Transcription
The demand for energy is infinite, and it is gated in the long term by supply.
Welcome back to Metals and Miners. I'm your host, Gary Bow, and today we're diving deep into the wild world of markets, energy, and global trends. If you're looking for unfiltered insights that cut through the noise, you're in for a treat. I'm thrilled to welcome back Doomberg, the anonymous yet razor-sharp voice behind one of the most influential newsletters in finance and economics. Known for their incisive analysis and knack for spotting what others miss, Doomberg brings a no-nonsense perspective on everything from commodities to geopolitics.
Doomberg, welcome back to Metals and Miners.
Thanks so much for joining us today.
I was going to say go on, but thank you.
Thank you so much, Gary, for the really kind introduction, and it's always a pleasure to chat with you and looking forward to this one as well.
All right, great. All right, well, let's jump in. Doomberg, during President Trump's recent visit to Saudi Arabia, reports noted a significant meeting with the crown prince and a successful deal with all the pomp and circumstances that you would expect when a deal was made. Also notably, there was a public appearance by Robert Friedland, founder of Ivanhoe Mines, who joined them in Riyadh. What kind of deal do you suppose was made between the two countries? What signals does this send about energy and mining? And is this even a sign, with Robert there, that mining could take center stage in global markets moving forward?
Yeah, great question. I must admit that we watched with a combination of amazement and curiosity at the sheer pomp and circumstance that was rolled out for President Trump. Give MBS credit; he understands the man, at least, and knows how to set the stage for a collaborative negotiation. And Trump being Trump, it sure looked like he enjoyed every minute of it, even though he kind of knew what MBS might be up to. But it was pretty amazing footage, and Trump is nothing if not aware of the optics of his situation.
To your question, you know, we've been long intrigued by what's been going on between Putin, Trump, and MBS—Russia, Saudi Arabia, and the United States. Between the three of them, they account for 40% of global oil production and probably at least as much of the global natural gas production. And anytime the heads of those three states are negotiating with each other, history teaches us it's almost always not about what the contemporary news media is reporting. And in this case, the war in Ukraine. We suspect that Trump has grander ambitions of a sort of definitive pivot in US foreign policy, US economic policy, US trade policy. He's had four years to ponder and to lament his first term, and Lord knows he's hit the ground running at the beginning of his second. And we noted with interest and have written at least two pieces on the fact that OPEC poured oil on the burning tape in the aftermath of the liberation day tariffs and gave Trump a gift of lower oil prices. And as we wrote at the time, and what your question alludes to, what was given in return is not known. One of the things we have speculated is perhaps let the price of gold run, although recent price action in the gold markets would seem to run counter to that hypothesis.
To the specifics of Saudi Arabia, it has long expressed a desire to diversify into phases of the economy beyond oil—high technology. You'll note the CEO of OpenAI, Elon Musk, and the CEO of Nvidia were all there as well. But also, Saudi Arabia has expressed a desire to integrate into mining, and the presence of a prominent gold mining CEO among Trump's entourage could be a sign.
No. And copper—I mean, I didn't mean to interrupt—but copper might tie in with our intelligence ambitions.
Exactly. And you know, electrify everything, and of course, the Saudis are big investors in an electric vehicle company. They have money to invest; Trump wants to make deals. Who knows the totality of the deals on offer? You have the Israel question and the Iran question in the background as well. And again, shape-shifting deals that impact the trajectory of the economy for decades are almost never reported accurately in the moment. Trump seems on a plan to do such a thing. I mean, the Saudis want to integrate into mining, and you correctly stated it's not limited to just gold, but gold has a special place in all of this, and the Saudis might have an extra reason to be interested in gold because our view is that gold is re-emerging as the neutral reserve asset in the aftermath of the sanctions against the Russian reserves, which effectively were a default by the West. Money was owed to Russia, and the West extralegally decided that Russia was not going to get that money, and that is a textbook definition of a default. And if you have defaulted on your European-denominated debt predominantly, but also some US-denominated debt, the rest of the world is going to sit up in their chair and take notice of that because who knows who the next president of the United States will be and whether or not any particular country falls out of favor with that president. And so the natural response, and I sincerely believe that the run-up in gold from 13,500 to 33 or 3,400 since the war in Ukraine broke out is due predominantly to that fateful decision to sanction Russia's reserves, which I would say probably came as quite a shock to the Russians as well.
