Speaker 1Hello, everyone. Welcome back to VRIC Media, your most trusted voice in metals and mining. I'm your host, Daryl Thomas. Today, we have the pleasure of interviewing Lynn Alden of Lynn Alden Investment Strategy. How are you doing today, Lynn?
Speaker 2I'm good. Thanks for having me back.
Speaker 1Yes, yes. Always glad to have you on the show. So I want to start with these bond yields. I know you've been providing some commentary on them recently. They've been pushing higher. So we're seeing these higher yields we haven't seen in 20 plus years. And is this a structural bear market for bonds where this can be just a longer-term trend where we have higher yields?
Speaker 2I do. And I do think it's a structural bear market. I mean, it's a kind of a negative view I've had since that 2018, 2019 period. I wrote a piece called, is this a bond bubble or is this the new normal? And my view at the end was it's not normal. It is a bubble. That was back when we literally had, I think we peaked at like 18 trillion in negative yielding bonds in the world, which is comical to think about now, that there were entities willing to literally pay money to store their wealth in bonds, rather than be paid to hold bonds. But that's the, that was like kind of the deflationary crunch we were in, in that kind of 2018, 2019 window. And I mean, it's all, so on one hand, we've already had, I mean, like the, just speaking of U.S. treasuries, let alone the rest of the world, but U.S. treasuries have already had like their worst five-year performance pretty much on record, especially when inflation adjusted, just absolutely catastrophic. And so, on some hand, like I would say the acute phase of the bear market is probably already over. Like the banks, their own balance sheets getting messed up by holding treasuries, just bond bulls, just getting completely just wrecked compared to every other asset out there. Like almost everything goes up except for bonds and currency. I think that the divide is actually, now that we're all talking about it, now that yields are over like 5%, it's almost like that, that crazy phase is done. But you can have a quieter bear market where you just, yields could go sideways. And just the fact that they're not going down anymore takes away that 40-year tailwind that bonds had of just, you know, yields grinding lower, which means prices grinding higher. If you just have flat yields, it means you have flat prices. So the entire return kind of comes from the yield. And when you combine that with various financial repression techniques, you can have a higher yield. And so, you know, bonds are going to be a very attractive place to be, even if the shock and awe phase of that bear market is perhaps actually behind us. If you want to learn how to make money
Speaker 1in precious metals, you need two things, to hear from people who've been right about the sector for decades, and to get face-to-face with early stage mining companies before everyone else does. That's exactly what's happening at the above and beyond summit. You hear from thought leaders such as Lynette Zhang, Jay Martin, David Morgan, and myself, and hard money advocates like Arizona State Senator Mark Fincham. And you will be in the room with early stage miners themselves, able to walk up, ask questions, and size them up in person. This conference is happening from November 22nd through November 24th in Scottsdale, Arizona. So sign up now and take $500 off with promo code VR500. That's VR500. You can click the link that is pinned in the comments or in the description, and we'll see you in Scottsdale. What does this mean for the banking sector? So we saw in 2023, we had a few banks collapse, and they had a run on the bank. And what we saw there was that banks were holding these treasuries that were very low yielding. And as the Fed raised interest rates at its fastest pace in 40 years, those banks got under pressure, and we started to see runs on those banks. And so do you see this being a broader issue for the banking sector? How are you seeing this? Yeah, good question.
Speaker 2I actually think banks are fine now, in general. I mean, obviously, individual banks can fail. There's bank failures every year. That was, I mean, there's a reflexivity issue. So when you go from, say, 1% yields to 3% yields, in terms of bond price, that's a bigger impact, than going from, say, 3% to 5%, or 5% to 7%. Let's say that happens. That reflexivity is a bigger deal. And so that was kind of like bonds being long at the top. And it was a couple other things combined. I mean, so the banks that were in trouble, like Silicon Valley Bank, they had a handful of things going against them. It wasn't just being long bonds. It was, one, they generally took in a lot of deposits very quickly. So Silicon Valley Bank and just, I mean, a lot of banks were taking deposits because of all the money printing. And so they were taking deposits because of all of the money printing. But Silicon Valley Bank and a couple others were taking in much faster deposits. And then they plowed them into treasuries and mortgage-backed securities at the wrong time. And then, two, they also had a higher ratio of depositors were not FDIC insured. Because FDIC insurance only goes up to a quarter million. And a lot of these were business accounts. And a lot of these were, in some other banks, it was wealthy individuals. And so they were actually not protected. And so they were not protected. And so at least the bulk of what they had in there was not necessarily protected. So when they get any tiny whiff of a bank failure, they're quick on the trigger finger to get out. Whereas investors that say, well, I mean, it's covered by FDIC insurance, they're less likely to freak out. So for example, on paper, literally Charles Schwab was insolvent. They