Speaker 1: Well, a chillions.
Speaker 2: I'm Joel Webber and I'm Eric Balcunas.
Speaker 3: Eric, there's a lot of stuff happening in the world
Speaker 3: right now, but one theme that has been just kind
Speaker 3: of like on a tear for more than a year
Speaker 3: or two years even is metals. We're gonna have a
Speaker 3: gentlemen join us, John Champalia, who's the CEO of sprot
Speaker 3: Asset Management. Eric, what's interesting about metals and spots approach
Speaker 3: in ETF investing.
Speaker 2: Let me give you a statue. About two weeks ago,
Speaker 2: the silver ETF SLV traded more in a week than
Speaker 2: any stock on planet Earth, more than Navidia, more than Tesla.
Speaker 2: A year ago, this ETF was ranked one hundred and
Speaker 2: sixty eighth. This is crazy what happened with silver and gold?
Speaker 2: Silver in particular felt like GameStop. It felt like, what
Speaker 2: in the hell's going on? How does something that's mid
Speaker 2: size takeover in terms of volume. So silver had this
Speaker 2: just parabolic move up. Gold has been going up for
Speaker 2: a year and a half. But between the two of them,
Speaker 2: I think they combined for I want to say something
Speaker 2: like sixty seventy billion in volume. That I mean, these
Speaker 2: are ridiculous numbers, it's going to die down. It has
Speaker 2: died down a little bit, there's been a sell off,
Speaker 2: but for the most part, these two medals really just
Speaker 2: went wild, particularly over the past couple months, and some
Speaker 2: people are calling it part of the debasement trade. It
Speaker 2: feels a little like fomo to me. People general investors
Speaker 2: have for a while now been buying equities like normal,
Speaker 2: but they've been buying gold. So gold has been a
Speaker 2: story for about a year and a half. But silver
Speaker 2: came out of nowhere and just went absolutely wild, and
Speaker 2: that's just caught everybody's by surprise a little bit. But
Speaker 2: the ETFs again, those volume numbers were absolutely ridiculous, and
Speaker 2: then there's some of the things to unpack there. But
Speaker 2: I think it's just one of those things where you
Speaker 2: never know, Joel. Just when you know things are like
Speaker 2: kind of going one direction, out thing comes from the
Speaker 2: side door and just goes wild. And silver was that thing,
Speaker 2: And where do we go from here? Both of these
Speaker 2: metals are like really at extreme positions. So what happens
Speaker 2: now also worth mentioning.
Speaker 1: John's been on the podcast once.
Speaker 3: Before a couple of years ago when we did a
Speaker 3: uranium episode. So if you want to hear more, you
Speaker 3: can listen back to that one this time I'm Tryin's
Speaker 3: Metal Mania.
Speaker 1: John.
Speaker 4: Welcome back to trillions, Thanks for having me back.
Speaker 3: Okay, So we mentioned this, this precious metals just having
Speaker 3: this incredible run. There's also like no shortage of ETFs
Speaker 3: that are offering exposure. So so curious what does SPRAT
Speaker 3: do differently and why does that matter?
Speaker 4: Right? Well, Sprout has a long history in metals of mining.
Speaker 4: It's kind of our DNA, it's our culture and it's
Speaker 4: all we do, so we know it really well. And
Speaker 4: we do everything from investing in physical commodities and that
Speaker 4: covers gold, silver, palladium, platinum, copper, and uranium all in
Speaker 4: physical form, and we do most of the related equity
Speaker 4: oriented categories and we also do active management as well
Speaker 4: as some private investments. So we do everything in the
Speaker 4: capital structure, both physical commodities, passive equities, and active equities
Speaker 4: in metals of mining. So, you know, we saw a
Speaker 4: lot of these trends starting to form three four, five
Speaker 4: years ago, and we built a large suite of ETFs,
Speaker 4: not just in the United States, but we also have
Speaker 4: funds in Europe and Canada and they're really designed to
Speaker 4: give investors opportunities to play a lot of these thematics,
Speaker 4: which we think are still in the early stages of
Speaker 4: their development.
Speaker 3: So Eric mentioned the debasement trade, and I'm curious that
Speaker 3: really became a theme, especially last year. It seems like
Speaker 3: it's really gone mainstream. When did that thesis first resonate
Speaker 3: with you? And what's changed even since then?
Speaker 4: Well, at Sprott, I can tell you the deplacement trade
Speaker 4: that that term we've been using since the Great Financial Crisis,
Speaker 4: and it's only been in the last year, so it's
Speaker 4: kind of entered the mainstream lexicon. And for your audience,
Speaker 4: I think we should define what it means because it's
Speaker 4: not a typical term we use in everyday language. But
Speaker 4: the basement is a term to describe a situation where
Speaker 4: very excessive levels of debt, very high levels of inflation
Speaker 4: are basically eroding your real real after inflation returns, whether
Speaker 4: you're investing in treasuries or currencies. And it's also a
Speaker 4: part of currency devaluation. Currency evaluation is very common when
Speaker 4: countries are in trade wars, which we're in right now,
Speaker 4: and all of these things kind of point investors to say,
Speaker 4: maybe I need to hedge myself against those risks. How
Speaker 4: do I do that? Well. Precious metals, for not one
Speaker 4: or two years, but for the last five thousand years,
Speaker 4: have been an alternative form of storing your wealth. And
Speaker 4: this is one of the reasons why gold and silver
Speaker 4: and platinum have all been really well bid over the
Speaker 4: last couple of years, because investors are rotating from let's
Speaker 4: call it paper assets, whether those are treasuries or stocks
Speaker 4: in some cases, two more real things that historically have
Speaker 4: performed well in these par periods of debasement.
