With inflation creeping higher and higher these days, now is the perfect time for this week’s guest to make his Stansberry Investor Hour debut.
Patrick Yip is a precious metals expert. He’s the director of business development at APMEX, one of the largest online precious metals retailers in the U.S., as well as the manager of OneGold, APMEX’s innovative investment platform for vaulted positions in gold, silver, and platinum.
And he says that in a market fraught with uncertainty like we’re seeing today, it’s especially important for conservative and speculative investors alike to consider adding precious metals to their portfolios…
If history repeats itself, inflation at its current rate could erode half of your wealth in nine years. No one knows what the future is going to give us. But if history repeats, precious metals are going to protect your wealth and maybe even increase your wealth.
Gold, he says, is perfect for those seeking extra portfolio protection during periods of high inflation. If metals rally like they did during the inflationary cycles of the 1960s and ’70s, investors could see gold hit $5,000 in the next few years. That’s more than 150% higher than today’s prices.
And silver – what Dan teasingly calls the “meme stock of the metals world” – offers equal opportunity for investors willing to stomach a little more volatility. Right now, silver premiums are sky-high. But as Patrick discusses, it all boils down to simple supply-and-demand economics…
He walks listeners through each step of coin making’s complicated process from mine to mint and pinpoints the exact spot in the supply chain that’s “stressed the most” right now. And he unveils how his OneGold system offers a unique way to directly own silver while bypassing the high prices.
Finally, Patrick touches on what Dan calls “the elephant in the room” – another popular (though, very different) asset – and how it holds up to gold and silver in one’s portfolio.
Director of Business Development APMEX and OneGold
Patrick Yip is the director of business development at APMEX and OneGold. APMEX is one of the largest e-commerce retailers in the U.S. and provides a two-way market for buying and selling precious metals. It has a selection of more than 20,000 products that include gold, silver, platinum, and palladium. Having been with APMEX for 11 years, Patrick held various roles in merchandising, sales, project management, marketplaces, and business development. Most recently, Patrick managed the company's fastest-growing platform, OneGold, which is a system that allows users to buy, sell, trade, and redeem vaulted positions of gold, silver, and platinum.
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 Patrick Yip from APMEX, one of the biggest coin dealers in the country. In the mailbag, we'll talk about cash holdings and truth in bubbles. Remember you can call our listener feedback line: 800-381-2357. Tell us what's on your mind and hear your voice on the show. For my opening rant this week, let's one more time we'll talk about Elon Musk and Twitter. That and more right now on the Stansberry Investor Hour.
So what do we want to say about Elon Musk and Twitter? Well, by now you probably know that about a week and a half ago he bid $54.20 a share, valuing the whole company of Twitter at around $43 billion. So he wants to take over Twitter. He wants to buy all of Twitter for $43 billion. It would actually take about $39 billion because he already owns about 9.2% of the shares. So he just wants to buy the remaining 90.2% or 90.8% that he doesn't already own.
At first, the stock market looked at it and said no, I don't think so. And the stock was actually down by the end of the first day. Usually when the market gets news of an acquisition offer like that – let's say a guy offers $55 a share for a company and the shares were at $45. Well, if the market believes it, then the share price just goes straight to $54, almost $55, but that little – there's usually a 1% to 3% difference. And that little difference is called the arbitrage spread or the arb spread. And the spread on Twitter has finished the first day 20%. That's the market saying, "Nope. Not going to happen. Never going to happen."
The stock wallowed in the $40s as news about this thing developed and a bunch of people gave their opinions about it. I won't go through all that. A whole bunch of people said, "Oh, it's terrible. He's a right-wing extremist. It's bad for democracy," and all this pure baloney, just pure baloney because of course Musk said that he's a believer in freedom of speech. He calls himself a freedom of speech absolutist. So he wanted to take over the company and strike a blow for freedom of speech because he doesn't like the way Twitter censors the views of people it just doesn't like. The views aren't particularly dangerous unless you hold the opposite one and don't want people to hear the opposing view.
So there's all this hullabaloo in the press about it and I really just paid it – I had something to say about all of this in two Stansberry Digest essays published last week on Monday and Friday. I maintained that I thought the odds were very good that Musk would be able to acquire Twitter and the latest news is that finalization of a deal is imminent, which is interesting because the very first thing the board of directors did was try to block it by enacting something called a poison pill, which we won't get into the mechanics of it, but their poison pill made it impossible for anyone to buy more than 15% of the company in the open market, effectively impossible or extremely prohibitively expensive. Put it that way.
So right away we got this idea that the management and the board of directors of Twitter did not want Musk's – did not want to accept Musk's offer, but they never issued a formal rejection of it. So then Musk comes out with a tender offer, and a tender offer is an offer straight to the shareholders. This gives the shareholders a chance to tender their shares. If you've ever participated in this you know how it works. A tender offer is made and you call your broker and say, "I would like to tender my shares." And it was the same price. He's never changed his price, $54.20.
And part of the reason why people didn't take the bid seriously was because it was $54.20. So it has that $4.20 number in it that he likes to put into financial transactions. He released a new filing on April 21 last week about some events that took place on April 20, 4/20 – 4/20 is a marijuana reference. You can Google it, but it's a marijuana reference. So he's putting this tongue-in-cheek stuff in the offer and doing his usual Elon Musk kind of a thing. He said one of the first things he would do if he took over the company was take the board of director's salary down to zero. He said that would save us $3 million a year.
He's probably not wrong about that. Most boards are overpaid. It's just a little – it's a clique. It's a little good ole boys club and they usually just rubber stamp everything the CEO wants and they're not looking out for shareholders. Their role – they were put in place to look out for the shareholders, but they don't really ever do that. Rarely, very rarely do they ever do that. Even Jack Dorsey, the former CEO of Twitter, who is still a board member, he came out and he tweeted fairly recently that the board of Twitter has always been what he called the dysfunction of the company. So he's kind of on Musk's side on that they both don't like the board.
