David Hunter: Volatile Selloffs Expected Before $10,000 Gold and $300 Silver

welcome back to palisade radio i'm your host tom bargerovics and joining me today on the program is david hunter he has 47 years experience in the markets and he can be found at dave h contrerian on twitter he also writes a newsletter by subscription how are you today david i'm great tom thanks for having me great to have you back we wanted to um get an update on how things are progressing in the markets you're part of a very small camp that thinks the cycle is going to end in a global bust so let's start by defining what you mean by global bust as we know that common language and precise terms are important to you yes they are i started using the term bust several years ago and said that this cycle would end in a bust and i've always defined bust as something that can cause the damage uh equal to a depression but happened in a much faster time frame so it's bigger than a recession kind of time frame of a recession but something more severe than a recession and yet not drawn out like a depression like we saw in the 1930s with the great depression so global bust obviously means it's not just u.s centric it's it's worldwide and i started talking about this many years ago because of the massive debt buildup we had in the system so both dead and derivative expansion has been through the roof and i said the next downturn will turn a normal recession into something i call a bust so so that's kind of where the origins of it began for me a lot of people use the term bust and they'll talk about the market went bust today or they throw around the term bus very loosely but i am using it in a very specific way absolutely and that's why i wanted to start by defining that so considering that we're seeing somewhat of the melt up as you call it where are we in that cycle as you see it yeah so yeah obviously we we had a rough go of it in march when the virus hit you know it looked like we were going to break the cycle and head much lower the central banks came in in a big way the fed came in a big way in the united states and kind of stopped that free fall and i said back then that i felt the cycle was still intact and that we would still see what i had been calling for prior to that swoon that we would see a melt up into a top that we were heading for a 30 uh what would become a 38 year secular bull market top and that it would end in a parabolic melt up into that top so in march right near the bottoms i said at that time i still see 4 000 plus on the s p that could happen by the summer so begin well before that and peak out maybe as early as the end of the third quarter so we're in the midst of that we've had a obviously a big run from that marsh low already consolidated for the last probably almost two months and it looks like we're poised for the next run something that i think will be pretty equal to what we have from march to now into a top so i would not be surprised see the s p at somewhere between 42 and 4 500 by the end of the summer which would be end of september or certainly by sometime this fall before the election as you mentioned derivatives earlier could you explain to us what role derivatives are going to play in that second phase of the bust sure derivatives are another form of leverage i'm not sure a lot of people think of it that way but you go back to the mid 1980s and we really didn't have and we had put some calls we didn't have a lot of derivatives out there we've had this huge run-up in derivative exposure now it's you know it's a lot of it's on the debt side some of it's on the equity side but with the advent of etfs and the huge expansion in credit derivatives etc we've gone to a point where the notional value of derivatives is quadrillions and so from very little to quadrillions and it's a form of leverage on the markets so if a market goes down derivatives can exacerbate whatever that move is when markets go up it exacerbates moves to the upside because you can with an option or some form of a derivative an option or future whatever you can actually capture a lot more of a stock or a bond whatever so you're able to really leverage up your move and leverage works in both directions so just like derivatives are something that will exacerbate moves and exacerbate cycles so i think we are at a point unlike any other time in history where with quadrillions and notional value of derivatives and 250 trillion in global debt those are numbers that are just mind-boggling really not something you can wrap your head around and all i can say to simplify it is that when we roll over those derivatives and that debt will exacerbate whatever happens and exacerbate it in a very big way so that's why i think we can take an ordinary market sell-off or an ordinary recession and turn them into something much bigger so as we're talking about the s p possibly hitting you know 42 to 4 500 that's another thousand points from where we are and it seems somewhat unlikely but explain to us the parabolic nature of this melt up and how prices could get chased that high sure you can see it in past markets certainly the dot com market in 2000 the nifty 50 peak back in 1973 are two pretty well recognized examples of where markets in the end go into a very steep sloping rally where you cover a lot more ground in a lot shorter period of time so things almost go vertical and that happens at ends of moves so another example would be back in the early 90s from the consumer growth stocks which was the drug companies the packaged food companies the coca-colas the world you know they were the steady growers they weren't exciting but they got driven up because that became popular they were flat on their back back in the early 80s and because of inflation and when inflation started coming down and the economy went through some changes that became the darling group just like the um fang stocks are today that became the darling group in the markets as we moved through that decade of the 80s into the early 90s and in the last year of that move many of those stocks doubled and doubled again in just a very short time stocks that kind of moved up gradually went into vertical parabolic moves so that happens in markets it happens in groups it happens