And to your several points here, Saudi Arabia has a lot of excess reserves that could theoretically go into US Treasury bonds. However, they probably would feel a lot more comfortable with it going into gold.
Yeah. So, but there's also the dimension that, again, our friend Luke Gromen has been writing about for many, many years, and I want to give credit where credit is due. If gold is to play that role, then the global market cap of gold as measured in US dollars needs to be much higher—much higher. And so, in order to serve as an effective neutral reserve asset for the settlement of imbalances in international trade, the US dollar value of gold needs to be higher. As good as gold for oil is no longer the case for the US dollar, which is the rumored deal that Kissinger struck in the 70s during the oil embargo. And if that's true, it also serves another purpose, which we think is a driving motivating factor for the Trump administration, which is dealing with this wave of refinancing of short-term debt that Janet Yellen left her successor. And one of the ways, one of the tools that the US Treasury could use, especially during a period of time where the Fed is acting in opposition to the president, which I think it's pretty clear Jerome Powell is certainly not being accommodative. And I think that is 100% a raw political decision on the part of Powell. He was very political in the timing of the interest rate movements of last year, designed to help the Biden administration and is doing everything in his power to stunt the objectives of President Trump. That's not a partisan statement; that's just an objective analysis of the facts. And so if the Fed is not going to play ball and Trump is berating Powell on the internet to lower short-term interest rates, then the Treasury needs to dip into its toolbox. And Janet Yellen was admittedly, and to her credit, quite creative in developing new tools. One of the tools that Secretary Yellen has at his disposal is to simply revalue the gold that is allegedly in Fort Knox and in other US storage facilities. And that immediately gives substantial breathing room to the refinancing wall of short-term paper that Janet Yellen, you know, when she shortened the duration of US debt—that was again a very raw, overtly political move on her part; that was not in the best interest of the country; that was in the best interest of Joe Biden's re-election.
It would make sense if they do dip into this part of the toolbox to allow the market to bid it up quite substantially before they actually do revalue, right? I mean, it's one thing to get 800 billion; it's another thing to get 3, 4, 5 trillion into the coffers. It's not like the banks haven't been warned with Basel 3 for a long period of time that they needed to get out of the business of manipulating the price of gold lower, assuming that's what they do. And I know that's a controversial thing, but many people listening probably believe it. And so better yet, if those banks were tipped off in advance and all got long. So, you know, there's lots of games that can be played. These games are routinely played. To think otherwise is to be naive, but to be 100% transparent, we are just guessing like everybody else, trying to read the tea leaves as to what's going on. But you can't reread 50-year-old history and then look at the contemporary news reports at the time and not conclude that whatever we're reading today in The Economist or the New York Times or the LA Times is simply not true and perhaps deceptively a false operation.
Okay. Well, there's a lot of threads. That's a great opening. There's a lot of threads to pull on. I want to stay in the geopolitical arena for a moment here. The US-China tariff trade war—we see this dramatic pause, but it's not a deal. There is no grand, beautiful, big, beautiful deal, however Trump is putting it, but in this US-China trade war, obviously, there would be a really positive, good outcome, and there would probably be a really bad outcome that could be pretty damaging. In your analysis, what do those outcomes look like? How do—and how do we get there?
So the big core question of the Trump administration, which probably takes your question to sort of a higher level, is whether or not Trump succumbs to the war-hungry wing of the Washington DC establishment and provokes a war with China/Iran and escalates with Russia; or, like his speech in Saudi strongly hinted, which I think was a historic speech, Trump is going to take on that faction of DC and continue his admirable record of not having started any wars while being president. And I believe sincerely that deep down President Trump would like to cut a deal with Putin, would like to avoid war in the Middle East, and would like to reach a deal with China. And I believe the Chinese would cede a lot on trade in exchange for a fair bit on Taiwan. And in the end, a sort of Hong Kong-style hybrid reunification of Taiwan with China in a way that doesn't threaten global semiconductor chip supply is probably something Trump would be amenable to in exchange for much more favorable trade terms.
