Fatal Conceits Podcast

“Try to resist labeling yourself, resist taking on any label because that hems you in. Suddenly, you think yourself as an X. And there's some internal pressure to believe everything that an X believes. And it makes you take sides just based on a label rather than reasoning your way through the issues.”

~ Chris Mayer, manager and co-founder, Woodlock House Family Capital

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TRANSCRIPT

Joel Bowman:Well, welcome back to the Fatal Conceits podcast, a show about money, markets, mobs, and manias. If you're joining us for the first time or even if you're a regular listener, please do head over to our Substack at bonnerprivateresearch.substack.com. There, you'll be able to check out hundreds of irreverent essays on everything from lowly politics to high finance, and beyond. Plus, a bunch of research reports and, of course, many more episodes of the Fatal Conceits podcast just like this one. Not a few of which feature my guest today, a popular guest on the show, and a good friend of mine.Christopher Mayer is the portfolio manager and co-founder of the Woodlock House Family Capital fund. And he joins me today. Chris, good to see you, mate. How are you doing?Chris Mayer:Yo, good to be on with you, buddy. How you doing?Joel Bowman:Good, mate. Always good to have a brighten up my day with a chat with you, mate.Chris Mayer:There you go. Yeah. Same. Looking forward to it.Joel Bowman:Now, readers and, I guess, listeners now who have heard a few of our previous discussions know that one of the themes that we touch on with Chris as an increasingly rare omnivorous reader is we like to thumb through some of the spines on his bookshelf, see what's got his gray matter, taking and inspired. We've had, I think, maybe three or four of these discussions now. And we've set them up with a few different categories of book, whether it be philosophy, or travel, or fictional, or what have you.But you had a bit of a different idea today, Chris, and thanks to your recommendation. I've done a little bit of a two-day crash course on your selected author and has turned up some very, very interesting points. So maybe we can get right into Neil Postman and his seminal 1985 work. It's quite amazing to think that this was that long ago, titled Amusing Ourselves to Death with the very appropriate subtitle of Public Discourse in the Age of Show Business. (Here’s a link to the book.)Chris, you want to set the stage for us?Chris Mayer:Yeah. So I put this under the category of understanding media or understanding media culture. So if you want to have some framework to make sense of social media and TV news and all the stuff that goes on, this book will really make you think. Yeah. What I think about is this eerily prescient. So, yeah, you said it came out in 1985. It's hard to believe that ... Here's the copy. I'm going to read just the beginning because this sets up the whole book. There's a little part in the beginning where he compares the dystopian vision, Orwell, 1984, and Aldous Huxley, Brave New World.So it's just one little paragraph. I'm going to read it because this is when he says to himself what this book is about. So it says, "What Orwell feared were those who would ban books. What Huxley feared was that there would be no reason to ban a book because there would be no one who wanted to read one. Orwell feared those who would deprive us of information. Huxley feared those who would give us so much that we would be reduced to pacificity and egoism. Orwell feared that the truth would be concealed from us. Huxley feared the truth would be drowned in a sea of irrelevance.Orwell feared we would become a captive culture. Huxley feared we'd become a trivial culture preoccupied with the equivalent of nonsense." So he goes on to say here that this book is about the possibility that Huxley and not Orwell was right.I mean, already just in there, there's a lot you could already sense, which is we're bombarded with so much information that it almost makes everything trivial. I mean, you're bombarded with so much news and takes all the time. It's hard to make sense of all. So I would say, if I had to sum up the key thrust of this book and what one of the main things I learned about, and we could talk more about it, is Postman really makes you think more about the medium itself rather than focusing so much on what is being said.But he would say, for example, instead of the content of a tweet that gets passed around a lot, he would make you think about, "Oh, what does that medium of Twitter bring? What kind of conversations does it force us to have or encourage us to have?" I remember one example in the book he gives is, think about smoke signals. If you're only communicating by smoke signal, it limits the conversations you can have. You can't have a deep philosophical discussion over smoke signals. Yeah.And so if you think of every medium that way, you think of Twitter as a medium, it constrains you in a certain way. There's the obvious character limitation. But there's the whole thing about it, there's the likes, there's the retweets, there's followers. And what conversations do that force you to have? What messages that it'd force you to have? And so that's the thing about this book that really makes you think about.

Joel Bowman:That's a really interesting and very germane points as Twitter and, of course, Elon Musk, and that whole potential takeover and the debate on whether or not one man should control this particular medium, and just the power of that medium and the power that it has accrued in just a very, very short amount of time.One of the points that I saw Postman make in an interview ... And this was in '95. So this was 10 years after the publication of this particular book, Amusing Ourselves to Death. So it was really, as you mentioned, I think the right word is eerily prescient because even the terminology that he's using, it almost looked like he had taken stock of the conversation today, and then transported himself back to '95 just to give us a bit of a warning about what was ahead.But he gave ... I remember he used this point about this technology, particularly communications technology, being this Faustian bargain, where it wasn't just this one-way cornucopia of benevolent gifting that we were the receivers of but we also had to give something in return for that. And a few of the points that he brought up, for example, was just basic social skills when we've got our head in a personalized computer and we're not building a community. How does the medium change the way that we interact with one another beyond just the way that we interact individually with information?And I think, to your point about Twitter, I mean, that's just such an obvious thing that we can point to and say, "Well, there's obvious echo chambers here, where people and whole communities are becoming just more and more fragmented and atomized.Chris Mayer:That's it, yeah.Joel Bowman:Do you think that that is somehow catalyzing the political divide that we see today, or?Chris Mayer:Yeah, definitely do. I mean, you think about people who can build their own little echo chambers now. You can tailor all your input so that you're only getting the stories that you want to hear. So it definitely is fragmenting that way. And I think also the point about new technologies and new mediums that he makes is that it's not like people tend to think, let's say, for example, when email came along and people tend to say, "Well, just another way to send a letter." But it wasn't, it's not that at all. It's a completely new thing. And it changes everything that went on before. Nobody writes letters anymore.When TV came along and people, in the beginning, they would have depreciated or downplay its potential, its influence, because for them, they just saw it as what they were familiar with as an extension to that rather than something that really was brand new and changed the game, even though they didn't fully understand it. They didn't fully understand what television would do to politics.And one of the interesting things, I don't know, I don't think it's in this book, I think it's in another book, Technopoly. He talks about the Lincoln-Douglas debates.Joel Bowman:Okay.Chris Mayer:And they would go on for eight hours. They'd go on for hours, right? They didn't have television. They were there. It was like an event, you'd sit and then have intermissions. And the other guy would talk and they have an hour and then you'd have an hour to respond or whatever it was. But we have TV now. What does TV do? Compresses it, makes an entertainment, we have commercials. And now we do these debates and they have two minutes to respond. It's ridiculous.Joel Bowman:Yeah, sound bites.Chris Mayer:What's your solution to the Middle East? You got two minutes.

Joel Bowman:Be concise, make it snappy. And also, I think, to your point there about this participating in person in communal activities, Postman refers to it as the co-presence of communications, where you are literally ... I mean, you and I are talking over Skype here for just want of geographical closeness. But there is something radically different from, let's say, attending. We were at the theater down here just last week with my wife's dad who was visiting in town. And we took him along to a show. We saw Giselle.I mean, it's an incredibly different experience when you go to Teatro Colon down here. It's a packed house. People are there, they're clapping in unison. It's very, very different from we took my seven-year-old daughter along and she'd seen some performances on the television before. But this was just a whole another world. And so it makes me think, given just the past couple of years and how these kinds of rolling lockdowns and interruptions to global travel and just almost the wholesale cancellation of the public space, how that might have affected the way that we digest our information.Chris Mayer:And I don't think we really fully understand it yet. That's the other thing is even social media, it's been around a while now. But I don't know yet that we fully appreciate and understand it, what its impacts are and how it's changed things. It took decades before people really figured out TV and how to use it and what its effects were and, yeah, it may take some time. And it's creates a whole new concept. I mean, it was one of the part in the book I like where he talks about, there are many examples of this kind of thing. But he talks about how even the concept of news of the day, it didn't exist unless you had a medium that you could see what was going on in faraway places, and made me think that that's one of the other things about Twitter.Here's the line I like. He says the news of the day is a figment of our technological imagination. And if one thinks about not just Twitter but any kind of social media or the internet generally is you can instantly see what's going on all the way across the world. And everyone right away have an opinion. I mean, it's like ... So even in Russia, Ukraine, how many times you see people that put little Ukraine flags on their Twitter page? Or how many people, they ... It becomes a show in itself.How much is this is really genuine and how much of it is just, "Look at me, I'm on what they call virtue signaling. Look at me, I'm on the right side." And you aren't doing crap for Russia, Ukraine, putting a little flag on your profile. You know, you want to do something to help out? There's lots of ways you can help. Rather than just, look at me pandering to the public opinion. So I don't know. Postman makes you ... When you read Postman, you can get pessimistic about this stuff.Joel Bowman:Right.Chris Mayer:He knows it too because he's always critiquing and he doesn't necessarily have solutions. He tries hard at the end of the book to have some solutions to this.Joel Bowman:One of the things that I liked, which seems to go a little bit begging nowadays when you've read how-to books or nonfiction type 12 steps to this or what have you. They're heavy on prescribed solutions but not necessarily on asking questions. And one of the things I think that Postman did, at least in one of the interviews that I saw, the interviewer tasked him with like, "Okay, well, you seem to diagnose a pretty good problem here, but what have you got?"And he came up with a series of questions and I thought it was very Socratic of him where he sat back and said, "Well, I think for a start, we need to be sensitive to the kinds of questions that these new technologies ask of us." For example, who benefits from this particular medium, this new medium of communication, for example? Is it the community? Is it society as a whole? Is it a small group of people who are, excuse me, who are the owners? What problem does this technology solve is another question that he had, and he used the example where he had just been to buy, this will date the interview a little bit, but a brand new Honda Accord when he bought it at 295 and he said the salesperson there at the car yard was upselling him to cruise control.Chris Mayer:I remember this interview, yeah.Joel Bowman:So what problem does cruise control address? And the salesman was like, "I've never had that asked to me before, but I guess the problem is just keeping your foot on the gas." Of course, Postman's response was, "Well, I've been driving for, whatever, 45 years used now and that hasn't presented itself as a problem thus far." So anyway, just the framework of asking questions-Chris Mayer:Yes, that's one of the very memorable bits. I remember that interview because I remember that exact example. And I often think about that. When I get a new technology, oh, what solutions does this solve exactly? What problem does it solve? And it's like you almost read the book because the way he ends Amusing Ourselves to Death is with a whole series of questions. Again, because he's ... But he says there's a good reason for that in the end.Chris Mayer:I like this line where he says, "To ask the question is to break the spell." So you get hypnotized by this new medium or new technologies. But if you just ask the question, immediately, you are less under that influence and at least you're thinking about different ways it's impacting yourself and what you can say, what other people are saying, why they're saying it, things like who benefits. There's a lot of questions you can ask. And it diffuses it a little, its influence. Same thing if you see a persuasive piece of advertising, you know what's going on.Joel Bowman:Right.Chris Mayer:If buying doesn’t make you sell, I want you to buy something. Just knowing that helps break the spell a little bit, right? Not always because sometimes things are so subconsciously influential. You can't really do anything about it. I've noticed that at least with myself sometimes, too. Damn it, they planted this idea in your head. Almost like I want to not see certain advertising. So I don't even want to see it because it's like magic and it pushes little buttons in your subconscious. So, yeah, that's your best route of resistance is to ask the questions.Joel Bowman:Yeah, it's a so what do you think of the emperor's new clothes type of question.Chris Mayer:Yeah.Joel Bowman:Well, actually, now that you've mentioned it, he does look a little naked over there.Chris Mayer:Yeah, it is. Postman's books are really easy to read. And this book is like, is it 200 pages long, it's 160 pages. And all of his books are like that. They're short. They're like sub 200. And they're very easy to read, quotable, witty. And they're only dated by the examples, like you said. He'll make references of things going on in Nicaragua or President Reagan. But if you didn't have those examples, it's really applicable.And he is a really good translator for Marshall McLuhan because he was really influenced by McLuhan. And McLuhan stuff is much more difficult and harder to read. I mean, I have this one here at Marshall McLuhan, Understanding Media, which is a classic. I mean, this book came out, I think, in the '60s. But a lot of the ideas Postman has come out of McLuhan. And this book is big, fat book and a dense book. But if you wanted to go into where this stuff came from, you could go to McLuhan.And there's one part in here, for example, because Postman is big on this too, like I mentioned, he's big into the medium and thinking about, "Well, what its effects are," really what its purpose is, the old Greek word like teleology. It has an almost inbuilt purpose, even though you may not know it. And McLuhan has this one chapter, where he talks about how we're all asleep and we don't necessarily think about what we're saying. For example, he's responding to a general says that, "We're too prone to make technological instruments the scapegoats for the sins of those who wield them."And Marshall McLuhan is saying, "That's ridiculous." And at first, I remember when I read that quote, I was like, "Makes sense to me," right? Technology, it's how people use it. And McLuhan is saying, "No, that's ridiculous." He goes, "Let me consider this. Suppose we were to say apple pie in itself is neither good or bad, it's the way it's used that determines its value. Or the smallpox virus isn't itself neither good or bad, it's the way it's used that determines its value. Or again, firearms are in themselves neither good or bad, it's the way they're used that determines its value. That is, if the slugs reached the right people, firearms are good.If TV too fires the right ammunition at the right people, it is good. I am not being perverse," he says. So I love that style because it makes you think, it makes you think about stuff. That's why it's such a great book.

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Joel Bowman:He goes all the way back to the agrarian revolution and the advent of the written word. And then all the way through to ... I guess Postman was probably influenced by his idea of the reading public, for example.Chris Mayer:Yeah. The trivium, McLuhan's big on that, the basic building blocks of knowledge. Yeah. And he was a big fan of James Joyce. And, yeah, the ancient Greeks. Yeah, he's challenging to read. But I think ... It took me two months to get to that book and I would just read a little bit every day. But lots of thoughtful stuff in there.Joel Bowman:That's interesting. It brings up another point as well. And as a card-carrying Joyce Head, who's about to head off to Dublin for the centennial balloons day celebration this June 16th. Yeah. Write me if you're going to be there and we'll grab a beer with the other freaks and geeks doing the balloon walk is this idea of attention span. And you mentioned this McLuhan's dense and rewarding book if you can put a couple of months into it. And obviously, Ulysses is notoriously a century on. And we're still unpacking all the different layers there.I'm wondering, to go back to Postman's questioning the nature of the medium itself as opposed to just the information that it's delivering, how you think these new mediums have affected both the individual and society in general's attention span. And how much we can pay attention to ... I mean, we have a look at these news cycles, they seem to just be getting increasingly shorter, where you need to, as you say, have an opinion on the history of Eastern European geopolitics. One week, you need to be a vaccinologist. The next week, you need to be a critical race theorist. The next week, you need to know all these things.I mean, how are these new mediums affecting our ability to be modern polymaths?Chris Mayer:Yes. Yeah, I agree. I mean, society in general, we become very impatient people with what we read. I mean, there's that little acronym people throw around, TLDR, too long, didn't read.Joel Bowman:Oh, right.Chris Mayer:And that's sad to me. People put that out. Yeah. And they put it out there like they're smart or being witty somehow but summarizing some longer argument in a soundbite. But, yeah, I mean, that's exactly right. A lot of the books in my library, you're not going to find the quick New York Times bestseller. A lot of these books, they take time to get through, but that's the rewarding part of it is to spend a couple of months with one book, an author, an idea and going through it.I mean, it seems like that's really becoming something that fewer and fewer people are interested in, right? I mean, like you say, it's a death of long-form journalism is another area where you see that. Everything has to be compressed and served up so somebody can get it in 30 seconds of lesson and be done.Joel Bowman:Yeah, even I think about this with regards to just the realm of fiction in general. Maybe have a different experience here but pretty much all ... And this seems to go very along that, this would be incredibly unpopular to say, but it seems to go very much along gender lines, where guys tend to read, older guys that I know, tend to read nonfiction and completely issued fiction have just zero patience for it, fall asleep at page three. And it seems to be only women, at least that I speak to, who have any patience for fiction and maybe that's just they have different types of patience or different types of tolerance levels, do you find that as well. It's kind of a weird observation.Chris Mayer:Yeah. I mean, one of the things I've observed too is that a lot of new books that come out, especially, I don't know, they're more topical or about investing and they're mostly nonfiction, they all tend to be around 200 pages. Almost like the publishers have drawn a line.Joel Bowman:This is the public's attention span!Chris Mayer:Yeah, it's 200 pages, substantial enough where you can still sell it as a book between 200 covers, but it's not going to put off anybody to show them this. Every once in a while, there are exceptions, right? And they become noteworthy in themselves. I remember when David Foster Wallace had Infinite Jest. Remember, that was a brick.Joel Bowman:Yeah.Chris Mayer:And David Graeber's Debt book was another big fat one that became a bestseller. So there are exceptions, but in general, a lot of these books are pretty thin.Joel Bowman:I wonder how many of those big classic tomes, if Dostoevsky or Thomas Mann rocked up with Buddenbrooks to the publisher with like-Chris Mayer:And then it comes in with Critique of Pure Reason, here you go.Joel Bowman:I'm sorry, you've got to ... Yeah, you're going to have to-Chris Mayer:We'll break that up in a series of 10.Joel Bowman:Yeah, yeah. How about we do a Netflix special and then people can binge it overnight? So do you-Chris Mayer:There's one thing you mentioned that I want to get to before I forget was you said about, you have to feel like you have an opinion about everything. In one week, you're a vaccinologist. And next week, you're an expert on recurring foreign pot. I mean, that's classic.But that reminded me of one of Postman's solutions. And it's not in any of the books we've discussed. There's another book called How to Watch the News or something like that. But in the end, he gives 10 things. And one of them is, try to reduce the number of opinions you have by a third. So it's just an interesting exercise to go through. Try it yourself just for a week. Try to ... Instead of when you see some story or some idea, try not to have an opinion about it and say, "I don't know."Joel Bowman:Yeah.Chris Mayer:It's interesting. It's almost a little liberating because every time you take an opinion, it's almost like you're staking some ground and making a commitment because then people are more reluctant to change their opinions. So if you try to withhold your opinion as long as possible and limit the number of opinions you have, it's interesting psychological effect, just trying it out.Joel Bowman:I could see how that could have a cascading effect as well in an increasingly bifurcated society, where if you voice a particular opinion on one issue, it almost hems you in with regards to a whole litany of other issues that might have absolutely nothing to do with the original issue at hand. I mean ... Chris Mayer:Absolutely.Joel Bowman:... things that are completely independent like, "Oh, you believe in global warming, okay, you have to wear masks during a pandemic outside playing golf." Just things that have nothing to do with one another, but we have to be Team Red or Team Blue.Chris Mayer:Yeah, exactly. What, do you believe in climate warming? Well, Trump was a good president. What do you mean? How are those two related?Joel Bowman:Right.Chris Mayer:Everything's politicized or whatever. That's another reason why they resist labels. That's another exercise is just resist labeling yourself, resist taking on any label because, again, that hems you in. Suddenly, you think yourself as a X. And there's some internal pressure to believe everything that an X believes or whatever. And it makes you take sides just based on a label rather than reasoning your way through the issues.Joel Bowman:So do you think that there's a takeaway or some applicable lesson to be drawn as an investor? I mean, in definitely multiple senses, if you're the one guy who's going to sit through and read the big dense tomes and not just skim the executive summary, does that give you an edge, or?Chris Mayer:Yeah, I think there's always an edge for the patient, who are willing to read the footnotes, as the old saying goes. But it's tough because if everyone else thinks the other way, in the short term, you can look pretty dumb. And you can look pretty dumb for a while. I mean, it could go on for months or you may not get validation for a year or several years.So it requires patience to go through that but also patience to then suffer when things aren't going your way for a while. I see it all the time. Some report will come out on some company and I'll know that it's sensationalist and not particularly true in certain areas, but it'll still not stock down from 10% or 15%. And then it may not recover for months until it cycles through. And for those of us who are professional investors and live on reported returns, it can be difficult. Well, just hang on, it's coming.Joel Bowman:Right. I guess it must happen the other way, too. Yeah, go on.Chris Mayer:Yeah. Otherwise helps too, I was talking about labels. I mean, people will label certain companies in certain ways because they want you to think about it in a certain way. But you get past the label. So for example, I don't know, let's take a random example, people that are being on Tesla will want you to think of Tesla as a technology company in some way or is a battery company, where people who are not so enamored with Tesla folks and say, "Well, no, it's a car company." And they look at it through that lens.And so you come through very different points of view, depending on what label you adapt. And that happens all the time as well.Joel Bowman:And I guess it must go the other way as well when something flashes across the news and new technology and something shoots to the moon. And you might be sitting there saying, "Actually, this thing, it doesn't have any earnings. It's got no growth. It's got no pathway to profitability." But you're watching a mania unfold.Chris Mayer:That's probably actually more common because I've been in volatile markets close to 30 years and I've seen that happen many times to me, where I'll be sitting and these companies will be flying and I won't be involved in any of them, but it takes time and then they unravel. So you see companies like Carvana didn't make any money but has a concept that got people excited and went to the moon. And now it's starting to finally come apart. There's a lot of other businesses like that that don't make any money. But they had a concept.And what I've seen people do, and particularly younger investors will do, I mean younger than me, they'll focus on things that I thought they'll talk about unit economics. So they'll say, I don't know, I don't want to use too many specific name companies, but let's say Company X, they sell something. And the unit economics of what they sell is really compelling. But the company overall is still not making any money because the operating expenses and everything below that line is high and it continues to grow. But they say, "Oh, when it scales." And then they do these projections based on unit economics.And what happens a lot is those businesses never get to that scale or they continue to grow, but the operating expenses continue to grow right along with it, and they never quite get there. And so I have this basic rule that I want companies to make a GAAP profit, a profit according to generally accepted accounting principles. And if you just have that filter alone, I know you would have avoided a lot of the trouble over the last six to nine months, where these companies have fallen 70%, 80%, 90%. Didn't make any money, but for a little while, they were darlings.Joel Bowman:Yeah, it's interesting. I spoke to our mutual friend, Mr. Eric Fry, last week. And I asked him if there was a couple of key takeaways that he could give to our listeners with regards to investing and when you're getting all this noise to talk again about the Postman idea of this saturation, this glut of information, how to cut through that noise in just a couple of basic starting filters that investors can use.And he said at the margin, you can cut out a lot of noise by just looking at earnings as a company outgrowing earnings. And he said, "It sounds almost facile, but it's ignored by a lot of people because they focus on crafty accounting." And Eric referred to it as accounting wizardry where, well, it's earnings but it's adjusted for this, or all these other adjustments that the accounting department makes that can hide a lot of a company's lack of earnings or lack of earnings growth.And then one of your favorite indicators, of course, was insider buying or selling. And at the margin, you're not going to be right all the time but those two things can help cut out a lot of the information or the glut of information that is maybe not as worthwhile as others would have one believe.Chris Mayer:Yeah, I would say overwhelmingly, for most investors probably, almost everyone is listening to us, just following the companies that make a profit. Just that filter alone. Now, we have to be fair, you're going to miss sometimes a great business. I mean, Amazon didn't report a GAAP profit for quite a while, right? So you're going to have to ... I wrote a blog post about this not too long ago, that every filter you create is going to have fish slipped through the net. I mean, that's the nature of it, you're not going to catch everything.But the idea of having a filter as an investor is to cut down on that universe because if you're looking globally, as I do, there's tens, thousands security. So you have to find some way to look at that world. And for me, yeah, profit. The other way to do it is inside ownership that cuts out a lot of stuff. I'm only investing in companies where there's a family or there's a CEO or somebody owns a decent slug of stock.The other thing that you always use is balance sheet, just looking at anything that's got a lot of debt out. So if you just sift by that, suddenly, the stuff that falls through is worth taking a look at, usually. And doesn't mean, of course, that there isn't some debt-fueled company that has no insider ownership that's going to be a 10 bagger. Of course, I'm going to miss that.Joel Bowman:Right.Chris Mayer:But that's the nature of filters.Joel Bowman:And I guess it imposes whether you're looking at information just in general from the media. It could be political information or entertainment information or whatever the news cycle is, or information that informs your investing. If you employ some of these tools, then it can impose a lot of self-discipline on you, when you're just focused on a smaller universe, as you say.Chris Mayer:It does. And then the other question, I take a very hard pragmatic approach when it comes to trying to sift through news and economic reports is I always ask myself, "Well, what would be the consequence of taking a belief here either way? Would it matter?"Joel Bowman:Taking a kind of agnostic approach from the outset, yeah.Chris Mayer:Yeah. Yeah. I mean, it was a mix ... Should I spent a lot of time figuring out the Russia-Ukraine thing? What practical difference would it make to me to take one side or the other? Or just lots of political questions or that way. And it helps you conserve your mental energy and your focus.Chris Mayer:There's another saying I like, where it's ... I don't know who first said it, but it's you are what you pay attention to. So you think about that, you are what you pay attention to. So if you pay attention a lot of this trivial nonsense all the time, that's who you are, that's who you become. Do you want to be that? Feed your mind good stuff. Pay attention to things that have some consequence that matter.Joel Bowman:Yeah. I think virtue is the habits that we undertake every day.Chris Mayer:Yeah.Joel Bowman:And it can be a bit of a spiral. I mean, I think we've probably, all listeners included, been around people who are so caught up in the whirlwind of Postman's information glut and this rapidly constricting news cycle that it's pretty easy to get yourself overheated. I mean, just from like a mental health standpoint, it's pretty easy to get yourself overheated on things that, well, are you going to become an expert in this in the next day or weeks? Shouldn't you focus on things that are, that old Voltaire quote, of tending your own garden that we have other things to do.Chris Mayer:There's a lot of wisdom like that. Girth is about sweeping your own doorstep.Joel Bowman:Sweeping your own doorstep, yeah. There you go.Chris Mayer:Wise people. But it gets to the title of his book, Amusing Ourselves to Death. So much of this is really entertainment. I mean, what we call news is entertainment. It's packaged that way. It's meant to elicit a reaction. And if you allow yourself, you're just letting them tug in control of you. So, yeah, I think that's a good message out of that.Joel Bowman:And so just changing tack slightly, what do you think of Twitter as a tool? I mean, we've talked about the drawbacks and the potential detrimental effects. I know a lot of people who see it as a tool to be able to cut through other information because they're able to focus on maybe a few investors that they like, and they follow, and it's kind of real-time.Chris Mayer:Yeah, I have a love and hate relationship with Twitter, really, because on the one hand, I've met some interesting people through Twitter. That has been valuable. There's been research that has been exchanged over Twitter. That's been valuable. I've got, I don't know, over 30,000 followers. So from a business perspective, it brings attention. I know at least a couple of investors have found me through Twitter. So it's not of no value, but then I am very mindful of the downside, too. So there are ways that I manage it. I'm only on it for certain times. So I'll go and try and tweak some things.I like to joke with my friends and say, "My Twitter account is a one-way feed." I put stuff out but I'm not going to engage anybody. Don't be offended if I don't see your tweet, I don't favorite you and retweet you. I don't do it for anybody. I don't pay favorite and tweet. I have lots of people I follow. It seems almost like a courtesy and they follow you. "Okay, I'll follow you." But I don't get into it that much because it's an enormous time sink otherwise.And you find yourself just ... I've had this early on when I was on Twitter, you're there for 45 minutes and then you're done. You're like, "Well, what did I do?" It's like junk food for the brain. What did I really get out of it? Yeah. So I tried to manage it. I limit myself.And the other things I've learned too, and this was earlier on, I used to talk much more about positions. But then I found that was a negative to do that because then people start to think of you as the guy for that position and then they want to come and ask you everything, every twist and turn. You got to be the guy who narrates it for people. And again, it may affect me in ways I don't really appreciate, forced me to dig in on a name that otherwise if all these people didn't know I owned it, they'd be gone or whatever.So I've limited that as well. I have discussed some names, times, but I don't give people the running commentary of what I'm doing or any of that anymore. So there are ways to manage it. Yeah.Joel Bowman:If they want the running commentary of what you're doing, they can follow your blog and I'll give you a plug, Chris, at woodlockhousefamilycapital.com for our listeners who want to find out more about your work.Chris Mayer:There you go. Thank you. You Google that and you'll find it. I write an occasional blog and then my Twitter which I do occasionally. The other annoying thing about Twitter is I keep getting these impostor accounts.Joel Bowman:Oh, really?Chris Mayer:It's crazy.Joel Bowman:Do you have the real Chris Mayer or something like that? What's your handle so people can avoid those?Chris Mayer:No, I tried Twitter. I tried to get verified a couple of times and they keep rejecting me. I think I'm just not quite famous enough or something.Joel Bowman:Oh, okay.Chris Mayer:But it's terrible because people will come up with a Twitter page, it looks exactly like mine. My handle is chriswmayer. They'll change it by some minor way. It'd be chrisi or they have two i's in or an x or something like that. But they make the page otherwise look exactly like mine and they tweet the same thing. And then they use it to sell some garbage.Most of the time, I've caught them pretty early and they don't have very many followers. But there was one that I just found, people were telling me about, has more followers than my real account. It's pretty embarrassing.Joel Bowman:Wow. Well, maybe you'll get the Fatal Conceits podcast bump and that will get you up to blue check status.Chris Mayer:There you go. That's it. I need that blue checkmark. I mean, there are other investors I know, they have blue checkmarks. And they're not particularly any more famous than I am. I mean, within investing, they're known, but they're not really that well known outside that world and they have blue checkmark. So I don't know what they did.Joel Bowman:Well, we'll probably have a whole other discussion on just the elitism that goes on within the new communication technology platforms. But one, you're talking about Twitter being a one-way relationship for you then and it reminded me of one quote of Postman's, which I wanted to get in. And this is another one of the questions that he routinely asks in order to frame the discussion you see. It's constantly going on in his own head. And it's as simple as, am I using this technology or is it using me? I think that cuts to the heart of the matter.Chris Mayer:I like that one. That's really good. That's really, really good.Joel Bowman:Right.Chris Mayer:Yeah. Yeah, the irony is I'll put that on Twitter.Joel Bowman:But in a one-way relationship.Chris Mayer:There you go.Joel Bowman:All right, Chris, that's probably a pretty good place to leave it for this one, mate. Thank you as always for sharing your insights. You've recommended so many good books to me over the years...Chris Mayer:Well, that's good. I'm glad you like Postman and, clearly, you've read quite a bit of stuff because you were spot on the whole time. Yeah.Joel Bowman:I'll put a link to a few of his books underneath because hopefully our listeners can get something out of them as well.Chris Mayer:And another one, Technopoly, I think it is. Those are the two that I would really recommend. Very good. And then after that, you can find your way to his other books as you're interested in different topics.

