Silver: The Quintessential Love-Hate Relationship

July 12, 2019

“Gold is the money of kings, silver is the money of gentlemen, barter is the money of peasants, but debt is the money of slaves...” Norm Franz

When I was in university, I knew a girl that hailed from Miami that had every guy in school drooling; she was tall and blond and curvaceous (to the point of causing car accidents) and was rumoured to be a tad “light in the loafers” but as I was later to discover, she was simply a tad “different”, the product of many years of harassment and obsession and stereoptyping because of her imposing shape.  Because I was a) a foreigner and b) a student athlete and c) really didn’t give a $%^&, I first had a conversation with her in the school quadrangle on a particularly nasty day in February 1974 whereby she demanded my SLU Billken hockey jacket because she was “freeeeeeee-zing-uh!” to which I responded with a rapid “Not a chance but here’s a dime for the phone booth.” As I walked away from the encounter, I quickly glanced back to see a young girl in the throes of disbelief, jaw agape, eyes enraged, and nostrils flared in a prehistoric gesture of impending attack/assault/Billiken jacket removal. Several days later, I was sitting in one of the lecture halls reading the most boring book on economics ever written when to left of the page on “Elasticity of Demand” I noticed a beautifully-tanned and crafted leg attached to a tapping sandal usually found in Sachs Fifth Avenue and suddenly realized that it was none other than Miss Miami (as the guys on the team had nicknamed her). “You owe me an apology.” she said, hands on hips and body poised for action; “You insulted me the other day in the quadrangle and I don’t appreciate it.” I closed my book and crossed my arms across my chest and after evading her eyes for what seemed like an eternity, I gradually moved my eyes up to hers and said “Excuse me?”,  a retort worthy of a b-grade soap opera or at best an elementary school pretender. In what was a pause of the most painful pregnancy, she finally let out a exasperative groan, spun on her Rainbows, and flounced away with nary a word.

That day began a classic love-hate relationship between the two of us, with me constantly noticing her in a crowd or pub or suddenly seeing her glaring eyes locked on me in class and from afar. While we never dated, it was only her stunningly good looks that caught my libidinous attention but I could never quite understand how, with the hundreds, if not thousands, of young male students (many of which were richer, bigger, and handsomer than me), that she developed this obsession with me. Sadly, I was too young and too nanve to grasp whether this was a romantic obsession or one of intense dislike. You see, being a young student althlete, I carried the affliction of thinking that I was far more important to everyone than I really was. That personality trait was a necessity in the retention of self-confidence at the NCAA Division 1 level of competition and it is that narcissistic quality of “swagger” that sustains the careers of professional athletes, politicians and certain mass murderers. Austin Powers called it his “mojo”; coaches and trainers call it the “edge”; I simply carried it as a means of “self-preservation” from the days as a 16-year-old teen competing against 20-year-old men. Perhaps this gift of instinct, carried forward through the millennia by DNA bequeathers, trained in the art of mate-clubbing and dinosaur-riding, was responsible for it all. Whatever the source and for whatever the reason, it created an interactional Mexican Standoff between the Miami bombshell and the Malton megalomaniac.

Years later, I met this lady at an SLU reunion and as frequently happens to events and relationships over time, their recollection tends to tilt in the favour of “good drama” with facts being inserted from hope rather than reality. In a conversation that occurred only due to the lubricating effects of Chardonnay, we finally had a civil conversation whereby she recalled our “flirtation” (my word, not hers) and when I finally probed into the reasons that she was so obsessed, she reared back in horror and disbelief and said “It wasn’t ME that was obsessed. It was YOU!” She went to tell me how she actually noticed “this creep” peeking at her from around corners and through library bookshelves and in hallway mirrors and was so “creeped out” that she was seriously contemplating meeting school authorities to get a restraining order. At the exact moment where the rubber of recall meets the road of reality, I found myself with nothing witty or otherwise to say and as I was struggling to assemble a volley of response, she seized the moment with a wink and a smile and in a voice dripping with solace and guile said, “Just kidding” and glided away into the evening.

