The last time today’s guest expert was on this channel, he warned that rising interest rates would cause a surge in the debt service cost on America’s national debt — and that THAT would perhaps be the destabilizing trigger that would “break something” and force a policy pivot by the Federal Reserve.
Well, the first half of that prediction has proven correct. Interest on the national debt is on track to exceed $1 trillion in 2025 — that’s more than a doubling vs last fiscal year.
So, what about the second part of the prediction?
Will higher debt service costs — for the government, for corporations, for consumers — be the straw that breaks the economy’s back? And if so, what will the repercussions be?
To discuss, we welcome back to the program Brien Lundin, CEO of Jefferson Financial, publisher of GoldNewsleter.com and producer of the excellent New Orleans Investment Conference.
LEARN MORE & REGISTER FOR BRIEN’S NEW ORLEANS INVESTMENT CONFERENCE at https://www.wealthion.com/noic
Brien Lundin 0:00
The markets are not addicted to easy money, they’re addicted to ever easier money. And you have to keep increasing the dosage to get the same effect on the markets. So the next crisis is going to demand so much more. I mean, it’ll blow your socks off, you will literally I believe what they’re going to come up with the next time that will really light a fire under a mining sector. That is completely washed out. Right. So I’m looking at this as a really a generational opportunity in the mining stocks.
Adam Taggart 0:40
Welcome to Wealthion. I’m wealthy and founder Adam Taggart. The last time today’s guest expert was on this channel, he warned that rising interest rates would cause a surge in the debt service cost on America’s national debt. And that that would perhaps be the destabilizing trigger that would break something and force a policy pivot by the Federal Reserve. Well, the first half of that prediction has proven correct interest on the national debt is on track to exceed $1 trillion this year. So what about the second part of the prediction? Well, higher debt service costs for the government, for corporations for consumers? Be the straw that breaks the economy’s back? And if so, what will the repercussions be? To discuss we welcome back to the program. Brien Lundin, CEO of Jefferson, financial, publisher of gold newsletter.com, and producer of the excellent New Orleans Investment Conference. Brien, thanks so much for joining us today.
Brien Lundin 1:39
Adam, it is always such a great pleasure to be with you. Thank you for having me.
Adam Taggart 1:43
No. Well, it’s a mutual appreciation society here, Brien, super excited to dive into this national debt topic with you. But I got a lot of other questions for you that tap your direct expertise. So really looking forward to this discussion. If we can now let’s just kick it off the way I like to kick off all these discussions. What’s your current assessment of the global economy and financial markets?
Brien Lundin 2:05
You know, Adam, I think what the markets were trying to do, I guess it was in early July, they were starting to price in the the essential fact that this interest rate hiking cycle has peaked or gotten gotten very close to the peak. And then of course, we had the Fed come in with another round of rhetoric and another quarter point hike. And the markets I think are regathered their feet, figuratively and are starting to try to reprice in that next big thing that’s coming down the road. You know, we’ve had a tremendous bond, sell off global bonds sell off, we’ve had soaring yields or soaring treasury yields. That rally came back a little bit in yields and is rising again, we’ve had the dollar fluctuate, but it has been a strong over the last month or so. And I think all that reflects this recognition that the Fed is going to try and keep things higher for longer. But they’re still in all there are markets out there, you know, and I know we’re going to get to it, but predominantly gold, that have refused to sell off in the face of all of these pressures against us in these headwinds. And I think that’s part of a realization from some big money to interest, some, some deep pocketed investors, including central banks, that the next big thing is going to be something that’s going to force the Fed to go to the down cycle, and start lowering rates and actually pivot. And, you know, there are a lot of candidates for what that will be what what caused that. But the record clearly shows that that’s the next thing that’s going to happen. And it’s just a matter of when end up in from where it comes.
Adam Taggart 3:57
Okay, well, that’s a great segue then into the topic of the intro, right, which is debt service costs, right? So there have been a lot of people and I’ve interviewed a lot of people on his channel over the past year and a half Brian, who had almost every milestone on this journey we’ve been on and on rate hikes and quantitative tightening, since it started, have said, Oh, gosh, you know, the Feds gonna break something in this process, and there’s no way they’re gonna get to 3% Fed funds rate? Well, there’s no way they’re gonna get to four, there’s no way there’s gonna get to five. Right. And Powell, to his credit has been very consistent in saying I’m going to keep doing this until inflation is under control. Right. I do think there’s a lot of people who have been scratching their heads who are saying, Oh, my gosh, I I thought of higher rates, we’re gonna break something it would have happened earlier. There are a lot of people out there now, whether a lot of people out there now saying, Well, maybe it’s different this time, right. You know, maybe this this whole lag effect doesn’t really apply to the environment we’re in right now. I don’t know why they think that I mean, except for the logical It hasn’t happened yet. So maybe it’s not going to happen from here. So don’t think he’s very logical. I’ve been one of those voices that have been just repeatedly banging the drum of the lag effect, saying it’s real folks, just because it hasn’t happened yet doesn’t mean it’s not going to happen. Don’t take your eye off the ball. But understandably, the longer time goes on and the status quo generally continues working the way it’s been working. I understand the average person’s, you know, responsive, kind of putting their head back in the sand and saying, well, it doesn’t seem to be something to be worried about here. So you mentioned there’s a lot of candidates of things that could break. But let’s let’s just start with these higher interest rates. I mean, what do you think are the most likely candidates that they themselves would break, and obviously, I’ll just toss one out there to get the conversation started. But we hear quotes, like 20% of the corporate fleet of American companies are, quote, unquote, zombie companies, right. And these are companies that, you know, have to borrow to pay their their debt service payments. And they could do that when rates were close to zero, you know, Fed funds rate was close to zero, and they were borrowing at, you know, 3%, or something like that or less. Now, if they have to go refinance, they’re going to be borrowing at more than twice that. Right. So that obviously could be a candidate. What else is on your danger radar?
