🎙️ NEW PODCAST WITH CHRIS AND BRAD

We’ve got a new podcast to share with you this week. Chris MacIntosh and our head trader, Brad McFadden, joined Danny over at CapitalCosm for a wide-ranging conversation that hit on everything — from looming market risks to unexpected opportunities hiding in overlooked corners of the world.

Here’s a smattering of the topics they covered:

• The two corners of the market where we see the most risk building right now.
• Why tuning out the daily market noise is one of the smartest moves an investor can make (and the long-term lens we actually use instead).
• The strange new version of the “American dream” retail investors are re-writing in real time (we’re being sarcastic, but it’s a perfect insight into today’s market).
• Even with a Fed rate cut likely coming this week, why we still see rates heading higher… and what that means for investors and the broader economy.
• The art of beating global markets (while cashing fat dividend checks) by owning “boring” companies hiding in plain sight, like an Israeli cigarette maker, a Central Asian bank, and an Argentine real estate play that’s already up 6x since we first got in.
• And mucho mas.

You can listen to the entire conversation on Youtube here.

💥 THE SOUND OF SOMETHING SNAPPING

The “mostly peaceful” protests of 2020 were the early warning flare. Last week’s assassination of Charlie Kirk? That might just be the sound of something snapping.

Tempting as it is to see this as shocking and isolated (and no doubt the MSM will frame it as such), it’s not. Anyone who studies history knows events like this are seldom random. Instead, they are part of deeper cycles where societies break down and rebuild stronger.

As Chris wrote back in 2020:

Depression, anxiety, and outrage at the political establishment will first manifest in sporadic uncoordinated civil unrest, and then the populace will begin to get organized.

Folks far smarter than us have reached the same conclusion. Ray Dalio argues the US is already in a “type of civil war,” with polarization at century-high levels and inequality exploding. As Dalio puts it: the US is no longer functioning as a unified nation.

The numbers make the same point. In 2000, the US national debt was $5 trillion. Today it’s $37 trillion and climbing. And 23 cents of every tax dollar now goes just to cover interest on that debt. It doesn’t matter who the podium donut in the Oval Office is — the trend is unchanged. Hoping for political salvation at this point is delusion.

Then there’s the growing cultural divide. On one side, the “pry it from my cold dead hands” crowd; on the other, those who think even the military shouldn’t be armed unless guns are ethically sourced and come with a high ESG score.

These aren’t just policy debates over family dinner. Rather, they are increasingly incompatible worldviews.

The pattern is hardly new. Nations rise on freedom and productivity, then rot from government overreach, redistribution schemes, and mismanagement. Collapse follows predictable phases: inflation, civil unrest, authoritarianism, secession, breakdown.

What’s new today, however, is scale. It’s not just America. The entire Western world is staggering under top-heavy governments in late-stage decline. America may simply be the first domino to fall.

Best case, we have a relatively bloodless breakup. Worst case? Ideological divides spill onto the streets.

The investment implications?

• Civil unrest has NEVER been deflationary. With fracture comes inflation.
• Inequality magnifies volatility… and America has it in spades.
• Defense, firearms, and security all thrive — not out of preference, but necessity.

Back in mid-2020, we recommended a basket of gun stocks in the Insider portfolio, then closed the positions two years later. Not because our thesis on America’s growing divide had changed (quite the opposite), but simply because better bargains were elsewhere.

After last week’s events, maybe we sold those stocks a little too soon.

This isn’t about cheering for violence. It’s about recognizing patterns that repeat across history. The kindling has been piling up for decades. This week, the match may have been struck.

💥 GOLD: THE BULL NOBODY WANTS TO RIDE

On the topic of investment implications from all this, did anyone notice gold is sitting at all‑time highs?

Now, even when adjusted for inflation…

The macro tailwinds for gold could hardly be stronger (perhaps that’s why central bank pointy shoes are stockpiling it like never before). And yet, allocations to gold equities remain at historic lows. For the average investor, the sector might as well not exist.

Ironically, profit margins for gold miners are now higher than at any point since Nixon slammed the gold window shut in 1971 — dwarfing anything seen during the entire “fiat era” over the past 50 years.

One thing is for sure: that’s not what the top of a cycle looks like.

If anything, it seems most investors view gold with disgust. And that’s exactly the kind of sentiment that historically plants the seeds for the next mania.

We’re perfectly content with that. Here at Capitalist Exploits HQ, our time horizon is measured in years, not quarters.

And as we like to say, with all these tailwinds, the bull market in gold (and gold equities) might surprise even the most ardent bulls.

🐂 VALUE, PRICE, AND THE MAGNETIC PULL OF PATIENCE

Whenever Howard Marks publishes a memo, we pay attention. His latest — on the interplay between value and price — is a perfect reminder of why most investors fail to win the long game.

Here’s the excerpt we think every investor should tape to their desk:

In the long term, the success of an investment will hinge primarily on whether the buyer was right about the asset’s earning power. However, an asset’s current earning power and opinions regarding its future earning power usually don’t change much from month to month or even year to year. Thus, short-term investment performance is likely to stem mostly from changes in the price investors are willing to pay for the asset. That makes price the dominant consideration for anyone whose principal concern is the short run.

Value should be thought of as exerting a “magnetic” influence on price. If price is above value, future price movements are more likely to be downward than upward. And if price is below value, future price movements are more likely to be upward than downward. However, in the short run, price can move in just about any direction relative to value. This is so because an asset’s price at any given point in time is mostly determined by investor psychology, which can be irrational and unpredictable. Thus, while the current relationship of price to underlying value should move in the expected direction, it can only be counted on to do so in the long run at best.

This is exactly why we’re drawn to markets most investors ignore: from countries like Greece and Argentina, oil and gas service firms, or unloved gold miners. In all cases, they’ve been shunned as toxic by most investors, but the long-term earning power hasn’t vanished.

As we pointed out in our last issue, emerging markets are trading near multi-decade lows versus US equities. Gold miners, meanwhile, are sporting the best margins they’ve had in years.

To paraphrase Marks, these sectors are magnets waiting to pull price back toward value.

Psychology can dominate for months or even years, but eventually fundamentals reassert themselves. That’s where patience stops being merely a virtue… and becomes an investing weapon.

🧭 WEEKLY HUMOUR

While we rarely dabble in linguistic gymnastics, it behooves us this week to make an exception.

And a puzzle only true greenies will be able to solve…

Have a great week!