Doubling Down On Hard Landing: Signs Of Coming Bear Market | Lobo Tiggre
Summary
TLDRIn this insightful discussion, the guest, referred to as Lobo, shares his outlook on the macroeconomic landscape, predicting a hard landing due to post-pandemic market distortions. He argues that while recession indicators suggest a downturn, the response from central banks and fiscal policy could mitigate the impact. Lobo also discusses the role of AI in the job market, the potential for a copper shortage, and the changing dynamics between gold and silver as investments. His views offer a blend of economic analysis and market speculation, providing a comprehensive look at the potential challenges and opportunities ahead.
Takeaways
- đ The speaker predicts a 'hard landing' for the economy, suggesting that post-pandemic market distortions have delayed an inevitable recession.
- đč The Bank of Japan's decision to raise interest rates for the first time in 17 years is seen as a potential indicator of an upcoming recession, based on historical patterns.
- đ Despite historical indicators like the leading economic index suggesting an overdue recession, the current 'uncharted waters' due to COVID-19 make it uncertain whether these patterns still apply.
- đŒ The speaker emphasizes the importance of distinguishing between a recession and a market crash, noting that they are not the same and can have different impacts on various asset classes.
- đ Recessions have traditionally been bullish for monetary metals like gold and silver, while industrial metals and commodities tend to suffer.
- đ The speaker questions the effectiveness of the Federal Reserve's tools in the current economic climate, suggesting that fiscal policy may be more impactful.
- đ€ The rise of AI is causing a shift in the job market, particularly in tech roles, with a projected decrease in IT jobs in the US and a need for workers to adapt and learn new skills.
- đ„ Gold has outperformed silver in recent years, which is unusual and may be related to changes in the use cases for these metals, with silver increasingly being used industrially.
- đ Global economic trends and supply chain disruptions, such as those caused by the war in Ukraine, have impacted commodity prices, but these effects are not always long-lasting.
- đ The speaker suggests that the gold-silver ratio is not a reliable trading tool due to its volatility and the fact that it doesn't specify which metal will move in which direction.
- đ For investors, understanding the nuanced relationship between different asset classes and economic indicators is crucial for navigating market conditions effectively.
Q & A
What does the speaker believe is the impact of labor hoarding and post-pandemic distortions on the market?
-The speaker believes that labor hoarding and post-pandemic distortions in the market have delayed the onset of a recession, potentially making it more severe when it does occur.
What historical pattern is mentioned regarding the Bank of Japan raising interest rates and its correlation with recessions?
-The historical pattern mentioned is that every time the Bank of Japan has raised interest rates in the past, except during the COVID-19 pandemic, a recession has followed within 6 to 8 months.
What does the speaker suggest about the effectiveness of traditional economic indicators in the current economic climate?
-The speaker suggests that traditional economic indicators may not be as reliable in the current economic climate due to the unprecedented circumstances and distortions caused by the pandemic.
What is the significance of the long-term unemployment versus current unemployment rates chart mentioned by the speaker?
-The long-term unemployment versus current unemployment rates chart is significant because it has a 100% success rate in predicting recessions when a 'death cross' occurs, which the speaker suggests is imminent.
How does the speaker differentiate between a recession and a market crash?
-The speaker differentiates by stating that a recession and a market crash are not necessarily the same thing. A recession is a decline in economic activity, while a market crash is a sudden and significant drop in financial markets. They can occur separately, and the speaker suggests that the market may actually respond positively to a recession if it anticipates a monetary policy response.
What is the speaker's view on the performance of gold and silver during a recession?
-The speaker believes that historically, gold and silver, particularly gold, have performed well during recessions as they are seen as safe-haven assets. However, the speaker also notes that the relationship between gold, silver, and the market has changed recently, with silver showing more industrial characteristics.
What is the speaker's outlook on the copper market in the short term versus the long term?
-In the short term, the speaker does not see a significant deficit in the copper market this year unless there are more shutdowns. However, in the long term, the speaker believes there will be a shortage due to increasing demand for electricity and the challenges in permitting new large mines.
What is the speaker's perspective on the impact of AI on the job market?
-The speaker believes that AI is leading to creative destruction, where jobs are being destroyed, particularly in the tech sector. This is expected to continue, with AI requiring new skills and leading to a reduction in roles and potentially lower salaries for those without AI skills.
How does the speaker view the Federal Reserve's potential rate cuts in response to economic conditions?