[Ed. Note: Find these two books here…Amusing Ourselves to Death: Public Discourse in the Age of Show BusinessTechnopoly: The Surrender of Culture to TechnologyJoel Bowman:Perfect. Chris Mayer, Woodlock House Family Capital fund, check it out. And chriswmayer, don't be taken in by the impostors on Twitter. And for our listeners, please head over to our Substack, which is at bonnerprivateresearch.substack.com, where you can find plenty more material, including conversations just like this one. That's all. Catch you next week.

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“Wall Street focuses on earnings or quarterly earnings per share, adjusted earnings, adjusted EBITDA. All this garbage. And it's garbage because it's all adjusted and it's all in the hands of the wizards called CFOs, chief financial officers, and their departments. It's wizardry, it's not accounting.”

~ Eric Fry, editor of Fry’s Investment Report and The Speculator

TRANSCRIPT:

Joel Bowman:Welcome to another episode of the Fatal Conceits podcast, a show about money, markets, mobs and manias. I'm your host, Joel Bowman, bringing you today's episode from down here in Buenos Aires in Argentina. Before we get into today's show, a quick reminder to long time listeners and newcomers alike, if you like what you hear during these conversations don't forget to head over to our Substack page, which is at bonnerprivateresearch.substack.com. There you can find hundreds of irreverent articles on everything from high finance to lowly politics and plenty more besides. You'll also see special reports, webinars with Bill's private network of analysts and writers from around the world, and of course plenty more Fatal Conceits podcasts just like this one. On that note, I'm joined by a long time friend and also a dear friend of the Bonner Private Research family today, Mr. Eric Fry. Thanks for joining us. Eric Fry:Hello Joel, welcome to be here. Joel Bowman:Yeah. Whereabouts are you by the way? I know you're in California but you kind of dash up and down the coast there. Eric Fry:I am at the moment near the Russian River. Joel Bowman:Russian River. The other Russian River. Eric Fry:Takes on new meaning. Russian River so named because it was founded in a way by Russians, Russian fur traders back in the late 1700s. Joel Bowman:Oh I didn't know that. Eric Fry:They came as far south as this area from Alaska to hunt sea otters. Joel Bowman:And this I'm imagining is what, 100 years or more before it became better known for its delicious grape varietals that now populate the hillsides? Eric Fry:Yes. Although, interestingly, in the local graveyard here there are a number of Russian orthodox graves and they date back over 100 years. So there's still a small Russian influence here. Fort Ross is close by and at the outbreak of the Ukrainian invasion, one particular Russian lawmaker demanded that we return Fort Ross to the Russians, which I thought was interesting. Fort Ross is not really a fort, it's just a little place on the pacific. Joel Bowman:Well, I guess in a pinch you need all the forts and frontlines you can get maybe. Eric Fry:The only thing that Fort Ross has now is access to abalone beds. That's about it. Joel Bowman:Oh, okay. Well, I was going to... I hope I'm not betraying any confidence here but I did want to let our dear listeners know that on a private conversation you and I had a couple of weeks ago when we were teeing this up, I don't know if you remember this but I put three questions to you. One was do you listen to podcasts, the second was do you have any interest whatsoever in the world of ever being on a podcast, and then the third was would you like pretty please to appear on the Fatal Conceits podcast. To which you promptly replied no, no, and yes. So just to underscore my gratitude. Eric Fry:Actually it was no, no and I guess so. Joel Bowman:No, no, and okay if I have to. Yeah, exactly. So Eric... Go ahead. Eric Fry:My wife is an avid podcast aficionado, so she'll listen to it. Joel Bowman:Oh okay. Well, that'll be one of the three of us who will listen to it then, so that's good. So just for readers and I guess listeners now who I think many of whom would be familiar with your work over the years, particularly the last couple of decades, do you want to just set the scene a little bit, a bit of a Fry origin story, how first of all you came to the investment world up in Wall Street, and then in particular how you got to know Bill and to come and work on The Daily Reckoning and all that?

Eric Fry:We'll make this very brief because as you well know, my least favorite topic is me. So we're going to rip through this. Went to UCLA, worked in restaurants for a long time, managed the Hard Rock Café in West Hollywood for a while. Eventually self published a financial newsletter and that little seed germinated and became a much larger venture, morphed into full on financial research and institutional research. I moved to New York, produced institutional research there, and that is... So I work with an individual named Jim Grant, who I absolutely idolize, brilliant financial mind, writer. And Bill Bonner was and is a reader of Jim Grant's, and Bill discovered me as it were toiling with Grant. And so he and I began... He hired me, began collaborating on The Daily Reckoning, and have been producing some form of institutional or individual investment research ever since. Including now. Joel Bowman:Right, so I'm just thinking back to those Halcion days at the beginning of the turn of the millennium. And I think it was a few years, maybe 2003, 2004 when you came over to work with Bill. Is that about right? Eric Fry:It was 2001. Joel Bowman:2001, okay. So I wanted to get into this because it was just after Bill had released his then novel idea of this kind of trade of the decade, which of course you'll recall, and I think many of our readers will recall too. If for nothing else that it was a very contrarian play at the time, the trade, a simple pear trade of course was buy gold, sell US equities. Gold had been in an infamous... Pardon the traffic outside my office window here, this is a little South American capital ambiance sound for our listeners. But gold had been in a bear market for a couple of decades, stocks were high flying and nothing but blue sky ahead of them. Part of your role over that first decade, and you and I wrote together for a good portion of that, was both tracking that, analyzing that, and also explaining a lot of the underlying philosophy behind that to our readers, both at The Daily Reckoning and The Rude Awakening. I'm wondering if the idea of a contrarian mindset for you as an investor, I won't ask about it as an individual, but as an investor is a kind of comfortable place for you to hang out intellectually or if it's something that you have to cultivate actively and consciously? Eric Fry:No, it's quite comfortable, but I'll go back first to the trade of the decade from 2001. So it became my trade of the decade by proxy since Bill had already introduced it before I started working with him. But it was a theme that I had already been pursuing and highlighting since '98, '99, 2000 when I was producing the previous institutional research. And I had made recommendations from that era that were gold focused and then more broadly commodity focused that produced some pretty brilliant results during a fairly dead decade. I mean, it was literally a lost decade for stocks. The S&P 500 produced a total return of zero during the early 2000s, the first decade of the 2000s. Whereas gold itself went up about 400% and many, many gold and commodity related stocks produced 1000%+ returns. So those investment ideas came out of a contrarian perspective per se. I don't really like the word contrarian because it's kind of a loaded word. I mean, a contrarian is sort of like... it feels synonymous with like a curmudgeon, like hates the world and hates whatever's working. It's sort of like you're an Aussie and you're younger than I am, so you probably aren't as familiar with The Addams Family, the TV series sitcom from the '60s, but Morticia Addams used to walk around the house cutting the heads off of roses. That was how she kept the house in proper form. So a contrarian feels kind of like that to a lot of people. So I'm not that kind of contrarian. It's rather, really looking for opportunities that provide the best risk/reward setup. And a lot of times, so where you have... We call them asymmetrical trades or imbalanced trades. Situations where the upside is significant, downside probably pretty limited. So oftentimes you're going to find those kind of trades in areas where most people aren't looking, or most people don't want to look. And if you go back to the era when I joined Bill, we were... That was the very first infamous tech stock boom, and it had just busted. The dot com era of the late 2000s. But the tech stock mindset was still all the rage. Everybody wanted to buy these beaten down tech stocks but they just kept getting hammered and hammered and hammered even more, where the real trade you wanted to be in was not that, not then. You wanted to be in other sectors, not just commodities but some of the insurance plays. There were different sectors of the economy that produced some great stocks. So coming, fast forward to the present, I guess about four years ago was making a number of recommendations in renewable energy, in particular in solar. And the way I discussion these ideas now is I apologize for them. I say I'm sorry for them.

[Ed. Note: Learn more about Fry’s Investment Report right here]Joel Bowman:Apologize in advance and get out ahead of the trends, right? Eric Fry:Yes, I apologize in advance. I'm sorry I'm recommending this. In the case of solar, so talk about solar today is a very different idea. When I was recommending solar stocks four or five years ago, I literally introduced them by saying this has been probably one of the worst industries to ever emerge in the history of capitalism. It has done nothing but impoverish investors for decades. So there's no automatic reason why the current moment should be different, except that it was different. The economics were changing, the demand structure was changing. Demand was ramping up at an exponential rate while prices were falling. So you didn't necessarily want to buy a solar panel producer but you did want to buy a company like nPhase, which I recommended and has gone up over 1000%. So different moments call for different sort of contrarian views but it's really not contrarian as much as it is just trying to find the opportunity that is mostly ignored. Joel Bowman:Right. And I guess that kind of brings us, you mentioned these big cycles, and I want to just put something of a neologism on the menu for our listeners. It was, I think, probably about four years ago, correct me if I'm wrong here, but about four years ago when you and your publisher CEO Brian Hunt coined the term technochasm, or maybe that was a little more recently. But I remember this kind of represented, because I remember in that first decade everything as you said, it was all about quote unquote "boring opportunities" over in the ag sector and the barbarous relic of big gold and whatnot. To see you developing this theory or identifying this big sort of primary trend with Brian was very interesting because it was almost as if the cycle had come sort of full turn and you had identified at maybe a point of maximum pessimism for growth stocks, a beginning of a very rewarding time for your readers. Eric Fry:Right. The technochasm idea is 100% Brian Hunt's, he came up with the term and the structure behind the phenomenon. And it's really, simply stated it is both economic... it's socioeconomic, it's both sociological and it is economic. So the idea being that folks on the right side of technology innovation and development will prosper, those on the wrong side will not. Both from an investment standpoint and from a sociological standpoint from your own lifestyle standpoint. So that is a great big theme that persists to this day, and dictates a large number of winners and losers. So there are entire industries that are on the wrong side of technochasm and are essentially on life support. They may look fairly robust and they behave in a “robusty” way. Joel Bowman:Another neologism. Eric Fry:Yes. Unless they adapt they'll perish. On the other side are the innovators. Unlike a lot of tech stock investors, I'm an investor in technology stocks of certain types when the time is right. I'm not a tech stock investor. But a lot of tech stock investors will buy the story, they'll buy the innovative, cool idea without paying much attention to the size of the total addressable market, the competition, see the likelihood that this new technology itself is uniquely vulnerable to obsolescence. So once you dive into any powerful trend like that one, there's a lot of digging to do to get to the true diamonds, the companies that really have some, as Warren Buffett would put it, a true competitive moat, or at least a good shot at it. And are operating in industries that have a very long runway of growth and then have a very large addressable market. So it's pretty easy to find things you don't like. It's much harder to find companies that really have a shot, to find the next Amazon, the next Netflix or whatever. Joel Bowman:Right. And so I guess this goes to you mentioned a few of the things you look for, investible moats or imminent obsolescence would be a couple of the high vis indicators one way or another. Maybe are there any other processes that you go through when screening for individual companies, like I'm just interested in the process that takes you from identifying this big primary trend which may carry out for a decade or even longer, and then getting to the point where you say okay, here is a ticker symbol, here is a price that I'm comfortable with, here's when I'm going to pull the trigger at and here's my short medium term strategy. Eric Fry:Okay, well a couple questions are buried in that question. The first one is more on a podcast like this or at conferences or whatever, individual investors, all individuals want something to hang their hat on. What's a thing that you do that I can also do? It took me a very, very, very long time to get to a helpful answer but I have one. Part of it is that if you are aware of complexity, and financial markets are complex. You're not solving for just a single variable, you're solving for multiple variables. And some of those variables are sociological, just the mood of the market. It's not just raw numbers. Obviously there's an art aspect of this. But if you're aware of a lot of variables and you're aware of complexity it's hard to pull back and say okay, how do I make it less complex? What's the thing that really matters here? There are two things that really matter for any investment. One, are sales rising? That's one. Two, are insiders buying or selling? So I could not know anything about a balance sheet except... I could know zero about a balance sheet. I could know nothing about an income statement except the top line, which is revenue. The very first number you see. And knowing that, and then looking up where you have to look up the data, are insiders buying or selling, I have a pretty good idea at the extremes, something that a company that's compelling and I have a pretty good idea of a company that's not compelling. So there is no... Wall Street focuses on earnings or quarterly earnings per share, adjusted earnings, adjusted EBITDA. All this garbage. And it's garbage because it's all adjusted and it's all in the hands of the wizards called CFOs, chief financial officers, and their departments. It's wizardry, it's not accounting. So if you like wizards then watch Harry Potter, but if you want to make some money on the market, pay attention to revenue, sales. So there is no such thing, does not exist. Never in the history of the planet has a company produced long-term growth and rewards for its shareholder by shrinking its revenues. Sporadically you can have trades in anything, but the long-term success stories are success stories of revenue up, revenue up, revenue up. So that's the first one. It may seem so obvious that it's kind of moronic, but it's not because many companies, especially in firm companies, will report rising earnings sometimes while their revenues are falling because they're squeezing costs or they paid back debt or whatever. But it's the earnings that matter. Then insider buying and selling. That's a soft metric, it's not something you can really super hard rely on but you can rely on the extremes. If you have fairly heavy insider buying that means something. If you have fairly heavy insider selling that means something. In the middle, not so much. But again, if you want the best opportunities, look at what insiders are buying and when revenues are going up. Period. That means they know something big's coming out of their market, they know, they have an edge. And they're not going to be loading up on their stock if they think they don't have an edge.

[Ed. Note: Learn more Eric Fry’s The Speculator research service, right here]Joel Bowman:Right. We had Chris Mayer on this show, a good mutual friend of ours obviously, and he's very big on the behavior and the psychology of the insiders. Presuming of course that they have some finger to the wind with regards to their own particular market. And obviously it's kind of do what I do, not what I say with regards to what they put in their own money. Eric Fry:Again, I'm talking about just two things that any investor can look at to start the process. Obviously there are many, many nuances to this analysis, and ultimately earnings matter, profit margins matter, all those things matter. No question about it. But if I only look at those two things, I'm rarely going to go way wrong. One of the more interesting ones from the short side, I have done and still do a lot of short selling, is if you find situations where insiders are not buying. Maybe they're not selling but they're not buying and the company is borrowing money to buy back stock, that's a sell. That company is a sell. It happens all the time. It's like okay, so if the stock isn't good enough for them to buy with personal money, they're going to keep a liability on a shareholder and buy the stock on their behalf, stock they themselves won't touch. So that's fascinating. Joel Bowman:Yeah, and I guess if you were tracking particular companies and you were looking at habits or trends of buying and you saw habitual monthly, quarterly, whatever insiders loading up and then all of a sudden radio silence, that would probably be a bit of a red flag there as well. So to back up to this idea of the technochasms and just to bring listeners more fully into it, you went out to Atherton, which is maybe not many people know, routinely ranked as the richest zip code in the States. And just to get back to that sociological data point that you mentioned before, that particular zip code is located near some very not well off zip codes within a nine iron from the 20, 30 million dollar houses. Do you want to just sort of contextualize that a little bit, because while I think people kind of intuitively understand like oh okay, yes, if you're Elon Musk and you have a few billion lying around for Twitter or to invest in Tesla or start these things up, that's one thing, but it's a bigger wedge societally as well that I think people, even non-investors would do well to be aware of.

Eric Fry:Yeah, so not far from Atherton is a town called East Palo Alto, and it's very poor. There are a lot of... It isn't a classic... East Palo Alto is... Well, parts of it... There are homeless encampments everywhere, and there are homeless encampments in Palo Alto, but it is not... that's not what it's about essentially, it's just a poor place. Especially alongside places like Atherton. So in one of the elementary schools in Southeast Palo Alto, more than half the kids are homeless. They actually go home to a trailer or a tent or whatever. Not only is it right next door to Atherton, but while we were there filming and talking to people, you can look a mile away is Facebook headquarters. It's right there. And in fact, to their credit the Zuckerbergs are building an elementary school in East Palo Alto. So there's that. But it's just this incredible juxtaposition of really extreme wealth. The wealthiest zip code in the United States, next to one of the poorest zip codes in the United States. The wealth that's in Atherton and obviously up and down Silicon Valley is technology wealth, it's tech wealth, they're on the right side of the technochasm. And the people on the other side, that's folks who isn't necessarily made any wrong decisions, it's just that's where they are. They clean houses or they work in some service industry of some type. Maybe they're running a successful gardening operation, business, but it's not a business that can grow exponentially through the benefit of technology. So the message is not like hey, don't be poor, be rich. The message was to the extent that you have an opportunity, be aware that technology can grow your wealth exponentially and the opposite can't. Joel Bowman:Yeah, and it does seem obviously and probably at no other time in history quite like the last 5, maybe 10 years, that that divide is increasing exponentially as the effects of being on the right side of technochasm extrapolate. Eric Fry:Yeah, the chasm is widening at an exponential rate. That word exponential is overused but it's mathematically accurate in this case. Joel Bowman:In this case, yeah. So I guess one of the questions that a lot of people are thinking about after Q1, and this kind of goes back to mapping on shorter performances for not just individual stocks but certain sectors of the market are grouped together, call them growth stocks. I know that growth and value stocks maybe sort of overused and particular equities maybe flip between one and another. But when we're looking at this big macro trend that you've identified, I guess a lot of people, they look at Q1 and they say goodness, I don't know what the NASDAQ's down year to date at the moment, something like 10%. It was obviously during March, during the March lows, more than double that down. And then of course you've got individual stocks, Netflix and Facebook that were completely routed on individual days even. I read in a recent article, a quote that I thought was very interesting from you, and this has just got to do with the various headwinds that are in the face of continued growth stocks, continued growth at the moment, and I'll just read this out to you and get your reaction, it's, "The truth is that the amount of innovation and wealth creation that's about to take place cannot be stopped," you write, "not by rising government debt, politics, border walls, inflation or rising interest rates." There's some pretty strong headwinds, but you expect, I guess, this chasm to keep widening and this trend to keep playing out. Is this a temporary pullback in your view, then? Eric Fry:Well, that comment applies only to the capitalistic phenomenon of innovation and wealth creation. It does not apply to stock price trajectory. It does not apply to where the stock market is heading. So if you are more, I guess, a student of history than I am, and as you well know there is often a wide disconnect between the pace of innovation and the success, the mantra of success, that those innovations deliver to their investors. So coming into this year we had a stock market at all time highs, based upon every single applicable valuation metric that anyone has ever used to measure stock market values. It was the highest valuation of all time, based on anything you want to talk about. So you don't hit the most extreme value ever, have it come off 20% and go, "Gee, how come these great innovations aren't producing big stock price gains for us?" It's because it already happened. You already got it. So let the pony take a breather. Feed it some hay. Just hang out and watch it for a bit. Joel Bowman:Right. Eric Fry:Stocks don't go straight up. And we saw the overall market fall 20 but we saw many individual names fall 50%, 60%, 70%. So that's a good start in terms of cleansing the air and creating a foundation for a new phase of growth in the stock market, as a broad comment. But even then, some of the stocks, it's so remarkable, even after surrendering 80% of their value, they're still trading at whatever. 100 times sales? Something that was unimaginable. Some of these numbers were unimaginable. Let alone they were at 1000 times sales, whatever they were at. So investors need to keep in mind that yeah, you don't get paid every single day. You're trying to find the best mega trend opportunities. Things that have powerful trends, big restful market, long live, and you're trying to buy stocks in those trends as well as you can. It's always going to be imperfect. And if you do that you're going to make a lot of money but maybe not tomorrow and maybe not next week. Joel Bowman:It reminds me again of... to bring up a mutual friend, Chris Mayer again, one of his more... I think his most recent book, 100 Baggers: Stocks That Have Returned 100-1 Gains and How To Find Them. He goes through the last 50 years of these mega successful stocks that have just made pot loads for investors, and it's, as you said, not a straight line. Many of these, including household names like Amazon, like Apple, have been cut in half or worse multiple times along the journey. So yeah, give the pony some hay and check in again next quarter. Eric Fry:I used to do, every once and a while in speeches, I had this little gag, I'd say, "Okay, so who wants to be a billionaire? Here's how you do it, here's how you become a billionaire. You find a stock that falls 20% every four years." It's some number, I can't remember exactly, but it's roughly like this. Falls 35% every six years and every 14 years produces a gain of zero. I mean, it goes 14 years fans or produces a gain of zero. So who wants to do that? And of course it sounds miserable. But the stock is Berkshire Hathaway. Joel Bowman:Yeah. Eric Fry:Berkshire Hathaway, I can't remember, 12, 13, 14 years producing a zero return. It had multiple 20, 30, 40% setbacks during its history.Joel Bowman:Yeah I feel like those guys did all right out of this whole sort of investing game. And that's interesting, it brings us to where I kind of wanted to get to talking about old school investing and old school tried and tested ideas. It does seem you've been writing a little bit more recently about another idea that dovetails with something that we're working on over at Bonner Private Research, and that is our trade of the decade, generally long old school energy, short the US dollar. And with all of the geopolitical backdrop, the inflationary backdrop, the fed being in the headline every other week, this is something that you've written quite a bit about lately and this strikes me as it's a little bit of a return to a cycle that has been unloved during the big run-up of EVs and whatnot and now people are cycling back to very unsexy, old oil. What was the catalyst that drove you back into the arms of the hydrocarbon sector? Eric Fry:I don't know if Bill stole my idea or if we both came up with it at the same time. I started writing about buying oil stocks in November, and to my point earlier in this podcast I had the lead sentence or paragraph for that first recommendation was I realize most folks don't want to buy an oil stock, I get it. I don't even want to recommend an oil stock. But I have to. Joel Bowman:Imagine how I feel... Eric Fry:So I recommended oil stocks. Those trades obviously have done really, really well. And I'm still in the process of recommending additional ones. To the point is it the trade of a decade, I don't know. What I know about... there's two or three things about the oil market that are fascinating and immovable. One is that it takes a very long time to bring new production online. Anywhere from if you've already got an existing shell operation, it attaches somewhere and you're just drilling a new platform, okay you can get that thing running in less than a year. But talking about discovery to production is 10 years best case, and it can be much longer. So it is the ultimate inelastic market. You can't just produce new oil if demand is there. So for a decade now, global oil companies have been under investing in new production. There's a company called Rystad that tracks it and I think the peak investment was $800 billion in exploration and production, or exploration investment globally in 2014. That number fell to 300 billion. 800 to 300. Anecdotally we know that's true from comments on dozens of conference calls from oil stock CEOs and CFOs. They are afraid to invest large sums in new production. So that's a multiyear trend that it's coming home to roost now. Our current global supply is constricted due to underinvestment for many, many years now. At the same time, the EV story, while absolutely authentic and powerful and real is widely misunderstood. Yes, EVs will take a larger share every single year from internal combustion vehicles. And yes, solar, wind, et cetera, coupled with energy storage will take a larger share of the power generation market. But, and it's a gigantic but, those activities are oil intensive.

Joel Bowman:Yeah. I've got a quote from you here in another column that you had. You write renewable energy is not oil free energy. I just kind of underlined there. And I think that's a dynamic that a lot of people miss when they're talking about solar, wind, EV, they fail to incorporate all of the very highly oil intensive processes that are involved in either manufacturing the blades for the solar panels or the mining process or the distribution process or the storage. These are high energy intensive processes, and we're not powering them by sunshine and wind at present. So we have to go through that to get there. Eric Fry:There are very few exceptions to that. The other, and probably an even more important point, this is two points. The second one is that while the EVs share of the global auto market is going to be growing year by year by year, the pie itself is growing. So the number of vehicles of any kind is going to be growing year after year after year. So that means that in absolute terms, the number of internal combustion vehicles on the road won't peak until at least 10 years from now. Obviously those are estimates, but the estimates run anywhere from 10 years out to 20 years out. It could be 2040 before internal combustion vehicle crude oil consumption peaks. No matter what EVs do. So you don't get there overnight.I mean, I think even under the most radical, aggressive assumptions about EV adoption, you're still looking at peak oil six, seven years out. I don't even think that's plausible, but okay, it's an estimate. But even if that's true, that suggests automobiles. Joel Bowman:Well, that certainly bodes well for our trade of the decade, which is doing quite well early on but-Eric Fry:That's a trade of the decade because to some great extent the supply is not entirely baked in the cake. I mean, US oil companies will try to ramp up production, everyone will try. But it's pretty much baked in the cake. In very, very round numbers the US is not capable of ramping more than a million or two barrels a day over the near term. But we're talking about a demand that would exceed that. Not in the US but globally, globally demand is probably already exceeding supply by a million or two million barrels a day, and no one else is growing production. Unless there's some addition coming out of OPEC, but I don't know where it's going to come from and we still aren't back to pre-COVID levels of demand from aviation, from trucking. In Asia, a lot of the Asian economies are still well below pre-COVID levels of crude oil consumption. So if you just return to that and then add in incremental growth, demand could be anywhere from three to six million barrels a day above supply. And that's off of a 100 million barrel a day base, so that's about what the world consumes. It could easily go to 105, 106 with supply sitting there at 101. Obviously that situation can't persist forever because you can't buy barrels that you don't have, so prices go up. Joel Bowman:Interesting that you mention 2014 as the high water mark for global investment in exploration. Obviously just happens to be... I'm sure listeners are recognizing the coincidence that that just happens to be the last peak in price of oil. It was 80 bucks, or whatever it was in 2014. So just attract sentiment and then you have whatever we've had, six, eight years of under-investment and under-capitalization in that industry, which is part of that whole thesis. What do you make of-Eric Fry:I thought it was because that's when Bitcoin launched. I figured they stopped investing in oil and gas and just bought Bitcoin then. Joel Bowman:Yeah, well Bitcoin is a highly oil intensive mining operation that needs to be supported. So I'm wondering just obviously the kind of other piece of this puzzle, which is a geopolitical piece but where we have and you've written also extensively about oil companies pulling out of Russia. At present it's not so much a big deal I think as your friend Brian Hunt said a few people in Moscow can't watch Squid Games and Netflix makes their exit, but it is a big deal when the western mages are beating a hasty exit and leaving not just decades' worth of capital intensive work and infrastructure and labor and intellectual property and whatnot behind, but also billions, tens, hundreds of billions, who knows, of oil that they won't be drilling anytime in the near future and oil that may very well not but available, at least not without significant strings attached to either the United States or various countries across the European continent who are heavily reliant on gas or oil to keep the lights on and to have their homes heated. So how much do you think that plays into... I mean, obviously a lot's been made of the quote unquote "Putin price hike" and blaming all of the inflationary pressures in the US on big bad Vlad across the way, but how much of it actually do you think does play in and how much of it, as you mentioned before, do you think was already baked in the cake, both as far as under-investment-Eric Fry:It's funny, we hadn't even mentioned Russia in the context of the oil trade of the decade.Joel Bowman:Oh yeah, that. Eric Fry:That's because when both Bill and I, apparently, conceived this idea, Russia wasn't yet the pariah it has become. So Russia definitely matters, it matters a lot to the equation. I think we, as I wrote, I think the oil market was already poised for a move to $100 a barrel and I was writing it when it was 60 a barrel. It was already poised for that move without anything happening in Ukraine or Russia. So now, maybe floor is higher, but the issue is twofold. One is that yeah, Russian oil will still come to market. Somebody will buy it at some discounted price. But those supply chains need to shift. And we've learned a little bit about what that looks like, how messy it could be and how much time it takes for supply chains to shift. So I don't know if China and India, for example, can sop up all the Russian oil that they... in lieu of buying it from somewhere else. But when you're talking about western benchmark prices, meaning Brent Crude in London and West Texas Intermediate here, WTI crude, those oil prices I'm talking about. And those prices are going to go higher because of a supply chain shift and also because of scarcity. So there's something called a Urals blend. That's Russian oil. And it used to be, meaning early this year, a spread between Urals oil and Brent oil was about a buck a barrel, like nothing. And now that spread is -25 to -30 dollars a barrel. That's how much cheaper Russian oil than world oil. So that tells you right there what's happening on the ground. There is a buyer's strike. So that's the first problem. The second problem is more serious. When western technology departs, a lot of industries struggle. So when Venezuela said, "We don't need you anymore," Venezuela's production plummeted. It didn't have the new technology, didn't have the parts, didn't have this, didn't have that. And Russia is also very reliant on western technology and western supplies to maintain both the production and the health of their fields. Joel Bowman:Human capital experts on the ground, all those companies that have since high tailed it out of there are leaving long shadows. Eric Fry:Right. And Russian production was already in decline. I mean, they were operating on aging fields in a lot of places so without the means to invest in sustaining and rejuvenating production, I think could fall fairly precipitously. Joel Bowman:And this kind of gets to this idea, I mean from another angle but this bifurcation of the global economy, whether we're talking about obviously energy is largely a catalyzing agent here, but even when we talk about financial sanctions and so forth, where it almost feels like, and I've seen a few other commentators, I'm not the first to make this point, but it does seem like there is this kind of resurgence of Cold War geopolitical bifurcation where you've referred to it, something of a similar trend, I think, as this trend toward deglobalization, where we have economies that were once open for business, open to lowering trades, lowering tariffs rather, and being more internationally cooperative, now sort of retreat back to their corner and deglobalize, essentially. What do you make of the potential ways that individuals, let's say in the United States and the west, are going to see that manifest itself in maybe just their everyday lives? And then we could talk about the markets maybe after that. Eric Fry:Yeah. Well, so I'll say this first in case Bill tries to steal this idea also. I've been writing about bubbles for almost two years. The new made in America brand and I also gave a little acronym, MNIC, it was Made in America or Not Made in China. And I have been suggesting this would become a powerful investment mega trend. I believe that as adamantly today as I did a year and a half ago. And we're seeing develop and mature and fan out across every industry. And now, with this Russian invasion and this instantaneous boycott of an entire superpower, that that just reinforces the idea of trade will deglobalize. There's going to be a messy divorce coming. For you old-timers in the crowd it will be as bad as Richard Burton and Liz Taylor. Joel Bowman:Oh, don't say it. Eric Fry:For the younger people in the crowd, let me see, give me somebody... Who had a messy divorce recently? Joel Bowman:Yeah, I'm going to be of zero help to you there. Brad Pitt and Angelina Jolie, that's as far back as I can go. Eric Fry:Kanye and Kim or something.Joel Bowman:Kanye and Kim, oh my god. Wait, are you breaking news to me right now, have they split? Eric Fry:Are they still married? Joel Bowman:Oh I have no idea. Eric Fry:Kim is with Pete Davidson, you know from Saturday Night Live. I can't keep up with these youngsters, Joel, you know that. Joel Bowman:Maybe they had a Will and Jada type arrangement where it was no exclusive or something. Maybe that's a cancelable statement, we're going to get booted off the air or slapped in the face online. Eric Fry:Anyway, so the de-globalization is something that will affect all industries. I'll give you one perfect example. So Intel, the giant American chip company, has announced a few months ago it was going to begin with an initial investment of $40 billion to build new fabs, new semiconductor foundries in Arizona, here in the US, and in Europe. And investors have been very, very nonplussed by this idea. They did all this major investment, becoming a manufacturer and blah blah blah, and why don't you just do it the way Nvidia does it? Why don't you just design the chips and outsource to Taiwan Semiconductor? It's like, huh. Taiwan Semiconductor. What is it about that name, I wonder? Joel Bowman:As a former resident of Taiwan I can...Eric Fry:Yeah. So even if, and I do assume that Taiwan will remain independent for quite some time, but even if it does, what Ukraine has showed us is that you can never be too sure. So it takes a long time to design chips into new technology. How enthusiastic are various technology companies going to be about oh yeah, we're using this chip from Nvidia that's manufactured in Taiwan. That should be fine, right? Maybe. Maybe not. So not so shockingly, about two weeks ago Nvidia said, "Huh, you know what, maybe we're going to contract with Intel to build some of our chips." For the first time ever. Build them here, or build them in the US or build them in Europe. So it isn't that the supply chain itself will automatically rupture, it's just now everyone knows about the threat. Everyone knows the risk. You can't say fool me twice. I think the pressure will be overwhelming on CEOs, nervous CEOs to de-globalize. Because if they don't, and the supply chain breaks down, even in an innocent way. If just a tsunami or something, it disrupts production somewhere. All right, well you should have known Mr. CEO that you can't build a business this way anymore, it's not how it works. So I think the pressure is pretty overwhelming to bring it home or as you said not made in China. I think it's going to be coming back to South America, North America, Europe, primarily. Joel Bowman:Yeah. It does kind of-Eric Fry:That's an opportunity. A very big one with legs. Joel Bowman:Yeah. It does kind of seem like the conversation before and after everybody knew that there was a gun at the wedding, let's say. It's the kind of thing you can't... Wanted to mention really quickly, and I'll put these links in the show notes for people who want to follow on with your work and they can go over to our Substack page again at bonnerprivateresearch.substack.com, and have a look for Fry's Investment Report, and The Speculator. And again, we'll have links to both of those in there where Eric fleshes out all of the trends, theories, macro analysis, et cetera that we've spoken about here and then in speculator drills into it a lot more with some more technical trading for those of you who are more advanced investors. But there's plenty of info over there. And Eric, I'm hoping that we get to catch up sometime in the near future now that we're returning to something like normalcy. Maybe we can hang out in the Russian River sometime soon. Eric Fry:Sounds good, sounds good. Joel Bowman:Okay, thanks Eric, great to talk to you mate. Cheers.

