March 1, 2021
The Fed told us last week it intends to continue printing money…
U.S. household income is now up 10% as a result of the government’s direct payments.
And as Congress prepares to offer another round of stimulus checks, some Americans are left with extra cash to invest…
The stock market is turning into a kind of Las Vegas. From GameStop to AMC, everyone wants to roll the dice and find the next hot stock.
But as I (Trish Regan) have warned before, this explosion in stock prices and valuations, coupled with an avalanche of government debt, could lead to a massive inflation problem – the likes of which we may have never seen before.
Anyone with a fixed income could be economically crushed. After all, your savings or monthly Social Security checks won’t really cut it if a cup of coffee costs you $30.
Should this inflation take hold, it would spell disaster for the U.S. dollar… So how can you protect yourself?
Stansberry Research’s Garrett Goggin, editor of investment newsletter Silver Stock Analyst, says precious metals, like gold and silver, are less prone to inflationary pressures. He says they are an excellent way to diversify your portfolio and hedge against an inflationary future.
All That Glitters Isn’t Gold…
The Recent Silver Squeeze
By Garrett Goggin
My Twitter exploded on January 29…
My followers increased by over 1,000 in an hour. My tweets were liked and retweeted hundreds of times in seconds. I’d never seen anything like this.
I’m a silver expert, so I’m not used to the Justin Bieber/Katy Perry treatment online. But something changed… Silver was in play. After the WallStreetBets group on Reddit made so much from a short squeeze in GameStop (GME), they decided to take on the biggest short story in the world – silver.
Some people believe the world’s major banks work with the Federal Reserve to keep a lid on silver and gold prices. According to their theory, they need to manipulate precious metals prices to maintain the easy-money policies that keep our debt-laden economy afloat.
If silver and gold shoot higher, it undermines confidence in the dollar. That could spark significant inflation. As a result, major banks sell short hundreds of thousands of silver and gold futures contracts worth hundreds of millions of dollars to keep their prices from rising.
The Reddit crowd picked up on this theory… and jumped into the silver trade.
Over that late-January weekend, the average dealer was cleaned out of hundreds of thousands of silver ounces. The average volume was 10 times what it would be on a typical weekend.
Even now, weeks later, the U.S. Mint is listing most of its silver products as unavailable. Dealers who do have stock are listing one-ounce silver coins for $40 or more – 50% higher than the $27-an-ounce futures price.
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Similarly, trading volume in the two bullion funds – the iShares Silver Trust (SLV) and Sprott Physical Silver Trust (PSLV) – also went through the roof. Shares of the SLV exchange-traded fund (“ETF”) rose from 615 million to 729 million in one week. This was the largest weekly jump ever. The fund had to acquire 114 million silver ounces overnight to back the shares.
SLV added new disclaimers in its prospectus on February 3 that stated, “The demand for silver may temporarily exceed available supply that is acceptable for delivery to the Trust, which may adversely affect an investment in the Shares.” In other words… the fund is having trouble sourcing physical silver.
The average yearly silver supply is about 900 million ounces. Industrial demand and coinage consume all of that production. Demand from ETFs creates a net deficit. The Silver Institute estimates ETF demand in 2020 totaled about 100 million silver ounces. The SLV fund took that down in one week.
The price of silver surged on Monday, February 1 from $26 an ounce to $30 an ounce.
COMEX, the major U.S. commodities futures exchange, immediately changed its rules to discourage silver speculation. Since then, silver has held up at around $27 an ounce.
But the fireworks are far from over. Trust me, this was the opening shot toward true price discovery.
Just consider what happened with SLV in March of last year. Investors shaken by the plummeting stock market rushed to precious metal investments. SLV shares outstanding rose 16% from 382 million to 445 million in a month, so the SLV fund took down 63 million silver ounces to cover the new capital infusion. That led to a 150% silver advance over the next five months. The SLV fund purchased 106 million silver ounces in just one week.
Last month’s demand surge was even greater…
Physical silver is gone, folks. It will take many months before dealers can restock. Now, it’s just a matter of time before the spot price of silver streaks higher to balance supply with demand.
This is the start of a major change…
Silver is one of the cheapest assets on the planet. It could be the only asset that is trading at the same price as it was 40 years ago. Yet, the volume of dollars circulating has exploded 1,125% since 1980. If a monetary asset like silver were priced in relation to that in the currency growth, it would be valued at nearly $200 an ounce today.
The price and volume surge we saw earlier this month is what you look for to identify an asset that’s ready to take off. That’s why $100-an-ounce silver is well within reach over the next couple years.
Silver Is a Key Player in the ‘Melt Up’
You are watching the Melt Up occur in front of your eyes.
My colleague and True Wealth editor Dr. Steve Sjuggerud has been talking about the Melt Up opportunity for several years. What he’s describing is the speculative furor that comes with the final gasp of a long bull market.
And right now, that’s exactly what we’re seeing.
Too many dollars are chasing too few assets. Low interest rates are causing investors to seek out returns any way they can. Speculators are running wild, armed with stimulus checks and the knowledge that the Fed will bail out the market with massive stimulus if it ever runs into trouble. And they’re right… the Fed will likely never raise rates, as the debt-heavy economy would crash.
Stock market multiples are off the charts by almost every measure – price to sales, price to book, etc. The stock market’s total market cap is trading at 196% of the U.S. gross domestic product. That’s legendary investor Warren Buffett’s favorite valuation measure, and it’s the highest it has ever been.
But regardless, as long as the Fed continues easy-money policies, the market will continue higher. This is what’s happened in every historical period of high inflation. Stock markets rose to the moon, while currencies were destroyed.
There is nothing wrong with rising asset prices. But when easy money begins to create social, political, and economic chaos… this is a signal that something is wrong. You see, the government has trillions of dollars of unfunded liabilities. In order to make this amount more manageable, the government encourages some inflation.
As inflation rises, the dollar purchases less. That monthly $1,500 Social Security payment from the government buys less and less over time. Our government has $27 trillion of outstanding debt (and growing). It will never pay that back. But a modest amount of inflation will reduce that burden in time.
Anyone on a fixed income is getting crushed… Investments into bank CDs or other traditional safe assets receive barely any interest. Over time, savings kept in safe investments lose purchasing power due to inflation.
As a result, investors and savers are forced to seek more risk to obtain some return, leading to an equity market that is overvalued by every metric. The stock market could rise to 100,000, but a bottle of soda is going to cost $20.
I’m a traditional financial guy from the mutual fund industry in Boston. I am a chartered financial analyst, certified market technician, and hold an MBA. I’ve always been a believer in alternative assets. Natural systems, like the stock market, can’t grow exponentially at 3% forever. The endless monetary growth has to result in serious inflation at some point. There has to be a shift to real assets as the dollar loses value.
History shows us that eventually investors will flock to stores of value, like silver. The shift to real assets is underway, and silver has been the chosen investment for thousands of years.
The key to the Reddit movement is the fact that they’re pushing a new narrative. And everyday people are starting to wake up to what’s really happening on Wall Street. But it’s happening fast… Investors are making extraordinary gains in very short time periods… And you don’t want to miss out.
Find out today how to get in on this recent silver action. Garrett has a unique and easy-to-follow strategy. He’s already done all the hard work for you… You only need to buy a few stocks to see long-term gains, and he guides you every step of the way. Click here to read more.
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Publisher, American Consequences
With Editorial Staff
March 1, 2021