Transcription
That is not a manic top. You look at the flows into the GDX and the GDXJ, and let me just say, this is as of last night. GDX has had flows of a billion in the last month, which is astonishingly high given the last five months. Take away the last five days, and it's been negative. That's an encouraging sign. It shows that people are actually taking advantage of the decline.
You're saying that during the run-up in gold, specifically in GDX, there were actually negative flows into the GDX miners ETF while gold was going on a run.
Absolutely. So, take away the last five days, and you had negative for one month, two months, three months, six months, one year. GDXJ has had out—they don't even have the last five days to help them. They've had net outflows as well for the last month and so on. So, again, this is not a speculative top.
Welcome back to Metals and Miners. I'm your host, Gary Bone. Today, we have a great and very timely discussion lined up with Adrien Day, a recognized authority in the global and resource investing space. Adrien is the founder of Adrien Day Asset Management. He's also the portfolio manager for Europacific Funds, which is owned by Peter Schiff. Adrian, it's an honor to have you back on Metals and Miners. Welcome to the show.
Well, thank you, Gary, very much for having me. I enjoyed it last time. Uh, it's been a bit too long.
I should just point out, I manage Peter Schiff's Europe Pacific Gold Fund. I don't manage the other funds.
Yeah, I appreciate the distinction. All right. So, Adrian, you've analyzed and directed investments in the precious metals markets for decades. The current cycle is absolutely manic on a historic level. It's whipsawing investors around. It's causing some to exit and others to be at a complete loss as to what's happening. Well, there's a lot happening, and there's a lot to get into. But before we do, what do you hope for those who are tuning into this conversation today that they're going to walk away with after listening to it?
Um, that's an excellent question. I think they're going to—I hope they're going to walk away with perhaps some thoughts on what they, as an individual, should be doing. Because I think in this market, uh, what individuals should be doing is probably going to be a little bit different, individual by individual. And we can get into that now if you want, or not. But, you know, to take two extreme cases from my own money management: Someone opened an account on Monday with $250,000 for a gold account that represents less than 20% of his investments. Well, I'm buying, and I'm buying pretty aggressively. Uh, for the conservative client who was 60 and is now over 70, and we had an allocation of 20% gold, which was high anyway, and now they've got over 40%. I mean, we've been trimming for that client, but you want to be selling. You want to be reducing that, uh, right-sizing it. So, I think it's—it's kind of different for each individual.
Makes sense. All right. So, Adrian, beginning last week, we've been having an incredible amount of volatility thrown into the metal sector. It began a few days before last Friday, and that's when the big smash happened. It took gold down 11%, silver got taken down about 35%. Since then, the volatility has continued, and even intraday a few days ago, it was incredible, you know, to watch silver go up 10, come down 10. Well, during this process, gold dropped to as low as $44.50. Silver dropped to as low as $65. And right now, gold is back up somewhere around $49.50, and silver somewhere around $75-ish. Let's begin with the volatile action. What do you make of it? What is the signal to take from all of this volatility?
Well, I think after you've—after you've had such a very, very sharp run-up, right, which we've seen for the last several months, but particularly the last two months. I mean, silver was up—in two months, silver was up 145%, or whatever. That is, should we say, abnormal or not normal. Um, so after you've had these huge—these huge spikes in gold and silver and in many of the stocks, um, it's not unusual for people, just as we're having a discussion now, it's not unusual for people to say, "What should I do now?" And everybody has a different view. And the person that thought on Monday, "I think I'll buy," maybe on Tuesday said, "Hmm, maybe I should sell." And so, you get this volatility because of individual psychology, I think. Obviously, you had the huge drop. Part of it was—was, um, uh, exaggerated by, um, stop losses. And in silver, you had the huge short sale out of, uh, uh, uh, China. Um, but you also had a lot of tight stops on silver, in particular, but also on gold, not so tight. Um, so that that exaggerated the down—the decline downwards. But then people don't quite know what to do. And as I say, people flip and change their mind from one day to the next.
That'll settle out. That'll settle out after a week or two.
Yeah. So, um, but going back to what you were talking about here, that, you know, the—there was a huge short sale from a tremendously large whale billionaire in China, right? And then the stop losses just got taken out all the way down in this elevator ride. Was there any other outside exogenous forces at play here that could have, at the very least, triggered this outsized move or helped it along? Or do you think that based on the outsized move higher, that a 35% move down was justified in one single session?
