TIP553: Why Hard Assets are Positioned to Outperform w/ Tavi Costa

You're listening to TIP. On today's episode, I'm joined by Tavi Costa. Tavi is a partner and portfolio manager at Crescat Capital. His research has been featured in financial publications such as Bloomberg, The Wall Street Journal, CNN, among others. During this episode, Tavi gives us a masterclass in why we're just in the beginning phases of a bull market for gold, silver, and hard assets like commodities. We also cover why Tavi believes that inflation is here to stay in the coming years, what the four pillars of inflation are, and why they all point to structurally higher inflation going forward, why the S&P 500's earnings are likely to roll over and decline in the near term, why yield-curven versions are bullish for gold relative to equities, why foreign countries are selling US treasuries to buy gold, where Tavi sees asymmetric opportunities in the gold mining industry, and at the end of the conversation, he explains why Brazil is akin to Switzerland or a more neutral player among the BRICS nations. Tavi held nothing back during this episode and really delivered many great insights and data points to help us weather through these uncertain times. Just as a heads up, Tavi and I walked through a number of charts during this episode that he's been sharing on Twitter. It may be helpful to pull up the YouTube video if you'd like to see the charts we're chatting about, but Tavi gives plenty of context during this episode to explain what the charts are showing. Without further ado, I hope you enjoy today's discussion with Tavi Costa. You are listening to THE Investors Podcast, where we study the financial markets and read the books that influence self-made billionaires the most. We keep you informed and prepared for the unexpected. Welcome to THE Investors Podcast. I'm your host, Clay Fink. I am absolutely thrilled to bring you today's guest, Tavi Costa. Welcome back to the show. Thanks for having me, Clay. Looking forward to this conversation. We had you on the podcast back in October of 2021 to cover precious metals. Since I discovered your work, then I've just been blown away by some of the charts that you've been posting to help shed light on what's playing out in the markets. Once you've been sharing these great charts, I figured it would make a ton of sense to pull some of these charts for those watching on video on YouTube. But for those listening on the audio, we'll be sure to chat through what's happening on the screen here and tie it into the questions. So to help set the stage for our conversation, let's start with what you called the most important macro chart of this decade. For those listening, the commodities to equity ratio has been in a decline since the great financial crisis, and it's well below its historical average. And it looks to potentially be on the upswing and maybe have a shift in momentum here to the upside. And what's amazing to me is just how far commodities have fallen on this chart relative to equities given how much commodities seem to have been under invested in. So maybe, Tavi, we can start with your thesis on why you believe we're just at the beginning of this uptrend for the commodity to equity ratio. Well to start with, I would say that this chart reflects, I would think, most of at least my views in the macro environment. And it's a reflection as well of how cheap, tangible assets are relative to financial assets. For many reasons, we've had 30 years or so of declining interest rates. Discount rates have been declining as a result. Cost of capital has been declining as well over the last 20 to 30 years. And therefore, that all had an impact on inflating prices of financial assets. So you have equity markets near record levels in terms of price relative to fundamentals. The same thing is happening with the bond market. Despite the fact that in 2022, we've had a decline in both asset classes. And the other side of this, which is absolutely important and critical for investors, has to do with the tangible asset side. We're seeing how commodities have been underallocated by investors. Also, we've had a chronic period of under investments in the space. And so a lot of those commodities have been, they need new reserves, they need new discoveries. They have been lacking the level of capital expenditure that we've had over the other times in history, especially when you are really looking at that data relative to GDP levels, because $10 million spent on the ground today certainly isn't the same as we saw back during the global financial crisis period or so. And so this chart showing how depressed commodity to equity ratios are, it is a reflection of those views. It's also a reflection of the views about inflation. Inflation is something that we've had in other decades, the 1910s, the 1940s and the 1970s, though in this chart, it only goes back 50 years. So we're not seeing the 40s in the 1910s. But you can see clearly that in the 70s, the fact that we did had inflation, in other words, the cost of consumer prices, or I should say the price of consumer goods and services was rising during that period. And also we've had the break of the gold stender and other issues that cause these most investors to flock into most of the tangible assets. The market did well better than the stock market. I would say the tangible assets in general, including commodities mostly from copper to gold to silver to energy in general, agricultural, all perform better than stocks and bonds. And I think that correlation shift, it is a little bit understated today by most investors that believe that we're always going to see equity markets outperforming other asset classes. But also bonds will serve as a haven asset for most portfolios. And all that is, again, is indicated in this chart as what I think that is going to be a paradigm shift for investing, where commodities are going to go back and become a larger allocation of investors. And also it's not only commodities, commodity businesses that are part of this as well. And so I think this chart is just simplistically telling us how cheap those assets are relative to financial assets. But there's a lot of ways to express that view in the markets. Some folks will think a certain commodity will do better than others. Let's say myself, I have a very strong focus in gold and precious metals. Some others have the same view on energy and so forth. I happen to think there's a way to express that view today, similar to how people capitalize in the early 90s with the creation of private equities and in venture capital approach of investing in many startups back in the 90s of the technology sector, which was the beginning of the internet and so forth, and did very well. The difference here is that this space of natural resource industries is perhaps one of the oldest industries in history. And one other thing that is related to this is a lack of folks that understand this space very well. I mean, we have not only an issue of prices imbalances between equities and commodities, but also a problem of labor markets that are not being able to fulfill the interest from companies that need geologists, for instance. So geosciences, undergrads, and graduate students in terms of the number of folks that are graduating in those fields has been also in a secular decline. All of those trends shown in this chart are secular trends. Their long-term trends that tend to occur for over a decade or so. And I think that we're entering another one of those. We've had the beginning of that recently. It's the gray rotation, the value-to-growth transition, the beginning of folks' really understanding profitability, higher cost of capital. So it's a lot to unpack on this chart. I can really talk about this chart for hours perhaps. But I think it's right at the core of why I believe commodities are undervalued and why I think that financial assets are yet to suffer a lot further from what we've seen so far, especially between multiples and prices relative to fundamentals that I think need to compress significantly from here. Let's touch on the inflation piece. I know you're a student of history, and history tells us that when inflation strikes, oftentimes it comes in waves. So after inflation may appear to be tamed, it can come back with the vengeance at some point in time later. So the recent inflation started in early 2021, and it peaked out in mid 2022, around 9.1% CPI here in the US. And then the most recent reading was 5.0% as of March 2023. So could you talk about what history tells us about when that second wave of inflation might be coming? Well I think we're getting very close to that for many reasons. First of all, we've had a liquidity issue recently with the banking situation, which was immediately met by a Federal Reserve intervention, which is in a way a liquidity injection in the system to avoid a liquidity gap otherwise. And so that goes to show how the Federal Reserve and especially policymakers have developed economies have one job, which is to maintain the stability of the financial system. And that requires liquidity injections and liquidity injections in an environment that requires as well financial repression ultimately. And so it is hard to believe that we're not entering just from that perspective, a period of inflation running higher