Michael Gayed: Gold warning signals
Michael Gayed joins the podcast to discuss current market risks, the Yen carry trade, and why he believes some larger institutional players are considering gold.
Additional Resources
Earn a yield on gold, paid in gold
The Case for Gold Yield in Investment Portfolios
Podcast Chapters
00:00 – Michael Gayed
01:13 – Stores of Value
03:54 – All-Time Highs
07:41 – Fed Rate Hikes in 2024
10:09 – Exogenous Shocks
11:49 – Japan
13:24 – Gold as a Warning Indicator
14:00 – AI Hype
17:19 – GDP and Stock Markets
19:35 – Zombie Companies
22:37 – Saving Smaller Cap Companies
24:26 – 5% Rate Environment in Other Countries
26:33 – Shifts Post-1971
28:34 – Rising Debt
30:57 – Mindset Tips
32:54 – Intermittent Fasting
36:37 – Questions for Guests
39:48 – Earn a Yield on Gold, Paid in Gold
Transcript
Ben Nadelstein:
Welcome back to the Gold Exchange podcast. My name is Ben Nadelstein. I’m joined by Michael Gayed, the one and only, the few, the publisher of the lead lag report, Michael, welcome to the show.
Michael Gayed:
The few, the proud, the few. Few, I think is the way to say it.
Ben Nadelstein:
I think if few were as gold, you’d be the richest man in the world. Michael, let’s start with some controversy that’s been on your Twitter. Anyone who is not following you absolutely needs to right this very second. You can even pause this recording to follow. Michael, gold and bitcoin. You see, these are a store of value. If you’re on Twitter for more than 10 seconds, Michael, you have a bit of a different take. What does the concept store of value mean to you, and where do gold and bitcoin fit in?
Michael Gayed:
So I am, this is kind of a personal thing for me. I’m a big fan of the idea that we have to agree on definitions before we can even discuss things like as a society in general. And I think we’re losing the sense of the meaning of words in general. That’s not a political statement. That’s just something that I’m observing right as far as the fabric of the way we communicate. So store value, this is going to sound controversial to me, is just a marketing term. And I get it. Everyone likes to use that term. But let’s take a step back and think about the definition. A store value has to be something that’s predictable on all timeframes. A store value is something that’s predictable on all timeframes that basically keeps up with the cost of living. Right. It’s not meant to have outsized returns. Also not meant to have outsized losses on any timeframe, whereas an investment does. Investment can generate big returns, also have big losses and investments not predictable because there’s what’s called tail risk extremes on the right side and left side on the gain side on the loss side. So the problem that I have with the term store value is that it doesn’t apply to gold or bitcoin and gold didn’t really store value the last decade.
Now it’s outperforming like an investment would. Bitcoin has crushed it relative to most things, like an investment in meta would have had you been one of the first early adopters in that company as a private investor. So now some people will say that’s just semantics. To me it’s not, because there is an implication in the term store of value that it’s safe means if you need that money tomorrow, it’s not going to impact on a relative basis your standard of living, right? But what if you go through a 1015 20% drop in a week and you’re all in on bitcoin, or you’re all in on gold or any investment and you’re all in and you got a rent due? This is my issue to, right. An investment is something you can size appropriately based on risk tolerance, volatility, all this stuff. A story. Value in theory should be something you go all in on. And you can’t go all in on something that has risks like that, right? So it’s really, and I have to, I am blown away because it’s like I primarily attacked it from the bitcoin side of things, right? And other cryptocurrencies, right?
Because everyone, whenever bitcoin and cryptocurrencies are down, I have fun with it. I take a screenshot and I show, show it being down big and I say store value. I also do it when it’s up big. And I always get these people that come at me and attack me. It’s like this is about definitions. I’m not attacking bitcoin. I’m not attacking gold. I’m just saying that these are not safe. Nothing is.
Ben Nadelstein:
And I think that’s an important point, because when you see people online saying, hey, this investment or this store of value has gone up x percent, in some ways that is arguing against their own point, precluding it from being a store, saying, look at how well, you know, Facebook stock has performed. That’s not a store of anything. And the value, although it is going up, it might be a good investment. We need different terms and different words for these things. Okay, so next we’ve seen that stocks, gold and crypto might not all be stores of value at all, but they’re all hitting pretty much all time highs. Gold has, stocks have and crypto or bitcoin, depending on how you want to term it, has as well. So first of all, are you surprised by this? Did you see stocks and gold and crypto all rising together, all hitting all time highs. Any of these three surprise you, and which do you think is most likely for a pullback?