In favorable trade terms, do you see lower currency there—US dollar currency? I mean, for Trump, this is the one dilemma that we have about Trump—well, not the one dilemma, a dilemma that we have about Trump because he is a complex man. He's most of the things people accuse him of being, both good and bad. Trump wants to catalyze a US industrial revitalization. Can't do that with a strong currency. You actually can't do that as the holder of the world's reserve currency. But he wants to be the holder of the world's reserve currency and for the US dollar to be the champion. One compromise is to let gold run because the Chinese and the Russians and the Saudis all own a lot of gold and could price their oil in gold and would diversify away from the need for US dollar treasuries as reserve assets. And that might be the grand compromise because it also helps Yellen with the refinancing wall that we talked about.
I don't think personally, and we suspect that Trump doesn't believe that Taiwan is actually in the US's national interest to the extent that its supporters and those who seem to always want to go to war have been propagandizing the Western public to believe. Again, war is tragic; war is terrible. We are unabashed isolationists. If you live in Ukraine today, the Ukraine war is an utter disaster for you and your family and your friends—for many a full tragedy. But if you ask the average person in the US Midwest how it is that they became to care about who controls the Russian-speaking part of the Donbas and whether they would send their kids to go influence that control, you would find precious few people who would say that's in our national interest. Taiwan is a slightly different story because of the fact that the vast majority of the high-tech semiconductors that make the current economy go are produced there. This is why we're seeing every country, including the US and China, Japan, Korea, trying to diversify away from that point source of risk that is Taiwan. But if you come to a negotiated settlement over Taiwan, which is in China's interest, admittedly, where you don't have kinetic conflict that settles the issue, which we wouldn't win either, by the way—which is another thing I think Trump is sort of facing the reality of; our whole adventure in Yemen and the Houthis might be eye-opening to him—a negotiated settlement over Taiwan that avoids a Russia-Ukraine situation is in line with Trump's campaign statements. You know, there's all kinds of stories in the media about insider say or sources familiar, but when you actually listen to Trump speak, and not even what he posts on Truth Social, when he speaks, he tells you what he's really thinking, and I thought that his speech in Saudi Arabia was quite instructive, and the grand bargain of a non-nuclear Iran, settlement of Taiwan, and a workable peace in Ukraine is probably Trump's objective, and that would be, we think, a wonderful outcome.
Yeah, that would be a wonderful outcome.
Okay. Let's shift over to energy for a moment here. Doomberg, fund managers are currently the most underweight energy stocks in over two decades. It's kind of reminiscent of the dot-com bubble era, which preceded a major energy bull run that lasted through 2008. With the Magnificent 7 having dominated the last decade plus, do you see a similar setup for energy stocks? Could we be on the cusp of another major cycle of outperformance for them at some point coming soon?
Our general view on energy and energy stocks is you have to partition them into categories. I don't think you can just blanket say, in the way that you can say gold miners, energy stocks, because there are companies within the publicly traded universe of available equities that predominantly do exploration and development, and then there are companies who are leveraged to volume who sell services, engineering services, or they lease land and they capture royalties; they're all quote-unquote energy stocks. But one set of those energy stocks is leveraged to the volume of energy being produced, and the other is leveraged to the price of energy that is being produced. And as a general rule, the long-term arc of energy prices in real terms is down. And getting along a company that produces a product whose price has a downward trajectory over time almost baked in by physics is not something that we're particularly interested or excited about. Whereas, since the human endeavor is a constant unrelenting struggle against the forces of entropy and all humans everywhere want a higher standard of living, being long stocks who make money when energy demand goes up is almost always a good deal. And especially since a lot of those stocks being grouped into the quote energy sector are beaten down, selling at low multiples, have high dividends, and sterling balance sheets. You know, I think of the midstreamers like ET or even the EQT natural gas producer/major pipeline owner operated by the Rice family. There are people in the energy sector who know how to make money. The market rarely rewards them; you can buy them at reasonable multiples, but yet they are not value traps. That is more interesting to us than, say, I think the price of oil is going up, so I'm going to go get long Exxon Mobile and clip a dividend while I'm waiting for the price to spike on a war outbreak.
