Podcast

Robert Mish: Front-Line Evidence That We Are Nowhere Near a Gold Bubble

At closest, we're at a "2" out of 10
Friday, March 9, 2012, 4:46 PM

Robert Mish has been a precious metals dealer for nearly 50 years and knows what gold bubble mania looks like. We are nowhere near that stage, in his opinion.

Instead, he sees a U.S. populace largely unappreciative of holding precious metal as a store of wealth, and engaged in a slow process of dis-hoarding their gold and silver to eager foreign buyers, who are more than happy to take the bullion back to their shores.

In terms of where we are on the gold mania spectrum, he sees us at a "2" out of 10.

But he foresees a very rude awakening ahead, as the populace eventually wakes up to the increasing damage that our over-debted global economy is doing to the purchasing power of world currencies. Because when the general investor finally realizes the protection the precious metals offer against currency debasement, much of the retail supply will already be out of the system, in very tight hands and largely overseas.

Moreover, when supply gets tight, there will be more challenges to obtaining physical bullion during a buying mania than there were during the last mania in 1980. There are many fewer local sources to exchange bullion these days, as much of that business is now transacted by online vendors dependent on mail delivery to ship product, and they are more vulnerable to supply chain disruptions.

Be sure you're aware of how the form in which you hold your bullion will affect the price you get during a buying frenzy, when refining capacity is overwhelmed. You may find that your gold or silver sells at a hefty discount because it's not in a preferred format for trade.

On What a True Gold Mania Looks Like

The phone calls were ringing so much we could not answer them. We had to just put all our lines on hold so we could service the customers, and we wanted to service our own customers first.

We would come in to open at nine in the morning and there would already be a line out the door and down the block. Sometimes the line was mostly buyers; sometimes there were sellers. We would run out of metal. We would run out of anything. And we would have to divide the line into two lines. We would take the sellers in first, get some product, and sort it before the buyers were let in.

And people were not very discriminating then; they were panicking. By the time it peaked in January 1980, there were people out there who did not even understand free market economics or precious metal economics; they were just buying because it was fashionable or because it was going up forever. Those are more the makings of a bubble; today most people are coming in to sell.

On Today's Typical Seller

The typical seller today is really the opposite of who they were 30, 40, 50 years ago. People used to save, either through a bank account, or keeping some coins around, putting away silver dollars when they came back from Reno or Lake Tahoe. They would be buying some interesting furniture or jewelry. And then they had income in excess of their expenses. Today, so many households are stressed having expenses greater than their income or servicing a lot of debt that they are starting to sell the things, the heirlooms, that they so prized before. So we are seeing people sell their Rolex they do not want anymore or cannot afford to keep, their old jewelry, their parent’s jewelry, and belongings that they inherited. The coins they collected when they were a kid. it is sad, in a way, because what we are seeing is the dis-hoarding of a culture.

On Today's Typical Buyer

Well, in the United States, the typical buyer is perhaps someone who has taken the Crash Course and has studied what is happening to our nation and understands that they have to protect themselves from the coming inflation and social ramifications of that inflation and the debt burdened economy. Big money is buying, but for every one buyer, there has got to be five sellers here, and I am sure that is similar among my colleagues around the country, maybe even more so. Because over here we are in a wealthier area, and I still have more sellers than buyers.

A lot of it is going overseas. A lot of the coins that came to America over the decades, over the generations, either through the fact that we had the money to buy them or through immigration or through the spoils of war, it is all going back now to the home countries. Especially if it is a home country, where their economies are rising and the people are saving rather than spending.

Just last night we had two visitors from China, colleagues of mine in Shanghai, they flew here just to see me, and they flew back the next morning. They cannot get enough coins in China; they are buying everything back that came here when the people in China could not buy their own coins. Next weekend I have more visitors coming. Coin shows, which have been all over America, are now appearing all over the world. There are now major coin shows in gathering marts in Singapore, Tokyo, Beijing, Hong Kong. It used to be once a year; now it is three, four times a year. Big auctions that used to be held in the United States are now organizing in Hong Kong and other countries.

So we are seeing a movement back in the opposite direction, and it is sad [for the U.S. market].

On the Importance of Physical Form

Chris Martenson: So you mentioned refinery problems. What is a refinery problem?

Robert Mish: A refinery problem is where a dealer buys the scrap gold and the scrap silver and his refiner cannot get it processed for several weeks or months. And that squeezes his cash flow so he has to pay less and less to the public.

