This is an automatically generated transcript. Denver Gold Group cannot accept responsibility for mistakes, errors, omissions, or any action taken in reliance thereon. Use of this transcript is governed by Denver Gold Group’s Terms of Use.

As a capital allocator across several sectors. And Wasif has taken a turn to recommending why tangibles are going to be his investment of choice. And he's going to tell us more about the case that he's making to his investors. Wasif, welcome. Thank you, Jim. How's everybody doing? Great. Awesome. So, how about this conference? What a fantastic event, really enjoying ourselves. How about a round of applause for Tim and his team? They've done a fantastic job and great, thank you for my friend, Dan Denbo who made the recommendation for us to come and talk at this event. And so thank you very much. So, Dan and I go back many years, we were neighbors, office, neighbors at USA A where we my office was to his left and, and we were there for many, many years and really great guy. I know him a lot. So great. Thank you very much for that. Interestingly, two nights ago, we were catching up and Dan said, well, where are you staying? And I said, well, I'm staying on the lakeside area of the hotel. He said, what floor? I said the first floor, he said what room? And I gave him my room number and he said, guess what? I'm right next to you. So I guess the, the Broadmoor folks knew that we were neighbors and they just wanted to continue that on anyway. Enough, enough of that. So, as, as Tim mentioned, I've been an asset allocator for the better part of 25 years. I've done it through managed accounts. I've done it through mutual funds, entire multi asset platforms, institutional portfolios and through ETF S so have a broad swath of experience as an asset allocator. So some may say, you know, master of none. But I've, I've done dabbled in a lot of different things and I have a very, very strong experience in terms of trying to figure out where the next thing is going to go. So, just a quick show of hand, how many Lord of the Rings fans are in here? All right. So you guys must have figured out the name for the, for the presentation. It's also the name of the paper that we wrote, that's on our website, return of the King. And and as Ronnie pointed out, and by the way, Ronnie and I didn't cooperated or, or discuss our presentations, but there's going to be a lot of similarities in what we talk about. My view is going to be a little bit coming from the acid allocator standpoint. So we just think that this is now the time is right for the king to finally be coming back and reed. as the, as the real money, as JP Morgan said in 20 in 1912, in the congressional testimony, it is a very famous quote. The goal is money, everything else is just credit. And so I think the world is going to become to realize that and see that. So how do we think about portfolio building and asset allocation? And after, you know, 25 almost 30 years of being in the investment management business, we built a framework. And if there's any slide that I'd like for you to think of and remember us with, it's this one, it's our key slide that we use to build and, and frame our, our, our strategy and what it does is we went back in time and we looked at prior cycles, market cycles, equity cycles and try to figure out how they've done and what's led the way and in every cycle. And this is the data that we were able to find at least through the 19th, from the 19 seventies onwards. But if you were to go back centuries, you would find the same phenomenon, whether it's the railroads in the 18 hundreds, whether it's the canals in the UK and so on and so forth. This is a common phenomenon in every market cycle. And so as, as an allocator, you wanna think about what is gonna do, well, what is gonna lead the market and then how do you focus your portfolio in that through that cycle so that you can truly benefit the portfolio from that standpoint? So going from left to right, the way to read this chart is each one of these colored lines is a new cycle represented by a leadership. There's a little gray line underneath it. If you can notice that gray line is the S and P 500 for that exact same period. And we're just trying to compare and there have been many versions of this type of a chart going back on social media in different places. And for us, it's not only important to look at the rise but also the drop that every cycle eventually peaks and then fades. So in the 19 seventies, the big gold bull run coincided with oil as well. So it was a big commodity boom. And we know some of the reasons why that happened in the 19 eighties. The big theme of that decade was Japan, Japanese equities. Anything tied to Japan was significantly strong and it outperformed the broader market and so on and so forth. As you go further in time in the 19 nineties, it was the internet boom. For those of us who are in the market at that time, we might remember that actually earlier in the nineties, it was about emerging markets until the the mid nineties when they had their financial crisis. But most of us remember the boom that we saw in the NASDAQ because of the.com boom and the ensuing bull market. And then in the two thousands was the last gold bull market coinciding with commodities market boom. And the China boom that really paved the way for that cycle to be led by emerging markets, gold commodities broadly speaking, where are we today? Currently? We are what we think towards the tail end of the big mega cap tech boom. I know when we talk to our and I have a lot of friends who are in that space, who invest in that space. I affectionately call them my tech bro