What's driving the price of gold

[MUSIC] >> Very happy to welcome Axel Merck to investing experts, President and Chief Investment Officer at Merck Investments, over 4 billion that you're managing. It's really great to have you. I for one have known about you for quite some time, long time ago, is to edit your work that we used to republish on Seeking Alpha. It's great to finally have you on the podcast. I'm trying to make it a time. >> It's great to be with you and that painful job of editing my writing is now a day. He's done by AI bots and by compliance. >> Well, I learned a lot because I feel like when I was editing people's work that was coming from outside Seeking Alpha, that's part of what enables me to call Seeking Alpha, Seeking Alpha University. Because more than editing, I was really reading and just learning a lot about the market. So appreciate your work. So talk to our audience for those that know you, those that don't know you. What are you focused on? What's your specific focus of the markets? >> As well as you mentioned in the introduction, we manage around 4 billion these days. In the precious metals space, both on the physical gold side and on the precious metals mining side, we weren't always there. The market kind of has pushed us into that. At the time, you were editing my writings. We had a very substantial focus on currencies, everything from directional to sophisticated alpha strategies. After the eurozone debt crisis, people didn't want to hear anything anymore about currencies. And one of the things about something fancy, if you might want to call this currency, is people are interested in those sort of things when the markets perform really poorly. But why do you invest in alternative strategies when the markets, quote unquote, always go up? Right? And we had started investing in gold around 2004 already. It's always been part of what we've done. But it's gotten more prominent. And these days, it's explosive in that direction. And just to take another step back, I first founded a company in 1994, actually abroad. I took it to the US in 2001. And if you want to go even further back, many people on our way, I actually have a master's in computer science, although I never worked in the field. I mentioned that because the focus of that was artificial intelligence. And to take one step further back, in the 1980s, I studied public key cryptography, kind of the foundation of lots of the crypto stuff out there. But these days, I hire a quant sent program must do things. But what it means is I have opinion about all these things. And to maybe round that out about the opinions part, we tend to focus on macro things. We do quantitative work as well. But in my public speaking, particular, it's on macro. And we like to go to the sources. So I have listened to just about every press conference of the European Central Bank since the early 2000s. That will happen to be one this morning as we're recording this on June 11. And so similarly at the Federal Reserve, I engage policymakers. I have gotten to know Kevin Walsh personally, the new Fed share. Doesn't mean anything that what I'm saying is correct or not. I tend to come from a slightly different perspective because it's truly a bottom-up building of my opinion. I want to get your take on gold and precious metals and miners because we've been talking a lot on this podcast and the news podcast about how gold has not been behaving as it typically has in the past. There's a lot of confusion out there. The price of gold in the long run has a zero correlation to equities. However, that doesn't mean it's always uncorrelated. The correlation to risk assets is moving in and out. In the long run, I believe a good way to think about gold is, it's ultimately, it's just brick, but biogrelic. It doesn't do anything. So it competes literally with the purchasing power of the currency in the long run. You can actually measure that. You can measure real interest rates in the market. And when I talk to Goldbugs in particular, they say, "What the hell? Nobody knows what a long-term real interest rates are." But those are market measures. And when they move, asset prices move. And gold is particularly sensitive to that. Now, even the correlation to real interest rates, that's the tips yield, is not stable. And last year, it wasn't, there wasn't any correlation. But that correlation became quite firm with the beginning of the war in Iran. And the way I would like to characterize it is that the market has been trading the war in Iran as a shock in contrast to a structural change. And so what's been happening is that when the fear about the war in Iran is flagging up, bonds are selling off. But because it is a shock, inflation expectations harm changing, which means real yields are moving higher. And that is part of the reason why the price of gold has been so sensitive. And some people are scratching their head. My God, there's a crisis, why isn't gold moving up? And it happens to correlate with what risk assets are doing, right? Because risk assets are having a similar characteristic in that particular scenario. And so I'd like to just throw it out there as thought, as people when they think about the price of gold. What would you say about the miners as they move along with the price of gold? What other contexts would you provide there? Well, first, I happen to invest in both gold and miners. Many investors just choose one or the other. Indeed, in the old days, the speculators used to go into gold. And then if they really