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Why Gold Needs a $500 Drop to Flush Out "Momentum" Buyers | Ted Oakley

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The 30-year U.S. Treasury yield is testing 5.18%, fundamentally shifting the math for equities, credit, and the traditional 60/40 portfolio. While Wall Street continues to buy the AI tech dream, Oxbow Advisors Founder and Managing Partner Ted Oakley warns of a severe disconnect between the stock market and the real economy.

In this Kitco News exclusive, Oakley breaks down the risks of late-cycle complacency and explains why the passive bid keeping the S&P 500 afloat will eventually dry up. Oakley details the physical energy reality behind the $725 billion AI buildout, sharing exactly why institutions will soon be forced to buy energy stocks, and lists his top pipeline and driller stock picks. He also outlines his contrarian view on precious metals, explaining why gold may need a $500 drop to flush out momentum buyers before its next major leg higher, and reveals the gold and silver miners currently sitting at historic profitability spreads. Finally, Oakley shares his core wealth preservation rules for investors navigating a high-yield environment.

Recorded May 19, 2026

Follow Jeremy Szafron on X: @JeremySzafron (https://twitter.com/JeremySzafron) 
Follow Kitco News on X: @KitcoNewsNOW (https://twitter.com/kitconewsnow) 
Follow Ted Oakley on X: @Oxbow_Advisors (https://twitter.com/Oxbow_Advisors)

CHAPTERS:
00:00 Markets Shifting
01:42 Bond Yields Break the Math
03:21 Fed Policy and Floating Rate Risk
05:29 Passive Investing and Late Cycle Complacency
09:22 AI Buildout Meets Commodity Reality
14:40 Energy Playbook and Stock Picks
22:13 Gold Pullback Setup
23:30 Spotting Momentum Washouts
25:07 Which Miners To Buy
27:36 Family Wealth Rules
29:15 Real Estate And Liquidity Events
37:35 Energy Mispricing Finale 

#Investing #Gold #StockMarket #TedOakley #KitcoNews
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Disclaimer:  
The videos are not intended to provide trading advice, and the views expressed do not necessarily reflect those of Kitco Metals Inc. Kitco News, its anchors, producers, and reporters are not responsible in any way for the performance or actions of any sponsor, advertiser or affiliate of Kitco News. In no event will Kitco and its employees be held liable for any indirect, special, incidental, or consequential damages arising out of the use of the content in this video.

SPEAKER_01

KitCo News in Focus with Jeremy Safron. Welcome back. I'm Jeremy Safron. Now, if you're watching the markets this morning, you're seeing a serious shift in real time. The 30-year U.S. Treasury yield is trading near 5.18%. Now to put that into perspective, I mean the long bond is testing levels not seen since before the global financial crisis. And while the mainstream market narrative is still leaning on Southlanding, the bond market's obviously sending a very different message. Higher longer-the-term yields obviously change the math for everything: stocks, mortgages, commercial real estate, private credit, federal deficits, and of course the traditional 60-40 portfolio. At the same time, we're also watching the credit AI trade come under pressure. Major U.S. tech firms are now expected to spend as much of $725 billion this year, much of it on AI data centers, chips, and power infrastructure. That raises a hard question for investors. Are these still asset-like growth companies, or are they becoming capital-intensive infrastructure businesses? Gold consolidating around $4,500 on the spot side. Silver pulled back into the mid-70s after a major move higher. Now, to help us cut through the noise and look at the actual math to figure out how investors protect capital in this environment. Ted, great to have you back on KitCo.

SPEAKER_02

Well, thank you, Jeremy.

SPEAKER_01

I want to start with you today, just talking a little bit about the bond market. I mean, you've said recently that stocks are as expensive as you've ever seen them and that we're likely in the eighth or the ninth inning of this bull market. For an average investor kind of watching here today, I mean, when the 30-year Treasury uh is trading near 5.18%, I mean, what mechanics kind of fundamentally start to break underneath this expensive stock market?

SPEAKER_02

Well, you know, Jeremy, anytime you have the bonds uh at a new low, which price-wise, which they are, uh, I think it throws people off in just many, many ways. You know, financing comes tougher for a long-term financing for a lot of projects, all sorts of things get thrown in the mix here. You know, you'll find mortgage rates will probably go up, uh, those sorts of things. But I think the biggest thing is you have a lot of people that own these bond funds and own long-term treasuries, and you know, they're they they haven't made any money. They probably haven't made any money in the last six or seven years. Yeah. And so, you know, we've said for a number of years that you cannot own uh the 20 and 30 year U.S. Treasury. It's just not going to work. But if you look, it's everywhere though. You look at Japan's 30-year bond is over four over four now, up from the last, I don't know, six years, uh, five years from like uh three quarters. You know, the UK guilts are at a new high. It that's you know, we've got this inflation thing working. We felt like that uh inflation was gonna be higher in this decade, and I think it will prove to be so in the long run.

