Get Ready to Pay

Get Ready to Pay for Paris Hilton’s New House [Podcast]

Notes From the Field by James Hickman  (Simon Black) January 14, 2025

In 1913, 24-year-old Charlie Chaplin arrived in Los Angeles, drawn by an offer from Keystone Film Company. Coming from a poverty-stricken childhood in London and a successful vaudeville career, Chaplin found in Los Angeles a place of limitless potential.

The city was largely undeveloped, surrounded by orange groves, open fields and dirt roads where coyotes still roamed. But it offered the perfect backdrop for the burgeoning film industry— mountains, oceans, deserts— and a chance to escape the constraints of traditional theater.

While San Francisco had flourished during the gold rush, Los Angeles was entering its own boom, fueled by filmmaking. Chaplin quickly became the silent era’s most famous actor, transforming the medium while the city grew into the heart of the movie industry.

Like Chaplin, Los Angeles embodied the spirit of creative freedom, shaping modern entertainment for a century.

The city, especially Hollywood, became synonymous with the film industry, and perhaps took that for granted.

Like California in general, LA assumed that however poorly it treated its residents, however burdensome the regulation, however high the taxes, people would still come flocking like there was gold in the hills.

If you ever wanted to be the author of your own decline, follow the example of California, and Los Angeles in particular.

Hollywood has chased away its own industry to burgeoning film locations like Georgia, New Mexico, and Toronto. Georgia especially is raking in the benefits from LA’s decline.

Los Angeles was a one industry town, and they chased it away.

They forced countless lockdowns on the city during COVID, even threatened to cut off water to those who dared to invite guests over. They declared themselves a sanctuary city against federal law, inviting illegals to enjoy a multitude of free benefits— then expected federal dollars to pay for it.

They cut police, and refused to enforce basic laws against things like shoplifting, or keep even serious criminals in prison. They destroyed education, from elementary to university.

And every business and individual is absolutely drowned in useless permitting.

Oh, and with all their idiotic spending priorities, somehow fire fighting, in an area prone to wildfires, seems to be the only thing they were unwilling to properly fund.

Who would want to continue doing business there? Or invest there? Or live there?

And tax revenue and talented workers are part of the exodus.

California ran things into the ground until they no long had money for basic services.

But hey, at least people can still get private insurance when the government fails them!

Oh wait, California has also run them out of town. Because of California’s regulatory burden many insurance companies no longer do business in the state. And that has left a number of people, including those whose homes have burned down, without insurance.

California has long relied on federal bailouts to fund all these idiotic policies. Their COVID lockdowns were paid for with federal tax dollars, and they’ve received bags of cash from the Biden administration to help pay for migrant care.

The damage from these fires could easily exceed $50 billion, and again, since they have chased away insurance companies, I have a funny feeling that California is going to have its hand out to the federal government once again to help people rebuild form a crisis that was not only preventable but a direct result of political incompetence.

Would you be surprised if the federal government came to their rescue, and US taxpayers ended up paying for poor Paris Hilton’s burned out mansion, because no one would give her insurance?

There used to be a saying, "As California goes, so goes the nation."

And to be frank, I think that’s right. The US itself has some deep challenges brought on by the last several years of horrific leadership and terrible priorities.

There is, starting next week, an opportunity to makes things right and get it back on track. And I am certainly rooting for them to pull it off.

If they don’t, we don’t have to wonder what the future of the US looks like— the whole world can see the failures of the left, in Los Angeles today, laid to waste.

And it is a snapshot of what might come if the incoming leadership isn’t able to right the ship.

Tune in to today’s podcast where we talk about this in greater depth, including at the end explaining our whole ethos on building a Plan B.

(For the audio-only version, check out our online post here.)

To your freedom,  James Hickman   Co-Founder, Schiff Sovereign LLC

https://www.schiffsovereign.com/trends/get-ready-to-pay-for-paris-hiltons-new-house-podcast-151973/

The US Government Has To Sell $28 Trillion Of Debt In The Next 4 Years

The US Government Has To Sell $28 Trillion Of Debt In The Next 4 Years

Notes From the Field BY James Hickman ( Simon Black )  February 19, 2025

Last summer, the Federal Reserve wanted you to believe that inflation was a thing of the past.

Sure, just about every category of consumer goods had increased in price. Electricity rates had increased 5% year over year. Rent and housing costs were up 5%. Hospital care had become 6% more expensive. Food prices were up. Fuel prices were up. Auto insurance had risen by a whopping 18.6%.

Yet, bizarrely, the overall inflation average was just 2.9%. And based on that number alone, the Federal Reserve had all but declared victory against inflation.

We knew it was BS. And, after diving into the numbers, it didn’t take us very long to realize why.

It turned out that, back in the summer of 2024, used car prices were falling dramatically— down around 11% year-over-year.

You probably remember what happened: during the pandemic, supply chain snarls and factory closures caused used car prices to go through the roof. Eventually, prices peaked... and then started to fall.

By July 2024, used car prices were still on their way down... essentially returning to a more ‘normal’ level. And based on the way that the government calculates inflation, the huge drop in used car prices dragged down the overall average, making the headline inflation rate appear smaller than it really was.

We wrote about this last summer. And we predicted that the decline in used car prices would soon cease... essentially eliminating the key drag that was holding the inflation rate down.

That has now happened. And as of last month, used car prices are no longer falling... and the overall rate of inflation is once again on the rise.

This is where our discussion begins in today’s podcast, and it’s an important one. We talk about why, at this point, lingering inflation is a major challenge. And it’s becoming a more likely scenario.

There are obviously some forces within the government that are working really hard to cut spending. There are also legions of misguided (or flat-out corrupt) politicians who are fighting to prevent those budget cuts from happening.

