less than one half of 1% of savings and investment Assets in the United States are denominated in Precious Metals the 40-year mean market share of precious metals is 2% if the market share of precious metals and precious metals related Investments merely returned to mean demand for these assets would increase four-fold and I believe that will occur within five Cal years of today yeah by the way it's estimated by JP Morgan Chase and it's only estimated because they didn't have data going back that
far that the market share of precious metals and precious metals related assets uh in 1981 exceeded 6% versus one half of 1% today that's speculative you don't need to say that demand is going to increase 12-fold increasing four-fold is certainly enough to reward investors and [Music] speculators hi and welcome to this discussion I've got Rick rule with me once again Rick how are you doing uh Mike I'm doing great the better to be on with you again thank you for having me back it's it's always great I just love
our discussions in fact uh you know we got on you know we've got a video scheduled a recording scheduled and we click link and we get on together and uh the first thing I said was boy I have no idea what we're going to talk about today and uh you came up with a couple of ideas and so let's just get into it so what were we discussing just before we hit the record button just before there were a couple topics that are fresh on my mind one is the self- congratulatory pros from the fed and
others about the fact that they have now achieved a soft Landing yes particularly soft of course for that employed but we'll leave that aside uh and that they may now be able to begin to cut interest rates the other thing that's of interest to me something I know a bit more about is the disconnect in capital markets between the market capitalizations of natural resource companies which are fairly weak and natural resource pricing which is fairly strong I guess that all begs the question will there be a recession if so
when and if there is how severe will it be and what will it affect uh certainly in the absence of a recession for those viewers that you have who don't think that there will be a recession uh the Commodities related equities the natural resources equities relative to the underlying Commodities are as cheap as I've seen them in my career going all the way back to the early part of the decade in 70s yes you know uh these things always take Everybody by surprise so once everybody becomes convinced that we've
achieved a soft landing and that the future is really bright that's when there's going to be some big huge emergency uh it it's it it never happens if everybody is worried about it and we've seen uh almost a majority of Market analysts and so on be very worried about a hard Landing about fed pivot about this about that uh that there's a recession due uh for the last uh you know ever since covid basically ever since they created Reckless amounts of currency and debt and uh now that the
narrative is changing and most analysts Market analysts and the public are are starting to become convinced oh the FED did it this you know for the first time in history the FED has done it and we we've got this soft Landing is this the point where you would uh think that that uh we are now basically do where the crisis is ripe where it could happen at any moment because in my experience these things always take Everybody by surprise I think that's right and I think for planning purposes that you have to think at least
as much about arithmetic as you do about narrative uh I I will admit to being of mixed Minds a bit schizophrenic I am astonished at the relative strength of the US economy after a more than doubling of interest rates I'm astonished in particular that private America has been able to hang in so make no mistake uh I'm one of those who's surprised I'm just surprised in the other direction I'm surprised it's held together so well for so long I'm in a little community in Northwest Washington
and there is a genuine labor shortage I mean a genuine labor shortage that doesn't mean that there aren't people who who are out of work but they're probably uh I'm making this up they're probably searching for jobs that they're not suitable for because we're in a place where the starting wage for a trainee at Safeway is $20 an hour you know it's a fairly strong economy I'm also however uh painfully aware of the bad arithmetic uh around the federal budget I'm aware of the fact that we have 34
trillion dollar in unbalance sheet liabilities and $120 trillion trillion Dollar in off balance sheet liabilities Medicare Medicaid military pensions Social Security trust fund that kind of thing and we service this with a debt with a with a budget that's in deficit two trillion doll a year so on the one hand when I talk to people I know when I look at my community certainly when I read the mainstream Financial press all is good all is good it's not too hot it's not too cold uh and they're
going to be able to cut interest rates uh when I look at the arithmetic then it's not so good I get scared I guess what served me well in life Mike in r in in reflection is that I'm a perennial Optimist who's always scared I've got a little bit of both you know the fact that I'm a banker uh means I'm not looking for unbridled upside I'm always looking to cover my downside at some point in time one more point before we move on Mike we've talked about this on your show before but there may be
