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Global Money Supply Surging_ Get Ready For Inflation's Massive Comeback | Tavi Costa

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the steepening of the yield curve is is

one of the most important Trends in my

view for the next year I think that

that's that's highly likely there are

indicators that show that inflation May

reemerge Global liquidity is ticking

back up government spending as percent

of GDP has been on an upward Trend this

may put pressure on the Federal Reserve

uh to cut rates if the fiscal side is

constrained this is according to

research from our next guest Tavi Costa

portfolio manager of crescat Capital who

believes that we may be heading into a

renewed inflationary period which may

boost commodity prices we'll be talking

about the implications investment

implications of his research findings

welcome back to the show Tavi David

thanks for having me looking forward to

this I'll be starting off by asking you

a very broad question did the FED make a

mistake with 50 basis points which is

what they did in September a 50 basis

point cut we spoke before September did

they make a mistake yeah it's not that

I'm trying to avoid answering the

question but not sure they had an option

um and from my my understanding of

looking at the government itself and how

much ER payments is going towards um

especially relative to GDP close to 5%

now compared to other economies you know

we used to say well the dollar is the

cleanest of all dirty shirts but then

Looking Back Now and saying well look at

Germany and Japan spending

0.5% or less than 1% of their GDP on

interest payments and most of the other

developed economies you know needless to

say that the Emerging Markets are also

spending way less than the US that gives

the the the the government or I should

say the Federal Reserve a sense of

urgency to reduce rates much more than

other economies and that has to have an

impact on the dollar itself so I'm not

sure that that the FED really had an

option A lot of people are seeing this

as look I think the FED has reduced

rates uh before really accomplishing you

know the the the end of an inflation

problem I don't disagree I mean I don't

think there's an end of the inflation

problem but I also don't you know I

think that saying that is also uh

Missing the fact that you know if you

were in their position you would have to

do the same you don't have an option

here would you keep rates at five five

and a half percent and you know and and

create a major burden for the government

when you know that basically majority of

the growth that we've had particularly

from a valuation differential of

companies in the US versus the rest of

the world is mostly attached to the fact

that we're able to spend more money

fiscally than other countries you know

then then you start reconsidering all

these things and and so if you if you

work under the assumption that the FED

is trapped and the FED has to lower

rates regardless of what's Happening

then you know you can you can kind of

come up with a lot of investment uh

potential investment ideas or investment

uh thesis that that are likely to unfold

given an environment where suppression

of rates is inevitable in my view

suppression of rates is inevitable so

interest rates are going to come down

we're going to talk about that in just a

minute uh that feeds into the next two

charts that I want to show this is from

your recent investment uh newsletter

here from crescat Capital uh very very

good resource by the way for investors

check out crescat .c link below Global

money supply has been going up according

to this chart that you put together uh

data from Bloomberg it looks like Global

money supply versus US CPI correlation

there that makes sense let's put these

two charts together what is the story

here that these tell well money supply

by the way this is prior to any I I I

put this chart out prior to anything

that came out of China from a

stimulative stem point in the Bazooka

that we came out which only adds to that

but that puts into perspective that the

level of grow were seen which is about

7% on a year-over-year basis OR7

trillion dollar because the money supply

is about 100 plus billion um we're

talking almost as much as we're kind of

in the same trajectory that we saw

coming out of the pandemic and really

there's not much going on right now

compared to what was happening at that

time and so when you think about this is

is you know it's not coming just the US

it's it's really globally China not as

much part of this as you would think and

China may even add tremendously to this

data um but but the the chart of CPI

with money supply I think the answer to

that is know those friends that we all

have that say money printing doesn't

create inflation you know that's the

person you want to share this chart with

and I'm not trying to be you know uh

hopefully uh rude or anything like that

but a lot of people like to get into the

technicality of what money print

printing really means the expansion of

money supply I mean it doesn't it

doesn't really change the picture you

know the money uh is being diluted in a

large way and that has to have an impact

on CPI particularly when you have you

know this level of monetary stimulus

along with fiscal uh which has been

something that combination of the two is

incredibly inflationary um what I'm

