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About this week’s show:

  • On Trump: America has needed a business executive in the White House for years!
  • Trump will be inflationary even as interest rates rise
  • Technical analysis says the cyclical bear in gold is over…gold now to resume secular bull market

The McAlvany Weekly Commentary
with David McAlvany and Kevin Orrick

“We all hear about the two certainties in life – you know, death and taxes. There is actually a third certainty in life, and that is that the value of your currency, no matter what currency you hold, will continue to decline. If you know that certainty exists, why not put some of your depreciating currency into an asset that is going to hold its value over thousands of years? And that is gold.”

– Bert Dohmen

Kevin: A favorite guest of mine, David, has been Bert Dohmen through the years, not just a guest, but we’ve seen him oftentimes when you’re traveling either to the Bahamas or Europe or Vegas. When you’re giving conferences, Burt seems to be one of the top speakers at a lot of the conferences that you are invited to.

David: Bert’s relationship with our family goes back many decades. We’ve known him for at least 30 years, probably close to 40 years, because I think my dad was very good friends with him in the 1970s, before I was even born. So it’s fun to connect with him, touch base with him. I’ve been in his home many times in California, and today we visit with him in Hawaii. I think what I like most is the combination of fundamental and technical analysis on the economy and investment markets in the Wellington Letter, something that Bert does very well, blending those together, painting not only the big picture, but some pivot points in the marketplace.

Sometimes we disagree, and he is right. And sometimes we disagree and he is wrong. But more often than not, he’s right and we’re wrong. I appreciate his perspective. We always are reading him and learning from him, and we wanted to extend that – he hasn’t been on the Commentary for a couple of years now and I really think that our current listenership needs to know him, be exposed to the Wellington letter and the value that can bring on a monthly basis.

Kevin: Well, and he is not married to one position or another. I remember, there were two men who had predicted a very long bear market in gold and Bert Dohmen was one. In 1981 he said that we’re going to have a 20-year bear market in gold and then it will be followed with my cyclical charting with a 30-year bull market starting in 2001. And I remember Richard Russell, who has passed away over the last year, said the same thing. He had predicted the bear market in gold, but he turned around and predicted the bull market. Those two men I highly respect. And actually, they were accurate on their timing. One of the things I think is interesting that Bert is saying is, he really feels the bull market in gold has restarted after the cyclical bear, and that it could continue as far out as 2031. So, we’ll see if he is right.

David: Bert, it’s great to have you back on the program after too long a stretch. I want to start with “America First.” This was the election mantra. The President of the United States now seems to be delivering on this in his first 100 days. What, in your opinion, are the implications, either positive or negative, of this America First position?

Bert: I think it’s a sea change. I compared it, even before the election, I said, “I have a feeling he is going to win. Forget the polls, they are all totally falsified.” All you had to do was look at the top people behind the polls and you knew that they were being paid by the Clinton campaign. So I said, all you have to do is look at the audiences that he has when he gives a speech. That tells you what sentiment is. He had 20,000 to 30,000 people, and she had 200-300 people at her events. So that told you he was going to win. And I said, “If he wins, you’re going to see a change, just like when Ronald Reagan got elected – tremendous change.”

Remember Jimmy Carter had really screwed up the works and it was an absolute mess. The Ronald Reagan came in. Now we’re seeing the same thing with Mr. Trump. Except that this time he has huge opposition. The radical left does not want to give up control over all of the institutions that they have had, and the agenda is to destroy him. So that is going to be very bad for America and for everything else.

David: Now, he is laying out what is the equivalent of a recovery plan. If you were a restructuring guy, you would sort of say, “Here’s where we need to cut the fat, here’s where we’re going to make to shore up business relationships. And this turn-around plan for America – I wonder what your thoughts are about implementation risk. Taking an idea to reality, in this case is not just about project management, because as you’ve just noted, it appears the president’s opposition may stop at nothing to prevent him from delivering on his promises. Soros may be a part of that, but certainly there is a broader context than one person that represents opposition to implementing this plan.

