Transcription
And then you had 911 in 2001. That those, those two combinations, at that time, gold was $250. It went from $250 to $900, 8x increase. And that's what we're going to see again this. And when it happened, if you go back and look from 2002 to 2011, the miners did unbelievably well. And that's going to happen again. You had a decoupling. The stock market was flat. As a matter of fact, the NASDAQ did not get an all new all-time high for more than a decade after that crash in 2000. It took over a decade to get back up. Same thing's going to happen here. And so, the winners is going to be the miners. The losers is going to be the stock market.
Welcome back to Metals and Miners. I'm your host, Gary Bone, and today we have a very timely discussion lined up with Don Durant, the founder of Goldstockdata.com. Don, it's an honor to have you back on Metals and Miners. Welcome to the show.
>> Yeah, Gary, we've done this a few times. I'm looking forward to it.
>> All right. Me, too. Okay. So, Don, you've been analyzing, you've been making investment recommendations in the precious metals miners for several decades. You've even written a book about it. This is not your normal run-of-the-mill cycle that we're in. It's unlike the 70s, the early 2000s, 2016, and 2020. There's a lot happening. We're going to get into it all, but before we do, what do you hope for those tuning into this conversation today that they're going to walk away with after listening to it?
Well, that's a big group, you know. It depends on the person. This is, you know, we started a bull market here in August. Silver was at 35. Until silver got above 35, we were kind of in wait mode. So, the bull market kicked into gear in 35. And so, now you have a lot of kind of newbies coming in that weren't involved in gold and silver. They see the opportunity. So, there's that group. And then there's people like me who've been waiting, waiting, waiting. So, it's hard for me to answer. Those groups are different. They have different outlooks, they have different agendas, they have different strategies.
The other thing, it's difficult to answer that question, or what are you going to get away from this, get out of this, is, you know, you could try to get a 25 or 50% return this year and next year, easy peasy, I think. And then you could go for a one bagger, two bagger, or you go for a three bagger, five bagger. There's different strategies, different approaches. There's a, you know, a conservative approach, there's aggress, there's a moderate approach, there's an aggressive approach.
I recommend my book. So, the 12th edition of my book just came out. So, you can decide which strategy you want to use, which one you're comfortable with. I think everybody's going to be a little different. Nobody, there's nobody's really going to, you know, agree on what approach to take. And so, you know, it's hard for me to answer that question because there's really three different groups, three different answers.
Fair enough. All right. So, Don, I'm sure you've been keeping an eye on the broader stock market and all of the challenges that it's having today. There was a sea of red everywhere you looked. Are you concerned that we're starting to see the initial symptoms of liquidity issues? And as it progresses, are you worried that investors will begin to sell what they have and not necessarily what they want to?
>> Yeah, um, yeah. Yeah. So, now this is a question everybody, you know, is going to be interested in the answer. And it's the same answer for everyone, because what we're talking about here is what's happening. And again, I said that the bull market kind of started in August, but its foundation goes back decades. And what people, what people don't understand, is what is causing gold.
Gold was at $2,000 in February of 24. In two years, it went up 3,000. Silver went from 35 to 120, which is kind of the equivalent of gold going from two to five. I mean, gold going to two to five is an epic, historic event. Silver going from 35 to 120, epic, historical event. You have to ask yourself why. And you have to connect the dots. And people have a hard time doing that because, number one, you have to, you have to project the future. You're basically connecting the dots, saying what's happening is what's going to happen. And people hate to do that. They prefer to basically just follow the crowd, follow the current data. But if you do that, you're going to be lost. You're going to miss out.
I recently wrote a post on X, and I talked about three different groups. And the vast majority are in these first two groups, who are not going to even attempt to connect the dots. The first group is the people who believe that the status quo is just going to maintain. So, in other words, America is going to maintain its global dominance, both economically and, you know, militarilistically, and across the board international trade. So, the status quo is just going to stay in place. What people don't realize is that the status quo is breaking down. So, that first group, and it, you know, I put it about 30%. Grock says it's 50%. The 50% are basically, you know, everything's fine, everything's going to continue, nothing to—it's basically the 'nothing to worry about' crowd, right?
Then the next group is, they start to worry, and I actually put this group about 60%. This is the group of people. So, 30% they're not even worried. Everything's fine. The status quo, anything that happens, we're going to get through. There's nothing to worry about crowd. The second group is about 60%. And the 60% crowd is like, 'Okay, something's, you know, something's going to break here. It's pretty obvious something's going to break. Something's going to give. We're going to get some change here. This isn't, this isn't good. We have too much debt.' Something, you know, this is this 60%. They're the people a little nervous, if you will, and those are the people that are buying some gold. The first group, very few of them are buying gold, except for the, you know, some of the very wealthy people who, you know, they're just diversifying because they just have a bunch of money, right? But it's not really a fear trade, per se. It's more of a hedge trade, kind of, 'let's be smart about this' kind of thing, but they're not really worried.
