Bert Dohmen: Gold Price Going "Much Higher," Silver to Play Catch Up

Key Concepts

• US Jobs Numbers: Critiqued as inaccurate and misleading, with a call for reliance on private sector data.
• Artificial Intelligence (AI): Discussed as a disruptive technology leading to significant job losses and potential deflation.
• AI Stock Bubble: Concerns raised about the sustainability of AI company valuations and their future expenditures.
• Cryptocurrency Meltdown: Forecasted collapse of cryptocurrencies to zero due to lack of intrinsic value and excessive leverage.
• Deflation: Identified as a major concern for central bankers, difficult to combat due to banks' reluctance to lend.
• Federal Reserve (Fed) Policy: Skepticism expressed regarding the Fed's actions, particularly Quantitative Tightening (QT) and interest rate adjustments, viewed as "kabuki theater."
• US Treasury Bonds: Discussion on the lack of trust in government bonds and a proposal for gold-backed US Treasury bonds.
• Gold: Presented as a safe-haven asset with a strong long-term outlook, supported by historical cycles and current economic conditions.
• Silver: Expected to outperform gold in the short to medium term due to its current undervaluation.
• Market Manipulation: Asserted that markets are heavily manipulated, particularly individual stocks, by algorithmic traders.
• Contrarian Investing: Advocated as a strategy to profit by going against the majority opinion.
• Risk Management: Emphasized as a priority in investing, more so than solely focusing on making money.
• Valuations: Highlighted as extreme in many stocks, with a warning against buying based solely on price momentum.
• High-Frequency Trading (HFT): Explained as a short-term trading strategy that makes it difficult for individual investors to compete.
• Uptick Rule: Discussed as a historical measure to prevent market manipulation, which was removed in 2007.
• Gold Leasing: Identified as a mechanism that can be used for gold price manipulation.
• Reading and Education: Stressed as crucial for knowledge acquisition and leadership.

Inaccurate US Jobs Numbers and Private Sector Data

Bert Dolman, founder and CEO of Dolman Capital Research, expresses strong skepticism regarding the accuracy of official US jobs numbers, calling them "so wrong and so misleading." He argues that these numbers are "totally tainted" and suggests they are influenced by political desires rather than factual data. Dolman advocates for relying on statistics from private companies, which he deems "much much more trustworthy." He draws a parallel to China's economic statistics, warning against believing them. The recent government shutdown, while causing a lack of data, is seen as a "blessing" by Dolman, as it temporarily removes these unreliable figures. He notes that businesses are reporting a significant downturn in their operations over the past three to four weeks, indicating a "real economy" that is "falling off the cliff."

The Disruptive Impact of Artificial Intelligence (AI) on Employment

Dolman identifies Artificial Intelligence (AI) as a significant factor contributing to the current economic downturn and potential job losses. He describes AI as "magic" and "amazing," noting its power beyond simple search functions, extending to project execution. This advanced capability, he argues, will render many individuals, even within tech companies, "superfluous." As an example, he cites Microsoft's recent earnings report, which showed record highs in revenue and earnings, yet simultaneously announced the layoff of 15,000 employees. Dolman questions what other companies, not experiencing record highs, are doing as they adopt AI. He revises his earlier estimate of half a million job losses in the US over the next couple of years to "millions," emphasizing that this is a worldwide phenomenon. Unlike previous technological advancements, such as the dot-com bubble, where job transfers occurred, Dolman sees no comparable compensation for AI-displaced workers. He predicts that those who understand AI will have job offers, while those who don't will face significant unemployment.

The Specter of Deflation and Central Bank Nightmares

The widespread job losses due to AI are predicted to raise the "spectre of deflation," which Dolman labels the "nightmare of central bankers." While central bankers can manage inflation by reducing money supply growth, they struggle with deflation. Dolman explains that even if central banks inject money into the economy through banks, the money supply will not grow if banks are unwilling to lend. This reluctance stems from bankers' concerns about not getting their money back, especially in a contracting economy. Consequently, deflation can lead to economic stagnation.

Concerns About an AI Stock Bubble and Crypto Meltdown

Dolman acknowledges the existence of a "lending bubble" related to AI companies, questioning where they will secure funding for their future expenditures, especially during a recession. He also points to the emerging "meltdown in the crypto area," which he has been forecasting. Dolman believes all cryptocurrencies will eventually reach a price of zero due to their lack of intrinsic value. He uses Bitcoin as an example, stating that one cannot purchase everyday goods like bread with it, rendering its value purely speculative. He predicts that books written about this era will describe cryptocurrencies as the "biggest financial scam ever in the history of mankind." The recent Bitcoin crash, where it dropped 35% in a couple of weeks, is seen as a prelude to a larger collapse, exacerbated by the significant leverage used by investors. He warns that any investment with three to five times leverage is bound to "implode."

Skepticism Towards the December Fed Meeting and Monetary Policy

Dolman dismisses the importance placed on the upcoming December Federal Reserve meeting, calling it "kabuki theater." He believes the Fed is "playing games" by creating uncertainty about interest rate cuts, when they are likely to proceed with them, knowing it will have little to no effect. He argues that a quarter-percent change in interest rates is insignificant to borrowers. Dolman also refutes the Fed's claims of practicing Quantitative Tightening (QT) throughout the year, stating that money supply (M2) and bank loans have reached new record highs, which is inconsistent with tight monetary policy. He asserts that the Fed is "lying again."

