I stood up this blog many years ago to write about a LOT of things. The last 5 years, I have written a lot about the macro environment, and with this – a hyper focus on metals. In 2020, I documented how I doubled my portfolio on mining stocks in 3 months, then sold half. I also documented how I used that to rehab one of my rental properties that hadn’t been inhabited since 2013. I spent a small fortune essentially stripping it to the bones and re-doing everything. Today – that property is highly profitable. However, with this – there’s “payback period” and the like. So the “profit” I’m seeing is paying back the profits I invested from the mining stocks. It will take another 1-2 years until I break even, but then perhaps 30-40 years of solid profits.

I write about all three asset classes, with my primary expertise in the silver market. I have been doing rentals since 2005, so I also write a bit about that.

The three asset classes are – in MY textbook world:

  1. Money (gold, silver, food, consumables for barter)
  2. Business (yield bearing assets)
  3. Property (items with cost, but can appreciate over time)

I went into great detail with my friend Jim Forsythe in THIS video. This is based a little off of Mike Maloney’s wealth cycles video. Meaning, you want to hold wealth relative to other items in your portfolio to grow.

For example, assume the below:

  • Money – you have 100 oz of gold at $250,000
  • You have stocks and bonds valued at $250,000
  • You have a home, washer and dryer, car, etc – and your property is worth $500,000

You can see your pie is allocated 25%, 25%, 50%.

When you do macro analysis, you have to understand the bigger wheels that are going on. In a “normal functioning” market, money growth happens through borrowing at lower rates, then the money finds its most efficient use. For example, if gold was $200 an ounce, and you see it as relatively underpriced to stocks, perhaps you sell some stocks to buy gold. Perhaps gold gets to $2400 and you sell gold to pay off your mortgage.

There are some strategies to consider when building your own wealth, over the long term

  1. Money – has the pile grown? If you are over your 25% allocation, by a lot, then maybe you take some of this money and buy undervalued stocks, pay off high yield debt, or pay off a mortgage.
  2. Business – what are your yields like? Are they keeping up? Are some of your yield bearing assets underperforming? Would that capital best be served moving to money or paying off high yield debt? Should you sell this to pay off your house?
  3. Property – this category technically loses value, unless you spend a lot for maintenance. Houses “go up” in value only as a function of low rates and “printing” M2. They require thousands of dollars a year for maintenance, you pay taxes on properties, and things like cars/washers and dryers have a shelf life. In this category, you allocate resources towards UTILITY. Anything you buy here serves a purpose. Shelter, transportation, clothing, washing dishes, etc. How much of your assets do you allocate here?

The next is to consider your income stream. How much do you have at the end of each month? You may go to grad school, get a fancy law degree – whatever. You have your mortgage and utilities, etc – but at the end of each month, you would like a pile to invest and convert to some money, and perhaps convert some of it to utilities to replace your deck or something.

The strategy here is twofold:

  1. Grow all of your piles, the best you can
  2. Maximize your monthly capital that is free

While I bought a short term rental, it’s not like you think. It’s not your typical AirBnB rental for $5,000 a week in a posh area that will remain empty most of the year now. It’s my second home that I can take my family to. I don’t necessarily like travel, and this serves several utilities:

  1. A place I can take my family to at any time. I get perhaps 200 days a year usage for $x. This more than replaces a family vacation for a few days at say $6,000. So I get a lot more utility out of this than I would for a 4 day cruise.
  2. A place to go in times of strife. The utility here is being concerned about the political situation in this country.
  3. A yield bearing asset, so this also fits in the “business” realm. But the goal here really isn’t to make a ton of money, it’s to offset the costs of the utility
  4. A place I can have for me and my buddies, or my wife and her friends, for yearly gatherings.
  5. A place I can let my close friends and family use

So I don’t really care if I rent it out much or not. However, I bought the place at an estate sale for dirt cheap. The catch was, I probably needed to put $50-70k into it to get it ok to rent. While I had gobs of credit available, I also had a ridiculous amount of equity from my home and rentals I could use. In the short term, you use the credit situation to fix it up, and then you transfer equity from one of your properties to this place in paying the credit down you used.