I think that's a great point, and I appreciate you making that point. Let's stay on energy demand specifically for a moment, Doomberg. AI's energy demand is surging with tech and manufacturing racing to integrate it into every system and item that they're building. And they're looking to replace workers, both white and blue-collar, with humanoids and robots of different kinds. If adoption of AI, robotics, humanoids, etc., continues unchecked, could global energy demand grow without bounds? And if so, is there specific energy sources that you're focusing on that you think have the biggest growth potential to meet this surging demand?
It's a brilliant question. The answer, short answer is yes. The long answer is our personal experience. We've navigated some early-stage AI private investing, which is how we tend to invest, and have come to conclude the following things about AI, which is important to say because it then feeds the answer to your specific question about energy demand associated with it. AI is absolutely 10,000% transformative; the leading edge of what's going on would blow your mind. It is far more and will be far more impactful on the trajectory of humanity than, say, the invention of the internet. But like the dot-com boom, there's all kinds of hype, fraud, and highly overvalued companies that will eventually be zeros. And it is a tricky situation to navigate. It's not like you can just blindly throw a dart and put money down on the AI circle and expect to collect. You have to be wise, and you have to be lucky as well. But when we get through this sort of fraud-hype cycle, which we will, what's left over is the Amazons and the Microsofts and so on that survived the dot bubble and went on to become trillion-dollar market cap companies. It is real. And so one of the challenges that skeptical people, and by the way, people who like to own gold are generally skeptical because they're owning gold out of skepticism for the system, is they see the frauds and the cons and the hype and say, "Oh, AI is a fad, and I don't have to worry about it." The reason I led with that preamble is to say that that would be a foolhardy conclusion to make based on the pump and dumps that we're seeing in the public and private markets in the AI space today.
So to your question, the demand for energy is infinite, and it is gated in the long term by supply. And because there is a cycle mismatch between the investment time horizons of energy companies and the business cycle, we alternate between gluts and shortages and price spikes and price crashes. But the long-term trajectory of demand for energy is up and to the right. And the long-term price for that energy is down and to the right, despite the price spikes that we'll have—I guess what you would call short-term periods that could last months or years, even a couple of years, where it's a spike, but then eventually it comes back and reverses the trend. History typically says it's months. The higher the spike, the shorter the time to regress to the mean. And in fact, to sort of build on an answer earlier about investing in commodities and so on, if you study history, all shortages are followed by gluts. And so if you see an Icarus print like we did after the war in Ukraine started, both in natural gas in Europe and in oil, the easiest trade in the world is to wait for the price of that commodity to fall 20% off its highs and then short it six months later because it's going to collapse 80% from the all-time highs. It always does. That's not trading advice; do your own due diligence. But far better to fade an Icarus print than to try to time it in advance and burn premium waiting for your out-of-the-money call options on WTI to come into the money.
But broadly speaking, to power AI, back to the question, we think natural gas in the US and in Western Canada is the cheapest hydrocarbon on the board, the cleanest-burning hydrocarbon on the board, and holds the potential to satisfy the electricity/power demand needs of AI without interrupting the grid because you could build bespoke off-grid pods where natural gas gets burned, boils some steam, spins a turbine, electricity is created, and that electricity is used on-site, and data comes out the other side of the building. And that is where we're going, in our view; that's where the world is going. A data center in British Columbia makes a ton of sense today with a buck 50 per million BTU natural gas and cold weather because half of the energy demand of a data center is in cooling. And it's nice to start out your cooling project when the outside is at below freezing than when it's 90 degrees in the summer. But the price of natural gas per mmBTU is cheap enough, too, that I think we're going to see a wave of off-grid natural gas-powered AI data centers. And the exception that proves the rule in this regard is Elon Musk's efforts in Nashville, where he's basically built an illegal power plant in Nashville with no permits and no approvals to power XAI's data centers using natural gas, much to the chagrin of the environmentalists and regulators who are probably afraid to say anything about it now because he's on the plane with Trump in Saudi Arabia.
