Why Gold and Bitcoin Provide Money Printing Insurance

[00:00:00] This is The Canadian Investor, where you take control of your own portfolio and gain the

[00:00:06] confidence you need to succeed in the markets.

[00:00:10] Hosted by Braden Dennis and Simon Belanger.

[00:00:15] The Canadian Investor podcast.

[00:00:17] Welcome to the show.

[00:00:18] My name is Braden Dennis, as always joined by the versatile, Mr. Simon Belanger.

[00:00:26] Sir, we got two big chunky topics today that I think everyone is going to like.

[00:00:32] Looks like the market is doing some weird things right now.

[00:00:36] I'll leave it to you and Dan, but it's a bad week to be short junk, it seems.

[00:00:43] Yeah, probably lost a lot of money if you were short junk this week.

[00:00:47] Yeah, I have a feeling you're referring to GME here, GameStop, and some of the other

[00:00:52] meh-meh stocks.

[00:00:54] Here's the thing though, it is not just the usual suspects.

[00:01:00] 16 of the 17 most heavily shorted Russell 1000 stocks were up massive double-digit

[00:01:08] percentage points on the day as of recording this.

[00:01:12] It's Tuesday May 14th, it's a similar story Monday May 13th.

[00:01:17] So it's a bad week to be short junk.

[00:01:23] We lost an investing legend last week, Jim Simons.

[00:01:28] Did you ever read the book The Man Who Solved the Market?

[00:01:32] I did not, but now it's definitely on my list of books to read, but I know about

[00:01:38] him though.

[00:01:39] Okay, yeah, so I haven't read the book either.

[00:01:42] You and I, we got the Audible subscription going, I hope it's on Audible.

[00:01:47] Maybe we can crush it and do a recap.

[00:01:50] Jim Simons investing legend died at 86 last week and I have not read the book

[00:01:56] about him, but I did listen to the three hour podcast that a choir did on

[00:02:02] Renaissance Technologies.

[00:02:04] So Renetech or Renaissance Technologies was a algorithmic trading hedge fund

[00:02:11] headed up by Jim Simons.

[00:02:13] It was basically a team of mathematicians that teamed up to build

[00:02:19] Renetech, which was an algorithmic trading firm that probably has the most

[00:02:26] successful track record of any fund ever, which is kind of insane.

[00:02:34] I mean, there are a ton of famous investors, but there is no more

[00:02:39] impressive track record since launching Renetech publicly in 1988.

[00:02:47] Have you seen the track record Renetech did?

[00:02:50] Have you ever seen it, explored it?

[00:02:52] I know, but I mean, you have it here so it's quite impressive.

[00:02:57] It's a track record that the first time I heard it, I didn't believe it.

[00:03:04] The second time I heard it, I said to myself, that's as good as Bernie

[00:03:11] Madoff, that kind of alarm bell goes off.

[00:03:15] The third time I hear about it, I thought to myself, what's the catch?

[00:03:21] It's almost unbelievable.

[00:03:24] The medallion performance fund, sorry, the medallion fund, the

[00:03:28] performance data of the medallion fund from 98 to 2018 is nothing short

[00:03:34] of spectacular and the returns since 2018 have also been spectacular,

[00:03:40] but here they published it from 98 to 2018 and the fund was limited to

[00:03:48] 10 billion up till 2018 for reasons that I'm going to talk about.

[00:03:53] But the average return was 68% gross and 40% net.

[00:04:02] They were doing a fund fee structure of five plus 20, I believe,

[00:04:10] or something like that.

[00:04:11] It is absolutely absurd.

[00:04:13] So that's 5% off the top and then a huge performance fee.

[00:04:16] Wow.

[00:04:16] The performance fee went up, huh?

[00:04:18] After 2000.

[00:04:20] Oh yeah.

[00:04:21] Yeah.

[00:04:21] So the performance fee went from 20%.

[00:04:24] So they've been charging a fixed fee of 5% for the first roughly 12 years

[00:04:29] and went up to 36% and then they said, hey, how about a 44% performance fee?

[00:04:37] So for those who were doing the quick math at home, it's 5% off the top

[00:04:41] and then 44% of our performance on the market taken as fees.

[00:04:46] Absolutely bonkers.

[00:04:47] But when you have fees that are 58%, 39%, sorry, performance fees

[00:04:55] that are net 58%, 39%, 33%, 39%, 70%.

[00:05:02] In 2000 they did 98% and in 2008 when the market lost, you

[00:05:06] know, more than 25% across the board, RenTech did 82.38% net of fees,

[00:05:15] 152% gross return in the year of 2008.

[00:05:21] It's just silly.

[00:05:23] It's just absolute silliness.

[00:05:24] I'm going to get into how they did this, but what are your

[00:05:27] thoughts when you see this?

[00:05:30] Yeah.

[00:05:30] I mean, obviously we've been pretty critical of fees in the past.

[00:05:33] This is a situation where they clearly had impressive track records.

[00:05:38] And I would assume that they had loads of demand for the funds, which allowed

[00:05:43] them to charge higher fees because clearly if you don't have demand,

[00:05:47] you cannot increase fees like that.

[00:05:49] And just goes to show what kind of returns you need to have to be able

[00:05:54] to zero out those fees and have some really nice out performance.

[00:05:58] Because if you start comparing both of them, it's like, okay, almost

[00:06:02] like, you know, your returns almost cut in half because of fees.

[00:06:06] They're still very good and outperform the market and everything's impressive.

[00:06:10] That is kind of one thing that comes to mind.

[00:06:12] The other thing is that I think it's especially impressive

[00:06:15] around the like 1999, 2000.

[00:06:18] I don't know when, you know, quant funds and funds that relied

[00:06:23] more on algorithms started to become more popular as hedge funds.