speculated they go into miners within the mining space, by the way, the risk profile is quite difference between the majors and junior companies. The junior companies are literally options that you strike gold. And you can develop a mine that you have access to funding, does some credit risk in there indirectly, at least, they probably raise money on the equity side. But that's that's fact in India. Then suddenly, Memestock's came about, Digel assets came about, and the speculator was more interested in those aspects, SPACs, well of interest and the like, as we're talking, the latest and greatest thing to invest in, and by the time the sales, I believe the IPO will have happened, the SpaceX is going public. So they're more exciting things so to be, and so what can happen periodically is that the volatility is dampen in these asset classes. But the speculator is not a loyal investor. And so when something moves, they come back and a little over a year ago, the speculator came back to the gold sector. And then the springtime, there was quite a bit of leverage in some of those positions and guess what, when risk flares up, people de-lever and say the headwinds to the price of gold were more significant. And so I think that framework, I think, is important. The miners more broadly, one of the things, and to maybe bridge that to the AI question, is let me give you a long answer here. In 2011, Mark Andreessen published a famous piece about software eating the world. And a key aspect of that was that the barrier to entry is low profit margins are high, fast forward to the world of AI, and AI is eating software. And so what's happening is you have this investment where a lot of investment apparently is necessary, the margins are somewhat uncertain. And the huge difference is that suddenly you have a level playing field with industrial investments, precious metals being a component of that, where the profit margins, at least in the current environment, are very high. And so that has attracted the interest, the much broader interest. One of the things we see is that in mid-sized mining companies, you see portfolio managers that are generalists participating. And if and when they allocate money, the moves can be quite significant. The one thing before I end it back to you, I might want to add is exchange-striped funds are not particularly suitable to provide funding to mining companies. And it's a depleting asset, and especially the junior mining companies have to go to the markets all the time, which means they're somewhat neglected in an era where, quote unquote, everybody is investing in ETFs, which to us means there are more opportunities. We try to find companies where you have potential sources of alpha that go beyond the margins that are created by an upward move in the price of gold. You took the segue out of my words. I was going to ask, is it an ETF thing for the most part for retail investors? And if you're talking about miners and trying to find alpha, what are the metrics that you're most focused on? So as I indicated, right ETFs are not well suited for the mining industry. First of all, the mining industry has the greatest dispersion of risk of any S&P sector. And that's a very fancy way of saying that the returns are all over the place. Another way of saying it is active management matters. And of course ETFs are not particularly suited for true active management. The other one is that in the mining sector, there are lots and mining companies go public very early. So they're quite a liquid. You can technically put them in an ETF. But If you want to make your market makers happy that they try to move the price of the underlying ad asset value to the market price, they need to have an arbitrage opportunity and they can use proxies but that's very cumbersome with ill-equipped securities. So it's not illegal, but the big market makers just don't have an interest in that. And so what it means is that the funding is really done by private equity firms. We manage a close-up fund where we can do it, but not by where the bulk of the money is these days. Much of the funding is provided by family offices that have previously been successful investors. And the one characteristic, if kind of from an investment process that we look for, is kind of what's applicable in any sector where you do fundamental analysis, which is we're looking for good management teams. And that is at least as important as a good resource. Obviously you need to have a good resource, but we've been in situations where we've provided funding to a management team that didn't have an asset yet. And the reason is that it's same, we call it venture capital-light, right? When you hear about Silicon Valley, they invest in the team more than the idea, and they're perfectly okay if that team is pivoting. Funding is often provided only for a year or two. And so, and obviously not all of these projects work out. That's why you invest in many of them. But if you do that, you can take advantage of what we call the institutionalizing disasters. As they grow, bigger investors are joining eventually to add it to indices. And justice in the IPO of SpaceX, where Elon Musk has been very eager to add it to indices right away. But that's the progression usually in a company goes public, over time gets added to indices. And when it is embraced by by larger types of investors, it tends to have an impact on the valuation. And so from an active management point of view, you can have a disproportionate impact on the portfolio, because