Right. Okay. So I fully understand your projection for energy, and it's often to the right, and it's going to far outstrip supply. However, you do believe that natural gas is going to fill the void for a significant amount of that with this rapid industrialization that AI is driving, both software, robotics, etc. Are there critical commodities aside from, let's say, copper, moving away from energy, that are most likely to face this demand-supply imbalance for a period of time?
Uh, none that immediately come to mind, mostly because most of those commodities are just derivatives of energy, and so it comes down to burning more coal in China. So my direct answer is that would be sort of a second or a third-order effect; it's easier to just play the first.
Okay. All right. So let's talk about uranium for a moment here. Uranium has been gaining a little bit of momentum again with rebounding spot prices accelerating, utility contracting, global tailwinds like China's nuclear buildout, Denmark's policy shift, etc. As a supply-constrained, strategically vital asset and one that could play a significant role in the upcoming AI energy demand blowout, how investable is uranium today after the downward volatility of the last few years?
Again, as a general rule, we try not to get long commodities directly. And our theory of sort of fading Icarus prints would have worked pretty well in uranium. You know, I remember being on a podcast with the Uranium Insider. His name is Justin; his last name escapes me, but great guy.
Yeah, that's right. Justin Hune, great great fellow. He runs a great business. And we were on a podcast with uranium in the high single digits. And I was like, you know, it's my friend Tony Greer at TG Macro likes to say, "If you're not going to sell under strength, when are you going to sell?" And it would have been a good time to take a few. And look, to be fair, I personally sold half of my gold in the high 3,300s. Always happy to buy back in at a lower price. I still always have a core position of gold, but there comes a point where when I'm starting to see gold being talked about in The Economist and Bloomberg and people spiking the football on Twitter, maybe you might want to manage a little risk into those moments. And so I think uranium is a commodity. Uranium is an energy commodity. The energy producers are powerful deflationary forces, and the supply response to the $100-plus print and the sort of stabilization in the 80s is such that it puts an upper bound on the potential for a shortage and a spike. And so there are probably better ways to play uranium than just outright buying the commodity—maybe a junior miner with a great deposit or maybe somebody with a technology that is great for enrichment or pick your favorite. But generally, we just don't like to get long energy.
Commodities directly. Um, it's just just not historically an alpha-generating trade.
Understood. All right. So you mentioned gold. I do have a gold question for you here. Uh, Doomberg, the US has a 27-plus trillion dollar GDP. In Q1, you probably remember this, enough gold was imported into the US to theoretically reduce GDP by 2%. In fact, that's exactly what they did—was reduce GDP by 2%. Equivalent to roughly $540 billion worth of gold in the first quarter. At today's gold price of 3250 an ounce or whatever, the total US gold stockpile of 8,133 metric tons is worth about 850 billion. So what was brought into the US in Q1 was more than 50% of what the US reportedly owns. Given this unprecedented scale of inflows, who orchestrated this move? What was their objective? Why did the US authorities permit such the such a massive transfer? Do you have any idea what's going on here?
Well, I don't think it was much of a concession for the US to permit the influx of such a staggering amount of gold in the sense that possession is 90% of the law. Um, if it's within your borders, you can always confiscate it. Um, and so I don't view that as a particular concession. And the GDP, of course, the the official GDP numbers correct for that gold—is not actually included; it's it's worked out of those import uh numbers. Um, it is the Fed Atlanta GDP model that didn't, and that's what sort of caused a bit of a stir on uh on Twitter, as you may recall, uh because even though we're not actively posting on Twitter, it is still an inbound source of much intelligence um for us, and and we do check it daily. Um, so again, back to an earlier point: What's actually going on behind the scenes? Who knows? Something major occurred. We find it interesting that this something major that occurred occurred at the same time that the US is facing this refinancing wall, and the price of gold was allowed to run, and Trump is basically reorienting the last 50 years of the the world's economic order. Um, the odds of all of that being a coincidence are very low; the odds that I can tell you with any certainty what actually is going on are just as low. Um, I don't know. Uh, it is a take-notice sort of thing, as a lateral thinker. Something is different. Our models need to be reconsidered. Um, but if I had the answer, you know, we would have written about it by now and made lots of money.
