The TRUTH About the Gold Rally: The System is Breaking

Summary

• Gold Rally: The podcast discusses the recent surge in gold prices, highlighting gold's dual role as both a speculative asset and a safe haven, driven by central bank purchases and speculative interest.
• Investment Strategy: Grant Williams emphasizes the importance of understanding gold's unique market dynamics, cautioning against speculative trading without proper knowledge and advocating for a long-term ownership mindset.
• Central Bank Activity: The conversation highlights the shift in central bank reserves from US dollars to gold, driven by geopolitical uncertainties and the desire to diversify away from potential US sanctions.
• US Treasury Market: The discussion touches on the declining foreign demand for US treasuries, with a notable shift in holdings since 2012, raising concerns about the sustainability of US debt financing.
• European Debt Concerns: Williams points out the unsustainable government spending in Europe, particularly in France, and the potential implications for bond markets and fiscal policies.
• Geopolitical Shifts: The podcast explores the geopolitical tensions between the US and China, the strategic maneuvers of countries like Saudi Arabia and Korea, and the potential realignment of global alliances.
• Investment Positioning: Grant Williams shares his defensive investment approach, focusing on gold accumulation, private debt, and short-term US treasuries, emphasizing capital preservation in uncertain times.

Transcript

The gold price has continued to hit all-time highs. But why is good news for gold investors bad news for pretty much everybody else? Why, no matter what the United States does to increase revenue through taxes, tariffs, or otherwise, will it not make a difference to their balance sheet? This and much more in my interview today with author and investor Grant Williams, one of the most respected voices in macro finance. And today we go deep into a handful of very important topics. And if you enjoy this conversation, Grant Williams will be speaking at my annual conference, the Vancouver Resource Investment Conference, January 25th and 26th. Hit the pinned comment below for tickets today. Welcome to the J Martin Show where we dissect the greatest minds in geopolitics and finance so that you can better understand the world. Here is Grant Williams. This is J. Martin. All right, here I am with Grant Williams. Grant, it's so good to have you back on the program. Really good to see you, Jay. As always, mate. It's always a pleasure to talk to you. We've had some fun conversations over the years, you and I. So, here's where I want to start. I want to start with a pillar idea in the market today. Something that uh you and I you and I may consider simple, but um gold is suddenly cool. And as you know, gold hasn't been cool in a very long time. I've been a gold investor for 15 years, yourself much longer. For the majority of that time, I felt like a a deep contrarian uh and sometimes very foolish. Um but as we watch the gold price rally today, I think it's important to remember what people have always said, be careful what you wish for because when the gold price starts to run, it usually means a lot of other very important stuff is breaking. And so I wanted to wrap uh the rest of the gold conversation uh to begin here. So, put some context, Grant, around the global impact or what the what what gold signals when it's running like this. It's interesting. You know, it's it's a great question, Jay, because um it's it's amazing how gold can be the ultimate speculative asset and also the ultimate safe haven asset at exactly the same time, which is I think what it is representing right now. you know, um if you if you look at the price action and you look at the chart of the price, it looks like a crazy speculative asset. The price is going crazy. Uh if you look at the buyers uh and the nature of a lot of those buyers, certainly the ones that that started this run, they're the ultimate safe haven buyers in central banks. And so there's a reason for that. You know, gold tends to attract speculative money when it starts to run, but it starts to run for very, very different reasons than price. You know, gold doesn't start running up because people think, "Hey, I'm going to make a load of money buying gold and staying long of it and trading it." So, I think for people who are looking at gold now because of the price, there's an awful lot you need to unfortunately probably learn the hard way. um because it it's it's not like other assets. It's it it it just isn't. And sometimes it can be hard to define why it isn't like other assets. But if you just think of it simply, you know, it's an inert element, right? It's a it's a pet rock. All these things that people call call. There's no way to value it. It doesn't have cash flows. It doesn't have a business. It doesn't have customers. It has nothing. It just sits there. And so when you can't value an asset on anything but emotion, it becomes an emotional asset. And emotional things tend to act emotionally, which is to say often times irrationally. So you do tend to get these these crazy spikes in gold when when the fever hits. And just as quickly, it can it can break your heart and fall when you think, well, yeah, what happened? This we've gone. Surely $5,000 was next. and then the next thing you know it's it's back at $25,000. Now I'm not I'm absolutely categorically not saying the gold is going back to $25,000. Um but what I'm saying is unlike um certain unlike Nvidia, unlike maybe even Bitcoin earlier on in its in its rise, if you're expecting gold to continue on this trajectory and continue to shoot up the way it is, I suspect you're going to find yourself in for a disappointment. Um would I say gold is in a bubble? Uh I would say that depends on your time frame. If you are a trader of gold, then I think from a trading perspective, gold is probably in a bit of a bubble right here, right? It's stretched. It's it's gone too far. And it's gone too far precisely because what we're of what we're talking about, we're talking speculative money coming into it because it's suddenly cool. You've got that froth that you always get when speculative money is is attracted something. Underneath that you've got the money that has been accumulating gold for the reasons that gold has been accumulated for many many centuries and that is as a diversifier as a hedge as an insurance policy all these things as a protection of purchasing power all these long-term reasons why people own gold and and I'm always very careful when I choose those words because you know I always talk about owning gold not buying gold because I think if you use the word buy, there's an implication that you're looking to sell. Um, if you own gold, it's a very different mindset. You know, this this is why we used to talk about uh owning shares in a company and now we talk about buying stocks and the mindset is completely different. So, what's happened for many many years is gold has been accumulated by people that wanted to own it. And that's why we've seen it squirreled away. We've seen volumes going up in things like the Shanghai gold exchange because people are owning gold. They're taking it off the market. They're putting it away and they're using it as all those things. It's a hedge as insurance policy as a diversifier. There wasn't really that much speculative money in gold. Um because it wasn't cool. And for the speculative crowd, you had Bitcoin performing even more crazily than gold tends to do when it gets a fever. So you could scratch that speculative itch outside of gold. Now Bitcoin's kind of, you know, reached the point where for it to perform in terms of percentages the way it has in the past, you're talking crazy crazy numbers. You know, it's gone up 10x. Well, that from here is a million bucks. Now, there are people who will tell you Bitcoin is going to a million bucks a coin. They know far more about it than I do. But but for it to get to a million bucks a coin is much harder than it is for it to go from $1 to $10, right? So you've kind of you've lost that that crazy ability to dream about 10 bagging something in in a short space of time. But suddenly gold's caught and so there's a lot of speculative froth for the people who are who have who are in gold now because