Chris Martenson: So if I walk in with a bag of junk silver, it is 90% silver, it has always been trading well. But if we are in a real heyday, your refiner says, "I am backed up 11 weeks. I can take that in 11 weeks." Meanwhile, prices are gyrating. You are going to look at me and say what?

Robert Mish: I am going to say, "Mr. Martenson, I wish you had come in here with pure tradable silver or something that is exchange-ready."

The marketplace determines the choice for medium of exchange. If you have silver in any other form, if it is in odd form such as coins, broken spoons, and knives, or whatever, and I have to have it refined in order to get it back in a marketable form, it is going to suffer a discount. And that discount is going to be greater the longer it takes to turn that around.

Chris Martenson: So anything that has to cycle through a refinery has that refinery risk. What was the discount that got applied at its most maximum in the 1980s?

Robert Mish: In the 1980s, when we were about eight weeks backlogged and not everyone even had a refiner relationship and [thus] had to rely on other dealers who did, it got to about a 30% discount for having the wrong form of silver versus the right form.

Click the play button below to listen to Chris' interview with Robert Mish (runtime 28m:19s):

iTunes: Play/Download/Subscribe to the Podcast

Download/Play the Podcast (mp3)
Report a Problem Playing the Podcast

Or click here to read the full transcript.


Robert Mish is the proprietor of Mish International Monetary Inc. in Menlo Park, California. He has served as a major dealer in bullion and numismatics for clients worldwide for 49 years.


Our series of podcast interviews with notable minds includes:

Related content

54 Comments

Grover's picture
Grover
Status: Platinum Member (Offline)
Joined: Feb 16 2011
Posts: 507
End game

Davos wrote:

I think those 2 are afraid of Blythe the queen master of paper with an unlimited digitial line of FR credit---who essentially trades the amount of physical silver actually available for investment, 891 times over each day.

Sherman,

You are probably right. The queen demands much respect. Nevertheless, if all the available inventory were to be removed from COMEX, wouldn't her magic wand magically turn to rubber? Her clothes would suddenly appear to be invisible. What other mainstream PM viaducts are there?

Mark_BC,

I agree that the COMEX is manipulated beyond belief. Unfortunately, most of the decision makers look to see which tune COMEX is playing. That alone means that COMEX controls much more influence than they deserve.

I agree that China and India and other accumulators are gathering as much PM as they can without trying to attract attention. When (or if) do they decide they have enough in their possession (meaning that it isn't worth prolonging the charade to gather more) and start the end game so they can cash in their winnings? That is what I'm waiting for.

Grover

Davos's picture
Davos
Status: Diamond Member (Offline)
Joined: Sep 17 2008
Posts: 3620
Grover wrote: ... if all the

Grover wrote:

...

if all the available inventory were to be removed from COMEX, wouldn't her magic wand magically turn to rubber? Her clothes would suddenly appear to be invisible. What other mainstream PM viaducts are there?

...

+1

Physical will determine the price.  

Link to Jesse’s Cafe’ for the entire read. Ms Masters gained notoriety for pioneering credit default swaps, blamed by many for the financial crisis. She acknowledged in a 2008 speech that she had been branded “the woman who created weapons of mass destruction”, although she defends the products, saying the people using them were at fault. 

✓ “One thing we know about people individuals high in psychopathy, through the literature, they don’t think there is anything wrong with them—it’s just the rest of the world that is screwed up.” (Source).  Just saying…
2OLD4OKEYDOKE's picture
2OLD4OKEYDOKE
Status: Bronze Member (Offline)
Joined: Mar 28 2011
Posts: 72
Whither The Fundamentals?

"Blythe .... with an unlimited digitial line of FR credit -- who essentially trades the amount of physical silver actually available for investment, 891 times over each day."

Yeah, all that computer automated trading by the huge moneys. WTF (pardon my English). Whither The Fundamentals? And then the CDSs. Some dollars are more equal than other dollars.

The NYT guy has written about this, whether gold follows the 'laws' for commodity markets or the 'laws' for currency markets or the Hoteling model -- one of many problems with the concept of a gold standard for the 21st Century. The gold standard ... and that's how we will get to markets that are not manipulated by TPTB ????? Meanwhile, I guess everything follows the "laws" of Queen Blythe.

I watch the gold-silver price ratio. To me, that's what it's all about. There's like one of those lines -- is it resistance or is it support? I mean gold-silver at 50.

BTW: About unlimited digital line of FR credit. Check out this little-known provision of the American Monetary Act -- YES, eliminate FR banking! What a concept!

