E14. Reimagining the 60/40 Portfolio, Hard Assets, Bitcoin as Digital Gold & Asset Allocation Strategies

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Hey, everyone.
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Corey Hofstein here.
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I wanna personally invite you to an event
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construction.
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Mark Horbul, managing director of the
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Plan.
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This is your chance to hear directly from the
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But space is limited, so head over to
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Hope to see you there.
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So as gold hold, I think the main advantage is
you can be very certain that you are not going
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to be diluted by new gold, which is coming into
circulation.
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Right?
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And this this gives gold a high stock to flow
ratio or a low inflation rate, however you
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wanna you wanna put it.
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The one is just the inverse of the of the
other.
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And in other words, gold is not so available
because there is necessarily such a limited
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amount of it, such a small amount of it, I
should say.
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There are rare earths which are much less of
them are available, but that doesn't mean
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necessarily that they are worth more, but gold
is so so interesting as a store of value
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because its amount is so constant.
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So you can really know it's basically the same
amounts going around this year than as as it
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will be next year.
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But not not 100%, but one one and a half
percentage points.
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Hello, and welcome to the GetStacked Investment
Podcast, where we delve into the exciting new
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world of return stacking.
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Join us as we break down complex financial
concepts into accessible insights, speak with
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leading experts in the space, and analyze real
world applications for return stacking.
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GetStacked is here to help you break out of the
traditional portfolio construction mold and get
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you to start thinking differently about the
path to successful investment.
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Corey Hofstein is the co founder and chief
investment officer of Newfound Research, and
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Rodrigo Gordillo is the president and portfolio
manager of Resolve Asset Management Global.
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Due to industry regulation, we will not discuss
any funds managed or sub advised by these firms
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on the podcast.
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All opinions expressed by podcast participants
are solely their own opinion and do not reflect
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the opinion of neither Newfound Research or
Resolve Asset Management Global.
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This podcast is for informational purposes only
and should not be relied upon as a basis for
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investment decisions.
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Clients of these firms may maintain positions
and securities discussed in this podcast.
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For more information, visit returnstack.com.
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We're thrilled to welcome Mark Valak, partner
at Incrementum AG and coauthor of the highly
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respected In Gold We Trust report, often called
the gold investor's bible.
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Mark brings decades of experience in macro
investing, asset allocation with a unique focus
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on the intersection of gold and monetary policy
as well as systemic risk.
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This year's 2025 edition is entitled The Big
Law, and it explores everything from fiscal
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dominance to central bank trusts to gold's
evolving role as a reserve asset and even
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Bitcoin's growing role here.
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So there's there's also a reimagining of the
sixty forty portfolio with the role of gold and
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Bitcoin in the new regime playing an expanded
role.
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Mark, it's great to have you with us.
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And, you know, from the perspective of the
paper, can you can you elaborate on the big
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log?
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Thanks for having me, gentlemen.
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It's a pleasure.
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Yeah.
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We as you already mentioned, right, this in
gold with trust report on an annual basis, and
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every year we've been giving the report a
leitmotif, and this year's leitmotif, as you
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said, was the big long, which is obviously a
little bit of a play on the on the movie, the
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big short in which which basically showed a lot
of the hedge fund managers back then betting on
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on on the housing crisis, basically.
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And this is a little bit of a inverse, the idea
that actually a long position on on the gold is
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probably going to, in our view, at least be a
very profitable trade, if you want to look it
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like that.
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But it is actually, in our view, obviously
much, much more than just a trade.
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It is like a systemic rediscovery of of gold as
as a reserve asset.
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I'd put it in this kind of terms.
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Because of everything we've been seeing in the
last years, actually, the the dollar based
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system is being eroded.
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It's the trust in it is slowly being eroded
with a lot of because of a lot of things which
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is, which have been happening.
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And this is really our our message to investors
since we are also asked a lot of times, well,
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Goldpress has has risen so much.
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What should we do?
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It's probably at the end of its road.
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And if you look at our cover, the the road is
is relatively long still, but it's also a
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little bit bumpy.
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It's it's not like a straight road.
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It's not a highway.
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It's nothing that we are expecting.
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But what we wanted to point out is we we do
think that this bull market has a a lot of ways
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to go because as I said, in our view, the
monetization, which is a difficult term, we can
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talk about that perhaps, but but the
rediscovery of gold as an asset in systemically
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has started in our view.
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And how are you observing that?
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Well, I'd say the the most evident or obvious
indication for that is if one looks at central
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banks.
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So we we know that central banks have been
buying gold and accumulating gold actually
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already since 2009 on a in a relatively slower
pace when it comes to the years 2009 to
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02/2022.
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I think the average accumulation was somewhere
between 300 to 400 tons during these years, but
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in 02/2022, something was kicking in.
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If if one looks at the the purchases, they they
blow off to over 1,000 tons a year.
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So basically three x, and they have been in in
this ballpark since consistently the last three
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years.
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So and probably the pivotal occurrence, what
what actually happened was in our view at least
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the sanctions, the sanctioning of of of Russian
assets in in this conflict, when it came to the
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one in Russia.
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Obviously, the the the world saw this, because,
I mean, if you if you take the the standard
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wisdom and even I think it's part of the the
CFA body, you if you take the CFA exam, you get
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to learn what is the riskiest asset and you
have to actually tick off the box US Treasury
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are the riskiest assets, For a lot of people in
the world, it became evident that they are not
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riskless anymore.
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So if you if you're politically perhaps not in
the the best friend of of The US, then perhaps
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counterparty risks are you should reevaluate
your counterparty risk.
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And I think the world is is being doing this
and again it it shows up in central bank
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purchases first and foremost.
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So, Mark, this is I just popped up one of your
charts here, and so that's the kind of big
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jump, say it's the Ukraine invasion that you're
alluding to, right?
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And do we think that's basically because of the
sanctions to to Russia and and the fiscal
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misuse of The United States and other Central
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Yeah, I I I guess it's it's not the this only
factor but it's I think that the jump does have
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to do with with the sanctions.
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I I would argue that and I mean, as one can
see, I think the first moment of of distrust
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was when when system the system was questioned
obviously was around the GFC or in the
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aftermath of the great financial crisis two
thousand nine, 02/2010.
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Back then, counterparty risk also obviously
became a topic since we had some banks failing
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at first, at least.
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And so this was, I think, the first dent,
bigger dent into this dollar centric monetary
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system, which has been going on since '19.
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You can argue '71, '73, where wherever you
wanna put the date, but really coming from from
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from from a very unique situation if one goes
back further, like, one looks at the end of if
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one looks at the nineteen nineties The US was
the only game in town when it comes to to
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geopolitics.
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It was also called the the only superpower and
it was that that was basically not rivalry
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going on.
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I mean, Soviet Union had broken down in '91,
and and and The US had a great run-in the
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nineties, even had some surpluses from the
fiscal side at the end of the nineties, so the
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dollar was really king at the end of the
nineties, no competitor, and gold was flat.
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Nobody had interest in gold.
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It was well, so basically where you had the
lows in the price, and a lot of things have
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changed since then.
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I mean, fiscally and also geopolitically.
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Yeah.
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Yeah.
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It's incredible to see that in post o eight.
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You get the rise in demand for central bank
purchases.
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It's around the same time that, you know,
Bitcoin launches as well as part of that
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mistrust.
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And it's, you know, big jump, consistent growth
in purchases, and then another massive jump in
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the last three years.
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So
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Well, it really was a watershed moment.
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I mean, we've had we've had conflicts globally,
but no one has ever seized the reserve asset of
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another nation during a conflict.
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And that moment in time caused everyone to sort
of stop and say, well, if the US treasury is
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the reserve asset, they know where all the
treasuries are held because they're the issuer
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of those assets.
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And if we do something that is not agreed to or
isn't liked by The US, then all of a sudden,
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our treasury becomes at risk for confiscation.
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And gold is that one asset where it's not a
counterparty risk to anybody else.
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When you hold the bar of gold, it is yours.
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Now paper gold's another another topic, but a
pretty significant watershed moment.
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And then you've got then you got the fiscal
dominance following that up, Mark.
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And I wonder if you've got some comments on
that or thinking into how this bleeds into
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other areas for demands for gold.
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And then, obviously, I'd love you to touch on
the initial conditions we have, I e, where
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where are we starting from from an allocation
perspective across portfolios generally.
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Yeah.
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So I'd like to add to the just to the to the
counterparty aspect.
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I mean, this is is not as relevant for for
every investor.
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As I said, I mean, probably the the 800 gorilla
in in a pound gorilla in the room is is China.
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Right?
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So, I mean, it's no no secret that China and
The US have this geopolitically rivalry, and
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and and China has huge surpluses.
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So this is a big topic to which going very
lively debated today in in policy efforts by
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the Trump administration, but that's that's
nothing new.
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So that has been going on.
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But I just wanted to say for US based
investors, the the the counterparty risk
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actually is hasn't been imminent, and I'd argue
it's it's still not imminent.
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So it's it's very crucial to whom you speak,
right?
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And I think also as a part of this reality, US
financial institutions who still own the
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largest pools of capital and therefore are very
important for price discovery for all kind of
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markets, but gold being one of them.
