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With the debt ceiling showdown over, the markets are breathing a sigh of relief.

But should they?

Today’s guest, Tavi Costa of Crescat Capital, is concerned that the wave of mandatory debt issuance in the coming months could prove much more disruptive than investors are prepared for given today’s adverse macro environment.

To find out why and how he recommends protecting your portfolio from this disruption, we’ll ask the man himself.

Follow Tavi at Or on Twitter @tavicosta


Tavi Costa 0:00
It’s pretty clear that investors are betting on one thing today that we’re going to see another 10 years of strong growth and low cost of capital when in my opinion, we may see low or negative growth with higher than average cost of capital. And so to me, this is another reason why I think equity markets may suffer.

Adam Taggart 0:28
Welcome to Wealthion. I’m Wealthion founder Adam Taggart with the debt ceiling showdown over the markets are breathing a sigh of relief. But should they? Today’s guest Tavi Costa of Crescat Capital is concerned that the wave of mandatory debt issuance in the coming months could prove much more disruptive than investors are prepared for given today’s adverse macro environment. To find out why and how he recommends protecting your portfolio from this disruption, we’ll ask the man himself. Tavi. Thanks so much for joining us today.

Tavi Costa 0:59
Thanks for having me, Adam.

Adam Taggart 1:00
Hey, it’s a real pleasure to have you. And I appreciate you coming on the program on relatively short notice. I read this fantastic report that you and your partner Kevin, there at Crescat, put out recently didn’t catch just my attention. A number of people I know it caught their attention, including Bill Ackman, who tweeted, congratulations, and kudos to you guys for great work here on Twitter. So congratulations, very well deserved. I wanted to walk our audience through the main insights of that report in this discussion if that’s okay. Before we get to the details of that, though, I just like to kick this off with a general question that always asked you when you’re on the program, just to kind of level set before we get into the details. What’s your current assessment of the global economy and financial markets?

Tavi Costa 1:45
Well, thanks for having me. Again, it’s great to be here. And I think the current assessment right now is that we’ve had a almost like the complete opposite of 2022, where I don’t think I think I do believe 2022 was the beginning of something that may unfold for much longer term. And this is not the end of it. In other words, this great rotation out of growth stocks, and mostly technology companies, into value companies, I think will continue to be the case. And I understand the recently, what we had is the complete opposite of that, in fact, with a lot of strength in terms of the mega cap stocks, in other technology, businesses and the AI, popularity, increasing and so forth. We also saw financial conditions is up compared to 2022. We’ve had interest rates also not being as pronounced in terms of increasing yields, like we saw in 2022. So a lot of things have helped to support the equity markets, but the economy itself is clearly getting into what we think it’s going to be a hard landing. And at some point, we’re going to start seeing again, prices begin to really reflect this deterioration of cash flows and fundamentals. So we haven’t seen yet in 2022, most of that decline in the 6040, portfolios, equities and bonds and so forth was really, in my opinion, more of a duration, reflection, more of a duration impact in those prices, in other words, interest rates rising, causing a lot of those also long duration assets to declining prices. Now do I think that’s the end of it? I don’t think so. That report that you’re referring to was a report that we went really deep into the treasury market, where I think the Treasury market is what holds the key for the entire financial system in a lot, a lot of ways is how we discount companies because of interest rates. It’s also related to how liquidity may be impacting the overall economy. It’s also involved with the collateral prices of the banks. If you remember what happened with the banking crisis itself was caused by the decline of collateral prices, ie Treasury securities, that really were the big portion of that issue. And so all of that together to me is pointing to a direction where I’m not sure the Treasury market is again, the safer place to be putting your capital to deploy capital into a defensive acid. I think that we’re in a transition away from that, where I think not only central banks, but also large institutions, the 6040 portfolios will look more balanced and start allocating capital to gold at the same time, all of that happening. We’ve had gold recently, breakout to new highs, a forum a triple top and a lot of people lost faith in the short term. It’s this is a classic shakeout period, in my opinion, before we make, you know, a break through record levels and way higher that we’re seeing currently. And so to me, this is the the sort of state that we’re in. A lot of people are worried about, know gold, how it would act. To the perform in a Heartland a scenario, and I think this is going to play out very similar to the 70s. In terms of market correlations, you know, we can’t use the 40s. And I’ll explain this later, as as an analogue perfectly, because in the 40s, gold prices were pegged against the dollar. So the only alternative for most investors is really to buy treasuries. But I think this is not the end of the Treasury market, by no means, but the demand for treasuries will be in check. And that if the overall thesis for owning those securities is really predicated on the fact that we cannot raise rates sustainably because of the amount of leverage in the system, I would say that gold is a far superior alternative. And that’s the whole point, that report and a huge part of my views for the assessment of the global macro environment today. Okay,

Adam Taggart 5:54
great. Well, then, let’s get straight into the report. As you mentioned, it sort of all starts with the criticality of the the Treasury market. You tuck it in the intro of your report here, that, you know, there is a bunch of mandatory debt issuance that’s coming up soon, and that that is going to have implications. So let’s, let’s start there, you’ve got some great charts, you know, kicking off here about the Treasury market. And let’s walk through your concerns on the debt side. And then let’s get to why you think that may usher in a new era for gold. And what’s interesting right now, as you you intimated that they’re going to be some reasons where people might work demand for treasuries might go down, but demand for treasuries right now is really red hot. So it’s gonna be interesting to hear how you think that demand is going to cool?

Tavi Costa 6:47
Yes. And look, I’ve also been a big believer in some of the deflation neices thesis, which is related to also the demand for treasuries and the demand for for the dollar itself. But I think there’s a macro regime change on the way in, I feel like in business schools, we learn how to invest in those in the bond market and fixed income assets by thinking about the interest rate risk, the default risk, and inflation risk. But we forgot about one thing that wasn’t the case for the last decades, which is the issuance risk? And I think certainly that is one thing that is understated, that will likely become a much bigger issue as we go. Adam, can you see my screen right now?

Adam Taggart 7:33
We can’t, it looks great. Perfect. So

Tavi Costa 7:35
maybe we can start with with this chart, which was the leading chart of the letter. And it’s it’s looking at one thing that I think a lot of people have been talking about, which is the Treasury, Treasury cash balance, that has been running very low. And this is one important point of this chart is that this tends to happen every time we have, we’re approaching a debt ceiling. And that is the case, because the government runs an astounding amount of deficit relative to GDP, which by the way, it’s the largest deficit, relative to how low unemployment rate is. And so the pace of of, of the growth in in terms of the compounding of the debt problem is, is really alarming, in my opinion. And I don’t think this is just my opinion, a lot of people have that view. But as you can see, as I point out, in this chart, a lot of the circle portions where cash was running really low. You’ve also have a period where the Treasury was not allowed to issue treasuries. And so they couldn’t really raise capital at a certain degree. But he can also see the red line where the debt is increasing after you have a debt ceiling problem. So once things get resolved, and the debt ceiling is agreed on being lifted, what you see it as a large issuances of treasuries, that issuance of treasuries, as you can see, is gradually increasing over time. So we saw 2015 2016 and $1.1 trillion, after nine to 12 months 1.3 in 2017 or so 1.4 and 2019 $2 trillion, after 2022. And today, some of the expectations is that we’re going to see about $1.2 trillion, but I’m sorry, it’s very clear in this trend, that this is going to be at least another two to $2.2 trillion, in my opinion that we’re going to see. So this speaks to the degree of how extensive that fiscal agenda really is. But also what we’re likely to see in terms of assurances are then in

Adam Taggart 9:38
real quick, just if you go back to that slide for a second. I just want to make sure the Treasury cash balance you’re referring to, that’s pretty much the same thing that we hear in the media called the Treasury general account or the TGA. Correct.