than historical standards. And then you add to the fact that something that I've been talking a lot about, which is what I call the four pillars of inflation. To me that's one of the most important ways of explaining how history has not only played out different roles in terms of the drivers of inflationary forces, but also how today this is so pronounced. Meaning today we have the wages and salaries growth, the wage price is spiral that is very similar to what we saw in the 1970s. And it starts with first of all, cost of living, rising, which is an important aspect here, which we've seen rents and other things in terms of services and consumer goods. Prices have been not only the increased since the pandemic, but also we're not seeing a deflationary aspect of them. They're not coming down prices. We're actually seeing those prices stay elevated, which causes people to require higher wages and salaries. And so to another point here that is important to, I would say, elaborate regarding wages and salaries has to do with the fact that we're seeing the share of labor costs relative to profits of corporations being a historical loss. And so there is a secular trend as well, just there that we think that corporations are not going to be able to get away with paying such low levels of the press levels of wages and sellers relative to what they make. And so that pressure is coming. And I think we're just at the beginning of that. And it fits into this wealth gap issue that we're seeing where most of the jobs that are likely to get higher wages are probably going to be the less skilled types of jobs for folks that don't have a high school degree and so forth. And if you really explore that, we're probably going to see, and we're seeing that right now the employment ratio across that part of the population in the US has never seen such a strong labor market throughout history, which means that even inside of the job openings and availability of jobs in general, we're seeing the need for those non-skilled jobs to be fulfilled. And so that is going to create, in my view, a higher demand for salaries to increase. And in a sense, it will play into this where the bottom 50% of the population financially speaking will probably be earning more money over time. And like it or not like it, there is a reason why folks stay at the bottom 50%. It's because they tend to spend and allocate their capital when they earn it in ways that are less disciplinarian than folks that are in the top 90% or so in terms of financially speaking within the population of the United States and other developed economies as well. So that is one pillar, very important one that is happening today. It has a lot of room for growth, especially if you look at the, again, the percentage of capital costs relative to profits from corporations. Number two, it has to do with what I just touched on initially in your first question, the chronic under investments in natural resource businesses. If there's anything that triggers a commodity bull market, that is looking at the aggregate cap backs of most of the commodity companies. And when you see that at the press levels, that tends to cause commodity prices to rise. And most of the reasons for that has to do with supply side being so constrained. I think we're in that environment today. And I know that for a fact is because of what's happening in terms of the need for those things to be developed over time. In other words, the need for metals and availability for resources in order to make the green revolution happen, even how oil has become such a strategic geopolitical asset over time. So all this is sort of playing an important aspect of the need for those materials to be more available. But we don't have that and it will take a long time for us to see the comeback of those investments into the natural resource industries to then translate into higher supply. I'm in the industry of investing in those things. So I'm very much aware of the time and effort that it takes to go from exploration to development phase and then producing phase of an asset within this space. And so I think that that's also a very secular trend. We've seen this throughout history as well in other decades. But I think it's again, very pronounced in today's environment. Number three, and I think it's important too, is the reckless or irresponsible amount of fiscal spending that we're seeing currently. Partially, that has to do with the cost of debt. So cost of that is increasing. It's creating a need for budgets to be or I should say deficit to be larger than historical standards. And this is going to get worse over time. But the interest payment on the debt only explains about 50% of the deficit today. If you look at the deficit currently relative to history, in the 70s and 60s, there was at least a notion from policymakers that government spending creates inflation. I'm not sure today that you can apply the same idea. In fact, we just passed recently, not too long ago, the inflation act part of the budget, which was something that goes to show how why in the world would you be spending more when you have an inflationary problem in the first place. And it's something that we're seeing in a large degree. If you actually adjust for inflationary numbers today in terms of the fiscal spending throughout history, you're going to find that today, by far, we're seeing something that is quite scary from that sense. It's almost like the government is undoing what the Fed is attempting to do in terms of raising rates and tightening monetary conditions. And I am not sure this is the end of it. I think that the agenda on the fiscal side has never been so extensive. Why? Because you have this inequality issue that forces governments to run a larger social program. Number two, you have, again, this issue with developed economies having to become more industrialized and go back to reinvesting in their manufacturing plants. And that is a problem that I think is it's a, you know, we will create demand for materials, for commodities, but also it is quite large in terms of the level of spending from the fiscal side. And so those things are very important. The Green Revolution is another one that it will fit into the agenda more and more over time. And it will also be a large percentage of deficits, in my opinion, for the next decade or so. Military spending, it's hard to make a case. Their military spending is going to be falling, all rising in the following years. You know, especially given what's happening with Russia and Ukraine, China and US, Middle East and US. And there's a lot of issues unfolding all at once. And I find it hard to believe that military spending is not going to be a much larger percentage of GDP. And just to give people a sense, percentage of military spending or defense spending back in the 60s was about 9% of GDP. Today is less than 3%. So there's a lot of room for that to grow over time here. So those are three pillars. The fourth pillar has to do with de-globalization. De-globalization is to me one of the most, maybe you started back in 2016 when we've had Trump initiating the narrative to fight China. And we've had his sort of discussions, which took a while until even the Democratic Party began to really understand or maybe even buy into that idea in general. And today I would say it's a very bipartisan idea in terms of being, you know, having a very different policies that we've had over the last decade or so. And so de-globalization is a trend that tends to be also something that magnifies over time. Excessor baits this inflationary problem. It creates changes in terms of logistics and also the need again for developed economies to reinvest what I call revitalization of their industrial parts in different places of the world. It will create different partnerships. I think Brazil, South America will play a big role into providing natural resources to some parts of the economy rather than Africa and other parts that have been playing a role and have a bigger, you know, connection with places like China. I think we'll create separations of countries that will do well because of the own natural resources in other countries that don't. So all those things are playing a role into creating some sort of issues related to de-globalization. I think that the war between Ukraine and Russia is perhaps more of a consequence of all those issues that we're seeing growing over time. Again, it's not like we're probably going to go to World War III, although everything is from a probability perspective. I do think that the need for folks to rethink how their dependencies with other countries lie ahead and perhaps, you know, internally trying to reduce those dependencies and improve their domestic economy over time to not have to rely on other countries like China. And so this is all playing a big role into inflation. Those are the four pillars of inflation, wages and salaries, the natural resources under investments, the reckless amount of fiscal spending and de-globalization are four things that are called the four pillars of inflation that will probably continue to play a role into creating what I think will be a secular inflationary period for the US and other developed economies. So many great points here. I mean, so many to go through. It seems like all four pillars of inflation