Wall Street Unplugged
Episode: 718April 22, 2020

Avoid these popular gold stocks

John Petrides

We all know the coronavirus is shaking the markets. But you might not know that there’s a big disconnect between Wall Street and Main Street right now… and it’s one we should all be paying attention to. John Petrides, portfolio manager at Tocqueville Asset Management, returns to the podcast to discuss the current environment… and some of his favorite ideas right now. [25:05]

Gold has been on an amazing ride recently—the price of the yellow metal has moved to within 10% of its all-time highs. But, while some companies will benefit as gold moves to record highs… there are certain stocks you should avoid at all cost… [50:13]

Inside this episode:
  • Guest: John Petrides, portfolio manager at Tocqueville Asset Management [25:05]
  • Education: Avoid these gold stocks [50:13]

Wall Street Unplugged | 718

Avoid these popular gold stocks

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.

Frank Curzio: How’s it going out there? It’s April 22nd. I’m Frank Curzio, host of the Wall Street Unplugged podcast, where I break down the headlines and tell you what’s really moving these markets. This week takes the cake in terms of insanity.

Frank Curzio: I want you to do me a favor. I want you to pretend you have a friend that fell into a coma in January. You just went to go see him in the hospital, and it’s a miracle, he just opened up his eyes, wakes up, comes to. The first thing he does is look at you, and he says, “Hey, why are you wearing this hazmat suit, the boots? Why do you have a mask over your face? You sound like Darth Vader right now. What’s going on? I just woke up.”

Frank Curzio: You tell him, “There’s this crazy virus going around. It’s infecting people everywhere. It’s nuts.” He’s like, “What do you mean, everywhere? In the hospital? In the state?” I’m like, “No.” He’s like, “In America?” I’m like, “No, the whole freaking world, every country. It’s insane right now.” He’s like, “Wow. What’s been going on lately? Is everything okay? Are things getting better?” I’m like, “Depends on how you look at it. We just found out China officially, we have intelligence, lied about the coronavirus. This is where it started, buddy, in Wuhan, where 11 million live, spread throughout the whole city.”

Frank Curzio: “China did a great thing. They said, ‘Hey, everyone living in Wuhan, we’re going to lock them down, and none of you are allowed to travel to anyplace else inside our country.’ Did a great job. But it was weird because China said, ‘People from Wuhan can’t travel to our country, but they can travel everyplace else in the world if they want to.’ Now two and a half million people have the virus, and over 178,000 people have died.”

Frank Curzio: He’d be like, “Whoa, those numbers are insane.” I’m like, “Yeah, the funny thing is we don’t even know if they’re accurate. We have no idea, since we’re barely testing anyone. Nobody knows how many people are actually infected, and it’s led to a worldwide lockdown where everyone, everybody, just about, 80%, 90%, whatever percentage, needs to stay in their house or lockdown.”

Frank Curzio: He’s like, “Oh my God, I better run out and get some food or something.” I’m like, “Food? Don’t worry about food. You’re good with food. You can go to the supermarket on anything you want. Amazon has been fantastic. They hired a ton of people. You can’t get toilet paper, though. There’s no way you’re going to get toilet paper. Don’t even think about it.”

Frank Curzio: Anyway, getting back to China, I tell him, “This is definitely going to lead to another trade war, where the world, not just the U.S., is going to punish China through tariffs, likely. Hopefully, it doesn’t get more serious than that. That’s a pretty big deal since China is the growth engine of the world, accounting for 40% of the world’s growth in 2019, last year. By the way, at the height of our trade war with China, which was December 31st, the S&P 500 fell to 2,500.”

Frank Curzio: This guy would be like, “2,500?” He’s like, “Wow.” He’s like, “December 31st? What about now?” He’s like, “What’s going on? It must’ve crashed.” “No, the S&P 500 is trading over 2,700 now. You’re fine.” He’d be like, “Really? With the economy basically closed right now, it’s up?” I’m like, “Yeah, it’s awesome. This China thing, it’s not even a big deal. We’re fine.” He’d be like, “Wow, that’s insane. This is great.”

Frank Curzio: I’m like, “Don’t worry about it pal. It gets better. Kim Jong Un, North Korea dictator, our biggest enemy in the world, he’s on his deathbed, and we have no clue who’s going to take over this nation, which, by the way, has nuclear capabilities. And North Korea’s goal… If somebody asked me what my goal is, it’s be a great father, a great husband, help investors, want to grow my business. North Korea’s goal is to destroy mankind. That’s their goal, to destroy mankind. We have no idea who is going to be the leader of this nation.” He’s like, “What? That’s crazy.” I said, “Yeah, but don’t worry about it. We’re cool. Nobody cares.”

Frank Curzio: “And listen, it gets even better. The other day, oil prices fell 276%. They fell below zero, all-time low.” He’s like, “Frank, isn’t that impossible? How can that happen?” I’m like, “I have no idea. I never knew the price of a commodity could fall 276% before, but it did. It happened. I’m not lying to you. It happened. But don’t worry, we’re cool on that front. I was watching TV the whole day, and everyone on TV told me, ‘Hey, this is just a blip. It’s this contango thing, people buying oil today, selling it for a higher price in the future.'”

Frank Curzio: He says, “Wow, all this oil, how are they going to store this thing?” They can’t store it anyplace right now. They’re trying to store it everywhere. They’re out of room. In fact, even the shippers, they’re throwing millions of barrels on ships, just storing stuff on their vessels staying out at sea. These guys are sunbathing on the deck while the day rates are skyrocketing. It’s easy trade.”

Frank Curzio: You’re like, “What? Negative oil prices? What would that do the industry? Do we see hundreds of bankruptcies? These companies must be dying. They’re filled with debt.” “No, one bankruptcy so far. Everything is cool. Everything is going to be okay, because the president tweeted yesterday. You were still in your coma. You didn’t see it yet. They’re going to make financial aid available for all oil companies. So what they were leveraged? It doesn’t matter. Who cares? They’re fine. There’s nothing to see here.”

Frank Curzio: “It reminds me of The Naked Gun, when that guy drives a missile into the fireworks factory, and it explodes, fireworks going off everywhere. Frank Drebin says, ‘Okay, people,’ and the flashes in the back, ‘nothing to see here. Keep moving on. Nothing to see here.’ Oil down 276% in a day. We’re going to be okay.”

Frank Curzio: He’s like, “Man, Frank, people must be struggling.” I’m like, “Yeah, but we got really good news yesterday. The Senate passed a $484 billion stimulus bill to help small businesses.” He’s like, “$484 billion?” He’s like, “TARP was only 475 billion. That was used to save the entire financial system.” He’s like, “And that was just of small businesses?”

Frank Curzio: I say, “That’s nothing. 10 days ago, the government passed a $250 billion stimulus plan for small businesses. We drained it in five days. The best part, we had companies like Shake Shack apply. Even Harvard applied.” He’s like, “Harvard? Don’t they have a $40 billion endowment fund that generates tons of fees for them?” I’m like, “Yeah. And you know that guy who runs it? Yeah, they use algos and stuff. The second he signed the relief bill, the president, Harvard already filled out the paperwork and was the first to apply, and they got the money. It’s amazing. They want to help students who can’t afford to go to Harvard. Oh my goodness.”

