Manic Speculation, Depressive Reality

Weekly Commentary • Jan 17 2024
Manic Speculation, Depressive Reality
David McAlvany Posted on January 17, 2024
  • ETFs now approved for Crypto bet
  • Explosive stock price gains on companies with plunging balance sheets
  • Gold and Silver poised for breakout this year

“We’ve got $7.6 trillion in US bonds maturing in the next year. That’s 31% of the total. Then you add to that the 1½ to $2 trillion in new issuance. If there was ever a year for the bond market to experience pressure, this is it, because now we’re talking about a credit concern, credit pressures applying directly to the US sovereign debt market.” –David McAlvany

Kevin: Welcome to the McAlvany Weekly Commentary. I’m Kevin Orrick, along with David McAlvany.

David, I’m going to take you back a ways to my graduation year, 1981, and there was a commercial on, I think a lot of the older people will remember that says, “Is it live or is it Memorex?” What they were selling was a cassette tape, which, that was the big thing back in 1981. And the way the commercial went, they had this long-haired guy singing a high note and he shattered glass. He says, “It’s amazing when a human voice shatters glass. It’s even more amazing when a cassette tape of a human voice shatters glass. But after a thousand plays, it still shatters glass.” And the play all through the years was, is it live or is it Memorex? Today, I look at the markets, I look at cryptocurrency, I look at some of the things going on in the tech stocks and I wonder what’s real. What actually is there to shatter the glass and what actually is Memorex? Or what’s a reproduction of that and how long does that last?

David: Well, here’s a contrast between manic and depressive. Cryptocurrencies are in that manic environment. They remain in the manic environment, in league with other forms of speculation where expectations of annual gains exceed the 7 to 10% returns of yesteryear. The boring old-fashioned wealth compounding that used to garner attention—not anymore. Now it needs to be double-digit gains on a daily basis or a weekly basis or a monthly basis. And so, there’s something new here. Frankly, what’s new is not new. At the end of cycles, people have their expectations change dramatically. Bitcoin was up 160% last year. Those gains, they fit the bill. Why care about a 13% rise in the price of gold or even pay attention to it? It’s on the cusp of a breakout from a decades-long consolidation. Gold prices are hitting all time highs in recent weeks, but it’s relatively uninteresting to the Western investor. Maybe we’ve moved on to our cassette tapes. Who needs live? The new version of Memorex.

Kevin: Well, David, I’d like to highlight that you said the Western investor’s not interested in the real. The Middle East, the far east, they’re interested in real assets right now. But it’s really not just cryptocurrency, is it? There’s an awful lot of wispy nothings that are just going through the roof right now.

David: Yeah, so just back to this manic and depressive contrast. What if the allocation of emotional resources got flipped? The positivity today turns negative, and all of a sudden your speculations are jettisoned. This goes beyond crypto. I’m thinking of other extreme forms of speculation. You’ve got options trading. You’ve got the two to three, even four times leveraged ETFs, exchange traded funds. You’ve got institutional versions of it, where the basis trade as we closed out the year registered at over $1 trillion—a few, just a few major Wall Street firms pushing a trade which is leveraged 50:1 in some instances. You’ve got the currency carry trade funded in yen. What does risk-off look like in an era of contempt for government bonds? So risk-on is full manic mode. We’ve got that. And it’s without respect for a changing geopolitical landscape, without regard for capital costs that may have registered a generational low and may very well be inching higher for several decades, not just a few months. I guess we’re back to this issue of flipping the emotional mojo from manic to depressive.

Kevin: Isn’t that an expression of confidence? I mean the Federal Reserve and Wall Street basically are managing confidence right now, and they’re saying, “Hey, there’s no worry in sight.”