SPEAKER_01

Yeah, yeah. That 2%'s been a little bit hard to touch. Um I gotta ask you, I mean, speaking of which, uh earlier this year, the the mainstream consensus was banking on multiple rate cuts. Now, with that inflation pressure still active and oil linked to Middle East risk, markets are starting to debate whether the next Fed surprise could actually be tighter, you know, not easier. So if Chairman Warsh uh and the Fed are forced to stay restrictive, that's a new one. I'm so used to saying Powell, by the way. But uh, if the new chairman is kind of forced to stay restrictive or or even consider a hike, what happens to the private credit and the equity markets that were built around cheap debt?

SPEAKER_02

Well, if it affects everything, if they decided to raise rates, obviously it would it would affect the banking system too. But I think people would start to realize that so you know there's quite a bit of floating rate debt out there. So uh, you know, that's going to affect all that floating rate. And uh I I I don't know the man, I don't know really what will happen here at the Fed, but yeah uh I know this much. I'll be surprised if they lower rates for sure. And we never thought they would anyway, honestly. But um but if it keeps on, I suppose, going like this, and I I wouldn't be surprised for inflation to pick up a little more in the next one or two quarters, then I'm assuming they're gonna have to take a hard look at it anyway. Um who knows? We really don't do much with the Fed. That's why we look at single companies.

SPEAKER_01

Yeah, yeah, exactly. But but to your point, I mean, if the Fed's if the Fed does hike again, uh where does floating rate debt kind of hurt first? Do you think it's private credit? Is it that commercial real estate, maybe small business loans, or or is it the bank's balance sheets?

SPEAKER_02

Well, I think it's overall. You know, there's a lot of floating rate debt in the banks because they they they they work off prime rate, you know, or half below prime, but it's floats, you know, so it would affect it would affect them. And then you have a lot of debt tied, you know, private credit, private. We have debt tied to um they'll take treasury or a sofa plus a number, and uh that goes up at the same time. Uh it all, you know, it all fits really fits together. Margin rates go up, everything goes up when they go at the same time. Yeah.

SPEAKER_01

You know, that kind of ties directly to into the fiscal picture. I mean, G7 finance chiefs are are meeting as governments face growing pressure to rein in spending and restore credibility with the bond markets. Uh, for a passive investor, let's say a passive index investor who just buys and kind of holds the S P 500, I mean, how vulnerable is that portfolio if government liquidity dries up and the market has to stand on earnings and and not on stimulus?

SPEAKER_02

Well, you know, those passive people who have done really well the last 15 years because passive has grown and grown and grown and grown. So you always had a bid there, and you probably do for the short term. There will come a time, though, when there won't be a passive bid, and then you run into a different sort of trouble. Uh, I I really don't know what to think about those people because, you know, we always buy individual companies and individual treasuries, but mainly short term. And so I I don't look as much at that, but I know one of the things I do know is I think these people are on autopilot uh that are in those things, and they're going to miss these situations where you really need to be raising cash at times and maybe lowering cash at times because they're just going to ride it through. And I've been through a number of periods like that where you look up eight or ten years later and you don't make any money uh because you just sat there with it.

unknown

Yeah.

SPEAKER_01

Yeah, yeah. Didn't touch it. Um, I guess that you know that's the core focus of your of your firm, too, is keeping clients out of those massive 50 or 60 percent drawdowns that destroy generational wealth. I mean, when you sit down with high net worth in investors right now, what is the biggest behavioral mistake you see them making as they chase late cycle valuations?

SPEAKER_02

Well, not so much our investors, but I'd say generally when I'm talking to people, uh they're really chasing these momentum stocks. And I don't think they realize if you look at the Mag 7 or the top 10 companies, and you just take them as a group, they're really not much higher than they were at the end of October, early November as a as a group. Now, Google, we own a little Google, it's a little higher. But generally that whole group, and so see, it's a it's a camouflage look because they're there it's not what they think it is. Even though they're making just minimal new highs, maybe that makes you feel good, but are you making any real money? Uh, that's a different question. And I think I think these people that are chasing the momentum side, that's what they're gonna fail to see here. That's what they'll miss.

SPEAKER_01

Yeah, Ted, I mean you you recently shared a story about one of the best traders in the world who is dancing by the door. He's he's still trading the Nasdaq, but he he's already bought his put options and is ready to run for the exit. And at the same time, I mean, volatility remains surprisingly low given the bond markets and the geopolitical risks and these stretched valuations. Why is Wall Street so complacent? And how fast does that exit door close when everyone tries to leave at once?

