This week, Dan encourages listeners to learn to look where others aren’t looking…
And invest where others aren’t investing…
Avoid things like gambling on-call options… and instead, look to buy real assets when you see them at attractive values.
This week, Dan invites Garrett Goggin onto the show to discuss an industry he says is one of the best values anywhere in the market today.
Garrett began his career on the New York Stock Exchange where he worked right on the floor executing trades.
He has worked alongside John Doody, as his right-hand man and analyst for Gold Stock Analyst and Silver Stock Analyst.
Over the past 5 years, Garrett’s Silver Stock Analyst Fave 5 portfolio has had incredible results… up 401.3% for an average of 45.2% per year.
So when it comes to finding opportunities in silver, there’s no one you’d rather have by your side than Garrett.
Dan and Garrett talk about why silver is priced so low today, how government policies are affecting the industry, and what’s the best way to play the upcoming silver bull market he’s predicting.
Garrett even gives the names of a few of his favorite silver stocks that he typically reserves for his paid subscribers…
If you’ve ever thought about adding some precious metals to your portfolio, this is a conversation you won’t want to miss.
2:40 – Where is capital moving nowadays? “If you look around, where is all the money flooding? Well, it’s flooding into things like call options on Tesla. And I saw another article where it’s flooding into call options on Apple…”
5:53 – Dan has a message for listeners today… “When you get these times like we’re living through, when it’s so utterly obvious that money is pouring into various areas, you should be really cautious about those areas…”
9:48 – This week, Dan invites Garrett Goggin of Stansberry Research onto the show. Garrett began his career on the floor of the New York Stock Exchange and has worked for a derivative arbitrage group in the United Kingdom and Ireland. He has worked alongside John Doody, as his right-hand man and analyst for Gold Stock Analyst and Silver Stock Analyst for over 10 years.
10:50 – Garrett tells his story on what it was like on the New York Stock Exchange… “Right out of college, you know, 22, 23… It was great! The New York Stock Exchange, I worked right on the floor, I executed trades…”
14:45 – Garrett makes the case for silver at today’s prices, “Silver is trading for about $22 today, the average silver stock is down 30-35% so far, year to date. So, we think it offers attractive valuation at these levels…”
21:40 – Garrett shares the name of a silver mining stock that he loves… “New Pacific Metals, the symbol is NEWP…
24:28 – Garrett tells Dan about another one of his favorite silver plays… “MAG Silver (MAG) is almost set up like a royalty company, with 44% of one of the best silver projects in the world.”
32:07 – Garrett says silver mining stocks are a cyclical industry… “Timing is important. You get certain times when it’s great to own miners but other times when it’s not great to own miners… Right now, the writing is on the wall, it can’t be a better time to own miners…”
36:40 – Garrett explains how some old mines can become valuable over time as the price of silver increases… “You look a little bit deeper with modern technology and you find some pretty attractive stuff…”
39:14 – “People lose faith in the government. They see the value of the dollar going down. They see inflation going higher. They want to own assets of fixed value. They want to own Bitcoin, they want to own gold, they want to own silver. These things work hand-in-hand…”
43:50 – “There was just another lawsuit, I think it was JP Morgan again lost $50 million admitting to spoofing the price of gold and spoofing the price of silver…”
46:43 – Garrett leaves the listeners with a final thought before the interview closes… “As far as investing in silver stocks, the number one thing – even above grade – is people and management…”
50:36 – We’ve got some great questions on the mailbag this week… One listener asks a few questions about last week’s guest, Mike Barrett… Another listener asks Dan about a gun manufacturer and if today is a good time to buy… Listen to Dan’s response to these questions and many more on this week’s episode.
Recorded Voice: Broadcasting from the Investor Hour Studios and all around the world, you're listening to the Stansberry Investor Hour. 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're going to talk with Garrett Goggin. Garrett knows more about silver mining than anybody I know, and I think silver's a great deal right now. So he's the man to talk to. In the mailbag today, just two questions... one about my interview with Mike Barrett and one about a stock I really like. I haven't talked about one of those in a while. And 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, learn to look where others aren't looking and where others aren't investing. I'll talk about that and more, right now, on the Stansberry Investor Hour.
So what do I mean? Look where others aren't looking and invest where others aren't investing. Well, it was inspired by a piece in the Financial Times by Merryn Somerset Webb, which was quoted by one of our past podcast guests, Tim Price, from Price Value Partners. And he writes a really great piece on his website just every so often, and this is one of them it's called "Free The Markets." And he included a quote from this article by Merryn Somerset Webb. And she reminded me, OK, this is getting convoluted, but just stay with me. She reminded me of a book called Capital Returns: Investing Through the Capital Cycle by Edward Chancellor.
It's a collection of essays. And the essence of it is, as Merryn said in her article, "The idea here is simple, you should look at how much capital is flooding into a sector rather than focusing on price alone. The more capital there is, the more likely it is that sector will see oversupply and price collapse." So if you look around, where is all the money flooding into? Well, it's flooding into things like call options on Tesla. And I saw another article recently where it's flooding into call options on Apple. So people are trading call options, usually short term like one week real quick, highly speculative bets on these big mega-cap stocks that they think are absolute no-brainers and will do nothing but go up forever. That's where lots of capital is pouring into.
