We Are Writing ‘Bretton Woods 2.0’ & U.S. Will ‘Write Up’ Gold Price to Pay Debt | James Thorne
Summary
Capex Supercycle: The guest argues we are entering a multi-year capital expenditure boom driven by energy and intelligence, underpinning broad asset reflation.
AI + Energy Nexus: Achieving AI leadership requires cheap, secure energy, with emphasis on nuclear, baseload power, pipelines, and grid buildout where the West lags China.
Precious Metals: Bullish on gold and silver as core holdings amid reflation and eroding trust, with gold likely consolidating near-term before resuming higher.
Cryptocurrency: Bitcoin seen as a growing store-of-value allocation alongside gold, with guidance to buy consolidations and expect high volatility.
US Equities: Positive outlook with liquidity tailwinds (rate cuts, QT ending) and an S&P 500 path toward 7,400–7,500 by spring 2026 before a healthy correction.
Key Companies: Palantir (PLTR) highlighted as forward-looking but hard to value with traditional metrics; Nvidia and Intel discussed within the AI/semiconductor supply chain context.
Critical Minerals & Infrastructure: Silver’s “critical mineral” status, plus focus on copper/uranium, support resource nationalism dynamics and investment in grids and nuclear capacity.
Portfolio Strategy: Favor beta and consolidation breakouts, avoid parabolic moves, and anticipate a rotation toward value/interest-rate sensitive sectors as rates fall.
Transcript
Welcome back. I'm Jeremy Saffron. Markets [music] are split in two this morning. Hope on one side and it feels like fear on the other. Now, the US government has now been shut down for just over 40 days. The longest such standoff in American history. And this morning, stocks are rising on hopes that a bipartisan Senate deal backed by the White House will finally reopen government operations. Now, if we look at precious metals at the same time, they're also rallying on this news. I mean, spot gold is trading at around $4,100 an ounce. Uh, silver too up almost 5% past that $50 an ounce mark on the spot side, which is uh back in that 50 zone. Some of the audience been looking for that one. Now, stocks are rising on optimism and gold is rising on what many are calling fiscal anxiety. So, which signal do investors trust here? Joining me now to break it down, Dr. James Thorne. He's a chief market strategist at Wellington Altis Private Wealth. Also just authored this this fun little report. I like it. It's called Wealth in a Capex superstyle super cycle. Great to see you, James. Thanks for coming on the program. >> Thanks for having me, Jeremy. >> Uh let's get right into it. I mean, this obviously this thesis that you're arguing that we're entering a long-term capex boom driven by energy and intelligence. Uh I mean, the federal government right now shut down, the Fed lacking fresh data, and of course, we got this global uncertainty at an all-time high. How can investors ignore the noise when the noise is is the system itself? >> I think what you do is you start taking a longer view >> Mhm. >> and recognizing the fact that there's going to be dayto-day volatility, day-to-day noise, but if you look out five to six quarters, that's what you should be thinking about when you're building your portfolios. So Jeremy, we have always been of the view or I've been of the view that look with the excessive level of debt that we have in the Western world, some call it at at Napoleonic war levels, >> we can either have a war or we can try to grow our way out of it. And my call is that we're going to grow our way out of it. And so, you know, we need lower interest rates. Inflation's really not going to be a problem. And then at the same point in time, I think there are going to be asset classes like gold and silver and and crypto and real estate and bonds and stocks that are all going to slowly reflate together. And we're going to reflate this our way out of this like we did between 1950 and 1975. >> Okay, that's interesting. Uh let's start then. I mean, I've heard the reflation kind of aspect and it does make sense on the long-term points, right? uh you projected that the S&P 500 could reach 8,000, right? I mean, based on on what you call this intelligence super cycle, and you argue that this time is obviously not like the 1990s.com era because today's leading tech companies are indispensable infrastructure. They're not really on these speculative bubbles. This draw down and volatility. I mean, how do you get through the noise and just for people looking at their passive accounts say I can't look at what's happening this past couple of months? I mean, I should say the S&P 500 is still up about 15% this year. >> Sure. I I think what you need to do is is is recognize the fact that um I guess the way I would put it, let's just overlay the demographics. Demographics suggest that we are at a a period of time within the cycles that we should run until the end of the decade. Anytime you have a massive cohort like the millennials in the younger generation when they become come into family formation years and investing years we typically have uh a secular bull market and they invest differently and they consume differently than the the previous uh generation. So, that's one. And then two, really, when you look at it, you know, you you you could overlay the four-year cycle, but what's really interesting about the four-year cycle is when you have these unique 20% corrections uh that are a surprise, shall we say, what happened in April. And when that happens, you reset the cycle. So, if you just go back in periods of time and say two things. First, unless we have a recession next year, you're not going to get two 20% draw downs in a row. Okay? It might call us for a growth slowdown, not a recession. That's one. And if that's the case, where does history say we go? And history says we go somewhere between 74 to 75 uh 100 on the S&P by the spring of 2026. And then I would suggest we're going to have a normal natural healthy correction of 8 to 10%. And that can happen at any time and for any reason just like we're going through right now. It wasn't even an 8 to 10% correction. And then I think we rally hard into the midterm elections. And so what's going to be unique about next year is that the midterm election cycle significant pullback that all of the historians are going to point to is not going to occur because the 20% correction happened a year early. >> Yeah. Interesting. So I mean if this cycle, you know, kind of depends on financial engineering to keep it alive, it almost feels like it's policy adrenaline. I mean how long before the patient builds tolerance? >> It's a good question, right? So when you think about it, so first is is let's look five to six to seven quarters out. And then the other thing is is that bull markets don't end in valuations or bubbles don't end in valuations. They end when the when the punch bowl is taken away or when liquidity is turned off. Well, we're going to have with the government uh uh opening, we're going to have the Treasury General account starting to be drawn down. I mean, I think it's close to a trillion dollars. So, you're going to have money coming into the system. Quantitative tightening is going to end in December, which means the Fed is going to be ping purchasing between 60 and 70 billion dollar worth of government bonds. And then we've got Fed, you know, Fed's the Fed's going to cut. And I think the Fed's going to get rates below 275, somewhere in the low two area. And that's the the framework of the reflation trade. That is wonderful. And that is good for risk assets and it's good for gold and silver as well. So Jeremy, what I'm not is I'm not an end of the world type guy. Like the next piece we're going to come out with in the in in in in the next month is look the end the narrative that the U the is the end of the US dollar, right? That's just wrong. Okay. And if you look at the data, you know, the US dollar system is still dominant. China just issued a ton of US dollar bonds last week and it was massively overs subscribed. So what we've got to do is we've got to delineate between US dollar system and the US dollar. And sure, the US dollar can go up, down, all around for a myriad of reasons, but that does not take away from the fact that since World War II, the plumbing of the global system and rightly or wrongly, the fiat money system has been US dollar denominated. And I just don't see the RAM or the euro or the Japanese yen replacing it. So that's you know so what what do I say is you hear people say it's the end of the dollar regime no but at the same point in time I think it's very prudent and what you're seeing with central bankers is they are prudently diversifying away some of their holdings into gold then I think eventually that will lead into Bitcoin and they're going to diversify assets and why would that be well because yellen and Biden weaponized the US dollar when they attacked Russian holdings of US treasuries irrespective of the whether it was right or wrong because of the Ukraine war. If you and I are are are consulting a large pool of capital somewhere in the around the world, we would possibly prudently say I think it's a good idea to diversify away and add some gold, but yet to still say that the US treasuries and the US dollars are still a the dominant store of value and still the dominant currency. >> Yeah. Yeah. Well said. And we will get on the debasement trade in a little bit. This is what we call a hook. We're going to make everyone wait just a little bit here. U before we do that, I'm just curious. I mean, I don't know if you saw an ex, this Michael Bur tweet, the big short investor. He's kind of saying that companies are overstating profits by extending the lifespan of assets on their balance sheet. He's estimating nearly 176 billion in under reportported depreciation through to 2028. I mean, if that's even partially true, we're we're we're we're not looking at that much productivity. We're looking at accounting sugar highs. Does that any of these types of things concern you? You know, the creative way or the creative headlines of some of these earning calls? >> No. I I I I find it interesting that they released their short, you know, their their what they were holding 45 days early. >> Um I think look, we are in I'm going to put my economist hat on here, right? Um there is a very famous paper by actually Janet Yelen's husband George Aaloff he won the Nobel Prize for it called market for lemons and really what it was doing it was attacking the efficient market hypothesis right and the problem with the efficient market hypothesis is that Jeremy you and I we assume that we know full information with 100% certainty we know everything and therefore we can determine what the valuation is. >> Mhm. What happens when you don't know the information and I don't know the we don't know we are living in a complete and total void of information where we don't know what the intrinsic value is of an asset a railroad a canal AI a server whatever a new drug >> what happens is is that the individual or the team or the person that has the best story at that period of point in time that captures the imagination of the market wins. So, let's be honest. Look, the S&P has gone from in early April of this year to the dark days, the end of the world, sell everything and Wall Street sold the bottom and we got to 6,900 