How much further will gold and silver run?

0:10Clem Chambers, welcome back to Seeking Alpha. Welcome back to Investing Experts. Always great to talk to you. It's great to be back. I'm actually here in New York. New York, New York. So good they named me twice. And it's buzzing here. It's buzzing. Hey, if you can make it there, you can make it anywhere, Clem. Ah, yes, I know. I've woken up in a city that never sleeps. Hey, we could keep this going all day. There's a lot of material to source. Talk to me. What are you doing in New York? Are you getting a sense of the pre-fed meeting vibes or other information? My vibes at the moment are, oh dear.

0:49I mean, gold and silver and the precious metals are on their way. And that only says one thing to me, which is trouble. in the world on the military front. And so I'm expecting the White House to do something pretty striking, hopefully not literally, on the Ukraine situation. And I think that's why gold is running and silver's running and gold's broken out and silver's broken out and precious metals. I mean, not that long ago, but a couple of years ago. I'm not a gold fan, never have been. don't really like it i've got a load now but i was just kind of thinking and i thought hold on a minute why do governments hold gold and you know people say oh well they're going to turn it back into money one day well no they're not they're never going to do that so why are they why do they have warehouses full of this stuff like that well what's the point of that then and of course you know suddenly it just jumped into my head well it's you know it's the it's bullets it's currency of war in a war you pay in gold in peace you pay in paper but in war you pay in gold so you know that's why countries keep it that's why they can't not have the ability to fight a war so you've got to have a warehouse full of it and then of course the the implication is over many years that war and the likelihood of it has receded and of course now it's not receding anymore it's it's the opposite it's coming this way and every month that goes by there's another headline of of you know oh no what are they doing no oh dear and they're gonna they don't they want to do what and which country now doesn't like another country and and you know china and and taiwan pakistan and india russia and ukraine russia and europe america versus greenland i mean you know Oh, dear.

2:46I shouldn't laugh, but you'd cry otherwise. And of course, it means that gold's going to go up because every country's got to buy more gold, hasn't it? Because as tension rises, you've got to defend yourself. And one of the ways you defend yourself is by having gold, because that would be the currency if things got really bad. I mean, you know, Poland kind of came out a couple of months ago and went, yeah, we bought loads of gold. yay if you're um not really into geopolitics you go why would poland care about buying gold well what's that all about well obviously you know they're not necessarily particularly um historic friends of russia and um you know that's why they're buying gold and they're not the only ones that's why china's buying gold that's why all sorts of countries are buying gold and in the old days you know there'd be people like me going oh i'm going to buy some cougar hands i need gold and you know the investment banks will go i can push those guys around i can go sure i can run the price down i can run the price up the customer is the retail and and they've got no way of stopping me pushing them about and doing what wall street does but when a government comes on board and starts saying we're buying gold you can't get in the way of that price wall street or whoever can't get in the way of China buying gold, can't get in the way of that demand, can't get in that, you know, they can't get even in the way of countries like Poland, because countries are the£800 gorillas.

4:12And no, you can't manipulate the market against those guys. And that's why the price is running, because there's a customer out there, many customers, and they're the biggest possible customers, and they are buying gold. And that's why the price is running. The question is, how far does it run? Not which way is it going? So how far does it run? What are you looking for along the way? And what if a lot of this military posturing doesn't turn out to be, you know, hopefully it doesn't turn out to be a bigger deal than it already has? What if it dwindles down? How do you see it going either way for the precious metals?

4:50Well, you see, I look at charts and the reason I look at charts is they show you what the people who know are doing, because they can't really go and buy tons and tons of gold without pushing the price. And so when it runs, you go, oh, no, ah, here's something wicked this way comes. And same for Bitcoin, because Bitcoin is is flight capital. So if there are people on one side of an argument and they think they might have to leave the bar in a hurry, they buy Bitcoin because it's flight capital. And you can flee with Bitcoin at a much bigger scale than you can flee with gold. And, you know, it's perfect for flight capital is Bitcoin.

