Well, it feels a lot like 2008, when the world was glued to the newsfeed waiting to hear which entity was the next casualty of the unfolding financial crisis, as well as what new extreme measure world governments would announce in response.
In times of heightened anxiety & uncertainty like this, it’s wise to tap the perspective of seasoned analysts who have studied and experienced decades of market action.
There are patterns to history that, when understood, give us advantage in assessing the probabilities of what’s likely to transpire next.
Which is why we’re fortunate today to speak with Fred Hickey, editor of the highly respected newsletter The High Tech Strategist, which Fred has been publishing since 1987.
Transcript
Fred Hickey 0:00
What I’m thinking is we’ll have a really bad September October, because that’s one that always seems to hit the fan. And then we’ll have a build up to that. I think that the bear market rally that we had ended, and we’re now in another downturn, we could have another rally after that, but some, some point September, October, it’s good, you know, things are really deteriorated and you’d like you said, you know, you start to see big job numbers and 600 700,000 layoffs and those kinds of things, you could start to see that. But it might also this also could extend even into 2024. Potentially, it’s so big, the excesses that have to be corrected, and it’s hard to know for sure, but I, but I’m fairly certain that 2023 is going to be better.
Adam Taggart 0:50
Welcome to Wealthion. I’m Wealthion founder, Adam Taggart, well, it feels a lot like 2008, when the world was glued to the news feed waiting to hear which entity was the next casualty of the unfolding financial crisis, as well as what new extreme measure world governments would announce in response. In times of heightened anxiety and uncertainty like this, it’s wise to tap the perspective of seasoned analysts who have studied and experienced decades of market action. There are patterns to history that when understood, give us an advantage in assessing the probabilities of what’s likely to happen next, which is why we’re fortunate today to speak with Fred Hickey, editor of the highly respected newsletter, the high tech strategist, which Fred has been publishing since 1987. Fred, thanks so much for joining us today.
Fred Hickey 1:40
My pleasure.
Adam Taggart 1:41
Well, Fred, I’ve been looking forward to having you in this program. For a long time, we scheduled this discussion, I want to say almost months ago, I knew it was going to be so crazy. You find a minute here, I appreciate you taking the time during what must be a very busy time for you and covering all this action to come on and talk with us.
Fred Hickey 2:02
Certainly, certainly not easy to keep up with everything leads this.
Adam Taggart 2:06
Right, we got you up, you’re saying that the rest of us don’t have any chance. We’ll look lots of questions for you. But if you don’t mind, let me start with my customary one. I like to ask everybody the beginning of these interviews. What’s your current assessment of the global economy and financial markets?
Fred Hickey 2:24
Well, I think that as far as the economy goes, we’re heading towards recession. I don’t, when you have central banks around the world that had lowered rates as far as they had to 0% in the US and negative in Europe and Japan, and then you had great spike in a very short period of time, one of the fastest rises ever. Not not since the 1980s, or 70s, I would think when you go from zero to 5%, and you built up all the debt that we have, you’re going to have a problem. And it’s going to lead to a recession. I can’t believe people were calling for a soft landing or no landing. And, of course, that went by the boards very quickly with the latest banking crisis that we were experiencing currently. So we’ve been in this process anyways, we, in the stock market, we sold off last year hard, was one of the worst declines that we’ve had. And in some time, obviously, and then in the bond market, it was the worst market decline error in history. So the combination was pretty terrible. And then we had a rally bottomed the s&p bottomed at 27%, down in October, and then we had a big rally. And that rally took us through January, and we had the best January 22 years. That’s not unusual. Back in 2000 timeframe we had, we had eight instances where the market went up 15% or more. And what those do is those of those travels, they get people out all excited, they start thinking there’s gonna be no landing. The bear markets over we hear a lot of that from a number of sources. Very recently, even they still believe that that would be the bear market was over we’re in a new bull market and that we wouldn’t have recession we wouldn’t have Heartland so I think we’re heading towards a hard landing. Obviously, the banking crisis has changed. Change the thought process now. Now they’re worried about not interest rates rising the right word. They’re thinking the Fed will have to cut rates going forward. And that’s the result of the downturn. That’s that’s in process. When you have a banking crisis like this you always have tightening of money, and that will also make make it harder for for more Have for earnings to have to hold up and they’re not going to hold up. They were, they were in decline already. And they’ll continue to do so. I think that in the stock market we were in, I agree with what Jeremy Grantham GMO founder of GMO and the great historian, called the Super bubble. And he said that there were four great super bubbles in the last 100 years. One of them was 1929. One of them was in Japan, 1989. And then we had a great 2000 bubble that I was deeply involved with, because it was tech driven. And now and now this one, and if you look at the valuations, this one relative to the other US bubbles was the greatest ever. So and valuations even though we had that sell off last year, they’ve only come down to levels that are now at the peak levels and 2000. So, price to sales ratio of 2.2 times is exactly this, the peak level in 2000. Market cap to GDP 150%. Today, it was 200%. But 150%. Today, well, the high the peak in 2000 was 140%. In 2007, eight, and that top that market top, you were 105%. So you can see how high we got. It was it was insane. It was a super bubble, and was super bubbles pop. They don’t just go down a little bit. You know, we’re down on the s&p up here today, we’re down on the s&p only in the teens right now. And that’s, that’s not exactly bear market action. Super bubbles dropped 50% or more. So in 1929, the Dow went now 90% in 1989. In Japan, the that dropped 80% The NASDAQ and tech bubble 2000 dropped at three a 4%. We’re nowhere near that in January, usually is a chump change of leadership. We didn’t see a change in leadership in January that that rebound that we had a bear market rally brought us back to buying mean stocks and Party City and Bed Bath and Beyond and back to buying Tesla again backed by Katherine Cathy ARKS ETF and, you know, options one day to expiration options, this is not in any kind of indication that you hit capitulation. In bear markets, the last third of all bear a ball bear markets are the worst. And that’s when there is capitulation. We haven’t seen any of that yet. That’s ahead of us. And, and these these rallies that we’ve had here throughout this bear market are normal. And they catch people, they destroy them maximum on money because they suck people in. And that’s what this latest rally did. And so now we’re heading down again, I think in fits and starts. And then you know, these bear markets usually going to your to your at least two years time it’s take it takes time for that to suck in the money and make people capitulate. So I don’t know how long it’ll go. And before we get to capitulation, and the only thing that could stop it is if the Fed comes in, and once again intervenes massively, as they’ve done with other and other periods where we’ve had, we’ve been in trouble and they come in with money printing.
Adam Taggart 8:35
Okay, that was a wonderful answer. I took great notes. And we’ll get to the possibility of central bankers trying to intervene here to, you know, maybe stop this carnage that you say history session happen. But let’s let’s take our time to get to that because I have a few other questions first, just one question for you, from how you sort of described all this is it, you sort of started your answer grounded in central bank policy, we had been at ZURB had a lot of intervention, you know, pretty much from 2009 on until we turned everything off, right at the end of 2021. And from what you’re saying it sort of sounds akin to like, you know, getting the market accustomed to driving, you know, at 100 miles an hour, and then all of a sudden, the Fed suddenly slammed on the brakes. And when you say we’re heading to a recession, it’s kind of like because the whole system which was accompanied to it accustomed to all that stimulus and cheap money, it’s now like hitting the windshield. Right. So is that a decent analogy?
