August 14, 2013; Ian McAvity: Gold is Pouring from the West to East

The McAlvany Weekly Commentary
with David McAlvany and Kevin Orrick

Kevin: Our guest, today, David, Ian McAvity, is a favorite of ours. He has been a friend of your father’s for over 40 years, and you, for most of your life. I don’t want to call him an old-timer, but he does bring an old-timer’s perspective to the gold market, and it is always worthwhile as we move into this August/September/October season, to talk to Ian, to see, what it really looks like in the gold market from his perspective.

David: There is a seasoned perspective that he brings to it, and Ian has been writing Deliberations on World Markets, his newsletter, for 40 years. Along with that, he has spoken at the New Orleans Investment Conference, basically every year since it was started, and is still a regular attender and speaker there. We will be joining him on the stage in November, as we present, and he presents, as well. Wonderful to learn from him, as we will today.

It is also worth mentioning that he has followed the gold mining industry very closely, and gold particularly, very closely, being one of the founding directors of the Central Fund of Canada, been around for close to 30 years, if I’m not mistaken, as one of the first proxies for gold, what he describes as the second-best way of owning gold, with the first best, of course, being that which is in your hot little hand, with no counter-party risk, whatsoever.

Wonderful reflections, each month, in Deliberations, and would consider that kind of investment in your education very important. You can do that by going to [this URL differs somewhat from the one mentioned three times in this Commentary; it is written correctly here], and mention that you heard the interview on the McAlvany Weekly Commentary. He’ll send you a free copy. I think you’ll get your copy and say, “Why haven’t I been reading this all along?”

Kevin: I know, David, as we research for the show we read an awful lot of material, but this is one that I always look forward to, front to back, I don’t really cut any out, and I don’t speed-read his newsletter.

David: I would gladly put other things down to read Deliberations. Well, it was Richard Fisher of the Dallas Fed who was describing Fed policy here recently, as having created a Gordian knot, a knot that can’t be untied, and it was in that context that he referred to the relative strength of the U.S. economy, saying that, I quote, “The U.S. is the best-looking horse in the glue factory.” And I was sitting there waiting for him to credit you, Ian, because that is, of course, the phrase that you’ve talked about many times in reference to the dollar, in those terms, and it wouldn’t surprise me for you to have a fan club in Dallas. Now, I don’t know if you like that fan club or not, but I just wish he would take some of your criticisms to heart, and with that in mind, again, maybe suggest a few things to the broader Fed audience.

How do we handle a Fed balance sheet this size? How do we handle, as individual investors, and respond to price fixing in the interest rate environment? If you could prescribe, if we do assume that he is a part of the fan club, he’s reading you and just didn’t give you credit for that (laughter), the U.S. being the best-looking horse in the glue factory, if you have his ear, what do you advise at this point?

Ian McAvity: For the individual investor, a shovel, dig a deep hole and hide. (laughter) I don’t see any easy way out of this, and what is scary is, not just the U.S. situation, but the global situation, because now that you have Japan trying to print their way out of whatever, and Europe keeps promising to do it, except that they haven’t actually done it. Draghi is just a very smooth salesman. And to me, we’ve got a bubble that’s going on in all of the financial markets, and it’s being encouraged by all of the central banks, and the only way, really, out of a bubble is that you know there is a bubble, you know there is a pin in circulation, and the Lord only knows which side of the bubble the pin is first going to hit. I don’t see any way for the Fed to reduce their balance sheet, at this point. For sure, the stock market will throw its so-called taper tantrum. They’ve got 85 billion dollars a month of fresh liquidity being injected to play with every day that they are not selling bonds to the Fed, and with the robo-trading that is going on in the stock market on the day that they are selling the bond to the Fed, that means that they are illiquid for about five minutes. It’s mind-boggling to watch this.

And the thing that really scares me is when I see all of this stuff going on, and then we see this leadership contest as to who is going to succeed Bernanke, and they are talking about Obama seems to want to bring back Larry Summers. Larry Summers is basically the architect of most of this stuff. He’s part of the Rubin/Greenspan cabal, basically, that eliminated Glass-Steagall and blocked all regulation of derivatives, and then introduced the commodity reform act that enabled the banks to become casino operators.

