finance
Welcome to The David Lin Report! I’ll be reporting on the most impactful market-moving events, as well as interviewing experts in finance, economics, science, and technology.
Brent Cook predicts gold will fluctuate within a $500-$600 range of its current price over the next year, citing caution in the mining sector despite a pickup in financings. He notes that while more money is being raised, it's going to fewer companies, indicating a focus on quality projects.
Brent Cook observes a significant shift in market sentiment within the mining sector, moving from euphoric to cautious over the past year. He attributes this change to gold's price pullback from $5,000, noting that investor enthusiasm often mirrors stock price performance.
Brent Cook notes that major mining companies' price-to-NAV multiples have fallen from 1.6x last year to 0.7x, suggesting they are more attractive M&A targets. However, he observes that historically, M&A activity tends to increase when valuations are already stretched.
The GDX index has fallen approximately 35% from its peak. Brent Cook suggests that while some investors focus on large companies for free cash flow, he is looking for 10x returns, implying a strategy that may involve identifying undervalued junior miners.
Brent Cook identifies key criteria for identifying companies likely to be acquired, emphasizing land packages, good jurisdiction, grade, and management. He highlights Rupert Resources and Arizona Sonora as examples of smart acquisitions made by companies with existing operations and infrastructure in the region.
Kai Hoffmann, CEO of Sore Financial, notes a divergence between copper and gold, with copper being more fundamentally driven and holding strong above $6 a pound, while gold is more headline-driven, reacting to inflation and geopolitical events. Hoffmann believes copper's strong fundamentals indicate more underlying story despite recent tech stock volatility.
Kai Hoffmann expressed concern that a potential bubble burst in the AI trade could negatively impact commodities, similar to how tech stock downturns affect copper. He noted that while AI is revolutionary, its job displacement impact and inflationary effects are still being debated, and the market is currently nervous about tech valuations.
Kai Hoffmann explained that the recent surge in oil prices, contrasted with gold's decline, is due to different fundamental drivers. Oil prices are influenced by supply shocks and Middle East disruptions, while gold is reacting to inflation and rate hike fears. He noted that while oil should be higher given disruptions, an oversupply entering the crisis has kept prices in check.
Kai Hoffmann stated that the market impact of the Iran conflict has normalized, with recent news like a Qatari ship being attacked barely moving markets. Investors are hopeful for a resolution, and unless there's a larger event or a significant rise in oil prices, the situation is unlikely to derail markets in the short term.
Kai Hoffmann discussed his firm's mining equity fund, which is built with a base of large producers and developers, highlighting developers as his preferred space for leverage to gold prices. He also noted a small position in explorers and mentioned that while gold and silver are the main focus, they are also looking for copper opportunities.
Kai Hoffmann stated that his fund recently bought more positions last week, though they are more hesitant today, waiting to see the market's weekend performance. He noted that despite recent market volatility, the fund has seen inflows, indicating a positive position in a down market.
Kai Hoffmann elaborated on the divergence between copper and gold, stating copper is fundamentally driven with a massive need for electrification and data centers, while gold is more sentiment-driven, reacting to inflation and geopolitical news. He emphasized that copper's current price of over $6 a pound reflects its underlying demand, despite broader market volatility.
Kai Hoffmann expressed interest in copper opportunities, particularly in South America and the US, mentioning Ivanhoe Electric as a fund holding. He was disappointed that Ivanhoe Electric did not pursue Arizona Senore, which was recently sold to Hudbay, as he saw them as neighbors with potential for a competitive bid.
Gary Wagner believes gold has tentatively formed a support level around $4,000, despite recent geopolitical tensions and varying inflation data. He notes that while lower CPI prints initially boosted markets, rising oil prices and events in the Strait of Hormuz could reignite inflation concerns.
The latest CPI print came in at 3.5%, lower than the expected 3.8% and significantly down from the prior month's 4.2%. This eased concerns about further Federal Reserve rate hikes and led to a 'risk-on' day in markets, with gold spiking 1.4%. However, rising oil prices due to tensions in the Strait of Hormuz may signal a short-lived reprieve from inflation.
Gary Wagner discusses gold's technical chart, noting a support level around $39.90-$4,000. He identifies $4,084 as a significant prior bottom and views the $4,000 level as primarily psychological, rather than purely technical. Wagner outlines upcoming resistance targets at $40.76-$40.80 and $41.80-$41.90.