extremely concerned because back in 2021

and 2020 when we came out of the

pandemic and we've had all these

stimulative packages coming out of most

developed economies even emerging

markets that the same and all the muddy

creation that we've had um we didn't see

the dollar actually depreciate relative

to other FIA currency zone so that to

the US economy you know just looking at

the US economy alone that was actually a

positive factor that uh helped not to

make the inflation issue even worse this

time I am very know I remember in 2021 I

came out very strongly saying I think

10year yields are going to go a lot

higher I'm still of that view I still

think 10 year yields could could go a

lot higher I think the suppression of

rates is happening on the short end you

just want to be clear of that it's the

FED funds rate two-year yields and so

forth those the t- bills they're all

going to be suppressed in a big way in

my view now the big Trend that I'm

paying attention is not necessarily on

the interest rate side of it but it's

the impact of that on the dollar I think

the dollar is extremely mispriced we've

had a big depreciation of the dollar

versus other fiia currencies recently

and that actually we had has moved the

other way a little bit recently as well

and I think that that's not the real

Trend the real trend is that the US

dollar is likely to devalue much further

versus the currencies now I want to be

clear as well I've had that thesis about

hard assets for a long time too I'm not

talking about hard assets at this at

this stage I mean I I'm extremely

bullish hard assets for the near- term

and the long term I am being very

specific about the dollar versus all

their fear currencies particularly the

ones that are Emerging Markets I think

that's going to have some major

implications in the global economy and

we have as investors to think about that

especially for the next zero to three

years and I'm not here to also say that

this is the end of the dollar or

anything like that that's I'm not going

that extreme either I'm just saying

depreciation of the dollar is highly

likely for the for for the foreseeable

future and you know I think that's going

to be very important the dollar is going

to depreciate relative to other

currencies why because other central

banks are going to be more doish than

the fed or other reasons the other way

around I think the FED is going to have

to be more doish than other central

banks I think we all if other folks have

not uh learned a lesson about currencies

is that it's a relative game always it's

a relative game especially from the

economy standpoint from policymaking and

all those things and when I look at that

interest payment relative to GDP this is

the main thing I'm concerned about

because I I cannot see this being fixed

I'll side of suppressing rates in a

large way and if that's going to be the

the case here um then even the ECB and

even the boj is in a better position in

the Than The Fad in terms of the

interest rate policy now keep in mind

the the Japan as a country has a

much larger uh leverage in the system

than the US I understand that that's a

very very uh contr and view what I'm

seeing are very unpopular the fact that

I think that the doj is in a better

position than the US and I'm fully aware

of what happened with the Dollar carry

trade uh not too long ago but I do think

that the fat is in it's really boxed in

and it's going to have to lower rates

regardless of what's happening and so

we're going to get into that path moving

forward and you know what's going to be

interesting David is if inflation

actually really starts re accelerating

which is my base case right here I think

that base case was a lot harder two

three weeks ago to call now you're

seeing break Heavens much higher you

know the dollar I'm sorry the the crude

uh crude prices are much higher you're

seeing most agricultural Commodities

much higher we've had one of the largest

increases in food prices over the last

you know since since the Russian

invasion period in 2022 so know things

are lining up to a point that I think

inflation could re accelerate as the FED

is lowering rates and the FED is going

to be forced to ignore that that cannot

be POS that cannot be positive for the

dollar my view I want to come back to

the inflation side of the story and and

you've done excellent research on the

interplay between the fed and fiscal

policy so we'll talk about that but I

want to focus on China stimulus first

arguably the most important piece of

news in the last couple weeks for base

medals just today on Tuesday October 8th

uh the Hong Kong uh hen index saw its

biggest daily decline since 2008 because

last night uh the government of China

announced that uh perhaps the stimulus

measures weren't going to be as big as

initially projected take a look at this

article from Reuters China stocks rally

Fizzles a stimulus offer disappoints

okay h s saw its biggest it closed 99.4%

lower heaviest fall since 2008 uh

comments here ultimately for the rally

to be sustainable we need to see more

fiscal policy and more measures to

support the economy and the property

Market uh says analysts so uh the

Shanghai compos also fell basically uh

economic IC planner chairman uh told

reporters shinh high was fully confident

in achieving economic targets of 2024

but his failures to detail sufficiently

big or new measures rekindled Market

doubts about beijing's commitment to