Fred Hickey 9:37
Absolutely. And but you know, it’s been going on for beyond before nine 2009. And then they came in and lowered rates in 2000 to one low. And then and then that caused caused a housing bubble and a global financial crisis. And they so it’s been going on even in the early late 1990s When they were intervening to stop Return on capital problem the to even the Mexican crisis that we had. They’ve intervening intervening and never letting the markets correct. And then And then finally, when they got to got high levels of inflation, they had no choice slammed on the brakes. And then we’ve seen the market decline. But every time they tried to back away, they’ve had a market issue. So it’s not just this time, back in 2009. Bernanke testified in Congress in April, I think it was, and he said, Oh, there’s only be a year or so it’s temporary. Well, this is his balance sheet, excuse me, balance sheet has gone up by 10 times since then, it doesn’t seem to be any end to it. You know, it just popped up 300 billion this past week, on some of the intervention work they did to some of the advances they made. Now they claim it’s going to be temporary, on their only one year, but nothing ever seems to be temporary.
Adam Taggart 10:53
Nothing’s as permanent as a temporary government solution. I am altern 52 this summer. And I basically been alive. I mean, I think I was born like two or three weeks before Nixon temporarily took the dollar off the gold standard, right? That’s been a pretty long temporary. Alright, so what you’re sort of talking about there is is really the Fed put that Greenspan initiated there in the late 90s. And they just keep doubling down on it right. And in I want to talk about the Fed in a moment, because I want to first update everybody on what’s going on in the banking system to see if you have any additional insights to add to that. But I’m a big question out there that I’m just preparing you I’m going to ask you is do you think that Powell, there are folks out there that think that Tao is trying to kill the Fed put this time round? And I’d be curious to see if you if you think that that’s isn’t real true intent here? And then if you do, if you think it’s possible, he can succeed on that? Or is the system just so addicted to it now, you just can’t kill it without sending the system into cardiac arrest.
Fred Hickey 12:06
I think Paul has good intentions. He was in he’ll go back to 2012. In the Fed minutes. He was the one fed member, one of the only Fed members that was arguing against QE and talking about the dangers of QE and moral hazards and all of the arguments that I could make today. He was making him that. But he continued to offer for like the key ways. When he became chairman, he tried to pull back. And then we had, we had a bit of a crisis again, rates spiked up and immediately we were fighting again. So there was a quick pivot. And that’s what they’re always looking for now pivots. The differences time is that we have we’ve seen real, not just asset inflation, we saw very high highest inflation in 40 years for decades. And that forced him to move again. his track record isn’t good. When it comes to holding firm when, when there are difficulties. And we’ve seen this, we saw we’ve seen it, there was always another bailout, always more money printing, I believe he’s the one guy that would cry, but I don’t think given the system where we are on the amount of debt that we have. And when you raise rates like this, what it does to blows things up. It breaks breaks things. And I don’t I don’t think that the politicians, our government, most of the Fed members can deal with any kind of pain we’ve been putting off that we haven’t allowed the markets to correct no cleansing of excesses. And so I think they’d hoped at least I know, Paul hoped he might be able to get away with this just as he did earlier. I don’t I don’t hold much hope.
Adam Taggart 13:47
Okay. Okay. So you’re, you’re sort of in the camp of the folks that say, the Fed is going to hike until it breaks something and you’re probably seeing the first things breaking down. You’re seeing that, right. Yes. And that that breaking is going to get so bad. It’s going to force him at some point to pivot to rescue the s ystem.
Fred Hickey 14:05
Yes. Now he’d be slower than anyone else. Because his intention is to try to break the but if he could, he knows that he should be the others don’t even know that he knows. He has an understanding of the problems, the long term problems that the Fed has created and will continue to great. So so I wouldn’t count on happening right away. That’s the one thing it’s, it’s he’ll probably drag his feet until there’s until he has no choice.
Adam Taggart 14:32
Okay, so, again, sort of putting words in your mouth here. It’s he warned us about pain. Yeah, hey, there’s gonna be pain coming. I think he hoped he will. We’ll get through the pain and then there’ll be better days tomorrow. It sounds like you’re saying he’s gonna He’s gonna withstand a fair amount of pay. But at some point, it’s going to get so great that he’s just going to have to capitulate
Fred Hickey 14:54
and we’ll be heading into an election year too. That will make things harder.
Adam Taggart 14:58
So just be massive political pressure on And, okay, well, real quick, let’s just update folks on the banking system situation here, which is totally fluid and may be out of date by the time this interview launches tomorrow. But the latest developments over the weekend were that Credit Suisse, which was basically one of the world’s biggest zombie banks out there, it’s been on life support for a long time. Finally, keeled over more or less, as a part of the ripple effects of what’s been going on in the banking system in the Swiss government. In Swiss National Bank engineered, basically a bailout, a four shot gun marriage between Credit Suisse and UBS, right. And, you know, that was done to show people, Hey, we’re just not gonna we’re not gonna have a Lehman moment, we’re not gonna let this bank fail and have all that contagion ripple across the global banking system. What was, say? TBD. We’re going to find out if they did a good job on that or not. But one interesting element about that is, let’s see. So the terms were UBS got to acquire Credit Suisse for a little over 3 billion. Interestingly, the bank was valued at about seven or 8 billion, you know, on Friday, the Swiss government is guaranteeing UBS $10 billion worth on Credit Suisse’s assets. So if those assets start going back, the government will backstop UBS. Totally understand what UBS would ask for that, in a deal like this. The Swiss National Bank is giving UBS a 100 billion, probably even greater than 100 billion liquidity assistance, just to kind of keep things you know, working smoothly. But the interesting thing was that they decided to stiff, some of their bondholders. The end, you would expect, you know bondholders to take a hit in a deal like this. But they they wiped out a sleeve called the 81 sleeve, which were the contingent convertible bond holders. And what’s notable about this is not that they got that they didn’t take losses, it’s that that they actually held it, they let the equity holders retain a fair amount of value. I mean, not not a ton, but about, you know, a little less than 50% of their equity. And that’s that’s really breaking the agreement. Generally with creditors, they’re pretty much always senior to equity holders here. So there’s a little bit of a scandal going on right here. And maybe this is just what they needed to do to get the deal done. I’m just curious if you have any thoughts on the whole UBS Credit Suisse solute solution here?