Then the 60% crowd, some of them are buying gold, but that 60% crowd, by and large, is confident that anything that happens, we can deal with. In other words, the status quo is not going to break down. The status quo is going to kind of stay in place. There might be a few changes, a few tweaks, but the world's going to still look like it looks today. Now, ironically, that encompasses 90% of the population, which is mind-blowing. So, only about 10% are actually watch, you know, and it's a small group. That's the people that are watching the metals and miners, right? Watching me. These are the people that are investing in gold. These are the people that are paying attention to this, this question, paying attention to this podcast. It's the 10enters. These are the people that recognize that the status quo not only is no longer tenable, but that we're on the verge of something catastrophic. And that's where I come in.
So, gold and silver are doing these epic changes because we've reached that point. So, you heard this term, 'kicking the can,' right? The Fed's just going to kick the can. They're just going to print. They're going to ignore the problem. They're going to bail out this bank, that bank. They're going to expand the money supply, kick the can, everything's going to be fine. Well, us 10enters are like, 'We see the wall. It's right in front of us.' And I've been saying that once the stock market stops going higher, that that's going to be the endgame. That's going to be, it's game over, because the Fed, the Treasury, the US government is dependent on that stock market going higher.
And the reason why it's dependent is because it got so bloody big. It's doubled and tripled in size. It's up to $65 trillion. The United States stock market is up to $65 trillion. It's over 60% of the global stock market. I think it's closing in on 70%. And that money is there to make money, if you will. And so, if you take $65 trillion, just a little bit of it in this US, the US government gets that in capital gains taxes. So, our budget is literally dependent on it. And our economy is dependent on it because if the stock market goes down, corporations will lay people off, and you'll have that downward spiral. So, the stock market is everything. And I've been saying the only market that matters is the S&P 500, because once it stops growing, that's going to be a Katy bar of the door moment. That's when there's no solutions for the Fed, if you will, because the Fed, you saw this in 1989.
In 1989, the Japanese stock market was 50%—that little country was 50% of the global stock market. 50. Today, it's five. That's how much it lost. And all the money was basically, it was hot money in Japan trying to make more money. Now you have all this 60, 65% is in the United States stock market. Well, that money, 20% of it is global money. When it leaves, when it leaves the stock market, that's it. It's kind of game over situation, just like 1989 Japan. Now, it's not going to happen overnight. This is going to be a slow process, especially this year. So, I've been saying the first half of this year, we're not crashing the first half of this year because we have all this momentum, if you will. It doesn't turn on a dime, and there isn't really anything that's going to rugpool the economy in the first half of the year.
But what is going to happen in the first half of the year is the stock market is going to stop going higher. And that's going to be the, that's going to be the signal. It's going to be the indicator that we are, we are approaching game over. And that's when people are going to start to get nervous. And that us in the 10% crowd, we're like, 'Okay, here it comes, people. We told you it was going to come. It's coming.' And so, I'm telling you, the S&P 500 and the stock market is so important to this economy, and it—we cannot. It's running out of gas. It's running out of gas. It can't go any higher. Look at the leadership. He's gone.
>> Okay. So, I, I see what you're saying. What do you, what do you suppose will happen as the market is topping out and or, uh, money, foreign money, starts fleeing home and going back to its home base, and that 60, 65% starts contracting to whatever the number it's going to go to, right? What do you suppose is going to happen with the commodity complex and the miners, etc.? Those stocks.
>> Well, they're the winners. I mean, that's why I'm doing this. I, I saw this outcome that we're experiencing right now. This is, this is not a shock to me. This is what I expected. This is, this is the outcome that was always going to happen. I mean, everybody, not everybody, everybody kind of knew eventually it's all going to blow up because you, you just can't live on debt. At a certain point, you, you have a problem. The problem's here. It's, it's, it's here and now. And, and the reason why we know that it's here and now is the, the sheer size of it. We've gotten to the point now where we're borrowing not just $150 billion to $175 billion every month for the US deficit, but we're rolling over about seven trillion. So, it's about nine trillion dollars that has to be borrowed that we, it's basically a law of numbers, at a certain point it doesn't work anymore, and that's where we're at. We, we basically hit the end point.
Now, you asked about, you know, how the miners are going to do. Let me finish on the miners to answer your question. You're going to see a decoupling, just like you saw in 2000, 2001. In 2000, 2001, January of 2000 is when the dot-com bubble bust, and the stock market went down 50%. I don't think we're going to go down 50%, but we're going to go down 30%. And then you had 911 in 2001. That those, those two combinations, at that time, gold was $250. It went from $250 to $900, 8x increase. And that's what we're going to see again this year. And when it happened, if you go back and look from 2002 to 2011, the miners did unbelievably well. And that's going to happen again. You had a decoupling. The stock market was flat. As a matter of fact, the NASDAQ did not get an all new all-time high and for more than a decade after that crash in 2000. It took over a decade to get back up. Same thing's going to happen here. And so, the winners is going to be the miners. The losers is going to be the stock market.