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They haven't been participating in this rally,
and I think this is also very important to
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explain, that's a very good chart that you're
pulling up, to explain this discrepancy between
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between all kind of performance of of, say,
instance, what we call performance gold, what
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what what we include gold miners, but also
silver, you know, both of these assets were
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actually relatively weren't performing that
well in the recent bull market.
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Why?
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Because that has the the bull market has been a
central bank driven bull market, and and
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typically silver, but also mining equities are
marginally bought by by western financial
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investors, and and they again haven't haven't
participated yet.
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I think that's just noteworthy fact and
referring to this graph, this is the new the
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new gold playbook, what we called it last year
or last year's leitmotif.
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We wanted to highlight that actually this
relationship between the real real interest
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rates and in this case, it's also the the ETF
holdings, the charts look very similar,
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actually has broken, right?
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So ETF holders, which are ETF purchasers, are
typically in the West, are typically Western
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financial institutions, and they always were
the last two decades at least have been the
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marginal buyer of gold, and I think this
correlation is is quite evidently seen here.
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Even though that's quite interesting, think
even though the total amount of gold they hold,
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and we see this on the left hand scale, isn't
isn't that big because we have estimated amount
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of total above ground stock of 220,000 tons,
and they've been holding something like 2,000
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tons, right?
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So that's not a huge amount, but at the margin,
it was enough obviously to move the price, and
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again, this goes back to my argument.
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They didn't see any need, if you look at the
right hand of the chart, any need to increase
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their their gold holdings.
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Actually, they they sold when when the interest
rates started to rise again, whereas the price
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just started to soar exactly then.
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So again, I think this is quite a good
confirmation of our argument why what has
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happened.
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It's been a central bank induced bull market,
which I think explains why performance cold
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gold, as we call it, has lagged and which also,
I think, one can conclude if western investors
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join the party, then we're going to see
performance go to to make make up some
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underperformance, and I think this actually may
have started during the last weeks.
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Yeah.
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Well, when you look at the, you know, there's a
pie chart here that I want to present quickly.
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When you look at the existing holdings for
gold, I thought this chart was illuminating,
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right?
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Since the beginning of my career, as I met
Mike, whenever we walk into a room of financial
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professionals, we ask how much of their
holdings for clients are in gold.
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It's a shocking amount that says zero.
218
00:16:08,029 --> 00:16:09,950
And this chart just kind of shows it here.
219
00:16:09,950 --> 00:16:15,149
You got golden precious metals at less around
1% versus all other asset classes.
220
00:16:15,389 --> 00:16:20,350
So that cohort has not woken up to the utility
of gold so far.
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00:16:20,350 --> 00:16:25,495
It's fascinating to me, but you're starting to
see some pickup, just not Yeah.
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00:16:25,495 --> 00:16:27,175
Would say greatest gold price.
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00:16:27,415 --> 00:16:31,975
I I would say that we're starting to see a
pickup and just evidenced by the way the
224
00:16:31,975 --> 00:16:33,894
underlying gold equities have been playing.
225
00:16:33,894 --> 00:16:39,019
As as Mark mentioned, you know, that that tends
to be a lot of North American participants will
226
00:16:39,019 --> 00:16:41,420
will jump into that, and it sort of flows down.
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00:16:41,660 --> 00:16:45,019
The the price of gold is up, and then it stays
up.
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00:16:45,019 --> 00:16:49,580
And then you have to, you know, go through the
discounted cash flow analysis for gold mines,
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00:16:49,580 --> 00:16:52,434
see how much they've sold forward, where
they're flat on it.
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00:16:52,434 --> 00:16:57,394
So there's this lag period between where you
actually get some interesting cash flows.
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00:16:57,394 --> 00:17:03,394
Now you're seeing those growth numbers in some
gold stocks too that are pretty substantial
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largely based on the gold price coming through
in their profits.
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00:17:07,230 --> 00:17:10,349
But you're seeing the capital flow that way
too.
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00:17:10,349 --> 00:17:17,069
Just if you look at GDX or GDXJ, the the ETFs
in North America that represent them, you see
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some outperformance finally in the last month
or two, I think.
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00:17:21,424 --> 00:17:25,744
So it does seem like your your thesis is on
point, Mark, that the that the North Americans
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are joining the party slowly but surely.
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00:17:28,704 --> 00:17:32,784
And I think you mentioned in the report you you
feel we're in middle innings on this in the in
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00:17:32,784 --> 00:17:34,625
the sense of a baseball analogy?
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00:17:35,179 --> 00:17:35,420
Yeah.
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00:17:35,420 --> 00:17:41,499
I mean, this is obviously always a very tricky
thing to estimate the bull market's evolution,
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00:17:41,819 --> 00:17:46,940
but I I think one can make the argument that
this is obviously, we're not at the beginning.
243
00:17:46,940 --> 00:17:48,220
That is also clear.
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00:17:48,220 --> 00:17:53,974
So if we don't think that we're at the end, so
I guess that that leaves us that we're
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00:17:53,974 --> 00:17:54,934
somewhere in the middle.
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00:17:54,934 --> 00:17:55,414
Right?
247
00:17:55,494 --> 00:18:03,015
But, obviously, I mean, we've been talking
about this this rediscovery of gold as an asset
248
00:18:03,015 --> 00:18:09,240
class, which has been much more prominent in at
the level of central banks.
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00:18:09,240 --> 00:18:16,359
Now it's slowly perhaps starting in the west of
financial scenes again, but I think what is
250
00:18:16,359 --> 00:18:22,534
still kind of an unknown, and you actually
asked me about that, Mike, just before,
251
00:18:22,534 --> 00:18:26,454
question before, about what's going to happen
with the fiscal situation, right?
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00:18:26,454 --> 00:18:31,255
Fiscal dominance, if you wanna call it like
that, and we really don't know where this is
253
00:18:31,255 --> 00:18:31,654
heading.
254
00:18:31,654 --> 00:18:35,979
I mean, it doesn't really look as if it would
change anytime soon.
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00:18:36,059 --> 00:18:44,219
We had, I have to say, a brief moment of
reconsideration, or let's put it that way, of
256
00:18:44,379 --> 00:18:51,014
looking at what's going to happen with Doge,
and you've already put up the the slide here.
257
00:18:51,654 --> 00:18:58,134
So one, I think, say about the administration
what one wants, but but what they did do for
258
00:18:58,134 --> 00:19:03,890
the first time, I think, ever, or at least the
last fifty years, they actually addressed the
259
00:19:03,890 --> 00:19:07,329
point of the unsustainability of the fiscal
situation.
260
00:19:07,730 --> 00:19:12,609
And that is, I think, quite significant
actually, because, I mean, if you just think
261
00:19:12,609 --> 00:19:17,184
last, treasury secretary, Janet Yellen, just
said, no.
262
00:19:17,184 --> 00:19:17,345
No.
263
00:19:17,345 --> 00:19:19,265
Everything is fine and no problems.
264
00:19:19,424 --> 00:19:21,184
Nothing nothing to see here.
265
00:19:21,345 --> 00:19:27,345
And and now the officials actually pointed out
very clearly or at least they did they did so.
266
00:19:27,505 --> 00:19:33,429
That was quite, quite an interesting moment,
and I'd say, I mean, at the end of the day, one
267
00:19:33,429 --> 00:19:36,470
has to think about why is the gold price rising
at all.
268
00:19:36,470 --> 00:19:42,150
The gold price is rising because there is more
inflation being produced in terms of more
269
00:19:42,150 --> 00:19:51,744
monetary units, monetary inflation in in order
to basically reflate the economy or inflate
270
00:19:51,744 --> 00:19:52,705
away the debt.
271
00:19:52,705 --> 00:19:52,945
Right?
272
00:19:52,945 --> 00:19:59,140
This is like typically structure of basically
also this tech based monetary system, one can
273
00:19:59,140 --> 00:20:02,259
argue, it's actually by design like that,
right?
274
00:20:02,660 --> 00:20:08,740
And so I think the really the fundamental
question which one has to ask oneself is the
275
00:20:09,299 --> 00:20:14,005
fiscal path or not?
276
00:20:14,244 --> 00:20:20,005
And obviously it hasn't been sustainable for
the last decades, but as I just said, they were
277
00:20:20,005 --> 00:20:25,329
at least addressing this point and talking
about changing the path, but it it doesn't look
278
00:20:25,329 --> 00:20:31,009
like as if there would be close to to
substantially change the path, and as long as
279
00:20:31,009 --> 00:20:38,615
we don't see a change in this in in this
momentum, I think the we we really don't know
280
00:20:38,615 --> 00:20:41,654
how how long the bull market for for gold
actually can last.
281
00:20:41,654 --> 00:20:41,974
Right?
282
00:20:41,974 --> 00:20:46,855
So so there are really a lot of factors which
which we do not know about the future, but we
283
00:20:46,855 --> 00:20:52,880
can say these factors are are steady right now,
and that's why we we assume that there's still
284
00:20:52,880 --> 00:20:53,600
a lot of upset
285
00:20:53,600 --> 00:20:54,000
going on.
286
00:20:54,000 --> 00:20:59,839
I mean, is it is fascinating to have watched
the ups and downs of the promises, the hope,
287
00:20:59,840 --> 00:21:06,400
and now with the big, beautiful bill, seeing
how much more spending and continuation of the
288
00:21:06,400 --> 00:21:07,759
past there's been.
289
00:21:07,759 --> 00:21:10,875
I think, what was it that Elon's line?
