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Mike Maroney Interviews CPM Group's Jeff Christian - January 2016

January 13, 2016
Video Transcript

Mike Maroney: Good afternoon! It's Thursday, January 28. My name is Mike Maroney and we're coming to you today from the Monex Precious Metals Studio. Today, we had a very special guest speak with our account representatives. His name is Jeffrey Christian. He is the Managing Director of the CPM Group and he is the provider of the reports that we send out to our customers. We have the 2016 Gold Market Outlook. We have the 2016 Platinum and Palladium Market Outlook and we also of course have the 2016 Silver Market Outlook. Jeffrey made a presentation today that was absolutely tremendous and hopefully I can ask him some questions about that presentation that will allow you to share some of the insight that he shared with us today.

Jeff we talked about being in the trenches for the last four years, but you said today that over the next two to three years you think that we're going to see a radically different situation exist in precious metals. Could you extrapolate a little bit on that?

Jeffrey Christian: I'll try to do a little, because it could go on and on and you'll cut me off if I get too wordy. Basically, over the last several years, two to three years, we've seen investors repeatedly reduce their perceptions of their near term risks that they're facing. You know, the economy, the stock market, the real estate market have all been doing some what better. Not really fabulously better, but some what better and investors have down graded what they see as their near term risks. In addition to that, you've had things not happen--the Greek debt rescheduling didn't cause the Euro or the European Central Bank to collapse, the monetary accommodation that we've seen has not yet lead to any inflation, and so investors have become less and less worried and they're buying less precious metals than they were in 2010 and 2011. They're still buying, historically very large amounts of metal, and you have a lot of investors who are looking at the roads and are saying, "You know what... these problems that caused 2007, 2008, 2009, 2010, and 2011 aren't gone." In fact, some of them, for example: debt, have gotten much much worse and other issues like structural labor market issues and International cooperation has also deteriorated further so that you have investors buying precious metals, actually taking advantage of the lower prices.

What we think is that at some point over the next three years you have a turning point and investors start raising their perceptions to near term risks. Those long term problems that they're watching become shorter term risks and they start stepping up their precious metals purchases. In the cases of gold and silver and palladium in particular, and to some extent in platinum too, we think that what you've got is that the fundamentals are tightening, line production has been rising in gold, but it's going to start falling sharply by 2018. We think that the markets are getting tighter. So that when investors start increasing the amounts of gold, silver, platinum, and palladium that they want to buy, even by small amounts, it probably will have a very powerful upward motion on the gold price or in the precious metals prices and... there are other factors in the market that suggest, that you'll see a lot of the people who have been shorting the market may quickly reverse to long positions accelerating the price increase.

Mike Maroney: Now, it's very difficult to buy at bottom. Everybody says it's much easier to buy new highs and one of the things I think investors look for is they look for signals. Now, I know you work with Central Banks all over the world, but today you shared something as far as the PBOC, the People's Bank of China, and that was the announcement that they made on July 17th. I think what that really did, in my mind, is... it kind of gave us a floor in place maybe. Could you talk a little bit about that?

Jeffrey Christian: First, the People's Bank of China is a communist organization, let's be honest...a lot of people forget that China is still a communist country. For 60 years, the People's Bank has said, "We don't see gold as playing a major role in our currency system, as backing our currency, nor do we see it as playing a significant role in our monetary reserves, the cash-on-hand that we keep, to protect our economy from International economic problems." In July, they came out and they made a bunch of announcements about moving the Yuan toward convertibility and accelerating the convertibility process in the Yuan. Part of that package of announcements was that they were changing their view towards gold, they were rehabilitating gold's view and they said, "We still don't see gold as having a backing for the currency or as being as a dominant monetary reserve, but we do think that gold should play a more significant role in our monetary reserves. As a result, we bought about 19.7 million ounces of gold in the Chinese market mostly over the last several years. We're adding that to our monetary reserves as of June and going forward we're going to continue to buy gold and add it to our monetary reserves as we do, instead of holding it in a lump sum and dumping it in." Since July, you've seen 4...5...600, 000 ounces a month being added to the Chinese Central Bank Reserves. So the People's Bank of China has said, “We think gold is a lot more important as a monetary reserve asset than we used to and we're going to put our money where our mouth is and buy it.”