SPEAKER_02

Well, I think the main reason they're complacent is because most of the people you'll see that are on the networks and that sort of thing don't really manage money. Now, they write macro or they write a letter, but they're not in the trenches every day. And I think that's the real difference between people that manage money and people that don't about how you want to invest in this sort of thing. Now, we started the year and and we thought this year would be up and down, up and down, and still think that. You know, we had a down, then we have a bup. I wouldn't be surprised if we're not into another minor down again and then go up again. We're just in that. That's what you get a lot of times in these second years of presidential terms. And I think I don't think this will do. This time it'll be much different than that.

SPEAKER_01

Yeah, yeah. Well, let's look at kind of where the money's flowing. I mean, the the AI trade is kind of pulling back this morning, but the spending boom has not stopped. I mean, Bloomberg has reported that major U.S. tech firms could spend as much as $725 billion this year largely on AI data center equipment, right? I mean, it's going to be interesting to kind of see what they do here. Now, your recent discussion with Jeff Curry, and everyone should go watch that by the way, it was really well done. You you he argued that that these tech companies are effectively massively short on energy. Uh, why does Wall Street continue to underprice the physical power required to actually run this AI buildout?

SPEAKER_02

Well, I I think uh from what I see, and and don't get me wrong, I'm not really big into those companies, but from what I see, I think they're just looking at the dream side of that. In other words, this is what it can do, this is what it'll do to employment, this will help what will help your company, this will do that. But we haven't gotten there yet, see? That that's the thing. And so right now they're just talking about these are the great outcomes that are going to happen. And I don't think they think about, well, in order to get that outcome, what do you have to put into this data center to make all of that work? Uh and so I think they overlook that and they think, well, you know, it'll there'll be plenty of there and we need it, but it's probably not correct.

SPEAKER_01

And you know, beyond oil and gas, there is the physical grid. I mean, copper, transformers, transmission, water, land, permitting, all the bottlenecks nobody cared about when this was just a software story. If if AI requires a real-world rebuilding of the grid, I mean, what's what's your best actionable areas in copper and in industrial metals and kind of power infrastructure right now?

SPEAKER_02

Well, you know, we've we've been high on commodities, and we felt like this decade would be a decade. If you didn't own commodities, you were gonna miss out. And so for us, we we own them all. I mean, you know, we own copper, we own iron, we own the miners and those things as well, tungsten, antimony. Um, you know, we own a lot of uranium, we own a lot of different things uh that fit into this commodity uh item. We own fertilizer, you know, a lot of energy, a lot of energy, a lot of oil and gas. And so I think you have to realize sort of what we're in right now. And I think we're in a commodity cycle, and those same commodities are the ones that'll feed into data centers and all sorts of other things for that matter. And I think that's why they misprice them because they think there'll be a lot there. Right. And the point I'm making is there's not a lot there. You know, we're we're running, we're gonna run tight on this stuff, and uh, and that's why we own a lot of it.

SPEAKER_01

Yeah, yeah. I kind of want to get into that oil play too. But before we do, you and I have talked about this before, uh, you know, Main Street versus Wall Street, that kind of thing. But I mean, Wall Street is kind of focused on tech spending. Uh, Main Street's dealing with higher borrowing costs and credit card stress, auto loan pressure, and of course this inflation fatigue. How does a tapped-out consumer eventually catch up to the stock market and break the earnings projections going into that second half of the year?

SPEAKER_02

Well, Jeremy, I think they're getting close. I mean, if you look at credit card delinquencies for right now, for example, they're right on the same level they were back in the great financial crisis. And auto-loan delinquencies are actually a good bit higher than they were then. So, what's happening with the consumer, and nobody wants to talk about it, but this can't go on a lot longer because they're spending more than they're making by a pretty fairly wide margin. And you it can go on for a while. You know, you can do buy now, pay later, all sorts of things like that. But we're getting closer and closer to where the consumer basically says, you know, Uncle, I can't, I I'm just gonna have to cut back. I can I can't spend it, and uh, people won't loan them any money anymore. And so we're getting closer to that, and people tend to keep saying the consumer's great, the consumer's great. I don't know where they're getting their information. Yeah. Because the average consumer is not doing great. That's a fact. But you know, you hear it talk in on New York City, they think the consumer is doing super. Um, but I think they miss the rest of the world for sure.

SPEAKER_01

And to your p point, Ted, I mean, if if the consumer rolls over, at the same time these tech giants have to justify hundreds of billions of dollars in AI spending. I mean, is that the catalyst that triggers that sobering up correction you've been anticipating?

