Ep 47 – Lobo Tiggre: The Future of the Dollar, Gold, and Commodities

Ep 47 - Lobo Tiggre: The Future of the Dollar, Gold, and Commodities

Lobo Tiggre joins Ben and Keith LIVE in New Orleans for a special edition of the Gold Exchange podcast. Lobo is the founder and CEO of Louis James LLC, and the principal analyst and editor of IndependentSpeculator.com.

Lobo breaks down why the tech sector will be hit hard by the “banana”, why the inevitable does not mean the imminent, and what a changing dollar price will do to commodities. This episode is jam packed with thought provoking discussion, breaking news, and expert predictions.

Connect with Lobo on his website and Twitter.

Connect with Keith Weiner and Monetary Metals on Twitter: @RealKeithWeiner @Monetary_Metals

Additional Resources

The Independent Speculator

Reasons Why Gold is the Best Money

The Wrong Trousers

The Dollar Milkshake Theory

Fed Rate Hike Graph

Ukraine and Useless Ingredients

Fed Hammer Article

Podcast Chapters

00:0000:15 Intro

00:1500:41 Lobo Tiggre

00:4102:00 Rate Hikes

02:0006:32 Dollar Milkshake

06:3211:05 The Wrong Trousers

11:0516:10 Gold, Copper, and Uranium

16:1019:50 Banana Deniers and Tech Layoffs

19:5021:13 Boobus Americans and Inflation

21:1323:00 Rate Hikes and Inflation

23:0024:35 Survivor Meets Keynesian Economics

24:3525:11 The Political Pivot?

25:1127:17 The Models and Blaming the Victim

27:1728:44 A Speculators Worst Enemy

28:4429:36 Outro

Transcript:

Benjamin Nadelstein:
Welcome back to the Gold Exchange Podcast. We we are in the New Orleans Investment conference. 2022. I’m joined, as always, by founder and CEO of Monetary Metals, Keith Weiner. And we are delighted to be joined by a special guest, Lobo Tiggre from the Independent Speculator.com. Lobo, how are you doing today?

Lobo Tiggre:
I’m fine. What makes me a special guest?

Benjamin Nadelstein:
Well, you’re one of our many.

Lobo Tiggre:
More special than the last.

Benjamin Nadelstein:
I know. Everyone special. All right, so let’s dive right in. So obviously, interest rate hikes have been kind of the hot topic. Do you see interest rate hikes continuing in 2022, or do you think the Fed is going to have to say.

Lobo Tiggre:
Listen, we’re pivoting in 2023.

Benjamin Nadelstein:
Let’s start with 22.

Lobo Tiggre:
There’s not much left of it. Well, then, yes, absolutely they continue. I think the Fed would cause more ruckus right now if it backed out of its guidance. Right now, the guidance is terminal rate end of the year, early next year. I do think they adhere to that now, whether it’s 75 or 50 and when that’s available. But I have no question that they continue, and they would make things blow up if they didn’t. In my mind, the really important question for monetary metals in particular is what’s the nature of the pause? Everybody is pricing in and expecting the pause. And I think a particularly important thing about the pause, like they get to their terminal rate. In that terminal rate, the market is kind of pushing it higher and higher as it goes. But the expectation is and I think even the hawks on the committee are saying at some point we need to pause and look at what we’ve already done. These are the most rapid increases on record or since whenever. So it doesn’t make sense to me that they will pause at some point, loop around. And here’s the thing. If the terminal rate has reached the end of the year or January and they pause to look, and at that time, you still have war and an energy crisis in Europe, double digit inflation in Europe, and you have the ECB tightening while the Fed is pausing, then that could really change the balance of things.

As I stepped up to this interview, you were talking to the dollar milkshake guy, right? Brent Johnson. so in that context, if the Fed is pausing while the ECB is tightening, the very same dollar milkshake mechanism that gold bugs love to hate right now could actually turn in gold’s favor. If it reverses, it’s reversible. If it reverses this winter, that could make things very interesting for all real assets, especially gold and silver.