Anyway, so that's just some of what took place with this offer. I maintain that I thought you know the company would get bought. I said, "Hey, maybe a private equity firm will come into play," and two private equity firms were reportedly working on offers last week. Thoma Bravo and Apollo were both in the news about Twitter maybe getting ready to make an offer. So the latest news is that it really looks like a deal is going to happen, and now the stock is into the $50s. It's up around above $50 a share as we speak. So that means the market considers an offer much more likely now than it did before.
I still think it's going to happen, but I have another thought about Twitter that I want to share with you. And my thought is that I don't know for sure. We don't know these things for sure. You'll never catch me saying I absolutely know something for sure when I really don't because that's something I think that affects the financial world in general, certainly the financial newsletter business and the financial analyst world. They all act like they're way too certain. However, I think Twitter might be too broken.
Part of the complaint about the company consistently has been that it needs to make more money per daily active user. They need to get more revenue out per Twitter user. Facebook has gotten a little bit more users. They've gotten about 20%, or I think it was 7% more users from 2018 through 2021. And during that time Twitter's gotten 70% more users, but – and Facebook has gotten a whole lot more, I think 75% or something, 70% or 75% more revenue per user, a lot more. But Twitter actually has less revenue per user, like 3% less.
So that's a little troubling, but I started thinking about it and these two articles I read worked on me. And I started thinking, man, maybe people go to Twitter for something that their emotions are so engaged on this other thing that they can engage the somewhat less passionate emotions necessary to click on something and buy it. Because marketers and advertisers, they count on appeals to your emotions, but I think people go to Twitter to wage war. They go to Twitter to tell their enemies that they're stupid and to speak up for what's right. I use myself as an example.
I went to Twitter to follow a bunch of good financial people and maybe even contact them, and I did and we've had some of them on the show. We're going to have some more of them on the show soon. Last week's guest, Wayne Himelsein, I contacted him on Twitter and he was on the show. Typical example. But I wound up tweeting about my political views. I don't want to get into it, but I wound up standing up for what's right and getting a little passionate or even very passionate about some of my political views. And I thought, "Wow. Where did this come from?" I wanted to avoid this, but I couldn't because I'm just too human and Twitter just brings it out in people.
One of the articles that I read suggested that social media in general is set up not to bring us together, or maybe to bring us together somewhat, but at least as much to split us apart and split us into splintered groups warring opposing factions all across society of various types, political or otherwise. I thought it feels like Twitter is ideally suited for that because it accommodates images and videos, but it's really set up for a war of words with these 280-character tweets more so than Instagram or Facebook. They're more ideal for connecting with family and friends, I think, and just posting goofy pictures and stuff.
Certainly, all of those things happen on Twitter. I'm not saying they don't, but something about Twitter, it doesn't surprise me that there's more users on Twitter in 2018 but less revenue per user because people, they don't go there to buy stuff. They go there to argue and to be angry with their enemies. At least I think that could be a problem. I don't know if Musk striking a blow for free speech and taking away all the Twitter employees' desire to censor conservative people, for example, just one group that they really don't like. I think it's good. It's right, but I don't know if it'll result in more revenue per user. I don't know if it'll improve the business.
He said – Musk said after he made his offer, he said, "I'm not thinking about the economics at all and I'm not – this is not something I'm doing for money." I think we should take him at his word. I just wanted to share some of those thoughts with you. I don't know if the company gets acquired and all this goes away, it'll just be something that we get to watch from the sidelines as Twitter – whoever owns Twitter, Musk and whoever rides along with him in private ownership of the company, they will reap the rewards or not of all of this and you and I will just read about it in the news.
But it's just a thought that I had based on my own experience and some articles that I read and thoughts I had about it. Just wanted to share it. It's an interesting topic. Elon Musk owning Twitter is an interesting facet of our time. I think it's also a product of the bubble because he'd never be able to afford it if his Tesla shares hadn't gone up more than 10-fold. They've skyrocketed and turned him into the richest man in the world and most of his wealth is in Tesla shares. He's financing a substantial portion of the acquisition with his Tesla shares. So it's part and parcel of life in a bubble.
One more thing I wanted to say about Tesla and the current equity bubble that we are still in is that I noticed an article in Bloomberg that indicated that Cathie Wood of Ark Investment Management, who we've discussed also on the show, they run this very large – it was very large, it's smaller now – ETF called the Ark Innovation ETF. Its ticker symbol is ARKK and the biggest position, 10% of the fund, is Tesla. She's a huge Tesla bull and she came out recently with some really bullish comments just days ago.
Now this new article on Bloomberg says that she just sold $162 million worth of Tesla shares. I want you to know whether this is what I think it is or not, it could be that Cathie Wood is feeling the effects of the bubble bursting because she owned all these growthy stocks that have fallen apart and that she is now selling what she must sell because she can no longer sell what she should have sold earlier. Every bubble I think gets to a point like that. The reason why really high-quality businesses fall dramatically in a bear market is because people can't sell all the garbage that's already tanked.
A lot of the garbage has already tanked. A lot of the components of the small-cap indexes or the Nasdaq, all those growthy tech stocks, a lot of them are down 50% or more already. So we may be to the point where people are selling what they have to sell or maybe Cathie Wood is just a little bit ahead of that because her fund is so distressed. If I'm right about that, look out below. We could have a nasty summer or maybe it takes until the fall and we'll have a really nasty fall, and finally the S&P 500 makes even lower lows than it's already made this year. We'll see. I don't know. I'm not going to predict. You know me, but it could happen. That's all I have to say about that for now.
Let's go ahead and talk with Patrick Yip. Looking forward to this one. Let's do it right now. One of the biggest fears I'm seeing right now from readers and podcast listeners is that there is no money left to be made in the U.S. stock market, that the extraordinary gains of the past decade are gone for good and that anyone over the age of 50 who is depending on stocks for their dream retirement is out of luck, destined for pain ahead. Look, I'm about as bearish as they come right now. You know that. But with the right information and recommendations, it simply does not have to be that way for you.