and then we had a big run and it was extended and it needed a correction. So, was that because of and then he comes out with his report. Now, look, we are not going to know what the intrinsic value of AI is for decades. So we h isn't it interesting that this always happens after Palunteer reports and Palunteer is a very very good very forward-looking uh company but you cannot use traditional CFA metrics to own it. You can't. It's just too expensive. Does that mean it's in a bubble? No. But in our daily grind of the market, people will use whatever they can to position and to basically profit off of trades that they have been positioned for. So this won't be the first time nor the last time that we hear that there's going to be a bubble. And Jeremy, what is you your listeners or your viewers have to understand is a bubble is a normal evolutionary process. part of a normal evolutionary process of when a massive technological wave is hitting an economy. No different than in the 1892, 1893 you had a financial crisis because everybody thought the railroads were a scam. Right? So what I try to say to people is look between now and the end of the day I will say to 31 >> and the reason why I say 2031 is that in the big beautiful bill capex is 100% tax deductible until January 2031 and so can we get periods of time where they get over you know overexuberant just like gold right you know you sell parabolic moves whether it's AI whether it's gold, whether it's Bitcoin, and then you basically sit and you look at what are in the consolidation patterns in the market to try to reposition yourself to find out what train is about to leave the station. So, do I respect what what Bur says? Yes, I am I I will I would suggest you it will not be the last time we hear about this narrative between now and the end of the decade. And it just is goes with the normal course of business when you're dealing with a massive technology wave where we are trying to figure out what the intrinsic value is. Why do I use intrinsic value? Because Jeremy, we cannot qualify what if we're in a bubble or not unless we can quantify what the intrinsic value, what the total value of the AI digital economy looks like out 10 to 15 years because we are going to be discounting free cash flows back. So, we don't know. So, there's going to be periods of time when you you get sharp corrections and there's going to be periods of time where you get parabolic moves. Get used to it. >> Yeah. Yeah. I got to ask you about the global race. I mean, if we kind of widen our lens globally, I mean, that arms race doesn't really appear to be happening in a vacuum. I mean, we're talking about China, of course. I mean, this global arms race, AI data, this intelligence platform, I mean, China's economy is kind of showing real deflationary signals in and producer prices have been negative for more than a year. How does that cycle you described continue if one of those key engines is contracting? >> Yeah, it's Yeah, great point. because yeah we've got the second largest economy in the world in a debt deflationary in spiral one two the China does not have the technology lead relative to the United States but they do have the energy lead >> right and the foundation to winning this AI arms race is cheap secure energy whether it's base load energy you know which it would nuclear, coal, uh oil and gas, nack gas, right? Um and then and then green like solar, right? I mean, everything is needed to basically get cheap energy and so China has that lead. Look, the way I frame it though is that look, with so much debt, and China does have an excess excessive amount of debt, um we all have to play nice in the proverbial sandbox so that we can all grow out of this debt crisis. And so that's why we've got to deal between uh Mr. Trump and Chairman Xi. That's why we're going to learn how to coexist. It's a truce. And so I I just look at this as when will the west understand that it's not about Nvidia's blackwell platform or chip that's the the worrisome. It's the fact that we are so far behind in generating cheap electricity and that is the key. And you know, the Chinese do not, you don't hear the bubble calls. You don't hear Michael Bur talking about the bubble calls over in in China. Wall Street gives China a pass. I don't know why, but they do. So, I look at the fact that with the date debt deflation spiral in China, they have to make a deal. They are weak, right? They have not escaped the middle income trap, right? And so there is excessive excessive overcapacity in the U and the Chinese economy. >> So we have debt deflationary fundamental forces >> underneath the surface and there is a huge cohort of individuals on Wall Street that think inflation's the problem and inflation isn't the problem. who holds that uh you know the energy advantage heading into the 2030s that we talked about because I mean innovation doesn't move a grid. China's building those 150 nuclear reactors. The US has only a handful in development. Canada is still debating permits. I mean are are we mistaking innovation for infrastructure? >> Yes. It's a massive infrastructure build and and the West lags China in energy. Yes. So the question we have to ask ourelves Jeremy what how is this cycle this capex cycle going to be different than let's say two decades ago when China entered the world trade organization then we had this big urbanization of China and you had this massive buildout of of of uh infrastructure in China and to a certain extent North America which didn't go far enough right that's what we're in front of we're in front of we need to build nuclear reactor factors. We need to build pipelines. We need to build grids. Right? So, this is a whole rewiring of the economy. And so, when you talk about a bubble, okay, so you don't like Palunteer, fine. Okay, great. But that doesn't mean that every other company within the AI food chain is at bubble valuations. And that's where I think people completely miss the story. They anchor on one company and then they generalize and they sit there and say, "Well, it's it's a it's a massive bubble." Well, we've got to build out energy, right? We got to build out nuclear power, right? And so that they're not in bubbles yet, right? But when you get the market to a point where, you know, everybody missed the trade, remember Wall Street sold the April bottom. Never forget that. And they have been complaining about this forever. Wall Street was not long gold, okay? They've missed it. They're underperforming. So, they are motivated to come on and to basically talk differently and to present the end of the world narrative. And that's okay. That's what makes a market, right? But I suggest to you that we are possibly in front of the largest capex super cycle in modern history. Do you want to miss out on that? And if not, how do you position your portfolios accordingly? >> Yeah. Yeah. Well said. I mean, as we talked about this super cycle, obviously energy is going to be a part of it. I mean, you contend that intelligence needs energy that it's going to be driving this next major infrastructure cycle. I mean, these real assets we talked about energy, minerals, grid infrastructure, copper, uranium are the logical play. But for our audience of uh you know resource and real asset investors, is this the moment that they've been waiting for after years of underperformance? >> Yes. Yes. I I I people you know I'm a long-term gold I've been pre guy. I've been I've been suggesting gold as a you know portion 5% of gold in your portfolio is just your standard right up here in you know I'm in Toronto right now. The TSX I think is 13% gold. You know, I thought gold could get, you know, 5,000 shortterm and maybe close to 8,000 by the end of the decade. I think gold has run too far too fast and it needs to consolidate. That doesn't mean that I'm still I I still, you know, I get calls all the time. Yeah, sure. You want to buy gold here? Sure. I think it's going to consolidate between 4,000 and 4,400 for a couple of months just to grind, right? But it's a core holding, right? and and so but at that but but but but to be clear I do not view the move in gold as the end of the US dollar or the end of the regime. >> I just think it's finally the time when gold has started to appreciate and people have recognized the fact that there are issues in the fiat money system. >> Yeah. >> Right. And that's been around forever. So that's not profound, right? So at 4,000 or 5,000, it should have been there a couple of years ago when and and for your listeners who are gold bugs, they know it. They've been waiting for this forever. So I just think it's, you know, gold and silver to a certain extent now that I don't know if folks realize that silver is now been identified by the US government as a critical mineral. Um and so they are standard holdings in your portfolio and the weight depends on you know what your risk preferences and tolerances but my whole suggestion would be 5% in the cryptos like so Bitcoin or Ether and you know then 5% in gold or silver but you know if you're older and you don't want crypto and you don't like crypto fine 10% % gold. You know, that's fine. And but but to to to to understand the fact that the way we get out of this is basically nominal growth or growing assets. Debt to GDP after World War II went from about 125 to 130% to about 35% in 1975 and it was all reflated away. Now, I think it's going to happen more quickly, but I think that gold is a part of it. Stocks are a part of it. I think they've got to get interest rates down because I think real estate's got to be a part of it, right? I think there's a multi, we need all cylinders of the engine clicking as we reflate our way out of this experiment, this flawed experiment which was modern monetary theory. Mhm. >> And so that's, you know, these are my conversations I would have across the country or across North America and all I would say to you is when somebody comes in like for example today $100 worth of gold I sit there would I buy gold or Bitcoin? I sit there and I go you can buy whatever you want but just understand that if you buy gold here it might trade sideways for three or four months and Bitcoin but might outperform. I like both. Right. But, you know, typically I talk to a lot of people that say they're long-term investors that are really traders. >> Yeah. >> Right. So, I think gold around here between four fine. I would be picking at it. I would be using the sideways consolidation pattern that I think we're in to accumulate. Um, if you don't want to sell, you don't have to sell. Is the run over? No. Is it a core holding? Yes. Mhm. >> And finally, gold is getting the recognition that it should have for decades. >> Yeah. Well said. People finally starting to talk about it. The debasement trade, as they like to call it, even though I get what you're saying on the the central bank dollar. I mean, the US dollar is still king and and we're seeing that right now. I mean, I want to go back on the silver front just because I remember reading your your quotes here on the on your last paper and you were talking about grid constraints and how they've become strategic bottlenecks. I mean, silver's up 5% today. It's it's obviously tied into solar and grid buildout. In your view, is is silver among the most mispriced bottleneck asset in this cycle? >> Could be. And and the other thing is if