Gold Futures Hit $3500, Silver Breaks $40: The New Metals War Between US and China (2025)

August 29, 2025 – As gold surges to $3,500 and silver breaks above $40/oz, are you positioned for the next macro shift? In this important update, Jim Puplava—President of Financial Sense Wealth Management—connects these record moves to breaking news this week: the US government's proposal to add silver to its critical minerals list, the warning from one of the world's largest mining companies, and core inflation continuing to remain hot. Drawing parallels to the Hunt Brothers’ historic cornering of the silver market, Jim explains his strategic shift into the “Shiny Seven” miners and explores how supply chain security, inflation, and reindustrialization are redefining opportunity for sophisticated investors. Have any feedback, breaking news, or comments about today's show? Click here to send a message.

Mentioned in today's show:

To speak with any of our advisors or wealth managers, feel free to Contact Us online or give us a call at (888) 486-3939.

Stay ahead of the news! Subscribe to our premium weekday podcast

Summary

Record Moves in Precious Metals: Gold futures surpassed $3,500 and silver broke above $40/oz, signaling a significant breakout in commodity prices.
US-China Strategic Resource Rivalry: Parallel between Hunt Brothers’ attempt to corner silver in the 1980s and today’s race between the US and China—two of the world's largest economies—to corner strategic metals.
Breaking News Developments: The US government is proposing to add silver to its list of critical minerals; a major Chinese miner warned of unprecedented risks in global metals markets; core inflation reached 2.9% in July, the highest since February.
Investment in the “Shiny Seven”: Jim Puplava discusses why he is heavily exposed to best-of-breed mining companies—referred to as the “Shiny Seven”—which have outperformed much-hyped tech stocks this year.
Reindustrialization and Supply Chain Security: The conversation highlighted the US push to bring manufacturing and supply chains back onshore, emphasizing the growing importance of domestic resource security.
Risks of Traditional 60/40 Portfolios: The traditional 60/40 equity/bond split is increasingly vulnerable in a persistent inflation environment, requiring a reassessment of asset allocation strategies.
Persistent and Structural Inflation: Five macro forces identified that are likely to keep inflation elevated throughout this decade, with implications for portfolio construction and risk management.
Dividend-Paying Stocks and Income Strategies: Merits of blue-chip dividend stocks and short-term bonds with equity kickers as inflation hedges and sources of reliable income, especially for retirees.

Transcript

Cris Sheridan:
Joining us, as always, on today's Big Picture edition of the Financial Sense NewsHour is Jim Puplava, our president of Financial Sense Wealth Management. So, Jim, given the big move that we saw in precious metals this week, gold hitting over $3,500 in the futures market, silver now breaking above $40 with a number of very large moves in the commodity mining space, let's talk about how this relates to the cornering of the silver market many decades in the past.

Jim Puplava:
Very few people are picking up on this. But if we go back about 45 years ago, you had two brothers, the Hunt brothers, who tried to corner the silver market in the late '70s and early '80s. They drove silver up to $50 an ounce. Fast forward 45 years later, and you have the two largest economies in the world, the US and China, in a race to corner strategic minerals. Now, China's got a head start on us. They dominate rare earths. And China is going beyond rare earths, which they have a big supply of in the country. China has moved into Africa, garnering resources there. They’ve moved into South America. Now the US is just waking up to this. And Trump is moving ahead, as he did this week, announcing a lot of strategic materials that are going to be necessary. Silver is one of them, copper is one of them. And we're now starting to see the government take stakes in key minerals, beginning with MP Materials, which makes and processes rare earths. And I think you can see more government stakes in key companies. One of the things I'm looking at right now is the Resolute Copper Mine in Arizona that's been caught up in environmental litigation. BHP and Rio Tinto are trying to push that through. It's been over a decade. But watch for them to waive some of these restrictions and regulations and start pushing it through. And watch for the governments to start taking key stakes in key strategic companies that are necessary for technology, energy transition, all of these things, and especially if the US is going to reindustrialize. I mean, I think the figure, Cris, is roughly about $15 trillion reinvesting in the United States. It was just announced, I think yesterday, that South Korea, which is the second biggest builder of ships next to China, is now going to be building a shipyard in the U.S. Well, if you're going to build a shipyard or you're going to build a factory, what does that take? It takes raw materials. And unfortunately, there's just been a dearth of discoveries for copper and silver and a lack of investment. If there's any mining today, it's done on Wall Street. You have oil companies buying other oil companies. You have silver companies buying other silver companies, gold companies buying others. So it's all been done on Wall Street rather than with picks and shovels. And so, if you take a look at the demand for copper and silver, it is going to more than double in the next couple of decades.

