Miners are Better Long-term Value than Tech Stocks
Published in November 3, 2013on
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Vanessa Collette: Welcome to Cambridge House Live. I’m here at the 11th Annual Silver Summit in Spokane, Washington. I’m here with Peter Spina founder and president of GoldSeek and SilverSeek– welcome Peter, it’s good to have you here.
Peter Spina: It’s great to be back here.
VC: Let's start right out by talking about Janet Yellen’s appointment to th Fed. What do you make of it?
PS: I think her nomination is a very positive a development for those who believe in ongoing quantitative easing and that has been the ongoing policy the Fed Reserve through Bernanke and with her nomination and probably eventual appointment we’ll continue to see this ongoing printing programs continue. So she’ll provide a good rubber stamp to ongoing money printing programs.
VC: Being Ben Bernanke’s deputy is she going to be able to do anything differently? Are we going to see any tapering there even more aggressive easing?
PS: Well I think there's different ways that you can influence monetary policy printing is one way, easing up some credit restrictions maybe even guaranteeing some various loan or credit programs ways to you get more credit out into the system so those are other ways that that she may come in and change things but she's made it very clear that one of the main things she is looking for is increasing employment through printing more money.
I don't know how that is really a free-market way of thinking, but to print money for jobs… but we are seeing very weak jobs numbers recently so she most likely will be printing a lot more money to get to that that target that she's looking for.
VC: And how is all this easing that you're speaking about going to affect the US dollar?
PS: It all comes down to supply and demand so the more units of whatever it is whether it's dollars or euros you create the more units it'll take to buy an ounce of gold or silver, barrel of oil or what not so specifically with gold and silver as a monetary metal the attribute is starting to become you know gold and silver's return into the system as money is going to continue to benefit from ongoing a monetary easing and printing so I think we’re really in a key point right now because there's been a lot talking about tapering, there has been a lot I belief that they may have tapered last a meeting or this upcoming meeting or the next upcoming ones but now with the data looking weak again and not a lot of confidence on the economy being able to handle any sort of pullback in the tapering front - there's going to be a really a big move in sentiment, shift in attitude into what gold silver should be in someone’s portfolio.
There’s been so much selling of gold by the Western institutions by western investors have had about 10 million ounces of gold leave the ETF and while that's shifted over into Asia I as has been the process for last couple decades all that wealth is moving overseas but now with the westerners now stopping selling their gold and silver positions, mostly the gold positions, if they’re going to start coming back to the market as buyers you see a lot of difficulty on supply side so that they could become a very bullish thing and we're in a very extreme negative state right now in the precious metals market in the west right now so I think we're going to see a big shift in and psychology in the markets in the gold and silver markets soon.
VC: What options do you think the US government left at this point?
PS: Well the they can continue to use this freshly printed money to run large deficits and try to be this and its Keynesian mentality of being in this conduit a trying to expand the economy through these various government programs but I i think there's something that's starting to come to the forefront which is foreigners are not willing to finance our debt as aggressively and recently saw about 130 some billion dollars of outflows of treasuries- the last I think through July's data so now we have China, Japan, Russia was a big seller of treasuries and we're issuing more and more debt so now the Fed is kind of in a position where the may actually have to increase quantitative easing to make up for this increased supply of treasuries and this need to actually create more money to put into the system by issuing more debt so I know there's a change now in an attitude and what's happening next I really taper actually have to be increasing the quantitative easing programs.
VC: SO how this this ultimately affect gold and silver?
PS: Well again the main thing here's the belief that we were entering this “escape velocity” that the economy would benefit from all this printing, all this money that's being fed into the stock market
the real estate market is another conduit to all this money printing, that that would create enough growth in the economy that they could taper, and that would generate enough growth and tax revenues so on so that they would have to have such easy credit policies so now that that's not happening and you're looking at potentially even more money printing and having it is easy credit standards go on for years and years and just kind of like Japan were you just can't get out at this cycle - main street’s going to start looking at gold and silver a lot differently again so that's very bullish for the gold and silver market but again it's the psychology of a main street and Wall Street at this time it's still quite negative - they still haven't figured out, but they're just about I think to figure out that things aren't the way they thought they were and gold and silver as money is going to come back to the forefront.
VC: Let’s talk specifically about some of your projections, you're the author of a weekly newsletter the gold and silver forecaster, where do you see silver going in the short term and long term?