Speaker 2: Let's talk about this so right now. I mean, inflation
Speaker 2: isn't that bad, Debasement isn't that bad. I mean, it's
Speaker 2: not like we just had a bunch of qi. It
Speaker 2: feels a little more like fomo as well. It just
Speaker 2: seems like gold started going up because people were buying
Speaker 2: it for that reason. But then I think as it
Speaker 2: goes up, it gets more fomo money. It just seems
Speaker 2: like more of a craze than it does seem like
Speaker 2: a general allocation to it for this long term inflation hedge.
Speaker 2: What's your take on that.
Speaker 4: We would describe it as a pivot, and the pivot
Speaker 4: is really twofold. It's one. I'm going to bring this
Speaker 4: more on a local basis. It's about running an economy
Speaker 4: very hot in the United States. That means allowing inflation
Speaker 4: to be higher than historic targets of two percent. That
Speaker 4: means running very high physical death sits, which is what's happening.
Speaker 4: It is also around very commoday to monetary policy, which
Speaker 4: obviously the Trump administration is trying to engineer with new
Speaker 4: FED chairman. So if you're running the economy hotter from
Speaker 4: a fiscal and monetary perspective, I think that introduces a
Speaker 4: different dynamic. But take a step back and look at
Speaker 4: the big picture globally, this really started four years ago
Speaker 4: when Russian invaded the Ukraine, and so what does this
Speaker 4: have to do with gold? While six hundred billion dollars
Speaker 4: of Russian assets were frozen with a few keystrokes on
Speaker 4: the computer. And this was a real eye opener for
Speaker 4: a lot of emergent markets and countries that aren't so
Speaker 4: friendly with the United States and other Western countries that
Speaker 4: their assets could be seized or frozen very easily. And
Speaker 4: this is what really kick started and accelerated a shift
Speaker 4: we call it dedollarization, basically where central banks around the
Speaker 4: world and governments were basically selling treasuries or reducing their
Speaker 4: dollar holdings, and what were they doing with the money.
Speaker 4: They were basically recycling it into gold. The Chinese Central
Speaker 4: Bank was really the primary proponent of this strategy. We
Speaker 4: know they have hundreds of billions of dollars of treasures
Speaker 4: that they are selling into the market and recycling in
Speaker 4: hard assets. It's not just gold, it's infrastructure, it's energy, etc.
Speaker 4: But there are a lot of central banks doing this India,
Speaker 4: Poland Singapore. They are moving away from dollars and treasuries
Speaker 4: as part of their foreign exchange reserves, and they're recycling
Speaker 4: the money into physical gold. And you're starting to see
Speaker 4: institutional investors mimic this behavior, which is why last year
Speaker 4: we saw very good flows into gold based exchange listed offerings,
Speaker 4: including the sprot Physical Gold Trust. And this trend, I
Speaker 4: think is starting to trickle down into more of the
Speaker 4: advisor channel and down to individual investors. They're kind of
Speaker 4: minicking the behavior of these central banks. And so you
Speaker 4: might say, well, is this a short term trend or
Speaker 4: is this part of a longer term kind of fracture
Speaker 4: of the global world order? And right now it feels
Speaker 4: like the ladder to us, which is why you have
Speaker 4: such a constant bid under the price of gold, why
Speaker 4: it's been so resilient, and obviously in the last few
Speaker 4: weeks it's hit an all time high.
Speaker 3: So god, there was a lot there. I want to
Speaker 3: ask about. You went from the institutional kind of to
Speaker 3: the retail. So let's pivot, if we may, from the
Speaker 3: institutional into the retail. And I'm curious, like, what role
Speaker 3: should metals play in a retail investor's portfolio? Now, I
Speaker 3: mean there was this sort of like old way and
Speaker 3: if you're describing sort of a new world, like what
Speaker 3: is the way that asset managers are financial advisors are
Speaker 3: starting to talk to one another about this.
Speaker 4: Yeah, I mean historically goal has always played a safe
Speaker 4: haven role in a portfolio. It's always done very well,
Speaker 4: particularly in financial dislocations or calamities. And the other assets
Speaker 4: that always historically did well are things like US treasuries
Speaker 4: and the US dollar. But last year the US dollar
Speaker 4: went down ten percent against a basket of currency, so
Speaker 4: didn't really provide the shock absorber against things going on
Speaker 4: with trade wars and tariffs and the lake. So what
Speaker 4: we see is some rotation of assets away from traditional
Speaker 4: treasuries to gold, and we think it's displaying a more
Speaker 4: effective hedge against some of the risks, whether it's currency, credit,
Speaker 4: equity risk. And we've always told our investors, and this
Speaker 4: is going back decades, that gold should always be kind
Speaker 4: of the ballast in your portfolio. You should always have
Speaker 4: some weight to it depending on what you know, what
Speaker 4: you're trying to hedge against. But it obviously goes up
Speaker 4: around eight to ten percent over long periods of time,
Speaker 4: and then it obviously can can perform well against other
Speaker 4: asset classes and a dislocation. But we've always said to
Speaker 4: people you should have somewhere between five to ten percent
Speaker 4: of your portfolio in physical gold help you stay invested
Speaker 4: in other asset classes that historically have been more volatile.
Speaker 3: Gold, but maybe maybe not silver. Right, So what's driving
Speaker 3: the interest in in silver? Is it just price momentum
Speaker 3: or is there something else going on?
