Jaime Carrasco: Gold, Silver, Miners — Where to Focus in Monetary Storm
Summary
Market Outlook: Jaime Carrasco emphasizes the ongoing global monetary shift driven by a massive debt bubble, suggesting a return to a gold-backed system as central banks continue to buy physical gold.
Investment Strategy: Carrasco advocates for a significant allocation to precious metals, recommending a minimum of 30% in gold and silver for his clients to hedge against currency devaluation.
Gold and Silver Dynamics: He highlights the historical role of gold as money and predicts a substantial price increase, with silver expected to catch up due to its current undervaluation and supply deficits.
Interest Rates and Debt: Carrasco discusses the unsustainable levels of global debt, particularly in the US, and the implications of rising long-term interest rates as central banks are forced to print more money.
Geopolitical Shifts: The rise of the BRICS nations is seen as a significant factor in the de-dollarization trend, with gold playing a central role in new trade settlement systems.
Opportunities in Mining Stocks: Carrasco sees significant potential in gold and silver mining stocks, particularly producers, due to their leverage to rising metal prices and free cash flow generation.
Historical Context: He draws parallels between the current economic environment and past periods of monetary upheaval, suggesting a potential restructuring of global financial systems.
Future Currency Systems: Carrasco envisions a future where gold is central to a basket of currencies used for international trade, similar to the Bretton Woods system.
Transcript
[Music] I'm Charlotte Mloud with investingnews.com and here today with me is Haime Carrasco. He is senior portfolio manager and senior financial advisor at Harborfront Wealth. Thank you so much for being here. Great to have you. Thanks for asking me to to join. I've seen some of your posts and you have you have had some really good guests, so I'm honored. Thank you. Oh. Oh. Well, thank you so much. And I've been following you from afar as well for quite some time. So, I'm excited about about the discussion. And I thought, you know, I'm sure many of our audience members will be familiar with you, but just since it is our first time talking, I wondered if you could start with a brief intro to yourself, your work in the resource sector, and what you are doing right now. Um, well, you know, my my work I've been in the business for quite a while. um over I guess heading for 40 years now. So I have to say when I look back it's been quite an interesting journey. Um how did I end up with the with the commodities? I'm not I'm not a gold bug. I'm not I'm not a u a a silver bull. I just see um I've always been taught to analyze the road ahead and how to how to manage through the challenges. And I think when you look forward um and not you know everybody's looking backwards at all the markets at 45,000 where it's going. I don't think people are really thinking about how it got here and and that's what's important to me because going forward I think how we got here is going to be very very precient. And I would have to say that how we got here is because of a debt bubble the the biggest credit bubble in the history of mankind. bubble to to some extent I helped to build because early on I was working on a repo desk before the unwanted glass keigle which was the legislation that allowed for for this uh debt explosion that we've had since the 80s um you know that was after Nixon and pegs from from some money which really put a a complete governor on our ability to print money then glass deagle gets unwind which was the legislation that Bill Clinton puts in sorry no Bill Clinton gets rid of the legislation, but Roosevelt puts that legislation so that banks and financial institutions are weren't allowed to do what they've done since the 80s, but it was what led us to the 30s, right? That's what that legislation was put was put in in 33. Um, and so that's really my concern because credit is my issue. And there we have to go back to to to history and understand well what have been the consequences of too much credit in the system how does that play out uh and what are the consequences going forward and to some extent you know back in 2015 when I was talking about a power shift that paradigm shift most people would have said well you're crazy the US will always be the global power today we're wondering you know people are finally questioning I think that Um I I think that what we're living through is a big global readjustment uh because of credit because of a new world that's being born. Um and and I think those to you know to to to some to a big extent JP Morgan's words that gold is money everything else is credit is important because all of that credit bubble that we're living through is also accelerating the power shift that's occurring and within that shift whatever is happening within that that puzzle that chess game gold is in the middle and his I'm the same way that for 4,000 years Gold has been in the middle. Gold is in the middle again. And you know, it's naive not to understand that. It's it's it's it's it would be silly not to comprehend that the reason why central banks of the other team we're talking about the breaks, this new power that's being born, the geopolitical shift that's that's occurring have been buying physical gold for a long time is consequential. Has a lot to do with what's going on. And and in a nutshell, we're going back to a return to sound money. Money not backed by the word of a politician and bankers and but by something sound like gold, which is money for 4,000 years. And in that context, it's it's important to understand that, you know, people might be saying, "Oh, 3,600 here we are. We're going to pull back. You might as well wait. Concentrate on price." You know what? That's all fine and dandy. But on that road ahead, it's important to understand that for gold as money to do what it has done for 4,000 years, and what I mean by that is to settle the trade trade settlement of the countries of the world, its price has to be way higher than $3,600 to achieve that. And because of that, I think to me it's more important to to understand where we're going, not necessarily how we're going to get there, because that's that's the fun part. You know, the fact that it took how many years for gold to break through 20,000 now we're through it. Now we're we're we're fighting higher. But more importantly, that that is inevitable. That is that has always played out. And I'd rather position myself for that future because that future is also a wealth transfer. And that's important to understand that it's not about the value of Nvidia or IBM or Microsoft. This is about the purchasing power of currencies transferring the purchasing power of the fiat currencies back to gold. And that is a massive opportunity because that kind of power shift or that kind of wealth transfer only occurs every one in in a 100 years and we're living through it. So to me, you know, we are living in interesting times. and I have the wherewithal to try to understand what's going on based on history and economics. And so that's how I'm positioning clients to benefit from from that inevitable unwind. And that is global. It's not a a regional thing. It's not like it's the country of Argentina or Chile or Venezuela going through that monetary shift from too much debt and the system has to cleanse, but it's it's global and and we can see that with with with long-term interest rates. how for the first time in 40 years, even though we're getting we're getting word that oh the the central banks are going to start dropping rates on the short end this time around. Well, in the during the last 40 years when that noise started, when that narrative started, interest rates on the long end would start dropping, meaning that the value of those bonds appreciates because they're negatively correlated. Well, what's happening today, if you look at interest rates, long-term rates in the US, in Canada, in sorry, let me put this on on on on mute. It was my assistant. She can we can get that later. Um, if you look at long-term interest rates in Canada, in Europe, everywhere, the the British guilt, the Japanese, they're all rising. They're all going up. And that's the different paradigm that credit is bursting. Credit is destroying itself. And so that's important because that's also another key factor of what happens when a debt bubble comes to an end in that at the end of the game because nobody wants to buy that credit which is why nobody interest rates are rising. Central banks are forced to print money to buy up their credit to monetize that debt and that is happening already. You know if you look at the tech numbers the the biggest buyer of US treasuries is is the US government be it the Treasury or the central bank. bottom line is they're going to have to print that money to get there and and that's you know so so today 2015 these were ideas and concepts now it's actually happening it's it's here and and I think people have to wake up because the monetary titanics are sinking and in my view gold and silver are the true lifeboats in that environment yes copper will go up everything else will go up because it's the value of money by which you price those things that are is losing value. So everything's going up. It's not that things are going up, it's that the money is is losing its value. And in that environment, silver has to catch up to gold, but gold will be the the prime winner. Very, very complex situation that you're outlining here. And I'm wondering, there's a lot of different paths that we can go down, but I'm wondering if you could say more about what's going on with interest rates because we're having this very exciting week right now for gold and silver and a lot of the talk seems to be centering on okay, everybody's looking toward what the Fed is going to do next. People are anticipating that interest rates come down at the next meeting. So, how do you see that playing out amid everything else that you've just been been going over right now? Okay. The the first thing to understand is um you know when when astronomers talk about stars they only talk in the terms of billions. The problem here is that people have no clue what a trillion is and what's been done on their name in terms of money owed. When we look at the stars we never talk about trillions. In 2008 we never talked about trillions. Everything was billions. Today everything is trillions. And we're talking not one trillion. We're talking 35 trillion just in federal debt. Never mind provin uh state debt, city debt, Medicare, Medicaid, social security like that total is about 300 trillion. Well, what is that? That is money that will never be paid back. Those are promises that will never be given. You know, people better wake up to the fact that is just the US. The total level of of credit out in the system is