the US government has classified it as a critical mineral >> Mhm. >> then doesn't that mean that President's Trump administration can take a piece out of a gold mine if it wanted to? I mean it's we're gamechanging here. Yes. and and so you know silver but silver is a highly volatile asset and you know I just look at it as in the same as you know it's poor man's gold but it's got industrial uses and all I was saying to our folks at Wellington on a note this weekend is look who they put they put uranium they put me coal they put silver they put some very interesting uh copper You know, this goes down to look, this is an arms race >> and you need safe, secure supplies of these critical minerals and energy and silver now is put into that bucket. >> Interesting. Uh, go back to what you're saying. I mean, I I know what you were saying. I mean obviously we've seen just of late US kind of coming in and taking equity stake in some public companies in the US but I mean you know could the US take a direct stake in you know in in a minor just take it I mean it's almost resource nationalism. Are we headed into a world where sovereigns own the means of production again? >> Well you think about it though right? I mean what what Secretary Basant says is he wants to he wants to use the balance sheet of the US government to the to to the benefit of the US people. And so, you know, one could easily argue that he's going to mark gold up from $44 an ounce. If he does that, you know, there's a trillion find, right? you know, why not participate as a minority holder in areas that they deem as critical, right? And then, you know, uh, you know, as this cycle goes, you know, the government and the, you know, balance sheet grows because of it, the asset side. So, I think it's it's a prudent call. I I trust Secretary Basset. I think he's a very smart guy. I mean, he's a legend in the hedge fund community. >> I mean, he he he he uh, you know, broke the Bank of England when he worked for George Soros and and and Drunken Miller. >> So, I I am not this, you know, I'm not this end of the world type person with my hair on fire. I try to sit there and go, "Okay, this is what they're doing. They took a position in Intel." I mean, I don't know. I mean, there's a lot of other semiconductor companies. I'd rather the the government to take down than Intel. I think Intel's got big problems, but >> so be it, right? And so, yeah, I the once all of these minerals have been identified as critical, right? Then I would suggest to you that the government of the United States or the Trump administration then would think about taking positions in them. >> Yeah. >> And that's that's the interesting concept, isn't it? >> Yeah. Well, I mean, rerating gold, on that topic, I mean, let's spell it out. Are we talking about a policydriven repricing of gold relative to the dollar like a modern version of what Roosevelt did in in 34 or just a market-based reset through inflation and and confidence loss? >> All I can tell you, Jeremy, what's really different about this run is back in the day, if gold if gold started to run, >> margin requirements would be increased in central bankers would start selling, right? And we don't have that now, right? So, all I'm trying to do is read the room in the sense of sitting here going, "What's different this time is margin requirements aren't going up." And as you mentioned at the beginning of the segment, central bankers are continuing to buy. >> So, look, it something's up, right? Something's up. Don't know what it is. building a theory, building a narrative. Do not think the US dollar is going the way of the dodo bird. Um uh and so you sit there and go, "Well, what could they do?" And then you listen to what they're saying and you you go, "Why wouldn't they write up the assets?" >> Yeah. >> Why shouldn't they write up the assets and use that to basically pay down the debt? I mean, everything's on the table now when you've got debt to de debt to GDP of like say 125%. >> And a deficit at 6%. Massive unfunded liabilities, a government that's gone wild. I mean, President Trump and Bent are just getting in there. But this this government, I mean, the last administration just went bonkers in terms of spending money. >> Yeah. >> Right. Absolute bonkers. So, you know, this is going to take a period of time to work out. >> So, is it more of a, you know, is I almost feel I mean, you you cite the notion of running the economy hot, rerating gold, and maybe even in your your note they're integrating digital assets like Bitcoin into national balance sheets. I mean, is it is it innovative policy then or is it just simply fiscal desperation? >> I think can two things can be true at the same time. >> Yeah. Right. >> And I I think that, you know, u look uh go back to 1945, right? Uh I'm not a Keynesian, but I'm going to quote Canes, right? So I'm not one of these progressive left guys that are at the central bank or on Wall Street, okay? But Kanes warned Harry Dexter White or the chief negotiator of the Americans that if you do do not do something significant, you are going to have a fall in the US empire. And what he suggested was to not have the US dollar as the medium of exchange of the global economy. He wanted the currency to be Bangor. And he also said what people miss is he wanted the a a a fixed mechanical trade adjustment mechanism so that balances and surpluses could get worked out and the Americans came out with we're going to come up with the World Trade Organizations which is a pylon. It's just a hollow organization that is totally useless. So since the 19 and Kane's warned he said you guys are going to follow this Ricardian trade theory and everybody else in the world is going to implement merkantist policies your manufacturing base is going to get hollowed out and your standard of living is going to drop and there's going to be a rise of populism. Kane's called this in 45. Right? So nobody should be profound and I would uh this is not profound and I would suggest to you that anybody that's studied history in central banking knows this. Okay. So this isn't like a revelation to some people. So we are where we should be right. We are exactly where we should be. And let's then overlay the fact that since Nixon closed the gold window, fiat currency has been growing somewhere between 8 to 9% a year. money supply. So when you think about building a portfolio, you've got to basically get 8 to n% a year just to maintain your standard of living. I think people are finally recognizing what has been talked about for decades and we're just starting to position it and we cannot kick the can down the road. And I would suggest the reason why was because interest rates or interest payments, sorry. Mhm. >> on the debt in the United States was greater than the expenditure on the military. And that is typically the Rubicon or when you cross that signifies the end of the empire >> when you can no longer finance your military expenditures. And you can go all the way back to the Romans on that one. So I would suggest we have to change. I would suggest you everything that I've told you as well is profound may not be in some circles and I would suggest that assets have to go up to reflate and I would suggest yes there needs to be fiscal responsibility and people are fed up with the fiat area fiat curren. But I think the more profound question there is they're letting it run. >> And I think they want it to happen. That's my simple interpretation. >> Yeah. Interesting. Interesting. Okay. Well, there's I mean I was going to say I mean you brought up gold there because Ke also said that the the mercantalism you eventually ends with nations hoarding real assets instead of paper promises which sounds a lot like what central banks are doing with gold today. >> Yes. >> Yeah. Yes. So, we're in this adjustment period, right, where the postworld war II environment is no longer sustainable. And that's, you know, Kane said it or you could, you know, people could write a book, call it the fourth turning or, you know, cycle theory or, you know, go back to Carol Quigley, read his books on it. We're at this point where the system has to be recalibrated. So, and you know, President Trump is the forcing function and his administration and I think he's got a very smart administration. I mean, I can't everything that we talked about Scott Bent knows. He taught history of economic thought at Yale. >> Mhm. >> Right. He's got real-time market experience. I mean, him and Drunken Miller and Soros took down the the you know, you know, broke the Bank of England. These guys are studs. These guys are smart, right? This isn't, you know, this isn't normal course of business of somebody who's your Treasury Secretary. This guy isn't a theoretician. He's a practitioner and he understands what's going on. And if you listen to what he's doing and the sequencing of what he's doing leads you to believe he knows exactly what the solution is. Now honestly, but obviously he's got to deal in a political environment which is Washington DC. I but I I think he knows a lot of these folks know what needs to be done where I would say in previous generations that just wasn't the case. >> All right. So James, you know, when you call this a capex super cycle, is it an investment or is it the early stage of an e economic cold war? Because if Keynes was right and this is the you know the mercantalist phase of the post-dollar world how does your super cycle function in a system where cooperation seems dead and competition is permanent it's not going away anymore >> so the arms race is to achieve or to get to artificial general intelligence AGI and you know some people that are smarter than me in the AI world think that that's 5 to seven years Mhm. >> Right. And so to achieve that, if you achieve that, then you basically have the lead in military, you have the lead in your industry and your company. So I am suggesting to you that this period of day tant that we're having right now will be a lot different in the mid of the mid uh the mid30s. I really am not so much concerned about where we are between now and let's say 2030 2031. I'm much more concerned about the hangover of all of this uh let's say 2033 to 2035. I think that's when the end of the world folks are going to eventually be right and we're going to go through some very difficult times. But between now and then, I think people are going to play nice in the proverbial sandbox to get their debt down and to get their economies healing and growing. And then once we get through that stage, we're going to go back to business as usual and I think that's when we're really going to start to see some tough choices and I really start I am really worried about the middle of next decade. >> Interesting. What does that look like? Uh we're going to have to pack it open. I know we're always we're always seeming to run low on time, but I mean what does that look like for you and and and more importantly for the audience because of course we've been talking about what that you know that terrible day or that reckoning would look like. But >> let's say let's say the S&P peaks at 15,000 in 2031 >> and doesn't reach achieve that level until 2041 like a decade of no a decade a decade in terms of asset class returns >> of asset returns. >> Not fun. Uh what are you investing in in those markets? I mean how do you prepare? How how