What to Do When Markets Become Casinos and Logic Goes Out the Window

Finance U Public Finance U
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Originally published at: https://peakprosperity.com/what-to-do-when-markets-become-casinos-and-logic-goes-out-the-window/

I really enjoyed this one. There’s something about a guy who’s reached the part of life where they just say what’s on their mind.

This is a wide-ranging interview with seasoned market and financial professional George Noble. He was the former manager of the Fidelity Overseas Fund, which became the #1 mutual fund in America, and a longtime assistant to Peter Lynch,

He’s as critical as I am about the Fed’s constant liquidity injections to “save the markets,” which have, instead, turned them into rampant casinos where capital is being misallocated on a scale never before seen in history.

Case in point would be the AI CapEx spending bubble. George believes the bursting of the AI bubble will be both destructive and become the reason for more Fed interventions. You know, to “save the markets.”

Fed Motto, probably: We have to kill the market to save the market.

But there’s always a bull market somewhere, and George is strongly bullish on energy equities, oil, metals (gold, silver, copper), and resources.

His reasons include chronic underinvestment, depletion rates, geopolitical shocks (Middle East, Russia-Ukraine infrastructure hits), and SPR drains. Oil is “incredibly cheap” when viewed through the gold/oil ratio as well as fundamentals.

His specific calls:

    • If you must be in the indexes, run from cap-weighted S&P (with its heavy tech exposure) and toward equal-weighted indices and real assets.
    • Energy is currently ~3.5% of S&P but is a disproportionate portion of the S&P’s free cash flow; therefore, increase allocations significantly.
    • Harsh critique of Tesla (cumulative profits ~$38B vs. ~$1.6T market cap) and especially SpaceX (massive overvaluation at ~$1.7T, low float with major unlocks ahead, structured for insider exits). Avoid these like the plague.

George is hosting an online webinar with 15 elite investors presenting in rapid-fire format for $99. As a courtesy, I told him I’d gladly help promote it. Here’s a link to check out the webinar if you are interested [link to Noble webinar]. He’s got some pretty talented folks lined up.

As always, enjoy the show and then let us know your thoughts or questions in the comments below.

Timestamps

00:00 Loss of Confidence in Financial Systems
01:15 Market Dynamics and Current Trends
03:12 Market Corrections and Volatility
05:17 Global Market Interconnectivity
06:15 Healthy vs. Unhealthy Corrections
10:05 Oil Market Manipulation and Dynamics
11:05 The Role of Financial Markets in Oil Pricing
15:30 Energy Stocks and Underinvestment
19:03 The Future of Energy and Market Predictions
22:57 The Truth Behind Market Narratives
24:15 Fundamentals vs. Market Narratives
29:22 Investment Strategies in Current Markets
32:13 The Fed’s Printing and Market Liquidity
36:27 The Illusion of Money and Market Trends
37:28 The AI Race and Capital Misallocation
40:22 Democratizing Financial Knowledge
45:33 SpaceX: A Misallocation of Capital
55:32 The Future of Investment and Economic Consequences

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Hi guys! I’m about ready to make some big, for me, financial moves and – fully understanding we are just conjecturing, so no “financial advice” etc – I’d like any intuitions or other thoughts on what I could do:
(1) I’ve been building out an apartment building this year in NH. I don’t feel 100% about doing that at this moment, but (a) I spent decades in residential management and (b) I want to complete renovation of this historic building I saved from scrap long ago but have never put to use.
(2) I’m doing this with cash, as I (a) I don’t know where else to put paper, except I am clear fiat is the pits and (b) I don’t want to encumber myself with debt in advance of Great Taking positioning. I’m very close to 100% debt free, at least in percent terms, but aware things can change with liquidity and rabbit out of the hat "regulation enforcement "(that is, I know the banks and STOCKS are all unsafe, having more personal experience with their lack of regulatory enforcement…by design)
(3) To do that I am intending to sell a large bucket of “paper” gold and silver to finance.

All of that I hope/ expect to do in the next few months. Hopefully the system will hold up well enough and, at the end, I can consider borrowing safely or maybe doing an exchange. In the meantime I am a Real Estate Professional so there are certain tax reasons as well.

(4) I am a bit ashamed to admit that I got snookered by a “too good to pass up opportunity” at the beginning of the Ukraine proxy war where I put a bit too much cash into Russian based oil and gas. But I did it. So now I think I will take my loss to partially offset the paper metals paper profit.
(5) Here’s a big question: Where would you put any excess funds from this paper sale pending the need for the cash to hopefully complete this apartment project over the next 6 months? Some of it I need right now to pay new bills. But there will more left over for the future bills (and hopefully I’ll have great cash flow at the end)?

