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 what this chart is showing is that commodities do well in both big deflation and big inflation hi this is Mike Maloney and I've got a special guest Ronnie Chevrolet from incremental AG he's back with us to go over their annual in gold we trust report they came out with one recently and it's a big one and there's a lot to cover in these so this is going to be several videos and we've got one that's just about silver and this is the very first time that they've done a whole chapter on silver

Ronnie how are you doing very well thank you very much for having me again Mike yeah it's always a big relief to get the report out it's like my wife doesn't like the comparison but it's like delivering a baby it's it's it's lots of work but it's it's it's we're just overwhelmed with all the positive feedback from from all over the world what I'm amazed at is that it's really this is a book how many pages is the whole report 350 but there's also a

compact version which is still hundred pages ok so let's get into your report and I'd like to you know we were talking earlier and down on page 13 there's the commodities index divided by the stock market basically so it's it's real stuff divided by paper stuff could you just go over this chart and give us your thoughts on yeah well I mean it shows the goldman sachs commodity index versus the Dow Jones Industrials index and it's a ratio and as you know Mike we we really enjoy long term charts because

you know there's so much so much fuzziness in markets nowadays and there is so much monetary intervention and and I think that those long-term charts and especially ratios give you more information than than absolute charts and only short-term charts so what you can see on this chart is since the year nineteen hundred actually commodities were only once that undervalued versus the stock market and that was in the 1960s until the beginning of the 1970s and we know what started afterwards and I think

first of all it's it's a sign that commodities probably are the most contrarian investment that you can make at the moment I know that if I would attend the conference now and I would say we're bullish commodities here we're buying commodities for our funds people would really kill me it's very similar to let's say one year or one and a half years ago when I said I'm bullish God's people said come on gold that's it's ridiculous nobody cares about gold so that's already good sign and I think

that all great investments they begin in discomfort so so they have to kind of hurt to be really good investments when it's obvious and when the everybody says yeah that's that's a great call you know buying Facebook buying Google now it's such a great idea then you have to become a bit more cautious now what you can see on this chart is that first of all we're trading at very very cheap levels compared to the stock market and we can see that we're way below the median so you know one of the ironies of

financial markets is the mean reversion so I think that we will go back at least to to the median which would would be 0.0 0.5 for 6 and at the moment we're trading at 0.1 so I think there's lots of upside then 5 times gained a minimum of commodities against paper assets yes III think that's that's not impossible and and and you know if you follow this chart you can also see that reversals most of the time also meant a reversal in the US dollar so of course that would also coincide with the with the weak

dollar and many people say ok so where should interest for for commodities come and my answer is first of all nobody's invested in commodities at the moment nobody cares about it and the second thing is I mean just open the newspaper you will see massive amounts of fiscal stimulus flooding into infrastructure programs that's basically it how governments and politicians all around the globe will try to solve this this this crisis with very Keynesian measures so so there will be you know I don't

know if they're gonna call it marshal plans or new deals or whatever those measures I think there will be very stimulating for for the commodity space which is at the moment probably the most hated asset class so I think there's you know that the risk rewards picture for for for commodities is fantastic and we always said first it is the gold market that starts moving we already see saw that so we can tick that box the second market is the silver market now we saw this massive spike in the gold silver

ratio up to 125 now we saw the reversal so silver started outperforming gold so we can tick that box as well and the third stage is always commodities going into a bull mark and then I think you know if you have a look at a copper prices for example other base metals as well I think it looks more and more constructive so so so I feel pretty confident that commodities will prove to be a really good investment going forward I think you're right I've got a couple of comments here in my book I

dedicated a whole chapter to trying to teach the difference between price and value and you cannot see true value when you're measuring things with dollars when you measure stuff against stuff like this chart the ratio chart so it was a whole chapter on just ratio charts of everything I actually broke down the commodities in the the stock market which was in a bubble back then against things like the commodities index but I drilled deeper oil the industrial metals index the agricultural index of the components of the commodity

and there really wasn't anything that you could use except the dollar everything proved that the stock market was in this hyper bubble again except the dollar if you measured it with dollars the stock market looked okay but the thing that I love about these charts is that this is something where you know my whole investment strategy was or is to find something that's incredibly undervalued on these long-term charts that people nobody trades these things so if you take the position in something

that's incredibly undervalued historically and if it goes down a little bit further you don't have to you know I think we're going into this deflationary dip so I do think that commodities will do one last pull back but then we're going into either big inflation or hyperinflation after that I don't know how long this will take to play out but what I love about charts like this you can just you know that you can take the position and just wait and if it goes down you don't have anything

to worry about you can add to your position that's what I've been doing with gold since the year 2002 I first saw my doubt gold ratio chart back in 2002 or 2003 and I was able to just take a position with absolute confidence and not worry about it and not get shaken out of my position I just add I use the the dips at when gold Falls I'm going alright it's down again I can get more but one of the things that I noticed here is usually like if you go back to the year 1930 on this chart and you look