Fred Hickey 17:36
Well, I said it’s, so I’ve never heard of that happening. Equity. But that will, those are the terms of the were most of those winds were gonna get wiped out first, but they should have known that if they ever had been to read the details, they were gonna get wiped out. And you know, that the fact that there’s the equity holders are still got something, I think that’s just the way they cut the deal at the end of the day, because they had no other choice. You know, I don’t know, I know that what I do know is that is that there’s a lot of we don’t know where all the bodies are buried yet where they’re starting to float to the top. We this, this wasn’t the first bank to go, we’ve had three others. We had the Silicon Valley Bank, which had its own problems. They had lent a lot of money to a lot of bad loans and got hit with deposit runs. Their loss management, treasury bonds, what’s that
Adam Taggart 18:39
terrible risk management on top of absolutely terrible risk management,
Fred Hickey 18:43
you know, they hit but we, you know, we had, this goes into my tech area here. It was when you printed that kind of money that you did, you know, $5 trillion dollars during the COVID crisis. It created insane malinvestment. You know, we have a fine car, all kinds of flying car companies and human, you know, human space travel companies, and one company was going to bring back the woolly mammoth, and it was out of control, like I thought I’d never see again, when I saw in 2000 Only this was worse. So, you know, we had gone to records of venture capital money that had been had been infused into the system, and then they doubled it and 2021 Same thing. Same thing with with IPOs just it was out of control unit 22,000 cryptos. So Silicon Valley Bank was was involved in a lot of that stuff, and are there big losses there. And but they’re not alone. I mean, these lines, there are losses out there because because everything was so crazy. We had what some people call an everything bubble. So we had we had we had these huge bond valuations with rates that you know, never seen before levels. And so a lot of we don’t know what the size of losses are on pension funds insurance companies that had trouble in 2008? You know, we know that we know commercial real estate is a big problem right now. What what floats to the top next? I don’t know. But I know, it’s, they’re all when you, when you have the losses that were that were taken last year, and in many cases, they were just not recognized. You know, they don’t have to mark their portfolios. And you know, that’s the case and with private equity, and they’re not, they’re not they haven’t, you know, we just saw, we just got one fun, cut their venture estimates had lost 60% of their money and on the stock side of it, and then cut it by like, 33%, this week or so. But that wasn’t anywhere near what they needed to cut what really need to recognize. So all these losses that are still out there, that can that can create problems. I don’t think the big banks, I think Credit Suisse was special because I don’t I don’t think Europe had corrected and made the corrections that we did in 2008 2000. I don’t think our biggest banks or JP Morgan’s and those kinds of companies are in trouble at all. But all over the place. Obviously, the regional banks, you know, federal republic there is still losing and is still dropping last I thought it was down 20% More today, and there’s a lot of others that are there. So it’s hard to know why no one could have predicted no one did that Silicon Valley Bank was gonna go and then at Credit Suisse was gonna go, Well, I just know that the losses are out there.
Adam Taggart 21:45
Got it. So listen to you, Fred, is it sort of fair to say that after, you know, a prolonged period of having interest rates at the lowest, some people have said like in recorded history that that went and of course that cheap money? cheap credit. You know, basically flooded, liquidity in the world encouraged rampant speculation led to all this malinvestment, you talked about, therefore, creating what you said many people call the everything bubble. Is it just sort of standard reason, then once that era has ended, and rates start rising, especially as quickly as they have so far? You just mathematically, we should expect the everything bust?
Fred Hickey 22:31
And that’s what that’s what I think is the Super Bowl bust, right? It’s a this is special, and it’s big. I knew it was coming. It just just it’s hard to predict the timing of such things. But there wasn’t any doubt in my mind, just as it wasn’t any doubt that I knew that was a housing bubble. I knew that I knew that the banks were in trouble in 2008. I was short those. I knew that I knew the tech bubble was a disaster. In 2000. I was short. What’s that? So this isn’t anything different was all you can see it if you if you you know if your eyes are open, you can see if you understand the markets. Difficulty is timing always.
Adam Taggart 23:07
Yeah. Although Is it fair to say that that the you know, you don’t know when it’s going to happen? But is it? Is it fair to say that the opening kickoff is now behind us, the game is
Fred Hickey 23:18
questioning, we had huge losses last year, like I said it was the worst bond market decline in history last year, and then the stock market was hit pretty hard to just not as hard as it will be by the time the bear market ends. But that all peaked, you know, in some of the mean stuff. Cap Kathy are Kathy woods are that peaked in 2021 in February, some of the craziest stuff, then and then then the market as often happens, the market itself and didn’t really start down until the end of the end 2020 21 into 2022. So this has been going on for a while now. And it’s continuing and these things take time.
Adam Taggart 24:01
Well, and to use my game analogy here, and I know you’re I’m asking you to speculate here but but like we passed halftime yet, or do you think we’re still in the first half?
Fred Hickey 24:12
Well, it’s hard to say I do know that. As I said the biggest clients come at the end when this congratulation. I know that we’re nowhere near that. Usually you get change in leadership. We’ve not seen that, you know, haven’t seen the big declines, yet. Valuations aren’t anywhere near where they should be. I’d say we’re probably halftime maybe with a lot of pain to go.
Adam Taggart 24:31
Okay. Okay. But but sort of the worst of the turning of the analogy or the the, the opposing team is going to score more points in the second half against us.
Fred Hickey 24:41
Yes, it’s gonna get rough. Okay.
Adam Taggart 24:44
All right. Well, let’s use this as a transition to just sort of your general macro outlook here. So you started saying, you see us heading towards recession, right. So as you look out, you know, across the rest of this year, maybe heading into 2024 Are you know, we had some debate last year as to whether we were in a recession or not and what the technical definition of recession was. And if you look at the GDP numbers for q3, and q4, they were pretty good. I haven’t looked at it today. But the last time I looked at the Feds GDP now for q1, I think it was still above 2%. You know, you have data and we can argue that it’s lagging and maybe even monkey Tibet. But if you look at, you know, jobs data, you know, people will say the economy still looks pretty robust, right? If you look at retail sales, you know, if you if you squint, and don’t dig too much, you know, they looked okay, in the last report. When do you think we’re going to not be debating in anymore when we’re just going to be like, Okay, we’re clearly in recession. Now. Is that Is that happening this year? Or is that 2024 type of thing and given your forecast?
Fred Hickey 25:58
We’ve seen all the early signs, real estate usually blows first they did. And housing market I should say housing market is as his as a rolled over badly on affordability is is very high and rates jumped up and and prices are too high. So everything’s kind of killing over there. Yeah. Badly inverted yield curve, that usually happens. Now you have your tightening of money. But you’re right. Well, the other thing too, is your employment lags. Always does. You’ll you’ll see that the end. When things get that’s when all the layoffs occur, people, especially now with a shortage of workers that we’ve had people are holding on to workers longer, that it’s difficult to see retail sales were born at Christmas time. They bounced in January, probably because of the weather, and then warmest weather we’ve warmest January, and I don’t know how many years. And then and then February numbers were not good again. So retail sales have been generally weak. That’s my report there. Again, from my technology angle. That’s my report a couple of weeks ago, and they can forecast continued problems into the consumer, US consumer. And so there’s Walmart and most of the mainstream depot and yeah, exactly, yeah, they’re all they’re all They’re all wanting. One of what we haven’t seen is so much is enterprise spending dropping. And again, we had a major earnings report two weeks ago from Dell computer. People don’t spend a lot of time with Dell. It’s not as flashy, as exciting as the fang stocks, not one of the fang stocks. But it’s a huge company. It’s $100 billion dollars in revenues. It’s twice the size of IBM, it’s twice the size of was 40 40% bigger than IBM. It’s twice the size of Cisco, there just isn’t anybody comparable out there in terms of computer hardware, and it’s their focus is not consumer PCs. It’s its corporate business enterprise. So the number one in computer service, the number one is storage, all these areas that number one, and they’re they gain market share, and they continue to gain market share. What did they say? They said that they saw that the customers were scrutinizing every dollar every budget dollar, they saw elevated inventories. They forecast continual declines in in, in the infrastructure area, storage which had been strong, weakened in the fourth quarter. Now the fourth quarter, when the quarter they just reported was a January quarter. So it’s it’s the latest data that we’re getting. There’ll be companies that will bore first quarter numbers and it’ll cool January in here. Across the board, broad caution in the IT spending environment. The only areas that had seen that were still holding up were financial services, construction and real estate. Now those aren’t going to hold up either. We know what’s going on. Normally, this is all before the banking crisis occurred that occurred. This happened just prior to their report was just prior to the Silicon Valley and silver gate problems. And now Credit Suisse and others. So we’re so now we’re starting to see it. In the industrial production numbers were weak, a lot of the capacity utilization was slipping. So it’s starting to get into the broader economy. Some of the semiconductor companies I monitor, seeing weakness in industrial as well. So it’s happening, it’s happening. It doesn’t happen overnight, again, takes time. But those those dial numbers are really important and they’re forecasting much worse numbers than the quarter they just reported going forward. So they’ve seen big declines in PCs, but now they’re seeing it in the infrastructure. They’re talking about being infrastructure business being down 15% year over year, pretty bad and that’s like I said huge company. Nobody better in the in the tech world.
