Doubling Down On Hard Landing: Signs Of Coming Bear Market | Lobo Tiggre

David Lin
30 Mar 202433:29

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

  • 📉 The speaker predicts a 'hard landing' for the economy, suggesting that post-pandemic market distortions have delayed an inevitable recession.
  • 💹 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.
  • 📊 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.
  • 💼 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.
  • 📈 Recessions have traditionally been bullish for monetary metals like gold and silver, while industrial metals and commodities tend to suffer.
  • 💭 The speaker questions the effectiveness of the Federal Reserve's tools in the current economic climate, suggesting that fiscal policy may be more impactful.
  • 🤖 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.
  • 🥇 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.
  • 🌐 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.
  • 📉 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.
  • 📊 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

00:00

📉 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.

05:01

💼 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.

10:03

💬 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.

15:05

📈 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.

20:05

🤖 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.

25:06

🥇 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.

30:08

🌐 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

💡Hard Landing

A 'hard landing' refers to a rapid economic slowdown following a period of growth or inflation, often as a result of monetary policies aiming to control inflation. In the video, the concept of a hard landing is central to Lobo's economic outlook. He predicts that the accumulation of post-pandemic labor market distortions and other economic imbalances have increased the potential severity of a forthcoming economic downturn. Lobo's perspective suggests that delaying necessary economic adjustments could result in more severe consequences when they eventually occur.

💡Labor Hoarding

Labor hoarding is the practice by businesses of retaining more employees than necessary, often to avoid the costs and difficulties of rehiring in the future. Lobo mentions labor hoarding as a post-pandemic distortion that has delayed the onset of a recession. This concept is critical because it implies that companies are artificially maintaining employment levels, which could lead to a sudden and sharp correction if economic conditions worsen, contributing to a hard landing.

💡Bank of Japan

The Bank of Japan (BoJ) is Japan's central bank, responsible for the nation's monetary policy. The video references the BoJ's decision to raise interest rates for the first time in 17 years, highlighting it as a historically accurate predictor of recessions. This point underlines the interconnectedness of global financial systems and the significance of major policy shifts in one economy potentially signaling broader economic trends.

💡Recession Indicators

Recession indicators are economic signals that suggest an upcoming recession. The video discusses several indicators, including the Leading Economic Index and the relationship between long-term and current unemployment rates. These indicators help economists and investors predict downturns, but Lobo emphasizes the unprecedented nature of current economic conditions, questioning the reliability of traditional indicators.

💡AI Impact

The impact of Artificial Intelligence (AI) on the job market is a key theme discussed in the video. The rise of AI is transforming the demand for certain tech roles, leading to job displacement and the need for workers to adapt by acquiring new skills. Lobo views this shift as part of the broader economic landscape affecting 2024, suggesting that AI's influence could exacerbate the challenges of a potential recession by displacing jobs even as it boosts productivity.

💡Monetary Metals

Monetary metals, primarily gold and silver, are discussed in the context of their historical performance during recessions. Lobo differentiates between the two, noting their varying responses to economic conditions. He highlights how recessions and economic uncertainty typically boost demand for gold as a safe-haven asset, while silver's industrial uses can influence its performance differently.

💡Fiscal Policy

Fiscal policy involves government spending and taxation decisions. In the video, the potential for a fiscal response to an economic downturn is mentioned as a countermeasure to a hard landing. Lobo suggests that government interventions, alongside monetary policy adjustments, could mitigate the impact of a recession, though the effectiveness of such measures is uncertain.

💡Commodities Market

The commodities market, including metals and agricultural products, is discussed in terms of its sensitivity to economic cycles. Lobo points out the distinction between industrial commodities, which are likely to suffer in a recession, and monetary metals like gold, which may benefit. The video also touches on the nuanced impact of wars and global events on agricultural commodities, challenging simple narratives about their performance during crises.

💡Gold-Silver Ratio

The gold-silver ratio measures the amount of silver required to purchase one ounce of gold. Lobo addresses this ratio to explain the changing relationship between gold and silver prices, especially during economic uncertainty. He suggests that while traditionally, silver might outperform gold in bull markets, recent trends and industrial demand have altered this dynamic, making past patterns less reliable predictors.

💡Copper Demand

Copper's role as an essential industrial metal, particularly in electrification and renewable energy, is highlighted. Lobo discusses the potential for a supply-demand imbalance in the copper market, particularly over the long term, as electrification efforts increase. This imbalance could lead to higher copper prices, reflecting broader economic and technological trends.