Bert: Yes, the hedge fund billionaire you mentioned stated in an interview with Bloomberg from Davos. “I want him to fail,” he said, referring to the president. That’s an incredible thing to say about the President of the United States. You want the President to fail? That means that America will fail, and all Americans will be hurt by that. I think the plan, as outlined so far, is tremendous. It is exactly what we have needed. It’s a plan that a successful businessman would do. He’s not the only one in the world that would do this. We have been yearning for a business executive type of approach to managing the country for decades. Now we finally have one and it seems there are people who want to destroy him.

He is going about it as a businessman. He says, “We have too much fat. Let’s cut the fat. Let’s cut expenses. Let’s start negotiating with all the big industry that has been just dining at the trough here and getting all of the taxpayer money without anybody negotiating for the taxpayer on the other side.” He wants to reduce regulations. He wants to reduce individual taxes. He wants to reduce corporate taxes, etc. But, of course, that has to be paid for, and that’s going to be the biggest obstacle. This is where the radical left is going to fight, and they’re going to say, “Look at these huge deficits.”

This is what they tried to do with Ronald Reagan, too. I was fortunate enough, with my wife, we had dinner with Mr. and Mrs. Reagan before he actually announced the he was going to run, and he said that the agenda had to be to put that monster on a diet. That’s what he said. And the way you do that is to do tax cuts first, and that’s reduces the revenues, and then the deficits will balloon to such an extent that the opposition will have to go along with cuts in expenditures. That was his plan.

Then, of course, he was criticized for the ballooning deficits in the first two years. But that was, actually, his intent. And then the Democrats had to say, “Yes, we have to cut expenditures, and the rise in expenditures.” So that was all part of the plan. We’re going to have the same thing here. The next time will be March when the debt ceiling will come under debate. That is going to be a tough debate. If they manage it so that the debt ceiling cannot be increased, it’s going to be a problem to get tax cuts through. So there are many different ways to sabotage the effort, and that is my concern.

David: After being largely critical of the establishment on the campaign trail, Mr. Trump has placed quite a few establishment types in his inner circle. How do you translate that?

Bert: Yes, I’ve done quite a bit of thinking about that. There are some people that, I think, all of us would rather not have there. But on the other hand, you want to have some representatives of the establishment, especially the financial establishment, on your side, so that you don’t have to fight them, as well. You want them to have a position inside the administration. You know the old saying, “Keep your friends close, but keep your enemies even closer.” I think that applies.

David: The last eight years we’ve seen, as you are a market practitioner, we’ve witnessed a sharp rise in asset prices, but really, very slow growth in the economy. If we flop from monetary to fiscal policy stimulus, could we now, in the next four years, have the opposite, stagnation in asset prices, but a sharp rise in economic activity and growth?

Bert: This is the big unknown, of course. When you take a look at corporate earnings, in the fourth quarter of last year, corporate earnings actually were lower than in the fourth quarter of 2011. That means five years of no earnings growth in the S&P 500. When you take a look at revenues of the Dow Jones 30 – the Dow Jones Industrial Index – revenues right now are actually lower than in 2010. That is incredible. You never hear this on financial TV. You never hear that there has been no growth in earnings, no growth in revenues for that time while the S&P 500 is up 87%. So there is a real disconnect here and I’m just concerned that this balloon will be blown up to such an extent that it will eventually be turned into – and it will be very easy for someone who intends to do that, to crash the market. And we might see that later this year. If things get over-valued sufficiently, then there could be just a tremendous run for the hills when the plug is pulled. Right now I see the attitude, many of the big money managers are still reluctant to get into the market, but they are being forced to because the market is going up, but I tell you, everyone has one eye on the exits, saying, “When the plug is pulled, we’re getting out.” So you could see just a very, very massive run for the exits whenever that plug is pulled. And it wouldn’t take much, and I have some ideas that I have shared with our subscribers to the Wellington Letter about what they will do to pull that plug.