290
00:21:10,875 --> 00:21:13,914
The bill can be big, it can be beautiful, but
it can't be both.
291
00:21:14,234 --> 00:21:16,714
I think that's bang on, right?
292
00:21:16,714 --> 00:21:20,394
And I think it's a, both a big, it's a very big
bill.
293
00:21:21,080 --> 00:21:28,839
And you know, I think the hope for the
administration is really unlocking efficiency
294
00:21:28,839 --> 00:21:31,480
and unlocking efficiency through cheap energy.
295
00:21:31,559 --> 00:21:37,304
But even as you look at the bill and explore
what they've done in terms of solar and the
296
00:21:37,304 --> 00:21:41,704
like, it just they're making it more difficult
to have cheap energy in The United States with
297
00:21:41,704 --> 00:21:45,785
the exception of trying to drill baby drill,
which is yet to be seen how they're going to
298
00:21:45,785 --> 00:21:46,664
accomplish that.
299
00:21:47,065 --> 00:21:50,670
If they're able to unlock that, then I think
all bets are off and who knows what's going
300
00:21:50,670 --> 00:21:54,990
happen to gold, If they unlock a ton of
efficiency, I think everything has to be most
301
00:21:54,990 --> 00:21:58,829
of efficiencies can be driven by cheap energy
loss.
302
00:21:59,230 --> 00:22:03,309
But that is a unlikely scenario in my view.
303
00:22:03,605 --> 00:22:08,644
And certainly going austerity is not going to
be something that the administration is going
304
00:22:08,644 --> 00:22:09,204
to do.
305
00:22:09,605 --> 00:22:09,845
Right?
306
00:22:09,845 --> 00:22:10,325
No.
307
00:22:10,325 --> 00:22:15,605
We have to print and with this quantitative
tightening has been ongoing late.
308
00:22:16,019 --> 00:22:21,539
They haven't even started to have to start to
roll some of the debt in quantitatively And we
309
00:22:21,539 --> 00:22:24,099
have this in the face of quantitative
tightening.
310
00:22:24,099 --> 00:22:26,099
We have a very strong gold price.
311
00:22:26,580 --> 00:22:32,184
I think the other thing in the real current
domain is people will say or have said it's up
312
00:22:32,184 --> 00:22:32,825
a lot.
313
00:22:32,825 --> 00:22:33,865
Well, that's fair.
314
00:22:34,345 --> 00:22:36,825
But we're going through a moment of
consolidation.
315
00:22:36,904 --> 00:22:39,144
It is consolidating those gains.
316
00:22:39,545 --> 00:22:44,140
And if you're someone who's been thinking about
allocating, this is the time to start actually
317
00:22:44,140 --> 00:22:49,339
giving yourself some time to allocate to an
asset as it kind of digests a little bit of the
318
00:22:49,339 --> 00:22:51,579
gains it's had over the last year or so.
319
00:22:51,980 --> 00:22:57,339
I just think it's a bit of a it's a bit of a
sweet spot where you're still early enough
320
00:22:57,704 --> 00:23:00,984
where you can garner the gains.
321
00:23:01,464 --> 00:23:05,785
And we often approach it, Mark, from the
perspective of the unique asset class to the
322
00:23:05,785 --> 00:23:06,664
portfolio.
323
00:23:07,065 --> 00:23:07,384
Right?
324
00:23:07,384 --> 00:23:13,865
Gold just brings such a unique orthogonal angle
to a portfolio of sort of more commonly
325
00:23:13,200 --> 00:23:14,319
accepted assets.
326
00:23:14,720 --> 00:23:16,480
It just always makes a lot of sense.
327
00:23:16,480 --> 00:23:21,119
How you accommodate it and get into the
portfolio, that's a bit of a long story, but it
328
00:23:21,119 --> 00:23:23,519
generally always makes sense to have some gold.
329
00:23:23,919 --> 00:23:29,464
And I just feel like that you know, we're going
through that that three phases of truth.
330
00:23:29,545 --> 00:23:32,825
You know, if you go back to I think even Gandhi
said this.
331
00:23:32,825 --> 00:23:33,065
Right?
332
00:23:33,065 --> 00:23:34,505
Truth passes through three stages.
333
00:23:34,505 --> 00:23:35,785
First, it's ridiculed.
334
00:23:35,945 --> 00:23:37,704
Second, it's violently opposed.
335
00:23:37,865 --> 00:23:39,144
And then third, it's self evident.
336
00:23:40,079 --> 00:23:45,359
And I think we've you know, the ridicule was
sort of back aways where people why would you
337
00:23:45,359 --> 00:23:49,839
ever buy gold in the in that period where The
US dominance was so strong?
338
00:23:50,160 --> 00:23:52,000
US dollar was very worthwhile.
339
00:23:52,654 --> 00:23:55,694
Then now it you know, it's been through this it
goes through this opposition.
340
00:23:55,694 --> 00:23:56,815
Why would I hold it?
341
00:23:56,815 --> 00:23:57,854
What are the reasons?
342
00:23:58,414 --> 00:24:00,894
And then eventually, it's gonna be self
evident.
343
00:24:01,454 --> 00:24:03,614
And but then it's gonna be all priced in.
344
00:24:04,014 --> 00:24:09,419
When it's self evident that it should be 10 or
15 or 20% of your portfolio, the price is going
345
00:24:09,419 --> 00:24:10,460
to be pretty high.
346
00:24:12,460 --> 00:24:15,099
So Mark, why don't you walk us through this
chart here?
347
00:24:15,099 --> 00:24:19,899
And you know, there's this chart and the one
next that talks about the path dependency, tell
348
00:24:19,899 --> 00:24:24,224
us about how you guys are thinking about the
different scenarios.
349
00:24:25,105 --> 00:24:31,105
Well, so as already perhaps may have become
clear a little bit of from from our
350
00:24:31,105 --> 00:24:37,250
conversation, what we do like is thinking in
the in longer terms because I think it's very
351
00:24:37,250 --> 00:24:41,569
difficult to evaluate something in the short
term, especially, I mean, everybody wants to
352
00:24:41,569 --> 00:24:47,809
know where will the gold price go tomorrow to
the end of the year, but, I think it's more
353
00:24:47,809 --> 00:24:54,304
realistic to get some kind of feeling in the
longer term, because these longer term trends,
354
00:24:54,465 --> 00:25:03,105
as we discussed a little bit, to us seem very
firmly be in place, and therefore we basically
355
00:25:03,105 --> 00:25:10,680
five years ago made some kind of long term
predictions, or at least we tried to quantify a
356
00:25:10,680 --> 00:25:15,799
model which where we calculated different
scenarios and then did a weighting of these
357
00:25:15,799 --> 00:25:16,759
kind of scenarios.
358
00:25:16,759 --> 00:25:23,115
We assessed how likely are each of those
scenarios, and our our basically, the the
359
00:25:23,115 --> 00:25:29,275
average scenario brought us for ten year time
horizon for the year 2030 at the end of the
360
00:25:29,275 --> 00:25:36,750
decade to a probable gold price of $4,800, and
that was, as I said, five years ago when the
361
00:25:36,750 --> 00:25:39,229
gold price was at 1,700.
362
00:25:40,269 --> 00:25:46,829
That back then sounded quite, I think,
outrageous for for some people, even though
363
00:25:46,829 --> 00:25:53,934
actually the average return, the compounded
rate of return wasn't extremely high.
364
00:25:53,934 --> 00:26:01,569
I mean, what we looked at for these
calculations was actually the decades, the
365
00:26:01,569 --> 00:26:10,609
historical decades of the gold price, and we
only have basically from 1970 to see these
366
00:26:10,609 --> 00:26:17,265
different decades, We had actually two two good
decades, which was which were the seventies,
367
00:26:17,265 --> 00:26:23,825
obviously, which was the the greatest decade,
and the February, which was quite quite a good
368
00:26:23,825 --> 00:26:25,984
decades for for the gold price.
369
00:26:26,384 --> 00:26:33,099
And during the other decades, it basically had
the side world markets or bear market in the
370
00:26:33,099 --> 00:26:41,740
case of the 80s, but so in the long term we
calculated or we estimated the rate of the
371
00:26:41,740 --> 00:26:47,944
monetary supply growth, that was one factor,
and also the other factor was like the implicit
372
00:26:47,944 --> 00:26:58,529
coverage ratio of gold, so how high basically,
to what extent will gold be basically covering
373
00:26:58,529 --> 00:26:59,970
the monetary base.
374
00:27:00,210 --> 00:27:06,450
And that's a function of two things again, of
of the amount of gold the central bank has and
375
00:27:06,450 --> 00:27:08,930
the the gold price if you market to market.
376
00:27:08,930 --> 00:27:11,794
That's that's how we calculated it at least.
377
00:27:12,434 --> 00:27:19,634
And yeah and we we as I said we we had the
different scenarios and the one thing so so the
378
00:27:19,634 --> 00:27:28,220
the the average scenario was 4,800 and we are
now above basically the path to 4,800.
379
00:27:28,859 --> 00:27:35,500
We were below the path but now we are above the
path and so this is the dark blue line which
380
00:27:35,500 --> 00:27:36,619
you which you can see.
381
00:27:36,619 --> 00:27:39,980
This is the path which it would need to take to
to get there.
