← The Tom Woods Show
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- [00:02]
A
Get ready to take a flamethrower to the official narrative and learn what the elites don't want you to know. You're listening to the Tom Woods Show. Hey, everybody, Tom woods here. It's episode 2738 of the Tom woods show. And I have the great Larry Lepard with me today. Professional investment manager for a long, long time, but way, way more than that. I mean, that devalues him in a way because he's really, really good at it. There are a lot of money managers who may as well be throwing darts at a dartboard. But I'm going to tell you there's a bias in this episode because I'm invested in Larry's fund and it's done so well for me that I'm just a huge fanboy of Larry Ler.
- [00:50]
B
Oh, thanks, Tom. You know, we've been lucky.
- [00:53]
A
Yeah, well, more than lucky. I mean, your strategy makes perfect sense given the current situation. I want to also mention your book, the Big Print, which we've talked about before, which I highly recommend. The subtitle what Happened to America and How Sound Money Will Fix It. So I recommend you go out and grab that to understand what's going on in the world. But given that there's a lot going on in the world, as there always is, but in particular, there are some questions I think we might have about precious metals, about the dollar and so on and so forth. And I thought, haven't talked to Larry in a little while and he's my go to guy. And by the way, let me tell everybody, I got to know you. First of all, you came on my radar and the first GOP Ron Paul presidential campaign because you paid to publish full page ads for Dr. Paul in major U.S. newspapers. And you know, nobody else was doing anything like that. So we all thought, who's this Larry Lepard? And then I got to know you and I realized that now this is just my opinion and I don't know if the FTC allows me to say it, but I personally think you're a freak of nature in terms of like, you know, you can't beat the market. Okay, well, and not always, that's true, but Larry's as close as you can get to somebody who's.
- [02:03]
B
Plenty of bad years, Tom. So you know the risks and everything and nobody's always right.
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A
No, that's right, that's right.
- [02:09]
B
It's been working. And I think the book talks about it. I think the reason I'm here and you're asking me all these questions we're in the middle of the theme that the book talks about kind of playing out. And that theme is that the government is just out of control financially and that what that leads to and historically always led to, and I think will this time as well, is money printing, which devalues the currency. And therefore I always tell anybody in the investment world today, you need to own things that the government can't print. And the three most notable things that the government can't print are gold, silver and bitcoin. They can't print common stocks either, and those have gone up. But companies can issue new stock and there are new companies coming along and you got to know which ones to pick and so forth. So. And just on the monetary debasement theme, these things have obviously been working. Although, you know, gold and silver worked really well last year, Bitcoin hasn't been working so much recently. And we talk about that and I talk about why I'm quite confident it is going to work. It's the right place to be. But as it does, it's gone through one of its significant drawdowns and it's testing the faithful.
- [03:11]
A
Yeah.
- [03:12]
B
So we can talk about that.
- [03:14]
A
What exactly does the book mean by the big print? Not just that the government has a tendency to do this, but what is the big print?
- [03:22]
B
Yeah, let's talk about that. Well, so since we entered this modern monetary era post 1971 where Nixon took us off the gold standard, you know, the government has always been, not always, but generally speaking, been running deficits and they print money to cover those deficits. But it really got more severe. And I say this, the book is entitled the Big Print will actually be the third one. The first one was the Great Financial Crisis when Ben Bernanke took the Fed balance sheet from 800 billion to 3 plus trillion in the space of two or three years. The second one was Covid where they went from 3 plus trillion to 9 trillion. Of course, it's come back in a little bit since then. But what I would suggest in the book talks about is the fact that the way things are structured, using debt to grow debt is the engine for growth. And the problem with using debt as your engine for growth is that when you get in debt, you need to pay interest on it. You need to repay the debt at some point in time. And if the amount of money in the circulation is not expanding, the debt's going to go bad. And so the more we take on debt, the more we deficit spend, the more it puts us into really almost just this Isn't a matter of an opinion, Tom, it's more mathematical fact that they have to print money or else the whole thing collapses. And so the book takes you through kind of a very structured argument of how and why it happened twice before. Once with the housing crisis, next time with COVID And my thesis and my belief is that mathematically there's going to be another one coming. There's some signs that it's starting. I mean, we can look at the Japanese bond market or you can look at the fact that in the last part of 2025, the Fed created a new program called Reserve Management, which interestingly, they said it's not qe, but it really is the same thing as qe. And that. What does that mean? It means they stopped shrinking their balance sheet, started growing their balance sheet, injecting newly printed reserves. They literally just hit a mouse key and the reserves in the system go up by $40 billion a month. And so, you know, others have called it a gradual print. And that's true. I mean, 40 billion a month is 480 a year. That's not the same as, you know, GFC or Covid where they printed literally trillions in very short periods of time. But the point is, tide is shifting. We were tightening, trying to get things under control because of all the inflation that the COVID print caused. And what they've now come to, the conclusion is, oh, we can't do that. And the reason we can't do that is they know that if things get too tight, they'll have a deflationary collapse on their hands. And so, you know, the system we've got is just, it's an out of control system where, you know, we're either looking at severe inflation or severe deflation. They're trying to steer it down the middle and you know, that's what I would do too. But they're not doing a particularly good job of it because they keep hitting the guardrails, you know, and I think they're going to hit another guardrail. My estimate is sometime in the next year, year and a half, and when they do, they'll print more and then we'll have another round of inflation. So that's kind of the big picture view. Right.
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A
Do you have an opinion on Kevin Warsh, the Fed nominee from Trump?
- [06:26]
B
It's a great question. He's a little bit of an enigma. Some people say he's a hawk. He said some hawkish things, he said some dovish things.
- [06:35]
A
But if he were a hawk, why would Trump want to nominate him. His whole argument is that Jerome Powell isn't something.
- [06:41]
B
Great question, Tom. And I've said this to a few other of my friends. I kind of think if you really need to have a dovish policy, and they kind of do, because of what I've described mathematically, wouldn't you want to put a hawk in there to do it?
- [06:53]
A
Yeah, sure.
