Why Momentum Says This Market Is in Trouble (Uncut) 02-11-2025

Michael Oliver: Why Momentum Says This Market Is in Trouble

I feel sorry for Trump, he stepped into this, not much he can do about it because it’s a bubble bigger than any we’ve ever seen and when it breaks, I don’t care who the president is, you know, it’s going to look bloody and it’s going to cause panic. Hi, Michael, thank you very much for joining us today. How are things in the great state of Colorado? Oh, as you would expect, cold, dry, beautiful horizon.

Well, I can relate. I am in Toronto and it’s also very cold here. So I love the state of Colorado.

It’s been a while since I’ve been there, but I’m a big skier and I’ve been there a few times. I can’t afford to go now because the lift tickets are so much in Canadian dollars. I didn’t know that.

Yeah, this U.S. dollar is killing me. Well it won’t kill you for long. So Michael, before we get into it and get your views on what’s happening within the financial markets, why don’t we just start with your process? Because your process is a little bit different than what other people use.

You don’t focus on price so much, you focus more on momentum. Can you just expand on that? Yeah, the popular term momentum means, you know, hey, it’s got momentum because it keeps going up, you know, that kind of thing. And actually, that’s not true.

Quite often, a market can be going up and yet losing momentum. And the way to measure that that we use is not what is typical on most quote screens like MACD or RSI. We call those wet noodle indicators.

We’re looking for snap type indicators. What we do is we plot the bars of price, whether it’s daily, weekly or monthly of a market, any given market, in its relationship to how much above, how much below a certain moving average. Now, if we want a long-term view of the market, we’re not going to look at a three-week average.

We’re going to look at like a three-quarter moving average or a three-year average. And we’re going to plot the bars in relation to that. And when you do that, you create an oscillator.

You get your price chart at top and right below it, you got your oscillator. And there’ll be times when they’ll be happy agreeing with each other in terms of a trend. But usually, almost always, before a trend changes, you’ll see the momentum not only weaken, like make lesser highs than a rising market, but break something that is structurally clear, meaning like a floor, not evident on price, but evident on momentum, where the market keeps coming down to the same momentum level, finally breaks it.

And if that chart were a price chart, most people would say, I’m going to be short. But most people don’t look at that kind of chart. And we find that it’s quite helpful on all timescales, short-term, intermediate, long-term.

And right now, we’re very much focused on the potential, and I think probably underway process of topping in certain key bubble markets around the world, US being one of the prime ones. We’ve already had some negative indications from S&P 500, but we’re still waiting on that leader index. We call it the leader index of the NASDAQ 100, because it led on the way up.

It did twice as good as the S&P did over the last 15 years in terms of ratio gain. And it will lead on the downside, just like dot-com top tech led the way down, too. So we’re waiting on it, and it has not broken our structures yet.

And when it breaks them, I think we will bang the table and say, that’s it. We’ve got a top in the US market. And I’m surprised you see weakness in the S&P and not in the NASDAQ, because it’s momentum.

Yeah, because you’re right. The NASDAQ hasn’t made that new high. The S&P nudged a new high two weeks ago.

The NASDAQ didn’t. But still, in the process of the last month, there was a drop in the S&P that caused it to break a very clear smack-you-in-the-face type structure on momentum of the S&P. And it’s still working below that level right now.

So it’s broken, but it’s not dropping yet, because the mama market, the lead market, NASDAQ 100, needs to break its structure. And it keeps coming down to it, down to it, but it won’t break it. All we want is a weekly close below a specified number.

At that point, as far as we’re concerned, it’s over. You’ve topped. And if you look back, actually, go back to July, I think I got the numbers right.

We’re up 2.5% in the S&P since July. Wow. Big deal.

And yet everybody’s screaming their head off about the grand bull market here. And meanwhile, look at other things since July, and you’ll be stunned to see what they are, way up, monetary metals in particular. Anyway, so yeah, that’s basically our methodology is to measure momentum in a structural manner.

Well, it’s interesting, too. You just mentioned about July. But in the first week of August, we had a big pullback in the financial markets on the unwinding of the yen carry trade.

Oh, yeah, yeah. And then here we are in the month of February, and we had some volatility associated with the whole new AI program or model called DeepSeek. But it looks like the markets, in both instances, the market has recovered quite well.

Well, some of it has. Microsoft hasn’t. NVIDIA hasn’t.

NVIDIA made a high, 153, it’s 116 or something right now. So there’s a bounce in some of the indices. NASDAQ’s not making a new high yet.

It’s close that far. But that doesn’t matter to us. What matters to us is the structure.

And usually, and I say usually, I mean, like 90% of the time, when you can find a structure on momentum that smacks you in the face, the chart, you look at it and you see a trend line, uptrend, let’s say it’s been used four times. When you see something like that or a floor that’s been used four or five times on momentum, now we’re talking, that’s called ripeness. And when something is that ripe on momentum, it usually exploits the structure.

It doesn’t wave goodbye to it and say, oh, thank you for being support. I’m going up forever. Usually, once momentum develops such clarity, it’s with intent to be used as a new starting gate, in this case, to the downside.

