Lawrence Lepard: During Uncertain Monetary Conditions Gold and Silver is Where You Want to Be

welcome back to palisade radio i'm your host tom bargervix and joining me today is returning guest lawrence lapard how are you today larry i'm great thanks nice to be on your show tom great to have you back lawrence is a gold stocks fund manager from boston and his gold fund was up 122.9 in q2 that's some awesome performance as we've seen from most gold stocks and uh funds in q2 larry i was thinking we could start by talking a little bit about what we've seen since april and that was the last time we spoke at that point we hadn't really seen the monetary printing that we have since then and the ramifications of it so let's talk a little bit about how much federal debt how much it's expanded by and maybe some of the deficits that we're seeing sure um it's a big topic and of course i should say that 122 recall that i was down 38 percent in q1 so it's not quite as good here today as that would imply you know this is a volatile space so the national debt uh has really taken off since the covet crisis occurred we were kind of in the 23 24ish area and we're now well up over uh 26 and a half so in that several months time you know it's growing quite quickly you know the rescue package the the cares rescue package put together were covered with a 6.2 trillion in size some of that was expenditure some of it was loans the underlying budget deficit for the quarter and this is rather stunning was two trillion dollars so if you annualize that that's eight now obviously a lot of that was one-time kind of stuff the ppp and um you know the checks that were sent to people and so forth may or may not be repeated so you can't realistically take the 2 trillion and annualize and say we're running a trillion dollar deficit but i've looked through it on a monthly basis and dissected the numbers pretty carefully and it is clear to me that we are running a four trillion dollar deficit you know unless we do more stimulus and so last year we were running about a one trillion dollar deficit slightly bigger than that because uh you know they understate the numbers since the balance sheet you know we grew at 1.2 last year but round numbers we had a one trillion dollar deficit last year my estimation is that we're running about a four trillion dollar deficit this year base rate before any extras of course they are talking about more stimulus packages and it's possible the economy won't grow or will deteriorate on a going forward basis so you know i think four is a low number i think it's very easy that we could have a five six seven trillion dollar deficit run rate in a very short period of time and of course that all gets added onto the debt so uh with a 20 trillion dollar gdp debt at 26 and a half and you know they were originally saying we'd be at 30 trillion of debt in you know five years from now five six years from now i mean it looks like we're going to be at 30 trillion in debt probably by the end of this year perhaps perhaps a tad longer than that and the point is that then that means we're 150 debt to gdp which is a very big number and historically has led to currency debasement in other countries that have tried this you know there are some exceptions but the treasurer issue went this year this is in my report we should mention that you can get my report by going on twitter and following me i put links to it there and or links to sign up to my newsletter so that you can get the report naturally i in the past i've offered the right to people to say hey send me an email and i'll send you the report as far as i got 2000 emails and i'm backlogged i'm filling those out so the best way to follow me and get these reports is to go to twitter but anyway just just before we continue that's at lawrence lapard l-a-w-r-e-n-c-e-l-e-p-a-r-d yeah so you know in the guggenheim organization forecast that we're going to issue close to five trillion dollars of of new treasuries uh this year and you know in the past as look roman and others have pointed out we have foreign buyers for these things and so we didn't have to print the money we could issue the debt and somebody else would carry it and so there wasn't any natural monetary inflation now it's become very clear because you can see it in the fed balance sheet you can see the treasury purchases that when we issue treasuries there's really only one buyer left and that's the fed and so the fed is monetizing the deficit and printing money and if one looks at history over the last you know several hundred years and studies countries that have run into currency trouble one sees that they've all been that currency trouble has almost always been preceded by a run-up in debt and then a a conversion of that debt to money printed to cover the debt and and that's exactly what we're doing and so this is very unfamiliar to a lot of people because it doesn't happen very often and it certainly hasn't happened in the united states since you know the continental when we were founded as a country or to smaller degree you know civil war when they issued greenbacks but in general we've had a pretty stable currency environment although one could argue it hasn't been as stable as many say since post 71 you know we've really been truly fiat and the dollar has lost a lot of value but on a relative basis the dollar was the cleanest dirty shirt but i would argue that maybe that's not even really true on a going forward basis because of the stimulus and the government has really kind of got themselves into a pickle you know they can in theory they could stop spending in theory they could cut back spending in theory they could raise interest rates and they could try and make the dollar strong again