Brien Lundin 6:26
Well, first off, I think I was in that chorus of voices saying, No way, they’re going to get the 3%. No way, apparently. So yeah. And I fully admit, you know, all credit to the FOMC. And Powell, I never expect them to be that resolute in this inflation fight, and, you know, in their sticking to it. But the fact remains that there’s simple math involved here. And right now, the Fed itself says that the current interest payments on the federal debt are $970 billion. So as we speak, there’s been more debt that is reset since that last update. So we are at a trillion dollars as I had predicted before, and yet the sun is coming up, and everything seems fine. And nobody’s talking about it. Still. I mean, other than you and I, and a few others, so why hasn’t it had an effect? Well, I think it will, I think it will, eventually, we’re starting to see some commentary that in mainstream publications, really across the political spectrum, noting that the costs of or this deficit this year is soaring way beyond where we should be outside of a recession. And in that there will have to be a new normal going forward, and that deficits as a percentage of GDP, are going to be at World War two levels going forward. And of course, we’re not fighting a world war right now. So there’s very little justification for that. And so I would have expected that a trillion dollars in interest payments, although it hasn’t been widely talked about or politicized yet. And I think that’s still to come, I thought that would have been a brick wall that would have stopped the Fed, but they don’t seem to care about that. Now, at the current rate, we are going to be as the federal debt, interest costs, the interest rate and federal debt resets closer to between four and 5%, we’re going to be closer to one and a half trillion dollars. So at some point, you know, this is gonna matter to someone. But you also mentioned the the other part of this one of the other two legs of the stool being corporate debt, the other being individual debt, but corporate debt, those zombie companies out there are still paying on debt, largely, that was priced at, you know, in a zero interest rate environment. And that debt is resetting over the months ahead. And I saw it about a month or two ago, Jim Grant, I think, get the actual number. He said, How many trillions of dollars in additional interest costs, this would be not total interest costs, but an additional interest costs and that corporate debt, but it is equal to the combined economies of Germany and Japan for these contracts that were barely able to make their their debt payments, you know, at zero interest rate, and now are just going to be I mean, it’s going to be an axe to the head of these zombie companies. That is resetting over the months to come. And that’s like a tsunami of debt service costs. It’s about the wash onto the shores that I think if anything will be the the one factor that’s going to bring on that recession that we’ve been expecting for so long.
Adam Taggart 9:59
Yeah, And I think you said earlier, you said remember carburetors? Like you said, it’s simple math, right? It’s, this is not, you know, some some gamble you’re making where Oh, there’s a probability of X, you know, if if something magical happens in the economy or markets or whatever, or political change or whatever, you’re just saying at the current debt levels we have, if they mature on their existing schedule and interest rates remain in whatever ballpark they’re in right now. It’s going to be adding this gargantuan amount of incremental interest. So the incremental interest you said, is as large as the combined economies of Germany and Japan, did I get that right? Yeah. Yeah,
Brien Lundin 10:45
I get it. This is from Jim Grant, who’s obviously a great source. But yeah, it’s amazing. And that’s just sitting out there waiting to hit, it’s going to come. You know, at some point, you know, and we talk about the interest payments on the on the federal debt, and people tend to dismiss that. Because, you know, number one, the federal government’s not going to run out of money, they just make more, right, which, of course, has its own implications, but they talk about gross public debt and debt owned by the public. The implication in that is always that the debt that’s owned by these government sponsored enterprises, the government itself, we owe it to ourselves, and that we shouldn’t have to worry about it. But that debts held by, you know, all the entitlement programs, Social Security, first amongst them. So there’s an argument to be made that that debt before any other is going to have to be paid off. And that’s about 20% of the gross federal debt. So even if you dismiss that and say, you know, those interest payments come back in the federal government, we’re still going to be over a trillion dollars in net interest payments in the very near future, at the rate that this debt is resetting.
Adam Taggart 12:04
Okay. Okay, so pretty grim outlook on the debt math. Obviously, the debt math is highly dependent upon what’s happening with interest rates in with yields. Where do you see interest rates headed from here? And well, let’s talk about the talk about the short end of the curve first, because that’s obviously what the Fed can control. It I think you mentioned earlier on it’s, it’s likely don’t be mischaracterize you’re here, but it’s likely that we’ve we’ve we’re at or we’re very close to being at the peak in in rate hikes that you don’t seem to see the Federal Reserve’s going to hike much more and that’s pals guidance, right, you know, we’re, we’re going to remain open, but we’re gonna be data driven, right. I guess I guess it really comes down to higher for longer, right? Yeah. How much longer? Can they do this? Do you see? Like, let’s just look at for the next year, do you see the Fed funds rate kind of hanging out where it is? Or do you think the Feds hand will be forced, by one way or another beforehand, either because something breaks and it’s got to intervene to rescue, or I’m just holding out the potential that maybe it gets down to 2% inflation faster than I thought, and it says, okay, job done, and we can start unwinding?
