Rafi Farber: The 1970s are Repeating for Silver Exactly And Its Now 1978
Summary
Transcript
According to the Wall Street Journal, treasury markets are losing their shock absorber, by which they mean the reverse repo shock absorber, which has actually stopped falling this month as the treasury has transferred bills to notes, meaning they’re raising money on the long end, on the longer end of the treasury market and locking in higher rates for two to ten years now. And since less bills are coming to the market, less reverse repos are draining, but the dollars are draining from somewhere else because it’s a zero sum game.
15 countries in Europe are in recession, including the euro area as a whole. Silver stocks are at an all time low relative to the silver price. And I’ll show you what happened the last two times that silver stocks were at an all time low relative to silver. And we’re going to take a trip back to the 1970s and remind ourselves what was happening there from 1974 to 1979, when actually, on net, the silver price did not move at all.
And then all of a sudden, it did. This week’s silver report is brought to you by Fortuna silver mines, symbol FSM. Last week, we went into the proven and probable resources for Fortuna, and they totaled 2. 691 millionoz of gold and 9. 8 millionoz of silver. What we didn’t go into is the Diambasudin, Senegal, gold project of 625oz of gold of indicated resources and 235,000oz of gold in inferred resources, which was not incorporated into that estimate.
That will be added into it in later 2024, I believe, August 2024, and project finished for drilling at the end of the year, and that will be added to their resources. And one of the things I love about Africa is that they are used to hyperinflation over there. They’re used to monetary collapses. And so the endgame won’t transform african society as it will the west as much, and there will be less crises there, which is why I believe that Africa is one of the actually safest jurisdictions to be in during the endgame.
Westerners don’t like to think of it that way or they can’t think of it that way because they think of Africa as a dangerous place. But actually, paradoxically, I believe it’s one of the safest. And with that, we’ll move to today’s silver report. We’re going to begin with another sign that the commercial mortgage backed securities market is toppling. Here is another big sign of that. Who could be next? Says Tyler Durden of zero hedge top canadian pension fund.
Sells Manhattan office tower for $1. Here, $1. Sparking fire sale panic. Well, why would you sell a building for $1, really? It’s 29% of the building for $1 because the debt payments on the building are not worth servicing, and so they are giving it away to one of their partners for $1. $1. Thank you, Lewis. This reminds me of that scene in Rocky two where Rocky can’t make his payments on the car, so he just gives it away to Paulie because he’s not fighting anymore and he spent too much money.
Well, that’s happening to Canada right now because they invested in real estate thinking that it would never go down. And look at that. It has because interest rates have gone through the roof. We’re back at 7% for 30 year mortgages. That doesn’t apply to office buildings, obviously, but nobody works in office buildings anymore because people decided to shut down the economy for whatever reason it was. I don’t even remember and I don’t want to talk about it.
That’s okay. I don’t need to fight no more. Listen, you want to buy the car, you want to pick up the payments and all that, but we all know who owns these mortgages, primarily regional banks. And the bank term funding program is ending in a few days, I think in nine days, by the time you’re watching this, and a month after that, most of the loans will be coming due.
And so what do you think is going to happen to the banks that own these mortgages? They’re going to sell them for $1. $1. Kevin says a dollar. Kevin says a dollar. And they’re going to take losses and they’re going to need another bailout. Let’s continue with this article from the conversation, academic rigor, journalistic flair, why economists are warning of another us banking crisis. Speaking of banking crises, this is from February 26, 2024.
And I wanted to scroll down to this. Only when the reverse uv balance reaches very low levels will the system feel the full effect of quantitative tightening, meaning we are anesthetized now because of the money that is being taken away by the Fed. Quantitative tightening, meaning they are selling bonds, taking the money out of circulation, taking it out into their black hole of monetary nothingness. At this stage, the Fed has indicated it will slow and then end that program.