It’s a see-saw right now and could go either way. But, at least for now, the government is still spending taxpayer money like a drunken sailor.

Last year’s budget deficit was nearly $2 trillion. They’re already on track to repeat that this year. All of that deficit spending adds to the $36+ trillion national debt.

But what makes matters even worse is that an unbelievable $28 trillion of the national debt will have to be refinanced over the next four years, according to Federal Reserve data. (We show you the Fed’s data in the podcast— it’s a chart you’ll want to see.)

The key problem, of course, is that interest rates are significantly higher today than they were several years ago. So when the Treasury Department refinances that $28 trillion in debt, it will be at a MUCH higher rate.

Think about it— if most of that debt was sold at a 2% rate, but now they have to refinance at 5%, then that’s an extra 3% interest to pay on $28 trillion— or $840 billion per year in additional interest.

Remember that the government’s interest bill is already $1.1 trillion per year. So in four years it could easily eclipse $2 trillion per year. Again, this is just the amount of interest.

It’s also pretty clear that a lot of foreign governments and central banks— who own a huge chunk of that $28 trillion which needs to be refinanced— are looking to diversify away from the dollar.

It’s already happening; obviously there are the loudmouthed BRICS countries that have started trading with one another in their own currencies, and thus begun reducing their dollar holdings. But even supposed ally nations in Europe are starting to trade their US dollar reserves for gold.

This is setting up a precarious situation... because if foreign governments and central banks continue reducing their dollar exposure, then who is going to buy up all that $28 trillion worth of US government debt that needs to be refinanced?

Well, the only remaining lender is the Federal Reserve. And as we’ve discussed before, the Fed buys government bonds by printing money... which ultimately causes inflation.

During the pandemic, the Fed printed $5 trillion and we got 9% inflation. Over the next four years the Fed might have to print a good chunk of that $28 trillion just to help refinance US government debt. So what will inflation be? No one knows. But probably not their magical 2% target.

The only way out is to slash government spending. And certainly there is a lot of low hanging fruit for DOGE to cut, which could get the deficit (and therefore inflation) under control.

But this is far from a risk-free proposition. And that’s why it still makes so much sense to have a Plan B.

We discuss all this, and more, in today’s podcast— and we hope you take time to listen in here.

(For the audio-only version, check out our online post here.)

To your freedom,  James Hickman   Co-Founder, Schiff Sovereign LLC

https://www.schiffsovereign.com/podcast/the-us-government-has-to-sell-28-trillion-of-debt-in-the-next-4-years-podcast-152106/

Is This the Biggest Heist of All Time?

Is This the Biggest Heist of All Time?

Notes From the Field By James Hickman (Simon Black) February 11, 2025

We recently received a question from a reader asking for my thoughts on crypto.

He said we’ve been talking about gold a lot lately, the gold price, and how the price could go a lot higher. Shouldn’t we hold the same views on crypto, given everything that has happened with Bitcoin over the last year or so?

We ended up doing a whole podcast about this today, We talk a lot about gold, and a lot about crypto. To clarify, I’m not anti-crypto. In fact, I brought Bitcoin to our audience’s attention back in 2013, when the price was under $100.   But there are some differences to gold.

Right now, I think there are some major catalysts that could drive the price of gold much higher. It’s a matter of arithmetic, and we walk you through the math on it.

The other important thing is that while gold is at an all time high, gold related businesses have been in the dumps for a long time. And that’s a bizarre anomaly that is simply not going to last.

Conversely, that same dynamic doesn’t seem to exist with crypto related businesses.

And we talk about, in today’s podcast, Microstrategy, as perhaps the best example.

This is essentially now a Bitcoin holding company, with 478,000 Bitcoin, valued at around $45 billion. Yet Microstrategy’s market cap is almost double that.

So if the point is to buy Microstrategy stock as a proxy for Bitcoin, you’re actually paying double the price.

Versus with gold, we have the opportunity to pay less than two times forward earnings for gold companies that have an all in production cost of $1,500 per ounce— roughly half the price of gold.

So it’s a completely different dynamic, and we explore all this and more in today’s podcast.

We even talk about the Microstrategy convertible notes, and why it’s frankly wildly inappropriate at this point to even compare “crypto” and gold.

You can listen to the podcast here.

(For the audio-only version, check out our online post here.)

To your freedom,  James Hickman   Co-Founder, Schiff Sovereign LLC

https://www.schiffsovereign.com/podcast/is-this-the-biggest-heist-of-all-time-podcast-152072/

With Gold At an All Time High

With Gold At an All Time High, This Gold Company is Still Insanely Cheap

Notes From The Field By James Hickman (Simon Black) February 10, 2025

And almost on cue, gold is at another all time high today and rapidly closing in on $3,000 per troy ounce.

It’s not hard to understand why.

We’ve been talking about this for quite some time— foreign governments, central banks, and even some large foreign corporations now are trading their dollars for gold. And that’s going to have some unfortunate, negative consequences for the US.

I’m sincerely pulling for Elon and DOGE. I really am. And I think they’ve got a great shot at cutting hundreds of billions of dollars from the federal budget. These guys aren’t messing around and have no qualms about cutting everything that doesn’t make sense.

I also hope Congress and the White House find the courage to make critical reforms to Social Security (though I am less optimistic about that one).

And the final piece to the puzzle of getting America back on track, of course, is slashing regulation and getting back to capitalism. There certainly seems to be a lot of momentum in this direction.

The math is pretty clear: if they manage to succeed at these key challenges, then there is a good chance for the US to grow its way out of debt. But even that is going to take many, many years.

In the meantime the Treasury Department will still need to rely heavily on foreigners to buy (and continue to hold) US government bonds.

