Even if the world enters into another gold standard, silver, which has historically been used as money, may not retain that role in the future.
Silver, maybe she gets raw from a monetary metal to something else. And we'll be talking about what that is with Lobel Tigray of the independent speculator Lobo. Welcome back. You have a very interesting report that you recently read. On your website to the key findings. And I'm going to start off by sharing with the audience.
The first is that, uh, while gold and silver have historically held a very tight correlation, you've calculated that since 1975, the correlation is 89%. And over the last 10 years, it's 0.75, but that has changed this year. The last year, it's only a one point. 1 9 5 9 is when you calculate this a 20% correlation in the last year.
Yeah, exactly. And furthermore, you said in your article that you expect this, this relationship, this new relationship to hold in the sense that silver will no longer track gold as closely at the future, it will track copper more. So tell us about your. All right. So boy, we're going to dive right into the controversy here.
And I want to start first by just saying it I'm not couching or backtracking, but I am a silver bullet. I am a silver bug. I literally own more silver right now than I ever have before in my life. I might, my stack they're bigger than ever. And I expect higher silver prices. I have said, and people have said, I'm crazy that I, the silver spike to come could take silver to triple digits.
I think that's still. For reasons that you and I have discussed before. So please don't hate me. I'm not anti silver, or if you hate me, find a good reason to hate me for being wrong. So let me say what I'm saying. First, first off, a lot of people have noticed this, you look on a daily basis and you'll see Gold's up, Silver's down or Silver's up, Gold's down.
They S the relationship seems to broken down. What's up with that. So I decided to look at it. And as you said, we look at the numbers and the longterm relationship is exactly what you'd expect. The two monetary metals, March in law. But recently that has broke down and for the relationship to go from 0.7, five or close to 0.9 and over the decades, 2.2, just under 0.2.
That's almost no relationship at all day. Uh, for that to happen over the last year is really a striking change. I mean, that's not just me being a bears. I think that's the data. What does that tell us? Something is different in the market. Uh, the something could be manipulation. You don't need to go too far down that rabbit hole, but I don't think so because why this year people have been talking about manipulation for years and years and years.
That's why this year something. Yeah. Right. Not necessarily a bearish story, you're telling it. You're just saying there, the two variables have not been correlated this year and that, and it matters. That's correct. I'm not predicting lower silver prices. I'm just saying that the data is telling us that right.
Is divorcing itself from gold and to some degree, that could be a good thing in the sense that if you're bullish on copper, as part of the electrification story, for example, over decades to come, which I am, and silver starts behaving more like an industrial metal like copper, and it's used in that same electrification story.
Well, you know what? Silver could have a much longer and more sustained. Then gold, if gold spikes on near term, uh, fiscal and monetary shenanigans, and then that blows over, it really falls on the sort of broader congestion commodity slash industrial outlook for metals prices to go higher. And that would favor silver much more than gold.
So yes, I'm not being bearish. I am saying to look at the data and the ask the question if you want, but, but the sort of the punchline. The the real significance here is if people are seeing silver Moore's and industrial metal, and before it was just like the banks, the banks stopped hoarding silver long time ago.
Once it became obvious that it wasn't going to go back into circulation as coinage governments started disporting silver in the nineties. That was part of the story for why silver prices were so low. And now we've got Basel three, we've got banks deciding that gold is a tier one asset, but not yet. And we have more anecdotal stories like the flash crash of a couple of weeks ago, gold got whacked, came screaming back right away, but not silver.
So we see silver behaving differently on a day-to-day basis differently on a month to month. And over the last year, the correlation has burned down. So I think this is important data. Uh, I, okay. Let, let, well, let's talk about the critical question as to why, why has this relationship broken? I would say why now would be my way of dialing in on that.
And I cannot honestly tell you that I have the answer. Like maybe it's just one of those things where an idea whose time has come, or maybe it's the implementation implementation of Basel three without silver. I can't tell you exactly why, but actually for years now, people have been saying mainstream media folks have been to the degree that they would cover gold.
They would dismiss silver as an industry. And even in the industry, a lot of industry people are, have over previous years said, wow, silver is more of an industrial metal now. And I've resisted that. I'm pretty sure if we go back to some of our previous interviews, we might find a clip of me saying silver is a monetary metal, still, you know, whatever these other people say, silver is still a monetary.
Right. But that does seem to be changing. Now. Now, now, I don't know David, but it's happening. I'm seeing it in the data. And so I'm seeing that I've changed my view. I'm not, I'm not running to book Powell here, but I'm being data responsive as opposed to dependent. I'm looking at the facts. When people would say this, oh, silver is just an industrial metal.
