Podcast: Play in new window
- Silver to Gold Ratio Trade: How & When?
- Silver Is Designated “Strategic”
- Will Premiums Return To Pre-1933 Graded Coins?
“I wouldn’t count on better entry points for bullion or for the miners till the end of the cycle. You’ve got the major trends and then the minor pullbacks around the major trends. Bullion has broken out, and the miners are just transitioning into the limelight. The reality is that real bull markets don’t afford people the opportunity to get in. You wait for a better entry point, and it moves away from you. And you wait for a better entry point, and it moves away from you.” —David McAlvany
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Kevin: Welcome to the McAlvany Weekly Commentary. I’m Kevin Orrick along with David McAlvany. David, we had a great set of questions last week, and I’m looking forward to this week. Thank you, again, listener for sending these questions in, we always learn something as well.
So our first question from Micah: “Hello. Per your request for year-end questions for the Weekly Commentary, I have one. I believe this question comes up every year, but I believe it’s worth revisiting on a yearly basis at least. My question for the Commentary is this: I have a great deal of concern about the political environment of both Canada and England. They are on a worsening trajectory, where winners and losers seem to be chosen based on their social credit score. I could also see them attempt to socialize banking. Is there any concern about these countries being the physical storage locations for the Vaulted program?”
Good question. Dave?
David: Well, I think there’s been an improvement from Trudeau to Carney, but I was told long ago to never trust carnys— Uh— Moving right along.
At present, I think there’s less concern on those points than there are benefits to being in the most liquid metals markets in the world. And so it’s something that is worth asking over and over again. And as things shift, then mid-course corrections can be made. Having said that, we anticipate over the next 12 to 18 months the creating of a dropdown function in the Vaulted app that allows you to select your preferred storage location.
There will be U.S. facilities to choose from as well, and just anticipate that pricing will vary. Moving away from the most liquid pools in London is one of those, certainly for silver. Pricing will vary reflecting the cost to transact in those less liquid markets. But those are simple trade-offs. If you prefer one geography to another, your trade-off is likely to be a small marginal price difference, but don’t look for that until the end of next year at the earliest.
Kevin: Okay. Well, that’ll be a nice option.
Next question from Peter: “Dear David and Kevin, do you subscribe to the notion of ratio trading? And at what ratio should we sell our silver for gold. 40? Or even wait for something slightly lower?”
Dave, these are questions that you answered last week to a degree, but why don’t you go ahead and recap what you were saying about ratio trading?
David: Yes, we do subscribe to the notion of ratio trading, and we track the entry points for all our clients and advise according to when trades are accretive on a client-by-client basis. So the transition points vary from customers that started at higher levels in the gold-silver ratio. Incrementally, you should consider 50, 40, 30, but of course this is with sensitivity to what your entry point was.
And always maintain enough silver exposure that in the event we see the gold/silver ratio where it went during the Hunt Brother days, you still have ounces to trade at that level. I think it should never be an all-or-nothing trade. It assumes that you know or we know more than is possible to know. So when we track that for clients and work with clients in that regard— I mean, this is I think one of the values of having an advisor relationship matters, and we’d be glad to guide that process.
Kevin: Next question from Adam: “One question I have is, can you outline strategies to legally avoid or minimize capital gains tax on precious metal sales, i.e. the 1031 exchange or other investment opportunities.”
What do you think, Dave?
David: Well, investing in opportunity zones, moving to Puerto Rico, et cetera. Probably the only effective and legal way to avoid capital gains is inside a retirement account structure. There is no other way, unless you have unique rules that exist in your home country. None exist in the USA today.
But in Britain, I think that’s where you have a good example. Any British sovereign, whether it’s an old sovereign, pre 1933, or a newly minted coin, also called a sovereign, is exempt from capital gains tax in Britain if you’re a British citizen. So if you’re a British citizen exclusively, why would you own anything else? Because you’ve got a tax-free pocket of gold.
Kevin: Right.
David: Roth IRAs, traditional IRAs, they’re the only means for U.S. citizens to accomplish what you’re suggesting. The 1031s no longer apply. That was applicable for a silver-to-silver swap or a gold-to-gold swap prior to 2017. If you followed strict details, you’d used escrow accounts, et cetera. But that no longer applies following the first Trump administration’s revision of the tax code in 2017. It’s now exclusively for real estate.
Kevin: This next question’s from Todd: “Love the Weekly Commentary. I’ve listened to it for years. Now that silver has broken out to all-time highs and bank manipulation suppression schemes are breaking down due to people asking for delivery on the COMEX and the London exchange, does technical analysis mean anything as far as predicting where the price of silver is going, how high it’s going to go?”
David: I think technical analysis is still helpful, but it’s not definitive. We have witnessed silver break free from a somewhat controlled trading environment. In the years ahead, looking at industrial demand and investor demand, these are now less constrained or even unconstrained, at least for a while. I think once you get to between 150 and $500 an ounce, you’ll see significant substitution of silver in industrial applications. That’s when it’ll become material.
But even with that being the case, and I’m thinking specifically of the amount of silver that goes into photovoltaics, into solar systems. Roughly 20% of all mined silver goes into solar today, to the tune of 196, 198 tons. That’s about 20% of total mine supply. I think substitution could be a factor at higher prices, but there’s new technologies which are emerging which are likely to either take the place of solar demand or displace it completely.
Kevin: You’re speaking of electronic vehicles, electric vehicles?
David: Yeah. Samsung’s development of solid state batteries are likely to stand in for industrial demand declines in solar at those higher prices. The efficiency of the batteries they’re developing is a game changer for electric vehicles and for hybrids. You’re talking about faster charge times, less than 10 minutes, longer ranges, up to 900 miles.
Kevin: Wow.
David: And of course, these are all sort of pro forma estimates in the development stages, but if they can deliver on what they think they’ve got, something that is estimated to take between 50 and 60% of all silver mined.
Kevin: That’s what Morgan was saying today, if there’s a 20% adoption rate in EVs for these new batteries.
David: For the new batteries.
Kevin: Yeah.
David: It would take 60% of global mine supply, which, again, so you lose some on the solar, but now all of a sudden you’ve got industrial demand picking up for new technologies, and that’s still not factoring in the investor demand. So I think when you look at the challenges that consumers have faced in making a purchase of a hybrid vehicle or electric vehicle, it comes back to charge times, ranges, and you’re talking about technology that exceeds anything that exists in the market today and far exceeds even anything that an internal combustion engine offers on the road today.
So I think there’s reason to look at the charts, but not necessarily to fall in love with them or think that they are predictive going forward. Sometimes it’s looking in the past at behavior patterns and trying to discern what happens next. But with significant technological innovation, and with a significant monetary reset on a global basis, I wouldn’t try to cap the price. If your expectations are that it’s going to trade like it has in the past, you’ll be surprised.
Kevin: I remember reading in the late ’80s an article saying that silver is doomed. It’s done because of this new thing called a digital camera, and it was going to replace film, and film was what took a lot of the silver. Isn’t it interesting how these new technologies come, and there’s a need for silver? At this point, what is it, a kilo of silver per one of these batteries?