David: Expand on that a little bit, because there have been some considerable changes on Wall Street. When we went through the crisis of 1929 to 1932, following that crisis, Washington got tough, and decided to crack down on what they considered to be improprieties in the banking community, and then all of a sudden we repealed that. We repealed Glass-Steagall, and as you say, the Commodity Futures Monetization Act in 2003, now you have them running a casino operation. Then versus now, and where do we go from here? Does it take a full-blown collapse in the financial system to come back around to modest, or reasonable, regulations?

Ian: I don’t see any way in which the corrupted power structure of Washington, and basically corrupted largely by the banking system, is peacefully resolved. Unfortunately, we almost have to throw the egg at the wall to start making the omelet on the floor. I don’t see anybody surrendering the power that they have or not lobbying for more power. That’s the thing that concerns me most, because in essence, the public, the voters, have now basically become the slaves of the system, and we have no say in it. That’s one of the reasons why the public has so blatantly left all of the financial markets.

David: You mentioned the leadership contest between the folks who may catch the baton, or be handed the baton at the Fed. We could have a continuation of the same, maybe on steroids, if we have the lovely lady from the University of California, Berkeley, or we would have more of the same, just an older version. Wall Street is fond of saying, “Past performance is not a guarantee of future results.” We can only hope that’s the case with Mr. Summers. Who is he, in your opinion, and what kind of damage would be done if he is put in that office?

Ian: The biggest problem with Summers is that he is completely unpredictable. He has his finger in the wind at all times. He is the only person I’ve ever seen in public with an ego that seems to require that all of his friends refer to him as the smartest person in the room, where-ever he goes. Quite frankly, he just frightens me.

David: So it’s the element of egotism which makes him dangerous.

Ian: Exactly. And the scary part of it is, everybody knows that he is very difficult to get along with. If we’re in a crisis period, the last thing you want is somebody at the table that nobody can get along with, or nobody is comfortable with. In that regard, if you have to have a Fed chair, I would much rather see somebody like Yellen, who has been part of this process, and has what I would call the academic credentials without the ego problem.

David: If we roll back to what we were talking about earlier, sort of an economic overview, you have accelerating global slowdowns. You can see that in China, you can see less and less positive effects from Abe-nomics in Japan, we don’t have a full-fledged recovery here in the U.S., and Europe probably in recession since last year. If you’re looking at the Economic Cycle Research Institute work on the U.S., we actually were in recession as of July of last year, and still are.

Everyone keeps on saying, though, how strong the U.S. is, relatively speaking. It was only yesterday that it was the other side of the coin. Emerging markets were pulling their weight, and were strong relative to the U.S. We don’t have enough strength, and so the central banks continue to print. I’m trying to address, I guess, the concerns of the deflationists, which would assume that the central bankers have the luxury of stopping the process of creating money and credit. Can they do that? How would they do that? Is that just strictly a logical impossibility?

Ian: I think the evidence is pretty well in, at this stage, that that’s what they’ve been trying to do, through QE-1, 2, 3, 4, and whatever, and basically it hasn’t worked, and part of it may well be that they are up against a demographic problem, quite apart from ObamaCare and all the other stuff that they are trying to inflict on the economy.

But I keep talking in stock market terms of the modern cycle having peaked in either 1998 or 2000, with the Long-Term Capital bailout in 1998 or the tech bubble top in 2000. And the series that I find most interesting to demonstrate my case is when I look at the payroll employment, I ignore the unemployment data because they refudge that data more frequently than Hershey changes its formulas for fudge, but total payroll employment from 1975 to January of 2000 grew at two times the population growth rate. Since January of 2000, it has grown at one quarter, 0.25% of population growth, but since January of 2000, the category not in the labor force has grown at twice the population rate, whereas, from 1975 to 2000, it grew at half of one percent of the population rate.