Tavi Costa 9:52
That’s right. That’s what the government uses to for its day to day operations and Given the deficit issue, they are always forced to issue treasuries essentially, in order to have that white line to be increasing. So when you have the debt ceiling, obviously, the white line is unable to rise. Given that issue, and I’m talking about obviously, not one every week or so you may have cases in a week or so, where revenues, I may may be larger than the spending side of it. But overall, the spending is certainly larger than than the revenue and therefore, why we’ve been having this chronic deficit issue in the government. I think a lot of people know this is not news. But the problem is, if you calculate, let’s just say, a $2.2 trillion or so which I think will be the case here, given how extensive the agenda is, given how the social programs are learning larger and running larger and larger, you’re also seeing other things such as the infrastructure developments and the need from almost at all costs to reduce the reliance on authoritarian regimes like China, and Russia, and forcing those governments especially the US, but other developed economies to really rebuild their, their infrastructure for industrial issues and our industrial purposes and other things. That is also going to be a bigger part along with the Green Revolution of deficits and government spending. And so those are important. But the problem is that when you look at the demand side, and in this seems alarming to foreign holders of US Treasuries as a percentage of the total debt, that number itself used to be at about 34%. At its peak, it’s now at its lowest levels in 19 years, that does not mean that they are actually net sellers of treasuries. Just want to be clear on that. What’s happening actually, is that yes, some players, some large players, like China would be one example, have been net sellers more recently. I think there’s lots of ways of thinking about that. But just just to make it clear, foreign central banks are not necessarily yet selling treasuries, what’s happening is that they surance is so large, relative to the amount of buyers that you’re seeing this percentage to decline. And this is a huge deal. It’s almost like your net sellers, because all the way back to the 70s, especially after the break of the gold standard, what we’ve had is that a period of our app should say since the 80s, a period of where central banks in order to create credibility of their balance sheets, the most credible central banks were the ones that held a significant amount of US Treasuries. What we’re seeing more recently is, and I believe this is in the next chart, has been the fact that that we’re seeing central banks are starting to buy gold instead. So there is a shift away from from from treasuries happening today. And across most central banks. And it’s a shift that is not again, being caused by selling treasuries so much. And this is factual. I’m not that’s not my opinion. But it’s it’s likely to start happening at some point. And the point of the show is this are not going to get any better from here in terms of the the underlying supply of those debt instruments. And so as you see that growing, it’s a big question is who’s going to be the buyer of those instruments? Would that be US banks? Would that be households, would that be financial institutions or other foreign institutions and in our opinion, that need will actually fall on the responsibility of the Federal Reserve at some point where they need to be the buyer of last resort, whatever you want to call this money, Printy monetization of the death, essentially, we’re going to have to go towards that path. At some point, the Feds responsibility is not so much job is stability, and, and inflation and but really is the financial stability as a whole. And that has to be on the dependency of making sure the Treasury market is aligned with its demand and supply imbalances. And this is a huge deal. So as you can see, in this chart, which I think it’s extremely relevant, a lot of people have been looking at the purchases of gold, which is an important chart, but to me, it really falls into the idea of looking at the gold holdings as a percent of a percentage of of international reserves because that at the end of the day is what creates the credibility of those central banks. And we’re at a at a stage right now in the global economy, where most of the major central banks and most of the largest monetary systems are under pressure, under pressure of showing that they hold high quality assets in order to back those reserves more and more regardless if it started with a crypto idea of a really this is the case with a gold bug, a thesis for many years, where the idea of holding having A monetary system that really falls back on, on the ownership of high quality assets. And I think that shift away from treasuries is very, very critical in this macro conditions. And so in order for us to go back to historical average, where central banks go back to a 40% ownership of gold relative to international reserves, we would have to add about $3.2 trillion of gold purchases, which that on itself is about 25% increase in the value of gold above ground, which is shown in a letter, as written in the letter, you know, that would be, you know, enough to take gold prices to record levels. Do I think that that’s all we’re going to see? No, usually when you have central bank’s making such a reversal of, of policies of owning gold relative to treasuries, what you tend to see is that other institutions tend tend to follow so the 6040 portfolios, the patient funds, endowment funds, the very large pools of capital, very likely to start owning more gold relative to US Treasuries similar to what we saw in the 70s. But I think it’s going to be even more in terms of the magnitude of those purchases.

Adam Taggart 16:14
Hey, Tommy, just a just a quick question there. And just asking for a gut guess, if you had this pick a percentage of how much of the traditional private portfolio like that is currently allocated to gold, right now, what would that percentage be,

Tavi Costa 16:32
you’re referring to 6040, portfolios, and so forth, and not 6040. Because by definition, they don’t hold but

Adam Taggart 16:40
the ones that you’re expecting to follow the central banks, they would be increasing from what to something higher.

Tavi Costa 16:45
Look, I think it’s plausible to have a 6040 portfolio shifting away from those balances and having perhaps, you know, 30% equities, in my opinion, and we’ll get into that equities are also the problem. But just looking at the bond side of it, I would say that at least, portfolios should own about 20%, at least of that in the next five to 10 years, this is a very conservative, you know, thought about what we we think it’s going to happen, so 20% of those large pools of capital, that is not including central banks at all. So I don’t think it’s the end of a lot of those institutions require to have some sort of fixed income assets. So, you know, corporate bonds and others, although, today, a lot of corporate bonds actually yield almost less than risk free rates, which is mind boggling blowing. Yeah. But outside of that, I do think, you know, call it a, I think 20 to 30% is going to be a very good range, we’re gold can start becoming a larger portion of those portfolios over time, especially as they see central banks perhaps owning now 40% of their assets, which would be just in line with historical average all the way back to the 70s. Prior to that actually was much larger, as most people know. So Right.

Adam Taggart 18:06
And that’s a mind blowing shift. And we’ll talk about that later, when we get you get really into the your arguments for gold. But But just real quickly, I’m gonna ask the question again, what do you estimate their current percent gold holdings in their portfolio to be? Are we talking less than 5%? Less than 1%? Less than half a percent? Like ballpark? What do you think? Well,

Tavi Costa 18:27
looking at the volumes, liquidity and other metrics that we can sort of understand and also institutional interests in the space. I’m investor of the gold miners industry, and I can certainly speak for that. And I think that my what my my guess would be educated guess would be that it’s probably less than 5%. If not less than 3% or so, for most institutions, we speak with some of those 6040 portfolios. And when I say 6040 portfolio, this I’m talking about 80 90%, their portfolios look like a 6040 a style of positioning, and certainly what you know, those folks are not believers of the gold market. And majority of that has to do with prior performance of the last decades or so, although gold has been outperforming treasuries, even in total return terms, meaning yields have not really in price appreciation has not really outperform the metal over the last years. But you know, if I go to the next chart, as you can see here, that kind of shows that that idea where you know, really the performance of gold relative to treasure has been in decline all the way back to the 80s. So, again, going back to your question, if it’s less than three 5% I think it has to do with this idea that majority of of the bearish case for precious metals in general has been, look, look what it’s done in the last, you know, 20 years or so. And I think that’s just backward looking. That’s not what we’re likely to see in the next decade. Under so which will probably look very different from now, given those big changes in, in this macro regime? This question

Adam Taggart 20:08
yeah does, that’s where I was going, which is basically, right now the current holding of these, you know, private portfolios is low in gold, you think they’re gonna watch the central banks follow the central banks increasingly increasing their exposure to it. And so I don’t put words in your mouth, correct me but my guess is that you’re going to see you’re expecting a pretty substantial increase in their percentage holding of gold as a portfolio asset. I’m going to guess maybe some multiples, right above where it is right now. It’s only 3%, you’re probably think it’s, you know, high single, maybe double digits going forward eventually. So basically, you’re just telegraphing, you expect to see a big shift in increased ownership of this asset? Is that correct?

Tavi Costa 20:52
That’s right, I think the multiples of what they own currently is correct. And I think it’s, whatever it’s 20 30%. At some point, depending on the profile of risk of each of those institutions, I think would be would be likely the case, especially when you have equity markets at those prices that they are currently and you also see the price of fixed income. One thing I noted there, as as is is this, you know, when central banks actually made the choice of starting to own treasuries, which you can see in this chart looking at Gold relative to treasuries, so it’s just gold prices are relative to to, to, to gold to US Treasuries sort of return, you can see the same here in this chart as well, basically, what you’re seeing is that 1978 1980s was really the peak where central banks began to actually buy US Treasuries over time. And that was, that was a good call, no treasures for cheap at that time. Very, very cheap. There are pain, very large amounts of yields, depending on what curve you’re in, in terms of of maturity. And that was certainly a good call to be to be invested. It’s important also know that about 40% of the US debt today will actually be have to be rolled over so 40% of that debt. So if you look at it overall debt in the US average interest rates about 2.6%. So, you know, for most of them money, market funds and other other potential places where could actually bring that capital into the treasury market, those folks want to earn at least 5% yields right now. And so we would have to be the reassurances of those strategies, in other words, rolling over those instruments at a much higher interest rate that they are currently and that would also add pressure to the Treasury market. So as you can see, here, there are gold cycles, which I think we’re entering another one today, then I’ll explain that in a few, you can see that the gold to treasuries ratio is likely to rise substantially from here, this is a very important change in the way we looked at especially how correlations work in markets. So recently, in the last 1020 years, there has been a very strong correlation between gold and real rates. And people love to extrapolate those things. And they say, well, that’s how it’s going to be for the next 10 years. And that’s not the case, usually, in the 70s. It wasn’t like that, in the 70s. If you look at a chart of tenure yield versus gold, it’s the same chart. So in other words, 10 year yields are rising, and gold was rising as well. That’s that’s also mind boggling, because a lot of people would say there’s no way that would happen today. Market correlations change when you add the risk of default, when you ask them at the risk of inflation and the interest rate risk, we’re the Fed has to have a view of interest rates higher than historical standards, at least for the last 20 to 30 years. That really adds pressure to the Treasury market, along with the issuances of that that flood of assurances that we may see along the way as well. So to me, it’s pretty clear that is this correlation between gold and interest rates may actually look quite different and causing gold prices to rise as treasuries actually either suffer or really underperformed the metal over the following years. Going back to the 40s, because I think we all like to look at analogues. I love looking back in history and seeing what is the macro regime today, relative to other times, and I’m a firm believer we’re entering an inflationary era. And I will answer are actually go deeper into that in a minute. But really, if you go back to the 40s, which is a good time to to, or a good analog for the debt problem. Certainly as you can see, in the first panel of this chart, looking at the public debt relative to percentage of as a percentage of GDP. We are very similar levels than we are today. That was the debt necessary in order to finance the World War Two. Today we’ve had other things not only COVID but Really this debt problem has been rising regardless of in Reason prior to the COVID problem. And as you can see, back in the 40s, majority of the institutions, if you’re running money during that time, believe it or not, you didn’t have a lot of alternatives. You couldn’t really a lot of individuals decided to buy US Treasuries. That was the war bonds called there was a nationalism, sort of wave where folks were willing to put their capital, provide their capital and finance the war, as a way of, of rising up and getting together in this in this world movement. And also at that time, as you can see, in the in the bottom line of this chart, US debt was at about sorry, gold prices were basically it was were packed. And so you didn’t have that alternative for most investors to be flocking into an asset that could potentially really helped to, to defend all over those those issues that we had at that time. The second thing that happened, as you can see is after the 70s, we’ve seen the debt problem increase over time almost exponentially went from 30%, all the way to 130%. Today, and to me, when we think about gold prices, it’s very difficult to say what really caused gold prices to rise some people by to really try to, to pinpoint one or two aspects, maybe inflation, maybe it’s just monetary dilution, maybe it’s just related to even deflationary aspects, may cause gold to rise. Ultimately, it’s the debt problem as well, it could be risks in the markets, it’s really hard to find out what works. But one of the things is clear this chart, note that since the 70s, gold prices and the deputy balance kind of moved the same direction. So making a bet against the metal today, to me is making it that that the debt problem is actually going to be resolved relative to GDP. And I don’t believe in that, Adam, I don’t know if you do. And if you know anyone who believes in that I would love to speak with those folks. But I just don’t understand what the case is where the debt problem is going to get resolved. And I ask people to look at one example. When you’re, when you’re thinking about this, look at Japan, Japan today is twice this amount, essentially, it’s about 250% or so debt to GDP in terms of public debt, not overall debt. And if that’s the roadmap for the debt problem, then I, you know, I can confidently say that I don’t know anything about the markets, I don’t have a crystal ball. But I have confidence in my thesis that gold prices are likely to break the 2000 level and go well above those levels, along with the debt problem getting worse. So those are important aspects of that.

