This Chart Shows Why $100 Silver Is Likely | Tavi Costa

Triple digit silver is likely, says Tavi Costa, partner at Crescat Capital (https://www.crescat.net). “It’s going to be very volatile.” He points to how many silver miners are extremely undervalued. Precious metals have very little mainstream interest right now. General investors now have almost no allocation to the gold space. But once the upward movement becomes clear, “you won’t find any distressed assets anymore.”

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INTERVIEW TIMELINE:
0:00 Intro
1:08 Silver update
4:43 Gold allocation
7:41 Miners
12:25 Stock market
20:30 Yield curve inversions
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It’s going to be very volatile uh and as we see that volatility play out I think investors are going to have to take advantage of those uh big movements this is Kaiser Johnson with liberty and finance and these are the miles Franklin weekly specials for February 19th through February 26 2024

While supplies last first we feature 2023 1oz silver Britannia at $315 cents over spot with a minimum order of 50 we also have 1 o gold KW Grand at only 50 9 over spot and finally we’re offering 1 o platinum valcambi bars at just $69 over

Spot to order our specials or any of the many other options we have available call us at 188881 Liberty that’s 18888156806 is our good friend Tavi Costa from crescat capital thank you so much for joining us today Tavi thanks for having me looking forward to this

Well it’s great to have you today I did want to discuss one of this the recent charts you put up on Silver uh you’re showing really the cup and handle formation we’re making and you said you don’t know exactly when it’ll break out but this is extremely bullish longterm

For silver can you expand on that yes and I I you know for those I’m I’m not a Trader but I do respect ECT uh technical Trends and as a macro investor I think you want to be early in those Trends and accumulate assets before those breakouts

So those assets that are distress become incredible opportunities as you see prices of the metals increase and change the economics of every project in the world and so I think that that’s really uh one of the things that really makes me so excited about silver I mean I’ve

Gold to Silver ratio today it’s it’s over 85 which historically every time we’ve seen that it was it actually coincided with periods when you want to be buying silver not selling um there are some really outstanding opportunities out there uh with uh important uh projects that have been um

Already operating Minds uh with great silver uh production profiles that will offer even better economics as we see silver prices breaking out so my focus right now has been solely in that front and you know I don’t think this is the time the fact that it hasn’t happened

Yet that breakout from that uh cup and handle doesn’t mean you should be uh discouraged and uh and and changing your focus I think this is the time when you want to be extremely um know laser focus in this opportunity and given the fact that we’re all waiting for a moment

Where gold really breaks out uh more um more uh uh decisively and as we see that happening I think that that’s going to drive uh not only attract Capital into this industry but really I believe silver is going to lead to the upside in a big way and so you know precious

Metals to me is is the main main focus and so i’ I really want to make sure uh we have a large exposure there now that formation the cup and handle formation what type of price does it really forecast or predict for silver well cup and handle formations usually you have a

Breakout from uh those prior highs and so you would expect uh that you know it wouldn’t it wouldn’t be surprising to see a uh you know a triple digit uh number in in silver prices and so at the end of all this but it’s it’s going to

Be very volatile uh and as we see that volatility play out um you know I think investors are going to have to take advantage of those uh big movements but you want to be buying these things before the Big Move not after uh when all the confirmations become

Very uh clear that we are in an upper Trend uh by that time you’re not going to find any distress assets anymore so distress opportunities are distress for a reason and so um that’s really why you can find mines today trading at two three times free cash flow at current

Metal prices which is crazy um and so I I think that that’s that’s a uh to me it’s it’s more of a setup to take advantage of uh rather than than run away from it and uh I wouldn’t surprise me to see Triple digit numbers in in

Silver prices uh as we see this cup and handle unfolding here and it is interesting to see how little investors are invested in the precious metal sector if you look at gold you uh recently created a chart here about 71% of investors have less than 1% Zer to 1% invested in the gold

Sector um what does that say to where we’re at in this bull market because it seems like we’re far from any sort of top it hasn’t even really begun yet well we’re in the process of seeing correlations change in markets where the 6040 portfolios worked really well until

Recently and then with the turbulence in the markets that hasn’t been really in mat with an appreciation of the treasury market certainly uh brought a lot of attention it’s been sort of um you know covered those issues by the fact that the equity markets have done so well so

If you own a 60/40 60% of portfolio actually did really well the last year or so but uh that’s that’s probably going to change and as we see treasuries becoming less and less of a good diversifier uh for those portfolios um I believe that gold is going to be

Entering the arena and and starting to become a larger and larger percentage of those defensive uh allocations in in in portfolio construction and so that that’s one side of it um and the other side of it would be central banks because if we do the same calculation on