-The speaker suggests that while historically the impact of rate cuts on stock markets has been mixed, in the current context, investors have been trained to see rate cuts as a signal to take more risk. However, the speaker also notes that if rate cuts are a response to bad economic conditions, it might take some time for the negative reality to assert itself in the markets.
What does the speaker say about the gold-silver ratio as a trading tool?
-The speaker does not recommend using the gold-silver ratio as a trading tool for making decisions on which metal to buy or sell. The ratio can widen or narrow due to movements in either gold or silver prices, and it does not provide clear guidance on which direction each metal will take.
What is the speaker's stance on the idea of agricultural commodities as a safe haven during a war?
-The speaker is skeptical about the idea of agricultural commodities as a safe haven during a war, noting that while there may be short-term disruptions to supply chains, these effects tend to be temporary and do not necessarily lead to long-term investment safety.
Outlines
đ Economic Hard Landing and Market Distortions
The speaker discusses the likelihood of an economic hard landing, attributing it to labor hoarding and post-pandemic market distortions. They reference the Bank of Japan's interest rate hike as a potential indicator of an upcoming recession, noting historical patterns where such hikes have preceded economic downturns. The conversation also touches on the disconnect between traditional economic indicators and current realities, questioning the validity of past patterns in the face of uncharted economic waters. The speaker suggests that while a hard landing may be inevitable, the response from central banks and governments could mitigate its impact.
đŒ Recession Indicators and Their Implications for Investors
This paragraph delves into various recession indicators, including the leading economic index and the long-term unemployment rate versus current unemployment rate. The speaker discusses how these indicators have historically predicted recessions with a high degree of accuracy. They also explore the concept of 'uncharted waters' in the context of the economy, questioning the reliability of past indicators in the current economic climate. The conversation then shifts to the impact of a recession on different asset classes, highlighting that while some assets may suffer, others like gold and silver could potentially perform well. The speaker emphasizes the importance for investors to understand which assets thrive during a recession.
đŹ Fed Policy and Market Reactions
The discussion in this paragraph revolves around the Federal Reserve's role in the economy and how market participants interpret and react to Fed policy. The speaker suggests that while a recession may traditionally be bad for risk assets, the market's expectation of a Fed response could lead to a different outcome. They argue that the market may view a recession as an opportunity for central banks to inject liquidity, thereby creating a potentially positive environment for risk assets. The speaker also touches on the distinction between a recession and a market crash, cautioning against conflating the two and explaining the different implications for investors.
đ Market and Economic Outlook
The speaker shares their economic outlook, predicting a hard landing and discussing the potential triggers for the next economic boom. They consider the impact of Fed policy and fiscal measures, suggesting that these could counteract the negative effects of a recession. The conversation also includes a discussion on the impact of AI on the job market, with the speaker acknowledging the potential for significant job displacement. They reference a Wall Street Journal article that highlights the changing landscape for tech job seekers, emphasizing the need for AI skills and the potential for lower salaries and fewer roles.
đ€ AI's Impact on the Workforce and Economy
In this paragraph, the speaker and David discuss the transformative effect of AI on the workforce and the economy. The speaker endorses the concept of creative destruction, viewing AI as a productivity-enhancing tool that will ultimately benefit society, despite the acknowledged short-term job losses. They compare the current AI revolution to the Industrial Revolution, noting the challenges faced by displaced workers. The speaker argues that while AI may lead to deflation in the long term by reducing the cost of living, the transition will involve significant disruption and pain for affected workers.
đ„ Gold, Silver, and Copper Market Analysis
The speaker provides an analysis of the gold, silver, and copper markets, discussing the potential for a copper shortage due to increasing demand from electrification and AI technologies. They debate the gold-silver ratio and its use as a trading tool, with the speaker expressing skepticism about its predictive value. The conversation also touches on the reasons behind gold outperforming silver in recent years, attributing it to changes in the use cases for silver and its growing industrial applications. The speaker predicts that gold is likely to outperform silver in the coming year based on the current economic outlook.
đ Global Economic Challenges and Opportunities
The speaker and David conclude their discussion by considering the global economic challenges and opportunities. They evaluate the potential for agricultural commodities as safe havens during conflicts, questioning the logic behind this narrative. The speaker shares their thoughts on the gold-silver ratio and its implications for investment strategies. They also address the importance of adapting to changing market conditions and the need for investors to be aware of the evolving dynamics between different asset classes. The speaker promotes their weekly newsletter as a resource for followers to stay informed about their investment insights.