Well, I'd hate to say it was justified, but, um, and it was certainly more than I was expecting. No question. But, but when you see those kinds of huge spikes, we know that they're not going to continue, right? We know they're not going to continue. We don't know whether the peak will be Wednesday or Thursday or Friday or a week from now, but we know they're not going to continue. And so, everybody is alert to the possibility of a decline. You had an awful lot of people, as Chuck Prince from City described it, continuing to dance but near the door. Um, and not everybody can get out at the same time, right? So, I'm not sure there was any other extraneous factor, to be honest. I think it was largely a—a reflection of the fact that it had just gone up so much.
Has the moves, the going up so much and then the coming down so much, and then the ensuing volatility, um, has any of this had you at all concerned that the precious metals bull cycle has topped?
Oh, not at all. No, no, no, no. If by top you mean 2011 or 1980 top, right? Not 2006 top, but we don't even remember these days. Well, or a pause, uh, you know, a a false start, so to speak, that a lot of people are worried about from 2016 or 2020?
Yeah. No, not at all. Not at all. And I'll tell you why. I think we are so far from the top, both in terms of price, but in terms of, you know, market dynamics. If you look at the fundamentals, if you look at the flows, if you look at the sentiment, all of those things are telling us that gold has not peaked. And let's just take sentiment. I mean, um, a good way of judging the sentiment, well, a good way of judging the sentiment, particularly of more retail people, more generalist investors, is, um, two ways I look at in particular. One would be coin sales. That's good for retails. Doesn't really tell you much about the generalist family fund, but it tells you a bit about retail. I spoke to two coin dealers last week who both said they were extraordinarily busy, and 70% of their calls are people selling, not buying. That is not a manic top. That is not a manic top. You look at the flows into the GDX and the GDXJ. And let me just—so this is as of last night. GDX has had flows of a billion in the last month, which is astonishingly high given the last five months. Take away the last five days, and it's been negative. That's an encouraging sign. It shows that people are actually taking advantage of the decline.
So, you're saying you're saying that during the run-up in gold, specifically in GDX, there was actually—neg—there was actually negative flows into the into the GDX miners ETF?
Absolutely. While gold was going on a run.
Absolutely. So, take away the last five days, and you had negative for one month, two months, three months, six months, one year. GDXJ has had out—they don't even have the last five days to help them. They've had net outflows as well, uh, for the last month and so on. So, again, this is not a speculative top.
Okay. So, let's talk about the downside here. What are you looking for that indicates to you that both gold and silver maybe have bottomed from this volatility time frame and maybe are consolidating and then beginning to move up, and they've established maybe a new solid re-entry point for those who are looking to dollar-cost average in?
Yeah. Well, I feel a little bit differently, to be honest, about silver than I do about gold. And I know that's not going to please a lot of people, but, um, I look at them differently. And I look at them differently right now, largely because of the fundamental factors. You know, if you look at gold, and you look who's been buying gold in size, who's been driving the price up for the last three years, and particularly the last year, it's been central banks. And in the last year, it's been Tether. Tether, I think Tether's influence on the market has been very underestimated. You know, in the last—in the second and third quarter, which are the last quarters to be reported, in the second and third quarter, Tether bought more gold than any central bank. I mean, let that sink in.
I think they also, in the last couple of days, have made another monster purchase. Right.
Absolutely. But we don't have the full numbers for the central banks and everything, so I can't make that statement about the third, fourth quarter. But it may well be true. And the point about both of these buyers, central bank and Tether, is that unless the world changes dramatically, they are likely to continue to be large and steady buyers. And B, very importantly, they are largely price agnostic. If Tether sells 10 million, 10 million gold-backed, what do they call them? Stablecoins, they have to go out and buy 10 million ounces of gold. They don't wait for a better price. They buy it. And so both of these are steady buyers who are price agnostic.
Okay. So, you have not touched on silver yet. You did say it was different. Before you get into your vantage point on the fundamentals of silver, I do want to ask you, um, while central banks are not buying silver, the United States and Chinese governments are both stockpiling silver. They both consider it a critical mineral or metal, strategic metal.
Which it is.
Which it is. They are both undergoing a few things simultaneously that there is no substitute for silver: that's military modernization, that's the AI race, and that's the electrification of everything. So, um, how do you view silver from a fundamental perspective when you take these into account, and the fact that it's been in a supply deficit for six years?
