Jonathan Wellum: Ask Me Anything – Protecting Your Wealth in an Overvalued Market
Summary
Market Outlook: Inflation appears to be easing and rates could drift lower, but signs of economic weakness persist, with the US still the relative bright spot. The guest expects slower growth and a potential recession, emphasizing macro awareness but prioritizing bottom-up investing.
Valuations & AI: Equities are expensive by P/E and free cash flow metrics, with AI-driven spending concentrating returns. NVIDIA (NVDA) was analyzed as a cautionary example of embedded hyper-growth expectations and semiconductor cyclicality risk.
Precious Metals: Strong case for gold and silver as long-term protection against fiat debasement and extreme global leverage, with a core portfolio allocation via miners and royalty companies. Central bank accumulation underscores gold’s role as real collateral.
LatAm E-Commerce: MercadoLibre (MELI) is viewed as the “Amazon of South America,” with attractive valuations, dominant franchise, and growing fintech services; likely candidate for portfolio inclusion.
Application Software: Roper (ROP) and ServiceNow (NOW) highlighted for durable growth, strong capital allocation, and AI enablement; software weakness seen as an opportunity rather than disruption.
Risk Management: The team holds ~20–25% cash to preserve optionality and deploy on drawdowns, avoiding momentum bets lacking margin of safety. Sell discipline focuses on thesis breaks, excessive valuation, or superior replacements.
Investment Philosophy: Emphasis on value investing, competitive moats, pricing power, and 3–5+ year horizons, rather than forecasting macro or chasing hype. Historical parallels to past bubbles reinforce patience and discipline.
Transcript
You cannot just pay anything for a business. Even if it's a transformational business, even if it's going to transform our our lives going forward, you have to be very careful what you pay. Uh there will come a day of reckoning. [music] Hello everyone and welcome back to Wealthon. I am Mario Rodriguez and joining me today for an AMA and ask me anything is Jonathan Well, CEO and CIO of Rocklink Investment Partners Partners. Jonathan's a long time wealthy friend and favorite known for his disciplined valuebased approach and clear macro perspective. Jonathan, it's always great to have you back, sir. How are you? >> I'm doing very well and uh looking forward to our conversation. Mario, >> fantastic. We got some great questions covering macro markets, value investing, you know, the goods. This is going to be very valuable for everyone that's watching and for me, your host. Just before >> Well, I'll I'll I'll do my best here. Don't give me too hard of questions. [laughter] >> I I I won't throw you uh any of the hard balls like they threw on the world in the World Series like they're throwing the World Series. So, uh, just, uh, before we begin, a quick reminder everyone. If you're listening to this and you have questions about anything we talk about or you want to get some help figuring out the right asset asset mix for you, you can get a free portfolio review from Jonathan and the Rocklink team by going over to wealth.comfree. That's again wealthing.comfree. All right, let's dive in. Jonathan, first first uh, there's some questions on macro and fed policy. This is from user at macromaven wolf32 and he says, "Jonathan, the Fed trimmed rates again. Some see this as the start of an easing cycle, others as a mistake that could reignite inflation. What's your read? Is the Fed moving too soon or exactly on time?" >> Uh, yeah. I mean, it's it's it's a good question. I let me just preface by saying we don't spend a massive amount of time looking at the Fed um because we're value investors and it's sort of a backdrop that we just have to deal with. We also are not big supporters of uh the Fed or any of these central banks and would much prefer the market interest rates were set by the market and interest rates were not manipulated really by the Federal Reserve with all of the various policies and quantitative easing, quantitative tightening, etc., etc. But uh just to speak to the current interest rate environment, yeah, I think that uh uh probably the rates can come down a little bit further. I think inflation is coming down. Um and the economy overall and I'm speaking here the global economy also with the I mean the US is probably the strongest of all of the economies in the world at this point, but there are weakening signs and I think the Fed uh in lowering rates a little bit further uh I think will help at least stave off some of that weakness. We've seen some we've seen some uh credit um you know issues in the credit market um liquidity issues um and so I think the Fed is a little bit concerned about that. So um my my view is yeah I think the rates probably should come down a little bit more but not too much more. I mean these super low interest rates as you know are not healthy um for economy. They they punish savers. They reward debtors which is really the problem. we have too much debt and so I don't think they should really come down an awful lot more um unless we have a real problem in our marketplace. I'm up here in Canada. We're we're already about one and a one 150 basis points lower and we lowered our rates also and we're down to just you know little over 2%. Uh which is because our economy is just so weak up here. >> Spoken uh like a true value investor, right, Jonathan? And I think uh part of the great job that you do and we'll get to you know portfolio management and and stocks you're looking at uh is the idea of finding businesses as Buffett would say with competitive advantages and not overpaying so that way you are protected uh from inflation. Can you speak a little bit to that >> in terms of value investing? >> Yeah. How value investing especially getting businesses that have competitive advantages and uh protect you from it? >> Yeah. when when you well when you're looking at sort of the value investing, you're trying to assess what the true economic value of the business is. And so you are not valuing it based upon momentum. You're not valuing it based upon what you hope might materialize. You're trying to look at what actually exists in the business today. And so you look at the asset, you look at the liabilities, you say look at the overall book value of the business, what kind of multiple it's trading at. Um, you're going to generally if you're a value investor, you're taking a three to five year, maybe even a longer time horizon. Ideally, you know, it's great if you own a business for 10 years and just compound on a tax deferred basis. That's that's really the the the beauty of uh making a lot of money. But but all that said, you're going to be looking for businesses that um have an established business, a moat around them, so they have a competitive advantage. They usually have incredible management. um their products and services that they sell are fairly predictable. Um so you can look out into the future and value the business with some degree of predictability. I mean um there's some businesses that again it could be some high high-tech biotech company and you don't really know what it's going to look like in 5 years. It's very much more speculative. If you're buying Coca-Cola um or you're buying a big consumer product company or an insurance company that's got a a real moat in its its particular industry, it's much easier to value those companies and feel comfortable with what you're paying for it. And of course, the idea is you want to pay less than what you think the company's worth. Um and that way you're buying low and so over time you can sell high. And so it's very important uh to uh again spend a lot of time understanding the companies, understanding how they're going to deploy capital, invest it back in the business and grow that business and then put a valuation model on it and hopefully buy it 15, 20, 25% below what you think is the actual value of that business. >> Right. And to tie that to your point before, that's much easier than figure out what the economy is going to do next month, in six months, in a year. >> Yes, absolutely. So, so some people say they're bottoms up. So, they look at the business itself and then they will evaluate, you know, how what they what they should pay. Others say they're top down. So, they look at the macros, the big picture, the economy, the global situation, geopolitical issues, and then they go back into where they should invest. I argue that um I think 80% of your work really should be at the business level and then 20% at the macro level. You do have to look at the macro level. I've heard some people that say they're value investors and they don't care what's happening out there. Um I think that's that's foolish. You have to contextualize the business. You have to put it into context of the economy >> and that will shape yeah that'll shape some of the industries that you want to go into. For example, um right now uh and we've talked about this before. We're concerned with this massive buildup of debt that's been going on for decades. I mean it's just been going for a long period of time and we are getting near the end of this at some point. So that means given that macro, we're going to look for precious metals companies, make sure that we have some, you know, exposure to gold, silver, etc. Um because uh we think that that's going to help hedge us in in a bad event. Now then we then what we do is spend a lot of time on buying businesses. Okay, let's look at the best gold companies, the best silver businesses. Let's look at the ones that are the best managers with great reserves or you know great growth opportunities. And then we'll spend we'll just go really deep into a handful of businesses that we'd like to own in that sector. But that's in the context of macro concerns. Yeah. >> Yeah. And I definitely have some questions for you uh in terms of gold, silver, and how you can get exposure through equities of companies of that sort. So um let's go to our next question. This comes from Tombbe and he says uh there's some folks and you were just mentioning this Jonathan that the economy is not as strong as it looks from your vantage point. Are we headed toward an outright recession or do you think the US perhaps you can speak to Canada here too which is different can thread the needle and avoid one? What do you think John? >> Yeah, that's a $64,000 question. Maybe it should be higher than that with inflation, right? But um well let me start from outside of the United States. Uh if I'm up here in Canada, we are basically in a recession and we were seeing really no GDP growth per capita now for quite a few years and that's because of just incredible mismanagement of our economy especially at the federal government level and not investing in our resource sector and so forth. There's a lot of different issues there over you know over taxation, regulation so on and over indebtedness. If you go over to Europe and you look at what's going over there, I mean, you have tremendous weakness in the European in the context of the European markets over there. They're now getting into even more deficit spending. France is in a just a real mess financially. The UK is sinking quickly uh in so many ways, but certainly financially their their debt to GDP has just gone off the charts. And Germany um is is very weak. Um and and so then if you look down at China, I mean, they've got challenges. uh you know, President Trump is I think got good leverage on them to to get what he needs. Uh again, from their their from the US's perspective and and Japan too has got a demographic cliff that they're facing. So you look around the world and yeah, it's not a lot of economic growth. I think the exception has been and probably will continue to be the US. What's really going to happen in the US? That's the that's the big question. Now, you've got a lot of money coming into the country because I mean, Donald Trump has been very aggressive in using tariffs, uh, cutting regulations, encouraging capital to come in. And if you're a multinational corporation and he's putting that kind of pressure on you, you're moving your money there. We see that in Canada. Um, he's already won the war of tariffs with Canada. I mean, our leaders don't seem to realize that he's already won. Uh, any any major corporation is going to invest in the United States instead of Canada. Um, and that's just a given, especially if it's in the manufacturing sector and so forth. So the what what's going to happen in the US is really the issue I think it's going to drive much of the global economy and there is weakness there. And so I think you look below the surface. Housing market is weak. The auto sales are down. Uh they're not they're not great. Um there's some cracks in the credit situation. The indebtedness of the average American is very high. There's just been a lot of excess spending at the government level and at the personal level for quite a few years and they've kicked this can for some time. So I find it very difficult even though I support and I think the the economic policies of the Trump administration are very very positive long term but they still have to basically you know disinfect themselves from you know the Biden years and the Obama years and so forth and a lot of these abuses and we've gone a long time without really a recession. So, um I I think that I think we should prepare for much slower economic growth and and a potential recession that could emerge in the US. Um and and and and again, you've got a lot of things going on with, you know, immigration, which again, they need to tighten up the immigration. Absolutely. But you've got less people floating around in the country, people leaving. So, there's a lot of these factors I think that are just making it more difficult to really get to the bottom line of the numbers. And uh but I do think over the next few years the US is positioning themselves if they can stay on this trajectory as a real engine of growth because if you can bring in 10 11 12 I mean Donald Trump's talking 20 I mean sometimes he exaggerates as we know 20 trillion in new capital in your country my goodness that's going to res that's going to result in growth. I mean it it it has to right. >> Yeah. Yeah. We've been calling for recession for years now right? Uh apparently the economy now is only growing or mostly growing because of AI expenditures and capital expenditures from companies. But certainly in the end we act by incentives. If Trump creates the right incentives for a lot of capital, and he certainly has been doing some of that, well, perhaps that can balance that that slowing growth that has been. >> Well, and