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

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if you if you want a headline David my

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headline is lowo doubles down on hard

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Landing I really do think that's coming

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I think that the the degree to which

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these things I'm talking about Labor

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Hoarding post-pandemic distortions in

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the market have prevented or held off

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the recession from you know or the piper

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from being paid to the degree that you

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hold him off that you increase your

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interest payment when he does show up

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for payment so I think the hard Landing

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left to its own devices would be much

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harder than it would have been had it

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been left to sort itself out Lobo of the

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independent Speculator joins us once

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again to give us his updated outlook on

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the macroeconomic landscape what's next

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for stocks the economy and commodities

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Bank of Japan raised rates for the first

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time in 17 years uh I was talking to you

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offline I'm going to quote a um an

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economist I know Peter barison he he uh

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posted this on his LinkedIn um in the

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history of uh Finance no better

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indicator has been this perfect in

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predicting recessions in the Bank of

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Japan raising interest rates this chart

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uh I think it's a ton and cheek chart

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but every single time the bank of Japan

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raises rates in the past barring the co

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uh Co pandemic uh there's been a

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recession like 6 to8 months later Max so

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here we are um it's it's kind of funny

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that that comes up you know every time

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except covid so I think it's actually

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kind of important David because we are

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in uncharted waters and you can say oh

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except Co but Co was the last incident

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and the things that have been done have

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been you know so many charts have been

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broken with lines going through what was

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the top before through this floor before

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so it is it is reasonable to question

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whether patterns that have held true

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before still hold true I'll give you an

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example a contra Lobo

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indicator um the leading economic

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index has never gone this long negative

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for so many months without the recession

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we overdue so you know according to and

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those are leading economic indicators

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right they're supposed to lead where

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we're going they turn negative I don't

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is it 20 months ago now or more and they

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have never gone that long without the

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ensuing recession and so there's people

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saying well if it hasn't happened by now

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it's not going to and to point at that

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you know they would seem to be right but

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but if we are in uncharted waters you

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can't go by previous charts that seem to

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work uh you know back on the plus side

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you know clearly if if the bank of Japan

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is forced off zero which they really

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didn't want to do until they absolutely

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had to you it's it's indicative it means

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something so let's throw another chart I

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don't have it handy but Jeff

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gunlock I think most of our audience is

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familiar with him he frequently does

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monthly updates with lots and lots of

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charts but his most compelling recession

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chart is always long-term

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unemployment versus Uh current

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unemployment rates and when you get you

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basically you get a death cross in that

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chart and that is an uninterrupted 100%

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success rate at predicting recessions

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and we're headed right there now I think

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the long-term line hasn't quite crossed

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yet the short-term one but but we're on

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the verge of that um that death cross

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and if you use a medium-term or or

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shorter term lines they have crossed

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already so so the softening that even

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the mainstream cheer leaders of the

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administration and or the economy in

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general are admitting to some softening

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in the labor market that's showing in

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the charts and you know smart

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experienced guys like gunlock are saying

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that is the most Ironclad predictor of

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recession including

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2020 what are your before we talk about

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your indicators of recession and what

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you may look at uh to make this

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assessment back up a minute why do we as

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investors care if there's a recession

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let's really think about that question

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what moves during a recession which

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assets do well well we know which assets

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do poorly but I think what we want to

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know is which assets do well during a

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recession right ultimately why are we

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talking about this right right no that's

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a good question and actually let me I

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will answer but let me go slightly

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sideways and point out that there's a

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there's an important distinction between

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recession on the one hand and a market

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crash on the other and a lot of people

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seem to think that the two are the same

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or assume that if there's going to be a

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recession it's going to market crash and

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that's not necessarily true cuz you know

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if it was true then recession obviously

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markets crash then that's a reason to

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you know go short uh risk and go into

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other Safe Haven assets which includes

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gold sorry mainstream as well as bonds

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and you know yeah I would I would much

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rather go with the gold with the bonds

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in this environment but um but that's a

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mistake and especially now that the FED

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has trained the markets it's almost a

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pavlovian thing and that's why we've

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been scat ing our heads about bad news

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being good news for Wall Street for

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years because of the expected fed put

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and in this case I think that's not an

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unreasonable expectation I think if we

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had uh the fed's second mandate called

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in that they would pivot you know fast

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as you could and not just monetary

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policy I think we'd see a fiscal

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response and markets are forward looking

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so markets could look at a recession and

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say yay the floodgates are going to open

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the easy money is going to flood the

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markets and the money helicopters are

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going to fly so hey go long go risk

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because the the money is coming so it's

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it's important not to conflate the two

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market crash with recession but if the

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reality on the ground is recession uh

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those have been historically always very

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bullish for monetary Metals that's gold

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and silver not platinum or Palladium or

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rodium sorry those are Industrial Metals