Right. Look, I don't want anyone to misunderstand what I'm saying. I am very bullish on silver, right? A year from now, two years, three years, I think silver will be much higher. And of course, it's lagged gold on a, you know, it's still not at its, uh, price-adjusted all-time high, as we know. Um, it would have to—well, from here, it would have to triple to get to its, uh, inflation-adjusted high. So, I'm—I'm bullish on gold. I don't want—I don't want anyone to misunderstand that. I—but, but just the the market dynamics and the fundamentals are different. And I'll address something you said as well, but in particular, it's who's buying. Yes, China and the US are stockpiling. What is the US stockpile of silver right now? Do you know?
I don't know.
But it's not large.
It's a fair question.
I—I just don't know. So, you do not have in silver, you do not have the large, steady, price-agnostic buyers that you have in gold. That's number one. Number two, you have a lot more retail in silver. You know, if you look at the flows into the into the, uh, SLV versus the, um, GLD, a large increase in flows into the silver ETF, um, much more than into into GLD, uh, proportionately. And again, not dismissing retail, but retail can tend to be more fickle, or at least retail can change their mind quickly and get out. Uh, a central bank who—who bought gold two years ago is not going to turn around and sell it today.
Right. Before you move on, before you move on, I just want to ask you a question. Um, to your point, which is a very, very fair point, there is no data saying that the United States or China is stockpiling X amount of tons of silver. We don't know. They're stockpiling it. It's—it's their—or they're saying they're stockpiling. We—we don't—we don't know. But they could also be stockpiling more than we could maybe perceive. It could go both ways.
Well, that—that's true. But I suspect, given particularly in the US, given how recent this idea of stockpiling silver has been, I suspect that they haven't built up the stockpiles yet.
But now that means that—that means we've got the probability of stockpiling more silver going forward. So, I—again, I'm not negative on silver. I'm just saying the run-up in the last two months was largely driven by speculative buying and by retail.
That's fair.
Speculative buying uses stops and was taken out. And retail can—not all of us, of course—but retail can be more skittish than, you know, Tether or or central banks. Um, so that's one thing about the, and the other thing is, yeah, what you're saying is right about silver's uses and so on. But just take solar, for example. When silver moved over $85, $90, a lot of companies said they were looking for substitutes for silver in their solar panels. They were looking for ways to make it more efficient, so they used less silver than previously. You know, when silver was $5 and $10 and $15 and $20 an ounce, it was almost like uranium in a nuclear power plant. You don't care the price. It doesn't matter. Nobody thinks about it. You don't spend all your R&D trying to, you know, reduce your silver exposure from 4% to 3.8%. But when it's $100, the numbers become meaningful. And so I think you're going to get more efficient use of silver, or or possibility, uh, and and frankly, a probability, but you'll get more efficient use of silver in solar panels and perhaps some, um, substitution as well.
Okay. And, and all of that is extremely fair. Um, I guess one question I have is, you know, there are discussions about some of that substitution going over to copper. But yet, copper has massive supply deficit, you know, potential moving forward. Do you feel like solar would get top of the food chain, um, access to copper as the substitute for silver over, say, AI grid buildout, data center buildout, military things of those natures that that copper is required for?
Yeah, I—I can't really answer that. And I'm not even—I'm not even sure that copper is a good substitute for silver in solar panels. Were you giving that as an example or stating it as a fact?
And—no, I won't state it as a fact, but somebody else had mentioned to me that copper is being looked at as a substitute for silver in solar panels, and that's why I'm using it.