>> All right. So, two questions. There's a lot of good information in there. The first question is, well, I just lost my train of thought. Um, let, let's do the bond side here for a moment. So, to your point, the nine or even more trillions of dollars that needs to be dealt with here, um, we have this massive deficit and this massive debt load. We have the trillion dollar annual debt servicing costs. We have 10,000 baby boomers retiring every single day, and their costs are shifting from unfunded liabilities onto the balance sheet, making this even harder. The budget's really strained as you were pointing out. I was just, I'm just adding a little context to it. Significant parts of the bond market, they're very weak. China and Russia, they're out as buyers, and China has been selling down quite a bit lately over the last decade. Japan's bond markets in crisis. They may need to become sellers very soon. Europe's economy is very weak. It's not like they're really robust and have a ton of reserves. And on top of that, they're trying to modernize their electrical grid, their military, and they need to acquire enough energy to meet their needs. They're in a tough spot. There just doesn't seem to be anyone out there capable of soaking up all this debt issuance. Are you expecting the Fed to print? And here is the second, before specifically before the election. And here is the second question that I was going to ask earlier, and that is, you were making the tie between the market and the, the federal government's capability of, you know, of continuing on. The fact that it's that large, there's a lot of tax revenues that come off. Do you think they're going to try to do something, or a lot of somethings, in order to prevent such a drastic decline like a 30% decline, because that'll affect tax revenues in the following year, which will ultimately, all of this combined, will, will really put a lot more pressure on the bond market as everyone's looking at this?
>> Um, yeah, to answer your question, the answer is yes. Everything you said, all of those factors are basically at play here. They're, they're, they're not nothing burgers. What people don't realize is that in 2008, the financial system was essentially illiquid. It was, it was basically meltdown mode. And this is worse. This is, this is worse because in 2008, we actually had options. We actually, and the number one option always is to print. So, in 2008, we just printed our way out. Well, guess what? This time we can't because what's going to happen to Kevin War is that when the econ, when the stock market starts to slow, he's going to try to use the playbook, which is to lower interest rates and print money. But he's, he's going to know, 'I can't.' And the irony of ironies is that he's not really a dove. He's not somebody that's going to basically go in there and doesn't care about inflation. He actually cares about it.
So, he's going to go in, and he's going to go, 'Okay, we can only bail out so much because every bailout is going to require money printing because Congress isn't going to have the money to, to bail anybody out.' You remember back in 2008? In 2020, actually, has it really kicked into gear. See, this is the fascinating part is that 2008 is when we adopted MMT, but 2020 is when we implemented it. You remember how much the Fed's balance sheet exploded to $9 trillion, right? That's MMT in action right there. So, in 2008, they basically said, 'Okay, we're going to use, we're going to do MMT.' And then Jen Yellen says, 'We're never gonna have another financial crisis in my lifetime because MMT to the rescue, right?' And then 2020 showed that, 'Uh-oh, MMT, they printed all that money in 2020, and what did it do? It, it created inflation.'
And so, Kevin Walsh comes in, and he goes, 'All right, we can only bail out so many banks because if we bail them all out, we have to print all that money. We're going to create inflation.' So, he's going to pick and choose who he, who he saves. And then, simultaneous to that, they're going to have limits to how much money they can print. They're not, they're not going to print at will. They're, they will print, but not at will. And so, what's going to happen is they'll print a little bit. It's going to be just like Japan in 1989, 90, 91. The same thing. Japan kept trying and trying and trying and trying to get their economy to grow, and it wouldn't. They print a little more, print a little more, right? It's going to be the exact same thing. Warship, print one trillion. Oops, nothing. Print two trillion. Oops, nothing. Print four trillion. Oops, nothing.
And, and, and it won't take long before—this is the reason why I own gold and silver miners—it will not take long before everybody to figure out, 'Uh-oh, the emperor has no clothes. The Fed doesn't have the tools to fix this thing. We're screwed.' And that's called fragility. And once the bond market becomes fragile, it's game over because at that point, the blood's in the water. The, you know, the sharks can see the blood in the water, and, and the sharks are coming out. And, and what, what I mean by that is people are going to start dumping their bonds. They're like Japan. You mentioned Japan earlier. As soon as our bond market becomes fragile, the, the Japanese will be forced to sell their bonds because at that point, China will have, will be selling. And once China's totals get below, say, 400 billion, 300 billion, at that point, Japan's is holding the back. They're holding the bag. They can't allow that. So, once China gets below 600, 500 billion, Japan's going to jump in there and start dumping. Otherwise, they're going to be holding the bag. They're not going to do that.
And so, that's that fragility. And it's not just them. There's going to be other bond sellers as well. The, the underlying thing that you people need to realize is that the global economic system right now, the underlying foundation of the global economic system, is US treasuries because those US treasuries are supposed to be risk-free, and those treasuries are sitting on foreign government balance sheets. If the US loses its global dominance—right now our GDP is 23, 24% of global GDP—if our, if that starts to go down and people start to get nervous about our bonds, it's game over. And I'm saying this is the year. This is the Jeremy Irons 'this is it' situation. That we're here. 26 is the year it all, it all basically happens. And like I said, once that S&P stops going higher, that's the trigger.
Today is a perfect example. Gold and silver, the way that they reacted today, is really the signal. The S&P was down 1%. Gold was down three, 2.7, 2.8, you round it, three. Silver was down 10. And, and the miners were down five, even more than five, like six, seven. So, and the S&P was only down one. And it just shows you that that, that little 1% caused all that, you know, volatility, if you will. It's like things, things are breaking.