Cris Sheridan:
Well, it's interesting when you think about what happened in the late '70s and '80s with the Hunt Brothers. I mean, that was just two brothers making large investments into silver in an attempt to corner it. And we saw a tremendous, dramatic price spike in silver at the time. But as you're saying today, this cornering of the commodities market, it's now two of the world's largest economies moving into things like copper and silver, really trying to secure the pipeline and the supply chain for these things. So this could be massive.

Jim Puplava:
It is going to be massive because, I mean, China is the world's largest manufacturer. We outsourced--a strategic mistake that we made beginning in the '70s. We've outsourced all our manufacturing. You know, the incredible thing, as I mentioned, South Korea is going to build a shipyard because they are now the second largest shipbuilder in the world next to China. During World War II, the US was banging out one ship a day. We have a shipyard here in San Diego. And I can remember, Cris, in the '00s decade seeing them build these transport ships. We were banging one of those out every couple of months here. I haven't seen that in probably the last 15 years. So we've outsourced shipbuilding, we've outsourced industry. Now we are scrambling as fast as we can to bring that back. And once again, you can't have industry without the labor and the raw materials. You can't make things unless you have raw materials. If we're going to build a shipyard, what are we going to need? We're going to need steel. We're going to need iron ore. We're going to need copper. We're going to need a lot of this stuff to build things, and we simply don't have it.

Cris Sheridan:
So again, I think all of you listening, wrap your mind around this: just think about the two brothers, the Hunt Brothers, cornering the silver market. And now substitute those two brothers with two major rivals, the US on one side and China on the other, and how they are both making investments into the commodity markets, trying to corner that as a way of securing long-term dominance. And of course, we see that with China doing that in rare earths, the US now attempting to get around that, find workarounds with investments into its own domestic production. And as we are speaking on Friday, August 29, silver just made a significant move. We've been talking about a generational buying opportunity in silver here on our show. And of course, Jim, you are heavily positioned and exposed to these areas in your own personal portfolios and with clients as well. So you're putting your money where your mouth is. That has played out quite well. Let's talk about this concept of the Mag 7, which everyone knows about and is endlessly talked about in the financial media, versus the Shiny Seven.

Jim Puplava:
Yeah, this absolutely amazes me. We're still talking about the Mag 7, which have not done that well, maybe with the exception of Microsoft this year. But the Shiny Seven, these are precious metal stocks, Cris. They are up 80 to 100% this year, and they're up four, five, sixfold since 2019. Nobody's talking about it. This year was a big year, but last year was big as well. I mean, we've seen stocks go from $9 to almost $90. We've seen stocks go from $5 to $45. I mean, it's absolutely amazing. You know, the financial media will show the price of gold, which is in the futures market. Gold just crossed $3,500. Silver just crossed $40 an ounce, almost up to $41 an ounce. So things are breaking out. And what are they talking about? I'm just looking at a screen of the financial channels. They're talking about the Mag 7.

Cris Sheridan:
Yeah. So the focus is still on the major bull market that we saw in the past, the Mag 7, all these big tech firms. We're not saying that you don't have any exposure to these areas. Of course, valuations are very, very stretched. That is a cautionary point. But what we're saying is you need to look at not just the Mag 7, you need to look at the Shiny Seven. And so these again are the best-of-breed mining companies positioned in these critical areas: copper, silver, gold as a monetary inflation hedge, all these other vital commodities necessary for powering both the reindustrialization of the US but also as part of this larger macro topic that we've discussed already with the cornering of the commodities markets by the two most powerful and largest economies in the world. And along those lines, there was a piece of news that just came out this week. This is from one of the world's largest mining companies. It's Zijin. So they're out of China. It says here, this is from Bloomberg, Zijin warns of scramble for critical minerals. And they say that growing geopolitical competition presents a challenge as nations vie to secure supplies of strategic commodities. And specifically, this is in relation to not just rare earths, but copper, silver, and even gold, of which they are a major miner. So we really are seeing a very powerful long-term investment theme emerging here. Of course, we've been discussing this on our show for many years. We're starting to see it reflected in these commodity mining stocks, which had lagged. They're really starting to catch up now.