SPEAKER_02

Well, I think part of it does, Jeremy, I think, you know, I've been poor, so I kind of I sort of know what happens with people that don't have money. You go along to a certain point and then you start to cut. You cut things you wouldn't normally think. Like, for example, you'll cut, you'll cut subscriptions to things. You'll think, you know what, I don't need that anymore. You know, I'm gonna watch a certain amount of shows on this one thing, all these other things I'm gonna cut. You know, I'll cut, you know, I'll cut what I spend going out to eat. We'll eat more at home. All these things fit into that, and right now that's what we're starting to see the beginnings of. And I I do think Wall Street misses that because this idea that the consumer is just doing great, again, I I don't know what they're smoking. Yeah, yeah.

SPEAKER_01

Well said. And uh, you know, that that also takes us to energy because obviously gas prices right now are elevated, but we could kind of pivot there. I mean, uh, this is where the conversation gets very practical for our audience. You you had Jeff Curry on your program. You were talking, uh he was arguing that oil companies are returning strong, you know, free cash flow while many tech hyperscalers are consuming capital at an extraordinary pace. But I mean, obviously, energy requires a strong stomach with President Trump pausing a planned strike on Iran this morning and oil reacting headline by headline. How do you manage energy allocations without getting whipsawed by the the daily geopolitical tape?

SPEAKER_02

Well, you know, Jeremy, uh, you know, for the last couple of years we've thought we've we've had a high concentration, a fairly high concentration of energy, probably a lot more than anybody else. And that and what I think people miss about that is these companies were so cheap relative to what you could make out of them that it didn't make any difference what oil did. Oil could stay at 70 or it could be at at 80 and you'd be okay. But then all of a sudden you start to realize that you know what we're using a lot of this stuff, and we're kind of we're getting down to that point where it's probably gonna get kind of sticky. And so uh oil, you know, I I I said a year and a half ago, and I got a lot of booze on this one, but I said, you know, oil could go to 150, and that was when it was like 60, and people thought this guy's completely crazy. But the point I was making was oil, like any commodity, comes and goes. And I think people are missing the point here, no matter what happens. I think we've been what 80 days down over there in the Straits. This thing's gonna get sticky here, really. I mean, poorly in a in soon. And I think uh people are that don't have a fairly high uh allocation to energy are gonna miss something here. Because right now, if you look at energy, it's it's the best of the pack this year. Even better, better than tech. I mean, just take it from January 1 to now, and so a lot of people are missing that. They don't have an allocation to it. They're over buying the these big seven on a trade, but all the while energy and and on the and the things that go with energy are going up are just steadily going up. And I I think that's what they're gonna miss this year on that trade.

SPEAKER_01

Yeah, it's interesting. You know, I talked to a couple people, and some of the analysts were saying they're worried that you know, with the EUE out of OPEC and what's happening with this trade of formers, when it finally opens, it's just gonna be flooded with oil, and that price is going to violently take a retraction. Any thoughts on that?

SPEAKER_02

Well, while I'm not somebody like Jeff Curry that can give you the exact numbers, I will tell you this a lot of things have been blown up and disrupted. It's not like you're going to go back tomorrow and everything is going to go back to normal like it was before. It's not going to be that way. And I I think that's what the street is missing. And once they realize that in the next three or six months, I think you get another leg up on oil because they'll finally figure out that hey, and maybe the straights never go back like they were. Obviously, it's been 80 days and nobody's been able to get it fixed yet. So, you know, who knows?

SPEAKER_01

Yeah, it's been uh interesting to watch. And I know, of course, you speak to a lot of folks in the energy uh business. Of course, you've been invested in that for a long time. And when you look at the physical supply chain and the the Russian oil flows and China and India demand sanctions, shipping routes, all that stuff, and the Strait of Hormuz, uh it obviously matters here. How has the rerouting of global energy supply changed the pricing power of Western energy markets?

SPEAKER_02

Well, I don't I think it's helped it's helped us in the West as far as the US, as far as pricing. But I think people forget that these can these big countries will figure out a way to get oil. China will figure out a way. I mean, you know, they're fairly close to Russia. They could just drop a pipeline in. You know, and they can unlike a lot of countries, they can build that pipeline in a hurry. And so I, you know, there's a lot of ways they can do things that I think people forget that are capable of making things happen. And for the U.S. to think that, hey, we're just gonna control everybody else in this area, I just don't think we're really looking at that clearly.

SPEAKER_01

Yeah, yeah. And to your point, I mean, we just saw Putin touch down uh meeting President Xi just after President Trump there last week. Uh I want to kind of get specific for viewers who want to understand where the opportunity is. I mean, you focus heavily on short duration cash flowing assets. You've you've talked about owning energy for cash flow, not just the commodity upside. Uh where do you see the better risk reward today? Is it is it that integrated majors? Is it pipelines? Is it royalty structures, refiners, or is it smaller producers?