Adam Taggart 29:58
Well in that part. It’s Korea. That is great intelligence. Let me just bring it up to a higher level of tech because you publish the high tech strategist newsletter technology is a sector that you’ve been an expert in for a very, very long time. You mentioned that Dell is not one of the fang stocks. But you know, those big tech stocks have largely been, you know, the ballast keeping the indices from rolling over. And last year, you know, it took a while for the indices to move down. And, you know, we got briefly to bear market territory in them. But, you know, if you if you looked at the, say, the NASDAQ, and you looked at the how far the NASDAQ was down, and then you look at how far down the average stock in the NASDAQ was massive difference. And it’s because these really big tech companies that are a huge part of the s&p as well, you know, we’re they’re such big behemoths, and they weren’t suffering as much as the rest of the guys. So they made the indicee the index look better than the average stock and it was performing. What is your general general outlook for tech here? Will we see a rotation at some point out of tech into sort of safer plays as what you expect to see happen progresses? Or are they so big and well positioned that they’re going to be the leaders going forward no matter what happens,
Fred Hickey 31:28
right? Well, in so the Nasdaq fell 33% Last year, but then it bounced 15% or so this year in that bear market rally and and because it was a bear market rally, the leaders, the old leaders continued to be the leaders again, they went right back to their favorite stocks. And the valuations are extreme, you know, apples two and a half trillion dollars market cap 26 pe at this point. You know, if you go back in after the 2009 timeframe, that bear market, Apple’s P E ratio ranged from 10 to 14 for several years, and didn’t get above 20. Until 2017. There’s just no precedents for for Apple to be selling and 26 times and no growth earnings. Earnings are expected to be down 6% in q1 and also down in for the year. And they’re in their third year their upgrade cycle, which is not a good time for them to be in so high growth timeframe. So so you can’t justify that you can’t justify Microsoft’s 30 pe that’s another one if you go back into that 2010 timeframe took several years for for it to ever get back to a 20 pe. I also want to go back to 2000. People thought those major stocks were invincible then too, and I’ve seen it every time and go back to 1990 which is Compaq, Oracle, Microsoft. Those companies were the leaders then. And they held up to until the last three months of 99. And then they fell 40 to 60%. That’s the capitulation phase. They were the Favorites then as well. We saw the same thing in in in 2000. They held up but then collapsed. And you know I look back on those top 10 stocks, Microsoft, Cisco, Intel, Nokia, Nortel, IBM, EMC, Sun Microsystems, the best one fell 60% And that was Microsoft. It took Microsoft Microsoft’s the only one of those names that ever got back its valuation level, the only one Sun Microsystems and AMC dropped 96% Live part of other companies now. You’ll Cisco down today 65% That was a dominant company. They thought that that was your amp. That was your your apple that was your Microsoft as the day had second highest market cap. Set 65% down Intel down 75% It was the dominant semiconductor company at the time, that was nobody close to the Nokia down 92% That’s what happens. It’s super bubbles. They were not but we’re not there yet. We’re talking we’re talking valuations that are extreme for these companies. You know, Amazon still 70 times estimator in videos 110 times it’s 22 times sales. These these things you don’t even see it most bubbles and yet that’s where we are right now, but the earnings are falling invidious earnings were down 33% non GAAP now 50% gap. Now they have a lot of AI hype here but their main business is not the main business aren’t doing so well. And with a recession ahead here, things are going to be that weird. As I mentioned, Dell said that things are turning down, well, it’s gonna turn out from Microsoft, you’re not selling computer servers, you’re not gonna be selling computer software. They go hand in hand. So the other part is that some of these companies that data cloud companies, the storage companies, like Amazon, and Microsoft, well, they’re dependent upon us companies and all the flying car companies and all that other stuff. And as with with lending, tightening and the economy goes into recession, those businesses will go away, in many cases, and others will have to cut back as we’re seeing them do it. So we’re in a downtrend, yet the valuations still don’t show it. But that happens every single time. So are all the tech cycles that I’ve had that urban through 2008, same thing, Amazon was a favorite at that time, it fell 60% In the last 334 months. Finally, that was, but that was 2008 was the end of the bear market. So they hold on to these things, their favorites, the ones they love the most, until they capitulate, and then panic, and you get these great clients and expect you’ll see that again, unless the Fed steps and again, with massive money, Bernie.
Adam Taggart 36:14
Okay. All right. So you answered my follow up question, which is, so do you expect the cycle to continue from here? And it’s basically said, Yes. Unless there’s something unnatural that the central bank step in to do? All right. Let’s see here. So many questions for you. I’m just trying to pack into the remaining time we have. So on the, on the inflation side of things, right. I mean, that’s what’s different this time round. For the central banks, right is there they’re much more limited in what they can do, because their primary goal right now is to get inflation under control. And it’s proving stubborn, right 6% last official CPI? Do you expect that to be brought under control? Because everything you’re talking about here is contractionary from an economic standpoint? So do you sort of expect inflation to kind of resolve itself as we go through this process into recession and another big capitulation? Or do you do you have a different outlook?