Yeah, good point. Okay. All right. All right.
So, Duneberg, what's one under-the-radar metal or mining trend perhaps tied to AI, tariffs, fiscal policy, maybe global monetary policy that you think will catch the markets off guard in the next few years?
Yeah. So, this is um, not knowing that you would ask it, but a it is a great question, and we've actually given this some thought, and we've sort of indirectly written about this. So in our latest piece, we told a story of how China uh has largely insulated itself from its critical weakness of not being back integrated into oil, and the way that they did that is they forward integrated into refining in a massive way. In fact, in that piece, um, we described how uh China has actually surpassed the the US in the refining of oil into gasoline and diesel and jet fuel, at least on a capacity basis. And that means if we we if the West chokes off China's access to oil, the rest of the world's going to feel it because gasoline and diesel and jet fuel are internationally traded commodities, and Europe needs it, and Japan needs it, and Korea needs it. And so they have jiu-jitsu'd a weakness into a strength, and they do this in multiple supply chains, including in the metals. So that which they are not endowed with naturally, they find the earliest stage in the supply chain that they can dominate with just money, and then they print that money, and they dominate it. So metals processing—um, China is not that integrated into cobalt, and most of the world's cobalt is mined in the Congo. China dominates the conversion of cobalt concentrate into battery-grade metal. In order to fully decouple from Chinese supply chains, the rest of the world needs to get into the refining business, and entrepreneurs who propose such projects during the Trump era are likely to get government support, accelerated permitting, and so on. So we would not actually be interested in the miners; we would be interested further downstream. Um, no matter how much rare earth the US mines, it all goes to China today because they have a literal monopoly on the processing of rare earths into magnet-grade metal. Same thing with polysilicon for solar. They have a 97, 98% share in ingot manufacturing and wafer. So if you mine polysilicon in the US, and there are three large polysilicon producers uh in the US, it all still goes to China and gets co-mingled at a choke point. And so one of the investment themes that we think, at least certainly in the private markets—um, perhaps some nimble publicly traded companies will see this trend as well. Um, wherever China has a chokehold, you know, a a monopoly share or a pinch point in a metals supply chain, there's going to be helicopter bags full of money to help the West, either the US directly or at least as much in sort of friendly nations, in sort of an indirect friend-shoring um in order to sort of diversify away from that um pinch point monopoly, especially if that metal happens to have a small but really important military application that the DoD cares about. So that is a framework as opposed to specific names that we would tell your audience to think about and to view potential opportunities through that lens.
Well, that's fascinating. I really appreciate you sharing that. So for everybody watching, I just wanted to welcome everyone to this fantastic interview with Duneberg. It's been an incredible discussion, very uh informative. And before we wrap up here with our final set of questions, I just want to direct everyone interested in the metals and mining sector to dive into our Substack at metalsandminers.substack.com. Join our quickly growing community and receive a free report that'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 title of the report. Consider upgrading for access to premium content. But even without that, there's plenty of free content daily. So visit metalsandminers.substack.com to join us and explore. And thank you for watching this wonderful interview with Duneberg. Now, I'm positive you're enjoying it as much as I am. So, please let Doomberg know. Hit the like and subscribe button and leave a comment below the video.
Dune, let's finish off our discussion with what I call a lightning round. I'm going to ask you I'm going to ask you to rank a few assets as a buy or a sell by giving it a score of one to 100. 100 is an extreme buy; one is an extreme sell. Just give one maybe two sentences as to why you take the position. We are doing a lightning round, so I'm going to flow through them pretty quick.
Okay, you bet. All right, let's go.
On a scale of one to 100, is gold a buy or a sell? And why?
uh, 65, just because of the run, but it gold is always at least a 50 in our book.
Okay. Gold miners?
um, 35, because gold mining management teams always find a way to disappoint and rarely create shareholder value for their owners.