David: Per battery.
Kevin: Is that right? Wow.
Next question from Alvin: “At what point does the Trump administration implement currency controls or confiscate gold holdings from Americans? Is the Vaulted program sufficiently offshore to insulate Americans from confiscation? What percentage of precious metals holdings should be offshore for the ordinary average American?”
It’s got another question here: “Will stablecoins like Tether transition and achieve through mirroring the behavior of central bank reserve holdings of U.S. Treasuries and gold—various virtues of becoming a free market money.”
What do you think, Dave?
David: Let me tackle the percentage question offshore. I’ve always looked at my responsibility as a father, as someone who sort of manages crisis, like the boy on the burning deck, with as much poise as possible. I’d rather not have my wife and my kids subject to the pressures that maybe I can bear. And so, for me, having a “pre-funded” vacation in a place like Zurich or Toronto, it’s not a huge amount of money, but if I wanted to look at the living expenses for a three to six-month period of time in Europe or in another geography, North America specifically, that’s kind of what I’ve picked. It’s not a percentage necessarily, but a certain number of ounces that affords me the flexibility of getting to where I want to be, and then operating on a stress-free basis with funds that are already there.
Kevin: Okay.
David: So I think an important distinction—coming back to currency controls—an important distinction is between a controlled and gradual decline in the U.S. dollar. If it’s controlled and gradual versus uncontrolled and in free fall, those are two very different scenarios. The administration has designs on the former, and has no intention of causing the latter, though they might, through broader fiscal policy mistakes, end up with that. Currency controls are not a high probability event, in my view.
Kevin: They’re going to try to control this decline in the dollar.
David: Manage the decline. And the Defense Department has been clear, we need to re-industrialize. We have significant vulnerabilities to not only China, but many of the countries that we import goods from, a dependency, which is unhealthy. And so regaining independence is going to come at a cost. And I think inflationary pressures, wage pressures, that’s certainly a part of it, but ultimately to manage our debt system and manage the amount of debt that we have will require a lower currency value.
Kevin: So the next part of the question was confiscation of gold; what are your thoughts on confiscation right now?
David: Confiscation of gold served a unique purpose in 1933, specifically control of the money supply. They wanted domestic inflation so that they could handle a tremendous amount of liabilities. And the difference between 1933 and today is that that machinery already exists. It is implicit to a fiat system. I don’t think it’s necessary for them to confiscate gold. What is more likely is a penalty tax rate to discourage private ownership. So when I think about the value of having physical metals inside of an IRA, this is one of the boxes that I want to check. IRA holdings perhaps would provide relief in that instance. The step-up in basis may also be one of those things that suffices in the passing on of assets intergenerationally, neutralizing a theoretical penalty tax rate.
With this issue of confiscation, I think there are too many unknowns, but it still, to me, makes sense to diversify assets through privately held ounces and IRAs, platforms like Vaulted, facilities that we’ve coordinated around the world. It’s just that we live in an imperfect world, and we live with imperfect information. So you can’t have a perfect solution in that context. So you treat your precious metals position like a bag of golf clubs. Different clubs are suitable for different purposes. There is no perfect club, but having a full range allows you to play the course well.
Kevin: That’s a good analogy. I still think the seven iron, even though I’m a terrible golfer, is almost the perfect club. You can almost put with it.
David: You can almost put with it.
Kevin: You can almost drive with it, but—
David: Yeah.
Kevin: Okay, stablecoins. He asked about stable coins.
David: Yeah. It remains to be seen if stablecoins survive the next de-leveraging event. They’re yet untested as an asset class, with complexity that is not sufficiently road tested. So to own a derivative of gold or a derivative of Treasuries in the form of a stablecoin might make sense under ordinary circumstances, but under acute market pressure like deleveraging, the real thing is the real thing. And I think derivatives, all of a sudden there’s a shadow that’s cast over them.
Smarter people than myself with far greater insight into the development of Tether and other stablecoins have suggested to me, to put it bluntly, that they are Ponzi-esque. And I’ll withhold judgment on that, but to me, an untested asset class is not what I would want to rely on in the context of a financial firestorm.
Kevin: Well, speaking of real is real, we both have a friend who was a special forces pilot, and ultimately a four-star general in the Air Force. He said, “I never flew behind enemy lines without a little bit of my gold.” I doubt that he would fly with stablecoin. I don’t know that it’s quite the same thing.
So I’ll move on to the next question from Cephus. Cephus asks: “What is the probable future for platinum coins?”
David: I like it. After a three-year supply deficit and with continued supply chain constraints from Russia— You basically are getting platinum from Russia and South Africa. So I think the future is bright. It’s a very small market, and doesn’t take a lot of demand to move the price, as evidenced by this year’s greater than 100% gains. Still trading at a steep discount to gold, we recommend five to 10% of a metals portfolio allocated there. No more. The reason, again, lies in its sort of purely industrial profile. But under the right circumstances, those ounces are a great performer. Gold remains the metal for all seasons because of its much broader range of interested buyers. When you look at platinum, it is one of those under-the-radar metals. If you were ever concerned with confiscation, you’re talking about something that is irrelevant in the world of—
Kevin: Monetary trade. Yeah.
David: Yeah. So it is a great way to have a hard and tangible and very portable and private asset which has amazing supply and demand dynamics. So should it be in the portfolio? By all means.
Kevin: Sure. A little bit. Little bit.
Jim asks, he says: “Hi, Kevin and David. Here’s my question. How low will the dollar weaken once we get the new Fed chairman seated in May of 2026? Merry Christmas, happy New Year, and I am off to get a Big Mac and a medium fry.”
Obviously, he listened to last week’s program.
David: Enjoy your Mickey D’s.
Kevin: Yay.
David: Incremental moves of 10 to 15% lower over several years, I think that’s reasonable to assume. If the administration could take the dollar down 30% but do that over time, I think the Treasury would be greatly relieved. It takes some pressure off of our debt load. If you look at most orchestrated devaluations, they’re not pre-announced, and they range from 20 to 30%. And the British did this in the ’30s, I think again in the ’40s, but more recently, I want to say even in the ’90s, there was about a 30% depreciation. 30% seems to be the— You don’t want to disturb the markets too much, but we are at a point in time where, like the Plaza Accord 1985, there’s growing consensus that the dollar is overvalued.
So I think between the re-industrialization of America, which seems to suggest a weaker dollar, you’ve got the academics here in the States and globally who make the case the U.S. dollar’s overvalued relative to the G7 currencies, the likely course is lower. Will it be orchestrated like the Plaza Accord? We don’t know. I mean, we’ve heard this conversation about the Mar-a-Lago Accord, which was kind of a throwback to 1985 in the Plaza Hotel, but we’ll see. By the end of the Trump administration, I think we’ll see the dollar 20 to 40% lower than current values. If I’m looking at allocations and ways to accommodate that, I think I’d rather be long gold than short the dollar, because frankly the currency markets are often surprising, and the surprise could be to the upside.
