Transcript for Turd Ferguson: The Inexorable March Higher For Precious Metals

Below is the transcript for the podcast with Turd Ferguson: The Inexorable March Higher For Precious Metals

Chris Martenson:  Hi. Welcome to another podcast. I am, of course, your host, Chris Martenson. And today, we're speaking with Turd Ferguson, founder and proprietor of the precious metals weblog, Turd was a licensed securities professional for nearly 20 years until leaving the profession in 2008 — disillusioned, apparently, — to become a self-described serial entrepreneur. Since then, he's become one of the more popular, and for sure, one of the most colorful voices advocating for gold and silver ownership by the average investor. Every month, hundreds of thousands of readers visit his weblog eager for his analysis, as well as his very specific short-term price predictions for where the metals are headed. Two-thousand-eleven has been characterized by tremendous price volatility, both gold and silver experiencing that. And at the time of this recording, it looks like both are starting to show maybe some breakout potential here.

Turd, I'm thrilled to have you on this week [to] help make sense of all this volatility and drama in the precious metals. Welcome.

Turd Ferguson:  Thank you, Chris. It is my pleasure, and it's a real honor to get a chance to visit with you. So, fire away.

Chris Martenson:  Oh, the pleasure's ours. So, listen, you dedicate your website to, and quoting here, "the end of the great Keynesian experiment." So we can already infer a lot about your level of confidence in the economic status quo here, as well as why you're so focused on precious metals — by the way, the same reason I focused on them awhile back. Before we dive into the details here, can you give us a little more background about your macroeconomic worldview, your expertise in the direction at which you come at this material?

Turd Ferguson:  Well, I guess we come at it from a number of different directions. I guess in the end, it's almost just a real-world experience. The numbers are what they are. The facts are what they are. And to the extent that the media or the shady powers that be that we all talk about would want to convince you otherwise. And I think we are rapidly approaching the endgame. And it is an endgame of an exponential growth of debt that cannot possibly be serviced and can't possibly be grown out of, as they say. 

And so knowing that that moment is coming, I guess it kind of falls upon all of us to – if we've seen, if we've had a vision of that future, we're not supposed to just keep that candle under a bushel basket. We're supposed to go out and try to tell as many people as we can to warn them, and that's what we try to do at TF Metals Report.

Chris Martenson:  So the exponential accumulation of debt can't go on forever, you say?

Turd Ferguson:  No. I guess if you ask Paul Krugman, he probably would tell you that it could. 

Chris Martenson:  Yes.

Turd Ferguson:  But at some point, no. With the average maturity now on Federal debt has actually crept up some, it's closer to five years. But the average, I guess, interest rate on that debt that the Federal government's paying is somewhere in the neighborhood of four percent, and it equates to $300 to $350 billion dollars a year of interest debt service alone in the budget. 

Those rates, as everyone knows, are historically low, and certainly aren't reflective of economic conditions or ongoing inflation. If rates were ever to – well, let me step back. If the Fed were to exit the interest rate market and rates were allowed to seek their own natural equilibrium of buyers and sellers for bonds, interest rates could go to 10 percent, could go to 15, whatever you would think that buyers of fixed income would demand for the risks that they are taking, especially inflation risk. And then again, if you triple the interest rate that the Federal government is paying on its debt, well, then the debt service is going to triple, and then you have to borrow more money to try to fund the ongoing operations. And the whole thing rapidly spins out of control, and that is where I think we're quickly headed.

They always say as a credit card holder, you're supposed to pay off your interest, at least your interest, every month, because you don't want that law of compounding interest working against you. And, well, unfortunately, it is working against all of us at the present time.

Chris Martenson:  Yeah. I've written about that great endgame debt spiral as well. It's just a natural one. It's the one Greece finds itself in, in what? Two-hundred-twenty percent plus for one-year paper. And it's a very simple spiral to understand. The more your interest rates go up, the more you need to borrow to cover the interest rates. And the more you borrow, the more your interest rates go up, and we just spiral around that. Off we go. So I…

Turd Ferguson:  Exactly.

Chris Martenson:  I see that as kind of an endgame. And so if the Keynesian experiment is approaching its end, which means that we can't just constantly inflate our way out of every difficulty – and by the way, we tried to inflate our way out of good times too. It didn't matter. Right? Good times, bad times, money was created well – and by money, I mean credit – well in excess of underlying nominal GDP growth, and it really was independent of whether it was a crisis or a good moment. And so here we are, addicted to this grand credit experiment coming to an end, which in your view also means the collapse of the U.S. dollar's purchasing power as we know it.

Other analysts, myself included, have also been advocating that investors gain a lot of exposure to gold. Silver, a less extent in my case, has some defense against this outcome. I like both metals, but for actually entirely different reasons. How do you think of gold? And when you look towards the future, what do you predict there? And the same questions for silver when you're done with that.

Turd Ferguson: Well, let me stop you for a second, Chris. You mean in terms of price?

Chris Martenson: Yeah. Yeah.

