Transcription
It basically both break down, leading to a reset. Now, it's...
Some people think that this is, you know, maybe it'll happen, but who knows when? It might not happen for five more years. It's a high-risk thesis. Me, I think it's a fait accompli right around the corner. I think we've been waiting for years and years and years for this outcome, and now it's becoming very obvious that that is exactly what's going to happen.
When you combine the economic problems in the US, for instance, the cost of living problem. I would submit that half of the families in this country can't pay their bills right now, and it's only getting worse. Um, and right now, the jobs market. If you lose your job right now, this isn't a normal economy. If the economy was strong, when they say the economy is strong, that's total BS. Because if this strong economy was strong, if you lost your job, you could replace it. But I would submit right now, if you lose your job and you're getting paid six figures or higher, there's a good chance that you're not going to find one anytime soon. 'Cause this is not a, this is not a strong economy. And so it's, it's, and I think it's going to get worse. So, I think the labor market is very, very weak right now. Now, if you have a job, that's great. But the problem is, if you lose it, if we go into recession, then replacing your job is going to be the hard part. Um, and the housing market is a total mess right now, where people can't sell their houses and people can't afford to buy them. That's a total mess. Inflation is trending higher. I think that's going to be the case for a while. Um, so the economy is weak, is weakening as we speak here. And, um, we're in a 15-year bull market. 15 years. Um, now, some people say that we had a recession back in 2020, but the stock market didn't go down. It went up. So that's not, that's not a recession. Sorry. [laughter]
Okay, um, I'll unpack that. There's about five questions in there, but I wrote, I wrote down some notes. So, starting with the strategy. >> Mhm. >> So, for me, it's a lot like Michael Burry in 2005. He basically saw that the housing market was going to burn to the ground, and he basically said, "Okay, what strategy am I going to use to maximize my profit?" >> Mhm. >> Um, and he, and he basically went after the very, the worst of the worst. And then, if you watch The Big Short, he basically went after the best risk-reward, and he called it a certainty, and it turned out he was right. And then, but, and for me, um, kind of that, that real high risk-reward, that kind of the meat that he went after is what I, I call the sweet spot. And so, you want to ignore, um, kind of the low alpha, um, which is the main, the top 20 majors, your ETFs, and, um, your royalty plays. Now, you're going to get three-baggers from those. I use them for diversification. Those are kind of like the base of my pyramid. But that's not where I'm going to make my money. I, the only reason why I own those is because I don't know when the reset occurs. I don't know if it's going to be in six months or if it's going to be in five years. So, I want, I got to have a foundation. So, I use those stocks as my foundation, my base, which those have less volatility, but they still have three-bagger upside. Um, at least three-bagger upside, in my opinion. And then the meat right in the middle, if you will, is undervalued producers and high-quality developers. And that's kind of where you want to be. That's where you want to be, 60, 70, 80% of your portfolio for me is those really high, high risk-reward stocks. And then the very top is your exploration, um, or options. And I think you can just ignore those. You don't need them. In a, in a bull market, I believe they just go after the, the real juicy high-risk reward, your undervalued producers and your high-quality developers. And my portfolio right now is pointing toward to a seven-bagger. When I started doing this, I said my goal is a five-bagger. Um, and I'm, I'm always conservative, and I'm like Burry. So, Burry, I'm sure when he, when he looked at his numbers and he looked at it, he basically, and it turned out, you know, you know, you can project out kind of what you're going to get. You, one of your questions was, when do you leave? Well, for me, I'm not going to climb to the top of the mountain. There's no reason to. So, right around a seven-bagger, I'll be out. But if it's really juicy, if it's still really frothy, but you have a lot of momentum, maybe I'll stick around for eight, nine. Maybe, but I probably won't. I'll probably exit early. But, um, but now, um, Burry, as soon as he basically, once his plane landed, he got out. He, he didn't wait. And, and so, some people are not, I've thought about this about leaving early, 'cause he left early. As soon as he, as soon as he started making money, he was out. Um, whereas Mark Baum, he waited another year before he got out. Um, and so, some people are going to wait longer than others. I'll be more, I'll be in the middle of those two guys. I won't get out early, I won't get out late. But you don't want to, you, you do want to be careful. Uh, you want to wait. I've, I've told people, you know, when do you begin to exit? This is a key question you didn't ask. When do you begin? You don't begin to exit until it gets frothy.