I—I can't—I can't answer that, Gary. I'm really—that specific thing on solar panels, I—I'm just not technically, um, equipped to answer that. But, but I think generally, there is no question that on copper, there's no question that the demand and projected demand for copper for all the various uses you've mentioned far outweighs the projected supply. And let's not forget, with copper, even to a much greater extent than silver or gold, with copper, we have very, very, very high visibility on production three, five, and even beyond years out, just because of the length of time it takes. I—I'll give an anecdote, if I may. A couple of years ago, I was talking to Richard Atkison, who was CEO of Freeport at that time. And I asked him about projects that they had in the pipeline and so on. But he made—he made the comment, "We have several shovel-ready projects." He called them shovel-ready. He said, "If a board of directors," he said, "we don't want to increase our so—our copper right now." Now, this is two years ago. So, nothing about the current market or about Freeport. We don't want to—we're not ready to increase our production right now. But he said, "Even if the board of directors tomorrow morning gave the go-ahead for a shovel-ready project, it will be a minimum of five years before we saw production." So, you know what the production could be in five years, and you—you know it can't be more than that, right? So, we have very good visibility on copper production, and if the supply is anywhere close to what people are thinking, we simply don't have enough copper, which means the price goes up. Now, I happen to think that a lot of the AI data farm projections are going to be massively reduced in coming years. And isn't this a history of technology? I mean, you look at this thing, excuse me, using my 2006 or something iPhone. But people laugh at me. This is an iPhone 7, but it still works. So, hey, but think about that phone and think about the computing power that it has compared with 30 years ago. But also think of the size of this thing compared with 30 years ago. Are we going to need 4 million, whatever it is, 4 million square feet data farms? I bet you over the next three, four years, we're going to start seeing that scale back dramatically. Even if we don't scale back for power, which is a totally different question. Um, but we're going to see the size scaled back, which means the demand for copper will be scaled back. But, but even notwithstand—and and I think the demand for EV cars is not in the West is not going to be anywhere near as great as the projections. Maybe hybrids will get more demand, but the demand for, um, EVs, I don't think will be what the current projections are. But even if you scale back all these projections, um, we still don't have enough copper.
Okay. So, then the takeaway is, is that you're very bullish copper.
Did I say that?
Yes.
Okay. Um, I had a couple more questions on, on, uh, silver and gold here. Um, we kind of veered off to copper, which I'm—I'm happy that we did. But back to silver for one moment. Um, I believe it touched about $65 overnight in the, in the trading session, or it was two, two nights ago, and it has bounced. It's $75 or $77 or somewhere in that range. Now, do you consider the $65 the bottom, the way it bounced higher, the way sentiment has been washed out, among other positives, or are you still feeling like the bottom is not yet fully in?
Well, first of all, I wouldn't say that that little drop to $65 and a bounce back, I wouldn't say that signifies a bottom in and of itself because, you know, it was overseas. Europe wasn't open, US wasn't open. Uh, it was just one moment in time. Um, I—I mean, my target, actually, I'm not going to take a victory lap, but my target was $65. I said I'm not going to start buying again till it gets to $65. I suspect with silver, I suspect with silver, we will see a lot of bouncing around for the next few weeks, you know, between $65, maybe $70, and $80 and $85, you know, that range, $65 to $85. We'll see a bit of bouncing around. And I may be wrong, but I just think silver is going to be weaker for the next three, four weeks, five weeks, six weeks than this gold. Um, I can see gold moving. I think we've seen the low in gold. I'm not convinced we've seen the low in in silver. And, and Gary, I should just mention when I'm saying this, this is all assessment and speculation. And I just have a—I just don't have as strong a conviction on the near term for silver as I do on the near term for gold. And in markets, as you know, and but it's really important, we—we emphasize this in markets, it's not a question of making a prediction and being right. It's a matter of making a prediction within the context of current price and on a basis of risk-reward and on a basis of my own personal financial situation and and and you manage investments within that context, not just your prediction. So, I mean, I think silver is probably going to go to $200 in the next two years. I am not negative on it, but I'm not convinced. And I'm certainly not convinced about the next six weeks.
Well, people want to hear your perspective, Adrian, and that's why I have you on the show.
Yeah. No, I appreciate it. I'm not. And the other thing I would say is that the silver stocks, by and large,
We're—we're going to get to those. We're going to get to those.
Oh, okay.
Yeah. But I want to ask you on the gold front, um, I'm sure you've heard over the last, I don't know, week or two or three, that big institutional banks like JP Morgan, Morgan Stanley, Deutsche, UBS, etc., they're now calling for gold to reach at least $6,000 by the end of this year. Do you feel—you know, they've been—they've been so bearish gold for so long. They, you know, essentially mocked gold, pet rock and relic of a bygone era, and, you know, all of this stuff. But all of a sudden, they're now calling for $6,000. And several of these were calling for $6,000 in the middle of this huge drop over the last couple of days. So, what do you—are you in agreement with them? What do you make, what do you make of that?