Michael Gayed:
So about a month and a half ago, I said I put a post out on X, something along the lines of you say watch bitcoin, I say watch gold. And this was before the breakout because it was just basically hovering around the prior all time highs. And its like, all right, if youre going to break out, nows probably the time youd do it. I know the gold move has been stunning. As you know, its just been vertical. People dont realize that gold has now outperformed bitcoin for the last two years. Its because it never really went through the big drawdown like bitcoin did in that time period. Preston okay, so the question around the surprise, around everything being at all time highs, I would challenge that a little bit, only because sure, the s and P is near all time highs, but most stocks, for example, small cap companies in Russ 2000, are still below the 2021 levels. I havent run the stat in a while, but I think it was like three weeks ago was the last time I checked it. But something like 68% of the stocks in the Russell 3000 index are not at all time highs.
Most things are still below their 2021 levels. Now, I think the bitcoin move, you can say, makes some sense because thats because of this ETF demand and all this money thats flown in and that transitional period. Gold had a similar dynamic. Gold kept on going when the GLD ETf first came out. I think whats surprising, or what will be surprising is the lag. And what I mean by that is, yes, you look at stocks, the S&P as your proxy, gold and bitcoin at these levels, but gold looks like its actually pushing higher while bitcoin is still quite volatile, having a hard time, and the s and P looks like its actually rolling over. Why does that relate to lags? Because one of the reasons, which is why I said watch gold a month and a half ago, that gold is doing well, I think, is not because it’s a store of value, but because it’s a diversifier, because it’s not correlated as an asset class. And I make this point all the time. If you’re a big money player and you’re nervous about equities, you’re not going to short equities. Big money does not short equities the way that people on social media think that they do.
Big money is mandated. Institutional money is usually mandated to be long, only they have to be exposed to some part of the investable landscape. Okay, so if youre worried about equities and youve got to put your money to work somewhere and youre still worried about bonds because the Fed may keep on raising rates, you dont have that many options to look for real diversifiers that are not correlated, that will act differently. Gold happens to be one of those options. Gold historically is not very correlated to equities or to bonds or to anything. I wish people would think more in terms of not gold as a store of value, but as a diversifier that marches to its own beat. And if Im right that thats the reason gold is doing what its doing, then it was suggested at the margin some of this very, these big money players are seeing something. What it is, who knows? But its probably not good.
Ben Nadelstein:
And I do want to pick on this one point you mentioned, which is that the Fed might even raise rates. Most people, most analysts have said, all right, 5%, 5.5%. This is where we got to. Thats about it. Fed is going to start looking to cut. We might get five cuts this year, we might get two cuts this year. But everyone agrees its cuts. Its just how many. You might have a different take on that. Is there actually a chance that the Fed raises rates again in 2024? Yeah.
Michael Gayed:
Okay, so let’s be clear on something. I’m actually very bearish on bonds. I’m not bearish on treasuries, which is a different dynamic. I think people are confusing the two. Right? I’m bullish on the flight to safety sequence, which would occur when credit spreads wide and which means corporate credit suffers while higher quality becomes a relative beneficiary against junk debt. Big difference. Im not some bond bull. Im a flight to safety, credit spread widening bull. Now, ive made this point a few times. So first of all, last year I was in the camp that was under this idea that the Fed probably overdid it, meaning I thought they over tightened. Here comes November December. Powell gets the market to think six cuts are coming. Yellen does her stick, save the treasury, and we see a rush of liquidity that causes the financial conditions to ease. In other words, they actually lowered rates without lowering rates. That was the effect of what happened November December. And you saw this rip higher in risk on assets to the point where now credit spreads are basically at cycle lows. And I keep making this point. It’s like, how in the world can the Fed lower rates when the bond market right now is saying there’s no default risk if you do that when credit spreads are as tight as they are when default risk is not getting priced in, youre going to re accelerate inflation.
I dont know why anybodys surprised by whats going on. As far as some of this inflation looking stickier? Yeah, sure. They threw more fuel on the inflation fire with their wording. Okay, so you cant really lower rates unless credit spreads widen, which causes financial stress. If credit spreads stay as tight as they are, then, yeah, they could certainly hike rates. I dont think thats going to happen because I think theres going to be an exogenous shock that forces them to cut rates. But that would be after spreads blow out, after a vix spike. I think the narrative is that they are able to get ahead of risk. I think history has shown the reality is theyre always a follower.
Ben Nadelstein:
What are some of those tail risks, some of those exogenous shocks that you see in the market? Youve talked about Japan before. Youve talked about China before as well. What should american investors be thinking about? Hey, it’s not all just about the Fed and rate hikes. That actually might be a causal factor. But where should investors be looking outside of the US?