[00:06:26] But I would assume it was probably like late 1990s so that they'd be able

[00:06:31] to keep those returns throughout, you know, the 2000, 2010s.

[00:06:36] I think that's where it gets impressive when it's smaller.

[00:06:38] Not that it's not impressive, but, you know, you're not playing

[00:06:42] with a lot of money, so it's oftentimes easier to make those returns,

[00:06:46] especially if you're a first mover with this kind of strategy.

[00:06:49] You probably have a first mover advantage.

[00:06:51] So I think it's especially impressive that they were able to do that

[00:06:55] over a very long period of time.

[00:06:57] And they were able to do it with a 10 billion dollar fund size as well.

[00:07:02] They had to cap it there as a result of slippage,

[00:07:05] what I'm going to get to a little bit.

[00:07:07] But here's a great quote from Jim Simons.

[00:07:10] He did a seminar.

[00:07:11] I can't tell you where, but I saw the clip.

[00:07:14] The quote was, I did a lot of math.

[00:07:18] I made a lot of money and I gave it almost all away.

[00:07:23] So very philanthropic guy.

[00:07:26] Every single photo I've seen of him is in front of a chalkboard

[00:07:30] with crazy formulas behind him smoking a cigarette.

[00:07:33] That's who Jim Simons was.

[00:07:36] So he did a lot of math.

[00:07:39] He made a lot of money and he gave almost all of it away.

[00:07:42] And they made a lot of money.

[00:07:46] An unbelievable amount of money during that time,

[00:07:51] because they had to keep the fund size at 10 billion

[00:07:53] because they couldn't go further.

[00:07:55] And for a while, it was a lot even less.

[00:07:56] So they basically were just raking in all this cash

[00:07:59] because they couldn't just put it back into the fund

[00:08:02] for reasons that I'm about to mention.

[00:08:03] But that is a bad ass quote.

[00:08:07] I did a lot of math, made a lot of money and I gave it all away.

[00:08:11] I don't know what's more impressive.

[00:08:12] The fund returns are living until you're 86 if you're a smoker.

[00:08:16] That's pretty impressive, too.

[00:08:19] If you Google images like he's smoking in nine out of ten pictures

[00:08:23] in front of a chalkboard, it's pretty it's pretty funny.

[00:08:27] So as far as I know, so into into the strategy and how this works,

[00:08:32] it's a fairly short segment I have here, and most of it's actually taken from

[00:08:36] shout out the acquired podcast.

[00:08:38] So as far as I know, the fund has been crushing it ever since,

[00:08:41] by the way, since these these numbers in 2018.

[00:08:44] The Medallion Rent Tech Fund is still doing exceptional numbers.

[00:08:48] And they thrive in down markets and volatility, including 2020.

[00:08:53] So so the story goes.

[00:08:55] I mean, look, they did 150 percent in the great financial crisis.

[00:08:59] I don't I don't think anyone was too mad about paying huge fees

[00:09:03] when they still netted out over 80 percent when almost everyone lost their

[00:09:07] people down the street, lost their house and their portfolio in the same year.

[00:09:11] I mean, breaking even was amazing for that year.

[00:09:14] Just break it. You were an all star if you broke even. Correct.

[00:09:17] Yeah. Yeah, they must have had like

[00:09:19] like some pretty interesting hedges in place.

[00:09:22] Yeah. Now there's a long short strategy for sure.

[00:09:27] So acquired podcast did an excellent job covering the Jim

[00:09:30] Simons Medallion Fund.

[00:09:32] Well, the Jim Simons headed up Medallion Fund of Rent Tech,

[00:09:36] a.k.a Renaissance Technologies.

[00:09:39] The flagship fund did 68 percent gross

[00:09:42] and 40 percent net over the past 30, 40 years on average,

[00:09:45] while never once losing money for those keeping track at home.

[00:09:49] Quote, one thousand invested in the medallion in 1988

[00:09:52] would have compounded to forty six point five billion dollars today.

[00:09:58] Oh, my goodness. Of course, that was not possible

[00:10:02] because you couldn't actually keep the money in the fund.

[00:10:05] They had to return it all back.

[00:10:07] And the reason for that, they had to keep the fund size capped

[00:10:10] to prevent something called slippage.

[00:10:13] Quote from the acquired pod.

[00:10:14] Up to this point, the vast majority of what Medallion was doing

[00:10:17] was trading currencies and commodities, not equities,

[00:10:19] because you might be thinking, OK, yeah, I hear you.

[00:10:22] The 90s was a different era.

[00:10:24] But half a billion dollar fund doesn't sound that big.

[00:10:29] How are they moving markets with half a billion?

[00:10:31] But it's not the equity markets.

[00:10:33] They're trading thinner markets.

[00:10:36] It's not commodities and futures are small markets.

[00:10:38] They're large, but they're thin compared to equities.

[00:10:42] There's just not that much volume.

[00:10:44] And you can't trade that much without slippage becoming a huge issue.

[00:10:48] And Medallion is now hitting that limit.

[00:10:50] So, Simone, it's basically like you'd be trading against yourself

[00:10:53] if you had like 100 billion and there's no liquidity,

[00:10:56] no volume to move on these thinner types of commodities they were trading.

[00:11:01] So that was the rationale for keeping it so small or, you know,

[00:11:05] 10 billion dollars, not a tiny fund, but for how much demand

[00:11:09] they were given from investors to take their money.

[00:11:12] It was a relatively small fund.

[00:11:14] Yeah, yeah, I mean, that makes sense, right?

[00:11:16] It's just equity markets are much larger.

[00:11:19] And then if you want to get in the really massive markets,

[00:11:23] then you go into the bond market or debt markets.

[00:11:27] That's like on another level in terms of size.

[00:11:29] Yeah, correct. Exactly.

[00:11:32] So they would hold thousands of long short positions at every given time.

