$40 silver price by year-end, E.B. Tucker forecasts

[Applause] joining me today is eb tucker author of why gold why now and director of metalla royalty eb welcome back to the show it's a pleasure thanks for having me your book is the gift that keeps on giving because every time i read a new chapter i learned something new and i have something new to talk about i want to start by talking about the chapter you wrote on the broken system that we're living in you said that the u.s system used to work but is no longer working tell us about that well i mean yeah you're taught as a kid that it's a capitalist system and it's better than a system that has too much state control but then if you turn on the if you forget about that and turn on the the media and really take an assessment of what's happening i mean if you had gone to sleep 50 years ago and you woke up today you would have thought i must have landed in moscow i mean i'm not i'm not sure i'm seeing this correctly right i mean because this the state has so much control uh and then then you look at the big companies you have four companies in the s p as of last week that were bigger in market cap than 385 smallest companies in the s p and um you just have you have distortions that that people from you know generations past wouldn't believe in david let me let me just put it to you like this when i was growing up you know i talked about my grandfather was my mentor in the book and taught me about the stock market and everything and he was a banker and all this he had a great great career he he would talk to me about the secret to getting rich it's to spend less than you earn and invest the difference very basic okay but the problem is if you had saved a million dollars 25 years ago and bought treasuries you had 70 grand a year in income you could have retired lived as decent of a life as any average person in the us now you need 10 million to get seventy thousand dollars in income off treasuries and seventy grand is gonna do very little for you i mean you you you'll be playing golf at the cheapest municipal golf course in the area and you won't even be doing it that often okay so my point is is that the standard of living has been under attack and so free markets would allow you the opportunity to position your yourself you know and and there would be corrections in these things there would be this system writes itself like a forest fire clears out the bottom undergrowth in the forest we don't have that anymore that stopped about 20 years ago you're right the government has been involved in our day-to-day but isn't that can't you say that's just keynesian economics governments are just spending to stimulate the economy isn't that just i mean someone argued that's actually a good thing you can you can call it whatever you want and i also don't think it's a bad thing i think it is what it is i mean you have a five trillion dollar budget deficit between 2020 and the estimated 2021 deficit in the u.s meanwhile you have 12 and a half trillion worth of gold in the whole world in the whole world there's 12.5 trillion worth of gold that's been mined since the beginning of time and yet in the u.s you're going to have about 40 percent of that value in two years in in deficit spending and so what happens is is that you pin interest rates at zero so that you can keep borrowing so you hear the message everybody keep borrowing keep borrowing keep borrowing because you've got to keep pushing money into the system see david the book the reason why you like the book is because it doesn't just say this is going to happen on this day it says there's a series of dominoes they're going to fall okay and they're going to hit each other like this click click click click click click and we're only about a third of the way into that and so if you want to know what to do to preserve wealth and to survive in a state controlled system you've got to see what the next dominoes are to fall and that's why the book's important is because it shows you the whole playbill i mean you you got to watch the whole play to see what's going to happen you don't just want to know what the ending is it's about how this the plot develops and who's going to get hurt and there's going to be a lot of people sadly that are hurt very badly in this system because this is not traditional market-based capitalism this is a situation where the the system has the power to pick the winners and losers some junk bonds get bought by the fed some junk bonds don't get bought by the fed interest rates are pinned at zero for some borrowers their market rate for other borrowers you see how this goes are you going to be in the n club or the out club in a communist society how close you are to the center is very important in fact if you have an apartment in the center you're you're considered to be part of the politburo right you're close this is the way things are going if you're close to the fed you get to sell junk bonds okay so so how how yeah how is the rest of the play going to end the rest of the two-thirds of this story where are we headed now so so as as this goes people are going to slowly realize that like i was saying about saving up you know 10 million bucks to earn 70 grand interest it's totally impossible i mean how would my grandfather today tell me just save your just get a job and say i mean who can save 10 million dollars just working so you have to speculate so it's going to turn everyone into a speculator now gold is has not seen that speculative mania yet and that's coming that's ahead