I’ve explained before that foreigners own roughly half of all fixed-rate, “marketable” US government debt. So they’re a pretty important lender.

And in order for this turnaround plan to work, the Treasury Department will need those foreign bondholders to keep investing and reinvesting in America’s national debt.

But right now there are a lot of foreign countries that are deeply concerned about holding US Treasury securities. This administration has already threatened even its friends and neighbors with tariffs, and the last administration had an endless fetish for sanctions.

Think about it like this: imagine you hold a good chunk of your money in a faraway bank, and your banker was constantly threatening to freeze your account and cut off access to your funds.

Sure, maybe it’s a very nice and prestigious bank. But after so many threats, would you still keep all of your money there? Would you still want your paycheck direct deposited into that bank, month after month? Or would you start looking around at alternatives?

That’s what’s driving the gold price right now. Foreign governments and central banks are wary about holding official US securities, gold is the most viable alternative. Just like dollars, gold has universal marketability— no central banker is worried about whether they’ll ever be able to sell their gold.

Plus virtually every other government and central bank owns gold, which means it can already be used to settle current and capital account deficits if necessary.

Concern over sanctions, inflation, and America’s gargantuan national debt led foreign officials to buy up more gold over the past couple of years. Overall, they made roughly $80 billion in excess gold purchases in 2023-2024, causing the gold price to jump from about $1,800 to over $2,900.

$80 billion is a drop in the bucket for foreign governments and central banks; they have 100x that much worth of US dollar reserves.

So if $80 billion of excess purchases resulted in a $1,000+ price jump in the gold price, what will happen if they buy $1 trillion or more in gold? That’s the potential scenario that could play out.

Either way, gold is at an all-time high today. But, quite bizarrely, gold-related companies are still at ridiculously cheap levels.

To give you an example, there is a company we presented not long ago to subscribers of The 4th Pillar, our premium investment research service; it’s a profitable gold company with an excellent, clean balance sheet, very little debt, and strong growth. In fact the company even pays a healthy dividend to shareholders.

Yet when we published our research on the company, it was only valued at a mere 5x Free Cash Flow. That’s practically nothing.

The stock has now more than doubled in price as some investors are starting to realize what we discovered and presented to our subscribers many months ago.

But even now, because current and projected earnings have continued to increase, the company is still extremely undervalued even though it doubled in price.

We still see a number of similar opportunities, i.e. gold-related businesses that may be paying strong dividends, have debt-free balance sheets, and are profitable, yet still trade at outrageously low valuations despite gold’s all-time high.

Another report we sent out to our premium subscribers just last week profiled an undervalued gold mining company that has an all-in production price of just $1,500 per ounce. And yet the business is valued at TWO times its expected earnings this year.

It’s really unusual to see such an anomaly, and it almost certainly will not last.

To your freedom,  James Hickman   Co-Founder, Schiff Sovereign LLC

https://www.schiffsovereign.com/trends/with-gold-at-an-all-time-high-this-gold-company-is-still-insanely-cheap-152066/

The “Wait and See” Phase for Gold is Over

The “Wait and See” Phase for Gold is Over

Notes From the Field By James Hickman (Simon Black)  February 6, 2025

In the year 1025, the Byzantine Empire stood at the height of its final golden age.

Basil II had just died, leaving behind a vast and wealthy empire stretching from Southern Italy to Armenia.  At the heart of its economy was the solidus, a gold coin that had served as the bedrock of Mediterranean trade for centuries. Merchants from Venice to Baghdad had so much confidence in its purity that the solidus became the primary currency for international trade as far away as China.

And this ‘reserve currency’ status allowed Byzantium to project economic power far beyond its borders.

But as the empire declined, so did its currency. Successors debased the solidus to cover military costs, mixing in copper and silver until it was barely recognizable.

By the late 11th century, merchants could no longer rely on the Byzantine government to maintain the purity of the solidus... so traders turned to a new, up-and-coming alternative: the Venetian ducat.

This pattern has repeated itself for thousands of years: reserve currencies come and go, and are eventually displaced by another.

Before the solidus, Rome had set the standard with its denarius, but centuries of inflation and political collapse led to its demise.

After Venice, the Spanish real de ocho became the world’s preferred trade currency, thanks to galleons loaded with New World silver. When Spanish power faded, the Dutch guilder took over, only to be replaced by the British pound sterling, which reigned until two world wars left Britain financially exhausted.

Even the US dollar, during its first two and a half decades as the global reserve currency, was based on gold, until in 1971, the dollar was removed from the gold standard.

The whole concept of fiat currency (i.e. paper currency which relies entirely on trust and confidence of the issuing government) holding coveted reserve status is a new phenomenon.

That means trusting the largest debtor in the history of the world, trusting the US financial system, abiding by the US government’s regulations, and dealing with the whims of their central bank—despite its mismanagement, soaring debt, and reckless policies.

So much can go wrong. And at some point in the future—whether years or decades from now—the US dollar will lose its status as the world’s reserve currency.

No currency has ever held that title forever, and it’s naive to assume the dollar will be the exception.

When that moment comes, future historians will look back in astonishment, wondering how it lasted as long as it did. Because a system built entirely on trust can only survive as long as that trust remains.

And for most of this century, the US government has proven time and again that it cannot be trusted.

We explore this topic in depth in today’s podcast, and discuss how and why gold will be the beneficiary of the dollar’s loss.

We also discuss:

• The short term “wins” possible by using tariffs as a political tool

• The long term damage to the dollar done by threatening allies

• What could replace the dollar as the global reserve currency

• The benefits of holding physical gold (for individuals and central banks)

• Investments that offer exposure to gold’s upside, without paying all time highs for physical bullion

We also mention a gold company that we are profiling this month for subscribers to our investment research newsletter, The 4th Pillar, which focuses on real asset investments.

