Meet Jimmy Connor! He’s one of the many faces joining the Wealthion team with one goal, to empower you to make the best financial decisions for you and your family.
Jimmy’s passionate about educating investors on the benefits of resources, such as precious metals, base metals, battery metals and uranium. He’s also the host of Bloor Street Capital.
David Iben, CIO of Kopernik Global Investors, joins Wealthion guest host Jimmy Connor to share his views on the economy, why his team is bullish on gold right now and if he thinks the S&P 500 is fairly valued.
Jimmy Connor 0:04
Hi, and welcome to Wealthion. I’m James Conner. And I’m so excited to be joining you on this channel as a guest host. I’ve been a massive fan of Wealthion for a while now, and I’m honored to follow in Adam’s footsteps, and to have the opportunity to be part of Wealthion mission, which is providing education and insights to you, our viewers, from leading experts in the world of finance to help you learn, build and protect your personal wealth. A bit of background on myself, I have a passion for resources and educating people about the benefits of resources such as precious metals, battery, metals, and uranium. Without these metals, we couldn’t operate in the world we live in today, you and I wouldn’t be able to communicate with one another on this channel, we wouldn’t have smartphones, and we wouldn’t be able to trade stocks on an app. In the coming weeks. I’m looking forward to educating you on the benefits of resources with some of the leading experts in finance. And now I would like to introduce you to our guests, David Iben. Dave is the chief investment officer of CobraNet global investors, which is an asset manager based in Tampa, Florida. Cooper next investment style is a bottom up value approach. And they manage just over $6 billion in assets. David, thank you very much for joining us today. And before we discuss where you see value in these markets, I want to first get your view on the economy. Inflation is running very hot at 40 year highs. And even though the Fed says inflation is only three or 4%, we both know it’s significantly higher than that. And as a result, it’s causing a lot of pain throughout the economy. You and your team have done a lot of work on inflation. How do you think the Fed is doing and do you think inflation is being subdued?
David Iben 1:44
Alright, well, it’s pleasure to be here. Thanks for having me. And did you suggest it is interesting times in the market? You mentioned we are bottom up and we are 100%. Bottom up fundamental research. We like it when our analysis says things are different than the market seem to perceive. And as you mentioned, the markets don’t seem to be paying a lot of attention to what’s going on, it’s more like they want to see. So as for the Fed, they were the wrong person to ask. We’re in the we’re in the Ron Paul camp of get rid of the Fed. We don’t think that people much less political type should be in charge of the stores of values of a nation’s well. But as far as how they’re doing, we all saw they took rates to zero and left them there for a decade. That’s the problem. It was interesting how Ben Bernanke used to say he looked at the 1930s. And they learned their lesson, we kept saying you’re looking at the wrong decade, you see like the 1920s that sowed the seeds for the 30s. And I think what the Fed and all central banks did the last dozen years or so is indefensible. And it’s maybe time to pay the price. We’ve talked a lot about how inflation is not transitory, it’s more migratory, it migrates from one thing to another, works its way through the system. And that’s sort of what we’re seeing our seeing, as you mentioned, prices going higher, have lots of things. People look at the CPI and maybe scratch their head. But even the CPI, that is a government measure that’s subjective, they only looks at consumer prices leaves a lot of things out and is tortured. Even that says inflation has gone up year over year, every year since 1954. I think it is. So it’s not contained. And what we’re seeing, even this last week, the market seems to like the numbers, but the numbers seem to say the prices are sticky, even with a slowing economy. And Dave, we can’t have a discussion on inflation without discussing the money supply. What are your views there? We believe as Milton Friedman, that money is made inflation is a monetary phenomenon. So we looked when I came into business 42 years ago are people who are obsessed with the money supply. If it grew like four and a half percent and they wanted four, they would kill the markets. People couldn’t have imagined a time period where 4 trillion to get printed out of thin air over several months time.
So we believe that there’s so many extra variables that people shouldn’t look at little small moves in the money supply they did in the 80s. But they should really pay attention to big moves in the money supply. So a doubling of the money supply in the last four years and a 10 fold increase since 2008. Those are things that people should pay attention to. That’s something that needs to be dealt with.
Jimmy Connor 5:00
So you bring up an interesting point there that the money supply has doubled in the last four years, that would imply real assets would also double. I don’t think mine have. But another way of looking at that is that the purchasing power of your currency has been cut in half. Would that be a correct assumption?
