Brien Lundin of the New Orleans Investment Conference on Gold & Blockbuster Lineup for NOIC 2021
Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is the gentleman that is in charge and oversees my favorite conference of the year, the New Orleans Investment Conference, which I'm excited to announce, I believe Brien, we have back in person this year. It's Mr. Brien Lundin. Brien, how are you today?
Brien Lundin: I'm doing wonderfully, Gerardo. Great to talk with you again.
Gerardo Del Real: Thank you so much for coming on. I could go on with the description. You're also the editor of the Gold Newsletter. Everybody knows you. Everybody knows your background. I am so excited to be back at the New Orleans Investment Conference this year. And I want to get your take on the gold space, the consolidation, the markets in general. But before we get into that, I got to say, thank you so much for having me back at the conference this year and I got to hear the details, because it should be an exciting one as it always is.
Brien Lundin: Yeah, it is. Everyone has been dying to get back to in person events and we are and will be the first big in person investment conference, at least one that's that focuses on precious metals and mining stocks and the likes. Everybody's dying to get back. We've gotten a tremendous response and is kind of a welcome… I think it's going to be a big homecoming for the entire industry. A real blockbuster event. And because of that, I've felt obliged to really go all out with the speaker roster this year. And it's absolutely amazing. We just locked in Ron Paul, we got James Grant, Jim Rickards, Danielle DiMartino Booth.
Gerardo Del Real: Oh man.
Brien Lundin: Yeah. Jim Iuorio, Doug Casey, Rick Rule, Dave Collum, who will be familiar with anyone who's really in financial Twitter, Dominic Frisby, Tavi Costa, Grant Williams, who else? Lawrence Lepard, George Gammon, Brent Johnson, Peter Boockvar. It goes on and on. And of course, Gerardo Del Real. Should have mentioned you first.
Gerardo Del Real: No, no, no. As I always joke, I'm happy to be in the sandbox playing with those that have been around for a lot longer than I and that I learn from every day. That is a heck of a lineup. You could have stopped five names in and I would have been impressed. That's impressive. And I'm happy to participate and speak and present, but I got to say, I'm actually really eager to hear from a lot of those names that you just mentioned.
Brien Lundin: Yeah. And there's dozens more and I'm working on a very special panel, which I can't reveal right now. I've still got a line up the participants, but it's going to really blow socks off anyone who's been tracking what's been going on in these markets, in the media, et cetera, et cetera. Yeah, a blockbuster event this year. As I said, I think people will be talking about this welcome home, welcome back to live events event for many years to come. It will be a must attend type of an event.
Gerardo Del Real: Let's talk about the markets. We're undergoing what I've called the craziest monetary and fiscal policy experiment that I've ever seen. And the markets, I think we talked to asset bubbles when you and I spoke last and it's only accelerated. Everything from NFTs, cryptos, despite the pullback. Where we're at, we have boxes of air selling for $18 million or something along those lines at an auction house recently. What's your take on the markets? Let's start with the gold space, but just the markets overall.
Brien Lundin: Well, you can really sum up everything by saying that crazy has been normalized. Everything that the Fed and other central banks did post the 2008 great financial crisis was extraordinary. A lot of it absolutely unprecedented. Quantitative easing for the first time, immediately zeroing out interest rates. And so when we had the next crisis, they had to outdo themselves. They had to do more than what they did before. They took essentially four years of quantitative easing and they did it in four weeks. More than they did over those four years, they did it in just the span of a few weeks, even a few days. They immediately went to zero interest rates, et cetera, et cetera. What happens is in every successive economic event, whether that's a full fledged crisis or whether it's just a recession or even just a hiccup in the economy, the Fed has since the early 1980s, lowered rates ever lower, ever lower.
Every time they have to come in, in every cycle they have to do more than they did before. In the process, the markets have become addicted, not to easy money, but to ever easier money. It takes more and more of the drug, a higher dosage of this monetary adrenaline to get the same effect or any effect as it did previously. We're stuck in this cycle. And the question of course is where does it end? Does it end this cycle? Does it end the next cycle? Or the one after that? And by ending, I mean at what point do we get the kinds of rates of inflation, the kind of dollar depreciation, wherein the dollar loses its credibility as a currency?