So you have this exodus out of the labor force, and the problem that they are trying to resolve politically is with increased food stamps, with increased student loans, that one way or another we are putting money in people’s pockets even if they’re not working. It’s unsustainable.

David: It seems to me that there is a difference of opinion on demographics. Some would argue that that is the boom ahead, that people moving into retirement now spend through their retirement assets. Maybe that’s the question. Do they have any retirement assets? If it is a demographic issue, then how does money-printing solve anything? If it doesn’t solve anything, then where do we go next, except to the store to get a shovel, and, as you say, dig a deep hole?

Ian: The problem is, you and I are thinking in terms of solving something in the context of, “There’s a problem, let’s resolve it.” Their approach to solving it is, “Let’s make sure it doesn’t blow up on our watch.” They’re not trying to solve anything, they’re just trying to make sure that whatever accident lies ahead is beyond their next election date. The biggest problem in all of their decision-making is that their focus is on the here and now, irrespective of the future consequences. That’s the thing that troubles me most about it.

David: What it means is that there is a wake-up at some point, and something akin to a social or political revolution, as people assumed that those at the helm were doing the job we would ascribe to leadership, when in fact, they were absent, as you say, probably more interested in their own skin and their own political careers, with a legacy, if you will, than fixing the problem.

Ian: They’re just trying to get through their period, and they hope that somebody else will inherit the problem.

David: Look at market internals. You have the Dow and the S&P, which are pretty widely followed globally. Maybe you could speak to volumes, and breadth, and some of the internal workings of the market – share buybacks, the number of stocks that are now selling below their 50-day moving average. From a technical perspective, where do you see the equity markets, and what signs or symptoms of the times do you see implicit in those numbers?

Ian: Let me back up to the top of the year 2000 which was the second major top that we’ve seen, the spring of 2000, and the summer of 2007. From 2007, you have had subsequent important tops in 2011, and then again more recently, and on this recent one, the S&P 500, taking that as the major proxy for the U.S. market, the S&P 500 has recently got to a record high. Virtually, no other global markets have done that. The majority of global markets are still below the highs they made in 2011, which were below the highs they made in 2007.

So you have a global divergence, and the weakest area of it is basically the Pacific-Japan region, which has been the engine of economic growth over the last several years, and they are now slowing. I find the great irony that the U.S. economy is the strongest of a very weak batch of economies, and just in the last few days I heard some comments about one of the encouraging recent bits of data was that U.S. exports to Europe were a little bit better than expected. Well, the first thing I did was go and look at what has happened in the last 52 weeks to the dollar versus the euro, and by coincidence, the dollar has gone down 7% over the last year against the euro. It was an exchange rate mechanism that probably ended up making the exports look better than they might actually have been.

But in terms of market internals, we are starting to see one very technical observation that is worrisome, and that is that with the market high, we’re starting to see the daily new lows list start to expand, in addition to the new highs list not making higher highs. That’s an early indicator. Sometimes it’s referred to as the Hindenburg omen, in the sense that there is going to be an accident somewhere along the path.

It’s not a short-term signal, but there have been an extraordinary number of so-called Hindenburg omen days over the last month-and-a-half that are worrisome, because when you look back at major tops in the past, that’s one of the indicators that said that the ice is getting awfully thin. I’m thinking particularly of the summer of 2007 when that top was occurring, and when I look at the number of stocks above their moving averages, they were higher earlier in the year, the percentages are still up there depending on whether you’re looking at a 20, or a 50, or a 100, or a 200-day moving average. But as the S&P has been advancing higher and higher, the number of stocks above the 200-day average, or the 50-day average, has been starting to shrink, but it hasn’t shown the kind of weakness yet that says, “Here we go over the cliff.” But I would say that we’re in the process of tip-toeing toward a cliff.

It reminds me, technically, very much of August of 1987. The summer of 1987, all of the indicators were more blatantly in place than they are right now, and I remember for the whole month of August, from chatting with one friend of mine who is much more active as a trader, the two of us were getting bored to death because we knew the market was going to go down, but it wouldn’t break. And every once in a while when I’m chatting with him, because we are old, old friends, he says, “It’s feeling more and more like August of 1987. What’s going to hit us, and where is it coming from?”

