Guest: Felix Zulauf is the founder and CEO of Zulauf Consulting, a boutique research and consulting firm.
Recorded: 12/14/2023 | Run-Time: 49:41 
Summary: In today’s episode, Felix shares his view of the global investment landscape from Asia to Europe to the US. He shares why the tailwinds of lower inflation may reverse and lead inflation to rise above 10%. He also touches on the state of gold, the Dollar and other currencies, and why he’s focused on the upcoming election in Taiwan.
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Links from the Episode:
- 1:23 – Welcome Felix to the show
- 2:14 – What the world looks like as 2023 winds down
- 3:30 – Why China is not interested in high growth
- 11:45 – How the Taiwanese election might affect markets
- 15:15 – Value disconnect between the US & the rest of the world
- 16:38 – Historic parallels to the market environment today
- 17:38 – Thoughts on fixed income and inflation
- 22:17 – Gold
- 25:20 – The US dollar and other currencies
- 31:21 – What will biggest surprise in 2024?
- 33:36 – Something Felix believes that of most his peers don’t
- 38:01 – Felix’s most memorable investment
- Learn more about Felix : FelixZulauf.com
Transcript:
Welcome Message:
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Disclaimer:
Meb Faber is the co-founder and chief investment officer at Cambria Investment Management. Due to industry regulations, he will not discuss any of Cambria’s funds on this podcast. All opinions expressed by podcast participants are solely their own opinions and do not reflect the opinion of Cambria Investment Management or its affiliates. For more information, visit cambriainvestments.com.
Meb:
Hello, my friends. We got an episode today. I’ve been looking forward to this conversation for a long, long time. Excited to share our chat with well-known macro expert Felix Zulauf, founder of Zulauf Consulting. He was previously the global strategist for UBS and later ran his own asset management firm.
In today’s episode, Felix shares his view of the global investment landscape from Asia to Europe to the US. He shares why the tailwinds of lower inflation may reverse and lead inflation to rise above 10%. He also touches on the state of gold, the dollar and other currencies and why he’s focused on the upcoming election in Taiwan. Please enjoy this episode with Felix Zulauf. Felix, welcome to show.
Felix:
My pleasure. Thank you for having me, Meb.
Meb:
I am so excited to have you. I’ve been wanting to talk to you for a long time. Where do we find you this morning? This evening?
Felix:
Yeah, it’s early evening in Switzerland, just back from my place in Florida. Change to colder weather.
Meb:
Well, it’s always been a challenge for me to adjust to California during the holidays, seeing a bunch of lights and trees out on a pier in the ocean where it’s 70 degrees versus Colorado where we’d still be going to school in a foot of snow. I’m not complaining because it can be pretty nice going surfing in December and January, but Switzerland sounds like a magical time this time of year.
Felix:
I’m not sure it is. We have no snow right now down in the cities, so it would be nice to have snow over Christmas time.
Meb:
So we’re going to bounce all around the world this chat. Why don’t we get started with your perch from over there in Switzerland, views of the global economy, what’s going on? There’s been some macro forces, a lot of people wringing their hands this year about potential recessions. And I think everyone keeps waiting for one to come and here in the US and it just seems like it’s always in the horizon. What’s the world look like to you today as we wind down 2023?
Felix:
We have three regions in very different status. We have China that is sort of weakish. It has lost its momentum. It has to digest the overhang from the real estate boom and the credit boom and that will take at least 10 years if not longer. So China will not be a locomotive to the world economy for many, many years.
China is trying to manage through this and the restructure step by step, provide stimulus to support but not stimulus to growth. It’s not on the Chinese agenda to create high growth. Decent growth, three, four percent is good enough for them and in reality, three or four percent what they publish is probably one to two percent, not more than that.
Meb:
And are you picking that up from kind of what they’ve been saying is the insight rather from just indicators you’re looking at? What makes you come to sort of that belief as you look to the far East?