Turd Ferguson: Or trend?

Chris Martenson: Or purchasing power preservation, however you want to look at that.

Turd Ferguson: Okay. Well, and again, I try not to make it too complicated. You mentioned earlier that the 20 years I spent in, we'll call it the financial services industry, in securities industry. I found that so many of these topics really get confusing to people very quickly. And not to make it sound like we dumb it down or anything, but I think to get people to really understand, you got to keep it on a rather simple level when you're approaching the masses. And so the way I put it for gold and silver so that people understand why you would buy them, the gold protects your wealth. It is the only currency that doesn't have – well, then here's a term for you and I. For everybody, it doesn't have counterparty risk. It is what it is, and it has been money for thousands of years. And so if you want to protect your wealth versus some wealth destructive event, you own gold. If you want to protect your purchasing power, a similar precious metal that functions as money is silver.

Purchasing power of anything, just because it's less in price. You can't walk around with one gold coin worth $1,600, or $2,600, or $4,600 in your pocket and expect any barter with it. But in terms of if the day ever came that you did need to, for whatever apocalyptic reason, you needed a store of money that you could trade with, silver accomplishes that. And again, because they are money, they can't be devalued. And as the U.S. dollar and other fiat currencies are devalued, you continue to see the value of gold and silver go up. 

Where do they go from here? Gosh, that sure is hard to say. And it's hard to say exactly how fast they will go, but if anything, I know they're not going to be going down over long periods of time. People have given me a lot of credit for being able to help people control their emotions when we get into corrective cycles, which invariably come in any bull market. You get short-term corrections. And the reason I'm always so confident that a correction is going to turn is, well, because the fundamentals are so strong. 

Prices may go down reflecting a short-term change in trading sentiment, but the long-term fundamentals are so strong because of that debt spiral that you and I just talked about and the devaluation of fiat currency. Therefore, as long as those fundamentals stay the same, gold and silver are going to keep going higher. How fast is going to depend on – and how far – is going to depend upon how quickly the spiral continues to play out.

So I have my targets for 2012, and frankly, they are targets because they are a continuation of the trend that we've seen from early part of this century. Gold has averaged about 20, maybe 25 percent a year. It allowed me a year ago at this time to project $1,750. We certainly have seen that and beyond, and we're trading as we talk near $1,800. 

Let's take the closing price on December 31st and add 25 percent to it. And don't be surprised to see it trade somewhere near there in 2012. That's for sure – $2,300, something like that.

Chris Martenson: Yeah. I asked about prices and targets because a lot of people expect to see it. I actually switched off the targets a while ago. I'm more in the view of – Eric Sprott gave a nice presentation at the KC Summit, and he said, "Look. Who cares about price? Let's look at the ratios that matter. How many barrels of oil can an ounce of gold buy? How many ounces of gold does it take to buy a house, a car?"

Turd Ferguson: Yeah.

Chris Martenson: Other things. And so when you look at many of these things that you care about, because that's what I care about. I care about I earn money. I save it. And when I get to the future, I'd like to be able to obtain the things I hope to obtain. So what I really care about, how are the trends out there? And right now, all of those key trends in terms of houses, oil, food, stocks, anything I care about, when you measure it in gold, you find you're just really in a very, very powerful bull market at this point in time with fewer corrections in it than you see with the dollar price. So instead of worrying about the dollar price of gold, I'm worrying about the gold price of other things. And it's been a useful sort of flip for me.

Turd Ferguson: Right. And, well, and along those lines, it really gets back. On my side, it gets back to are you stacking it? And why are you holding it in the first place? If you're going to get all upset because the fiat price of gold went down a couple hundred dollars in September, well, why are you holding it in the first place? Because I can assure you by next year at this time, or two years at this time, it's going to be higher than it is today. So if you're going to be upset about a drop, it's only probably because you are trading futures, or ETFs, or something, and it caught you in a downdraft. But if you're buying it simply as protection, if you're buying it because you know what's going on in the world and you can see how this is all going to end, hey, take advantage of those drops and use it to accumulate more physical while you can.

Chris Martenson: Yep. Yeah. If you can, do it.

Turd Ferguson: Yeah.

Chris Martenson: So, well, where do you fall on the heated topic of price manipulation? I mean, if you're a big believer and the trend says it's going to be higher next year, then clearly, if there is manipulation, you don't view it as being successful. Where do you fall on that for gold and silver?

Turd Ferguson: Well, it is successful, actually. It's successful in keeping it in check. It's probably part of the reason why it's been such a consistent trend higher. I mean, every year almost. It's not like it's 50 percent and it's – or 25 percent and it's 50 percent one year and zero the next. It's just pretty consistently 20 or 25 percent a year. And it's because of that presence of what we call the cartel, the bullion bank cartel, or on my site, we refer to them as the evil empire. It is their suppressive tactics that keep price in check. We can hope that one day they will exit the market and leave gold and silver free to trade, and actually find a true valuation, but unfortunately, that isn't coming anytime soon. 