We don’t have a deleveraging event today, but that can create something of a synthetic short in the dollar where, as it’s covered, the price goes higher. And it doesn’t necessarily make sense from a balance sheet perspective. It doesn’t necessarily make sense in terms of global trade or anything else, but there are big surprises in the currency market. I’d rather just be long gold and short the dollar. Tend to argue against a strong dollar, given the net benefits and the need to relieve pressure on Treasury obligations. I think that the reality of marching towards 40 trillion and ultimately $50 trillion in debt—assuming that they cannot control the entire yield curve and can only pick points on the yield curve to buy down the rate—you are talking about a massive drain of capital from tax revenue just to pay the interest on the national debt. So anything that they can do to relieve the pressure, inflation’s the classic strategy, and this goes back to ancient times.
Kevin: One in a million. One in a million understands it, and it’s the easiest way to pay your debt off.
David: Yep.
Kevin: Yeah.
David: I mean, and sometimes it does happen rapidly. There was, going back, we talked about Tiberius, we talked about a couple of issues relating to Rome and ownership of metals and what that would represent today in terms of a healthy allocation for a US person. You had 200 years to go through a 50% devaluation, and then I think there was a six-year period where you went from 40% silver content to less than 6% silver content. And so devaluations can happen quickly, just depends on the circumstances.
Kevin: Well, our next question from Drew and Gigi has to do with health. “Hello and Merry Christmas to our MWM team. As seniors on Medicare, how much of our wealth should we dedicate to healthcare? Thank you for all your efforts throughout the year to educate and build our wealth, wishing you a joyous Christmas and a healthy, prosperous 2026.”
David: Yeah, it’s a great question because as you move towards being on a fixed income, you want to look at your variable expenses and manage them as best you can.
First, let me say that I don’t listen to many podcasts, but one that has caught my attention is done by Peter Attia. And he doesn’t answer the healthcare cost question, but he does an excellent job framing the wellness regimes necessary to becoming a healthy centenarian, and I think that’s worth thinking about. What he frames as training to become the centenarian decathlete. I think it’s an inspired look at what you need to manage, which is outside of the healthcare system, and I would invest the time to manage your health outside that system. What I see amongst our clients is a concerted effort to manage their wealth well into their 70s, many of them actively involved in that. Eventually they start to delegate some of those responsibilities as time and energy begin to dissipate and they want to focus on other things in the golden years.
And often health is an afterthought. And I think the more it remains an afterthought, the more it will take of your wealth to manage over time. So better to set a trajectory that needs less interventionism. And so, again, I would spend some time on Peter Attia’s website. He’s got some various subscriptions. Not very expensive at all. But engage with that notion of being a centenarian decathlete.
And again, it’s basic stuff, flexibility, the ability to lift basic weights. That gives you balance, making sure that you have balance. This is not— I know some of you may think, “Well, Dave, you’re a triathlete. You’re just upping your game as you get older.” No, actually, this is really basic. Is Dave flexible? No. And do I have good balance? No. I mean, these are all things that as I get older, I need to start focusing on because if I can, it keeps me from falling over and breaking a hip. It keeps me from cracking a rib. Preventive, I think, is the best way to approach it.
Now more generally, as a society, we have abused our bodies. You look at the quality of the food that we eat, you look at the quantity of exercise in our daily regimes, and that frankly is why our healthcare system is under pressure. I think it likely moves in two directions towards a single payer socialized system on the one hand, and towards concierge medicine on the other. The latter could cost you dearly out of pocket, the former may cost society a great deal, but provide, at least my experience with the single payer system— I’m not on Medicare yet, but my experience with a single payer system was pretty awful. Medicare is already a version of a single payer system. When I lived in England, I remember having strep throat and getting in touch with the doctor’s office. They set an appointment. I just had to wait five weeks.
Kevin: Wow. For strep?
David: To get in. So it was an uninspiring experience with a single payer system. So again, I go back to sort of the Boy Scout way. What can you do to manage your health outside of the interventionist system? There’s good aspects to our hospital and healthcare system, but I think we are the problem in the system when we haven’t adequately cared for ourselves along the way.
Kevin: You may recall Ned Overend, who is a well known older athlete. He was interviewed once, and he said, “The best thing to do is just don’t let yourself fall out of shape.” He said, “Keeping in shape, it’s so much harder when you get older to get into shape if you’ve let yourself fall out of shape.” And I always remembered that. I thought, you know— So in the mornings when I think, am I going to run or not? I go run just because I remember what he had to say. Not that I’m in the greatest shape, but you go run, movement. Motion is lotion, right?
David: My freshman year at Biola University, I met a gentleman. And I was in the office looking for a job, and he was in the office, the employment office, looking to hire somebody. And we met and next thing you know, I’m doing his yard work, and I did his yard work for three years. But Bill Carden was an amazing guy. He was in his late 80s and had lived beyond his first wife, who had passed from cancer. Betty was amazing. His second wife was absolutely amazing.
But I remember every time I went to his house, twice or three times a day, he would do 10 chin-ups and he had a bar and he’d do his pushups. And I mean, we’re talking about 10 push-ups, not a lot. He was out walking, probably walked five miles a day, and his mental acuity and physical agility and comfortability was absolutely amazing. I thought, that’s how I want to age. I’d come in after working in the yard and he’d serve me a iced tea or whatever, and his great love was the English poets.
And so we’d talk about English poetry, and— Anyways, I gained a great respect for somebody who in their late 80s was doing what they could do and it showed. It showed not only in his body, but it also showed in his mind.
Kevin: Well, I was going to say poetry and exercise. Poetry and exercise the older you get. All right. Our next questions—plural, there are four, Dave, so I’ll just go ahead and read all four and then you can answer them—are from Dan. Number one, he says, “Is there a chance that the current government programs delay the monetary crisis as we steal money from other countries and use the funds to pay down some debt?” Question two, “Are the precious metals the only store of real value and some commodities to get through the next major crisis?” Question three, “Could some exogenous event, like blockchain technology—not bitcoin, change the system enough to grow us to prosperity?” He sends a smiley face and says, “I’m looking for some hope. I’m scraping.”
And question four, he says, “If the short end of the bond market is manipulated lower for extended periods of time, where can the average person keep funds they need to live on? We can’t stretch out to 10 year bonds without lots of risk. Don’t want to own 80% gold and silver, seems too much.” And he says, “Help.” With many exclamation points behind it. So can you help?
David: Yeah. For the first question, I think likely a financial market shock forces fiscal and monetary measures which cement a US dollar crisis, and that’s something yet to emerge, but is not difficult to imagine. Tariffs are one of the ways the current administration has attempted to drive revenue without increasing taxes, and that is, to your point, sort of taking money from other countries. I can imagine others, but even tariffs remain in sort of legal limbo. I’m not sure that that form of taking isn’t a primary factor driving global de-dollarization and ultimately compromising dollar stability. Clearly that’s not the intended consequence, but the unintended consequence of tariffs is that everybody’s looking at us with even wider eyebrows and greater concern.
Kevin: So his question on precious metals, are there other things that you can do other than precious metals?
