Transcription
I mean, literally, these companies are printing money. Statements like, "how the world will change," are very dangerous because we don't know. We just don't know. This is a forth turning scenario, proven over history to be as good as 100% fatal for the fiat currency. If you don't have gold before that quantity bull cycle has years to run, the idea of American nationalizing deposits was essentially 0% possibility 10, 15, 20 years ago. Can we say that now? I would argue that you can't say it with...
>> Grant Williams, investor, co-founder of Real Fishing, and publisher of the newsletter, "Things That Make You Go, Hm." It is a true pleasure to host you on Palisad Gold Radio today.
"It's good to be here. It's good to be here. Nice to see you."
>> Excellent, Grant. We live in very interesting times. We're going through potentially the largest commodity flow disruption in history. And one could make the case the world moni monetary order is changing right in front of our eyes. Today, I would love to try to separate signal from the noise and really focus on what matters to a long-term minded investor. So, what is on your radar currently, and what are the big long-term trends anyone should keep their eyes on?
Well, I think, Steve, this is a great way to frame this conversation because I think it is time to take a long-term mindset. And I think that the big change you identified there, you know, that is the current monetary order and the obvious changes that are taking place to it. And, yeah, the real question is, does that change get reversed? Does the current system kind of reassert itself? Does dollar hergemony get reinforced, or do we see the kind of change that a lot of us have been looking to happen for some years now that progressively chips away at the dollar's place at the head of a pecking order and ushers in a new multipolar era with multiple reserve currencies?
And for me, importantly, does that change place gold back at the center of the monetary system again, even if it's just temporarily, as an anchor, as a stabilizing device? And that's something, you know, I gave a presentation back in 2018 called "Crywolf," which talked about this as a possibility and the idea that when monetary systems start to fracture, gold tends to be the stabilizing influence. But also that, you know, when people talk about, "well, a gold reser a gold um backed currency system would never work," they kind of look at that through the lens that it would be a choice that is made. You know, do we decide to go back to a goldback monetary system and a gold standard of some sorts? And my argument then, as it is now, is no, that's not how it works. You don't choose to go back to that system for obvious reasons. You know, it impairs the ability of politicians to promise and spend money they don't have, which is something that they're never going to choose to do.
But the time will come when you're forced back onto that gold standard because it's the only money that can be trusted ultimately. And when trust in the system breaks down, you have to go back to that until you can kind of reset and reimagine the monetary system and people can develop trust in it again. So, those to me are the big questions: Is that the process that's underway? If so, is it an irreversible process now? How long does that process take, and what does the world look like at the end of it? And of course, many of those ultimate questions are unknowable, particularly sitting here today in the kind of middle of the upheaval part of the process. But really, I think it's incumbent upon every investor to sit down and consider these ideas and try and get an understanding of, if that is the case, if we are going through a reordering of the monetary system, what does that look like? If gold is placed at the middle of it for any length of time, what does that look like? And then, how does this impact my portfolio?
And then, once you've figured that out, you have to individually handicap it and figure out what you think the possibilities are that that change happens. If you, you know, and I've talked about this a lot, if you think it's a less than 1% chance of that being the outcome, maybe you don't need to make any adjustments to your portfolio. But if you think it's a 10% or 20% chance it happens, or even a coin flip, then you most likely need to make changes to your portfolio and rethink the way you invest your money for the longer term.
But of course, we live in an age where there's a significant percentage of the investment population—I use "investment" under advisement there—who are much more short-term oriented and much more focused on trading than investing. In which case, nothing really changes long term. You're trading the momentum. You're trading the you're trading the noise. You're not really looking for the signal. You want the noise. You embrace the noise because it gives you opportunities. So, that's kind of in a nutshell how I look at the very big picture, and we can take that in any direction you want to go.
>> Excellent. And there's already a lot of threats there that I would love to pull, but perhaps we should first talk about the elephant in the room: the commodity flow disruption that I hinted at the start of this conversation. What we're seeing with this trade for moose war is now currently in a ceasefire. It could restart potentially. The headlines of this are quite scary. We're talking about 15 to 20% of the world petroleum based products, 50% of the global ura supply, 30% of the global helium supply, around 7 to 10% of the global aluminium supply. How much of this is, in your opinion, noise that we should just discard versus how much of this is actually signal that could significantly impact a long-term, you know, investment portfolio?
Well, again, look, if, let's suppose that's right, let's say 20% of the world petroleum products are disrupted by this, which does not seem unlikely to me. If you write that off as noise, you're either very brave, you're either very certain, or you're very foolish. And I don't think any of those are sensible things to do. You know, being very certain about anything in today's investment environment, I think, is a potentially catastrophic mistake. I don't think you should be certain about anything. Writing it off as irrelevant also strikes me as a poor way to handle it.