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Patrick Yip: Thanks for having me on, Dan.
Dan Ferris: Yeah. Thanks for coming because of course as we e-mailed leading up to this, I had to talk to somebody. There was an issue about which I must talk to somebody, but maybe before we get to that you can just tell us a little bit about yourself and how you got into the coin business.
Patrick Yip: Yeah. So I'm the director of business development at APMEX and OneGold. For those of you who don't know APMEX, we are one of the largest online precious metals retailer. We've been in business for 20 years. We have over $15 billion in lifetime sales. So we estimate that we have about 40% of the U.S. market share. I've been with the company for a little over 11 years now. I've held various roles in merchandising, sales, project management, marketplaces, and most recently, business development.
My most recent role is managing the company's fastest-growing platform, which is OneGold, which is a company that allows users to buy, sell, and trade vaulted positions of gold, silver, and platinum. OneGold has done about $700 million in transactions in its first three years of operations. A little bit about my background is back in 2008 I was invested like most people in the stock market. I saw my 401(k) get turned into a 201(k), as many people saw as well. I then said, "Well, how is it that no one saw this happening?"
So it got me studying into Austrian economics, got me into precious metals... started actively buying gold in 2008 and then in 2011, I was doing my own thing, just working for myself. I said, "Hey, let's try to apply for APMEX. Let's see if they'll take me." I was living in California back then and APMEX is in Oklahoma City. So I sent a cover letter, sent a resume. Interviewed with the CEO and EVP then and they said, "Hey, we really like you," and now I'm here.
Dan Ferris: That's cool. That is very cool. I entered the newsletter business very similarly. I just dropped them a note and sent them a quick cover letter and resume and 20-odd years later here I still am. Of course, the question to which I alluded before I asked you to introduce yourself is why are silver premiums so high right now? Because man, I was shocked. You look at the spot silver price, it's in the mid-20s. Then I went to look at the coin prices and they're way up in the $30s. Patrick, what is going on?
Patrick Yip: That's a very good question and we get that question from a lot of people too. So let me start by giving you a ground level overview of what we're seeing on the APMEX side and I'm going to look at the Silver Eagle, which is by far the coin that has the highest percentage premium. So to start, APMEX is one of the handful of authorized purchasers from the U.S. mint. This means we buy coins directly from the U.S. mint. It's important to note, there's several strict requirements. So the U.S. mint has to identify you as a market maker.
So you have to basically create a two-way buying and selling market of bullion coins for the U.S. mint to even consider you. But APMEX is one of the handful of people who buy directly from the U.S. mint. So during a normal market what happens is the U.S. mint gives us a weekly allocation of coins. We then say, well, ideally this allocation should meet our needs. So we buy some or all the coins from the U.S. mint. They charge us $2.35 over spot, which is public information. We have no need to source metal from anywhere else. So then we make a small spread. We sell the coins for roughly $4 over spot. So that's a typical normal market. That's what we saw in 2016, '17, '18, and '19.
Now moving forward, let's look at a tighter market. So the U.S. mint still gives us the weekly allocation of coins. We then buy the full allocation. However, we have a little bit of a problem. We need more coins than what the U.S. mint is willing to sell us. So then we reach out to other authorized purchasers and maybe other dealers, depending on our need for these coins, and then we ask them, "Hey, do you want to sell your coins?" And then obviously they're in the business to make money. They're not going to sell it at $2.35 to us. So they say, "I'm going to sell it for $3. I'm going to sell it for $4." And these numbers are just indicative. It obviously depends on the market.
If we're buying coins at $4 we said, "Well, we can't sell it at $4. We have to sell it at $5. We have to sell it at $6." So that's a little bit of a tighter market. Then fast forward to today. Today is a unique situation. So the U.S. mint still gives us our allocation. This time it's actually biweekly. So they're not giving it to us weekly. So that hurt us a little bit. We then buy everything we need from the U.S. mint, but we have a huge shortfall. We need a lot more coins than what the U.S. mint is willing to sell us. So then we reach out to our partners too. We reach out to the other authorized purchasers, the other wholesalers, and even some of the retail public now.
Then we said, "Hey, we need coins." Then we have to pay up for coins. And in some cases even looking at our purchase history, we've paid over $9 for a Silver Eagle to certain dealers. These are dealers that are part of our network of dealers.
Dan Ferris: Oh, wow.
Patrick Yip: Obviously, if I'm paying $9, I can't sell it at $4, $5, $6 to $7. I have to sell it for over $10, which is currently where we're at today.
Dan Ferris: Wow. So as I thought the answer might be, it's a classic supply and demand. The demand is through the roof it sounds like. And you've got to get coins from wherever you can get them and pay just about whatever anybody is asking in order to it sounds like even begin to fulfill that. It sounds like you're not even really fulfilling that demand.
Patrick Yip: Yeah. In many cases we see dealers and we've run into situations too where sometimes product goes out of stock. Ideally, we don't want that to happen. But unfortunately, no one can predict demand. We saw certain cases back, let's say in early 2021, we had the silver squeeze. That completely surprised us. It came out of nowhere. We only had, let's say, a day or so of notice. It actually happened on the weekend and we actually had to shut down sales and that put a tremendous strain on our supply.
Dan Ferris: So Patrick, I know that part of the equation for the supply of silver ore, silver out of mines, is that mostly there's not dedicated silver mines. It mostly might be like a copper/lead/zinc kind of a thing or gold and silver, but the price of everything has gone up, which of course is an incentive to produce more. Is there more supply coming in on the horizon because of this? What's that dynamic? Do you see this lasting in other words, the curve dynamic?
Patrick Yip: Yeah. So I think it's – let's touch a little bit on supply and demand first. So as we mentioned on the demand side, demand is basically at an all-time high. APMEX has been in business for 20 years. We have not seen demand at this level ever in our history.
