Why The Next Recession Will Change Everything (Uncut) 02-18-2025

STOCK MARKET CRASH: Why The Next Recession Will Change Everything | Don Durrett

And I actually think gold is sniffing that out now, and it’ll stiffen out in advance. So to make money in the miners, we don’t need a default on the bond market. All we need is fragility to where people recognize that that’s where we’re heading.

In other words, people catch up to me and say, they’re gonna default, it’s a matter of time. And that’s when people start dumping bonds and it starts spinning out of control. And I think this recession is right around the corner, is the trigger for all of that.

Hello, and welcome to Soar Financially, a channel where we discuss the macro to understand the micro. My name is Kai Hoffman, I’m the Ed.J. Iron Mining Guy over on X, and of course, your host of this channel. Really appreciate you joining us for a discussion with Don Durette.

He’s the founder of goldstockdata.com and somebody we haven’t had on in years on this channel. He was one of my first macro guests, I believe, here on Soar Financially or SF Live, as we called it back then. And I’m really looking forward to catching up with him, discuss the macro situation.

What is happening in the markets and what is shaping and driving gold and silver prices right now? Why is gold rallying like crazy? Is it going to continue? Is there an end in sight? And what does it all mean? Like, let’s put some context around that. That’ll be the main focus of the discussion today. And I’ll also ask my guest about the recent Q4 results or year-end results of the major miners.

Curious to see if he has some thought or some input there and what he thinks the majors are performing right now. So, lots to discuss, lots to digest, of course, as well. And before I switch over to my guest, quick reminder, kindly hit that like and subscribe button.

It’s a free way to support us and we tremendously appreciate it. Thank you so much. Now, Don, it’s great to have you back on the program.

It’s good to see you again. Thank you so much for joining us. Yeah, Kai, it’s great to be back on.

It’s been a while. It has been a long time, yeah. You were in Vancouver as well, but I missed you there.

I was only at the conference for like a day, sadly. But I saw there’s a video up of your presentation, I think, as well on the Cambridge channel. So I still have it.

I have it cued. I haven’t watched it yet, I have to admit, but we could probably put a link down to it below as well so people can get some more details and some slides attached to it as well. Don, but as I said, we have lots to talk about.

Maybe we’ll start with an opening question. Very basic, but all-encompassing. What’s your assessment of the economy and the financial markets right now, Don? Well, we’ve been in a 15, now it’s 16-year bull market and the stocks, S&P.

We got out of the recession in June of 09, but so maybe it’s, so 09 till 24 is 15, 2010 to 15. So I think they’re saying it’s going on 16 years. I think it would be 16 in June.

Maybe it’s 15 and a half. And so we’re kind of, we went through this COVID mess from 2020 forward and we inject a lot of money. And I think that kind of messed up the business cycle, kind of extended this rally injecting all that money because in my opinion, this economy is kind of built on sand.

It’s not really built on a real strong foundation because since 2000, I mean, we have to admit this economy really hasn’t been able to grow on its own. The only way it’s really been able to grow is through manipulation by the Fed, lower rates, injecting money. And if you go back to the 1990s, that was really the last time that the economy was really kind of had a solid foundation, was doing well.

And so I got into gold and silver because I just believe that the direction that America was heading in was untenable. And I still believe that. I actually say that you shouldn’t invest in gold and silver miners, unless you believe that the US government is gonna default on its debt.

Now, that’s an extreme, but that’s why I’m in this. And so I actually believe that the recession that’s coming, I don’t see how they can avoid it. And I think we can go into details on why I think we can’t avoid a recession.

That when we go into this recession, because we’ve been manipulating the economy for 15 years plus, you could say we’ve been manipulated for 25 years, that it has a lot of misallocations of capital, if you will. And so, for instance, this government’s, a lot of it is like government spending. Like right now, the GDP is supposed to be between two and 3%, but we have a budget deficit of 2 trillion, which is way out of the norm.

Without that government spending, we wouldn’t have this kind of growth that we have. So it’s kind of misguiding us on what’s really happening here. And so I think that when we do go into a recession, and it could happen fast, I think it could happen as soon as, begin as soon as March.

I mean, that’s kind of the window for me. It starts to open there. It depends on how the markets react to Trump’s tariffs.

But on the whole, I think that once this recession begins, that it doesn’t end. I’ve written some books on this. I’m very pessimistic.

I actually think this is the end of an era. And we’re starting to see it like with the BRICS nations, how they’re all aligning in the South, kind of against the US. We’re seeing this historic shift, if you will.

And I think that once this recession begins, it’s gonna be all downhill, if you will. I’m kind of an outlier in that regard about how pessimistic I am regarding the economy. For me, I think the whole foundation of it all is the bond market.

And so when you’re bought right now at a $2 trillion deficit, we’re borrowing 100, if you divide that by 12, an average of 166 billion every single month. Now, who’s buying that? Well, foreigners, in many respects, have kind of left the auctions. And not completely, we don’t, but they are definitely declining.