in individual stocks that towards the end of a major bull market move things can go vertical and that's what i expect to happen in the stock market we're maybe a thousand to 1500 points away from a top in the s p and you can say how and it seems crazy to say that could happen in the next couple months but just remember we we came from where we did at the march lows and we've covered you know over a thousand points there and that was really covered between march 23rd and june 6th so that happened in virtually two months and if you understand a slope will steepen as it goes into the parabolic if you covered the first thousand points in a couple months you could cover the next thousand in less than a couple months even a month so doesn't mean it has to happen but that is what i see coming is the likelihood that we see this thing just really get into a steeper slope so david do you think that's going to be correlated to congress passing another substantial relief package that will help it's not really news driven as much as it will be fomo fear of missing out you know psychologically driven uh it will help to have a package from congress certainly i think it's necessary we're not out of the woods by any means and i'm pretty sure we will see a package whether it's today or whether it's a week or two away you know congress will finally figure out a way to compromise and both sides get some of what they want so that will certainly help but more than that if the s p moves above its highs prior to the march swoon you know it's all-time highs the nasdaq's already moved there you're going to see people getting on the momentum bandwagon don't forget we've had an awful lot of investors who got bearish in march that was a scary time in three weeks time we saw the biggest decline in the markets ever in history percentage decline and that scared a lot of people and then obviously the virus was scary in itself and what it did to the economy and shutting it down there were lots of uncertainties out there and an awful lot of investors both retail investors and professional investors chose to sit out this rally because they you know they were worried about the bad news and so there's an awful lot of money that did not come back into the market after the march drop and it's still sitting there worrying about the next shoe dropping and i think is starting to get nervous that they were wrong or that they're not going to get that opportunity down there again and if we break out to new highs on the s p i think you can see some of that money maybe a lot of that money come back in step at a time by definition almost markets are most fully invested at the top and least invested at the bottom it's psychology at work and also most bullish at the top and most bearish at the bottom so as we move to that top you're going to see more people moving away from their bearish stance to a more bullish stance and obviously as a result putting more money into the stock market so that's what i would expect is it's more as i say driven by the tape than it is by any particular news it will help if in fact we're bending the curve again if some of these southern states like florida and texas and arizona and georgia begin seeing their cases come back down i think that will be part of this any news on you know better prospects for vaccines will help too but it's it's really more the tape that will drive the decisions so david as you're talking about the second shoe to drop what could trigger the second phase of this bus and what are the characteristics going to be of that sure i think basically we have seen the bus the bus started that's what march april may june was all about we got an awful lot of stimulus pumped in from the fed and from the treasury to deal with that and that's going to give us at least a statistically strong rebound i've called it a v recovery because you know you could have a very strong third and fourth quarter that being said you still have many parts of the economy closed down or in very limited production so you look at the hotel industry or the airline industry or the restaurant industry you know cruise industry obviously and lots of other areas where the consumer's not comfortable going out or a fairly significant percentage of the population is not you know it's impacting those businesses and not to mention they're only allowed to operate at reduced capacity obviously you know another big industry in our country is the sports industry and you know that has repercussions across lots of different things you know so there's no youth sport so you're not seeing sporting goods stores doing well etc you know in a lot of those areas even with the strong statistical rebound in the third and fourth quarter you're nowhere near out of the woods and many of those restaurants and other consumer businesses are not going to open back up or can be sustained by the government's ppp program for just so long but that can carry you through a short period where you're in trouble but that can't sustain you and so as we get through the third quarter and into the fourth in the markets look ahead so the market will top out well before the economy finishes its rebound however the economy itself let's say we get through two quarters of rebound i think 2021 you're dealing with all those things coming back at you you know gee we're not out of the woods with the virus um winter's coming and maybe it even worsens again and you've got just the lack of ability for companies big and small to be able to sustain themselves during a period where they have very reduced demand so i think as we go through this what i call the second shoe dropping or the second phase of the bust it will be all about companies not being able to make it you know a lot more what i term involuntary debt liquidation where basically bankruptcies where companies are going to have to declare because they don't have the revenues to cover their expenses and their debt and i think that's going to be a big story in 2021 maybe bigger than anything we've ever seen you know ever seen in terms of the dollar numbers of that liquidation and again i always have to remind people i talk mostly u.s centric but this is a global phenomenon this will be happening all around the world so i