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so it's primarily gold secondarily

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silver it's also at the outset at least

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uh you know depending on monetary policy

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that the the fear can be good for bonds

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but we have to see how that works in

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uncharted waters it's bad for Industrial

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Minerals and commodities and you know I

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it should be bad for the stock market as

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a whole but as we said in the bad news

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is good news World on Wall Street it may

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not be but it probably will be bad for

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Commodities so Commodities markets don't

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seem to get the same treatment from wall

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stre that the equities markets do and

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bad news is just bad news for for

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Commodities if there's a downturn in the

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economy that's bad for iron it's bad for

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oil bad fed can't the FED can't save

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Commodities is what you're

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saying yes you know well it's actually

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arguable whether the save the FED can

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save anything here we are on fed day and

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you know what they do does it really

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matter their tool box is actually quite

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limited and if if it's fiscal large s

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that's really still that pig working its

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way through the python that's making

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inflation sticky do their inflation

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sorry do their interest rate decisions

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really matter that much you know are

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they trying to hammer a screw or turn a

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nail yeah arguably what's more important

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is what they do with their balance sheet

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you're right um Okay so we've answered

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what does well in a recession recession

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indicators that you look for then let's

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talk about that well we've seen quite a

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few already we've seen an earnings

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recession even Wall Street is not

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entirely divorced from Main Street so

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that's interesting to me we certainly

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seen a Commodities recession if Dr

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copper is called that for good reason

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okay we've seen higher copper prices

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with some interesting optimism coming

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out of China but still U the Commodities

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complex has been signaling an economic

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downturn we've got conventional

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indicators from Germany to the UK to

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other you know large EC eies flashing

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red around the world I think it's not

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much of a stress to say that there

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actually is a global recession going on

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we're not just looking at indicators

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we're looking at a reality right now on

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the ground and then the question is is

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the US the exception is American

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exceptionalism apply here and I would

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argue that the

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um again we're in uncharted waters but

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given how we got here if we have and you

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know the postco distortions in the labor

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market you know the labor hoarding the

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companies not wanting to fire people

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they really don't need uh because of how

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hard it was to find people during and

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after the covid situation so then that

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that pillar that the this American

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exceptionalism rests on of the strong

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consumer laborer right if that is not as

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strong as it looks or if it's

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artificially been propped up post

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pandemic and then that breaks down then

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things change in a big way so if you if

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you want to headline David my headline

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is low doubles down on hard Landing I

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really do think that's coming I think

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that the the degree to which these

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things that I'm talking about Labor

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Hoarding post-pandemic distortions in

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the market have prevented or held off

play09:15

the recession from you know or the piper

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from being paid to the degree that you

play09:20

hold him off that you increase your

play09:22

interest payment when he does show up

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for payment so I think the hard Landing

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left to its own devices would be much

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harder than it would have been had it

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been left to sort itself out and then

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the question of course becomes what are

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the powers that be do so I'm doubling

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down on hard Landing but I do think the

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money helicopters will fly and and the

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timing of this is is really the critical

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point do the powers at be open the Easy

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Money floodgates the moment it looks

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like that recession is coming or do they

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wait until the NBR declares in hindsight

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oh yeah we're in a recession I have a

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feeling they may not wait I mean there's

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as we speak on fed day it's really quite

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striking to hear the debate about

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whether the FED should be loosening how

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quickly it should be loosening when

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supposedly the economy is doing so great

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right the the Biden team not not to get

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political here but the Biden team keeps

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pulling their hair out over why Joe

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doesn't get credit for wonderful biomics

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how great that's doing for the economy

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but the reality on the ground is is not

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that great these numbers that they look

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at don't account for the reality that

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people are experiencing on the ground so

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you know I'm saying things are worse

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than they look in these contrived

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averages and GDP numbers and you know

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CPI and hedonically adjusted you know

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supercore CPI all these numbers they

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keep coming up with uh but the reality

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is different and I think the reality

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will be out and I I suspect though that

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you know Powell and Company they that

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they know this they can't admit it but

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they know it and so I I sorry I'll stop

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talking David my point is though that

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this recession this hardlining I'm

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looking for could trigger the next boom

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because of the pavlovian fed put

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response and also fiscal policy