Mindmap
Keywords
đĄHard Landing
đĄLabor Hoarding
đĄBank of Japan
đĄRecession Indicators
đĄAI Impact
đĄMonetary Metals
đĄFiscal Policy
đĄCommodities Market
đĄGold-Silver Ratio
đĄCopper Demand
Highlights
The discussion emphasizes the potential for a hard economic landing due to labor hoarding and post-pandemic market distortions.
The Bank of Japan's rate hike after 17 years may signal a forthcoming recession, based on historical patterns.
The leading economic index has remained negative for an unusually long period without resulting in a recession, challenging traditional predictive models.
Long-term unemployment vs. current unemployment rates, or the 'death cross,' is highlighted as a reliable recession predictor.
There's a distinction between a recession and a market crash, with different implications for investors and asset classes.
Monetary metals like gold and silver tend to perform well during recessions, historically.
The Federal Reserve's actions, including interest rate decisions and balance sheet management, may have limited impact on certain economic factors.
A hard landing could potentially trigger the next economic boom due to expected government stimulus measures.
The rise of AI is leading to job displacement in the tech sector, with a projected shrinkage in the IT job market.
Uranium prices are influenced more by supply and demand dynamics than by overall economic strength.
Inflation is expected to remain stubbornly high, with a likelihood of staying above 3%.
The Federal Reserve may cut rates not only in response to a recession but also to maintain a level of restrictiveness as inflation falls.
The unemployment rate is anticipated to rise, reflecting the possibility of a hard economic landing.
Copper production may face a significant deficit in the coming years due to increasing demand and permitting challenges.
Gold has outperformed silver in recent years, indicating a shift in their traditional relationship and market dynamics.
The gold-silver ratio has been widening, suggesting a change in the historical pattern of silver outperforming gold during bull markets.
Investors should be cautious about viewing agricultural commodities as a safe haven during conflicts, as their prices can be influenced by various factors.
Transcripts
if you if you want a headline David my
headline is lowo doubles down on hard
Landing I really do think that's coming
I think that the the degree to which
these things I'm talking about Labor
Hoarding post-pandemic distortions in
the market have prevented or held off
the recession from you know or the piper
from being paid to the degree that you
hold him off that you increase your
interest payment when he does show up
for payment so I think the hard Landing
left to its own devices would be much
harder than it would have been had it
been left to sort itself out Lobo of the
independent Speculator joins us once
again to give us his updated outlook on
the macroeconomic landscape what's next
for stocks the economy and commodities
Bank of Japan raised rates for the first
time in 17 years uh I was talking to you
offline I'm going to quote a um an
economist I know Peter barison he he uh
posted this on his LinkedIn um in the
history of uh Finance no better
indicator has been this perfect in
predicting recessions in the Bank of
Japan raising interest rates this chart
uh I think it's a ton and cheek chart
but every single time the bank of Japan
raises rates in the past barring the co
uh Co pandemic uh there's been a
recession like 6 to8 months later Max so
here we are um it's it's kind of funny
that that comes up you know every time
except covid so I think it's actually
kind of important David because we are
in uncharted waters and you can say oh
except Co but Co was the last incident
and the things that have been done have
been you know so many charts have been
broken with lines going through what was
the top before through this floor before
so it is it is reasonable to question
whether patterns that have held true
before still hold true I'll give you an
example a contra Lobo
indicator um the leading economic
index has never gone this long negative
for so many months without the recession
we overdue so you know according to and
those are leading economic indicators
right they're supposed to lead where
we're going they turn negative I don't
is it 20 months ago now or more and they
have never gone that long without the
ensuing recession and so there's people
saying well if it hasn't happened by now
it's not going to and to point at that
you know they would seem to be right but
but if we are in uncharted waters you
can't go by previous charts that seem to
work uh you know back on the plus side
you know clearly if if the bank of Japan
is forced off zero which they really
didn't want to do until they absolutely
had to you it's it's indicative it means
something so let's throw another chart I
don't have it handy but Jeff
gunlock I think most of our audience is
familiar with him he frequently does
monthly updates with lots and lots of
charts but his most compelling recession
chart is always long-term
unemployment versus Uh current
unemployment rates and when you get you
basically you get a death cross in that
chart and that is an uninterrupted 100%
success rate at predicting recessions
and we're headed right there now I think
the long-term line hasn't quite crossed
yet the short-term one but but we're on
the verge of that um that death cross
and if you use a medium-term or or
shorter term lines they have crossed
already so so the softening that even
the mainstream cheer leaders of the
administration and or the economy in
general are admitting to some softening
in the labor market that's showing in
the charts and you know smart