And I stress, and I've been very open and forthright about this ever since I've had a Web site. People wondered how it is I'm able to – well, you mentioned earlier, Chris, the short-term price targets with some relatively high degree of accuracy. I can do that because the markets are manipulated. The gold and silver markets are manipulated. What I do does not – believe me. If you looked at my trading account and looked at my success chart to trade gold, or not gold, but corn, or soybeans, or crude, or something like that. I make choices just as badly as the average guy. The reason why I am successful in forecasting gold and silver is because they are manipulated. Because once you understand that the bullion banks, particularly JPMorgan in silver, are in there trying to stack the deck in their favor, then you use some simple technical analysis. And you begin to see where they're going to act, where they're going to place some sell orders to try to start a cascading waterfall selling by tripping stocks. It's not real hard. I mean, its pretty basic stuff. But once you, again, like I said, once you admit to yourself that if this does take place, it makes forecasting where price is going pretty easy.

Chris Martenson: Mm hmm.

Turd Ferguson: I'm in the camp – it's funny. I haven't really ever met Bill Murphy of GATA. We talked once on one of my podcasts. And I've not really read a lot of his work, or Chris Powell's work. It's not like I read that stuff, and a light went off, and I said, aha, yeah, these guys. But I respect what they do, but it's not like I'm just simply parroting what they've said. I've come to all these conclusions myself just in years of following gold and silver. What my experience has been just jives what their experience is and their data show. And so, to me it's a quite clear case of what takes place.

Chris Martenson: I traded pretty actively for a while and I saw manipulation all over the place, not in just gold and silver. I mean, all kinds of markets. So part of my market philosophy is that they're rigged. And one of the ways I know they're rigged is when you see the four biggest banks turning 100 percent trading win ratios off their prop desks. Right?

Turd Ferguson: Yeah.

Chris Martenson: Obviously, they're not trading because trading involves risk. So they're doing something else. Right?

Turd Ferguson: Yeah.

Chris Martenson: And when I was very actively short homebuilders in 2006, '07, and '08, I would watch them absolutely go the wrong direction on earnings reports that were absolutely in line with what I was expecting, and very painful short moments to sort of ride out. And I realized through that experience that there is very, very asymmetrical information. That's part one. So I had access to the information at the retail level that was very much different from the books that the rest of the world could see, I guess.

And the second thing I learned was that if the price moves went in the direction that I'm going to call the powers that be would favor, there was really no inquiry. There was no looking into those things. They were just sort of left unexplained and that people would throw their hands up and say, those are markets, I guess. Right?

Turd Ferguson: Uh huh.

Chris Martenson: And so, a simple example. I would notice that when there were big down days in the markets, the systems would get pulled. Right? They somehow didn't work when computers had to put a minus symbol in front of stuff. You know? 

Turd Ferguson: Right. 

Chris Martenson: And on big up days, there was never any sort of like circuit breaking, or systems going down, or rule 48s, or any of this other stuff. It was just I noticed this asymmetry that as long as things were going in "the right direction" – I've got air quotes up, "the right direction." Once I developed that view, I actually became a better trader because I stopped trading on technicals and fundamentals and I started trading like a criminal.

Turd Ferguson: Yeah.

Chris Martenson: I would just ask, where do I think somebody might want these prices to go? And often, that was a better, more useful sort of a trading position for me than all of the technical and fundamental analyses put together.

Turd Ferguson: Right. No. And absolutely correct. I agree with you 100 percent. And you can see it. I just wrote this afternoon, before we started visiting. I finished up a post to my site about the events of just today in gold and silver. We see this quite often where the prices of gold and silver – they decline rather sharply after hours, after COMEX trading hours on the GLOBEX.

Chris Martenson: Yeah.

Turd Ferguson: It's akin to – because volume is so thin there.  A little bit of money thrown at the market – any new paper shorts can have a rather dramatic impact in that, and fundamentally, I guess, your readers probably know how this works, or your listeners probably know how this works. But at any given price, there's an equal number of buyers and sellers. 

In a thinly traded afterhours market, there is just a few on each side. Well, if you come in there with 1,000 contracts of silver to sell, it might fill 100 at $35, and it might fill another 50 at $34.95, and it might fill another 100 at $34.90. And the price just keeps getting marked down until there's enough bidders found to satisfy that whole order. Well, by the time that's done, it might be $34.50 or $34.25. And in the afterhours market when no one is there, when the volume isn't there to absorb those big orders, you can take a dollar out. You can take 75 cents out really quickly. You start – well, it just happened two hours ago. And that's money you don't get back. It's not like their going to reset tomorrow morning when the COMEX opens back up to where it was when the COMEX closed the day before. So if they can come in and raid the price of silver for 50 or 75 cents when nobody's around, hey, well, that's the new price.

Chris Martenson: I know it. We saw that in that big rundown from when it lost 25 percent, from 50 down into the 30s. Right?

Turd Ferguson: Exactly. When that… 

Chris Martenson: And where did that start? That started Sunday night at 1:30 in the morning, Monday morning. Right? 