Well, I hope you are enjoying this interview with Michael Oliver. And here we are in the month of February, and it’s full of volatility. The markets are up one day and down the next.

And if you need help trying to figure out how to position yourself for the financial markets and how to look after your financial future, consider having a discussion with a professional financial advisor at Wealthion.com slash free. Once again, to find out more information, go to Wealthion.com slash free. Now, let’s get back to the interview.

And what sort of timeline do you get on this indicator? Once it’s screaming at you that the market’s lost momentum? Is it a week before, a month before? Could be a month or two before if it’s long term timescale. Sometimes it’s days before if you’re dealing with short term stuff. Right now, what we’re looking at, again, is longer term momentum of the bubble markets.

And by the way, there’s a couple other bubble markets, not China, not Europe. Like the Euro stocks, 50s up a double and a half in 15 years. Big deal.

That’s not a bubble. China’s only double where it was in 2009. Not a bubble.

You go to Sensex in India. S&P is up nine fold. It’s up 12 fold in 2009.

And it’s broken structure. And it’s been in sync with us pretty well. Inhales, exhales about the same time.

And it’s broken our key structure. Nikkei up six fold since 2009. It’s got a very similar structure that when you look at the momentum chart, you say, oh gosh, you better not break that.

It’s toying with it right now. In fact, it traded below the level last month. Didn’t close the month there, though.

And it’s trading back down near it this month. So when we break that NASDAQ 100 in the US, as far as we’re concerned, that’s it for the US market. Sensex has already said, I’m broken.

Nikkei is hanging in there, barely. Those are your three biggest bubble markets. And when they go, I bet they go at fairly good unison.

And that breakage on momentum, most price people won’t see it as breakage. When they look at the price chart, the numbers we have, for example, get down there, no big deal. Wouldn’t upset the price folks.

You drop another 5% or 10%, you probably get their attention. So momentum will lead. And what sort of pullback are you expecting? Bear market, not a correction.

I mean, we’ve got a 15-year-old bull market in the US. You go back in US history and find me one, okay? You know, even 2009 came from up from major lows in 23. I mean, 1929, a six-year bull, you’re like doubled or tripled.

The mid-70s, nice bull market. 2000.com, S&P was like a double to a triple NASDAQ more, but not 18-fold like NASDAQ is now. Also the 2007 top, mortgage crisis top.

That had come up from below in 2002. So five-year bull trend, okay? We’ve had a 15-year bull trend with dimensions that triple anything seen before. And you could say, well, that’s a good economy under Biden, whoever preceded him, Trump and all, you know, et cetera, last 20 years.

No, look at an M2 chart and you’ll see that the money flow, which is constant every decade anyway, money supply almost doubles every decade. This time it was more over the last 15 years. And two, look at a Fed funds rate chart, go back 50 years and look at the relative rates we’ve had on the short end of the market.

And you’ll see we’ve had zero rates for 10 of the last 15 years. Then they raised rates recently. But even at the peak of that recent race rate rise, it was still low, historically speaking, going back 50 years.

That’s a very low level. So we’ve had 15 years of effectively free money. So, you know, treat it like a hallucinogen, you know, inject it into your arm.

Oh boy, you know, free money. So I’m going to go out and invest this, that, or that, or build a new factory, you know, whatever mistakes are made. And when a bubble in a stock market reflects, builds in those mistakes, not just in the stock market, but in people’s daily lives, you know, let’s build a new home, dear.

Okay, we can afford it. Rates are low, you know, and all of a sudden, then you get caught in high rates and you’re pinched. So once the error gets exposed, that’s when the pain comes.

And almost always the pain doesn’t come in the data points we’re talking about now, like unemployment and so forth, until the stock market breaks down. Go back and look at 2000 top. It wasn’t until after that top that you really started to see negative data points.

2007 top, mortgage top. It wasn’t until like 2008, you really started to get punched with very bad data points. So the Fed can say all they want to, but all the economy look, job market looks great, et cetera, baloney.

First of all, it doesn’t look that good anyway. But once those data points shift, following the stock market top, you can bet that the central banks, not just ours, will go berserk. That’s what they’re made for.

Print us out of this crisis, okay? And they will print you out of the crisis. And of course, there’ll be a major beneficiary in that, monetary metals. And I want to talk about the metals, but before we do that, I just want to continue on with this discussion on the S&P and the NASDAQ.

You mentioned the tech bubble of 2000 a couple of times. And when the market peaked out in March of 2000, when I’m looking at the S&P now, it dropped 50% in the ensuing two years. The NASDAQ lost over 80% in the ensuing two years.

Do you envision that same sort of pullback here? Yeah, the dimensionality, the percent drop, it’s almost always 50%. And by the way, most bear markets get done in a couple of years. That’s not the problem.

The problem is usually the real pain for the public comes near the end of that. And it doesn’t get better when the market turns up again. And by the way, the Fed always cuts rates all the way down.

It doesn’t help the market. Once that bubble is technically broken, they can do whatever they want, print the money, lower rates, increase their balance sheet. It doesn’t help the market that’s breaking.