experienced guys like gunlock are saying
that is the most Ironclad predictor of
recession including
2020 what are your before we talk about
your indicators of recession and what
you may look at uh to make this
assessment back up a minute why do we as
investors care if there's a recession
let's really think about that question
what moves during a recession which
assets do well well we know which assets
do poorly but I think what we want to
know is which assets do well during a
recession right ultimately why are we
talking about this right right no that's
a good question and actually let me I
will answer but let me go slightly
sideways and point out that there's a
there's an important distinction between
recession on the one hand and a market
crash on the other and a lot of people
seem to think that the two are the same
or assume that if there's going to be a
recession it's going to market crash and
that's not necessarily true cuz you know
if it was true then recession obviously
markets crash then that's a reason to
you know go short uh risk and go into
other Safe Haven assets which includes
gold sorry mainstream as well as bonds
and you know yeah I would I would much
rather go with the gold with the bonds
in this environment but um but that's a
mistake and especially now that the FED
has trained the markets it's almost a
pavlovian thing and that's why we've
been scat ing our heads about bad news
being good news for Wall Street for
years because of the expected fed put
and in this case I think that's not an
unreasonable expectation I think if we
had uh the fed's second mandate called
in that they would pivot you know fast
as you could and not just monetary
policy I think we'd see a fiscal
response and markets are forward looking
so markets could look at a recession and
say yay the floodgates are going to open
the easy money is going to flood the
markets and the money helicopters are
going to fly so hey go long go risk
because the the money is coming so it's
it's important not to conflate the two
market crash with recession but if the
reality on the ground is recession uh
those have been historically always very
bullish for monetary Metals that's gold
and silver not platinum or Palladium or
rodium sorry those are Industrial Metals
so it's primarily gold secondarily
silver it's also at the outset at least
uh you know depending on monetary policy
that the the fear can be good for bonds
but we have to see how that works in
uncharted waters it's bad for Industrial
Minerals and commodities and you know I
it should be bad for the stock market as
a whole but as we said in the bad news
is good news World on Wall Street it may
not be but it probably will be bad for
Commodities so Commodities markets don't
seem to get the same treatment from wall
stre that the equities markets do and
bad news is just bad news for for
Commodities if there's a downturn in the
economy that's bad for iron it's bad for
oil bad fed can't the FED can't save
Commodities is what you're
saying yes you know well it's actually
arguable whether the save the FED can
save anything here we are on fed day and
you know what they do does it really
matter their tool box is actually quite
limited and if if it's fiscal large s
that's really still that pig working its
way through the python that's making
inflation sticky do their inflation
sorry do their interest rate decisions
really matter that much you know are
they trying to hammer a screw or turn a
nail yeah arguably what's more important
is what they do with their balance sheet
you're right um Okay so we've answered
what does well in a recession recession
indicators that you look for then let's
talk about that well we've seen quite a
few already we've seen an earnings
recession even Wall Street is not
entirely divorced from Main Street so
that's interesting to me we certainly
seen a Commodities recession if Dr
copper is called that for good reason
okay we've seen higher copper prices
with some interesting optimism coming
out of China but still U the Commodities
complex has been signaling an economic
downturn we've got conventional
indicators from Germany to the UK to
other you know large EC eies flashing
red around the world I think it's not
much of a stress to say that there
actually is a global recession going on
we're not just looking at indicators
we're looking at a reality right now on
the ground and then the question is is
the US the exception is American
exceptionalism apply here and I would
argue that the
um again we're in uncharted waters but
given how we got here if we have and you
know the postco distortions in the labor
market you know the labor hoarding the
companies not wanting to fire people
they really don't need uh because of how
hard it was to find people during and
after the covid situation so then that
that pillar that the this American
exceptionalism rests on of the strong
consumer laborer right if that is not as
strong as it looks or if it's
artificially been propped up post
pandemic and then that breaks down then
things change in a big way so if you if
you want to headline David my headline
is low doubles down on hard Landing I
really do think that's coming I think
that the the degree to which these
things that I'm talking about Labor
Hoarding post-pandemic distortions in
the market have prevented or held off
the recession from you know or the piper
from being paid to the degree that you
hold him off that you increase your
interest payment when he does show up
for payment so I think the hard Landing
left to its own devices would be much
harder than it would have been had it
been left to sort itself out and then
the question of course becomes what are
the powers that be do so I'm doubling
down on hard Landing but I do think the