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“[T]here are serious problems with our money system. You can either solve them in the way governments have solved them in the past, which is inflating away the debt, which is a huge quality of life issue for people right now on fixed incomes whose costs have gone up, whose rent has gone up, whose fuel has gone up, whose energy costs, whose food. That's happening now.”

~ Dan Denning, Publisher, Bonner Private Research

TRANSCRIPT

Joel Bowman:I'm Joel Bowman for the Fatal Conceits podcast, a show about money, markets, manias, and mobs, and I'm joined by Mr. Dan Denning, who we haven't heard from for a little while, who's been hanging out up in the high plains of Laramie, Wyoming. Welcome to the show, Dan.Dan Denning:Hi, Joel. Yeah, winter's nearly over. So, I've come out from my hibernation. And I didn't see my shadow, so it's safe to come out.Joel Bowman:Right. Mate, I thought we would start just at the top here with the other subject that everybody's talking about and I don't mean Will Smith's inability to take a joke, but the 8% official, let's say, inflation rate. It's the highest that at least has been witnessed in America in the 40 years of my lifetime. But the official rate is probably, or the unofficial rate rather, is probably a bit higher, maybe considerably higher than what most people are being told. What's your read on the ground when you go to the pump and the grocery store and order your frozen steaks?Dan Denning:Yeah. Well, anecdotally prices are definitely up. I don't drive, although I recently bought a used car from one of my uncles. So, I timed that probably poorly as a contrarian, where I'm buying-Joel Bowman:Mate's rates, I hope.Dan Denning:Yeah. So, anecdotally he said the market there is still incredibly tight and it's partly because dealer inventories are low. And I don't know if that's a supply chain issue. But also part of it is that prior to the supply chain issues, if you looked at the financing in the car market for new cars, the company-owned financiers, in addition to the dealers, were offering extremely generous terms with no money down and financing for 48 months or 72 months. And we see that before in all sorts of credit booms, where it brings forward demand. And I think in the car market, it brought forward demand so that there just wasn't a lot of...Once that hit the supply chain issue, then you saw a real shortage of both used and new cars. So, prices are up. But I just talked to a friend of mine who lives in Spain, in Barcelona. And he said energy prices are through the roof over there, and food prices are up. So, I think the big picture for investors is that the Fed was poorly, poorly mistaken in all of its policy guidance about inflation. So, when it said 2% was the target, and then it was willing to let inflation overshoot until that showed up in the data, and then it did show up in the data and they ignored the data, they missed it. They missed the boat.And now the problem is, how do you get ahead of rising prices? And we can get into that later if you want, but it's not what the market thinks it is. So, nine rate rises between now and the end of the year is not going to be enough to get in front of inflation. So, the inflation will probably go higher, and it will take a higher policy rate to bring it under control, if the Fed has the stomach for that. Which they don't have the brain for it, and I don't think they have the stomach for it either.Joel Bowman:So, as part of the narrative that the Fed either willingly or unwillingly sold to the American public... I asked Bill this question up in Salta just last week and I'm wondering on your take. Were you surprised at the switch in narrative from Chairman Powell's frustration with not having been able to achieve inflation, to watching it tick over the targeted 2%, calling it transitory, then actually it's good for you, and now bizarrely in somewhat of a non sequitur, I think, to many people. Having 8% or generation high inflation positioned as the price we pay for standing shoulder to shoulder with our Ukrainian brethren? I mean, that seems a bit of a stretch, but are people buying into that or is that, do you think, a coverall for them getting away with the kind of shenanigans they wanted to get away with in the beginning?Dan Denning:I think part of it is an insular bubble mentality with policy-makers, especially at the monetary level, that they didn't see that quantitative easing itself was inflationary because they saw that it was contained to, really, a kind of antiquated back corner of the financial system about in what form reserves were held. Were they held as cash with banks or were they held as treasury bonds and were they held at the Fed or somewhere else? So, when the Fed expanded its balance sheet prior to 2020 and it was about 4.3 trillion, they said, "Well, that was fine. That didn't cause consumer price inflation. The only inflation that it caused was asset price inflation." And that seemed to be okay for one reason, because the Fed has this theory that the wealth effect, when people have more financial paper net worth, they tend to spend more money. And that actually helps get them to that 2% inflation target. They thought, "Well, that's okay. Rising stock prices produce the wealth effect, which produces 2% consumer price inflation. That's the policy." Also, it turns out that some of those Fed governors may have been front-running their own policy decisions.Joel Bowman:No, no, no.Dan Denning:So, rising stock prices were great. But then something did appear to change in 2020 when the Fed doubles its balance sheet, roughly, from 4.3 to whatever it is, 8.9 trillion now, in two years. That was inflationary because a lot of the bonds that the Fed bought was money that the government spent on the fiscal side that went directly into consumer pockets. So, this was the Paycheck Protection Program, which turned out to be riddled with fraud. This was the stimulus that was sent to people's pockets. And of course, now you're talking about the government handing out even more money to offset another policy blunder the energy market. But that did clearly turn out to be consumer price inflation, the stimulus and all of the money spent during the pandemic.And I think the mistake from an academic point of view, which is what the mentality that the Fed governors are locked in, is that they're saying, "Well, that shouldn't produce inflation. It should be fine. It's transitory," which is why they said that. Or, "It's related to interruptions in the supply chain." It didn't occur to them that inflation is a cyclical process and that once it gets underway, also as a psychological process, then something has to break the cycle, and that something is not magically lower gas prices. It's interest rates that are much higher than the rate of inflation. So, we have nominal interest rates that are barely positive right now, but in real terms are still negative. So, if inflation's at 8% and real interest rates are negative 2% and to combat inflation, real interest rates have to be three to 5% higher than the inflation rate, you're looking at real interest rates or nominal interest rates of around 12 to 14% to break the cycle of inflation.And that is clearly so unfathomable to investors and to policy-makers that they don't know what to do with it. But that's the Fed's own Taylor rule, which says where interest rates need to be to have inflation at 2%, stable prices, and full employment. And if you use that model, depending on the rate of inflation, current interest rates would have to be at least 12% and as high as 21%, depending on what you use as the rate of inflation, to break the cycle of higher prices. And so that's something we're working on right now, Tom and I, to figure out, well, is that possible? If the market were in control of interest rates, where would they be? And then obviously, what do you do with your money in that environment?You don't want to have your money in cash. You certainly don't want to have it in bonds if interest rates are headed up. So, where can you put it? So, it's a super important question for investors right now. But I think the main point is, the Fed got it wrong, massively, on inflation. And in order for it to get back ahead of the inflation story, it has to do something that it might not be willing to do politically, or might not even have support to do politically.

Joel Bowman:Right. And that reminds me of the person who's looking at the weather app on their phone saying, "Hey, it's supposed to be 80 degrees out today," while it's snowing on their head. The reality was just in such stark contrast to what their theories were telling them where they had to go. So, the two numbers that you mentioned just then 11-ish% and then maybe up to 21%. I'm assuming the differential there is based on the different methodologies used to calculate CPI from '80s, '90s, and today. I don't know when this Taylor law was first proposed, but I'm assuming it was not taking into account the way that inflation is counted for today. Is that right?Dan Denning:Yeah. So, a full explanation of how the Taylor rule is constructed is probably beyond the scope of our discussion, but it was an academic study done retroactively about really what happened in the 1970s and where the Fed went wrong in terms of containing inflation at that time, and then what Paul Volcker had to do to break the cycle of inflation. So, within the rule itself there's a couple of components. One is what the actual rate of inflation is. And that depends on how you calculate it and where it may be in a month or two from now. And the other is what they would call the difference between long term GDP growth, trend growth, and current growth. So, if there's a gap in output, then how do you get that gap back up to trend?So, there's a couple of different components. But I think for our purposes, the big component to focus on is, what is the actual rate of inflation right now? It's probably higher than 8%. And after we get the official data in from energy prices and their impact on March and April prices, it'll be higher still. And then what Taylor showed from Volcker's experience is that whatever the actual rate of inflation is, you had to add four to six percentage points of interest rates on the difference to circumvent that cycle where it just goes higher. So, you couldn't just match the policy rate with the inflation rate and say, "Okay, well, interest rates should be 9%. If inflation's at 8%, then that means savers earn 1% a year." Normally savers expect to earn between three and 4% over the rate of inflation.So, if you say the current rate of inflation is actually closer to 12% and savers demand an additional 3% on top of that plus whatever you need to break the cycle where people believe that inflation is ingrained, that's where you get that range of 16 to 21% and saying, there has to be a cushion which savers can start to make money buying government bonds, and then there has to be something on top of that that breaks the cycle. But the main point, I think, is that it doesn't come down naturally once it gets underway. And the only way it comes down is if you either let the market set interest rates, which the Fed is considering doing by not intervening in the bond market the way it has been in the last two years, or by setting the policy rate much higher.And that's the other thing that was interesting in the last couple weeks or since I spoke to you, that the big result of all this is that if the Fed continues to be so far behind the curve and gets it wrong, what you'll see, and I started writing about this a couple of years ago when I reviewed the Chicago Plan from the 1930s, is you'll see calls from the political sphere of American life to take away the Fed's control of the money and give it to either Congress or the Treasury Department. And in that regard, the Fed floated its proposal for a Central Bank digital currency. But in the last couple months since I've talked to you, someone floated a bill in Congress calling for a digital dollar that's created and managed by the US Treasury, not by the Federal Reserve.So, instead of a Central Bank digital currency, I would call it a central government digital currency. And it doesn't have any of the features of cryptocurrency. There's no distributed ledger. There's no blockchain. It's really just like an electronic credit card from the government or an application on your phone where the government debits money into your account to spend. And to me, that's the political response to the Fed's policy errors, saying, "Fine. If you guys can't control inflation or produce stable employment or full employment and stable currency, then you're failing in your dual mandate and we'll just take control of the money system from you and we'll do it ourselves." So, I think that's an issue-Joel Bowman:What could go wrong?Dan Denning:Yeah. Well, what it means is what we've said, is that there are serious problems with our money system. You can either solve them in the way governments have solved them in the past, which is inflating away the debt, which is a huge quality of life issue for people right now on fixed incomes whose costs have gone up, whose rent has gone up, whose fuel has gone up, whose energy costs, whose food. That's happened now. That's not a future thing. If you're on a fixed income and you're getting negative interest on your savings after you include inflation, your cost of living's gone up. So, the issue is, where does it end? And it ends in either a massive, further depreciation in the dollar, or it ends up in a new kind of currency. And that's why we're having conversations about Central Bank digital currency or now central government digital currency.Joel Bowman:So, let's follow that thread just a little bit further and imagine, indeed, that Congress wags its tut-tut-ing finger at the Fed and says, "You've failed in pretending to curb inflation and you've failed in pretending to safeguard full employment. Your time's up. Now, we're going to pretend to do these things on behalf of those we effect to serve." Let's imagine that, indeed, a CGDC, a central government digital currency, does indeed come into effect. Given the recent backdrop of the weaponization of foreign assets or foreign currency assets or the ease at which money or donations were confiscated, which we saw up in Canada with the whole GoFundMe debacle, what do you foresee in this kind of Orwellian in future where the government may well have the power to, for one reason or another, turn off your access to its permission-based money? I know this is something you've read and thought about a lot.Dan Denning:Yeah. I think it's on track. I should qualify it and say the bill that was introduced in Congress, it's still in committee. So, it doesn't guarantee that it's going to get out of committee. And it's not likely, I think, to get passed by either the House or certainly the Senate before the midterm elections later this year. So, what it called for is several pilot programs to be implemented within 90 days passage of the bill that would test a central government digital currency as either a debit card, which apparently they have in the military. I think it's called EagleCash. So, it's a preloaded card or it's a card that has a pin number. And the reason they want that is it's compatible with the way most people who are in the banking system now get their money.It's just a new card with a new pin number and the entity on the other side is the government, rather than a private bank. The other pilot program calls for it to be used on your phone. And they figure that between debit cards or credit cards and phones, that covers the vast majority of people who have a bank account right now. And even those who don't have a bank account, they could be brought into the financial system that way. So, as a pilot program, in theory, it's compatible with the existing financial infrastructure and architecture to test. So, it doesn't require a brand new development in technology or a lot of development time. I still think it's unlikely that it'll happen before the midterms, but to me that's not the reason to dismiss it. The reason to think is that it's going to happen eventually anyways, that it gives the Congress, whoever's in control of the Congress, a lot more control over money.So, we don't talk about it, but I'll talk about it briefly. In the budget that was recently passed, which wasn't really a budget, it was a 1.5 trillion funding bill, they reintroduced earmarks, or pork barreling as it used to be called, where Congressman or Senators could fund projects in their district that directly benefited their constituents. And it was just a wink, wink thing that if you do that, I'll let you do this. And so hundreds of billions of dollars of spending end up back in someone's congressional district because someone slipped it into the government bill.I think that when you look at the trend with this central government digital currency, it's kind of a way of earmarking spending based on a couple of things. Probably based on net worth, perhaps political party affiliation, or perhaps, in the most dystopian view, your political views as expressed on social media and as monitored by a social credit score. So, for example, at the top end, people who have most of their net worth tied up in financial assets, they're not affected by inflation. And by the way, this is why the Fed was surprised with inflation being higher than they expected, because their cost of living doesn't matter to them, you know?

Joel Bowman:Right.Dan Denning:They don't spend as much money on food and fuel. So, they just didn't notice that the way-Joel Bowman:As a percentage. Yeah.Dan Denning:Yeah. The middle class did notice it. But you've already seen with the discussions on taxing unrealized capital gains or taxing net worth, things like that, that at the top end, a central government digital currency doesn't affect you because it's not pocket money. It's not a pocketbook issue for wealthy people. It is an issue for the middle class and people who are net recipients of government benefits. And the point is for the middle class, your access to money will be controlled. On what basis we don't know. That's the issue. Will it be based on how much you should be spending or whether you're saving too much? Are you hoarding your savings? Whereas you could be doing your part to help the economy by spending more money. So, if you have more than $100,00 in savings in a FDIC insured account, they may tax those savings or impose a negative interest rate.Joel Bowman:That's unpatriotic.Dan Denning:Yeah. Or say, "Look, if you don't spend it, the money expires." And there are systems in the past where the money was timed. So, they said-Joel Bowman:Like a time decay.Dan Denning:Yeah. "Spend it or lose it." Yeah. And then the other issue with people who don't have money is to say, Hey, "If you're on social security disability, if you're on social security Medicare or Medicaid, or unemployment, we will send you money but only if you agree to have it downloaded and monitored on your phone, or it comes pre-installed on this piece of plastic. And then in that case, you can't spend it on things which are prohibited." So, your receipt of government benefits is dependent on our permission. So, to me that seems like either party of Congress would be capable of saying, "Yeah, we'd be happy to have a lot more control over who gets to spend money and how much they get to spend."The real issue is why would the bankers willingly surrender their control of the monetary system that they have now through the Fed? They wouldn't willingly do it. And we know that they're huge contributors politically to the people that get elected to Congress. So, it's a very powerful lobby that's going to want to preserve its position of privilege in the money system, but they are now directly opposed philosophically by people who say, "You failed. You're just a bunch of rich bankers anyway. Why don't we have a money system that works," quote-unquote, 'for the people' and is run by the people?" And that's probably going to be how this issue is framed in the next year or two as a political issue.Joel Bowman:And it does seem like something that you and I have been talking about for, goodness, the past 18 months, maybe longer, that I don't think you necessarily have to be conspiratorially inclined to put the left foot in front of the right foot and say that these events, whether it be plague or pestilence or the COVID or even the latest great cause du jour in Eastern Europe, that these tend to be catalyzing events for trends that were really already underway. And we've seen this usurpation of power away from the individual into the hands of the state in many other realms and aspects of life. It would seem to make sense that the financial would follow on from there. So, getting down to where rubber meets the road here, what does that mean for you when you and Tom sit down and look at the strategic allocation for the Bonner Private Research portfolio, when you try and work out what your allocation to cash versus stocks versus gold hard assets, for example? How do you play that out in the next, let's say, near to medium term future with balancing those competing forces on the horizon?Dan Denning:Yeah, that's a great question. I mean, we released, in early March, the last of the three major reports that we wanted to produce for new subscribers. So, the first was Tom's Gold Report, which explained the relationship between the financial assets measured by the Dow Jones Industrials in real money measured by gold. So, it's the Dow in gold terms. And that gives people probably the broadest understanding of what we think is going on within the stock market relative to gold. So, two decisions there on how much to own of each asset. Then we introduced our Trade of the Decade, which is an inflation-based energy trade. And that's another pillar of our strategy, not just for this year, but for the next 10 years, at least we hope. And then the third was, generally we'd call it an asset allocation strategy, but we just called it the Strategy Report. Which is to say, when you look at these big piles of money in different asset classes, how much should you have in each based on our macroeconomic forecast for inflation and based on the last 10 years of performance for each of those asset classes.So, it's not an exact science, but there is a lot of data which shows how different asset classes perform in different macroeconomic environments. So, gold, stocks, cash, and bonds in a high inflation, low growth environment, or a low inflation, high growth environment, that you can look back and see what's happened. But the standard disclaimer is past performance doesn't guarantee future results. But where we started the year was with a very high allocation to cash, no allocation whatsoever to fixed income or bonds, and then a mixed allocation to equities and hard assets. And it gets a little bit more complicated because most people don't have crude oil stored in their backyard or soybeans in their garage. When you talk about getting exposure to rising commodity prices, there's only a few ways you can do it.You can do it through the futures markets, which is a financial instrument that benefits from real price rises. But as we saw with what happened on the London Metal Exchange when the nickel trade was suspended for two days because the nickel price just went through the moon, financial speculation on real assets doesn't always equate to profit. You can get the decision right and still not make money. But you can also buy equities. You can buy commodity producers. But then you're buying an equity, which is a different asset class and, as we know in the past, when there's a bear market in stocks, which is what we think there is right now, we think we're in the middle of a very vicious bull market rally within a long term bear market, stocks as an asset class go down in a bear market.So, you might own something you think which is really high quality. This is the point Chris Mayer made in the conversation you and I had with him about a month ago, is even the highest quality stocks that have great earnings and very little debt and very high returns on equity or high returns on capital, when liquidity leaves the stock market, if it's a liquidity-driven bear market, it affects everybody. So, stocks as a way to hide from a bear market, high quality commodity stocks, aren't necessarily safe in a bear market. You've got to measure and understand the risk there. On the other hand, Tom has made a really good point that buying shares in high quality businesses that grow earnings and have some particular catalyst that's driving their earnings, whether that's a supply shortage or demand growth, it varies from business to business or industry to industry, but you can find sectors or pockets of value or pockets of out-performance that I would describe as more tactical trades.

And that's why we don't include them as the Trade of the Decade. So, our goal this year is to reduce the allocation to cash, increase the allocation to equities and real assets, by wherever the best opportunity is, whether it's a financial trade or it's an equity trade. But the bottom line is, and I mean this from a large-term perspective, if you look at interest rates going back 700 years, and you look at what's called the risk-free rate on whatever was considered the soundest, most credit-worthy government, the risk-free rate has been going down for 700 years, since Venice in the Middle Ages. And what we're talking about is a fundamental change to a very long-term trend. So, not even the 50 year trend in the US dollar, but interest rates that have been going down in the United States for 40 years, which resulted in a 40-year bull market in bonds and equities.If that's the kind of change we're talking about right now, then whatever your strategy is, it has to account for that. And that's what we're trying to account for, but it's a really, really big subject. And we think that most conventional advice on that continues to have way too many equities, hasn't really figured in what would happen to the bond market if interest rates went up by 10 to 15%, and hasn't put any thought into what alternative assets or hard assets are the best place of refuge if you're reducing your allocation to those other classes. So, I'm kind of happy that we're in, again, a really contrarian, outlandish position. But on the other hand, there's no such thing as a risk-free position anymore. And particularly with cash, given the inflation rate and the trends in the banking and financial sector to redefining what money is, our goal is to reduce our cash allocation by the end of the year, hopefully by the middle of the year, if we can.Joel Bowman:Yeah. It is a huge challenge, as you said. It does seem like the world is awash in what we might call return-free risk at present. So, the bringing forward from the Medici's onward, I'll bring just wrap us up with a quick update on how your Trade of the Decade is going. For those who are just joining us now, it's probably generally defined as long old-school hydrocarbon energy. And by virtue of the flip side of that would be to short US dollar. So, how are we going, what, a year into this? When was it first made public? I guess it would've been around the winter catastrophe.Dan Denning:It was over a year ago. So, it was January of 2021 with our previous publisher. But I think in the context of what's happened recently, the most frequent question I get from new readers is, "Have I missed the trade?" Because it's up. So, it's up around 100%, which if it were a short-term trade, we might very well just close it out and look at reentering it at a lower price. But it's not a short-term trade. So, the point I would make to new readers and the point Tom and I have tried to make to all new readers when they're trying to evaluate how to incorporate our research and coverage into their own financial plan is, we will explain to you what we think could happen and what the trade is designed to do, and then you've got to decide how to manage that with your own plans.In this particular instance, in the last week we've had the Biden administration announce that it's going to release a million barrels a day from the Strategic Petroleum Reserve for the next six months to try and mitigate, presumably, the effects of cutting off Russian imports. And obviously going into the summer, the driving season and into the midterms, to try and bring down the price of gasoline so that people aren't upset when they go to the voting booth. None of that will matter at all to our trade. The two key points of that trade were that you had 10 years of under-capital investment in oil and gas, which has led to a deficit of supply which cannot be easily made up. So, it's not like flipping on the light switch.So, the other component would be that demand is going to rise. And the financial component was that these investments, excuse me, performed so poorly for the previous 10 years that from a cyclical point of view and a sectoral point of view, it was almost like the Dogs of the Dow, but it was like the Dogs of the S&P, that the sector should have a good 10 years. It's not a straight line. So, what we've advised people is, as the oil price corrects from time to time, then look for the price of the trade that we recommended to be more approachable for new investors. But as a long-term trade, I'm not worried. I don't know how big the upside is. When Bill made his successful trade in gold in the 2000s, I think gold was up 420% that decade and the S&P 500 was down 19%.Of course, those percentages are determined by what the start date is and what the entry date is, and that varies a lot, depending on when you got in. But I'd say for the Trade of the Decade, there's still a lot of upside left because the oil price could go much higher, and the fundamentals in the fossil fuel market favor the old-school oil and gas companies. For Tom's stuff it's a little bit different, but I would remind people that Tom's ideas are designed to be shorter term and tactical. So, if you've missed something like the tanker trade or the shipping stocks, Tom will tell you what the risk is. He'll tell you where the stop losses are. But he'll also tell you not to chase the trade. The whole point of having a subscription to what we're doing is that we're researching new stuff every month.And although some of the ideas are long-term, Tom's entire job is to come up with new ideas. So, we don't want people to come in and look and see what they missed out on, although we want them to evaluate the quality of the research and decide, "Are they right? Did it work? Could I have made money?" But there's no FOMO in our service. We don't want people to be focused on past gains. We want them to be focused on future opportunities and also future risks. So, we try to do our best. Tom writes every Wednesday and I write every Friday. So, we try to, as new readers come in, we try to bring them up to speed on where we stand with outstanding positions. But the main focus is, what are we going to do going forward?And what are we going to do? What will the world look like in two years, and what should we be doing now to be in the right place for that world? So, it's exciting, but it's extremely challenging for everybody. And investors have different timeframes too. That's the other thing we've got to keep in mind is, I think for your six year old, she might be in a really good position to buy stocks at incredible low prices by the time this bear market is over. So, for her, it'll be the opportunity of a lifetime. But for her grandparents, it's a clear and present danger to the value of their retirement. So, how you view the current situation depends on your perspective. And we try to incorporate that when we comment on it as well.

Joel Bowman:Yeah. It is, without torturing a much overused word, it is somewhat of a holistic approach that you guys are taking, both with regards to near-term tactical trades, but also balancing that out with longer term macro observations which, in the case of the Trade of the Decade, will unfold over, I guess we've got a good nine years of upside, let's say, to go on that one. So, for listeners and readers, just to recap, Dan writes to our paid Bonner Private Research subscribers every Friday and he'll be updating in, depending when this goes out, a couple of days. Tom writes to our readers every Wednesday, updating the positions that he has in the Bonner Private Research portfolio, including, as Dan mentioned, strike prices, a little risk profile or figure that he gives those particular equities, and some commentary along those lines along the way. So, I think maybe we'll leave it there, Dan, and let you return to the windy chills and climes of Laramie. I'm going to head out for a steak lunch myself down here and we'll catch up against soon.Dan Denning:All right, Joel. Thanks very much.Joel Bowman:Cheers, Dan. Bye.Thanks for listening to this episode of the Bonner Private Research podcast. Until next week.

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“I don't actually see the world through the prism of left and right, I see it more as authoritarian versus libertarian.” ~ Dominic Frisby

TRANSCRIPT

Joel Bowman:Welcome to the Bonner Private Research podcast. I'm your host, Joel Bowman. Each week we bring you exclusive conversations with members of Bill Bonner's Private Research team, as well as some special guests we'll meet along the way. We're trying to connect the dots from high finance to lowly politics, private investments to public follies, from Wall Street to main street, at home, and on the road. We're into sound money, personal freedom, classical books, and great wines. Not always in that order. So join me and the rest of the Bonner Private Research team, as we pack our bags and follow the money. We're welcoming today to the Fatal Conceits podcast, Mr. Dominic Frisby, who is a British author, comedian, and investor. He is also, as he and I have just been discussing, a fellow Substacker. So, make sure that you check out his Flying Frisby articles over on Substack. Right out the gate Dominic, for those of our readers/listeners who are perhaps not yet familiar with your work, but soon will be, you occupy a double life as both an investor and comedian, which it's not unusual certainly, uncommon for the average listener. I've always thought of markets as a bit of a tragic comic projection of the human condition with all our hubris and folly and fear, greed, envy, and whatnot, projected up onto the markets. I'm wondering if you feel that those twin hats that you wear are maybe not so delineated as maybe most people might think.Dominic Frisby:Well, it's a bizarre situation that I find myself in, it's completely accidental. It's not something I planned. And, I think, I am the world's only finance writer stroke comedian. I was once doing a show up in Edinburg at the Edinburg Festival. And, some chap came up to me and said, "I am your German rival. I am a German financial writer comedian." So there might be a German guy who does it. But, I don't know who he is, but he did come up and say, "Hello." But, I think I might be the only one who does it in the English language, put it that way.And yeah, it is funny because while a lot of comedians tend to veer slightly to the left in their world view, they would've been anti-Trump and anti-Brexit and all that stuff. They might say that, but if you look at what they actually do, being a standup comedian is probably the single most libertarian existence that there is, because you don't get any government support. You're only as good as your act. You troll your act around the country and hopefully eventually around the world and get better. And as you get better, you get better paid gigs. And you are acting entirely out of your own self interest. But, it is in your interest at the same time to get on with everyone else. But, the more you work at your act, the better your jokes get the more people laugh. And the more pleasure they derive from watching you, and as a result of the pleasure they derive from watching you, the better gigs you get and the more money you earn.And, certainly at the grassroots level, there's no government intervention in live comedy. There's no subsidy, there's nothing. It's the only art form that survives without government subsidy, all things like opera and ballet require loads of subsidy. So yeah, it's a libertarian, Adam Smith existence. And then, you actually talk to comics and they go, "You're a financial writer." And, loads of them are speculating in Bitcoin and cryptocurrencies. And if you go, "Oh, I've got the really sexy junior mining company I'm looking at here." They all want to know what it is.Joel Bowman:Right.Dominic Frisby:And I think it's because they've all got a speculative mindset. And so, there's definitely... And, the famous thing with traders, Jesse Livermore and famous traders is that, they're often prone to depression, bouts of elation and bouts of depression. And Jesse Livermore, of course eventually killed himself. And, that's the same existence of the comic. They're famously happy one minute and sad the next. And so, I do think there is a lot of crossover between the two worlds, albeit accidental.Joel Bowman:Yeah. It does seem that it's a extreme expression, as you mentioned, of those highs and lows, those vicissitudes of life. And, just on the point of government subsidies, I honestly can't imagine anything less funny than a government subsidized comic. That's got to be just the bottom of the barrel, surely.Dominic Frisby:Well, I'll show you a government subsidized comic. It's someone who's on the BBC.Joel Bowman:Yeah.Dominic Frisby:And you just look at the state of BBC comedy and it's dire, and it used to be brilliant.