So the US is having to pick that up. And I don’t think the US, especially when we go into a recession, can handle 166 billion a month. And that’s when everything, that’s when the bond market begins to become fragile.

Now, I saw this coming years ago, many years ago. This was the ultimate outcome that, and this is how it will unfold, in my opinion. It’ll start with the Fed monetizing the majority of the auctions.

Now, right now, I think in the 10 year, 20 and 30, they’re probably already, they’re saying they’re not in there buying, but I wouldn’t be surprised if they are. But as they, as the Fed, this is how I think it’s gonna unfold. As they become the biggest buyer, and their balance sheet starts getting, expanding out, that it’ll become an untenable situation.

It’s not gonna be like Japan, where Japan was, their central bank was, they basically would be able to buy all the bonds. I don’t think that the Fed will be able to do that. And so, at a certain point, I think it’ll be around 2027, the U.S. Treasury and the Fed will have a meeting, and they’ll basically say, we can’t do this anymore.

So, basically what that means is, is that the Treasury will not be able to borrow what it needs, and that’s the end game. And I actually think gold is sniffing that out now, and it’ll stiffen out in advance. So, to make money in the miners, we don’t need a default on the bond market, all we need is fragility to where people recognize that that’s where we’re heading.

In other words, people catch up to me and say, they’re gonna default, it’s a matter of time. And that’s when people start dumping bonds, and it starts spinning out of control. And I think this recession that’s right around the corner is the trigger for all of that.

Now, lots to unpack in there, Don. So, I really appreciate your introduction there. Maybe we’ll take it down chronologically, sort of how you mentioned the points as well.

We’ll focus on gold and the recent price moves here towards the end of the discussion, or later on in the conversation, maybe not towards the end. But we have to follow up, like recession, maybe we’ll start there. It’s been a topic, it’s like, I’m not even sure what the euphemism for it is, but we’ve been forecasting it for the last two and a half years, it has yet to show up.

I think deficits are to blame for that, like overspending by the government, or just kicking the can down the road by throwing too much money at the problem. But the Fed, and it seems like the Senate Banking Committee is celebrating itself for a no landing, or very, very soft landing scenario. Is that naive? Well, actually, this is a very pertinent question thing.

They asked Powell if he thought, when it was a Wednesday, they asked him if he thought that it was a soft landing. He was unequivocal with his answer. He didn’t say maybe, he didn’t say possibly, he said no.

And because he recognizes that we’re not out of the woods here yet. We’re in a dicey situation. And I don’t think for a second we have a soft landing here.

Now, right now, the leadership on the S&P 500 has kind of faded. Right now, for this year, Meta’s the only, of the MAG7, Meta’s the only one in a green for the year. And I don’t see anybody taking over leadership there.

We’re not talking about new leadership, right? So I think that that’s an omen for this market to run out of gas. And once it runs out of gas, I don’t see, the Fed is not gonna be able, I don’t believe, to fix it like they did in 2020. Because they’re not, the problem is, if they lower rates, that causes inflation.

And if they print money, it causes inflation. And inflation’s our big problem right now. Now, we had the CPI come out this week at 3%, which is higher than people expected.

Today, we had the PPI come out at 3.5, higher than people expected. So inflation isn’t going away. So, and I’ve been saying this, that Powell has already lost the battle.

He can no longer be proactive. He can only be reactive, which is the first time ever. So all the Fed has now is a options choice.

Do we fight inflation and basically, you know, and the economy goes down, or we go after the economy and then inflation goes up, which eventually pushes the economy down. In other words, we are in this, so we’ve had this 15, 16 year run here since June of 09. And it doesn’t run forever.

And that’s where you, you know, you need some type of a reset. Now, it’s starting to get really complicated. Trump comes into office, he wants to lower taxes in order to stimulate this economy and keep it going, but he can’t because he already cut taxes and Biden never raised them.

So Trump already has low taxes. There’s nothing he can really do on the tax front. He can do it a little bit on the margin, but when you have low income taxes and low corporate taxes already, and you have a really high budget deficit, so he would have to do some fairly radical tax cuts on top of what we already have.

So they’re gonna, they’re actually, what they’re gonna do is they’re gonna put his tax, they’re gonna make a, they’re gonna push it forward, maybe make it permanent. They’re not gonna lower them very much because if they lowered them very much, it would be fairly radical. Plus, if he lowered them significantly, the budget deficit would go higher, which is a problem, right? So there’s not a lot that Trump can do.

Now, Trump says that he wants to get rates down. He doesn’t have control over rates, Powell does. And Powell knows if he aggressively reduces rates now, he’s gonna cause more inflation.

Powell’s number one priority right now is to fight inflation. So that’s not gonna cut rates, which Trump needs to get the economy. And so if Powell doesn’t cut rates, then we get this recession that I’m talking about.

Now, Trump knows that he needs to get his budget in order, but in order for Trump to get his budget in order, he needs to raise revenue, because he can’t cut. If you look at the budget, you have Social Security and Medicare, which are kind of untouchable. You can’t cut them.

If you cut them, you barely cut them at all. They’re kind of untouchables, right? Then you have defense. The Republican Party is known for being kind of a hawkish party.

