Commodity supercycle or not, copper has one of the "most bullish cases" around, said Lobo Tiggre of The Independent Speculator.
No matter the general sentiment around commodities, the copper supply-side ensures price gains in the future.
"I like copper a lot. It is one of the most solid bull cases. And even if the commodity supercycle does roll over, I could see copper keep on going," Tiggre told Michelle Makori, editor-in-chief of Kitco News.
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Follow Michelle Makori on Twitter: @MichelleMakori (https://twitter.com/MichelleMakori)
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See Full Interview Transcript Below
Michelle Makori: We're at the New Orleans investment conference one of the top gatherings of investors for 47 years now I'm Michelle Makori and joining me is Lobo Tiggre the founder of independentspeculator.com good to have you with us
Lobo Tiggre: Always happy to be co first time speaking with you so I'm glad to finally make your acquaintance
Michelle Makori: Likewise so let's get straight into it because one of the big themes of this conference has been inflation and stagflation and the general consensus is that inflation is certainly not transitory that seems to be a predominant message that we're getting and with the declining economic growth that we could certainly be in a stagflationary economic environment what's your read level
Lobo Tiggre: Well the short answer is yes I have been in the stagflation camp for some time I have been writing about it well before I became headline news and my favorite punching bag in the in the financial media is this transitory yarn it just, you just keep seeing example of not just that the numbers are still high and you look at the US inflation numbers the monthly increases rolled over but they're still increases and increases to a high level means you stay at a high level so you look at the overall inflation and it's still high so we have persistent high inflation and it's not just the US it's global but the fear is of course well we also have this weakness and the standard model is a weaker economy that's deflationary so deflation is going to go down, well I don't think the standard model is right the 70s did happen I'm not saying it has to be the same as the 70s but the 70s show that you can have a weak economy and high inflation for what reasons well some of the kind of reasons that we have now you had the oil supply shocked in, we've got an energy shock right now interesting you've got guns and butter back then you've got fiscal spending at the wazoo a monetary policy that couldn't be easier just about not just in the US but the US is important to focus on because commodities are priced in dollars and that's why we're here right you know we love our gold stocks and other resource stocks and they're you know what happens to the dollar is essential so yes I'm in the stagflationary camp I think that's very important because this especially as news comes out as long as this transitory yarn holds on the news comes out and you see inflationary news and gold sell off you know it makes no sense except it does make sense if you accept the transitory Kool-Aid you think the Fed's going to tighten rates and that's going to be bad for gold so we have this ironic and I think this is the transitory part this short-term belief that cannot last that somehow inflation is bad for gold I think that just creates buying opportunities
Michelle Makori: So the notion that inflation is transitory you think that's a transitory notion and the minute that people catch on that it's not what do you expect to see happening
Lobo Tiggre: We may see soon the Fed's own inflation expectation numbers are going up and the last read was quite striking it was you know the one year was over 5% and the three year was over 4% those are well above you know the 2%
Michelle Makori: 5.4% in September
Lobo Tiggre: Just striking numbers so we may see soon enough but to answer your question what do I think happens it's not just what people think it's the traders and their algos and how they're programmed these economic models need to be debunked people need to understand the people who push the pieces of paper when you rephrase we talk about the price of gold but what we quote is not the price of gold we price we quote the price of futures contracts and the people who trade those it's not you and me or it's not the person that goes down to the coin shop in the corner and buys an ounce of gold or silver to stack, it's these traders who function based on these economic models which don't contemplate that stagflation can exist at all it's not in the model so when does that break down how long does it take I don't think it's gradual I think at some point they wake up and smell the napalm, the financial napalm and like oh this isn't working and you get a change I don't think that can be very far off in the future
Michelle Makori: But what does that change look like
Lobo Tiggre: I think it looks like I think it looks like gold's starting to respond more directly and proportionally to inflationary news I think it means that people start seeing that real rates which have been the driver right and you adjust real race by nominal rates minus inflation so that inflation starts getting factoring into real rates and you start seeing gold like this here at gold's been with the breakdown on the rates in the transitory story it's been responding more to the dollar price directly I think we go back to seeing it responding more directly to interest rates and CPI