We think that's important for two reasons. First off, they'll probably be buying 6 or 7 million ounces a year going forward and the second thing is that...they have a lot of respect amongst Central Bankers. So Central Banks will look at what the People's Bank is doing and a lot of Central Bankers have been having this thought already, this will probably help them convert them to the gold camp. So we think that what you're going to see is greater amounts of gold being purchased by Central Banks, including the People's Bank of China, especially the People's Bank of China and the Central Bank of Russia, which has been a big buyer over the last several years. We think that you're going to see much higher demand for gold from Central Banks going forward over the next 10 years or longer than we have seen over the past 40...50 years.

Mike Maroney: Now that, obviously, creates an underpinning, or a foundation, but one of the things you said is, "Many of the Central Banks may actually follow the People's Bank of China's lead." What about the population of China? Do you think that they would respect that opinion enough to continue to take some of their money and invest personally in gold and silver?

Jeffrey Christian: Well, they have been, I mean, the individual private sector demand for gold in China. They've added about 50 million ounces of gold to their private holdings between 2008 and 2014, probably another 5 or 10 million ounces again in 2015. So individuals in China have been buying gold and I think that they do see the People's Bank's announcement as sort of like a government imprimatur. Yes, gold makes sense as a way to store your wealth and preserve your wealth and diversify your assets. In addition to that, they understand that the transition to a convertible yuan and the move in the Chinese economy from a managed economy that's growing at a higher rate to a freer economy, less controlled economy, that's growing at a slower rate. The maturation of the Chinese economy is going to have some bumps and air pockets. So, I think, there's an increased interest in the part of Chinese investors to continue to buy and have gold in their wealth portfolio.

Mike Maroney: So the Chinese maturation process, obviously, we've seen some severe volatility as far as their stock market. A matter of fact, the other day I think it was down 7.5 percent. We opened up the next day and actually rallied back, but you talked a little bit today about our stock market and you felt that that could also be a key catalyst.

Jeffrey Christian: Yes, let me just say one last thing about the Chinese maturation. The 6.9 percent or 6.7 percent growth in Chinese Real GDP in 2015 in dollar terms was as great or greater than the 14% growth in 2007. In 2007, the Chinese economy was probably about a $5 trillion economy. Now, it's about an $11 - $12 trillion economy. So people who look at the percentage and have really seen a massive slow down in the percentage growth in the Chinese economy are missing the fact that it's still growing at the same pace in dollar terms, the growth in output. It's just that, as you get bigger, it's a smaller percent.

In terms of the U.S. stock market, we had a stock market that has been rising very strongly into the beginning of 2015. In 2015, it moved sideways in very volatile fashion. I think the high was probably made in June or July, I won't swear, and we're off about 10% like on the S&P from that mid 2015 high till today... or... till yesterday because the market is up a little bit again today. So you've seen the market looking like it's topped and that factors in with the view of the U.S. economy as having had several years of growth, anemic growth, but growth nonetheless and we're sort of getting at a mature part in the economic recovery. We've become more vulnerable to a recession and the stock market is reflecting that. So you're seeing the stock market topping off.

Now, if you look at gold, one of the reasons why people have shifted away from gold over the last couple years has been the strength of the dollar and the strength of the stock market. If the stock market is no longer offering strength, it's offering greater uncertainty, very volatile moves, and 10% to the downside, investors start moving away from the stock market. I'll give you an example of my son. I bought some gold in early January and I mentioned it to my son. He said, "Yes, I bought gold on December 17, the day after the Fed announcement." He's made a very good return on the stock market over these several years. So he's seeing it and other investors are seeing it. I think that the stock market is setting itself up and is vulnerable to another 10% downward move. That is really going to shake the confidence of having your assets in the stock market on the part of investors. That could be the trigger for increased demand in gold.

Mike Maroney: Now, when you think about the size of the stock market in comparison to the gold market. If we see a classic percentage, as far as sector rotation is concerned, that amount of money could really move the price of gold?

Jeffrey Christian: Oh, absolutely! I mean, the gold market on a global basis is minuscule compared to the U.S. stock market. So it takes very little rotation out of stocks into gold to cause the gold price to rise disproportionately more than the stock market's falling.

Mike Maroney: Now, you were also talking today about the hedge funds. Interestingly enough, I talked to a lot of hedge fund players and across the board they've told me that a lot of money has come into their coffers that is predominantly supposed to be long positions. But you talked a little bit today about the COT and the current positions and how a big short position that has developed could start to reverse and could signal a potential bottom. Could you give me a little more information on that?

