I was planning to put out a thought piece today about why the US pint is a better measure than the English pint, but that will have to wait as I felt the need to comment on this week’s market action.

WTI Crude surged above $100, and Brent above $110. We are now above the levels reached when Donald Trump first started bombing Iran. We have a proper uptrend in place and oil stocks are looking good, bringing some respite to portfolios that are being battered elsewhere. The sub $60 days of January feel a long way away now and we are not going back there any time soon. Get used to $100 oil. It’s the new normal. But look: we got a textbook double bottom.

The old 2008 highs around $150 are back on the radar, with the Iran conflict no closer to resolution, supply chains disrupted and inventories being drained.

$150 oil - equivalent to maybe $200 today - was a major and often overlooked cause of the Global Financial Crisis, as I outlined here. Higher energy costs drain capital. Costs suddenly rise across every supply chain. Disposable income at the household level and margins at the corporate level get squeezed, and there is suddenly less capital available. Oil peaked at $147 in July 2008. The crash followed.

Higher energy prices together with higher interest rates make over-leveraged western economies extremely vulnerable. Higher rates, such as we are seeing in the government bond market, mean money costs more, while higher energy costs mean there is less of it available. Liquidity is drying up, risk is very much off and it feels like there are few places to hide.

Gold is now sitting right on support at $3,900 and, from a technical perspective, really needs to hold. But at present gold is not a hiding place. It will be, but for now it is vulnerable to liquidity drying up. I don’t feel that confident it will hold $3,900 (that might be a postive sign) even with central bank buying. If it doesn’t, the next stop is $3,500. I have highlighted the support zone in blue.

That is not a reason to sell physical by the way. If anything it is a reason to buy. In a liquidity squeeze everything gets sold, gold included. But when the inevitable print comes, it will go higher.

Silver is, among other things, a leveraged play on gold, but that works both ways. This week it has been hammered and it looks ugly as hell. $50 is the break point that goes all the way back to 1980 and 2011. It was the ceiling then; now it needs to be the floor. After that it’s $45 and $35. Do not underestimate the power of silver to decimate portfolios.

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Something a little different this week.

On Monday I gave a talk for UK Finance called Making Sense of It All, about the multiple contradictions at work int he economy: rising bond yields yet equity markets grinding higher, huge investment in AI despite limited profit, and the growing squeeze on the materials needed to build AI infrastructure. (Many thanks to Duncan and Rhiannon for inviting me to speak).

I’ve taken the deck and put together an online version - the first time I’ve ever attempted such a thing - I hope you will find it useful.

The transcript is available above.

Until next time,

Dominic

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James Turk, founder of GoldMoney, has spent five decades working in banking, finance and investments, making the case that gold is not an investment or another commodity, but money in its purest form. We discuss why he believes the US can no longer repeat the Volcker rescue of the 1980s, the relationship between sound money and liberty, and why he expects gold eventually to return to the centre of global commerce as technology changes the way money moves.

James’ latest book is Money and Liberty and you can find his IEA paper here.

This interview was brought to you by The Pure Gold Company

You can either watch the interview above or listen via your favourite podcasting app.

Subscribe now

And, in case you missed it, here is this week’s commentary.

Thank you for being a subscriber to the Flying Frisby.

Until next time,

Dominic

After an extraordinary run which started in 2022 below US$20/oz and ended in January this year at US$122, silver has been working its way downwards. We have had a correction of almost 50%. Today we’re at $58/oz having been as low as $55 in July. We are almost certainly going to go back and retest that low, I would say, and silver is very much in a downtrend.

$50 has been a huge line in the sand that goes all the way back to 1980 and for decades silver could not get above that number. Then, late last year, it cut through it like butter.

What was resistance becomes support is one of the technical analysts’ guiding mantras, and there is every chance $50 will do just that. However, if there is one thing I have learnt about silver over the years it is that has an unrivalled propensity to let you down, which is I suppose my way of saying it could quite easily go a lot lower. It’s silver after all.

However, the fundamentals favour silver. The market remains in deficit. The Silver Institute’s latest World Silver Survey forecasts a 46.3 million ounce deficit in 2026, which would be the sixth consecutive annual deficit. Never mind jewellery and investment demand, silver finds an enormous amount of industrial demand (~60% of annual demand), especially in electronics, because it is such a good conductor of electricity. The sudden increase from solar panel demand a few years back is thought to have triggered the recent run, although manufacturers are reducing the amount of silver used in each panel.

Bear markets are a time to build. As an investor, you research the companies you might want to buy - there is no need necessarily to rush out and buy them - start building positions when nobody else wants them, make the purchases on your own terms. There is no need to rush.

With that in mind, I am going to tell you about my largest silver position today. I even have an interview with the boss.

It was a big winner for readers in the last cycle going from below 30c north of C$3, rising more than 1,000%. With the falls in the silver price it has now come back more than 50%, and I think it is worth taking a look. Its CEO is both young and competent and he is growing the company in an admirable way so that in 3 to 5 years time you are going to see something much bigger.

The company will rise and fall with the silver price, of course, but when it rises it will rise a lot more than silver itself.

Sierra Madre Gold and Silver (SM.V), market cap C$180 million, is a silver and gold producer in Mexico. Its main operating project is La Guitarra, which currently produces around 1.5 million silver equivalent ounces per annum at a marginal cost of $55/oz. CEO Alex Langer tells me his target within 5 quarters is to get costs below $25/oz, double throughput and get production to 2.5 million ounces.

In addition, the company has district scale exploration potential around La Guitarra , particularly to the east, where CEO Alex tells me the are some 24 historical mines and over 600 artisanal workings.

And the third string to its bow is that it has purchased from major producer First Majestic (NYSE:AG) another mine, Del Toro, for $40 million (with another $20 million in milestone payments to come). The replacement value of the mill would be north of $450 million, so quite the discount.

The plan for the next year is to grow current production and explore the east zone. Then perhaps 2 to 3 years from now it will look to restart Del Toro. So in 3 to 5 years this small marginal producer, with exploration upside, becomes a mid tier producer producing 10 to 12 million silver-equivalent ounces a year. That’s the aim.

Here’s the chart.

Unlike certain companies I could mention, this is one where I have faith in management to execute.

I can’t tell you what the silver price will do. But I can say that everybody should have some exposure to silver because of what it has the potential to do. We saw that in January. Sierra Madre is my way of playing it.

I met with the boss last week to discuss the company and here is a video of that meeting.

WARNING: If you are interested in buying this company, take note: it is not the most liquid company in the world, and can rise sharply on low volume. Don’t chase it. Use limit orders.

Disclaimer:

I am not regulated by the Financial Conduct Authority (FCA) or any other regulatory body as a financial advisor. Therefore, any information provided in this newsletter does not constitute regulated financial advice. It is solely an expression of opinion. Small-cap stocks are inherently risky. Please conduct your own due diligence and consult with a financial advisor, if you have any doubts. Remember, markets can both rise and fall, especially in the case of small and mid-cap stocks. I am not aware of your individual financial circumstances, so only invest money that you can afford to lose

Good Sunday to you,

We have a fantastic interview for you today. I sit down with legendary Canadian investor Frank Giustra to discuss gold, government debt and why he believes the world is entering the most dangerous geopolitical period of our lifetime. You can either watch the video or listen as a podcast via Spotify et al.

Frank made his fortune in mining and natural resources, before founding Lionsgate Films, the world’s biggest independent film studio. His track record as a businessman and investor is superlative. We discuss why he believes this is no ordinary metals bull market, the accelerating shift by central banks from government debt into physical gold, the risk that another round of quantitative easing could trigger a dollar crisis, and whether gold may ultimately need to be revalued higher, dramaticically higher.

We also touch on China, financial repression, critical minerals and why, of everything Frank owns today, gold remains the asset he is most excited about.

Money Markets & More is the interview series from Dominic Frisby, exploring money, markets, gold, economics and the ideas shaping the world.

🥇 The programme is brought to you by The Pure Gold Company

📘 Here is a link to Frank’s book: The Money Dilemma: My Unlikely Path to Wealth, Philanthropy and Peace. And you can follow Frank Giustra on X

Thank you for being a subscriber to the Flying Frisby.

Until next time,

Dominic

PS Here is this week’s commentary in case you missed it:

PPS As Frank and I mentioned it, here is a link to The Secret History of Gold which is getting rave reviews and is available around the world at all good bookshops. The audiobook is especially popular.

