Transcription
I'm you. You can identify these bottoming patterns everywhere in the commodity space right now, which is also another function of evidence that we're in a commodity bull market.
[music]
Welcome back to Metals and Miners. I'm your host, Gary Bow. Today, we're digging into the wild and exciting world of precious metals, miners, and energy with our friend and expert market analysis, Andy Hosy. Andy is the founder of Finding Value. Andy, it's an honor to have you back on Metals and Miners. Welcome to the show.
Yeah, thanks for inviting me back, Gary. Really appreciate it.
Yeah, thank you.
All right, so Andy, you've analyzed and invested in the markets for many years. The current cycle is certainly whipsawing and confusing many investors, and some just don't see the bigger picture. They only see the day-to-day ticks in the price charts, and that's having its way with them. What do you hope for those tuning into this conversation today, that they'll walk away with after listening to our discussion?
Good question. Um, the way that I play the markets, I play a little bit longer-term outlook views. I don't play the short-term little wiggles. So, if I were to walk, you know, if I were to come away from this, um, I would come away with the value is in commodities in relationship to financial assets, and it will be that way, uh, for probably many years. So it could be 5, 10, 15, 20, depending on how fast the supply responds, uh, to everything. So this is a much larger bull market, much bigger cycle. Uh, probably more similar to the 1970s than like the 2000 to 2011 commodity bull run. So I, I think it's larger than what most people think, and people are going to sell far too early.
So, so your takeaway for these folks is, um, don't be alarmed by maybe consolidations and some pullbacks during these early innings. That if they're going to stay, if, if they're going to want to reap the full benefit of the cycle, they're going to need to have the stomach to deal with the volatility.
Yeah, you're going to get, you're going to get consolidations and volatility no matter what. Uh, no matter where you go, it's not going to be a straight line higher. Uh, you're going to get probably 40 or 50% pullbacks in the equities regularly. Uh, it's going to twist and turn your stomachs if you're in the smaller market cap stuff. Um, we are incredibly early. So we are, we are very low in terms of, uh, I call it ratios that I follow. Ratios are two assets priced against each other. And basically, you can price gold against the S&P, gold versus Dow, those types of ratios. And we're like just starting to break out on a lot of these ratios. So, I don't think this is going to resolve itself in months. Like, I think there's zero chance that it's months. Um, it's going to take many years, and you're going to ride through pullbacks. But to maximize the potential of this cycle, you're going to have to size up the big trend. And sizing up the big trend is where all the money's made. And you have to ride through it. If you don't, if, if you can ride through and get to long-term capital gains, you ride through and you don't have to sell all these little pullbacks and accumulate a bunch of tax bills along the way. Because, as you pay taxes, you have to earn more money and more money to make up for the taxes that you're losing each year, especially if it's short-term capital gains taxes.
So, um, sizing up the big trend, knowing that we're incredibly early, um, highly valuable if you can figure out a way to track where you're at in the cycle. I think that's also very valuable. Um, and know that you're going to have to live through some gut-wrenching pullbacks. Um, if you want to make big money, that's the price you're going to have to pay. I mean, that's really what it is. Um, I've, I've been in this for a while. So, it's not like I just came to gold and silver a year or two ago. I've been in this for many years. I've watched the markets, even last commodity bull market in 2000 to 2011. Uh, buying the bottom, uh, in 20, you know, 2016, I think was the ultimate bottom. 2020 was a nice big pullback of a double bottom. So, '16 was a bottom and 2020 was a bottom. Uh, and now we're, we're entering the up, the up phase. So we've got a big cycle bottom from '16 and '20, call it a double bottom. Uh, and now we're in the up, the up, the uptrend, upcycle phase. Uh, which is going to last many years. And if you look at it from a very big picture view, way, way out, um, I think that wave one was in the 1970s. We had a big consolidation from the '70s all the way to 2020. And then 2020 onward, we're in what could be considered wave three of three in Elliot wave speak, where, uh, we're in the most powerful part of the cycle. And this is, I, I think it could be bigger than the 1970s.
Well, I'm looking forward to getting into the charts with you in a few minutes. I just want to let everybody know that I'm battling, battling a little bit of a cough here, so I apologize if I'm periodically doing that.
All right. So, the precious metals, they overran and overheated and were extremely stretched on a technical analysis basis about a month ago, and many were calling for a top, if, or, or maybe even a collapse or a very long bare market. I was seeing some saying, you know, one to two years of a bare market. Um, and this was all just a few weeks ago. And, you know, both gold and silver have held up incredibly strong. They've been so resilient. They've held the line. Silver has even broken out to new highs. Gold is a few percentage points below all-time highs, but not far. So, from a technical analysis perspective, how do you explain the behavior of the precious metals in light of some of these other TA experts suggesting a major collapse was coming?