>> Okay. All right. So, let's look over at the metals here. Silver is under tremendous supply strain. Data for the Comx, LBMA, Shanghai, they all show depleting supply levels over the last year. Modern civilization and military, though, require silver. There's no alternative. It's also under tremendous paper games being played by very large players. There's tremendous volatility. We've been seeing it for the last 3, 4 weeks. It's whipssawing many investors. What's your base case for silver for 26?
>> Higher. Um, and so, the reason why is because I've been trying to tell people this, but people have a hard time, you know, kind of connecting the dots and realizing, you know, what's kind of driving things. So, they look at silver and they look at the inventory thing and they try to analyze it in isolation. You can't. You have to think in terms of, 'Okay, what are the drivers of silver?' Well, the drivers of silver, the number one driver of silver by far, is gold. So, gold was down almost 3% today and, and that was the trigger for silver, and so then silver went down 10. So, you have to look at it—it's not the story is not about silver. It's all about gold. What is driving gold?
Now, silver has an inventory problem. And so, what happens is it becomes highly levered both directions when it becomes a monetary metal. And so, it's just you have huge leverage, you have huge players, you have huge traders. And silver's a small market. It's a very small market versus gold. And so, I don't think they can stop gold. Gold's up to $5,000 now. Gold went up $2,000 in two years. And so, it, $3,000, excuse me, $3,000 in two years. And so, silver has, the gold has the potential to be volatile. When you, when you rise that much, that fast, you can see these 3% down days. You can see 5% down days. We had a 12% correction in October. We just had another 12% correction. We're at 5600, and I think we went down 12, 12 again, 10 to 12. So, these big moves, if you will, I mean, are going to continue, but the, but the trend is higher. And the trend is higher because everything I explained earlier about everything's breaking.
And so, silver, I always say this, is that silver's just along for the ride. Recognize that. And so, we're really betting on gold. And then we're, we're basically saying, 'look, we are confident that gold's going higher. And since gold's going higher, silver's coming along for the ride.' And not only is it coming along for the ride, but it's going to outperform gold by 2x or more. I, I said that it's going to outperform it by two and a half. And that's kind of what's happening. I mean, we had a gsr around 90 when this started, right? 90. And so, when this is over, it'll be two and a half. And so, silver's going to outperform gold by two and a half from that starting, from now, from this point forward. It, it's going to, it will continue to outperform gold.
I, I now I think that, um, is as far as where it's going, but it's hard to predict how, how quickly it'll get there, if you will. Uh, but we could see this year, and we, depending on what gold does, that if gold trends to say 5500 this year, silver could go north of 150. Um, Michael Alder thinks it's going to go north of 150 in the first half of the year. It'll be interesting to see if it does. But, um, we're going to see higher floors. Like right now, I think the floor is around 70, maybe a little lower than that. But we're in this, we're in this, uh, channel right here between 70 and 90. I think we'll stay in the channel until maybe March, and then maybe get above 90, and then 90 will be the new floor, and then we'll go from there. We're looking at big numbers. We're looking at big numbers in silver this year. I think, I think north of 150 is definitely in play here, and I think that ultimately we're going to go north of 200. Maybe even next year is a, there's a possibility we get north of 200 next year. It's actually not crazy talk to think it could happen this year, but I don't think it's going to correct. That's the one thing. It's not going to correct where you have lower lows anytime soon. I think 18 to 24 months, we're looking at higher highs. Um, and then we get to 28. Once we get to 2028, we're going to have a better insight into, you know, when this bull market ends. But I think between now and the end of 27, I think we get higher highs. I think we're, I think 200 is definitely in play, and we probably are going to see above 200.
By the way, when I was, uh, reviewing our discussion, which was the very end of September, so four, four and a half months ago, uh, gold had not yet hit 4,000, and that was what was in play, and we were discussing 4,000 coming up as a possibility. That was in September. So, it's hard to believe because of how far things have moved and the tremendous volatility that we've experienced, uh, both in October after we had that discussion, and now again in January into this month. Uh, but with all of that said, both gold and silver are positive even year to date. And so, there's just been so much activity. Now, your overarching message last time, Don, was 'ride the gold and silver miner train and buy the dips.' You still feel that way?
>> Oh, absolutely. And we, we, we've had two dips to buy. Um, uh, do I feel that way? Absolutely. I, I feel that, um, I just said it. I think that this bull market has legs, um, at least 12 months, but probably 24 months. Um, and I actually think that the biggest gains are going to be in that 24-month period in 27, but we had unbelievable gains in 25. Um, I mean, the ETFs averaged almost, you know, 180% um, up upside last in 25. And we're, we're in it right now. Basically, all that gain came from August forward.
Um, and so, I think that this bull market, um, the reason why, and I'm glad we talked about this earlier, um, the reason why this bull market is going, going to do so well, gold, the gold, silver bull market is going to do so well is because the, the bond market, the US bond market is heading for trouble. Um, it's, there's no solution to our debt. There's literally no solution. Um, and so, it's just a matter of time before problems arise, if you will. We have a $2 trillion deficit, and there's, it's impossible to cut the, cut spending. So, if it's impossible to cut spending, all we can do is just pray that we can borrow what we need. And the moment that the stock market stops going higher, it all breaks. It's, I mean, it's a very simple thesis, but it's a thesis that's been in play for, for a long, long time.
