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0:00:02 – 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.

0:00:16 – Frank Curzio

How’s it going out there? It’s July 17th and I’m Frank Curzio. This is the Wall Street Unplugged podcast. We’re bringing you the headlines and Tell you what’s really moving these markets. I told you Wednesdays Gonna start getting more interviews for you guys. Got a great one coming up today.

It’s with my buddy, John Petrides, portfolio Manager at Tocqueville Asset Management. I’ve seen him a lot in the media a lot CNBC a lot quoted a lot, and I know John for over 10 years. I haven’t shown him numerous times. He’s a fantastic analyst, someone who also challenges me, which I love, because I love talking to smart people who have a different opinion than me and you’re going to see that in one part of this interview we discuss mergers and acquisitions. Is Trump going to be better? We’re going to see more M&A activity. He points out a couple of good points of how we’re seeing some strong M&A activity in one particular sector. But we have a relationship where we go back and forth. We always want to get things right. But the most important thing, what I love about John is he’s been right a lot when he’s on the podcast.

His market calls, his economic calls, and in this interview we’re going to cover a lot of cool stuff. So we’re going to cover what sectors own in the second half of the year, going into 2025, fed cuts, which are probably on the way, which John says he really doesn’t care about, and it’s a reason why, and it makes a lot of sense. And also, which I found very, very interesting is the position they have in gold and how they continue to increase. I think it’s one of the largest positions in gold. He’s going to tell you why, and not for the reasons that you know everybody thinks why you should own gold, but more fundamental. So great, great interview. Make sure, turn up those speakers. You’re going to learn a lot and let’s get to that interview right now. John Petrides what’s going on, man?

0:02:00 – John Petrides

Oh, Frank, thanks for having me on. Congrats on the continued success with the show, doing a great job and so happy to be back, man, thank you.

0:02:09 – Frank Curzio

Thank you so much for coming on. Like I said, it’s been a long time. You’re such a great guest. People always love getting ideas and things from you and we go anywhere, right. That’s what we’re going to do today. We’re going to really talk about the markets.

There’s so much going on and, you know, going into earnings season we’re not in the heart of earnings season a little bit in it. But I want to start off with the markets. There’s so much chaos, there’s so much going on with the world, yet you see the VIX at low levels. It’s almost like promoting risk-taking. You would think higher interest rates would have resulted in the market pulling back, would have resulted in housing pulling back, and we have this mixed market that we’re not used to seeing ever right, with a high interest rate environment and makes it for a tough, you know, risk reward profile. What are your thoughts on the market? How are you playing this? And I guess after that we’ll get into the Fed and what you think they’re going to do, if it even matters. But yeah, what are your thoughts on the market right here, because people are nervous, but we keep going higher and higher, hitting new records.

0:02:58 – John Petrides

Yeah, you know, I think if you look at the market as the S&P 500. The market right now is not the market. I mean, we’ve discussed this a million times, you’ve discussed this a million times of how concentrated the S&P 500 is, you know that you have a handful of stocks driving the whole ship and nothing else really matters basically. And so you know there’s this false sense of wow, stocks are doing great because the S&P 500 is up. You know, between 10% and 15%, something along those lines. And remember, the S&P 500 is market cap weighted, meaning the larger the size of the company, the larger it dominates in the index. So the Apples and Amazons and Googles, all those are the top of the list because they are $3-4 trillion type companies, which is just crazy to think about, by the way. It’s just crazy to think about companies, which is just crazy to think about, by the way. It’s just crazy to think about.

So what we like to look at is the equal weighted S&P 500. So there’s an ETF out there, the RSP, which says forget the market cap, pound for pound, what is each stock doing on their stock price, their total return, and the equal weighted is up? Sort of low single digit type returns and the equal weighted is up sort of low single-digit type returns. And that’s probably a better indication of when you’re looking at how the economy is doing versus how stocks are doing than versus the stock market which is driven by a few. So when you look at it pound for pound, what’s the average stock doing? It’s kind of up like low to mid-single-digit and that kind of feels right. When you have interest rates at 5.5% and the Fed trying to slow the economy and we’ve been in 5.5% interest rates for a full year now the economy is marinated in it and you’re starting to see cracks form for sure.

0:04:42 – Frank Curzio

So what do you see going forward? Because you’re looking at, like you said, it’s having exposure to those. I mean you can say 10 stocks, but it’s really like five or six, right 10 count for 30%, asp 500. But those stocks and those names are driving earnings significantly, right?

They’re all into the right trends in terms of AI, big data, analytics, they’re all robotics and stuff right. They’re all into the right trends to generate a massive amount of cashflow. They’re actually laying off employees which I’ve never seen in my 30-year career companies at all-time highs, but they’re doing that because they’re also not just increasing earnings, which you’re going to do if you lay off employees temporarily, but they’re increasing sales. That means they’re showing more productivity. Do you have more exposure to these names? Are you selective with other names?

Because when I look at the markets right now, when I look at the markets right now, what we’ve seen with Helen and Troy this is a company I bought back $100 million worth of stock last quarter and going through a restructuring plan and falls 30% right. A consumer-related stock that sells stuff most of their stuff, 40% of the sales are through Target, Walmart stores like that Even Salesforce, great company, gets wrecked. I mean it seems like what pockets and what areas and how you play in this, because it seems like you pick the wrong stock, you could be down 20%, 30% in a day and even if you pick the right one, it looks like outside of those top five or six that maybe if you get a company that reports good earnings and raises guidance, maybe you get like a 5% 7% pop. It just seems like the risk-reward is tough. But where are you looking right now? Because it seems in this environment it’s not as easy as it was, say, six months ago, nine months ago, at least from my point of view.

0:06:04 – John Petrides

So it’s a great question and there’s a million ways to slice and dice it. I think the one good thing that, or one of the good things about today’s environment that we have that was not present in 2021 and, to a degree, in 2022, is that I think investors are finally rewarded for being diversified, meaning, yes, there has been a one horse race In the past seven years. There’s essentially been one asset class that has dominated all the others and that has been large cap US-based technology growth companies. If you look at the returns, there’s essentially no comparison to anywhere else in the world. And guess what? That is a very crowded trade right now.

