At the same time, the Fed also announced that in the latest overnight repo, it had accepted $56.4 billion in securities, a modest drop from the recent range and the lowest roll amount since the Fed expanded the available size of overnight repos to $100 billion. A big reason for this is likely that $25 billion was shifted over from overnight to 28-day term repos.  
The biggest concern: the repo rate over year end remains stubbornly stuck well above 3%, more than double the Fed Fund rate, and clear evidence that the U.S. inter-bank plumbing remains broken.
It remains a pressing question for funding markets why, even with QE4 in place and now daily overnight and short-term repo operations in place, banks continue to rush to lock in year-end liquidity, where some fear a similar explosion in overnight repo rates as was observed on Dec 31, 2018 when General Collateral soared amid a widespread liquidity shortage. Indeed, even with the Fed's commitment to continue providing liquidity to the financial system around year-end, the market is still showing concerns, indicating that for all its telegraphed firepower, the Fed has failed to calm markets and ease counterparty risks which as the BIS observed yesterday, now involve hedge funds.
What is even more troubling is that in just 6 days, the next major potential crack in the repo market is due: on Dec. 16 there is a tax payment day looming; that's when cash is drained from the banking system, similar to the Sept 16 tax payment which many alleged sparked the original repo crisis, and as Bloomberg's Marcus Ashworth notes, "with the repo rate over the year end more than double the Fed rate of 1.5%-1.75%, this is not proving to be a temporary problem."
Another link to it is  here .    

Yesterday, the Bank for International Settlements (BIS) dropped a bombshell report that torpedoed the Federal Reserve's official narrative on what has caused the overnight lending market (repo loan market) on Wall Street to seize up since September 17, leading to more than $3 trillion in cumulative loans from the New York Fed as lender of last resort.
The Federal Reserve has said the repo crisis was a result of corporations draining liquidity from the system to pay their quarterly tax payments alongside a large auction of U.S. Treasury securities settling and adding to the cash drain. That excuse was clearly bogus since the Fed has provided hundreds of billions of dollars weekly into the repo market since September 17, while stating that it plans to continue this activity into next year.
The BIS report dropped the bombshell that the "U.S. repo markets currently rely heavily on four banks as marginal lenders." Curiously, the BIS report was too timid to name the banks.
The risks posed by a handful of banks in the derivatives market is even more concentrated. According to a quarterly report from the federal regulator of national banks, the Office of the Comptroller of the Currency (OCC), just five banks control 82 percent of the $280 trillion in notional (face amount) of derivatives at the 25 largest bank holding companies. Derivatives played a critical role in blowing up Wall Street banks in 2008 and resulted in the largest taxpayer and Federal Reserve bailout of any industry in U.S. history.
Another link to it is  here .

Gold took a breather since hitting $1,500 an ounce. But it’s now getting ready for the next leg higher. E.B. says that the next move for gold will catch mainstream asset managers off guard… and that the metal will eventually take out its 2011 high next year.

Casey Daily Dispatch

Why Gold Will Break Its All-Time High in 2020
By Chris Reilly, managing editor, Casey Daily Dispatch
Gold has roared back to life in 2019.
It’s up 14.2% since January – and is on pace for its biggest one-year gain since 2010.
Take a look:
Of course, this shouldn’t come as much of a surprise to regular readers.
·          My colleague E.B. Tucker called this move a year ago…

E.B. heads up our popular Strategic Investor and Strategic Traderadvisories. Before working in the newsletter business, he comanaged a precious metals equity investment fund. Today, he serves on the board of a successful gold company.

In short, he has deep connections in the gold business. And it pays to listen to him.

In December 2018 , he went on record saying gold would hit $1,500 an ounce in 2019. Gold was sitting at just $1,237 at the time… down 35% from its 2011 peak.