SPEAKER_02

Well, I think you own the whole gamut there, Jeremy. I mean, you you hone from like you're gonna own the produ like we own the producers, okay, in natural gas and uh and oil. But then again, you know, you could you can put a refiner in there with it, but then we own the midstream pipelines as well in in that group. Um and then um in the last uh really in the last two months, we picked up a couple of drillers because now, see, you're gonna have more drilling, you're gonna have to have more drilling, but you've blown up a lot of things that have to be redrilled, they've shut in wells, different things. And so we think those drillers are gonna be really active as well. We think that whole group, all the way from drilling it to selling it to pipelines, the whole thing will work for you if you do it uh, you know, as a group. And we own, we own everything up and down the group. Single names, by the way, but every we own things up and down that lane.

SPEAKER_01

Now I have to ask you if you're willing to name names, or any one or two producers or maybe the infrastructure place?

SPEAKER_02

Well, uh I'll just give you a name. So, you know, for example, on on gas, you know, we really like a little company called Entero. It's uh AR is a symbol. I mean, they've it's a cheap company relative to what they're gonna make the next two years. We like the way they're set up and what they do. We own the big companies. We own Exxon, we own Chevron, but we also own a company called Matador, which is a great small oil and gas company uh that we think has a lot of potential to it as well. On the pipelines, we own energy uh uh EPD enterprise products, we own energy transfer, uh, we own MPLX. Uh all of those are great and pay a lot of money. And then uh on the drilling side, you know, we own Transocean, RIG RIG, and Noble, uh, NE. Noble pays a nice little 4% dividend. But a lot of these, a lot of these things all fit together. Uh, and we just, you know, we invest in the whole package really at the same time. And they've all they've done well for us. I will tell you, they've they've done they've done real well for us.

SPEAKER_01

Yeah, absolutely. It's been a nice run on that side. And I I got to move over to metals. I mean, gold's consolidating around that $4,500 level. Silver's kind of pulled back into the mid 70s after a huge move. You treat gold as kind of a a true currency, not just a commodity. Uh, I mean, with obviously with central banks continuing. To diversify reserves and reduce dependence on the dollar system, as we've kind of talked about how does that structural shift change your long-term view of gold in this market?

SPEAKER_02

Well, I think it makes a difference. I mean, you know, uh I know gold's been down, Turkey's been a seller. I mean, there's certain things have been going on. Uh, and I I don't know if you remember recall, but the last time I talked to you, at the very end of 25, early 26, we sold um a lot of the miners, almost all of our silver, and a little bit of gold. We keep most of the bullion, though, but it doesn't look like to me right here, okay? Now, don't get me wrong, long term, we're we're we're all over gold. I mean, we're we're fine. But in the short run, you see a lot of people when you got up to around 4,500, 4,600 and ran on in to 5,500 on gold, you picked up the momentum crowd on that trade right there. And I think you have to get enough selling now to get rid of those momentum people. And that's probably gonna mean another $500, maybe as much as $500 down from here, you know, $4,000 or lower. But if if and when that happens, and I'm not saying it will happen, but if and when it happens, that's where you know you want to be a pretty good sized buyer of gold. Now we still own uh part of our miners, gold miners, but we cut back on a number of things. Um, and and we just feel like uh it's it's not the time for that quite yet. Uh I'll put it that way.

SPEAKER_01

Yeah, yeah. I mean, you know, short term, obviously we've seen volatility across the paper markets. Um I was looking, there's some latest 13F filings. Jane Street reduced its SLV position sharply. Uh you also said that you'd be willing to get more aggressive on gold if there were a deeper pullback, possibly. And I mean, you just mentioned 4,000. Is that kind of the level where you feel comfortable getting in? I mean, how do you tell the difference between paper market selling and real physical buying opportunity, you know?

SPEAKER_02

Well, I uh you know, I've been out I've been at this a long time, and I get a pretty good sense of of where uh the momentum people are, you know, and what you want right now in gold and silver is you want to flush out those people so they're not there anymore. And it probably means lower prices to an extent to get rid of those people. And and I and I I think like if you'll notice all the miners which ran up, you know, had the momentum people still around, we sold a lot of the miners in the very first week of the new year, and they've corrected and they rallied again. But those to me that was momentum type stuff, but now they're giving it back. And so if you take the new lows at this point, see that takes those people and they say, Look, this thing's done, it's not gonna work, which is about the wrong time to say that. But that you have to watch that group and and see where they are, particularly in the metals. Yeah. Um I but I do think, and I'm thinking for people that are looking out, you know, two years from now, you know, you you need to own some gold more than likely. I mean, you should.

unknown

Yeah.

