Speaker 1: With silva, you have the industrial use and that creates
substantially momlatility. So one interpretation of the rise is that
the economy might be doing better than expected.
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Speaker 3: Ever, and welcome.
Speaker 4: You are listening to and watching the Financial Survival Network.
I'm your host, Carrie Lutz. Well, market's going crazy. Silver
almost at forty dollars an ounce, just a hair's breadth away.
We've got gold up there at record levels. We've got
Bitcoin up at record levels or near record levels, let's
put it that way. Bitcoin so volatile. Axelmurk is with
us now live from the vineyard and you know him well,
a well known fund manager who has a pensiant for
precious metals.
Speaker 3: Axel.
Speaker 4: Great to have you back on. It's been too long,
but silver. Are we heading for a silver squeeze? A
short squeeze? It seems like it's baked into the cake
to this observer.
Speaker 1: Great to be with you. It's been way too many years.
So I'm a simpleton. I focus mostly on gold, and
the reason I say that is because gold has much
simpler dynamics. With silver, you have the industrial use and
that creates substantially more molatility. So one interpretation of the
rise is that the economy might be doing better than expected.
Regarding the squeezing offline we talked about a little bit,
I think precious metals invest does. I always think the
special that the market gets particularly manipulated. All markets with
with derivative markets are quote unquote manipulated, and and what
that really is, it's it's really dynamics that are the
consequence of these markets. It doesn't necessarily mean that they
are the various actors that they just want to make
it buck along the way. With regard the potential for
for a more volatile move to the upside, well we've
seen of course that that that we've had this move,
gold has moved quite substantially. Silver historically can be quite
amplified in its move, and so I wouldn't rule it out.
I actually think it's it's quite possible. Whether that's new
to a short squeeze or not.
Speaker 3: I don't know.
Speaker 1: I it's it's nice to put a narrative on things,
but I like to keep it simple for me. The
key thing is that silver is signaling that the kind
of the bottom isn't falling out of the economy, and
that's why it's it's it's playing catch up in some
ways and then some.
Speaker 4: Also. Don't you think there's some renewed investor demand for
the shining metal as well?
Speaker 1: Well, there's certainly been been broadening and just for contact
for those who don't know us, we manage a two
and a half billion in both gold and the gold
miners or precious metals miners that include silver do not
many good pure plays on silver, so it's often more
of a byproduct. And indeed, the way I would just
kind of astracted speaking group the investors aside from the
central banks, you got the diversifier, you got the investor
who's concerned about the person car of the dollar, and
then you do also have the speculator, and the speculator
tends to be more on the mining side than the
physical side. Many of those speculators are more on the
cryptocide these days, they are not very loyal. They'll go
whenever there's action. Now, what we have seen is we
have seen more interest from every one of these constituents,
and we have more conversation on the physical goal side.
We see flows on that side, we see on the
on the mining side, in part because there's been disappointment
with the larger mining companies, we've there's a lot more
attention to what we do. But even within the industry
of course as well, merger activity has kind of moved higher.
Speaker 3: And the other day I.
Speaker 1: Got a question about convertible debt. How much we own
of that, and there's sure we own some. But the
equity markets are open, meaning there is an ability to
raise capital. The question to me is what does it
mean with regard to the phase we are in. And
the short answer is, it's possible that it's a short window.
It's possible that's a tenure window. It's it's very very
difficult to say. We don't see signs of excessive deals.
We don't see signs of people getting into the space
who who have.
Speaker 3: No business being in that space.
Speaker 1: I mean, of course, to something extent that always happens
a little bit, but there is, but there is over all,
I still feel that this is an early inning, but
that's more of a feeling.
Speaker 3: I don't have a crystal ball either.
Speaker 4: Well, but look, you've been in this for decades, somebody
like you says, I think this is starting to happen,
and it's happening now. I think it's incumbent upon everybody
who's watching this to say, what does this guy know
that we don't know that you don't know? And where
do I find out? So this is your gut talking,
and this is your expert system with decades of experience.
What is the most important factor you think that is
pointing to potential upswing in the metals here?
Speaker 1: No, First of all, it's a little bit more than
my gut. I'm on record as an inside of Baya
in the mining space, and I haven't sold anything in
that space, and so I put my money where my
mouth is. Just to clarify that it's not for the
faint of heart. I do have to put that caveat
out there. It's a very volatile space. My speech is regulated,
So I got to add that. When we when we
talk about the potential for the for the upside, the
I mean we've seen the price of gold was substantially higher.