What happens is asset managers and investors perceive stocks to be high risk, low reward, and they seek something else. So all that river flow that the Fed creates goes somewhere else. And in 2000, 2002, 2007 through 2009, where were the two places to be? T bonds and gold, period.

Now, this time around, I don’t think T bonds will, I think they’ll participate on the upside, drop in yields. They’re already trying to come up out of the hole right now. And a company gold, which is already, of course, advancing.

But it won’t be the same because T bonds have technical problems of their own. Annual momentum is broken there. In other words, any rally you get in T bonds now, any drop in yields, it’s going to be temporary.

But that’s what happens. The money flows elsewhere. And that’s what we expect this time.

And technically, the technicals tell us, yep, expect it this time. So the poster child for the tech bubble of 2000 was Cisco. And once that market burst, I think it lost 80% to 90% of its value.

The poster child for this bubble would be NVIDIA. And it really exploded since November of 2022. But where do you see NVIDIA going? I don’t know.

I look at some charts and 50 bucks makes sense to me. But the main point to make here is that remember the dot com top. The deal was then that, God, internet is going to change our life.

And boy, you know, any statements made back then about that were so right. In fact, they were under right. It changed our life in more ways than even the max bulls back then thought it would.

And yet Nasdaq went down 82%. And it took 16 years for the Nasdaq 100 to come back up to and exceed the 2000 price high. Now, 16 years means money degraded during that time in terms of real buying power.

So that was only a nominal return to the old high. Not a real return. And from an investor’s point of view, you know, a buy and hold type guy.

That was a wasteland. That was half of an investment lifetime, totally zero, if not negative, unless you got out at the top that we said is a major sell in January 2000. And for Nasdaq, it peaked a few months later.

The S&P had actually made a new high in August, not great new high, but it persisted. So it labored for quite a while up there, despite broken long term momentum. Just like we’re laboring now, you know, it’s not really going up a lot.

We’re just sort of fiddle farting around. But we have now AI is the story. Well, sure, it’s going to change your life probably in more ways than we can imagine.

That doesn’t mean anything. The problem is it’s a bubble. It got overbought, overpriced temporarily.

And it’s going to need to reorganize again. No, the reality is real, but the pricing isn’t. That’s the issue.

I think one of the other things that’s somewhat unique about this current environment that we’re living through is how many different bubbles there are. And if you just look at the last five years, we’ve had a massive bubble in cryptocurrencies. Of course, everybody knows about Bitcoin and Ethereum, but there’s hundreds of other ones.

I’m thinking about NFTs, hundreds, thousands of NFTs. Remember the one that was sold by the artist known as Bipple and sold it for $69 million through Christie’s. I don’t know what’s going on with those NFTs now.

I think they’ve all gone to zero. And now we’ve got this thing going on in AI. There’s just so many.

Oh, look at all the meme coins, right? Like, it’s just craziness. Yeah, yeah, it is. And as far as the cryptos go, we do analyze them as well.

Bitcoin and Ethereum in particular. The two biggest markets in terms of volume. And the one thing we’ve noticed about Bitcoin, especially over the past two years, is that it moves step by step, sometimes even day by day with the Nasdaq 100.

And so if one of them is a bubble, the other might be too, because it’s behaving not like Bitcoin is in some different world. It doesn’t behave like gold. So it’s not like, oh, it’s competing against paper fiat money.

No, it’s moving with the Nasdaq 100, which means possibly an emotional bubble type market, just like Nasdaq 100 is. They’re in sync. And so when we look at the long term technicals of Bitcoin, we see a totally different picture than what you see on a price chart.

We see one that’s very vulnerable, just like the Nasdaq 100. So it wouldn’t shock us if you break the Nasdaq, Bitcoin’s top two at that point. Yeah, it makes total sense.

It’s a risk on trade. So you think you see weakness in the S&P. You don’t see it yet in the Nasdaq, but it’s getting close.

When do you see it happening? Can you put a timeline on it, like in the next three months, the first half of the year, the back half? No, I suspect it’s in this quarter and possibly very soon. I mean, I don’t think the S&P broke it for nothing. I don’t think the Sensex broke its stuff for nothing.

Now, once you break something, it doesn’t mean you can’t have a counter trend move. In other words, you can go down in a market, even in price, and you can still have a rally, but it’s a negative rally. I mean, it’s in a negative context.

So you can always get counter trend rallies. So even though the Sensex broke vastly its structure, it could spend a month now trying to go back up and bump the floor of the momentum structure it broke, which would tease people, make them think, oh, it’s nothing broken. You know, but when you break the S&P, you break the Sensex, you got Nasdaq dancing on a glass.

When I say glass, I mean a line you can see very easily. And when you got Nasdaq sitting on a level that is unbelievably used and used and used on momentum, it’s slightly ripe, mean and soon. And Michael, what do you see the catalyst as being? The catalyst is already there.

In other words, you don’t need one. I mean, yeah, we got this new thing with NVIDIA, you know, being hit by this Chinese thing, but AI is hit. But you don’t need that, really.