David: I thought you would find this humorous. There was a gentleman being quoted in Bloomberg this morning by the name of Brent Moulton. He retired this past December from the Bureau of Labor Statistics after 32 years. He says that right now he is concerned that the new administration may manipulate government statistics by a change in methodologies, or by dropping certain statistics, if Trump thought that was politically expedient. I wasn’t sure if this was reading as a confessional (laughter), or if this is just sort of reflecting his personal disappointment in the November elections. But then they bring in these academics to say, “Hey, you know, we’re going to be flying blind. If they’re going to play with the numbers, then we’re going to be flying blind, in terms of the economy.” And I’m thinking to myself, Bert, as we’ve compared notes through the years, these methodologies shifted repeatedly, over the last 20-30 years. It didn’t matter who was in the Oval Office. It happened during Clinton’s administration, it happened during the Bush administration, it happened during Obama’s. Now the BLS is concerned that maybe there is a manipulation of statistics?

Bert: (laughs) Yes, you know, David, we’ve had long discussions, personally, about that topic. The Department of Labor and Statistics is like Grimm’s Fairy Tales. It’s laughable. Remember, before the 2012 elections, suddenly, in one month we had 800,000 new people being added to the payrolls. I explained in our services to our clients how they calculated that number. Basically, it was all part-time jobs.

They called 70,000 households every month and they said, “Have you worked?” And the guy says, “No, I haven’t really worked this last month.” And they said, “Are you sure? Haven’t you done anything?” And he said, “Oh, I mowed the lawn for my father-in-law.” And they said, “Oh, so you have worked.” He said, “Yeah, but I didn’t get paid for it.” And they said, “It doesn’t matter. You don’t have to get paid for it. It’s still a job. So how many times did you mow the lawn?” “Well, about four times in a month.” “Oh, so you had four jobs during the month.”

That’s counted as four jobs, although he didn’t get paid for any of it.

This is how our labor statistics are fudged. And if you don’t believe it, just go to a page deep inside the Department of Labor website, which explains how they calculate these numbers. But no economist ever does that. These Ph.D. economists don’t even know how these numbers are calculated. So that’s what you get from our economists. When economists are making policy for the governments, you know you’re going to be in trouble.

This is what Mr. Trump is facing right now with this BAT tax – the Border Adjustment Tax. I’m sure this was fabricated by somebody who does not want Trump to succeed. This is such a horrendous piece of garbage. Putting a 20% tax on anything that comes across our border – this is terrible. It will cause him to fail. And today, we just heard that he is reconsidering that and it may not go through. I hope he will not go that route.

Our economic statistics here, and I’ve written this many times, are as bad as those coming out of China. If you believe the economic statistics from China, you will also believe the ones out of Washington.

David: We’ve had an interesting experience the last eight to nine years, not only a massive amount of liquidity created by the central bank community, you look at what the Fed’s activities have been, the growth in their balance sheet, the change in behavior that has affected at the commercial banking level, and now you have two trillion dollars in excess reserves of depository institutions which are held at the Fed.

We have rising rates, with the front edge of rising rates a reversal of elements of Dodd-Frank, and I wonder if we can’t, with an appreciation for how a fractional reserve banking system operates, look at those two trillion dollars in excess reserves, and see a path to it getting into the economy, turning a disinflationary environment to an aggressively inflationary environment quite quickly.

Dodd-Frank – reserves are already there. The nature of fractional reserve banking is 8, 9, 10-to-1, and maybe there is a reason for banks to lend if you’re in a rising rate environment. It’s actually more profitable for them to lend. What are your thoughts in terms of a potential transition out of a disinflationary environment to one where there are greater concerns about inflation?

Bert: David, that is exactly what we addressed in our special report last week on gold, and you have your finger right on the right spot, as you normally do. I have always said you’re one of the smartest guys out there. In the late 1970s we had a situation similar to this, and I’ve been talking about that for the last year. I said that we could get into a situation like 1978. At that point, we got a new Federal Reserve Chairman, we were coming out of a 16-month bear market in the blue chip stocks, and the Fed Chairman said, “I’m not going to fight rising inflation with tight money, I’m going to do it with interest rate policy.