You can listen to the podcast here.

(For the audio-only version, check out our online post here.)

To your freedom,  James Hickman  Co-Founder, Schiff Sovereign LLC

https://www.schiffsovereign.com/trends/the-wait-and-see-phase-for-gold-is-over-podcast-152055/

How to Buy Gold at Just $1,500 an Ounce

How to Buy Gold at Just $1,500 an Ounce

Notes From the Field By James Hickman (Simon Black)  February 5, 2025

In the late 1990s, the Internet was brand new... and sizzling hot. And most people thought it would bring radical change to the world, practically overnight.

This is a common theme with disruptive technology. Enthusiasts often overestimate the impact of new technology in the short run, and underestimate its impact in the long run. Such is the case with AI today.

But the euphoria over the Internet in the 1990s compelled investors to pour money into Internet startups— companies with no profits, no cash flow, and no real business model.

In fact, a joke emerged from this era which perfectly described many of these infamous dot-coms: “We lose money on every sale, but we make up for it in volume.”

But it didn’t matter. Dot-coms were the meme companies of their day. And even the most ridiculous businesses that claimed to have anything to do with the Internet commanded outrageously high valuations.

Meanwhile, actual real businesses that didn’t have anything to do with the Internet, like boring old ExxonMobil, were completely ignored by investors.

Exxon was a great example because oil prices at the time sat at a modest $30 per barrel, and most people simply assumed that oil would stay cheap forever. So Exxon traded at just 11 times earnings, generated over $17 billion per year, and even paid a healthy dividend to the shareholders who had the foresight to own it.

Common sense eventually prevailed, and all of the pie-in-the-sky dot-coms went to money heaven. And the real businesses, like Exxon, survived the hype cycle and prospered.

Today, there are plenty of super sexy businesses which have become incredibly popular with investors. A lot of them are really overvalued.

And just like Exxon back in the late 1990s, nobody is paying attention to other profitable, extremely undervalued, real asset businesses.

Personally I think oil could get a lot more expensive from here. And there are some really undervalued oil companies to consider, just like there were in the 90s.

But the really obvious example I want to talk about today is gold.

Gold is still hovering near its all time high. And as we’ve discussed many times before, there are a number of catalysts which could drive the price much higher from here.

There has already been a coordinated effort by several countries to de-dollarize.

BRICS— Brazil, Russia, India, China, and South Africa— hold conferences explicitly discussing how to move away from the US dollar. And both the amount of global trade in dollars, as well as the share of American dollars held as reserves by central banks, has been steadily declining.

Central banks and foreign governments own trillions worth of US dollar reserves. And the reason the gold price reached this all time high, is because those foreign governments and central banks traded a tiny percentage of their dollars for gold.

That additional demand was enough to send the gold price soaring to almost $3,000.

So if this anti-dollar trend continues—or even accelerates— we could see $5,000 or even $10,000 plus gold.

These foreign governments and central banks, however, only buy physical gold. They do not buy shares in gold companies.

So while the gold price is near its all time high, gold companies are trading at ridiculously low levels.

Here’s a great example.

The company that we’re profiling in the upcoming edition of our investment research newsletter, The 4th Pillar, is one such undervalued gold business.

It’s a mining company with outstanding properties and a fantastic long term earnings horizon. It operates in an absolutely tier-one jurisdiction with minimal geopolitical risk— i.e. not the Congo or Nicaragua.

Its balance sheet is pristine with no debt. Yet they have a very strong cash position.

Due to their operating efficiencies, their production cost is quite reasonable at around $1,500 for every ounce of gold that they mine.

Yet the market is valuing them at a low, single digit multiple.

I would encourage you to check out our research to find out more.

I think it’s well worth the price of a subscription— especially because right now we’re having a limited time promotion on The 4th Pillar.

The full report on this particular gold company will be sent to 4th Pillar subscribers over the next few days.

To your freedom,  James Hickman   Co-Founder, Schiff Sovereign LLC

https://www.schiffsovereign.com/trends/how-to-buy-gold-at-just-1500-an-ounce-152049/

This Trade War Might Be The Straw That Breaks The US Dollar’s Back.

This Trade War Might Be The Straw That Breaks The US Dollar’s Back.

Notes From the Field By James Hickman (Simon Black)  February 3, 2025

It was early spring in the year 1171 AD when Byzantine Emperor Manuel I Komnenos decided to go to war against his much smaller ally-- Venice. And the historical record shows that it was a really bad idea.

The Byzantine Empire was still a vast and powerful state by the late 12th century. But it was becoming obvious to anyone paying attention that they were in serious decline.

The Byzantine treasury was almost always empty. Imperial debt was piling up left and right. Byzantine borders were constantly being invaded by Muslim hordes. And the imperial coin-- the gold solidus-- was beginning to fall out of favor as the dominant currency for international trade.

Perhaps most importantly, there were a great deal of inexperienced or incompetent Emperors who stood by and did nothing while adversaries exploited imperial weakness.

One bright spot in Byzantine foreign relations was with the Republic of Venice; and over time the two cultivated a strong friendship, and enjoyed significant trade and military cooperation. When the Byzantine Empire went to war, for example, Venice would often provide naval and maritime logistics support.

Trade was so strong between the two, in fact, that thousands of Venetian merchants moved permanently to Constantinople.

But it all came to an end in March of 1171. The Emperor very suddenly changed his tune on Venice and started viewing them as rivals who were taking advantage.

To be fair, Venice was definitely a rising power at the time. But they were a pipsqueak compared to the size and strength of the Byzantine Empire… and the Venetians in no way wanted a conflict. They got one anyway.

