Silver, The S&P and Sanity

Miles Franklin sponsored this article by Gary Christenson.

Silver prices peaked in 2011. The descent has been long and tedious. Perhaps silver prices made an important low on September 11, 2018, like they did on November 21, 2001 at $4.01. That long-term low was twenty cents below the price on September 11, 2001, the day the twin towers fell at free-fall acceleration, which marked the beginning of the silver bull market that launched prices upward by factor of 12.

The S&P 500 Index has risen for over 9 years, from a low of 666 to a high of 2,940. It sits in late October at about 2,641. Massive debt increases, central bank created low interest rates, fiat currency devaluations, stock buybacks and debt based optimism fueled the rally. A correction is occurring.

Sanity: I know of no metric to measure the absence of sanity in the financial world, but if such a metric existed, it would register HIGH! Consider:

  • Official U.S. national debt has increased an average of 8.8% per year since 1971 when President Nixon defaulted on the U.S. promise to exchange dollars for gold. It is not sane to expect the economy to grow a few percent per year while debt grows 8.8% per year. Debt rising faster than economic growth for decades creates dire consequences.
  • Finite World: The world and its resources are finite. Yet we demand expansion and more extraction of resources every year. How sane is exponentially increasing use of commodities in a finite world? How sane is creating exponentially larger quantities of fiat currency and debt in a finite world?
  • Negative Interest Rates: Several European countries promise, in ten years, to repay a smaller number of devalued euros than the amount borrowed. If you want fewer euros than you loaned, and will wait ten years, and understand the repaid euros in ten years will be worth far less than current euros… step forward. Crazy!
  • Nuclear War: Mutually Assured Destruction—MAD. Building bigger and more deadly nuclear bombs at huge expense accomplishes what? Encouraging guaranteed global destruction is not sane.

Year               Silver                DOW                S&P500             Nat. Debt $Bill.

1971              $1.39                   900                     100                           $398

2018            $14.44              24,443                  2,641                      $21,700

Ratio             10.4                    27.1                    26.4                            54.5

Increase/yr     5.1%                7.3%                     7.2%                           8.8%

The DOW and the S&P 500 Index have grown much faster than silver since 1971. National debt has exploded higher. This shows the power of printing fiat currencies to fund deficits, levitate stock markets, overstate asset prices and understate risk.

The banking cartel creates debt, boosts stock markets, increases wealth for the political and financial elite and devalues fiat currencies toward their intrinsic value of zero. This is beneficial for the political and financial elite, but few others.

Official national debt has increased 8.8% per year since 1971, doubling every eight to nine years. Assume debt will double every nine years. By the year 2100, debt will have doubled nine times. That places the U.S. official national debt at about $11,000 trillion. Insane! The dollar, if it still exists, will buy next to nothing. Expect a reset.

Conclusion: A reset will occur. Buy silver! Debt will be defaulted or inflated to worthlessness as the banking cartel devalues the dollar. The alternative is that fiscal sanity will return, congress will balance the budget and reduce debt, the Federal Reserve will disband, pigs will fly, and three other impossible things will happen…

Regarding overvalued stock markets…

“So when the herd thunders off the cliff, most participants are trapped in the stampede.” Charles Hugh Smith

Is Silver Undervalued Compared to the S&P 500?

Silver prices are too low when compared to the S&P 500. Expect the ratio to rise for several years. Assume the S&P 500 corrects by 50% and silver rises to about $50. Even at those prices the ratio would remain below the level reached in 2011.

The price of silver could rise far higher than $50 and remain within an expanding trend channel dating back to 2001. A financial reset could devalue dollars, implode debt, and force central bank intervention with tens of trillions of “funny money.” These events would create investor disillusionment with paper assets and might boost silver and gold prices by a factor of ten or more.

Is this a forecast? No, but higher silver prices are inevitable, short of nuclear war.

SUMMARY:

  1. Debt and currency in circulation grow exponentially.
  2. Silver and stock prices grow exponentially.
  3. Silver prices are low in 2018 compared to stock indexes. Silver prices will rise and stock prices will fall, and then rise again. The long-term trend for both, thanks to created “funny money,” is higher.
  4. A reset of the financial system, an implosion in the stock and bond markets and falling real estate prices will panic investors, as it did in 2000 and 2008. Silver prices will rise as they always do.
  5. When? Soon, maybe very soon, but don’t underestimate the manipulative power of central banks to delay the inevitable while they transfer more paper wealth to the elite.

WHAT ABOUT THE GOLD TO SILVER RATIO?

History shows that gold prices rise and fall a smaller percent than silver prices. When the ratio is too high, silver prices have fallen into the basement and will rally.

The gold to silver ratio as of September 2018 has reached a 25 year high. Now (most of 2018) is a buy zone for silver.

CONCLUSIONS:

  • Silver prices are far too low when compared to the S&P 500 Index.
  • The S&P 500 Index has risen too far and too fast. Markets that rise too far and too fast always correct, but they can become even more extended before they implode. Remember that the NASDAQ 100 Index fell 84% from high to low after the 2000 peak.
  • The gold to silver ratio shows that silver has fallen hard compared to gold. Those times when the ratio is high have been excellent buy zones for silver.
  • Debt has increased too far and too fast. A reckoning is coming. The result will be a category 7 financial hurricane. Protect your assets with silver and gold.