Felix:
I have said that for many years. When I saw the overhang from construction boom, real estate boom, the credit boom, once that is over, the overhang is tremendous. And think about it, the US has what? 140 million units of home in the whole us. The overhang of empty homes in China is about 100 million. So that’s a lot to digest and unfortunately they do not have a population that is growing.
It is actually shrinking slightly, but it will accelerate the shrinking over time. So there is no way they can grow out of the problem. That is impossible. Therefore, they have to restructure, they have to take the write-offs and eventually they have to recapitalize the local governments, which are the big players in that and they have to recapitalize the banking industry and they have to monetize a lot of the debt.
But they will only do so once the western world is at the point to do so also, because we have our problems, structural problems as well. And I think that will only come in the second half of the 20s. But we will run into a major crisis in a few years’ time, fiscal crisis, et cetera, and then we will try to stimulate out of it. And once the western world stimulates, the Chinese will do so.
Recently, against the expectation of most of the experts China tighten monetary policy, which the western world didn’t understand, but they did so to protect their currency. They didn’t want their currency to go down and break down badly. They want to keep everything in balance until 2024 when we probably have a recession in the US and central bank will begin to cut rates and the pump liquidity into the system. Then they can do it also, but otherwise it would hurt them.
Then we have Europe. Europe is the big loser in this whole game of rivalry and new arrangement of world order. Europe is weak, it has no army to speak of that can defend its own territory and they have no saying in the world really. Economically they have been strong, it’s a big market, but they all depend on China for exports and US for exports and US on defense and they will come out very weak.
The economy is suffering particularly in those areas where they try to go green and the off fuel led energy and nuclear energy like Germany that’s very weak. They are destroying the German economy actually. Other parts are doing a little bit better. Spain is doing very well. Italy has now outperformed Germany I think for almost four years.
So net I would say Europe is sort of stagnating borderline to recession. And if the US goes into recession, we will probably also go into recession and the recession will deepen somewhat. The US is the odd guy. It has been the strongest economy, provided a lot of money to the people to spend. And that fiscal support helped of course. And I think the tightening over the last year and a half or so will eventually be felt during 2024.
But the consensus of a soft landing is very pronounced. And what I have learned in my career is when you have such a pronounced consensus and all the experts and forecasts agree, something else is going to happen. So I think the economy will first be a little bit stronger than expected and then weaker than expected and fall into recession. And that should hurt the corporate earnings.
Let’s say it’s going to be a mild recession because we do not have a huge inventory overhang or anything of that sort. That could mean that corporate profits let’s say go down 10%. It could go down more but let’s say mild 10%. Usually in a recession they go down 25%. And you take a bottom, a bear market bottom, a multiple of 16, you arrive at about 3,500.
That’s not what people have in mind when they enter the market these days. And actually the market has some technical issues that are very dangerous. And I’m referring to the tremendous concentration of stocks. Concentration of stocks that perform very well and are the beneficiaries of weak inflows of money on the way up can pull the market index up dramatically as done this year.
The 493 stocks did not as well as the Magnificent Seven, but keep in mind that when you invest in a passive way and you index or when you invest in an active way and you do closet indexing as most guys are doing, then you end up with probably 80% of the equity invested worldwide is benchmarked. And that means that if you invest in a world index, almost two thirds of the money flows into the US market and out of that money one third flows into seven stocks.
So you have a concentration like never before in the world. And that was very nice on the way up. I think it will exaggerate the move on the way down. So when a correction comes, when managers are hit with redemptions, when they have to raise cash, et cetera, they have to sell what they own too much of and those are the heavyweights of the Magnificent Seven because if you wanted to outperform, you had to overweight those Magnificent Seven, otherwise you are done.
And I recently read a report that said the large hedge funds in the US have 70% of their equities in 10 positions. I’m not sure whether that is true or not, but I could imagine it is. And if that is true and the market for whatever reason turns down, then you get the move down that gets exaggerated and has nothing to do with the real economy. People do not understand that as the move up here does not have much to do with the real economy.