are working against us at this point in terms of trying to prevent it from happening. And this ties into company profitability and earnings as you alluded to there. And you just recently published this chart here on the screen showing the basic and diluted earnings per share for the S&P 500 dating back to the 1950s. And you can see this secular uptrend in the basic earnings per share. And it looks like we've hit sort of that extended point probably in 2021 and it's starting to roll over. I'm curious what your take is on this chart. And, you know, it seems to play into this inflationary thesis and, you know, wage growth hurting company profitability. Essentially, this would have been in a 70 year channel in earnings per share aggregate basis in S&P 500, meaning there is a ban, upper ban and a lower ban in this chart that you can see very clearly that I pointed out with two lines. And basically every time we hit the upper side of this ban, we see a critical juncture in terms of earnings that tend to be in a contraction mode for the next months or years depending on the situation. And it's important to go back throughout history again and see I like to do analysis on decades because it's a long term analysis of reduced noise from different macro events that may have occurred. And you can see more clearly macro regimes and different parts of history that played a role into the views that we have today. And in my opinion, you can find in that research is that earnings, there are really two things that are important here. Well, first, the 2010s, which was the prior decade that we've had was by far the strongest real earnings growth that we've had in history. That is the first thing to put out. And the question is, can we see two decades of that in a role? And the answer for that is we've never seen this in history. The other two times we've had such a robust growth in earnings of corporations happen in the 1920s, the roaring 20s, which was a time when we had the different inventions at the time was the television. The television created a communication piece for the world at that time. It created marketing in a different way, commercials, movies and different things that you can extrapolate that as a thought of how the global economy was transformed by just that invention itself. Other things happened during that period. Supposedly, the roaring 20s was a time when we've had the capital or I should say, consumer spending to a degree that we haven't seen in the past. And the macro environment was very different than today, but it's important to see how that period was a time when the economy really prospected. But also, corporations did very well despite the differences that we have with the current environment. The second decade that we did very well was in the 1990s, which was the time when technology was during a revolutionary period when we had the beginnings of the internet. And a lot of businesses were created during that phase. And it was a period where actually, believe it or not, corporations also did very well in terms of their earnings. Their bottom line was growing at a state that we've only seen during those three decades, the 2010s and the 1920s. And if you think about those two decades specifically, the subsequent period, or the subsequent decade after those two were times when corporations struggled significantly to earn capital, meaning this was the 1930s, which was the Great Depression. And I would say the 1930s was a very, very difficult period as well. And corporations had a significant contraction in their earnings. The same happened in the 90s. After the late 90s, we've had the tech bust. Corporations have struggled to make money again. And then right after that, at the end of the decade, we had the 08 experience as well, which was a decade that was one of the worst periods for growth in terms of corporate earnings that we've had in history. So that never happened throughout. But we've never seen two straight decades of strong earnings, especially when we have such a strong period like we've had recently. What would make that change? I mean, some folks believe that the changes that we're seeing today, technologically speaking, will create an environment that justifies the multiples that we have currently in equity markets and maybe justifies the growth that we're seeing in corporate earnings to maintain that over the next decade. I don't think that will be the case. I think despite the fact that we're seeing those breakthroughs through AI and other incredible things that are being created recently, even in the biotechnology space as well, it's just hard to believe that the pillars of inflation are not going to play an important role into squeezing the margins of those companies at a time when cost of capital specifically is I think at a structural increase, meaning it's not going to be cyclical. It's going to be we're going to see cost of capital and specifically cost of debt being higher than historical standards. And at a time when what I said about wages and salaries is a real problem, operating expenses are likely to go much higher and cause operating margins to be squeezed significantly. This is the main reason why we've had such a period in terms of the times when corporations have been able to spend less capital paying for their wages and salaries relative to how much money they've been making. And I think that with the political agenda that we have currently on top of the need for most of the population to start making more money to afford such a high cost of living environment that we have today, it will force those margins to be squeezed over time. I also have a strong view about material costs because of this under investments that we've had over commodities and really into the natural resource industries. It is very unlikely that the availability for raw materials would be here in the next three to five years. So the cost of those things depending on what business you were related to are likely to be pressuring those margins to be squeezed. Margins are starting to decline currently. So we're now looking at earnings in this chart. But if you look at margins themselves, first of all, they increase to all time highs with never seen margins this high recently with the COVID situation. And then after that, margins have declined to prior peaks, prior peaks that we've had before the global financial crisis, before the tech bust. Look, I think we're going to see a period where there is earnings recession. I don't think we're immune to those issues. I do think there is a business cycle after all. And I do think we're likely to be experiencing right now the beginning of a downturn in terms of earnings of most corporations. And we have to extrapolate that thought again and think, well, if we do see a decline in earnings, if earnings are inflated, and despite the fact that earnings are inflated, multiples are record levels, meaning prices are high relative to inflated fundamentals. What happens if fundamentals fall 20%, 30% or so? What does that do to the current multiple that we have? It's such an important question. I do think we're going to see multiples get compressed. And again, when I go back to history and I see, all right, well, I have a view about inflation. I think there's this is going to be secular despite the fact that we may see the acceleration and acceleration, like you said, through waves like we saw in the 70s and the 1910s and 1940s all had their waves as well. But what is important to go back in history is to see that multiples of equity markets during inflationary periods, in average, compressed significantly over 30% during those periods. And so I do think we're at the beginning of another area like that, but never throughout history, we started an inflationary decade with such a large degree of valuations that we have today. The valuations we have currently resembles periods like we've had in the tech bust or prior to the tech bust and during the tech bubble and prior to the Great Depression, so the late 1920s. Again, those are the two times that we also had strong earnings in the prior decade. And it's just normal to see this because we have strong growth in earnings. And then analysts, especially Wall Street analysts and other investors begin to extrapolate that we will continue to see that and therefore you get those large multiples that we're seeing today. But it's very, very difficult to maintain that same growth rate that we're seeing that we've had in the last decade. So I think this chart is important. I think it tells us that we're again at this critical juncture that we're probably going to see a declining earnings for all the reasons I mentioned here. And if that's the case, it really questions again the valuation of financial assets, which we all tend to have a positive and more bullish view, especially the younger generations that have only lived through periods where the Biden dip mentality has worked. And I think it will work again at some point, but we do need to see the dip. We haven't seen the real dip in markets yet. And so I think we're overdue for that. And it's just hard for me to think that this excessive allocation of most large portfolios will continue to be excessive in equity markets and bond markets. I think we're going to see a much more the most popular portfolio locations in 10 years from now will look very different. Gold is probably going to play a role. Commodities will probably play a role. And all this is linked to this idea that earnings are probably going to be compressing as well. So started to go long on this, but that's really what's in my mind when I think about this chart. Let's take a quick break here from today's sponsors. Are you curious how equity crowdfunding provides unique access to investment opportunities that are typically reserved for venture capitalists and private equity firms? Recently, I had the pleasure of speaking with Auto-coma co-founder and CEO Daniel H. Galancy about the evolution of capital formation and the rules that have evolved over time, allowing enterprises to challenge traditional capital raise norms through equity crowdfunding. During episode 541, how equity crowdfunding is changing the game. Daniel and I discussed the role equity crowdfunding plays in this tumultuous economic environment and its benefits for everyday investors. 