We don't really know the exact timing. A lot of people are out there, a lot of very smart people and a lot of them will be at our conference this year, have ideas about the specific path that we'll follow to get there. But nobody doubts that we're on the path. Nobody of any sense doubts that we're on the path, it's just a matter of precisely which way we go, precisely how long it's going to take. Nobody really knows, but we know that you're going to need gold and silver. You're going to need tangible assets to protect against this repeated and now accelerating depreciation of the dollar.
Basically I look at it in terms of gold and silver is twofold. You have to have physical metals or allocated representations thereof, to ensure against this inevitable and rapidly progressing deterioration in the dollar or whatever your home currency may be. The other part of it is you have to invest or should invest knowing that this trend is in place and find investments that leverage that trend. Big picture view is you need to have bullion or some representation thereof as insurance, wealth insurance. And you should have investments that leverage this trend to build your wealth along the way. And that's what we try to do through the New Orleans Investment Conference through Gold Newsletter is expose our readers to those opportunities.
Gerardo Del Real: I often joke Brien, that I am a very simple person who tends to ask very simple questions and it's helped me for many, many, many, many years. And when I look at Fed policy and I look at the one day market tantrum that we had after the Fed meeting, after the Fed announced that it was thinking about meeting and talking about maybe raising rates in a couple of years, I asked myself a very simple question, how much room is there really for the Fed to hike rates, given the balance sheet? Given the treasury holdings, given the corporate debt that's out there, is there really even much room when we talk about a potential rate hike in 2023?
Brien Lundin: No, there really isn't. That room is determined by the way, by the rate of inflation.
Gerardo Del Real: Exactly.
Brien Lundin: If we had 5% inflation, I think they could get the Fed funds rate to maybe three and a half percent or something like that. The key is that at the current level of debt and I was saying this pre-pandemic, I've been saying this about five years now. That the level of debt at this point is so great that it precludes real interest rates, inflation adjusted interest rates that are even positive, that are even above zero because the debt service costs are so large. Before the pandemic, I did some, some research and compiled the effective rate of interest on the federal debt. And from that it was obvious to me that if the Fed had gotten the Fed funds rate up to their target of 3%, that it would entail a debt service of over a trillion dollars every year. And the public just wasn't going to take that and at that point, people would be talking about debt default and the like.
At the very least, that level of debt service payments would have crowded out every other entitlement program, National Defense, et cetera, or at least dramatically accelerated debt creation or the rate of increase in the federal debt. It wasn't going to be possible back then. Now with what we've seen in the growth in the federal debt, the growth in fiscal spending, the debt is growing so quickly right now that the interest rates cannot get higher than the rate of inflation. Look at it this way, the rate of inflation is essentially the rate of dollar depreciation. What has to happen is the dollar has to depreciate, has to decrease in value and therefore decrease the value of the federal debt more quickly than the government is paying interest on that debt. Otherwise, the whole fiscal house of cards explodes. Interest rates have to be negative, have to be negative on a real basis, adjusted for inflation going forward, essentially forever. And that as you know, is a tremendously bullish environment for precious metals and other tangible investments.
Gerardo Del Real: Absolutely. I couldn't agree more. That's really well said. For years I've said that there's only really two options at this point, you either inflate away the debt or you default to restructure. And at this point, Brien, I'm concerned that I'm not sure that we can inflate away the debt at these levels and at the pace that we're issuing new debt. How do you feel about that?
Brien Lundin: Yeah, that brings up the question of course, often argued of the great reset. What happens when we hit the wall? And again, I don't know whether that's going to be this boom bust cycle or the next one or the one after that but we're headed there. Now I think that's going to entail and a number of smart people have said this over the years, Jim Rickards most recently, that it will need, it will require to restore the credibility in the dollar, it will require some attachment of the dollar, some backing of the dollar by gold. Now, if you look at the numbers on that, at current levels of say M2, if you back the dollar by only 20%, meaning 20% you revalued gold to a level where it would back 20% of the M2 dollars in circulation, you would need to raise the price of gold to $10,000 an ounce.