And I have that feeling that there is an accident looming, and my best guess would be that you’ve got everything in Europe being held together so that Angela Merkel gets re-elected with as few ripples in the pond as possible, and the day after the German election perhaps a few things are going to crawl out from under the carpet.

David: Ian, it was about six weeks ago, maybe more like eight or nine weeks ago, that housing stocks began to tip over. They topped, and lumber prices have also come down quite a bit. So as a leading indicator for what was supposed to be a source of recovery in the U.S. economy, housing stocks are in decline. How would you feel about there being a complement between housing stocks on the one hand, and financials on the other, if they were to both be moving lower, in concert?

Ian: The problem with the housing starts, and if I can use the Case-Shiller home price index as the best example, it was in March of 2012 that that index made its extreme low, and so for the last few months in 2013 everyone is talking about the wonderful gain year-on-year, without bothering to point out that it’s still down something like 25-30% from where it was at its peak five years ago.

The problem I have is that the Case-Shiller index – I had this in one of my recent newsletters – the Case-Shiller index today is back up to the level that it first reached in early 2004, but there is 2.6 trillion dollars more mortgage debt still outstanding than there was when we first reached this price level. So if you have that mountain of mortgage debt still overhanging the housing market, who’s going to finance an expansion from here?

Because lending standards have been tightened, so you don’t have the mortgage-backed securities pool that you once had, and for the most part, the lending that the banks are doing these days is not to Jane and Joe Six-Pack, it’s to their pals on Wall Street who are buying up bundles of houses by the thousands that they can then flip into a trust and retail off to investors as rental pools.

And to me, you don’t have a sustained housing recovery by converting owners into renters, and yet, that’s where most of the growth of the market has come from, and the banks, essentially, engineered part of this price rise by withholding on their foreclosures. So they’ve shrunk the visible inventory, but the invisible inventory has barely changed. So to me, it has been a very artificial housing recovery.

David: When you look at gold and silver, we have, obviously, divergent opinions on Wall Street, very bearish on the one extreme, and fairly bullish on the other, and so opinions are a dime a dozen. You tend to focus on technical analysis. What do you see when you look at the daily, weekly, monthly charts in gold and silver?

Ian: The two biggest things would be that the market vane bulls on gold, a sentiment indicator I’ve used for decades, and it’s the one I’m most comfortable with, in essence, your near-decade lows in bullish sentiment, which, contrarily, I find very encouraging. That’s not to say that we go up tomorrow, but I would say a great proportion of the late money has, effectively, gone.

Secondly, I look at the commitment of traders’ reports, where they have essentially covered the extreme short position that they had about a year-and-a-half ago. They almost got to net long, but not quite. They got to their lowest net short position since, I think, 2001, and on the most rebound they started to increase that short a little bit on the rally, but that’s fairly normal behavior. It was a big week-to-week change that a lot of people got worried about, but on a trend basis, to me, the commercial shorts have covered. And overall, I think we have a lot of bottoming characteristics in place. The one thing that worries me is that we had two good panics in the bottoming process, the real wipeout in April, and then lower lows in late June.

The one ingredient that worries me at this point is, what happens if the Dow-Jones drops 2000 points in a week, or in a 5-10 day period? That would probably take down all markets with it. If we had had a serious decline in the stock market, I would be a lot more bullish on gold and silver right now, but that’s the one thing that keeps me nervous. If we have a serious sell-off in the stock market, will it take gold and silver back down to test those lows?

It might, and I would say, almost for sure that it certainly would take the gold-mining stocks down to those lows, because that would be the first thing the margin clerks would be selling in a sharp sell-off. We have a lot of the bottoming characteristics in place. I would say a great deal of the downside risk in the gold market has been taken out, but we still face the risk of what happens if there is an accident on Wall Street.