Adam Taggart 27:48
Just go back to everyone certainly savvy. So I would say the one piece of the puzzle that I might be able to add is that, you know, I interview five to six people a week, over the course of Wealthion. Two plus year history, you know, I’ve interviewed hundreds and hundreds of experts. I do not know of one who has said, oh, yeah, don’t worry about the debt. I have a outlook for how it’s actually going to get resolved from where it is right now. Yeah. So I think that the bet on the debt continuing to mount from here is probably one of the safest bets that you can be making on the macro side right now going forward. I also have a question for you on this, which is you’re right, the gold price roughly does track the increase of debt to GDP here. What happened in the past decade to cause that, that, you know, trough that multi year trough in gold and the gold price? Because we had a lot of debt issuance during that period, something decoupled for that decade, it’s now re coupled. But what’s your what’s your best explanation? It’s probably multifactorial. But

Tavi Costa 29:00
I think is a lot of things, I think number one with we came into that peak in 2011 have a very, I would say almost like a bubble type of an environment in the gold space. We’ve had a specialty Ken trick that on takeouts of most of those exploration businesses in the mining space, were being taken out at about 60% of the value in the ground today, and the average historically is that, you know, a company that has a high degree of resources in the ground would be taken out about 20% of the value in the ground. So certainly there was a level of speculation that caused that pause. And those charts are not really logged. So that dip that you’re seeing actually looks much more pronounced than what actually was the certainly was a bear market. We’ve had a lot of spendy in terms of most of the mining businesses were really, you know, drunk or sailors in terms of capital bleeding and so forth. And that has completely shifted in the last in the last year or less. Five years or so we’re seeing now capital conservative conservatism being very pronounced across the industry, in terms of cap x aggregate has been in a historical lows. Also, you can point out to the disinflationary environment, although we’ve had dilution of the monetary system by the increase of the balance sheet of the Federal Reserve, we didn’t see on the other side of it, that inflation on goods and services, if you looked at the commodity prices, for instance, during that 2011, to now there was a secular decline in commodity prices during that period. So a lot of things in the tangible assets realm, were at a peak level during that time. And for other reasons that I think are caused by the low term cycle of the commodities commodity businesses in general. And we’re in the other side of that today, people making that call today, I think they’re out of their mind. I just don’t see the same metrics that were pointing to a peak level of tangible assets and commodities are almost the complete opposite today, on top of greenrevolution, it wasn’t the case we didn’t see there was a globalization trend actually improving from that period all the way to that whole Do you see a dip that you see during that time that you refer to today, we have d globalization trends intensifying over time, you note we’ve had an inflation problem that has begun, in my opinion, for many reasons. You know, wages and salaries, growth, reckless fiscal spending, chronic under investments in commodity businesses, and the intensify of those the globalization trends on top of it. So all of that is playing a role into almost creating a floor for gold prices. If you think that way. And it’s a main reason why I think that if you are of that view, where there’s almost a floor for gold prices, you want to take leverage in terms of not debt itself, but understanding what are other ways of expressing that view that gold prices will rise, because gold prices will make you unnecessarily rich just by buying gold. But there are ways of expressing that opinion in markets today, that could potentially get multiples of your money, and really creation of wealth. If if you get that movement right in gold prices, which I think that we’re you know, very well set to, to see that unfolding in the following in the following years. You know, one thing I pay a lot of attention to, Adam is, is yes, I think the macro thesis for precious metals is extremely robust. I think, if you looked at back in the 70s or so for the last 50 years, there were really two important bull markets during those those that entire era in the 70s was one of the bull markets. The second was the early 2000s. And both of them lasted about a decade. And if you notice, notice, there are macro drivers that are very different during those two periods, the 70s was perhaps caused more by inflation and other issues. And then you have the early 2000s, which in my opinion, it was really caused by China entering the WTO and really preparing and, and building up its economy to become the manufacturing plant of the global economy. As you see that occurring, it created unleashed really a commodity cycle, which commodities and gold are almost all in the same place when one start moving, all of them are really always interconnected. So you tend to see both moving in the same direction. So but one thing that you saw during those two eras of the gold bull market in the 70s, and early 2000s, was a decline in global production of gold. And that is certainly what we saw in the 70s and early 2000s. And what we’re starting to see today, it could be caused by metals, you know, most of those businesses shifting their focus away from gold into green metals, which sounds classic, classic, you know, bad moves from most of those major companies at the wrong time, just given the fact of how potentially there’s so much institutional attractiveness in terms of capital chasing battery metals, lithium, and forgetting about, you know, gold as, as a potential, you know, asset that could really outperform most of the other assets in this tangible asset realm as well. So, I think there’s a lot of explanations for that. But where you are today, if you look at this chart, is that we’ve had a triple top, the triple tops usually don’t tend to hold. You know, what you see is a major resistance once you hit that level, and this is certainly what we’ve seen over the last weeks, so Basically, we’ve had the 2020 peak. And then after that we came down. Then we saw the sort of war scenario, once the Russia invaded Ukraine, we’ve had another period where gold prices reached new levels, and then declined again. And now Now we’re hitting that level again. But as you can see, in this chart, the candles, we’re starting to see gold prices actually stabilize at that level, although we’ve seen some volatility recently, gold prices are stabilizing at that level, almost like getting ready for a major move to the upside is that what is is that that ceiling agreement along with the potential for the Fed having to, you know, step in and be the buyer of last resort of treasuries, the beginning of the very large movement in gold potentially, is the Fed having to ease monetary conditions because of a hard lending, also be another trigger, there’s so many potential triggers that could, in my view, really cause gold prices to surge from the levels that we’re seeing right now is central bank’s buying those instruments going back to the 40%. And adding $3.2 trillion of inflows being the catalyst, potentially, so there’s no shortage of those, and I think the train is leaving the station. And once it does, you know, I think a lot of people will follow there is a sense of lack of liquidity and volume in the mining space, which I think to me, it’s almost like a soccer game, we’re all watching a soccer game between, you know, a sec, a World Cup final between treasuries and gold. And essentially, where you’re seeing that you’re in the penalty kicks, and gold is about to go for the last kick to win. And if they do, everything will follow, right, everything will follow you is going to see probably institutions chasing not only gold, but looking for other ways to make money, potentially looking for the miners, potentially looking to take more risk and go to explorers, and so forth. So that’s really, to me what you know, most of my thesis is in this chart, I do believe gold will break out from this levels. And, you know, I think I think this is going to be a big change in the thesis over time.

Adam Taggart 37:15
Hey, Tommy, let me just ask the question there for a sec. So if we get time in this conversation, we’ll address it. I’m deliberately try not to interrupt your flow here too much. But if we have a hard landing, like I believe you said at the beginning that you expect a hard landing. Could there very well be a period of time where capital is flowing both into treasuries and into gold? I think

Tavi Costa 37:43
Potentially, yes. And

Adam Taggart 37:44
let me just clarify that it because I want to, I want to, does your thesis depend on capital rotating from treasuries into gold? Or there are catalysts here that could that could pop gold higher? Even if capital is still going into treasuries, say, as a safety trade?