they look at the price, they look at the momentum, they think there's a trade there. There absolutely is. But this is not like Bitcoin. It's not going from here to 10,000 in a straight line. You know, I'd be I'd be amazed if gold traded at 4 12,000 before it traded back at 3 1/2, maybe lower. Amazed. Do I think it's going higher than 4,000 over the long term? I absolutely do. But that requires a different mentality because if you're buying gold purely based on the price, you may have to suffer some pain and check your gut and and and find out that where trade has become an investment. Um but uh but again, that's just that's the nature of gold. And if you and if you want to speculate during a gold bull run, you know, the mining shares give you so much more leverage if if that's your thing. If you're an imbeetent speculator and you're looking for the biggest bang for your buck, then the gold mining shares and they've already outperformed significantly on this run as they finally uh have been promising to do for years and they have. Um, but I I I think for anyone new to gold, you you need to do a little bit of reading. You need to understand that it's it it's just not like other assets. It doesn't behave the same way as other assets. And understanding the history of how gold trades in bull markets is going to be a really important thing to research and understand because you know you and I can and talk about it from experience. Um there's no bull market like a gold bull market but it carries an awful lot of jeopardy if you have the wrong mindset at the wrong at the wrong point in that cycle and then the wrong risk tolerance. Yeah. Okay. I mean, you hit on so many clutch ideas there and one I just want to call it back was uh you know, you drew the parallel between speculators looking at Bitcoin the way they might have looked at gold or gold stocks in the past and this is a conversation that I've heard countless times over the last 10 years from gold investors who were saying there's not as much speculative money available to gold stocks because of Bitcoin, which absolutely there's truth to that and als Also, if the Bitcoin thesis plays out the way most believers believe it will, that leads to a far less volatile asset eventually, which is maybe where we're at. Just as you mentioned, Bitcoin has demonstrated 100x in the past. Well, 100x from 100,000 is a much different story. So, you end up uh with more of a direct parallel between why people might invest in Bitcoin versus why they might invest in gold. But either way, that competition from a volatility standpoint is sort of over or coming to an end. Uh you might just look at the asset differently or at least you should. You also touched on the two driving forces behind the gold price today. And I think they're very important to differentiate one being the buyer and one being the trader. And yeah, we we've talked about this before. It's very important to understand what kind of investor you are. Are you buying equity in a company or are you just trading its share price? And most people, I might guess, are trading share prices, but they think they're buying companies. And yeah, the the mindset doesn't match the activity, and that's why you get a bit caught. Uh but a as a consequence of those two factors driving price, you have um uh tons of short-term volatility inside the long-term trend, right? You have long-term buyers that are accumulating over time and over years, we've seen the gold price respond logically to that. But along inside that long-term trend, buyers over buy and oversell and over buy and oversell. And that's the reason you might see gold withdraw back to like high 30,000s before it makes a move to four. And that's just part of the game. You can't really get around that. Yeah, absolutely. And and as I say, when when gold makes those moves, let's say it does go back to 3,000, um it's very difficult to for a lot of people to understand why there's no there's no earnings, there's no, you know, there's no conf there's no takeover speculation. There's nothing, right? It's it's emotion and it is and it's flows and it's do the central banks pull back. There are all kinds of things that can that can move gold, but you're not really going to ever read about them before the event unless you're paying attention to the right places and you understand the factors that tend to influence the gold price. And right now, I would say the most important thing to look at, apart from the speculative money, which you you you can't really understand central bank flows. You know, if you if you if you keep paying attention to what central banks announce every quarter when they when they announce whether they're buying gold or not, as long as that central bank bid remains there, you have a really good underpinning here because central banks are indiscriminate, nonpric sensitive buyers. They just need to own gold as part of their reserves to diversify and and and decrease their reliance upon the US dollar. And that, you know, that's a shift that has been going on for, you know, two or three years now, uh, as people look to potentially get themselves out of the way of sanctions, out the way of, um, asset seizures, which the Russian central bank has obviously seen. So there there are absolute imperatives to central banks to own more gold, and they are they are doing that clearly. Um, so you know if you focus solely on the price and you are a an accomplished trader, you can look at all your usual um trading signals. You can look at oscillators, you can look at MACD's, you can look at moving averages, you can look at all the stuff on the charts and you can if you know what you're doing, you can trade it just as a price. But if you are um a speculator who is new to gold markets and has just been used to being able to find the hot asset, buy it, let it run up, and then sell it. I think you need to be careful with that with gold, particularly here. You know, I I I as you said, you and I have been buying gold for a long time. I've been a proponent of gold for many, many years now. But my motivations and my um my modus operandum is are very different. I don't speculate. I just accumulate gold and I have done for 20 almost 25 years now. So the price is not important to me, you know. I'm not I'm not making decisions based on price at all. I'm not looking at the price now and think I should lighten up. I don't wait for it to pull back so I can buy more. I just keep accumulating it because I want to hold liquidity and hold reserves in in a form that I believe rightly or wrongly is going to protect my purchasing power over time and it's done that. For the people who are purely looking at this thinking, man, this thing's a rocket ship. I got to get involved, just be aware that this has been a very sharp run up in the gold price and there is certainly room for it to correct even though I think over time if you're an investor, it will go significantly higher than this. Yeah, that's super important. And actually a mutual friend of ours, uh, Rick Rule was making waves this week for encouraging investors to start taking profits. Like rule number one is stay at the table, right? So make sure you are taking profits, staying in the game. Uh, don't fall in love with an asset ever, especially in equity. Uh, it's easy to do that when uh, you know, uh, it becomes cool again. So let's dive into some of those driving factors behind the central banks. And I want to sort of move through the the the purchasing activity. A lot of folks won't be surprised. I mean, you mentioned the Russian confiscation, the Russian uh US dollar asset confiscation a few years ago now, and that kind of set a new precedent that permeated the mindset of central banks all over the world, it seemed. And we saw record central bank gold buying over the next two years like we haven't seen since the 40s. Um, but it's not just sort of Russian allied or bricks adjacent countries, right? It's not at all. uh western nations as well are playing this game. So, so what are they watching and what are you watching when you say if you're not paying attention to these bigger activities and the motives of central banks, you'll miss the reason gold may be moving up or down. So, what are you watching, Grant? Well, you've got to understand the motivations here, right? Um, you know, every central bank