- [06:53]
B
It's kind of like, you know, we were trying to do it on top with China. Well, you couldn't send, you know, a real softy over to China. You had to send a hard ass like Nixon, you know. So there's an argument that I think what happened here is I think the fix is in. And they went to Kevin and said, look, you know, do you want to be Fed Chair? Yes. Okay. You've got a good reputation, you'll get approved, Jamie Dimon likes you, etc. But you do understand that what we have to do is we've got to change the direction here. And so two things have happened since he got in there that I think are meaningful. One, he's made some statements about he thinks that AI is increasing productivity rapidly enough, therefore monetary policy can be looser. I thought that was pretty interesting. That's kind of what Greenspan said in 95 and 96. He said technology was changing things and it justified loosening. So I think there's a good chance he's actually going to cut interest rates. He's going to succeed at that. I don't think Trump would have picked him if he thought he wasn't going to cut interest rates. He's talked in the past about reducing the size of the balance sheet. And I don't think there's any doubt that he would like to, but mathematically he can't. But I think what's going to happen here, if you read the tea leaves, is Bessant, Scott Bessant, the Treasury Secretary has talked about a program whereby the treasury and the Fed will kind of work in concert to keep everything going forward. And of course, the big challenge they face is they have to roll over 9 to $10 trillion with the short term bills this year. And so here's my guesstimate as to what's going to happen. And it's literally just a guess. I think, you know, Powell will leave in May, works will come in and there will be some kind of an announcement that the treasury and the Fed have entered into some sort of agreement. And what they will do is they'll create a new program, be some new name to it. It'll sound benign, but the net effect of it will be they'll figure out a way to get money to the banks so that the banks can then buy the bonds at a small spread and the banks will make a profit on doing that. And that's kind of what they did in World War I too. You know, they issued Liberty bonds and then they gave the banks a chance to buy, you know, to get new money from the Fed at a lower rate. And the banks made money. So maybe the Fed balance sheet doesn't grow, but the bank balance sheets will grow massively in order to support that debt level. Because one thing we do know, this goes back to the math. They cannot have interest expense continue to go up. They've got to get it down. It's over a trillion one run rate today. It's a huge piece of budget. It's, you know, if the deficits 18 to 2, half the deficits, interest rates. So if they could cut interest rates a lot, particularly the short term bill rate, that would help them with their deficit problem. So my sense is it's going to be kind of a mixed bag of policies that keep kicking the can down the road. But one thing is for sure, those of us who know how it all works will identify it and it will be printing money and M2 will grow and that will be inflationary. That's all that really matters. You know, if M2 grows, that's the definition of inflation. More money, same amount of goods. And so, you know, we'll be back where we were before. And in my opinion, those assets I mentioned earlier, gold, silver, bitcoin, will plow onto new highs as that kind of
- [10:03]
A
unfolds, even if they do manage to get price inflation down month to month. The thing is, most of the public doesn't remember the 1970s. They're not used to this. And so they feel like this is an aberration and we'll know the problem is solved when the prices go back to where they were like five years ago or seven years ago. And that's not going to happen. Yeah, they're not going to reverse it that much.
- [10:26]
B
No. So no way.
- [10:28]
A
So a lot of people don't quite understand exactly what it is that we're facing. And now some people could say it's true that the prices of the goods that you buy will go up, but you know, a lot of times you'll get a cost of living increase at your job and it'll kind of balance itself up, but it doesn't balance out because the one of the factors we're leaving out is your savings. If you have managed to have any savings, you are punished for it.
- [10:52]
B
Exactly. That's exactly right. And the other thing I would mention, it's talked about a little bit in the book, is that, you know, what really is inflation? What are the inflation measures? I mean, does anybody really believe the stated rate right now is around 3? I mean, and I suppose in some things it might be that low. I mean, they've gotten lucky. The brilliance of our oil and gas industry has managed to create enough oil and gas. The gasoline prices aren't bad right now. I think that could change in the future. But turn around and look at your insurance costs. You know, I mean, auto insurance, medical insurance, that's going up more than 3% a year. I can assure you of that, at least on my, based on my experience. And so just the measure of inflation is somewhat cooked as well. And look, they are going to try to spin it as, hey, this is the greatest economy ever and just ignore those prices. And the thing that represents somewhat of a positive here, it's not a big one, but it is one, is that if they do this, if they're successful at this, you know, it's unlikely the economy is going to fall apart and unemployment is going to go up a lot. I mean, I think Trump's noted policy here is to try to run this thing hot. The good news about that is that people will have jobs. It's not necessary. I mean, one thing that could drive the big print would be if something blew up. We had a real downturn in the stock market. But since they've kind of figured that out and since they're intent on giving us more money in any way possible, you know, that's now seeming less and less likely. Although they're, you know, they're little cracks. I mean, for those who are reading the tea leaves, you know, this blue owl gaining redemptions on private credit, you know, is kind of something. It reminds me very much of the summer 2007 when the bear Stearns, you know, subprime funds blew up. You know, I mean, so, so there's some indications that maybe the economy is going to hit a speed bump. But you know, stock market's close to all time highs and unemployment's not, you know, not surging and, you know, people are going to work and, you know, everybody's suffering, I think, from inflation. But it's tolerable now. It's not quite as bad as it was in the heat of COVID at the top of COVID where it's 9%. But the other thing to keep in mind is think of the political cycle here. You know, we've got midterms in November and these people, the people in charge, you know, besant to some degree, wars because, you know, worse as family, friends with Trump. I mean, these guys have known each other for a long time and you know, there's no doubt they want to see Trump win a reelection. So they're going to try and do everything they can to make sure they have a healthy economy. The other thing is when you do this kind of thing I'm describing, you know, you might print and you might grow M2, but there's a lag. The inflation doesn't necessarily show up until a little further down the road, you know, and so I think the plan, if I had to guess, it's just a guess, the plan would be, you know, get worse in there, have some grand strategy for how we're going to make the economy beautiful, how we're going to get the money into the system, how we're going to chop interest rates. And by the way, chopping interest rates will help people. I mean, people trying to buy homes, the mortgage costs will come down a bit and so on and so forth. And the notion is they do all that and they'll have an economy that's cooking along and have a better chance of not losing the midterms. So, yeah, I think that's kind of the backdrop.
- [13:55]
A
Yeah, I guess that's pretty probably what they always try to try to do.
- [13:59]
B
Yeah, I mean, look, these guys manage month to month, election cycle to election cycle. There's no, not, no, there's very little long term strategic thinking going on.