Frank Curzio: He’s like, “Wait, so let me get this straight. The government just gave $250 billion to help small businesses 11 days ago, and now they’re giving them another $484 billion?” I’m like, “Yeah. This is all a big part of a $2.8 trillion stimulus package that the government passed this month. They bailed out everything, airlines, cargo lines. Now it’s going to be the oil companies. Gave checks directly to families, hospitals.” “2.8 trillion? What the… I won’t say it. I won’t curse.” I’ll be like, “I know. It’s nuts. It’s really crazy out there.”

Frank Curzio: He’s like, “Man, I can’t wait to go back to work.” I’m like, “You know what, don’t worry about work. The government has you covered there as well. They’re going to pay your full salary to stay home for the next four months. You’re fine.” He says, “Wait a minute. Are they doing that for everybody?” I’m like, “For most people, since everyone is being told to stay at home. No one is allowed to work, at least for now. In fact, 5.25 million people applied for unemployment benefits last week. These are people that got laid off, furloughed by their employers.”

Frank Curzio: “But hey, buddy, don’t worry about it. It’s okay. You know why? The market was expecting only five million people, so we were close to that number. That’s good news. That’s good news. But unemployment rate is now up to 17%.” He’s like, “Frank, it’s up to 17%? We were at 10% in 2009, when the entire financial system almost collapsed.” I’m like, “I know, dude. This is crazy.”

Frank Curzio: He’s like, “You know what, I’ve got to take a look at my retirement accounts. Things are crazy. It’s probably in jeopardy, with every country on lockdown, 17% unemployment, infection still spreading, nobody knows when it’s going to stop.” I’m like, “Yeah, you know what, don’t worry about it. The market is only down 15% this year. It’s back to where it was trading in October, a couple months before you went into your coma. You’re okay. You’re not down that much. You’re fine.”

Frank Curzio: “The government said they’re going to bail out everything. They actually said, ‘Whatever it takes.’ Even if guys like Harvard line up, whatever it takes. We’re just going to keep spending money. Where’s the money coming from? I don’t know. I have no idea where it’s coming from, but it’s coming. They keep printing it.”

Frank Curzio: He’s like, “Holy shit, this is crazy, Frank.” He’s like, “You know what, I just need to get away, vacation, whatever.” He’s like, “After this coma, I’ve got to get out of here, get off the grid. You know what, I’m going to go to Argentina.” I’m like, “I wouldn’t go to Argentina if I were you. They just rejected a new bailout plan on Tuesday. They’re about to go into sovereign debt default for the ninth time since the country became independent.”

Frank Curzio: I’m serious about this. This story was yesterday. No one is even talking about. Remember the days when Greece failed and they defaulted? Everyone was like, “It’s going to break down the whole market.” Argentina, they’re leveraged to so many different countries. It’s going to be huge. These are not even stories today. If I had to bet, Argentina’s debt default, I bet you 90% of you have not known anything about this. They just rejected it. They rejected a bailout plan, which means they’re going to basically go and default again. I don’t even think this makes the top 300 stories in terms of importance these days.

Frank Curzio: Again, I’m highlighting this stuff in a joking manner, but it’s no joke, because this is just what happened this week. This isn’t like, “Hey, this happened for the whole financial crisis. Lehman failed, AIG. Look at all the banks in 18 months.” This is seven days. All this shit happened since the last time I had this podcast.

Frank Curzio: And the S&P is just down 15% this year, trading at 25 times forward earnings, which, by the way, no recession ever have we seen the trough at 25 times earnings. If you look back from 1930 to 1995, we went through nine recessions, stocks never ever… They didn’t even trade at 25 times forward earnings at their peak before the recession took place, but that’s where they’re trading right now. People are saying, “Hey, we’re at the bottom. We’re good. We’re fine.”

Frank Curzio: I want to thank David Rosenberg for that stat. It was great, 1935 to 1995. Good stuff. Reading tons of material. You can send them in, frank@curzioresearch.com.

Frank Curzio: Remember, 25 times forward earnings with most of the world still on lockdown, with the coronavirus nowhere close to being contained. What’s happening right now, guys, it’s unprecedented. It’s something we’ve never seen, where full economies are on total lockdown. We still have no answers.

Frank Curzio: How many times do I have to see or you have to see a mayor, governor, politician say, “You know what, it’s all about the data”? I heard it like six times today, and I’m doing this on Wednesday, six times today so far on CNBC. Guys come out, “Well, it’s all about the data. We’re going to look at the data. We’re going to look at the data before making a decision. That’s the most important thing.”

Frank Curzio: The data is wrong. It’s been wrong. It’s going to continue to be wrong since we’re not testing enough people. With the antibody tests, they’re saying maybe people in LA, 40, 50 times the amount of people might’ve had it. We don’t even know. But we’re going to look at the data.

Frank Curzio: You can go back. You want to go look at the data? Go look at what Fauci was saying. Go look at what Cuomo was saying. Go look at what the president was saying. Go look what all those guys were saying in January and into February, “We’re fine. We’re good. This isn’t spreading in the U.S.”

Frank Curzio: Governor Cuomo for New York, “Listen, I hate to be arrogant, we’re New Yorkers, but we’re going to handle this fine. Our hospitals are in great shape, and we have nothing to worry about here. We’re not going to get infected like other countries.” Well, New York has more infections than every other country right now, any other country, just New York alone, and your hospitals were not as great as you thought.

Frank Curzio: I’m not ragging on him. I think he’s doing a good job. Most of the mayors are doing a good job. People are trying to save lives. My point is this is something brand new. You’re looking at data that the infectious doctors who’ve studied this crap for 30 years are dead wrong. They said it wasn’t even going to spread here. But we’re going to look at the data. We’re going to look at the data, and we’re going to make decisions on the data.

Frank Curzio: I think it’s time we use common sense. That’s what time it is. It’s common sense time. Enough of the doctors’ bullshit. Enough of the president. Enough of the governors. Enough of all politicians, all the shit.

Frank Curzio: If we’re looking at max, if you look at it, several doctors say, “If we do nothing, two million deaths. That’s how many deaths we have.” That amounts to 0.6% of the population. You’re closing 99.4% of America because of that small a percentage? I know what you’re thinking, especially Democrat, Republican. A lot has to do with this now. It’s all politics. I don’t care what side you’re on.

Frank Curzio: Georgia opened up its border just now. What happened? CNN is destroying the guy. “Well, how could you do this? The data. You don’t know the data.” Nobody knows the data, but they’re just ragging on the guy. He’s the first governor to say, “Hey, let’s go back. Let’s open gyms. Let’s start getting back to normal.” They say, “Well, you’re going to see tons of more infections.” Yeah, of course you are. Everyone is in their house right now. When they come back out, you are. We have to go through this process. It’s got to be like the flu.

Frank Curzio: If you’re a first-time listener, before you start yelling at me and saying, “Frank, really, you’re going to kill people, this and that? That’s wrong. Old people.” My mom has been in the ICU for four and a half months. She just got out in January, thank God. If she’d still be in there, she might’ve had the coronavirus. Four and a half months. She has COPD, diabetes, all from a botched surgery for a hernia. Almost lost her twice. If she gets it, reality, guys, it’s a death sentence.

Frank Curzio: My youngest daughter, beautiful, nine years old, she has Crohn’s disease. She takes a drug that lowers her immune system. She’s at risk. It doesn’t get more personal than that for me, but it’s not about me. It’s about the world. It’s about the economy.

