Grizzle Hard Money Conference - Key Takeaways Part 2
Grizzle Hard Money Conference - Key Takeaways Part 2
Unlimited Funds, Goehring & Rozencwajg, Kobo Resources, Dolly Varden Silver, Blokland Smart Multi-Asset Fund, Math, Money, Bitcoin
The second installment of the Grizzle Hard Money Conference key takeaways are presented below - an thought provoking collection of insights on the future of gold, silver and Bitcoin.
We’ve provided summaries of the segments along with video links. You can view the full conference on the following platforms: Twitter, YouTube, iTunes, Spotify & LinkedIn.
Unlimited Funds - Bob Elliot, CEO & CIO
Interview Link | Unlimited Funds Website
Bitcoin as an Investment:
Bob discussed the impact of the newly created spot Bitcoin ETFs, noting they offer stronger protections for individual investors, which helps to reduce friction for wealth managers considering digital assets for their clients. These ETFs are pivotal in making Bitcoin investments more accessible and safer, with fees as low as 25 basis points.
Bitcoin's Viability as a Currency:
While acknowledging the potential of Bitcoin as a transactional medium, Bob expressed skepticism about its viability due to high transaction costs and slow processing times. He emphasized that for Bitcoin to function effectively as a currency, transaction costs need to be significantly lower, ideally around 1%, and transactions need to be nearly instantaneous.
Market Dynamics and Bitcoin's Correlation:
Bob pointed out Bitcoin's evolving correlation with other risk assets, noting it has become more idiosyncratic rather than just amplifying movements in tech stocks. Recent market actions have made Bitcoin's behavior more unpredictable, complicating its role as a predictable hedge in investment portfolios.
Interest Rates and Market Impact:
Discussing the broader financial markets, Bob highlighted the dynamic nature of interest rates and their impact on asset prices. He referenced historical data, suggesting that when U.S. 10-year rates hit around 5%, it tends to suppress equity prices and could lead to broader economic slowdowns if sustained.
Gold and Hedge Fund Positioning:
Bob noted that hedge funds have been relatively neutral on gold, which could imply potential for future price increases if these funds decide to enter the market. This neutral stance is notable given hedge funds' historical role in leading price appreciation in gold.
Outlook on Financial Markets:
He shared a cautious view on the near-term trajectory of the financial markets, particularly noting the high expectations set for corporate earnings growth against a backdrop of strong macroeconomic indicators. Bob questioned the sustainability of the current growth expectations in light of potential rate hikes and other macroeconomic pressures.
Goehring & Rozencwajg - Adam Rozencwajg, Founder and Managing Partner
Bitcoin's Energy Consumption and Proof of Stake:
Adam highlighted the energy-intensive nature of proof-of-work Bitcoin, describing it as a significant issue due to the high energy consumption required for mining. In contrast, proof of stake addresses these energy concerns but might introduce security vulnerabilities.
Bitcoin as a Risk Asset:
Adam noted that Bitcoin has recently behaved more like a risk-on asset, aligning its movements with riskier investments rather than acting as a safe haven like gold.
Gold Market and Central Bank Purchases:
Adam is bullish on gold, suggesting its significant undervaluation. He provided a historical context, noting that gold is as cheap relative to financial assets as it has been since the late 1990s, except during periods of heavy central bank selling. He mentioned that central banks have been net buyers of approximately 1,000 tons of gold over the past two years, helping to support gold prices despite a reduction of 750 tons from Western holdings.
Historical Monetary Shifts and Current Valuations:
Discussing potential shifts in the global monetary system, Adam correlated significant historical shifts with current market conditions. He suggested that for gold to be considered overvalued today, its price would need to reach between $10,000 to $15,000 per ounce, based on the ratio of gold backing to the U.S. monetary base used in past gold bull markets.
Prospects for Gold Equities:
Adam identified a significant value in gold equities, particularly in companies about to start production which are generally undervalued due to market cycles. He suggested that these companies are stuck in what is known as the "Lassonde Curve Valley," indicating a potential for significant future appreciation.
Global Monetary Dynamics and Gold as a Hedge:
He discussed the evolving role of gold in the global monetary system, especially in the context of de-dollarization efforts by countries like China, Brazil, and others. Adam speculated on the sustained trend of central bank gold purchases and its implications for the gold market.
Kobo Resources - Paul Sarjeant, Director, President & COO
Interview Link | Kobo Resources Website
Kobo Resources Overview:
Founded in 2015, Kobo Resources specifically targets opportunities in Cote d’Ivoire due to the region's historical under-exploration. Their key project, the Kossou Gold Project, is adjacent to the second largest gold mine in the country owned by Perseus Mining.
Strategic Choice of Location:
Sarjeant emphasized the strategic choice of Cote d'Ivoire for their operations, noting the country’s updated mining code in 2014 and its significant increase in gold production from 25 tons in 2017 to almost 50 tons in 2022, yet still far less than nearby countries with similar geology.
Recent Developments and Exploration Achievements:
Since going public in March of the previous year, Kobo raised $4.8 million. They have completed over 5,500 meters of trenching and nearly 6,000 meters of reverse circulation drilling. They've focused on three main targets, yielding promising results such as 29 meters at 6.5 grams per ton on the Jagger zone and 33 meters at 4.5 grams per ton on the Road Cut zone.
Advantages of Operating in Cote d'Ivoire:
Sarjeant highlighted the favorable business and political environment in Cote d'Ivoire, facilitated by the new mining code which promotes mining as the second most important GDP driver. This environment has attracted numerous operators to the region, increasing mining activity rapidly.