They’re not somebody who’s gonna cut defense. I think Trump will actually increase defense, even with his budget deficit. Worst case, he’s gonna do like a 3% increase.

I don’t think he’ll cut. If he cuts anything, maybe 3%. I mean, he’s not gonna cut much.

And then you have your interest expense, which is going up, because we’ve been using short-term bonds. If you use short-term bonds, you have to constantly roll those over. So interest expense isn’t going down.

We’re at $1 trillion, or $1.2 trillion this year in interest expense. So there’s nothing he can really do to cut the deficit. All he can really do is increase revenue, and that’s where tariffs come in.

People were saying that Trump was gonna use, they bought into what he said about, I’m gonna put tariffs on Canada and Mexico to fight immigration and drug trafficking. Well, that’s total misdirection. That was his excuse, because if he said the truth, that I need revenue because the budget is out of control, and then the budget’s out of control, what? I thought we were in MMT, where the debt doesn’t matter.

And if Trump acknowledges that the debt matters, and says, we gotta do something about that, then he has a problem on raising spending, like defense or whatever. So Trump has a budget problem, and he doesn’t have any solutions. We have an economy that’s slowing, and they don’t have any easy ways to keep it growing, or to reverse it from slowing and get it growing.

Everything’s pointing to, in my opinion, a slowdown. And then everything, once you get a recession, it’s kind of a Katie bar the door scenario. I think it’s gonna be a lot worse than people expect.

Yeah, there are a few factors or indicators, or yeah, lagging and leading indicators I wanna address with you. And of course, inflation is one of them, which is a lagging indicator, of course. But it has been ticking up over the last four, four months here, coming in at 3%, just reported earlier this week.

Is that trend going to continue? And how worried are you personally about inflation here? What does that inflation trend tell you right now? Is that something we should panic about? Are we heading back to 9%? No, that’s not what you should panic about. What you should panic about is the US economy deteriorating. That’s a much, much worse situation here than inflation.

Because we’re not gonna get 10% inflation. That’s not gonna happen. And the reason why it’s not gonna happen is because you’re gonna get a lot of deflation.

Because once the recession starts, you’re gonna have bankruptcies all over the place. Well, those create deflation. Then you’re gonna have a lot of layoffs.

That’s more deflationary for wages. So wages, you’re gonna have downward pressure on wages and you’re gonna have downward pressure on money supply because money’s gonna get destroyed. And so you’re gonna have two competing forces, deflation and inflation.

You’re gonna get inflation and stuff you need, like your rent. I really don’t think rents are really gonna go down that much. They might go down a little bit.

Housing, now, the one thing about housing is housing is a very defensive move for you for inflation. So if inflation is at 4% and 5%, if you have debt, it goes down. So it’s good to have a mortgage when you have high inflation, because money goes further.

So people are gonna buy houses. So I don’t see housing totally crashing here. I do think it probably, over time, it probably will go down 10 to 20% nationally, but I don’t see it going down much more than that because people are gonna wanna own houses because they protect you against inflation.

But things you need, such as food, energy, I think oil prices are gonna go a lot higher. Food and energy, I think are gonna go up. I think services, I don’t see services going down because services, a lot of services have pricing power.

And so if inflation’s not going down, the services are gonna go up. And that’s just part of it. So we’re gonna have crisscross, right? We’re gonna have some inflation, some deflation, but that’s not the problem.

Problem, that’s not the problem at all. The problem is if you lose your job, you’re not gonna be able to replace it. So what we’re gonna end up seeing is a lot of winners and losers.

The winners are people that keep their jobs, and the losers are the ones that lose their jobs and can’t replace them. And it’s gonna be nasty. I think it’s gonna be really nasty for a long time.

In other words, I don’t see this as a one-year recession at all. I don’t see this as a business cycle. A lot of people are saying that because we have Trump, we’re gonna go into a recession and we’re gonna reset everything, clear it all out, and then Trump’s gonna get this thing going again.

I heard this analogy of Reagan. Reagan came in 80, 81, 82, and it was kind of a mess. And then Reagan got it all going in 82.

And they were thinking that’s gonna be a similar situation for Trump. I don’t think so. I think it’s gonna go from bad to worse.

Now, it’s like, it’s where the crossroads are. As you said, I think you used the word crossroads, but I think it’s crossroads actually as well. Like deflation versus inflation is the debate.

The question is, you mentioned wage growth or wage stagnation or dropping wages. I have a hard time believing that because we’re seeing 5.7% of wage growth right now, which is fairly high. Hence, the economy is doing okay.

I talked to Darius Dale just yesterday or two days ago. And he said, as long as that is in equilibrium, the consumer is happy to spend an extra 3.2% like they are right now because wage growth is keeping up. So yes, if you throw in inflation, real inflation, you pick your number here, Don.

Things look a little different, but the hard facts, like the numbers we have to work with, because I don’t go around the grocery store and check the carrot prices every week here or the egg prices, which are terribly inflated if you can even get them these days. I’ve been seeing photos from Costco’s, people going out of the store with shopping carts full of eggs. Not sure what they do with them, by the way, but it’s an interesting situation here.