Frank Curzio: The fear that’s been spread about this virus is insane. It’s insane right now. We went from going, “Oh, we’ve got to stretch that curve out because we don’t have enough supplies in hospitals,” which is fine. Now hospitals are supplied. They’re great. You’re seeing all these numbers go down in the most infected states. But now it’s gone to “Whoa, you’re going to die if you get this. This is crazy. Look how nuts.”

Frank Curzio: Guys, we’ve got to take it easy. We’ll have to take it easy. We have to open up the economy. When they do that, it’s going to be a long haul, and industries are going to be changed forever, if not forever, for three, four, five years. That’s why trading at 26 times forward earnings here, and I’m looking at this going, “What the hell?” We deserve these multiples? Are people just like, “Well, 2020 doesn’t matter. It doesn’t matter. It’s all about 2021?”

Frank Curzio: Do you remember…You should remember. If you don’t, go to Curzio Research. We have a timeline on our page. It’s a timeline of all my videos. We’re doing daily videos you can watch, Curzio YouTube, for free, Twitter, whatever, make fun of me getting old. You can’t get your hair cut these days, and I’m probably not going to get a haircut for a month, so feel free to make fun of me.

Frank Curzio: If you’re looking at this timeline, just go back, google it, how many people said that…You look at Goldman Sachs, you look at Bank of America. You look at JPMorgan, all of them. “It’s going to be a quick recovery, just like we saw with SARS all the time. With SARS, with MERS, everything, all these pandemics, we see the same thing. One bad quarter GDP, then bounce right back, that V-shaped recovery.” Now it’s like, “Well, it’s not going to be a V, V. It’s going to be maybe two bad quarters, and then third quarter we’re going to be fine.” Now it’s like, “All right, negative GDP for first quarter, second quarter, third quarter, and it looks like it’s going to be a weak fourth.”

Frank Curzio: You see that as we go out week by week, we’re pushing this out further and further in terms of recovery, but if you think about it, even restaurants, we’re going to have to practice social distancing. For restaurants, that means you’re going to have to separate tables more. You’re going to have to remove tables. That could result in at least…If everybody comes back just as normal and nobody cares, that’s going to result in at least a 15% to 20% decline in business, which, on the margin, that’s a difference between bankruptcy and staying open for a lot of restaurants, for bars and things like that.

Frank Curzio: Are people going to rush back to go on planes? Imagine sitting in the middle seat of a plane. I can’t, and I’m not paranoid about this stuff at all. I don’t want to get it, but I’m not locking myself in a room isolating everything from me from the entire world.

Frank Curzio: When you see this, and you’re looking and it stretches out into 2021, everything is going to be fine? Disney, 60 times forward earnings, highest multiple in history. Everyone is going to go back to parks? They’re going to watch those Broadway shows, Beauty and the Beast and everything? They’re going to go? Yeah, are you going to do that? Are you going to go to the theaters to watch all the movies?

Frank Curzio: Oh, but their streaming business is doing fine, which almost nobody makes money on. You look at the cash flow numbers when you look at Netflix. Netflix is spending $17 billion this year, $17 billion on new content. Disney is spending a billion. They probably won’t even be able to spend that, because they don’t have the money. They’re highly leveraged. But hey, buy Disney. JPMorgan says it’s their best idea.

Frank Curzio: There’s a lot of hope here, hope that just doesn’t make sense, where so many things have to go right. This week, oil prices crashing 270-something percent, going to zero, announcing a $486 billion on top of the 250 you just announced. You were that wrong in a week? 11 days ago was the last stimulus. Stuff like this doesn’t happen when markets are healthy and strong, and you’ve got to realize that, because at 20 times forward earnings, I think we can all agree this is not a short-term problem. There’s no V-shaped recovery, no way.

Frank Curzio: Once those lockdowns are lifted, it’s not going to be back to business as normal. People are scared. You’re going to see older people…Older people love going to restaurants. They go to theaters. You think they’re going to go now? No. Maybe they have dinner at home, or they order out and just have a couple people in the house with them. It’s different now. It’s scary. They can’t get this. If they do, they’re at significant risk.

Frank Curzio: I think it’s the most dangerous market I’ve seen in my 25-year career. It just shakes off everything. Earnings are expected to climb by at least 25% in 2020. Again, that rebound in 2020, one, that rebound was supposed to happen in third quarter 2020, fourth quarter in 2020. Now it’s getting pushed out. You think it’s going to be first quarter, second quarter, third quarter 2021? The market is trading at these levels.

Frank Curzio: For them to go higher, we’re going to be trading at 30, 35 times forward earnings. Maybe that’s okay. You have the Fed saying, “I don’t care. We’ll give money to Harvard, Shake Shack.” I know Shake Shack, everyone is like, “Well, Shake Shack gave it back.” Why the hell did they even apply for a freaking loan? F– them. Are you kidding me? Why did you apply? They gave it back, not to be nice, because they saw the backlash coming. People are going to pat them on the back? Are you crazy? I’m still going to go there. They’ve still got the best shakes. But still, come on. You’ve got to be kidding me.

Frank Curzio: Tons of risk here, guys, and you’ve never seen me like this, so bearish. I’ve been bullish for most of the last seven, eight years. There were pockets saying, whoa, got a worry here, got a worry there, and then we had the corporate business tax reforms, which earnings surged 20% the following year, got bullish again.

Frank Curzio: Listen, earnings drive stock prices, right? That’s throughout history. We don’t have earnings. We don’t even have revenue. How are we going to have earnings? How are we going to have cash flow? You’re looking at CapEx down 25% across the board, money you spend on M&A to grow your company. You’ve seen advertising budgets cut tremendously. If you’re not spending money to build your company, if you’re not spending money on marketing, how are you going to get back to normal by next year? You can’t.

Frank Curzio: Does that mean stocks don’t go high? I don’t know, if the government is like, “Hey, you know what, airlines, here you go. Here’s a check. Where did that come from? I don’t know. Don’t worry about it. Here. Here you go.” They’re going to have to increase that considerably. They generated $300 billion last year, the American airlines. You gave them 25 billion. Come on, do the math. They’re down 90%. What do they have, 10%, 20% capacity right now? They’re going to need more money probably in a month from now. Delta was just saying they’re burning through $100 billion a day, with hardly any revenue coming in. It’s crazy.

Frank Curzio: You look at it, almost three trillion spent. Guys, that’s got to be five, six trillion. Our economy is 21 trillion. That’s our GDP last year. You don’t think they’re going to spend at least five trillion to help? Everything is pretty much shut down, and if you’re not shut down, other than those few pockets of growth… You guys know the Amazons, Walmarts, and stuff like that where they’re hiring people. You have software companies, seeing Zoom do good, Roku.

Frank Curzio: Netflix is up tremendously. Yesterday, reported earnings. Down a tiny bit after earnings, but up tremendously off this run, and they should be. Their numbers are really good, and they were honest on their call, “Look, these numbers are not misleading, but they’re huge because more people are staying home. They’re probably going to go down.” I like that. It’s pretty easy to say when your stock is at a 52-week high, and half is to the move, to be like, “All right, guys. Yeah, we’re good.” You don’t have to be a cheerleader anymore.

