Dave Kranzler | How Will Gold, Gold Miners & USD Respond to the Coming Stock Market Crash?
On June 27, 2017, Dave Kranzler of Investment Research Dynamics and I (Bill Powers) discussed the coming stock market crash what will happen to gold stocks and the US dollar when the crash occurs. In the interview Dave also gave his current take on precious metals investor sentiment and offered some advice to precious metals investors frustrated by gold and silver price manipulation.
Dave earned an MBA from the University of Chicago with a concentration in accounting and finance. Over the years he has worked in various analytic and trading jobs on Wall Street, trading junk bonds for a large bank for nine of those years. For the past 16 years, Dave has been an avid student of the precious metals markets and a steadfast proponent of holding physical gold and silver in one’s portfolio. Currently, he co-manages a precious metals and mining stock investment fund in Denver and is the editor of the Mining Stock Journal and Short Seller’s Journal. Dave’s stated goal is to help people understand and analyze what is really going on in our financial system and economy.
I began our discussion by asking Dave to respond to a recent comment posted on the MiningStockEducation.com YouTube channel: “Optimism in PM’s and miners is on life support. People are tired of the manipulation. People are tired of the PM pushers saying PM’s are going to break out. People are just tired of the whole sector doing nothing.”
When asked if he thought the statement accurately reflected current investor sentiment towards precious metals and mining stocks, Dave acknowledged that “some investors are probably discouraged,” especially those that entered this market at a higher cost basis. However, he pointed out that “it depends on how you measure sentiment,” because if you look at two professional sentiment measuring sticks such as John Brimelow’s Gold Jottings and Hulbert Gold Newsletter Sentiment Index, you would conclude that sentiment is “probably bordering a little on the positive side.”
In regards to the average retail investor being frustrated by precious metals price manipulation, Dave reminded listeners that “all markets are manipulated.” Over the past 16 years of engaging in the precious metals markets, Dave has learned to emotionally detach himself from the intervention. Dave acknowledged that no one knows when the intervention is going to fail, but when it does, investors want to be positioned in this market. Dave stopped putting timing on his gold and silver price forecast because the manipulation makes it too difficult. But to put the gold price in perspective, he reminded listeners that since 2000/2001 gold has outperformed every major asset class “and I don’t know how you can argue with that. I mean what more do you want from an investment?” Dave continued, “Yes there is intervention that is going on and you have to live with it and learn to live with it. But at some point down the road anyone who hangs in there is going to be very amply rewarded in my opinion.”
A topic Dave has frequently written about is the expected, coming stock market crash. When asked about his thoughts on billionaire investor Jim Rogers’ recent statement that the biggest crash of our lifetime will occur later in 2017 or in 2018, Dave pointed out that Rogers is “a smart guy and he also is very cagey” and suspects he has probably protected his vast wealth with physical gold and silver. Rogers has not been publically vocal about gold up until now but Dave said, “if you are going to trust anyone’s instinct, I think you got to trust him. If he is out here issuing these warnings, I’d say we are probably a lot closer to a big accident happening in all the markets than we were 3-5 years ago.”
When asked if he thought the downfall of the US dollar would trigger a stock market crash or if the downfall of the US dollar would be on the other side of a crash, Dave responded, “That’s a really good question. And again, I kind of throw it into the category of no one really knows how this thing is going to implode, what the trigger is going to be. From time to time I kind of come to the thinking that they are going to be able to hold this whole thing up until they can’t prevent the dollar from collapsing.”… “I think that something is going to happen before the rest of the world says, ‘no more dollars thank you.’ I think what’s going to happen is that there is going to be some stone tossed on to the proverbial camel’s back of our stock market and it is going to set off an avalanche of hedge fund algorithm-HFT selling. And it’s going to be more than the Fed can prevent and I think at some point they’ll just have to unplug the markets.” The dollar, then, would collapse on the other side of a stock market crash.
When asked how the gold and resource stocks would respond to a general stock market crash, Dave said he thinks that the mining stocks would be driven down with the rest of the market due to hedge funds liquidating their positions after receiving margin calls. Dave pointed out that, “you’re not going to be able to time that. No one can time that. But you definitely want to leave some cash on hand for when it does happen and then jump in. And again, you are not going to be able to time the bottom on something like that.”… “In a scenario where we get a steep market sell-off, I think you probably see everything sell off in correlation with that and then I think you will see a flight-to-quality bid come into the market that will move gold and silver higher and then the mining stocks will follow those. That’s the best model that I have to answer that question. Other than that, it is anyone’s guess.”