I think what what some of the listeners need to realize too, if you're in the United States, I don't think you appreciate how poorly run many of the other countries are in the world. Um, so you often you often can look at your own country and go, we've got this problem, this problem, that problem. But my goodness, I mean, in Canada, I just speak to our own situation. We have a government that's so restricted by ESG and the green economy that it won't we won't develop our resources. It will basically slow walking um the development of new new money coming into the country and developing our resources. This is in a country that is a resource-based economy. We've got so much wealth under the ground, but if you have a government that says, you know, we can't release any CO2 and we have to muzzle the oil and gas industry, which is your more most important industry. I mean, um, these are crazy policies and there they're they're really choking off the wealth creation that should be taking place in Canada in our position in the world, uh, stage. So Donald Trump by unleashing drill baby drill and and taking regulations off and so forth. I mean his best friends uh are basically all these other countries which are sabotaging their own economies. That's what we're doing in Canada. That's what they're doing in Europe. That's what they're doing in many countries around the world. So if you're in an economy where they're actually trying to unleash the free market, unleash capital, then you're going to be much further ahead. And I think uh again people just don't realize how poorly run the other countries are in Europe, UK, Canada, and and a lot of other a lot of the other competing company countries. >> Absolutely. Can't agree with you more. Uh love it. I think uh a lot of Americans don't really know how how good how good they have it, how good of an economy is, how how resilient despite, you know, the debt and mismanagement and uh all the regulations, it's still a lot less regulated. it's still a lot more attractive for a lot of companies and investors and it draws capital it draws interest >> and and the best talent uh we see this in Canada also and this comes from you know other other countries in Canada the brain drain from our country our topic our top graduates from our university that you take the university of water which is known for uh its research in technology um high levels of mathematics and so forth um those those graduates are not staying in Canada they go right down south of the border and uh this is this is a big problem. So you know the capital brain drain the next generation of talented people the US still has the ability to attract all those people better than any other country in the world and you know it's a it's a freedom um and you can make money uh and that's that you know the free you cannot trump the free market system. The free market system is absolutely clearly far superior in terms of creating wealth and opportunities and it will attract the very best people and the capital if you can generate the return and keep the benefits and the and of of what you've earned. Uh you know if you live in a redistributo economy which we see in Europe, we see in Canada is much more focused on redistribution then you don't produce that which is going to be taken from you. I mean it's as simple as that. you produce less, you invest less, you save less, and uh you uh become poor. Um and so again, I think the US again, it's got lots of problems, lots of challenges, but it's still by far, I think, uh the hotbed for for capital and for the for the future if they can keep on this trajectory. >> Yeah, I can't agree with you more. In the end, that freedom allows for wealth creation, and that wealth creation is reflected in the stock market. And that's where I wanted to take us right now. Uh there's a question. >> Yeah, in Mario in Mario I would say also freedom of speech. Freedom of speech. So we see that around the world freedom of speech is being constrained. Uh in the United States there's still a large large degree of freedom of speech which is protected by the constitution and in a beautiful way and uh and if you don't have freedom of speech everything will come down including the free market system. And so we see that pressure in other countries also. So again, that's a huge leg up that the US has their their constitution and their and their bill of rights which protects Americans much more than other people around the world. >> It is the bedrock of other of the other freedoms. Yes, I I completely agree with that as well, Jonathan. Great great observation. So uh let's get to the markets and this is from Martin S and he says equity valuation valuations are skyhigh by some metrics similar to taught the dot era the.com levels. Do you think we're due for a serious correction and what's rock doing to navigate a potential downturn? So are are you hedging a little bit there Jonathan? Just uh you still raising cash? >> Yeah, the markets are very expensive. I think anybody who tells you they're not expensive, um I I just they just don't know how to use a calculator. Uh I mean the price earnings multiples, price to free cash flow, they're just off the charts. And so uh we also know that that is heavily influenced by the AI spending um and uh the amount of money that's going to that area. And from our perspective, we don't know where all this is going to end. I mean, we know AI is going to become increasingly important. It's going to get integrated into all the businesses. um it's going to be transformational, but there's a price to pay ultimately, right? You just can't pay um anything for businesses like that. I just had a someone just sent me something this morning and it reminded me of the 1999. The gentleman's talking about 99, the tech bubble. Uh Cisco Systems was trading at 148 PE PE ratio back in uh in 1999 just before the crash. 148 PE ratio. And uh again, as we know, uh it took uh I mean, Cisco, I don't even think it's actually gotten back to where it was back in 1999. Yeah. >> And um and so people and again, Cisco was an amazing company and oh, it was going to revolutionize the world, change the world, da da da da da, and so forth, all of that, right? And um you know, we had Nortell systems, Sun Microsystems, EMC, JDS, Unif was trading at 660 times earnings. I mean that business is was eaten up and and now it's gone. Um and so uh yeah, you cannot just pay anything for a business. Even if it's a transformational business, even if it's going to transform our our lives going forward, you have to be very careful what you pay. Uh there will come a day of reckoning. And so there's no question in my mind that some of these stocks are going to get just absolutely trounced. Um because you're factoring in growth rates which are not sustainable. So even if you take a Nvidia uh as an example, just again you have to run yourself through these numbers. It's $5 trillion company market cap. Well, if it's going to eventually eventually over time as it matures trade at 20 times earnings, that means it must it's going to have to earn earn net income of $250 billion. Um current currently that's its revenues is about half that. Um and so uh that's revenues. So when you think about the kind of growth that is embedded in Nvidia and it is growing quickly, no question. But it's going to have to grow and grow and grow and grow and grow and not stumble and and and and and dominate in the in the global arena for many many years. And Nvidia is one of the best case cases you can look at. I mean this is a very powerful comp company and it's an amazing company. So I'm not downgrading to Nvidia. It's just, you know, to to justify a$5 trillion dollar valuation over time and trading at 20 times earnings, which again is not cheap, um, you need 250 billion in net income, you know, on a business that's generating 130 140 billion in revenue now. So again, be very, very careful. Um, there's many, many businesses below Nvidia's quality that are trading at ridiculous valuations and you're definitely going to get your head handed to you at some point. So you have to know the difference between momentum investing and investing for the you know medium to longer term. And so for us we can't buy companies like that and that's fine. We go and look for other companies. We've done very well this year um in other businesses that can grow. Um and some of the some of the mag seven companies I think are much more appropriately valued. Um I'm not saying they're cheap. They're not cheap but you know Apple it would be much more you know closer to a real valuation. in the Amazon also. Of course, Amazon has not gone up very much this year and they continue to expand and develop their business. So, you know, so there's ways that you can look in the marketplace and from our perspective, we've got to go find companies that are trading at valuations that we can stomach and that will weather a downturn and protect our investors capital >> in value investing. Harlons, there's no margin of safety in Nvidia and many of the many of these other companies are related. You know those uh that you were you were talking about Cisco back in the docom era and I was uh looking at something that I thought was super interesting. So Cisco back at its high was around 4% of the entire GDP of the US back then. Nvidia's already passed 6%. It's market cap related to the American GDP. It it is truly mind-blowing and difficult to justify as an investor as you very wisely pointed out. >> Yeah. And I think what people have to realize is you just these are not predictable companies. Also I mean there's a certain I mean they dominate they're strong. So I'm not saying there isn't some degree of predictability in them but we just don't know 5 years out what Nvidia is going to look at. Like if you own a Coca-Cola which again is a much more boring company and I understand all of that. You have a certain sense that they'll be selling a certain amount of you know cola drinks and uh other other uh other other products that they have. Um, and and the other thing is with semiconductors and some of these chip businesses, I mean, there are cycles to these things. Right now, it's a boom. No question about it. But believe me, like listen people, um, you you know, you've heard it from me, you'll hear it from other people. Uh, chip companies have a cycle and there will be a cycle. This they they have not ended a cycle. Even though there's rapid growth right now and there's massive amounts of capital coming in, that capital will slow down because it has to ultimately generate a return on invested capital. And so when Microsoft, Meta, uh, Google, Apple, when they figure out that um, they've reached more of a saturation point and they've done enough capex spending and they start cutting back on some of that spending in order to justify um, returns and to make sure they're getting returns on their investments, then someone like Nvidia, that will really impact that business. And so be very, very careful. If you're momentum investing, yeah, you're investing for a week, two weeks, three weeks, the next news cycle, then you're more or less speculating. That's not really investing. But if you're investing, you want to protect your capital, yeah, you you want I I would not be I would just would not be buying the stock. And I'll take flack from people who are more momentum investing. But again, I want to be in something I can go to sleep with for the next three years um or longer. >> As Charlie Munger would say to Warren Buffett, no commentire [laughter] here, sir. Uh, fantastic. So, Jonathan, can you share with us any sectors or specific stocks that you're finding attractive amongst, you know, this very overpriced market particularly in tech? >> Yeah, it's an interesting question. Um, one of the companies that we're looking at now, um, is Meranto Libra. Now they are uh really the Amazon in South America and they trade at much better valuations um and are growing quickly and have a really dominant franchise and also have some financial service businesses in them. So that's one that uh we're just finishing up some work on and looking at and uh quite likely we'll add it to our uh our new product that we're going to be launching in a couple of weeks. So that's a company again that uh you can look around the world and find other businesses that uh are similar to ones that you know we know in North America but uh they dominate in their particular markets. Um we also uh uh I mean I've mentioned this company before and I think uh when you look at some of the software companies the software business has been hammered many of them had actually been hammered down uh I think illegitimately they continue to grow very quickly and they haven't had any slowdown in the growth but people are suggesting that AI is going to knock out some of these software companies. So, a company like Roper um which has come down from like $525 down to like $460 470 as we're talking today um is trading at a very attractive multiple and they just released their earnings recently and they're chugging along very nicely. They're growing organic growth 7 8% consistently year after year and they're great capital allocators. So, um, it's interesting. You can sometimes find businesses that the market says, "Yeah, you know what? AI is going to maybe, you know, dislodge this business, change the economics." Um, but if that's not really the case, they they can morph and they can change and they can actually use AI in their businesses, then there's an opportunity there because they've been knocked down in value and um and uh you can you can invest in companies like that also. Um, so yeah, so companies like that we we we like the service now model also. We we have picked some it's it's volatile. It's it's it's been up and down like a yo-yo. Um and uh but that's fine. We buy it when it drops. And of course, they are using AI and embedding that into company after company after company and making companies more efficient in how they manage their data and their operations and they get embedded in a company and they you know you can't get them out type of thing. And that's one where again they're benefiting from technology and its implementation and making companies more and more efficient and driving that efficiency and productivity in in uh in corporations. So that's again another example of a company. Yeah, >> those are great examples. So basically the market is punishing them wrongly because every everyone is so over optimistic about these AI companies. uh but if you are rational about it and you analyze if you do find a margin of safety and can sleep when you get a good return >> you know I think investor investors need to be careful