some listeners who haven't listened to Prior shows the way the big thinkers calculate inflation really teas me off the CPI which they have sold to your listeners as a cost of living index is not it's a constructed index it's so-called hedonistically adjusted which is to say they decide what your home is worth not what the market says they decide what your computer's worth and probably more challenging when it's inconvenient for them they don't add food or fuel I like to fly and I like to eat so
that doesn't reflect the basket of goods and services I consume but more concerning to that is that the CPI doesn't include tax and tax as a component of your listener's cost of living is more important than shelter energy Transportation or food combined yeah the idea that the CPI purports to be a cost of living index purports to measure the deterioration of the purchasing power of wages and savings is a fraud and I think people need to look at that I'm not saying that people need
to be scared go huddle in the corner wrap up in a blanket buy seven guns and go to Gold I'm not saying that although a little bit of gold would be prudent what I am saying is that they need to temper the unbridled optimism that they see on CNN or or read in the Wall Street Journal with a little bit of simple arithmetic yeah you know in my first book I coined the term the CP lie because that is exactly what you're talking about it is the CP lie it it is fraud uh and I wasn't even talking about
the tax component that's uh something new that uh you have been talking about recently because you're right it is the largest component at least for anybody that is actually um making something if if you're producing more than you you consume if you're a successful person you get punished for being successful and then on top of it uh if you look at the uh average worker if if you're falling in a tax bracket say you're uh below the average income and you're falling in a tax bracket that is 5% or
10% uh when you get to the end of the year the actual taxes that you've paid so you're taxes when it comes to the net benefit uh in society uh your benefit is positive you're getting more back from the government than you're paying in taxes uh but people do not calculate the taxes that your employer is paying on your behalf and if your job didn't exist the employer wouldn't be paying those taxes therefore it's actually your taxes and so there is no such thing as somebody that's uh paying a net of5 %c
or or you know zero taxes if you're employed your employer is paying uh you know matching taxes for Social Security and they're paying unemployment and they're paying this and they're paying that and it comes up to quite a huge sum so uh the the average worker that thinks that he's in a low tax bracket is being lied to and fooled and if you incorporate that with the taxes that you actually see on your tax return into the CP line why then you've really got something and of course that's leaving
off consumption taxes oh yes right it's leaving off the tax component as an example at the pump when you buy gasoline which is substantial uh you know people it's great that you bring that up because people tend to assume that that's all baked in the cake I guess it is baked in the cake but if one proposes to eat the cake it would be move one to understand something about the ingredients uh yes I I'm really concerned for in particular younger investors and Savers uh who perhaps haven't thought
about this as thoroughly as they have to be planning their financial future understanding that the CPI is a component of confidence it's not a measure of the deterioration of the purchasing power of their savings uh over time I'm sort of convinced that in my life the price of most things has fallen in a real sense but the price of the dollar has fallen faster we make stuff much more efficiently than we used to we transport stuff much more efficiently than we used to we have a global supply
chain although it's creaking uh what's changed uh isn't the ability of the private sector to produce efficiently that's just got better and better and better what's changed uh is the denominator uh it's the value of the currency and I think that younger people need to assume that that circumstance is going to continue to their detriment yeah you know uh the other thing that you spoke about was the uh deficit and the debt and uh I remember uh back when I was writing my H first
book so this is back in 2004 56 and seven uh and David Walker was The contr Controller General back back then and uh his office was giving different projections than the Congressional budget office and the Congressional budget office had us in deficit for a few years and then it was going to go positive and and you look you go back in history if you download the financial Consolidated financial statement of the United States and you look at the Congressional budget office's projections for the future it reality
always ends up being 10 time s worse they are so far off it is it's it's total fantasy uh what they project every single time and you know I was saying that there would be uh trillion dollar deficits uh someday soon and and here we are at multi-trillion Dollar deficits uh when during this period of time before the crisis of 2008 we are supposed to be experiencing these enormous surpluses uh back when uh you know in the Clinton years when we supposedly had these surpluses it's a baloney cash
accounting uh that they use that that um ignores a whole bunch of factories if we actually had a surplus the national debt would have gone down in those years the na the the change in national debt is the true deficit or Surplus that's all you have to look at ignore everything else they tell you every other accounting method that they use because it's just a bunch of smoke and mirrors if you owe more this year than you did last year then you had a deficit period and it's important to look at the whole