The idea was this…

  1. Rates may come down. It’s possible I could cash out refi a place
  2. Rates may come down and a straight up equity loan could suffice, and pay this with rents
  3. Metals and miners will go parabolic, and I “skim from the top” to take some profits and pay this credit off.

What this essentially does, is then transfer what I sell in miners and metals into equity in that place. A “wealth cycle”, if you will.

The place I fixed up over the last 3 months probably increased in equity by over $100k. The final touches are the pool being repaired. If I wanted a pool here at my primary residence, it’s $95,000. Instead, I bought a house WITH a pool, but the repairs will cost around $10,000. This is between a new liner ($6700) and robots, pumps, equipment, etc. The house needed a lot of TLC.

So the last few months, I was expecting my portfolio to more than double, and I was going to take half and pay off the credit, like I did in 2020. That was option #3, if the rates didn’t come down. Rates didn’t come down.

So I sold 80% of my portfolio and 40% or so of my silver (this is a guess, because some pieces I still have, have numismatic value). I had bought a massive tranche of silver in October 2023 in the form of bricks that had zero sentimental value. I was buying it at $21 and $22 and begging people to buy then. I was able to offload it around $30 an oz. It took the purchasing power from October 2023, and then inflated it perhaps close to 50%.

What I also mentioned in my post is that instead of borrowing a home equity loan (not a HELOC, which is interest only), I sold stocks and metals temporarily because I see a contraction ahead. I called this in March, and have been wrong every day since then. So do not follow me into the gates of hell. I just feel ALL asset classes have been significantly stretched – and people like Buffett are in $189B in cash. Why?

I chose to take profits, and rotate it into an undervalued asset. If I had to sell this place, today, I’d have made a pretty penny. Especially when the pool is done in the next week.

I will then use the rents from all of my rentals – and salary – to buy back into miners and metals at what I feel will be a decreased price, at some point in the future. I am also short 2 silver micros – as I feel the high point right now will come down.

Remember, I did a lot of studies on previous bull markets. Many of you are just thinking of March 2020, and how silver went from $12 to $30 in no time. You feel that perhaps we are only halfway through that move. You could be 100% right. I’m not here to say “you are wrong, I am right”.

My spidey sense with all that is going on today tells me there’s a massive rug pull coming. It’s a presidential election year, but that Feds Funds rate is NOT coming down until something breaks. And – there’s a vice grip there until they NEED to reduce it. Meanwhile, we have commercial real estate on a clock, with many regional banks holding that bag. You have super low trading on the SPY, and Dow at 40,000 – where all of this mania was pricing in 7 rate drops this year, and there may be none. In fact, inflation is sticky and rates may even have to go up yet.

Everyone is drinking the kool aid. I see the government reports as flawed. Hiding things. Not reporting how things REALLY are, in order to score political points. Many who are reading this are possibly wealthy and scoffing at what I’m saying. I grew up poor, and can tell you, those I grew up with who didn’t go through 6 years of grad school are struggling. Badly.

The estimates I had for a mini split lately were $2400 from Home depot, with three heads. But the installing company wanted $12,000 to install. Why?? Because they can, because anyone with credit is spending like a drunken sailor. I then pushed back, and someone else called me back. They quoted me at $7600 for 2 guys for a day. All of the equipment needed was with the package. It came out to nearly $500 per hour, per person, they were billing. Dude held firm when I called him on this.

This is a recipe for a smash down. I’m sorry.

So what I attempted to do, was instead of borrowing at 9% or so to take my credit items down – I sold stocks and some silver to do exactly what I did in 2021, and just like then, I added to my portfolio over years. I sold stocks in March to pay the 10% down and closing costs for the house. These were stocks I also didn’t want to sell, because they were lagging and I kept waiting for the mining stocks to break out. They gradually went up.