(6) I keep thinking there ought to be some opportunity in oil and gas right now. But where? And how can it be held relatively safely? Longer term, I’d prefer to have more agricultural land, but that is beyond reach at this moment. I obviously don’t trust paper metals – and I think nobody should; but, regardless, I don’t.

Okay. Maybe not so much asking for advice as just to speak out loud and maybe get a new perspective. I think it is time to sell the paper metals, as they have been clearly manipulated a lot, and that will be continued at least for a while longer.

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Reference to gold oil ratio chart in the video

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My version in yearly candles alongside the 5-year MA:

Gold.Crude.Ratio.year
Gold.Crude.Ratio.year800×600 31.6 KB

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My biggest question/concern is: given the degree to which market fundamentals have been neutered over the past 20 yrs, what might “they” do to quash investments in an energy-commodities bull market?

This is different than manipulating paper markets to suppress prices. I’m talking about punishing those invested in commodities.

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I took a shot from that link. And I added a rough L-T average of 15.

If we hold gold constant at $4k, then oil needs to rise to $266/bbl to get back to that average.

image
image784×648 116 KB

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Do yourself a huge favor and set-up and appointment with Paul Kiker. Those are all excellent questions and he’s well-positioned to help you answer them.

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Not sure a flat line is a good representation of the changes in oil excess and scarcity changes over that 40-year period. I think the 5-year MA is a better representation since it can change as the oil supply/demand environment changes over time.

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Before 1970, Gold essentially had a fixed price… Then we have the 70’s issue with oil. Then the shale oil boom. On top of all that, we know both gold and oil are heavily manipulated with zero true price discovery.

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I think over time, oil can’t have a zero true price discovery situation, since its a global commodity, and if (say) the price was really pounded lower, some other country would just take delivery until no more oil existed. The tricks will work until the oil is gone. No way it works over a 5 year period.

If this had been happening all along, no more shale wells would get drilled.

Same thing with gold. If gold was really super cheap (say $1 per ounce) then lots of people would buy all of it. There are limits to what they can do.

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Not that I know anything, but if you need the funds soon, then you need to keep them in something liquid and stable? Don’t Americans use 30 day T Bills? or just a regular interest paying bank account for some of it.

The key to everything is the timing and the price. Not often good to pile in after a big move while the talking heads are still talking it up. Maybe wait for a retracement and then buy in. I mean, all the talking heads would have had you piling into gold at $5000+ as “great long term investment” - which it may well be - but it is good to get a good price - and not a euphoric price that you have to suffer a load of drawdown with. A bit of timing isn’t for everyone and you have to make your own calls really - which also isn’t for everyone.

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My last frustrated comment got some pushback, which was deserved due to the language that I used. But I’m feeling the same here. Am I just an unfortunate dufous who can’t understand the finance buzzword-loaded chats?
Maybe this isn’t the community for me. I do well with science and medical stuff. But talk of yield curves and shorts without explaining what that means for the average 401k owner isn’t helpful.
Or maybe I’ll just ignore it and read the summaries. But I miss Chris’ bites into things I can actually understand. Seems like that was a long time ago.
[Background: I recently came into an inheritance and I’m going crazy trying to figure out how to keep it safe.]

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We are in most interesting unprecedented times. Especially just now getting the crazy world, you probably want some expert advice. As posted above by Chris, the link below may help you out.

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Thanks Phil. I’m still dealing with the death of a parent, estate matters, etc. Overwhelming.

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We steer away from buzzwords like “synergy” and “holistic approach” or other things that are designed to sound smart but go over people’s heads. Things like “yield curves” are technical terms, or “terms of art”. “Shorts” are extremely basic in trading terms - it’s forming a contract to profit when something goes down in price. These interviews aren’t the tutorial.

If you want to ask specific details here, you’ll probably get an answer. But honestly, if you’re happy with scientific and medical technical terms, just ask an AI to explain the financial ones to you. If you care to follow along, level up a bit - it’s really easy these days.

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I see where he’s coming from with saying Tesla is a misallocation of capital - the electric cars are getting beaten by BYD, Tesla is still winning self-driving but they should have landed years ago and they’re losing their lead, and the robots don’t seem to be ahead of China.

But SpaceX is a different game entirely. They may well be 10 years ahead of the next competitor. The question is addressable market. What fraction of the human economy will be off Earth by 2050 and 2100? I’m going with 5% and 90%. What are they worth in such a scenario? Will they go down in the short term due to market dramas and unlocks? Very likely. But treating a frontier innovation company like it’s basic manufacturing and reading off revenues is rather dull. What would he have made of Henry Ford or Thomas Edison at the time? I’m sure much the same disgust.