in the world pretty much has US dollar reserves because the US dollar is the energy currency and everybody either has energy imports or energy export needs. So, they're either taking dollars in in return for exports or they need dollars to pay for their imports. So, every central bank in the world owns dollars. Uh and that's been fine for you know whatever 50 no 80 years since the end of end of um World War II and then even more so after 1973 and the petro dollar agreement. So um if you assume every central bank in the world holds US dollar reserves to some portion of their overall foreign exchange reserves, the second that the Treasury froze those Russian assets, you essentially told every single central bank in the world this could happen to you. Now do I think that they're ever going to do that to the UK? No. Australia? No. Canada? No. No chance. But the fact that it has happened now crystallizes the idea that it can happen. And if you are managing sovereign reserves, you cannot under any circumstances allow those reserves to be at the whim of a capricious government. You just can't. It's a national security imperative. So you you you're not going to sell all your dollars straight away. But if you were happy holding 80% of your reserves in US dollars, you might want to over time ease that back to 50%. Right? Just just as a precaution. It's it's it's the sensible thing to do. And these people are are in the most part sensible. So how do you do that? Right? You don't have to dump your Treasury bonds. You just you just participate a little less eagerly in the auctions. You let your bonds roll off and with those proceeds instead of reinvesting into treasuries you you buy gold with them. You know, gold is a neutral reserve asset. So no government can impair that asset. If you own that gold and it's in your own vaults, there's there's nothing anyone can do about it. And it's completely funible, completely liquid. And I think that's that's a big part of what we've seen with these central bank purchases is just uh a cautious approach to potentially catastrophic outcomes that are out of their control. And yes, none of these other countries are going to invade Ukraine, but who knows what decisions you might make as a government might put you on the other side of of the United States. We don't know. Can you afford to take that chance? No. So that has been the big driving force behind I believe behind this this surge in in not only the gold price but also the level of demand from central banks and that hasn't gone away and that's not going to go away. Now there's a strong possibility that a lot of central banks have have done the shift that they needed to do in order to get themselves to the right level where they feel more comfortable that their reserves are diversified sufficiently to give them a cushion. But it doesn't mean as they take in more reserves, they're not going to need to add more gold to keep those allocations the same. And so you kind of have this bid now under the gold price from central banks which if the gold price comes back, they're not waiting for it to pull back, but it just incentivizes them further if they see the gold price fall to maybe speed up their um their conversion of US dollar treasury bonds into gold. And at the same time, the US with the deficits it's running is desperate to find uh outlets for for uh its treasury securities. You know, this is one reason why the stable coin, the genius act has been passed to to create a whole not a whole new tranch of buyers for for treasury bonds because they need to find them. So there there's a massive shift underway in the composition of the reserve asset uh framework and it is absolutely a shift towards more gold fewer treasuries and the unlike treasuries which are unlimited in supply gold doesn't have that luxury. You know the supply is absolutely limited in gold. Uh the the free flow is limited and the and the speed with which more can come online is also limited. So it's a very different dynamic to if you see a spike in demand for safe haven assets which are treasuries you're not going to see the price go crazy uh because they can produce as many of them as the market demands. Gold is not the same. Can I ask you uh in regards to US Treasury market, we've seen you know bricks appetite fall off a cliff um you know alongside many sort of adjacent countries but recently have I got this right the UK has emerged as the biggest buyer in the US bond market and and and is now the second largest holder right behind Japan and and now above China. Have you watched that? I don't I don't know if they're the biggest buyer. um they've been a big buyer recently, but the the important there's a there's a chart you can find if you if you go the Treasury the TRIC, the Treasury International Capital Report publishes this every quarter. Um which is the total foreign official holdings of US treasuries. Um and if you look at individual countries, you might see, wow, the UK are buying or the Chinese are buying or the Japanese are buying or selling or whatever. You might see in any six-month period what looks like a change in behavior by one of the uh individual central banks. But if you look at the overall total foreign official central bank holdings of treasuries, you'll see it basically peaked in 2012. So it peaked 13 years ago and it's kind of wavered, but you can draw a line across the top and in the last year or so it's it's fallen. I won't say precipitously, but noticeably that that chart has bent down. So within that fall, yes, you might see the UK buying more, but the sale by the Japanese or the Saudis or the Chinese or whoever it may be is more than making up for that. So it's the overall component. And if you've got um if you've had 13 years of essentially flatlining demand for treasury bonds by foreign central banks at a time where deficits have increased to six, seven almost 8% of GDP, you have a problem brewing uh in that you have to find buyers for those treasuries. If it ends up being the Federal Reserve, you got a problem on your hands. Now these are official holdings, so you might see corporations buying more. it it's a very muddy picture, but the official holdings of central banks is is probably the most important because that sends a message about um relationships between other countries and the United States. If if other countries central banks are not prepared to continue to buy treasuries to support uh the US need to sell them, then something has shifted. Particularly if you look at that chart, you see it just goes up and up and up and up guessing in 2012 and then goes sideways and starts to go down. something shifted in 2012 and if you look back at um comments made by the people's bank of China around that time you will find um comments by uh the head of safe the the the state administration of foreign exchange that said you know we we are going to reduce our uh purchase of treasury bonds and they've done it uh as have others. So, um, it's a very complicated picture that everybody wants to distill down to the price of gold. You know, everyone says, "Oh, so where's the gold? Are we going to 5,000? We going to 10,000?" It's way more complicated than that. There are way more things um that that move it around. I think you're fortunate at the moment because it really the movements are being driven by central banks which are arguably the easiest of the inputs to to look at in terms of looking for a trend and I think they are consistent buyers. It doesn't mean the price is going to go up all the time the way it has done, but it means there's a bid under it which should support the price if we do get some kind of correction from kind of quasi bubble territory back to a slightly more uh sensible and measured trajectory higher. Okay. Okay. Thank you for that. Um, in your recent letter, Grant, you uh walk through um various examples of debt vulnerability throughout Europe um and excessive government spending. And you know, as you phrased it, we're in a situation of politically untouchable and financially unsustainable um government support and spending. And in the EU, I think you mentioned 48% of GDP through the EU is now direct government spending. in France it's over 50% in that country specifically. So what should people pay attention to and in terms of what is that the smoke of what what is that indicating