Lawrence Lepard: The Fed Is a Runaway Printing Machine
Tom welcomes Lawrence Lepard of Equity Management Associates back to the show. Lawrence discusses the collapsing global debt bubble and what it would take to avoid a a major economic collapse. The system would need to generate enough inflation to grow GDP, but that would likely require further debt. The US had similar debt levels after World War II, and they successfully worked through the problem. There was a lot of inflation, and bondholders took big hits. They are likely to do something similar this time, but many things are different today, including the mindset of the population.
Lawrence discusses how free markets should operate and how price fixing distorts markets. Central banks have created enormous debt structures by holding interest rates low, which generated excess capacity. Money grows along with debt, and forty percent of all money has been created in the past year. The entire commodity complex is moving up rapidly and likely prices on everything.
Businesses are having a hard time filling low-end jobs because of various stimulus programs and unemployment benefits. We see shrink-inflation with goods becoming smaller or reduced quality. We are well above the government’s official inflation statistics and likely heading into a time not unlike the old Russian saying of “They pretend to pay us and we pretend to work.”
He says, “The underlying problem in the world today is that the money is no good as politicans have taken advantage.”
Lawrence explains how money velocity drives inflation and velocity has been plummeting. When people realize inflation is running hot, they will want to get rid of dollars, and velocity will pick up. We need sound money. The solution is that simple.
Today, Gold markets are not free markets, and many banks have admitted to manipulation. Governments have figured how to suppress gold markets over the past forty years, and today, there are multiple paper claims for every ounce. Gold should be up at $3000 or $4000.
Central Bankers are spreading uncertainty regarding Bitcoin, and he believes they are beginning to panic.
Investors should start by having a considerable position in physical metal, and then they can look at speculating in mining equities. These companies come with significant risk but also excellent potential for reward. Lawrence discusses what to look for in the mining sector and mentions some specific companies that interest him.
Time Stamp References
0:00 – Intro
0:38 – Global Debt Bubble
6:10 – Price Fixing
13:55 – Money Expansion
17:28 – Currency Revaluation
20:45 – Money Velocity
33:08 – Sentiment & Hedging
39:57 – Bitcoin & Pullbacks
43:00 – Mining Equities & Risk
51:32 – Mining Equity Picks
55:10 – Wrap Up
Talking Points From This Episode
- Global Debt, Inflation, and Bonds.
- Market distortion and price-fixing.
- Employment and money velocity.
- Metal ownership and mining equity speculation.
Lawrence Lepard founded Equity Management Associates, LLC (EMA) in 2006. EMA is an equity investment management firm that invests in growing private and public companies worldwide. Since 2008, EMA has focused on investing in companies that mine the monetary metals, gold, and silver. Larry presently serves on the Board of Directors of two development-stage gold mining companies: Amarillo Gold Corp. (Toronto/Brazil) and Rise Gold Corp. (California).
He has been a frequent guest of many media outlets, including Bloomberg Television, for his expertise on the monetary metals market.
Before founding EMA, he spent 13 years at Geocapital Partners (Geo) in Fort Lee, NJ. There, he was one of two Managing General Partners responsible for four venture capital funds, aggregating ~$500 million. At Geo, he invested and served on the boards of many successful deals, including Autoweb, Jackson Hewitt, Netcom, and Realtor.com. Prior to Geo, Larry spent seven years at Summit Partners in Boston, MA, and Newport Beach, CA, where he established Summit’s West Coast office.
Larry was a General Partner in Summit I and Summit II and invested and served on Chips & Technologies and Software Spectrum boards, among other investments. Earlier in his career, Larry worked in the Mergers & Acquisitions Group of Smith Barney, Harris Upham & Co.