Speaker 4: Yeah, I mean silver obviously and gold are very tied together,
Speaker 4: but there are some key differences between the two. Silver
Speaker 4: is what we call a hybrid metal. That means it
Speaker 4: has monetary elements to it and it has industrial elements
Speaker 4: to it. And I think it's important to take a
Speaker 4: step back and look at the price history of silver.
Speaker 4: I mean, silver was fifty dollars an ounce in twenty eleven.
Speaker 4: It meandered around for over ten years, and in the
Speaker 4: last I guess three or four months, it was like
Speaker 4: a coiled sprint. It had a huge catchup trade because
Speaker 4: gold was rallying first. But there's also kind of a
Speaker 4: geopolitical angle to silver as well, because silver is a
Speaker 4: very important metal for anything that conducts electricity. So think
Speaker 4: about defence industries, evs, things where you need very high
Speaker 4: levels of electrical connectivity. Silver's your go to metal. China
Speaker 4: has recently put export restrictions on silver, so there's some
Speaker 4: challenges there. The other element that's got silver kind of
Speaker 4: really going is substitution effects. So what does that mean. Well,
Speaker 4: what it means is if you're an investor in a
Speaker 4: place like India or another emerging market where you don't
Speaker 4: trust your currency because of hyper inflation or whatever, gold
Speaker 4: has become very expensive for those for those people. And
Speaker 4: so what we see is that as the price of
Speaker 4: gold becomes unaffordable for some groups in the world, they
Speaker 4: switched to silver. So a really good example would be India,
Speaker 4: you know, huge owners of physical gold. When the price
Speaker 4: of gold kind of broke five thousand, we saw eighty
Speaker 4: five million ounces of silver in the just a two
Speaker 4: month period get imported into India, So they're basically hoarding
Speaker 4: silver now as y're touched at the beginning. Was there
Speaker 4: a bit of a fomo you know, memification going on
Speaker 4: with silver in the last couple of weeks. Yeah, absolutely,
Speaker 4: there was a absolute wild trading looking at some of
Speaker 4: the ETFs you look at, we were watching the options
Speaker 4: trading on some of the ETFs. It got very excessive,
Speaker 4: and we've had kind of a correction here, which I
Speaker 4: think is quite healthy. But we're holding at eighty dollars,
Speaker 4: so you know, we were fifty dollars an ounce in
Speaker 4: November and we obviously broke through one hundred and corrected
Speaker 4: back down to eighty. But there's also a shortage of silver.
Speaker 4: We've had a supply deficit for five years and that
Speaker 4: is obviously starting to catch up to the marketplace.
Speaker 2: So SLV alone traded one hundred and forty six billion
Speaker 2: in the last week of January, and that's an enormous number.
Speaker 2: And even leading up to that, we're talking like eight
Speaker 2: ten times its average. Now, all that volume, all that return,
Speaker 2: and yet no flows. This was interesting to me. I
Speaker 2: want to get your take on this, so Joel. Normally,
Speaker 2: like when gold started to go up, the flows came in,
Speaker 2: like people were like, oh cool silver. No flows in
Speaker 2: fact outflows, and I heard a theory and it feels
Speaker 2: but I want to get your take on it. That
Speaker 2: silver for a minute there and I'm not sure if
Speaker 2: it still exists was so hot and demand physically, especially
Speaker 2: in Asia and China. One guy tried to smuggle silver
Speaker 2: in through Hong Kong, got busted and they put up
Speaker 2: the picture all the silver he was trying to snuggle
Speaker 2: it in these Danish cookie boxes. Anyway, I wouldn't mess
Speaker 2: with the Chinese government, but that's just me. Anyway, he's
Speaker 2: trying to get this in. And the thesis I heard
Speaker 2: was that the traders out there were using SLV for
Speaker 2: its silver stash. They were actually handing in chairs of
Speaker 2: SLV to get physical silver back and then sell it
Speaker 2: in arbitrage it in the open market, especially in Asia.
Speaker 2: So it was almost like the ETF was getting raided
Speaker 2: for its valuable thing that it held. And that's why
Speaker 2: there could be outflows that overwhelmed the inflows from the
Speaker 2: FOMO people. Thoughts.
Speaker 4: Yeah, I mean, I think you have to look at
Speaker 4: it fun by fund. So Sprott has a physical silver
Speaker 4: trust that's actually been in net inflow, so we've been
Speaker 4: accumulating new new dollars into the fund, and buying silver
Speaker 4: with SLV is more of a trading instrument versus a
Speaker 4: buy and hold, And obviously I think the options market
Speaker 4: for that is more the tail wagging the dog on
Speaker 4: that thing, just the way it trades. But yes, you're right,
Speaker 4: there are some arbitrage opportunities by location. So for example,
Speaker 4: there's too much metal sitting in North America right now
Speaker 4: versus places like London, India or China, the other big
Speaker 4: kind of metal markets. And we know that because there's
Speaker 4: a price differential as to what the price of silver
Speaker 4: trades for in Shanghai versus New York, and there is
Speaker 4: a big spread, and traders are very opportunistic. If that
Speaker 4: spread provides an arbitrage opportunity, they will physically move the silver,
Speaker 4: put it on a ship, sail it around the world,
Speaker 4: and deliver it and the vaults into whatever market. We
Speaker 4: haven't quite seen that yet because there's not enough arbitrage there.
Speaker 4: There is some vat taxes in China that makes that
Speaker 4: arbitrage why than you would think, But we see that
Speaker 4: all the time when markets dislocate. I think the great
Speaker 4: example right now is copper. We obviously saw the price
Speaker 4: of copper at one point trading over ten percent over
Speaker 4: the price of copper in London and traders were basically
Speaker 4: loading up ships and rushing it to the United States.