Benjamin Nadelstein:
And Brent wanted us to ask, what is the bank of England going to do? What is the bank of Japan going to do, because clearly the Fed is in a tough spot, but the Fed is in one tough spot. These other guys are in the heat of the fire.

Lobo Tiggre:
It’s really interesting, as we’re doing this interview, we have the news out now that Kwasi Kwarteng has been sacked. It’s a question, open question. How long do you wait?

Keith Weiner:
I’m sorry?

Lobo Tiggre:
Kwasi Kwarteng has been sacked today. Yeah, just this morning.

Keith Weiner:
I did not.

Lobo Tiggre:
Breaking news, folks. Right. And an open question as to how long the trust government itself will last. This is enough of a sacrifice to appease the mob. Or not. Right. Important takeaways, though, for resource investors are if there was any doubt that the UK or London was still an important financial hub that’s been put to rest. Look at the waves this is caused in the market for the perspective of monetary metal stove. It was really interesting. We were just talking about how Brent Johnson’s dollar milkshake mechanism is reversible. It’s neither bullish or bearish for gold. It depends on what the dollar is doing. So we saw in space exactly. This demonstrated by the upsets in the UK and when the pound fell, right. And the dollar gold fell, and then when it reversed, we saw gold go screaming back up again. So I think, in addition to I’ll leave the global analysis to Brent, but in addition to yes, you need to pay attention to what’s going on in the rest of the world because it affects the milkshake mechanism. I know you’re going to ask about this, but it really focuses the attention on how important the dollar is.

I mean, of course it’s the word reserve printer, of course it’s important. But for our investments right now, particularly gold, it’s long been known for decades that the number one variable is the real interest rate, that’s the highest correlation is not the only thing, but it’s the one variable that everybody looks at is what are real interest rates doing? But this year, particularly since the war in Ukraine, gold and the DXY have been like a rorschach block, like mirror images, just moment to moment, intraday moves, just exactly opposite to each other. So this makes the dollar milkshake thing more important than ever right now, because it is the prime driver. It is absolutely what’s making things go up and down that we care about. Right. So this business with the UK is an example of this in motion. What I said earlier about if the ECB is tightening while the Fed is pausing is another variable to look at here. So now, objectively, I understand that you know how the dollar compares to other Fiat currencies who’s winning the race to debate. That’s a stupid way to look at gold. Like the value of gold is what it is.

Not whether the yen or the yuan or the pound is beating the dollar today or losing, but because of these things that we’re talking about, because of the dollar milkshake mechanism. The DXY has become the variable to watch this year. So this is a key takeaway to your audience. I don’t take the DXY too seriously. I call it the wrong trousers. In honor of Wallace and Gromit. It’s a funny cartoon, you can look it up on YouTube. The DXY is the wrong trousers. It logically has nothing to do with the value of gold or very little tangentially, maybe, but it is the variable right now to watch. And if you want to know what’s going to happen next, look at what’s happening to the dollar and maybe listen to what Brent has to say, since he nailed that one.

Benjamin Nadelstein:
So, well, let’s talk about key indicators for a second. There’s leading indicators, there’s Lagging indicators, there are key indicators. What is a key indicator that obviously we’re watching? DXY, but what’s maybe a key indicator that everyone’s watching that we really shouldn’t be watching?

Lobo Tiggre:
Well, I would like to say the DXY, it’s the wrong trousers. It’s not what defines the value of an ounce of gold or especially silver now with its increased industrial aspect. So that’s been my thing. And the world has turned on its head because it’s become so important this year. Go ahead.

Keith Weiner:
One way to look at that, and I agree that all the currencies can be sinking together, even while Milton Friedman says they’re floating and they’re just thinking of different rates, the dollar is sinking faster or slower than other currencies. Doesn’t really have anything to do with gold. The driver of DXY right now, and not at all times, but at the moment, is just stress in the credit markets. And I’ve been talking about this in other interviews, too. I think there’s enormous buying pressure in gold as people look at the madness of central banks and also a fiscal policy, but there’s also enormous selling in gold, which is why the price has gone down. And there’s a lot of forced selling. When people in credit stress, they have a margin call or in a lot of cases, this portfolio rebalancing when it’s your entire portfolio down 40%. Now, gold, you’re suddenly overweight relative to where your target was, so you’re selling the gold. That’s the connection, I think, between DXY temporarily. Then when the central banks I won’t say fix the credit stress because there’s no real fix, but I’ll use the word tamp it down.