5:34And so you see Bitcoin. Although also, if I may interrupt, we're also seeing like this President Trump's strategic reserves. we're seeing some countries get into Bitcoin we're seeing a lot of companies get into Bitcoin it seems to be evolving beyond that I'm not a fan of that argument I would tend to say that whatever government touches turns to dust and I think we would all agree that they don't have a great record of efficiency or looking strategically forward on what's going to happen so the fact that government says ha ha we like this now that's no endorsement in fact it's the opposite you know that the dead hand of the engagement with government is is really a negative and bitcoin has run as it's run purely on on the um on the retail market and now that we've got so-called institutions well they're not famously good for the assets they look after in fact they're the opposite they're famous for rampaging through the um through the private investor and industry sucking every fiat dollar out of an asset they can get their fangs into that's what happens with the institution so institutions now saying it's is exactly a counter indicator and government getting excited well that's that's not so great either and when the sorts of governments are really excited about bitcoin you find out the ones that are really excited it's even less of an endorsement north korea um el salvador iran he ran mines 25 of the bitcoin you know oh yes what an endorsement that isn't so anyway um you don't really have that sort of anyway but bitcoin says oh something something's going to go bang very shortly but gold going up is is the grind towards you know conflict and there's a long road for that to grind along and um you know 5 000 see i i thought before this all kicked off before this sort of thing when gold was nobody loved it a few years back i i wrote it's going to go to three and a half thousand and i wrote that in forms and i drew little googlers on the old chart and said this is where it's going to go and it's there now and then i couldn't when i said it i can see it going to three and a half thousand i can't see it going any further i you know my my or my voodoo magic says three and a half thousand and then when it started to go it became clear to me that it could go to 5 ,000 so I think 5 ,000 is is a number but as things unfurl it will become clearer what that this will all mean so I think somewhere in the four to five thousands is is what's happening next and things would have to develop in a more negative manner for any move above 5 ,000 to be a thing but you know if bad things did happen and frankly if if you're not confused and upset and and disorientated by how geopolitics has been developing in the last year, then maybe you haven't been reading enough.

8:31It can go to 10 ,000. It's like when people say to me, oh, Bitcoin's going to a million dollars a coin or$10 million a coin or$20 million a coin. And I go, yeah, but beer could cost$10 ,000 a pint. And there's all sorts of things that can happen to make big numbers. But what you really want is an asset that goes up in real terms. And gold is going up in real terms because the demand for gold is going up in real terms. And therefore, the value will go up in real terms. And that's really the key. And if you look at, say, silver, there's some very funny ratios going on in precious metals. Gold, they make 3 ,200 tons a year of that.

9:13Now, they make 25 ,000 tons of silver. And there's a shortage of silver, but that's only eight times as much if my mental arithmetic does the business. this so you know silver eight times gold that'll be like 400 dollars an ounce and i can't i don't see that i don't i'm not saying that's going to happen but the ratio of production is is 25 000 tons to 3 200 and when you go to platinum which is an incredibly important thing for the future hydrogen economy um dealing with all this pollution that's going to be caused by all this energy that's going to be needed because of of ai they only make 200 tons of platinum they only make 200 tons of palladium 200 tons i mean that's crazy right so that is kind of where i'm i'm digging into when it comes to uh precious metals is now what's the demand and supply and what is the the production level and what's going to happen when the price goes up now there's a lot of silver out there just sitting around and so you know if the price moves much above where we are now all of a sudden people were melting down tea surfaces again like they did back in the back in the day and there are a lot of tea surfaces and it always i mean i i i could have 100 weights of well even more i could have tons of silver and which i could buy in tea services and knives and forks because you can basically buy all that old victorian silver which is beautiful and handmade made and fabulous for the price of the silver in it in fact you can buy it at below the price of the silver and you know so that stuff is out there so silver actually can um you know we can find a lot of silver out of centuries of silver usage um and melt and you know that's what people do they they buy teapots and they melt them down because the tea silver in the teapot is worth more than the teapot quite incredibly even stuff that's 400 years old even stuff that's like charles ii of england by the far great far london when you buy a teapot from that period it's not much more than silver value because nobody uses that stuff anymore and who wants to have it on the shelf when someone comes from your window to take it away um so there's issues with that but nonetheless going back to precious metals these precious metal ratios what will pop out of nowhere if the price hits a certain level that is interesting but the direction of travel is up because of this global tension.