Speaker 4: So these physical movements of metal actually happen.
Speaker 1: We do it.
Speaker 4: That's brought all the time. We have to buy metal
Speaker 4: and move it around the world. But yeah, there's definitely
Speaker 4: I think the volatility has been exacerbated by some of
Speaker 4: the inventory mismatches right now going on.
Speaker 1: Who's calls when you have to move metal like that?
Speaker 4: Yeah, so we we obviously work with different banks and
Speaker 4: shippers and believe it or not, silver, It just gives
Speaker 4: you a quick background silver. So how do you move
Speaker 4: around these one thousand ounce bars. Well, we put six
Speaker 4: hundred of them on a semi flatbed tractor trailer, which
Speaker 4: is a reinforced trailer, and we moved six hundred bars
Speaker 4: at a time, and sometimes it'll take us six months
Speaker 4: to move large quantities around to our vaults, but we
Speaker 4: do it. It's a lot of work, but we have
Speaker 4: a whole team of logistics people that organize this. And
Speaker 4: gold is a little different. It's obviously it's obviously in
Speaker 4: armored cars because of the volume to value, but silver
Speaker 4: is so bulky you need to put it on flatbed trailers.
Speaker 2: Interesting about all this, like moving this merchandise around and ships.
Speaker 2: And I just finished a book project on bitcoin and
Speaker 2: one of the chapters is called the Store of Value SmackDown,
Speaker 2: and it's basically gold versus bitcoin. One of the big
Speaker 2: arguments that the bitcoiners have is, hey, if you want
Speaker 2: to move bitcoin, you just like basically click a button.
Speaker 2: You can move it anywhere in the world. You don't
Speaker 2: have to get it through a border, there's nobody who's
Speaker 2: going to confiscate it. You don't have to call like
Speaker 2: a big ship up, you don't have to ensure it.
Speaker 2: It's just easy. So it's like better version of gold.
Speaker 2: And obviously it has made that case pretty well. Even
Speaker 2: seventy thousand dollars after this huge pullback, that's still a
Speaker 2: lot of money per bitcoin, and it's been around seventeen years. Obviously,
Speaker 2: gold has really crushed in the short term, and bitcoin
Speaker 2: crushed maybe we'll call it twenty twenty twenty three and
Speaker 2: twenty twenty four was up four hundred and fifty percent,
Speaker 2: gold up way less. So they go back and forth.
Speaker 2: But what's your take on bitcoin? Could it be used
Speaker 2: as the same store of value in it as they
Speaker 2: say a digital gold, and is it even better because
Speaker 2: you don't have to worry about calling up a ship.
Speaker 4: Yeah, it's a good question. I obviously get that all
Speaker 4: the time. I'm going to use your seventeen year term
Speaker 4: and say that gold's been a store of value for
Speaker 4: five thousand plus years. So we have a long history
Speaker 4: as humans in terms of our value and accumulation of gold.
Speaker 4: So it stood the test of time over millennia. You know,
Speaker 4: seventeen years. It sounds like a long time, but it's
Speaker 4: still in its infancy in terms of a new asset class. So,
Speaker 4: but yes, they have pros and they're very different there.
Speaker 4: It's not a digital gold. We don't like to think
Speaker 4: of it that way. It's a very different asset. Last obviously,
Speaker 4: if it was digital gold, there wouldn't be a forty
Speaker 4: percent difference in performance just over the last few months.
Speaker 4: So they have very different audiences. They have some similarities. Yes,
Speaker 4: you can zip it around digitally, but there's obviously trade
Speaker 4: offs with security, whereas trying to steal gold is pretty
Speaker 4: challenging given how heavy it is and how highly secure
Speaker 4: it is. So they can compliment each other, but we
Speaker 4: just we don't like to think of them as substitute.
Speaker 4: That's brought.
Speaker 2: Hold on, Joel. I have a trivia question for you.
Speaker 2: How old is gold?
Speaker 1: I mean, like from the beginning.
Speaker 2: Yes, here's how old it is. It was mentioned in
Speaker 2: the Old Testament three hundred fifty times. That's old, man.
Speaker 2: If you get if you're like getting shout outs in
Speaker 2: the Old Testament, I mean that is really old. And
Speaker 2: that's why gold I do think it's it should get
Speaker 2: respected more from the bitcoinners. It's like you're seventeen years old.
Speaker 2: This thing is like has been through it, and every
Speaker 2: human generation has come along has come on and say
Speaker 2: gold is valuable. So that is definitely worth something. I
Speaker 2: think they both can exist.
Speaker 3: But you know, John, actually I'm curious do you think
Speaker 3: that the kind of the rise and popularity of bitcoin
Speaker 3: has that actually sparked an interest and expanded the interest
Speaker 3: in more hard assets that are physically backed.
Speaker 4: Look, I think there's similarities in terms of what people
Speaker 4: are trying to do with each asset class. Right, people
Speaker 4: are trying to diverse away at the fundamental base of
Speaker 4: from FIA currencies, which are basically paper money which can
Speaker 4: be printed as free will and debased. There's that term
Speaker 4: again over time from excessive money printing, inflation, excessive debt levels,
Speaker 4: et cetera. So there are some commonalities in terms of
Speaker 4: what people are trying to avoid. So those are the
Speaker 4: common I think the commonalities between the two. Obviously one
Speaker 4: is a lot more volatile than the other. We don't
Speaker 4: see central banks accumulating bitcoin yet. Maybe there are one
Speaker 4: or two that I am not worre about of. But
Speaker 4: we obviously have lots of central banks that a store
Speaker 4: as in there as part of their foreign exchange reserves
Speaker 4: as a liquid, tangible acid they can easily exchange for
Speaker 4: whatever it wants to when it wants to. So we
Speaker 4: haven't quite got central banks buying bitcoin. Maybe I'll Salvador,
Speaker 4: but time will tell to see how they play out.