When they get that all tamp down and that’s no longer flaring up at the moment, still smoldering, but not flaring, then DXY will no longer be an interesting thing to look at. The correlation won’t be there anymore with gold, and then it will be on to the next temporary, the next six to nine month period will be a different thing that you’re suddenly looking at, like, look at right after a COVID hit, gold traded exactly opposite to equities. Stock swelling, gold price rising. Now gold is trading with equities. Right? Well, that’s going to reverse again, there is no good long term. And that’s what makes gold such a great portfolio hedge. It doesn’t have a long term correlation to anything really, right?

Lobo Tiggre:
Long term, inverse correlation to inflation, long term since 1971 at X chart of gold versus the value of the dollar.

Keith Weiner:
Although a big part of my thesis, and we’re here to interview you, but a big part of my thesis is that we have particularly now, some very large non monetary forces driving prices up, which gold doesn’t respond to tariffs. And Ukraine, a lot of commodities used to be exported out of Ukraine that all basically stopped and then locked down in the whiplash. There’s a bunch of hopefully temporary things that really push consumer prices up, but they’re not monetary in nature. And therefore but when consumer prices go up simply because the dollar is devalued, then of course you see the gold price is the inverse of the dollar. It is ultimately the measure of the dollar. So if the dollar is cut in half, then the gold price has doubled. And that’s absolutely true since 1971 and arguably since 1933, except the government. It’s like if you declare a rent control or something, that’s not the real price, that’s the statutory price. Or if you go to Argentina, what’s the dollar worth? Oh, it’s one dollars equals one peso. So by law that’s what they’re saying. But actually the numbers been moving.

Lobo Tiggre:
But if you think about it, with the devaluation in the 30s, actually gold did do its job. If you want to think of it as a price, the price of gold went up.

Keith Weiner:
Right. There was a devaluation from twenty point sixty five dollars to thirty five dollars. But after that you have a flat line. When I think actually, especially after the war, you had a rising price of gold. That was the signal was suppressed. The reality was it was rising. And so the 1970s was a very quick catch up to a reality that has already occurred decades prior.

Benjamin Nadelstein:
I want to ask now about kind of going back into the centuries. If we’re holding on to one asset, you’ve got an asset that you can hold for a century, a decade, and just the next year, what might you hold?

Lobo Tiggre:
It’s fine. There’s a story in the press just a couple of days ago about some gold coins found in a wall somewhere in the Middle East where there had been an invasion. And obviously the owner of whatever that place was hoped to come back and recover his treasure. And it’s still a treasure today. And even if you melted it down and destroyed the historic significance of the find, it would still be valuable, it would still be gold today. So there’s no question in my mind longer term gold is the thing. But I don’t see it as a speculation. I don’t see it even as an investment. The reason to own gold is because it’s real, it’s physical. I can gold it in my hand and it has value. Whatever happens to the Fiat, Currencies or anything else in the world, it is what it is and that’s not going to change. So for the longer term, for the decade ahead, who knows what happens? I like monetary metals for that, but I think for the decade or immediate decades ahead actually, my favorite thing more in the investment vein is copper. I think we’re looking at protracted supply constraints on copper.

The electrification story, whatever you may think of the SG and the green agenda, whatever that is, the way the world is going. Consumers want electric cars now. That genie is not going back on the bottom right. And copper is essential to any of whether we have need nickel for the batteries or not. Well, there’s some batteries that don’t have any nickel or cobalt in them at all. There’s lots of variables here. Lithium is very important. It’s not going away. But there’s a lot of it where copper? It’s not just me, it’s the Wood Mackenzie of the world. It’s some of the biggest, most reputable shops in the space. Everybody is looking at a copper shortage going forward after the very meaty term. There’s debate this year, but going ahead, I actually think the best in that space that’s almost buy it and forget it kind of investing, that’s how strongly I feel about copper. For the immediate year ahead, it would be uranium.