Meb:
Man, Felix, you touched on a lot there, so we’re going to dive into a few things. The first, I was laughing as you were talking about Italy because one of my favorite things to do when I go on TV is I ask my son, he’s six. I say, “You got to give me a word to work into the interview as a challenge and so that you’ll watch it and make it fun for me, because otherwise I get bored talking about some of the stuff that is the daily topic.”
And I thought he finally defeated me this time because in years past it was words like “Ninja” or “Blah blah blah” or a meme and this time it was “Mama Mia.” And I’m like, “There’s no way on live TV I can work in Mama Mia.” But Italian stocks were having a great year and so I thought I couldn’t do it but I was able to squeeze it in. I don’t think anyone understand what I was talking about, but I had an audience of one so I finally made it.
Okay, so there’s a handful of things that I would love to get into. We’re going to get back to the Magnificent Seven in a minute, but one of the things I’ve seen you write about as we’re talking about kind of geopolitics, everyone is so focused in the macro world always on the big events, what’s going on in Ukraine, what’s going on in Israel, elections, we got one coming up in the US next year, Argentina. But the one that I’ve seen you write a lot about is the importance of the Taiwanese election. Maybe talk a little bit about how that may be an important role or an important point in the next few years as far as geopolitics and macro and markets.
Felix:
The Taiwanese are also Chinese originally. And I think China and Taiwan over the long term will unite and get together. It’s natural. Of course the US is using Taiwan as a provocation to China as they used Ukraine as a provocation to Russia. And I think if the US would sit quiet regarding Taiwan, there wouldn’t be a problem and we wouldn’t talk about it and Xi would not have made the mistake of saying we want to integrate Taiwan within the next five years.
That was a big mistake. It should not have put a time limit on that. In Taiwan you have people who favor getting closer with China and you have others that are against it. And on January 13th there is the next election and you have two opposition parties that together in the polls have 53% that are in favor of getting closer with China. Not integrating completely but getting closer with China.
Unfortunately the two could not decide to use just one candidate. So there are two candidates and really to make it work for them, one candidate close to election time has to endorse the other one to make it happen and then they could win the elections. I was hoping that Xi or China would lean on those two parties to some degree to make it happen. We have to wait for the outcome, but you also have to understand that about 10% of the Taiwanese workforce already active in China.
They work there and the experts and the engineers from semiconductor companies, Taiwanese semiconductors, they are also working in China. And though I think the exchange of know-how is going both ways and they trade and they are friendly, of course the Chinese are occasionally aggressive with their military maneuvers et cetera. But I do not see a war coming up there.
I think that would be bad. I think the Taiwanese working in China are telling their people back home they are treated very well, they make a good living, everything is fine. And over time, if nobody would provoke, over time the two would get closer together. The Taiwanese by the way, whenever they made a new innovation or new chip or so they always gave China a three to four months lead over others to keep them happy.
Meb:
Well, it’s interesting, we were talking about this the other day with somebody where everyone is so excited and hot bothered about a lot of the American large tech. And particularly when you’re talking about investments in stocks, American semiconductor companies.
And if you look in Taiwan and elsewhere, South Korea especially, there happens to be a lot of semiconductor companies, also ones that trade at a much larger valuation discount than some of the ones in the United States do, including a few that have been two, three baggers this year alone.
It’s always interesting to see the value disconnect, which we’ve been talking about for quite a long time, US versus the rest of the world. I don’t know if there’ll ever be a catalyst for this to close, but it seems like an entire investing career at this point.
Felix:
No, I think the catalyst will be when the Magnificent Seven decline, that will be the trigger. And then you will have maybe another one more cycle where the US outperforms and that should be it.
Because then the world order gets rearranged and the US dominance is in decline. And I think capital may then go to other places once everything is settled out and we have a new world order that looks to be stable. But we go through this order and the volatility in geopolitics for another five to eight years or so.
Meb:
I wonder is there a historical parallel or analog? In my head I’m thinking of phrases like NIFTY 50. You go back and read some of these books about some of the stocks you just had to own. You couldn’t not own some of these companies in decades past because of the same sort of concept where it just dragged the whole market cap weight up. Are there any other periods you think that this kind of feels a little like or similar as far as we look at the playbook on what may transpire?