Joel Bowman:So, what's going on there? Because, we all grew up with comedians, and yeah, many of them had left wing tendencies, but they were funny. And, I'm just wondering what... It's like what happened to the anti-war left, what happened to the funny left? Now it seems that comedians on the left are telling jokes more for applause than they are for laughter.

Dominic Frisby:Well, yeah. And, I tell you what that is, is I think to be a good comic, you've got to be counterculture. You've got to be irreverent, you've got to be against the status quo, you've got to mock the status quo. Zero Mostel used to say, "Comedy's about exposing pomposity." And by the way, I don't actually see the world through the prism of left and right, I see it more authoritarian versus libertarian. But, I think when we use the term left, we all know what we're talking about. And that slightly authoritarian, "We know better than you" left, that technocratic mindset that dominates state planning, and government, and regulation, and the federal reserve bank, and the Bank of England, and the civil service, and it just dominates the entire establishment. It dominates the cultural establishment as well.And so, by adopting that world view of, "Trump stupid. Trump orange hair. Ho, ho, ho." You are not doing anything counter-cultural. They think they are, because Trump is the president and they're attacking the most powerful man in the country. And there is an argument for that, but really, Trump himself was counter-cultural in that he was so anti-establishment or anti the conventional way of doing things. And so, yeah. So, the irreverent really funny anti-establishment voices are coming more from the right, they're coming from the libertarian angle, than they are from the establishment state planning world.Joel Bowman:Yeah. And just to speak to that establishment mindset, it does seem that on both sides of the pond, two countries separated by a common language as Mr. Wild observed, that there is this surging sensorial impulse that is cracking down on culture across the board. And it seems like there's a very one size fits all mentality to what you're allowed to think. And it doesn't matter what the subject is, whether it's a pandemic, or a mandate, or a war, there's just this very monotone mentality that we're allowed to express. And that seems to be really the antithesis of comedy. Would you agree?Dominic Frisby:Yeah. A 100%. The standard reaction to any worldview that you don't like is to try and get it canceled.Joel Bowman:Yeah, yeah. Right. It's a very childish reaction.Dominic Frisby:It is. It's like, "Why is the BBC giving so and so a platform?Joel Bowman:Right.Dominic Frisby:And it's got so stupid, it's like anyone who's to the left of Bernie Sanders, he's a far right racist. And you're like, "It's insane." And it's some mental illness, it's obviously been propagated by the Russians, who are trying to spread dissent and disorder. I'm joking when I say that, but I do think at one stage they were trying to divide the right. And, whether by accident, or whether it's just by social media, or it was going to happen anyway. But yeah, the world is so divided, but the standard libertarian thing is live and let live. But, that doesn't apply to the left, and there's no live and let live there it's "Either agree with me or have your livelihood cut off."Joel Bowman:Yeah. You only have to go back a generation or so, and that seems to me just utterly anathema to that late-60s, happy-go-lucky Berkeley Free Speech Movement, the hippies getting their groove on whatever they happen to be into. I mean, they seem to be demanding their own civil liberties, as far as obviously freedom of speech, freedom of what they wanted to put in their body. Goodness knows that has come full circle now. And, they were very much anti-war, anti-establishment, anti-big corporation, anti-big government, and now down the line, it's the total opposite.Dominic Frisby:Well, I just think there are loads of people who are libertarian and they do not realize it. And so yeah, that whole movement of peace, anti-war, live and let live, flowers, get back to nature, local rule, all that stuff that they stood for. And it was a brilliantly creative time artistically, and especially musically, it's just ended with more government. And, they all find themselves now supporting the NHS, state welfare, state mandates on climate change, all this big state stuff. And you're like, "How did that happen?" And, I think there's this weird thing that they cannot understand that with less state and more individual responsibility, the result would be better welfare, better healthcare, better all these things, but they can't that emotional leap to the point of trusting human beings to do the right thing. They're unable to do that. And so, they think, "All right, well, government must provide it." So, it's bizarre. So, all that movement has just ended effectively in light socialism, or rather heavy socialism.Joel Bowman:Yeah. It is bizarre, isn't it? That they've quashed competition and that they're so allergic to, I think, it was Hike who called it spontaneous order, which is where you take a leap of faith and you rely on the market to find nuanced and work around solutions to of things like central banks destroying our money, and universal healthcare providers diminishing our level of care, and on and on down the line, look at education, et cetera, et cetera. But, I wanted to ask you, just segueing from comedy to the go government's version of it. I did see a couple of your posts, which I found pretty amusing. And, we've seen just in the past couple of weeks, both the permanently startled Nancy Pelosi and Joe Biden saying that government spending... I'll have to paraphrase them both here. But it's something like, government spending is absolutely not to blame for inflation. Presumably, they're laying that at the feet of the evil capitalists. Does that line make you laugh? Does it make you cry or wince? All of the above? It's its own peculiar brand of comedy, I think.

Dominic Frisby:Well, I mean, it makes me do all of the above. And, this is why I absolutely adore Bitcoin. I just think it's the most fantastic movement. I think I discovered gold in 2005, 2006. And, it was one of those clarity moments that one has in one's life, when soon as I discovered gold, you uncover all the Austrian economic worldview, the libertarian, the small state, all the arguments for having an independent system of money. And it keeps governments not being able to print money, keeps them in check. And, it's using independent money as a way by which the citizen can hold his government to account, and all that stuff. And just suddenly so much about the world came clear to me. Fundamentally, why houses are so ludicrously expensive in London.And, I spent many years trying to educate people. I wrote a film called Four Horseman, which was an incredibly popular film. It had something like 9 million views on YouTube, something like that. And, I wrote it with a guy called Ross Ashcroft, but all the stuff in there about gold and fiat money and all that was all me. And I wrote a book called Life After the State, and I wrote my weekly column, and time and time again, I just saw it as my mission to educate the people about the evils of fiat money. And every time you wrote the word fiat, you'd go, fiat money (money which is money by decree, or money which governments can print) or whatever. You'd have to define what fiat money meant.And then, along comes Bitcoin and as well as being the most fantastically glorious speculative vehicle, if you are long, particularly, if you were long early on. It's also been the most brilliant educative tool. And, it's just educated anyone... I mean, I'm 52, and I suppose I first discovered Bitcoin, it would've been maybe 2012. So, when I was in my early-40s. And, I'd go to a Bitcoin conference, and in my early-40s, I'd be the oldest person there. And then, I'd go to a gold conference and I'd be the youngest person there.Joel Bowman:The changing of the guard.Dominic Frisby:Yeah. And so, I was straddling, and I'm in my early-50s now. So, anyone born in 1969, 1970, around about that time is on the cusp of the two worlds. And, I'm younger than a boomer, obviously. And so, the old guys all knew about gold and all that, but the young, they're all speculating in Bitcoin, and then they're creating the memes, and then they're all laughing at the memes, and so on and so forth. And, it's just been the most wonderful educative tool about the natures of fiat money, inflation, all these things. And it's just brought these arguments into the mainstream while earning a lot of people, a lot of money. And so, everyone celebrates the glory of Bitcoin, "Bitcoin fixes this." But one of the many things it fixes is financial literacy.Joel Bowman:Yeah, absolutely. I have a somewhat similar experience to you with both gold and Bitcoin. I'm down here in Argentina, as I mentioned to you before the show, but I recall going to an Austrian economics conference with some friends, Jeffrey Tucker, and a few others who were speaking there back in... Oh, it would've been 2012 or something. And-Dominic Frisby:Was that the one in Acapulco, or was that the one in Germany?Joel Bowman:... No, this was in South Paulo in Brazil.Dominic Frisby:Oh, okay.Joel Bowman:Some years ago. But yeah, the same experience, where I had been used to going to these gold shows around the U.S., where my publisher at the time was holding conferences. And you would get people who were very, very well versed in Aristotle's five characteristics of sound money, and they knew all the ins and outs of gold, and they knew enough Latin to understand what by decree came from, and what fiat meant, and all the rest of it. But they were having a bit of a mental blockage with regards to Bitcoin.Joel Bowman:And then, I went to this conference in South Paulo. And, it was full of young kids. I was around maybe young-30s at the time, but it was full of kids in their early-30s and even in their 20s, who were just talking up this new currency, and really actually just asking the questions that I don't think people had really asked about the nature of money for... Maybe going back to Keynes's "Barbarous Relic" comment, but certainly even some time before then, where we just took for granted that it was up to the state to manage our money for us, and that the private market had no business entering that realm.Joel Bowman:And then all of a sudden, Bitcoin exploded in 2008. And yeah, we were invited to really question the foundational role of the state in producing money, and maybe even address the question that had been addressed around maybe when the Gutenberg Printing Press came along originally, which is, can we separate the church from the state? Now, all of a sudden we were confronted with the proposition of potentially separating the money from the state. Is that something similar to the way that you grappled with it in the early days?Dominic Frisby:Yeah, exactly. And, that's the mission, separate money and state. And, there are people who still think the pound and the dollar are backed by gold. They actually think it. They can only print as much as they've got gold and silver. And you're like, "Oh, please. Do me a favor..." But anyway.Joel Bowman:I noticed just incidentally that there's not a whole lot of Bitcoin and crypto money being used to purchase tanks and jet fighters. And, just while we're on the roll of what the state uses its tax dollars and its untethered money to fund.Dominic Frisby:They will.Joel Bowman:Yeah.Dominic Frisby:When we get our little Bitcoin citadels and we need to defend them, we will have to buy some tanks, and we'll use Bitcoin to do it.Joel Bowman:Right. Right. Well-Dominic Frisby:And, they'll be sound tanks. They won't get caught in 40-mile traffic jams in Ukraine or whatever it is.Joel Bowman:... Right. Oh, well, so moving on there. I've read a couple of your recent articles, and again, that's the Flying Frisby on Substack, for people who want to check out Dominic's work. You and some others around the space have been observing, of course, that inflation is something that had been ticking up to, at least in the U.S., 40-year highs before Mr. Putin even circles invade Ukraine day on his calendar. But it seems that in the past couple of weeks, since the conflict in Eastern-Europe has erupted, that everything that has been going wrong with Western economies is now being blamed on the conflict in Ukraine, including, not least of which, some pretty extreme price action in the commodities markets. What's been your take on, for example, nickel going limit up across in the $100,000 a ton mark, and doing us all an Al Gore shaped hockey stick just last week, I think, and some other really crazy price action in the commodities markets.Dominic Frisby:Well, that nickel chart was extraordinary. It's like nothing I've ever seen. I think it went up from 25,000 to a $100,000 in two days, which for a-Joel Bowman:It's insane.Dominic Frisby:... I mean, it's not a cryptocurrency, it's a nickel, it's an essential basic metal. And for it to quadruple in a day is nuts. And I also happen to think the London Metal Exchanges decision not to honor the contracts signals the end of the London Metals Exchange. To close the markets and not force the dude in China to cough up, even if he hasn't got the money, they have to do that if they're to maintain the integrity of the LME. But anyway, that's their own business. And, yeah, I mean, commodities have basically been in a bull market since the big corona panic sell off in March, 2020, oil went to minus 30. And so, it went from minus 30 to 130. That's a $160 move. That's one heck of a trade, if you bought the lows and sold the highs.Joel Bowman:Yep.Dominic Frisby:And, this always happens with commodities is that, you get 5 or 10 years of under investment. So there's a shortage of supply. There's a few cranks on the internet like me, you, and Bill who go, "There's a shortage of supply in this metal, it should be trading much higher." We quietly inform our readers. We take positions in mining companies and in metals, and so on. And, I've been banging the drum about oil for goodness knows how long. And then, we just watch it go up.Dominic Frisby:And so, commodities were all in a massive bull market. And, what this war has done is given us the speculative blow off top. And, now I'm looking at this, and as we speak today, oil's gone from 130 to about 95 bucks. It's had a $35 sell off in what... Three, four days. Gold has gone from testing its old highs, 2070 around about there, that's sold off and it's gone back to its previous old highs, 1920. So that's $150 sell off. But all the metals, platinum, palladium... Palladium's lost about a third of its value. And, they're just so speculative. And, I'm not suggesting you got speculative bubbles under a gold standard, but you did, but there were nothing like they are now, because everyone's losing leverage, and leverage is a fiat money thing, all leverage is, is debt. And so, you just got these mad speculative markets where everyone's speculating, wanting to get rich quick. It's all part of that fiat money mindset. But I'm look looking at commodities now and I'm going, "Was that the top?"I think, there's a really good chance... I put out two pieces last week and both said the excess here feels like a top. That excess marks a top. But then you look at the fundamentals and you go, "Well, Russia supplies something like 17% of global commodities, and 40% of European gas, and I think it's 10% of world oil." And, I can't remember what the number is for nickel, but it might be something like 20 or 30% of world nickel. Palladium, I think it supplies more than 50%. And, you can substitute palladium to a certain extent with platinum, but not totally. And it's nuts that palladium should be more expense of them platinum in the first place. But anyway, and with all these sanctions coming, we haven't solved the lack of investment in commodities in a few weeks, there is still this fundamental problem of lack of investment, lack of exploration, and all this.So, all that makes me think, "Hmm, we're not going to go that low at least."Joel Bowman:Yeah.Dominic Frisby:But I think, the bubble blow off top that we've had, and now the unwinding, this is all going to take a while to digest and unwind. So I'm not rushing to take new commodities positions, but I do notice that in all of the insanity gold miners didn't have the run up that gold had. They had a bit of a run up, but gold led the miners, and ideally you want miners to lead the metal. Although, I think those days might be gone, because of all the various ways there are to own gold, ETFs, and gold money, and Bullionvault fault, and gold core, and futures, and spread bets, and there's so many different ways to own gold. You just think, "Why take on individual company risk and own a minor?"And nevertheless, even with that disclaimer aside, I'm still quietly bullish about gold mining. Now there's so much dross in the sector of gold mining, so many bad companies, but I've got two or three companies that I like that can survive gold going back to 1250 an ounce, if it ever goes there. They were set up during a bear market with a bear market mentality, that awful bear market of 2013 to 2016. So, if you can find the right gold miners, I think you can do well. And in fact, I recommended two, one in February, one in March for my paid subscribers on Substack. And they're both higher than when they were even with this massive correction.Joel Bowman:Wow. Okay.Dominic Frisby:So, I'm like, "Oh, look at me. I know what I'm doing." I mean, of course you make tips and they don't always work out that well. But I am quietly British about gold miners, as long as they're well run ones and not run by crooks or bozos. And I'm afraid there's a lot of crooks and bozos. By bozos I mean, stupid people. And there are quite a few of them in gold mining. That's one of the things I admire about Bitcoin by the way, is there are just so many geniuses in the sector, young, enthusiastic, energetic geniuses at the height of their career building years. And just by owning Bitcoin or owning five coins, or one of those funds that you can buy that gives the 10 best DeFi coins or the 10 best metaverse coins, whatever it is. You're just getting exposure to that colossal intellect. And with gold mining, there is just not the same intellect. I'm not saying there are not clever people in gold mining, there are. But, there's not genius, after genius, after genius, in the way that there is with all that computer stuff and Bitcoin.

Thank you for reading Bonner Private Research. This post is public so feel free to share it with goldbugs and Bitcoiners alike...

Joel Bowman:Yeah. And it does seem, I mean, for those of us who have been around the Bitcoin ecosystem for a little while now, and it really is only a little while, it's only 14 odd years old. But, even just during that short period of time, the amount of wealth that's been created for individuals... I've witnessed a little bit of this myself and the people that I've seen who held on for dear life, who hodl-ed early on and made some pretty sizable fortunes. I can't think of a single one of those people that I know who just tooled off to a Caribbean island and put their feet up and did nothing for the next however many years and dropped off the map. All of those people that I know have gone into other entrepreneurial pursuits, they've started up clinics, or they've branched out into computronics, or some other disruptive industry where...This is a generation of people who are often derided for slacking off on the couch and taking their gender studies degrees and just living in mom's basement. But there is a portion of those people, I think, who are attracted to all that the Bitcoin world offers, part of what you were saying before about live and let live perhaps. And those people, they seem to be the ones that are building the parallel economies of tomorrow.Dominic Frisby:Well, agreed. I mean, you see it, I know loads of Bitcoiners. I started up a privacy tech company in Canada listed on the CSE, called Cypherpunk Holding. And, I was having lunch with Jon Matonis. He's been around for a long time. He's a formidable intellect, and he really doesn't need to work if he doesn't want to. And, I just showed him this privacy tech company that we were setting up and he said, "Oh, I'd really like to get involved." And so, John became a director. And that's just an example of, people don't want to stop just because they've made a lot of money, Richard Branson didn't stop.But, I've just bought one of the gold companies I recommended, the guy who's the CEO... Or actually the president, not the CEO, has just sold another company, and he's made something like 2000 times his money, he doesn't need to work again if he doesn't want to, but people like working, and even into your retirement... My dad was a writer, he died at the age of 87, but two weeks before he died, he was still hustling and still trying sell his place. So, we don't stop, just because government says you can stop when you're 60, individuals don't necessarily do that.Joel Bowman:Well, yeah, it's almost a permissive off ramp, isn't it? That "Work up until this high water mark and then just kick back for a little." While I find that the people who are more self-reliant and yeah, self-starting entrepreneurials, aren't looking for that permission to stop. They're quite the contrary. They're looking for people to get off their backs so they can get going. So, let me ask you then, Dominic, because we've been through a few episodes with Bitcoin now with regards to it being... To quote one of my favorite philosophers of the 20th century, "Born in a crossfire hurricane." As Mrs. Jagger Richards would have it.In 2008, it came onto the scene during the big bailouts. And then, obviously it kicked on higher in that catalyzing moment of the Cyprus Bail-Ins. And we've seen a few geopolitical events that have set off or sparked new rallies. I was curious this time around, with all that's going on with Russia and the Ukraine, it seemed like gold was performed in its traditional role of risk off safe Haven. Bitcoin, not so much, perhaps because of just regulatory uncertainty, or... I haven't checked the price today, but what do you make of its near-term response to that geopolitical uncertainty, and where do you see it going perhaps over the medium-term from here?Dominic Frisby:Well, firstly on the subject of gold. Gold did what it was supposed to, but now it's stopped doing what it's supposed to, it just sold off $150 and it's done a massive double top. It's also done an island reversal. The chartists must be looking at gold and just shaking their head and crying. But, I love gold and you can make an argument about an asset. So, I'm making this argument, I'm using the disclaimer first, I love gold, I own loads of gold. If the world went back to some day factor gold standard, I wouldn't be an unhappy man. But you can look at gold and you can make two arguments. You can go, "Well in 1980, the value of America's gold holdings could have paid off its debt." And, the Jim Sinclair argument, "The role of gold is to balance the books of the United States." And so, if the United States now were to pay off its debt with its gold, then the gold price would have to be whatever. I don't even know what the number is, $50,000 an ounce or something stupid, and probably more.Or you can look at gold and you can go, "Well actually, it might have been money since..." Gold was the very first metal that human beings used. We used it long before we used copper and we discovered smelting in the bronze age. Gold was the first metal we used. We discovered it in river beds when we were hunter gatherers, stone-age people, and we decorated ourselves with it, and we gave it to other people, and used it as reward, and we used it in barter.So, it was the very, very first money. It was the first metal we used and we used it as money. Obviously a less sophisticated form of money than what we have today, but its role was money. We used it to store wealth, display status, all that stuff. And, probably 20,000 years before we discovered smelting. So, it's the oldest metal we've ever used. It's probably the oldest substance on earth, when it came in at its supernovae collisions. And you can make all those arguments, it's been money for 20, 30,000 years, longer. Why would it stop being money now? Well, the horse was transport for 20,000 years and the horse no longer is transport because we invented cars. So, you could say about gold, "It's as irrelevant to modern finance as the horse is to transport." And, I see that argument. I don't entirely agree with it, but I can see it.And on the other hand, like I say, you could say, "Well, gold has to balance the United States... The balance sheet of the United States." So, it's up to you what argument you want to make at any given time. And in a bear market, you'll find yourself making its irrelevant argument. And in a bull market, you'll find yourself making, "It's going to balance the books of the United States." But anyway, we do seem to be... I'm following all this Luke Gromen stuff, and I'm quite interested about how the east, the Euro-Asian countries, Asian countries are trying to go back to some independent money system.And by the way, I've spent a long time auditing China's gold, and working out how much they've got, how much they've mind over the last 15 years, how much they've imported, and how much falls into private hands, and how much falls into state hands. And, China's gold holdings are bigger than the United States. They're not declared as bigger. They're declared at 1,600 odd tons, to United States 8,000 tons. But in reality, China's gold holdings are somewhere between 15,000 and 30,000 tons, in my opinion. So, at least twice what the U.S. has. And that's an astonishing fact when you think about the implications. Anyway, so that's gold, and in all probability, my theory is it'll go up a bit, and it'll go down a bit, and it'll go up a bit, and it'll go down a bit, and it'll probably end up in the mid to high 2000s by the time this is all over. So, that's a bit of sensible rational view of gold.

Bitcoin on the other hand is tech. And as you probably know, it's been tracking the NASDAQ and it behaves like a tech stock. Now, I have over the mind that everyone should own some Bitcoin, everyone should have some exposure to it. It's the money of the future. It's the cash system for the internet, but it is not the opportunity that it once was. And every double gets harder than the last. And so, to double from Bitcoin from 50 cents to a dollar, it would've be a 100 million dollars in market cap or something. But, for Bitcoin to go from $40,000 to $80,000, it's at 40,000 now, to go to 80,000 or a $100,000 dollars, we're talking about trillions of dollars of market cap. That's a really difficult double to make.But at the same time, you look at the Bitcoin chart, it's made a double triple bottom around the $30,000 area. And there four phases to a Bitcoin cycle. There's the quiet accumulation phase, there's the noisy bull market and blow off top, there's the unruly, horrendous, noisy correction. And then, there's the frustrating consolidation. And I would argue that at the moment in Bitcoin, we're probably in that frustrating consolidation phase, which... It has corrections in it, it's frustrating, but it looks like $30,000 is the low. And, if Russia can start World War III and Bitcoin still holds up about above $30,000, I'd say, that's a pretty good sign. But it's so frustrating, and we're probably without even knowing it in one of those quite accumulation phases.But it does trade like the NASDAQ. It seems to have got itself with the NASDAQ in risk on and risk off. Is the correction in the NASDAQ over? It was one almighty bubble. A lot of those stocks are down 50, 60, 70% now, is that enough? It probably is. But, I don't think we're set for another massive bull market just yet. I think we're still in for a bit of so-called frustrating consolidation, but frustration consolidation is a good time for quite accumulation.Joel Bowman:Yeah, very well said. Well said. And, I'm just thinking back to that... You got me scratching my head on China's gold holdings, just as far as the implications for what a... People like to talk about a new monetary world order or something of that nature. What that looks like if you have... As we have seen now, just in the past couple of weeks, I don't think people made lot of noise about this, but I found it just extraordinary that, we had sanctions that were essentially canceling the foreign reserve currency assets of other sovereign nations, central banks. I mean, it was almost as if the United States declared that all of the dollars outside of its national borders are now currency by permission and liable to be canceled if anybody misbehaves. I'm wondering just what the follow-ons of that "permission-based money" might be. And, whether not there might be a risk premium that other large holders like China of U.S. dollars might be now factoring into their future purposes, or their appetite for future purchases.Dominic Frisby:Yeah. Well, I'm sure China will be looking at what's happened to Russia, and going, "Wow, we do not want that to happened to us." So, China's got a bit more than $3 trillion, I think. And, it's official gold holdings are 2% of its Forex reserves. Whereas, America's gold holdings are 70%. Now, if China came out and said, "Actually, we've got 15,000 tons of gold, 16,000 tons of gold. We've got twice as much gold as America has." It would be almost a declaration of war. And, it would, A, cause a massive spike in the gold price, because people would go, "Oh actually, gold isn't an irrelevant antiquated asset, it's the money of the future. And China's going to back its one with it." And secondly, it would cause a huge sell off in the United States dollar. And China doesn't want that, the way it's building its economy, it wants to keep its currency cheap, and it doesn't want to destroy the value of its gold holdings. So, as far as declaring its gold, it's declaring the minimum that it can declare and look credible.Joel Bowman:Right.Dominic Frisby:It's only my theory, but until somebody comes up with a better one, I'm sticking with it. And-Joel Bowman:Yeah, no. We're all for we're all for unsubstantiated theories and scuttlebutt here. That's fantastic. I'm thinking that also in the context with their last year, putting the kibosh on crypto mining in China, and there's certainly a chronology to all this that if we were conspiratorially inclined we could build some completely unsupportable scuttlebutt here.Dominic Frisby:... Well, yeah. But anyway, I completely agree. Sorry, somebody is WhatsApping me as you talk, and it's making a noise, and I'm apologizing if my mic picks it up, I'm just turning my WhatsApp off now. But yeah, yeah. Anyway, that's my theory on China's thing and it sounds like you're indulging. So, good stuff.Joel Bowman:Good stuff.Dominic Frisby:But, if I was putting myself in China's thing, it's going to go, "Wow, look at how they've weaponized the dollar. We don't want that to happen to us, at least not just yet." And nor is it, I don't think, going to invade Taiwan because it's just going to see how America's weaponized the dollar against Russia and go, "Well, they'll do that to us. And we'll be screwed, and Apple won't build all its tech here, and it won't build its this and that. And, we're just not ready for that." So, I think China will just quietly stay out of it and continue as much as it possibly can to de-dollarize itself, until it is ready. And, the weaponization of the U.S. dollar, I would argue, has probably worked, because all the oligarchs, surely they're going to have be really hacked off with Putin and they're going to want their money back.And so, there's going to be so much internal pressure on Putin. I mean, the likelihood is, he's going to drag on, this whole thing's just going to drag on. But, I imagine China will just stay out of it for the time being, and we're going to have this 5, 10 year war in Ukraine, which will be not unlike the war in Afghanistan, which eventually brought down the Soviet Union. It'll probably do the same to Putin eventually. But it will happen quicker, because everything happens quicker now. So, I doubt it'll take 10 years, but it could take three, or four, or five. But yeah, so China is going to do all this stuff, but it's not going to do it yet. But it will have watched what America did, how it weaponized the dollar and thought we're not going to allow that to happen to us.Joel Bowman:Yeah. Not-Dominic Frisby:And they will be preparing and taking the right precautions. And, part of those precautions will involve gold.Joel Bowman:... Yeah, I can't imagine them risking three plus trillion dollars of foreign currency reserves and however much gold they've got-Dominic Frisby:It's 20 years of savings.Joel Bowman:... Yep. There you go.Dominic Frisby:20 years of savings and investments. They're not going to throw away tomorrow.Joel Bowman:That's a big piggy bank. A big piggy bank. I really appreciate just looking at the clock here, and I know we're ticking up on an hour here. I really appreciate you taking the time. I wanted just move on real quick before we end it for this particular... And hopefully, we get to you back in the future. But I'm planning at some point this year to hopefully take my young family up to the UK. So, I wanted to just touch on a little bit about how travel is going and whether things are getting back to normal. It's interesting that when you and I first started emailing to schedule this podcast a few weeks ago, COVID would've been pretty much front and center, I would suspect of our conversation. And yet, here we are two or three weeks later. What happened to COVID? Where did it go? And, are we able to travel to the UK yet? Am I going to be able to get a pint of your famously warm beer or what?Dominic Frisby:I think it was Milton Friedman said that, "The art of politics is getting the wrong people to do the right things." And we had a situation in December where we were about to lock down again, when this a Omicron, however you pronounce it. Omicron is actually the correct pronunciation, but everyone says, "Omicron." But anyway, when this Omicron variant broke in, I guess, it was early December, late November, there was a huge pressure to lock down again. And Boris Johnson was about to lock down, under the advice of all... They're actually called Sage, but his wise government medical advisors. And all the back benches from the conservative parties said, "No, if you lock down the economy again, we're going to do a vote of no confidence in you."Joel Bowman:Yeah.Dominic Frisby:So, he massively backpedaled, and didn't lock down when the rest of Europe pretty much did lock down. And then, our COVID rates... Omicron was pretty much the best thing that could have happened, in terms of COVID, because it was massively infectious and very, very mild. So, in terms of building up natural antibodies and all the rest of it, it was literally the best thing that could happen. And so, that happened and we let it run, right? And our infection rate was no higher or lower than anywhere else, not significantly so, and nor was our death rate, nor was anything else. And yet, we had a relatively normal Christmas. And then we opened up.And governments have got no imagination, they're not bold, they're all thinking about career risk. So if somebody else does it, then it's okay to do it. But if you are the pioneer, then they don't want to do it. That's the technocratic mindset, it's the opposite of being an entrepreneur. And, the rest of Europe started to look at England, which didn't lock down. And then, they gradually started copying us. And I think sweet Switzerland a couple of weeks ago decided, "Screw this. We're opening up." And so, I went to Switzerland skiing. Well, I actually went to France skiing, but I went via Geneva, last week. And, I think in one restaurant in France, I got asked for a COVID pass. And I had COVID a few months ago, so I had the COVID pass on my phone. But apart from that, I don't think I got asked once. And then, the only time I did get asked bizarrely was getting on the plane in Geneva, coming back to England, and they want you to do this passenger locator form or something.And so, I just filled that in, and it was a bit of a palaver in the airport. But anyway, the short of it is, I was able to go to Geneva, and then from Geneva to drive across the border into France, and then have a week skiing in two different resorts in France, and then come back to Geneva. It wasn't quite as relaxed as it was before COVID, but it was significantly less relaxed than it was... You had to wear your mask on the plane and stuff like that.But, compared to what it was six months or something ago, we're in a much better place. And, you just assume everywhere else will follow. I just think we've got COVID fatigue now. And, everyone's just like, "Well, we're going to have to live with it." And I'm hoping gradually, quietly, while everyone's eyes are on Ukraine, all the laws will be largely relaxed. And, all the various hypocrisies will be quietly brushed under the carpet and we can just move on and get vaguely back to normal. It's never going to be quite what it was, but there's always going to be this unfortunate precedent that's been set. And, every crisis government intervention increases, and it never quite goes, and taxation, and everything increases. And it never goes back to where it was before the crisis started. But hopefully, we're stumbling back to some freedom. And I use that word, relative freedom, let's put it that way.Joel Bowman:Yeah. A big asterisk, but yeah, it does seem hopefully that the dominoes are falling. And as you say, they're back-paddling on this as politicians, which is to say quietly and while hopefully attention is distracted elsewhere. But mate, look, thank you very much for your time. Do let our readers and listeners know what you've got coming up. I mentioned the Flying Frisby on Substack where they can check out your articles. I know you're often performing in... Is it Comedy Unleashed? Is that the...Dominic Frisby:Yeah, I do a lot of stuff with them. Yeah.Joel Bowman:Okay.Dominic Frisby:And, I am nothing if not prolific. And, I have a large output, and some people prefer me wearing my financial hat, and some people prefer me wearing my comic songwriter hat. And if you want the financial stuff, I would urge you to go to the Flying Frisby, which is just frisby.substack.com, and sign up for my newsletter there. I've only been doing it for two weeks, but it's been going great. I can't believe how quickly it's become so popular. Substack is just fantastic. Literally, within two weeks, if I want to, I can go and become a digital nomad, and I don't need to be in the UK anymore. Just from two weeks on Substack.Joel Bowman:It's a highly recommended lifestyle, by the way.Dominic Frisby:Oh my... Yeah, well, I mean, I've just got to do it. Maybe I've been on it a month now, I might be slightly exaggerating. But, Hey, it's the media, we're allowed to.Joel Bowman:Exactly.Dominic Frisby:But if you want me wearing my comedy songs, go to dominicfrisby.com and you can sign up for a newsletter there. But if you're in the UK, I'm doing a gig on March the 30th, this month at Comedy Unleashed in Bethnal Green, two hours of unacceptable songs and among other things. We'll be singing the libertarian national anthem. And if you like, Joel, you can download the libertarian national anthem off YouTube, and you could end this podcast with it. I can think of no better way to end the podcast than with the National Anthem of Libertaria.Joel Bowman:That's fantastic. You've come with your own plug, mate. That's fantastic. You're doing my work for me. Wonderful, mate. Thank you so much again for taking the time. Yeah, listeners tune in for some imminently cancelable comedy with Dominic Frisby and check out his Substack. And, tune in again next week for your next episode of the Fatal Conceits podcast. I'm Joel Bowman, your host. Talk to you again next week.Dominic Frisby:Arise libertarians above totalitarians. Our guide is the mighty invisible hand. Reject state controls, collectors and patrollers. Our choices are better than government plans. Taxation is a form of theft. Free markets and free tree are best. Free speech, free movement, free minds, and free choice. Our actions are all voluntary. Not coerced or compulsory. War we abhor, socialism does not work. No debt or inflation, no stealth confiscation. No pigs in the trough at the gravy to drink. No state education to brainwash our nation. No experts dictate what to do, what to think. We scorn your fiat currency. Gold and bitcoin is our money. We own ourselves and we live and let live. We take responsibility. Life, love and liberty. Leave us alone, let a thousand flowers bloom.Joel Bowman:Thanks for listening to this episode of the Bonner Private Research podcast. You can find more conversations like this in the members only section of our website at bonnerprivateresearch.com. If you would like to contact us, please address drop your comments in the section below. We look forward to hearing from you either way. Until next week.