I don’t know if it’s my own little online bubble, but every time I open my phone at the moment I am being swamped with bearishness and negativity.

Never mind all the political and social stuff, it’s financial as well. The problem I have is that a lot of the bearish arguments are well reasoned.

In a nutshell: too much concentration in the S&P 500, which under the surface is looking very mucky, bond yields too high and too much government spending.

Given that governments everywhere are running such unsustainable deficits, the chances of a sovereign debt crisis are very real. The cost of their debt, aka bond yields, is rising across the western world, and higher yields will suck liquidity out of every market, be it real estate, precious metals or equities. There is risk everywhere you look.

It’s easy to say the words sovereign debt crisis. It’s also easy to say that we actually need one: we need governments to default and reset because, unless they do, we will just continue as we are, sinking further and further into socialism and atrophy.

But an actual crisis, followed by a default and a reset, is, to put it mildly, not a pleasant experience. It is not an easy thing to get through, and the rollercoaster ride that asset prices will go through can be seriously damaging to your wealth.

There is a problem with owning anything. Let’s go through it.

And we’ll start with real estate. Rising yields push up mortgage rates, which lessens affordability. That means prices have to fall to reflect that. Maybe not straight away, but I think yields have to go higher, even with financial repression. In the UK, shoved along by higher taxes, it’s already happening: people are finding it very hard to sell property.

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Good Sunday to you,

I have a lot of charts for you today, and fascinating ones too, but we begin with a little story.

John James Cowperthwaite was the financial secretary who oversaw Hong Kong’s extraordinary growth in the 30 or so years after World War Two. It was one of the greatest periods of economic expansion the world had ever seen. I’m not sure it has ever been equalled.

In the span of little more than a generation, this tiny territory with no significant natural resources to speak of went from shanty town with a refugee problem and a GDP per capita below $300 to become the world’s busiest port, an international manufacturing and financial powerhouse, among the ten richest nations in the world with a per capita GDP above the US and the UK’s. Its population would grow by over ten times.

Cowperthwaite was asked by an African president what poorer countries should do to turn their economies around, as Hong Kong had done. The first thing he said was ‘abolish the office of national statistics’.

Cowperthwaite was an acolyte of Adam Smith: it is said he slept with a copy of Wealth of Nations by his bed - presumably because it got him off to sleep. And he despised government statistics, not just because they are so frequently flawed, but because he knew governments would use them to meddle. He was, in the words of his successor, Philip Haddon-Cave, a ‘positive non-interventionist’, who felt that (his words) ‘clumsy bureaucratic fingers’ should be kept out of the ‘sensitive mechanism’ of the economy - far better to rely on the ‘ hidden hand ’.

When British officials came to find out why unemployment data was not being collected, he sent them back on the first available flight, and when his own Legislative Council demanded GDP figures he filibustered them away year after year. Such figures, ‘do not have a great deal of meaning,’ he said. ‘That other countries make use of them is not, I think, necessarily a good reason to suppose that we need them.’

In 1962, Cowperthwaite came under such pressure to provide GDP numbers and other such statistics that he hired a professor to do the necessary research. He then declared that he had set up study to look at the feasibility of collecting the information. For seven years he sent back the poor professor ’s drafts: either something needed further clarification, or it needed investigation, or it needed development. By 1969, still no data was forthcoming. He explained that the professor was having difficulties coming to closure on how it should be collated. The poor academic had been set up to be a fall guy.

I’ve always loved this line of his:

Take note Andy Burnham. Take note John Healey.

Right. Park that story for a moment as we turn our attention to thread two of this argument.

If you want the full story of Cowperthwaite and Hong Kong’s breathtaking economic success, it is one of many you can read or listen to in my grand opus, Daylight Robbery: How Tax Shaped Our Past and Will Change Our Future.

And that brings me to another of my opera, on the subject of gold. Long time readers/sufferers will know that gold is the great constant. “Neither rust nor moth devoureth it,” to use the words of some ancient Greek bloke. (Pindar). Gold been about since before our solar system was formed, never mind Planet Earth, and it’ll be around long after it’s gone, which can’t be too far off if we continue on this current trajectory. And in all that time it never changes, because it is inert. You can’t destroy it either, not by natural means anyway, so all that gold that has ever been mined still exists. Nothing is as constant as gold. It’s scarce too.

That makes is both a wonderful store of value and a wonderful unit of account.

What does change is the above ground supply: the more we mine, the more there is. Gold supply grows at just below 2% per year. For most of history the gold supply has grown at the same rate as the human population.

It is Nature’s money.

In fact, since 1850 and the various gold rushes, and the improved mining techniques which have followed, gold supply has grown marginally quicker than the human population, going from a historical average of roughly 2/5 oz per capita to 4/5 oz today, albeit gradually over a 175 year period.

This is likely to continue as population growth has sunk to ~1%.

As you know, money has three functions. To be:

1. A medium of exchange

2. A store of value

3. A unit of account.

And it is the third, overlooked function that is our focus today.

We use our national currencies - pounds, euros and dollars - as our unit of account because we must pay taxes in those currencies and we are obliged to account in them by law.

But they are rotten units of account, because the unit of account changes all the time. A pound or a dollar today is not the same as a pound or dollar twenty years ago. Just since 2020 the pound has lost 40% of its value. Money supply growth around the world varies enormously between countries and periods, but ~7-8% is a reasonable average to use. That means the unit is increasing at ~7-8% annually, or doubling every 9 to 10 years.

Gold makes a much better unit of account for all the reasons stated above: it is constant. Its physical supply cannot simply be expanded at the stroke of a government pen, so the unit itself does not get diluted. If we are trying to compare economic performance over long periods of time, that matters.

If we are trying to reach the truth, then we should account in gold.

So now we are going to take a proper unit of account to government statistics.

Ever get the feeling that, despite the government telling you the economy is growing, and that, despite your income going up, you’re actually getting poorer? That’s because you are.

I shall explain.

Every year some government body will tell you what Gross Domestic Product (GDP) is. Really they should be leading with GDP per capita, as that is the more relevant figure, but they don’t. They want headline numbers that flatter them and with mass immigration, GDP will always grow, even if a flood of cheap workers from overseas pushes salaries down for locals.

In the UK in 2023, for example, GDP grew slightly, while GDP per capita fell.

Leading with GDP and not GDP per capita gives them a better number to boast about. Put bluntly, it enables them to lie. No wonder Cowperthwaite so loathed government statistics.

What is worse is not just that they are used to lie and to meddle: the numbers that inform the policy (meddling) are flawed, which means the meddling/policy is inevitably misguided.

How abominable the record of the UK’s statistical bodies such as the ONS and OBR is no surprise given the flawed nature of their methodology.

if you are looking to appreciate the full scale of the clusterfook: this applies to all government policy everywhere when it is based on a flawed unit of account. It is literally all misinformed.

Sorry I rarely use capitals or italics but I couldn’t help myself.

If you are measuring GDP in a unit that is increasing at 7-8% per annum, then of course GDP will grow.

Official growth figures are adjusted for inflation, but by the government’s own inflation measure, which understates how fast the currency is being debased (~3% vs ~7%).

As I am fond of saying, gold tells the truth, however - and we are going to come to that in a moment.

But first here is GDP in the UK and the US over the last 50 years.

Wait, what? UK GDP has grown by more than US over the period. Is that a function of the sorry state of affairs in the UK in 1975 and therefore a lower starting point? In part. It might be a function of higher proportional immigration?

No!

It’s because we are comparing different units. The pound began 1975 at ~$2.40. Today it’s $1.32. It has almost halved over the period. In real terms US growth has been more impressive, but the UK’s growth look more impressive mostly because the pound was debased faster than the dollar. This is precisely my beef.

Now here is GDP per capita over the same period.

You can see that the increase in GDP per capita is much lower than the increase in GDP - which is why politicians tend to focus on GDP.

Now here is GDP in gold.

Oh, look. Measured in sound money, GDP has actually fallen - down 32% in the US and 44% the UK. That is a very different story to the official narrative.

Must be all that outsourcing of manufacturing.

(That does not necessarily mean the quantity of goods and services has fallen. It means the market value of those goods and services, expressed in gold, has fallen).

And now here is GDP per capita in gold over the same period.

Down 57% in the US and 55% in the UK.

These are declines we can all sense, but cannot prove. Conventional economic measures conceal them, but they’re very real once you start using a proper unit of account.