My rambling on here is like, I wanna jump to a different topic. You mentioned Fed monetizing the debt, and that is a really, really big one because that could bring the whole house of cards down, in my opinion, especially when the news get out. So while you were chatting, I was quickly looking up the Fed balance sheet and it’s still on its way, like it’s trending down, like meaning like the debt on the balance sheet of the Fed is trending down.

So they haven’t, like based on the numbers, they haven’t started buying just yet. But maybe just to recap, you said this will happen this year, it’ll happen soon because the Fed or the Treasury, sorry, the Treasury and Scott Besson, they need to refinance a lot of short-term bills this year. Well, I think it’ll happen once the recession begins and I do expect the recession to begin soon.

Now, as far as monetizing the debt, we should talk a little bit about what Bassant said. He said that he was gonna monetize the US assets. And there are really only two assets that I can see that have any value that they could monetize.

One is all the land that we own, like we own Nevada. I mean, if you look at the state of Nevada, federal land, the whole state’s basically federal land. So they could sell Nevada, which would be worth a lot of money, right? But historically, that’s never happened.

And it’s almost kind of an off-limits kind of thing. I don’t know why, but we’ve had debt for, since Reagan started increasing the debt in 81, we’ve had this explosion in debt. Nobody’s ever talked about selling land.

I don’t think that’s gonna be it. So what’s left? Gold. So we have $8 trillion in gold if the last audit is accurate.

We haven’t sold off our gold. If the gold is still there, we have $8 trillion in gold. Now, so there’s a couple of ways to monetize that.

The easiest way to monetize it is to give it to the Fed. So right now, the Treasury owns it. They can swap it to the Fed and say, okay, here, Fed, we’re gonna give you the gold.

And then in exchange for that, you’re gonna give us cash. So they could basically swap their gold, give the gold, it’s basically selling it, but it’s kind of indirect because we’re giving it to the Fed, but we could call it a loan, even though it’s kind of not a loan because we’re never gonna pay it back. It’s kind of a fake loan.

We’re not gonna sell it to private people. We’re gonna give it to the Fed as collateral. We’re gonna give it to them as collateral, and they’re gonna give us cash.

And then eventually, we might pay it back. But if they do that, there’s a lot of benefits. Number one, there’s no interest.

I don’t think there’s gonna be any interest they have to pay the Fed. I don’t see any reason why they’d pay any interest. And then one, there’s no principal due.

So all they’re doing is, and the gold will probably stay in Fort Knox, right? All it is is on paper, we’re basically saying, we’re gonna loan the money to the Fed, and now the Fed’s gonna give us $8 trillion. So it’s kind of QE by stealth, but the problem with that is it will create inflation. It’s not a free pass, because the Fed is gonna print money to give us that 8 trillion.

And if Trump’s gonna do that, I don’t think he’ll do one, two, three. He’ll probably do the whole eight. Give me the money.

And then, I don’t know, then you’d have $8 trillion in cash and assets. Then, I mean, that’s, I don’t know, they could monetize that in some way. They could leverage it.

The hypotheticate, I can’t pronounce the word, hypothecation. The other thing that they could possibly do, and this is the one that everybody thinks they’re gonna do, but for me, it makes no sense. They think they’re gonna take that gold and say, okay, here’s 8 trillion, and we’re going to issue 50-year bonds backed by gold.

So people will buy the bonds. So we’ll sell $8 trillion in bonds. We’ll have to pay interest on them, but they’ll be backed by gold, so we’ll be able to easily sell them.

But the thing about it is $8 trillion is a drop in the bucket for how much debt we have. We have, I think, 36 trillion. It’s 25% of what we owe.

So if you only issue 8 trillion in gold-backed, you still have this big, huge mess over here on the side. So there’s no easy solutions here. Let’s put it that way.

Yeah, maybe just to clarify, how do you get to the 8 trillion? Can you explain the math quickly behind it? Like the US owns 8,000 tons of gold. So if you could break that down for us so we can follow. Maybe it’s four.

So, yeah. Yeah, you have to multiply it by 2,900. I forget the exact.

I thought it was 8 trillion. Maybe it’s four. We could Google it right now and see how many tons we’re supposed to have.

I think it’s 32,000 tons, 33,000 tons. So you’d have to get your pencil out. And what’s a ton? How much is a ton worth times 33,000? Yeah, it’s 8,000 metric tons, so.

Okay, 8,000 metric tons. Okay, so how much does a ton go for? I should have prepared for that. You know, let’s continue the conversation.

I’ll look that up in the meantime. It’s a lot of money. Yeah, like the one big, you know, dominating discussion maybe in the news.

Maybe I’m way off. Maybe it’s only 800 billion. Maybe I’m way off.

I’ll have to double check the math because I need to convert the metric tons into ounces and then multiply. I think, I’m glad you brought that up. I think I might be way off.

It’s either 800 billion, 4 trillion. It can’t be 4 trillion. I’m way off.

