Announcer: You're listening to the weekly wrap up on Sprott Money News.
Craig: Greetings once again from Sprott Money News and sprottmoney.com. It's Friday, December 7th, 2018. And this is your weekly wrap up. I'm your host, Craig Hemke. Joining us as usual on this infamous date is Eric Sprott. Eric, good morning.
Eric: Very infamous. And it's been a good week for the first week of December. The prices of the metals seemed to be firming up here. And some of the things that we might have anticipated in the market seem to be manifesting themselves. So we have a lot to talk about.
Craig: That's right, and only 17 days left of holiday shopping. Eric, you got your Christmas shopping done yet?
Eric: Let me think about that. I don't think so.
Craig: Out to the mall this weekend.
Eric: It's way too early, Craig.
Craig: I see. Well, okay. There you go, perfect segue. It's never too early to stop by sprottmoney.com to do your holiday shopping, Eric. Sprott Money, of course, has an exciting holiday catalog that is one of the most looked forward to things of the year. And we have a giveaway that goes with it now. Anyone can make a purchase from the holiday catalog any time over the next week before 5:00 Eastern next Friday. And if you do so, you'll automatically be entered for a chance to win five Sprott silver rounds. That's about $100 Canadian value. So all you got to do, go to sprottmoney.com, make a purchase, and you're automatically entered with a chance to win five silver rounds. That's a cool deal. You can go to sprottmoney.com or of course, call it 888-861-0775. Again, that silver is going about 14.60 an ounce, this morning up 30 cents on the week, Eric. And gold's up 20, 22 bucks, pretty good week.
Eric: It's been a good week. I think the best part of as I reflected back to our conversation last week was kind of the setup that we could see manifesting itself where stock markets were weak, bond yields were crumbling indicating something. We had huge problems with various companies, whether it's GE or PGE, the fangs in Canada, the pot stocks, the cannabis stocks. And you had this sense that the markets were different. And, of course, then we whir into this week and we just give them like the biggest bop of all time of 800 points on Tuesday. And then yesterday, we were down at one time of 800 points. So there's a lot of things that are kind of shaping up that would take people to gold. I think every day we see new information that takes us there.
Craig: It sure looks to me that the Fed is behind its own curve at this point,in that the way the bond market is rallying. You and I talked about how it seems like the ten-year note couldn't go past three and a quarter percent without crashing the stock market. And now it's all the way back to 2.9, the two-year notes under where it was before the last Fed Funds rate hike back in September. I mean, is the bond market signaling an imminent change in Fed policy, Eric?
Eric: It would appear that way. I should share a little story with you. I was saying to my wife...and God bless her. So I try to figure out exactly why the market's down 800 points. And she said, "Well, you know what, it's the trade war and something about a curve," which got me laughing, because it's, like, out of the mouth of the uninhibited, something about a curve. And, of course, the curve, the inverted bond yield curve is really an indication of either, one, we're going into recession, or the Fed is out of line. The bond market is not acting in line with administered rates, which is what the Fed administers. You got to take your pick here. We're going to have a recession or the Fed has made a mistake. And neither one of them, of course, creates a positive outlook for equity securities.
Craig: In the news, Eric, we had a pretty lousy employment report here in the US, and earnings aren't growing either. It would sure seem that the Fed is going to have trouble raising as we go into next year.
Eric: Well, it looks that way. I mean, the number about 155 for the month is kind of weak or neutral or whatever. And I gather the wages were up by 0.2, something like that, but the work week was down by 0.1, which is equivalent to 0.3. So the employee wasn't getting any more take-home pay that week, so yeah. And then we have the signs of auto sales being weak, housing sales been incredibly weak all around the world now, even probably more so in Canada and Australia and the U.K. than yet has yet manifested in the US. But we see it everywhere as these mortgage rates kind of perk up here. And plus, we have the scenario where lots of companies are having trouble, GM cutting 25,000 jobs, rumored that Ford's going to do the same. Of course, all of the governments, municipal, states, federal, they all have their own issues with the unfunded liabilities. I mean, when is this going to come home to roost here? I mean, it's just...you read stories about some of these states and how much money they owe and then they just can't get out of it. And the federal government, who says we're going to take care of health care for all these people, there's just no way. So, those are longer-term problems. But maybe as the market starts breaking here, people start to bring those longer-term problems more into focus, because if you don't get the stock and bond markets up, all these pensions...I mean, imagine what the performance is going to be this year. They're supposed to have 7% performance based on their bogeys here. Man, they looks like the way it's going, they won't have anything from the stock market. And bonds, I'm not even sure whether bonds are probably flat on the year. It's not very good in pensionville here.
Craig: And gold is on its way back to trying to break even on the year as well. And it needs about another $50 or $60 back to the upside. And if it runs the usual course of the last four years, it's going to rally here in last part of December and into the new year. We've got some interesting bits of news out there that's coming in the next couple weeks. Of course, in two weeks, Eric, we've got that December FOMC, but next week brings that vote on Brexit next Tuesday. Do you think that might have a little impact and shake things up?
Eric: Well, it might, because I think everyone's in a very untenable position over there. I mean, it's not the end of the world what happens, particularly for us over here. But over there, it makes a difference. And probably worse in Brexit is what's going on in France these days, the fact that you got to have 99,000 policemen out there on the weekend to protect property, is a little bit mind-boggling. I mean, 99,000 policemen, my God, it's like a small army or large army for that matter. They have their issues, the whole EU thing with Italy defying the EU, Britain with their problems, France with their problems. It's not a very pretty sight over there.
Craig: And are you watching the European banks as well these days, Eric? I mean, Deutsche Bank just keeps making new all-time lows.
