Why Most Portfolios Are Still Wrong on Gold | Jeff Weniger
Summary
Precious Metals Thesis: Guest argues portfolios are structurally underweight gold and silver, advocating moving from 0% to at least a 5% allocation as a core diversifier.
Allocation Rationale: With gold representing an estimated 12.7% of the global investable market, zero allocation is no longer neutral; adding metals can improve diversification versus equities and bonds.
Gold vs. Bitcoin: Gold provided better diversification than Bitcoin during recent S&P 500 selloffs, reinforcing gold’s role as a portfolio hedge.
Macro Tailwinds: Past Fed easing (starting ~19 months ago) and relatively stable long-end yields support risk assets and non-yielding stores of value like gold and silver.
China Physical Demand: Surging Chinese silver imports and East vs. West dynamics suggest robust physical buying in the East while Western markets trade metals more like risk assets.
Implementation: Reallocate primarily from fixed income or use ETP overlays (e.g., equity plus gold futures) to maintain a 60/40 while layering metals exposure efficiently.
Oil Shock Context: Current oil shock appears less demand-destructive than past episodes (1979, 2008), supporting continued economic expansion that is favorable for metals.
Industrial Metals Signal: Strength in copper (Dr. Copper near $6) and supportive money supply trends indicate ongoing economic momentum, benefiting industrial metals alongside precious metals.
Transcript
Welcome back. I'm Jeremy Saffron. Precious metals have spent the last 30 days violently repricing after we saw that parabolic run above $5,300 in March. Gold now consolidating near $4,700 on the spot side. Silver also exhibiting high beta, you know, behavior, pulling back to that six $76 level. But again, both metals still up year to date. This is a market caught in a massive crossurren between rising geopolitical risk premiums and a decidingly hawkish repricing of the Fed curve. The question for investors is whether this is time to kind of press that reset button or or a warning that portfolios are not positioned for this kind of volatility. Our guest today is challenging how institutional models these assets essentially. Jeff Whitaker is the head of equity strategy at Wisdom Tree and his team argues that zero allocation to physical metals is no longer a neutral position pointing to data that places gold at nearly 13% of the global investable market. So we got a ways to go. Jeff, welcome to the desk. Nice to see you. >> My pleasure. Thanks for having me. >> Uh I I want to jump right into silver here. We had a couple of jitters as onx before. People are saying what's happening? I mean, it's, you know, it was up around 80. It's sitting at 76. Either way, we're seeing those intraday swings that we're not used to seeing. Um, yet the the physical data that we're seeing from the desk this morning shows Chinese silver imports surged 78% last month. I mean, what's the market missing here? >> Well, look, I mean, you know what? Maybe we got a little bit spoiled. I mean, yeah, you know, I'm starting to get to that point in my career where I'm old enough to remember when you could go on eBay a quarter century ago, it was $4 an ounce. And now here we retrace the silver price over a couple of of months and it's like, you know, it's surprise surprise, it's it's shock and awe that it's down a little bit. Um, the reality is is that if you ask the typical investor, and I think that we are pretty good gauge of that at Wisdomree because what we do for a living is talk to financial advisors. um generally they don't own any silver. They still don't own any gold. Um you know when you're thinking about you know whether or not there's upside retail demand uh from the Chinese I think that there is this continuation of a concept where maybe I need to rethink what I would be allocating to um in that specific country. I mean, the Chinese specifically used to have a a concept of just perpetual property ownership as the path to riches, and that kind of went out the window in every bit of the last 5 years or so, Jeremy. And so, I think that a lot of the dynamics that would propel silver or gold higher or just a lot of people reassessing portfolios or prior convictions. And I mean, you know, if if China's kind of buying physical silver while the Western markets are trading it like a a risk asset, who's reading the market correctly? I mean, it did get a little frothy there. I mean, everybody was kind of in the trade. Uh, we've seen it consolidate, but I mean, you know, it still feels like an east versus west story. >> Well, you know, it it's tough to tell. I mean, look, I I know Western civilization best, right? I am a westerner and one of the things that I've noticed through the years is you're you're having a conversation with financial advisors or you're discussing uh gold in a portfolio or silver in a portfolio. You make a passing reference to to 90% bags of junk, you know, that type of thing and what are you talking about a bag of junk? Like junk silver? What what is it? Like people don't even know what that is. I mean, we're here on KitKo. We we know what that is. >> Um but people don't typically own these types of things. They don't have old angle hard bars or that were, you know, melted in 79. They don't have that. Um, I think that one of the key concepts that was disruptive to getting gold and silver off the the tarmac in recent years before they got running was there was to the extent that somebody decided to go alternative, they went over to Bitcoin. >> Yeah. >> And I think the last few years people started to say, you know what, what what's going on with this gold stuff? you know, maybe I need to take a look because I'm 20, 25, 30 years old. My instinct back in, let's say, 1979, 1980 might have been to go to Krueger's and now maybe my instinct in 2015 or 2020 is to go into Bitcoin. And I think that if you take a look at the action last year in 25, Bitcoin didn't do so well when the S&P was selling off. And and the reality is is most people have a big portfolio of stocks and bonds and then precious metals or crypto is the the other thing. >> And the reality is is one of those two other things didn't diversify very well in 25. Bitcoin decided to die on the vine during the two S&P selloffs and gold was shining. And so I think that that's part of the reason people will be coming into gold. >> Yeah. I was going to ask you, I mean because you brought up a good point there. I mean you're talking to investors all day. I mean what are they actually doing? right now. Are they are they adding gold and silver here or are they still sitting on the sidelines? >> Well, I mean, look, I I know the ETF business, the ETP business, exchange traded products. Uh I know it well. I've been in it for years. I've been at Wisdom Tree for nine years. And one of the things we used to lament last year, you know, Microsoft Teams, you're typing to your to your co colleagues is, wow, there weren't a lot of creations going on in in our products or the competitor products on the gold mining or or or gold bullion itself despite the fact that we were melting up in all this stuff. It was the talk of the town. And you still have when you look at the big flows, I mean, it mostly goes into the S&P 500 tracker funds. And typically, I mean, if you think about the business model, you get uh uh your hands on the financial advisor's uh portfolios, whether it's an RAIA or a broker dealer advisor, and you take a look at it, you say, "Oh, oh, here's another one with 0% gold. Here's another one with 0% gold miners." And it's kind of shocking actually, Jeremy, because