E.B. Tucker, director of Metalla Royalty, discusses with David Lin, anchor for Kitco News the outlook for stocks, gold, and silver in 2022.
We're talking about the major investment themes of 2022 and the outlook for gold, silver and minors with ed Tucker, director of Metalla royalty and author of why gold. Why now you'd be welcome back to the show. Thank you for being a pillar outlook. 2200 GS series. Thanks for having me, David. Yeah, no problem.
As we're speaking today. On Friday, the Dow's down 300 points. And the, tell us about the story of your stockbroker. He sent you some, this is I, I, I get a lot of gifts at Christmas time, but this is the most unique gift I got all year. My, one of my stockbrokers sent this to me. It's a dancing bear and it's carved out of, uh, some sort of works.
And the, the, this, the Carver is pretty famous. You, uh, artists. So it's very interesting, but it came with a whole story about when the bears dancing, it's a sign of competence, you know, that the bears, you know, expressing this dominance. And, and I said, w w I mean, I love art. I said, well, what, what does it mean when your stockbroker sends you a dancing bear?
It means you've had a tough time. Uh, and, and so anyway, I, I know he's watching, so I'm not gonna say who it is, but I have a couple of brokers. So they, you won't be able to pin me down on which one it is, but, uh, it's the most unique gift I got this year and I hope next year he sends me a dancing bowl. I mean, that's, that's what I'm going for is, is, is it will be next year.
I'll, I'll get a, a match. Yes, I have big horns on it. That's the theme of our discussion today. So people who have, I guess, invested in the minerals in the metal space have had a tough year. So that pair might've been justified. If you invest in other things, the tech sector, for example, you had a great year.
Well, what's he trying to say right now? Is he, is he, is he projecting our rotation? Is he, is he giving you signs of a change of fortune? Is that what the message is? Most likely, most likely he's just messing with me, you know, expect, expects me to respond in kind, but look here, here's the thing. I don't think people have made as much money as they'd like you to think.
I mean, I, all these people now say that they're day traders, but I don't think they are. I think what's happened is, is that they took the stimulus. They bought stocks that were popular. They got on Reddit and all these forums and they started coming up with the next great thing. And now the market's rolling over.
If you look at these popular stocks, they're down heavily, in fact stocks that did really, really well with them, no fundamentals have rolled over hard. And what I see is these people freeze in place. So what it is is you pick up nickels, you pick up nickels, and then when you lose dollars, you freeze and you pause and you say, well, it'll come.
And the reality is, is that it's not coming back. Things are shifting. You have this gigantic, uh, platform with all the, the governments of the world coming out and saying, we're going to be net zero carbon emissions. You know, everybody's going to have electric cars. We're going to redo our whole power grid and all this system.
And nobody's doing the math on how much. And meanwhile, the copper stocks are just they're left on the road for dead. I mean, with, with Nova royalty in OBR, I mean, I've got upwards of a century of copper royalty exposure to the biggest development projects out there, and you could just, nobody wants that.
Right. So, so I think, I think we're shifting we're, we're turning into a time next year where, where you're going to see money, start flowing into things that are real and things that have substance and, and by the way, David, when you own something. You sleep great at night. You, you don't, you're not worried about the next thing the company is going to say.
I mean, these people with GameStop and AMC and pancake coin and sushi token, I mean, it's crazy. It's like they're sitting in waiting and these things are going down and they're just freezing in place, but what do you really own? You own nothing. So what's worked out well for me is, is that this is the time of year.
Tax loss selling is the time of year when I make bigger moves. I mean, you look around if something's down, it's because people's brokers telling them to sell. Maybe that's what my broker saying, clean up the clean up the losses, take them against gains. But I think you do the opposite of that. I mean, you look at a stock like Metalla MTA, it's still an eight transactions this year, the royalty space it's got over 70 royalties now, which is decades and decades of gold production.
Gold price is doing fine. I mean, 1800 bucks. For mining companies are making money. They're consolidating, you know, looking at Kirkland, getting bought, you know, look at these, Pretium getting bought and they look at these companies are consolidated doing great. So you see the charts and they're all being punished for tax loss, selling turn around and do the opposite.