of us still that's why we had the 2500 gold target for this year which i want to revisit that with you our target for the end of the year is 2 500 now we're not saying gold will finish over that we're saying gold will touch that by the end of the year it's very important distinction we think silver hits 40. think about that that's a 62 and a half to one ratio which is about the historic average 2500 gold and 40 silver these markets haven't become speculative yet they're just now starting to see serious cash flow berkshire hathaway now i don't know if you know this but if you bought an ounce of gold on january 1st of 2000 and you bought the equivalent number of dollars worth of berkshire hathaway gold outperformed berkshire hathaway and outperform berkshire hathaway stock so buffett doesn't pay a dividend gold doesn't pay a dividend okay you could look at these things fairly equally and if you just bought physical gold you outperformed the world's most famous investor and now he's buying he's buying barrick gold why is he buying bear gold because the operating margin is twice microsoft because the dividend yield is higher than microsoft because the company's fundamentals and metrics are far superior to the other companies in the market that have been levitated he's on to something and it's going to go farther there's going to be more of this you're basically you're assuming that silver is going to outperform gold why is silver going to outperform in the next couple months so silver's got some catching up to do one of the things about silver that people need to understand is that the supply of silver is not elastic and what that means is the price goes higher the mines can't just turn it on i mean only about a quarter of the silver supply comes from actual direct silver mining the rest of it comes from byproducts and recycling and all these different things so if a company's mining copper and they produce a little bit of silver and the silver price goes up they can't just turn on more silver production now gold you know can do that silver can't so silver has a little bit of catching up to do now one important thing to to remind everyone if you look back over 25 years and goldsilver.com just did a great article on this they they looked at the months of the year where gold outperforms almost all of gold's performance has come between september and december every year going back this is an average okay of course there's been years where maybe it didn't but september to december is the bulk of the move in gold i mean you can you can say well why we need to know exactly why that is it might just be because people come back from the hamptons on labor day weekend and they say something doesn't look right so like it seems to be this time of year when people start gathering up supplies for the winter and and so i don't want to look too deeply into that but i want to say look this is the time of year when it moves and also what's going to happen early november you have an election that people are already contesting the election and there hasn't even been a vote yet so you have you know the perfect storm for 2500 okay so evie so just to clarify 40 silver by the end of the year just like 2 500 gold it's going to touch those levels right these levels okay so i'm curious why not 50 silver because as you remember 49.50 that was the all-time high yeah gold's already touched the all-time high why don't you think so it's going to touch the all-time high by your end i do think it will ultimately cross the old-time high but i don't think it'll do that by the end of the year because i i think as these things build what happens is you pull new entrants into the market each time now nobody's in this market david believe me i'm in this market in the derivatives market in the spot market and through metallo with the with the royalty market nobody's in this market so you have a long way to go because it's like a party i mean there's only a few people at the party you know the cops don't come until much later when the house is totally filled we're a long way from that so so this year it's 40 we'll see where it goes from there i'll come back on here and tell you when we when we have a target for the 50 but but not yet 40 is plenty plenty of a run from here i wonder how much of this run-up in precious metals is tied into your thesis of our system not working i just spoke to congressman former congress congressman ron paul um earlier uh last week and he had said to me that uh the monetary system we have today is on its way to collapsing and that he used the words central economic planning a lot to to describe the current situation in the united states now we don't associate that word typically with with the united states we think about soviet union uh china north korea communist countries when describing central economic planning is that would you say those are very strong words or would or is there some validity in what he's saying right now well i don't think he's crazy i mean in the book i talk about the former ceo and chairman of one of the biggest banks in the country who i've had a meeting with and he he told me that he joked with a federal regulator once and why didn't the government set the price of oranges and the regulator told him because that would reward the bad uh farmers you know and and punish the good farmers that produce premium oranges and the government in the united states doesn't do that and he said well why do they do it with interest rates it's a really good question and i think the guy was