Well, what do I make of it? Uh, what I make of it is that you came to the year-end, and at the year-end, you know, everybody does their year-end review, and everybody does their year going forward, and some people had to go and sit in front of a committee, and, and I'm sure a lot of questions were, "Why were we not in gold?" And so, and so the guy says, "Okay, I'll raise my target for gold." Um, I mean, yeah, as you were saying, they were bearish for so long. I don't put a lot of credence into these big bank and big broker projections, to be honest. If anything, it makes me nervous, but they've become so bullish. But no, I think it's largely a matter, I mean, think about how the dynamics of how this work, and I know how a fund works. You know, at the end of the year, you go and sit before the investment committee, and they look at your December 31 portfolio, and, well, why don't we wait a minute? I don't see any gold or silver. We don't own any gold or silver. Is that right? Well, yeah, that's right. Because I believe in AI and I believe in tech, and gold is just a pet rock. And then someone else says, "Gosh, I think we should own some gold. Don't you, Fred?" And Fred says, "Yeah, it'll be a good idea to own some." And the manager goes out and buys something. And that's the way it works. He may not have conviction, but he doesn't want to answer in March as to why he still doesn't have any. And the same with the analysts, you know, they just don't want to be left behind.
Okay. So, I didn't realize you were such a master of different voices. That was outstanding.
I wouldn't say that.
All right. So, Adrian, in the last year or so, the Trump administration has sent many signals of basically a new mining boom needs to be kicked off. They made some very strong speeches around the globe about mining. They have purchased direct equity stakes in some mining companies. They've established many prominent metals as critical and strategic. They announced that they're setting up funding for more than a hundred billion dollars to make direct investments or to lend. They've spoken about setting up a new system to protect miners and their profits by setting up price floors and partnering with other countries to do the same. They even established a pro—a project known as Project Vault to stockpile and store these strategic metals. What's the message you're taking away from all of these actions? I mean, I don't remember another administration not only talking like this about the mining complex, but taking actions like this.
No, you're absolutely right. Um, I think I think the mining sector generally is is an area where, um, you know, an area where we can say the Trump administration has done a lot of good. Now, I have to say that frankly, frankly, my preferred, uh, route would simply be for the government to get out of the way. Make permitting easier. Don't put roadblocks everywhere. Don't spend 10 years on a study on a, you know, an endangered tortoise, etc. Um, I think it's very—from a—from a political point of view, I think it is extraordinarily dangerous when the government starts taking stakes in companies because you know, "I'm from the government, and I'm here to help you." They're going to start to want to make decisions pretty soon and to build mines that are unprofitable and so on and so on and so on. So, I'm not—I'm not jumping up and down ecstatically about, uh, uh, the government, whether it's Trump or anyone else, about the government taking stakes in private companies. If I were—if they came to me and said, "We want to take a stake in your money management firm," I'd tell them to get lost. Uh, go look for someone else. Um, but while you're at it, could you just reduce some of the stupid compliance rules I had to live with? And so I think, but, but, but, but, but again, um, we've already seen, I mean, we saw a year ago, I mean, it came very quickly. We've already seen dramatic improvements in permitting processes, uh, and, and anecdotes, anecdotes galore. People say that they just couldn't get a meeting with the local EPA guy. I mean, he just wouldn't return calls or emails, you know, and now they're reaching out saying, "Anything we can do to help you." So, this is all very—that part of it is extraordinarily positive because, as you know, one of the biggest problems in the mining business, I mean, you obviously have to look at, uh, the, the, um, a mineral deposit, you have to be able to raise the equity. Um, but one of the biggest problems has been permitting.
Yeah. All right. Well said. So, we just watched gold and silver prices in the fourth quarter really across the board raise compared to the third quarter. So, they were significantly higher fourth quarter than third quarter. We're now in earnings season. Are you expecting, uh, that this earning season on the whole is going to be a generally positive impact on the miners?