And so, I think you have to set aside the potential disruption to commodities and the performance of the stock market because a lot of people have grown accustomed to taking their cues from the stock market. If the market doesn't crash, then all the smart people aren't worried about this, so I shouldn't be worried about it. And I think, you know, what's happened over the years, we've all become conditioned to living in this "just in time" world where everything is immediately available. We have abundant liquidity. We have the ability to have things delivered to our doorstep the next day.
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And so, this "just in time" world we live in has, I think, inadvertently affected the way people look at situations like we have now, to the point where, just as we don't worry about having access to things because we can just order them at the last minute, they'll show up. People are writing this off and saying, "Well, if it does matter, it'll matter, and when it matters, I can do something about it." And so, they don't tend to act in advance. They look at the fact that the stock markets aren't falling 20% and assume it's not a problem. And if it is a problem, we'll do something about it at the very last minute.
And so, you know, I think the last 25 odd years has been a remarkable one in financial markets for many, many different reasons. But I think a lot of the lessons that people have had reinforced to them is this idea that you don't need to necessarily take responsibility for your investment decisions because you're going to get bailed out one way or the other. The markets will bail you out, and if not, central banks and governments will bail you out by making sure that nothing really bad ever happens. And that's, look, that's been a sensible way to think for a long time now because that's exactly what's happened. The markets have bailed you out. The Fed have bailed you out. Governments have bailed you out. And you could afford to be wrong. Leverage would kill you because if you're too levered, you don't have the luxury of staying in the game until the fix is put in.
But, I genuinely feel like we've reached the end of that road. I don't think that the central banks and the monetary authorities have the kind of policy tools available to them that they had. And by that, I don't mean to say they can't try the same playbook, but I think if they start multi-t trillion dollar bailouts again, that's going to start getting reflected very quickly in currencies, and ultimately in bond markets first, and then stock markets. So, we are, as you said at the beginning, we are living in very interesting times, but they're also very dangerous times for the complacent investor. And I think complacency is something that you'll find everywhere you look in markets, in discussions around potential risks. And I think there's potentially a very problematic environment to be certain about anything.
In a very interesting line of thought, like you outlined earlier, the trust of the previous world monetary order might be breaking, but also this trust that we have in a eventual government bailout. You know, governments and central banks can't pin petroleum, as you are likely well aware of. So, could this potentially, when we ignore this tail risk too long and the worst were to occur, further break the trust that we have in the system as the eventual bailout that we're all expecting couldn't arrive?
>> Well, look, we've been through an age of financialization and securitization, all of them in the abstract. And of course, the authorities have been able to fix the problems in that world because they are abstract. They can print money; they can buy bonds. You know, they can jawbone equity markets higher, and it works. It's been proven to work. It creates decay and rot at the heart of the system. But it works in terms of keeping asset prices high, keeping confidence together.
But we've moved from an age of the virtual, if you like, towards an age of the ver of virtue. And by that, I mean real things: truth, trust, physical commodities. And I think your point is absolutely right: the kind of things that have worked so far in the virtual age in terms of shoring things up will not work because, as you quite rightly say, you cannot print petroleum, you can't print copper, you can't print iron ore.
And we've seen at the edges, we've seen moves already being made by state actors to secure supplies, secure access to these vital commodities. It hasn't reached the investment world yet, apart from those who spend their entire waking hours immersed in the commodity space. I think they can all see what's going on. But sadly, yeah, the world we live in, the commodity story is a kind of a boring, long, slow, grinding higher market. And people, they don't really care for that. They want something that's going to double overnight. They want the moonshot. They want the 10 bagger. And while there will be plenty of 10, 20, 50 baggers in the commodity space, they're not happening yet. And so, people aren't drawn towards them.
But I think if you talk to anybody who has spent time in the commodity space, they are just rubbing their hands at the prospect of what we're looking at for the next 10, 15, 20 years here: not a desire to secure access to commodities, but an absolute need to do so. And, you know, when you need to do something, you don't have a choice. So, I think it's going to be an extraordinary period to being investing in commodities, but no one's going to really care about it except commodity investors until these stories are on the front page, until the stock prices start going up.