If you don’t own you know shares of the mag 7 individually, I’ll guarantee you you own a lot of them through all the other mutual funds and etfs, throughout your 401k, you know, in your investment portfolio. You own them somewhere. Uh, the whole world owns those stocks, right? So that means there has to be value elsewhere. So you know, international developed countries, large cap international outside the US that sell globally is really really attractive here, especially with all the political issues going on in Europe War, obviously, between Ukraine and Russia, has scared some people away. You already have cost cutting, interest rate cutting going on in the European Central Bank, which, hey, if people are all excited about it on the US, why wouldn’t you be excited in Europe on that? You have Japan seemingly seems to be getting itself turned around there from a positive inflation growth without having to manipulate the market as much as it has.

So I think the US growth story is very, very well known. Valuations are not as attractive. Fantastic companies, as you mentioned, generated tremendous amount of cash flow, zero balance sheet issues, great trend in AI, all that good stuff. But if you’re playing the long game, there’s a lot of value to be had in international. Small caps have been really left for dead and been massive underperformers. Small cap stocks are really really interesting here. And you know what, frank? I know your discussion is principally on the equity side of things. The bond market is finally investable. You are earning yield income above the rate of inflation for the first time in like 15 or 16 years, 17 years, right.

0:08:35 – Frank Curzio

It’s not a bad investment going into it’s not a bad investment, and you know what Interactive broker’s money market account.

0:08:41 – John Petrides

Yeah, exactly, and if you want to be patient and you want to sit in the catbird seat and you had a little bit of cash sitting on the sidelines and it’s picking up 4% of money market fund, which was not happening from 2009 until 2023, you can have some there. So my point behind that is the way we look at it, and particularly my team. We have balanced strategies. You have some US large cap. You should be buying or looking at international developed. You should have some bonds. It’s OK to have some cash and, for the first time in a long time, we think being diversified across assets is attractive and you could play it, so you don’t need to be on one side of the boat, despite the fact that that one side of the boat continues to seemingly feel like it keeps going up into the right with no end in sight, which never ends. Well. Nothing ever goes up into the right forever. Yeah, I know it’s been a while, though. We saw a downturn in 2022 temporary.

0:09:44 – Frank Curzio

I know it’s been a while, though. I mean we saw a downturn in 2022 temporary, but it seems like a downturn, especially since I don’t go back since dot com, right, I mean that was a big downturn. That was three years. Three years of 75 percent declined over three years. Now, you know what you always said uh, the worst thing that happened to our government during the credit crisis, they made money on everything that he bailed out. They made a fortune on it, right? So it gives them the okay to bail out everybody and everything now, and just money goes behind everything. But even with COVID, what was it? 30 days? You know 2022. Okay, we had a few months.

These downturns, they’re severe, but they’re so quick that people come in and buy stocks and I guess you know staying with the part. What specific countries does your team maybe at Tocqueville like the most, because I’ve heard the pitch for international for over 10 years and it’s been blowing up in everybody’s face.

I feel like, for the most part, when you have US exposure, you have US companies that generate I mean, you probably know a percentage better than me around 40% of their profits overseas. But it just seems like even when we have inflation, even when we have high interest rates, this is terrible for other countries even though they’re lowering rates, it’s just terrible when we’re able to pass off inflation to them.

I agree with you the valuations are great, but being very selective is not easy. Where owning ETFs is easy for different countries, but then you have to buy a bunch of stocks where guys like you and me we look at individual names and can pick and choose.

0:11:11 – John Petrides

But how does an individual investor, maybe from the ETF side, play to what country? Yeah, so it’s a great question. And the issue with being a longer-term investor is it’s like, well, what’s the catalyst? Because you can look at something that looks cheap forever, like international, and when you’re looking at international stocks versus domestic, the strength of the dollar is usually the primary driver, and then it goes down into politics and all these other issues and then it gets down to fundamentals, interest rates and all these other things before you get to the pure fundamentals.

But it’s definitely developed Europe Japan again is starting is looking attractive, but it’s not necessarily just. It’s those companies that are domiciled there but they sell globally. That’s what you want, that’s what we’re looking for. It’s those larger cap companies that are based in developed Western Europe, in Japan, that sell internationally and don’t necessarily get all of their sales from their domestic country, and those typically that give back a big dividend.

So, for example, we primarily our team, specifically within my team, specifically within Tocqueville buys individual stocks, buys individual bonds. But if we want international and or small cap exposure, we do utilize ETFs and some mutual funds and there is a Vanguard, international, high dividend yielding ETF VYMI. I want to make sure I get that right when it’s international stocks, larger cap, where they have a high dividend yield, so you’re trading at a discount to domestic stocks and you get paid to wait with the dividend. So that’s an interesting way to play this theme and within our individual equity strategy, you lift up that hood. We’re buying individual stocks that fit that theme as well, so that’s something where we’re finding attractive opportunities for sure.

0:13:00 – Frank Curzio

Yeah, it makes sense. So you talk about catalysts right, and that’s how I like to invest, because value cheap stocks get cheaper. What’s the catalyst? What’s the growth catalyst Right? Is the Fed lowering rates a catalyst? Because, let’s face it, we’ve been waiting for a year, which we were ahead of it.

We played it wrong. I thought the market was going to come down a lot more because in 2022, we started raising rates right, and we started raising rates until the market come down and I knew the Fed wasn’t going to cut. It’s just what they were saying. They weren’t going to cut, especially 2% inflation rate. I don’t know if we’ll get back to that and I’m like they’re not going to cut and that was the basis for the bullish case in 2023. The Fed’s going to cut. The Fed’s going to cut a cut right. Is this a big deal? Because you know everyone’s been anticipating it. We didn’t need cuts for the market to go up tremendously or is a cut going to be like? Like, is that going to be the callous for a sell-off? Maybe, okay now. Finally, you know it’s selling a news event, but is this a callous something you’re looking for? You’re looking for the fed to cut.