I’m way off because 4 trillion, that’s how many bars are actually out there. It’s 18 trillion total, 4 to 6 trillion in bars and coins. So I think it’s 800 billion.

Yeah. So I’m way off. And 800 billion is nothing.

When you take 800 billion and you compare it to our debt, 800 billion is peanuts. That’s 32,000, 150 troy ounces. So that’s 257.2 million troy ounces times 2,922.

That’s 751 billion. There we go. So there we go.

That’s. So I thought, yeah, yeah, yeah. Now I thought about 800 billion.

So 700 billion. Yeah, it doesn’t fix the problem. No, it’s like, because it is a drop in the bucket.

Because a lot of people talk about revaluing gold. There’s no way out. There’s no way out, people.

We’re toast. There’s no way out. The point is the same, exactly.

Like a lot of people talk about revaluing gold and keep it even on the balance sheet, but just revalue it to current prices. Yeah, so now I know where I’m, now I know the reason why I had that 4 trillion, 8 trillion is they want to revalue gold higher. So they take that 800 billion.

And then if they do it by five, then it takes you to 4 trillion. Those are the numbers I’ve been seeing. So you basically have to take it from 3000 to 15,000, 3000 to 20,000, which to me is pie in the sky stuff.

Yeah, and the weird part is like, and a lot of people confuse that as well. Like it doesn’t change the spot market price. It only changes the price on the balance sheet.

What the spot market does is a different story. I have to interrupt you there. No, but I’ve been hearing people say that Trump would have the ability to literally revalue gold by, he has a few methods, if you will.

And one of the methods, and I don’t see how to do this, is that he would back the bonds by gold and then make them redeemable in gold. If he did that, the price of gold would skyrocket. Because basically what he’s doing is he’s creating a market for gold and saying, look, this is the market.

I’ll redeem it at $15,000. If he does that, gold will go to the moon because he’s literally setting the gold price. I’ve heard that.

That’s what people were saying he’s going to do. Back the bonds, make them redeemable, and just push gold to the moon. If he does that, he’s basically lowering the value of the dollar.

But the problem is it’s gonna create a lot of inflation, tons of inflation. Yeah, it’s the same situation. Once the Fed starts monetizing the Treasury debt, meaning buying the Treasury debt, it’s the same thing.

The US dollar will crumble. The question is though, and maybe is that even wanted? Because Trump, I remember in his first term, he wanted a weaker dollar. Like he wanted, so he could export more and to really shrink that deficit, the import-export deficit here as well.

That was one of his goals back then, if I remember correctly. So that’s probably, like, I wouldn’t rule that out that it’s actually something he would want to do, like get the dollar lower. I think I mentioned, go ahead.

They’re gonna do something, I have no doubt. Basant, he’s gonna do something with that goal. He said, he was basically letting everybody know, I’m going to monetize our assets.

Well, their number one asset, well, their number two asset is gold. He’s gonna do something, we don’t know what, but I think that is why. Now, I’m gonna ask your next question for myself.

I think that the LBMA, the reason why gold has been moving from the LBMA to New York and the ComEx inventory has been spiking is because of this expectation that Basant’s gonna do something and they’re prepping for it. I thought they were prepping because of tariffs. They’re like, oh, they’re gonna put a 25% tariff on tax, on gold, I mean, and we need to get inventory because we won’t be able to buy any gold and silver.

I don’t think that’s the reason why. I think the reason why is because Basant and what he wants to do with gold and everybody’s nervous and they’re not sure exactly what he’s gonna do. Or the ComEx was given a heads up and told you need to get your inventory up because of what Basant’s gonna do.

But I do think that something’s coming, something big is coming and bottom line is this, is that the LBMA, whatever caused this movement of gold from London to the ComEx, we’re moving from the LBMA inventory to ComEx inventory. That’s what’s happening here. And if that’s happening because of what’s coming, the price of gold is not going lower.

Price of gold is going higher. In other words, this is foreshadowing something to push gold up, not down. This is very positive for gold.

And so I’m gonna ask myself another question. So I feel very strongly that the only thing that’s gonna push the gold and silver miners higher, like everybody thinks that the gold and silver miners are breaking out here. And they’re about 330 on the HUI.

Well, we were at 354 back in October and gold was much lower. So the miners haven’t broken out. I mean, if you look at the HUI versus the S&P, it’s starting to break out, but it’s still bouncing on the bottom.

But my point is this, is that the miners, the gold and silver miners, they only do well when you have economic turmoil. And the economic turmoil hasn’t started yet. So I’m talking about an extended bull market.

Yeah, you can have a six month rally like we had in 2020. And then you go to 2016, you can have a short term rally, kind of a counter trend rally, but it’s not an extended bull market. Extended bull markets in gold and silver have only happened twice, the 1970s and the 2000s.

We’re waiting for that to come back. I don’t think we’re gonna get an extended, I’m talking two to three year move in gold and silver and the miners, all three of them, until the economic turmoil arrives. Maybe I’ll counter another reason for what’s going on with the miners.