382
00:27:40,515 --> 00:27:47,634
And and we also I mean one of these scenarios
was an inflationary scenario on because I mean
383
00:27:47,634 --> 00:27:53,154
as I said the seventies were a very good
environment for for the gold price due to
384
00:27:53,154 --> 00:27:55,234
inflation slash stagflation.
385
00:27:55,700 --> 00:28:02,660
And if we see such a scenario once more in in
this decade, we back then said, well, then the
386
00:28:02,660 --> 00:28:09,859
the target will be considered considerably
higher, something like $8,900 in in in that
387
00:28:09,859 --> 00:28:10,180
range.
388
00:28:10,855 --> 00:28:17,414
And what's been interesting in that regard is
obviously we saw quite significant inflation in
389
00:28:17,414 --> 00:28:23,750
the first half of this decade, but the problem,
at least statistically speaking, came resolved
390
00:28:23,750 --> 00:28:28,149
or what was was wasn't so so bad in the last
year.
391
00:28:28,149 --> 00:28:30,789
So inflation rates at least came down.
392
00:28:30,789 --> 00:28:35,669
Obviously, that doesn't mean that prices came
down just the the rate of increase of of these
393
00:28:35,669 --> 00:28:37,109
prices came down.
394
00:28:37,349 --> 00:28:43,934
But it was it was at one point quite
significant, I think close to 10% even in The
395
00:28:43,934 --> 00:28:50,174
US, something like 9% or so in in in this
range, but that came down to three percentage
396
00:28:50,255 --> 00:28:51,295
range again.
397
00:28:52,019 --> 00:28:58,180
So, you know, our view to to really and similar
thing actually happened in the seventies.
398
00:28:58,180 --> 00:29:03,299
We had one wave in in the first half and the
second inflation wave in the second half of the
399
00:29:03,299 --> 00:29:03,859
seventies.
400
00:29:03,859 --> 00:29:11,035
So in in order to qualify as an inflationary
decade, I guess we would need a second wave of
401
00:29:11,035 --> 00:29:14,474
inflation and I think that's totally possible.
402
00:29:15,275 --> 00:29:22,330
In in fact, it's it's quite likely in in in our
view And if if we will have a second wave of
403
00:29:22,330 --> 00:29:28,570
inflation in the second half of this decade, I
think this decade will go down as inflationary
404
00:29:28,570 --> 00:29:33,004
decade even though right now it's not perceived
as as this yet.
405
00:29:34,125 --> 00:29:41,644
And and then I we feel very confident with with
our bullish price scenario close to $9,000, but
406
00:29:41,644 --> 00:29:44,204
we will see if if it really kicks in.
407
00:29:44,684 --> 00:29:45,085
Yeah.
408
00:29:45,085 --> 00:29:50,900
Because, look, it's again, whether that
scenario ends up happening, I think it's
409
00:29:50,900 --> 00:29:57,059
important for people to recognize that
predicting the near future is really tough.
410
00:29:57,220 --> 00:30:02,980
And so I think a lot of people see these lofty
predictions and then they invest in a month
411
00:30:02,980 --> 00:30:08,924
later, when there's a 20% correction, they say
I told you so, or you got me into this at the
412
00:30:08,924 --> 00:30:09,404
wrong time.
413
00:30:09,404 --> 00:30:14,525
So I think it's it's important to show this
chart here where you kind of describe what the
414
00:30:14,525 --> 00:30:17,565
different kind of corrections might be along
the way.
415
00:30:17,565 --> 00:30:19,005
You know, it's not a straight shot.
416
00:30:19,700 --> 00:30:22,099
So, walk us through this chart.
417
00:30:22,579 --> 00:30:22,980
Right.
418
00:30:22,980 --> 00:30:30,180
So, we also looked at the at the max drawdowns
during during each of these decades especially
419
00:30:30,180 --> 00:30:35,835
during the bullish decades because I mean, our
premise is that we are in a bull market
420
00:30:35,835 --> 00:30:42,235
obviously and even bull markets have have
drawdowns and during the last two bullish
421
00:30:42,235 --> 00:30:50,080
decades we had drawdowns between twenty and
thirty percentage points, I think three or four
422
00:30:50,080 --> 00:30:52,559
times more than 20%.
423
00:30:52,559 --> 00:30:57,680
In one case in the seventies, at one point,
actually, it's 50% drawdown, which is just
424
00:30:57,680 --> 00:30:58,640
quite severe.
425
00:30:58,640 --> 00:31:03,375
Can argue if that actually then ended the bull
market and the new one started in in the second
426
00:31:03,375 --> 00:31:03,695
half.
427
00:31:03,695 --> 00:31:09,934
That's a statistically question how how you
wanna define the bull market, but in any case,
428
00:31:10,174 --> 00:31:16,654
the point being 20 percentage points of
drawdown, definitely something which one should
429
00:31:16,654 --> 00:31:22,609
should can and should expect, even if one is
bullish, and just to basically give give
430
00:31:22,609 --> 00:31:28,210
investors, some kind of an overview what where
where that would put us from from the last all
431
00:31:28,210 --> 00:31:34,565
time high, that would be $2,800 basically, if
we fall 20 percentage points from the last all
432
00:31:34,565 --> 00:31:36,724
time high, which is totally possible.
433
00:31:38,404 --> 00:31:44,724
But again, we don't know if it does fall that
low, so I mean, the one strategy which I think
434
00:31:44,724 --> 00:31:50,970
in any case makes sense probably is is to
average in and to average out by the way as
435
00:31:50,970 --> 00:31:51,289
well.
436
00:31:51,289 --> 00:31:57,529
So, averaging in will will will help you to get
a little bit of a better average price and I
437
00:31:57,529 --> 00:32:02,565
think that the other help is is
psychologically, because if if you just like
438
00:32:02,565 --> 00:32:10,005
pinpoint your your entry point on on one
specific point in time, you you always it's
439
00:32:10,005 --> 00:32:15,220
kind of if it does if if the market doesn't go
the way you you want, you're always like, we'll
440
00:32:15,220 --> 00:32:20,339
question this decision, but if you if you kept
some powder and and averaging, you you you
441
00:32:20,339 --> 00:32:25,859
actually have a lot of in in both cases, if it
rises, well, you didn't do it wrong, right,
442
00:32:25,859 --> 00:32:30,545
because you put something in already, but if it
falls, you have enough power to to average down
443
00:32:30,545 --> 00:32:31,345
your price.
444
00:32:31,505 --> 00:32:36,144
So that really, I think, helps you to be more
comfortable with with the position to some
445
00:32:36,144 --> 00:32:36,785
extent.
446
00:32:37,424 --> 00:32:43,220
Also, I think helps build intuition for
allocators and investors who may not have had
447
00:32:43,220 --> 00:32:48,579
an allegation to gold, which is not given the
facts we know from the report.
448
00:32:48,659 --> 00:32:52,179
1% of assets held by asset owners are in gold.
449
00:32:52,575 --> 00:32:59,694
So not a lot of people have intuition for how
this asset class functions in different ways
450
00:32:59,694 --> 00:33:04,894
when compared to, let's say, stocks and bonds
and how it responds to inflation and
451
00:33:04,894 --> 00:33:05,934
potentially deflation.
452
00:33:06,589 --> 00:33:11,950
And so as an allocator, I think I I echo Mark's
advice there.
453
00:33:11,950 --> 00:33:12,909
Take your time.
454
00:33:13,470 --> 00:33:17,390
Make an allocation and then rebalance that
allocation.
455
00:33:18,190 --> 00:33:22,684
And also maybe you sin a little because you
feel you're in a bit more of a bull market and
456
00:33:22,684 --> 00:33:28,524
you let that allocation run up, gives you a
profit cushion, allows you to add more at a
457
00:33:28,765 --> 00:33:34,700
potential time down the road to continue to
complement those traditional asset classes that
458
00:33:34,700 --> 00:33:40,779
people are so over invested in from stocks and
bonds to even private equity, private credit to
459
00:33:40,779 --> 00:33:41,499
some degree.
460
00:33:41,659 --> 00:33:47,295
One of the things with regard to allocating and
speaking with allocators and contemplating gold
461
00:33:47,295 --> 00:33:52,734
versus other traditional asset classes is the
lack of yield that gold has, right?
462
00:33:53,295 --> 00:33:58,590
From a fundamental perspective, professional
allocators, like the dividend yield, we've
463
00:33:58,590 --> 00:34:01,230
learned the discount value mechanism.
464
00:34:01,789 --> 00:34:06,509
We are getting yields on bonds and cash, but
gold doesn't offer any of that.
465
00:34:06,910 --> 00:34:14,275
And so how should we help allocators think
about gold as a diversifier, gold as an asset
466
00:34:14,275 --> 00:34:18,034
class, given that it doesn't offer much on cash
flows?
467
00:34:18,034 --> 00:34:22,914
In fact, it probably costs a little in terms of
storing and carry costs.
468
00:34:24,320 --> 00:34:24,719
Right.
469
00:34:24,719 --> 00:34:32,400
I mean, this is, I think, a very essential
question, and this basically to to understand
470
00:34:32,880 --> 00:34:36,000
at least our view, but I think a lot of people
share this this view.
471
00:34:36,614 --> 00:34:43,335
One really needs to dive into into the monetary
system, and at the end of the day, answer the
472
00:34:43,335 --> 00:34:45,175
question, what is money?