Brien Lundin 13:24
Yeah, I the latter, I don’t think is, is likely I don’t think the Fed can get is going to be able to get the rate of inflation down to 2%. I think that’s probably going to settle down around three to 4%. And of course, the historic record tells us that inflation comes and spikes, you know, waves upon a rising tide. And, and so we are going to see some spikes coming up that may try to maybe encourage the Fed to to hike. But before that happens, yeah, I do think the Fed is probably done or close to done maybe another quarter point in that the cycle has essentially peaked. So that it is that the danger really is how long at these at these levels. Nobody really knows and I wouldn’t pretend to be able to predict that. But getting back to the point that you kind of started everything with you don’t go from the the easiest monetary policy, really in human history. 5000 year lows on the interest rates, negative yielding sovereign debt, tremendous fiscal rescue efforts. You don’t go from the easiest monetary policy ever seen to one of the harshest rate hiking policies ever experienced in the flip of a figurative switch with probably breaking a few things. Not just one thing, but a few things. So I think the Feds intent is to keep it higher for longer. I don’t think that they’re going to be able to do do that because of the damage that this interest rate regime is going to do to the US and global economies and what it’s going to do to corporations, all of the zombie corporations and the monstrous to hit the candidates for something that’s going to force the Fed to stop and perhaps start lowering rates there. There’s a lot of them. I mean, we have the debt service costs. We just mentioned that we have the recession, which could be exacerbated dramatically by a wave of bankruptcies, you know, bankruptcies bankruptcy filings in August, where I believe the highest ever for that month, and they’ve really spiked,
Adam Taggart 15:39
right, and we’ve had more this year than in any year prior to 2010. I think already. Yeah,
Brien Lundin 15:44
yeah. Some really dramatic statistics there. And the bottom line being we’re seeing a spike in bankruptcies already. There are a lot of candidates, there’s the banking crisis, you know, the that banking crisis, to me what was almost there, it wasn’t so much that there were just a few select banks that didn’t hedge duration risks adequately. I don’t think those banks, their business practices were that far out of line with what the vast majority regional banks were doing and had been doing. You look at Silicon Valley Bank, for instance, that was a classic bank run, that was a loss of confidence as deposits went to either higher yields or to the safety of larger banks, due to perception of risk for that specific bank. So that could reignite very quickly, we have the derivative issue is always out there. So there are a lot of candidates right now. That for the event, or the crisis, or the development that will force the Fed to cut rates again, we don’t know exactly what that’s going to be eventually, it’s very likely to be something we haven’t even thought of yet. And the timing is obviously uncertain. But I think we’re we can be pretty confident that something is going to force the Fed to lower rates again, because that’s just the way things work. That’s the cycles, the Fed, tries to normalize, and then it’s forced, once again, to come to the rescue of the markets and inject up liquidity. And the next time it does so is going to have to do so much more than it did post COVID to get the same effect on these these markets that are absolutely addicted to to that monetary adrenaline.
Adam Taggart 17:41
Yeah, it’s interesting. You say the monetary adrenaline. I think a lot of people, myself included, thought we would see the addict go into withdrawal shock a lot faster. You know, when the Fed withdrew the monetary adrenaline beginning of last year. I’ve had some people in this program, you know, of late talking about how there’s there’s still sort of stealth liquidity going on now more on the fiscal side. Right. And maybe that’s what’s kept the, the addict from from fully crashing at this point. All right. So a couple questions for you one very tactical, you talked about recession, like almost like it was almost in process, but it sounded like you’re pretty confident a recession is going to happen. And I just want to ask you is that indeed your your forecast here? Simply because 2023 has become the year of the well maybe won’t be a hard landing, maybe it’ll be a soft landing. And it’s now morphed into a hey, I think we’re in the no landing world.
Brien Lundin 18:40
Yeah, I, I think that is, you know, as well as anyone, every major indicators pointed toward recession, even some that have been, you know, at least in the modern area, infallible. So that’s really what I’m basing it on. I will be the first to say that the US economy is so dynamic has this innate dynamism that you have to really screw things up, to mess it up and send it into recession. And, and that’s the good news. The bad news is I think they’re really screwing things up. And again, you don’t have to that kind of a rate hike cycle in an economy that has been built upon a foundation of zero interest rates, you know, without something happening, and so I think it’s going to happen I again, I I’m somewhat of somewhat of a cynic, Adam, having talked to so many people over so many years, predicting the next crisis, and I don’t know that any of them have ever been right, you know, at least 100%. Right? And nobody’s really smart enough, I believe to predict the exact path ahead here. We can just kind of look at probability But I think we can be confident that something is on the horizon. And I think the markets are starting again to, to factor that in the fact that gold has, you know, Gold lost 1%, according to the World Gold Council reporting yesterday lost 1% In the month of August. And that’s a month where treasury yields soared where the dollar index catapulted higher. And yet gold only lost 1%. Now, that doesn’t say that there isn’t some there aren’t some people selling gold? What that does saying is there’s some big players buying gold in the face of those kinds of headwinds. To keep the price supported, there has to be very strong demand out there. And I think, because gold is one of the most powerful predictive mechanisms in the investment markets, I think the people buying gold or are betting that we are going to have some kind of a turn in this major hawkish majorly hawkish monetary policy in the months just ahead.
Adam Taggart 21:12
Okay. And that’s, that’s the segue I’m trying to make here. So let me let me just repeat, because I think I heard you say, yes, your sort of default expectation is that we’re going to go into recession, probably at some point in next year, because earlier, yeah, if I heard you correctly, you said two things, you said you think the Fed will, will intervene to rescue, and that it will likely require or hurt you, right? Even more intervention than what we saw during the pandemic. And that’s basically just because the market has. Its bearing so much debt at this point in time. And you also kind of get into Lacey hunts, you know, cautionary zone of like the Fed, increasingly pushing on a string, where it just takes more and more stimulus to generate the same amount of response in the economy. But let me just pause there for a second, did I get it correctly, that you anticipate if the Fed intervenes, it’s going to be on par or higher than what we saw during the
Brien Lundin 22:16
index, just if you look at the track record, you know, if you look at that policy, ever since Volcker killed off inflation, you see a ever descending stair step in, in interest rates in response to every little slowdown in the economy, every recession, they always lowered interest rates, but we’re always in unable to raise rates, even to the previous midpoint of the midpoint of the previous range. So you had this constant stairstep, until you got to 2008 in a great financial crisis, then they went straight to zero, and came up for these programs, expanded the Fed balance sheet, etc, over the next, really four to five years, post COVID. They came in and they did everything that they did in 2008, over four to five years, they did in essentially four to five days, much more of it. So the reason being that the markets are not addicted to easy money, they’re addicted to ever easier money. And you have to keep increasing the dosage to get the same effect on the markets. So the next crisis is going to demand so much more. I mean, it’ll blow your socks off, you will literally believe what they’re going to come up with the next time. And in so this is a clear cycle that they have to either for years, they’ve just lowered rates ever lower until they hit zero bound, and now they’re having to come up with all this direct fiscal stimulus. So next time, what are they going to have to do to get to achieve that same kind of shock and awe that they did post COVID It’s going to be something that’s going to be mind boggling.