David: Well, I think cash is also a valuable asset. Yes, inflation is an issue with a healthy cash position, but I think with a sufficient allocation to metals you can neutralize the decay in purchasing power. And so, generally, I think what you’re looking at with a cash position is liquidity, which is of such great value in the context of a major crisis. I think allocating to hard assets more generally can also be helpful. We do a lot of that in our asset management offerings, but if you’re looking at cash and gold as sort of a balance, I would agree, owning 80% in gold and silver, while that’s not enough for my dad, it’s more than enough for me. I think closer to a third of liquid assets and however that translates into in a net worth figure.
Kevin: Okay. So for his third question, is blockchain technology going to pull us out of this one?
David: Well, I think human ingenuity and creativity should never be discounted. And when you’re in the context that the rule of law is operative and you have the opportunity to take risk in the context of a free market, it is absolutely amazing what can be unleashed. So I would just say don’t discount, don’t underestimate human ingenuity and creativity.
I don’t think blockchain is a solution. It’s certainly not a productivity miracle. Very slow. It’s a very inefficient system. It’s great for record keeping, it’s good for creating new systems of compliance and transparency, but it’s not a boon to productivity. Other technologies, really the only one that comes to mind, and this is kind of looking back at what unleashed tremendous amounts of wealth over the last thousand years. It was always an innovation with energy. And with energy innovations came proliferation of wealth and an expansion of a middle class that had previously not existed, or had not existed—
Kevin: Are you thinking of fusion?
David: Absolutely.
Kevin: Yeah.
David: Fusion technology, if you can reduce the cost of energy, you do, I think, unleash a new era of growth. Coal did that. You don’t have to like coal, but historically you look at what it did, and it was a game changer. Oil did that. Nuclear energy. Fission has done that to a degree. And certainly small scale sodium nuclear reactors are intriguing. But in terms of reducing energy costs in an economically transformative way, fusion would, I think, change everything.
Kevin: I have a client that I love talking to who works for Livermore Laboratories, and they did, at a very, very, very small scale, achieve fusion. That’s extraordinarily exciting if they could actually capture that and turn that into something.
David: Yeah, right now the economics don’t work. The amount of cost that goes into the energy necessary to create the fusion energy—
Kevin: It’s greater than the gain.
David: It’s greater than. So it’s a minuscule benefit to the massive investment to get it to happen, but theoretically it’s proven out. I have a friend on the East Coast, in the Southeast, actually, and he funds multiple laboratories around the world exploring fusion. Australia, Switzerland, a number of other laboratories, and I don’t know when, but certainly if that were to happen, back to the scraping for hope, growth and prosperity, something that is absolutely transformative, is the reduction in the cost of energy.
Kevin: And until then, the fourth part of the question is, where can you put money until then?
David: The short end of the curve is bogged down. The latest round of quantitative easing announced just a few weeks ago the recycling of agency paper proceeds into T-bills. They both have that effect of pressuring T-bill rates lower. I think you have to live with that. I would not stretch for yield. I would not stretch the duration. The approach that we’ve taken in our asset management business, we average close to 4% in dividends with exposure to hard asset companies, which is a very different approach than looking at fixed income for income, but one that I think makes more and more sense in the years ahead. If you’re looking at a T-bill position, I think you just balance it with gold and silver, and again, just kind of live with a little bit of uncomfortability. It’s not perfect. But I would guess that if you go out on the time horizon, in essence, a year from now or two years from now, I think you will find decent yields in two to three year paper, well above the T-bill rate.
And so there may be some comfort there as the bond market adjusts for sticky inflation that just doesn’t seem to go away.
Kevin: So you’re not saying run away from Treasuries, you’re basically saying, “Keep your maturities relatively short, but you don’t have to make them 90-day either.”
David: That’s right. And also what I’m saying is I wouldn’t stretch to two to three year paper today, but a year from now or two years from now, I think the circumstances will be ripe for an allocation to slightly longer duration paper, not out to five, 10 or 20 year. Not interested. There is way too much duration risk. And by that point, we may also be looking at significant credit risk associated with Treasuries. That’s to be determined.
Kevin: Our next question from Bill. This has to do with the cartels in Mexico. He says, “As we all know, the cartels have a lot of control on most things in Mexico. Is the government pro miners and making it easier to do business? And are they protecting the miners from the cartels? What I’ve heard is that they are after massive kickbacks, if not total control. Thanks, I’ve really enjoyed your insights.”
David: Well, I think it varies by state and also by how connected the miners are to the government. I can’t really say, but as metals prices rise, the cartels are paying more attention to the miners as a source of revenue. I think, again, you’re talking about the lower tier, which is probably most vulnerable, and in particular states. Established miners farther along in the mining life cycle are already a significant income generator for the state, and I would assume that those income streams will be protected. The greater threat is from government, not a criminal element. I know some people view government as a criminal element, but at least for this conversation, we’ll create that contrast.
Kevin: Right.
David: They control leases, they can change legal structure, resource nationalism. This is something that’s as old as dirt because it ties to human nature. These are real threats to the mining industry. So jurisdiction matters, which is why our percentage allocation globally, I’m talking about our asset management company, our percentage allocation globally to anything less than a tier one is de minimis. We do have some, but not enough to hurt us.
Kevin: You don’t take a lot of risk with that.
David: No.
Kevin: Next question from Tony. “Please help me understand the risks of being all in on precious metals, 100% hard assets in diverse places and forms. Why isn’t this a good idea now?”
David: Well, my own portfolio might be all in.
Kevin: Yeah.
David: I’d say ask me in five years and I’ll tell you if it made sense to be all in. I would say that diversifying across hard assets with a healthy exposure to metals makes sense. In our separately managed equity accounts, we have global natural resources, a very broad range of publicly traded companies that are in a wide range of commodities. Precious metals miners, infrastructure in its varied forms. We’ve owned everything from data centers to cell towers to toll roads to energy and gas pipelines, oil and gas pipelines. So global natural resources, precious metals, infrastructure, and periodically we have exposure to specialty real estate. I think I’ve talked about that previously. That’s an area that we’ve limited exposure to—actually eliminated exposure to—in the context of the rise in rates. So we manage top-down macro with an emphasis on company specific fundamentals, so bottom-up, micro as well, and it allows us to be very tactical.
And in anticipation of rising rates, we eliminated the majority of our real estate holdings and have been at zero for some time. So the all-in on hard assets, I think you need to broadly define hard assets. Get better diversification. I prefer that diversification. The record of the past year, sort of 2025, if you were ignoring this sort of past performance as not a predictor of future results, just measured on the past year, having 100% in precious metals probably made sense, but you can’t do that. Weathering a 20 or 30% correction, even a 50% correction, off of peak levels makes that kind of concentration unbearable. And I go back to 1973, 1974, gold moves up from $35 to 198, goes from 198 to 102 and from 102 to 850. And I can tell you that for anyone who was invested 100% in gold, they loved it from 35 to 198, and they were saying—
Kevin: And they hated it when they lost half.