David Iben 5:19
Yeah, that’s the way we see it cut in half and four years, and people can stay. But didn’t they just take a trillion dollars out of the system? Yes, they did. It’s a doubling. Even after that the money supply went from 4 trillion and 9 trillion back to 8 trillion. So it’s still a doubling. And, you know, Friedman, and a lot of others say, as you do that, maybe a doubling of the money supply is 100% increase in the price of things. We’ve been talking to people a lot about a guy named Richard kattiline, from three centuries ago. But he’s a fascinating guy, or people should read about him. He was,
I think, partners with John Law, who kind of launched the whole Mississippi scheme during the bubble in France at the time, which is the same time as the South Sea bubble, and he was able to make a lot of money off it. But his saying was sure, money is inflationary, but money is not neutral. So when you print money, it doesn’t affect all beings equally. As he put it, if you have a river, then you double the water in the river, but you do it all at the source of the river. People downstream don’t know. They will know in a day or a week or a month, depending upon how long it takes to get down there. So it it the money supply leads to price increases something sooner, some things later, some things not at all. And if one bank of the river is high, it doesn’t flush there. If one bank slow, it floods, all the prices go up there. And so if you look at that, that she really how it plays. Now, you look at the 1920s in the 1990s. And well, 1960s and 70s, for sure you print money, and what goes up, usually they print the money to buy bonds, the bond market goes up. And then money leads the bond market into stocks and real estate and art and other things. And so those prices go up. None of those are captured accurately in the CPI. So people will say there’s been no inflation. But of course there has it’s just gotten into those sorts of assets. After a few years of housing prices going up a lot. People say we can make money building houses. So they started building houses that drives the price of lumber up and copper up in concrete. And when those are going up and there’s more jobs, then you have to pay more for the electrician and more for the carpenters so their wages going up. And as they get rich, they go to the restaurants more often and those prices go up it kind of migrates to the system. And so to your point, that money says wise doubled, its up tenfold since 2008. And I put some figures Okay, so the money supply of 10 times. So Caroline’s point things should go up 10 points return times. But what’s happened since then is the NASDAQ has gone up 10 times 11 times the NASDAQ 100. That’s gone up 14 times, whereas the s&p has only gone up seven times. And the MSCI is only up four and a half times gold has only double other commodities as reflected by the Bloomberg commodity index, not up why gold’s gone up two times the GDX has not gone up and the GDX J has gone in half. And we can go over other examples. I won’t vote right now on other commodities, but the price is go in unevenly. And the fact that say your assets or my assets haven’t gone up tenfold yet is disappointing, but it’s actually kind of exciting because it’s things migrate through the system. You know, in the 60s, they migrated out of stocks and bonds into commodities for the next 10 years that that was the place to be in the 70s same thing following the 99 bubble the place to be was in commodities. So I think you can make up a great case that it’s it’s that they haven’t gone up yet.
Jimmy Connor 9:57
And you brought up gold a couple of times and I do You want to go there. But before we do that, I have to ask you about interest rates because this is in response to this. high inflation, the Fed has lifted rates, I believe 11 times I lost track, but they’ve done so at a very accelerated pace. And this is causing once again, a lot of pain through the economy, with businesses and with individuals. And because the Fed has lifted rates at such a fast pace, do you think that there could be some other event that might be unfolding in the not too distant future?