See what January brings. I mean, that's how I think people need to think in the short run. All right. Well, we're going to talk about tax Luxe. Uh, and just a bit, but, uh, let's talk about, uh, well you mentioned earlier real and half substance, what are things that have substance now AB how do you define something that is real and something that is not, I believe that was a question for a first-year philosophy students, by the way, but this here, I mean, the, the, the most important thing to realize is that, is that the powers that be, have you playing dizzy bat?
I don't know if you've ever played dizzy bat. When you were a kid, would you put your head on a bat and you spin it? 10 20 times and you stand up and you try to walk and you can't walk because every single it's, it's a very, it's a, that's what Americans do, uh, that that's part of what's wrong with us.
Okay. So, so this is what's happening interest. Uh, inflation is going to be transitory. Oh, okay. Wait a minute. Inflation's not going to be transitory. Oh, wait a minute. It is going to be transitory again. Okay. But don't worry. We have it under control. Interest rates are going to go up. They're going to go down.
They're going to go sideways. Real interest rates are negative. What are real interest rates? I don't know. They said it doesn't matter. I mean, you see every single day you've got a new series of narratives coming out that it's very, very confusing and crypto. Okay. Now forget about like Bitcoin Ethereum, the major points, which have kind of different purposes, but you have 10,000 tiny crypto coins, which basically means you have a national suites.
Where everybody's going in and it's like with scratch off tickets as the guests. Everybody's going in and saying, well, which is the next coin. That's going to go crazy as a pizza coin. I don't know. It might be pizza coin. It might be token. What is it going to be? Well, I'm going to go after it. It's a penny.
It might go to a dollar. You know, if it goes to a dollar, then I'll be really rich, but it doesn't go to a dollar. It goes to a 10th of a penny and then you trade out of it. Dark point is on Saturday night, live it's 70 cents and now it's 17 cents. But well, maybe it'll come back, but it's probably not gonna get.
You're distracted. You see this as a huge distraction and then taxes are going to go up and maybe only for the rich. Okay, well maybe not for me, but I hope to be rich one day, but I don't want to pay any taxes when I'm rich. It's a huge distraction. And then you got virus stuff and booster shots, other variants, and more booster shots and bike proteins and 75 different times.
The way the variant can get you that the other one can get you. And it's, this is a time. Your job is to not be confused. Okay. Like, Take a minute, turn off the media, turn off the TV. Not don't turn this interview off, but turn off the other interviews and, and, and, and take a deep breath and say, what is going on here?
Okay. What do I own? And then ask yourself, what do I want to. If I want to own it for a year or two, but what are the big trends that are happening? Okay. The metaverse versus a big trend that's happening. Okay. But, but, but this is an emerging trend. Okay. Uh, blockchain economy is an emerging trend. The blockchain economy doesn't have anything to do with pizza coins.
All right. So if you have pizza coin and you think it's going to be part of the blockchain economy, I'm not going to tell you that you're. But I'm going to say the odds are probably against you. Okay. So, so look at the energy transition, how much copper is needed for the energy transition. You're going to need to find a gigantic copper mine every year or two for the next two decades.
Are you going to be able to do that? Probably not, but what's going to happen to the price of copper, probably going to go higher. What do I want to own? Mining stocks, maybe royalty stocks. Yes. That's what I want. And how am I going to sleep when I own those royalty stocks? Great. Because I don't care what happens in the short run.
I don't care about the day to day, what the fed says is the fed going to do this. They're going to taper. They're not going to taper. How much are you going to taper? They're going to raise rates. They're not going to raise rates. Look, David, this is what people don't understand. Interest rates are deeply negative, deeply negative.
And they say, well, yeah, they say, be you're wrong. The interest rate is 1% of the tenure. Okay. Yes. But the inflation rate is I say 19. The government says, you know, six or seven. Okay. That let's take the government's figure just to be fair. That means that that six or 7% interest inflation rate 1% interest rate, you're going backwards by 5%.
Do you see this? So why would the government want you to go backwards? It's very simple because if you can keep real interest rates negative, you are eroding the value of the debt. You see this. So like if interest rates are 1% and inflation is six or seven, Then every single year, the pile of debt is 5% cheaper to pay off and nobody understands it.
They say, well, this is too confusing for me. I'm just going to stay on Reddit and buy more stocks. That sound interesting. Okay. And I'm going to become rich one day, right. But the reality is, is that you go to work and you save money and you're trying to have a better life. And then the money that you say is losing value by five or 6% a year.