SPEAKER_01

I mean, you often tell investors to think in relative terms, kind of like tracking how much gold it takes to buy a house rather than just this, you know, staring at the dollar price. When you apply that same logic to miners, uh anything that still looks cheap and and anything that looks expensive here.

SPEAKER_02

Well, I think all the miners are are getting cheaper. Now, don't get me wrong. I mean, we uh we've known owned Agnicco Eagle for I don't know, four years probably. Um, and so we have some real low bases in some of these things. And so when you're looking at these companies, you know, uh for us, I mean if you're looking at gold, you look at Agneco, you look at Alamos, um, you know, those are really good gold companies now, but they're getting selling right now. That's my point in those. Um on the silver side, you know, Hecla is a great silver miner, again, getting selling. And and so you have to you have to wait that stuff out really, uh, because if you look at the big names, the big New Monts, uh, Barracks, all that sort of thing, they're they're they're they're coming back, they're they're settling back in price. And you sort of have to wait till that's over if you want to buy the miners. Now, the miners will go more than the bullion once you get it rolling. Um they're still cheap. Relative to 2011, they're still real cheap.

SPEAKER_01

So still some potential there, but you're looking for a little bit of a pullback. I mean, you you've you've favored royalty companies before in streamers, right? Like wheat and precious metals. What exact kind of metrics make a mining company worth owning here? Is it is it margins and jurisdiction? Is it ounces in the ground? Is it gray, balance sheet takeover potential?

SPEAKER_02

Well, the biggest thing is what does it cost you to lift that ounce of gold relative to the price? And that spread today is the best spread they've ever had. I mean, it's huge. Uh, and that's why these companies are making so much money. Now, you're getting the announcements right now on these companies are really good. They're saying, hey, we did this, we did that. Um, and that's that throws a lot of people because the price is coming down. But it's it's just a matter of time. You wait on these things. Uh, and I still say the miners, if they sold today, Jeremy, at the same price to cash flow uh that they did in 2011, these things would be 200% higher from here. I mean, you know, they're cheap on a relative basis, even though they're probably going to come down a little more.

SPEAKER_01

Just wait it out. Interesting perspective. Uh speaking of which, Tate, I want to kind of tap into your experience with wealth preservation. I mean, you you obviously write a lot about second-generational wealth and raising financially independent kids. You and I have talked about it. We've had conversations with my son, even though he's young. Um Listen, we're operating in an economy defined by sticky inflation right now. We've got these 5% long bond yields and a national debt that's about $40 trillion. What is the single most important financial lesson a family must teach the next generation right now if they want their capital to survive this decade?

SPEAKER_02

Well, I think they have to teach them, number one, that you can't have too much debt. I mean, debt is ruins everything. I mean, I've been around too long and seen too many great people, but they got hung up with too much debt and it ruined them. And I've seen too many individuals do the same thing. You can have a lot of money, but if you have a lot of debt, you can lose a lot of it in a hurry. And I think if you can teach people, look, okay, hey, you gotta keep the debt low, okay. It doesn't mean it doesn't have any, but you have to keep that debt low. You have to you have to learn to try to save some money. You know, you you can't be out there on the on the spectrum all the time really really trying to speculate. You have to you have to learn that there's different kinds of money. And for a kid for a younger person, they need to understand that. You know, you've got investment money over here, and I've got what I what I call my money base over here that I never touch. Um, and uh that that's that's that those are two different kinds of money. If you can teach that to them, you're probably gonna do pretty well. That's interesting.

SPEAKER_01

I mean, you advise clients obviously to focus on kind of short duration uh cash-flowing assets with the 30-year treasury or 5.18% and mortgage rates likely to stay elevated. Do you still consider commercial or residential real estate kind of a viable hard asset for capital preservation, or is the debt burden in that sector just too high?

SPEAKER_02

No, uh Jeremy, real estate's one of my favorite things. I mean, that's also one of those things that you want to own as a hard asset during this commodity period I'm talking about, this decade. And real estate's great because you know you can you can raise the rents. That's the key. I'm not big on land development, but I'm just saying if you have if you have apartments or buildings that have a great cash flow to them, you know, uh they're in a good place, you know, you've got you've got good leases, things, everything fits together, then that's a real estate's one of the best investments there is. They've got all the tax benefits to them. And uh, you know, and unlike Wall Street, you can walk out there and kick it and see it.

SPEAKER_01

Do you think it'll get cheaper? Are you are you waiting for a bit of a pullback on that side? You think there's gonna be lots of keys given? Is that when somebody goes in and grabs?