Just how radically the picture changes when you stop measuring economic progress in a currency whose supply can be expanded by governments and central banks.

Gold tells the truth.

If only governments and government bodies started using it.

Cowperthwaite had the right idea. Don’t let governments anywhere near statistics.

They produce them not because they are true but to justify what they want to do.

For all you chart nerds out there, at the bottom of today’s article I’ll post charts for the above, which go all the way back to 1900. Interesting viewing.

Here is this week’s commentary, in case you missed it: on the ongoing collapse in the government bond markets and what it means for your money.

This is not just a UK problem, but worldwide. We could be in the early stages of a global sovereign debt crisis. Printer is coming.

Thank you for being a subscriber to the Flying Frisby.

Until next time,

Dominic

Here are those charts:

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The yields on 10-year US treasuries are rising. They’ve hit their highest level in nearly 20 years.

What does that even mean? And more importantly what are the implications? A lot of people are getting their knickers in a twist.

And why has gold’s promising little rally hit a wall?

And what about UK gilts, they’ve rocketed slap bang in the middle of the Labour Party conference, when they’re all promising more spending.

Make it make sense.

US Treasury yields are not just a US problem. They put upward pressure on the entire developed-world bond market, and the UK is particularly exposed because its own fiscal position is already so precarious.

Today, the yield on a US 10-year Treasury is around 5.25%, the UK 10-year gilt hit 5.44% on Monday, its highest level since 2007. At Tuesday’s auction, the government paid an average yield of 5.38% to borrow for ten years, the highest yield at a UK 10-year gilt auction since 1999.

Even a small increase in the cost of borrowing puts governments in trouble. Where are they going to find the money to pay the interest?

They’ve either got to raise taxes, cut spending, let the deficit grow, pray for growth or all four – and in the case of the UK in time for the Healey budget on October 28.

As US rates rise sterling comes under pressure against the dollar – it will no longer be propped up by the relatively high rates we have been offering - hence sterling’s recent declines. So we get higher inflation, especially energy, because of increased import costs.

Investors around the world need a reason to hold a UK 10-year gilt. Previously the higher rates we were offering were a reason. If a US 10-year Treasury offers, say, 5.25%, why hold gilts and carry the sterling risk without a much higher rate to compensate? The US Treasury market effectively sets a large part of the global opportunity cost of capital.

Higher US rates thus put upward pressure on UK interest rates. So debt gets even more expensive. Our fiscal position deteriorates. Higher rates hurt remortgaging, housing affordability, commercial property, corporate borrowing, infrastructure financing, private equity and so on.

Another point to note: the UK 10-year gilt is now yielding 5.4%, despite the Bank Rate being only 3.75%. That gap is telling you that the bond market is pricing a considerably higher long-term cost of capital than the overnight policy rate alone would suggest.

The really worrying configuration for Britain would be US real yields rising, US inflation expectations rising, sterling falling and UK gilt yields rising faster than Treasuries.

How will all this impact Gold and bitcoin?

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There are so many ways to bring down the cost of new build in the UK, chief among them reduced regulation, planning and taxation. So I was most disappointed, putting it mildly, to see Prime Minister Andy Burnham’s new initiative, Your First Home, which will give government-backed equity loans of 20% to first time buyers, who will now be able to buy new build property with just a 2.5% deposit. Initially, that 20% will be interest-free.

This is just another means to saddle young people with debt. As if student loans weren’t bad enough.

Unlike period property, new build struggles to keep its value. It’s often because people overpay for new build - the so-called new-build premium. You’re buying a brand new product and somebody, you, has to cover the developer's margin, marketing costs and all the other costs wrapped up in that shiny new flat.

Meanwhile, there is no longer the buy-to-let investor to prop up the buy side. The government has already seen to that. The risk of in the inexperienced first-time-buyer overpaying is high and the likelihood of them falling into negative equity is immense.

Look at the problems those who went down the Help To Buy route are now having with London flats, where prices are down 20-30%, with owners in negative equity, unable to sell without taking huge losses, and unable to move up the property ladder. Trapped.

Help to Buy artificially inflated the prices of new-build flats. Developers knew buyers had government backing, so they charged a “new-build premium,” which effectively captured most of the subsidy. It handed money to people who already had it. Of course building companies will welcome Burnham’s scheme this time around.

Now that the Help-To-Buy subsidy has ended, new buyers must purchase using normal mortgages, which has caused prices to “normalise”, ie fall 30%.

Meanwhile, there are the problems of skyrocketing service charges and the fallout from the cladding scandal, both of which have also made flats hard to sell.

The main people Help To Buy helped were the large building companies, and Andy Burnham’s new scheme will do just the same. It is yet another demand-side intervention in a market where the fundamental problem is that housing is too expensive to build.

It is a terrible and misguided thing to do. Builders can (and will) overprice their deals, and trap buyers, who, as first-timers will be naive, in punitive leasehold deals. It is no more than a subsidy for building companies. It does not address the many causes of Britain’s unaffordable housing. It exacerbates them. You are creating more of what caused Britain’s affordability problem in the first place.

This is new builds only. So happy days for the likes of Barratt Redrow, Vistry and Taylor Wimpey, never mind the cowboys, who will take the money and run, and leave you holding the bag of poor construction, leasehold and unsellability. Builders’ shareprices will rise on the back of this.

Loads of people will be suckered into buying because of the easy affordability now, and thier desperation to own a property. “Oh, it’s better than renting” “Oh, we only have to pay this much.” But if you or anyone you know is tempted by this, I urge you or them to please avoid it at all costs.

As a rule flats, particularly new build, are to be avoided because, there is so much beyond your control that you end up being financially responsible for, from basic repairs and maintenance, to problems in the actual build, such as cladding, only found years later, which have now become your unsellable asset.

A 2.5% deposit is just too much leverage. It’s fine if you know what you are doing, but most don’t.

You could overpay for your property by 5%, which is easily done when you have the carrot of easy affordability now being dangled in front of you. Prices could fall 10%. Or you lose your job. Heaven forbid prices should fall 20-30% as they have with Help to Buy. There are so many routes to negative equity. It is going to ruin people.

Do our policy makers never learn? Never mind Help to Buy, what about the US subprime crisis? And then there is 1989-94 and the loose lending that preceded that crash. All the evidence of where this goes is right there in living memory, staring them in the face.

There is also the issue that interest rates today are much higher than they were when Help To Buy was introduced.

Yet again the government is addressing the problem of unaffordable housing by making it easier to borrow more money to buy unaffordable housing. In other words, it’s finding more ways to bring money into the system when the problem is too much money.

This will absolutely screw people. And it’s all dressed in this great guy, true Northerner, trustworthy kids TV presenter, helping you out language with no mention of the risks. It is proper gaslighting. It’s like the friendly chap outside the school playground with the gateway drug.

There are times when I think this country’s leadership and administration is just superlatively incompetent. There are times when I actually think Satan might be at work and this is one of them.

And you wonder why I can’t stand governments!

If you’re interested in the subject of unaffordable housing, you might enjoy this classic from the archives

Finally, but perhaps most importantly, here is this week’s commentary. I urge you to read it, if you haven’t already.

Thanks for subscribing to the Flying Frisby.

Until next time,

Dominic

For my readers on the other side of the pond, let me also plug next month’s New Orleans Investment Conference, which runs from October 28-31. I’ll be there and there is an array of great speakers.

Good morning to you and a big welcome to the many new subscribers, both paid and unpaid, who have joined the Flying Frisby this week.

We are now the Number One riser in Finance and Number Two in the UK, so we must be doing something right.

If you have not yet received your Britain On Sale report, you can access it here. (Any issues getting hold of it, DM me or reply to this email - paid subscribers only).

So to today’s piece, and an important one, I think, as this is going to be a big theme over the next few years.

The government is coming for your money.

You’ve earned it. They haven’t. Don’t let them confiscate it from you, is my advice. I’ll explain all.

The same situation applies across the western world, but I am going to focus on the UK today.

We begin with this Russell Napier interview with Peter McCormack. If you haven’t already watched/listened, I urge you to. It is well worth your time. Napier’s forecasts, which chime with my own, have grave implications and you are going to need to protect your capital.

Napier is a market historian of the old guard, highly respected and, I might add, with good reason. He gets a lot of big calls right.

He describes the situation in the UK and indeed most of the West, which we all know. Public sector finances are a mess: bloated, wasteful, deep in debt, an accident waiting to happen.

