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 [Music] [Music] I'm Charlotte McLoud with investing news.com and here today with me is Tabby Costa partner and portfolio manager at crescit Capital thank you so much for joining me great to see you thanks for at great so we're here at the New Orleans investment conference and one thing that I wanted to start by asking you is about sentiment among the Juniors I know that you talk to a lot of these companies there's some here out on the shore floor although I don't think youve probably had time to go go out there yet

but yeah just your thoughts on on sentiment because I know there's a lot of negativity right now and I wondered your thoughts well sentiment is is despite the fact evaluations are quite similar than the where they are a year ago I would say the big difference in not only sentiment but what's happening in this environment is we're starting to see the engagement of major companies with the smaller businesses some of them even gold companies now approaching electrification metal projects types of

you know copper and and cobal and other things that didn't used to be in their agenda but now currently are becoming part of their agenda and so it's it's sort of interesting how that has been shifting certainly the access for Capital remains very um very difficult for companies to raise money in this environment so um so you're seeing some of the balance sheets that stay stronger are starting to do very well but there's a difference between two types of companies there's sort of uh some of

those that are being very disciplined which is the right approach and there are other ones that are hunkering down significantly which is not the right approach and they basically disappeared uh just given the fact that the market is not very favorable I don't think that's the right thing to do in this environment you should continue to be advancing a project in doing things to unlock value of your company over time but um so there's definitely a few different pockets of of how companies

are behaving and the sentiment remains to me just weird it just seems like everyone is sort of waiting for this breakout in Gold otherwise nothing there's no party right everyone is just waiting um patiently and and in my view it's going to happen it's it's inevitable that we're going to see a breakout and then other Commodities should follow and the valuation of company should be rated so okay okay a couple of points to pick up on there I think it's funny I asked Rick rule this

morning the question is is it ever a good idea for companies to do that hunkering down kind of strategy and he would he said the same thing he said no no you should keep moving forward so that's pretty interesting um other point I wanted to follow up on with you okay so you said you're seeing companies that are in things like gold and maybe copper shifting into other things like B Metals lithium that kind of thing when I see that happening I generally think that doesn't look good like maybe you should

stay in your lane focus on what you know best what do you think what do what does that mean to you oh I would probably agree with you and and the reason for that actually if you look back in history the production of gold itself right now we're seeing production of gold declining for many reasons across the major companies some of that has to do with the quality of the projects quality of grades and all those things have been causing them to be more constrained uh to increase production over time but if you look back all the

way to the 70s you see when or other times we saw this type of reduction of of production of Topline growth in their in those businesses is you know he usually coincides with the gold cycle it's it's interesting that companies kind of lose their focus at the very wrong time and in my view this is the exact time that you want to be actually deploying Capital into gold projects I love electrification Metals I think this agenda for Green Revolution and other things is probably going to be driving

things a lot higher but more importantly there is indeed a global debasement happening across many FIA currencies and I think one of the most important kind of institutional pitches that most companies should be using is the fact how do we go from having a reshoring of economies uh developed economies in in particular revamping uh manufacturing capabilities how we're going to go from you know the Green Revolution itself revamping even electrical grids um increasing defense spending without making the uh mining industry a lot more

relevant than what it is currently and and that to me is just you know when we see this this inflows of capital that I think it's kind of inevitable as well along with gold prices breaking out um it's going to it's going to rate everything so you want to be really focused right now on those projects um I'm not going to be very selective on you know if it should be gold or copper and know if a project is high quality and it desire it deserves the capital to be deployed you know we're going to be

looking at it so that's sort of our approach right now okay okay and You' mentioned kind of a couple of times where we're waiting for this breakout in gold or it seems like a lot of people are and I think people who follow you on Twitter will know you post a lot of interesting charts there and one of the recent ones was looking at triple top in gold and and the breakout potential there so I wanted to ask you about that chart and why is such a bullish formation well it's a bullish formation

because technically speaking and and by the way technicals don't matter right there is other things that are much more important than this but to answer your question there's something called a double top a double top you should be very careful usually when that happens which is what's happening right now with Fang stocks uh the Magnificent 7 and some other issues when you look at those businesses yes those are that type of technical formation is is very bearish now a trip triple top usually is

something that if falls it it does Mark a top initially uh but then what you see is is a true uh uh recharging moment of of the asset price and then you see a much higher breakout that tends to be uh what drives the beginning of a long-term cycle so to me gold is is in a classic technical setup for that um now the macro is is even more interesting because you know the Us and other developed economies are facing in my opinion some very unique it's it's sort of a chronic de crisis with embedded