more than 2,000 trillion. Think about that. And and why is that? Well, because who is the prime beneficiary of that? The banking system. Those that could access that by by taking little little little spreads. But in the when we're talking about trillions, it's a lot of money. Now, that is the cost of having believed once again that central banks control the value of money. And we're talking about fiat money. fiat as in not backed by anything. And so in that environment, what's important to understand is that 1 trillion is more than a generation will ever pay back. All of these trillions is money that will never be paid back. So then you got to peel back the onion and say, well, so how am I going to get that pension? Right? Here's my biggest concern is that when I look at institutional money today, Western wealth is only 2% allocated in the sector. That's sheer ignorance. right? That we have a 2% allocation in a sector that historically money has sat under normal circumstances at 6%. That is also an opportunity and a risk kind of like how the Chinese write the word for danger using both symbols for opportunity and risk. The risk is in that people better understand that you're going to get your pension plan money, but the purchasing power of that money will be substantially less than what you think you can buy. So now you have to start taking uh taking um the situation into your hands and how do you position yourself, right? And so because of that, uh, I think young people, um, I think, um, society is about to go through a very important step as people finally wake up to the reality that the Titanic is sinking right now. I've been preparing for that for a long time, but most people aren't. And again, back to pension plans, they're not participating in the one in the lifeboat of the Titanic. And when does that come? You know, I I I think that that should start now, especially within the producers, which is nice that they're out up out performing because they might not understand that gold and why gold and silver are going higher, but they will understand free cash flow of the sector. And the free cash flow of the sector is kicking in at an unbelievable pace and it's now beating high-tech. So greed is greed, and they're going to want to make returns. And so they're going to go for those for those companies. So eventually the flood of money will come here. And my plan has been to patiently acquire these assets and now sit tight until I see um a more realistic values for those assets. And I think the the the road ahead is is is beautiful for those that are already I love to use the analogy of the yellow brick road because a lot of people don't understand that the yellow brick road was an allegory to warn us of the banking system. You know Dorothy slippers were silver in the book. The lion represented uh the banking sector, the tinman industry and the scarecrow agriculture. and the wizard was the banker that we should stay away from but stick to the yellow brick road right and so because of that it's important to understand that those that are on the yellow brick road are watching this from a different perspective that those that aren't right forever over the last uh 3 to four years I started rising my allocations to the sector in 2015 where I had gone down to 5%. Once we never broke 1500, I started raising my allocations and the minimum percentage in the sector that a client will have when working with me is 30%. But I can tell you that anybody that particip had 30% last year is substantially higher now, but they're not selling because now they understand that this lifeboat is feeling pretty good now looking out to what's actually happening going forward. So, back to answer your question, the problem is is that it's way more debt than will ever be paid back and that has consequences, especially for our retirement. And from that perspective, it's an opportunity because money never disappears. Money always transfers from one area to the next. And at the end of the game, it always transfers to gold and the precious metals or the monetary metals. And that's the that's where we are at the end of that of of of a huge cycle, a very long cycle. Is there anything that you can say? So, we're in the midst of this transfer towards sound money, precious metals. What does that end up looking like? I always have trouble envisioning, okay, once we get to the end, how does it look for for the everyday person, for example? You know what that that's a great question and I would have to answer that in the context of history because the last time we mess with a fiat system the republics were born. The reason why the republic of Chile of Argentina of the US are all born at the same time. Not only did Simon Bolivar, Bernardo Keige, San Martina and George Washington live together in London, they all knew each other and the world changed so much through that construct through that mess that the republics are born. The the the the complete social structure of the world completely reforms into something new. So if we were if we were sitting in September of 1775 telling you that the world's completely going to change and you might have a vote. You would have said to me, "Well, what's the king going to say about that?" Well, guess what? Once the revolution starts, the king had no say. The the system was done, right? Uh Chile and and and why is that? Because at the very during that period the the the the hegemonic power were the French and they they started printing money and printing money and created massive hyperinflation through the through the whole global system. And that hyperinflation is what causes the economic tr uh troubles that unwind the the societies at the time in that they get reorganized, right? And so so so as it as we have this rebirth a couple of things happen. We go back to a gold standard. So the gold standard was set in 1789 again the British take over the power by going into that gold standard. Then it was set by Isaac Newton and John Lock and it's on a sound money system that the industrial revolution is replayed. So when you look at the positives, you know, most people will will will look at the negatives, which is what's happening in France. You know, the the the the the social inequality that is created from that where the the wealth gets greater and greater concentration because they have access to the printed money. Meanwhile, the peasants in France and the middle class, the the little bit of the bulrai that was being born is getting decimated. Well, guess what? It's exactly what's happening now. Look at the US. we have we have complete social dislocation in that 1% of the population controls 99% of the wealth that that's to some extent it's exactly the the same factors how does it rebuild I am extremely positive because uh I think blockchain will be part of that rebuilding because blockchain is a decentralized ledger and a bank is a centralized ledger that's all it is you know they ledger your money to guarantee that it's your money. Well, now we have an electronic solution to deal with that. So, so if you start to think out of the box and extrapolate how that technology could be applied, think about your vote. You know, in Canada, we sent our our our politicians to Ottawa for four years, even though they're there for about a week, but we pay them huge amounts of money a year, right? Because of of when we set up the country, we didn't have these lines of communication. Well, now we have a tool that well, why do we have to send those guys if I can have an immediate vote of what I'm thinking, right? Well, it's too early to think about how we're going to restructure society, but do understand that society itself because we're broke is going to go through a massive readjustment that will require new solutions to rebuild. So, that part of the scenario, you know, I think it's too early to tell, but I can assure you of one thing. Gold is in the mix and gold will have to be much higher to do what it has always done. And we know for sure that the bulk of the world wants to use gold again because it's the only thing they trust more than the American dollar which has been doing that function. Right? The the the think about the bricks. The bricks don't want to use the the the the yuan or the ruble or the rupee, right? um or the the the Brazilian realale or the South African brand I think it's called right but what do they trust the gold right and the US dollar can't continue to be part of that because trade now um well first of all look at look at the value of the US dollar right the US dollar is is just debt with no maturity and that debt has most of the Most of the global debt is in US dollars. So it has to devalue. So by default that's a ship the sinking ship that that that is already rebuilt but gold is the is is the way to get over. Right. And I was going to ask you a little bit more about the bricks as well because they've been coming up in this conversation. So as we make this transition, we've been seeing the rise of the bricks in recent years. Are they going to be dominant in this system especially as we see you know deolarization happening? How do you see it? Well, I think they have to be dominant because of the size of the population, right? Also, they have the military power. You know, one thing that Putin is proving is that, you know, it's going to be very hard to to do anything in Ukraine because they have nuclear weapons. Are we going to go to nuclear war? I don't think so. You know, who's being more belligerent? Look at look at look at Europe itself. I think that's the basket case of the world right now and it's going to get worse because first of all you know look at France people retire at what be at 60 be at 65 be at 50 it doesn't matter because they don't have the money to pay for that now on the other hand they've been following these silly economic policies of yeah we're going to have growth with no energy and and that energy comes from was coming from Russia right so so now so now they want to go into this green energy thing. Well, where's world going to come from? You know, at some point it's going to hurt, right? And so, as we go through this transition and I look at the other side of the equation, what are the countries that are going to come ahead? And I think the bricks are it. Like, think about China for a second, right? Think about China today versus the 1980s, right? When when when I was in my 20s. Well, China, you didn't trust their products, right? Today, China, you know, they have 25,000 kilometers of highspeed rails. they have these massive cities that they build, right? So, so, so I think China, Asia is is is it's silly to it's naive not to understand that that is going to be the economic engine of the world. And you know, it's funny. I was looking at that military parade they had just this past week celebrating Victory Day and then you compare that to the parade they had in Washington, right? So is that military might