Plus: gold • uranium • bitcoin… and how to lower risk when investing in these volatile sectors.
Marin Katusa, founder of Katusa Research, joins me for an interview you can’t afford to miss [30:10]. We discuss everything from gold… to uranium… to bitcoin.
As always with Marin, it’s a wide-ranging interview… and he explains how to lower risk when investing in volatile sectors.
In my educational segment, I break down why I’m more cautious today than I’ve been anytime in the last six years [1:12:22].
I’m not saying it’s time to sell everything and build a bunker… but it is time to lighten up your exposure. I tell you why…
Wall Street Unplugged | 671
I haven’t been this cautious in six years
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 May 29th. I’m Frank Curzio host of The Wall Street Unplugged podcast this is where I break down the headlines and tell you what’s really moving these markets. I’m not sure if you could find a worse sector to invest in since 2011 than mining well it’s been a total disaster, with just about every company in the industry has gotten smoke.
Frank Curzio: And we’re talking about an industry a cyclical industry that’s been depressed for seven straight years which has been brutal, completely brutal for investors. And being honest here it’s difficult to see a short term catalyst. It’s going to make the sector favorable again, long term, it’s cheap it’s crazy. But let’s be honest here when it comes to mining, it is one of the crappiest businesses in the world, right?
Frank Curzio: We have your big producers whose margins are pretty low considering all in costs are around a thousand some of them saying 900 some of them say 11 but around 1000 on average depending on the producer. You have gold prices around 1250, 1270, 80 around there. So the margins are not that great considering these are the big guys they’re blowing up mountains.
Frank Curzio: I saw these projects, I mean, Cortez in Nevada, unbelievable what Barack is doing there. You’ll see like half a mountain blown up these massive trucks. You talk about the employees they have Newmont has over 12,000 this is pre-gold corporate had taken over Barack has over 17,000 employees. It’s a very capital intensive business where material costs are a big factor.
Frank Curzio: They can go up to the point where it’s getting another hundred dollars to your all in costs, like the next quarter or six months later. And inflation it’s so many things involved for simply such little margin. But when I look at these names even the big producers, I mean, Barack is trading at $11 right now it was $50 in 2011. Newmont Mining was $7 in 2012 it’s trading around 31, [inaudible 00:02:29] I mean, from seven to 31 actually that’s not that terrible.
Frank Curzio: It might be one of the best performers down and that’s what down a little bit more than 50%. And so much some of these companies got smoked you look at Gold Corp. The other company trading around 11 today was $55 in 2011. But you can see why there’s so many large cap mergers taking place right now in the market. Does it make sense?
Frank Curzio: These things are trading at significant discounts to where they were seven years ago, six years ago, three years ago even. And when you look at the mid-tier producers like the amount of goals Eldorado, Aim gold life is really really tough for these guys. And these mid tiers have higher costs, their balance sheets aren’t as strong. They have to be careful what projects they choose to invest in drill because their margins are getting lower than the majors. Look at Yamada that was a $20 stock it’s now below two Eldorado, Eldorado was over $80 a share in 2011. It’s $3 today, this is common. EM Gold was $22 in 2011 and it’s now under $2 and 50 cents that’s the mid tiers.
Frank Curzio: You get to the junior miners whole different story, forget about it. And most of these guys on projects that can only be produced at 1300 dollar plus gold prices I might be conservative there but unless you see gold go to 15, 16, 17 and they go to 1300 it doesn’t mean, wow, let’s develop this. No, I mean, they could fall over it was a 12, 15 years to develop a mine I mean, they could fall considerably, you’d like to have that cushion. Hey five, 16, $1700 gold prices where a lot of this makes sense to start developing 13, 13, 15 and $1400 dollar projects where that’s the break even if they develop that project over certain amount of years.
Frank Curzio: You throw in the fact that only one this is the real cool stuff that I love one in every 3000 gold projects goes from that early stage development to an actual producing mine, one in every 3000. So to put that in perspective guys the next time you go to a junior mining conference, you look around at all those companies. Maybe a few hundred there sometimes there’s 1000 there, depending on what conference and the PDA scene and stuff like that it’s one of the biggest, but you got to figure 85% of those companies are probably not going to be around seven years from now eight years from now. Such things they’re going to raise a lot of money, they’re going to develop, I get it, I understand it. But man, it’s going to be really tough, most of those companies are not going to survive.
Frank Curzio: It doesn’t mean you can’t make money on them it’s like investing in biotech where phase one could be great, phase two could be great, you can make hundreds of percent of that thousand percent gains and then maybe they don’t get to phase three and you see that same thing in different stages. It’s pretty crazy when you think about and you look at the numbers.
Frank Curzio: You look at management teams for the junior miners, they basically do early stage permitting, testing, drilling in the efforts of find you higher grade gold and a property can be scaled, right? Scaled is the big name in anything that you’re going to invest in early stage that’s still looking for high grades and scalability.
Frank Curzio: But if you’re looking at the majors, right and where they are today, they don’t have to take on the risk of buying these early stage projects right now. Considering you could buy a major producer trading what 75, 80% discount to its 2011, 2012 valuation. So why these junior miners again yeah, they have that intention on or basically no intentions on ever developing that project to where it’s actually going to be a producer. But when you see these long drawn out markets, you’re just sitting on their hands. Most are running out of cash, they’re forced to raise money using crazy deals, five year warrants which sometimes can be a short sellers dream, right? Because what do you do as a company as you’re approaching people raise money.
Frank Curzio: Also the investment bankers they know especially in Canada, which companies need to raise money. And they’ll call them and when they decide they make that phone call, what do they do? Well if they think that, hey, they might raise money through a particular firm I mean, there’s a lot of backdoor stuff that happens in this industry.
Frank Curzio: And if you can find out a company is going to raise money or they come to you, you could short it again, illegal, it would be insider information but there’s a lot of shady things that happen. But you could shortly if they come to you at a dollar and you got to raise money and you want to raise significant money, it’s going to be probably at 70, 75 cents. So you short them, make sure they offer a five year warrant, you get into the deal.
Frank Curzio: You can sell out your initial stake, you have the five year warrant, you shorted the stock and now you make the spread, which is a no risk proposition because you’re long and short. You’re long for the free warrants that you got five years and you short the stock and you just capture the difference taking your money out and now you can invest in other things and you’re liquid. It’s a simple explanation, a simple example and it’s more detailed than that but when you’re offering those warrants and you’re going to the market right now depressed, a very depressed market, super bad market it’s difficult to raise money.
Frank Curzio: And there’s a reason why a lot of these junior miners who raise money using five year warrants are down more than the overall market. It’s crazy. Not saying it’s a bad thing. The market comes back hey, come back two years, three years fine, these things are going to I mean, from these levels being down 80, 90% guys I mean, the upside, if the trend turns that could happen five years, 10 years from now it could happen next year, you don’t see a hundred percent gains, you see thousands of percent gains in this sector.
Frank Curzio: Again, it’s been causing a lot of people money and for us, we hit a couple of stops trying to pick away at this industry, which we’re fine with, because the upside potential is that great 300% more easily. But it’s just been depressed for such a long time it’s crazy.
Frank Curzio: And for me, I feel really bad because I have so many friends in the industry, I travel to these conferences, I speak a lot at these conferences. A lot of these guys live in Vancouver, which is considered the mining capital of the world. I know a lot of these guys work hard. They continue to move forward developing projects, raising cash, try to buy projects on the cheap. But even that’s difficult, right? Since mostly acquisitions in this space.
Frank Curzio: They’re not done using cash, they’re done using stock that’s the currency. Or their stock price down 80% plus from the all-time highs, you’re looking at their market caps going from maybe 500 million to under 100 million, 70 million. It’s not that easy to really use your stock as currency now because your valuation is much lower.
Frank Curzio: But in this sector guys, even if you have a great management team, a great project, operate in mining friendly jurisdiction and even have enough money on your balance sheet to fund your company for the next two years, which is a pretty long time especially in this industry, it really doesn’t matter. Because this is the worst bear market and at least four decades for gold, and that’s not coming from me that’s coming from the guys who’ve been in this market that long. And they’ve said that publicly. It’s kind of like the credit crisis where you look at these stocks early 2009 because it’s 20% of the stocks in the S&P 500 trading the single digits. The only way that happens if something is super-duper depressed.
Frank Curzio: I’m sure that number is probably less than 2% today. But that’s when you get good deals, that’s when you’re able to get warrants and different structure different deals and again in this type of market to lower your risk. And to make matters worse, with the gold industry you have Bitcoin. Which Bitcoin you would argue is a currency I would argue it’s more than currency than gold consider I could pay for travel using Bitcoin, I could pay for food at some places credit card processors, some of them accept Bitcoin as payment. It’s a global currency. Now it’s back over 8000 in fact, closing at a 9000 Bitcoins up over 100% of the year compared to a market where hey wop around 10% doesn’t feel like that. But remember, we fell 20% from September through December.
Frank Curzio: So we popped up in January, February, March, Easter April and now we have a lot of trade tensions and a lot of risk in the market, which I’ll get to in a minute educational segment. But most of the major markets around the world are really not performing well seeing much slower growth yet Bitcoin doing well. And this time I’m going to tell you guys it’s different when it comes to Bitcoin and the crypto markets. I said in the past that 90% of the ICOs are completely worthless and for a while. So 10% or so. You’re screening through 150 to 200.
Frank Curzio: I was able to find maybe a dozen two dozen good names. And some of these were recommended in crypto intelligence our newsletter and they’re doing very well right now and up a lot. And one of those names is Binance coin 100% for us inside of a few months. And guys ICO’s remember, right? These are utility tokens. Utility tokens are used for products and services usually available through the company site. That’s their value. So if you don’t have a running site or any traffic going to your site, which is the case for more than 80% of these companies right now utility tokens, these coins are basically worthless.