Gary Wagner discusses how the amount of time an asset spends at a certain price level can indicate its likelihood of retracing or consolidating. He uses gold's history around the $4,000 mark to illustrate that prolonged stays at a level suggest significant support or resistance.
Peter Boockvar suggests that the current downturn in tech stocks, particularly AI-focused ones, is not just a rotation during earnings season but a reflection of deteriorating free cash flow and significant spending. He notes that even semiconductor companies are experiencing a "vertigo" due to these pressures.
Fed Governor Chris Waller indicated that if inflation data comes in hot, he would be inclined to raise interest rates at the end of the month. This statement suggests a potential shift in Federal Reserve policy, moving away from forward guidance.
Peter Boockvar observes a continued rise in long-term interest rates, particularly real interest rates, not driven by increasing inflation worries but by growing debt and deficits. He notes that investors are being "swamped with supply" from governments.
Peter Boockvar believes that 3-4% is the new normal for inflation, down from recent highs but still elevated compared to the pre-pandemic 1-2% range. He attributes the stickiness of product prices, despite falling crude oil prices, to bottlenecks in refining capacity.
Peter Boockvar anticipates that oil prices will likely rise into the $80-$90 range due to the ongoing difficulties in managing the situation with Iran. He notes that while crude oil prices have fallen, product prices have not seen a similar decrease, indicating persistent inflationary pressures.
Peter Boockvar describes the current Federal Reserve as "differentiated" and confusing, with some members offering clear guidance while others withhold it. He questions how the Fed can move rates before newly created task forces on inflation and data gathering provide their findings.
Peter Boockvar highlights a bifurcated labor market, with an improvement in the establishment survey but weakness in the household survey. He attributes the stagnant unemployment rate to a falling participation rate and notes that inflation remains the primary concern for the Fed.
Peter Boockvar states that the AI tech trade and associated data center build-out are the sole focus for investors, overriding concerns about higher oil prices or Middle East developments. He believes that if the US 10-year yield hits 5%, it will significantly impact the market.
For the 'Mag 7' stocks to regain leadership, Peter Boockvar suggests they would need to halt capital expenditure at current levels, which would negatively impact semiconductor stocks. He also believes they need to reverse the "dramatic deterioration in free cash flow," which he doesn't see happening.
Peter Boockvar expects gold and silver to resume their bull market in the latter half of the year, despite their recent digestion of an extraordinary run. He believes real interest rates and the dollar will drive this, though he is not entirely confident about the dollar's continued strength.
Peter Boockvar anticipates significant strategic stockpiling of key commodities in the coming years, citing examples like the Department of Defense creating a lithium strategic reserve and Germany's plans for a natural gas reserve. This trend is driven by a desire not to be caught short like in past supply chain disruptions.
Adam Taggart, host of Thoughtful Money, shared insights from a recent elite party where tech billionaires expressed concerns about the AI stock bubble. Many of these individuals, who made fortunes in tech, revealed they have been selling their AI-related holdings and moving into T-bills as a risk-off strategy.
Adam Taggart highlighted that physical limitations, rather than capital, are likely to constrain the rapid build-out of AI data centers. Issues such as land availability, permits, water, and chip supply could slow down the expansion planned by analysts.
Adam Taggart expressed concern that current AI sector valuations are based on optimistic capital expenditure projections, often relying on 'Excel spreadsheets'. He notes that a growing chorus of potential constraints could hinder the physical realization of these build-out plans.
Adam Taggart sees parallels between the current AI trade and the dot-com bubble, questioning whether the market is in early 1998 or early 2000. He notes that many in the industry acknowledge it's a bubble, and the key question is whether the peak is near or has already passed.
Adam Taggart observes that three of the 'Mag 7' stocks are down year-to-date, suggesting a potential topping pattern in the market. He notes that while the market has been driven by these tech giants, their recent lag, combined with the narrowness of the AI rally, raises concerns.
Adam Taggart emphasized the significant concentration of the AI sector within the broader market, noting that AI and AI-adjacent companies comprise 45% of the S&P market cap. He warns that a downturn in this sector could have a cascading negative effect on the entire market.
Adam Taggart cited recent news of Blackstone withdrawing from what was slated to be the largest data center in the US. This development, coupled with a partner also pulling out, raises questions about the viability and future of the project, highlighting potential market hesitations.