Tavi Costa 38:01
That’s, that’s a good a good question. Because the rotation from Central Bank perspective is not happening yet. All we’re seeing is that new money added to their balance sheets is coming to gold versus treasuries. So that’s an important difference. Will that happen? Probably I do think it will. Why am I not short treasuries? Today, given all the thesis I gave you, why am I not short treasuries? Today? There’s one part of it and I don’t have this chart here. But anybody can see this. In the CFD CFTC website, you can you can pull the positioning for treasuries today. People are ultra bearish treasuries right now. So as a as a fund manager, I think yields are going to be poised to go high. And in fact, given how positioning is so extreme on the on the on the bear side, it’s almost like why would a treasuries been rallying? Right now, it’s, it’s just, you know, there are so many big forces into that market that makes it so difficult to to be bullish or bearish. The Bearish side, I think it’s pretty clear, I just presented the bear side of it. And I, you know, if this was just what I know, or what I knew, I would certainly have a very large percent of the portfolio short treasuries right now. Now, I do understand that the system cannot sustain higher rates either. I understand that the system is required to have financial repression. I understand that if that’s the case for treasuries to be owning, treasuries today is just because we cannot sustain rates being higher than I think gold is by far a much better alternative here. Because it’s not pegged against the dollar. Number one, we know that the debt problem is very, very likely to continue to get worse over time. We know that the secular deflationary forces in the way here as well and they may decelerate like we’ve seen recently, but likely continue to be, you know, forcing things to be to be more inflationary than will be seen over the last Sears. And we also know one important aspect, which is the fact that tangible assets are really cheap relative to commodities, which I think it’s unlikely to be the case in the following decade, I think we’re going to see tangible assets really outperform financial assets being equities and bonds at both in combination are extremely expensive, especially relative to history. So would I be buying bonds here in the heartland Senate lending scenario? Like you said, No, that’s not my call? I would not be doing that at all. I think there’s it’s much more plausible to be owning gold in any environment. And I know people will say 2008 was different tabi don’t you? Didn’t you see that, you know, way gold prices decline? And I’ll answer to those folks. Look at the 70s Look at what happened in the 70s. Look at what happened in the early 2000s. Oh, wait, wasn’t the only crisis we had throughout history and gold actually perform well during other turmoils? It really depends on what type of macro regime you’re in. And in this case today, I think that folks are going to start favoring those types of tangible assets that also carry a very look at the downside volatility between treasuries and gold today, I had a chart like I was supposed to put it in the letter just didn’t. It was getting too long. But if you looked at the downside volatility of treasuries versus gold, you’re gonna see that gold has just recently become a much more attractive asset relative to that treasuries, like we’ve never seen in less 30 to 40 years. Uh huh. So if you’re running a fund, and you’re worried about downside, are you buying treasuries, because you want to have a defensive asset that when things go into a turmoil, treasuries rally? Well, recently, that hasn’t happened? So in gold has actually done the opposite. Look at 2022 gold’s performance relative to any other asset. So there’s a significant break of correlations happening today. That to answer your question, I think gold will actually serve as a safe haven relative to treasuries in a very significant way as well. Okay, great, thank

Adam Taggart 42:04
you. So

Tavi Costa 42:06
inflationary waves. You know, I think inflation has been, you know, I put off this chart of maybe a year or two ago of talking about inflationary ways, and so forth. And I think this has really gotten around this whole idea. And in periods like the 40s, and 1910s, we’ve had more sporadic types of inflation, in the 70s, they kind of built on its own itself. And, and the so gradually higher waves, as you can see here, first wave, second wave and a third one. And then we’ve had as deceleration of inflation, and I think in in December of 2022, I put out a tweet, and I said, you know, that we will likely see a deceleration of inflation. And unfortunately, a lot of people will think that that’s the end of inflation, and you probably won’t be and here’s where we are, he this is exactly what we’re seeing today, a lot of folks think that inflation is at its end, and it’s not going to be a problem anymore. But when you think about the the forces that are behind that issue, you know, we have not fixed if anything, tightening monetary conditions have created access for capital become very difficult for most of the metals, and mining, energy companies and so forth. So we’re not seeing an increasing supply of, of most of the natural resources that we need to, to make the Green Revolution, the infrastructure developers and so forth. So all that is still the case has not been resolved, anything got even worse recently. The second thing is the wages and salaries growth, which is something very important because that is involved with the fact of we may see corporate earnings deteriorating over time, we may see a lot of things of margins being contracted. And most of these because of the labor costs relative to profits, has been in a secular decline, and recently has started to increase. And as you see cost of living staying high, not continue to grow, but staying high, it will likely force especially the lower or what I call the I call the but it’s called the non skilled jobs are likely to be more and more expensive. When you think about what’s happening in terms of the job openings, and a very large amount of job openings relative to other times in history. Most of those jobs are non skilled jobs. And when you see the lower income folks starting to demand higher wages and salaries. Look, I come from a from an emerging market Brazil and certainly when you have to lower that the bottom 50% of your of your economy in terms of of economic class of your households earning more. There’s a reason why the stay at the 50% range is it has to do with their interdisciplinary way of spending capital meaning they don’t have discipline they don’t know how usually how to spend money like it or not like it is unfortunately the case they tend to spend more money than the richest parts of the society when it comes to the percentage of their capital, not the nominal amount. And that is usually what also has an impact on this wage price spiral that causes inflation over time, which we saw in the 70s. I think we’re going to see this time specially because profits are too high margins are too high. And you’re likely to be compressed, as we see, you know, inequality issues emerging and other things that are not emerging them that they’ve been happening for a while, but they starting to, to create social programs and other things to try to really address those issues. Number three is the reckless amount of fiscal spending that we’re seeing reckless amount of fiscal spending, today were about 7.3% of GDP in terms of deficit, that’s not including the current account problem, but just or the trade balance. But when you look at the deficit Now, compare that with the 70s. Just just for curiosity, and you’re going to find is that the 70s, today is 7.3. We didn’t see anywhere close to deficits like we have today. So there was certainly a general sense of understanding that government spending creates inflation in the 70s. Today, that notion is is out of the window. I mean, not a lot of people understand what I mean, for sakes, we just passed a inflation act recently. Do you think that would have happened in the 70s? No way,

Adam Taggart 46:24
by the way, called the inflation Reduction Act, even though it has spending associated with it.

Tavi Costa 46:30
There’s nothing you know, there’s no reduction in that package. If anything, the government spending level is almost undoing what the Fed has been doing, right? The Fed is attempting to, you know, reduce inflation by raise interest rates, and do Qt which recently reversed. And now it’s back on in terms of the balance sheet side. But let’s assume that the Fed is trying to reduce inflation. Well, the government is doing the opposite. The government is spending more if you look at the deficit problem recently, it’s been actually increasing. And there’s a lag of that on the inflation problem, the lack of a year or so where that capital starts to create inflation as well. And don’t blame this on interest payment. Because that’s only 50% of the problem. There’s another 50%, or problem that comes from social programs, as I said, the Green Revolution, manufacturing and other things that are happening. And by the way, defense spending is at historical lows right now. So you know, if you want to make the case of anything here, I do believe defense spending is going to be a much larger percentage of the economy today’s less than 3%. Back in the in the in the in the 60s, not even other periods, 60s was about 9%. So can we go back to 6% 5%, all of that is going to have an effect on deficits and the debt problem as well. So again, I think inflation is is here to stay, yes, we’re decelerating. And inflation, we’re probably closer, very close, it’s hard to pinpoint when but getting closer to a period were in this can get delayed, we have a hard landing, you know, things can get delayed here in terms of the second wave. But I don’t think this problem is going away, you know, five years from now, a few very confident we’re going to see another wave of inflation coming back. And I know five years is a long time. But that that can happen literally Latin next year. So if depending on how things unfold, so Well, one thing I think a lot about is the industrial production aspect of the US. You know, back in the days, US was always an economy that had a very large percentage of manufacturing relative to GDP, you can see the growth in this very long term chart all the way back to the 1920s. To now and you can see this 80 year period of explanation, growth in industrial production. And then recently from 2000. to Now we’ve had a stagnant period. Right, it’s volatile, but stagnant. And you may say what happened during that period of Well, China entered the WTO, and also became to, you know, the a large exporter of goods, in terms of I think it’s as close as 30% of the global exports today is coming from China. That was not the case back in early 2000s. That increase has certainly cause not only this reliance on on on their economy in terms of the g7 economies too, but also the fact that we’re starting to see that relations between the two countries to deteriorate significantly. And I think it’s it’s it’s going to be the case where most economies at almost all costs cost be prices being higher in of their of their goods and services in their own economies, domestic economies, but but the cost of reducing the idea of reducing their dependency with with ties with China. And so do I think that this is the beginning of a manufacturing revitalization era? Yes, I think that’s going to be the case. Now think about this. If one When economy cause a commodity boom market back in the early 2000s, that was China. What would that do if g7 economies g7 economies start doing exactly the same today. And when I think about that, it’s hard to believe we’re not going to see base metals and other things doing very well. So all of that is going to play a role. Leslie and I can go on and on Adam, if you if you don’t stop me, but if

Adam Taggart 50:29
I need to, but keep on going.