- [14:09]
A
Hey gang, let's smash another myth. I think most people think the only way to grow their money for retirement is to risk at buying and selling stocks. Not true. You can reach your financial goals and dreams without taking any unnecessary risks. Bank on yourself is the proven retirement plan alternative that let you bypass Wall street, beat the banks at their own game, and take control of your financial future. We're talking guaranteed predictable growth and retirement income with no luck, skill or guesswork required. Your plan doesn't go backward when the markets tumble. Both your principal and growth are locked in and you're in control. You get access to your money for emergencies and opportunities with no questions asked. There are no government penalties or restrictions on how much or when you can take it. And when you use your money, it keeps growing like you never touched it. Try doing that with a 401k or IRA, not to mention built in inflation protection. Your money is guaranteed to grow by a larger dollar amount every year in both good times and bad. You can get a free report with all the details on how the bank on yourself strategy adds guarantees, predictability and control to your financial plan. Just go to bankonyourself.com woods that's bankonyourself.com woods. I want to ask you about, you know, questions you get all the time, but I can't help it. I got Larry Lard on the show here and I want to talk about gold for a minute.
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B
Sure.
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A
And I want to, first of all, let's say something about people who observe this in the news. They see gold hitting all time highs, silver hitting all time highs, or let's say, you know, a year ago, bitcoin hitting all time highs. And people who might be in a the market to buy some of these things for themselves. What tends to happen is they hit an all time high. That's when they start noticing it and they say, well, I'm too late, it just hit an all time high. I'm not going to be a sucker and buy it now. But then when the price falls, they say, oh well, it's going in the toilet. I'm not going to buy now. So they never end up buying.
- [16:00]
B
Yeah, right. Well, that's right. And you know, I think it's very important when you're investing to ask yourself what is the time frame? You know, are you a trader? Are you looking to make money in three months, are looking to make money in five years or 10 years? And I mean, Tom, you've been in my fund for a while. As you know, all of these assets go up and down. My view is I want to try and get the long term trends right. And so on any quarterly or yearly basis I might look wrong. But what I expect is that on the other years where I look right, it's going to be a lot more right than the year where I was wrong. And so, yeah, I mean, what you describe is unit bias. It's very hard. There's a certain group of people who want to chase a price. Oh, it's an all time high. I got to buy it. I got to buy it. It's getting away from me. That's good. Well, the problem is that person then when it falls goes, oh, I made a mistake, I'm gonna sell it. Yeah.
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A
Yep.
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B
Right. And then there's the other person's, ah, it's too high, I can't buy it. So then you know, like Bitcoin as an example. 120. I had friends at Bitcoin at 124 who said, I can't buy. It's too high. You bought it too. So, okay, fine, don't buy it. You know, I. I didn't. You know, I mean, they could do whatever they want, but. But now I say, hey, guess what? You got a 50% off sale. You know, it's at 65. Now would actually be a really good time to buy. I mean, using the models and the statistical methods I use, it's only been as cheap like 5 or 10% of the time in its whole history when compared to its moving average. And so, you know, in fact, gold versus bitcoin. Right now, bitcoin is much cheaper. But of course, there's a ton of fud around bitcoin. Everyone thinks maybe it's broken, maybe it's not digital gold, maybe the thesis is wrong, et cetera, et cetera. Having been in it since 2013, I can say I've seen this cycle many, many times. And I'm extremely confident the book lays out the reasons that, you know, it's the right place to be, you know, for a very long time now. It's uncomfortable buying it right here. It might be more comfortable buying gold right here. I know a lot of people are like, I've been to bitcoiner, saying, geez, maybe I should sell my bitcoin and buy gold. I'm like, yeah, be careful. Gold's had a big run. Bitcoin's gotten corrected. We can talk about why all that happened. But the point I guess I'm trying to make is I think you need to dollar cost average over long periods of time. I mean, it's getting the absolute tops and the absolute bottoms. And you need to ask yourself, why do I own these things? Because I think five years from now, you're going to wake up and gold's going to be at least 10,000 and maybe 15 or 20. And I think bitcoin's going to be, you know, at least 120,000 and maybe 200 or 300 or 400 and so. But that's five years. So, you know, can you be that patient? I mean, you might buy bitcoin right now at 65 and it might go to 50. I mean, I. I don't think it's going much lower than it is right now, but I could be wrong. I'm pretty sure it's not going below 50, 55, so that, you know, if you bought it now and it went down, you know, 10 grand, big deal. And by the way, gold at 5,500, I mean, could it correct back to 4,000? Oh yeah, in a heartbeat, in a heartbeat. But I think that what's underlying all of this is a larger trend that we haven't seen in many, many years. You know, in fact, most investors haven't really seen in their lifetime because the last, well, we've had some markets and gold, but the last time we really had a big sovereign debt crisis was around World War I and before the Great Depression. And of course everyone who's around that is dead now. So. So there's no, you know, you got to read the history books to kind of think about what's going on here. And you know, to me what's going on here is we're seeing the end of, you know, the fiat monetary world as we knew it from 71 to present. And so it's not a monetary debasement trade, it's a monetary debasement long term trend. I think you need to be on the right side of it. Now, does that mean you've got to take 100% of your assets and put them in this area? No, doesn't. But I know people who own all stocks and they have the retirement accounts entirely in the S&P 500 or the Mag 7. And I think that's a very ill advised strategy because that's been the best performing area in the last 40 years of deflation. But I think we're coming out of a deflationary period and entering a 70s, 1970s, like inflation, inflationary period. I think that started in 2020. I've written about this extensively in the book and my letters. And so if we are in an inflationary period that's going to last between 10 and 20 years. Well, if it started in 2020, we're five years in. So, you know, you missed the first two innings and obviously it would, if you got none of this stuff, it would have been better if you had this stuff, you know, five years ago, certainly gold, because five years ago gold was a thousand twelve hundred. But you know, bitcoin, you're kind of getting a second look. I mean it, it hit 100,000 last year in 2024, five years ago before the run up in 2020 is at 10. But basically from then until now it was somewhere between 60 and you know, well, it dipped down briefly to 15, but you know, it's also been as high as 125. So to me, bitcoin is an easier Buy if you can handle that volatility.
- [20:47]
A
I'm going to ask you a dumb guy question about gold mining companies and why is it if I want to get quote exposure to gold, why don't I just buy gold? What's the benefit to buying stocks of a gold?