ensuring the world's second largest

economy can climb out of its most

serious slump since the global pandemic

copper today fell uh by the order of

let's see here uh 3 and a half% 3 yeah

2% 3% in one day pretty big drop as you

know base metals like copper rallied

significantly um this was the

announcement by the Chinese Central Bank

here so what's next for base medals are

we still is the China stimulus story

still important after today's

announcement well first I don't think

mows really rely solely on this China

thesis I think the China thesis is very

much a potential upside to the story in

a big way and the reason for that is

because the amount of I want to be clear

one thing the amount of spending we're

seeing from developed economies outside

China whatever you want to call it

developed or Emerging Market the Chinese

economy but the amount of money on

construction on trying to fix the

electrical grids and and Green

Revolution all those those those things

that's not ending anytime soon the UN

Shoring and clearly that is yet to drive

even further demand for for the um for

the Bas Metals in particular and you can

see that as well I mean utilities are

leading way in the S&P 500 year today as

a sector what does that mean now either

a defensive sector is very negative for

the economy to see a defensive sector

leading or it's just the fact that a lot

of institutional Capital it clearly

understands that uh all these

Technologies and and macro trends that

we're seeing from on shorings in

particular uh are yet to feed a much

larger uh investment towards uh the

utility space and if we see that uh

that's has to also Drive the demand for

for the metals and so I want you know

that's that's number one number two I

think what's happening with China not

too long ago China was was uh reported

actually purchases of gold and gold was

doing very well on the back of those

those reports and then one one month it

basically reported that you know

unchanged Holdings of gold and gold had

a terrible day on that day um and

everyone was extremely bearish and

saying look China's not buying gold

anymore and and all it did was it didn't

buy for a month and all these

assumptions are made I don't agree it's

a to me this is very similar to that I I

disagree with this type of noise the

Chinese market went up massively in the

last few weeks everyone is extremely

bearish and op food it everyone had a

change their views and now after a

massive move it's absolutely normal to

see a volatility or a volatile day on

the downside we're seeing that today now

is that the end of it I wouldn't bet

against it I wouldn't bet against it at

all I used to be a China you know

hawkish per I used to write all the

papers about the the potential for a

Leman brother moment in China years ago

I'm not in that I'm not in that camp at

all I think that the time to be short

China was two to three years ago this is

not the time now you know things have

been cutting half you know some other

things are down 80 plus per already um

and if you don't understand that as an

investor I think you're missing the

point in a large way so I I I fully have

this this uh China thesis as a as a as a

potential for uh other things like gold

and and base metals and others I do

think that the Chinese economy or the

Chinese government is serious about um

stimulating their economy once again and

um while I don't see this being what is

highly dependent on the base ble skes I

think could be a very important upside

even for other emerging markets and so

you're seeing is sell off in in in crude

is sell off and a lot of other things

and if you look at technically speaking

crude is actually right in a support it

would make sense to have a weakness uh

right at that level that we're seeing

right now now those those types of I

shouldn't say support resistance those

types of resistances are are are are

usually not you know very strong you

tend to see a big break out of those and

I would I would would be betting on the

other side of this I actually think that

inflation will re accelerate I think

Commodities would do much better here in

three months from now and uh and that

can change quite a lot this this Dynamic

that we're seeing in a day like today I

think those things are quite normal if

you're an investor and you follow these

things and I want to say one more thing

every CH every thesis that you have that

you come up with will be challenged at

some point everyone I mean I've had my

own Theses that been challenged in the

past you know how many people told me

Silver would never ride how many people

told me gold would never rise and trust

me I've had situation with silver

trading $18 and I had to defend my

thesis while those folks that came out

recently and said China was was a trade

to be in and they got it right now

they're being challenged and what are

you doing that position do you just get

spooked and out of the the Theses or or

do you have the bases and the support to

really you know rely on it add to your

position in a day like today now I I'm

not an investor of of communism I'm not

an investor of those those companies at

all I want to be clear there too but I

would not bet against it and I do think

there's ramifications to the global

economy and I think that's going to be

very positive for emerging markets so

I'm a buyer of emerging markets and I

think that's that's really the the the