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sure so so so equities could do well but

play11:18

still industrial Commodities are likely

play11:20

to take it on the chin for some by the

play11:22

way the we talked about uranium before

play11:24

but let's just revisit that okay is the

play11:27

price of uranium indicative of

play11:29

either the market perceiving economic

play11:31

strength or actual economic strength or

play11:33

they not related at all I ask just

play11:35

because as you know and we've talked

play11:37

about this the price of uranium shot up

play11:39

I want to ask you if that's an indicator

play11:42

for anything on the um on the

play11:45

economy I I wouldn't dismiss it entirely

play11:48

you know I've said that uranium is

play11:50

recession resistant not because nothing

play11:52

is entirely Recession

play11:54

Proof uh but it is the best source of

play11:58

247 365 Basel load power um and that's

play12:03

not the sort of thing that you want to

play12:04

mess with you you you may decide in a

play12:06

recession not to go visit Grandma's

play12:08

often and drive less and use less gas

play12:10

but you still want the lights to come on

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and broadly speaking as a society you

play12:14

still want the energy for your airports

play12:15

and hospitals and things and that's

play12:17

where nuclear really excels

play12:20

so I won't say it doesn't mean anything

play12:23

David but I will say that it is a

play12:25

separate consideration it's much more

play12:27

important when you're looking at uranium

play12:29

to look at the supply and demand balance

play12:31

in the market look at what secondary

play12:33

Supply is doing to that I don't think

play12:36

that uranium going to over $100 meant

play12:38

that the economy was going to go zooming

play12:40

off to the moon and I don't think that

play12:42

uranium correcting now is particularly

play12:45

that's not a recession indicator that

play12:46

I'm looking at I just think the market

play12:48

got ahead of itself and some correction

play12:50

was to be expected and boy did I get a

play12:53

lot of heat for saying that in Vancouver

play12:54

when we met last but I'm not sure where

play12:57

you want to go with this but no I don't

play12:58

see

play12:59

I I just I I I just want to know if

play13:01

iranium going up means the economy is

play13:04

booming no let's yeah simple as that you

play13:07

could yes no you could you could

play13:09

absolutely have the economy in a in a

play13:11

significant recession and uranium still

play13:13

go up because the supply isn't there for

play13:15

all the reactors that are being built

play13:17

around the world which is scores of them

play13:18

David let's play a quick game of true or

play13:21

false okay pretty simple just true or

play13:24

false give your justification true or

play13:26

false inflation will not come down below

play13:29

3% this

play13:32

year talk about headline headline CPI

play13:35

yes yeah okay

play13:37

yeah doesn't matter sorry true and false

play13:41

I don't know it could but it would

play13:42

really matter I think it's going to be

play13:43

sticky so let me

play13:45

say so let me go with false then I'm

play13:47

closer to false than true all right

play13:50

you're GNA put that where so the

play13:51

justification would be it's sticky

play13:53

already I said it was going to be sticky

play13:55

I was right about that and if you look

play13:56

at the charts they're pretty much flat

play13:58

over the last nine months months and

play14:00

that means we're getting the end of Base

play14:02

effects which will no longer help so the

play14:05

stickiness is about to get stickier and

play14:07

more difficult

play14:10

um I I don't have a crystal ball so I

play14:12

don't know where it's going to go but

play14:13

but much closer to false than true next

play14:15

true or false the FED will only cut if

play14:19

the economy shows obvious signs of a

play14:23

recession

play14:25

false Okay C other reasons yeah yeah

play14:29

because if if I'm wrong and inflation

play14:31

does get unstuck and goes down further

play14:35

then doing nothing would be increasingly

play14:37

restrictive by their definitions and

play14:40

they've already talked about this that

play14:41

yes it does make sense to them if if

play14:43

inflation keeps going down to maintain

play14:46

the same level of restrictive which they

play14:47

say not me this is the Fed they say

play14:50

they're at sufficiently restrictive now

play14:52

so if inflation keeps going down you'd

play14:53

have to cut rates to maintain that same

play14:56

distance or else you would be you would

play14:59

increase the restrictiveness of policy

play15:00

if you didn't cut so there is a path

play15:03

where that would happen but that's not

play15:05

what I'm expecting I'm expecting them to

play15:07

cut because they have an obep moment

play15:09

when they realize they've broken

play15:10

something else or that that hard Landing

play15:12

is

play15:13

coming uh true or false the unemployment

play15:16

rate will not tick up later this year

play15:21

false it's already ticking

play15:23

up um let me rephrase that considerably

play15:27

more than 1% higher than what it is

play15:30

now more than one if you just said

play15:32

considerably I would have said true if

play15:34

you say more than 1% I don't know it

play15:37

could depend on what they do and how

play15:38

they Define it discourage workers but I

play15:40

think there's a good chance that we will

play15:42

see it Go a percent higher if if I'm

play15:45

right about hard Landing even because

play15:46

even if they throw the money at it David

play15:49

it takes a while for policy to impact

play15:50

things and if companies that have not

play15:53

fired people that they didn't need

play15:55

anymore suddenly start doing that or

play15:57

going bankrupt and then you know firing

play15:59

everybody right the easy money isn't

