Tom Bodrovics welcomes back long-term contrarian investor and entrepreneur Simon Mikhailovich for a discussion centered around first principles, focusing on precious metals, commodities, economics, geopolitics, trade, and monetary matters. The conversation begins with the acknowledgement of high levels of uncertainty and complexity, making accurate forecasts challenging.

Mikhailovich distinguishes between speculating on precious metals versus using them as a reserve asset. For speculation, market drivers are pertinent. However, for gold as a reserve asset, its unique property as the only financial asset without a counterparty makes it inversely correlated to confidence and trust in other people’s promises.

The conversation touches upon the concept of the fourth turning and where we are in this cycle. Mikhailovich underscores the significance of understanding current problems before predicting future demand for gold. He also discusses how post-World War II arrangements have led to the United States’ hegemonic role economically and militarily, and the start of financialization and globalization.

Mikhailovich raises concerns about understated inflation and its potential impact on real economic growth or contraction. He also highlights the lack of clear guidance from Federal Reserve Chairman Jay Powell in navigating through uncertain conditions.

They explore the winners and losers of the global economy, with tactical gains for Wall Street investors, technology industries, and certain countries like China. However, working people have been losing due to job outsourcing. Mikhailovich mentions China’s growing power and desire for independence from the United States as potential challenges to the current economic order.

The conversation delves into geopolitical tensions in the Middle East, with borders becoming less inviolable after World War One and World War Two. The Suez Canal’s declining traffic and resulting increased costs serve as an example of inflationary pressures.

Mikhailovich discusses the significance of gold as a financial asset and its increasing demand, particularly from China and other countries, as a response to a loss of confidence in the global financial system. He also mentions the relationship between digital currencies like Bitcoin and the US dollar, suggesting that regulatory actions could impact their independence from the dollar and the broader financial system. Lastly, Simon emphasizes understanding the complexities, considering various data points, focusing on resiliency, and looking at first principles.

Time Stamp References:
0:00 – Introduction
0:44 – Uncertainties & Metals
4:22 – The Fourth Turning
9:00 – Statistics & Reality
17:00 – Wars, Rumors & Borders
26:47 – Economic Fragility
33:55 – Gold & Eastern Buying
38:30 – Trump & U.S. Dollar
41:18 – Gold & Confidence
50:07 – Trump & Bond Markets
53:56 – World Has Changed
1:03:02 – Inflation Vs. Panic
1:05:20 – Socialism & Competence
1:10:02 – A Serious Situation
1:13:13 – Wrap Up

Talking Points From This Episode

• Gold as a reserve asset is inversely correlated to confidence in other people’s promises.
• Understanding current problems before predicting future demand for gold is crucial.
• Concerns about understated inflation, lack of clear guidance from Jay Powell, and China’s growing power pose challenges.

Guest Links:
Twitter: https://c.com/S_Mikhailovich
Website: https://www.bullionreserve.com

Simon A. Mikhailovich is a co-founder, lead manager of The Bullion Reserve, and a director. Mr. Mikhailovich is an entrepreneur and contrarian investor who predicted and profited from the financial crises of 2000 and 2008. Before co-founding TBR in 2014, Mr. Mikhailovich co-founded Eidesis Capital, a special situations investment firm. Between 1998 and 2014, the Eidesis team deployed over $2.5B of capital through special opportunity funds focused on high yield corporate bonds and loans, credit derivatives, distressed CDOs and MBS, and gold. Previously, Mr. Mikhailovich was a Portfolio Manager at Falcon Asset Management, overseeing alternative investments in hard assets, including oil and gas properties, timberlands, and agribusiness. During the credit cycle of the early 1990s, he headed a workouts’ team responsible for restructuring multiple businesses in North America and Europe. Mr. Mikhailovich received a M.S. in Business (Finance) from the University of Baltimore and a B.S. from Johns Hopkins University.