Infrastructure and Operational Efficiency:
The proximity of their projects to the capital and major labs offers significant operational advantages, including quick assay turnaround times—often within three to four days—compared to months in Nevada or Northern Canada.
Future Plans and Exploration Strategy:
Kobo Resources plans to continue aggressive exploration with a focus on defining mineable ounces. The immediate plan includes a 4,000 to 5,000-meter diamond drilling program, with a potential follow-up of 10,000 to 12,000 meters based on available capital.
Long-Term Outlook and Resource Estimation:
Sarjeant projects that if exploration continues successfully, Kobo might release its first mineral resource estimate by early 2026, focusing on comprehensive and efficient resource definition rather than interim updates.
Dolly Varden Silver - Shawn Khunkhun, CEO & Director
Interview Link | Dolly Varden Silver Website
Market Dynamics and Investment Timings:
Shawn highlighted significant moments in the silver market, specifically pointing out times he felt were optimal for investment. For instance, he referred to September 2022, when silver was at $18 per ounce, and September 2023, at $20 per ounce, as critical moments for investors to enter the market.
Strategic Acquisitions and Asset Value:
Shawn recounted a specific instance on April 16, 2023, when there was significant interest ($50 million for a $12 million raise) in an asset acquisition by his team even in a depressed precious metals environment. He wanted to illustrate that the right asset has demand in any market environment and this applies specifically to the Madsen mine bought by West Red Lake, where Shawn is an advisor.
Silver's Unique Position and Industrial Demand:
He emphasized silver's dual role as both an investment and industrial metal. Silver, unlike gold, is extensively used in industries, particularly in emerging sectors like the solar energy, which is expected to dramatically increase its share of silver demand from 3% to potentially 50%.
The annual silver deficit, which has reached 200 million ounces, points to a growing gap between supply and demand, primarily driven by industrial usage.
Outlook on Silver and Related Mining Stocks:
He provided a bullish outlook on silver, projecting that the ratio of silver to gold prices and the industrial use of silver could drive silver prices much higher over the medium term. Shawn suggested that even if the price of silver doubled, it would not significantly impact the cost of industrial goods, such as electronics and electric vehicles, where silver is a key component.
Blokland Smart Multi-Asset Fund - Jeroen Blokland, Founder
Interview Link | Blokland Fund Website
Investment Philosophy:
Blokland's fund is unique in combining investments in both physical gold and Bitcoin alongside other assets. This strategy stems from his belief in the importance of diversification and investing in scarce assets.
Role of Gold and Bitcoin:
He values gold for its historical role as a form of money and its track record as a hedge against various economic uncertainties, including market downturns and inflation. The total market cap of gold is estimated at around $17 trillion.
Bitcoin is favored for its potential to become a significant asset class, especially as traditional investors potentially shift away from bonds due to low yields and reduced diversification benefits. Blokland views Bitcoin as potentially absorbing some of the outflows from the bond market.
Market Dynamics and Asset Allocation:
Blokland discusses the structural issues in bond markets, predicting that traditional bond investors will increasingly migrate towards other asset classes like gold due to its size and established market presence. He thinks this could be a massive opportunity for non-bonds assets given the size of the bond market.
He suggests that Bitcoin's integration into the financial system, its liquidity, and regulatory risks contribute to its volatility but also its potential as an emerging asset class.
Strategic Operations and Fund Management:
The fund manages physical gold stored in a vault in Switzerland and emphasizes physical custody of assets, including Bitcoin, to align with its investment philosophy of holding scarce assets.
Blokland elaborates on an "emergency break" mechanism in his fund management, utilizing a moving average-based strategy to mitigate risks during financial downturns or market crises.
Future Outlook and Strategic Moves:
He is optimistic about the role of scarce assets in contemporary investment portfolios, especially in the context of increasing debt levels and potential inflationary pressures.
Blokland's approach is to position his fund strategically between traditional and alternative investments, capitalizing on the gap in the market for a fund that combines these elements.
Math, Money, Bitcoin - Fred Kreuger, Founder
Interview Link | Twitter Handle
Bitcoin as Future Money:
Krueger argues that Bitcoin is not just another asset but represents a fundamental upgrade to the financial system, predicting it will eventually replace traditional currencies like the dollar, yen, and euro. He suggests this transition could take 20 to 30 years.
Historical Context and Bitcoin's Advantages:
He compares Bitcoin to historical standards of money, noting that like gold, Bitcoin is "hard money" due to its limited supply and difficulty to mine. However, it also shares the movability of fiat currencies and has a unique advantage in security, as it can be secured easily through technology like multi-signature wallets.
Market Growth and Adoption:
Krueger points out Bitcoin’s rapid market adoption, mentioning that it has grown from zero to a $1 trillion market cap and from no users to approximately 100 million worldwide within 15 years. He also highlighted the proliferation of Bitcoin ETFs as a sign of its growing mainstream acceptance.
Security and Self-Custody:
Discussing the security of assets, Krueger emphasized the ease of securing Bitcoin compared to physical assets like gold, which poses logistical challenges in terms of storage and security. He uses an example of how easy it would be for someone to steal gold from your safe deposit box if they impersonated you to an underpaid bank attendant.
Bitcoin's Role in a Future Financial System:
He envisions a future where Bitcoin is integrated into everyday financial transactions and banking, suggesting that banks might issue Bitcoin-backed instruments for everyday use, reducing the need for direct transactional use of Bitcoin and circumventing its scalability limitations.
Investment and Market Strategy:
Krueger advises against speculative trading with high leverage in Bitcoin due to its volatility. Instead, he recommends a long-term investment approach, suggesting that individuals allocate a significant portion of their wealth to Bitcoin as a hedge against traditional financial systems.