Adam Taggart 24:07
It’ll be mind boggling massive blow your socks off? Because you said Okay, so is it? Do you think that in terms of the Fed funds rate, they’ll be going back to ZIRP or are closer and closer in that direction, obviously, to where they are right now? Right?
Brien Lundin 24:23
Yeah, you know, they’d have to cut at least three 300 basis points to get any kind of an effect on the economy and they can do that now. But I think they would probably have to get to zero this is the first time they’ve been able to raise rates past the previous their midpoint of the previous range. That said it wasn’t really hard to do when rates are at zero and in the previous high was at two and a half percent right. Now, who wouldn’t want a high bar to clear as it were, but okay, yeah, the pattern will I think prove out once again.
Adam Taggart 25:02
Okay. So you think they’re headed significantly lower, maybe as low reserve? Reason why I’m going here is you said earlier that you expected that inflation isn’t going to come down to 2%. And it’s probably going to hang out somewhere. I think if I remember correctly, you said around three to 4%. Right. And where I’m going with that is now a segue to the precious metals, which is your kind of daily area of expertise, which a lot of people that track the precious metals, say, precious metals really respond to real rates, right. And particularly, they tend to perform quite well, when real rates are negative, and less well, when real rates are positive. And just to set up your answer here. We’ve now had positive real rates for a while now. And we haven’t had them for a long time. We’ve had positive real rates now, first time in forever. And gold has actually hung in there pretty well. Yeah. Right. And I’ll let you opine on that. But, you know, some would say that’s showing some real strength with gold that it’s, it’s it’s kryptonite, right? It’s nemesis, positive real rates aren’t really weakening it that much, right? It’s not powering to new highs, but it’s hanging out not too far from its highs, right? If we then shift in a relatively short period of time, if something breaks, and the Fed has to get really aggressive, from these positive real rates to negative real rates, and maybe even quite negative real rates, that should be very gold and precious metals positive. So with that context setup, let’s turn it over into the precious metals part of this discussion. First, if you could just react to that to see if I summed up things accurately. And then secondly, if you can just sort of give us the current state of what’s happening in the precious metals world right now, as you see it?
Brien Lundin 26:51
Yeah, I think you said it perfectly. Adam, that gold is in silver, or I think looking at this current state of being of positive real rates as being temporary and are looking a bit further down the road, that’s something is going to come up to force the Fed saying that the cycle will repeat, as it inevitably does. And when that happens, you know, real good will likely happen in some kind of a crisis situation. And it will, therefore demand a kind of response we’ve seen from the Federal Reserve, and that’s the big bet on the metals right now, that this will be the next big thing that will send in gold’s case prices to well above the record high. And in Silver’s case, you know, far higher than where it is right now. One of the comparisons I’ve been making a lot for people lately is to set that up. We’re in the metals market, the metals have been holding in there, but the mining stocks have not the mining stocks have leveraged the metals to the downside and have not been performing really across the whole spectrum from the major producers down to the junior exploration stocks. So the question for a lot of people in this industry or in this sector is what is going to get them to move. And I’ve been drawing on my experience back in 1999 to 2000 that double bottom and gold and gold hit $252 An ounce the mining stocks were completely bombed out at the time as you can imagine when we had that kind of a bear market in the metals. But they gradually turned over the next couple of years as we had about a two year uptrend consistent uptrend in the gold price the mining stocks started to to respond and then we ended up with a near decade long bull market that a lot of people made a lot of money in compared to today the mining stocks are bombed out again especially in relation to the metals prices with gold about six or 7% away from an all time high. We won’t need two years of an uptrend to get the mining stocks ignited again, we will only need about two weeks. So we just have a little bit of an uptrend in the gold price which where we are now if we gained five 6% We’re gonna be at New all time highs that will really light a fire under a mining sector that is completely washed out right now. So I’m looking at this as a really a generational opportunity in the mining stocks. The last time we saw it was around 2000. But at that point in time it took us a couple of years before the mining stocks really got moving. Now it won’t take any time at all.
Adam Taggart 29:51
All right. Okay, so much to dig into there. Why don’t I stay with the metals just for a moment before we get to the miners? Do you see the metals is kind of then just sort of being range bound until something breaks from here? Are there any other catalysts positive or negative? You see that could influence the price of the metals themselves materially up until some big crisis like this?
Brien Lundin 30:18
Yeah, I think seasonality is the obvious one, you know, we’re we’ve just closed the door on summer. So we have that negative influence where people are away from their desk. markets generally are not that attentive, that factor tends to play in more for the mining stocks. them for gold, but it’s still the fall usually is a better period for gold. And I think that’s going to help us. And, you know, if you’re looking for a big catalysts for for the metals, if you’re looking for big catalysts, for equities, for bonds for anything, every market these days is driven by central bank policy. And that really means just the Fed, the Fed leads, everyone leads everything. And and that’s the factor that you need to look at to really determine where anything’s gone.
Adam Taggart 31:11
Okay, and let’s just pontificate here for a second. So I’m not going to hold you to this. But the Fed, does what you think it’s going to do. Right, some crisis of the magnitude you think is going to happen the Feds responses as large as you think it’s going to be? You said gonna go to new highs? Are we talking 2500 announced new highs? Are we talking something potentially substantially in excess of that?