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On a relative basis, it actually outperformed the S&P 500 by 147% after the 1973-74 version. On average, on a relative basis, it's increased by 72% after other inversions here as shown on the chart. You walk us through why yield-curven versions are such a key indicator to watch for gold specifically. Maybe expand on why it leads to this relative outperformance. I'm sure a lot of it ties into what we've been talking about so far. To be frank, I think this is almost like a different topic that at the end of it will relate to what we've been talking about. But it's back in just to give some history, in 2018-2019, I was really trying to analyze the yield curve signals because we managed a macro fund and yield-curving versions are beginning to emerge at that time. There was a risk of a recession and we wanted to understand portfolio positioning when you have yield-curving versions. At that time, what I was able to understand was that there were a little popular spreads that people would like to look at, like the two-year versus a 10-year yield or looking at the three-month versus the 10-year yield as well. Some folks, Professor Campbell, actually got a Nobel Prize for the research on this. There's a lot of talks on how to really analyze a yield curve. I do think that the signals that you receive from that are very different. For portfolio positioning purposes, it's not very helpful because the two-versus-tans inverted about two years before the downturn during the global financial crisis. If you look back in the tech bust that spread is specifically inverted right at the time when you're supposed to be positioning to the downturn. While majority of people like to look at yield-curving versions fighting the less war, meaning just looking at OA and claiming that that's really what happens throughout history, that's not true. In the 70s, we've had times when yield-curving versions coincide with declines and others that precedes a decline. To me, this research needed more meat to understand how to really invest in periods when you have that. That was the beginning of something I called the percentage of yield-curving versions. I created this metric recently. I actually did a presentation on the IMF explaining why this metric is so relevant for markets. The idea of it is instead of looking at one or two yield-curved spreads, let's look at all the possible spreads in the treasury curve, meaning there's about 45 or really 45 mathematical spreads, possible spreads in the yield curve and the entire yield curve. What you find is rather than looking at one or two specifically, let's see how many of those inversions are happening throughout the curve. How many of those spreads are actually inverting or actually negative? What I figured out is that every time you go above the 70 percent handle, when 70 percent of the yield spreads are inverted, there is a recession. Recession meaning there's a downturn in the business cycle where a lot of things can happen. That also is not very helpful because recessions, when you signal a recession itself, usually that tends to be the case that you're actually at the bottom of the market. When people are talking about the recession, everything, especially the government, the downturn already occurred. For portfolio positioning, what I found is, okay, so every time we got the 70 percent, we have a hard lending, there are even some periods where equity markets rally after the 70 percent handle. How do I manage money after this? I back-tested a lot of asset classes, treasuries, oil, gold, the S&P 500. They all have different performances, especially in different macro regimes. What you find is that the gold to S&P 500 ratio is by far the best portfolio position after the 70 percent handle is triggered. To be fair, we've had this indicator going above 70 percent in November of 2022, and the gold to S&P 500 ratio has been going up. In fact, it has been trekking almost perfectly its average performance of all the way back to 50 years of history. In other words, the gold to S&P 500 ratio has been rising recently, about 20 percent or so. In average, after two years from that 70 percent inversion, you go to the average performance is about 72 percent, which is what is shown in its chart. Again, there are times when gold goes up and S&P 500 actually goes up as well. There are times when gold declines, but the equity markets decline further. The ratio rises. There are times in history when both flags of the trade work together, meaning gold rises with the equity markets falling. This is such an important point because if you, again, go back and study which ones are those periods where both flags of the trade work very well, guess what? One of them was during the stagflationary period in that 1973-74, and the other one was during the tech bust. Both periods, if you go back to the commodities to equity ratio chart, you're going to see that both periods also align with the times when commodities are depressed relative to overall equities. Does that sound familiar? I do think there is a very, very strong case to be made of why precious metals in general could perform very well relative to equity markets. Those two cases specifically, it wasn't just gold. Silver did well. The miners did very well. Other commodity producers did very well. We, I think, as investors, need to stop looking at OA as the only timing history that will replicate what likely will happen here because of a potential for a recession or a downturn in the economy and need to go back further and see what asset correlations we may have given the structural changes that we're seeing in the macro drivers, especially during inflationary periods like the 70s, and seeing what those market correlations look like during those downturns. And Treasuries did not serve as a haven asset. Gold did very well. And so if that's the case, and institutions begin to really understand that gold is going to play a role as a defensive asset for most portfolios. And we're at the beginning of those institutions realizing that and they will be allocating capital towards this. And remember, central banks lead the way what institutions are likely to do. Central banks are already in process of what I call this period of improving the quality of their international reserves. I don't want to digress and we can probably talk about this in the next questions, but really what's happening is that central banks are buying gold. And so I do think that the 60-40 portfolios that we have today, their most popular portfolio positioning that we've had over the last 20 to 30 years, are not going to be popular 10 years from now. And it doesn't mean equity and bonds are not going to play a big role into portfolios, but it means that they need to make room for things like gold and other commodities to be part of those portfolios. And if you just look at the downside volatility of the treasury market today relative to the downside volatility of owning gold, especially in the next 20 months or so, what you're going to find is that by far, the treasury is never seen the spread between the two where treasuries are much riskier than gold from a downside perspective than we've seen in the last 30 years or so, which in my view, as people will start to see those types of researches, pieces going around, will start realizing that gold does play a role as a defensive asset for most portfolios. I think the biggest pushback you get across this is when you see treasury yields rising because treasuries are falling over time, at some point you start seeing the fact that you're actually able to get some yield and gold doesn't yield anything. So why would you own gold when treasury yields are higher? Well, the reason for that is because the risk perceived in the markets by owning treasuries starts to change. Today, you can separate the risk of owning treasuries by three things. It's a default risk, there's inflation risk, there's interest rate risk. In the last 30 years, we didn't have any of those factors really playing an important aspect here of pricing those instruments. In the 70s, we did see that. We had interest rate risk rising. We've had the fact that we had inflation rising and the fault risk wasn't really high. Today, we have the three working as, I would say, strong