Jim Puplava:
Yeah, I mean, everybody's talking about Nvidia's earnings this week. Nobody's talking about what is happening in these mining companies that are reporting earnings that are up 100, 200% over last year. These companies are buying back their stock, they're raising their dividends. I mean, think about it, folks. Gold is up 182% since 2019. Silver is up 210% since 2020. I mean, Cris, I've never been this excited. I mean, I was excited in the '00s decade, and at that time, I was very much influenced by a book I read by Jim Rogers. He had gone around the world, and of course, he came back and started the Rogers Index. And when I read that book, I took a look at it. I took a look at where the markets were, where commodities were, what was going on in China. And I basically dumped all our stocks in December of 1999. I went into commodities and foreign government bonds in the year 2000. I haven't been--I think what is going to happen in the next two decades is going to be much, much bigger than what we saw in the '70s, much bigger than what we saw in the '00s decade. I mean, I'm so excited about this. And here's the thing about it: very few people are talking about the things we're mentioning here. And it reminds me of where we were back in 2000. You know, investors were chasing tech. What are they doing now? They're chasing the Mag Seven, ignoring commodities. And it's one reason I just started a natural resource portfolio that I'm putting my own money in, where we're owning energy, precious metals, uranium, base metals, ags, strategic metals. Because this is where the scramble is going to be. Every nation on the planet, they're building nuclear plants hand over fist in China, India, and elsewhere. So we're going to need more uranium. And watch what's going to happen to the price of copper. I think you could see the price of copper double by the end of this decade, if not more. And already, I've seen some people are talking about where silver's going on this Friday. It's breaking out in the futures market. We're over $40, so silver is on a run. And they're talking about in the next couple of years, we could see $144, maybe $150 silver here.

Cris Sheridan:
Well, I do think it's interesting that just this week we saw two breaking news items that align with the conversation that we've been having on our show here for many years. And that is the scramble for critical strategic commodities. And we have included silver and copper in that. That was something that one of the world's largest miners again declared this week as geopolitical tensions heat up between the US and China. Also, when the US Department of the Interior suggested just this week adding silver and copper to the critical metals list as well.

Jim Puplava:
Yeah, I'm so excited, Cris. That's one of the reasons I started the natural resource portfolio. One of the issues that we had to deal with is we're almost 30% in commodities. It didn't start out at 30%. It's doubled. You know, we originally started out in the area of 10 to 15%. But just take a look at where these commodities have gone over the last three to five years. It's the reason we're 30%. So one of the things we've done is set up a natural resource portfolio for high net worth investors because the minimum is half a million dollars, and it can't be more than 10% of your net worth for complete compliance reasons. So it's one of the reasons we've gone in this direction that allows me to focus 100% on what we think is going to be a strategic run here over the next 10, 15 years. And I did this in the '00s decade, where we started a gold account because, you know, our gold stocks were up five, six, sevenfold in the '00s decade. And I could see that taking place again if this trend continues, where we're going to be owning a lot of these key strategic materials, from energy, precious metals, uranium, base metals, agriculture, strategic minerals, all the things that we need that our high-tech society requires, and especially now in the United States, where we've begun this massive reindustrialization. I can't tell you, this is such a big major macro factor, and what this might mean for the economy is a booming economy. But also, along with that, we're going to see inflation. I think you just had Ed Yardeni on your show, and I think what's he talking about, the S&P at 10,000 by the end of the decade?

Cris Sheridan:
Yeah, he's had a Roaring 2020s thesis in play really since 2020. And he thinks that, yeah, the S&P 500 could get as high as 10,000 by 2029. So yeah, that was a very fascinating conversation we had on FS Insider this week regarding Ed's outlook. If any of you haven't heard that already, or our other discussion with Dr. Alan D. Thompson on artificial intelligence, brain-machine interfaces, and China racing ahead in these areas, feel free to sign up to listen to all of our weekday content at financialsense.com by hitting the subscribe button. But Jim, going back to our conversation about the US and China both scrambling for key commodities, the ongoing push to reindustrialize here in the US, and the big moves that we are now seeing in gold, silver, and these best-of-breed Shiny Seven mining stocks we hold for our clients, how does all of this tie into your outlook on inflation?

Jim Puplava:
You know, it was interesting, Cris. I was looking at some stats on inflation, and this I think you're going to find surprising. Since World War II, we've only had four years of deflation, and three of those years took place in the '50s. We had deflation in 1949, 1954, and 1955. From 1955, we've had inflation every single year. The one exception was during the financial crisis in 2009, where we had deflation that year. So, out of 80 years since World War II, we've only had four years of deflation. So what does that mean? The average inflation rate since 1945 has been 3.6% a year. What that means is your cost of living is going to double every 20 years. You know, it's rather interesting, Cris, and this was a cue for me. I have it framed in my office. I have the front cover of BusinessWeek from April of 2019. It's got a Tyrannosaurus Rex on its side, and the cover story was, "Is Inflation Dead?" It reminds me of a similar cover that BusinessWeek did, "The Death of Equities," in April of 1979. To me, that was a bell-ringing event that the era of disinflation was over, and I began to move portfolios into commodities, beginning with precious metals, in 2019. Now, I want to talk about what we think are five macro forces that are going to keep inflation elevated this decade. One of them is fiscal dominance and easy monetary policy. For the last five years, actually six years, we've been running trillion-dollar deficits. And since 2020, we've been running multiple trillion-dollar deficits.