Tavi Costa 50:32
One thing I think a lot about is how the gold cycle is very much in line with the valuation of equity markets cycle. So if you look at the top of this chart, and again, this is going to play a role here, and then commodities idea and so forth, you looked at where we are today, in terms of total market cap as a percent of GDP, which is the first part of this chart. And you can see periods where we’re running up on that inflating all the assets in valuations relative to their fundamentals. And you see the peak of the tech bubble, which today we’re exactly at the same level, slightly above that. And we’ve had this everything bubble that I’ve marked back in 2021 2022, when our key investments and not not fully money losing businesses begin to to lose value as as, as a measurement of their stock prices, fixed income, corporate bonds, and so forth. All those things begin to fall. That marked, in my opinion, a big change in correlations, and, and situation. So today, I think we’re in the deflating process of that. Now, I know recently, we’ve had aI becoming a, you know, something that a lot of people like to point out as a potential catalyst for things to continue to be frothy. That is not my view, if anything, what AI is doing is an enabler of capacity for most companies, especially smaller companies, to close the gap of their valuations relative to mega cap companies. In other words, I think AI is almost like that perfect assistant that you need for free chat. GPT is, it’s my assistant, I work with that all day long. And what I can tell you is, is it’s almost like I have 100, analysts working for me creating the best variable, the best formula that I can use for my day to day business, better writing everything is I work with that what that tool is, it’s incredible, everyone should be using it. But if you think about from a macro perspective, it really closes the gap between a smaller business versus a larger company. And so if you think about today, the valuations of big companies versus smaller ones is at a level that they haven’t seen in many, many decades. In fact, it’s larger than what we saw in the peak of the tech bubble. And I think that that gap, not only caused by chat, GPT or AI and other things, it will start getting close by other reasons as well, because you know, there is a cycle of businesses, where you also have valuations being too frothy, and very difficult to be sustained over time. Think about from another degree as well, not only small versus large companies, that enabler of making small businesses able to catch up with larger companies in a big way, in a lot of tasks that they might be attempting to perform. You can think about developed economies like the US where equity markets are very frothy versus other emerging markets. Why would the gap be so large? You know, there are some gaps there that I think will be closed over the next 10 years, especially commodity led economies that may take advantage of not only those breakthroughs in technologies, but also the commodity space as well that might heat up and help those economies do much better. So going back to this chart, you see that the inflating period of those asset bubbles is also aligned with the fact that gold begins to underperform US stocks during those periods. So you saw that in the 90s. And then, after that fact, when you peaked in those levels, what you see is that gold starts to perform better than overall equity markets. That’s not just gold commodities also did better tangible assets did better. Go back to the 70s and look at housing market relative to equities, which one performed better the housing market was were equity markets expensive at the time though, equity markets are not expensive, but it was a period where you’ve had tangible assets performing better than then than financial assets today I think we’re in a very similar environment what we’ve had gold prices underperform equities for a very long time. Everyone has struggled at the thesis everyone is skeptical about the metal you know, whatever if it’s crypto your thing or or growth stocks or any or AI Um, you know, I know that I’ve heard that argument before I’ve seen it. And I don’t think that would be sustainable over time. I think that I believe in cycles. And what I think is happening is a great rotation out of those growth stocks, out of those expensive technology companies, at some point will continue to materialize and causing value companies, but along with commodity businesses, outperforming those companies. And so I think we’re in the process of that this is not going to happen all at once. The last two to three months have been certainly going against that trend. But I think that this is all in line. And, you know, Adam, I had a incredible pleasure of actually presenting to the IMF three months ago, about this chart that you look at in the screen, the IMF contacted me because I was the person who created the percentage of inversions chart. So when I looked at yield curve inversions, rather than looking at to versus 10 year yields, or three month versus 10 year yields, I think, some people have seen a chart going around, that’s calculates a more comprehensive metric of all the percentage of yield curves, and how many of those are actually inverted. And so basically, look at the percentage of those. And over time, what you find is that when you go above 70%, you tend to see a hard landing, okay, can to see me every time since the 70s, we’ve had a hard landing. The reason why I wanted to create that metric is because when you looked at separate spreads, like the two versus stands, that three month versus stance, so forth, you’re gonna see different signals during different different times. In the 2006. Era, it took two years until we saw hard landing in 2000 was writing line, and 7374 was writing line, what’s the inversion happened, the decline in equity markets happened, the hard landing happened as well. But that mix of signals is critical if you’re running money. And to me, that was just nonsense, how we are all relying on his metric, when it just doesn’t give you a perfect way of really a trajectory of how to invest in in the following years after seeing those inversions. And so that caused me to go deeper cause me to understand, are there other spreads that are more important to to versus Stan’s and so forth? Should I be looking at this in a more broader ways? So that’s when I created the all possible spreads in the yield curve. And looking at the percentage of those that are actually inverted. And IMF contact us, myself actually, and said, hey, you know, we love that research. I know you’ve done empirical analysis and what assets you own when you have that 70%. And that was certainly a presentation here is regarding that empirical analysis. So you’re seeing here is the green line, which is looking at the gold to s&p 500 ratio, which by the way, is the best way of protecting your portfolio during periods of after the 70% handle of yield curve inversions. I looked at oil, I look at treasuries, I looked at gold itself, s&p 500. I want to understand how do assets do after you see such a large level of distortions in the treasury curve. And what you find is that the position of owning gold and selling the s&p 500 In other words, being long the gold s&p 500 ratio is by far the best success ratio of of during those periods for the next two years. And so in the yellow line, you’re looking at the average performance of the gold s&p 500 ratio. After after you hit that 70% handle on percentage of inversions, it doesn’t matter if the ratio goes to 90. All you need is a signal after have gone above that 70%. And that’s when it starts tracking the performance of different acids. And you can see a 72% return happens in many ways. Sometimes it’s gold prices rising. Sometimes it’s equity markets declining, sometimes is both legs of that trade working. But more importantly, is that the ratio works. The blue line is looking at times with both legs of that trade worked and which ones are those 7374 and that that bust. Does that sound familiar? And are we not in an stagflation airy environment where technology is expensive relative to GDP relative to overall equity markets, you got mega caps, you got aI just like the internet, literally everything sounds so familiar to the blue line. If you ask me, I think we’re going to see returns similar to what we saw with the blue line where which goes up about 150%. And that ratio, or both sides of the street work very well. I think this is going to be the case it’s kind of in line with the only tangible assets and and selling financial assets. It’s kind of in line with commodity business, really outperforming other firms. issue, parts of the economy searches, you know, technology businesses, Treasuries and other corporate bonds and other things. Everything is so frothy today that I just find it hard to believe that we’re not going to see this ratio working specially today. So, to me, this is the most important metric when I think about 6040 portfolios and ways to manage your portfolio. To me, this is almost, you know, as critical as it sounds super to be to be looking at it.

Adam Taggart 1:00:30
Hey, Tommy, real quick, just back to that slide for a second. First off, congratulations on catching the attention of the IMF and being invited to present to them. So I was going to ask you, so when this time round, did we hit 70% of the yield curves being inverted? Looking at your chart here? Assuming you put this together relatively recently? It looks like it happened somewhere right around the start of the beginning of this year. Is that, is that accurate?

Tavi Costa 1:01:00
It’s about it’s actually November was was the was the the hit? And so November is it’s just a little bit outdated. But it’s it’s basically tracking the yellow line recently. And by the way,

Adam Taggart 1:01:14
so sorry, just just ask this key question. So if history repeats itself here, we should be seeing really, by the end of this year, q4, of this year, you know, a real material ramping up in this ratio, whether it’s gold going up in price s&p Going down, or both happening together?

Tavi Costa 1:01:34
Absolutely. And look at the blue line, by the way, I mean, the blue line had some big run ups, and some pretty significant dollar moves, too, which scares a lot of people, right? If you’re long the blue line, as you can see, not even the yellow, just the blue line, where both sides of that that trade work. There are a period of three to four months where this just doesn’t work. And can you I mean, this sounds so familiar to today, what we’re seeing right now, which recently gold has really underperformed some of the equity markets. And in my opinion, that’s just unsustainable. So yeah, those that’s a good point, I think that we’re getting to that stage where it’s approaching that something is going to happen with this ratio to the upside. And that might be in line with the gold triple top chart. It just feels like everything is a line here are a slowly aligning. And you know, we may see this ratio move up, we may see gold prices surge well above that triple top, we may see equity markets, you know, maybe move lower, given the fact that we’re seeing this, this level of of euphoria towards AI. So, to me, this feels like this is just my feeling, obviously, that with empirical analysis done, we’re getting close to some sort of resolution, then he actually ended up being very positive for the green line to continue to rise.

Adam Taggart 1:03:00
All right, great. Thanks.

Tavi Costa 1:03:04
Oh, do you want me to keep going? Because there’s, there’s a lot more and I can probably, yeah, I can keep going. And please stop me when if you think I’m going too long

Adam Taggart 1:03:14
shirt. So I’m sure the audience would shoot me if I said, stop. So yes, definitely keep going. I want to mark that we’re about an hour in mostly just to be respectful of your time. So you figure out what pace you want to go through the remaining charts with but we’ll we’ll hang with you as long as you’ve got material here.