Frank Curzio: You’re not getting an equity stake in this. People still do not understand that a lot them from security token so what we offer. What does that mean? It means if Microsoft comes in and buys say, Binance coin for $10 billion, you get nothing as a token holder. That doesn’t represent equity stake. Utility tokens just gives you the right to use goods and services.
Frank Curzio: Now for Binance, which has one of the biggest trading platforms in crypto there’s numerous uses for this token. But you can use it to get discounts and trading fees, use to purchase a house though a site they partner with. Use it to pay the bills in nightclubs in Vegas, buy virtual gifts. I mean, this company’s signed so many deals with so many companies with their token their coin could be used as payment that provides value to the token.
Frank Curzio: Not a lot of companies like this most of them 85% are worthless. But you’re looking at Binance they’re birding 20% worth of their profits every single corner, which is a lot of money considering they have one of the biggest trading platforms and generating a shit load of money.
Frank Curzio: When I say burning profits they’re burning they’re taking the profits and burning the tokens of 20% of the profits. Now what does that mean burning a token, it’s similar to buying back at shares. So Binance plans on burning 50% of the total outstanding tokens they have over the next I think it’s like 10 years or so. And every quarter and amounts around 20% of their profits that they’ll take out and they’ll buy back their token.
Frank Curzio: And then they say that they burn it, that’s what it’s called which reduced the amount of tokens making each one worth more. And Binance went even further to announce a new lottery system I’m not just promoting, I’m just showing you how there is some value, but you have to spot it where they launched this new Binance Launch Pad platform. Which new issues come out and they do an incredible job of finding a due diligence process like it’s in a minute.
Frank Curzio: But they have like a lottery and it used to be on a first come first serve basis on who gets the opportunity to invest it in these things when they first come out on this platform. And Binance said wait a second, instead of doing first come first serve, we’re going to have a lottery. And that lottery and those tickets is now based where the more tokens you hold the more coins you hold, the more lottery tickets you get, which increase your chance of being able to invest in some of these deals.
Frank Curzio: It’s kind of like having a $50 million account at Goldman and every IPO they underwrite, you’re going to get a phone call, and you’re going to get a piece of. The more tokens you own the better shot of that happening. That’s smart, that’s using a token you see in that automatic burn up, well over 100% on that the last few months.
Frank Curzio: What I’m seeing crypto guys is definitely different. And when I say different, I mean for the better. Because a lot of BS is getting cleaned up there are a few dozen utility tokens that have value huge upside potential, which are tough to find, but I’ve been doing this for a while now I have great source out there, which helped us really rain in the risk of our crypto newsletter Crypto Intelligence these times are really bad through 2018 and into 2019.
Frank Curzio: We didn’t recommend anything for months, we only had 16% of our capital at risk when you saw Bitcoin completely crash and all crypto currencies down 70, 80%, which was good. And over the past few months, we’ve been nailing and I’m happy to see subscribers making money because I did get some shit from subscribers, which is understandable.
Frank Curzio: Since people paid a lot of money to subscribe to this product and I wasn’t recommending a stock every month but I was providing great educational content and I get it, I get it. If you look at subscribers out there and they subscribe to your product, what do they want to do? They want to become rich, they want to make money. They want to make money in the market, they want to follow someone they trust and I get it. But that’s not the most important thing for me.
Frank Curzio: The most important thing and the reason why I’ve been doing this so long is because when times are bad, my job is to try to protect you to limit that risk. And we’ve done a great job here and that cost me a couple subscribers. Saying, “Hey, I thought you were going to recommend…” I’m not going to recommend stuff if I know you’re going to lose money on it because it’s a terrible market I’m not going to do that.
Frank Curzio: And now the performance is doing great, we’re very patient, we’ve really analyzed some great situations, getting some great ideas from our sources in the industry because yeah, we launched our security token, we have a lot of great contacts out there now and our performance is doing better. But my job first is to protect you to try to make sure that hey, we want to limit our losses because we’re all going to be wrong sometimes every one of us. You could analyze a stock anything it looks perfect on paper, it looks great. Checks every single box and the thing’s going to go down 25, 30% it just happens.
Frank Curzio: It happens to everybody, it happens to the greatest investors in the world. But the greatest investors limit their risk this is why they always have money to invest long term. And now this newsletter is performing great and a market that’s even at global markets has been terrible. But getting back to my point here I’m seeing some amazing things in this industry more regulation. You got the bigger players are in the big exchanges and they’re not accepting every token every coin willing to pay them to go on their exchange, which once they raise money, it’s pretty easy to give someone 100,000, $300,000 if you just raised a few million and there’s a detailed screening process. I know we’re going through right now with our current equity owners token.
Frank Curzio: We have lots of investors in it, raise money it’s great I plan to have a trade on major compliance security token exchanges like T-zero open finance and even Binance who launched their own security token platform. But there is a detailed screening process now which is awesome. You will get the lawyers in this industry that have much more experience compared to 18 months ago and even a year ago many of these guys had no clue.
Frank Curzio: I saw friends who raised money and they just structured their token wrong and they got nailed with taxes and had a utility function with a security function and all over the place I mean it cost them a fortune because their lawyers. It’s different now, these guys have more experience maybe 12, 18 months. Lawyers just jumping this industry saying wow, look at the billions being raised let’s take a percentage of it.
Frank Curzio: Well try to do a little homework on the industry first before you screw everybody, it’s much better now. Help you have a good clean offering if you use the right lawyers. You’ll see major companies like Amazon, Microsoft, JP Morgan launching their blockchain platforms using this theory of network. And guys these are the biggest companies in the world. I mean Amazon, Microsoft the China market caps, JP Morgan biggest bank in the world these guys are using the theory of network it’s for real. Then we have the digital token market which is starting to explode. A record amount of digital security tokens and they used to be called security tokens STO but that record amount launch last quarter.
Frank Curzio: And the first two and guys please listen to this because this is important. The first two will go free trading this quarter on the open finance platform. What does that mean? It means you don’t have to be an accredited investor to invest in these things, you can be non-accredited. It can be open to everyone. And remember our STO or digital securities is only available to credit investors that’s the way it has to be since security everybody that comes out with a security offering in US has got to be non-accredited, it’s got to be held for I believe it’s around 12 months and there’s a way to shorten that up but it has to be available to non-accredited investors. I’m sorry to accredited investors and that pissed off some people who wanted to buy our token because they wanted to invest and they’re not accredited investors, and I get that.
Frank Curzio: But 12 months from now it’s going to be available to everybody. Hopefully it will be trading on lots of exchanges which things are looking very good. Our company should trade based on the growth of our company similar to a stock and again this is a security. And this market’s on fire right now. A record amount of STOs launched in the first quarter which are 47. They get a contingencies number go up each passing quarter. But one year from now these 47 that were announced raise money last quarter one year from now these are going to go free trading, not accredited investors could buy these things on crypto exchanges.
Frank Curzio: So now let’s look two to three years out now we’re talking about hundreds of them will be available for non-accredited investors. Talk about a whole new market, likely thousands over the next five to 10 years. This is one of the best ways to raise money compared to doing a major IPO which costs a small fortune. You could do simple IPOs on the Canadian exchanges at a low valuation or whatever but you can’t really do it here or otherwise you’re going to be trading Pink Sheets which is nonsense. A market nobody cares about if you’re going to be on NASDAQ or New York Stock Exchange in order to get this thing underwritten and get on these things it’s going to cost you a fortune. And they want to see like the massive growth potential sales probably more than five, 10 million dollars it’s not easy.
Frank Curzio: Or you could do a traditional private placement where investors hey, what’s your liquidity period? At least seven to 10 years before you get your money back you’re locked up that money’s locked up until the company either does an IPO or they get acquired. That takes an average seven to 10 years. But I truly believe Bitcoin if you look at it, it’s definitely claiming a lot of gold investors who like to speculate in junior miners. And I know there’s gold bugs out there feel free to email me they’re going to call me crazy, Frank@curzioresearch.com that’s cool. And I’m not telling you to sell your gold and buy Bitcoin either. If your goal is to the $7 trillion plus market with Bitcoin is what? About 150 billion.
Frank Curzio: But when you truly look at the reasons why people buy gold or the reason many gold bugs convinced you that you need to own gold over the last 10 years. You look one is for safety and it’s definitely not a safe haven. It hasn’t been for a long time, just look at the market, the market crashed gold crashed, gold stocks crash prices come down. It’s not really a safe haven treasuries are the safe haven. Look at the yields today crashing with all the risks in the market right now. There’s tons of monies flowing into treasuries.
Frank Curzio: You buy gold we’ll protect you against inflation, which Bitcoin kind of be used the same purpose. I’m not sure we’re going to see inflation anytime soon since our government spent trillions to try to inflate the markets since the credit crisis. And it really hasn’t worked if you’re looking at the CPI.
Frank Curzio: Invest in gold because it’s he a currency, the US dollar is going to disappear. It’s better if you invest in gold yet you can’t really pay for anything in gold, well most things. You can’t carry all of your gold on a plane from China to wherever or from here to whatever, you can’t do that. Bitcoin provides a way for you to transfer money anywhere right away.
Frank Curzio: You use it to pay to so many different things. But I can see Bitcoin from an investor standpoint being a better option to owning gold here, especially since the gold market a lot has to do with sentiment, right? It’s been horrible since 2011. There’s zero excitement, there’s like zero innovation in this industry a little bit coming with AI and stuff.
Frank Curzio: It just makes it difficult to hold something when there’s no news and it’s crashing when all the markets are up pretty much a lot more than gold since 2011, 2012, especially the US markets. So I see investors exploring other options, or maybe putting a percentage maybe 10, 15% of their gold portfolio into Bitcoin. I think that’s happened, I think that’s hurt the market. And they’re ranting about the crypto markets for 18 months saying they need more compliance, people need to know their money is safe and insured. Where Binance got hacked several weeks ago, someone stole 40 million from investors seemed as an inside job. But they admitted fault, they covered all the losses, they made good and with their own funds.