And that, for us, was the green light for a big bull market in the precious metals. And in stocks, it was totally contrary to what Wall Street was saying, because Wall Street always says, rising inflation rates and rising inflation is bad for stocks. We said that the rising inflation will be bullish for stocks because stocks will become an inflation hedge, because companies can raise prices in the marketplace. What you said is exactly what could happen, that these tremendous reserves in our banking system – the Fed has a balance sheet of over four trillion dollars right now, and that money is just sitting there – gives it to the banks and the banks send it back to the Fed as reserves and let it sit there because they’re not making loans.

But once those reserves, by a factor of about 10-to-1 – you’ve mentioned two trillion. Let’s say it’s two trillion of bank reserves. You multiply that by ten, you can have, potentially, 20 trillion dollars of loan being made. Of course, it won’t be that much, but even if a couple of trillion dollars of loans are made, this economy could really start humming and prices would rise. And especially if the America First program goes through, forcing U.S. companies to get manufacturing back into the U.S., at much higher cost, prices are going to have to rise substantially.

The only thing that will prevent prices from rising is if the consumer doesn’t have enough spending power. But if banks start lending again to individuals that will be resolved, so we could see just a big inflationary binge in the economy, and that would totally change the ballgame for investors of the last seven years. You have to be ready for that. And it would open up some fantastic opportunities. I started my business in 1977. When we predicted in 1978 what was going to happen, it really launched the business, and we had two years of a tremendous bull market in the precious metals. And then, of course, Paul Volcker came in and we said, “He is going to actually tighten money.” And tight money brings you the opposite. That’s the sobering up period.

And then we had the big crash, the big recession. And we even said that when gold broke through $694 to the downside, we said, “That’s it, we’re going into a 20-year bear market in gold.” People didn’t want to believe us, 20 years, but our cycle study said, 20-year bear market that is going to be followed by a 30-year bull market. And it is interesting, we are right now in that 30-year period for the bull market and that’s what makes us bullish on gold and silver.

David: It’s interesting, because we talked a little bit about the excess reserves of depository institutions. If that does get into the economy, 1-2 trillion, let alone 5, or 10, or 20, which as you say, is unlikely, but we’re talking about an increase in the velocity of money. That creates a bit of demand pull inflation, too much money chasing too few goods. We could see wages rise. We might also get a little bit of cost push inflation.

I wonder, with that as a backdrop, we already know the Fed is behind the curve. If they shift from their eight-year war footing against deflation, tactically pivot and start addressing an inflation surprise, what is the impact to asset prices? Because what may be different than 1977-1978, is the amount of leverage that is in the system. You look at the amount of debt that is in the system, you start raising rates and you’re talking about balance sheet – I don’t know if it’s impairment, but it certainly is going to take corporations a lot more in terms of current cash flow if they’re paying higher and higher rates.

Bert: Yes, and that is, of course, a downside. And then in 1980, when everything started crashing down, we had a 21.5% prime rate in December of 1980, and inflation was around 15%. So that was incredible. Then Paul Volcker hunkered down and started fighting inflation. Then, of course, the whole ballgame of participating in the benefits – let’s call it that – for speculators, of inflation, reversed. This is exactly the reason why I say, you cannot be a buy-and-hold investor right now. Perhaps in previous metals, but not in stocks.

So the downside here, of course, is if you have rising inflation, rising interest rates, by the Fed, that means that bond prices will have a tough time. In 1978 we predicted that Treasury bonds would lose 40-50% of their value, and that was considered crazy. The chief economist of Goldman-Sachs, in fact, in a seminar that he held here where I live, said that was ludicrous. And it happened. Treasury bonds went down 44%. And our subscribers really benefitted from that because we showed them how to make a lot of money out of that.

So we could see this again. As long as inflation keeps in rising, and as long as money is available, that higher inflation will not bother anything. In fact, it will fuel speculation. The thing that you want to look for, then, is when they actually start tightening money. People have to differentiate between higher interest rates and tight money. Most economists say rising interest rates means tighter money. No, it’s not at all. There is a huge difference. If interest rates rise because of rising inflation, but money is available, credit is available, it’s actually fuel for speculation.