actually had the same problem. But they didn't have the problem of flighty deposits. So you needed kind of both. There are some where they had big unrealized losses, but they didn't have flighty deposits, because they didn't have that kind of profile that was like concentrated wealthy businesses or individuals that were not FDIC insured. Or there are other ones where they had flighty deposits, but they didn't have the core issue. They didn't have, they weren't like, you know, underwater on bonds. So the banks that failed were that one-two punch. I actually think banks are fine now. And if, you know, when people see like, for example, the Japanese bond yield soaring, I mean, obviously, it's a very publicly indebted country. And so, you know, when you go from almost zero yields to over 3%, people are worried about the banks. If you look at bank stocks in Japan, they're actually doing wonderful, is the funny thing. This past few years of rising bond yields have been amazing for banks there, because they can't make money on like a totally flat yield curve. You know, if like the 10-year is pegged at 0.25%, and the. And the short end is like negative 0.1% or whatever it was, that, I mean, the absolute numbers are so low, they had so much trouble making money. And if anything, a steeper yield curve is just way better for them. And some of them at the current time are having unrealized losses on their balance sheet. There's, you know, obviously certain banks can have problems, but especially for a lot of the large banks, you know, it's like they take one hit on their balance sheet, but then their income side improves dramatically. And so I actually think in a lot of countries, the banking system is not the heart of it, even though we're all kind of trained from 2008 to worry about the banks. It's not to say there's nothing to worry about, but it's just, I think the problem is elsewhere.
Speaker 1Got it. Got it. Yeah. Thanks for sharing that. So with these higher yields, I imagine this is going to be a longer term problem for the U.S. government. How do you see that fiscal dominance playing out in that way? Do you see the Fed eventually being forced to intervene? I know that their balance sheet has been growing not as much as it's grown in the past, but there's been some debate about the big print. You wrote the gradual print. And so I want to get your perspective on that.
Speaker 2Yeah, I continue to view the gradual print as in play. I think this is a slow burn crisis rather than kind of a sensationalist one, meaning that the responses will be numerous and smaller, most likely, rather than large and, you know, time constrained, meaning like we already see, for example, that the Treasury is shifting around various things. It's doing buybacks. You know, it's taking effort to kind of unsuccessfully, you know, address the bond market. And, you know, we can see things like that with the Fed in the future. You know, like, I mean, even the fact that right now they're ostensibly trying to fight inflation. They acknowledge inflation is a problem, and yet their balance sheet's going up. Like, even though it's going up slowly, it's still going up because it's kind of a separate problem. So there could actually be moments where they come in and just buy bonds. Like the Bank of England, literally at the peak of inflation in 2022, the famous guilt crisis or the lose trust moment, the Bank of England literally canceled a planned speech that the governor had on balance sheet reduction to instead do emergency balance sheet expansion. Like, it's a typical shift that they had to do. And the funny thing, they were able to eventually reduce the to some degree, but they weren't able to do it on the timeline they expected because they had to put out literally a bonfire. And so I think the US and the Fed could find themselves in a similar situation. But in general, I think these issues are going to be longer term and individually probably not that big, and they just accumulate over years.
Speaker 1Okay. Okay. That's interesting and Totally get that. So I've been having a lot more conversations with people that I know about long-term debt cycles, monetary cycles, and everything. I've been reading a lot of Ray Dalio's work. And when you look at problems developing in the sovereign debt markets today, where do you think we are in this broader debt cycle?
Speaker 2So I think there's more awareness about it now. I think, for example, when I was writing about this in 2018, 2019, 2020, even, it was more fringe. Whereas when I talk to institutions today, it's just more understood internally in institutions where we are now. There's more of an awareness of what fiscal dominance is, more of an awareness that we're some degree in fiscal dominance. And this is just a background macro thing that we have. And we were talking before we jumped on air, like I came back from Egypt. I mean, in Egypt right now, official inflation is 15%, right? And it's just a background thing that investors there are aware of. It affects, I mean, it's how they think about things. It's how they do things. And in the U.S., you know, in the 2010s, for example, we adjusted to a certain way of investing, which was, you know, we were in a zero rate environment. And, you know, inflation was officially low. And now, you know, we're in a higher yielding environment, a higher inflation environment. It's sticky. It's self kind of reinforcing to various degrees. And I think it's just it's a different background tenor that both just people like citizens, consumers as well as investors have to have to navigate. And it's I mean, it's a lighter version than what people that even right now might be watching this from emerging markets are dealing with on a regular basis. It's just that it's happening in a developed market.