then you're not dependent on the price of gold. Cornagore is always going higher. What would you say about the ETFs like GLD, for instance, about the price of gold? What you see is what you get, right? They invest in the largest ones. And so, but they have company specific issues. They have recently worked through some of them. But they are because they're so large, they are too large to to replenish the gold that they're mining fast enough. And even the smaller companies are not large enough to just gobbled and up to buy them. And so some of them have started to move from the more traditional gold mining to more copper gold mining. Like when you mine, usually one thing, one mineral in the ground, we invest in a gold company, they discovered lithium, a market like lithium, so they re-branded themselves as a lithium company. But what happens on these large miners, they tend to then embrace copper gold projects that are much more capital intensive, which suits them because they are, they're obviously large enough for that. But these are 20-year projects, sometimes in due restrictions, where you don't know whether you have the security of the 20 years, whereas on the more traditional side, these smaller projects are very more kind of, it's more compact, the clarity is more there. That doesn't mean one investment is better than the other, but it makes them different. It makes it provides a different profile. There happened to have been some corporate issues and some of the largest mining companies as well. And they matter, right? Because they influence how that's sector-mose, but a side effect of that is that if you look at, there are still a lot of mutual funds in that space, and the returns are quite widely spread, depending on where the emphasis is. And that's the beauty of active management, you truly get that in that space. Are you also looking at other precious metals? Like you mentioned, the copper bleeding into gold, are you looking at other precious metals? Are you looking? Well, silver is the most obvious one. The challenge on the silver side is that there are not many good pure silver companies. And silver tends to be a byproduct. The price of silver is notoriously volatile. Just for a reference, the price of gold historically, and I haven't looked at recent months, well, volatility has gone up, but historically, similar to that of the equity markets, and then has these episodes where it spikes higher. Well, silver has always been notoriously more volatile. We happen to invest in one of the largest private silver companies. We can, in a close and fund investment, the private company as well. And so we can provide access to certain things. But it's a, it's really gold and silver the emphasis is gold, because it's less volatile, the visibility is a little bit less. Also, in the silver companies, you tend to attract more speculators and nothing wrong with speculators, but it does add to the volatility profile and we tend to be long-term investors. And so that our investment approach, yes, we have silver exposure, but overall, we focus on precious metals more broadly. Wherever there is an opportunity, of course, but it tends to be very heavy emphasis on the gold side of things. And what do you see for the next, let's say, year, like let's say, near-term and long-term, how are you thinking about gold right now? Sure. Tomorrow, the price of gold is going to be there, and then in a week, it's going to be at this level. I think I'd say, part of the reason I gave this explainer us to what is driving the price of gold in the current environment is because I think it's the price of gold is hostage to what's happening in Iran. And as we were speaking, right, the mood was swinging and there were some various substantial moves in the metal and in the miners as a result of that. Ultimately, the market is used to just about any crisis. It's one reason why I don't like it when the perception actually comes to reality that the price of gold goes up because there's a crisis somewhere. We'll figure things out. I mean, even with Iran, the market will figure this out. It may not be good for long-term geopolitics. It may not be good for this or that. But let's take a bad case scenario where Iran does control the state of a move. It charges a toll of $1.2 million, a $2 million ship, that's $1.2 a barrel. Much of it would be absorbed locally by the producers because the price is set on a global stage. And so the geopolitical implications obviously could be much broader, but the market will figure this out or shipping things by truck. Obviously, you can't ship that volume by truck, but the folks believing in getting out of fossil fuels would be happy because it encourages you to invest more in solar and nuclear energy. So we're willing, and on the fertilizer thing, it's a part of the reason the fertilizer's produced there is because energy is so cheap down there. It doesn't mean you can't produce fertilized elsewhere and it is created elsewhere as well. And so if you ask people kind of in the medium term, we obviously have a midterm election coming up. All's a larger hire that we're going to get some sort of gridlock. On the one hand, that's good news because when you don't get anything done, you don't have much spending, except the only way to get things done is if you promise everybody something that you end up not having entitlement reform, which is kind of a key driver for many investors to invest in something like gold because they're worried about the purchasing power of the