To give you an idea how bad, here’s Dan Hannan, Director of the Institute of Economic Affairs:

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But before you go all out and despair about the decline of Britain, Napier also describes a private sector which is in good shape, lean and hungry. This is an observation we have also made on these pages and why we have been beating the drum that now is a good time to buy British stocks. Hence this report.

Britain needs growth, if it is to get out of its mire of government debt, but is not going to get growth while taxes are high and regulation is heavy. All that is required is to unleash growth is government to get out of the way. But it is incapable of doing that. Indeed this current lot shows no sign of wanting to lower tax or lighten up on regulation, so we are caught. Nevertheless, there is this lean beast waiting to escape and that is a positive thing.

Moreover, the country needs a huge amount of investment as it moves away from dependence on China for its manufacturing - which must happen for strategic and political reasons. The balance sheet is there in the private sector, says Napier, to make that investment.

It might be that some kind of pragmatist comes to power or, more likely, that someone is forced to be pragmatic by the bond market. But we are not there yet.

That’s the backdrop. Let’s come now to Napier’s forecast. Our current total debt, public and private sector, stands around 235% of GDP. We are bad but by no means the worst. (Napier is particularly bearish on France, by the way).

There are five ways in which we can lower that debt: growth, default, austerity, repression or inflation.

You’d need 4% growth which he sees as unlikely, even with the productivity boost that is coming from AI. Austerity is also unlikely because of the Labour backbenches and the numerous promises made and obligations it carries. Default would take too long to recover from (Napier uses the example of Greece). That leaves financial repression, with inflation doing much of the work.

Repression and inflation is easiest solution, because it affects fewest people visibly. Visibly is the point. As we know, politicians always choose the path of least resistance.

What does repression mean in practice? There are pots of wealth in savings, in insurance and life funds, and in pensions, and the government is coming for it. The biggest victims or targets of this will be old people, for the simple reason that they have the most money. That is where the capital is. Governments will go where the easy capital is

I would also add houses to the mix as they are tapping that market too.

This wealth grab is all happening quicker than we realise. Mansion taxes are coming, as we know, and word is the threshold will be now brought down from £2 million to $1.5 million. (Talk about mendacious language - anyone know where I can buy a mansion in London for £1.5 million? You can barely get a terraced house for that in Zone 2)

Meanwhile, last week the Bank of England did not put up rates, as it should have, were it to honour its mandate to bring inflation down below 2%. Their measure of inflation is 3.1%!

The Bank also announced that it will no longer sell the gilts it printed the money to buy through Quantitative Easing (the ones it started selling the day before the Liz Truss Kwasi Kwarteng budget) but instead hold them to maturity. This will considerably reduce selling pressure on the gilt market. If I were Liz Truss or Kwasi Kwarteng, I’d be fuming.

But both moves mean yields payable - ie the cost of debt - will not properly affect real inflation or market forces. But who actually understands the sleight of hand that is taking place here?

Napier uses the example of a French 50-year bond bought in 2021, as having lost more than 75% of its value. The debt was bought by pensions. The individuals that effectively owned it through their pensions don’t even know that they bought it because it’s hidden in balance sheets, locked out of reach. That’s how this particular raid can effectively be kept a secret.

The government is going to force people to buy these bonds. Many will not even know they are doing it, as it will happen remotely via pension funds. Napier calls it “the power of the mandate”, a great term. The UK government already has this power to some degree, through changes to the regulatory framework which can influence what pension funds are permitted or encouraged to hold. (Governments elsewhere in the world that do not currently have this power will soon acquire it, don’t you worry).

By forcing people to buy bonds, they keep interest rates down, and so the government will be less beholden to “the market” when it wants to borrow and spend.

There is plenty of previous for this, bond sales during wars being a prime example. Some kind of regulation will be imposed that demands safe investments and of course bonds and gilts will be deemed safe.

This repression will be enacted, effectively, by stealth, and governments will get away with it because it will happen, as both Keynes and Lenin famously observed, “in a manner which not one man in a million is able to diagnose.”

Imagine a government that just cut taxes and spending instead. We can but dream. It’s all so dishonest. That’s what I hate about it.

I was always taught that saving was a good thing, but saving will be villainised. This immediately makes me think of the US in 1933, a story which I cover in the book. When Roosevelt introduced the gold surrender programme, he villainis ed hoarding gold and blamed hoarders for America’s woes during the Great Depression. But hoarding gold was just saving and that’s what people do. Saving will be somehow villainised, and we will all be required to “play our part” as Andy Burnham put it when imposing illegal immigrant camps on rural villages which don’t want them.

So what can you do? And how do you protect yourself? Where on earth do you put your money?

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Good Sunday to you,

I finally went to see Odyssey last night. I’d been intending not to, after everything I’d read on X, but my daughter persuaded me, and I actually quite enjoyed it.

Maybe not an A+ movie, but a pleasant enough way to spend a few hours. I didn’t feel violated by all the casting, in the way that purists were, although Helen should have been stunningly beautiful, which she wasn’t. To use the parlance of the incel rugby player, she was a three-pinter.

And what people see in Zendeya, who plays Athena, remains a mystery to me. Given that Athena is the Goddess of Wisdom I would have advocated casting someone who at least looks like they might have a high IQ.

If anything, the greater violation was the proliferation of American accents. I love an American accent as much as the next man. I want to live in the US. But to me, maybe I’m just biased, anything classical or mythological always sounds better in an English accent.

During the first scene with Tiresias, the blind prophet of Thebes, I thought I was going to hate the film. I turned to my daughter and said as much. What’s the point of prophesying stuff if people can’t understand what you’re saying. But after that, it was OK.

It’s amazing, though, that with the mightiness of modern sound, engineers often can’t get the mix right, so that spoken words, especially by actors with poor diction (eg Zendeya and whoever played Tiresias, though they were by no means the sole offenders), get lost. Even my daughter, whose hearing remains intact, complained that she couldn’t make out what they were saying.

Note to actors: being natural does not mean being incomprehensible.

I sound like my dad.

In other news, bitcoin staged another welcome and unexpected rally this week, with the companies I mentioned last week seeing gains of 15-25% or more.

A bitcoin bull market in which you don’t have a position is a deeply frustrating experience, and not one I recommend. So don’t miss this next one.

I show you the easiest way to play it here, a way that avoids the complexities of cold storage and the bureaucratic rigmarole the FCA has imposed on UK investors.

The jury’s still out on whether we get one more retest of the lows before the next bull market, but it’s looking increasingly unlikely. The next bull market may already have begun.

In other news, in case you missed it, here is this week’s piece. It is a whopper of a report on gold miners and well worth a look if gold miners are your thing.

It was very encouraging to see gold rebound in the wake of last week’s interest rate rises by the Fed. The inference, as far as I’m concerned, is that the lows for gold are now in, just below $4,000.

We’re still in consolidation mode, and I doubt we see new highs before next year, but it looks like we now have a base.

Turning to an ongoing theme on these pages, being the decline of Britain, how about these for some stats?

The pound has lost 40% of its purchasing power since 2020 (partly due to Covid money printing), according to Truflation measures. With all that debasement and the increased money in circulation, the number of millionaires “should” have increased.

But it has actually declined by ~60% since 2021, reaching its lowest level in 20 years.

The wealth destruction taking place in this country is staggering.

The US is growing its number of millionaires at 1,200 per day meanwhile, and has created over 1.6 million new millionaires since 2020. Americans are much better at debasing their currency.

We must be the only country in history to have printed this much money and still seen declines in nominal wealth.

I know I am mixing data sets but you get the point.

Thank you for being a subscriber to the Flying Frisby.

Until next time,

Cheerio,

Dominic

PS I appeared on the New Zealand Every Day Investor podcast this week. Here is the interview, if you fancy it.

But before we begin, I want to warn you about something that is extremely concerning.

As I’m sure you know, over the years, somebody has been repeatedly impersonating me in order to scam people who read or watch my stuff. They have now gone up a level and created an AI mock up of me with which they are now conducting video calls.

One reader sent me this video message they received. Yes, it’s a bit crap - my shirts aren’t that well ironed - but some people’s detection of AI is not as good as others, and people who don’t know me well could easily fall for it.

What is really concerning is that these fakes are only going to get better.

Apparently this thing is already holding live video calls with people.

