The Armchair Trader continues its series on gold investment in partnership with E.B. Tucker
Last week E.B. Tucker took us on a journey through Bitcoin and blockchain, from its origins with the mysterious Mr. Nakamoto to its possible conclusion with an omnipotent, oppressive, centrally controlled FedCoin.
This week E.B. Tucker talks about where to position yourself today, with gold and other assets.
We’ve only scratched the surface so far with this series, but you can get the full fat experience by buying a copy of E.B. Tucker’s book ‘Why Gold? Why Now?: The War Against Your Wealth and How to Win’ which you can find here.
Summing it all up
I had the pleasure of visiting the UK recently. I came to talk about what we’ve been doing with Metalla and Nova Royalty over the past few years, as we haven’t been able to get across for a while.
The UK is a great place to visit now – I don’t mean that in a spurious way – but it’s a great example of what is happening around the world now, as you can see trends much more clearly in the UK than in North America.
In the UK there aren’t enough workers; prices are rising like crazy; there’s no return on capital for the average person and it’s operating in a pressure cooker of stagflation. The UK has gone through some significant structural changes, the biggest being Brexit.
A lot of the finance guys I was meeting with were saying how dumb it was to do Brexit. I wouldn’t agree, Brexit is just symptomatic of what is going on in the world right now: the death of globalisation. It feels like you made a dumb decision, but its just you guys in the UK were first movers, and as you’re out there on your own – bathing naked when the tide goes out – it feels dumb. But every developed economy is going to feel this sooner than later.
The UK is just at the tip of the sword, localisation is the new theme, but what we are going to see happening as part of this is that the established financial system, and the way that we have lived our lives for the last 40 years is going to fracture.
This generational shift might usher in scary changes, but you can proof yourself from this .
Making money in tough times
I’m not smart, well not exceptionally so. But what I have done throughout my professional life is that I’ve seen structural changes as an opportunity and tried to make money from them. My investment philosophy is simple – buy a dollar’s worth for a nickel.
I’ve done it in Real Estate in Florida. I’ve done it through gold and mining royalties in Nova and Metalla, now is the time to look out for opportunities. Dollar worth; nickel value.
The biggest change upon us is the green energy transition. People are in their minds making the shift – for example buying a Tesla and plugging it in, but conveniently forgetting that the battery is charged from a coal-fired power station spewing CO2 into the atmosphere. However, they are not making that change in their lives.
That change may be forced upon them. In the future more energy is going to be mined than drilled and right now copper is the key. Robert Friedland recently said that 700 million tonnes of copper have been mined in human history, but in the next 22 years we’re going to need at least that amount. However, copper miners are not mining.
At some point they are going to be forced to start mining, and that’s why I’m trying to get as much royalty exposure to copper as I can. Dollar worth; nickel value.
Inflation proof asset
So, to gold. Gold is money, in times when money has lost its value. Gold is foundational wealth. It’s not a trading or speculative asset. It’s no pancake or sushi coin, it’s the foundations of your financial castle. The guys who hold gold – kings and queens, central banks, Indian housewives – are not traders, they are hoarders. That’s why gold prices aren’t spiking like Bitcoin.
The value of all the gold in the world is a fraction of the piles of debt, mountains of financial derivatives, and surging liabilities holding back the economy today. As the world’s financial system barrels towards an inevitable reset, gold may be the only asset that holds value.
We know the importance of owning physical gold. At least a good portion of this should be stored safely outside of the financial markets. That means not traded on an exchange or held by an unknown custodian. There’s no substitute for real, hold in your hand gold. As the size of your gold hoard grows, you may need to own some gold on an exchange or held with a broker. But physical gold is not an investment, its wealth insurance.
You can invest in gold miners, but many miners don’t get to actually mining, so it is a speculative investment.
However, you can get leverage through holding royalties. It doesn’t taker a huge hike in the price of gold to make money, just USD100 or USD200. A royalty is inflation-proof. For example Nova doesn’t own trucks, hasn’t got a shed full of TNT, doesn’t have power plants, we don’t have hundreds of employees (we have five), but we do have exposure to 30 years of future gold production through our 70 royalties. The mining companies have to deal with the price of diesel, wage inflation and have to dig the holes in the ground. We can just watch on, whilst the miners do the work.
You need diversity, one day royalties will not work. But that day hasn’t arrived yet. Make sure you spot that time point.