Brien Lundin 31:41
Well, let’s look at say COVID. Where we went from, I think the bottom was $1,140 announced that they’re about to be hit close to 2000. Are there abouts. In the kind of environment we’re talking about. It would not be unusual for gold to gain 20% or 30%, gold gains 20%. From this level, you’re talking what $2,300 2350 or something like that, on the gold price. 30%, you’re probably talking $2,500 or there abouts. That’s kind of typical for a gold bull market. You know, in the early stages of the 2000s. bull market, when gold came off that low are at $252, they quickly doubled in price. So you get at numbers that would have a few years ago seemed absolutely crazy. And today, to some extent seems surprising. But when you work out the percentages at numbers this high, it is very easy to get to a $2,300 to $2,500 gold price over a year or over two years. And that just changes everything. When you’re talking about mining stocks at their current levels. And when you talk about gold producers margins, when you add another three $400 to the current margins, that you’re talking about tremendous increases in share prices in a sector that is already washed out right now.
Adam Taggart 33:24
Okay. And it’s important for you to kind of box this because there are some people out there that are talking about, hey, you know, when gold really turns in the next year or whatever, you know, they’re saying this could go to 3005 1000. Some people are out there with like a $10,000 outs. I don’t hear you saying that you’re expecting that kind of a dramatic surge, at least in the next couple of years. Correct me if I’m wrong, but even without it. What I hear you saying which we’re going to get into in a second when we shift to the miners, as you’re saying even a 25 to 30% surge in the underlying base metals should light a tremendous fire under the the mining complex in such a way to use your terms, that there may be general right generational opportunities to build wealth in that sector.
Brien Lundin 34:14
Yeah, absolutely. And in the only reason I didn’t predict, you know, multi $1,000 prices on increases on gold is because you didn’t give me a chance to now. Quite, quite literally though every major bull market in gold funds 74 To 7677 to 1980 and 2000 to 2011 has seen the price of gold go up six to eight times, really seven eight times. So if you look at the bottom of this cycle is around $1,140. So if we have that same kind of experiences in the three previous gold bull markets you’re talking at about 2006 $8,000 on gold price.
Adam Taggart 35:04
Wow. Okay. And I don’t hear you necessarily calling for that. But you’re saying there’s a historical precedent for it. I don’t even want to keep this discussion in that range, because that’s a that’s a world. I’m not sure anybody, even existing gold investors are prepared for. But you’re saying there’s still, you know, fortunes to be made? Long before we even got to a crazy price like that. Right. Exactly. Yeah. Okay. Okay. Last question on the metals before we get to the miners? You know, you are, I know from our long history, Brian, you know, you are a long term skeptic, of fiat currencies in terms of, you know, loss of purchasing power that they all exhibit over time for fundamental ways in which they’re constructed, combined with the Prophet kit. And, you know, spendthrift ways of the humans that run our political and monetary systems. Is there a monetary argument you want to layer in here at all to?
Brien Lundin 36:15
Yeah, I think that, again, if you look back 40 years, really even 60 years, going back to the the debut of deficit spending and the guns and butter, 60s, you see a clear trend of the dollar depreciation of ever easier money. And this cycle, I think this long term, multi decade old trend is in its endgame, you know, we’re seeing much more dramatic crises. We’re seeing them coming fast. On the heels of the previous one, we’re seeing, metaphorically the waters circling more quickly around the drain. So I think we’re in the end game with that cycle of that trend. Now, that doesn’t mean that’s going to happen in two years, it doesn’t mean that the end is going to happen in five or even 10 years. But how many cycles boom, bust cycles, can we go through where the central banks come in, and evermore dramatically create liquidity or depreciate their currencies? With the stroke of a few keys? How many more of these cycles do they go through before those currencies lose all credibility. And as you know, when you get to the ends of these cycles, things happen much more quickly, that more exponentially. Whereas I don’t think we can predict the timing, we don’t know whether it’s going to be discipled in excellent acts, I think we have to recognize that trend and know that going into it, we want things that over the very long sweep of history, hold their value in the face of depreciating currencies, and foremost among those is gold and you have silver, then other tangible assets, real estate, people need to look at these things and position their portfolios for a future that I think is, you know, indeterminant but from a big picture standpoint is perfectly clear.
Adam Taggart 38:21
Okay. All right. So you Well, let me say this, it’s it’s worth pointing out that the central banks, which, you know, publicly, you know, have referred to gold is a barbarous relic. Right. Something that, hey, it’s it’s doesn’t really fulfill the role that it did. I believe it’s true that we’ve we’ve seen record central bank gold buying over the past year. Is that Is that true? Are they still buying at? Yep. Had or near record high levels?
Brien Lundin 38:57
Yeah, at record levels, I think on quarterly bases. But yeah, they are they have been in the leaders over the last few years, that were Russia and China. And I don’t know that it was necessarily for any specific strategy, but perhaps just sensing. You know, that these trends are culminating, at least in the Chinese standpoint. From Russia standpoint, I think it’s just trying to gain independence from the from the US. But Russia has not been buying. They’ve been somewhat preoccupied. China has been buying their official totals just eclipsed 5000 tons. Most people believe that it’s, it’s much more than that. But yeah, and sorry,
Adam Taggart 39:47
just to wrap it for relative sake, as far as we know, the US has around 8000 tons, right. Is that true?
Brien Lundin 39:53
I believe so. That sounds familiar. Yeah. Okay.
Adam Taggart 39:58
So they’re catching up. Basically, they go are catching in may actually be far ahead of us. We just don’t know. You know, there’s the Whisper numbers that are out there.
