Latest / Financial Survival Network / 2024 Economic Forecast: Fed Policies, Gold's Surge, and Geopolitical Risks -- John Rubino #5973

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2024 Economic Forecast: Fed Policies, Gold's Surge, and Geopolitical Risks -- John Rubino #5973 · Financial Survival Network

0:00
I mean, obviously the government is having to pay more on a rising deficit.
0:04
That's obvious. But for regular people, you know, if you're putting
0:08
a big chunk of your life on plastic and you're being charged twenty percent interests
0:12
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0:44
you are listening to and watching the Financial Survival Network. It's December eighteenth.
0:50
Hey, we're finishing up this year in the in w record. In rare
0:54
style, the Fed has reversed course. What happened? What's going to happen?
0:59
What does it mean for you? John Robino is here if you find
1:02
him at Robino dot substack dot com. John the Hey, happy mondays,
1:07
So, So Powell finally did the unthinkable. We all knew he was going
1:11
to, but nobody wanted to believe that he would. But he had to
1:17
right hey, carry, Yeah, it's been a fascinating couple of weeks for
1:21
FED, for the FED end for gold, and that The FED story is
1:25
that as recently as December first, Powell was out there saying, oh,
1:30
yeah, we're we're not done raising interest rates yet, and there is not
1:34
even a hint that we're going to start easing, you know, he was
1:36
talking tights, tight money. And then two weeks later, on their December
1:41
thirteenth meeting day, he comes out and says, ah, yeah, yeah,
1:45
we're done raising interest rates and we're going to start cutting. We'll cut
1:48
three times at least in twenty twenty four. So you know that something happened
1:52
in that two week stretch, and probably what it was was a phone call.
1:57
Yeah, the White House, in the White House, right, No,
2:00
No, this is an election year, exactly exactly, That's exactly what
2:05
it was. So they had one of their attack dogs called it, probably
2:07
the oh who's that guy who does all the appointments chief of staff? The
2:10
chief of staff probably called him up said listen, if you want to be
2:15
part of the you know, the mainstream financial world going forward, you need
2:20
you can't be raising interest rates going into an election that we need to win,
2:25
all right, So you you at rates and you do it traumatically or
2:30
else I'll destroy it. You know. That's probably how the conversation went.
2:34
Yea, and so Powell, you know, good little bureaucrat that he is.
2:37
I've said what he said at the meeting. You know, he turned
2:38
dubbish. But you know, now, to complicate the story, a lot
2:43
of other fed talking heads are out there kind of rolling that back a little
2:46
bit and saying what he meant to say was, so, who knows what's
2:53
going to happen. But I think, you know, leaving the White House
2:58
phone calls and the election and everything aside, we are heading into a recession
3:01
right now. We had some good macro numbers in the third quarter, and
3:07
fourth quarter numbers are all terrible, you know. The scariest ones, from
3:13
my point of view, are, of course, the government. Interest costs
3:15
just spiked from a few hundred billion dollars to a trillion dollars and they're still
3:21
rising, which means we're running these massive deficits now solely because interest expense is
3:28
high and rising. The same thing happened for regular people. I'm not sure
3:34
what the terminists for it. I think it's private interest expense or personal interest
3:38
expense consumption. No, it's interesting interest. Yeah. So basically, in
3:43
other words, what we're all paying on our car loans and our credit card
3:46
debt and our student loans and stuff like that, that spiked in the same
3:50
way. I went from two or three hundred or billion dollars a year to
3:53
six hundred billion dollars a year in the space of one year. It just
3:57
went straight up. That's amazing. Those are crisis numbers. You know,
4:01
that's a depth spiral. If you look at those charts and everybody knows that,
4:08
you know, be fed. If they know that, which I think
4:10
they do, has to assume that they're going to have to counter that in
4:13
some way. And you counter that by lowering interest rates, right, so
4:15
so everybody's interest costs go down, or just letting the system with money so
4:20
that everybody has the ability to refinance at a lot of yeah debt, yeah
4:28
yeah. And basically what that means is que you know of some sort,
4:33