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B
That's a really great question. I mean the nice thing about buying gold itself, particularly if you take self custody, is that there's no management team to screw you. There's no risk, there's no operating risk and nothing else that can go wrong. If you have it in your own possession, it's kind of a neat asset because the government doesn't really know you have it and they can't tax you in unrealized gains like you know, the Netherlands are trying to do and, and so on and so forth. It's got estate planning benefits, you can just hand it to your kids, etc. So owning gold coins is a great way to go. The reason you speculate or you invest in gold mining companies is as Buffett says, gold is just a rock that doesn't, it's goose that doesn't lay any eggs. It just sits there. Your one ounce is your one ounce and it will protect you from the debasement of the currency. Price will go up in the currency terms because the currency is being debased. The reason you own the mining companies, if you want to get aggressive. And the mining companies represent, they're like many central banks, they represent flows of future money. So a good gold Miner might have 10 or 20 years of gold coming out of the ground and that represents a stream of growing discounted cash flows and the history. Tom, just to put it in perspective, the typical rule is that the gold miners will amplify the return of the underlying gold by about 30%. So gold's up 10%. Gold miners should be up 130% and that 30% grows every year. So again, it's just a way of levering the underlying metal price. The problem is the thing that comes with it. That's annoying. Somewhat of a problem is that, you know, some of these companies are poorly managed. They don't all do a good job, they run into trouble, you know, there's political risk, etc. So you know, there's taxation risk. I mean mines have been seized in the past, et cetera. So it's not error free. But if you look at the performance of the GDX or the GDXJ or the SIL or silj, you'll see that they've beaten the underlying performance of gold, not by as much as they should have, by the way. And there's actually right now, I would say to your listeners, there's actually an anomaly out there and that is that the silver price has gone up a great deal. You know, it went from the low 30s to you know, 120. It's backed off into the 80s and 90s. Now I believe it's going to 200. But over a couple years, silver miners generally spend about $20, $25 getting an ounce out of the ground. When they were selling it for mid-30s, you know, they're making $10 an ounce. Well, $25 to get it out of the ground hasn't changed. But if suddenly the price of silver is $75, you know, and they paid 25 to pull it out, well, that's $50 of profit per ounce instead of 10. So that means the silver mining profits should have gone up 5x over what they were. And they pretty much have. Yet the silver stocks, the silver mining stocks have not gone up nearly that much. And the reason for that is that most people don't believe that this new silver price is going to stick. You know, and I see a lot of people and the Canadian analysts and all who are most of the miners are out of Canada. It seems to be the leading kind of place for financing these companies. And as a result of that, you know, you've got all these guys in Toronto and they're, they're all saying the silver price is going back to 50. And if you believe that, then the silver miners are, you know, less undervalued than I think. But I actually think the silver price is going to 200 and I think it's going to 400. And so if that's the case, and once people come to accept that and understand that, you know, these silver stocks are going to explode. So in the mining world right now we've taken our fund and we're very heavily exposed to the silver mining stocks because we think that's where the most upside is as they catch up to the gold mining stocks.
- [24:38]
A
What is meant by the term a silver squeeze and what could bring that on?
- [24:43]
B
Yeah, that's a great point. So as we all know in this world that we live in today, you have commodities and you have futures markets and obviously they're the physical coins and then the physical bars. And you know, if you're a battery maker, you're Tesla or you're solar manufacturer, you buy 1,000 ounce bars, you know, and you use them to, you Melt it down and you put it in your goods. What's happened over a long period of time is all these derivatives markets have come along like the London Metals Exchange and the comics out in Chicago, where they trade futures in these things. And so, you know, if you and I want to go to the comics and I want to buy a contract from you, which is five 1000 ounce bars and you want to sell that contract to me, you can sell it, I can buy it. And no silver ever got affected in there. We just made a side bet. And the thing that's happened over time is those side bets have gotten really large compared to the underlying metals. So that there maybe we think, you know, people who think there's many as 300 side bets for every one ounce, and I think it's more like 100 side bets for everyone else. But the point is that if everybody who thought they had bought a piece of silver, a contract on silver at the comics, went to the comics and said, you know, I'll take delivery of that contract. Why don't you send me the metal? You know, there'd be 99 contracts that wouldn't get the metal because there's only one piece of metal for every 100 claims. And we see that kind of going on. We're seeing increased offtake on the comics. We're seeing it on the London Metals Exchange, we're seeing it in Shanghai where more and more people are beginning to think it's kind of like a game of musical chairs, right? More and more people are kind of thinking, yeah, you know, I've got this contract on silver, but I don't really have the silver. And what if the guy who sold me the contract goes bankrupt? What if he's Lehman Brothers? What if he doesn't? He's not able to get the silver in the future. And that's what, quote unquote leads to a short squeeze where the buyers of the long contract say to the sellers, hey guys, give me the silver. And the sellers, oh, I haven't, I got to go buy real physical silver. And that represents demand that up until that point had just been satisfied by selling a piece of paper. But you can't fake the metal, right? And so we think, those of us who are watching it very carefully, that's part of the reason why we actually think silver is going to 200. And there are a lot of other good, smart tech. I'm not the only one who believes this. I'm not. It sounds crazy, right? Because they went from 30 to, you know, 120. I went from 120 down to 70 and now I don't know, it's in the mid-80s somewhere. But gosh, I mean it's, it strikes me that if it really is true that there aren't as many stocks of silver out there as the claims that have been sold against them. And everyone who's bought a claim starts saying, please give it to me. The only way to satisfy that imbalance is going to be much higher prices. And so, you know, I think we're going to go to 200 plus silver. And you know, at that point you're a silver Miner, you're paying 25 to take it out of the ground, you're selling it for 200. I mean we have companies where, if that were to occur, these companies are selling it, you know, one times profits, one times future profits or less in some cases. So it's really kind of wild and it, it's reminiscent of what the Hunt Brothers kind of did back in the 80s where they drove silver up to $50 or there was a similar squeeze in 2011. But in both those cases they were somewhat different because it wasn't driven by physical demand. The thing that's going on this time is that silver is being heavily used in the solar industry in China and China is going after solar in a big way. I've seen numbers that suggest that the Chinese solar market could consume half of the silver market not that far from now. It's at 20% right now. And then also what we're seeing is silver gets used in electronics and data centers. And it's also being talked about being used in some of these new batteries that are being discussed for electric cars. And so one thing just to give you a sense of how tight and how important it is as a metal is that you see companies out there actually going to the silver producers. And very rather famously I think it was Toshiba went to one of the companies who invested in a company called Silverstorm, which is a very good company by the way, and said, we will invest in you at these non market terms and in exchange you will agree to sell all your production to us in the future. Now Toshiba doesn't do something like that unless they're worried about actually getting the metal in the future. Right. They're willing to give non market terms to a silver producer in order to guarantee supply. So there's something really interesting going out on the silver market and I think it's a great opportunity. But you know, let me caution, this is volatile. I Mean, you know, anyone who bought silver at 120 and wants to go to 70 probably had a moment of doubt there that, oh, you know, I should have sold it.