Gold is a perfect example. You know, we've seen the gold price finally react to years of debortchment of currencies, and what do we get? We get questions from people saying, "Well, gold's gone from 5,500 to 4,500. It's in a bare market now. What does this mean?" No one bothered to talk about it going from 2,000 to 5,500 in a matter of weeks, which is truly an outlying move in something like gold. And now we're starting to see some of the results being announced by some of these gold companies the other day. I mean, literally, these companies are printing money, but people don't care. Because they're not sexy, and the sector's been so beaten down for such a long time that people are still looking to kind of sell the rips in commodity stocks because they have been conditioned to believe that every time a commodity stock goes higher, you can sell it, and it'll ultimately fall back down to earth, and you can make money. I think the people doing that are going to be proven spectacularly wrong, just not yet. And when it happens, it will happen fast; then the move will be violent.
>> Yeah, it's a great point that you're making also with gold. Of course, it entered very much the public side in January, February, but we all saw how short that lasted. Um, yeah, I would love...
>> But look, it's sitting at $4,500 today. It's double what it was a little while ago, and it's gone through levels and held them that people would were talking about as pie in the, you know, to a $3,000 goal. "Well, you know, like there's never going to get to 3,000, 4,000, 5,000 gold." These were just pie in the sky numbers for people who weren't paying attention. And yet, you know, after entering a bare market, we're sitting at 4,500.
And so, if you don't recognize what's changed here in gold—not people's attitudes towards it, because that takes much longer to change, but the performance of gold, the nature of the buying, the identity of the main buyers—it's a sea change. And if you don't see that happening, then I don't know what to tell you. It probably means that you haven't really been paying attention to gold for some period of time, and you've bought into the narrative that, you know what, it's a pet rock, and it's a useless thing, and it's a barbarous relic, and all these things about gold because people can't find a way to explain why it has value. Yeah, I don't know what to tell you. I don't know what to tell you, but, you know, listen to Rick Rule, read financial history. There are all kinds of ways you can get a better understanding what's going on here. It's just that little bit more complicated than "number go up," which has been in vogue now for several years.
>> "Number go up," definitely. I think to really understand what is behind this commodity super cycle that you're outlining here, one should also understand the changing world order, like you spoke about earlier. So, very big picture, zoomed out view of that: What is the world? How have you analyzed it the last decades, let's say, and how do you think it will change over the next few decades? And how could that actually look, this new world order that we're talking about?
Statements like, "how the world will change," are very dangerous because we don't know. We just don't know. You know, the life of an investor or a speculator is one which is mired in uncertainty, whether we like to believe that or not. And people don't; they're very, they have high conviction about what's going to happen, and in a lot of places, certainty. And in the last, you know, six to eight months, I've been talking to people, and my biggest problem is that I'm drowning in certainty. Everybody's so certain about everything that's happening; it blows my mind.
But what we're talking about when we talk about a reshaping of the monetary order is merely the fact that we've gone from this period post World War II, post the signing of the Bretton Woods agreement, of outright dollar hegemony, where the dollar has been the global reserve currency. The US has run the necessary deficits to supply dollars to the world, and that, in tandem with the 1973 petrod dollar agreement, where the Saudis agree to only sell oil for dollars, has been the backbone of dollar primacy.
As the US has increasingly undermined confidence in the dollar through, first of all, a lot of bailouts, first of all, the expansion of the Fed balance sheet and the flooding of the market with more dollars, but more importantly, in my view, when they sanctioned Russian central bank assets back after the invasion of Ukraine, all of these things chip away at people's confidence in the dollar. And we've seen this now happening over the last year or two in slow motion.
First, through people just lightening up on their dollar reserves, letting Treasury bonds roll off. We've seen, if you go back to 2013, I think it is, total US official state holdings of Treasury bonds have gone sideways and down a little bit even since then. Other buyers have been found, but they're much more parapotetic buyers. They're not the kind of people that and buy them and hold them as part of their sovereign reserves for decades to come.
At the same time, we've seen other countries demanding a more important role, demanding more equitable inclusion into the monetary order. And so, all these things together make a case for people to say, "Well, look, I'm not going to completely turn my back on the dollar, but whereas the dollar was 75% of my reserves, maybe I take that down to 65%." Which doesn't sound like a lot; it still makes the dollar by far the biggest component of those reserves. But, you know, if every country does that, if every country reduces their dollar reserve holdings by 10%, that's a big problem for the dollar.
We've seen for the first time in a long time gold overtake dollars as the biggest constituent part of reserves around the world. Now, a lot of that is due to the increase in price of gold, but not all of it. There's been a lot of lot of countries swapping dollars for gold and repatriating that gold and having it under their own opaces in their own countries. And all of this speaks to this deterioration, this erosion of trust in the US, in the dollar, in the system itself. And, you know, once trust is broken, it's a very difficult thing to repair, and particularly in the world of monetary affairs, if you lose confidence in a currency or in a government or in a system. It's too big a risk not to do something about that. It's too big a risk to have most of your reserves in the dollar. If you've lost faith in the American government, the Federal Reserve, the monetary system, the dollar's role in it, whatever it is, if you have lost trust, lost faith in that, you kind of have to do something about that. You can't just say, "Well, maybe it'll get better." And I think that's what we're seeing.
