Silver Up 90%: Analyst Who Called It Warns "Systemic Risk” Worse Than 1929 - Dohmen

Key Concepts

• Advanced Technical Analysis: Utilizing charts, price, and volume to understand market movements.
• Volume: The amount of trading activity, crucial for confirming price rises.
• Support and Resistance Levels: Price points where a trend is likely to reverse.
• High-Frequency Traders/Algo Traders: Automated trading systems that can manipulate short-term markets.
• Intrinsic Value: The inherent worth of an asset, absent in cryptocurrencies.
• Systemic Risk: The risk of collapse of an entire financial system or market.
• Quantitative Tightening (QT): A monetary policy tool where central banks reduce their balance sheets.
• Money Supply (M2): The total amount of money in circulation.
• Carry Trade: A strategy where an investor borrows in a currency with a low interest rate and invests in a currency with a high interest rate.
• Dollar Cost Averaging: Investing a fixed amount of money at regular intervals, regardless of the asset's price.
• Leverage: Using borrowed money to increase potential returns, but also amplifying losses.
• PE Ratio (Price-to-Earnings Ratio): A valuation metric that compares a company's stock price to its earnings per share.
• Treasury Bills (T-bills): Short-term debt obligations issued by the U.S. Treasury.

Summary

Bert Domen, a market analyst known for accurately predicting past market crashes, is now issuing a severe warning about current market conditions, describing the systemic risk as worse than in 1929. He highlights several critical factors contributing to this elevated risk: record-high margin debt, the dissemination of "fake economic data," a potential bubble in AI stocks, and an impending brutal bare market.

Silver's Performance and Technical Analysis

Domen discusses the recent historic peak of silver, attributing its strong performance to advanced technical analysis, which he emphasizes involves not just price but also volume. He notes that many media analysts neglect volume, which is crucial for validating price increases. A price rise unsupported by higher volume signals caution. He also stresses the importance of support and resistance levels, which charts reveal.

Regarding short-term market timing for gold and silver, Domen advises against it, stating that even after 50 years in the business, he hasn't found a reliable method. He advocates for a longer time horizon, especially given the influence of high-frequency and algorithmic traders who can manipulate markets in the very short term. He observes that while everyone is becoming bullish on silver due to its recent performance, this is precisely when caution is needed.

Critique of Cryptocurrencies and "Real Money"

Domen strongly criticizes cryptocurrencies, particularly Bitcoin, calling it a "big misnomer" and not "digital gold." He argues that cryptocurrencies lack intrinsic value, as demonstrated by their inability to be used for everyday transactions. He points to Bitcoin's recent 36% drop as evidence that they do not keep pace with gold and silver, which have soared. He contrasts this with "real money," which he defines as gold.

Systemic Risk and the US Dollar

A significant concern raised is the potential "reset" or "revaluation" of the US dollar, leading to a loss of purchasing power. Domen notes that central banks are buying record levels of gold, signaling their anticipation of this event. He suggests that individuals should position themselves like central banks to protect their wealth.

Market Manipulation and CME Outage

Domen asserts that the CME outage coinciding with silver's price surge was not a coincidence but an intentional event. He has been trading since 1975 and believes significant manipulation occurs, primarily by large bullion banks like JP Morgan, who have faced convictions and multi-billion dollar fines for such activities. He argues that these fines are insignificant compared to the profits made through manipulation.

Dangers of Leverage and ETFs

Domen strongly warns against using leverage, especially in ETFs. He describes how leveraged ETFs (2:1, 3:1, and even 5:1) can lead to complete loss of investment if the underlying assets decline, even by a modest percentage. He illustrates this with the example of a 20% drop in the underlying assets potentially wiping out a 5:1 leveraged ETF. He criticizes the human tendency to hold onto losing positions, emphasizing that selling at a loss is the best sell signal.

Catalysts for Silver's Rally

Domen explains silver's catch-up rally by noting that gold has become very expensive for the average person, making silver the "poor man's gold." He highlights that silver lagged gold for years and is now playing catch-up. Additionally, he points to silver's industrial uses, particularly in the AI revolution, alongside copper.

Long-Term Outlook and Historical Perspective

Domen reiterates that for gold and silver, a long-term perspective is essential, advising investors to "put it away and forget about you have it." He shares a personal anecdote from his childhood in Germany during the war, where old silver coins (Maria Theresian Thalers) retained their value and purchasing power when the Reichsmark became worthless. This experience solidified his belief in gold and silver as stores of value.