Dan Ferris: Ever?
Patrick Yip: We actually had our best sales month ever. We sold over $260 million in retail products to customers in March. So that's – we all do retail sales. None of it is wholesale. And then you see global ETFs are seeing about $12 billion in gold inflow just this year. So demand is crazy in all aspects, all sides. Then you look at the supply side. There's currently – if you look at supply right now, so metal is first mined, from the various mines. It's then refined. So obviously as they mine it, it's not .9999. So they refine it. The metal is then extruded and put into blanks. This is currently where the supply chain is stressed the most. So there's just not a lot of capacity here. So there's a massive blank shortage, which is causing further problems down the supply chain. So ideally these blanks would then get shipped to the mints.
Dan Ferris: Hey, Patrick?
Patrick Yip: Sure.
Dan Ferris: I wonder if I could stop you. I'm not going to assume that our listener is real savvy with all the coin terms. So the four nines that you mentioned, that's the purity, .999, like 99.9% pure silver, right?
Patrick Yip: That's correct.
Dan Ferris: What are those blanks that you mentioned?
Patrick Yip: So the blanks, if you look at a coin it's obviously circular. A blank is basically a circular disk without anything stamped on it. So to take a step back, when it's refined it's put in these big, whatever, bars, industrial products. They look ugly. They then have to be extruded, made to a certain thickness, and then polished up, stamped out, and then they're made into these little circular disks. And then these circular disks are then shipped to the – what the disks are called, they're called blanks because they don't have anything on it. So they're clearly blank.
They're then shipped to the mint. The mint, like the U.S. mint, for example, takes these mints – they source a lot of their products from, let's say Sunshine, for example, which is a large minting company. The U.S. mint then stamps out these blanks and then the blanks become coins since they now have the Silver Eagle on it. Then the coins get shipped to certain authorized purchasers. As I mentioned, APMEX is one of them. Then APMEX then sells to the retail public. So that's a high-level overview of the supply chain.
I think over time premiums will come down, but probably not to levels seen in 2017 when they were extremely low. Back then if I look at it, we had an overcapacity in the supply chain and there was basically a race to the bottom. So a lot of these mints were basically cutting margins, trying to get their product out. Since then you've had a lot of the capacity taken away. For example, when Republic Metals went bankrupt in 2018 they took some of the capacity away. In addition, you have some new players like 9Fine Mint, which is APMEX's own private mint, come online too.
Basically, the supply chain has been right-sized as of, I guess before COVID, 2018, 2019. But I think at some point like many things too, the supply chain will catch up and premiums will go down. I think another thing that's important to note too is we saw high premiums back before in prior years. In 2011, we saw $7 premiums in Silver Eagles when silver spiked up to $50. Then the crazy part is even in 2008 silver dropped down to $9 and people were paying $6 premiums for Silver Eagle, which is a 70% premium back then in 2008, which is much higher than what we're seeing today. But over time I think supply chains will catch up.
Dan Ferris: And as you just mentioned 2008, do you feel like this demand is really coming from just people feeling really panicky about inflation and the war in Ukraine? Do you hear – in other words, my question really then is do you hear from your clients and individual customers, maybe big institutions, small customers about why they're buying coins?
Patrick Yip: Yeah. I think the biggest reason is inflation. Anything you look – anything you do right now is more expensive. You fill your car up with gas you're like you probably haven't paid this amount since 2008. You go out to eat and it's more expensive. You're shopping for groceries, much more expensive. You look at just everything. Everything is – natural gas is up 155% year over year. Oat's up 90%, wheat and coffee up 64%. Everyone is just seeing things are more expensive. Then historically what people have looked at is precious metals have been basically a good place to park money during these inflationary cycles.
Dan Ferris: So that brings me to a question that I have been dying to ask someone like you. A while ago, and I mean just within the past few weeks, I just took a look at a long-term chart of spot silver and spot gold prices and I noticed that of course gold made its most recent all-time high in, what was it, August of 2020? And it almost got there recently again. Silver is still working on its 2011 high. I noticed in general silver has this really – the chart has this really spiky quality to it.
The demand comes out of nowhere and spikes to the moon. The price goes up and then whoa. The downside on the other side of those spikes could be quite breathtaking, even more than gold. This doesn't look like – this looks like a spike in demand. It doesn't look like the spike in price that I'm talking about. Is it? I wouldn't expect, for example, I don't expect silver to be $17 any time soon or anything like that.
Patrick Yip: Yeah. So, interesting comment there. If you look at what typically happens with silver and gold is silver often rallies after gold, but to a much further extent. So if you look at the 1970s bull run. This is when gold hit $8.50 in 1980 and silver hit about $50. If you look – so let's start at 1976, for example. Silver and gold were both at their lows. I think gold was – what is it? It was really cheap back then. I know it was pegged at $35 an ounce back in '71, but basically, it was low. Silver was I think $4. If you look at 1978, so two years later, gold doubled.
So it basically – actually '76. I'm looking at it right now. It was $100, but it doubled from $100 to $200. Silver, on the other hand, only increased 30%. So silver lagged in that first bull run. Then in 1979m both metals were 4X up from their lows. Then in the final year of the bull market, so in 1980, gold was up eight times from its low. So it hit $8.50 and silver was up 12 times from its low. So basically silver, during that final year, took off and rocketed way past gold, performance-wise. Then you see the same thing in the 2000's to 2011's rally too. You look at that final year in 2011 where gold and silver both rallied. Gold was up about seven times from its low in about 2000 and silver was up 12 times again from its low.
Dan Ferris: I tell you why I ask. You're going to hate this, Patrick. So just prepare yourself. It seems silver is like the meme stock of the metals world. My impression is the demand pours in from retail at the end and it just pew, the price skyrockets, and then of course that demand – when it soars out of sight, in meme-stock fashion, it tends to crash the same way. How much do you hate that, is the question?