At the time, it seemed to many like an off-base prediction.
Just a couple months prior, mainstream media outlets like Seeking Alpha were printing articles such as “5 Reasons Never to Buy Gold.” And JPMorgan warned investors that they wouldn’t see a gold rally until the end of 2019.
But E.B.’s call was spot-on. Gold struck $1,500 an ounce in August. It’s since cooled off a bit and slipped to $1,468 an ounce.

But E.B. says it’s gearing up for a much bigger move…

  • In fact, he’s made an even bolder bet for 2020… 

Here’s E.B.:
The move we saw this year is the first inning of something much bigger.
I expect gold to take out its previous high of $1,900. That’s a 29% gain from here. And I expect that to happen in 2020.
From there, I see it hitting $2,200 – a 50% rise from its current price of $1,468 per ounce.

If you missed out on the first move, this is your second chance…
  • E.B. says there are many catalysts, which will push gold, higher…

For one, several large mining firms combined this year, which is extremely bullish for gold. (Our small-cap resource expert Dave Forest has more on that in today’s “Chart of the Day” below.)

E.B. says political dysfunction and ballooning deficits also set the stage for gold today. And central banks are buying gold hand over fist. According to the World Gold Council, in the first nine months of 2019, central banks have purchased 12% more gold compared to the same timeframe last year.
But E.B. says we need more than strong anecdotes to risk money on the gold sector.

·         He’s looking at the technicals as well…  
It’s what helped him determine that $1,500 an ounce was an appropriate price target this year. And right now, the chart of gold is saying higher prices are coming…

The gold chart below goes back to 2014. Notice that after gold hit its low in late 2015 (circled in red), each rally that followed registered a higher low. The pullbacks of 2016 and 2018 (also circled in red) each hit low points higher than the last. To E.B., this meant it was only a matter of time before gold exploded higher.
Again, gold took a breather since hitting $1,500 an ounce. But it’s now getting ready for the next leg higher. E.B. says that the next move for gold will catch mainstream asset managers off guard… and that the metal will eventually take out its 2011 high next year.

  Goldman says buy, buy, buy, but JPMorgan says short it.  Yeh, they want to get everyone to sell it so they can accumulate more – as cheaply as possible, the dirty dogs.

Goldman Sachs Group Inc. said investors should diversify their long-term bond holdings with gold, citing "fear-driven demand" for the precious metal.
"Gold cannot fully replace government bonds in a portfolio, but the case to reallocate a portion of normal bond exposure to gold is as strong as ever," Goldman analysts including Sabine Schels said in a note Friday. "We still see upside in gold as late cycle concerns and heightened political uncertainty will likely support investment demand" for bullion as a defensive asset.
The precious metal climbed to a six-year high in September as the Federal Reserve cut borrowing costs and the total pile of debt yielding less than zero climbed to a record $17 trillion, boosting the appeal of non-interest bearing gold.
Hedge funds and other large speculators boosted their bullish bets on the precious metal by 8.9% in the week ended Dec. 3, government data showed Friday. That's the biggest gain since late September.
This gold-related news item showed up on the  Bloomberg website a 12:27 p.m. PST on Friday afternoon -- and it was updated two hours later.  I found it on the Internet site -- and another link to it is  here .

One by one, Eastern European countries are bring their gold home from England.  A good idea.  Only the American “retail investor” is blind to how important gold is as the Fed keeps on pumping trillions into the market place.

"I guarantee that if something happens, we won’t see a single gram of this gold . Let’s do it as quickly as possible..."

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Miles Franklin was founded in January, 1990 by David MILES Schectman. David's son, Andy Schectman, our CEO, joined Miles Franklin in 1991. Miles Franklin's primary focus from 1990 through 1998 was the Swiss Annuity and we were one of the two top firms in the industry. In November, 2000, we decided to de-emphasize our focus on off-shore investing and moved primarily into gold and silver, which we felt were about to enter into a long-term bull market cycle. Our timing and our new direction proved to be the right thing to do.

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