Speaker 2: One more question on this, because one of the other
Speaker 2: things that we bring up between bitcoiners as well, Okay,
Speaker 2: gold is definitely scarce because one of the big you know,
Speaker 2: reasons to buy bitcoin is there's only going to be
Speaker 2: twenty one million, and twenty million are already done, so
Speaker 2: you're almost at the capacity and it's locked in. That's
Speaker 2: hard coded. Now gold two three percent is dug up
Speaker 2: from the ground a year, right, so there's a little
Speaker 2: bit of inflation. And then now they're talking about digging
Speaker 2: up the ocean floor or even beyond that mining asteroids. Joel,
Speaker 2: there's an asteroid called sixteen psych and did you know
Speaker 2: it has seven hundred quintillion I think, not gold on it.
Speaker 2: That's enough for ninety billion dollars per person on Earth.
Speaker 2: I don't know that could really decrease the price of gold.
Speaker 4: No, I think that's a pretty far fetch, well a theory.
Speaker 3: But it also I will pivot that again, pivot into
Speaker 3: a question about miners. There's the physical and the physical backstaff.
Speaker 2: Hold on, but I want to get to miners.
Speaker 1: But well, he would have exposure via miners.
Speaker 2: Oh yeah, why don't they send the gold miners into
Speaker 2: the ocean or to space space?
Speaker 4: Well, how about when was the last time somebody landed
Speaker 4: on the moon, let alone an asteroid? So I'm not
Speaker 4: holding my wreath on that one. But you do raise
Speaker 4: another question which is obviously being thirsty debated right now,
Speaker 4: which is basically mining on the ocean floor. You know,
Speaker 4: there are these polymetallic nodules that sit way down in
Speaker 4: the bottom of the ocean, and there's a lot of
Speaker 4: debate going on right now across government agencies and countries
Speaker 4: around whether that is is fair game or is that
Speaker 4: basically something we should not attempt to do. And it's
Speaker 4: still not clear cut, but yeah, there's minerals all over
Speaker 4: the place, whether they're at surface blow surface, at the
Speaker 4: bottom of the ocean, so that I think we don't
Speaker 4: have enough clarity on. But finding these minerals is not
Speaker 4: easy to do. It takes a long time to find
Speaker 4: a large scale deposit that has economically viable permitting, building minds, etc.
Speaker 4: There's a long lead time with commodities, and I think
Speaker 4: that's one of the interesting aspects of it. You might say, Okay,
Speaker 4: all these commodity prices despike, so we're going to have
Speaker 4: a huge supply response, right The answer is no, because
Speaker 4: it takes so long to find these deposits bring them
Speaker 4: to market. And yes, the incentives are very high right now,
Speaker 4: but you know, it will take several years for new
Speaker 4: deposits to come into production, which naturally, I think keeps
Speaker 4: these bull markets running much longer than normal business cycles.
Speaker 1: Okay, related to that, we hear a lot about rare earth.
Speaker 3: The Trump administration obviously views this is a strategic competitive
Speaker 3: competition with China. Obviously, there's nothing that looks like a
Speaker 3: rare earth ETF maybe ever or yet at least, But
Speaker 3: what would it actually take like, not only for markets,
Speaker 3: but supply chains and regulation. What would a rare earth
Speaker 3: vehicle look like?
Speaker 4: Yeah, I mean we're investing a rare earth's it's brought
Speaker 4: both passively inactive. We have a fun called the Sprought
Speaker 4: Critical Materials ETF, and that does have exposure to rare earths.
Speaker 4: And maybe we should take a step back and say,
Speaker 4: what the heck are rare earths. Well, it's a group
Speaker 4: of minerals. Most of them I can't even pronounce, so
Speaker 4: they're so obscure. But they're very strategically important because they're
Speaker 4: used in very small quantities for very important technologies defense industries.
Speaker 4: Other technologies from the magnets are used in electric vehicles,
Speaker 4: things like that. Now, so, yes, they're rare. They're usually
Speaker 4: found in very small traces in other deposits, so they
Speaker 4: come as a byproduct. They sometimes are produced smelting other materials. Okay,
Speaker 4: why does all that matter? Well, why it matters is
Speaker 4: that China controls between eighty of the processing of these
Speaker 4: rare earths. So it's not so much that they control
Speaker 4: of the mining, but it's the processing that they have
Speaker 4: a stranglehold on. And we know that this is being weaponized. So,
Speaker 4: for example, in the last few years, China gets into
Speaker 4: a spat with Japan, China says that Japan, we're not
Speaker 4: saying you anymore rare earths. And this is this has
Speaker 4: not gone lost by many administrations around the world saying, look,
Speaker 4: if we got cut off from these supply chains by China,
Speaker 4: our industries could be crippled. And this is why the
Speaker 4: Trump administration and even prior to the Bide administration, has
Speaker 4: been taking steps to basically build the jargon is resilient
Speaker 4: supply chains, which is code for diversify away from China.
Speaker 4: And so what's happening is a lot of energy policy
Speaker 4: and national security driven policy is driving the incentives to
Speaker 4: produce rare earths. In the United States and other Western
Speaker 4: countries to build processing facilities because it's not just the minerals.