at where it went from that extreme undervaluation it went commodities went big-time so your gains were absolutely enormous you know here we've got a factor of close to six it's about five and a half we're the more undervalued you you know I see these charts as like a pendulum swinging back and forth and if it's a little bit undervalued it's gonna go a little bit overvalued but a lot undervalued it's gonna so the likelihood of a swing up to that one point zero area is huge where

is it at currently it's it's it's point one I would say it's it's the same levels like like in the end of the sixties so you're talking to ten bagger and this is a broad index if you pick the right things out of this broad and get index you could get a twenty bagger or more you know for the audience a bagger is how many times your winnings are over what you invested so I think that this is an amazing chart showing the the overvaluation of paper assets compared to real stuff and we've had a

century of overvaluation of paper assets the interesting thing is how smooth the the trough is in the 60s that's when the stock market did an invisible crash it went up into a bubble in 1966 and then just went sideways and then but it went sideways until 82 basically so the middle of this chart is when commodities took off during the Arab oil embargo during the period where the US dollar was disconnected when Nixon took the world off of gold ended the Bretton Woods system so those two things oil and

gold drove the reversion in this chart and they may once again so anyway any other last comments on this chart before we move on to the next one well I think it's it's it's also of course it's it's it's coins with inflation and and from my point of view inflation is perhaps it's not around the corner but it is on the horizon and I think you know with all the debt creation that we saw I mean those numbers are just staggering and and and at the moment I think it's we crunch

numbers until end of April and it was 23 trillion u.s. dollars fiscal and monetary stimulus so roughly 20 percent of world GDP and we always said you know after the corona crisis the health crisis we will end up in an economic crisis and probably in a debt crisis so we know how that crisis normally gets solved and I think we will see hugely negative real rates not only for the next year's but also for that for the next decades probably if not a monetary reform so so I think that you know higher inflation

rates because now we're seeing that control over the money supply is being passed from central banks to government's we're seeing more closer interaction between central banks and fiscal policy stuff like mmt helicopter money using versa basic income whatever I think this will have a much more direct inflationary consequence and therefore I think it will but what I see in this chart when I look at it you know I'm looking at 19 the 1920s and you see that during the roaring 20s from about

25 this is falling even though and and that really wasn't a big inflationary period but then in 29 it continues its fall and that's because the stock market crashed and then you see the commodity or yeah the stock market crashed from 29 to 32 so it goes up during that period from 29 to 32 is the huge spike there so it's basically the stock market falling even though commodities they were trying to get you know Roosevelt had all of these policies of trying to boost agricultural prices and stuff to help

the farmers so he's trying to make food more expensive for people during the Great Depression it was insane and and they were actually paying they were taking tax money from productive businesses and individuals and paying farmers to plow under their crops to not plant things to try and get the prices of them to go up it was totally insane this is what happens when you've got central planning of an economy and it just made things worse this is one of the things that caused the Great Depression it was just a stock but this

chart shows it so dramatically and and you know it's whatever is moving the most that causes the big gyrations in this chart and back then it was stocks falling more than it was commodities rising in the 70s it wasn't stocks falling they went sideways all through the seventies it was commodities rising and so but what's interesting is when you take the dollar out of the create the equation so what this chart is showing is that commodities do well in both big deflation and big inflation it's only

when things are just going along with everything in balance and perfect that commodities don't do well and we are not in one of those times right now we're in a time with where everything is crazy and so commodities should I mean this chart is showing that this is an area where you can take a position and just wait and don't watch it every day and don't get scared out of selling your position when it takes a little temporary dip because the dip is temporary and this chart is guaranteeing

that for you that's what eyes I'm sorry I interrupted you no no that's fine I think you know you're right but if you have a look at it stocks in the 1970s basically 66 until 82 on a nominal on a nominal basis dated okay but on a real basis it was a horrible performance absolutely so so so I the second-largest crash after the 1929 stock market crash yes a percentage of losses even though the stock market just went sideways the Dow bumped its head on 1,000 points and couldn't get

through for 16 years and and during that time though we had raging inflation so I believe that the amount of losses it adjusted for inflation is like it's it's in the high 80 percent range it's not the it it's it's very close to the what the Great Depression rather not the Great Depression but the stock market crashes 29 through 32 well that wraps it up for this video Ronnie this was great such an in-depth dive into commodities versus paper assets because paper assets have really

been in a bubble for this entire century by all of the other measures the stock market and bonds are just to me totally insane and so I'll be interesting coming back to this next year when you come out with your next big report like this so we're gonna I'm gonna see you in the next video I want to thank you so much for being here thanks a lot Mike okay I will see you next time