And that's the conservative. The real inflation rates, probably nine or 10. And so you have nine, 10% inflation. 1% interest rates are going backwards by 9% a year. And that's what people cannot understand. And they don't even want to think about it. They just say, well, I'll just say that. You see how everyone's a speculator.
Everyone is a speculator. I mean, I'm telling you I've been going to Christmas parties. Okay. And I go to the Christmas party. What have you been up to? I've been trading stocks. Everybody's trading stocks. What are you trading? Oh, you know, this and that. All this stuff. And it's down right now, but it'll come back.
Everybody is a speculator. And so next year I expect this speculation runs out of gas. There's no more stimulus check coming. Okay. There's no more liquidity coming into the average person's pocket. They got a raise this year, but everything they're buying is going up in price sales are slowing down. You know, the refinance, boom is slowing down.
Everybody got their rocket mortgage, suck the money out of their house. Went on a trip, bought a bunch of toys and plastic and stuff. And now this is all slowing down. And so as this slows down and people see the stock market is grinding sideways. It's not doing anything. It's up 300 down, 400 up, two 50 down a hundred.
It's not doing anything there's rotation going on. The big stocks are getting less appealing than the small growth stocks are starting to become more appealing because people are finding fundamental growth and they're buying. Whereas for 10 years, it's been by the gigantic tech hub. I call it a day.
That's over. It's finished. Yeah. So next year you're going to see a rotation out of that. And then you're going to see a move to something real, and people are going to say, what does it even mean? Something that's real, something that's tangible, something that, that someone else's effort to produce this. I mean, imagine when you own a room.
You have 20 or 30 years of production of an actual hard commodity, you drop on your foot and it hurts. Okay. And somebody else pays to bring that out of the ground. Where do you think prices are going much higher? So the operating costs of these mines is going. So you brought up a number of themes. Let me just summarize for the audience here.
So emerging trends, blockchain technology, of course the metaverse, uh, energy transition you brought up. So speculation coming to an end. That seems to be the major concern here for, for, for, I guess, risk of asset investors, but why would it come to an end? Uh, EDB? Is it, is it because interest rates are potentially rising?
Is it because we'll see an end to zero interest rates, which we've seen for so long that in itself could be a theme.
answering this stocks. Let me tell you, I have this gorgeous metallic mug that the company sent me made by Yeti. It's got this stock symbol in the back here, right? So let's talk about metallic. Now. Metallic got very hot in the beginning of the. Stock. We went to like 1350 us and then the money flowed out of the stock.
I watch it every single day on the screen by me here. Meanwhile, the business got fundamentally better. And so the reason I bring this up is because what we've seen in this market is speculative money flows like a giant tidal wave over to something like a movie theater chain, and then it starts to flow.
Boom all the way over to the other goes to something else. And who's left holding the bag you are. So the, the person that's least informed is left holding the bag. So speculative trends, what happens is, is this money goes flying in one direction or the other, I say, well, why did you buy a game stop? Well, Yolo, you only live once.
Oh, that's not a very good reason. Okay. So, so this is, what's been happening in 2021. Now, eventually people take losses like they're doing now. They pull money out of the market to live. Their cost of living is going up. You know, their, their wife says, look, you know, the tuition went up for the. You know, the medical insurance costs went up, you know, the, the, all these, the car, the car payment changed.
We had to get a new car. You know, we got an electric car, whatever things change, you don't have the surplus cash lying around, go to the grocery store, go to the, go to the organic grocery store costs. You're up, you know, you're ringing up your 10, 12% more than you were last year. If you buy meat, you're 30% more.
Okay. So that people pull this out. Well, this is the speculative. And so as this speculative wave moves around, okay. It, this, this, this loses its power. Every time the wave crashes, it leaves a little water on the beach. Okay. And this wave is, is diminishing in power. And so as you move into next year, this is done.
And you look at, and you say, what do I want to own? What do I actually forget about what do I want to buy? That's everyone's question Eby, what do I buy? What do I buy? What do I buy? But nobody ever says, what should I own? I want to own something. I mean, you don't buy a business. And then trade it two days later.
That's not what you do. You buy a business and you run it for four or five years and the business gets better. Well, those are traders, so, okay. Let's, let's talk about speculators. So use that speculation is going to likely dry up or right. That some, someone agree with you, maybe a speculation would dry up in the, uh, you know, 10,000 old coins that you mentioned that, uh, that, uh, many of which probably, you know, aren't, aren't, aren't going anywhere.