if you think about um the the typical financial advisor in this country, this is a person who's 50 or 55 years old. you would think that they would at least have been in their earlier stages of their career working with people who were around in the 70s uh when it was all oil, gold, and silver. But we see we see this type of thing all the time like nope no still is you know ran up to $5,000 still don't have any. And so that's one of the things I mean we're not at 5,000 anymore. We're like 4,700. But that's one of the things you really scratch your head >> and you say, "Well, from a an investable asset perspective, >> why are you still zero?" Um, and that's the bull case really. >> Yeah. >> I want to, you know, we're going to talk about the allocations because you got an interesting kind of thesis there and and I wanted to look at the the macro picture because that thesis kind of suggests that the the market is ignoring the the lagged effect of the easing we saw in 2024, 2025. But you know the reality of the curve today is that the markets are pricing out any rate cuts for 2026. Why why should investors still care about the liquidity of the past when the current cost of capital seems to be you know kind of rising or or is the market simply telling us I guess whatever easing we had is already behind us. >> Yeah. And and I don't know whether it is Jeremy is it our goldfish attention spans? It it it might be I mean if you think about right now late April 2026 what we are talking about when it comes to monetary policy it's I is JPOW going to be out of there and now it's going to be Kevin Worsh and is Worsh going to give us one cut or one hike or what have you and when's that going to come? That's the conversation. What the hell are we doing here? I I mean I'm sorry but what I should be concerned about or maybe opposite of concerned when you think about past tense is what has the Fed done past tense as it pertains to liquidity conditions right now and last time I checked J Powell was cutting rates in the initial slashes of the back end of 2024. This goes back 19 months ago and then we paused and then Jay Powell gave it to us again in the fourth quarter of 25. And if you look at these historic rate cycles, whether you're thinking about the implications for Oh, heck, Jeremy. I mean, we we're doing this macro stuff all day long. Initial jobless claims, marginal propensity to lend in the banking system, S&P 500 earnings. There's a correlation between all these things. A 19-month uh starting point past tense on Fed rate cuts is something that is immensely bullish for risk assets. This is the period in time whether or not it is you deciding you need to remodel your bathroom and you take out a home equity line which is a floating rate piece of paper and you do that because the Fed cut a year and a half ago and into today, right? Because you used to have short money was five and a quarter to 550. That was the Fed funds rate. Now you're in the upper 30s. You're going to be more likely to remodel the bathroom. You're also going to be more likely to take on a small business loan. And you're also going to be more likely as it as it as it goes in this conversation to say, "Okay, my opportunity cost here in the money market is X." Well, X used to be 5 and a quarter to 550 to go over to PNC or Bank of Well, maybe not at those institutions, but your local savings alone, >> right? overnight money a five handle. Now overnight money is a three-handle. And you're saying, "Well, okay, safe deposit box with some with some krugars or some maple leafs in there. It's it's on net positive. This is what we've always known with respect to precious metals. The it's an opportunity cost relative to what I can get in these other assets." And Jay Powell gave a gift to precious metals and he gave it to us 19 months ago. >> Yeah. Yeah. And and I mean, you know, if nominal yields stay elevated and inflation proves to be a little sticky and some of the things that we're see, I mean, does that hawkish Fed repricing put a hard ceiling on non-yielding assets like gold? >> Well, look, I mean, you know, when we start thinking about yields, are we talking about overnight yields? Are we talking about the long bond, for example? Now, if you if you look at the bond market, something that the gold market or the silver market would hate would be an erratic tape, uh, waking up in any given morning and the 10-year Treasury note is 20 basis points higher or 20 basis points lower than it was in the prior session. And that that applies to any asset class, right? If you and I were in building construction, we wouldn't want to see that because we don't know whether or not we should be signing with our lenders today or waiting till next month because there's so much v on the on the bond side. >> Totally. But if you look I mean heck Jeremy I think maybe like the last year or so I'm just eyeballing the chart in my head and we were at 395 on a 10-year Tynote what one or two months ago >> the highest I can recall in the last year on a 10ear tote something like 450. Now these are higher levels than when we were you know down at 0.60 on a 10-year during COVID. But whatever the case may be, if we if we back the envelope this and call it 395 to 450, >> that's a nice little tight trading range >> where I can say, okay, it's a portfolio stability situation that I would have some higher degree of confidence than perhaps I had in a prior year that maybe I wake up a month from now or three months from now and my best guess is somewhere between 395 and 450 on that on that keynote. Now the question is is whether or not this is the other part of what you're talking about inflation ends up surprising to the upside. Now this is where I think um inflation expectations some of it's already baked in right I mean we saw PPIs producer price index gauges pop in March. That's no surprise. We saw a lot of CPIs continue higher in March. Um now we have to wait for some of the April data uh to see how that goes. But I would point out that is it inflation or is it really what ends up happening to monetary policy as a function of that inflation that will influence metals prices. Um and the whole thing was oh we have this exogenous shock out of the straight of Hormuz and that therefore let's go with Kevin Walsh. Kevin Walsh will have to hike rates in reaction to that. Well, first off, you can't control with monetary policy an exogenous shock. It's out of your hands. You're just at the equities building, right? So, how do you gauge that? It's not that there was massive lending by the sock gens of of the world or the BFAs and suddenly that you ran the credit spigot too hot. So, you have this exogenous shock. And then the other part about it is is I was told that Kevin Worse is in there to cut rates >> because that's what Trump wants. Yeah. >> And so why would he hike rates? And and so that doesn't make any sense to me. And so now you have a situation where all right, we keep this we keep monetary policy here in the mid-3s. We now have a situation where money supply, which is, you know, like we're doing 99% talking straight of hormuz and 1% talking money supply. That's essentially what we're doing right now. and money supply growth as it pertains to time zero. It is tappid and not bullish for the metals complex, but it's rising off of a base. So, we have we were doing this the other day. We were doing um a combination of Japan, the Euro zone, and the United States on M2 money supply on a year-over-year basis, and we have it at plus 3.5% and during COVID, it's in the it's in the teens. So, you know, I I don't know that we're going to be sitting