The deficit this year will be over 2 trillion. We’ll probably be over 38, maybe 38 and a half trillion by the time we end this year. The other factor, reshoring and reindustrialization. So when you think about the US bringing factories back to the US, it’s going to be more expensive to make goods here. But it’s critical that we start doing this because, as we saw with the supply chain disruptions with COVID and also China’s dominance of just about everything from raw materials to actual manufacturing. The other factor, tariffs and trade policies. Now, so far, the administration is saying this hasn’t had an impact on inflation. I think it’s too early to tell that yet. And I think we’re going to start to see this show up because, I mean, take a look. I’m reading more and more stories about companies that are forced to raise prices now because of these tariffs. The labor market dynamics, we don’t have enough key people, whether it’s in trades or in technology. So, you know, if you think about it, if there’s been $15 trillion announced by companies and countries that are going to be reinvesting money into the United States, well, if they’re going to build a factory, where is the technology and the individuals with the skill set to run those factories? So, higher labor costs. And then we talk about, you know, Ray Dalio’s “How Countries Go Broke.” And we’re in the four phases of this debt cycle. We’re in the last phase when the debt gets to be so high, it’s growing faster than economic growth, and the only way out is to inflate your way out of it. And I think that’s what’s going to be coming. The thing I really believe that you’re going to see, Cris, is the Fed is going to be pressured to start cutting interest rates. Already the market’s anticipating that first rate cut comes next month. And it reminds me of some of the stories that we had in the past that people are saying, well, Trump is really jawboning the Fed. That’s unheard of. Well, you don’t know your history because here’s an interesting story. In 1965, William McChesney Martin was head of the Fed, and Johnson wanted him to bring down interest rates. He was running for reelection, he had the Vietnam War that he was fighting, and he instituted the Great Society programs. Well, he didn’t do it. So Johnson calls McChesney Martin to his ranch in Texas, literally picks the guy up by his shirt and throws him against the wall and says, “You will lower interest rates.” Long story short, he dropped interest rates, and that began the great inflation. Nixon did the same thing when he appointed Arthur Burns to the Fed. And Burns told Nixon in 1960, when he was running against Kennedy, that interest rates better get down, or it’s not going to go well for him in the economy. That’s exactly what happened. Nixon lost to Kennedy. So, fast forward to 1972. Nixon had already devalued the dollar by taking gold backing of the dollar off, and we began the free-floating exchange rates that we have today. But Nixon jawboned Arthur Burns, and he did the same thing. And of course, we know the result was the great inflation that we saw in the ’70s. So, we have been in a disinflationary environment, in my opinion, up to about roughly 2019, because during that period of time, we saw falling yields, falling prices. In summary, Cris, the inflation is going to increase, and we are at a pause. We don’t think that inflation has gone away. We just think it’s paused, and it’s going to pick up and will resume with the coming rate cuts by the Fed.

Cris Sheridan:
So, in sum, Jim, as you’re pointing out, we have been discussing on our show for this decade that we believe higher-than-average inflation is going to remain here with us. That was something that we began stating during COVID that has played out true, and we believe that that is going to be playing out in the back half of this decade, especially as the Fed has moved towards more of a flexible inflation targeting regime, admitting that it is willing to go above or below its 2% in order to meet its other objectives. So, we are likely going to see that continue. And pressure from Trump’s presidential administrations on the Fed, given the very high US debt levels, is likely going to remain in place. That’s fiscal dominance, as we’ve discussed. And we are seeing commodities and precious metals respond to all of this. As we are speaking, let’s dive into persistent inflation. Again, a higher-than-average inflation backdrop for this decade. How does this shape the investment environment, and what works most in a higher-than-average inflationary environment like we see today?