Oh, absolutely. Look, I mean, not only have you got the price significantly higher in the fourth quarter, as you mentioned, but the costs of mining are stable or or even lower. You look at the price of oil, for example, which is the main cost input for mining. And then you look at the, what we call commodity currencies, the currencies of the countries in which the mines are located, which is your second highest, uh, uh, cost determinant, because that's where all your local costs are. So the workers can get an 8% inflation boost, but if it's in a currency that's declined 10%, that's not bad for a US or Canadian miner. So, so oil and then the commodity currencies are the two main, main, um, uh, cost inputs, and they have both been flat to down. Um,
So, despite, so despite what's gone on volatility-wise over the last week and a half and the plummet in in silver price specifically, uh, you're not as alarmed about the miners? In fact, you're actually—you feel confident with this earning season that that—
Oh, absolutely. Any company that doesn't have at least strong cash flow and free cash flow, uh, this doesn't report it this quarter, you know, unless there's something extraordinary going on, um, is doing something wrong, and seriously wrong. Now, they should be very, very strong. Now, there's been some indications on guidance from a couple of companies. Barrick is one, I think Pan-American. We've had some guidance from companies for 2026, uh, that was meaningfully lower than one might have expected, or soft, let's say, not let's not exaggerate, but was softer than one might exaggerate. So, you know, we'll have to see what all of the companies give for guidance. And, um, I think in the case of Barrick, it's a matter of trying to be more conservative, um, because Bristo, of course, Mark Bristo, former CEO, was notoriously optimistic. He—he said it himself. He said, "I'm just an optimistic guy. I want to tell you what I think could happen." Um, but so we'll have to see companies like Agnico, that has tended to be more cautious with their guidance, what they come out with. But no, these, these fourth quarter numbers, which are also full-year numbers, of course, and the full-year numbers will get more attention from generalists than the quarterlies, uh, they should be very, very strong, very strong indeed.
And then to piggyback on that, this first quarter, even with the volatility and the drop in prices, the average prices are still up so far first quarter over fourth quarter.
Yes. And they're certainly up from the third and second quarter. So, yeah. Yeah.
So, there's pretty good momentum in your opinion.
So—absolutely.
Yeah. So, with all that, you know, with everything we've been discussing, with all the price volatility, the price drops, the, you know, the just all everything we're talking about, um, it sounds to me that, or, or I don't want to say it that way, you're—you still like the miner portfolio even in this type of volatile environment.
Oh, absolutely. No, absolutely. What if you look at—I'll just—Oh, I don't have it on my screen. I'm sorry. If you look at a company like Agnico, you know, the third or second largest gold mining company now, and one without particular, you know, no hairs on that dog. They're not in Pakistan like Barrick, or they haven't just made a huge acquisition like Newcrest, you know, that's a nice clean company. You look at that price to cash, price to free cash flow right now, higher than it was at the end of 2024, but lower than it was all the way back to 2020. Does that make sense that their valuation on a price to free cash flow, which to me is the most important metric for a mining company, of the price to free cash flow, does it make any sense that it's lower today than it was, you know, two, three, four, five years ago? Absolutely not. And that's just one example. You could look at a lot of examples.
Is that—is that because of the years of being suppressed? Is that because people threw out the baby with the bathwater over the last week and a half? Is it a—
I think it's because this might surprise people. When the exit—when the GDX was up 150%, 140%, or whatever, I think the prices of the stocks have not kept up with the increase in the valuation of the companies, given the increase in the price of gold. It just hasn't kept up with it.
So, you're actually more bullish on the miners than you are on the actual metal.
Oh, yes. Unquestionably. Now, you know, if the price of gold drops $2,000, you know, then the valuations are not that strong anymore. That's—that's always a trap with commodity stocks where what they're selling is so volatile, and you don't—that's a trap with the commodity stocks. But, um, and why I said about silver, so, so that's Agnico, and I think a lot of the gold stocks are just, uh, very low valuations relative to their history, lower valuations in the broad market, which in itself is very unusual. That's been true for a couple of years now. Um, and yet the cash flows and the free cash flows are growing faster than any other segment. That is getting people's attention. And I think when they report a full year 20, uh, 2025, that's got to get more people's attention, particularly with the volatility and the rotation and the, the lack of momentum that we've seen in the big tech stocks recently.
Yeah. Which we're going to get to by—
Over—if I may, just given the drop in silver, right? Given the big drop in silver, and then it continued to drop all the way down to $65, I would have thought that a stock like Pan-American, which I love, which we own a lot of, but I'm not knocking in the slightest, I would have thought the stock price might have gone down more, you know, than $10 off a $65 price tag. Yeah.
That's all I'm saying about silver stocks.
Well, that's—that's positive news.
Yeah. Yeah. Yeah.
It's positive unless silver stays at $65.
Right.
Then there's more downside in the stocks.
Okay. All right. So, you brought up oil a moment ago. It's been cheap, but it's been rising fairly steadily since mid-December. Is there an oil level that if reached, your concern level would be significantly higher than it is now over holding a mining portfolio?
Sorry, you mean, uh, on the high side, I would want to reduce my exposure to oil.