uh that we may see um in the next couple years here coming out of Europe? What are you concerned about? Well, it's you know the smoke this has been smoldering for a long time. I think anybody that's paying attention understands that functionally many of these countries, if they're not bankrupt, they're as near as bankrupt as effectively matters. Um, you know, the the the debt the United States has, is it ever going to pay it back? No. But it can print its own currency. um France, the bond market is finally starting to sit up and take notice and and demand um higher rates to to finance the French government. The UK is having a similar uh problem. You know, we had this this famous list trust moment back in 2022, September 22, where which led to the downfall of the government because the bond market revolted against their budget plans. Um yields in the UK are higher now than they were then. Um, so we're at this point where uh the finances of these governments and the seeming impossibility of any way that they can ever pay them back or ever get themselves out of this situation without um either significant spending cuts or significant tax rises is is pretty obvious to everybody paying attention now, particularly the bond market. And so you can be functionally bankrupt for a long long time and people are still happy to put their fingers in their ears, hold their nose and buy your treasury bonds or your or your guilts or your oats or any of these uh sovereign bonds of western governments because uh to use my friend Ben Hunt's uh phrase, it's not common knowledge yet. We all know, but it's only when we know that everybody else knows that it starts to matter. And it feels like we're maybe not at but we're close to that point where bond yields are which have been so dutifully obeying what central where central banks set interest rates. When central banks cut rates, bond yields fall, the market falls nicely in line behind them and and everything functions normally. We're now starting to see the bond market um you know in in the wake of Federal Reserve rate cuts. the bond the initial reaction will be that yields fall but then at the longer end they'll start to tick up again you know and there's this there's this phrase that uh people that watch the bond market talk about will the Fed lose control of the bond market and by that what they mean is are are rates in the in the open market going to start doing things that are at odds with rates that the Federal Reserve is setting and we're starting to see that at the margin we're starting to see activity in in in bond yields that we haven't seen been uh for a long time and the kind of activity that at the margin you can expect to see once bond markets are starting to query the narrative that's been laid out by the Federal Reserve. And these are really important turning points to watch and they might not mean anything and they might be a few basis points and they may turn out to be false signals. I'm not saying this is a guaranteed way to understand what's going on. But the very fact if you've been watching bond markets that this kind of thing is happening tells you that something has changed. And so when things that significant change, it means you have to be paying attention to them. Um and you have to be watching them even more carefully because if the bond market does result uh revolt, then the central banks uh and the treasury departments of these very countries have a major problem on their hands. Um and we all know that the public's willingness to to to bear austerity is zero. Uh they will happily vote out anybody that tries to impose it. But at the same time, the constraints on the other side of that equation, i.e. can we raise taxes much more? Um their their hands are tied because inflation has eaten away at purchasing power. They've already uh at the margin hiked taxes to a point where the public are starting to get really antsy about it. So, we're at that tipping point where something's got to give. Either spending has to be cut, you have to raise taxes to uh to increase your revenues or the bond market is going to make that decision for you. And anytime you reach that point, um you know, things can move very far, very fast. And it's the kind of environment where people will turn to gold as a neutral reserve asset as something that is not uh at the whim of of of treasury departments or central banks and that will provide some kind of protection against uh either either confiscation or loss of purchasing power. And you know that that lever the taxation lever is one that politicians are likely to pull on. uh you discussed the concept of the the ler curve, right? Which is to say if taxes are zero, the government collects no revenue from taxes because the tax rate is zero. But if the tax rate is 100%, they also collect nothing because nobody's going to work just to give all the income away. And so the puzzle we have to solve is what's that sweet spot where people are incentivized and motivated and revenues are sufficient, but we're not deincentivizing, you know, past the point of diminishing returns. Um, could you so explain that concept uh in in this context for us, Grant? I'd love that. Yeah, I mean Arthur Leer famously drew the LER curve on a napkin in a in a Washington steakhouse many years ago. And it's just simply uh a curve. It's not even a bell curve. It's just a from zero to the top to zero. It's an upside down U. Um, and uh, you know, that's not to say that 50% in the middle is the sweet spot, but somewhere in the middle of that curve is the point of maximum taxation after which your your tax revenues tend to decline because you just push it that little bit too far and you incentivize people to either, you know, work less or take their take their businesses elsewhere. And I would suggest that that a lot of countries are bumping right up against that at the worst possible time because to my earlier point, governments are either going to have to increase taxes or cut spending. Um what they really need to do is cut spending because the spending has has gotten out of hand. And the entitlement issue, not just for the US, for every single Western democracy entitlement issue is a massive problem. the unfunded liabilities, the promises that have been made cannot be made good on. And the sooner they face that fact, the better and the sooner they do something about it, the better. But it's political suicide. You know, telling people that we are the government who are going to tell you that we're no longer going to honor the promises we made you is political suicide. They'll be out tomorrow. Um even though it wasn't that government that made the promises, it doesn't matter. Whoever delivers the bad news, they're out in their ear. The next sales the public gets. So, of course, they're going to try to do it through taxation. Um, but if you are at that point on the Lafacura where you've reached the maximum effect that raising taxes can have and you and after that you you're going to see diminishing returns, you've got a real problem on your hands. And so, you know, that's kind of where we are. We may not be exactly there, but we're not far enough away from it that there's a meaningful amount of room for a lot of these governments to raise revenues by raising taxes. So, you know, at the point of maximum debt, at the point of maximum public resistance to austerity, let alone the breaking of of of uh promises, you need to somehow find a way to raise revenues. And as we all know, the only revenue governments have is taxes. So, do we see more tariffs from other countries as a way to try and raise tax revenues? Possibly. But then you get into trade war territory. you know, the the room for maneuvering now is minimal. And um and so when you have that little room for maneuver, governments tend to be forced into doing things rather than making proactive policies. And anytime you're forced into something, the market will call you out on that fall short. You know, it's it's funny, right? I feel like it's like watching an entrepreneur ignore the big problem and focus on the fringe opportunities. Like the US government doesn't have a revenue problem. Sure. Tariffs, taxation, do whatever. It's a spending problem. If they raise more money, they'll just spend it. Like that is very obvious to me. Well, you've already spent it, right? If you raise more money, it's already been spent. You're just you're just throwing money into the hole you've already dug. Yes. Yeah. I think like as you mentioned in your recent letter, the future obligations of both Social Security are like 22 trillion by the 2030s. For Medicaid, it's like 50 trillion by around the 2030s. These are future promises to pay with money that we don't have. I don't know where we're going to get it from. Is this correct? Yeah. And and look, I deliberately took the low estimate there. I mean, we're at 75 trillion. Yes. There are people that will show you the numbers that say it's twice that, 150 trillion. But the problem is mentally, I think for all of us, when you get into the 150 trillion number, it's not real anymore. It's such a big number, you kind of go, what am I going to do with that? Right? 