I say, no, look at the daily fluctuations. They might go, might go up more than silver or less, you know, but they would both go up the same day or they both go down the same day. That's not happening now or it's happening much less. That's a significant change. Honest answer is David. I don't know, but it's happening.
And I'm trying to react accordingly as a speculator. Well, we'll, we'll show a charts of both silver and copper. You'll you'll notice that, uh, over the last, uh, well, since early 20, 20, they've both climbed up relatively around the same time. Um, well, one could argue that was due to the pandemic. Everything climbed up during those months, but you do see that both, uh, both metals have stabilized in terms of the price.
Uh, since the, uh, later part of last year. So yeah, you could, you could make, you can make the argument that silver is tracking copper and other base metals more closely. Now I'm saying we're seeing that shift happening. I think this develops over time and I still, you know, the reality is that many people all around the world still regard silver as money.
Silver is the word for money in any languages. So I'm not saying that silver is, is done as a monetary metal and it's never. I'm saying that the data shows as a shifting relationship and I expect, expect that to play out and increase over time. So I would not say that over the next year, that silver will track copper more closely than gold.
I would say over the coming years, it will track copper more and more closely unless I'm wrong. Unless this change reverses itself often. So many I am outside. All right. Well, you did write in your report that I see evidence that Silver's dual nature as a monetary and industrial metal is changing for the reasons you've just highlighted.
And then you wrote something interesting is that even if global finance adopts a new gold standard in the future, silver may never go back into circulation is money. Well, okay. I mean, it hasn't been really in circulation as money for a while now, though, but sure. Let's talk. Sure. And the reason for that, I mean, that's sort of the, the real punchline here, David is I'm projecting based on the change in the data, a trend over time of silver becoming more and more priced in the marketplace as an industrial metal.
But what happens in the future? If the world goes back on a gold standard, the last time, at least in the U S we had a, you know, a real gold standard, it was by metallic. It was gold and silver. What I'm saying is there's good reason to think that that may not happen in the next. And the reason for that is that historically, why, why was silver used as well as gold or even copper bits as well?
Because the value in gold is so much so concentrated that it was actually inconvenient to pay for small things with gold. You could it's malleable, you can make little bits of it, but after awhile it gets pretty inconvenient to use little teeny bits of gold that can be easily lost. Sure. Um, so you use silver to make change and you use copper to make change for silver pennies dimes.
That's how it was, but in today's world, we have solved that problem beautifully with the blockchain slash distributed ledger technology. And the, there are dozens right now of go back cryptos that are going out there. We'll see how they do, and we'll see what the government response to that is. But if at some future point let's just stipulate at some future point, the world gets tired of all this paper, money Fiat.
The thing blows up and the world realizes needs is to base money on something real. Okay. Just let's go with that. If that happens in a world where we can say here's a vault and we can infinitely divide the contents of that vault and distributed it electronically, that gets rid of, you know, needing to hire an army of Brinks army of trucks to transport your gold anywhere to make a large payment.
And it gets rid of the problem. Needing something else to make very small transactions. You can use, you know, thousands or hundreds of thousands of a gram of gold to make a payment. If you can do that instantly almost for free on the end internet, what do you need silver for to make change you don't. So I can see a future in which the world does go back on a gold standard or reality-based standard.
And that silver ends up not going back to its historic norm. And, and let me just say real quick before people get upset at me, cause now silver is real money. It's God's money. I understand that silver is real, it's valuable and it could be used to back money. Yeah, I'm just saying it doesn't have to be anymore.
And it would be more convenient for the world to go to a one standard, uh, gold standard would be simplified pricing, transactions, everything. Uh, I'm just, yeah. I mean, I'm, I'm trying to follow your logic here because you're saying that in the past, when, when there was a gold standard, people still use silver as well.
Uh, because it was, it was, it was, it was less valued than gold, so it was easier to divide. It was easier to pay for smaller transactions with, I mean, if we're, if we're going into a blockchain ledger where gold can be divided, uh, infinitely, uh, presumably that could be used that, that, that technology could be applied to any metal.
I, you, you could use that. You can use that for silver, but, but why would you, there's no need to, if you can do it. And as far as the banks go, you've got balloon volts there. Silver tarnishes, it's bulkier it's you need more of it to have the same value as gold. So it's less convenient to use tobacco or something.
And then the other thing is that, okay, let me, I'll let you finish up almost that's quick. When we had the penny was worth X amount of dollar, you had silver coins worth X amount of a dollar. The ratio between those was set by the government. Now the prices are free to fluctuate. So if you're a supermarket and you're selling twins, 4.0 0, 0 1 grams of gold, but somebody wants to pay with silver.