putting 20% plus growth rates on companies beyond a couple of years it's just very difficult I'm not saying companies can't grow at 25 30% but the law of large numbers means it's very very difficult there's only a handful that ever do that for for much of a period of time so um you we love to buy companies that we can justify their price at 8 n 10 10 10 uh 10% growth. And if they grow faster than that, great. We're going to get some good upside. But, you know, when you start factoring into your models, you know, really low low um discount rate and then you got like 25 30% growth rates because this industry is just going to go go go. You're setting yourself up for a capital loss. It's just a matter of time. Um the businesses just cannot deploy capital that rapidly for extended periods. Very few can. And uh you maybe you'll find the one that can, but uh there'll be for every one you can find uh that can do that, there'll be 10 that can't. And so be very very careful um in terms of these uh momentum investments. >> Yeah. In other words, Straw, trees don't grow to the sky, right? Speaking of an era that where where trees were thought to be growing to the sky was the 1920s. I I recently read Andrew Russin's new book 1929 and I can't recommend enough to you and to our viewers because there are a lot of parallels right now between today and 1920s. Obviously, it's AI today and it was the radio and uh debt or leverage people getting get getting loans on their stocks and you know installments for the radios and their cars and everything different era but what one can learn definitely from reading financial history >> one of the most one of the most important things that you can study is financial history I've talked to uh different business schools and where I went and studied my my business uh endeavors I'll talk to the different dean of the school and say, "Why don't you have a course on financial history?" I mean, I think it's one of the most valuable courses. And and to me, I I've not seen that really added into the curriculum. And I think it's one of the most valuable um courses you could take because human beings, we repeat the same mistakes, whether we whether we'd like to admit it or not. You know, our human nature has certain, you know, greed and fear and so forth and that lends itself to certain patterns and those patterns are repeated uh decade after decade after decade. Yeah. Absolutely. And you as a value investor take advantage of of that. >> Abs. Yeah. Yeah. >> Fantastic. Uh so this next question comes from David R and he says you've been pretty open about holding a lot of cash. What's the logic behind that? I think we've talked a lot about that, but um maybe we could you can speak to this. Are you waiting for specific catalyst before putting money back to work? >> Yeah, it's a good question. and we've had about 20 25% cash depending on the depending on the client. So again, we have some clients who like to be 100% you know equities and uh we'll run them close to 100% equities but overall we've just been tardy a little slow in deploying capital because we see the market and prices are fairly expensive and you can make good money overall in your portfolios even when you're carrying 20 25% cash. I mean we're up 20% this year plus in in basically our portfolios. Um and so we haven't been held back in terms of uh performance. Now you could argue I guess if we had deployed all of that we'd be up a little bit more. What are we waiting for? Well um we're not I'm not waiting for any big macro event per se. I think a macro event could precipitate um us deploying that cash more quickly if something came along that dropped the market. We're actually re we're actually waiting more for just companies as we research and that we can come across that we feel comfortable investing in. Um and so that's really those are the two things that we be you know that slow us down just looking for for opportunities new opportunities that we can invest in where the stocks are trading below what we think are is intrinsic value you know low price earnings or low uh you know very high free cash flow yield type of thing um and or a macro event. Um, yeah, definitely macroevents do come, um, and they can come out of the blue. And I think that there's enough things swirling in the world that we could have a black swan, so to speak, and that then could help us, uh, deploy capital even more quickly because some of these great, I mean, we have a list of companies we would love to own, but they're just trading too expensively. And so I say to our guys constantly, you know, we keep that list really close to us. if there is a break in the marketplace and we can buy some of these great companies that will probably get discounted even though they won't be overly affected by uh the a drop in the macro then we're going to step in and buy. So those are the things that will will you know that um sort of occupy our mind in terms of how we're allocating uh capital and how much cash we're carrying. But overall just a little bit more cash just the high valuations in the market and we just want to be careful. It it makes a lot of sense to me. You are sounding a lot like Seth Kleman. I remember he Seth Kleman a famous value investor and he was was talking about my level of cash depends on how much opportunities I find in the market. Uh >> the more opportunities the less cash the less opportunities the more cash that makes a lot of sense and it allows you to >> to be opportunistic and make more money and be >> yeah I I I I encourage listeners and people who are doing investing on their own and that just get you keep this little bit money to the side. It gives you uh firepower when uh when you least expect it. And I mean Warren Buffett uh he's a great example over the years. He has raised cash from time to time and of course right now he's got a lot. He's one of the largest owners of US treasuries. Um but having said that aside from this time period, I've studied him for many decades. Uh and he generally when there's a when there's a problem in the economy, he can step up. And when you can step up in in a time when things are discounted heavily, boy, that gives you a great book value. And that's what sets you up for great long-term returns. And so be disciplined, be careful. U FOMO, fear of missing out can really, really hurt your long-term performance. >> Absolutely. Absolutely. So, uh, our next question, Jonathan, this comes from Mark L, and he asks you, "Wow, Jonathan, when do you decide to sell a stock? What are the top things that trigger your exit decision? Are you like a like Warren Buffett that uh the the the bestselling point is never? >> Well, we'd love to hold a company forever. Our time our time hold time frame, I guess as Buffett says, uh the perfect one is forever because then you com you compound tax deferred and that's really the way you make your money by letting your tax deferral compound with you. But having said that, no, it's very important to have a sell discipline. One of the toughest things uh when you're a long-term investor, you s you get to know these companies and you and you have to realize that they don't know you and they don't care whether you own them or not. It's just a stock. But why do we sell? Made a mistake. You know, you buy a company and you go, you know what, the thesis that we had, it's not panning out. We miss, you know, we missed something. We miscalculated. So, you make a mistake. Get out of it and move somewhere else. Number two, the stock really does become quite excessively overvalued and you want to just take some money off the table, protect yourself because you you know you know it's going to come back at some point. There's could be too much hype in the stock. Number three, um the you have a better alternative. So we generally run 20 to 25 stocks in a portfolio and we don't want to just keep adding stocks. So, if we find a business that we really want to own, it's selling at a compelling valuation, it's a strong business, it's it's got a great future, we'll look through our portfolio and say, what's the least um you know, the least uh attractive company that we own, the one that's maybe the weakest link in in our portfolio, and we'll sell it then um and uh and then move in a better company. So, it's like that pruning operation. Basically, you're pruning some and putting other companies in. So those that's really why uh we would uh the reasons why we would sell. It's very important to have a sell discipline and uh sort of you know target prices where you might start to think I should take money off the table and also be honest if a company is underperforming and uh you miscalculated in your in your analysis um don't don't worry about that get out of it cut your losses and move into something else if uh if the fundamentals are not u holding up and uh because I find once a company starts making some mistakes and they start to get off track uh boy they can really go off track for quite some time and it's better to cut your losses sooner rather than later. >> Yeah. Psychologically, emotionally, I find selling so much more difficult than buying. And it's just like you say, right, company XY said is starting to make this mistake, then make another, and then as a person, right, we're so influenced by our psychology and our emotions. You start thinking or you start actually rationalizing it, justifying it. Oh, you know, they'll bend their way soon enough. you start paying perhaps too much credence to management. So yeah, I I find uh having a selling discipline is is absolutely of the most of the utmost importance. >> Yeah. And you want to avoid torpedoes because sometimes when companies start getting into trouble, uh they can lose value very quickly. And again, depends on the business you're buying. If you're buying a company that's already highly valued and they're getting off track, they can they can just lose 50 60% of the value, you know, in just a matter of days. If it's a highly leveraged company, so you get into, we saw this in 2008, 2009. If you're buying a highly leveraged company, like a financial um business that's got a lot of leverage, a lot of debt on the balance sheet, maybe it's a a lender of some of some sort, and they get into trouble, they can go from uh you know, $50 to $2, like literally u they can wipe out your equity if you have a company that's you know 20 20 to1 leverage type of thing. Uh and we saw that in the banking sector. Um we saw that even with large banks. Um and so again you want to be careful uh if you if you get into a company that's highly levered a financial institution and you start to see cracks or problems in them um you know go for the hills as fast as possible because they can wipe out your equity um in in matter of just days. >> And speaking to that that's why I find value investing such a wise investment philosophy and framework because you're always trying to find that margin of safety. So that means that if you make the mistake, you're not going to be in so much pain. >> Generally speak, >> right? That's the that's Yeah, that's the idea that, you know, you don't you shouldn't really come across too many what we call torpedoes. Um I mean, sometimes you might underperform and we might own a stock that, you know, we're down 20% or something, but seldom will we ever be down something like 40%. That's happened very few times in my career. Um and that's because you are trying to look at the balance sheet. You're looking at something that's solid. um you know a fundamental value that uh if that will hold that stock up uh better than uh other other businesses and it's not a high-f flyier. So you yeah you should generally avoid big draw downs in terms of individual stocks. >> So uh Jonathan let's shift to a topic that you've talked a lot about in the past here on wealth and that is gold and silver precious metals. Just uh before we dive in, and you actually mentioned that, but before we dive in into this topic, a quick note, speaking of gold and silver, if you're looking for a simple, secure way to invest and own physical gold and silver, please visit our sister company, Hardass Assets Alliance at hardassetsalliance.com. That's hardassalliance.com. So, uh, Jonathan, the first question, this comes from a interesting username at goldhound 1979 asking you, Jonathan, you've long held a big chunk of gold and silver for you. Are these assets mainly about protection against via devasement or do you see genuine upside potential ahead? You kind of spoke to this already, but how are you viewing holding gold and and silver? And we'll talk about equities later. Is it is it to protect purchasing power or is it because you're trading? >> Yeah, the the key reason would be to protect purchasing power. I mean we are in a world where for 50 60 years we have run up debt at unprecedented levels. I mean we've reached levels that are basically they truly are historic. I mean a lot of times people say you know this is historic but they are historic and that's because we have a financialized system that didn't exist before ever in the history of the world. So uh we've financialized our whole system and uh and we're so leveraged it's just unbelievable and the promises that governments have made to their citizens you know unfunded liabilities on top of the onbalance sheet debts are as I think everybody knows just right off the charts. I mean they're they're they're multi they're hundreds you know I mean you're talking about multiples of the GDP many many times over especially if you preclude pension assets and health care promises and benefits I mean you can get into 500 600% of GDP I mean it just it I mean it just gets so high that it doesn't make any sense whatsoever I mean like how could we possibly be so stupid to create an economic system um like this um and we have and uh it's it's just because of arrogance and uh you know year after year abusing the system. So, having said all of that, now we're investing in the middle of a highly highly leveraged global economy and where there's promises all over the place. And so, the key is, okay, how do I protect the purchasing power of this hard-earned money that I have? I've worked hard. I've saved. I've done everything that they've told me to do. And uh at the same time, I'm concerned that my fiat currency is going to continue to lose a lot of value. And I think that uh over the next 10 years um we're going to see our fiat currency lose substantial value. What do I mean by that? Probably um you know 60 70 80% of its value. I mean it's almost impossible not to given the massive amount of debts. I mean even over the last couple of years we've seen it lose 30 to 40%. I mean if you're buying food you've seen this massive