David: When it comes to technical analysis, it’s almost like going to an art museum. You are looking at pictures, and there is something of a subjective element to it, or at least it would seem to be. The recent interview with Louise Yamada, she and Alan Shaw ran a great technical team at Smith-Barney for years until they canned the whole team in 2004, but she has been fairly negative on gold and said, basically, the monthly charts just don’t look compelling to her.

Ian: We still have work to do. It’s one thing to put a bottom in place, it’s another thing to resolve that bottom and get going on the upside, and what I’m talking about is having the bottoming ingredients in place, with the caveat that we could yet see those lows probed. On the other side of the coin, to turn bullish in the shorter term, the recent rally has been nice, but it didn’t get through 1350 yet, and above 1350 it’s got to go through 1425, and then it’s got to go through 1550.

Above 1550, which is really where the April crash began, then you can start to say a bottom has been confirmed. So we are still bottoming, rather than having a bottom behind us. I think Louise would probably be more in that school, perhaps a little more bearish than I am, in the sense that you couldn’t rule out gold making a lower low. But my guess would be if we did make a lower low, it might be a very brief affair.

David: And correspond to a major decline in the equities market, something that would be exogenous to the gold market, per se.

Ian: Yes, exactly. Basically, it would be a vacuum creating a search for quick liquidity on Wall Street, and gold is nothing, if not liquid, in a crisis mode. And that’s the one worry that I have in the precious metals still.

David: The mining shares, you feel, still have that vulnerability, the tie to the equity market, and obviously, the easy selling to raise capital to meet margin requirements.

Ian: The mining shares were beaten, literally, to within half an inch of their life, on the recent lows, and they have made some pretty impressive rebounds off those lows, but they are going to have to do some more basing, and when I look at the major mining companies, they are still, to some degree, in denial. They keep talking about how they are cutting back everything, they’re shrinking expenses, maybe they are going to be a little more honest about what their operating costs really are, and they are up against geopolitical risk because they’ve all diversified into a lot of countries that I personally wouldn’t invest in.

And so, the mining shares were beaten down, and they, to some degree, deserve to be beaten down because of the way they have treated their investors over the last seven or eight years. They’re going to need more repair work. In some respects, they’ve done more damage to their credibility than the metals have, so I’m still partial to the metals. For people who want leverage on gold, I’d prefer to have silver than the gold miners, themselves. But the miners have been beaten down to levels where even the worst of them will rebound once we see an $1800 or $2000 gold price. But I thought we were going to get there a lot quicker. We still might, on the other side of an accident, but the mistakes that will cause that haven’t been made yet.

David: Talk to us about Central Fund of Canada. This is a group that you’ve been involved with for many decades, and it’s a combination of gold and silver. What does it mean to you when it’s trading at either a discount or a premium, a discount as it is today?

Ian: When Central Fund of Canada, where I’m the lead director now, and it’s actually 30 years ago this month that we proceeded with converting Central Fund of Canada into the bullion entity that it is today, and Central Gold Trust, as well, where I’m the lead trustee. Both of them are trading at a discount. Historically, when they are trading at a discount to net asset value, that has tended to coincide with the bottoming process.

They can trade at small discounts for several weeks on end, which they have been doing recently, and the one difference between the present and the past is that in the past, historically, we never had ETFs that were competing with us, so that the premium discount levels tended to swing in a much wider range, so that we actually at one point, I think, had something like a 25% or 28% premium over net asset value on Central Gold Trust, which, to me, frankly, was scary at the time, and in the past we’ve seen discounts in the area of 10% or so, or even worse on Central Fund.

But with the liquidity of the gold ETFs, the swing in the Central Fund premium discount ratio has been narrower. And as I say, we have been fluctuating between zero and about 5% discount recently, for some weeks off and on. So in essence, what you are looking at is long-term holdings of physical gold or physical silver in Canadian bank vaults, trading at a 5% discount to market.

David: When you put that right next to nearly three weeks of backwardation, implying strong physical demand, how do you square these two where you have discounts on the one hand, premiums on the other? Maybe you can unpack that a bit?