Look past the immediate tape. The daily fluctuations in the silver price reflect temporary noise. Traditional sentiment fixates on brief pullbacks or immediate macro headlines. True market dynamics are found beneath the surface. We must analyze the long-term structural imbalance rather than short-term price action. The broader macroeconomic landscape is quietly shifting. Equity markets have sustained a prolonged multi-year run. History demonstrates that such cycles consistently culminate in a period of high valuation and complacency. Concurrently, the structural health of the sovereign debt market remains fragile. When these traditional systems experience stress, monetary authorities face a distinct challenge. They are structurally compelled to support system stability. This dynamic leads to persistent monetary expansion and the gradual decline of currency purchasing power. This macro environment forms the foundation for a permanent precious metals bull market. Silver is adjusting to these long-term monetary realities. Mainstream financial markets consistently exhibit delayed recognition. The broader public remains focused on nominal equity gains, overlooking structural currency decay. Historically, tangible assets undergo an extended period of under-allocation before the wider market acknowledges the shift. Current valuations reflect this lag, keeping quality assets fundamentally underpriced. This macro transition is driven by severe physical scarcity. The global silver market faces a structural supply deficit that has built over multiple consecutive years. Industrial demand for high-technology applications and clean energy remains rigid. These industrial consumers require the physical raw material. They cannot settle their operational requirements with paper contracts. Meanwhile, primary mine supply is highly inelastic. The vast majority of global silver is produced as a secondary byproduct of base metal extraction, primarily copper, lead, and zinc. Because it is a secondary product, mining corporations cannot easily scale up operations simply because silver prices increase. The supply ceiling is structurally fixed by entirely separate industries. As a consequence, above-ground vault inventories are facing steady, unyielding drawdowns. The coming adjustment will not be a typical speculative mania. It is an inevitable mathematical calculation. The paper market cannot indefinitely override physical shortages. If you seek to insulate capital from systemic counterparty risk, consider a physical position. Look into securing tangible asset allocations while available above-ground inventory permits.
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Well, you know, I've been doing interviews like this for a while now. Um, and as we get closer and closer to my thesis, it just, it just becomes so obvious that I, I, I, I can kind of see where we're going here. It's becoming more and more obvious, if you will. But it's complex to, to unpack it and explain it in, you know, in five minutes. Because this has really been building for 40 years. And so, I think one of the easiest ways to understand this is just looking historically at what stock markets have done. I mean, if you go back to the 1920s, where you had that big run in the 1920s, followed by a 20-year bear market, pretty much. I mean, it's just a massive see. And then you had the same thing happen in the '80s and '90s. You had this massive run, especially in the '90s, and then you had the correction in 2000, and it lasted a decade. And now we've had another 15-year run. And what's the outcome going to be? It's, for me, it's very obvious. You're going to get a protracted bear market. And nobody seems to be expecting it. But these bull markets, they always end in euphoria, which is exactly what we have. For instance, if you look at the last two, 1929 and 2000, those both ended in euphoria. Everybody, you know, this is great, this is great, we're all making money kind of thing, and then boom. And that's exactly what's happening here. Um, and I really feel that this is different than 1929 and 2000. And the reason why it's different is because in both of those eras, in both of those periods, the US was the global leader. The US was basically positioned in a very strong, had a very strong position. In other words, the US dollar was not, was not at risk in, at those two periods, not even close to being at risk. And the bond market wasn't fragile. So, it was a completely different. This one, we're actually going into a bear market in the top when the US is losing. This is where it gets really complex, and you [clears throat] kind of have to know history. It's losing its position in the world geopolitically. And so, when you combine that geopolitical risk with the US economic risk, and that the middle class is basically getting rug-pulled here through, you know, this MMT, modern monetary theory, where we just use debt to expand the, expand the economy. Well, guess who's the loser in that? The middle class is a loser in, in globalism, and it was the loser in financialization of the economy. And so, we're having a, we're basically building to a head here where the US economy is going to falter. And when it falters, it's going to be worse than 1929, as bad as that was, because in 1929, we had the ability to get out of it, to climb out of it, to, to basically everything that kind of stayed intact, if you will. This time, we're not going to, we're not going to get through this one. I call it the Humpty Dumpty crash. There's going to be no putting this one back together again.