Patrick Yip: To be honest, that's what it does. That's history. I think if you get in silver at the right time it certainly could be a good investment, but it's a lot more volatile than gold. So you see a lot more investors, at least if you want to speculate they get into silver. If you're more for asset protection, portfolio diversification, people lean heavily toward gold.
Dan Ferris: Right. So silver does have that – but it has – that speculative element is wonderful and I don't think we've seen anything like – I think there's – I think that lies in our future. Do you agree with that?
Patrick Yip: Yeah. I agree.
Dan Ferris: In the fairly near future.
Patrick Yip: I'm actually tremendously bullish on precious metals and I could go over a little bit of what we've done too, studying history of past inflationary cycles and what gold and silver typically did if you're interested.
Dan Ferris: I am very interested. History is – yes. Absolutely. Do it.
Patrick Yip: So obviously no one knows what's going to happen in the next several years, but I think history is probably the best indication. So let's start by talking about inflation. So obviously inflation is the big topic right now. You hear that inflation is at its highest level since I believe 1981. So unfortunately, we have to go way back to figure out what exactly happened. So I'm looking at – so we had two inflationary cycles, one in the 1960s and another in the 1970s.
If I look, there was an inflationary cycle from about '66 to about '74 where inflation started around 3.8%. It hit 12.3%. Basically, it was about a nine-year cycle back then in the '60s before the Fed was able to tackle inflation. Then you look at the 1970s. From '76 to '80, you had another inflationary cycle where inflation started at 4.9% in '76 and hit 14.8% in 1980. This inflation wasn't really resolved until Paul Volcker increased rates at 20%, basically about 5% higher than inflation was running. So I think the first thing to note too is I think we're in a similar situation right now. You're seeing inflation at 7.9% was its most recent stats.
Then the Fed increases rates by 25 basis points, which to me is like what does that even do? Does that even tackle anything? So I think the Fed is behind the curve. If history repeats it may take nine years to resolve it as we saw in the 1960s or five years to resolve in the 1970s. So I wouldn't be surprised to see this thing last for several years. If you look back, this is basically the first year of full inflation. Just back in January of 2021, I believe inflation was running around 1.4%. So basically nonexistent just a little over a year ago. So we're just year one in this.
So I think the next thing to consider is what happened during these inflationary cycles. So for example, if you look at S&P, so in the 1960s to 1970s, S&P lost 26% nominally during this inflationary period. So basically not a great performer and then when you factor in double-digit inflations you're down a significant amount of purchasing power. In the 1970s to the 1980s, the S&P was basically flat or it increased 4%, but 4% is not going to cover your 15% inflation that you saw in 1980s. So stocks, if history repeats, I think are going to struggle.
On the other hand, if you look at what gold did, so in 1965 to 1974 it was basically up 5X. So it was $35 to about $200. We had a brief period from '75 to '76 where real interest rates were actually positive. Gold declined from $200 to $100, but then inflation started running again in 1976 and gold went up from $100 to $850. So basically an 8X move. Then if you look at gold's most recent low in 2015 of about $1050, if history repeats and you have a 5X or 8X move, you may see a couple-thousand-dollar gold. One of the guys that I follow closely is Rick Rule and in a recent podcast I think about a month or two ago, he mentioned that he wouldn't be surprised to see $4,000 or $5,000 or $6,000 gold.
Dan Ferris: I know Rick well. I've known him for almost three decades now. We had him on the program recently and I agree. That's where I am. I'm thinking that this doesn't really peak. If past – if this cycle is like past cycles you will get that blowoff. I think the peak is at least going to be something like $5,000, but it's a wild guess at this point as to what the future does. The important thing though is, is it not, is to know that you need to own precious metals. You need to be prepared because you can't predict. You can't predict what the price is going to do, the same way you can't predict what the federal reserve is going to do really. You can't predict what's going to happen and I feel like precious metals are essential, not only because you know inflation is happening now, but just because you don't know what's going to happen in the future.
Patrick Yip: I 100% agree. What we like to do is we like to offer solutions for all different types of customers on APMEX. So if you like the fiscal, we'll gladly sell you the fiscal. We have 25,000 products available in stock for immediate delivery. Another interesting thing that we're seeing is on our platform called OneGold, if I could introduce that too, and what we're seeing is people are using that platform to basically go around current premiums.
So on a high level, I'll give you an introduction of OneGold if you're open to it. Back in 2018 APMEX partnered with Sprott to come up with OneGold, which is basically a new and modern way to purchase precious metals. Many people call it the Robinhood or the coin base for precious metals because it's so intuitive. It's so user friendly. OneGold is a platform that allows you to buy, sell, and trade vaulted positions of precious metals stored at various vaults around the world. We have agreements with various companies. So we have agreements with Brinks, Loomis, Royal Canadian Mint, and CNT.
We then source products. So typically 400-ounce gold bars, 1,000-ounce silver bars, and then we store the metals in the various Mints. The metal is then listed for sale. We actually will not sell metal we don't own. So we want to ensure that one-for-one backing. Back during the silver squeeze, there was a time, as I mentioned, we had to pause sales because we said we don't have silver and I'm not selling you an unbacked promise. So when metal is purchased it's 100% owned by customers. Doesn't appear on OneGold's balance sheet. And this is where it gets interesting too.
Premiums are very attractive. So we're selling gold at 80 basis points over spot, or 0.8%, silver at 2% over spot, much lower than that 50% premium you're seeing on the Silver Eagles. It's because customers own part of a larger industrial bar. The metal is insured and audited. A neat feature about OneGold is we have a redemption option where customers could actually take their position at OneGold and swap it into any of the products available at APMEX. So this gets around to what a lot of customers are doing too is they're seeing the 50% premiums on Silver Eagles. They're like, no thanks. Don't want to speculate on the premiums, but they want silver. They want gold. But then they're like, "Well, what's the best solution?"