irritated with him for asking it but in the us we we set the price of interest on capital and we set it at zero soon we're going to set it at below zero now the reason why we're going to do that is because we need savers to take that money and invest it or speculate with it or spend it so that this economy can continue expanding in the book we talk about how a debt-based system it has to keep growing but something's not natural if it has to keep growing you're managing this growth that's what dr paul's talking about is is this is a system where it's it's expansion at all cost not too much expansion but certainly not contraction you hear powell come out the other day and talk about we're gonna abandon this two percent target so that we can have more than two percent inflation and and make up for lost time but meanwhile the the rate of return on savings is zero soon to be negative so you're gonna be losing two or three percent a year the way this guy talks now david nowadays these central planners in the u.s are like celebrities they come on i have a bloomberg terminal as soon as the guy's talking it flashes all red powell says this powell says that 50 years ago it wasn't like this these you barely knew the names of these guys i mean they they did you know some thinking in washington you know in a nice marble building okay but these guys weren't financial celebrities now everything they say is pushed across the wire and it's an effort to to manage this economy that's not a market-based system remember my friend the the banker was right why wouldn't you set the price of oranges because it would reward the bad actors look you set the price of money at zero you have all kinds of distortions to get created and then you have to continue applying more and more control to keep the system from breaking down so this is this is if it was a market-based system the people that made bad choices of money would ultimately have to to you know go away and come back you know as as new market participants there's a natural purging process and capitalism that's over if you're connected you don't ever have to purge if you're not connected you have a really hard time getting anywhere all right so you also wrote that we're no longer living in a free market i think that's congruent with what dr paul said i mean those are some pretty strong words if we're not in a free market that also implies that the government is controlling the markets i guess indirectly through interest rates and like you said monetary policy can you elaborate on that further why aren't we living in a free market anymore well look at the the situation that happened this this just this week with the options market you know you had all this news of the options market driving the stock market when you had you know open interest in options that you know had more power to move stocks than the actual stocks themselves i mean a derivative is based on the underlying security now in this case the derivative is controlling the underlying security i mean this has never happened before this means that the speculation is so rampant there's so much capital in the system and there's so much connected capital in the system that that seeks an advantage and uh you look at the average guy you just don't have a chance you don't have a chance i mean you're looking at microsoft facebook apple google the size of the market cap is is larger than the some of the biggest countries economies on earth it just doesn't make any sense and then you start looking at the metrics of these companies now guys like buffett are turning around and saying wait a minute the gold company actually makes money i mean remember a lot of these companies it's not the profits they produce it's the it's the growth that they'll have the market dominance the monopolistic power you know the connection to government connection to intelligence all these things i mean social media think about it you've got people walking around snapping pictures with geo-location devices in their hand telling you everything that they're doing it's an intelligence a dream come true right it's no surprise that these companies have become so dominant okay so as as we go forward looking at business fundamentals business metrics is not something that has played into this market this market rally that we're seeing and if it is you buy gold stocks i mean because you look at these companies they're increasing dividends they have virtually no debt they're increasing production the price of gold is rising profits look great costs are under control nobody's watching why is nobody watching david if these guys on the desk in new york were really doing the math that's what they'd be buying and i think that's ahead of us buffett it gave people permission to look at the gold mining stocks you're going to see follow through from that eb it's important to remember that the federal reserve was only around for about 120 years or so and uh before that actually it was jp morgan not the bank the person jean-pierre paul morgan who urged the government to establish a central bank because they didn't have one before and he was actually personally lending out a lot of money to rescuing them from an economic crisis back in the late uh 1800s and the government had to realize well look we can't just rely on one person as a lender of last resort we have to have a central bank do you think that role of a as a lender of last resort has shifted and do you think we still need a federal reserve today well regulation and market involvement is inevitable