Lobo Tiggre:
We’re talking about how the dollars, that dollar wrecking ball, as the media calls it, it’s destroying everything. And gold is doing great because it’s down less than everything else. But you know what the other yellen metal. Uranium is up this year. And while everything else has been smacked around by the dollar lately, it’s been waffling around $50, which is a great improvement over last year, which was a great improvement over the year before. So it’s actually in a multi year, volatile, but multi year upward trend. The demand is just going crazy with the war and everything. Even Germany is considering holding on to.

Keith Weiner:
Nuclear, even Greta Thunberg, right?

Lobo Tiggre:
Yes.

Keith Weiner:
How much upside do you think there is in uranium from here?

Lobo Tiggre:
Yeah, there’s this uranium bugs hate it when I say this, but there’s this expectation it’s going to be like 2007 all over again and it’s going to go from $7 well, that was before, but $7 to 104. You’re like, we’re all going to make it. But the last time that happened, there was no Kazatomprom. There was no Kazatomprom, the largest and cheapest producer in the world. It’s a different market than it was then. So I do think it goes up. And as markets do, I do think it overshoots. Does it go to triple digits probably at the moment of maximum enthusiasm? Does it stay there? I don’t think so. Uranium is actually not that rare in economic ready to go deposit. There’s only a few of those. So I do see an imbalance there. But I do think high prices, pure high prices in this space. I don’t think that takes very long. And you still have the two biggest producers because Kazatomprom and Tamako under voluntary production cuts. So there is easy supply to come back online. Never mind all the new projects are that already people are starting to build these projects that have been waiting for higher uranium price.

That’s why I said the next year or so, absent a major nuclear incident, another Fukushima or something, this is my highest conviction trade for the immediate term. Our friend Rick Rule likes to say don’t confuse the inevitable with the imminent. And I’m like, I don’t want inevitable. That’s where it’s happening now. So I like that a lot. But don’t forget to take profits because it’s a space where high prices will cure high prices and it is a space as much as the market fundamentals and the technicals are on my side now, it literally can blow up on us overnight. So take care.

Benjamin Nadelstein:
We got to thank Rick for that. I like that a lot. Imminent but not inevitable. Using that framework. Let’s talk about the recession or as the story will be told in a second, the recession or the banana. Are we in an inevitable point at getting into a recession or is it imminent? What do you think?

Lobo Tiggre:
I would put that in the happening now category as well. The banana is here whether you want to deny it or not. There’s banana deniers out there. How dare they?

Benjamin Nadelstein:
So Keith, why don’t you explain what’s the banana recession? What’s the joke here?

Keith Weiner:
I have to go Google it. So here I’m going to be on video for all time without my facts straight and I want to say it was a Fed chair and I want to say it was the 1970s, but the story is he was talking in his speeches about recession probable or imminent or whatever, and the president told them don’t say that because it’s going to hurt his chances of reelection. So in his next speech, he said my boss, the President said not to say recession. So when I’m in recession, I’m going to say banana. And so there’s high likelihood of a banana next quarter and a banana this and a banana that and a banana will last three quarters, which I just think is super funny that he would actually say. My boss had not to say this and it says that on TV.

Benjamin Nadelstein:
So the banana deniers, we’re not in a banana right now, but what do you think? I mean, with interest rates hikes…

Keith Weiner:
Sorry, it depends on what the meaning of the word banana is.

Lobo Tiggre:
And they’re different scales of banana. Sure. The global banana I think is clearly upon us. The European banana is right there smacking you in the face. The UK banana I mean, the US has the most plausible deniability on the banana front because of the supposedly strong labor market. Sure, but I have to call BS on that. When you have such low labor force participation, the numbers are artificial and even Powell says that. Even Powell admits that the official unemployment rate isn’t real. But I see the Fed as being balanced on a one legged stool. I mean, there’s weakness visible everywhere else. Never mind the so called technical definition of two quarters.

Keith Weiner:
Sure.