you know you know at some point it's funny because the the big problem I think is that the US went arry when they stopped listening to the warnings of Eisenhower about the military-industrial complex. Well, what do we have today is that the US over the last couple of years have been creating all of this debt for what? Right? To fight more and more wars, right? But where is the economic growth? Where's the economic benefit to Americans? It isn't there. The US has to be rebuilt, right? On the other side, you have the rest of the world and it it's moved on. It's it's it has massive cities, massive economic growth. And you know, I look at China. Yeah. China is still consuming a lot of coal because they're building nuclear plants, but if you look at their electricity demand continues to go through the roof because that's true economic growth and that's going to lead Asia. So, so you know I think that the picture of the future is pretty clear if you're willing to just look right and so to me what's important is how are these countries what is the big adjustment that is happening economically the demand that's going to happen well no matter what we're going to need a lot of commodities the question to me is what currency are we going to pay for them in that is the true opportunity because that's where the power the the the the power shift is occurring, the the wealth the the purchasing power shift that always happens that will benefit those that can serve that way. Well, and do you have any thoughts on what that currency? So, obviously we're going to have gold, but you're mentioning a currency. What do you have any thoughts on what that could be? Well, we we we are starting to see answers to that puzzle. And you know, look at Mbridge. Uh Mbridge, not Mbridge, the Canadian company, but M and Bridge, the the the the alternative to the Swift system that the IMF uh the Bank of International Settlements built for China. Well, that's up and running and that is a trade settlement mechanism. But what's interesting is gold is in the middle of that, but it allows for countries to continue to to do everything in their own currency. So it really it is a a full trading uh trading platform. So to some extent um the the way that I see that puzzle is that you're going to have greater economic um what's the word I'm looking for? Sorry. uh control over your over your currency and allow these countries to to trade settle themselves using their currency but with gold in the middle right so so so so I it's going to be a little bit different I think it's going to be more of a basket but that's more similar to Breton Woods right before Nixon and Pegasus from gold of course right so so so regardless it's a basket and within that basket gold's going to be the the prime the the the the prime glue of that system because it's the one that everybody trusts for settlement, right? And and in that environment, um I think no matter what, everybody's going to have to tap on as we go through these changes, right? The the number one question I have is well, you know, you have all this noise coming out of the Trump administration. All I care is just the golden Fort Knox because that'll that'll make it very clear where whether the US is number two in this game or back at the end of the line, right? If the gold is there now, I personally do think that the gold is there because of the history of that gold. I don't think any I I think a lot of central banks gold isn't there because of uh of uh accounting in that central banks are the only entity that can lie about the or not use sorry let's not use the word lie but not use proper accounting practices and all the lease gold is still considered an asset so we don't really know who's got what right there's a lot of paper contracts in that system I think China has a lot of that gold. Um I know that more from um from having been at the Perth Mint and watching uh gold beans melted from from pound bars to kilo bars because they work in a metric system. So we know how many how many metric bars were melted and sent to China from the three main uh smelting points in the world which is the Perth bin for Australia, Switzerland historically has always been and then Dubai for the Middle Eastern market. Well, we know that over 20,000 tons have been smelted and sent over to China. So they're sitting on they're going to be number one. The question is is the US going to be number two at that table? Well, and I guess that's something we're going to have to wait to find out, but it's it's clear from what you're saying that gold is going to be at the center of everything. And I'm curious when you look at it, do you you've mentioned that gold needs to be much higher than it is today in order to fulfill its role here? Do you have a price in mind when you look at it? Is that important to you? How do you think about it? Well, it's funny because one guy that actually answered this a little bit and I was having this chat yesterday at a meeting in Toronto, um, Sultan Pner, do you know who he is? Well, when he was with Credit Swiss, he did a great paper where he said if the bricks alone, now this was before the bricks was 30 countries. This was when the bricks was only five countries, when it still with Credit Swiss, before Credit Swiss went bankrupt. I love pointing that out because everybody thinks banks are so stable. Uh he said well if the bricks themselves were were to start using gold for trade settlement of their energy trade alone oil. Now that's that was an important assessment because uh Russia is today the biggest energy producer. So he used he used oil not energy which includes natural gas. Um the price of gold just to trade settled the trade of those five countries should be at at least $7,000. That's it. Now add the other things that we trade. Add the rest of the world to that trade. Right? So 7,000 starts to become pretty small. Right? So that's why I do think that the real number has another zero behind it. That's for sure. Right. And um and uh from 3600 is a massive opportunity. However, the true opportunity is in the price of silver because that has to go up way more percentage-wise to uh to catch up. Well, and let's yeah, let's talk a little bit more about silver because there's been so much discussion lately about gold silver ratio and how out of whack that is versus historically where it's been. So, if you do see this coming for gold, what are the implications for silver? Okay, first of all, you know, it's funny because um I'm always on Twitter. Um I I reply to anybody that makes a comment on my Twitter. I like to if if if the questions are smart. Everybody looks at price. They don't worry about an allocation. And and I think that's the first mistake that people are are are are having is, oh, the price of 3600 should pop back. I'll wait. And they keep waiting and waiting and waiting. The first thing I always say is is set up your allocation. What's going to be your allocation? Like I said, any client that comes in my door right now, the minimum that they're going to have that I'm going to set them up with is 30% in the in the monetary metals. Now, the next thing is the price of silver, right? The price silver is one of the most misunderstood metals because most people don't understand that the bulk of the production of silver has been uh as a byproduct. So when you mine copper, you have a little a little bit of silver. When you mine lead, you have a little bit of silver. Zinc, same thing. Gold, same thing, right? So thanks to that, we haven't really worried about the supply of silver until now because now we've had a deficit for over 6 years. And those deficits are going to get bigger and bigger because since the price had not appreciated, we weren't looking for silver mines. In Canada, we're only building one right now, the Olly Bart, right? And that won't be up and running for a bit. globally very few right so we have a structural deficit in the metal the metal's needed for for electronics for a lot of things and and on top of that now we have what's happening in the substitution from gold to metal to to silver because look at Costco you go to Costco and you're going to spend $3600 for 1 ounce of and an ounce is pretty small for 1 oz of gold but then you're looking at the same side and here's an ounce of of silver. So people are substituting over to silver. So that substitution effect has has begun to take place. But then we have another issue which is the reason for the gold silver ratio historically has always been in our ability to big up from the fact that nature has always yielded 16 ounces of silver for 1 oz of gold. So back to the Romans, the the Romans monetary system, the Daenerys, which was a silver coin, was worth 16 to buy one um centario, which was the gold coin, right? Because they would dig out 16 ounces of silver out of the ground for each ounce of gold. So throughout history until we be until we got into this fiat environment that we're living in where money just has no value and that's what's coming back. Gold always was between 20 to1 to 16 to1. Now that's pretty pragmatic here and assess that because silver is a byproduct and we don't have many silver mines yet. We're going to have to start building them. Last year that was 7:1 not 16 to1 7:1 but yet the price differential is 88 to1 right now it's got a it's got as high as 100 right so is it different this time and our our ability to control these prices going to continue forever well I say it isn't markets always win out so I think what's going to happen is that and it's starting to happen the price of silver has to rise to catch up now I I think eventually because markets always go from one side of the spectrum to the other where we've been on the on the value proposition side of the spectrum for so long, we're going to go to the other side and it's highly probable that we get to a 1:1 gold silver ratio. However, the it's it's that silver ratio that's going to dictate the discipline by which I'm going to I'm going to manage my client's money and how we're going to benefit from this. So for the past uh three years I have had a lot of gold companies right we have it within the portfolio but we've also been building our silver companies taking profits from those gold companies like I always talk about at Nikico Eagle which if you look at the chart it hit the inflection point was $60 and now we're sitting at 200 Canadian 204 right now that inflection point when it started running higher You had all of these silver companies that had come down and they stayed down and they just weren't moving, right? So, my strategy has been to acquire those producers at ridiculously cheap prices. Watch the free cash flows margins kick in, which they have this quarter with the jump that we've had since 20 and the profitability is is starting to play out and just let it build until we get to a 40 to1 gold silver ratio. Now that's a conser that that's not unrealistic cuz that was the high