0:13:59 – John Petrides

yeah, I think at this. Yeah, I think at this point, and really the past six months or so, five months, I’ve been feeling that you know, will the Fed cut and how much? Who cares? Right, and what I mean by that is the important point of what the Fed is going to do is that they’re no longer raising rates and the economy has now slowed enough, and Powell spoke last week that they’re seeing enough evidence that the Fed is not going to need to raise rates.

And the Fed does not want a 1970s Arthur Burns reboot of stop-and-start monetary policy. They want to make sure that when they cut, they’re cutting. So that’s number one. That’s the point. It’s not when will the Fed cut? And 25 basis points here, 25 basis points, the fact, the big signal that they’re no longer raising, all right. So that’s part of the reason I think of why equity markets are rallying is because they’re saying, okay, we’re done raising. Now what? Whether it’s 25 basis points, and whether it’s in Jackson Hole at the end of August or the third week in September when they meet, or, and whether it’s in Jackson Hole at the end of August or the third week in September when they meet, or the Fed has a meeting, frank. The day after the election, the day after the US election, the.

0:15:11 – Frank Curzio

Fed meets, so we’re not going to have a president then. Anyways, yeah, that’s right, that’s right.

0:15:21 – John Petrides

So I’d be shocked if the Fed did anything the day after the election. So then that kind of gives you sort of a September timeframe and then sort of a Christmas holiday gift of something. But I think the bigger picture, frank, is take a step back. Unless there is a credit market event a la 2008 or a pandemic black swan 2020 event, the reality is the Fed is probably in a range on interest rates between, call it, 3.5% on the downside and 5.5% to 6% on the upside for the next 5 to 10 years. That’s the key. That’s the key.

The fact is that if you’re buying stocks because you think the Fed is going back to 0% on interest rates, or you’re selling stocks because you think the Fed is going to need to ramp interest rates to 10%, stop. We’re finally in an environment where massive market manipulation by the Federal Reserve to move money in and out has probably come to an end and they’re going to get back to a normalized range of interest rates. And that’s so healthy, right? Because then we go back to doing what you and I do and sharpening the pencil and saying, okay, a company is going to get multiple expansion because they’re going to grow earnings, because they’re doing X, y and Z, rather than what’s the Fed going to do, and personally I have no data to back this up. This point I’m just going to make of the market has moved.

So many investors have moved to passive index investing where they just own the S&P 500, or they own the triple Qs or something along those lines, that when you see people go on CNBC or Bloomberg or some of these other networks and they’re talking so much about what the Fed is doing, it’s just an easy way to tell a story about why the stock market is going up or down, because you could blame it on the Fed, fed or you could say the Fed is action. The reality is it’s earnings that drive stock prices right, it’s earnings that drive, and interest rates and inflation come second. So Except if you’re Tesla, yeah well, who?

0:17:16 – Frank Curzio

knows, it’s amazing how much and we were on that but it’s amazing how much Tesla is going up. I mean we did very well because sentiment was so bad. I love it would send them so bad now. I mean you’re going up, with margins coming down, earnings coming down. They’re cutting prices, you don’t? You haven’t seen that right. It’s not like meta’s growing earnings you’re looking at. You know, all the apple apples, like you know at least, position themselves for ai that they’re going to see a huge growth cycle with the, the new 16 coming out. Uh, you know Netflix is growing earnings. You’re right, earnings drive it.

0:17:39 – John Petrides

But it’s interesting to see sometimes, uh, yeah, and and some exceptions, but yeah, most of the time that Well, we’ve been in a period here, frank, specifically this year, specifically where momentum has been so powerful as a factor where you just pile on one after the other and you start having people out there questioning if valuation matters, because they keep seeing stuff going up into the right and they throw the towel in.

And that’s when volatility is low and momentum drives winners higher, and higher is when, uh, people start loosening the screws on their risk tolerance and that’s when issues happen. You know there’s a lot of shiny objects that are being dangled in the window once again, frank, and that’s when my antenna goes up to be more cautious and more patient in terms of deploying capital for high quality stuff to become on sale and, to be honest with you, that happened a lot in February and March where we’ve owned a lot of the AI names and for our clients, specifically at Tocqueville, we took some profits and we were buying things in the basic material sector, the commodity sector, which sold off way too much Consumer staples which people have flipped out over, glp-1s and pricing coming down, some consumer discretionary type stuff, high quality companies that sold off because everyone else wanted these big AI plays. We were able to diversify and if you’re playing for the long run. There’s a tremendous amount of value there.

0:19:14 – Frank Curzio

Yeah, and people look at the markets. By the way, you look at the markets at all-time highs, that’s all people see. But guys like us, we’re looking under the hood. But you look under the hood, you see, the economy isn’t as great as it is, especially when you’ve seen a market at all-time highs. And think of some of the stocks that have 52-week lows. You have Nike, you have Lululemon, John Deere, Las Vegas Sands I mean, these are quality companies that, hey, it’s all about rotation at the end of the day.

And I guess that’s the next question I wanted to ask you, because I love the way you put it when it came to the fed, where you’re like, look, it doesn’t matter what they do, who cares? It’s? It’s going to be between three and a half percent, five and a half percent. I love that, but there’s a big difference between three and a half percent, five percent. So you know we’re five over five percent. Banks right, banks are going to do fantastic net interest margin wide way lower. You’re seeing you have a little more risk tolerance in terms of companies with debt. They’re going to be able to lower their, their debt and their interest rate payments and stuff. Uh, you know where do you see that, uh, you know how much the fed’s going to cut and is that determined, like how you’re going to allocate going forward? Because, like I said, there is a big difference between three and a half percent, five and a half percent. If you see the fed, you know staying higher for longer, or you know well, the question.