Speaker 1What's your sentiment on the average people understanding like these bigger cycles that are at play? So the geopolitical cycle, we have the broader debt cycle, fourth turnings, all of these different cycles that are that we're in. And people are wondering, OK, why is civility on a decline? Why is the perception of civility? On the decline? Why is there so much political polarization? Why is central banks selling bonds and buying gold? You know, what's happening with with the United Nations? Why are there conflict there amongst amongst nations? So there's like a lot of questions that I get from like just the average person when I'm having those conversations. And I'm curious if you have any read on that from any conversations that you've been having.
Speaker 2Yeah, my view. My view is that that most people, because it's not the work they focus on, are just not not not well versed in this area. I mean, the fourth turning was a relatively popular book that they might have heard of. Some people have, you know, there's there's a couple of phases. I think most people, they just say they would say, what is a fourth turning? What is fiscal dominance? What do you mean sovereign debt crisis? Just completely off their radar. Then there's people who might have read a book on it once, might have heard the term, might have come across me on Twitter, might have come across one of your interviews like they've they've touched it, but they haven't actually internalized it, understood it, thought about it. I would say it's a very small percentage, I think, that are just, you know, that they're just focused on this now. And then it's also complicated because, you know, those are the macro terms, the fiscal side. The cyclical things, there are cycles, but there's also just every cycle is different. And so, you know, we have these these longer term cycles. But this isn't a. Context where the modern financial system really, I would say, only goes back at best to the late 1800s, basically ever since, you know, I kind of separate when we invented and deployed the telegraph. So, you know, we went from a very analog world to suddenly being able to send communications around the world almost instantly. That's kind of the, you know, kind of the break to the modern era, which is also roughly when we started harnessing hydrocarbons at scale. And so we've been on this kind of like, you know, almost this path. For the singularity for a century and a half, which is we get hydrocarbons, we connect the world digitally. Then, of course, you know, we went on this whole semiconductor expansion path computation. Now we're in AI flight, you know, and things feed on each other. So when you have hydrocarbons and you can make tractors, you can you can make it so that you don't need two thirds of the population to be farming for everyone else. You can you can have, you know, one or two percent of the population farm and that that frees everyone else to go either. Go in manufacturing, go in health care, go in, you know, research everything else they can do. So in addition to these cyclical things, we have this kind of like big stretch of just ever rapidly advancing technology, which constantly reshapes what civilization can look like, which, you know, if you go back in thousands of years of history, they didn't have anything that rapid that was there was changing so much within it, within a single human lifetime or even two to three human lifetimes strung together.
Speaker 1Mm hmm. Yeah, I've been just having these conversations with with people and they've been seeing like, I mean, it was interesting when Gallup came up, came out with their recent survey where there's they saw all time high and perception of government corruption. And and so, you know, people in the U.S. are like, what the hell is going on? You know, and like it's like rapidly changing around us. And so I've been kind of just wondering, OK, how long? Do we have before we reach like a crisis point, a fourth turning event? I mean, we're we're in the fourth turning, according to Neil Howe's work. And and, you know, and we've had multiple situations happen. We had, you know, the 08 banking crisis. We've had covid. We've had, you know, multiple, multiple different things on multiple fronts. And reading Ray Dalio's work, you know, he talks about the how governments typically go towards more. Democratic leaders and and such. And so so, you know, I've just been kind of trying to frame all of this and think about my own future. You know, also the future of my family, friends and and like what what could this actually look like in the future? And so that's something that that I've been pondering on. So what are kind of like your thoughts on that, on on how this looks in the future for for American citizens?
Speaker 2Yeah, it's a good question. I mean, I think some things are just nonlinear and therefore hard to predict. So it's hard. It's hard to predict breaking points. One thing I keep pointing out, what people say, like, when does the debt matter? And my view is it already does matter. And, you know, the rising kind of social tensions, I think, are just in part tied to the macro context. And I think my read on the most likely way this unfolds is it's like a hindsight crisis, which is to say, you know, I think a lot of us are trained to expect one big moment. You know, like the equivalent of like a D-Day in World War Two or like the equivalent of 2008 banking crisis, you know, kind of like one one crazy year or 9-11. You know, there are certain events. But I generally think this this this era that we're in now is more of that slow motion set of mini crises and just just just fires that keep erupting that that that simmer for a long time. Using Egypt again. I mean, they had obviously they had their kind of their crisis. I guess, you know, fourth turning, which was when they had the Egyptian revolution. You know, they threw out a dictator that was in place for decades and they had this big reset for a period of time. But then two years later, they they kind of elected like the same type of person. And then now now they're now they're three terms in. And it's just it's a it's there's this rising authoritarian aspects to it. There's stagnation in a sense. Some things are better. Some things are worse. And it's and they've averaged double digit inflation throughout that entire time. And nothing ever like after the initial crisis, nothing ever really broke like this, like five years ago, four years ago, seven years ago, the entire period almost. I mean, I think we're going 15 years since then. It's just it's just stagnation. And and sometimes it's just not dramatic. Sometimes it's just it's stagnation. And I think the U.S. could. My. My assumption, and I would like to be wrong, is my assumption is the U.S. just goes through this this stagnation where in some ways it's already happened. And the main difference is that in Egypt, kind of almost everyone is struggling. Obviously, some are in a better position than others, whereas in the U.S., I mean, if you're obviously if you're in tech, if you're in finance, a certain other areas, you're it's a golden age. You know, whereas for. A lot of people just this every kind of if they take a three year snapshot and look back and you just say, like, you know, do you feel like you're running in place? Do you feel like you're, you know, are things. Things are, you know, are you able to work less and buy more or the opposite? You know, a lot of people will say I'm either kind of in place or maybe taking a step back. And I think that, unfortunately, we'll probably have a lot more multi-year periods like that strung together in this kind of somewhat stagflationary or two-speed economy with, you know, rising just obviously very low sentiment on Congress. Generally speaking, high degrees of obviously polarization around presidents. We're not in the era of JFK and Eisenhower anymore. You know, we're in the era of senility and corruption with some of our latest choices. So it's a different era, unfortunately, and not to the positive.
