This week on Stansberry Investor Hour, Dan Ferris sits down with Egon von Greyerz, Founder and Managing Partner of Matterhorn Asset Management AG. Egon, whose company specializes in wealth preservation, has been a gold bug for decades. He and Dan talk about how gold is the No. 1 hedge against inflation and market chaos.
Egon says “gold is the best instrument you could ever buy to ensure your wealth.” And holding gold will protect you from the coming consequences of our current massive market bubble… created and fueled by the Federal Reserve’s unlimited money printing and our highest inflation rate in decades.
Unfortunately, Egon predicts that the impending “wealth destruction will be massive.” And the folks who think the Fed is going to swoop in and save the system again this next crash are wrong… Egon says that there are “tough times ahead,” but this makes wealth preservation, which includes holding gold, even more crucial.
Dan and Egon also discuss bitcoin, as many have asked if gold will be replaced by the popular cryptocurrency. Egon is confident that will never happen, and makes the bold prediction that “bitcoin won’t still be around in 50 years.” He goes on to say that bitcoin “will always be a fringe investment”… and that “it’s not real money.”
Lastly, Dan asks every guest the same last question: “If you can leave our listeners with only one last thought, what would it be?” And Egon’s answer won’t disappoint… Dan says his response is one of the best he’s ever heard.
Listen to this episode for even more fascinating conversations about gold and our economy, plus check out Dan’s rant on exactly who’s in charge of the stock market…
Egon von Greyerz
Founder and Managing Partner of Matterhorn Asset Management AG
Egon von Greyerz is the Founder and Managing Partner of Matterhorn Asset Management AG (MAM). Egon began his professional life in Geneva as a banker and thereafter spent 17 years as the Finance Director and Executive Vice-Chairman of Dixons Group Plc. During that time, Dixons expanded from a small photographic retailer to a FTSE 100 company and the largest consumer electronics retailer in the UK.
Announcer: Broadcasting from the Investor Hour studios and all around the world, you're listening to the Stansberry Investor Hour. [Interlude plays] Tune in each Thursday on iTunes, Google Play, and everywhere you find podcasts for the latest episodes of the Stansberry Investor Hour. Sign up for the free show archive at investorhour.com. Here's your host, Dan Ferris.
Dan Ferris: Hello and welcome to the Stansberry Investor Hour. I'm your host, Dan Ferris. I'm also the editor of Extreme Value, published by Stansberry Research. Today, we'll talk with Egon von Greyerz of Matterhorn Asset Management. We'll talk about gold and all the reasons to hold it right now. I have to tell you, Egon's answer to my final question is one of the best. It's a really great message right now. In the mailbag, questions about bitcoin, gold, and silver.
Remember, you can call the listener feedback line, 800-381-2357. Tell us what's on your mind and hear your voice on the show. For my opening rant, "Who's in charge of the stock market?" I'll answer that and more right now on the Stansberry Investor Hour. Well, who used to be in charge of the stock market, huh? Institutions. Big institutions. That's been for most of the last two or so decades.
All the quants and technical people, they wanted to know what big institutions were doing. They looked at the fund flows in and out of institutions and what they were buying and what they were selling, and that was really important. And we've seen a change because now the institutions are looking at what the small-time day traders are doing. There have been a couple articles on this. One of them came out – actually, they both came out Monday at 7 a.m. One's in the Wall Street Journal and one's in Barron's.
And the one in the Wall Street Journal said, "Hey" – just basically what I said. And there's a quote by this guy... JPMorgan's global co-head of cash equities trading, you know? You think they do billions and hundreds of billions of trades? He says, "The flow from retail" – from the retail investor, the folks who are really in charge of the stock market – he says, "The flow from retail is not something you can ignore if you're a professional investor."
And that's what's happened. Since COVID, since March of 2020. You know, tens of millions of new retail brokerage accounts have opened up and people are flooding into the market. And they're pushing stocks around. And we know – I mean, we know the obvious ones, right? The meme stocks and Tesla. We talked about this. This was in a recent rant.
I talked about how the options market is pushing the equity market around, and the folks in the options market are retail traders who have found out, "Hey. I can just buy a – you know, pay a small premium and control 100 shares of Tesla." [Laughs] So they do that instead of buying the stock for $1,000, one share. So the tail of the options market is wagging the stock market dog and the tail of the, you know, retail trader is now wagging the stock market dog.
They're in charge and institutional investors know it. And they're spending time now going onto, you know, Reddit and other social media Websites researching what retail investors are talking about and what they say they're buying. And large firms with billions of assets under management are doing this and buying stocks. I mean, you remember we had Chris Camillo on the show. And he was one of the traders in Jack Schwager's latest book, Unknown Stock Market Wizards.
And Chris is neither technical nor fundamental. He does what he calls social arbitrage. He looks around in social media and other sources of information, looks to see what people are talking about. And now, that has kind of filtered up because of, you know, the huge moves in Tesla, in the meme stocks, AMC, GameStop, and other meme stocks – there's a whole list of them – and institutions are waking up.
And this firm – there's a Barron's article on this. A firm in Europe, called DNB Asset Management, got nearly $70 billion in assets under management – recently tripled their investment in AMC. AMC is a dying movie theater chain with too much debt that has almost a $10 billion market cap – still $10 million market cap – even though, as we speak, it's something like 80% off of its crazy meme-stock high. It surged, absolutely surged, and hit a meme stock crazy high in June of last year – $62 – and the low before that was $3... $2.97.
So, boom... 20-bagger from January '21 to June '21. Boom. Straight up. And most of that gain happened between – in one month... in the last month. And now, OK, it peaked at $62 and now it's below $20, right? So it's lost two-thirds of all that awful froth and it's still dramatically overvalued, right? And then, another couple of stocks they bought at DNB Asset Management, they substantially raised assets in Apple – OK, fine. Chinese electric-vehicle maker NIO. Of course, Chinese stocks have sucked wind. NIO is way, way down.