So, I'm a hybrid. I add market cycles, fundamentals, and technicals all mixed together. I call it the three-pillar approach is, is my approach to the markets. And I think that's required because technical analysis is, is not enough to get you where you need to be in my opinion. So I kind of marry up market conditions and ratios and technical analysis. Ratios tell you if you're cheap or expensive, and that is a part of where you're at in the cycle. So right now, we are, we are cheap in terms of those ratios that I look at from commodities and precious metals. Uh, which puts the wind at your back for valuation and the technicals. What people, most people do is they only focus on the technicals, and then they get into the really short-term stuff. The short-term stuff on the technicals is the least accurate in my opinion. As you back out and go bigger and bigger view picture and you marry where we're at in the cycle with the, with the ratios of what's cheap and what's expensive. Um, I see that we're in a big up cycle and the, and all the tailwinds are behind us. So although a lot of people are calling for the short-term pullback, uh, maybe a consolidation, whatever it may be, um, I, I don't, I don't try to time that short-term stuff. It's very difficult to do, and I wouldn't listen to those that are trying to time it either. And that's, that's where the big problem exists, is the short-term little wiggles and the short term.
So, let me, I'll just define what I think short term. Short term is measured in months. So weeks and months is all short term. Uh, longer term, you know, medium term is a few years. Longer term, you're looking at like decade stuff. So 5, 10, 15 years, that's long term. And then the medium terms are measured in like single digit years, one, two years. Uh, and what people try to do, and this is where I got messed up when I was, uh, listening to experts on YouTube back in the, uh, early, mid, late 2000s, is that everyone's trying to time the short-term time frame, and people just mess it all up. And that's expected. So, it's not the fault of the technical analysis person doing that. It's just very difficult to have a high success rate on time in the short term.
So when I look at these, you can see patterns across all these different sectors where we've got these big bottoming, double bottom patterns from '16 and '20 all across commodities and precious metals. You can even see a lot of bottoming patterns in the mining companies, precious metals in the 20, you know, 2020s here on a, on a shorter term time frame. We're heading out of those bases to the upside on all of it. So to call for a short-term technical, you know, consolidation or pullback, you're entering dangerous territories because you're trying to trade the short term in a massive bull market. And that's where you mess up. You, you, you lose your position, you sell out, and then it goes up on you, and you can't get back in because psychologically, you sell it at, I'm just going to make up numbers, $45 silver, and you're at $50 something bucks, and you're like, I don't want to buy it up here.
So, what do you do? You're stuck in this no man's land of psychological distress, is what I'll call it. And you're saying, I can't buy it in. It's too high. And then it just keeps popping up in a way.
But you do eventually chase that price higher. So you might buy in at 58, 60, 65 in, in that scenario, or, or even higher because you finally capitulate.
Yes. So that's what eventually will occur. Um, and also another difficult thing for most people. I'm just going to say it in general. Uh, they gain confidence by price movements, and that's not what you want to do. So they chase price, they gain confidence as it goes up, and then they lose confidence as it goes down. Um, you want to size the big picture view. You want to say, "Okay, we are low in this, and I'm going to try to ride it all the way until it becomes more expensive. More expensive against financial assets, more expensive against, uh, whatever you're, you're comparing it against. Uh, it could be other asset classes like bonds or M2 money supply or, or financial assets like the S&P 500 and NASDAQ. That's where I gain the confidence. And when you start to look at those ratios and you see them starting to bottom and break out and turn, that's part of the cycle. It's cheap. So, at the ends of cycles, things are expensive. At the beginning of cycles, things are cheap. And then, if you're cheap and they're just starting to break out, you want to stay long and you want to ride it all the way up. And that's where big, big, big money is made. And what I mean by big money, I'm not talking 100, 200, 300%. Um, I am talking thousands of percents, thousands, maybe even 10,000, which is a hundred bagger, which is possible if you can buy low and, and ride it through. Now, the genetics of human beings, the psychology of humans are not naturally set up for this. It is very difficult. And so, [snorts] I've, I've been riding. I've been holding. It feels like you're getting kicked in the, you know, in the, in the groin, uh, on some of these pullbacks, but you're going to have to just figure out how to play this game and ride through it if you desire to make a lot of money and do so while reducing taxes.
Yeah, I agree with everything you just said there. And you got to find your peace in this in the midst of the storm, so to speak. Um, because these things move so far, so fast, so quick when they start moving. I mean, just the other day, I was seeing some that were moving, you know, 25, you know, 15, 20, 25% in a, in just a couple hours. And so, you know, if you think you can time this just because we have a, you know, a one-month drop, uh, you are going to miss out on some things. I mean, you know, it's one thing to skirt a massive bare market, you know, like a liquidity issue, a stock market, um, you know, implosion, but those things are rare. Um, and so, you know, that's that would be advisable to sidestep, but the rest is so difficult to to move in and out.
All right. Well, Andy, the miners, they typically deliver about 2.3 times leverage on the metals move to the upside. Despite the great year for all, we haven't really seen that level of leverage yet. Not completely. Why not? And do you expect the leverage to revert to mean over time?