within the that that was the the average just over this aberration period. Right? So at 40 to1 I plan to finally take profits off my silver companies. I'm not going to get like just today I was reading so many comments that popped up. It's like well this might be a high and you better get out of the market. Well, guess what? Only 1% of 99% of all the Western wealth is sitting in the sector. I'm not selling. And that 99% isn't even in. So, I don't know who's going to be selling these stocks. I'm not. I'm holding. Right. But, so my discipline is going to be to hold my silver companies until we get to at least a 40 to1 silver gold ratio and then take profits, right? And that's the opportunity that here we are. the wealth transfer that's ahead of us is going to translate more through the companies and that's important the why right what's important to understand is that gold goes from 3600 to 12 that's 100% increase however you have to understand that the the mechanics of the companies that produce it their earnings grow at a much faster pace so if you have a 1% move in the price of gold their earnings are going to go by 2 to 3% so it's that leverage that I want and that's why I rather on the producers than the than the than gold and silver. To me, gold and silver are just money. And I do buy physical silver that I put away the same amount. I started doing more to track the premiums years ago, but I've always bought the same dollar amount every month. And I've noticed that first of all, the amount that's coming every month is smaller, right? That's it's not as many coins as I was buying six years ago or seven years ago. Um, and the other thing is is that uh that's my goal strategy because my plan is once we get to to to to wherever we're going, I'm going to switch my silver to gold and take advantage then of the rise in in the price to convert to gold. Where's it going? You know, I think both have to go much higher. But just to get to a 40:1 gold silver ratio right now at 3600, hold on. Uh it's roughly about $120, right? So that's a pretty good profit from 41 and the company should go through the roof before I take any money out. Now to get back to 16 to1, that's another story. Now the other question I have and this is why it's better to have this approach. Where's gold going to be by the time we get there? I just did the number 3600. Gold is running higher as well. So, you know, I again I think that my my the best analogy I can use I'm a big I love the sea. I love the ocean. But the best analogy is we've been waiting to surf this wave and each one of the producers is a different kind of company, right? So, you have the longboards like at Nico, the long the big producers that are going to do very well right that wave all along. Then you have your shortboards the the smaller producers with the good leverage especially in the silver company that those guys are going to go very fast but highly likely they're going to get taken over. Then we have the explorers. That's a completely different animal. But from a from an investment perspective there's a lot of value in these companies because the the the indexes have just begun moving to catch up. Right now they're going to get more expensive very quickly because there's so much money that's not in the sector that needs to come in. So I think what's more important what I my my number one advice is what's your suitable allocation and I hope it's greater than zero which is what everybody has. It's funny I have a client who uh just the other day his father is uh is getting older and he asked me to look at his father's portfolio because he had advice which he's going to inherit which um is is managed by one of the big banks here and he looked at it. It's a really good portfolio but he has zero in precious finals. So there is no concept and he asked you know what about a Nikico eagle and they said no we don't need it now he's got a lot of it on my side but he's got a he's got a he's going to share that that that that that uh inheritance with his brother and sister and they don't have any precious metals either because they're listening to this group. He's doing very well but they're not in that boat. And so that's the problem is that people are completely dismissing precious metals as though they're pet rocks when no, they're money. And that's important to understand that that's going to change. And so you're going to end up with this massive flood of money coming our way at some point which is going to lift all of these stocks much greater than I I think we're going to go to a mania level in the same way we went to Nvidia. And by the way, Nvidia got up to Nvidia's free cash flow margins got as high as I think it was 39%. Well, like Nico Eagle is running at over 39% now, right? And it's only going to get better going forward. I think that gives a really good idea of your strategy and goals moving forward. Just a small followup on the smaller gold and silver companies. So, you're you're looking closely at the producers focusing there. Would you would you move down the chain to the developers or the explorers or or Oh, no. I have you know it's Oh, yeah. No, through uh we've been very lucky in that there's it's all about stock picking and on stock selection. I I within the portfolios like somebody comes in the door and says, "Hey, I need you to manage my money and we're going to have another 30% of the producers." Most people, older people, they're not going to be participating in the explorers. That's a completely different animal. But then you have some that once they become comfortable with the sector they'll say why don't we take 10% of my money and we'll put it into the explorers there we've done extremely well that like some of the com the lift we've had in those companies you know I can talk about some of those because some some have have gotten taken out but FO was one that we played through Londinine gold um AAX is one that you know we did preo um and now it's sitting in the $2 range which is have a huge discovery right beside FO we've also participated in the in the property beside AEX and Felo which is they're going to start exploring and it's highly likely that they have that they have similar uh structures to that. I don't want to talk about that company because that one hasn't moved yet. So, that's another story. But yeah, no, the stock selection within that like just um just this past week, we did a huge private placement into a spin out by a Mexican um um explorer explorer developer I call it, because they're they're they're they're looking to figure out how much actual silver there is in a mine that shut down in 1909 that's already permitted. See, there was a big banking crisis in the early 1900s. This mine shut down. There were three highgrade silver company silver miners there. And the holes that they've drilled into it is huge. So, I think there's massive upside. But then they spun out another deposit that was copper, gold, silver, which they only drilled down to 150 m and it's ridiculously priced. So, we're buying those assets at a very cheap price. Right. So, so, so I love that because this thing's permitted. Permits are the issue in Mexico. The companies with permit are going to do extremely well. If you don't have a permit, you got you're in trouble. But both of these particular place are permitted. So, I participated right away. But the the the the um the the valuation is crazy, right? The the it's it's it's less than 10 million market cap. The reserve as it sits on the ground, what was already found is roughly about $30 gold for each ounce of gold on the ground. It's copper gold. The the copper's coming in at pennies on the dollar and the silver is free, right? So so so the valuation was great. So when you come across those, you you do see them, but those are becoming uh much much less available because those projects are have been picked away. So yeah, we do participate in the exploration and that's really what's what's driven quite a bit of the of the stagnant growth we had had for the last three years because we were able to take profits from those and continue to add to the producers. So so my strategy through the last three years was everybody walked away. Oh, these things are down, right? A good example of that that I'll talk about because I've talked about it in the past is America's Gold and Silver, right? U now they just split. So, the stocks I'm I'm going to pre-split. The stock at 373 should be trading at about a $1.70 maybe now. Well, it was 30 cents last year. And at the bottom of the cycle, they did a money race and I participated in that money race. Now, why do I like that company? Because they have the most profitable silver mine in the world, Galena. And the numbers that are coming out of there are huge. And that's in the US, right? So, I added a lot of assets in the US as I think the US is going to be a beautiful mining mining jurisdiction because they're going to free up all of they they have to start producing everything again. So I've been shopping in the US for mining assets on the exploration development side. Same thing in Chile, Peru, Argentina. Argentina has turned out extremely well and what's happening there with some of those stocks again exploration developer right not part of the portfolio but part of the part of our practice and the work we do okay that that helps me understand very well what you're doing I think we've covered a lot of ground so I'll let you go but before I do any final thoughts that you would share investors it's obviously a very complex time right now to navigate the markets have an allocation Right? Do you understand that that this sector throughout history has been the prime beneficiary of any monetary storm? And if you don't understand that type of a monetary storm in front of us globally, in every country, in Canada, everywhere, right? And and if if if if you want to get a better picture of what I'm talking about, just look at a chart of gold in your own currency in in Canadian dollars, US dollars, Australian dollars, yen, euros. They're doing the same thing. It's going exponential. It's not that gold is going higher. It's that the value of your earnings is going down. Now, here's the other thing people have to understand. you're getting u hit from personal taxes, from the inflation that is created in your labor. Like the money you're working for that for most people that's all they have is their earning power from their labor. But they better understand that that earnings are buying less and less every month because of inflation. Well, inflation is the devaluation of the purchasing power of the money. It's not that things are going up in prices. That the money you're earning with is losing value. And in that depreciation of credit, gold is money. And that's why it it it's doing what it's done for 4,000 years. And in that environment, the the the comp the the prime beneficiary will be the producers of the money, right? because their earnings the cost of production will stay steady in relation to the profitability. It will go up maybe at the pace of inflation but because gold will of go up with that rate the leverage on the earnings means that the earnings are accelerating at a faster pace and that's already happening. Well very very strong points to end on there. So thank you so much for coming on to talk about what's going on in gold and silver and of course much more. This was great. Thank you for having me. Of course. And once again, I'm Charlotte Mloud with investingnews.com and this is Haime Carrasco. Thank you for watching. If you like this video, make sure you hit the like button and subscribe to our channel. We'd also love to hear your thoughts, so leave us a comment below. [Music]