The catalyst is what’s already happened. In other words, if you built a bubble and compounded over 15 years, real world errors that are reflected by that bubble, not just overinvesting in the stock market, but other things related there too. And you’ve made financial errors as a company, as a family, state government, federal government.

And suddenly those errors get exposed and you have to put the fire out and the fire catches, you know, it takes over. In other words, the reasons for the drop don’t come. They’re already there.

It’s just a matter of technically breaking that market and exposing the errors underneath the surface. So that’s the fundamental, I think, that goes into play. And then usually what happens after that is you then get the headlines.

Remember 2008 and 2009? Oh, my God, you know, Bear Stearns. Oh, my God, Lehman Brothers, you know, the errors exposed. It wasn’t because of that happening then that caused the break.

It’s because of the things that were built up over the prior years. So that’s the way we see things. So we’re not really that concerned with something new to having to cause this.

It’s already there. You know, I feel sorry for Trump. He stepped into this.

Not much he can do about it because it’s a bubble bigger than any we’ve ever seen. And when it breaks, I don’t care who the president is, you know, it’s going to look bloody and it’s going to cause panic. And I think he will accommodate because already he said on the other side of his intellectual ledger, one side appears to be free market and the other side appears to be fed, cut rates, make money cheap, artificially, you know.

And he’s already told him cut rates. Anyway, it’s a it’s a crisis to come based on factors that have already been built into the market. And those factors here, it sounds like you’re alluding to the debt levels that the federal government has taken on that debt levels.

Everybody’s taken on. I mean, right now, you know, you hear the ads like I drive down the road, my Toyota 4Runner and a serious radio on it, whether I go to Fox News or CNN, the ads about half the ads are we can help you with the IRS. I thought everybody’s in pretty good shape.

What does everybody need IRS help for? You know, they’re coming after you. What for? You can’t pay your taxes. So if everything’s so great and then also debt consolidation companies will come in and consolidate your debt.

Was everybody in debt? No, I thought everything’s great. OK, anyway. Subtle side things, you know.

So if I was going to play devil’s advocate about the federal debt levels and it’s currently at thirty six trillion dollars, I believe the deficit is deficit is around six to seven percent of U.S. GDP. But we’ve had these debt levels for decades now. I’ve heard people talk about debt levels and it keeps going up the numbers.

I believe when Trump came into office in 2016, federal debt was around 16 trillion. Now we’re at 36 trillion. It doesn’t seem to make much of a difference.

The economy keeps moving along. And even if you look at it as a percent of GDP, I think it’s around 125 percent. Japan is running a debt to GDP of 200 percent.

Yeah, well, there’s a point at which these things that are bleeding obvious finally pay. And sometimes it’s an external factor that might cause it, not that the focal point itself, not the government debt itself, although that’s technically a problem, by the way. Let me go back here in 2020.

T bonds were up at 170, 180, you know, and in October 2020, we turned long term major bearish because we broke annual and quarterly momentum and the market collapsed. T bonds yields went up to 2022. And we’ve done this for three years now, going into our fourth year of high yields, low prices and T bonds, regardless of what the Fed does on the short end.

T bonds didn’t rally when the Fed cut rates. T bond yields went up some more. So they’re beyond the Fed’s control.

And that’s a choking factor. It’s just there’s no way around it. And it’s anyway, that’s so the government debt issue.

And also what helps expose that as a problem is when you break the stock market, is when you bring pain to the public. You’ll bring pain to the bond market as well. I mean, it’s not, you know, sometimes it isn’t the thing you’re looking at that seems to cause the break, although it’s got its reasons, justifications, but a provocation from some other market category that’s overly done.

And so when it breaks, the central banks have to go berserk. Well, that’ll further destroy the debt. You know what they can do? Spend, spend, spend, print, print, print.

Well, that further destroys the underlying value of the real money unit. It destroys the underlying value of the T bond. It’s expressed in dollars.

The dollars depreciate. You know, I get the point. So it’s a lovely crisis that’s been made for decades.

And it’s finally reached a point where, you know, a little pinprick could cause it to come unraveled. So, Michael, let’s make the assumption that the market does top out here in the next couple of months. How do you think investors should position themselves going into this? Within the stock market, there are areas that look safe and don’t look at all like the stock market.

Forget the gold and silver miners for a minute. We’ll get on that later. But in the commodity related area, commodities look to us like they’re starting a second wave up.

Now, the first wave came from a low in 2020. Bloomberg Commodity Index then traded below 60. Put that in context.

Bloomberg is a broad commodity index, very well weighted. It’s not overly energy and so forth. While gold doubled in price from 2015 to 20, commodities continued down.

Not precipitously, they collapsed into 2015, but they bled for five more years to the summer of 2020. In October of 2020, we put out an explosion signal, commodity explosion, and commodities doubled in price. But even from that low below 60, go back and look at where commodities were in 2008.

230 something when the Bloomberg became, it made a low at 60. And when they went to 140 in early 2022, most of that occurring before the war, by the way. Even at 140, it was still very cheap compared to the 2008 and the 2011 price highs.