75 tr sounds ridiculous. $75 trillion is a more uh is a more understandable number I guess when you when you got when you got $34 trillion of public debt. 75 trillion there's some context to that. It's twice the national debt. 150 trillion is a is a meaningless number to most people. So look, I mean that's as good as the problem potentially is. And if you look at uh congressional budget office forecasts, these deficits that US is running 6 7 8% are going to persist for another 6 seven years. And and traditionally the CBO uh their forecasts have been light. Right? So if they say that we we expect 6 7 years of 6 7 8% deficits in 6 7 8 years time you're probably going to find they were low on their estimates. Um, so it look, it's a real problem, but it doesn't matter until it matters. And it sounds ridiculous because this is mathematics we're talking about. And the the laws of mathematics are set. You can't cheat them. The question is when is this going to matter? And the tail of that is always going to be in the bond markets. gold is potentially signaling that things are changing and the attitude to these to these debts is shifting, but ultimately the bond market is where you're going to see this. So, people need to pay really close attention to bond yields in absolute terms and also relative terms to where they've been in the past, but also as I said, the the the reaction function of bond yields to central bank interest rate decisions. If you if you if you get a cut and yields fall alongside that and they stay down, that's a good sign. If you get a cut, yields fall in the aftermath and then they tick back up again, that's a very bad sign, right? And I think this is important because we've seen a lot of celebratory headlines uh under the new American administration. We're driving more investment into the country and and we're having uh people are bending the knee in in response to tariffs and all of this. But when you dive into the details, rarely is it what it seems or was it announced. And uh like South Korea was a clutch example. I think they had a handshake deal to invest 300 billion in the American economy to get out of the tariff uh that was threatened on them and they've since come back and said, "Yeah, we can do 350 billion, but you'll have to lend it to us, right?" And it's like, "Okay, so they're going to invest in the American economy. Hold on. With American dollars, they have to borrow, right?" And so it's like actually just this indirect stimulus program like cash injection, correct? And it's if you dive into the details, you're like this is just a circus. It's silly, right? But there was a headline that sounded promising. When you dive into the math, you're like, oh, that doesn't actually add up whatsoever. Well, two things I'll say. One, one is that the beauty of those headlines for the government, for the administration, is that most people don't dive into the weeds. They just take the headlines on and and that's good. and then when the story breaks two weeks later that they're going to have to borrow it, that doesn't register anywhere near as as well. The other thing I would say is that you know for for for 20 almost 20 years now um post global financial crisis and if you were paying attention for for 25 years back to back to the dotcom bubble um the idea that when interest rates are cut by the central bank markets go up has been ingrained as a reaction function to an entire generation of investors. There are people who have spent their entire lives knowing and being reinforced over and over again. Fed cuts rates equals stock market higher. And it has been that way for 25 years. But that is not to say it will continue to be that way for another 25. And that's why the bond market signals are so important to understand. just because the Fed have cut rates. The initial reaction which we saw when Pal made those announcements was exactly that. Yay, off to the races. Up we go. And and yields fell and stocks went up. But if you look over the next week, you'll see this was not okay, we're off to the races again. There was a lot more confusion after that. And and that really is a function of of the the money that has been conditioned to think rate cuts equals market up pile in straight after the the event. They exhaust themselves and then uh you get the real reaction of of the big money in the market saying this is actually not a good sign. And so we've sold into that that kind of knee-jerk trading bid and we've got more to sell because we're slightly more concerned now about the future. So um it's if you're a really good trader and I mean a really good trader, this is a good environment for you to be in. But I think a lot of people have have um have come to believe themselves to be really good traders because they've been successful because markets have been supported by interest rate cuts, supported by quantum easy and they tended to go up. This is the choppy part where you will find out very quickly how good a trader you are. And you know, I would say to people watching this, um, there's nothing wrong with actually sitting back and saying, you know what, I I thought I understood the way markets work. They they don't seem to be working that way right now. It's okay to say I'm going to take a step back until I can either understand the reasons why markets are slight acting slightly differently to how I have become conditioned to believe they would or I see a set of conditions and I see a set of reactions to policy announcements that I recognize and I can go back in and say okay the market is back to functioning how I have become accustomed to it functioning. I recognize this. I'm okay to commit capital again. You know, sitting out for a period of time when you don't really feel that you truly understand what's going on is the smart thing to do. It's not the cowardly thing to do. It's the smart thing to do because just putting yourself at risk of permanent impairment of your capital is the number one sin for anybody uh investing or trading in capital markets. that that's the most that's so important and I just want to hammer that because it doesn't matter right now if I see somebody who's got a um a bent towards investing in the gold sector or they're still going long you know QQQ or or whatever it is the common emotion that I see is urgency that's the most common emotion that I see in investors today no matter what asset they're looking at is that I'm late I have to go now that it's it's a very FOMO FOMO mindset still and your council that sometimes the best trade is patience is priceless. Very very important. Yeah. I mean at at the moment for the last well let's call it 3 months go gold has been you know the ultimate get-richqu scheme right the way Bitcoin was. But in reality, what gold is is a stay rich slow scheme, right? Gold is something that over time will protect your savings, will protect your purchasing power and and if you've uh you know, I g I gave a presentation at Rick's conference in July and I talked about this, you know, if if you've been invested for the last 40 years or any essentially any extended period of that last 40 years, you got rich period. Whether you were in bond markets, equity markets, real estate, if you've been invested in the last few years, you've got rich, the the issue now is is it time to try and get more rich or is it time to try and stay rich? And I would argue that it's time to try and stay rich because I think the markets and given the constraints we've just outlined in the last you know half an