counterarguments for owning US treasuries as a defensive asset. I do think that there's going to be some pressure in US treasuries in the following years. This is going to be driven by the large amount of supply of treasuries that we may see given the fact that we're running large deficits and we're also seeing less demand from large central banks and institutions given of what I just said, of this shift towards making more room for gold and commodities relative to what they currently have of fixed income and equity allocation. All that is going to play a role into driving gold prices higher. We can touch on this later, but to me, when I saw this research, it made me such a bull and gold prices for the next five to 10 years that I wanted to understand how do I find the most asymmetric ways to express that view that gold prices are going to go higher, not lower, 10 years from now. I don't think the answer to me was to own gold. Gold is sort of a boring asset and it's not news for anyone. Gold is not something you're going to get rich by buying that. It is truly a defensive asset. It's truly something that has a history and credibility in terms of being having the track record of being a defensive asset during periods when you need that protection. Especially at times during secular inflationary forces, higher cost of capital and things like the nature that we're seeing today. I do think that it is one of the most important questions that I ask myself. I have a lot of potential answers of how to express that view in the markets after 30 years thinking about this. We've created even a fund to invest in, I think there's an issue in the industry itself of the lack of discoveries. I think there's a lot of inefficiencies not in the mining industry overall, but really first and foremost in smaller businesses, which there's a lack of people that understand the space very well. Again, this is all linked to the idea of why commodities are so cheap and equities are so expensive. Why I think that we're probably going to see a hard landing, a recession, and also a contraction of earnings over time. One of the most important macro indicators to look at is the percentage of yield-curving versions in my opinion. We've had that signal in November. Don't be surprised if the goal doesn't be 500 ratio rises for the next 18 months or so. Before we get to some of those asymmetric plays to discuss, I thought it was a really interesting dynamic how you posted this chart of China's US Treasury holdings. Back in 2013, it was over $1.3 trillion in US Treasury holdings. Today, it's approaching $900 billion. That's about a $400 billion drop. That's interesting with rising interest rates, as you mentioned, leads to falling US Treasury values, meaning that if foreign entities want to strengthen their balance sheets, then they better look for something that potentially stores its value a bit better. How does the foreign Treasury holdings play into this thesis and your research? I think if we go back to the 70s again and understand what the composition of central bank assets look like back then versus today is maybe very relevant to answer your question. Essentially when I looked at that, first thing you find is that gold is a percentage of international reserves by central banks. First of all, let's understand what central banks do before we answer that question. Central banks, they usually run a monetary system. You have in case you're not a central bank, but a currency system. The euro in this case or European currencies, you've got the US dollar, the Canadian dollar, the Japanese yen. The euro really started in the 90s. Obviously, there's changes in terms of that in those monetary systems. Every monetary system requires high quality assets to back those currencies. That topic became a thing recently because of Bitcoin, which was a, I would say, a normal argument across the gold community, but it became, I would say, a lot more popular of an argument of questioning what really backs the US dollar and other fiat currencies today after we've had this Bitcoin and crypto movement across the younger generations first and foremost. What is important to note is that back in the 70s, gold was about 70% of those international reserves. Those are the quality assets that central banks used to own in order to support their own currency systems. After the 70s and the 80s or so, we peaked in that ratio of gold relative to other international reserves. We've been in a decline, which has been almost a 30-year decline, really. The most credible central banks in the world were the ones that bought Treasuries, were the ones that actually accumulated US Treasuries over time. It's very, like it or not like it, this was certainly what occurred. On top of it, we've had also the 60-40 portfolios happening at the same time, which also helped to fulfill that demand that was required to create such a bull market that we've had in Treasuries over the last 30 years. More recently, given the fact of the de-globalization trends, the inflation issue, the default issues starting to rise, questions about interest rates, the cost of capital needs to be higher over time. Can they maintain those interest rates to be as low as they were back in 20, 30 years ago? Do we need to see higher historical standards for cost of capital? All those questions are becoming more, I would say, relevant over time. I think what's happening is clearly with the de-globalization trends of most central banks now thinking about, should I own debt from another indebted economy? Like owning your Treasuries? Or should I own a neutral asset like gold that has very long history of a track record of being that asset that creates the quality of international reserves that a central bank requires in order to not completely lose value of their fiat currencies and create some level of credibility? So, we're at the beginning of this process of central banks having to improve the quality of their international reserves. This is why we're seeing gold being purchased by most central banks recently in record levels, really. And it's something that drives entire gold cycle at the end of the day. And so, I think it's important to go back to the 40s because today, despite the fact that we like to go back to decades that we had inflation like the 1970s, that that problem today is a lot more severe than what we've had during that decade. And in 1940s is a good example of a time when leverage was an issue as well. It was a different reason back then. The reason back then was how to do with the war. The war drove leverage in the government side to levels that we have currently. And who financed that time? Well, there's a lot of things that happened during that period. Number one, we've had, and I think that was one of the most important things, was really the individuals are buying war bonds. So, individuals in the US were actually financing the war, number one, but financing that debt that we've had during that period, that buildup of that debt. And that was a significant portion of the demand driven by treasuries at that time. The second thing that happened was that the Fed instructed the banks to buy US treasuries too. And so, that created another demand for treasuries that it's not the case as much today. And then we also re-instituted this yield curve control that is also really popular topic today, the potential for that happening. And I think it will happen at some point inevitably. But it's important to go back to the need for financial repression, given the fact that you have such a high levels of debt, also will play into this inflationary problem. But ultimately, yields had to move higher. And we've had a move up in yields all the way to the 70s and 80s that then peaked in the 80s. And then we've had a 30-year period of declining interest rates. So, I don't know how bad things are going to be. But today, I would say that those issues with treasuries are probably one of the worst that we've seen in history. Number one, we haven't even seen the same degree of, or the same need for deficits to be running as high as it was in the 40s. So, it was a war happening, a world war happening and folding at that time. Today, that could happen. And we would start that war already at very record-lavaged ratios in terms of the government side, which was very scary in general. But this is the case with every developed economy, including China, which you may say it's not a developed, it's an emerging market, or maybe it's in between and so forth. But the biggest issue with treasuries today to your question has to do with the amount of treasury issuances that are happening in the market. Recently, we've had something called the debt ceiling. The debt ceiling has been basically irrelevant for markets. Every time someone claims that this is going to be relevant, it's not relevant. And the markets don't care about it. And markets go higher on the back of the debt ceiling situation. This time, however, it's not that debt ceiling itself that matters. It's not the agreement between the Republicans and Democrats if they need to extend the debt situation or not. That has to happen like it or not like it. We may see a technical default or something like that, but that's not really relevant because they will ultimately extend the debt limit because otherwise everything is going