I remind you: I do not offer offering options trading, portfolio insights or similar by DM, by WhatsApp or Telegram. If someone messages you offering such a thing, it is not me.

BEWARE!!!!

(Lord knows what the political implications of these deep fakes are - eg one government doing fake video calls with another - but I cannot worry about that. I just don’t want you to be scammed.

Right on to today’s piece.

Gold currently sits at around $4,300 an ounce, even after yesterday’s hike by the Fed. I think it is going higher. My target for the end of the decade is $7,000, with $10,000 possible on a spike.

I have spelt out the reasons for this view a hundred times, so I don’t need to go into them at length here. National currencies are being debased as governments around the world run uncontrollable deficits. At the same time, gold is being re-adopted as a reserve asset and store of wealth by individuals, institutions and central banks.

The weaponisation of the US dollar has accelerated this process. Central banks, particularly across the Silk Road economies, are increasingly diversifying away from US Treasuries and towards gold, because gold carries no liability.

This is, in effect, the remonetisation of gold - not as a medium of exchange, but as a store of wealth and reserve asset.

We are still in my year of consolidation, following the mania of last winter, but it looks as though the lows for gold are now in just below $4,000 with summer weakness is behind us. The lows might be in, but that doesn’t mean we go straight to new highs. More churn is likely and I doubt we see new highs before next year.

Many commentators have put much higher targets on gold. They get more clicks as a result. I think $7,000-$10,000 by 2030 is both sober and achievable.

For the more speculative investor, though, a doubling in gold over the next three or four years may sound a little tame. You want more torque, as they say.

One way of getting it is through leverage: options, futures, spread bets and the like. Another is to invest in gold miners.

If gold reaches $10,000, some of these companies will multiply many times over.

I have been investing in mining companies for many years and know the sector well. Today I’m going to share my ten largest gold-mining positions. You will know some of them already, others you may not.

I’ll explain what each company does, why I invested, where it sits in the mining cycle, what I think it could be worth and what I intend to do with the position.

So here goes.

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Keep those long oil positions.

I can’t pretend to be an authority on Middle Eastern geopolitics, but the control the Houthi rebels now have over the Yemen Red Sea coast, together with the closure of Saudi Arabia’s East-West pipeline, look pretty significant to me, and not in a good way.

Meanwhile, I have lots to share today, starting with this week’s commentary.

We are going into the buy zone for the next bitcoin cycle and, if you haven’t already, I think you should be aiming to have your long positions in place by November-December.

There’s nothing worse than being on the sidelines while bitcoin is going on one of its runs and everyone is crowing about it, and that is not an experience I want readers of this publication to go through. Actually, there are many worse things, but you take my point.

I think bitcoin goes to $200,000 on the next cycle, roughly 2.5x where we are today.

I show you the best way to play it without having to deal with the technical complexities of cold storage or infuriating bureaucratic FCA hoops. I’ll also show you how to outperform bitcoin, so that if bitcoin 2.5xs, my tips should see many times that.

So take look.

How come pineapples are so cheap?

I think you will enjoy this 3-minute video which I posted earlier in the week on my comedy substack - if you haven’t already seen it.

It marvels at how a lucky we are to be able to enjoy fruit grown on the other side of the world at such low prices. How it is even possible?

Dominic Frisby's Comedy News

The Pineapple

A short and gently humorous poem for you today…

Listen now

a month ago · 94 likes · 26 comments · Dominic Frisby

Here it is on YouTube, if you want to save on clicks:

New Orleans

Let me also plug the New Orleans Investment Conference, which runs from October 28-31. I’ll be there and there is an array of great speakers.

The Liz Truss Show

And finally I appeared on our former PM’s podcast this week talking money and banking. Have a watch.

Thanks for being a subscriber to the Flying Frisby.

Until next time,

Dominic

Bitcoin is both volatile and cyclical.

You get periods of extraordinary gains. But then you get periods of extraordinary losses. But …

If you can buy during low points in the cycle, that volatility can work in your favour.

And the house view is that we are within a month or two of the low point right here and now.

It might be that the very low was on July 1st at $58,000. It might be that we need to give that price one more retest this autumn. Either way you want to be sure that by November-December, if you haven’t already, you have your long position in place, ready for the next run.

There is nothing worse than watching others enjoy a bitcoin bull market while you’re on the sidelines.

I have made many mistakes over the years, but I do get some things right, and last time around, in August 23, I wrote up Microstrategy, now Strategy (NDX.MSTR) close to the lows, and some readers made twenty times their money. It made me very popular.

I am planning a similar coup this time.

Today, I want to explain the bitcoin cycle, where I think we are in it and how I would get exposure.

If you are one of those people who didn’t buy Bitcoin at $500 or $1,000 and have spent the years since telling people how you could have bought it, but missed out, now is your chance to move on from that story.

And if you are one of those people who says, “I don’t understand it,” and uses that as a reason not to invest, I’m going to address that too.

For the avoidance of doubt, I have some history here. In 2014 I wrote what was, as far as I am aware, the first book about bitcoin published by a mainstream publisher. I have been following this thing for a long time.

“Read it and glimpse into the future,” said Sir Richard Branson. Though it’s not clear he did actually read it.

I have a target of $200,000 for the next cycle, perhaps 2.5x where we are today. (Bitcoin currently sits around $78,000

But I am going to show you a simple way to play this where the returns could be much, much greater than 2.5x.

So let’s get into it.

The four stages of the Bitcoin cycle

The bitcoin cycle goes something like this

1. Quiet accumulation.

2. Rampant bull market and blow-off top.

3. Monster correction.

4. Frustrating consolidation.

Then the process starts again.

This cycle is remarkably consistent and quite easy to identify. I think we are currently somewhere between stages 4 and 1, and that is when you want to be getting positioned.

The high came at $128,000 a year ago. Bitcoin was on the front cover of every paper. The US was going to adopt a bitcoin standard and fiat money was on its way out. Something like that. It duly crashed.

Now it’s going to be destroyed by Quantum computing or something. All the talent has left bitcoin for AI. Nobody is talking about it any more. And now, with the Coldcard disaster followed by the Blockstream hack, we have had the requisite failures in major players which mark bear market lows.

The great difficulty with bear markets is psychological. It is easy to buy when it is going up. You get sucked in. It is much harder to buy when everyone is telling you it is finished.

Another simple, but eerily accurate way of playing the bitcoin cycle is the 500-day rule. Buy 500 days before the halving and sell 500 days after it.

A bitcoin halving is when the rewards paid to miners reduces. This happens every four years, and the next one is due around April 2028. We are perhaps 580 days before the next halving.

(One thing I have noticed is that when everyone knows about a cycle, they tend to come earlier, hence my alerting you to this one now and not in 80 days time).

Again it means you want to be positioned before December.

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Time stops.

Absorb the weather, whatever form it takes, but sunny is best. Breathe in the air. Sleep as the boat gently bobs up and down. Contemplate. Talk. Play games. Eat. Swim.

Peace descends and nothing much matters any more.

I’ve done this several times on the Thames and, having just spent a few days in Serbia, I now plan to do the same thing on the Danube. I just had a little taster.

I flew out to Serbia because I was speaking and performing at Liberpulco, the European brother of Anarchapulco, an anarchy meet-up - I hesitate to call it a conference - held every year in Acapulco. The idea is that the European version should take place in Liberland.

Wait! What? Where?

Gornja Siga is a small area of river islands and floodplain in the Danube about three square miles in size (more when the river is low). For some context, it would be about the size of Gibraltar.

The Danube forms the border between Serbia and Croatia. Following the break-up of Yugoslavia, there was no agreement as to who owned this floodplain. It was terra nulla.

Enter Vít Jedlička, a Czech politician and entrepreneur, who declared the territory the Free Republic of Liberland and has been trying to establish his own micronation ever since. “We are building the greatest tax haven the world has ever seen,” I once heard him declare in a presentation.

Jedlička is a wonderful speaker, a great publicist and highly entrepreneurial. For obvious reasons, the project appealed to alienated libertarians around the world.

He began selling passports and citizenship. He appointed various ministers. The nation’s coffers were held in bitcoin. The nation even declares an annual profit.

However, he needs another nation to recognise Liberland, which no one has yet done (despite, I gather, Argentine president Javier Millei being a citizen), and of course the idea has gone down like a bucket of sick at the UN.