Michael Gayed:
Look, when the tinder is dry, anything can light it up. That’s just the reality. And oftentimes you only know the reason after the fact. For all we know, it could be aliens, which may be more Qe if that’s the case. But the point is that you don’t really know the wine unless it’s after effect. Now, I’ve always had this thesis, really, since August, roughly August of last year, that what could spark a lot of turmoil is Japan. And this actually relates to a much more shorter term risk, which is these rumblings around Iran possibly doing an attack on Israel, because in the case of Japan, we talk about a country that doesnt know how to deal with inflation that just got off of the negative rate side, okay, which has tremendous debt, which has been a financier of cheap leverage globally, which is what the carry trade is for decades now. They have to deal with wage hikes, which are inflationary, with a yen which keeps on weakening against oil, which is rising. Now. Why does that matter? And why does that cause some turmoil? Because Japan imports all of its oil. If the end is weakening and oil is rising, then that’s a double whammy as far as cost push inflationary pressure when they already have elevated inflation.
And if the bank of Japan does not step in to try to save the yen, which basically lowers the price of oil in yen terms by causing the yen to appreciate, we got a real problem now. The thing is, they step in to save the yen. That means there’s going to be maybe some panic from all those borrowers in Yen who took those cheap yen, converted into another currency, put it into AI stocks, and now they got to deal with the currency conversion, hurting them. And if at the margin, a lot of people do that, that creates sort of a self fulfilling margin call. This was always my thesis back to August. I think this dynamic with, if it turns out that Iran does strike on Israel and it gets to be a bigger situation, which nobody wants to see, but is a scenario you have to consider, oil probably continues to rise or even spike, and that even worsens the dynamic for Japan further. I know it sounds like a complicated sort of reasoning path, but that, to me, seems to be sort of what the real risk could be now. It could be something totally different, could be China, could be Russia, could be any number of things.
I think in general, the market is probably underestimated and underpriced, broadly speaking, in geopolitical risk. Yeah, ive kept on saying on x, gold is sending a warning. Gold is sending a warning. Gold is sending a warning. I think the warning is Warren, and thats not me being a fear monger, but its like, I dont know how else you can explain it. Sovereigns like gold. They dont like bitcoin. So if sovereign entities are worried about something, theyre going to be stacking gold bars. Theyre not going to be stacking stats.
Ben Nadelstein:
Preston, that makes sense to me. I want to know what you think about this AI hype train. Like you said, people are borrowing yen, coming to the US, and buying AI hype stocks, which just seem to be keep going up, right. Everything is about AI chat, GBT, the next Dali. You know all about the AI. Can you tell me what are you seeing in this kind of AI craze? Is this a mania? Should people be saying, you know, it’s time, maybe it’s time to start shorting Nvidia? I’ve heard people saying stuff like this. Can you tell me, first of all, what, what do you see in terms of mania or bubble in this AI? How much of this is real? How much of this is hype? And then also, how should people think about the AI or the tech sector in general in the States?
Michael Gayed:
So I think, the first of all, I’ve been very wrong in Nvidia. Clearly, I have to own up to it. It’s all the stocks I had to pick on. On x, I had to choose that one of all the things I could have chosen. But the original reasoning on Nvidia was it’s running away. Small caps are going sideways. If AI is such a big deal, then you should see broad participation by the users of AI because it means margin expansion is coming. Zombie companies might survive higher rates because they’re squeezing out more productivity wise. That was always the reason. And obviously invasions kept on going. And AI has largely been the narrative, which has, I think, countered the Fed in terms of easing financial conditions through price appreciation on market cap weighted averages. Now Nvidia is a great company, clearly killing it. But as an example, if earnings go up by ten x, but a price goes up by 100 x, price is not going up because of earnings. This is about relative commensurate magnitude. I just find it hard to believe I could be wrong, that that can continue ad nauseam. And maybe it does.
But if the AI hype is real, I keep going back to there should be certain dynamics that come with it. One is if AI hype is real, you better be bullish as all hell on utility companies because its going to use a lot of electricity. I dont know, maybe that explains some of the strength now, but that has been lacking in the narrative. If AI hype is real, small cap should benefit because therell be beneficiaries of AI. Then the third thing, which is the real big one in my view, is it should be disinflationary. Its technology is disinflationary, which means yield should be dropping and dropping precipitously. If the market is truly a discounting mechanism of the future, none of those have really happened. Now, maybe it still will. I don’t dispute that, right? But I look at that, I say to myself, okay, it looks more like divergence than a consistent narrative. And I am a big fan of this idea that you cannot apply a narrative to just one company. If you’re going to apply something that’s supposed to be a game changer, it has to be applied everywhere. Otherwise it’s just narrative.
