Brien Lundin: If They Don't Want You To Own It, You Probably Should

We're living through the most extraordinary period of monetary printing in all of human history. It’s as widespread as it is delusional.

One of the most perplexing mysteries to us is that right as the Federal Reserve embarked on QE3 -- which was a huge, enormous, $85 billion a month experiment -- commodities began a multiyear decline within two weeks of that announcement. Concurrently, the world’s central banks plunged the world into steeply negative real interest rates, a condition that has almost always resulted in booming commodity prices -- but not this time. Today, the ratio between commodity prices and equities is at one of, if not the most, extreme points in history.

To explain that gap, we talk this week with Brien Lundin, publisher of Gold Newsletter and producer of the New Orleans Investment Conference (where Chris and Adam are speaking on Oct 25-28):

Gold Newsletter was started in 1971 by my mentor in the business, Jim Blanchard. That's the same year that the United States had closed the gold window, closed the convertibility of dollars into gold by other nations. Jim realized that now the US could print money with full abandon, it could print as much money and create as much debt as it wanted. And at that time still, and until we managed to get gold legalized in 1974, you couldn’t own gold legally, except in the form of jewelry or rare coins. It was up there with plutonium and heroin as substances you weren't allowed to own.

So it should be little surprise that, today, we're seeing a synchronous rise in equity markets across the globe. It corresponds almost exactly with the unprecedented rise in debt, in liquidity, in all of these developed nations. If you look for example at the rise in the Fed's balance sheet since 2008 and the corresponding rise in the S&P 500, the correlation is 97%. I don’t think that’s a coincidence. That’s where all of this reflation, this monetary reflation went, into those markets -- which is why you really need to up your allocation to the uncorrelated assets [such as the precious metals] that are at historic lows in relation to financial assets.

Every time in history, before we’ve had a great upset in the financial markets, people have said: This time is different. And every time, it’s proven not to be. You have to have a correction. You have to have things return to the mean and, usually, overshoot a bit.

Alan Greenspan just a couple of days ago made the point that we’re in a bond market bubble and that's what’s eventually going to burst. The risk inherent in bonds is not being priced into the markets now. When that bond bubble bursts, it’s going to take equities down with it. And there’s still tremendous liquidity out there; massive amounts of money will start suddenly looking for a safe haven.

The gold market is miniscule. It’s so small relative to the funds that are in bonds, interest bearing securities, equities, that it won’t take much of an allocation at all to send gold to record levels. That’s going to happen at some point. We can get fuzzy on the actual timescale and the timing of when it’s going to happen. But the fact that it will happen is inevitable, these trends are absolutely irreversible at this point.

So...What’s so special about gold? If it's what they tell us: that it’s a barbaric relic and it has no use in society, then why be so secretive about it? Why be so reluctant to have your citizens own it? That alone tells you all you really need to know.

If they don’t want you to know about it, if they don’t want you to own it, you probably should.

Click the play button below to listen to Chris' interview with Brien Lundin (46m:01s).


This is a companion discussion topic for the original entry at

Here’s the chart Brien referred to during the podcast:

The discussion about lithium batteries reminded me of a conversation I had with a PhD who’s familiar with the technology. When the conversation switched over to nano-lithium batteries he said that they have the energy density of C4, the explosive. A very good investment may therefore be with the technology companies developing them.
An off-topic comment: Nano-thermite should also have a much higher energy density than ordinary thermite.

Maybe gold has lost it’s shine, but the new rush may be in Lithium. PM’s will be taking on a new image if we see the traditional sources become more dear (e.g. Lithium, Cobalt, etc.). It looks like the new prospectors will be looking under every rock to find a treasure. Kinda harkens back to the Crash Course, wouldn’t you say, Chris?

It’s no surprise that as we approach global resource depletion, population and poisoning never before seen, that we also see an “unprecedented” poisoning of the “representative” financial systems. It’s frightening to see them answer these problems by growing more but it may be more than corruption and could be fear itself. They don’t know how to get out of this and in many ways, they can’t.

First thanks for the Podcast. The discussion about silver came up and Chris mentioned it cost around $17 USD to mine the silver at one location. Mr. Lundin thinks silver as a industrial metal is only worth 5 to 7 dollars. How does that math work out? I was riding my bike while listening so hopefully I heard that correctly.

Petey1 wrote:
First thanks for the Podcast. The discussion about silver came up and Chris mentioned it cost around $17 USD to mine the silver at one location. Mr. Lundin thinks silver as a industrial metal is only worth 5 to 7 dollars. How does that math work out? I was riding my bike while listening so hopefully I heard that correctly.
To understand this you need to know two things about silver. 1) 75% of silver comes as a by-product of other base metal mining. For example, copper mines usually produce trace amounts of other metals including silver and gold. 2) 25% of silver (roughly) comes from straight up silver mines. These mines, and the one I was specifically talking about, have all-in costs of production in the %16-$17 per ounce range last I looked into the matter. Some are lower, some are higher, this was the average. The base metal miners in (1) don't care if silver is $1/Oz or $100 they will still keep doing what they do which is make profits mining the base metals (copper, zinc, lead, etc). Silver is a by-product. It's gravy. Again, they will sell that gravy if the price is $1 or $100. I believe what Brien was saying is that if we removed investment demand, the remaining industrial demand would be satisfied by the base metal by-product output and that the price for that might settle around $5 or $6. It's a guess. Might be higher. Might be lower. But that price would settle around a clearing price for the volume of silver being produced as a by-product and the demand of various industries. Just supply and demand. With the suppliers being price insensitive because it's just a by-product. They will sell for what they can.