Fred Hickey 37:13
Well, inflation is starting to come down. And that would be expected part of its base effect. Part of it was energy prices coming down a lot. At other, you know, other copper or those kinds of things. You don’t need as much housing as lumber prices. So we’ve seen a lot of commodities decline in price. All that’s to be expected. But you have other issues that are that are pushing up inflation, you have a wage price thing going on here? Well, we have, we don’t have networks. The jolts report still shows 10 point 5 million job openings. And we have 1.9 more job openings. So we have that we have workers available workers unemployed, we have wage pressure, you know, if you saw the Delta and had a contract of wage contract, negotiation, 34% increase, and Americans said they match it. And then American pilots still going on strike, supposedly, because that’s not enough. You know, you had increased labor have been left behind for a long time. And now they’re more in the driver’s seat. And with the shortage of people, we have shortage of accountants, we have shortage of healthcare people in New Hampshire, the hospital all got together and said, Warren, we don’t have enough people at all levels. And so expect long waits now to get health care, retail, and you go on and on and on. There’s their, their, their their labor has. Labor has an advantage right now. And we’re seeing it in higher wages. So and that leads when you have higher wages, corporations have to increase their prices, and some of them weren’t able to get all the price increases they needed last year. So they’re still raising prices. So you’ve unleashed that. And that’s kind of structural, you have you have, we’ve lost a lot of workers, retirees, baby boomers, like myself, I’ve retired. You’ve lost them to some some cases that there’s disincentives for some people to work there. The COVID was a problem. Daycare is a problem where all these reasons we don’t have, we don’t have workers. And then we’re also globalization reversing we had all the positive effects from globalization, which reduced prices. And now we’re going to try to restore and when you do that, it’s higher cost. So the positive things that have kept inflation in check for all those decades, really, a lot of those those those key key drivers are now reversing. So I think you’ll see a decline in inflation. And what you might see is what we saw in the 1970s which was up and down, up and down, and then always a little bit higher. If the Fed doesn’t, you know if Paul doesn’t pick and
Adam Taggart 39:59
you say that Received substantially higher inflation results,
Fred Hickey 40:02
we could, I think we could see substantially higher inflation, because of the way we’ve, you know, printed incredible amounts of money supply growth during these during the COVID, period 40% for almost two years, some of that money still floating around. If we put more in, if we continue to do that, then I think we will, because we don’t have the benefit of globalization, keeping prices down, we don’t have, we don’t have the amount of labor that we once had. And so these these pressures are going to be it’s sort of like 70s 70s stuff. And then I also think energy prices are going to reverse and again, and rally again. You know, I was in energy stocks in, not I resist them this year or last year or reduce them, it was a good move. But I had a substantial energy position for a couple of years, because I know ultimately, we’re going to have shortages. Again ConocoPhillips CEO said we’re going back to the 1970s 80s. Pioneer pioneer natural said that we’ll never see the production levels that we we reached before, which is like 13 million barrels a day. And that’s because of ESG because of the Biden administration’s disdain for for the group. You know, the Permian wells are seeing great production declines right now. We brought down the Strategic Petroleum Reserve from 650 million barrels to 370 million barrels, and that helped take the price down. But that was a one time shot. And, you know, we go we’ve seen demand destruction, and that’s also helped in the weather helped. And especially in Europe, but longer term, these pressures, these energy prices, I think are going to a higher again, and that that will reverse the benefits that we’ve seen to, to inflation here recently.
Adam Taggart 42:02
Got it. Fred, I’m making a note here, I’ve got to have you back on again, to dive more deeply into energy stocks, or just the energy situation. I agree with everything. You’re saying we’ve had experts on this channel, as recently as just this past weekend with our conference, talking about exactly the issues you just mentioned, but also the fact that we’ve been under investing in capital investment in energy for a good long time it prior to the current administration and whatnot. So yes, there are some decisions we’re making in the near term here that are disincentivizing, the industry to invest going forward. But but we’ve done stuff 510 15 years ago that we’re going to be paying for going forward as well. You’re nodding as I’m saying all this. So I think it’s a really interesting story to tell there. We don’t have time to do it justice here. But I do want to flag
Fred Hickey 42:54
it just like you mentioned inflation. It’s an important part of it. Yeah, no, that’s great. Okay, so
Adam Taggart 42:59
you sort of see this path of I’m going to call sort of secularly. Stubborn inflation pressure, upward pressures that we haven’t had before where the CPI bottoms out at who knows. But let me let me make this statement, you can correct it, we’re probably not going back to, you know, multi decade average ahead of us. That’s 2% or less, like we’ve been doing,
Fred Hickey 43:22
I wouldn’t, I wouldn’t expect that. I wouldn’t expect that to happen. No. Okay. declines in will have declines related to this related to this recession that are causing, you know, demand destruction. But at the bottom, I’ll go, I don’t think it’ll go below 2%, because of all the other questions that are out there.
Adam Taggart 43:41
Okay. There are two questions that I wanted to dig into you with you. I, in the interest of time and getting to another rich vein, I’ll just say, Look, if there’s anything that you want to say about either the scope of layoffs, risks, the risk of layoffs in this coming recession that you see ahead of us, and also thoughts on the housing market. And mostly I asked those lumping those two together, because I’m really more interested in your sense of what the living experience is going to be for the folks watching this video going into the recession that you see ahead, you know, is it going to be? Oh, it’s not so bad. We’ll just kind of muddle through it. Is it going to be like, Oh, it’s a quick recession that we almost didn’t even realize happen like we saw in 2020? Or is this going to be more like a grinding deep Hey, you people around you may be losing their jobs, your house might get cut value by 30%. And it’s going to be a long, hard slog Where do you sort of see that?
Fred Hickey 44:39
Now, again, John, depend upon the Fed does. But if they if they are slow to move, and it’s going to be rough because we have built up all these excesses over all these years. You need to have cleansing of the system. Have the malinvestments that are occurred. And we have that so you kind of build up all this, this, this inflammatory stuff that just going to blow up. And so we’ve seen a lot of layoffs in tech so far, but not in the major part of the economy. And I think they’ll come. The only thing that does help is the shortage of workers. So that that will keep people keep companies from laying off as many people as they would, but they’ll have to, we’re already seeing that. I mean, Dell Dells laying off people as well as a result going forward in the last conference call here, and a lot of others will. So it’ll be a I assuming there isn’t any great fix, save the jump, that jump starts everything again, it’s going and if that happens, we’re just putting it off for a little bit longer anyway. So it’ll be another worst decline down the road. But ya know, it’s going to be it’s going to be very difficult period. No, I don’t think it’s going to be a Great Depression, we had 25% of the population kind of thing, but double digit kind of, you can see double digit jobless unemployment rate potentially take a long time to get there because only 3.6% Right now. Right. But yeah, you could you could see that.
Adam Taggart 46:19
Okay. And that is sobering. I mean, double digit. Unemployment is something we haven’t had to deal with. I mean, we had a brief, massive loss of jobs in the pandemic, but it got it got addressed immediately. Right. And
Fred Hickey 46:32
but notice it got addressed immediately. And that was the thing that turned that around otherwise, right, otherwise it would result COVID Obviously resolve itself, but each time you know, in 2008, same thing. Yeah. banks, the banks were done under?
Adam Taggart 46:49
Yeah, yeah. Yeah. And I mean, and one of the reasons why I mentioned this is is, you know, having lived through 2008, you know, it was just like, month after month after month of hundreds of 1000s of jobs being lost, every single month. And I’m just not sure with what everyone’s reading with. Oh, don’t worry, jobs are fine. You know, they’re just not ready for that type of potentiality.
Fred Hickey 47:11
No, I’m sure not when they’re talking about no landing and week ago, no land and soft landings. No.
Adam Taggart 47:19
All right. So I’m getting to a very particular question. Right before I get there. So intuiting, from everything you’ve said so far, Fred, I get the impression that you think that we could easily have back to back disappointing years in the markets, right? A lot of people like to point to, oh, well, when a markets down by 20%. One year history says that the likelihood of us having a positive year, the next year is X percent or whatever. So but I think you’re skeptical of that saying, given the realities on the ground, there’s not a great optimism that a great argument to get real. You no longer market here.
