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Ask The Expert

Ask The Expert - Rob Kirby - January 2018

Headshot of Rob Kirby

When your biggest customer has a lot of problems, this tends to precipitate back on the person doing business with them.” Toronto-based author and analyst Rob Kirby (kirbyanalytics.com) returns to Ask the Expert for a wide-ranging discussion about the impact of the yuan-denominated crude oil contract, the future of the US dollar, and what declining US fortunes mean for Canada. Rob also gives his thoughts on Canadian mining shares and the latest on the silver manipulation civil lawsuits. Plus, Rob answers the question: what is the most undervalued asset on the planet? Don’t miss this tremendously informative interview with the editor of the Kirby Analytics Newsletter.

Watch it here: https://youtu.be/tSuDgGiyOtM


Announcer: You're listening to "Ask The Expert" on Sprott Money News.

Craig: Well, greetings once again from Sprott Money News and sprottmoney.com. This is you "Ask The Expert" segment for January of 2018. And joining us this month for a return visit is Rob Kirby. Rob is a Toronto-based author and analyst. He is editor of the Kirby Analytics Newsletter that can be found at kirbyanalytics.com. Rob, thank you so much for taking some time to join us again here at Sprott Money News.

Rob: It's a pleasure to be with you again, Craig.

Craig: And before we get started, just a reminder, that one of the big benefits of working with Sprott Money is that we do have a precious metal storage program. And if you sign up today at sprottmoney.com, you can get one month free storage. That's a pretty good deal right there. Rob, Sprott Money customers are the folks that sent in these questions as they do every month for our expert. We've got six of them for you to answer. So if you're ready, can I hit you with number one?

Rob: Sure. Let's do it.

Craig: Okay. Looks like this was sent in last week, maybe I'll preface this. We're recording this here on Wednesday the 17th, and there was expectation and maybe there still is expectation that the Chinese will launch their yuan-denominating crude oil contract as soon as tomorrow, but here we are on the 17th. I'm hearing some reports personally that it may be delayed six to eight weeks again. Regardless of that, Rob, the question is, do you expect this yuan-denominating crude oil contract to be a big deal when it finally begins trading?

Rob: Gee, I guess the answer to that from my perspective whether it is a big deal right away or not is more or less irrelevant. When I look at the inevitability of a one denominated crude oil contract, it's another piece or another dot in the collection of dots or pieces of a puzzle towards a world where the dollar is not as prominent in global trade settlement. So, you know, we've heard in the last couple of weeks that the country of Pakistan is now making arrangements to do all their trade with China on a yuan basis as opposed to a dollar basis, so the Chinese creating the yuan contract for crude oil. In my mind, I view that as quite possibly being the proverbial straw that breaks the camel's back that might actually force Saudi Arabia into doing crude oil trade in non-dollars if they aren't doing it on the sly already.

Craig: So, it's more of a, maybe not expect a great fireworks just as it gets started, but it's more of a part of the process as the world moves away from the dollar. Is that how you would say it?

Rob: Yeah, sure. It's an exclamation point that this global movement away from the dollar is occurring. And, you know, the sad thing is, at least in my view, Craig, is why this is all happening? And the reason it's all happening is because America has been an extremely poor steward of the world's reserve currency. That's why this is occurring.

Craig: Right. All right, question number two, and I think I'm looking at the question now. I think it was now gonna be two years ago when the news was starting to break about some of the settlements in the silver manipulation civil lawsuits, and Deutsche Bank was moving to settle. Anyway, so the question is, can you provide any updates? Have you heard any more on the silver manipulation civil lawsuits that you talked about back in 2016?