Jaime Carrasco: Gold, Silver, Miners — Where to Focus in Monetary Storm
Summary
Transcript
[Music] I'm Charlotte Mloud with investingnews.com and here today with me is Haime Carrasco. He is senior portfolio manager and senior financial advisor at Harborfront Wealth. Thank you so much for being here. Great to have you. Thanks for asking me to to join. I've seen some of your posts and you have you have had some really good guests, so I'm honored. Thank you. Oh. Oh. Well, thank you so much. And I've been following you from afar as well for quite some time. So, I'm excited about about the discussion. And I thought, you know, I'm sure many of our audience members will be familiar with you, but just since it is our first time talking, I wondered if you could start with a brief intro to yourself, your work in the resource sector, and what you are doing right now. Um, well, you know, my my work I've been in the business for quite a while. um over I guess heading for 40 years now. So I have to say when I look back it's been quite an interesting journey. Um how did I end up with the with the commodities? I'm not I'm not a gold bug. I'm not I'm not a u a a silver bull. I just see um I've always been taught to analyze the road ahead and how to how to manage through the challenges. And I think when you look forward um and not you know everybody's looking backwards at all the markets at 45,000 where it's going. I don't think people are really thinking about how it got here and and that's what's important to me because going forward I think how we got here is going to be very very precient. And I would have to say that how we got here is because of a debt bubble the the biggest credit bubble in the history of mankind. bubble to to some extent I helped to build because early on I was working on a repo desk before the unwanted glass keigle which was the legislation that allowed for for this uh debt explosion that we've had since the 80s um you know that was after Nixon and pegs from from some money which really put a a complete governor on our ability to print money then glass deagle gets unwind which was the legislation that Bill Clinton puts in sorry no Bill Clinton gets rid of the legislation, but Roosevelt puts that legislation so that banks and financial institutions are weren't allowed to do what they've done since the 80s, but it was what led us to the 30s, right? That's what that legislation was put was put in in 33. Um, and so that's really my concern because credit is my issue. And there we have to go back to to to history and understand well what have been the consequences of too much credit in the system how does that play out uh and what are the consequences going forward and to some extent you know back in 2015 when I was talking about a power shift that paradigm shift most people would have said well you're crazy the US will always be the global power today we're wondering you know people are finally questioning I think that Um I I think that what we're living through is a big global readjustment uh because of credit because of a new world that's being born. Um and and I think those to you know to to to some to a big extent JP Morgan's words that gold is money everything else is credit is important because all of that credit bubble that we're living through is also accelerating the power shift that's occurring and within that shift whatever is happening within that that puzzle that chess game gold is in the middle and his I'm the same way that for 4,000 years Gold has been in the middle. Gold is in the middle again. And you know, it's naive not to understand that. It's it's it's it's it would be silly not to comprehend that the reason why central banks of the other team we're talking about the breaks, this new power that's being born, the geopolitical shift that's that's occurring have been buying physical gold for a long time is consequential. Has a lot to do with what's going on. And and in a nutshell, we're going back to a return to sound money. Money not backed by the word of a politician and bankers and but by something sound like gold, which is money for 4,000 years. And in that context, it's it's important to understand that, you know, people might be saying, "Oh, 3,600 here we are. We're going to pull back. You might as well wait. Concentrate on price." You know what? That's all fine and dandy. But on that road ahead, it's important to understand that for gold as money to do what it has done for 4,000 years, and what I mean by that is to settle the trade trade settlement of the countries of the world, its price has to be way higher than $3,600 to achieve that. And because of that, I think to me it's more important to to understand where we're going, not necessarily how we're going to get there, because that's that's the fun part. You know, the fact that it took how many years for gold to break through 20,000 now we're through it. Now we're we're we're fighting higher. But more importantly, that that is inevitable. That is that has always played out. And I'd rather position myself for that future because that future is also a wealth transfer. And that's important to understand that it's not about the value of Nvidia or IBM or Microsoft. This is about the purchasing power of currencies transferring the purchasing power of the fiat currencies back to gold. And that is a massive opportunity because that kind of power shift or that kind of wealth transfer only occurs every one in in a 100 years and we're living through it. So to me, you know, we are living in interesting times. and I have the wherewithal to try to understand what's going on based on history and economics. And so that's how I'm positioning clients to benefit from from that inevitable unwind. And that is global. It's not a a regional thing. It's not like it's the country of Argentina or Chile or Venezuela going through that monetary shift from too much debt and the system has to cleanse, but it's it's global and and we can see that with with with long-term interest rates. how for the first time in 40 years, even though we're getting we're getting word that oh the the central banks are going to start dropping rates on the short end this time around. Well, in the during the last 40 years when that noise started, when that narrative started, interest rates on the long end would start dropping, meaning that the value of those bonds appreciates because they're negatively correlated. Well, what's happening today, if you look at interest rates, long-term rates in the US, in Canada, in sorry, let me put this on on on on mute. It was my assistant. She can we can get that later. Um, if you look at long-term interest rates in Canada, in Europe, everywhere, the the British guilt, the Japanese, they're all rising. They're all going up. And that's the different paradigm that credit is bursting. Credit is destroying itself. And so that's important because that's also another key factor of what happens when a debt bubble comes to an end in that at the end of the game because nobody wants to buy that credit which is why nobody interest rates are rising. Central banks are forced to print money to buy up their credit to monetize that debt and that is happening already. You know if you look at the tech numbers the the biggest buyer of US treasuries is is the US government be it the Treasury or the central bank. bottom line is they're going to have to print that money to get there and and that's you know so so today 2015 these were ideas and concepts now it's actually happening it's it's here and and I think people have to wake up because the monetary titanics are sinking and in my view gold and silver are the true lifeboats in that environment yes copper will go up everything else will go up because it's the value of money by which you price those things that are is losing value. So everything's going up. It's not that things are going up, it's that the money is is losing its value. And in that environment, silver has to catch up to gold, but gold will be the the prime winner. Very, very complex situation that you're outlining here. And I'm wondering, there's a lot of different paths that we can go down, but I'm wondering if you could say more about what's going on with interest rates because we're having this very exciting week right now for gold and silver and a lot of the talk seems to be centering on okay, everybody's looking toward what the Fed is going to do next. People are anticipating that interest rates come down at the next meeting. So, how do you see that playing out amid everything else that you've just been been going over right now? Okay. The the first thing to understand is um you know when when astronomers talk about stars they only talk in the terms of billions. The problem here is that people have no clue what a trillion is and what's been done on their name in terms of money owed. When we look at the stars we never talk about trillions. In 2008 we never talked about trillions. Everything was billions. Today everything is trillions. And we're talking not one trillion. We're talking 35 trillion just in federal debt. Never mind provin uh state debt, city debt, Medicare, Medicaid, social security like that total is about 300 trillion. Well, what is that? That is money that will never be paid back. Those are promises that will never be given. You know, people better wake up to the fact that is just the US. The total level of of credit out in the system is more than 2,000 trillion. Think about that. And and why is that? Well, because who is the prime beneficiary of that? The banking system. Those that could access that by by taking little little little spreads. But in the when we're talking about trillions, it's a lot of money. Now, that is the cost of having believed once again that central banks control the value of money. And we're talking about fiat money. fiat as in not backed by anything. And so in that environment, what's important to understand is that 1 trillion is more than a generation will ever pay back. All of these trillions is money that will never be paid back. So then you got to peel back the onion and say, well, so how am I going to get that pension? Right? Here's my biggest concern is that when I