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Ronald-Peter Stöeferle: The Biggest Wealth Destruction Event in History

Tom welcomes back Ronald from Incrementum AG. Ronald brings us an update on the gold markets and his thoughts on the overall global economy.

Ronald believes that recession concerns will be the focus in the United States instead of inflation. This may provide the Fed some leeway as the public will be distracted by the economy. Europe will be more concerned with sticky inflation issues as energy problems continue. Europe is definitely in a recession, and it’s quite likely the United States is now as well.

The Fed’s decision to raise rates aggressively will give them some wiggle room. Europe has only seen minor rate hikes in the Eurozone, which may be problematic for them.

Mr. Putin is given the blame for high-energy prices, but the real cause is a lack of prudent investment in resources. Many are realizing that commodities are a necessity. The West has overestimated our bargaining power in the resources. There are very strong structural drivers for a commodity bull market.

We’re seeing problems with credit default swaps and expectations for interest rates hike continue into next year. Market sensitivity to rising interest rates is increasing, influencing the economy and spending behavior. Sixty trillion globally since January has been wiped off the books. This is massive wealth destruction, and the gold market is indicating we may have seen peak hawkishness.

The impact of the Fed hikes are just now starting to be felt. It’s like drinking ‘tequila shots’ as there is a time delay to the effects. The real tightening only started recently. We’re seeing enormous strength in the dollar, which is acting as a wrecking ball. The problems will manifest over the coming months, and by then it may be too late to pivot.

Eurozone’s countries will subsidize energy this winter. This is the road to serfdom, and arguably the E.U. is no longer a market-based economy.

Gold is doing its job by performing well against nearly all currencies. When dollar strength wanes, gold will once again outperform. Should the dollar rise further, we will see serious issues globally. In the long term, the currency to be in is gold.

Sentiment in the junior metals space has been hit hard, but things are shifting. Most large cap miners and streaming companies are in good positions. The large players have excellent balance sheets and acquisitions will resume at some point. There are some great values in the resource market. The biggest problems are in the development space, where costs have increased and the appetite for risk has waned. New money is needed in the space, but it will take time for retail and institutions to enter the space.

He discusses some of the models they use and how keeping them fairly simple may be key.

Talking Points From This Week’s Episode

  • Why inflation concerns in the U.S. will switch to recession fears.
  • The West is facing the consequences of failing to capitalize resources and energy markets.
  • Fed’s aggressive policy actions are only starting to be felt.
  • Overview of the mining sector and why new money is needed.

Time Stamp References:
0:00 – Introduction
1:10 – Inflation Outlook
5:20 – Resource Investment
8:00 – Fed Policy & Intervention
11:28 – Sixty Trillion Wiped
13:14 – Rates & Time Lag
20:40 – Gold Vs. Currencies
23:44 – Miners & Capital Flows
30:42 – Price Distribution Model
35:00 – Wrap Up

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Ronald-Peter Stöeferle is a Chartered Market Technician and a Certified Financial Technician. During his studies in business administration and finance at the Vienna University of Economics and the University of Illinois at Urbana-Champaign, he worked for Raiffeisen Zentralbank in Fixed Income/Credit Investments. After graduating from university, Stoeferle joined Vienna-based Erste Group Bank, covering International Equities, especially Asia. In 2006, he began writing reports on gold and gained media attention when he expected gold to rise to USD 2,300/ounce when the current price was only at USD 500. His six benchmark reports, called “In Gold we Trust,” drew international coverage on CNBC, Bloomberg, the Wall Street Journal, Economist, and the Financial Times.

In 2013, he became managing director and partner of Incrementum AG, based in the Principality of Liechtenstein. The company focuses on asset management and wealth management and is one hundred percent owned by its partners. In addition, he continues to write the annual “In Gold we Trust” as a senior advisor to Erste Group.

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