Tavi Costa 1:03:29
Okay. So let’s look at this chart, which is important. Now we’re seeing a starting to divergence between basic and diluted EPs and s&p 500. Know that the white line going back to the 50s has this range, as you can see, where earnings is kind of staying in this range for for many, many decades, as you can see. And every time we go up to the very top of that range, the upper side of that channel, really, you tend to see it, you know, earnings contract significantly. A lot of people and analysts and investors, especially the less seasoned investors, the younger guys, they tend to extrapolate what’s happened in the past. If we think about what has been happening recently, we’ve had in 20 2010s, that decade of 2010s, coming out of the global financial crisis was the strongest growth in corporate earnings that we’ve seen in history in real terms strongest prior times in history that we’ve had significant increases really other two times the 1920s. Okay, and the 1990s. Both of those periods preceded a decade, that really, in ACIP, subsequent 10 years, basically, we saw major contractions of earnings, meaning we’ve had the Great Depression in the 30s or late 20s that then kind of work it through In the 30s, and also we’ve had the tech bust in the night, late 90s. And also, I should say, really, it was in the early 2000s. That really lasted for two to three years. And then later on, we’ve had another bus, which was a global financial crisis at the end of that decade in oh seven away, that also cause corporate earnings to decline drastically. And again, go back to those times. They were also very important tech, technological breakthroughs that occurred during during those two periods. Do I think this is very similar to now? Yes, I think it’s very similar. In that sense, I think we’re going to see, you know, this idea of extrapolation of earnings for most analysts, to me is makes no sense, I think will take a long time for things to really materialize on bottom line improvements of those businesses to continue to beat that case. I think there’s other things happening along the way, meaning, the pressure from most of the, if we’re going to see robust earnings, you I can almost guarantee you that we’re gonna see a very large pressure from workers to make more money. And this is, this is almost like what happened in the 70s. But we’re starting from such a much larger amount of profits, and also much larger and in terms of, of the margins that we see today, that is unlikely to be sustainable. And so if we looked at this chart, at this critical juncture of this seven year channel, upper channel of earnings were diluted EPS has already started to contract. I feel very strongly that we’re just at the beginning of that contraction of earnings. And if that’s the case, you have to ask yourself, what are what is the right multiple to put an equity markets, if you looked at in the last 120 years of history, there are really two types of decades where equity markets, underperform valuation problems, and inflation problems. Okay. While people think inflation is good for the markets, it could be, but what tends to happen is that there’s a compression of multiples during those periods. Sometimes it’s caused by fundamentals improving, but or but but the price is not really doing very well. So you see a compression of multiples, the average compression of multiples there inflationary periods is about 47%. We have both a valuation and an inflation problem, in my opinion, and I’m not talking about, I know that there has been a deceleration of inflation recently, but prices, that’s a deceleration of inflation growth, the prices of things, goods and services remains really high. And that alone is likely to be I also foresee the squeeze of those of those margins over time, I think the compression of multiples. By the way, the compression of multiples we’ve seen in the past, didn’t really start from the valuations we’re seeing today from those inflationary periods. The difference of today versus other inflationary periods is that when you look back, the equity market wasn’t inflated relative to fundamentals at all. And so to me, this is, you know, when I hear, you know, Stanley Druckenmiller and some other folks saying, I don’t think that performance of equity markets will be as robust or maybe we won’t see any positive performance the next 10 years, I think it’s very, very reasonable. Having that thought, I think if I was having my own nine to five job that’s not related to finance and having to work and, and have a 401k, what would I be doing with my money, I would probably be owning tangible assets, believe it or not, even with housing prices, where they are, I think housing prices will drastically outperform equity markets, in my opinion, on a relative basis. Given this idea where tangible assets rising prices, cost of building may be a lot higher, 10 years from now, I think, feel very strongly about that. I think all those things are going to play a factor. And so in my opinion, this is going back to not only looking at the valuation side, but this chart really shows the fundamental risk that we’re running in this environment. And then the next thing that you can look at is that we’ve had a contraction of earnings that already started so the last time on management, this was a decline of about 30%. Usually very hardly any scenarios, you can see you can see a decline of 57 71% in earnings. If that’s the case, Boy, those multiples are off in today’s equity markets, because, you know, things are certainly not reflected in that environment. Now, notice that the red line is basically leads the white line and the red line is earnings. That’s bottom line. The white line is revenues top line. So top line has been actually very rich. sealian Recently, we’ve had earnings. And that story for me was that you can clearly see, guidance continues to be very strong, but also revenues continue to be strong. And a lot of people are seeing this and saying, why this is I was expecting much worse deterioration of fundamentals. And I’m not really seeing that is that durable, and it is normal. What you’re seeing is really bottom line is leading the way, it’s already down. If we get to a hard landing scenario, you would expect things to get a lot worse fundamentals. Wise, and on top of it, I think top line is going to follow the same path. Recently, we’ve had this run up in prices, which you know, when you think about what’s been happening and the breadth of the market and mostly driven by the mega cap companies, and smaller businesses all really not showing the same strength that we’re seeing small caps. Look at the relative performance of technology relative to small cap companies, micro cap companies are also showing a lot of weakness.

different sectors of the economy are also showing the weaknesses too. But mostly if this is, as you can see, in this chart, it’s pretty clear to me that everything is predicated on 10 year yields, also financial conditions those last year. So even before when we started seeing the peak of the market, financial conditions are really worsening. At a time when 10 year yields are rising, and equity markets begin to really suffer. And more recently, we’ve had the opposite of that. That’s why I said at the beginning of the interview, how 2022 2023 has been the complete opposite 2022. But I don’t think this is sustainable, I think cost of capital will continue to be higher for longer, I think the Fed is going to have to leave rates higher for longer, I also think we’re going to see a pressure from 20 year olds to be higher for longer. So you know, when I think about this overall scenario, it’s pretty clear that investors are betting on one thing today that we’re going to see another 10 years of strong growth and low cost of capital, when in my opinion, we may see low or negative growth with higher than average cost of capital. And so to me, this is another reason why I think equity markets may suffer. When I look at the fundamentals of the fang stocks, or the companies that are holding up to the stock market today, you can see the red this see no middle terms, by the way, not not even really adjusted for inflation and other things. But you can see here, despite this idea of AI and all dysphoria towards technology businesses, particularly the large companies, you can see the declining in in revenue growth. And by the way, I’ve had people when I post this chart to say why did you only go back to 2005? Go back to the the only reason why I do that is because the decline, it would be even crazier, by the way. So you’re welcome to do that on your own. But it looks like an insane chart. So you know, just for illustration purposes, I went back to that period. And honestly, you can see the picture very clearly here, that when you grow to a certain degree of the economy, like Mega caps have grown in terms of relative to GDP, which is larger, larger than what we’ve seen throughout history, when it comes to the size of those businesses, relative to the overall economy, you can’t really grow much further, you kind of hit a, you know, a limit in terms of growth. And that is reflected in this chart. The problem is, is that multiples are getting more and more expensive, along with the deterioration of growth. I don’t think that’s justifiable. So to me, this is one part of the market that potentially could have issues. The second part you can see is commercial industrial loans have been contracting. We’ve seen this in other periods. And now with the banking crisis, things can get more intensified. Remember, we’re also over a year now into this tightening policies to in the Federal Reserve. And so tightening policies have a lag effect. Are we about to see the lag effects is starting to play into the economy here soon? I think so because my belief is that the banking crisis has nothing to do really with the tightening of monetary conditions as far as what the Fed did. It had all to do with the collateral prices of US Treasuries, is treasuries declining in price to cause the problem going further. Now, we’re gonna see a massive issuances of treasuries that maybe can drive treasuries lower, or at least not, you know, cause treasuries to rally significantly from here, given that the upper pressure and supply I think that this is also going to cause banks to also land less, especially given the new regulations and other issues that we’re seeing. So commercial and industrial loans are likely to continue to contract. And as you can see, those are also periods that you can see other Heartland things like the tech bust and the global financial crisis. I think this is going to add to that thesis that is also very negative banking failures. Look, we’ve seen some banking failures. But usually, as you can see in this chart, once you start seeing one or two, and you can see that looking at the the orange line, then it starts to become almost like a cascade effect a domino effect, one causes the other. I don’t need to be right about this. But throughout history, certainly that happened. So I would at least be cautious that, you know, maybe some of the other banks may create some other problems as well, maybe we’re not out of the woods in terms of that issue itself. That could be caused by Treasury markets, that could be caused by Fed tightening policies that can be caused by the delay of those monetary conditions beginning to cause issues here as well. And other just normal slowdowns in the economy caused by most of the small caps. And one thing someone said, Adam, that I felt was really important back when I posted a chart of mega caps versus small caps, I think was Peter boockvar, which is a shout out for him for saying that I thought was really smart. Basically, what he said is that pay attention that most of the small cap companies that are not performing very well and diverging from the mega caps are actually a client’s of those of those mega cap businesses. And so pay attention to those clients actually starting to really underperform. Because those are important signals that tend to precede large shifts of allocation in markets, meaning peaks of maybe similar to what we saw in the tech bubble, and so forth. The macro Outlook, you can see different ways I showed the yield curve inversion problem. I’ve shown other situations about the commercial and loans, I’ve shown corporate markets beginning to I should say corporate fundamentals beginning to contract, look at this soft data as well, because it’s important, that is what executives are thinking about the economy, and are likely the ones that make the decisions of maybe doing more or less capex, maybe doing more or less employment, and so forth. And you can find here clearly, by many different soft data, this is one that I thought was interesting, because it goes back to the 70s. Every time we’ve had such a big decline in this Philadelphia Fed business outlook, we tend to see also a Heartland a scenario. So things are adding up to this whole thesis. You can also see credit spreads. Now, as I said earlier, being lower than are being on the negative side meaning corporate bonds are yielding less than than risk free, risk free rates, which is in my opinion, also insane. To think about it that why would you take that extra level of risk of owning those instruments, when really you can just own a risk free rate instrument that while risk free is also questionable, but but really questionable is why would you buy those corporations with deteriorating quality of their own fundamentals, and also the risk of cost of capital staying higher, and they having to reissue those, those debt commitments over time and causing rates to move a lot higher. So pay attention as well to the risk that the corporate spreads were they were back in a wait, what they were not negative. They searched all the way to 8%. Today, they’re negative. And so you know, we’re talking about maybe another rise of our hike of interest rates recently that’s going to cause this go even deeper in this negative camp of this corporate spreads. I don’t think this is reflecting an environment that we’re might be entering have a hard landing. If this is a hard landing scenario, you do not want to own this securities, in my opinion, I think meaning corporate bonds. I think there’s a lot of risk there as well.

Adam Taggart 1:18:52
Great. Hey, two quick questions on that just real quick. So first off, I love this chart, because it shows how apparent this current condition is right? Go back the 30 plus years in this data series, we don’t see this happen, right. And presumably, if we get a hard landing, would you expect to see a repeat in the spreads where we would slingshot from out of the negative to some much higher number here, the way that spreads blew out going into the GFC?