Ian: That is also getting into the negative gold forward rates, which gets very technical, and sometimes I’m not sure that I even get it right. There is no question that the panic in April has set off a rush for physical gold. And even in the case of Central Fund, I’ve always said, we tried to create the second-best way to own gold. The best way, still, is gold in your own hand, because then there is no counter-party between you and your fingertips.

And we’ve been in this situation of a crunch on physical gold. I see on the Internet, all sorts of things that are going on in the COMEX warehouse inventory levels between J.P. Morgan and Scotia, and HSBC. The one thing I don’t see anybody addressing is that COMEX warehouse deals in 100-ounce bars. The major international players in the gold market deal in London’s good delivery bars that are 400-ounce bars. I’m still trying to get a straight answer as to whether or not the COMEX inventory includes any 400-ounce bars.

And there is no question that this is scrambled on gold flowing from West to East. There’s no question China is absorbing a huge amount of gold. Russia is continually adding gold to their reserves. A number of the smaller former Soviet states have been adding their gold to reserves, and you can see coordinated activity going on between China and a number of its major trading partners, settling their trade balances with each other in their own currencies.

So there is clearly an effort underway to convert U.S. dollars into non-U.S. dollars, with gold being the primary reserve asset, and other currencies being second choice, with the dollar a weak third choice. The business that is going on between the backwardation on the futures, I’ve heard any number of people that probably know more about the technicalities of futures trading than me, talking about the fact that derivatives are now driving the futures market.

To me, the COMEX market has always been very important for price discovery, but of the thousands of tons that we have in silver and gold in Central Fund, we’ve never bought one ounce on COMEX. COMEX is a price discovery market for paper trading. It’s not a physical delivery market.

David: Which means that there are obviously other places that people all around the world buy their metals and COMEX is less relevant than it is treated.

Ian: No, it’s a very important price discovery marketplace, in the context that you have producers and bankers involved on both sides of hedging, for example, or of actual net transacting, using COMEX, I would say, for small portions of a trade to discover price, but the real transactions are occurring over the counter beyond the jurisdiction of the CFTC. The whole point of owning gold is once you own gold you have no counter-party risk, and typically, that’s why the gold market, globally, has always been such an opaque market.

David: When we look at that move from West to East, and the increase in ounces, by the ton, even by the hundreds of tons, by the Central Bank of China, the PBOC, if you were to take a guess at how many tons they have – it went from 400-and-change up to 1000 – what would you guess the official holdings of the PBOC are at present, and when do you think they would publicize it?

Ian: They will probably make a formal announcement that will show that they are the second-largest owner of gold after the U.S., at some point when it suits their purpose. I have no idea when that will be. At some stage, there is probably going to be increasing trade resistance, trade barriers being talked about. It will be nationalistic, to some degree.

But there will be a point at which China will take a lot of their gold holdings and add them to their officially declared gold reserves. I think it will be to make sure that they demonstrate to the world that they are the largest owner of gold, behind the U.S., and ahead of Germany and the ECB. In terms of timing or circumstance, beyond the fact that the Chinese will do it when it suits their purpose, I think it’s impossible to forecast.

David: That’s 6,000-8,000 tons if they wanted to be number two. Germany has 3300 tons, we have 8100 tons. I guess you can sideline the IMF, but Italy and France still have close to 2400 tons apiece. The ECB is not that great, 500 tons, more or less.

Ian: Part of the problem with all of the European gold holdings, is you don’t know to what extent some of that may be double-counted, how much of the ECB’s gold is actually German gold, and they are both counting the same ounces, which is quite possible.

David: Right. Well, as we look ahead to a very interesting Fall, we have the seasonal up-tick in the metals price, the Indian wedding season has been a part of that. Do you have concerns with the increase in taxes and the limitation of imports, that this could be a softer season than most, or is that less important?