Yeah, I still think that, [clears throat] a lot of the commodities space is just not, and precious metals is not in favor. It, the, the sentiment hasn't fully shifted because the S&P, NASDAQ, and some of these other asset classes are still quote working. They're still going up. The pain hasn't been felt in those asset classes. Uh, the only asset class that's been absolutely smoked has been bonds as interest rates go up. So, usually in these gigantic big bull markets, money needs to like it needs to move. So, money piles into financial assets as interest rates go down. That's why they're so expensive right now. So, rates been dropping, dropping, dropping all the way down into the bottom of 2020, 2021. And everybody piled into financial assets because bonds weren't paying an interest and, uh, stocks were doing quite well. So everybody just piled all that. That's where everyone's at. It's super expensive. Commodities and precious metals are just coming off the floor. So we need money to move, and we need pain to be inflicted not only to the bond market but also the stock market. And then money is going to look for other alternative asset classes. As that pain is inflicted into their accounts and beaten over their head, they're going to say, "You know what? I got to do something. I'm underperforming now." And then they're going to go look, they're going to look at gold and, and miners and all these other areas and asset classes, and they're going to chase price performance, just like they, humans are are naturally set up to do, which is chasing price performance.
It seems like, which is good for those of us who are in early and are holding and are waiting for that tidal wave to come in.
Yeah. So in the movie, is it Margin Call, uh, they said, "Cheat, be smarter than everyone, and be first." Well, we can do the first two. We can be smarter and cheat, or be smarter and be first. Uh, and that's where all the money is made. So you use patterns to determine the accumulation areas, and then we accumulate when the smart money accumulates. That's kind of, and I mean, we, like me myself and, and yourself, I'm sure, and you, you buy in these bottoming patterns where people are accumulating, then you ride the whole big bull market. Um, most people, that is very difficult to do because they feel like they need to do action. They need to to trade and, and take a little bit off the top. I'll take some profits. I'm up 100%. That's not how you make big money, though. You buy cheap.
Rick Rule talks about exactly what you're saying. He's like, you know, if you're going to go buy your child a, a winter coat, and it's $100, but it's on sale for 50% off, you'll buy that all day long. And if you've got three kids, you're buying all three kids a jacket right there, right at $50. But when the stock is on sale, or when the metal's on sale that you know is in a cycle where mathematically it has to rise at some point.
If it's dropping like that, for some reason, you can't pull the trigger. You, you wait till it starts going up again, and then you'll, you know, you'll go with the masses, so to speak. So, you know, the psychology is interesting when it comes to financial assets versus, you know, buying widgets or things.
Yeah. The, the most important thing as an investor is to master patience. That's the most important thing because you'll see opportunities, you'll grab them, and you have to be patient for the opportunity to exist, and then you have to be patient for the opportunity to go up in a different market condition. You're waiting for market conditions to change. That's really ultimately what it is. So you buy it out of favor, and then when people gain confidence, the price goes up, they gain confidence in it, and then more people keep piling in and piling in. Uh, you need to have that confidence when everyone else is uncertain about the asset class.
And that's like the master. You walk in when.
If you can handle uncertainty and you're patient, you can master the markets.
All right. Well, Master Andy, let's move on to the charts and have a look at what you're seeing. Let's start with gold and then the gold miners. Um, and we'll go from there. One of the things that I, while you're pulling that up, one of the charts that's been making the rounds, excuse me, lately, uh, on X has been the implied allocations, um, of today. I'm sure you've seen that versus the 2016 and 2020, 20 runs, which we're still under in terms of allocations there. And the 2008 to 2011 runup, it jumped all the way up to about 8%. I think we're around 2% uh institutional implied, uh, allocations currently. Um, so I'm interested to know if you expect the allocations in this cycle to at least mirror the runup to 2011, and if so, what does that mean for these prices?
I think it's going to beat 2011. That's what I think. Um, and I, all I can, I can explain why, and I'll show you exactly what I'm seeing. So, you said start with, uh, with gold here. I'll just put it as a white line so it's easy to see. And obviously, this was not freely traded here. So, uh, I think this was, there was some pent-up demand to create this massive move. Uh, silver was running up the entire time here, um, because it was freely traded. But big picture view, uh, this is your big bull market. Uh, commodities and precious metals were cheap against financial assets in the '60s and '70s. Um, we had this gigantic move in gold all the way up to 1980. Uh, that was the big, big bull market in, uh, in gold that everybody knows. Uh, a lot of people will say that this was wave one, and potentially this is wave two. So this is actually in a declining interest rate environment, so to speak. This was an increasing interest rate environment, and this was the declining interest rate environment. And I can show that, uh, through, we'll put the two, the 10-year underneath it. [clears throat]
So this is, this is the 10-year. So this was your big bull market. Uh, this is where money was rotating out of stocks and bonds simultaneously. Uh, we know that bonds were being sold off because interest rates were going up. Uh, we had a peak roughly in the same general area. We had a big decline in interest rates all the way to the bottom of 2020. That was your declining interest rate environment. And this here is your consolidation, that whole area. And I know that we had the, the big bull move in 2000 to 2011, that was in a consolidation area. So we're in an increasing interest rate environment. Uh, in my opinion, I think that the downtrend of 10-year yields is broken. Uh, we're heading higher. We're making higher highs, higher lows, and we very well could dip a little bit if we have a panic in the market or something like that. But I still think we're in an uptrend, and I think gold is just starting that uptrend, and it's going to be for many, many years. Uh, so when I view the markets, I view it from this perspective. Um, I view it from the interest rates. I view that that this is a consolidation.