Turd Ferguson: Yeah.

Chris Martenson: And who's trading then? It's like they were trading cattle in Hawaii, and all of a sudden, cattle get sold like crazy in Hawaii. And Oklahoma wakes up and finds out it's 25 percent poorer. I mean, how does that work?

Turd Ferguson: Exactly. Exactly. And then, that is where the manipulation has a lasting impact. And you can't get that money back. You take a dollar out and it's a dollar gone. And it takes a whole bunch of new buy orders, a whole bunch of new speculative longs and commercial longs to come in and bid it back up to where it was before that raid. And so, they're always going to be in there. Again, I guess the ultimate question is at who's behest are they doing this? But, nonetheless, they're in there controlling price, managing the assent, if you will, to create this illusion that there's still confidence in the dollar, that they're still – that everything's – all is well. And that it's okay to go buy a new car. 

Chris Martenson: Yeah.

Turd Ferguson:  And that the economy is still humming along. It's an active part of maintaining that illusion. And one day that will all – the whole – the house of cards will fall in on itself. But it's hard to tell when that's going to be.

Chris Martenson: I don't know this for sure, but I have very strong suspicion – I'd put money on this – that if the reverse were true and Sunday night at 1:30 in the morning, all of a sudden, silver vaulted up 25 percent. You'd wake up and they would undo a bunch of trades. They would close COMEX. They would launch an inquiry.

Turd Ferguson: Right.

Chris Martenson: They would – all kinds of things would happen. They'd look for who was responsible. They would say that was unacceptable. But when it went down 25 percent, they were just like, oh, well, you know markets. That's markets. Right?

Turd Ferguson: Yeah.

Chris Martenson:  We're not going to look into that, really. So that's what I mean by an asymmetry. I just believe that as long as things are moving in the right direction, and I believe you're right, the down is "the right direction" for precious metals because of the signaling event. I mean, come one. When Ben Bernanke writes an op-ed in the Wall Street Journal and says, "Listen. We're very pleased with where stocks are and we're very happy with our support to the markets that enables stocks to be higher because higher stock markets signals the right things to the people." Right? He didn't say anything about stocks should have a correct price for the risk involved and for the opportunities that are looking forward.

He said that it's an important signalling device, and that's how they look at these things. And, of course, if you don't believe the Fed has thought about gold as a signalling device, you need to go back and study history starting with the '69 Gold Pool, and Ruben's Strong Dollar Policy, with Taylor's Paradox, all that stuff. Right? So they've been focused on it a long time.

Turd Ferguson: Oh. Absolutely. And they'll continue to. I mean, if gold was trading at $5,000 an ounce tonight, what would that tell you about the global level of confidence? Yeah. And when it was getting ready to go to $2,000 just 60 days ago, what does that tell the world about the level of confidence in fiat money? Or somebody needs to perform this exercise. Take a look at the U.S. Dollar Index for the last five years. It's essentially flat. Again, the dollar index is, I guess, a picture of the U.S. dollar versus a basket of global currency, so in relation to other fiat currencies, the dollar is about the same as it was five years ago.

Chris Martenson: Yeah.

Turd Ferguson: But gold has gone from $400 to $1,800 tonight.

Chris Martenson: Yep.

Turd Ferguson: It's lost, what? If you want to look at it that way, well, it lost 75 percent of its value versus gold. Is that the right math? So they have to maintain this illusion. And most importantly, and I guess I kind of touched upon it earlier, if the true measure of inflation was actually out there – not this CPI nonsense at two percent.

But an actual of real goods that have impacted a real, in this case, American family in the pocketbook. If you had that true measure of inflation premium, what it really is – 10, 12, maybe 15 percent – you can't. There is no way. There would be no bids for treasury notes at two percent. Why would you guarantee yourself an annualized loss of 13 percent net real interest rate. Nobody would do that, so rates would have to go higher. And as we discussed earlier, rates moving above these historically low levels just rapidly – just increases the speed of which the Ponzi unravels. And so they can't have it, and so they'll continue to maintain this charade of the kind of economic normality. And one of the elements of that charade is suppressing the price of metals as best they can.

Chris Martenson: Well, I think it's a great thing because I get to accumulate more at a better subsidized price.

Turd Ferguson: Yeah.

Chris Martenson: I think that's incredible. But history is very clear on this. Negative real rates of interest are just an incredible time to hold gold. Just on that one thing, if you want to keep it simple. I know you said you like to keep it simple.

Turd Ferguson: Yeah.

Chris Martenson: Right there. For somebody who doesn't want to talk about monetary policy, or potential manipulation, or how markets work, or any of that, if you hold gold during negative real rates of interest, historically, that's a very good thing to do. Simple.

Turd Ferguson: Yes. Exactly.

Chris Martenson: Very simple.

Turd Ferguson: Exactly. And that's where we are right now and will – well, that's not going to stop next week.

Chris Martenson: No.