It’s just, it’s too easy to make money with the S&P 500. It’s only been the last couple of weeks that it’s been lagging, right? Before, and you mentioned it earlier in your intro, since 2008, 2009, we’ve only had three down years in the S&P 500. I’m excluding the one where it was negative 0.5%. So that’s not really a down year.

That’s a rounding error. But the last really bad down year was 2022, where the S&P was down 20%. But that was the gravest one.

And it’s been up 20, 25%, pretty much 13 out of the 16 years or so you mentioned, or 12 out of the 15, we can debate here. But so the people have been just used to getting 20, 25% annual rate of return on their investment. Like, why would you even bother buying gold mining stocks that have been like historically underperforming in general anyway? So the competition was just too great, right? They’ve been terrible performers.

I mean, why would I buy that? Yeah, absolutely. Yeah, when you get 25% or so in the S&P 500, no risk, okay? Like I’m saying that very carefully, but. I keep asking myself my own questions, but.

Okay, so the HUI back in 23, in October of 23 was at 200. And then February 24 was at 200. Those were the bottoms, I believe.

The HUI is up 65% over one year. So everybody thinks the miners have actually outperformed everything for the last 12 months. But they’ve been bouncing off a bottom.

But everybody ignored that. Wall Street looks at it and goes, oh, they’re up 65%. Actually, it’s 68% year on year.

Maybe I should buy some of those. So they’re starting to show themselves. Now we’ve had a 12-month run here.

And if it keeps going, they’re up, the miners are up 20% for the year. So in six weeks, the miners are up 20%. And they’re up 66% in 12 months.

So Wall Street’s ignoring them. But I think they will pivot. And this is what they always do.

Once you get the economic turmoil, and what economic turmoil essentially means is the economy stops growing. So the economy stops growing. At that point, most of your stocks are gonna be going negative.

Not positive, negative. You just mentioned it, you know, 22. So if your stocks, if all these sectors start going negative, Wall Street’s gonna look around and say, where can I make money? And they’re gonna look at, they’re gonna see these miners that are up, okay, they’re up 66% for the year, 20%.

The miners are gonna be up, I think, by the end of this year, significantly. Let’s put it that way. So at a certain point, they will pivot to the miners because that’s how Wall Street works.

What’s making money? Well, S&P’s making money. It has made money. I’m gonna stay there.

But once this bull market ends on Wall Street, that’s when the bull market and the miners begin. I think the best, by far, the best correlation is 2000 to 2005. So 2000, you had the end of the dot-com bubble, which basically Wall Street lost so much money coming out of that.

And then right after that, you had 9-11 in 2001. So the markets were basically rug pulled and gold was starting to move higher. That is the perfect correlation.

And then gold went from 2002 all the way to 2011. Same thing that happened from 1972 to 1980, nine-year bull markets. And I think that’s what we’re getting ready to see is the markets go down, like they did in 2000, 2001, and gold goes up.

I think that is exactly the correlation that’s gonna repeat. Yeah, since we’re on the miners, Don, we gotta talk about the Q4 year-end performance here. We’re just starting to see the numbers come out.

If you could put some perspective around those for us, like Barrick reported, Kinross reported, Royal Gold has come out with numbers. Can you put some perspective around us, like context, what does it mean? Are they good, bad? Like what should we be looking forward to? Yeah, the key number here, and this is what I use, is the free cash flow multiple because gold and silver mining is like a unicorn. They don’t have any customers.

Most company like Microsoft, well, Microsoft has a monopoly, but if you look at a company, let’s just say Amazon. I mean, Amazon, they compete against Walmart, for instance. They compete, they have competitors.

Newmont doesn’t have any competitor. Newmont and Barrick do not compete against each other. They don’t have customers, they have buyers.

They don’t have problems selling their product. So they’re unicorns. They’re strange, very strange companies.

And so that’s the reason why it’s so difficult to understand them. I say it takes at least two years. If you start investing in gold and silver miners, you’re gonna be clueless for two years.

You can read my book and speed that up, maybe learn in a year. You’ll read my book twice. But it’s very difficult to understand.

And so you can’t use PEs for gold miners. People are like, they’re gonna use PEs. You can’t, it’s a weird, it’s bizarre.

The reason why you can’t is because the price of gold has such a huge impact on the valuation of these companies. And so the price earnings is just gonna go up and down based on the price of gold, if you will. And it’s a cash business because you constantly have to put more money into these mines to keep them operating.

It’s called recurring capex. And then you have to also, you have to do explorations. They’re constantly plugging money in.

It’s like R&D. You know, we always hear about Amazon’s capex, right? Well, that’s part, that’s exactly what the miners have to do. They constantly have to plow money back in and then they have to build new mines, which requires cash.

So it’s a cash business. So the bottom line is the most important number in my opinion is the free cash flow multiple. Now, what is the free cash flow multiple? So you take the free cash flow and I use free cash flow as the break-even point.

So in miners, they have something called the all-in sustaining cost. That’s not the break-even point. So you have to pad it.