play16:02

going to instantly create those new jobs

play16:04

so I I think there's a pretty good

play16:05

chance that the answer will be yes to

play16:06

that this is an article from The Wall

play16:08

Street Journal this has nothing to do

play16:09

with a softw or hard Landing but it's

play16:11

just AI wiping out jobs okay Tech job

play16:14

Seekers without AI skills face a new

play16:17

reality lower salaries and fewer roles

play16:19

the rise of AI is affecting job seekers

play16:21

in Tech who accustomed to high paychecks

play16:23

and robust demand for their skills are

play16:25

facing a new reality learn Ai and don't

play16:27

expect the same pay package PES you were

play16:29

getting a few years ago they want a job

play16:32

for $200,000 and they're not finding it

play16:34

because they don't have the skills he

play16:36

said if they were an accounts receivable

play16:38

project manager and they don't know

play16:40

anything other than that they're going

play16:42

to have a hard time finding a job AI is

play16:44

projected according to this uh report

play16:46

it's projected that uh the IT job market

play16:49

in the US is expected to shrink by

play16:51

20,000 to 30,000 jobs in 2024 this

play16:56

year sorry was there a true or false

play16:58

question in David no this is this is

play17:01

just uh I want you to react to this no I

play17:04

I'm in that camp and you know as a

play17:07

person who who has an Austrian economics

play17:11

perspective on the on the world and the

play17:12

economy I believe in the concept of

play17:15

creative destruction Innovation happens

play17:17

you know old ways of doing things are

play17:19

broken new ways of doing things in power

play17:21

I I think AI is going to be a

play17:23

tremendously uh creativity and

play17:26

productivity enhancing Boom for our

play17:28

species it's a great thing but clearly a

play17:32

lot of jobs are going away and that's

play17:33

not just going they're gone I mean last

play17:36

year we had a whole swass of people who

play17:38

would type repetitive real estate

play17:40

listings entries in that you know that

play17:41

job just doesn't exist anymore and you

play17:44

the same way that you know uh horse

play17:46

buggy or or candle lighters and horse

play17:48

buggy whip makers and so on that that

play17:51

started immediately with chat

play17:53

gpt3 um now as the applications apply

play17:58

this this new technology to specific

play18:00

solutions for businesses I think this

play18:02

year this isn't a someday some when

play18:04

imminent or inevitable this is happening

play18:06

now there are jobs being destroyed right

play18:08

now so I I have no doubt about that and

play18:11

this is part of my my concern now it's

play18:15

it's interesting that there are very

play18:16

smart people out there that's saying

play18:18

well the AI productivity is actually

play18:19

going to be the thing that holds the

play18:21

recession off and I I have a hard time

play18:25

with that I'm I'm I'm actually very

play18:27

optimistic but cre cretive destruction

play18:29

is a real thing and the destruction

play18:31

happens before their creativity I I I I

play18:34

have to just point out a lot of people

play18:35

were making the comparison to the

play18:37

Industrial Revolution when farmers were

play18:39

you know losing their jobs because

play18:41

Machinery um made a lot of farm Farmers

play18:45

you know human Farmers obsolete so they

play18:46

moved to the cities in the UK to work in

play18:49

factories yeah but that was more or less

play18:50

a lateral move we're talking about

play18:51

manual labor to manual labor um here

play18:54

we're talking about people who have

play18:55

trained for years gone to school for a

play18:57

certain profession and now all of a

play18:59

sudden that profession is Obsolete and

play19:01

so making a lateral move is difficult

play19:03

they're going to have to either uh be

play19:05

underemployed for a while and gain new

play19:07

skills or yeah no I'm going to push back

play19:10

on that one David I mean if you were a

play19:12

farmer and you spent your day looking at

play19:14

the hind end of a mule in front of a

play19:16

plow and now you went to work at a

play19:18

factory tightening bolts like Charlie

play19:20

Chaplain in modern times that was a very

play19:22

different thing you you did need to

play19:24

learn new skills uh and by the way some

play19:26

people went to work you know make making

play19:28

the machines servicing the machines

play19:30

there were different jobs and some of

play19:31

them were higher paid I think

play19:33

urbanization as much as it's reviled in

play19:36

the in movies and stories at the time it

play19:39

did accompany a rise in the average

play19:40

standard of living so I'm not sure I

play19:44

would see that as a lateral move but

play19:46

clearly highly disruptive and people

play19:49

throw the word disruption around oh you

play19:51

know we're going to disrupt mining with

play19:52

this or whatever like that's a good

play19:53

thing well the eventual creativity is a

play19:57

good thing but the disruption causes

play19:59

problems along the way which are painful

play20:02

so I I'm not sure where you want to go

play20:05

with this but but my view is that this

play20:06

is actually a red flag for 2024 we're

play20:10

going to see more pain before we get the

play20:12

game and it's happening now that's my

play20:15

view long term would it be deflationary

play20:17

the Advent of AI yes oh no

play20:21

question and and you know this is

play20:23

actually a Doug Casey ISM my mentor the

play20:25

longest Financial Trend all of history

play20:29

is deflationary the lowering cost of

play20:31

living you know where you know the poor

play20:34

people today have a infinitely better

play20:36

lifestyle than the kings of Y who didn't

play20:38

have dentist or Nova cane or or Cancer

play20:42

Treatments or whatever right um you know

play20:45

over the long

play20:47