Rob: In a word, I've heard nothing more. I mean, other than it's been quite revealing that these criminal activities have been admitted and, you know, it's no longer a conspiracy theory that these things occur, Craig. It's just ought right fact that these things have been going on. And what's a little bit maybe disheartening is that the real... I find it very interesting that in these proceedings and fingerpointings regarding metals manipulation, it seems that all we've really managed to do is lay the blame on a bunch of foreign banks and...in my view anyway. And I think there's plenty of evidence to support what I'm going to say. The real ring leader in the suppression of precious metals is none other than the U.S. Government because it's been U.S. regulators that have been low to point the wrongdoings out. And I do notice that in the...and it's very conspicuous at least in my mind that in this suit where Deutsche Bank got fingered, there were no American banks indicted or accused of being part of this conspiracy against precious metals. And at the end of the day, if we go by the axiom of who benefits, the suppression of precious metals is a benefit to the keeper of the world's reserve currency, namely, the U.S. Treasury.

Craig: Yeah. As you've said, it's a bit dispiriting and that all that information came out in the discovery process. You know, we had the text, we had the chat room details of the blatant moves to manipulate price, and yet there's been no legal follow up at all it seems. You're right, it's very frustrating. All right. Let me move on to question number three, Rob. Over the last 12 months, if we go back to 2017, it seemed everybody was expecting the U.S. Dollar to rally and then return to king dollar. And instead, the dollar as measured by the dollar index fell by more than 10% in 2017. A lot of folks think the dollar is going to rebound in 2018. What do you think?

Rob: I think the dollar is very likely...got some very, very, very tough terrain to negotiate over the next little while, and longer term, I think the dollar has got some very, very big issues to confront. And a lot of this is coming from realizations on the part of global players, at least in my view, that an awful lot of dollars are in existence and have been created that are not acknowledged in official monetary aggregate data. And this was highlighted very recently with the revelations of Dr. Mark Skidmore of Michigan State University, and it was just five days after he made an appearance and did an interview with Greg Hunter, where he laid out a case where the Department of Defense cannot account for the $20 trillion worth of money which somehow flowed through their hands between the years of 1997 and 2015. And interestingly, Craig, or perhaps not, this 20 trillion number far exceeds, you know, what they're allocated on accumulative basis, but they're allocated on an annual basis as their budget.

This money has been created and it's been stuffed away in, what I call, dark pools, it's dark money. And my best guess is that these funds have been created through extreme crisis events that we've been faced with, such as 9/11 when the World Trade Center buildings collapsed in their own footprint. And records of trade settlement of Cantor Fitzgerald for instance in the World Trade Center, the world's largest broker of U.S. Government securities. And then through the financial crisis of 2007 and 2008, where quantitative easing was adopted and put in place where... These things, idealist false flags where hideous amounts of monetization of fictitious debt was very likely in play. The world's become aware of this. And you know what, and so has the White House because five days after Skidmore pointed out $20 trillion in missing funds, it was the White House that ordered a complete audit of the Pentagon. So, anyway, we've got these things to confront and the, let's just say, the powers that's be in America and the keepers of the U.S. Dollar are going to have some...are going to have a lot more scrutiny regarding these issues on a go forward basis and I do not believe this boards well for the dollar.

Craig: All right. We're halfway done. Let's move on to question four, Rob. And this draws on, I guess, the fact that you are Canadian and based in Toronto. The question is, do you trade any Canadian mining shares? And if so, can you name a few that you like?

Rob: I do not trade any mining shares whatsoever. And if somebody put a gun to my head and asked me to buy, you know, let's just say, a precious metal's equity, I would... Because I have recommended some to some folks over the years, and strangely enough, Sprott physical fund, the...

Craig: PHYS or the PSLV?

Rob: Yeah, and also the central fund products I have recommended in the past. And I've been somewhat of an admirer over the years, Craig, of Silver Wheaton.

Craig: Okay. Is there a reason why you don't follow the shares? It's just not your area of expertise or do you have some other thing that you don't like there?

Rob: Well, my view is that until the manipulation is broken on the pricing of precious metals, ownership of the equities is the wrong place to put one's muster. The QECO of price suppression is physical metal. I'm an advocate of owning physical precious metal, and for every ounce of physical precious metal investors take off the market, in my view, that's 300 paper ounces or maybe 500 paper ounces, the bad guys cannot sell. So, if you're going to fight something, my belief is, why not do it effectively.

Craig: Yeah, right.

Rob: And efficiently.

