Announcer: Wall Street Unplugged looks beyond the regular headlines heard on mainstream financial media to bring you unscripted interviews and breaking commentary direct from Wall Street right to you on main street.

Daniel Creech: How’s it going out there? It’s Thursday, January 20th. You’re listening to the Wall Street Unplugged podcast, normally hosted by the one and only Frank Curzio, every Tuesday, Wednesday and Thursday. But this week, Frank has been out of the office, doing boots-on-the-ground research, meeting of the minds, pulling of the strings, making of the deals.

Daniel Creech: So I… Hello and welcome. I’m Daniel Creech, senior research analyst here at Curzio Research. I’m the one that gets to work alongside, behind, for, and with the one and only Mr. Frank Curzio. He’ll be back. For Frankly Speaking, he is en route or already back landed. We’re just having a lot of fun here, people. It’s been a great time to fill in. Let me say this from the get-go. Send me all your feedback, good or bad. I appreciate everything that’s coming in at daniel@curzioresearch.com. That’s daniel@curziorresearch.com. Going to try to get through three fun topics today. Two of them are kind of related, gold and crypto. The other is on China. And my comments from a couple weeks ago about a short-term trade, which those of you who listen regularly know I’m not a trader. Some great feedback on China and the trade there, and I’ll explain my thinking there.

Daniel Creech: Yesterday, I talked the mega deal between Microsoft and Activision heading into the metaverse. That’s all good. Hey, let’s focus on what’s working. The markets are being volatile right now as interest rates move higher. Anticipations are heating up over higher prices across the board. What’s working right now? The yellow metal. Gold has finally popped a little bit. Yesterday it was up as high as, between one and a half, 2%. That was on Wednesday, kind of closing in on that 1,850 mark, which is significant because the 1,800, it dip below. It’s kind of holding that, finding some price value there.

Daniel Creech: Again, I’m recording a little bit early just for production reasons. Our wonderful Garrett in Baltimore has been helping me out. And, as I explained at the end of podcast yesterday, we’re having some fan issues. So if I sound bad, that’s all my fault, not anybody else’s. I’ve had some really good conversations about gold and crypto lately, but I’m going to focus on gold here. A couple of months ago, a good friend and business owner and his business partner were talking about gold as maybe an investment. And then the other day, somebody very close to me, a mentor of mine, was asking my opinion on gold. So, I’m going to break down this as a thesis, in terms of how I think about it, how I think you should think about it in terms of an investment or kind of the hoarding, not a negative word. Don’t take me to the end of the world there, but some people view it that way, and we’re going to get through that.

Daniel Creech: CliffsNotes version right here. Does Daniel Creech think that you should own gold or allocate some money in a portfolio to gold investments? Yes. We could cut this under three minutes moving on. That’s easy, but let’s dig deep. You always want to have a plan whenever you’re thinking about an investment. Some people want to hold gold literally in the form of coins, gold bars. And this goes for silver as well, but we’re focusing on gold. You want to hold it in your hand. It’s material, it’s physical. You can use it, haven’t forbid if you need it. It’s been valuable and a store of value since we have records of history and financial transactions. You can’t argue that, you can argue about what you think it should be worth, should gold be at 1,850, should it be at 1,950, should it be at 500? That’s fine, you can argue that. The reality tells you that it has value because for the last several thousand years, people have used it as currency, store value and still do today.

Daniel Creech: No doubt it’s lost some of its momentum or luster to cryptos, which I’ll talk about in a moment. But from the standpoint of, if you want to hold gold and you’re safe or under your bed, I have no problem with that. As an investor, I would only point to that on what is your exit strategy.

Daniel Creech: If you’re buying gold, holding your hand physical gold to plan on using it, or if shit hits the fan, for a lack of a better term, that’s fine. Just be cautious on how much you allocate to that pile. I wouldn’t put all my eggs in any basket and you shouldn’t either, but if you’re only buying gold because you think the financial world is going to crash, the dollar is going to crash, lose its world status reserve currency, if you think that we are headed for just crazy inflation times and paper money is going to be worthless to where you see those comics and old-school things, and this happens over… It’s happened over history, it’s happening right now. Basically, in Turkey recently with their currency crashing and you have these cartoons, these people carrying wheelbarrows full of cash to buy a loaf of bread, they can print and print and print, but if it’s not worth anything other than toilet paper, who cares?