David Iben 10:31
But it’ll be interesting, because it’s true, they’ve come up faster and further than what we’ve seen in history. So obviously, they will be consequences to that. On the other hand, 10 years of zero interest rate. That’s unprecedented. So why come into business, we couldn’t have imagined rates as low as 5%. And so now they run all the way up to 5%. Is 5%. Higher, isn’t it high, smarter than me Can, can make that decision. But certainly there’ll be consequences, the type of assets that did well, during the 40 years of falling interest rates are highly unlikely to be the same assets that will do well, when rates are going up. And so we suggest that people look at the 1970s. Or they look at other countries that have had inflation problems and see what did well there. And in the 1970s, you did not do well, if you own stocks or bonds, unless you own the stocks of Schlumberger, and oil service company, or Exxon or Homestake, mining, those sorts of things. So quite likely, these rising interest rates will, will hurt some of the winners of the last 40 years, we’ve seen what it can do to Silicon Valley Bank and places like that. I don’t think people should be that surprised if there’s not other entities out there. They’ve got got too long on duration or, and we’ll see if there’s credit implications. Certainly, you see that the numbers on credit card deletion, delinquencies and autos and other things are, and some cases were sent in 2008. Nine. So the consequences are starting to be seen, but they are certainly not being seen by the stock market. We should we shall see. But I would guess that companies with lots of leverage, and or sell into leverage markets will feel increasing pain. As far as gold and commodities. People tend to think that raising interest rates are really not a problem for the NASDAQ in their opinion, but is a problem for gold. We think that’s Miss misunderstanding. In the 1970s, interest rates rate for a couple of percent to 20%. So gold Chyna got killed if they if rising rates are bad for gold, gold and not get killed and went from $35 to 800. Then rates went from 20 back to three or four. So did gold go to the moon? Now Gold fell from 2000? Or are you from from 800? Yeah, so gold went from 35 to 800. Then Gold fell from 800. Back to 255. So clearly, that’s been wrong since then, real rates going up and gold’s done pretty well. So what matters is real interest rates, not nominal interest rates. So in the 1970s rates were going up but continuing to lag inflation on the way the last three years. That’s been the case too, it’s rates have gone up but tended to lag inflation. Now inflation may or may not be cooling. It may or may not be temporary, but it’s not clear at all that rising rates, nominal rates are bad for gold’s probably quite the opposite.
Jimmy Connor 14:24
It seems like it was just yesterday when they said or the Fed said that inflation was transitory. Yeah,
David Iben 14:30
yeah. Now, you know, I guess they had to say something. And now some people are starting to say that slowdown and CBI showing that it was transitory, but they should worry because when commodities took off to the moon a few years ago, they said that’s the reason that yeah, the CPI is up. Then commodities in many cases fell 70%. It was a big drop in a lot of commodities. So then I guess the CPI should have dropped six or 7%. But it didn’t it stayed positive all the way through and generally more positive than their 2% they wanted. So it’s not playing out the way they would have hoped, I think.
Jimmy Connor 15:14
So Dave, you’ve touched on gold a couple of times, you and your team are very bullish on gold. Now explain what the thesis is.
David Iben 15:21
Yeah. What does the thesis is always as bottom up investors, what’s something worth? And why does the market have a different opinion than then we do. They’ll people will say we must be thematic. Macro, we say Now we’re 100% bottom of the market, there’s been adding in the market is 10s of millions of people. Famously, we don’t all think as well as part of a crowd as we do on our own. You see that all the time, football games, rock concerts of politics, you see the crowds get crazy sometimes. And so if the crowd decides they like something a lot, usually, that means it’s out of our price range. And so we don’t end up buying it. What gets us excited is where people get to negative on things. Work gets better than three years ago, when the price of oil got negative, there was a day where it’s minus $40, or something. And that was saying that really obscene ly low rates for a long time. So intelligent people have good say whether the fair price is 40, or 60, or 80, or 100, people can have that discussion. But zero or $20 was never a consideration. And the idea that we were going to be off hydrocarbons in three years, you know, the words by now was crazy. And so as bottom up investors, we can say, alright, let’s buy companies, well, we’ll make some pretty good money. If oil is at 50, we’ll make a lot of money if it’s 70. And that worked out pretty well. And as people thought we were in a depression enhanced oil down, that meant copper was cheap. Gas was cheap, it meant uranium was cheap. And so we’re able to take advantage of all that. And that worked out. Now the world’s come around to they like oil and gas kind of, they like uranium a lot more than they used to. They’re still arguably all too low in price. But over the last three years, the price of gold has done nothing and the price of gold stocks for the most part have gone down. So we like uranium gas, well, others are kind of liking it. We like gold on the fundamentals. And the market does not like gold at all. And so that’s where we’re coming from, we’re saying well, at $2,000 or less, nobody is building a major goldmine. So if the miners are