but you know the the natural outcome of doing all of those things would be just to put the economy right into the dirt and we'd have a depression on our hands and you know we might arguably have a depression even if they don't do those things but setting it aside you know this economy cannot handle higher interest rates and reduce spending i mean if those things occur this economy is going to crater and so what we know is that the policy makers who run our government their job and they view their job is keep things going keep as many people employed as possible and keep the economy from cratering and if to do so they have to print money well then they'll just view that trade-off as something that you know they have to make and they'll worry about the inflation later and they've been blessed because you know as a result of the china price and low money velocity and a lot of other reasons inflation has been relatively low and there's a psychology that says inflation is always going to be low and i think that's been a reasonable thing to assume based on looking backwards but like so many things in life everything comes to an end and so i think this low inflation environment is coming to an end and there are signals everywhere that it's happening and as it comes to an end you know it's going to be a very very bad thing for people who are in fixed income securities and it's going to be a very good thing for people who own forms of money and assets which cannot be readily printed or replicated so and gold obviously is the top of the list in that category so how is this money being distributed larry obviously we've heard that this stimulus package was more for main street rather than wall street so tell us a little bit about how it has been distributed and maybe a little bit about how the bank reserve rules have changed yeah okay great questions i mean first of all they really did cross a rubicon when they started sending money to people in companies i mean in 2008 a lot of people said well this looks like 2008 and we came out of 2008 okay although it took a few years to recover and this will be the same and i say well yes and no the similarities they're plugging the holes in the bank balance sheets but they also went direct and that's a term that the federal reserve has said you know in the next downturn we don't have the policy tool of dropping interest rates from five percent to one percent the way we did in 2008 you know rates were two or three percent we took them to zero but so there's not as much effect there we've got to do something different we've got to go direct and so you know the twelve hundred dollars the twenty five hundred dollars per family that's a form of going direct the ppp loans to businesses some of which were very healthy didn't need the loans but they got them anyway you know that's a form of going direct and that's really just printing money and giving it away to people and no one could argue that it's important and necessary and humane to do it and one could also argue that the amount given to the people is really trivial compared to the amount given to companies and there's still a lot of crony capitalism going on but the point is they crossed that rubicon and you know this is the kind of thing that was you know bernie sanders universal basic income sort of stuff that never would have been thought about pre-covet and now it's just become accepted and you know my sense is that you know the republicans are putting on a show of trying to be frugal about not extending it my sense is they're going to have to extend it because the economy is going to crater if they don't the other thing they did is they extended the unemployment benefits and they cut the payroll tax there were a lot of ways in which they printed money and put it into the system and that's why if you go to my report and look at page five what you see is that the change on the money supply in this particular circumstances is much higher than it was in 2008. and so that to me is there's your fuel for your inflation that's coming the other thing they did i think you brought up it's an interesting point very few a lot of people missed this but again luke roman saw it and pointed it out is they they dropped the bank reserve requirements down to zero you know the way that money gets created in a couple of ways one thing is it gets printed and spent by the feds another way it gets created is that the banks effectively issue credit and so you have a multiplier effect when money gets injected into the banks they loan it out it gets deposited loaned again and again again but there's usually a limit to how much that can happen because the bank has to keep some money in reserve as a reserve requirement well because they knew that this was a really bad one and they had to get a lot of money into the banks and they wanted the banks to be in a position where they were able to buy a lot of treasury bills which needed to be financed they basically said to the banks your reserve requirements are now zero you can create an unlimited amount of credit which really is to me quite stunning i mean it's just you know and it actually fits to with the federal reserve rhetoric these people have been saying things i mean like you know jay powell basically said what we are going to do whatever it takes we are going to print money there are no limits to what we can do i mean some of the quotes on the federal reserve have just blown my mind you know in terms of their aggressiveness and i think that's because you know the fear of god got put into them by this collapse and they realized that if they didn't say those kinds of things they were going to have a smoking wreck of an economy on their hands and some people have asked them and