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So, what does the new world look like? As I said, my belief has been for a number of years now that we will go back to a gold standard of sorts while everybody figures out their new place in the new world order because they will need something. The same way the dollar was that something after Bretton Woods, everything was, the dollar was pegged to gold at $35 an ounce, and then every other currency orbited around the dollar. But you had that one thing that you knew, which was you could always exchange $35 for an ounce of gold. Of course, as of 1971, that was no more. But we managed to maintain faith in the dollar sovereignty and faith in the in the in the credit of the US government. But of course, that's been eroded. You know, we're now 35 odd trillion in debt in the US. They've proven themselves to not necessarily be good partners in recent years when it comes to sanctions and weaponizing the dollar through the swift system. And all of that adds up, and I think we're at the point in time where people are starting to look for alternatives. And, you know, it doesn't happen immediately.
And my good friend Brent Johnson's famous milkshake theory, whereby he actually predicted all of this, and, you know, people give him a hard time about it. The point he made was that, yes, the dollar is a flawed currency, but less so than the rest. And the dollar will be the last one to go. And before it does go, we'll see a stampede into stampede into dollars. And we're kind of at the point now in that theory, it seems to me—I'm sure Brent will come on and tell you more himself; it's his theory after all—we're at the point where we either do now see the beginnings of that stampede into dollars, or we find out that that's the part of the theory that hasn't worked because everything he's laid out has worked thus far. And again, I don't know. I'm not certain about how this plays out, but I'm as sure as I can be that whichever way it plays out, owning gold is going to prove to be a very sensible and forward-looking thing to do.
When we look at what has happened in the world recently, I mean, Venezuela, Iran, potentially Cuba, potentially Greenland, is this all part of the same play?
Yeah, I mean, when you go dive deeper into these long-term debt cycles, changing world orders, you quickly end up in a forward turning style framework. Is this all part of the of the same game that we're seeing, a logical progression and next step?
>> Well, again, I don't know, but I think so. I mean, that's my read on the situation: this is a forth turning scenario. And I think that that framework is a really useful one. Like any framework, it's never advisable to pin everything to a prediction about the future, such as the one that Neil and Bill Strauss made back in the mid '90s. But as a framework, as a way of understanding the change that's happening in the world, I've not seen a better one yet.
You know, you can look at things like Kandratio of waves, you can look at things like the war cycle, and all of these things are overlapping right now, and they all point to a similar period of upheaval and a period of change and something new emerging. And so, I think with change like that we're seeing at the moment, it's very difficult for us as humans to comprehend it because it's this big slowm moving change that isn't necessarily represented by numbers on a screen.
And if you don't have a some kind of framework, some kind of of road map on which you can place various events and try and have them make some sense to you, it makes it that much harder to figure out what's going on. So, for me, when I first read that book, it was an eye openening moment for me. And I've had that as a very useful lens to look through, and I've been fortunate over the years to get to know Neil uh Neil how, and we've had many, many conversations about this. And each time I talk with Neil about it, you know, I come away with more pointers about why it makes sense to use this as a structure to hang the world on and hold it up to past events and try and see the similarities and the differences, and that's been invaluable to me.
So, for people that have read it, I'm sure they feel the same way. For people that haven't, you know, the book's out there; it's available at Amazon. I would suggest you buy it, sit down, read it, and then make your own mind up whether you think it's useful to you or not. And there are plenty of people that don't believe in cycles, and they won't believe that to be useful. That's totally fine. But it's just at moments in history like this, where such great change is happening, I think it's a very dangerously shortsighted approach to write things off that you perhaps don't agree with. It doesn't necessarily mean they're wrong.
>> Definitely. And I guess what potentially makes the future that we're describing here even more murky is when you look at the dollar: the US government is highly overleveraged. However, it seems that almost any power that matters in the world is also highly overleveraged with large government debts. So, finding another fiat currency that could become the world reserve currency, like what happened with the British pound transitioning to the US dollar, that seems to be a harder transition this time, and likely it would benefit gold more in this scenario, I would suppose.