Brien Lundin 40:05
Yeah. And perhaps just as importantly, they were been selling down their treasury holdings to buy gold and Russia completely sold down its treasury holdings to buy gold years ago.
Adam Taggart 40:18
Right? There’s a, there’s a great comic, I’ll see if I can find and put on the screen here. I think it’s done by Axel mercs organization. Yeah, but it shows the US and China in a money fight. And we’re throwing bricks of gold over at the Chinese and they’re throwing dollars our way. And so we’re getting this big pile of dollars up on our side, and they’re getting this big pile of gold bricks up on their side. And you’re thinking, who’s really winning this? Oh, that’s the Chinese are making out like bandits. Yeah, that is,
Brien Lundin 40:49
of course exactly what happened in the early 70s. That’s what Charles de Gaulle was going to the US and taking all of the gold out of as much gold as he could get out of Fort Knox and Nixon’s hand was was really forced
Adam Taggart 41:04
that that’s why Nixon had to slam the gold window shut and 71 because of exactly that, right?
Brien Lundin 41:09
Yeah, he could have either done that or devalued the dollar, it just changed the ratio, and that would have stopped it. But that would have been a public admission of failure on his part.
Adam Taggart 41:21
Okay, so last question. I lied. This is my last question on the metals before we get to the miners. So for people that perhaps are, maybe don’t have a lot of precious metals holding right now, or getting inspired, or maybe a little like, nervous, anxious from what you’re painting here. And I’m thinking, Oh, I should start accumulating precious metals from here. I imagine you would say, in general, you’re not giving personalized financial advice, we’d probably say, Yeah, that’s probably a smart thing to do. But I imagine you would say and correct me if I’m wrong here. You would say, hey, when this crisis arrives, yeah, you expect the metals prices to perform very well. But there may be a period at the onset where they actually get pulled down with everything. Because we’ve seen in the past with big crises, when there’s a when there’s a downdraft and you have margin calls, and you have, you know, all that, that vortex of volatility, you have a lot of people that are being forced to have to liquidate whatever assets they have that still have value to meet margin calls and things like that. And, and there can be a period of time where the precious metals get dragged down with that before they then find their true level. Am I describing this correctly?
Brien Lundin 42:30
Absolutely. In you in a crisis environment, you have that liquidity vacuum, that where everything goes down, and everything that can be sold goes down in gold, in particular, if the there’s if it’s widely held by institutions, then it gets sold, because it has the ultimate liquidity. And its advantages then work against it. And it’s, it’s the piggy bank that gets broken in the emergencies to meet margin calls. So that it does go down. But if you think that you will be able to buy it at that point in time, and be nimble enough to then get a huge position in the metals. And in writing on the way back up. I don’t think that’s, you know, a bet that roll usually pay off, at least for most investors, I think you need to have those because it goes comes and goes in a flash. In 2008, we saw gold go from trying to remember the numbers of $1,000 to $700. And it had $100 swings on a daily or two day basis, back and forth until it’s stabilized and then tripled over the next two years. So you know, you can be smart and in buying some at the bottom, but I would buy get your holdings together now, especially your holdings that you would categorize as insurance. And if you have speculative funds, and that’s another thing that you know, generally it’s a good thing to do keep some dry powder for these kinds of opportunities that when you see that sell off come to jump in and take advantage of it because the rebound is is typically quite sharp.
Adam Taggart 44:24
Okay, great. I want to make sure people are aware of that so that if you’re new, you don’t get shaken out during that time period and right out of even smarter, smarter knowledge on top of that. Okay, so let’s finally get over into the miners here. So that’s where you believe the real action is going to happen. That’s because as you said, mining stocks are leveraged to the price of the underlying metals. And to help folks sort of understand that as Brian was saying earlier, when the when the metals prices goes up, the the mining companies have their costs of extraction. acquisition of the metals and once the gold price goes up above that, it’s all margin for them. It’s all gravy. Right? And so you can go from a company that is making gold profitably. And let’s say maybe it’s it’s, it’s, you know, the current gold price. There’s $100 of profit per ounce of gold that the mining company is making, well, if their gold price goes up another $100 Well, well, now they’re their profit has just doubled. Right and so that’s the way it begins to work here or think about it like this, you know, if if, if the price of something is going up, you know, the mining companies are like them it mince. It’s almost like if a currency’s value is going up, these are the these are the companies that are minting it, they’re taking it out of the ground. So they benefit the most from all of this. So tell, just just set the stage for us here for why you think this moment in time really is the opportunity to build again, use your word generational wealth in the mining space. What’s so unique about right now,
Brien Lundin 46:00
the interrelation to the metals prices to mining stocks are cheaper than they have ever been in history. So if you have a bit of an uptrend, that really not reignites interest in the sector, you’re going to have a rebound effect that, you know, in a in a typical bull market, assets go from oversold to overbought, and they overshoot equilibrium, just to get to where they should be fairly valued. According to the metals prices, you’re talking about the potential to multiply your money in a lot of these stocks, especially when you get closer to the juniors that have or developers that have significant resources but aren’t yet producing companies. So if you get to the kind of market that we’re talking about where you have significant gains in the metals, then and you have it in a leverage, then you’re you’re talking about the kind of opportunity that, you know, the only time I can think in my career that was similar was around 2000. But it took us a few years to really experience those kinds of gains. It won’t be as long as time won’t take nearly as long because the metals prices are already very conducive, very supportive of the mining market. It’s just that the interest isn’t there in the mining market.