money helicopters will fly and and the
timing of this is is really the critical
point do the powers at be open the Easy
Money floodgates the moment it looks
like that recession is coming or do they
wait until the NBR declares in hindsight
oh yeah we're in a recession I have a
feeling they may not wait I mean there's
as we speak on fed day it's really quite
striking to hear the debate about
whether the FED should be loosening how
quickly it should be loosening when
supposedly the economy is doing so great
right the the Biden team not not to get
political here but the Biden team keeps
pulling their hair out over why Joe
doesn't get credit for wonderful biomics
how great that's doing for the economy
but the reality on the ground is is not
that great these numbers that they look
at don't account for the reality that
people are experiencing on the ground so
you know I'm saying things are worse
than they look in these contrived
averages and GDP numbers and you know
CPI and hedonically adjusted you know
supercore CPI all these numbers they
keep coming up with uh but the reality
is different and I think the reality
will be out and I I suspect though that
you know Powell and Company they that
they know this they can't admit it but
they know it and so I I sorry I'll stop
talking David my point is though that
this recession this hardlining I'm
looking for could trigger the next boom
because of the pavlovian fed put
response and also fiscal policy
sure so so so equities could do well but
still industrial Commodities are likely
to take it on the chin for some by the
way the we talked about uranium before
but let's just revisit that okay is the
price of uranium indicative of
either the market perceiving economic
strength or actual economic strength or
they not related at all I ask just
because as you know and we've talked
about this the price of uranium shot up
I want to ask you if that's an indicator
for anything on the um on the
economy I I wouldn't dismiss it entirely
you know I've said that uranium is
recession resistant not because nothing
is entirely Recession
Proof uh but it is the best source of
247 365 Basel load power um and that's
not the sort of thing that you want to
mess with you you you may decide in a
recession not to go visit Grandma's
often and drive less and use less gas
but you still want the lights to come on
and broadly speaking as a society you
still want the energy for your airports
and hospitals and things and that's
where nuclear really excels
so I won't say it doesn't mean anything
David but I will say that it is a
separate consideration it's much more
important when you're looking at uranium
to look at the supply and demand balance
in the market look at what secondary
Supply is doing to that I don't think
that uranium going to over $100 meant
that the economy was going to go zooming
off to the moon and I don't think that
uranium correcting now is particularly
that's not a recession indicator that
I'm looking at I just think the market
got ahead of itself and some correction
was to be expected and boy did I get a
lot of heat for saying that in Vancouver
when we met last but I'm not sure where
you want to go with this but no I don't
see
I I just I I I just want to know if
iranium going up means the economy is
booming no let's yeah simple as that you
could yes no you could you could
absolutely have the economy in a in a
significant recession and uranium still
go up because the supply isn't there for
all the reactors that are being built
around the world which is scores of them
David let's play a quick game of true or
false okay pretty simple just true or
false give your justification true or
false inflation will not come down below
3% this
year talk about headline headline CPI
yes yeah okay
yeah doesn't matter sorry true and false
I don't know it could but it would
really matter I think it's going to be
sticky so let me
say so let me go with false then I'm
closer to false than true all right
you're GNA put that where so the
justification would be it's sticky
already I said it was going to be sticky
I was right about that and if you look
at the charts they're pretty much flat
over the last nine months months and
that means we're getting the end of Base
effects which will no longer help so the
stickiness is about to get stickier and
more difficult
um I I don't have a crystal ball so I
don't know where it's going to go but
but much closer to false than true next
true or false the FED will only cut if
the economy shows obvious signs of a
recession
false Okay C other reasons yeah yeah
because if if I'm wrong and inflation
does get unstuck and goes down further
then doing nothing would be increasingly
restrictive by their definitions and
they've already talked about this that
yes it does make sense to them if if
inflation keeps going down to maintain
the same level of restrictive which they
say not me this is the Fed they say
they're at sufficiently restrictive now
so if inflation keeps going down you'd
have to cut rates to maintain that same
distance or else you would be you would
increase the restrictiveness of policy
if you didn't cut so there is a path
where that would happen but that's not
what I'm expecting I'm expecting them to
cut because they have an obep moment
when they realize they've broken
something else or that that hard Landing
is
coming uh true or false the unemployment
rate will not tick up later this year
false it's already ticking
up um let me rephrase that considerably
more than 1% higher than what it is
now more than one if you just said
considerably I would have said true if
you say more than 1% I don't know it
could depend on what they do and how
they Define it discourage workers but I