Fred Hickey 47:56
No, no, as I said, the valuations are terrible. And we’re heading towards recession. And as you pointed out, we’re not quite there yet are a lot of mixed signals. But the things are turning down and about just, you know, I’ve never all the bear markets, I’ve seen they they all go on average a couple years anyways. And so that argument, you don’t have two years in a row when it’s craziness. Especially with the valuations that you have here, they’re just not going to be sustained. And they I expect, what I’m thinking is we’ll have a really bad September, October, because that’s one that always seems to hit the fan. And then we’ll have a build up to that. I think that the bear market rally that we had ended, and we’re now in another downturn, we could have another rally after that. But some, some point September, October, it’s, you know, things are really deteriorated. And you’d like you said, you know, you start to see big job numbers and 600 700,000 layoffs and those kinds of things, you could start to see that. But it might also this also could extend even into 2024. Potentially, it’s so big, the excesses that have to be corrected. And now it’s hard to know for sure, but I but I I’m fairly certain that 2023 is going to be a bad year.
Adam Taggart 49:13
Okay. All right. Well, let’s say that, of course, the whole purpose of this channel is to help the regular investor look through the eyes of seasoned experts, such as yourself, become better informed, and then hopefully use that information to take more prudent and more informed action to protect, preserve, and hopefully at some point, grow their wealth. I wonder I want to read a comment that you made on Twitter the other day and then give you a chance to elaborate on it. The feds in quite a pickle. More tightening to fight inflation ensures more credit events. Stop and inflation could surge even further. Meanwhile, there’s still that bloated 8.3 trillion balance sheet. One day they may learn not to mess with free market forces got gold? Yeah, so it seems from a lot of your your writings and even though you’re the high tech guy, you decidedly oftentimes it seems come back to a decidedly non tech asset as a good thing to be holding, given this current macro environment. So can you explain, you know, your, your recommendations for gold in this macro environment.
Fred Hickey 50:31
Gold does poorly and does poorly in times of joy. So when you’re having big bull markets, like the 1980s 2000s, that double time, gold was in a bear market, prior to that 1970s, you had a great gold bull market. And that was a terrible, terrible period for the economy and also the stock markets with major declines, their stocks didn’t go anywhere, but lost money in real real terms. In 2000, we had the bubble break, and, and I knew Tech was done that when you have a big bubble like that, you’re going into a secular decline. And that’s when I started getting interested in gold, then I assumed that central banks would kind of do what they were doing, which was always bailing things out. And I never imagined we’d get to this level. But but that was a good choice to make my fairly first purchases and mining stocks in 2002. Because they went on a terrific run, they went up 1700 Well, 16 100% 17 times in the 2000 to 2011 timeframe and going up every year during that time, for a decade. Because things were bad and people wanted store values and safety. And then with all money praying that happened in the stock markets went up NASDAQ went up every year from 2009 on and gold went into a correction a major correction period. And here we are again now. We are we bottomed I think in 2000, at the end of 2015, with gold at 1050. And we’re going to we seem to be going to ever higher lows, with each each downturn that we have. And that’s because there’s been enormous amounts of buying overseas. From the east. The central banks bought a record amount of tonnage last year 1100 36 tonnes, a lot of that has to do with governments wanting to get away from the US dollar, the Chinese have reduced their treasuries from 1.3 trillion to 800. And something’s the lowest since 2010. The weaponization of the dollar has caused a lot of countries now to be buying gold. China itself imported 13 143 tonnes last year 64%, India, Egypt, you know, Bank of Singapore bought 45 tons in January, there’s this huge mine is going on. So China import all that gold last year, but that was during an economic downturn when they were closed, and now they’re open and we’re seeing, you know, February their their their imports that will sue the Shanghai Gold Exchange 169 tons in one month. So 84% from where they were in 2022 in that month in 2021. So there’s an enormous demand that’s coming in from overseas for both because they see the situation that we may see us, you know, we’re not going to have a hard landing we’re not going to have it’ll be a soft landing. Everything’s fine stock marketable will go down two years or all that stuff. That’s not how they see it. They see big troubles here in the West, massive deaths deficits $31.5 trillion, and not not a lot of fiscal responsibility shown. And so they’re preparing and they’re buying, they’re buying gold, and the Western investors have not. So they say that they say the East Asians will set will set the floors for gold, and we’ve seen that floor rise. So it was 1050. Then it was it went up to 1180 in 2018. And it jumped up to 16 110. Last year. That was the bottom this year. It looks like the bottom was $200 Higher 1810. Last night we went to $2,000 Yet we went to $2,000. But the the Western investors don’t have any positions right now. So they’ve taken their positions down to points where you usually get big routes. Silver went negative in the CLT report for manage money. The speculators hedge funds and CPAs and gold was only down to was down to 14,000. net net long contracts. These are bottom levels open interest for the futures traders was only 423,000 At the beginning of this in February, end of February. These are all signs that you’re going to have another rally from the low, the bottom the floor that was set By, by the agents and others that are buying. And so it’s kind of a perfect scenario where you have inflation, you have the loss of confidence around the world central banks are buying overseas buyers are buying. The Western institutions don’t have any positions, they took their ETF with GLD GLD is the largest ETF and they took their positions down by 200 tons in this latest downturn, and they only added 20 Back in this latest round. So they’re going to have to increase positions, they used to have larger positions, you know, maybe up to 5% of their of their portfolios were in gold, and now it’s a fraction of 1%, you raise that to one or two 3% and see what happens to gold when there doesn’t seem to be a lot of gold around or even silver. Technically gold tremendously oversold in his latest downturn that seems to have ended for sure. Longer term, there’s this giant cup and handle for over a decade that the gold people talk about that is like a perfect indicator for for blast off of the price of gold. We’re also heading into the eight year cycle, the better part of the eight year cycle for gold people like my friend, Felix zulauf, and many others look at that very closely. And there is that pattern. So next year, and maybe even earlier this year, we’re heading into the best three to four years For gold. So everything seems to be coming together. Even last year, when when rates were were were up and the dollar was soaring. Gold held its own it didn’t go down. And that was a major accomplishment for gold given the lack of interest in the West, but it was because of all those Asian buyers and others that have been buying gold. So in an inflationary environment with all these debts with a recession that gold does well, during recessions, these are perfect times. Or for a big rally in gold. That might be at the level that you saw, we saw in in the 1970s went up from 100 to 850, or in the 19. And the 2000 timeframe went from 252 to 1900. So it could be many multiples of where we were from the bottom.
Adam Taggart 57:21
Okay, so I was gonna ask, so what would the modern equivalent of that be? Would that be sort of at the 5000? Ish? Higher?
Fred Hickey 57:29
No higher? Maybe eight? Yeah, you know, given all the money that’s been present, yes. Wow. And some people have a lot higher numbers. I don’t like to see those big numbers. I’m just telling you, it’s a perfect setup right now.