David: Yeah. A 50% correction in the context of a structural bull market, it’s not without precedent. Ultimately, the journey from 35 to 850 was worth the ride, but to be 100% invested means that you’re losing a lot of sleep at different points in the cycle. Anytime you are all-in on an investment, there is an assumption about how much you know, both of the present and of the future. And we’ve always preferred a simple asset allocation model we refer to as the perspective triangle, a third in liquid assets—that’s cash, T-bills, money market funds—a third in insurance—physical metals—and a third in growth and income thematics.
And of course, our preference for that last third, growth and income, is in the hard asset space previously defined in those four categories. So these are all liquid assets. I think another way that, Tony, you could consider diversification is in privately held assets. That could be real estate, that could be land, privately held businesses. These are also allocations that offer diversification. They’re just non-liquid.
Kevin: Okay. Grant asks a question that I think, Dave, you’ve probably adequately answered in the rest of the program. He says, “With silver on a great run over the last two years and the gold silver ratio declining, where would you make a trade from silver to gold and at what ratio?” You want to just leave the question answered the way you have?
David: Yeah, I think I’ll leave that one.
Kevin: Well, then we’ll move to the next question. Thanks, Grant, for the question. It seems to be on everybody’s mind right now. So our next question, “Hi, David and Kevin. Greetings from Los Angeles. Thank you all for your insights in the podcast. I’ve been a longtime subscriber, 17 plus or minus years.”
David: Wow.
Kevin: That’s how long we’ve done that. Thank you. Thank you. “And genuinely appreciate your hard work,” she says. “My question, what factors do you consider when exploring the optimal time to sell silver, the gold/silver ratio or another metric? And do you have a time frame in which you could guesstimate when that ideal time would be?”
David: Again, similar to the last question relating to gold and silver, I’d say yes, it is the gold/silver ratio, which is one of those helpful things because price becomes irrelevant at a certain point, particularly if you’re talking about periods of time where a currency is under acute pressure and you lose any real reference. You saw that in Hungary in the 1940s. You saw that in Germany in the teens, 1918.
Kevin: In the early ’20s.
David: Yeah, 1924, where you could have an ounce of silver trade for billions of marks. What does the ounce translate into in terms of other real goods? And that’s where, again, thinking in relative terms is really helpful because eventually nominal pricing becomes very confusing. You’ve just got to disconnect from that at a certain point. So the gold/silver ratio is helpful. I think incrementally swapping to gold or if you’re going back to high ratios, incrementally swapping back to silver. And it all, as I’ve mentioned in previous questions, it depends on your starting point. But 60, 50, 40, 30, 20. I would do it incrementally. Don’t try to make any hero calls.
Kevin: Don’t try to hit the absolute maximums on anything. Yeah. Paul asks, “Is it possible to exchange, straight-up, silver to gold, avoiding tax liabilities of selling the silver and then purchasing gold?” Question number two is, “Is there anything going on as far as changing the way gold and silver is taxed? It seems for me, I would lose near 50% through federal and state taxes. Just doesn’t seem right.” And number three, with the federal government designating silver as an essential national resource, is confiscation a real possibility. Also, I wanted to thank you for your time and effort in doing the Commentary. I’ve listened for many years, and it has helped educate me in trying to decipher the economic puzzle. Thank you.” So those three points, two of them on taxes, one on confiscation, Dave.
David: Well, and I don’t have to have a CPA, the designation, to answer the first one. Avoiding the tax man, unless your favorite color is orange—
Kevin: Yeah, don’t do it.
David: —I think it’s a bad idea, plus orange doesn’t work with my skin tone. So IRAs are really the only way that you can approach reduction in capital gains tax. And if you have a Roth IRA, that is particularly compelling because you get to keep every dollar at the end of the day. You’ve already settled up with Uncle Sam on the front end. I do think that within the next five to 10 years, the Roth will go the way of the Keogh and other retirement strategies. It’s too good. And I think that the future need for revenue will mean that existing Roths are grandfathered, but new ones are not allowed. So if you don’t have one, I would start one. If you can start the gradual conversion from a traditional to a Roth, I think that is a great way to pay now so that you don’t have to pay more later.
Kevin: The younger you are, the better.
David: When I say pay now versus pay more later, the general assumption with a traditional IRA is that you are in your peak earning years and you’re stuffing away as much as you can into a traditional IRA and then taking out small amounts in retirement to add to or supplement Social Security. And the implication or the suggestion is that you’ll be in a lower tax bracket and you’d rather pay later. But when you look at our current fiscal mess, I think the appetite for revenue from government will only increase. I think it’s a healthy assumption that we move the direction of Europe and we move towards 40, 50, 60% tax rates. And so somewhere between paying off our debt with devalued currency and increasing revenue by jumping marginal tax rates, I would rather pay now than pay later, although that goes against the conventional financial planning wisdom of pay later because you’ll be in a lower tax bracket.
Kevin: Yeah. And then the third part, confiscation. I think you’ve addressed that also, but—
David: Yeah. And one more thing just on the tax piece, the rate on metals is 28% of the gain, not 50. If your state is adding that much of a burden, I would consider a relocation, particularly if you have a healthy gold position. That’s not the only reason to move, but clearly there’s a lot of states, Texas and Florida, that don’t have income taxes and have much more favorable tax rates for things like this. So I’d consider warmer climes. And if you’re in California, it’s warm, it’s beautiful, and it’s a tragic place to be.
Kevin: The left coast.
David: The left coast. Well, the last question—
Kevin: On confiscation.
David: —on confiscation. No, I don’t think it’s more likely. The impact is that it smooths the permitting process, and it makes the Department of Defense a likely source of funds for mine development and investment. We’ve already seen that with a number of publicly traded companies where they’ve taken significant stakes in those companies with the idea that they’ll have access to or an offtake agreement for production and can insulate themselves from foreign dependence for those products. So I see a positive in it, not a negative in it. That may change.
Kevin: For demand?
David: Yeah. And a positive in terms of— The normal permitting process, from the time I dig in the dirt, drill a hole, discover, in this case, let’s say silver, it may be seven to 10 years before I’m actually in production.
Kevin: But this may smooth it out since the Department of Defense is involved.
David: I think because we’re looking at strategic initiatives and national security issues, you are talking about an EPA and the permitting process with the Forest Service and any other parties, which will be pressured to go much quicker.
Kevin: So maybe a leapfrog, something like that. Okay. Rob asks, he says, “I’m told to prepare for bank failure. I already have one year’s worth of expenses outside the banking system. Using the Weiss rating system, I found a local credit union that had an A credit rating, but in one quarter it dropped to a C rating. If I take out the remaining 15% currently spread out among a few banks and later need to place it back to make a large purchase, I will no doubt be required to fill out forms and be scrutinized. Rick Rule’s Battle Bank sounds promising, but it’s not opening for six months.
“If the government will support the too-big-to-fail banks, then is that the best place to be? I was told local credit unions would be safer, but it seems they are vulnerable too. Should I move to a brokerage account? In light of the book and talk”—and we talked about this before, Dave— “The Great Taking, where do you advise holding cash? What brokerage firms are you recommending or are you using? Is taking possession of physical stock certificates an option? If so, how? Thank you. Merry Christmas, Rob.” So he’s got a number of questions about where do you safely have money?