Frank Curzio: Significantly increased their security and that’s the way it needs to be, right? If something like this happens, people need to know that they’re okay that they’re safe. That they just didn’t lose money because if Binance didn’t make good on that again, you’re talking about a platform that generates hundreds of millions of dollars over the past few years in profits. And these guys have to cover their losses if something like this happens and you get to be better and remember this new industry, you’re going to see a lot of this crap happening, you want to get stronger but you want to see more compliance in this industry, and they did the right thing. And they probably didn’t lose too many people all from their platform, which is important.
Frank Curzio: So we’re definitely making strides in the right direction where I see a digital security token market really taking off in the years ahead. And guys, do me a favor, get educated on this now. It doesn’t mean you have to look at our token because you’re equity owners. I’m not pitching anything here because if you get educated on this right now and there’s a way to actually do that because we created a site but more to the point.
Frank Curzio: You listen to this podcast because you want the real story and of course you guys trust me, right? Well for me, when I look at this industry, I base my company on this trend, that’s how much I believe it. So I put my money where my mouth is. That’s how much I believe in this.
Frank Curzio: And we raise money through our own security token. It’s been great thus far, I’ve lots of investors. And you know what? For the first time investors, the very first time ever have an equity ownership and a financial newsletter published through a security token. And trust me, if you’re even a 30 year vet in this industry, you have a big name, you’ve been doing it for a long time, you have amazing credentials.
Frank Curzio: It’s nearly impossible to own equity in a financial newsletter published space. It is impossible. And it kind of sucks because it’s one of the most scalable high margin industries you’ll find. And now we offer that to some of our subscribers, we have to execute now we have to do a good job. There are tons of risk just like with every business.
Frank Curzio: But we’re happy with where things are going and we’re growing, things are awesome right now. We chose security token market because it’s just better, it’s cheaper. You know what I said earlier, I want you to start learning about this. About digital securities and you can do that for free again I’m not pitching anything here by going to our sites go to Curzio Research and click Token Tracker.
Frank Curzio: That’s our dedicated site to stories about security tokens. You know everything that’s going on in this industry you pull all these stories in the best digital security sites out there. So it’s really a great starting point just to see because you’re not seeing that, you’re seeing trade and all that stuff, the trade wars, you’re not seeing a lot of security tokens.
Frank Curzio: And it’s amazing how many institutions how many great people how much money is being raised. I think it was 350 million last year only from April or May for 2018 through the end of the year and now it’s even picking up further because this makes sense this market. It’s giving you access to open markets for the first time without having to go through these brokerage firms again, if you want the big brokerage firms and how they screw you look at Alibaba I mean not Alibaba. Look at the two ride sharing companies, right? Lyft and Uber.
Frank Curzio: The ride sharing market is on fire. It’s a major growth market. The numbers are unbelievable. I know I analyze them. It doesn’t mean you should buy these two stocks that they inflated the valuations for again, when they IPO it’s a liquidity event for the insiders. And yet so many people familiar with these products, familiar these companies buy into it and they’re getting crushed because it came out at stupid valuations. Doesn’t mean the markets bad, doesn’t mean it’s slowing. And if you like a Snickers bar, you’re not going to pay $25 for it. Maybe I’ll pay $1.50 for it or $2, $3 if I’m really hungry and I have no other place to eat but these valuations are insane. That’s the investment bank approach. They make lots of fees they want to inflate those valuations, this market’s a lot different.
Frank Curzio: So for me overall the market not surprised of this amazing move in Bitcoin we’ve seen. Bands are going to say, “Hey, we still offer a ton from its high of 19,000.” And Bulls are going to say it’s roaring back from breaking 3000. Now it’s closing at a 9000 and it’s going to a million. Look Bitcoin’s not going to a million guys. It’s not going to a million but I can tell you something it’s for real. It’s here and it’s not going away anytime soon.
Frank Curzio: So start educating yourself on this market and you could do so at our site for free, or just by doing simple Google searches and make sure you’re finding the right people or the right sites to listen to its very important because there is a lot of garbage out there. But this is definitely for real and again it’s not going away anytime soon.
Frank Curzio: I had to debate this topic with my guest who is never at a loss for words. I love him because he always speaks his mind. This guest his name is Marin Katusa. He was a founder and CEO Katusa research. So the financing investing and mining companies for nearly two decades. This is also giving you some pretty amazing ideas on the podcast over the years in a market that’s been terrible.
Frank Curzio: There’s always a winner but he does have lots of winners that he did give you. John is going to talk about cryptos, he is going to discuss the current state of the gold market. Is there any value in junior miners right now? And if so, how should you be investing in them since buying these names on the open market may not be the best way?
Frank Curzio: Finally Marin has strong opinions in the uranium industry. And if you’re bullish you definitely want to listen to this because opinions get really heated on Twitter and all over the place when it comes to uranium. This is going to be a really cool segment you definitely want to listen to. Later on in my educational segment I’m going to break down the current state of the markets. Getting lots of questions, people are worried. And I could tell you why we could see further downside over the next few months. I’ve been bullish for a long time. A few periods where I said, “Hey, guys you got to be cautious. This is different.” Doing a lot of work on the macro side.
Frank Curzio: You’re going to see why it may be a good idea to protect some of those profits you made over the past years the markets growing higher because there’s a lot of risk right now. A lot of risks and I don’t think it’s factored into the market at these prices. It’s a really great educational segment coming up a different tone definitely want to listen to that. But first, let’s bring in longtime guests and resource expert, Marin Katusa. Marin Katusa thanks so much for coming back on the podcast.
Marin Katusa: Oh, it’s a pleasure buddy.
Frank Curzio: So I want to start by addressing the gold market, right? You just had an opening saying man mining is such a tough industry I have so many friends in it. It’s been so difficult for we’re going on over seven years now. And going over the macro, we’ll get to several points here. It’s going to be very interesting, great conversation. I want to start out with your thoughts on Bitcoin because we hear it all the time. And when I hear it from people who are diehards in gold they’re like there’s no comparison, gold’s totally different from Bitcoin.
Frank Curzio: But do you think even for a speculated type of view, even for a currency when people buy gold as an alternative currency, do you think money is coming out of gold stocks and going into Bitcoin is that again, that’s speculative money. But is that crazy to say? Because some people are so far over to the left and some people are so far over to the right. But I truly believe there is money coming out of the market that may be flowing to Bitcoin.
Marin Katusa: I think for over two years I’ve said it, it’s been a competitor definitely that 10 years ago it wasn’t. What percentages we really don’t know but with the younger generation, I would say the under 45 it definitely is. Secondly, where I think it is a huge competitor is go take 20 ounces of gold across the border and see what happens. I get there’s the face value and what it really is versus the actual complexity of taking gold across the border, which 25 years ago wasn’t an issue. Whereas the ability to move crypto and convert it is still isn’t as easy as it will be say in five or 10 years. But it is easier than taking a pocket full of gold across the border through security.
Marin Katusa: So it definitely is more so the cannabis market has been the biggest competitor to the resource sector because it’s all based off of speculation. And the liquidity tells you that that’s what’s going on. Look at the financings for the cannabis sector, the blockchain, you look at Canada’s largest exchange it’s called Einstein, they got 178,000 registered users and they’ve been up for less than two years. I can assure you that no brokerage account has had that type of growth in the resource sector. So that kind of answers your question.
Frank Curzio: Now, let’s get into a couple other topics here because first of all let’s get into like the mergers, right? We see emergence of a lot of the major companies. And we talked about this briefly I think last time I had you on a few months ago. I wonder if there was an update that you can give us because from what I see is these junior miners, a lot of these guys and they’re the young generation, right? 45 and under they start these projects, they have no intention on developing where they’re going to become producers, right? 10, 12, 15 years, however long it takes.
Frank Curzio: But now the majors it seems like they’re like instead of buying these projects, which we’re going to have to develop put money into, why don’t we just buy Gold Corp which is 50 bucks and now it’s 11, 10 bucks for Newmont or Barrick and you’ve seen these mergers and then they’re saying, well, we’re going to divest some of our non-core assets. Is this a bad sign for junior miners? I mean, is this creating another risk that was not really anticipated? Maybe it was a year ago?
Marin Katusa: Well, Frank we’ve talked about it over a year ago and in your podcast, I’ve mentioned how it’s all about supply and demand. And the reality is, is a lot of these majors are looking for what’s called tier one assets north of 5 million ounces, north of 500,000 ounces of annual production and it’s politically safe jurisdiction.
Marin Katusa: So there’s tier two, most of the tier three assets are being dumped into the market. But I also over a year and a half ago I wrote about the Commonwealth Take Over how the Australians are being valued at a much better nav basis than the North Americans. So they’re going to come and buy out the North American listed gold companies.
Marin Katusa: And we’ve seen that Atlantic was on our list that it would be taken out, it just happened by an Australian company, which is interesting because just under five years ago, the opposite was true. I remember when I wrote up what new market was doing, they bought out a Australian producing asset, which was Fosterville that was a company owned by Crocodile Gold and new market was bought out by Kirkland Lake and that stock went from a buck 50 to 50 bucks.
Marin Katusa: So we’ve seen the market shift from the North Americans had a premium to the Aussie’s and the last two years it’s shifted now that the Aussie’s are having a premium to the North American. So we’re seeing a lot of that transition where it’s the Aussies coming and buying out the Canadian companies.