0:20:17 – John Petrides

The question is yes, nominally there’s a difference, meaning like from three and a half the numbers, but it’s, it’s what, it’s what. How fast do you get there Right? So my point behind that is, you know, don’t buy stocks because you think the Fed is going to run to this side of the boat or run to that. Look we, we went. We went in 2020, like you mentioned, the Fed cut interest rates to zero and bought back a quadrillion, and you know, bonds to make sure the credit markets don’t lock up, because we had COVID, right, and then we had the fastest raise in interest rates in modern monetary policy history, where you went from 0% to 5.5% in what was it? 18 months, or something like that.

So my point is you should not seize extreme moves, which causes extreme movement in asset allocation. We’re getting back to a certain level and there are generations out there a generation of investors that have no idea. There’s a generation of investors that have never seen a 7% mortgage rate. There’s a generation of investors that have never earned any money on their cash. They don’t know what to make of it. There’s a generation of investors that all they have seen is tech and growth.

So you got to remember that, longer term, there are other factors in play, and not only is it important, though, that, going back to my earlier comment that the Fed is probably not going to raise rates, but and again it’s moral hazard.

I think to what you’re saying, that if the Fed has to cut, the Fed can now be in play if the credit markets do lock up. So, for example, I’m not suggesting that’s going to happen. So in 2022, when inflation was 9% and the Fed was on their raise to raising rates God forbid Silicon Valley Bank or some of these other you had a banking crisis in the summer of 2022, because how much would the Fed, how much more money printing would the Fed have been able to do without stoking inflation higher? It would have been really in a tough spot if you had a Lehman Brothers-like scenario unfold in 2022 with inflation at 9%. That would have been really sticky. Now you don’t have that. If there is a calamitous event, you have the moral hazard, the safety net, of the Fed having to come in if they need to be, but I think we’re back in an environment where we’re going to be in a contained monetary policy range, and that’s very healthy.

0:22:42 – Frank Curzio

Yeah, I mean banks are more healthy than I think I’ve ever seen in my 30-year career. I mean the fact that the regulations are so good for the big banks that the more regulation because you can’t it’s the only industry where you can’t really have a smaller mid-cap bank like penetrate that right well, it’s just that the rules.

It’s just you can’t get over 100. That’s what happened with New York community, right, they got over 100 billion assets and what happened? That increased their ratios and went to crash in the stock. So, but the latest stress test you could see, they have to be able to withstand all these basically at the same time a 55 cut in the markets and equity markets, a 40 decline in real estate. You know this massive market where just you get a not GDP, uh, negative GDP of over eight percent, like conditions that we’ve never really so since the great depression, right. So you have to see how and what do they do after they pass stress tests. They raise the dividends and then you know just the profit generation machine. But yeah, I definitely agree with you on that in terms of you know being, I don’t see that.

0:23:34 – John Petrides

You bring up a good point, frank, on regulation. This is a slight of a bit of a tangent, but you know, it’s kind of the way I think about banking and regulation. It’s kind of like defensive schemes in the NFL. The NFL looks, the National Football League looks, to create crazy regulations. So there’s more points put on the board, because points make people excited the more you can score, so they really hamstring defense. So you get really smart people to go out there and change defensive schemes until that starts working.

So you have the banking system, which is massively regulated, so you’re not going to have a large bank issue. But if you’re an investor and you need financing, you start going to private lenders. So now you have this whole sort of shadowed banking system going on that are not regulated because JP Morgan is not allowed to make a loan, or a Bank of America is not allowed to make a loan because of Citigroup is not allowed to make a loan. Regional banks are not allowed to make a loan because of regulation, so they’re going to other parts of the market and I don’t know what to make of that Right? So if you have a severe recession, what then happens to all of these loans that have been made not through the regulated financial institutions, and I don’t know.

I don’t know I’m not trying to throw up a red flag or something but there is another lending institution entities happening that are not currently being regulated to the way that the large and or regional banks are. That has to take share. I mean JP Morgan. Actually, Jamie Dimon called it out on a conference call once and, by the way, we own shares of JP Morgan for our clients and he said that you know, the private equity guys and the private banks, the private lending institutions, are having a field day because the large banks can’t write loans to certain entities that want it, so they’re going elsewhere to get their money because they have to fund their own growth. So I just don’t know what to make of that. Volatility being low, with things being kind of quiet, despite all of the noise and a lot of things happening. The antennas S&P 500 has been up and to the right strongly since Halloween of 2023 doesn’t mean anyone should be sitting on their laurels.

0:26:16 – Frank Curzio

So let’s get to the fun part in terms of investing. Say, if I’m a client, I don’t know what the minimum is for a client in Tocqueville. Say if it’s whatever, $100,000, whatever it is, the minimum is for a client in Tocqueville. Say, if it’s you know whatever, a hundred thousand, whatever it is, if I come in and I’m a new client, how do you allocate? You know, where would you talk about international but not just allocate because, okay, fine, you put into large cash flow, but where are you going overweight right now, over the next, like you know, six months into the election, and maybe you know like a 12 month outlook, if that’s how you look at it, like 12 months is how I’m going to position this client that comes in with the average risk tolerance, right?

If it’s a 90 year old person. It’s going to be a lot different than 30 year old, but but the average person. You know. Where do you see the pockets that you’re like? Hey, next 12 months, look really good here.

0:26:55 – John Petrides

Yeah. So the public service announcement that I’d make on this is you know, we take a step back you looking to achieve. No two clients are the same. Everyone has different relationships to money. Everyone has different income needs, risk tolerance, time horizon, tax situation, right. So we figure that all out and then we say, within that our team manages six different strategies, all long, only, all liquid, all on public markets, and we figure out okay, how much do you need in domestic or core equity? How much do you need in taxable or tax-exempt bonds? What do you want? International, small, mid-cap thematic. And then we have an enhanced income strategy where we’re looking to get income first, growth second right. So usually a client is some mixture of those six to some degree where there’s some sort of capital appreciation, long duration preservation, income generation. So it really depends on the client and, like I said, very different than 2020, 21 or 22.