And everybody was screaming, commodities are off the page. No, they’re just having a hiccup off of levels that are so low that it’s ridiculous. It was they were priced off the page as a category.

They’ve since pulled back to 100 on the Bloomberg. For about two years now, they’ve done this. The most boring asset category out there, three or 4% up, three or 4% down.

It’s just absolutely stone cold to sleep. And it’s reflected in most of the markets within the Bloomberg. Last month’s close on the Bloomberg caused us to put a thumbs up on quarterly momentum of the Bloomberg Commodity Index, meaning it’s no longer asleep, it’s waking up.

It looks like it’s now ready to join gold. Something it hadn’t done between 2015 and 2022. You know, where it went down through 2020 and it went up when it actually went up from late 2020 to early 22.

Gold was going down during that time in a range. So it was totally opposite. But right now, I think commodities are about to join in sync with gold.

What does that mean? In the stock market, you’ve got your energy stocks. Everybody knows about that. They look poised to participate.

And there’s also ag related stocks, agricultural related. There’s an ETF called Moo, M-O-O. It contains companies that produce agricultural related products, including fertilizer and so forth, tractors.

And it looks to us like some of those categories will go up nicely. And accompanying the commodity upturn. And they’re safe places to be within the stock market.

Not what we call the normal stock market, but still the stock market. But we think that 2025 is going to be the table pounding year for gold and silver miners. So I’m not familiar with that index, the Bloomberg Commodity Index, but what would be the top five commodities? Well, it’s well balanced.

So it’s got base metals. It’s got gold and silver in there. It’s got energy, natural gas, oil, gasoline, and the ag sector.

It’s got soybeans, corn, wheat, and some others. For example, it’s not been distorted lately by cocoa and coffee. Two commodities have gone berserk on the upside.

The Bloomberg hasn’t because they’re not even contained within the Bloomberg, unfortunately. So they haven’t distorted it in some upside way. We look at the grains, the energy, and the major subcomponents, copper, for example.

And they’re all pretty much in sync with what we see in the Bloomberg. The momentum action looks like they’re turning up with the Bloomberg. Corn’s already broken out.

Beans are on the edge. Wheat’s close. We happen to think, we could be wrong, but I think that this time around, this next leg up, grains will be a leader within the commodity complex.

Energy tended to lead the last time around, 2020 to 2022, on a percent gain basis. But I think the grains will do better this time. And it doesn’t really matter, but basically the broad commodity complex, I think is going to be one of those alternative asset classes, that when the money starts to flow out of the broken bubble, it’ll flow somewhere.

And in the late 70s, we had a global recession. They call it stagflation, right? Gold exploded during that time, yet we had a global recession. Commodities exploded.

Stocks were a total wasteland. Stocks were a wasteland for about 15 years, where you couldn’t, you know, it just went sideways. You could draw a line.

But commodities exploded during that period, while stocks were under pressure. And I think they’re about to join gold now, in which case within the stock market, look for commodity related sectors. Okay, so let’s talk about gold.

You said you’re very bullish on it. Where do you see it going? It’s currently trading around 2,800 bucks an ounce. Yeah, we turn bullish based on, first off, we’ve turned bearish and bullish on gold over the past three decades.

We’ve been around since 1992, MSA. And we call major tops and bottoms. And in 2011, a couple months off the high, gold dropped just enough, dropped in price, didn’t disturb anybody.

But on our long-term momentum, it broke a major trend structure that went back several years. And yet on price, you couldn’t see that trend line being broken because it wasn’t there, it was on momentum. And so we turned major bearish on gold.

And we had to explain to our subscribers for a year because it dawdled, gold after topping dropped. And then it went sideways through early 2013, confusing both sides of the market. Is it bullish? It was holding, but it never could get back to its high.

And finally it crashed. So we can be bearish on gold. We turned bullish again in February of 2016.

And that was two to three months off the bear low. Bear low was in December of 2015 at 1,050. We turned bullish at 1,140.

And nothing on annual momentum of gold has caused us to not be bullish. So we’ve had these zigzags in price, in two-year wide, two, three-year wide range in price with 2020 to early 24, where it went sideways in a 15% range basically. Nothing has caused us to be bearish except to note that these are just pauses or corrections within an ongoing bull trend.

If you go back and look at prior bull trends in gold, you’ll see that often near the end of the move, the last year of the move, let’s say, suddenly price goes berserk. And in particular at that time, you’ll see silver go berserk to gold, where you’ve had this arm wrestling struggle on both the monetary metals. Two steps up, one step back for gold, three steps up for silver, two steps back for silver, that type of process, which is very tough to weather, but nevertheless ongoing.

And then suddenly in that last year, snap, it takes off. And I think we’re at that point now. And I think one of the things that will assist in sparking that acceleration in the advance, so a couple up, two down, now it’s gonna be 10 up, then one down, that type of thing, is the breakage in the stock market bubble.

Because that money will then seek a new place. And any asset manager with his head screwed on, even now he should realize it, gold’s been beating the stock market. It beat it last year.