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“I actually find myself pretty optimistic just to see people out in the streets because realistically, this stuff has been going on for a while, like financial censorship, speech censorship. So just seeing people out in the streets is encouraging because ultimately, I don't think the people's will will be denied for too long.”

~ Adam Sharp, Start-up Investor and Editor at HIVE Blockchain Technologies

TRANSCRIPT

Joel Bowman:Welcome to the Bonner Private Research Podcast. I'm your host, Joel Bowman. Each week, we bring you exclusive conversations with members of Bill Bonner's private research team, as well as some special guests will meet along the way. We're trying to connect the dots from high finance to lowly politics, private investments to public follies, from Wall Street to main street, at home and on the road. We're into sound money, personal freedom, classical books, and great wines, not always in that order. So join me and the rest of the Bonner Private Research team as we pack our bags and follow the money. Mate, so let me welcome you officially to the show because it's been a little while since you and I got together in person. But I've known you for what, 10 years now I feel like?Adam Sharp:Yeah.Joel Bowman:Right around there.Adam Sharp:It's been about that long, yeah.Joel Bowman:So you're an early investor, a crypto enthusiast. I know you're doing a lot of work with the gents over at HIVE Blockchain Technologies and early investing as well. But one of the, and we can get into all that, but one of the conversations I wanted to start off with you is something that's just been rattling around my head in the past few weeks, and that is what is going on with your friendly, mild-mannered neighbors to the North. This is instructive in multiple ways for an antipodean who's been watching what's happening in Australia over the past couple of years. But just for people who are catching up with this story or maybe they've had it just peripherally on their news feeds, but maybe they're paying attention to, I don't know, what's going on in the Ukraine or whatever else, do you want to just catch us up to speed with what's been going on in Canada, what the latest is?Adam Sharp:So most people are familiar with the basics of what's going on with the trucker convoys. But it is interesting, like I talked to my parents about it this weekend and they really didn't know what was going on because it's not really being reported in the mainstream. So you have to go to some social media platforms to get up on it. But basically lot of Canadians are really sick of the vaccine mandates and the mask mandates and the quarantine rules. So it's set off really a large protest in Ottawa, which then spread to become a blockade at several of the US-Canadian borders. And now there's been much protest in all major Canadian cities. So they really cracked down hard on the one in Ottawa, batons and mace and cracked some skulls and trampled some people with horses.And it's surreal to watch because these people were totally peaceful protesters, they were cleaning up after themselves, crime actually went down in the city during this occupation. And Trudeau invoked these emergency powers that basically give him unlimited ability to freeze people's financial accounts, which they are doing. So anybody that is associated with the protest that they can identify, either they donated to the protest or they were on video, it's very Orwellian. They are using video to identify people, facial recognition, and then blocking their bank accounts. Then we've heard multiple stories of people who just went to the grocery store and all of a sudden they donated to the convoy, so their credit cards aren't working, their bank accounts are frozen. They're going to try to now take a bunch of the trucks that they towed away from downtown and sell them and keep the money.

Joel Bowman:That just seems vindictive at that point. This isn't just an impounding and come along next week, pay a fine, and get your rig out. This is, I would guess for the vast majority of people who have their being taken from them, this is probably their main source of income, this is-Adam Sharp:Oh yeah. And probably most of them have a big loan out-Joel Bowman:And livelihood.Adam Sharp:Right?Joel Bowman:Right.Adam Sharp:And they probably owe a million dollars on a loan a lot of them. I don't know how much of big rig costs, but I'm guess it's not cheap. So I just keep being reminded of this great George Orwell quote, and he says, "All tyrannies rule through fraud and force. But once the fraud is exposed, they must rely exclusively on force." So I feel like that's where we are, at least, in Canada.Joel Bowman:It's like the veneer has been pulled back and now this is just the naked state just ruling through power and brute force.Adam Sharp:Yeah, exactly. Like that old Frank Zappa quote about the brick wall.Joel Bowman:Some Frank Zappa.Adam Sharp:Yeah, exactly. So it's interesting, I think it's been inevitable for a while. But I think it's going to be a hard period that we're going to have to go through. But I actually find myself pretty optimistic just to see people out in the streets because realistically, this stuff has been going on for a while, like financial censorship, speech censorship. So just seeing people out in the streets is encouraging because ultimately, I don't think the people's will will be denied for too long. We have the internet still, hopefully we will going forward. But it's nice to see people getting a little angry and a little upset because this stuff has been going on for a while, it just didn't affect us as directly.Joel Bowman:So I feel like we can, you touched on this from multiple angles there, but I feel like broadly we could break it up into a couple of main themes here. And for our American listeners/viewers/readers, however you're consuming this, it almost feels like there's a first amendment component of this and then something we, I don't know, we maybe call it a fourth amendment component. Where there's the censorship of free speech and very importantly, in the case of these demonstrations, the ability or the right to peaceably assemble and petition the government for redress. So this would be our first amendment point of attack there. And then it gets into something entirely different when you're talking about asset seizure. You sent me the story originally, but I think this started with the government leaning on a private company, this was GoFundMe I believe. It gets a little muddy for me after that, so what happened? They lent on GoFundMe, they backtracked after a little bit and said, "Actually, we're not just going to take the money, we're going to automatically refund it to you." But then things escalated.Adam Sharp:So there was over $10 million raised for the leaders of this trucker convoy. And it was going to pay for their gas and some other expenses, but mostly for of gas. GoFundMe basically shut down the raise after it had reached $10 million and they said, "We're not going to give it back." Or no, "You can ask for a refund. But if you don't ask for a refund, we're going to take that money and donate it to charities of our choosing." Now, they got a lot of pushback on that. So they reversed, they automatically refunded everybody. So a new fundraiser started on a Christian crowdfunding site called GiveSendGo. And GiveSendGo is basically only around because GoFundMe shuts down so many dissident and conservative type of fundraising events. They're basically very political in who they allow to fundraise on the site.So GiveSendGo all of a sudden turns into a big, big business. They raised about I think over $8 million for the truckers. And they did get some of that money to them. Then the Canadian government stepped in, a lot of that money is frozen now in a US bank. They got some of it to the protestors, but a lot of it is still in limbo, so it's been frozen. But this is leading to a bigger thing that we've been talking about a little bit, where there's a potential here that we're going to see parallel economies develop. Like GiveSendGo is the fundraising platform for conservatives and dissidents and GoFundMe is the one for normies and whatever. So are we going to see that for social media? We're already starting to see it for social media. Are we going to see it for banking? Are we going to see it for payment processing? It's a big, big thing.If you guys aren't aware of what's happening on social media with censorship, this has been going on for a long time. The first time I remember seeing blatant political censorship on Facebook was in 2007, it was during the GOP primaries. I saw Ron Paul talk and I was impressed. So I went to Facebook and I'm like, "Oh, let's join a Ron Paul group." And there were no Ron Paul groups. So I was like, "Well, that's strange." I guess I didn't think much more about it, but I never joined one. I could have been involved in the movement, I could have been spreading the word. But they had intentionally hidden them it turns out. And if you look it up, TechCrunch did some reporting on this. So this was 2007 and they were disabling the ability for people to create Ron Paul groups on social media. So this stuff has big, big impacts. The ability for a company like Google or Facebook or Twitter to control someone's thought process through little nudges and through censorship is tremendous, it's just really, really powerful.Joel Bowman:And we're not talking about tiny, little corner of the web type outfits here, we're talking about the main choke points of information, the main filters through which, I don't know what the percentage would be, but it would be upwards of 90% of internet traffic is driven through Google, through Twitter, through Facebook. These are the feeds that allow people the reality that we just take for granted when we go online. And as more and more of our life is played out online, whether it be the news you get or the commerce that you interact in, your brokerage account, your online banking, where you travel, where you stay, and probably in future at some credit score.But let's go back to the truckers for just a second because I want to play the other side for a little bit. And this will circle around to what I've experienced just watching, from down here in Argentina, watching what's been happening in my birth country of Australia. And that's that there'll be a narrative that will say, "Hey, actually, these people they were out protesting, they were disturbing locals, and they were hampering trade across the border." I've seen a bit of that. I wanted just to get your take on this idea that these things have become so politicized now that rather than it being a case of, hey, it's the people the state and their oppressive, be it mandates or it could be a taxation policy, it could be some kind of draconian law, it's been turned into a divide and conquer situation, where you get all this mud slinging back and forth between people on the so-called right and people on the so-called left, whatever that even means today.Such to the extent that looking at the diametrically opposed coverage of what's going on in Canada, I'm just reminded of that old poem which starts out, "First they came for the communists and I didn't speak up because I wasn't a communist. And then they came or this other socialist and what have you." I think that people who are defending the encroachment of the state onto any civil liberties are going to maybe be unceremoniously reminded that actually they're going to guard their civil liberties at some point in the future, and maybe there won't be anyone left to stand up for them.Adam Sharp:Right, exactly. It's interesting how things have basically become... There's basically two or three or four separate realities and people believe in them steadfastly. And there's not a lot of... I don't think a lot of people are being convinced one way or the other on a lot of these issue. So it is interesting, it's disturbing, but it just appears to be where we're at.Joel Bowman:It seems, perhaps even to have been exacerbated this divide during the past couple of years. And I think part of maybe, and you can speak to this, your experience in the US would have been different to what we had down here in Argentina, but the atomization of society in general during these lockdowns and isolations and social distancing. I feel like a lot of the checks and balance that usually hold polite society together, when you gather around the water cooler at the workplace and maybe you flesh out a couple of ideas or Tony from accounting says something a bit wayward, but then his friends pull him into line and say, "Hey, that's a bit of a crackpot theory." Or whatever.I feel like a lot of those checks and little social balances and etiquette have just completely been done away with. And now we congregate on Twitter where we just scream at each other. Everything has to be as divisive as it can possibly be and as incendiary as it can possibly be. So I feel like, even more so in the past couple of years we've had this, people have been digging their heels on both sides. It seems like we're farther from the center perhaps than we've been in a long time.Adam Sharp:It is interesting. One thing that I've noticed is that I look a lot of political and social polling, and Rasmussen Reports does some of the most interesting stuff. What their latest polls are showing is that independents are about 70% in line with conservatives and Democrats are becoming more on an island by themselves. So it is interesting to watch. I'm convinced that it's 99% based on the media that you consume, for most people. It's just like if they watch Rachel Maddow, they're angry about certain things if they watch Sean Hannity, they're mad about other things. But social media, despite all its flaws, despite all the censorship, it's priceless.Just to be able to follow what's going on around the world and maintaining that place where people can share ideas freely, I think that's going to be an increasingly important thing going forward. With Twitter, Facebook, all these companies, they're all towing the same line, they all are follow orders basically from the government to sensor certain things. Like I sent you that article where Facebook had this algorithm, that was exposed, where it gave users a vaccine hesitancy score. So if you had a certain score that showed that you were vaccine hesitant, your comments would be hidden or downgraded or put below the fold. So my view is that stuff like this is happening really widely on most of the social networks, and people can sense it, right?

Joel Bowman:Yeah.Adam Sharp:Back to polls for a second, I think something like 55% of Americans now believe that big tax sensor is based on political views. It's become widely accepted I think. Obviously some people don't accept it, but it's pretty clear to me that they are using their own personal political views to censor and steer the discussion. Ultimately, I think that's a really bad strategy. If you think about a company like Google or Facebook or Twitter, they've basically... I still use Twitter because it's just a great learning tool, right?Joel Bowman:Yeah.Adam Sharp:But something like 40% of their audience hates them now and is desperate for alternatives. They want places where they can speak freely and not be banned or shadow banned or whatever. It's just creating this huge opportunity for these alternative platforms. And that's an area that I've been focused on for a while. But right now it's just more relevant than ever, right?Joel Bowman:Mm-hmm (affirmative).Adam Sharp:People want truly, well, a lot of people, some people don't want free speech platforms, but a lot of people do.Joel Bowman:Free speech that they agree with is fine, it's just free speech that they don't agree with that they're unhappy about.Adam Sharp:Exactly. So I don't think that trend of big tech censoring stuff is going to reverse anytime soon. But it's created a really unique actually investment opportunity because these alternative platforms have an unfair advantage right now. They can really have free speech and people want that. So I think if Google and Facebook and Twitter and everybody hadn't started censoring people, it would have been really hard for any of these platforms to gain traction. But because they are cracking down on certain political views, it just hands these guys a huge gift. It's like, "Hey, Rumble..." So Rumble is a YouTube alternative. And I think they had 63 million monthly active users in Q3. And they never would have gotten that if YouTube hadn't started banning all this stuff. Because YouTube has banned basically anything that goes against the establishment in terms of COVID, even the war on terror to some extent. So people are finding these alternative outlets and the growth on them is really exploding.Joel Bowman:It does feel like if you build that they will come moment for a lot of these companies that are waiting in the wings and they're watching, you would have had to be really avoiding the news cycle to not hear Joe Rogan's name in the past month, let's say. So here's a guy who inks $100 million contract with Spotify. Wherever you fall on whether or not he should be able to say what he has to say or whether his guests should be able to say what they have to say, what is undeniable is that a large amount of people want to hear that. And he has an incredibly large audience, the kind that would make your average CNN anchor weep into his teacup.So that audience are craving long-form interviews, they're craving a curious mind, investigative, even interrogative journalism, really getting into the weeds on certainly unpopular mainstream opinions. And it just demonstrates that there is a huge demand for that. So go through a couple or a few of the companies that you're looking at. Because I know you're a startup investor. I may have mentioned at the top of the show here, but since you and I have known one another, you've invested in over 125 startups, a dozen or so have grown to unicorn status at this point, which is pretty. So when you see this, as you say, potentially even a gift being handed to companies that are positioning themselves as free speech alternatives or maybe even existing in a parallel economy, what are the standouts, outfits that you think are doing a pretty good job or that are keeping an eye on?Adam Sharp:So in terms of public companies, there's really two that I consider credible, the first one is Rumble. So Rumble is a YouTube alternative. If you guys aren't aware, YouTube bands a lot of content, pretty much anything that's anti-establishment. If it catches on and gets too many views, YouTube will quickly delete it. So YouTube, also if you don't know, is one of the most lucrative businesses in the world, they apparently get over $63 a user per year. So that's pretty good, considering a lot of those people don't use the platform very often.Joel Bowman:They have a subscription model, is that through... I guess that would average out between advertisement and subscription, right?Adam Sharp:I think that's just free, that's just ad based content.Joel Bowman:Oh, wow. So that'll go even to another point where advertiser's are going to go after this. If we get a lot of eyeballs on Rumble, that can take off quickly. Anyway, I'm jumping in there.Adam Sharp:No, it's fine. So Rumble's an interesting one. It is a SPAC, and SPACs are weird for a few reasons. It's a fancy reverse merger kind of. So all SPACs start off trading at around $10, CFDI is $14 right now. It is a little expensive, I believe the market cap... It's tricky with these SPACs because if you look at Yahoo Finance or something, it'll tell you $400 million, but it hasn't merged with Rumble yet. So until it does, we won't know the full valuation. So it's more expensive than it looks. But I think they had, let's see, 63 no. So they grew monthly active users from Q3 2020 to Q3 2021 from 2 million to 36 million. So that's pretty explosive growth, 18 times in a year.So they do have serious growth, they have a lot of good content. I watch stuff on Rumble, a lot of stuff that just isn't available on YouTube. And like I said, the company hasn't merged yet. It's worth watching, I might buy a little of it. So the big risk to Rumble is right now, they pretty much allow almost any controversial content. They allow stuff that's controversial that YouTube would never allow about COVID or about conspiratorial stuff. So right now, they are in the app store, they're in the Google and the Apple app stores. But the question is if they're going to get banned if they don't start censoring. Because the whole reason people use Rumble is because they don't censor like YouTube does, but that also puts Rumble at risk of being deplatformed from the app stores.Joel Bowman:And you would imagine that, especially if these are indeed the early days for Rumble, that they would be attracting, I would imagine, some of the more conspiratorial out there stuff that people would want to more easily point their finger to. So that may even give the app stores a little bit of cover to say, "Well this is exactly the speech we don't want. And so let's clamp down on that before it gets out of hand."Adam Sharp:Yeah, that's exactly it. So the people that get kicked off other platforms, they go to these new platforms. And sometimes they do have views that are offensive, it's going to happen. Sometimes they're going to be neo-Nazis, something like that. But just ignore them, you don't have to paint a whole platform because of the content that is on it. If it's a free speech platform, there's going to be some offensive stuff on it. I feel like we're adults and we can deal with that.Joel Bowman:One would hope.Adam Sharp:But some people don't agree. So Rumble is an interesting one. The other big one is Trump's social media platform, so this is called Truth Social. And it is publicly traded, but there's some warnings here. So the ticker is DWAC, and it's another SPAC company. So right now, it does have about a $20 billion market cap, and they just launched the app last night. So last night they launched the app just for Apple users. Apparently they have a huge wait list. I'm pretty sure if they can get a platform that works and is scalable and is fast, they're going to get some traction for sure. Because, like we said, people are really craving free speech, but there...So right now, it does have about a $20 billion market cap, so that's pretty steep for a company with no revenue. It's also up from... So like all SPACs, it started off trading at about 10 bucks. And last I looked this morning, it was $90. And there's a lot of potential dilution there too because with SPACs, people who invest at that in the private round, they get warrants at $10. So there are a lot of warrants at $10. So there's more dilution in this thing than it looks like. But I do own some DWAC, I think it has potential to become the mother of all meme stocks.Joel Bowman:Mother of all meme stocks?Adam Sharp:Yeah. Think about how obsessed people were with GameStop just because it was fun. I don't know why exactly they were obsessed with GameStop. But I think that this thing could become... If people start using it and people like it, it could really run. I don't know that fundamentally it's a great buy, it's probably not. But it's interesting nonetheless just to watch.Joel Bowman:It seems also maybe this is, well, I would bet that this was something that was driving the GameStop, AMC type buyer, was a bit of a finger to the man in some way. This is like, "Hey, this is how we can swarm and leverage asymmetrically our..." It's a flash mob in some sense.Adam Sharp:That's exactly it. And what sticks it to the man more than supporting Trump's social media network?Joel Bowman:Very unpopular for the man.Adam Sharp:So you summed it up really well there, I think that's the reason that it could run, is just it's almost like Bitcoin a little bit. People buy Bitcoin because we think the current system is flawed, we don't love it. And a lot of people think that social media and big tech is super flawed. So I think people could use it. If it catches on with users, I think it could certainly run. But it is already expensive, so just be aware of that. It's up a lot and there's a lot of dilution that's not baked in yet. So just be aware of that. Really the more interesting opportunities though are private. Most of the up and incoming free speech platforms are still private. One of the ones that I invested in a while ago is gab.com. So Gab is a very free speech platform, it's controversial, of course, because it is a free speech platform. And it does attract people that have been banned from other sites.But there's a lot of good people on Gab too and a lot of funny people and a lot of good news for conservatives and stuff. But that's an interesting one. I think they had about 90 million visits in January. So the interesting thing about Gab is how much censorship they've had to deal with. So in 2017, I believe their app was banned from the Google and Apple play stores simultaneously because of hate speech. And specifically it's because Gab doesn't believe that you can say, "We don't allow hate speech." Because it's always subjective. So they don't have a policy in there and basically they won't ban people that Google and Apple don't like. So Google and Apple, to play on their play stores, want it's like editorial control of these platforms. So that's the reason they got banned from the app stores basically. They were also banned from AWS and all the other major web hosts payment. They even got their domain banned from GoDaddy, which is crazy.

Joel Bowman:Wow, that's too heavy...Adam Sharp:So a domain name banned. But you know what, the founder and CEO, Andrew Torba, is really an impressive guy. He's a Christian, he's a family guy, and he just keeps building. No matter what they throw at him, he built his own infrastructure to host, they built their own email system, they built their own marketplace now, and they're also building their own payment system now, which is interesting. And by the way, I think this whole concept of the parallel economy, I think it's Andrew the CEO of Gab who coined that term. So I do want to give him credit for that. But the other interesting thing about these private market investments is that a lot of them... No mainstream VC would probably touch Gab with a 10 foot pole. So there's this artificially cheap aspect to some of these plays too because they're a little bit too icky for mainstream investors or they're a little bit too-Joel Bowman:It's like a risk discount.Adam Sharp:Yeah, exactly. Yeah, a risk discount, exactly. So Substack is the other interesting one, and you guys are on Substack.Joel Bowman:Indeed, yeah.Adam Sharp:And I just started the Substack, it's great. It's a really good service, they don't seem to censor stuff yet, and they're growing like crazy. I think this was a while ago, but they've just passed a million paying subscribers. So if you guys aren't familiar, well, everybody that's watching this is familiar with Substack, so I don't have to go into it, but it's another free speech platform. Interesting-Joel Bowman:And the founders have come out and been pretty... There was some rumbling, I think a couple of articles and maybe the Guardian and the usual suspects pointing fingers that, was it Chelsea Clinton retweeted something complaining of antivax or misinformation grifter. Of course, misinformation is anything that the establishment disagrees with, just by definition there. But I was very encouraged to see the founders of Substack basically come out and say, "Look, sunlight is the best disinfectant. So we're going to have ideas out there, if you don't like the idea, come up with a better idea, counter it, put up some information, and let's get to the truth of the matter as best as we can. But we're not going to get there by telling people that they just have to sit down and that it's not their turn to talk."Adam Sharp:Yeah, exactly.Joel Bowman:You mentioned Bitcoin before. And that being a similar kind of... I guess it had its genesis as a bit of a workaround to what many of us saw as a flawed central bank system. The whole end the Fed or audit the Fed crowd found a lot of appeal in a currency that didn't depend on the fiat whims of an elite central banker class. So I was thinking about this just before when we had... This was born in 2008 during the Cypress bailout. Then we had the whole Cypress bail in, which was a catalyzing event for Bitcoin to take another bull run.I'm wondering, now we have this G7 country, which is essentially, and this is to take a full circle back to Canada, we have a G7 country which is confiscating the financial assets of its own citizens. But we've seen gold respond this time, we haven't seen Bitcoin responding. And there's still a lot of downward pressure in the market on cryptos in general. What do you make of that in light of Bitcoin's historical role as responding positively to these financially sensorial market conditions and why perhaps it hasn't done that so far this time?Adam Sharp:That's a great question. It almost reminds me of March of 2020 when every everything in the world was selling off. I was sitting there saying like, "Well, they're just going to print unbelievable amounts of money. Why is Bitcoin selling off?" But the market just hadn't come to that realization yet. And when you do get these forced sell offs, a lot of these leverage trade and hedge funds, they're just forced to sell their Bitcoin no matter what. So I think long term, it's going to be great for Bitcoin. I wrote an article about that in February of 2020. But it takes the market a little while to catch onto things that might seem obvious to you and me, I think. I think there also is concern because in Canada, they are forcing centralized crypto exchanges too to freeze people's accounts, freeze people's Bitcoin. So people are like, "Whoa. Oh, you can just freeze the Bitcoin too?" Which it is a problem.Joel Bowman:For sure.Adam Sharp:People can pull their Bitcoin off exchanges, they can trade with it amongst themselves. But in order to cash out, you do need that government approved exchange. So it's certainly a hiccup for Bitcoin. If Biden comes out and says something similar, there certainly are some near term risks to Bitcoin. But I can't imagine a more bullish overall fundamental environment. Money printing as far as the eye can see, I don't think they're going to be able to raise rates and normalize, that just seems like a fantasy to me. But I don't know, I'm just still incredibly bullish on Bitcoin. But yeah, it might get Rocky for a bit. We could go lower. What do you think?Joel Bowman:I'm more or less in agreement. I think that there are scenarios where I can see short term pain. I recall the situation during some pretty hectic selloffs in the past. And I don't think that we're necessarily there yet, just with regards to general market sentiment. A lot of people got in during that run up to 60 plus K. And for them, a 40% draw down isn't really gut wrenching by historical standards. So it does look like there are a few catalysts that could potentially send it a little lower.But this goes back to the general theme, where I think all of these governmental tightening, whether it's with regards to free speech or assembly or seizure of financial assets or any restrictive behavior that the government engages in, which I can only imagine is going to get more intense, is going to be beneficial long term for any of these kinds of workarounds, provided that there are enough people who still value all of those things like free speech and people who want the right to be offended, the people who want to go on social media platforms or listen to videos or interviews or transact with people that might not necessarily be to everybody's liking. As long as people value that to some extent there'll be a huge demand for it. And I think in the long term, I'm hoping that demand for freedom is going to win out and pay off. So we'll have to see.Adam Sharp:Yeah, I agree.Joel Bowman:Well, Adam, we've probably gone a little over time already, and I'm very grateful for your time. But I did want to get to what you guys are doing over at HIVE. Give us an update on what's been happening there. I know it's been a pretty busy Q1 so far for you guys, so what's in the pipes?Adam Sharp:So if you guys don't know HIVE, HIVE is a leading cryptocurrency miner, we mine Bitcoin and Ethereum. And we do it, I think, in a really clever way. We basically locate our facilities right next to cheap and clean hydro power, so Canada, Iceland, Sweden. And we mine a lot of Ethereum in Bitcoin. I just started at the company last June. So it's been fascinating to learn more about the mining industry just because I've been around Bitcoin and I've been an owner for a while. But learning about how the sausage is made it's fascinating, it takes a lot of capital investment. Like all these... There's a bunch of big publicly traded miners now, and some of them are spending up to a billion dollars I think.There's some serious capital being invested into the Bitcoin ecosystem. Like we're building a big campus or expanding a big campus up in new Brunwick, Canada. And it's so cool to see these purpose-built Bitcoin miners going up. And the timing of the China ban last year was really interesting because it was great for North American and other miners because all of us a sudden we have all these data centers and people want to get their equipment in there. The hash rate went down, mining became a lot more profitable. I think that the decentralization out of China, because what percentage of Bitcoin mining was in China? It was like 60% or something.Joel Bowman:A worrying percentage of eggs to have in one basket for sure.Adam Sharp:So it's spread out throughout the world, and I think that's a great thing. It's going to be interesting to see what happens. Like we're saying, both of us have been in Bitcoin for a long time and we don't know what's going to happen in the short term. But long term, I really don't think... I think this is the world that Bitcoin was created for. This is why Satoshi did it, inflation, bailouts, all these different things.Joel Bowman:Well, it's the world of chaos and uncertainty, where you don't know the future and you can't centrally plan everything from the top down. So you will have organic moves, whether they're geopolitically responsive to something like the China ban. Or whatever happens in the future with regards to, I don't know, you throw on some climate and energy restrictions in one particular jurisdiction and then all of a sudden crypto miners who were, I don't know, position next to a hydrotech all of a sudden become much more attractive. So these are market responses that we can't predict down the road. But that's what makes it fascinating and interesting and rewards the front row tickets to it, I think.Yeah, absolutely. It's going to be fascinating to watch. Like you said, it's probably going to get worse before it gets better, but I am convinced that it is going to get better. People are, I know this is very cliche, but there is an awakening going on about overreach of government power and overreach of central bank power and all these different things. So that's not to be overlooked. Once the people... The first step towards change is recognition, and I think we're at the recognition stage right now. So hopefully change follows, and I think it will.Joel Bowman:All right. Adam, let's wrap it up there but get you back on shortly for some more chat. There's certainly no shortage of things going on in the world to hold our attention. Okay, Adam Sharp, thanks a lot, mate. Appreciate itAdam Sharp:Thanks, Joel. Bye.Joel Bowman:Cheers. 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“Much of the world's oil doesn't go to people just driving their cars to the mall. I mean, a big part of it goes to the trucks that pull everything around, to the ships that sail everything around, to the airplanes that fly everything around, to the plastics and to the precursor materials that go into everything that you wear. I mean, the buttons on your shirt, the soles on your shoes. It’s… everything.” ~ Byron W. King

TRANSCRIPT:Joel Bowman:Before we get started, Byron, I was just looking at the time zone differences here. I know you're in Pittsburgh. I didn't realize that Pennsylvania was a commonwealth or designated as a Commonwealth. I thought that was a yolk only we once and former colonists labored under. I didn't know that it extended to Pennsylvanians, too.Byron King:It's one of those things that goes back to colonial days, Commonwealth of Massachusetts, Commonwealth of Pennsylvania, Commonwealth of Virginia, and the Commonwealth of Kentucky. Then there are 46 states and four commonwealths. Although Puerto Rico is considered a commonwealth as well. It has colonial roots. I used to know the answer to that or I used to have an explanation for it, but I actually don't recall why that is. Ben Franklin-ish kind of things or something.Joel Bowman:One of those historical anachronisms. Byron, you and I have known each other for a little while now, longer than I've care to mention. I don't want to date our young dapper looking selves, but you are a man who wears many hats. A historian, an energy investor, a international geopolitical commentator, Well, for listeners who perhaps recognize your name and probably they've seen you around the traps for the last couple of decades, I'd say, writing alongside Bill and some other well-known cast of characters throughout the newsletter publishing world, do you want to just fill us in a little bit by way of a bio to get started? And maybe talk us through up and until how you got to meet Bill and came to working with and writing alongside him?