for the folks watching I mean they've been watching the debasement trade they've watched gold when we started talking about it at 2000 race up to 45 have this correction I mean where should they be predicting it are you just kind of saying buy those funds take this trade to 2030 and then position into more real assets >> yes I think there's going to be I think people are going to con recognize that gold and bitcoin are going to have to have a significant allocation in their portfolios as a store of value. I really do. And so in this period that we have right now, look, it's a matter of national security to get the lead to achieve the holy grail, which is artificial general intelligence. We're not there. Large language models are not there. Right? So, we've got this period of time where I just don't think valuations matter. Right? and valuations will matter. I just think it's not going to be until the end of the into the middle of the next decade. And and then what will happen is what all these, you know, Michael Bur and all these people are saying is right. We're going to walk in and and people are going to say, why do I have XY Z stock trading at 250 times price to sales when it should be at five, right? So if you put the value tilt on it, like if you're coming out of the internet bubble, right? it would be deep value names, cash and real assets would be the place to be, right? But, you know, that's where we are. But I I I would suggest to you look, let's get let's get to 28 cuz I really think the that to to this is all predicated on Trump being able to implement supply side economics which is completely different than the Keynesian models that we've been running since Bernani got into the Fed in early 2000. So supply side economics is going to allow us to run the economy hot with not without inflation, >> right? I think. But then everybody goes, "Whoa, that's bad for gold." I go, "No, it's not." No, it's not. Because people are going to recognize the fact that gold is the place to be. People are going to recognize the fact that we are writing Brenton Woods 2.0 and gold will be a key contribute as it always should be. I am not one of those per people that sit there and say we got to go back to the gold standard. But I think as investors, you have to have a significant weight as you always should have. So really, Jeremy, the narrative has really not changed. All I would add to that is we go into the digital world and you throw Bitcoin in that and that has perfect digital scarcity, right? And so when you have that and then the only other thing I would say to you is with with your listeners about gold stocks, you know, you've had this big run up to 43 or whatever, 44. Now, now these mining companies have to execute. >> Mhm. >> And it's they're no longer the ramp up because gold went from 2,000 to 4,000 is over. Now, these companies need to execute. And the tough part for them is going to be that mining is a very difficult business. And it's a very difficult business to model with a Excel spreadsheet to adhere to all of the fun things that Wall Street wants you to hit quarter by quarter, right? You know, something could happen, a mind could flood, you know, and everybody will freak out and hammer the the the gold stocks. So, there's another question that you really got to ask yourself if you're investing is is has the big gold run been over and what you should be doing now is just picking at the physical and not the the the equities that are highly levered to the next move up. I think that's an interesting question that investors and teams should ask themselves. >> Yeah. So, I mean at that point, but just because obviously a lot of our investors watching, they have some juniors, you know, they got some of these larger cap miners that have been really printing cash. I mean, some would argue that this cycle is just beginning for the miners. Do you think that this haircut that they've been experiencing, I mean, it's kind of permanent? >> No, not at all. I I you know, I I you know, it's it's not it's it's you know, we are early in this run. We are early early in this run and it's just more of what I'm trying to do and trying to be a little bit nuanced is >> I mean Jeremy you're asking me about buying gold now. >> Where the heck were you when it was a thousand and I was banging pots and pans. You know what I mean? You want me to buy >> I will [laughter] >> but but you know or Nikico Eagle I just picked that as one hot gold set. Great company, but you know it's trading I don't know what is it like two I don't know I don't have a look at the you know what is it like 235 Canadian today or something like that. >> Where were you guys when it was 40? >> Yeah. >> Right. So the big money in this run has been made. That doesn't take anything away from the fact that you need to have a significant portion of your wealth in gold. >> Yeah. Well said. Uh okay. What popular trade or asset do you think is maybe priced for perfection? I mean, maybe runs the risk of of being the decoy in this cycle rather than the winner. >> Oh jeez, that's a great question, right man? I don't know. I think I think in this ETF driven world >> Yeah. >> where, you know, this is we're moving away from the boomers, how the boomers invest, which is active managers to millennials of the younger generations. They like options and they like ETFs, right? And they're much more top- down focused. I think everything is going to get it it it's going to get dragged up. So, the easy thing for me to say to you is just get beta in your portfolio. Just get exposure. Don't own cash, right? And then for those tactical traders that like uh that like to trade is you don't you look at you you do not buy parabolic moves. Parabolic moves are never resolved by a calm sideways action. Right? That's usually a very violent some very violent corrections in trading sideways. And the other thing I would say to you is look, go find sectors where you've got very very frustrating consolidation patterns. And that's why I go I sit there and I say the Bitcoin Bitcoin's had a very frustrating consolidating pattern, right? has gone from, you know, low low 100s to like 124. That thing breaks out of 124, it's gone. In a New York minute, it's gone. And you won't be able to get in. So, you need to allocate your capitals into the frustrating consolidation patterns and sell the parabolic moves, holding on to your core positions. So I think everything goes and I think the last thing you need to ask yourself is and let's talk about it the middle of next year if the Fed cuts rates substantially and the and to the point where the interest rate sensitive sector ignites >> then you could easily talk about a big catchup trade in the value section of the port of of of the market and you know the AI trade could then trade sideways for a period of time right and get into that consolidation pattern. I think that will be the asset allocation decision of next year. When do you basically allocate away from AI and your winnings and put them into the interest rate sector sensitive sector for a catchup trade and I think that's going to happen in the back half of the year. >> Interesting. Back half of the year. Okay, I'm writing this down. I'm taking notes. Okay, we're coming up on on our time. But before I let you go here, Jay, uh what happens when when the system kind of meets margin? I mean, a lot of these new crypto and tech investors have never lived through a real deleveraging, you know, event. Never seen liquidity pulled when rates spike or even collateral calls start hitting. Did do they actually understand how fragile the structure can get once leverage unwinds? >> No. Gez. I mean, that's what happened in October, right? You had a massive deleveraging in Bitcoin. >> Yeah. >> Right. I mean, when can these leverage long, you know, uh, casino players leave, right? So that's why it's got such a high vault, right? And but that's what happens with an infinite asset, right? >> Um, you know, the market does have a lot of leverage. It's always h, you know, in my career, it's always gotten more leverage. That's why I've always argued that, you know, I know the central bankers think the indust rates. We can't. We can't take high rates. So, I think we need to get I I think the Fed wants to get the overnight rate down to 275, which is neutral. And I just think because they waited so long, they're going to have to overshoot to the downside. And you're starting to hear people, smart people like the president of the New York Fed, Williams, talk about, you know, maybe they're going to have to kick in asset purchases to stabilize the system. So I think the interesting thing for me is, you know, everybody thinks that ' 08, the global financial crisis was the norm as opposed to the exception. And I think it was the exception. We've had the big one. And now we're going to have these other corrections where, you know, people are going to get scared. But I mean look at what happened with uh with our friend who came out burrows when he came out with the short squeeze. Everybody sits there and goes this is going to cause the global financial crisis. No, the global financial crisis was caused because the counterparty risk got so bad and the transparency got so bad that near dollar assets, right, that gave you a couple of extra beeps >> return that you would put in your money market fund when no bid and the money market funds broke the buck. the the the global financial crisis was caused. It was a settlement problem. And when you hear people, there's always going to be companies blowing up because they're overlevered or because they lied or because they pledged their assets five or six times. That's just normal course of business. It's unfortunate, right? But to extrapolate that that this is going to be the global financial crisis. Well, guess what? It sells newsletters, right? Okay. And that's fair. But I'd rather take the other side of it and trade against it. So when that we were having this correction over the last couple of weeks, I was saying get your A-list together. Highgrade your portfolio. The government's going to open. QT is going to stop. They're going to start purchasing assets. They're going to cut rates. That's risk on, not risk off. >> Yeah. Yeah. till 2030. Uh, you know, the last time we saw that kind of set up those record deficits, this falling long yields, political pressure for easy money, it ended up in that 1970s inflation spiral. I mean, well, I guess there is some differences this time, but you you can't reflate an economy, but you you you can't refate trust, right? I mean, once markets realize that debt is being monetized again, rates may fall, but gold and hard assets will do the talking. >> You just nailed it, right? they've lost trust. So once they've lost trust, what's the go-to trade? Gold, right? And then I would say then I would say eventually it's going once it gets a little bit more mature, Bitcoin. You can't get the genie back in the bottle. I think what has happened over the last couple of years has just been totally unfortunate in terms of you know we have seen finally I would say the general public the general investing public has seen behind the curtain of the great wizard that some of us have seen for a long period of time. >> Well said. All right let's leave it at that just because it gives us a little tease for your next appearance. All right. Dr. James Thorne is the chief market strategist at Wellington Altis Private Capital joining us now. Thank you for this. Next time we have you on, we got to talk Canadian economy. We got to get into that Bitcoin versus gold debate and uh hopefully not so much macro. Hopefully some things will slow down here for us, James. >> Nice to meet you. Thanks for having me. >> Thanks so much. I appreciate your time. And it's a jam-packed week of course over here at Kiko News. We're going to be ahead of all of it. So stay tuned. Hit subscribe. And [music] I'm Jeremy Saffron. This is Kicko News. Thanks for watching. We'll see you next time. >> [music]