Speaker 1Yeah, so I'm seeing this K-shaped economy. And you recently had commented some thoughts on the… growing number of boomers. I think that the younger generations pay more taxes to fund Social Security. And so do you see more dynamics like that playing out as we continue further down this train of cycles?
Speaker 2I think it will come to a head in the 2030s because that's when the Social Security Trust Fund ostensibly runs out and certain political decisions have to be made. They can print the difference. They can try to expand taxes on workers. They can. They can, you know, pay 70 cents on the dollar to outgoing. They can do means adjustment, meaning that wealthy recipients won't get… Basically, they'll get defaulted on their Social Security, whereas poor recipients will still get it. There's a couple options. There's probably four or five options that they have, and they'll have to choose some combination of those. I think that's where it will generally come to a head. But, yeah, I think that the demographics issue is a major deal. I mean, Japan kind of… It shows that it can be a problem, but they also… Japan has like a very… They don't have the same political polarization challenges we currently have. They have a more homogenous society, a very ordered society. So there's kind of a quiet suffering that happens there, whereas in the U.S., it can just come to the head more often. And, again, I think this gets punctuated by a series of mini crises rather than one moment. It'll be more… It'll be more like historians in 2050 will say, you know, that whole 2020s and 2030s for the U.S. was just kind of a gradual melting in many ways from their social constructs, the macro scale, and just the overall trust in institutions. And I think there's still just quite a while to go there.
Speaker 1So I was reading one of Ray Dalio's recent pieces, and he said that he… He says that he suspects that the U.S. will go through a sovereign debt crisis in the next three years, or he may have said government debt crisis, whatever the two, if those are different at all. What does that look like for government? What does that look like for average people?
Speaker 2Yeah, so I actually think we went through a quiet government crisis for the past five or six years, which is when literally the 10-year went from 0.5% to 5%. I mean, that's… That's absolutely catastrophic for anyone who was long bonds, like, especially when you compare it to purchasing power. You know, like, not only did people lose money on bonds nominally, in a real sense, just their purchasing ability for housing, for insurance, for anything else they can own, gold. I mean, you know, gold went from under $2,000 to touching the $5,000, you know, currently chopping around $4,000, while bonds went down. So your ability to buy almost anything else… So your ability to buy almost anything else has just been catastrophically defaulted on, really, for people that were holding bonds. And so I think we've actually already had some degree of a sovereign debt crisis. And I think it'll just keep happening, basically, and just be more on the surface. You know, the fact that we have, you know, the Treasury taking steps to do, like, buybacks and things like that, which in and of themselves is not a giant deal. But I think it's just going to keep stringing together. And the part where it could become a little bit more visible, I think, is Europe, just because you have a central bank that is not within the sovereign entity of multiple different nations. So that can have a little bit more turbulent outcomes. But in the U.S., I think it'll often just take the form of just empty speeches, like, unable to articulate why the balance sheet's going up despite inflation still being high, talking about ample reserves. And there's no good answer for it. I mean, it's like, you know, if I was in that role, I wouldn't have the right answer, but it's also why I wouldn't take the job. And so I think that it's just going to be like a string of non-answers because there's no good answers. And the sovereign debt crisis, again, I don't, you know, I don't think there'll be like a moment where they say, oh, that year was the sovereign debt crisis. It'll be more like that period of time was the sovereign debt crisis. And I think we're already in it.