Felix:
The NIFTY 50s were one, the TMT stocks in 2000 were another one, and then the conglomerates in the late 60s were another one. The conglomerates like Litton Industries, Teledyne and all those conglomerates were then in favor and they got a very high multiple because of that and the money was flowing into them and eventually most of the stocks with a few exceptions declined badly thereafter and some even disappeared.
Meb:
One of the big topics for the past couple years, certainly here but also certainly in other countries like Argentina has been inflation. And inflation certainly spiked to pretty worrisome levels and it feels like now in the United States’ most feel like it’s conquered and is done with. How do you sort of look at this dual topic, and you can take this where you feel appropriate, of both inflation and bonds? I’ve seen you talk a lot about optimism and the bond fixed income world is pretty extreme right now. What’s your thoughts on that general area of fixed income and inflation?
Felix:
Well, first of all, the consumer price index has never gone down. It has always gone up. And inflation is the rate of change of the consumer price index. And they constantly change the composition of the consumer price index to make it look lower than inflation really is or the cost of living really is. In the 70s, they took energy out and food out because they said, “We cannot control it,” as if people would not drive cars and would not eat. It’s nonsense, of course.
And recently they took out healthcare insurance premiums and replaced it with healthcare insurance company’s profits because the one went down and the other went up. So I think there are a lot of silly games being played and if you take the basket of 1990, you are at nine or 10 percent inflation at the present time in the US. And I come to the US for 50 years and in all those 50 years restaurants have always been cheaper than in Switzerland except for this year.
This year is the first time in virtually 50 years that the US was more expensive than Switzerland. And that tells you that the US has an inflation problem. And of course the rate of change is going down and the base effect is helping and commodities are helping, oil is helping and we get maybe down to 2% or something like that next year, but the cycle behaves very much according to the cycle in the late 60s and 70s and that means it’ll bottom out next year and then it goes up.
And if I’m right about the recession next year and they inject liquidity, that will make commodities go up and you compound that by the rivalry between the BRICS and the G7 and the BRICS control three quarters of the commodities of the world and they will make it most cost than ever. And the underinvestment we have seen in recent years will make commodities rise very, very dramatically in my view.
So you will have probably an oil price in 26 of 150, 200 dollars. That gives you a CPI of more than 10%. So I think we will have another inflation cycle ahead of us and I think in the next inflation cycle the bond markets will be crushed even more badly than in the last one. And in the last one was pretty heavy.
I mean, a 20-year treasury ETF went down 50% from 2020 to 23. And I think next time it’s got to be worse because when you go the second time over 10%, I do not believe that the 10-year treasuries will stay at five. And then if you go to eight or something like that, then of course the question is can our system handle that? And I think it cannot. We will have a crisis. We will have probably one of the most severe recession crisis in the later 20s. And that’s what we probably need to make the structural changes in our government’s expenditures and income statement. That can only be made during a crisis.
You cannot cut entitlements and you cannot raise taxes dramatically if you are in a pleasant circumstance, if everything is going normal. But if you are in a painful crisis that hurts everyone and the world is looking very grim, then I think you can do it. Then the politicians can sell it to their constituencies. We all have to sacrifice something and need to do it for the benefit of our nation. So this is what I see ahead.
Meb:
You allude to commodities, which is a topic that I think is hard for a lot of investors. Well, there’s one in particular that’s nudging at all-time highs right now and that’s of course the shiny metal that generates probably more varied opinions than almost anything out there except for my Aussie and Canadian friends, they’re on board.
But you’ve talked about gold in the past. Most Americans, I feel like that listen to the show, don’t own much in their portfolios. My Chinese and Indian friends, it’s a different story. What are you thinking about the shiny metal, do you think it’s interesting, not interesting, is hitting all-time highs here?