inflationary forces and the US economy and not just the us but other developed economies too they're completely rying heavily rying on fiscal stimulus at a time when already have government debt at levels that we've never seen unless you were talking about war periods and so I don't know how we're going to you know really balance all those things without making hard assets a much more relevant portion of the economy um and then you look at 6040 portfolios or those what they call the traditional investment

strategies and they don't allocate any Capital to hard assets so how do we you know how can we even come up with a bearish view on those things and and what are hard assets of those are Commodities gold um you know and so if you're driving let's say a if you're if you're managing a portfolio a very kind of traditional portfolio and now you hold 40% of bonds and so forth you're in a kind of a pickle you want to own some of gold as as a defensive alternative same thing for central banks um central

banks enhancing the quality of their International reserves and so you're starting to see some shifts happening already it's creating shifts and correlations to in markets um and I think this is just the beginning I think we're going to see a lot more so you know I boy I'm I'm super excited because I think I think this is a generational wealth kind of opportunity in right in front of us yeah and you know I like that you separate out the technicals from what's going on in the macro because I know

that both are they can be important but some people would favor one over the other but it looks like for gold they're both kind of moving in the same correct direction yeah I it's you know from a a technical already kind of said a little bit about it but even from a macro side taking away just the the fact that we're are but if you look back in other gold Cycles you know I would say 70s we had a kind of an inflationary time we broke the gold standard so that drove gold prices higher um we saw some

accumulation of gold by central banks in the early 2000s we had the second cycle in gold and that was really driven by China entering the WTO becoming the manufactured plant of the global economy they drove commodity prices higher then gold prices and uh went a lot higher too but we didn't see central banks buying gold at that time which is really interesting and today we kind of have both environments happening all G7 economies have to resore and and really revamp like I said their capabilities

industrial side on manufacturing side uh even on the public side in terms of airports and and highways and all sorts of things all that requires materials and then on top of it I think what we're seeing today is quite inflationary compared to um other periods and you know if you look at the forces de globalization is a large one Reckless fiscal spending the chronic under investments in in natural resource companies um all those things un the affordability of housing now how do you how do you fix that issue you're going

to have to build more um so inequality problems now what happens with inequality issues well you tend to see more social programs so all those things are kind of playing a role into creating this a much more inflationary era that is eventually drives investors back to to precious metals and tangible assets overall okay I think I think my question now would be how important is is timing for you because when you people hear about things like okay the gold breakout is coming they always want to know when

but is is that so important or is it more important to be positioned for when it does eventually happen don't remember who said this but do you know what the difference is of uh of uh what is the definition of a long-term investment have you heard of that before it's a short-term investment that didn't work so um you know all of us want our investments to work in the next day and unfortunately that's not how it works but um back in 2018 just to be very clear um I started really looking at the Capa

trends of natural resource companies and you can kind of see when that bottoms out you tend to see a bu marketing Commodities and this is you just don't know on the macro side what the trigger is going to be but the foundation of the thesis is there and it's the same with oil it's the same with agricultural Commodities with gold with silver and people get too hung up oh gold is up it's about to make new Highs but silver is not moving it's not leading the way I don't think this is a real movement just

you know just don't get to hung up on those things I mean this is the time you want to be focusing on assets that are high quality that actually have exposure to silver or things that will probably lead the way to the upside as you see a gold cycle so it's you know I wish I had a better answer for you but I feel like everything is really coming together right now and the sentiment is is really bearish even among most of the people uh that that are speaking in this conference I ifan if you talk to them

off camera they're not very bullish right now and I'm not going to name names but you know I am I am not that way at all I'm I'm extremely bullish I'm really focused right now because I do think this is the time to be um no like I said you don't want to lose focus at the wrong time and I think the majors are doing that and you know I don't think money managers should do the same so okay okay so you're you're very bullish we talked about gold and and kind of a little bit of your focus there

where else are you seeing these opportunities in the resource sector I know we've talked about this before but if we could get your update and thoughts well I think gold is not the only thing certainly silver copper Cobalt manganese um there zinc is an important one for us we recently acquire one of the largest silver and zinc mines in the world uh the S pral mine in Bolivia um you know that to me is one of the best vehicles to kind of make money in this market of of of higher prices it's important to

know that when you are um when you identify that you are in an inflationary area what do you do as an investor well you want to be buying uh companies that have pricing power um and which ones are those companies is a really hard analysis to make and in my opinion uh commodity business have an inherent pricing power in in their business model which has to do with the underlying price of Commodities when they rise they obviously have the tendency of charging more for their uh their sources of the

products and so it's it's sort of normal to see commodity businesses doing well during inflationary periods I think that's the most important thing is to look for those types of uh kind of macro forces that potentially are creating this kind of long-term cycle of of that and if that's the case then you want to be deploying Capital into Commodities and I think you can take a diversified basket approach uh no it happens to be the case that I believe that look the metals and mining industry even relative