It's pretty amazing. This is an end of era situation here where the US has maintained global hedge money, where we've literally been the big boy on the block for since 1945. And it's coming to an end here. And, and it's really interesting how it's coming, it, it basically came to an end over a 15-year, 16-year bull market that was predicated on manipulation. It wasn't predicated on reality. The 1990s were real. The 1990s was real growth because we had the internet boom. It was literally, you know, that was the real McCoy, but it ended in 2000. And since 2000, we've been, you know, using funny money to maintain our standard of living. And so, we have this 15-year manipulation where now we know, 'uh-oh, we have a problem.'
Um, and I, like I said, there, there's really no way out here. There's no solution here. Um, and, and everyone's going to figure this out. Like I said, once the stock market stops going higher, people are going to look around and say, you know, 'where's the meat? Where's the beef? You know, where's the green shoots? What's going to get this economy back on its feet?' 'Uh-oh, we got a problem here.' Um, you know, and because in 2008, we didn't solve this correctly. We, we basically ignored the problem. We did, we kicked the can. We bailed out companies, printed money, lowered rates to zero, and started manipulating. And now it's all, it's all basically coming to a head. Um, and like I said, there's, there's no solution. Um, and it's just a matter of time.
I mean, a, another reason why you can see how close we are is, is all of, all the policy that, that Trump's been trying to utilize. These are all acts of desperation. If you, if you're paying attention, tariffs are not good for the economy. But Trump's trying to sell it that way, right? Trump's trying to say, 'Oh, these are, this is fantastic. We're getting income.' Yeah, you're taxing somebody. You're hurting the economy to get income, right? There's not a free, it's not a, taxes are never a free pass. That, that, and he's a Republican doing it. He's doing it. It's an act of desperation. Um, he's not getting along with any of our allies. I mean, he, he's actually going after our best allies. I mean, he's going after England with, with tariffs. He's going after Japan with tariffs. These are like our best allies, and he's going after them. That's the kind of Canada is another one, right? Canada's our ally. He's going after them. Um, acts of desperation. 50-year mortgage. That's kind of an act of desperation, right? Um, bullying. I mean, look at all of his bullying that he's been doing to these countries. 'Either or.' I mean, you know, 'you do this or else,' right? What? That's another act of desperation. That's not something you do publicly. I mean, so you can see something's kind of, something's kind of breaking here.
Um, you know, the ICE, what's he, what he's doing with ICE is totally splitting the country apart. Um, uh, and we already are split apart, but I mean, that's kind of adding fuel to the fire. So, you know, you see these other, these, these data points and you can kind of connect the dots and realize this, this isn't a good era and then they say, and then they point to the stock market and they say, 'this is a strong economy, everything's fine.' Like Trump was talking about 50,000 DAO, you know, 'spin, spin, spin,' right? Basically, spinning, spinning everything. 'this is gonna be the greatest economy of all time, we're gonna have GDP of 15%.' This is just, you know, that's when you, you, you gotta, you got to step back and go, 'wait a minute here. Something's not right.'
>> All right, so, um, let's move over to the miners. You've talked about them a little bit here and there. Um, the HUI index, it sits about 10% below its highs. Gold itself is about 11 and a half% off. The HUI began the year around 700, so it's up 21% year-to date, which is amazing. That would make for a great year in a just a normal year, a normal cycle. Um, but because of recent price action, it almost feels like it's down to start the year. But do you view miners right now as fairly valued or as undervalued right now?
>> Oh, extremely undervalued, which is kind of, kind of mind-blowing. If you—so, I, I, I do this for a living, you know, 247, so I know exactly what the valuations are. If, if you look at the free cash flow multiples, they haven't even come close to catching up. Remember, gold's up $3,000 in two years. And, and it's up $3,000 in two years simultaneously during a period when the stock markets was up 50%. You know, the last two years, right? So, so Wall Street hasn't been involved in this. Wall Street's like, they're not even paying attention to these minors. So, the, the big money has, has stayed out of the minor. So, you've had this big disconnect between, you know, margins going exploding and the miners not, you know, coming along for the ride, if you will.
If you look at the valuations of these companies, we're not even—they're cheap. I mean, if you look at pneumont, it's trading at a 50% discount versus—I mean, if you look at its margins, um, its free cash flow multiple right now is about an eight, eight and a half. Um, and it should be 15. That would, if these, at these margins, um, the margins that we currently have are, are, are fairly. pneumont is free cash flow right now, um, gosh, around 15 billion, 13 or 15 billion dollars a year. Um, their, their debt around five billion. I'm plus or minus here, but basically, they, they could clean up their, their debt by the end of the year, uh, easily if they wanted to. You know, they probably don't, but, but most of these companies by the end of this year are all going to have clean balance sheets, but the market isn't value, is not pricing them in for that. The market is pricing them in as if the gold prices were 3500.