hour or so that governments are under means that there are market forces and there are um government and official sector forces that are going to try and take some of that wealth away from you whether through taxation or through uh market performance. So your number one risk is loss of capital not underperformance of benchmarks and and as I said you know the avoidance of lo the avoidance of the loss of your capital is the very first consideration of any investor and any trader. How do I mitigate the risk of impairment of my capital period? Mhm. Okay. I want to uh I want to widen the umbrella a little bit. You know, we've we've talked about sort of new precedent that was set in 2012 in the bond market in 2022 with the confiscation of Russian assets and and these things set new trajectories in play and I'm wondering if we're watching uh something similar right now from a geopolitical standpoint. So uh a lot of what we've are watching right now geopolitically is a is some kind of a competition between call it the US and China to grossly simplify but that is occurring and countries to a degree are having to make a decision or will be forced to probably in the next couple of years about which major economy they might align with and there's a handful of economies that are trying to figure out neutrality some successfully some not. You know, Canada is a country that's trying to play a bit of neutrality card right now. Will never really be successful simply because of proximity to the United States. When you share the longest land border in the world and on the other side of it is the world's wealthiest and hungriest customer and you're a commodity export nation like that just product falls across the border. It's gravity. Uh Australia, bit of a different situation, right? They're trying to play both sides and from a proximity standpoint actually China makes more sense. Presently, from a defense standpoint, the United States makes more sense and they're trying to thread that needle. Another country you might say is uh Saudi Arabia. They can do this successfully because of how powerful they are from a commodity export standpoint. But after the uh the bombing in Doha in Qatar, now this made a lot of headlines, right? Israel bombed Qatar, which is u, you know, effectively a friendly nation to United States, was gifting the president a $400 million airplane only a few months ago. Um, and um that made headlines. What didn't make as many headlines two weeks later was that Saudi Arabia, seemingly directly in response to that, signed the Defense Pact with Pakistan, which is the only um Muslim majority nuclear armed country. And that nuclear technology came from China, which indirectly slides Saudi Arabia under the Chinese nuclear umbrella, which is no longer neutrality from a military standpoint. And I think that's significant. And I I read that and I wondered, is this is this one of those moments as significant as 2022 that we'll look back on and say this that was a step too far? Doha was a step too far and sent a signal the same way confiscating Russia's US dollar assets sent a signal and triggered ripple effects through many central banks. Is this a signal that um you know your your defense path isn't what you thought it was and maybe it's time to rethink that not just US dollars but military alignment. What what's your take? I it's kind of a lot to unpack but what's your take on on that high level or in the weeds grant? What do you think? Yeah. Look, look, it's what it is, Jay. It's another signal, right? And and I think anytime you're at turning points, one signal is your ears prick up, but once they prick up, you're looking for other signals. So, I think, you know, this is definitely another signal. um you know the the the the importance of the signal that US gave by freezing those assets is as we said earlier on it's something that the other countries can't ignore because it's a national security imperative. So that one signal in and of itself ordinarily you wouldn't you go okay hang on something's changed here what is it I need to understand it but they had to respond to that and they have done this one isn't necessarily one that requires an immediate response but it's another signal that that things are changing um the first one was uh the sanctity of reserve assets has changed this one is there's now a fuzzy gray area as to who's on whose side but You have to understand that every single nation that's caught between China and the US, which is to say essentially every single nation, is incentivized for the most part to play both sides off against the other for as long as they possibly can. No one is going to really make that choice unless they have to. or in the case of someone like Canada, they're so ideologically and geographically aligned with the United States that there's there's there's really no point in them aligning with China. So, we may as well declare early and gain the the kudos that comes from that. Um, so anywhere kind of Middle East into Southeast Asia because obviously the US has a a significant present in Southeast Asia, anywhere in that part of the world, they are best served by keeping both sides sweet and trying to play one off against the other and giving a little bit to the United States in terms of maybe sanctions against Russia here, but giving a little concession here to the Chinese and pushing back against something from US here without having to accidentally categorically come out and say, "Okay, well, we are in the Chinese camp or we're in the US camp." Um, you know, you look at Korea, right? Korea is um you know is it has always been under the US umbrella but I would argue and I've been here in Nucket I've been talking to some people about this today. The chance of Korean reunification and the chance of Korea ultimately ending up under the Chinese umbrella is probably much higher than people think. um and and a much bigger potential black swan than people think. Uh Japan slightly different. You know, the the the enmity between Japan and China is well known. But uh you know, if you if you look at the the ripple effect say of of the Chinese taking Taiwan for example, you know, a lot of people saying it's imminent. They've been saying it for a couple of years now. were the Chinese to to uh to try and take Taiwan by force, that is more likely to cement all those countries around Southeast Asia into the US because they're going to want protection from an aggressive China. So, the Chinese are probably going to, I would think, hold off on that a little bit longer. Um, so there there is so many shifting plates here. Um, but this is where, excuse me, this is where political and geopolitical statecraft becomes really, really important. And that is a question of keeping your options open. Do not tie yourself to one of the two protagonists until you absolutely have to. Um, and you're going to see more of this. You're going to see many more deals, um, energy deals, trade deals, um, you know, uh, signed agreements over security. You're going to see all kinds of things. And each one of them is probably going to make you go, "Well, hang on a second. Does that mean they're shifting towards China? Does that mean they're shifting towards the US?" And then, you know, 3 months later, you'll see another deal sign, which throws a bone to the other side. So it it's it's a very murky time to to to to pay attention to any individual declaration. The important thing is to understand that the jeopardy is rising. Um the the day when you're going to have to declare your allegiance is approaching. um and be aware and and pay attention not in an absolute term but pay attention over time to which countries if they suddenly sign three or four separate agreements with China or they have state visits in both directions. You know, these are the little signs that ties are actually strengthening. Particularly if they do, you know, if you see Xi Jinping going to Mumbai on a state visit and then Modi doing the same in Beijing without, you know, Modi signing some kind of agreement with the US in the interim. They're the sort of things that should prick your ears up and make you think, well, is something material happening here? But for the moment, you're going to see America and China courting all these countries and looking to solidify relationships. You're going to see all kinds