And electric truck-maker, Nikola – right, NKLA – Nikola was like – it wasn't a meme stock but it's part of the electric vehicle craze. And, you know, same thing as the meme stocks and all the other kinds of bubbly stocks, right? Only, Nikola is even worse. Nikola was – what was it? It was like $10, January of 2020, and then by June of 2020, it was almost $80. I think it hit $80 in – I'm just looking at closing prices. I think it did hit $80 in trading that day.
So, you know, January to June, boom. Huge multi\bagger. And it's down almost 90%. It's below $9 now. So, you know, it's $8-something. So almost 90% off. And it's probably a zero. AMC is probably a zero. And I think Nikola is probably a zero also. And yet, they still have these big market caps even though they're way the hell down... they're way down, they have way more downside to go. And this firm [laughs] is buying them.
It's a unit of Norway's largest financial services firm that's buying these stocks, and the only reason to buy them is because you think the retail investors in charge, the fundamentals don't matter and you're just going to buy what the dumb money is buying. The smart money [laughs] – that's the smart money trade now in the beginning of the year 2022 – is, the smart money says, "What do we buy? Whatever the dumb money is buying."
So it's the ouroboros. It's the snake eating its tail. It's ridiculous. And the Wall Street Journal article on this – which is called, "Day Traders as 'Dumb Money'? The Pros Are Now Paying Attention." The Wall Street Journal article has a chart that I just – you got to look at this article. Its monthly net purchases of U.S. securities by individual investors – and it kind of mopes around somewhere in the lower part of the area between zero and $10 billion.
And then, zoom. Like, April – March, April of 2020 – zoom, $26 billion. June 202, another $26 billion... January 2021, $27 billion... March 2021, $27 billion... June 2021, almost $28 billion... and lately, December 2021, still $22 billion. Just, you know – it's a sea change. It's crystal clear that the COVID bear market flipped the script and put the retail investor in charge and the retail [laughs] investor is doing crazy stuff like buying garbage, zero companies that aren't worth anywhere near where they're trading if they're worth anything.
And now, that's what institutions are buying. Let me tell you something. It's one thing when the – to say that the retail investor is in charge and, you know, when they stop buying, "Ooh, that's really bad." But when the retail investor is in charge and the institutions are following it in, when the money starts flowing back out of AMC – man. And the other meme stocks, AMC, GameStop, even Tesla at this point, Nikola, anything – it's going to be really, truly ugly, you know?
It's the classic, you know, yelling fire in a crowded theater and not being able to get through the door kind of scenario that will materialize. And I think Tesla has this potential but maybe less so than like AMC and GameStop. They have the potential for you to wake up one morning and the thing's down 50, 60, 70%. That's the potential here. Because there's no way objectively speaking, by any rational standard, they're worth anywhere near where they're trading, and big money is now flowing into them, following the retail money.
This can't end well. The AMC bull is going to look and say, "See? We're right. And the institutions are following us." No, that's not how it works [laughs] I. You know, this is the snake chasing its tail, and pretty soon it's going to devour itself and then it's going to be bad news. Anyway. That's all I have to say about that. Retail investors are in charge and I don't think it's a good thing. Because they were in charge up until the dot-com boom, right? And, ooh, you saw how the money flowed out of those stocks. Some of them still haven't broke even with their 1999 and 2000 highs.
And, you know, we could easily be looking at something like that, you know? The financial crisis of 2008, well that took us back to 1996, the S&P 500 did, right? It fell so far it was back to 1996 levels. So, you know, you can wipe out a decade or so of gains. In a good bear market. Or, I should say [laughs], a bad bear market. Nothing good about that for most people, is there? All right. That's all I'm going to say about that.
Speaking of the potential for chaos, let's talk to a man who thinks a lot about chaos hedging and where to put money to hide it from big troubles that he sees coming in the future – Egon von Greyerz. So let's talk with him right now. [Music plays and stops] Back in October, right here on the Stansberry Investor Hour, Marc Chaikin talked extensively about a special event that he was hosting that focuses on his Power Gauge system. And he really, really wants you to have an opportunity to check out his system. So he's giving away a free recommendation.
And I'll give it to you right now. According to Marc's Power Gauge software, the stock Mimecast – ticker symbol MIME – could make you a lot of money on this little-known company if you're willing to act today. If you've never heard of the Power Gauge, it's a system Marc created that gives you the chance to double your money by predicting tomorrow's stock ratings on Wall Street – today, in any market.
Last year alone, it pointed to Riot Blockchain before it shot up 10,090% in 11 months... Digital Turbine before it shot up 789% in eight months... and Overstock.com before it shot up 1,050% in four months... and many more. It's been so successful Marc once charged his former clients $5,000 a month to see its findings. But today, he's turning his back on Wall Street for the first time ever and sharing away to claim free access to his system. So go online to 2021tradingsystem.com.
The website, again, is 2021tradingsystem.com. 2021tradingsystem.com. Check it out. [Music plays and stops] All right. It's time for our interview. Todays' guest is Egon von Greyerz. Egon is the Founder and Managing Partner of Matterhorn Asset Management AG. He started his working life in Geneva as a banker and spent 17 years as finance director and executive vice-chairman of Dixons Group PLC.
Since the 1990s, Egon has been actively involved with financial investment activities, including mergers and acquisitions and asset allocation consultancy for private family funds. This led to the creation of Matterhorn Asset Management in 1998, an asset management company based on wealth preservation principles. Egon, welcome to the show and thank you for being here.
Egon von Greyerz: Dan, very good to be with you. Thank you.