The market is paying much less fond ounce of precious
metal in the ground, but of course that means also
valuations are in that sense more modest, And of course
we've seen a significant move, but in my assessment, nothing
compared to where where we would be if the market
were to assume that these markets are more permanent the
current level. I happen to think that there are plenty
of underlying drivers that provide kind of support for where
we are subject to shorter volatility. Some of them are
the ones I'm trust you have discussed with many of
your guests about the deficits and whatnot to make sure
I give you your view or something that maybe they
don't hear everywhere else. One fact I think that's completely
underestimated is the impact on financial flows from teriffs. And
let me go to the stupid Trader Joe's or a
supermarket example that's like, oh, you have a trade defastate
with Trader Joe's. Well, what people don't realize that if
you get this trade more into balance, it does affect
financial flows as well.
Speaker 3: And in my.
Speaker 1: View, the rise in interest rates longer term interest rates
in the US in recent months is the direct results
of the teriffs, meaning that deficits are less financed from
abroad than they previously have been, and that translates to
a higher cost of boring and from that lead all
kinds of unintended consequences, notably also increased pressure on the
federal reserved to lower rates and whatnot. But it's that
that sphere of things I think we need to pay
attention to. The low long term interest rates could of
course also be higher growth attention because of the regulation.
But if if I'm correct, then we have to be
very careful with regard what we call is exorbitant privilege,
which is really the idea that we can borrow and
the infinite amount of money very cheaply to invest for
higher returns abroad. And so if we throw a wrench
into this global system, and not saying they aren't good reasons,
maybe from trades should be rebounced, But if we throw
a wrench into that system, it does have an impact
on financial flows, and I think that is one of
the underestimated factors. Beyond that, yes, these these mining companies
that are producing are going to be very, very profitable,
and unlike another eras we've had that the the overall
cost of mining hasn't exploded as much, and it's been
it's it's it.
Speaker 3: We are in a in a much.
Speaker 1: Better sweet spot, so to speak, than we've been in
the past.
Speaker 4: Yeah, yeah, well, and so we're at record goal prices.
You know, I saw a statistic I've new and for
years that silver is the only commodity in the past
forty years that hasn't made a new high and probably
more than forty now. And how much higher can gold go?
And how much? How much higher is possible here without
some major world disruptions taking place?
Speaker 1: Well, I won't give you a price target. Let's talk
about disruptions though for a moment, of course, different types
of disruptions. Historically, I don't like geopolitics as a driver
for the price of gold, simply because the market gets
used to anyone crisis. Let there be a terrorist attack,
the price of gold goes up right and very quickly
market used to it, even if that terrorists are taken
to might continue. What has changed, though, is that I
think we're in a new year in the sense that
the peaceful period since World War Two has somewhat come
to an end, and you're the financial survival network people
to relate to that. But the kind of what we've
seen in Ukraine or Gaza are but symptoms of a
new era that we live in, and very abstractly, it
means that the cost of doing business has gone gone up.
Countries will invest the fortune into defense. Germany alone wants
to invest the five hundred billion, and in order to
get done they have to promise five hundred billion in
infrastructure investment. The EU wants to spend much more money.
They have different motives because they want to have EU
jointly guaranteed debt. But we have an era of more
industrial policy to address whatever the governments believe are the
important issues of the day. In the US we clearly
have shifted also more towards industrialist policy. Those policies cost money,
they're expensive, they're inefficient. They may be the right thing
for national defense or whatever it may be, but it's
not cheap, it's not efficient. The US is no longer
the guarano that global trade on global seeds is safe necessarily,
and so all of that is a disruption. And in
that sense, yes, the there is is less global certainty
and it translates to higher cost of doing business. It
translates to governments to spending more money, and presumably a
lot of that is going to be deficit spending.
Speaker 4: Right, So continued devaluation of the currencies. You know, how
much more can they be devalued before there's a major
economic disruption of a loss of confidence in the system
here a because we think it can't go it any worse,
but you know, technology.
Speaker 1: Eail, it can always get worse. And that is one
of the things, especially to just offend some gold bugs
out there, because a lot of folks say, oh my god,
there has to be a reset at some point, there
has to be this or that there's always a day after.
And just look at Latin America, right they You would
have thought that some of these countries have done well
and then they suddenly there's integrate or whatever it is.
There's life is always there is a day after and
society adjusts.
Speaker 3: Just think about it.
Speaker 1: In the nineteen fifties there was one bread winner in
the house and people could have a decent living. Now
if you nowadays and if in nowadays you have two
bread winners. Similarly, people haven't saved enough for retirement. Well,
I guess what if you are sixty seven and have
a job. You're proud that you have a job. You're
not lamenting twenty four hours. I mean some people might,
but most people they take it as a pride that,
oh I can still work, I can still be productive.