And lots of capital is pouring into like every meme stock you could ever name, right? At any given time, meme stocks come and go. The most recent one that I would call a meme stock was DWAC, the ticker symbol, D-W-A-C, Digital World Acquisition Corp. was a SPAC that acquired Trump Media & Technology Group, Donald Trump's still-nonexistent website, which is valued... it has a billion-plus or a 2 billion valuation these days, even though it does not exist, it's crazy. So we see where money is pouring into, that is the easiest thing to see nowadays. But where money is not pouring in just yet, even though oil prices have performed kind of well of late, we don't see the money pouring into the old energy sector and we don't see the money pouring into like the mining sector.
And we're going to talk today on the program with Garrett Goggin because it's a great time to buy silver miners because money has not really poured in. Because when the silver price doesn't behave, most people abandon silver stocks, right? If the gold price isn't going up and up and up, people sell their gold stocks. If the silver price isn't going up and up and up, people sell their silver stocks. And silver has disappointed people of late because they think, well, gosh, with the Fed printing a lot of money and the government issuing lots of new debt and spending it on all these programs related more or less to COVID, trillions and trillions of dollars, silver and gold should be soaring people think, right?
So they're disappointed and the capital is not exactly flooding into those areas. But we did have Rick Rule on the program recently, and he said he thinks that the smaller names, the little, the more speculative exploration stocks in those areas are actually pretty fairly valued. And he was going more for the midcap and the larger-cap names in gold mining and silver mining. They were a much better deal, and we'll talk about some of those with Garrett Goggin today, I'm sure. He covers all of them. So this is really my message today: when you get these times we're living through where it's just so utterly obvious that money is pouring into various areas, you should be really cautious about those areas, you should be really cautious about –
Well, actually let's just think of one example, which I think is perfect. Cannabis, right? Marijuana stocks, the money poured in, you couldn't go wrong, it was a no-brainer. Everybody knew it was the next big thing. And then boom, they peaked earlier this year in like February or March and crashed so much that now all the cannabis guys are just foaming at the mouth. They're like, "Wow, these things are cheaper than ever and they're better businesses than ever." So that whole cycle has gone 180 degrees over the course of several months. From a place where capital was pouring into a place where people are more cautious and now the capital is not as excited to pour into them.
So cannabis I think is right up there actually with silver mining as another great place. And you could probably buy a decent cannabis ETF and a decent silver mining ETF, and kind of forget you own it for five or 10 years and you'd probably do really well. But that's the lesson today and you can read more about that general idea in great detail in that book I mentioned, Capital Returns: Investing Through the Capital Cycle by Edward Chancellor. And you can read more about it in Merryn Somerset Webb's article of November the 27th in the Financial Times, which is called, "Investors Need to Pay Attention to the Capital Cycle." And you could probably Google the words "capital cycle" and find all kinds of other stuff to read.
But that's what the capital cycle means. It means watching the flow of investment money, where people are spending every last cent they can get their hands on and borrowing more, be careful. Where nobody wants to put capital in, get interested, learn about it. That's all I have to say about that. Let's talk with Garrett Goggin about a place where hardly anybody wants to invest, silver miners. Let's do it right now.
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OK. It's time for our interview. Today, we're going to talk with Garrett Goggin. Mr. Goggin began his financial career on the floor of the New York Stock Exchange, cool. He worked as a trader for a derivative arbitrage group in the U.K. and Ireland, he has been working for the Gold Stock Analyst since 2010 and is editor of the Silver Stock Analyst since 2012. He's a chartered financial analyst charterholder and certified market technician. He holds an M.S. and MBA business degrees from Babson College. He has served as treasurer for the CFA Society of South Florida since 2011. Garrett, welcome to the show.
Garrett Goggin: Dan, thank you. Thanks for having me.
Dan Ferris: You bet. It's really good to talk with you. So I have to ask about starting your financial career on the floor of the New York Stock Exchange, I mean talk about trial by fire. How old were you when you did that?
Garrett Goggin: Right out of college, 22 to 24. It was great, the New York Stock Exchange. I worked right on the floor, executed trades. It was a pretty amazing experience down there because that's where it's at, but you could see the writing on the wall, even back then. It was the heyday of program trading, you had all the computers driving trades, they were starting to execute them electronically. The floor brokers were introduced with like handhelds when I was down there, so they were getting orders electronically. And then even then, 80% of the volume was being executed electronically. So all the actions upstairs, we had a lot of different clients.
We had arbitrage clients that were very time dependent. So we got paid more for those orders and we had brokers. If they wanted to buy IBM, you got to figure out where IBM is on the floor – was it post No. 5? You got to activate the broker, you got to hit his beeper right post No. 5, you got to really add trade to him and then he's got to get it back to you in a timely manner. And the funny thing about the specialist post is they were run by families, they had fathers down there, they had sons down there, they had uncles down there, and they gave preference to who they wanted to execute trades with. And they had a monopoly, if IBM was traded at their post, they had a monopoly on all that IBM volume. So it was a very interesting system, it was a great way to learn about Wall Street and it was good time.
Dan Ferris: Wow. That's pretty cool. And it's really changed a lot since then.
Garrett Goggin: Yeah. Right now, it's kind of like it's an image of American democracy and free markets and it's like a museum right now. That's why it's still open and people still running around. Because you can't put Maria Bartiromo or whoever in front of a computer server, you know what I mean? So you put her in front of the floor and you get people running around and just as a symbol of American business.