David: Confidence is frail. Confidence is very frail. Risk-taking is an expression of confidence. And confidence is bolstered or destroyed by the prevailing mood. And so when you look at the mood today, positive. No debate there. It’s a little bit like building a sand pile. It builds and it builds, providing its own evidence of progress and success. Just look at the stature of the pile, scaling larger until the structure destabilizes and instantaneously slides. That’s the nature of confidence. It tends to break and break hard on an instantaneous basis. Sand pile math is no different than the Minsky moment. Stability is the precursor to instability.

Kevin: You bring to mind something we’ve both read, talking about catastrophe math, where you have tension building and building and building. A man named Zeeman who came up with the formula for when it breaks. Now, you can’t ever time when it breaks, but you can be sure that the bridge will break if it doesn’t have the support that it needs.

David: We’re continually surprised on the upside. Look at Apple. Apple briefly exceeds $3 trillion in market cap, the largest capitalization of any company in history. And it’s only displaced shortly thereafter by Microsoft at a reduced number, 2.9 trillion. And you say to yourself, “Is price indicative of value?” Maybe that’s the case, and maybe we are seeing the world through the wrong lens. It could also be indicative of broad-based devaluation where everything is marked to a higher level, although you do have to second guess what the value is implicit to the asset we’re talking about.

Kevin: When you’re talking about the value, a lot of value comes from the earnings of the companies that you’re buying. I mean the price:earnings ratio, you go back and you look at the charts, the Shiller adjusted price:earnings ratio, it always tells you where the market ultimately will go. And you were talking about Apple. People are paying twice the price that they normally would for Apple based on earnings.

David: Value, when you’re talking about just the price, not what you get for the price paid—and that’s really where I would focus on value— But people are speculating perhaps on a massive increase in revenue from here. Perhaps they’re speculating on further multiple expansion, but it would seem the market has spoken. Apple is much loved. And I think it’s loved in spite of itself. It’s 2023 gains of 48%, that’s a good move. And, as you say, at a price:earnings multiple twice its average over time. It’s sitting over 31 at present. The market has driven up the price relative to the earnings.

And it’s curious, really, because if you look at this most-loved stock, this is in the face of four quarters of declining revenue, the longest stretch in revenue decline for Apple in 22 years. Compliments of Fred Hickey. He does some great work on technology shares, and I’m indebted to him for insights on technology. A drop in net income, a drop in cash flow from operations which forced a curtailing of its massive share buyback program. I mean, in short, fundamentals are deteriorating rapidly, but mood has been positive. And with that being the case, fundamentals can be ignored. I don’t think they can be ignored forever. You have two recent analyst downgrades who are looking at the fundamentals and saying, “Something’s shifting here.” You get analyst downgrades with investor euphoria, and it’s a little bit like a balloon dancing with a pin.

Kevin: Some of these companies have gotten to be larger than large countries. You look at Apple and Microsoft, you’re talking trillions and trillions of dollars in capital assets. So if there is a balloon dancing with a pin, boy, now we’re talking in the Ts, not in the Bs, for the trillions.

David: Yep. Microsoft too, 60% gain in 2023, a PE ratio that’s double its average over the last several decades. 36.5 on the PE is not cheap. And again, these are two of the seven which were the outperformers, which dragged the S&P 500 higher. Perhaps we will again be surprised on the upside.

We may have the wrong lens here. What are we talking about? If today’s market cap, market valuation, is 3 trillion or just shy of it, are we talking about stretching to 5 trillion? A PE ratio of 100? The context, of course, is mood, right? The CNN Greed/Fear index punched above 80%, which is an extreme level of greed. You’ve got the American Association of Independent Investors, their poll, which shows the fewest number of bears in over six years. Of course, when we look at the markets, we do so on a routine basis, on a disciplined basis, reviewing a variety of indicators which show on a uniform basis not just these few companies, but again, the mood of the market shows confidence. These indicators, on a uniform basis, are showing a scaling op of risk-taking, a uniform boldness, a global trade in risk-taking and speculation.

