Precious metals could do well in either an inflationary or deflationary environment…
Tom welcomes returning guest Tavi Costa of Crescat Capital to the show. Tavi outlines Crescat’s macro model and how it drives their investing focus.
Tavi discusses how the only way out of the global debt burden is through further debasement and a continued race to the bottom for currencies. Equity yields are down in real terms, and this will drive demand for safe monetary assets like gold and silver. Precious metals could do well in either an inflationary or deflationary environment.
Debt monetization is happening everywhere but increasingly in places like Canada and Australia. The real estate market in Australia is beginning to impair their overall macro position. Similar problems are occurring in Canada and within the Canadian banking system since their deficits are ballooning.
Globally debt is piling up at an unprecedented pace. The suppression of interest rates means central banks have to expand the monetary base to maintain growth. Currently, just the tech sector equities are nearing 40% of GDP. Markets today have numerous excesses, but most investors share a general lack of comprehension of the risks.
Large miners have had few discoveries due to a lack of capital allocation in exploration. This is resulting in a constrained supply and an opportunity for those miners that are exploring. This lack of supply, along with all the various macro drivers, will send gold much higher.
Tavi compares the monetary dilution of the past few decades with both gold and silver. This looks very good for gold and amazing for silver. He expects silver to head towards $50 fairly soon.
Investors should consider selling popular equities and buying miners with free-cash-flow. The idea that central banks can control a decline in the business cycle is absurd.
Time Stamp References:
0:00 – Introduction
0:28 – Crescat’s macro model.
3:10 – Treasury cash balance.
5:30 – S&P Ratio to Deficits
8:15 – Global negative yielding bonds.
10:45 – Monetary Supply vs Deficits.
14:30 – Thoughts on China.
17:00 – Australia Credit Card Accounts
17:50 – Australia Rents and Real Estate.
19:00 – Central Bank Balance Sheets (Canada)
22:00 – Gold Discoveries Vs. Price of Gold
25:30 – Fed Balance Sheet Expansion & Gold
28:10 – Silver relative to money supply.
31:10 – Buy gold and sell equities.