deficit Mike uh most people when they look at the deficit they look uh at GDP versus uh the FED deficit they look at the $34 trillion represented by bonds they don't look at the Net Present Value never mind the nominal value the net present value of unfunded liabilities promises that we've made to each other social security Medicare Medicaid military pensions the federal pension guarantee board uh the super fund trust fund all monies that have been earmarked uh but any proceeds that have been
appropriated have already been spent and reinvested in 30-year treasuries it's important to note that the real debt that we face isn't the 34 trillion non Al uh value of the treasuries or the 27 trillion net of the fed's Z own balance sheet but rather adding that to the $120 trillion Congressional budget budget office estimate of the net present value of unfunded future liabilities it's very important I think that your listeners think about that and I'm not suggesting that they run away in Terror and say
it's it's hopeless if you quit before you start for sure you're going to lose you just need to take it into into account yes and so uh what was the other topic that you wanted to talk about uh related tangentially uh which is to say if you well maybe not unrelated maybe if you are concerned about the fact that the easiest way for the FED to get out of the net present value of the unfunded liabilities is to inflate right uh which you have to mathematically ad based monetary system uh can't remain constant you can't have
like the same number of dollars per person uh throughout the decades and not have a deflationary implosion simply because there's interest due on every dollar that gets created well the other way you could do it is the way that you and I would have to do it uh which is to say that you begin to save and you spent less as an example yeah younger people Mike could look at you and I 2 70 year olds and they could say you guys voted yourself all these cool benefits for 50 years you didn't pay for
them you pay for them we're going to cut Social Security we're g to cut Medicare we're g to cut Medicaid we're going to eradicate the super fund trust fund that could happen uh the probability of it happening politically is I think fairly small but the truth is if you yourself were confronted with a systemic deficit uh an unserviceable life abilities you would have to change the way that you live and invest um the fed well let me rephrase that the government uh because ultimately they
possess the guns uh has a different alternative they can uh fraudulently reduce the burden uh through inflation and my suggestion is that while inflation as measured by the CP Pi is moderating that the CPI isn't an adequate measure of inflation secondly my suggestion to your viewers is that they're looking at the next year and most of them are going to survive 20 or 30 years so they need to be looking further out and when they look further out they need to look at a total debt that exceeds $140
trillion yes and then divide that by the population of the country or actually div div it by the number of workers in the country that pay taxes and you end up with astronomical figures that each person owes more than they can possibly ever pay and so the only way out of this is more debasement uh and the debasement what people don't a lot of people don't understand when they say oh they're just going to print up currency well it's being the the value is being stolen from you from anybody out there that has any
and if you earn a a a paycheck or a wage that isn't somehow indexed to True inflation which is almost impossible because nobody really calculates that the closest person is John Williams of shadowstats uh.com uh and um so if you prices go up if you're lucky enough to get a raise that just pushes you into a higher tax bracket you know since we're in this Gloom Loop uh Mike let's make it a little worse before we make it better okay your audience is an audience that's concerned about these things which
suggests us they're probably in an upper income tax bracket and what that means is that the the true liability falls disproportionately on them if you examine tax receipts capital gains and income tax receipts at a blended federal and state level what you'll find is that pto's law applies 20% of the taxpayers pay 80% of the tax those are your viewers yeah uh it's also true that that good lip the 20% conformably aligns which is say that 20% uh of the taxpayers uh 20% of the 20% pay 80% of
the 80% or 4 to 5% of the taxpayers pay 60 to 65% of the tax and it's also true that that performance dispersal curve conformably aligns at least one more time the top 1% of us Pat taxpayers pay in excess of 40% of the federal and state capital capital gains and income tax so when we talk about the liability that faces all Americans the liability that faces the Americans that watch the Mike Maloney show is much higher that cheery note this morning yeah and if they're not high income earners they're
at least exposing them themselves to uh the the thing that will make them uh hopefully a wealthy person one day uh I do have a lot of people out there that commendably are uh chasing after knowledge uh knowledge of how to get ahead how to protect themselves and uh you know how to become more successful in the future you know um what the things that you just uh said were all how much taxes were being paid not how much uh the net is when you include uh the uh things that the government is giving us and I've I can't remember