Celebrity Endorsements and Market Tops

Domen expresses caution when celebrities like Tucker Carlson enter the gold and silver space, suggesting it can be a sign of a market nearing its peak. He believes that buying at these elevated prices carries a higher degree of risk than buying earlier.

Year-End Stock Market Rally and Window Dressing

Domen anticipates a year-end rally in the stock market, driven by institutional money managers engaging in "window dressing." This involves selling poorly performing stocks and buying those that have done well to present a more favorable year-end portfolio.

Overvalued Stocks and PE Ratios

He criticizes the high valuations of some stocks, citing an example of a company with a PE ratio exceeding 300. He questions whether investors understand that such valuations imply it would take 300 years of earnings to recoup the investment, without any profit.

The "Rush Away from Currencies"

Domen identifies a significant underlying factor driving market rises as a "rush away from currencies." He argues that the US dollar's value is measured against other currencies, not against "real money" like gold. He contends that central banks are engaging in loose monetary policy, contrary to claims of quantitative tightening, as evidenced by record-high M2 money supply and bank loans. This loose money is fueling markets globally, as countries devalue their currencies. He uses the analogy of a shrinking yardstick to explain the diminishing purchasing power of money.

Japan's Carry Trade and Potential Global Crisis

Domen believes Japan is "overdue for another crisis" due to its artificial market created by government ownership of stocks via ETFs and near-zero interest rates. He recalls the 1980s implosion in Japan, where real estate prices crashed significantly after the government attempted to curb speculation. He notes that Japan's cheap money led to significant investments in US real estate.

Lack of Intelligent Global Leadership and Geopolitical Risks

Domen expresses concern over a "total lack of intelligent leadership worldwide." He criticizes political leaders and points to ongoing conflicts and escalating tensions, including the war in Ukraine, the situation in Gaza, and potential conflicts in Nigeria and Venezuela. He questions the motivations behind potential military actions, suggesting that profit is a primary driver. He also raises concerns about the legality of Volodymyr Zelenskyy's leadership in Ukraine, questioning the validity of any peace agreement signed by him.

Bitcoin Decoupling and Crypto Risks

Domen attributes the decoupling of Bitcoin from stocks to a growing realization that cryptocurrencies are "dangerous." He believes the "stable coin act" further clarifies this risk, and he would "not touch that stuff with a 10-ft pole."

Avoiding Conflicts of Interest and Market Cycles

Domen emphasizes his commitment to avoiding conflicts of interest, stating that his firm only sells research and does not deal in precious metals. He recalls accurately predicting a 20-year bear market for gold in 1980, followed by a 31-year bull market, which he now attributes to "infinite money printing."

Defense Against Systemic Risk: Education and Conservative Investments

Domen stresses the importance of education, urging people to understand why markets are moving, not just to follow buy/sell signals. He reiterates that markets are rising due to a flight from money into assets perceived to have more value, such as stocks, which can raise prices during inflation. However, he warns against overvalued stocks with excessively high PE ratios.

For defense, he recommends short-term Treasury bills, emphasizing their safety due to the full faith and credit of the U.S. government and their short maturity, which prevents price depreciation. He advises against money market funds that may contain riskier assets.

Investing in Silver and Dollar Cost Averaging

Regarding buying silver at current prices, Domen states it depends on the time horizon. For long-term wealth preservation, he recommends dollar cost averaging. He explains this as investing a fixed amount regularly, buying more when prices are down and less when prices are up. He encourages self-education on this strategy.

Platinum and Market Manipulation

Domen agrees with Mark Faber's bullish stance on platinum, considering it "way underpriced." However, he expresses caution about platinum due to its thin market, making it susceptible to manipulation. He acknowledges that most markets are now manipulated, and he has shifted from being a short-term to a long-term trader, citing Jesse Livermore's advice that "the big money is made by sitting by."

Conclusion and Final Advice

Domen concludes by reiterating his core advice: avoid greed, do not use leverage, and be wary of enticing tokens and speculative ideas. He draws a parallel to Isaac Newton losing a fortune in the tulip bubble, highlighting that human emotions can override even the greatest intellect. He wishes viewers well and emphasizes that "greed does not get rewarded."