here looking at a high singledigit CPI, but it is starting to go a little bit higher back towards medians. And that generally speaking is horrible news for whether you know your ability to purchase a loaf of bread or a box of Cheerios. Um, but it is pretty good news for your copper, your zinc, your S&P 500. >> Yeah. >> And so on. >> It's a good point. Um, and we should probably talk about the mandate, too. I mean, I'm going to scrutinize your portfolio data just for a second because what is it? Wisdom Tree calculates gold at at 12.7% of the global investable asset base. Now, if if that number's even directionally correct, I mean, most portfolios are structurally underweight as you as you can imagine. Running a 12% allocation to physical metal kind of introduces massive tracking error for institutional managers. No, I mean is this 12.7% figure like can it happen? Is that a deployable mandate that institutions should actually execute? >> You're asking the most the most difficult question. Um the the ability of you as institution A to deviate meaningfully from what institution B, C, and D are doing. >> Um this I mean take it take it from this uh this analogy around the corner. We'll do a roundabout way of doing it. All right. So you have a a US b an American financial adviser with an American client base uh you know retirees in Scottsdale right and if you think in terms of a just think of stock market in general the United States is something like 60% of the global pie and all the other countries combined in stocks forget gold and bonds everything the other com countries combined to be 40%. All right. So to the extent that you allocate 60% US stocks and 40% overseas, you are going to be materially overweight overseas stocks compared to 95% of financial advisors even though you are in line with something like the MCI all country world index which is the global basket. And so now you you subject yourself to career risk. Yeah. You're actually in line with logical portfolio construction, but you're out of line with that adviser who's in that office park across the street who's been talking to your clients and trying to poach them from you. And so, this is one of those things that we have as as a struggle with gold, right? We have gold products >> over at Wisdom Tree. A lot of our competitors do, too. >> And forget 10 12%. Just go with a Fiverr >> to take you from zero to five. All right, cool. Well, I mean, basically, I mean, how many studies have we seen through the years say let's let's throw five into gold. I mean, it's a it's not too wild. It shouldn't move the portfolio too much. It's a diversifier. We've seen in the last 10 years or so a notably in non-existent correlation between gold and the S&P 500 and also gold and aggregate bonds. So, beautiful for portfolios. But to the extent that you have five and then you have 95 and everything else, most people you're competing with have zero. And so you better get it right. This is this is one of those things we encounter all the time. The one that's second place in the convincing advisers to go at portfolio weights would be like emerging markets uh stocks, >> right? So how many advisers in this country and general retail investors have 10% in emerging markets? not many >> um but just to be the base case let alone being overweight having something like 20% in emerging so these are the psychological obstacles that you encounter and >> for a living that's what I encounter >> yeah yeah yeah yeah that's what you deal with >> you know when you're saying 5% what does that actually replace in the portfolio you taking that from equities you take fixed income cash >> okay all right so that's that's an interesting one it depends on what you're bullish or bearish on >> um if you think we are going to have um the the positive effects of the the rate cuts that commenced 19 months ago. I would theorize and I have theorized and I've got the charts out there on X that you could see the rate of growth on S&P 500 profits peak out in the out years of this decade which is really really bold to hypothesize because street consensus on S&P 500 earnings growth for calendar 26 is 22% Jeremy 22. So imagine continuing double digit earnings growth. So you don't know whether or not you want to take it from from stocks. The the area you might want to take it from is fixed income. And the I I think I mean Jeremy I think so the the key reason why fixed income is not the diversifier it once was and the proverbial 6040 the 60% equity 40% >> fixed income is the grueling experience of 22 when stocks and bonds went down together. um and gold was a quasi diversifier that year was roughly flat in in in that year. And so that's why I think you got to take it from fixed income. But one of the things that we've done in in the you know the exchange traded products is create these mandates where you can have you put a dollar in the mandate and it has 90 cents of the dollar in stocks and then has the gold futures layered on top of it. So you have a buck 80 worth of exposure. And if you start thinking about that, then what you can essentially do is not get out of the 6040 and end up with like slide the 5% into the combination of gold plus uh equities in it. You could be kind of like a 6045 and then you have 105% in your portfolio. So it's a know what you own situation, but it's really really cool. Um and it's part of our efficient capital concept. We've been rolling these things out for years. H let me let me just step back just for a moment because you know what you're really outlining as a market where traditional portfolio assumptions may not hold up the way that they used to and it's refreshing to hear. I mean we need to factor in the crude markets. Brent's holding above 106 I think uh during these interruptions and disruptions in the in the Middle East. Oil is no longer just an energy story. It obviously feeds into that inflation expectation policy. But you've argued that this oil shock is is not causing the demand destruction we saw in previous prior cycles. So I mean talk to me about that data. >> Yeah. And that might be uh a different um assessment than a lot of your guests. Uh and it's >> it you have to think about it. It's it's a little counterintuitive. the fact that it's an oil shock that does not hit the consumer as as as roughly or as brutally as prior oil shocks, that is that is a very good thing for gold. You don't think it instinctually, but let me explain. Um, all right. So, it's 1979 and we're going to have uh that second oil shock. I mean, I take 1979 because the 73 oil embargo is before we had the the fuel economy data from the EPA and we just use unled gasoline as a concept because look, it's whether or not you are showing up at the Kroger or the Publix or what have you and purchasing the box of Cheerios we're talking about or whether you're contacting Elon and buying um that Tesla or whether I'm just thinking about this laptop, whether or not I decide yes, I'm going to buy a laptop or no because of my household uh disposable income. And so if you go back to that 79 the 79 oil shock >> Mhm. In that situation, the fuel economy, we calculate the fuel economy back then of your typical vehicle on the road is 6 miles per gallon less than today's Chrysler Pacifica, which if everybody doesn't know, the Chrysler Pacifica is the big eight-seater that you buy if you've got a caravan of kids to go to soccer. So, the cars we were driving back then were pieces of garbage. And so and if you take it from this from that perspective and you look at the degree by which oil shocked the number of miles you could drive make it a function of the ga