Don't have a future anyway, but let's talk about speculation in, let's say the resource sector, people are speculating in cryptos, but if they're, if they're buying junior companies and you don't really necessarily know. If a deposit is going to work out, isn't that a form of speculation as well? It is, it is.
And, and that used to attract a lot of speculative money because everybody knows the most exciting thing in life is if you buy a junior mining stock and they find something and it goes shooting to the moon, but that's not happening anymore. So that's not that doesn't happen in 10 years. In fact, most of the people in the market today say, what is a junior mining stock?
Now, let me just be clear. I'm not advocating people. Speculate junior mining stocks. Based on my experience over 20 years, I decided I didn't want to own any junior mining stocks. I wanted to own royalties, and I don't even want to own a royalty on the junior mining stock. I mean, I I'm interested in owning royalties on big development projects.
I mean, take copper. For example, there is no small copper mine that I know of. I mean, maybe there's one here, one there. Yeah, this is a multi-billion dollar project to put a compromise production. If I can have 1% of that, then it goes on for 5,000 years. I'm all in on that. That's something I own. I don't do anything for 50 years.
I mean, that's the best business in the world in my book. I that's what I call it. It's the most profitable business in the world. And, and so this type of thing I think is going to become in the boat because people are going to say, what do I actually. What is this? I mean, I own GameStop, I owned a bunch of strip center, video stores, uh, you know, and there's guys behind plexiglass, you know, selling used video games.
I'm not saying it's a bad business, but I'm saying, I don't think it's a $20 billion. I just don't. I mean, I, I, I think it's a, it's a real business, but it's not something that you, that you feel great about owning because the games are going to be distributed via the web. And will those guys be able to dominate that maybe, but I don't know that it's that good of a bet.
I mean, so, so I, I just think people because of their, because of the confusion they're playing dizzy bat every day, they can't see what's going on. All they can see is what's right in front of them. And so they can't, they have no foresight, they can't see what's coming down the road. And, and I don't think junior mining stocks are the place to be.
I mean, there's a lot of risks in there. You know, most of the projects don't work out, but I think when you have a royalty, you've got something that is very obviously set to gain traction, gained value. I mean, you look at the gold price. Everybody says, well, why doesn't it go to 5,000? I mean, you put the gold price at 2020 200, the value of 30 years of gold production in royalties goes crazy.
I mean, believe me, I've seen the models, you know, so, and, and why isn't the gold price moving? I mean, look at the look at, I have a, this is a Bloomberg terminal. You go on the news section of the same. You can't find one article about gold, not one. And every single article is tokens, tokens, tokens to. And, and, and Elon Musk and all it's it's it's constant.
And so the gold, the idea that owning gold is a good idea is so foreign to people that what's going to happen is one day they're going to panic and they're going to say my entire life is held on my phone. So I'm basically in a digital prison. All my pizza coin is on the phone and then just got hacked.
All my data is on the. Everything I own is online. I've got no cash. I've got no gold. I I've got some real estate, but the taxes keep going up and interest rates went up so I can't sell it. And I'm stuck. Okay. So, so this, this is the type of thing where people wake up. And so you can, if you're watching this interview, you can wake up sooner.
You can say, I'm going to be ahead of that. I'm not going to. I'm not going to be behind that stampeding herd of people that's just charging in one direction or the other I'm going to, I'm going to go. I'm going to go ahead of that hurts so that that's coming. I think it's coming this year. Gold, silver or stocks.
Let's just stick with those three assets, which will do the best in. Look, I mean, obviously I'm partial to the royalty business. I mean, I, I, I think, you know, gold goes up over 2000 this coming year, and I think the Realty business does better at a multiple of that. And, uh, you know, silver hit 50 and 1980, it hit 50 and 2011 and it's sitting at 22.
Uh, it's a by-product metal, you know, it's not something you can turn on the spigot and whenever you want. So silver, I think gets a little crazy. Um, and I think you've gotta be careful how you play that. If you play it with short-term trading instruments, you have a lot of pressure, you know? So how do you play it?
Well, Metalla Scott, you know, about a third of the company's royalties are silver lake. So I mean, that's how I've chosen to play it. You know, my stock broker could send me, you know, bears over overnight posts as much as you want. And, um, I feel great about the royalties that I own. So we go into this next year, I expect the overall markets to grind sideways, not really go anywhere, disappoint people.