That spring, Emperor Manuel imprisoned as many as 10,000 Venetians in Constantinople. He also confiscated their assets, properties, and businesses.

The ruler back in Venice (coincidentally known as “the Doge”) tried to negotiate a peaceful, diplomatic solution. But in the end, a war between the two broke out. And while direct military conflict was quite limited, the economic and trade warfare seriously wounded both powers.

In retrospect the long-term consequences were clear: the Byzantine Empire lost a supportive ally, essentially pushing Venice into the arms of Western European powers. The Empire also never quite recovered the lost trade and economic opportunity costs from the war.

That’s because all war-- whether a shooting war or trade war-- is expensive. There are very, very few instances in history in which a nation benefited from prolonged war. In fact, the last guy to consistently wage ‘profitable’ wars was Napoleon… and he understood the key was to end it as quickly as possible.

Maybe that’s the strategy in this new trade war today. Maybe the whole idea is to show people that you’re not afraid to make good on your threats… to show that you’re not bluffing… and that everyone should run to the negotiating table immediately.

Perhaps. But it’s been well-documented that a long-term trade war, i.e. tariffs on goods imported from Canada and Mexico, will be incredibly expensive. Canada sends energy to the US. Mexico sends food. If there are two things that US citizens don’t need to become more expensive, it’s food and fuel.

The rough calculations show that American households will pay a few thousand dollars per year more. Most people can’t afford that, nor are they particularly inclined to try.

The optimists say that America doesn’t need to import any of that stuff, and that “we can produce everything we need at home”.

OK, that’s sort of true. The US has the capability to produce almost everything if it really had to. But to borrow from the great philosopher Chris Rock, “You could drive with your feet if you really had to. But that don’t make it a good f***ng idea.”

Every country, every economy in the world has a finite amount of resources-- workers, raw materials, capital, land, etc. And in a free market, those finite resources are put to their best and highest use… because that’s what generates the most profit, i.e. the most wealth and prosperity.

No one puts resources to work making socks and underwear if they could put those same resources to work developing disruptive technology. And the US economy has that option-- producing goods and services of extremely high value (including technology).

This has been a key driver of wealth in America.

But suddenly having to divert limited resources to something less valuable consequently means… less wealth and prosperity. Bottom line, trying to produce everything at home requires misallocating economic resources into less profitable, less prosperous industries.

And the opportunity cost of doing that cannot be overstated.

There’s another, even bigger problem, though.

The US dollar is already in trouble. Plenty of countries have already started to line up against the dollar; and as we’ve discussed in the past, foreign central banks have started ditching the dollar to buy gold instead.

This is a big problem for the US government; the Treasury Department desperately needs foreigners to keep funding America’s massive budget deficits. And even if the budget deficits miraculously disappear, America still needs foreign nations to hold on to the US government bonds they already own.

Threatening (and then actually following through) with tariffs will only make foreign countries less inclined to own US dollars.

Secretary of State Marco Rubio even admitted this weekend that within five years, “there will be so many countries transacting in currencies other than the dollar that we won’t have the ability” to impose sanctions or tariffs.

Less demand from foreign governments and central banks to own US dollars ultimately means higher inflation and higher interest rates across the board-- including higher mortgage rates. So more expensive food. More expensive fuel. And more expensive housing.

Again, this trade war might be a ploy designed to force everyone to the negotiating table… and perhaps they expect it will be over in a matter of days or weeks. But that’s a risky assumption.

A century ago, the ‘experts’ back in 1914 assumed that World War I would be over in a few months, and that the troops would “be home before the leaves fall from the trees” (according to what Kaiser Wilhelm of Germany reportedly told his soldiers departing for the front line).

This, too, may be long and costly. But even if it's short, declaring war on your own ally could easily create lasting consequences for America by accelerating backlash against the dollar.

To your freedom,    James Hickman  Co-Founder, Schiff Sovereign LLC

https://www.schiffsovereign.com/trends/this-trade-war-might-be-the-straw-that-breaks-the-us-dollars-back-152034/

This Will Likely Be A Really Big Deal For Gold

This Will Likely Be A Really Big Deal For Gold

Notes From the field by James Hickman (Simon Black)  February 4, 2025

Well that was fast.

The smoke had barely cleared on the opening salvo of the Great North American trade war, when all sides called a truce to talk out their differences.

Just as we wrote yesterday, this is exactly what I was hoping would happen. In fact, in a Zoom call that Peter and I had Friday with our Total Access members, we predicted this outcome: that the trade wars were just an elaborate show to demonstrate to the world that America is willing to make good on its threats, and force everybody to the negotiation table.

There may be some short term benefit that comes from this. But as we said yesterday, there will likely be some long term consequences and here’s why:

According to Federal Reserve data, there will be roughly $28 trillion worth of US government bonds maturing over the next four years, i.e. now through the end of 2028.

That’s more than 75% of the government’s $36+ trillion national debt.

This is an absolutely staggering figure, averaging $7 trillion per year for the next four years.

And remember, we’re just talking about the existing debt that is set to mature. It doesn’t even include new debt that has to be issued over the next four years, which could easily be another $7-10 trillion.

This is an enormous problem for the Treasury Department, because they clearly don’t have $28 trillion to repay those bondholders.

Now, usually whenever a government bond matures, the investor might simply roll the proceeds into a new government bond. In other words, the old bond matures, and the investor puts the entire principal and interest into a new bond at whatever the higher interest rate is today.

This alone is going to cost the government a lot of money, because most of the bonds that are maturing over the next four years were originally issued 5, 10, or even 20 years ago, when interest rates were much, much lower.

So let’s do the math: if the government issued $28 trillion in the past at an average interest rate of 3%, but now they’ll have to refinance all that debt at a new rate of 5%, then effectively they’ll be paying an extra 2% per year.

