Tom welcomes back Patrick Karim for a discussion around the potential for a significant capital rotation event in financial markets, focusing on the relationship between gold, stocks, and other assets. Karim emphasizes the importance of using logarithmic charts for accurate long-term financial analysis, explaining that linear charts can distort historical price movements and hide critical trends. The core of Karim’s analysis centers on the potential shift of capital from stocks to commodities, particularly gold and silver. He highlights several key indicators suggesting this rotation may be imminent, including the stretched valuation of the stock market relative to currency circulation and the increasing distance from long-term moving averages.
Karim points out that gold has been showing signs of breaking out against the S&P 500, which historically precedes periods of economic restructuring. He notes that when such capital rotation events occur, commodities like gold, silver, and uranium tend to outperform stocks for extended periods, potentially spanning 8-12 years. The analysis extends to silver, which Karim sees as particularly promising. He suggests silver could potentially achieve a significant yearly breakout, with potential targets ranging from $65 to $128 over time.
For mining stocks, he recommends focusing on individual leaders rather than broad ETFs, as some miners are already stretched and approaching correction territories. The bond market also provides critical signals, with the relationship between two-year and ten-year Treasury yields indicating potential economic stress. The narrowing spread and downward trend of these yields suggest increasing recessionary pressures. Ultimately, Karim’s perspective is not about predicting an immediate market collapse, but rather identifying a potential structural shift in asset performance. He advises investors to watch for confirmation signals, such as gold breaking out against the S&P 500 and stocks experiencing a meaningful correction, before making significant portfolio adjustments.
Timestamps:
0:00:00 – Introduction
00:01:13 – Capital Rotation Events
00:09:40 – Stocks in Bubble Territory
00:12:32 – Total U.S. Public Debt
00:17:50 – Charts Log. Vs. Linear
00:25:17 – Low Risk Entries For Gold?
00:37:20 – Silver Next For Capital?
00:42:07 – Miners Vs. Silver & Entries?
00:50:49 – Bond Market Signalling
00:54:43 – Ratio Charts To Watch
00:56:28 – Wrap Up
Guest Links:
X: https://x.com/badcharts1
Website: https://NorthStarBadCharts.com
YouTube: https://youtube.com/c/NorthstarCharts
Patrick Karim is a proprietary capital manager and chart trader since 2006. Patrick’s background in commerce, psychology, and an ongoing career in systems engineering has allowed him to evaluate trading scenarios systematically.
His psychology background helps him understand the human factor: overcoming stress, which is mostly responsible for maintaining a successful career.