And so we are adjusting to whatever the cards we're
dealt with now. It doesn't mean we have to put
up with it, and we doesn't mean we have to
kind of put up with the erosion of the perchain
cower that we have. But I've argued for a long
time that kind of the the populist device we've had
and including current president, is just the symptom of people
being very dissatisfied they've seen an erosion of the perchain power,
and they'll lead to more populist politicians, either on the
left or the right. Could have a sharp turn to
the left after this presidency. It's completely feasible. People are
just dis chant. Just look at New York City what's
happening there right as an example, and a lot of time,
the sort of solutions that are being proposed are more
addressing the symptoms rather than the root cause. And say
when people say, oh, the government needs to go back
to the gold standard, I when the interests of government
are not aligned with the interests of investors. I would
not hold my breath that that's going to happen. And
so investors might want to take care of their own
gold standard if that's what they if that's what they
believe is the appropriate thing to do.
Speaker 4: Yeah, there's no desire among the world's governments to reign
in the deathicit spending. It's not just the United States.
It doesn't have a monopoly on it. It's China, it's Japan,
it's every country in the world except maybe Russia. And
there's no political will it appears to actually come to
terms with this situation. So then what's the endgame?
Speaker 3: Here? Is the endgame?
Speaker 4: A new economic system? Is the endgame? A reshuffling of
the deck chairs on the Titanic?
Speaker 3: What is it here? Give us your insights.
Speaker 1: No, I don't think there's an endgame. It's a process.
And one thing people have said I mentioned earlier about
the exorbitant privilege and Moody's I think has said, oh,
there is no alternative to the dollar, and therefore don't
worry about any of these scenarios. My scenario is that
that does not need to be an alternative what we
will see is that disintegration of global finance. We will
see and again it's a quote unquote less efficient way
of operating. We will see more patchwork of things. Of course,
eventually something may come up. But there's of course a
reason beyond I talk about it. I don't like the
impact on financial flows and terrorists. There's of course a
reason why the US is the growth engine of the
world that goes far beyond that, right, and so those
advantages will persist. But at the same time, when financial
flows are inhibited it it will create more pockets. Ultimately,
it is healthier for many economies if they finance themselves domestically.
Too many countries are boring in US dollars because it's
been cheaper to find out their projects. Part of that
is because the domestic markets aren't sufficiently developed, and that's
because there'sn't enough trust in these markets because of a
lot of reasons. That's not going to change overnight, and
I don't think that the Europeans are going to get
to act together tomorrow. Quite the opposite. But they can
spend They are big, and they can spend a lot
of money and say it will be a disintegration Also,
what happens along the way, in my view, is that
that all dynamics between countries will resurface. I would think
we should keep a close eye on what's happening in
Turkey and in other places we've seen. I mean a Russia,
of all places, is plunging above its waistline. It's a
tiny economy, right, and it's controlling a lot of the
imagination in the world in what they can do. And
they've re engineered the economy that they're kind of dependent
on military spending now.
Speaker 3: So there is And the.
Speaker 1: Other thing to keep in mind is it's a go at.
Endgame is at some point the bond market will tell
the government in the US to get the back together.
But we'll see a thousand eight remember two thousand and eight.
Government can change the rules along the way. So even
if I had a crystal ball, or you did, or
one of your guests had, we just don't know how
exactly it's going to play out, because the rules of
the game when the government is cornered will change. And
it's enough and address that living within your means, controlling
your Yeah, you can live within your means. You can
try to reduce or eliminate your debt. You can try
to have more income and expenses. I mean, we talk
about gold and silver and whatnot. The reason we do that,
of course, is because we want to preserve our purpose
and power and and and yes, if we get again
on top of that, that's fantastic. But that's usually what
investment is about, and what whatever people do, it's somewhat
related to that, right, I mean, if you buy your
favorite in the video.
Speaker 3: Stock or gold, or or a piece of real estate.
Speaker 1: And of course we have our reasons why we want
to diversify or be concentrated, or why we think one
is better than the other. In a in an unstable world,
you got to think more about the basics, Right, are
your property rights secure and how? And I live in
the world where maybe taxes will have to go.
Speaker 5: Up because at some point in some government has gone
that out there and say, well, with high taxes we
can solve all the problems out there, which of course
is not going to happen, but a lot of damage
can be caused along the way.
Speaker 3: Yeah, yeah, so yeah.
