I think we will see the real silver.
Squeeze.
I was taken by surprise by the amount of physical silver that was
bought by newcomers to the silver market.
Well, I think you look at what the FED has to do, and what the impact
of that will be over time.
It seems to me that the FED would like to let interest rates rise a
little bit, they'd like to do it so that they have a tool where they
can lower them if they need to again, but it's tough to lower them
below zero.
It's also tough to let them rise.
I know that most audiences prefer narrative to arithmetic, but I'm
going to give them some arithmetic.
Anyway, if as is true, the US 10-year treasury yields 1.5%.
If you go back over the last 40 years, traditionally the US 10-year.
Treasury has had a positive yield over the rate of inflation.
If the rate of inflation 6.5% then if the treasury yield was to revert
to mean the US 10-year treasury would be selling with a 7 handle or a
seven-and-a-half candle which
Means that the debt service cost throughout Society, but particularly
to the government would go up fourfold.
I don't think they can do it.
But again, it gets worse.
Traditionally, the 30-year mortgage rate in the US, the rate that
American homeowners pay to borrow money to buy a house trades at a
premium to the US 10-year treasury, if the US 10-year treasury rate
was at seven.
The first mortgage rate would be at at what 288 and a quarter as
Two, three.
That would give you affordable housing.
The old-fashioned way, which is to say that the price were the
affordability of houses would fall so much as a consequence of
interest rates that the real estate market would get crushed.
Am I saying this is going to happen?
No, what I'm saying is that it is unlikely that the FED is going to be
able to let interest rates rise to any substantial degree, which means
that the set of circumstances that's in front of us, unfortunately.
Unfortunately, probably favors gold for a fairly substantial period of
time.
Do I know what's going to happen a month from now?
No.
Do I know it's going to happen.
Three months from now.
No.
Do I know a set of circumstances?
That's very much more likely to occur than not occur.
Yes, and am I able as a consequence of looking at the probabilities
around what has to happen fashion, our response in my portfolio that
will
Much more likely than not reward me overtime.
Yes, I prefer probabilities or certainties over longer periods of time
rather than psychologically secure, improbable outcomes during shorter
periods of time.
And I would urge your listeners to begin to view life in the same
fashion.
Some of this now is going to become conjecture Charlotte, but a lot of
life is about conjecture.
I've lived through two precious metals, bull markets in my life, 1979
1981, and 2000 to 2011.
Both of those were decade-long Affairs.
In fact, 11 year-long Affairs.
I believe that the bull market that we're in now probably got underway
in 2018.
So we're three years into a bull market.
I suggest that if past is prologue doesn't need to be but if past is
prologue a probably seven years ago, so we're probably still in the
first half of the bull market.
And we talked about before, bull markets, have substantial Dimension.
The gold price now is gone from what 1000 to 1800, u.s.
Something like that and people say, well isn't the bull market over?
I mean, goes up 40%.
Well, first of all Market, gold was up 25-fold, S bull market, gold
was up, six fold.
Am I saying that gold is going to be up three or fourfold?
No, but it wouldn't surprise me if it was.
As we talked to examining prior bull markets, there is this incredible
volatility.
These incredible cyclical, declines, in secular markets, which is
precisely what I think we're involved.
And I went through one of these in 1975, where the market, the gold
market fell by half.
I went through another one in what 2002 where the market fell by 20 or
30 percent.
So this is not unheralded to me.
The other things I've learned about gold, precious metals bull market
and getting back to your question, is that normally bull markets are
brought on by fear buyers and the fear buyers go to insurance.
They go to Gold.
Once gold has established the momentum, and the narrative around
precious metals becomes more understood and accepted by the market.
And the investors and speculators come into the market, which is to
say the greed buyers, keep the fear buyers.
He then the metal with more volatility and lower value, per unit of
exchange.
Silver begins to take over the second half of the two bull markets
that I have that.
I have been through have been silver Centric and I would say to the
speculators who I suspect are an important part of your audience that
the most upside volatility that you see in Precious Metals markets are
in reasonably high quality.
Silver, equities, the market capitalization around the silver.
Equities is so small that when the narrative begins to appeal to the
generalist investor and money flows from the generalist investor into
the silver equities, there simply isn't enough market cap in that,
Silo to handle the money.
I'm reminded early in my career of things like silver standard, which
we underwrote it, 76 cents going to $45.
Pan, American silver, which I if I remember correctly, we underwrote
at $0.50 going to $40 the bull market before that in the 70s Coeur
d'Alene going from Penny, Dreadful in Spokane, at ten cents to $65 the
upside in reasonable quality.
Silver stocks.
In a silver bull market is truly insane.
Unlike anything that, well, I guess I've seen it in other instruments,
like, uranium stocks and and crypto in the uranium stocks.
I understood it and crypto.
I don't, but I can say among the classes of investment in speculation
revolving around, precious metals that for speculators.
The silver stocks have incredible upside.
I've been talking to them a bit.
It because part of my audience is attracted to me because of the call.
I made on uranium a couple of years ago.
It's interesting that when you and I were talking about uranium as I
say, three years ago, nobody cared.
And now everybody is fascinated.
And what I want to say to speculators is yes, there's more room to go
in uranium, but the markets affinity for silver now is where the
markets Affinity was for Uranium two and a half years ago.
To be a successful Speculator.
You got to hit them where they ain't, you got to buy assets that are
unloved.
You can't get an asset that's loved cheap.
And so, in terms of sentiment silver is where uranium was, I think we
will see the real silver squeeze in front of us.
The silver squeeze that we saw was very interesting and I got to say,
I was taken by surprise by the amount of physical silver that was
bought by newcomers to the silver market.
It was incredible to see the amount of silver that they bought, but
that isn't what the real silver squeezes about.
The real silver squeeze is simply about the market share of precious
metals returning to their historic means it's about University Pension
funds State, Pension funds, and insurance companies.
Going from having no precious metals in their asset or words to
having.
two or three percent in Precious Metals when that happens Charlotte,
and I really think it's when not if
when demand for precious metals merely returns to the prior means,
I think then you see demand for precious metals.
Triple.
We hey, may have seen as a consequence of the silver, squeeze a 10 or
12 percent increase in demand for silver in the United States.
You know, relative to supply on float.
I think we're going to see demand triple.
That's three hundred percent, not 10%.
And when you have a 300% increase in demand with no concomitant
increase in Supply because you can't increase Supply, that much, the
price action can be very, very dramatic.
So I think the the silver squeeze that we saw was an interesting
phenomenon.
It tells us that the way the world investment speculates is changing.
The information doesn't need to come from Chase Bank or the Wall
Street Journal.
It can come from Charlotte in the cloud.
There's distributed information and distributed response.
That was the message of the silver squeeze.
But in terms of its impact on the silver market, there wasn't much.
What will make a difference in the impact on the
Over market is when we get away from the Reddit crowd and we go to,
you know, Ontario Municipal Employees, you know, TIAA-CREF, the
biggest institutional investors in the world when they begin to return
to Precious Metals markets as they had to do as responsible.
Investors latter part of the 70s.
I think then you see the reals.