But when tight money starts, then of course, assets, which include stocks, are sold in order to get cash because no one has cash. Everybody is loaned up to the gills. That is when things reverse. We’ve always made huge money for our subscribers in bear markets. Those are the greatest opportunities, because nobody is prepared for it. If you are one of the few that is prepared for it, you can make so much money.

I remember in 1980-1982, we had put options on all of the major gold mining stocks, and at the end, the put options were priced higher than the stocks themselves. But here we had from 1977 to 1980, we were long the mining stocks, we had the call options, we made lots of money. But then we made the turn. You had to know when the turn occurs. That’s the essential thing. You cannot be locked into your investments. You cannot be a crusader for a cause.

David: You asked the question in your recent special report, “Gold and silver, the opportunity of a lifetime?” That’s a question. How do you answer that? I hear you saying that we may be 15 years into a 30-year bull market. Are we comfortable saying that a cyclical bear is behind us and we’re back to the secular bull trend?

Bert: I actually have a question mark on that because we don’t have a key to looking into the future. But just using technical analysis, I made the case in that report, actually it started a year ago, which was our first piece on this that said, “Look at these charts. It could be that the cyclical bear market, which was from 2011 to 2015, is over. The secular, as you know, is a very long-term bull market that started in 2001.

Look at this, how cycles can work. In 1981 we said a 20-year bear market in gold. And it turned out this time – you know, cycles sometimes vary. If you say it’s a 20-year cycle, it may be 18 or 22 years, but this time it was right on the button. It was 2001 when the new bull market in gold was launched. The secular bull market, if it’s really going to be 30 years, should last until about 2031, something like that. So we still have some time.

Now, what I also said in 1981 was, we have no idea what has caused a 30-year bull market in gold. But this is what cycle studies going back several hundred years told us. And now we know, it’s this huge 21 trillion dollars of additional reserves have been created by the world’s major central banks – by the ten top banks. This is 21 trillion. This is huge. The world has never seen such a monetary experiment – ever – and it can only lead to the total destruction of the value of currencies.

And this is why we are now seeing this attempt of the major central banks and governments to do away with currency totally and give us all digital currency. So everything has to go through digital mechanisms which the government can shut off any time they want to. They want to get rid of your currency in your pockets. One experiment was recently conducted in India. When they called in the currency notes 86% of the currency in circulation suddenly disappeared. That experiment, as we know now – it wasn’t advertised that way but, as we know now – that was hatched in Washington, D.C. So, they’re really experimenting with doing away with currencies.

Now, gold, of course, in the U.S. and the EU, they can easily penalize you for holding gold. They don’t have to even prohibit gold ownership, they can just say there is going to be an 80% tax on any profit that you make. And suddenly the gold bull market is over. They can do this. But other countries may not do that – like China and Russia. China really wants to accumulate as much gold as they can. Not only the government, they want people to own gold. They’re smart. They’re very smart over there. I think they’re looking over the long-term. They’re saying, “This cannot end well, and currency eventually is going to be worthless.” So, they want to own the gold.

David: So, in the language of secular markets and cyclical markets, I guess we are comfortable concluding that the evidence is building and we don’t have it definite, but the evidence is building that that period of 2011-2015 was an interim decline in the larger context of a major move higher. Maybe you could speak to what any secular trend in any market looks like. When you look at a secular trend, regardless of the asset in question, how does the market behave? What does that look like as you move into the last half or the last third of a major secular trend?

Bert: You look at chart formations. Charts repeat – the chart pattern. With gold, we had that first phase, I call it, of the secular bull market, which would be from 2001 to 2011 – ten years. Then we had the five-year decline, which was a cyclical bear market. Then we saw the bottom. And that was a 50% retracement of that first ride. A 50% retracement in technical analysis is normal in any bull market. Now, if it would have gone deeper, and especially, if it would have gone deeper than the 61.8% Fibonacci retracement, then you would have said, “Okay, the secular bull market is over. It’s done for. And we’re going to go back down to the 2001 lows.” But it didn’t happen. It held at 50% and then started rising.