the unleted gasoline price and then average hourly earnings we have all this data this pales in comparison to this shock and even to put it in more recent terms if we draw a line through the 2022 action because it's you know it's a gasoline shock in recent memory wages weren't so much different than today then go back to summer of08 and Jeremy this is so crit critical here because when even people in the industry like me, we think summer of08, okay, well that means we're like three months short of Lehman is going to go under. That means we're three months past Bear Sterns just bas did go under. Wakovia, AIG, Subprime, all that stuff. But forgotten in the annals of history is that we had a gasoline crisis in this, not just this country, across the world. This is when we had in East Asia, we had the rice riots. We had memory serves. I have to try to think what year it was, the Egyptian food riots as well due to that commodity super cycle. Well, if you go back to summer of08 when we busted up through $4 a gallon, we have found that fuel economy for cars in the vintage 2020 2008 was 21 miles to the gallon. Today's late model cars are 28 miles to the gallon. So, call it 33% more fuel economy there. But critically, what the heck does $4 a gallon even mean? It means what? Whether you have $4 in your pocket. >> And at the time, average hourly earnings in this country was $17. And now it's 32. >> So if you were to do fuel economy in concert with whatever the heck you're driving with what you're earning, we calculated this a few months ago. We got to $95 a gallon to make this as brutal as the '08 shock. And the wink wink is of course we're going to make believe Bear Sterns just collapse. Right? So that's that's part of it. But if you're So now you're saying, okay, oil shock, do I like gold? Right? Isn't that really what we're asking here? Oil shock, do I like silver? Well, to the extent that demand destruction does not occur at $4 a gallon or that demand destruction does not necessarily occur in prochemicals or in bunker fuel, right? Because the stuff that's sitting here on this desk did come from China and that requires bunker fuel. All these hundred or thousand different items that are definitely affected by the straight of hormuz. >> Maybe my demand curve does not get destroyed quite as much as I would imagine would be the case. I maintain my demand or the middle class maintains its demand for a I don't know microphone or coffee cup or these things I'm looking at on my desk. And as that occurs, okay, as that occurs, then that means well, for one, I might have more money in my brokerage account to go buy some gold fund. That's one. That's the obvious one. Um but critically, um I could get um uh the system to continue with economic expansion, right? Right? I mean to the extent that it's an oil crisis that does not cause recession. Now I have economic expansion. You take an industrial metal like silver. If we want to call that an industrial/precious metal and you want to you want to link in pure industrial metals like copper or zinc into this of which you can bring other people on the phone here and they could talk about you know copper and and zinc supply and demand dynamics. I just think in terms of generalized economics, maybe I continue to put my purchase order in for copper. Maybe I can maintain $75 or whatever it is right now on the silver price because we are in economic expansion. And to make the short story long on this one, Jeremy, that copper chart looks nice. >> It's it's $6 back again on copper. Call that 60 days ago. We we touched six. We retraced back to five and a quarter or 550 or whatever it was. Busting up through $6 again on Dr. Copper. And this is where we define terms. I think I think you know we call it Dr. Copper >> because Dr. Copper has a prescription for the economy. You look at the at the chart of copper at any given time. And if it's going down, you say the economy is going to weaken or hit a recession. And if it's going up, you have economic expansion. And anybody who wants to pull up a one-year chart on Dr. copper right now. Tell me this economy is going into recession. Doesn't look like it to me. >> Yeah. Yeah. Hey, let me ask you directly too. I mean, with gold and silver holding these these elevated floors, if a wealth manager finishes this interview and leaves their traditional portfolio completely unexposed to hard assets, I mean, what exact mistake are they making? >> Well, essentially, if you're think so, they have zero in precious metals in that circumstance. Um well now they're they're they're essentially making a a wager for perpetual dollar strength and or missing out the increasing on the increasing sophistication of the old pie chart. I mean so think about in the span of my career which is a couple of decades um what I've seen come into the fray and become mainstreamed. And sometimes these assets go up and sometimes they go down. But I remember early in my career during the commodity super cycle in the private client uh framework, the the high net worth, the ultra high net worth over at the old Harris private bank. Um we started to see implementation portfoliow-wise of MLPS, master limited partnerships of pipelines. Um you know even like Canadian royalty trusts, that type of thing. Um certainly the rise of private equity and private credit for better or worse right I mean private credit is up against the wall right now or some people think it is >> um you know I've even seen like the advent at treasury of the floating rate note >> right and so there's there's things that are happening inside fixed income that have changed >> and I think that we had a period of time uh essentially from January of 80 until the turn of the century where at the margin all new money in a in the old pie chart started to leave precious metals because it was so grueling. I mean Gordon Brown was liquidating the gold was 99. >> Yeah. >> You know to make the to make the Gordon Brown reference that that's the old story of um the Bank of England legendarily sold sold the bottom on gold. And I think that was Jeremy I think I was in high school man. I think I was in high school when that happened. I think that was 1999. Um and then of course we've seen portfolio sophistication rise. I mean you've seen the p you've seen the private equity, private credit, seeing changes in fixed income. And I think that there is now more of a role for metals in a in a portfolio. I thought maybe the 2022 action was going to awaken that. I thought maybe the bull runs of 23 24 25 would awaken that. But frankly, man, I'm telling you, there's a whole lot of people with still 0% precious metals. It It's befuddling. >> Yeah. >> But it's bullish. You want everybody to be in zero because that means you can't go lower than zero. Well, I guess I guess you could short them. I guess you could short them. >> But you actually, if you're bullish on metals, you want it to be at zero because to the extent that some critical mass of of investors comes from 0 to five or 0 to 10, >> yeah, >> that's new money coming in. So I It's bullish. >> It's bullish. I like it. Just put in 5%. I like that one. >> Yeah. I mean, who know? I don't know the number. I don't know the number. >> No, but hey, makes sense. Um, all right, man. Jeff Wiggger, head of equity strategy at Wisdom Tree. Uh, excellent institutional breakdown today. Uh, thanks for joining us. >> Thanks, Jeremy. >> Appreciate it. And for our viewers, if you want analysis grounded in real market data, not just headlines, make sure you're subscribed right here to Kiko News. I'm Jeremy Sapper. We'll see you next time. Heat. Heat. Heat. Heat.