David: Yeah, let’s start with the first. And we had a similar experience with a local bank here that prior to the global financial crisis was an A rated bank and it was about six months into the global financial crisis, they realized they had lent too much money into the local real estate market to a number of developers, and those developers were not going to make good on their payments. They went from an A to a D, and they are no longer in existence.
Kevin: That was a big jump.
David: Yeah. Now, of course the assets got bought by another bank, so it wasn’t as if the depositors had money at risk in that sense, but I think it’s worth regularly checking. And if you want to do that on a biannual basis, call our office. An advisor can provide those Weiss ratings for insurance companies, which we’ve talked about in recent commentaries, probably more important now than ever before.
Kevin: That’s a great practice to keep up with the rating on your bank.
David: Yeah. Look, if we’re doing an annual or a biannual checkup, and we’re looking at changes in your financial picture to see what needs to change to accommodate asset allocation models that fit new variables, whether it’s health concerns or a move or a liquidation of a home, we check in on those things, we’ll engage with you as often as you want us to. It makes sense that you do regular checkups on the institutions that you’re trusting your money with.
Kevin: Yeah. So just call us.
David: Yep. That’s credit unions, that’s insurance companies. Do we do credit unions?
Kevin: Yeah. Oh, yeah.
David: Okay. Credit unions, banks—
Kevin: Credit unions, banks, insurance companies.
David: Yeah. And we’ll get that for you. I would say that an easier approach is to spread the risk amongst several institutions and stay within the FDIC limits and manage your cash accordingly. I know a couple of corporations that have between 500 and a thousand banking relationships, and it’s a full-time job for a team to manage that—
Kevin: [Unclear] banks.
David: —institution’s liquidity and move so that there’s always under the 250 limit. So spread the risk.
I think one of the unanswered questions I have with Battle Bank is an area that I think they’ll come under intense scrutiny, and that’s their gold lending program. Every company that I’ve known who has done an aggressive asset-backed lending program has had issues at some point with loan-to-value flipping upside down and then dealing with legal implications from that, et cetera. So depends, of course, on how conservative they are with their loan to value, but it’s an unanswered question because there’s not a lot published yet. I don’t know how aggressive they’ll be. Future volatility, downside volatility, in the metals market could be the undoing of a great idea. That is a primary concern. I think I’ve addressed my concerns with the assumptions that go into The Great Taking.
What I would say is that holding a lot of cash for me personally, I’ve opted to hold it in metals, either in my own possession or if I need something that is more liquid and transactable, the Vaulted program which we launched in 2017 is a great way of very inexpensively positioning in and getting an economy of scale through partial purchase or complete purchase of kilo bars and thousand-ounce silver bars. So for me, I go back to that perspective triangle. If I have a third in physical metals, on occasion, if I’m uncomfortable with a cash balance, I’ll cheat the right side of the triangle and increase proportionally into kilo bar position. I do not substitute silver for a cash position ever because it’s way too volatile and unpredictable. And so if you are substituting for a “cash position,” focus on very inexpensive bullion gold products. That would be a way of holding cash in the 5,000-year old currency of choice.
Kevin: And the concern about the question in the question about forms, if you’re pulling cash out of the bank and putting cash back into the bank, there are forms that are filled out, but what you’re talking about, Dave, with Vaulted or anytime you’re doing a transfer within the banking system, there are no forms that are filled out. And so when you shift from your checking account over to Vaulted for a while and then it comes back out and goes back into the checking account, sure, you’re going to get a 1099, but there’s no cash reporting forms because there’s no cash involved.
David: Yeah. I mean, I would be cognizant of the fact that if you’re moving in and out of banks, an institution like I mentioned, having 500 to 1,000 accounts, that’s an established relationship and there’s established patterns of behavior. Anytime your patterns of behavior shift, you can expect a suspicious activity report to be filed. So if you’re operating business as usual, great. Great relationships usually come at small banks, not with large banks. So part of that question that ties to going to the too-big-to-fail banks, good luck having a relationship that matters. I prefer our local bank where— I started working here in Durango 23 years ago at the same time that a young man was a junior bank officer at that bank, and he’s now the president of the entire bank. I know who to call if I have questions—
Kevin: He knows your name.
David: —or concerns. We’ve done lunch once a year for 23 years. We compare notes on interest rate trends and leverage ratios and hot money ratios, and I have a good sense for where his bank is relative to the peers, but relationship matters. And when I think about what we do in the metals market, relationship matters. When I think about what we do in the asset management space, relationship matters. When I think about banking relationships, who are you working with? And if you don’t know them and they don’t know you, I think there’s a disadvantage in that. So I would try to pick B+ or better rated banks, smaller where the relationship is something that exists.
The last question was on physical stock certificates. I don’t recommend it. The industry has moved away from it, the cost to transact, the time frames involved when you have the paper and want to return it to a transfer agent and have it registered in your account, you’re going to be in a very difficult position if you ever want liquidity, ever need liquidity. The system has moved digital, and is not interested in accommodating your preference for paper certificate. I understand the benefits of it, but there are so many more problems that arise today. Even 20 years ago taking delivery of certificates and returning them to a transfer agent, it was a pretty straightforward process. Intentionally, it has become very difficult.
Kevin: So liquidity always factors into any decision that you make.
David: Yeah. If you are taking delivery of stock certificates, I think you’ve categorized it now as like a privately held asset. You can’t trade it. When I look at the perspective triangle and it’s growth and income on one side and it’s insurance and it’s liquidity on the other side of the triangle, I think you have to begin to re-categorize it because you’ve just lost one of the benefits of being in the asset class immediately.
Kevin: It comes more like real estate than a stock.
David: Yeah.
Kevin: All right. Sean asks three questions. He says,” I’m a low net worth investor who has purchased through McAlvany Precious Metals numerous times. How do I know if I qualify as a client for you to help me manage my investments and purchase new ones?” I think he’s talking about McAlvany Wealth Management. Number two, “For the podcast questions and answer, I would like to purchase mining stocks, but lack understanding of what one should look at in a mining stock or if they’re going to have a correction or not. I need a helper. Happy to pay you to find them for me. I may be too small to consider as a client.” And number three, “For the podcast in particular, would you be willing to share two to three investment failures that taught you important lessons? I’d love to hear them. You guys all sound so clever on the podcast, but surely you are flesh and blood and bleed at times. Love the podcast,” he says. Gosh, Dave, I almost want you to start with question three, but I can’t wait till you get there. The pain.
David: Yeah. I have a whole notebook—
Kevin: Of pain.
David: —of mistakes and assumptions that went into particular investment decisions. And I keep the notebook because I don’t want to remember inaccurately either what went in on the front end, just making a decision to allocate, or the postmortem, and there have been plenty of postmortems. When you’re assessing the dead body, the corpse, and saying, “Okay, how did this happen?”, it’s best to keep a record and reflect on it. I’m not interested in learning hard lessons twice. So my own investment journal or notebook, it’s a diary of mistakes, and I love it. I love it. I’m not hiding from them. In fact, I brought it out again. I’ve got it on my desk at the office. As we go through the end of the year and go into 2026, it’s always helpful to refresh and say—
Kevin: Good to review.