look at institutional money today, Western wealth is only 2% allocated in the sector. That's sheer ignorance. right? That we have a 2% allocation in a sector that historically money has sat under normal circumstances at 6%. That is also an opportunity and a risk kind of like how the Chinese write the word for danger using both symbols for opportunity and risk. The risk is in that people better understand that you're going to get your pension plan money, but the purchasing power of that money will be substantially less than what you think you can buy. So now you have to start taking uh taking um the situation into your hands and how do you position yourself, right? And so because of that, uh, I think young people, um, I think, um, society is about to go through a very important step as people finally wake up to the reality that the Titanic is sinking right now. I've been preparing for that for a long time, but most people aren't. And again, back to pension plans, they're not participating in the one in the lifeboat of the Titanic. And when does that come? You know, I I I think that that should start now, especially within the producers, which is nice that they're out up out performing because they might not understand that gold and why gold and silver are going higher, but they will understand free cash flow of the sector. And the free cash flow of the sector is kicking in at an unbelievable pace and it's now beating high-tech. So greed is greed, and they're going to want to make returns. And so they're going to go for those for those companies. So eventually the flood of money will come here. And my plan has been to patiently acquire these assets and now sit tight until I see um a more realistic values for those assets. And I think the the the road ahead is is is beautiful for those that are already I love to use the analogy of the yellow brick road because a lot of people don't understand that the yellow brick road was an allegory to warn us of the banking system. You know Dorothy slippers were silver in the book. The lion represented uh the banking sector, the tinman industry and the scarecrow agriculture. and the wizard was the banker that we should stay away from but stick to the yellow brick road right and so because of that it's important to understand that those that are on the yellow brick road are watching this from a different perspective that those that aren't right forever over the last uh 3 to four years I started rising my allocations to the sector in 2015 where I had gone down to 5%. Once we never broke 1500, I started raising my allocations and the minimum percentage in the sector that a client will have when working with me is 30%. But I can tell you that anybody that particip had 30% last year is substantially higher now, but they're not selling because now they understand that this lifeboat is feeling pretty good now looking out to what's actually happening going forward. So, back to answer your question, the problem is is that it's way more debt than will ever be paid back and that has consequences, especially for our retirement. And from that perspective, it's an opportunity because money never disappears. Money always transfers from one area to the next. And at the end of the game, it always transfers to gold and the precious metals or the monetary metals. And that's the that's where we are at the end of that of of of a huge cycle, a very long cycle. Is there anything that you can say? So, we're in the midst of this transfer towards sound money, precious metals. What does that end up looking like? I always have trouble envisioning, okay, once we get to the end, how does it look for for the everyday person, for example? You know what that that's a great question and I would have to answer that in the context of history because the last time we mess with a fiat system the republics were born. The reason why the republic of Chile of Argentina of the US are all born at the same time. Not only did Simon Bolivar, Bernardo Keige, San Martina and George Washington live together in London, they all knew each other and the world changed so much through that construct through that mess that the republics are born. The the the the complete social structure of the world completely reforms into something new. So if we were if we were sitting in September of 1775 telling you that the world's completely going to change and you might have a vote. You would have said to me, "Well, what's the king going to say about that?" Well, guess what? Once the revolution starts, the king had no say. The the system was done, right? Uh Chile and and and why is that? Because at the very during that period the the the the hegemonic power were the French and they they started printing money and printing money and created massive hyperinflation through the through the whole global system. And that hyperinflation is what causes the economic tr uh troubles that unwind the the societies at the time in that they get reorganized, right? And so so so as it as we have this rebirth a couple of things happen. We go back to a gold standard. So the gold standard was set in 1789 again the British take over the power by going into that gold standard. Then it was set by Isaac Newton and John Lock and it's on a sound money system that the industrial revolution is replayed. So when you look at the positives, you know, most people will will will look at the negatives, which is what's happening in France. You know, the the the the the social inequality that is created from that where the the wealth gets greater and greater concentration because they have access to the printed money. Meanwhile, the peasants in France and the middle class, the the little bit of the bulrai that was being born is getting decimated. Well, guess what? It's exactly what's happening now. Look at the US. we have we have complete social dislocation in that 1% of the population controls 99% of the wealth that that's to some extent it's exactly the the same factors how does it rebuild I am extremely positive because uh I think blockchain will be part of that rebuilding because blockchain is a decentralized ledger and a bank is a centralized ledger that's all it is you know they ledger your money to guarantee that it's your money. Well, now we have an electronic solution to deal with that. So, so if you start to think out of the box and extrapolate how that technology could be applied, think about your vote. You know, in Canada, we sent our our our politicians to Ottawa for four years, even though they're there for about a week, but we pay them huge amounts of money a year, right? Because of of when we set up the country, we didn't have these lines of communication. Well, now we have a tool that well, why do we have to send those guys if I can have an immediate vote of what I'm thinking, right? Well, it's too early to think about how we're going to restructure society, but do understand that society itself because we're broke is going to go through a massive readjustment that will require new solutions to rebuild. So, that part of the scenario, you know, I think it's too early to tell, but I can assure you of one thing. Gold is in the mix and gold will have to be much higher to do what it has always done. And we know for sure that the bulk of the world wants to use gold again because it's the only thing they trust more than the American dollar which has been doing that function. Right? The the the think about the bricks. The bricks don't want to use the the the the yuan or the ruble or the rupee, right? um or the the the Brazilian realale or the South African brand I think it's called right but what do they trust the gold right and the US dollar can't continue to be part of that because trade now um well first of all look at look at the value of the US dollar right the US dollar is is just debt with no maturity and that debt has most of the Most of the global debt is in US dollars. So it has to devalue. So by default that's a ship the sinking ship that that that is already rebuilt but gold is the is is the way to get over. Right. And I was going to ask you a little bit more about the bricks as well because they've been coming up in this conversation. So as we make this transition, we've been seeing the rise of the bricks in recent years. Are they going to be dominant in this system especially as we see you know deolarization happening? How do you see it? Well, I think they have to be dominant because of the size of the population, right? Also, they have the military power. You know, one thing that Putin is proving is that, you know, it's going to be very hard to to do anything in Ukraine because they have nuclear weapons. Are we going to go to nuclear war? I don't think so. You know, who's being more belligerent? Look at look at look at Europe itself. I think that's the basket case of the world right now and it's going to get worse because first of all you know look at France people retire at what be at 60 be at 65 be at 50 it doesn't matter because they don't have the money to pay for that now on the other hand they've been following these silly economic policies of yeah we're going to have growth with no energy and and that energy comes from was coming from Russia right so so now so now they want to go into this green energy thing. Well, where's world going to come from? You know, at some point it's going to hurt, right? And so, as we go through this transition and I look at the other side of the equation, what are the countries that are going to come ahead? And I think the bricks are it. Like, think about China for a second, right? Think about China today versus the 1980s, right? When when when I was in my 20s. Well, China, you didn't trust their products, right? Today, China, you know, they have 25,000 kilometers of highspeed rails. they have these massive cities that they build, right? So, so, so I think China, Asia is is is it's silly to it's naive not to understand that that is going to be the economic engine of the world. And you know, it's funny. I was looking at that military parade they had just this past week celebrating Victory Day and then you compare that to the parade they had in Washington, right? So is that military might you know you know at some point it's funny because the the big problem I think is that the US went arry when they stopped listening to the warnings of Eisenhower about the military-industrial complex. Well, what do we have today is that the US over the last couple of years have been creating all of this debt for what? Right? To fight more and more wars, right? But where is the economic growth? Where's the economic benefit to Americans? It isn't there. The US has to be rebuilt, right? On the other side, you have the rest of the world and it it's moved on. It's it's it has massive cities, massive economic growth. And you know, I look at China. Yeah. China is still consuming a lot of coal because they're building nuclear plants, but if you look at their electricity