473
00:34:45,414 --> 00:34:52,170
And that this is a simple question, but it's I
think this has it has no simple answer, but if
474
00:34:52,170 --> 00:34:58,250
one looks at the Austrian perspective, Austrian
School of Economics perspective, I mean, money
475
00:34:58,250 --> 00:35:05,804
basically evolves or evolved or often evolves
always again in in an economy which where you
476
00:35:05,804 --> 00:35:07,324
have the division of labor, right?
477
00:35:07,324 --> 00:35:13,885
So you need to the demand for medium of
exchange occurs is once once the economy
478
00:35:14,045 --> 00:35:18,320
produces supply output, which is was greater
than its consumption.
479
00:35:18,320 --> 00:35:22,800
So you basically have the need to to store some
of your excess production.
480
00:35:22,800 --> 00:35:23,440
Right?
481
00:35:23,519 --> 00:35:30,074
And you need a bit of exchange, which basically
keeps account of these excess production
482
00:35:30,074 --> 00:35:31,035
excesses.
483
00:35:31,594 --> 00:35:37,275
And depending I I mean, it's really
interesting, and I can, really, just encourage
484
00:35:37,835 --> 00:35:43,434
everybody to to read, Elle Greenspan's essay,
which is short but very to the point, gold and
485
00:35:43,434 --> 00:35:45,119
economic freedom.
486
00:35:45,199 --> 00:35:46,239
You can just Google it.
487
00:35:46,239 --> 00:35:52,079
It's a really great essay from from El
Greenscan, which which he wrote in 1967, I
488
00:35:52,079 --> 00:35:58,045
think, where where he basically describes also
this evolution of of of money in in in
489
00:35:58,045 --> 00:36:03,325
different stages depends how much surplus you
produce as a as a as a economy.
490
00:36:03,485 --> 00:36:05,324
You need a more durable money.
491
00:36:05,324 --> 00:36:05,644
Right?
492
00:36:05,644 --> 00:36:13,300
So so in in the decentral evolutionary market
process actually, all over the world, the more
493
00:36:13,300 --> 00:36:19,139
sophisticated the economies became, the more
excess savings they produced, they had a demand
494
00:36:19,139 --> 00:36:26,534
for a more durable medium of exchange, because
you had all kinds of monies all the time, and
495
00:36:26,534 --> 00:36:35,175
with nobody legislating it that way in a
market, in a competition process basically,
496
00:36:35,255 --> 00:36:41,900
precious metals won the race, right, due to
their characteristics, and we can talk a lot
497
00:36:41,900 --> 00:36:47,099
about the different angles of that, but perhaps
the most important and oftentimes under looked,
498
00:36:47,420 --> 00:36:55,285
most overlooked factor is the stable stock to
flow ratio, especially from for gold, this is
499
00:36:55,285 --> 00:37:01,285
true, and the stock to flow ratio basically is
the inverse of the inflation rate or the growth
500
00:37:01,285 --> 00:37:07,640
rate of the gold, so the stock is all gold
stock above ground stock, that would be the
501
00:37:07,640 --> 00:37:16,039
220,000 tons of gold, which I referred to, and
the flow would be 3,000 tons, 3,500 tons
502
00:37:16,039 --> 00:37:23,005
roughly, which is being produced every year,
and if you divide these two numbers, you get
503
00:37:23,005 --> 00:37:27,164
like 1.5 percentage points inflation rate if
you want.
504
00:37:27,164 --> 00:37:27,805
Yeah.
505
00:37:27,885 --> 00:37:35,405
So this is so as gold holder, you you I think
the main advantage is you you are you can be
506
00:37:35,405 --> 00:37:41,079
very certain that you are not going to be
diluted by new gold, which is coming into
507
00:37:41,079 --> 00:37:41,800
circulation.
508
00:37:41,800 --> 00:37:42,280
Right?
509
00:37:42,360 --> 00:37:48,599
And this this gives gold a high stock to flow
ratio or a low inflation rate, however you
510
00:37:48,599 --> 00:37:50,039
wanna you wanna put it.
511
00:37:50,200 --> 00:37:52,360
The one is just the inverse of the of the
other.
512
00:37:52,974 --> 00:38:01,855
And in other words, gold is is is not so
available because there is necessarily such a
513
00:38:01,855 --> 00:38:05,534
limited amount of it, such a small amount of
it, should say.
514
00:38:06,140 --> 00:38:12,539
There are rare earths which are much less of
them are available, but that doesn't mean
515
00:38:12,539 --> 00:38:18,539
necessarily that they are worth more, but gold
is so so interesting as a store of value,
516
00:38:18,699 --> 00:38:21,340
because its amount is so constant.
517
00:38:21,755 --> 00:38:28,155
So you can really know it's it's it's basically
the same amount going around this year than the
518
00:38:28,155 --> 00:38:30,235
the as as it will be next year.
519
00:38:30,315 --> 00:38:34,074
But not not 100%, but but but one one and a
half percentage points.
520
00:38:34,599 --> 00:38:39,639
And this rate was very it has been extremely
stable over the last one hundred and fifty
521
00:38:39,639 --> 00:38:41,719
years where we have the data.
522
00:38:41,880 --> 00:38:48,574
Going back further, it's a little bit difficult
to assess the exact data, but most of the gold
523
00:38:48,574 --> 00:38:55,214
has been produced recently, basically the last
hundred years, because even one and a half
524
00:38:55,214 --> 00:39:01,295
percentage points adds up, and we had I think
30,000 tons the end of last century in 1900,
525
00:39:01,690 --> 00:39:07,289
and now we've got 200,000 tons, so it's most of
the tons, the gold has been produced now, but
526
00:39:07,289 --> 00:39:12,890
still it's a very constant amount, and this is
the unique thing.
527
00:39:12,890 --> 00:39:18,734
So this makes it a good store of value, and
this makes it the good money, basically.
528
00:39:18,734 --> 00:39:19,295
Right?
529
00:39:19,295 --> 00:39:25,214
And that's why actually it it has sent it to to
money, and it is no one in no one's else's
530
00:39:25,214 --> 00:39:25,855
liability.
531
00:39:25,855 --> 00:39:26,094
Right?
532
00:39:26,094 --> 00:39:31,469
I mean, we talked about that as well, and this,
again, I think is a very important prerequisite
533
00:39:31,469 --> 00:39:32,990
for for real money.
534
00:39:33,070 --> 00:39:36,190
You you want money to be an asset.
535
00:39:36,190 --> 00:39:39,869
You want the money not to be in another man's
liability.
536
00:39:40,349 --> 00:39:45,775
And this is this is why gold has such great
characteristics for money.
537
00:39:46,335 --> 00:39:46,734
Yeah.
538
00:39:46,734 --> 00:39:51,534
And and this is also the reason now, going back
to your initial question, why it actually
539
00:39:51,534 --> 00:39:53,534
doesn't have to pay interest?
540
00:39:53,614 --> 00:39:59,400
Because, if you think about the alternative
investments and actually one shouldn't in our
541
00:39:59,400 --> 00:40:06,360
view at least directly compare gold as money or
as as a non feared money's stuff value with
542
00:40:06,360 --> 00:40:13,255
with productive assets like bonds or stocks,
but in in these cases, if you if you lend money
543
00:40:13,255 --> 00:40:18,695
to a government as we also discussed already,
it comes with there's always risk involved.
544
00:40:18,775 --> 00:40:20,535
There's a counterparty risk involved.
545
00:40:20,615 --> 00:40:27,340
If you give some money to an entrepreneur, to
invest in a stock, there's a risk involved.
546
00:40:27,340 --> 00:40:33,980
That's why there is a justification for a
compensation for this kind of risk, but if you
547
00:40:33,980 --> 00:40:39,514
basically don't give give any if you don't have
any counterparty risk, actually, you can make
548
00:40:39,514 --> 00:40:40,394
the argument.
549
00:40:40,635 --> 00:40:44,235
You don't actually are entitled for for yield.
550
00:40:44,235 --> 00:40:44,635
Right?
551
00:40:44,635 --> 00:40:50,210
If if you if you have the cash in your pocket,
you also don't get any interest, by the way.
552
00:40:50,210 --> 00:40:55,089
You only get it if you if you put it on the
banks, and then you already are taking risk
553
00:40:55,089 --> 00:40:55,570
again.
554
00:40:55,570 --> 00:40:56,050
Right?
555
00:40:56,289 --> 00:40:59,170
And a lower yield most of the time if you just
put it in the banks.
556
00:40:59,170 --> 00:40:59,489
Right?
557
00:40:59,489 --> 00:40:59,889
Yeah.
558
00:40:59,889 --> 00:41:00,530
Correct.
559
00:41:00,530 --> 00:41:01,650
So gold is money.
560
00:41:01,650 --> 00:41:07,115
I think gold is the natural money or it it it
has very good characteristics of money.
561
00:41:07,195 --> 00:41:11,434
And that's the reason why central banks hold it
because at the end of the day, and it's also a
562
00:41:11,434 --> 00:41:18,280
great Greenspan quote, you know, in in times of
extremists, gold will always be accepted, and
563
00:41:18,280 --> 00:41:21,559
and and they know to recapitalize the system.
564
00:41:21,559 --> 00:41:28,519
They need an asset, which is is no one else's
liability, which is not inflatable, and that's
565
00:41:28,519 --> 00:41:30,679
why they hold it because it's the real money.