said well look you know you're doing all these things doesn't that mean there's a potential risk of inflation and they even conceded yes there's that risk but we will deal with that later you know we're going to do one thing at a time and our first job is to make sure the economy doesn't implode and then our second job will be to solve the inflation problem and you know they probably realistically think that they can solve them in some kind of sequence and that they'll have tools to go after the inflation problem but what i would submit is that they won't that once the place is out of the bag and gresham's law starts to kick in they're going to have a real problem and they're not easily going to be able to solve the inflation problem so you know another argument for why gold is a good place to be so obviously you touched on a couple times about inflation and let's say a natural consequence of this much printing so what could some of the consequences actually be and explain to us a little bit about a term you're trying to coin yeah yeah and they'll be famous if this term catches on so i thought i want to give it a try so everyone talks about inflation and the traditional inflation is what you learn in macro 101 right it's demand poll or cost push you know the labor market's too tight people start raising wages they have to pass along in prices you know blah blah blah okay that is one kind of inflation and that's what gets measured in the cpi and that's really what the tips price off of and everybody uses that as your inflationary measure i mean the fed use of the cpe which is slightly it's their own version of the cpi and that's an important measure of inflation it shows how goods are going up in a normal economy you can kind of get a sense of what prices are changing and a couple things have happened one they really messed with the cpi measures they used hedonics they do substitution they used all kinds of things and basically the cpi now is in my view a joke it's a cook number which if you compare it to the chapwood index or the sts numbers shadow government's path numbers it's nothing like the real inflation we experience i mean everyone knows we've seen inflation healthcare we've seen inflation in higher education we've seen inflation in lots of places it just hasn't showed up in what they call the cpi i think it will but even if it didn't here's another kind of inflation that i've you know and why i coined this term currency substitution inflation psychology i call it csip and what it means is people have assets people have savings not everybody but most people even people who don't have a lot of savings they get paid in in some form they get some currency when they get their paycheck and then they have to decide what they're going to do with it are they going you know unless they're going to spend it instantly they're either going to leave it in their bank account as a deposit or they're going to do something else with it and you know and if they have assets and savings and they have a retirement account they got to decide what are they going to do with it whether you put in bonds stocks or cash and if they believe that it's going to hold its purchasing power those three choices all of them would be reasonable to do but once they begin to think hey you know what this money is not going to buy me as much in the future as it has in the past and though i believe this money is losing its value it's a currency and they start to substitute it based on inflationary psychology and they start saying themselves all right i've got this currency cash but you know what i know these prices are going up i know this cash isn't going to hold its value i know they're printing like crazy and i know they can never stop printing and therefore i'm going to find some other currency which is better i'm going to find you know i've got the right to buy another currency that won't go down in value and of course the natural choice there is gold or silver i mean they're both 5 000 year old currencies that can't be debased and so the substitution effect becomes very real where they say i'm getting out of this currency that's losing its value and i am getting into a currency that is going to appreciate or hold its relative value and so sometimes people say well you know the price of gold is going up i say no a gold ounce is a gold ounce never changes right what's really happening is the dollar is going down in gold measured terms and so as more and more people become aware of that you're going to see more and more people leaving the dollar and putting their savings into gold and there's nothing more than gresham's law which is the bad money dollar gets spent and the good money that you want to save you save your money in gold and you know since 2000 gold has gone up kind of 10 11 a year in most currencies and you know you'd be hard-pressed to find you know a lot of investments that consistently over that time frame have gone up 10 or 11 a year and so i think you know the signal here that we've got a real inflation problem is going to be the gold price you know as the gold price continues to appreciate you know we're now very close to the all-time high from 2011 of 1921. i mean we closed almost plus or minus within 50 of it today you know and i mean we had silver up eight percent today which is just stunning it was up seven percent yesterday i mean i think there's a real chance that people are beginning to move towards the exits rather aggressively now am i sure of that no there could be another slam the prices could get hit back down and there are lots of ways that the people who run the system have where they've been able to mask the underlying debasement that's been taking place but when eventually gold