Why Most Portfolios Are Still Wrong on Gold | Jeff Weniger
Summary
Transcript
Welcome back. I'm Jeremy Saffron. Precious metals have spent the last 30 days violently repricing after we saw that parabolic run above $5,300 in March. Gold now consolidating near $4,700 on the spot side. Silver also exhibiting high beta, you know, behavior, pulling back to that six $76 level. But again, both metals still up year to date. This is a market caught in a massive crossurren between rising geopolitical risk premiums and a decidingly hawkish repricing of the Fed curve. The question for investors is whether this is time to kind of press that reset button or or a warning that portfolios are not positioned for this kind of volatility. Our guest today is challenging how institutional models these assets essentially. Jeff Whitaker is the head of equity strategy at Wisdom Tree and his team argues that zero allocation to physical metals is no longer a neutral position pointing to data that places gold at nearly 13% of the global investable market. So we got a ways to go. Jeff, welcome to the desk. Nice to see you. >> My pleasure. Thanks for having me. >> Uh I I want to jump right into silver here. We had a couple of jitters as onx before. People are saying what's happening? I mean, it's, you know, it was up around 80. It's sitting at 76. Either way, we're seeing those intraday swings that we're not used to seeing. Um, yet the the physical data that we're seeing from the desk this morning shows Chinese silver imports surged 78% last month. I mean, what's the market missing here? >> Well, look, I mean, you know what? Maybe we got a little bit spoiled. I mean, yeah, you know, I'm starting to get to that point in my career where I'm old enough to remember when you could go on eBay a quarter century ago, it was $4 an ounce. And now here we retrace the silver price over a couple of of months and it's like, you know, it's surprise surprise, it's it's shock and awe that it's down a little bit. Um, the reality is is that if you ask the typical investor, and I think that we are pretty good gauge of that at Wisdomree because what we do for a living is talk to financial advisors. um generally they don't own any silver. They still don't own any gold. Um you know when you're thinking about you know whether or not there's upside retail demand uh from the Chinese I think that there is this continuation of a concept where maybe I need to rethink what I would be allocating to um in that specific country. I mean, the Chinese specifically used to have a a concept of just perpetual property ownership as the path to riches, and that kind of went out the window in every bit of the last 5 years or so, Jeremy. And so, I think that a lot of the dynamics that would propel silver or gold higher or just a lot of people reassessing portfolios or prior convictions. And I mean, you know, if if China's kind of buying physical silver while the Western markets are trading it like a a risk asset, who's reading the market correctly? I mean, it did get a little frothy there. I mean, everybody was kind of in the trade. Uh, we've seen it consolidate, but I mean, you know, it still feels like an east versus west story. >> Well, you know, it it's tough to tell. I mean, look, I I know Western civilization best, right? I am a westerner and one of the things that I've noticed through the years is you're you're having a conversation with financial advisors or you're discussing uh gold in a portfolio or silver in a portfolio. You make a passing reference to to 90% bags of junk, you know, that type of thing and what are you talking about a bag of junk? Like junk silver? What what is it? Like people don't even know what that is. I mean, we're here on KitKo. We we know what that is. >> Um but people don't typically own these types of things. They don't have old angle hard bars or that were, you know, melted in 79. They don't have that. Um, I think that one of the key concepts that was disruptive to getting gold and silver off the the tarmac in recent years before they got running was there was to the extent that somebody decided to go alternative, they went over to Bitcoin. >> Yeah. >> And I think the last few years people started to say, you know what, what what's going on with this gold stuff? you know, maybe I need to take a look because I'm 20, 25, 30 years old. My instinct back in, let's say, 1979, 1980 might have been to go to Krueger's and now maybe my instinct in 2015 or 2020 is to go into Bitcoin. And I think that if you take a look at the action last year in 25, Bitcoin didn't do so well when the S&P was selling off. And and the reality is is most people have a big portfolio of stocks and bonds and then precious metals or crypto is the the other thing. >> And the reality is is one of those two other things didn't diversify very well in 25. Bitcoin decided to die on the vine during the two S&P selloffs and gold was shining. And so I think that that's part of the reason people will be coming into gold. >> Yeah. I was going to ask you, I mean because you brought up a good point there. I mean you're talking to investors all day. I mean what are they actually doing? right now. Are they are they adding gold and silver here or are they still sitting on the sidelines? >> Well, I mean, look, I I know the ETF business, the ETP business, exchange traded products. Uh I know it well. I've been in it for years. I've been at Wisdom Tree for nine years. And one of the things we used to lament last year, you know, Microsoft Teams, you're typing to your to your co colleagues is, wow, there weren't a lot of creations going on in in our products or the competitor products on the gold mining or or or gold bullion itself despite the fact that we were melting up in all this stuff. It was the talk of the town. And you still have when you look at the big flows, I mean, it mostly goes into the S&P 500 tracker funds. And typically, I mean, if you think about the business model, you get uh uh your hands on the financial advisor's uh portfolios, whether it's an RAIA or a broker dealer advisor, and you take a look at it, you say, "Oh, oh, here's another one with 0% gold. Here's another one with 0% gold miners." And it's kind of shocking actually, Jeremy, because if you think about um the the typical financial advisor in this country, this is a person who's 50 or 55 years old. you would think that they would at least have been in their earlier stages of their career working with people who were around in the 70s uh when it was all oil, gold, and silver. But we see we see this type of thing all the time like nope no still is you know ran up to $5,000 still don't have any. And so that's one of the things I mean we're not at 5,000 anymore. We're like 4,700. But that's one of the things you really scratch your head >> and you say, "Well, from a an investable asset perspective, >> why are you still zero?" Um, and that's the bull case really. >> Yeah. >> I want to, you know, we're going to talk about the allocations because you got an interesting kind of thesis there and and I wanted to look at the the macro picture because that thesis kind of suggests that the the market is ignoring the the lagged effect of the easing we saw in 2024, 2025. But you know the reality of the curve today is that the markets