think there's a good chance that we will
see it Go a percent higher if if I'm
right about hard Landing even because
even if they throw the money at it David
it takes a while for policy to impact
things and if companies that have not
fired people that they didn't need
anymore suddenly start doing that or
going bankrupt and then you know firing
everybody right the easy money isn't
going to instantly create those new jobs
so I I think there's a pretty good
chance that the answer will be yes to
that this is an article from The Wall
Street Journal this has nothing to do
with a softw or hard Landing but it's
just AI wiping out jobs okay Tech job
Seekers without AI skills face a new
reality lower salaries and fewer roles
the rise of AI is affecting job seekers
in Tech who accustomed to high paychecks
and robust demand for their skills are
facing a new reality learn Ai and don't
expect the same pay package PES you were
getting a few years ago they want a job
for $200,000 and they're not finding it
because they don't have the skills he
said if they were an accounts receivable
project manager and they don't know
anything other than that they're going
to have a hard time finding a job AI is
projected according to this uh report
it's projected that uh the IT job market
in the US is expected to shrink by
20,000 to 30,000 jobs in 2024 this
year sorry was there a true or false
question in David no this is this is
just uh I want you to react to this no I
I'm in that camp and you know as a
person who who has an Austrian economics
perspective on the on the world and the
economy I believe in the concept of
creative destruction Innovation happens
you know old ways of doing things are
broken new ways of doing things in power
I I think AI is going to be a
tremendously uh creativity and
productivity enhancing Boom for our
species it's a great thing but clearly a
lot of jobs are going away and that's
not just going they're gone I mean last
year we had a whole swass of people who
would type repetitive real estate
listings entries in that you know that
job just doesn't exist anymore and you
the same way that you know uh horse
buggy or or candle lighters and horse
buggy whip makers and so on that that
started immediately with chat
gpt3 um now as the applications apply
this this new technology to specific
solutions for businesses I think this
year this isn't a someday some when
imminent or inevitable this is happening
now there are jobs being destroyed right
now so I I have no doubt about that and
this is part of my my concern now it's
it's interesting that there are very
smart people out there that's saying
well the AI productivity is actually
going to be the thing that holds the
recession off and I I have a hard time
with that I'm I'm I'm actually very
optimistic but cre cretive destruction
is a real thing and the destruction
happens before their creativity I I I I
have to just point out a lot of people
were making the comparison to the
Industrial Revolution when farmers were
you know losing their jobs because
Machinery um made a lot of farm Farmers
you know human Farmers obsolete so they
moved to the cities in the UK to work in
factories yeah but that was more or less
a lateral move we're talking about
manual labor to manual labor um here
we're talking about people who have
trained for years gone to school for a
certain profession and now all of a
sudden that profession is Obsolete and
so making a lateral move is difficult
they're going to have to either uh be
underemployed for a while and gain new
skills or yeah no I'm going to push back
on that one David I mean if you were a
farmer and you spent your day looking at
the hind end of a mule in front of a
plow and now you went to work at a
factory tightening bolts like Charlie
Chaplain in modern times that was a very
different thing you you did need to
learn new skills uh and by the way some
people went to work you know make making
the machines servicing the machines
there were different jobs and some of
them were higher paid I think
urbanization as much as it's reviled in
the in movies and stories at the time it
did accompany a rise in the average
standard of living so I'm not sure I
would see that as a lateral move but
clearly highly disruptive and people
throw the word disruption around oh you
know we're going to disrupt mining with
this or whatever like that's a good
thing well the eventual creativity is a
good thing but the disruption causes
problems along the way which are painful
so I I'm not sure where you want to go
with this but but my view is that this
is actually a red flag for 2024 we're
going to see more pain before we get the
game and it's happening now that's my
view long term would it be deflationary
the Advent of AI yes oh no
question and and you know this is
actually a Doug Casey ISM my mentor the
longest Financial Trend all of history
is deflationary the lowering cost of
living you know where you know the poor
people today have a infinitely better
lifestyle than the kings of Y who didn't
have dentist or Nova cane or or Cancer
Treatments or whatever right um you know
over the long
term progress means stuff gets cheaper
let's just close off your economic
Outlook and then I want to close and
then I want to move on to the final
segment which is Metals uh the core area
of your research so bottom line you're
doubling down on hard Landing uh what
was your take on the markets CU I know
we've talked about the fact that just
because we're getting a recession it
doesn't necessarily mean the markets
will you know will move down bare market
and recession not always they don't
always come together right so well with
bare Market they they usually have I
said crash crash okay it may not
necessarily crash what's the difference