It beat it last month handily. And yet there’s nobody pounding the table and headlines on CNBC or Financial News Network or on Fox News, Business News, about how gold has beaten the stock market. Okay, there’s no emotion there.

And I love that. But that’s where I think we are. We’re on the cusp.

But then the issue is, okay, well, if the mama metal’s going up, gold, what about silver, which everybody thinks underperforms gold? And point of fact, over the last 12 months, close of January 24 to close of January 25, silver beat gold, percent gain. Gold miners beat gold and silver. Nobody would believe that.

They think, oh, no, they’re dogs. But no, on a percent gain basis, and even last month alone, miners were at the top, silver was next, gold was third. And then you had some minor upticks in the stock market.

But I think the miners are about to be the place to go. And it’s not just because they’re dirt cheap. They’re dirt cheap, not only in price, but in terms of their spread relationship to gold, price of the mining sector relative to an ounce of gold.

You can plot that as a spread. And the price of, let’s say, the GDX index versus the S&P 500, go back several decades and look at that relationship. And you can see that once the collapse occurred into the bare low of late 2015, that spread also collapsed, meaning their relative value to gold, relative value to the stock market.

But since then, to be precise, GDX and the XAU index, which we look at goes back to the 1980s, the XAU index is actually up more since it’s 2015 low than was the S&P at that same month, December of 2015 to its present level. XAU index has beat it since 2015. Tell somebody that and they’ll chuckle.

Okay, but it’s true. But even with that slight outperformance to the S&P and to gold, by the way, XAU index has handily beat gold in that nine-year period. It’s still in this range on this long-term spread chart where you look at the spread, it collapsed, and it’s in this little box way at well low levels on the spread chart.

And if you looked at that as a price chart, you’d say, it’s like a base. Something’s real cheap, doesn’t wanna go lower, it’s going sideways. And treat it as such.

And we think there’s technical reasons to assume it’s gonna come up out of that base. If it does, it argues to us that the gold miners, I’m using GDX in this case, relative to gold are likely to triple the upside gains of gold once they break out of that base. Where as gold explodes, silver will, but the miners will go berserk.

Why? They’re cheap, they’re a stock. Some people don’t like to trade silver bullion ETFs or futures. They’d rather be in something in the stock market.

And some of these gold and silver miners offer pretty decent returns and earnings. So I think a lot of that money that leaks out of the stock market, some of it will seek positions in the tiny little gold silver mining sector, which will goose it. And that’ll be a reflection that one, the process of upside in gold is accelerating.

And that two, investor interest in that sector is suddenly woken up. So if we get this pullback in the S&P and the NASDAQ, as you have anticipated, where do you see gold and silver going if you get this mood of, I think what you call berserk? Yeah. Let me tell you this.

It’s hard to predict that. I’ve got some fundamental friends, names you know that think we’d go in the 20,000 zone gold. Okay.

And it’s not because gold in and of itself, gold is reflecting the ongoing collapse in the real value of fiat currencies. And by collapse, I mean the doubling in the quantity of each money unit over a decade. And that accelerates during times when the central banks that print those things go berserk trying to save assets that it wants to save.

Doesn’t care about commodities, heck with those guys. Farmers can go broke, but we don’t want the stock market to collapse. And we don’t want the debt related sectors in the stock market to collapse.

So they’ll go berserk and that’ll help gold. But if you go back and look at the last 50 years since gold was legalized in the US, there’s at least two times you can make a case for three, but let’s just take the two. Gold made a corrective low at 103 bucks in the summer of 76.

It had been at 200 when futures came on board. It had a bull market at that point. Futures came on board January, 1975.

It collapsed 50% into the summer of 76 to 103. From the mid 76 low to early 1980, they went up to 850, okay? Eight fold move. Much of that in the last year.

In fact, the latter half of 1979. Silver went berserk during that time. Then the next bull market.

Gold pulled back into the 2000 year, 2001 and two, and it based at around $265 an ounce. It went from there to 1920 by 2011. So it took it a decade.

But in the last year of that move, it was an acceleration in silver and gold. Dramatic. Where it wasn’t, it was an arm wrestling, it was just vertical.

That’s two eight folds, okay? Okay, well, you put that on a log scale price chart. You know, log scale, not arithmetic scale. And there’s two moves of equal size.

And you say, well, okay, let’s do it again. Just another one. We’ve done it twice before.

Let’s do it again. That’d give you $8,000 gold. Why? Because our bear low was 1050.

And to even get to 8,000 is just to say, oh, we’re doing it again. It’s not anything exceptional. But when you look around the horizon with the other asset categories that are in extreme jeopardy, and likely to expose such soon, the world is different than it was then.

The crisis that we faced then was trivial compared to the one we potentially face now in terms of, you know, upending of things, institutions, notions, concepts, institutions, et cetera. Gold could go crazy. And, you know, 8,000 may be a joke, you know? So when I put out that 8,000, people say, oh, Oliver’s predicting 8,000.

No, I’m not. I’m just saying it’s done it twice before in its routine. And then there’s another thing I want to… Go ahead.