Kevin: And sometimes it just doesn’t matter what it is. You can almost make up the investment. You remember a couple of years ago with GameStop, this was a company that was literally going out of business, and there was just enough buying to push that stock through the roof. I look at earnings of some of these companies, and the earnings are plummeting. I mean they’re losing. What would you call that? Negative earnings. Yet the stocks are still rising in price.

David: Well, a last note on pricing being out of sync with fundamentals—the sand pile setup, if you will. Again, this is from Barron’s Roundtable alumnus Fred Hickey. Micron. I used to live in Boise, Idaho, and Micron’s headquarters were there—a sizable semiconductor manufacturer in the United States. They lost 6.9 billion—with a B—billion dollars over the last four quarters. They lost $6.38 per share on a revenue decline of 50%. A revenue decline of 50%. In order to offset their cash outflows, they were forced to increase their debt by $6 billion, with a B. And there we end the bad news.

Some analysts would consider that on the depressive side, right? But then there’s the lens that the market sees the world through today, which is quite manic, not depressive. The stock rose in the face of a 50% decline in revenue, in the face of losing $6.9 billion, in the face of losing $6.36 per share. The stock rose an impressive 71%. They beat even the Philadelphia semiconductor index, which was up 65% for the year. Manic? Yes. Now, is it justifiable? Well, this is where you’re not supposed to question the market’s wisdom. It reflects the aggregate vote. It reflects all information that can be imputed to price at a given moment. It’s kind of the financial version of democracy, or perhaps it’s not wisdom at all. But instead, the emotional pendulum, the emotional pendulum swinging towards high levels of confidence in spite of the fundamentals.

Keynes comes to mind. You remember he quipped that the markets can remain irrational longer than you can remain solvent? That sounds about right, because remember, there’s irrational greed and there’s irrational fear, and there is the mistake that you can make on both ends of the emotional investment spectrum. Being too greedy or too fearful, we have to be wary of both of those.

Kevin: I think sometimes the investment, it’s just the ease of being able to do it. I notice more and more as we watch football, that football is becoming just a way of advertising gambling. And gambling is something that’s now done on your cell phone. ETFs are a lot like that. You can go buy just about anything without knowing a thing about it if you just go buy an ETF. What’s your thought on the judgment that we can now have Crypto ETFs?

David: Yeah, it’s interesting the development of the exchange traded fund market. You now have more products that are representative of the underlying asset than the underlying assets themselves.

I mentioned the semiconductor index. Okay, so one ETF, you can buy a cross section of semiconductor stocks, right? But now you can buy ETFs that only represent one company stock. Why in the world do you have that? Why does it even exist? Because you can buy the company itself. “Oh, no, no, no. You should buy the ETF that represents just the one company.”

You mentioned crypto. This is a case in the last 10 days. “Buy the rumor, sell the news.” That’s a phrase that you often hear in Wall Street or investment circles. And basically, what it means is that the anticipation is greater than the reality, the buildup, the anticipation. And then when the news comes out, you realize, “Oh, well, it really wasn’t that big of a deal.” Anticipation being greater than reality, it’s another way of thinking about that. Will that be the case with last week’s approval of cryptocurrency ETFs? The price ran up to—I’m thinking of bitcoin in particular—48,000, 49,000 for bitcoin prior to the SEC approval. Once the approval was released by the SEC, price declined 15%. Declined 15%. It’s interesting.

Kevin: Like you said, buy the rumor, sell the news. And if everybody is buying—we’ve seen this with the indexed funds right on across the board—if everybody’s buying something, there may be a day when everybody wants to sell at the same time.

David: Yeah. I mean, in theory, the investment community can now more easily allocate to an opaque asset class, cryptocurrencies, which for years has had fee structures that are way out of line with traditional assets. So you’ve got increased volumes that come with the launch of the ETF. Theoretically, that brings about a crushing of costs. That’s an improvement. That’s a maturation of the market, if you will, an improvement to liquidity. One of the things that that does, if you keep in mind, the old players who are used to those fat margins, the old players are now being displaced by Wall Street firms. High fees, fat trading margins should become a thing of the past. And with that, you’ve got business models that were dependent on those fat fees. They will fail. With the development of infrastructure or availability in the market, you also have a destructive event because now you can pay as low as 20 basis points to buy, own, sell the exposure to bitcoin as opposed to 3, 5, 10 percentage points to own the same cryptocurrency.