depleting their minds at a million a quarter, and not replacing that gold, ultimately, that has to lead to higher prices, whether that’s 200, or 300, or $400, above where we are now, who knows, but it certainly takes higher prices. So we like that. But then the bears will come to us and say, Fine, if we don’t produce enough oil, oil gets consumed in the gas tank and whatnot, we’ll run out so we understand why oil needs to come up to its equilibrium price. But gold, who cares? We don’t put it in the gas tank, we don’t eat it. We don’t use it industrially. We say all right, we kind of agree with that. Gold does not sound like a commodity, it sounds like money. And we don’t eat dollar bills. And we don’t put euros in the gas tank and we don’t put in into the industrial process. And so maybe we should look at you know, supply and demand of dollars versus supply or demand of gold. That’s gone up from 400 An ounce when I came into the business 40,000 an ounce or something like that now, so we’re not saying that’s gonna happen. We’re just saying maybe gold’s worth where it is today, maybe it needs to go to 300 higher to reach an equilibrium. Or maybe it needs to go a few 1000 higher to adjust for the the idea that it needs to come back in line with the money supply over time. So that’s one thing and then the most exciting thing though, and this applies for uranium, natural gas, gold, you name it. The commodities might be undervalued. But on Wall Street, they’re more undervalued. And so that’s an opportunity but even more exciting. The things that people should value most if something is needed and desired and hard to find, then you don’t want to have to go find it, you want to already own it. So the most valuable resource companies are the ones with the big resources. But everybody on Wall Street does a DCF model and they do the DCF model upside down. They do not say like all DCF models, the price of the dollar, or the euro is going to fall 5% A year against goods and services. They say if you pull gold or copper uranium out of the ground next year, it’s a commodity that’s down 5% against dollars. And after five years, it’s down by point nine, five to the fifth power, that’s after 10 years, point nine five to the 10th power, the commodities are dropping against dollars, that’s backwards. So that means we are able to buy big, big reserves of your uranium and gas and especially gold right now, at really crazy low prices. Because of people’s, what we make is Miss analysis of long lived reserves.
Jimmy Connor 21:12
So there’s a lot to unpack there, but I’m gonna play devil’s advocate and Dave, Bitcoin is up 100% on the year that gold is up small in the year, somewhere between five to 10%. And my question to you is, is Bitcoin the new gold? Yeah,
David Iben 21:29
that’s a question that comes up quite a bit. I know a lot of my friends that used to be proponents of gold now. Now love Bitcoin. There is a lot of similarities between the two. You know, with both of them, you got a relatively fixed supply, and you don’t have to trust government politicians as to whether to buy. However, if people have on average 1% of their money in cryptocurrencies and on average 1% of their money and precious metals, and they have 90 something percent of their money and dollar based assets. And they’re printing money like there’s no tomorrow over time, then I would say the real question is the battle between fiat currencies and real assets stores of value. And so, yeah, as we saw in the 1970s, as we’ve seen in Argentina, Venezuela, you name it, we see that when people start to lose faith in this money, it goes into all kinds of real assets. So people can talk about, you know, whether they should like real estate, more commodities, more Bitcoin more gold more, or Google or Apple more, these are all stores of value, we would suggest that Google and Apple are deserving to be viewed as a store of value, but everybody knows them, or they likes them, everybody owns them, they’re not likely to be undervalued. Whereas commodities have not run up. And they got a lot of history as being stores of value. So they’re probably a nice place to be over the long run. Bitcoin, like I say, whether it takes a little market share away from gold or lose a little market share to gold, or whether it all goes to copper, and neither of those they I don’t know. But if massive trillions of dollars, start exiting bank accounts or bond accounts and going into stores of value. I don’t see why gold and Bitcoin can’t both be winners, as well as agriculture and commodities. And Google, you name it, they can all win. And so we don’t think the battles between the two of them, they’re both stores have value. The difference, though, is for both good and bad. Gold is boring. Yeah, it is what it is. And it will be a store of value. It’s been a store of value for 1000s of years. It’ll keep its value, but it’s not going to be the the thing that creates tons of value distorted by Bitcoin, that might be the thing that goes up 1000 times, or it might go to zero. So there’s a little more risk to that. With gold, you don’t have to worry about solar flares, knocking out of memory or electrical grids. You don’t have to worry about what happens if electricity shut off. You don’t have to worry about losing your wallet or somebody hacking into the system. You don’t have to worry about this algorithm that’s promised us that is gonna keep Bitcoin scarce. Not being any better than the promises of central bankers who promised this for years they wouldn’t print currency. So to us better coin is interested in speculation we kinda like it, but but to put a meaningful part of people’s wealth into it, why not gold, gold? It’s nobody’s liability and it can’t be printed under any circumstances. It’s a known quantity. So that’s that’s our opinion on that.