Dan Ferris: Based on wealth preservation principles. How's that different from other asset management?
Egon von Greyerz: Well, most people in the world don't understand risk and especially the risk that we have today. Because in my view, we're looking at something that is unprecedented in history. We have never had a global situation with basically every major economy in the world being bankrupt and only managing to survive – and especially in the last 10 years since 2000 – by printing unlimited amounts of money and borrowing money that just consists of thin air and thereby creating assets that, you know – I call it thin air but some of those assets are real, of course.
You build buildings, etc. But the evaluations are fantasy. So you're looking at here, now, a world where I think wealth protection is more important than ever. And in my view, the traditional ways of protecting wealth by, for example, buying government bonds, sovereign bonds – people who are doing that are absolutely mad. You [laughs] are buying an instrument from a bankrupt borrower who are never going to repay it, and the best they can do is to just print more money to repay it with totally worthless money.
And on top of that, most countries – especially in the last few years – they either charge you for the pleasure of lending them money with negative interest rates or they have – or, you know, you get 1 or 2%, but the real rate is, as we can see now, going up – it's 7 in the U.S., but the real inflation is a lot higher than that. So you're getting a massive negative return on your money. So, therefore, you know, the conventional way of preserving wealth by going to government bonds – I mean, that's absolutely ludicrous.
I mean, people doing that is like people committing suicide. Buying property, yes, that's been a good hedge for many years, but property is one of the biggest asset bubbles ever now and therefore property's not a good wealth preservation investment either. So the way that we read the world and the reason why we started to – for ourselves initially – buy and store gold and silver in the safest private vaults in the world was really to create a system whereby we could protect ourselves and some of the people we advised from the consequences of this massive bubble that we see.
And we started this with gold in 2002 at $300. But they'd be – but gold today at... well, it's gone up today, probably because we're talking, Dan. It's right now worth about $18.38. But gold today measured against U.S. money supply is as cheap as it was in 1972 at $25 and as cheap as it was in 2000 at around $300. So gold is, today, undervalued and unloved and as it was when we went in.
And therefore, I think it's the best instrument you could ever buy to ensure your wealth. And that's why – we're not gold bugs and such. We just saw gold as the best way to protect against the consequences of an absolutely mad world and a world that is not going to survive in its present form. Sorry. Sounds like a problem of doom and gloom but I'm not. I’m an optimist. I just like to understand risk and protect against the downside.
Dan Ferris: Right. But the doom and gloom is really – it's not for all humanity. It's simply for the consequences of, you know, fiat currencies and the way the central banks are run and the banking system in general. Correct? I mean, you say you're an optimist. I too – I mean, the ascent of man is an unstoppable trend and will continue to be one. But the ascent of the, how shall we say, omnipotent, omniscient central banker – [laughs] that's going to be a shorter trend.
Egon von Greyerz: Very much so. I mean, central banks are not needed. and certainly, they're not needed for the purpose that they're being used now. I mean, it's criminal what they're doing, creating all this worthless money and lowering bubbles of a magnitude that creates a much bigger disaster than if the central bank hadn't been done... and we would've been better to do absolutely nothing about it and let nature's normal cycle of sort of tops and bottoms or supply and demand take over.
That would've been a lot better solution to the big, big problem that the world is going to see now. And it's not going to be just the financial bubble because the financial bubble will lead to high inflation, leads to poverty, will lead to the food prices going up and normal people will not be able to afford to live, and we see energy prices moving up. Which becomes a very big part of normal peoples' budget... food and energy. And they're not going to be able to afford this. This'll be a real mystery for a period of time. How long? Only future historians can tell us about. But nevertheless, I think it's going to be for quite a while.
Dan Ferris: Egon, I want to ask you a question that I know is on our listeners' minds. You constantly hear these days how bitcoin is going to replace gold. It's actively replacing gold. Some people say it has replaced gold. And to me, I think this is foolish because gold has been around 5,000 years, bitcoin has been around a little more than a decade. And bitcoin trades like a risky asset – a risk-on asset, really. When the market is in risk-on mode and everyone's guying risky stocks, they buy bitcoin too.
It correlates very well with the Nasdaq, a really frothy technology stocks that have made people so much money in the last decade. And so, bitcoin to me just looks like another – the way it trades, anyway, looks like another risky asset. I'm not saying it doesn't have a good future – I'm long bitcoin, I like bitcoin – but where do you come down on this issue of bitcoin replacing gold? They even use that one, use the second one.
Egon von Greyerz: Well, to me it's very clear. I mean, I’m obviously totally [laughs] aware that people have – some people have become very, very rich by buying bitcoin early. And good on them. Absolutely. You know, if they identified a trend – and a lot of people jumped on that bandwagon and made people wealthy. But in the end, it will end badly in my view, like all of these bubbles do. I think we'll have to wait, as you – we'll probably have to wait, if not 5,000 years... so a few hundred years or 1,000 years before we can tell if bitcoin actually will be.
My guess is that bitcoin won't be here even in 50 years. But I might be wrong. Well, you know, I have a view that bitcoin could go to $1 million, or it can go to zero. And I think that's about – you know, there's a binary decision. And I'd rather not hold an investment that can be worth zero or – even if it could be worth $1 million. Sure. If you put a few dollars or a few euros on it and take a punt, that's fine.
Dan Ferris: Mm-hmm.
Egon von Greyerz: But, you know, what is certain to me is that bitcoin has nothing to do with wealth preservation. It might if we go to the million-dollar – so it might be [laughs] an inflation hedge. But, you see, if bitcoin becomes too big and successful, central banks are never going to allow it to take over the monetary system. So it will always be a fringe investment, bitcoin or the other cryptos. It will never be – it will never be real money in my view. Because once they start with our CDCs – and I hope that will fail eventually because, you know, CDCs – sorry –
Dan Ferris: CBDC.