Frank Curzio: I’m not just telling you, “Get out of stocks. It’s crazy. It’s nuts.” If you look at the S&P 500, it’s close to 25% off FAANG stocks plus Microsoft, so a lot of money pouring in, money managers on the sidelines. They have to invest this money in order to generate fees. They can’t keep it in cash. Hey, let’s buy those stocks. But those stocks are incredibly different in the new world order, in tomorrow’s world. Advertising budgets are cut tremendously during recessions. That’s Google and Facebook. I don’t care if it’s online. Companies are cutting their budgets. They’re not going to spend as much.

Frank Curzio: Apple has been impacted almost more than any other company, outside of Boeing and Disney maybe and the large caps. That’s a hardware company. It’s an iPhone company. It’s 65% of sales. They don’t even know if they get their components. They even said, “We have no idea.” They were one of the first to warn in January.

Frank Curzio: People say, “Frank, wow, that was a great call. You told us.” Yeah, Apple told you. Microsoft told you. Starbucks told you. China told you. Our president told you when he closed our borders and said nobody from China can come in here right now, which is incredible considering China is the growth engine of the world. What did you think was going to happen if we’re trading at a growth multiple? These companies were talking about it for three weeks before we finally started to crash.

Frank Curzio: Now, there’s pockets out there where you could generate some amazing returns, and I’m going to break down my favorite sector in my educational segment. I want you to listen, because while I like this particular sector, there’s one part that everybody loves to buy within the sector that’s a sell right now. Trust me, it’s going to make sense when we get into my educational segment.

Frank Curzio: For now, I want to bring in my guest for this week, who is John Petrides, portfolio manager at Tocqueville Asset Management, close to 20 years of investment experience. John is a great analyst, great friend, regular guest on this podcast, stock junkie just like me. We always go wherever we want with these podcasts. I always get amazing feedback. He’s about to share his favorite trades and investment ideas with us, so you know what, let’s get to that interview right now.

Frank Curzio: John Petrides, thanks so much for coming on the podcast.

John Petrides: Hey, Frank. Thanks for having me on. I hope you and your family are all doing well, and obviously sending the best wishes out to all of your listeners.

Frank Curzio: I appreciate that, bud. Same to you and your family during these difficult times. Pretty crazy.

Frank Curzio: Let’s talk about those times. The last week alone, some of the things that we’ve seen is pretty crazy, oil going negative, more stimulus. What’s 486 billion? Not a problem. This is just in the past week, a lot of these things going on. What’s your thoughts on the coronavirus, the impact? Because when I look at these markets right now trading at 26 times 2020 earnings, people are just saying, “Forget about 2020. It’s going to come back right away, V shape, or whatever shape you want to call it, but it’s not going to be as long as everybody believes,” what are your thoughts right now? What are you telling everybody?

John Petrides: Yeah, Frank, in a strange way, I’m happy that the past couple of days, the market had actually given some back and we sold off, because I do think that in the near term the market has gotten a little too far ahead of itself. Obviously, kudos to you for getting out in front of this over two months ago and sending out warning signals that bad things are going to happen.

John Petrides: We had the fastest selloff in the stock market ever from February 20th until March 20th, of about 34%, and then we had the fastest rise of 25% in the S&P 500 from that March 23rd bottom up until about April 15th. My fear was that the market was not pricing in a second wave of COVID-19, which Dr. Fauci and others are predicting will happen in the fall. We don’t know the severity if that happens, A, and what the severity is going to be, because if we go back to a country shutdown, then the market is going down again.

John Petrides: I do think it’s important that investors separate the difference between a stock market recovery and the economy and the economic recovery and the shape of that. We all like to say, “Well, is it a V? Is it a U? Is it an L?” I think the stock market will have a W type of shape. We’ve had this, from February 20th, this downward slope, then we’ve had an upward slope to this 25%. I do think that we’ll get another downward slope, and then as we get closer to finding a vaccine, getting treatments, things like that, social distancing becomes a thing of the past and we all live in our new normal world, the stock market will rally.

John Petrides: The economy, on the other hand, I would predict a shape of a U, and it’ll be a deep belly of the U. We’re having, over the past four weeks, over 22 million people laid off, which is an enormous number in a four-week period. You have this big, dramatic downturn in the economy, and the belly of it is going to be quite steep. But I do think that once we turn the lights back on, we get out of social distancing, we will start seeing an improvement in the economy. We were at a 3.5% unemployment rate coming into COVID-19 two months ago. We probably shake out two years from now at around 6.5%. I don’t think we’re going back to 3.5% entirely because there’s going to be so many disruptions to so many different industries, but things will normalize to some degree. I expect the stock market to move in a W fashion and the economy to move in a U fashion with a deep belly in the middle.

Frank Curzio: Now, do you think stocks are pricing that in right now? Because I don’t see them at 26 times forward earnings, where it’s a W, where, okay, it’s down, then back up, then back down again. I don’t know if we’re going back down yet because, again, we’re doing this Wednesday, and the market is up again.

Frank Curzio: But you’re right, there’s a difference between the stock market and the economy, and stocks are forward looking. Are we looking too forward, where we’re trading at a more expensive valuation today? When we look historically, dating back to the ’30s and recessions, the trough of earnings are usually 10 times, 11 times. It’s not 20-something times. It seems like we’re pricing in a lot of great things, and to me, it’s just hard to see that. Again, maybe I’m getting it totally wrong and I don’t understand it. Are we pricing in perfection here?

John Petrides: Well, I think you’ve articulated the conflict that we’re all dealing with at this point, and the conflict goes something like this. The stock market tries to predict the future. We’re discounting future cash flows. Earnings season, which we’re in the middle of right now, companies tell us how they’re doing in the present, and the economic data that gets reported reports of the past. How are we digesting what the market is trying to predict in the future, what companies are telling us in the present, and what the economy is reporting in the past? Those three elements are providing massive confusion and conflict, and that’s why you’re seeing volatility elevated.

John Petrides: I do agree that I think the market has gotten a little bit too far ahead of itself. I think you have to forget about 2020 earnings for right now, because who knows where they’re going to be? You have to look to what’s the market value on a 2021 basis. If we can get to $160 per share for the S&P 500, that gets us to about flat earnings growth from the end of 2019 to the end of 2021.

John Petrides: Now, I would equate that…I do think where we are today, and given the disruption of COVID-19 and the change of our everyday life and how people do business, is going to impact us as we go back to some sense of normalcy. Trying to value the market as a whole is a hard thing to do. I’m taking the tack where I think investors need to view the stock market almost as if it was in real estate. Real estate, as we all know, Frank, is local. My real estate market where I am in New Jersey is different than your real estate market in Jacksonville and other parts of Florida. There’s just different places, and each local economy is different.

John Petrides: You have to view the stock market that way. You have to view industries…How are individual companies faring? What are they going to be worth? What are specific industries going to be like? What are sectors going to be like? For example, Amazon is going to be a completely different place than where Carnival Cruise Lines is going to be. Companies like Nike are going to be different from where energy companies are. Different parts of the financial sector, banks could be different than publicly traded trading platforms within the financial sector. You really have to roll up your sleeves and value companies on a stock industry and sector level rather than looking at the market as a whole.

Frank Curzio: I saw you write something that was interesting where you say, “Stock market tries to price in the future. Earnings tell the present. Economic data reports the past.” You said, “The conflict of these three data points is, obviously, to increase volatility.” When you look at that, and just based on what you’re saying, how do you position yourself? You’re a portfolio manager. Everyone’s time horizon is different. You can’t have the same portfolio for anyone.