Dan Ferris: I mean, at this point are they actors, are they doing anything in the background when she's talking or...?
Garrett Goggin: Basically actors. They are executing business, there's some specialty business that they still execute. Like I said, the arbitrage guys, and I'm sure there's a lot of other little stuff that goes on down there, but the vast majority is electronic.
Dan Ferris: Well, that's not a surprise. So look, I just want to jump in. I like learning how people started out in the business, but I want to jump in because the whole reason that you're on the show and the whole reason we want to talk to you is really because one of the most attractive things in global equities right now, to me, are silver stocks and gold stocks too. And obviously the silver stock guy is always going to say that, right? So we want to hear from you about this.
Garrett Goggin: Yeah, no doubt. The prior few years we had a great year. The Silver Stock Analyst prior to 2021, over the previous five years, was up over 400%. We were doing great. And then this year, with COVID and then all the financial stimulus and inflation, you expect silver to go through the roof, but it's tailed off a little bit here due to the Fed talking about the taper. And the taper, it's not even a tightening, it's just a taper. They're reducing purchases, but they're still purchasing a tremendous amount. And then usually what happens is they announce a taper, the market starts backing off, the market crashes, and then they got to back away from this taper-tightening talk. So we think the same thing's happening here, silver's trading for about 22 bucks. The average silver stock is down 30, 35% so far year to date. So we think it offers attractive valuation here at these levels.
Dan Ferris: Nice. So do you like miners only or do you also play among the speculative tiny little exploration plays?
Garrett Goggin: I focus on the miners and the explorers. Now, after covering the industry for 10 years, the major thing you need to watch out for is shared dilution, right? You know this, Dan. And unfortunately, when you look at charts of stock charts, you see the line goes up, it goes down. It's really hard to get that outstanding sheer total in a graph sort of form. I'm lucky enough to have Bloomberg, Bloomberg's got that... but a lot of the other services don't. So a lot of these smaller companies, they don't have any revenue, so they constantly issue shares. And they're able to sell these shares because it offers Canadian tax savings, so they get that. And there's a tremendous amount of dilution involved. Now, if a company's growing and they're adding value to their projects, either by drilling or by coming out with economic studies or best yet, free cash flow in production, that's all good, but you need to take a look at how many shares they issue and how much value they're generating.
Because the major thing right here is there's a lot of little companies out there, and when the price of silver goes down, they are dead in the water. Some of the higher cost producers they're having to issue shares, and they dilute shareholders and the share price goes down. And there's Coeur Mining, one of the big silver miners, they're not even basically silver. I think it's like, I don't know, 35% silver and 65% gold. Their share price, split adjusted, was at about $300 a share, back in the late 90s. Now it's at, I don't know, six I think. It looks like a triple-leveraged ETF, just beta decay. Straight down with some spikes up. And the reason that happened is because they grew uncreatively and they issued tremendous amounts of shares.
And when I say grow uncreatively, that means they're paying $500 million or so to acquire gold or silver production and they weren't getting that back. They were only getting whatever, they're running at a breakeven, they're never going to get their money back from a lot of the acquisitions that they made over the years. So that immediately comes out of the share price and it's dilutive growth. So looking at silver and gold projects, you need to find companies that pay the right price for projects. Say, I don't know, $100 million where they can get $50 million free cash flow in a year. So over 10 years, they're going to get $500 million and they only paid $100 million. This is business 101, and unfortunately a lot of miners didn't follow that.
Dan Ferris: And the company you mentioned was Coeur Mining, like Coeur d’Alene?
Garrett Goggin: Yeah, absolutely.
Dan Ferris: Yeah. Ticker symbol CDE.
Garrett Goggin: Yeah. Down like 95% over the past 10, 20 years. So you need to watch out for miners like that. But there's good miners out there, too, that do grow creatively. They pay the right price for projects and they squeeze them for all the free cash. And the free cash is what companies use to buy back shares, issue dividends, pay the management, and all that stuff. So that's what I focus on, I focus on companies that generate a tremendous amount of free cash. So it's almost like a free cash sort of enterprise value metric that I look at.
Dan Ferris: So Garrett, how many pure silver plays are there really? Isn't silver mostly a byproduct of mining other metals?
Garrett Goggin: Yeah, no doubt. Some of the largest silver mines in the world are run by the big boys like Phelps Dodge and Freeport-McMoRan and there's a company, Polska, it's a Polish company, they've got big copper projects and they've got some silver in it, only like six grams a ton. The average silver mine is at like 200 grams a ton, so they're getting this small gram byproduct of all the copper ounces that they are processing. And then they sell this and that accounts for, I don't know, probably 40% of all silver production. And then the remaining production comes from silver miners, the Coeurs, the Heclas, the Pan Americans.
And I'm looking at my chart in Silver Stock Analyst and I post the percentage of revenue that these companies get. There's only two miners right now, one exploration company, that have 100% silver. That's Aya Gold & Silver, and that's in Morocco, that's an interesting project. And then New Pacific Metals, which has a 100% pure silver project in Bolivia called Silver Sands because, silver in its natural form, when it's found in the earth, it's very rare to find 100% pure silver deposit. It's usually... you find it in high-grade epithermal veins and it's got lead and zinc and copper and gold. And as you go deeper, the base metal credits grow higher.