Daniel Creech: If your mindset is that, then okay, fine, allocate a little bit to that. Because if it comes to where you have to use or rely on the gold that you’re holding, there is so much more chaos going on in the world that you also need to have food, guns, ammo, and other situations. That’s like a survival mode. And if that came to fruition, I don’t think that that would be a long period in time. If chaos and things hit the fans so hard that you are bartering, we go back to a barter system basically, there’s going to be violence and chaos everywhere. Something major would happen with government stepping in or whatever. My point to say all that is that I’m not discouraging you from holding that collectibles or anything, just have an exit strategy. If your exit strategy is to say, hey, I’m going to barter with this, this will keep the wolf away from the door when the crap hits the fan, that’s all well and good. That’s an oh no moment.

Daniel Creech: The other way to play it is through stocks. I’m not going to get into futures or hedges like that, but if you want to look at stocks, you have a couple of options. You have gold producers, and I’m going to give away a great company who I told my friends and mentor about, Newmont Mining. It’s a longer-term recommendation in Curzio Research Advisory. It’s an excellent gold producing company with an excellent management team. And it has just a long track record of, for no lack of a better term, printing money going forward. Those are producers.

Daniel Creech: You have junior miners, who Frank has talked about a lot, had a lot of great guest on, CEOs of projects, where you have gold in the ground or resources in the ground, but it’s not producing anything yet. A, it takes time. B, it takes money to get permits and everything like that. But there is value there when you know it’s there through studies and different drilling results in such nature. That’s more leverage and more volatile because it doesn’t produce anything. So, those will definitely pop as gold prices move higher, and they’ll drop as gold prices move lower.

Daniel Creech: Then you have one amazing business strategy, which is the royalty model, your Franco-Nevadas, your Royal Golds. These companies put money upfront. They invest in projects, management teams, situations to where they don’t have to do any more labor. They’re all just capital-intensive. Excuse me, not capital-intensive, they’re just capital-invested. They put money upfront, and in return as that mine or stream starts producing, they either get a fixed price to buy gold at and they can turn around and sell it and make the difference, or they get so much in delivery, royalty payments, either in cash or actual physical metal.

Daniel Creech: I do like Newmont Mining for a couple of reasons. A, it’s producing gold and it’s going to give you tremendous leverage to it. Now, I’m not saying this podcast is not about why gold is not going to ever go down from here. I don’t know where the price of gold is going to go, and I’ve been wrong for a couple of years. I admit that. I’ve had conversation with people over time about, hey, where do you think gold prices are going? I can’t believe… Frank and I have joked about this. I know Frank’s talked about this as well. I have egg on my face. I mean, I’ve been bullish on gold for a few years and it’s gone basically nowhere, or a little bit down. I mean, it spiked here and there. I think it cracked 2,000 an ounce in 2020 during the coronavirus. That was kind of oh shit moment. Oh, that’s twice. Now my mom’s going to yell at me if I say it one more time. Three strikes are out.

Daniel Creech: It spiked to 2,000 during that. It’s pulled back. Now, it seems to have found a base around the 1,800 level. Give or take on either side. I’m not saying it’s not going to go down from here. I’m saying that the odds going forward of it going a lot higher or a lot lower are in the favor of a lot higher. We don’t have to rehash the easy money policies, the recklessness of governments and federal reserve here in central banks around the world, endlessly printing money, which leads to those cartoons, in some cases about wheelbarrows full of money, low interest rates. And you got your typical knocks, hey, gold, doesn’t pay you anything. As Warren Buffet joked, you dig a hole in the ground to grab gold, and then you dig another hole to bury it in there. It doesn’t pay dividends, it doesn’t do anything. That’s all true. Doesn’t mean it’s not valuable and doesn’t mean you shouldn’t invest in it.