Lobo Tiggre:
Everything else, if it’s not bad, it’s souring. So it’s clearly there and yet the Fed is up to saying, oh, but we have this wonderful strong employment market, even though we don’t quite believe it. Right. So it’s like they’re balanced on this one legged stool with a noose around their neck, tied to the beam, and they say, this is perfectly safe, we’re fine here.

Keith Weiner:
I have to put something on that. The stated inflation of the Fed is to cause unemployment to lessen demand and therefore get consumer prices to come down. So on the one hand saying, we’re trying to cause unemployment, on the other hand saying, employment is strong. It’s just kind of a twisted into a pretzel sort of posture and it’s.

Lobo Tiggre:
Like knocking that one leg the stool is on, but this is perfectly safe, we can manage. Like people are talking about even the bears on the mainstream media, the bears on Wall Street are saying, oh, it’s going to go up to four and a half, maybe 5%. I think they’re delusional once the banana really hits big, messy banana goo everywhere. The layoffs are not going to be mild and quick. You’re going to have, especially in the tech sector and some of the interest rate sensitive places, the layoffs are going to be massive, they’re going to hurt. And I really do think we’re going to see history doesn’t repeat, but it rhymes. I think we’re going to see a lot of rhymes with the for gold, silver, bugs out there, monetary metals spans. I think one of the key things to look for is how gullible sorry, but the boobus American it’s the consumer sentiment just came out this morning. It’s higher again. And the issue here, and I don’t understand why people believe still the transitory story, but there’s a key data point just out this morning, right? The consumer sentiment was high, but their inflation expectations have suddenly jotted back up again.

Over the last few months, inflation expectations have been going down with gas prices. And just now we got the new number back up to 5.1 from 4.7. So one data point doesn’t make a trend. But this is potentially very interesting because I think the big ingredient missing from now in the 1970s was back then, everybody knew, like the entrenched inflation expectations, people knew that prices were going up. So you bought things now because you knew it was going to go up later. You bought gold and silver now because you knew that was your way to hedge inflation. That’s not present now in the broader market space. The average person out there doesn’t think about gold or silver at all. And until at least until now, they’ve been thinking if that was going to be an inflation. When that changes, I think that’s when we see a lot more rhyming with the 1970s and sticky high inflation, we’ll see how long until that rhyme comes back.

Benjamin Nadelstein:
Well, let’s hit on inflation for a second. If there’s nonmonetary forces causing a lot of this inflation pressure, how are interest rates hikes that are going to kill some of these zombie corporations, kill some of these high tech sectors? I don’t see how unemployment lower production. How that’s lower inflation? I mean, I didn’t take economics in school, but am I missing something?

Lobo Tiggre:
Jerome powell. No. But yes, I know a little bit. If we lived in a world where real money was still the currency of the land, right. Things would, I think, correlate and corresponding work in a much more predictable way. In a world where we have a fiat monetary system, you take something that might be a little more mechanistic, not entirely, and you see this gooey psychology comes into play and expectations and confidence and all that stuff. It shouldn’t matter as much as it does, but it does in a fiat system because it does affect velocity of money, which I know is an abstraction. But if money was physical, is real, and you had to have it in the bank to write a check on it or whatever, it’s different than when you have banks printing money into existence and that can expand and contract. We saw M two, like the supposedly real money go up and we saw inflation go with that. We’ve seen that stop, but then things overshoot. They go beyond because of all this other stuff. To answer your question, no, you’re not wrong. There is the supply issues with inflation, and nothing the Fed does can change that.

Lobo Tiggre:
On the other hand, you can’t just dismiss demand destruction that does work. If Powell does get half the country fired, you know what? They’re going to stop spending as much money and that will affect consumer prices.

Benjamin Nadelstein:
Well, let’s talk about this demand destruction. It’s kind of a euphemism and kick the bucket. But if you’re kicking the bucket of the economy, that’s real people, real jobs, real companies. What is this idea of demand destruction? And can you kind of break that down for us? It doesn’t sound as rosy when you explain it, pete, what was the old.

Keith Weiner:
Joke about it’s a recession when my neighbor loses his job and it’s a depression, so they want to cause a recession and a banana. That’s right. A rebanana that my neighbor loses his job and therefore doesn’t outcompete me to buy groceries, and therefore the price of groceries go down.