to be collapsing and imploding in the US. So assuming that's going to happen at some point, the question now is, how can the market absorb a large amount of treasury issuances once we do have that agreement in place? So the treasury cash balance today is running at one of its lowest levels in history. Today it's at about 200 billion. Just to give you some perspective, in March, the amount of fiscal deficit that we're running was over 300 billion. So in one month, we could dry up the entire cash balance. That cash balance is basically used for day-to-day operations is basically what funds the treasury deficit that we have currently. So once the agreement happens and every time we've had a debt ceiling, basically if you look at the amount of debt outstanding in the US, if you look at a chart of debt outstanding, you see a straight line which is caused by the debt ceiling. In other words, the government is not allowed to issue treasuries. Once that gets resolved, you see a jump in treasuries or a jump in treasuries outstanding. That means that they're issuing treasuries. We don't know if it's going to happen in long duration. Short duration, meaning is that going to be two-year yield, treasuries going to be issued, day-and-year, 30 years. I don't know. I don't have an answer for that. I have a feeling it's going to be a mix, but I don't think we all have an answer for that just yet. But it will happen. It has to happen. And so what does that mean? How would the market absorb this? It's a very, very important question because we just went through 2022, which was a total collapse of the 60-40 belief. Despite the fact that it was a big decline in prices, too, it was really a collapse or a break of belief in this portfolio allocation, which it's interesting that in the first quarter of 2023, we've had this sort of comeback with mega caps doing well, treasuries rallying, and that portfolio actually did very well. But to me, this is almost like a bear market rally of that portfolio positioning. We'll see if I'm right here in years from now. But I do think that the age of the 60-40s is over. And if that's the case and you have on top of all this, the banking problem, which think about this, well, the banking problem was not caused, was really caused by collateral prices falling that caused a mismarking of those assets in their balance sheets. And then the unintended consequences of the treasury market decline. What happens if we have a $500 billion to a trillion issuance of treasuries at a time when 60-40 portfolios believe is somewhat broken? You have central banks not buying those treasuries. And who is going to be the buyer, individuals? Are they going to create, I don't know, green energy bonds and people will be buying them at record levels? I don't know. I don't think so. If I look at probabilities, I think there's a high chance that we may see some big issues in the treasury markets sometime, like similar to what we saw in the BOE, the Bank of England last year. And the Fed is going to have to step in. It's the Fed's responsibility to try to avoid the instability of financial system. And so if the treasury market is linked to everything in the financial markets and causes that turmoil, then the Fed is going to have to step in. And it's not something we haven't seen. What QE is exactly that is then buying those bonds, creating the demand for those bonds is essentially monetizing the debt. Now just because I said that some people may have issues with the technicality of that and say it's not really monetizing the debt, well, it is. At the end of the day, it will be monetizing the debt. And even if I was a policymaker, I get that question a lot. What would you do differently? I don't think there's a way to do anything different on me or I think they're trapped. And so investors need to be thinking about that context and saying, how do I exploit those issues in order to capitalize on that? And I think there's a lot of trends that will be successful here. It probably won't be the sexy technology space or the treasury market or the 6040 portfolios or the software companies or even maybe the overall crypto market. I don't think it will be. I think there will be other things that maybe will look more attractive for the future. Natural Resources is one example. Value companies going back to understanding fundamental analysis is going to be in demand. Understanding short sellers, how they do their craft, which will be very handy and high demand to understand their downside risk of markets. So everything is interconnected in a way and the treasury market to me is fascinating. It basically holds the key for an entire stability of the financial sector and not sector with financial assets in general. And it's something that I'm paying very, very close attention. Let's take a quick break here from today's sponsors. Hey, everyone. I'm absolutely thrilled to share an amazing experience I recently had with a company called Viator. So I had a trip booked in Miami and had one day where I was totally free. So I hopped on the Viator app to see what sort of experiences were offered in the area. And Viator introduced me to a city tour that showcased Miami's top attractions to kick off my trip. 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Now since you're in the investment business, you mentioned you're looking to make the most bang for your buck when you're allocating capital and you have the thesis around gold. And then you have things like gold miners, which offer more upside potential because they're a derivative of gold. So when gold moves up, say 10%, maybe these gold miners move up, call it 30% or something, depending on how well you choose your gold miners. So how do you think about allocating to gold miners and how that might apply to our audience as individual investors? Okay, so I think in order to understand the gold space, you need to have some also historical contacts on the industry too. And recently I talked to a lot of institutional investors that ask me questions about our strategy of investing in natural resource businesses and trying to exploit those inefficiencies. And what we find is the biggest question, most popular question we get is why do you see gold prices making new highs, but you're not seeing the miners following suit? It's such an important question because the majority of the indices that track gold miners are indices that use the composition of those indices are really driven by larger miners, the barracks, the new moths, the king-rosts of the world. And in my view, that does not reflect the opportunity in this decade in the space. Although they might, for other reasons, do very well and if gold prices rise, I don't think that's ultimately where the large amounts of money will be made. So if you think about the biggest reason why we're seeing this chronic underperformance across the majors, it has to do with the fact of how they're running the low-level businesses. If you looked at just a chart of gold prices relative to revenues of those companies, you're going to find a major divergence where gold prices are rising and their revenues are not rising. Why? Well, you can't even explain that by saying operating costs is higher because we're looking at top line. We're not even subtracting by operating costs whatsoever. So the main reason for that, it has to do with the fact that most of the major companies or all of the major companies have aging assets with deteriorating quality of those assets and also a total lack in vision for growth. There is no production growth happening across those firms. If you look at barracks production for gold over the last decade, you're going to see a secular decline. If you look at king-rosts, you're going to see the same Anglo-Gold, the same idea. Newmont, same gold production since we've seen 16 years ago. So why would an institution buy those assets if all they're doing is retiring those assets over time, their own projects, their are producing assets, and then what they do with the capital because of the pressure from some investors and even their own board members on cost saving is that what they do is they take that capital, that profitability they're generating because gold prices are record levels, and then they return that capital back to shareholders are record levels, meaning they should be spending money on focusing on replenishing their existing reserves, improving the quality of those reserves, finding new discoveries, being bold at a time of the beginning of a gold cycle instead, they're just letting those assets run their course and the average grades of those assets have been in the also a multi-year decline. So what's the vision here? It's creating, in my opinion, one of the best opportunities for an investor to be creative, to maybe build the next newmont, the next barrack of this cycle. That's what I'm trying to do. So the way I think it's going to happen is you have producers, developers, and explorers. The majority of people when they talk about miners, they're really talking about producers. If you're looking at GDX, the ETF, or the GDXJ, both ETFs are basically all producers. So you're not seeing the real opportunity here. I'm not here to claim that what we are trying to accomplish is easy. We are investing in very small cap names in the mining space. There is over 3,000 