Adam Taggart 57:40
Okay. And if we if we were sort of talking about the five to 8000 range here, what’s it not saying you’re calling exactly for this? But what’s a credible timeframe? You think that could be reached over? I’m just trying to get a sense? Is it like, in the next year? Or is that sort of like a four year type of journey?
Fred Hickey 57:58
Yeah, it’s probably three years, maybe, you know, that’s when we talked about that, that eight year cycle, the best the big years, or the three years, or the first three years, or the eight year old cycle. So I would say three years would be and then you what you end up with that is a bubble at the end of it was that a lot of the a lot of it comes at the end. And then the last, the last of it, just like you get capitulations at the end, you get you get spikes at the end of big bull markets as well. So yeah, that’s what I would think. But boy, we’re in a good we’re in a really good position right now with everything that’s going on in the world.
Adam Taggart 58:35
Okay, so you had another comment you put out on Twitter, where basically you just said, welcome to day one of the gold and silver mining rally. You give your reasons for why you think that that should happen. They’re largely commensurate with what you’ve already said here. But you said a big part of this is just going to be you know, continued heavy buying from overseas, as they continue to understand what a financial mess the West is in. So in terms of the miners, which are obviously the the leveraged way to play the prices of the metals. And mean, you talked about the metals, potentially going up several multiples in a relatively short period of time. I’m intuiting, that you think that the miners could then have a massive run? You know, like you’ve said they’ve had earlier before when you first started getting into them at the beginning of the millennium. You’re nodding as I’m saying this. So I guess one of the questions I want to ask you is like, is this the back up the truck moment for the minors? Or is this more sort of a, you know, begin to dip your toe in if you’re not one yet, but it’s not the time to go hog wild just yet. I think it’s
Fred Hickey 59:48
back to truck up time. And here’s why. So the miners have been depressed oversoul they’re not purchased by overseas investors. overseas investors in China and India and Turkey and all those places buy gold, they don’t buy it, don’t buy Barrick Gold, they don’t buy Newmont. That’s the purview of US investors and, and Canadian investors. They’re the ones that are primarily buyers in those. So while we had this big move up and gold from the 1610 level, now 1810 level all the way out, miners haven’t really performed. And one of the reasons is last board, if you look at the numbers from last board, the average realized the old price was $1,730. For the gold miners, the all in sustaining costs, that includes almost all the costs, including the cost or to reverse depletion to refill reserves. The all in sustaining costs have gone up with inflation, because energy costs were up and costs for, you know, grinding materials and cyanide and all these different types of things costing up 14%. And the average, all in sustaining costs in the fourth quarter was $1,231. Well, $1,231.17 31, that gets you $500 margins, right. Right now we’re at 19 189 19 180 to 90 minus the 12 130 is $750. So what you’ve just seen in a matter of weeks, two weeks here is a 50% increase in margins. Right, they’ve gone from $500 margins to $750 margins. Now, we didn’t even see $750 margins, on average, in that 2000 timeframe. One one, you know, these miners have gone crazy. So this is what I’m going to be one of the highest. So their numbers don’t reflect this yet. They’re gonna blow away earnings numbers, while the rest of the economy is doing very poorly, and people are cutting estimates and the tech company earnings continue to fall, the gold mining stocks earnings are gonna go up. And that’s why you you typically see a three to one leverage gold stocks to the gold price. And you look at the what they call the Huey to gold ratio, which is the gold stocks, you will use an index of gold stocks to gold is currently at point point one to two in the 2000 timeframe when during the best of the years in the air. That was point four, six on average point 464. Almost four times the level is today went to point six something right? Why five times. So you can see how depressed they are relative to the price of gold. But there was a reason for that because their margins were falling and people didn’t like it when their earnings are falling. Some of the companies like Newmont and Beric, were cutting dividends, well guess what? Its cash flows are gonna go up too. And the dividends are going to start rising again as well. So we’re right here, it just happened. And the miners are barely up this year. I think the juniors are only up 3%. And the and the the the GDX major miners were only up six or 7% or something like that, and l had occurred last week, because they were down in the year. So we’re in we’re on day one here almost we’re in week one. We’re one week into this. And so far, the prices are only going higher. Right now, as I said, we hit 2000. Tonight, we’re backing up just a little bit right today, which was to be expected. But you know, the technicians are talking about breakouts and all of that kind of thing. Think about what the margins would be and what the cash flows will be. And the dividends will be if you’re talking about much higher gold prices, as I just talked about. It’s just enormous. And that’s why you get, you know, in the 1970s, the small miners went up 30 times some of them, the big ones went up 10. In in in 2000 timeframe. Like I said it was a 17x increase, because the leverage on the bottom lines and on the cash flows and everything else it just fantastic. So if you believe that this is the perfect scenario on which I do, and we’re on the cusp of something really big right here, then the monitors are gonna be at play. All right.
Adam Taggart 1:04:15
Well, that is fantastic. I’m excited to hear that. But you know, on this program, Fred, it really is all about helping people build wealth, right? And to build wealth first, you got to protect it, and then you have to grow it and for so much of the past year plus on this channel. You know, we’ve been talking about all the reasons to be defensive and concerned and whatnot, which which still exists in spades. But where we can identify potential opportunities of undervaluation in the market, where something’s going to get repriced, to the upside. It’s great to be able to highlight those opportunities. So thank you for doing this for our viewers. I want to just note to folks here that we just had the Wealthion spring conference this past weekend, and Rick Rule, you know, famous Natural Resources investor dialed through a number of his stock recommendations in the precious metal space as well as in several other sectors for natural resource investing. So if you’re looking to get some specific stocks to go investigate, if you haven’t, if you didn’t attend a conference, it’s not too late you can buy the replay videos for that over at wealthion.com/conference. Fred in your newsletter do you give recommendations as well for particular mining stocks are you tend to trade in the major ETFs for the sector?
Fred Hickey 1:05:35
Now I don’t deal with ETs I’ve been because I’ve been involved with the group now for over two decades. I do know something about them I think and I can do a little bit better than the the ETS themselves so I have it’s been
done. Okay. Happy with them. So yeah, I what I tell people is what I own.
So I don’t recommend any recommendations or suggestions to people in terms of percentages or anything like that. This is what I own in my circumstance. And you know, these are these are ideas for you if you’re interested. And so yeah, I do. I can name I can I can give you if you want it I can give you my favorite major minor, my favorite intermediate minor and my favorite junior minor if you want. I don’t think
Adam Taggart 1:06:22
people would shoot me if I said no. So yes.