Marin Katusa: And the reason they call it the Commonwealth take over is because they were all part of the Commonwealth of the UK. But the reason the fundamental reason is the Australians basically across the board value their ounces in the ground at $1,000 an ounce where the North American guys are around 1250 per ounce when they do their nav evaluation. So they’ve had a bit more disciplined approach and the market’s rewarding them for that. And it’s going to continue.
Frank Curzio: Now for someone who has been in this market, I want to stay for close to two decades, if not longer. I’m not too sure exactly the time frame. But you’ve financed hundreds of companies and been in industry, this is your life. How would you describe it to someone who’s been dabbling in this industry for the last five years in terms of the market conditions because how much has changed? Because I’m a big believer, you have to change with the times the strategies, and it’s been such a horrible market. One, how does this market compared to anything else you’ve seen over your career? And two how are you finding ways to invest to make money in it?
Marin Katusa: So the biggest question that a lot of the people in the resource sector haven’t been asking, which I’ve been publishing on for well over a year is how are you going to pay this debt? So after the global financial crisis of 08 early 09, cheap money wasn’t just for the financial sector or the housing sector, it was also made available to the mining sector. And it was done at a time when prices were high, the commodity prices were high.
Marin Katusa: So it was a cheap way for the CFOs to fund their growth strategy rather than diluting equity, they did a lot of debt. So this debt wall now is starting to roll over meaning you have to pay the debt. That’s the problem with debt, eventually, you have to pay it and remember, debt is first secured it goes ahead of the shareholders.
Marin Katusa: So across the board I wrote in a whole analysis on this, across the board you’re seeing anywhere between 35 to 65% increases in the cost of capital and debt. So you really have to emphasize the financial viability of the projects you’re involved in or looking at. So this is a sector that geologists and speculators come in. But more than ever now you really have to understand financial analysis and truly understand the balance sheet more so than ever before because margins are getting tight and I haven’t changed my tune, I think in near term, the US dollar is going to stay strong commodity prices are going to be under pressure.
Marin Katusa: So what I’ve been doing myself and as you said, I’m probably one of the largest financiers in the sector. We’re announcing what I’m calling it’s kind of a Warren Buffett inspired strategy where we’re doing very large convertible debentures, which means I get paid while I wait to speculate. But we convert you have the right to convert into shares and the way I’ve structured is with the unit, so you get a share and the full five year warrant if the share price takes off. So I capture all of the upside but I want to get paid while I wait. So rather than taking a second position in equity, I want to be first position. And that’s what you get with debenture.
Marin Katusa: Interestingly enough, you can list these debentures so they trade like a stock. So Rick Rule calls this thing called a Katusa worm which you list the full five year warrant. Now we’re doing Katusa debentures where you list a debenture. And with that, you get a full five year warrant after you convert. So it’s a sound strategy. I get paid while I wait double digit interest rates in cash flowing solid businesses because that’s the new normal.
Frank Curzio: So man, that’s a great deal for investors, right? That makes a lot of sense but it doesn’t really make sense for the actual companies, right? I mean, they’d rather just hey-
Marin Katusa: Well it does.
Frank Curzio: It’s one year warrant, right? Okay.
Marin Katusa: Well I’ll explain why it does. Because the way I do it I don’t take any fees from the company. These bankers come around and they pitch the company, they’re going to take them to London and New York and Boston and they’re going to do this whole financing tour and these management get all excited, they jump in business class and they’re paying crazy costs. And on top of that, the banker takes 8% cash and 8% in broker fees. So it sounds like it’s 16%, but it’s not when you look at the broker fees, it works out to be about 12 or 13% cost of capital to get that. So out of the gates an investor puts a million dollars in well only 888,000 gets to the bottom line because the bankers take their cut.
Marin Katusa: So I go to these companies and say, “I’ll tell you what, you’ve given yourself a five year option because that’s what the exchange allows. And I respect that I get it, you have to incentivize your guys. It’s competition, peer pressure, blah, blah, blah. But you know what, for me and all the Katusa subscribers, I want to be on the same playing field with management or I’m not going to give you my money.”
Marin Katusa: So after building this reputation for 10 years in the sector, I’ve survived because I’ve dictated these terms. And rather than taking the fees and paying the banker, me and my subscribers, get aligned with the management. And by the way, management has to be a major investor in the same terms. So everybody benefits.
Marin Katusa: So the dilution that would go to the bankers, we don’t need that and give it to the shareholders and it’s a net net positive for the company. Because if they think it’s so cheap well, then they should do it themselves also. And on top of that, you’re not taking that massive dilution today by doing this debenture that you would otherwise with a bank. And on top of it with the banks, they go to three or four funds and they just want to blow this out and put pressure on.
Marin Katusa: So the game has really changed in the sector right now and I think it’s the best time to be positioning yourself for the upside but you have to have a two to three-year time frame because I still think the next six months will be pretty tough. But Frank, when you and I went to Northern Dynasty, it was a tough time and I was able to get that full five-year warranty you don’t want to be investing in something when everyone’s excited about it.
Marin Katusa: You understand the value of the company, you do your homework, you understand the financial analysis and I’m talking about no risk. This isn’t exploration risk. I’m not taking any expiration risk right now. I want cash flowing de-risked built assets that are already built, permitted all that stuff. And that’s where we are in this market. I’m buying dollars for nickels that’s what I’m doing.
Frank Curzio: So are you seeing a lot of companies do this with you? I know you’re structuring a couple of deals, is this becoming more common or is this a lot of companies are just pushing back a little.
Marin Katusa: I’ve got we have a spreadsheet of hundreds of companies that want us to give them money. The problem is, is there’s very few companies that I want to give money to. So we’re announcing one this week for all the subscribers that I’m backstopping 10 million of it myself. And I look at this and say, once I find the company and the terms work my subscribers get in at the same price and at the same time. And the last time we did it we were up over 50% already in a pretty crappy market, right? So and that’s where we’re up right now. And guys like Ross Beatty and Doug Casey they’ll come in with me on these because they know it’s structured well that’s the key to all these things.
Marin Katusa: And the only negative for the retail clause you do have to be accredited to do this. And to be accredited you just tick a box in the financing say, “Yes, I’m worth this much.” And that’s what you do to prove you’re accredited. And for the retail guys that aren’t accredited. Remember when I started, I was not accredited. You worked your way up and it goes off of your balance sheet and your portfolio. And there’s always a way to do it if you’re patient. You look at some of these incredible values that we’re seeing in the market on de-risked assets, you don’t need to take any risk today. The market is cheap, be a value investor and be patient the market is coming to you.
Frank Curzio: Now that’s a different tone to be honest with you over the past at least year or two years where you’ve been bearish on this industry. But now you seem more optimistic when you’re looking at a 24 month time frame.
Marin Katusa: Correct because so many fund managers have blown up and there’s just so little money available that now I’m getting these terms that Frank are like for example, this one that I’m publishing on later this week. Bloomberg when you list debentures, they have a function that you can value and it’s what 90% of all the fund managers in the industry use, right? We have the Bloomberg terminal, you type it in what you look at your mall, what it’s trading at the share price and then what should the debenture when you list it what should it be trading at? Because we’ve structured it such in a way with the full five year warrant, we had to go to the programmers at Bloomberg and walk them through because they’ve never seen this before.
Marin Katusa: That tells me that we’re doing something right because the terms and the odds are so much in our favor. When there’s no one else competing with us for the capital, you get to dictate the terms. Now Frank six, seven years ago I wasn’t doing many financings because I had to compete with all of this fund money who thought this is a near term blip. All those guys have been washed out. The commodity market has washed up hundreds and hundreds of billions of dollars. So this is our advantage of being here and it will change eventually once I see competition and guys willing to do say a half warrant well then I step back.
Marin Katusa: And remember the fundamental rule is if management issue themselves a five year option, why the hell am I going to take a half year warranty at two years? My favorite line is management tried to negotiate with me and it’s kind of a thing they want to be big and tough in my boardroom and say, “Well, we’re not going to accept that.” And I said, “No problem, then there’s no money like get out of here.” And then the irony is they try to weasel out of that and then choke you what about a three year warranty? I said, “Okay, I’ll tell you what, you change your options to three years and I’ll do the three year warrant.” You should see how fast I get my five year warrant.
Frank Curzio: Explain how because when we were on a bus tour we went to your Kappa project, right, which is really cool. We had a lot of big names on that bus, I’m going to say more than 30 people, maybe 40 people and I remember you saying, “Hey guys financing is open for me, five year warrants.” And everybody kind of laughed at you, talk about to maybe average investors out there I mean, five year warrants, you never really heard of them for a long time. And now they’re more common because of the market. But it is… yeah, how common was that pretty much before 2013?
Marin Katusa: Oh, very, very, very, very rare. You had to go down the food chain and accept a lot of the risk and it was more early stage projects. And it was funny like you’re on that trip and remember, we had that microphone and I made everyone jump up in front with me and they had to pitch to everyone else. And the wild thing was here we are, we’re going up to this copper mine and there’s about 45 guys, what did we calculate? Something like $12 billion of net worth was on that bus and I put up my hand and I asked, “Put up your hand if you’ve ever been to an operating mine?” It was like six guys out of 45.
Frank Curzio: Yeah, that was crazy.
Marin Katusa: Right, these are some of the biggest names in our industry and I was blown away. So few guys have actually gone the distance to build these mines so many guys like you mentioned were get to the point of selling your project to someone bigger who will build it. And that’s why I took the conservative thing and everyone like you said laughed at me and said, “Ha-ha the Katusa warrant, sure whatever buddy.” Well guess what? Now it’s like a mandatory with producing companies.
Marin Katusa: You know what you’re also seeing now Frank, a unit financing where the investor can get a piece of the royalty. This is a game changer what we’re working on here. And this is going to be a big competitor to the royalty companies because so many retail guys have said, “Well, I’ll just invest it in a royalty company because they get royalties.” And I said do have a staff?” That’s fantastic.