demand continues to go through the roof because that's true economic growth and that's going to lead Asia. So, so you know I think that the picture of the future is pretty clear if you're willing to just look right and so to me what's important is how are these countries what is the big adjustment that is happening economically the demand that's going to happen well no matter what we're going to need a lot of commodities the question to me is what currency are we going to pay for them in that is the true opportunity because that's where the power the the the the power shift is occurring, the the wealth the the purchasing power shift that always happens that will benefit those that can serve that way. Well, and do you have any thoughts on what that currency? So, obviously we're going to have gold, but you're mentioning a currency. What do you have any thoughts on what that could be? Well, we we we are starting to see answers to that puzzle. And you know, look at Mbridge. Uh Mbridge, not Mbridge, the Canadian company, but M and Bridge, the the the the alternative to the Swift system that the IMF uh the Bank of International Settlements built for China. Well, that's up and running and that is a trade settlement mechanism. But what's interesting is gold is in the middle of that, but it allows for countries to continue to to do everything in their own currency. So it really it is a a full trading uh trading platform. So to some extent um the the way that I see that puzzle is that you're going to have greater economic um what's the word I'm looking for? Sorry. uh control over your over your currency and allow these countries to to trade settle themselves using their currency but with gold in the middle right so so so so I it's going to be a little bit different I think it's going to be more of a basket but that's more similar to Breton Woods right before Nixon and Pegasus from gold of course right so so so regardless it's a basket and within that basket gold's going to be the the prime the the the the prime glue of that system because it's the one that everybody trusts for settlement, right? And and in that environment, um I think no matter what, everybody's going to have to tap on as we go through these changes, right? The the number one question I have is well, you know, you have all this noise coming out of the Trump administration. All I care is just the golden Fort Knox because that'll that'll make it very clear where whether the US is number two in this game or back at the end of the line, right? If the gold is there now, I personally do think that the gold is there because of the history of that gold. I don't think any I I think a lot of central banks gold isn't there because of uh of uh accounting in that central banks are the only entity that can lie about the or not use sorry let's not use the word lie but not use proper accounting practices and all the lease gold is still considered an asset so we don't really know who's got what right there's a lot of paper contracts in that system I think China has a lot of that gold. Um I know that more from um from having been at the Perth Mint and watching uh gold beans melted from from pound bars to kilo bars because they work in a metric system. So we know how many how many metric bars were melted and sent to China from the three main uh smelting points in the world which is the Perth bin for Australia, Switzerland historically has always been and then Dubai for the Middle Eastern market. Well, we know that over 20,000 tons have been smelted and sent over to China. So they're sitting on they're going to be number one. The question is is the US going to be number two at that table? Well, and I guess that's something we're going to have to wait to find out, but it's it's clear from what you're saying that gold is going to be at the center of everything. And I'm curious when you look at it, do you you've mentioned that gold needs to be much higher than it is today in order to fulfill its role here? Do you have a price in mind when you look at it? Is that important to you? How do you think about it? Well, it's funny because one guy that actually answered this a little bit and I was having this chat yesterday at a meeting in Toronto, um, Sultan Pner, do you know who he is? Well, when he was with Credit Swiss, he did a great paper where he said if the bricks alone, now this was before the bricks was 30 countries. This was when the bricks was only five countries, when it still with Credit Swiss, before Credit Swiss went bankrupt. I love pointing that out because everybody thinks banks are so stable. Uh he said well if the bricks themselves were were to start using gold for trade settlement of their energy trade alone oil. Now that's that was an important assessment because uh Russia is today the biggest energy producer. So he used he used oil not energy which includes natural gas. Um the price of gold just to trade settled the trade of those five countries should be at at least $7,000. That's it. Now add the other things that we trade. Add the rest of the world to that trade. Right? So 7,000 starts to become pretty small. Right? So that's why I do think that the real number has another zero behind it. That's for sure. Right. And um and uh from 3600 is a massive opportunity. However, the true opportunity is in the price of silver because that has to go up way more percentage-wise to uh to catch up. Well, and let's yeah, let's talk a little bit more about silver because there's been so much discussion lately about gold silver ratio and how out of whack that is versus historically where it's been. So, if you do see this coming for gold, what are the implications for silver? Okay, first of all, you know, it's funny because um I'm always on Twitter. Um I I reply to anybody that makes a comment on my Twitter. I like to if if if the questions are smart. Everybody looks at price. They don't worry about an allocation. And and I think that's the first mistake that people are are are are having is, oh, the price of 3600 should pop back. I'll wait. And they keep waiting and waiting and waiting. The first thing I always say is is set up your allocation. What's going to be your allocation? Like I said, any client that comes in my door right now, the minimum that they're going to have that I'm going to set them up with is 30% in the in the monetary metals. Now, the next thing is the price of silver, right? The price silver is one of the most misunderstood metals because most people don't understand that the bulk of the production of silver has been uh as a byproduct. So when you mine copper, you have a little a little bit of silver. When you mine lead, you have a little bit of silver. Zinc, same thing. Gold, same thing, right? So thanks to that, we haven't really worried about the supply of silver until now because now we've had a deficit for over 6 years. And those deficits are going to get bigger and bigger because since the price had not appreciated, we weren't looking for silver mines. In Canada, we're only building one right now, the Olly Bart, right? And that won't be up and running for a bit. globally very few right so we have a structural deficit in the metal the metal's needed for for electronics for a lot of things and and on top of that now we have what's happening in the substitution from gold to metal to to silver because look at Costco you go to Costco and you're going to spend $3600 for 1 ounce of and an ounce is pretty small for 1 oz of gold but then you're looking at the same side and here's an ounce of of silver. So people are substituting over to silver. So that substitution effect has has begun to take place. But then we have another issue which is the reason for the gold silver ratio historically has always been in our ability to big up from the fact that nature has always yielded 16 ounces of silver for 1 oz of gold. So back to the Romans, the the Romans monetary system, the Daenerys, which was a silver coin, was worth 16 to buy one um centario, which was the gold coin, right? Because they would dig out 16 ounces of silver out of the ground for each ounce of gold. So throughout history until we be until we got into this fiat environment that we're living in where money just has no value and that's what's coming back. Gold always was between 20 to1 to 16 to1. Now that's pretty pragmatic here and assess that because silver is a byproduct and we don't have many silver mines yet. We're going to have to start building them. Last year that was 7:1 not 16 to1 7:1 but yet the price differential is 88 to1 right now it's got a it's got as high as 100 right so is it different this time and our our ability to control these prices going to continue forever well I say it isn't markets always win out so I think what's going to happen is that and it's starting to happen the price of silver has to rise to catch up now I I think eventually because markets always go from one side of the spectrum to the other where we've been on the on the value proposition side of the spectrum for so long, we're going to go to the other side and it's highly probable that we get to a 1:1 gold silver ratio. However, the it's it's that silver ratio that's going to dictate the discipline by which I'm going to I'm going to manage my client's money and how we're going to benefit from this. So for the past uh three years I have had a lot of gold companies right we have it within the portfolio but we've also been building our silver companies taking profits from those gold companies like I always talk about at Nikico Eagle which if you look at the chart it hit the inflection point was $60 and now we're sitting at 200 Canadian 204 right now that inflection point when it started running higher You had all of these silver companies that had come down and they stayed down and they just weren't moving, right? So, my strategy has been to acquire those producers at ridiculously cheap prices. Watch the free cash flows margins kick in, which they have this quarter with the jump that we've had since 20 and the profitability is is starting to play out and just let it build until we get to a 40 to1 gold silver ratio. Now that's a conser that that's not unrealistic cuz that was the high within the that that was the the average just over this aberration period. Right? So at 40 to1 I plan to finally take profits off my silver companies. I'm not going to get like just today I was reading so many comments that popped up. It's like well this might be a high and you better get out of the market. Well, guess what? Only 1% of 99% of all the Western wealth is sitting in the sector. I'm not selling. And that 99% isn't even in. So, I don't know who's going to be selling these stocks. I'm not. I'm holding. Right. But, so my discipline is going to be to hold my silver companies until we get to at least a 40 to1 silver gold ratio and then take profits, right? And that's the opportunity that here we are. the wealth transfer that's ahead of us is going to translate