exactly what the figure was but it's like the top 10% uh pay 108% of the taxes when you include right all of the benefits that the government pays out so the bottom 90% is is uh actually paying like uh negative 8% tax and it gets more and more negative the lower the income uh you and you know I always sort of viewed life as entrance into Disneyland and you're in this long line you know I haven't been to Disneyland in 50 years but uh uh you're in this long line you used to buy these
ticket books you know AB C tickets uh and uh there was a cost to them and if you were in line and you say oh well he makes more than I do so he'll pay for it and then he gets up the window oh he makes more than I do and finally the the person that is actually running businesses employing people actually creates uh wealth and prosperity for the world uh and took usually most of these people uh the the wealthy people aren't somebody to be demonized most of the time they most of them didn't inherit
their wealth they made if you look at the uh you know Forbes the the list of billionaires the list of a a lot of them and the vast majority uh did this themselves they may have started with something some of them started with nothing but they took tremendous risk and uh tremendous pressures throughout their lifetimes the as an entrepreneur the number of nights that you go out go through without getting a single minute worth of sleep uh is just uh mind-boggling compared to the average person you know there's been a couple of
times in my life where I just had a job and it was so nice turning that job off with the light switch when I left the office that part was great and being able to file a much simpler tax return where you didn't need multiple CPAs keeping track of everything and spending you know many many many thousands of dollars uh to be able to just defile a tax return um uh so so I don't know what the point was that I was making there but uh to your point of how much taxes each different group pays and how the
burden Falls disproportionately you know they always say tax the rich well we are I mean we've already gone past this point when you take taxes away from a productive individual that's running a business that individual once you get past a certain amount of wealth you don't keep cash in the bank or cash in a safe or cash in your closet your keep your your wealth is determined by your stock portfolio and the business you're running and uh you know like even Alon musk the world's richest man he doesn't
have a whole bunch of cash what he's got is Tesla stock SpaceX stock and so on and so by trying to take wealth away from him you are actually decreasing the number of jobs because all that he would do with his currency or his wealth is plow it into the business further and grow the business hire more people create more goods and services and produce a better future for all of mankind yeah I think it's important when you're talking about the super rich and when you look at the nominal tax rates
that they pay they're sometimes very low the way that happens is because their current account is always in deficit the Elon Musk is able to buy is able to borrow pardon me uh against the market capitalization uh of SpaceX and Tesla and the boring company and so it might be that Elon Musk rather than having a bunch of cash lying around has a five or $600 million credit facility which he's drawn down now what that means because he pays himself very little salary and no dividends is that his taxable income is
nil because he gets the interest deduction right on the money that he's borrowed which he has in fact invested what that means is far from having cash lying around what he has is debts lying around now these are debts that are very very very well secured any Banker myself included would love to lend Elon Musk money SEC secured against his wonderful companies but the truth is when people like uh Warren Buffett criticize uh the musks of the world for paying no tax they need to understand that's because
those people have no uh income or all of that if they had paid tax all of that tax that they didn't pay uh stayed in a company and created more jobs so you can just say that that amount of tax that they would have paid created this amount of jobs take uh that tax away from them those jobs would have never been created cor so people very often do not see the entire economic all economics as a closed loop uh it doesn't matter what you're looking at there is another side to it that most people do
do not see uh BOS Frederick basat was just great at uh the Unseen you know he that which is seen and that which is unseen and uh economics is everywhere in economics no matter what thing you're looking at there's always something that the vast vast majority does not see and that is the dangerous part that is what uh limits the growth in prosperity for all of mankind hi I just wanted to take a moment and thank you for subscribing and mention that if you'd like to help our Channel please consider my company
goldsilver.com the next time you buy precious metals we're one of the most trusted names in the industry our prices are sharp delivery is fast and we have an insiders program where you find out exactly what I'm doing with my own Investments thanks for making Golds silver.com your dealer and now back to the video so that Soliloquy probably leads up to uh a discussion of Investments that people can make that might help them in the context of inflation uh it'll be no surprise given that I've invested in natural resources