Ian: I think we’re in the seasonal window. It’s going to be interesting to see what unfolds at the G20 meeting in Moscow now that you have Obama trying to snub Putin, and Putin shrugging it off. The other element going through my mind, and this goes back to, early on, we mentioned the inflation/deflation thing. The two numbers that I’ve been worried about for some time, have been the Canadian dollar breaking 95 cents, and copper breaking $3 a pound. We’ve recently tested those levels and bounced off them again. I used to also point to 95 cents on the Australian dollar, but the Aussie dollar did break 95. But two of the three, what I would call deflation indicators, may have dodged a bullet over the last month.

But to me, the two numbers that I would continue to worry about would be to watch the Canadian dollar at 95 cents, and watch the copper price at $3. If copper goes through $3, the global economy is weaker than anyone thinks, and that’s the way I read them, from the sense that copper is the most purely globally produced and globally consumed commodity at the heart of the industrial process.

David: I enjoy your presentations at the New Orleans Investment Conference each year, and look forward to seeing you there again. Fortunately, I don’t have to wait once a year to have your thoughts. I do enjoy reading Deliberations, and would encourage any of our listeners to consider subscribing to Deliberations on World Markets. Technical analysis, but certainly there is more than that, and it focuses on major world markets, stocks, bonds, currencies, precious metals. You’ve written that for, shall we say, a number of years.

Ian: Over 40 now. (laughter)

David: 40 years. I think you should double your price, it’s worth more than that, but I would encourage any of our listeners who are interested, certainly, take a gander. Ian, where could they find you, where would you like for them to contact you, to get a sample copy, or to subscribe?

Ian: I don’t operate a website of my own, but my primary chart provider does. He has a page for Deliberations at That would give them all the details as to how they could reach me, and if they say they listened to our discussion today, I would be happy to send them a copy of the most recent issue at that time.

David: Okay, that’s

Ian: Yes.

David: I look forward to seeing you in New Orleans in November, and keep up the good work. Thanks for joining us today.

Ian: Okay, thank you.

Kevin: David, one of the things I love about listening to Ian, and it’s in his writing, but actually it’s more in his speech pattern, as he comes up with these Mark Twain-esque, or Twain-isms, like taper tantrum. The stock market – every time the stock market thinks there is going to be a tapering of quantitative easing, they a have a taper tantrum.

David: We’ve covered a lot of great ground today, and whether it was talking about the Hindenburg omen, and the fact that we’ve had deterioration in the equity markets, the fact that we do see a growing argument for gold having put in the lows, but with, realistically, some hard work ahead, both over the months and years ahead, putting in new highs, but certainly on the horizon.

These are very, I think, helpful observations, and looking at Deliberations on World Markets, he supports a lot of his ideas with technical analysis, and I think he’s one of the best in the business, I would say, next to Louise Yamada, who I used to look at on a weekly basis when she was at Smith-Barney. I wish Ian had something on a weekly basis. He publishes 18 of these issues a year, and that’s not enough. If he was doing more, I would be looking at them more.

Kevin: I think it is interesting, too, Dave, that he is realistic about the potential of a 2000-point drop on the Dow, actually, for a short period of time, affecting the price on everything, so it is a vulnerability that we have. We’ve seen it before. I remember 1987, when the Dow dropped, mining shares just got crushed. They were the second-worst loser behind toy store stocks.

David: (laughter). Ouch.

Kevin: Yes, it could be a really painful time. But as far as the physical metal, even though he sells products that are not necessarily physical ownership metal directly, he still says physical metal is his personal first preference on any type of investment in gold.

David: Well, it makes sense. When you look at the world and the shape that it is in, and the direction that it is heading, from both a political and social vantage point, he begins the conversation by saying, “You should probably get a shovel, dig a deep hole, and hide.” It’s not because he’s alarmist, it’s just because he’s looking under the hood and saying, “This is what we’re dealing with. This is out, this is out, this is not working, this should be working, and it’s not there. This hasn’t been put in the right place. We have significant problems. This engine isn’t going to function the way it’s supposed to, given the configuration we have today.”

Problems ahead? Realistic appraisal. That’s what I appreciate about Ian. Bringing his wit and sense of humor to it is just more fun.