Michelle Makori: And what would that mean for the price of gold then what is your six month outlook
Lobo Tiggre: I'm not one for targets but I'm just going to say it goes upward and depending on how much they lose control of the situation or not a lot upwards I'm very, very, bullish and I despite my new mantra of Darth Silver for my comments on the changing nature of silver in the market, I do think silver tracks gold it's still a monetary metal I think when this change happens, when these traders who have broken models realize it and they change their models I think that's very good for both gold and silver
Michelle Makori: All right gold and silver is set to go higher but you're leaving it with a vague higher
Lobo Tiggre: Yes
Michelle Makori: Let's talk about what the stagflationary environment means for other commodities especially in light of the commodity super cycle narrative that's been out there if we have slowing economic growth and a lot of the super cycle was driven by growth but at the same time we have inflation which increases commodity prices what's your outlook on some of the other commodities
Lobo Tiggre: Well and there's a good question but I would actually dispute one of the premises I'm not sure it's really clearly understood exactly why the commodity super cycles work the way they do, it's you know what's going on in China and the fear about economic weakness there and or in the US or in Europe may or may not derail the commodity super cycle depending on what you mean by it what I mean by it is that the prices for commodities tend to correlate very highly even gold and silver which have safe haven status in addition to their uses commodities you might think that they will move very differently from commodities in times where safe haven demand is more but we're worried about the economy and industrial demand is less but it turns out the correlation is very high commodities tend to move together in these very long large waves and we are in one of those that has been in an upward trend for years actually so I don't worry about China's you know Evergrande problem derailing the commodity super cycle I see it as very robust and I see what's happening now in fiscal and monetary policy pushing that in that continued direction so I guess what I'm saying is if we get more shocks more weakness near term it's volatility but I don't I would be very surprised if it actually derailed the commodity super cycle and as more of a fundamentalist than a technical analyst I do think that the fiscal and monetary policy not just in the US but around the world is so easy and so commodity that's extremely bullish for all commodities for several years yet to come
Michelle Makori: Except you think we're halfway into this commodity super cycle which is defined as 10 years of commodities rally whereas the other opinion is that it started in the beginning of 2021 with the low interest rates with economies recovering from the pandemic with pent-up demand and not enough supply but you think we're already in into the cycle
Lobo Tiggre: That's right so I'm disagreeing with that definition and again the way I look at it is the price cycle so that did not start last year I mean we were already well on our way up gold bottomed in late 2015. Interestingly enough so did uranium silver too other things somewhat spacing oil copper somewhat spacing but the commodities super cycle that I'm betting on is a price cycle and that started years ago
Michelle Makori: And the question is how much more does it have to go people love these things because people want to know when they should be taking their profits
Lobo Tiggre: there's a there's a there's the mining cycle clock my friend Bob Thompson likes to talk about of you know what time is it on the clock there's also a quarters theory like you know we're in the first quarter second quarter um these are these are interesting metaphors and they help to understand but actually I think it's a little dangerous to believe in them too much like what if you if I give you a number Michelle I say oh we're at three o'clock well then people say oh well then we've still got you know right so I'm hesitant but sorry I'll answer real quick and I will say I think we're farther into this cycle than a lot of people say or admit for the things we've just talked about I think it really started five years ago so we could be a third to halfway in
Michelle Makori: Well let's break down some specific commodities let's start off with oil we've got $80 oil where are you on that well it's not cheap that's the short version is you know I like oil I can absolutely see it going back over a $100 but it doesn't have to and while we've seen stories lately about how some of the OPEC members have actually not even been able to meet their quotas, the Covid shutdowns and the problems they've created have that have been created have made it so they can't even meet their quotas and maybe they have a deal inside OPEC where Saudi Arabia can't steal their market share or something but I can't see the Russians abiding by that, so we have a situation where you have voluntary supply constraint, it's voluntary, they have to all I have to do is volunteer to do something different I would be very surprised if oil prices this high doesn't incent new supply to come online quickly