- [29:13]
A
Now I, again, just being an amateur, I, I never reproach myself for timing nor should anyone.
- [29:19]
B
Hard? Yeah, yeah, it's really hard. You gotta, you gotta take a long term view on these things. You wanna, you wanna get in assets where you have the wind at your back. You wanna catch the major trend. You know, if you catch the major trend, I mean if you bought Microsoft in the early days or Apple in the early days, or Google in the early days or you know, Nvidia in the early days, I mean, yeah, they all had drawdowns of 30 to 50% at some point in time, but because they really had something set up that was right, they grew and compounded over years and decades. And I think what you have to do is you have to understand and appreciate the mathematics of the thesis about the basement. And once you do that, you make a bet in this area and size it appropriately, right? I mean, like I said, I don't think anybody should take 100% of it. I mean I happen to have close to 100% of my investable assets in this stuff, but I'm a professional and you know, I'm aggressive and that's just what I'm doing, right? But you know, the average person, I mean, you know, should have something in this area. I mean to have zero in this area, given what we now know, you're nuts. That's just like crazy. And some people come to me and say, well, I don't have any weightings. Should I put into gold, silver, bitcoin? I'm like, you know, maybe 20%, you could argue for much, much higher, but I think if you don't have 20%, you're likely to experience regret. And you know, you want to keep the other 80% in stocks or real estate or other things you're about, fine, great. But you need to have a meaningful bet on this area because to me it's the most attractive area out there right now.
- [30:43]
A
Hey everybody, Tom woods here with a quick tip for small business owners. If your business isn't showing up online, your competitors are getting the leads and you're missing out. That's where Persist SEO comes in. For over 15 years, they've been helping local businesses grow through SEO, paid ads and the latest in AI powered search optimization so you stay visible and competitive. And in the digital age, whether you're in home services, legal or healthcare, Persist SEO delivers real results without locking you into long term contracts or overwhelming you with tech jargon. Visit Ineedseo Help or call 770-580-3736 to schedule your free consultation. That's Ineedseo Help. Easy to remember, powerful for your small business. All right, before I so I want to talk about bitcoin now because you've been hinting at your, you know, you want to tell us what's really going on before we do that. If I say this at the end, no one's going to be around to hear it. So I do want to say, because I was added to the roster very recently, that I'm going to be speaking in Concord, New Hampshire. It's the New Hampshire Liberty Forum, March 5th through 8th. So if you folks, if you're listening and you're in that area, I would love to see you. The website is NHLibertyForum.com so check that out. It'll be a great time. NHLibertyForum.com I'm going to be the VIP dinner speaker. One of the, One of those nights I could have sworn, Larry, that you and I met in person, speaking at a conference somewhere.
- [32:12]
B
And it may well be, I know we'd met a couple times in the past. I mean, we, you know, we traffic in the same circles, right?
- [32:17]
A
Yeah. Well, I mean, I saw you one of the mises. I could have sworn because I, in fact, I, I specifically remember. You won't remember this, but I specifically remember. The only thing I remember from this conference where you and I were both speaking was that I said just as a spontaneous, unplanned, extemporaneous remark in my comments, I said, by the way, I favor tax cuts for the rich. You know why? Because rich people have rights to, you know, they're not just cash cows.
- [32:47]
B
Yeah, absolutely. Well, tell Mondami that you know.
- [32:51]
A
Yeah, well, no kidding. So, all right, let's talk about bitcoin. So everybody wants to know. Now, let me say also, I've been friends, I mean really friends with Peter Schiff for a long time. I used to fill in as a substitute host on his former radio show. He's tried to convince me to move to Puerto Rico. You know, I have nothing against Peter Schiff at all, but wow, on this subject of bitcoin, he is running victory laps. Cause he's saying, and he's right, he's saying that during these uncertain times with all these question marks in the air, gold is going up and silver is going up. But bitcoin is in the dumps. How are you going to tell me bitcoin is digital gold? Get out of here. The market has spoken. The safe havens are the precious metals. What do you say to that?
- [33:36]
B
Well, he's right in the sense that the 5,000 year old safe havens are the precious metals. And the reason that know the precious metals are outperforming bitcoin is that central banks buy them. And there are 7 billion people on the planet who understand that gold is, is a safe form of money. Bitcoin is an emerging safe haven. And I want to emphasize the emerging piece of it. You know, the number of people who are aware of bitcoin in the world, it's probably less than 5%. If you take the entire world and the number of people who own it is probably, you know, worldwide it's probably less than 1%. And everyone's quite skeptical of it. And so this is just what happens when you have a new monetary standard coming into place. And it goes through cycles of. Bitcoin's going to 10 million and it's going to eat the entire world. You know, where, you know, I remember Bitcoin was 100,000. Saylor was throwing his party, everybody was thinking, this is fabulous. And gold guys were in the dumps. I remember the sentiment then, you know, great. And bitcoin had crushed gold on every single timeframe. You know, now we've, the roles have been reversed and gold certainly in the shorter time frames has crushed bitcoin. If you go back long enough, bitcoin's still relatively far ahead. But so now we, you know, bitcoin's dead. And this is what it does. It goes from euphoria to complete, you know, no, it's not going to work this fud, you know, and people have all kinds of different reasons, quantum threat, whatever it might be. I don't think there's any threat there. And so this is just human emotion in a very new, you know, in monetary terms, you know, 17 years doesn't compare favorably to 5,000. Okay? But that does not mean bitcoin's dead. And that does not mean bitcoin won't over the next 10 or 20 years outperform gold. Because I think it will and I think it will massively. But the price of that outperformance is this volatility. And the reason the price is down right now is actually the reason why it's going to be up so much in the future. And that is bitcoin's the best functioning fire alarm for Liquidity, it's driven by liquidity in the financial system and it's driven by, you know, aggressive liquidity, you know, risk taking liquidity. People who want to take risk, want to speculate, would look at something new, a new technology like an Nvidia, and they would speculate in it. And Bitcoin represents that. And so my view is that what bitcoin's price being down right now tells you is that we are getting liquidity is getting tight. And I've seen a lot