So why???

Let’s look at the 2011 run up.

You can see many periods in green – lots of 2-3 month run ups, high RSI, then sell down. Rinse and repeat.

This is the period between Nov 2008 and July 2010. Let’s look at the next year

In this – you are seeing stronger moves, over shorter periods of time. In both cases, you see…

  • higher highs
  • higher lows

Only in the last two legs here do you really see violent moves. This was separated by a short term consolidation. But the last leg here, look how straight up and down it went?

Additionally, if you look at RSI in this final leg of the bull, you can see RSI above 70 for quite some time. In the previous chart, it would get into 70 RSI and peak and trough.

Let’s look at the last year….

This is NOT the 2010 year. If anything, this looks like 2007-2009. Each one of those RSI peaks then got knocked down. The ONLY difference is this last run, the RSI only went down to 50ish. Which is a GOOD sign.

This was telling me the following:

  1. keep a lot of silver back. I did sell only about 40%. Part of me feels everything is going to be smashed. With this, I believe the hard floor now is $20. I do not think it can go below that, ever again. Base metal producers make up 90% of the silver supply market. Their business doesn’t matter if silver is $35 or $20. This is what is lost today on most investors. As long as base metal producers sell this on futures for $20-$25, people will buy it. This is driving the silver primary miners out of business or to switch to a different primary metal, like gold.
  2. There will be periods of time, ahead, to buy more silver back on dips, with profits from the rentals.

Additionally, if you look at the metals to mining stocks, they have NOT performed like they did in 2020. With what I feel to be a strong correction ahead of OpEx, I liquidated 80% of my account. The 20% that remains is all junior high leverage stocks. Meaning, if we see $100 silver tomorrow, my entire remaining portfolio will 10-20x.

You can see in 2020 where the miners went berserk, and hit the bottom rail of my chart. THAT is when I sold half of my miners for a double. Over the course of the last 3 years, this has receded. Of most issue is on times the metals ran up, I and others went out and bought miners, only to see smash downs on the metals happen, and disproportionately affect the miners I had just bought.

A few things I noticed with miners….

  1. inflation has driven up their costs, significantly.
  2. If Newmont could not make a profit at $2300 gold, and claiming $900 or so AISC, something is very wrong with how they communicate profits to us.
  3. Overhead on some of these companies is crazy
  4. At higher prices, mine managers may run less profitable material. This is sneaky – but they do it because at higher prices, they can keep the same profit levels by running lower grade material. You and I expect them to run the same grade material, but they preserve the higher grade material and run lower grade. It pays the bills. It preserves the higher grade material.

What I had expected was fireworks at Q1 profits for miners. While some were favorable, you had to ask yourself this question. At $2300 gold, how the hell aren’t the majors running like thoroughbreds right now?

To me, I believe that a few things have happened:

  1. Many of the lower grade companies have been exposed over the last few years, and many saw the scams from the pump and dump and stayed away.
  2. Many bought over the last few years to see massive dilution along with costs skyrocket. They got out and aren’t coming back
  3. Equities are flying. Why would someone buy into NEM when they can 5x with NVIDIA?
  4. Everything is going up. Capital is flowing currently to where the greatest gains will go.

You then have to look around at the dire warnings everywhere. With Buffett in $189B in cash, it’s signaling to the world that all equities are overpriced. Their strategy here is to be in a lot of cash, and with this, jump on weakness to buy items 40% less.

Companies have been doing stock buybacks and not expanding. Paying down debt. Strong cash position. Expansion has stopped.

Contraction is near. Cash is there for companies to weather any storm. And they all have umbrellas. You can see the banks piling up shorts right now on silver.

“This time it’s different”. That was in the comments a few times.

