Introduction: Andrew ("Andy") Hoffman, CFA joined Miles Franklin, one of America's oldest, largest bullion dealers, in October 2011 and serves as Marketing Director. For a decade, he was a US-based buy-side and sell-side analyst, most notably as an II-ranked oil service analyst at Salomon Smith Barney from 1999 through 2005. Since 2002, his focus has been entirely on precious metals, and since 2006 has written free missives regarding gold, silver and macroeconomics. Prior to joining the company he spent five years working as an investor relations officer or consultant to numerous junior mining companies. Andy's articles can be found on the Miles Franklin Blog, at www.milesfranklin.com.
Daily Bell: What a month for gold. What's going on?
Andy Hoffman: Remember, all markets are now manipulated on a 24/7 basis. It is the only way TPTB have been able to maintain their fiat Ponzi scheme this long, by "painting" markets like stocks and precious metals to tell the story they want told. Of course, not all markets – like crude oil and Treasuries – are not cooperating. Nor, for that matter, the physical gold and silver markets, which tell a dramatically different story than the suppressed paper markets. This particular month, the paper-based raids were more aggressive, as TPTB were terrified the Swiss referendum would be passed, forcing the SNB to buy 1,500+ tonnes of gold.
Daily Bell: The Swiss gold referendum was soundly defeated. What happened?
Andy Hoffman: In a nutshell, even the "world's smartest 0.1%" regarding the value of gold have been brainwashed by central bankers and market manipulation into believing the referendum was a bad idea. Heck, these were the same people that allowed constitutional gold backing to be surreptitiously removed, enabling the SNB to sell 1,500 tonnes of their gold at less than $400 per ounce and subsequently, to peg the Franc to the dying Euro in 2011, preceding an historic 16% plunge that is on the verge of getting much worse. The reason given was to improve Switzerland's competitiveness, but Swiss GDP growth has averaged a paltry 0.4%/quarter since its cost of living is so high, they had a referendum this year about raising the minimum wage to $25/hour! In other words, TPTB still have the Swiss duped – which I assure you, they'll understand more clearly sooner rather than later.
Daily Bell: Were you disappointed by the Swiss referendum? Did you have higher expectations?
Andy Hoffman: Yes, I was, as the initial polls – before the aforementioned propaganda and market-rigging scheme were executed, favored a yes vote. In fact, the attempt to quell gold sentiment was so powerful, they closed down the eBay account where foreigners could contribute to the "yes" campaign, and didn't allow the leader of the "yes" movement to participate in the televised debate. In my view, this was the last chance for the people to deal a blow to TPTB before the real chaos begins, and they failed.
Daily Bell: Why do you think the Swiss voted against it and in such quantities?
Andy Hoffman: First of all, I have significant doubts regarding the integrity of the vote. However, it is not unheard of for such referendums – like in Catalonia, Spain, for example – to see major sentiment swings in short periods of time. However, assuming it was a legitimate vote, what I noted above – of massive anti-gold propaganda and viciously attacking PM prices for the preceding month – swayed public sentiment.
Daily Bell: Has Switzerland changed?
Andy Hoffman: The people haven't changed, but a decade of central banking market rigging have temporarily confused even the world's most financially savvy population. They are now essentially a European vassal state, but I assume they will re-embrace their financial neutrality when the next financial crisis hits and the Euro-pegged Franc collapses – and with it, the SNB's bloated, insolvent balance sheet.
Daily Bell: Is the old Swiss republic finished?
Andy Hoffman: I doubt it, but right now it's in a dramatically weaker financial position than at any time in its history. Heck, in just three years' time, the SNB's balance sheet has ballooned to 80% of GDP to protect the Euro peg. This compares to 25% for the Fed, 30% for the ECB and 50% for the Bank of Japan, to demonstrate just how suicidal the SNB's policy has been.
Daily Bell: What do you think of UBS and Credit Suisse? Are they a new kind of Swiss bank?