dollar. Another angle tariffs do matter for disaster class. I believe that while people focus on the flow of goods, the flow of currency is the other side of that coin. No pun intended. When you have tariffs, you have less money, less currency flowing into the US that helps fund US deficits, which translates to higher yields. And then I briefly mentioned Kevin Walsh earlier. Unlike what some people might say, he is no dove. He is set during the nomination hearing that more work needs to be done. Inflation is too high. I don't think he has much of an impact on rates in the short term, but it will depend a great deal of the sort of flexibility the market gives him. We continue to have supply shocks and other shocks. The market will be in a driver's seat as to where rates are going to be. A lot of people invest in gold as a diversifier. I do think it continues to fulfill that role. But as you pointed out in the beginning, in the short term, it's been correlated with equities. When that happens for a little bit, then people may take a little bit before they embrace gold again as a diversifier. Although I must say, when I look at the markets, I've seen speculators pay back their positions. Long term investors, I have not seen a pay back positions in any meaningful amount. I say that based on the visibility that we have from where we are. And so in some ways, as volatile as these times are, it's somewhat business as usual for the sector. Are you still looking at currencies these days? When I look at them, I get calls from journalists that haven't been taken off their rotos. and I want my latest wisdom of what happens to the Mexican phaser and what do I like. I mean, obviously, what I learned there still applies, I don't trait currencies institutionally anymore. It's kind of the one thing I can maybe that might be valued to some people is, first of all, a lot of people are confused that inflation goes up while currency sometimes on that day actually moves higher. The reason is because the market believes the central bank will do the right thing and will have tighter policy. It's only then in the medium term when people realize, "Oh my God, they didn't like rates." Maybe that currency needs to be weaker. The other thing is that currencies that have a significant current account deficit in my analysis are far more sensitive to economic growth. So when when New Zealand or Australia had weak growth, the currency weekends and vice versa, whereas the eurozone doesn't really have that. So the eurozone dynamics are very different from that of other currencies. I love it when people comment on currencies that have no clue about them and people say, "Oh my God, they must be right." It's a very interesting sector of the market that says frustrating to trade is just about any other sector of the market. One of the things I think when you talk to people always make sure you differentiate between whether they adjust a talker or whether they actually have money at risk in that space because it does make a difference often what they say and your choice as to who you listen to. It's funny. I was just talking to somebody today, or yesterday, David Keller, and he was saying that he does not consider himself an expert, trader or investor. He feels like his skill set is in educating, but he does feel like he has an expert. So there is a certain distinction between even if you don't have money or skin in the game that you can still give cogent analysis. Well, of course. And first of all, if you have enough gray hair, you probably have gotten some humility in the markets because you have been around a little bit. And also, I would say none of us, I certainly do not have a crystal ball. The one thing I can do and any educator can do is we can get anyone out of the comfort zone and consider a different point of view. And then you as an investor can stress test your point of view against that. I wouldn't recommend anybody do any trade based on what I say or anybody else says, but if the argument is rational, if the person has credibility, well, why are they saying something I might disagree with, right? And that's where the value is, I think, in a discussion like this. Yeah, I don't know where the price of gold is going to be tomorrow, but I have a process and I'll continue following that process. What is your daily and weekly process? What are the things that you're looking at to inform you? Well, I'm a cat who are to achieve of the boss of my job. And so I'm running a lot of meetings. We have daily morning briefings. We have risk meetings. We have research meetings. One of the things we do is in the spring of 2008, I called Bill Poole. Those old enough may recall that he's the former president of the St. Louis Federal Reserve. He was a big critic of Eddie and Freddie, Danny and Freddie before they were taking on to conservatorship. And we talked to him to assess the macro picture. He is a kind of an open, he knows everything about any of our meetings that has ever taken place. But then at the other end of the spectrum, I'm a chief investment officer. And so I have to supervise our portfolio managers. They are the experts on the mining side. I kind of have a veto right. I and I at the same time, we live in a regulated industry. So a lot of my time is spent that we cross the T's on many things. And so we have a lot of internal discussions. One of the reasons I'm active on social media is because on social media, I get unfilled at feedback if somebody disagrees with me. It's not that, hey, I'm the