PS: Well Silver is working through this very extreme, negative state, the silver market is kind of two extremes we had silver hit fifty dollars and over shot itself to the upside in the short term there now the opposite happen we've come down to even below twenty dollars an ounce which is an excellent opportunity but the negative sentiment and attitude towards silver right now is really amazing from a contrarian standpoint this is an amazing – you can’t get much more negative than we are right now so in the short term I think we're to be lifting off this extreme negative state and we’ll kind of have to see what happens with the next Fed meetings but if there's no tapering and coming up next couple meetings I think that will help to benefit the monetary metals. Silver is starting to move back up to the mid-twenties I think that will probably see $24-26, it’s kind of a resistance area technically but we could see Silver kind of hover around that area, consolidate for some months but eventually will see go to upper 20s around 30. Mid to long-term I expect fully that it will retest fifty dollars an ounce and much higher in the coming years.
VC: And what about gold?
PS: Gold as well, gold is going to help lead silver and once gold starts to move as it did on the downside silver was a much large degree to what gold is doing, so on the upside silver will move a lot faster. You know right now we’re around a sixty to one ratio so sixty ounces of silver will buy one ounce of gold - that is a lot higher than we have been in the last few years. If you look at how much gold and silver there are in the earth, that’s about a 12 the one ratio and historically it's been around a 12 to, I think, sixteen ratio. So it's very likely that will return back down to that ratio so silver will outperform and its kind of a leveraged way to invest versus gold. So at this sixty, sixty-five to ratio right now I think this is a very interesting, exciting time to be switching. Even if you are in gold then you want to move some over to silver right at this time.
VC: Peter how well do you think the silver stocks are going to whether this negative sentiment that you’ve discussed?
PS: Sure. Well it depends which started stocks you're talking about – if you’re looking at the grass root exploration companies who are always constantly needing to go to the market to finance and raise cash, they are in a very difficult position right now. Those who actually can find capital are going to be issuing money at very low share prices, so they are going to dilute their share structure and that's not, as investor, you're going to lose a lot of leverage in and it's a risky time. When you start looking more advanced development stage companies, producers, they’re trading at very low valuations, very attractive valuations right now and buying some these companies for sixty, seventy, eighty percent of what they were trading at a couple years of years ago is quite amazing. It is a question of timing, you'll never be able to time the top of the market and will never be able to time the bottom of the market and right now that's kind of the question where the bottom, have we hit the bottom here in June and we are now lifting off of that or are we going to have to retest that again. So and it's a very difficult thing to predict short term but I would say that if you can accumulate at these levels right now in the coming years you'll look pretty good.
VC: Peter, the S&P , Dow and particularly tech stocks have been hitting new highs. What keeps you from jumping ship and investing in the tech sector?
PS: Well I think it's its that there's a lot of these financial bubbles happening and its being fed by the Fed Reserve by the easy money policy - so you look at the tech sector the valuations they’re very high, and there’s a lot of exciting stories out there, things I would've liked to invest in if they were a lot lower valuations than right now. It's kind of- its it's a bit of a bubble mentality and it's not as extreme as it was in the late 90's but I can’t justify buying some these companies were 2,3,400 P/E ratios when you can buy some miners who are trading at single digit P/E ratios.
VC: So fundamentally what is it that you like about mining stocks?
PS: Well they have leverage to the price. So a company is producing silver at a cost of say fifteen dollars an ounce, and the price is over the twenty dollars an ounce, and they're making five dollars and ounce. Now if silver goes back to thirty their profits increase it goes up , double, triples there from that level so you know the leverage that the miners provide is very enticing and they should outperform the silver price when silver starts moving up.
VC: We have a question from one of our viewers that was asking if the gold-silver ratio price is met- isn’t that going to make electronics and solar panels unaffordable for the middle class?
PS: Yes, I think that what we'll have to see is when the this monetary situation plays itself, this debt problem plays itself out and we see gold and silver at record highs, its going to hurt, you’ll going to see problems in the industrial demand side especially for silver. But it's going to be overwhelmed by the investment demand. So yes it may cause those problems and you'll see some decrease of demand from that side but again 100 million, 200 million investment demand is peanuts. There's trillions of dollars floating out there so it'll overwhelm the loss in industrial demand.
VC: Well Peter, it was a pleasure having you with us again today and we hope that you enjoy the rest of the show!
PS: Great, thanks for having me on.