Usually with gold miners, you have to pad it about 300 to $400, sometimes a little bit more, but 350, 400, you have to pad the ASIC. So, you know, if we use Newmont or if we use Barrick, I think their ASIC was, I think came in 1500. So we pad it, we get it up to about 1900.

At 2900, they have $1,000 margins. And so they didn’t have those $1,000 margins 12 months ago. And because gold made a really big run in 25.

And so what happened was their margins started blowing out. Well, when you have $1,000 margins, you’re generating a lot of cash. So they generated $400 million last quarter.

And because we’re now up to 2900, they’re currently generating 600 to 700, because they’re like $3 billion run rate right now on free cash flow. So it’s between seven and eight. So we can call it 700.

So they did 400 last quarter. Their run rate’s like 600, 700 billion in free cash flow. Well, they’re trading, their multiple right now is a nine.

And what’s happened over, nobody wants to own these miners. And so the free cash flow multiple, anytime you can get a major of high quality in single digits, it’s like you’re buying it like half off. Barrick and Newmont will both have, when the sentiment improves in these miners, they will all have multiples in the 20s.

So it’s currently at nine and it’s gonna go in the 20s. So you’re buying Barrick and Newmont right now, literally at half off. And a lot of these miners are even cheaper.

Their company, the average right now for producers is a six. And it should be at least an eight or a nine average for the industry at $2,900 gold, at least. So it’s 30%.

I mean, if you take six times 50%, it would be a nine. So I think that right now, most of these miners are like 50% off. Some of them more, 100% off.

Like not 100%, but I mean, they’re gonna go up 50, 100%. They’re gonna double basically. Barrick and Newmont are literally gonna double in multiple expansion, just multiple expansion.

So if the price of gold goes up and they have more free cash flow, so let’s say that they go from a nine multiple to an 18, that multiple is how much free cash flow they’re getting. So that’s the valuation of their market cap. So let’s say it’s $100 million market cap and they have 50 million in free cash flow, right? So the free cash flow, they’re gonna double their market cap from 100 to 200 million, just on expansion alone.

And then the market capital go up from 50 million to 100 million. It’ll double as well. So you double it again.

So it goes up three times. And that’s what’s gonna happen here with Barrick and Newmont. They’re gonna go, like Newmont’s about 45.

I mean, you blink, it’ll be in the 80s. You blink again, it’ll be in the 120s. And Newmont and Barrick are, those are not your best opportunities, right? Your best opportunity is your highly undervalued mid-tiers.

Those are gonna go up even more. And then you can look into the junior space, which the developers that have even more upside. So we’re early innings here.

I mean, I keep posting that this is a fake out, not a breakout. And the reason why is because if you look at the HUI chart, the HUI chart, the breakout point is 350 and we’re at 330. We haven’t even broken out yet.

We’re still in a 30, we’re in a, what is it? It’s a 12-year channel, from 2013 to now, we’ve been in this channel, this HUI channel, and we have not broken out of that channel. We went into that channel in 2013 and we have not gone out. So we’re at 330 on the HUI.

My target for the HUI is 1,200 to 1,500. That’s how far this thing’s gonna run once it finally starts. So we haven’t even started yet.

All we’ve done is bounce off the bottom. We were at 200 and now we bounced back to 350. So that’s that 66% move from 200 to 330 is a 68% move.

So all we’ve done is basically do this, bounce off the bottom, if you will. A lot of people have lost money in miners. I mean, a lot of people that are holding miners, they’re underwater because they bought at the wrong time.

You know, most people chase the momentum. So they always buy at the wrong time. You’re not supposed to buy when gold’s going up.

You’re supposed to buy when gold’s going down. But that’s why you read my book, but most people, they can’t do it that way. They just don’t, they follow the herd.

They buy the runs, not the dips. Yeah, maybe, Don, very last question, a bit of an unfair one, but where do you think gold will end the year this time? Like there’s so many factors weighing on it. I know it’s a difficult forecast.

I don’t even dare looking out past this weekend here personally, but curious what your thoughts are. Like how will the gold price develop since you mentioned the word fake out? Yeah, so my target for the high for the year is 3,200 to 3,400. However, I don’t think that right now that’s where we’re heading.

And I don’t think that it’s possible gold could leave here and we don’t have any significant dips, if you will. But if we only have 5%, if the worst correction we have for this year is 5%, that would be amazing. But I think that the correction is gonna be somewhere between 10 and 15%.

And so 3,000, if you do 10%, that takes it to 2,700, which isn’t bad at all. I’ll take that all day long. So it’s a little lower than that, 2,600 to 2,900.

So my targets have been, I have had a target at 2,350 to 2,450, but I’ve had that in place since we’re at 2,700. So now we’re 2,900. So I think that my floor at 2,350 is now up to 2,400.

So I would put my range somewhere between 2,400 and 2,600. I used to say that I doubted that 2,500 would hold and now I’m doubting that 2,600 will hold. So in other words, I’m expecting a 10 to 15% correction at some point this year.

And so if you’re on the sidelines, maybe you don’t wanna be 100% on the sidelines, but you definitely, maybe only put 50% in and then you wait to see, wait for that correction to come. And if we do break out, then you can put the other 50% in. And so what is the breakout? For me, the breakout is gold gets above 3,000.