Jim Puplava:
Well, if we take a look at the paradigm, the investment paradigm that has been out and operating probably for the last 40, 50 years, and that’s the 60/40 split, and, Cris, that no longer works. 60% equities, 40% bonds. And now, that worked beautifully for bear markets that we’ve seen probably since the ’70s. You know, the idea is you put 60% in equities. Well, if the equities go through a bear market, as they did, like, let’s say the bursting of the tech bubble, the great financial crisis, if you had 40% in bonds, bonds actually went up as interest rates came down. So, they would offset the losses in equities and minimize the loss. Well, let’s take a look at what happened in 2022. In 2022, the markets were down 25 to 33%, but Treasuries and corporates lost double digits as well. So, if we take a look at, for example, TLT has lost over 36% since 2020. Now, corporate bonds have done a little better. Junk bonds, which are similar to equities, have been about the only place you made money in the bond market. So, you have to rethink retirement planning because inflation has been persistent. As I pointed out, out of 80 years, we only had four years of deflation, and most of those occurred in the early ’50s, one year during the great financial crisis. So, the industry, in my opinion, has the whole picture on investing and especially for retirement all wrong. Because the idea is, as you retire, so let’s say you retire at age 65, you should have 65% of your portfolio in bonds. Well, how’s that going to work out if we have persistent inflation where your cost of living is going to more than double in your retirement? The other factor that goes in is what I call sequence risk. And you take a look at the tech bubble. When the tech bubble burst, the market was down almost 50%. The bear market lasted 929 days, almost two and a half years. The great financial crisis, stocks were down 57%, lasting 517 days, and stocks went nowhere for 13 years. So, if you retired in January of 2000 and let’s say you were just putting your money or retirement nest egg in equities, it would not be until April of 2013 that the market finally broke out above its March 2000 highs. And if you look at interest rates, imagine if you were relying on income. I can remember, Cris, in 2000, we were getting 6 and 7% returns in the bond market. By the time we got to the last decade, interest rates dropped down to 1%. And, as I mentioned, Treasuries got down to a half a percent. So, this idea that you take out 4% each year out of your account. So, let’s say you have a million dollars in an IRA you retire from, and your withdrawal rate is 4%. So, the idea is you take out 4%, $40,000 a year, you sell off your mutual fund shares, you take the money, and hopefully, the market goes up every year. Well, it works in a bull market. It does not work very well in a bear market. Imagine if you retired in January of 2007, your nest egg was in equities, you lost almost 60% in the next two years. How would that work if you’re withdrawing money as the market’s going down double digits? So, you know, if you take a look at the market over the long run, it does well. But there are periods of time, like 1968-82 or the years 2000 to 2013, where stocks went nowhere.

Cris Sheridan:
So, Jim, when we’re talking about structurally embedded, higher-than-average inflation or persistent inflation for this decade, given some of the things that you discussed and the scenarios that we should consider going forward, how has this changed how we manage money for clients of Financial Sense Wealth Management?

Jim Puplava:
Well, I’ve been a big believer in blue-chip dividend-paying stocks. I mean, you know, one of the things we look for, at least I do, I look for a 10% dividend return each year made up of dividend yield and dividend growth. So, for example, if I find a stock that has a 4% dividend, I would be looking for a 6% dividend growth. So, I know that I’ve got an inflation hedge for income because that’s what people in retirement are going to need. Now, when it comes to bonds, we have taken a different strategy. Given this inflationary environment, we’re keeping our maturities short. So, we’re using individual bonds, usually two to three years, sometimes five. And, but what we have come up with is an equity kicker because it’s not just enough--the problem that you have with a bond, especially in a period of inflation. So, let’s say I have a hundred thousand dollars invested in a bond, it’s paying me 5 or 6%. I know what I’m going to get. Every single year, I’m going to get 6%. But what is that bond, or what’s the purchasing power of that bond going to have three, five, or ten years from now? It’s not going to keep up with inflation. So, that’s why we are using equity kickers in our bond portfolios. It’s not just that we want to lock in on a higher yield, keep it short-term because we see interest rates rising. But what is going to give us that inflationary kicker that we need to maintain purchasing power? So, that’s one of the things that we’re using because, if you think about it, people that retire today, there’s three phases of retirement. Age 65 to 75 is what we call the go-go years. That’s when you’re healthy, you’re traveling, you’re doing stuff that you maybe didn’t have the time to do when you were working. Age 75 to 85, you’re starting to slow down a little bit. So, you’re probably spending a little less money, doing less travel. And then we get to 85-plus, that we call the no-go years. That’s when you’re running into medical expenses, maybe one spouse may be in a retirement facility. So, you have to understand, expenses will more than double in your 25-year period. And yet, the industry is telling people, as you age, the older you get, the more you should have in bonds. How is that going to work in an inflationary environment? So, the purpose that we try to do is increase income for clients and keep them even with inflation. I can’t do that with investing in a mutual fund or an ETF or a bond fund because there’s no predictability. If you have a bear market in bonds or you have a bear market in stocks, what happens? People pull their money out of stocks or the stock mutual funds. The manager has to sell off stocks, the bond fund manager has to sell off bonds. So, you don’t have a predictable income stream or a principal stream with these ETFs and bonds, especially when you go through bear markets. So, everything we invest in is based on increasing income and capital appreciation, including our bonds. So, we’ve adapted to what I call an inflationary environment. And not to mention, Cris, higher taxes. Now, Trump has lowered the tax rates, especially at the lower level, and he’s capped the top tax rate at 37%. So, that’s in place. But the nice thing about dividends, they’re taxed at 0 to 23.8% versus ordinary income coming from a bond that’s taxed at 37%. And, you know, when I take a look at the true cost of living, I think, Cris, you know, when Mary and I first got married, I can remember I was going to Arizona State. I was paying $300 a semester to go to Arizona State. Today, that tuition is roughly about $6,800. I remember the first car, a brand-new car I bought, was a Volkswagen VW. I paid $2,000. That car is probably about $30,000. The first house we bought was $63,000. That house is probably worth about a million and a half. And most medical expenses were next to nothing. Fidelity has come out each year with how much the average retired couple will spend on medical during their retirement. And, Cris, it’s closer, almost close to $200,000 right now. So, this is just, you know, this is what you’re going to face if you’re getting ready for retirement. And the idea that, as each year you get older, you put more into fixed income, that is not going to get you through retirement, and you’ll probably run into financial difficulties if that’s the way you proceed.