So, we're going to go through three phases here. Phase number one is going to be normalization. That's when new goes to 15, and, and that'll happen this year, I believe. And then this, this, when they, that, that'll be when everything starts becoming fairly valued, if you will. And so, new months around 125. So, that'll be around, you know, a little over $200 somewhere in there. They'll start, they'll get a multiple around 15, maybe higher than that, 230, 250. Um, probably let's call it 250. They'll be, have a 15 multiple. Um, so, they got a ways to go. So, they're, that's just multiple expansion alone. So, they're basically valued about half off.
Um, and then the second phase is when valuations get high, which is what we have today in the S&P 500. So, we have a multiple right, forward multiple in the S&P is about 22, 23, and I, I equate the pees to my free cash flow multiple. Um, I prefer to use free cash flow multiple because cash is king in the mining business. Um, and so, once pneumont gets to about a 20, then that's when you start to see high valuations. So, you really don't want to take any profits until pneumont gets to an 18. So, that's a good indicator. I'm just going to sit back and wait and watch. And, and pneumont is just one company, right? We, we'll also look at the, the multiples of Agniko Eagle and Bareric Heck. We'll look at all of them and, and get an idea of where we're at. Um, and then so, we don't want to really take any profits. We're, we're really early in the, in the cycle. And so, until you get to about 18 on—
>> Just real quick, you're just real quick, you're looking at the, uh, the multiples to determine maturation in the market.
>> Yes. Absolutely.
>> How mature, how mature is—
>> Perfect example is the S&P 500. Right now it's mature as heck at 23, right? We, we pretty much know it's, it's kind of pricey here. It needs, it needs to go back down to its historical norm, right? It was about 16, 17. So, yeah, it's out of whack. It's way, way overvalued. And that's what we, and that's another big data point, right? So, we don't really want to take profits. I've telling people there's a smart time to take profits and there's not a smart time. It's too early to take profits. So, that's a good one indicator, but we can look at some of them.
Then once it gets to about 20, at that point you're basically going, 'Okay, now we're getting late in the cycle.' Once you get to about 20, we're starting to get late in the cycle. Now you're starting to get, 'okay, now it's time.' So, at 18, will you begin to take profits? At 20, when new mine gets to a 20, at that point, you want to aggressively take profits. And then the next, the final cycle, the final phase is the mania phase. You don't get mania phases in the stock market because the, the, because the miners are unusual because they're cyclical, and because they're cyclical, you get mania. You get, they basically, you know, a top of a cycle, you get these manas. And that's what we're going to, we normally see in a bull market. And if this is a two-year bull market, the chance of us getting a mania cycle is very good. That's usually what happened because more money, as the money comes in, more money comes in, and the momentum pushes it up, and you get a mania. So, the mania is when pneumont gets to a 25. When pneumont gets to a 25 and hecka gets to a 30, 35, at that point you're like, 'take money off the table, people. It's time to get out of here.' So, yeah. So, for me, um, you know, pneumont 25, heckler 35, those are, I'm not gonna have very much money on the table at that time. As a matter of fact, I might sell everything.
>> When pneumont gets to 25, I might sell everything.
>> Okay. Interesting. I appreciate you running through that. All right. Don, other than a few brief moments since, you know, we'll call it March of 24, since this bull market has begun, sentiment, specifically in the minors, and, and the miners started probably early 25. Um, sentiment has seemed very underwhelming throughout most bull markets, the sentiment is strong. It's durable. That's just not been the case with precious metals miners. Why do you believe that the sentiment has been largely weak and anemic? And when that dynamic changes, if you expect it to, when that dynamic changes, what will the environment for gold and silver miners look like at that time compared to what it looks like now?
>> I, I love this question, Gary. Absolutely love it, um, because it, it, it, it, it's a great follow-up question to my, my previous answer about how multiples are low. So, multiples are low because sentiment is in the toilet. Now let me, I'll give you two examples of sentiment in the toilet. Well, first pneumont, I think that's a really good indicator. But probably the better one is B2 gold. B2 Gold right now is trading at a 2.7 multiple and it's producing 1 million ounces with margins of $2500. Its free cash flow run rate right now is $2.5 billion a year. And their, their debt is like 400 million, which is going to get paid off with, you know, this year easy. And they like to pay high dividends. They like to pay 30% dividends. And they're building another project, a big one in Colombia called Grammalot, which is they're building that one. And they just finished building, um, a big mine in, in, in a Alaska. Um, no, actually it was in Canada, excuse me, and 2.5 billion free cash flow trading at 2.7 multiple and nobody wants to own it.
It's like, now they get about 50% of their profit from, from Molly, from one of their mines in Mali. But if you, if you take that out completely, if you just shut that mine down, they're still trading at 5.4, which is still low for a company. So, they're still a 500,000 ounce producer. Now they're all, all their minds are in good locations, trading a five multiple. They're still ridiculously cheap. So, in other words, the risk isn't really that high because it's so cheap and nobody wants to own it. So, that's one example of sentiment being a total toilet. Nobody wants to own B2 gold. There's a million producer with a really good management team. That's a shark that grows production and nobody wants to own it. And, and like I said, their dividends are going to explode. So, if you buy that stock today, your, your dividend is like 1%. But if the stock doubles in price, it goes to like 2%. Right? And it triples in price, it goes to 3%. And then if they increase the multiple to 5%, your, your dividend goes to 15 and nobody wants to own it. So, that's one stock.