Frank Curzio: My mom is 78, and she just came out of the hospital. She’s doing a little bit better and walking around and stuff, but for her portfolio, you look at it and say, okay, the working power that she has is zero, and you’re worried. But yeah, if she passes, she’s going to pass it on to the kids, and that will go right into our 401(k)s or whatever. But what happens if she lives to 95? Now, how do you position someone’s portfolio like that? That’s a difficulty, and that’s a really tough question. I know I’m throwing that at you. Compared to someone who’s 25, 35, 45 that has plenty of working power, where you’re like, “You know what, just hold your stocks. In five years, you’ll be fine.”

John Petrides: Yeah. It’s a great question, and a difficult question to answer, but it’s something that I deal with every day with every client that we manage assets for.

John Petrides: You hit the nail on the head. The big question mark with all of this is time. In terms of positioning in this environment, you have to ask yourself, what’s the time that all this gets resolved? Is COVID-19 here in permanency, where this is going to turn into the bubonic plague and you’re going to have significantly more deaths, and a second wave of this is going to be worse than the first wave, and that really derails all of the assumptions taken by the Fed and the federal government and publicly traded companies and things like that? What’s your time horizon that we get out of this? If your time estimation is that, come the fall, the second wave is not as bad as the first and then we’re off to the races because a vaccine is developed, that depends on your positioning. That’s one element of time.

John Petrides: The second element of time, and this is the most important, is something that we deal with clients, is we’re not making massive changes to asset allocations in today’s environment. That question is answered when we first sit down with our clients. We ask them, “What’s your income needs? What’s your tax situation? What’s your time horizon?” We bake it on the assumption, as you correctly point out, is that people are going to live until… If you have a couple that’s 65 now, studies show that one of the people in the relationship, there is a 50% chance that one of them will live in their 80s, and there’s a 25% chance that one of them will live in their 90s.

John Petrides: Although we’re fearful about COVID-19, the biggest risk to investors is outliving their money. It’s not necessarily COVID-19. It’s not U.S.-China trade wars. It’s not how did Netflix report earnings last night. That’s all irrelevant. It’s not who’s in the White House. It all depends on, do you have enough assets to live off of as you age? Because the one thing that we can’t deny is that people are living longer.

John Petrides: We start that conversation day one and try to build out the right asset allocation where there’s a mixture of capital appreciation, i.e., stocks, with capital preservation, i.e., bonds, and some form of income-producing assets, which we tell in our enhanced income strategy. You have to bake all of those equations into the cake and do the best estimates that you can, assuming that someone is going to live longer than what they may.

John Petrides: Think about it. If someone retired at the age of 65 today and they live until they’re 90, you’re talking about a third of their life they’re going to be without earning income. A third of their life, they’re going to have to deal with living off of their saved assets, and studies have shown most Americans are not prepared for that.

Frank Curzio: Well, one of the sectors that you talk about…Great answer, by the way, because that is a very tough question. That’s something I deal with, even with my mom. I know a lot of people deal with it, in terms of seeing this market, the economy on lockdown, unemployment at 17%, at least right now, just based on the claiming numbers in April, and we were at 10% during the credit crisis, just to put that in perspective right now. I know people are seeing it, they’re at home, and it’s crazy watching the stock market rebound now.

Frank Curzio: One of the things that you mentioned, I think you mentioned it a little earlier, too, is oil, where you see oil could bounce back. The economy is definitely going to be open, and we could see $45, $55 oil in 2021. Is this one of the sectors that you’re looking at? Maybe we can cover some of those things that you’re looking at.

Frank Curzio: I’ll admit, I bought Devon when it came down a lot. I bought Boeing higher, and I lost money on that one. But Devon was five bucks when I bought it, and it’s much higher now, even with everything going on with oil. A lot of these companies are pricing in death, but some of them are going to survive. Plus, like you said, the economy is going to turn back on. Still have a ton of supply in the market. But are you investing in this sector in individual stocks right now?

John Petrides: Great question. You have to be careful. Coming into this, we were sticking with quality within the energy space, and we are definitely, across our portfolios, underweight energy. Where we do have exposure are those energy companies within our income strategy that generate a lot of cash flow are throwing it off and have the balance sheet capacity to continue to pay out that dividend. We’re finding value in high-quality companies with energy-related exposure or within the energy space that pay out a high dividend that we do think have the balance sheet capacity to weather the storm. Now, if they had the ability to grow the dividend this year, maybe that gets scrapped, but I don’t think they eliminate dividend entirely.

John Petrides: For example, we own Kinder Morgan, KMI. I own it personally. Kinder Morgan reports that they transfer about 40% of the country’s nat gas through their pipes. Kinder Morgan is an oil and gas pipeline. It’s a master limited partnership, although it does not issue a K-1, that’s important for investors to know, and the dividend yield is, over 6%, something, right now. The company has grown their dividend 20%, 25% per year over the past couple years. They were supposed to grow their dividend 25% this year, and then they were reevaluating the future divided plan. They haven’t announced it yet. I hope they hold to the 25%, but wouldn’t be surprised if they said, “Hey, let’s husband some cash.”

John Petrides: Kinder Morgan has an investment-grade balance sheet. Nat gas prices have actually risen. Why? Because, as you know, Frank, from the days when we were talking about shale, when you do horizontal drilling in the Permian and you’re drilling for shale and you’re looking for oil, just as a derivative, you’re going to release natural gas. The fact that oil price is collapsing, that’s going to shut down production, which just means less natural gas is going to be produced, which helps in an environment because we have so much natural gas supply to begin with.

John Petrides: We have to pick and choose our spots. Although we focused on quality coming into this, we continue to focus on quality and income within the energy space.

Frank Curzio: Now, my audience always loves when you come and you give ideas. One of the places I know you like is where stocks are providing a yield. That’s safe. AT&T is a good example of that. They came out and reported. I thought the numbers weren’t good. They weren’t supposed to be good. Time Warner, NCAA canceled. I get it. But they said they’re maintaining their dividend, and the stock is barely down after reporting not-so-good earnings.

Frank Curzio: You like names for the yield perspective, where people are going to be dying for yield, and the ones that are able to keep them and really maintain have those strong balance sheets. Do you have any names out there you want to throw out?

John Petrides: Yeah, so let’s take a step back to the issue like your mom and many others are facing, that we hope they live a long time and they have to live off the fruits of their portfolio. In a normal environment, the textbook would say you take 100 minus your age, and that should be your stock-to-bond ratio. In your mom’s case, she would have 22% allocation to stocks and a 78% allocation to bonds. Well, if she needs to live off the cash flow of a portfolio, good luck getting yield in the bond market, especially in the high-quality bond market. The only way that you get yield is going into the junk bond market, and you have to go in the really nasty stuff because there’s no yield to be found in the bond market.

John Petrides: What we’ve done is we do think that within the equity world and within the preferred stock world, there’s a tremendous amount of high-quality yield on sale. What we like about playing in the preferred stock market right now, and in some select investment-grade and high-yield bond market, in addition to common stock, is look what the Fed has done in terms of their quantitative easing. The Fed is out there… They took a page from the Europeans during the Greek crisis. The Fed is out there buying investment-grade bonds, which they did not do in 2008 and 2009. They’re out there buying fallen angels, high-yield bonds, again, an unprecedented action. The Fed is out there buying lower-quality stuff outside of just mortgage-backed securities and some of the traditional things that they did to add to their balance sheet. The Fed is buying that type of yield. We feel a bit more comfortable moving up the capital stack, buying yield above the stock market, so you want it in preferred stock.