So it's rare to find that pure silver producer. First Majestic's 51% silver, Pan American is only 20% silver. And then over the past few years, a lot of these silver miners, they run towards gold. Pan American did it, First Majestic did it, because the margins are higher on gold versus silver. The margins of silver right now, the average of sustaining cost for the miners I cover is about $17.30. And the average price of silver year to date is $24.60. So that is a margin of what is it? 42%. The gold miners are double that.
Dan Ferris: I see. Wow, double that. So you gave us a lot of info there. You mentioned, though, a project that you really like. Was there a ticker symbol? Can you dig down a little bit more into the company for us?
Garrett Goggin: Well, yeah. New Pacific Metals, has taken on a little bit of political risk. Bolivia, they had a tough time through COVID, they need mining in order to drive their economy. So they're looking for foreign partners and New Pacific Metals is one of their partners that they chose. New Pacific has that 100% silver sand deposit in Bolivia. The symbol is NEWP. Now one of the things that's happened with silver over the past couple years is the No. 1 country that mines silver is Mexico. And AMLO, the new president of Mexico over the past couple years, he is a socialist, he is fighting for Mexican rights. He's standing up against the foreign companies and a lot of the silver mining industry is being impacted.
First Majestic has been operating in Mexico since day one. They just bought Jerritt Canyon in Nevada because of that political risk. Fortuna Silver has got their San Jose mine that's been operating for 10, 15 years, they can't even get their permits renewed. So Mexico's become a tough place to mine silver, even though it holds a lot of the world's top silver ounces, and historically it's been the silver leader for hundreds of years. One company that's really interesting right now is MAG Silver. Production's going to start in the end of this year at Juanicipio, which they own 44% of, their partner is Fresnillo Mining. Fresnillo is a Mexican company, Fresnillo has got a good relationship with the Mexican government. So they shouldn't encounter any of these problems that a lot of these other silver companies have had.
And the silver endowment is over a billion ounces. And MAG Silver is going to get, 44% of the free cash flow. And it's almost like a royalty. You know, Dan, royalties trade at a higher multiple than miners because they're more diversified. And then the royalties, they pay money up front, they'll pay $2 million for a stream, that cost never goes up. Even though the price of silver and gold go up, even though inflation goes up, that 2 million that they paid never goes up, so their costs are fixed. So as gold, silver inflation rides, the royalty companies do great. And MAG Silver is almost set up like a royalty with 44% of one of the best silver projects in the world. They've got low corporate overhead, they probably have 10 employees. There's going to be a lot of free cash flow to spread around to shareholders in the form of dividends and buybacks.
Dan Ferris: MAG Silver, ticker symbol, MAG. And you mentioned Fresnillo, which trades over the counter in the U.S. under the ticker FNLPF. Do you like that one or you're just highlighting the deal and you prefer to own MAG it sounds like.
Garrett Goggin: Yeah. MAG's definitely a better play, but I cover the miners that trade in North and South America. So even though Fresnillo's got a pink sheet, it trades in Mexico, I don't cover it.
Dan Ferris: All right, cool. MAG Silver sounds like one of your favorites for me.
Garrett Goggin: I do like MAG, yeah.
Dan Ferris: Wow. So we're already knee-deep in names here. You got any more for me, you're great, man.
Garrett Goggin: Well, I'll tell you what I look for in silver projects. Grade is king. You need to find miners that have a deposit with extremely high grade because your cost to mine a ton of ore, and that's what it takes, it's a ton of ore. And the gold, there was like a fingernail of gold in every ton of dirt, and silver it's more, it's like 200 grams a ton. But since it costs you the same to mine each ton of ore, you want to get the most silver and gold out of it. And the way that happens is you got to find high-grade deposits. The average silver mine operates about 200 grams a ton. Some of the ones that I like are over a thousand grams a ton. Aya has over a thousand... one of the other companies I like, SilverCrest Metals, is over a thousand grams a ton, MAG Silver is close to a thousand grams a ton.
So you need to find high-grade deposits. I see some economic studies come out. There are some deposits that have been around for, God, 50 years, they change their name every 10 years. Basically it's a cow pasture with some low-grade silver in it, and it's never going to be economic. It's like 15 grams a ton, and they come out with these economic studies that say, they're going to be a billion-dollar mine and all this crazy stuff. And they're never going to be able to make the mine economic. There's gold in seawater, and if the price of gold goes up high enough, then they'll be able to mine seawater for gold. But that's much higher gold prices because the cost of extracting it is so high. So the other factor with grade is when you're figuring out your cost per ounce, since you're getting more production ounces out of that high grade, your costs are lower on an ounce basis and free cash flow is higher. So the higher the grade, the higher free flow you get.
Dan Ferris: All right. So high grade sounds like numero uno for you, is anything else you look for?
Garrett Goggin: Management. It amazes me in the industry how some of the stuff that the management does is not illegal. A lot of these companies they don't care about shareholders, all they care about is putting money in their pocket and paying their $300,000 management salaries year after year. They mine shareholders instead of mining the ground, it's a travesty what these companies do, and they're never going to tell you they're doing it. But me, I've been covering leadership for 10 years, so I know the good guys from the bad guys, the ones that care about the shareholders versus the ones don't. And shareholders are the owners of the company, so all the companies should be driven and managed for the benefit of shareholders, but a lot of them aren't.