The other one that I'll give you, one other example of sentiment being in, in the toilet is, is 1911 gold. They came out with a PE to produce 60,000 ounces. And this is starting, I mean, they're going to expand production. Whenever a company does a pea, it's just, 'this is what we're going to start at.' You know, it's not, it's going to grow fairly quickly after, after they're probably, usually when some company does a PA, when they start production is usually higher than the PA a lot of times. And that's the case with these guys. So, they came up with a PA $1,900 ASIC with a $50 million capex and they used $3,000 gold. Their price went down 11%. Now, this project is in Canada. Do you know how many mid-tier producers there are in Canada today? Gold only producing, they only produce in Canada. So, basically, you're buying a location risk in Canada today. Number, there are one, one Artemis Gold. And people love mid-tier producers in Canada. They absolutely love them in a bull market. They'll pay through the nose. They'll pay massive premiums to own a mid-tier producer in Canada. I've seen it and it's going to happen again. There's, there's one and these guys are joining the party and nobody wants to own it.
It was down, it was down like 11% when they announced the pea because the capex was a little bit higher than people expected. It was a 50 million, might have been 60 million. I thought it was 50 but didn't miss by much. The ASIC was $1,900. It missed by like maybe a hundred bucks and then, and then the payback was two years and, and little tiny miss and the stock goes down 11%. Are you kidding me? So, yeah, sentiment, sentiment is in the toilet today.
>> So, okay, so we, yeah. So, sentiment is in the toilet, but what does the environment look like when sentiment reverses and it's no longer in the toilet? It's robust. It's, it's strong. It's exciting. It's positive. What, you know, what does that environment look like?
>> It gives me the chills, actually, because I look at my portfolio, and I've told people, I said, 'When I hit my number, I'm out.' I'm gonna hit my number really fast once the sentiment turns, and I'm gonna be leaving really early in this cycle. And it's going to be a tough decision for me because, like, remember I said you're not supposed to—I don't really want to exit until pneumont gets to 25. I don't think I'm going to have the patience to wait for pneumont. I'm gonna leave a lot on the table because when sentiment turns, these stocks are going to rip, like B2 gold, 1911, these two stocks that I just mentioned, next year.
So, so next year, 27, B2 Gold's—their costs actually go down next year because they have, they have finance. That's another reason why nobody wants—they're penalizing it because they have some financial, you know, constraints this year because when you borrow money, the bank always, you know, penalizes you in the short term. So, B2's got some penalties in this year. Those all come off next year. So, next year, you know, B2 gold, you know, sentiment improves next year. B2 gold is actually going to just be kind of be a rocket ship. You know, its multiple go from, you know, 27 to an eight, but then it, and but then on top of it, the free cash flow will go up.
Um, and then 1911, they go into production next year. They get into production, you know, rocket ship. Um, we're going to see a lot of rocket ships. Next gold will go into production next year. Silver Storm will go into production next year. All these companies that are going into production next year, Silver Co Mining will go—
into production. Silver Mountain, um, Andy and Silver, these all these companies that are going to go into production, the time, their timing is going to be impeccable. And that's what I mean. I mean, it's just going to be we're going to see some, you know, they're these stocks are going to rip your face off. They're going to go up so fast.
>> And you're expecting sentiment, >> the the turn in sentiment to coincide with the change of sentiment, we'll call it, for the general stock market, for the S&P. We're going to see a herd we're going to see a herd shift from the S&P to the miners and they're going to take their sentiment that they've been so bullish on towards the S&P for so long and they're going to bring that with them and they're going to now be bullish over here in the miners. Is that is that is that am I getting that?
>> 100%. That's exactly what's going to happen is basically people are as the money pivots into the miners, everybody's going to jump on that on that train ride. Everyone's going to jump in and as they jump in, the momentum goes in and the sentiment just explodes. Absolutely. And then the the thing that's going to make it unbelievable is that gold is going to be perceived as the go-to asset. It already is now as we speak, but people still are apprehensive because it went so fast. 2,000 to 5,000. So people are a little apprehensive today. They're not sure about gold. Not everybody's sure about it, right? So they're not people aren't people aren't buying gold because they're not sure about it. Well, we are entering an era where people are are going to be sure about it. You think of it thinking of it terms this way is the Indians and the cana and the Chinese th those cultures are sure about gold they don't st they don't save in in dollars or their currencies they save in in gold that's what they they save in because they believe in gold and and their you know it's a part of their belief system their structural system that is coming to the west that's coming to the west and when that comes to the west the percentage of people that are buying gold is going to expand and that's going to create sentiment improvement in the miners and that will happen once the S&P stops going higher. So once it stops going higher, people are going to look around and go, "How come gold's not going down with the market? What what's up with that?" And and that's when people start to become believers in gold and believers in silver. That's why I say that even though silver is going to go to 150200, it's not going to crash. It's not. It's it's it's basically going to follow gold. The reason why it's not going to crash is because gold's not going to crash. The chance of gold not making it to $7,000 is pretty low in my opinion. It's pretty darn low. So, if gold's going to $7,000, good luck pushing silver down. Good luck. Anybody that's bearish silver or short silver, good luck with that. I mean, you could do it as a trader short term, but you know, if you're trying to do it, if you're like, I'm not going to buy that silver. It's it's it's going back to zero crowd. You're missing the trade here. You're missing the trade.
