Announcer: You're listening to the "Weekly Wrap-Up" on Sprott Money News.
Craig: Well, hello, once again from Sprott Money News and sprottmoney.com. It's Friday, January the 4th, 2019. And this is the first Sprott Money News Weekly Wrap-Up of the year 2019. I'm your host, Craig Hemke. And joining us, as usual, this fine Friday morning is Eric Sprott himself. Eric, good morning.
Eric: Hey, Craig, Happy New Year and Happy New Year to all our listeners. I think we are in for quite an exciting year here, particularly from the perspective that we tended not to be believers in the stock market, and we have been believers in the precious metals and I think our wishes will be realized this year.
Craig: And I think it's just in time for a sale as well. I just got news yesterday that the good folks at Sprott Money are kicking off 2019 with an exciting offer and a great sale. Who doesn't like a sale? Right? With the markets on the move, we want everybody to make sure they check out the Sprott Money silver sale. On our Deals page, it's sprottmoney.com. That's the place you want to go to, sprottmoney.com, look for the Deals tab, and you'll find Sprott Money silver sale.
So, you can go to sprottmoney.com or just simply call us at 888-861-0775 for all the details. And the details are good. Eric, we've gotten the year off to a very strong start. You and I were talking about the likely prospect of a rally out of the end of the year and end of the first quarter and that baby is well underway. Gold up again this week, though it looked down a little bit after the employment report this morning, but still up at 1288. And silver now pushing towards 16. How did the week treat you, my friend?
Eric: Well, it's been a great week so far, and I don't think we could have expected a better setup than we've had here. Perhaps I should even start off with, you know, an economic thing that happened. That was the Apple iPhone sales suggestion that the revenues would be down. And it was interesting that the announcement was made the first business day of the year. And, of course, being the sort of cynic and or skeptic that I am, I'm like, "I wonder what would have happened if that announcement had it been made in mid-December." Because they must've known about it mid-December. It didn't just start happening on the last day of the quarter.
And had they made that announcement while stocks were plunging, it might've put the nail right in the coffin. And I'm sort of imagining that all the lawyers wondering about, "How come you're so late in announcing that? You must've known a lot earlier than the January 2nd that, you know, your numbers weren't going to come together."
But anyway, they weren't announced. But when they were announced, of course, everything got trashed quite quickly. And it's sort of reconfirmed the deterioration that seems to be manifesting itself economically. And there's lots of other things that are telling us we're heading for the problem, the one that you and I talked about, crusty old bond and version thing and the lower rates on the treasuries. And, of course, some of the higher yield obligations that are trading lower.
So, there are lots of signs that we do have a miss-pricing of things. And the Fed, notwithstanding the big jobs number today, which was 312,000 jobs, which I rarely ever believe. But it would seem to me that the Fed will have to reverse course. The market is saying we're going to have rate cuts this year, 2019. And, of course, between the rate cuts and maybe ending quantitative tightening, we're setting up the stage for gold and silver really [inaudible 00:03:54], already really gone. And the stocks are reacting. And the stock indexes are breaking out. So, I think there's lots of good things for us to expect going forward here.
Craig: Certainly feels that way, Eric. You know, and it's a odd way to start the year. I just I don't want to like to get into a bunch of hyperbole and alarm stuff, but there's some weird things going on, Eric. And I just wonder if you've noticed this too, besides the huge move in the bond market, where the 2-year notes gone from 3% down to 2.4% in 60 days. That's an incredible move. Had that big drop in crude oil late last year. Obviously, the stock market's down.
Then we had these meetings called by the secretary or the treasury of the President's Working Group on Capital Markets known as the "Plunge Protection Team" back around Christmas. We had the Japanese version of that called a meeting last night. We had The Office of the Comptroller of the Currency and the FDIC come out and say that the banks are in good shape. What's going on here? Are these all connected, or they just kind of points that are just happening all at the same time?
Eric: Well, it's interesting. I was actually imagining going back to the Apple thing that they must have known this quite a while ago. Okay. And, in fact, I'm sure it probably was being discussed with people in government. "Oh my God, we have this failure of things over in China. We have this trade war going on. It's not good. What are we going to say to people?" And, of course, it can't just be Apple. Okay, who's kidding who?
Everybody is going to be affected. China is either slowing down and/or restricting American imports into China. It is going to be a lot of companies affected. And, of course, when companies are affected, the earnings go down. And when earnings go down, stocks tend to get hammered but typically you have a high in multiples. So, I think that the more you look back at why was the market crashing is perhaps this realization that things were bad already.
I mean, it couldn't have been news to the people in Apple that just all of a sudden in the January 2nd they find out that the things weren't good. It's been going on for a while here. And it will be more than just Apple that realizes it. And I think that's why this market has been sinking. And in the bond markets [inaudible 00:06:11] gold has its own...is its own canary in the goldmine. But the fact that gold has been going up here and acting so strong technically is telling us that there's some problem with the system. And between the trade war and the tightening, things are not going well.