and so that that's going to be the twenty twenty four story is where something
4:38
blows up and it could be related to these debt numbers, or it could
4:42
be related to toward real estate or pension funds or insurance companies. There's so
4:48
many things that can go wrong. One of them goes wrong, and then
4:51
FED has its excuse to start cutting rates again and deal with this interest cost
4:57
problem. Has the interest cost problem blow up, but it would reach the
5:01
point where it's debilitating another year like the last year. So they can't let
5:06
that happen. So they needed an excuse. So you know, whatever an
5:11
excuse will happen. Yeah, and you my grandfather had an eighth grade education,
5:15
but he was smart enough to know. He said, when you're paying
5:18
interest on interest, you got a problem. And all of society's paying interest
5:25
on interest. Job, well, yeah, because I mean, obviously the
5:27
government is having to pay more on a rising deficit. That's obvious. But
5:32
for regular people, you know, if you're putting a big chunk of your
5:35
life on plastic and you're being charged twenty percent interests on that credit card,
5:41
that right, there's a crisis. But then if you have an auto loan
5:44
that's seven hundred dollars a month, and your student loan just kicked in and
5:47
it's five hundred dollars a month, and you need to put those things on
5:53
plastic as well, because you're just not cover you know, you're your three
5:57
part time jobs that you cobbled together don't quite cover your rent and all the
6:00
rest quite Yeah. So you know, you've got a scenario in which growing
6:08
numbers of people are going to go bankrupt, and there's your crisis. You
6:12
know, if personal bankruptcy spiked been consumer spending raiders. The economy is seventy
6:17
percent consumer spending. So you've got the circumstances in which the FED panics that
6:24
starts easing again. So you know, I think that's next year. I
6:26
think that's what happens in twenty twenty four. I think you're right. But
6:29
you know, it was really interesting what happened to gold that day. Once
6:32
he once he muttered the Dubvish line, you know, gold just instantly spiked.
6:40
Yeah. Well, the gold story has been really interesting too, because
6:44
even predating the FED saying what it said, gold has been banging its head
6:49
on the two thousand resistance level over and over again. It's three times in
6:55
the last three years, and then we had a fourth just now. And
7:00
so when the FED started easing, or started talking about easing, gold spiped
7:03
and went all the way up in overnight rating. To like twenty one five
7:08
or something that's unbelievable. Yeah, it was a straight up sixty dollars move
7:14
in the after, you know, four o'clock in the morning or whatever,
7:16
and then it got smacked back down. So twenty or two thousand was once
7:20
again resistance and gold was back in the nineteen hundreds. Then it jumped up
7:27
again and breached two thousand, and now it's I think twenty thirty as we're
7:31
speaking. So the question is is that the last attempt to breach two thousand
7:41
before it keeps on going and then two thousand becomes support rather than resistance,
7:46
and we'll see. I mean, I think at some point that was going
7:47
to happen because Gold was soaking up all the potential sales at two thousand,
7:51
you know, everybody that wanted to take profits and were willing to sell it
7:58
that big number. So you know, it could be that the conditions are
8:03
ripe now for Gold's next leg, because, first of all, seasonality is
8:07
favorable. We've talked about that before. Second, the Fed is talking about
8:13
easing and Incrementum puts out a really good chart that shows what happened the last
8:20
three times the FED stopped raising interest rates. In each of those times,
8:22
gold immediately embarked on a nice run. So if the fourth time is the
8:30
is like the previous three times, we got at least a fifty percent increase
8:33
in the gold, Prince Come, I wouldn't doubt it. Yeah, doubt
8:37
it at all because Martin Armstrong, you know, one of our regulars,
8:43
always says that gold goes up when confidence in the system goes down. And
8:50
can you think of a time when confidence has been lower than it is now?
8:52
John? Oh? You know, the establishment has blow it on such
8:56
a multifaceted level. You know, start with the pandemic, which we don't
9:01
have to go into, but suffice to say that nobody trusts the public health
9:05
system anymore. Yeah, that was a big system that everybody used to trust.