Egon von Greyerz: CBDC.
Dan Ferris: Central Bank Digital Currency.
Egon von Greyerz: Yeah. Central Bank Digital Currencies. You know, that obviously is just another form of fiat money. It's not going to change anything. It's not going to, in any way, repair the monetary system... or, of course, they will say some clever things and undertake some clever transactions, it looks like the debt – the old debt – has disappeared. But you can't make it disappear, certainly without making all of the assets that bubble has – that debt finance – also disappear.
But of course, digital currencies, digital central bankers, will also have the benefit of government being able to control you, and that's very unpleasant. I hope – and I don't think that it will last long, but we might have a period of that in some countries. But it's going to take a long time – it's not going to go as quickly as everybody says to implement. And if it just replaces drawing rights, etc., then that's nothing.
But their intent is probably to replace paper money with it eventually. It'll be very – I mean, I can't see Switzerland, for example, being as a digital currency or a central bank as a digital currency. You know, people in Switzerland still love their cash... not for the point-of-view of evading or avoiding tax but from the point-of-view of, if you have cash, it's as real money as you can ever get in this world – especially if you have Swiss francs.
You know, when I started my working life in Switzerland in 1969 we had 4.30 CHF to $1. Today, it's about 90 Swiss cents. So it's gone from $4.30 to $0.90. So it's gone down 80%. The dollar – the strong dollar, the mighty dollar, has lost 80% against the Swiss francs during my working life. And it shows you what a rubbish currency the dollar is. And relatively, the Swiss is a stronger currency.
But, you know, like all currencies Swiss is also going down in real terms against gold. Not as far as the dollar, but nevertheless it is. And, you know, it will probably be a low slower to reach zeros, Swiss franc, than the dollar. But nevertheless, you know, this currency system is now doomed. And it's only a matter of time before we'll see the evidence of that.
Dan Ferris: You know, I don't disagree with you about the U.S. dollar being a rubbish currency. And yet, here it is. I think it's something like 80% of global transactions and 60% of foreign exchange reserves. It's obvious people have no problem using it still, even though it has lost value versus Swiss franc and it continues to lose value. Over the long term against gold, it has. Gold's a 50-bagger since 1971 versus the dollar. So it makes me wonder if having ultra-sound money – those of us who believe gold is real money, as I do – it makes me wonder how important to a global economy a sound currency really is.
Egon von Greyerz: Yeah. That's a very good question. And of course, it is incredibly convenient for the world to have a trading currency that is accepted by everyone. But, you know, since Nixon temporarily took the dollar off the gold backing, temporarily –
Dan Ferris: Temporarily [laughs].
Egon von Greyerz: -And at the same time said in his speech that "This is not going to hurt the dollar in your pocket at all." Well, as we know – as you just said – the dollar is down 98% against the real money – IE, gold – since 1971. So I think it has the dollar in America's pocket. The thing is, the majority of Americans never travel abroad, they don't have a passport either. They don't see what's happened to their money. They don't realize that the value of their money is plunging at such a rapid rate.
But, you know, why the Americans were very clever, of course, was forcing the petrol dollar onto the world by agreeing with Saudi Arabia and doing both trade agreement sand weapons agreements and lending agreements with them, etc. So that's what kept the dollar going and that's what made it then into the world currency and into, you know – continuing to be a reserve currency... doesn't deserve it at all, and it doesn't deserve it by running a budget deficit, for example, since 1930 with only four years exception.
I think in the '40s and '50s is the only times the U.S. had a real surplus. Clinton years were another surplus. They were deficits with just – because the debt continued to go up during the Clinton years. It's just that they manipulated, you know... put some fake figures in and put some of the income below the line instead – or some of the outgoings below the line instead of above the line and they created – so basically, the U.S. has, with a few years exception, run a budget deficit for 90 years and is now running bigger deficits than ever.
How can that country's currency be a reserve currency? It's ridiculous. It doesn’t deserve it. But the combination of, as you say, the general acceptance of the dollar worldwide and, of course, the trade – especially oil trade – has meant that it has continued for well past [laughs] the life that it should've had the dollar. So that'll continue for a while still, and then at some point – you know, things always take longer than we expect.
I didn't expect that the world was going to – more than years after the last crisis going to still be here and booming more than ever. You know, of course, we will soon know that the boom was only based on an illusion, not on real money and real wealth and real assets. But sure. For the people who made the money and can keep it, but very few – the world's destruction we're going to see in the next few years will be absolutely massive.
Because most people will believe that the central banks and the Fed, in particular, is going to save them this time too. Because if you look at, you know – let's look at – if you look back at the Dow, you look at all the falls in the Dow that I have experienced in my working life... so you had the '73, '74 fall... you know, big, big fall at the time. Then you had the '87 fall... massive.
Then you had 2000, and then you had 2000, and then you had a year ago – or also a year and a half ago. And every time, all of those falls looks like nothing on the chart. It just recovered because unlimited amounts of money printing had taken place. I think that this next time – and, again, history will prove if I'm right or wrong – I think that the system won't be saved this time.
And I think all the ones that are going to stay in with their investments, going to buy the dips, etc. – they will be badly, badly hurt. So I think the world's destruction is going to be much greater than anyone can imagine because very few people will actually get out in time. You know the psychology of investors, say, "The market goes down 25% and they say, 'Well, if it goes up to that level I will sell.' And once the number reaches that level" –
Dan Ferris: "I'll sell in the hole again."
Egon von Greyerz: Yeah [laughs]. And then I say, "OK. I'll hold on." And then it goes down further, I say, "OK. If it goes to that level, I'll sell now." And that way, I can see the majority of investors riding this next bad market, which in my view is going to be the magnitude of, let's say, the '29, '32 when the Dow fell 90%. I think that's the least we will see this coming time. Certainly in real terms, I imagine against gold depending on how much hyperinflation we get.