Cris Sheridan:
We are using a higher concentration of dividend-paying stocks as an inflationary hedge because, as you said, you have a dividend yield plus growth rule that you use as part of your income portfolio. How do dividend-paying stocks perform in bear markets? What have we seen historically there?

Jim Puplava:
Well, I’m going to give you an example of three stocks. I often use the example of Coca-Cola, but I’m going to give you an example of Coke, Procter & Gamble, and Exxon. Now, the market was down roughly about 60% during the great financial crisis. Coke lost about 30%. Exxon lost about 30%. Procter & Gamble, similar. So, they were down about half of what the regular market did. But here’s the important thing and why this works. In 2007, Exxon’s dividend was $1.29. It went up to $1.49, $1.64, $1.73. So, at the end of the financial crisis, had you done nothing and held on to your Exxon, your dividends were up 34%. If you owned Procter & Gamble, your dividends were up 27% during the financial crisis, and Coca-Cola was up 32% during the financial crisis. So, this is why I prefer using individual securities. Because I couldn’t say that if I owned, let’s say, a stock fund. And that was unlikely to happen because, in a bear market, what is the portfolio manager doing? He’s getting liquidation notices. As the bear market proceeded, people began looking at what was happening to their account. They began liquidating their mutual funds. The fund manager would have to liquidate the stock, so he had no predictability of income. And there’s a misnomer that I think a lot of people have that if you go into a bear market, your income’s going to go down. That’s true if you’re in a mutual fund or an ETF. But, as I just mentioned, if you own an individual stock, you did nothing but just held onto them. Your income went up every single year. And that’s the most important concept you need to grasp because your income is not going to change. It’s going to go up despite the difficulties. Now, it may not go up as much depending on the severity of the crisis, but I mean, Exxon was up 34%, Procter & Gamble was up 27%, and Coca-Cola was up 32%. That’s not a bad rate of return for just sitting and collecting checks.

Cris Sheridan:
So, in general, when you look at dividend-paying stocks, and these are particularly the best-of-breed dividend-paying stocks, they typically hold up better during a bear market. And if you are also collecting dividends at the same time, that is also mitigating that risk, at least in terms of price, you’re still collecting the income from those. So, those are some of the things to keep in mind.

Jim Puplava:
One of the worst things you want to have happen is you finally retire. You’ve spent your whole life accumulating all these assets. You probably rolled your 401(k) into an IRA, and now you’re going to start living on it. The last thing you want is to go through a bear market where stocks lose 50, 60%. It could devastate--we call this in the business sequence risk. So, if somebody’s getting ready to retire, depending on the market environment, we will take particular caution in terms of what we do, and we mitigate these risks. But by investing in dividend aristocrats, companies that increase their dividends every year, because the most important thing we can deliver is income, because that’s what a person that is retired is going to be dependent on. And buy short-term bonds with equity kickers. So, we have some inflation hedges, but there’s a number of things that you can do. And, Cris, I’ve just found this over the years. It just works. Who doesn’t want to have a pay increase each year? Think about when, if in your working career you’re working for a company, what do you get on your annual review? You’re probably going to get a cost-of-living or a COLA increase in your salary. Well, what happens when you move into retirement? Where’s your COLA going to come from if everything you have is fixed income? So, that’s why I think dividend-paying aristocrats fit in well with somebody that is nearing retirement. And in retirement, how are you going to pay for those medical expenses when you’re in your 80s, or one spouse gets sick, you have to go, or even both of you have to go into a retirement home here in California? A monthly stay in a nice retirement home is probably $8,000 to $10,000 a month. I mean, think of how much that costs. So, this is why I think this works over the longer term. And any study that you look at about equities, I don’t care if it’s “Triumph of the Optimists,” where they looked at stock Bohemian stock markets globally over a hundred years, the best returns came from dividend-paying stocks. If you just look at price appreciation, it’s very small, it’s about roughly half, and the dividend return is about half as well. So, when you hear words that, hey, the stock market has done 10% a year over a longer period of time, just remember half of that came from dividends.