>> Yeah, I couldn't agree more. I mean, all of these countries are in the same boat. And I think this is why Brent talks about the US being the, you know, "the least dirty shirt." All those tired old tropes, whichever one you want to use, it's the same thing. But, yes, they're all in the same boat. But I think if the US defaults, it's a major problem for everybody. There are other places that could default and get their own houses in order without it rippling through the economy quite as badly as the dollar would. That's not to say that default is going to happen, but it doesn't have to be an explicit default. We can have a de facto default through inflation, which is the most likely path forward for a lot of these countries.
And realistically, look, there will be a first mover advantage to this. You know, the quicker you take your pain, and the quicker you merge with a tidier balance sheet, the more attractive you're going to be to other people who, to your point, are going to be looking for something that they can they can use to as a as a safe investment. And that's to me why gold is the natural place for people to go because it there is no counterparty risk. There is no liability. It's a pure monetary asset that you can own very easily. It's never going to go to zero. It's not going to get defaulted on. And in times like this, those are really important considerations.
You know, you didn't have to worry in the 1990s that countries were going to default. You didn't need gold in the 1990s. And we saw that. We saw central banks through the Washington agreement selling gold consistently and steadily down. We saw people happy to borrow in all these fiat currencies and and store their reserves in these fiat currencies because the debt levels were such that you didn't need to worry. You do need to worry now.
But the time of of worrying is upon us, and as you say quite rightly, all of these countries are in the same boat. And I think for a lot of people, the leap from one currency to another fiat currency to another is a simple one to make because they equate the dollar with the euro, with the yen, with the pound. That extra move of effectively taking yourself out of the fiat monetary system as you understand it and going into gold is a leap of faith for some people, which ironically, they can't justify it when it's really the only currency you can have faith in.
People aren't conditioned to do that, and, you know, rightly so. It's been what, 70 odd years that we've been on this postw World War II fiat monetary system, and it's been 50 since we went purely fiat after August 1971. So, it's no shouldn't be a surprise to anybody that most people can't conceive of an alternative monetary system because this is the only one they've ever known. A little reading of history will help you understand the past, but it's still a big leap to believe that we could go back to that because it's something that people believe happened, you know, in olden times when horses were pulling wagons and stuff. It's just not the case, unfortunately.
>> You mentioned, "the quicker you take the pain," the better it could potentially be from a competitive perspective. What pain would that be? Would it be inflation after you inevitably have to revalue gold to a higher level?
>> Yeah, look, I mean, we can agree that the monetary system is, if not broken, then breaking. We can agree that the debts of all the major issuers of fiat currency are at this point unmanageable. They're only manageable because they don't seem to matter to investors who seem to believe that everything will be okay. But they matter. And if you read your Reinhardt and Rogoff and you look at where we are in terms of debt GDP, you'll see that all of these countries effectively with the exception ironically of places like Russia are at debt levels which are proven over history to be as good as 100% fatal for the fiat currency.
But people don't seem to want to worry about that because, again, to this "just in time" thing, it hasn't happened yet, so it won't. And if it does, I'm either going to get bailed out, or I can, you know, I always I used to watch Looney Tunes cartoons when I was a kid. Sadly, they don't make them anymore. But there was one in particular where Bugs Bunny was in a lift, and the lift was crashing to the floor, or the cables have been cut by, you know, you Sam or somebody. And he's in the lift, and just as it gets ready to hit the floor, he steps out onto the onto the sidewalk, and the lift crumples, and bugs bunny's fine. And of course, you know, a rudry a rudimentary understanding of physics tells you why that doesn't work. But that seems to be the playbook most people are running here: that, "well, when things crash to the ground, I'll just step off at the last minute, and everything will be fine." And it doesn't work that way.
And so, if you don't have gold before that moment in time, you'll probably be able to get some if the purchasing of gold hasn't been banned and governments aren't hoarding all the gold for themselves, but you're going to pay a significantly higher price for it and have to jump through a lot more hoops, I suspect. So, forewarned is always forearmmed. And in periods of investment history where you have seen periods like we've seen recently, where it's all been about crazy gains and chasing outsiz returns, and people believe there's no need to put your money in a safe haven asset because, "look at what you're giving up if you own gold in the last few years." I mean, people will still tell you that even though gold's outperformed the S&P, dividends reinvested over 25 years, people still tell you it's a safe haven asset. "You're giving up potential gains to store it in a worthless rock."
I, you know, I've run out of kind of things to help people understand that. I mean, I've been doing this for, gosh, 15 plus years now, making these presentations, trying to explain why why you want to earn gold. And every time I come around to doing one of these presentations, I'm left trying to explain the same thing in a different way because the story hasn't changed. The need to own gold hasn't changed. The urgency to do it is probably the only thing that's changed, but people are predisposed to their fiat world. They're predisposed to believing that gold is something it isn't, which is to say, a useless piece of inert metal.