9:09
That was one of the few things. You know, the CDC.
9:11
Look at any disaster movie. The CDC guys are the good guys. They're
9:16
the ones who come in and try to fix things because they're honest and they're
9:18
competent. No longer now they're just a bunch of clowns in most people's opinion.
9:24
Okay, so I trust doctor fraud Chief, Yeah, you trust him
9:28
to be himself, which is a different thing than naturally trusting him. But
9:35
so anyhow, that that's one thing. And then geopol politics, you know,
9:39
we're just a huge mess overseas, the US military industrial complex. People
9:45
get that. And you know, people never really trusted the big banks after
9:50
two thousand and eight, two thousand and nine, and then you know,
9:54
the current government. What can we say is is just an inherently trustworthy or
10:01
untrustworthy you know, they're just they're this is not a good government. So
10:05
anyhow, all of that stuff is happening, and like Martin Armstrong says,
10:11
the less you trust the broader world, the more you want safe haven assets
10:18
to protect you from the you know, the clear mismanagement of the okay,
10:22
and the monitary system too. You know, we had double dig inflation in
10:26
twenty twenty two. You know that terrified people so so nobody trusts. Still
10:31
it's still like we were talking about pre call is the banks are still increasing
10:37
the rate at which they're doing the emergency emergency borrowing from the emergency discount window.
10:43
Right yeah, yeah. The the local and regional banking sector is in
10:50
crisis right now. You know, if you have been failed, were bailed
10:54
out. But going forward, the rest of them have massive unrealized losses from
10:58
their bond for folio from one interest rates one up, which makes bond prices
11:01
go down. They're they're carrying all kinds of commercial real estate paper, and
11:07
commercial real estate might be the domino and once everything else ound, that's a
11:11
sector in crisis, and depositors are pulling out a lot of money. So
11:16
the the government fund that you just mentioned is basically to allow local and regional
11:24
banks to use government money to pay back their depositors when the depositors leave,
11:30
to go to a money market fund or whatever, so that that doesn't force
11:35
the local and regional banks to cash their or to sell their bonds which are
11:39
underwater in order to pay back depositors, because then they would have to report
11:43
those losses instead of just having them be notional. So it's they had to
11:50
report those losses that would terrify everybody. The depositors would completely leave and all
11:54
those banks, you know, three thousand or however many there are would go
11:56
bust, and they can't have that. So the government is basically papering over
12:03
that banking crisis, and they've they've used what a trillion dollars of taxpayer money
12:09
right now to do that, and it's still rising, so there's no way
12:13
to know where that ends, especially if there's any kind of another crisis.
12:16
You know, let something else happen out there, and all of a sudden,
12:18
people will get even more paranoid about the banks. Anyhow, it's all
12:22
happening. When something happens, you know, yeah, gotta happen, and
12:26
you know, it's just there's no confidence left there. And you know,
12:31
even though you know, the other the thing that I found distressing about gold
12:35
being up is that the mining stocks are shot. I mean, they're like
12:41
a major, major depression. We've all lost money at them for sure.
12:46
And you know, now we got this article you mentioned Kitko saying that the
12:52
junior minor capital market is kind of Kaputski. Yeah. What normally happens at
13:00
the troph of the cycle is a precious metal cycle, is that people lose
13:05
faith in an increasing price of gold going forward, and that leads them to
13:13
do not want to be invested in the miners that are basically leveraged bets on
13:18
gold. You know, if you think gold is going to be flat or
13:20
go down, you don't want to buy a leverage bet on it. And
13:24
so the miners are really suffering lately. Now the junior miners and the explorers
13:28
are suffering especially badly because they don't generate much cash flow or any cash flow.