think you're going to see some as a result of that liquidation cycle i think you're going to see some major bank failures i think not so much in the u.s u.s banks really depends on how bad it gets here but our u.s banks had such a hit in 2009 that they were forced to be very vigilant about their balance sheets going forward and so our banks are because of 2009 the subprime crisis because of that our banks are in better shape than most of the world banks i think europe is probably where i would say you have the weakest banks and the biggest risk today in the banking industry but canada's you know was strong in 2008 nine they're nowhere near as strong today canadian banks you know the asian banks are gonna struggle so so there's plenty potential around the world for a banking crisis and we're not immune to that here in the u.s because you have counterparty risk etc so there's a lot that i think 2021 could see that we didn't even see in 2009 you know in terms of magnitude and speed of that risk can you define debt liquidation cycle for us sure what i call a involuntary debt liquidation cycle is basically saying that companies reach point where it's not their choice to close down the creditors try to do workouts and things but you reach a point where it just isn't workable and companies go under so it's a involuntary debt liquidation cycle is just a period of large numbers of companies that are forced into bankruptcy because of their excessive debt and we went off the rails over the last few decades in terms of private equity and levering up balance sheets because as i said before about derivatives that allows you to enhance your earnings enhance your results during times when things are good the problem is as i learned in business school we all learn in business school leverage works both ways it enhances on the way up and it exacerbates on the way down so i think it's very sad frankly nobody talks about this but private equity which is a fancy term for leveraged buyout company uh back in the 80s when mike milken really drove that industry you know it was called an lbo now we talk about private equity well it's just taking companies their public companies private by levering up the balance sheet exchanging equity for debt and then restructuring those companies and bringing them back out to market and making lots of money that's been done successfully by these private equity companies many times but there's also a lot of companies that didn't make it look at the list of retail companies just in the last year you know pay less shoes and forever 21 etcetera companies that were loaded with that you know we just had men's warehouse and joseph a bank's file today i think or at least the rumors that they're going to file you load these companies up with debt and they have cyclical earnings and when the earnings don't cover the debt something happens it's not good so that's basically what we're seeing because of this huge use of debt i think we're in a cycle unlike any cycle we saw it in 2009 to a great degree but i think we're even much farther beyond that in terms of leverage this time around and unfortunately it means we are going to have something unprecedented in terms of the post-world war ii era in the economy interesting so moving forward from that a little bit let's talk about the dollar why are we going to see disinflation coming into next year and where do you see let's say kind of your perspective on the dollar milkshake theory and the demand for dollars around the world yeah i'm not a dollar milkshake i couldn't even tell you exactly what that means i know there's a guy out there that has popularized that and pushed that theory so but i'm not sure exactly what that all entails uh all i can tell you is that i believe that the dollar and for a dollar decline for a long time when many out there were bullish the dollar in fact you go back to mars at the top of the dollar when it ran up to 104 you had virtually nobody except me out there saying the dollar's gonna fall and fall sharply and i used 85 as my target that remains my target so from 104 to 85 sounded crazy four months ago today we're down in the 92 in change area so it doesn't look so crazy anymore and i've got a lot more company on the bearish side now but i can tell you there was nobody bearish but me back in march and people thought i was nuts so the dollar i think is going to continue to slide it'll have it bounce along the way but it will slide and part of that is because europe is probably in a better place right now with the virus than we are and our interest rates are getting closer to their low rates you know there was a wider spread there for a while that helped the dollar and what you heard back you know several months ago that was making everybody so sure the dollar was going to go a lot higher than 104 was that there was this huge dollar shortage around the world as a result of all the dollar denominated debt you know that even foreign companies would find they could sell a lot of debt and dollars and you know be cheaper than doing it in their own currencies so as things started getting rocky in the global economy a lot of those companies were running into problems because interest rates in the us were much higher than around the world at that time and it was impossible for them to refinance their debt or to fund it and it was going to lead to some real problems so people said as as they run into more problems they're going to need more of the dollars and that a lot of that has been alleviated because the fed who was behind the curve for a long time didn't understand that they were too tight everybody was telling them they were too easy they finally got religion in march and have obviously expanded the balance sheet from less than four trillion to seven trillion dollars on its way to probably ten trillion this year and so that has created a lot of dollars around that has helped alleviate the shortage of dollars so i think that all goes into why the dollar if it's going to continue to print and dollars going to continue to go lower here i do believe if we down around 85 probably bottom out you will see a another run to higher highs on the dollar beyond that but for now it's a weak dollar story and i think that's what