Miles Franklin sells real money—gold and silver. Market prices show that now is a good time to recycle dollars from overvalued stock markets into silver. Call 1-800-822-8080.

Gary Christenson

11 thoughts on “Silver, The S&P and Sanity

  1. Other than Robert Russel, who has passed away, Ron Rosen is probably the oldest and wisest man watching the markets today, and he says that after 14.95 silver, it is blue sky and a new bull market. I’m a lot younger than Ron, but have learned to listen to the wise.


  2. A construction job couldn’t figure out where all the wheel barrows were disappearing to. The job was fenced off so it would be almost impossible for someone to sneak in and take one on the weekend. Finally one day the superintendent watched from a vantage point the last hour of work and noticed a laborer pushing a wheel barrow across the job which wan’t unusual. What was unusual was he continued to push it right to the back of his pickup, so the mystery was solved and I’m sure the laborer fired. Buying silver almost feels the same in that I’m buying it right in front of a everyone and know one seems to noticed. Some day everyone is going to wonder where all the silver disappeared to? Maybe some will watch the last hour and see that people are actually buying silver right in front of their noses and solve the mystery, only to wish they too had been accumulating all those years. Unlike the wheel borrow, buying silver won’t cause you to get fired but will be your salvation financially some day in the near future.


  3. I think you are being too optimistic on silver and metals in general. According to elliott wave analysis, we have another 4-5 years remaining in the metals bear market. Any rally now will be a bear market rally. We have yet to reach the lows. We may have a short term rally, but that will lead to more selling pressure. We may even reach the low $20’s, but the lows are not in yet.
    Once the stock market and real estate start to drop, we will enter into a deflationary period. There will be intolerance for the debt bubble to expand further. Also, deflationary. Commodity prices will start going down taking metals with it.
    Making matters worse, the GFMS and the USGS report that silver report that silver supply has increased for 13 consecutive years, even doubling in the past 7, while silver eagle sales have dropped from 41 to 9 million ounces. Bearish. Stock piles are huge and demand is dropping.
    The catalyst is not there for a sustained bull market.


    • Maybe. But sentiment for silver is bad. Premiums on coins are low. The stock market is far too high. I would rather sell something too high and buy something far too low when sentiment and public demand is low. The cycle will turn. Supply may be rising but so is industrial and medical demand. Investment demand will rise when people figure out debt based assets – such as stocks and bonds – are overpriced and going down. Look at Amazon stock in the last 2 months.
      The Deviant Investor


      • Currently, small speculators are long silver futures, while commercials and hedge funds are short. That is not a good sign. The monthly weekly chart for silver clearly shows that the lows are not in yet for silver. Silver is not oversold enough.
        During the last economic downturn, silver was $9. Now, there is twice as much supply (global reserve) than before. Prices will deflate during the next downturn, even silver.
        Everyone is too optimistic about silver and prices will continue to drop when stocks and RE deflate. This may last another 4-5 years. It is too early to be long silver.


        • Time will tell, but I’m not buying your supply vs demand argument. What about debt and money supply. They are much larger than 10 years ago and in the long term they correlate with silver and gold prices. You may be correct, but I strongly doubt it.
          The Deviant Investor


          • You can research supply vs. demand yourself. I have. Supply has doubled while demand has dropped. The expansion of debt is inflationary. We are at record national, mortgage, student, personal, and margin debt. When debt expansion starts to collapse (intolerance to creating more as in 2008), deflation will become widespread. Everyone is forgetting what happened just 10 years ago. Stocks, RE, metals all dropped over 50% in a year. It is going to happen again and metals will be taken with it. This time could be even worse. When no on wants to buy your debt, deflation occurs. Most people think the opposite occurs. Everything must go on sale at a discount.
            The lessons from the past are soon forgotten.


            • You should check out SRS Rocco Report’s analysis of the difference between the 2008 crash and now. PMs were already at highs along with the stock markets and so had room to drop. It is not the same this time with PMs at near 7-10 year lows. Gold, Silver and Platinum are all near the same price as they were in 2009 and 2010.

              See:
              https://srsroccoreport.com/which-precious-metals-are-likely-to-be-better-investments-during-the-next-market-crash/

              https://srsroccoreport.com/coming-breakout-the-gold-silver-setup-today-vs-2008/

              Also, the best performing assets in the Great Depression were Gold and Gold Stocks – see Mike Maloney’s analysis – Hidden Secrets of Money. In episode 6 I think, he has a good discussion with Harry Dent who agrees with your position.

              I’m not saying who is right. But I agree with Gary.


              • No disrespect, but those reports do not mean much. SRSroccoreport has been bullish since the 2011 top.
                Maloney has also been perpetually wrong about silver. He is not objective.
                The USGS reports silver global reserve as
                2009 270k MT
                2010 400k MT
                2018 530k MT
                You cannot get by those numbers and create a bullish scenario. Objectively, it is more bearish than when silver was $10.
                We are now sitting on a massive reserve while production has declined for 5 years due to lack of demand. Silver will continue to drop in price especially when a global recession kicks in. There is no catalyst present to make silver go higher, at least not for another 4–5 years.



  4. Thanks for the post Gary.

    There is no doubt we will see gold at $4500 and silver at $100………..and after hitting 160, the DXY at 50.

    but with the ten year at 10% after the EU comes apart, the DOW at 40K….possibly 60K.


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