11:42I mean, this meeting just a few days ago between China and Putin and India, I mean, how can gold go down? How does the interest rate conversation figure into this? As I mentioned, we have a September meeting coming up. There's much talk of lower rates. How does that figure into the precious metal conversation? Well, okay. First of all, interest rates are set by central banks and they can set them where they like okay and they can they can make their bond yields go wherever they want to go if they want to but there are ramifications so if a central bank comes out and says right okay we're going to buy back our bonds and we're going to keep on buying them we're going to bring down the the value or the yield by just buying them back and giving you a fear you can you can bring that bond rate right down you can bring the interest rates right down and that's what QE was about but the trouble is with that is that you end up monetizing your debt and you then end up injecting cash into the system which then there's more money than the stuff and you get inflation that's how it works monetization printing money okay you can just print money you can just you know say bring paper in this one end and we will push paper out with presidents on the other end and you get inflation or you can say give me give me your bonds and i'll give you cash which is almost as bad because all of a sudden people start printing bonds and that's the same loop or you can say give us our bonds back that we've printed there's enough of them after all and that has a very similar effect at all so it's all about liquidity how much you inject where you inject it and how you shift the the the the the overall spread of liquidity stroke illiquidity so the more you bring assets towards liquidity the more cash goes into the market and it starts splashing about the place and flooding around and you know i had a government i had a million bucks of government bonds but now i've got it in my hand and now i'm going to um you know buy a buy a car with it or buy a house with it or go on holiday and create retail inflation so what happens to interest rates and what happens to liquidity what happens to what the central banks do next is very much a determining factor and most central banks have been trying to pull in the liquidity that they pushed out during covid without crashing the economy without taking too much money out to get inflation back under control but now america is decided or the american government decided that they want growth hell for leather and their interest rates have to fall and thereby buy liquidity must go up and therefore that's going to be stimulus if but it's also going to be inflationary and it's where they set that balance because they they can they can they're they've got all the tools these days it's just about you know the reason central banks are made independent is so politicians don't go around and tell them that they need to get re-elected next time around and flush the money and don't care of the consequences now if you go south of the border and you go to South America they've been doing that for 100 years which is why they've got all that inflation because they say print money I want to be elected print more money my mates need more money print it for them and that's how they have all this runaway inflation and that's why places like Turkey have runaway inflation or because they just print money they don't tax they just print it and they use inflation as the alternative to tax and you know that's a very miserable place that you end up in down here you have too much austerity and everybody's not enough money to go around.

15:23You could be doing so much better if you printed some. And at the other end is something completely different, which is hyperinflation and countries move from one end to the other, depending on their political system. What's your sense or what are the scenarios that you're playing through in terms of the bond market for the next couple of months and the stock market for the next couple of months? I'm worried. I wouldn't say worried, but I could see a potential coming where the political level is picking a fight with the central bank level. And what happens then? I mean, you know, the central banks have been working very, very hard to try to, you know, keep things on the rails.

16:01And they've been left to do it. And they've been given support by the political systems all around the world to do their job. They haven't been told that they don't know what they're doing, and that they should do something else. That's the whole point of being independent that politicians will try that one on. So when you start having America saying, oh, you central bankers, you don't know what you're talking about, you're idiots, start actually insulting them in a sort of schoolyard manner, and then start getting them sued to throw your weight around. Well, that's potentially an explosive situation, isn't it?

16:36What's your sense? You wrote an article last week about Intel. What's your sense of how much the tech sector figures into the general stock market conversation? And what's your sense of how tariffs are affecting the market? Well, I think tariffs are a single hit to inflation. And once they've factored in, that's it, unless you put them up. And then when you charge$7 million for a container ship from China to land at your hall, you're injecting another percent or two of inflation into the system and that's happened and i was even noticed that there's this big um two percent import duty that comes by charging chinese um ship owners a you land that here we're going to charge you seven million dollars and you know that that's going into inflation and that's another thing so there's a lot of unexpected unpredictable not even followed things that are happening and they're all getting baked into the economy and it doesn't have a positive or negative effect much apart from you know reading headlines to start with but then it gets baked into the system and it's either going to be good or going to be bad and there's so much getting baked in and it's so dramatic that it just adds to volatility which means we could have a great run for six months and then a crash uh it could go to the moon one minute and then and drop like a rock the next because without a doubt overall uh economic and political volatility is up and that means things are going to be a more bumpy ride so overall we're just going to have a really really bumpy ride and it could be good and it could be bad and you know it's hard to imagine somehow it's going to be amazingly good but you know who knows there it is and and And when does the process of injecting more and more volatility end?