Well, the ratio between gold and silver is not set. So you need to actually have a price there. You know, we're selling it for this many grams of gold, this many grams of silver, this many micrograms of copper, but you'd have to have different prices and they'd have to adjust all the time. It actually, it becomes, I think there's a market incentive for the market to work its way towards a single standard that is easily measurable, universally accepted.
And I think that ends up being gold. Well, let me ask you this. Maybe it's more philosophical if you had to, if we do go back to some sort of standard, whether it be gold or a whatever standard, right? Why would gold be considered a more short form of money than silver? If you had to pick between one thing being used as a monetary metal?
Why, why, why golden? Why not? Silver? Is it because silver has an industrial property? No, actually that would, that would tend to support your question. Silver has more visible uses in the world as an industrial metal. Then you could say you could make a case that objectively silver having all these more uses is better than gold is a backer for money.
I can see that. I think that the other, um, problems with silver, the bulkiness, the tarnishing, the, the it's less convenient in other ways. I also think. Just making that transition. It might be that in the future, David, the world does go in that way, but I don't think the world will discover, oh my gosh, all these Viet currencies have, have caused this disaster.
We need to go something real and would immediately jump into silver. The banks, the central banks already have gold ports, right? They don't have silver boards. It would be easier for them to make a transition to backing their currencies with gold because they have. And so at least initially I think you start with gold and people think of it that way as gold, it's already a financial asset.
I just see the transition is easier. And then does it become self-sustaining does it stay that way? Does silver creep in as the more useful metal? I don't know. It could be that, uh, just gold to usefulness as money as part of what becomes self perpetuating. But don't forget that gold does actually. Use in industry.
It actually is used in jewelry. It's used in electronics. It's used in high-tech applications for which there is no substitute and it is more rare in the Earth's crust, then silver. So there is a real value case for gold. It's not just a pet rock, no matter how many famous billionaires say so. Yes. True. I mean, we can't forget that there are some industrial applications for gold as well.
Yeah. Maybe not in the same scale, there's other, other metal metals like copper and silver, uh, on that segue, I want to talk about Palentier. The tech company recently bought $50 million worth of gold bullion, not ETFs, not paper, uh, not, uh, futures, but gold bullion, uh, to, uh, add to their treasury. Uh, um, you know, my question is, do you, if you were an investor of Palentier, would you.
Them to do. Would you, what, what would your response be? Would you walk into the general shareholders meeting and say, I support your position because ultimately you, as an investor, you could diversify into gold yourself. You don't need a stock that you're holding to do that for you, right? That's correct.
But it's trick question because of course I would, but everybody will say, well, of course you would, you're a gold bug. If I was a non gold bug, you know, would I still support Palantir's action? And I would hope that I would be rational enough to say yes, Because unlike Michael sailor risking his, you know, the large chunk of his company's cash treasury on something as volatile as Bitcoin Palentier risks, a very small amount.
It's a, it's a modest and I think reasonable amount, cautionary, safe Haven asset in case things go wonky. I think there's actually quite important. We'll see if this becomes a pebble, it starts in avalanche. It's too early to say, oh yes, this is the Michael Saylor. And everybody's going to pile into gold now because Peter deal and Palentier did.
So we don't know that's going to happen. Maybe it does, maybe it doesn't, but I think it's very significant. And I think it's, I think it's a good thing that they did it in such a responsible, measured way. I think be very hard to make a case that they did something crazy. What do you mean by when things go wonky?
Are you saying they're holding it as some sort of an insurance hedge against, against what, why do you think they're doing this as a broader question? Wicked, we can spin science fiction urines here, David, about what it might mean. Remember these guys work for a lot of the intelligence agencies. They'd be interesting to know, be a fly on the wall in that office and see what do they know that we do?
Maybe the CFO just likes gold. Maybe he says, well, you know, I think gold is going to go up and go, go, go. I don't know. It could be a simple. Like I said, we don't have to tell us science fiction stories about what this might mean, but I, I think it's enough that a company moving in a responsible, reasonable way chose to hedge itself against future uncertainty.
And the reality is, you know, nevermind what the CIA knows or whatever. We all know that the global financial system is in uncharted waters, even. Powell and other central bankers say we're in uncharted waters and somehow they think they know how to navigate these uncharted waters. But if even those guys amongst the powers that be admitted, I don't think it's unreasonable at all for any CFO of a large company to say, you know what, a little bit of safe Haven, a modest amount of safe Haven that hardens our balance sheet, and then just strengthen it, hardens it against real black swans.