Wall Street smells an opportunity, and it’s the opportunity for individual investors to churn themselves into oblivion. I will note the one company which said, “Nope, we’re not interested. We see this as downside for the average investor,” it was John Bogle’s company. Vanguard said, “No way. We won’t touch this with a 10-foot pole. Wall Street’s taking over the benefits of the individual, churning themselves into oblivion. Generally speaking, if you look at Wall Street, if you look at the SEC, it’s frowned upon for Wall Street to churn its investors, but it’s considered okay if you supply the tools for individuals to churn themselves. What the SEC gave the market last week was approval for a version of self-annihilation.

Kevin: I’m thinking of that cassette tape, Dave, and it reminds me, in 1990 there was a Grammy awarded to a couple of people from France and Germany, R&B. They were called Milli Vanilli. What happened was they were the best new artists of 1990, and they were actually performing and the tape got stuck and started repeating. The name of the song was Girl, You Know It’s True. And what happened was, the irony was it just kept repeating, “Girl, you know. Girl, you know. Girl, you know.” And they were lip-syncing. And it came out later that they not only were lip-syncing, which is very common when people are performing, but they found out later that Milli Vanilli never recorded any of their music. It was other recording artists, and they were called Milli Vanilli, but they had never really sung a note. They had to give that Grammy back. So, girl, you know it’s true. I just wonder about these assets, Dave, if some of them aren’t like Milli Vanilli, that they don’t even really exist.

David: Yeah, it’s that little problem with the Memorex. Girl, you know. Girl, you know. Girl, you know.

Kevin: Girl, you know.

David: Two considerations remain. They’re just issues in the back of my mind. You’ve got supercomputers. We’ve mentioned this before, but as we develop quantum capacity, that changes the dynamics of bitcoin mining. And maybe that’s a minor issue considering how few bitcoins can be created at this point. There’s 19 million out, out of 21 million, so 19 that already exist. Maybe that’s an non-issue. But also in the back of my mind is a far greater concern. The largest holders of crypto have kept the float limited. And any asset with an arbitrarily limited supply is somewhat suspect. De Beers and the diamond market comes to mind. Yeah, diamonds are scarce, but it’s in large part because the cartel manages the supply. And I’m not suggesting there’s a bitcoin cartel, but there are these whales that have and continue to hold the vast majority of the product, and there’s very little that actually trades in the open market.

There’s also a third aspect that I’m unclear on. Bitcoin in particular is a digital asset. It can be valued out to eight decimals, which in essence multiplies the available units for purchase. 21 million is the hard cap. But if I can subdivide and trade 21 million units out to eight decimals, there is latitude to increase volumes on a fractional basis.

Now, you come and you bring in the little guy, the miniature investor. It’s a trading dynamic that draws in small investors. Notice how, on a variety of trading platforms—whether it’s Fidelity or other firms, they will allow you to buy fractional shares in groups like Apple or Berkshire Hathaway. And so you can be a small bit player, and float is the thing that comes back to mind. The limited float of cryptocurrencies like bitcoin leaves the whales in control of the market. The estimates range from 12 to 18% of the total quantity actually are available over any period of time. That’s what is available to trade. And this is I think where Wall Street is sharpening its beak in advance of wetting its beak. Exponential gains are still in the math when you consider driving mass investor interest into something that has a controlled supply.

Kevin: So let’s put that in perspective, Dave. Okay, so 12 to 18% float. How does that compare with some of the stocks that are out there?