David: —”What was I thinking?”
Kevin: Yeah.
David: So I’ll get to that. The first question, I’d just say, give us a call. We can see. And for us to have a diversified equity portfolio, we need just over $100,000. Our stated minimums are higher than that, but we’re flexible. What’s critical if we’re owning 50 to 60 companies is that we have the flexibility. There’s enough breadth in the portfolio in terms of dollars to actually allocate adequately to the—
Kevin: It’s not that you’re trying to exclude anybody, it just doesn’t mechanically work under a certain level.
David: Yeah. I would say, back half of 2026, our most popular model portfolio should be in the form of an ETF. And so if you wanted to allocate $5,000, $10,000, 50, $70,000-
Kevin: That’s an entry.
David: —it’s very accessible. It’ll be available on all platforms, whether it’s Schwab or Interactive Brokers or whoever you happen to do your business with.
Kevin: Yeah. Okay. So the second part of the question, mining stocks can be a sticky wicket, Dave, if you don’t know what you’re doing, right?
David: Yeah. I think this is where the aggregation of knowledge and experience over time does give us an edge. There is a list of people that circulate within the mining space that border on charlatanism and gold bugism, and they’re really not good business managers. They’re interesting speculators and they’d love to speculate with your money as they try to dig something out of the ground and produce real wealth.
Having experience knowing the list to avoid is helpful. We focus on quality. We focus on the quality of assets, the quality of management, the quality of the geography, and we’re happy to find them for you. That’s a lot of what we’re doing, whether it’s in the precious metals space, the global natural resources space, the infrastructure space.
We’re looking at a balance between risk and reward. And you will find oftentimes our portfolio underperforms in a rising market because we’re not willing to take certain risks. They don’t fit the quality check boxes. Our buy boxes are not— The expectations are not met. So if you want more rank speculation, then certainly you can find higher returns. What we’re trying to find is the balance between risk and reward. So, yeah, we’re happy to find them for you and would love to engage with any of our listeners on that. I think 2026 is going to be a great year.
Kevin: Okay. So that takes us to your failures, Dave. We want to hear the failures. What have you learned?
David: Two big lessons on one particular company. The Williams Company is a natural gas pipeline company which I like. I think it’s a very intriguing investment even today. This is not a solicitation or recommendation. I’d need to give you that caveat, but this is looking back 25 years ago. Williams offered preferreds. And the preferred shares were issued at $25 a share. The yield was just into the double digits.
Kevin: Oh, wow. Good income.
David: And first of all, I fell in love with the yield, which if you were looking at tax-free munis at the same time, you could have been at six and a half to six and three quarters. So living in the state of California at the time, the taxable conversion would have been roughly 9%. So there’s a couple percentage points more on top for this preferred. And I thought it made sense.
I liked the Williams company, but I wasn’t following, I wasn’t in tune with, some of the macro factors impacting the energy markets. It was on the eve of the Enron debacle. And everything in the energy space was caught up short, whether it was Calpine or Enron or Dynegy. Williams certainly was in that mix too. And you were just in the wrong neighborhood if you were in nat gas. And you had the energy brownouts in Southern California. Of course, the decline, the ultimate destruction of Enron.
So, fast-forward, shares are issued at $25 a share, and I hit the panic button at 12.50. It was a 50% loss. And in retrospect, one, I didn’t need to pull out of the position. I had already done a study of the balance sheet, and Williams was going to be fine. Furthermore, having done a study of the balance sheet, I should have looked at the common stock. Trading at $1.75 per share, today it trades at 59. Twenty-five years later, it’s a 33x off of the recovery lows. I made two mistakes, and they all dealt with psychology. They all dealt with fear. They all dealt with second guessing.
Kevin: Was it all or nothing, too? Did you pull out completely?
David: Completely.
Kevin: Yeah. Yeah. That’s what you talked about in The Commentary. Be careful when you do that.
David: Yeah. And I should have been paying attention to the larger environmental factors, specifically the macro factors impacting the energy space. And so that’s one. The WMB PRI was the ticker for the preferreds. It’s etched in my brain. The other is DROOY, which is the ticker symbol for Durban Roodepoort Deep. And I think that was—
Kevin: I was on that one too.
David: Yeah, my mistake there was hindsight bias. Past stellar production in a period of time where occasionally with South African miners you can benefit not only from the depreciation of the rand, but also the increase in the price of gold. And this is one of the old, old gold mines. And I think there was kind of a familiarity bias, too, because I’ve been to some of those mines.
Traveling to South Africa with my dad in the ’80s to go to Blyvooruitzicht, to go to some of the richest gold mines in the world, never mind the fact that they were mostly played out. But again, between hindsight bias and familiarity bias, too much of the past was in my mind, and not enough of the future, not enough critical analysis. And so that was a big issue. I have a painting on the wall at home. It’s the only good thing that ever came from Durban Roodepoort.
And I was at the time fairly fully invested. And Mary Catherine and I went to Santa Fe. We’re on Canyon Road. There’s a whole series of fabulous galleries. And we saw a painting and we’re like, “This is one that we could grow old with. I wouldn’t mind looking at it every day for the rest of my life.” And I didn’t have cash in the account. So I went and sold shares in Durban and we bought it and I don’t have anything else of Durban. It was a nasty, nasty loss, one of the largest losses I’ve ever taken. I still have the painting. And in that I do also remember, it reminds me that when you get to elevated prices, migrate a few dollars. Don’t be greedy.
Kevin: I was in that one, Dave. And I will say that I had quite a bit. It purchased a racing bike for my son. That was the entirety of what I had left was a racing bike for my son. No, it was a great racing bike. It was a Scott. It was a carbon fiber, but yeah, a lot of loss there. How about any more?
David: Well, the last point would be private investments. And when you look at private equity, when you look at direct investing with people, I would just say it’s people, it’s people, it’s people. Great ideas are distinct from great people. And I’m analytical enough to look at a spreadsheet and analyze an idea and pick it apart and see what works and doesn’t work.
Nine times out of 10 when I’ve taken a loss on a private investment, it’s because I underestimated the value of the people involved, and integrity is 100% of what has to be in place. And I’ve witnessed this with my dad too. I’ve always invested in people. The more private investments I’ve made, the more, frankly, I love the public markets.
Kevin: Yeah.
David: And that’s not because I’m a bad judge of character. Well, maybe I am, but I think there’s easier risk management and I have not found sufficient premium returns for the illiquidity attached to private investments.
Kevin: That’s a good answer. And it’s a good reminder because people with heart a lot of times want to invest privately with people that they know.
Joel asks, or actually he says, “Love The Commentary. I’ve been listening for over 10 years and love your viewpoint as well as your biblical values. How can silver go up during an inflationary spiral that at the same time is an economic slowdown? Will the slowing of industrial demand lower the prices faster than the money going in can raise them? Would you expect a large slump in mining or bullion prices at some point before they continue to rise?” So what do you think?