Now, if we can dive into silver, because I think that silver is a very good way to compare this. Silver is freely traded. Even back here, uh, this is the kind of the big picture view for silver. Uh, this is interest rates on the bottom. So, uh, we had a declining interest rate environment back in the, um, the Great Depression. So back there, you can see it started in 2020, the Great Depression in the '30s over here. Uh, and we had silver fall back with interest rates. We bottomed in what I consider to be here. Let me, uh, put this a little bit better. This is a, uh, falling wedge. So this is a falling wedge here into a double bottom. We broke, [clears throat] out, and then we went into a big bull market. That bull market, uh, if you were to look at from kind of bottom to top, uh, in that, in that general area there, it was 14,112% for physical silver.
Physical silver. So declining interest rate environment, increasing interest rate environment. If we were to put the tops, they're generally roughly the same. So this, the peak in interest rates, the peak in silver, the peak in gold, 1980-ish area. We went into a consolidation with declining interest rate environment. That's what created the big cup and handle pattern in silver. It was the decline of interest rates and money going into, uh, financial assets. So money piled all into financial assets from 1980 to 2020, 2021. Um, and then it's going to take time to break that psychology of humans because everybody's, they're, they're they've only known the bull market in financial assets, which is bonds and stocks and, and NASDAQ and all those is what I consider to be financial assets. Now that interest rates are breaking out, we're starting to see gold break out. We're starting to see silver here break out. And I think in my opinion that it's being driven by interest rates.
Now, [clears throat] as interest rates go up, if you look at history and you look at some of the statistics behind financial assets and how they do, and interest rates at about 5%, there's going to be, if we, if we get interest rates above 5%, the stock market and interest rates, uh, they uncorrelate. They, they diverge. [clears throat] So, they're correlated when it's zero to 5%. They both go up. Interest rates and the stock market, financial assets. And then they diverge at 5%. And that's where I think we could potentially be heading is we get four and a half, 5%, they start to diverge, and money looks for other asset classes because you're going to start to see underperformance of stocks. And then this is where I think.
You're talking, when you talk about four and a half, 5%, Andy, I'm sorry to interrupt. Uh, you're talking about on the long end of the curve, right?
I'm talking like 10-year.
Yeah. So, [clears throat] not it's not the 30, but like the 10-year is kind of what I use. And then you can hear Ben talk about they're going to try to hold rates underneath a certain level. And it just so happens that we are paused here below 5%. [laughter] So there might be some interest of trying to keep interest rates below a certain level so the stock market doesn't want to roll over and pull back. It's a, it's a large tax revenue for governments. The, uh, the stock market is, and, and the taxes that are generated from stock markets.
So it could also be.
Are you expecting a negative real interest rate environment then?
Yes. I, yeah, I think we're, I think we're in one right now. Uh, it's, I mean, as weird as, as rates are.
For the long term, for the next, you know, 10, 20 years?
Yeah, we, we could have inflation be greater than the interest rate for a while. And I think that's probably what they're going to try to do to inflate the, the debt away, which then is rocket fuel for commodities and precious metals. And then everything's in alignment that I look at low valuations in commodities and precious metals. Uh, and we can do a lot of ratio charts if you want to, to kind of show that. So this is the big takeaway though, that interest rates and these consolidations and the breakouts that are occurring, they look fantastic for long term. Now, to play this in the short term, I just think you're giving up all of your advantage of knowing what I'm just describing here, cuz you're going to try to play short-term little market movements, you know, like this little, we'll call it a consolidation retest. It's even like a little cup and handle perhaps, uh, that we're breaking out of. I just don't think the short term matters. Like it, it, people are too worried about, uh, could a recession come, could this happen, could that happen? It's like, guys, the big picture view is all, it's all lined up, and you're buying these assets at some of the cheapest times in history, and they're, they're not risky either. So the, my view is to get in, get positioned, and then just sit and hold for a long time. Uh, because the, the whole cycle in terms of interest rates and, and, and the debt problems that we have, it's all just tailwinds. Everything. So the, the, the winds have shifted. They were all behind financial assets, uh, from 1980s to 2020s, we'll call it. Uh, it takes time for people to change their mindset. It takes pain to be inflicted in their accounts for money to rotate into these sectors, and we're just at the tip of this.