SPEAKER_02

Well, I am seeing quite a few apartments where the banks are kicking them out of their portfolios at a real cheap price. In other words, probably 75% of what you could build it for per door. Uh, we're seeing a good bit of that. Residential, I think, will be, I think it'll be under the water for a long, long time because of your demographics. You have this baby boomers that own all the big houses or all the houses, and they have this idea in their mind about the house is worth, so they're stuck on it. And they and they'll take it off the market and put it back on, but it doesn't sell. And we're probably in that situation for a long time.

SPEAKER_01

Now, you're an army veteran, uh Ted, and I have to imagine that discipline translates directly into how you manage risks. I mean, you know, your firm is over two and a half billion under management. When a business owner comes to you after selling a company and suddenly has a major liquidity event, what is the first rule you kind of put in place to stop that person from speculating at the wrong point in this cycle?

SPEAKER_02

Well, what we recommend, Jeremy, to them, uh, and we wrote about this, wrote a book 1992, and wrote it three other times entitled You Sold Your Company. But what we recommend to them is for that first year or 18 months, don't do anything with your money. You know, just ice it in treasuries, know it's okay, but you you've got a lot of other things you need to think about here. You're you're changing your entire lifestyle. You know, all of a sudden you and your spouse have a different situation. You're not going to the office every day, you know, uh, you're not Mr. or Mrs. Kingpin anymore because you don't own the company. Uh there's an ego transition there of quite a bit. And I think people are not in a mode right there for the first year where they'll make a really clear decision, and they'll have hundreds of people coming at them with a new deal or the great deal. And so they've got plenty of chances to spend it. But what we recommend to them that first 12 to 18 months is nothing. Don't do anything with it. And and just give yourself time to think and get your head straight, get your feet on the ground. You got plenty of money, you don't have to worry about anything. Um, and don't go out and start buying, you know, three houses here in a new jet plane. Just don't do anything for a while uh till you sort of decide, okay, this is the way I want my life to go. And I I think that'll help you as much as anything.

SPEAKER_01

That's an interesting one. You know, uh, you become uh a point of contact for investment decks. You know, everyone's pitching you the next big deal. I mean, just avoiding that must be hard.

SPEAKER_02

Well, it is because you're everybody's new best friend. Yeah. You know, and uh and they didn't call you before because you didn't have any money, but now that you have money, you know, have we have we got a deal for you? Yeah.

SPEAKER_01

Hey, let's bring this together for the audience before I let you go. I mean, we we covered the 5% long bond, expensive stocks, the AI CapEx kind of trap. We talked to energy real estate gold miners. The traditional 60-40 stock and bond portfolio is under a lot of pressure in this environment. I mean, without giving personal financial advice, what does a more resilient allocation look like today across cash and short-term, uh, you know, short duration income, hard assets, defensive maybe equities and energy or gold?

SPEAKER_02

Well, I think, Jeremy, I think it's okay to have the 35 or 40 percent in treasuries. You just have like for us example, most of ours are less than 18 months. We have a lot that are three months, six months, nine months. And you have to be able in the tr in the bond side, you have to be able to uh to be able to reprice what I call reprice. If rates go up a lot, you have to own the kind of paper that's going to reprice. So you get the advantage of that. And if you own really, really long paper, you can't do that. And I that's on that side is what you do. On the stock side, I think if you'll learn to find companies that are really good companies that'll come to a price that you can really make some sense out of cheap this company is. You know, when we're looking at things, a number of companies we bought in the last three or four months are probably down 30, 40 percent from their high just last year. And these are good companies now. Don't get me wrong, I'm talking about Lockheed and Sony, uh, Ulta Beauty, those kinds of companies, uh Cortiva. Um and and then try try to have, you know, try to have a mixed portfolio. Learn how to buy companies as opposed to just saying, okay, you know what, uh I like the SP 500. And you have to remember the SP 500 is going to get riskier and riskier and riskier because they've just made the decision that you don't have to have that six or eight quarters of profit now to go in there. That if you're large enough, they'll put you in even if you're losing money. Now, I don't think the average person can ferret that out in the SP. So they're gonna have to learn to start owning things. And again, don't be afraid to take some money off sometimes when prices are high. Uh, take some off and don't be afraid to put it back on and prices are low.

SPEAKER_01

Yeah, that's a that's a good point. I mean, you active uh you actively maintain uh tactical cash. I mean, what kind of specific data points or market event are you waiting for before you deplet that dry powder into the market? Is it that 20 to 40 percent equity correction you just talked about, Ted? Is it a credit event, a spike in yields, maybe panic in the miners or something else?