Jimmy Connor 25:23
You touched on uranium a couple of times, and you and your team are also big investors in uranium. And it’s done very well this year, I believe it’s up 50 plus percent. But what’s your thesis there? Why do you have such a interest in uranium? Yeah,
David Iben 25:37
it’s interesting. We talked about the crowds being fickle. So in the 1960s, people were pretty excited about uranium. And by time I came into the business in the 80s, people were starting to get tired of the cost overruns, you build a plant for a billion ended up spending 6 billion and uranium started to become less popular. And then you have some events like Three Mile Island or Chernobyl. And people decided they didn’t like it anymore. And the price went from one point 137, down to 18. And in the midst of that was the Fukushima event. But 137 People were focused on this is cheap, and it’s clean, and it’s carbon free, and safety wise, it’s actually been safer and safer than any other form of electricity. And then after Fukushima they came out with many things can happen, and it’s kind of scary sometimes. And how do you deal with these things? And you know, that’s correct, also. So 137, that was too high. People were too below age 18. That was too low. People were too bearish. Now people are slowly coming back to, you know, it is safer than most others. And we do on our carbon free environment. And how can you do that without nuclear is baseload? And so as they’re coming back, the price of uranium is coming back to a fair price. Now what is fair, we like the Charlie Munger approach to things let’s throw out what’s wrong. So if you don’t know exactly what’s right, and 2737 and up from 10 was too high. But 18 was too low. At 18. People were closing minds, they were not building minds. We like to watch what people are doing. We even when was a team? He kept saying somewhere between 90 and 6060 and 90. That’s a range that’s that’s defensible. Since then, they’ve doubled the money supply. So we’re saying perhaps 60 to 90. That’s one scenario. The money migrates to the system, and it’s worth 100 Something is a highly likely scenario. So we think if we buy most uranium stocks, now they’re a tad undervalued with this optionality that it’s probably worth more. So we kind of like uranium. We loved uranium, when it was bouncing around between 18 and 32. That was a real gift. That’s where we think maybe the gold stocks are now.
Jimmy Connor 28:44
Interesting. And Dave, because you’re a value investor, I have to ask you about lithium, which is one of the primary components that goes into evey batteries. It was up 140% in 2022. And now in 2023, it’s down 60%. Give or take. And is that a sector you’re looking at? Because it’s been so beaten up?
David Iben 29:06
We’re absolutely looking at it. We had a group of us went down to a global lithium conference down in Salta, Argentina last summer, I went up into the into the Andes and visited some mines. We’ve met with a lot of companies. It’s interesting that the bulls and bears all have some interesting cases. So whether we’re ready to buy, I’m not sure if it’s getting more interesting. It does seem to be that it’s a little more complicated than some other things. Maybe it’s more like bauxite, where the value to turn it into aluminum is more important than having the Bauxite and so it seems like the companies that own the real high quality reserves from weight back, and the licensing and have the ability to do the chemistry and everything that’s involved. And taking that lithium into something that people can use for batteries might be more valuable than just having the lithium itself. You know, lithium, they’re finding it everywhere. So like likebox, I’d like iron, maybe it’s having high quality reserves and having the ability to do something with it. So the stocks are down big in the last year, up big on the last five years. If earnings could even half stay where they are now, these are pretty interesting stocks. So we are looking at have not yet but
Jimmy Connor 30:43
David, when we talk about all these different mining stocks and minerals, I guess one of the things that comes to my mind is it can be very profitable, but it can also be very risky. And that’s mostly in part due to geopolitics. And we saw that recently with First Majestic, which owns a mine in Panama. And they just negotiated a new mining agreement if for whatever reason the government has rescinded that agreement, and the stock loss, I believe, 50% of its market cap, which is somewhere around eight to $10 billion. So it was quite significant. But I’m curious how you and your team manage jurisdictional risk?