drop in our purchasing power. So that's that's just in the last couple of years, let alone if you go back to the early '7s and you look at um you know gold at $35 and now it's you know over $4,000. Um I mean it's outrageous the loss of purchasing power that we've had. You could buy you know what you could buy property for for $2,000 lots. Um those lots now are going for $200 $300,000. Right? So we've seen massive amount of loss of purchasing power. And I think that that's, you know, one of the key things as a money manager when people come to me and they're relying on us to protect their pensions is how do we protect their capital. So that's why the gold and silver where um particularly gold um but also some of the other precious metals u are very important in our portfolios and that's really just been since 2010 when I started up Rock Link. My previous life, I ran a mutual fund company and we we were the largest institutional shareholders of Franco Nevada back in the 90s. Um, but that was that wasn't because we were gold bugs per se. It's because Franco Nevada knew how to generate cash flow and all we cared about is we didn't want cash flow cash cash. But over time I shifted from not just cash flow but also to protection of purchasing power. And that shift really took place with the financial crisis in 0809 when when you really saw the full extent of how how weak our our global system was. And that's why we that's why we've now made gold and silver a core part of our portfolios at Rocklink because we have now for 16 years and they've been in the early days 15 I'd say 15% now we're well over 20% of our portfolios um distributed amongst miners and royalty companies. Yeah. >> Yeah. Great answer. I I think people really miss and this is because it's difficult to understand compounding in the long term. how much purchasing power folks just you and me people on the street how much purchasing power people have uh lost since uh the delinking between the between gold and the US dollar in the 1970s or or just in the last 20 years or the last five, right? Things are really much >> Yeah. Yeah. And you could you could argue that a lot of this came in too with 1913. And what happened in 1913 was the Federal Reserve and they were going to save us from all these ups and downs and you know market cycles and they were going to build stability and our purchasing power and our money and so forth. And you know Mario has been the exact opposite. And that shouldn't surprise us because if you're looking to the state or some kind of bureaucratic organization that's going to be, you know, genius and they're going to run our financial system for us and tell us what interest rates should be and how much money supply there should be. If you think that that will work, then you really have no understanding of human nature and the history of the world because it won't work. You want to break all that power up into as many people as possible and let the market determine these things as it was before 1913. Yeah, you have you'll have ups and downs and things like that, but there was also stability of purchasing power for hundreds of years uh you know with the first formation of the United States until they got to 1913. And we've seen just steady erosion since. And of course that just got worse with uh the dellinking, the complete dlinking of gold. It was already delin with Brett and Woods, it wasn't a full gold standard. But um in 1971, that's when it really got completely delin. And I mean we've, you know, we've seen a debt buildup that is just outrageous. Yeah. Uh, so this next question, and I'm sorry Liam, if I'm not pronouncing your last name correctly, Liam Tierney6309, he's asking, it's an interesting question, geopolitical, I would say. Uh, central banks now hold more gold since 1996 than US paper treasuries. What do you think about that? >> Yeah, I mean, a lot of people are speculating on this. I we don't we don't change our investment thesis because of this reality. Um but I do think it highlights the importance of gold after 20 years, 25 years of people poohoing gold and saying it's a barbarous relic and and some central banks just ditching it completely. I mean we know that's what happened in the UK. Um and you know they call it Brown's bottom when uh the the head of the excheer there, Brown, he sold right at the bottom. I think the lowest gold prices, you know, in the last 40 years, 30 years. Um, and then in Canada, we got rid of all our gold over a period of time. It wasn't just under Mark Carney when he was the Bank of Canada governor, our current prime minister. Um, and so it what's interesting is that um whether you know, don't do what they say, do what you know, do what they do. And I think the central banks have accumulated the gold because it is real collateral. I mean, I don't care what anyone says. It's it's hard to understand sometimes. It's hard to get your mind around. But since uh you know the the the book of Genesis was written in the Bible in Genesis 2 um gold's mentioned and gold has been used for the last six seven 8,000 years of human history that we have recorded that we we know uh that humans been on the earth um and it's been money and um so um I think that you know that's that's that's our view in terms of how how we approach it um from that perspective. Um, so that's that's that's why we want to own it and that's why we um, you know, go into that area and uh, we think again you that's the only way uh, it's one of the only ways you're going to protect your purchasing power over time. Now the other way you protect your purchasing power is buy a great business with pricing power. Um, when you're buying a business that's essential that has assets, it could be assetri business, could be real estate, could be utilities, it could be infrastructure assets or a company that can pass on it as price. That's another way. It's not ideal. It's not, you know, going to be a one for one, but it's way better than just having your money sitting in cash. Um, and so if you can buy an active business that can adjust uh itself and uh and repric constantly, then that's another way of protecting your purchasing power. Stocks are much better, of course, than fixed income or or uh or uh just holding cash. >> Yeah, that's that's great, Jonathan. And I think it makes a lot of sense and it speaks to what we were talking about earlier right on um companies with competitive advantages and therefore pricing pricing power. So so let's move to that effect which is value investing. I got some questions from the audience there. Um and this is from patient capitalist 3098. Jonathan, you've said value investing still works even when the market's obsessed with hype and momentum. How can ordinary investors keep their discipline when everything around them screams short-term gains? This speaks a lot about, you know, psychology, controlling your emotions, which would be great to hear from you, Jonathan. >> You have to have strong belief system. You have to have a strong belief system. You have to develop your your ideas of what you think is true and uh how you're going to execute in the marketplace so that you're not pulled in different directions. is no different than um other areas of life that if you're going to be anchored, you have a strong faith. You're going to stick to that faith because you believe it's true. You believe that those give you the proper guard rails that will protect you and keep you from getting off track. The same thing with investing. If you're a value investor, um is because you believe that the best way to protect your capital and grow it consistently because the idea is you want to grow it consistently over time. It's not about just, you know, making as much money in the next six months as possible. I mean, that sounds great and your neighbors telling you how much money he's making by trading, you know, who knows what stock or what, you know, new AI stock, but that's not a consistent way to compound your money. And so, again, if you look at someone like Warren Buffett and one of the most amazing things about Buffett, if you go back and you read all of his annual reports, you can get, you know, the compendium of his reports, sit down and read them consistently year after year after year. So, you can, you know, in a couple hours, you could probably read a decade. you're going to see this consistent consistent application because he is a believer. He knows what he believes and he sticks with it as best as possible. He also admits occasionally you'll make a mistake, you know, omission or commission. Um, but you have to really be be grounded into your bone marrow what you believe about your investment principles and then you have to stick with them. When you start to get tempted to step outside of them, you've got to slap yourself um or find someone else. I mean, other people, you know, it's great to work on a team. I have a team of people here and that we keep each other in check because um they say, "Hey, hey, wait a Jonathan. Are we diverging here a little bit? Are we getting a little off track?" So, I think it's again it's a frame of mind. You've got to know what you believe. Those have to be core principles and those principles cannot change because you know they're going to work over time and it's going to keep you on track. I remember going down to um the annual meeting in Birkshshire Hathaway in 1998 1999 and might tell you Buffett was being chastised. He'd have people stand up and say that he didn't know what he was doing. I mean here's a man who was already worth at that at that time I don't know 20 20 billion or something like that. He'd been one of the most successful investors for three four decades. And he had the young people stand up and go you don't get it. You know you're out of you're out of tune with reality. you don't know how to, you know, you don't know uh tech businesses and and he admitted he goes that we're not going to invest in things we do not understand. Um we have a circle of competence. We want to stay within that circle of competence. And there's you if you don't know where that circle of competence is, you don't have a circle of competence as Munger would say, right? And um and so I I heard people just chastising um Buffett and his stock went from I think about 80,000 down to about 45,000 when the tech stocks hit their high. And then the tech stocks got nailed by 80%. Some disappeared, but even the best ones got nailed by 80% drop. And Birkshshire Hathaway doubled over the next couple of years. And all of a sudden, it's like, well, maybe Warren didn't know what he was doing. And so, you have to know the game you're playing and stay within the the the area that you feel comfortable and you're competent. You don't have to make money the same way your neighbor makes it. you make it in the businesses you understand, the ones that are close to you. And you can become very wealthy by investing in areas that other people aren't even investing in. I if you look at the Forbes 500 list, um, and you look at where people made money, they made money all over different industries. And, and often it's not in businesses that are just, uh, uh, the high-flying businesses. They're just, you know, businesses under the radar screen. So, yeah, I think that's the best way to keep on track. You have to know what you believe in, why you believe it, and then keep that reinforced um in your thinking by the books you're reading, the people you speak with. Keep things in check with uh with other friends and so on. >> Love it. Stick your principles and be rational about what you know and and what you don't know. And I guess also try learning about other industries so that you can expand that circle of confidence as Buffett would say. Fantastic answer, Jonathan. Really, really great. Okay. Um, I'm think we have time for one last question. This is from uh Charles T. Jonathan. For someone who's serious about learning how to invest, not trade. What books would you recommend? When which ones make the biggest difference in your journey? Just before we were shooting, we were talking about Peter Lynch, remember? And One Up on Wall Street that very fabulous books. But what are which books are your favorites on investing, Jonathan? >> Yeah, One Up on Wall Street is is a classic. uh it's very practical and Peter Lynch is a tremendous communicator and I have that on our library uh and our website that that we recommend. I think Hagstrom's book on the Warren Buffett way is also very good uh book in terms of investing. If you want to understand a little bit more about Warren Buffett um the book that I guess it was snowball that was written by um >> oh I forget Alice Sher that that's that's also a very interesting uh interesting read. She really he opened him himself he opened himself up to her and uh for a number of years she sort of trapesed around with him and uh and that's a real insightful book also. I mean, if you're glutton for punishment, you can pick up one of Ben Graham's books and on value investing, intelligent investor, but there I I would recommend uh uh yeah, you just maybe look at certain sections in that book depending on your aptitude uh and reading that. And um yeah, so books like that are really helpful and financial history. There's the one book uh you're catching me off guard. It's on the um it's on the uh Wymer Germany on the death of money. Um Ferguson. Uh >> yeah, that that that's an amazing book to read. Uh and and it puts, you know, puts things in perspective where all of a sudden you go to a coffee shop and you're they're changing the prices while you're sitting there drinking your coffee. Um and they're wheelbarrowing in uh you know, your your Deutsch marks. Um and and so it it it's that again we have to we have to understand that um just because we haven't seen that extreme hyperinflation in Canada, United States um in our lifetime, it can happen and and don't fool yourself. It has happened in very developed countries and economies in the world. We can't break all these financial rules indefinitely. I'm not suggesting it's going to happen tomorrow, but don't be naive. And by reading books like that, it really puts things in perspective. Plus, they're very fascinating reads. I mean, uh they're it's hard to put some of those books down. They're very very interesting reads in terms of history and what we've done before. So, there's there's a few books and we do have a library on our website where we have quite a few books. Um some of James Rickard's books I've enjoyed that he's written um on gold and on the economic system. Uh you I find that he's very insightful. Again, it's good to read a number of people because, you know, none of them have the corner on truth or the, you know, information that you want to read, but uh but there's some great books that you can read. Those are some of them. Yeah, >> those are all great and uh you definitely added some to my reading list. I'm going to put a a link up here on the screen uh with that page of yours on your website with with the book list. So, Jonathan, this was fascinating and as always, incredibly insightful. uh thank you for sharing your time and wisdom with our audience today. And uh for our viewers, if you'd like to connect with one of Wealthian's endorsed financial advisors, including Jonathan and his team at Rocklink, again, just go to wealth.comfree to schedule a free portfolio review. That's wealth.comfree. Jonathan, once again, thank you so much. And to everyone, thanks for watching and we'll see you again next time. >> [music]