Dan Ferris: I'm glad you brought that up because one of the things about mining is a lot of those companies they'd rather be listed in Canada than the United States, because they can get away with all kinds of shady stuff in Canada that they can't get away with, in the United States.
Garrett Goggin: Yeah. Canada doesn't really have an SEC they have some jurisdictional body up there. But it's the Wild West up there, it's investor beware. There's no SEC to protect you, so they prefer their Canadian listings.
Dan Ferris: The Wild West sounds a little rough.
Garrett Goggin: Yeah. That's why it needs the Silver Stock Analyst to tell you the good ones from the bad ones.
Dan Ferris: Right. So Garrett, does Silver Stock Analyst work the same way as Gold Stock Analyst? Because that publication has been around a long time as you know, and it works in a very specific way, looking only at companies that actually produce gold and it has a whole specific set of metrics that it churns through every month. Do you work the same way?
Garrett Goggin: Yeah, but I've had to go down the food chain a little bit. So I cover about 30 different silver miners. Some of them are small, some of them are not in production, some of them are exploratory firms. So I've had to expand it a little bit and take a look at a lot of the smaller companies as well as the companies that generate free cash flow and are in production. But to be honest with you, the smaller companies, the exploration companies, they're really interesting, but they're really hard to decipher the good from the bad. Because a good drilling result, that's a lightning strike and you're betting on which tree's going to be hit by lightning. You know what I mean? Like a tree's going be hit, but which tree, you don't know, so it's a hundred-to-one bet.
But if you do your research, you look at grade, you look at the ore bodies, I'm able to make a decent probability bet on some of these smaller plays. New Pacific Metals, I broke the story a couple years ago. I put that thing on the radar, because I was able to decipher their drilling results of over 200 meters of 150 grams a ton and basically predict what their resource study was going to be. And I was basically close to right on what they reported when the stock exploded higher. So there's opportunity there. And being a metals analyst and a mining analyst, I'm that interesting because I value a company strictly on free cash flow. It's boring, it's a lot more nuanced than that. And even with the companies with free cash flow, you need to look at their projects, you need to look at what they're doing in the future, you need to look at their recent acquisitions to put a probability on the likelihood of success. So it all factors in.
Dan Ferris: Yeah. So something you just said reminded me of something. You just talked about the difference between a real producer versus lightning striking a drill hole play. That reminds me too, of the difference – every time I talk to people about gold or silver, they talk about owning actual physical gold and silver in the same breath as they talk about owning gold and silver miners. And I always have to separate those two because they're not the same proposition at all, right?
Garrett Goggin: No, not at all. The mining industry is tremendously cyclical. If you look at the big boys, you look at Barrick, you look at Newmont, their stock price hasn't changed in 20 years, they're basically the same levels. You're not getting that accretive growth seen in an Apple or an Amazon where it can grow from 100 mil to 100 bil because they're able to produce more iPhones and put a pink button on it and come up with a purple one. And mining's mining, it's a commodity industry. And they can't compete upon price and they can't really grow their business. It's an extremely capital-intensive business, so you need to find miners that treat the shareholders right and grow their business the right way. Oh, and the last thing, since it's a cyclical industry, timing is important and you get certain times where it's great to own the miners and you get other times where it's not great to own the miners.
And right now, the writing's on the wall. It can't be a better time to own the miners, where gold and silver are a little bit down in the year, the inflation is through the roof. The last time the real interest rate was this negative was back in 1980, and silver was at 50 bucks. Silver is the only commodity that's down in price over the past, what, 40 years, it's a staggering value and all the stuff that we use every day, like your iPhone, your laptop, your iPad, solar industry, Tesla batteries, the electronic battery, it's all using silver. Silver's being consumed hand over fist more than ever and the price is half of what it was 40 years ago.
Dan Ferris: OK. So these are all the classic topics that investors have to know about, right? Because you highlight increased demand, amidst lower than you would expect silver prices to be right now, but that's sort of the way it goes, isn't it? Because we use silver for so many things, and it's much cheaper than gold and does some of the same things, because we use it, a lot more is produced, has to be because we need it. And therefore, it's more of a commodity... it's 20 bucks an ounce instead of 1800 or something.
Garrett Goggin: Yeah. Silver's got that monetary quality though too, for hundreds of years it's been used as money. Like one of the interesting stories is New Pacific Metals in Bolivia, right down the road is this mountain of silver called Cerro Rico. And Cerro Rico financed the Spanish empire for 300 years. They discovered that and they brought all the silver back to Spain and it financed all of Spain for hundreds and hundreds of years. And this silver sand deposit is right down the street from Cerro Rico. And there's an interesting movie on it, I think it's called The Devil's Miner about how the town right nearby Cerro Rico, Potosi. Potosi was one of the largest cities in the world. It was back in the 1600s, it was London, then Paris, and Potosi. Potosi is this little town in Bolivia, third largest city in the world back in the 1600s, all because of silver.
And the movie's called The Devil's Miner. And it was on Netflix, you can find it on Amazon Prime, but it's about Cerro Rico now. And it's impoverished, you have a lot of artisanal minors, it's extremely dangerous to work. They got all these little rabbit holes through Cerro Rico. So it's not a very glamorous view of money, but it's realistic. Where New Pacific, they want to build their Silver Sands deposit with over 100 million ounces of silver. And they're going to do it the right way, the modern way, and provide jobs and safety and all that and money to the local community.