What's interesting, Andy, is that, um, with all the, the rocket fuel that the stock market has, [clears throat] had, the S&P, um, which is heavily influenced by the MAG 7, um, it has gone up so much, you know, in the last five years. Um, I just saw that gold has returned better even in the 2020s over the last five years than the S&P.
Yeah. So, if you want to see some crazy ratio charts, uh, we can pull like this is silver divided by Bitcoin. Uh, and what I, what I look for are these squeezes into corners. Uh, what, what a, what a falling wedge is, let's just describe it real quick so everybody understands. The falling wedge is when it, it squeezes up into a corner in a psychological basis, and kind of an explanation is the buyers are starting to equal the sellers, and we're reaching an equilibrium point. This is quote, the equilibrium point is when price stops going down. The buyers and sellers equal each other, and it basically comes into a corner, or what I call is a dead period, where the buyers equal the sellers, and the price doesn't really move. Then we get a move higher. It breaks out. You'll generally see it with volume at the bottom. This is the volume of silver. And now we're getting this breakout. This is just the beginning. And this is, this is a representation of hard assets versus financial assets. That's why I'm using these two. And Bitcoin, everyone loves Bitcoin. All of retail is all stuffed in there because all they do is chase price performance. This is turning. And it's just turning complete. Now.
Are you expecting over time, however long it takes, a complete reversion back up to that top area?
I'm not 100% sure how far that's going to go. Um, I don't know if we're going to come all the way back up. It could. I'm not sure. And I think if it does do that, I think we'll probably see Bitcoin cease to exist, maybe, or have problems existing because there's some inherent flaws in my opinion in the design of Bitcoin itself. When I, when I look at it in terms of break-even to produce Bitcoin, and the way that Bitcoin is designed, there's some inherent flaws, is what I'll leave it at. So, I think there's a, a good solid chance that hard assets are going to completely get repriced, and people are just, they're not, they're not thinking like that. They're not, they're thinking of the past 40 years. They think it's linear and it's just going to continue forever. I'm saying that there's a turn, a turning point coming, and this is one piece of evidence. Um, you can also look at, say, XA, you know, this is silver divided by the S&P 500. And gold looks way better because it's, it's gone up so much, so quick. Um, and then when I see these, these, um, ratio charts, I think that we are squeezing into corners, even going back to when the Federal Reserve was created back in, you know, 1913, '14, all that area back there. I think we're squeezing into a corner where weird stuff is coming. And I, I, I, I can't tell you exactly the explanation, uh, of all this, if it's resource constraints, supply side issues, debt problems, or a combination of both of those, those things simultaneously. Like we have supply problems in silver, and we've got a debt crisis, and they're going to merge and hit together where we could see this huge outperformance, uh, of, of hard assets versus financial assets. So, a lot of this, and I put this here because there's other charts that look better in falling wedges. Um, even gold has it where something's coming, and it's all coming into a corner here. You can also look that, uh, we've got a double bottom here too.
Yeah.
So, all these look very, very good.
Very interesting.
Okay. So, I've got a question here. Silver miners versus the metal silver. They appear to be undervalued, especially since they have not regained their previous highs from five weeks ago or so, six weeks, while the metal itself has shot past and gone on to new highs. Does this imply a lag and the miners are going to explosively catch up, or that the investors don't believe the runup of the metal and they're expecting a pullback?
Yeah, there's a, we've got the charts and the charts will, you know, this is the chart here, J, which is the juniors versus silver falling wedge breakout, and you can see we've been pulling back a little bit here recently. Um, the silver miners, that's, [clears throat] a function, you're playing the margins, right? So it's whatever they're making in terms of their margins. So it's the, the silver price going up and their costs remaining, you know, somewhat level, and then you get the gap up between silver and their, their costs, their input costs. So perhaps, and I, I'm just guessing here, this is just an opinion, it's not fact, but my guess is maybe people, um, are worried about potential input costs out in the future, maybe. And maybe there's a little bit of disbelief from that. Um, this is broken out. I think, you know, the way that I view this is I want some exposure to it in the portfolio. So I've got physical metals, which I know I think they're going to go up, and then you've got this speculation on the margins of the mining companies. So right now, oil prices are incredibly low, and we've seen a big move in gold and silver. So the, the margins of the miners are going to do incredibly well. It's part of, usually this happens in kind of a slowdown of the cycle. So, um, when you get a slowdown in the economy, slowdown in inflation, we'll call it a disinflationary period, um, you'll get this mismatch where oil pulls back, and, and gold and silver, which is a safe haven asset, goes up, and then the mining companies make a whole bunch of money. Looking out in the future, if we get a stronger economy, we could start to see inflation pick up, their input costs pick up, and, and oil and stuff like that pick up. So, I'm not stating that we're there right now, but that could occur six months, a year, two years out, somewhere in that range.