breaks through that all-time high of 1921 and then through 2000 and then through 2500 what you're going to see i think is continued awareness among a bunch of people that oh my goodness you know the cash i have the money i have is getting seriously debased rather quickly and when financial survival is at stake people can be pretty aggressive and they can move pretty quickly and so you know if gold takes out 2 000 and then it rather rapidly takes out 3 000 well my opinion is it's going to 10 000 and then ultimately it's going to offer because the dollar will be worthless and i don't think that's as far-fetched of possibility as the average financial advisor would think so you know is it going to happen for sure you know it may not i mean i i sincerely hope for the countries and other people say that at some point in this process the government gets intelligent and says hey we got a debt problem here we're going to have a one-time restructuring we're going to transition to a gold standard and we're going to do five volt dollars equals one new dollar and the one new dollar is going to have a gold backing and the price is going to be x i mean that would be the way to nip this thing in the bud and prevent a full-fledged collapse of the currency which i actually think is a possibility but you know it would be sad if it happens i don't want it to happen but i'm i'm paid to be an analyst and that's what i've done for you know 30 years of my career and so you know as i analyze it that's what appears to me is going to happen so obviously i think that you know not having some of your savings in the form of gold or silver is not wise i think it's very wise to have something here i think everybody has to decide what weight they want to put on it but i think a lot of people are missing the fact that as good as this stuff has been for the last six months this could be just jacks for openers as bill murphy likes to say i mean it's possible that we're going to go into a situation very much like the 70s i know in our earlier conversation you asked me about that and i was around in the 70s i was young but i was investing you know there was talk in the late 70s that the dollar was going to completely fail and you know when gold hit 700 800 that was kind of what the talk was and that inflation could never be tamed and you know it was kind of the end of the road for the dollar paul volcker came in put rates up to 20 percent can you imagine that today i mean if we had 20 interest rates today i mean the entire world would go bankrupt right you know put rates up to 20 created an enormous real interest rate and put a halt to it but i don't think they have that solution today i don't think that's one of the choices they can make so i think the better solution would be to try and do a restructuring and i hope that's what they choose to do i mean a lot of interesting things going on right it's very interesting to me that they just put judy sheldon on the pet board or at least they recommend it to the senate no senate may not vote to put her on you know and she's a very strong sound money advocate she's weakened reviews a little bit recently but i think that was just for the cosmetics of having a chance to get in the ring and uh at least i hope that's the case i think more and more people are coming to realize that we've got a serious issue here i mean the numbers are just so large this time around you know there was a story on zero hedge today this guy deutsche bank's top credit analyst makes stunning admission i am a gold bug fiat money is a passing fad in the history of money i mean these are establishment people who are coming out and starting to realize that gold has a role to play in a monetary system that's kind of lost its bearings with respect to what's really valued so it's it's certainly interesting times i'll say that and i worry continually that you know we'll have setbacks here but yet and and that's why you know nobody should take all of their assets and put them into this category you know although ironically that's kind of where i am but um but you know i can afford to do it but i think everybody should have some of their assets in this category because it's very very clear to me that we're in that circumstance that happens once every 100 years or so which is you know you have a sovereign debt crisis and when that happens you know a new monetary regime comes in and there's the ultimate form of money is gold and silver right next to it so larry as you were talking about paul volcker you have a piece in your quarterly letter about him saying in his autobiography that they made a mistake by letting the price of gold get away from them in the way that it did so what do you think the possibilities of the fed actions against gold could be and without really touching on or let's highlight some of the considerations that one should have not mentioning confiscation well i mean confiscation is always a risk and that's a reason to have some diversity of where you have your holdings i mean we get into a lot of philosophical and political discussions here i mean i would be a lot of boating accidents and i think if uh you know people said if they want to confiscate i think a lot of heavily armed people who might say well i lost my boating accident um let's go to the volcker question first i mean what tools do they have i suppose they could they could threaten to confiscate they could threaten to heavily tax and they could try and discourage i mean let me say this because i also said this in my letter i think for a while they're on our side okay in other words i think the people who run the show you know at the fed level are smart enough to know that they absolutely have to have inflation the whole thing's going