We’re feeling more comfortable adding to bonds today because we know we don’t have to take on much risk to get income. We started our enhanced income strategy in 2010 and 2011 because the bond market just stunk and we knew interest rates were going to go up. We knew bonds would be running into the wind, so we created this other strategy to do that. So there’d be a combination of bonds and some income and then on the equity side, we’re definitely favoring international. We’re definitely favoring, again, these developed non-US type companies. We have a lot of the high quality tech stocks. For sure these are real companies, unlike 2000. The companies that are leading the growth charge do generate a lot of cashflow, do generate a lot of free cashflow. They have learned their lesson from the dot-com play. For sure they are buying back a lot of stock. They are reinvesting for growth. So there’s a lot of good stuff going on there. We’re mindful of where valuations are, so we just weight them differently than we’d say where the market is, and then we’re adding a lot to commodities.

We think that the market has really underestimated war. The market has really underestimated the amount of debt that the US has pay from its budget just on bonds rolling off, and what the government has to buy at today’s levels is enormous. So if you think of like, you know what are the biggest expenses from the government Social Security, Medicare, defense spending and then other right interest expense will now crowd out that tremendously. So how do you cover that interest expense? You have to buy more, raise taxes or cut spending from elsewhere. Guess what, frank? You’re never going to cut Social Security spending. You’re never going to cut Medicare spending. Are you really going to cut defense spending when there’s war going on all over the place and we’re involved in it? Probably not. So you got to fund the interest expense elsewhere. So from that standpoint, gold is very attractive to us. I know gold has had. We typically own gold for our client portfolios. We raised our rate in gold, our weight in gold in client portfolios, in January of 2023.

0:30:17 – Frank Curzio

Spot gold or are you going into?

0:30:19 – John Petrides

stocks, so spot gold in our equity strategy and our income strategy. Individual stocks, because the price of gold is so high, the miners are making a lot of money and they’re paying out dividends, so you kind of get gold with an income play there which is attractive for us, despite the fact that the miners have stunk relative to spot gold over the past decade.

0:30:43 – Frank Curzio

It’s funny when you look at the miners too. If you look at their market caps, their market caps are higher than they were back then. The stock prices are cut in half because of the massive dilution that they’ve seen over the past 10 years. Massive dilution so I mean even some of the big guys. So it’s amazing when you look at dilution, people are like, well, the stocks haven’t performed market cap wise, they have, but have but stock price? No, because you’re increasing the share count by a ton right.

0:31:11 – John Petrides

So it’s interesting If you look at some of the ones that haven’t done that. Those are the ones that are 50-something guys. Yeah, earlier this year again, when the AI craze and the equity market sort of took its second level higher, the chat GPT end of 2022 was sort of the first leg, and then the end of last year was sort of the second leg, or the beginning of this year was sort of the second, or the beginning of this year was sort of a second leg. In my opinion, we were buying a lot of commodities, so commodity miners, commodity-related companies, so copper, fertilizer. We thought the utility space, which I haven’t been a fan of in a very, very long time because I thought investors were overpaying for the dividend yield, which finally got to an attractive standpoint because people are overly focused on where interest rates were relative to where utilities are. So we found value there.

And now you have everyone jumping on the board of this AI, energy, infrastructure, utility electricity type play, which is gravy for us because we assume the grid regardless of who the administrator is. That you’re going to have this continuationaked havoc this time last year on the consumer products goods. I think that’s kind of overdone. I do think GLP-1s are here to stay for sure. I do think that that will gain market share. Do you think that if the healthcare providers start compensating the drug, the prices for GLP-1s it’s game set match. You’re going to see that thing go through the roof.

Oh yeah, but I do think some of the food company stocks have probably sold off a bit too. So one way of saying is those high quality, non-ai related type companies we were loading up on earlier in the year, for sure, yeah.

0:33:14 – Frank Curzio

And all the healthcare. Now I think about it. I mean UNH is going to report pretty soon, but just that whole industry hasn’t been doing too well.

0:33:22 – John Petrides

But healthcare is really attractive. Yeah, if I was one of those companies, I would announce that I’m covering the weight loss drugs.

0:33:29 – Frank Curzio

Just announce you’re going to have 10 million people sign up to them right away. I mean they’re paying $500, $600 for this. I mean it’s $1,200.

0:33:34 – John Petrides

They get a special card or whatever, but insurance isn’t covered no-transcript and I think ultimately the numbers will be made to work.

0:34:19 – Frank Curzio

I really, really miss talking to you because we don’t do anything. Script. I say, hey, what topics you want to touch? Because we won’t talk about certain topics that are really strong to us right now. You’d be like, okay, Fed, but we rarely go everywhere and anywhere. It just makes it cool because there’s really no direction. You’ll see me looking down and writing a question down because I’m just feeding off of you saying oh that’s good.

I want to follow up on this, but I love it and I guess a yeah, you’re giving us that much of your time, but do you have any allocation of Bitcoin now that the ETF’s got approved, or are you just like, okay, gold is what we’re looking for out of that investment? And have you thought about that at all?

0:34:52 – John Petrides

Sure. So for my team specifically at Tocqueville, we have a strategy that’s called small and mid-cap and thematic, and it’s usually a long-duration diversifier to overall portfolio a long duration diversifier to overall portfolio. So, for example, if a typical client has about 50% of their portfolio in our core equity strategy, maybe 25% in bonds, 15% in our enhanced income, that gets you to 80%, maybe it’s 10% of their portfolio is in our smaller mid cap and 10% international, something like that. Within the thematic portion, we have a very small position in Ethereum and we’ve had that for a couple of years now and it’s not necessarily the Bitcoin and Ethereum is the trust and I own it personally and it’s again a very, very small position.

0:35:43 – Frank Curzio

And You’d probably pay big now if you own it for a couple years yeah, the idea behind it is.