Long-Term Rates, Government Bonds, and the Gold-Backed Treasury Proposal

Dolman differentiates between short-term and long-term interest rates, stating that long-term rates are the "balance." He anticipates short-term rates will eventually fall to 0% if the recession deepens into a depression. He highlights a significant problem for the US Treasury: the lack of demand for long-term bonds. This is not due to a lack of confidence in the US specifically, but a global distrust in governments. Dolman proposes a radical idea for former President Trump: backing US Treasury bonds with gold. He believes this would make US bonds the most desirable asset globally. To back all outstanding US Treasury bonds, the price of gold would need to rise to approximately $20,000 per ounce, which he suggests as a potential target rate for gold.

Gold as a Safe Haven and the BIS Classification

Dolman explains that if US Treasury bonds were backed by gold, other nations would invest in them. He references the Bank for International Settlements (BIS), the "central bank for central bankers," which classifies gold as "zero risk" for banks. This classification means banks do not need to hold reserves against their gold holdings, making it an attractive asset. He contrasts this with cryptocurrencies, which he calls "liquid gold" but a "fairy tale" that cannot compete with the tangible value and historical significance of gold, which has served as money for 3,000 years.

Historical Parallels and Investor Psychology

Dolman draws parallels between the current economic climate and the 1930s Great Depression, predicting similar occurrences of famines, wars, social unrest, and government overthrows. He notes that while history doesn't repeat exactly, it "rhymes." He advises investors to be aware of human emotions, particularly "fear and greed," which drive market fluctuations. Dolman's core investment advice is to be contrarian: when the majority is on one side, be on the opposite. He emphasizes the importance of recognizing when one's own opinion becomes the majority, as it often signals an impending error.

Advanced Technical Analysis and the Dolman Money Flow Index

Dolman explains his firm's use of "advanced technical analysis," focusing on "money flows" rather than just price. He criticizes mainstream financial analysts for focusing on indicators like RSI and MACD without considering volume, which he deems the "important factor." He states that looking only at price can be misleading, as traders can manipulate it. Dolman's firm developed the "Dolman Money Flow Index," which tracks the amount of money entering or leaving the market. He points to a recent trend where the money flow index has been declining across major indices while the indices themselves were making new highs. This divergence indicates "distribution," where "smart money" is selling to "naive latecomers."

Valuations and the Irrationality of the Market

Dolman criticizes the extreme valuations of many stocks, citing examples like Palantir trading at 200-300 price-to-earnings ratios. He argues that the market's focus on price momentum ("If it's going up, you got to buy it") is irrational and that investors should consider selling short in such scenarios. He uses the analogy of buying a used car for half a million dollars if it's an old, junky Ford, highlighting the absurdity of overvalued assets.

Market Manipulation and the Absence of Fairness

Dolman asserts that markets are not fair and are heavily manipulated, estimating that "probably 100%" of the market is manipulated. He believes that fundamentals are often disregarded, and people only become worried when their bank accounts are empty. He contrasts this with the past, where he estimated 60-70% manipulation. He criticizes the SEC for not enforcing existing laws against manipulation.

Contrarian Investing and Risk Management

Dolman reiterates that the way to profit or protect oneself in a manipulated market is to be contrarian and take the opposite side of what others are doing. He highlights that his firm has been making "very good money" for its subscribers by employing this strategy with low risk. He emphasizes that reducing risk should be a "priority one" for investors, warning against "stupid crazy risk." He notes the alarming statistic that stocks without earnings have outperformed stocks with good earnings by a factor of ten, and stocks without sales have performed even better.

Long-Term Outlook for Gold and Silver

Dolman's long-term outlook for gold is very strong, based on historical cycles. He references a 400-year cycle study that predicted a 20-year bear market in gold from 1980 to 2000, followed by a 31-year bull market. He attributes this bull market to "infinite money printing" by governments worldwide. While he doesn't provide a specific price target for gold, he dismisses speculative predictions of $10,000 to $1 million per ounce as "BS" without evidence. He believes that current fundamentals strongly support higher gold prices for years to come, citing the US debt of $37 trillion as an example of unsustainable fiscal policy.

Regarding silver, Dolman believes it has "a lot of catching up to do" with gold, as it has not risen as much in recent years. He expects silver, and particularly silver miners, to see larger gains than gold. He recommends diversified ETFs for silver miners to mitigate the risk associated with individual stock manipulation.

The Role of High-Frequency Trading and the Removal of the Uptick Rule

Dolman explains that high-frequency traders (HFTs) operate on very short timeframes, making millions of trades per second with small profit margins per trade. He argues that individual investors with laptops cannot compete with these sophisticated systems. He advises shifting focus to longer-term investments, especially in assets like gold and silver. He recounts the history of the "uptick rule," implemented after the 1929 crash to prevent bear raids and market manipulation. This rule, in effect from 1933 to 2007, required short sales to occur only on an uptick in stock price. Its removal in 2007, he claims, paved the way for the market crash of 2008, as HFTs could then sell short without this restriction.

The Vulnerability of AI and the Need for Disclosure

Dolman expresses concern about the misuse of AI, citing examples of AI-generated videos of prominent figures like Warren Buffett and Elon Musk. He advocates for a simple federal law requiring clear disclosure in large letters when AI is used to produce content, indicating that it is not the actual person speaking. He believes disclosure is the "best rule" to allow people to make informed judgments.

Gold and Silver as Low-Risk Investments

Dolman considers gold and silver to have "so much lower" risk compared to other investments. While acknowledging the success of companies like Nvidia in the AI sector, he points out their very high valuations. He would only consider investing in Nvidia for diversification within technology but would avoid companies with extremely high P/E ratios (100-300 to 1). He prioritizes avoiding losses over chasing potential gains.

The Wellington Letter and the Importance of Reading

Dolman promotes his firm's publication, "The Wellington Letter," a twice-monthly, 50-page research report offering contrarian market views not found on mainstream media. He stresses the importance of reading for knowledge acquisition, especially for younger generations, stating, "If you want to be a leader, you have to be a reader."