13:35
In the case of the explorers, they consume cash and nobody wants to
13:39
let that money right now. Yeah, yeah, So a lot of emrecs
13:43
essentially threatened by you know, having no funding for the next two years because
13:48
at some point they've got to be able to borrow in order to keep thrilling,
13:52
in order to become to stay going concern. And if they can't do
13:56
that, then they're out of business. So a lot of junior miners,
14:00
you're allable to die pretty soon here. Now, this this means a couple
14:05
of things. Means it's you know, tough times for the junior miners,
14:07
although that could be alleviated in a heartbeat by gold going to, say,
14:11
twenty two hundred dollars an ounce all of a sudden, all those you know,
14:16
preliminary economic assessments and things like that from the gold miners, did it
14:20
suddenly look really attractive when you know they basically the last numbers that they put
14:26
out on eighteen hundred dollars gold now gold is a twenty two hundred all of
14:31
a sudden, they make a lot of money in their mining centerio and everything,
14:37
so that that would solve the problem the vir junior miners. And the
14:41
other thing is that junior miners problems are royalty company's opportunities. Penalty companies are
14:52
out there cutting really stringent deals, really favorable deals with the exploration companies that
15:01
have nowhere else to go. So in the next upcycle, you know,
15:03
when gold goes from twenty two hundred to thirty five hundred, let's say in
15:07
the next cycle, which is my official prediction, that's that means that the
15:13
deals cut today by the royalty companies will generate a torrant of cash flow because
15:20
gold will be going up. Gold and silver will both be way above the
15:24
numbers they used to justify the deal. And that makes the royalty companies look
15:31
really interesting right now because they're the profitable at today's gold prices, but incredibly
15:37
profitable at twenty percent higher prices. So if you know, we get another
15:45
fifty percent increase, which is what the last three times around when the Feds
15:48
stopped raising interest rates brought to gold. That means the royalty companies are super
15:54
profitable and really attracted. And the exploration companies are lottery tickets. The ones
16:00
that work out operationally are ten bangers, and so you want to own the
16:07
best of them too. You know, if you just had a portfolio of
16:10
royalty companies and high quality explorersch you know, that's a high risk portfolio,
16:17
but a potentially life changing one because you know that whole portfolio could be a
16:22
five bagger, maybe a ten bigger. Yeah, and you know one you
16:26
know, when you're entire portfolio is a ten bagger, you have made life
16:30
changing money. And that's the kind of thing that's out there potentially so true.
16:36
Hey, but you know, like in the meantime, the political environment
16:40
for minors keeps getting worse, especially in South America south of the border.
16:45
Mexico seems to be exempted thus far, but there's a situation in Panama with
16:52
shutting down a couple of mines. You know, a lot of countries are
16:56
putting up obstacles to miners. Yeah, Well, in Niger or Niger,
17:02
depending on how you pronounce it, there was a coup that imperiled the major
17:07
uranium mine. Then Chile decided to nationalize their lithium deposits, and Mexico actually
17:14
did. They changed the law governing how miners are taxed and everything. It
17:18
wasn't it wasn't horrible, but it did expect it actually struck down. Yeah,
17:23
they're not expecting it to hold up under the new government that's coming in.
17:27
Yeah, but it still adds to the uncertainty that somebody like Mexico would
17:36
do something like that, because that's a high quality jurisdiction. Yeah. And
17:40
then the thing in Panama, they had one of the biggest copper minds in
17:44
the world operating there that accounted for four or five percent of the Panminaian government's
17:48
revenues. It was a big deal in context, and it got a lot
17:53
of environmental protests. Copper minds are they're big intrusive things, so I understand
17:59
the environmental issues. But the government just decided to shut the mind down.