That’s almost $600 billion in additional interest EACH YEAR on top of the $1.1 trillion interest bill that they’re currently paying. But even that might be wishful thinking.

And the reason why is, if you look at America’s public debt, the investors who buy those bonds are split pretty evenly between US entities (the Federal Reserve, American companies, US individual investors) and foreign investors (foreign government, central banks, multinationals).

This is critical to understand: the Treasury Department relies very heavily on foreigners to buy US government bonds and help fund the national debt.

At the moment, most countries around the world have to buy US government bonds simply because the US dollar is still the world’s dominant reserve currency. So they are essentially forced to hold US dollar assets, and Treasury securities are still the most liquid US dollar assets in the world.

Yet for the past several years there has been a significant movement underway by a number of countries to engage in trade and commerce without using the dollar. And this movement is growing.

I mentioned in my letter to you yesterday that the brand new Secretary of State Marco Rubio acknowledged this over the weekend, suggesting that the dollar’s dominance could be seriously diminished within five years.

Facing the constant threat of sanctions and tariffs will only motivate Brazil, Russia, China, India, and even many countries in Europe, to accelerate their diversification away from the dollar, and away from the United States.

The natural beneficiary of that trend will be gold.

We’ve written about this extensively. Gold rocketed to an all time high last year because central banks, and foreign governments, were reducing their dollar holdings.

And think about it. If you’re a foreign central bank and you have $100 billion of US government bonds that are about to mature, what are you going to do?

Are you going to reinvest that entire $100 billion back into a country that might already be threatening you with economic penalties?

Or do you quietly let the treasuries mature, take the money, and find someplace else to invest that $100 billion?

A lot of foreign governments and central banks are going to be giving serious consideration to option two.

But they are going to have to invest that money in an asset that, like US dollars, is widely accepted, and has universal value and marketability around the world.

Gold is one of those assets. And that’s why central banks have been buying so much of it for the past couple of years.

I think there’s an obvious case to be made, given the prospects of tariffs and further trade wars, or even just the threats thereof, they are going to keep buying gold and send the price even higher.

So if you’re interested in hedging against future risks to the US dollar, gold makes a lot of sense.

But on a final note, I’ll point out as I have in the past, that foreign governments and central banks buy gold. They do not buy shares in gold companies.

And right now there is a bizarre financial paradox in that gold is at an all time high, but thriving, profitable businesses which produce gold are trading at absurd discounts.

And we’ll talk about some examples over the next few days.

To your freedom,  James Hickman   Co-Founder, Schiff Sovereign LLC

https://www.schiffsovereign.com/trends/this-will-likely-be-a-really-big-deal-for-gold-152041/

Even the US Government is Worried There Won’t Be Enough Electricity

Even the US Government is Worried There Won’t Be Enough Electricity

Notes From the Field  January 27, 2025  By James Hickman (Simon Black)

It was known as the “Timber Famine” in 18th-century Great Britain. And it was no exaggeration to say that it was a national crisis: Britain was running out of wood.

The first major reason was population growth; wood was the major material and fuel source of the era, used for cooking, heating, and construction. And Britain’s booming population growth created insatiable demand for timber.

The second reason was technological advancement. New machines like steam engines needed a reliable fuel source to generate heat... causing demand for wood to skyrocket.

Soon timber demand outstripped supply. Loggers cleared out entire forests, and timber prices shot up dramatically. British writer Malachy Postlethwayt lamented in 1747, “So great is the scarcity of wood. . . that where cord wood had been sold at six and seven shillings per cord, it is now sold for upwards of fifteen and twenty shillings; and in some places is all consumed.”

But Britain’s timber famine wasn’t just an economic problem—it was a matter of national security.

The domestic iron industry needed wood to fuel its fires. And with the timber shortage came a major risk of having to rely on foreign imports. Moreover, the timber famine also jeopardized the ability for the Royal Navy and merchant fleets to build new ships and repair existing ones.

The solution was clear: Britain needed to switch to a well-known alternative fuel source: coal.

But it didn’t happen without serious resistance.

Those profiting from the timber trade formed a powerful lobby, and the politicians in their pocket made ridiculous, specious arguments against coal.

Coal critics even went as far as arguing that the smell of wood smoke was preferable to coal smoke, and cleverly labeled coal “the devil’s excrement.”

Another criticism was that coal production was too dangerous (compared to logging). But technology fixed that too. Inventions like water pumps and safety lamps dramatically improved conditions in coal mines.

In the end, coal overcame the criticism and became the primary fuel of the Industrial Revolution; and the world became vastly more prosperous as a result of the combination of cheaper, more efficient energy, combined with groundbreaking productive technology (like the steam engine).

The world faces a similar choice today.

Like Britain throughout the 1700s, significant population growth has increased demand for electricity around the world, including in the US. And while there’s no “timber famine” today, there are major challenges in the production of electricity.

Much of this is self-inflicted. Years of climate fanaticism have pushed power companies to shut down coal-fired plants and replace them with inefficient wind and solar facilities.

Look, I like a clean environment as much as anyone. But the reality is that wind and solar simply aren’t as clean as the mainstream narrative would have you believe.

The mining of key input materials like germanium, cobalt, etc. is incredibly filthy. Batteries are filthy. The manufacturing process is filthy. And that doesn’t even get into child labor issues.

Plus, with wind and solar, you have to build in all sorts of extra redundancy for times when the wind doesn’t blow. Or, you know, night time, when the sun doesn’t shine. And all that extra redundancy increases the environmental waste even more.

Despite the costs and limitations, however, the share of wind and solar powering America’s grid is higher than ever before. This is a major reason why the electrical grid is struggling to keep up with surging demand.