Now, the reason why I'm in gold and silver is because gold is the winner here. When everything goes down, you have $250 trillion in assets that are at risk between stocks and bonds. 100, 100 trillion stocks, 150 trillion bonds. They're both at risk. Well, if, if that, if those assets are at risk, where do people move their money to? And gold is the obvious answer. Gold is the winner here. So, the gold miners and silver miners and silver, they're just along for the ride. That's not the story. The story is gold. The story is the bond market. I'm going to, I'm going to finish with this is that we've gotten to a point now where people can't see this, but it's becoming the elephant in the room. So, the Fed was supposed to have a dual mandate of price stability and full employment. Well, that's gone. That's, that's out the window. That no longer exists. Even though they say it is, they're lying through their teeth. Because the elephant in the room now, whenever they have a Fed meeting, is how do we ensure that nothing burns to the ground? How do we ensure? So, they're basically, the only thing they care about now is stability. It's not about full employment or or inflation. You know, they could have solved the inflation problem at 2% very easily. You just don't print any money. You know, um, inflation is a monetary event. They, but they kept maybe praying. Um, they, they don't care. And that's the reason why is because they're, they realize that what's more important is the stability, right? That literally the stability of the economy. So, it's not full employment. That's, that's an, assuming assumption that you have stability. So, now, when the Fed, now, right now, when Warsh has his meeting, they're not, what I'm about to say, they're going to, they're going to ignore in the room. They're going to ignore the elephant. The elephant's over there, but they're not going to talk about it. We, if, if Warsh was honest with them, but he can't be honest because if he's honest, then it'll leak, and if it leaks, he'll sound like a, he'll sound like a complete idiot. So, he can't tell the truth. We're, we're in an era where there you can't be transparent because if you're honest and transparent, you get attacked because people attack what they don't understand. So, if Warsh was honest, if he sat down in the room and go, "Okay, people, we have a big problem here. We have to make sure, we have to ensure the stock market doesn't crash, and we have to ensure that the bond market remains stable." And, and that's his job. Literally. Those are the, that's the elephant. Those two issues. We got to ensure that the stock market doesn't crash and the bond market doesn't become fragile. But he can't say it out loud. And so, the, so, that, that elephant is just going to keep getting, every meeting that they have is just going to keep getting bigger and bigger and bigger. And at a certain point, somebody in the room is going to go, "Okay, the stock market's down 5%. What are we going to do here?" So, it, it's, it's about clown world because we can't tell the truth. We can't be honest. Somebody yesterday on Twitter, they posted a list of 20 items where nobody's went to jail. It was like there's 20, 20 things and not nobody went to jail on all 20 items. Um, and we know that all 20 of them, people are breaking the law. We literally live in clown world now. Um, and so, the Fed has become clown world as well. And again, the only thing that really matters right now is stability in the stock market, stability in the bond market. Everything else is noise. And gold is going to be the eventual winner. We can see where this is going. The Humpty Dumpty crash is coming.
So, when I wrote this book, um, 2012, um, at that time, I thought that, you know, it was a complete guide. So, I thought, "Okay, I better include a chapter on options here." And the, and the main thing that I mentioned, um, not maybe not main, but one thing I mentioned as an opportunity you could use for options is hedging. Um, because hedging, um, using options gives you a lot of leverage if things go south on you. So, so I thought, "Okay, I'll write a chapter on options." And the last book, might, and I think it's going to be my final book, the 12th edition. It might be the 13th edition. I, I've done so many of them. I've updated it so many times. I removed that chapter. It's not there anymore. And the reason why is because now we're, now we're in the bull market. So, in, in a bull market, I really, um, think it's, uh, the, I, I, options is not easy. You, you really need to be a professional to use options. It's difficult. The, there's so many. The one of the things they say about options and trading alone. So, here, here's the thing about options. Just trading, period, um, only about 20% of the people make money in trading. If you trade options, it gets worse. It's like 10%. >> [laughter] >> So, nine out of 10 people are going to lose money trading options. So, it's like, "Ah, you know." So, I, I removed it from the book. Um, because I, I just don't really think you need it now that we're in a bull market. There are five, 10, 20-baggers still all over the place. So, when you have that much leverage in the system, you really don't need to gamble with options. Now, a lot of people are going to do extremely well. Um, I, it almost seems like a slam dunk for some of these options, but I just told you, nine out of 10 people lose money. Um, so, but I mean, if you look at like SILJ, for instance. >> Mhm. >> It's an ET, silver miner ETF. >> Junior miners, yep. >> Yeah, so you're kind of reducing your risk of basically a problem for one mine, right? Now, there are people that have options on SILJ that they bought like a year ago, all the way to January '28. They got in like, it, you know, [snorts] it's like 25 right now, 27, 28. They got in like when it was under 10, before this, before this market really took off, and they're going to make a fortune. You know, they, and so, if, if you get into these options, the key is, now it's, it's getting a little more difficult.
The paper derivative market attempts to manage this structural deficit through institutional leverage. For decades, paper contracts have completely obscured the actual volume of the underlying physical metal. This traditional pricing mechanism functions only while institutional confidence remains intact. It fails when physical material is demanded at a systemic scale. A clear divergence is opening between paper market suppression and real physical demand. Let's get back to the rest of the interview.