Speaker 4: I think the first order of business of any organism,
living organism and governments and countries are living organisms, and
one way of looking at it is survival, keep the
game going, and you know they'll do whatever they have
to to basically perpetuate their existence at the expense of
the country, the world, et cetera. You know, what are
some things you think that they're going to try to pull,
so we can be a little prepared for it.
Speaker 1: Axel Well, I think we should study the your zone
debt crisis, like what happened in Greece, what happened in Spain,
what happened and the sort of politics that go on
or in the US right when in September October two
thousand and eight, when when the markets brought politicians to
their nees and got bail out. The one thing kind
of to take this back on a higher level, we
live in the credit driven society. We have fracture reserve banking,
and you talk about the Federal Reserve worrying about interest
rates and unemployment. Well, those are subordinate mandates to the
primary mandate, which is financial stability. And we know the
playbook of the central bank that they'll for to.
Speaker 3: Run the way right.
Speaker 1: They will make liquiding be available to the banking system
because that is what keeps the glue together.
Speaker 3: Indeed.
Speaker 1: I mean, if you if you want to go in
these scenarios in March twenty twenty, when when the pandemic hit,
you might recall your viewers might recall we had this
one day when the market's absolutely crashed. The one thing
that happened overnight that night was that the currency markets
got unhinged. There were spreads of five six percent in
major currencies. And the reason that happened is because the
folks that the Federal Reserve were sleeping. It was nighttime,
it was past midnight, and it was further a wave
of a shark. And and and yes, I mean if
they if they were wake, they would have they would
have done something. And it was just stunning to watch.
I mean there if you ever saw markets completely falling
apart for about two or three hours, that was the
case there before they they kind of put Humpty dumpty
back together. But that's the that's kind of the idea
that there's there's a certain risk or just fast forward, right,
I mean, the reason what happened in in Iran there
was attack on the on the central bank and causing
a financial panic induced by by the idea and what
if something like that work to happen in the US right,
And of course we think we are called more sophisticated
and better in this and that, But it's it's it's
always interesting as to kind of can you imagine scenarios
that could happen? Sure, I mean anything can happen. Diversification
is the name of the game. You can't safeguard against
any possible scenario. You also have to assign some probabilities
to it. Now I happen to put more weight on
kind of high risk, low probability events. But everybody needs
to be so comfortable with what they do. And one
thing I tell people, ultimately, if they invest in themselves,
that's probably the best investment they can do, because you
are fixed income generating machine that you have a much
better control of than whether you buy a stock with
a click off a button.
Speaker 4: Agreed, Agreed. Rick Rules said the same thing. I've said
the same thing for many years because from personal experience,
every time I've invested in myself, better tools, better knowledge,
it's always paid dividends. It used to be when I
was in business, every time I upgraded my computer, it
made money for me. I had no idea how it worked.
I just knew that updating it, whether it saved me
two minutes of waiting around every day and I did
something more productive. I don't know why, but that upgrading
and better tools for yourself and in human capital increased
knowledge is always going to pay better returns than anything
else you can do out there.
Speaker 1: No, absolutely, it's a it's a if you're thinking about
doomsday scenarios, investing in yourself.
Speaker 3: Is probably the best thing that you can do.
Speaker 1: And that I can say without my regulator slapping my wrist.
Speaker 4: Yeah, yeah, nobody can take issue with that one, that's
for sure.
Speaker 3: All right.
Speaker 4: So, Axel, where's the best place to find you? To
read your work? To connect with you on the web?
Speaker 1: Back Investments dot Com is our website. There you can
see what we do in the gold and gold mining site.
We have a free newsletter. We periodically have webinars on
gold miners and whatnot. Follow me on Twitter at Axelmerk
is my handle there imus about what's happening in the world,
off the Federal Reserve, in the precious metal space and whatnot.
I can't talk about products on social media, but otherwise
I'm quite accessible, all right.
Speaker 4: Hey, Well, appreciate if you've got a question out there
for Axel or myself. Just shoot me an email Klatkerrie
Lutz dot com. We'll get your quick response back and
you'll find a link to accel site in the show
notes of this interview on Financial Survival Network dot com.
If you visit, we just ask that you sign up
for a free newsletter. Axel always always intellectually stimulating experience.
When we talk, you make me think about things that
I might not have otherwise thought about, so we won't
let as much time go by till next time.
Speaker 3: I appreciate you coming on my pleasure.
Speaker 2: Thanks for listening to Carrie Letz's Financial Survival Network, your
solution to today's trying times. For the latest, go to
Financial Survivalnetwork dot com. Financial Survival Network
Speaker 3: Now more than ever