Felix:
Gold is money and you see that physical gold is moving from the West to the global South, China, Russia, other BRICS nations are buying it and the West is selling it. And I think they have started history because when you go into a crisis, gold is money when you need it because your own debased fiat money, maybe nobody wants at that time, but gold is always accepted. And gold is volatile, goes up and down.
It reflects the debasement of the fiat currencies. Gold they say is always worth about an expensive suit. So there are people buying suits for 2000, 3000 dollars and that’s probably the price range. Gold is on an eight-year cycle. When you go back, it is a pretty regular eight year cycle and the cycle low, the theoretical cycle low is due next summer in summer of 24. And that goes together with my expectation of a recession and a big change in monetary policy.
So I think from that theoretical cycle low, which will probably be a higher price than now, we will see an acceleration on the upside for about four years. So I’m pretty constructive on gold. I have recently seen a survey among American investors, 71% of those polled showed they owned between zero and one percent of their assets. So gold is not widely owned and I think it will be more widely owned as prices go up. Most people buy the most at the top and not at the bottom.
Meb:
I laughingly joined Costco because I was trying, I don’t know if it was a promotion, they’re trying to get press or they’re actually trying to do it where they were selling gold bars at Costco and they immediately sold out of course. So I’m going to look forward into the next couple of years when Costco becomes the biggest distributor of gold bars in the world.
I learned a great fact this year that Costco puts out, it’s sells something like half of the world’s cashews. Which I think is the worst of all the nuts, listeners, but people like them. So I don’t know what, maybe Costco puts some magic seasoning dust on those. So tied along with this topic of gold, inflation, you mentioned the US being cheaper than Switzerland.
So my takeaway from all this is I need to get my passport and go travel a little bit while I got the time and the chance on the, let’s talk about the dollar and global currencies. Is it a lot of the Quants will say that purchasing power parity US dollar is expensive. Is that your view? What do you think about the global FX market, where there’s opportunity where we should avoid?
Felix:
I think the dollar has topped last September I think it was, and is now in its second medium term decline. And that medium term decline, I expect to end sometimes in the first quarter, probably together with when the stock market tops out. And from then I expect a recovery. I do not know how long it’ll will last, but in a non-safe world, when you compare the attractiveness of currencies and places and jurisdictions, the US still comes out very high on the top.
So I wouldn’t put, as an American, I wouldn’t put my money into China or Russia or Argentina or whatever because you cannot trust those jurisdictions. They can simply make a new law against foreigners and you lose everything, as happened in Russia. And therefore, I think capitalists from all over the world are still looking for a safe haven and turn to the US.
So the problem for the dollar will then come and arrive when the US central bank begins to ease monetary policy. The system is such because the dollar is still the dominating currency in this whole currency system. It’s dollar-based. When the central bank sees the dollar declines because it creates more dollars than all of other currencies.
And if the central banks tighten, the dollar goes up because it tightens, the biggest pond tightens more than all the others little ponds. And when they begin to ease next year, then I think at some point from summer on or so, the dollar may have a bigger problem and may decline quite sharply. You misunderstood me, I said the US is more expensive than Switzerland, not the other way around.
Meb:
Yeah. Yeah, US expensive, so we got to travel.
Felix:
Yeah.
Meb:
Right. Right. Right. Right.
Felix:
Yeah. Yeah. That’s right. Yeah, you have to travel. You have to travel.
Meb:
My listeners are tired of hearing about me talking about skiing in Japan where the yen is probably some of the lowest levels it’s been in a long time. So I’m definitely excited about heading back to Japan. So as we talk about all these different areas, what’s an area as we talk about avoiding the big Mag Seven, are there pockets of the US or particular countries elsewhere that you’re interested in? It could be styles like value growth, it could be sectors, it could be countries? Anything that you’re say, “Okay, this looks a lot better other than just avoiding the big dudes.”
Felix:
I think we are just about changing from growth to value. We are in the late stage of this pull cycle from last year’s low last fall. It’s the third up leg and that up leg when it ends will most likely lead to a bear cycle. And as I explained, I think the growth stocks due to the Magnificent Seven will suffer more than the under-owned, than the under-owned stocks which are value stocks and are cyclical stocks, et cetera.