friends. And so, you know, all of those folks I know they in their minds, this will never end, but history tells us it eventually does. And what's interesting is as it is ending or as it is peaking, the next one begins and what is the next one to us? The next one already began as Ronnie showed in some of the charts and will show in some of our charts starting around the pandemic time we crossed the Rubicon. We the world changed drastically in, in a lot of different factors, including how we think about life, how we operate. But also from an asset price perspective, from the interest rate cycle, the 40 year bull market in bonds led by declining interest rates and declining inflation ended. And as a result of that, we entered what we think is the new commodity super cycle that really began in earnest around 2021 with oil leading the way and then gold following as well. And we're calling it the return to tangibles. And so there's a, there's a little bit of a play on words here. Number one, in the 9 2000 teens, the world at large was enamored by technology by the digitization of things through social media. And the idea that the physical world is something that we take for granted that we really don't need. And between a combination of peak oil theories or idea about us not needing this stuff, we took commodities generally speaking that everything that comes from the ground that we consume for granted, but the pandemic changed things. They jolted the world awake to the need because of what we experienced with the supply chain constraints, the the surge in inflation. And all of those experiences reminded the world of how important the broad commodity space is. And I know this is a gold conference and I will get to that and we'll talk a lot about gold. But I just wanted to lay the groundwork that we think of this gold as part of a much broader construct, a much broader market leadership regime and a theme that will be a commodity super cycle. And we're calling the return to tangibles and tangibles. We're calling intentionally because up until now, software which is considered an intangible asset has garnered a lot of intention and garnered a lot of allocations in the future. We think the world will return to the tangible side, the commodity side and come back to that. This is a quick view of the comparing pricing of commodities versus equities. So in this case, the S and P 500 and all we're trying to show is how attractive they are multigenerational, attractive broad commodities are compared to equities even more so than they were in the bottom of the tech bubble in 1999 early 2000 or even before the 19 seventies. So we are at unprecedented levels of attractiveness of commodities versus equities. So the way we break down the broad theme of return to tangibles, we break them down into some sub themes and I'm gonna walk you through some of those sub themes in a little bit detail and yes, gold is part of that. So let's go through it. So what we do is we say, how do we break down the tangibles theme into its components? One really, really important foundational component is energy, energy is life. There's a very common phrase many people have used it. Energy is the foundation of economic growth, economic prosperity. You look back in history, any country, region, empire that has grown to strength has done it on the back of cheap and abundant energy. And that is a critical thing that we need. And so the world is coming back to that in terms of the need for oil, the need for gas. And that has been the wake up call in the pandemic when in 2020 oil hit really low levels negative in certain cases and then rebounded back to the importance that it is the usage of energy is continuing to grow incrementally every year. So the headlines are saying we are post that environment, but that's not the case. The use for energy is continuing going. The other piece is in addition to oil and gas, uranium is going to play a big part. Not only are we having a gold renaissance, we're also experiencing a nuclear renaissance where the world is coming back to that and that's gonna be a big part of what we use and all of these things, all of these sub themes are already a part of our portfolio. So the next piece is geopolitical and fiscal risks. We are clearly in an era of higher geopolitical risks and higher fiscal risks. We are in a fiscal dominant world where the politicians have got a taste of fiscal spending and the since the pandemic in the western world, we have been spending at war time levels of spending. And that is supportive of gold as is the geopolitical environment that we're in. And just as an aside in our portfolio, I'm gonna go through these sub themes, but gold is a very significant part of our portfolio between the commodity itself and the gold mining stocks as well. So as Ronnie mentioned, we're doing the same thing, we are on offense in allocating to not only gold but also the gold mining stocks and we're hitting that sweet spot. The next sub theme is to build the future and that build the future is a combination of two things. One, the emerging world or the developing countries are going to continue to grow their need for infrastructure building is just going to continue to increase. India has projected to double their economy over the next six years from $3.5 trillion to $7 trillion. And infrastructure spending is a big part of that. As is the infrastructure needs for places like Indonesia, Malaysia, even China for that matter, all of those places are going to continue to grow. The other component of build the future is in the western world, especially in the US, but also in China, in building data centers. We've all heard about the