Jonathan Wellum: Ask Me Anything – Protecting Your Wealth in an Overvalued Market
Summary
Transcript
You cannot just pay anything for a business. Even if it's a transformational business, even if it's going to transform our our lives going forward, you have to be very careful what you pay. Uh there will come a day of reckoning. [music] Hello everyone and welcome back to Wealthon. I am Mario Rodriguez and joining me today for an AMA and ask me anything is Jonathan Well, CEO and CIO of Rocklink Investment Partners Partners. Jonathan's a long time wealthy friend and favorite known for his disciplined valuebased approach and clear macro perspective. Jonathan, it's always great to have you back, sir. How are you? >> I'm doing very well and uh looking forward to our conversation. Mario, >> fantastic. We got some great questions covering macro markets, value investing, you know, the goods. This is going to be very valuable for everyone that's watching and for me, your host. Just before >> Well, I'll I'll I'll do my best here. Don't give me too hard of questions. [laughter] >> I I I won't throw you uh any of the hard balls like they threw on the world in the World Series like they're throwing the World Series. So, uh, just, uh, before we begin, a quick reminder everyone. If you're listening to this and you have questions about anything we talk about or you want to get some help figuring out the right asset asset mix for you, you can get a free portfolio review from Jonathan and the Rocklink team by going over to wealth.comfree. That's again wealthing.comfree. All right, let's dive in. Jonathan, first first uh, there's some questions on macro and fed policy. This is from user at macromaven wolf32 and he says, "Jonathan, the Fed trimmed rates again. Some see this as the start of an easing cycle, others as a mistake that could reignite inflation. What's your read? Is the Fed moving too soon or exactly on time?" >> Uh, yeah. I mean, it's it's it's a good question. I let me just preface by saying we don't spend a massive amount of time looking at the Fed um because we're value investors and it's sort of a backdrop that we just have to deal with. We also are not big supporters of uh the Fed or any of these central banks and would much prefer the market interest rates were set by the market and interest rates were not manipulated really by the Federal Reserve with all of the various policies and quantitative easing, quantitative tightening, etc., etc. But uh just to speak to the current interest rate environment, yeah, I think that uh uh probably the rates can come down a little bit further. I think inflation is coming down. Um and the economy overall and I'm speaking here the global economy also with the I mean the US is probably the strongest of all of the economies in the world at this point, but there are weakening signs and I think the Fed uh in lowering rates a little bit further uh I think will help at least stave off some of that weakness. We've seen some we've seen some uh credit um you know issues in the credit market um liquidity issues um and so I think the Fed is a little bit concerned about that. So um my my view is yeah I think the rates probably should come down a little bit more but not too much more. I mean these super low interest rates as you know are not healthy um for economy. They they punish savers. They reward debtors which is really the problem. we have too much debt and so I don't think they should really come down an awful lot more um unless we have a real problem in our marketplace. I'm up here in Canada. We're we're already about one and a one 150 basis points lower and we lowered our rates also and we're down to just you know little over 2%. Uh which is because our economy is just so weak up here. >> Spoken uh like a true value investor, right, Jonathan? And I think uh part of the great job that you do and we'll get to you know portfolio management and and stocks you're looking at uh is the idea of finding businesses as Buffett would say with competitive advantages and not overpaying so that way you are protected uh from inflation. Can you speak a little bit to that >> in terms of value investing? >> Yeah. How value investing especially getting businesses that have competitive advantages and uh protect you from it? >> Yeah. when when you well when you're looking at sort of the value investing, you're trying to assess what the true economic value of the business is. And so you are not valuing it based upon momentum. You're not valuing it based upon what you hope might materialize. You're trying to look at what actually exists in the business today. And so you look at the asset, you look at the liabilities, you say look at the overall book value of the business, what kind of multiple it's trading at. Um, you're going to generally if you're a value investor, you're taking a three to five year, maybe even a longer time horizon. Ideally, you know, it's great if you own a business for 10 years and just compound on a tax deferred basis. That's that's really the the the beauty of uh making a lot of money. But but all that said, you're going to be looking for businesses that um have an established business, a moat around them, so they have a competitive advantage. They usually have incredible management. um their products and services that they sell are fairly predictable. Um so you can look out into the future and value the business with some degree of predictability. I mean um there's some businesses that again it could be some high high-tech biotech company and you don't really know what it's going to look like in 5 years. It's very much more speculative. If you're buying Coca-Cola um or you're buying a big consumer product company or an insurance company that's got a a real moat in its its particular industry, it's much easier to value those companies and feel comfortable with what you're paying for it. And of course, the idea is you want to pay less than what you think the company's worth. Um and that way you're buying low and so over time you can sell high. And so it's very important uh to uh again spend a lot of time understanding the companies, understanding how they're going to deploy capital, invest it back in the business and grow that business and then put a valuation model on it and hopefully buy it 15, 20, 25% below what you think is the actual value of that business. >> Right. And to tie that to your point before, that's much easier than figure out what the economy is going to do next month, in six months, in a year. >> Yes, absolutely. So, so some people say they're bottoms up. So, they look at the business itself and then they will evaluate, you know, how what they what they should pay. Others say they're top down. So, they look at the macros, the big picture, the economy, the global situation, geopolitical issues, and then they go back into where they should invest. I argue that um I think 80% of your work really should be at the business level and then 20% at the macro level. You do have to look at the macro level. I've heard some people that say they're value investors and they don't care what's happening out there. Um I think that's that's foolish. You have to contextualize the business. You have to put it into context of the economy >> and that will shape yeah that'll shape some of the industries that you want to go into. For example, um right now uh and we've talked about this before. We're concerned with this massive buildup of debt that's been going on for decades. I mean it's just been going for a long period of time and we are getting near the end of this at some point. So that means given that macro, we're going to look for precious metals companies, make sure that we have some, you know, exposure to gold, silver, etc. Um because uh we think that that's going to help hedge us in in a bad event. Now then we then what we do is spend a lot of time on buying businesses. Okay, let's look at the best gold companies, the best silver businesses. Let's look at the ones that are the best managers with great reserves or you know great growth opportunities. And then we'll spend we'll just go really deep into a handful of businesses that we'd like to own in that sector. But that's in the context of macro concerns. Yeah. >> Yeah. And I definitely have some questions for you uh in terms of gold, silver, and how you can get exposure through equities of companies of that sort. So um let's go to our next question. This comes from Tombbe and he says uh there's some folks and you were just mentioning this Jonathan that the economy is not as strong as it looks from your vantage point. Are we headed toward an outright recession or do you think the US perhaps you can speak to Canada here too which is different can thread the needle and avoid one? What do you think John? >> Yeah, that's a $64,000 question. Maybe it should be higher than that with inflation, right? But um well let me start from outside of the United States. Uh if I'm up here in Canada, we are basically in a recession and we were seeing really no GDP growth per capita now for quite a few years and that's because of just incredible mismanagement of our economy especially at the federal government level and not investing in our resource sector and so forth. There's a lot of different issues there over you know over taxation, regulation so on and over indebtedness. If you go over to Europe and you look at what's going over there, I mean, you have tremendous weakness in the European in the context of the European markets over there. They're now getting into even more deficit spending. France is in a just a real mess financially. The UK is sinking quickly uh in so many ways, but certainly financially their their debt to GDP has just gone off the charts. And Germany um is is very weak. Um and and so then if you look down at China, I mean, they've got challenges. uh you know, President Trump is I think got good leverage on them to to get what he needs. Uh again, from their their from the US's perspective and and Japan too has got a demographic cliff that they're facing. So you look around the world and yeah, it's not a lot of economic growth. I think the exception has been and probably will continue to be the US. What's really going to happen in the US? That's the that's the big question. Now, you've got a lot of money coming into the country because I mean, Donald Trump has been very aggressive in using tariffs, uh, cutting regulations, encouraging capital to come in. And if you're a multinational corporation and he's putting that kind of pressure on you, you're moving your money there. We see that in Canada. Um, he's already won the war of tariffs with Canada. I mean, our leaders don't seem to realize that he's already won. Uh, any any major corporation is going to invest in the United States instead of Canada. Um, and that's just a given, especially if it's in the manufacturing sector and so forth. So the what what's going to happen in the US is really the issue I think it's going to drive much of the global economy and there is weakness there. And so I think you look below the surface. Housing market is weak. The auto sales are down. Uh they're not they're not great. Um there's some cracks in the credit situation. The indebtedness of the average American is very high. There's just been a lot of excess spending at the government level and at the personal level for quite a few years and they've kicked this can for some time. So I find it very difficult even though I support and I think the the economic policies of the Trump administration are very very positive long term but they still have to basically you know disinfect themselves from you know the Biden years and the Obama years and so forth and a lot of these abuses and we've gone a long time without really a recession. So, um I I think that I think we should prepare for much slower economic growth and and a potential recession that could emerge in the US. Um and and and and again, you've got a lot of things going on with, you know, immigration, which again, they need to tighten up the immigration. Absolutely. But you've got less people floating around in the country, people leaving. So, there's a lot of these factors I think that are just making it more difficult to really get to the bottom line of the numbers. And uh but I do think over the next few years the US is positioning themselves if they can stay on this trajectory as a real engine of growth because if you can bring in 10 11 12 I mean Donald Trump's talking 20 I mean sometimes he exaggerates as we know 20 trillion in new capital in your country my goodness that's going to res that's going to result in growth. I mean it it it has to right. >> Yeah. Yeah. We've been calling for recession for years now right? Uh apparently the economy now is only growing or mostly growing because of AI expenditures and capital expenditures from companies. But certainly in the end we act by incentives. If Trump creates the right incentives for a lot of capital, and he certainly has been doing some of that, well, perhaps that can balance that that slowing growth that has been. >> Well, and I think what what some of the listeners need to realize too, if you're in the United States, I don't think you appreciate how poorly run many of the other countries are in the world. Um, so you often you often can look at your own country and go, we've got this problem, this problem, that problem. But my goodness, I mean, in Canada, I just speak to our own situation. We have a government that's so restricted by ESG and the green economy that it won't we won't develop our resources. It will basically slow walking um the development of new new money coming into the country and developing our resources. This is in a country that is a resource-based economy. We've got so much wealth under the ground, but if you have a government that says, you know, we can't release any CO2 and we have to muzzle the oil and gas