So if we get that kind of fall, you know, as I said, the world destruction will be enormous. And remember, '29, '32, the situation in the world globally and the debt situation were nowhere near as serious as today and the U.S. – especially the U.S. debt-to-budget situation were much better than today. So, you know, therefore I can see the major wealth destruction coming and most people will ride it all the way down.
Dan Ferris: There's one thing about the relationship between the Federal Reserve and the financial markets that has come to bother me a bit. So the Fed prints up these dollars, then they go into the bond market and they do a – they basically do a swap. They buy Treasurys from all the few-dozen dealer banks, and then that dollar – which now yields nothing... you know, the Fed has taken the yield onto its balance sheet and the dollar yields nothing, it sits there in a Fed member bank reserve account, and I have not been able to figure out – I can't draw a line from it. I mean, when I look at the Fed balance sheet, it looks enormous – it's like looking at a picture of the side of Mount Everest, right?
It just is going up and up and up and to the right. And there has to be something desperately, terribly wrong with printing all this money. But then when I try to draw the line from the balance sheet to the stock market, I can't get there. You see what I'm saying? I know it's bad. I know it's wrong. I know historically it has proven to be the precursor to disaster [laughs], but when I really try to get the mechanics of it I'm befuddled. I don't know if you can help me with that or not. I just thought I'd throw it out there.
Egon von Greyerz: Well, no. No. I understand what you're saying. But to me, it's very simply – you know, in an economy which is running deficits and which is creating money constantly, that – so the printing press is running, and then you have always the ones that stand nearest the printing press benefit. So you get the banking system and the wealthy who will take advantage of the financial system – they stand nearest the till and they actually use that money and invest and do well out of it.
This is like Mugabe in Zimbabwe. You know, they were running obviously a very hyperinflationary economy. And he got the first Zimbabwe dollars coming out. Once it was passed on to the people, it was worthless, and he changed it quickly to gold or to dollars. And so, he did all right. And that might not explain quite your line, but I think that's actually the way I see it. That's what happens to the system. So –
Dan Ferris: No. It's very clear, Egon. It's very clear what you're telling me. I need to go to work for Goldman Sachs [laughs]. That's what you're telling me, right?
Egon von Greyerz: Absolutely. You know, you're absolutely right. You know, I don’t know how well Stansberry pays, but – I mean, it's a very successful organization. But nevertheless, yeah. Sure. These bankers – I mean, it's unbelievable. You know, I have a son-in-law's who's been with one of the major – you know, he's the managing director at one of the major U.S. investment banks and has been for the last 20 years.
And, you know, every time I'm telling him about the economy collapsing, every time he gets a bigger bonus. And 2008 when the whole world of financial system – including his banks and all the other banks – were collapsing and saved by the Fed and other central banks, the bonuses in 2008 were as big as the one in 2007. And that was bonuses from all bankrupt banks. And that tells you how sick the system is.
Dan Ferris: Yeah [laughs]. I can't imagine looking on that from main street, from a – you know, if you're a mom-and-pop shop of some kind, you're running a small business and you're struggling and struggling. And then, you look at that – it explains a lot. Let's just leave it at that. So besides –
Egon von Greyerz: Yeah. But you mentioned something important. Because, you know, one of the problems with us people in this industry, we talk to people with money. We talk to people who have money to invest. Ordinary people, they don’t hear what we say. And we don't hear what they say either. We don't understand what their lives are like. Because the world consists mainly of ordinary people.
And you can take just now with COVID. What's happened to these – and the way that governments have totally destroyed so many businesses with all their stupid rules about COVID. You know, remember that 200 countries in the world have – and each country and each promise within each country states whatever it is – counts as a... they have all their different rules about COVID. So, you know, you have a disease that's supposed to be a global pandemic.
There is not one county that deals with this in the same way as another country. Which means that nobody has a clue. Nobody has a clue whatsoever how to deal with this pandemic. And the sad thing is, then you have these small mom-and-pop businesses and ordinary people – they're on ones suffering. They're the ones who are not selling their wares. They're the ones who are now seeing massive inflation because of all the money that's been printed to benefit the rich and to save the central bank from disaster because they already have so much debt, so they will need to print so much more to keep alive.
And that's obviously only temporary. But nevertheless, that's what's happening whilst all ordinary people are just seeing everything going up, price going up, good going up, fuel going up, etc., etc. You know, and they're really suffering. But nobody cares about them. Sure. At the end of the day, the vultures will say something, and that's of course why when this downturn really starts in earnest, the political situation in the world will be absolute chaos.
Because, you know, people will be vaulted out of power quicker than you ever thought was possible when they start happening. No one is going to stay because, all of a sudden, whatever they promise is not going to happen. So the next incumbent will promise more, and he'll be thrown out too. And remember in Germany in the '30s, people were shot. A lot of politicians were shot. And also in the '20s during the hyperinflation. Because during the Depression, you know – that's what happens.
And so, we're going to have tough political times on top of the financial problems and ordinary people are going to suffer very, very badly. The wealthy who've managed to save some – the wealthy who've managed to save some money and protect that, I mean, they'll probably do all right. They might have 75 or 80% less wealth, but there's still enough to buy food. But the poor are not going to have that, and governments are not going to be in a position to help them either except with money which is worthless.
Dan Ferris: I'm glad you mentioned changes in political power. Yeah. Yeah. I think you're right. And a thought that went through my head – I forget what I was doing last night, just puttering around the kitchen or something. And I thought to myself, "These are the sorts of times when people begin to do that horribly disastrous thing that feels right at the time" – which is calling for stronger political leadership.