Uh, and, and I think that the, that the metals are going to shine because remember there's people out there managing 10 billion and, and they're, they're sitting with negative, real interest rates, turning markets, confusion every day, and they have investors to satisfy. And it's not, it doesn't take a whole lot for them to say, I need something to.
Yeah. And, um, when, when that happens, it's too late. I that's only going to happen one time. So you gotta be ahead of that tax loss selling. Let's talk about that and we'll end it there. What does that mean? Yeah. So, so look, I, this is one thing I want everybody to know. I understand is that my whole career I've done the opposite of what the brokers have told me to do.
They always say at the end of the year, Hey ed, you got all these games over here. You've got a couple of stocks that are dogs, sell the dogs and take it against the games. I don't do that. So I actually do the opposite. I investigate my dogs and I say, well, what happened in this business? I mean, is, is the, does the business get worse?
Okay. Maybe I will sell it. But if the business stayed about the same and the stock got a little volatile and everybody's selling it for tax. I'll buy it and then wait and see in January, the stock comes out of the water, like a beach ball that you held under the water comes flying out and then I'll sell it then.
So I've done this many, many times. It's really fun to watch. It goes on until about the 22nd or 23rd of December. Everybody goes on. And nobody's trading and the market value, the volume goes way down. And then all of a sudden these stocks that were getting punished during tax loss, selling start moving up into January, they start moving up again.
And so when your broker tells you to do tax loss, selling, I'm not telling you don't do what he says, but just think about it. I mean, if the stocks getting punished, sometimes you come into January and all that punishment is done. I mean, everybody is tax loss selling, right? So you have something that's down.
You think twice about selling it, sell it in January. You know, I've done this years and years and years. It's, it's, it's a lot of fun and everybody looks at January and says, wow, why is that stock going up so much, but nobody's selling it anymore. And so if you do the opposite, you know, you're, you're on the other side of that.
It's a very fun. Interesting. Okay. Do you, do you actually save in taxes for this. Well, the thing about it is, is that, is that you're going to pay taxes regardless. Right? And so, and so you look at it in the U S you know, my capital gains rate is 23.8%. It's 20% in the high income bracket. And then there's another 3.8%.
So it's quite high. And everybody thinks that's a big deal. But if the stock that like, look at Metalla, for example, if your tax loss selling Metalla to save 23.8%, but the stocks down 25% because of tax loss selling, are you really saving any. No. I mean, you're better off letting the stock come out of the water, selling it later, you know, uh, I mean, I, I'm not going to be selling my own stock during tax loss selling, but what I'm saying is, is that take that stock as an example, are you saving any money?
If you're trying to save the 23% tax and the stocks down 25% during tax loss selling, are you really saving? No. If that stock returns back to where it was before tax loss selling, but why would you pay capital gains if you're down? Well, because you have gains and then you have stocks that your broker looks in there.
He says, Hey, you got 26. There are four of them are down, sell those stocks, take it against your gains and neutralize, neutralize, the gains you have in your pizza coin or whatever else you made money on something else. Yeah, exactly. I mean, if you have all losses, then there's no point in tax loss, but typically this time of year, the broker says, Hey, you did really well in this stock.
Beginning of the year, we have this $50,000 gain. You got a couple stocks that are down. Why don't you just sell those take. Put it against the game and then you'll lower your tax bill. But my point is, if the stock you're going to sell is already beat up because of tax loss, selling all you're doing is following the herd.
I understand. So where I've had good luck is do the opposite. Buy the stock that people are tax off selling. Then come January, nobody's selling it anymore, pops back up, and then you carry the gain into next. You can deal with it later. I mean, it's really, it's a, it's kind of a bad idea to be doing what everyone is doing at the same time.
You know, it's like anything in life, right? If, if everybody's thinking the same thing, somebody is not. You know, so, so this is the time of year where, where you can take advantage of that. That's what I've done for many years. It's worked out great. Well, he beat that was a fantastic interview full of quotable quotes.
Uh, I appreciate you coming on and thank you for your outlook, mayor Christmas, happy holidays to you. And, uh, I'll see you in the new year. Look forward to it, David. Thanks for having me. Thank you for watching Keiko news. I'm David Linden.