big Trend ahead of us going back to uh

your thesis here liquidity is going up

stimulus from China and stimulus from

other central banks so immediately what

what are we looking at in terms of

investment implications you like

Emerging Markets

Commodities uh these are your highest

conviction calls right now for bullish

assets that will react to this stimulus

yeah I I have you know I've been very

consistent over the years in those ideas

um my ideas have always been we've been

in a entrenched inflationary era um

where central banks worldwide are very

in a very limited position to fight

those Trends and therefore going to have

to allow them to uh continue

infiltrating the system and ultimately

it drives Capital back into things that

have been neglected for a long time hard

assets being one of them and also

Emerging Markets now of course I have

near-term um views as well and I I think

energy looks very attractive I think a

lot of people are are you know not

counting on uh on the idea that energy

can break out and change quite a lot the

uh the macro setting here and I think

that's a real possibility um you know

there's geopolitics that can play into

this as well as a premium to Energy

prices uh but also um yeah natural gas

oil all those look extremely attractive

um other implications that I think are

important when you have the suppression

of interest rates on the on the on the

short end but you also have inflation

running you know somewhat uh freely um

you can have a major steepener of the

yield curve and so the steepening of the

yield curve is is one of the most

important Trends in my view for the next

call it year I think that that's that's

highly likely we were highly likely to

see a steep steepener of or steep

steepening of the yield curve and um and

so those are those are important Trends

uh that are you know also uh still you

know likely to unfold here let's talk

about that steepening of the yield curve

the most important investment trend of

the next year uh why why is that going

to happen um for two reasons one I as I

said I think the fattest trapped that

they're going to have to reduce rates

more than other central banks and

they're going to have to act quickly

despite what's happening and that

doesn't mean we're going to see 50 basis

points tomorrow anything like that I'm

also not saying this but I think that

that that the trend of rate Cuts is here

and it's here to stay and so you know

this is my my view on the short end so

short end is likely to actually go lower

and then on the back of that we're

seeing inflation actually re

accelerating this you know with with the

fat acting that way uh but so with more

stimulus globally on the money supply

front uh we're seeing Commodities

starting to Trend higher if you you know

and if you are of that view that

inflation is re accelerating you

probably have the view that the 10year

yield will be challenged and the other

thing that I think not enough people are

covering and they were covering a couple

years ago and now this thing has been

sort of on the sidelines has been the

insurances of treasuries more recently

on the long end are starting to increase

again and I think that that drive Supply

much higher drives yields much higher as

well so I would not be want to be long

the you know the 10year treasuries or

the 30-year treasuries um and I do think

those yields are going a lot higher and

so if that's the case you know you have

uh a short end that is limited and it's

likely to go lower the long end is is is

has got a lot of upside so that means

steepening is is highly likely plus

historically when you have a deeply

inverted yield curve what do you see on

the back of that a abrupt moments where

the yield curve tends to un invert and

in a very significant way and so I don't

think this time is different I think

we're going to see that once again when

historically when the 10year minus

twoyear yield curve steepened in the

past which assets have historically done

very well oh that's a good question I I

actually did a full research on this

looking at um I created an indicator and

I actually did a a presentation at the

IMF um about this which is a I was

invited to because I created the

percentage of yield curv inversions so

instead of looking at separate yield

curve uh spreads like the two versus

stands that you referred to and others

uh that a lot of people tend to look at

I decided to actually create a little

bit more comprehensive way of looking at

this and and looking at all possible

spreads in the yield curve there's about

45 y uh possible spreads and then

calculating how many or how much percent

of those yield spreads are actually

negative and when you reach when you go

up above the 70% handle you tend to see

a recession uh and if if it's not a

recession which actually happened I

think one time um where Equity markets

you know did well despite all this uh

but one Trend that is very clear that it

tends to happen more often than not and

and and not only that but the

performance is very robust is that the

gold to S&P 500 ratio tends to rise

significantly after those you know very

large amounts of inversions begin to De

uh to un invert and so we are at the

process now if you look at the the gold

to S&P 500 ratio has been going higher

uh but not massively yeah because the

the equity Market has been holding up

well and you know gold has has has been

doing tremendously well I mean the the