They are cheaply priced. Many of the cyclicals and value stocks are not expensive. They are cheaply priced, they are under-owned and that’s what I want to buy in the next decline. Right now we have one sector going against the market that is energy. Energy will be an attractive sector going forward, but it is now correcting because the price of oil is discounting a global recession and it’s coming down because of that.
It is actually telling us a very different story from the stock markets. The stock markets are telling us everything is rosy while the commodity markets and oil in particular is telling us it’s not so fine, it’s not so nice out there. So, I think when oil goes down to let’s say 60 or below 60 in a few months’ time, then I think it’s an attractive place to buy energy producers, oil producers and gas producers in good jurisdictions, in safe jurisdictions.
So North America would be a good place. Stocks that produce in North America I think will be the front-runners. They are attractive. I also think that the commodity related stocks, producers of copper and aluminum and those things will be attractive stocks in the next cycle, but it’s too early to buy. They will also go down with the market but not to the same degree as the growth stocks.
And usually when you have a change in leadership, it’s usually during a down cycle, during a downdraft where those sectors that decline less than others, those are the ones that are sold out and you do not have the selling pressure. Whereas those that are over-owned, they are declining more than others.
You want to buy at the bottom the ones that are under-owned and do not decline as much. So you have to study relative performance during the decline. And I think you will find many attractive companies among the industrials and the cyclicals commodity related also, energy that we’ll be verifying for the next up-cycle.
Meb:
The late Byron Wien always used to have his 10 surprises. If we sit down a year from now and Felix says, “Okay, this is looking back on it, probably the biggest surprise of 2024 or so differently, what do you think is going to be the biggest surprise of the year?” Anything in that category of what you think might be the big surprise? Or we touched on it already.
Felix:
The big surprise will be that the yen will be the strongest currency.
Meb:
Oh man, I better pay for my trip ahead of time.
Felix:
Absolutely.
Meb:
I need to pay my expenses. Let’s go ahead and book those.
Felix:
Absolutely. You have to understand that the Japanese did not tighten policy and they were the only ones that did not tighten and all the others have tightened. When all the others begin to ease, the Japanese will not ease because they have been easy all the way and therefore their currency has declined. The Japanese yen is probably undervalued on a purchasing power parity by 40% or so, and it has been used as the biggest funding currency.
When you have to finance a project, you always go to the currencies that are the cheapest to fund and the weakest, cheap and weak. Interest rates were low, the currency was weak, that was the ideal currency. What that means is that you have a huge [inaudible 00:32:41] position out there from those financings.
And when the trend changes, and it probably has already changed, when that trend changes, it goes very fast. I remember the last time we had such a situation was in the late 90s, 1998. I was in that trade in 1998. In 97 the Asian crisis started and because of that the yen was very weak, a very weak currency, and the dollar was a very strong currency. And dollar yen was at 148 and three weeks later, in three weeks it went from 148 to 108.
Meb:
My goodness.
Felix:
It was a dramatic trade and it was one of my better trades. I used a lot of options and I had one of my very good years in those in 1998. Yeah.
Meb:
You have quite a few non-consensus views. I do a Twitter thread where I talk about what view do I hold that’s 75% of my investing professional peers. So if we sit down at a table in Switzerland or Florida for coffee or lunch and Felix says something, the vast majority of the table would shake their heads and say, “He’s crazy.”
What is a view? And this could be a framework, it doesn’t have to be a current opinion, but it could be a current opinion, but what’s something that you would say or believe that most of the table would not agree with? So something that’s non-consensus that you believe that most of your professional peers, not retail, but professional peers may not agree with you on.
Felix:
Five years ago I started to write about coming wars and everybody was shaking their heads and they laughed at me actually. And now we have wars and I think the wars will intensify, they will grow bigger. We will have more wars and we run the risk of a war where the big guys get involved. I wouldn’t say that Chinese tanks will roll through the US or so, but I think it could be a war where we try to sabotage their electrical grid and they ours and the internet and things like that.