And it's difficult, but I think the lessons are being written in much more clear terms recently if you're paying attention and if you have a mind that's open enough to entertain that, you know, "it's possible that gold wasn't the right investment for me for 15 years. And it's also possible that right now it's exactly the right investment for me." But that requires me to kind of turn my back on all the things that have worked so well for me and look at something that I believe to be pointless. And that takes bravery. It takes guts. It takes a willingness to change. And, you know, a lot of us don't have that ability, don't have that willingness to confront things that we've believed to be wrong for a long time, re-evaluate them, and then say, "Actually, you know what? I might be wrong about this. I need to give it a second look."
So, I think that is where we are. We're at the point where people need to reexamine the way that has worked for them, let's be clear, for a long time. But maybe now is the time to assume that what has worked won't work going forward. And it requires the way a way to look at the world and position yourself in a very different fashion, in a fashion that has been kind of laughed at for some considerable time.
In this world order that's changing, and debasement would, of course, go hand in hand with it. You already outlined one can position itself in in in gold to potentially even benefit from this changing world order. Are there other places one can one can position themselves, or is gold by far the best place to be positioned?
>> Well, I think gold is the cleanest representation of this as an idea because what we're talking about specifically is the loss of trust in fiat currency, in what people have come to know as money. It's not money; it's currency. And so, if that's the issue you're trying to mitigate for, then gold is by far the cleanest, simplest, and most readily understandable and executed way to do that. Whether you do it through the ETF or my preferred thing is always to own physical gold outside the banking system.
But of course, if what we're talking is a shift from the virtual to the virtuous, as I've talked about in terms of trying to frame it, then commodities of any kind—you know, buying exposure to things like copper, buying shares in companies or long daily call options on companies that will ultimately, if the commodities go up, be a highly leveraged exposure to that performance in the underlying commodities. You know, all of these things make sense depending on your risk tolerance. Your risk tolerance is going to dictate how you position yourself and the instruments you use to do that.
But the beauty of it is, for people that really are just so steeped in trading in the stock market, and that's what they understand, and that's what they've known, and that's what they've been successful in, there are, I mean, more companies than you can imagine who are commodity companies. It gets a little trickier because you don't have a "mag seven." You don't have a nice catchy title. You've got to do a lot of work yourself to understand which commodities which companies are going to perform the best in a in a commodity bull cycle. But they're out there, and the right people to listen to are out there. And the performance of a lot of these companies speaks for itself. You need to understand the management. You need to understand a lot of how the how the company's been run during the dark times when it was tough to raise money for commodities. So, it's not going to be simple, but the companies are out there in the commodity space that will perform extraordinarily well for people when we get a real bull commodity cycle.
And the beauty of it is, I think we're at the beginning of that. So, the commodity bull cycle has years to run. And so, if you're smart about picking your stocks, you can find stocks that you can buy as core holdings in a portfolio that you're looking to hang on to for 5 to 10 years and just ride the belly of a commodities cycle curve that will absolutely translate into superb performance for these these these shares in the stock market.
>> Yeah, commodities could potentially be a very interesting place to be, as, like you rightly outlined already, it very much intersects with this changing world order narrative. But also, we've just as a society been underinvesting in it for decades. I mean, when you look at those charts of tier one corporate discoveries, we haven't made one the last 5 years.
>> Yeah, it's so true. You know, commodities have been a dirty word. They've been it's been really difficult. When you're competing for capex dollars with things like AI and data centers and all these really sexy things that people are seeing, the stocks respond and go crazy. It's tough, you know, because people want to see immediate returns. And if you're investing in data centers, you can build those, and you can tell a great story, and you will see the results happen very quickly. But as you well know, if you want to invest in a mine, it's probably 10 years before you can get it permitted and built and have stuff out the ground, and people just don't have that kind of time preference.
But that's one of the other big changes that I think you're going to see is we've lived in this high time preference world where every minute is crucial, and people want to want results to happen in hours, if not days. But a commodity bull cycle is the opposite of that. It rewards patient money that can look at a deposit, look at a management team, understand the capabilities here, and understand that in over a 10-year period, as the mine is developed and built and put into production, the accretive performance of the stocks as you get closer and closer to the point where all the people that want instant gratification will come in and say, "Right, this mine's producing Now, they're the guys that will take your stock up 5 10x once it's a proven mine."