surge we seening prices uh is really

what's been driving this ratio recently

but there's a lot more to happen here in

my view and so I would be uh surprised

if we don't see the gold just at p500

ratio uh be substantially higher in in

call it one two three years um because

of this this uh you know correlation it

tends to have with the UN inversion of

of the yield curve and so that's usually

the big sign now it depends to your

question it's going to depend on a lot

of things so if you are in the

deflationary era treasuries is a good

bat and so in the last 20 years or so

every time you were in the position

where Yol curve is is extremely inverted

and it starts to un invert as a

recession unfolds you want to buy

treasuries uh if you are in a more

inflationary era you do not want to buy

Treasures you're going to get in trouble

you want to actually buy gold and so it

really depends on where what type of

regime you're in and now I I have my

opinion on that I certainly believe

we're in an inflationary era and I think

you can measure that in many ways um

particularly how you know Commodities

have been Trading

uh we can get into that there's kind of

a rotation Dynamic that we tend to see

from a when you're in a commodity cycle

uh in very inflationary era and uh in my

view this gold to S&P 500 ratio may

actually work even more than we've seen

in the past so and pay close attention

to that uh because of this you know

development in the yield curve so we're

going to be in a bare steepener versus a

bull steepener meaning the uh uh the

shortterm will fall faster than the

longterm but that's going to be into

happening into more of an economic

decline is that basically your thesis I

am agnostic about bar bull steeper and I

I think that you interesting you don't

really have to answer that question um

as a as a unless you you want to answer

that question but um I don't think you

you need that answer I mean we have that

trade on in in our portfolio and we

don't have that you know I don't have

that answer I really don't know the

answer for that um and I don't have a

strong view because I don't know which

one is going to move Mo uh more honestly

if the fiscal side becomes a a a problem

and the 10year yield moves a lot higher

I'm I'm sympathetic with that view what

if what if what if we see labor markets

you know we I know we've seen some some

data recently on employment rates and

others that they'll support further Cuts

but let's see we do in a month from now

and you know a big change in the

narrative on the labor markets uh front

and now justifies the FED to cut much

further you know then then the short end

moves more than the long end so you know

I why I don't really need to answer that

question because I actually think the

trajectory of both sides or not both

sides but the the spread itself is is

moving higher regardless so what we do

is we keep always you know we we have a

duration adjustment of of the position

of that of those of those um of that um

of that idea in a portfolio and every

week or so we try to you know kind of

match that duration because the duration

uh the position would change because of

the movements we tend to see so as long

as we're haging both sides and and that

spread continues to be you know balanced

in the portfolio then that's you know I

think that you can be agnostic to that

question actually makes a lot of sense

I'm going to flip back to my screen here

you have in your report you said that

your primary concern however is that the

rising share of interest payments and

entitlement spending post a serious ious

challenge the sustainability of this

Dynamic I think you were referring to

the role of monetary policy here such

non-growth oriented expenditures have

surged significantly so by non-growth

you mean spending on things that aren't

infrastructure things are productive

you're just spending things on interest

payments on debt for example and that

spending from the government has been

rising sharply per your research what

does this mean for Cal markets this

chart yeah I I look I usually my letters

kind of long and I kind of build on them

over time and the prior letter was about

a research I did about you know the

average fiscal spending we've had since

the global financial crisis across the

globe and clearly the US is the one to

spend the most it makes sense we're the

reserve currency we can we can be less

disciplinary than other economies um

it's it's what comes with territory

right and and so that's what we did we

spend we meaning I'm I'm Brazilian I'm

not American Amer but that's what

Americans did they spend more money on

the government side that created growth

on the back of that that created a

Divergence of valuations of equity

markets in the US versus other places

imagine spending more every year than

other economies on a relative basis kind

of explains why you have such you know

froy valuations in the US versus other

places so that's number one now when you

dive into that 8% annual uh spending

that we see relative to GDP every year

right uh in in average um one important

aspect of that is is that the known

growth now how much of that is known

growth how much is that is entitlement a

lot of people say that oh entitlements

is see it's eating the lunch of spin

it's not I mean it is but it's it's it's

not as bad I mean it's actually been

very stable over the years believe it or

not yeah I I I I ask everybody to look

