00:00 the lack of retail response to the gold trade given the similarities you pointed out between the decade of the '70s and now is interesting to me. There is no price close to the current price that would cause me to be a seller. So the only price action I'm interested in is lower. I'd like to own more.
00:21 For me, this pullback is heaven-sent. I'm a saver in gold, which means I'm fairly price insensitive. A speculator might feel different. Somebody who's leveraged long futures contracts or something, they might feel different. But a saver likely welcomes the lower gold prices. >> Right.
00:42 >> If the discussion that you and I have been having comes true, which is to say if the US dollar loses 75% of its purchasing power and gold maintains its purchasing power, there's no reason I can think of why people who can afford to wouldn't want to be buyers. And in that sense they're served by lower prices.
01:02 You know too that even the spot — particularly the London reference spot — is arbitrary, and most investors can't buy at spot anyway. They buy at spot plus five or spot plus five and a half. They sell it back to the dealer at spot minus three, spot minus three and a half. There are products, if you're willing to take certificated products like my former employer's Goldtrust where you can narrow the spreads, but for most people if they're buying physical gold spot is a reference price at best.
01:40 Only that gold in particular has done well over time when people are concerned about the maintenance of their purchasing power in fiat-denominated instruments. >> Mhm. >> Correlation with silver has, I think, been less precise. In my lifetime in precious metals markets — I've been in them for, I'm embarrassed to say, 50 years now.
02:05 >> You should be proud to say that, not embarrassed. >> I hadn't thought of it that as long as you're on the north side of the grass, you should be grateful. >> And anyway, my experience tells me, I'm not sure why silver runs the way it does, but I've noticed that momentum has to be established by gold.
02:28 When the momentum established by gold draws the generalists into the metals market, silver tends to outperform. My suspicion is because of its reputation for volatility, but also because of its lower unit price. >> Mhm. >> Recently, like 10 days ago, I saw some data that said that physical silver importation into India is at multi-year highs, and that would tend to suggest that the Indian peasantry is concerned again about the maintenance of their purchasing power in rupee, for good reason.
03:02 >> Yeah, for very good reason. >> And there's probably 300 million people in India who can't afford to save in gold, so they have to save in silver. >> Mhm. >> I'm making this up, by the way. I don't know that to be true, but I have noticed in prior markets that momentum is established by gold. And when the generalist comes into the space — and I'm referring broadly to the Indian peasantry as generalists — that leadership changes from gold to silver.
03:30 >> Mhm. >> And for myself, I save in gold. I don't invest in gold or speculate in gold. I save in gold. >> Me, too. >> It occupies a very different bucket for me. >> Mhm. >> And I have in the past speculated in silver. My silver speculation had to do with the fact that for a long time it was a hated asset class.
03:57 And my belief was that gold would run, and when gold ran then silver would run and it would become unhated. >> Hold on. Let's lock in what Rick just laid out because there's a lot of signal here. First, he's not a seller at any price near current levels. He's a saver in gold, which means lower prices aren't pain, they're opportunity.
04:20 Second, the London spot price is essentially meaningless for most retail buyers. You're paying spot plus five, selling at spot minus three. The reference price isn't your price. Third, silver's outperformance historically isn't random. It follows gold's momentum and it's the generalist flood that ignites it.
04:40 India's physical silver imports just hit multi-year highs. That's not a retail investor. That's 300 million people voting with their rupees. Coming up, why Rick thinks the dollar could lose 75% of its purchasing power and what that means for everything you hold outside of metals. >> I sold 80% of the silver I had in my speculative bucket.
05:00 May return, if in some future conference we notice in the attendee notes that they hate silver. If silver becomes hated again, >> You would start buying? >> Well, Lynette, at one point in time I was a stockbroker, too. Albeit a long time ago, and I owned a little bit. >> long time ago.
05:25 >> One of the things I did owning a brokerage firm is I went in the cage at the end of every trading day, and any day when buy tickets overwhelmed sell tickets four to one or better, I'd make myself sell something the next day. And anytime silver — sell tickets overwhelmed buy tickets four to one, I'd make myself buy something the next day. I'm not a trader at all.
05:53 But what I learned is even in a reasonably high-volume retail brokerage firm, you have enough data that you can trade against overbought and oversold circumstances. And that's sort of the way I speculate. When silver earlier in this year in January was in that wonderful — to some — melt-up phase, what I've learned, and I'm sure you learned this as a stockbroker too, is that those hyperbolic up moves, what the Canadians call hockey stick charts, resolve themselves unpleasantly for the longs.