to create so my sense is very much like in 09 and 010 they've got much bigger fish to fry than the gold price right now i mean they they probably want a higher gold price they want to have some inflation they want to see the economy keep going they want to see the stock market keep going up in other words in fact i think the s p is the national policy tool i think the s p you know like i mean i've come to see it the way luke roman sees it which is we can't have the s p decline or else the economy is going to go tapioca and so my belief is that they want to see a higher price for a while now what they don't want to see is a runaway price they don't want to see gresham's law kicking in in spades which is frankly why watching what's going on right now gives me a little bit of concern because i would prefer that we just got a nice orderly growth in the price you know year on year you know aleister mcleod who does a great job on twitter talking about this he thinks this whole thing will be over in six months he thinks you know we've got kind of a john law like environment and in six months the whole thing will be over and the dollar will be worthless i think that's possible i don't think it's likely but i think it's possible i think there's a chance they'll threaten this confiscation i think there's a chance of threatening at a bitcoin-like solution or a coin-like solution i think there's a chance that they'll maybe talk about a restructuring or some kind of a debt jubilee and all of these things could be rather turbulent for the gold price but in general i don't think they can kill it um even if they confiscate it they'd have to pay you know the going price for it and i think it's a small enough percentage of total assets out there that they're not likely to go for because confiscating what people don't have doesn't really solve the problem so you know i'm not sure to be honest with you what all the tools are you know they can't do operation twist operation twist was how they got us in 2011. and we had them on the run in 2011 i mean gas in massachusetts was four dollars silver was 50 bucks gold was 1900 they realized that all the money they created in 2008 was a problem and so you know they had a big meeting in dc goldman sachs came out with a big negative support on gold they got all their friends heavily shorted you know and then they went out and they just hammered i mean they and i watched it because i was in it and they were trading such enormous blocks in 2011 that there's no way there's no investment firm big enough to trade those kind of futures blocks the only people who could have been doing that with the central banks it was the only people and they did it the correspond with operation twist which is when they basically went from um you know the long bond was like four and a half and that's the biggest indicator of future inflation so they knew they had to kill it and so they did twist which was diabolical i mean they basically sold treasuries and used them to buy long treasures and they brought the long bond yield from a foreign change down into the you know low twos as i recall so that was a diabolical move and that put the kibosh on the gold price at the time and then it allowed him to create another credit cycle and of course when a credit cycle's going up nobody needs gold until everyone switched over and started buying the fangs in you know 2011 12 and 13 and they got this everything bubble going so can they do all those things again i don't know maybe but we're kind of the ultimate level i mean first it was dot-coms they re-blew that one with housing then it was housing and now they re-blew that one with the sovereign credit level i mean what's the next level up i mean we're going to save by you know jupiter and mars i mean i i don't know i mean i i don't i don't think there's a next level another bubble to be blown but can they make it messy in the interim oh yeah i'm sure they can but i'm hanging on to my coins and i'm hanging out like old stocks and if they go to grab the coins the stocks will do very well i mean one thing to consider in the 30s they grabbed the coins but the stocks were a 10 bagger in the 30s and that was the big stocks the little stocks were probably 20 or 30 baggers they don't really record all those it's hard to get the data from back in the 30s but it's valuable stuff and six billion people know that it's valuable stuff and there are a lot more of us than there are them you know the powers that be i mean we all sit here and quake at you know what the fed the government can do but it's really a small group of people and when the currency starts to become worthless people are going to be pissed off and rightly so and they're going to be really pissed off you know i like the hand we're holding a lot more than the hand they're holding i think they're screwed i mean i think they're absolutely screwed but we'll have to see i mean it could be a very rocky and rough road and frankly that wouldn't surprise me and i'm kind of used to it you know in march my fun went down and i think at one point my fun was probably down if you barked at the market i almost couldn't look i mean i was probably down 50 or 60 percent year-to-date in the on march 23rd under that awful day when jayna blew up but i had a little bit of cash i used it to buy and everything else i had i held i rotated out of some of the bigger names and bought some of the cheaper smaller names and we came out of it it's a very volatile space but that's what happened and this is the danger i mean what these people are doing is absolutely criminal when you play with the value of the money you're really playing with fire and you can destroy a society this way you know lenin said it the rothschild