I think that's a reasonable and prudent thing to do. It just strikes me that, you know, 50 miles million dollars is not a lot of money for them. They have, they have revenues of over a billion dollars. I'm just Googling this right now. $1.1 billion was their top line revenue in 2020. Let's assume that the dollar, it was going to depreciate significantly over the next five to 10 years.
And let's assume also that they realize this and which is why they're doing this well, 50 million, 50 million on $1.1 billion. It's really. All that cash they're making on revenues. You're still going to be denominated in us dollars. They're still going to have to convert all of that into some sort of hard asset, like gold in order to protect their, their, their, their top line from being devalued away.
And the same goes for any company operating in the U S if you're assuming that the dollar is going to depreciate well, technically all your holdings need to be converted, right? It's not just, no, no, you buy insurance and you hope never to. Yeah. And most people don't want all of their net worth in an insurance policy.
So, okay. She does insurance and, and reasonable insurance, but here actually, this ties into something interesting. I'm sure you've discussed with Rick rule before his notion that historically over the last, whatever decades, the average allocation, safe Haven allocation to gold and investment portfolios globally has been about 2%.
And that currently the allocation to gold is about 0.5. So even if nothing crazy happened, even if the world didn't adopt the gold standard, if investors around the world just went back to the historic me, that would quadruple the investment demand for gold. And I've heard Rick say this for many years and I thought, well, yeah, but why would that happen?
And absent some gigantic catastrophe that shakes people's confidence in Fiat money in the, in the financial system as it is. I don't see it happen, but this Palentier thing is. People are starting to think about it. And you know what, maybe we don't have to have a big crash to make people nervous and allocate more to go.
Maybe if more responsible people like Palentier, CFO, start thinking, you know what, a little bit of hedge, you know, let's go to that historic mean of 2%. Let's go 2% to harden our balance sheet that would make a gigantic difference to the gold market around. Yeah, I was just going to say, I mean, let's say, let's assume every single company in the S and P 500 makes a 2% allocation.
What's going to happen to the gold price. Just 2%. Uh, I haven't done the math on that, but obviously it goes up. It's a multiple, it's a multiple, it's not just a marginally. I see. All right. Finally, let's talk about, uh, your views in the stock markets and we'll end it there. You wrote also in your, on your website, uh, Tina, uh, the, there is no alternative is another word for FOMO.
All these acronyms that people are throwing around. So, so you don't, you don't buy that. There is no alternative to stocks right now, correct? I th I'm glad that you brought that up because I think this is actually, it's an irresponsible thing. A lot of the talking heads on financial. Not Kitco news, of course are talking about this.
Tina, Tina, Tina here every day, all the time that Tina, Tina, there is no alternative. And what's happening is if you've got your sort of mainstream wall street blinders on and you see, you know, the traditional 60, 40 is not working anymore. 60, what is 60, 40 well it's stocks and bonds. If your whole universe is stocks.
And bonds aren't working. Then there is no alternative Tina to stock. So that means that nosebleed valuations on, on stocks don't matter. They just keep going higher because there is an option. I heard it, but this is just not true. That's an artifact of these blinders and not seeing the wider universe out there.
Commodities as a whole, for instance, are the obvious alternative to equities and commodities are not bonds and they are based on something real, right. They are. Yeah. And if you look at those famous charts of say the Dow or the S and P 500 versus commodities, despite the recent increases, commodities are dirt cheap compared to stocks right now.
So not only is there an alternative, it is objectively dirt cheap compared to stocks right now. I think it's really irresponsible for these guys and gals to get on there and promulgate this Tina false news. Right. I mean, some institutional investors have a fund mandate, so it'll be maybe a little bit difficult for them to change a change.
Okay. It could, but that's not what they're saying. They're not saying I'm constrained and I can't do this. They're saying there's no alternative what that really means. That's why I said that's really FOMO and disguise. It's it's, here's the bandwagon. Here's where the money is being made. And we don't want to be left behind.
We're going to put our money where everybody else is going. That's FOMO. You can call it Tina, if you want to, but it's really. Lack of creativity. And while we know your views on the metals and commodities are bullish, so, uh, let's end it there. Lobo. Excellent thoughts, excellent research. And speaking of research, where can people read more of you?
But everything we've just been talking about is what I've written about lately and it is available for free@independentspeculator.com. Okay, excellent. And, uh, thank you so much for coming on the show today. We'll speak to you next time and thank you for watching Kichler news. I'm David Lynn. Don't forget to subscribe to our YouTube channel and follow me on Twitter at David Lynn underscores.