Speaker 4: You need the processing, which is very complex to ensure
Speaker 4: that we have adequate supply. Now, just in the last week,
Speaker 4: the Trump administrations announced something called Project Vault, and Project
Speaker 4: Vault is twelve billion dollars of funding to stockpile critical
Speaker 4: materials like rare earths. So this is basically going back.
Speaker 4: We're going back to the Cold War where governments basically
Speaker 4: stockpiled a lot of different minerals to ensure it was
Speaker 4: not disrupted. And you know, the genesis of all this
Speaker 4: is obviously in the nineteen seventies when Opek squeezed the
Speaker 4: oil price. It was really the wake up call for
Speaker 4: government saying, you know what, we're vulnerable here. If somebody
Speaker 4: shuts off our oil or rare earth, you know, we
Speaker 4: could be really screwed here. So government is basically taking
Speaker 4: a very holistic approach to incentivize mining of rare earths
Speaker 4: and minerals. In the United States, they're talking about public
Speaker 4: private partnership, so that's things like loans to get these
Speaker 4: projects off the ground. That Trump administration is even gone
Speaker 4: as far as taking equity stakes in some of these
Speaker 4: mining companies wear erth lithium, et cetera, and they're taking
Speaker 4: in exchange for the equity off take agreements. So off
Speaker 4: take is basically a promise to deliver me future production.
Speaker 4: They're even contemplating in some cases price floors, which says
Speaker 4: we will guarantee a price of X for all that
Speaker 4: future delivery. That price of X may be above the
Speaker 4: current spot price, So they're basically putting a floor under
Speaker 4: the price so that it incentivizes and allows the project
Speaker 4: to get to completion. And one of the big complaints
Speaker 4: about China is over capacity, and they basically flood the
Speaker 4: market with heavily subsidized production, which destroys the price and
Speaker 4: doesn't allow mines around the world form me ever getting
Speaker 4: off the ground. You know, in the last couple of years,
Speaker 4: we've heard he's a here's a cobalt mine in Idaho
Speaker 4: shut because the price collapse, you know, because China controls
Speaker 4: the cobalt supply out of the Congo. So this is
Speaker 4: the game, the chess game is playing right now geopolitically
Speaker 4: around trying to wrestle control away from China of these
Speaker 4: critical supply chains. It's happening right now in our earth.
Speaker 4: It's happening in things like cut, excuse me, copper. These
Speaker 4: are all metals that are very strategically important to the West.
Speaker 1: How's that chess match going from your vantage so far?
Speaker 4: Well, China has the benefit of playing a long game,
Speaker 4: and we seem in the West to go administration by
Speaker 4: administration in terms of new administration comes in and they
Speaker 4: flip flop and unwind everything that the prior one did,
Speaker 4: so we don't have the benefit of having a government
Speaker 4: that can play out the next ten to twenty thirty years.
Speaker 4: But I think it's basically a woke in the giant,
Speaker 4: just like in in the midst nineteen seventies when the
Speaker 4: Strategic Oil Reserve and the International Energy Agency was formed.
Speaker 4: So it's not a fight over oil like it was
Speaker 4: in nineteen seventies, a fight over metals. This is a
Speaker 4: very different I think geopolitical struggle right now, and metals
Speaker 4: are at the forefront of it. And the reason is
Speaker 4: is because metals are a very vulnerable supply chain, and
Speaker 4: metals are so ubiquitous in everything we do in our lives.
Speaker 4: Just about every industry, technology, defense, AI, all these things
Speaker 4: are very mineral intensive, so why are people fighting. It's
Speaker 4: not about rocks. It's about controlling chips and missiles, it's
Speaker 4: about controlling AI data centers. All of these things are
Speaker 4: the new front line, and governments around the world are
Speaker 4: really responding to this challenge.
Speaker 2: We're going to wrap up here, but I wanted to
Speaker 2: pivot to uranium since you are the issue of view.
Speaker 2: RNM jewel Uranium miners are up twenty two percent this
Speaker 2: year and I can't not do it. How much are
Speaker 2: they up? Since yours truly pitched this ETF in the
Speaker 2: Best New ETF Launch competition in early twenty twenty at
Speaker 2: Inside ETFs and came in third place, even though I
Speaker 2: should have won. Go ahead and tell you tie hundred
Speaker 2: and fifty percent. I remember standing up there. I was
Speaker 2: in front of a whole room, and I said, look
Speaker 2: at this back test. It came started way up up
Speaker 2: or left, down to the bottom right, and I said,
Speaker 2: I trust a crappy back test. This thing has been
Speaker 2: beaten up for ten years, so it had room to run.
Speaker 2: And then I said to everybody, look, everybody here wants
Speaker 2: to be like mister environmental, But how'd you get here?
Speaker 2: You know, walk if we want to go from A
Speaker 2: to Z in terms of like helping the environment, you
Speaker 2: just can't do wind and solar. It's just not enough.
Speaker 2: That was my pitch. I should have won, you know what,
Speaker 2: it was jobs ahead of.
Speaker 1: Rode wasn't in the audiences, I know, And.
Speaker 2: Also they had employees from the conference in the competition.
Speaker 2: It's just kind of suspect.
Speaker 3: I gotta say, I don't know if you're bitterer still,
Speaker 3: I can't tell.
Speaker 2: Anyway, I was too ahead of my time. I think
Speaker 2: if I had pitched this three years later, I would
Speaker 2: have won, But I was super early. Anyway, you obviously
Speaker 2: were all over this. How big is this going to be?