Following price for a single chart.
Ben Nadelstein:
That’s a good point. When the Internet came out, it wasn’t that one specific company or stock. It was everybody. There was an Internet company bubble, but it was companies. It was not a single company. There are other narratives like microstrategy and Bitcoin, which are truly for a single company. But it would seem like you mentioned that the AI hype should also be on other companies as well. You should see that in their margins, reflected in their prices, or even things like GDP. Stronger, stronger numbers. Maybe this is because, oh my gosh, productivity. And like you said, technology is disinflationary. So let’s talk about GDP and stocks real quick. We’ve had Jeff Snyder on who said GDP and stock markets have pretty much no correlation to each other. Right. The GDP of one country can be doing great while the stock market is crashing. How do you see that relationship? We’ve heard commentators say, but Michael, GDP is doing great. We’re seeing positive prints, we’re having growth. Things are all right. I mean, the GDP is doing well. So let’s, let’s disembark for a second and see what we think about that narrative.
Michael Gayed:
Yeah, I mean, well, I don’t think GDP matters anyway because it doesn’t tell you anything about the well being of a society. I mean, okay, so GDP is strong. Okay, nevermind the link, which I agree doesn’t really exist as it used to against the SMB, largely because by the way of financialization and buybacks. And, you know, it’s, you’re playing more with the supply side of shares rather than it being reflective of the health of the economy. That’s all right. I mean, you can have killer GDP with everybody having three part time jobs and a full time job. Like that doesn’t seem like a good society to live in if it’s because everybody has to hustle just to be able to afford things. So, yeah, I don’t disagree with that point. I think it makes for a good headline. And obviously the politicians love it. But the reality is GDP doesn’t tell you anything about the well being and happiness. I mean, this is the other thing too. It’s like for all the yelling and screaming around economic growth, I mean, how are we valuing our times, our time anymore? Like, if it’s only about just, you know, you got to keep on getting all these jobs to be able to just keep up with the Joneses and the price of everything else around you that’s going up.
Oh, and look how great America’s economy is. But you’re only sleeping 5 hours a day and you’re not enjoying your life. What’s the point?
Ben Nadelstein:
We talk about zombie companies. You mentioned this earlier. For those who don’t know, we actually did a segment last year during the month of October because Halloween was coming up. We did a zombie month. So we had experts on come and discuss zombie companies, how they are, what they look like. For anyone who doesn’t know, a zombie company is basically with some caveats. A company that cannot pay the interest expense on its debt. It owes some amount of debt outstanding, and then that debt has an interest payment. A company that cannot even afford that interest payment is known from the bank of international settlements as a zombie corporation or a zombie company. So at 5% interest rates, most people would say, okay, at 0% interest rates, I could maybe see how a zombie corporation survives. But how do 5% interest rates mean that zombies are still walking around? Is this part of the leads and lags discussion? And do you see this kind of zombification coming to, coming to a big collapse at some point here, or is there more zombie to go?
Michael Gayed:
Yeah, well, I mean, look, you’re hitting on the core of why this has been such a weird environment, which is why small caps have not made new highs, because there was a lot of these. A lot of these zombie companies are more on the smaller cap side. Very low profit margin, high leverage, unable, unlikely to survive, higher for longer rates. So a lot of people will say, listen, nobody cares about that because it’s such a small portion of, you know, of equity markets, right? It’s who cares? Everyone’s indexed to the S and P. That’s where all the momentum is. And these are small companies, and who cares if they go under? They probably should not be around to be. Okay, fine. But a lot of these companies hire and employ a lot of people, which means you have zombie companies dying. You’re going to have unemployment go up. How could it not? I mean, you know, if anything, the AI dynamic on the tech side is going to make it so that you can’t go get hired by some other bigger company because you got laid off from the smaller one. One. So I take issue with the idea that small caps don’t matter like I really do.
I don’t think it makes sense to me. At some point, the zombie dynamic will come to a head with credit spreads. In other words, you look at credit spreads, they’re at cycle lows. There’s no default risk. Small caps are worried about default risk. One of them, I think, is going to be wrong. If one of them is going to be wrong, the implication would be either small caps are wrong, meaning then you have everything rallying. Zombie companies become exactly where you want to buy or what you want to buy, because it’s like the distressed asset that nobody wanted to touch. Now, that has upside that could be explosive. The other side of it is credit spreads could be wrong. Small caps could be right, in which case you get the VIX, spikes, spreads, blowout, all this stuff. But I guess the broader point is you can’t ignore what’s going on with small caps because it will have implications on the actual economy.