Fred Hickey 1:06:27
Okay, so my favorite. So the big, there’s big three miners, and one of them’s Newmont, one of those barrack, one of them’s Agnico Eagle, and Newmont Beric. haven’t been able to grow. The industry isn’t really growing very much of Eric’s numbers. Last quarter were at a 22 year low production more or last year, and Newmont has been stuck at 6 million ounces a year Agnico was a grower, and they go into they have they have very good growth prospects. So as a result of that, you get a higher multiple. They also are thought to have the best management team. And their minds are located in the best jurisdictions in the world. They purposely stay out of difficult areas. So you won’t find them involved in Russia or South Africa or Venezuela and places like that. Most of their minds are in Canada, I have a I have a mine in Australia, they have mine in Finland, but these are all very highly rated jurisdictions. So from a security standpoint, something you know, being able to sleep at night, they’re very good pays a dividend has for 30 plus years, it’s pretty good dividend 3.3%. stock is down because the miners were depressed here recently, their costs are gonna go down and 2024 and 2025. So not only, and that’s because they have higher grade mines coming on. So not only you get the benefit of the higher gold price, but you also have lower costs than expected. That’s their forecast. So that’s my favorite. And it’s always good to be buying when the CEO is buying as well. And he bought the end just a couple of weeks ago, he bought $400,000 worth of his own stock in an open market. So that’s also that’s also a very good thing. So that’s my favorite major. My favorite intermediate is Alamos gold, AGI. And, again, the best locations and all of their production is North America, most of its from Canada. They their costs are declining. Even more so and this is very rare to have cost declining in this industry, their costs are declining. They’re all in sustaining costs, we’re a little over $1,200. Last year, last quarter was less it was in 11 130 range, they’re forecasting $1,000. By 2025. Because of these very high grade, they have an expansion in Canada, and Ireland, gold is going to double production that these huge grades and low costs. They also have a higher, higher lower cost of production coming from mine in Mexico. So the valuation is they buy back shares. They don’t have any data at all, as I said, the best locations and they’re only a little bit above their net asset value right now. Very, very cheap, even though it did well last year, but it did well, because things were going well more than last year to in that downturn for many of them with with higher costs for most companies. And then the final one would be a junior, and I don’t think it has any peer among juniors. And that’s all Cisco mining. And that’s that would be OS K on Toronto exchange and OB NF on on the New York, where you trade in New York. It’s has a mined coal windfall that is thought to be one of the most significant discoveries in the last 100 years. One of the top ones we haven’t had many and this is one of them. This is a 10 million likely 10 million ounce mine, all in sustaining costs estimated at $758, because the grades are so high on this thing, they’re going to be double digit, you know, 10% plus grades I, I think they’ve had some samples that have come out a lot higher than what their, what their feasibility studies have been. They. Again, it’s in Canada, so it’s a great location. It just, it just it and it’s not, it’s cheap. One of the reasons why it’s down recently, it fell was because they have a body of offering, they put pressure on the stocks and gives you an opportunity to buy some also, and but now they don’t need money from from an equity offering for a year and a half, there’ll be some kind of a deal, because they’re constructing, they’re beginning to bring this together, and they should be producing gold by 2025. So juniors don’t produce but this is one that will be in the near term, relative near term. So it’s a you know, there’s a lot of these juniors that go up a lot because it really cheap. I mean, I’ll give an example while mentioned the name, but you know, it’s it’s all in sustaining costs are almost equal to that 17 130 average realized price, so they’re getting no margin, but that nine to $2,000.18. Now they have $200. And they had nothing before so you can see the you can see the leverage on that one. But these, these are all, I think the highest quality names really good. I don’t I know go up with with the ones that were the there’s a lineup stand next to a hall and you get those penny stocks, there’s a million of them, I only stick to the highest quality ones where they have identified a lot of gold, a lot of reserves, and they’re solid, solid managers. The other thing about Cisco mining is that management team also has already had built very built the Canadian Mark market, mine was one of the most successful mines in Canada. And then they sold it and they they’re doing I think the same thing, I don’t know if they’ll sell it or not. They don’t want to sell it cheap. They’ve had interest. And they’ve because of what they have in hand. They think they kind of made a mistake when it was sold now owned by Agnico. Eagle, fantastic mine, and they built that themselves. And this the same group is building this one as well.
Adam Taggart 1:12:20
Wow. Well, Fred, thank you, that was just pure gold. Sorry, pardon the pun. But that really was exactly the kind of, you know, insider insight in terms of, you know, identifying the wheat from the chaff that folks love to see on this channel. So it’s thank you so much for doing that. It’s interesting. Wealthion has actually been in touch with the management team at Cisco to see if we can get the CEO to come on this channel and actually tell their stories. So it’s great that you actually picked them out there. Alright, look, well, Fred, this has been wonderful. You’ve been extremely generous in your time, we’ve gone way over the allotted time I said we we’d have for this interview. So thank you for sticking with us here. I’m going to wrap it up here. I know I’m going to disappoint a lot of people who would love for us to keep going but hopefully Friday, we can have you come back on the channel at some point in time, give us an update on your outlook as we’re further into the year. Very importantly, though, for folks that have really enjoyed this discussion, maybe first time they’re actually getting to see your speak. Where can they go to learn more about you and your work?
Fred Hickey 1:13:24
We don’t do any advertising never have thankfully we never had to in the 36 years we’ve been doing this never had to advertise. I am on Twitter. So you can kind of read some of the tweets there. And that’s at HTS have Heche I finished. I believe that’s it is that. And then also if anybody has any interest, we can send you all the details about the newsletter. If you send us an email to the high tech strategist@yahoo.com That’s th e h i g h strategist as it spelled@yahoo.com You send that to us, we’ll send you the details. If you’re interested.
Adam Taggart 1:14:04
Great, Fred. And when we edit this video, we will put the URLs up both your email address and your Twitter account so people know exactly where to go. This has been great folks, as you I’m sure can gather at this point in time. The high tech strategist is one of the most respected financial newsletters out there, you now totally understand why having listened to Fred talk here for the past hour plus, highly recommend if you’re interested in more of what Fred has to say that you take advantage of him by emailing him and signing up for that newsletter if you can. Alright, real quick as we just wrap up here. A couple of quick resources for folks just want to remind folks that if you didn’t watch our conference from this past weekend, which was amazing. You can still get access to the replay videos, you can go purchase them over the over at wealthion.com/conference URL I mentioned earlier. Also, you know, Fred painted his outlook for the rest of this year. I think to say that it’s going to be challenging is probably quite an understatement. And this is why we recommend so many people subscribe to expert newsletters, like Fred’s. But also, if you have a bit of a real life, and you don’t have the time to watch the markets, the way that an expert like Fred does, and react to the shifting landscape here is where we highly recommend most people work with a professional financial advisor, who understands the issues that Fred talked about here and take those into account when helping devise a portfolio strategy for you. Beyond just developing a plan, you want somebody who can be your partner and actually, you know, executing the strategy, especially as it has to react to changing developments on the ground, a lot of what Fred’s outlook depends on is what the Fed does. Next from here. So you need to have somebody who is paying attention and making decisions based on that not somebody who’s just saying, hey, market will always take care of you in the long run. And just basically put your 100% long and doesn’t look at it again, for the next couple years. If you have a good advisor who is playing that role for you, excellent, stick with them. But if you don’t, or if you’d like a second opinion from one who does, feel free to schedule a free consultation with the financial advisors that Wealthion endorses to do that, just go to wealthion.com Fill out the short form there doesn’t cost you anything, no commitment to work with these guys. It’s just a public service that they offer. Fred, this has just been absolutely wonderful. Thank you so much, folks. If you’d like to see Fred, come back on this channel again, at some point in the future, please support us by hitting the like button, then clicking on the red subscribe button below, as well as that little bell icon right next to it. Fred. I can’t thank you enough for the extremely generous amount of insight share with us today. That’s been my pleasure. All right, everybody else. Thanks so much for watching.
Transcribed by https://otter.ai
