Posts Categorized: Bill Holter
Normally I do not respond to attacks but this one needs addressing. Jason Burack posted a YouTube video yesterday (listen at about the 10:30 mark) where he spoke my name in the same sentence with the words “lazy and dishonest”. He “laughed” at our recent interview with Greg Hunter because of my $87,000 per ounce math on gold, but at least he admitted he did not even bother to listen to the interview (lazy?). I spelled out the very simple math; if the current US (on books debt only) debt of $22.5 trillion were to be backed by current purportedly held national gold in US vaults of 260 million ounces, the result is roughly $87,000 per ounce. I say “purportedly” because there has been no audit since the 1950’s. I believe if the gold really is there AND unencumbered, we certainly would have had many audits advertising this…but we have not…and have not for a reason!
He then goes on to say that $87,000 per ounce gold would be a very scary and dystopian world where guns, ammo, and the ability to grow your own food will be at a premium … at least he understands high(er) gold prices do not mean happy days are here again! I did not listen to his entire interview but did hear just prior to where he attacked me, he said re China and their “$50 trillion debt bubble” that even if they had $trillions in gold…it would not help. Jason is making the same mistake that others often do when in essence he is claiming there is not enough gold. There IS enough gold to back all currency and all debt on the planet if gold were priced correctly. Would $87,000 per ounce do it? No, I do not believe it would but at that number, the US (if we actually have the gold?) would be able to settle current on books debt outstanding.
As an FYI to Mr. Burack, trying to put any $ number on gold cannot be done because we do not have enough information to plug in. We have no idea how much future money supply the Fed will be forced to create in order to prevent financial implosion. We also do not have any idea how much future debt the US Treasury will be forced to borrow to keep the lights on and try to keep life “normal”. Lastly and most importantly, we have no idea how much gold the US actually has. If the Treasury has no gold at all, would that not suggest a number of “infinity” which is the mirror image of zero? Trying to forecast any true gold price level is a mugs game because of lack of information. We can however do the math on what info we do have and come up with a minimum number as money supply and debt will assuredly not shrink and more gold held than claimed is highly unlikely…THAT NUMBER IS MULTIPLES OF CURRENT PRICE!
To finish, Jason, you as many others, correctly opine the current situation of too much debt and gross derivatives have created a financial bubble which is unsustainable. The aftermath of which will be very ugly. We have both suggested two separate avenues of financial protection. You suggest crypto currency while I suggest gold and silver. You suggest something non tangible with less than a 10 year track record while I suggest something tangible and a 5,000 year track record. If (when) “we” are correct and the credit bubble bursts, no doubt there will be societal upheaval to the point Mad Max is a very real potential. In a world of total chaos I would much prefer to rely on something tried and true for millennia rather than “hope” something new under the Sun will save my family! “Hoping” Mad Max is not the coming reality (and you personally have made a case it can be the reality) is not a plan, preparing for it is…
Lastly Jason, you do truly owe me a public and personal apology. I worked as a broker for 23 years, 12 of which as a branch manager. Never in all those years or since, retiring and leaving the country in late 2006 (good timing?) was I nor ANY of my brokers ever subject to any legal claim, arbitration or settlement. In today’s world, this is nearly an impossibility. While my wife might agree with you regarding lazy, you piss me off and slander me by speaking “my name and dishonest” in the same sentence. I (all of us) was born with only one thing, my good name. I plan to meet my creator with my name in as good stead as possible. I take this more seriously than anything else in my life and why it is best we don’t meet face to face!
Standing watch with elevated blood pressure,
Interview available here
This article was posted for subscribers in early May. Now that gold is breaking out above the manmade, 6 year trading range, the concept is extremely important. Please reread the article until you understand what I am describing?
The Greatest Gold Call Option On The Planet?
Originally posted May 6th, 2019
If you have done your homework and concluded the financial world is on the precipice of a credit/currency meltdown, then you understand gold (and silver) is your safe haven. We at JSMineset posted a quote by Simon Mikhailovich six months ago and have left atop the homepage ever since.
If one offered investors a fat tail put option that never decays or expires, costs about -1% pa to carry, has no counter party risk & no chance of ever becoming worthless, there would be a line out the door. But when one explains that this option is physical gold… no interest.