Daniel Creech: Taking Newmont, for instance, this juggernaut of a producer recently… Let’s see, this is going back to December, put out its outlook for fiscal year 2022 and beyond. This juggernaut is saying 2022 outlook with attributable goal production, it’s going to basically produce around six million ounces of gold per year for the long-term. Somewhere around that. It’s all-in sustainable cost are $1,050, but let’s round up to 1,100. So at current prices, let’s just say, hey, it’s making seven to 800 bucks per ounce of gold. The power behind this is because it continues to focus on driving down cost. Obviously, you want your cost to be lower, and you want the price to go higher because that’s going to funnel right to the bottom line.

Daniel Creech: And a conglomerate like Newmont, hey, everybody’s facing inflation and higher prices. You don’t think the fuel cost for Newmont’s mines are going up to run all its trucks and equipment. You don’t think pay has to increase for the workers and employee wages like everybody else. Of course, it does. So, they have to manage. That management is managing that, but they’re guiding to an all-in sustainable cost, AISC, if you’re in the biz of under 1,100. And they’re projecting, they’re making these assumptions on $1,800 goal prices, which is fantastic as a management or as an investor, you want your management team to be conservative to the point where you don’t want to be disappointed. We’ve talked about expectations in the past, how that can cause volatility in your stocks and everything else.

Daniel Creech: Management is taking a conservative approach saying, hey, we don’t need gold prices to go to record highs. We don’t need gold prices to go through the roof to make money, we are going to focus on producing millions of ounces of gold for the next foreseeable future. So, several years, and we’re going to do it and drive the cost and keep it around $1,100. In the meantime, it pays, let me pull something up here, roughly pays, let’s just round down a three and a half percent dividend yield while you wait. So, what do you get when you buy Newmont? You get one of the best management teams, one of the largest, if not largest producer right off the bat, a conservative management team guiding for gold prices, a dividend that’s much higher than the S&P 500, much higher than the 10 year treasury, which is even moving higher towards 2% is three and a half percent.

Daniel Creech: Yes, you have volatility in the share price and you don’t want to just buy it for the dividend, but think about the business. I focused on this, think about the business you’re investing in, they can control costs, management’s guiding for the entire year already, which means they’re locking in different expenses and whatnot. Oh, I can’t believe I said that, to manage and control their bottom line. Yet, if gold prices move higher, and there’s every reason they should. Again, those situations other than really the boost and money printing that has happened since the coronavirus have been the same. So, that’s what’s frustrating about gold, and gold price is still relatively boring, for a lack of a better word.

Daniel Creech: Honestly, I can’t believe goal prices are 2,500 to $3,000 an ounce. And I’ll get to this in a minute, in a world where crypto and Bitcoin is hovering around 40,000, I don’t think it’s hard at all or a long stretch to walk out on a limb and say, hell, take a percentage of that. You don’t think gold, which been around as long as we have history can trade at four or $5,000 an ounce or even much higher. It can go parabolic just like everything else.

Daniel Creech: Newmont would be my favorite way to play it just because of what I’ve talked about. I do like the royalty model and Royal Gold and Franco-Nevada. Depending on how much time and effort you want to put it, the juniors are going to give you leverage. But again, I’m talking from a mindset of, hey, this is what you would buy gold bars for and allocate a little bit of money here. I would allocate a little bit more money to the stocks’ investment side, because A, Newmont’s paying you a dividend. You also have price appreciation potential, share prices could go down as well, but always have an exit plan. Hey, if Newmont doubles, are you going to sell? Are you going to take off half? If gold goes to $3,000 an ounce, are you going to sell and take some profits?

Daniel Creech: I don’t know about selling everything and I’m not giving personal advice here, but you should have that plan in place. You should know going into it if I’m buying X, then I will sell when Y happens. That’s good for everything, because you can never realize you don’t ever make money until you actually sell. You can make paper gains, you can have paper losses, but until you execute the investment, which is both the buying and the selling, it doesn’t matter. So focus on that. Make sure you have a plan. If you’re going to buy Newmont, if you’re going to buy Franco-Nevada, if you’re going to buy gold bars, just know why you’re buying it. And when you’re going to, at least take some profits or when would you cut your losses. What if gold goes to $700 an ounce or $500 an ounce? No doubt, all these companies that I’ve mentioned and talked about related to gold would go down with that. That is how Daniel Creech is looking at gold and gold investments.