for 50 years and given that I lived through the decade of the 70s when resources proved their worth in an inflationary time that this would have to do with resources my uh postulation Mike is is that if we don't and I'm not saying we won't if we don't have a really truly severe worldwide synchronized Global recession uh that uh a broad spread shortage in Commodities will develop sooner rather than later if we do have a recession it'll be postponed not eliminated if that's true that means
that extractive industry prices uh across the board will go higher and that's very interesting because the equity prices for commodity producers oil and gas producers base Metals producers and in particular gold and silver producers uh suggests that those Commodities are headed lower in price if that conjecture is incorrect if that widely held precept is wrong there are superb opportunities in the resource space the disparity between commodity prices and the resultant free cash flow to commodity producers and the equity
prices the market capitalizations command Ed by those producers is as broad as I have seen it in a 50-year career let's review uh a couple of the subheads we've talked about oil and gas on your show before the oil price has been coming down the gas price has been coming down uh it is true that if there is a resolution of the conflict in Ukraine between Russia and the Ukraine I'll leave that to your viewers to determine the probability of that there is more downside in the oil and gas
price there's more downside too if there was a revisit of covid which stopped air travel again uh but in the absence of that the oil and gas industry outside the United States in particular is underinvestigated if the industry doesn't pick up its capital spending it isn't deferring Capital expenditures because it doesn't have the money these companies are making a fortune at these prices they are curtailing capital expenditure because the political class is told them that they're going to put them out of
business in 2030 when President Biden asked the oil companies to invest for in oil and gas and says at the other side of his mouth that he's going to have him out of business in 2030 uh you know this sort of thing doesn't work uh if you believe as I do that peak oil demand occurs in 2065 rather than 2030 the oil companies are cheap the rub is do they get cheaper uh and that really revolves around do you think that the Russia Ukraine conflict uh ends sometime soon uh and do you believe that there's going
to be a global recession even if you believe there's going to be a global recession what a global recession will do is push out the peak punch point the peak shortage from something like four and five years from now to seven years from now or eight years from now so in terms of uh inflation adjusted Returns the arithmetic suggests that the oil and gas companies are cheap and they have proven to be effective inflation Hedges but the cheapest sector I would suspect is precious metals and I know in the
comment section after this interview goes up people say that old man's crazy or uh gold hasn't moved for x amount of time why on Earth would he be talking about gold that's precisely why I'm talking about gold because it hasn't moved except Mike it has when people ask me when gold is going to move I say I made substantial additions to my gold Holdings in 1998 and it is true for two years that the gold price did move except for down but since 1998 the gold pric has moved from $256 an ounce to $2,000 an ounce
which is to say an eight or eight and a half percent compounded gain for 24 years when's gold going to move well over the last two decades my suspicion is that the moves become more pronounced in the next five years than they have been in the last 20 years and if that's true then the gold companies from the highest quality the royalty and streaming companies through the senior producers through the intermediate producers through the single asset producers through the highquality developers are in historical terms
insanely cheap uh uh and I'm not suggesting that your uh listeners put a 100% of their net worth in expensive penny dreadfuls what I'm suggest testing is that gold is so deeply out of favor that the market share of precious metals in the United States the largest savings and investment Market in the world is less than one half of 1% which is to say less than one half of 1% of savings and investment Assets in the United States are denominated in Precious Metals the 4year mean market share of precious
metals is 2% if the market share of precious metals and precious metals related Investments merely returned to mean demand for these assets would increase four-fold and I believe that will occur within five calendar years of today yeah by the way it's estimated by JP Morgan Chase and it's only estimated because they didn't have data going back that far that the market share of precious metals and precious metals related assets uh in 1981 exceeded 6% versus one half of 1% today that's
speculative you don't need to say that demand is going to increase 12-fold increasing fourfold is certainly enough to reward investors and speculators I find all most I mean most investors in the world can't spell gold despite the fact that it's a four-letter word your listeners are probably uh more sophisticated with regards to that but the truth is that I think that the disfavor that gold and silver find themselves in is a rearview mirror disfavor it doesn't take into account debt and deficits it doesn't take into