566
00:41:31,000 --> 00:41:34,894
And so shifting a little bit to the new gold,
Bitcoin.
567
00:41:34,894 --> 00:41:36,735
I know you guys did some work on that.
568
00:41:37,375 --> 00:41:43,614
You tell us what you guys think about Bitcoin
and how it relates to the characteristics of
569
00:41:43,614 --> 00:41:44,414
gold and how it doesn't?
570
00:41:44,849 --> 00:41:49,489
Right, I mean it's funny because gold is an
emotional topic because of these topics which
571
00:41:49,489 --> 00:41:55,650
we already have been talking about, which these
concepts are not so widely thought of in the
572
00:41:55,650 --> 00:42:03,054
financial words and the monetary system also
not such a big topic of the typical investor.
573
00:42:03,534 --> 00:42:09,934
And now with Bitcoin, this is even my
experience at least more more controversial,
574
00:42:09,934 --> 00:42:14,255
more emotional when when it comes to Bitcoin
relative to gold even.
575
00:42:15,210 --> 00:42:23,449
So I think that's a good transition to Bitcoin
because building on what I just laid out, yeah,
576
00:42:23,449 --> 00:42:30,405
Bitcoin was basically, I think, designed
obviously with by whoever with a lot of
577
00:42:30,405 --> 00:42:32,645
knowledge about evolution of money.
578
00:42:32,805 --> 00:42:38,244
So they were very conscious of the problem
obviously of of this debt based monetary
579
00:42:38,244 --> 00:42:44,880
system, but they also knew about the gold's
advantages, but they actually tried to improve
580
00:42:44,880 --> 00:42:52,800
gold even in in in the sense that there is not
even this 1.5 percentage points inflation, but
581
00:42:52,800 --> 00:42:55,199
at the end of the day, zero inflation.
582
00:42:55,914 --> 00:43:00,714
So I think this is obviously a very big part of
Bitcoin's appeal.
583
00:43:00,795 --> 00:43:05,755
It's absolute scarcity, and that this is a
concept which one really, I think, has to think
584
00:43:05,755 --> 00:43:12,010
about harder than one may think initially,
because it's it's really a a new concept for
585
00:43:12,010 --> 00:43:13,050
for for humans.
586
00:43:13,050 --> 00:43:19,929
There there hasn't been an asset which has been
absolute scarce at least not the fungible one.
587
00:43:19,929 --> 00:43:24,889
Obviously, we have art pieces, unique art
pieces where there's only one Mona Lisa and so
588
00:43:24,889 --> 00:43:29,954
on but you can't definitely can't use Mona Lisa
as money because there is only one.
589
00:43:29,954 --> 00:43:30,355
Right?
590
00:43:30,355 --> 00:43:36,114
You need a fungible money to have the ticket of
all the boxes for the requirement of money.
591
00:43:36,355 --> 00:43:42,420
So Bitcoin brings along fungibility, but it
brings along absolute scarcity also, and this
592
00:43:42,420 --> 00:43:49,860
is the first time what we've been confronted
with such an asset, which is a digital asset,
593
00:43:49,860 --> 00:43:54,660
which again makes it difficult for a lot of
people to wrap their heads around it.
594
00:43:55,304 --> 00:43:56,905
You cannot touch it.
595
00:43:56,984 --> 00:44:03,065
So it's it's perhaps less intuitive as as gold
because if if you do touch this gold, you get
596
00:44:03,065 --> 00:44:08,344
some kind of a sense of value, sort of has
something mystically to to it.
597
00:44:08,344 --> 00:44:10,505
I think for most people that that's the case.
598
00:44:11,460 --> 00:44:13,780
But you you have none of that with Bitcoin.
599
00:44:14,179 --> 00:44:20,739
So so it's it's really the scarcity argument,
obviously, which which which is important.
600
00:44:21,380 --> 00:44:28,074
Also, so also one can I mean, we've we've been
we've done all all kind of comparison between
601
00:44:28,315 --> 00:44:29,514
gold and Bitcoin?
602
00:44:29,514 --> 00:44:35,034
Obviously, we're not the only ones, and Bitcoin
has advantages relative to gold as as money.
603
00:44:35,034 --> 00:44:39,835
I would definitely say that, but it also has
disadvantages, but the fact the matter of the
604
00:44:39,835 --> 00:44:46,230
fact is it has been discovered also as an
alternative store of value, and I think one can
605
00:44:46,469 --> 00:44:47,989
best compare it with gold.
606
00:44:47,989 --> 00:44:53,030
It's not the perfect comparison, but it's it
people who invest in Bitcoin have similar
607
00:44:53,030 --> 00:44:55,875
motivations as people who invest in gold.
608
00:44:55,875 --> 00:45:00,994
And the design of Bitcoin has, you know,
similar design features as gold.
609
00:45:00,994 --> 00:45:07,235
Think I think that's the idea was to make it a
gold alternative just simply by how the stock
610
00:45:07,235 --> 00:45:11,210
flow works, how the fact that it's gonna be
scarce, And then after that, it was a network
611
00:45:11,210 --> 00:45:12,730
effect, whether it was going be adoption.
612
00:45:12,730 --> 00:45:18,809
I mean, gold, why gold versus any other metal
historically, you know, we can talk about that.
613
00:45:18,809 --> 00:45:24,089
But the reality is that society has accepted
gold as a medium of exchange, as a store of
614
00:45:24,089 --> 00:45:24,569
value.
615
00:45:24,569 --> 00:45:27,635
Every major economy has some gold.
616
00:45:28,195 --> 00:45:34,035
Most individuals in one way or another are, you
know, backed by gold because they live in the
617
00:45:34,035 --> 00:45:35,155
country that owns gold.
618
00:45:35,155 --> 00:45:38,275
And now we have Bitcoin that has a similar
characteristic.
619
00:45:38,275 --> 00:45:42,739
The question is, you know, what are the blind
spots of both gold and Bitcoin?
620
00:45:43,219 --> 00:45:45,619
And I think they generally tend to complement
each other.
621
00:45:45,619 --> 00:45:47,219
It's an interesting use case here.
622
00:45:47,219 --> 00:45:53,724
So there's as we're as Bitcoin becomes more and
more adopted, though, what are you guys what
623
00:45:53,724 --> 00:45:55,804
are you guys trying to tell us here with this
chart?
624
00:45:55,804 --> 00:45:56,204
Yeah.
625
00:45:56,284 --> 00:45:57,164
On in regards
626
00:45:57,164 --> 00:45:57,485
to Yeah.
627
00:45:57,485 --> 00:45:59,085
So exactly.
628
00:45:59,244 --> 00:46:04,684
So how how to measure gold and and and we
measure that in a in a monetary sense and now
629
00:46:04,684 --> 00:46:10,840
building of our gold prediction gold model, we,
this year, for the first time, integrated to
630
00:46:10,840 --> 00:46:17,800
evaluation model relative to to gold, because
as I said, both both assets are used for
631
00:46:17,800 --> 00:46:18,920
similar use cases.
632
00:46:18,920 --> 00:46:23,885
Obviously, there's a store store of value or
speculation, however you want to put it, but
633
00:46:23,885 --> 00:46:31,324
what we are seeing here is basically the market
capitalization of all global above ground
634
00:46:31,324 --> 00:46:41,140
stock, so gold, these 220,000 tons priced at
market, and we are somewhere at about
635
00:46:43,619 --> 00:46:51,525
$22,000,000,000,000 currently market cap, so
that would be the golden area representing the
636
00:46:51,525 --> 00:47:00,885
market capitalization on the left, and we are
somewhere about over $2,000,000,000,000 all the
637
00:47:00,885 --> 00:47:02,804
Bitcoin market capitalization.
638
00:47:02,804 --> 00:47:11,500
So roughly a ratio of one to 10, or in other
words, all world's gold is is worth 10 times as
639
00:47:11,500 --> 00:47:15,260
much as all Bitcoin, which are currently
produced.
640
00:47:15,820 --> 00:47:22,275
And then in both cases, we in Bitcoin's case,
by the way, we know more exactly, how how the
641
00:47:22,275 --> 00:47:27,635
exact supply will will be in in the future, but
in gold's case, we we know it pretty good.
642
00:47:27,715 --> 00:47:34,579
We we estimate that the gold exploration in in
of the next five years, plus our our our our
643
00:47:34,579 --> 00:47:37,700
price targets in the conservative range.
644
00:47:37,700 --> 00:47:42,980
It's, as I said, 4,900, let's call it $505,000.
645
00:47:43,300 --> 00:47:50,135
That would bring mark gold's market cap up to
38,000,000,000,000, So that's almost a two x
646
00:47:50,135 --> 00:47:52,695
still from from here, not quite.
647
00:47:53,175 --> 00:48:00,375
And Bitcoin, if one looks at the relative at
the ratio basically, we we can see obviously
648
00:48:00,375 --> 00:48:05,989
that the market cap has been growing much
faster in in Bitcoin, but it also has been
649
00:48:05,989 --> 00:48:11,429
growing much more volatile, so the the the
ratio has been going from coming from zero
650
00:48:11,429 --> 00:48:18,465
basically and and and moving up to to 10
percentage points roughly, a lot of drawdowns,
651
00:48:18,625 --> 00:48:24,625
and I want to point out that the right hand
scale is logarithmic, which basically doesn't
652
00:48:24,784 --> 00:48:30,549
the drawdowns don't seem so significant, but
there was quite significant obviously, but but
653
00:48:30,549 --> 00:48:39,349
I think the the logarithmic scale shows this
this increase nicely and also it shows a small
654
00:48:39,510 --> 00:48:41,109
decrease of this increase.