Craig: Understood. Okay, question number five. It was in 2017, you told Greg Hunter that silver was the most undervalued asset on the planet. Why is this, and do you still think this way?

Rob: Yes, I do still feel this way. And the reason I feel this way is that unlike gold, silver largely is consumed in industrial processes. And the amount of silver that goes into industrial processes on a per unit basis is a very low dollar amount. And as it's consumed, let's just say recovery of it, like, a lot of silver ends up in landfills and it's not economical, certainly not at today's prices, to try and recover any of it. And therefore, because silver is consumed, the actual above-ground stocks of silver are actually smaller than above-ground stocks of gold, which tends to be hoarded. And silver is a very, very critical element in so many of the emerging technologies, whether it's in batteries, whether it's in solar cells. And silver just seems to have 1001 different critical uses. And silver also, Craig, is very difficult to, let's just say, replace or imitate, whereas other metals can be readily or easily replaced in industrial processes, silver is very difficult to do.

Craig: Yeah.

Rob: Oh, and then I guess really, the really big thing is that for every ounce of gold that is mined out of the earth's crust, roughly eight or eight and a half ounces of silver are mined out of the earth's crust. And that would tend to be supportive of a gold-silver ratio in nature of something around, call it 8 or 10 to 1 and the current price of silver is 177, I believe, of an ounce of gold. And that is flying in the face... To me, that's fooling Mother Nature, and I believe there's a reason why cliches exist. It's not nice to fool her.

Craig: Yeah. I've always felt, Rob, that that craziness of that ratio that has held for a millennia is due to the fact that we price off of the supply and demand of derivatives for silver, not supply and demand of physical silver. You think that sounds right?

Rob: Absolutely.

Craig: All right. Lastly, and here is our final question. So we'll let you have a go at this one. With zero gold reserves left in Ottawa, what is the future of the Canadian Dollar?

Rob: Well, the Canadian Dollar is a derivative of the U.S. Dollar, and I believe hard times are coming for America as the possessor of the world's reserve currency. But America also happens to be the counter party for 80% of Canada's trade, and Canada has a trade-driven economy. And when your biggest customer has a lot of problems, this tends to precipitate back on the person doing business with them. So, the prospects on a go-forward basis, I think Canada is going to be put into position. Due to declining fortunes of their biggest customer, Canada is going to need to restructure and try to develop an awful lot more trade with the Asian economies because my view seriously on the prospects for the dollar and American economic outlook is not brilliant going forward. But with our currency being a derivative of the American Dollar, I can see... Let's just say, the quality of living in Canada is very likely to be pummeled or diminished right along with the demise or reduction in American living standards, except it's quite possible that we don't get it quite as bad because we still do produce and have vast caches of critical and strategic natural resources that the rest of the world will demand no matter what.

Craig: Exactly. Exactly. And that definitely harder for the average Canadian citizen to continue to switch out of Canadian Dollars into some of those natural resources like gold and silver too, as protection because you're right. You are definitely joined at the hip.

Rob: Yup, we are.

Craig: Well, Rob, thank you so much for your time. You just did a great job. And I think this has been tremendously informative for everybody that's listening. Again, we've been speaking with author and analyst, Rob Kirby, editor of the Kirby Analytics Newsletter that you can find at kirbyanalytics.com. We invite everybody to go check that out. Rob, thank you so much for joining us.

Rob: My pleasure, and hopefully, we'll do it again soon.

Craig: And from all of us here at Sprott Money News and sprottmoney.com, thank you for listening. We'll talk to you again next month.

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About the Author

Our Ask The Expert interviewer Craig Hemke began his career in financial services in 1990 but retired in 2008 to focus on family and entrepreneurial opportunities.

Since 2010, he has been the editor and publisher of the TF Metals Report found at TFMetalsReport.com, an online community for precious metal investors.

*The author is not affiliated with, endorsed or sponsored by Sprott Money Ltd. The views and opinions expressed in this material are those of the author or guest speaker, are subject to change and may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy, completeness, timeliness and reliability of the information or any results from its use.


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