Ben Nadelstein:
I think thats a good point. There has been a two tier stock market now for a little while, which is that magnificent seven companies, or sometimes six or five have been carrying the stock market. Theyve had outsized gains while other smaller cap companies, which like you mentioned, still do employ lots and lots of people, are maybe struggling, maybe not hitting all time highs or at best still chugging along. And so actually looking at the health of small cap companies might give you a better understanding of how the economy is doing compared to just looking at a upward price spike in Nvidia.
Michael Gayed:
100%.
Ben Nadelstein:
Yeah. And so when we’re looking at these smaller cap companies, and obviously a larger portion of them, like you mentioned, are zombie companies, do you think that there’s going to be a push to save smaller cap companies if these zombies start to hit bankruptcy and foreclose? Or is it as long as Nvidia is doing okay? So should we actually care in terms of the Fed and risk and lowering interest rates whether small cap companies are doing okay? Or do you think the Fed says, hey, let them go? Some people have to have their zombie heads chopped off?
Michael Gayed:
I guess it depends on if it happens before or after the election. Just not to be cynical, but I think that’s reality. I would argue if the Fed is serious about getting inflation down to 2%, they probably want to see some bankruptcies. You need to have unemployment go up to crush the demand. Of course you do. I mean that slows down the economy that creates the disinflation, that creates the 2% trending direction and creates financial stress. You need some financial stress to get down to 2%. Now its political though because to your point, that becomes an interesting thing for any politician to say, well, were going to come up with some plan or some program to extend the lifeline to these companies that took on low rates post COVID and now have to deal with these higher rates. Yeah sure. The thing is youd already have some damage already being done at that point. It has to have already been be taking place for that to be a narrative. So yeah, I’m cynical when it comes to the way politicians would use it. I think the Fed probably wouldn’t mind seeing it even though they claim that they obviously want full employment.
The reality is you can have full employment when there’s so much money sloshing the system still and get to the 2% inflation.
Ben Nadelstein:
What do you think about other countries? So we’ve seen we’ve talked about Japan a little bit. We’ve even mentioned China. What do you think about other countries? How they’re handling a 5% interest rate environment in the states? Obviously, like we mentioned, this is almost a reverse for them, right. They have maybe dollar debts or dollar funding. How should investors be seeing foreign equities, the rest of the world thinking about other countries or potentially investors living in other countries?
Michael Gayed:
I mean, I think it’s why you’re seeing a lot of the sort of de dollarization, you know, discussion because you know, they’re getting hurt from the, their pain on the interest rate side is a currency risk, is the currency movement, and you’re seeing that with the BRICS and you know, talk about sort of different currency and like all this stuff you know, pops over every now and then and never really goes anywhere. But I think it’s a reminder to all these other countries that they have to themselves probably de globalized from the US, at least at the margin, because whatever happens to the US now will negatively impact them because of the currency side. Again, maybe thats another reason to own gold or why some of these countries are on the central bank side are stacking up on gold. But I think its a longer term dynamic. Regardless, there is a risk that the dollar does have one of these super spikes, meaning just like a very sudden appreciation against everything else. And that becomes wildly disruptive if it takes place again. Doesn’t mean it’s the end of the world, but just for a moment in time.
And maybe that’s also something gold is sensing. Goes back to my point, when the tinder is dry, who the hell knows? Maybe it is a dollar spike or maybe it’s the reverse carry trade, which is more on the end side obviously. But yeah, I think the broader point is if you are outside the US, you’re not liking the strong dollar.
Ben Nadelstein:
And youve said this a couple of times, which I do agree with, which is that when the tinder is dry, pretty much everything can start a fire. How do you think of 1971 and the closing of the gold window? How does that, and maybe it doesnt at all, but how does that come into your thinking? Because it seems like we have a superficially strong economy in some senses. Like we mentioned the GDP numbers or unemployment numbers, and you can dig into those and maybe theres something there. But it does feel like something has drastically shifted in the past, let’s say 50 years from our post 1971 economy versus our pre 1971 economy. Do you think there is actually something to that? Or it’s more just gold bugs online?
Michael Gayed:
No, I think there’s a lot of evidence around that. A lot of things just either accelerated or started getting historical relations started breaking. If there’s one thing you can argue that happened after 1971 is it’s very clear that more and more money goes to the top 1% and everybody else gets crumbs. It actually created even more increased wealth concentration because when you remove the discipline aspect of gold, right. Underpinning your monetary base. Yeah. You’re going to have corruption. You’re going to have people that benefit the most from lower rates and fiscal stimulus because they’re closest to it and because it looks like it’s unlimited. Right. There is a lot of, that’s not me being spiritual. I think it’s just human nature. Right. If you allow corruption, then corruption will happen. Right. And obviously we have a fiat based system. There’s a lot of chance for corruption. Right. So now, will we ever go back to a gold standard? You know, I have no idea. Maybe a hybrid at some point. I doubt it because the powers that be want to stay in power and everybody else is too distracted by social media.