Daniel Creech: Turning to another volatile sector and even more so is crypto. Now, crypto currently, and again, I’m doing this a little earlier than when you guys get it, but Bitcoin is holding around the 41,000-ish mark. Of course, those move like crazy. Let me address one thing quickly. I don’t know, just like the crypto version of gold, should you allocate money or should you invest in crypto as a diversified portfolio? Yes. Moving on. Why do I say that? Because the world is big enough for both. It doesn’t have to be gold or crypto. It doesn’t have to be stocks or bonds. It doesn’t have to be real estate or businesses or stocks. The world is big enough. Investors should and can allocate to different things to be diversified.

Daniel Creech: Frank and I have talked about this in the past, and we joke about this, but I really just honest to God, gosh, please email me, daniel@curzioresearch.com. Give me some heads-up. Why is it do you think there is such a negativity? And it’s on both sides, just like politics, you got crazies on both sides, but why are there some crypto people that can’t stand gold? And why are there gold people that just think crypto is going to zero? Help me out there and email me.

Daniel Creech: With Bitcoin a lot of it is tied or a lot of the thesis is just like gold, people value scarcity and limits. So there’s only going to be 21 million Bitcoin ever. People are going to value that. And just like gold, you can argue granted, it’s a lot newer. It’s only what? 11 years old, Bitcoin, but there is value there. There’s value there, not because Daniel Creech says so or not because you say or don’t say it has value. The reality is, it’s around $41,000 or so right now. Okay? Pay attention to that. And that’s okay.

Daniel Creech: So, if you allocate money to crypto, and depending on your portfolio now, a couple of people I’ve talked to about gold, they are more well off than your average bear. But that doesn’t mean that the average guy like me can’t invest in both crypto and gold and insurance and bonds or whatever. So, don’t get so hung up on the number or the value, but more of the percentage of allocation that you’re doing. And because crypto gives the opportunity and volatility of such massive gains, i.e. basically zero to 40,000 in 10 years, you don’t have to allocate a lot of your percentage or a lot of your net worth to make a life-changing or a big score. That’s positive. When you have opportunities like that, which is what crypto is giving, you to not only pay attention, but at least participate in some of that.

Daniel Creech: So Bitcoin, 21 million. The limit there, the mining a lot like gold with these powerful computers, all that is going to take calls. So, you can play Bitcoin through regular Bitcoin. There’s a lot of companies that are holding, well, not a lot, but MicroStrategy, you can play through stocks if they’re holding it on its balance sheet. Obviously, the minors, like Marathon, Riot Blockchain, Marathon Digital, I believe… I’m having a brain freeze there. And just like Newmont mining for gold pay attention to what it costs them to break even on their Bitcoin. If it costs them $50,000 to mine for Bitcoin and Bitcoin’s going to hang around the 40 or $42,000 mark for the next three or four years, that’s not good for the stock obviously. So, pay attention to that and how you want to play it.

Daniel Creech: From a macro-level, the reality is the market is telling you Bitcoin is valuable and it is acting as a hedge against chaos, against other currencies because of that limit in value, or limit in quantity. That’s a good thing. Not to mention, just like… And quickly the reason why on Wednesday, some of Galaxy Digital. So, another way you can play is you play through Bitcoin, the cryptocurrency. I just mentioned a couple of minors. Galaxy Digital has been a stock that Frank and I have talked about run by the wonderful Mike Novogratz. It’s a conglomerate in the crypto world. It’s got its hand in just about everything, from deal making to investing, to custodial, to wallets, to trading. I’ve been extremely bullish about that.