Dan Ferris: Interesting. So you've got this huge, you're calling it Silver Sands deposit right near this thing that basically financed the Spanish empire for centuries and that's pretty cool. I've heard stories like that from other sort of mining analysts and investors, investor groups and individual investors, how they studied history and it kind of informed some of the exploration now, but that's the way it always is, isn't it? Like I ask all the explorer types, where do you look? And they're like, well, we look where it is. We look where it's always been, that's where all the exploration happens, where it's always been. Same places in the world, right?
Garrett Goggin: Yeah, no doubt. And high-grade silver deposits are extremely rare and you need to look for old workings because back in the day, the way silver deposits were found, you could see the silver. The epithermal lands were poking up through the ground and it's like, "Hey, there's some shiny stuff, let's start digging it." So the Indians started digging it and then the Spaniards enslaved them all. And they continued down to some mines that went down 100 feet or so, and they mined all the high-grade stuff, the thousand-plus gram a ton stuff. And then it became uneconomic to go any further, it just cost too much due to the very low price of silver back then. So now that the price of silver has increased, a lot of these mines become economic again. So you look around old workings and you go down a little bit deeper with modern technology and you find some pretty attractive stuff.
Dan Ferris: All right, Garrett, let's shift gears a little bit here. How much do you care and watch and analyze and think about just macro issues... interest rates and political, well, you need to watch political risk in countries, but that's not what I'm talking about, you know what I'm talking about, mostly interest rates. How much do you think about that?
Garrett Goggin: I look at them pretty closely, I look at real interest rates just because of the correlation. Like, if you overlay real interest rates in the 10 year over the gold and silver price, they track on this, tick for tick. And the rates are as negative now as they were in 1980. And that's using inflation the way we calculate it. Now, it's actually much higher, that whole thing. So real interest rates are deeply negative. Now that leads the whole mindset of you put cash in the bank, you're getting no interest and you're going to be left in the dust because your money's going to be losing value year after year after year. And that becomes good times to invest in gold and silver. That story's been true for a while and it's continuing and it's going to continue. The Fed is trying to taper a little bit, they're trying to reduce some of their purchases, but whenever they do this, the market crashes and then they're going to come back in with another trillions of dollars of stimulus and then the gold and silver price go nuts again.
But basically, the way I think about it is, is the government going to stop spending, is our deficit going to go down? Are they going to run a balanced budget? And it's like, never, they broke the bank the last couple years spending trillions and trillions of dollars of stimulus. It's gone-zo, this isn't going change anytime soon. And once people expect to get payments from the government, then it's going continue because that's how they buy votes. So our government's not going to change course anytime soon, they're going keep on spending trillions and trillions of dollars. A trillion... it's astronomical amount of money and it's going to continue. So I take a look at it over the longer term, and then that leads you into the whole crypto discussion.
Crypto – bitcoin and gold and silver – they're tied at the hip. It's the same mindset that's driving crypto that drives gold and silver. People lose faith in the government, they see the value of their dollar going down, they see inflation going higher. They want to own assets of fixed value. They want to own Bitcoin, they want to own gold, they want to own silver. And these things, they work hand in hand. Like I said, it's the exact same mindset. I guess you had Wall Street Games on? There's a website, Wall Street Silver, right? And Wall Street Silver's got 300,000 subscribers. And all these people do, they show their stacks of silver. They take their dollars, they convert them into silver and they got piles and piles of silver at home stored away. And the problem with gold and silver is they're bulky, like you got to store them, you got to protect them, there's a cost to that, you're getting interest, but you know what, there's some interest in crypto products that are linked directly to gold and silver. Do you know Paxos, PAXG, Eric Wade recommended at the conference.
Dan Ferris: Really? I don't know that one.
Garrett Goggin: You own PAXG, that entitles you to gold ownership of, I think it's linked to grams or whatever, but you own physical gold and you can stake it and get a 5% yield. So, boom, there's your yield. And then that I see tied into silver, because silver, in the futures market, there's millions and millions of ounces traded every day. The silver production on a yearly basis is only, what, 244 million ounces a year. And that amount trades every day, if not more in the futures exchange. So the futures is driving the share price. If a crypto project is ever able to gain critical mass to link to gold, link to silver, pay good yield, the miners would be able to sell their silver directly to these crypto products and that would help free up the silver price and free up the gold price from the futures market.
Dan Ferris: What's really interesting to me is lumping silver and gold and bitcoin altogether. I agree it's obvious, right? But there's something that bothers me about bitcoin and that is the fact that it still trades like a biotech stock. It's like major risk on, risk off, huge ratcheting volatility. In other words, Garrett, it doesn't seem to behave like gold and silver. Those prices move quite a bit, but not nearly the way bitcoin, it's like the market just doesn't know what to make of it still.