Michelle Makori: Lowering oil then
Lobo Tiggre: Or at least stopping it from going higher
Michelle Makori: But on the bigger picture you have this trend to go green get away from fossil fuels so there's been lacking investment in oil and the argument is that because as investment that's been lacking and disincentivized people to get into that space while it takes time for the clean green energy to catch up we're gonna have a big boom period for oil
Lobo Tiggre: That's an interesting point I actually believe that I think that's right but I also think that's farther ahead I mean there again there is oil right now waiting to be produced, the Russians and the Saudis can pump a lot more tomorrow if they want to
Michelle Makori: So you're not buying 80 oil I would be very cautious about buying at these levels this is not a buy low sell high and if I had big wins I would absolutely be locking those in that doesn't mean dumping everything get out of oil that means making sure my wins don't slip through my fingers
Michelle Makori: Those that have been long uranium recently certainly have some profit taking to do one could argue uranium doing spectacularly well at about what $48, what do you see happening there
Lobo Tiggre: So not as far as oil you know with oil at $80 you know that pays the bills for everybody everybody's happy uh uranium at $50 is actually not high enough for most miners most miners need a $60 to $70 price to even contemplate bringing a new mine onto production uh the low-cost guys you know they make tons of money there but that's not most miners and the low-cost guys cannot supply the entire demand so I do think that uranium needs to and absent a major nuclear accident will go higher but it doesn't have to double again it doesn't have to reach the 2007 peak of $140 that would be nice if it does and maybe if the market goes manic you know and the Sprott phenomenon and the Kazakhstan jumping in on taking cheap pounds off the market you know maybe it does but doesn't have to and we were already seeing prices high enough to bring new secondary supplies like new sellers on the market
Michelle Makori: Is there still room for an investor to get into uranium at $50 uranium
Lobo Tiggre: Yes but I wouldn't do it at 50 since uranium bottomed in late 2015 it's been two steps forward one step back two steps forward
Michelle Makori: So you're anticipate a pullback
Lobo Tiggre: Absolutely and the last time I said this on camera people got mad at me uranium was a 52 bucks and people got mad at me no it's going straight up somebody tweeted at me that I would never see a cheaper entry point and then of course it went down back under 40 not long after that so those are the buying points and I think we'll see more so I'm not telling people it's too late, I'm saying watch for that sawtooth pattern by the way
Michelle Makori: What do you think leads to a pullback in uranium
Lobo Tiggre: I think the okay so it will take a while for uranium miners even the low-cost producers that have idle capacity to bring it's not a switch you can't just flip a switch and they start pumping more uranium, even the ones that are like that the solution mining guys they still have to check the well heads and do all this stuff it takes months to bring a mothball uranium mine back online um but the people who bought you know the companies that bought and stored uranium for the purpose of selling it later not to take it off the market forever or the funds that did the same thing you know they're there to hold those pounds to sell when it's advantageous to them so that can be done in a day that can be done with a push of a sell button and if you bought uranium at 25 bucks and you're looking at $50 well you've doubled your money that's a fantastic investment and if you've got a mine to build or you have something else that you need the money for you know okay maybe it goes higher but you if you need that money now you sell you get that money and this brings new sellers in the market so what I'm saying is it's a false sense of confidence to think oh well it's going to be six months or a year before the producers ramp up production there are other potential sellers that I think $50 brings them onto the market already that doesn't mean it's topped it means you know that sawtooth pattern continues
Michelle Makori: All right so you anticipate a bit of a pullback in uranium as a buying opportunity but overall long term very bullish on uranium
Lobo Tiggre: Absolutely
Michelle Makori: Okay copper is there a commodity that you think it's still a good point to get into and something tells me that it could be copper based in our previous conversation