Adam Taggart 47:29
And can you explain why? Because we’ve heard from folks like you for the past several years that the miners are really cleaned up their game, versus where they were like a decade ago, where they seem to be much more poorly run. They were doing tons of shareholder dilution. And when we, when we came off of the 2012 correction in the metals prices, they were really forced to stay alive, they were really forced to, again, clean up their game, prove to investors that hey, we’re, we’re worthy of putting capital into and you know, technologies presumably have gotten better to help, you know, miners extract and find precious metals in that period of time. I get that everything kind of got sold off last year. But this year, the markets have been on fire. And granted, a lot of that’s been driven by the Magnificent Seven tech stocks. So why is nobody looking at the miners when they’re now you know, on average, more sanguine about the prospects for the markets and saying, Hey, there’s some great values here.
Brien Lundin 48:35
Yeah, you know, I think there’s been some competition and other ways to leverage the metals out there. But I think a primary reason is that markets don’t really care investors don’t really care what the price of anything is, they don’t care what the price of the metals are, they care where they’re going. So we have not had the kind of sustained uptrend kind of consistent uptrend, that kind of breakout that we really had expected. We’ve had essentially a triple top in the gold price around 2050, or something in the gold price. And we haven’t really firmly and decisively broken through to a new high. Once that happens, I think it’s going to attract a lot of money into the sector. Now, the triple top doesn’t sound good and unless you look at the broader technical pattern in the gold in the gold price, and you see a very classic, multi year cup and handle pattern. So that triple top is a fifth essentially forming the handle on the cup. And that that technical pattern that formation projects to a gold price of $3,000 or above. So that again is one of the reasons why I’m I’d say we’re really at that point where a brand Miguel, and again, only about a six or 7% increase in the gold price gets us there, a breakout to a new high really brings a lot more money into the market, and I think ignites that next stage of the gold bull market.
Adam Taggart 50:15
Okay. And look, I just want to reiterate for everybody, you know, my mining companies highly volatile, it is a speculative part of the investing spectrum. So it really is a place where you should be investing money you can afford to lose, I always encourage people to work with an advisor that can help you set up with hedges against your mining portfolio as well to protect on some of that downside risk. I always recommend that people who are new or even moderates in the space to work under the tutelage of somebody who follows the space really closely understands the geology understands the management teams, etc. There are people out there who have newsletters, and you can basically invest by looking over their shoulder right where they’re telling you okay, I’m excited about these companies for this reason, they share it all. That way, you’re just not some you know, newbie doing this, you know, picking the stocks in your armchair with incomplete information. It’s a difficult space to get, you know, to pick a lot of winners, and you want to take a basket approach and hopefully your winners more than make up for your losers, but guaranteed there will be losers in there. I’m saying this because I believe it to be true. But also I’m teeing up the fact that you are a publisher of one of these newsletters, Brian and I think people should do or interested in this should definitely check out gold newsletter.com. I’ll let you talk about it in just a second. But having invested in this space myself for a while. What’s interesting, folks is you learn how volatile it is for sure. You’re definitely going to have some companies you fall in love with that just totally break your heart. But you will if you’re at it long enough, and you pick good enough companies and maybe you’re a little bit lucky, you can have some tremendous winners. Unfortunately this year Brian, I finally had one snowline gold, I think I got into that thing at about 30 cents, that’s almost $4 today. So that’s over 1,000% return. Very happy about that. It’s made up for a lot of the other volatility in my mining portfolio. And I’m, I’m optimistic hearing you talk about, you know, hey, this is kind of a gloomy time in the market. So I’d expect that stock as well as some of the others I hold to do even better, you know, if the sector eventually catches fire, so but I just want to let folks know that they’re, you know, I’m walking proof that, you know, when one of these hits, it can hit real big. I know you’ve seen a ton of those returns in your lifetime. Brian. So what can you tell folks about gold newsletter? And do you want to add any additional color to what you expect to be an investor in this space?
Brien Lundin 52:48
Yeah, and gold newsletter is the oldest precious metals advisory in the world today. This is our 52nd year and maybe the oldest financial newsletter investment newsletters still going on today. But you know, the if people go to our website, gold newsletter.com, we have a free report. And it’s not just one of these free promotional reports people put together, it’s a detailed 40 page report, highly objective. And we we go through every step from soup to nuts every way you can invest in metals, from futures options to physical metals to mining stocks, explain how to analyze a mining stock. Importantly, we tell people, what are the best conferences to go to out there, what are the best newsletters to subscribe to, you know, all of my friendly competitors in the industry that I think are worthy of your time and effort. I detail and give all the contact information in this in this free report. And in trying to we try to do is make clear. A point I tell everybody who’s new to the sector that it is an inefficient sector, you can find overlook gyms lying on the ground, that are tremendously undervalued and have a lot of catalysts to increase their value. You just have to put in a little time effort, educate yourself on it, subscribe to some of the better newsletters, go to some of the better conferences out there. If you do that, you can get the kinds of returns you got the snow line gold, perhaps get something like some of the multi 10 or 20 baggers that we’ve been able to pinpoint over the years and gold newsletter. But if you’re not willing to do that, then you can simply buy the the indices GDX and GD xj. And in a, you know, a strong classic bull market scenario you might triple your money in something like that. But there are tremendous tremendous wealth building opportunities available in mining stocks, in an environment where the demand metals prices are rising. When when the market is such that a rising tide is lifting all boats, it gives you those real multibagger potentials. But it also injustice importantly, mitigates your risk to the downside, when even your losers are holding ground or gaining a bit. It really does wonders for your portfolio. And that’s the kind of market we have from say, 2000 to 2011. And frankly, that’s what I think we’re facing right now a return of that kind of a bull market environment.