And if you're patient and smart, you can invest pennies and a few dollars today in good management and good companies and good assets. Be patient, and your reward might not come for five or 10 years. I suspect it'll come sooner once the bull market picks up pace and people are looking to deploy money into this space. But when it comes, it will be spectacular. It's just a case of you're going to have to delay that gratification. And again, that's something that people aren't accustomed to doing. Instant gratification has been the thing for a long time now.
You know, I did a presentation last year about all this and talked about all these shifts from an age of abundance to an age of scarcity, from from a high trust world to a low trust world, from a high time preference world to a low time preference world. All of these shifts are happening, and they're really important shifts because they all speak to much slower accumulation of capital, which for the patient investor is just a fantastic environment to be in. But for the vast majority of people who've been conditioned to expect immediate returns, it's going to be a difficult transitional period learning how to invest in a slowmoving world.
How much of an edge is just that variable: being patient? I mean, everyone is so focused, it seems, from my perspective at least, on day trading, short-term trends, the news cycle. Just having an outlook that's measured in years instead of days, how much of an edge in a portfolio is that already?
>> Look, it's always an incredible edge, and you only have to look at, I mean, look, for example, let's talk about the kind of returns people have made. Someone like Amazon, as it's been part of the "Mag 7," and Amazon's gone crazy, people have made significant money. If you were patient money that bought it in 2008 when it fell 95%, you've made significantly more.
Let's talk about Bitcoin, the ultimate crazy low time preference asset that people have been talking about. "Oh, we're making, you know, it went from 30,000 to 100,000. I made three times my money in days." Or, "it went from a,000 to 100,000. I made 100 times my money." Great. But the patient money bought it for almost nothing, for pennies, and held on to it. The really patient money always, over the course of the cycle, makes the real money. Yes, you can be lucky: get in, time it right, get out, but that's a really difficult way to make money, and only a few people are very very good at that.
But the patient capital that knows how to position itself correctly, knows how to build a position over time, doesn't go too big too soon, make sure it has dry powder, understands that it's not a one-way ticket. You're going to have periods of good returns and then periods of down returns. And you're going to have to understand how to keep your position the right size all along. But patient capital is always going to make really really good money over the cycle. The cycles have been very short in the last number of years, and that's been confusing for a lot of people. But commodity cycles don't tend to be short. They tend to be, by definition, very long grinding cycles where patient capital outperforms remarkably well.
Are there any specific commodities that you think will perform exceptionally well? For example, when you look at oil, even at $100 today in real terms, it's still historically relatively cheap. One could think about smaller commodities that have, you know, even less additional supply on the sideline. One could think about copper, where we haven't made any large discoveries for the last 5 years. Is there any vertical within a commodity complex that you are especially interested in?
If we're in a commodities bull market, which I suspect we are, you can make it as complicated or as...
easy as you want, right? Um, you know that every country on earth needs oil. You know that every country on earth needs copper. Period.
So, if you start there and you understand that there is now going to be competition for those two commodities from every country on earth, uh, it's a really great starting point. You can get into rare earth. You can get into some of the smaller commodities and do your research and understand the supply and demand pictures. Uh understand that demand is going to be increasing on all of them. But yeah, there are, excuse me, there are substitutions available for certain commodities. There are, you know, if you look at it, silver does everything that copper does better than copper, but it's too expensive. And that's why we moved to copper.
So if you're new to commodities, the beauty of a commodities bull cycle is you can start with the real basics. Iron ore, copper, um zinc, oil, these things are absolutely absolute necessities. And if we're going into a world of need, people need to secure commodities, start there and then educate yourself on on on tin and zinc and aluminium or aluminum if you're American. Uh you know, palladium, platinum, people group those with gold, but they're at points in the cycle, they're going to perform very differently to gold because gold is going to perform as a monetary metal.
So I if if we're in a commodities bull cycle, educate yourself about commodities. If nothing else, it's a fascinating world to go into. It's it's interesting and it's it's got great stories and there are great characters and the history of it is incredible and you will learn something about the building blocks of our entire civilization that will stand you in good stead.
It's the you one of the other things that I think is shifting materially is this idea that I just I just want someone to give me a stock tip. I don't want to know about comm. Just tell me which copper company to buy and that that's all I need. Thanks very much. I'll buy the copper company and I'll get rich. Um this idea that the low homework period I think is going to is not going to be rewarded. But the high homework period is going to be you know if you if you really start reading and understanding the commodities then the companies and the management and and you really educate yourself you will be able to find on your own really great ideas where you're not relying on other people's suggestions.