You also can’t currently access the island by boat from Serbia without running into the Croatian police. If you should attempt to dock your boat, the police will arrest you. I think the grounds are entering the EU illegally. I swam to within about 5 feet of depth but then lost my nerve as the Croatia police boat approached and swam back into deeper water.

Keeping a boat permanently stationed there is costing the Croatian police millions. Most days nothing happens. The police just sit there bored. What a waste of a life.

You can access Liberland from the Croatian side, and some settlers live there in tents. Might for fun for a bit, but probably not a long-term option except for the most dedicated.

Jedlička has now bought a plot of land beside a lake in the nearby Serbian town of Apatin, called it Ark and declared a government in exile. They have built a campsite, a small conference centre and various other facilities. It feels as much like a holiday resort as a country.

Here is your author by said lake giving his best salmon impersonation.

I don’t know the ins and outs of the whole thing, but the project appeals to me if only because I find its sheer irreverence very funny. And because everyone wants to start their own nation. Who actually does?

So that was what brought me to Serbia. And I am most grateful to the organizers for having me.

Dogs and cigarettes

We flew into Belgrade, which itself is a tricky place to get to (try getting there from the south of France) and from there drove three hours to the town of Sombor and our hotel.

I loved Sombor.

I felt as though I had gone back in time to how European cities used to be: sleepy, friendly and safe. The country is 99% Christian Orthodox, and, from what little I experienced, both there and in Belgrade pretty monocultural. Serbs mostly seem to speak very good English. They are shy, polite, respectful, ambitious, hard working, driven and they take whatever they are doing very seriously.

It’s not like many other countries I could mention where you get accosted everywhere you go. People mostly left you alone to get on with whatever you were doing. But if you needed anything, they couldn’t have been more helpful.

In Belgrade, for example, taxis don’t seem to stop on the street and there is no Uber. It took me more than 24 hours to work this out. But randoms on the street were more than happy to stop, get their phones out and call a taxi for me. If I asked a random in London to call me a taxi, Lord knows where that would end up.

The food was delicious. Lots of trout, catfish and pork. Not particularly cheap.

People looked pretty healthy, I must say. No rampant obesity. Although there were plenty of older men who looked as though they had drunk their fair share of beer over the years.

That was another thing that took me back in time. Everybody smokes. Lots of sitting around in cafés, smoking and presumably discussing existentialism. You go into restaurants and there is a smoking area and a non-smoking area, and the smoking area is often more crowded. I’m so used to non-smoking restaurants that I have to say I didn’t particularly like the smell.

Belgrade was the same. Not particularly cheap. Some excellent food. As good a steak as I have ever eaten.

Av ery high dog per capita ratio too. Everyone seems to own a dog and, what I liked, even in the capital many seemed to walk their dogs off a lead. Like the UK in the 1970s early 80s before pitbulls, health and safety arrived.

Belgrade’s location where the Danube and Sava rivers meet means it has been enormously important strategically. How about this for a stat? It has been fought over in 115 wars and razed 44 times

Lots of splendid Orthodox churches. Look at all that gold leaf.

Quite a bit of graffiti too. I couldn’t understand what it said, but presumably something to do with the war.

It has an unpopular and corrupt government that faces weekly protests. According to one taxi driver, always a reliable source of political opinion, it promises to join the EU and never does. Like somewhere else I could mention, the population is split 50:50 as to whether joining the EU is a good idea or not.

A beautiful central park with a fortress that looks like Helms Deep. Lovely walks along the Danube. Lots of views. Here’s one of them.

I managed to rupture a tendon in my knee playing pickleball a month back, and this gave me an unexpected insight into the Serbian healthcare system. My knee was hurting so I took to google and got an appointment that same day with an orthopaedic surgeon. The clinic was not in the centre of town so we got some insight into ‘the real Belgrade”. What struck me was the relationship between the doctors and their patients. It seemed so good. They all seemed to know each other. There was affection. They seemed to feel part of the same community. It was so good to see.

I then had an MRI the following day, all for about a quarter of what I would have expected to pay in the UK. That was a good experience too.

I liked Serbia and will go back. Next time I am going to get a boat and drift up the Danube for a few days. There is something about being on a river that strips life down to its essentials. For a few days at least, I will drift, gently sway, bob up and down and nothing much will matter any more.

Here is this week’s commentary, in case you missed it.

Until next time,

Happy Sunday,

Dominic

Yes, physical gold is a safe haven, but gold also attracts a lot of speculative capital, particularly the paper markets. Gold futures are among the most traded futures in the world, and there is nothing physical about them. So when there is a panic, gold tends to sell off along with everything else as liquidity dries up and everyone rushes to cash.

The US dollar is actually the safe haven, except that it isn’t, because you are bleeding 7 or 8% of value every year to money supply growth.

I am getting so many messages at the moment asking me what to do “when the collapse comes”, as though the collapse of fiat is a foregone conclusion. I don’t think it is. I think continued depreciation is more likely. Fiat could collapse, of course, but we are in a probabilities game and I’d give it perhaps a 25% probability, while continued depreciation I’d put at well over 50% likelihood.

At present we have three financial storms on the horizon. Whether they actually reach us or not remains to be seen, but we should be aware of them nonetheless, so that we can be prepared if they do eventually close in.

Nasty stock market correction ahead?

They are, first, the fact that US markets are so leveraged to AI. You don’t even need the AI bubble to pop, you just need it to deflate a little bit, and it takes the S&P500 down with it.

It’s not like I, and many others besides, haven’t mentioned this before, but it bears mentioning again: the Magnificent Seven, which are highly AI oriented, currently account for about a third of the combined market capitalisation of the S&P’s 500 companies. Ten years ago the equivalent concentration was around 15%, and that seemed like a lot.

From an asset allocation perspective - particularly with so much passive investing - this is dangerous, to put it mildly. Concentration is fine when markets are going up. If you’re concentrated in the right sector you make a lot of money. But when things unravel you get your backside handed to you on a plate. Diversification spreads risk. The S&P500 “should” be diversified. It isn’t. Passive investing is supposed to be diversified. It isn’t.

But this has been the case for a long time. It hasn’t mattered. It doesn’t matter until it does.

Then there is the fact that every mid-term election years have a tendency to deliver autumn drawdowns. According to some sources, every year.

If we get a significant drawdown in the S&P500, the safehaven that is gold will sell off too.

Wobbly bonds

The second financial storm - is it even on the horizon any more? - lies in the government bond market. It’s worth remembering just how large the bond market is. The global value is estimated at around $145 trillion, so larger than the combined stock market which is closer to $130 trillion.

You have probably seen headlines this week saying bond markets are “on fire” and that governments are “in hock to the bond market”. Government debt across the developed world - and deficits with it - have risen dramatically since Covid, and the bond markets are not so willing to finance that borrowing at the ultra-low rates of the previous decade. Investors want more yield for their risk. Can’t say I blame them.

That basically translates as, “if I am to lend you money for ten years, you are going to have to pay me 5% interest, maybe more. 2% is no longer enough.”

As yields rise, the cost of servicing debt rises with them. Just a small increase can add tens of billions to annual interest payments.

The US has the enormous advantage of issuing the world’s reserve currency, but its huge structural deficits mean it is vulnerable. Japan, Britain, France and Italy are particularly at risk because they combine high debt burdens with fiscal or political problems.

Higher yields mean higher interest payments, which make deficits larger, requiring governments to issue still more debt. Vicious circle time. Governments try to avoid this by issuing shorter-term debt, but that merely increases refinancing exposure. The US Treasury’s increasing reliance on shorter maturities is therefore a concern.

Politicians might promise to spend more, but somebody has to buy their debt. If investors want a significantly higher return, governments may find that fiscal policy is increasingly dictated by the bond market rather than by politicians.

You may see that as a good thing and it probably is. Government spending has to be reined in somehow. But higher interest rates will put pressure on real estate and equities, and they increase the likelihood of defaults, which tend to snowball. See 2008 for more details.

Defaults should also increase demand for gold, because there is no liability or counterparty. But that doesn’t happen straight away, necessarily. The liquidity has to come out of the market first, and that means everything goes lower. Just gold doesn’t go down quite as much and it turns back up first.

The reaction of governments to a debt crisis will of course be to print. And that too benefits gold.

Which brings us to financial storm number three on the horizon, although this one is really a subset of two.