Ben Nadelstein:
Or the eclipse.
Michael Gayed:
Yeah, or the eclipse or whatever nonsense that’s happening. I’m not saying nonsense, but it’s like whatever headline that the media is hyping, but it’s like, okay, the eclipse was okay, cool, I don’t need to spend my whole life talking about it.
Ben Nadelstein:
And what are some things that you think, okay, obviously we’ve got exploding debt, we’ve got interest rates that are incredibly volatile. They can cut 5% in one year and they can be back at zero or even negative in some countries nominally or in real terms. So where do you see more of this heading? Is it just more debt, more risk, more volatility? And at some point we have more disasters and people just learn to live with them. Many people my age just say, oh, yeah, every eight years theres some sort of financial crisis and that just is what it is. Do you think theres some way out of this? Do investors start saying, hey, Im going to earn a yield on gold, painting gold, Im going to own bitcoin or something. Do you see that? Theres actually a way out of this? Or is this kind of the new normal?
Michael Gayed:
There could be a way out of it if AI is as big as it’s thought to be, but only if you don’t have government spending increasing at the same pace like you get out of it by having taxes actually pay down the debt, actual taxes paying down the debt. And at the same time having spending be cut. It’s like you can’t just say it’s a spending problem or it’s a tax problem. It’s both problems. You can’t have one without the other. I mean, I’ve made that point before. It’s not even like a political argument. It’s just math. You can’t raise taxes and then spend more and debt goes down. That’s not how it works. And it’s wrong for both Republicans and Democrats. I mean, Republicans are not free of blame for that. So, yes, there is. There, is there a possibility you come out of. Yeah, sure. I’m doubtful. Because the reality is everybody that gets elected into office gives freebies. Yeah, let’s, let’s forgive some more student loans. Yeah, why not? Yeah, we’ll put it fine. Don’t worry about it. Yeah, keep going with that degree that, you know, you never would have made money to begin with.
Right. And we’ll just pay for it just because you wanted to study some, some weird thing like, no disrespect to anybody that’s doing that. I mean, I don’t have to pay for that.
Ben Nadelstein:
Good example. I was a vocal jazz minor in school and decided, hey, you know what? That’s probably not the best use of your time. Emphasis on minor. But I totally agreed there’s certain things that maybe we should invest in. And also, if you’re a great investment, someone will privately invest in you. A banker will say, oh, my gosh, you’re going to be an engineer. Here’s $100,000. Go learn it. So, yeah, I do agree with the incentives there that if we don’t radically change as citizens our opinion on how debt works, how taxes should, how high they should be, or entitlements and spending, that will be a problem. So I now want to go to kind of more mindset questions, which is as a investor, as a trader, as someone looking at economics or financial markets, what are some mindset tips or tricks that you can give people saying, hey, there’s maybe a mania, let’s just jump in, or not jump in. Here’s how to kind of keep your head cool while everyone else is freaking out about bricks or the new currency or whatever it may be. What are some, what are some mindset tips that you can give people?
Michael Gayed:
Turn the phone off. I think it’s probably the biggest one. Right. It’s like most people get into trouble not because of their investments, but because of themselves. Right. And what I mean by that is there’s a lot of studies that prove this out. You know, when you see prices daily and you see volatility, more often than not, it creates an emotional response, which causes people usually to sell the exact wrong time. So I think one of the major mindsets is don’t look at prices that often if you’re going to be an investor. The best thing to prevent yourself from making mistake is to not look like that’s just the reality. Now I get it. That’s pretty much impossible. It’s impossible because it’s like, you know, everyone’s talking about it. It’s trending, right? It’s all non headlines and it’s like all this stuff, it doesn’t help at the end of the day. Right now, in my case, it’s a career, right? Because I have my own funds and I have to be, unfortunately be a part of that show, right. But for most people, biggest thing is just focus on other things.
Ben Nadelstein:
We had Spencer Jakab come on the podcast, and he’s on hurt on the street and from the Wall Street Journal, and he’s written a couple of great books, which I recommend you read. And one of the books, I think they did a study saying who outperformed certain benchmarks and who did the work compared to certain benchmarks.
Michael Gayed:
Yeah.