companies in this part of the industry, and what I would say is that 90 or 95% of them will fail. So the thing is, the quality companies and the bet-run companies are basically being priced at the same level today. So you can find a company that trades a sub 20 million market cap that is very likely onto a major discovery of gold. And investors don't care about it. In fact, they priced that along with another company that most likely won't have anything in the following years as they follow up on those projects. So what we found is that there is a plan, oh, and by the way, majority of the billionaires in this industry throughout history have made their money on discoveries. Remember producing, development, and also the explorers. Most of the capital made in this industry was actually made on exploration. Basically it was a property that some of those billionaires acquired or invested in a company that owned the property, that then found a major discovery that became a company maker deposit. That's what we call, and there's something that is very economically viable, scalable, high grade, and successful over time, creates such a level of profitability during that speculation period of going from a very low value of owning a property or a mineral rights over that property to then finding a major discovery. That increase of speculation, that creation of value that you build during that phase of the mining industry is what makes most of the billionaires in this industry. And when thinking about this, we thought, well, isn't this very similar to the technology space? Most of the billionaires made their money and startup companies that then became multi-billion our businesses. That's how they made most of their capital at that initial phase. The growth came from that startup phase part of the industry. What if we replicate the success of venture capital and the success of private accounting general, which includes venture capital, of investing in what I think it's the beginning of a trend, meaning natural resources in this case, specifically metals and mining, because that's where I would say our niche is and our knowledge is across the team and working with geologists and so forth. What we've built is in metals and mining. What if we create a place where we can invest in maybe 100 companies or so, where all we need is one or two of those businesses to be very successful, meaning becoming unicorns or multi-billion dollar companies on the back of major discoveries, knowing that the value of those businesses are today priced for failure already. There's a lack of understanding of that industry overall. What if I come in with a more intellectual and institutional approach towards this rather than the current participants in this market and really exploit those inefficiencies and own the best quality assets I can find and exploration side of it and really build a business on top of that? Just to be fair, this is the model that Newman became Newman. Newman's the largest gold companies in the world and they started as a fund. They own a bunch of early stage projects that then became major discoveries or a company maker types of projects. That on the back of that was the beginning of Newman that started really in 1920s. I saw we were trying to replicate that specifically the same way. We were trying to turn Kreskett into a mining company or anything like that, although we like to keep the optionality open. The fact that no one is spending time and effort to go deep, intellectually deep into this space and understand the level of opportunity we have, it's funny how you have either I'm very wrong or I'm going to be very right because why would you see gold prices at record levels and a property that has very likely a major discovery of that metal? We have statistically very good ways to give us conviction that they are onto major discoveries. One of the main reasons is because they drilled and they found gold, very high grade gold and not just once. They drilled in some cases several hundred meters of those deposits have been drilled. What you find there is that, wow, then why would they be priced in such a depressed level when gold prices are higher? To me, it's sort of like a no-brainer. That's why after going deep into this and knowing that the major companies are in desperate need at some point will have pressure from investors to improve, again, the quality of their own reserves, not central banks, just the miners. They need to improve their own reserves, their existing reserves, the quality of those. If I am now the largest investor of a lot of those major discoveries that are high grade scalable and economically viable and I can provide that to the majors at some point and maybe we don't want to do that. I don't know. Those are all options that are, I think, one of the most important things for investors to be successful is to have optionality. I can think of a time when I can find more optionality than this. I think this is one of the best ways I find to really create wealth, generational wealth in an environment that not a lot of people care about. I don't go to a restaurant or a bar and hear people talking about acquiring gold properties or copper related properties or a silver discovery or anything like that. I do hear people talking about technology and crypto. To me, this is one of the most contrarian and interesting ways of asymmetrically tackling an opportunity that I have very high conviction given my macro views. I think it requires a lot of understanding. I've been in this industry now for three to four years and I would say that the level of understanding of this continues in terms of the learning curve, continues to be steeper and steeper. I continue to learn about this and our portfolio, I think, looks much better than it looked three years ago. I hope that's the case. Five years from now, we continue to improve that way. I think that we'll be in demand as well, this level of knowledge of the space with especially across institutions. At some point, they will realize in my opinion that that's really the opportunity. That's why we did what we did. That's why I'm so excited about... I've been talking about silver for so long or gold. Guess what I did recently? While we purchased the seventh largest silver mine in the world, is there a better way to leverage up your trade than that? Well, actually, this was a leverage buyout and so it's literally leveraging up a trade. I don't know of anything. Every dollar the silver goes higher, the free cash flow of this mine goes up by $15 to $20 million. What if we see gold of silver prices and triple digits one day? I don't think that's out of reality. That's probably going to go higher than $50, which was a prior peak. Then we're off to the races and probably going to go much higher than that and make new highs and historical highs and probably head towards triple digits at some point. I am trying to think ahead of time here. I know that this is speaking out of terms and maybe difficult for people to see this opportunity. I love that factor, how contrary and this is. We'll see if this is going to be proven right or wrong. I had funds or paid to take risk and I think this is a high conviction risk that I like to take. Another highly contrarian play I think you've been talking about is getting exposure to Brazil. I believe your fund is invested in Brazil and you also shared a chart here of the Brazilian to US equity ratio. Is this thesis of Brazil highly in line with this commodity and gold thesis or are there more factors at play here with Brazil specifically? I would say the biggest thing that really brought to our attention, this opportunity to invest in Brazil has to do with the fact of as we learn about this natural resource space better and better. As we really researched this throughout history, what we found is the market is very small. It's a very thin market to spread your wings around, especially if you're a large institution looking to find significant exposures. Let's say I'm right about 60-40s and now we're going to have a 20% allocation or 15% allocation towards commodities one day. You can only go so far if you're a pension fund managing billions and billions of dollars into that space. You can buy the companies that are in developed economies. You can buy energy companies. It's probably the easiest way to start getting to the metals and mining space. Very rarely you're going to see someone trying to play where we're playing in terms of the microcap names in the space and even companies are not even public yet. As you dive into the potential ways of expressing that low commodity view in the markets, what you find is at some point you're going to find look for countries that are likely to benefit from that environment. When I thought about emerging markets, I think emerging markets immediately think about bricks. Brics could not be one of the worst ways to think about this as an opportunity because the bricks are so different from each other. It's not a block of economy. It's actually very segregated and very different in the nature of those countries of how they are run. You've got China that is an authoritarian regime that is a net importer of commodities, not a net exporter. You've got Russia, which is a net exporter of commodities, but a total geopolitical mass that I don't think any