at that data look how much enam is is

being spent relative to GDP over the

years and you will see that line has

been going sideways recently now what's

not going been going sideways is

interest payments relative to GDP that

has been surging and now you know so

you're looking at that

55% of of us spending is no growth

because that's entitlements that's

interest payments now 20% of that is

interest payments just to give you some

sense so it's a quite significant number

and it's only going to grow from here

unless we take rates to zero tomorrow

which won't be the case either so you

know I do think that this is a problem

and it comes down to two potential

Solutions if you think about it one you

can suppress rates so the interest

payments can Decline and that's one

solution and I think that's going to be

part of it and number two is let's spend

more so that no growth aspect while May

grow over time um you know you still

have that other part uh the the growth

aspect uh that will still be coming in

in a in a more significant way at over

time as well so let's say instead of

spending 8% of or call it 6% of GDP on

on fiscal spending on deficit uh you can

maybe be spending 8% so but but that

those things are highly inflationary

both policies and I actually can see

them actually know working together not

you know not separately we can see a

suppression of rates with more spending

but what's funny about this David is

that if we see suppression of interest

rates that just means that the no growth

aspect that 55% may actually shrink

because you're suppressing interest

payments uh relative to GDP so you have

to think that way monetary policy is

becoming more and more a tool uh to

allow the government uh to uh to free up

some of that burden from the debt front

and and it's it's changing even the you

know the Mandate of of the FED itself

which used to be you know let's let's

try to create stability from the

inflation front labor markets and the

real in my view the real um issue here

is is how do we pay our bills tomorrow

from a government standpoint and so it's

it's changing the dynamic in a big way

uh and I think again it goes back to

being very very inflationary because all

these Solutions or potential solutions

to the problem they're not really fixing

the problem they're just you know um I

guess uh creating other imbalances and

inflation is a big one so uh I view this

as a problem and and I do think we're

going to see a lot more inflation uh and

this is not the end of it and it's you

know it's interesting that policy makers

try to justify these changes in interest

rates and other things um by saying that

you know inflation is back to normal

levels uh when I know first those that's

really coming from government data but

secondly you can you can look at

Commodities and commodities are not you

know I I wouldn't explain this earlier

but Commodities are in kind of a

rotation that Dynamic right now you know

you can see this clearly because every

month it's there's one commodity that is

the flavor of the day right it's like oh

now it's gold gold price is surging and

then the next no three months ago was

copper uh and then was orange juice um

and then it was energy you know you saw

oil and and natural gas back when Russia

invaded uh uh Ukraine um and then you

saw lumber prices coming out of 2021

ammonia prices went up a lot so you can

kind of see they rotate and that's

usually a signed you're in a commodity

cycle so I I would I would not play

against that I I do think that that's

that's a much longer Trend than most uh

think it will it will last you've

identified here something that I've

noticed as well um which I find very

interesting the relationship between

gold and base Metals you use copper here

as an example and you wrote that the

recent rally in gold prices that's been

happening all year long could serve as

an early indicator of what could be on

the horizon for base medals since when

have they started

moving together in tandem um logically

that wouldn't happen but here we are

well it's interesting because I think

all of us try to be you know very

specific when we look at Copper and say

well it's a very cyclical commodity and

tends to move more as an industrial met

therefore it moves more with the economy

and um you know when it falls it falls

more than gold and when he rises it

rises more than gold those things are

all true I'm not here to say they're not

true but clearly if you were in a gold

cycle you're probably in a copper cycle

look at that chart um and I think it's a

reflection as well of what happens a lot

in markets where the easy capital or the

easy decisions are made with things that

are safer right first and then as people

feel confident they start spreading the

risk uh and increasing going up on the

risk curve so in other words it's much

easier to take on a gold position at

first than a proper position but as when

gold starts moving they me a reaction of

any vast like are there other metals

that could move along with that and then

you start doing your research in other

metals and usually they're part of the

same cycle you know if you're an

investor in the gold space if you're a

minor a lot of the the gold deposits

also have copper a lot of the copper

deposits also have a lot of gold a lot

of the gold depos have a lot of silver

so they're all kind of in the same fr

the same in the same uh phenomena and