>> Let's say you're near the end. >> S&P is showing signs of cracking. People are starting to migrate over. Gold has not collapsed. It's 6,6500, 7,000, who knows? whatever the number is. Are Western investors looking at that number saying, "Wow, that's rich." Um, wonder if I can get piece of gold maybe through the miners for cheaper. Oh, look, these these miners, there's small miners that are, you know, anywhere from a dollar to $3 a share. And then, oh, look, here's some a little bit bigger. They're from $3 to8. and oh look there's bigger ones. So do you think they're they're looking at that saying I can get more value for my investment dollars in their mind um when they see a gold price of 5565 $7,000.
>> Um yeah, basically what you're alluding to is basically the overall market. Think in terms of all the investors, right? There's going to be more and more people coming into physical gold, physical silver, and the mining stocks than there is today. It's going to expand. And and it's going to expand because of the things we've been talking about throughout this interview, which I think has been a really good one, by the way. even though I have a cold and I feel terrible.
>> Um the >> good >> the the the people that are going to be coming into this sector um is it's going to be significant. It really is. Um and so they're going to push these miners higher. They're going to push gold and silver prices up. The West is going to kind of join the East here um over the next 12 to 24 months, I believe. And it and it all equates to to one simple thing. End of era. It's basically an end of era for the US. End of global hedge money, a new monetary system. And everybody that thinks that we're not going it's not going to happen, that this is a cycle change, think about this. We did not have a reset in 2008. We had a very short short recession. It was over. In June of 2009, the recession was over. It was a very short-lived thing. We didn't have any type of a reset. So this time, if you think that we're going to have the same thing that basically soft landing, no landing, you know, Janet yelling, no, no recession. That's a stretch. the chances are much much higher that things get ugly here very soon because again we're on 16 years and like Jim Rogers said if you think that the business cycle went away good luck with that I'm paraphrasing him by the way
>> well this has been an incredible discussion Don before we wrap up I want to direct everyone who's paying attention and who's interested in the metals and mining sector to dive into our Substack at metalsanders.substack.com. Join the quickly growing community and 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 Dallio. And that's the name of the report you'll receive. Now, I'm positive that you've been enjoying the conversation Don and I have been having as much as I have. Please let them know. Hit the like and subscribe button and leave a comment below the video. All right, Don, we're going to wrap up here. Would you share a key takeaway that you want viewers to keep in mind and then let everyone know how they can connect with you, how they could follow your work, and how they could learn more?
>> Yeah, the takeaway is we're we're in a bull market. You don't want to waste a bull market. And the two groups of stocks, if you're interested in the stocks, the two groups of stocks that are going to participate that you can count on them participating in, so you might as well own the best riskreward stocks. Number one is the producers and number two is the quality developers. And the quality developers ideally you want a company that's going to be in construction within three years. If it's if it's longer than that, you know, you might pass on it. There might be one or two that okay, I'll do a stretch on it, maybe longer than that. Those are the two groups of stocks that I'm focused on because those are the groups that are going to participate in a big way. I mentioned all of those near-term silver producers, right? those are the ones I want to own because they don't get revalued until they actually get into production. And same with these developers like you know once they get into construction like if they're going to get into construction within three years once they get into construction they get rerated and the producers I mean just look at a veno I mean the stock was trading at 50 cents and now it's up to eight or nine dollars and it's heading to 50 plus and all you're doing is just riding you're just riding you know the producer it's just elastic as heck. It just keeps riding that silver price higher. So that elasticity is a thing of beauty for producers but you don't you don't want to overpay too much you know like the big ones like pneumont beric agree lundine those stocks maybe you maybe you pass on those and then look for the ones a little bit lower than that one where to find me my website of course um but I wanted to say that if you have any interest in mining stocks read my book I just came out with a 12th edition I just updated it it's really good one I I I figured this is going to be my last one, so I put a little extra effort into it. Added a couple appendixes, but the 12th edition available on Amazon, both paperback and digital, and it's going to be available in audio audio. Audible Audible audio um Audible um in the in the next two weeks. I posted it. They said they needed 10 business days to approve it, but I finally did an audible version of the book. So, and it's really good. So the book is very thorough. It's the only one out there that you want you want to understand these gold, silver, mining stocks, you read my book. Thanks for having me on, Gary. It was it was great. Really enjoyed it. I didn't think I was going to I feel great today, but I enjoyed the conversation.
>> It was outstanding. I also enjoyed it. Um I always enjoy spending the time with you and and uh our discussions and um I did. Again, thanks for coming on to Metals and Miners. you've been really generous when you're not feeling well. We all appreciate it and of course look forward to having you back on sometime soon. Everyone else who's who's tuning in, thanks for watching. Want to direct everyone who's paying attention and who's interested in the metals and mining sector to dive into our Substack at metalsanders.substack.com. Join the quickly growing community and 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 Dallio. And that's the name of the report you'll receive. Heat. Heat.