Uh, if oil was going up—
To a certain level, would that make you question holding, um, as substantial a mining portfolio because of the input cost of—
Oh, see, I beg your pardon. I beg your pardon. I'm sorry. I thought you were asking whether I prefer oil stocks to gold stocks. Um, well, it would have to catch up. It would have to catch up with what it hasn't done for the last five years. So, you know, if we started seeing, well, $140, that would give me some concern. But let's not remember, let's not forget rather that oil was over $140 back in 2011, and we've had inflation since then. So, I'm just guessing that an inflation-adjusted price for $140 back in 2011, this is a guess, sorry, off the top of my head, would be more like, you know, $180, $190. So, we are meaningfully below, meaningfully below the highs. But of course, that was a peak for mining. So, it was a dangerous time. So, if we started to see go—oil at $120, $125, $130, I'd start to sharpen the pencil. Yeah.
So, oil under $100, you're really not that concerned.
No, not in the slightest. Not in the slightest.
All right. So, you brought up the general market earlier, tech stocks. I—I'm sure you've been keeping an eye on it, Adrian. How do you view the markets and what's happening in tech? You know, are you concerned about a market crash, which is on the minds of many people, or are you more looking at what's taking place with the tech stocks as well? You know, look, we've been needing a rotation to broaden out the market here for a while, and that's really what's happening.
I think it's more rotation, to be honest, at the moment. Um, you know, so long as, so long as employment continues to be reasonably strong, people are going to continue to have 401ks, but month after month are going to put money into the market. And an awful lot of that market goes to the S&P, um, because that's—that's the options that you're given when you work for a big company. You can have a bond fund or a fixed income fund, or you can have a, you know, US growth or US value or global growth, and that's about it. So, an awful lot of that money is going to continue to, so long as employment stays high, that money is going to continue to go into the market. But I think we're going to start to see massive rotation. So, I'm not looking for a crash.
But, you know, things can change, but I'm not looking for a crash.
We may see lower prices. So, if the S&P is lower by 20% at the end of a year than it is today, I would not call that a crash if it didn't all happen on one day, is, you know. But to me, there's two things. One is the tech and being expensive, and one is what's cheap. So, if you look at the tech, especially the AI, that is what has really been driving the US market over the last five years because those companies are not available in every other market. If you're a Swiss manager or British manager and you want exposure to AI, you have to buy the US market, right? You have to. And that's what's been driving the US market so much higher. So, I'll say two things. One is on AI itself. Just as we said, I said earlier, rather, I said, you didn't—you may not agree, um, just as I said earlier, but we're going to see the projections for data farms come down dramatically, I think. And the spending of companies like Meta and Google, where where AI, or where building massive data farms, particularly in the case of of Meta, is not their main business, right? I—I think we're going to see a lot of massive reductions in the spending, uh, projections, in the spending budgets for AI. But we're also just going to see a more efficient AI. And is Nvidia, for example, is Nvidia going to be the winner? Think back to 1980. Think of the top five internet companies at that time. I can't even remember who they were, but remember—
You mean 2000.
2000.
Yeah.
Not not 1980.
Sorry. Sorry. Sorry. That was gold. Sorry.
Internet wasn't around then.
Think of Netscape.
Oh, yeah.
Who's heard of them? Do they even exist anymore? I don't know.
Cisco. Cisco was the was the number one company.
Cisco is still here.
They're still here, but they're not—they I don't even know if they've reached that peak, the 2000 peak since.
Exactly. And remember that wonderful comment from, um, oh, who was it? What's the guy who runs the company called? He said, "Listen, if, if all of your projections for our sales are true, and if we have no costs going forward, we don't have to pay our employees, but they continue to work for us. We don't have to pay any taxes, but the government doesn't sue us, right?" He said, "And we don't—we cut our dividend," he said. Um, what did he say? It was something like, "We would have—we wouldn't earn our money for 120 years." And he said, "What were you thinking?" And I think it's the same with AI now. Is Netscape—is Nvidia going to be the Cisco or the Intel, or is it going to be the Netscape that no one's heard of in five years' time?
I think also, also to your point, I just want to add to your point here. You know, software as a service, they have such bloated, uh, ratios, PE ratios from over the last 15, 20 years. And AI is starting to eat software as a service.
And so, not only are the big AI companies probably and most likely overvalued, but those all have to be rerated. Every one of those.