SPEAKER_02

Well, Jeremy, we look at it company by company. So if the whole market was falling 30 or 40 percent, that means we're going to have a lot of companies to choose from, which is great, by the way. That's how you make a lot of money. Uh and so we have you know, we probably average right now 40 to 40, right around 45 percent in treasuries across the board in all three strategies. So we have a lot of money, but what would happen is we're always looking at individual companies. And so I'll give you an example. If we look at a company and we like what we see in numbers, their earnings for the next five years, we'll try to present value that and buy that even 20% cheaper than that after it's come down to a level that we know we can live with. And that's how we start to buy those. And and and that works. I mean, it I'm not saying it works every time, but what happens is you're buying them a good price and a really good business. We look at it as a business, and you just own that business for a long time. We own, you know, our gas pipelines we've owned for 25 years.

SPEAKER_01

I mean sounds like Agniko's entry point uh isn't this 250 range.

SPEAKER_02

Well, no, we have we have some really we have some double digit uh AgNico. So yeah, it it but that doesn't mean we wouldn't buy it for new money at the right price. Uh I just think you you have you have to, you know, how you buy is where you make money. You know, that's how you you're gonna get a chance to sell it, but you where you buy, that's it, that's that's that's where you make the money.

SPEAKER_01

Hey, final question, Ted. Uh what is the market most underpricing over the next six months? Kind of what is the opportunity investors are missing because they're still fighting the last cycle?

SPEAKER_02

Yeah. Well, I think the biggest thing they're mispricing now, because they do not own a lot of it, I know this for a fact, is energy. If you look at energy, it's only 3% of the S P 500. And I remember back in the early 80s when it was 32% of the SP, and and tech was only like 11 or 12. And so it's reversed now. You know, tech is really, really high, energy is really, really low. So think about it like this that if energy keeps doing well for its pricing, the only thing these people have to do is buy it because they don't own it. See? So you're right in the place you need to be. And these are great, you know, if you have a look at the energy companies we own, most of them pay anywhere from four to ten percent on the dividend. So you get good cash flow to wait on it. Maybe a good few months and nothing's happening, but you're getting paid well to hold it. Um, and that's the way we look at it. We're not always bullish on energy. There will come a time when you turn it, but we just don't think it's now. We think we're in a commodity cycle, and you really need to put that at the front of your portfolio if you're going to stop buying things today, buy that energy first.

SPEAKER_01

Yeah. I mean, well, what gets energy back into institutional portfolios? I thought it would have been higher oil and and this inflation staying sticky that we've seen, but is it just dividends? Is it free cash flow?

SPEAKER_02

No, I'll tell you what it is. If you remember last year, Jeremy, in the metals and the miners, they drifted up during the year, okay? They drifted up from January to about August or so, and they kept on going up. They were going up a lot. And then all of a sudden, people realized they didn't own enough of them. And so from that period on, from that July, August period on till the end of the year, they exploded. And I'm talking about huge moves, you know, 70, 80, 100%, 120% moves in a lot of these things. I think the same thing happens in energy. They watch it move, move, move, and then all of a sudden, you know, they're institutions.

unknown

Yeah.

SPEAKER_02

They're like, hey, we've got to own some of this stuff. Well, what do you do if you don't own it? You got to go buy it, and so everybody buys at one time. I think it's similar to that this year with energy. It'd be much like it was with gold and the miners last year.

unknown

Yeah.

SPEAKER_01

And do you think it'll have kind of more staying power than than a short covering rotation?

SPEAKER_02

Well, I do. You know, because you you you never know for sure, but because you're what's going to happen is you're going to have a big move in it. Eventually, you're going to have a recession and you're going to have to turn the energy though. That's the thing. You know, energy is not, it's not one of these things you you buy and hold forever. But uh eventually it will go high enough to where it affects everything. I mean, it affects the economy and GDP and the whole thing. Well, you're going to have to start going the other way then. Um, because you, you know, after during recessions and afterwards, energy goes, you know, it'll go low. Um not always, but but many times it does. Yeah.

SPEAKER_01

Interesting. All right, Ted Oakley, founder of managing partner at Oxpo Advisors. Uh, your experience shows, by Fred, we appreciate you cutting through the noise with us today. Uh, we look forward to having you on again soon. All right, Jeremy. Thank you. Thanks, Ted. Appreciate it. All right, to our viewers, the bond market is dictating the reality of this economy right now, regardless of what the broader consensus is hoping for. Now, watch the long end of the treasury market, watch the physical energy requirement behind the AI build-out, watch gold just as not as a commodity, but as a measure of trust. And remember to value your assets in relative terms, not just in dollars, like Ted just said. Now, the question now is not just how much investors can make, it's how much risk it's w they're willing to take getting there. Now, if you want accurate data, straight talk, actionable insights on gold, markets, mining, wealth preservation, subscribe right here to Kitco News. I'm Jeremy Staffrin. Thanks for watching. We'll see you next time.

SPEAKER_00

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