boss. And therefore they have to agree with me. And so it helps to get another perspective. I try to get out of my echo chamber. I think that's increasingly difficult. One of the things we spend over $100,000 a year in getting news, right? I mean, it's just incredible. And a lot of that is Bloomberg, I suppose. Bloomberg terminals are expensive. But it's, of course, you can get news from many sources. But if able, being able to curate one's news is ever more difficult. And we have long before the world was as polarizers today, worked very, very hard to try to get news from various sources. And from everywhere, right? I mean, we have global investor in many ways. So our morning briefings do include global news. I listen to to international news every day. And it's just trying to keep up to speed with what's happening out there. And in terms of being in discussion with your portfolio managers, is that process something that you talk about ahead of time and then you kind of let them do their thing? How is that set? But fully managers by nature, alpha personalities, not all of them, but many of them. You're seeking alpha. So you probably know something about it. And so they are independently driven. They know what they're doing. And so it ends up being a cat hurting exercise, at least as much as anything else. In our segment of the market, where we invest in a lot of junior mining companies, there's a lot of talk to executives of mining companies. And a lot of discussions of brokerage firms, they tend to be a link that provide introductions. And a like, and so it's probably a little different from many investors these days that tend to more high with a push of a button based on some some quantum algorithm. Do you guys use charts? Are you do you base a lot of things on charts? And none of our public communications do we use technical analysis? And I phrase it this way is I did a lot of technical analysis in the 90s. Indeed, I applied AI to to the market. I thought those of you old enough, you may remember the was a magazine is I think it was called technical analysis of stocks and commodities or commodities was a commodity is public a stock and commodities publication. And I calculated the fractal dimension of the stock market and kind of had a had written a paper and created a consumer version as to why if you apply technical analysis, it applies to both tick data and long term data because the quote unquote fractal dimension of short term and long term data is similar. And article was never published because there was too academic in it. But I do I used to say that technical analysis important, especially when overtaking to to make sure that that you see everything else is okay in the market. As a practical matter, most of what we do is is based on fundamental analysis, but yes, we do monitor fundamentals and technicals and specifically, I think if I realize a lot of listeners are more on a technical side, in the gold sector, it probably applies more than in other sectors in part because there are so few fundamentals. A goal is so simple and so it tends to attract the technical investor that can become a self-fulfilling prophecy. You mentioned some connections with the Fed. If you were in Kevin Worsh's position, how would you be running things? What would you do either differently or what do you agree with that's been done? Well, it hasn't done much so not much I can do differently at this stage. What he is faced with is first a market that has clearly dictated where interest rates are likely to be in the short term to next several months. So that's probably not the most important thing right now. You have an FOMC that's very polarized right now. And one of the things that I don't think that hasn't gotten enough coverage is Chris Waller, he was one of the candidates, he was one of the early guys on warning about inflation. He has been shooting across the bow behind the scenes. He has told the regional Fed presidents and those, I don't want to get too technical, they're the governors that are kind of politically appointees and the regional Fed presidents that are that are nominated in this district by the banks to which the governors have a veto right but they are not selecting them. They are fiercely independent. And Chris Waller has said, "Hey, we want to rationalize some things you guys are spending too much money and you got to consolidate HR and other things." And so that creates a very hostile attitude there because they don't they don't like to be meddled with what's happening, by the way, for historic reasons. There has been a lot of consolidation. Regional Fed's used to be in charge of processing checks or kinds of things much more actively transporting currency and other things. All that has been very much consolidated. But he goes in there and obviously there is the camp. Hey, should we raising rates or lowering camp? He rates Kevin Worsh at a core. It is core is a hawk. But he also believes in my assessment that the only way to US can move forward. forward is if they outgrow the debt. So you've got to give the productivity boom a chance. Power, by the way, I argue, has been trying to present the Fed on the silver platter. He talked about productivity gains last December. He also talked about the other aspect. Kevin Worsh wants to do a lot on the communication strategy. And while that might sound strange or can it is super relevant for the effectiveness of monitor policy. And if you get that right and if you can improve on that, he is not a fan of all the forward