of charts that suggest that. And in fact, we've also seen the Federal Reserve reverse their policy and start printing money again. So that suggests that in a tight liquidity environment, gold could do well, primarily because what happens is people are looking for a safe haven. And so gold becomes like a bond. And so that's really what's happened. We've had a liquidity squeeze. And so bitcoin has contracted down to the lower end of its range. But I think what that's going to lead to is a situation where the government literally has to print money, a big print, as I would say, and that when that occurs, you know, bitcoin is going to rocket to the high end of the range. And the high end of the range is going to be 250 to 300. And so. And look, I mean, everyone must. I mean, one of the biggest arguments against bitcoin is this can't be money because it's too volatile. And my counter argument to that is no, of course it's volatile. It's just emerging. This is what happens when you have a new standard emerging. Everyone thinks it's great. Ah, everyone thinks it's. Everyone thinks it's great. Everyone thinks it's. And so, you know, I've known Peter for a long time too. I, you know, I think he's kind of butt hurt that bitcoin stole his thunder. It's still on the longer term time frame. It still has outperformed him massively. And I think it will continue to do so. But there are brief periods of time where gold looks a whole lot better and we're in one of them right now. So, you know, my takeaway from that is that's a signal to buy bitcoin and sell gold. And, you know, I've been doing some of that. I have a lot of gold, I have a lot of silver, I have a lot of gold and silver stocks, you know, in my fund. And personally I've been tending to harvest profits in the gold and silver and gold silver stock area. And then Take that and put it into Bitcoin and Microstrategy, which I think is the best bitcoin stock. So look, everyone has to figure out what the risk preferences are. I mean, if you just want to, you know, protect your capital and protect yourself from debasement, you don't trust digital assets and you don't like volatility. Well, gold and silver are great choices. You don't even have to go to bitcoin if you're looking for alpha, which is the highest rate of return. You know, I think bitcoin's going to give it to you in the next five or 10 years. So I think it will beat gold substantially in the next five or 10 years. I mean, I can see gold going to 10,000, you know, maybe 15 or 20, full monetary reset, maybe 50. I think Bitcoin, the next time it moves, you know, the last time it moved. This is an interesting statistic too. I think it's useful to take you through this history. Let's go back to 2019. In 2019, the Fed had to pivot because we had a repo rate blowout in the fall and liquidity got too tight. Repo rates went up to 10% and Powell totally changed. He was shrinking his balance sheet. There was no QE, you know, rates higher, etc. And when that happened, he immediately changed all three of those policies. He cut rates, he started buying bonds again, QE printing money, you know, on a go forward basis. He was accommodative, okay, with lower rates. And so in reaction, and then Covid hit and it got even worse. In a reaction to that, gold went from 1200 to 2000. That was in, you know, February, March of 2020. Covid the time Bitcoin was somewhere stuck between 5 and 10,000. Okay? So throughout the whole summer, gold kind of traded between, you know, 1900 and 20, 100. Gold stocks went up a lot. My funds had two really great years. All right, great. It's now October. Bitcoin still suck at 10,000, but he's now printed $5 trillion and it's seeping its way into the economy and PPP loans and all the other stuff that they did, you know, direct bang. Bitcoin woke up and it went from 10 to 60 and it took five months to do it. So it went up 6x in five months. Okay. I mean 6x. I mean, gold has never gone up 6x in any short period of time. And of course then it chopped around at 60 and Sam Bankman free took it back down again. Blah Blah, blah. But the point is, I think this is going to be a very similar cycle. You know, you have these drawdowns, they're between 50 and 70%. We just had 50, we might get to 60. I doubt we get to 70. And then, you know, what's going to happen here is they're going to have to start printing because the math dictates that they will start printing. And when that occurs, you know, bitcoin's going to wake up and let's go from 60 to, you know, 6x would be 360. I don't think it'll do that. I mean, one of the things that's happened over 17 years of Bitcoin is, you know, the ups have been smaller and the downs have been smaller. It's getting more accepted. The volatility is not as high, still high, but not as high as it was. So, you know, instead of going up 6x, maybe it goes up 4x. So if it goes up 4x off 60, that takes you to 2, 40, which I think is entirely possible in the next two years. So, you know, it's just one of those things, Tom. It's just the way it works, you know, but it's hard for people to see that. I think I would point out. And this is a really interesting statistic that came out of Fred Krueger's book called Bitcoin 1,000,000, which is must reading in my view, is that Bitcoin between 2018 and 2025, so that's a seven year period, it went up 600%, roughly. Round numbers. Okay. If you missed the best 20 days, you didn't make any money. I think about that seven years you missed the best 20 days you make. In other words, when it moves, it goes bananas. So once, once the liquidity comes and once this thing starts moving, you know, it's not going from 60 to 90, it's going from 60 to 250, you know, in a short period of time. And, you know, you can think to yourself, well, I'll wait until that starts happening before you do it. Fine. But there are lots of periods where it's gone up 20 or 30% in two weeks. So, you know, you better be ready. And my view is the better way to approach it is just buy and hold it.
- [41:33]
A
Yeah, that's what I'm doing.
- [41:34]
B
I mean, really?
- [41:35]
A
Yeah.
- [41:35]
B
Actually the best way to do it, in my view is just your dollar cost average. You know, you just buy a fixed amount every. You know, you say, I want to have 10% of my net worth in bitcoin. Fine. You divide that out over 11, 12 months. You know, you buy 1% a month, right. And just, you know, averaging whatever the price is.
- [41:51]
A
I can't not ask you about this. You mentioned Michael Sailor and micro strategy. Now, strategy. There are a lot of people who, if you so much as say that, that discredits you.
- [42:00]
B
You know, I know it's ridiculous.
- [42:03]
A
All right, let me lay out for you. Not that you need it, but for the sake of the listener, let me lay out some of the nicer things they say about him.
- [42:12]
B
Oh, yeah, okay.
- [42:13]
A
So they'll say that what's going on with his bitcoin strategy is he keeps on issuing convertible debt and equity to buy more bitcoin. This inflates the company's valuation, basically through hype, through bitcoin's price pumps. But there's no real underlying business to support it. When bitcoin slumps, then the company resorts to raising cash reserves not to buy bitcoin, but to cover interest and dividends. And there's something fishy about this model. So what do you say?