We Are Writing ‘Bretton Woods 2.0’ & U.S. Will ‘Write Up’ Gold Price to Pay Debt | James Thorne
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Transcript
Welcome back. I'm Jeremy Saffron. Markets [music] are split in two this morning. Hope on one side and it feels like fear on the other. Now, the US government has now been shut down for just over 40 days. The longest such standoff in American history. And this morning, stocks are rising on hopes that a bipartisan Senate deal backed by the White House will finally reopen government operations. Now, if we look at precious metals at the same time, they're also rallying on this news. I mean, spot gold is trading at around $4,100 an ounce. Uh, silver too up almost 5% past that $50 an ounce mark on the spot side, which is uh back in that 50 zone. Some of the audience been looking for that one. Now, stocks are rising on optimism and gold is rising on what many are calling fiscal anxiety. So, which signal do investors trust here? Joining me now to break it down, Dr. James Thorne. He's a chief market strategist at Wellington Altis Private Wealth. Also just authored this this fun little report. I like it. It's called Wealth in a Capex superstyle super cycle. Great to see you, James. Thanks for coming on the program. >> Thanks for having me, Jeremy. >> Uh let's get right into it. I mean, this obviously this thesis that you're arguing that we're entering a long-term capex boom driven by energy and intelligence. Uh I mean, the federal government right now shut down, the Fed lacking fresh data, and of course, we got this global uncertainty at an all-time high. How can investors ignore the noise when the noise is is the system itself? >> I think what you do is you start taking a longer view >> Mhm. >> and recognizing the fact that there's going to be dayto-day volatility, day-to-day noise, but if you look out five to six quarters, that's what you should be thinking about when you're building your portfolios. So Jeremy, we have always been of the view or I've been of the view that look with the excessive level of debt that we have in the Western world, some call it at at Napoleonic war levels, >> we can either have a war or we can try to grow our way out of it. And my call is that we're going to grow our way out of it. And so, you know, we need lower interest rates. Inflation's really not going to be a problem. And then at the same point in time, I think there are going to be asset classes like gold and silver and and crypto and real estate and bonds and stocks that are all going to slowly reflate together. And we're going to reflate this our way out of this like we did between 1950 and 1975. >> Okay, that's interesting. Uh let's start then. I mean, I've heard the reflation kind of aspect and it does make sense on the long-term points, right? uh you projected that the S&P 500 could reach 8,000, right? I mean, based on on what you call this intelligence super cycle, and you argue that this time is obviously not like the 1990s.com era because today's leading tech companies are indispensable infrastructure. They're not really on these speculative bubbles. This draw down and volatility. I mean, how do you get through the noise and just for people looking at their passive accounts say I can't look at what's happening this past couple of months? I mean, I should say the S&P 500 is still up about 15% this year. >> Sure. I I think what you need to do is is is recognize the fact that um I guess the way I would put it, let's just overlay the demographics. Demographics suggest that we are at a a period of time within the cycles that we should run until the end of the decade. Anytime you have a massive cohort like the millennials in the younger generation when they become come into family formation years and investing years we typically have uh a secular bull market and they invest differently and they consume differently than the the previous uh generation. So, that's one. And then two, really, when you look at it, you know, you you you could overlay the four-year cycle, but what's really interesting about the four-year cycle is when you have these unique 20% corrections uh that are a surprise, shall we say, what happened in April. And when that happens, you reset the cycle. So, if you just go back in periods of time and say two things. First, unless we have a recession next year, you're not going to get two 20% draw downs in a row. Okay? It might call us for a growth slowdown, not a recession. That's one. And if that's the case, where does history say we go? And history says we go somewhere between 74 to 75 uh 100 on the S&P by the spring of 2026. And then I would suggest we're going to have a normal natural healthy correction of 8 to 10%. And that can happen at any time and for any reason just like we're going through right now. It wasn't even an 8 to 10% correction. And then I think we rally hard into the midterm elections. And so what's going to be unique about next year is that the midterm election cycle significant pullback that all of the historians are going to point to is not going to occur because the 20% correction happened a year early. >> Yeah. Interesting. So I mean if this cycle, you know, kind of depends on financial engineering to keep it alive, it almost feels like it's policy adrenaline. I mean how long before the patient builds tolerance? >> It's a good question, right? So when you think about it, so first is is let's look five to six to seven quarters out. And then the other thing is is that bull markets don't end in valuations or bubbles don't end in valuations. They end when the when the punch bowl is taken away or when liquidity is turned off. Well, we're going to have with the government uh uh opening, we're going to have the Treasury General account starting to be drawn down. I mean, I think it's close to a trillion dollars. So, you're going to have money coming into the system. Quantitative tightening is going to end in December, which means the Fed is going to be ping purchasing between 60 and 70 billion dollar worth of government bonds. And then we've got Fed, you know, Fed's the Fed's going to cut. And I think the Fed's going to get rates below 275, somewhere in the low two area. And that's the the framework of the reflation trade. That is wonderful. And that is good for risk assets and it's good for gold and silver as well. So Jeremy, what I'm not is I'm not an end of the world type guy. Like the next piece we're going to come out with in the in in in in the next month is look the end the narrative that the U the is the end of the US dollar, right? That's just wrong. Okay. And if you look at the data, you know, the US dollar system is still dominant. China just issued a ton of US dollar bonds last week and it was massively overs subscribed. So what we've got to do is we've got to delineate between US dollar system and the US dollar. And sure, the US dollar can go up, down, all around for a myriad of reasons, but that does not take away from the fact that since World War II, the plumbing of the global system and rightly or wrongly, the fiat money system has been US dollar denominated. And I just don't see the RAM or the euro or the Japanese yen replacing it. So that's you know so what what do I say is you hear people say it's the end of the dollar regime no but at the same point in time I think it's very prudent and what you're seeing with central bankers is they are prudently diversifying away some of their holdings into gold then I think eventually that will lead into Bitcoin and they're going to diversify assets and why would that be well because yellen and Biden weaponized the US dollar when they attacked Russian holdings of US treasuries irrespective of the whether it was right or wrong because of the Ukraine war. If you and I are are are consulting a large pool of capital somewhere in the around the world, we would possibly prudently say I think it's a good idea to diversify away and add some gold, but yet to still say that the US treasuries and the US dollars are still a the dominant store of value and still the dominant currency. >> Yeah. Yeah. Well said. And we will get on the debasement trade in a little bit. This is what we call a hook. We're going to make everyone wait just a little bit here. U before we do that, I'm just curious. I mean, I don't know if you saw an ex, this Michael Bur tweet, the big short investor. He's kind of saying that companies are overstating profits by extending the lifespan of assets on their balance sheet. He's estimating nearly 176 billion in under reportported depreciation through to 2028. I mean, if that's even partially true, we're we're we're we're not looking at that much productivity. We're looking at accounting sugar highs. Does that any of these types of things concern you? You know, the creative way or the creative headlines of some of these earning calls? >> No. I I I I find it interesting that they released their short, you know, their their what they were holding 45 days early. >> Um I think look, we are in I'm going to put my economist hat on here, right? Um there is a very famous paper by actually Janet Yelen's husband George Aaloff he won the Nobel Prize for it called market for lemons and really what it was doing it was attacking the efficient market hypothesis right and the problem with the efficient market hypothesis is that Jeremy you and I we assume that we know full information with 100% certainty we know everything and therefore we can determine what the valuation is. >> Mhm. What happens when you don't know the information and I don't know the we don't know we are living in a complete and total void of information where we don't know what the intrinsic value is of an asset a railroad a canal AI a server whatever a new drug >> what happens is is that the individual or the team or the person that has the best story at that period of point in time that captures the imagination of the market wins. So, let's be honest. Look, the S&P has gone from in early April of this year to the dark days, the end of the world, sell everything and Wall Street sold the bottom and we got to 6,900 and then we had a big run and it was extended and it needed a correction. So, was that because of and then he comes out with his report. Now, look, we are not going to know what the intrinsic value of AI is for decades. So we h isn't it interesting that this always happens after Palunteer reports and Palunteer is a very very good very forward-looking uh company but you cannot use traditional CFA metrics to own it. You can't. It's just too expensive. Does that mean it's in a bubble? No. But in our daily grind of the market, people will use whatever they can to position and to basically profit off of trades that they have been positioned