of compromise and all kinds of deals being signed. Um, it's going to get very messy. You've got to just stick to trying to figure out the the signal from the noise. It's, you know, it's a trip phrase, but there's a there's so much noise at the moment, it's very difficult to discern what's what what signal. But if you pay close attention, you're going to have a much better chance of understanding than you are every now and again if something happens going, "Uhoh, that deal I've read about means this." And jumping straight in as as though it means X is siding with Y. Right. Yes. Okay. I mean, two big threads I want to pull on there. And the first, I suppose, would be the the South China Sea. Um, you know, a major economy needs unobstructed access to the oceans. It's one of China's problems is that in between them and the global seas are Japan, Taiwan, and the Philippines, Western allied countries. And I'm very curious to see how that develops over the next couple years because I think you're right. There will be subtle trading agreements uh developments that will not be as obvious as just some kind of a hot conflict. Like that's probably not what we're going to see. We're going to see slow courting uh occur and try to win one side either to neutrality or over the line. Um and uh you know it's interesting because you could make the assumption that because uh China's rising and very clearly becoming competitive as a global superpower in a true sort of multipolar world relation to in relation to how the United States seems to be falling that countries like Taiwan, Japan and the Philippines might be incentivized to align with China. You know as John Mshimer points out he's like often the opposite happens. countries aligned to contain a rising power. And one of the reasons that so many countries aligned with the United States instead of the Soviet Union during the Cold War was because in the early years it was the Soviet Union that actually looked a lot stronger. That was the power that needed to be contained. And so countries alli allied with the United States to contain the Soviet Union, which obviously ended up uh not being what people thought it was. But it's a bit counterintuitive, right? And I I can see it. Um, I I just want to move over to your comments about Korea because I've been curious about that too and I think you put a lot of significance on that uh the potential realignment um some and you use the word black swan event and it was not lost on me that at the Shanghai cooperation organization summit uh about a month ago and this was the biggest SEO that's occurred in in I think five six years there were uh 40 plus countries that attended And one notable performative uh but thing that occurred was the South Korean minister shaking hands with Kim Jong-un on stage sending a message I guess from President Xi to the world that we can stick handle this right we can moderate this conflict and look it's happening on our stage not out west and a lot of people noticed um and that's immediately where my mind went when you mentioned that so what is the significance and just unpack that a bit for me well I think the significance because we we've we've we've had this assumption that uh that were things to go pear-shaped in in Southeast Asia, the South Koreans would immediately because of the military bases there would immediately fall into the US the arms of the United States. Um and they may well do but clearly there is reproachment there from the north. We've seen a lot of that over the last you know five or six years. Clearly the Chinese are interested in kind of getting in the middle of that and having having some influence on the outcome and and it makes perfect sense. I mean that the countries are literally joined at the hip. Um so you know this idea that that China will take Taiwan by force, it's understandable cuz to your point they want access to deep water. Um and Taiwan gives them that. But, you know, with with the US moving chip production into Arizona and spending billions in trying to ramp up chip production in Taiwan, again, I was talking about this here today. Um, once the United States is in a position to replace Taiwan semiconductor and UMC as foundaries and produce chips in America, um, how big an imperative is it to defend Taiwan? I I don't know. I I I don't you know I asked that question open-endedly. I I don't know the answer to that. But clearly a big part of the of the fear over any loss of Taiwan is the loss of the of the uh of the micro microprocessor production and they've taken steps to melate that. There will come a time when that is replaced. So there's a window here where the Chinese might b their time and think, well, you know, if we give this two or three years, the Americans replace the chips. They're not going to come and defend Taiwan. And the the realistic uh assessment that is, can the US afford to defend Taiwan? Probably not. Is it a sensible use of resources given how stretched they are? Probably not. Um, are Americans going to want to send their kids to die in the South China Seas? Almost certainly not given what's happened. Um, so there are so many moving parts to this and I don't have any answers. I have a ton of questions and anybody who definitively tells you this is what's going to happen in the South China Sea, I'd be very wary of um because we don't know and and you can make incredibly cogent arguments in both directions that the Chinese will take it by force or the Chinese won't even bother. They'll just wait until it falls into their arms. And you know, either could be true and the outcome from each individual action is wildly different and and poses a completely different set of decisions for particularly America. And then as a as a second domino, Japan and the other nations that that surround Taiwan. So, you know, again, it it's heightened awareness time. It's recognizing that this is a situation that can completely reorder global geopolitics for uh a generation. Have it on your radar, but don't be wedded to the fact that oh yeah, the Chinese are definitely going to go into Taiwan within the next they've got a year to do this or the T the Chinese will never go into Taiwan. We just don't know. And at a time when um you know the the the West is struggling internally with with social division and China has issues of its own and you know there's plenty of credible chatter out of China that that Xi Jinping may not be as impregnable in his position as leader as he as he perhaps once was. You can't rule out the fact that a conflict in in the south in the Taiwan Strait might be actually quite convenient either for the Americans or for the Chinese or both in terms of galvanizing the public around a common enemy and a common idea. So that it's a really difficult time to make absolute guesses and this is just another reason why I go back to this idea that in a world that's so uncertain and it's the kind of uncertainty that you have no control over and no predictive ability about husbanding your capital and making sure that it's it's protected as best you can first and foremost becomes paramount. Okay. Again, uh I feel like I'm restating so much of what you say in today's interview, but it's just important stuff that you know your your spotty sense should go off whenever somebody gives you a high conviction prediction about anything geopolitical. There's so many unknown variables. You know, in a world where we can't predict the oil price 6 months down the road and we know all the inputs, we know where it comes from. We know where it goes. Yeah, we can't get that right. Trying to make a high conviction prediction about something like this, like forget it. Having said that, and I don't mean to make light of this, it is in my opinion the most interesting story you could possibly follow. And um you know, tracking these developments and watching the maneuvering of each of these two major economies um I I've never been so captivated to be honest uh by this real time, real life, global chess match that's occurring. It's fascinating. It's fascinating. So many threats. Yeah. Yeah. So, let me let me um in response to the uncertainty concept, Grant, and by no means uh am I framing this under the the guise of like investment advice, I'm just curious personally um you know, how you might be positioned right now from a portfolio standpoint. And