[00:11:36] And the holding periods ranged from like a day or two to a week or two.

[00:11:41] Apparently, they made up between 150,000 and 300,000 trades per day,

[00:11:45] algorithmically did a lot of math, made a lot of money and gave it all away.

[00:11:50] The fund was capped at five billion for a while than 10.

[00:11:52] And I believe I don't know this for a fact,

[00:11:56] but I believe it sits at 15 billion today.

[00:11:59] It's no longer Jim running it.

[00:12:01] It's two of his more trusted guys running it.

[00:12:03] I think they're running it at 15 today, as far as I know.

[00:12:06] They went on to open a demand.

[00:12:09] I hope it's no longer Jim running it.

[00:12:13] OK, dark, dark joke.

[00:12:15] Dark joke. I love it.

[00:12:16] I think it is. I'm sure some people caught that as well.

[00:12:19] Dark joke. But here we're here for it here on the pod.

[00:12:23] They went on to open another fund because people were very obviously

[00:12:26] there's a lot of interest for people to to give them money, of course.

[00:12:30] They uncapped it.

[00:12:32] And it's fair to say that it didn't really work

[00:12:36] without without capping it.

[00:12:38] So they have other funds and they've done fine.

[00:12:42] But you're not you're not covering it on the podcast.

[00:12:45] You're not writing any books about them.

[00:12:47] So so their strategy really does face up against size constraints.

[00:12:52] Yeah, yeah. I mean, it's definitely an interesting kind of

[00:12:56] interesting to look at.

[00:12:57] And I think it's just a reminder that, you know, people can make money

[00:13:02] with different strategies.

[00:13:03] I think that's kind of the main takeaway.

[00:13:05] And I think it's also I'll come back to the fees is

[00:13:09] you have to get really strong over performance when fees are that high.

[00:13:14] And I think, you know, this is more the exception to the rule.

[00:13:18] I think that's really important.

[00:13:19] And we've talked about private equity before.

[00:13:21] I've been very critical.

[00:13:23] But one of those reason in private equity will actually have kind of

[00:13:26] a similar fee structure.

[00:13:28] So they'll have kind of base fee and then a performance fee.

[00:13:32] But the issue with private equity is where how they calculate

[00:13:34] those performance fees, right?

[00:13:36] It's more of an estimate.

[00:13:38] And they're a bit generous in terms of when they start calculating

[00:13:42] those returns without going to too much detail.

[00:13:44] But that's why I've been critical.

[00:13:45] That's why I also Buffett and Munger have been quite critical

[00:13:48] and other people about that, those kind of strategies.

[00:13:51] But definitely, you know, this fund is completely different from that.

[00:13:55] But I just wanted to mention that even though this might sound impressive,

[00:13:59] I mean, this is the exception to the rule for fees.

[00:14:02] Yeah. And is it Mark to market or Mark to I just made it up?

[00:14:08] Yeah, you can.

[00:14:10] Oh, right.

[00:14:11] Mark to vibes.

[00:14:14] Yeah, it's like, oh, I'll just kind of, you know, pick and choose

[00:14:17] what I want to compare it to.

[00:14:18] I'll just pick whatever fits my vote.

[00:14:19] It's like inflation.

[00:14:21] Yeah, it's like an inflation number.

[00:14:22] Mark to vibes.

[00:14:24] All right, Timon, that's the recap on legendary investor.

[00:14:28] Rest in peace, Jim Simons, extremely impressive mathematician

[00:14:34] and just inspiring collector of the smartest human beings possible.

[00:14:41] Like it's like an experiment when you bring together just the most elite.

[00:14:47] Like I think he had over 100 PhDs in mathematics of like the most bright people

[00:14:53] who were not like they didn't have backgrounds in finance or trading

[00:14:56] or algo or quant or any of that stuff.

[00:15:00] But they were exceptionally smart and he aggregated like hundreds of PhDs

[00:15:06] over those over that time frame of just the smartest people.

[00:15:10] So it's an interesting kind of experiment on what happens when you bring

[00:15:14] this the brightest people in the room together, headed up by someone

[00:15:17] who's a leader and has the vision for it.

[00:15:19] So rest in peace, Jim Simons to an absolute legend.

[00:15:22] Yeah, no, exactly.

[00:15:24] And now we'll move on to the other segment.

[00:15:26] So another question that I got.

[00:15:28] So question from Brent on Join TCI.

[00:15:30] And obviously we can't always get to all the emails and questions we get

[00:15:35] like Join TCI.

[00:15:36] We you know, we make sure that we respond to people.

[00:15:39] Sometimes takes a few days.

[00:15:40] We both have some busy schedules, but sometimes I'll pick some questions

[00:15:44] because this one was good and I'm just like, OK, it's going to be way

[00:15:48] too long of a response.

[00:15:49] I think people know me.

[00:15:50] I try like when there's something I want to put a lot of thought in,

[00:15:54] you know, I can do quite lengthy responses.

[00:15:57] So the question from Brent was why own both gold and Bitcoin?

[00:16:01] If you're concerned that central banks can't be trusted

[00:16:03] and will just dilute the value of the local currency,

[00:16:06] why not just own gold or silver as insurance?

[00:16:09] At least gold and silver has a modicum of application for industrial usage

[00:16:15] so you can make the case that it has some fundamental value.

[00:16:19] Bitcoin is just ones and zeros.

[00:16:21] I just don't see where the fundamental value is.

[00:16:24] It really just seemed like an artificial way to own gold.

[00:16:27] So what am I missing?

[00:16:28] And of course, go Canucks go at the end.

[00:16:31] So I haven't checked.

[00:16:33] Are they leading the series right now?

[00:16:35] I haven't been following the playoffs.

[00:16:36] I believe it's two.

[00:16:37] I believe it's two one as a recording when you guys hear for the Canucks.