Eric: I don't specifically look at them, but I do know, like, as a group, in fact, there's some data on the world's most, whatever the words they use is significant banks. And my God, they're down, like, 33% their abouts, okay, which means they're in a bear market. Between the fangs and the banks and these various indications of bear markets, I mean, there's a lot of stuff that's breaking down here. Of course, it hasn't helped the whole trade war thing and the arrest of the CFO of Huawei in Canada because they're breaking some US rules. I mean, it just got the Chinese in a tizzy. I don't blame them quite frankly. I mean, that's kind of almost unheard to see [inaudible 00:08:21] of all people. But anyway, I mean, we'll see how it plays out. But I can't imagine this trade thing ending any too smoothly.
Craig: And Eric, would you add a couple comments on the stock market action this week because we've almost had a couple of meltdowns due to just simply computer trading. And that's something that people need to be aware of.
Eric: Yeah. Well, there's some funds called CTAs that have sort of technical levels where if the markets breached those levels, they have to sell. So, for example, I don't know where the first level was. Let's just say it was X. They had to sell 33 billion of securities when the S&P went through X level, which they did. That's what caused the 800 point decline. Then as Tuesday closed, the next level was 2711 on the S&P. Well, it closed below 2711. They had to sell out another 32 billion of securities. And if the market had ever broken 2574 on the S&P, then they'd have to sell approximately 120 billion of securities. So you can just imagine the waterfall kind of declines you're going to experience. Well, we did experience. We went down 1,600 points in a day and a half of trading. So you have these funny setups where guys are forced to sell. These would be people who when they think it's going to bear market, "Man, we got to get max bearish share all of a sudden, like sell everything." So it's not like the standard pension fund that maybe tweaks it at the margin raises 5% cash or some. These guys go from 100% long to zero long, maybe max short, who knows? So they cause a lot of disruption in the stock market.
Craig: So I guess putting it all together here on a fine early December Friday morning. We've got stock market volatility that seems uncontrollable by humans. We've also got the bond market that's rallying like crazy, potential big change in Fed policy coming. We've got Brexit other news that's out there. We've got civil unrest. It sounds like a pretty good recipe for owning gold. And it's starting to perk up, yeah. What are you going to look for as we go into the end of the year, shares, that type of thing?
Eric: Well, one of the things also that happened is in the month of November, there was 21 tons added to gold ETFs in the world, which is a good number. And I would say that trend is just starting. And as you know, we've had a number of high profile money managers come out and recommend gold and now talk about gold. So you can sense that there's going to...and it's the one thing that's hanging in there. There's nothing else hanging in. It's the only thing. And I look at the Bitcoin plunging again down to, whatever, $3,300, like gold, not only hanging in. It's going up, and the stocks are starting to go up. So we're making that sort of demarcation between the good guys and the bad guys here. It looks like we're going to end up on the right side of the ledger here.
Craig: It certainly looks that way and it sure sets us up for an interesting year next. One last thing before we wrap up, I want to talk again about the holiday catalog from Sprott Money because this really is a special deal. And if you're looking for Christmas gifts for your children, your grandchildren, nothing better than a silver round, start teaching them about sound money. That's all part of the fun of the Sprott Money holiday catalog. You can go to sprottmoney.com. There's one other exciting offer we want to mention today. It's a stocking stuffer. You can buy nine Sprott gold wafers and get one free. Hey, free gold. That's pretty good deal. Yeah. Did authorize that? You might want to go ahead and let them know. That's a heck of a...
Eric: I'm feeling poorer as we speak.
Craig: Yeah, yeah, take some gold off Eric's hands. You can purchase this online or you can call 888-861-0775. Now, you mentioned the holiday catalog for your chance to win those Sprott rounds too when you place your order. Eric, I tell you, it's going to be a very interesting week next and a really interesting remainder of the month and year. I think we're going to have a lot to talk about as we close out the year.
Eric: Sure. And I'll just give you a little anecdote. I was at a gathering of my graduating class, which I almost hate to say what year it was, but it was 1965. So, I met with ten other guys who are all grandfathers and I brought a whole bunch of these Sprott rounds with me. And I said, "Okay. I'm going to pass these rounds. Whatever number of grandchildren you have, just take the equivalent number of coins." Well, one guy, I know have nine grandchildren, he nearly cleaned me out, anyway. They're a great gift. And I love giving coins away and I love being able to seize sort of the magic of the eyes of the grandfather giving away too and the kids love this stuff too. Anyway, it's a great present.
Craig: You're absolutely correct. And you know what? Anybody that ever has collected metal, you're stacked metal, all you got to do is hold in your hand once and you know you've got something special, something substantial.
Eric: Oh, yeah, for sure. That's all good and the stocks have acted well here. Kirkland hit a new high yesterday in the Canadian price. I'd haven't checked to see whether there's a new high in US but it must've been awful darn close. Things are well there. Our friends at [inaudible 00:13:44] probably will have some kind of news release coming up, which I hope will be very interesting, might confirm the sort of tenor of gold that they have. And one other thing that might be happening here in Canada is that it...and I mentioned it before, it looks like the OSC's going to start investigating some of these short-selling things that go on in our exchange.
Eric: And I've seen a lot of small stocks, like penny stocks go up a lot because maybe they're saying, "Okay. Hold on. If they're going to start looking, I better stop doing." So that might open things up for us as well.
Craig: Well, that would be a very welcome development, no doubt about that. Please keep us posted on what you hear up there because that would affect a lot of folks, no doubt.
Eric: Undoubtedly, yes.
Craig: All right, my friend. Well, thank you for all your time. At this point, I wish you a great weekend.
Eric: Okay, Craig, all the best to you too.
Craig: And from all of us here at Sprott Money News and sprottmoney.com, thanks for listening. Have a great weekend. We'll talk to you next Friday.