Check out recent pre-publication online release of a chapter from upcoming book by Greg Coleridge on impact of the FR banking system (to be published by American Monetary Institute) --

createrealdemocracy.blogspot.com/2012/02/banking-political-influence-how.html

beginning with this quote --

"And the banks -- hard to believe in a time when we're facing a banking crisis that many of the banks created -- are still the most powerful lobby on Capitol Hill. And they frankly own the place." -- Dick Durbin, US Senator, Illinois, 2009

capesurvivor's picture
capesurvivor
Status: Platinum Member (Offline)
Joined: Sep 12 2008
Posts: 941
structuring

I wanted to post this somewhere and here looks pretty good. I get a free newsletter that offers advice and seminars on ex-patting (not in the cards for me). She posted these three example, with number two being possibly relevant to a bunch of CM readers. Then Google "structuring" and see how the IRS is screwing guy #2. Are we living in a developing fascist state or what?

CS

"Here are three examples from my experience. There are hundreds of similar cases being argued throughout the United States right now.

Example #1: Offshore Account

"I know a single father of three who makes about US$80,000 a year as a self-employed consultant. Eight years ago, he moved some money offshore, to diversify and for asset protection. He never filed the necessary IRS forms, and he failed to report the account on his tax return.

"Unfortunately for him, the account was at UBS Switzerland. He was reported to the IRS, which has decided to prosecute him.

"Here is the rub: He did not have any unreported or untaxed income...which is to say, the account did not earn any interest, and the guy would not have had to pay any additional U.S. tax had he reported it.

"That's irrelevant now. In settlement negotiations, the man is facing up to one year in jail and a fine of US$540,000.

"He has little money left and will never be able to pay the fine. What is the point of the prosecution? The IRS gets to issue a press release showing a conviction in this city. This press release will forget to mention that there is no tax loss in the case, but it may induce many others to come forward...thereby increasing revenues on the back of an everyday citizen who made a mistake.

Example #2: Cash Transactions

"A retired U.S. citizen I know, living in California, age 60, is concerned about a major devaluation of the U.S. dollar. He decided a while ago that he wanted to purchase gold. He owns a condo with some equity and has a few hundred thousand dollars in retirement money.

"As a regular guy, he can't afford to buy large amounts of gold bullion, so he purchased gold coins from a local dealer. He paid cash for these coins so the dealer would not have to wait for a check to clear before handing over the merchandise. He has never sold any of his coins, thus there is no tax issue.

"What did he do wrong? He took cash out of his account once or twice a week, always less than US$10,000 at a time, to make the gold purchases. To the IRS, this can qualify as "Structuring," which is a crime.

"The man's bank sent two suspicious transaction reports to the IRS and closed his account. He had been a client of this bank for more than 30 years, yet the bank made no effort to warn him in advance of the reports they made to the IRS or to offer any assistance. They just turned him in.

"As a result, the man is looking at a fine of up to US$100,000 and possible criminal charges that could incarcerate him for up to five years. Add to this a minimum of US$100,000 in potential legal fees, and the reality for this guy is that he and his family could be wiped out. Again, this is all the result of an innocent mistake.

Example #3: Dual Citizen

"Another client is a 55-year-old engineer who has been working at the same job for 20 years. He is a dual citizen of the United States and the United Kingdom. When he moved to the States, he rented out his U.K. home. Ever since, he has deposited this rental income in a U.K. account.

"The man has filed tax returns in the U.K. reporting the rental property, but he did not report it, or the U.K. account, to the IRS. Had he reported the property and the related rental income all along, it would not have made any tax difference in the United States. In fact, reporting the rental could have reduced his U.S. tax, thanks to the depreciation he could have claimed.

"In 2009, this man learned of the requirement to file an FBAR form and entered the IRS Voluntary Disclosure Program. As a result, this story has a happier ending than the others. This guy will not face criminal charges. He will, though, pay a fine of approximately US$22,000.

"Cases like these and the hundreds of others currently being argued have changed the way that tax attorneys deal with clients. While we once would say, 'Come clean, be honest, and let's get through this,' now we advise, 'Be afraid...be very afraid.'

"It is this culture of fear that is pushing many Americans to look around the world for places where they might live better, freer, and less fearfully.

"I'll note that these changes are not the result of one political party or another. They represent a permanent change in perspective by the U.S. government in general, in how both parties view their citizens. Changes to the tax laws, and in the ways the laws are interpreted, began under George Bush II with the Patriot Act and continue under Barack Obama with the Bank Secrecy Act and the HIRE Act.

"In the face of a troubled U.S. economy and out-of-control spending, the U.S. government desperately needs to expand its tax revenues, and the IRS has decided that it can raise more money with fear and violence than with honey.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Login or Register to post comments