term progress means stuff gets cheaper

play20:52

let's just close off your economic

play20:53

Outlook and then I want to close and

play20:54

then I want to move on to the final

play20:55

segment which is Metals uh the core area

play20:58

of your research so bottom line you're

play21:00

doubling down on hard Landing uh what

play21:03

was your take on the markets CU I know

play21:05

we've talked about the fact that just

play21:06

because we're getting a recession it

play21:08

doesn't necessarily mean the markets

play21:09

will you know will move down bare market

play21:12

and recession not always they don't

play21:14

always come together right so well with

play21:17

bare Market they they usually have I

play21:19

said crash crash okay it may not

play21:21

necessarily crash what's the difference

play21:23

between Bare market and crash for the

play21:24

audience well a bare Market can be a

play21:26

long grind lower that doesn't have a

play21:28

waterfall

play21:30

event you

play21:31

know a crash is a in my mind it's a 2008

play21:35

or or

play21:38

1929 or 2020 perhaps you know flash

play21:41

crash you know that sort of

play21:43

verticality um and you know a multi-year

play21:46

bear could take you as low as a sudden

play21:50

crash but if it happens over years you

play21:52

have time to see it coming you have time

play21:53

to adapt your portfolio it's it's a much

play21:56

different experience for the investor

play21:58

than waking up on a Black Friday and

play22:00

being worth 25% of what you were on

play22:03

Thursday can we just settle this uh once

play22:05

and for all I've heard different

play22:07

theories um the Federal Reserve cutting

play22:10

rates is that good or bad for stock

play22:12

markets historically it's been mixed

play22:14

sometimes immediately following a Fed

play22:16

cut uh the stock markets have fallen

play22:19

sometimes uh lowering rates actually is

play22:22

is a boost for equities it really

play22:23

depends the context if they're cutting

play22:25

because the economy is bad usually that

play22:27

means stock markets will will will fall

play22:30

afterwards but what's your view on fed

play22:33

Cuts you You' put your finger on the

play22:35

important thing it's there's you know it

play22:37

should depend on what the cut is the

play22:40

reason for the cut why they're doing it

play22:42

in our current context investors have

play22:45

been so trained like I say it's a

play22:47

pavlovian reflex you easier money means

play22:50

go go risk on I'm not sure that even if

play22:53

the FED did cut for bad news that

play22:56

investors wouldn't look for forward to

play22:59

oh well there'll be easier response more

play23:00

easy money and everything will come back

play23:03

it might take a while for reality to

play23:04

assert itself like you know holy cow the

play23:07

FED is cutting because they problems and

play23:10

its Cuts aren't fixing the problems like

play23:12

bad like for bad news to really become

play23:14

bad news on Wall Street again might

play23:18

take let me not mince words I think it

play23:21

probably will take some re-education of

play23:25

investors and that re-education is going

play23:27

to be a very painful education true or

play23:30

false moving on to Metals uh there is a

play23:34

lot less production of copper than there

play23:36

will be potential demand or current

play23:39

demand meaning there's going to be a

play23:40

shortage or deficit of copper production

play23:43

therefore the price will be uh you know

play23:46

significantly higher because of that

play23:48

demand Supply imbalance true or false

play23:51

time

play23:52

frame I I this year next five years 10

play23:55

years what are we

play23:57

talking

play23:59

because the answer would be different

play24:00

you know this year I would say how would

play24:01

the answer would be yeah how would the

play24:02

answer be different this year I'd say

play24:04

false maybe like there have been some

play24:06

problems we had Cobra Panama go offline

play24:09

last year we have some shutdowns in Peru

play24:11

we have things going on so you know

play24:13

borderline for this year but not for

play24:16

sure if we're looking five 10 years

play24:18

ahead or even just a couple years ahead

play24:20

I think there's there's just nowhere

play24:21

near enough copper and it's so difficult

play24:25

to permit these big mines the ones big

play24:27

enough to matter the the MEAP pit

play24:29

projects and so on that can really help

play24:32

Supply the world of the increasing

play24:34

electrification which does not depend

play24:36

just on electric cars dear audience you

play24:38

know the world needs more electricity

play24:40

anyway oh and the latest big craze is AI

play24:42

right AI is going to make our

play24:44

electricity demands go through the roof

play24:46

even if that doesn't happen even if

play24:48

people go completely back to Industrial

play24:50

sorry internal combustion engines

play24:52

there's still going to be more need for

play24:54

Dr

play24:55

copper um so the answer depends on the

play24:59

time frame David but for this

play25:01

year you unless we get more shutdowns I

play25:04

I don't see a huge deficit this year and

play25:06

if I'm right about a hard Landing

play25:07

there'll be demand destruction and so we

play25:10

could actually see the market remain

play25:12

imbalance or slightly in Surplus this

play25:14

year we'll have to see not a true false

play25:16

question but I'm wondering why uh gold

play25:18

has outperformed silver in both the last

play25:21

two years and and the last one year at

play25:23

12 months so I'll just give you I'm

play25:26

looking at the charts here as of the

play25:27

beginning of of 2022 Gold's up 20%

play25:30

Silver's up

play25:32

6.97% as of the beginning of 2023 I'm

play25:35

zooming in here Gold's up 15 16%

play25:37

Silver's up only

play25:39

4% um you

play25:42

know my Darth silver Mas here to answer

play25:45

the question I thought I thought I've