Speaker 2: We actually reinvented this theme last year's roal. We said,
Speaker 2: this is a backdoor way to play the AI revolution
Speaker 2: because all these big mag seven companies seem to be
Speaker 2: either renting or building nuclear facilities or buying to and
Speaker 2: they're using uranium obviously to fund the AI. Huge energy suck.
Speaker 2: What is the bull case here? Is it just the
Speaker 2: AI or what else is going on?
Speaker 4: Yeah? Well I think you've I think you've been winning
Speaker 4: continuously for five years with your call. So congratulations. It's
Speaker 4: been an incredible run for uranium and you're right, Okay,
Speaker 4: basically was left for dead. It had a horrific ten
Speaker 4: year bear market that basically wiped out most of the industry,
Speaker 4: and in the last five years the industry has come
Speaker 4: back to life. It's really being driven by a number
Speaker 4: of really big pivots. One is around decarbonization. Governments are
Speaker 4: focused on lower carbon forms of energy, but more recently
Speaker 4: obviously energy security because uranium produces just abundant amount of
Speaker 4: energy and affordable energy. And you're right, it is base
Speaker 4: load power, which means it runs twenty four to seven
Speaker 4: three sixty five, unlike wind and solar that run twenty
Speaker 4: five to thirty five percent of the time. You obviously
Speaker 4: cannot run very energy hungry data centers on intermittent or
Speaker 4: variable energy. So this is part of this big shift
Speaker 4: going on around energy security and national security. Just the
Speaker 4: Quick Factory, About nineteen percent of the electricity United States
Speaker 4: today is generated from NUKO, so it's a huge part
Speaker 4: of the mix. It was forgotten and it's now going
Speaker 4: through a new renaissance where governments are starting to take
Speaker 4: you know, nuclear out of the penalty box and actually
Speaker 4: provide incentives. The Trump administration has been very pro nuclear,
Speaker 4: lots of executive orders, lots of funding available to build
Speaker 4: new reactors, so it's coming. But the real story is China.
Speaker 4: China is building like six to eight new reactors a year.
Speaker 4: And so if you look at the West pivoting back
Speaker 4: on top of places like India and China building tons
Speaker 4: of new nuclear capacity to increase energy production, you're looking
Speaker 4: at a uranium sector that between now and twenty forty
Speaker 4: is forecast to double. So again, the cure for low
Speaker 4: prices is low prices, and right now the uranium price
Speaker 4: has gone from the twenty dollars per pound up to
Speaker 4: the mid eighties, so it's doing its thing. The supply
Speaker 4: response has still been kind of lukewarm because the industry
Speaker 4: was so shut in for such a long time, and
Speaker 4: so capital is finally coming back into the sector. It's
Speaker 4: no this legacy stigma around the technology is largely gone,
Speaker 4: and we've seen tremendous success in our suite of uranium ets.
Speaker 4: We have the largest physical uranium fund in the world,
Speaker 4: which is about seven billion dollars, and so it's been
Speaker 4: a huge win for our clients the last few years
Speaker 4: investing in the CUD.
Speaker 2: Yeah, real quick on that this physical uranium etf Joel,
Speaker 2: You guys get inflows. You have to go buy yellow cake,
Speaker 2: I guess, and store it. How does that work? And
Speaker 2: you ever been there? I mean it seems like unlike
Speaker 2: gold or silver. You know, there's obviously some danger right
Speaker 2: with storing you know, uranium?
Speaker 4: No, no danger, I mean, I mean basically what we
Speaker 4: store is something called U three awaight uranium oxide, and
Speaker 4: it basically looks like a yellow powder and it's it's
Speaker 4: stored and steeled drum just outside on a concrete pad
Speaker 4: and to stock the barrels up.
Speaker 2: Joel. No smoking, you can't let a cigarette in there, right,
Speaker 2: is that a rule?
Speaker 3: I hope there's no smoking anyway, Okay, but.
Speaker 4: It's a fairly inert substance. And yeah, we have over
Speaker 4: seventy five million pounds of the stuff that we stored
Speaker 4: in the United States, Canada and France. And it's it's
Speaker 4: obviously a very early stage product. It has to get
Speaker 4: refined into enriched training, which obviously then goes into a
Speaker 4: reactor core. But yeah, our investors have been huge supporters
Speaker 4: of the vehicle and it has grown enormously since we
Speaker 4: launched it almost five years ago.
Speaker 3: Actually, I'll bring this back as a way of asking
Speaker 3: you to answer a question that I teased but we
Speaker 3: didn't ask. You have the physical back stuff, and we've
Speaker 3: spent some time talking about that. You also, the portfolio
Speaker 3: also includes a lot of miners. When do you, like,
Speaker 3: what's the purpose of the miners and like when does
Speaker 3: that take trade takeoff versus the physical back stuff? And
Speaker 3: this goes for a portfolio, right, you've copper miners, uranium miners,
Speaker 3: gold and silver miners. Like what's the relationship between the
Speaker 3: physical back stuff and the and the miners?
