In a conversation exploring the collision of traditional finance and futuristic technology, top Wall Street strategist Tom Lee sketched out a wild \u201cblack swan\u201d scenario in which the global financial system is upended not by the Federal Reserve, but by Elon Musk.<\/p>\n
Speaking at a live recording of SoFi\u2019s The Important Part podcast at WNYC, the Fundstrat cofounder and head of research raised his eyebrows and offered various thoughts on the asset, wowing the crowd and drawing smiles and laughs from co-panelist Michael Lewis, author of The Big Short, and podcast host Liz Thomas, head of investment strategy at SoFi. Not only is gold a \u201cLindy effect\u201d asset, Lee said, but it\u2019s also a \u201cdemographic\u201d story, in Lee\u2019s opinion, that has to do with nostalgia. All that, and he sees a \u201cblack swan\u201d tail risk that involves Musk, the world\u2019s richest man, discovering a new asteroid and becoming the world\u2019s central banker.<\/p>\n
In Lee\u2019s opinion, gold is \u201cprobably a demographic story,\u201d noting Fundstrat does a lot of demographic research, and it\u2019s found \u201cpreferences skip a generation.\u201d For instance, every 50 years you get another peak in RV, or recreation vehicle, sales. Noting the peak in RV sales during the pandemic, he said the last time sales were so strong was during the 1950s heyday of I Love Lucy.<\/p>\n
\u201cKids don\u2019t buy what their parents like,\u201d he said, \u201cbut they buy what their grandparents like.\u201d And gold, he concluded, was \u201creally a big investment for the boomers,\u201d whereas Gen X went into hedge funds and alternatives.<\/p>\n
Lee said gold was comparable in size to the stock market, with data backing him up, gold having a total \u201cabove ground\u201d valuation of $29 trillion to $34 trillion, which compares to the Magnificent 7\u2019s roughly $21 trillion market cap.<\/p>\n
\u201cBy the way,\u201d he added, \u201cit all fits in a swimming pool, all the gold in the world.\u201d<\/p>\n
Lewis commented his palms were starting to sweat, \u201cjust imagining\u201d this idea. \u201cSaliva starts coming to your mind,\u201d he said.<\/p>\n
Lee continued on, saying gold is a \u201cLindy effect\u201d asset: something that, because it\u2019s been agreed upon as a store of value for many years, is still accepted in that way. What could disrupt this? This is where it gets to Musk.<\/p>\n
Gold\u2019s black swan scenarios<\/p>\n
One key risk for gold is the above-ground aspect.<\/p>\n
\u201cThere\u2019s a million times more gold underground than above ground today,\u201d Lee estimated, nodding to estimates that most of the gold on earth is inaccessible. If gold gets too expensive, he argued it would create perverse incentives. \u201cLike, literally, Mag 7 is just going to get into the gold mining business, right? Because you might as well just dig for gold. It\u2019s more valuable than anything.\u201d<\/p>\n
Another key risk, he added, is gold is \u201call extraterrestrial,\u201d nodding to gold\u2019s origin as coming from meteorites smashing into earth. This suggests space companies could discover more gold floating out in space, he said. \u201cSpaceX might do a mission to Mars and then run into a gold asteroid,\u201d Lee told the audience. \u201cAnd Elon Musk, if he\u2026 would own all the gold, he would become the new central bank.\u201d<\/p>\n
When asked about manufactured gold, Lee agreed that was the third risk: alchemy.<\/p>\n
At any rate, Lee added, gold has probably \u201ctopped,\u201d based on Fundstrat research. Fundstrat looked at 100 years of gold to stock market capitalization and it typically reaches 150% before falling back. Noting it fell 9% on Jan. 30, Fundstrat looked back and found only three other times gold had a single-day decline more than 9%, and all three times marked a peak.<\/p>\n
\u201cSo I don\u2019t know, but if history is a guide, it\u2019s probably topped,\u201d he said.<\/p>\n
Then Lewis revealed how he came to take a stake in the gold trade, very profitably, through an old poker buddy from New Orleans.<\/p>\n
The old poker friend<\/p>\n
\u201cWhen I own it, I think I\u2019m long fear,\u201d Lewis said about the yellow metal. \u201cIt\u2019s an Armageddon trade.\u201d<\/p>\n
Lewis revealed that despite being a proponent of passive index fund investing, he accumulated a large gold position after a conversation with a former poker buddy turned fund manager, who he lost touch with for many years before reconnecting while reporting The Big Short. Lewis recalled seeing his friend\u2019s collection of old Roman coins.<\/p>\n
\u201cHe showed me the way the emperors debased the currency over time. And the silver content was less and less and less. And then he gave me a long argument for buying gold,\u201d he recalled. \u201cAnd it was so persuasive. Like, I don\u2019t do that. I don\u2019t buy gold. It\u2019s insane. It\u2019s like insane. But I couldn\u2019t get it out of my head.\u201d<\/p>\n
Finally, three years ago, Lewis said, he \u201cbought a bunch of gold.\u201d<\/p>\n
\u201cAnd it\u2019s just gone up and up, up, and up,\u201d Lewis said, adding he felt so guilty and he wasn\u2019t advising anyone to do this either, but he decided to invest this money back in his friend\u2019s fund.<\/p>\n
\u201cAnd what he\u2019s doing, and he\u2019s much smarter about this than I am, is buying gold mining stocks,\u201d he added. \u201cIt\u2019s a cheaper way to buy gold.\u201d<\/p>\n
Lewis cited the \u201cunstable political situation\u201d and general global anxiety as his primary drivers for holding the metal.<\/p>\n
\u201cI don\u2019t see any reason not to be scared,\u201d Lewis admitted. \u201cAnd I think fear is not a bad thing to be long right now.\u201d<\/p>\n
Source: RhinoEasy News<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":" In a conversation exploring the collision of traditional finance and futuristic technology, top Wall Street strategist Tom Lee sketched out<\/p>\n","protected":false},"author":1,"featured_media":1022,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"colormag_page_container_layout":"default_layout","colormag_page_sidebar_layout":"default_layout","footnotes":""},"categories":[9],"tags":[],"class_list":["post-1023","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance"],"_links":{"self":[{"href":"https:\/\/rhinoeasy.com\/index.php?rest_route=\/wp\/v2\/posts\/1023","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/rhinoeasy.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/rhinoeasy.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/rhinoeasy.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/rhinoeasy.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1023"}],"version-history":[{"count":0,"href":"https:\/\/rhinoeasy.com\/index.php?rest_route=\/wp\/v2\/posts\/1023\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/rhinoeasy.com\/index.php?rest_route=\/wp\/v2\/media\/1022"}],"wp:attachment":[{"href":"https:\/\/rhinoeasy.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1023"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/rhinoeasy.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1023"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/rhinoeasy.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1023"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}