Misplaced Loyalties: ‘Mad’ Money and the Markets

Source: Michael Ballanger for Streetwise Reports   03/22/2021

Sector expert Michael Ballanger considers the value of advice of stock market “gurus” and charts the lastest moves in the precious metals markets.

“Man, Powell is such a hitter. He is relentless in his desire to help the underclass of this country. More than anyone. It’s truly incredible. . .and joyous!” —March 17 tweet from CNBC “Mad Money” host Jim Cramer

Since the mid-1990s, I have been forced to observe the antics of the one man who epitomizes the transformation of stock investing from casual hobby to full-time obsession over the past 25 years, and that man is Jim Cramer. This is the stock market “guru” who, in the days leading up to death of investment bank Lehman Brothers in 2008, told millions of viewers that “Bear Stearns is fine; do not take your money out!” Within days, JP Morgan was strong-armed into buying Bear for something like $2 per share, after trading at $160 a year earlier.

With that in mind, I was floored on Wednesday when I read Cramer’s tweet praising Fed Chairman Jerome Powell as if he were some kind of messiah sent by our Maker to save the world. It is bad enough to lavish unearned accolades on this former stock-salesman-turned-central-banker, but to actually deify him as the “savior of the underclass” was nauseating.

Let us all get one thing very straight: Jerome Powell does not work for the underclass. The very utterance of the word “underclass” is an insult in itself, but anyone with a knowledge of the history of the Federal Reserve knows full well that there was never any intention to serve the “underclass” when it was created in 1913, after a notorious meeting of bankers on Jekyll Island, S.C., at the private hunting lodge owned by J.P. Morgan. It was designed to be a mechanism allowing the global banking system to be protected from the panics such as the one in 1907, that nearly crashed the system. When those bankers, drinking fine whiskies and expensive champagne, sat around that big dining room table hatching their scheme to create a monetary “safety net” underneath their private fortunes, the thought of the plights of “those without privilege” was the farthest thing from their minds.

When I first entered the financial world in the late 1970s, there were perhaps a handful of coworkers that could tell you who was running the Bank of Canada, and even fewer knew who ran the Fed. There were market experts and even a few gurus, but government stayed out of stock market affairs and continued to do so right up until the October 1987 Crash. The President’s Working Group on Capital Markets arrived after that, which spawned the Plunge Protection Team (PPT), now believed to be the legions of full-time traders over at the New York Fed.

Then, Fed Chairman Alan “The Maestro” Greenspan assumed ownership of the U.S. stock market and deftly elevated himself to god-like status, such that by the time the dot.com bubble burst in 2001, the entire world bought and sold stocks based on the thickness of his briefcase or shine on his shoes. That was 20 years ago.

Where we are today is an abomination of every facet of “generally accepted accounting principles,” because stocks around the world are now at record highs, while pension funds are forced to hold bonds bearing negative rates of interest, all while governments struggle with insolvency-bred chaos. Europe is completely broke, and Canada is even worse, but nothing compares to the sheer size and weight of the mountain of American debt—federal, state, corporate and individual—that is magically serviced by government-sanctioned counterfeiting. Yes—that is exactly what is being performed in order to keep the “system” afloat. Counterfeiting.

Now let me swing back to the Cramer statement at the start of this missive and point out that this money-printing exercise is being justified by the Fed chairman under the guise of “maximum full employment” (touted as one of the Fed’s stated mandates). It is, in reality, yet another excuse to liquify the balance sheets of his masters that created the creature from Jekyll Island 108 years ago.

The first dollar of liquidity that was printed by the Fed in the fall of 2019 was from REPO funds that went directly to the banks. Long before COVID and long before lockdowns, Jerome was patching the holes left behind by his beloved member banks, and all through 2020 and continuing today is the delivery of “Dollar One” to the banks first and to everyone else “later.”

I want everyone to tell me where in the book of demographics do we see the terms “banker” and “underclass” walking arm-in-arm down the aisle? So, when a Wall Street personality like Jim Cramer tries to deify a former securities peddler as the next coming of Mother Teresa, I react in the only manner that counts. I take his picture and place it in the middle of the dartboard and hum projectiles at his smug little face. As juvenile as that may sound, it is wildly satisfying.

I continue to believe that gold has put in a short-term bottom, with my March 8 Email Alert delivered to subscribers that morning with gold at around US$1,680/ounce. However, gold needs to surpass the $1,740 level, which is the downtrend line drawn off the early January high and the April high.

However, what has been capping the up moves in the metals in Q1/2021 has been the trajectory of the U.S. 10-year yield, which impacts the TIPS (Treasury Inflation-Protected Securities) and gold, and the TIPS are strongly correlated, primarily by the algobots that rule markets these days. Also of note is the gold-to-silver ratio, which has been creeping back up.