account uh the necessity to inflate and it doesn't take into account the historic cheapness of these assets and their reduced market share relative to other asset classes relative to other asset classes and since gold and silver are money relative to currency size of the currency Supply compared to the size of the Precious Metals Supply yeah you know um I I think you're absolutely right uh I think that uh we are going into you know now that we've exceeded the uh 2011 high and then the triple top
that we had over the past uh three or four or five years I can't remember exactly what it was uh but uh there was a triple top there which is substantial resistance and we overcame that uh and so I think we're set up when when there is another crisis for just a slingshot move I think this it would be a fiveyear five years for the the big payoff like you're talking about if we don't have some major surprise any major surprise will accelerate that timeline and uh I I think uh that we're and you know in
looking at this uh assets that are managed any funds and so on uh 71% of all asset managers have somewhere between zero and 1% exposure to gold zero and one% and so I fall in a category that uh can't in this type of measurement I fall in the 0% range there's nobody else there to to measure that has as much of their net worth uh tied up or as much of their exposure in precious metals and then you know my mine is skewed because I use the gold silver ratio to determine how much gold I'm going to buy and how much
silver I'm going to buy with a given amount of cash uh and because that has been so out of whack for the well it's been out of whack for the past Century but especially uh in just the past uh you know the um during the uh crisis of ' 08 and uh there no in 2011 uh it started to revert back toward uh the historic Norm the mean uh but in covid it was you know 120 to one it's never been that out of whack and I bought a bunch of silver during that uh fall in silver prices when everybody
else was panicking and um to me that's you know you're a contrarian investor but you're always you're watching your back the whole time right so yeah so uh being an optimist that is always afraid can be a very good thing it's it's interesting what you said about gold and silver what I found uh and this goes into psychology as opposed to arithmetic I think is that precious metals markets are interesting in that they reverberate between both greed and fear the two great uh investment stimuli
uh I postulate that every precious metals bull market is led by gold because the fear buyer predominates uh when the fear becomes extreme enough that you get price momentum the greed buyer comes in uh and ironically the price move uh that is caused by by the greed buyer reinforces The Narrative around the fear buyer and the fear buyer increases his or her purchases my experience tells me irrespective of the gold silver ratio that silver doesn't move until the beginning of until pardon me the middle
of a bull market that the market needs to be led by gold when the narrative becomes broad-based enough that the generalist money comes in the market and looks at the relative weakness of silver compared to Gold the silver market absolutely takes off it moves much faster and much further but it doesn't move until the middle of the market we have said before on this show that the most volatile asset class of all are those few relatively high quality silver companies because there simply isn't
enough market cap in that space to hold the generalist money when it comes into the market if you'll permit me a couple of examples in the 1970s cordelan 10 cents to $65 not a typo 10 cents to $65 wow in more recent times the the bull marketting the early part of the 90s uh panamerican silver. 50 cents to $45 silver standard 72 cents to $44 you own these stocks not with money that you had set aside for a child's College education but rather that money that you can afford to lose half of in
anticipation of making 10 to 15 times your money people who are listening to this discussion please use money that you can afford to lose half of without it changing your decision as to what to have for breakfast that comment doesn't apply to buying gold bullion or silver bullion buy that to sustain your lifestyle buy that because you're afraid buy that because it's actual wealth buy it because it's actual money the very very very high quality producers buy those as Investments but the
speculations that we're talking about the 10 cents to $65 the s72 cents to $44 use money that you can afford to lose half of without it changing your decision as to what to have for breakfast with regards to the oil stocks only buy them if you drive or use energy in other words everyone should own them interesting okay I I want to thank you so much for this discussion for everybody out there please like And subscribe and uh put something in the comments about this so Rick where can people find you
at uh the most useful work that I do is found at rule investment media.com uh at rule investment media.com if you list your natural resource stocks I personally will rank them go to rule invest M media.com list your natural resource Holdings please no technology please no pot stocks I'll rank them one to 10 one being best 10 being worst I'll comment on individual issues where I think my comments might have value okay okay that's great uh that wraps this up I want to thank you so much for your time and all of your
knowledge it's great thanks always a pleasure thank you
Post a Comment