Daniel Creech: The reason I believe it dropped on Wednesday some was because I bought some more on Tuesday for my personal position. So, if you’re listening to this, you know I’m big and I’m planning to allocate money to that over time. And I’m buying as it’s going down and believe me is it going down. So, I feel your pain there. I’m getting my teeth kicked in. You could all smile and have a cocktail and a cheers if misery loves company on that.

Daniel Creech: Bitcoin is going to stay around. I think that argument is over. I don’t think governments are going… When I think about the big macro risk, hey, what if the Internet goes down? Yes, that’s a macro risk, and your Bitcoin is not going to be helpful if you don’t have any Internet connection. That’s just like holding gold bars though. That’s a major chaotic event, where basically you better have other supplies if that’s the situation for a long period of time. I don’t think that that’s just to say, oh, well, if you don’t have the Internet you can’t use your Bitcoin.

Daniel Creech: I don’t think that’s a strong enough argument to then say, well, just write it off in general and don’t ever invest in it. I just think that’s too far of a stretch. Because like Frank and I have talked about, and you can see through different headlines and news articles, the amount of money flowing into Bitcoin and flowing into projects related to crypto is just massive. It’s in the billions. And it’s going to continue to be that way for at least the foreseeable future. That is going to be a major tailwind in the space. Doesn’t mean Bitcoin goes from 40 to 80 or 100, although I do think it will crack six-figures over the next year. I think it’ll be very volatile to both the up and downside, but I think it’s going to finish higher than lower over the next year to 18 months. I know that’s not a great prediction or I’m not going too far out on a limb and hand anybody the saw, just giving you my personal perspective.

Daniel Creech: Again, just like gold, just like having a plan for everything else, if you bought Bitcoin at seven or eight or $10,000, and here it is at 40, if you take some off the table, I’m not going to yell at you. That’s fine portfolio management. I’m not giving personal advice, I’m simply saying you have to manage that, but have a plan, have something written down to where you know, hey, this is why I’m getting in. This is what I’m going to do. I’m going to do X. If Y happens, I execute. The world is big enough for both. I think you should have allocated capital to both Bitcoin and gold.

Daniel Creech: One last thing on Bitcoin here is, it’s a paradigm shift in breakthrough to the concept that, and I can’t even appreciate this to the fullest extent that I should, but the idea and the transfer of goods, of value, whatever you dim that to be, whatever price. Over the Internet, mobile to mobile, computer to computer without a bank, without a third party, 24/7 as long as you have an Internet connection is a massive breakthrough that is being used and is being built out across different platforms, smart contracts, which is where you can execute contracts without a third party, all based on an algorithm where two parties can agree. That is massive. That alone is significant enough to allocate capital. It’s a starting point to say, hey, this is at least something you should dip your toe in as you look into it further, it’s not something you can afford to ignore. That’s my macro take on both Bitcoin and gold.

Daniel Creech: A few weeks ago, when I filled in for Frank when he was attending the Consumer Electronics Show, and real quick note on that, Frank put together a watch list of some of the stocks that found or caught his eye. He’s putting together a special report/watchlist for free. So, go to curzioresearch.com, check out that. I don’t know if you have to sign up for it, or if you can just download it, but give us your email, throw us in. We got to get something from you guys. We got to provide value. Hopefully, you’ll come and be a long-time lifelong customer. But anyway, be sure and check out his CES watchlist report.

Daniel Creech: While he was there, I was filling in for Frank, and I mentioned from a trading’s perspective in volatility China’s gotten so beat down and there’s so much negativity going on. I would think that China would be a decent short-term trade. And the reason I said that was because we’re getting close. We’re approaching a major, major event that happens once every four years, the Olympics. The Winter Olympics are in Beijing and they’re about to kick off. My thesis behind this was, when looking at a trade, China was down. Wow, man, what was it? 25 or 30% off of its highs, I believe.

Daniel Creech: When I was talking about this a couple weeks ago, I was trying to make the point where, hey, things aren’t just going to evaporate. China continue to be dead money or trade sideways, but it’s not going to zero. It’s a massive economy. You can argue if you like the economy or the way it’s run, the combination, the attempt to blend capitalism and communism. I don’t agree with any of that. My point is I don’t think they should try to manage the way they do. I’m simply saying after such a rough year, I’m looking at Seeking Alpha down at the bottom of the main page where it has countries in the one year. So, a year ago from right now. So, last January 19th, since then, China’s down about 26%. That’s a massive move for a country of that size.