for. So this won't be the first time nor the last time that we hear that there's going to be a bubble. And Jeremy, what is you your listeners or your viewers have to understand is a bubble is a normal evolutionary process. part of a normal evolutionary process of when a massive technological wave is hitting an economy. No different than in the 1892, 1893 you had a financial crisis because everybody thought the railroads were a scam. Right? So what I try to say to people is look between now and the end of the day I will say to 31 >> and the reason why I say 2031 is that in the big beautiful bill capex is 100% tax deductible until January 2031 and so can we get periods of time where they get over you know overexuberant just like gold right you know you sell parabolic moves whether it's AI whether it's gold, whether it's Bitcoin, and then you basically sit and you look at what are in the consolidation patterns in the market to try to reposition yourself to find out what train is about to leave the station. So, do I respect what what Bur says? Yes, I am I I will I would suggest you it will not be the last time we hear about this narrative between now and the end of the decade. And it just is goes with the normal course of business when you're dealing with a massive technology wave where we are trying to figure out what the intrinsic value is. Why do I use intrinsic value? Because Jeremy, we cannot qualify what if we're in a bubble or not unless we can quantify what the intrinsic value, what the total value of the AI digital economy looks like out 10 to 15 years because we are going to be discounting free cash flows back. So, we don't know. So, there's going to be periods of time when you you get sharp corrections and there's going to be periods of time where you get parabolic moves. Get used to it. >> Yeah. Yeah. I got to ask you about the global race. I mean, if we kind of widen our lens globally, I mean, that arms race doesn't really appear to be happening in a vacuum. I mean, we're talking about China, of course. I mean, this global arms race, AI data, this intelligence platform, I mean, China's economy is kind of showing real deflationary signals in and producer prices have been negative for more than a year. How does that cycle you described continue if one of those key engines is contracting? >> Yeah, it's Yeah, great point. because yeah we've got the second largest economy in the world in a debt deflationary in spiral one two the China does not have the technology lead relative to the United States but they do have the energy lead >> right and the foundation to winning this AI arms race is cheap secure energy whether it's base load energy you know which it would nuclear, coal, uh oil and gas, nack gas, right? Um and then and then green like solar, right? I mean, everything is needed to basically get cheap energy and so China has that lead. Look, the way I frame it though is that look, with so much debt, and China does have an excess excessive amount of debt, um we all have to play nice in the proverbial sandbox so that we can all grow out of this debt crisis. And so that's why we've got to deal between uh Mr. Trump and Chairman Xi. That's why we're going to learn how to coexist. It's a truce. And so I I just look at this as when will the west understand that it's not about Nvidia's blackwell platform or chip that's the the worrisome. It's the fact that we are so far behind in generating cheap electricity and that is the key. And you know, the Chinese do not, you don't hear the bubble calls. You don't hear Michael Bur talking about the bubble calls over in in China. Wall Street gives China a pass. I don't know why, but they do. So, I look at the fact that with the date debt deflation spiral in China, they have to make a deal. They are weak, right? They have not escaped the middle income trap, right? And so there is excessive excessive overcapacity in the U and the Chinese economy. >> So we have debt deflationary fundamental forces >> underneath the surface and there is a huge cohort of individuals on Wall Street that think inflation's the problem and inflation isn't the problem. who holds that uh you know the energy advantage heading into the 2030s that we talked about because I mean innovation doesn't move a grid. China's building those 150 nuclear reactors. The US has only a handful in development. Canada is still debating permits. I mean are are we mistaking innovation for infrastructure? >> Yes. It's a massive infrastructure build and and the West lags China in energy. Yes. So the question we have to ask ourelves Jeremy what how is this cycle this capex cycle going to be different than let's say two decades ago when China entered the world trade organization then we had this big urbanization of China and you had this massive buildout of of of uh infrastructure in China and to a certain extent North America which didn't go far enough right that's what we're in front of we're in front of we need to build nuclear reactor factors. We need to build pipelines. We need to build grids. Right? So, this is a whole rewiring of the economy. And so, when you talk about a bubble, okay, so you don't like Palunteer, fine. Okay, great. But that doesn't mean that every other company within the AI food chain is at bubble valuations. And that's where I think people completely miss the story. They anchor on one company and then they generalize and they sit there and say, "Well, it's it's a it's a massive bubble." Well, we've got to build out energy, right? We got to build out nuclear power, right? And so that they're not in bubbles yet, right? But when you get the market to a point where, you know, everybody missed the trade, remember Wall Street sold the April bottom. Never forget that. And they have been complaining about this forever. Wall Street was not long gold, okay? They've missed it. They're underperforming. So, they are motivated to come on and to basically talk differently and to present the end of the world narrative. And that's okay. That's what makes a market, right? But I suggest to you that we are possibly in front of the largest capex super cycle in modern history. Do you want to miss out on that? And if not, how do you position your portfolios accordingly? >> Yeah. Yeah. Well said. I mean, as we talked about this super cycle, obviously energy is going to be a part of it. I mean, you contend that intelligence needs energy that it's going to be driving this next major infrastructure cycle. I mean, these real assets we talked about energy, minerals, grid infrastructure, copper, uranium are the logical play. But for our audience of uh you know resource and real asset investors, is this the moment that they've been waiting for after years of underperformance? >> Yes. Yes. I I I people you know I'm a long-term gold I've been pre guy. I've been I've been suggesting gold as a you know portion 5% of gold in your portfolio is just your standard right up here in you know I'm in Toronto right now. The TSX I think is 13% gold. You know, I thought gold could get, you know, 5,000 shortterm and maybe close to 8,000 by the end of the decade. I think gold has run too far too fast and it needs to consolidate. That doesn't mean that I'm still I I still, you know, I get calls all the time. Yeah, sure. You want to buy gold here? Sure. I think it's going to consolidate between 4,000 and 4,400 for a couple of months just to grind, right? But it's a core holding, right? and and so but at that but but but but to be clear I do not view the move in gold as the end of the US dollar or the end of the regime. >> I just think it's finally the time when gold has started to appreciate and people have recognized the fact that there are issues in the fiat money system. >> Yeah. >> Right. And that's been around forever. So that's not profound, right? So at 4,000 or 5,000, it should have been there a couple of years ago when and and for your listeners who are gold bugs, they know it. They've been waiting for this forever. So I just think it's, you know, gold and silver to a certain extent now that I don't know if folks realize that silver is now been identified by the US government as a critical mineral. Um and so they are standard holdings in your portfolio and the weight depends on you know what your risk preferences and tolerances but my whole suggestion would be 5% in the cryptos like so Bitcoin or Ether and you know then 5% in gold or silver but you know if you're older and you don't want crypto and you don't like crypto fine 10% % gold. You know, that's fine. And but but to to to to understand the fact that the way we get out of this is basically nominal growth or growing assets. Debt to GDP after World War II went from about 125 to 130% to about 35% in 1975 and it was all reflated away. Now, I think it's going to happen more quickly, but I think that gold is a part of it. Stocks are a part of it. I think they've got to get interest rates down because I think real estate's got to be a part of it, right? I think there's a multi, we need all cylinders of the engine clicking as we reflate our way out of this experiment, this flawed experiment which was modern monetary theory. Mhm. >> And so that's, you know, these are my conversations I would have across the country or across North America and all I would say to you is when somebody comes in like for example today $100 worth of gold I sit there would I buy gold or Bitcoin? I sit there and I go you can buy whatever you want but just understand that if you buy gold here it might trade sideways for three or four months and Bitcoin but might outperform. I like both. Right. But, you know, typically I talk to a lot of people that say they're long-term investors that are really traders. >> Yeah. >> Right. So, I think gold around here between four fine. I would be picking at it. I would be using the sideways consolidation pattern that I think we're in to accumulate. Um, if you don't want to sell, you don't have to sell. Is the run over? No. Is it a core holding? Yes. Mhm. >> And finally, gold is getting the recognition that it should have for decades. >> Yeah. Well said. People finally starting to talk about it. The debasement trade, as they like to call it, even though I get what you're saying on the the central bank dollar. I mean, the US dollar is still king and and we're seeing that right now. I mean, I want to go back on the silver front just because I remember reading your your quotes here on the on your last paper and you were talking about grid constraints and how they've become strategic bottlenecks. I mean, silver's up 5% today. It's it's obviously tied into solar and grid buildout. In your view, is is silver among the most mispriced bottleneck asset in this cycle? >> Could be. And and the other thing is if the US government has classified it as a critical mineral >> Mhm. >> then doesn't that mean that President's Trump administration can take a piece out of a gold mine if it wanted to? I mean it's we're gamechanging here. Yes. and and so you know silver but silver is a highly volatile asset and you know I just look at it as in the same as you know it's poor man's gold but it's got industrial uses and all I was saying to our folks at Wellington on a note this weekend is look who they put they put uranium they put me coal they put silver they put some very interesting uh copper You know, this goes down to look, this is an arms race >> and you