David: I think investor demand is the, or a, major gap filler. When or if industrial demand slackens, then investor demand theoretically can make up for it. The scenario analysis is right. As the economy slows, you can expect to see some hit to industrial demand, but it’s not like all industrial demand goes away. So you’re talking about the marginal balances, the marginal flows. And I would suggest that, not only as we talked about earlier, solid state batteries from Samsung, that may be more than enough. And if their projections are correct, a demand source that takes 60% of every year’s available production, I don’t know what price you put on silver. I mean, that’s your $500,000 silver price. There’s no way to accommodate 600 tons going to Samsung. There’s no way to accommodate that, except with significantly higher prices.
So I think that you can run the scenario analysis and think in terms of GDP growth slowing or going negative, an economic hampering of retail interest and lots of products, demand destruction on the industrial side of the metals. It doesn’t account for economic innovations. It doesn’t count for technological innovations and it doesn’t account for the gap filling that comes from investors. So I’m probably less concerned there.
To the further questions, I wouldn’t count on better entry points for bullion or for the miners till the end of the cycle. You’ve got the major trends and then the minor pullbacks around the major trends. Bullion has broken out and the miners are just transitioning into the limelight. The reality is that real bull markets don’t afford people the opportunity to get in, and you wait for a better entry point and it moves away from you and you wait for a better entry point and it moves away from you.
Kevin: That’s truly been the case with this bull market.
David: Right.
Kevin: Yeah. People are just waiting for pullbacks that just don’t happen.
David: Dollar cost average, make your purchases in tranches. If you’re fortunate enough to get a pullback, great, but have a strategy otherwise. I hope for significant pullbacks. I hope for consolidations.
Kevin: That’s why you keep some cash ready to go.
David: Always have some powder dry, but I think you have to shift the mindset. We’re in a significant bull market.
Kevin: It’s been kind of fun.
David: It is.
Kevin: Yeah. Chris says, “Hello. Many years ago…” Oh, you’re going to love this question, Dave. This is just right down your alley. “Many years ago on the Weekly Commentary, David and Kevin were discussing precious metals and David mentioned an old book on gold. Perhaps it’s listed in his most important books, if such a list exists. I’ve searched the Commentary archives, but cannot find a reference to it. Is it possible David or Kevin may remember the title? I realize it’s a long shot, but David seems to have good recall of books that were influencing to him. As it is out of print, I have the title in my Amazon saved list, but it is no longer there. Any help would be appreciated.” Dave, there are some outstanding books on gold. Are there any that come to mind where it’s out of print? Two or three came to mind for me when I read the question.
David: An indirect one that’s a classic is Jacques Rueff’s The Monetary Sin of the West.
Kevin: That’s right.
David: And I say it’s indirect because it’s about the fiscal pressures and the monetary choices that were made in Britain during the ’30s and the similarities to decisions that needed to be made by the French in the 1960s and ’70s and an appraisal of where the US was in that timeframe. And so certainly, there’s a thread that runs through that tapestry, which is a golden thread. So I would say Jacques Rueff’s The Monetary Sin of the West.
Kevin: I brought that one up, actually. I brought that one up. You bought this for me, Dave.
David: That’s fabulous.
Kevin: I think he spent 250 bucks to buy this for me, actually, because it is out of print. And then I found out that the Mises, if you go to Mises.org … Yeah, Mises Institute has it for free. So you can read it at Mises, if I remember right.
David: That’s a PDF. It’s not a hard copy.
Kevin: It’s a PDF. It’s not this. So thanks, Dave.
David: You got to have a hardback.
Kevin: Yeah.
David: Roy Jastram’s The Golden Constant is a great retrospective on how gold performs in both inflations and deflations, and it does an amazing job of demystifying gold. I think it’s a healthy balance to Barry Eichengreen’s Golden Fetters in which he basically lays 100% of the blame for the Great Depression on the gold standard.
Kevin: That’s a Ben Bernanke move right there.
David: And it’s become a book that has informed most public policymakers and professional economists, which is unfortunate.
Kevin: You don’t read that book.
David: Well, you can read it, but I would read it right next to Roy Jastram’s so that you can have kind of a contrast and a balance. Let the debate occur between the two authors and you act as moderator, reading them. That’s a healthy perspective.
The last book that comes to mind, I can’t remember the title. I was on my way to interview Larry Kotlikoff for The Commentary.
Kevin: Yeah. He wrote the book Jimmy Stewart is Dead.
David: Yeah.
Kevin: Remember that? Yeah.
David: And he’s done some great work as an economist. I think he’s at Boston University.
Kevin: Yeah.
David: And also some interesting work on Social Security, Medicare, Medicaid, unfunded liabilities. He’s a good thinker. So he was running late and needed 20 minutes. So I just walked around the block and there was a used bookstore. I walk in and I opened this book and there’s an abstract by John Exter.
Kevin: Your dad knew John Exter.
David: He did. And he was at the Federal Reserve Bank of New York. I think he also served in some capacity with the Central Bank of India. I’m trying to remember all of his biographical points, but I can’t remember the name of the book. Yeah.
Kevin: We’re going to have to leave it a mystery. You know what? Commit. We’ll commit right now, when it comes to mind we’ll say it on the Commentary.
David: I’ll say it on The Commentary. What was interesting about that book is it’s a conversation by central bankers on the topic of gold. And Exter is a champion for gold ownership and the gold standard. And his inverted liquidity pyramid is worth studying and figuring out because in the context of crisis I think that’s probably one of the greatest visuals you can have in mind. Why do you want gold in the context of a financial crisis?
Kevin: It’s like a funnel.
David: Look at the inverted liquidity pyramid. Anything that’s at the top of the funnel you want to avoid. This is derivatives, and you can kind of see this gradation of quality and liquidity.
Kevin: You can stand to cash, and then he gets to the gold. Yeah.
David: So obviously, he’s not talking about the inverted liquidity pyramid in this chapter, but there’s this active debate throughout the book. And there was a discussion in the 1970s about controlling the price of gold.
Kevin: Volker even talked about that. Yeah.
David: One of the salient points was, we cannot allow speculators to benefit from devaluation of the currency, which would show up in the appreciated price of gold.
Kevin: It’s a tattletale.
David: And I’ve always thought, “Well, for all of those who are concerned about tinkering with the rules in the middle of the game, central banks certainly see the rules as flexible and pliable.” And to be unaware of that as a risk factor is to be naïve. And so when I find the book, we’ll post the title. I don’t know that it can be found.
Kevin: I think we’re going to have to leave that a mystery, and that is our final question.
Hey, thank you all for your questions. Dave, I know you appreciate it too.
David: Well, let me just say 2025 was a great year. I think 2026 and 2027 will continue to be great years. We look forward to learning and growing and exploring what’s happening in the financial markets. Really appreciate the questions, the level of engagement, and for many of you the commitment to be with us every week for years and even decades. We just wish we knew you better and could have these kinds of conversations across the table with a cup of coffee. We really appreciate you. So thanks for contributing the questions and giving us the opportunity to explore them with you.
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Kevin: Well, 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 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.