And when I look at the United States – I never used to worry about these things because they were these big top-down worries, they never materialized exactly as people suspected – at least during my lifetime. I was born in 1961. And yet, I'm beginning to worry when I look at a fellow like Joe Biden in the White House. I really don't care if it's Democrat or Republican.
I'm not partisan that way politically and... but he strikes me as sort of a weak fellow. And it's a prime situation for folks in the United States to start talking about the need for strong leadership. And, man, you know what [laughs]happens. A strong leadership is never good. You know, what comes in afterward is – it's always worse. And this troubles me.
Egon von Greyerz: Yeah. No. You're absolutely right. And of course, out of these situations often you get a Marxist type of leader who promises a lot and takes a lot of power and, you know, creates hell for the people.
Dan Ferris: And we've just run this massive experiment – haven't we, Egon – where governments the world over have proven that "Hey. We can get away with a lot more than we thought. We can turn Australia back into a penal colony, for goodness sakes."
Egon von Greyerz: Yeah. No. It's unreal. It's unreal. You know, you could just take a leaf out of the government's book. And, you know, the way – how easy it's been to indoctrinate the people and telling them about, "You've got to wear a mask. You've got to take injections. You know, you can't work. You can't travel. You can't do this," etc. And everybody just accepts it. And you take, I mean, all of Germany, all of Austria, all of Australia, etc. – you know, they just accept it. And it's horrible.
At least, you know, I have two home countries. I've lived in many other – but I'm from Switzerland. I’m Swedish. At least Sweden – you know, there have been very few restrictions. Swedish industry has continued as normal. They haven't locked down anything. They haven't – you never had to wear a mask or anything in Sweden. So Sweden has been – it's been a little bit worse now with Omicron in the last two, three weeks.
But nevertheless, on the whole – so that's an example of a country that has dealt with it with, you know, almost... very, very few measures that have tied the people down. And then as I said, you have these – Australia, Germany, France. You call these, "You've got to be crazy They're also" – and, you know, it shows what – yes, with propaganda and indoctrination, you can do anything with the people. It's just frightening how easy it's been to get them to do – to take all these crazy measures. I mean, you know, even now. I saw there's been – even debate in the U.S. now. I've always thought the masks had no purpose.
And that's what – even in the U.S., they're starting to talk about now, also. But we've known it before. Of course, it's not new. But probably mask has just bad for you because you can't breathe. So yes. Yeah. Sadly. And if we get – that's what you started with. We get now a very difficult economic situation in the world, these kinds of measures can easily be implemented. Again, not the same as for COVID but a lot of restrictions and a lot of rules that people would not have accepted in normal times.
Dan Ferris: Right. Now, I hold gold myself. I think it's an asset that I can't be without for many of the reasons that we were discussing as a chaos hedge and inflation hedge and so forth. But in the United States at least, you have this problem of the tax treatment. Because you can't – you know, you can't buy things with gold. You've got to translate it into dollars. And right away, it's taxed like an asset. And by the way, so is bitcoin [laughs]. By the way, so is bitcoin.
Egon von Greyerz: Yeah. Yeah.
Dan Ferris: So it makes one wonder – I suppose in that respect... it's not so much that you're holding sound money, perhaps, but simply that you're holding a safe asset like you would, you know, hold real estate or like some people hold art or something like that.
Egon von Greyerz: Yes, of course. The beautiful thing is if you can afford to hold gold and never use it.
Dan Ferris: Yes [laughs].
Egon von Greyerz: That's really – because then, you can see your wealth grow without paying half of it or over 28%, whatever you do pay in the U.S.
Dan Ferris: 28 – yeah.
Egon von Greyerz: Yeah. The government – and of course, I mean, that's... it's penal. You're actually – that you have to pay for money maintaining its value. You have to pay the government 28% of that. It's absolutely crazy.
Dan Ferris: It is.
Egon von Greyerz: But we can't do anything about that. Taxes, if you live in the country, you have to accept the taxes in the country. You have the choice of moving somewhere else, which very few people can do, of course. But that's one alternative. And it's interesting. Again. Tax on gold or on gains of precious metals is very different around countries in the world – in the UK, you have a high tax with normal gold.
But if you hold sovereigns or Britannia's coins – one of those coins issued by the Royal Mint, their money – so you don't pay any tax on those. Very few UK investors understand that. So it's a wonderful way of saving... you know, protecting your wealth and without having to pay any tax. I mean, hopefully – of course, there's – of course, it's characterized as real money, then that's not likely to change in the short term, anyway... at least for a long, long time.
And other countries in Europe don’t have capital gains tax at all, so that wouldn’t have any capital gains tax. So it's treated very differently. But overall – I mean, I agree with you. If you hold what is money and all you do is to protect your purchasing power and you have to pay away about 28% of that, it's ridiculous. Absolutely ridiculous.
Dan Ferris: Yep. And yet, there's nothing we can do. We must accept the world as it is.
Egon von Greyerz: Yeah. Yeah. Sadly. Sadly.
Dan Ferris: It certainly – yeah. You make a good point. Because as you say, a wealthy person who's protected may lose 25% of their hopefully substantial wealth but, you know, others who cannot accumulate savings will be far worse off.
Egon von Greyerz: Yeah. And you only pay 25% on the gain that you wouldn't have had if you kept it in real money. So, you know, you're still – it's only on the gain. So you still keep the 75% of the gain. That's what you have to point out. You have to turn it around to a positive thing.
Dan Ferris: There you go.
Egon von Greyerz: And that's what you're doing [laughs].
Dan Ferris: Right. All right, Egon It's time for my final question. And it's the same question for every guest no matter what the topic. And I'm really curious to hear what your answer is in light of our conversation. And the question is very simple. If you could leave our listener today with a single thought – you can only leave them with one idea – what would it be?