[00:16:41] Yeah, exactly.

[00:16:42] When you guys hear this, who knows?

[00:16:44] But whatever team comes out of that, we need

[00:16:47] we need a Canadian team to at least go the distance here.

[00:16:51] If not win the whole thing, we absolutely are desperate for a Canadian team.

[00:16:56] This could be a good year for it.

[00:16:58] I mean, the odds are kind of following, right?

[00:17:00] I think in terms of percentage of Canadian teams versus American

[00:17:03] to have two in this round, I think it's following the odds.

[00:17:07] One in the next one now just just hoping we beat the odds

[00:17:11] for the Stanley Cup final.

[00:17:12] So that's right.

[00:17:13] You know, I don't have a horse in the race, so good luck to both teams.

[00:17:17] Having said that, I think it's a great question.

[00:17:19] And the reason that Brian has that question is because I had a goal

[00:17:23] to my portfolio last month in my joint TCI update.

[00:17:26] Now, I'll kind of break this down a little bit.

[00:17:29] So and Braden, feel free to chime in as well.

[00:17:32] So the first part he mentioned, like being concerned about central banks,

[00:17:36] the fact that he can be trusted.

[00:17:38] And I think honestly, the evidence is clear that central banks

[00:17:42] can't be trusted as harsh as it may sound.

[00:17:45] The way I view trust here is that you don't know what they'll do

[00:17:48] and what consequences it will have in the long term.

[00:17:51] And to be fair, I don't think they also know what they're doing

[00:17:54] and what the consequences will be in the long term.

[00:17:57] And I recently listened and I'm not just being just saying that like this.

[00:18:01] I recently listened to a former president of one of the feds

[00:18:06] in the US and interview really long form interview.

[00:18:08] It was on thoughtful money for people interested with Adam Taggart.

[00:18:12] Really good podcast for macro focus.

[00:18:15] And he was talking to the Fed president that was there

[00:18:19] during the financial crisis, you know, in 2008.

[00:18:23] And basically, you know, whatever we think our suspicions are

[00:18:27] about central banks in terms of making decisions and being very

[00:18:32] reactionary and not necessarily thinking what the consequences

[00:18:35] can be in the long term.

[00:18:37] He pretty much agreed with all of that.

[00:18:38] So that's why it's and that's someone who was there.

[00:18:42] And one of the few dissent then voices of, you know,

[00:18:45] doing those massive bailouts during the great financial crisis.

[00:18:48] I just wanted to add that just so people don't think like,

[00:18:51] oh, like they're smart. They know what they're doing.

[00:18:53] I'm just saying that like I'm, you know,

[00:18:56] this is not just based on random stuff.

[00:18:58] And we've seen also evidence of this happening if, you know,

[00:19:02] if we go back to covid, for example,

[00:19:04] central banks panic and lowered rates to essentially zero

[00:19:08] when that wasn't really the issue.

[00:19:09] The issue was supply chains that got disrupted,

[00:19:13] not interest rates being lowered.

[00:19:16] So these are just example.

[00:19:17] But for the most part, it's because, like I said,

[00:19:20] central banks are reactionary and rely on lagging data or questionable data.

[00:19:24] And an example of questionable data would be the surveys

[00:19:28] that central banks conduct from businesses and households.

[00:19:31] One of the big issues with these surveys is that the response rate

[00:19:35] is not very good.

[00:19:37] And we'll add the link here from the Bureau of Labor Statistics

[00:19:42] in the US in terms of response rate.

[00:19:44] And most major surveys have a response rate of below 60 percent.

[00:19:50] So that comes into question in terms of like,

[00:19:53] how accurate is this data?

[00:19:54] There's not a lot of people in businesses responding to that. Right.

[00:19:58] So that's the first thing.

[00:19:59] Obviously, they look at a maraud of data points,

[00:20:02] but that's just an example of, you know, whether they're even,

[00:20:07] you know, the data they're looking at is even accurate or not.

[00:20:11] And money printing obviously is an exponential equation.

[00:20:16] So if you look at M2 money supply, which includes money in circulation,

[00:20:20] demand deposits, savings deposit,

[00:20:23] demand deposit would just be like regular deposit.

[00:20:26] So if you want to withdraw your your deposit from the bank,

[00:20:29] you just go and get it.

[00:20:30] So these are demand. You can get them from any time.

[00:20:33] Small time deposit.

[00:20:35] These are like CDs or CDICs in Canada.

[00:20:39] So they have a term to them and then retail money market funds.

[00:20:42] So this would all be included in the M2 money supply.

[00:20:46] It's the most widely quoted metric of money supply.

[00:20:50] There are different ones, but it would be too long to go over all of them.

[00:20:54] And just to give people an idea of how exponential it is.

[00:20:59] So in December of 1960, the M2 money supply was $360 billion.

[00:21:05] In December of 1990, it was $3.3 trillion.

[00:21:09] In December of 2020, it was $19.1 trillion.

[00:21:13] And in December of last year, it was $20.8 trillion.

[00:21:18] It just, I mean, it's the power of compounding, right?

[00:21:21] We invest and you know, your returns compound over time.

[00:21:25] But the reality is, is that the money supply is also acting in a similar fashion.

[00:21:31] And what's even crazier here is that it doesn't even include the money

[00:21:35] in the euro dollar system and the euro dollar system.

[00:21:39] Just to make it simple, essentially, US dollars that are in circulation

[00:21:44] outside of the US.

[00:21:45] And that's a quite massive, you know, it's quite massive as well.

[00:21:50] So just to give people a sense here and join TCI listeners

[00:21:54] will actually be able to see in terms of the growth of the money supply over time.

[00:21:59] And clearly, you know, this cannot go on forever.

[00:22:03] I don't think I'm breaking that for everyone until when can it go on?

[00:22:06] Who knows, but is definitely something to consider.