– S. Mikhailovich
We did so because the quote is 100% correct. Gold is the ultimate put option versus an overlevered world. But how can you “leverage” your position in gold either offensively, or as a hedge defensively? Plainly, what is THE greatest gold call option on the planet? What follows is my opinion of what I would look for in seeking the greatest gold call option. Let’s look at the characteristics of a call option and apply them to gold.
The list of characteristics are as follows;
- First and most important, the option must have a direct and contractual connection to real physical gold, verifiable as to the existence of the physical gold. A paper contract “promising gold” will not cut it because the liability involved where you must rely on someone else’s performance. You want as direct a calin to physical gold as possible.
- The option must have leverage to the price of gold, meaning it must out perform gold on the upside. The option must move in multiples to the upside when gold is moving higher.
- The option should have no expiration date.
- The option should never be allowed to be taken out (sold) from under you against your wishes. Its sale should be solely on your discretion and your timing.
- It must be liquid.
In the real world, what might this call option look like? Checking off the boxes from the above wish list, this option can only be a corporation because corporations have no date of death. They live forever unless they are bankrupted or taken over by another entity. In this instance, the call option would have no decay of premium or “time value” because there is no expiration date.
The company would also need to be chartered in a jurisdiction where a takeover attempt is extremely difficult. In Canada for example, it is extremely hard to take over a company in a hostile manner because before the process is done, the suitor must effectively control and have the vote of 90% of outstanding shares. This is a tall order if management has any sizeable stake, impossible if management can count on 10% or more of the votes.
As for leverage, this option can only be a mining company with operating leverage to the price of gold. For instance, a company that can mine current gold of $1,300/oz at say $650, makes $650 per oz mined. But if gold doubles to $2,600, this same company will make $1,950 per oz. A doubling of price creates three times the profit! The gearing is obviously much higher if the company is a high cost producer. For instance, a producer with a cost of $1,200 per ounce only makes $100 profit if it sells product for $1,300, but will make $1,400 per ounce if gold doubles. In this case, the option will have earnings at 14 times leverage to gold’s price.
This company must have proven and economically mineable reserves. Obviously the more reserves the better but the important part is the amount of ounces per share outstanding. The more proven gold per share, the better! It would also be helpful if this company not only has a lot of gold per share, but also has the future prospect of adding in many more gold ounces to their reserves by drilling and proving even more. Then, is there a “blue sky” factor? In other words, is there any prospect of finding more economically mineable gold,either deeper on the same property or on other properties owned? Lastly, is there even more gold but mineable only at higher prices? This is where the really crazy leverage comes in!
Maybe of greatest importance, where or what country does your reserve reside? Your property must be in a country with a rule of law and the threat of nationalization minimized. This threat can be minimalized in several manners. Is your contract with the host nation fair or is it imperialistic and not allow a fair share to the host? If imperialistc, the risk of nationalization is high. Along these lines, does or can the host nation have the know how and work force to efficiently mine the reserves? Or would their share of the reserves be enough to entice them to sit back and collect revenues knowing their take is higher than if they tried to mine the entire property on their own with picks and shovels?
Liquidity is also very important, I would desire a company listed on at least one major stock exchange. A major stock exchange in two different countries (or even more) would be ideal. Remember, as they say, “liquidity is only important when you need it”!
Lastly, and still under the rule of law category, is your mining company chartered in a jurisdiction that has an international treaty with the country where the reserves exist? This point is often overlooked but extremely important if conflict arises between the miner and the host nation. This is something many do not know, a treaty between nations is stronger than any business contract, not a minor point by any means.
Wrapping this up, the above is not 100% complete but enough of a boiler plate to be functional. Mining companies have been beaten down (many bankrupted) and for the most part forgotten since 2011. This should be expected because of the “leverage” described above. Leverage works both ways, up as well as down. Put mildly, current “entry” into any gold or silver resource/operation is about as cheap as any time in history…in other words, the downside is minimal because it’s already happened. The “it’s already happened” part is important because the next big move in gold and silver is up rather than down. The time to seek maximum leverage to gold WITHOUT using margin is here and now!