Aside from population growth, another key driver of demand is new technology. Similar to Britain in the late 1700s, it’s well known now that our modern technology (AI) consumes massive quantities of electricity.

The net result of this supply and demand imbalance is a major concern for looming electricity shortages.

Elon Musk predicted last March that “the world will face supply crunches in electricity” this year. He’s far from alone.

One of the ventures that I’ve invested in (along with many of our Total Access members) is a technology company that focuses on specialized microchips. And the head of sales told me he was in the Washington DC area last week meeting with various government officials who are prospective customers.

One of the major concerns they expressed to him was that there simply wasn’t going to be enough electricity to meet their needs (hence their interest in our technology, which is designed to consume less power).

They recognize that there isn’t enough electrical production capacity coming on line to match demand. They also understand that demand for electricity can (and likely will) grow much faster than supply.

And it was extraordinary that even government officials were complaining about the intense, bureaucratic regulation at the local, state, and federal level to bring new power plants online. God forbid you have to displace a bird’s nest, which might set you back several years.

In Britain’s timber famine, they solved their supply shortage by turning to a better technology: coal.

Today there is also a vastly superior technology, and that’s nuclear.

We’ve written about this before— the idea that a single rock can power a small city is nothing short of astonishing. But like coal in Britain’s industrial age, nuclear power today has plenty of detractors.

But the latest emerging technology— small scale reactors— dispenses with virtually all criticism. It’s safer, cleaner, and cuts down on 90% of the waste. It’s also cheaper and faster to build, requiring 80% less energy to construct than traditional reactors.

And it has the potential to drive widespread prosperity throughout the world— something cheap energy has always been able to do.

A lot of countries have already woken up to this idea, which is why places like China, India, and even Russia have been rapidly building their own nuclear reactors.

Europe has naturally been shutting theirs down, but those governments are clearly insane. And if you have a problem with their self-destructive decisions then you’re a far-right fascist. Those people are in serious need of psychiatric care.

The US is now waking up from its green fantasy. And as America often does, it’s starting this race from behind... but will probably catch up quickly.

All of this makes uranium, i.e. the fuel source for most nuclear reactors, one of the most critical resources in the world.

Yet the supply chain for uranium is fragile, and the market is painfully underdeveloped. Decades of disinterest in nuclear have kept uranium exploration and production at a standstill, even as global demand is poised to soar.

The US government is acutely aware of this risk. In 2020, Congress established the US Uranium Reserve, allocating $75 million to buy domestically-produced uranium.

But $75 million is nothing. Even with this program, domestic production is expected to fall far short of what’s needed to fuel the next generation of reactors.

Meanwhile, the uranium market is taking notice. Prices have more than doubled since 2021, but they remain well below the levels needed to incentivize new production.

The few publicly traded uranium miners and developers have seen their stocks surge. Yet most investors remain unaware of just how critical this resource will become.

Uranium is also a quintessential real asset— a critical resource that is vital to economic prosperity and new technology.

Yet, again, uranium is in a deficit. Demand already outpaces supply, and that imbalance is only set to worsen.

That likely means skyrocketing uranium prices. And massive profits for the few producers left— many still trading at quite modest valuations.

To your freedom,   James Hickman   Co-Founder, Schiff Sovereign LLC

 https://www.schiffsovereign.com/trends/even-the-us-government-is-worried-there-wont-be-enough-electricity-152012/

It’s like a Netflix and a Half Just Vanished Yesterday.

It’s like a Netflix and a Half Just Vanished Yesterday.

Notes From the Field By James Hickman (Simon Black)  January 28, 2025

Yesterday, Nvidia—the company which makes GPUs, including for AI— suffered the largest single-day market value loss in history.

The stock dropped 17.4% wiping $600 billion from its valuation in hours, and actually pulling the entire Nasdaq Composite down 3.4%. 

To put that in perspective, this amount of value loss is like if the entire company of Netflix AND AT&T simply disappeared.

What caused this? A Chinese AI startup called DeepSeek. Over the weekend, it revealed a new large language model (LLM) that matches the output of OpenAI’s ChatGPT and similar models but at a fraction of the cost.

Here’s the kicker: DeepSeek trained its LLM with just $5 million and 2,000 low-tech Nvidia GPUs. Compare that to ChatGPT’s $100 million budget and over 100,000 cutting-edge GPUs.

Venture capitalist Marc Andreessen called this AI’s Sputnik moment.

And that’s true.

It was 1957 when the Soviets launched Sputnik into space, which made the Americans realize how much they needed to catch up.

There was a lot of panic yesterday, and it’s easy to understand why. The whole industry felt they had a competitive advantage that no longer exists.

But the reality is, this is good news for everyone. And this is the topic of our podcast today.

Many of you know that I’m the chairman of a emerging technology company which makes extremely powerful and efficient semiconductors.

It’s completely unrelated to AI, so DeepSeek doesn’t have any impact. But I reached out to a number of people in the business to help me understand this better. And overall there are a few conclusions that are pretty obvious.

One, Nvidia is still going to be able to sell all the GPUs they can produce. The difference is now they will be selling to more people. The days of Nvidia delivering GPUs by armored car are long gone. And now these professional grade chips are going to be available to even the lowliest of AI start-ups.

It also means that AI start ups can launch their businesses and develop their technology with a smaller amount of money.

Instead of having to raise half a billion dollars just to get started, they can create a viable product for just a few million dollars now.

That means more innovation, and hence more productivity for everyone.

The last thing is the market rout yesterday was classic overreaction and panic that extended to sectors that still have me scratching my head.

There was even a sell-off in natural gas stocks, which is absurd.

We talk a lot about real assets, and why they are such a smart buy right now. And natural gas companies are a great example.