Speaker 1Gotcha. So we've seen central banks continue to accumulate gold. We've seen a couple of central banks recall their gold from the U.S. and Canada. And these geopolitical tensions continue to rise. Some of them have cited geopolitical tensions. Some of them have used more politically friendly terms to describe why they were making their move. And so do you see this being like a fractured? To like the stability and the peace that I mean, relative peace that that came post-World War Two, where there was like it seemed like there you had the U.N., you had all of these these groups that were formed to like maintain peace because those people experienced the catastrophic nature of destruction of their economies. You know, tens of millions of lives lost. And many of those people, those leaders that were during that time have passed on. And so they're they're not even no longer here. And so it seems like kind of like this human psychological element where we repeat the same behaviors. And then, you know, you're kind of getting into these these situations where, you know, peace is something that some nations leaders don't don't value. And so how connected do you see, like the central banks accumulation of gold to to have their own financial sovereignty and selling off of U.S. debt related to this? Yeah, I do think we're structurally
Speaker 2entering a multipolar world is something I've been writing about since 2020. And I think that that continues to very slowly unfold. And I think it's not even a negative thing per se, because I've been you know, I've been on the record that I think I think the whole world using one country's currency and bond market as kind of its principal ledger creates structural balances like it's inherently a temporary situation. And the more I think I think the more sustainable situation is neutral reserve assets as the core of the system, you know, gold at scale, potentially Bitcoin one day. But, you know, neutral reserve assets like inherently scarce collateral that no one nation or entity controls rather than one nation's ledger. And in World War Two, I mean, the U.S. just basically came out so strong, even the winners in Europe were generally decimated. But, you know, even the Soviet Union just was, you know, in terms of population, in terms of economic size, even was like a secondary compared to the U.S. And so the U.S. at the peak had well over 40 percent of GDP in one country with like 4 percent of the population and, you know, had the most gold and, you know, had a major hand in setting up these institutions. And going forward, the more natural state, like if you look at if you look at like a multi-thousand. Year history of like GDP share, for example, China and India always had really big numbers. And in this kind of, you know, call it two century era of of kind of Western expansion and dominance, they, you know, they had a period of being diminished, but they've kind of had a resurgence. And that's that's just getting back toward their baseline of just being pretty big shares of global GDP, partially because population and culture. So I think going forward, we're just. Going to have several really big polls that exist. So it's like the U.S. poll, you know, potentially, you know, Brazil, Latin America, Europe keeps finding ways to shoot themselves in the foot to not not have like not be a serious poll, but like that's a that's a poll area. Russia, China, India, Japan, I think we're entering a remote, more multipolar world. Some of that is just it's more sustainable for countries to have, you know, gold in their borders. As their sovereign collateral, rather than being so tied to one country's bond market. But of course, you know, obviously, in this era, there's rising divisions. You know, when I first started covering COVID, for example, I was like this, you know, this this looks like a war financially, like the types of things we're seeing looks like a war. And I was like, I hope it doesn't become kinetic. Obviously, since then, there's been, you know, war between Russia and Ukraine and therefore by proxy, some of the West. There's obviously been. issues, Israel, Palestine, Iran, that there's multiple fronts uh that luckily are nowhere near this the scale devastation that world war ii reached um uh but partially because there's just more decisive weapons now so i think like this total war is like hopefully more just not contemplated um but it's just these simmering crises uh and and just various entities kind of deciding now is the time to shoot their shot because there's no one really in charge anymore uh and it's a time for reorganization um and so i you know a more multipolar world is kind of a more sustainable world in a way like it's kind of that's the natural order of things but also transitions are chaotic and a more multipolar world means that on the boundaries there can be more conflict than a than a world that's more
Speaker 1unipolar so uh there was a lot of talk about reshoring of manufacturing and and many other nations even considered this as well um when many have saw like china has like a monopoly on on a lot of the refinement of critical minerals and and many other many other uh commodities and so how do you see this going for the u.s do you see some progress there is this like a um a decade-long uh experiment how do you see us bringing manufacturing back and so and and i also want to tie that to like commodities so many of our viewers believe we're in a commodity bull market i believe so as well i mean these ai data centers are going to need um many commodities to to function and to power uh their their data centers and also uh i was i was recently uh reading on mp materials i saw that they had uh they had a 500 million investment from apple and so for uh some of the critical minerals needed for apple's technology and so apple you know i think it's going to be a big deal for us to well still gets a lot of that from china i believe and so i'm just curious in your perspective on the commodity bull market in this whole thing of reshoring manufacturing yeah i think