guidance. And Powell was asked in March, well, what happened to your reform of communication strategy? And he kind of said, oh, I tried. I didn't succeed. Couldn't get my colleagues on board. So you said, I couldn't do it now. Powell was not an intellectual leader on those matters. But Kevin Worsh comes in and there is somewhat of a hostile atmosphere. And so he asked me what would do. I'm guessing that in the first meeting, he's not going to change rates. He needs to set the tone that changes in the air without getting anybody upset or too many people upset. And so the lowest hanging fruit is that he'll do something radical as far as the FOMC statement is concerned. Some of your listeners read that stuff or hear about it. For economists, it's a big deal. What's in there. But there is no need to like Powell said, I wish I could have done this differently in the last FOMC statement. Yeah, he could have. He's the boss, right? So he could compress that statement to address the few words or something. And then say, hey, we need to do war work on inflation. But otherwise, I want to give plattitudes because that then gives him time to work the scene in the background. So this is much more of an answer than you probably expect that. But that is what I would expect that I wouldn't be surprised if that's the sort of thing he does. No, I love a fully fleshed out answer. So much appreciated. You were talking at the beginning about how you were in the precursor to the crypto space. How do you think as a macro guy, like what column, what pillar, how does the crypto space slot into the broad macro economic picture according to you? So first of me tied that to Kevin Warsh because he is actually coming on crypto. He considers it a technology that's worthwhile. He doesn't think it's a threat to the dollar. It's just a different way of providing liquidity and other things. So he has a very rational perspective to it. He is not one way or the other highly political about it and says, this must be done or that must be done. When I started public key photography in the 1980s, it wasn't about Bitcoin because Bitcoin was invented. It was more about secure communication. So it was about the protocols. And maybe because of that, I am fascinated by the underlying technology far more than the specific implementation of this or that. One of the things I have said is that Bitcoin still wants to decide what it wants to be when it grows up. And the reason I have said that is that Bitcoin has mostly behaved as a risk assets, as a speculative asset. And that may change over time. But I think part of the reason why Bitcoin hasn't done so well in recent weeks is because they're more exciting things to be. And risk has been off. And now there is a space like IPO. There's something else. It's more exciting. And so if you only attract a speculator, that may happen. That correlation may change over time. My interest is far more in the decentralized ledger and the power that comes with it. I do believe that the economy is going to be more digitized over time. And of course, they are going to be growing pains. This has to be the one thing that I learned in one of my many hats is this was way before the Patriot Act, I believe, regulators are concerned about AML. They want to know who does what. And indeed, on the digital asset side, you have a very detailed trail. Depending on the cryptos token standard you're using, you can have all the AML features that you want. But of course, it's very different from this very arcane system we use, especially in the US, of how the broker has the relationship with the client. I don't know how many people are aware it is that all the securities that you own, you actually don't really own them. It's DTCC owns them. It's an arcane trust company. And then the custodians, the big brokerage firms hold them on behalf of the beneficial owner. And it creates a very convoluted structure. And the digital world kind of throws all of that out and provides a different avenue. And since you have sophisticated investor, let me just make one of the common. The exchanges are working on digital versions of the securities. And actually two different models. The NASDAQ wants to work with DTCC and tie tokens into the DTC structure, whereas the NISI model wants to use the DRS system, digital registration system, and have a tokenized transfer agent. Many people may not be aware is when you hold an ETF, the transfer agent literally only has one holder, which is DTC. And then it goes back down the channel on the custodians holding things on behalf. And ETF administrators are actually not equipped to use DRS, direct registration system. Whereas if you all share like IBM, you can say, "Hey, I don't want to hold it with my broker. I want to hold it directly with DRS." So I might have lost some people, but you told me out of time, your audience is sophisticated. So I dare to go down that rabbit hole. We like to talk up to our audience, big billionaires in that, leading them to a high bar. Axel, what, well, actually, let me ask you this. Do you feel like there's just peripherally? Do you feel like there's any currencies that are compelling for investors to look at right now? No. We have the opposite of last answer. No, I mean, all the currencies are somewhat going down the drain. You're talking to a gold guy for goodness sake. Yeah, I know. That's why I asked. Clearly, the reason the dollars the Safe Haven asset is because we have the deepest, most liquid markets in the world. And when I say that trade was