Central banks uh they also own before you know in the past used to be 70% over 70% of their balance sheets used to be gold um and now it’s it’s less than 20% so that has a lot of room for change we know the central banks have been buying

Record amounts of of the metal uh but when you put it into a historical perspective there’s a lot of room for that to grow and so U you know I like I like stories or I like uh investment ideas uh that have that alternative and and and large

Percentage of ways to uh for for your thesis to play out and now I can’t think of a better one than than precious metals because you have the 6040 portfolios being pressured to change their location you have the central banks doing the same you have the skepticism across you know the globe

Really towards the metal uh you have most people focus on crypto now and and crypto basically is is NASDAQ right it’s the same trade I mean if you look at Bitcoin and and NASDAQ it’s no difference especially in the last three years um and so I think that

That’s all linked and to me it’s a much better opportunity to be a buyer of of matal year because I I think that that uh price change will be uh very meaningful in terms of changing the multiples of business is to have that leverage towards the gold and and

Precious metals overall and as we see that occurring uh I think it’s going to create a lot of uh great generational wealth opportunities now as for the miners um it you’ve talked about recently how they’re really undervalued compared to the metal can you expand on that and

There’s a also a question a lot of people ask is with Rising Energy prices is that going to have a negative impact on miners so uh your perspective on both of those ideas look I think there’s a lot of things to unpack there number one yes miners are extremely undervalued

Right now if you look at the GDX uh ETF it it it’s sort of not telling the true story because royalty companies have kept their ground quite well relative to the miners overall but if you look at miners like Newman they’re down over 60% from their Peak recently and that’s you

Know reminiscent of of other periods like the global financial crisis is um in which it decline quite a similar uh uh number actually about 67% from P to trough and so if you look at the fundamentals they haven’t drastically changed in the last two years or so well

The the big changes if you see is companies are still doing more and more shareholder friendly uh policies such as uh specially dividends uh know some of the miners are now paying more dividends than the utility companies utility for those who don’t know is a proxy for treasuries people buy those uh those

Companies in order to receive yield and know knowing that a lot of those yield yielding instruments are actually lower than uh than miners which carry a lot of capital intensive properties and other things it is very telling of how conservative those companies have been in a mining space in order to attract uh

Uh investors to invest in their companies uh but you know from a a usual uh I guess argument regarding the miners is the fact that we’re have we’re seeing production costs Rising substantially the problem with that analysis is that people immediately then link that to Energy prices and then link that back to

Go to oil and if you looked at I saw somebody else commenting in one of my tweets regarding how you know you want to be buying the miners when the goto oil ratio is declining and that sounds plausible right unless you really understand the mining industry and if

You do understand it you you will see that uh energy cost despite the fact that it’s something significant it it’s not all all know the main factor you should be focused on in fact the prior bull market we had in the mining space which was the early 2000s of a

Sustainable B market that we had um the go to oil ratio was actually falling not rising and so you know that to me is is very telling where yes there are some projects in specific companies that are very linked to oil prices but the overall industry is not and you know you

May see I’m very bullish on oil does that make me bearish in the miners no um you know I in the 70s you should have been buying both uh you know with with your portfol and so to me this is sort of similar in that sense and then not

Just the 70s the 1940s the 1910s all those three decades which are highly inflationary decades you wanted to be buying hard assets and hard assets businesses and so so know which ones are those well energy is one of them and the miners is another one and so I think

People are overthinking just because we’ve had a a bull market in energy that wasn’t really met by um and accompanied by the mining space it doesn’t necessarily mean that the mining industry uh is is in a terrible state or anything like that and for those that talk about production costs you know

Look at the relative performance of gold versus uh gold miners versus gold versus uh then look at the Copper uh miners versus copper itself and you’re going to find that copper miners actually had a very good relative performance to their underlying metal um compared to gold and

Why is that you know they both face the same thing in terms of production cost and so you know what I’m trying to say is it’s nothing to do with the energy prices at all uh you know it’s been something more specific with the gold miners given the fact that people have

Been completely neglecting that industry now is at the end of the gold miners is that the you know are we in a in a in a structural shift of the market that’s not my view I think the gold miners are not only one of the oldest Industries

Out there uh but will probably be one of the most profitable investments in the next decade and so I think it’s time to be uh know buying those neglected parts of the market rather than uh continuing to ignore them now a lot of people are looking towards precious metals cuz they

Don’t really see anywhere else to go when it comes to for example the general Equity Market you’ve talked about how it’s extremely overvalued right now you put together the market cap to GDP by country of a whole lot of different countries here and showing that the US

Um the stock market is more overvalued compared to our country’s GDP than pretty much any other Nation out there right now did you want to expand on that yes uh look I think there are some incredible opportunities in South America um you know some companies that are trading at a single digit uh