Okay, um, I'll unpack that. There's about five questions in there, but I wrote, I wrote down some notes. So, starting with the strategy. >> Mhm. >> So, for me, it's a lot like Michael Burry in 2005. He basically saw that the housing market was going to burn to the ground, and he basically said, "Okay, what strategy am I going to use to maximize my profit?" >> Mhm. >> Um, and he, and he basically went after the very, the worst of the worst. And then, if you watch The Big Short, he basically went after the best risk-reward, and he called it a certainty, and it turned out he was right. And then, but, and for me, um, kind of that, that real high risk-reward, that kind of the meat that he went after is what I, I call the sweet spot. And so, you want to ignore, um, kind of the low alpha, um, which is the main, the top 20 majors, your ETFs, and, um, your royalty plays. Now, you're going to get three-baggers from those. I use them for diversification. Those are kind of like the base of my pyramid. But that's not where I'm going to make my money. I, the only reason why I own those is because I don't know when the reset occurs. I don't know if it's going to be in six months or if it's going to be in five years. So, I want, I got to have a foundation. So, I use those stocks as my foundation, my base, which those have less volatility, but they still have three-bagger upside. Um, at least three-bagger upside, in my opinion. And then the meat right in the middle, if you will, is undervalued producers and high-quality developers. And that's kind of where you want to be. That's where you want to be, 60, 70, 80% of your portfolio for me is those really high, high risk-reward stocks. And then the very top is your exploration, um, or options. And I think you can just ignore those. You don't need them. In a, in a bull market, I believe they just go after the, the real juicy high-risk reward, your undervalued producers and your high-quality developers. And my portfolio right now is pointing toward to a seven-bagger. When I started doing this, I said my goal is a five-bagger. Um, and I'm, I'm always conservative, and I'm like Burry. So, Burry, I'm sure when he, when he looked at his numbers and he looked at it, he basically, and it turned out, you know, you know, you can project out kind of what you're going to get. You, one of your questions was, when do you leave? Well, for me, I'm not going to climb to the top of the mountain. There's no reason to. So, right around a seven-bagger, I'll be out. But if it's really juicy, if it's still really frothy, but you have a lot of momentum, maybe I'll stick around for eight, nine. Maybe, but I probably won't. I'll probably exit early. But, um, but now, um, Burry, as soon as he basically, once his plane landed, he got out. He, he didn't wait. And, and so, some people are not, I've thought about this about leaving early, 'cause he left early. As soon as he, as soon as he started making money, he was out. Um, whereas Mark Baum, he waited another year before he got out. Um, and so, some people are going to wait longer than others. I'll be more, I'll be in the middle of those two guys. I won't get out early, I won't get out late. But you don't want to, you, you do want to be careful. Uh, you want to wait. I've, I've told people, you know, when do you begin to exit? This is a key question you didn't ask. When do you begin? You don't begin to exit until it gets frothy.
Now, what is froth? Froth is basically your PE ratio. So, if you look at the current stock, current, um, stock market, we have froth. We have froth up the ying-yang. The price-to-earnings, PEs are at 42. The all-time high is 44. And so, you, you have froth there. So, that's how you can tell. It is the PE ratios. I don't use PE ratios. I use free cash flow multiples. And the free cash flow multiples right now are in single digits for your producers for both gold and silver, single digits, which is really cheap. And the reason why they're really cheap is because nobody believes in my thesis. Everybody thinks that everything's fine. Gold and silver, no, they already had their run. It's done, right? So, nobody cares about these. So, free cash flow multiple under 10, um, and they're going to go, they're going to double. And so, until all, so, one of the things I look at is your highest quality producers. Those highest quality producers should all get into the 20s. It, so, once a few of them get into the 20s, that'll be early exit. Once they all get into the 20s, then get ready to get out. And then, we don't know how long the mania will last, but that's when you know, um, I, I'm not going to be there for the very end of it, how long this thing lasts at the very top, but I can leave, I'll be, I expect to leave a lot on the table, um, but like you said, the, you don't know what's, you know, what the financial system's going to do here when things start to really start to break. So, I'll, I'll definitely be exiting, uh, you know, once it gets frothy.
Ignore the short-term volatility. Let the broader market chase the daily headlines. Focus on the physical deficit and the structural constraints of supply. The repricing of silver is not a matter of if, but of when. For serious investors, the objective is preservation. Assess your exposure. Position your capital in quality assets while availability remains. That's all for today, folks. Thank you for watching and keep stacking physical silver.