Turd Ferguson:  It's going to be like that quite a ways into the future. So…

Chris Martenson: If it does, I'll be very surprised. It's like, whoa, Paul Volcker came back. That's crazy.

Turd Ferguson: Yeah.

Chris Martenson: Yeah.

Turd Ferguson: And he pulled that off 30 years ago at a time when – I mean, he couldn't pull that off today. Let's put it that way.

Chris Martenson: Oh. I know. I know. I know. We had too many things to list. We were a net positive trade export nation.

Turd Ferguson: Yeah.

Chris Martenson: We were a net creditor to the world, you name it. There was much less leverage in the system, everything. Yeah.

Turd Ferguson: Yeah.

Chris Martenson: It wouldn't work out.

Turd Ferguson: But someone hoping for that type of miracle 30 years on. I mean, it's just not going to happen.

Chris Martenson: I know. I know. So here we are. So the great experiment, it's going to reach its conclusion here at some point. Here's an interesting question for me is what indicators are you going to be looking at to determine that it's time to get out of this metal?  And the PM bull market is more or less over, and it's time to get capital out of PMs into something else. What's the exit strategy? 

Turd Ferguson: Well, for me, the ultimate exit strategy is you are converting your paper money into physical money now. And I guess what I'm planning for is that someday there will be a new currency regime, a new global and maybe a regional reserve currency, like a North American currency, a Eastern Pacific currency, and some type of newly formed Euro. And then those will have to be asset-backed once we've all learned our lessons about the dangers and the fallacy of fiat money. 

So if you transfer your money out of fiat into hard assets now, into physical metal, then at some date in the future, you'll convert your physical metal back into whatever the new money is. Or you'll take your physical metal and you'll trade it for some other hard asset like land, something like that. So I don't see a time, Chris, where, okay, hey. All the problems are fixed, so let's trade out. I'm going to sell all my gold and silver and convert it all back into Federal Reserve notes. Again, I mean, I'm just Turd. I mean, what do I know? But that's the way I'm planning it. I just don't see that happening. I think only you'll convert your hard metals back into a hard asset base, hard asset-backed currency, or into some other hard asset.

Chris Martenson: That's what I'm looking to do. I've had a ratio that I've been telling my subscribers about for, oh, probably five or six years now, which is that when – and this was the original ratio at which I moved into gold. I said that when I could trade an ounce of gold for an acre of productive land, I would start making that trade because that's a ratio that goes back centuries.

And I thought, well, that's a decent starting place. And, of course, people were laughing at me because that was during the run up in the whole real estate thing, when I was holding that view. That was crazy talk. I'm starting to – I'm looking around. I can actually start to make that trade this year for certain pieces of land. So…

Turd Ferguson: Yeah. Yeah. It depends on if you're in Iowa, or Nebraska, and places like that. Yeah. It's getting pretty close.

Then that would probably be, like you said, the historical – there's a reason why there's a historical relationship there.

Chris Martenson: Yep.

Turd Ferguson: Because it's been that way for a long time.

Chris Martenson: Yeah. And I'm not going to go all-in at this point. I'm going to nibble because I think overshoot is a possibility here. 

Turd Ferguson: Right.

Chris Martenson: So, I mean, the beach ball's been held under so long, I just think that when it does go, I'll have better opportunities. But I've never really made my investing style all-in, all-out. I tend to move in. So I first started moving into gold and silver in 2002, and I did it in '03, and '04. I just kept accumulating. So for those who are looking to increase their exposure to precious metals, or maybe start, do you have any strongly felt guidance for how they should go about building that exposure? Physical versus vaulting versus paper. How you accumulate? All of that.

Turd Ferguson: Well, it depends on the individual first and foremost, obviously. But for the average guy that's trying to figure out a way to kind of put his kid through college, or get him there, or pay for his daughter's wedding, and trying to figure out how he's going to get mom and dad in a nursing home. I mean, you got all these different concerns. And maybe he has an IRA that he's rolled out an old 401(k), and is looking at that going, what? I don't have – you can't buy gold or gold funds in a 401(k) at work, but I've got this IRA that I rolled out the last time I changed my job. 

There are ways you can invest in that IRA, if that's your main asset whether – if you wanted to stick with a traditional route, you can buy miners, high quality miners. You buy a basket of them. Kind of almost like how people talked about back in the dot com days where you'd buy 10 Internet stocks and hope that one was going to take over the world kind of thing.

Chris Martenson: Mm hmm.

Turd Ferguson: You might buy 10 miners knowing that one or two may come up dry holes, but the rest of them will eventually take off. You could buy ETFs. I really encourage people to stay away from the big ones, GLD and SLD, and look instead at the Sprott Physical Trust out of Canada, and things like that. There are companies where they will help you buy your own gold in your IRA. That’s possible as well. And then, as it comes all the way down to just simply stacking the metal. Getting a dealer that you trust. There are several of them that are available online that I've worked with before. You can just go on and they'll send you a nice shiny sleeve of Canadian Maple Leafs, or a Silver Eagle, or something like that. 