Garrett Goggin: Right. Well, bitcoin is tremendously volatile, but you know what, it's been volatile to the upside. So I don't necessarily look upon that as a negative thing. And you look at the volatility of a lot of the smaller, emerging technology companies, they're tremendously volatile as well. So I think it presents an opportunity, but the bitcoin trading is interesting because the SEC hasn't approved a physical bitcoin ETF yet. The reason why is because all the bitcoin trading is driven by exchanges that own custody of the assets. In traditional markets, such as stocks and bonds, the exchanges only act as intermediaries. You have financial institutions, fiduciaries like State Street, that come in and they act as the custodian. So that's the reason why the SEC hasn't approved that bitcoin spot ETF yet, because the trading is still driven by the exchanges and the exchanges are – you got some of the smartest quant guys in the world at Goldman and stuff and they're playing games with the crypto prices. They're moving the price around to drive all the stops out and to move the price back up. So there's way more games in the crypto market than there are in the traditional markets.
Dan Ferris: Interesting, because there's a lot of folks who will tell you that gold and silver prices are highly manipulated by those same firms and they'll name like JPMorgan of course, had a scandal around that not too long ago, couple years ago. And Goldman, and just all the same names.
Garrett Goggin: Yeah. Well, there was just another lawsuit. I think it was JPMorgan, again, lost like $50 million in a lawsuit admitting to spoofing the price of gold, spoofing the price of silver. When the economic reports come out and they're noninflationary hawkish, thousands of contracts representing years of silver production have dumped on the market like in one second. So I see that argument, I don't spend a lot of time there because I can't really control it or affect it. And it's been around for a long time. I don't know, maybe the silver miners are highly dependent upon the financial markets and these banks for financing, like I said, they do a lot of equity deals. The banks do them, they do bond deals, the banks do them. When they sell their silver to the refinery, the banks pay them. So there's a really close relationship between the miners and the banking and the financial industry. And I don't know, I just see gold and silver doing better if they're able to unlink from the financial industry and get paid for their gold and silver from fully transparent crypto-type gold and silver ETFs products.
Dan Ferris: Right. And the approval process on those bitcoin ETFs is weird to me because it seems like you can have a trust, like grade scale, or you can have a future space product, but actual bitcoin is like, we don't know what to do with it. It's strange.
Garrett Goggin: That's because futures are traded on the traditional financial markets with custodians and the bitcoin markets don't use custodians, the exchanges act as custodians and that's a –
Dan Ferris: Sure. I mean, it all makes sense when you consider who's doing the approving and regulating and how it all works, but it winds up being an odd state of affairs, anyway. We've been talking for quite a while here, Garrett, and I'll tell you, our guests love names and ticker symbols and quick dives into ideas. So you gave us MAG Silver, New Pacific – ticker symbol, MAG and NEWP – we thank you for that. But it is time for our final question, which is like the exact same question for every guest, no matter what the topic is. And it is simply this, if you could leave our listeners today with one thought, what would it be?
Garrett Goggin: As far as investing in silver stocks, the No. 1 thing even above grade is people and management. And like I said, a lot of these companies are not run well. There are companies that do look out for their shareholders, you can take a look at First Majestic Silver, symbol AG, they've been operating for close to 20 years. Keith Neumeyer is CEO. Keith Neumeyer is a very outspoken silver proponent. He talks a lot about the silver price, and he's out there, you can find him on YouTube or anywhere. A lot of interesting discussions, but at heart he's a really good miner, he's a really good businessman. He pays the right price for projects and he drives them for free cash flow. The free cash flow goes right to the bottom line, it goes right to shareholders and he's done well for shareholders over the years. When silver takes off, First Majestic has the highest beta to silver out of all the silver miners over every time frame, one year, three year, five year, 10 year. When silver takes off, First Majestic takes off and we don't expect this time to be any different.
Dan Ferris: All right. Sounds good. Thanks for being here, man, it was great.
Garrett Goggin: Good. Nice catching up.
Dan Ferris: Yeah. All right, we'll invite you back real soon.
Garrett Goggin: All right, good. We'll talk soon.
Dan Ferris: It's always great to talk with Garrett. I see him like twice a year basically, I've seen him twice a year for the last, I don't know, just over the past decade, I guess. And he's, as you can tell, really knowledgeable and loves to share his knowledge of this weird space, silver miners that hardly anybody really is any kind of an expert on. So given the fact that I personally own a bunch of silver miners in an ETF, I could probably name more than a few of them that are in there. And the fact that in the world today, capital is like pouring into absolutely every asset, except for gold and silver miners, we had to have Garrett on at this time. And he does a fantastic job in the Silver Stock Analyst publication, which as we said before, he has been at it since 2012. And I think you can go to either stansberryresearch.com or stansberryinvestor.com and find out a lot more about him and about Silver Stock Analyst. And if you're into it, you should because you'll learn more about silver than you ever thought there was to know. So really great to catch up with Garrett. All right, let's check out the mailbag. Let's do it right now.
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Time for the mailbag. In the mailbag each week, you and I have an honest conversation about investing or whatever is on your mind, send your 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, this week was just a quick note from Jeff K., who was responding to our interview with Mike Barrett. He said, "Mr. Ferris, isn't Mike Barrett your assistant? Sincerely Jeff K." Yeah, Jeff. But I don't call him that because he's really more like a partner.
He is sort of like the chief research officer of the Extreme Value newsletter and he is the sole editor of the 10X Investor, a brand-new publication that we were talking about on the show. So I don't call him an assistant anymore. He hasn't been that for a long time. Mike is a force of nature. He picks things up, like I gave him one idea about how we might want to analyze companies in Extreme Value using this particular model from a book called Expectations Investing. I sent him a copy of the book, boom, that was it. He took it and ran with it, and that's our primary mode of stock selection now. I always want to talk about Mike Barrett, so ask anytime. Thanks.