are pricing out any rate cuts for 2026. Why why should investors still care about the liquidity of the past when the current cost of capital seems to be you know kind of rising or or is the market simply telling us I guess whatever easing we had is already behind us. >> Yeah. And and I don't know whether it is Jeremy is it our goldfish attention spans? It it it might be I mean if you think about right now late April 2026 what we are talking about when it comes to monetary policy it's I is JPOW going to be out of there and now it's going to be Kevin Worsh and is Worsh going to give us one cut or one hike or what have you and when's that going to come? That's the conversation. What the hell are we doing here? I I mean I'm sorry but what I should be concerned about or maybe opposite of concerned when you think about past tense is what has the Fed done past tense as it pertains to liquidity conditions right now and last time I checked J Powell was cutting rates in the initial slashes of the back end of 2024. This goes back 19 months ago and then we paused and then Jay Powell gave it to us again in the fourth quarter of 25. And if you look at these historic rate cycles, whether you're thinking about the implications for Oh, heck, Jeremy. I mean, we we're doing this macro stuff all day long. Initial jobless claims, marginal propensity to lend in the banking system, S&P 500 earnings. There's a correlation between all these things. A 19-month uh starting point past tense on Fed rate cuts is something that is immensely bullish for risk assets. This is the period in time whether or not it is you deciding you need to remodel your bathroom and you take out a home equity line which is a floating rate piece of paper and you do that because the Fed cut a year and a half ago and into today, right? Because you used to have short money was five and a quarter to 550. That was the Fed funds rate. Now you're in the upper 30s. You're going to be more likely to remodel the bathroom. You're also going to be more likely to take on a small business loan. And you're also going to be more likely as it as it as it goes in this conversation to say, "Okay, my opportunity cost here in the money market is X." Well, X used to be 5 and a quarter to 550 to go over to PNC or Bank of Well, maybe not at those institutions, but your local savings alone, >> right? overnight money a five handle. Now overnight money is a three-handle. And you're saying, "Well, okay, safe deposit box with some with some krugars or some maple leafs in there. It's it's on net positive. This is what we've always known with respect to precious metals. The it's an opportunity cost relative to what I can get in these other assets." And Jay Powell gave a gift to precious metals and he gave it to us 19 months ago. >> Yeah. Yeah. And and I mean, you know, if nominal yields stay elevated and inflation proves to be a little sticky and some of the things that we're see, I mean, does that hawkish Fed repricing put a hard ceiling on non-yielding assets like gold? >> Well, look, I mean, you know, when we start thinking about yields, are we talking about overnight yields? Are we talking about the long bond, for example? Now, if you if you look at the bond market, something that the gold market or the silver market would hate would be an erratic tape, uh, waking up in any given morning and the 10-year Treasury note is 20 basis points higher or 20 basis points lower than it was in the prior session. And that that applies to any asset class, right? If you and I were in building construction, we wouldn't want to see that because we don't know whether or not we should be signing with our lenders today or waiting till next month because there's so much v on the on the bond side. >> Totally. But if you look I mean heck Jeremy I think maybe like the last year or so I'm just eyeballing the chart in my head and we were at 395 on a 10-year Tynote what one or two months ago >> the highest I can recall in the last year on a 10ear tote something like 450. Now these are higher levels than when we were you know down at 0.60 on a 10-year during COVID. But whatever the case may be, if we if we back the envelope this and call it 395 to 450, >> that's a nice little tight trading range >> where I can say, okay, it's a portfolio stability situation that I would have some higher degree of confidence than perhaps I had in a prior year that maybe I wake up a month from now or three months from now and my best guess is somewhere between 395 and 450 on that on that keynote. Now the question is is whether or not this is the other part of what you're talking about inflation ends up surprising to the upside. Now this is where I think um inflation expectations some of it's already baked in right I mean we saw PPIs producer price index gauges pop in March. That's no surprise. We saw a lot of CPIs continue higher in March. Um now we have to wait for some of the April data uh to see how that goes. But I would point out that is it inflation or is it really what ends up happening to monetary policy as a function of that inflation that will influence metals prices. Um and the whole thing was oh we have this exogenous shock out of the straight of Hormuz and that therefore let's go with Kevin Walsh. Kevin Walsh will have to hike rates in reaction to that. Well, first off, you can't control with monetary policy an exogenous shock. It's out of your hands. You're just at the equities building, right? So, how do you gauge that? It's not that there was massive lending by the sock gens of of the world or the BFAs and suddenly that you ran the credit spigot too hot. So, you have this exogenous shock. And then the other part about it is is I was told that Kevin Worse is in there to cut rates >> because that's what Trump wants. Yeah. >> And so why would he hike rates? And and so that doesn't make any sense to me. And so now you have a situation where all right, we keep this we keep monetary policy here in the mid-3s. We now have a situation where money supply, which is, you know, like we're doing 99% talking straight of hormuz and 1% talking money supply. That's essentially what we're doing right now. and money supply growth as it pertains to time zero. It is tappid and not bullish for the metals complex, but it's rising off of a base. So, we have we were doing this the other day. We were doing um a combination of Japan, the Euro zone, and the United States on M2 money supply on a year-over-year basis, and we have it at plus 3.5% and during COVID, it's in the it's in the teens. So, you know, I I don't know that we're going to be sitting here looking at a high singledigit CPI, but it is starting to go a little bit higher back towards medians. And that generally speaking is horrible news for whether you know your ability to purchase a loaf of bread or a box of Cheerios. Um, but it is pretty good news for your copper, your zinc, your S&P 500. >> Yeah. >> And so on. >> It's a good point. Um, and we should probably talk about the mandate, too. I mean, I'm going to scrutinize your portfolio data just for a second because what is it? Wisdom Tree calculates gold at at 12.7% of the global investable asset base. Now, if if that number's even directionally correct, I mean, most portfolios are structurally underweight as you as you can