between Bare market and crash for the
audience well a bare Market can be a
long grind lower that doesn't have a
waterfall
event you
know a crash is a in my mind it's a 2008
or or
1929 or 2020 perhaps you know flash
crash you know that sort of
verticality um and you know a multi-year
bear could take you as low as a sudden
crash but if it happens over years you
have time to see it coming you have time
to adapt your portfolio it's it's a much
different experience for the investor
than waking up on a Black Friday and
being worth 25% of what you were on
Thursday can we just settle this uh once
and for all I've heard different
theories um the Federal Reserve cutting
rates is that good or bad for stock
markets historically it's been mixed
sometimes immediately following a Fed
cut uh the stock markets have fallen
sometimes uh lowering rates actually is
is a boost for equities it really
depends the context if they're cutting
because the economy is bad usually that
means stock markets will will will fall
afterwards but what's your view on fed
Cuts you You' put your finger on the
important thing it's there's you know it
should depend on what the cut is the
reason for the cut why they're doing it
in our current context investors have
been so trained like I say it's a
pavlovian reflex you easier money means
go go risk on I'm not sure that even if
the FED did cut for bad news that
investors wouldn't look for forward to
oh well there'll be easier response more
easy money and everything will come back
it might take a while for reality to
assert itself like you know holy cow the
FED is cutting because they problems and
its Cuts aren't fixing the problems like
bad like for bad news to really become
bad news on Wall Street again might
take let me not mince words I think it
probably will take some re-education of
investors and that re-education is going
to be a very painful education true or
false moving on to Metals uh there is a
lot less production of copper than there
will be potential demand or current
demand meaning there's going to be a
shortage or deficit of copper production
therefore the price will be uh you know
significantly higher because of that
demand Supply imbalance true or false
time
frame I I this year next five years 10
years what are we
talking
because the answer would be different
you know this year I would say how would
the answer would be yeah how would the
answer be different this year I'd say
false maybe like there have been some
problems we had Cobra Panama go offline
last year we have some shutdowns in Peru
we have things going on so you know
borderline for this year but not for
sure if we're looking five 10 years
ahead or even just a couple years ahead
I think there's there's just nowhere
near enough copper and it's so difficult
to permit these big mines the ones big
enough to matter the the MEAP pit
projects and so on that can really help
Supply the world of the increasing
electrification which does not depend
just on electric cars dear audience you
know the world needs more electricity
anyway oh and the latest big craze is AI
right AI is going to make our
electricity demands go through the roof
even if that doesn't happen even if
people go completely back to Industrial
sorry internal combustion engines
there's still going to be more need for
Dr
copper um so the answer depends on the
time frame David but for this
year you unless we get more shutdowns I
I don't see a huge deficit this year and
if I'm right about a hard Landing
there'll be demand destruction and so we
could actually see the market remain
imbalance or slightly in Surplus this
year we'll have to see not a true false
question but I'm wondering why uh gold
has outperformed silver in both the last
two years and and the last one year at
12 months so I'll just give you I'm
looking at the charts here as of the
beginning of of 2022 Gold's up 20%
Silver's up
6.97% as of the beginning of 2023 I'm
zooming in here Gold's up 15 16%
Silver's up only
4% um you
know my Darth silver Mas here to answer
the question I thought I thought I've
asked this to a few people this week I
want to get your take I thought silver
outperforms gold during a bull rally
usually but that wasn't the case the
last two years well you even even even
Darth will agree with me here there's
several what's the story behind that
mask by the way you can't just bring
that on without any context here you
don't know that the Wall Street Silver
guys called me Darth silver no I'm not
aware of that oh wow you've been out of
the loop so okay so the reason for the
mask is that I have been I've had whoops
sorry Darth had the tarity to say that
there's been a change in the
relationship between gold and silver uh
and these numbers that you're pointing
out are case in point right the the the
use case has changed and you know the
good news is that clearly there's a a
vastly increased industrial use case for
silver and I do think that is good news
because you know the investment case the
monetary case doesn't necessarily go
away and
so if I'm right about the hard landing
and monetary medals get a bid because of
the recession then that would be gold
and silver that'd be good for silver
if I'm wrong and the economy takes off
well that's good for industrial demand
for silver so that's good for silver not
so much gold so you know people call me
Darth silver and all that but I'm I'm
not anti-s silver I'm not even a silver
bear the reason for the name though is
that something is clearly changed these
numbers that you're pointing to you can
see it on a daily basis there's over the
last year or two you look at gold and
silver and copper on a daily basis and
the silver line intraday will frequently
with
more with the copper line than with the
Gold