Let me. Now we're kind of in the, the sweet spot for them going up.
Yeah. Okay. So, you, you're talking about oil. I think this is a good spot to ask you this question.
So, it seems to me that the Trump administration has made oil a very important, uh, focus, different than what people were expecting with "drill, baby, drill." You mentioned earlier, and rightfully so, um, you know, that the stock market and tax revenues are directly correlated. We saw that in 2022 when the stock market dropped 20-some percent, 2023 tax revenues significantly dropped in the current, um, budget deficit environment that we're in. It would be potentially catastrophic if we saw a similar situation. One of the things that, [clears throat] I saw at the beginning, uh, even before they were elected with this administration, was that 333 policy. Uh, I don't know if you're familiar with it, but Treasury Secretary Scott Besson was talking about, and one of the components was adding 3 million barrels of oil per day. Now, that could be done domestically. That could be done, you know, in conjunction internationally with the idea that oil-based inflation is pervasive and seeps into everything in the economy. Monetary inflation not as much. And so if they can keep oil chained down, we'll call it, you know, in a range. I'm not saying under $60 like it's been for the last month or so, but maybe under $70 or what, $75, whatever the number is to them, then they can control inflation, uh, to a degree. And if that's the strategy that they're deploying, then as long as the metals continue to move higher because of monetary inflation, then we're going to continue to see margin expansion for the miners. What, what's your thoughts on all of that?
I think there's a window of opportunity for the miners right now because there was some projects that came on worldwide with oil in 2025. And then we have, as economies pick up, I think the economy of China is going to pick up. They're releasing oil back into, quote, the wild from OPEC, right? So they're, they're bringing back oil that was, um, bringing it back to the market that was, uh, brought off the market. So, I think there's a transition period that we're in right now where economies are actually strengthening around the world, and OPEC is bringing oils back, barrels back, and, uh, a couple of projects in Brazil and Guyana is are coming online late '25 right now. And that's kind of like the big hit, so to speak. And it has nothing to do with, with the Trump administration. Drilling's gone down, rig count's down, everything's down. And I don't think, I don't think we're going to produce three million more barrels of oil from United States domestic production. I think we're pretty much tapped out, so to speak, uh, in terms of shale oil and where a lot of the growth of the oil came from in the world. I think as you look out past 2025, 2026, and you look into say '27 and on, I, I, I think, uh, I think oil is going to get real tight, real, real tight, and it will continue to tighten. And I don't know where the supply or this copious amounts of supply is going to come from. I also think that's why the oil equities are very high. They're, they haven't really fallen back down, is because people are looking past this little, it's not a glut. It's, uh, bringing oil back on the market, economy strengthening, and a more balanced market here in '25, probably beginning of '26, and then the back half of '26 is going to tighten. So on the charts in the equities, the equity is not falling. They're staying on top of their big support structures like Exxon Mobil, Kiko Phillips, all the big boys, Chevron. Um, I, I think oil is going to go way up in, in the future, and I don't know how that will impact the mining companies here in the long term. Uh, their margins could stay relatively stable as the metal just runs like heck, as oil prices also run with, with the metals. So, uh, I'm not, as when you look longer term, it becomes more, it's not a sure bet as like the physical metals, I think, and it becomes a little bit more cloudy because right now they're enjoying massive margins.
Yeah, totally agree with everything you just said. Um, I have no problem with any of what you just said. The only issue that I would say is to go a little bit more forward thinking beyond that. If we do see a massive move in oil, um, at some point, we then will see a return of massive inflation in conjunction with these massive budget deficits and the, and the weak consumer that we have. Um, and at that point, two, three years out, we have to add in potential job loss with AI, um, as the excuse, maybe under the guise of inflation. And we could then see the big recession that everybody's worried about, which would then take oil down with it again. So, yeah, if we see a massive spike, I'm saying in, in oil rather than a gradual, you know, elevation of oil into a higher zone, but not necessarily a very, very high zone like we saw after the Russian invasion.
Yeah. So you want, is it okay if I pull up oil here then?
Yeah. Yeah. Yeah.
Yeah. Yeah. So, since we're talking about oil, um, I'll show you what I think, uh, this looks like, uh, and, and what my opinions are around it. Doesn't mean I'm 100% right, but, um, this is long-term oil, uh, that I've got marked up here. The bull markets are from the, the green, the green to green with the arrow. So, those are bull markets. Um, the circle that I have in oil price is the circle of where I think we're lo, of where we're located today. So the circle here was 2001, and we're somewhere around the end of this potential slowdown over the next six months, year, I can't tell you exactly when they're going to have, we're going to have another large increase, uh, of, of the economy growing, potential money supply growth, all that stuff. Maybe they restimulate. I think Trump was talking about stimulus checks again. As they stimulate this, we're going to get another uptrend move to, as they reliquify the world, is what we'll call it. So, what we're looking at here is there were three consolidations. Consolidation one, consolidation two, consolidation three. Uh, I've got the three, I call it the three hump consolidation. Uh, it's a psychological consolidation that it shows up in charts everywhere, uh, in these consolidations. So, there's three there. It's the same pattern here as the three hump there. So that's what I mean by the three hump. And then we've broken out of that consolidation. So here's your consolidation. You're broken out. And then the orange dot is the orange dot location, uh, in 2001. If you were to compare it to history, I think that this here is going to come over here. Uh, and we're going to go probably to $400, $500, $600 oil. Um, I know that seems weird, but it's not oil going up. It's the dollar having problems. Put it that way. If, if that makes it easier for people to understand, because it's not going to just happen.