So they're buying a position in OneGold. So they're buying silver at 2% over spot. They, like me, think that premiums are going to go down when the supply chain fixes itself and then they're now saying, "Maybe it's six months, maybe it's a year, maybe it's two years, but I'm going to take this position at OneGold. I'm now going to redeem it for my Silver Eagles when premiums are now $4 or $5 as opposed to over $10."
Dan Ferris: Wow. That is an amazing feature at OneGold that you can get around that. Amazing. Just remind me again the mechanics of how you're able to do that whereas you're charging – is it because, as you said, you're basically not buying coins with OneGold it sounds like.
Patrick Yip: That's correct. So let's say you wanted to buy 500 ounces of silver. One option is you could buy 500 Silver Eagles. You buy a monster box and you pay $10, $15 over spot. Not ideal. The next option is you go into OneGold, which is an online investment platform. You then create an account, fund your account. You buy 500 ounces of silver. You can choose a location to whether you want the U.S., Canada, Switzerland, or the U.K. You then own part of a 1,000-ounce bar. So we have 1,000-ounce bars in various vaults.
Obviously, you can't really take delivery of it at that form because we can't just chop the bar in half and say, "Here you go." But you now have exposure to silver. You have direct ownership in metal. So you basically get the exposure to silver, but without paying the premiums because you don't have Silver Eagles. You have 1,000-ounce silver bars. Then when the supply chains fix itself, so like I said no one knows when, but the plan is for these people to sell their 500 ounces and that 1,000-ounce silver bar, get the current price of silver. Hopefully, it's higher. And then just pay the small premium for Silver Eagles, not the $10, but hopefully, they're $5, let's say.
Dan Ferris: So I am absolutely certain that someone listening to the sound of our voice right now, one of our listeners at least, if not more, are thinking, "So if I just own a piece of this bar, like you said, I can't redeem for physical." It feels like to me – I have gold coins in other places, but I might have one or two around because it just feels good. It's tangible. I know that there's my little stake. It's all mine. I don't share it with anybody. But the sharing in the vault, it seems an odd idea. It makes me wonder about the legality of the ownership because I didn't get together with 10 other people and say, "Let's each buy a tenth of a 1,000-ounce bar." OneGold just took care of that for me, right?
Patrick Yip: That's correct.
Dan Ferris: Does this ever create a problem, I guess? Is there risk here of any kind that you can think of? Put it that way.
Patrick Yip: There is – with any platform I'm going to say there are risks. I think first of all it's important to understand your counterparty. As I mentioned, I'm not going to say anything is riskless. Even going to physical has risks too. I would say look at your counterparties. OneGold was founded by APMEX and Sprott, currently backed 100% by APMEX. First of all, it's like do you trust APMEX, do you not trust APMEX? If you don't trust APMEX, like I said, we offer a lot of solutions and maybe physical is your best option.
But if you do trust APMEX, being one of the largest, if not the largest precious metals dealers in the U.S., then maybe you feel OK with it. We are looking into certain programs too where if you do have – let's say you have 1,000 ounces. We are looking into something. We need to figure out the logistics on how that happens and if there's any minimums or anything, but we are looking into whether you could actually take that possession of that a 1,000-ounce silver bar directly from the vault. Obviously, if you have the 500 ounces, I can't chip away – I can't cut the bar in half and give it to you nor would you want a half of a 1,000-ounce bar.
But we are figuring out logistics of taking actual delivery from the vaults. The problem too is a lot of these vaults are not set up to deal with the retail public and that's where we're running into certain issues just because Brinks is not set up to say, "Well, a customer knocked on your door and they want your product." They're like, "I don't know what to do with you."
Dan Ferris: Right. But it sounds like – we talked about this with Ken Lewis from APMEX, your boss I assume at APMEX.
Patrick Yip: Yeah.
Dan Ferris: And we talked with him at the Stansberry conference on stage and we talked with him here on the podcast about OneGold. I've known the folks at Sprott forever. I've known Rick forever. So listeners should be familiar with it. If they're not, I agree. I have a OneGold account and I did something with it two years ago and I just haven't even thought about it, which is nice. I know it's stored in a vault somewhere. I'm not worried. Inflation is ticking up. Metal prices are rising and I'm getting the benefit in that account without having to think about it, which is cool.
All right. So do you – one thing, I wonder, if you could tell me a little more about APMEX. Do you have dedicated economists and researchers and people who just focus all their energy, not necessarily on metals prices, but on all the things that we're afraid will push metals prices through the roof like inflation and the Federal Reserve activity and all these macro factors that people worry about that make them want to buy these things? Do you have dedicated people who just do that?
Patrick Yip: We have some people, but a lot of people over here do certain things. Some of our marketing team does write daily articles and blogs and so on. I do my own research too. We don't have dedicated people, but we have people that research it and are aware of it. Certainly, all our salespeople are aware of the current market conditions too and what's going on and can intelligently talk about that.
Dan Ferris: Right. So that's cool. I figured. You seem like a really well-informed guy. I get it. Now we've made quite a point of saying metal's prices have come up and maybe you and I or Rick Ruler, whoever, expects gold to be $5,000 at some point in the next just say decade or something, but we've already seen quite a move here. I know – it's just human nature, Patrick, right? People see a big move and they're like, "Wait a minute. It's too late." Is it too late to buy gold, to buy silver?
Patrick Yip: I don't think it is. If you look at it too, I think it's – I look – and Rick Rule said it too. It's about price and value. So you look at it too and if you were looking back in 2011, let's say gold was $1,900 an ounce. Inflation was nowhere near our 7.9% that we're seeing. At that point the price is high. Value is probably not there. You look at it today and gold is back in $1,900, but inflation is here. Inflation is at multiples of what we saw in previous years. So I think you look at it and I think now is a time that gold is likely to run.