We are very close to that happening. Nonetheless, the transition could be bumpy, to say the least, with banks potentially raising lending rates and becoming less willing to lend. Many analysts expect the buffer to disappear in 2024, with a range of predictions from late in the year to as soon as March. Exactly when it happens doesn’t really matter, but it will happen this year because the treasury needs money and they will get it from the reverse repo program.
And just update where we are on that. It has not moved much this month. At this month we began at $503,000,000,000 and today, which is February 29, we are at $502,000,000,000. So basically we have not moved at all this month. And why is that? I’ll show you in a second, and the answer may surprise you. We take a look at this table that I configured from treasury direct.
This shows the record breaking auctions in size going back all the way to whenever. We have data on treasury direct, which is the Treasury’s website. So we have here the record breaking dates for all of the types of debt that they sell. And we see here in the bold that half of all the record issuance for all of the denominations come this year in 2024, and three of them come in February and two of them on February 26.
So there was a record two year auction at $63 billion and a record five year auction at $64 billion both on February 26 and a record ten year auction of $42 billion on February 7. The point is that the treasury is switching over from bills to notes. Bills are short term treasuries. Notes are longer term treasuries, two year to ten year notes. What does the reverse repo money flow into? It flows into bills because those are money market funds and they cannot invest in longer term treasuries.
They can’t buy two year notes or ten year notes because of duration risk. They are money market funds and people can ask to redeem them at any time. So they won’t buy that kind of debt primarily, maybe a little bit of it, but not a significant amount. And so the drain out of reverse repos has temporarily stopped as the treasury is moving from bills to notes. It hasn’t really stopped.
It has slowed down. It is still coming down slowly, and I believe it will continue to come down in March, even though the bill supply isn’t increasing because the money does leak out to other purposes. But for now, the treasury is locking in these long term interest rates for years to come and the budget is not going to like that. Now, if we continue, we can see that these high interest rates, even though they are being counteracted by the reverse repo money coming into the system, they are starting to take serious effect on world economies.
So we have here a table from trading economics that I got, and it shows 15 countries in Europe, including the euro area as a whole, here at the bottom euro area. So we see here all of these countries are in an official keynesian recession, which means they need to print more money. We have Iceland, Estonia, Moldova, Ireland, Finland, Romania, United Kingdom, Lithuania. Germany is the big one. Germany is in recession.
Germany is the engine of the European Union and the eurozone. Luxembourg, Sweden, Poland, Hungary, Greece, the euro area as a whole and Austria, all in recession. It is happening. They’re going to need to print money very soon and this whole thing is going to crash if they don’t. Now, let’s move to silver here. I’m sure we are all aware that silver stocks are not doing very well in dollar terms or even in silver terms.
But I wanted to show you this chart. This is the silver price relative to silver stocks represented by the Sil ETF. It’s not a great representation, but it’s the best that we’ve got right now. And so we are at a one ratio, whatever that means. Exactly. We’re at an all time low of silver stocks relative to the silver price. And look what happened the last two times that we hit this level.
Well, we have one here at bear market bottom in 2015, early 2016. And look at that. Right after we hit an all time low, we hit an all time or very close to an all time high. Very similar here. This was March 2020. And here a few months later, we hit very close to an all time high of silver stocks relative to the silver price. The all time high was over here in late 2010 as silver was approaching 50.
So what’s going to happen here? I don’t know exactly. But I do know that the last two times that silver stocks hit this level, which includes our sponsor for tuna silver mine symbol FSM, we promptly headed to an all time high or very close to an all time high in silver stocks relative to silver. Is that going to happen exactly the same way this time? No, nothing is exactly the same.
But if I were to use history as a guide, this is a great place and do your own due diligence and this is not advice. This is a great place to buy very undervalued silver stocks. And this time, in the end game, whenever that happens, we are not going to go back down because things are going to be replied price in silver terms, as the dollar takes its final plunge of death.