Marin Katusa: But what if you now can get a share, a warrant and a slice of the royalty? That’s where we are in this market. It’s not going to last long but you have these windows of opportunity. I remember the exchange couldn’t understand why the HDI guys were giving a full warrant on the world’s largest undeveloped gold copper project. It was $25 a share five years earlier. And we did it at 45 cents a unit with a full five year warrant that listed. And within a year that warrant was trading at four bucks. Do you know why Frank? Because me and you and David Lowe were the only guys willing to jump on a plane and go there and I backstopped 40 million of it. That’s why we got those terms because no one else was willing to do it.
Marin Katusa: And at the end of the day, these companies need capital, right? And it’s just a supply demand issue. So if you’re there maybe it’s luck that we position ourselves to have cash in a bad market whatever, it is what it is, this is where we are and these are the terms I want and that’s what we’re getting. And what I was made fun of by the industry five years ago demanding these five year warrants is now kind of common nomenclature. So everyone’s kind of accepted that’s the new normal.
Frank Curzio: Yeah it’s amazing because what you’re saying here too we can go back to when you have really depressed times, right? Marin liquid with Buffett the deal he had during the credit crisis with Goldman. You’re looking at getting five billion worth of perpetual preferred shares, right? Which get paid before the common shareholders in case of a bankruptcy. But then he was also able to get warrants which was like 43 million and I think he put whatever five billion and made three point whatever billion a few years later it was almost like a no risk deal to him at the time, but you only get those deals when things depressed, right?
Marin Katusa: Correct. And that’s where I’m at right now. It’s about limiting my downside and if the upside turns out, then I really capture as much as I can on the upside but I’m going to get paid while I wait for that upside with interest in debentures. It’s just a really smart way of playing this game.
Frank Curzio: Okay, now let’s move from gold to uranium, right? And this is a sector that you have a lot of bulls on, there’s a lot of emotions on Twitter, I want to keep this cordial as possible because there’s a lot of bulls out there, I have money invested in uranium and I believe you have money invested in uranium, but you have a different opinion out there because there’s people who are super bullish on this market. And just all in and when you have different opinions on anything, especially if it’s Tesla or whatever you see the Twitter the trolls and everybody go crazy. But I want you to talk about the uranium market because you do have a different opinion than a lot of people out there in this market as well. And you’ve had that opinion for I think a couple of years now. What’s your thoughts on uranium? Do you think this is a good sector to invest in?
Marin Katusa: Okay, so you’re going to hit a nerve in the troll factory here like never before. It’s funny, the uranium market I think they’re using one dimensional analysis here. So many of these guys keep talking about what it should be. And the irony is, is everything they’re saying is correct. Except one thing that they’re missing here and like I’ll give you some just for the viewers that don’t know my background in uranium. Frank literally, like I’m one of the largest investors in the uranium market and have been for years, but I look at it a very different way.
Marin Katusa: I remember writing articles in 2013 about under feeding I was the first guy to really crack the whole thesis of how the Russians are going to flood the market with their under feeding. And I remember at the BMO conference, which is kind of like a very it’s the institutional world who’s who and the big company guys meet with the management and I was in a room with the producer of the president of the world’s largest publicly traded company at the time, and I said, “Hey Tim, I think your under feeding numbers are wrong, your whole team and the whole industry thinks it’s going to be 5 million. I think it’s going to be like 15 to 20.” And he laughed at me in front of the whole market he goes, “Man, you’re a smart guy but you and your love for Russia.”
Marin Katusa: And I kind of sat there and I went this isn’t about love for Russia. I’m Canadian, we’re neutral whatever, I treat everyone with respect. The irony was the Russians came out with over 25 million in under feeding, okay. And what I was trying to explain at the time was the currency advantage that the Russians and the Kazakh’s have.
Marin Katusa: And I actually think and I talked about this in 2015 when I was asked to give the keynote at the world nuclear fuels market, that’s kind of the who’s who of the utility buyers versus the producers. And I said, “Look, guys, you really need to get your stuff sorted because if I was the Kazakh’s, I would flood this stuff.” And I don’t think the Western world truly understands how big these resources are on the Kazakh side and the permitting advantage that they have.
Marin Katusa: Secondly, I talked about the currency advantage that they had and you look at how the whether it’s the ruble or the tangy with the Kazakh currency, they’re still as profitable as they were when uranium was 40 because of the currency advantage, they’ve been depreciated more.
Marin Katusa: Thirdly, you look at okay, I was kind of surprised when if you pull up Kazatomprom went public and they’re listed now in the London or a percentage of the company is listed on the London exchange. And you go and look at their PowerPoint, you flipped through to one of the slides and they use something that I wrote and they credited it to me. Now, they didn’t ask me for that but they did do that. Cool, whatever, that’s kind of an all a tip to the hat of who they think are the top names in the industry.
Marin Katusa: There’s three large firms that are well followed and I’m the only one that was not paid for by the uranium or nuclear industry. UXC, their clients are the uranium industry and the Tetra Tech is also their clients are. Mine are not, mine are my subscribers. So I was the only independent guy that they used in that report. Here it is fundamentally what I think Frank, if you were the Kazakh’s and let’s play game theory here, okay?
Marin Katusa: Now we’re going to get into some deep stuff. What does chemical have? They’ve got some incredible assets, they defeated the CRA hassle which was a headache for them. They were right, they did that the management Tim and Kutzell and their crew did a fantastic job. And then they have some ownership in Kazakhstan on their production in Chi and all that.
Marin Katusa: So what if the Kazakh strategy is to actually bleed out their number two competitor? Actually, what Rockefeller did with Standard Oil. And the difference is you’re backed by the state rather than being an independent company. So what I think that I do believe that happening, this is my unique perspective. And I think chemical is fighting a battle with someone that they can’t beat.
Marin Katusa: Number two, I believe the result of the section 232 will come out in what I’ve called a quota system where it’ll be a gradual build up. I’ve talked about this for over a year. And it was funny, you were at the conference, my conference and my partnership with Jay at Cambridge house where I had the guy who created the section 232 openly said, “Marin, I got the idea from your book and the chapter on uranium.” Like so these are my friends Jeff Glendo is a good guy.
Marin Katusa: And I talked to him about it and I said, I just don’t see them going to 100% you just don’t have the infrastructure. And he said, “Yeah, I think you’re right but maybe your quota strategy will get to there.” And I do see that and years ago I wrote about how we have in the oil markets you get, it’s a Canadian pricing, Western sedimentary price. You got your WTI price, you got your brand price for the Europeans, there’s different pricing for oil. I’ve always suggested that there will be a different pricing for uranium. And I do believe that the result for the section 232 will come that it will benefit permitted, built and the key is unhedged. That’s where you want your maximum size.
Marin Katusa: So now if you’ve got some deposit in Africa in an AK47 nation, oh I’m going to get the trolls going now because they hate when I talk about AK47. I’ll tell you what guys, after you visit over 100 countries and put body armor on and visit these places, then come and talk to me about trying to rip into what I call AK47 nations. The point is Frank, if you’re not willing to take your family there, don’t put your portfolio there either, okay? I’ve learned the hard way.
Marin Katusa: I’ve been there done that and so many of these areas don’t have the infrastructure in place, that even if uranium got to 100 bucks, guess what? It still wouldn’t be economic. Because guess what? We’ve seen two massive cycles in uranium in the last 25 years. And those same projects have been floating around.
Marin Katusa: So if they can do it at $135 uranium even with the improved technologies and all the great stuff that these industry is doing, it isn’t going fly. So keep it simple, stick to build, permitted and unhedged. That’s where I’m putting some big money and I think that’s going to be the clear winner. And I wanted just US production if I can just quickly drive down and see the assets, I’m not going to go to places where I need to put body armor on. And you know what guys? When I was 23, 24, 25 years old I thought it was really cool going to somewhere discover something cool like in the movies.
Marin Katusa: That’s not how the real world works, you’re going to get caught up in changing political regimes security issues, the world’s changing and more importantly, the Russians and the Chinese have an advantage over you as a Western going to those jurisdictions because they’ve got the government behind them. You don’t as a Western investor. So put the odds in your favor and keep it simple. That’s it Frank and I’m still bullish on the sector. But I’m just telling everybody I don’t need to take the risks. It’s so cheap I’m getting build out permitted assets for a fraction of what it costs to build today. Never mind the permitting delays. Keep it simple.
Frank Curzio: So you brought up an interesting point where Pakistan is bleeding, whether there’s chemical or whatever and I was just thinking like it could be similar to OPEC where they try to bleed the Shell producers, right? So they flood the market with oil, some of the prices are low, saving [crosstalk 00:58:23] $45 a barrel, right? And then most can’t produce at those levels. But after a while and this has happened with MacArthur coming off and everybody cutting supply, the fundamentals begin to change where no Shell producers are producing anymore so a ton of supply comes off the market.
Frank Curzio: And even if demand stays the same or happens to go higher now the fundamentals go in your favor, which is the argument I’m hearing for uranium where they’re looking for price discovery, there’s huge demand, a lot of suppliers come off the market. And there’s a lot of contracts for the biggest electricity producers that are going to have to get renewed. So I mean, is that a callus that you see or is that something that you think is overrated? Or is that something that you do see because you actually said, “I am bullish here, I just don’t want to take on the risk.” And you think prices are going higher.
Marin Katusa: There is no shortage of uranium. And that’s something that in their analysis a lot of the ultra bulls fail to like when you just go through some of these companies and I know the management team and they keep pitching it. And one thing I want all your viewers to truly understand, go through the MDNA and see some of these talking heads are these gurus or wannabe gurus, they’re getting paid by these shitty companies to talk about these things. That’s the biggest piece of shit around, right? Like so you look at and go, “Okay, you don’t really have a deposit that’s anywhere near being built or permitted.” And they’re giving me all these like 10 pages on the uranium sector fundamentals.