Jeffrey Christian: Unfortunately, there's not enough data on the Futures markets to really understand what's going, but the data that is there, the Commitments of Traders (COT) and the open interest and the gross open interest on the long and short basis, by hedge funds and other institutional investors. We've seen an unprecedented increase in gross short positions, not only in gold, silver, platinum, palladium, but in oil, copper, and a variety of other commodities over the last two years. What we think is that the vast majority of that short money is actually money that has been given to commodity trade advisors and other institutional funds managers by investors who are saying, "Ok, the stock market is looking top heavy, economy is maturing, the economic recovery is maturing, commodity prices has been hammered down, I want to put some of my money into commodities, but I really don't understand the esoteric nature of all these commodities. So I'm going to give a professional money manager money to manage in commodities." When they give it to them, because most of these commodities traders and advisors are computer driven and they don't necessarily study the fundamentals and they don't necessarily take a ripe ole shot and say, "gold looks good, platinum looks bad, copper looks bad, zinc looks good." They go to their computer and they say, "What should I do with this money that's coming into our coffers?” and the computer says, “Short commodities.” So we think that a large portion of the short position that's built up over the last couple of years actually is this kind of new money coming in. We've written about what we've called the new shorts in commodities. That's important, because if you look... now go back to gold and silver the gross long open interest in silver is at record levels. The gross long position in gold is down from record levels about 30 million ounces in 2010-2011, but it's still around 20 million ounces, which is very high from a historical perspective. If you have these guys who are now computer generated and their computers start telling them to lighten up or liquidate their short positions, they'll take that as a reason to go long. So we think that what you see is the short positions that have been built up have helped push the prices down, and when they get liquidated, they're not going to go away from the market, they're going to go long. They'll come into a market that's already got historically high levels in silver of long positions and very high levels in gold. We think that... that could cause the prices to rise much more sharply off the base than you would otherwise expect.

Mike Maroney: I noticed that we had the Bloomberg Commodity Index trading at 2002 lows and I think what you're saying is...we've seen money move in, and maybe they even think they're long, but they see quality returns being on the short side, and the definition of a short is a promise to purchase at a later date. So that promise to purchase at a later date not only could be to cover shorts, but also to execute long positions and suddenly we could see a dramatic shift, as far as, the velocity of an up move, which is typically a little bit slower than the down move.

Jeffrey Christian: Right. If you just look at the gross shorts and let's just say they liquidate these positions or liquidate most of them, you're going to see 10...15 million ounces of short covering buying. That's buying--when you cover shorts you're buying them back. So just if they would liquidate their positions, it's 10 to 15 million ounces of buying and then if they say, "Wait a second...if my computer is telling me that I shouldn't be short, it's really telling me I should be long." If they take that money and go long, then all of a sudden you've doubled it and you've got 20 to 30 million ounces of gross buying as you liquidate your shorts and buy new long positions.

Mike Maroney: I can imagine that maybe some of the money they haven't shorted with and that money is sitting on the sideline, suddenly the market starts to move. They haven't taken exposure in the market. The last thing they want to do is talk to a client that wanted to be long commodities and isn't taking advantage of a big move. So that money could start to also chase the market a little bit.

Jeffrey Christian: Absolutely.

Mike Maroney: It’s Interesting. Now, we have some other events happening this year. You talked a little bit about the election and I found it very interesting that you really kind of felt that the winner of the Presidential Election probably doesn't have as much of an affect as many people might believe.

Jeffrey Christian: Yeah. I think that my take is that whoever wins, we lose. I look at the current slate of candidates and none of them inspire great confidence on my part. I think that the way I look at the election may not trigger immediate buying of gold and silver by investors who are worried about the consequences of a dysfunctional American political system. Let's admit it, it's just more dysfunctional than it has been for the last 30 years or so. It's nothing new here. It's just an even worse episode than the previous seasons. So I think what the election does... is it accentuates and increases the sense of ill ease on the part of investors around the world. There's so many bad things happening and there's so much gurgling around in the market. Syria doesn't have an immediate affect on us or on the global economy. Terrorist attacks don't have an immediate affect on us personally, unless we happen to be in that local or on the global economy, but they help create the sense that things are not right and there's an ill ease. Everybody's got one foot toward the door. I think that the Presidential Election just increases that sense of ill ease on the part of investors around the world--It makes them more nervous about the dollar, makes them more nervous about the U.S. economy, the stock market, International relations, terrorism. I think that that's the major affect that the election will have on investment markets, including gold and silver.