Daniel Creech: I point that out because when things like that, everybody knows. Frank and I have talked about this, they’ve cracked down on all kinds of things in their country, from Jack Ma and his Alibaba trying to spend off in financial. They’ve cracked down on gaming, how much screen time kids can spend on social media and different games and things like that, products. The Uber of China, Di… I couldn’t think of it, DiDi going public, delisting, crackdowns on online learning. I mean, they’ve dropped the hammer on a ton of stuff. I got great feedback from a subscriber here. I’m not going to mention his name, but they make a great point in the feedback, saying, “Hey, I couldn’t disagree with you more. What the hell are you thinking, Creech?” And he lists and he provides comments and he provides YouTube videos and different things about saying, “Hey, look at what’s going on over there.”

Daniel Creech: I’m not disagreeing with any of this. I really appreciate the feedback. Keep it coming at daniel@curzioresearch.com. I’m simply saying when something falls almost 30% in a year, a lot of that is priced in. You don’t need things to get fixed for it to get better or to move higher. Over the last month, China’s only up a little over 1%. Year-to-date, it’s up 0.18. This is as of Wednesday, as of yesterday, again, on the Seeking Alpha main page. My point here was this is a fun trade in how to look at things on, hey, things are priced in. A lot of this is priced in. Now, they could come out. My thesis around politics, which goes back and forth with people because you love to love and hate it, they’re not going to not try to make nice and show good on the world stage of the Olympics, which is why earlier this week they cut interest rates in the company too.

Daniel Creech: Basically, long story short, they’re just adding money into the economy. They’re just stimulating the economy. It’s a short-term band-aid fix, but I think it’ll happen. So, I’m just look at the year-to-date or the one month leading up to the Olympics to see about that, if that was a trade. Let me provide a little bit of value here and see if we can…

Daniel Creech: So the FXI, maybe we can do that. It bounced off the 35ish level. So, FXI is the iShares China Large-Cap ETF. That’s a very general way to play it. Like I said, I was just talking from a macro view, but wanted to point that out and say, when you see something dropping so hard, don’t get caught up in the momentum of, oh, well, this is going to zero or this is going to continue even further. It may, but it’s worth looking into. When you have a huge event coming up in the spotlight, don’t think that they’re not going to try to pull strings and make everybody dance. Or when you say jump, they say how high type deal because the Olympics are coming up. That’s a major thing. They’re going to make some big announcements. You don’t let these kind of moments pass without trying to take full advantage of it. Just like politicians, don’t waste a disaster. You want to take advantage of that. And as an investor, you may be able to benefit.

Daniel Creech: Frank and I were talking about China a few months ago. I would stay away from it. Now, I have switched that just as a short-term trade, heading into the politics thinking they would just try to throw everything, but the kitchen sink essentially through rate cuts, stimulus, who knows what they can announce as we get closer to those Olympics next month? I just think that the short-term momentum would be higher than lower. I’ll come back, at least in a couple months or after the Olympics, we’ll see if it popped a few percentage points, or if it remains down, and I could have some egg on my face. But continue to email me, good or bad, with all your feedback, daniel@curzioresearch.com.

Daniel Creech: I’ve had a lot of fun filling in with Frank for the entire week. Man, this is exciting stuff. I know I have a lot to work on, but I appreciate you guys so much. I’ll get better at my uhs and sos and pauses, but I want to be entertaining. I want to provide value for you guys. This is a passion, and I honestly can’t believe I get paid to do this. Until next week, you guys have a great weekend and have one for me. Cheers.

Announcer: Wall Street Unplugged is produced by Curzio Research, one of the most respected financial media companies in the industry. The information presented on Wall Street Unplugged is the opinion of its host and guest. You should not base your investment decision solely on this broadcast. Remember, it’s your money and your responsibility.