Tavi Costa 1:19:23
I think it’s very likely we’re going to see a blow out of this of the spreads. But I think about markets in a probability way. And looking at negative numbers. It’s at least just a responsible sense of really having exposure to a potential for spreads too wide. Much further note that this has 30 years of history. And the reason why it doesn’t go back further, as well. It has to do with the history of corporate bonds. We don’t know corporate bonds are fairly new. We don’t know how corporate bonds would behave in inflationary regimes. We don’t know how corporately and I’m talking about the magnitude of this market relative to other decades, is is much larger with there’s a lot of businesses, as I said earlier, that we’ll be rolling over there that we don’t know how that’s going to behave as well as they roll those over. Investors are likely to demand higher yields and so forth. And so that on itself can become reflexive and cause other issues. I think when you think about the equity markets, you’re really thinking about valuations where interest rates are, which is really cost of capital, and also earnings, I look at the three aspects of that, and all of them look really scary. Valuations are very pronounced. So you got you got interest rates in terms of cost of debt for, for each of those businesses forget about risk free rate for a minute, just think about, mean, the whole reason why this this number is negative today, it’s not because corporate bond yields have been declining, has been mostly because the Fed Funds rates have been rising. And so and in my opinion, we’re yet to see corporate bond yields really rise a lot further and begin to reflect those issues in the economy that we may see. Again, most of the issues we’ve had in 2022, were duration risk that we haven’t seen yet those cash flows, no weakening of cash flows, and so forth, and contraction of, of margins, and other things really be reflected in prices and cost of debt. Yep. And that may be the thing that could occur in the following six months or so. One thing I noticed as well, and it’s been in the labor markets, because labor markets are kind of hard to really look at I mean, if you start seeing the permanent job losses increase is something very alarming. I mean, yes, we’ve seen this in other times in history, usually, they also tend to be during hard landings. But permanent job losses are happening across most of the technology businesses, you’re seeing other others as well, their sectors that are seeing large financials, you know, banks have been actually laying off a lot of people. And those are really good jobs in the economy. Those are jobs that high paying salaries and tend to be have an impact on the demand for goods also have an effect on consumption in general, which, yes, in a way could decelerate inflation over short term. But also, if that’s going to be the case, we’re also going to see a very significant contraction in in fundamentals. And given where prices of most of most assets are today, certainly that is not aligned with with those potential issues. And to me, the job market is almost obfuscated, been obfuscated by this, this increase in non secure jobs. And in this chart, you’re seeing the population rage ratio for people that have less than a high school diploma. And that is surging recently, right. So basically, you’re seeing lots of people taking on jobs in that in that camp, a lot of people being employed, a lot of people a lot of demand for those. And you’ve had other businesses that also try to hire those folks to work for them. But we’re not seeing as the red line shows high paying jobs, which is also in line with permanent job losses. You know, in a very good scenario, as you can see, there’s been also a secular decline in the red line. But more recently, it’s been rolling over as the other line of, of non skilled jobs have been surging. So to me, the strength of the labor market has been obfuscated by the strength of the non skilled jobs, which is, in a way is also a little alarming when it comes to the overall economy as well.

Adam Taggart 1:23:43
Yeah. And those unskilled jobs that are all the growth there, most of those are short term positions or part time positions. Right. So not only the unskilled, but they’re they’re part time they don’t come with benefits that type of stuff. Correct. That’s, that’s my read of the BLS data.

Tavi Costa 1:24:02
Not only that, Adam, that if you go back to the prior chart, and you looked at temporary jobs, losses, you know, it’s a very different chart. So which is right in line with your comment, right, so non skilled jobs are subjected to unskilled jobs, apologies for my my English. But unskilled jobs are the ones that are that are really, really inflating the jobs market when you look at job openings, and so forth. And this is going to be a continuation of the upper pressure and wages of those that part of the market. So you may see wages come under pressure and other things coming oppression of skilled jobs. But unskilled jobs may actually continue to go higher in terms of wages and salaries, given a demand that we’re seeing the continuation of that as well, which is another thing to think about as well. So you put it all together, all those charts and you think about This one because to me, this is the most important chart. It’s from a friend of ours, Roni from incremental AG. And they do an incredible job themselves in terms of research. I love reading their stuff. And they put this chart together, years ago, and it’s called the commodities to equity ratio. And it really shows the secular moves from tangible assets relative to financial assets shows the picture of valuations of those equity markets and, and bond markets, relative to, to to, to commodities, it also shows how we’ve seen the flow of capital going into technology, forgetting about the basic necessities of the global economy, such as natural resource industries. It shows us this globalization period that we’ve had since the global financial crisis. And even before that, they really helped to keep costs low, and not have a lot of disruptions in logistics and other things. There’s so many things, you can think about the great rotation of value to growth, you can think about 6040 portfolios favoring equity markets over commodities, and this has been reflected in this price. So a lot of things really boiled down to this commodities to equity ratio, which as I said, in other interviews with you, and I think this is the most relevant chart of the next 10 years is something I think a lot about, how do I how do I really capitalize on the trend of this slide going higher? Is this buying emerging markets? How do we buy emerging markets? Is it Rowley commodity led economies? are bricks going to be different? You know, the China’s not an emerging market? I want to own a commodity importer? India is not a commodity is not a commodity led economy either. Do I want to hold Russia with so much geopolitical risk? Oh, wait a second, but there’s Brazil, geopolitical neutrally. Speaking is very, very neutral, there’s not a lot of issues. It’s also an economy that is got exposure to an energy, agricultural commodities, metals and mining, almost all sorts of things, it’s likely to play a key role play a key role in the global economy, as most of the g7 countries start really chasing minerals and, and natural resources to rebuild their own economies as well. So something I’ve been thinking a lot about is this chart. And you know, to me, this is probably the most important thing investors should be considering. Finally, just to make a point, and I’ll end on this one is that sometimes we like to say, well, copper is a very cyclical commodity. You know, you can do the same with agricultural commodities, by the way, we like to look at the commodity space and more segregated speaking, meaning, they’re all independent, they’re not they’re very interconnected. Once you start seeing there’s such a small markets still, relative to in terms of exposure of most of those large institutions, when you start seeing capital flowing into the space, everything goes up. And so that is also how we see this throughout history. So you can see gold prices versus copper. And they’re basically the same chart. So yeah, you can get it wrong for six months or 12 months. But over the course of 10 years, if you’re right about a gold cycle, at its its early stages, most likely we’re going to see copper prices leading the way as well to the upside to along with silver prices along with agricultural commodities, along with energy, a lot of things could actually move in the same direction, as we see things unfolding here. So to me, this is something we kind of overlook a lot of times because of the cyclicality nature of some of the commodities versus others. But at the end of the day, was those markets begin to really get this not discover, but favored relative to others. Everything is interconnected and you tend to see what we would you often call a commodities cycle. And I think we’re at the early stages of one, while we may see decelerations and periods when things can get a little rough. Energy was just the beginning of that in 2021, and 2022. And I think we’re going to see a lot more of that unleashing in the following years. So Adam, maybe I can stop here because I think there’s a very long presentation.

Adam Taggart 1:29:32
Wow. But it’s been wonderful. Tavi. Yeah. It has been a tour de force here and here. Let me see if I can stop your screen sharing here so we can see your face. So first off, thank you, that was just magnificent. And you have absolutely made the your case with a ton of data here. And I do Want to wrap this up? Because we’ve taken so much of your time, but, you know, presumably you look at that and you think, okay, so how to play that? That commodity to equities upswing, right when you showed that key chart there near the end, how we’re still very close to a historic trough here. And if history repeats itself, that ratio should to really start shooting up. So I obviously own a basket of commodities, precious metals and energy, agriculture, softs, etc. You’ve named them all look to countries that are going to benefit from the strengthen commodities. So big producers like Brazil, that you mentioned, I presume in terms of owning the commodity exposure. Some of them are easy to own directly, like you can buy some gold and silver, no problem. Hold it yourself, if you like. A lot of other ones are harder. And so the way to play those I’m presuming are more than mining shares. You’re nodding as I’m saying all this, but I’m just putting all this on the table in the shortest period of time, how can you kind of tell people your approach to positioning it to take advantage of this major, you know, macro Upswing that you expect?

Tavi Costa 1:31:14
I like to use a thematic approach of that. So I looked at a themes that I think will win this year. From the short side, I think mega caps, you know, are our risky part. I mean, I don’t think that the overall market and the breadth of the market is is is is is telling you something that tends to be proceeding a peak of the market and you should be worried about it. I wouldn’t, I wouldn’t have a larger location there. Number two private equity funds and other other businesses that have private equity valuations. I think that those are yet to show very large Miss markings of of their assets. As they get forced to mark to market as they get forced to mark to market, I think you’re coming. There’s a lot of pressure of different regulators recently in that in that front, I think that that’s going to become an important part of the market. I also think that corporate bonds look really troubling as well. So those are going to be important ports, portions of the market. I think volatility is suppressed unjustifiably I think there’s certainly a case to be made that we may see that become an issue and I look for companies that will have problems with high cost of capital. So that is one of the things in terms of shorts and things like that certainly is been a focus of ours is to look for companies that will have that cost of capital problem moving forward, what regardless if it is causing their margins to be squeezed or rolling over of their debt, and other problems that may be emerging because of the the cost of debt being elevated. On the long side? Well, I think the global financial, the global fee at the basement is a real thing. I think, you know, regardless if it is owning a defensive asset like gold for you, or if it is owning, you know, to me is really owning a lot of exploration assets. The reason why I think that way is because gold prices are basically near all time highs, about to buy my opinion break to that level. And as we see that a lot of huge influx of capital is likely to come into the market of the gold space. I think that the major companies lack vision, that’s just my opinion, I don’t think they’re focused on growth or don’t I think they have the curating assets. And so when I think about owning high quality assets in the space, I think developers and explorers are the way to go. We like explorers, because we have a niche with an exploration geologist, but I think both sides of that market are much more attractive from an asymmetry perspective, but also just just the quality of the assets relative to what the what the majors own.