Okay. Physical silver?
um, 50. Uh, we have no view. It's an interesting metal. Um, it is monetary in some regards, but the potential destruction of the ESG uh net-zero movement is uh a bit of a bearish um headwind for silver. But we haven't studied enough to give a definitive view. Doesn't excite us either way.
Okay. I'm sure you feel the same way then about silver miners. So I'll move over to copper.
um, 60. Um, AI, electrification in China um are bullish; global macroeconomic risks, at least in the short term, are bearish, but uh, betting on Trump's grand vision, we could really see a boom, and so um, adding it all together, 60, and I'm just giving you my instinctive response because I didn't know these questions in advance, right?
uh, uranium—the physical metal?
um, 35. It's a commodity. Um, there's plenty of it, and we don't get long commodities.
Okay. Uranium miners, do you make a distinction there?
Depends on the miner. You know, if you got a great asset and a good management team, you can make money, which is the the whole seduction of the gold miners because, yeah, 19 out of 20 don't do anything, but one does a 30-banger. And so, you know, you miss that 30-banger and chase the other 19, which is why we just try to avoid that area.
Yeah, that area. Okay. How about oil?
Uh, oil we would put at uh 40. Uh, Trump wants $50 oil. He looks likely to get it. Recent relative strength has surprised us. Anytime market moves surprise us, we take note. Um, we're never arrogant enough to think that we know more than the market. So, uh, 40.
Okay. NASDAQ?
uh, 25 um because in the vision that Trump is putting forward, um, technology companies aren't going to benefit as much as old-school industrial engineering companies that build real stuff, and they're undervalued today. When I look at the valuation of a Tesla or even an Nvidia, um, look, Nvidia is going to get out-competed by the Chinese. Tesla's its own special case. And the subset of the NASDAQ that those two companies alone represent gives a significant pause. So you're seeing a rotation of dollars out of those and into more old-school names. There's a finite amount of dollars in the world, and one never got rich betting against the desires of the president of the United States, whether it was Biden or Trump.
Fair point. Okay. S&P 500?
uh, 50. You got to be exposed to it. Portfolio theory, yada yada yada, risk tolerance, time horizons. Uh, but um, far less concentration in a potentially uh out-of-favor sector than than the NASDAQ.
Okay. Short-term treasuries, say under two years?
uh, 80, only because I'm long a boatload of them. Um, I think Trump will get short-term interest rates down, whether Powell does it or not, and um, again, consistent with our philosophy, it's very clear the sitting president of the United States would like short-term interest rates to come down, and it's a sucker's bet to bet against the will of the president, especially this president who's pretty strong-willed.
Yeah, fair point. Okay, so, uh, long-term treasuries?
uh, 20, maybe zero. I I I don't own any. Um, the the the US will not make money good in real terms on its long-term debt. So purchasing power destruction is here to stay. It is uh forever thus.
Forever thus. Okay. All right. On a scale of 1 to 10, each representing a percentage point—one, two, whatever. You could even go halves or quarters. What do you see inflation ending the year? And we'll just use, you know, the uh the figures that they push to us.
Yeah, measured inflation as reported by the government, right? Um, by the end of the year, yeah, 2.2%.
Okay. So you believe it's coming down a little bit.
Tariffs are deflationary because they destroy demand. Okay. Uh, 1 to 10, 10 being the highest probability, we're headed into a recession by the end of '25.
I think we're in one now. So I mean, whether we measure it as such and the official government statistics say it, our contacts in industry have been screaming recession risk since February. We've seen supply chains seize up. I think Trump has knowingly gambled this and that we would come out of it ahead of the midterms. So a different question is whether or not we see two consecutive quarters of negative GDP and whoever it is that has been assigned the tasks of officially declaring a recession. I would put that at at three.
Okay. But as far as like metrics and data are concerned and the feelings of businesses and how they're responding to the current environment, you're putting that at a 10?
Well, I think we're in one. So, yeah, I guess I would have to say 10.