Benjamin Nadelstein:
Right.

Keith Weiner:
Even if that theory were true and I have a lot more to say on that topic. But even if that theory were true, that’s kind of morally reprehensible say, well, we’re going to render all these other people unemployed. To me that sounds a lot like the politics of we have to put in a $10 billion light rail system in our city and everybody sitting there stuck in traffic is thinking all these other bozos that are in my way, I don’t plan on getting on the light rail. Of course all these other people will get on the light rail, they’ll get out of my way and the highway will be a Zeppe right into downtown. Not thinking that the other ones are thinking that’s going to be true of them. The same thing is true with a banana who’s losing their job. And the idea that everybody would vote for somebody else who loses. It’s like Survivor meets Keynesian economics. We get to vote you off the island, but off the island means you lose your job.

Benjamin Nadelstein:
Right? What do you think about this idea of Powell? And we’ve got midterms coming up. Do you think he’s going to try to save the economy and turn this around for Biden or is it really staying the course and the Fed is not political in that.

Lobo Tiggre:
Actually, I think that would backfire if he was perceived as trying to help Biden. I think it gold. Probably hurt Biden. Yeah. I expect them to at least talk. And election is coming up, so there’s not a lot of time for them. The midterms are upon us. I think he said something really interesting. Morally reprehensible. Aren’t we evil capitalists and all we care about is making money? No, actually most people, most people do care about right and wrongs. And throwing people under the bus to help yourself, that’s not necessary. But broader looking at the economy, these guys, the mainstream economists, especially hundreds of them working for the Fed, they had these models and they’re incorrect, but their models say that this is how you do things. We have to we’re not trying to be mean, we have to hurt people and unemploy them because that’s how you control inflation. But what if that’s not true? There is supply side economics too. What if you grow the pot? And it’s really unfortunate what’s happened just now in the UK because the Trust government proposed opening up, becoming trying to grow their way out of some of the difficulties, cut taxes, open things up and that is another way that’s not imaginary, that really can’t happen.

But the problem was they also proposed the tax cuts and spending increases at the same time and everybody called BS on that. But what’s going to be remembered? Nobody’s going to remember the growth option. Nobody’s going to remember the opening up of possibilities in not firing people to heal the problem. Everybody’s going to remember the tax cuts those got the acts first. And people are going to blame the victim here in a way. But I think it’s never going to happen because we’ll never get elected with such unpopular ideas. But it is actually possible, I think, to address these issues in constructive way. Let’s say it’s physically possible. The real world possible is politically unfeasible in our world right now.

Benjamin Nadelstein:
Right, well, we’re going to wrap up here in just 1 second. I got one more question for you, but before we get there, where can people find your work?

Lobo Tiggre:
Independent speculator.com. Thank you for asking.

Benjamin Nadelstein:
Okay, let’s get to our final question here. We’re at the New Orleans Investment conference, obviously all talking about investing. What’s some of the best investing advice you’ve ever received that you can share with us?

Lobo Tiggre:
Well, we talked about Rick and his inevitable and imminent. That’s an important one. So I’ll go back to Rick, and he likes to say that the average investors or speculators worst enemy is to the left of their right ear and to the right of their left ear. In other words, it’s yourself. And when people ask me how do I start or what do I do, it sounds mushy and psychological like self help, whatever. But I think it’s actually quite important, and it is to look yourself in the mirror and ask yourself what kind of investor you are. And to be honest with yourself, remember Rick’s ears. Right. Because if you have a low risk tolerance, for example, and you dive into penny stocks in the golden space, right, juniors, you’re going to get your posterior handed to you. So I think it’s really important to have your goals, to find a degree that you can be rational, be disciplined, discipline paid, and know yourself, master yourself, and you’ll be ahead of 90% of the herd.

Benjamin Nadelstein:
I love it. It’s great advice. We had such a great time with you on the show and we look forward to seeing you later.

Lobo Tiggre:
Okay, well, thank you very much.

Keith Weiner:
Thanks for stopping by.

Benjamin Nadelstein:
That’s all for the Gold Exchange podcast. We’ll see you soon.

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