Many years have now passed since that reunion and many more since that fateful day in the SLU quadrangle but in the manner of a whining dog or a buzzing mosquito, that encounter has nagged me for decades as I strain against the shackles of aging memory to arrive at the truth of that bizarre, distorted, and very distant relationship. Trying to navigate through the fogs of poetic license made denser by the passage of time has made this story difficult to accurately describe. However, the one thing that Miss Miami both knew was that while we didn’t really know each other, we both hated the other person for the ease with which we handled and attracted people but loved the thought of being in their world of glamour or athletics or social standing. It might have been a love-hate relationship or that might simply be a failing sexagenarian memory bank fabricating a story of romance and mystery where in truth it might have simply been a post-pubescent crush manifesting itself with testosterone-driven ferocity and festering over decades. Would that George Orwell could lend me his Time Machine so that the truth could be rediscovered…

The anecdote I just relayed is not unlike my relationship with yet another elusive beauty whom I also first encountered back in the 70’s and that maddening vixen is SILVER, the “Poor Man’s gold” that can be viewed as the “heir apparent” to the precious metals throne or the freckle-faced, red-haired stepchild that tortures animals and teases siblings. As an investment, silver is the most frustrating endeavour of the past 1,3,5, and 8 years, Once commanding a 30:1 relationship to gold, that ratio is now over 90:1 with little signs of decoupling from the stranglehold of bullion bank interference and price management. That being said, in addition to being a monetary metal, its use in solar power, medicine, electronics, and high-tech is growing in leaps and bounds which is one of the reasons in the past that I had elected to favour silver over gold. However, as much as I LOVE the look and feel and utility of silver as a physical tool of wealth preservation, I also HATE silver for its dismal underperformance and even moreso for its inability to break free from bullion bank control. Yet as much as I have this love-hate relationship with silver, I have to assess the reasons and they are not unlike the metamorphosis of recollection recounted earlier. Silver advanced from under $2.00 per ounce in 1974, when I first learned of its role as a monetary metal from former Dean of the Finance Department of SLU during the 101 class which fascinated me. The “recall imprint” it left upon me in 1980 was formidable, as the 25-times advance in silver made millionaires out of paupers and millionaires out of billionaires, as was the case when the Hunt brothers had their 100%-successful “corner” of the silver market illegally reversed by the U.S. government acting through the DOJ, the CFTC, and the Fed. Through highly-illegal and thoroughly-corrupt orchestrated increases in “minimum margin maintenance” (“MMM”) levels, they changed all of the rules in order to force liquidation of the Hunt silver horde causing silver (and the Hunt’s net worth) to crash and burn. The same tool was used in 2011 to cap the advance from 2003 at $4.00/ounce with another massive coordinated series of MMM increases followed by London access market attacks carried out during the illiquidity of the European trading sessions. This too sent silver reeling to the downside and while it held $25/ounce for two more years, it was the Sunday night massacre of April 2013 that crushed momentum and sentiment and left silver as a comatose corpse of what was once a flourishing, beautiful and rewarding superstar.

Yet, as the chart below clearly indicates, since 2000, silver is STILL ahead 195% and while it was up 840% by 2011, those investors that accumulated it in 2000 alongside the S&P500 have actually outperformed the S&P which has returned 112% in the same period. Why then, have investors soured so much toward an asset that has been such a stalward defender of wealth and privacy, well-away from the watchful, covetous eyes and tentacles of the banking cabal? The reasons are multitudinous but the main reason is the “RECALL IMPRINT” not of the advances but of the declines. History would dictate that in periods of outperformance by the S&P500, silver languishes under the moistened blanket of inattention. Each time a silver rally is snuffed by bullion bank thievery, investor sentiment further snuggles under the covers of fear and loathing. It is this period of unbridled opportunity that savvy investors quietly accumulate silver as in 1969-1974 and 1997-2002 after which the silver steed broke out of the starting gate and massively outperformed every other asset on the planet giving investors a Secretariat-type “Ride for the Ages” not unlike the famous Belmont Stakes race of 1973. However, the mainstream media only afforded silver any sort of coverage after it had completed as much as 85% of the advance. The vast majority of the investing public had never even heard of silver until late 1979 (at $25-plus) and 2009 (at $20-plus) and it was only until the Wall Street Journal (in ’79) and CNBC (in 2010) began regular coverage of this moonrocket of a story that the poor, unsuspecting public started to get on board and mortgage homes, farms, and first-born children to own it. The horror stories we hear are NOT from the quiet accumulators of 1969-1974 and 1997-2002 but rather the ones circulated by the MSM about the “outrageous losses” taken by the “disadvantaged small investor” that swallowed the calculated marketing bait herding retail money into silver at the top. The lesson to be learned and one I am applying to the current 2019 landscape is that we are now in just one of those 1969-1974 or 1997-2002 lulls where a good silver story gets turned off not because of its substance but more because of the five-hundred email blasts and blogger posts with the blaring headline of “$100 SILVER JUST AHEAD – CLIMB ABOARD THIS SILVER STOCK NOW!” (but only after you subscribe for $3,499 a year). This gold-bug-on-steroids type of sensationalist marketing hurts the integrity of the fundamental case for silver more than anyone knows and it is not the strategy I wish to employ. What I am seeking out as I fully anticipate a recovery – not “explosion” – in the price of silver is LEVERAGE, the octane of all investment returns (and accidents, if handled improperly).