Lobo Tiggre: All right well yes I have to say that you know north of four dollars pushing five dollars I can't call copper cheap anymore there's a lot of the studies for these mines that are waiting to come into production they need $3 plus copper so four dollars is a great price already it doesn't have to go higher to incent higher supply now does this mean that copper stops already no, no, it takes 10 years for these things to come online even once you line up the financing, the permits and all that other stuff forget about discovery and exploration of known deposits you have to all these ducks to get in a row and then you decide to build the mine I was just talking with Adrian Day about this and from that point it still takes five years for these big copper mines to come online so this is a sector where high prices take a long time to cure high prices but that doesn't mean things have to go up in a straight line so I like copper a lot it's perhaps one of the most solid bull cases that even if the commodity super cycle does roll over I could see copper just keeping on going but it's also one that I want to buy on the dips rather than the ups there will be volatility and I want to use that to my advantage
Michelle Makori: I think that's a general sentiment people like to buy on the dips rather than the others but they don't
Lobo Tiggre: When I mean I agree with you that's the logic but the reality is that when gold's going nuts it's going vertical that's when people are buying just look at all those stocks okay so copper's going up the copper stocks are up 10 times as much that day
Michelle Makori: But if you had to pick your commodity of choice to get into right now that you think has long-term solid fundamentals it's copper
Lobo Tiggre: Yes well so it depends on what the goal is like long-term as an investor I would say actually yes copper if I want a more immediate pot like if my game is short-term gains it will be gold and silver with potentially silver actually despite being Darth Silver and my comments about the changing role of silver, silver is still I think relatively undervalued to gold and that does give it upside in the next sort of you know monetary scare and safe haven rush and we still see that, when they do move together silver typically is two, three, four times the percentage move as gold so for short-term gains I'm probably silver would be my favorite
Michelle Makori: Short-term gain silver, multi-decade gains copper
Lobo Tiggre: And maybe the best blend would be gold uranium is um yeah that's that it's just it marches to the beat of a different drummer and by the way all this inflation, stagflation doesn't matter to uranium at all it can't be produced in enough quantities still at current prices and the demand is increasing even if the global economy goes into reverse the Chinese and the Indians they're still going to build those power plants, they still have smog problems and so on, so absent a big accident and I always have to say that because this is an investment that can literally blow up on you right, so absent that so maybe one of the it because we're closer to what I see as an is a as a success in in uranium maybe it sounds like I'm less bullish but I also see it as very, very, solid for sort of the not right away pop but the middle road
Michelle Makori: I just want to focus what you said about the changing story or changing role of silver just elaborate on that for us
Lobo Tiggre: Sure well I think most of the audience can probably track me on this you look at gold and silver on Kitko on a daily basis and often you'll see one in the red and one in the green and you're not imagining that really is happening a lot if you look at the correlation over the last year it's almost disappeared it dropped to 0.2 and a 0.2 correlation is almost no correlation at all um and if you look at those charts you know what happened since the spike in 2020 and so on and how differently they behaved, you've seen this data you know what I'm talking about and so I've been thinking about that well what does that mean and you know a couple takeaways or something to consider is that in every bull market for monetary metals since 1971 when the dollar was fully divorced from gold, silver has always lagged gold you probably had guests tell you this before silver lags gold and then more than catches up on a percentage basis you know later in that bowl cycle silver outperforms gold on a percentage gain basis, that didn't happen in the 2020 spike and you could say oh well it's not over yet well but you know it's been a big correction and now we're going into a new phase so I would argue that silver not catching up to gold in that big spike last year is the first time since 1971 that that pattern broke and so that tells me that something's going on something is different and I need to pay attention to that as a speculator in this space and you know what's the cause the proximal cause is the increasing industrial demand you see the silver going into the solar panels and in the electronics I mean forget the panels for them even just your Tesla car and your computer printer all this other stuff there's more and more silver going into the gadgets as well, so it seems pretty clear to me that the industrial side of silver is becoming more and more important and that's not necessarily bad because the industrial case is actually getting bigger and bigger so that makes me more bullish but it is something I think silver enthusiasts not to use any majority of terms should recognize you know the data is telling us that there's a change happening in this marketplace
Michelle Makori: All right well thank you for breaking down that change as well as uh several other insights on commodities really appreciate it Lobo Tiggre thank you
Lobo Tiggre: Thank you Michelle
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