Egon von Greyerz: It's very simple. It would be that – we are talking financing and money the whole time but life is not – the explanation is longer, but the solution is a short one. So, you know, we're talking about money and how to preserve your assets and all that. Life is all about people... about helping people and about family and friends. And in the times we're going to have now in the next few years – which will be very difficult times – the most important thing will be to help others.
Because the world is going to suffer. Help your friends, help your family and support people and create little groups of support groups and then enjoy the real things in life – which is nature, music, books, conversation. That's really what people should be thinking about... not about – don’t focus on money. If you have the money to protect, protect it but really focus on your fellow man and your family. It's a little bit longer than you wanted, maybe, but I think it's an important point.
Dan Ferris: Oh, no. Believe me, Egon. I've gotten answers much, much longer than that one [laughs]. So thank you. That was quite brief as they go. But thanks a lot for being here. And I will be – I think 2022 is setting up to be quite a tumultuous year. Maybe we should have you back at the end of it.
Egon von Greyerz: Yes. I mean, it'd be a pleasure, of course, to come back and... because I think we're going to see some real, real things happening this year. I know we've all said it before. We never thought it was going to be for as long as it has. But nevertheless, it has. But I think now we're at the point when, sadly, things are going to start happening this year. And therefore, you know, be a pleasure to talk to you again and we'll – well, whenever you want to have a chat, I'll be really, really, really happy to talk to you. Because I think things will look very different at the end of this year.
Dan Ferris: Excellent. We will definitely be in touch. And thanks again for being here.
Egon von Greyerz: Well, as I said, thanks so much. And it's a real pleasure and I wish you and all your listeners all the best for the coming quite difficult times we're facing [music plays and stops].
Dan Ferris: Well, it was great to talk with Egon. Egon sounds like an old-school, you know, deficit-hawk gold-bug type, but he's not. And we've heard this from other folks that we've interviewed. They sound that way, but it's only because – at this point in the cycle – they're looking around for really good assets to be holding in light of the current set of risks that are out there and the current set of opportunities. And they come up with gold.
So I'm really curious – to me, that's a very thoughtful – they just have a very thoughtful but very committed view on gold, right? And I share a lot of the concerns. But like I said, I just have so much trouble drawing a straight line from the Federal Reserve's balance sheet to the financial markets – well, not to the bond market maybe but to the stock market certainly.
We don’t have that problem with Japan – right – because they were buying [laughs] – and I believe they still are buying... you know, they were buying ETFs I think starting in 2010. And the Federal Reserve has bought bond ETFs but they have not bought equities yet. That would make a clear, straight line from the Fed to the stock market. Otherwise, I don't see the connection. But it's rational to have all the same concerns, nonetheless. It is. It sounds like a contradiction but it's not.
And even if it is a contradiction, [laughs] it still makes sense to me. All right? So let's check out the mailbag. Let's do that right now [music plays and stops] And now, an important update. A major shock is about to hit the U.S. financial system. It has nothing to do with inflation or the resurgence of COVID sweeping the nation, although they're both definitely making the situation worse. Months of stock gains could go up in smoke because nobody's done a darn thing about the zombie problem lurking behind all the flashy gains last year.
Now, if you understand what's coming, it's about the hand you a wave of opportunities unlike anything else anywhere. Each one of which could double your money or more, plus send you a dividend-like payment of 10 to 20% or more while you wait for your legally protected payout. These opportunities will come fast, and it's critical that you know what to do now well in advance. For more details, visit www.messagefromdan.com. Again, that's messagefromdan.com. [Music plays and stops]
In the mailbag each week, you and I have an honest conversation about investing or whatever is on your mind. Send questions, comments, and politely worded criticisms, please, to [email protected] I read as many e-mails as time allows and I respond to as many as possible. You can also call our listener feedback line, 800-381-2357. Tell us what's on your mind and hear your voice on the show.
First up this week – and we only have two this week. First up this week, Jim W. And Jim W., thank you for being very straight and to the point. Jim says, "Very informative. You covered the stock market, bond market, gold, bitcoin. No mention of silver. Does silver pretty much parallel gold? Jim W." Yes and no. I tend to think of it as gold on steroids.
Although, the differences on the supply side of silver – the supply side of silver is odd because you can have a goldmine – a straight-up, pure goldmine – and there might be some copper in it or something else, but there are... you know, people look for goldmines and they find them. But silver mines are kind of rarer beasts. Most silver is a byproduct of mining other metals. So the silver supply depends on the supply of those, you know, copper, lead, zinc, etc., other metals... and gold too. You get gold-silver deposits. So it's a different beast that way.
But for me, I tend to think of it as poor man's gold or gold kind of on steroids. Because all of the – a lot of the demand is industrial uses and things. And, you know, maybe jewelry and maybe industrial. And then in certain times, that marginal bit of demand can really, really bump the price, right? Because gold has a pretty steady investment demand. Most of the demand is jewelry, most of the time, but then there's still a pretty steady investment demand.
But with silver, it tends to be kind of a, you know, more – a greater shock, right? The sudden, big difference in investment demand. So you tend to get these sort of explosiver – more [laughs] explosive moves in silver than in gold. It has that potential. So, you know, when I say, "Buy gold," I really always mean, "Buy gold and silver." Because I think holding them both is a smart idea.
But yeah. It's a good question. "Does silver pretty much parallel gold?" Yes and no. In some ways, yes... in some ways, no. All right. Our second to last question this week is a longer one from Kelly F. And I've tried to take out – I tried to make it as short as I can and still be a good question. So here we go. "One concern," Kelly F. says – "One concern I have about bitcoin is that it's treated as an asset, not an alternative income for income tax purposes.