Ben Nadelstein:
And it turned out the people who had forgotten that they had an account at all had outperformed. And the people who, like you said, were day traders or check their phones every single day, did the worst. And so, yes, that might be something to consider is saying, hey, maybe turn the phone on, do not disturb, and maybe not check the Twitter trending or x trending list. Okay, so now I want to ask you about fasting, which some people have said, oh, my God, if you start fasting, your heart’s going to explode, everything’s going to be bad. Tell us a bit about fasting. How have you come to it? What is your experience been and where do you think you’re going to go from here?
Michael Gayed:
Well, thankfully my heart’s not going to explode. The studies on that, I always go back to that line, amateurs look to the right of the equal sign, pros look to the left. And when you actually look at the study that you’re referencing that got all this hype, like the study is a joke. I mean, it’s not the methodology. There’s so many things that are wrong with it. And that’s just not me saying that. It’s like other actual real dietitian scientists actually looked at it and said, yeah, this is silly, right? So basically, because I’ve been going through such a nasty cycle because my funds have to be in treasuries when they’re risk off, right? And that’s how I designed them. Last three years have been painful. I let my health go, honestly, it’s been a very painful last three years for me. It’s even where the whole Persona on x comes in because it’s like, how do I grow my reach and audience while waiting for the cycle to come my way? When people are seeing that I’m having such a hard time with my own funds as a PM, I’ll start saying few and exquisite and all these silly things which are just entertaining.
And I feel like comedian having to explain the joke with this stuff now on X. But basically in July, the light bulb switch went off. I said to myself, you know what, I cant control the value of my portfolio, by the way. Anyway, that says, heres a portfolio manager saying he cant control the value of his portfolio. Its like, of course I cant because if I could control it, id never have a down day. Its like a ridiculous way to think about things. Nobody controlled the value of your portfolio. Control what you do.
Ben Nadelstein:
Yeah, please send them my way.
Michael Gayed:
Yeah, please. Ill close my funds and go all in on your product, if thats the case. So basically, it’s funny because I started seeing all these random ads for intermittent fasting on X in June and I just started doing something like, you know, research YouTube, omad one meal a day, learning about autophagy, started listening to some podcasts and it’s like, all right, let me, let me give this a shot. So initially I did two meals a day, then doing one meal a day, and then basically several of these extended fasts where I wouldn’t eat for like initially 24 hours and 36 hours, then 48, then I’ve gone as long as I think it was six and a half days of just water and coffee, which people think is like crazy, but people forget that when we were cavemen and cave women, that’s how we ate.
Ben Nadelstein:
Like, it’s minus the coffee maybe, but yeah, yeah, right.
Michael Gayed:
Exactly right. I mean, so, exactly so it’s like, so, so, you know, the health benefits have been unbelievable. I’ve lost, you know, 90 some odd pounds, right, since July. All my biomarkers are phenomenal. Like, you know, I’m getting all this stuff checked regularly. And once you’ve done fasting once, it’s actually super easy. You have to just kind of go through it to make yourself believe it. But it’s like by far the easiest and best thing you can do for yourself. Portion control doesn’t work. It’s really about time control. I think that’s sort of the way that I kind of justify. And then, of course, you know, you focus more on pie protein and I’m going to the gym as much as I can. I mean, I’ll tell you something, it’s. I look at these old videos, which are not that old of me, you know, talking about markets, and it’s like I never imagined, I never thought of myself as being heavy. Like, I didn’t see myself that way. And now after having done this, it’s like, yeah, I mean, what a difference. I’m not going to go back to that, right? And now. And now I know what, what needs to be done, like, and I know that if I veer too much, I’ll go back and do another extended fast.
And you know what? I respect and appreciate food more. I know I’m going to live longer. Right. And again, you control what you can control. You can control your health. You can’t control your portfolio. At least control that.
Ben Nadelstein:
I like that. It’s an inspiring story. Hopefully others listening can maybe do the same. You can even comment if you’ve ever done intermittent fasting before. I’d like to hear. Okay, so coming towards our final question here, what’s something I should be asking all future guests of the Gold exchange podcast?
Michael Gayed:
Do you have skin in the game? Now? I’m saying that very purposely. Look, I get it. A lot of people, everyone likes to give an opinion. We’re human, right? Everyone likes to give an opinion on something. And you end up having a lot of people on social media, especially in the financial fine, X world, whatever, who give an opinion and they sound smart and do all these things and they get all these followers and you don’t know if they have actual skin in the game. You don’t know what their motivations are. You don’t know what their performance is. You don’t know anything because they’re not out there running funds. At least I am. I put my money where my mouth is and I’ve gone through a hard time. And I think that cycle is now changing, thankfully. But it’s like, it’s not to the point where I would say that a lot of people that talk markets are fraudulent. But I think a lot of people that talk markets are just talk. Right? And unless you are putting yourself on the line, unless you recognize that path matters more than prediction. And by the way, I don’t, I don’t care if you were somebody who had bad performance.