And this will do a lot of damage eventually to our economies. And I think this is not taken into account when I listen to Wall Street, the mainstream guys. They go and they have their playbook, they have their formulas, and I think those formulas in the next few years you can throw out of the window. It doesn’t work that way.
Meb:
Is there anything generally that kind of at the time led you to that belief? Was it just rhetoric from various groups? Was it long-term trends as far as societal kind of macro issues?
Felix:
It’s the basic idea of the [inaudible 00:35:40] trap. This is when you have a situation where you have a hegemon that controls everything in the world or in a region and all of a sudden new power rises comes up and challenges the guy, then you have a conflict. And that conflict situation we have seen in the last 500 years, 16 times. 12 times, it led to direct war of the two rivals and three times it led to deputy wars and only one time it worked without wars.
And that was the change from the Mother of Great Britain to the [inaudible 00:36:20] of the US. And I think we are in such a situation again. And when Trump started to try to push China on trade, it was clear on the [inaudible 00:36:35] the conflict would be inescapable, the conflict would come. It always starts with straight conflicts and then it becomes eventually militarily.
And I think we are moving towards such a situation. The situation in Israel is dangerous because if Israel, after the Gaza operation tries to turn against Hezbollah. Hezbollah is in Syria, and Syria and Russia have a military agreement. Syria is backed by Iran, as is Hezbollah. It could pull those guys in and it’ll pull in the US on the other side.
And the Chinese are the current power broker in the Middle East. It’s not the US anymore. And of course they would back the BRICS side. It’s a very dangerous situation. I’ve recently heard that it’s the first time that the Israeli commando must always first talk to the US before they start something because the US is realizing how dangerous the [inaudible 00:37:45] is and could become. So that is something I’m very worried about.
Meb:
As you look back in your career, this is going to be a tough one, you mentioned the yen already, what has been your most memorable investment? It could be good, it could be bad, it could be in between, but just the one that seared into your brain.
Felix:
The most memorable investment was a bad investment. That always… The good investments you talk about, but the bad investments you never forget.
Meb:
They stick with you.
Felix:
My worst investment was when silver peaked at 50 and I saw that peak. I sold out my gold and silver and I thought it would go down to 36 and then bounce to 45 or so. So at 36 I bought silver, and as I bought, it just started to go down, down, down, down, down. And I sold out that 18. I lost 50% on that trade and I was completely confused. I was 30 years old at that time and it hurt. I had to turn the screen off for a few days. I couldn’t watch it anymore.
And then I went back to the drawing board and did my homework and I figured it would decline to 12 bottom in the 12, 10 area and then bounced back to 24. So I waited and about six months later I bought three times as much between 10 and 12 and then it rallied to 24 where I sold. So I came out nicely at the end, but oh, that was horrible and it hurt badly and I never forget that and it taught me the lesson never try to be super smart. Smart alone is good enough.
Meb:
Yeah. Silver, we didn’t mention yet today, but I was trying to pull up a chart to see where we’re sitting today as gold is pulling it up. Right around 20, 24, 25. So.
Felix:
Yeah. Yeah.
Meb:
Not all time highs. So maybe we got a little catch-up to be doing.
Felix:
I think silver will be interesting .and particularly from next year on, I think silver on the way up, once the precious metal cycle begins to gain traction, then I think silver will outperform gold on the way up. It is an industrial metal. It’s not the monetary metal. But nevertheless, I think it’ll break 50 and go to new highs.
Meb:
Well, you heard it here. Felix, if people want to follow your writing, your research, your consulting, where do they go? What’s the best place to find more information about you and what you’re up to?
Felix:
You go to www.felixzulauf.com and you can write to info@felixzulauf.com and there you find us.
Meb:
Felix, it’s been a blessing and so much fun. Thanks so much for joining us today and happy holidays to you and all of yours.
Felix:
Happy holidays to you too. And thank you very much for having me. It’s been an honor. Thank you, Meb
Meb:
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