Absolutely. So, anyway, enough on that. But I mean, then you just look at Nvidia. Nvidia's market cap is greater than the market cap of Great Britain. Oh, we can talk about how lousy Starmer is and everything else, but it's greater than Great Britain. Does that make sense? You could take—it's 50% greater than Canada. Now, we can all complain about what Justin Trudeau did to the company and country and all of that stuff, but does that make sense? You could take all of Germany, all of Sweden, all of Singapore, all of Spain, all of the gold stocks in the entire world, and all North American oil and gas companies, and still have money left over to buy a few Nvidia shares at the end.
Does that make sense?
No.
So, just as Nvidia is expensive, other things are undervalued in my view, and we're going to start to see their rotation. The most undervalued thing of all, well, there's two really undervalued things. One is a, uh, uh, uh, one is just overseas markets in general. The, uh, World XUS at the end of last year trading at its lowest, lowest relative value to the US in history. It has never—the world has never been cheaper relative to the US, uh, as it was at the end of, uh, 2024. Now, last year, the global markets, the world markets started to outperform, and the world index, it's a Morgan Stanley Capital International World XUS index, sorry, was up about 32%, and the S&P was up 17%. So, close to double this year. Um, I don't have them on my screen, but this year, the Dow is down. No, sorry. The Dow is up, what? Less than 1%. Uh, the S&P is up, what? 4%. Uh, the NASDAQ is down this year. And Europe, they're all up 4 to 10%. Asia, they're up from 3, 5, 10%. So, this year, that's continuing. Foreign markets, and that's in US dollar terms, foreign markets are dramatically outperforming the US. When you get, first of all, um, first of all, the, uh, the, the, these ratios tend to, tend to last a while. I said the US was outperforming global markets for 15 years until last year, but the period before that, for it was 10 years, a—eight years, rather, but global markets were outperforming the US. So, they tend to, they tend to have a life. Um, so I think that's going to be a big trade for the next, uh, three to five years is selling, selling the US and buying global markets.
Okay. You said there was a second one.
Well, the second one, obviously, is commodities. If you take out gold, silver, uh, copper, of course, is at an all-time high but has lagged. Um, but if you take those out, uh, commodities are just remarkably cheap. And even if you include them in any commodity basket, both of the commodities themselves and of the commodity stocks, they are at 100-year lows relative to the S&P.
So, you view, so you view the, um, the miners, um, as a beneficiary of the rotation that you see that has started.
Absolutely. I mean, if I'm a money manager and I'm getting nervous about tech and I want to reduce my tech, but I've owned Apple for 10 years. I've got some nice profits, but I want to reduce that exposure, move into other things. I start to look at what, what's cheap. And what's cheap are commodities, uh, value stocks relative to growth. Again, if you look at a hundred years, people don't realize this, but value has outperformed growth by an average of over 4% a year. Astonishing outperformance. Yeah. For the last, since, since the great financial panic, growth has outperformed. So, I think we're going to get a rotation into value and then a rotation into into global stocks.
Wonderful. Well, Adrian, this has been an incredible discussion. Before we wrap up here, I want to direct everyone who's listening in and who's interested in the metals and mining sector to dive into our Substack at metalsandminers. When you 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, and that's the name of the report you'll receive. Now, I'm positive that you've been enjoying the conversation Adrian and I have been having. Would you please let them know? Hit the like and subscribe button and leave a comment below the video. All right, Adrian, as we just want to wrap up here, would you share a key takeaway that you want the viewers who are tuning in to keep in mind, and then let everyone know where they could learn about your work and how they can connect with you?
Yeah. Um, I think the key takeaway is, is, you know, right-sizing, not getting greedy, and making your portfolio fit your own financial circumstances and, um, uh, uh, uh, preferences. Um, it could be a silver stock, but it could be Nvidia. I mean, if you bought Nvidia 10 years ago, you may still be bullish on Nvidia, but it's if it's 50% of your portfolio, forget everything I've said.
Forget everything I've said. You still like it, but it's just time to reduce it and forget about, you know, it's going to go to the moon and in 10 years you could retire. So, right-sizing and doing things appropriate for your portfolio, your circumstances, is is critical. And then people can find out, it's adrienday.com.
Okay. Wonderful. Adrian, thank you for coming on to Metals and Miners again. This was a lot of fun. You've been really generous with your time, analysis, and ideas. We all appreciate it. I look forward to having you back on sometime soon.
Well, thank you. I really appreciate it.
Yeah. Everyone else who's tuning in, thanks for watching. I want to direct everyone who's listening in and who's interested in the metals and mining sector to dive into our Substack at metalsandminers. When you 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, and that's the name of the report you'll receive. Heat. Heat.