David Iben 31:25
Yeah, that’s an excellent question. With my name. There’s the geopolitical risks. There’s also risks with geology and chemistry and management mistakes, currencies, you name it. So a lot of people that even like copper, and gold and whatnot will not buy the miners, which to us is music to our ears. If a lot of people won’t touch something at any price, there’s a price for everything. But way back in school, we learned a different view than now. Now people view that the markets are not risky that we learned that market risk was risky, business risk was less risky, because you can diversify it out. And so if one is inclined to invest in minors, because the businesses can be risky, we think the proper thing to do is analyze them understand them the best you can figure out what they’re worth, and buy them at a huge discount. And we tend to buy these things that 50 to 90% cheaper than we think they’re worth, and not exaggerated. And and then if you do that you can diversify across. And so if you have a portfolio of 20 stocks, and some of them go up in price three, four, or 510 times which these things do during the good times, then you can be wrong on a few of them. You look at different examples. I remember back in 2009, we had a portfolio of lottery reserves around the world that were trading, in our view, 10 cents on the dollar. The mine in Venezuela was stolen from us, management teams screwed up elsewhere in South America. So those were two things that didn’t work out for us. We had a career year because we made seven times our money in Papa New Guinea and 10 times our money in Mongolia four times in the DRC. Again, in 2016. We had a hydrocarbons company that we feel was stolen from us. Yeah, sour grapes. But the important thing was that with that position as a loss, we still had a tremendous six months, because there again, we had a lot of stocks go up three, four or five times in a very short time period because you’re able to buy them very cheaply. If you are talking to people a few years ago and say where are the safe places to be? It’d be like, definitely Chile. Definitely the United States. Panama exist. Very us influenced and and now all of a sudden, surely as people were eight and you mentioned Panama we have a big property is the largest undeveloped copper developed in the world and it’s in the US. And the government and others are doing their best to try to make sure it is not built. So it’s totally opposite of what they want it a lot of money companies view the US is more dangerous. Meanwhile, one of our best performing stocks in recent years was in the DRC in the Congo, where you know, Ivanhoe is the holder tremendous mine and the government’s been pretty good to work with we’ve had had a lot of success and other parts of the world that people might give second thoughts to. And so the idea is that you never know what things are going to look like a year or two from now. So buy things inexpensively, diversify, always important, but especially with resources. Dave,
Jimmy Connor 35:20
I want to move on now and get your views on the broader indices, the s&p and the NASDAQ. And despite everything that’s going on in the world with Ukraine, the Middle East, both the s&p and NASDAQ are performing very well. Does this surprise you in how do you see the s&p as being valued? Is it fairly valued or overvalued?
David Iben 35:42
If you go back to the whole catalogue effect that we were talking about, when they print a lot of money, it tends to go into the financial markets. And when financial markets are doing well, for a long period of time, everybody jumps in lots of unsophisticated people. And then the analysis becomes fairly binary. People say this is good, this is bad. And so if something’s good, they think that there’s no price that’s too high. And when something’s bad, they think there’s no price, it’s too low. And usually they’re not half as bad as people think they are. And 1929 people were absolutely right, if they thought the US was really a great place to be that had a century and fundament, that was going to be great. And that radio was going to be a wonderful thing. And cars and all these other things, they would have been dead, right? Where they would have lost 90% of their money the next three years. And with RCA, if you got the winter, you would have broke even in the 1950s that happens when you pay too much money. And that’s what people do. They printed too much money in the 90s. They printed too much money in the 60s and that created the gogo stocks man the nifty 50 and nifty 50 were great companies. Turns out they were right. These are companies that for the next 50 years, have done well coke and Procter and Gamble and Gillette and Johnson and Johnson, people lost half their money. In the last couple of years, they lost 7080 on some of these things. 10 years later, when I came in the business, even though earnings have gone up for 10 years in a row, the stocks had plunged, you could buy these things for a bargain. So they paid too much. And 1999 people were right that Microsoft and Cisco and all these companies will probably do pretty well. They just the NASDAQ went down 80% The next few years, that was the time to buy. So a couple of points, one, now we’re back into 10 years of massive money burning 15 years of massive money printing. The markets basically have been going straight up, people are back to their binary thoughts and they’re saying Magnificent Seven, no price is too high for that Magnificent Seven. I suspect people will find that light at the peak and video was 42 times revenues. reminds us of that Scott McNally thing. Nearly me for from after Sun Microsystems guy hit and he’s like, Well, you’re talking to me, what are you guys thinking paying 10 times revenues from my stock. But if you if I paid you 100% of revenues every year for 10 years, you’d only get your money back not make a nickel and by the way what I’d have no workforce, no technology, no plants, no anything. That’s 10 times earnings. 