- [42:42]
B
There's really nothing fishy about the model at all. It's really quite simple. It's financial engineering, what he's doing. He's got an asset that over a long period of time is growing right now at about 40. I mean, you got to understand what's going on with the bitcoin price. You really have to understand what the power law is and how the power law for 17 years has predicted the price of bitcoin with an r squared of 96%. So right now, the bitcoin average rate of return is 40% a year. Okay. What he's doing with a stretch product, his preferred stock, he is saying to a boomer, I will pay you 10% guaranteed in interest payments and I will strip off the other 30% from my common shareholders. And so my stock is going to be very volatile because when bitcoin goes up, you know, I'm going to look like a genius. When bitcoin goes down, I'm going to look like a goat. But I do know that over a long period of time, and he uses the 4 to 10 year window, and I think that's the right window to use. I do know that over a long period of time, unless bitcoin stops going up at that rate, and I don't see anything to suggest it has stopped or will stop going up at that rate, I can pay you 11% and my shareholders will get the difference. And it's Just as simple as that. And I've looked at the company, Tom. You can't break it. You can't financially break the company. I mean, the preferred is covered six times. You know, it's perpetual equity capital. He doesn't have to pay it back. All he's got to do is make the 11% interest payment. And you know, what he's doing is he's just taking that cash and putting it into an asset that's very volatile and stripping off the 11% for a boomer. And by the way, the boomer, I own some of it. By the way, the boomer who buys that gets 11%. They also get that 11% tax deferred. What does that mean? Well, because he's issuing common to pay the dividend. Your money you get on the dividend is a return of capital. So if you put a million dollars into, you know, stretch, you get 11% return. So you get 110,000 annual interest income off of that. Okay. And normally if you had that kind of dividend income, you'd pay taxes on a dividend, but you don't. What happens is your basis gets reduced. So 11% actually becomes more like a 16 or a 17% effective yield to you until the first nine years are over, because every year your basis goes down. So it's a very attractive product for the boomer class and it gives them a way to participate in Bitcoin in the sense that they are getting a much higher than market yield. You know, and admittedly they may. You know, you're taking bitcoin risk. I mean, look, here's what happens if Bitcoin fails. Sailor goes bankrupt. There's no doubt about it, okay? But there's no evidence to me that Bitcoin is or will fail. To the contrary, I think there's incredible evidence, 17 years of it, that bitcoin is going to continue to march higher. Every low is higher than the prior low. Every high is higher than the prior high. You know, the Power law model suggests that the mean power law evaluation in 2032 is a million bucks. And I think we'll get there. And Power law also shows that over that 17 year time frame, there's never been a drawdown that took you below 1/2 a standard deviation of the Power law price. Right now that 1/2 a standard deviation is 55ish, something like that. So, you know, could we go down to 55 or 50? Yeah, maybe. But I don't think it'll stay there very long. So, you know, until this model breaks, I Just don't see the problem. And there are a lot of people who love to hate Sailor. I, I actually think if you take the time to listen to some of the things he said, written, et cetera, you can't help but conclude that the guy's a genius. I, I think in 10 years, Sailor will be the richest man in the world by a large measure. Because what I think he's doing is he's running a speculative attack on the US dollar. Now, he doesn't say it like that because he doesn't want to piss off the CIA and the government and everybody else, but really this is. He's running a speculative attack on the US dollar. He will sell you preferred. You'll get an 11 return. They'll use that to buy Bitcoin. And it's reflexive. And the price of bitcoin will continue to go higher. So, you know, it's easy to hate the guy, but the company is 100 times larger than it was when he started this strategy, you know, to say he's not succeeding. He raised $25 billion last year. His preferreds are the largest preferred stock in the market by a factor of 10x. I mean, there's something going on here, Tom. And it's very easy for kind of the Twitter warriors and the people who are keyboard warriors to take cheap shots at him. But, you know, the guy's a billionaire and he's very, very smart, and I think what he's doing makes perfect sense. And honestly, I mean, strategy, I've been, I bought some strategy this morning. Strategy at $126 a share. I mean, it's a screaming buy. Now, this will be a thousand dollar stock within five years. So I don't see why all the Sailor hate. Now let's go back to what could cause Bitcoin to fail. Okay, because if Bitcoin fails, he's. I get that, but what? The only two things that could cause Bitcoin to fail are technical problems, which we've got 17 years of evidence suggesting that they're will not be technical problems. But, you know, this whole fud around quantum has been brought up, and I don't think that's a problem. But, you know, it's obviously concerned some people. The second thing that could cause Bitcoin to fail would be a loss of interest and, you know, lack of adoption. But if you look at the growth in the wallet addresses, you look at the growth in the hash rate, you look at the growth in transactions. The lightning network, which is layer two for payments on bitcoin I just read it this morning. It grew like 300% in the last six months. I mean, you know, more and more people are using this stuff. So just the way the Internet, you know, it started off from nobody had the Internet to now everybody has the Internet. You know, we're still kind of closer to the nobody has bitcoin and someday we'll be at the everybody has bitcoin stage. So, you know, unless I see that trend get reversed, I'm like, well, what's going to stop it? You know, I mean, I don't see what stops it. I mean it, you know, it's like Amazon. I mean, I remember when Amazon first came out. Who cares about buying online? Well, boy, was I wrong. I mean, you know, it turns out, I mean, you should see my wife every day at Amazon.
- [48:40]
A
We have that in common.
- [48:42]
B
Yeah, right. So, you know, yeah, it turns out you can buy a lot of online. So to me it's a trend in motion that's not going to stop. So, you know, yeah, I get it. The volatility scares the out of a lot of people. I get it. But you got to read through that. You got to look at the big picture here. And you know, I was, as you, I think I told you I was an investor in the Internet when it first came around. I was in the venture capital business before I became a sound money zealot. You know, I remember all the skepticism around the Internet. You remember Krugman, it's like a fax machine. I mean, oh yeah, who cares about this? It's not gonna, I was just like, no, guys, they're gonna figure out all kinds of things you can do with it. It's really going to be quite useful. And you know, here you and I are speaking in different parts of the country and you know, broadcasting real time, you know, tape to a bunch of people. I mean, it's amazing, right? And, and so I think the same kinds of things are going to happen with Internet based money. I mean, I mean, I know it's really nice that I can, you know, move money anytime, 24 7. I can send, you know, I don't have to. If I want to send a big amount of money to a vendor in Europe, I don't have to go to my bank and wait an hour and pay $100 fee and all that. I just send it to their strike account. So it's where things are going. It just, it strikes me as pretty clear, so.