Cris Sheridan:
And when it comes back to the Mag 7, of course, there is increasing talk about a bubble, an AI bubble. Of course, we see values stretched in the housing market as well. So, how do you take these things into consideration as a money manager when it comes to potential downside risks?

Jim Puplava:
Well, I mean, if we look at where the market is today, P/E multiples, not quite as high as they were in 2000, but they’re close. If you look at where the P/E multiples are today, it’s 34 on the NASDAQ, it’s 26 on the S&P, and about 22 for the Dow. Dividend yields are down to about 1.5% on the S&P, a little over 2% on the Dow. And although we’re not quite in bubble territory, I mean, if you look at the P/E multiples of some of the Mag 7, 37 for Microsoft, 59 for Nvidia, 53 for Palantir, 27 for Meta, and even some of the large retail, Costco is 53, Amazon is 35, Netflix is 52. And part of the reason we’ve talked about this on the show is, is passive indexing is still where investors are putting their money. So, every time you put a dollar in the S&P fund, about 35 or about 33 cents is going to go into the large-cap stocks like your Microsoft, your Meta, your Amazons, those kinds of companies. So, this capital flow that’s coming in, and as the Wall Street Journal talked about, individual investors are all in. It’s the light. We’re at record levels for margin debt. Now, if you look at bear markets, we’ve had about 15 of them since 1945. The average duration is roughly about 290 days, and the frequency is about every 5.1 years. The longest bear market was in 2000. It was two and a half years with losses of 20% to 57% and even over 70% on the NASDAQ. So, you know, one of the things that we’re doing is we are avoiding extreme P/E stocks. I mean, I just don’t want to be investing according to the greater fool theory. I know I’m overpaying for the stock, but I need to buy it because money’s flowing into it, and there’s going to be some other fool behind me that’s going to be buying that stock at a higher price. I’m not sure what triggers the bear market, but, you know, sooner or later, we’re bound to have one. It maybe could be some exogenous event. It could be some kind of shock to the system, either economically, geopolitically, or, you know, something, quite honestly, in the resource sector. What happens if oil was to spike to over $100 a barrel? What happens if gold’s at $4,000? What happens if copper’s at $9 a pound? Imagine silver at $100. I just read an article predicting $144 an ounce. Something like that could be a shock. But, Cris, it’s not just stocks. It’s real estate. If you take a look at today, I want to give an example of this, but this will really demonstrate what happens. I think one of the reasons you’re seeing the high prices in real estate is people aren’t turning over their real estate. I mean, if you have a 3% mortgage, why are you going to dump your house, buy a new house, and pay and get a 7% mortgage? And on top of that, we changed the tax laws on the sale of a personal residence. Clinton changed that. It used to be, if you had a house, if you sold it and rolled it over into another house of similar value, you didn’t have to pay capital gains tax. You deferred them. Well, we changed that. And we said in 1994, if you have a house and you’re single, the government’s going to give you a quarter million of capital gains free. $500,000 for a married couple. Cris, we have not changed that or indexed it to inflation since 1994. So, imagine if you have a house. I have a friend who bought a house here in San Diego, about a quarter million dollars in 1998. That house is worth about one and a half million today. Let’s take, you know, and this is what I was trying to explain to him. Not only was he going to get hit with about $800,000 in capital gains taxes, both federal and state, but think of the person that would have to buy that house. So, if you take that house for one and a half million, you’re going to probably have to put 20% down, that’s $300,000, a 30-year fixed mortgage today at 6.62%. That’s a house payment of $7,638 a month. On $1.5 million, your property taxes are $15,000. That’s $1,200 a month. So, now you’re paying close to $9,000 a month, and not--here’s the catch on this too. From a tax break point of view, not all of that is deductible. The $15,000, you can’t deduct it all. The government only allows you $10,000 in terms of the mortgage deduction on, let’s say, a million-dollar mortgage. The government only allows you to deduct up to $750,000. So, not only are you going to pay higher interest rates and higher payments because of the price of the home, but you’re also going to be paying higher property taxes. You’re going to have to mortgage a larger mortgage to buy that house. And not all of that mortgage is deductible, not all the property taxes are deductible. So, we see a softness in real estate prices. They’re down 8 to 10%. I see more of that coming in residential real estate. We’re already seeing it in commercial. I mean, I just sold my commercial building because commercial is going to really get hammered here. We saw a lot of that working from home with COVID. So, the vacancy factor around here is roughly about 20%. So, Cris, I think we have much further prices to go. So, I don’t want to get caught up in something that is so high-priced that I’m vulnerable to a downturn. So, whether it’s coming to stocks, we’re looking at the new bull market in commodities, or we’re looking to value stocks where I’m not overpaying. I want to buy--I just bought a major financial company, and I’m paying 10 times earnings. I feel comfortable with that. I’m getting a dividend yield of 4%. That dividend is growing at 8% a year. That’s the kind of thing I want to own in this kind of market. I don’t want to buy a stock that I’m paying five and six hundred times earnings, hoping that it’ll continue along that because the problem you have with these high-priced stocks, all of a sudden, you have a quarter where they miss their earnings, they miss their revenues, and that stock could be down 20, 25% in a single day.