John Petrides: The capital stack, Frank, of a company is what’s their debt, then their preferred, and then their equity? If a company were to go out of business, they have to pay off their debt first. Then they have to meet the obligations of the preferred stock market. They’re preferred shares. Then the equity owner is left holding the bag. That’s why bonds are less volatile than stocks, because stocks are the bottom of the barrel in terms of the capital structure.

John Petrides: We like the preferred stock market here, particularly variable-rate preferreds, preferreds that go from a fixed rate to a floating rate, because we do think in a couple of years’ time, Frank, as things normalize, if you remember the taper tantrum of 2013, when the Fed announced they were going to start reducing the assets on their balance sheet, bonds sold off 7% in about a four-month period. We’re not there yet because we haven’t gotten through this crisis yet, but once things do normalize, longer-dated bonds are going to be in a problem. We like those elements where you’re getting the yield. Most preferreds that we’re buying right now are 5%-plus in terms of income. At some point in the future, you have that ability where it’s going to float higher. The variable-rate preferred market is something that we really like.

John Petrides: In terms of the equity side, again, we go into an investment with understanding the cash flow, understanding the balance sheet. I’ve been on this show in the past and I pitched Chevron. Many would say, “Hey, how come you didn’t take Exxon? Exxon had a higher yield than Chevron when you first bought it.” Chevron has the balance sheet where it’s not dealing with a lot of the issues that many of the other energy companies are dealing with. We still own Chevron. I own it personally.

John Petrides: One name that I like is Interpublic Group, IPG, Ingrid Paul George. This is one of the largest, one of the top four advertising companies in the world. Stock has gotten beaten up, obviously, about 6.5% dividend yield, double-digit free cash flow yield for the company. They don’t have that much leverage on the balance sheet. I think it’s well within range.

John Petrides: The ad business, yes, we know that if companies are struggling, ad dollars and marketing budget can get cut. That’s usually one of the first things that happen in a recession. You cut that cost. But the IPG model is all variable cost. It’s not capital intensive. Who do they employ? They employ people. If contracts are cut, what do they do? They cut employees. They cut head count. They’ll just adjust their head count over time to the demand of the business. This is what they did in 2008 and 2009.

John Petrides: Their well-run management team have stressed on many conference calls over the past six or seven years of how they are committed to the dividend, how they continue to grow the dividend, which they’ve done north of 5% annually over the past several years. IPG, I think, is an interesting stock here. They do report tomorrow. It’s a name to put on the radar.

Frank Curzio: That’s great. I love it, because for me… Advertising goes down. Every recession, we see advertising crash. But remember, guys, you have to look at the stock price to see if that’s factored in. This company has gotten nailed. Digging into that balance sheet and things like that, this is what we want to do as analysts. Yeah, we know things are bad in certain sectors, but for me, when I don’t like Apple, I don’t know, if it factored in 12% off of its high, that they would move their guidance. Who knows if they’re even making iPhones at the 12 right now if they got the supplies? We don’t even know that. Yet with a company like Interpublic Group, a lot of that seems to be factored in. Yeah, definitely a cool pick. A controversial pick, but I like it. Good stuff.

Frank Curzio: John, thanks so much for coming on, man. You’ve done a lot for me. We’re good friends. I mentioned… Well, I’m going to mention after this, so I won’t spoil the surprise, of who you helped me get on this podcast, which we book next week. We won’t mention a name. I’m going to mention it right after this interview, but I appreciate it.

John Petrides: Good stuff.

Frank Curzio: Yeah, a good friend, and I really appreciate everything that you’ve done. I know my audience loves you because you’re always giving them picks. You’re always there. I really appreciate it, man.

John Petrides: Yeah, man. Thanks for having me on always as a guest. And again, Frank, you were out in front on all of this, so kudos to you for having the stones to go out there and make some of the calls that you have. It’s a testament that your viewers and your listeners could heed your experience and knowledge. You’ve been doing this for a long time. Keep it up.

Frank Curzio: I appreciate that. I really do. All right, man, so I’ll talk to you soon. Thanks again for coming on.

John Petrides: All right. Be well, Frank. Thanks a lot. Take care.

Frank Curzio: That’s great stuff from John. Love having him on. By the way, you should be thanking him because he introduced me to Tom Lee, who’s going to come on my podcast next week. We already set a date, as long as everything is cool, but we locked it in. I know a lot of you guys know Tom Lee. He’s on TV a ton. He’s known for being a big permabull, Bitcoin expert. I say Bitcoin expert because he’s one of the few institutions that cover it.

Frank Curzio: I’m excited to talk to him because he is an incredibly bullish person, and right now I’m bearish, and that’s what I want to do. I’m not going to attack him. I just want to hear what he’s saying and have a nice debate. I think it’s going to be a fantastic interview. I love Tom because he always brings it when he goes on CNBC, when he’s on all his media outlets. People disagree with him and they get loud with him sometimes, and he just throws out facts and figures and “This is my research, and here it is.” I respect that. I respect that. I’m looking forward to that. I’m a fan of Tom’s. It should be a great interview, guys. That’s next week.

Frank Curzio: Thanks to you. Thanks to all my guests. The guests that are coming on right now, just very high-quality. I’m trying to put people in front of you that are going to help you, not people that are just shouting out, “Hey, you buy this now and do this now.” No. It’s got to be original. It’s got to be something I’m not hearing out there. You have to educate me if you’re a guest.

Frank Curzio: Those are the guests I’m bringing on, especially in this environment, like when we saw Cactus come on and say single-digit oil prices. We saw Kuppy come on telling you about the trade and shippers, something we’ve been in CVO, one of our recommendations. I can’t tell you the feedback I got, how much sense that made. We have no place to store oil. We’re storing it, that’s the shippers in these vessels, VLCCs, very large crude carriers, they’re called. They’re storing millions of barrels of oil there, and these things are trading dirt cheap because most of the economies are closed. Now a lot of them are storing oil just playing the contango, buying oil prices now, which are cheap, and selling them at a forward month in the futures. That’s a contango, but it made sense. A lot of people got into that trade. I got thank you’s everyplace. These are the guys that I want to bring on in front of you. I want to put them in front of you. I’m going to learn what’s working. There’s pockets that are going to work.

Frank Curzio: When I was talking about the market, guys, being 25% of those big names, and there’s separation between them, but it doesn’t necessarily really mean we’re going to see a huge decline in the S&P 500, because those companies represent a big part of that index. You could see a lot of companies fall 30%, 40%, and yet the index is not going to get hit that hard, or as hard, as long as those big names hold up well. Microsoft is going to hold up well. Netflix is going to hold up well. Amazon is going to hold up well. Those are companies that are perfect for this environment.

Frank Curzio: The other ones, I’m not too sure. Google, Facebook on the fence. I’d like to see those numbers. Again, advertising, we’re seeing across the board… Look at AT&T’s numbers. Saw that come with Time Warner, no live sports, March Madness. Do they have enough money to fund their dividend? People don’t realize how much money that company generates. It’s like $25, $30 billion in cash flow, because they have businesses that are fantastic. Disney doesn’t have. Other companies don’t have, some media companies. You have the cable companies that have it, Comcast and stuff like that, where you’re just getting that recurring revenue coming in from people paying internet services and stuff like that, and wireless and things. You’re going to see separation in this market, guys. You will. You absolutely will.