This means that all purchases using bitcoin are treated as two transactions. A deemed conversion to tax, which is a taxable transaction followed by the purchase at a dollar price. So widespread use of bitcoin as a currency is impractical at best because of the record-keeping and tax reporting required. More likely, it's just impossible to be widely used as a currency. I guess I see it as a store of value as long as the market sees it that way.
But a chaos hedge? Not likely. One of the first things that will happen in the event of international chaos – like heavy-duty conflict with Russians, Chinese, or Iranians is that the reliability of getting access to the market, even the reliability of the power grid – comes into question. If it's not a hedge, then you can't trade it for things that you need.
So it seems to me that those who are primarily concerned with having a safe haven will stick with gold and silver. I'm interested in your opinion on this analysis. Kelly F." So, Kelly, you got three items here. You've got the tax treatment issue – which I just agree with you on that. It can't be a currency if it's taxed as an asset because, every time you use it, you're going to pay 28%.
I think it's taxed like that. And then, the next issue was, you said, "I guess I see it as a store of value as long as the market sees it that way." I don't see any evidence of the market saying bitcoin is a store of value. It trades like a risk-on, you know, technology play of some kind. It looks like a biotech stock or a, you know, Nasdaq meme stock [laughs] or something. It's just really, really volatile. And I put most of that down to its novelty, right?
It's only been around since January 2009. That's not much history, right? 13 years? Not much. And then, you said, "But a chaos hedge? Not likely." Yeah. A chaos hedge or an inflation hedge – a chaos hedge, I don't know, bitcoin. But really, the real issue for me with all of this – you're talking about an alternative currency, store of value, maybe an inflation hedge but definitely a chaos hedge... this is like – these are things that you expect out of hard currency, out of real money that would hopefully maintain its value like, you know, gold should be.
But, again, in the United States, we have that tax issue. So it's weird, isn't it? It's weird to figure out what to do as a chaos hedge. Because actually, real estate has kind of worked out – real estate even worked out for some people through World War II. You know [laughs]? The real estate was occupied but then, you know, because there was a decent entitlement system, you got it back. But then, there's the Russian Revolution. Well, you didn't get it back – there's no getting it back there.
And the current, you know – the current regime are a bunch of crooks, right? Oligarchs. I mean, we had Bill Browder on the program who told us that Putin went to the oligarchs and said, "I'll leave you alone but I need 50%... 50% of your company. Not for the people of Russia but for me." So chaos hedges are hard, aren't they? And even if you say, "Well, you know, I'm just going to buy put options.
And if the market crashes, I'll be protected." You will, technically speaking, but there again you're paying this cost over time and you – you know, so timing is an issue if you don't want this to get very, very expensive. And some investors have done that, and it has been a disaster since 2009... except for a couple of moments where, again, you had to have the timing right for it not just to cost a fortune.
So chaos hedges are hard. I mean, gold and silver are the best thing I got. And I agree. You said. "For a safe haven, you're sticking with gold and silver." You know, it's not like it's wonderful. It's not like you hope that you'll have to, you know, get the benefit of chaos. But it's kind of a best thing in a bad situation sort of a play. Guess that's the definition of a chaos hedge. So there we are. But it's good. It's good to think about this stuff, Kelly.
And I'm glad that you did submit this question with all these different aspects to it about these topics. We need to keep them alive because they're hard. Well, that's another mailbag and that's another episode of the Stansberry Investor Hour. I hope you enjoyed it as much as I did. We provide a transcript for every episode. Just go to www.investorhour.com, click on the episode you want, scroll all the way down, click on the word "transcript," and enjoy.
If you liked this episode and know anybody who might enjoy listening to the show, tell them to check it out on their podcast app or at investorhour.com. And do me a favor... subscribe to the show on iTunes, Google Play, or wherever you listen to podcasts. And while you're there, help us grow with a rate and a review. Follow us on Facebook and Instagram.
Our handle is @InvestorHour. On Twitter, our handle is @Investor_Hour. Have a guest you want me to interview? Drop me a note, [email protected] Thank you. Several people did that this week. Thanks. Or call the listener feedback line, 800-381-2357. Tell us what's on your mind and hear your voice on the show. Till next week, I'm Dan Ferris. Thanks for listening.
Announcer: Thank you for listening to this episode of the Stansberry Investor Hour. To access today's notes and receive notice of upcoming episodes, go to investorhour.com and enter your e-mail. Have a question for Dan? Send him an e-mail, [email protected] This broadcast is for entertainment purposes only and should not be considered personalized investment advice.
Trading stocks and all other financial instruments involves risk. You should not make any investment decision based solely on what you hear. Stansberry Investor Hour is produced by Stansberry Research and is copyrighted by the Stansberry Radio Network. The opinions expressed on this program are solely those of the contributor and do not necessarily reflect the opinions of Stansberry Research, its parent company or affiliates.
You should not treat any opinion expressed on this program as a specific inducement to make a particular investment or follow a particular strategy but only as an expression of opinion. Neither Stansberry Research nor its parent company or affiliates warrant the completeness or accuracy of the information expressed on its program and it should not be relied upon as such. Stansberry Research, its affiliates, and subsidiaries are not under any obligation to update or correct any information provided on the program.
The statements and opinions expressed on this program are subject to change without notice. No part of the contributor's compensation from Stansberry Research is related to the specific opinions they express. Past performance is not indicative of future results. Stansberry Research does not guarantee any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment discussed on this program. Strategies or investments discussed may fluctuate in price or value. Investors may get back less than invested. Investments or strategies mentioned on this program may not be suitable for you.
This material does not take into account your particular investment objective, financial situation, or needs and is not intended as a recommendation that is appropriate for you. You must make an independent decision regarding investments or strategies mentioned on this program. Before acting on information on the program, you should consider whether it is suitable for your particular circumstances and strongly consider seeking advice from your own financial or investment adviser.