for a system if you want to maintain the system i mean i don't have i'm not one of these people that wants to throw out the fed or do all these things it's not a surprise to me that the that the fed is going the direction that it's going it's the nature of things nobody wants to delicately let go of control of the system and as this as this progresses i mean it's similar to junkie behavior you know it's not a surprise you know that that at the end of the line things get pretty messy because that's the incentives that are in place i mean they're not going to say well now we'll let you have a recession so you know for a few months here batten down the hatches only the people that have saved capital and are our tight operators are going to make it any of you guys that borrowed a lot of money uh sorry but you're gonna you're gonna be in trouble you can't do that you know it's because then you end up with just a revolution and and you create all kinds of just of real kind of serious problems so so look a system's always going to have some sort of central authority it's it's somewhat of of dreaming to think that you just have totally lose a fair system i'm not advocating that there's always going to be something but the point is as the system gets into trouble you have to you have to be aware of what's going on because your wealth is on the line the subtitle of the book is the war against your wealth and how to win it i mean think about it save up 10 million dollars to retire with 70 grand in income it's impossible you're you're being painted into a corner okay so you need to see that you're being painted into a corner and you see what comes next so you can preserve yourself this isn't about being an ideological kind of warrior to this country should be this or you should use silver coins to buy groceries forget about all that there's always going to be a system but now we're in everything is a life cycle david we're in the dangerous kind of end of this life cycle of the system and when that's happening you you've got to preserve your wealth so that you can survive into the next system and not be a surf when when things when things shake out well the federal reserve as you wrote in the book confiscated gold holdings in the 30s it happened to your grandfather and you're offline you were telling me it's going to happen again at some point right what what's going on why would they do that you see this this is a 20 uh bill from the 1920s that entitles you to an ounce of gold it says at the bottom in gold coin i keep these things around to show people because they don't believe me twenty dollars for an ounce of gold i mean now you're at nineteen hundred and sixty dollars and rising you know so and i've brought on on camera before it's about that much money you know it's an insane amount and soon it's gonna be two two of those stacks right so so so look it's the nature of the the group that controls the money to try to slowly devalue the money i mean powell is telling you he's telling you in plain english that this the rate of return on savings is going to be zero and the the inflation rate is going to be above two i mean i mean you you don't have to be an mit math whiz to realize that if you're going backwards three percent a year you have to run very fast it's enough to not you know experience erosion and so and so the question david's going to be can they manage the devaluation gracefully and slowly so that people don't notice because if you make a hundred grand and i give you a two percent raise and inflation's four percent you might feel like you're making more money but you're going backwards okay and we're not talking about this radical inflation from the 70s you got you got to look around i mean the place where i get coffee raised price is 12 and a half percent and they told me they said look you know we have to raise prices we're running at 50 capacity we have all these you know coronavirus protocols to do we have to raise prices you start looking around you have these little price increases going on all around okay nobody notices nobody notices so gold is is a safe harbor for some of your wealth during that time and eventually you'll trade the gold back in and buy something else with it part of the problem you wrote is also low interest rates uh and you argue that there's a big problem with zero interest rates i mean in theory it actually sounds quite nice you go to a bank you get a loan you don't pay interest and so you can really expand your personal line of credit you can expand businesses if you want businesses can expand their operations with very little uh you know very cheap debt financing what's wrong with this picture though you get too much capacity so the problem is is that is that it's slowly over time you got too many luxury apartments you got too many hotels too many cruise ships too too many strip centers right so you have you what happened was like think about the housing boom to make it simple you made money really really cheap they built tons of houses and there were too many houses so so you you end up building things that you would not otherwise build if you were saving up the capital and doing this in a market-based system you would never build 14 spec condominiums and try to flip them to overseas people that were going to re-flip them you know to an unwitting buyer at some point down you would never do that it wouldn't be possible you because you because what would happen is you would have to generate a return when the money is zero you generate one percent return