industry, which is your more most important industry. I mean, um, these are crazy policies and there they're they're really choking off the wealth creation that should be taking place in Canada in our position in the world, uh, stage. So Donald Trump by unleashing drill baby drill and and taking regulations off and so forth. I mean his best friends uh are basically all these other countries which are sabotaging their own economies. That's what we're doing in Canada. That's what they're doing in Europe. That's what they're doing in many countries around the world. So if you're in an economy where they're actually trying to unleash the free market, unleash capital, then you're going to be much further ahead. And I think uh again people just don't realize how poorly run the other countries are in Europe, UK, Canada, and and a lot of other a lot of the other competing company countries. >> Absolutely. Can't agree with you more. Uh love it. I think uh a lot of Americans don't really know how how good how good they have it, how good of an economy is, how how resilient despite, you know, the debt and mismanagement and uh all the regulations, it's still a lot less regulated. it's still a lot more attractive for a lot of companies and investors and it draws capital it draws interest >> and and the best talent uh we see this in Canada also and this comes from you know other other countries in Canada the brain drain from our country our topic our top graduates from our university that you take the university of water which is known for uh its research in technology um high levels of mathematics and so forth um those those graduates are not staying in Canada they go right down south of the border and uh this is this is a big problem. So you know the capital brain drain the next generation of talented people the US still has the ability to attract all those people better than any other country in the world and you know it's a it's a freedom um and you can make money uh and that's that you know the free you cannot trump the free market system. The free market system is absolutely clearly far superior in terms of creating wealth and opportunities and it will attract the very best people and the capital if you can generate the return and keep the benefits and the and of of what you've earned. Uh you know if you live in a redistributo economy which we see in Europe, we see in Canada is much more focused on redistribution then you don't produce that which is going to be taken from you. I mean it's as simple as that. you produce less, you invest less, you save less, and uh you uh become poor. Um and so again, I think the US again, it's got lots of problems, lots of challenges, but it's still by far, I think, uh the hotbed for for capital and for the for the future if they can keep on this trajectory. >> Yeah, I can't agree with you more. In the end, that freedom allows for wealth creation, and that wealth creation is reflected in the stock market. And that's where I wanted to take us right now. Uh there's a question. >> Yeah, in Mario in Mario I would say also freedom of speech. Freedom of speech. So we see that around the world freedom of speech is being constrained. Uh in the United States there's still a large large degree of freedom of speech which is protected by the constitution and in a beautiful way and uh and if you don't have freedom of speech everything will come down including the free market system. And so we see that pressure in other countries also. So again, that's a huge leg up that the US has their their constitution and their and their bill of rights which protects Americans much more than other people around the world. >> It is the bedrock of other of the other freedoms. Yes, I I completely agree with that as well, Jonathan. Great great observation. So uh let's get to the markets and this is from Martin S and he says equity valuation valuations are skyhigh by some metrics similar to taught the dot era the.com levels. Do you think we're due for a serious correction and what's rock doing to navigate a potential downturn? So are are you hedging a little bit there Jonathan? Just uh you still raising cash? >> Yeah, the markets are very expensive. I think anybody who tells you they're not expensive, um I I just they just don't know how to use a calculator. Uh I mean the price earnings multiples, price to free cash flow, they're just off the charts. And so uh we also know that that is heavily influenced by the AI spending um and uh the amount of money that's going to that area. And from our perspective, we don't know where all this is going to end. I mean, we know AI is going to become increasingly important. It's going to get integrated into all the businesses. um it's going to be transformational, but there's a price to pay ultimately, right? You just can't pay um anything for businesses like that. I just had a someone just sent me something this morning and it reminded me of the 1999. The gentleman's talking about 99, the tech bubble. Uh Cisco Systems was trading at 148 PE PE ratio back in uh in 1999 just before the crash. 148 PE ratio. And uh again, as we know, uh it took uh I mean, Cisco, I don't even think it's actually gotten back to where it was back in 1999. Yeah. >> And um and so people and again, Cisco was an amazing company and oh, it was going to revolutionize the world, change the world, da da da da da, and so forth, all of that, right? And um you know, we had Nortell systems, Sun Microsystems, EMC, JDS, Unif was trading at 660 times earnings. I mean that business is was eaten up and and now it's gone. Um and so uh yeah, you cannot just pay anything for a business. Even if it's a transformational business, even if it's going to transform our our lives going forward, you have to be very careful what you pay. Uh there will come a day of reckoning. And so there's no question in my mind that some of these stocks are going to get just absolutely trounced. Um because you're factoring in growth rates which are not sustainable. So even if you take a Nvidia uh as an example, just again you have to run yourself through these numbers. It's $5 trillion company market cap. Well, if it's going to eventually eventually over time as it matures trade at 20 times earnings, that means it must it's going to have to earn earn net income of $250 billion. Um current currently that's its revenues is about half that. Um and so uh that's revenues. So when you think about the kind of growth that is embedded in Nvidia and it is growing quickly, no question. But it's going to have to grow and grow and grow and grow and grow and not stumble and and and and and dominate in the in the global arena for many many years. And Nvidia is one of the best case cases you can look at. I mean this is a very powerful comp company and it's an amazing company. So I'm not downgrading to Nvidia. It's just, you know, to to justify a$5 trillion dollar valuation over time and trading at 20 times earnings, which again is not cheap, um, you need 250 billion in net income, you know, on a business that's generating 130 140 billion in revenue now. So again, be very, very careful. Um, there's many, many businesses below Nvidia's quality that are trading at ridiculous valuations and you're definitely going to get your head handed to you at some point. So you have to know the difference between momentum investing and investing for the you know medium to longer term. And so for us we can't buy companies like that and that's fine. We go and look for other companies. We've done very well this year um in other businesses that can grow. Um and some of the some of the mag seven companies I think are much more appropriately valued. Um I'm not saying they're cheap. They're not cheap but you know Apple it would be much more you know closer to a real valuation. in the Amazon also. Of course, Amazon has not gone up very much this year and they continue to expand and develop their business. So, you know, so there's ways that you can look in the marketplace and from our perspective, we've got to go find companies that are trading at valuations that we can stomach and that will weather a downturn and protect our investors capital >> in value investing. Harlons, there's no margin of safety in Nvidia and many of the many of these other companies are related. You know those uh that you were you were talking about Cisco back in the docom era and I was uh looking at something that I thought was super interesting. So Cisco back at its high was around 4% of the entire GDP of the US back then. Nvidia's already passed 6%. It's market cap related to the American GDP. It it is truly mind-blowing and difficult to justify as an investor as you very wisely pointed out. >> Yeah. And I think what people have to realize is you just these are not predictable companies. Also I mean there's a certain I mean they dominate they're strong. So I'm not saying there isn't some degree of predictability in them but we just don't know 5 years out what Nvidia is going to look at. Like if you own a Coca-Cola which again is a much more boring company and I understand all of that. You have a certain sense that they'll be selling a certain amount of you know cola drinks and uh other other uh other other products that they have. Um, and and the other thing is with semiconductors and some of these chip businesses, I mean, there are cycles to these things. Right now, it's a boom. No question about it. But believe me, like listen people, um, you you know, you've heard it from me, you'll hear it from other people. Uh, chip companies have a cycle and there will be a cycle. This they they have not ended a cycle. Even though there's rapid growth right now and there's massive amounts of capital coming in, that capital will slow down because it has to ultimately generate a return on invested capital. And so when Microsoft, Meta, uh, Google, Apple, when they figure out that um, they've reached more of a saturation point and they've done enough capex spending and they start cutting back on some of that spending in order to justify um, returns and to make sure they're getting returns on their investments, then someone like Nvidia, that will really impact that business. And so be very, very careful. If you're momentum investing, yeah, you're investing for a week, two weeks, three weeks, the next news cycle, then you're more or less speculating. That's not really investing. But if you're investing, you want to protect your capital, yeah, you you want I I would not be I would just would not be buying the stock. And I'll take flack from people who are more momentum investing. But again, I want to be in something I can go to sleep with for the next three years um or longer. >> As Charlie Munger would say to Warren Buffett, no commentire [laughter] here, sir. Uh, fantastic. So, Jonathan, can you share with us any sectors or specific stocks that you're finding attractive amongst, you know, this very overpriced market particularly in tech? >> Yeah, it's an interesting question. Um, one of the companies that we're looking at now, um, is Meranto Libra. Now they are uh really the Amazon in South America and they trade at much better valuations um and are growing quickly and have a really dominant franchise and also have some financial service businesses in them. So that's one that uh we're just finishing up some work on and looking at and uh quite likely we'll add it to our uh our new product that we're going to be launching in a couple of weeks. So that's a company again that uh you can look around the world and find other businesses that uh are similar to ones that you know we know in North America but uh they dominate in their particular markets. Um we also uh uh I mean I've mentioned this company before and I think uh when you look at some of the software companies the software business has been hammered many of them had actually been hammered down uh I think illegitimately they continue to grow very quickly and they haven't had any slowdown in the growth but people are suggesting that AI is going to knock out some of these software companies. So, a company like Roper um which has come down from like $525 down to like $460 470 as we're talking today um is trading at a very attractive multiple and they just released their earnings recently and they're chugging along very nicely. They're growing organic growth 7 8% consistently year after year and they're great capital allocators. So, um, it's interesting. You can sometimes find businesses that the market says, "Yeah, you know what? AI is going to maybe, you know, dislodge this business, change the economics." Um, but if that's not really the case, they they can morph and they can change and they can actually use AI in their businesses, then there's an opportunity there because they've been knocked down in value and um and uh you can you can invest in companies like that also. Um, so yeah, so companies like that we we we like the service now model also. We we have picked some it's it's volatile. It's it's it's been up and down like a yo-yo. Um and uh but that's fine. We buy it when it drops. And of course, they are using AI and embedding that into company after company after company and making companies more efficient in how they manage their data and their operations and they get embedded in a company and they you know you can't get them out type of thing. And that's one where again they're benefiting from technology and its implementation and making companies more and more efficient and driving that efficiency and productivity in in uh in corporations. So that's again another example of a company. Yeah, >> those are great examples. So basically the market is punishing them wrongly because every everyone is so over optimistic about these AI companies. uh but if you are rational about it and you analyze if you do find a margin of safety and can sleep when you get a good return >> you know I think investor investors need to be careful putting 20% plus growth rates on companies beyond a couple of years it's just very difficult I'm not saying companies can't grow at 25 30% but the law of large numbers means it's very very difficult there's only a handful that ever do that for for much of a period of time so um you we love to buy companies that we can justify their price at 8 n 10 10 10 uh 10% growth. And if they grow faster than that, great. We're going to get some good upside. But, you know, when you start factoring into your models, you know, really low low um discount rate and then you got like 25 30% growth rates because this industry is just going to go go go. You're setting yourself up for a capital loss. It's just a matter of time. Um the businesses just cannot deploy capital that rapidly for extended periods. Very few can. And uh you maybe