655
00:48:41,109 --> 00:48:41,429
Right?
656
00:48:41,429 --> 00:48:49,035
So the rate of return is being far greater with
Bitcoin, but it has been coming down slightly
657
00:48:49,035 --> 00:48:54,235
over over over the years, and we we we
basically extrapolated this this trend.
658
00:48:54,235 --> 00:49:03,440
So our our estimation is our premise is that
Bitcoin will keep growing faster than gold.
659
00:49:04,079 --> 00:49:10,000
We think gold will keep growing, Bitcoin keep
growing faster, and and I mean, this is a
660
00:49:10,000 --> 00:49:16,724
numbers game to be to be honest, but we picked
a number of 50 percentage points, so we could
661
00:49:16,724 --> 00:49:21,844
imagine that at the end of the decade coming
from 10 percentage points market cap where
662
00:49:21,844 --> 00:49:29,369
we're currently roughly, we may end at 50
percentage points market cap in terms of
663
00:49:29,369 --> 00:49:32,570
Bitcoin to gold market cap ratio, right?
664
00:49:32,890 --> 00:49:40,890
And that brings you to quite high numbers, I
mean, this is also this table we included to
665
00:49:39,375 --> 00:49:47,054
for everybody to to plug plug in their own
expectations, but with these two numbers, so 50
666
00:49:47,054 --> 00:49:52,460
percentage points market cap and and a and a
price of 5,000 at the end of the decade, that
667
00:49:52,460 --> 00:50:01,420
leads you to very high six digit prices in five
years time, which is bullish, which is
668
00:50:01,420 --> 00:50:08,324
optimistic, I would like to add here, but we
don't think that it's we think it's achievable.
669
00:50:08,644 --> 00:50:09,204
Mhmm.
670
00:50:09,284 --> 00:50:15,684
It is achievable, in fact, if the ongoing
trends remain intact, then we will land in in
671
00:50:15,684 --> 00:50:17,125
such a kind of a range.
672
00:50:18,164 --> 00:50:18,724
Yeah.
673
00:50:18,724 --> 00:50:23,900
I mean, it's an interesting way that you guys
have modeled this up.
674
00:50:24,219 --> 00:50:31,099
It's certainly, you know, if if there is
continued debasement, again, because of the way
675
00:50:31,099 --> 00:50:34,219
that Bitcoin has been designed, it it also
makes sense that we're gonna get more and more
676
00:50:34,219 --> 00:50:34,699
adoption.
677
00:50:34,699 --> 00:50:36,135
We're seeing institutional adoption now.
678
00:50:36,135 --> 00:50:40,934
BlackRock has something that's investable for
the traditional finance individual.
679
00:50:40,934 --> 00:50:43,815
So it's becoming easier to accept.
680
00:50:43,815 --> 00:50:47,175
It almost feels like people are talking about
Bitcoin more than they're talking about gold.
681
00:50:47,255 --> 00:50:50,695
So it also tracks that it'll probably get
higher adoption faster, right?
682
00:50:51,360 --> 00:50:51,920
Yeah.
683
00:50:51,920 --> 00:50:53,280
From a lower base rate.
684
00:50:54,240 --> 00:50:54,800
Yeah.
685
00:50:54,800 --> 00:51:01,920
When what what I always can witness is that
these two assets are nearly all the time being
686
00:51:01,920 --> 00:51:03,360
mentioned in the same discussion.
687
00:51:03,360 --> 00:51:03,599
Right?
688
00:51:03,599 --> 00:51:10,284
I mean, that's that's that's that's really
evident, and that's also I mean, we wrote 2,019
689
00:51:10,605 --> 00:51:16,125
gold and Bitcoin stronger together, and that is
also what we do as an asset managers management
690
00:51:16,125 --> 00:51:16,684
company.
691
00:51:16,684 --> 00:51:22,869
In 02/2020, we launched our combined gold and
Bitcoin product because we were of the opinion
692
00:51:22,869 --> 00:51:27,750
that in in combination, these two assets have a
better risk return profile.
693
00:51:27,750 --> 00:51:35,755
And I mean, so far we've been, I think spot on
with that idea and also with, I mean, the track
694
00:51:35,755 --> 00:51:41,835
record of the assets and of the combination, I
think, also confirms this thesis so far.
695
00:51:42,235 --> 00:51:49,380
So we have now a hard asset or sound money,
however you want to put it, bucket, which I
696
00:51:49,380 --> 00:51:54,659
think will more become kind of a building block
of people's portfolio.
697
00:51:54,659 --> 00:52:02,179
You can do it on a single level, where you can
basically adjust the compulsion of this hard
698
00:52:02,179 --> 00:52:08,244
asset block as you see fit, or you can do it in
a combined way.
699
00:52:08,244 --> 00:52:14,885
That's what we offer basically, where we do the
rebalancing for our clients, where one can also
700
00:52:14,965 --> 00:52:21,090
have the advantage of an overlay, derivatives
overlay, which then by the way makes it
701
00:52:21,090 --> 00:52:27,090
possible to to earn some yield, so we solve the
yield problem also in in that regard.
702
00:52:27,329 --> 00:52:28,050
But yeah.
703
00:52:28,050 --> 00:52:33,170
So so I think this this is going into this
direction of the last sentence in in this
704
00:52:33,170 --> 00:52:33,650
regard.
705
00:52:34,674 --> 00:52:39,875
People like Ray Dalio, who I think are very
highly regarded, especially among asset
706
00:52:39,875 --> 00:52:41,234
management managers.
707
00:52:41,234 --> 00:52:47,155
To me, I think he's he represents, like, the
the king of strategic asset allocation.
708
00:52:47,155 --> 00:52:53,660
I mean, he's referred as hedge fund manager,
but I think the real USP was the combination,
709
00:52:53,980 --> 00:52:58,140
the structuring of of the portfolios at at at
Bridgewater, what they do.
710
00:52:58,460 --> 00:53:06,284
Anyway, they he also, I think, two or three
years by now ago said, I like my gold with
711
00:53:06,284 --> 00:53:08,525
sprinklers of Bitcoin on it.
712
00:53:09,164 --> 00:53:16,204
So he also sees these two assets as in in one
bucket at least that's what I took away from
713
00:53:16,204 --> 00:53:17,085
from that comment.
714
00:53:17,679 --> 00:53:24,000
And I guess this is slowly but steadily moving
into this kind of direction.
715
00:53:24,800 --> 00:53:25,599
Very interesting.
716
00:53:25,599 --> 00:53:26,000
That.
717
00:53:26,000 --> 00:53:26,559
I like that.
718
00:53:26,559 --> 00:53:28,480
We've got maybe five minutes left.
719
00:53:28,480 --> 00:53:32,894
Do you wanna talk a little bit about how you
guys reimagine the $60.40 through the context
720
00:53:32,894 --> 00:53:39,614
of of a new regime and and gold and silver
stocks, or is there another topic that you'd
721
00:53:39,614 --> 00:53:40,094
like to hit?
722
00:53:40,094 --> 00:53:41,695
I'm happy to do so.
723
00:53:42,094 --> 00:53:42,414
No.
724
00:53:42,414 --> 00:53:43,215
Happy to do so.
725
00:53:43,215 --> 00:53:52,260
The new $60.40 portfolio is something we
presented last actually in 02/2024, and we
726
00:53:52,500 --> 00:53:52,819
yeah.
727
00:53:52,819 --> 00:53:58,579
So do you know about the classic sixty forty
portfolio multi asset portfolio where you have
728
00:53:58,579 --> 00:54:06,125
the 60% equity, 40% bonds, or some kind of
variation thereof, and that I think does make
729
00:54:06,125 --> 00:54:12,445
sense from a risk adjusted perspective, but
especially in in the during a time horizon
730
00:54:12,445 --> 00:54:18,940
where you have falling interest rates or
disinflation, which basically comes with each
731
00:54:18,940 --> 00:54:26,219
other, and because you have typically the bond
part of the location, which profits when when
732
00:54:26,219 --> 00:54:32,445
you go into recession and the equities when you
have growth, so you've got slightly negative
733
00:54:32,445 --> 00:54:40,690
correlation between these assets in general,
and both of them produce yields, so if you add
734
00:54:40,690 --> 00:54:48,369
them up, you have a superior risk adjusted
return profile, and that's what's most mostly
735
00:54:48,369 --> 00:54:50,210
about in asset management.
736
00:54:50,210 --> 00:54:50,690
Right?
737
00:54:51,090 --> 00:55:00,714
But we we are of the basically since we see
that the interest rate trajectory is with we
738
00:55:00,714 --> 00:55:06,315
hit zero, right, and now we are of the opinion
that we're rather seeing a bull market in
739
00:55:06,315 --> 00:55:12,650
interest rates, in other words a bear market in
bonds, something again similar maybe to the
740
00:55:12,650 --> 00:55:17,690
70s, and that's awful for this combination.
741
00:55:17,690 --> 00:55:24,755
We saw that in 2022 already, when you had a
year where stocks and bonds combined actually
742
00:55:24,755 --> 00:55:29,315
really had a really bad performance because
both assets fell.