There are two types of leverage in dealing in the silver world; you can go to your local futures broker and take a seat in the Crimex casino where the house always wins and the retail trader almost always loses OR you can find a group of qualified mining and exploration professionals with a history of team play resulting in life-changing investor returns that have located a project that, if successful, provides the ultimate leverage to the silver price and therefore a longer-term opportunity that undoubtedly carries potential for a shorter-term windfall. The second option I describe avoids the volatility, headaches, and risks of the Crimex and insteads places those risks in the hands of professionals that have “been there and done that” before but done so SUCCESSFULLY, generating outstanding passive returns for shareholders. A few days back, my colleague and friend, David Skarica, emailed me information on what I now believe is just such an opportunity. As I ticked the boxes on my due-diligence checklist, my interest began to grow.

  • Asset: silver (and gold)

  • Location: Chile

  • Resource: Advanced

  • Management: established with a track record.

The name of the company is Aftermath Silver Ltd. and they are currently engaged in a funding round (details attached) at $.08 (half warrant at $.12)  in order to finance the acquisition of the Challacollo silver project located 130 kilometres southeast of the port city of Iqueque, Chile.  In today’s missive, I will refrain from regurgitating data from the attached corporate presentation. Instead, suffice it say that it Aftermath will control 100% of an advanced resource (37m ounces Ag indicated and inferred) that is open to advancement in both size and grade representing leverage to the upside from two perspectives: the price of silver and potential for resource size increases through exploration. These two forms of leverage are the octane that creates a multiplier effect to one’s investment. Instead of enjoying a 50% return on a move from $15 to $22.50 in physical silver, the same type of move could have a tenfold impact on the share price of Aftermath. For us to have that type of leverage, you need the right team, starting with the Chairman, Michael Williams, who successfully leveraged the Golden Saddle Yukon discovery by Underword Resources into a $138 million buyout by Kinross in 2009. At this point, I will defer to the attached corporate presentation so that you can all see the obvious advantages of this type of silver exposure versus the commodity play. Another advantage is that the successful advancement of the project may not necessarily require the cooperation of the commodity price advance and while I most certainly expect silver to play catch-up to gold by way of a dramatic drop in the Gold-Silver ratio, the non-price potential for project revaluation is there.

Silver is a commodity that we has attracted us over the years and many times as a moth to flame usually because we all get bemused with the incredible momentum of the price moves from 1974-1981 and 2002-2011 that had even the most seasoned and cynical of investors back on their heels in disbelief and awe at the majesty of those moves. I am accumulating silver today precisely because of its current status as a “divorce-maker” investment. That it is TODAY reviled, ridiculed, and repressed is the exact reason I am accumulating it by way of those companies that are in possession of an advanced resource (so as to eliminate exploration risk) but still carry exploration potential. In this manner, I get the best of both worlds and reduce my risk. If I am correct and we are in fact approaching the latter stages of one of those “lulls”, then the obvious outcome should be a move not unlike the ones we witnessed in past, occurring after prolonged periods of inattention and dormancy. Given this week’s dovish testimony by Fed Chairman Jay Powell, the policy-makers appear poised for a USD decline allowing the Fed’s targeted 2% PCE inflation rate to be realized and with an accomodative Fed and a depressed silver price, conditions are ripe for an imminent return to the “Love” rather than “Hate” side of that quirky relationship, one of the few idiosynchrasies found both in the human condition and in the world of investing.

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.

Gold falls on firm dollar, China rate cut lends support