you'll find the one that can, but uh there'll be for every one you can find uh that can do that, there'll be 10 that can't. And so be very very careful um in terms of these uh momentum investments. >> Yeah. In other words, Straw, trees don't grow to the sky, right? Speaking of an era that where where trees were thought to be growing to the sky was the 1920s. I I recently read Andrew Russin's new book 1929 and I can't recommend enough to you and to our viewers because there are a lot of parallels right now between today and 1920s. Obviously, it's AI today and it was the radio and uh debt or leverage people getting get getting loans on their stocks and you know installments for the radios and their cars and everything different era but what one can learn definitely from reading financial history >> one of the most one of the most important things that you can study is financial history I've talked to uh different business schools and where I went and studied my my business uh endeavors I'll talk to the different dean of the school and say, "Why don't you have a course on financial history?" I mean, I think it's one of the most valuable courses. And and to me, I I've not seen that really added into the curriculum. And I think it's one of the most valuable um courses you could take because human beings, we repeat the same mistakes, whether we whether we'd like to admit it or not. You know, our human nature has certain, you know, greed and fear and so forth and that lends itself to certain patterns and those patterns are repeated uh decade after decade after decade. Yeah. Absolutely. And you as a value investor take advantage of of that. >> Abs. Yeah. Yeah. >> Fantastic. Uh so this next question comes from David R and he says you've been pretty open about holding a lot of cash. What's the logic behind that? I think we've talked a lot about that, but um maybe we could you can speak to this. Are you waiting for specific catalyst before putting money back to work? >> Yeah, it's a good question. and we've had about 20 25% cash depending on the depending on the client. So again, we have some clients who like to be 100% you know equities and uh we'll run them close to 100% equities but overall we've just been tardy a little slow in deploying capital because we see the market and prices are fairly expensive and you can make good money overall in your portfolios even when you're carrying 20 25% cash. I mean we're up 20% this year plus in in basically our portfolios. Um and so we haven't been held back in terms of uh performance. Now you could argue I guess if we had deployed all of that we'd be up a little bit more. What are we waiting for? Well um we're not I'm not waiting for any big macro event per se. I think a macro event could precipitate um us deploying that cash more quickly if something came along that dropped the market. We're actually re we're actually waiting more for just companies as we research and that we can come across that we feel comfortable investing in. Um and so that's really those are the two things that we be you know that slow us down just looking for for opportunities new opportunities that we can invest in where the stocks are trading below what we think are is intrinsic value you know low price earnings or low uh you know very high free cash flow yield type of thing um and or a macro event. Um, yeah, definitely macroevents do come, um, and they can come out of the blue. And I think that there's enough things swirling in the world that we could have a black swan, so to speak, and that then could help us, uh, deploy capital even more quickly because some of these great, I mean, we have a list of companies we would love to own, but they're just trading too expensively. And so I say to our guys constantly, you know, we keep that list really close to us. if there is a break in the marketplace and we can buy some of these great companies that will probably get discounted even though they won't be overly affected by uh the a drop in the macro then we're going to step in and buy. So those are the things that will will you know that um sort of occupy our mind in terms of how we're allocating uh capital and how much cash we're carrying. But overall just a little bit more cash just the high valuations in the market and we just want to be careful. It it makes a lot of sense to me. You are sounding a lot like Seth Kleman. I remember he Seth Kleman a famous value investor and he was was talking about my level of cash depends on how much opportunities I find in the market. Uh >> the more opportunities the less cash the less opportunities the more cash that makes a lot of sense and it allows you to >> to be opportunistic and make more money and be >> yeah I I I I encourage listeners and people who are doing investing on their own and that just get you keep this little bit money to the side. It gives you uh firepower when uh when you least expect it. And I mean Warren Buffett uh he's a great example over the years. He has raised cash from time to time and of course right now he's got a lot. He's one of the largest owners of US treasuries. Um but having said that aside from this time period, I've studied him for many decades. Uh and he generally when there's a when there's a problem in the economy, he can step up. And when you can step up in in a time when things are discounted heavily, boy, that gives you a great book value. And that's what sets you up for great long-term returns. And so be disciplined, be careful. U FOMO, fear of missing out can really, really hurt your long-term performance. >> Absolutely. Absolutely. So, uh, our next question, Jonathan, this comes from Mark L, and he asks you, "Wow, Jonathan, when do you decide to sell a stock? What are the top things that trigger your exit decision? Are you like a like Warren Buffett that uh the the the bestselling point is never? >> Well, we'd love to hold a company forever. Our time our time hold time frame, I guess as Buffett says, uh the perfect one is forever because then you com you compound tax deferred and that's really the way you make your money by letting your tax deferral compound with you. But having said that, no, it's very important to have a sell discipline. One of the toughest things uh when you're a long-term investor, you s you get to know these companies and you and you have to realize that they don't know you and they don't care whether you own them or not. It's just a stock. But why do we sell? Made a mistake. You know, you buy a company and you go, you know what, the thesis that we had, it's not panning out. We miss, you know, we missed something. We miscalculated. So, you make a mistake. Get out of it and move somewhere else. Number two, the stock really does become quite excessively overvalued and you want to just take some money off the table, protect yourself because you you know you know it's going to come back at some point. There's could be too much hype in the stock. Number three, um the you have a better alternative. So we generally run 20 to 25 stocks in a portfolio and we don't want to just keep adding stocks. So, if we find a business that we really want to own, it's selling at a compelling valuation, it's a strong business, it's it's got a great future, we'll look through our portfolio and say, what's the least um you know, the least uh attractive company that we own, the one that's maybe the weakest link in in our portfolio, and we'll sell it then um and uh and then move in a better company. So, it's like that pruning operation. Basically, you're pruning some and putting other companies in. So those that's really why uh we would uh the reasons why we would sell. It's very important to have a sell discipline and uh sort of you know target prices where you might start to think I should take money off the table and also be honest if a company is underperforming and uh you miscalculated in your in your analysis um don't don't worry about that get out of it cut your losses and move into something else if uh if the fundamentals are not u holding up and uh because I find once a company starts making some mistakes and they start to get off track uh boy they can really go off track for quite some time and it's better to cut your losses sooner rather than later. >> Yeah. Psychologically, emotionally, I find selling so much more difficult than buying. And it's just like you say, right, company XY said is starting to make this mistake, then make another, and then as a person, right, we're so influenced by our psychology and our emotions. You start thinking or you start actually rationalizing it, justifying it. Oh, you know, they'll bend their way soon enough. you start paying perhaps too much credence to management. So yeah, I I find uh having a selling discipline is is absolutely of the most of the utmost importance. >> Yeah. And you want to avoid torpedoes because sometimes when companies start getting into trouble, uh they can lose value very quickly. And again, depends on the business you're buying. If you're buying a company that's already highly valued and they're getting off track, they can they can just lose 50 60% of the value, you know, in just a matter of days. If it's a highly leveraged company, so you get into, we saw this in 2008, 2009. If you're buying a highly leveraged company, like a financial um business that's got a lot of leverage, a lot of debt on the balance sheet, maybe it's a a lender of some of some sort, and they get into trouble, they can go from uh you know, $50 to $2, like literally u they can wipe out your equity if you have a company that's you know 20 20 to1 leverage type of thing. Uh and we saw that in the banking sector. Um we saw that even with large banks. Um and so again you want to be careful uh if you if you get into a company that's highly levered a financial institution and you start to see cracks or problems in them um you know go for the hills as fast as possible because they can wipe out your equity um in in matter of just days. >> And speaking to that that's why I find value investing such a wise investment philosophy and framework because you're always trying to find that margin of safety. So that means that if you make the mistake, you're not going to be in so much pain. >> Generally speak, >> right? That's the that's Yeah, that's the idea that, you know, you don't you shouldn't really come across too many what we call torpedoes. Um I mean, sometimes you might underperform and we might own a stock that, you know, we're down 20% or something, but seldom will we ever be down something like 40%. That's happened very few times in my career. Um and that's because you are trying to look at the balance sheet. You're looking at something that's solid. um you know a fundamental value that uh if that will hold that stock up uh better than uh other other businesses and it's not a high-f flyier. So you yeah you should generally avoid big draw downs in terms of individual stocks. >> So uh Jonathan let's shift to a topic that you've talked a lot about in the past here on wealth and that is gold and silver precious metals. Just uh before we dive in, and you actually mentioned that, but before we dive in into this topic, a quick note, speaking of gold and silver, if you're looking for a simple, secure way to invest and own physical gold and silver, please visit our sister company, Hardass Assets Alliance at hardassetsalliance.com. That's hardassalliance.com. So, uh, Jonathan, the first question, this comes from a interesting username at goldhound 1979 asking you, Jonathan, you've long held a big chunk of gold and silver for you. Are these assets mainly about protection against via devasement or do you see genuine upside potential ahead? You kind of spoke to this already, but how are you viewing holding gold and and silver? And we'll talk about equities later. Is it is it to protect purchasing power or is it because you're trading? >> Yeah, the the key reason would be to protect purchasing power. I mean we are in a world where for 50 60 years we have run up debt at unprecedented levels. I mean we've reached levels that are basically they truly are historic. I mean a lot of times people say you know this is historic but they are historic and that's because we have a financialized system that didn't exist before ever in the history of the world. So uh we've financialized our whole system and uh and we're so leveraged it's just unbelievable and the promises that governments have made to their citizens you know unfunded liabilities on top of the onbalance sheet debts are as I think everybody knows just right off the charts. I mean they're they're they're multi they're hundreds you know I mean you're talking about multiples of the GDP many many times over especially if you preclude pension assets and health care promises and benefits I mean you can get into 500 600% of GDP I mean it just it I mean it just gets so high that it doesn't make any sense whatsoever I mean like how could we possibly be so stupid to create an economic system um like this um and we have and uh it's it's just because of arrogance and uh you know year after year abusing the system. So, having said all of that, now we're investing in the middle of a highly highly leveraged global economy and where there's promises all over the place. And so, the key is, okay, how do I protect the purchasing power of this hard-earned money that I have? I've worked hard. I've saved. I've done everything that they've told me to do. And uh at the same time, I'm concerned that my fiat currency is going to continue to lose a lot of value. And I think that uh over the next 10 years um we're going to see our fiat currency lose substantial value. What do I mean by that? Probably um you know 60 70 80% of its value. I mean it's almost impossible not to given the massive amount of debts. I mean even over the last couple of years we've seen it lose 30 to 40%. I mean if you're buying food you've seen this massive drop in our purchasing power. So that's that's just in the last couple of years, let alone if you go back to the early '7s and you look at um you know gold at $35 and now it's you know over $4,000. Um I mean it's outrageous the loss of purchasing power that we've had. You could buy you know what you could buy property for for $2,000 lots. Um those lots now are going for $200 $300,000. Right? So we've seen massive amount of loss of purchasing power. And I think that that's, you know, one of the key things as a money manager when people come to me and they're relying on us to protect their pensions is how do we protect their capital. So that's why the gold and silver where um particularly gold um but also some of the other precious metals u are very important in our portfolios and that's really just been since 2010 