then you think about what is what really

creates a cycle for Commodities know at

the end of the day if you could pick one

thing what is it and it's usually cap

acts it's it's Capital spending of The

Producers when producers are spending a

lot of money in aggregate that's usually

the end of a cycle when producers are

not spending enough giving money back to

shareholders are not doing Acquisitions

and so forth that's usually the sign of

being at a bottom we're probably there

right we're seeing some Acquisitions and

usually they're happening between Majors

one major bu another or merging with

another major um but we're not seeing

any cap ax increases cap axes are still

extremely low relative to history

particularly if you divide it or you

adjust it by GDP which you should be

right 10 million spend on the ground

today are not $10 million you spend back

in ' 08 they're very different those

dollars will not get you the same that

you did back in in in ' 08 and so I

think it's all kind of linked and the

same way goes to this I don't know

ridiculous notion that is completely

unsupported by history that if we see

gold prices this time rise which has

been happening we're not going to see

the miners actually perform well I've

never seen this throughout throughout

history I I don't think that's supported

at all uh by data and if we do see gold

prices going a lot higher which I think

we will

it's just my opinion um I think that the

miners will also follow and also base

Metals copper silver Cobalt zinc

manganese you name it most metals should

should be moving in the same direction

and ultimately if the underline metal

price is moving higher then it means as

well that we're likely to see uh better

fundamentals for most uh mining

companies so I've heard this Theory from

some people and tell me what's wrong

with this assumpt what the underlying

assumptions behind this Theory gold

going up could signal um more volatility

ahead more weakness in the economy

perhaps basically gold going up is a

barometer of weakness in Risk assets

which could then signal slower growth

which means bad bad news for base medals

like copper basically gold going up

should mean copper going down a

Divergence from your chart what if

anything is wrong with that well David I

would uh to those folks that have said

that can you please forward this chart

to them I think that would be important

I think you should ask them the question

what happened in 2000 why did gold rise

so much and copper also was Rising as

much as as it did during that period

some people will say because of China

China was driving both markets really

what about today what are we seeing have

you seen how much spending we're seeing

in construction or have you actually

taking the inflation act and how much is

being spent even from the government

forget about private and compare that

with times like coming out of World War

II when we did you know nowhere close to

what we're seeing today even even the

Marshall Plan which was a global plan

not in the US was smaller than what

we're seeing now adjusted for inflation

or relative to GDP which is insane and

so the the the amount of money going

into construction is also likely to

drive copper prices and I think that the

whole idea of copper uh being more

industrial and also uh having this

connection with economy is true it's

very very true um and and and

potentially you know this is the

beginning of an era now maybe this whole

chart is wrong and the Divergence we're

seeing is is the beginning of a new era

where copper goes one way and gold goes

another way um that's not what I believe

you know this chart actually you go back

to the 70s was the same thing um and

usually this is just the case because um

paent funds and other large Capital

allocators uh they you know yeah gold

has a potential to be signaling a

weakness ahead if it's if it's rising

not every time you know look at the

early 2000s when was that you know that

was the teack bust right and still

copper did well look at that copper was

still you know going up it it it

actually had a little bit of a lag which

is the whole point of this chart right

yeah it's the arrow that is a little bit

ahead of it but it went up and it went

up a lot I'm just scrolling back to yeah

I mean you're you're you're absolutely

right uh good relationship between

copper which is right here the uh uh the

purple line and then gold the bar chart

um obviously there have been periods of

Divergence but if you just scroll back

into oneyear increments here um for the

most part except for uh 2019

um they've held on pretty well so now

would it shock you if you put

agricultural Commodities in this it will

also show the same link yeah and

interesting is that shocking I mean you

know you start thinking about it from a

just the rationale of putting Capital

into gold and then gold starts going up

you you start thinking about what are

some other hard assets I should probably

be considering should I put one of my

fund into agricultural Commodities now

that they're so cheap and they haven't

moved as much as gold yeah here's wheat

um moving quite well with gold yeah so

there's this is interesting yeah and and

so definitely there's a link in in in in

these Commodities and you know they're

usually all aligned so you know another

point that is important remember that

early 2000s all the way to 2011 where

gold prices basically went one way way