Mike Maroney: Now, it's interesting, because the patriarch of the company, and I think you were just saying, "Hello!" to Lou, he simplifies it sometimes as far as gold and silver pricing is concerned. He always tells me that all you have to do is look at the overall government debt. And if we have $17 trillion in government debt, in his mind eventually gold will be trading at $1700. Then he takes an 80 to 1 ratio, as far as gold, and then he can figure out the price of silver, but what we've seen recently is a pretty move up in the value of the U.S. dollar even though we're accumulating a lot of debt. Now you talked today about the Fed and I was a little bit surprised, because you made it sound as if they still have a lot of powder left and maybe they've been kind of jawboning and acting as if they don't. You've talked a little bit about $4 trillion worth of paper being printed, but you thought another $40 trillion could be available to them.

Jeffrey Christian: It's a crisis. People will say that the Fed and other monetary authorities have run out of ammunition, but the fact of the matter is they have an unlimited supply of ammunition, because their ammunition are digits on a computer. It's not even gun powder and brass casings. The way banks work is the more assets that you have on your book, the more you can lend out. The Fed runs as a bank, because it is in fact a conglomerate of all the different Federal Reserve Banks. So as the Fed has bought these various debt instruments and printed money against them, they've bought about $4 trillion worth of debt instruments, and they've added that to their assets. That has increased their asset base from $1 trillion in 2007 to about $4 trillion now. That gives them more buying power. So in early 2009, we were talking to the Fed and we were saying that, “People are complaining because you've gone from $1 trillion to $2 trillion dollars and they say you don't have any more bullets, but we look at you as a bank and we say you could go to $20 trillion given the fact that you have $2 trillion of bonds in your portfolio.” They said, "No, it's not that much is it?" So I said, "How much is it?" "It's $18 trillion," they said. I said, "Oh, $18 trillion on top of the $2 trillion you already have?" They said, "Yes." I said, "So it's $20 trillion in total that you could go to." "Oh yes, but we wouldn't do that." I said, "But if you had to, you would?" They said, "If we had to, we could." Now they have $4 trillion so they're lendable amount is $40 trillion and would they do that? They would hope that they wouldn't have to, but if you get into a situation similar to 2008, 2009 but worse where it's a matter of let’s print another $10 trillion dollars, buy $10 trillion dollars worth of bad debt from various people and through it in our portfolio or allow us to go into a great depression worse than the Great Depression of the 30's, similar to the Great Depressions that we saw in the 1870's, 1880's, and 1890's, where the collapse of the dollar and major deflation. The Fed will choose to print money and they do have the capacity to print more money. They've learned both from the Great Depression itself and from the Great Recession of 2007, 2008, 2009. They've learned to be more forceful rather than more cautious.

Mike Maroney: Now, a lot of people thought quantitative easing would bring hyper inflation and needless to say we haven't really seen the velocity of money move. Matter of fact, I think it's at an all-time low. So a lot of the money that's being printed, really hasn't worked its way through the system. Do you see any political changes on the horizon that could force that money to start to percolate a little bit more?

Jeffrey Christian: Well, I think what would have to happen... yeah...that's why we haven't seen inflation. Unless it does, we might not see inflation. Even when it does percolate into the market or into the broader economy, you might see it sterilized through bond sales by the Fed, which could suck up some of the excess liquidity if you see inflationary pressures. We may not see inflation. The one thing that worries me is there is a movement among some Congressmen to cause the Fed to not be an independent bank, but rather to have to respond to the directives of the Congress and the Administration. My view is you may have criticisms about the way the Fed is doing things, but look at the Congress and do you really want Congress people controlling the bank? Do you want to give control of the Nation's Bank to Congress people? I mean that's just really scary to me. That could be really bullish for gold.

Mike Maroney: I could imagine.

Jeffrey Christian: ...but that's probably the major political change because otherwise, I think, what you’ve tended to have... Bernanke, I think, was a big exception to the rule, but you've tended to have technocrats run the Fed. I think, Yellen probably is too technocratic. Greenspan was a technocrat, but he understood markets and he had a sense of markets that his two successors haven't had. So, I think, if the Fed stays independent, we are probably in better shape than if they come under the control of the Congress and the Administration.