Some of these businesses are well managed, profitable, dividend paying, and have pristine balance sheets. And yet the market is now giving them away.

We discuss all this and more in today’s short podcast.

(For the audio-only version, check out our online post here.)

https://www.schiffsovereign.com/podcast/its-like-a-netflix-and-a-half-just-vanished-yesterday-podcast-152017/ 

To your freedom,   James Hickman  Co-Founder, Schiff Sovereign LLCIt’s like a Netflix and a Half Just Vanished Yesterday. [Podcast]

Some Thoughts On Today’s Record High Prices

Some Thoughts On Today’s Record High Prices 

Notes From the Field By James Hickman (Simon Black) January 22 2025

Herbert Hoover was an unstoppable force in 1928.

The Roaring Twenties were in full swing. Prosperity (it seemed) was everywhere. The stock market was soaring. People were making money hand over fist. And Hoover was the ‘status quo’ Presidential candidate that year.

In other words, a vote for Hoover was a vote for the good times to continue. And the guy vanquished his opponent on election day, November 6, 1928, by one of the most lopsided margins in history up to that point.

So the euphoria continued. In the four months between Hoover’s election victory in November, and his inauguration in early March, the stock market soared by more than 20%.

Optimism was everywhere. And, convinced that asset prices would only go up, Americans borrowed heavily to buy shares on the stock market.

But it was less than eight months into Hoover’s presidency that the stock market crashed... and all that confidence quickly evaporated. The Dow Jones Industrial Average went on to lose nearly 90% of its value over the next three years.

Now, don’t get me wrong— I’m not predicting an imminent crash of the stock market. America’s economy today is fundamentally different than it was in 1929.

But there are some similarities.

One key similarity is that stock valuations, i.e. the amounts that investors are willing to pay for every dollar of a company’s earnings, revenue, and/or assets, are more stretched than they were even in 1929.

And the cause is also similar.

By 1929 the Federal Reserve was still pretty new; it had only been formed in 1913, and had spent most of the decade engaged in a rate-cutting monetary bonanza that fueled wild financial speculation.

Roughly nine decades later, the Fed engaged in a similar monetary bonanza as the pandemic began. They conjured trillions of dollars out of thin air and slashed rates to zero, sparking one of the most extreme speculative bubbles in financial history.

I’m sure you remember: even the most outrageous assets— meme stocks, shitcoins, and ‘artwork’ consisting of a banana duct-taped to the wall, traded hands for unbelievable prices.

Interest rates have risen significantly since then, and the Fed has made some efforts to make tiny reductions to the money supply. But most of the excesses still remain— hence historically high stock market valuations like Price/Earnings ratios, or the total stock market capitalization to GDP ratio.

If stock market valuations were to return to historic averages, it would require either a sharp decline in stock prices... or an extended period of stagnant market performance.

But again, I’m not predicting this is going to happen. There’s absolutely no reason why stocks can’t remain expensive... or become even more expensive. Historic averages are indicators of some deviation from the norm. But they don’t dictate immediate outcomes.

But for investors, this environment presents a dilemma. On one hand, it’s difficult to justify paying record high prices for assets at super-stretched valuations. Yet, again, on the other hand, historically high valuations don’t necessarily mean that a collapse or pullback is imminent.

But there is an alternative worth considering.

Early in his career, Warren Buffett favored an ultra deep-value strategy that focused on buying companies trading at steep discounts to their intrinsic worth.

Some of these businesses were of questionable quality. In a way, Buffett was willing to buy almost anything if it were cheap enough.

But soon his long-time partner Charlie Munger entered the picture and introduced Buffett to a transformative idea: instead of sifting through mediocre companies simply because they were cheap, why not seek out high-quality businesses with durable competitive advantages, even if they came at a higher— but still fair— price?

Buffett eventually understood the axiom: “it’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”

(Obviously it’s even better if you can find wonderful businesses at wonderful prices.)

Where can you find that today?

Well, it’s very difficult in the US. There are some wonderful businesses. But it’s hard to argue that a 100x Enterprise Value to Free Cash Flow ratio is a “fair price”.

But if you expand your horizons abroad, there are fantastic businesses around the world that trade for next to nothing. It seems like everyone is buying US stocks, but they completely ignore amazing deals overseas.

Another option we’ve talked about many times before is the real asset sector, i.e. vital resources and commodities such as metals, energy, agriculture, and productive technology.

There is a severe lack of investment in many of these real asset companies, to the point where certain commodities are becoming scarce relative to demand.

Uranium is a great example. There is now literally a supply deficit, i.e. not enough production to meet demand. And given the momentum for nuclear power, uranium is poised to become one of the world’s most important resources.

Gold is another example. For years, exploration has been lackluster, partly due to lack of investor interest in the sector. Remaining mine reserves are dwindling, and future gold production is questionable.

Yet demand for gold has skyrocketed— mostly from central banks who have been dumping their US dollars. So the gold miners who have efficient production, high quality mines, and solid reserves are making huge profits... yet their share prices have barely moved.

In other words, investors would rather pay 100x earnings for a popular tech stock than pay 3x earnings for a profitable, debt-free, dividend paying gold stock.

Again, the stock market could keep flying higher to even more dizzying heights. But there are definitely some excellent companies out there which offer profits, dividends, and substantial value— if you’re willing to look beyond the mainstream.

To your freedom,  James Hickman  Co-Founder, Schiff Sovereign LLC

PS- We routinely name specific real asset companies, which we believe are primed to boom under these conditions, in Schiff Sovereign Premium.

We focus on businesses which have valuations just 4 or 5 times their yearly free cash flow, and often pay out a lot of those profits through dividends.

https://www.schiffsovereign.com/trends/some-thoughts-on-todays-record-high-prices-152000/