need safe, secure supplies of these critical minerals and energy and silver now is put into that bucket. >> Interesting. Uh, go back to what you're saying. I mean, I I know what you were saying. I mean obviously we've seen just of late US kind of coming in and taking equity stake in some public companies in the US but I mean you know could the US take a direct stake in you know in in a minor just take it I mean it's almost resource nationalism. Are we headed into a world where sovereigns own the means of production again? >> Well you think about it though right? I mean what what Secretary Basant says is he wants to he wants to use the balance sheet of the US government to the to to the benefit of the US people. And so, you know, one could easily argue that he's going to mark gold up from $44 an ounce. If he does that, you know, there's a trillion find, right? you know, why not participate as a minority holder in areas that they deem as critical, right? And then, you know, uh, you know, as this cycle goes, you know, the government and the, you know, balance sheet grows because of it, the asset side. So, I think it's it's a prudent call. I I trust Secretary Basset. I think he's a very smart guy. I mean, he's a legend in the hedge fund community. >> I mean, he he he he uh, you know, broke the Bank of England when he worked for George Soros and and and Drunken Miller. >> So, I I am not this, you know, I'm not this end of the world type person with my hair on fire. I try to sit there and go, "Okay, this is what they're doing. They took a position in Intel." I mean, I don't know. I mean, there's a lot of other semiconductor companies. I'd rather the the government to take down than Intel. I think Intel's got big problems, but >> so be it, right? And so, yeah, I the once all of these minerals have been identified as critical, right? Then I would suggest to you that the government of the United States or the Trump administration then would think about taking positions in them. >> Yeah. >> And that's that's the interesting concept, isn't it? >> Yeah. Well, I mean, rerating gold, on that topic, I mean, let's spell it out. Are we talking about a policydriven repricing of gold relative to the dollar like a modern version of what Roosevelt did in in 34 or just a market-based reset through inflation and and confidence loss? >> All I can tell you, Jeremy, what's really different about this run is back in the day, if gold if gold started to run, >> margin requirements would be increased in central bankers would start selling, right? And we don't have that now, right? So, all I'm trying to do is read the room in the sense of sitting here going, "What's different this time is margin requirements aren't going up." And as you mentioned at the beginning of the segment, central bankers are continuing to buy. >> So, look, it something's up, right? Something's up. Don't know what it is. building a theory, building a narrative. Do not think the US dollar is going the way of the dodo bird. Um uh and so you sit there and go, "Well, what could they do?" And then you listen to what they're saying and you you go, "Why wouldn't they write up the assets?" >> Yeah. >> Why shouldn't they write up the assets and use that to basically pay down the debt? I mean, everything's on the table now when you've got debt to de debt to GDP of like say 125%. >> And a deficit at 6%. Massive unfunded liabilities, a government that's gone wild. I mean, President Trump and Bent are just getting in there. But this this government, I mean, the last administration just went bonkers in terms of spending money. >> Yeah. >> Right. Absolute bonkers. So, you know, this is going to take a period of time to work out. >> So, is it more of a, you know, is I almost feel I mean, you you cite the notion of running the economy hot, rerating gold, and maybe even in your your note they're integrating digital assets like Bitcoin into national balance sheets. I mean, is it is it innovative policy then or is it just simply fiscal desperation? >> I think can two things can be true at the same time. >> Yeah. Right. >> And I I think that, you know, u look uh go back to 1945, right? Uh I'm not a Keynesian, but I'm going to quote Canes, right? So I'm not one of these progressive left guys that are at the central bank or on Wall Street, okay? But Kanes warned Harry Dexter White or the chief negotiator of the Americans that if you do do not do something significant, you are going to have a fall in the US empire. And what he suggested was to not have the US dollar as the medium of exchange of the global economy. He wanted the currency to be Bangor. And he also said what people miss is he wanted the a a a fixed mechanical trade adjustment mechanism so that balances and surpluses could get worked out and the Americans came out with we're going to come up with the World Trade Organizations which is a pylon. It's just a hollow organization that is totally useless. So since the 19 and Kane's warned he said you guys are going to follow this Ricardian trade theory and everybody else in the world is going to implement merkantist policies your manufacturing base is going to get hollowed out and your standard of living is going to drop and there's going to be a rise of populism. Kane's called this in 45. Right? So nobody should be profound and I would uh this is not profound and I would suggest to you that anybody that's studied history in central banking knows this. Okay. So this isn't like a revelation to some people. So we are where we should be right. We are exactly where we should be. And let's then overlay the fact that since Nixon closed the gold window, fiat currency has been growing somewhere between 8 to 9% a year. money supply. So when you think about building a portfolio, you've got to basically get 8 to n% a year just to maintain your standard of living. I think people are finally recognizing what has been talked about for decades and we're just starting to position it and we cannot kick the can down the road. And I would suggest the reason why was because interest rates or interest payments, sorry. Mhm. >> on the debt in the United States was greater than the expenditure on the military. And that is typically the Rubicon or when you cross that signifies the end of the empire >> when you can no longer finance your military expenditures. And you can go all the way back to the Romans on that one. So I would suggest we have to change. I would suggest you everything that I've told you as well is profound may not be in some circles and I would suggest that assets have to go up to reflate and I would suggest yes there needs to be fiscal responsibility and people are fed up with the fiat area fiat curren. But I think the more profound question there is they're letting it run. >> And I think they want it to happen. That's my simple interpretation. >> Yeah. Interesting. Interesting. Okay. Well, there's I mean I was going to say I mean you brought up gold there because Ke also said that the the mercantalism you eventually ends with nations hoarding real assets instead of paper promises which sounds a lot like what central banks are doing with gold today. >> Yes. >> Yeah. Yes. So, we're in this adjustment period, right, where the postworld war II environment is no longer sustainable. And that's, you know, Kane said it or you could, you know, people could write a book, call it the fourth turning or, you know, cycle theory or, you know, go back to Carol Quigley, read his books on it. We're at this point where the system has to be recalibrated. So, and you know, President Trump is the forcing function and his administration and I think he's got a very smart administration. I mean, I can't everything that we talked about Scott Bent knows. He taught history of economic thought at Yale. >> Mhm. >> Right. He's got real-time market experience. I mean, him and Drunken Miller and Soros took down the the you know, you know, broke the Bank of England. These guys are studs. These guys are smart, right? This isn't, you know, this isn't normal course of business of somebody who's your Treasury Secretary. This guy isn't a theoretician. He's a practitioner and he understands what's going on. And if you listen to what he's doing and the sequencing of what he's doing leads you to believe he knows exactly what the solution is. Now honestly, but obviously he's got to deal in a political environment which is Washington DC. I but I I think he knows a lot of these folks know what needs to be done where I would say in previous generations that just wasn't the case. >> All right. So James, you know, when you call this a capex super cycle, is it an investment or is it the early stage of an e economic cold war? Because if Keynes was right and this is the you know the mercantalist phase of the post-dollar world how does your super cycle function in a system where cooperation seems dead and competition is permanent it's not going away anymore >> so the arms race is to achieve or to get to artificial general intelligence AGI and you know some people that are smarter than me in the AI world think that that's 5 to seven years Mhm. >> Right. And so to achieve that, if you achieve that, then you basically have the lead in military, you have the lead in your industry and your company. So I am suggesting to you that this period of day tant that we're having right now will be a lot different in the mid of the mid uh the mid30s. I really am not so much concerned about where we are between now and let's say 2030 2031. I'm much more concerned about the hangover of all of this uh let's say 2033 to 2035. I think that's when the end of the world folks are going to eventually be right and we're going to go through some very difficult times. But between now and then, I think people are going to play nice in the proverbial sandbox to get their debt down and to get their economies healing and growing. And then once we get through that stage, we're going to go back to business as usual and I think that's when we're really going to start to see some tough choices and I really start I am really worried about the middle of next decade. >> Interesting. What does that look like? Uh we're going to have to pack it open. I know we're always we're always seeming to run low on time, but I mean what does that look like for you and and and more importantly for the audience because of course we've been talking about what that you know that terrible day or that reckoning would look like. But >> let's say let's say the S&P peaks at 15,000 in 2031 >> and doesn't reach achieve that level until 2041 like a decade of no a decade a decade in terms of asset class returns >> of asset returns. >> Not fun. Uh what are you investing in in those markets? I mean how do you prepare? How how for the folks watching I mean they've been watching the debasement trade they've watched gold when we started talking about it at 2000 race up to 45 have this correction I mean where should they be predicting it are you just kind of saying buy those funds take this trade to 2030 and then position into more real assets >> yes I think there's going to be I think people are going to con recognize that gold and bitcoin are going to have to have a significant allocation in their portfolios as a store of value. I really do. And so in this period that we have right now, look, it's a matter of national security to get the lead to achieve the holy