imagine. Running a 12% allocation to physical metal kind of introduces massive tracking error for institutional managers. No, I mean is this 12.7% figure like can it happen? Is that a deployable mandate that institutions should actually execute? >> You're asking the most the most difficult question. Um the the ability of you as institution A to deviate meaningfully from what institution B, C, and D are doing. >> Um this I mean take it take it from this uh this analogy around the corner. We'll do a roundabout way of doing it. All right. So you have a a US b an American financial adviser with an American client base uh you know retirees in Scottsdale right and if you think in terms of a just think of stock market in general the United States is something like 60% of the global pie and all the other countries combined in stocks forget gold and bonds everything the other com countries combined to be 40%. All right. So to the extent that you allocate 60% US stocks and 40% overseas, you are going to be materially overweight overseas stocks compared to 95% of financial advisors even though you are in line with something like the MCI all country world index which is the global basket. And so now you you subject yourself to career risk. Yeah. You're actually in line with logical portfolio construction, but you're out of line with that adviser who's in that office park across the street who's been talking to your clients and trying to poach them from you. And so, this is one of those things that we have as as a struggle with gold, right? We have gold products >> over at Wisdom Tree. A lot of our competitors do, too. >> And forget 10 12%. Just go with a Fiverr >> to take you from zero to five. All right, cool. Well, I mean, basically, I mean, how many studies have we seen through the years say let's let's throw five into gold. I mean, it's a it's not too wild. It shouldn't move the portfolio too much. It's a diversifier. We've seen in the last 10 years or so a notably in non-existent correlation between gold and the S&P 500 and also gold and aggregate bonds. So, beautiful for portfolios. But to the extent that you have five and then you have 95 and everything else, most people you're competing with have zero. And so you better get it right. This is this is one of those things we encounter all the time. The one that's second place in the convincing advisers to go at portfolio weights would be like emerging markets uh stocks, >> right? So how many advisers in this country and general retail investors have 10% in emerging markets? not many >> um but just to be the base case let alone being overweight having something like 20% in emerging so these are the psychological obstacles that you encounter and >> for a living that's what I encounter >> yeah yeah yeah yeah that's what you deal with >> you know when you're saying 5% what does that actually replace in the portfolio you taking that from equities you take fixed income cash >> okay all right so that's that's an interesting one it depends on what you're bullish or bearish on >> um if you think we are going to have um the the positive effects of the the rate cuts that commenced 19 months ago. I would theorize and I have theorized and I've got the charts out there on X that you could see the rate of growth on S&P 500 profits peak out in the out years of this decade which is really really bold to hypothesize because street consensus on S&P 500 earnings growth for calendar 26 is 22% Jeremy 22. So imagine continuing double digit earnings growth. So you don't know whether or not you want to take it from from stocks. The the area you might want to take it from is fixed income. And the I I think I mean Jeremy I think so the the key reason why fixed income is not the diversifier it once was and the proverbial 6040 the 60% equity 40% >> fixed income is the grueling experience of 22 when stocks and bonds went down together. um and gold was a quasi diversifier that year was roughly flat in in in that year. And so that's why I think you got to take it from fixed income. But one of the things that we've done in in the you know the exchange traded products is create these mandates where you can have you put a dollar in the mandate and it has 90 cents of the dollar in stocks and then has the gold futures layered on top of it. So you have a buck 80 worth of exposure. And if you start thinking about that, then what you can essentially do is not get out of the 6040 and end up with like slide the 5% into the combination of gold plus uh equities in it. You could be kind of like a 6045 and then you have 105% in your portfolio. So it's a know what you own situation, but it's really really cool. Um and it's part of our efficient capital concept. We've been rolling these things out for years. H let me let me just step back just for a moment because you know what you're really outlining as a market where traditional portfolio assumptions may not hold up the way that they used to and it's refreshing to hear. I mean we need to factor in the crude markets. Brent's holding above 106 I think uh during these interruptions and disruptions in the in the Middle East. Oil is no longer just an energy story. It obviously feeds into that inflation expectation policy. But you've argued that this oil shock is is not causing the demand destruction we saw in previous prior cycles. So I mean talk to me about that data. >> Yeah. And that might be uh a different um assessment than a lot of your guests. Uh and it's >> it you have to think about it. It's it's a little counterintuitive. the fact that it's an oil shock that does not hit the consumer as as as roughly or as brutally as prior oil shocks, that is that is a very good thing for gold. You don't think it instinctually, but let me explain. Um, all right. So, it's 1979 and we're going to have uh that second oil shock. I mean, I take 1979 because the 73 oil embargo is before we had the the fuel economy data from the EPA and we just use unled gasoline as a concept because look, it's whether or not you are showing up at the Kroger or the Publix or what have you and purchasing the box of Cheerios we're talking about or whether you're contacting Elon and buying um that Tesla or whether I'm just thinking about this laptop, whether or not I decide yes, I'm going to buy a laptop or no because of my household uh disposable income. And so if you go back to that 79 the 79 oil shock >> Mhm. In that situation, the fuel economy, we calculate the fuel economy back then of your typical vehicle on the road is 6 miles per gallon less than today's Chrysler Pacifica, which if everybody doesn't know, the Chrysler Pacifica is the big eight-seater that you buy if you've got a caravan of kids to go to soccer. So, the cars we were driving back then were pieces of garbage. And so and if you take it from this from that perspective and you look at the degree by which oil shocked the number of miles you could drive make it a function of the ga the unleted gasoline price and then average hourly earnings we have all this data this pales in comparison to this shock and even to put it in more recent terms if we draw a line through the 2022 action because it's you know it's a gasoline shock in recent memory wages weren't so much different than today then go back to summer of08 and Jeremy this is