hype of A I and data centers and all that stuff and yes, copper is a big part of that and we invest heavily in copper as well but not only because of that short term trade if you will. but, but we're investing in it from the long term perspective of all, given the longer term trajectory of what we're thinking is is going to be driving the demand for copper. And the last one is the geopolitical world we are in as resulting in the Cold War that we're in with China is resulting in the on shoring or the French shoring that's taking place. So when you move a factory from China to Mexico, that's fantastic. But you gotta build another factory when you're moving chip plant from China or Taiwan, or you're adding a TS MC plant to the US that's gonna require you to build a factory, all of that requires additional commodities and, and a key component of that will continue to be copper. So th so those are the sub themes that we're allocating to in our portfolio. And as I mentioned, gold is a big part of that. So this is a gold conference. I'm gonna stop talking about the broader commodities and we'll switch to gold quickly. and, and run through some of the drivers of the gold price. So here's a chart the history. this is going back to the sixties. So showing gold moving in its various bull markets and then going through longer periods of that base building or the period that might be not as enthusiastic for, for gold prices. And we know what happened in the seventies as I showed earlier in that chart between the stagflation shock going off the gold reserve, gold status. We had that big boom in gold prices. And then shortly afterwards when inflation was subdued and it, and it went into slumber, I wouldn't say killed, it went into slumber. like a dragon, another Lord of the Rings reference. and, and we experienced the 19 eighties and most of the nineties, we, we saw that the gold price just as other commodity prices didn't do as well. And then we saw the big boom in the two thousands. What's interesting is both of those bull markets, whether it was the 19 seventies or the two thousands. They were for different reasons. It wasn't the same reason. One was geopolitical risks, inflation rearing its head. And the latter one was because of the globalization. More people buying jewelry, more people buying gold, the advent of the ETF for gold, the advent of the ETF for gold miners trivia question. When did GDX start 2006? So this is an era where more and more allocators like myself were able to get into this space and allocate to not only gold but also gold mining stocks and that also contributed to it. So where we are today, to us, it seems like we might be seeing a combination of the two. So it might be the seventies show that we saw between the geopolitical stuff that's going on, the inflation that we think isn't dead yet and what we're going to experience in terms of the economic boom that's going to also occur in the rest of the world. I'll go through these slides quickly because it's a lot of stuff that you've seen before. in terms of the drivers of gold inflation, we all know that inflation has a strong relationship to gold. What we think is is that the current narrative in the market that inflation has been subdued, it's dead. We don't believe in that. So we think that we're experiencing something similar to the 19 seventies where the fed increased rates, inflation came down. And then they thought it was the all clear and for a variety of other reasons, including politically driven reasons, they began to cut rates and you saw gold surging. So we think that there might be something of that nature. Obviously, we don't know exactly what's gonna happen. History will tell us what it looks like. But it seems to us that there's this high risk out there that the fed is gonna lower rates and inflation is gonna come back. We don't think inflation is dead. It started in the stuff that we buy because of the lockdowns because of the the supply chain constraints. You weren't able to get your things that you're building in your house and upgrading your house. All of those things started, the pricing increases which then permeated into inflation and autos which then permeated into inflation in other parts of the economy. And we think in the inflation is going to continue to move along and, and rear its ugly head as soon as you know, the fed starts cutting the cycle and, and as we've seen in other charts that's gonna happen. So this is a similar chart to what Ronnie showed, which is comparing gold prices to real yields. Huge relationship of this going back many, many, many years and this relationship has decoupled, it's untangled. But I would add at the tail end of this chart, if you'll notice the hook up on both sides, which tells me that it isn't completely dead. There's an additional component, there's an additional buyer of gold in this market, which is the geopolitical side that comes in which is the central banks. The fiscal risks are clearly out there. We're running high, high deficits in the US alongside other Western countries. So the western world, the developed world is flirting with high levels of debt and high levels of interest rates we saw in the UK, if you remember the li trust moment where the UK guilt market put its foot down and said you can't spend and make it free and, and have you know, debt pay for it. We're just not going to stand it and yield, start spiking up. There's a risk that you get that type of an event in the us as well. We're not sure of that, but there's a clear risk of that happening in the meantime, what's happening is the politicians have gotten a taste for deficit spending and that's just gonna continue