when I started up Rock Link. My previous life, I ran a mutual fund company and we we were the largest institutional shareholders of Franco Nevada back in the 90s. Um, but that was that wasn't because we were gold bugs per se. It's because Franco Nevada knew how to generate cash flow and all we cared about is we didn't want cash flow cash cash. But over time I shifted from not just cash flow but also to protection of purchasing power. And that shift really took place with the financial crisis in 0809 when when you really saw the full extent of how how weak our our global system was. And that's why we that's why we've now made gold and silver a core part of our portfolios at Rocklink because we have now for 16 years and they've been in the early days 15 I'd say 15% now we're well over 20% of our portfolios um distributed amongst miners and royalty companies. Yeah. >> Yeah. Great answer. I I think people really miss and this is because it's difficult to understand compounding in the long term. how much purchasing power folks just you and me people on the street how much purchasing power people have uh lost since uh the delinking between the between gold and the US dollar in the 1970s or or just in the last 20 years or the last five, right? Things are really much >> Yeah. Yeah. And you could you could argue that a lot of this came in too with 1913. And what happened in 1913 was the Federal Reserve and they were going to save us from all these ups and downs and you know market cycles and they were going to build stability and our purchasing power and our money and so forth. And you know Mario has been the exact opposite. And that shouldn't surprise us because if you're looking to the state or some kind of bureaucratic organization that's going to be, you know, genius and they're going to run our financial system for us and tell us what interest rates should be and how much money supply there should be. If you think that that will work, then you really have no understanding of human nature and the history of the world because it won't work. You want to break all that power up into as many people as possible and let the market determine these things as it was before 1913. Yeah, you have you'll have ups and downs and things like that, but there was also stability of purchasing power for hundreds of years uh you know with the first formation of the United States until they got to 1913. And we've seen just steady erosion since. And of course that just got worse with uh the dellinking, the complete dlinking of gold. It was already delin with Brett and Woods, it wasn't a full gold standard. But um in 1971, that's when it really got completely delin. And I mean we've, you know, we've seen a debt buildup that is just outrageous. Yeah. Uh, so this next question, and I'm sorry Liam, if I'm not pronouncing your last name correctly, Liam Tierney6309, he's asking, it's an interesting question, geopolitical, I would say. Uh, central banks now hold more gold since 1996 than US paper treasuries. What do you think about that? >> Yeah, I mean, a lot of people are speculating on this. I we don't we don't change our investment thesis because of this reality. Um but I do think it highlights the importance of gold after 20 years, 25 years of people poohoing gold and saying it's a barbarous relic and and some central banks just ditching it completely. I mean we know that's what happened in the UK. Um and you know they call it Brown's bottom when uh the the head of the excheer there, Brown, he sold right at the bottom. I think the lowest gold prices, you know, in the last 40 years, 30 years. Um, and then in Canada, we got rid of all our gold over a period of time. It wasn't just under Mark Carney when he was the Bank of Canada governor, our current prime minister. Um, and so it what's interesting is that um whether you know, don't do what they say, do what you know, do what they do. And I think the central banks have accumulated the gold because it is real collateral. I mean, I don't care what anyone says. It's it's hard to understand sometimes. It's hard to get your mind around. But since uh you know the the the book of Genesis was written in the Bible in Genesis 2 um gold's mentioned and gold has been used for the last six seven 8,000 years of human history that we have recorded that we we know uh that humans been on the earth um and it's been money and um so um I think that you know that's that's that's our view in terms of how how we approach it um from that perspective. Um, so that's that's that's why we want to own it and that's why we um, you know, go into that area and uh, we think again you that's the only way uh, it's one of the only ways you're going to protect your purchasing power over time. Now the other way you protect your purchasing power is buy a great business with pricing power. Um, when you're buying a business that's essential that has assets, it could be assetri business, could be real estate, could be utilities, it could be infrastructure assets or a company that can pass on it as price. That's another way. It's not ideal. It's not, you know, going to be a one for one, but it's way better than just having your money sitting in cash. Um, and so if you can buy an active business that can adjust uh itself and uh and repric constantly, then that's another way of protecting your purchasing power. Stocks are much better, of course, than fixed income or or uh or uh just holding cash. >> Yeah, that's that's great, Jonathan. And I think it makes a lot of sense and it speaks to what we were talking about earlier right on um companies with competitive advantages and therefore pricing pricing power. So so let's move to that effect which is value investing. I got some questions from the audience there. Um and this is from patient capitalist 3098. Jonathan, you've said value investing still works even when the market's obsessed with hype and momentum. How can ordinary investors keep their discipline when everything around them screams short-term gains? This speaks a lot about, you know, psychology, controlling your emotions, which would be great to hear from you, Jonathan. >> You have to have strong belief system. You have to have a strong belief system. You have to develop your your ideas of what you think is true and uh how you're going to execute in the marketplace so that you're not pulled in different directions. is no different than um other areas of life that if you're going to be anchored, you have a strong faith. You're going to stick to that faith because you believe it's true. You believe that those give you the proper guard rails that will protect you and keep you from getting off track. The same thing with investing. If you're a value investor, um is because you believe that the best way to protect your capital and grow it consistently because the idea is you want to grow it consistently over time. It's not about just, you know, making as much money in the next six months as possible. I mean, that sounds great and your neighbors telling you how much money he's making by trading, you know, who knows what stock or what, you know, new AI stock, but that's not a consistent way to compound your money. And so, again, if you look at someone like Warren Buffett and one of the most amazing things about Buffett, if you go back and you read all of his annual reports, you can get, you know, the compendium of his reports, sit down and read them consistently year after year after year. So, you can, you know, in a couple hours, you could probably read a decade. you're going to see this consistent consistent application because he is a believer. He knows what he believes and he sticks with it as best as possible. He also admits occasionally you'll make a mistake, you know, omission or commission. Um, but you have to really be be grounded into your bone marrow what you believe about your investment principles and then you have to stick with them. When you start to get tempted to step outside of them, you've got to slap yourself um or find someone else. I mean, other people, you know, it's great to work on a team. I have a team of people here and that we keep each other in check because um they say, "Hey, hey, wait a Jonathan. Are we diverging here a little bit? Are we getting a little off track?" So, I think it's again it's a frame of mind. You've got to know what you believe. Those have to be core principles and those principles cannot change because you know they're going to work over time and it's going to keep you on track. I remember going down to um the annual meeting in Birkshshire Hathaway in 1998 1999 and might tell you Buffett was being chastised. He'd have people stand up and say that he didn't know what he was doing. I mean here's a man who was already worth at that at that time I don't know 20 20 billion or something like that. He'd been one of the most successful investors for three four decades. And he had the young people stand up and go you don't get it. You know you're out of you're out of tune with reality. you don't know how to, you know, you don't know uh tech businesses and and he admitted he goes that we're not going to invest in things we do not understand. Um we have a circle of competence. We want to stay within that circle of competence. And there's you if you don't know where that circle of competence is, you don't have a circle of competence as Munger would say, right? And um and so I I heard people just chastising um Buffett and his stock went from I think about 80,000 down to about 45,000 when the tech stocks hit their high. And then the tech stocks got nailed by 80%. Some disappeared, but even the best ones got nailed by 80% drop. And Birkshshire Hathaway doubled over the next couple of years. And all of a sudden, it's like, well, maybe Warren didn't know what he was doing. And so, you have to know the game you're playing and stay within the the the area that you feel comfortable and you're competent. You don't have to make money the same way your neighbor makes it. you make it in the businesses you understand, the ones that are close to you. And you can become very wealthy by investing in areas that other people aren't even investing in. I if you look at the Forbes 500 list, um, and you look at where people made money, they made money all over different industries. And, and often it's not in businesses that are just, uh, uh, the high-flying businesses. They're just, you know, businesses under the radar screen. So, yeah, I think that's the best way to keep on track. You have to know what you believe in, why you believe it, and then keep that reinforced um in your thinking by the books you're reading, the people you speak with. Keep things in check with uh with other friends and so on. >> Love it. Stick your principles and be rational about what you know and and what you don't know. And I guess also try learning about other industries so that you can expand that circle of confidence as Buffett would say. Fantastic answer, Jonathan. Really, really great. Okay. Um, I'm think we have time for one last question. This is from uh Charles T. Jonathan. For someone who's serious about learning how to invest, not trade. What books would you recommend? When which ones make the biggest difference in your journey? Just before we were shooting, we were talking about Peter Lynch, remember? And One Up on Wall Street that very fabulous books. But what are which books are your favorites on investing, Jonathan? >> Yeah, One Up on Wall Street is is a classic. uh it's very practical and Peter Lynch is a tremendous communicator and I have that on our library uh and our website that that we recommend. I think Hagstrom's book on the Warren Buffett way is also very good uh book in terms of investing. If you want to understand a little bit more about Warren Buffett um the book that I guess it was snowball that was written by um >> oh I forget Alice Sher that that's that's also a very interesting uh interesting read. She really he opened him himself he opened himself up to her and uh for a number of years she sort of trapesed around with him and uh and that's a real insightful book also. I mean, if you're glutton for punishment, you can pick up one of Ben Graham's books and on value investing, intelligent investor, but there I I would recommend uh uh yeah, you just maybe look at certain sections in that book depending on your aptitude uh and reading that. And um yeah, so books like that are really helpful and financial history. There's the one book uh you're catching me off guard. It's on the um it's on the uh Wymer Germany on the death of money. Um Ferguson. Uh >> yeah, that that that's an amazing book to read. Uh and and it puts, you know, puts things in perspective where all of a sudden you go to a coffee shop and you're they're changing the prices while you're sitting there drinking your coffee. Um and they're wheelbarrowing in uh you know, your your Deutsch marks. Um and and so it it it's that again we have to we have to understand that um just because we haven't seen that extreme hyperinflation in Canada, United States um in our lifetime, it can happen and and don't fool yourself. It has happened in very developed countries and economies in the world. We can't break all these financial rules indefinitely. I'm not suggesting it's going to happen tomorrow, but don't be naive. And by reading books like that, it really puts things in perspective. Plus, they're very fascinating reads. I mean, uh they're it's hard to put some of those books down. They're very very interesting reads in terms of history and what we've done before. So, there's there's a few books and we do have a library on our website where we have quite a few books. Um some of James Rickard's books I've enjoyed that he's written um on gold and on the economic system. Uh you I find that he's very insightful. Again, it's good to read a number of people because, you know, none of them have the corner on truth or the, you know, information that you want to read, but uh but there's some great books that you can read. Those are some of them. Yeah, >> those are all great and uh you definitely added some to my reading list. I'm going to put a a link up here on the screen uh with that page of yours on your website with with the book list. So, Jonathan, this was fascinating and as always, incredibly insightful. uh thank you for sharing your time and wisdom with our audience today. And uh for our viewers, if you'd like to connect with one of Wealthian's endorsed financial advisors, including Jonathan and his team at Rocklink, again, just go to wealth.comfree to schedule a free portfolio review. That's wealth.comfree. Jonathan, once again, thank you so much. And to everyone, thanks for watching and we'll see you again next time. >> [music]