I’m very much aware of what’s going on with Shanghai prices, and this may be what is drawing gold and silver prices higher. It’s been my contention that they are getting out of treasuries and into hard assets. I even pondered a few months ago, with EVERYTHING going up like it has, isn’t this a signal that others around the world are getting out of USD and into tangible things like real estate, commodities, etc?

Right now, everything is algo driven. It’s all reading fake headlines of fake government data. None of this is reflecting the 70% of the US that is paycheck to paycheck. How most of our middle class has disappeared in a very short time – as grocery prices have soared.

The top 10% in this country are now living like kings. The next 10% is losing ground, and very quickly, as taxes and insurance are putting a pinch on them. The next lower 60% is struggling hard, and cannot afford to do anything extra anymore. It’s tight for them. The bottom 20% is now lost, and you can see this in just about any inner city in this country, big and small. Drug problems, violence, theft. It’s a rot that cannot be fixed…

Until prices come down. A lot. With everything.

The Great Deflation is coming, at some point. Hunter may be right. I don’t know.

All I know is that I want back in on the miners and metals, and will dollar cost average in at what I perceive to be “higher lows”.

Trolls

I awoke to what seemed to be dozens, if not hundreds of comments on my Tweet thinking I sold everything and rid myself of the gold and silver trade. Hell. No. I still have 60% of my silver, and 20% of the miners. I “borrowed” from my equities to pay down debt that improved the equity of a house that will pay me money. That money, and the rents of others, should help be get back to where I was in 6-12 months from now.

I am expecting the stocks I owned to go up, substantially. But what I have seen, and what I feel is inevitable had me de-risking a bit, and rotating profit and equity into another asset class – that I bought as a severe discount.

I hope to be whole in 6-12 months and then take that magic carpet ride up for the next few years.

Note. This isn’t 2011. It’s more like 2008, and we all know what happened in 2008.

OK – time to go. I just wanted to post something to respond to the trolls. I didn’t leave silver, by any stretch. I took a bunch off the top, and want to reload. All of you think there is never going to be a time to reload, that the price will continue to go vertical from here.

Look. At. This. Move.

If you think there’s zero correction coming here, I cannot help you. I am looking for a higher low coming, and will add around that time. Tranche by tranche.

Ideally, a year from now – I’m back whole, but what I have bought along the way all goes vertical. And – I will have no debt from the house, and gets serious rents because of the improvements I’ve made.

This is wealth cycles, and all of you need to understand that there’s more than one asset class. The silver that I do have will never be sold, unless there is a Weimar event. I did not sell that. I sold an investment pile I bought 7 months ago and made an incredible trade on it. While I’m sad to have sold my one miner at 50% profit, what you are missing is that was capital tied up for 2.5 years. I will buy back on dips.

Hedging…

Lastly, I believe in “wealth preservation”. If I am wrong, and silver goes immediately to $100 next week – my remaining silver mining stocks will all do a 20x, and the remaining silver I have I’m buying an island with. If I’m correct, and there is a smash of sorts, I can buy a lot back cheaper, using profits from rentals to do so. But what if everything melts up? The rentals I have will scream higher, as rents will be maxed at highest rates, equity in all of my properties will go ballistic – AND I have enough mining stocks left to make a substantial impact in paying off any debt I have remaining.

If you are all in on one asset class, or one trade, you are putting yourself at high risk. Take a few minutes to understand the genesis of my strategy with Maloney’s wealth cycles.

While mining stocks went down from 2020-2024, my real estate has soared in value. I took an opportunity to reduce some debt prior to what I feel is to be a deflation. Debt during a deflation has a crushing effect as you have less dollars in assets to pay back a nominal number. IF you are expecting inflation, you take on low rate debt. IF you are expecting deflation, take inflated assets, sell, and pay down debt.

We’ll see how this plays out. I will sleep better with no debt on this – if a steam roller is coming for us. If a steam roller is NOT coming, my STR rates will be high and maxed out, and I can more quickly buy back into my mining stocks with the profits.