Marin Katusa: That’s one of my biggest pet peeves in the sector is when you see these companies with no gold and they’re talking about the gold sector, that’s a side rant in itself. Secondly, what they don’t tell you is there’s no shortage of uranium for the US okay, it’s going to come down but the fundamental rule of Section 232 is they’re trying to even the playing field and security, what they’ve done in the US on the oil side has been great for the country. And people forget that just 35 years ago America was the world’s largest producer of uranium. It’s American technology that took Kazakhstan from zero pounds produced in the late ’90s. And I remember when I first visited I think it was in 03′ or 04′, they had 800,000 pounds of production.
Marin Katusa: And then last year, so like you’re talking about in 16 years, they went from just under a million pounds Frank, to over 60 million pounds. Talk about the growth there. There’s no other commodity or any other country that has seen that explosion in less than 20 years. Like that is game changing, right? Secondly, if you’re in America I don’t want some foreign company coming in not producing in America, but then buying it from the Kazakh’s and then relabeling it and then dumping it in the US.
Marin Katusa: That’s an obvious thing that I think has been happening in the sector. So why should some foreign company non Us and then the sector in the US be vulnerable to that, right? So I do see the advantage for the American sector is US grown, this is made in the USA and I think it’s going to be a gradual build up. I don’t know, I throw out numbers because really I’m guessing Frank, I don’t know.
Marin Katusa: I look at how much is built and I’m one of the few guys that have been to every single producing mine. And I see what they could do. And I go it’ll probably start at two and a half, three to five million pounds and gradually build up, but the Americans consume a little over 50 a year. So can they get to 50 in five years? Hell no, there’s no chance in hell the levels will get that much built in that fast because of the permitting delays.
Marin Katusa: This is not Kazakhstan where the president says and it follows it’s just it isn’t going to happen that way. So I think it’s going to be a quota system and it’s going to be best case scenario 15 to 20 million pounds over 10 years or something like that. I don’t know what the numbers will be but it’s just kind of like common sense and game theory and see where we’re at.
Frank Curzio: Now, last question here on uranium is section 232. For me, it seems like it’s been a drag, right? So if people don’t know 232 is a mandate’s on the President’s desk now as of April, where they want to produce more uranium I don’t know if its 25% in the uranium.
Marin Katusa: Well the last time I saw a picture of Trump, there’s nothing on his desk so what I’m trying to say by that joke is okay Frank, you’ve been in this game long enough to know name me one company that had a catalyst, we’re going to get a permit end of Q2 and they actually did it. Or they got their mine in production on time, or they closed their finance like Frank, the whole point is everything takes longer and we’re talking about politics.
Marin Katusa: Who says it can’t be delayed a little bit like and what is the uranium sector? Which is like a zit on the ass of the American economy going to do if Trump says, “I need more time.” They’re going to say, “Okay.” Like I get that they say that it has to be done because that’s the thing. But so many guys are expecting like overnight that the uranium market’s going to pop I think that’s the wrong bet here.
Marin Katusa: I think there’s been so much of that expectation priced into so many crappy deposits that I know that are being promoted and are being paid to not just promote, but paid to troll the side of what I’m trying to say is like, “Hey guys, you don’t really need to take the risk of this and just stick to the common sense place.” They hate that strategy because the junior sector is so used to positive promotion from the talking by the industry leaders and I’m saying, “Yeah well, I don’t really want to go to that part of the world to develop your shitty asset because the world doesn’t really need that mine in production.
Marin Katusa: And it’s not going to be economic to begin with even if we tripled the price of uranium today. So I don’t need to go there right now.” Now that doesn’t mean some of the stuff that some of my colleagues are financing that need $90 or $100 uranium won’t work in five years or 10 years. But that company is going to dilute itself to hell and that’s not where I’m at right now.
Frank Curzio: That makes sense. All right so let’s finish with this because we really covered in depth and great stuff there and I mean, in both subjects. Again, guys, you get different opinions about everything but for me and I know you feel this way to Marin is when I’m really bullish or bearish, I always want to hear the opposite opinion. It just makes me research even harder.
Frank Curzio: It makes me ask questions and in today’s environment, especially with our politics here with Democrats and Republicans, you have to hate each other. You can never come together and sit and disagree and say okay, why do you disagree? Okay, here’s what I see and then work out something a solution or whatever. It’s I hate you, I hate you too and then nothing ever gets resolved so differences of opinion is always great.
Frank Curzio: And I guess we’ll finish with this since we covered golden in so much depth and uranium. You’re always giving ideas. I know you said earlier even with gold that you’ve been more conservative convertible debentures. What are some of the names out there because I see in like ore and resources as it just seems to me it’s a really good position, they got a great management team, you introduced me to the management team probably about five, six years ago.
Frank Curzio: They’re doing all the right things, their stock has gotten hit, but it’s actually been performing pretty good lately. But there are certain companies out there that are doing it right and it’s just their stock has gotten hit pretty hard just because of the market conditions. Is there anything out there that you’re kind of like looking at saying, “Okay, this is something I want to invest in or maybe I’ll invest in if I see it come down a little bit more.”
Marin Katusa: Look and talking about Oren Ivan’s a good friend of mine, I’ve known him for crap over 12, 13 years he’s a hustler and most importantly, he’s a survivor that’s backstopping his own deals. I’ve seen him put this whole network to backstop the deals so he’s a good guy. I think you have to start with the people. I’ve put a hell of a lot of money into uranium royalty core because I believe they’re going to take advantage of the near term disappointment in the uranium market. And that’s like I’m playing the long game, Frank.
Marin Katusa: I don’t need… everyone expects us to pop in the next four or five months. Look if that’s what you really think you need to rethink your whole strategy. This is a long game and it’s a very political one in the uranium sector so that’s one that I think you really need to watch I think that’s going to be a big winner.
Marin Katusa: And then start with the people in the sector. And you talk about gold I’m very close with a guy named Ross Beady. He’s put over 100 million dollars of his own money into a company called Equinox. Now open disclosure, I’m one of the largest shareholders of the company myself. And you could today buy stock at a price lower than the average price that Ross and I bought the stock at. But that doesn’t mean it’s a bad investment, it just means that’s the sign of the times and we keep buying it. But that’s what you want to do. And he’s put two they have two operating mines today and they’re trading at a little bit above point four and a half. You don’t see that in a normal market and he’s going to continue to grow the company. And when Ross says he’s going to get to a million ounces of gold, he’s going to do it.
Marin Katusa: We had a massive win without Altera, same thing. Ross is the largest shareholder, I think I was maybe second or third largest shareholder. You go in with these stories and you move forward. Remember when I took you up on a helicopter with Ross, you saw the intensity and just the way he thinks you’re like there’s a reason that guy’s a billionaire, right? He avoids the noise and he just does it.
Marin Katusa: You look at what like Lucas Landeen has another guy you want to follow in the industry that I have a huge amount of respect for. Some of his companies are trading at a big discount. Recently you look at what’s happened with Pan American, that is something that you might want to start looking at building a position. And so and these are all producing built de-risked and it’s cheaper than when they were getting to where they are today.
Marin Katusa: That kind of confirms my whole thesis here of why do I want to take any exploration risk in this game? I’m super light exploration. A, the geologists have been a catastrophe in this industry like it’s funny, a lot of the geos don’t like my style, but really like they’ve God, have they been awful like just really horrible use of capital. The management teams of these exploration companies, their lifestyles, their costs, the GNA has just been awful. Secondly, why do I need to take risk when something built and producing is cheaper than I could build it for?
Marin Katusa: So why go through that whole cycle when I can just do it now advanced and with the best names in the industry and Frank, let’s just you got to look in the mirror and really ask yourself, are you better at picking a stock than someone like Ross Beatty, who has a whole team of analysis, they’ve had access to the site visit drill core, data room, and they have the ability to backstop this thing to the conclusion, then when you and I jump in on a site visit and spend three days there.
Marin Katusa: So if you find the best guys in the business and they have the best team around them, you become a partner with them and work with them and backstop their financing and hopefully you can get a warrant out of them. And you kind of try to do the Katusa negotiation with them with someone like Ross hey, we do have a full five year listed tradable warrant on equinox. Like that is a phenomenal valued asset. And he just said that it’s a sign of the time, but he himself has put over 100 million dollars into the deal. That’s how you’re going to survive this bear market.
Frank Curzio: And last thing here, when is the next invitation to drink wine at your house? I think I cost you a lot of money buddy.
Marin Katusa: I don’t know if you want to explain what happened there but my God was I hurting the next day.
Frank Curzio: Yeah, so I went out to Vancouver and Marin invited me to his house and yeah, and we had a yeah, he’s got how many bottles of wine in your wine cellar?
Marin Katusa: A lot.
Frank Curzio: And yeah, I definitely owe you on that one. But yeah, we just popped a couple and we kept going and going and going it was really cool. So we had a good time that night, but I’ll make that up to you. I’ll make that up to you I promise. So yeah, because we drank yeah, a lot of wine and I wasn’t feeling so good the next day either. So I really appreciate that. That was a lot of fun buddy.
Marin Katusa: Luckily, I’ve got a very understanding wife.
Frank Curzio: Yeah, no I hear you, I hear you. So all right man listen, we covered a lot, man I appreciate it man. We really you went in detail a lot with again, with the gold sector and the macro point I think from individual investor standpoint I thought this is fantastic where they listen, you could make a lot of money in this market because it’s so depressed, but you want to take on as little risk as possible and you provided ways to do that so I know that we really appreciate it and like always we share your ideas so thanks so much for coming on man. I really appreciate it.
Marin Katusa: You bet buddy and I guess I’ll see you in July next.