irrespective of who's in the White House, who irrespective of who's leading in any Western economy. We think that we are in a populist driven world and the politicians are preve trying to hopefully see that, that populism doesn't turn into pitchfork populism. And because of that, they're trying to placate by doing fiscal spending and trying to do that. The other thing to think about is whenever the economy goes into recession, the deficits are in good shape and that's when the government steps in because the private sector is receding. Well, the starting point we're in, we're already in high deficit environment as the go as the risk of a recession is increasing. So this is the spending on interest rates for the US versus defense. So now we have crossed, we have crossed the Rubicon in so many different metrics. I it it's countless. this is another clear one where now in the US, we're spending more on interest rate servicing than we are on defense. And then lastly, there's another chart on geopolitics. So this is the ETF buying of the GLD ETF in, in the holdings versus the price of gold. And as you can see, it has decoupled, there's an interesting hook up towards the end. So we think that the price movement is enticing a lot of investors to look at it and come in anecdotally. There's evidence to point out that prices doesn't making a difference. So the momentum is and the headlines are forcing people to pay attention and look at it. And that could mean the the the tactical money, the hedge fund money, the fast money is beginning to come in as well as some retail money. And this is the a similar view to what was shown earlier. This is the central bank buying of gold and how it jumped up in 2022. And we know what happened in 2022. It was a Russian invasion of Ukraine. And what is the term now being used commonly? Which is the weaponization of the US dollar. When the US dollar was weaponized, it sent a signal to all countries around the world, allies and foes, your dollars are not your dollars if we decide. So and because of that, what the rest of the world has been doing in their own self interest, which makes sense logically and rationally, all they're trying to do is diversify away from the dollar that are in their balance sheets and the treasuries. So what does that mean for an asset allocator? Why allocators haven't wholeheartedly jumped into this space? And why is the delay? So one of the things to think about it is asset allocators come at it from the top down and a bottom up perspective, we are different from a lot of our peers. We're looking at things from a top down perspective. All the factors that I showed you, but a lot of my peers and, and we used to do this in a lot of our other portfolios is to run bottom up asset allocations process, which is looking at the capital asset pricing model. Look at mean variance analysis, look at the relationships of stocks and bonds because gold or gold miners or commodities in general are competing for the dollars of allocators alongside stocks bonds and other alternatives. And in a world where rates were extremely low and other assets have been doing extremely well. It made for a tough competition. That's number one, number two, because of the way they run mean variance optimizations and things like that. They're looking at it and saying, OK, there's a long period of time where this thing underperforms. So why would I own it? And I cannot get a dividend on it. I cannot get a coupon on it. So how do I value it? So those are some of the challenges I've heard many, many allocators and I'm sure a lot of you folks have heard different people as well is how do you value this asset? So number one question is, is it an asset class? Some allocators say it's not, it's more of a tactical position as opposed to a strategic asset class for us. It is clearly strategic. I've been an investor in gold and gold mining stocks going back 15 years when I was at USA and, and maybe Dan convinced me, I don't know, but I, I was able to excuse me, allocate. I enjoyed the ride up in the two thousands. It was fantastic. But as an allocator, I felt the pain of the downside and it wasn't fun because it wasn't part of my benchmark and I experienced the down draft and that is the pain that allocators go through. So for them, it's a tactical trade and what drives a lot of tactical decisions? It's the price. So as the price continues to move higher for all of the macro, top down factors that we've talked about at this conference as, as I've discussed, that will continue to drive this higher and higher. And we think that ultimately that's gonna go, we don't have a price target. 4800 sounds fantastic to me. I believe it's gonna be a lot more than that. In the seventies bull market gold was up. what 24 X in the two thousands market, gold was up 6.5, almost seven X and so far it's only up to 2.5 X. So we think there's a lot more going on, especially when you combine both, what's happened happening on the geopolitical front, the inflation front and then in the interest rate environment and the growth of the world environment. So us to us again, ultimately, it's the combination of the seventies and the two thousands that you're gonna see together. I'm literally down in my three seconds. So I'm gonna leave you with this thought. Nikki yesterday talked about the foremost dangerous words from John Templeton. I'm gonna leave you with his other words, which is bull. markets are born on pessimism. They grow on skepticism, they mature on optimism and they die on euphoria. We think they were in the skepticism part because there's still a lot of skepticism but the price will pull reluctant allocators in. Thank you very much.