Next comes Steve M. and this is the only other bit of feedback we got this week. Kind of light on the mailbag... that happens around the holidays. That's cool. But Steve M. writes in and says, "Hi, Dan, I first learned about firearm manufacturer Sturm, Ruger during physician-management training about 15 years ago, as an exemplary implementer of lean manufacturing principles. Our mission was to hunt down entrenched inefficient medical office routines in order to become more capital efficient. I never bought shares of Sturm, Ruger, as they had always run up prior to the company coming to my mind, but this past week's sharp pullback seems like an opportunity. This relates to having sold fewer firearms this past quarter, compared to previous surging sales. Nevertheless, the company is profitable and pays a substantial dividend. Concern regarding rising crime across the country would seem to suggest the reduction in sales will be transitory. In the Extreme Value archives, I took note of your January 3, 2017 mention that you would only consider buying Ruger if shares fell back from its high at that time. How about now? Thanks, Steve M."
Steve, I will sort of go public with this now, as you've given me the opportunity to do so. I recommended Sturm, Ruger recently, just a couple months ago, at our annual Stansberry conference in Las Vegas and I still think it's a buy. And yes, the pullback looks like a better entry point than when I first discussed it. The reason that I like Sturm, Ruger though, I used to think about it in a more cyclical way, I figure it's politically cyclical, right? Barack Obama was one of the greatest gun salesmen in history because during his administration, they were always talking about more gun control and more strict gun laws. And then Trump came into office, he was a big Second Amendment guy, although I think he banned bump stocks and maybe something else. But overall, he was viewed as benign by gun buyers. So there wasn't the big rush to get out to the gun store to buy them. And indeed, you could see that reflected in Sturm, Ruger's share price.
But today, selling the stock, which we did, we recommended selling it. We sold it in Extreme Value when Trump got elected... that was dumb. Because if you look at the longer-term trend in the United States, on both sides – on the side of sports shooting and the side of defense, self-defense, the trends are all in the right direction, right? They're all up and to the right. Now, I believe there are 21 states in the United States that have some form of what they call constitutional carry. Or some people call it Vermont carry because Vermont has had it since day one, literally 1787, they've had it the whole history of the United States... where you don't need a permit to carry a concealed handgun. And different states have different laws, some are concealed weapons, concealed gun, whatever. But the bottom line is I believe it's now 21 states that have some form of this concealed carry, where you don't need a permit.
And if you do get a permit, there are some states where if you get a permit there's reciprocity in addition to the concealed carry, that gets you the ability to carry a concealed gun in something like 30 or as many as 40 other states. And that's increased over the past couple of decades here. Well, it's increased for about the last 15, 16 years. And so the trend is good in self-defense. The extreme views on guns on both ends of the political spectrum are just wrong, right? The people are paranoid about there's too many guns, guns cause crime. That's false, it's easy to demonstrate, then the group on the other end that says the government's coming after our guns. Well, no, they're really not.
And they couldn't, they never could, there are more guns than people in this country. It just couldn't happen. So both ends, the most paranoid ends of the political spectrum are all wrong. And the truth is, like I said, on the defense side, the trend is in the right direction. Lots of people bought guns in 2020 and in 2021 again, but people have been also participating more in shooting sports and the growth in both sides of this equation has been in younger people, women, minorities. Not the old white guys like me buying another gun for their collection, right? So there's a trend in place here that is pretty good. And shooting is an Olympic sport. And if you look at the list of Olympic sports, there's quite a few shooting events.
There's a whole lot of track and field, there's a whole lot of swimming, and there's a whole lot of one or two other things. And I think the number of shooting sports is like third or fourth in the list. And we have a lot of shooting sports in the United States. There's all kinds of different pistol shooting and, there's cowboy-action shooting where they use revolvers and lever-action guns and shotguns, and there's three-gun competition with rifle, pistol, and shotgun... all kinds of different pistol categories. At the local gun club where I belong as a member, they do all kinds of different competitive-type shooting on different nights of the week and so forth. And this overall has been growing, especially among these other groups of people who traditionally have not been interested.
So for that reason, I think the longer-term trend is just to buy one of these stocks. And I like Ruger better, I do. Smith & Wesson is a fantastic brand, but we've looked deeper into Ruger in Extreme Value, Mike Barrett and I, and we like the management better, it's got a great balance sheet. As you point out in your e-mail, they mastered the lean manufacturing principles. They totally redid that company back in 2005, 2006ish, a guy named Mike Fifer came in and took over as CEO. He's actually gone now, but he completely transformed the company and it's a really well-run company. Ruger is a hard brand to avoid if you're a gun buyer, and I do like it. So I'm really glad obviously that you asked about it, because I rarely talk stocks on the show and this gives me a chance to talk about one that I like.
So that's another mailbag and that's another episode of the Stansberry Investor Hour, I hope you enjoyed it like I did. We provide a transcript for every episode, I got more questions in the mailbag about that this week. We have 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 you 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. If you have a guest you want me to interview, drop me a note at [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. Till next week, I'm Dan Ferris. Thanks for listening.
Recorded Voice: 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.