Byron King:Thanks very much, Joel. It's really a pleasure to speak with you and certainly to be on your podcast. I have been part of the Agora Familia since, I believe, around 2002 in one way or another. I've been on the payroll. I was on the payroll at Agora from about 2007, and so the next 15 years. I met Bill Bonner as a subscriber. I was just a reader of The Daily Reckoning. One day I was reading my Reckonings and he made some comment. This is about 2002 or so, he made a comment about the war in Afghanistan. I was just a reader. I was Joe reader out there, and I was a free reader. In fact, I wasn't even ... I thought, "I have a bunch of friends just got back from Afghanistan and I know a few things about what's going on over this." So I send him a little email, "Dear Bill Bonner, we've never met. You don't know me. But I have a bunch of friends just got back from Afghanistan. Here's what's really going on." Next thing you know, we had this discussion going on. Next thing I know, he's printing my emails to him in The Daily Reckoning and I was his friend. Then eventually I became his friend in Pittsburgh. I was a dear friend. Like, "Oh my goodness. This is starting to warm up."Joel Bowman:You're moving up the ladder here.Byron King:Next thing you know we started having this very nice correspondence. Then one day I went to one of the Agora conferences, The Vancouver Investment Conference. And I talked to Addison Wiggin, an old name from the past. Very still around, doing well. And I said, "Addison, hi, I'm Byron King. I'm your unpaid correspondent in Pittsburgh." And he says ...Joel Bowman:That's right. Unpaid correspondent. I remember that.Byron King:He said, "Would you be interested in starting in writing for us and we'll pay you?" I'm like, "Yeah, sure." "Just freelance." "Yeah. Okay." So I started writing Whiskey and Gunpowder with Dan Denning, who we know, Jim Amrhein, he's still around as well, and myself. I said, "What do you want me to write about?" He said, "Well, you seem to know a lot about energy and military stuff. So my first article I ever wrote for Whiskey and Gunpowder was the Ghost of Colonel Drake. Colonel Drake being 1859, drove the well in Titusville. Kind of the birthplace, the DNA of the modern oil industry. Although people in Canada say they drove an earlier well and people in West Virginia say they drove an earlier well. But Colonel Drake gets the credit. We started Whiskey and Gunpowder. I would write about energy and the oil industry. We were writing about military things, US strategy. I mean, the war in Iraq. I remember this one article I wrote about the Sicilian invasion of ancient Greece when the Athenians invaded Sicily. And somebody says, "Why are you writing about the Athenian sailing across the Mediterranean to invade Sicily?" And I said, "I'm really not writing about the Athenians sailing across the Mediterranean to invade Sicily. I'm writing about the war in Iraq, I'm writing about the war in Afghanistan."Joel Bowman:This is actually a Trojan horse for me to get my point across, to go back to the Greeks. Byron King:I would write about Herodotus and I would write about ... But it was fun. We picked up a lot of names, and Whiskey and Gunpowder was a highly successful newsletter. Then one day in 2007, the phone rings, I picked it up, and it's someone from Agora. And they said, "Hey, Byron. The guy that edits our energy and mining pub, outstanding investment, just quit. You want the job?" I'm like, "Is it a real job?" "Yeah." "You pay me?" "Yeah." "You guys have healthcare coverage?" "Yeah. Don't give that job away."Joel Bowman:Sounds like a real job.Byron King:Literally, I hung up. This was in the morning, about 8:00 in the morning. I got in the car, I drove to Baltimore, which is about four and a half, five hours depending on traffic. I had lunch. I came home and I told my wife, I said, "Hey, I got a new job." She says, "What kind of job?" I said, "You know that Agora Group down in Baltimore?" "Yeah." I said, "They offered me a job." She's like, "Do they pay you?" And I said, "Yeah." She said, "Healthcare coverage?" "Yeah." And she said, "Great. Because you hate your other jobs so do this job."Joel Bowman:I liked that she had the same filters as you. That you get paid, there is healthcare...Byron King:I get paid, there's healthcare coverage, and we'll do some fun things. Anyhow, that was 15 years ago and I'm still around, part of the Agora family. I think first time I met you was we actually went to Titusville together.Joel Bowman:I was going to mention that.Byron King:I think it was 2005.Joel Bowman:I think it was probably back in 2005 because I'd read that piece that you wrote in Whiskey. I just mentioned it to you somewhat offhandedly maybe on the sidelines of an editorial meeting or something where we fleshed out these ideas. Within a week, you had sent an invitation saying, "Hey, if you're keen on having a look at this, why don't you come on up and we'll do an old school dynamite frack? I've got some buddies in the industry who can show us around." That was a real hoop. A blast, I got to say.Byron King:And that's what we do. You were up there and one or two others. I had my two children with me. And we went up to Titusville. It was a beautiful, gorgeous fall afternoon. The trees were beautiful and gorgeous, leaves of Western Pennsylvania. We go out to this a working oil well. I knew these fellas. They were doing an old time ... Well, it was an early frack, but it was an old time exploding the well. Literally, they would drop a charge down there. they called it a torpedo. And they would drop it down to the oil bearing zone. And then they covered it with water to keep all from blowing up out of the hole. And boom, they exploded and they fractured the well.They started doing that in the 1860s. There was some colonel or some general from the Union army, got wounded in battle in the Civil War. He couldn't be in the army anymore so he came back. But he knew a lot about explosives so he went to work in the oil fields. And so they came up with it. So fracking, in a sense, has been around for a long time. Although, today with hydraulic fracking, it's quite different than exploding things. For all the listeners, readers, viewers out there, it's an old story, it was a fascinating, old story. And that's how we started, that's how we really got up close and personal to the oil fields.Joel Bowman:For sure. It's very interesting because that dovetails very nicely into the something that I want to get into with you here. And that is an email that you sent around, like the old days, send on a letter and it spawns all these different branches here. Down here in South America, we say, [foreign language 00:11:54], to go for the branches. But anyway, the email that you sent earlier in the week, and I've got the article here was linking to a column that cited a well-known Goldman commodities analyst, Jeff Curry, who's been around the traps for, goodness, I think 30 odd years, maybe more, very well-known. And he said he's been examining the commodities markets, of which you're very familiar, and said he hasn't seen anything like it in his entire career.And I want to get this quote right here because it's a pretty powerful one. He says, here it is, "I've been doing this for 30 years. Never seen markets like this." Here's the key takeaway, "This is a molecule crisis." He said, "We're running out of everything. I don't care if it's oil, gas, coal, copper, aluminum, you name it, we're out of it." And I guess we're starting to see that reflecting itself in prices across the board with oil at its highest mark since 2014, I think. A basket of commodities covered by Bloomberg, a couple of dozen of them from ags to metals, to energy all across the spectrum were really, really ramping up here. So I guess, first, is that similar to your reading, with your experience in the commodities markets? These big shortages that are driving prices? What do you see when you look out across the horizon?Byron King:Well, I mean, I'm old enough to have been around for a few things. There are cycles and then there are really humongous cycles. So we're in a humongous cycle. Not to say that it won't be resolved, but I mean, as people say, the cure to high prices is high prices, the cure to low prices is low prices. But there's more to it than that really, because we're changing the whole investment paradigm industry in what is passed for the industrial revolution for the last 200 years. I mean, when Colonel Drake drilled his well, getting back to the 1859 and Colonel Drake, I mean, people lit their houses with whale oil. I mean, petroleum was this exotic stuff that they skimmed off of creeks and they sold it as a patent medicine. There was no petroleum. So to the modern mind or the modern ... A lot of people think, "There's no petroleum. I guess there were no gasoline engines. I couldn't drive to the mall." That's right. You didn't have any internal combustion engines and you couldn't drive to the mall, but there was no mall. And when you got to the mall that wasn't there, there was no stores selling clothing made out of plastics. And you didn't have natural gas to heat your house and you didn't have electricity for your light bulb, to illuminate.The industrial age has been a coal age but a petroleum age as well. Because you can't have electric wire without copper, but you can't have it without something to wrap around a copper, which is plastic. Much of the world's oil doesn't go to people just driving their cars to the mall. I mean, a big part of it goes to the trucks that pull everything around, to the ships that sail everything around, to the airplanes that fly everything around, to the plastics and to the precursor materials that go into everything that you wear. I mean, the buttons on your shirt, the soles on your shoes.Joel Bowman:Every molecule.Byron King:It's everything. The medicines, you think you're taking an antibiotic and you can label it as that. But if you really go back to where it all started, that antibiotic began in an oil well somewhere because the materials in which they ... The medium in which they grew the bugs that they wound up pressing in to it, the little plastic bottle that it came in. I mean, if you didn't have that, we would live in a very different world. Actually, we wouldn't be here. Somebody else would be here. We would've gone off, would be some alternative universe. Joel Bowman:Is there a shortage of molecules? Byron King:Yeah, of course. Of everything we can get into.Joel Bowman:For sure. I guess, right out the gate, an obvious question presents itself and that is what do you, as someone who is a trained geologist at one of those fringe institutions, I think, it was Harvard university. One of those ...Byron King:Wild and crazy place.Joel Bowman:So what do you say to people who essentially advocate for a world in which all of those processes, those very, very careful processes that you just outlined in which we take these raw materials, these petroleum-based materials, and turn them into finished goods, and all of the energy inputs that are needed along that value chain, what do you say to people who want to go back to an era pre that? To a so-called carbon neutral era? I mean, it seems like we're asking for trouble there.Byron King:They're not just asking for it, they're calling in the artillery on their own position. I mean, it's completely totally destructive. I mean, if you want to say we need to be better about using our energy, you want to be more efficient about energy, you want you want to change life. Well, yeah, except when it comes to changing lifestyles, I mean, how do you plan to do that? Are you going to lock the world down for two years and hold everybody at the point of a gun, and if they drive their trucks in front of your parliament building and honk their horns, you're going to arrest them all or something? I mean, how do you plan to really get this done other than to make life miserable for everybody? To borrow from Ernest Hemingway, "Slowly and then all at once."I mean, that's a very, very, very long talk, you know what I mean? Before we come here, I showed you a ... This is a piece of copper. This is elemental copper, literally chopped out of the ground with a rock hammer. This is a rock hammer, which helps to prove that I'm a geologist. Literally chopped out the ground in the Keweenaw Peninsula, the upper peninsula of Michigan there. I mean, this is copper. America's first mining boom was in about the 1840s in upper Michigan, upper peninsula, where people went up there and literally chopped this stuff up. This is the copper that that era of America used for its tea kettles and to line its ships and to make its wagon wheels and make copper nails to hold the shingles down on people's slate roofs and stuff like that.We don't have this anymore. Well, I mean, you can find it as an exotic specimen every now and then. I mean, this is 99% copper. Today, copper mining, people are mining fractions of a percent of grade of copper. How do you mine fractions of a grade of copper? Well, you go to a mountain somewhere in the Andes, big mountain in the Andes, and you put all sorts of explosives in the ground and you blow it up and you haul this rock out in the great big, huge trucks, and you crush it, and you process it, and you go through all sorts of chemistry. And eventually at the end, you wind up with copper, which you make your electric wire or what-have-you. At every step of the way, the explosive, the trucks, the facility where they crush it, the facility where they process it, the facility where they turn it into copper, all the trucking along the way, the ships that haul it across the ocean or whatever, if you don't have some stored energy in the form of hydrocarbon or various materials that come from hydrocarbon for your chemicals, that's not going to happen. So people will say, "Well, we're just going to go to electric cars." Your electric car uses about four times, maybe five times as much copper as your normal conventional internal combustion car. I mean, you're talking about increasing ... Just in the auto sector, you're increasing the use of copper by four X and five X. So when the man says there's not enough copper, that's partly what it means.

Joel Bowman:And that's just one, of course, that's just one metal. This is just one element we're talking about.Byron King:One element on the periodic table. That's just one. I mean, we could go to other things. If you want to do exotic stuff. This is a specimen here, this is a titanium ore. This is rutile. Titanium dioxide. This is a beautiful specimen. I mean, no way I'm going to throw this one in the crusher. These crystals are as big as my thumb. I mean, if you want this thing, maybe I'll take 2,000 bucks for it as a mineral specimen. But it's not for sale.Joel Bowman:Where does this come from?Byron King:Well, this came from Graves Mountain in Georgia. Again, chopped out with my hammer. It's a unique geologic locale, but we don't have any of these anymore. When I say we, pretty much anywhere in the world, you don't find this stuff anymore. Maybe one or two here and there. You can go to Graves Mountain on a Saturday afternoon dig and maybe dig out a few of these things. But most of the world's titanium comes from very, very disseminated mineralization. What do you use titanium for? Well, it's everything in the white paint, all the way to a landing gear on airplanes. So where does most of the world's titanium come? It comes from Russia. I mean, let's all get mad at Russia. Let's all blame Russia for everything so that they can shut off titanium. They'll shut down Boeing in about three days if we don't have any titanium to build the jets with. Now we've covered two elements on the table. There's 90 others. Joel Bowman:So we've got a couple of ... I mean, you've touched on a few points here, but a couple of key takeaways thus far, I think is A, we're not just raking this stuff up off the front lawn anymore. These are hugely energy intensive processes in order to be able to get this stuff from whatever highly pressurized cavern. It is a subterranean, extreme environment up to whether it's painting your walls or driving your car, what-have-you. But the second component and from the Andes and to Russia, you've now mentioned, is not all of these elements, these raw materials are in geopolitically friendly jurisdictions. Which adds a huge price premium or at least a certain amount of market volatility that might be this kind of at the whims of just hoping things go the way that you want them to go. But that's not always the case.There's two angles to that geopolitically unfriendly jurisdictions. There are the geopolitically unfriendly jurisdictions where their government has contrary interest to our government, there's that kind of thing. But then there are the geopolitically unfriendly jurisdiction like Minnesota, where a very significant mine for copper, nickel, cobalt, there's several different proposals in Minnesota have all been shot down. They've all been killed off by the environmental lobby. Another geopolitical jurisdiction, California. You got to try opening new mines in California. Nevada, you can mine Montana, Idaho as if the ... The US and to some extent, Canada. Even Canada has become an unfriendly place to try to do any major projects because ... Byron King:It's not just that the permitting is so hard, it's the level of opposition. You get sort of I call it permanent capital. You know how BlackRock goes out and buys up entire neighborhoods, buys all the houses and nobody can ... You have to rent now. You can never own a house because BlackRock owns them all. Well, you get that same east and west coast permanent capital. And it funds these environmental lobbies and they come in, and their job is to stop projects. It doesn't matter the merits of the ore deposit, it doesn't matter the merits of the geology, it doesn't matter how many water quality analyses you do, how many air quality analyses you do, it doesn't matter how carefully you're going to run your mind or whatever. And if you've ever been around a modern mine, you'll see the absolute lengths to which the modern big guys go to to be safe and be careful and not be environmental stewards. There's those sort of geopolitical issues. And you know what? It's not even just a mining thing. I mean, a lot of people say, "We need more titanium. We need more copper here." It's a mining thing. It's sort of a mining thing. Your deposit is where it is. If it's not there, you can't mine it. If it is there, you still might not be able to mine it. It's a mining thing. But then, all you've done when you've blown up the rock and hauled it out in a truck is you've hauled out a bunch of rock. Now what? Now you need an entire industrial chain. You need the mills, you need the processing facilities, you need the refining facilities, you need the downstream facilities that keep adding value to it, add value, add value, add value. And the people who know how to do this in the world today, we call them Chinese. We don't call them Americans. We hardly ever call those kind of people Americans anymore. There are very, very few places in America where you can go to school and actually learn about, for example, rare earth refining. I mean, at one point, there were no places to go. Now there's Colorado School of Mines and a few other places around the country. China has entire universities that are devoted to teaching people chemistry metallurgy, hydro metallurgy, extracting these minerals. And they're capturing that part of the value chain. I'll just add one thing because I know we're going to talk some more of it. China is actually getting out of the mining industry. They don't want to dig up their ground as much anymore because they've got a huge environmental problems, water problems, food problems. They don't want to do that. They would rather buy the materials, process them in China down to a certain value add level, and then sell them to Western companies and sell them with strings attached saying that, "If you guys don't build a factory in China, if you don't share your technology with us, we're not going to sell you the materials you need." That would be the rarers, the permanent magnets, the phosphorous for lighting systems, things like that. We could talk about that all day.Joel Bowman:For sure. And if I'm not mistaken, China has some enormous percentage of the world's rare earth deposits, 90 plus percent or something. Am I in the right ballpark there? Byron King:You are absolutely in the right ballpark. I mean, you see a lot of figures and a lot of these figures are fudged figures. Well, China used to control 95%, but now it's only 80%. Well, really, when you get to the sweet spot, to the stuff that you can actually have a magnet and put it in the alternator of your car or have a phosphor and put it in your light bulb, things like that, China's back up around. They're way, way, way over 90%. What they're doing is, for example, in the US, there's a company called MP Materials, which mines rare earth ore at a place called Mountain Pass, California. It's a legacy operation going back to the '50s. Otherwise, they would never be able to build it today. But they literally mine the material, they crush it, they concentrate. They put it on in trucks, they haul it down to the port of Long Beach. And when those ships get done unloading in Long Beach and Los Angeles, they put the material on those ships and they send it back to China and we never see those molecules again. I mean, China isn't processing those on behalf of MP Materials. That's not what they call a tolling agreement. They're just selling them the ore, China gets it. And then they export it in the form of high value added materials, whether it's your microwave oven or your air conditioner or ...Joel Bowman:They send us back iPads and sneakers.Byron King:Yeah.Joel Bowman:I mean, all of these little tiles add up to a pretty dismal looking mosaic for the future of energy independence. If not only the US but in the west as well. So talk a little bit about how ... Because you touched on BlackRock just before and the idea of permanent capital and they're having such a mammoth share in the market. I'm talking BlackRock and Vanguard and these gigantic funds. When they move into the kind of mindset that is very high focused on environmentally sustainable governance, or ESG is another buzzword around now, when they go long on that type of regulatory framework, what does that do for American energy independence, and how much is it sending folding those cards to jurisdictions abroad?Byron King:Well, there you go. I guess you'd call it postmodernism. The philosophical postmodernism has transformed itself or it has beamed itself down as this ESG movement. And you get permanent capital, you get really big funds, really big organizations. They own a whole bunch of shares of all these different companies, pick her name, whatever you want. You had the one funded, owned enough shares in Exxon that they could influence other shareholders and they got their people on the board of Exxon. So all of a sudden Exxon went from saying, "We're an oil and energy company and this is who we are and this is what we do." To saying, "We're going to be carbon neutral and we're going to throttle back on this and that." Joel Bowman:That was just in the summer of '21, I think.Byron King:Just three, four months ago. Six or five months ago. Or you look at other big companies, Shell Oil, the Dutch company, or BP, British Petroleum, as it used to be called, as President Obama used to call it during the oil spill in the Gulf of Mexico, the British Petroleum, BP is their name. They're basically saying, "Well, we don't want to be called names, we don't want people to think harshly of us. We're going to be deinvesting in our traditional business opportunity. We're not going to drill as many wells. We're not going to explore as much. We're going to walk away from certain project, we're going to walk away from this big, huge gas project off of Mozambique or we're going to walk away from this opportunity offshore, Brazil or wherever."What it means is they are intentionally, consciously underinvesting in their business. When you say, "Who cares about Exxon?" "Well, I care about Exxon." I do not own a single share of Exxon. I don't think I ever have. Maybe I've bought and sold, I don't know. But I do not own a single share of Exxon. But I do care that they produce oil, gas, chemicals, plastics, what-have-you because I live in this world.Joel Bowman:You want to turn the lights on. Wear some shoes.Byron King:I like it when I flip the switch and the lights come on.Joel Bowman:Button your shirt up.Byron King:I like having little bull plastic buttons on my nice shirt. But when they underinvest, maybe we won't notice it today ... Well, we won't notice it today, tomorrow, next week, next month. But if they underinvest for the next year or two, by year three, we're going to begin to notice. Well, guess what? First of all, during COVID, there was a lot of underinvestment just because people are sick, can't work, can't show up to the office. Entire areas were just off limits. You can't fly anywhere, you can't drive anywhere, you can't cross borders. There was a lot of underinvestment for two years just because of COVID. And now as we wake up coming out of COVID because I mean, the COVID is ending. It's not over, but it's ending. That's a whole another discussion, but as we come out of it, we look around and we say, "Hey, wait a minute. Geez. People have been underexploring, under drilling, under developing, underplaying their geophysics, underdoing for the last two years. And we've got a couple more years of this as we look out on the whole ESG waterfront. What happens then? Well, if you don't invest in, go out, explore, drill fine, so what do the markets tell us? They're going to have a shortage of oil in the future. I guess, I'll bid oil up to $90 a barrel, maybe $100. How about $110 or $120? I mean, I've seen estimates of oil at $300 a barrel. Of course, when oil's at $300 a barrel, the economy crashes and everybody gets laid off. We'll see what happens. You'll see what the markets do. But then the other angle on that is that when a Western oil company walks away from developing a big oil or gas project somewhere, guess who else moves in? Either the state oil companies, the national oil companies of those other countries, Chinese capital moves in. China has plenty of permanent capital as well. They know how to write checks just as well as BlackRock and Vanguard. And if you pull out of here and you leave a vacuum, somebody else's capital will come in. Joel Bowman:Exactly as you would expect. As you said, we've been, goodness, I don't know how many years, but it would've been probably since the last peak in oil around 2014, thereabouts, that we've had this kind of cyclical turn. And as you mentioned, undercapitalization, underinvestment, under exploration, and now we're reaping the high prices of that under attention, I guess, to an entire sector. So let me ask you, because the people who are advocating for this, great transition, which they never fully get around to explaining how it's going to be funded, although we know the price tag is something extraordinary. I think Janet Yellen put it in the ballpark of $150 trillion. I guess they just print those. I have no idea where they all come from. Those people will say, "Okay, Byron, it's going to be tough. We're going to have to move from these fossil ideas, I guess, of the old oil and gas and the old stalwarts in delivering our energy. But what we're looking forward to is this utopia where we've got windmills and solar panels and all the rest of it." So talk a little bit about how that doesn't quite compute, doesn't quite deliver, how the sun doesn't shine, the wind doesn't blow, and all the rest of it. Because it seems to be a big gap between wishful thinking and cold, hard reality there.Byron King:For sure. I mean, windmills and solar have a place in the world. I call it a niche. They are niche performers. I mean, just to do windmills and solars, what do you need? You need steel, which comes from iron ore, which comes from rocks in the ground. You need coal to make the basic steel. You need coal to make the pig iron, and then once you have the iron, you can melt it. But you still need electricity, and where do you get your electricity from? You can't do big industrial scale electric things off of solar and wind because they ... Unless you have huge capacitors that somehow store the energy. I mean, I don't want to get all electrical engineering on you here. But to do solar and wind, you need a lot of steel, you need a lot of exotic elements, you need a lot of rare earth, you need a lot of silver. The polysilicon that is in the face of the solar panels. I mean, polysilicon is a very exotic material that the ... I mean, where's most of it made? Well, China. For windmills, you need all these big, fancy, permanent magnets in there. And these rotating machinery as the big blades go round and round and round. Where do those rares come from? China. Magnets? China. You've got other issues and these things have a life cycle. They aren't really renewable in the sense that after, pick a number 10, 15, 20 years, these machines, they too will wear out. They aren't going to last forever.Maybe you can rebuild them. Maybe there's a recycling element to them, but right now, what happens to old windmill blades? They bury them in landfills. Well, that doesn't seem very renewable. That's just the machinery about it. But you mentioned, the wind doesn't blow the sun, doesn't shine. The sun comes up and the sun goes down. And when the sun comes up, the little solar panels are out there and you go from no electricity, no electricity to, "Good. We're making lots of electricity. Lots of electricity." Sun goes down, no more electricity.What happens when you want to run your society during those nighttime periods or if it snows or if it's cloudy day or something like that? Well, now you need baseload power. Well, where's the baseload power come from? Well, traditionally coal. Nuclear, that'd be great. But we've really put a lid on nuclear. In the west, I mean, in Germany, they're shutting down their new plants. I wrote an article for Bonner Private Letter about that in December. Germany's energy StalingradJoel Bowman:That's right. Excellent metaphor and not a very good one for students of history who know how Stalingrad went.Byron King:It didn't work out well for the Germans the first time, they want to do it again. I don't get this. Some people don't learn. They don't learn too good, as the saying goes. Right now, as we speak, what happens when the sun goes down and we need to get that base load balanced again? We need to balance the load so that literally the lights will go on, so the refrigerators keep running, people's computers keep working, so that you can charge your Tesla at night or what-have-you. How do we get that power? In a lot of places in the United States, the way to get quick, almost instant electric power is you turn on your natural gas fired turbines. You have out there in the gas fields, you got the pipelines. Again, pipelines are made out of this thing called steel. That comes from ... They're put together by big, heavy machinery that are run by this stuff called diesel fuel. And they're wrapped in these protective coatings that are made out of this stuff called plastic, which comes from this thing called oil, which comes from these things called oil fields. In comes the natural gas to the great, big, huge gas turbines that are made by Siemens and General Electric and what-have-you, made out of all sorts of exotic materials like titanium and all sorts of fancy magnets made out of materials that came from China. We spool these babies up and we generate this electricity and now we balance the load. So by day, we are subsidizing solar power because they all have tax breaks and tax credits and everything for their solar panels and such. By day, we're flooding the market with this subsidized solar power. And by night, we're having to turn on these merchant power systems, these natural gas fired systems just to balance the load. We're really ruining the economics of a broad scale electric power industry. I mean, across the country, public utility commissions in every single state are wrestling with this. I mean, where the public utility goes to the commission and says, "Listen, we're having to pay these high rates back to the homeowners for their solar panels by day on the sunny days but that doesn't support our grid." And then meanwhile, we have these idle plants that we have, these natural gas plants on each side of the sunrise, sunset, we have to pay ... Those are capital costs, too. We have to pay for those. We don't use them for eight or 10 or 12 hours a day but then we have to spin them up at night. You get into public utility law that is very, very complex. The lawyers are having a field day with it, the lawyers and the economists who deal with this. Great jobs for those guys, those gals. There's a whole thoughtless sense to it all. Then you go to a place like California, which has reached something, on a sunny day, something like 30% of the California on a sunny day is solar-powered or so-called renewable power. Okay, but now you destabilize the whole grid with on again, off again power. And they're importing power from British Columbia, they're importing power from Nevada and Utah and other places. How do you do that? Joel Bowman:I mean, it goes back to what you were saying about Germany and what you wrote. I'll link to this article below for our listeners because it's really well worth their reading. It's a little peek into the future just as I'm down here in Buenos Aires, Argentina is a little peek into America's inflationary future if it doesn't pull its breeches up. But I think you can look into the future by having a look at what's going on in Germany. And if we keep down this path as Germany has done, not only do we watch just basic electricity heating costs go through the roof, as we've seen natural gas futures, and oil price skyrocket over the past couple of months during this winter.But also you eventually have to revert if you put a whole load of your power load onto an unreliable, so-called renewable or green energy grid. When that doesn't come through or when the wind doesn't blow, as they found out in Texas last year, then all of a sudden you're back to dirtier fuels. Coal, in the case of Germany. Where you're undercuting your whole reason for going green in the first place when you're ... I think it was actually lignite they went back to. It was even worse.Byron King:They come burning lignite. Is there a dirtier fuel than lignite? The answer, no. I guess if you could burn your front lawn or something...Joel Bowman:You could burn a rain forest.Byron King:They're burning lignite to release the energy to boil water, make steam, spin a turbine and literally keep their lights on and keep their little street cars running in diesel cars.Joel Bowman:Crazy. So what about people who say, "Okay, this is all well and good. But man has innovated past paraffin. We've had whale oil." In some parts of the world, in Indonesia, they're still burning through forests." We used to burn various types of fuels until we got to this high grade, high ERORI of the petroleum energy return and energy invested ... There you go. Until we got to these high ERORI fuel sources. So we've just got to have a bit of faith in technology, we've just got to have a bit of faith in innovation and tomorrow's battery cells and tomorrow's whatever. They're just going to be so much better that we just need to transition to the eutopic future and we'll all live happily ever after over there. What say ye, Mr. King?Byron King:Well, there's an old expression that I heard it long ago from a guy at Westinghouse, the old Westinghouse Electric Company, which was this massive company that it did everything. It made electrical appliances, it made electrical equipment, built nuclear plants. I mean, it built the nuclear reactors for Navy submarines, things like that. But they were very stovepipe company, they had a lot of different branches. And the guy said, "If we only knew what we know, we could really do much better." And when you say, "People are innovative, there's lots of patents out there." Yeah, there are. There's lots of patents out there. And if we knew what we know, we might be able to cobble something together. That takes political leadership and that takes policy making people who actually understand this stuff and who didn't just read a couple magazine articles or didn't just spool up after reading a New York Times article or two about, "We're going to kill ourselves. We're ruining the world," and all this sort of stuff. We're ruining the world and we're all going to die, okay. I grant you that. I mean, in rare earth, for example, there was a not too long ago study that I saw, heard about. They compared patents in the rare earth arena by different countries and they adjusted per population, what-have-you. For every patent in rare earth, which are important if you're going to do renewable, for every patent in rare earth that happens in the United States, there are 35 patents in China. Joel Bowman:Wow. This is population adjusted as you mentioned. That's an important caveat there.Byron King:When it comes to who's going to own the future, the people who are going to own the future are people who are thinking about it and thinking about tying it all together. Which is not to say that China's 10 feet tall, but Chinese people are 10 feet tall, that they strongest gorillas and all this sort stuff. No, no, no. I mean, they're people, too. But they think about it. And it doesn't mean that I want the CCP, the Chinese Communist Party, approach to running life in America or Canada. Even though sometimes you wonder. You kind of wonder, I mean, how much of that rule book over there have they brought over here?Joel Bowman:Gramsci's long march through the academies is alive and well.Byron King:These long march through the academy. I mean, when people say, "We have a carbon dioxide crisis." I said, "Well, all I can say for sure is that every year, there's more carbon dioxide in the atmosphere." It's a very, very, very small fraction. Some people say, "Well, it's enough to change the climate and everything else." "Well, I don't know that the models are that good." Other people who are smart have different models of it. I've spoken with Russian scientists who cover this and they think that Western scientists are just they don't know what they're talking about. And the Russians, they know a few things about the high arctic. I mean, half their, of countries in the north of the Arctic Circle. But we have really a global environmental crisis. I mean, if you look at how much crap is just being thrown into the rivers and streams and the off flow of agriculture chemicals and things, I mean, we're ruining the ecology of the planet, I'll grant you that. I mean, it just seems to me that the policy ought to be broader than just this crackdown on what I'd call the center of gravity of modern life, which is a petroleum-oriented or hydrocarbon-oriented energy and materials economy. When you say, "We've got to turn the valves and we've got to shut in the oil wells and shut in the natural gas. We're going to put the coal companies out of business. They should all go bankrupt." The woman who almost became the comptroller of the currency that President Biden nominated be the comptroller of the currency, from Cornell Law School. She was an immigrant from the Soviet Union. She wrote her thesis on A Marxian analysis of the economy. She said that in order to ...Joel Bowman:Omarova, I think her name was.Byron King:... have the future that we want, we're going to have to bankrupt all the oil companies. It's like, "Well, to bankrupt all the oil companies means our energy's going to go away. Our classics are going to go away, our agricultural fertilizers are going to away, our chemicals are going to go away. I guess that means you just want to kill us all off. Well, no, thank you. No, thank you. We're just fine killing ourselves off without you helping."Joel Bowman:Right. Saule Omarova I think her name was. Another of her quotes, I think she was taking the scorched earth approach. Not only to oil and gas, but I think to banking as well. She wanted something like some federal deposit accounts where, of course, the government would be able to control maybe through a central bank digital currency or some such. Where you spent your money, with whom, at what time, under what circumstances. Because of course, central planning worked out so well for the Soviets. She was a School of Moscow graduate, I think.Talk a little bit, Byron, about a potential kind of transition fuel. It strikes me that when people talk about, "Okay, let's throw the baby up with the bath water." Let's throw the entire petrochemical industry just in the drink. First of all, there's not enough room in St. Greta Thunberg's arc for two of every species at this point, let alone the whole human race. But is there some possibility that we could transition to say, a larger percentage of our energy needs reliant on, say, natural gas or nuclear, if we could get the political will behind it and move away from either geopolitical risk in some places? I mean, you speak about the United States, there's no shortage of natural gas there. One would think that would be a perfect strategy for ensuring a bunch of jobs, reinvesting in America's energy independence and its energy grid, and having a somewhat of a lot, well, a lot cleaner source than say coal or German lignite, for sure.Byron King:Well, it is a rough and rocky road ahead to change. I mean, we're looking at 200 years of inertia here. We're looking at a lot of what we call the built economy, the things that run on things that we used to have. I mean, the easements and the rights of way kind of like with the railroad, they are where they are and they were established long ago. And it's if you want to build a new railroad today or change the trackage of a railroad, how do you do that? I mean, I talked to a guy once at the US Department of Transportation and I said, "What's your biggest problem when it comes to building roads?" He says, "The biggest problem that we encounter most is graveyards." Every time they want to build a road or expand a road, they have to dig up a graveyard, move all the caskets. Transition the economy, every time you want to do something slightly different, you're going to have to dig up somebody else's graveyard. You break their rice bowl or dig up their graveyard. You know what I mean? Now we said, "The thing is we have what we have." And like I said earlier, if we knew what we already know, if people could actually synthesize what we already know, we can do this. And in fact, this is future looking in terms of where Byron is going with his writing. We'll talk about that in a few moments, if you wish. But if we knew what we know and we started to really tie things together, we could take what we have. We could take where we are and begin a reasonably decent transition and people who are part of it could make some money at it investment -wise.We can't just turn the valves and shut off the oil industry because a third of the oil goes for transportation and a third of it goes for industry and chemicals. I mean, it's not just people driving to the mall that's destroying the world. Don't take what you see every day when you're out and about. Don't take that as the problem or, natural gas. Let me just leap frog ahead a couple of things. I mean, we must absolutely revitalize the nuclear sector for base load electricity. Lots of great ideas out there for that. There's uranium. I mean, I could get into thorium but that's a whole another ... We could spend all day talking about thorium.Joel Bowman:It's another episode.Byron King:A whole another episode to talk about thorium. Just basic uranium reactors have an incredible future for base load electricity. Another thing and another point, and this is something that I'm working on right now and I'm going to be coming out eventually, give me a month or so with a report, it's going to be on fuel cells. You take a solid oxide fuel cell. You pass the hydrocarbon over it, natural gas or you could use diesel or you could use almost any hydrocarbon you want. But because of the chemistry and the physics of a fuel cell, and I don't want to get into it, this isn't going to be mechanical, electrical engineering class here. But because it is an immensely efficient way of removing the energy from that hydrocarbon, turning that energy into electricity and capturing and controlling the emissions, I'm not going to say that there will be zero emission. Fuel cells will never emit another molecule of CO2 again, but we will sure emit a lot fewer using fuel cells. And when you say, "Well, tell me more about this fuel cells." I don't want to get into the electrical engineering of how they work. I mean, you can read, I'll tell you more when I write about it and you can read about it eventually and you'll know about it.But the materials that go into these fuel cells, they are familiar materials, again, from the mine mill factory side, copper, nickel, platinum, palladium, rare earths. Oh my goodness. Yttrium-stabilized zirconia. You want exotic metals. I mean, we got to have yttria-stabilized zirconia to make these things work. Is there a molecule shortage of that? You're damn right there is. But what that means that if how to get yttria or if you know how to get zirconia, you're on the right track here investment-wise. That's one example.Joel Bowman:Well, let me ask that because I want to get around to your writings and where people can find them. But before we do that, give us a broad sweep. I don't want to undercut any of your own paid subscribers here, but for investors who are out there, who are they've been having a bit of a turbulent ride in the markets potentially so far this year, to say the least, if they've been investing in the new shiny things and they're looking at getting back to basics as it were. And this of course, Dan Tom have been writing about their trade of the decade, which very generally speaking is long energy, long, old energy that is. We spoke about this earlier in the year or late last year, rather, with Rick Rule, Winter Catastrophe Summit for Bonner Private Research. But when you are looking at ways to actively invest in this long term trend, what kind of sectors are you're looking at and how specific can you get with regards to sharing with us things that are on your radar?Byron King:Well, I'm still writing for one of the old line at Agora pubs. I work with Zach Scheidt on one called Lifetime Income Report. Every week or so, I write a little column that goes out in every month, I write another longer column for the monthly. It's a value investing kind of approach. I mean, just good basic companies in good basic sectors that can survive the tsunamis of what's going on. Nothing big and flashy, no Facebooks that are going to drop 25% one day, that kind of a thing. Joel Bowman:You mean we can't power the world with cat videos and the likes?Byron King:No. You just can't power the world with invitations to your birthday party kind of thing.Joel Bowman:Who would've thunk it?Byron King:That's where I'm at right now. In terms of what do I talk about? I talk about the classic things. I mean, I talk about gold, silver, just basic. I mean, there's definitely an upside to them but they also have what I like, which is the limited downside. And even if they do drop during a market crash, what's the first thing that recovers after a market crash? Gold. It's the most liquid thing there is. People sell their gold to pay their margin calls on Facebook or on Tesla or whatever like that because they got slammed. But then the thing is when they sell their gold, somebody else goes in there and buys it as with a lot of other things. Why do you think Facebook dropped 25%? Well, because it went no bid. Nobody wanted to buy it up there. Maybe some bottom feeding sharks came in to buy it down there. But I actually think some of those bottom feeding sharks are going to wish that they had found a lower bottom, so there's that.I like classic traditional energy. I mean, a company like Exxon or a company like Chevron. I mean, I was writing about Exxon a year ago when the share price was about 50% of where it is now. When the dividend yield was something like, I don't know, 10%. And you say, "Well, Exxon, who needs to be told to buy Exxon?" Well, I don't know. A lot of people seem to be told to buy Exxon because the share price has gone up significantly in the last year. Somebody was buying into it. And even with the people on the board who were like, "We're going to go ESG and we're going to decarbonize ourselves." They're making all this money in spite of themselves in the current oil environment. And I don't see the current oil environment self-correcting.I mean, it's not like government policy. Not this government, not the one we got now, not this ... They're not government policying towards more oil lower prices. I mean, you may have seen our wonderful Secretary of Energy, the former fashion model, tour guide at Universal Studios, Governor of Michigan, Jennifer Granholm, when she was asked, "What's your solution to lowering energy prices?" She literally laughed at the person who asked her that question. Somebody asked her, "How many barrels of oil does the United States use every day?" And she says, "Well, I don't really have that data." I'm like, "You're the secretary of energy and you don't know how many barrels of oil the United States uses every day? Why are you there?"Joel Bowman:You would think of all the pieces of information, that particular data might be one that would maybe spring forth from a well-fertilized mind, but doesn't appear that that's what we're speaking about at this juncture.Byron King:And it's an easy number. I mean, it's in the realm of about 20 million barrels a day to run the United States. Joel Bowman:It's a nice round number. Byron King:Nice round number. You just have to remember that. You don't have to get down to the nearest 100,000 or whatever. Just throw that out and you'll sound like you're smart, like you know what you're talking about. Where does it come from? Well, I mean the United States imports more oil every day from Russia than we do from Saudi Arabia or Mexico. I mean, nobody knows that. Again, let's get into a war with Russia here. Unless we can somehow make another Mexico to make up for that deficit. But anyhow, in terms of like, "What am I looking at?" I mean, basic energy, US natural gas, certain pipeline plays because ... Not all pipelines. I mean, if you have a pipeline to a declining energy basin, well, you have a 50% full pipeline. That's not a good pipeline.If you have pipelines into the Permian basin, which is 98% capacity, that's a good pipeline. So things like that. I have been spending a lot of time talking with the mining place and the processing place for the battery metals, the technology metals, the energy metals, the rare earth place. As I've mentioned earlier, in North America, US, Canada, we have some mining place. We don't have a lot of the downstream place. It's just not there. There are a couple that might turn into something. I mean, Canadian companies, a company like Appia Energy, A-P-P-I-A. Appia Rare Earths and Uranium is their full name, they have the best deposit of a mineral called monazite in North America, maybe the world. It's the highest grade minerality I've ever seen. It's unbelievable minerality. Monazite for again, not to get into all minerology on you here, but it's a fabulous ore for rare earth. The problem is with Monazite is you also get low levels of uranium and thorium so it's a radiation problem. They're in Saskatchewan. They have a relationship with the Saskatchewan Research Council, which has a licensed nuclear capable facility. So when they process their minerals, when they get there ... They're still developmental. But when they get there, when they process the minerals, the Saskatchewan Radionuclide site, they're going to take those radioactive minerals away. That's a good thing. And we'll be left with the molecules we want, which is the rare earths, the neodymium and the dysprosium and the erbium and terbium and gadolinium and all those good stuff that make things work. I've been working on that. It's a model of an investment paradigm that feeds on where the war world is going in the future. Again, if we could only know what we knew. That's going to be ...Joel Bowman:I think we have a title for this episode. If only we knew what we knew.Byron King:If only we knew what we know.Joel Bowman:Well, Byron, I'm cognizant of the fact that we've run a little over time here, but I'm always thrilled to talk to you. It's such an encyclopedic knowledge of all of the aforementioned subjects and so many more. Besides, we didn't even get into half of the things that I wanted to talk about but we can save those for another podcast in the future. And in the meantime, as you mentioned, it looks like trends in motion are going to stay in motion, at least for the remainder of this administration and who knows how long beyond. What that means, I guess, is to torture a metaphor, a rich vein for you to tap with regards to individual investments in a field that you know probably better than anyone out there. So that's good for followers of Byron King and good for followers of Bonner Private Research. We'll be talking to Byron plenty more in the future if we're so lucky. So mate, thank you so much for taking the time. I really appreciate.Byron King:That's great. I thank you for your time and your courtesy. For all the viewers and listeners out there who watch this or listen to it, thank you so much. I truly appreciate that you would give me any of your time at all. And I hope that we've helped you with your thinking.Joel Bowman:Excellent. Byron, thanks a lot, man. I really appreciate it.