18:04
You know, there's more to the story, but they're just mine is shutting
18:08
down. Now. The first quantum is the miner that owns right Line,
18:15
and that was an existentially threatening hit for them. You know, that was
18:18
one of their big minds and it's just boned done. But also Franko Nevada
18:25
had a big stake, a big royalty line, and they took a big
18:29
hit from that too, probably too big of a hit. I think it's
18:32
all in the price and then some now, so that might be a kind
18:36
of a value play at this point. Franko Nevada diversified. That's the whole
18:40
point of these royalty streamers. They have streams, so many streams from so
18:44
many different projects all over the world that they're able to take these hits when
18:49
they happen, or that the mind never makes it to fruition, never becomes
18:55
a producer. So you know, as long as they don't get too many
18:59
of these, they'll be okay. But yeah, I'm sure it was a
19:02
big source of their revenue. But like say, they're a huge royalty streamer,
19:07
so they'll find a way around it. But the first quantum a whole
19:12
different story, you know. So so the investment thesis from the geopolitical thing
19:19
might be that physical commodity ETFs are a lot more attractive than than many people
19:26
taught, because what they do is they just go out and buy whatever commodity
19:32
is. You know, uranium, there's one for uranium, one for gold
19:34
and silver, none for copper. Yet I think because copper is too cheap
19:37
per pound, you need a you know, price, copper is going up
19:44
in price. It might very well be these nationalizations is whatever they want to
19:48
call it, it's a nationalization, it could be that could well be what's
19:52
driving it now, you know that job, Yeah, exactly. When the
19:56
Cobra Panama online was closed, hopper went up because it means the supply of
20:02
copperator will be lower going forward. So with these physical ETFs, they you
20:08
know, they raise money and they go out and take product off the market,
20:12
which raises the price. So it becomes a kind of a self perpetuating
20:17
process. And then they also benefit when any big crisis out there closes down
20:22
supply because they're supplies in a warehouse somewhere and it gets more valuable. So
20:29
I think the greater the political risk, the geopolitical risk becomes, the more
20:34
attractive physical ETFs become. Exactly, I think they're interesting right now, you
20:41
know. Maybe so you create a portfolio of royalty companies and yeah, those
20:48
ETFs, those physical ETFs, and then a handful of really high quality explorers
20:52
for your lottery tickets, and you get basically all the exposure you need to
20:59
the precious metal, sex and commodities in general. So yeah, you know
21:03
the thesis the investment pieces is kind of coming together here, you know where
21:07
the portrait visionable. Yeah, so and if you're really negative, you sell
21:14
the minors and buy the ets and you arbitrage that play because maybe it's going
21:19
to change. It's it's not what normally happens. Like we started this conversation
21:26
out with where the companies go down and the metals go up. But you
21:32
know, the companies have company risk, the metals don't. And so maybe
21:38
the play is that, yeah, we're going to be buying the metals,
21:44
whether inform it ETFs who are actually physical because because they're going to get even
21:49
more valuable because the companies do even worse. Right, Yes, it's really
21:56
an arbitrage. And you hold on to a couple of explorers is hoping that
22:00
there'll be some M and A activity and you know that's it. Well,
22:06
you know the explorers their story is a little bit more complex here because they
22:12
if they're in a good jurisdiction, right, they also become more valuable when
22:18
the bad jurisdictions really start acting bad. Because you got if you've got a
22:23
bunch of gold in the ground in Saye, Nevada, and a big gold
22:27
mine in Africa or Latin America gets taken out of operation for some reason.
22:33
That makes a deposit and a good jurisdiction more valuable. So when you're choosing
22:41
your lottery ticket explorers, keep that in mind if geopolitical risk is part of
22:48
the equation and you want to make sure the deposits that you're buying when you
22:52
buy an Explorer, those deposits are in really safe jurisdictions so they don't get
22:59
hit by politicorisk too, because that's what really i'd be, that's jurisdictions.
23:03
Yeah, yeah, you don't know anymore, because I mean Canada is suddenly
23:07
not trustworthy anymore. I mean they're they're a you know, borderline autocracy now,
23:12
and the US is just okay, well, you know, let let's
23:17
just say it. A large number of people in charge of the US are
23:19
crazy, just flat out crazy, or like Janet Yellen and a few of
23:25
their diversity hires, utterly incompetent, you know, So you can't even guarantee
23:32
that the US is a safe jurisdiction. But look at Trio, look at
23:36
Trilot up in Alaska, you know, they took they had the road permit
23:41
under Trump and then Biden came in and revoked it. Yeah. Yeah,
23:45
So you know, in terms of jurisdictions, you're talking relatively safe, not
23:52
objectively safe now, you know. So you you lower your risk by choosing
23:56
the US in Canada and Mexico, but you don't eliminate geopolitical risk at all,
24:03
you know, So maybe maybe we should just come back to the physical
24:06
ETFs here. I'm starting to convince myself that that's all I want to own
24:10
at this point. So what has happened to the United States? There was
24:12
a time when if they threatened to seize banana plantations, you know, we'd
24:18
send in the battleships. And now they like take mines, they shut them
24:22
down, They do all this stuff, and the United States sits around and
24:26
does nothing here. You know, well, what happened to gun Where is
24:30
gunboat? Diplomba say? When we need it? Yeah, okay, if
24:33
they only did it for gold mines and copper minds, I might be on
24:37
board, you know, but they can't remember Chile, right, uh?