said it you know give me control of money i don't care about the law you really are playing with fire and um i think we're going to end up back on the gold standard i don't think we're going to end there necessarily because enlightened people and our governments are going to take us there i think the odds of that are pretty low but i think we're going to end there because once this currency is worthless everybody's going to realize nobody's going to ever trust fiat currency again and if you know we're going to go back to first principles which are gold and silver or money they were naturally selected that way as a result of five thousand years of history so i think that's where we'll end up and therefore having coins having things related to gold would be you know a very wise thing to have done in terms of protecting your wealth i mean egon von brauer has done a great job of saying this for 20 or 30 years others have too i mean dealership a lot of people who totally understand it have been out there talking about it and of course we were all branded as crazy for many many years but we're not going to look so crazy here we're starting to not look crazy now in a couple years i think we're going to look absolutely brilliant and we're not as brilliant as we'll look but we weren't as stupid as we looked in 2015 either so there's got to be some midpoint in there and i sincerely hope that it doesn't have to get ugly and nasty and one thing i mean says well look this is going to be horrible how can you be rooting for this i'm not rooting for it i'm just observing it one and two i've actually studied enough of these cases that if we don't get into a big shooting or we don't kill a bunch of people once you restore sound money things actually go back to normal pretty damn quickly i've read everything there is to read on weimar and this guy shaq who came in after the thing collapsed put him back on the gold standard they tested him a few times he held firm and bang the whole economy just got going again now they were so pissed off and angry they elected hitler but that's a different problem the monetary can be solved if we go back to sound money if this thing collapses and judy shelton says okay look we got to have a sound currency here we're going to follow the constitution it's going be experienced the silver whatever it might be we can recover and by the way everyone's gonna be in the soup you know the other countries are gonna have the same problems i mean all these currencies are gonna collapse but when we go back to sound money i think we'll be stunned at how quickly with all the technology we have and the self-organizing society we have i think we could be stunned how quickly things get good again and that's kind of what i care about because i'm worried about my kids and my grandkids you know i'm 63. i mean whatever you know i can't complain with the way my life is gone but i care a lot about how my kids lives are going to be and i think the sooner we get the sound money the sooner we're going to have a foundation on which i think we can build good lives you know the degree that i make money on this thing i mean i've already committed i'm going to spend a lot of that or some piece of that on arguing for a sound money standard i think it's the biggest thing that we've got wrong in this society right now it's going to be interesting to watch i mean i think eric scott's going to be the richest man in the world by far i think buffett and gates are going to be nothing you know they'll be fine obviously but i think it's going to be kind of stunning how big the wealth transfer is here that takes place because if you take fiat currency down to zero the people who own gold and silver are going to have a lot of marbles so anything that can't be printed that's my that's my story and i'm sticking with it uh one of the last things i'd like to touch on larry if you wouldn't mind explaining to us a little bit about kind of how best to play this scenario you're saying you own coins but you also own stocks so maybe tell us a little bit about emerging producers how to identify them and why they kind of present a very asymmetric gain opportunity in this in this uh sure be happy to do it i mean so first of all everyone should understand that stocks are risky okay i mean for people who don't know what they're doing and haven't invested in stocks before you know you can hear all kinds of please buy this hot stock tip and i mean the robin hood crowd is going to come in here and you're going to see some of these things doing moon shots everyone's going to talk about how easy it is and nothing could be further from the truth so you know i mean part one i mean anyone who's buying stocks if they don't have some coins in front of that they're nuts you got to start off with some savings okay you got to have some coins that you know are going to hold their value because everyone needs a basis savings okay fine you got your savings now you got some money and you're thinking all right i'd like to see this grow you know the coins are just going to sit there and i'm not going to have sex and multiply they're just going to sit and evolve and they're going to grow in value on relative basis but they don't grow otherwise okay so now you want an asset that will grow in value potentially because it's going to do something constructive as buffett says gold is a goose that doesn't lay eggs well okay the stocks do lay eggs because they grow their production and so forth okay within the stocks in my opinion see this in my writings my opinion is that the sweet spot is what i call the emerging producers and these are companies that have a mine i mean backing up for a second they're three kinds of stocks they're drill stories they're