- [49:48]
A
Well, look, you've already said it, but if you're going to be in microstrategy, it's obviously, as you say, it carries the bitcoin volatility, which is putting it mildly. Because if you got in, let's say last summer, oh yeah, you got your
- [50:01]
B
ass handed to you.
- [50:02]
A
Yeah, yeah. You're sitting on a pretty big unrealized loss.
- [50:05]
B
No, I know. And I, everyone who bought it there, I mean, I'm, I hear from them all the time and I bought some there, by the way, but this is the roller coaster of this game. I mean, I bought Bitcoin in 65, I bought Bitcoin at 17 in 2017. I watched it go down to three, you know, and I doubled down. I mean, it's, it's, you gotta, you gotta understand what you own here. And can the rewards be big? Yeah, they can be really big and I think they will be really big. Is the price of getting there free? Nope, nothing's free. You know, the price of getting there is you gotta be willing. I mean, I think you've told me in the past, I think you own some bitcoin, right? I mean. Oh, sure. You just don't think about selling it. Right. I mean, I just, I look at it as my long term savings. I know it'll be worth more in the future, you know. Yeah, but a lot of people, they come at it and they're just. So much of America is short term focused, you know, and I've seen people who, it hit 100,000, they bought it 50, it hit 100, they felt great about it and they sold it at 100. I said, what are you doing that for? You know, it's going to a million and then it's going to 10 million. And it is, I mean, again, read, read some of the books. It's not like we're operating in a vacuum here. We now have 17 years of data. Read Bitcoin 1 million. It's a great book by Fred Krueger. And it'll take you through the logic and the model, the mathematical model. And I put a lot of faith in models that have been successful. You know, with a 96% R squared. I, I think there's a lot of logic to it. So, you know, to me, I'm just hanging with it. I think it's going to work.
- [51:25]
A
Well, Well, I want to, let's see, I want to do two things as we wrap up here. First, I want to remind people you got to read the big print by Larry.
- [51:33]
B
Yes, please.
- [51:34]
A
Gotta read it. Okay, there it is right there on your screen. For those of you on video.
- [51:38]
B
The big by the way, it's hardcover, soft cover, Kindle, ebook, and also audiobook.
- [51:44]
A
All right, so now you have even less excuse not to read it. It's in every convenient format you could ask for. So I'll link to it@tomwoods.com 2,738. But the other thing I'm going to link to, that's our episode number. The other thing I'm going to link to@tomwoods.com 2738 is a presentation that Larry and his partner David Foley made to my people on what they call monetary debasement insurance, which is how they think about the philosophy behind what their fund is all about. If you like what you're hearing here, I strongly recommend you watch that replay. I strongly recommend.
- [52:18]
B
Thank you. I appreciate that.
- [52:20]
A
Well, not only is it really educational, but there are two great benefits of watching it other than the education. One is if you don't have the dough to be in Larry's fund, that's okay because you'll get a kind of a crude sense of how you might DIY it.
- [52:36]
B
Absolutely. You don't have to come into my fund. I mean, you can buy SILJ or gdxj, you know, gold or silver or bitcoin and, you know, microstrategy, and, you know, you've got 80% of what we're talking about here. I mean, my fund is not required.
- [52:51]
A
But the other benefit is if you do want to, if you just want Larry to take care of it for you, then you'll find that out, too. So that'll, I'll link that with the
- [52:58]
B
proviso that you got to be accredited and the minimum is a couple hundred grand. So.
- [53:02]
A
Right.
- [53:02]
B
Just can't take dinky accounts, but. Right. Right.
- [53:05]
A
So that's all the, the, the Larry lard smorgasbord is tom woods.com2738 so, Larry, I appreciate you doing this.
- [53:13]
B
Really great to hear from you, Tom. It's always an honor. I really respect what you've done a lot and consider you a good friend. So thanks for having me on.
- [53:20]
A
Thank you very much. And I love the big print. I cannot endorse this highly enough. I absolutely love it. And I. Because I think one of the things you're doing, Larry, is there are people out there who, let's say, might more or less share your outlook on where to put money, but who don't have the full picture in their heads. They don't, they don't have the historical background. The theory and you've got it all there in that way.
- [53:43]
B
Well, I tried to do that. I mean, I tried to make it, you know, it was a fine line to walk because I wanted to have the facts and the data to support the argument. But I also wanted it to be really readable and easy to understand so that, I mean, I got blue collar work. I wanted anybody. You don't need a high school education to get this. I mean, you can just read it and you'll go, oh, yeah, I see what you're talking about. Right, right. I really tried to make it common sense, logical. Hey, you know, we're all being screwed by this Keynesian monster government that we all live underneath. And the only way we got a chance of getting out from underneath that being screwed is to get into the sound money stuff. And then the sound money people become, well, well enough off that we can influence the government, go back to sound money, you know, because that's where we went wrong. I mean, this is a, you know, until 1971, really, until 46. Well, there have been different times, but in general, generally speaking, the greatness of America was built on sound money. It was built on a country that lived on the gold standard, full stop. You know, over time, it got diluted. We had some detours with the Civil War, you know, the creation of the Fed, fdr, et cetera. But the point is, we were, generally speaking, a sound money country until 71. And after 71, man, it all started to go to hell in a hand basket. And now it's really gotten bad. So if we want to get back to the greatness that was America post World War II, where we stood at the top of the world, were respected. I think we got to start with having a foundation of sound money. And the book lays out that case very soundly. I think so.
- [55:16]
A
All right, well, check it out. Tom woods.com2738 thank you, Larry. And thank you, ladies and gentlemen.
- [55:21]
B
Thanks, Tom.
- [55:24]
A
Make yourself and those you love less vulnerable to the regime, both mentally and physically. Get more forbidden information@tomsfreebooks.com and be sure to subscribe to the show wherever you listen. See you next time. Foreign. Like the sound of the Tom Wood Show. My audio production is provided by Podsworth Media. Check them out@podsworth.com Enter code WOODS50 to get 50% off your first order. If your recording sounds rough, the Podsworth app can make it not only listenable, but professional. Remember, when you use code WOODS50, you'll get half off your first order and you'll also be supporting this show.