we're going to see through this year so after we've talked about all these negative things and everything falling obviously most of the palisade radio listeners know that the precious metals industry seems to be somewhat of a safe haven so can we get a little bit of your outlook on what all of this means for gold and silver moving forward sure absolutely yeah the gold and silver are obviously in the sweet spot right now they're you know let's step back a second gold peaked out in 2011 at something over 1900 and silver back then was over 50 i think or around 50 and spent many years consulting dropped sharply in the next couple years after 2011 and then basically went sideways to down for several more years so it was like an eight year period of drought in gold and silver and back in 2011 after a decade-long run you had a big number of gold bugs out there a huge sponsorship for gold and silver and then you know you can understand that year after year people were calling for it to finally turn around again and go up again and after eight years a lot of those gold bugs got very discouraged and probably well before eight years and walked away from it and said i'm not looking at that it's about a disaster and so in the last year particularly he began moving up from that i mean a goal bottomed out i can't remember which year it was but several years ago at 10 50 so down from 1900 1050 ran up to i can't remember where but then corrected back down to a higher low and but it spent again a lot of time where it'd start to rally you think here we go and then it'd pull back again and only in the last year has it really consistently started to move other than march it got hit really hard in march and particularly the miners themselves got hit hard in march and silver got hit very hard in march but they've come out of that and are now extremely strong you know silver got up to 26 the other day and probably will exceed that within the next week or two and gold is on its way to 2000 here and i think ultimately my target for this year is 2300 so you've made it all the way back in gold to new highs and i think that's starting to capture a lot more people's attention again so gold is back in favor and silver which i call poor man's gold is gaining favor because it's behind gold you know the gold silver index got up over 100 and i think all-time highs indicating that gold was far more highly valued than silver at that time that's since corrected as silver started to have a catch-up rally here so i think there's a lot further ago on that and on the downside in terms of the gold silver ratio but they're both going to move up strongly here into i think into the next certainly through this quarter and into the next quarter so i as i said i think gold can get up to 2300 in that rally and i think silver can get up to something around 35. then i would guess they sell off and i'm not sure about the 2300 that may not even be the high for gold i'm more comfortable with my 35 target for silver 3536 gold could run a couple hundred points past 2300 i don't know but ultimately i think they will be hit in the bust with most assets so when the melt-up's over and the second shoe drops on the bust you know i i'm very bearish on the stock market we can talk about that in a minute but um i think almost all assets other than maybe treasuries will be hit hard so gold and silver will be part of that sell-off because of a deflationary bust because of what happens in 2021 but i used to think that you were going to see a far bigger sell-off in gold and silver to kind of mirror what was going on in the stock market i now have kind of switched to where i think they sell off to the tune of 25 or 30 percent maybe but not 50 not 60 percent and so you know you might see gold if 2300 is where tops out you might see it back at 1800 if silver tops out at you know in the mid-30s you might see that back to the mid-20s and then from there my view on gold and silver is probably as bullish as anybody on the street i think you'll see this decade gold get up as high as 10 000 maybe higher and you'll see silver get up as high as 300 and maybe higher so there's a big long runway ahead but there's going to be some volatile sell-offs between now and those runs but for right now i mean there's nothing in a sweeter spot than gold and silver right now excellent what kind of action are we going to see from the miners obviously if we see a pullback in the spot prices on the metals what kind of correlations are we going to see with the miners sure the miners obviously benefit greatly from these metal price moves you know i think there's still a good ways to go on the upside in this particular rally if gold goes 2300 i think gdx can get up to 55. i think gdxj the junior miners can probably get up near 100 on the silver side right now where's sil now i can't remember silj is 16 and change i think and i think both of those have long runways ahead i think sil can get up as high as 75 silj probably over 30 so the big moves still ahead and then obviously in the next big bull cycle after the bust miners will be huge beneficiaries of the big runs in the metals i have said before i think next cycle not right now but in the next cycle which is going to be an inflation cycle i think the miners will be to the next cycle what the dot-com stock's worth of 90s i think you will see you know if gold can run from 1800 to 10 000 plus or silver run from the mid-20s to 300 plus but imagine what that does to the mining industry you will see all kinds of investment banking opportunities you know a lot of new mining operations are profitable when your prices are up there things that can't be mined today because you just can't you know the costs are too high to justify it when you get a price move like that it opens up a lot more opportunity so i think you will see a lot of new startups you'll see a lot of merger and acquisition activity going on so i think the 2022 to 20 28 period could be the most exciting time in the minors that we've seen in many decades excellent let's turn a little bit to oil one of your forecasts is that we could see oil heading back down to ten dollars a barrel in the second stage of the bust is that simply due to a lack of demand when things kind of get shut