The pattern that we now have – we knew this one year ago – the pattern that we now have confirms everything that we said a year ago. And we’re now seeing a beautiful inverse head and shoulder pattern which is bullish forming on the long-term, the very long-term chart, of gold. If we see a breakout now above about 1435 on gold, it would complete that pattern, and that means that the 1930 level in gold would be challenged. And once we are above that, just the technical measurements on the chart, we would be looking for about $2700 on gold. That’s not a forecast, I’m just talking from a strictly gold chart pattern analysis of what can happen.

So this is what we’re looking for, and in technical analysis you always want the patterns to confirm your prior analysis. Once there is a divergence you say, “Hey, wait a minute. This should not have happened, if we really think this was a bottom. But then you know that something has happened to change it. So you never want to get locked in. You want to always look for additional confirmations of what you were looking for. That is the only way to stay out of trouble, and to make money in a long-term trend. So right now we have to look at the $1430 to $1435 area. And we also look at the mining stocks. The mining stocks are actually looking much better than the metals, themselves.

David: The opposite is usually also the case. When you’re in a bear trend the mining stocks are that much worse. So if the mining stocks are improving and performing better, you have something of a confirmation there. What does it mean to you when the bullish consensus on gold hits a 14-year low

Bert: The bullish consensus – when there are so few bulls out there, it is very bullish for a market, any market. And we had that chart in the special report last week where it showed that in early 2016 there were almost no bulls amongst the big speculators. The big speculators were short, and the big speculators are usually wrong at important turns. And so, if there are no bulls, then they are all bearish, and that means that you want to be bullish. You want to be on the other side. You always want to be on the side where the big speculators are not – the unpopular side. We call it the winning minority.

David: (laughs) You know, I started traveling with my dad when I was about three years old, and I probably heard this quote a thousand times. If I heard it once, I heard it a thousand, maybe ten thousand times – that the majority is always wrong. I mean, I tell you, over and over and over again, and maybe my dad wanted to impress that upon me as I was heading into junior high and high school that I didn’t need to follow the crowd. I was probably trying to figure out why he said this all the time.

But the bullish consensus, what you just said, the little quote that my dad always raised me with – “The majority is always wrong.” Why do you think that is? Why do you think the majority of investors are unwilling to question a trend, or are unwilling to step back from history and say, “Okay, I see that we’re at this point, and we should either see reversal, or the market is at an extreme?” Or what have you? What do you think about investor psychology being locked in at this point?

Bert: It’s human nature. It’s the herding instinct. We all feel more comfortable when we’re part of a group, and everybody has the same opinion. We say, “Wow, everybody here thinks the way I do, it must be a good idea.” No. If everybody thinks the same way that you do, it must be a very bad idea. That’s how it usually works. Now, in the investment markets, that is even amplified because money is involved. In the investment markets, if everybody is bullish it means that all the money has already gone in there. All the money has already gone in there. You can’t find anybody who is not in it.

But that means that the next phase is when one little negative thing starts rising up, then some people start selling. And then that selling gets lower prices, and that gets more people selling. And this is how a bear market starts. And then fewer and fewer people are interested in buying the thing. They are more interested in selling. And this is the cycle of human emotions. And this is what makes bull markets and bear markets. And it has absolutely nothing to do with corporate earnings and corporate revenues, and all of these things that financial TV and Wall Street want you to believe in.

It is so comical when you hear these earnings reports from corporations. And on financial TV they don’t tell you how that earnings report compares with one year ago. They don’t even let you know if it was better than a year ago, or worse than a year ago. No. They tell you it’s an estimate – an estimate. But who makes the estimates? It’s Wall Street, the greatest manipulators of all. If they want most companies to beat estimates they just put their estimates lower than they think they’re going to be. And then everybody beats the estimates, and then what you see on financial TV is, “Wow! 70% of the companies reporting so far beat estimate.” Well, estimates are totally irrelevant.