Line it's it's it seems to be responding
to the same stimuli to the same
decisions that copper buyers are making
than gold buyers frequently now it is
still money of course it is the word for
money in many languages and especially
since the new war in the Middle East
broke out we've seen Silver go back to
tracking gold more closely I find this
very reassuring yes it is still a
monetary metal so I like that win-win
but but the industrial side could
certainly hold it back this year and you
said that silver outperforms gold what
even di hard silver bulls will tell you
it outperforms gold at the end of the
bull market it typically lags at the
beginning and then more than catches up
at the end so if we're going in you know
we've been consolidating sideways since
2020 we're going on four years David
this is no longer the same bull market
of 1919 sorry 2019 2020 if we break out
again and and and we seem to be doing
that on the gold
side history tells us that silver will
lag at first anyway when I first started
in this industry it I've observed that
silver has had a higher beta to Gold if
you want to use gold as of sort of the
base case basically it just follows gold
with a higher beta it's more volatile so
you'd expect it to move up more in Bull
markets move down more in bare markets
it just hasn't been the case in the last
two years so I'm wondering why but that
was a good explanation um well sorry
just just one more thing I mean it's
it's really important if you're if if
you want to be uh fanatical about
defending your favorite metal or
commodity or whatever fine not you know
knock yourself out if there's an
ideological agenda here fine but don't
mistake that for being an investor if
your goal is to make money what what
David is saying right now I mean these
this is like truth with a capital T
these are the facts just look at it in
2020 we had this flash crash gold and
silver fell off a cliff gold immediately
starts coming back up again as it should
as a monetary metal should as a safe
haven asset should and silver just kind
of stayed on the map right it's been
struggling just to get back to and it
still hasn't hit a new all-time high
nominally even as gold has so the market
now is the data is telling us something
is different and you could I suppose
chalk all of that up to manipulation but
you know the scale of manipulation to
keep silver in the 20s when gold is over
20 100 uh globally it's just uh not
credible it's it's not an easy thing to
believe yeah nobody talks about
manipulation when the prices are going
up so you know that's something to
consider uh okay well would you use a
gold silver ratio as no as as a trading
tool like go it goes above 80 your short
gold or whatever no no no first first
because it's been continually widening
or not continually it has with
volatility been widening for decades now
like there was a big breakdown in 2020
but that was just the latest in a in a
trend um and the gold silver ratio can
close by gold coming down just as easily
as silver going up you know if you if
anything that gets to an extreme you
know if the gold silver ratio blows out
over 200 say I would I would at that
point be willing to bet that it would
close or at least somewhat close but it
doesn't tell me which metal is going up
and which one's going down
I had I heard a very interesting um case
for agricultural Commodities during a uh
during a war kinetic War usually grains
with uh Wheats things like that um
things that get imported or exported
over distances those prices go up
because of disruptions to the supply
chain and so ironically it's become a
safe haven to invest in agricultural
products during a war uh can you
evaluate that is that true it it's hard
for me to see something that can rot in
a ships cargo hold as a safe haven David
uh and I don't want to I don't want to
use the abused word transitory but those
cruffles tend to be ironed out and there
was a big story out there in
2022 when the second invasion of Ukraine
occurred about you know food scarcity
and and starving in Africa because
Ukraine and everything and and and
basically you know none of the dire
scenarios worked out I mean it was real
it was a phenomenon there was food
inflation there's still food inflation
how much of that is due to the war and
how much of that is due to money
printing I couldn't tell you um but I
can tell you that anybody who who you
know bet the farm on this huge
agricultural Commodities going to the
sky narrative um I I don't know how many
of them lost the farm but I think
they're they're in Jeopardy okay so
final TR truth or true or false and
we'll leave it there uh given your take
on the economy it's more likely that
gold Will outperform silver this year by
the end of the year true okay well that
was that was a fantastic session we ran
through everything thank you uh where
can we follow your work Lobo I know you
cover stocks we haven't talked about
mining stocks we talked about that by
the way Lobo and I had a very thorough
discussion about Miners and Mining
stocks in our January interview from two
months ago I'll put a link in the
description down below if you want to
revisit that episode uh so watch that
and also follow Lobo where can we follow
your work on miny stocks yeah the easy
answer is please sign up for our free
Weekly Newsletter at Independents
Speculator tocom if you do I promise I
will not spam you with a flood of daily
advertisements I mean you get one email
per week and then you can see if you
like my thinking you know via that free
product okay thanks very much we'll put
the link down in the description below
appreciate your time as always Lobo good
to see you we'll see you again
soon
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