0:35:47 – John Petrides

The idea behind it is um, you know it’s a, it’s, it’s a a platform. Not necessarily, you know, we don’t subscribe to the bitcoin being digital gold from that standpoint, but because it’s hard to value. So the idea behind Ethereum is that it’s a platform, right right Of which you can make money off of, because people if other tokens are going to work off of the platform, they got to pay you to do it. If you’re going to do things like DeFi, decentralized finance and things like that, you pay for that. So there’s a business model behind it, but clearly it’s a very Frank. When I say it’s like a very, very small position of 10%, you know what I mean. So, because we understand the volatility behind it, we understand this is still a very new technology, but again, it’s in a thematic long duration and it has to be sued with the right client. So a lot of disclaimers there saying speak to your financial advisor before you go out and start investing in that stuff.

0:36:49 – Frank Curzio

Yeah, but it’s good. It’s good to expand into that because you see the demand for it. I mean, the younger generation from 45 and younger has grew up in the digital revolution. Everything’s digital to them. So you’re looking at the gold and I feel like it’s this great investment, but it’s been pitched for such a long time and, whether you think about it or I think about it, you brought up a good point with the government, where you have the moral hazard. We don’t like that. The government’s there, but they are going to be there if something’s and you’ve got to factor that into your analysis. Right, like, oh, okay, if this happens. But when it comes to Bitcoin, they look at it like the older generation looks at gold and you can’t ignore that like demand and how they feel and the government spending and stuff like that. It’s just interesting when you see it’s more than just, oh, this speculative asset.

It’s being in that industry and talking to these people like young people, holding an investment forever just is a concept they usually don’t see either. They want to make profits right away.

0:37:52 – John Petrides

It’s just, it’s just. Yeah, you know, I, I, I think, frank, you’ve come up with a book idea on the generational viewpoint of cryptocurrency, because it is bifurcated, right, it is very much. You kind of get it, uh, you, you, you believe in it and and you have, you, you, you believe in the narrative, uh, and a technology behind it, or you don’t, because it was sort of fabricated by somebody and no one really even knows and you have massive skepticism. So for me, one of the tales of I think the whole crypto world has come out of the war and the sanctions placed on Russia and some of these other ones Because, if your traditional means of moving money have been blocked off again same analogy of a defensive coordinator of an NFL team If the government is, if the commissioner is telling you we want to score more points and your job is to come up with a defensive scheme to stop the other team from scoring more points, you’ve got to come up with a scheme.

So same here. If you’re no longer allowed to move money in traditional methods, you’re going to have to find ways to move money and it looks like the crypto market allows for that.

0:39:04 – Frank Curzio

Yeah, I mean, there’s such a disruption there with the SWIFT system too. You bring it up. I mean that wasn’t on the table to take.

0:39:09 – John Petrides

Russia with the SWIFT.

0:39:09 – Frank Curzio

That was a big surprise and that’s why, you see, I mean there’s, you see, de-dollarization of dollars always going to remain the couple of running backs. You know it’s like, yeah, yeah, that’s right, yeah, it’s, it’s, it’s crazy, like, like that changed. That really was, it was, was, it was difference maker, which was crazy.

0:39:33 – John Petrides

But again, there are certain generational things that are being shaken up. You know. Think about the oil market. You know where the, the, the, the Saudis were selling oil to the Chinese and they’re going around the dollar. The Russians in India had their own sort of transport of oil going non-US dollar. So even if they’re experimenting with those means, it is what it is. They’re experimenting with it and it’s something to be mindful of. Again, another reason why, ironically, that we’re talking about crypto and you make your comments about gold why gold is one of the largest positions in our portfolio. We think gold is very attractive If the Fed does reduce rates and that’s beneficial for gold. The debt situation on the US balance sheet is beneficial for gold. The amount of gold that central banks has been buying and storing again probably keeps the price of gold higher. So all of those things scream attractive to gold for us and all of those things scream attractive to gold for us.

0:40:47 – Frank Curzio

Okay, so the last part here before I let you go is the election. There’s a big difference in who gets elected in terms of sectors that are going to work and one of the things I see you could say, okay, well, trump’s definitely taking a lead after the debate, which I think is factual if you’re looking at every poll, if you’re looking at every poll, but there is going to be a significant difference in terms of regulation, I think, especially when it comes to mergers and acquisitions, where I see a company like Spirit Airlines and JetBlue trying to merge and they didn’t allow it because they’re like well, it’s going to create less competition and you’re going to raise prices.

But now you’re looking at Spirit, actually on the verge of chapter 11. I mean, they’re working with creditors because you know they’re in trouble. Maybe they get out of it with creditors. It might be easier to go chapter 11, just like every single airline has done in the past. If you look at Delta, American Airlines, whatever. But you know, now you could see some of these deals getting done where I feel like every deal, no matter what it is, even Microsoft buying Activision right, it’s like you just said, it didn’t even look. They’re like no, I mean. So if we do get Trump in, what do you see differently? Because it is, I would think that has to result in certain areas, especially like oil and drilling, and maybe climate change, alternative energy and stuff, and even emerging acquisitions. Is there like a big shift in allocation or it’s like, hey, we’re well-positioned either way, which you may be, because there’s some sectors that obviously are really not going to matter, no matter who gets elected.

0:42:10 – John Petrides

So I think the first thing is elections around the world. There were 40 major elections this year or there will be, and before we talk about US, you have to talk about, basically, the referendum on the leader in India. You had the issues going on in France with a referendum on, and the far left is taking issue over in France, so you have massive amounts of. There is a new president in Mexico, so the point behind all that is, whatever status quo may have been is being changed because you have a new leader in Italy that came on last year, so you have more extreme views left and right coming to the global stage. That will affect global economic policy.

It’s not just about the US, and I think it’s important for investors to recognize that. You have massive change in economic trade and flow. Because of that. It causes major policy changes. But if we focus on the US specifically, it’s really hard to handicap M&A activity. Maybe you see a rush in more M&A leading up to the election. Get it in now, because we don’t know what the outcome is going to be. You don’t know who the Democratic candidate may or may not be.