Craig: And it certainly feels as if we are in the early stages of this, Eric. And it reminds me a lot of 2016. It also reminds me a lot of 2010. But I want to lay this down on you because I thought this just gives you some idea of just how little investment there is in gold and gold stocks at this point. Back on Thursday when Apple fell nearly 10%, the market capitalization of Apple declined by $67 billion. Well, Eric, the combined market capitalization of Newmont, Franco-Nevada, Barrick, and Goldcorp is just $56 billion. Can you even imagine if we get some institutional money moving into our sector?
Eric: Well, you know, that's going to happen here because at the end of every day or in any week or the end of the month, you're looking out and say, "Well, what's working?" Okay? Well, what's working is gold and gold stocks. And what isn't working is things, and high tech, and the other economically sensitive groups. So, the shift will be on and it's like trying to get squeezed through a very small hole because there's no room to get that kind of money into things.
There was a portfolio rebalancing just after Christmas for $67 billion, which was what caused the Dow to go up at a 1000 points that day. And it just shows you what can happen when a little bit of money has to go...decides to go to a certain place. And I'm sure that's what's going on in the gold shares right now. And I think we're going to see that continue because I think we are in troubled waters here economically and stock marketwise. So, I think it portends that things are going to look awfully exciting going forward.
Craig: And it does seem as if we're in the early stages. We had 34 metric tons of gold allegedly flow into the GLD in December alone. We're seeing pickups in all the other ETFs. We're also seeing huge amounts recovered a couple of weeks ago coming out of China and India. At this point, I would imagine you've got your eyes on a few equities, things like that. Which direction are you looking at this point?
Eric: Well, I think there's going to be all sorts of actions. Some of the junior stocks are starting to run as you know, and they're very much involved in lots of juniors. And you get these things where, you know, a stock goes up 15% in a day just like that. Like, that's what happens in a Gold Bull Market. And I've seen it in some of the various stocks that I own, and there's lots I don't own that obviously are doing just as well as some of the outstanding ones that I have.
So, you can see it in the GDXJ index, GDX, the XAU, the UAE are all just at a point where they're about to explode is my guess. It didn't help that we had this employment number to sort of suggest that maybe the Fed might continue with their rate increase. But I think the Fed's going to figure it out that it's not coming together here, the economy is weak. That there were problems, big, big problems, whether it's, as I mentioned that you just can't have another rate increase. I mean, that's just such...would be so misguided.
And I think they got to come off that. And I think Chairman Powell will be speaking very, very shortly today, so it'll be interesting to see what he has to say. But I think it's all greenlight ahead for us. And I had been spending a lot of time studying various stocks and comments by people. In fact, I just said before that I enjoy going to these chat lines and there's some key people I've been reading on. One of them is AU Investor. Another one Investor 111, who does a lot of work on Kirkland Lake Gold. And it's interesting.
I find that people, away from the brokerage community, quite often do better work than the brokerage community does. Because believe me, they're in it. You know what I mean, their money sit that. Okay. They study it very, very carefully. So, it's very fun and exciting for me to check things out and see things coming together for everybody. And I think it should be a good year all around.
Craig: I feel the same way, my friend. And it's going to be a very exciting year. Very interesting year, no doubt about it. And there is no time like the present to add to your stack. Dollar cost average if you own it at a higher price, bring your average price down, and be ready for the rally to come to that end. Sprott Money, again, makes it very easy for you to stack. Whether it's that Sprott Money Silver Sale that we mentioned at the beginning of the show.
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As usual, just check us out, sprottmoney.com or call 888-861-0775. Eric, like I said, I think this year is going to be something else. I look forward to visiting with you each Friday to wrap things up and look ahead, but for now, I think I'll give you the rest of the week off.
Craig: Well, you know, it's been great so far. And, you know, as everyone else is suffering in this carnage that's going on in the markets. Gold investors, for the most part, are doing a lot better. I pointed out last week, I think the gold indices are outperforming the stock indices by the 30% in the last quarter. That's the sort of thing that makes a huge difference. And, hopefully, we can continue to do that in this and subsequent quarters.
Craig: And you point that out, Eric. And I neglected to mention that just yesterday, gold made a new all-time high in Australian dollars. And as you know, it's very close to new all-time highs in Canadian dollars. So, a lot of people around the world are doing just fine.
Eric: Yeah. And luckily, we're in that group and we should see an exciting first-quarter here.
Craig: No doubt about it. Well, thank you, my friend. I look forward to visiting with you again next week. And from all of us here at Sprott Money News and spropttmoney.com, have a great weekend and we will talk to you next Friday.