24:41
You know Salvador Lende. Yeah, it t the stage to coup. It's
24:48
actually a funny spoof movie about it called Head Office with Eddie Albert and Judge
24:53
Reinhold, and they literally are having a coup in their company headquarters because the
25:00
government into whatever South American country that they want kicked out as they're visiting,
25:06
and you know, they're having a revolution in their headquarters. Juz. Well,
25:11
you know, not that I would eliminate that as a possibility in the
25:15
US going in invading a bunch of new countries. But I think we're past
25:19
the point where we actually have the power to do that, because you know,
25:22
if we start invading other countries, everybody joins the Bricks coalition, you
25:29
know, once everybody start thinking, you know who's next? Could it be
25:32
me? Well, I better go make an alliance with Russia in Saudi Arabia.
25:37
Yeah. Well, you know, if you've been reading about the Belton
25:40
Road Initiative, what a failure that's turned into that. China's like wasted a
25:45
trillion and a half dollars trying to buy off all these countries and put them
25:48
into debt traps. And then Italy withdrew. They were the only G seven
25:52
country in the Bilton Road Initiative. They withdrew and they have countries that are
25:57
just like against In Ecuador, they built a dam, except the problem is
26:04
that the dam is like crumbling before their eyes and they're going to have a
26:07
major tsunami once it collapses, and it just shows like and then the Chinese
26:14
would say, we'll give you all this money, but you have to use
26:15
our companies to build it, and they send ten thousand people in there to
26:19
go build it and do a lousy job, and it's their policies and shambles
26:25
like the country. I mean, yeah, it's it's madness out there.
26:30
And you know, the only salvation that many of these countries have is to
26:33
exploit their natural resources, and yet they're doing the opposite John and it's a
26:38
totally self destructive path that's going to lead to disaster for these countries. I
26:42
mean, the Panama Canal is Panama's biggest money source, except it's problematical because
26:49
it's drying up. You know, the levels are going down. Yeah.
26:53
You know, it's hard to look around the world and find an example of
26:56
anything that's working anymore. Yeah, and you know, I mean literal Germany.
27:02
Look at Germany. Germany was the smartest country in the world. Ten
27:06
years ago. People thought you know, well run placed labor and management get
27:08
together, export high quality stuff all around the world. They anchor the Eurozone
27:15
and you know, single handedly they've created you know, and all of a
27:19
sudden, in the space of ten years, Germany is the dumbest country in
27:23
the world. You know, everything they touch is a catastrophe. Yeah,
27:26
and Japan, you know, Japan is blowing up its financial system in the
27:30
US used to be much better than we are now, you know. And
27:33
so yeah, you can't find examples of excellence anywhere now. And that's right.
27:41
How long can this charade go on? How long can the show go
27:44
on before everybody discovers that the tide has gone out and everybody was naked?
27:49
That's really the question. And I don't think we're going to answer it this
27:53
week, but maybe maybe in two weeks we'll answer it, John, maybe
27:56
we'll have some more information in any of it. Make sure you go over
28:00
to John's substack. It's a Rabino dot substack dot com. Link is in
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the show notes, and John will catch up with you in two weeks and
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see what other madness they've got for us. Okay, thanks, care,
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I see you soon. Thanks for listening to Carrie Letz's Financial Survival Network your
28:18
solution to today's trying times. For the latest, go to Financial Survivalnetwork dot
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com. Financial Survival Network now more than ever