06:36 >> Yep. >> As do hyperbolic declines. >> Yep. >> And that's the only kind of trading I can do. You have to give me something very very obvious for me to make money as a trader. What I've learned to do is stick to what I do. So when people ask me to comment on whether, say, Nvidia is overpriced, I have to say I don't know.
07:03 I can price natural resource companies. I can price conventional financial services businesses — banks, wealth managers, asset managers, insurance companies. But I don't know how to price technology companies. So I can't tell you if it's reasonable or if it isn't reasonable. And to be honest with you, I don't care.
07:23 I'm reminded by my mentor, Peter Cundill, who said there's always something to do somewhere if you stick within your own circle of competence. >> Mhm. >> Buffett has said the same thing. >> Mhm. >> He has no fear of missing out because over time he's done fairly well doing what he knows how to do. I have suspicions which I will share with you, Lynette, and I hope that nobody loses any money based on these suspicions.
07:53 >> Right. >> One suspicion is that if as much capital as looks like is going to be thrown at AI and data centers is thrown at AI and data centers, that we will find a way to build them and build that capacity more cheaply. >> Okay. >> The capital input estimates, I suspect, if we build these things at scale we'll find a way to come down.
08:21 And I also think that we will find a way to operate these things in a more energy-efficient fashion, because if all of the projections come true we don't have that much energy. >> Let's stop here because what Rick just revealed is the full picture of how he actually operates. He sold 80% of his silver for speculation when the crowd turned bullish.
08:43 Not because he lost faith in silver, but because he only buys what's hated. That's the same logic he applied to gold earlier. Lower prices aren't bad news, they're the entry. Second, he trades against extremes. When buy tickets swamp sell tickets four to one, he sells. When silver hockey sticks up like it did in January, he gets out.
09:02 Third, he stays inside his circle of competence completely. Natural resources, financials, banks. Not Nvidia, not AI. Which sets up everything coming next because he does have suspicions about where AI capital expenditure is headed and what that means for energy, for commodities, for the very metals we've been discussing.
09:22 The final stretch is where those threads connect. Don't leave now. >> My suspicion is if there is as much utility in AI as people suggest that there is, and if as much money gets thrown at it as they are suggesting will be thrown at it, the technology probably will solve half the energy problem. Which interestingly doesn't derail the energy case.
09:48 There are a billion people on Earth — not AI hyperscalers, by the way, poor people — that have no access to primary electricity. And I think we solve that problem over the next 20 years. So energy demand is going to take care of itself. Some of your younger listeners will say, "Yeah, but that's going to be alternative energies.
10:11 It's going to be solar and wind and biomass and all that kind of stuff." And to those people I need to say that over the last 45 years humankind has invested about 10 trillion dollars in alternative energy generation. And we've reduced the market share of fossil fuels from a high of 83% all the way down to 81%.
10:37 And if the prognostications by the big thinkers of the world are even remotely true, we don't have that much energy and we don't have the capacity to have that much energy. There isn't that much energy. Some of us will make a ton of money trying. >> Truly a ton of money trying.
11:08 But the energy consumption numbers that people are talking about by 2050 — we can't do it. We just can't do it. Doing so would require, as an example, more copper production >> Yeah. >> over the next 15 years than has occurred in all of human history. Given that we have underinvested in the copper business for 30 years, in the timelines mentioned, we can't do it. It's impossible.
11:45 It'll be a hell of a lot of fun trying. But we can't do it. >> I heard, and you know, copper is one way to play energy and of course it's also a way to play these hyperscalers. >> At Metals Week in London at the end of last year, they published a paper saying that the 10 largest copper companies in the world needed to invest $250 billion over the next 10 years to maintain current output.
12:20 >> Wow. >> Current output is in a deficit to current consumption, meaning that you would maintain a deficit against current production in a market where the lowest estimate of demand growth is 1 and 1/2% compounded and the highest estimates that I've seen are 3 and 1/2%. It's also worth noting that that $250 billion was constant 2025 dollars, not inflation-adjusted dollars.
12:54 The point of all this is that no matter what we do — with the possible exception of a synchronized global depression — can derail the rationing of various of these substances by price over time, because it's too late to correct supply shortages in the next 5 to 10 years. It's just too late.