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Brian Hirschmann: $7000 Gold & The Global Debt Contagion Powder Keg

Welcome back to the show, Brian Hirschman, Managing Partner of Hirschmann Partnership, also known as the “World’s Most Bearish Hedge Fund.” Brian explains how many investors are unaware of how to value gold in comparison to other assets. He details a methodology for analyzing the gold price over long periods and notes that it is currently below the fifty year average, which could cause gold to skyrocket in the coming years. Brian outlines why gold did so well during the inflationary period of the 1970s, as it is the only asset with no counterparty risk.

The lack of appreciation for gold may be due to bond investors remaining confident in their inflation expectations, but if that changes, gold will rise. High inflation can be caused by excessive debt, which is a problem for the United States and other Western nations, and Brian references the British Empire’s debt to GDP ratio and eventual default. Japan’s approach is different, but their situation is precarious as well, with Japanese depositors now getting negative returns when adjusted for inflation. This could lead to depositors investing elsewhere to seek returns, which could be a big problem for the Bank of Japan.

Brian also discusses how global bubbles are worsening, and why we could see multiple collapses all at once. He gives some targets for where gold and the miners could head as a result, and explains why the Mining ETFs and equities have largely not kept up with the gold price. He notes that A.I. will likely not be the panacea to get us out of the coming crisis, and that demographics are contributing to entitlement problems and a general decline in the labor force, which is not good for GDP.

Time Stamp References:
0:00 – Introduction
0:30 – Perspectives & Time
5:40 – Golds Recent Performance
8:10 – Inflation Causes & Effects
12:30 – Debt & Avoiding Default
20:10 – Capital Control Contagion
25:00 – Cures & Causation
28:00 – Growing Global Bubbles
37:30 – Gold Price Target
39:30 – Resource Valuations
41:20 – GDXJ Performance
43:10 – A.I. & Inevitable Crisis
45:30 – Demographic Issues
46:55 – Wrap Up

Talking Points From This Episode

  • Gold is currently trading below its fifty year average, making it a potential investment opportunity.
  • High inflation caused by excessive debt could lead to a gold surge.
  • Global bubbles, demographics, and A.I. could all contribute to a coming crisis.

Guest Links:

Brian Hirschmann, CFA, is the Managing Partner at Hirschmann Partnership (HP) launched in 2014. Since its inception, HP has outperformed its benchmarks by a substantial margin despite being the “World’s Most Bearish Hedge Fund,” according to ValueWalk.

Previously he was an associate at Goldman Sachs Principal Strategies (GSPS), a multi-billion dollar hedge fund whose alumni include Robert Rubin, Tom Steyer, Daniel Och, and Eddie Lampert. After GSPS, Brian returned to Los Angeles to join Hotchkis and Wiley Capital Management where he was an equity-owner and made over $1 billion in long-term investments.

Brian graduated with distinction from Yale, where Professor Robert Shiller strongly influenced his investment philosophy. Robert is one of the few to predict both the dot-com and housing bubbles. Robert was also influenced by Professor David Swensen, Yale’s legendary endowment manager.

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