Frank Curzio: Yeah, absolutely in July. Yeah, absolutely so a lot of conferences coming up and I’ll probably be there actually June, aren’t we going to the other event in Vegas?
Marin Katusa: Oh yeah, that’s right I will see you in June. I forgot about that.
Frank Curzio: Yeah, so what conference is that again? That’s the libertarian conference or something, right?
Marin Katusa: Yeah, that’ll be kind of interesting to see.
Frank Curzio: That’s going to be a lot of fun yeah, so I’ll definitely see you in a couple weeks man. Thanks so much for coming on.
Marin Katusa: Take care buddy.
Frank Curzio: All right guys great stuff from Marin. And look he provided ways he’s positioning himself in a depressed market, try to take as little risk as possible yet you could enjoy that huge upside if the cycle turns. Because you all know you make the biggest gains, right? You make huge gains when investing when times are terrible. Usually stocks are cheap, they’re out of favor they trade at ridiculous valuations which we’re seeing a lot out there.
Frank Curzio: I mean I thought they were ridiculous valuations over a year ago but bear markets and even bull markets tend to last longer than everyone expects. But I loved his comments, I love providing ways saying, “Hey you know what, I want to see bullish on uranium over the long term.” I think he shared the same opinion as most people out there. Which is saying hey, be careful in the short term and he’s not going to do which is a little different from other people out there.
Frank Curzio: Alcan is big uranium and these guys again, when they get on Twitter sometimes it gets a little heated and stuff like that. And for me, it never makes sense to just be pissed off at someone because they have a different opinion than you. For me I want to learn I want to talk to them, I want to ask them why. If they don’t know the numbers the things aren’t working I’m going to share my numbers with them but that’s what makes you a better investor. And it’s even with Democrats and Republicans these days, right? I mentioned that before with at the end of the interview with Marin that man these guys like hate each other.
Frank Curzio: Let’s just come together it’s okay to have a difference of opinion I mean that’s what capital is about, markets are about that’s what we’re founded on, this country was founded on, right? And democracy but you have to be able to talk to each other where it just can’t be hey oh, the republic have a good idea. Forget it no, we don’t like it. Democrats have a good idea and we’re Republicans no, we don’t like it because it came from you especially heading to election year because it’s pretty crazy. I loved his comments on the sector. Let me know what you thought again, this podcast is about you not about me and what you thought about their interview at Frank@curzioresearch.com that’s Frank@curzioresearch.com.
Frank Curzio: Now let’s get to the educational segment run a little along. But hey, this podcast has a lot of great information. This is going to be even better here guys, pay attention please. So people ask me, “Frank is it time to be worried? You’re nervous with the markets.” And I had a whole rant on how this trade thing is all BS and it’s going to disappear and I truly believe it will. But right now, hey, you’re hearing strong statements from both sides trying to save face, which is fine depending on what time of day Trump tweets, things are good with China, things are not good with China going back and forth. But if we do have a trade war listen, it’s going to really crush both economies. I mean, China much more which we know we’ve seen by the numbers.
Frank Curzio: You’re cutting off the person you sell the most goods to. It’s common sense. And now on common sense I broke down the numbers on past podcasts showing you how it’s a disaster for China, it’s a disaster if they don’t get this deal done. But now it’s going to be a disaster for us as well. We didn’t feel it last year our markets didn’t go down at all last year, they went down from September through December mostly on Fed concerns, they were more hawkish looking to raise rates and then they change their tone like in December and then the markets went up a lot this year to start the year. It’s up about 10% still. But now this year, we had tax reforms last year, it’s a big difference. Now those are factored in so it’s going to hurt us as well. But it’s in the best interest of Trump and China to do a deal. It just is.
Frank Curzio: There’s an ongoing risk and more importantly it creates uncertainty. You guys know how I feel about uncertainty. I’ve told you it’s the death of stocks, it’s death of markets, people hate uncertainty. There’s a reason why when you see a company getting sued and then they’re getting sued over a long period of time you’ll see the stock weak, it really doesn’t get momentum.
Frank Curzio: And then once they settle, even if it’s for a good amount so I was not going to bankrupt them. It usually the salvage can be paid over 10, 20 years but once they announce that settlement that risk, that hurdle is removed you’ll see that stock even though they have to pay you’ll see that stock roar higher because you took that uncertainty out of it because we hate uncertainty and we have a lot because of trade right now.
Frank Curzio: There’s so much you see stupid stories like China is going to sell treasuries, by the way the Treasury Department sold 40 billion of two year government notes last week to the strongest amount it’s seen and I believe it was nine months at a yield of 2.125%. By the way, that’s the lowest yield at an auction for two year treasuries since January 2018. This tells you treasuries aren’t a safe haven people don’t want you to… believe me things are fine.
Frank Curzio: China is not going to be selling the treasuries anytime soon. But you just see things like that pop up and there’s people that have been saying, “Oh, China can really destroy the US.” They have to put that money someplace and it’s best to put it here. Every little turn that they’re just destroy the entire nation it could be so dangerous.
Frank Curzio: But again, you’re going to see these stories surface. And like I said, if China wants get serious about a trade war they would cut the supply of [inaudible 01:17:22] to the US or raise prices significantly, which our tariff’s on and which would crush a lot of chip companies. Would crush manufacturers of tech devices yes, that’s Apple. It would hurt our defense companies who uses materials to build weapons and China controls what? 85, 90% of the supply base depending on what stat or what firm you want to believe. But it’s around 85 to 90% of the supply in rear earths.
Frank Curzio: And we’re starting to see stories like this surface which has led to rear earth prices rising over the past two weeks. So you’ve seen these things escalating a little bit. And look, I still think a deal is going to happen, there’s too much at stake for both nations when there seems like an easy solution given that China and the US can help each other in so many ways, so many ways.
Frank Curzio: And China opened up its market so they can accept foreign investment in their state run companies now, which were monopolies. There’s like 12, 13 major ones. There’s just LNG how we could supply them whatever there’s just so many different ways that we could work with them that makes sense where we’ll both continue to be the world’s leading economies for decades and even centuries to come.
Frank Curzio: And just considering what has to happen. Well, we just want trade to be a little bit more fair and stop stealing intellectual property. Trump heading into election year guys and he’s pretty crazy to continue to have these fights going on because it is going to hurt the market a lot. Which I’ll tell you in a minute why it’s hurting the market. But that’s just one risk.
Frank Curzio: One risk again something that I think it’s definitely get resolved. But the longer it goes the more uncertainty is but then when we look at store closures, they’re out of control right now. It’s not just department stores, the CVS Pier One, Party City closing lots of stores. It ends up over 7000 store closings announced this year it’s not even June yet. This compares to about 5500 stockholders announced by this time last year.
Frank Curzio: And when he said a trade war and how is it affecting and is there going to be a solution? I could tell you, you listen to the conference calls and a lot of these retailers. A lot of them warned that earnings will possibly be lower and it’s not factored into their guidance, like the trade war if there’s a 25% tariff in Chinese imports if that becomes a reality that’s not factored in. It’s not factored in to their guidance. You look at Macy’s, Macy’s report a great quarter. They blow out the numbers on their earnings report a great revenue, but they didn’t raise that guidance.
Frank Curzio: And on the call, they said hey, this doesn’t include 25% tariffs on Chinese imports or anything. If that happens, we’re going to have to change our supply chain and that’s a lot of retailers, a lot of companies probably more than 40, 50% of the country’s SP 500. If that happens that creates uncertainty. That’s why you’ve seen very few companies raise their guidance this earning season, even if they blew out the numbers. And what happened to Macy’s up seven 8% after they announced their numbers, and then by the end of the day it fell 1% because people are worried. Again, uncertainty. It’s a killer. It’s a death of stocks, it’s the death of markets.
Frank Curzio: Looking at stocks in general look really ugly and we’re up 10% this year, yes. But remember, we fell 20% from September through December. So we just bounce back a little. We have more companies trading at 50 week lows and 50 week highs, a lot of names, good names breaking down. And there were big news on 20% plus over the past six weeks, it’s pretty insane. And I’ve seen a lot of stocks kill it right now.
Frank Curzio: The ones that did report strong earnings and even raised their guys last quarter, those companies came down as well. And I’ve seen a lot of leaders who are just killing it in this market. Manufacturer activity just came out it’s at a nine year low. This accounts for one of the biggest components when it comes to employment, especially in sectors like healthcare and business services and it’s a nine year low something to worry about.
Frank Curzio: US new home sales fell about the most in four months. QGDP guys getting cut by everyone out there from well over 2% to a little bit above 1% that’s a big deal for the next quarter GDP it’s being cut. We have an inverted yield curve, which I would tell you is bullshit right off the bat. Because we’ve seen this news come out how many several times it’s going to create a recession all the time. But and by the way, inverted the 10 year Treasury yields form below the three month treasuries, you see that is viewed as a recessionary indicator. And again, although it’s not accurate when you throw in all the other risks in the market, now you’d want to pay attention to something like this.
Frank Curzio: Again it’s not just one data point that works every time it doesn’t if there was everybody would use it. But now I’m taking this a little bit more seriously with the rest of the risks. You look at it internationally you see how much growth has slowed. Eurozone manufacturing contracted last month, German business confidence is at a four year low, South Korea exports decline this is a big indicator for the chip sector, it’s telling demand is slowing. Brexit has not been resolved, how long ago did that happen? Again, something that creates a ton of uncertainty. Washington is worse than ever and probably our biggest risk. I mean, I don’t see this change anytime soon because nothing is expected to get done probably for a very, very long time.
Frank Curzio: No matter if the republicans get re-elected, if Trump gets reelected or not. I mean, these two sides just hate each other. We have an infrastructure built on we have continued investigations on Trump after everything was cleared regardless of how you feel about this or whatever. But isn’t there so much more important things? Yes people are going to be out there saying, “Oh, you should impeach him or whatever.” Whatever. You’ve got extremists, take out the extremists and I’m talking to like most of the people in the middle I don’t know the wire not all the way in the right all the way in the left but we need infrastructure in this country, okay it’s dangerous.