David: Yeah, your larger companies—back to Microsoft, Apple, the old standard-bearer IBM, in the tech space—you’re talking about 99% of the stock is available. It is 99% float. Tesla a little bit less. Tesla, 87%. 12 to 18% is nothing. So part of the volatility profile of the asset is explained by how limited the float actually is. I don’t own any, because to be frank, it still doesn’t make sense to me to invest in a receipt, a receipt that is just evidence for a math problem being solved, right? I’m not sure I see the appeal. And with a controlled supply, it feels like a rigged game to me. Granted, there’s lots of opportunities in life. This is just one that I’ve chosen to sit out.

Kevin: Well, so I think the question would be, what’s appealing to you? Your whole family, your dad first and then you, but actually I saw how your granddad valued things, real things, so I’m sort of baiting you, but what is appealing to you, Dave?

David: To me, a compelling opportunity— There’s some that I will sit out because we can’t be an expert in all things. And so, we’ve watched the cryptocurrency craze march past us. My tendency is still to think of it in terms of a tulip bulb mania and not necessarily greatest thing since sliced bread.

What is a compelling opportunity? What am I not sitting out? I sound like a broken record on this, but gold, yes, I’m in. And even more so, silver, if you’re talking about a real time opportunity. Now, I’ve mentioned this in previous weeks, but I’m cautious given the current Commitment of Traders reports, which ranks the hot hedge fund money currently chasing the price. And I’m cautious when you look at the COTs, commercial hedging is on the rise. Even with that in mind, you’ve got aggregate exposure, you’ve got open interest which is still well below levels that we’ve seen at peaks for gold and silver.

And when you look at the fundamentals, again, the fundamentals for many of the best performing stocks last year are abysmal, which doesn’t necessarily make sense, but here’s a space where fundamentals are actually quite supportive. You’ve got the central bank interest in de-dollarization. That continues unabated. Over the last nine years, you’ve got gold holdings by your BRICS countries. This is the anti-dollar crowd. It’s up 75%. We’re now at 6,139 tons. That interest continues to grow because the “repudiation” of the dollar is not just a theory, it’s not just a potential risk. It’s something that is unfolding, and it’s one of those cracks in the system that has been, that are emerging. In essence, the fundamentals are lining up with the investor community still absent.

And investor interest in the West remains apathetic. I mean the mark of this is in the flow of dollars to or out of an asset, 88 tons of liquidations last year from the two largest US-based ETFs. We’re talking about the gold ETFs, GLD and IAU. 39 tons liquidated from GLD. 49 tons liquidated from IAU.

I probably should qualify this. You said it earlier, the rest of the world, the rest of the world is a different story. The rest of the world is paying attention to structural changes, not only in the global monetary system, but with regard to geopolitical risk. And I think, as they see the world, and it’s not necessarily through a depressive lens, I think it’s through the lens of realpolitik, a hedge seems most reasonable to them.

Kevin: Well, and you wonder why. I mean, we have seen the seizure of assets of countries that are unpopular, whether it’s Iranian assets factoring— Iranian hostage crisis. There was an op-ed in the Financial Times recently that recommended that Russian assets should be seized, $300 billion worth of Russian assets. If you’re in Russia and you have to be able to buy and sell, you’re going to be buying gold. You don’t really care what the COT report says. You’re going to be buying gold because you may have to trade in it.

David: Well, and that has been evidenced in the central bank demand for gold. They basically said, “Look, if it can happen to Russia, it can happen to any of us. How much of your assets do you actually control if it’s not in your hot little hand?” So you’ve got central banks asking a question which usually is left to investors, investment banks, the Wall Street elite: counterparty exposure. Who would’ve thought that having money domiciled in the US represented some form of an existential threat?