Brien Lundin: That's where Jim Rickards, for example comes up with that number and it's entirely feasible. Now the timing again is in question. That could happen in a few years, it could happen 10 or 20 years down the road, but we're heading toward that. And I don't think that what you'll see is a situation where the price of gold suddenly will be revalued to $10,000. You'll see a situation where the situation in the dollar has deteriorated to such an extent that the price of gold has risen to an extent where it is defacto near or at that level where it is giving it is backing the dollar by say, 20% or 30% or something like that.
Gerardo Del Real: Ultimately it's a confidence game, right?
Brien Lundin: Yeah. And ultimately, people have confidence in the dollar right now, but all of the currencies in the world, this is the thing that's different today than it has ever been before in that every currency in the world is trying to devalue. They're all racing down the hill, trying to get cheaper relative to their cousins and trade partners. But when they're all being devalued, they can't devalue against each other. One currency might be in the lead on that race down the hill for a while and then another one may take its place, but they're all headed in the same direction. If they're all devaluing, what are they devaluing against? And that is real things, tangibles, primarily on a monetary basis, gold and silver but other things like real estate and other tangible investments, not NFTs necessarily, but other tangible investments.
Gerardo Del Real: Real tangible investments, which brings me to my next question for you. Look, we know that as robust as a gold environment as we're in and we're entering, given the macro situation, the assets that tend to be the levered to, to a higher gold price, the gold mining companies, the explorers that are successful, the leverage there is phenomenal. And so I can't let you go without asking you for a couple of names of companies that you follow or you like or you're personally invested in that are worth looking into.
Brien Lundin: Yeah. I think it's important to look at the exploration companies right now at this moment, because I do believe that gold and silver prices will remain choppy over the next few months as the market tries to absorb and interpret this change, this shift in the Federal Reserve messaging. And as we determined whether these inflation signals are transitory or more permanent. I think we've got some volatility, so that means if you're bullish over the longterm and you really want to make some money or have the potential to have some really big winners, you need to look more toward the exploration plays.
There are a couple of companies I like right now, I like Heliostar Metals. They have the Unga property in southwestern Alaska. The climate there is relatively mild and they were actually able to start drilling a couple months ago and results are coming in now. Previously explored project by companies with limited resources so it was very scattered, has a historic resource, very high grade resource. This is their second phase of drilling and they are really expanding on what they've come to understand as far as the mineralization on about four different targets. They are very predictably turning out some outstanding drill results right now. And I really like that company. Unfortunately, I do not own it. I'm only recommending it in Gold Newsletter. Haven't had a chance to buy it myself unfortunately.
Another one that I did own or do own, after investing in a private placement is Ophir Gold, O-P-H-I-R Gold, that symbol is OPHR on the Venture Exchange. And that's a company that is drilling at this moment an historic resource that was very high grade. Again, it's historic, it's not up to current compliance standards, but if the grades that were previously reported are accurate, then this represents a resource of hundreds of thousands of ounces of gold at very high grades. They're right now drilling that project to verify those previous historic results. It's better than a completely greenfield play because there are reports of significant, even a bulk sample of the resource before and very significant high grade results. They're going to try to verify that and drills are turning at this moment.
Gerardo Del Real: Excellent. Excellent. Brien, this has been a fascinating discussion as always. Where can people find information about the conference, about Gold Newsletter, about yourself?
Gerardo Del Real: Fantastic. Brien, anything else to add to that?
Brien Lundin: No, except to encourage people to come to this year's conference. You will never find a lineup of speakers like this anywhere. And there's nothing as, you know Gerardo, like walking the halls, bumping into big name experts that you've only heard about or seen on television or seen in social media and can actually stop them, talk to them, say hi, ask your questions. And our attendees, because they're there, they've demonstrated that they're the smartest investors out there. Everybody's willing to share ideas and thoughts and it's just an intellectual energy that's unparalleled. You just can't find it anywhere else.
Gerardo Del Real: I can't wait. I wish you were doing it twice this year, but I'll take the one in October. Thank you so much, Brien.
Brien Lundin: Thank you, Gerardo.
Gerardo Del Real: All right, chat soon. Bye, now.
Brien Lundin: All right. Take care. Bye.