effect flows into the US, it's not like a light switch that's turned off. It's a little bit of sand that's thrown into the engine. But if you want to, think of the US like a giant hedge fund or a giant bag, you borrow cheaply in the US to invest for higher returns abroad. No other place comes close to that. And it also for in us, borrowing US dollars to fund things locally. Now, what that means is that when risk flares up and volatility flares up, people de-lever, which means they're reducing the short position. And when you borrow dollars to invest abroad, that's akin to a dollar short position. And that's why you have that short squeeze. That's why you have the dollar gets stronger when you have a risk off world. Now, there's been a lot of talk. Oh my god, the dollar's going to lose its reserve currency status and so forth. And then the people say, and it is correct, of course, that we have incentivized other central banks of countries that are hostile to the US to use the dollar less. But they're kind of stuck to it, but they're trying to figure it out. But the alternative, and that's part of the reason I say no, that there isn't any currency I like. The alternative is not that the euro will take over or whatever, which our currency will take over. The alternative is increased fragmentation that none of them take over. That means there is this hedge fund sort of mechanism is going to spotter, which means less economic growth, less growth. And so quote unquote, everybody is losing in that game. Now, of course, on a relative basis, there will always a buck to be made. And if you have the right investment strategy, good good for you, but from a fundamental point of view, all of those trends are concerning. And of course, they're sticking to the US, right? The deficits that we have are rather concerning. The one thing we do know is that policy makers are amazing can-kakers. And so any problems we have will be pushed down the road. In the US, we can probably do that more than in other places. The other thing to keep in mind, just to go down that rabbit a little bit. If there were to be a financial crisis, we saw it in the financial crisis in the US, we saw the eurozone debt crisis. Policy makers, governments can change the rules of the game along the way. And they will do that when it's in their interest. So even if you have perfect foresight of what's going to happen, it does not guarantee that you'll make money with that trade because if you're betting against the government, they might just find a way to have the upper hand at the end of the day anyway. So someone who's been around, yeah, absolutely, absolutely. Axel, do you think that American based investors should afford themselves some sightline to the international picture. Like, is there a recommendation you would give to US centric investors for as a way to broaden their horizons? I think investors need a process and it doesn't need to be a good process. I have four children. They all have a little different investment process. I give input to each one of them, but the input I give each one of them is very different. And as long as you stick to a process, you'll be all right. I mean, you can argue that both ways about international investing, US markets are completely disproportionately overvalued. But of course, there's a reason because the rest of the world, Europe in particular is a huge mess. Now, just because there is a mess doesn't mean there isn't any value there. But let me just give you an example. The Europeans are known to be really good at red tape. Well, the industry of the future is technology and AI. But red tape does, it protects the incumbent. And nowadays, it means that US companies have a leg up over European companies because the US companies are the big tech companies. They can deal with the red tape, including the red tape in Europe, better than European companies. That's one of the reasons why European companies are outperforming. But at the same time, right? I mean, arguably some of the max seven companies are a little pricey. And so where do you hide? Well, I have bad news for you. On the way down, everything is going to come down. Right? Now, in the dot com, after the dot com bubble burst, small cab value did well. I have some small cab value. But does that mean it will do well this time? I have no idea. And for what it's worth, we have no idea whether in this boom, when 1998, 1999 or in 2000, there's no hindsight. And there will be a few people that got the top right. But I happen to think, yes, international investing is important. But I don't have a crystal ball of whether European or Asian markets are outperforming tomorrow or not. Appreciate it, Axel. Appreciate this conversation. Where else can investors, can our audience find more of your work? Get in touch with you. Merckinvestments.com is our website. We have a free newsletter. I can't talk about our products here, but you'll find them on the website. I'm active on social media at Axel Merck. He's my handle on Twitter for X these days. And yeah, follow me there. There I can comment live on what's happening, warning when there's a central bank meeting. I tend to tweet there actively. But then that, yes, you can reach out any time. I tried to be responsive. Just to remind you, anything you hear on this podcast should not be considered investment advice. It's important to keep your eyes on what you're doing. And if you're not, you can't be too close to what you're doing. You can't be too close to what you're doing. [BLANK_AUDIO]