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“I'm not a gold bug. I'm not a gold guy. I don't buy gold out of some philosophical distrust of the system or anything like that. I'm actually an investment guy. I like stocks. I like investments. And I intend to have our savings in the stock market most of the time.”

~ Tom Dyson, Investment Director for Bonner Private Research

TRANSCRIPT:

Joel Bowman:Welcome back to the Fatal Conceits Podcast, a podcast about money, markets, manias, messiahs, masochists. We could probably come up with a bunch of other descriptive adjectives for the show, but in any case, we're thrilled today to welcome the Bonner Private Research Investment director, Mr. Tom Dyson, to the show. Tom joins us from the Dyson household in London. Welcome, Tom.Tom Dyson:Thanks, Joel.Joel Bowman:Good to see you again, mate.Tom Dyson:Good to see you, too.Joel Bowman:We've got a lot to talk about today, but I think for your long time readers, they're interested in just catching up on how the family's doing. I know you mentioned that you guys all got COVID recently. We're hoping you're all well and on the mend.Tom Dyson:Yeah, thanks. Yeah, we did. We caught COVID. All five of us tested positive at the same time and it wasn't a big deal, just mild cold symptoms.Joel Bowman:The highly mild variant.Tom Dyson:Yeah, exactly. Exactly.Joel Bowman:All right. Good, good. Well, glad to hear that everyone's on the mend. So mate, before we get into your story and in particular your role as the investment director here at Bonner Private Research and the whole new project that we're undertaking here, I thought maybe we could back up a little bit. And just for who or listeners rather who might be just joining us at the moment, maybe we could start with a little bit of an origin story, if you will. I know you got into investing as quite a young lad. Do you want to just pick up the beginning of your journey and how that all came to fruition at the very beginning?Tom Dyson:Yeah, my dad was a banker and I guess some of it must have rubbed off on me because I was interested in finance as long as I can remember. And one day he spread the Financial Times page of all the stock market quotes in front of me and asked me to choose some stocks. I was 11 years old at the time, and I chose Marks and Spencer and Euro Tunnel. At the time Euro Tunnel was just ... I don't even know if they'd finished construction of it yet. In fact, they hadn't. I have to go back and look, but I had no idea what I was doing.So what happened was within about a year, Euro Tunnel had tripled and I wanted to sell, but by the time I'd written a letter back to my dad asking him to sell, it had lost some of his gains, but I ended up more than doubling with my money. And Marks and Spencer, I held for many years, probably two decades after that and it didn't really do much. It wasn't a good investment and I sold it probably 15 years ago or something. So that really got me, got me started. That's where I started my addiction of checking stock prices all the time. I would grab the Financial Times any time I could and look up the prices of my stocks. And then the internet came along and that addiction just went into overdrive.

Joel Bowman:Yeah. The internet's been an enabler for many of folks' addictions, I think. A good old brand would leave that to be desired. Yeah, it sounds like a pretty auspicious start if nothing else. So you went along. Were you working at ... I think it was Salomon Brothers, was it? Or one of the ...Tom Dyson:Yeah, Salomon Brothers had just merged and was called Smith Barney. And then while I was there, it turned into City Group.Joel Bowman:Okay.Tom Dyson:So that was my first job after college, my first serious job. And that was in March 2000, so literally at the peak of the technology bubble.Joel Bowman:Right.Tom Dyson:Actually, the bubble actually crashed the first day while I was on the plane in the air flying back to London to take my position.Joel Bowman:Wow.Tom Dyson:So it was...Joel Bowman:That was a warning sign.Tom Dyson:Yeah. The timing was incredible. Effectively, my entire professional investing career has been a series of bull markets and bear markets.Joel Bowman:Right. Right. All right. Well, mate, let's get into a little bit of that because as, I think you may not protest at the descriptor, something of a contrarian, you didn't take what would be for many the path most traveled. And you have quite a colorful history even from there on out. So when it comes to traveling, and for those who have followed your postcards and your writings over the years, it's not Club Med type traveling. Tom is a pretty extreme traveler going to weird and wonderful places and traveling on trains and all this kind of stuff. So how did your interest in traveling and travel writing and investing converge? And in particular, how did that bring you up to working with Bill, which would've been around, I guess, just a few years after that, maybe early 2000s?Tom Dyson:Yeah, 2003, I think, I wrote to Bill and asked him for a job. I told him I'd quit my job at City Group on the training floor and I'd go and work for him for free. And it didn't quite work out how I imagined, but it did work out in the end. So I was never a writer. In fact, I can admit to you that I failed my English GCSE, which should have been pretty easy. I mean, it's a nationwide exam that anyone with a pulse should really be able to pass. But I was always much more into mathematics, economics, physics. I guess my mind is more comfortable with numbers and equations than it is with words and that kind of thing.So the fact that I'm a writer is still a surprise to me. I never thought that that would've happened, but what happened was I was at Citi Group. I was there for four years and I went to night school to study accounting. And I'd go to professional accounting qualification as well, which I've always loved accounting, but I didn't like working at City Group. I found it stifling and I wasn't doing what I really wanted to do, which was research investments. Instead, I was working in a cubicle. I was working for a trading floor. I was managing spreadsheets and basically I was doing whatever my boss told me to do. And I was commuting every day and I just wasn't inspired by that at all. It wasn't how I had imagined it to be.And another thing I should add is in addition to studying investing, I loved reading books about investing when I was a teenager, I read Liar's Poker. I read Barbarians at the Gate. I read about Michael Milken. I read about the big takeover crazes. I read lots of that sort of literature. And so that really inspired me to go work in the city or on Wall Street, but as I said, it wasn't quite as I had imagined it to be. And so another passion that I've always had are railroads, freight trains specifically, not passenger trains. I'm not that interested in passenger trains, but for freight trains, I'm really interested in. And I have been ever since I was a kid.We used to have a model. I used to build model railways when I was a child. And then anytime we were in the car with my parents and I saw a train, I would always pester them to stop and see if we could see trains coming, et cetera. So I just had this fascination with trains. And I decided instead of working for Citi Group ... and Bill didn't get back to me right away, so I quit my job anyway. And I went to America and started backpacking around and trying to catch rides on freight trains, like a hobo, hobo style. And I'd been inspired by that because the internet and email was quite new at that point, and newsletters were quite new. And I'd been reading Bill's email newsletter, and I decided to write my own email newsletter back to my friends who all had cubicle jobs in London. And to describe to them the series of misfortunes and mishaps that I went through as a young investment banker trying be a hobo.And I had plenty of mishaps to write about, and I just really wanted to entertain my friends and make them laugh. It wasn't to show off or anything else like that. I just really wanted to entertain. And that is where I first started writing and getting interested in writing. And from there, I think, I think Bill and Addison and some of the other people at Agora saw that I was in a way a unique, because I enjoyed writing, but I also had experience with professional finance. And I think it's quite a rare combination. Finance guys are interested in numbers and spreadsheets, and writers, they're interested in poetry and art and literature. And there's a rare crossover there and I was that. So anyway.Joel Bowman:Well, a rare crossover, I guess, that it's not so often that you get a hobo investment banker, so yeah, there's a unique flavor to your approach. And as you were describing this chapter of your journey, then I'm thinking about something else that I know you and I are very interested in, and maybe we'll do a separate podcast about this. But as you're talking about the texts that you were reading and just consuming voraciously as a nature, it's that auto didactic nature that I think when some people, as you mentioned with, with the GSE, they may not gravitate toward traditional learning, but they may have a passion or a flare for something. And if they follow that dream, whether it's on a railway or into investment biker books or Liar's Poker or whatnot, yeah, that can really nurture a lifelong love of something in which you bring a passion and dedication that is often very rewarding.So mate, let's fast forward a little bit to when you were working in Agora for a while, writing some very successful newsletters, the 12% letter and doing a bunch to research with a lot of people whom I think ... probably a lot of our readers and listeners would be very familiar with, a lot of personalities in the investment newsletter industry. You had a bit of a break and then you picked up again ... What would it have been? 2015, 2016 or something when you got together again with Bill, spoke about a dow-gold trade? And this is chapter two, I guess, maybe of your involvement together.Tom Dyson:Much later, actually. More like 2019, actually.Joel Bowman:Okay.Tom Dyson:2019, so not very long ago with, what, 2022 now, so it's three years ago. Yeah. What happened was Kate and I, my wife, and our kids, we went off traveling. I'm sure most people are familiar with the story because I've beaten it to death, but we went off traveling and I had stopped writing. I wrote a newsletter for the best part of 10 years. And then I went more into the publishing world where I started a publishing company and I stopped writing. And I hired analysts to do the writing and I built a publishing business. So I really stopped writing at that point to try something different. And it was after we went traveling that I guess I got the call inside me to start sharing again. And that's when I started writing emails back to my friends, basically.Again, it's the same story. I wanted to entertain people with our stories. And as you alluded to before, we were not staying in five star hotels and going to theme parks. That to me is not interesting, and I wouldn't want to read that. I just don't want to read that. I want to read people who do things different or funny or shocking. I want to be entertained as a reader. I always think I really just write stuff that I would like to read if the roles were reversed. I think that's where it comes from. And there's nothing funny about someone going to a five star resort and showing how fortunate they are to be by an infinity pool, or eating a gourmet meal. There's just nothing funny about that at all, so I would never write about that.But the way we did it, we were backpackers staying in really terrible hotels and youth hostels for $4 a night. And that was quite funny, especially how the children reacted to that and how Kate reacted to that. And we were doing our laundry in sinks and hanging them up on anywhere we could find, a corner. And anyway, so I'm rambling, but that's how I got back into writing. And that's also at the time where I hooked up with Bill and Dan and I started doing something more serious.

Joel Bowman:Yeah. So I guess that brings us from a personal background to a little bit of where the rubber begins to meet the road, because as I have been reading along with others, your journey along the way, you took what I think most people would consider a pretty big plunge, or at least something that's very entertaining to read. And that's with your dow-gold trade and going all in as it were. I think a lot of people were intrigued by that. It's not a usual orthodox way to go about one's investing life. So maybe catch us up on a little bit of that backstory, and then we'll get into what we're doing now and your role as investment director with Bonner Private Research and what we're looking at going forward.Tom Dyson:Yeah. There's a lot to that. I think people's reactions surprised me because I didn't feel like I was doing something risky or more crazy or wild. To me, gold is really the most boring, the most risk averse thing you could do. It's like doing anything else seems to me like adding risk. So at the time, we were traveling and I think we were in central Africa when I first started withdrawing all the money out of our bank and purchasing gold. I was doing it on the phone ordering in gold in boxes. And yeah, to me, that was ... I guess I looked at the situation. And if you go back to ... and this was in the fall of 2018 at the time, gold, it was much lower than it is today. And the start market, well, that was also lower than it is today.But at the time it was at an all time high and valuations were still really high. And we were in a bull market and I just wanted to be safe. And so part of the reason going to gold was for me like, I'm on sabbatical. I'm sitting on the sidelines.Joel Bowman:Yeah.Tom Dyson:I don't want to think about investing at the moment. I don't want to worry about my savings. I don't want to stress. I want to sleep well at night. I want to have fun with my family. So to me, that's why I went to gold. As I said, I was surprised that people thought it was risky or ill-advised. But to me, that was just the best way I could sleep well at night. It was nothing more than that. So, that's what I thought of it. And if you look back over history, there are times when the stock market does very well. I'm not a gold bug. I'm not a gold guy. I don't buy gold out of some philosophical distrust of the system or anything like that.I'm actually an investment. I like stocks. I like investments. And I intend to have our savings in the stock market most of the time. To me, there is no better way to grow wealth passively, outside of having your own business, as passive investments. There is no better investment than the stock market. I mean, that's just a fact, so that's where my interest lies. I like investing and I aspire to have my savings in the stock market as much as possible. And so…Joel Bowman:It has to do with timing really. What you're saying is that there's times that you want to be in secular bull markets and times where you want to ride it out on the sideline and surround yourself with safety. So for readers who aren't perhaps familiar with this trade, it's essentially you are looking for the ratio to hit five or something loosely around there, where that's a signal to you that it's time to get off the bench as it were and dive back into the opportunity. So gold is to maintain and preserve wealth, but when the time comes and when bargains abound, valuations drop back down from the stratosphere, and you see some opportunities there with the kind of research that you're doing, that's the time that you deploy some of your wealth and have it work for you. Where are we at along that right now, do you think?Tom Dyson:Where we were when I first made the trade, more or less, and we can talk specific numbers. The Dow-Gold Ratio back then was above 20. I think it was more like 21 when I made the trade. And you are right, yeah, I'm effectively betting that the stock market is a bad deal and I'm trying to time it so that the stock market falls and I'm able to get back in when it's a good deal. I'm effectively bargain hunting. So selling out at the top, waiting, hoping the stock market goes down in terms of gold. And then I'm going to buy back in, and then I'm going to wait for another cycle. So yeah, it's effectively bargain hunting. And at the time it took about 21… of gold to buy a unit of the dow. And today, it's a little bit below that. It's, I think off the top of my head, 19 something. And in the meantime, it's been about three years, the dow has fallen drastically against gold, reaching about 13 at the bottom of the Corona meltdown. So it was in March 2020.Joel Bowman:Yeah. Right.Tom Dyson:Yeah. So I was up 30 or 40% on that trade for a second, but then the authorities came in with a load of printed money and stimulus and inflation, and it bounced all the way back. So now we're basically back where we started and we're waiting.Joel Bowman:So this feeds into something that you were writing about in your January issue. And maybe I'll just take a moment to point out to listeners who aren't aware. As the investment director of Bonner Private Research, Tom's paid investment strategies are available in a monthly newsletter format. Tom also does weekly updates with Dan Denning, Dan on Fridays and Tom on Wednesdays. And this is along with a bunch of other private zoom calls with members of Bill's inner network of analysts and thinkers and strategists and real estate investors. We've got a bunch of people that we're going to bring into of these private zoom calls, webinars, anyway, a whole host of other things that are available to paid readers. And I think I'm not being too cheeky in admitting that I think we may have priced this thing wrong because at a couple of bucks a week, I wouldn't be surprised if there's a price hike in the future.I hope I'm not letting a cat out of the bag there, but if readers or listeners are interested in signing up for, I think, probably the best deal going right now when it comes to quality investment research, then the things that Tom, Dan and Bill are doing for our paid readers goes above and beyond. So I'll put a link to that in the transcript, and you'll be able to find it on the website. But Tom, to get back to your January issue, just picking up from where you left off there, you touched on inflation volatility. And this is something that we've obviously seen whip sawing in the past from the low of a Dow-Gold Ratio at 13. They pumped these trillions of dollars into the system and then we see things just going absolutely crazy. You described this in your January issue as inflation volatility, and it's going to be a bumpy road ahead. Do you want to maybe dig into that just a little bit more? And then we might get to what's on your or radar for coming issues.Tom Dyson:Yeah, of course. So again, these are quite complex ideas, but the gist of it is that there hasn't really been my much inflation for a long time. We've been living in a world with very moderate levels of inflation, basically, our entire lives. And to me, I started anticipating or expecting a sea change in 2018 when I finished my sabbatical and started rolling my sleeves up and getting back to work. The thesis that I basically hung my hat on was that inflation was going to make a comeback. And so I'm gratified that I was right. I mean, inflation is now 7% year over year, which is something we haven't seen, I've never seen in my adult life. And Bill's seen it before, but but it's been a long time. So…Joel Bowman:I think 40 years. It's about 40 years since prices were rising at this pace. Tom Dyson:Right, since the seventies.Joel Bowman:Yeah. A whole generation of people who haven't witnessed this before and are just now confronting it and maybe don't know quite what to do about it.Tom Dyson:So, that's very important. That's very important because if ... let's say the the fed and the central government have both found a way to stimulate the economy. And basically any time there has been the suggestion of a recession or any type of crisis, they throw money at it, and the results have always been good. They've always headed off that crisis and got things back up again. And so the question you ask yourself is why can't they always do that forever? And why can't every other country always do that? What's stopping that going on forever? And the answer is inflation. It's the only answer. It's the only thing that prevents them. And for many years there hasn't been inflation and there has been no check on that behavior of bailing out the economy or reinvigorating it with stimulus. So now we have inflation.To me, that changes the whole dynamic of the relationship between the central government and the free market, and between the central bank and the free market, and between the complicated ways that professional investors think about risk and reward. We've got inflation now. It completely changes the game. However, I always wondered if it would simply be a case of no inflation and then inflation and I don't think that's the case. I think inflation ... my gut sense is that it's going to be capricious. It's not just like a light switching on, and now we've got inflation which I imagine a lot of people imagine that's the way it is. Oh, now it's going to be inflation. It's going to be the end of the dollar. The whole world's going to melt down.I don't believe that's the case. I think it's going to be persistent, but capricious inflation, where it goes up and then it tricks you, and then it disappears again. And so that's what I mean by inflation volatility and it's going to keep everyone on their toes that's for sure. And what it does is it prevents you ... If you knew, for example, that it was going to be nonstop inflation of 7% a year, every year for the next 10 years, it'd be quite easy to invest.