Oh, I was just going to ask you if gold goes to 8,000, where is silver going? Excellent question. Go back and look over the last 50 years, and we plot a chart in a recent report that shows this. The spread relation between silver and gold.

Now, we don’t do it the ratio way that most people do. We divide an ounce of silver into gold and express it as a percent. What percent of the price of gold is an ounce of silver? Okay.

If you go back 50 years and plot a bar for each year, graph bar, what’s the high that year of the silver spread versus gold? You can see that in 20 of the past 50 years, silver has at least been 2% of the price of gold at some point during 20 of the past 50 years. Sometimes it’s been two and a half to 3%. It was one time it was six and a half percent, but let’s eliminate that one.

Let’s assume you get up to two is sort of like a norm. Two and a half is no big deal. Even 3% is possible.

Okay. $8,000 gold. Okay.

What’s 2% of $8,000 gold? Okay. You know, silver is like tripled, quadruple, quintuple from where it is now. Okay.

If silver merely went up to 2% of the price of gold and gold were 8,000 bucks. So the potential gain and silver is cheap right now in relation to gold is 1.15%. Not 1.5, but 1.15% the price of an ounce of gold. If it just said, oh, I think I’ll go up to my normal level of 2%.

Wow. That may look small on a spread chart, but it’s enormous in terms of the upside price dynamics that silver would expose show itself. While gold’s going up to 8,000 or wherever, silver would beat it handily.

And I think that spread is on the verge of breaking out. Meaning if you go back to 2020, 2021 on that spread, silver was at a high in relation to gold. Not up to the two and a half percent, but still.

It cascaded down in performance where you could plot it on a chart. It’s like a price chart. It’s a spread chart.

You get up to about 1.6%. We start to break out and you get over 1.32%. Still cheap in relation to that 2% level. And you have a massive breakout on the spread. So we’re not just watching the momentum and the price of gold and silver, we’re watching the relationship.

Because whenever that spread shifts and breaks out of a downtrend, favoring silver at that point, it also translates into accelerated price action by both metals. The difference being that silver’s far more. So I think we’re on the cusp of that.

So again, that’s another thing we think will occur in 2025. Not only will the gold miners likely reassert themselves, gold and silver miners versus gold, but silver will too in a big way. So those are two areas we’re watching closely for best place to be.

So I’m a big believer in gold. I always have an allocation toward physical gold. And then sometimes I might play a producer and a royalty company.

I stay away from the silver companies. I’m always frustrated with the lack of movement in the silver games. And as you know, the all-time high on the price of silver is 50 bucks.

When was the last time it was at $50? Twice in its history. It briefly traded up to 50. That was 50 years ago and then 2011 peak.

Okay. So everybody’s looking at 50 bucks and probably you get through 50 and the whole world’s gonna wake up. But they’re a little late, I would say.

But they’ll wake up. We think the 50 buck dual highs up there are a joke, meaning they’re not technically important. And yeah, gold’s above all those comparable highs.

But when silver reasserts itself in this next phase, I think not only will 50 not be an event, there’s not even be resistance, but you’ll blow well past it before you even take a pause. So in other words, what I’m arguing for is once we reassert ourselves as we’re doing right now, in fact, this past several weeks, gold and silver are, in terms of coming up off the recent corrective lows. This next up won’t be like the other ones we’ve seen over the last year, where it was like, you know, like I said, three steps up for silver, two back, then three steps up.

Gold, it’s two up, one back, that type of thing. It’ll be a little gush on the upside. And I think at that point, when you will see the one, the spread shift, favoring silver versus gold, miners versus gold, but also the silver miners will outperform.

In fact, personally, I only own silver miners. I do own a GDX double ETF, but I don’t own any gold miners as such. I own only silver miners.

I think they’re the place to be. And they’ll beat the gold miners as silver beats gold. There’ll be a reflection of that.

But I think these dynamics are set to happen and we’re literally on the cusp. But I think, again, that one thing that will help provoke it, punch a little hole in that bubble and that money starts to flow. And anybody who can do their math will say, hey, boss, you know, the trading room guy from the back, go up to the manager of the fund and say, gold’s beat the stock market over the last year.

I don’t know if you know that. And the gold miners have beat the stock market over the last year. I don’t know if you know that.

Suddenly, whether he likes gold miners or not, that asset manager is going to say, let’s allocate some money to the gold and silver miners. And it’ll be like grabbing a wet bar of soap. A couple of points I want to make.

First of all, with regard to silver, I think a big issue has to do with the fact that 75% of all silver is produced as a byproduct. There’s very few pure silver producers. So you have these massive base metal companies like Codelco, for example.

They’re one of the world’s largest producers of silver. It doesn’t matter if it’s trading at five bucks or 125 bucks. They produce it and they blow it out onto the open markets.

And then you get the same thing happening with gold companies, royalty companies. And I think it’s just overproduction and there’s not enough demand for it. Well, actually the production has been flat for years, even though silver price has gone up in the last several years a lot, doubled more than that.