Multiples if you get into a resource uh favorable environment and those companies uh and those economies are abundant in terms of Commodities and so you would expect them to do very well in in in in in those uh setups and I I think we’re you know likely going to be

Into another one of those and so I like to be buying uh you know Brazilian equities in South America overall looks very attractive relative especially to the US you know if you can see that uh trading in very different ways and one of the main reasons why we’ve had this

Discount of of prices during uh across Emerging Markets relative to developed economies and particularly us uh is has to do with a lot of things has to do political risk which won’t change by the way we just likely to see markets prioritize other things instead of the

Political risk uh no I’m not expecting the political risk to change at all that’s that in the early 2000s Emerging Markets are a great opportunity although the political environment was crappy it was terrible you know Lula was the president of Brazil in the early 2000s and guess what Brazilian markets went up

18-fold so there are times when the markets change what they prioritize and I think that we’re going to be entering another one of those one of the things that it’s in line with what really caused this underperformance recently it has to do as well with uh what I what I

Think is the quality of Labor markets and you know recently we’re seeing what I call this AI Paradox where a lot of people are thinking that big Tac big companies are going to be always benefiting from all this I actually think that the fact that we’re that

Those AI tools are are really true uh capability enablers and in in a way where uh it’s allowing companies that used to have a whole team to work with and now you’re seeing you know some of those tools helping smaller companies with small amount of employes uh to basically have all sorts of

Incredible assistance um for free and and that’s a huge change in in this um in the labor markets because if you extrapolate the same thesis into emerging markets and you start thinking look today I use chat GPT all the time and I basically have a geologist a chemistry a historian all sorts of

Assistants working for me for free um you know it’s it really isn’t I have a a programmer a mathematician I mean all those things I mean I can ask any question and so you know back in those days with uh uh with Emerging Markets didn’t have that so the the gap of the

Quality of labor was massive now think about that actually closing not completely but closing significantly and what does that do does that make those Emerging Market companies a lot more competitive I think it does and not only that those multiples differentials between a business in the in Brazil

Versus in the US I think they’re going to be at least a lot smaller than what it is today which is at historical levels and so that’s just my two cents on how this whole thing will will probably this Dynamic will unfold now when it comes to the stock market are

You seeing any fundamentals right now that would signal that we would be seeing a crash coming ahead I know you put out a chart that really showed the correlation we’re seeing between what happened right before the 1929 crash and what is happening right now in the S&P

500 and it doesn’t uh spell it doesn’t spell good things for uh the stock market going forward but on a fundamental level are there any signals you’re seeing that uh would signal that we’re headed for a crash ahead lots of them and I would say that you know that

Chart is specifically referring to brought more trouble to me than good things because and it speaks to the sentiment you know I think a lot of people in the very beginning of that tweet I believe I said you know although these types of Trends and analoges don’t

Tend to work I I thought this was just an important historical perspective because we had such a strong rally in equity markets recently and if you look back in the 1929 before that big crash um we saw something very similar and people tend to say well you know even

The early 2000s what happened was we had this concentration as well in markets where most of the mega cap companies are carrying the indices and then um you know those things are starting to fall apart and in March of 2000 and then later part of that year what happened

Was Russell 2000 and the rest of the market begin to actually catch up and go up and so you’re starting to see that broadening of of the breath of the market think about that you’re probably looking at it you’re saying well this is very bullish right because you know now

You’re seeing all these other industries that have lag now actually starting to catch up to what technology did you know 3 months four months ago and guess what that was the very top of the market so it’s so important to look at uh those you know those prior bubble

Territories to see how things really played out during those environments and 1929 was another one of course so things are different uh you know gold was was paged at that time so think about the the monetary dilution uh policies we have today relative to those times um you know it’s it’s shockingly different

Um now there are some similarities that we should also pay attention to the wealth Gap problem is is a great one the concentration of Mega caps is another very important one The Leverage is another important one in the system outside of the government is a very good

One too so you know I don’t necessarily pinpoint that’s the timing history you should be watching for but you know there are things that you should be at least uh aware of uh in case things are unfolding similarly today now you ask me other things I mean the yield curv

Inversions from being be deeply inverted and now de inverting well that’s usually a sign of a recession ahead um you know the labor market starting to show some issues yeah that’s also a sign of things that are probably about to turn um you know the fact that you’re seeing all the

Small cap companies that represent well the economy uh completely having a very different performance relative to Mega caps that’s also something very telling so you know I think that this uh the the construction of the market is is Shifting in a large way um and and it’s

It’s a scary you know seeing the semiconductor businesses today in terms of the weight in the market retesting periods like we saw back in the bubble of the early 2000s of the technology bubble know those things are you know they don’t you know they don’t end well