[00:22:10] And you added another one here, Brayden.

[00:22:12] Yeah, that's the one from the Bank of Canada of the money supply.

[00:22:16] Yeah.

[00:22:17] Yeah.

[00:22:17] The five year trend is from the mid two trillions to high three trillions.

[00:22:23] You know, that's and that's only five years.

[00:22:25] Right.

[00:22:26] It's if you go back further and further, you see a similar story.

[00:22:29] I just I'm just pulling out this number because I have been vocal about this.

[00:22:36] I've been critical about this.

[00:22:37] I think Canada is a post covid loser when it comes to economic status

[00:22:42] and growth trajectory forward, real economic growth, not not job numbers

[00:22:48] hidden behind, you know, public public sector job growth.

[00:22:53] So I just wanted to include that here as well.

[00:22:55] But yeah, I'm with you.

[00:22:57] I mean, everything you said so far, it's like it definitely is nerve

[00:23:01] racking to anyone who looks at this data.

[00:23:05] Like it's it's it's it's a stress inducing graph to look at.

[00:23:10] Right.

[00:23:11] And he's like, how long can it?

[00:23:13] I don't I don't know the answer to that.

[00:23:15] I know I know.

[00:23:16] Yeah.

[00:23:17] I guess the counterpoint to that is you and I differ on gold quite a bit.

[00:23:23] And we can talk about that more.

[00:23:25] I think you're about to kind of get to that next.

[00:23:27] Yeah, we're aligned.

[00:23:28] We're aligned on Bitcoin.

[00:23:29] Of course, you've owned it for a lot longer than me.

[00:23:32] You've made you know what that means.

[00:23:34] You've made way more money than me.

[00:23:37] That's that's an easy way to say.

[00:23:40] Nicer way to say you've dominated me returns wise with that perspective.

[00:23:45] But you and I are not on the same page on gold.

[00:23:49] And that's it. That's totally OK.

[00:23:50] I just think that it's a bad, bad form of money.

[00:23:53] And I think we're more aligned on the digital version of it.

[00:23:57] But but I'll leave it there.

[00:23:59] Yeah.

[00:24:01] This is just to provide a bit of context here.

[00:24:03] So I'll get to gold and silver.

[00:24:05] So essentially, gold and silver have been used throughout history as a form

[00:24:09] of money in terms of industry, industrial application like Brent was

[00:24:13] referring to. I would push back on that.

[00:24:15] That's more true for silver than gold, because under research I've done around

[00:24:20] 50 percent of the silver produced is used for industrial purposes,

[00:24:24] while 10 percent of the gold produced is used for industrial purposes.

[00:24:28] So gold primarily is definitely either a kind of jewelry

[00:24:33] slash fashion slash money.

[00:24:35] And gold has a higher money premium than silver.

[00:24:38] And a money premium is just a prize that is put on an asset

[00:24:42] because it can be used as a form of money.

[00:24:45] And then if we go to the question, so why do you own Bitcoin and not gold?

[00:24:49] I mean, I do own both, but and I don't think it's an either or.

[00:24:53] And that's the reason for it.

[00:24:54] And there's a lot of people out there that are, you know, I'm Brayden.

[00:24:58] And I'm sure you know this like either gold bugs that are all in on gold

[00:25:02] or you have Bitcoiners that only own Bitcoin.

[00:25:05] And, you know, I'll be very, very blunt.

[00:25:08] I think that's a mistake.

[00:25:09] I think it's a mistake to be all in on one kind of asset

[00:25:12] because of one simple question.

[00:25:14] What if you're wrong?

[00:25:16] And, you know, at the end of the day,

[00:25:19] I know I can be wrong about certain things, about certain investment,

[00:25:23] about other things in my life. Right.

[00:25:25] And to me, that's why I like to diversify in different kind of assets.

[00:25:30] And gold has a lot going for it. It has history on its side.

[00:25:33] I mean, it's been used as a form of money for thousands of years.

[00:25:36] Gold is one of the most innate elements of the periodic table.

[00:25:40] That means, you know, it doesn't really it's very stable

[00:25:43] and it does not corrode or tarnish over time.

[00:25:46] And that's one of the primary reasons why people like it as a form of money.

[00:25:51] But it also has a great balance between rarity, availability

[00:25:55] and difficulty to produce.

[00:25:57] And people may kind of push back in and say, well, as technology gets better,

[00:26:02] Well, the issue is, is the easiest goal to produce has already been produced.

[00:26:08] Now, the gold that needs to be produced is harder to produce than previous time.

[00:26:12] So the technological advancements are being offset by that.

[00:26:16] And the addition in supply every year has been incredibly stable

[00:26:20] in terms of between one and two percent every year.

[00:26:24] And it's a hard asset for central banks to hold,

[00:26:27] especially when the reserve currency can be confiscated, you know,

[00:26:31] exebit a, you know, Russia with the US dollar putting sanctions on Russia.

[00:26:37] I mean, whatever your thoughts are, I mean, it is serving notice

[00:26:41] to other countries that may not be on the best terms with the US

[00:26:44] or that maybe now, but in the future, then, you know,

[00:26:48] maybe they will come to a disagreement and they might be afraid of getting that

[00:26:53] those assets frozen so they they compensate with getting more gold reserves.

[00:26:59] And it's not an all or nothing.

[00:27:00] And it's just on the hedges for now.

[00:27:02] But, you know, you have countries like China that have been

[00:27:06] buying more and more gold in their reserves.

[00:27:08] So that's kind of the base case, I would say, for gold.

[00:27:12] But the biggest issue with gold is definitely portability and purity.

[00:27:16] So see, you have one ounce coin.

[00:27:18] Well, that's worth currently in excess of three thousand dollars Canadian.