down again yeah demand certainly the biggest driver i mean we'll still have a supply glide i think u.s companies have done a pretty good job of shutting in capacity as a necessity but when the band's falling like a rock in the second phase of the bust you're not going to be able to adjust supply to that so what gives is the price so yeah very simply i think you can get we're you know we're around forty dollars now up from negative oil prices a few months ago so it's come a long way back from you know where it was below zero it was that was kind of a technical glitch because of a contract but basically from from the single digits it's come all the way back to 40. i think we probably can get it up to 50 maybe a little higher here in the next few months with the economy opening up and then i think that second shoe dropping on the bust leads to obviously a lot lower economic activity around the world and depression level economic activity leads to a huge drop in demand for oil and so yeah you get into a situation where demand far outstrips supply again and down we go and i would i'll use ten dollars just to re-test of that ten dollar area which was kind of where it was headed until you had that contract disruption for a few days so i think you can go back and retest that ten dollar area and you know it's a 2021 story i think as with the metals i think the 2022 to 2028 29 period will be big time for oil i think oil can probably get up over 300 a barrel in that recovery cycle because the recovery is going to be i think focused on industrial demand you know we've had a consumer that dr has driven the economy for 40 years from you know the early 80s until recently and i think because of what happened in 2000 with people's wealth getting hit 2008 nine again and now this time and i think the consumer's going to be in a lot less favorable position going forward and it's also kind of learned i think in this shutdown that maybe shop till you drop isn't what i need to do anymore maybe i need to save money maybe i don't need all the material things i've been buying so i think there's going to be a bit of a change in behavior going forward some of it out of financial necessity and somehow just changing behavior so what will replace it in terms of the growth vehicle in the next cycle i think will be industrial demand we'll be building new capacity in this country we bring capacity back from china i think that's going to be a driving force i think you're going to see again not only here but around the globe huge infrastructure spending government's physical expansion trying to pull us out of this bust so you'll see military spending you'll see spending on roads and bridges and airports and and you'll see in this country certainly you'll see a lot of money spent on the electric grid which needs upgrading so there'll be a lot of places that will stimulate demand for materials as opposed to retail shopping and restaurants and that kind of thing so i think that means the next cycle is very much going to put upward pressure on commodity prices across the board so not just metals not just energy but also i think ag prices will move up in that cycle aggressively for other reasons but i think they will fit that commodity cycle and you know you'll see um pretty much all commodities across the board going up aggressively over the course of the next decade you know first we got to get through this deflationary bust and that's what this next phase will be deflationary it's not disinflation anymore we've had disinflation which is uh inflation at ever lower rates from the early 80s till now and i think in 2021 we will have the first deflationary downturn that we've had since the 1930s widespread deflation so we've got to get through that 2021 will be deflation and that's not a fun thing that's not just a reduction in your cost that's a really tough period and then we'll begin a new inflation cycle first very slowly and gradually in 2022 and then it will accelerate to the point where i think by the end of the decade we'll see inflation maybe up to levels we saw in the early 80s so back to you know 15 or 20 percent and that's because of all the money printing that will go on well david i think that's a great way to wrap things up for today any uh concluding thoughts as we finish up um only i guess i'd just say to everybody you know hold on to your hats we're in for volatility like we've never seen before you know it's uh it started out obviously march was pretty volatile and what we've seen on the upside here has been surprisingly fast moves and i think as we move into the end of this cycle and into the downturn it's only going to get faster excellent just a reminder to follow dave at dave h contrarian on twitter and also like and subscribe to our youtube channel thanks very much for your time today david okay thanks tom you take care youtube this podcast is for general informational purposes only nothing on this podcast should be taken as investment advice guests on this show are not compensated for their appearance listeners are urged to educate themselves and make their own decisions do not base any investment decisions on the information contained to view our full disclaimer please visit our website i think you understand the junior mining sector and you think that the participants in the mining sector junior mining sector are good people and kind people hit the bid how violent that term could be it actually could be quite violent it could be a rip your face off uh uranium rally and the world is always going to need raw materials it's going to be copper and gold and nickel and so forth totally destabilized hey hey troll did you hear what's going on

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Keywords: Palisade Radio, Collin Kettell, buy, sell, invest, gold, silver, precious metals investment, QE, QE4, QE5, Stock, Market Crash, low, high, best, worst, trump, central, banks, freedom, bitcoin, blockchain, uranium, potash, expert, alpha, beta, fortune, billionaire, ounce, pound, mining, energy, independence, freefall, rise, fall, outlook, private placement, warrant, decline, increase, value, price, Monthly Report, Update, millionaire

Id: fxq9v8XH2jg

Length: 35min 46sec (2146 seconds)

Published: Mon Aug 03 2020