Speaker 2i think one of the first steps is awareness so one of the first things is to kind of acknowledge you have a problem uh to then start taking action i mean the the we can separate the two things to rare earths uh you know kind of the the commodity supply chain and and manufacturing but what they share in common is that both of those are are very long-term torn turnaround stories uh you know an industrial base takes years and decades to build up uh you know it has certain network effects kind of like how new york i mean like new york has a network effect around issuing securities like investment banks uh lawyers that work in investment banking uh everything's just very tied together in one space and silicon valley uh you know it's very centered around venture even like again the lawyers there specialize in venture right it's how uh and and scale that that is repeatable uh you know vancouver is known for resources uh and it's a resource hub china happens to have the manufacturing hub certain regions of china um they they have these kind of a network effect a generation that specialized in it uh relationships between all the different suppliers the know-how uh and that that doesn't just you can't snap your fingers and throw money at it and just teleport that somewhere else kind like how you can't you can't teleport financial hubs like hong kong london or new york you can't just say we're gonna we chose to create this somewhere else it takes a long time uh even when you're intentional about it like for example dubai building up a new financial hub over the years we've seen how long that that takes and how sometimes it can be fragile when it's challenged uh so i i do think that the u.s is kind of as you know we're we're exiting the period of globalization not that we're not going to be connected anymore but that um you know we're like there's more of a of a focus on supply chain resilience um somewhat of a resurgence of a of a cold war almost right so like um kind of the current wave of globalization happened in starting with the 80s when china kind of opened up to the world and then of course the fall of the soviet union in the early 90s this was like a one-two punch that really just kind of connected a lot of the world that was otherwise uh cut off and i think now with you know with kind of the rise of china the the dot the the rival between china and the u.s the resurgence of russia it's a little bit more of that those walls coming in play uh somewhat softer and so when you're the u.s you're just you're you're and the political leaders the corporate leaders they're more aware of tail risks um than they were in the 90s the 2000s the 2010s uh so um and just also tech changes so for um and just also um and just also tech changes so for media that was the big companies were building search engines and social media that's that's low um you know physical capital capex you know uh and but now as we enter the era of ai and compute um it's more physical it's it's chips it's power uh it's you know robotics potentially um you know we didn't really get a ton of advancements in robotics for a while and maybe you know we're hitting certain breaking points where we can actually get get more advancements in robotics um and so that's kind of the the the the the the the the the the the the so that is more physically uh intensive uh which of course is is commodity intensive so i i tend to be in the camp that we are in a more a longer term commodity bull market i think that aligns with the fiscal dominance framework pretty well i'm bullish on that topic i just think that that reshoring everything that is a very long-term
Speaker 1process what's your view on the mining sector uh currently so obviously mining i mean you got copper you know gold silver many different metals rare earths uh what's your view on the mining sector uh currently so obviously mining i mean you got copper you on that sector as as a whole we had a we had a big kind of revaluation i know that um i've been subscribed to your newsletter for a while you were positioned for a long time in many of these companies when they were a lot cheaper and then um then last year we had a big boom uh going into early this year uh you know you mentioned gold you know hitting five thousand dollars but many of these miners were were going up significantly and then they've sold out since then now do you think that's still a good place to be
Speaker 2yeah good question i mean i use the boom to kind of um exit some of my positions which was to say that uh you know i used to view for example gold and silver is just dramatically undervalued uh and therefore some of the equities uh dramatically undervalued um once they shot up very quickly uh even though i might still be structurally bullish the the asymmetry is gone which is you know to say that that you know they can go down almost as much as they can go up in a given multi-year stretch uh whereas before they could go up a lot more than they could go down um and so uh it i i'd say like easy mode is off now um and mining is just in general a harsh business um you know it's historically as a group it's a low returning capital destructive business uh but of course people that do it well can can make extremely uh substantial returns given how volatile how volatile it is how it's kind of a uh and so i it's an area that i increasingly leave to to professionals um just because from a macro standpoint it's like the easy money's over potentially at least the way i approach it and so uh i'm just yeah more kind of cognizant that um it's less asymmetrical and i i i think that there's a lot of opportunity there but you have to really know what you're doing
Speaker 1and so i i imagine you're not getting into these junior resource companies these explorers or
Speaker 2that exactly yeah there was a period of time where they were so cheap that i would dabble a little bit um but because of the the number of things i focus on i mean i do venture work i do private equity work uh i focus on macro uh there's a certain point where you just don't have you don't have an edge so you just say okay these are the people that have an edge that's their area uh and uh so at a personal level i just kind of skip that area now even though of course i focus on commodities and macro in the in the structural sense yeah
Speaker 1yeah so what what are some of the the ways that you approach uh investing so i've been following like um a lot of your uh investment strategies for some time i mean some of them were some big winners and uh and not to say that all of them were but like you know some of them were some big winners i saw you recently talk about the latin american banks um and those were really good winners um you know i benefited from i sold a sold two of them i sold two of them early lynn okay so too early but um the when you're approaching valuing these companies and what's what's kind of like your methodology what's kind of like your framework are you doing more net asset valuations are you what kind of metrics are you looking for when you're doing that right so