David: (laughs) That’s right. Well, when you describe gold as a hedge against a loss of confidence in a currency, we have this already to some degree overseas. Maybe King Dollar stays King Dollar a lot longer – I don’t know. But demand for gold overseas seems to reflect a diminishment in enthusiasm for other currencies. How do you conceptualize a decline in currency values, having a position in gold as an offset, and also balancing out what you might see in terms of behavior in the stock market? Is it necessarily negative for stocks? Is it positive on the front end, or negative, as time goes on? Help us wrap our minds around that.

Bert: Gold is not a crisis hedge, it is not a fear hedge, and all of these other things that you always hear. In my opinion, gold is only a hedge against declining purchasing power of the currency. That’s what it is. And when you take a look – you know (laughs), I was just at a shopping center, and a little cup of ice cream – seven dollars! I can’t believe this. I remember when it was a nickel. And this really tells you what has happened to the purchasing power of the dollar.

Now, other countries have had even a greater reduction in the purchasing power of their currency. And this is what it all comes down to. We all hear about the two certainties in life – you know, death and taxes. There is actually a third certainty in life, and that is that the value of your currency, no matter what currency you hold, will continue to decline. That is a certainty. If you know that certainty exists, why not put some of your depreciating currency into an asset that is going to hold its value over thousands of years? And that is gold. Gold has done that.

That doesn’t mean you have to have 50% or 100% of your assets in gold. No. But it’s smart to diversify. It is really smart to diversify. You want some real assets in this next go-round. This is going to be the big one. All that money – and you said it initially in this interview, when the reserves that are currently stuck at the Federal Reserves, the bank reserves, when they are being used for loans – first you get the kick in the economy, it’s going to really do well. Then you get the inflation.

And then, finally, you eventually get to the point where the central banks are saying, “Whew, too much inflation. We have to tighten money.” And that’s when everything starts tumbling down. And that includes the precious metals at that time. But in 2008, during that crisis – we predicted that crisis. I even wrote a book in 2007, Prelude to Meltdown. I said, “2008 is going to see a global financial crisis.” Nobody wanted to believe it. So the book, obviously, was not a best seller. But we saw the precious metals get hit just as hard as the stock market, and oil and everything came tumbling down. And look at the recovery that gold and silver had after that.

So the first reaction is, everybody sells everything just to get cash, because nobody has it. Everybody just has a lot of loans outstanding and they need the cash. And everything is sold. The second phase is when the big smart money goes and picks up the bargains, and in this case, they were picking up gold. And this is what will happen the next time around, too, in my opinion, because the next financial disaster is going to cause the central banks of the world to just create so much confetti, otherwise known as currency, that people will say, “This can’t be good. We have to diversify. We have to buy some gold. We have to buy some silver.” And I think that is where you’re really going to be making the money.

David: When I think about Wall Street and their ability to increase prices in an inflationary context, they can – I think what they ultimately butt up against is a change in investor behavior, or consumer behavior, really. And I experienced it this last week. I looked at, for the first time in a long time, the size of a Girl Scout cookie box. You probably have them out in your neighborhood. This is the season. They’re out in force. It’s a smaller box and the boxes are a dollar more expensive than they were last year.

Bert: How much are they now?

David: I think it was four bucks a box instead of three, and it’s a smaller box.

Bert: (laughs)

David: And I looked at that, and I thought – I mean, I love Thin Mints, but I don’t love them that much. And so, it didn’t happen. I changed my behavior. Can I afford four bucks? Sure. But do I love junk food that much? No, I was actually offended by the sticker shock. So it changed consumer behavior, at least, for me. I don’t know how many other people it does, I’m not trying to discourage you from buying Girl Scout cookies, I think you should. But it just seems that there is a change in behavior.

One of the other changes in behavior that we saw in 2008-2009 – you mentioned smart money moving to gold in 2008-2009, picking it up at bargain prices. We now have an awareness of counter-party risk and counter-party concerns that was not really out there prior to this most recent crisis. So you add counter-party concerns to inflation concerns where people decide to own the metal in order to just get out of the banking system. What are the dynamics that you think are possible in the gold market, where again, you have sophisticated money, large money, that wants to come in and own gold by the ton, and the man in the street who doesn’t really like the banking system. It seems to me that when you get to the end of a bull market that is when you see an increase in the rate of change, and the potential for parabolic moves. Am I wrong?