Usually and so I just don’t know I don’t have the the the crystal ball when things are going to pop but you know would I be putting my Capital today to you know for the L term and closing my eyes to see where things are going to be

5 10 years from now no way I I think there’s better things to be putting their Capital towards and I think natural resource companies are going to be proven to be one of those those segments of the markets that are likely to be doing very well now mentioning the

Yield curve inversion we’ve talked about a few last times we had you on uh the chart that you put up that is the percentage of yield curve inversions in the US and how really when that gets above 70% we see a recession or an economic crisis and you’ve really put

That all together very clearly now we’re actually at 15 months uh for when we’ve seen More than 70% of the yield curves inverted so what is that signaling why have we gone so long uh with this yield curve inversion without some sort of Crisis that’s a really good question and

I wish I had the perfect answer for it but I think it’s it’s it’s been um a lot of big differences in terms of the signals we’re seeing in the treasury market versus other times in period I don’t think this time is different by the way but there are some differences

That it’s important to notice um uh one of them is is the fact that the FED is facing an inflation problem near term that it hasn’t faced in a very long time and so it didn’t know how to deal with that and therefore it called it

Transitory it tried to say all sorts of things to avoid um you know calling it a long-term issue but at the end of the day they had to raise interest rates to levels that we haven’t seen in very long time but not only that but really the

Speed of how they act was something that really caused the yield curving version issue the second thing is is that usually during other recessions that we’ve had you tend to see the 10e yield fall as as the FED starts raising rates because people start having expectations that we’re going to see a recession

Ahead and this time was not that way at all basically what happened is very stagflationary where 10 Yos are rising but during the 70s the stagflation was causing 10 year yields to rise and 30-year yields to rise because of the inflation issue now today I think

Inflation is also a problem but the main issue as well is is the number of issuances of treasuries that are happening in the market that are also causing that the upper pressure and yields in the long end and so you know it’s a little bit of a different dynamic

In that front but I still think that you know the fact that we have seen 15 months as you pointed out consecutive months of this yield curv inversion problem you know one way to play the recession idea and one way to play the you know the end of that would be uh

Betting on a steep and in the yield curve and then people start thinking wow you know but should I you know is do you think that that’s because the the two-year yield is going to fall further or the short term is going to fall further or the long it doesn’t matter if

It’s steepening that’s all that matters and so to me that’s not an easy there’s no easy trades and out there but it’s something that sounds very plausible just given the fact that first of all we’ve seen such a long period of inversions and also knowing that we uh

Know this frothiness and and people being so bullish you know may actually cause a recession here soon and a steeping in the yield curve actually being line with that so um I think it’s one way to play um U the you know even the reemergence of inflation you know I

Can’t see the 10-year yield not outpacing the the two-year yield because the FED is trapped at the end of the day and the FED can’t raise rates too much on the in the short end so would have suspect that the long end would actually rise even further so there’s a lot of

Ways to play this steepening of the yield curve that really sounds very attractive to me I mean it’s you always want to look for optionality when you have an idea and I think this one has a lot of optionality to work and if for viewers are interested in learning more

About your analysis where can they find you you can find me uh at in our website c.net or also they can find me on Twitter at taby Costa and I share a lot of ideas there but uh yeah those are the the places you can find me fantastic

Well thank you so much for your time Tavi any last thoughts Before I Let You Go no just think that that’s uh too many uh problems on one side and too many great things to focus on on the other side and uh you know I think a lot of

People just like to look at the news rather than react towards it and I I’m always thinking about ways to express my views in the markets instead and U I think there’s no shortage of ideas out there regardless if it is you know precious matters if it is the private

Side versus the public side if it is you know creating a rollup strategy to buy all these projects that are very cheap or the energy side that looks really attractive agricultural Commodities are also another place to be um in our view Emerging Markets versus developed markets also look really especially the

Ones that are resource uh abundant that there are many of them um and so there’s no shortage of things to be doing even in a small cap any a relative to Mega caps look attractive to me as well so um while there are a lot of risks I think

There’s a lot of opportunities and so I’m I’m definitely uh looking for those right now to deploy Capital fantastic well Tavi thank you so much for your time and God bless thank you this is Kaiser Johnson with liberty and finance and these are the miles Franklin weekly specials for February

19th through February 26th 2024 while supplies last first we feature 2023 1 o Silver Britannia at $315 over spot with a minimum order of 50 we also have 1 oz gold KW Grand at only $59 overs spot and finally we’re offering 1 oz platinum vcan bars at just

$69 over spot to order our specials or any of the many other options we have available call us at 188881 Liberty that’s 1888 815 4237 we’re available after hours and on weekends and we look forward to speaking with you