more through the companies and that's important the why right what's important to understand is that gold goes from 3600 to 12 that's 100% increase however you have to understand that the the mechanics of the companies that produce it their earnings grow at a much faster pace so if you have a 1% move in the price of gold their earnings are going to go by 2 to 3% so it's that leverage that I want and that's why I rather on the producers than the than the than gold and silver. To me, gold and silver are just money. And I do buy physical silver that I put away the same amount. I started doing more to track the premiums years ago, but I've always bought the same dollar amount every month. And I've noticed that first of all, the amount that's coming every month is smaller, right? That's it's not as many coins as I was buying six years ago or seven years ago. Um, and the other thing is is that uh that's my goal strategy because my plan is once we get to to to to wherever we're going, I'm going to switch my silver to gold and take advantage then of the rise in in the price to convert to gold. Where's it going? You know, I think both have to go much higher. But just to get to a 40:1 gold silver ratio right now at 3600, hold on. Uh it's roughly about $120, right? So that's a pretty good profit from 41 and the company should go through the roof before I take any money out. Now to get back to 16 to1, that's another story. Now the other question I have and this is why it's better to have this approach. Where's gold going to be by the time we get there? I just did the number 3600. Gold is running higher as well. So, you know, I again I think that my my the best analogy I can use I'm a big I love the sea. I love the ocean. But the best analogy is we've been waiting to surf this wave and each one of the producers is a different kind of company, right? So, you have the longboards like at Nico, the long the big producers that are going to do very well right that wave all along. Then you have your shortboards the the smaller producers with the good leverage especially in the silver company that those guys are going to go very fast but highly likely they're going to get taken over. Then we have the explorers. That's a completely different animal. But from a from an investment perspective there's a lot of value in these companies because the the the indexes have just begun moving to catch up. Right now they're going to get more expensive very quickly because there's so much money that's not in the sector that needs to come in. So I think what's more important what I my my number one advice is what's your suitable allocation and I hope it's greater than zero which is what everybody has. It's funny I have a client who uh just the other day his father is uh is getting older and he asked me to look at his father's portfolio because he had advice which he's going to inherit which um is is managed by one of the big banks here and he looked at it. It's a really good portfolio but he has zero in precious finals. So there is no concept and he asked you know what about a Nikico eagle and they said no we don't need it now he's got a lot of it on my side but he's got a he's got a he's going to share that that that that that uh inheritance with his brother and sister and they don't have any precious metals either because they're listening to this group. He's doing very well but they're not in that boat. And so that's the problem is that people are completely dismissing precious metals as though they're pet rocks when no, they're money. And that's important to understand that that's going to change. And so you're going to end up with this massive flood of money coming our way at some point which is going to lift all of these stocks much greater than I I think we're going to go to a mania level in the same way we went to Nvidia. And by the way, Nvidia got up to Nvidia's free cash flow margins got as high as I think it was 39%. Well, like Nico Eagle is running at over 39% now, right? And it's only going to get better going forward. I think that gives a really good idea of your strategy and goals moving forward. Just a small followup on the smaller gold and silver companies. So, you're you're looking closely at the producers focusing there. Would you would you move down the chain to the developers or the explorers or or Oh, no. I have you know it's Oh, yeah. No, through uh we've been very lucky in that there's it's all about stock picking and on stock selection. I I within the portfolios like somebody comes in the door and says, "Hey, I need you to manage my money and we're going to have another 30% of the producers." Most people, older people, they're not going to be participating in the explorers. That's a completely different animal. But then you have some that once they become comfortable with the sector they'll say why don't we take 10% of my money and we'll put it into the explorers there we've done extremely well that like some of the com the lift we've had in those companies you know I can talk about some of those because some some have have gotten taken out but FO was one that we played through Londinine gold um AAX is one that you know we did preo um and now it's sitting in the $2 range which is have a huge discovery right beside FO we've also participated in the in the property beside AEX and Felo which is they're going to start exploring and it's highly likely that they have that they have similar uh structures to that. I don't want to talk about that company because that one hasn't moved yet. So, that's another story. But yeah, no, the stock selection within that like just um just this past week, we did a huge private placement into a spin out by a Mexican um um explorer explorer developer I call it, because they're they're they're they're looking to figure out how much actual silver there is in a mine that shut down in 1909 that's already permitted. See, there was a big banking crisis in the early 1900s. This mine shut down. There were three highgrade silver company silver miners there. And the holes that they've drilled into it is huge. So, I think there's massive upside. But then they spun out another deposit that was copper, gold, silver, which they only drilled down to 150 m and it's ridiculously priced. So, we're buying those assets at a very cheap price. Right. So, so, so I love that because this thing's permitted. Permits are the issue in Mexico. The companies with permit are going to do extremely well. If you don't have a permit, you got you're in trouble. But both of these particular place are permitted. So, I participated right away. But the the the the um the the valuation is crazy, right? The the it's it's it's less than 10 million market cap. The reserve as it sits on the ground, what was already found is roughly about $30 gold for each ounce of gold on the ground. It's copper gold. The the copper's coming in at pennies on the dollar and the silver is free, right? So so so the valuation was great. So when you come across those, you you do see them, but those are becoming uh much much less available because those projects are have been picked away. So yeah, we do participate in the exploration and that's really what's what's driven quite a bit of the of the stagnant growth we had had for the last three years because we were able to take profits from those and continue to add to the producers. So so my strategy through the last three years was everybody walked away. Oh, these things are down, right? A good example of that that I'll talk about because I've talked about it in the past is America's Gold and Silver, right? U now they just split. So, the stocks I'm I'm going to pre-split. The stock at 373 should be trading at about a $1.70 maybe now. Well, it was 30 cents last year. And at the bottom of the cycle, they did a money race and I participated in that money race. Now, why do I like that company? Because they have the most profitable silver mine in the world, Galena. And the numbers that are coming out of there are huge. And that's in the US, right? So, I added a lot of assets in the US as I think the US is going to be a beautiful mining mining jurisdiction because they're going to free up all of they they have to start producing everything again. So I've been shopping in the US for mining assets on the exploration development side. Same thing in Chile, Peru, Argentina. Argentina has turned out extremely well and what's happening there with some of those stocks again exploration developer right not part of the portfolio but part of the part of our practice and the work we do okay that that helps me understand very well what you're doing I think we've covered a lot of ground so I'll let you go but before I do any final thoughts that you would share investors it's obviously a very complex time right now to navigate the markets have an allocation Right? Do you understand that that this sector throughout history has been the prime beneficiary of any monetary storm? And if you don't understand that type of a monetary storm in front of us globally, in every country, in Canada, everywhere, right? And and if if if if you want to get a better picture of what I'm talking about, just look at a chart of gold in your own currency in in Canadian dollars, US dollars, Australian dollars, yen, euros. They're doing the same thing. It's going exponential. It's not that gold is going higher. It's that the value of your earnings is going down. Now, here's the other thing people have to understand. you're getting u hit from personal taxes, from the inflation that is created in your labor. Like the money you're working for that for most people that's all they have is their earning power from their labor. But they better understand that that earnings are buying less and less every month because of inflation. Well, inflation is the devaluation of the purchasing power of the money. It's not that things are going up in prices. That the money you're earning with is losing value. And in that depreciation of credit, gold is money. And that's why it it it's doing what it's done for 4,000 years. And in that environment, the the the comp the the prime beneficiary will be the producers of the money, right? because their earnings the cost of production will stay steady in relation to the profitability. It will go up maybe at the pace of inflation but because gold will of go up with that rate the leverage on the earnings means that the earnings are accelerating at a faster pace and that's already happening. Well very very strong points to end on there. So thank you so much for coming on to talk about what's going on in gold and silver and of course much more. This was great. Thank you for having me. Of course. And once again, I'm Charlotte Mloud with investingnews.com and this is Haime Carrasco. Thank you for watching. If you like this video, make sure you hit the like button and subscribe to our channel. We'd also love to hear your thoughts, so leave us a comment below. [Music]