Mike Maroney: Now, I loved it today when you talked about America. You said, "America is Great" and a lot of people in the gold business they always talk about the demise or the death of the dollar. I think in your presentation today is... the dollar is not going anywhere. It's going to be around for a long time to come and obviously we could see price fluctuations. Do you see the Yuan potentially in the future being a key reserve currency?

Jeffrey Christian: I see it being a key reserve currency, not the key reserve currency. The People's Bank of China sees it that way too. The last thing that they want is for the Yuan to be the reserve currency of choice, because they've watched the French and the British and now the U.S. really damage their economies by allowing their currencies to become the currencies of choice. What a lot of Central Banks, including the Chinese Central Bank, would like to see is a slow movement away from the dollar being the de-facto reserve currency of choice to a multi-polar currency system... but it's going to take a long time for two reasons.

First off, individual countries have to change their rules to allow individuals to own their money in whatever currency they want and most countries don't allow that right now. So there's got to be major reform on a country by country basis. The second thing is, if you owe the world enough, you own it and with 60% or so of the monetary reserves denominated in dollars and probably 70% to 80% of private sector financial wealth denominated in dollars... the world is so washed in dollars that if you said today, "Well, let's replace the dollar with a basket of other currencies," it would be so hyper-inflationary to those other countries, because they would have to print so much money. If all of the other currencies combined represented only about 40% of the world's monetary reserves and only about 25% of the private sector reserves, you really can't make a fast transition away from the dollar. So as long as that's the case, there's a case for keeping the dollar and for strengthening the dollar.

In addition to that, there's something very important. Yeah, I do take offense with those people who say they want to make America great again, because America is still very Great and it's very strong and it has a number of resources that every other country in the world envies. We have an installed manufacturing base, installed industrial base, we have an education force that's poor or none. If you look at the Universities, the top rated Universities in the world, it's down. It used to be that 9 out of 10 were American, it's probably about 7 out of 10 now. We still have natural resources. People don't realize that we're still one of the world's largest producers of all sorts of agricultural commodities as well as industrial commodities--copper, coal, steel, iron. We're still in the top handful of countries in terms of a lot of that stuff. So we have all sorts of capacities that tend to get overlooked. You know, our manufacturing output. If you look at it, our manufacturing output is, I believe, 50% higher than it was during the Reagan administration. We haven't lost manufacturing capacity. What we've done is we've lost manufacturing jobs.

Mike Maroney: Right!

Jeffrey Christian: We're producing 50% more in dollar value of manufacturing goods today than we were 30 years ago.

Mike Maroney: Now, needless to say, if you invest in gold, you're not betting against the United States. You see uncertainties out on the horizon that obviously could force investors to move a little bit more of their portfolio into precious metals. Now you talk about a couple of different variables. You talk about catastrophic insurance. You talk a little bit about wealth preservation and you also talk a little about wealth accumulation. I like the way you termed it today, you said, "We look at having different silos." Could you expand a little bit on that?

Jeffrey Christian: We advise wealthy individuals and people like Monex who advise other individuals too as well as wealthy individuals. When we get a client and they'll say, "How much percentage of my wealth should I have in gold and why should I have gold or silver?” We talk about these different silos, because gold and silver each have different functions for each individual investor. The first function is that catastrophic insurance. I may not think that the world is going to collapse, but I do think the world will suffer numerous problems over time--crises, recessions, perhaps bouts of deflation, bouts of inflation, and large long term structural issues like International labor, International cooperation, a movement to a multi-polar currency. There are a lot of problems that are out there and those problems will cause issues in the markets and in the economies from time to time. They may not lead to a collapse, but they're going to bad and you should have some portion of your wealth as a catastrophic insurance policy in case things really do go bad. Americans tend not to see it, because we've had a relatively stable country, but if go to China, or Southeast Asia, or Europe, or the Former Soviet States, or Africa, where you've had regime change, government change, and currency replacements. Where one day you wake up and the currency is gone. Another day you wake up and the President is gone. You find people saying, "Ok, I want some of my money in that insurance policy in case things do really go bad." In that insurance, what percentage of your wealth depends on who you are. If you're very wealthy, it may be a relatively small percentage. If you're not so wealthy, it's probably going to be a much bigger percentage, but then you should also have gold and silver as what we call long term investments, just to have a diversification of your portfolio and a diversification of the currencies in which your wealth is denominated, if you will. So, rather than have all your wealth denominated in U.S dollars, have some denominated in gold and silver. Then there's a third role that we look at which is more opportunistic--metal that you buy and sell. Understand now, gold and silver are markets, they rise and they fall. There are a lot of people who that think gold and silver only rise and there are a lot of people who think any decline is because of some conspiracy, No! These are markets, they rise and they fall. So, it was very easy for me when gold was $270 in 2000 to say, "Buy gold." It was very easy for me when gold was $1860 in January 2012 to say, "It's a time to sell." Right now... it's a difficult...well No, not right now it's easy. It's easy to say, "This is a good time to buy gold," but I think that if you can be opportunistic and you have this long term holding that you keep, but then you have another position that you buy and sell depending on where the price is, you will do a lot better over time.