Another thing too, I look at different cycles too. I think a lot of things are cyclical. So you look at 2000 to 2011. You hear that stocks had their lost decade. Basically, stocks didn't do anything. Gold, on the other hand, went from $250 up to $1,900 for a 7X gain. That's from 2000 to 2011. You look at it now and stocks have had a crazy bull run. They went from $1,250 in 2011 all the way up to $4,800 in the S&P. So a four times gain, which to me is just insane. Then you look at gold, for example. Started at $1,900, went down to $1,050, and now it's back at $1,900.
So basically gold had that lost decade. I think we're in different times now. You're seeing inflation here. You're seeing the Fed increase rates. You're seeing a lot of geopolitical instability. I wouldn't be surprised if that cycle moves on. So now that stocks might struggle for the next couple years and precious metals will rally. I think now is the optimal setup for it.
Dan Ferris: Right. So there's another worry here too and we're going to introduce what I feel is the elephant in the room. I can't wait to watch your face cringe when you hear me name the elephant in the room. So some folks – and this is just like casual conversations, anecdotal stuff, things I see on Twitter, articles here and there. Some folks might not be interested in precious metals because while inflation is really soaring, but the performance actually isn't good enough for them, the performance of gold and silver.
Then there's this other thing, this elephant that they say is better than gold and silver and it's called bitcoin. I wonder so many things about a guy in your position, what do you actually think is – do you like bitcoin at all? Do you think it deserves a place in someone's portfolio? Do you think it really is taking some of that marginal dollar from gold and silver? Do your customers ask about it? I have a lot of questions about it. You can take any one over all of them or whatever you like.
Patrick Yip: That's a great question. Wasn't as big of an elephant as I thought. So if you look at bitcoin, I think it certainly is a big consideration. It certainly is in the news. I look at it and I almost think that they have different positions in a portfolio. You look at gold, for example, it has thousands of years of history. I don't think gold is going to make you rich overnight, nor do I think silver is going to make you – I don't think you're going to have $1,000 plus, $2,000 plus, $5,000 plus. It's not the Dogecoin. It's not the shiba inu coin. It's not even bitcoin. I think gold and silver are much more stable and they've had that history.
You look at bitcoin and bitcoin could do anything. It was just at $60,000-some, now I believe it's $40,000-some. It could go to $100,000, maybe it goes to $10,000. I don't know. No one knows. There's all these crazy projections on it. I think they have a different place in a portfolio. If you're concerned about long-term asset protection, stability, I think gold and silver is the way to go. If you're looking for a speculation, it couldn't hurt to get in bitcoin. It couldn't hurt to get in Dogecoin or shiba inu or whatever it is.
I was actually talking. I was at the New Orleans investment conference a couple of months ago and I was speaking over there. I actually have an account with Sprott USA and my broker happened to be there at the conference too. We were just talking casually between a couple of the speakers and he and I both agreed on something. It's like, it couldn't hurt to have a small position in it. I would say with bitcoin, it's highly volatile. If you could stomach those 50% ups and downs or whatever it is, go for it. Nothing wrong with that.
I would just say if you are looking at a speculation asset, and I consider crypto speculative because I think bitcoin started in 2008. So it doesn't have that long history that gold has. Put what you could afford to lose. If it goes down 50%, that's what it is, but it couldn't hurt. No one knows what the future is going to do. I'd like to think that gold and silver are going to rally like what we saw in the '60s and '70s. I don't know. Time will tell. Same thing. Maybe crypto takes over. I don't know. Time will tell. So it couldn't hurt to have a small exposure into some of the cryptos.
Dan Ferris: That's interesting to me that you have – you've discussed Doge and Shiba and bitcoin as all just part of crypto, where I think most people will view bitcoin as that's like the high-quality crypto, but the others are really just speculative potential garbage that probably doesn't have any value whatsoever. Bitcoin's fundamentals don't mean something to you? In other words, are you telling me that by calling it speculative crypto that bitcoin, just like the other cryptos, you don't see it ever fulfilling this dream that people have about it where it's a really hard currency and it does preserve value for the long term, similar to what people expect from gold? You don't see that happening with bitcoin?
Patrick Yip: It could. Time will tell. I look at it an asset. Anything that's created from 2008 to now doesn't have a long enough history for me to consider it, I guess, super stable. The thing I worry about bitcoin, and not to I guess bash it a little bit, but I look at it and it's been there for, let's say, 15 years. I don't know what people are doing with it other than buying it, hoping it depreciates, and then liquidating it for whatever they liquidate it for. As far as I know, it doesn't have a lot of use so far in – it is another currency. We currently accept bitcoins and cryptos on APMEX and OneGold, but it hasn't changed anything to me.
Dan Ferris: Right. Yeah. A lot of people are using it. A lot of people accept it all over the place. El Salvador seems to be crazy about it. So you don't want to make a prediction and I appreciate that. You're a man after my own heart. I don't like making predictions either. So let's get to – let's just get to my final question, which is the same for every guest no matter what the topic and you're free to – it doesn't even have to be about coins or metals or anything. It can be about life or anything. You answer this question however the spirit moves you to answer it. It's very simply, if you can leave our listeners with one thought today, what that might be?
Patrick Yip: Yeah. I would say inflation's here. The Fed is currently – or the – what is it, not the Fed. The CPI is currently at 7.9%. If you look at that, if you look at past cycles, 7.9% inflation over five years is going to erode a third of your wealth... 7.9% over nine years, which is what we saw, is going to erode half your wealth. Historically gold and silver have performed extremely well in this. Obviously, like I mentioned with bitcoin, cryptos, and precious metals, no one knows what the future is going to give us.
If history repeats, the precious metals are going to be a place to get – basically protect your wealth and maybe even increase your wealth. So I would say if you don't have an exposure, definitely get an exposure. If you want physical, buy it through APMEX or any other credible dealer. If you're OK with a vaulted solution buy it through OneGold, but I would say it couldn't hurt to at least get yourself a little bit of protection.
Dan Ferris: That's a great answer. That's an answer for the moment for our times. Well, Patrick, thanks for being here. I appreciate you doing this and coming to talk with us.
Patrick Yip: Great. Thanks, Dan.