play25:47

asked this to a few people this week I

play25:49

want to get your take I thought silver

play25:50

outperforms gold during a bull rally

play25:53

usually but that wasn't the case the

play25:55

last two years well you even even even

play25:58

Darth will agree with me here there's

play26:00

several what's the story behind that

play26:01

mask by the way you can't just bring

play26:03

that on without any context here you

play26:06

don't know that the Wall Street Silver

play26:07

guys called me Darth silver no I'm not

play26:10

aware of that oh wow you've been out of

play26:12

the loop so okay so the reason for the

play26:14

mask is that I have been I've had whoops

play26:18

sorry Darth had the tarity to say that

play26:21

there's been a change in the

play26:23

relationship between gold and silver uh

play26:26

and these numbers that you're pointing

play26:28

out are case in point right the the the

play26:30

use case has changed and you know the

play26:33

good news is that clearly there's a a

play26:36

vastly increased industrial use case for

play26:39

silver and I do think that is good news

play26:43

because you know the investment case the

play26:45

monetary case doesn't necessarily go

play26:47

away and

play26:49

so if I'm right about the hard landing

play26:52

and monetary medals get a bid because of

play26:55

the recession then that would be gold

play26:57

and silver that'd be good for silver

play26:58

if I'm wrong and the economy takes off

play27:01

well that's good for industrial demand

play27:03

for silver so that's good for silver not

play27:04

so much gold so you know people call me

play27:07

Darth silver and all that but I'm I'm

play27:08

not anti-s silver I'm not even a silver

play27:10

bear the reason for the name though is

play27:12

that something is clearly changed these

play27:15

numbers that you're pointing to you can

play27:17

see it on a daily basis there's over the

play27:19

last year or two you look at gold and

play27:22

silver and copper on a daily basis and

play27:24

the silver line intraday will frequently

play27:28

with

play27:28

more with the copper line than with the

play27:31

Gold

play27:32

Line it's it's it seems to be responding

play27:35

to the same stimuli to the same

play27:37

decisions that copper buyers are making

play27:40

than gold buyers frequently now it is

play27:43

still money of course it is the word for

play27:45

money in many languages and especially

play27:47

since the new war in the Middle East

play27:49

broke out we've seen Silver go back to

play27:51

tracking gold more closely I find this

play27:53

very reassuring yes it is still a

play27:55

monetary metal so I like that win-win

play27:59

but but the industrial side could

play28:01

certainly hold it back this year and you

play28:03

said that silver outperforms gold what

play28:05

even di hard silver bulls will tell you

play28:07

it outperforms gold at the end of the

play28:10

bull market it typically lags at the

play28:12

beginning and then more than catches up

play28:14

at the end so if we're going in you know

play28:16

we've been consolidating sideways since

play28:18

2020 we're going on four years David

play28:21

this is no longer the same bull market

play28:22

of 1919 sorry 2019 2020 if we break out

play28:27

again and and and we seem to be doing

play28:30

that on the gold

play28:31

side history tells us that silver will

play28:33

lag at first anyway when I first started

play28:36

in this industry it I've observed that

play28:38

silver has had a higher beta to Gold if

play28:41

you want to use gold as of sort of the

play28:43

base case basically it just follows gold

play28:45

with a higher beta it's more volatile so

play28:47

you'd expect it to move up more in Bull

play28:49

markets move down more in bare markets

play28:51

it just hasn't been the case in the last

play28:52

two years so I'm wondering why but that

play28:54

was a good explanation um well sorry

play28:56

just just one more thing I mean it's

play28:58

it's really important if you're if if

play29:01

you want to be uh fanatical about

play29:04

defending your favorite metal or

play29:05

commodity or whatever fine not you know

play29:07

knock yourself out if there's an

play29:08

ideological agenda here fine but don't

play29:11

mistake that for being an investor if

play29:13

your goal is to make money what what

play29:16

David is saying right now I mean these

play29:18

this is like truth with a capital T

play29:19

these are the facts just look at it in

play29:22

2020 we had this flash crash gold and

play29:24

silver fell off a cliff gold immediately

play29:26

starts coming back up again as it should

play29:29

as a monetary metal should as a safe

play29:30

haven asset should and silver just kind

play29:32

of stayed on the map right it's been

play29:35

struggling just to get back to and it

play29:38

still hasn't hit a new all-time high

play29:40

nominally even as gold has so the market

play29:44

now is the data is telling us something

play29:47

is different and you could I suppose

play29:49

chalk all of that up to manipulation but

play29:52

you know the scale of manipulation to

play29:54

keep silver in the 20s when gold is over

play29:57

20 100 uh globally it's just uh not

play30:02

credible it's it's not an easy thing to

play30:04

believe yeah nobody talks about

play30:06

manipulation when the prices are going

play30:07

up so you know that's something to

play30:09

consider uh okay well would you use a

play30:13

gold silver ratio as no as as a trading

play30:16

tool like go it goes above 80 your short

play30:18

gold or whatever no no no first first

play30:22

because it's been continually widening

play30:24

or not continually it has with

play30:26

volatility been widening for decades now

play30:29

like there was a big breakdown in 2020

play30:31

but that was just the latest in a in a

play30:33

trend um and the gold silver ratio can

play30:37

close by gold coming down just as easily

play30:39

as silver going up you know if you if