But for most folks, that's how they do it. It's through their traditional investments of their IRA, but instead of owning the Vanguard S&P fund, they own the First Eagle Gold fund instead, something like that. That's probably the main base exposure most people do is they try to kind of put their words into deeds. You know what I mean?

Chris Martenson: Yeah. Yeah. I noticed, too, over the years, I've had the opportunity to work with people who got paralyzed by gold prices. Because one of the things you can't do is open a paper without reading about how gold's in a bubble. It's been in a bubble since about $500. And every $100, it's in a bubble again. And that's just some really sloppy journalism and displaying a bias and a set of beliefs. And that's all fine, but still I find people often, particularly if they haven't yet pulled the trigger. They get a little paralyzed because they say, oh, I can't buy it now because it's at $1,900. And then, it pulls all the way back to $1,550. And then, they go, well, it's really falling now. I'm scared where it's going to go. Anyway, they get paralyzed because it's either down too much, or up too much, or something like that. What would your advice be for these people?

Turd Ferguson: I get that all the time, too. I have friends that know that I'm Turd and I do what I do. And they'll, "Hey. I hear you write this Web site. Well, why should I buy gold now? It's going down. It can't stay up here. It's too high." And I look at them, and I say, "Well, who told you it's too high?" "Well, I read in the paper," or "I saw it on CNBC," or whatever. Well, whatever. All I can tell you is it's going to be higher a year from now than it is now. I mean, it might go down first. It might go up more. And what I encourage people to do is – many people are familiar with the concept of dollar cost averaging which is kind of an old financial planner – financial advisor – term for people that are working their way into the market. To set aside and set up an investment plan, kind of like your 401(k) where you're just putting in money every two weeks or every – once a month, you buy some shares of a mutual fund or stock. Thinking that sometimes you're going to buy high and sometimes you're going to buy low, but it's the regular disciplined purchases that kind of averages it all out to kind of a lower average price, and take some of the emotion out of it. I would encourage people to, and I do encourage people to set up almost a dollar cost averaging of physical metal. To just say, look, I'm going to take some money and I'm going to buy some on the first of every month, or the 15th, or whatever, and just continually do it. And that way, you will take it. You'll buy high sometimes, but you'll also buy some dips too.

Chris Martenson: Yeah.

Turd Ferguson: So that works for me as well.

Chris Martenson: Yep. I totally agree with that approach. Just, again, I'm never an all-in kind of a guy. Now, I've been trading. I traded gold and silver when I was a trader in futures trading, in addition to my shorts position on homebuilders. And I found that I just couldn't predict those markets. I tried. I just couldn't do it. They have a mind of their own.

Turd Ferguson: Yeah.

Chris Martenson: At any rate, so I found that dollar cost averaging in that market was my best bet, and then hanging on and holding on. And one of the reasons I advocate physical, and this is because for me is that when I hold paper stuff that I can sell at the click of a mouse button, I tend to do that. I tend to be a little active that way. And my best holdings have been the physical holdings, which I have accumulated. And then, because it's kind of a pain to – it's not impossible. I have sold it, and bought it, and stuff, but it's just enough of a barrier that I kind of go, ah, not worth it.

Turd Ferguson: Yeah. Yeah. But if you're going to take your sleeve of Eagles and go marching down to the whatever or put them on eBay. No. You're absolutely right.

Chris Martenson: Yeah. So that's helped me because riding the bull is the most important thing, not getting shook off. That's hard. That's hard work right there.

Richard Russell would agree. So in addition to all these precious metal ideas, you cover a number of other topics on your blog, such as the recent implosion of MF Global. Thank you, John Corzine. Very well done there. And all the implications that those things forebode. For those that are looking to preserve as much as their wealth, say quality of life too in the next decade as they can, what other key trends should they be paying attention to here?

Turd Ferguson: Well, as we talked about, it's that macroeconomic stuff first and foremost. And that the only, I guess, Keynesian recipe that works is if you're able to grow your economy faster than you're growing your debt, to kind of keep that debt to GDP ratio low, or at least below 100. And so you've got to really pay attention to what's going on in the economy. That would be the first big indicator. Again, suddenly, if they try to tell you the GDP is growing, but at the same time infla-…or not inflation, but unemployment is still at nine percent and higher, it gets back to what we talked about earlier. I guess, on the side of it earlier about the perception management of the government to try to convince you that all is well. 

But I think you got to look at the macro. You've got to try, as hard as it seems for the average guy, you've got to try to pay attention to what's going on globally. And I think it's very easy to say why do I – I don't care about Greece. Oh, and now they're trying to tell me that Italy's bad. Who cares? I mean, I'm still going to go to Italy every once in awhile. I love going to Rome.

Chris Martenson: Mm hmm. Yeah.