The UK. It is a standout amongst all of this. Our interest rates are already high, which means greater pressure on the government (they are the main reason sterling has held up). We have a new Prime Minister, who is currently trying to buy popularity and who seems to think that the solution to many of the UK’s problems is more government spending, not less, and that will require more borrowing and higher taxes. But he has inherited a precarious fiscal position and a bond market that is already demanding a substantial return. Ten-year gilt e yields have risen above 5%, their highest level in 18 years, and longer-term borrowing costs have reached a 28-year high, with 30-year gilt yields closing down on 6%.

The political situation is also awkward. The combined right-wing vote exceeds the Labour vote by some considerable distance, but it is split between the Tories, Reform and Restore. Does Burnham exploit this to call an early election? Will his backbenchers even let him if he wants to do this? Will an early election mean greater or less stability?

On the other hand high rates are at least propping sterling up. I say propping up. On a purchasing power parity basis, the UK is actually cheap and sterling too. Doesn’t mean it can’t get cheaper.

As UK nationals, we have inevitable exposure to sterling, but the prudent thing for a UK citizen to do is reduce sterling exposure. Hold non-government currencies is my advice: gold and bitcoin. I’ll have more on the la tter soon.

BOLD.L might be the way.

Most roads lead to gold at the moment but they are rocky roads.

Other matters

I have turned my Britain On Sale series of seven undervalued companies that could be taken out during the current takeover frenzy into a downloadable PDF report. Here it is.

There is a real opportunity here right here and now. I cannot stress that enough. The UK is cheap and being bought up.

And last but not least, The Secret History of Gold is now out in paperback in the UK, so get your copy now. It has had excellent reviews and has now reached best seller status, I’m delighted to report, with the audiobook especially popular.

A couple of interviews to share this week, both talking about the precious.

First, on Dutch channel Reinvent Money. (Host Paul Buitink is a bit of a legend by the way in the “alternative money” scene. Our paths first crossed in 2013, when he produced the Goldmoney podcast, which I used to host. Love that guy.)

Then last week I was in Serbia playing my libertarian songs at an anarchy conference in Liberland, as you do.

The Free Republic of Liberland, in case you are not familiar, is an island in the River Danube between Croatia and Serbia.

Here is your author looking fetching in his swimming trunks with Liberland in the background.

We couldn’t actually get to Liberland because the Croatian police wouldn’t let us land from our boat. So we swam in the waters nearby instead.

Gosh, the Danube is beautiful.

So conference was held up the road, and, as the sun went down, I entertained the freedom fighters with my anarcho-capitalist repertoire. Singing (the vastly underrated) Show Me The Way to Ancapistan to the citizens of Liberland is a memory I will always treasure.

Here are those dastardly Croatian police who would not let us in. (Those stick insects on the beach in the background by the way are settlers. Once of them is waving the Liberland flag.)

The police need to give their boat a good clean.

I should really do a full post about my trip to Serbia by the way. I just loved it. But in the meantime here is an interview I conducted while I was there with Tim Allen of the Free Cities Foundation. Another dude.

Britain On Sale

In other news, you might find this useful.

I have turned my Britain On Sale series of seven undervalued companies that could be taken out during the current takeover frenzy into a downloadable PDF report.

Here it is (paying subscribers only).

And, finally, here is this week’s article in case you missed it:

Thanks for reading the Flying Frisby.

Have a lovely Sunday.

Until next time,

Dominic

The Secret History of Gold is getting rave reviews and is available around the world at all good bookshops. The audiobook is especially popular.

And the paperback has just come out in the UK.

Today’s post is short and simple.

Investing is often best done that way.

The short of it is this: a new commodities supercycle has begun. It’s going to last several years. You want to be long natural resources and natural resource companies.

The declining purchasing power of national currencies muddies the waters, but I should say that the eventual price of commodities, metals, grains, meats, fossil fuels, softs such as coffee and cotton, is lower. This is especially the case if you measure them using a constant unit of account such as gold.

Unless you subscribe to peak oil theories and the like - that there is a finite amount of something and the resource is running out (and I have some sympathy with these arguments) - the simple fact is that we are getting better at producing these things.

As we get more productive, their price heads lower. Once we used manpower, picks and shovels to mine metals. Now we use huge great machines and robots. Grade may be declining, we may have to go to far-flung and inhospitable places to mine rock, just as demand is increasing, but human beings are also getting much better at mining.

The same goes for farming. We are getting better at it.

However, if prices fall too low, mines and farms close down. Investment dries up. This leads to shortages. Prices then go up to compensate, which leads to increased production, which leads to surfeits. Then prices fall again.

Thus commodities are highly cyclical, even if the broader direction of travel is lower.

Cycles tend to last many years. It takes a long time to get a mine producing. The last great commodity supercycle was the noughties. The one before that, in broad brush terms, was the 70s.

We are in another one now.

And the charts are confirming it.

Exhibit A

This first chart shows the SPDR S&P Global Natural Resources ETF, which owns natural-resource equities rather than the commodities themselves: It’s a basket of resource companies, mining, energy and agricultural.

There is a huge, 15-year saucer base from roughly 2011 to 2026.

There was a breakout from the major resistance zone, followed by a fall back to the zone for a retest, to kiss it goodbye, as they say.

It has now broken out to new highs.

$65 is your line in the sand. A sustained move below that and the breakout has failed. That’s where to manage your risk to.

Silver has done something similar, by the way, though over a much longer timeframe.

This chart is so bullish I couldn’t not mention it.

I’m always a bit hesitant with silver, as you know, but you absolutely must have some exposure in your portfolio, either to a miner or to some of the metal itself.

You can start quoting silly numbers for silver, if you like - $200/oz and more. I wouldn’t blame you.

Exhibit B

Next we have the ratio between the CRB, the Commodities Research Bureau Index, generally seen as a benchmark for commodities, and the S&P 500 over the last 3 0 years.

When that chart is rising, commodities beat the S&P 500. When it is falling, the S&P 500 is the outperformer.

Over the very long term there is a powerful downward bias for reasons described above - improved productivity. But there are periods when that trend reverses, most obviously during the noughties commodity bull market.

But on a relative basis, it’s insane how historically depressed commodities have become. (Over a 50 year period the chart is even more remarkable).

But the ratio has tested essentially the same low three times since 2020 and refused to break down. It is now making higher lows.

Is that a W I see before me?

Let’s zoom in and look at the last ten years.

Again, you can see the clear line in the sand at around 0.0425. It went briefly below that during the insanity of Covid, when oil went negative. But to all intents and purposes, the red zone is the low.

The ratio rallied hard in 2022, thanks in part to a certain invasion, then fell hard. But it never broke the 2020 low. It tested it and the retest held.

This year’s pullback - which started with another war - held at around 0.0475 as well. We now have what looks very much like a major base, with a succession of higher lows.

That is what I want to see.

The bottom line is that I think we have several years of natural-resource outperformance ahead of us.

It won’t always be thus. Nothing ever is.

But this isn’t the bottom. The bull market has already started. What I see from the charts above is confirmation.

Were I to compare this to the noughties bull market, I’d say we were somewhere around 2003-4 maybe. The secular low is behind us, some assets have already made enormous moves, but natural resources as a whole remain extraordinarily cheap relative to equities.

There will be corrections. There will be scares. Some commodities will do considerably better than others. Wall of worry. But for now the big asset-allocation call is simple:

Be long. Keep it simple.

And keep an eye on 0.0425 on that CRB/S&P 500 ratio. A sustained break below there would tell me the thesis is wrong.

My thanks go to all of you who filled out my survey last week. If you haven’t yet and have a spare three minutes, you can do that here. (Paying subscribers only please).

Disclaimer:

I am not regulated by the Financial Conduct Authority (FCA) or any other regulatory body as a financial advisor. Therefore, any information provided in this newsletter does not constitute regulated financial advice. It is solely an expression of opinion. Small-cap stocks are inherently risky. Please conduct your own due diligence and consult with a financial advisor, if you have any doubts. Remember, markets can both rise and fall, especially in the case of small and mid-cap stocks. I am not aware of your individual financial circumstances, so only invest money that you can afford to lose.

This week I’m talking to the goldbugs’ goldbug, Alasdair Macleod.

I’m more of a continued decline, muddle through guy, but Alasdair, as you shall see, is very much in the outright collapse camp and he sees that outright collapse coming soon, as you shall hear - within the next 18 months!

Alasdair has spent decades studying financial markets, monetary history and the role of gold, and his argument is uncompromising: gold is money; pounds, dollars and euros are credit. I could not agree more. Confidence in fiat currencies is approaching breaking point, he says, and any currency that hopes to survive will ultimately have to become a credible substitute for gold through a proper gold standard.