Speaker 2there there are very different types of companies so for example the way i would value nvidia is different than how i'd value a brazilian bank for example uh but in general i'm there's kind of two buckets i'm looking for and i'm looking for a lot of different types of companies so for example one would be long-term compounders so just wide moat businesses uh and the a metric that i really look at there is the dividend adjusted peg ratio so so the peg ratio is priced to earnings over growth um and so you what you're generally looking for is is growth at a reasonable price it's called uh which is to say not growth at any cost um but you're you're paying for destructually growing things and trying to trying to buy them at a point that is reasonable um and so for example if you have a company growing by fifteen percent a year uh and you're you can get it at a 15 times earnings multiple that's a peg ratio of one which is really good um and and generally speaking i try to find peg ratios under two you know peter lynch uh famously looked for ones under one but that was also in a very low valuation era right so if you're if you're only looking for under one you're going to miss up you're going to kind of have a i think a two narrow filter so looking under two uh i think helps and then i i do a dividend adjustment component which is there are some companies that are growing a little slower but they're just spitting off dividends all the time and that that should be kind of added back to their their the growth side um you know a company that's you know paying you five percent a year is allowed to grow a little slower um because you're you're able to reinvest those dividends so you'd have to take that into account um so i i add back the the dividend component when it comes to other other investments that are not in that kind of like wide mode economic long-term compound or growth category it's more like things that are solid under-owned and with explosive potential like and i still think for example i think latin american banks still have further to go i mean there there'll be years where they don't do well um uh and then there'll be years that they do uh and i just think that years from now it'll still just be seen as as part of a structural you know shift in the market uh that we're undergoing uh and for there i tend to stick to areas i know like i know how to analyze a bank more than i know how to analyze a bank and i know how to analyze a bank more than i know how to analyze a junior miner for example um and and so i'll more readily stick there and sometimes if i'm bullish on a place like on a thing like commodities i'll say well well show me the banks in in countries with a lot of commodity exposure or currencies that are certainly having a lot of commodity exposure because that might be an era that i that i can play in you know in a more sophisticated way than i can do with my own selection of junior miners for example so um uh i often just i don't know if i'm going to be able to do that in the future but i'm going to be able to just if there's an area that i'm interested i try to say okay well what is my edge in that in that area uh even if it's not necessarily the core of the
Speaker 1area what's your general uh thoughts on latin america uh right now so i saw that recently the brazilian stocks started to rally uh especially ewz the etf which uh a good friend of the show tabby costa has been been touting for a while i think there were some elections happening on that front i saw that there were some elections that happened on the columbia front we saw argentina rally significantly after malay was uh elected and then uh we saw a big sell-off when uh when uh his uh party was under pressure and then they they overcame that and then we saw a big rally so i participated in that um one of my biggest uh holdings wheat and precious metals i mean they operate in peru um so they they they get a lot of um uh investments from there from the antamina mine and so it seems like mining's happening there banks are starting to uh you know wake up and rally and some of the equities uh what are your thoughts on latin america as as a whole uh so
Speaker 2i'm generally bullish from an investor standpoint um i i mean i think a lot of aspects will continue to be messy but i think it's just it partly it's just so under owned so so especially in emerging markets you get a flywheel effect where you know capital pulls out of of equities and bonds that weakens the currency that further like you know their central banks have to like be hawkish even when they have a recession because they're just trying to prevent like a currency crisis uh so you get like in a really negative feedback loops uh and eventually you just kind of hit rock bottom uh and i think i think brazil and other latin american countries have kind of like long since hit that phase and now they're in the recovery phase um where you know a lot of them have really high positive real yields um so they have plenty of room for just kind of growth oriented policies um on average global investors tend to like to see center right types of of of election outcomes uh basically respective of capital uh and things like that um uh and so so but i i tend i think overall i tend to underweight that compared to what most people do because for example like the the prior massive bull market in in brazil from the you know the say they call it the 2003 2007 period was was under president lula like it it can just happen regardless of of who's in charge sometimes because the macro flywheels are what they are and so you get the you know when you when when stocks and and bonds are going up and then and then foreign capital is coming in and that strengthens the currency and then that you know it only takes you know a small amount of capital from like these big areas like japan or the u.s or europe to go into a place like brazil or a smaller latin smaller latin american country to have really big uh impacts in the economy and so i i tend to say okay well almost regardless of election outcomes other than the most extreme ones um it's like i make a macro call first and then certain certain political outcomes can add fuel or slow it down to various degrees uh but i i think in general mostly because of that macro flywheel um that it's it's still a place to be invested uh probably going years out i