0:43:47 – Frank Curzio

No, you don’t know. It’s a long time to November. It’s a long time.

0:43:50 – John Petrides

You really don’t know what to make. The M&A and the oil patch has been going on for 15 months now. So, whether Trump is reelected or someone else, I don’t see that changing because you know, basically you have a land grab amongst the US oil guys. Because US oil guys, because oil wells are depleting, you got to buy more land with more wells and you got to figure out an alternative energy strategy, because that’s ultimately where the world is moving. So you’re going to see more consolidation. In with the on the oil patch, in with the with the on the oil patch.

Hard to tell what happens on the bank side of things. You know the government has tried to prevent too big to fail. But you know, when the banks were going down in March of last year, who did Janet Yellen call up? She called the big banks and say hey, can you take some of these off our plate Because we don’t want an issue in the credit market. They create more too big to fail. So you know, at the end of the day oh and by the way, let’s not forget about the impact on interest rates Money is not free.

It is expensive. Typically, leverage is involved to do deals. You’re seeing more stock for stock type of deals rather than going to credit markets. So where are interest rates at a certain point in time when companies want to do deals? What’s their cost to finance the deal? So a lot of factors involved.

Under the current administration, lina Khan came in as a massive hardline. Stop to further consolidation. And you know what, frank, ultimately deals got done. There were just a handful of deals that may have spooked the overall M&A market but at the end of the day, if things were delayed and lawyers got paid more money and investor bankers got paid more money because the delay, at the end of the day the deals got done. So you know, I don’t, I don’t, I ultimately don’t see that much of an issue.

It’s hard to really handicap. You know, the biggest issue is obviously taxes coming into the election because the Trump’s tax bill sunsets in twenty five. So odds are if he gets reelected or if he’s elected again, he’s going to extend those. How we pay for it is another story, but most likely that’s going to get extended. Democratic candidate comes in and wins and they end the sunset. That’s an impact. Do they raise rates on the corporate tax rate? That’s not going to help stock prices much because it makes earnings go down if corporate taxes go up. So it’s really tricky, unlike 2016, I think, where you had a clear understanding of the agendas for Trump and you had a clear understanding for the agendas of Hillary Clinton. At the time you could kind of see what sectors would benefit and what wouldn’t. It was crazy right.

0:46:56 – Frank Curzio

I remember, because when Trump got elected, I remember the market came down a lot right.

0:47:00 – John Petrides

People were worried and all of a sudden, boom, it’s just like the market came down for like six hours it was like it was like at nine o’clock when they started announcing their outcome, or whenever it was 10, 11 o’clock, the markets, the intraday, the futures, sold off aggressively to about 4 or 5 in the morning and then everyone’s like, well, maybe companies are going to make a lot of money now and you sort of had a rally and things like that. 2020, we had the spending with interest rates at zero. The agenda was spend big on infrastructure. We got the US infrastructure is falling apart. Guess what?

Whether you like it or not, Biden has definitely came through on that. There is a lot of money being spent. Part of the reason why the economy has been as strong as it has been has been because of government funding to support infrastructure spending. There’s no doubt about that. I don’t know it’s hard to outside of social issues like immigration and things like that. It is really hard to see where, because Trump is entering this election in a very different tone and a very different manner on his agenda than he did in 2016.

0:48:06 – Frank Curzio

He didn’t accept crypto. He accepts crypto now. Again, it’s a lot of positioning for votes too right, 100% Outside of taxes and immigration.

0:48:13 – John Petrides

It’s hard to see where Trump comes out and you don’t know, outside of continuing the narrative on the Democratic side, of falling through on inflation and green energy and all that stuff. You don’t know if Biden is going to be the candidate and or if, who the replacement is, what their agenda is going to be. So it’s tricky. It’s very, very tricky to invest purely on what the US election is going to be. That’s why, you know, try to focus on company fundamentals. That’s the best thing you could do at this point in time. It’s a tough question.

0:48:44 – Frank Curzio

That’s why I asked you. Young, you know everything.

0:48:55 – John Petrides

So I know it’s a tough question, didn’t? I didn’t say anything, I just gave that question to you. Let you go. So right. My goal, frank, is to come up with a reasonable answer that has reasonable probability around it, because the reality is none of us know what you’re trying to do.

0:49:00 – Frank Curzio

The best we can right that’s. The odds are not favorable, as much as we can, so no, go ahead, I’m sorry no good, that was it yes, so by the end of the interview and have to answer your question. This is probably the most important part of the interview, right, I’m going to say yes is the answer to the question. Have you started looking at fantasy football? Yet? It is July, august. You’re going to hear a lot about it, right? I haven’t.

0:49:22 – John Petrides

And here’s the reason, frank. Last year I changed the investment process a little bit towards my fantasy, because usually you’re right. Then on, I’d have the trapper keeper out and I’d be breaking down the spreadsheets.

0:49:35 – Frank Curzio

Did you win last year?

0:49:38 – John Petrides

Were you league. In the 22 years that I’ve been in my fantasy league, I scored the highest cumulative points that anyone has ever scored, got the buy. I had a couple of players get injured and I lost in the semifinal round, which is that’s where the luck, you know. That’s why I like investing.

0:49:54 – Frank Curzio

There’s a lot of luck Investing.

0:49:55 – John Petrides

you got to play the long game and if you’re worried about day-to-day movements, you know. So I did the least amount of research that I ever did in fantasy and I scored the highest points that I’ve ever done. So I’m going pure growth and my strategy is take the best player at that moment in the draft that I could find rather than playing value and and and that’s that’s where I’m going with it. So my keeper is.

I took Jordan Love in the 13th round last year nice and you keep one player and you select that pick. So I think that’s who my keeper is going to be, because I don’t give anybody up for it right. 13th round 13th round.

0:50:32 – Frank Curzio

That’s amazing.

0:50:33 – John Petrides

Keeping that right so so I think that’s where uh you know, uh, uh, that’s where I’m at. See the important issues.