up despite the decline back in ' 08

which was brutal for investors but if

you if you're sticking with the trend

you did very well but um another thing

that tends to happen when gold prices

are rising Emerging Markets you know and

there's a reason why we tend to see at

times every couple decades a certain

type of leadership in the market

sometimes it's technology it's not

forever and then it changes to Banks and

it could change to emerging markets and

then it goes back to us companies are

leading the way to the upside and look I

mean back in in um in uh in in the early

2000s if you bought ebo Visa which is

the Brazilian index of equities the most

barring way to buy Brazilian equities

just buying an index it went up 18 fold

until 2011 right so that's like those

are the types of returns you can get

with you if you uh if you're if you're

being able to identify these Trends

early and I think that's the type of

opportunity we can have here um in a big

way so yeah I want to finish off we have

a few minutes left I want to finish off

on mining stocks here you have here

excellent chart cash flow of the gold

sector and gold companies of all the

uh of all the sectors in the S&P 500 it

looks like this one has the highest cash

flow margin uh is it by the the last

quarter that you're looking at yeah as

of September 17th um the GDX has just

started to outperform the S&P 500 year

to date it's up 25% versus the 21% but

the outperformance is recent now tvy uh

so what's next oh well I I think we're

not you know we're nowhere close to what

we're likely to see with the mining

industry in my view um level of skep

skepticism hasn't changed a lot of

people still think that you know the the

overwhelming view out there is that gold

yes I agree with gold of course you

agree gold is going up already it's so

funny how people tend to miss misses

things but but uh you know I think that

the mining industry has a lot of

Leverage to metal prices and leverage

works both ways in a good way and a

negative way if you catch the wrong wave

of gold prices and metal prices in

particular you're you're done right it's

going to be a very difficult period to

be in the mining industry if you catch

the right wave where things are going up

then yes C cost will also caught up to

you know will also rise at some point as

well and there's certainly a degree of

that linked to gold prices too but they

do have leverage and you start see

institutional Capital come in

scalability of projects um know things

can change quite drastically the whole

reason of this chart is is to kind of

prove the point that you know there is

there has been fun fundamental

Improvement in this industry uh and you

know margins have been improving it's

needless to say that gold prices have

been rising to degree that we haven't

seen um in history and uh and other

matters are yet to follow so um in my

view the next wave here is going to be

very much driven by the mining industry

and so I'm very focused on this because

uh gold prices have already showed the

direction and I think that the next one

um to uh to o benefit from this is the

mining industry and you know we're

seeing General investors become more and

more interested in the space uh but the

lack of knowledge understanding of of

this whole industry I think reflects on

the lack of efficiency that we have in

and how we price this this this secur

the Securities and you know in

efficiency is also a cool word for

opportunity in my opinion so uh this is

why I I you know I'm

always there's two things that I'm

really interested for the next you know

decade um one of them is you I'm you

know three things one try not to be too

cute with markets right I mean I don't

know when gold prices are going to go

down 5 10% or copper or any and not just

me but anybody now I have a strong view

that gold prices would be substantially

higher 5 10 years from now if that's the

case there's two trends that I'm very

focused on mining I think mining will do

very well well you could see energy you

can see other things do very well but I

think mining is going to be one of the

main ones and number two is emerging

markets and uh I think those are

extremely mispriced today and you know

talk to me in five to 10 years if I'm

wrong on that then you know I'm happy to

admit and move forward but that's that's

really where my my my allocation of time

Capital attention is is really towards

at this point well it's been a great

year for uh and precious medals in

particular so you've been correct on

that call so we don't have to wait 5

years to congratulate you you've already

been right on that uh good stuff Tavi

thank you always for your updates where

can we learn more about you and uh what

can we learn from your work learn more

about me on Twitter at Tavi Costa and

you can see some of my post uh and also

at crash.net where you can see some of

uh our research and pieces that we put

out there as well but thanks again David

always a pleasure speaking with you and

uh yeah look forward to speaking with

you

yeah thank you very much thank you for

watching don't forget to like And

subscribe follow Tavi down below

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YouTube Transcript:Global Money Supply Surging_ Get Ready For Inflation's Massive Comeback | Tavi Costa

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Global Money Supply Surging_ Get Ready For Inflation's Massive Comeback | Tavi Costa