institutional large institutional capital will ever chase that in the next five to ten years. You've got India, which is less of a geopolitical mass than the other two, doesn't have an authoritarian regime, but it's a net commodity importer in a very large one. Then you have Brazil in this different environment where it has exposure to every commodity I can think of, large exposure to agriculture, metals and mining, energy, even water. Most of the Brazilian economy is related to natural resources. At the same time, it is almost like the Switzerland of the bricks in terms of geopolitically speaking. It's very neutral. It will sell things to China. It will also sell things to the US. Even sell things to Russia, really. It is very interesting that today because of the political leadership in Brazil, and to be fair, I am from Brazil, I could have not been more skeptic about the political environment, but also the corruption, scandals and corruption history of the country over the last 30 years. I am not even talking about the last year or so. I am talking about the last 30 years. It was very difficult for me to put away those biases and become bullish in the space. Just so you understand the context a little bit of how it was difficult for me to become bullish in the whole country. Understanding the commodity markets and the likelihood of the beginning of a commodity cycle, which, by the way, is a trigger in different ways. Sometimes, in this case, it started with energy and then it's a domino effect. Then it triggers agricultural commodities rise. We've had a pause in gold prices over the last two years. Now gold prices begin to rise all of a sudden. Every time is going to be one section of the commodity market. You have to be, I think, diversified into the space. The Brazilian market attracts me not only for this backdrop that is positive for tangible assets, specifically commodities, but also because of how cheap and historically undervalue those assets are in Brazil. Given an example, if you look at the banks, which are not necessarily tying directly to the natural resource industries, although we all know if an economy is a commodity-led economy, you should think that indirectly a bank that is operating in Brazil should be impacted by a commodity bull market. It is. If you look throughout history, the banking industry does very well during those periods as well, where commodities do perform better than other periods. What you're going to find there is that they're trading at one of the lowest multiples in terms of prices relative to fundamentals that we've seen throughout history. I think it's an opportunity. I think the political risk is real. It requires a change in terms of allocation of how you allocate those assets into your portfolio. I don't think it requires a very large percentage of your portfolio because if you were right, those things are so cheap that potential for return could be exponential. Look, everything has a price. You don't just avoid risk at all costs. There's risk reward in everything. In this case, the reward is very mispriced relative to the risk. I think the risk is completely priced into most of those equities. I find that a very interesting opportunity. Then I looked at the commodity producers chart of an index of looking at world commodity producers relative to the Brazilian equity market. What you're going to find is that there is a very strong correlation between the two, positive correlation. Recently, we're seeing a gap on that since elections and so forth. Brazil has been sideways recently while commodity equity markets have been moving a lot higher, especially driven by energy, which is a huge part of exposure in the Brazilian economy as well. I think there's some really interesting opportunities in the Brazilian market. I think you can also again, extrapolate that as well into South America, not every South America is a place we invest. We recently increased an exposure to Bolivia, which I think is in the processes of opening up their economy. Very similar to what we saw with Peru back in the 90s, where it became a very hot market in the mining space is specifically driven by this openness to foreign investors to invest in the space. I think believe it is basically not priced for that. I understand the risks of Brazil believe in all that, or at least I appreciate the fact that there are risks that maybe could be impacting how cheap those assets are. I think those assets in general are not, broadly speaking, are not considering any improvements whatsoever on the political environment. People think a lot about the political side of it rather than an economical side of it. An economical side usually leads the way, meaning what happened with Venezuela, for instance, just to use it as an example here, was exacerbated by the fact that energy was in a collapse. Meaning the energy space was collapsing, oil prices were collapsing. That really created the narrative that you needed for the populism that you saw in Venezuela to create that situation. The political environment worsen. You'll have the inflationary of pressure because their currency devalues. Everything is related. You'll have social unrest. You have a populace that comes in and brings up this authoritarian agenda. I think we're not going to see that again in South America, given the fact that commodities are unlikely to go to a bust of another 10 years like we saw from the 1910s. In fact, go back just for an idea quickly to that the whole thought about how we've had the best earnings season in 2010s was also a time when all commodities are basically falling during that period. That's not my view today, right? I think Brazil is likely to benefit tremendously from those commodity trends. I think you'll have to also consider commodity-led economies versus commodity importers. China, on the other hand, if commodity prices rise drastically, different than what everyone thinks. They have upper hand in the commodity markets. I don't think so at all. I think that could potentially see social unrest. That could potentially see major devaluation of the currency. That could potentially see a shift in the political environment. Those things are not priced in the Chinese market today, in my opinion. A much rather own Brazilian asset, South American assets, it's a portion of a portfolio. It's not a huge portion of it, but it's a growing portion of a portfolio. I can see it growing over time. I'm very bullish about Brazil. I love the fact that opportunity has been masked by the political leadership right now, which a lot of people are bearish on. It's important to remember that the early 2000s when we had a commodity bull market, in fact, happened when Lula, the same president today, became the leader of that time. I think there's a lot of similarities with that period, and especially given the fact of how cheap they are relative to equity markets, which is the chart that you brought in today. I like to own Brazilian assets. I think there's also asymmetric opportunities in the S-Space as well. Well, Tavi, I do not want to take too much for your time. I really, really appreciate you joining me. I know I really enjoyed this discussion. Before we close out the episode, as always, I want to give you the opportunity to give a hand off to where people can get connected with you and Crescat Capital. Well, thanks for having me in your show. My apologies for the long answers. I get really caught into my views, and I love sharing some of those as well. You can find my work on Twitter at Tavi Costa. I've been doing a new version of my posts recently, which I've been trying to elaborate a little more on my views. Let me know if you guys like that, but that's a new thing that I've been working on as well. You can also find our work. If you like more in-depth research that are long letters and ideas about how to maybe assess this macro environment, my view is at least you can find it at crescat.net. Crescat is the company that I'm a partner, and we run three funds, a global macro fund, a long short fund, and a precious metals focus fund. We'll be launching a commodity institutional fund here soon, along with a macro institutional fund as well. It's actually one of the longest macro funds that have been successful over the years in the space, and we're very proud of it. I think there's a lot of opportunities to be a macro investor today, and especially given all those big macro trends being unleashed in this environment. I'm really excited about the future, and I hope I provided some good ideas for investors in general. Thanks for having me. Lots of great ideas, really amazing work. I enjoy all the stuff you put out, especially all the free stuff. You're a great follow on Twitter, and I've enjoyed following you the past couple of years. Thanks again for joining me, Tommy. Thank you. Thank you for listening to TIP. Make sure to subscribe to Millennial Investing by the Investors Podcast Network, and learn how to achieve financial independence. To access our show notes, transcripts, or courses, go to theinvestorspodcast.com. This show is for entertainment purposes only, before making any decision consult a professional. This show is copyrighted by the Investors Podcast Network. Written permission must be granted before syndication or rebroadcasting. I'm going to go ahead and get started.