Turd Ferguson: I'm not going to worry about it. No. There's more to it than that. I mean, everybody's connected now. And Germany can bail out Greece, but the Italian economy is almost two-thirds the size of Germany's. So they can't bail out Germany, or they can't bail out Italy. You've got to pay attention to that. And, again, as you pay attention, you've got to try to think of the endgame. Well, what's going to happen? How can they manage all that debt? And then the counterparty risk that comes with all that debt, and then all the outstanding derivatives. In the end, it all becomes about how much money can you print to try to paper over these problems and just keep kicking the can down the road, if you will. And as long as they are going to continue printing money that's just going to continue to make investments in precious metals that much more attractive. You got to look at the U.S. economy and what it's doing, the political structure of it. You got to take time to understand that what happens in Europe is going to have a major impact on how things go here too.

Chris Martenson: Yeah. Everything is so cross-correlated, and crosslinked, and interlinked. And we've got our 600 to 1 quadrillion in derivatives still standing out there. And nobody really understands all that. So it's almost like if somebody said they're looking at this one organism, this one body that happens to be the world economy now. And they say why should I care if my right leg is infected? I don't know. Well, it's connected. So it really matters a lot. And the chief risk that really concerns me at this moment in time – here we are in early November of 2011 – is the idea that the banks themselves are so interlinked, and they're so wrapped up in the sovereign debt issue, and all of that sort of very complicated fancy stuff that's going on with the EFSF. It skews just one simple fact, which is that there's too much debt, that deleveraging is going to happen. Somebody's going to take the haircut. 

The longer they wait to see if they can push that haircut onto an unsuspecting taxpayer, which I think they have less chance of doing in Europe, by the way. And if they can't do that and the whole thing sort of falls apart, we face the risk of a really interesting moment of financial system instability. That's another thing that correlates beautifully with a rising price of gold is just uncertainty and system stress. Those two things I think we've got in spades right now.

Turd Ferguson: Yeah. Look.  And we mentioned it early. It sounds – and I know the funny looks I get from family and friends sometimes when I talk about this stuff.

Chris Martenson: Yeah. Yeah.

Turd Ferguson: I mean, it sounds like you're some kind of nutcase. What are you talking about? You'd have some silver for barter. What? What? How is that? And I'm not saying going to happen, but I remember, I was on a flight one night back in September of 2008. And I distinctly remember looking down out the window someplace over about Tennessee, thinking, I wonder if those people know down there that we're on the verge of complete financial – global financial collapse where the ATM just doesn't work, or the bank is closed. And you can't just get some cash and go to Sam's Club and buy yourself some food and some – I mean, we were that close. And we'll probably be that close again. Maybe we will, maybe we won't. But having gotten three years of an awakening to prepare. I have to use that time and prepare myself for that possible eventuality. And it's, like you said, everybody's interconnected. And all these banks do business globally, and they all share each other's – that counterparty risk. And so all it's going to take is one domino to fall and they all kind of start tumbling into each other. And then, you got to be mentally and financially prepared for that, and almost like a just in case. What is it? You hope for the best and plan for the worst. Right?

Chris Martenson: Yep. Absolutely. Absolutely. And a little bit of preparation goes a long way. And here's the funny part. Many of these preparations, the opportunity cost of them is low. So I advise people to keep some cash out of the bank. What are you missing out on? Zero percent on your demand account?

Turd Ferguson: Right.

Chris Martenson: So it doesn't really matter if it's in the bank or out of the bank from an opportunity standpoint, except you actually are more liquid with it out of the bank if you can get your hands on it.

Turd Ferguson: Yeah.

Chris Martenson: Same thing with gold and silver. I mean, these assets – like if you held stock. I can show you a bunch of stocks where if you held them, they went to zero. Gold will never go to zero. Never.

Turd Ferguson: That's right.

Chris Martenson:  Right? It might go to something lower, but it's not going to zero. So when I look at these and I just think about the risks – and here's the interesting part about this to me. It's the idea that what you and I are talking about is just simple, prudent risk management that anybody ought to be thinking about and planning for. And still a lot of people won't do it. Mostly, because it's an emotional barrier. It's a belief-based – it's something, but it doesn't have anything to do with prudence and really thinking through the risks and managing those risks. And that's fine. More and more people are waking up to this story. I find people who a year ago, I couldn't engage in this conversation are now engaging in it. We're there in that conversation, so I think you're doing good work in helping people figure out a way to preserve their wealth, and stay on top of these things.  

For those readers who want to find out more about you and your work, where do they do that and how do they follow you?

Turd Ferguson: Well, the Web site is tf, as in Turd Ferguson, metals report, M-E-T-A-L-S – all one word. We try to – it's a different site. It was not anything that I sat down with pen to paper and drew up a business plan and said, okay, here. Now, this is really going to be a neat deal. This all just kind of developed out of the blue. And I realize, frankly, from being on the Internet that – and from having been a financial person, there's not a wealth of readily available unbiased precious metals information out there.

Chris Martenson: Mm hmm.