Speaker 1think what are your thoughts on foreign currencies uh right now so i've been kind of diversifying a little bit into uh the swiss francs as well as the norwegian crones and just kind of looking at okay historically when have they appreciated against the dollar saw that in 2008 2009 and then i'm looking at the brazilian real now just seeing like okay is there something there uh do you dabble in foreign currencies like i know some people trade it some people may may hold them just just as a diversification
Speaker 2so i do it indirectly in the sense that when i make an equity investment foreign i don't currency hedge it because part of my thesis is the currency so when i go long brazilian banks for example i'm partially along the brazilian currency as part of that trade you know if they if they do great in brazilian real terms but then you know the the the currency gets cut in half relative to the dollar that doesn't do me a lot of good so i i look at kind of the expected dollar returns unhedged of positions i take um uh and you know so obviously there currencies like the swiss franc uh or norway's currency i mean those are those are high stores of value like they have big sovereign funds um very wealthy uh generally uh separate from broader issues right so kind of like separate from the eurozone and things like that uh in in their area uh generally speaking current account surpluses um and so those are those are defensive currencies when it comes to brazil it's not necessarily that the currency is going to go up versus the dollar but it's more of a like that the the kind of like the carry trade concept where the yield you get on the currency combined with the relative uh performance of that currency is pretty attractive uh so it can be held outright um but i again kind of like a junior mining i would i would leave i generally leave currency trading to currency experts um but as just part of a macro framework i do look at currency strength as is part of my unhedged thesis for the equities i go in uh and i i think in i think brazil in particular latin america in general uh is kind of a cold spring there in terms of the the the interest uh and and currency appreciation that i think investors could potentially
Speaker 1get okay well uh lynn last last thoughts uh from you on bitcoin uh actually took a position in micro strategy uh recently and one of my friends was like hey good luck with that and uh i was like yes it paid off you know it paid off you know it paid off obviously it could could be a longer term hold but um curious any thoughts on bitcoin
Speaker 2uh so i think we've most likely seen the bottom uh i think the sentiment bottom and and probably the price bottom are in uh and um i don't have any kind of near-term price expectations other than i my expectation is that call it three years from now this will still be viewed as an attractive time to have bought um uh and i i think it's you know it's the it's the leading asset for what it does i'm i'm broadly pretty bearish on crypto so outside of bitcoin and stable coins um you won't find me saying a lot of positive things about the ecosystem um but you know stable coins are obviously a a useful technology for a lot of people and then bitcoin is is the the best thing we have for kind of like just global portable bear assets um uh in a sense uh so i kind of lump it with gold and silver in a way obviously it's a very different it's a much newer thing uh it has pros and cons relative to those um uh and so i but i think from a price standpoint it's just kind of like how this money's out like just left brazil and at some point just the bad news just doesn't drive things lower anymore and that already happened with bitcoin money already got out they went to ai when it went elsewhere and at a certain point it was like oh my god i'm gonna have to buy a new bitcoin and i'm gonna have to buy a new bitcoin and at some point just as the price stops going down and money starts trickling back in and you go from chart traders to momentum traders to to retail fomo um and i think we're still fairly early on that on that cycle okay got it
Speaker 1well then appreciate you for coming on the show and i appreciate your time uh spent with us here today so folks can obviously go to lynn alden.com and and read some of your publications you you produce uh at least uh twice a month uh for subscribers and members and then uh i know you put out a public newsletter as well uh how's your books doing you got the uh stole guard incident you got broken money you're you're talking about writing another one i was actually happy that you wrote a fake book and you know sometimes i just think like this whole macro stuff like geopolitical stuff it can just kind of get in our heads and like get us in a negative mind space so it was good to see like you know you're still having some fun and you're thinking outside the box and you kind of have some boundaries around this and so um you know i was happy you wrote that uh so how are
Speaker 2the books doing yeah we need hobbies um and so obviously broken money is my flagship book uh it's because it aligns with the work i do um but i've i've had a lot of fun writing sci-fi we can only do so much with spreadsheets uh and talking about bond yields and bad news uh and i mean the funny thing is the sci-fi books can be kind of dark the ones i write um but they're they're they're fun in their own way they're they're character explorations they're the intersection of technology and how that can change things uh so i find a lot of fun and so far readers have been enjoying them uh you know the biggest challenge i think is is breaking into the broader fiction space it's obviously a very competitive space and the fact that people are just kind of turning out ai books now uh even makes the the market more competitive uh but for me it's it's the joy of writing them uh and trying to make them as good as i can for for those that that find them and enjoy them yeah yeah
Speaker 1that's good well you all be sure to go check out uh the stogart incident as well as broken money and uh lynn appreciate you for your time thank you if you enjoyed this interview today and found it valuable i encourage you to click the link that is pinned in the comments as well as the description to the commodity university as we go deeper into what drives commodities and commodity pricing and we also jump into different dynamics of this industry and so i encourage you to click that link to learn more go check it out
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