It'll be interesting to see how our economy and the tax base and everything could handle, um, that, [clears throat] level of price of oil.
Yes. And, and, and I know that seems very difficult, but the same thing would have been said here. Um, you know, we were at $37 as the peak here, and we were sitting at $20. And if someone said we're going to $150, you know, up here at, uh, from $20, people would say, "No way." Uh, what I'm telling you is right where we are today is $20 in 20 in 2002. So $20 is equivalent to $60 today. Uh, and then we're going to, we're going to break out of this zone, and we are never going to go back below about $150 probably in our life.
What did we hit during the Russian invasion? Was it 140?
It was, yeah, it was somewhere around 120-ish.
120.
I think. So that, that led to, um, that led that led to a, to a, uh, a stock market decline, which led to a shortfall in tax revenues. Um, yeah. Yeah. It would just be interesting to see how we handle that.
Yeah. So what was happening back then is interest rates were following oil up. They're going up, up, up, up. And what did they do? They had to slow down oil. So they released the strategic reserves. Just boom, flooded the market. Try to flood it, flood it, flood it. Get those interest rates down. Get it down because they don't want the stock market to crash.
Right.
And remember that 5% key level that I'm talking about, where did the interest rate level stop? Right at 5%. There's the 5% level right there. And they were like, flood it. I don't care. Get this down. Get oil down now. Now the, the, the crisis, quote, the crisis of Ukraine had nothing to do with oil prices in my opinion. Oil prices were running already, and then they just blamed it on that particular thing. They need, they need war. They need something to blame. So then they, they point fingers. Oh, it was the Russia. It was the crisis here. I don't believe that. I think it was a gigantic mismatch of a bunch of money that they created looking for products and oils and everything. So it was the money creation flowing through the system creating shortages. It wasn't supply chain shortages. It was so much money chasing so few of goods, it created the shortage, and the supply chain couldn't keep up with the money that was created in that time frame. So most of these movements, when you look at all these movements, they're all currency exchange related movements, almost all of them, including the dollar or including gold. Gold, you know, one ounce of gold is one ounce of gold, and, and the price going up is currency related, not gold related. So, it's not, a lot of people say, well, it's, it's demand from central banks. No, that is a resultant of the cycle. Central banks are buying gold because they don't want to buy other people's bonds, and they have to go buy gold and they accumulate. So my opinion is a lot of this is currency related, and then that currency relationship, uh, is going to drive commodities and emerging markets and some of these other areas higher because of the unwillingness of people to transact in dollars, hold dollars, and buy bonds. That's the, the, the sole kind of basis of my thesis there.
Okay. All right. So Andy, um, is there a specific, um, corner of the metals and mining sector, just one specific corner where the setup looks so great to you right now that you're currently shopping?
Are you saying just the precious metals, or are you saying?
Uh, overall the metals and miners. Yeah, anywhere. Anywhere there on the commodity side, anywhere that you're seeing something right now, you know, in the last month or the last week or whatever, where it's just looking so good to you that you're now shopping there.
Yeah. So, uh, I'll just proceed this before I start sharing all of it. Um, I'm a value guy. I think that value protects me from bad things. So the, the lower I can get something and the better the value I can buy it at, it gives me a larger protection against downside. So when I go and I look out at, at the markets, I don't necessarily prescribe to a breakout in technical analysis for my opinion to buy something. I want something cheap. I want it kind of squeezing into a bottom or corner, and then I buy really, really low and early, and I'm patient enough to ride for the cycle to come into, [clears throat] cycle. So I, I want to preface what I, my opinions with that. So when I look at the markets and I say, what's, what's a great area to look at. Um, the gold and silver guys, they're kind of running right now. We're mid-stride. We're, we're ripping higher in a lot of them. They've broken out of patterns. They're moving now. The, the spots that people aren't looking where I get excited. Iron ore, which no one talks about. Coal looks really good. Um, I think lithium is, it's broken out of some of those bases. It's come back and it's right doing a retest. That's a really good area to be looking at. Uh, [clears throat] there's other areas too in some of these other metals that people aren't looking at, like graphite, uh, vanadium, uh, and, and some of these other copper. Copper's already kind of running. So, that, that's up quite, quite a bit. And if you want an example, I can show a quick example of of what I mean on a chart of what I consider to be low and what's running. You want me to show that real quick?