18:32Because this is going to get cumulative. Yeah. So you start out with a tremor and then you get a shake and then you get a real shake and then things start to break. And, you know, that's the trip you take from being Switzerland to going to the far end and being Sudan. Right. It's just a level of volatility, a level of unpredictability, a level of entropy, a level of madness you know there's no government that it doesn't get up to mad stuff or anybody for that matter but when you get down the far end it's you know absolutely terrible and unfortunately we're going through a period of increasing entropy and increasing volatility and increasing danger and going back to gold i'm not a gold bug i just you know that is the currency for that situation and you know we're bound to see elevated volatility elevated inflation elevated uncertainty and you know that is i suppose that's if you're a speculator that's that's wonderful news because that's where you make your money but going back to tech i see that we've had a market that's developed into very much concentration to a very small numbers of stocks and and that's kind of been a factor of a lot of market operators using hedging to to um you know generate their returns and of course if you follow the logic of hedging you end up going long a smaller and smaller group of larger and larger companies and shorting a broader and broader and broader group of smaller and smaller companies so you get valuations kind of like both suddenly there's like a small group that valuations don't make any sense anymore that everybody buys and a large group of people that everybody kind of sells and i think there's a lot of that has been going on a lot of that hedging and arbing has meant that a small group of superstar stocks with the ability to to have incredible um quarterly earnings and do all sorts of magic with numbers get into a tighter and tighter group of more highly valued companies.

20:42While great companies have great businesses and make great money that even pay dividends are basically suppressed because they're the short leg of the long leg, which is now only concentrated into a very small number of companies. We were just talking about this on our Wall Street Breakfast podcast, where our director of news was talking about these valuation concerns, specifically as it pertains to NVIDIA after their earnings calls. What's your sense of how you're looking at stocks? What's your sense of how you're specifically looking at them now? And how would you encourage retail investors?

21:19What metrics or what data points is it earnings calls? How should we be digesting and marinating over the data points? And what data points would you say are worth focusing on? Well, you see, I'm basically a contrarian. So I disagree with everybody. And I just find the completely obvious thing that's wrong like for example they only make 200 tons of platinum i mean i can't explain that i can't explain why that should have the same valuation as gold so you know it's such a chasm it just doesn't work in my head so much that i follow that so for example the market looks about a year out okay and so if anything's going to happen maybe in more than a year's time nobody cares so i like to look out two years most people cannot be contrarian they they want to go rah rah rah and support stocks and investments like sports and and they somehow think that their opinion somehow makes the the progress of that asset and helps it you know or or what if they're short they say oh it's rubbish it's rubbish and they expect what they say they hope what they say will make it go down and i i don't go along with any of that i just think that most people should find the the theme of investing be it momentum be it tech be it contrarian be it value or whatever it wants to be be astrology and and they need to be find an area where they're comfortable in and they and they feel that it flows for them when they make three decisions they're only wrong ones yeah so that and and that could sleep at night so you must sleep at night you should be diversified and you know you should be um you should be sensible you should find the thing that fits so if you love tech that's great if if the only thing you love in the world is tesla then just study the it to death and you'll know when to be short and when to be long so you know but as long as you're comfortable with it rather than you know oh i've got some testages i'd like to ask you what you think about them you know if if if you if you don't know if you have to ask the answer is always no so you have to find the comfortable place the happy spot for you and then it'll go it'll be fine and if you if you don't then you won't be fine and if you follow other people you won't be fine you have to absolutely know with your investments i know i should be diversified um and i should have 40 in bonds and 60 % in equities or 60 % in bonds or 40 % in equities.