Adam Taggart 55:33
And, you know, if you’re, if you’re new to mining, and this is, you know, intriguing you, I will say there are a lot of long suffering mining sector investors out there like Brian and I, and I think a lot of people watching this. And so the good news for you, if you’re just getting in now is you have sidestepped, I think the vast majority of the pain that the rest of us have endured in who knows exactly when this upcycle will start. But I can tell you, you’re 10 years closer to it. Jumping in now, you know, than you were when when a lot of us old graveyards, you know, got in or were in it. Alright, there’s a couple other resources of yours in one or two wealth hands. I want to mention before we wrap up here, Brian, real quickly, though, and I’m not going to sadly be able to give you a lot of time to to really delve into it deeply. But maybe a 32nd plug. Is there a company right now that’s on your list of companies that you know, you like in gold newsletter, that you think it’s just particularly interesting that someone who might want to just go and learn more about a company that’s got your attention can go check out?
Brien Lundin 56:39
Yeah, I say, I’ll give you three fire week metals, energy metals, it’s zinc and tungsten, primarily. Gold great company. It’s had a wonderful few months, but I think it’s got a lot more to go. I like I like baseless silver, silver, great silver resource building a great resource. I own both of those companies, by the way. And a third that I just heard an update on today that I really liked Helios star metals is another one that I like, and and I also own.
Adam Taggart 57:17
Okay, great. Thank you for doing that. And folks, if you want to dig into more deeply why Brien is interested in that stuff. Go check out gold newsletter.com. All right, well, so Brien, you and I have have known each other for a long time now, I think over a decade. And we get together, oftentimes multiple times a year, but for absolutely sure. Once a year at your excellent conference in New Orleans, which is coming up in early November. Not that long after Wealthion ‘s online conference, you just take it to a whole other level because you’ve got it’s your was a four day event. And you get to you know, see these people live you get to you know, come up with them in the hallway actually have a real conversation with them, as well as be surrounded by a lot of like minded people. In our last remaining couple of minutes. Can you just tell folks, whatever you want to tell them about the New Orleans investment conference and I will say this year just let me give it an extra plug for this year. Your faculty for this year and there’s a lot of overlap with with my event, but you have brought in some amazing speakers at the very high premium end. I’m super excited to go there and meet them this year. Yeah, I
Brien Lundin 58:23
am too. You know, I read everything. watch everything. I’ve done that for decades. I like you, I think have an eye for the real challenge out there than listen insightful thinkers of the day. And I’ve got just about everybody that I wanted to get this year. It’s really an amazing lineup. I’ve got Matt Taibbi who I think is the most important journalist of our, our generation. I have James Rickards Danielle DiMartino booth coming back. George gammon Constantine Kisan is a new addition who I know you’re excited about. I’m very excited about him. I urge people to look him up. Rick Rule Dominic frisbee Brent Johnson, Lynn Alden is is coming in person. Very excited about that Dave column Peter book bar gem stack Peter Schiff, Jim Ireo Tabby Costa, James lavish is a new addition this year that I’m very excited about as well. And really, dozens and dozens of real estate guys Adrian de Adam Taggart I see on this list is one of our
Adam Taggart 59:24
speakers. How did he squeak in there? It goes on
Brien Lundin 59:27
for dozens and dozens of the top thinkers taught new newsletter writers really in the resource space, especially but covering every asset class. It’s going to be the place to be this fall.
Adam Taggart 59:41
All right, totally agree. So folks to learn more about Brien’s excellent event and learn how to register for it. Just go to wealthion.com/noic. And you’ll have all the information there. Alright, and just wrapping up here. Again, as I mentioned, Brian’s event is right after mine. mine’s on October 21, I won’t go into the details, most of you have already heard it. But if you haven’t, and you’d like to learn more about it, or you’ve been, you know, planning on registering for it, but just haven’t done so yet, go to wealthion.com/conference. And as a reminder, you can still get the early bird price discount of almost 30% off. And if you’re an alumnus, check your email inbox from me because you’ll have a code that you can get an additional 15% discount on top of that 30% earlybird discount. So make sure you take advantage of those rock bottom prices while they’re still available. If you are new to investing in precious metals, and have been inspired by this conversation to do so, two resources to recommend for you. One is if you’re looking to buy metals yourself directly, I always recommend that folks go check out the hard assets Alliance where you can buy metals directly, you can have them stored for you in an allocated manner, which is the only way to have them stored for you don’t do pooled storage, do allocated storage, you can pick which brings ball around the world, you want them stored in a lot of benefits to their program. To learn more about that just go to wealthion.com/h A, and I think there’s like a six month free storage option if you go through that link. And then, as Brien and I said, you know, if you are not a highly experienced investor in this space, you want to be following the guidance of somebody like Brien to you know, identify what the good opportunities are to invest in in the mining space. But then there’s all sorts of strategies about how you get into these stocks, what a percentage of your portfolio they should be, when to buy, how much to buy, when to revisit when to call Do you want to put some hedges against this stuff, highly recommend that you work under the guidance of a professional financial advisor who can help guide you on those key decisions. And if you don’t have one, you can do that for you. I highly recommend you talk to the ones that Wealthion endorses, you can talk to them for free to do that just set up a free consultation by going to wealthion.com filling out the short form. They’re totally free to have these conversations, no commitment to work with these guys. It’s just a free public service they offer. Alright, and in wrapping up here. We haven’t hit you with enough great resources here. If you’ve enjoyed having Brien on this channel, like to see him come back on especially when the precious metals start to move next, please voice your support for that by hitting the like button, then clicking on the red subscribe button below. As well as that little bell icon right next to it. Brien, it’s always a pleasure speaking with you, my friend. Thanks for coming on the show. I really look forward to seeing you at your event in November. Any any last words for the audience here as we we say goodbye to folks?
Brien Lundin 1:02:43
No, I just think the conference is here is a great time to timings perfect. I do think it’s a generational opportunity. And Adam it’s always a such a great pleasure to talk with you. Thank you so much for this opportunity, really looking forward to having you at our conference. And we’ve got some great roles for you there. So very excited to see you in a couple of months.
Adam Taggart 1:03:05
All right. Thanks so much, Brien, everyone else thanks so much for watching.