Frank Curzio: Great stuff from John. Again, Tom Lee is going to come on next week. I’m really excited about that. Any questions, comments… Again, this podcast is about you. I say that all the time. It’s not about me, so let me know what you thought, frank@curzioresearch.com. That’s frank@curzioresearch.com.

Frank Curzio: Now, let’s get some educational segment. I’ve been providing some sectors especially to subscribers to invest in during these crazy volatile times, and most of the companies, the individual names that I’ve recommended, are companies where I have an idea where earnings are going to be a year from now. I’m talking about the Walmarts, the Amazons, software companies, video game companies that are doing fine in this environment, compared to Apple, compared to even Starbucks. There’s a lot of companies out there, you really don’t know. They pulled their guidance, and you have to see the impact.

Frank Curzio: Yeah, I go to Starbucks. I love it. They’re fantastic. They’re great. But they’re obviously going to see a big decline in their revenue. People like going out there, hanging out there, buying stuff, going in with their computers, Wi-Fi. You’re going to see a decline in revenue. You’re going to see it.

Frank Curzio: I think it was the Unilever CEO came on. I love what he said, because the stock was up, and he’s like, “Look, guys,” he’s like, “these businesses that you’re mentioning right now are really good for us during these times, but overall this is going to impact us, and we’re going to see a decline in sales and earnings.” I respected that. Some people are just looking at “Wow, you sell a couple products that are fantastic.” Well, you sell 80 products, and six or seven are doing great. The rest of them could see significant declines with businesses closed, but they’re trading at levels like nobody cares.

Frank Curzio: The Walmarts, Amazons, I’ve recommended a lot. I’ve given away Amazon and Walmart because we’re up a lot on those. I recommended Amazon a while ago and then re-recommended it, told people to get back in it over a month ago, and also Walmart in February. It was one of the few stocks on a 52-week high. It was the first to hit a 52-week high. It’s still going to 52-week highs. I’ve recommended Walmart because they were mandated in China at the time to stay open, and everybody was getting their food and stuff from there. A few other stores, but mostly Walmarts. I knew if this thing spread, Walmarts were going to stay open and they’re going to see revenue beyond belief. You have to hire new people. That’s what’s happened.

Frank Curzio: But aside from those companies, the obvious one is gold, and it’s not an overcrowded trade right now. If you’re a Curzio Research Advisory member, we recommended Newmont. We’re up 100% on it. We recommended close to the bottom. We got lucky. I got lucky where I recommended it. I loved it because it was just great. It’s super depressed, and I liked it. Now you got a lot of people going into the beige.

Frank Curzio: But you have to be careful here on gold because most of the mines are closed. That means producers, they’re fully capitalized now. They’re fine. They’re going to be cool. We’re going to open up mines pretty soon. They’ll be okay. As gold prices go higher, these guys are going to make a fortune. That’s great. That’s on the table.

Frank Curzio: Then you have the royalty companies. Now, what are royalty companies? Everybody wants to invest in royalty companies, especially through gold. “Franco-Nevada, Royal Gold, these companies are great. Look at them. They have no access to the mines. They have to keep their costs low.”

Frank Curzio: Let me tell you something about royalty companies, a sector I invested in for a very long time. I know CEOs of these companies. I’ve met them, almost all of them, through Marin Katusa. Thank you. These companies are built on growth. That’s why you buy them.

Frank Curzio: What happened in 2011, 2012, the majors were a bunch of idiots. They leveraged themselves crazy. A lot of them just went out of business. They had to deleverage themselves. And what did they do? They winded up merging with each other, just like the oil industry did with Exxon Mobil, Texaco, Chevron, all that. They all merged into these big, big, big players in the oil industry. That’s what happened now in this industry.

Frank Curzio: Now, during that time, they needed cash. When you look at the royalty companies, they were like, “Hey, we have cash. We’re finance companies. I’ll tell you what, give me some of your best project, give me a piece of it. Here’s, whatever, 20 million, 40 million. When you produce, then we get to buy that gold for $500,” or whatever it is. They have so many terms. Again, it’s very tricky. These are finance guys. You have to be very, very smart to run a royalty company because it’s all about financing.

Frank Curzio: That’s great. They were able to get a piece of some of the biggest gold-producing projects in the world, and that’s factored in now. That’s why these things are trading at astronomical valuations. But these companies usually take out leverage and then buy more royalties, and then you’ll see their stock and they continue to grow. That growth is going to slow. Why? Because where are you going to get royalties these days? The majors are going to go tell them to F themselves, “I don’t need you right now. No, I don’t need… No, I’m not giving you this. No, I’m going to keep this for myself. I’m good.” They’re having a difficult time finding good projects to invest in.

Frank Curzio: Then that brings back the question, and I know everyone is asking this right now, so I’m going to address it, “Well, Frank, gold is going to go to 2,000, 2,500, 3,000 if you listen to Bank of America, so these things are going to do good.” You’re right. Because those that are getting royalties from producing mines, they’re going to do good, but every gold company is going to do good if prices go higher.

Frank Curzio: I tell you what, the majors are better leveraged to the price of gold going higher, so if you had to buy majors, and you’re looking at royalty companies and junior miners, and gold prices go higher from these levels and go past 2,000 and surge to a new record, the royalty companies are going to underperform the majors, and they’re going to significantly underperform the juniors. You say, “Why is that?” If you look at the juniors and their projects, there’s so many companies that are like biotech companies in clinical trials just throwing darts at a wall hoping something sticks. None of these projects were economical. Now they are.

Frank Curzio: At 1,500, you’re like, “All right. At 1,300, 1,400, I’m not going to spend X amount of millions of dollars over the next 10, 15 years to develop this thing when I don’t know where gold prices are going to be.” Now we’re at 1,700. There’s a lot of companies out there, junior miners, where their projects were uneconomical and now they are. That’s where you see the biggest thing. When something goes from terrible to less terrible, that’s where you see monster gains.

Frank Curzio: You’re looking at this market that’s been decimated, and yes, it’s come off its flows, but if you look at 2011, 2012, these things are still trading down 60%, 70%. It’s incredible, of how bad this industry has been. But once these large caps start producing again and open up those mines, you’re going to see them take over. You’re going to see M&A go crazy in this industry. They’re going to be taking over a ton of stuff. They need to because they haven’t really been drilling. Those reserves have been depleted, and they’re looking for projects where that didn’t really make sense or were borderline.

Frank Curzio: If you look at some of these projects, most of these guys, they haven’t re-rated their projects. They’re still looking at these PA studies that are at 1,250 gold prices. You’ve got to raise that to 1,400, at least, even 1,500 maybe. Now you’re looking at a project IRR significant… You’re looking at these returns that are huge.

Frank Curzio: If you have royalty companies, it may be good. Don’t sell the whole thing. I don’t know. I’m not perfect. I’ve been wrong before, but I’m telling you, if you think gold prices are going higher, you want to start buying quality junior miners.