Mike Maroney: Well, one when you showed me the chart as far as your buy recommendations, absolutely impeccable, and you admitted that you liked gold at $1300, which a lot of analysts will come out and say, "Well, we got stopped out of that position," but today you said something that got me excited. You felt that we're getting very close to a bottom and that if investors are thinking about getting into precious metals, now may be a great time do do so. Obviously, with all of the different catalysts and you talked about numerous days of reckoning. What was... explain that term a little bit more.

Jeffrey Christian: Well, I was in a discussion on the long term outlook for the global economy in 2013 and the other participant was a Federal Reserve Economist and people asked us about the debt situation--is this untenable? He said, "Yeah, I think there has to be a day of reckoning at some point. It could be in the distant future. It could be near. We just don't know." I said, "I don't think there's a day of reckoning. I think there are many days of reckoning," because quite frankly what you look at... the way the world has worked for the last 500 years... is that you have this massive build-up in debt and then you have a crisis, as we did in 2008, 2009, and we find a way to paper it over. So I think, that there will be a day of reckoning and the devil will stalk the surface of the earth, and we'll engage him in a poker game, and we'll buy ourselves another 5 to 10 years. And then 5 to 10 years later, we have another day of reckoning and the devil comes over and says, "This time the odds are in my favor," we'll play again, and we buy another 5 years. That's how the world's economy has tended to run since 1400. I mean, if you look at Spain. The Golden Age of Spain was the 1500's. Spain ruled the world. Spain went bankrupt three times during that century and each time it did it went off to the private wealth holders of Europe and said, "We're Spain, give us more money," and they said, "OK."

Mike Maroney: One of the things you did say today though and I loved hearing it because it's always good to have a potential target out on the horizon. You were talking about the market potentially making new highs. Gold breaking above that $1900 level, maybe silver. You didn't give a number on silver today, but you did give a date. You said sometime in the next three to four years by 2020. Can I tie you down on that one?

Jeffrey Christian: Yeah, I think that... we look at gold. Let's look at gold specifically and see three really big positives. It's just a matter of when they're going to come together. One is that investors have pulled back from buying as much physical gold as they have been, but we think that the economic and political environment at some point--it may be this year, it may be in two years, three years-- it's going to cause investors to step up their gold purchases again. When they do, they're going to find that there are all these Central Banks, including the Chinese Bank, that have stepped up their gold purchases and the gold market will be that much more crowded. So they'll start competing with Central Banks for scarce gold resources and we look at mine production. We think that gold mine production will probably continue to grow this year and next year, but after 2017 world gold mine production is likely to fall very sharply and that's pretty much baked in because of the long lead time for expansions and new developments of mines. We think that the current low gold price has starved the gold industry and you will see mine production fall. So if it takes until 2018 or so, you get this trifecta there--where you've got investors stepping up the demand for gold, when they get to the gold market they find its crowded with Central Bankers with a lot of more money to spend, but are probably actually more price sensitive than private investors, at a time when my production newly refined supply is falling and that we think could cause the gold price... we expect the gold price to move modestly higher in the interim. Maybe get to $1200 or $1300 by the end of this year depending on what happens with the election, and the stock market, and the dollar, move a little higher in early 2017, but at some point you hit this infliction point and we think the price starts accelerating rapidly. By 2020 or so, we think you'll see nominal prices at record levels.