We also look at the fragility of the bond markets, starling, Japan, China and what a 21st-century gold standard might actually look like.

My thanks as ever go to The Pure Gold Company for making these interviews possible.

This is the last of the videos for a while, as we take stock and evaluate. Broadly speaking, most of you seem to like them, so that’s good.

As always you watch the video above, or listen via the Substack app, Apple podcasts, Spotify et al.

And if you want to follow Alasdair and read his immensely popular Substack, you can do that here:

MacleodFinance Substack

Dedicated to explaining why gold is money and the rest is credit. Dedicated to explaining economics relevant to the preservation of wealth. And dedicated to explaining geopolitical developments relevant to investors.

By Alasdair Macleod

In other news, the latest edition of Charlie Morris’s Atlas Pulse is out now. It’s free, so get your copy here. Gold smells QE, he says. Well worth reading …

And, finally, here is this week’s piece - not on gold, but on copper. It’s telling us something.

Disclaimer:
Nothing in this programme is intended as investment advice. It is an expression of opinion only. We do not know your financial circumstances. Do your own research.

I have been banging the drum for copper for some time, but it is becoming increasingly difficult to ignore.

Gold has the glamour, but many, including veteran investor Rick Rule, now see the greater opportunity in copper.

In summer 2024, I highlighted three copper companies Amerigo Resources (ARG.TO) at around C$1.75 and Arizona Sonoran Copper (ASCU.TO) at C$1.36 and QCCU (QCCU.V) at 12c . Amerigo and Arizona Sonora both hit C$8 on Monday meaning gains of ~350% and ~500%. QCCU, on the other hand, is still at 12c. You can’t win them all.

Back in May we noted that things were getting a little hot. The metal had just hit fresh highs; there was a plethora of investment bank supercycle notes and social media was full of predictions about imminent shortages.

The long-term story is intact but don’t chase it, we suggested. Copper tends to be weaker over the summer and some consolidation could give you a better buying opportunity.

We got a good opportunity in June but it did not last long, and here we are three months on with copper at ~$6.50/lb a couple of per cent below where we were in May.

It doesn’t take a genius to work out which way the trend is going in that particular chart.

The summer lull has been more of a pause than anything else.

Meanwhile, beneath the surface, the fundamental copper story is getting stronger.

Copper’s problem is not demand. It is supply.

We covered the demand side extensively in May. AI needs copper. Data centres need it. Power grids need it. Electric vehicles, rearmament, reindustrialistation, India - they all need copper.

This is not the usual China story by the way. If anythign China demand is lacklustre. Its imports of unwrought copper fell 11.5% year-on-year in July and industrial production there has been slowing.

But, as RBC notes, the LME copper market had moved into its steepest backwardation since the 2021 squeeze. In other words, buyers are paying substantially more for copper now than for delivery later. That is a classic physical tightness indicator.

Antofagasta has cut its 2026 production guidance after problems at Los Pelambres. Codelco has abandoned its 1.34 million tonne production target and now expects to produce less than it did last year.

Meanwhile we have BHP’s latest results. Copper now accounts for 54% of its earnings (EBITDA). Its copper mines are extraordinarily profitable (70% EBITDA margin). Yet despite the obvious incentive to produce more, BHP’s copper production actually fell 3% last year.

This is the largest mining company in the world, with some of the best copper assets, engineers and access to capital on the planet. If anyone can turn on the copper taps, so to speak, it should be BHP. Yet it is talking about a “persistent structural deficit” of as much as 10 million tonnes a year next decade. Demand from electrification, digitalisation, data centres and other newer uses, meanwhile, is expected to grow at around 6.5% a year.

So it now aims to grow its copper production at ~5% a year, faster than the rest of its business. The requires an extraordinary amount of capital.

In a recent video, Merlin Marr-Johnson, CEO of Fitzroy Minerals (FTZ.V) analyses BHP’s spending plans using Escondida, the world’s largest copper mine, as an example and concludes, “They’re spending $5 billion to stand still. And that is the copper industry in a nutshell.”

Billions of dollars of investment don’t necessarily mean billions of dollars of new production. Mines get older. Grades decline. Pits get deeper. More rock has to be shifted to produce the same amount of metal. Processing plants wear out and have to be replaced. Sometimes you have to spend billions just to stop production falling.

Which brings us to Rick Rule.

Is copper now a better bet than gold?

It could be.

Rule argues that “The biggest copper mining companies in the world need to spend $250 billion to maintain current levels of copper production.” Note - to maintain, not increase. Not every one has $250 billion sitting around waiting to be spent. “The copper development boom that we absolutely have to see in the next 10 years will require vast amounts of capital.”

“There’s nothing that we can do, nothing at all that we can do, to avert a shortage in copper,” he says. As a result, five years from now the copper price will be, “dramatically higher than it is today.”

As you know, copper is an important strategic mineral. Citi recently looked at what might happen if countries start building national inventories. Global refined copper inventories, it estimates, currently sit around at around 3 million tonnes, equivalent to just 1.3 months of global consumption. If governments decided they wanted three months instead, they would need need to find another 4 million tonnes of copper.

Where does it come from?

To be accumulated over two years, Citi calculates, would require the copper price price to rise to over $10/lb to bring enough scrap into the market and destroy enough demand to balance things.

That is not a forecast, by the way, it is a scenario. But governments are increasingly treating critical minerals as a matter of national security. The US has proposed a US$12 billion strategic commodities programme, the EU has allocated billions to critical-mineral security and there have been calls in China for increased copper stockpiling.

So what do we actually buy?

I like Koryx Copper (TSXV: KRY).

I wrote about this Namibian company in early July, and the shares have risen a few pennies since then.

It’s in consolidation mode, after a big run up in 2025.

Its main asset is Haib, which has a characteristic that increasingly matters in this copper market: it’s big. As Rule says, “size matters” when it comes to majors making acquisitions.

Haib’s current resource stands at roughly 1.32 billion tonnes, containing around 7.6 billion pounds of copper, plus molybdenum and gold.

It is low grade. But it is enormous, close to surface and potentially capable of supporting a very large, long-life open-pit operation.

Recent drilling continues to demonstrate the scale. One recent hole returned 831 metres at 0.27% copper equivalent from surface, including 244 metres at 0.42%. Another returned 654 metres at 0.25%, including 84 metres at 0.47%.

The grades are unremarkable but as CEO Heye Daun says, “These results stand out for their length as much as their grade.”

There are now 15 rigs drilling at Haib, seven of them operating double shifts. Koryx now needs to demonstrate that all this copper can be mined economically, to the point that somebody with a much bigger balance sheet decides it needs to own Haib.

He has done this before, by the way, with Osino Resources which he sold to B2. The next major milestone is the pre-feasibility study, due around the end of this year.

That will tell us much more about the optimum mine size, capex, operating costs, recoveries and, crucially, the economics of exploiting the higher-grade portions of the deposit first. If it delivers the improvement management expects, Haib takes an important step from large, low-grade copper deposit to strategic copper asset.

Strategic copper assets - large mines - is what there is shortage of, and it’s what the majors want.

My full write-up on Koryx is here, by the way:

What if we get a recession?

Recession is the big threat to the whole argument. Copper is an industrial commodity. A serious global recession, particularly one involving China or falling stock markets, could send the copper price sharply lower. Koryx, as a developer with no revenues, could fall considerably more.

There are also Koryx-specific risks. Haib is low grade. The capital spend will be enormous. The PFS could disappoint. Koryx will probably need to raise more money before the story reaches its conclusion. The buyer I expect may never show up.

But investing is a probability game and you have to weigh up the odds. There is evidence of physical tightness everywhere.

Sometimes the summer lull means prices fall 25%. Sometimes, as this year, it’s little more than a pause.

Perhaps this is as good as the correction gets.

Disclaimer:

I am not regulated by the Financial Conduct Authority (FCA) or any other regulatory body as a financial advisor. Therefore, any information provided in this newsletter does not constitute regulated financial advice. It is solely an expression of opinion. Small-cap stocks are inherently risky. Please conduct your own due diligence and consult with a financial advisor, if you have any doubts. Remember, markets can both rise and fall, especially in the case of small and mid-cap stocks. I am not aware of your individual financial circumstances, so only invest money that you can afford to lose.