Frank Curzio: You’ll find that out if you follow me. I’ll tell you exactly which ones to buy in my newsletters. It’s a crazy sector. It’s filled with con artists. It’s one of the most crazy sectors you’ll ever see, the gold sector, the mining sector. Just being in that industry for 10 years and following the right people, you know who’s full of shit and you know who’s real. These are the companies that you want to recommend, especially ones that have cash in their balance sheet, don’t have to raise money, mine-friendly districts. That’s where their mines are producing. Otherwise, Venezuela shuts it off, and your stock goes to zero.

Frank Curzio: You want to make sure they have access to water, infrastructure, which costs millions and millions, sometimes tens of millions of dollars. If you have a project in Antarctica that’s 300 million ounces of gold, but it costs you $50 billion to develop it, again, maybe the math might make sense for you to develop it, but you get my point. You have to be careful where these mines actually are. You need good insider ownership, good management team, has a history of bringing mines to production, or starting up these companies and selling them to majors, going through that and being able to finance for that whole time, because these companies don’t generate revenue.

Frank Curzio: It’s junior miner time in the gold industry. It really is. You’re going to see a lot of these names take off, and those names, if you believe gold is going higher, like I do, are going to significantly, guys, significantly outperform the royalty companies and definitely outperform the majors. I think the majors will even do better because they’re going to generate more revenue, but when you’re looking at those royalty companies, that model is based on growth, taking out more leverage, generating more money from existing streams, royalties, and then spending that money on more projects, but there’s no projects out there, unless you want to buy projects that are going to get developed 6, 7, 8, 10 years from now.

Frank Curzio: The days of you picking the pockets of the majors are over. The quality of those streams and royalties are going to be much, much lower, and those companies, let’s face it, have made their move. Those companies are up tremendously. Pat yourself on the back, but be smart here. As you know, things don’t go up forever. There’s times to buy. There’s times to sell. Don’t get caught with “Hey, I’m sitting on 150% gains on Royal Gold or Franco-Nevada, and it’s going to go up another 300%.” Don’t do that. Take half off the table. “This Curzio guy is crazy, what he’s saying about royalty companies.” If I’m wrong, you own half. If I’m right, you have enough money to invest in other names.

Frank Curzio: If you think oil prices are going higher, royalties are not the place to be in. It’s the junior miners. And of course, keep your positions in the majors. Hopefully, that wasn’t too complicated, because I am getting tons of questions on gold.

Frank Curzio: With the amount of money being spent, already spent, and the amount of money that’s going to be spent going forward, not just in the U.S., trillions, but all over the world, if gold doesn’t work now, retire. If you read a gold newsletter, if you focus on gold, it’ll never go up if it doesn’t go up over the next three, four, five years, because right now I’ve never seen bigger tailwinds in almost any industry in my entire life, because the government basically said, “Whatever it takes.” If you’re going to invest in gold, just remember that saying, “Whatever it takes.”

Frank Curzio: Okay, guys, I have a major announcement for you before I go. Curzio Research is going to have our first webinar. It’s going to be late next week, just finalizing the date. Looking at Thursday right now. That’s April 30th. Webinars are free. I have a feeling we’re going to have a pretty big audience, so I’m really excited.

Frank Curzio: We’re going to dig deep into the coronavirus, talk about the risks we still face. We’re going to talk about the stories you’re not hearing in mainstream media that are going to have a significant impact to you and your family, not just from a health standpoint but also from a financial standpoint. I will tell you how to position your portfolio in this crazy market.

Frank Curzio: It’s going to be things that you haven’t heard on this free podcast. Lot of new information, how to position yourself, stats and figures. I’m not going to talk a lot about numbers, I promise. I’m going to make this thing entertaining, exciting. It’s going to make a lot of sense to you, of how to protect yourself during these crazy times, and also how to position yourself when this thing does end.

Frank Curzio: For me, I sound bearish, but I’m bearish through 2021. There’s a lot of sectors that are not going to rebound for many, many, many years that people think, “Hey, everything is going to go back to normal.” On the opposite side, there are sectors that will explode due to all this spending by the government that we’ve seen. The same thing happened last time, 2009, 2010, all that money in stimulus, keeping interest rates low. It’s going to encourage. Once people get more confidence, businesses are going to take out more loans. They’re going to increase CapEx. They’re going to increase marketing. You’re going to see earnings rise. But it’s not going to happen in 2021. It’s probably going to happen after that, but you want to position yourself in the right names. That’s why I’m having this free webinar. First time we’ve ever done this. I’m really excited. Again, looking at Thursday, April 30th.

Frank Curzio: For all my listeners, I want to let you know that I am going to take questions once we finish this thing, the webinar. I’m going to take questions from everyone. But for you, my listeners, I’m going to give you a deal to the point where you could ask me questions early. You can send me questions at questions@curzioresearch.com, anything about stocks, anything about the markets, whatever, coronavirus. You can send your questions in first. I’ll answer those first, before we go out to the whole entire audience.

Frank Curzio: Again, if you want anything answered, questions@curzioresearch.com. That’s the email. It’s not frank@curzioresearch.com. It’s questions@curzioresearch.com, specifically for you. You’re the only ones that have this email address. If you’re going to attend that event, we’ll send out all the material. I’m going to update you more as we get closer to that date. But if you have any questions, again, email us at questions@curzioresearch.com. That’s questions with an S. I’ll try to answer as many as possible for you.

Frank Curzio: Really cool webinar. Looking forward to it. Again, first time ever. Yeah, I’m really excited to just go crazy on it. It should be a lot of fun. Again, it is for free.

Frank Curzio: Guys, that’s it for me. If you want daily info, want more updates, you can go to my Twitter account. That’s @FrankCurzio. Again, that’s absolutely free. Curzio Research YouTube page. Tom Lee, when I do that interview, is going to be a video. I’m going to take the audio and put it on the podcast on Wednesday, because I think we’re taping it early Wednesday. Then you’re going to be able to see the video of both of us on our Curzio Research YouTube page, which is really, really cool, because they’re getting tons and tons and thousands of hits right now, so really excited. Those are two platforms where you get a lot of daily stuff from us, in case your Frank Curzio weekly fix is not enough.

Frank Curzio: You guys, thanks so much for listening. I really appreciate all the support. Really starting to grow now, and a lot of that due to you. You’ve been sending our research different places, not our paid research, but just more and more people coming to the podcast. We’re at record downloads, and we continue to hit new records every passing week. Really excited. That’s because of you, and I just want to say thank you. Really appreciate it. I’ll see you guys in seven days. Take care.

Announcer: The information presented on Wall Street Unplugged is the opinion of its hosts and guests. You should not base your investment decisions solely on this broadcast. Remember, it’s your money and your responsibility.

Announcer: Wall Street Unplugged, produced by the Choose Yourself Podcast Network, the leader in podcasts produced to help you choose yourself.

P.S. Unprecedented times call for new measures… so I’m doing something I’ve never done before.

On April 30, I’m hosting an exclusive virtual Town Hall event, where I’ll go over what you can do right now to protect your portfolio—and ultimately profit—in the coronavirus economy. 

During the event, I’ll answer the top questions I’m getting from subscribers on the current market situation. If you have a question, send it to me here.

Frank Curzio, founder and CEO of Curzio Research, is one of America’s most respected stock experts. His research is regularly featured on media outlets like CNBC’s Kudlow Report, The Call, CNN Radio, ABC News, and Fox Business News. His weekly Wall Street Unplugged podcast—ranked the No. 1 “most listened-to” financial podcast on iTunes—has been downloaded over 9 million times.
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