the most exciting you know they're gonna they're gonna do moonshots or crater that's it's gambling um you can do it i do some of them but you've got to be careful the average person shouldn't be doing drill stories producers are or you know development stories are people who have a deposit and they're going to try and build a mine not quite as risky as a pearl store because at least they have a deposit but still risky because they got to get their mind built the third thing are producers okay within the producers you got big medium and small big barbaric and newman very safe lots of diversity but very hard to grow production and very fully priced so when the big money comes in it'll initially go to those names but it takes a lot of money to build those names i mean barrack and newman have market caps of 46 billion dollars and it's going to take a lot of money to move the stocks up below them you've got another whole class of miners which i call emerging producers these companies have found a deposit and built a mine and built a processing plant and they are actually pulling ore out of the ground and generating positive cash flow and so what you've got in these companies is three ways to make money you can make money in the following ways one the price of gold goes up so the margin goes up okay that's item one two they produce more ounces over time and this is why i say emerging producers you know they may have one mind they're building a second mine they're increasing capacity at their first mine so that maybe they're producing 100 000 ounces today and in the future they're going to produce 200 000 ounces so all the things being equal they're going to double their cash flow i mean barrick does five million ounces a year they're struggling to maintain five million ounces a year there's no way barrick is going to produce 10 million ounces any time in the next five or 10 years there's just no way it's physically impossible okay yeah i've got a lot of companies in their portfolio they're going to go from 100 000 ounces to 200 000 ounces so they grow production the third way they grow in value is their multiple expands okay so what you do is you look at what are you paying as a multiple of cash flow so how do you find these companies you go out and you look at all the gold mining companies and you start by screening for which ones are making positive cash flow if they're not making positive cash flow they don't qualify okay then you look at is that cash flow growing over time and is it growing either based on higher price of gold or is it growing based on production growth and so you can find how many ounces they're producing how many they tend to produce in the future and where they're going there and so that's useful data and you know no guarantees about future production but over time you get who's got a reputation for doing what they say they're going to do et cetera then what you can do is you can say all right let's look at this and say all right this company is producing this amount and a thousand dollar asic and an 1800 gold price i'm making 800 per ounce of production and they're producing 100 000 ounces a year ah bingo you know at a my level they've got 80 million of cash flow now they've got sustaining capex to maybe grow the deposit they've got sg a and so forth below that they might have financing charges whatever but you can develop a kind of a free cash flow number coming out of that company then you can compare that to the market cap and if you do this for eric or newmont you'll find that you know it's you're paying something like 10 12 15 times and some of the really are sexier ones like kirk and lake you know or west home you're up around 15 times cash flow a lot of the ones i'm involved with you're trading at kind of four to five times cash flow so multiple expansion is when that small company gets bigger better known and people trust it more and they're like you know this doesn't deserve a single buying discount it just doesn't deserve the jurisdictional discount that it's got instead of trading at 4x cash flow this thing should trade 8x cash flow and so all other things being equal you've got to double in the stock just based on multiple expansion so think about it if you can get all three of these things lined up the price of gold might go up their production might go up and their multiple might expand bingo that's your sweet spot right you're looking for those three things and that's what i do with my fund that's why my fund doubled the gdsj numbers last year and i'm kind of doubling year-to-date so far i've been doubling them this year and i just basically that's what i do i pick the companies that meet those three criteria and i leave the other ones for the index guys to buy but you know you can do this at home you don't need me it's a pretty simple formula and it works really well right now because these juniors have been left for debt i mean we're coming out of a it was a big bear market from 2011 to 2016. we got a bump up in 2016 but then we fell back down in 17 and 18. and 19 don't get me wrong we started to go up i mean we're clearly i mean i was up 100 last year and right now year to date this year i just did this this morning about 70 but you know the numbers we still got a long ways to run there's a chart in my report which shows that a lot of these gold bull markets when they hit these stocks you get five six seven x your money and we've kind of done one and a half to two x if you kind of look at the index averages so so there's still room left i mean we're not at the end of it i mean i'd say we're in the third inning maybe the second and it kind of depends on where the gold price goes so people who are thinking about getting into it i don't think you're