Frank Curzio: Our bridges, our pipes, our waters, our dams. Come on there’s millions of studies out there just it’s terrible. This infrastructure, some of it’s over 100 years old, how hard is it to get together on something like that? To really pass a deal with the debt ceiling deadline coming at the end of the summer, you know that’s going to be fun, that’s going to be a nightmare but how many politicians are going to just sugarcoat get as many things as they can to vote. To pass I don’t know why it was extended for years and years, this keeps coming up and again, creates uncertainty and other risks to the market.
Frank Curzio: We should have the demonstration fully focused on getting a deal done with China not fighting continuing investigations that were already investigated. At the end of the day, it’s all nonsense since we have an election coming. And guys are politicians you need to know it now. I mean, the only thing they care about is getting reelected, believe me, they don’t give a crap about you, they don’t give a crap about me or the best interest of the country, they’ll lobby on it, they’ll say it, these guys are looking to get re-elected. These are power people that’s what they care about power. That’s what it’s about when you’re a politician. You need to be in control, you need to get reelected.
Frank Curzio: If you ask any one of them if you had the opportunity to do the right thing for this country and not get re-elected or if you had that choice, oh, I’m going to get re-elected. Or I had the shot to not get reelected but I’m going to be a huge proponent on a certain topic that makes sense and I want to make the country better, a hundred out of a 100 times they’re going to vote nope, I have to get reelected. They think they could do more in office that’s what they’ll tell you. But it’s all about power. And the hate right now guys this is the biggest risk, long term risk to our market is Washington.
Frank Curzio: And to make matters worse you have Biden throwing a big fundraiser in New York City, which makes sense. You don’t like Biden and he’s the front runner now. And he’s being funded by Andrew Cuomo, which makes sense, but it’s also being funded by Jim Chanos, Jim Chanos is the biggest short seller in the world, the smartest short seller in world. I don’t know if there’s a glaring indicator or not of what he thinks is going to happen if Biden gets elected, I mean short sellers are now funding political campaigns? I don’t know is it me, does that sound crazy?
Frank Curzio: I guess I’d do the same thing if I’m a short seller, I want to put money behind the person I believe is going to be the worst and destroy the companies, is that how he feels about Biden? Is that the guy you really want raising money for you? I know he’s a billionaire I know he’s rich but he’s a short seller. That’s what he does. He doesn’t go wrong on anything and he’s pushing for you to get elected. I don’t know that’s pretty crazy. And not always bad guys, not always bad. Inflation is tamed despite milk prices rising like 15%, gasoline prices rising in the holidays, tuition, food, electricity, education, all these costs rising.
Frank Curzio: These are the costs that us Americans know the most American households, we pay those. But they focus on a CPI and its tame and employment is still very strong. Valuations are not crazy rich, SP590 is training about 16 times forward earnings. That’s in line with the five year average and over the past 10 years is like 15.3. So we’re not just to put in perspective, the NASDAQ is trading at 40 times earnings just before the tech bubble busted, right? So we’re not crazy expensive at all.
Frank Curzio: We have Biden in the lead if he does get elected, it’s much better than Bernie Sanders, right, in terms of the market where well in terms of markets because his plan is to take 70% of the income from the super-rich and give it to whoever? I just laugh at I don’t care what side of the isle you’re on, how is that a good thing for Americans, capitalism, innovation, I mean, that never worked in the history of any country ever since the world was created. The distribution of wealth. And where do you think those people who are making that income are going to go? They’re going to leave this country immediately. You think that’s good? You think it’s good for innovation, you think it’s good for philanthropy, you think it’s good for so many different things?
Frank Curzio: And basically you’re giving people who don’t have a job money, right? So you’re giving money to these people, it’s the easiest way to get votes makes sense. And look hey, if I didn’t have a job, I had tons of debt from credit cards and student loans, I’d be wearing a Bernie Sanders shirt every day, I’d be out there, “Hey, Bernie, let’s go.” Fortunately, I work a lot, I work my ass off. I don’t think I should be giving a lot of money and again, I’m not in that class of 70%.
Frank Curzio: But still, I work hard, I sacrifice spending some time with my family to make things work because I know long term if things work out, have a good retirement, be able to spend more time my kids and stuff but you’re going to get penalized for that for working really harder than everybody else? Are you going take more money away from us and just distribute it to someone else? I mean, does that create anything on economic front? Does that create value?
Frank Curzio: So anyway, the fact that Biden is an elite I think is a positive. I also think if you look at the Fed, I mean the Fed is probably going to lower the rates a lot sooner than people believe. Because we’re seeing growth slow tremendously I mean, look at the cuts in GDP from two point whatever, two, three, four, five to 1%, 1.2% around.
Frank Curzio: So you know the economy has really cut GDP and then if you look internationally, man the market is slow and like crazy. There’s very little growth out there. So that would be a positive low interest rates. As you can see a lot more negatives and positives, right? It’s why I’m lining up on a portfolio my newsletters, so expect a few seller to the next week or so if you’re a subscriber.
Frank Curzio: And again, I could be wrong and I truly believe there is going to be a solution to this, which is getting drawn out much longer than I ever anticipated. Doesn’t make sense? And the trade war, so when it does, that’s going to get positive to the market remove uncertainty. But still when you combine everything and you look at everything at a whole guys, I want to look at the numbers, if the numbers change, you have to be able to change your opinion. And right now, there’s just a ton of uncertainty in the market right now, a ton. And again, we may see a quick rebounds since the market is down for like three straight weeks, but it’s probably going to be short lived. There’s just too much uncertainty out there. Uncertainty with trade, uncertainty with Brexit, uncertainty with Washington.
Frank Curzio: I’ve seen economic numbers come down, figures come down slow growth internationally. And more important, it’s hard for companies to invest let alone investors, when they have no clue what’s coming down the pipeline. And those people are out there saying, “Well, nobody can predict the future.” But you’re looking at companies where things are going good let’s take Macy’s as an example fine turn the corner based on these numbers.
Frank Curzio: If we have trade wars with China and yeah, we see these tariffs being raised, you’re talking about a company that’s going to have to then change their supply chain. And you’re looking at hundreds, hundreds of companies, the SP500 are just sitting on their hands going, “Okay, what do we do?” Like we could forecast growth, you never know what’s going to happen in the future. But there is so much uncertainty what’s going on with trade in China.
Frank Curzio: And some of these companies have exposure, especially technology companies. I’ve seen a lot of those companies get nailed one by one. But there’s just you have companies that won’t raise guidance, they’re not going to invest right now because you’d be crazy to invest with this much uncertainty because that’s a major change. Now as you invest it’s think about gold, would you invest in gold if your project produces at say 1100 and prices are 1000, let’s just say.
Frank Curzio: You’d be like, “Oh, you know what, next year we’re going to put some more money into this project, we want to stop producing it.” Now you throw in China who says they’re going to raise price by 25% now that cost goes from 1000 to 1250 are you still going to invest that money in that project? Again I’m using this as an example no, you’re going to hold up, I want to see what’s going on first.
Frank Curzio: And when you have this uncertainty, you’re going to see companies continue to be conservative they’re not really going to invest that much. You know a lot of these companies do great when they invest their money, they return a capital. Some of these companies are great, some companies suck at it, but a lot of most companies are great, especially in SP500. But they’re holding back capex, they’re holding back investments until there’s more certainty until there is lightening up a little bit.
Frank Curzio: Yeah, it should be up, they should be doing good overall portfolios, should be doing good overall with the markets had been up a lot as long as you’re not 100% invested in mining and gold and stuff like that, which unfortunately, some people are. But lighten up a little bit about 15%. So if we do come down, you’ll be able to buy your favorite names at cheaper prices. And that’s what we want to do buy low and sell high so you may see a couple of sell alerts. So you will see a couple sell alerts in our newsletter over the next week or so.
Frank Curzio: And I think you should lighten up a little bit because there just is too much uncertainty out there in the markets. If you’re looking for how do I invest in companies right now? What should I do? Really quick, you never know when the bottoms in or what’s going to happen and we’re down three straight weeks but folks on inside of buying.
Frank Curzio: And it’s not the end all but again just like I said we have an inverted yield curve doesn’t mean you’re going to have a recession even though everybody says that’s an indicator but when you throw it in with so many different things, right? If you look inside of buys it usually means the stock is near bottom I think, right? Most of the time and you see that especially depending on the insiders who are buying not just a fund but if it’s the CEO the CFO these guys know the company the best, that’s a company that I want to check out.
Frank Curzio: See what they did last quarter in earnings and did the company kill it and still down 15% plus because of market conditions? Nothing can be specific but may be a good name you want to take like a 20% position in. In case it is the bottom. Okay, we don’t know I think it’s going to go lower or go high, I don’t know. We know Trump can’t go into election year with trade up in the air, people vote with their wallets he knows that so I can’t say he’s not having a deal done.
Frank Curzio: I mentioned earlier China is crazy to make this a long term problem and cutting off the biggest consumer instead of just doing the right thing and stop stealing intellectual property, make trade fairer. It just seems like a lot to give up considering China will fall into a depression without demand for their products from the US. So a deal will get done eventually.
Frank Curzio: So again, you just want to pick away at some names like a couple of different things look for inside of buys right now you’re seeing a few of them. Might be a way to pick away but be very very careful here. Don’t buy gold as a safe haven it’s not a safe haven hasn’t been for over two decades. I suggest buying staples with high yields if you feel the need where I don’t want to go into cash maybe you want to earn a little bit of a yield. Stay with utilities and also folks on companies that are reporting strong growth last quarter who’s shares a down since reporting.
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