Um, I'm going to use copper just for an example here.
Uh, so I'm going to use COPX, which is the U.
I'll just switch it back here. So this is, this is a, a a quick.
of a big picture chart, uh, of copper equities, just an ETF. You get this double bottom. When I was talking about 2016, that was bottom one. So you have a falling wedge where the buyers equal the sellers. You come to a bottom. This is your bottom here. Then we came up, created a double bottom. Uh, that's the two circles there at the bottom there. We've got this resistance area where we have the turning point of the double bottom. Uh, we've broken out of this bottom and we did a retest and then we worked our way on up.
What I'm trying to do is I'm trying to buy this here, all in this area, all through like those two circles. And then most technical analysis people will buy it here and here. So they'll buy in the breakout and then they'll buy on the retest. And I also buy on the retest, don't get me wrong, but that's where I try to get in here. That's where the most amount of money can be made in the cycle. And the reason I'm focusing on that particular area here is because of the asymmetry, the large upside and the small downside risk. So I'm going around and looking for companies that are bottoming in this general area through there. You're not going to be perfect. You might have to ride through some volatility. This is a lot of times is like a last wash out sale before it really rips. So when I make those opinions, uh, I'm either looking for companies here or here.
Now, copper equities, this has already broken out. It's running. And then what I think is going to occur is that this, what this is, is one big bottoming pattern where we were in a downtrend here. We bottomed and then we're going to go in an uptrend and then I think this is going to go way on up, uh, because of the fundamentals of copper out in the future, the deficits that are coming, what we want to do in electrification in the world and all that stuff. So I'm, you can identify these bottoming patterns everywhere in the commodity space right now, which is also another function of evidence that we're in a commodity bull market. So they're all kind of interconnected and linked.
Very good. Well, this has been an incredible discussion. I want to welcome everyone who's tuning in to it, uh, with Andy Hosey, founder of Finding Value Finance. Before we wrap up with our final question for Andy, I just want to direct everyone who's interested in the metals and mining sector to dive into our Substack at metalsanders.substack.com. Join the quickly growing community. You're going to receive a free report. It's titled, "If you don't own gold, you know neither history nor economics." That's a famous quote by investing legend Ray Dalio. That's also the name of the report that you'll receive.
Now, I'm positive that you've been enjoying our conversation today. Please let Andy know. Hit the like and subscribe button and leave a comment below the video. Andy, we talked about doing an asset ranking lightning round before, but uh, in the interest of time, uh, we're going to skip that today. I'll have you on again soon. Uh, would you please share a key takeaway for the viewers to keep in mind about today's economic market monetary situation? Something that you want to leave with them and then let everybody know where they can learn more about your work and how they can connect with you.
Yeah, I'll just, I'll reiterate. Buy value. Don't worry too much about the short term. Value is your protection. Value is everything. Uh, if you can get low and buy where the value is and you're able to hold on, more than likely you're going to, I'll say, fulfill the dreams that you set out to have. And, and, and most of the time you have to kind of just get in when it's real cheap. Sit and do nothing. Just sit and do nothing. Doing nothing is doing something in investing. Taking profits, fiddling things, flipping things around, switching it from company A to company B and doing this. Uh, that's not what you want to do in my opinion. Uh, take the research, take the time to research the companies, understand the company, take a position, ride it through the entire bull market. And I think that will be the most profitable strategy of anybody. And most people are going to sell far too early. Uh, that's, that's what I'll say.
Uh, but if you want to follow me, if you're interested in learning this stuff, obviously I've got the website finding.com. Uh, we have Q&A sessions on the weekend. You can ask me whatever questions you want, just like this. And you can ask me questions about the markets and stuff.
Wonderful. And you're also on X.
Yep. I'm on X, uh, Finding Finance. And then I'm also on YouTube, Finding Value Finance as well.
Okay. Wonderful. I'll have all the information up on the screen here. I'll also have it in the description area. Everybody can click through. Um, Andy's very generous with his videos and he's sharing, uh, his analysis. So, if you have not been following Andy, uh, I would highly recommend it. He's a fun follow. He loves to scribble and draw and make pictures, but he shares a lot of information and it's very educational. And so, uh, for those who don't have that background, um, it's really worth your time to spend some time, uh, tuning in to what Andy is sharing. Andy, thank you for coming on to Metals and Miners again, for being so generous with your time, analysis, and ideas. I always love spending time with you. Uh, I always learn something new. I look forward to having you back on sometime soon. Everybody else, thank you for watching.
Before we wrap up with our final question for Andy, I just want to direct everyone who's interested in the metals and mining sector to dive into our Substack at metalsanders.substack.com. Join the quickly growing community. You're going to receive a free report. It's titled, "If you don't own gold, you know neither history nor economics." That's a famous quote by investing legend Ray Dalio. That's also the name of the report that you'll receive.
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