so crit critical here because when even people in the industry like me, we think summer of08, okay, well that means we're like three months short of Lehman is going to go under. That means we're three months past Bear Sterns just bas did go under. Wakovia, AIG, Subprime, all that stuff. But forgotten in the annals of history is that we had a gasoline crisis in this, not just this country, across the world. This is when we had in East Asia, we had the rice riots. We had memory serves. I have to try to think what year it was, the Egyptian food riots as well due to that commodity super cycle. Well, if you go back to summer of08 when we busted up through $4 a gallon, we have found that fuel economy for cars in the vintage 2020 2008 was 21 miles to the gallon. Today's late model cars are 28 miles to the gallon. So, call it 33% more fuel economy there. But critically, what the heck does $4 a gallon even mean? It means what? Whether you have $4 in your pocket. >> And at the time, average hourly earnings in this country was $17. And now it's 32. >> So if you were to do fuel economy in concert with whatever the heck you're driving with what you're earning, we calculated this a few months ago. We got to $95 a gallon to make this as brutal as the '08 shock. And the wink wink is of course we're going to make believe Bear Sterns just collapse. Right? So that's that's part of it. But if you're So now you're saying, okay, oil shock, do I like gold? Right? Isn't that really what we're asking here? Oil shock, do I like silver? Well, to the extent that demand destruction does not occur at $4 a gallon or that demand destruction does not necessarily occur in prochemicals or in bunker fuel, right? Because the stuff that's sitting here on this desk did come from China and that requires bunker fuel. All these hundred or thousand different items that are definitely affected by the straight of hormuz. >> Maybe my demand curve does not get destroyed quite as much as I would imagine would be the case. I maintain my demand or the middle class maintains its demand for a I don't know microphone or coffee cup or these things I'm looking at on my desk. And as that occurs, okay, as that occurs, then that means well, for one, I might have more money in my brokerage account to go buy some gold fund. That's one. That's the obvious one. Um but critically, um I could get um uh the system to continue with economic expansion, right? Right? I mean to the extent that it's an oil crisis that does not cause recession. Now I have economic expansion. You take an industrial metal like silver. If we want to call that an industrial/precious metal and you want to you want to link in pure industrial metals like copper or zinc into this of which you can bring other people on the phone here and they could talk about you know copper and and zinc supply and demand dynamics. I just think in terms of generalized economics, maybe I continue to put my purchase order in for copper. Maybe I can maintain $75 or whatever it is right now on the silver price because we are in economic expansion. And to make the short story long on this one, Jeremy, that copper chart looks nice. >> It's it's $6 back again on copper. Call that 60 days ago. We we touched six. We retraced back to five and a quarter or 550 or whatever it was. Busting up through $6 again on Dr. Copper. And this is where we define terms. I think I think you know we call it Dr. Copper >> because Dr. Copper has a prescription for the economy. You look at the at the chart of copper at any given time. And if it's going down, you say the economy is going to weaken or hit a recession. And if it's going up, you have economic expansion. And anybody who wants to pull up a one-year chart on Dr. copper right now. Tell me this economy is going into recession. Doesn't look like it to me. >> Yeah. Yeah. Hey, let me ask you directly too. I mean, with gold and silver holding these these elevated floors, if a wealth manager finishes this interview and leaves their traditional portfolio completely unexposed to hard assets, I mean, what exact mistake are they making? >> Well, essentially, if you're think so, they have zero in precious metals in that circumstance. Um well now they're they're they're essentially making a a wager for perpetual dollar strength and or missing out the increasing on the increasing sophistication of the old pie chart. I mean so think about in the span of my career which is a couple of decades um what I've seen come into the fray and become mainstreamed. And sometimes these assets go up and sometimes they go down. But I remember early in my career during the commodity super cycle in the private client uh framework, the the high net worth, the ultra high net worth over at the old Harris private bank. Um we started to see implementation portfoliow-wise of MLPS, master limited partnerships of pipelines. Um you know even like Canadian royalty trusts, that type of thing. Um certainly the rise of private equity and private credit for better or worse right I mean private credit is up against the wall right now or some people think it is >> um you know I've even seen like the advent at treasury of the floating rate note >> right and so there's there's things that are happening inside fixed income that have changed >> and I think that we had a period of time uh essentially from January of 80 until the turn of the century where at the margin all new money in a in the old pie chart started to leave precious metals because it was so grueling. I mean Gordon Brown was liquidating the gold was 99. >> Yeah. >> You know to make the to make the Gordon Brown reference that that's the old story of um the Bank of England legendarily sold sold the bottom on gold. And I think that was Jeremy I think I was in high school man. I think I was in high school when that happened. I think that was 1999. Um and then of course we've seen portfolio sophistication rise. I mean you've seen the p you've seen the private equity, private credit, seeing changes in fixed income. And I think that there is now more of a role for metals in a in a portfolio. I thought maybe the 2022 action was going to awaken that. I thought maybe the bull runs of 23 24 25 would awaken that. But frankly, man, I'm telling you, there's a whole lot of people with still 0% precious metals. It It's befuddling. >> Yeah. >> But it's bullish. You want everybody to be in zero because that means you can't go lower than zero. Well, I guess I guess you could short them. I guess you could short them. >> But you actually, if you're bullish on metals, you want it to be at zero because to the extent that some critical mass of of investors comes from 0 to five or 0 to 10, >> yeah, >> that's new money coming in. So I It's bullish. >> It's bullish. I like it. Just put in 5%. I like that one. >> Yeah. I mean, who know? I don't know the number. I don't know the number. >> No, but hey, makes sense. Um, all right, man. Jeff Wiggger, head of equity strategy at Wisdom Tree. Uh, excellent institutional breakdown today. Uh, thanks for joining us. >> Thanks, Jeremy. >> Appreciate it. And for our viewers, if you want analysis grounded in real market data, not just headlines, make sure you're subscribed right here to Kiko News. I'm Jeremy Sapper. We'll see you next time. Heat. Heat. Heat. Heat.