Cris Sheridan:
Well, I know we’ve woven this through much of our message and what we’ve discussed so far today, but how are you managing investments in this macro environment when we think about, like you said, the high valuations, some of the big breakouts that we’re seeing in precious metals and commodity mining stocks and the like?

Jim Puplava:
Well, as I mentioned, we use individual bonds with an inflation hedge. So, we’re keeping our maturities between three and five years, Cris. And we use a laddered approach. In other words, we have bonds that are coming due each year. So, if interest rates go up, as they have been this last four or five years, we can roll those bonds over into a higher interest rate. And with some of these companies or the bonds that we own, we’ve been able to convert into the stock. So, we like that with the convertibles that gives us an equity kicker and an inflation hedge. The other thing, as I mentioned, we’ve been using dividend aristocrats. These are companies that are producing an annual dividend return of 10% made up of the dividend yield and the dividend increase. And then, once again, we’re going into value stocks. Now, we are into technology stocks, but we’re more invested in the picks and shovels. If you look at AI, if you look at data centers, how are these data centers going to be powered? They’re going to be powered by natural gas. So, we own natural gas pipeline companies that are paying 7 to 8%. And, you know, when we’re looking at value stocks, we like to look at stocks that are down 25 to 50%, where we are basically derisking because if a stock’s down 25 to 50%, it’s already gone through most of its bear market. So, there’s less at risk in a downturn. And especially if you’ve got these stocks that have high dividend yields because the stock is only going to go down so much because if it does, that dividend yield even goes higher. And then, as I mentioned, we’re invested in commodities in my income, a little over 30%. And it didn’t start out at 30%. But a lot of these stocks, I mean, this year, a lot of our Shiny Seven stocks are up 75 to 100%. And not to mention how much they’ve been up since 2019. So, you know, this is, we’re looking at where the market is going. People don’t understand what a macro shift is taking place in the United States on trade policy and the reindustrialization of this country. This is going to be the driving force in the economy, in the market, over the next 10 to 20 years. So, this is, you know, for almost 40 years, we outsourced our manufacturing in order to get cheap-made goods. And the emphasis was on consumption. That is going away with inflation. The emphasis that you’re going to see in the economy now is not going to be on consumption. It’s going to be on the production of goods.

Cris Sheridan:
You know, we have the financial media airing, whether or not that’s Bloomberg or CNBC, in the foyer and on the TVs in our office. And, you know, the main focus is, again, the Mag 7. That’s where most of the financial industry is laser-focused on every earnings release by Nvidia or Microsoft, a lot of the latest AI development. Of course, all of these things are important and changing the way we work and live today. But it’s fascinating when you think about these Shiny Seven, these best-of-breed mining companies that we’ve identified and that we’ve invested in, what’s happening under the radar that is not getting the attention of the financial media today. And I just love that concept that you discussed of thinking about the Hunt Brothers in the late ’70s and early ’80s cornering the silver market and how we see the US and China cornering the commodities market today. As we close, we manage money for high net worth individuals and investors. If anyone is interested in the Natural Resources portfolio or in our other accounts, what would be the best way for any of our listeners to contact you or other wealth managers to have a conversation?

Jim Puplava:
Well, they can go to our website, financialsensewealth.com, or they can call us at 888-486-3939. In the meantime, on behalf of Cris Sheridan and myself, we’d like to thank you for joining us here on the Financial Sense NewsHour. Until we talk again, we hope you have a wonderful, pleasant holiday weekend.

For a link to our full podcast archive, see Financial Sense Newshour (All) and don't forget to subscribe on Apple Podcasts, Spotify, or YouTube Podcasts!

Content is for informational purposes only and does not constitute financial, investment, legal, or other advice.

There are risks involved in investing, including the potential for loss of principal.

Forward-looking statements are based on assumptions that may not materialize and are subject to risks and uncertainties.

Any mention of specific securities or investment strategies is not an endorsement or recommendation.

Advisory services offered through Financial Sense® Advisors, Inc., a registered investment adviser. Securities offered through Financial Sense® Securities, Inc., Member FINRA/SIPC. DBA Financial Sense® Wealth Management.