Turd Ferguson: You can go see your typical stockbroker and tell them that you want to buy all the stuff that you and I just talked about and so, therefore, you want to buy some gold, or you want to buy a gold miner. First, that stockbroker's going to look at you like you got two heads and think you're some kind of nut. And if you persist, then the stockbroker might patronize you in a way, and reach back into his credenza, and pull out a report on some miner with whom the firm has an investment-backing relationship, and therefore has their rating and their research report. And you don't know if – I mean, we found all that out 10 years ago, about the conflicts of interest between the sell-side firms, and their analysts, and the companies that they follow. I mean, it's a joke. You can't get good information. And so that's why I started the site. Because I thought, well, with the success of things like Wikipedia where it's user-provided content, and it's not always going to be 100 percent accurate, but at least you know that – well, maybe that's not the best example with Wikipedia, but at least you know people are trying. They're trying to tell you their honest opinion. 

I thought, well, what if we built something like that in the metals arena. Where, yeah, you got my content, but the real wealth of knowledge is in the forums, and the bulletin board section where you can go in and find user or other member-provided information on certain miners, or certain commodities, or bullion dealers, or coin dealers, things like that. That's where all of a sudden it dawned me there was an opportunity. So that's why we built the site. That's what it's there for, and it's for people to go interact with like-minded people. We have a rule there. You got to treat others the way you want to be treated because so many Internet sites turn into these kind of verbal sword fights…

Chris Martenson: Yep.

Turd Ferguson: …name calling, and it just turns me off. And so the number one rule of the site is you got to, like I said, treat others the way you want to be treated. So we try to always keep it cordial and helpful. And I think that kind of draws people to the site too. So it's, again, We're just trying to help as best we can to, like you said, help people prepare for what is most assuredly coming. 

The last thing I would add to that, Chris, and one that's challenging, and I'm sure you've seen this too in working with your subscribers is where we are headed is unlike anywhere where we've been, at least in recent memory. I mean, there may be some octogenarians out there that remember what it was like before the Great Depression and during the Great Depression and before World War II. But it's a world like that where we're headed to. All I've ever known, all my friends and family, even my parents really have ever known is this hegemonic United States that was the world power, and provided the world's reserve currency. And we could print as much as we wanted to, and then export the inflation to all the other poor staff that had to – took our dollar. And so we bought their cheap stuff. And those days are over, and it's a really hard concept. If you haven't had personal experience with something else, it's a really hard concept to get your arms around. That we're not always – that the United States isn't going to be this huge economic and military superpower. Just because it always has been doesn't mean that it always will be. And as we talked about, the numbers and the fundamentals suggest that it's not always going to be. And so you got to kind of prepare yourself that tomorrow's not going to be like today, that we're in a new paradigm. And try to intellectually figure out, okay, how do I survive and prosper in this new world knowing that it's coming? And that's what we try to do. I know that's what you try to do. And it's our job, Chris, to try and help as many as we can.

Chris Martenson: I absolutely agree. And like you, I didn't have a business plan and I didn't pencil any of this out. I just started doing something that – and frankly, I created what I wanted to see on the Net but couldn't find, just like you did. I was like, "Where is it? Oh. I'll create it." 

Turd Ferguson: Yeah. Yeah.

Chris Martenson: And so it turns out that the growth industry out there right now happens to be purveying accurate information as best we know it. Right? And you're probably like me. When the information changes, you'll change too, whatever that happens to be. But right now, we've got a set of trends that are pretty clearly in place where there's been precious little to deflect me from my main storyline over the past few years. And so here we are in the middle of it. I used to say that the future is going to be really different from the past. We're in it. I think we're in the middle of it is my view what we're seeing in the world now, what we open the newspaper to in the morning, that's – it's here. 

And so I really want to thank you for your time. And the idea here is that there will be more official responses to try and fix an unfixable problem. History's pretty consistent on this. We're going to try and print our way out of that. And even though we try and do that, the amount of system level stress, and risk, and all these other things just say, listen. Maybe it's time to take your chips off the table, or some of them. Go get a drink until you understand how the cards have been dealt in this hand. And gold presents one way to do that. Silver, too. 

Turd Ferguson: That's absolutely right.

Chris Martenson: So, Turd, I just want to thank you so much for your time, and I hope we can do this again.

Turd Ferguson: Chris, my pleasure. Anytime you'd like to do it again, we'll do it. Please keep up the good work. I enjoy your site. I know a lot of the folks that read my site go to your site. And so please keep up your diligent hard work. We all appreciate it.

Chris Martenson: Fantastic. Thank you. This is Chris of signing off.

"Turd Ferguson." is the proprietor of TF Metals Report. Turd approaches the subject of PMs (precious metals), the markets, and the economy with a certain amount of irreverence. Even though we are dealing with serious subjects here, we don't take ourselves too seriously.

"Turd Ferguson" was a licensed securities "professional" for nearly twenty years. Disgruntled by the fraud known as "financial planning", he retired to a career as a serial entrepreneur in 2008. Though otherworldly in his ability to forecast price movements, The Turd is NOT a soothsayer, a psychic or a witch. After all these years, he simply has a decent understanding of the forces at play in the precious metal "markets".


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