you're good to go so what happens is you build out so much capacity that you're over supplied so so this is the this is one of the distortions that comes up now look picture you're worth 100 million dollars what do you do with the money what do you do with the money you're going to buy an office tower forget about it you can't work in an office anymore you're going to build an apartment complex too many of them you're going to buy stocks i mean microsoft you know trading it at 30 times you know ev to ebitda are you going to buy that come on you're not going to buy that what are you going to do with your money you're going to buy a little bit of gold okay that's good that'll do something with some of the money you're gonna buy a house for yourself i mean think about it it's a real problem like what do you do with this money there's too much money the returns have been compressed down to nothing okay so when that happens everybody is stretching and taking risks to generate any kind of return possible now ultimately business risk comes into the picture sometimes people don't pay you back they can't carry on they shut down their operation and then you're left holding the bag and nobody has factored that in because they've been so fixated on i gotta generate some return that's coming e.b i have uh we only have a few minutes left so i have one more question for you which is in regards to one of your final chapters in the book the most profitable business in the world which you described as being franco nevada why do you like why do you like royalty companies so much so the the magic of royalty companies which i explained in the book is that you get a perpetual non-dilutable carried interest in the mining operation now let's just make sure we don't miss anyone there perpetual means it goes on forever non-deludable means the mining company can issue billions of shares you know borrow money and do all kinds of crazy things to fund its operation and it doesn't matter one percent is one percent now and forever and and so as the gold price rises the value of the gold to come out of the ground in years ahead increases dramatically and then the value of those shares goes up earlier i told you that gold had had returned 580 percent since the year 2000 since january 1 2000 and berkshire had returned 486 but royal gold a competitor to franco has returned over 3 500 percent over 3 500 so you ended up with a multiple of the return on gold so if you think gold's gonna perform well the royalty companies assuming they're run the way i tell in the book because it's not just any royalty company you have to do certain things you're going to have pierre on later he's the godfather of the royalty business i would quote his performance but they were they were not public the whole time you know there was a period of time where they were part of pneumont so but but pierre knows how to do it because you focus only on gold and silver you spread out your jurisdiction of where your royalties are and you stay uh fiscally tight i mean franco has about a billion dollars in market cap per employee about a billion dollars per employee think about that i mean google doesn't even come close facebook i mean these guys are in the millions per employee in market cap so in my opinion the royalty business is the most profitable business in the world the most lucrative business in the world because it takes very few people to run the business you need a savvy deal maker like pierre i tell the story of what happened in the 80s he went to nevada he realized he was going to go bust drilling and drilling forever and issuing 50 cent stock he bought a royalty for two million an american barrack discovered a a serious monster gold deposit uh near elko nevada right through the middle of pierre's royalty it's returned over a billion in cash think about that two million into a billion now what does pierre had to do in the meantime well you gotta check the mail in toronto you gotta have you know maybe the lawyer check on things i mean there is some work that has to be done but it's not the type of work that you get into when you're running a widget company that requires constant sales efforts and all these things the royalty business is uh let's just say it's the smart lazy man's way to make a killing when the gold price goes up yet i'll get you on uh pretty soon to talk more about royalties and mining but uh it was a great talk today thank you very much for coming on the show thanks for having me thank you for watching our coverage of the precious metals summit david lynn here stay tuned for more kiko news [Music] you

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Keywords: gold, silver, finance, news, investing, investing news, finance news, financial news, economy, precious metals, gold price, silver price, gold price today, macroeconomics, u.s. dollar, modern monetary theory, recession, stock prices, stock market crash, sp500, eb tucker, negative interest rates, federal reserve, jerome powell, quantitative easing, gold price prediction, bitcoin, wealth, inflation, hyperinflation, deflation, silver price forecast, e.b. tucker, david lin kitco

Id: ZX7UGTbr0Rs

Length: 25min 48sec (1548 seconds)

Published: Mon Sep 14 2020

Reddit Comments

[u/tiefighter1992]

I just want it to run. The longer this bullrun drags out the higher the risk of nationalization. Esp as we are in the prelyde of a currency reset.

[u/j1077]

E.B. Tucker is worth listening too. Appreciate his experience.

[u/Punished_Blubber]

That doesn't sound unrealistic at all