Dan Ferris: I know a lot of you are thinking about coins, gold, silver, should we buy, should we not, how to buy. I have used OneGold. It seems like a really great way to get around the problem of high silver premiums if you're worried about that. Patrick is obviously very knowledgeable. I'm really looking forward – I want to live every day like it's my last, but I'm really looking forward to seeing where we are a year, two years, five years from now and having him back and talking about the metals markets because I agree, it's nothing like too late. You have to think in terms of cycles.
We are early in the cycle. The price action may be very bullish and you might be afraid to buy, but if you're a long-term holder, and you know me, I said I sold some gold coins a couple of years ago. Deeply regret it. I'll never do that again. And you just want to own these things with the intention not to sell them. All you're really doing is taking money out of fiat currency and putting it into something else that has a very good chance of holding its value and appreciating substantially if this metals bull market continues, which I think there's a very good chance that it will for at least another five, if not 10 years, as we discussed with Patrick. His knowledge of history was great. I think that's a great way to think about this.
All right. That was fun. Let's take a look at the mailbag. Let's do it right now. Gold just passed $2,000 an ounce, setting the stage for a historic new bull run. Multiple billionaire investors are loading up on gold including hedge-fund founder Ray Dalio and real estate mogul, Sam Zell, meaning now is the time to own gold. One precious metals expert is stepping forward with a big prediction. He believes we could see gold reach as high as $3,000 by the end of the year, possibly higher. Find out why and get instant access to his No. 1 gold investment for 2022. It's not bullion, an ETF, or a mining stock.
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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 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 is Larry B. and Larry B. says, "Dan, I would like to hear more discussion about places to put short term cash that would provide at least some protection against inflation with very minimal volatility, something like Vanguard's VTI PETF, for example. I know that there are all sorts of practical and theoretical problems with how inflation is calculated and that this is probably not a complete solution, but I think the general question is whether a short terms tips fund is potentially a better place to park cash for one to two years than a money fund. Thanks, Larry B."
Well, Larry, on the face of it your logic is irrefutable. You know that a tips fund is going to do better than a money fund because a money fund yields diddly squat, plus it's not going to be adjusted for inflation at least for the CPI. So the tips fund yields diddly squat also, but it's going to be adjusted. So I think your logic is very sound and I have no objection to this whatsoever. Personally, I keep cash closer at hand. I don't put it into vehicles like that. I want it ready.
I think there's – I always feel like I'm about to find something great to do and if it sits for a year or so and loses 3% or 8% or something, then that's my bad and I've screwed up a little bit. I think I believe that I'm always right around the corner from finding something else and I want to have cash ready. If you aren't like me and a big, fat impatient – in a big hurry, what you say is perfectly logical, perfectly sensible.
Next and actually last this week – we only have two – is our longtime listener and frequent correspondent, Ludvig H., and he makes a very good point that I think is worth repeating. He says, "Is it not the case that bubbles and new innovations or hypes have a sense of truth? There is a root of it in it," a root of truth, believe he means. Ludvig, I couldn't agree more. We've made this point on the podcast before. Yes. That's how bubbles get going. If they were complete nonsense from the beginning and people agreed, they could never get going in the first place. They turn out to be right.
The Internet bubble, the investments all went sour and you had to ride out a huge 90% drawdown in stocks like whatever, Amazon. Great businesses, right? Cisco, Microsoft, take your pick, a whole bunch of them. But the Internet, yes, did change the world and it was the biggest thing that had come along in a very long time. So it was rooted in an observation that was absolutely true. Maybe nowadays maybe electric vehicles really are going to change the world, but I still think Tesla is a one-stock bubble in electric vehicles. There's no way that its intrinsic value is anywhere near a trillion dollars, which is where it is today. It's ridiculous.
There are other things that have occurred over the past, I don't know, five, 10 years. Even things like 3D printing, that had all the earmarks of a bubble and the equities behaved in a very bubble-like soaring and crashing fashion. But I think finally 3D printing is really – it's changing a lot of things. It's certainly changing the firearms industry dramatically. We could probably, if we thought about it – well, cannabis. Cannabis looked like a big, fat bubble in early 2021 and the stocks all crashed, but that is a huge economic development. It's a huge change in our society. Cannabis is legal all over the place for recreational purposes. You're allowed to smoke it. You're allowed to buy it and have it and smoke it.
So yeah. I agree. It's definitely worth repeating, definitely worth repeating. We could have named the housing bubble as another example. So I agree. The current bubble is rooted in truth, but it has gone – it has still gone way too far, way too far. So far we're not really – this certainly isn't a bear market for absolute certain. It's not certain that we're in a major new bear market. That has yet to be seen. You won't really know it and it doesn't really get confirmed until long after its crystal clear. You just can't ever say for sure.
The S&P 500 could go on to make new all-time highs and then well, so much for that. That wouldn't be a bear market, would it? Or it could wind up down even more than it's already been this year. It could wind up down 20%, 30%, 40%, 50%, and faster than you ever suspected or maybe slower and choppier than anyone ever suspected. You just can't predict. I personally think it's a huge bubble. I think it's starting to look very toppy. Starting to look like it's over for me. Certainly, it's over for a whole bunch of tech stocks that have fallen 50% or more, a whole bunch of Nasdaq components and I think a bunch of small-cap stocks too. So we'll see. We'll see if this bubble is truly over and we have actually entered a major new bear market. Good stuff, Lotaveek. Glad you pointed it out.
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 like this episode and know anybody who might like it, tell them to check it out on their podcast app or at InvestorHour.com. Do me a favor too, 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 review. Follow us on Facebook and Instagram. Our handle is @InvestorHour. On Twitter our handle is @Investor_Hour. If you have a guest you want me to interview, drop me a note, [email protected], or call the listener feedback line: 800-381-2357. Tell me what's on your mind and hear your voice on the show. Until next week, I'm Dan Ferris. Thanks for listening.
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