The geopolitical landscape favors an allocation to gold. Not only does the Russia-Ukraine conflict persist, and of course that conflict has China’s explicit support of the Putin— Think of it in terms of territorial adventurism. China is that much closer to its own version of adventurism, and this is just after the weekend’s results in Taiwan. This is just days ago. If Taiwan was eagerly anticipating reunification, you would’ve seen the Kuomintang party sweep the election. Didn’t happen. They lost the presidency. They did gain some seats in parliament. But China said immediately following the tallies that reunification was close. I don’t know exactly how to read that, but that could be soon. And if you think about it, if it is, it’s not with that island, Taiwan, particularly enthusiastic about those prospects, right? So you’ve got geopolitical aspects, which I think have the world’s attention. You’ve got the Balkans quickly deteriorating—again, time to reorder—

Kevin: Over and over.

David: Yeah. You can reread—or if you haven’t, pick up a copy of The Bridge over the Drina. It’s the story of how conflict in that region has been a longstanding thing. But here it is reemerging. We’ve got Serbia again sort of moving back into conflict zone. It’s just more conflict in Europe. So you mentioned Asia and you mentioned the Middle East being significant buyers of gold. Europe is, too. Physical metals are very important given the geopolitical landscape. US investors care very little about what happens in the rest of the world.

Let this sink in. When we turn on the television, it’s not to be informed, it’s to be entertained. US investors are too busy with sports bets on Green Bay and Kansas City, while the rest of the world sees a fracturing of geopolitical stability. And enough historical recall is still in their minds to position accordingly.

Kevin: Yeah, Dave, I’m not a sports better, but I will tell you this, I did watch the games, and that Green Bay game, that was amazing. And then not long after that, the Detroit game, that was worth watching. But to be honest with you, it bothers me that everybody is getting into this manic “let’s go bet on anything” mentality. Why can’t you just watch football?

David: Well, and again, what are we seeing? We see the lens through either the greed perspective, that lens, which lends towards the manic behavior we see in the markets today, or perhaps the depressive. And maybe that’s where the rest of the world just sees things differently than we do here in the US. But it’s not just the geopolitical landscape that favors an allocation to gold. The monetary policy backdrop supports the gold market, too. If the Fed indeed pivots to QE—again, we’ve been in this sort of quantitative tightening mode. If they pivot to QE, we’re dealing with a credibility issue with our central bank. That, too, drives traffic to the metal. I think of gold as a no-confidence vote on policy initiatives—monetary policy, fiscal policy. That’s where today, obviously, the confidence is high. But these are things which, like mood in the market, shift pretty quickly.

Kevin: Well, and you bring up fiscal policy. I mean, monetary policy, we’ve watched for years because we’ve really been in a monetary policy bubble since 2008. But fiscal policy, we’re spending more right now than we did for an entire world war.

David: Yeah. And so that’s a part of it, too, when we’re talking about credibility. Fiscal largesse has not been seen on this scale since a world war. So you can couple central bank credibility with Treasury Department credibility. And this kind of sneaks up on me because I think about how much money has to be rolled over—how many liabilities at the Treasury have to be rolled over—over the next three years. And back-of-the-napkin math, just— I just by divided by three, and I’m wrong, this snuck up on me. We’ve got $7.6 trillion in US bonds maturing in the next year. That’s 31% of the total. Then you add to that the 1½ to $2 trillion in new issuance. If there was ever a year for the bond market to experience pressure, this is it. Because now we’re talking about a credit concern. Credit pressures applying directly to the US sovereign debt market.

You add these up, these are all demand-side related when you’re thinking about gold. The demand side—admittedly, it’s impossible to predict from a timing standpoint when you have people who want out of risk-on trades and want the safety of some safe haven asset. When the go-to safe haven— We’re in the middle of watching it be compromised, right? So the demand side’s impossible to predict from a timing standpoint, but you’ve got macro factors that are supportive of a mass migration to the metals. What is not so mysterious is the supply side.

Kevin: And that’s important that you bring that up because I remember when Morgan was talking about how many one-million-ounce-plus finds have been found recently, and I think the number is zero, over a million. But for a while, it was common to find over a million ounces at a time in gold finds.