[00:27:22] So if you buy something that's five hundred dollars Canadian with it,

[00:27:25] you better hope that the person store you're buying it from has smaller

[00:27:29] denominated gold available to give you your change.

[00:27:33] But the smaller the denomination, the more of a premium there is

[00:27:36] on the value of gold.

[00:27:38] And then there's always a question mark about purity.

[00:27:41] I mean, you can get tested, but that takes time, costs money.

[00:27:44] And that's why it's important to buy it from a trusted source.

[00:27:48] But that's probably like Costco downfall.

[00:27:51] Yeah, like Costco. Exactly. That's it.

[00:27:54] Have you bought a gold bar from Costco yet or what?

[00:27:57] Apparently they were hard to get. Yeah.

[00:27:59] No, they're not that hard.

[00:28:00] I mean, they just they kind of sold out like they end up

[00:28:04] selling out pretty quickly if the price goes up and they have it priced lower.

[00:28:08] And then they reprice it higher.

[00:28:11] And then there's availability.

[00:28:13] So what I did is basically I got it from Costco and then I put it in our

[00:28:17] safe deposit box with our with our bank.

[00:28:19] So that's kind of the way the way I went.

[00:28:22] Yeah, nice. Well, that's cool.

[00:28:24] I mean, anything you want to gold bars are pretty I mean, I'm not a gold bug.

[00:28:29] And I know many people are and I get and I get it like I I'm with you.

[00:28:34] I I'm I understand the thesis.

[00:28:36] I understand all of that.

[00:28:38] I just don't see it playing out the way that the gold bugs

[00:28:41] think that it will for the reasons that you've mentioned.

[00:28:44] I mean, portability, purity.

[00:28:46] It's just it's just a really bad currency in 2024.

[00:28:50] And it's not it's not to say they don't look cool.

[00:28:53] I want a gold bar.

[00:28:54] I actually I want one in my storage deposit box.

[00:28:58] Yeah, I'm jealous.

[00:29:00] I won't I want some.

[00:29:01] But don't hear what I'm not saying. I get it.

[00:29:03] I just I just don't see how it can be a very valuable currency.

[00:29:07] I've been I've been out for a long time.

[00:29:12] I've been out on the story for a long, long time.

[00:29:14] No. And I think gold is more the way I see that as more of a way to kind of

[00:29:20] it's not necessarily to see it as like an investment per se.

[00:29:23] It's more something where you I would say it's more of a store value,

[00:29:27] you know, longer term.

[00:29:28] It can be volatile on a shorter term basis.

[00:29:31] And I think that's how the proper way to view it,

[00:29:33] because if you want to have maximum returns,

[00:29:36] that's probably not the best investment.

[00:29:39] You know, spoiler alert, that's probably not right there.

[00:29:42] But, you know, in terms of the historical foundation,

[00:29:45] I think that's where, you know, gold has a lot of to stand on.

[00:29:49] But again, I mean, I'll just give an example.

[00:29:52] And, you know, I'll say that right away as kind of the biggest advantage

[00:29:56] for Bitcoin is that in my view, it is its portability,

[00:29:59] which I think it's second to none.

[00:30:01] I mean, you don't believe me.

[00:30:02] You want to take an airplane with a decent amount of gold?

[00:30:05] Good luck with that.

[00:30:07] I mean, they're going to be asking a lot of questions

[00:30:09] if they do let you go on the plane, right?

[00:30:12] Depending on the amount of gold you have.

[00:30:14] If you don't believe me, if you want to plan a trip to Vegas

[00:30:17] and you want to bring, you know, 15,

[00:30:19] 20 thousand dollars to play some world series of poker tournaments.

[00:30:24] You know, good luck getting through customs with that amount of money.

[00:30:27] You will be asked a whole lot of questions and I'll have to declare.

[00:30:31] With Bitcoin, though, you can just go to another country

[00:30:34] and bring as much as you want.

[00:30:35] That's because it's all you need is your seed phrase to be able to access it.

[00:30:40] And I think it's the best solution of them all in terms of capital controls,

[00:30:45] because ultimately governments cannot do anything about it.

[00:30:48] They can make it difficult for you to withdraw the money

[00:30:50] and use it in the, you know, the system that's in place in their jurisdiction.

[00:30:56] But they can't do anything if you go somewhere else,

[00:30:58] especially if they don't have any treaties in place.

[00:31:01] And obviously Bitcoin has a lot of gold like properties, but in it,

[00:31:05] the biggest issue doesn't have the same track record.

[00:31:08] But I think it's important to mention that you can have more than one

[00:31:12] form of money at a time, which can be used for different purposes.

[00:31:16] I mean, for example, long term servings versus spending.

[00:31:20] I mean, we've had, you know, in the past, there's been,

[00:31:23] you know, gold when we had gold back fiat or gold back money.

[00:31:27] Essentially, people could have gold, but used paper money

[00:31:31] for everyday transaction and keep gold for more the longer term savings.

[00:31:35] And traditionally, if you look at history of money, that's usually the case.

[00:31:39] There's always going to be like two or maybe more at the same time

[00:31:43] where there's going to be different usage for each form of money.

[00:31:47] Capital controls, for those who are not sure, there's simply measures

[00:31:51] that are placed by governments or central banks to restrict

[00:31:54] the flow of capital in and out of the country,

[00:31:57] can be imposed in a variety of ways and can affect both citizen and foreigners.

[00:32:02] In Canada, we've been relatively lucky for that.

[00:32:05] But in recent budgets, I mean,

[00:32:07] there are certain things that I think would qualify as capital controls,

[00:32:12] you know, depending like an easy example is preventing foreigners

[00:32:16] to buy properties in Canada or putting restrictions on that.

[00:32:19] So that is a form of capital control, whether you think that's a good thing or not.

[00:32:23] It is a capital control, but they can take other forms right to the extreme.