to the energy companies or energy sector are just a fraction of that right so to me like I said I don't know how we're going to go through all those fiscal sides of the agenda right now without making the mining metals and mining industry a lot more relevant and so to me taking kind of a nichy approach into mining is very attractive and so that's why I've been very focused on that but I think there's going to be people that will make a lot of money on agricultural Commodities and you know uh perhaps in

in energy as well and and all sorts of things and even you know some people like to do that in housing market well housing market is another tangible asset but I don't think it's as asymmetric but you know some people will make money with that I'm sure okay and I want to go back to a point that I think you made earlier you brought up the 6040 traditional portfolio and how that is kind of on its way out so what do you see that being replaced by what do you think people are going to go more toward

um well that's a very good question because if you looked at 60/40 portfolios as kind of the aggregate valuation of those so if you take the valuation of the equity markets give a 60% weight and take the bond market take it give it a 40% weight aggregate that through all the way to the 1800s you're going to see that right now we're one of the most overvalued periods in history and you may say well but the bond market already fell apart and you know maybe there is more opportunities there and so

forth but in agregate they're still very expensive and the problem is one feeds the other so if rates start moving higher then you have to Discount Company present value of businesses lower and so those two allocations need to be redefined and so to your question I think Commodities are going to play a role there um I think gold is going to kind of be one of those assets that are going to be more of a uh competing with with treasuries uh just like central banks have been you know changing their

allocation when back in the 70s they used to own 80% of gold relative to treasuries now it's the opposite so can we see just going back to historical average maybe 50% of central bank's assets is in Gold you know that'll be a huge change and so or there was a research recently on how much gold advisers own today in their portfolio 70% of them said that they own less than 1% so I mean how much do you have to lose in here so to me that's the type of kind of risk reward opportunity that I

enjoy kind of looking for um and so I think that's going to be one side gold and then a basket of Commodities will probably take the other side and I would say Emerging Markets especially Rich uh resource economies like Brazil uh will probably take a part of the equity Market portion so that's going to be a very interesting uh way of allocating um you know Capital over time and so I'm I'm also really really interested in that market okay as as we're starting to wrap up I have a question I think it's a

fun question I've been asking this one to all or most people if you had to choose an asset to hold for 5 years you want to get the best return doesn't have to be in Commodities but of course it could be what what would you choose I think would be silver um but I also think yeah I think it would be silver that's that would would be my answer but I also think there are uh mining companies that would do very well but you probably asking more of an asset class question I would also answer the Brazilian equities could do

very well I think that they have a very good uh chance of of having a good run um and um potentially natural gas from now until five years I think we're going to have the problem is I wouldn't it wouldn't be something I would hold today until 5 Years cuz that you know Metro gas is very volatile but I do think you're going to see a big spike in the next 5 years in that Gess and it's a you know it's a it's a very volatile and explosive commod like silver I think silver will be more of a established

kind of movement but sorry I gave you three answers but those those are kind of my the things that come to my mind that's done that's great three for the price of one okay as as we're finishing up any final thoughts that you would leave investors with kind of as we head toward the end of the year well I think it's uh this is an interesting setting in terms of the investing um environment because of how where interest rates are right now there's a lot of things that haven't been reap chist according to

where the cost of debt really is and uh we're going to see a lot of refinancing of sovereign institutions and corporations and even households and the reason why we haven't seen things really break yet is because most of the effective interest rate is still very low relative to where actual interest rate really is and effective interest rates is looking at the total Deb and seeing how much people are paying for interest payments uh and relative to that so we're going to see the refinancing of those instruments moving

forward if people were not going to go into the debt market and issue more debt at a higher interest rate what are they going to do they're going to dilute their Equity so we got to think about this as a risk in terms of the financial markets overall and I think there's some some pockets of volatilities that are really cheap right now freddit spreads is one of them I think Mega socks offer a good opportunities for haging I think the volatility in terms of the the FX Market it's going to be quite attractive

and I think we're back to the old days of Matt for when you know George Soros used to make a bunch of money on shorting currencies or you've had a Dr Miller and some other guys who made their names basically shorting and and looking for kind of volatility events in in the FX market so I think all those things are going to be you know coming back to to to this environment in the next three years you said okay I think that's a great place to wrap it up thank you so much for coming on to to share

all this with investors I think this is really valuable thank you thanks and once again I'm cloud with investing news.com and this is Tabby Costa thank you for watching if you like this video make sure you subscribe to our Channel we'd also love to hear your thoughts so leave us a comment below we'll see you next time [Music]