Uh and of course as soon as you take a suggestion from someone else and you add it to your portfolio the responsibility shifts from them to you and people don't recognize that. they they put this stock in their portfolio because the smart guy on a podcast told him that this was the one to buy. Um and then they they assume that that guy will tell them when to get out of it. In the meantime, you know, the smart guy has been in and out and found a better company and moved into that and you know it's there's no substitution for doing your own work and really understanding what you're investing in. We've been through a period of time where you could get away with that because the rising tide lifted all boats. I think that time has changed. I think one of the hardest lessons that people are going to be taught, one of the most painful is just that you you you can no longer just stick some money into a tip and expect it to go up. You can stick money in a tip and expect it to go down. Uh that's going to be the way this goes. And so the more you understand the the more confidence you can have in committing your capital.
>> Is North America potentially the best place to actually invest in in resources? I mean if you talk about a reindustrialization trend apologies a shifting monetary policy a fast resource wealth that that place has. Is it the best place to look for these type of companies?
Look, it has been. Whether it will be going forward, we just don't know. There is so much change happening in America at the moment with the way it it has positioned itself, with the way it has treated allies, with the way it's prioritizing this America first program. And that's not to say that's not the right thing for America to do, but for 40, 50 years, America has been doing the right thing for the world. in many cases to its own detriment, but it's doing the right thing for the world. Um, it certainly has the rule of law better than a lot of jurisdictions where where you can invest in the commodity space, but does that stay the same? We don't know.
Um, desperate times call for desperate measures. And and and when it comes to securing national resources, are we absolutely certain that America won't nationalize copper mines? I'm not saying they will. To be clear, to be quite clear, I'm not saying they will, but what I'm saying is we could have said that with as close to 100% certainty as it's possible to say anything 10 years ago. The the idea of American nationalizing deposits was essentially 0% possibility 10, 15, 20 years ago. Can we say that now? I would argue that you can't say it with the same degree of certainty.
So America is still an exceptional place to invest in commodities. It's still one of the best places to invest. Will it remain so going forward? I honestly don't know. Uh and it's some it's a calculation that everybody has to now factor in. You didn't have to think about that. You do now. That's the difference. The answer is probably still it's totally fine. But if you just assume it's totally fine without thinking through what might happen uh looking at the past five years and extrapolate that in the future and saying okay what does the past 5 years tell me about what might potentially happen in the next five years it's uh if you didn't do that before it didn't hurt you. If you don't do it now there's a chance it could. And when you're investing what is irreplaceable capital in many places, leaving those kind of things to chance, I don't think is a very sensible idea going forward.
And and I will say if the headline for this uh interview when it goes up is will America nationalize copper mines, I'm going to be fuming because that's not what I'm saying. I do I do recognize a clickbait headline when I say one. Trust me.
Nationalization is actually a very interesting trend because to a certain extent we might already see that in the United States with Trump taking a fancy and MP materials intel and the likes taking active equity stake for the government. We might already be seeing the start of a potentially very slippery slope.
>> Yeah, that is the thin end of the wedge. There's no two ways about it. Uh there's no two ways about it. But of course, when something like that happens in Peru or Chile or Colombia, everybody goes, "Well, you know, that's the cost of doing business in South America. You know, that's how it goes." It's very different in America. But it but it's happening. And you know, that's the entire reason why I say you have to think it through at least um and recognize that it's no longer a zero-risk outcome.
And and so you have to factor that into your look any investment is is a whole series of decisions that you have to get comfortable with. Um my friend Tony Deedon calls uncertainty the the default human condition and he's absolutely right. We all invest with incomplete knowledge every single day of our lives because we we do not know the future and people have conflated uncertainty with risk. They're two very very different things. Uncertainty is is permanent. risk is something that you can look at on a case-by-case basis and sometimes you can actually quantify those risks. There's no quantifying uncertainty because that's the nature of our world.
>> Grand this has been truly incredible. I would love for you to talk about things that make you go hm for a second.
>> Oh, look uh yeah, I've been writing that um since 2009, which blows my mind. Uh it's a it's a letter I write and publish once a month now. I I write about anything that I think is either interesting or important or hopefully both. So, one one month I might write about Japanese government bonds. The next month I might write about gold. The next month I might write about um uh I've wrote about the Suez Canal a couple of months ago. Uh before a lot of people were talking about that with with um the Straits of Hormuz. So, uh it's a labor of love for me. Uh I write it, publish it monthly. Um, if anyone's interested, they can go to my website, grant-wills.com, and you'll find that and my podcast. Everything's in one place, so it's nice and easy to find.
>> This has been truly illuminating. So many threads left to pull, but perhaps we should do this again in a few months time. Really appreciate it, Grant.
>> Anytime. Anytime. I've enjoyed it. Thanks for having me.
>> Thank you.
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