Speaker 4: Yeah, great question. I mean we try to offer our
Speaker 4: clients both where we can options in physical metals, and
Speaker 4: we do that in about six different metals and then
Speaker 4: obviously the related mining companies, and they both have different
Speaker 4: attributes the physicle commodities. You're playing the spot market, you're
Speaker 4: playing a bullish view that the price of copper is
Speaker 4: going to continue to go up, and copper recently had
Speaker 4: an all time high like it has for silver, gold,
Speaker 4: and platinum. The miners are obviously tied heavily to the
Speaker 4: commodity price, but they obviously have enormous operating leverage, and
Speaker 4: they also have a lot of optionality with the discoveries
Speaker 4: and bringing new discoveries into production, so they are more volatile,
Speaker 4: but they can obviously create tremendous value for investors when
Speaker 4: they are benefiting from higher commodity prices, but also when
Speaker 4: they're bringing new production to market. And right now, a
Speaker 4: lot of these mining companies are minting profits because the
Speaker 4: body prices are high and they are finally getting capital
Speaker 4: to move their projects forward. You know, there was a
Speaker 4: long period of time where nobody wanted to invest in
Speaker 4: this segment. Everybody was invested in having a good time
Speaker 4: in tech stocks, and we're seeing a rotation going on
Speaker 4: right now where capitals finally in the last i would say,
Speaker 4: twelve to eighteen months coming back into these sectors, which
Speaker 4: is allowing many of these companies to move their projects forward,
Speaker 4: which is how they ultimately create value for investors. So
Speaker 4: we find most investors will invest in some ratio between
Speaker 4: the two. Sometimes it's driven by relative value, sometimes it's
Speaker 4: risk tolerance. So a lot of our institutional investors they
Speaker 4: like to own, you know, the physical commodities sprinkled with
Speaker 4: some of the hot sauces. Eric likes to call it.
Speaker 4: So we don't have a prescribed formula, but we find
Speaker 4: most of our investors hold these things in tandem.
Speaker 2: And is there any commodity just you know, last question
Speaker 2: that people are forgetting about, Like we just went over
Speaker 2: some of the big ones, like how do you have
Speaker 2: a nickel etf like? Is there anything? Like?
Speaker 1: But everything's up right, is it? But Eric Tright, is
Speaker 1: there anything that we haven't?
Speaker 2: Yeah?
Speaker 1: I thought? Or what else? What do you think?
Speaker 2: Dark horse commodity right now?
Speaker 4: Ooh, the dark horse commodity. That's a good question. They've
Speaker 4: all they have all been moving together, which is very odd.
Speaker 4: Commodities typically all have their own little cycles. Dark Horse commodity.
Speaker 4: Maybe lithium. Lithium kind of came back to life last
Speaker 4: year after getting really washed out after a period of
Speaker 4: excessive pricing. That lithium has kind of come back to life.
Speaker 4: Nickel is is stabilized. There was a period there where
Speaker 4: Indonesia was kind of flooding the market with nickel. That
Speaker 4: seems to be being put in check a little bit
Speaker 4: as they've realized that they've disturbed the market. But the
Speaker 4: other one that we're excited about is copper coppers finally
Speaker 4: starting to hit new highs and what you find when
Speaker 4: these metals finally break new highs. It provides kind of
Speaker 4: a logical signal to investors. And the copper miners have
Speaker 4: done incredibly well the last couple of years. They're really
Speaker 4: printing money right now. And copper is so important for
Speaker 4: so many different industries that and so much of it
Speaker 4: is around electrification right now. So copper is another one.
Speaker 4: We're pretty excited about it. John.
Speaker 3: Final question, it's a personal one. I'm curious, is your
Speaker 3: personal portfolio does it have anything other than medals in it?
Speaker 3: Or like, do you own stocks and bonds or is
Speaker 3: it just metals?
Speaker 2: Oh, but goal miners don't count. I'm talking like regular stocks.
Speaker 4: Oh absolutely, I invest in all kinds of tech stocks
Speaker 4: and yeah, absolutely, I mean I get I have a
Speaker 4: lot of economic exposure to these metals through my work income,
Speaker 4: so I have a great hedge there. But yeah, absolutely,
Speaker 4: I mean I am a proponent of having a diversified portfolio.
Speaker 3: I'm going to ask a follow up question that's also
Speaker 3: one that we ask a lot of in trillions. I
Speaker 3: gotta say goldbug g Bug, great ticker. Yeah, that's a
Speaker 3: world class ticker. Is there any ticker that you think
Speaker 3: is better than that one.
Speaker 4: That's a really great ticker, and when I found out
Speaker 4: it was available, I said, let's grab it right away.
Speaker 1: Yeah, I like.
Speaker 2: I mean, he made like glitter g ltr. That's the
Speaker 2: Aberdeen Physical Precious Metals Basket, which is a gold, silver, platinum, pladium.
Speaker 2: That's pretty good, right.
Speaker 1: Any other ticker envy? John?
Speaker 4: Uh, you know, I was a little disappointed, to be
Speaker 4: honest with you, when the ticker gold just got reassigned
Speaker 4: to somebody after Barrick Mining dropped it, which was.
Speaker 2: Who got it?
Speaker 4: A puzzling thing. A company involved, I can't remember the
Speaker 4: name of it, but a company involved probably met total
Speaker 4: kind of cold you know, kind of precious metals and
Speaker 4: coins and stuff. Okay, but that that's a killer ticker too.
Speaker 3: Okay, all right, John, thanks so much for joining us
Speaker 3: on trillions again.
Speaker 4: Thanks so much. It was great to be back.
Speaker 3: Thanks for listening to Trillions until next time. You can
Speaker 3: find us on the Bloomberg terminal, Bloomberg dot com, Apple Podcasts, Spotify,
Speaker 3: or wherever else you'd like to listen. We'd love to
Speaker 3: hear from you. Hit us up on social I'm at
Speaker 3: Joel Weber Show. He's at Eric Balchina's Trillions is produced
Speaker 3: by Magnus Hendrickson