0:50:41 – Frank Curzio

Right, these are the important, exactly, we have sons I’ve done one of my daughters actually into football, so I do fantasy with. Oh nice really. Yeah, have you done that.

0:50:48 – John Petrides

I’ve done a couple of, uh, father-son leagues and it’s a lot of fun, yeah, yeah, this is gonna be the first one I do with her, so I throw the football she throws a football is my youngest, with my eighth grader.

0:50:55 – Frank Curzio

She throws a football. She’s a rocket spiral. I can’t, I don’t, I can’t. I can barely throw a spiral. Now she throws a spot. I’m like she’s playing football.

0:51:01 – John Petrides

I’m like football, really I was like, yeah, the rotator cuff isn’t what it to be frank, no watch that now we’re at that age where you gotta be past that age to be honest with you.

0:51:10 – Frank Curzio

Yeah, I don’t know. But, john, listen, thank you so much. Yeah, we have to have you on again. Uh, I love having you on me going away, like I said, with subjects, and I know my audience loves you because you always provide really good ideas, good sectors ideas and stuff like that, and you’ve been right a lot. You have a great track record, especially coming on this podcast, so I really appreciate it. If someone wants to get in touch with you, Tocqueville, how can they? What’s the easiest way?

0:51:30 – John Petrides

Well, go to tocqueville.com T-O-C-Q-U-E-V-I-L-L-E.com. You could find me and my teammates on there, along with the rest of Tocqueville, would love to engage with anyone who could be interested to help you out. If we can answer some questions, that’d be great. And read our commentaries. It’s all there open for the public to take advantage of Love being a guest on the show. Frank, I could sit here. We could do this all day long. Thank you for having me back on again. Congrats on the success.

You know Frank and I were talking before I got on. You know we’ve known each other for almost 10 years now, but I was listening to Frank before I became a guest in 2011. And you know Frank has been a. You know there’s there’s a lot of podcasts out there, but Frank has been a pioneer in the. You have been a pioneer in the podcast world, for sure, and it’s a credit to you and your loyal you know viewers. Right, I mean, clearly you’re doing something right.

If you had the longevity that you have in this industry and in the podcast world, uh, because you were doing stuff before anyone else was, you were. I remember at the time, cause I had a long commute I was like I gotta you know it’s gotta be a podcast out there somewhere that has that’s talking stocks. And you were the only one out there. Everyone else was technicians or you know, save for your five, 29, some sort of financial planning thing, so, and I was like you know what this guy knows what he’s talking about. So so credit to you and again, thanks for having me on, because I love being a guest on the show.

0:52:56 – Frank Curzio

I appreciate that I was just letting you go. Man, that’s cool, I’m humble.

No, I’m serious, I’m humble Thank you and really it so that makes the audience tune in even more and I’m thankful for that. So thanks so much for coming on and really, hopefully you join us again, definitely join us again, absolutely. Thanks, frank. Thanks, great stuff from John. Like I said, I’m going to have a lot more interviews going forward, getting responses from some big names now and that’s thanks to you. I think we’re over 15, 16 million total downloads in over 100 countries and now in today’s world there’s thousands of investment podcasts right, so it’s hard to separate.

If you reach out to say a new guest and say I want you on a podcast, they’re probably getting that request by hundreds and hundreds and hundreds of people and they’re like, oh, and the first thing they do is they’re going to do their due diligence. I do the same thing. When someone asks me, I try to help out on the podcast, because I’m one of the first ones that have done a podcast in the investment sector. I’ve been doing this for 15 years and you always want to help people out, but sometimes you want to make sure that it’s the right person, that you’re going on and it’s the right demographic and stuff and making sure that it can help you out, obviously, but when they see those numbers, it’s easy to get a lot of guests on, especially if they’re promoting a book or marketing or something you know kind of what you see on late night shows, right. So most of the guests are going to be people that are promoting a movie or something and, you know, get some analysis from these people and stuff, which is going to be fantastic. But some really high profile guests I’m going to start putting in front of you and not just guests that have the same opinion as me. It’s not what we want. It’s how they’re going to challenge us. How are we going to learn from them? I don’t care if you’re Democrat, republican, I don’t care what you are. You want to be fair. I want those interviews to be really great.

I never believed in interviews where you’re fighting back and forth and you’re arguing and I have a strong opinion and telling the guy what the hell are you talking about? I’m even open to getting Peter Schiff on. I mean, I kind of harsh on him sometimes, I get pissed off, but look, he’s marketing his company and stuff. But we really want to get some great people in front of you and I’m going to do that a lot more. We did that a lot in the past and went away from it, but now we’re going to get some more interviews. So anybody that you think I said this last week they think would be a great fit. They could be a CEO, they could be an industry specialist, they could be an analyst, economist, a doctor, following certain trends but of course, I look at these people as well, but I think they’re going to be a good fit and we’re all going to learn from them.

Those are sometimes the best guests I know in a podcast world and even CNBC. I feel like whatever guest is on, you know exactly what they’re going to say. They’re going to be bullish on the markets. Tom Lee’s going to be bullish on the markets. We’re going to see people who are bearish on the markets right, so you’re going to have perma bears.

For me, I want to bring out something that is different, and you do that by doing your research on these interviews, right, you do your research of everything they said over the last three, four months. Sometimes I’ll go back, even a year, but try to get even more out of them, but sometimes I feel like there’s not a lot of value in bringing on someone that’s just going to sit there. They’re going to talk their book and it’s the same book they talked about for 20, 30 years. You know, we want value now. Trends change every single day, every day now with technology. So again, we want to get some good people out there. I know, with this network that we have which is fantastic over a hundred thousand people, you know. Again, feel free, if you feel like someone’s a great guest, email me, frankcurzioresearchcom, and if I did that good fit, I’ll definitely, definitely, interview.

So, with that said, that’s it for me and I’ll see you guys tomorrow on Wall Street Unplugged Premium. Take care.

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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 guests. You should not base your investment decisions solely on this broadcast. Remember, it’s your money, and your responsibility.