Joel Bowman:Right.Tom Dyson:You just… Yeah, but because it's not going to be like that, what it means is you can't just position your portfolio in one way and just leave it, and then not have to think about your investments again for 10 years. I don't think that's going to work. I think, unfortunately, we have to have a rotation going on in order to prosper, which is going to be very difficult for the average investor.Joel Bowman:Yeah, for sure. And I'll just piggyback on what you were saying there in that treating inflation as a limiting principle to just infinite monetary stimulus, one only needs to look to ... I'm coming to ... you hear from Bueno Aires, Argentina, which is obviously no stranger to economic catastrophe and rolling decennial crises, usually underpinned by money printing and inflation and all the kinds of usual suspects. So right now we have officially 50% inflation and you would've experienced this, of course, on your travels to various countries. But for readers and listeners who have spent a generation growing up with more or less stable prices, what you have just said about inflation and it being akin to a kind of emergent property where it's constantly in flux, it doesn't increase at the same rate all the time.It's a hugely volatile and unpredictable environment where storekeepers and people who are keeping inventory have to constantly readjust their strategy, even just retting prices on inventory, merchandise, et cetera, et cetera. And for investors, it's a really, really difficult environment to navigate. So let's go to looking a little bit forward. We've got probably some rough rides ahead, as you said, but we've been talking behind the scenes about some contrarian plays. Did you want to mention anything perhaps with regards to where you're looking next and the opportunities that are just popping up on your radar?Tom Dyson:Sure. So the reason I love gold is because by my estimation gold performs well in both, while inflation is high and also when inflation disappears. In fact, gold relatively, I think, will perform when there is deflation and the stock market is under pressure and risk assets are under pressure. I think that's when gold has its best relative out performance, but during times in inflation, gold will do okay also. It'll keep up. And a lot of people have asked, well, gold, hasn't done very well over the last year. And that's in spite of the fed monetizing four trillion dollars of government bonds. So why? And I mean, I think gold anticipated it and has risen quite a lot since 2018. And so I like gold because I think it's like an all weather. It's an all weather asset.That said, the stock market and the investment market, just as you say, this capricious inflation is a nightmare for investors. I think there's another meme out there that in times of inflation, you need to own stocks because stocks are real assets producing cash flow. I disagree with that. I think the evidence shows that that stocks do not like inflation. Stocks like 2% is the sweet spot. If it goes higher or lower, the stock market doesn't like it, it weathers. So I lost my train of thought, where I was going there, but ...Joel Bowman:No. Yeah, I think we were back onto some of the opportunities potentially that you are looking to help readers navigate what, I think probably I would agree, are going to be a pretty volatile…Tom Dyson:It's a nightmare. Yeah. I mean, I could be wrong, but my base case is that we're heading into a nightmare for most investments. And even the uncertainty, investors hate uncertainty. It alters the models, it alters the spreadsheets. So my base case is we're heading into a bear market and generally a nightmare for passive investing. And so the only investments that I'm really willing to write about or even look at are things that have not done well during the bull market years. Joel Bowman:I think you were calling them old economy investments, things that are …Tom Dyson:Right, old economy value stocks.Joel Bowman:Value stocks, that's it.Tom Dyson:And then there's a whole ‘nother thing here. The market at the moment, and since the 2008 crisis, has really put a high premium on future growth. And that's because interest rates have fallen, and because interest rates, especially corporate bond rates have gotten down to sort of 2%, 3%, even junk bonds got below 4% for a little bit last year, which was below the rate of inflation. So effectively real interest rates below zero, effectively debt finance is free for companies. And because of that, obviously, they borrowed tons of it. And then they bought back their shares, which was a completely rational thing to do.Joel Bowman:Yeah.Tom Dyson:But what it meant was their equity holders receive a big payday. A big source of cost for the average corporation was removed. And so equity holders got a bonanza over the last 10 years. In addition to that, the stock market looked into the future at all the future earnings and capitalized them at a much lower discount rate, which basically means that therefore the price must be marked up. And so you've got these two tailwinds that have effectively really caused a huge bull market in growth stocks, in companies that have a long runway of profitability into the future.And at the same time, investors completely shunned companies that do not have that long runway of profitability and growth into the future. And these are companies which basically tend to be old economy, utility type investments, where they don't have growth. They have cashflow. They're profitable, but they don't grow. And so the most simple example of that would be a bond, a corporate bond that pays a coupon of 6% a year. That does not get valued very highly in the market, the fashion for investing over the last 10 years.And so yeah, I'm a contrarian and I think that that inflation is going to reverse that dynamic, reverse those trends, reverse those fashions. It might take a while and so the only thing that I'm interested in investing in other than gold, which I don't really think of as an investment, but more of as ballast or cash, are investments that have been shunned over the last 10 years. And so if I'm wrong, we can't lose much anyway, because they've already been depressed for so long.Joel Bowman:Right.Tom Dyson:But if I'm right and we do get this new sea change, I think that the market may come to value a stable but consistent cashflow with much higher multiples than it has been. And so that's why I've been looking at old economy. Shipping is my favorite as a broad basket, but also raw material producers and steel companies or coal miners or oil tankers or whatever.Joel Bowman:Yeah. Yeah, for sure. Now it seems to make sense that in a world of uncertainty and unpredictability and volatility that steady as she goes, reliable, stable, cashflow producing companies that are at present at least relative to their growth cousins are deeply discounted. So, all right, well, it sounds like there's going to be a lot of opportunities for savvy investors going forward to look into your research. We're recording this at the beginning of the month, so I think we've got about three more weeks until your next monthly issue hits the digital stands. Is that about right?Tom Dyson:Yeah, that's about right, but I'm like ... this new sub stack model, to me, I had in mind that I was going to publish a monthly newsletter like I used to, but I now realize now, we've been doing this for a month now, that the medium, it doesn't necessarily lend itself to having a long eight page month newsletter and then nothing in between. I mean, to me, that's quite analog. That's like the old days where you'd write a long letter and once a month send it out to your subscribers, but now that the… Yeah, through the post. So I don't want to ramble, but I'm not going to lock myself into recommending stuff once a month in a long writeup. So actually every Wednesday now I'm just going to write an investment newsletter and they may or may not have a new idea in them, but yeah…Joel Bowman:Yeah, no, that's a very important point to bring up because for people who've been following along with Bill's new project exactly as you say, Tom, it's a new medium. And it is allowing us a lot more flexibility and to be a lot more nimble in the way that we deliver information and interact with readers. So just yesterday, for example, we tested out a thread on Sub stack, which is essentially we mail out a research note, what you would maybe consider a research note from an investment firm. They identify a particular point of interest, maybe a non-intuitive aberration in the market, or just something that captures the imagination. So Dan Denning shot something out yesterday to our paid readers about gold. And it's storied history in American monetary throughout the 20th century.So we had, yeah, just some huge involvement and engagement from our paid readers who jumped on, had a really great discussion. There were a couple of hundred comments. People were all very respectful and well behaved. So it's just a really, really good forum where people can get in and nut out some ideas, exchanged some information, and there was a lot of really valuable discussion there. So we're going to keep on discovering new tools and new ways that we can present our very best information, including, Tom, your best investment research, Dan's observations, and of course, daily speaking of reliable and stable and just somebody that you can always rely on. Bill is there every single day with all the wit and charm and panache that you've come to expect from his daily messages for the last, goodness, 30, 40 years on the case connecting the dots. So, Tom, I just want to say, mate, thank you very much for checking in, and hopefully we'll be able to do this on a much more regular basis in the future.Tom Dyson:Yeah, absolutely. Please, just let me know. I would love to keep doing these, and I agree with what you said about the Substack. It's quite new to me, but so far, I love the ... It's very comfortable, so a very good way to serve our audience in my opinion.Joel Bowman:Excellent. All right, Tom, mate, thanks very much. And we'll catch up again soon. Cheers.Tom Dyson:Yeah, please. Thanks, Joel.

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“This is now the greatest financial crisis in American history. We don't know how long it'll last, whether it'll be something like the 1930s or whether it will be something more volatile and violent, but let's not be afraid to call it what it is.”

~ Dan Denning, Bonner Private Research

TRANSCRIPT:

Joel Bowman:Welcome back to the Bonner Private Research Podcast. I'm Joel Bowman coming to you from my home office down here in Buenos Aires, Argentina. Now, it is a capital city in the middle of South America, so if you do hear some impatient Argentines honking horns and some construction across the street, you'll just have to chalk that up to a little ambient sound. A special thanks, too, to our new readers and listeners, many of whom are joining us for the first time this Christmas season. By way of a little backstory, I've known Bill Bonner personally for almost 20 years now. And as his long-term readers will know, nothing Bill ever does is uninteresting. I expect this latest adventure to be no exception to that general rule. For those of you who perhaps don't know, it's been a decade or more since Bill, Dan, Tom, and I wrote together for the same publisher back in Baltimore, in and around the mid-2000s.So, in that way, this does feel a little like getting the old band back together. I'd like to say thanks therefore to my once and future colleagues for joining us along the ride. On that note, we'll have some other personalities dropping in along the way, some of whom you may be already familiar with. Folks like Chris Mayer, Rick Rule, Byron King, Verne Gowdie in Australia, Tim Price and Charlie Morris in the UK, Ronan McMahon, wherever we can track him down, and plenty of others besides.As you well know, the world has changed plenty over these past couple of years, not least in the way that we communicate with one another, from Zoom conferences to webinars and podcasts just like this one, we now have more tools than ever to stay connected with you, which is exactly what we're hoping to do with this new venture. It's a small core team to be sure, just the four of us, Bill, Dan, Tom, and myself. So, we'll be freewheeling a bit and ask your patience for any bumps that we may encounter along the ride. "Ready, fire, aim," is our general motto here. To help us explain a bit more of what you can expect from the Bonner Private Research project, I caught up with my co-pilot Dan Denning a little earlier this week. I invite you to stick around for our quick powwow up right after the break.All right. We're talking today to Dan Denning, all the way up in Wyoming in the northern end of the Americas. I'm Joel Bowman. I'm coming to you from down in Buenos Aires in the southern tip down here in Bill's sometimes home of Argentina. Dan, how are you doing today?Dan Denning:I'm all right, Joel. Thanks. Yeah. Laramie's really high plains. It's where the, as you know, where the Great Plains meet the Rockies. And it is super windy here today. That's one of the quality of life issues I ran into when I picked it. So, if I blow away or the roof rips off, that's why.Joel Bowman:We'll just-Dan Denning:But hopefully we'll be okay.Joel Bowman:We'll just continue recording. It'll make for good footage. Mate, so, we've got a little bit of housekeeping to get through today because we've got some new readers and new listeners along for the journey, along with our long-suffering, faithful and unfaithful readers, I guess. So, we'll get to all that in a little bit, but first, I guess, an update on something that you and I have been discussing for a long time, both professionally and just by way of email, and something that you and Bill and Tom have been writing about for the better part of a couple of decades, perhaps even longer, and that is the question on everyone's lips and one which becomes more urgent with every passing month and every passing week, it seems like now, and that is whether or not we are in the greatest financial crisis in American history.Dan Denning:Yeah, that's a good question. And-Joel Bowman:Just to start with a small question.Dan Denning:No, it's a serious one. And it's one that I've already received from new readers who've signed up for Bonner Private Research. And I should say that that's not my phrase, actually. Tom Dyson and I went and visited Bill in Baltimore in late October, and we were trying to be very precise about what we thought was at stake for investors right now. And Bill, who is not prone to hyperbole and is usually fairly reserved about what he claims to know had said, "Well, what we're really talking about is the greatest financial crisis in American history." And one of the reasons he had mentioned that is we had been discussing what happened during the Civil War, which was obviously more than a financial crisis, but there was an aspect to it that was purely financial.And the monetary aspect was Lincoln printing greenbacks in order to pay for the war. So, that was a huge crisis for the country. Then there was another crisis in World War II where the government's debt inflated massively against the size of GDP. And again, there was an existential crisis for the country and it came after the Depression. So, we coupled the Depression and World War II as a second great crisis. And both of those were also historical and demographic. But since our beat here is money, we're always focused on following the money. And typically when the money goes, everything else goes. So, when we were talking about it in Baltimore, Bill said, "Look, the trends are pretty unequivocal." We look at government debt to GDP. We looked at the inflation figures, which have just gotten worse since then.And we look at the length of the current monetary regime, which started in 1971 when the Fed, Richard Nixon, decoupled gold from the dollar. This is now the greatest financial crisis in American history. We don't know how long it'll last, whether it'll be something like the 1930s or whether it will be something more volatile and violent, but let's not be afraid to call it what it is. So, that really focused our minds and energies on, "Well, what can we do now to prepare for that and to help readers get through it unscathed?"

Joel Bowman:Right. So, we're now, this year, actually, you mentioned 1971, where exactly half a century into this monetary experiment. And I think people are getting a sense that things are starting to unravel. The kind of things that you and Bill and Tom have been writing about for the past couple of decades are really now coming to the fore. And we're seeing what previously would've been headlines in fringy, alternative news outlets starting to hit the mainstream papers. So, I think people are really starting to wake up to what's going on around them. So, this brings us to, why this new project? Why have we chosen this particular outlet affording us the independence to speak directly to readers? Do you want to speak a little bit to that about Bonner's new project and how we're all involved in that?Dan Denning:Sure. I think when we had our discussion we just thought, "It's a really serious moment for anyone who's retired or at or near retirement age." If you already have a lot of money invested in both the housing market and the stock market, typically we don't like to lose that money. So, for a long time, since Bill and I have been collaborating, especially since the Bonner-Denning Letter started almost five years ago, the main investment goal was not to lose money. And the main investor that we were speaking to was someone who may be doing other things with their money, but also wanted someone who looking at for what the big risks were. And so we wanted to be able to just focus on that message without any interference, not interference, really, but without any distractions, because it's not only a full-time job to try to understand this stuff and then make the right moves with your money, but it's not going anywhere anytime soon.We think that this is something that may play out over the next decade or so. So, what we really wanted was a way to talk to and write to readers who are interested in help in that problem, where we could write to them as often as we'd like, where we could sometimes talk to them this way, or they could engage with us on message boards. And also, they could do it in an ad-free environment. This is the only thing we're doing now, and so we can focus on it 100% and they're not going to receive any other ads for anything else, which to some readers that helps them focus on what's going on as well.So, we looked around for a platform. There's a lot of interesting digital platforms where you can express yourself without getting canceled, hopefully, and we thought this was a really good self-publishing platform. A little bit different than what we've worked with in the past. But as Bill mentioned, the world is changing and we thought, "Well, let's change with it and try something to see if it's a better service for the readers that are interested in our message."Joel Bowman:Right. So, you and I have been having conversations much like this for the past, going on maybe a year or so now. And we've touched on a bunch of different topics that seemed to us, at the time, very relevant. We couldn't have known, of course, how relevant they would become. And I'm talking, of course, about all of the trends that have been accelerated during this past year, whether it be with regards to government indebtedness or surveillance, or our ability or rather inability to travel freely, to protect our money against the inflationary whims of central bankers, et cetera, et cetera, et cetera. This medium, us being able to speak directly to our readers, is something that's going to change our relationship with our readers. Do you want to take a look under the hood and maybe explain to readers and listeners now how this is going to be different and maybe a little bit of what exactly they can expect going forward with regards to specifics of subscriptions and such?Dan Denning:Sure. Yeah. That's a good question. And I'll just tell a quick backstory. I first started working with Bill in 1997, but I was in France before I'd moved to France permanently in 2002. I was there in the August and September of 2001. I was there with some other colleagues and we had retreated to Bill's house to try to figure out what was going on in the world. And of course we were all in the Paris office on September 11th, and we didn't see what had happened until later. We heard it on the radio, but the media world was different back then. So, the fortunate thing, which was very small in the context of what was going on, is that we were in the same place and we had a chance to spend some time thinking about what it might mean for a lot of things, not just financial markets, but for the universe of issues that we concern ourselves with: money, history, markets.So, a similar thing happened in late 2019 when Bill and I were in Baltimore and we started hearing about this virus from China and what was going on. And then of course, I ended up shortly thereafter... Tom was with us at that time as well. And then we all spread to the four corners of the earth. Bill got trapped in Argentina. I got trapped in Australia. And I don't know where Tom was at the time. He was somewhere in America on the road or something.Joel Bowman:Might been up in Canada or something. Yeah.Dan Denning:Yeah, yeah. But we started doing things like this. We knew we needed to talk about what was going on. And we were having private conversations about what this meant for investors. So, as you remember, in March of 2020, the S&P 500 fell 35% in 23 days. And since then the rally has been considerable. So, everything that was happening in the world started happening a lot faster. We needed a way to talk about it amongst each other so we could better advise the readers what was going on. So, we started having a lot more private conversations, not only amongst ourselves, but with you and with people we'd known for a long time, like Verne Gowdie down in Australia, Tim Price and Charlie Morris in the UK, and then Rick Rule, Byron King, Chris Mayer, Ronan McMahon. Just people Bill has known and relied on for a long time to help him figure stuff out.And so we thought, we've been doing that really since 2020, and in the last six or eight months we thought, "Well, maybe that's what we should be doing for everyone. Maybe that should be available to all of our colleagues and readers that we've met all over the world all these years past." So, we decided to do it. Now, what it means is it's really not going to change much if you were already an existing reader of the Bonner-Denning Letter or Tom Dyson's Portfolio or Bill's Diary, except you're going to get all that work in one place now, instead of having to subscribe to multiple things that come out at different times. What you'll end up getting is you'll end up getting an email from Bill every day, which is his Diary. It used to be the Daily Reckoning. You'll end up getting, if you're a free reader, you'll get a summary of everything at the end of the week which, Joel, you're going to prepare so people can see what's going on behind the scenes if they're busy and they don't always have time to read every day. And then for-Joel Bowman:Yeah. It's a kind of digest.Dan Denning:Yeah, that's right. It's a little more convenient for people to keep up with everything that we've published. And then for readers who are paying subscribers, I'll continue to provide what I've been providing to readers of the Bonner-Denning Letter, which is just a review of any important events that happened that week that might affect either our long-term strategy or, and and this will be a bit different, our shorter term strategy. And that's because Tom, the work that he used to be doing for his Portfolio readers, will now be doing in this place with Bill and I. So, Tom's work is a little bit more tactical. There are a few more trades involved. And by trades, I don't mean day trading. I mean, things that he has spotted in his research, like the tanker trade that he made and obviously the Dow gold ratio. That's going to be what he's focusing on. So, in the weekly updates you'll get anything related to Tom's individual trades.And then you'll get a monthly research report, which is a collaboration amongst all of us, which focuses on our best ideas. And it tends to be a weightier, more thoughtful piece that you can print out, sit down and read. And that's a lot like the Bonner-Denning Letter, except now it's going to be called Bonner Private Research. Tom has accepted the role of being our investment director. I'm going to be the managing editor. And my job is to continue my work on the macro themes, but to also bring in the work of people that I mentioned before, like Chris Mayer and maybe Byron King from time to time, and anybody else who we know, like Rick, who has interesting things to say and wants to share them with you. So, you'll be getting daily, weekly, and monthly research. And then from time to time, hopefully even before Christmas, we'll be doing something like this, where you get to engage and talk back and ask questions. And it's more of a conversation or a dialogue rather than a monologue.

Joel Bowman:Right. All right. So, lots of new stuff to look forward to. I feel like this might be just the right time for this. I mean, were we to have this exact conversation a couple of years ago in the pre z-Zoom era or the pre-work-at-home era, some of this might have seemed a little different. But as you say, the world's changing. Platforms are adapting. The way that we best reach our readers and our listeners is changing. So, there's a whole host of new ways that we're going to be able to engage and people will be able to choose a level of engagement that best suits their needs. So, on that point, I wonder if there might be people asking, "Hey, is this for me? Do I need to be a pro investor? Maybe I'm just somebody concerned about what I see on the headlines." Who in particular is this for? Do you want to speak a little bit to that perhaps?Dan Denning:Yeah, I can try. And in fact, this is the interesting thing. If you've ever owned a small business or started a business, or I guess really worked in any enterprise whatsoever, small group dynamics are funny. People all have their own idea of how things should be. And so I think one of the things new subscribers should expect is that we kind of have an idea of what we're trying to do in terms of... Well, we definitely know the problem we're trying to solve, but the division of labor and how we work together, those things are evolving. And one of the issues we'll have is, who are we writing for? So, for example, I know that Bill and Tom write to currently hundreds of thousands of people who don't consider themselves investors, but they enjoy reading about the world. They enjoy Bill's perspective on financial markets. I know a lot of people are completely fascinated with Tom's journey with his family, with his personal story, with his getting back together with Kate, and of course, with the homeschooling of their kids.So, we don't want to lose that because we're real people too, and we all have real lives. And some of the things that we're doing in our own lives are interesting to our readers. But I would say that the focus will probably shift more work towards investors. So, if you are a saver, if you are a retiree, if you're on a fixed income, if you're interested in buying a house or selling a house, these are huge financial decisions. And if you're at that point in your investment journey where you're trying to preserve the value of the assets you've accumulated, that's mostly our audience. So, those are mostly the things we're going to be writing about. And so a lot of the work that we're going to be doing now is for investors, and therefore you're going to have to pay for that work. But Bill's also made a career out of not being too adamantine about how he wants to do things. He likes to let things evolve. So, he wants to continue to write for free every day.People who want to read that, even if they don't necessarily invest, will want to subscribe to what we're doing. So, we're going to try to create a subscription option where you can read all of the research at a reasonable price, but also make it possible to continue to read, if you're just interested in Bill's analysis of what's going on in America. Because it's funny, it's lighthearted, it's not as serious. It doesn't mean it's not sophisticated, but Bill has this incredible talent of making complex things sound interesting and finding the humor in them. And I think that's important as well for people, that we don't want to just write about problems that are not solvable. We want to try and solve them. And occasionally we want people to remember, "You're not in this alone and sometimes there's even funny things that happen." So, that's how we're going to try it going forward.Joel Bowman:Yeah. Something tells me we're going to need, as much as anything, a sense of humor over the months and years that are waiting ahead of us. So, definitely stay on board for that. And I wanted to just ask very quickly if people are just joining us now for the first time and maybe they want to get other people, their friends or family, their loved ones involved, they want to sign them up, they can share links to our free resources and there'll be no problem with sharing our stuff around and inviting other people on board. That's correct?Dan Denning:Yeah, that's right. And this will be strange for people who've been with us for a long time because we're used to being part of larger organizations that we've built or joined and they have substantial resources to create large archives and libraries of introductory material. And there's lots of resources available, including customer service and phone numbers. This is very much a startup. And I know it sounds strange to hear that coming from people who've been in the publishing industry for, in Bill's case, 40 years, and in Tom and I's case, 25 years almost, but it's really a four man band right now. It's you, me, Tom and Bill. We're doing everything ourselves. And so the reason we picked the platform we picked is that they could do the payment processing and all we're going to do is write to you.So please, when you go to those construction sites and it says, "Please excuse our dust. We're trying to improve things," we're building everything from scratch here. And if we had waited to have everything built out so that it was a brand new, shiny, gleaming, perfectly functioning thing, we would've waited too long. We thought it was more important to start now and just focus on the important stuff, which is the ideas, the investment research and getting those to readers on a regular basis. But if you think it's interesting to you and you want to share it, the only social media we have right now is Twitter. So, if you want to follow us on Twitter, it's @bonnerprivate. Otherwise, if you want to keep hearing what we have to say, then you can either sign up for the free email, which doesn't cost anything, and that gives you what Bill says every day and that weekly update from you, Joel.And then if you want to pay 10 bucks a month or 100 bucks a year, that gives you a subscription with all the research. That's it so far. And it really is paired back. There's no fancy website. There's no username or password to log in. Substack handles all of your login for you. So, I know there'll be a few bumps in the road and I know people will have some questions on how things are going to work. We'll try to get to them as quickly as we can, but be as patient as possible with us, since it's just the four of us. Which really, because Bill's in Ireland and Tom is on the road, means it's just you and me. And you have a daughter and a wife, so it means it's just me. So, I will do my best as quickly as I can, I promise.

Joel Bowman:Right on. Well, having worked with you on and off over the years, Dan, I know our readers and listeners are in good hands. And really, this is all part of the adventure too. Because as the old motto, "Ready, fire, aim," goes, we're going to be learning by the seat of our pants. But one thing that it does mean is that we're going to be able to be nimble and dynamic and responsive, which I think is very key in the kind of world that we live in today, where things are changing week by week, month by month.For anybody who had travel plans interrupted over the last year or budgets that they had to recalibrate because of price differences or market action or what have you, we'll be able to hopefully stay on top of all that with conversations like this and plenty more. But I think, mate, that probably does it for a bit of an introduction to our new readers. Please spread the word. Get other people involved and on board. And we look forward to talking to you again soon. Dan, thanks for chiming in from Wyoming today, mate. Good to talk to you.Dan Denning:Yeah. Thanks, Joel. One last thing real quick just so people, whenever they're listening to this... Our first monthly issue will be in January. Tom is headed back to London. He's made the decision to hunker down there for a while with the kids who got their passport from the home office. So, the first monthly report will be in January. We're going to start publishing Bill's daily emails in late December, and I'll start putting out weekly updates this weekend. So, if you're just joining us, that's what you can expect in the coming days. There's always a little bit of a lull in the holidays, which should help us work out any of our technical issues. But on a personal note, I just want to thank everyone who's decided to join us. It's really exciting to be involved with it again. It's always a little intimidating when you're not quite sure what it looks like, but off we go.Joel Bowman:All right, mate. Tally ho. For readers who are just joining, there's a whole bunch of archives on the website of old podcasts and things that we've had over the last couple of years or the last couple of months. You'll get a little bit of a look in to some of the other personalities that will be joining us along the way. Dan mentioned a few of them at the top of the episode. So, have a look through there, and look out in your inbox for future communications. Thanks a lot, and talk to you again soon.Thanks for listening to this episode of the Bonner Private Research Podcast. You can find more conversations like this in the members only section of our website. We look forward to hearing from you either way. Until next week.

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Time stamps - A rough guide...

(00:50) - Intro
(01:30) - Addison’s intro...
(02:50) - Omicron and the wrong way to learn the Greek alphabet
(03:50) - Morris, Alive - A novel investigation into the “Idea of America”
(04:50) - All fiction is, in the end, autobiographical - Jorge Luis Borges
(05:50) - Why it has become fashionable to denigrate America
(08:05) - A look inside American culture... from an outsider’s perspective
(10:20) - America as the home of the individual
(11:20) - From Walt Whitman to Bob Dylan, a legacy of literary independence
(12:20) - The uniqueness of the American project
(16:20) - Clear and Present Danger: A look at the threats to American culture
(19:50) - Why literature? Why draw the line in the sand here?
(24:20) - What’s wrong with Marxism anyway?
(31:35) - The second coming of Neo-Wilsonian progressivism
(37:20) - Progressivism through the 20th Century... and what’s next
(39:20) - Breaking out of the echo chamber
(47:50) - END

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.bonnerprivateresearch.com/subscribe

Time stamps - A rough guide...

(00:50)
(02:50) - Bill Bonner
(03:00) - Advice from father of the bride - Start saving now
(04:00) - What to do when inflation hits 50% (Learn mental math!)
(05:00) - Trends in motion accelerated by a pandemic
(06:30) - The US follows Tokyo... all the way to Buenos Aires!
(08:30) - How the country is going down the tubes... let us count the ways
(12:00) - How might 2021 years of progress come to a grinding halt?
(15:00) - Out shrinking world - How the State curtails freedoms
(16:00) - “What makes progress is the ability of people to decide what to do for themselves. It’s freedom.”
(17:00) - What we learned from the 20th Century’s 3 Great Mistakes
(19:30) - Welcome to the USSA: Saule Omorova and the New World Improvers
(22:30) - Public profligacy, private snooping - Big Brother eyes your accounts
(23:30) - “The whole idea of democratic government is basically a fraud.” Bill Bonner
(24:20) - “The actual value of a single vote in America today is approximately zero.”
(29:30) - Bill weighs in on vaccine mandates and the absence of consent
(30:30) - Fake whistleblowers and Facebook’s war against competing ideas
(35:00) - The corruption of the dollar and the false signals it sends
(38:00) - A sneak peek into the future of Bill’s new private research project

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.bonnerprivateresearch.com/subscribe