grail, which is artificial general intelligence. We're not there. Large language models are not there. Right? So, we've got this period of time where I just don't think valuations matter. Right? and valuations will matter. I just think it's not going to be until the end of the into the middle of the next decade. And and then what will happen is what all these, you know, Michael Bur and all these people are saying is right. We're going to walk in and and people are going to say, why do I have XY Z stock trading at 250 times price to sales when it should be at five, right? So if you put the value tilt on it, like if you're coming out of the internet bubble, right? it would be deep value names, cash and real assets would be the place to be, right? But, you know, that's where we are. But I I I would suggest to you look, let's get let's get to 28 cuz I really think the that to to this is all predicated on Trump being able to implement supply side economics which is completely different than the Keynesian models that we've been running since Bernani got into the Fed in early 2000. So supply side economics is going to allow us to run the economy hot with not without inflation, >> right? I think. But then everybody goes, "Whoa, that's bad for gold." I go, "No, it's not." No, it's not. Because people are going to recognize the fact that gold is the place to be. People are going to recognize the fact that we are writing Brenton Woods 2.0 and gold will be a key contribute as it always should be. I am not one of those per people that sit there and say we got to go back to the gold standard. But I think as investors, you have to have a significant weight as you always should have. So really, Jeremy, the narrative has really not changed. All I would add to that is we go into the digital world and you throw Bitcoin in that and that has perfect digital scarcity, right? And so when you have that and then the only other thing I would say to you is with with your listeners about gold stocks, you know, you've had this big run up to 43 or whatever, 44. Now, now these mining companies have to execute. >> Mhm. >> And it's they're no longer the ramp up because gold went from 2,000 to 4,000 is over. Now, these companies need to execute. And the tough part for them is going to be that mining is a very difficult business. And it's a very difficult business to model with a Excel spreadsheet to adhere to all of the fun things that Wall Street wants you to hit quarter by quarter, right? You know, something could happen, a mind could flood, you know, and everybody will freak out and hammer the the the gold stocks. So, there's another question that you really got to ask yourself if you're investing is is has the big gold run been over and what you should be doing now is just picking at the physical and not the the the equities that are highly levered to the next move up. I think that's an interesting question that investors and teams should ask themselves. >> Yeah. So, I mean at that point, but just because obviously a lot of our investors watching, they have some juniors, you know, they got some of these larger cap miners that have been really printing cash. I mean, some would argue that this cycle is just beginning for the miners. Do you think that this haircut that they've been experiencing, I mean, it's kind of permanent? >> No, not at all. I I you know, I I you know, it's it's not it's it's you know, we are early in this run. We are early early in this run and it's just more of what I'm trying to do and trying to be a little bit nuanced is >> I mean Jeremy you're asking me about buying gold now. >> Where the heck were you when it was a thousand and I was banging pots and pans. You know what I mean? You want me to buy >> I will [laughter] >> but but you know or Nikico Eagle I just picked that as one hot gold set. Great company, but you know it's trading I don't know what is it like two I don't know I don't have a look at the you know what is it like 235 Canadian today or something like that. >> Where were you guys when it was 40? >> Yeah. >> Right. So the big money in this run has been made. That doesn't take anything away from the fact that you need to have a significant portion of your wealth in gold. >> Yeah. Well said. Uh okay. What popular trade or asset do you think is maybe priced for perfection? I mean, maybe runs the risk of of being the decoy in this cycle rather than the winner. >> Oh jeez, that's a great question, right man? I don't know. I think I think in this ETF driven world >> Yeah. >> where, you know, this is we're moving away from the boomers, how the boomers invest, which is active managers to millennials of the younger generations. They like options and they like ETFs, right? And they're much more top- down focused. I think everything is going to get it it it's going to get dragged up. So, the easy thing for me to say to you is just get beta in your portfolio. Just get exposure. Don't own cash, right? And then for those tactical traders that like uh that like to trade is you don't you look at you you do not buy parabolic moves. Parabolic moves are never resolved by a calm sideways action. Right? That's usually a very violent some very violent corrections in trading sideways. And the other thing I would say to you is look, go find sectors where you've got very very frustrating consolidation patterns. And that's why I go I sit there and I say the Bitcoin Bitcoin's had a very frustrating consolidating pattern, right? has gone from, you know, low low 100s to like 124. That thing breaks out of 124, it's gone. In a New York minute, it's gone. And you won't be able to get in. So, you need to allocate your capitals into the frustrating consolidation patterns and sell the parabolic moves, holding on to your core positions. So I think everything goes and I think the last thing you need to ask yourself is and let's talk about it the middle of next year if the Fed cuts rates substantially and the and to the point where the interest rate sensitive sector ignites >> then you could easily talk about a big catchup trade in the value section of the port of of of the market and you know the AI trade could then trade sideways for a period of time right and get into that consolidation pattern. I think that will be the asset allocation decision of next year. When do you basically allocate away from AI and your winnings and put them into the interest rate sector sensitive sector for a catchup trade and I think that's going to happen in the back half of the year. >> Interesting. Back half of the year. Okay, I'm writing this down. I'm taking notes. Okay, we're coming up on on our time. But before I let you go here, Jay, uh what happens when when the system kind of meets margin? I mean, a lot of these new crypto and tech investors have never lived through a real deleveraging, you know, event. Never seen liquidity pulled when rates spike or even collateral calls start hitting. Did do they actually understand how fragile the structure can get once leverage unwinds? >> No. Gez. I mean, that's what happened in October, right? You had a massive deleveraging in Bitcoin. >> Yeah. >> Right. I mean, when can these leverage long, you know, uh, casino players leave, right? So that's why it's got such a high vault, right? And but that's what happens with an infinite asset, right? >> Um, you know, the market does have a lot of leverage. It's always h, you know, in my career, it's always gotten more leverage. That's why I've always argued that, you know, I know the central bankers think the indust rates. We can't. We can't take high rates. So, I think we need to get I I think the Fed wants to get the overnight rate down to 275, which is neutral. And I just think because they waited so long, they're going to have to overshoot to the downside. And you're starting to hear people, smart people like the president of the New York Fed, Williams, talk about, you know, maybe they're going to have to kick in asset purchases to stabilize the system. So I think the interesting thing for me is, you know, everybody thinks that ' 08, the global financial crisis was the norm as opposed to the exception. And I think it was the exception. We've had the big one. And now we're going to have these other corrections where, you know, people are going to get scared. But I mean look at what happened with uh with our friend who came out burrows when he came out with the short squeeze. Everybody sits there and goes this is going to cause the global financial crisis. No, the global financial crisis was caused because the counterparty risk got so bad and the transparency got so bad that near dollar assets, right, that gave you a couple of extra beeps >> return that you would put in your money market fund when no bid and the money market funds broke the buck. the the the global financial crisis was caused. It was a settlement problem. And when you hear people, there's always going to be companies blowing up because they're overlevered or because they lied or because they pledged their assets five or six times. That's just normal course of business. It's unfortunate, right? But to extrapolate that that this is going to be the global financial crisis. Well, guess what? It sells newsletters, right? Okay. And that's fair. But I'd rather take the other side of it and trade against it. So when that we were having this correction over the last couple of weeks, I was saying get your A-list together. Highgrade your portfolio. The government's going to open. QT is going to stop. They're going to start purchasing assets. They're going to cut rates. That's risk on, not risk off. >> Yeah. Yeah. till 2030. Uh, you know, the last time we saw that kind of set up those record deficits, this falling long yields, political pressure for easy money, it ended up in that 1970s inflation spiral. I mean, well, I guess there is some differences this time, but you you can't reflate an economy, but you you you can't refate trust, right? I mean, once markets realize that debt is being monetized again, rates may fall, but gold and hard assets will do the talking. >> You just nailed it, right? they've lost trust. So once they've lost trust, what's the go-to trade? Gold, right? And then I would say then I would say eventually it's going once it gets a little bit more mature, Bitcoin. You can't get the genie back in the bottle. I think what has happened over the last couple of years has just been totally unfortunate in terms of you know we have seen finally I would say the general public the general investing public has seen behind the curtain of the great wizard that some of us have seen for a long period of time. >> Well said. All right let's leave it at that just because it gives us a little tease for your next appearance. All right. Dr. James Thorne is the chief market strategist at Wellington Altis Private Capital joining us now. Thank you for this. Next time we have you on, we got to talk Canadian economy. We got to get into that Bitcoin versus gold debate and uh hopefully not so much macro. Hopefully some things will slow down here for us, James. >> Nice to meet you. Thanks for having me. >> Thanks so much. I appreciate your time. And it's a jam-packed week of course over here at Kiko News. We're going to be ahead of all of it. So stay tuned. Hit subscribe. And [music] I'm Jeremy Saffron. This is Kicko News. Thanks for watching. We'll see you next time. >> [music]