play30:43

anything that gets to an extreme you

play30:44

know if the gold silver ratio blows out

play30:46

over 200 say I would I would at that

play30:48

point be willing to bet that it would

play30:51

close or at least somewhat close but it

play30:54

doesn't tell me which metal is going up

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and which one's going down

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I had I heard a very interesting um case

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for agricultural Commodities during a uh

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during a war kinetic War usually grains

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with uh Wheats things like that um

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things that get imported or exported

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over distances those prices go up

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because of disruptions to the supply

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chain and so ironically it's become a

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safe haven to invest in agricultural

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products during a war uh can you

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evaluate that is that true it it's hard

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for me to see something that can rot in

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a ships cargo hold as a safe haven David

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uh and I don't want to I don't want to

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use the abused word transitory but those

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cruffles tend to be ironed out and there

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was a big story out there in

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2022 when the second invasion of Ukraine

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occurred about you know food scarcity

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and and starving in Africa because

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Ukraine and everything and and and

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basically you know none of the dire

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scenarios worked out I mean it was real

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it was a phenomenon there was food

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inflation there's still food inflation

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how much of that is due to the war and

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how much of that is due to money

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printing I couldn't tell you um but I

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can tell you that anybody who who you

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know bet the farm on this huge

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agricultural Commodities going to the

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sky narrative um I I don't know how many

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of them lost the farm but I think

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they're they're in Jeopardy okay so

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final TR truth or true or false and

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we'll leave it there uh given your take

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on the economy it's more likely that

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gold Will outperform silver this year by

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the end of the year true okay well that

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was that was a fantastic session we ran

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through everything thank you uh where

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can we follow your work Lobo I know you

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cover stocks we haven't talked about

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mining stocks we talked about that by

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the way Lobo and I had a very thorough

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discussion about Miners and Mining

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stocks in our January interview from two

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months ago I'll put a link in the

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description down below if you want to

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revisit that episode uh so watch that

play32:56

and also follow Lobo where can we follow

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your work on miny stocks yeah the easy

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answer is please sign up for our free

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Weekly Newsletter at Independents

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Speculator tocom if you do I promise I

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will not spam you with a flood of daily

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advertisements I mean you get one email

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per week and then you can see if you

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like my thinking you know via that free

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product okay thanks very much we'll put

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the link down in the description below

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appreciate your time as always Lobo good

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to see you we'll see you again

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soon

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