The production levels have not increased and demand has, particularly Chinese demand. And for solar panels, they produce 80, 90% of the solar panels and the photovoltaic cells in the solar panels have silver in them. It’s a central ingredient.

And it’s cost factor of silver doesn’t really cause the cost of the solar panel to go up much because it’s such a small amount of silver, but it’s such quantity that suddenly they’ve become the overwhelming component of new demand for silver and it’s outpacing production. And so, yeah, you’re right. Most of the silver does not come directly from silver miners as such, but it comes as a by-product of copper production and so forth.

And therefore, the rise in silver doesn’t necessarily provoke the base metal miners to produce more silver because their main job is to get copper out of the ground or some other metal. So the rise in silver doesn’t incentivize them to produce more metal. Silver miners, it would, but it still doesn’t cause a big increase in the production.

Yet we have this ongoing and year over year increase in demand for silver coming from, like the Chinese and from solar manufacturers, which you see globally speaking is huge because, I mean, the Chinese are selling these things worldwide to Asia and Africa. Developed nations, continents that need electricity and they don’t necessarily have a public power facility down the block with a wire under the ground. You know what I mean? So solar panels are essentials.

One other point I would say you made mention of the fact that you think we’re going to get big outperformance in gold and therefore the gold equities are going to kick in. And I think one of the things we’ve really seen in the last 10 years is that a lot of these gold miners and a lot of the executives that are running these companies are poor stewards of capital. And I’m just going to pull, I’m going to look at Newmont, for example, the world’s largest gold miner.

In 2024, when the price of spot gold was up 25%, Newmont was down on the year. Barrick also down on the year. And I think that’s another big issue.

And there’s such a divergence when you look at these gold producers, you know, you have some of those big names that are down on the year and you have others that are up. Yeah, all the time. Yeah, no, I see that.

And that is an issue. And, you know, companies are different. And despite their bigness or their smallness, sometimes the small ones are good bets.

Depends on their own corporate fundamentals and the price of the metal. But, you know, if you look at Newmont as a performer, yeah, it’s been underperforming lately. It dropped from the mid to upper 50s down to under 40 recently.

And right now it’s 42, 43. But if you go back over the last 10 years, you’ll see there’s points where Newmont vastly beat gold, vastly beat the gold miners. And then there’s times it vastly underperformed.

So it’s an oscillating situation. It’s not really a constant. There’ve been times when Newmont was the place to be.

And right now it looks to us like on a spread basis, measuring relative performance. And we do that every month. We go through the gold and silver miners, the major ones, especially.

And look, how are they doing versus GDX? We don’t mean are they up or down in price, but on a relative basis, are they going down less than GDX when GDX pulls back and they’re going up more than GDX when GDX goes up? We’re looking for outperformers. And this is a case with any stock market sector. You’re gonna find stocks within any sector that are beating the sector.

And then for a couple of years in the trend, they’re beating it. Suddenly they go to underperform and the sector keeps going up. So it’s a constant process of doing that type of assessment.

And we do that once a month. And right now, Newmont, for example, and Barrick are both in the sewer, so to speak. But they’re stopping.

Meaning the spread is starting to cease its decline that we just had. And it looks like they might be basing in terms of relative performance. So they wouldn’t surprise me, didn’t you? In the next year or so, they come back out of the hole again and become leaders.

So it’s not a constant. Well, that was a great discussion, Michael. And I just want to summarize a few of your points.

So you see some weakness right now in the S&P, but it hasn’t been confirmed yet by the NASDAQ. The NASDAQ is still pretty strong. But you do see both markets topping out here in the coming months.

You’re very bullish on gold. You’re even more bullish on silver. And you see significant moves coming in both of those asset classes in the coming months or years.

And you’re also bullish on commodities when you look at the Bloomberg Commodity Index. Yes, that’s true. So in other words, we’re shifting.

Gold has been performing well versus the stock market. You know, you go back and do the measurements. You know, it’s not what you think it is.

It’s been beating the stock market for a good time. Especially the last couple of years. Especially last year.

But the miners have been underperforming and the commodities have been underperforming. But things change. And that’s what we measure.

And right now it looks like that change is about to occur. Well, I hope you are right because I’ve been long for a couple of years now. And I’ve been taking a very defensive stance.

And it’s cost me a lot in terms of performance. Just given the big moves we’ve seen in both the S&P and the NASDAQ. Michael, I want to thank you very much for being with us today.

If somebody would like to learn more about you and about the services that you and your firm offer, where can they go? OliverMSA.com. We explain our methodology, give you a lot of historical back reports of ours to show what we said at certain times, why we said it. You can see the momentum action of a market versus what everybody else sees. And you’ll get an understanding of what we do and why it’s different.

And you can request sample reports. Michael, once again, thank you. Thank you.

As Michael has stated, he’s very bullish on the price of gold with an $8,000 target price. And if you would like to learn more about gold and how it can benefit your portfolio, consider going to our sister company, hardassetsalliance.com. Once again, hardassetsalliance.com to find out more information on gold and how it can benefit your portfolio. Thank you very much for being with us today.

And I look forward to seeing you again soon.