I mean, I mean, that happens. There’s no gurus, only cycles. That’s fine, but at least have something verifiable, right? Something, some kind of credibility. And the credibility isn’t in some, you know, letters after your name. It’s in, are you actually doing it? And can you prove it? Right. Like, I think to me that’s always, that’s always been the frustrating thing to me about the social media end of this, of this business, because you end up having really a lot of nonsense that’s put out there. People believe it because they don’t. They’re gullible. Like, I hate to say, but a lot of people are gullible when it comes to this stuff. And I think it’s detrimental to everybody when, whether you agree with somebody who’s performing well or not performing well, at least you can verify it.
Ben Nadelstein:
And someone I like is Robin Hanson. He’s done a lot of work on conditional prediction markets. So saying, hey, if this happens and all those types of betting. And one of the things he mentions is, hey, when you have skin in the game, that cheap talk no longer becomes so cheap, right? So for the few people who do follow me personally on Twitter or x, you’ll see a lot of times I’m commenting, hey, would you be willing to bet on this? Hey, what’s your probability of happening? And sometimes people do. I’ve had someone who said AI is going to destroy the world by 2030. Okay, I don’t believe it. But if you’re actually willing to bet on it, clearly you do. Uh, and so Robin Hanson, Brian Caplan and other economists we’ve had on the podcast who’s, who’s made a public list of bets saying, hey, I think, you know, this will do X, Y and Z. It keeps you accountable, it keeps you honest. So having that skin in the game is very important because that credibility factor, even if you’re wrong, right, you say, hey, listen, I think gold’s going to the moon, or whatever it may be.
At least if you own some gold, people can actually, you know, credibly believe your story versus saying, I think bitcoin’s going to the moon. And how much bitcoin do you own? Or maybe you do own bitcoin and you’re trying to pump your bags, as they say. So having that skin in the game is important. What’s something that you think people should know about you? I mean, hopefully everyone watching this is a big fan of yours. But for those who don’t know about you, where can they find more of your work if they want to be interested or look into more of your funds, where can they find those?
Michael Gayed:
Yeah, appreciate me at lead lag report on, on X, Instagram, YouTube. You know, lead Laglive, the podcast I run, which I’ve had keith on from your side on a couple times. I was a fan of his work. Look, I have a very loud personality on X. It’s a Persona because it works with the algorithm. But as hopefully people can tell watching this, there’s a lot that goes into the research, the thinking, and like everything else, I’m going to be right at times and wrong at times. Nobody can tell what the future holds. I mean, for God’s sake, I keep going back to this point. It’s like we keep looking at the Fed and the Fed saying they’re going to do this. The Fed literally four months ago got everybody think they were going to be six cuts coming, and now they’re fed officials saying, well, we may not cut it all or may even raise rates. This is just what a few months like, nobody knows what tomorrow brings. That’s how this works. But at least hopefully for anybody that’s actually curious and tracking and checking out substack leadlagreport dot substac.com, the best thing I can do is just provide a different perspective just to get people to think.
I feel like that’s lacking in all domains now. Everyone’s just reacting and it’s like if you say something that is against what you think or believe, you’re the enemy. It’s like, no, come on, stop it. You can’t advance that way.
Ben Nadelstein:
I may be dumb, but I’m definitely not trying to do it to hurt your feelings or be mean. Michael, I want to thank you so much for coming on the Gold exchange podcast. It’s been awesome. We’re going to make sure everyone follows you. Keeps an eye on that few, the one in, the few, the only, the few on your Twitter or X on lead lag report, anywhere else people can find you, sub stack your funds, things like that. I want to thank you so much for coming onto the podcast. And we’ll have to get you back in case some carry trade unfurls. If zombies start getting their heads chopped off, we’ll be making sure to have you back on the podcast. In the meantime, we’ll see you on x.
Additional Resources for Earning Interest in Gold
If you’d like to learn more about how to earn interest on gold with Monetary Metals, check out the following resources:
In this paper, we look at how conventional gold holdings stack up to Monetary Metals Investments, which offer a Yield on Gold, Paid in Gold®. We compare retail coins, vault storage, the popular ETF – GLD, and mining stocks against Monetary Metals’ True Gold Leases.
The Case for Gold Yield in Investment Portfolios
Adding gold to a diversified portfolio of assets reduces volatility and increases returns. But how much and what about the ongoing costs? What changes when gold pays a yield? This paper answers those questions using data going back to 1972.
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