too late having said that having a 20 or 30 percent pull down in these stocks is like you know an everyday occurrence so you might find one of these things i just described by it right now when we actually are pretty overbought frankly then suddenly you get a 30 drawdown and it's like holy i screwed up well no you didn't you might have not bought it the most opportune time and so the way i think you address that or i would recommend friends address this i was talking to my sister about this actually the other day i said you got a dollar cost average you know you just got to say all right i want to put this amount into these things and they're going to go up and down and you know i'm going to buy four equal amounts for the next four months and you know if we have a pull down well then i'll get a little more if it runs away from me well at least i made money on the first piece i bought so they are volatile and people should be aware that it's not easy but i think assuming the gold price is going higher which i strongly believe is true and if you do analysis and come to that conclusion then i think you can rest comfortably that you buy even if you get that 30 drawdown you know we are in a bull market for this stuff and standard operating procedure in a bull market is you buy the dip so you know you leave yourself some dried powder you buy some today you get your drawdown you buy the dip and then when it comes back you're glad you did and your first piece comes back and even and you made money you made money on the dip that you bought excuse me so that's kind of how i approach it and that's what i would recommend people do but everybody has to look at their own situation and everybody has to recognize that these do have risk and there have been times when the results of these things have been brutal i mean if you look at my results which are right published on my quarterly report from 2011 to 2016 i mean i stunk up the joint i did terribly i mean i did better than the averages but i did terribly i mean i lost a lot of money you know it's the timing on this kind of stuff i'm on gold i mean 80 of the time gold and gold stocks are not a good place to be investing but in times when there are sovereign debt crisis and times when there are credit bubble collapses both of which i believe are going on right now they happen to be extremely good places to be invested and so you know you've got to make your own decision on where are we in that cycle and if you believe as i do that we're in a very opportune part of that cycle then i think we're going to make some serious money here in the next few years you know obviously you can only be comfortable doing it if you believe those things so excellent larry that was a perfect explanation on what we should be looking for in a gold stock one final question for you have you found any yellow hot dog relish yet no i haven't and you know somebody said you're being awfully amateur putting that kind of stuff up there it's not institutional quality stuff but you know i just i'm out there i just react to what i see i actually asked it as a sincere question and what i learned and explained it was that apparently some of these food manufacturers because of covet have had to really cut back on skus so they you know they're like well look we can you know we don't have as many people whatever the issue is and i guess yellow hot dog relish is not a popular sku and so it got cut out and it's it's fascinating i mean if you go to amazon try and buy it it's you know the price gouging on it because there's not much of it out there you know it's the times we live in right it's a covert thing is terribly sad there are a lot of people hurting a lot more than this guy who doesn't have yellow hot dog relish i just couldn't get it i've been to six stores i'm like well you know what is it i mean i got regular relics they've got a lot of other things but for some reason nobody's making yellow hot dog relish i don't know why but there you go it's an sku minimization scheme on the part of the major food manufacturers so i feel sorry for the people who are suffering in this thing and i'm certainly not one of them so i'll do fine without my hot dog relish and i hope i hope i hope we move through this thing quickly and i hope the economy and the country heals i hope people who are suffering stop suffering because it's horrible what's happened it's absolutely horrible and i really feel for the whole country and i it's compounding the monetary problem and i really wish we had better leadership you know at all levels because there is a solution to this monetary problem we don't have to go through a full-blown crisis here we could restructure right now and and get back on a good on a good path and you know people like judy shelton i think understand that and so i hope the congress does you know or the the senate does approve her but you know who knows that they'll have the intelligence to do that i'm not holding my breath but we will see so all i would say to people is buy those coins i don't think you'll regret it you know their money they always have been it's a great form of savings and i think you might be surprised at how high the prices go so some sound advice there larry thanks very much for your time today yeah thanks tom for having me on and for letting me hold forth i i hope i didn't spend too much time but i hope it's helpful to somebody and that's why i do it so absolutely i'm sure it will be i wish everybody good luck 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

Channel: Palisades Gold Radio

Views: 10,405

Rating: 4.9733925 out of 5

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: sMZb1yUKrsc

Length: 40min 19sec (2419 seconds)

Published: Thu Jul 23 2020