[00:32:28] It could be a government that prevents people from leaving the country

[00:32:31] with a certain amount of money, anything in excess of that.

[00:32:34] And you would not be able to.

[00:32:36] So it's just something I am keeping in mind.

[00:32:39] I don't want to have a tinfoil ad on, but, you know, history has shown

[00:32:43] that governments can go to these measures if they're trying to,

[00:32:47] you know, keep investment in.

[00:32:49] Can you hear that? Do you hear that sound? No.

[00:32:51] That's the sound of my tinfoil hat crinkling

[00:32:56] up a little higher and higher.

[00:33:00] The you know, the mics we use are so good, you can't even hear it.

[00:33:03] You know, block that out.

[00:33:04] But you can you can hear a crinkle in this room.

[00:33:06] No, I get it.

[00:33:08] I mean, it might I think I think a lot of people's tinfoil hat

[00:33:11] in this country has grown significantly

[00:33:15] the last four or five years, no matter what your stance is.

[00:33:19] And so I'm with you.

[00:33:21] So OK, so how do we round this out?

[00:33:24] Like, yeah, you own you own both for the reasons you've you've mentioned.

[00:33:29] The FBI is going to knock on your door in the next 24 hours, by the way.

[00:33:32] You know, you own both.

[00:33:34] You have this thesis.

[00:33:36] What can people do?

[00:33:37] I mean, I own Bitcoin.

[00:33:39] You own Bitcoin.

[00:33:41] What do you say to the people and what do you say to me?

[00:33:44] This is an easy way for me to ask this question like that.

[00:33:47] I'm because I don't know as much as you about this topic.

[00:33:49] Why does Bitcoin move so much on the NASDAQ?

[00:33:53] Like, why is there so much correlation to

[00:33:56] what I'll call growthy equity assets?

[00:33:59] Why have we not seen a breakaway in terms of correlation between those

[00:34:05] and the correlation between inflation prints?

[00:34:08] Like, what do you say to what do you say to that argument

[00:34:11] and to me asking about that?

[00:34:14] Yeah, I mean, I think at the end of the day is probably

[00:34:17] because it's still nascent when you look in the grand scheme of things.

[00:34:20] I mean, Bitcoin has been around for about like 16 years, I think, at this point.

[00:34:24] So, I mean, it's still a nascent technology, although it has some pretty

[00:34:28] significant network effects at this time.

[00:34:30] It's still even compared to gold, right?

[00:34:32] It's about a 10 to 1 in terms of size gold versus Bitcoin.

[00:34:37] So it's still relatively small.

[00:34:38] And gold is just a small pawn in the grander or the bigger financial system.

[00:34:44] So people might think, you know, ten trillion dollars, which is typically,

[00:34:48] you know, give or take a few trillion what gold is in terms of market cap.

[00:34:52] And Bitcoin is about, you know, a trillion, trillion and a half,

[00:34:56] maybe a bit more now.

[00:34:58] In terms of market cap, so it's just still a small pawn,

[00:35:01] I would say, in all of that.

[00:35:03] And it can still move quite a bit just because the sheer size of it.

[00:35:06] And I know these are big numbers, but, you know, when you're thinking

[00:35:10] about hundreds of trillions of dollars in terms of debt in the system,

[00:35:14] you know, a trillion or two is just, you know, it's like chunk change.

[00:35:18] So I think that's one of the bigger reasons for its volatility

[00:35:21] is just because it's so small.

[00:35:23] I mean, it's just, you know, it's I know I don't have the market cap

[00:35:26] right now, but I think it's smaller than Nvidia.

[00:35:28] Right. In terms of our market cap.

[00:35:31] Yeah, I think so.

[00:35:33] Sure. Yeah. To put things in perspective.

[00:35:35] So I think that's the way to see it.

[00:35:36] I mean, for you know, I'm a big proponent.

[00:35:39] I think you've known me long enough and I've changed my stance a little bit.

[00:35:42] But I think for me is just being able to diversify,

[00:35:45] you know, not only stocks, but also in other assets.

[00:35:48] I think by doing that and just owning a percentage of your portfolio

[00:35:52] that you're comfortable with, because you mentioned that Bitcoin

[00:35:55] will be volatile.

[00:35:56] Gold has some volatility as well.

[00:35:58] So does silver, if that's something you're interested in.

[00:36:01] Obviously, stocks can be quite volatile as well.

[00:36:04] Although I don't know if you look back at the last year,

[00:36:06] it feels like it's always a number go up as well for stocks,

[00:36:10] at least for the main index.

[00:36:12] But in terms of value, I mean, at the end of the day,

[00:36:15] value is whatever the market is willing to give to an asset.

[00:36:18] Right. A ledger like Bitcoin that is censorship resistant,

[00:36:22] decentralized and already has a substantial network

[00:36:25] effect in my view and in a lot of people's view as a lot of value tied to it.

[00:36:29] I know it's a bit different than what we're used to.

[00:36:32] But I mean, to me, it has more value than the graphic

[00:36:36] I just showed for a joint TCI listeners that shows the money supply

[00:36:40] where, you know, central bankers can just increase that money supply

[00:36:43] basically at will.

[00:36:44] And if you and a few people decide how it grows

[00:36:48] were even though it's a young technology for Bitcoin,

[00:36:51] I mean, the protocol, you know, there is a certain cap.

[00:36:54] It will not go beyond 21 million.

[00:36:57] Are there some risk?

[00:36:58] Of course, there's some risk with Bitcoin and it's my own viewpoint.

[00:37:01] But I trust the protocol way more than I do central bankers

[00:37:05] because central bankers are reactionary.

[00:37:08] You know, we saw what Tiff McClimbs said, you know,

[00:37:11] these rates are going to be low for a very long time.