Andy Hoffman: No, just plain old criminal European banks. And now that they kowtow to U.S. political pressure, they no longer can even purport above average client privacy.
Andy Hoffman: Per above, the Swiss no longer value their neutrality and independence. Its politicians and bankers are now more interested in garnering favor with the corrupted London, Brussels and New York establishments, there appears to be little reason to trust their stewardship any more than the rest. If they had voted "yes" on the referendum, they could have reclaimed their heritage. But instead, they chose to sell their souls to the printing press.
Daily Bell: Do the Swiss really benefit from having the franc linked to the euro?
Andy Hoffman: NO, NO, NO! Per above, not a single benefit has accrued to Switzerland and the nation's financial condition has been dramatically weakened in just the three years since the peg commenced. And just wait until Europe really collapses next year and the ECB goes hog wild devaluing the Euro with QE.
Daily Bell: Where is the euro headed? Will Draghi be able to stimulate the way the US has with QE?
Andy Hoffman: The Fed has NOT stimulated anything except financial markets, whilst the Main Street U.S. economy has dramatically suffered. And now it's weakening anew, with record debt, zero interest rates and record low faith in central banking. As for the ECB, all I can say is LOL. Draghi doesn't even have the reserve currency to work with and politically, Europe is about to tear apart. Printing more money will only make things worse, as it always does.
Daily Bell: What about Japan? How has Abenomics worked?
Andy Hoffman: It's proven that money printing only makes things vastly worse. Heck, they just increased Abenomics dramatically and cancelled the sales tax increase that was supposed to "pay" for it. The Yen is in free fall and if the people re-elect Abe in this month's snap election, they will make the Swiss "no" vote look like no big deal. I continue to maintain that the "Land of the Setting Sun" will be the first "first world" nation to experience hyperinflation.
Daily Bell: Will the golden bull resume its momentum at some point? When?
Andy Hoffman: OF COURSE! It always beats the printing presses and always will. Ironically, the "bull market" is deemed to be over despite record global gold and silver demand in 2013, which will likely end 2014 at even higher levels. The gap between suppressed paper prices and real physical metal fundamentals has never been wider and the recognition of such is expanding like wildfire. In my view, gold and silver have never been cheaper throughout history – and I doubt they'll stay that way.
Daily Bell: Is gold unpopular in the West these days?
Andy Hoffman: Absolutely. Sentiment in the West – such as Miles Franklin – is as low as it's been since the bull market commenced in 2000. And yet, the U.S. and Royal Canadian Mints had record silver sales last year, which will be surpassed this year. This is because the wiser Easterners are actually buying them out!
Daily Bell: Is gold more popular in the East?
Andy Hoffman: That's the understatement of the century. Record demand in China, India, Russia and even Japan (where, by the way, Yen-priced gold is nearly at an all-time high). Eastern demand will NEVER stop growing; it's just a matter of when TPTB's efforts to suppress Western demand inevitably fail.
Daily Bell: Do you see the gold-buying habits of Asia and China diminishing?
Andy Hoffman: NEVER. They will only become more voracious, given their multi-century understanding of the dangers of fiat money.
Daily Bell: How about India? There were some changes regarding gold in India recently. Your take?
Andy Hoffman: The same. India has always been the world's largest PM consumer, and now that the fiat-loving Congress Party has been swept out of office, the insane tariffs and import restrictions they imposed – which, frankly, created nothing but a massive importing black market – are being lifted. India will likely reclaim its leadership in gold imports in 2015; and as for silver, tariffs notwithstanding, 2013 imports were at record levels and 2014 will be much higher.
Daily Bell: Where does gold go from here through the new year?
Andy Hoffman: That's quite a short timeframe. I have not a clue, as TPTB love to attack at year-end. That said, they did much of the year's attacking in November this year, ahead of the Swiss referendum. Consequently, it appears to be firming up; and with the news flow getting more bullish each day, as prices remain below the cost of production, it's difficult to make a convincing case of being past, or not far from, the ultimate bottom.