David: Yeah, I mean, in recent decades, if you go back 20, 30 years—it was recent enough—you’re talking about, in each of those decades, 100 finds, 150 finds.

Kevin: Over a million.

David: Of over a million ounces. That’s correct. And now it’s zero. So in addition to a dearth of new finds in excess of a million ounces, we have the gold mining companies themselves with reserves in aggregate which have declined by a third over the last 10 to 15 years. So the supply side constraints— If you project forward a bit, the supply side constraints will end up multiplying the upside volatility, precious metals prices, as the demand side kicks into gear.

Kevin: So let’s talk about silver for a moment because we get the question, “you guys talk a lot about gold, what do you think about silver?” And actually, silver is an investment that you want to buy when it’s undervalued relative to gold. It’s not an investment necessarily that you would always buy. Your thoughts on silver, Dave?

David: I think a really good understanding of the precious metals includes what the central banks are doing. And they don’t buy silver, they buy gold. The investor class does buy silver. And because it’s a micro cap by comparison to the gold market, it just doesn’t take as much buying to get it moving. The fact that it hasn’t moved suggests that there really hasn’t been a lot of interest there.

And I look at silver as one way of playing the total precious metals complex. There’s a variety of ways to engage in the metals complex depending on your risk tolerance, depending on your financial objectives. And they range from physical metals to some form of derivative exposure. All are intriguing. Not that it matters what I’m personally doing, but I’ll tell you a bit. A sizable personal trade for 2024 for my family is in silver. Vaulted is this year’s destination. I like thousand-ounce bar pricing. I do eat my own cooking. And I see that gold’s on the edge of breaking out. And as it does break out, you’re looking at the catch up—the catch up to silver getting to its old all-time high, $49, which is a significant move from here.

I sat with a friend this weekend on chair lift—great skiing this weekend, we got a bit of snow. And as I was discussing what my 2024 ounce additions would be—allocations, additions would be—the question was, why not look at the miners? And I think, with qualifications, this is kind of what I explained. Gold is on the edge of a breakout. When that occurs, silver plays catch up to the old highs, and the miners then play catch up as well. So sometimes when I’m on a Bloomberg interview or something that wants price projections, if I were to guess—and it’s only a guess—I think gold has upside of 15 to 19% in 2024. Silver, in turn, closing the gap if you look at the current ratio of 88:1—if we see it trade to a 50:1 ratio, that implies silver at 108% higher for the year. So 19% max upside for [gold in] 2024. Silver, 108% higher.

And the miners, correspondingly, 250 to 300% higher measured off of their recent lows. Well, why not just go all-in on the miners? Again, this comes back to how you engage with risk. What your financial objectives are. And when I allocate, I’m just as happy to own physical metals as I am some derivation thereof. Some dollars are allocated to physical. That’s wealth preservation. Other dollars to miners. That’s speculation. And we started the conversation today talking about rank speculation not justifiable by fundamentals. I can make a very strong case for fundamentals that relate to gold.

Kevin: I go back to that Memorex commercial, Dave, and I still like the real things. Is it live or is it Memorex? I think I’ll stick with the live any day.

David: I just need to understand why. When it comes to a speculation, what are the bona fides? This is, in my view, stacking up to be an exceptional year for the metals, and that includes all sorts of metals exposures. I don’t mind speculation. I just need to understand why. And this is stacking up to be an exceptional year for the metals—and for that matter all sorts of metals exposures.

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You’ve been listening to the McAlvany Weekly Commentary. I’m Kevin Orrick along with David McAlvany. You can find us at mcalvany.com. And you can call us at 800-525-9556.

This has been the McAlvany Weekly Commentary. The views expressed should not be considered to be a solicitation or a recommendation for your investment portfolio. You should consult a professional financial advisor to assess your suitability for risk and investment. Join us again next week for a new edition of the McAlvany Weekly Commentary.

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