Okay. All right. And lastly, the recommended portfolio allocation. It used to be 60/40—60% stocks, 40% bonds—the stock bucket would be, you know, spread out over the different allocations and and areas from international to tech to whatever. So this seems to be changing radically. If you were to include any of the asset classes that we've spoken about um and that we haven't, what would your approximate recommended portfolio allocation look like today versus that 60/40?
So this is a difficult one because we don't invest in—typically we don't invest in risk assets of publicly traded equities or even bonds. Um, our personal philosophy is we earn money in fiat because we live in the fiat world. We have to pay our bills in US dollars. Um, we save by investing in real assets like gold and land and collectibles, and then we invest privately where we can affect the outcome. We call it sweat alpha. Um, so if I personally know the management team or my network of contacts can help that company, or we could provide funding at reasonable terms at critical moments and we could help them with the sort of five pillars of building their business, we find that we could compound our capital with more control and better certainty than we can get just by passively investing in the market where you're just you're you're investing against computers and algorithms and machines that know way more information than you. Recognizing that very few of your listeners um invest in that way, um, perhaps our answer is a bit unsatisfactory. But um, our main question internally is how much of our worth do we want in the savings bucket versus the invested bucket? And generally speaking, um, we are leaning into the investment bucket, um, right now because the private markets are suffering, and there are good opportunities to help good companies on much better terms than there were two years ago or three years ago. And as hard as it is, we try to pride ourselves on buying low and selling high. Um, so that's where we are. We're leaning into private opportunities, for example, like AI startups and things where we know the founders. Um, it's okay to participate in sort of mania and booms. Just be recognized. Just recognize that there comes a time to sell—like, again, if if you can't sell under strength, when will you ever sell? Um, but we are buyers on weakness and sellers on strength. Everybody tries to do that; everybody says they do that. To the extent that you can do that, then you'll make a lot of money. But that is our outlook. So we don't really think about the 60/40 portfolio; none of my retirement account is in any of that stuff. Um, if anything, it's sitting in short-term treasuries or gold, and I just occasionally borrow against it to make investments. Um, so that that's our view.
Well, I appreciate that, and that's an interesting lens to view the world through, and it's uh contrary to um, you know, how things are structured out there. So I appreciate you sharing that. Would you would you share a key takeaway that you would like viewers to keep in mind, you know, regarding the monetary system, the economy, the markets, whatever, uh that that you have on your mind and then inform everyone uh where they could learn more about your work and how they can connect with you?
Sure. I'll give you an off-the-wall thing that we haven't talked about, but it is a derivative of the AI wave. In a world where AI takes over, computers do everything, we have a tentative conclusion we've drawn that we haven't yet written about, but I have spoken about it on a few other podcasts. Um, AI algorithms don't buy things; humans buy things. And in a world where AI takes over, the value of that which is authentically human is set to skyrocket. That's a a contra prediction. Um, but as humans are required to do less but still have the financial resources because computer programs do not have financial resources, they will spend more and more of their time and money acquiring things that are authentically human, and that is a mega trend for the next 20 years that we think is highly investable. So that's that's the last sort of takeaway that I would leave with your audience. Um, you can find all of our work at duneberg.com. Um, we publish seven to nine articles a month for our regular subscribers. And then for our pro-tier subscribers who pay a bit more, they also get, in addition to those articles, a monthly webinar where we do a 45-minute to an hour-long deep dive on subjects. This month it's going to be on whether oil is actually a fossil fuel. Next month will be a deep dive on gold. Um, but you can find all of that at duneberg.com.
And Gary, we always have such fantastic discussions. This was no different. And uh, very much looking forward to the next one, and and I would close by thanking you for for having us on. It's always an honor.
Absolutely. I love having you on. I love our discussions. I uh definitely look forward to having you back on sometime soon. Thank you for being here. Thank you for sharing your insights and your wisdom, your analysis with the uh folks tuning in. Um, everybody else, thanks for watching. So for everybody watching, I just wanted to welcome everyone to this fantastic interview with Duneberg. This has been an incredible discussion, very uh informative. And before we wrap up here with our final set of questions, I just want to direct everyone interested in the metals and mining sector to dive into our Substack at metalsandminers.substack.com. Join our quickly growing community and receive a free report that'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 title of the report.