Bert: No, I don’t think so at all. But the problem that I see in all of this is what the governments will do to prevent people from going to gold as an alternative to money. And whether it is currency that they have to print, or whether it is digital money, throughout the ages, thousands of years, governments debase their currencies, have imposed penalties on their populations for trying to use alternatives to the phony money they’ve printed, or coins. There was included, even, in some countries a few thousand years ago, a death penalty if you accepted the money of a neighboring country which might have a higher gold content than the stuff that your own government was giving you.

Well, you’re going to be fighting the powers of government and the central banks, and we have to figure out a way to prevent that. That is why I, as a U.S. citizen, like mining stocks, as well, because they’re not going to prohibit you from holding mining stocks. And they’re probably not going to tax it differently than industrial stocks. So, this is a dilemma that investors will face, obviously. So, foreign investors – they can have their gold somewhere else, stored especially, that is an advantage. They can go to gold and probably not have those concerns.

David: Yes, it’s an excellent point. It’s a problem that has to be solved, the desperate reach of government under desperate circumstances may put penalty pressure on current investors, and something that has to be borne in mind. It is certainly our desire to do everything that we can, legislatively, to ensure that gold ownership is possible. And this administration, perhaps more than any other, would be open to that, I think. You look at their position, sort of, against the Fed, and maybe even the demand for an audit of the Fed, and I think you might have a friendly audience to legislation that protects that right indefinitely, or at least, until it is overturned.

Bert: David, you are so right there in what you said, because when you listen closely to what President Trump says, either as a candidate, or now that he is President, he knows what is really happening behind the scenes. He is totally aware. And I cannot say that about other presidents that we have had in the last 20 years or so. He is totally aware, and that is why he is dangerous to what the free world, the journalism and some others call the Deep State. Somebody that knows as much as Trump is dangerous to these people. But hopefully, he will be able to accomplish what others have not been able to accomplish.

Ronald Reagan went ahead and showed them that with the backing of Americans he was able to overcome this entrenched establishment. And, of course, there was an assassination attempt, but it failed. But he had the courage. Remember when he fired all the air traffic controllers? Nobody thought that was possible, but he did, because they violated federal law by striking.

And maybe President Trump will be able to do the same thing in ousting people who have now criminally released tapped phone calls of his own phone calls with the Prime Minister of Australia, the President of Mexico, the telephone conversation of his National Security Advisor. They were tapped. That’s criminal.

And not only were they tapped, they were transcribed and then released to the media. That’s another criminal violation.

Mainstream media says nothing about that. It’s incredible. These leaks are coming from the intelligence community, or certain members of the intelligence community. So, that shows you how far they will go to destroy this president.

David: Bert, thank you for, through the years, recommending people consider our company if they want to own physical metals. We appreciate that. We appreciate the relationship that we’ve had, going back decades, multiple generations. And I would really encourage folks to get ahold of your Special Report in the Wellington Letter – “Gold and silver, opportunity of a lifetime?” What is the best way for them to request that, or to subscribe to the Wellington Letter?

Bert: The best thing that has all the information would be to go to our website, which is dohmencapital.com, and all the information about our services. We also have subscriptions services for short-term traders that want to trade. They are doing very well. At times we are both long and short. We buy the strongest stocks, we short the weakest ones. In today’s environment that is a pretty good idea.

David, it is always really enjoyable talking with you because you’re the son of an old friend of mine that I knew since the 1970s. I always respected your knowledge of the markets, and you know I’ve told you that in person. By the way, you are the only company that I ever mention to someone when they ask me, “Where can I buy gold and silver coins.” Anyway, it is always great to speak with you, and I’m glad we had this opportunity. Let’s do it again sometime.

David: Yes. Hey, great to hear your voice. We haven’t spoken as frequently as we should have in recent years, and I hope we can fix that. So, I look forward to seeing you soon. Best regards to everyone in your family, and I look forward to our next conversation.

Bert: Thank you very much, David.

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