[00:37:13] And just what a year, year and a half after,

[00:37:16] we saw the the fastest interest rate rise in pretty much history

[00:37:22] in terms of the speed that it got up from.

[00:37:25] So I think it's just something to keep in mind here.

[00:37:28] And like I said, Bitcoin is at 100 percent certain.

[00:37:30] Of course, it's not.

[00:37:31] I don't know exactly what could go wrong,

[00:37:33] but it doesn't mean that nothing could go wrong.

[00:37:36] And I think that's where it comes down to being diversified.

[00:37:40] That's why I own multiple asset types, including stocks.

[00:37:44] I mean, the majority of my investment are in stocks,

[00:37:46] short term treasury bills, Bitcoin and gold.

[00:37:49] You're the modern day Ray Dalio, Simone.

[00:37:52] There you go. Yeah.

[00:37:53] The all weather.

[00:37:55] The all weather portfolio.

[00:37:56] That's the way I try to see it.

[00:37:58] You know, will it work out?

[00:37:59] We'll have to see, but I'm pretty comfortable with that.

[00:38:02] Yeah, very cool.

[00:38:03] Well, I appreciate the the perspective, right?

[00:38:07] It makes sense.

[00:38:08] Simone, we're at 40 minutes into the show here.

[00:38:12] You know, EQ Bank's been a long term sponsor of the show,

[00:38:16] and we appreciate the heck out of them.

[00:38:18] They've been wonderful partners.

[00:38:20] We love the product quite a bit.

[00:38:22] And you know how last episode I go,

[00:38:26] hey, hit me up about the business bank account.

[00:38:28] Hit me up.

[00:38:29] They emailed you or texted.

[00:38:32] What did they what did they send you?

[00:38:33] They emailed me. Yeah, they emailed me.

[00:38:35] Sorry, I was like I was coughing up a lot.

[00:38:38] That mute button does wonders.

[00:38:40] They forward you an email and say, hey, by the way,

[00:38:43] tell Brayden to sign up for the waitlist on the business banking.

[00:38:47] And apparently it's very, very close to launch.

[00:38:49] So I did that.

[00:38:51] And if you are a small business owner, it's launching soon.

[00:38:54] I don't know how soon.

[00:38:55] So I don't want to they did not put the pressure on.

[00:38:58] Putting the pressure on.

[00:39:00] No, I think it's going to be fantastic.

[00:39:02] I'm going to be a customer for sure.

[00:39:04] So I have two call to actions.

[00:39:05] If you run beautiful small businesses in Canada

[00:39:10] or large businesses or medium businesses,

[00:39:13] one go sign up for the waitlist at EQBank.ca

[00:39:16] FB.com.

[00:39:17] And I think it's going to be awesome.

[00:39:20] And two, if you've been listening to the show for a while,

[00:39:24] maybe you're a listener to this pod, you understand the vibes,

[00:39:26] you understand the content, you understand the host,

[00:39:29] you understand the demographic, which is just the best Canadians on earth.

[00:39:34] Obviously listening to the podcast.

[00:39:36] Maybe you want to sponsor the show and you can get in touch with us

[00:39:40] on our website any time if you ever want to sponsor the show.

[00:39:44] We're pretty full right now,

[00:39:46] but we can get you in this year.

[00:39:47] So two call to actions if you run a small business in Canada,

[00:39:50] go sign up for a waitlist at EQBank.ca forward slash business.

[00:39:54] And then also, if you want to sponsor the show,

[00:39:57] you'll get one of us to endorse your product and we can work together.

[00:40:01] Anything else, Simon?

[00:40:02] Any anything else on your mind?

[00:40:04] I know just need some cough medicine, but aside from that, that's

[00:40:08] you're going to wreck these days.

[00:40:10] I mean, we all whatever's coming through.

[00:40:13] Yeah.

[00:40:13] You'll see if you have kids one day.

[00:40:16] You're going to, you know, the the daycare viruses.

[00:40:21] It's not a myth.

[00:40:22] It's it's definitely true.

[00:40:24] Well, between you and my sister, who has two young ones running around

[00:40:28] very similar age of your your first one there, it's

[00:40:33] I get all the stories now and I'm looking forward to it, you know?

[00:40:38] Personally, I am looking forward to it as you cough out another lung.

[00:40:41] I got I got a couple of years.

[00:40:43] I got a couple of years here, though.

[00:40:44] Yeah, I think.

[00:40:45] No pressure. No pressure.

[00:40:47] I hope I hope she's not listening to the podcast.

[00:40:52] Earmuffs earmuffs over there.

[00:40:54] Thanks for listening to the show.

[00:40:55] We really appreciate you.

[00:40:57] And, you know, again, if you run a small business,

[00:41:00] you can bank that CFO, it's such business or write us to the show on

[00:41:05] if you want to sponsor the show.

[00:41:07] We appreciate the heck out of you.

[00:41:08] We are here Mondays and Thursdays.

[00:41:11] I'm with Simon Mondays and Dan and Simon talk earnings, news,

[00:41:16] lots going on, the madness of the stock market casino day to day.

[00:41:21] But also the long term things that really move the needle

[00:41:24] when it comes to earnings and things that we care about

[00:41:27] and as a pattern recognition for you to take notes on.

[00:41:30] That is on Thursdays.

[00:41:32] As well as we have the real estate show, the real estate show

[00:41:35] is the Canadian real estate investor hosted by two handsome devils,

[00:41:39] Nick Hill and Dan Foch.

[00:41:40] That is the Canadian real estate investor on your podcast player.

[00:41:45] Peace out.

[00:41:46] The Canadian Investor Podcast should not be construed

[00:41:49] as investment or financial advice.

[00:41:52] The host and guest featured may own securities or assets

[00:41:56] discussed on this podcast.

[00:41:58] Always do your own due diligence or consult with a financial professional

[00:42:02] before making any financial or investment decisions.