Mike Maroney: One thing you did say today though, something about the long term suddenly becoming the short term. What was that all about?

Jeffrey Christian: I'm a very big bull on the long run. Short term, I'm probably more moderate than I'm sounding today and again you referred to my track record, which has been pretty good.

Mike Maroney: Impeccable!

Jeffrey Christian:We've had our faults, but we've had a pretty good time. One of our strengths is... if you look at 1980 to 2000... 68% of the time we're telling people don't buy gold, sell it and we're willing to stand down. We're willing to tell investors... we have had investors. We've had multi-billionaire investors. We've had the world's largest hedge fund at the time, come to us in 1990 and say, "We think that we should be buying gold, but we were having dinner with one of your clients last night and he said before you buy an ounce of gold talk to CBM Group," and we told him five reasons to not buy gold and we were looking for to turn bullish. So he shorted gold from 1990 to 1992, late 1992 right after the election, and then late 1992. Actually before the election, we told our clients things are changing and we think that by March of '93 the price will rise. So he sold off his short position, went long, everybody was bearish, so he bought the grossly out of the money puts...or call options and he made a fortune. He made the newspapers because he was so big. We have this view. You will find people in the gold market who have been telling you that the treasury is going to collapse and gold prices are going to sky rocket for 40 years and some day they will be right. We have a reputation where we've been saying, "Yeah, now's a good time to buy," "Now's a good time not to buy or to sell," and so when we come along and we say, "Now's a good time to buy," I think we have a little bit more credit on the street because there have been times like January of 2012 where we said, "Time to sell, get out!" It's funny, because people will ask us, "Well, how much money do you have under management for your clients right now?" and we say, “Very little." They say, “Why is that?" We say, “Because we told them to sell it in 2012 and they said go for it. So we sold off most of the assets we were holding. Now people are reluctant to get back in the market, because they're not convinced it's the bottom.”

Mike Maroney:In the banks right now, Jeffrey, I got something from the bank the other day. It was three year CD for less than 1%. Why would somebody put $500,000 in a bank, get paid less than 1%, when you could potentially buy gold at approximately $1100 an ounce, and if we see $1900 gold in the next 3 or 4 years, that's a quality return?

Jeffrey Christian:Yes, Oh yes. In fact, one of your guys showed me an article this morning in which somebody pointed out, that if you had bought the stock market in 2008, you'd be up a certain percentage today from where it was even with all the gyrations in between now and then. But if you had bought gold in 2008, you'd be up probably doubled as much. People overlook the capital appreciation potential on a long run basis in gold and that's still true and it's going to continue to be true. I wouldn't put half a million dollars or anything into a 3-year CD at this point. I would be looking at --in terms of my own personal portfolio-- I have much shorter term cash instruments, because I just don't see how it makes any sense to lock up your wealth in such a low interest product and again because I'm all about diversification. If I had half a million dollars, I wouldn't buy a half a million dollar 1% 3-year CD. I would put some money into short term interest rates. I'd put some money into gold and silver and I'd probably put some money into other assets too to give myself... It's like playing roulette and you put chips on a number of the squares.

Mike Maroney:Jeffrey, we’ve have taken up so much of your time today. We’re absolutely so excited that you were able to come in and speak with all the account reps. I think these reports are absolutely phenomenal. What you shared with my guys today was incredible. It really fired them up, because I think what happens, you've been beaten down in the trenches and needless to say sometimes you just need to see a light at the end of the tunnel. What you're saying though is...we're not sure how big the tunnel is, but there's a light out there for gold buyers to take advantage of the current prices and silver buyers and palladium buyers. You feel pretty confident about that.

Jeffrey Christian:Right and let's go back to a question that you asked which I don't think I answered and I said in your presentation. You can look at the gold market as a long term. There's a lot of reasons to own gold and expect the price to rise sharply and you just don't know when that long-term becomes the short term. You wake up one morning and the price is up and because of the potential of those shorts flipping and going long, when you start seeing the move it will go fast.

Mike Maroney:Fantastic! Well, I hope everyone enjoyed Jeffrey's comments. I think you would absolutely love to read these reports. We are a big believer in CPM Group and I think you'll find this information absolutely incredible at helping you make a decision whether precious metals fits as far as your portfolio. Jeff, thank you so much again.

Jeffrey Christian: It's always a pleasure.

Mike Maroney:Have a great day!

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