Daily Bell: Why, if the demand for gold is high, does the price continue to recede?
Andy Hoffman: Because of NAKED SHORTING in London and New York, via the same algorithms I have written of for years. The only difference between now and the past is that the volume of shorting has increased, whilst the Cartel's previous attempts to "mask" what they were doing are no longer used. This is why the aforementioned gap between physical and paper markets has never been wider; and why inevitably, it will tear apart.
Daily Bell: Paul Craig Roberts wrote, in a column we carried this week: "In a blatant and massive market intervention, the price of gold was smashed on Friday. Right after the Comex opened on Friday morning 7,008 paper gold contracts representing 20 tonnes of gold were dumped in the New York Comex futures market at 8:50 a.m. EST. At 12:35 a.m. EST 10,324 contracts representing 30 tonnes of gold were dropped on the Comex futures market." Your reaction?
Andy Hoffman: They do this essentially every day, and have been for years. PCR, frankly, knows little about gold trading at all. He relies on what Dave Kranzler tells him who, like me, has been following gold manipulation for years.
Daily Bell: He also wrote: "Massive sales concentrated within a few minutes minimize sales proceeds and are at odds with profit maximization. A rational seller would not behave in this way. What we are witnessing in the bullion futures market are short sales designed to drive down the price of bullion. This is price manipulation." Sound reasonable?
Andy Hoffman: Yes. I have been writing of this phenomenon for 13 years; which has never been worse than it is today, given how much closer TPTB are to losing control of their fiat Ponzi scheme.
Daily Bell: And he asks: "Why is manipulation of the price of gold in the futures market not investigated and prosecuted? The manipulation has been blatant and repetitious since 2011." Do you think there will be investigations?
Andy Hoffman: Why? Why are the manipulations of all markets ignored? Why is not a single person in jail for what happened in 2008, or a single politician impeached? Because evil currently rules the financial markets, which, fortunately, cannot last forever.
Daily Bell: He has an answer, as well: "The answer to the question is that suppressing the price of gold helps to protect the U.S. dollar's value from the excessive debt and money creation of the past six years … In other words, the illegal rigging of the price of gold in the futures market is deemed by the US government to be essential to the success of its economic policy … " Logical?
Andy Hoffman: Yes; but again, PCR is a brilliant politician and economist, but has only been in the "gold manipulation" game for about six months. I have been writing of this since 2002 – as have GATA and many others. This all goes back to the "Gibson's Paradox" article written by Larry Summers in the mid-'90s, essentially making the case that suppressing gold prices enables interest rates to remain low.
Daily Bell: He writes, "The rule of law and accountable government have been sacrificed to failed policies." Too radical a conclusion?
Andy Hoffman: Dead on, and not just in the financial sector, but all aspects of the dying American empire.
Daily Bell: Predictions for 2015?
Andy Hoffman: I do not "invest" in anything anymore, and am not a financial advisor. My gold and silver are my savings and I don't predict what their purchasing power will be in short timeframes, in a rigged market. That said, I have been dead on in my macroeconomic forecasting since the turn of the century and have never been more confident that the global economy will be dramatically worse 12 months now than they are today.
Will TPTB be able to keep stock markets higher amidst the chaos and carnage, as currencies the world round continue to collapse? Will they be able to hold gold and silver prices down as supply plunges and demand explodes? I don't know, but I'll just sit on my metal, sleep tight and wait.
Daily Bell: What about those who believe gold goes down to $700 against the dollar? Any possibility?
Andy Hoffman: The most ridiculous thing I've heard in 25 years in financial markets and anyone making such claims should be steered clear of. At current prices, the entire mining industry is collapsing. At $700 gold, there wouldn't be any mining at all. Ain't happening, or even close. Just propaganda and/or fear-mongering.
Daily Bell: How do you see silver against the dollar these days?
