Dear Fellow Investor,
This is Dylan Jovine with Behind the Markets.
Happy Wednesday.
Today is Wednesday, July 29th.
I can't believe July ends on Friday.
Anyway, I want to talk about gold today.
While I was on the road, driving through different states, watching the farmland roll by, I had CNBC on in the car.
My kids had their headphones in, trying to find a happy place while I tortured them with lectures on American history.
They're going to need therapy after this trip.
But I caught something on CNBC that I want to share with you.
John Paulson was being interviewed.
Now, I don't listen to most of the people they put on that network.
A lot of them are promoters.
They're part of the machine.
But John Paulson is one of the few I actually pay attention to.
What Paulson Said
He was asked about gold.
His answer: we are in the early stages of a long-term bull market.
That is exactly what I believe.
That is exactly what Stanley Druckenmiller has argued.
And here is the reason why.
Western governments — especially America — cannot get their fiscal house in order.
Both parties.
Nobody has had the discipline to actually tighten spending.
So we keep running massive deficits to pay for social services, and we keep borrowing money we don't have.
When you borrow at that scale, you devalue your currency.
You disincentivize people from holding dollar-denominated assets.
You put downward pressure on the dollar and on your bonds.
And you make gold more attractive by the day.
A couple of months ago, gold overtook the US dollar as a world reserve currency for the first time in thirty years.
Think about that.
We blew one of the greatest financial privileges in human history.
And the rest of the world noticed.
Central banks around the globe are now buying gold instead of US bonds.
They used to hold dollar-denominated assets as their reserve.
Now they're holding gold.
The only dollar-denominated assets they're still buying are US stocks — because stocks can actually grow earnings above the inflation rate.
Everything else is losing ground to gold.
Where Paulson Is Putting His Money
Paulson's preferred way to play this bull market is through gold mining companies — specifically NovaGold Resources (SYM: NG).
NovaGold has an indicated claim on 40 million ounces of gold, including a 40% stake in the Donlin Gold project in Alaska.
Small market cap of about $4.2 billion.
Paulson is a major backer.
This is the same man who made $2.3 billion shorting the housing market — the real story behind The Big Short.
Not Michael Burry.
John Paulson.
He took the other side of Wall Street's bet and made a fortune.
When a man like that says he sees a long-term bull market in gold, I listen.
My View
I've been saying this for a long time.
We have too many retirees, too much deficit spending, and no political will to fix any of it.
The deficits stretch as far as the eye can see.
That will keep putting downward pressure on dollar-denominated assets.
And it will keep putting upward pressure on gold.
Yes, we'll have corrections along the way — like the pullback we've seen over the past few months.
That's normal in any long-term bull market.
But over time, this is a big one.
And if you haven't thought seriously about your exposure to gold, now is a good time to start.
Have a wonderful day.
I'll see you tomorrow.
“The Buck Stops Here,”
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Written by Dylan Jovine