Please read this a couple times or more because you have the blueprint to levering small amounts (or large) of capital into large amounts of gold and thus price action without using margin, without a contract where another entity makes a promise you must rely on, and without an expiration date…AND at a deep discount to anything even resembling “fair value”. It’s pretty simple really, if you understand the above, you can position yourself for maximum gain/protection when (not if) the credit/currency system implodes. Gold (silver) will be the primary (possibly ONLY) beneficiaries when the skyscaper of debt topples. Maximum leverage to gold’s price should be extremely high on your list of preparations!
Originally posted for subscribers on January 4, 2017
By now you should already know the story behind the gold/silver ratio and why silver is the compelling buy of the two. The ratio is currently about 82-1 (it takes 82 ounces of silver to purchase one ounce of gold). Silver is found in the Earth’s crust at roughly 10-1 versus gold, let’s call this “God’s ratio”. Were the ratio to reach 10-1, silver would thus outperform gold roughly 8 fold. 10-1 may or may not be a stretch but suffice it to say that silver should certainly outperform gold in the coming bull market. Let’s call this anomaly #1,
If you understand the above then you understand you should be more heavily weighted in silver versus gold. But what “form” of silver should you own? Your choices are ETF’s or pooled accounts (a very poor choice as the metal may not even exist and all you own is a worthless piece of paper), bars, generic rounds, foreign sovereign mint coins, or US mint lineage coins.
Bars in my opinion are the worst possible form of physical ownership. I say this because they are the easiest to counterfeit and larger bars such as 10, 100, and 1,000 ounce bars are just too large for any utility. You may have originally purchased these because they were the “cheapest” but they are the cheapest for a reason which we will get to shortly. The potential counterfeit issue also exists for one ounce rounds. We have not seen this yet but rest assured that once the price of silver rises significantly, counterfeit silver will become a very real issue.
About a year ago, Jim spoke to the issue of potential gold (and silver?) confiscation. He believes this will eventually occur and gold/silver not issued by the US Mint will be “illegal” to hold or trade. The way to protect yourselves is by holding US Mint lineage coins rather than bars, rounds, or foreign sovereign coins like Maples, Kangaroos, Philharmonics etc. This basically leaves you with two choices, either American Eagles or “junk”. Junk, meaning 1964 and earlier dimes, quarters, halves and dollars.
Junk is by far the best form of ownership for several reasons. First, they are “fractional” silver meaning they are broken down to less than one ounce. Each $1 face amount of 1964 and earlier coin contains .715 of one ounce. In other words, for every $1.40 in face amount, you have one ounce. So 14 dimes holds the same amount of silver as does an eagle, do you see the advantage here? In a system down scenario which is looking increasingly likely, dimes give you the potential of 14 transactions rather than just one with an eagle. In other words, if one ounce of silver is valued higher than something you are trying to trade for, how do you get change back?
Another reason why junk is superior is the counterfeit issue. Bars, especially the larger ones are easily counterfeited with obviously more incentive than once ouncers. The incentive to counterfeit dimes or quarters is obviously less than one ounce AND, these old coins must show wear and tear because they circulated and were used for years. Unless it is a slabbed and graded coin, it better be worn somewhat, otherwise you are probably looking at a fake.
The last reason and we will call this anomaly #2 is “price”. Over many years, junk normally carried the highest premium of all forms of silver and generally equal to or higher than eagles. If you look back 4+ years ago, dealers were bidding $4-5 over spot for junk! Typically, and due to surcharge by the mint, eagles carry about $2.50-3.00 premium over spot. This premium does move up and down but not normally by much. The reason junk normally carries the highest premium is twofold, it is “fractional” and has not been supplied (nor will it) since 1964.
With the above in mind as to why junk is the best form of ownership, current premium is roughly $1.25-1.50 over spot (and currently rising) which allows an opportunity. Currently you can trade silver eagles for junk and end up with more silver ounces. If you trade Canadian maples or some other sovereign mint coins, you can do the trade even up and lose no ounces but end up with a better form of ownership. Swapping bars or generic rounds can be done at a small deficit but is very wise in my opinion as junk premiums will eventually normalize with junk being the highest valued form of ownership.
If the above makes sense to you and you want to consider a swap, or if you just want more information, please contact me. I believe the current anomalies will not exist for very much longer and the time to reposition is here and now. I am posting this for subscribers only at this point and will make this article pubic in a week or two. Once the pubic gets wind of this opportunity, I can envision junk supply being cleaned up and premiums moving higher and above all other forms of silver ownership. The time to reposition is now!