42 times earnings is a fascinating saying so do I think that the s&p which is dominated by these darlings is overpriced? Absolutely on almost any metric on price to sales price to GDP. price to book value priced into pretty much anything. It’s very expensive. Fortunately, back in 72, if instead of buying the nifty 50 or the General s&p, somebody about Japan, they did well if they buy oil they did well. Agriculture will go well. Same thing in 1999. We were fortunate to make pretty good money every year why that market was falling because the money rolled into commodities and whatnot. So now you got all these trends that are all very much in favor of managers, I believe active managers you have the index is really overpriced compared to other stocks So that’s interesting, growth is very overvalued compared to the value that we bank, it’s pretty interesting in the US, it’s a great country. But for 60 some odd percent of the entire index to be in one country is a fascinating thing. So that’s very overvalued, versus everything else in the world, or the US is, I guess, now considered to be worth 50% More than every other country in the world put together. So now’s a good time to buy International. And then you might have seen these charts going back 150 years showing real assets divided by financial assets. And it’s, it’s pretty much as good as it’s been a century and a half. So yeah, if the s&p does prove to be as expensive that looks like, we’ll probably see that money migrate out of the s&p into things. You saw it start to do that a year ago, we’ll see whether that was the Head fake or whether this little reverse trend is they had certainly the fundamental support that financial assets are rather expensive and real assets are very cheap under most any measure. Dave,
Jimmy Connor 41:20
you mentioned that the US is extremely overvalued. So if you don’t allocate money toward the US, then where would you suggest allocating money? What countries do you like? Yeah,
David Iben 41:30
and you know, we’ll point out that we do bottom up analysis. So we don’t have a crystal ball that says which country to go in. And it turns out with natural gas, we do have a couple in the US. So it depends, but the US has very little exposure, because most industries we can find better values elsewhere. If one likes natural resources that we mentioned, Canada, lots of value and Canada. Companies are there that happened to own properties all around the world. So that’s interesting. Korea is fascinating. Korea might be where Japan was five years ago. Nobody liked Japan. Now they’re starting to like it again. The Japanese market sets at a nice run. But with Korea industry by industry, auto companies cheaper there than elsewhere, tire companies cheaper, their conglomerates are way cheaper there. We’ve made a habit of comparing Korea telecom to Verizon and AT and T thus far instead of Katie, doubling Verizon, and AT and T fell in half, that ultimately those valued emergencies come together. If you get great at Telecom, you’re getting at triumphalist with great technology, that’s trading a 6% dividend and a fraction of book value trading for four or $500 per customer versus five, six times that for AT and T and Verizon. So across the board, we do not own Samsung now that it’s I think at what 40% of the cost of Apple even though they have bigger market share and waste and so big valuation there, Japan less so than it used to be. But there’s still lots of pockets of value there. So we still see things there. And you know, Southeast Asia is starting to get very cheap. Some things in Latin America are getting pretty cheap pockets of Europe. So people should just look industry by industry and say, Where are the good companies? If it’s in another country, we’re not saying if you can get 18 times earnings in the US are 16 times earnings somewhere else you should take the 16 are saying if you get 18 times earnings in the US and eight times earnings, and another country, that’s pretty good. That should be pretty interesting. And that’s the sort of divergence we’re seeing.
Jimmy Connor 44:11
Davis we wrap up, you’ve lived through many cycles. Does this current environment remind you more of the 1970s or the early 2000s?
David Iben 44:21
I think much more than the 1970s. I think the 2000s was, you know it was Tech was more tech oriented. I think the 1970s was time period very much like now where you had lack of fiscal discipline. Yeah, governments were spending a lot more in the US. We called it guns and butter. We are going to finance the Vietnam War while doing massive social programs and whether that was good or bad, but it was something we couldn’t afford. That led To a lot of money printing, and it was also a time period where there’s lots of geopolitical skirmishes going on around the world. And you had more heavy handed governments people believe that that was a good thing. Whether it is or isn’t history and logic was show that big governments and deficits and wars and all these things are inflationary. And certainly all those sowed the seeds for a decade of inflation in the 70s, where that was not the case fall away in the 90s, which was more of too much money to go in into some popular stocks that for the most part did not have debt. And that crashed and we moved on.
Jimmy Connor 45:48
Well, Dave, that was a fascinating discussion, I want to thank you very much for being with us today. If you are trying to figure out how to invest in your future, consider a consultation with a financial advisor that Wealthion endorses at wealthion.com. You can fill out a short form there, it only takes a few seconds, and there’s no commitment to work with any of these advisors. It’s just a free public service that they look to help as many people as possible. If you’ve enjoyed this discussion today with David and myself, please hit that subscribe button and give us a like, and if you have an interest in learning more about resources and how they can benefit your portfolio, visit our channel, Bush free capital. Thank you very much for being with us today and I look forward to seeing you again soon.