Adam Taggart 1:33:58
Do you plan to own them? Because they’re going to their share prices are going to rise higher as the underlying metal prices go higher and capital goes into those companies? Or maybe it’s an and are you owning them because you expect the majors for your say lack vision, we’ll just go and acquire them once the gold price starts going up.

Tavi Costa 1:34:18
I like optionality when I buy something I like optionality. optionality means having a large number of ways to the right. And in my opinion, what you mentioned about majors acquiring those businesses, it’s just one of them. They are swimming in cash, basically, they’re being ultra conservative, which I think it’s the wrong approach when you see gold prices at their levels, and you know, you’re not producing most of the businesses Beric and gogo. Can Ross even Newmont have been in a secular decline in terms of of gold production, they’re going to have with deteriorating grades as well. At some point they’re going to have to come in so that’s One thing, the second thing is just market or the industry receiving capital over time. I mean, if you see gold prices go up significantly from here, it is just natural. The AMI institution looking for ways to capitalize on this, we’ll look for other things that are linked to gold prices that have not moved yet. And this might be the first time in my career that I’ve seen gold prices up near record levels. And the valuation of exploration development stocks near record lows. Yeah. So you know, it’s, you know, it’s just sometimes it takes a trigger for that to happen. And I think the trigger is gold prices breaking out, we’re all watching that match that the Treasury’s versus gold World Cup final. Once that, finalizes, I think everyone’s going to be cheering on 6040 portfolios, large institutions, endowments, funds, central banks, everyone is seeing that happened live. And as we see that breakout not only on gold itself, but also gold relative to treasuries, I think we’re, it’s going to attract a lot more capital in interest to this overall industry. So

Adam Taggart 1:36:07
it’s just just waiting for gold to sink that penalty kicks, what you’re saying?

Tavi Costa 1:36:10
Yes, I think that’s just one way to be long commodities. The second way would be outside of owning gold itself. Of course, outside of owning commodities, I would say electrification metals is a real thing, I think you can apply the same strategy with copper deposits in development phase or, or also an exploration phase. Similarly, we’re seeing prices of base metals being elevated, he’s with historical standards. And at the same time, the valuation of those businesses are extremely low. Gold is even more pronounced, if you think about it. But base metals are also that way. And there is a real institutional attractiveness in terms of, of folks seeking exposure towards those things. And I believe that that’s going to be an important part of the thesis.

Adam Taggart 1:37:00
And sorry, but but as part of the year, there’s YaSM, there to the tailwind of fiscal spending, that is going into infrastructure projects to electrify grids,

Tavi Costa 1:37:11
that revitalization of manufacturing era. That’s another one. The fact that economies have to cut the Reliance’s with China, Russia and other authoritarian regimes. Just the whole idea of the influx of capital into gold that tends to drive other commodities, they’re all interconnected. The 6040 transition, so many things will play a role into this movement towards those metals that are also going to benefit from the green revolution itself. And so to me, that’s an important aspect here that I think I would not ignore energy shortage. I think that’s, that’s an important theme. It’s not necessarily shortage in that sense. But certainly, we’re not seeing companies on a rush to increase production of oil. And I think there are those businesses today, in terms of the terminal rate of them are being priced into markets, like they’re going to be out of business in three to five years, you can see that by just looking at the free cash flow yield of those companies. I think that you can own those companies over time, they’re gonna last much longer than what the market thinks they will. And I think they’re one of the cheapest parts of the market still. And we’ve had two years of significant increases in prices of those stocks. And then we’ve had a last year of literally going sideways if we have a hard landing scenario. I think we could see those those stocks get hit, but it would be an incredible opportunity. So obviously, you know, be careful with the cyclicality of the base metals and the energy side. But there are clear winners of this decade, in my opinion. So number four agricultural commodities. And I think there’s ways to be Nietzsche here, there’s ways to be to go deep and understand those markets. Well understand agriculture, commodities have a shorter timeframe, as far as the supply curve, you can get supply fixed much quicker than metals, mining, metals, and mining metals and mining can take, you know, 15 years, 20 years, especially a lot longer if the government gets in the way, which that happens literally every time and so well, to me, the now you will go back to the 70s. And you understand that agricultural commodities perform incredibly well during that period as well. Again, I’m not claiming this is the 70s. I hate when people say that, but it’s not that it’s just understanding market correlations. First and foremost, I understand the debt problem wasn’t the case in the 70s and other things, but when you just looking at market correlations, look at what happened agricultural commodities in the 40s, the 1910s. And you see clearly that there those are very, very good investments to so I wouldn’t count them out. Those are good places to maybe deploy capital. And I can think of I love South America in general. I think South America is a place that has been, you know, maybe ignore over the years, for many reasons commodities have not performed well, what happened with Venezuela, what’s happening with Argentina? Recently, we have had Brazil, you know, having a big shift in terms of the president leadership, that I think it’s masking the opportunity, everyone’s looking at that and saying, Oh, my goodness, it’s gonna be another event as well, I cannot invest in this. But the prices of assets, everything has a price to begin with. I don’t think this is going to happen in Brazil, if I look from Brazil, the political environment, there has never been so segregated. By the way, it’s been the first time in many decades that we’re seeing a real right wing party, challenging the left wing party. And that is a huge deal as far as popularity as far as policy making decisions and other things that may occur in the future. And I think that that’s going to play a role and to making things a lot more difficult to develop on the left side. And if that’s the case, people are going to lose their focus towards politics, which is always going to be a problem. Don’t forget, when Brazil outperform other markets in early 2000, in the 70s, as well, there was also political issues. And so everything has a price, and Brazilian banks are really cheap. Brazilian commodity businesses are really cheap. I think it deserves a certain level of education, you don’t need to go big. But you know, I think folks that understand the commodity markets, folks that understand emerging markets, especially Brazil and other other areas of South America are going to be in demand that knowledge will be in demand. And I think, you know, I, I spent a lot of time on there as well. I think one part of the growth market that has nothing to do commodities to equity ratio that I’m excited is the biotechnology industry, that’s a conversation for another time, maybe, but it’s a small, very small percentage of our portfolio. But the only reason why I like to own that is first is a good hedge on a lot of other things we all but also, I understand also, I would say that there’s going to be need for that, in the future. There’s a true revolution happening. The difference between biotech and other technology related industries, is that the valuation is completely opposite. I mean, those companies, some of them are trading well below their cash balance. To me, that’s a no brainer. And understanding that industry very well, it will be also in demand. So you know, we recently hired a scientist to understand that better. That was the beginning of her gold strategy. That was the beginning of her commodity strategy. So I can see that developing over time. I know it’s a separate topic, but it’s something I wouldn’t, you know, I wouldn’t ignore either. You know, if for folks that understand that market? Well, I think that that would be an interesting place to be invested as well in the future.

Adam Taggart 1:42:55
All right, Tommy, this short and long break down, these sort of thematic breakdowns are super, super helpful. Thank you so much for sharing them. And on the biotech. Folks, let us know how interested you are in that topic down in the comment section Tabi. If there’s enough interest, I think there probably will be, we’d love to have you back on at some point to do a discussion just on the emerging opportunity that you see there. All right, I’m gonna have to wrap it up here, just out of respect for your time and looking at my calendar to another interview. But this was phenomenal. So tabi for folks that have really appreciated this really enjoyed this. For the few that didn’t know you beforehand, got to know you a bit through this interview. Where can they go to find out more about you your work, and we won’t have time to go into them in depth today we talked about in the past, but to go learn about Chris cats funds, where should they go for all that

Tavi Costa 1:43:50 Is that website, you can find a lot of information over Research Letters, information about our funds, and everything about our business. And also I put a lot of research out on Twitter at Tommy Kosta. You can communicate there with me or also communicate in our contact us page on the website too. But thank you again, Adam was a pleasure to be here. Thank you for finding the time to to share all this information. So I appreciate the the opportunity.

Adam Taggart 1:44:17
It’s always wonderful having you on Okay, folks. So really quickly tabi when we edit this, I will put up the URLs to Chris get that net and your Twitter handle on the screen so folks know exactly where to go. We’ll have links down below in the description as well. Just a quick reminder to folks if you want some help in taking action on any of the themes that Tommy mentioned here, I highly recommend you do that following the guidance of a professional financial advisor. But not just anyone when that really understands the macro issues that Tommy went through in immense detail here. If you’ve got a good one who can do that for your great work with them, but if you don’t, or you’d like a second opinion from when you’re does, consider scheduling a free consultation with the financial advisors that Wealthion endorses that the guys you see on this channel with me every week. To set up one of those free consultations, just go to only takes a couple seconds to fill out the form. There’s no cost. There’s no commitment to work with these guys. It’s just a public service they offer. If you’d like to see Tabby, come back on the program again soon, folks, please voice your support by hitting the like button, clicking on the red subscribe button to as well as that little bell icon right next to it. Tavi. It’s just been wonderful again, can’t thank you enough. I really look forward to having you back on the program again soon.

Tavi Costa 1:45:27
Thanks for having me, Adam.

Adam Taggart 1:45:27
All right, everyone else thanks so much for watching.

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