Andy Hoffman: Gold and silver have a 100% directional correlation, as they are both MONEY. Silver is far more undervalued, however, as it is more manipulated (because it is far smaller. When it finally, inevitably breaks out, the gold/silver ratio will surely decline significantly. Please listen to the "Miles Franklin Silver All-Star Panel Webinar" I hosted last month, as a wealth of great information on the topic was disseminated.
Daily Bell: Is silver going to close the ratio gap against gold?
Andy Hoffman: Absolutely. I expect that, in time, the historic gold/silver ratio of 15:1 will be revisited.
Daily Bell: Do you recommend paper gold?
Andy Hoffman: LOL, that's a trick question, right? I will never buy a paper security for the rest of my life; much less, in the world's most manipulated sector. And if anyone thinks "paper gold" is a way to protect oneself against the bankers, they're going to have quite the spiritual experience in the coming years.
Daily Bell: Do you recommend taking delivery? Where should one store gold?
Andy Hoffman: YES! Holding it at home is the best asset protection of all, assuming you do it responsibly and prudently. Otherwise, I recommend Miles Franklin's Brink's storage vault in Montreal – where I keep my personal metal.
Daily Bell: What about other tangible assets? Commodities?
Andy Hoffman: I have no comment. I am not a financial advisor, even though I've been in the financial business for 25 years, and have a CFA. Personally, I believe "financial defense" is the only way to act in today's horrific environment – which is why my only personal assets are my home, my gold and silver and a little cash to pay the bills.
Daily Bell: Are commodity prices going to continue to collapse?
Andy Hoffman: Unless hyperinflation emerges quickly – which it very well may – I expect plunging commodity prices a la 2008, just as I expect interest rates to plunge to zero the world 'round, as the entire world front runs central bank "QE to Infinity."
Daily Bell: What does that tell you about the stock market?
Andy Hoffman: Western markets are trading at all-time high valuations due to QE, PPT operations and in some cases – like Japan – overt monetization. They could just as easily hyper-inflate, like in Venezuela, as plunge, as in 2008. I couldn't care less; I won't invest in the stock market if I live another 1,000 years.
Daily Bell: How much of a portfolio would you allocate to gold or silver?
Andy Hoffman: As much as you feel comfortable with, particularly with prices so far below the cost of production, global demand at record highs, production on the verge of collapsing and news flow as PM-bullish as at any time in our lifetimes. Personally, I hold 90% of my liquid net assets in physical gold and silver, so I walk the walk.
Daily Bell: Any other thoughts?
Andy Hoffman: PROTECT YOURSELF, and do it NOW!
Daily Bell: Resources you want to recommend?
Andy Hoffman: Yes, the Miles Franklin Blog, which publishes for FREE daily. I write five articles per week, as does Bill Holter, and several from our firm's co-founder, David Schectman. Moreover, I do three to five podcasts each week, including my own "AudioBlog" each Thursday.
Daily Bell: Thanks for your time.
Thanks to Andy Hoffman for his no-holds-barred support of gold and the gold market. Andy, of course, works with a gold broker, but that's no secret. He may be talking his book, but we agree with him on a number of fronts. With all the bad news about gold, it's nice to hear from a pro-gold bull.
Andy, of course, is not much of a stock fan. We still see value in equity, given the constant promotion of today's markets. In fact, we've promoted the Wall Street Party as a way of profiting from central bank monopoly money printing. And our suggestions have proven pretty accurate thus far. But just because you can make money in stocks, for now anyway, doesn't mean you ought to neglect other parts of your portfolio.
We have a fondness for gold and silver based on its historical record, which surely stretches back thousands of years. Gold and silver are indeed a store of value in a way that other forms of money, mostly state coins, are not. As Andy points out, central bankers attack gold because it is not an easily controlled money – as paper/fiat is.
Andy obviously understands that private purchases of gold and silver are the best weapon against currency debasement, especially if one takes physical delivery and attempts to ensure against confiscation. Confiscation is usually the end-game of bankrupt empires, as it was of even the most powerful empires such as Rome. Before confiscation occurs assets may be devalued via numerous types of state manipulations, as they are being today. History almost always repeats …