Speaker 1: With silva, 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.
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Speaker 1: And welcome.
Speaker 3: 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. Bitcoins 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 1: Axel.
Speaker 3: 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, great to be with you. It's been
way too many years. So I'm a simpleton.
Speaker 1: 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. I don't know. 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 3: 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. There 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.
And the other day I 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 no business being
in that space. 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. I
don't have a crystal ball either.
Speaker 3: 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 short 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 of 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. And in my 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 why 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 we
are in a in a much better sweet spot, so
to speak, than we've been in the past.
Speaker 3: 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 3: 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 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. Just think about it. In the nineteen fifties
there was one bread winner in the house and people
could have a decent levy. Now if you nowadays and
if in nowadays you have two bad 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 3: 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 1: Here? Is the endgame?
Speaker 3: A new economic system? Is the endgame? A reshuffling of
the deck chairs on the Titanic?
Speaker 1: What is it here? Give us your insights. 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 it's 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. So there is And the 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 act together.
But we'll see a thousd 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, stock or gold or or a
piece of real estate. 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 the secure
and how? And I live in the world where maybe
taxes will.
Speaker 4: Have to go 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 1: Yeah, yeah, so yeah.
Speaker 3: 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 run
the way right. They will make liquiding be available to
the banking system because that is what keeps the glue together. Indeed,
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
is 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 3: 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 is probably the best thing
that you can do. And that I can say without
my regulator slapping my wrist.
Speaker 3: Yeah. Yeah, nobody can take issue with that one, that's
for sure.
Speaker 1: All right.
Speaker 3: 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 on 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 3: 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 1: 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 1: Now more than ever