23:55I absolutely know that. I've read a few books and I'm convinced that's the right thing to do. And I constantly check that I'm not wrong. And that's what my thing is. You'll be fine. You know, if you go, I went down a pub and someone said, there's this new gold mine coming up and it's going to be great. And they drew it up to the center of the earth and it's all gold down there and it's going to go to the moon. You're lost. You're going to lose all your money. so in a way you should you have to have a theory and you have to keep testing it oh it doesn't matter how mad it is doesn't matter that nobody agrees doesn't matter that everybody agrees you got to keep testing you got to keep testing it which is the whole purpose of of you know of your publication is that you can constantly benchmark acid test your crazy ideas or maybe brilliant ideas against everybody else and pretty much everybody else is going to be wrong just like you but you have to keep testing it and then you'll be fine you'll do great would you say that you have learned more from experience or was it a book was it a guru was it somebody that taught you something and then you applied it what has been the greatest teacher for you for me what I did when I started out and doing all this is I just made little rules don't buy political footballs don't buy family firms don't buy companies with a PE more than wealth don't buy companies that send out press releases that start off with I'm delighted to to tell that our figures are down this year or whatever just just a list of these little rules and and don't break them and then see how they work for you and then that was that's a really this family firm's gone up 10x I got that one wrong or whatever so you just build up these rules and then you don't have to have many and but you'll pick up more as you go along oh ah no I don't know ah and so you know add another rule to the list and you just build up this heuristic and you know keep it sane sane and obvious you know if you are you know there's a there's a there's a planetary um uh thing going hang on over there and I'm going to go long wheat.

26:05No, you know, keep really obvious truisms and you don't need much of a list. And then you look around and you see ones that fit them on the buy side or break your rules so you don't buy it. And then you just go around the perimeter. Oh, look at that one. Oh, tick, tick, tick, tick, tick, tick. I have some of that. I've made too much money on this one. I need to sell some to get back to my diversification. I'll sell some. how much conviction do you need to make something a rule like what what what is the metric that makes it a rule is it seen something a few times or sense intuition just seems like common sense yeah common sense that rare thing i was gonna say does that still exist clem is it still around i mean it it it doesn't and and and that's mainly because of of the current um state of the media yeah but that's really where you make your money by getting to your common sense it's like someone was talking about warren buffett to me he said oh warren buffett's selling down his stock it must mean the market's going to crash i said it must mean he's 93 and he's he's making arrangements it's common sense that somebody of his age is going to be starting to you know organize his affairs right you don't have to imagine that it's something more complicated than that so just keep stuff really really really really simple it's like you know what's the purpose of gold it's a simple question.

27:25What is the purpose of gold? And then work out from there. So you get your little ideas and then you just keep testing them, testing them, testing them, expecting them to be perhaps wrong or the world to change on you. Yeah. And then you'll be fine. You'll be fine. And you'll make on two and you'll lose on one and you'll be fine. Well, appreciate the conversation, Clem. Clem Chambers is the name that he goes by in real life and on Seeking Alpha. I'm happy for you to share with our listeners your final words and also where they can find out more of your analysis and writing? They can read my stuff on Seeking Alpha.

28:04I know a lot of people write a lot on Seeking Alpha, but I only write stuff when I think it's glaring and it's good because I write for publications like Seeking Alpha and Forbes and do lots of media as a way of crystallizing my thinking so that, you know, I can, I don't go, oh, actually, that's, I sound silly when I say that. Oh, So it's clear in my mind why I believe, for example, gold is for war, why platinum is only 200 tons a year of production and what the implication is of that. And by having to go through those thought processes, it over the years has put me on the spot to pick up on lots of great opportunities.

28:46And occasionally, you know, you take your half the ball for 10 minutes and you miss something like the quantum thing. that I completely missed that earlier on in the Anna Rowe piece in Seeker Alpha about what are the equivalent of quantum computing that will be coming next, the themes that can break out and will have a mad, crazy trading opportunity if they do. That's the sort of thing that I like to write about. I hope people enjoy it. Just a reminder, anything you hear on this podcast should not be considered investment advice. This is for entertainment purposes only, and you should seek advice from a licensed professional before investing.

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