743
00:55:29,394 --> 00:55:34,835
You you had a a positive correlation in a
falling in a falling market.
744
00:55:34,835 --> 00:55:36,114
That's not what you wanna have.
745
00:55:37,019 --> 00:55:43,900
And I think that was an indication for for more
of those similar years to to come potentially,
746
00:55:44,140 --> 00:55:49,660
especially again if we see second inflation
waves, then then these kind of portfolios, I
747
00:55:49,660 --> 00:55:51,579
think, are very, very much endangered.
748
00:55:51,579 --> 00:55:58,835
So that that makes an argument to basically
reconsider, especially the bonds component of
749
00:55:58,835 --> 00:56:05,795
of this this 6040 portfolio, which which we
did, and find substitutes for for for bonds,
750
00:56:05,795 --> 00:56:09,820
and I think this is this is going on,
especially with gold.
751
00:56:09,820 --> 00:56:14,860
So gold, I think, to some extent, has been
still very slowly, especially in this
752
00:56:14,860 --> 00:56:16,059
institutional level.
753
00:56:16,380 --> 00:56:23,340
Not not at all yet, I'd say, but to some
extent, being substituted, and and we see this
754
00:56:22,364 --> 00:56:23,724
as as a trend.
755
00:56:24,844 --> 00:56:31,005
And and also another argument in favor of gold,
I think, I mean, typically, if if you have a
756
00:56:31,005 --> 00:56:37,909
few percentage points at all at maximum in your
conventional multi asset portfolio, I think one
757
00:56:37,909 --> 00:56:44,069
can make the argument also from a risk point of
view since it is so unique, the asset, and it
758
00:56:44,069 --> 00:56:50,494
doesn't have an counterparty risk if one if one
takes into consideration the whole return
759
00:56:50,494 --> 00:56:55,855
distribution, you don't actually have, like,
kind of a black swan event with with gold.
760
00:56:55,855 --> 00:57:00,574
Obviously, the price can fall, but you don't
have a sanctioning event where you're something
761
00:57:00,574 --> 00:57:05,420
that there, by the way, I also think it's it's
advantageous Bitcoin.
762
00:57:05,420 --> 00:57:10,619
You have potentially some technical problems,
which I think the risk is pretty low also, but
763
00:57:10,619 --> 00:57:13,019
I think I'd say it's not zero, right?
764
00:57:13,019 --> 00:57:17,180
So you have all you have in all kind of
different asset classes, but especially in
765
00:57:17,180 --> 00:57:23,505
bonds, you have like left end probability,
which would be very bad if that happens, and
766
00:57:23,505 --> 00:57:28,305
you don't have that with gold, and I think also
from that perspective, it gives you a great
767
00:57:28,305 --> 00:57:33,905
argument to increase your gold portfolio
significantly, because you don't don't acquire
768
00:57:34,190 --> 00:57:38,190
some some kind of black swan of it with the
gold generally.
769
00:57:38,670 --> 00:57:46,670
So so we tried to structure a new $60.40
portfolio accordingly, and we increased.
770
00:57:47,594 --> 00:57:55,594
So we had in the 60% what is typically the
equity portion, put in all the bonds and all
771
00:57:55,594 --> 00:58:03,890
the equities in 60%, so that we ended up with
45% equities and only 15% bonds, which brings
772
00:58:03,890 --> 00:58:13,410
it to 60, that's the 60%, and the 40% in our
new 40% portfolio is a hard assets, basically
773
00:58:13,410 --> 00:58:14,930
non inflatable assets.
774
00:58:15,414 --> 00:58:21,974
So we've got a chunk of security gold in there,
but we've got some performance gold, as I said,
775
00:58:21,974 --> 00:58:28,829
that would be mining equities in there, we've
got a small slice of commodities in there, and
776
00:58:28,829 --> 00:58:37,869
also a small slice of Bitcoin in there, so we
come up with a hard asset block of 40%, and we
777
00:58:37,869 --> 00:58:42,910
are of the opinion that this is going to
outperform the conventional sixtyforty
778
00:58:42,910 --> 00:58:50,244
portfolio, which it has, by the way, since
2024, but we'll see how that ends up in a few
779
00:58:50,244 --> 00:58:50,965
years' time.
780
00:58:51,525 --> 00:58:56,804
Yeah, so I think I just found it, just to
quickly share with everybody here.
781
00:58:57,230 --> 00:59:03,949
A sixtyforty into that combination here, you
have 45% stocks, 15% bonds, 50% of safe haven
782
00:59:03,949 --> 00:59:07,069
gold, 10% of performance gold.
783
00:59:07,069 --> 00:59:12,589
So again, performance gold is the idea of
miners, silver, etcetera, right?
784
00:59:13,255 --> 00:59:18,534
10% of traditional commodities and 5% Bitcoin
for everybody, and this is in the in gold we
785
00:59:18,534 --> 00:59:19,494
trust playbook.
786
00:59:20,135 --> 00:59:26,349
Right, so this is, I'd say, an extremely
unconventional allocation currently, but I
787
00:59:26,349 --> 00:59:29,230
mean, it's it's not so far from my personal
allocation.
788
00:59:29,230 --> 00:59:36,349
So so we we really, I mean, practice what we
preach, and we I think it's so far for this
789
00:59:36,349 --> 00:59:43,055
decade, this has been doing very well, and as I
said, I think the dynamics are are in place for
790
00:59:43,055 --> 00:59:45,615
this portfolio to to keep outperforming.
791
00:59:46,414 --> 00:59:51,614
There are risks, obviously, involved with every
asset class, with every with every strategy,
792
00:59:51,614 --> 00:59:54,170
but we are quite convinced that a good way
793
00:59:54,170 --> 00:59:54,809
to go.
794
00:59:55,210 --> 00:59:56,329
Given the regime?
795
00:59:56,329 --> 00:59:58,170
Sounds like a sound plan.
796
00:59:58,329 --> 00:59:58,890
Yeah.
797
00:59:58,890 --> 01:00:01,210
Well, thank you, Mark.
798
01:00:01,210 --> 01:00:03,210
Really appreciate your insights today.
799
01:00:03,210 --> 01:00:04,329
Very insightful.
800
01:00:04,730 --> 01:00:09,335
Love you know, this is the first time I've
actually read this report, so it provides a lot
801
01:00:09,335 --> 01:00:13,175
of insight on all things precious metals and
Bitcoin.
802
01:00:13,175 --> 01:00:16,775
I recommend everybody download the chart book
or read the paper.
803
01:00:17,655 --> 01:00:27,110
Just before we sign off, tell the audience
where people can find you, what you guys do and
804
01:00:27,110 --> 01:00:27,510
offer.
805
01:00:27,510 --> 01:00:30,150
You mentioned fund and investment
opportunities.
806
01:00:30,150 --> 01:00:32,230
So tell us a bit more about that.
807
01:00:33,355 --> 01:00:34,074
You're right.
808
01:00:34,074 --> 01:00:40,315
So basically, our fund business can be found at
incrementum.li.
809
01:00:40,474 --> 01:00:42,474
That's our homepage here in Liechtenstein.
810
01:00:42,954 --> 01:00:45,195
And we have our eGold.
811
01:00:45,195 --> 01:00:47,594
We trust report at ingold.
812
01:00:47,829 --> 01:00:56,389
We trust all1word.report and everybody can
subscribe, can download without subscription.
813
01:00:56,389 --> 01:00:57,989
We keep it very open.
814
01:00:58,230 --> 01:01:05,255
Personally, I we we have a Twitter Twitter
feed, Incorporate Trust Twitter feed, which is
815
01:01:05,255 --> 01:01:09,894
quite active, so we can be found on on these
sources.
816
01:01:10,454 --> 01:01:13,894
And, yeah, if if anybody has question, drop me
an email.
817
01:01:14,500 --> 01:01:15,059
Fantastic.
818
01:01:15,059 --> 01:01:16,180
Thank you, Mark.
819
01:01:16,180 --> 01:01:20,340
Really appreciate your time and the hard work
that you guys put in on this.
820
01:01:20,500 --> 01:01:24,820
We'll hopefully have you back again when gold
hits 5,000.
821
01:01:26,340 --> 01:01:32,594
But yeah, if anybody has any questions, you can
go to those two websites and and contact Mark
822
01:01:32,594 --> 01:01:33,635
and team directly.
823
01:01:33,635 --> 01:01:35,075
Thanks again for your time.
824
01:01:35,235 --> 01:01:35,795
Thank you.
825
01:01:35,795 --> 01:01:36,914
Thanks for the invitation.
826
01:01:36,914 --> 01:01:37,954
Have a great day.
827
01:01:37,954 --> 01:01:38,914
Thanks all.
828
01:01:40,114 --> 01:01:45,155
If you're enjoying the podcast, please consider
heading over to your favorite podcast platform
829
01:01:45,119 --> 01:01:49,440
and leaving us a rating or review and sharing
us with friends or on social media.
830
01:01:49,760 --> 01:01:52,400
It helps new people find us and helps us grow.
831
01:01:52,640 --> 01:01:57,519
Finally, if you'd like to learn more about our
extensive research on the concept of return
832
01:01:57,519 --> 01:02:01,233
stacking, please do head over to
returnstack.com.