The HUI gets above 350. And if gold gets above 3,000, the HUI will definitely get above 350. Those are kind of correlated.

But the third one, you need all three. The third one is silver. And silver needs for this basically breakout to occur, silver needs to get above 35.

And ideally you wanna be over above 35 for two weeks, two closing Fridays above 35, and I think it holds. If you go above 35 on a Monday and then you close the week under 35, that doesn’t count. And I think the breakout for silver is 36.

You get above 36 and the floor on silver just went up significantly. You probably, you get above 36, I think the floor is probably 32. And right now I have the floor of 26, 27.

So that’s a big jump. I got the floor 26, 27 right now. You get above 36 and that floor goes from 26, 27 to 32.

And looking at, we’re looking at 50 plus. In other words, we’ve been waiting a long time, since 2011 really, to kind of have another big run in silver. And $30, it was kind of a line in the sand.

We got above 30, we kept going below it. If you go and you look at the chart and we got above 30, we went back down below it like five times. Like 30 hasn’t really held and now we’re at 32.

But we haven’t really busted out above that 30 level. Once we get above 36, I think 30 is gone. I’m not worried about 20.

Once we get above 36, I’m not worried about 20s anymore. 20s is the past. You’re not gonna be able to buy any physical in the 20s anymore.

That’s like, that’s all history, right? And so for me, you get about 34 and I, below 34, I could care less. And I wanted to talk a little about the S&Ps. I’m gonna ask myself another question.

We do have to wrap it up in five minutes, Don, but yes, let’s talk about the S&P. I can do it in five. Let me finish up with gold and silver and then I’ll do the S&P real quick because we have five minutes.

I just checked my clock. So gold and silver. So silver, if it gets above 34, I could care less under 34.

Doesn’t mean anything to me. You get above 34 and I’m gonna start to get excited. And then you get above 35, so I get above 34, I get the champagne bottle out.

You get above 35, I put the champagne on ice. You get above 36 and I pop the cork. So that’s kind of the breakout.

Now let’s look at the S&P 500. The S&P 500 is the exact opposite because the S&P 500, I want that to break down because that’s that economic turmoil. That’s when Wall Street finally wants to buy the miners.

Wall Street could care less about the miners, but I’m gonna tell you when they’re gonna get interested. Okay, so above 6,000 on the S&P, you got a bull market. Everybody’s bullish, nobody’s afraid.

Although now that you have the lag seven, people are starting to get nervous, even above 6,000. Okay, the next one line of sound is 5,500. As long as you’re above 5,500, nobody’s really gonna buy miners.

Wall Street is gonna remain bullish and Wall Street’s gonna wait for the bounce, if you will. They’re gonna call it a temporary correction, kind of like October of 24. It’s like very short-lived.

Actually, it was 23. September, October 23 was the last correction we’ve had. We haven’t had a correction in 18 months.

They basically bounced off that bottom. So they’re gonna expect a bounce, right? The next one is 5,200. Once you go below 5,200, that’s when the bearishness really starts to begin.

So 5,500, 5,200, and it’s kind of starting, but below 5,200, you’re gonna have a lot of bearishness. You’re gonna have a lot of sellers. Then the next one is 5,000.

You go below 5,000, then the sellers are really gonna kick into gear, and it’s gonna speed up. So it’s gonna be exponential downward. So you don’t wanna go below 5,200.

You definitely don’t wanna go below 5,000. You go below 5,000, that is equivalent to my above 34 on silver. You go below 5,000, you get the champagne bottle out.

You go below 4,800, you put the champagne bottle on ice. You go below 4,500 on the S&P, you pop the cork, you’re in recession. I’ll end it there.

No, I appreciate that, Don. Really, really insightful. And we do have to put a bow and wrap this up now, unfortunately, but we’ll have to get you back on because Jerome Powell was asked whether the US is in a recession, and he sternly said no.

We’ll have to talk about, like recession is always announced six months after the fact anyway, but we’ll have to talk about recession triggers next time. So we’ve gotta leave the audience hanging a little bit, Don, because we will get a BLS labor report revision here soon, and that should be quite eye-turning, or what do you call it, like eye-opening. Not eye-turning, eye-opening as well.

So, Don, where can our audience follow your work? Where can we send them? Well, definitely my website, Goldstockdata, if you own gold and silver miners, so anybody that owns them, because my website is more to help people do analysis, so it’s data, right? I analyze each company, so you can see what I have to say, but I consider my website as a starting point, and you do your own research, but it’s a great database. And then you can follow me on Twitter, at Don Durette, and you can follow me on Substack, Don Durette. So those are my three big ones, but thanks for having me on, Kai.

No, absolutely. Thank you so much for joining us, Don. Really, really appreciate it.

We’ll have to get you back on here very soon again, and to everybody else, thank you so much for tuning in here to Soar Financially. I hope you enjoyed this conversation. If you did, or if you didn’t, I don’t know, I don’t care.

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