I I'll say two things about that. Uh number one, you know, I'm I'm and I'm happy to to share in response. I'm positioned for uncertainty. and positioned uh in such a way that I think expressly says I don't know what's around the corner and when I don't know what's around the corner I'm in more of a defensive position but because of where I spend 95% of my time I'm also very competitive in the gold silver equity space like I live there you know what I mean so I can be agg I am being aggressive there right now but it's like I've been in that arena a long time I'm not aggressive in every speculative asset class just the one I'm an expert in right and so that's my portfolio but it's personal to me because of how I invest my time. My portfolio is a reflection of that. Can I ask you a similar question like how are you positioned? Yeah. Defense, offense, what does it look like? Yeah. And and look, Jay, it's important for people to understand that you your rolodex is such that you can talk to the right people about this, right? And that's to say if you want to understand what a company's doing, you can call the CEO and say, "Right, tell me how the company's doing. I want to understand what you guys are doing." um you know, you you can ask the questions that shareholders can ask companies, but but you happen to have a direct line because you know all these people and that's that's an incredible advantage. There's nothing we're not talking insider trading here, but being able to actually understand how a business is running um by asking the right questions is is important. Um and so, you know, investing as you are aggressively in a space you know really well is exactly the right thing to do. But what we've seen over the last 10 years or so is people have become kind of closet experts at everything, right? Everyone was a natural gas expert and then they were a nuclear power expert and now they're an AI expert because they read a few articles in, you know, Wired magazine. That's the danger. That's the danger stuff because you are going up against people who in the AI space are like you. They have the rolodex in the AI space and they understand the subject really well. For me, you know, I've got a significant amount of gold that I've accumulated over the last 22 years. Um, I continue to accumulate that not as a speculation, but as a as a way of protecting purchasing power, and it has exceeded that brief significantly, which is great. Um, I'm in uh private debt investments. That's not to say, you know, private credit. I'm in loans to companies that I know and and entrepreneurs that I know at interest rates that I'm comfortable with that I know are going to get paid back because I know the people know the business. Um, you know, I've got some some short-term sovereign debt, but only at the short end. I won't go any further out than two years. Um, and I'm very I'm very defensive because I think, you know, as I said, I'm I'm lucky to have been involved in financial markets for the last 40 years, which has probably been the best 40 years to have been involved in financial markets that we've had in history in terms of consistent. Yes, there's been a few, you know, 2000, um, you know, 1997 in Asia, uh, 2008 obviously COVID, but that didn't really register. But if you've been invest that period, you you you've had the most incredible tailwinds. And now my uh my motivations with a couple of grandkids is don't be dumb and give it back. I mean, that's the that's the worst thing that I could ever do is to is to give the money I've taken so long to accumulate and trade my way into, invest my way into and earn. Giving it back is the the most ridiculous thing I could do. I I could never forgive myself if I if I, you know, if I squandered my kids, my grandkids inheritance on speculating at a time when my certainty about the outcome is the lowest it's ever been. So, you know, I I think anyone that wants to speculate, go for it. But, but speculate where you feel you have an edge in terms of an information advantage. Don't speculate wildly on on a tip that your friend gave you that, oh, you know, you need to get some of this thing because I've made a load of money on it. Those days have been I think those days are gone. And while you might get lucky, the risk of doing that sort of thing now is for me personally is too great. If you're 22, you got a load of disposable income and no girlfriend and no kids and you want to do that, have at it. You know, you got time to make it up if you're wrong. But um for someone with the my color hair uh this is not a time to be to be wildly speculating expecting that you know you can catch the next bubble and 10x your money. Uh the riskreward ratio is just all wrong for me. Yeah, I appreciate that. And uh and again, you know, the even the age thing, we recently hired a couple um super young uh cats at Cambridge House, like early 20s, 21, 23. And um you know, it's funny. I was chatting with them the other day and they're like, I just wish I got here earlier. You know, I wish I got here sooner. And I'm like, "No, you don't. No, you don't. You're out of the perfect time." But I get it, right? They're they they're intelligent enough to know this is a hot market in the gold sector and they wish they got here sooner. And you know, it's it's fine. You can be aggressive and and patient at the same time by just being strategic with what you're putting in the speculative box and what you're holding in that in the investment box, right? And knowing the difference between the investments in the speculation. That's exactly. Yeah. At 22, swing big, but also recognize like you got another 60 years to play this game, right? like you got runway, you know what I mean? You're going to see all kinds of markets in that time. So, why not be patient, learn as much as possible. Don't bet more than you can afford to lose and get taken out and then spend five years sitting on the sidelines, right? Gunshy, because that happens to most folks, right? As you mentioned, like I don't want to do something dumb and give it all back. It's like that's a mistake that people make early in their careers often, right? They recognize a win, man, I'm good at this, right? They double down on the next one and suddenly it's gone. Um, and so you're you're heavy into gold, which which makes sense given your expertise and everything we've talked about today. Um, uh, you talked about some debt instruments, companies that you're familiar with, entrepreneurs you've done diligence on, you understand and trust, and at rates you find palatable, so you're in some debt, and then short-term sovereign bonds, two years max. Could you comment on which sovereign nations you're invested in? Grant US Treasury. It's very simple. Very simple. you know, as I say, and and I know it sounds ridiculous given the fact that I've said that the US is um to all intents and purposes bankrupt, but like I said, that doesn't matter until it matters and and two years, the return I'm getting those 2-year bonds, you I'm getting 5% on on 2-year money. Um I'm okay with that. You know, I'm I'm okay with that return for the risk and it's liquid. Uh and I can deploy that capital elsewhere if I need to or if I see an opportunity. Um, but if I don't see an opportunity, I'm perfectly happy to sit that out and um and reassess it as that as that rolls off. Okay. Excellent. Excellent. Grant, uh, thank you so much for coming on today. It's super fun jamming with you and we're going to see you in Vancouver January. Vancouver. I'm looking forward to as always, my friend. You put on a great conference and uh, I look forward to that every year. Oh, man. I can't I can't wait. All right. Thanks so much, Grant. Enjoy Nantucket. Uh, super keen to hear about it. I've never been there. Uh but uh yeah, hope you're having a good time and I I'll see you soon in Vancouver. Thanks again for today. You bet. Anytime, buddy. All right. If you enjoyed that interview, Grant and dozens of others will be speaking at my annual conference, the Vancouver Resource Investment Conference, January 25th and 26th in Vancouver, British Columbia. Join over 8,000 junior mining investors, 300 companies in the trade show, and nearly 100 keynote speakers who will help you allocate capital in 2026. Hit the link below to join me at the Vancouver Resource Investment Conference. See you there.