I do not want to see the GSR break above 70, lest we find ourselves with an underperforming silver market. Since the gold chart looks so dodgy these days, it has been the technical resiliency of silver that has kept me in the bull camp, albeit tentatively. If the GSR violates the 100-dma (daily moving average) at 72, it portends serious weakness to silver versus gold and thus removes the positive underpinning for the entire precious metals complex.

Best case scenario is for silver and gold to rally next week, but you can see from the chart below the damage done to the chart pattern by the #Silversqueeze nonsense. Because the cheerleaders on Twitter managed to fire up a few hundred rookie Millennials to go in and “teach those big, bad bullion banks a lesson,” they got their hindquarters handed to them, after which the cheerleaders all retreated to their “oh, you should have bought physical silver” baloney. What they accomplished was the creation of a textbook “head” in what is now clearly defined head-and-shoulders topping pattern requiring serious reparation.

We are now experiencing a period of seasonal weakness in the junior mining sector, in a phase that I coined a few years back as “The Post-PDAC Blues.” The Prospector and Developers’ Annual Convention has been around since 1932, and while it was once an invaluable trade show, where bundles of juicy investment ideas sprang forth, in later years it devolved into a freak show of sorts, resembling a cross between a Midwest traveling carnival and a wagon train of snake oil salesmen.

Back in the 1970s, when PDAC was held at Toronto’s venerable Royal York Hotel, it was all about meeting the prospectors that held great dreams of “enrichment through discovery” and determining if they were credible (or not). I was first alerted to the mighty Hemlo discovery at PDAC 1981, and from that point onward I never missed it—until 2009, when I was wandering through the main exhibit hall with Bob Bishop (ex-newsletter writer), with a trail of perhaps two dozen investor relations representatives following behind us, all fiercely determined to speak to Bob and have him tout their stock in order to fulfill their dreams of “enrichment through disposition” (of their company shares). In the old days, junior miners would all advance in the weeks before PDAC, as investors were all assured that “big news” would be released during PDAC. But what usually happened was that the flurry of activity died out by the last day of the convention, and the next few weeks would see disappointed investors dumping losing positions. Hence, the “Post-PDAC Blues.”

It might be different this year because the pre-PDAC period in February saw a 22% drop in the TSX Venture and a similar haircut in shares listed on the CSE as well. It finally bottomed on Friday, March 5, after which I issued the “BUY” signal on gold on the following Monday. I recognize that corrections in Norseman Silver Ltd. (NOC:TSX.V) and Getchell Gold Corp. (GTCH:CSE; GGLDF:OTCQB) can be alarming, but the post-PDAC period is always “gut-check time” for all subscribers, as the fear of losing the gains of a CA$0.69/share Getchell or a CA$0.76/share Norseman Silver can force really painfully bad decisions.

A few more weeks of backing and filling, and the junior developers should be well groomed for the resumption of their uptrends. If your nerves are jangling and you are forced to hide your portfolio reports from your spouse for fear of “rolling pin revenge,” do what I do and pop a few painkillers and wash them down with a fine chianti, cranking up Creedence Clearwater’s “Green River” to mind-bending decibels. If nothing else, you will forget your woes and make much better decisions. Honest.

Originally published March 19, 2021.

Follow Michael Ballanger on Twitter @MiningJunkie. He is the Editor and Publisher of The GGM Advisory Service and can be contacted at miningjunkie216@outlook.com for subscription information.

Originally trained during the inflationary 1970s, Michael Ballanger is a graduate of Saint Louis University where he earned a Bachelor of Science in finance and a Bachelor of Art in marketing before completing post-graduate work at the Wharton School of Finance. With more than 30 years of experience as a junior mining and exploration specialist, as well as a solid background in corporate finance, Ballanger’s adherence to the concept of “Hard Assets” allows him to focus the practice on selecting opportunities in the global resource sector with emphasis on the precious metals exploration and development sector. Ballanger takes great pleasure in visiting mineral properties around the globe in the never-ending hunt for early-stage opportunities.

Disclosure:
1) Michael J. Ballanger: I, or members of my immediate household or family, own securities of the following companies mentioned in this article: Getchell Gold, Norseman Silver. My company has a financial relationship with the following companies referred to in this article: Getchell Gold. I determined which companies would be included in this article based on my research and understanding of the sector. Additional disclosures are below.
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Michael Ballanger Disclaimer: This letter makes no guarantee or warranty on the accuracy or completeness of the data provided. Nothing contained herein is intended or shall be deemed to be investment advice, implied or otherwise. This letter represents my views and replicates trades that I am making but nothing more than that. Always consult your registered advisor to assist you with your investments. I accept no liability for any loss arising from the use of the data contained on this letter. Options and junior mining stocks contain a high level of risk that may result in the loss of part or all invested capital and therefore are suitable for experienced and professional investors and traders only. One should be familiar with the risks involved in junior mining and options trading and we recommend consulting a financial adviser if you feel you do not understand the risks involved.

Charts and graphics provided by the author.