Now, I wanted to relate to the excruciating time that silver has been having, especially since 2020, when we saw that the dollars were being printed like they never before in history. And still silver has not done much since 2020. It’s basically stayed the same. And so I wanted to go back to the 1970s. This chart is courtesy of gold. Charts are us. It’s a great site. I have no affiliation with it.
I’m just recommending it because it really is great. So we have here a chart from 1970 to 1980. And the chart ends at December 31, 1979, here. And so we don’t see the final moonshot here from about 25 to 50. So from this point, silver doubled in about three weeks. So we have here 1975. Here is where Nixon took us off the gold window took us off the last vestiges of the gold standard.
And silver did not react. That did not react very strongly immediately. This is about August 1971 over here. And we see silver heading down into 1972. But then it started to climb from about, let’s say one dollars and parabolic top of about $6. 25. That’s four times, five times, close to a quintupling of the silver price. And look at that. All the silver stackers started to go into silver and say, oh, my God, look at that.
We’re off the gold standard and silver is going to moonshot. And then we had a double top here. This is very similar to what we saw in silver squeeze. Let’s say this was the August 2020 top and silver squeeze was February 2021. So there’s another parallel over here. And then for two years, silverhead down, down into 1976. From early 1974 into early 1976, we hit a bottom. Two years.
And silver stackers are like, what’s going on? Nixon took us off the gold window, took us off the gold standard. Why is silver going down? And then it started to climb slowly back up. But it took another one, two, three years until 1979, when we hit $6. 25 again from 1974 to 1979, two months, less than five years. And it was excruciating for silver stackers. And then look what happened.
We all know from 1979 to 1980, gold silver went from about six dollars to fifty dollars. Now look what’s happening now. Is this out of the ordinary for silver not to respond to crazy money printing. No, it’s not. It just takes some time. This is where we are now. We hit a high in silver over here in August 2020. We had a double top during the silver squeeze movement of 30.
And then it took two years for silver to bottom in August of 2022, August 2020, August 2022, bottom in two years. And now we have had four excruciating years of silver not reaching 30, a bottom here. And we’re slowly moving back up here, struggling against the 250 week moving averages, and we’re going to hit 30 again. And once we do, I believe history will repeat itself. Does it mean it’s going to take another year? I’m not predicting that, and I’m not rescaling my time horizons here.
I’m just saying that this is historically accurate and there is historical precedent for what is going on now. And it is very frustrating, as it was for silver stackers in the 1970s. It’s happening again. Oh, no, not again. Now, if the 1974 high for silver was $6. 25, that took us five years to regain, and 2020s high is $30. That is a factor of 4. 8. So if you repeat what happened in 1979 and 1980, which I believe we will, and then some, the target price for silver at the top should be about $240.
And that’s if we stop there this time. And I don’t think we will, because this time, I think the dollar will spiral completely out of control. And so as much as our emotions want to tell us, this is a rigged game and this is not fair and something is wrong with the silver markets, and this has never happened before in history. It makes no sense. Well, in fact, it has happened before in history.
It makes a lot of sense. And it’s going to end exactly when? I don’t know. But we are four years into this. In the 1970s, it took five years. We’re in the same patterns now. And there’s no reason to think that it’s not going to happen again. It doesn’t mean it has to repeat exactly. It doesn’t mean that it’s going to take five years this time. But in order to survive the endgame, we have to know where we are in history.
Stay calm. Keep stacking. Endgame is coming. And when it does, silver will be remodeled not by central banks, but by we, the public of the world. This is Ralphie of the Endgame investor with this week’silver report for Arcadia Economics. You can sign up to my substac for free to get my articles there my free articles there. I just wrote one about jackfruit. It’s very entertaining. And you can always become my patron on Patreon, where I give biblical commentary on the monetary silver and gold markets.
And next week we are dealing with God being on a silver standard. And I’m serious. I found the verses that prove this and I will share them there. Check it out@patreon. com. Endgame investor and I’ll see you guys next weekend. .
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