Adam Taggart noted that Reno, Nevada, a historically data-center-friendly area, has imposed a moratorium on new data center construction. He suggests this is indicative of broader physical constraints like electricity, water, and land availability that will likely affect the AI infrastructure build-out nationwide.
According to mortgage broker Ron Butler, the housing market is unlikely to see a rebound for at least 18 months, and potentially longer. He attributes this to a combination of high home prices and rising interest rates, which have made it difficult for potential buyers.
Prediction markets indicate a 64% probability that the 30-year fixed mortgage rate will surpass 6.7% by the end of the year. This forecast is based on current trends and market sentiment, with traders anticipating potential payouts if their predictions hold true.
Ron Butler notes that the housing market correction in Canada is widespread, with previously strong markets like Quebec and Alberta now also experiencing downturns. This follows declines in British Columbia and Ontario, indicating a broad-based cooling of the market.
Ron Butler explains that while central bank policies influence interest rates, mortgage rates are more directly driven by supply and demand dynamics in the market. He indicates that factors beyond official policy rates play a significant role in their movement.
David Lin suggests that global events, such as the ongoing conflict in the Middle East and persistent inflation worldwide, are contributing to upward pressure on interest rates. These international factors prevent any significant softening of rate positions.
Ron Butler observes a contrast between the struggling condo market, plagued by oversupply and safety concerns, and the high prices of single-family homes in many regions. He notes that while capital might rotate into single-family homes, record prices present a significant barrier for buyers.
David Lin highlights the divergence between the US and Canadian economies, stating that the US economy is not struggling, unlike Canada's, which is described as weak. This economic strength in the US is seen as a factor supporting the US dollar.
Ron Butler acknowledges that using oil prices as an indicator for inflation and interest rates is a simplification but the easiest approach. He argues that sustained high oil prices, like WTI over $100 a barrel, would inevitably lead to inflation.
David Lin explains that a strengthening US dollar tends to drive down commodity prices, which in turn helps to dampen inflation. This dynamic is closely tied to the overall strength of the US economy and the Federal Reserve's actions.
Ron Butler states that the Canadian dollar's value is closely linked to oil prices and the strength of the US dollar. If oil prices fall, the Canadian dollar is likely to weaken, and a strengthening US dollar further contributes to the Canadian dollar's decline.
Sam Rahman notes a significant selloff in tech stocks, particularly semiconductors, on July 2nd, with the Nasdaq down 1.5%. He suggests this could be an unwind of AI-related positioning, with money moving into sectors like healthcare, consumer staples, and financials. This rotation is partly attributed to a three-day weekend and concerns about Meta's strategy shift.
Contrary to expectations, Sam Rahman points out that semiconductor stocks, not the 'Mag 7' (Mac 7), have been the primary outperformers in the tech sector year-to-date, driven by AI data center build-outs. However, he notes that these semiconductor companies are dependent on the 'Mag 7' as major customers, raising questions about the sustainability of this trend.
Sam Rahman discusses Meta's strategic pivots, first from social media to the metaverse, and now towards AI. He highlights that Meta pulled back from the metaverse after significant losses, leading to a stock rally. Now, Zuckerberg is focusing on AI, but Rahman questions Meta's ability to innovate beyond acquisitions, positing that AI presents an existential risk if user engagement shifts to AI agents, impacting Meta's advertising business.
The transcript references a weaker-than-expected jobs report for June, with non-farm payrolls increasing by only 57,000, significantly below the consensus estimate of 115,000. This data point is presented as a key factor for understanding potential shifts in Federal Reserve policy and the broader economic outlook.
The Korean KOSPI index experienced a significant drop of 7.89%, falling to 7600, after Meta announced its move into the cloud computing space. This news reportedly cooled semiconductor investor sentiment in the US, leading to sell orders in chip stocks, and resulted in foreign investors net selling over 5 trillion won on the KOSPI.
Lobo Tiggre, speaking with David Lin, suggested that gold and silver might be headed for lower prices. This discussion is a continuation of previous conversations about the metals' performance.
An analyst observed that the market might incorrectly assess copper demand due to AI-driven trading, potentially overreacting to perceived decreases in data center construction. This overreaction is a common market behavior.
Matthew Piepenburg discusses investor disappointment with gold's recent sideways trading, noting that the price is only slightly down from its all-time highs and has shown significant growth over the past five years. He attributes the recent pullbacks to factors like leveraged ETF liquidations and sovereign selling for oil purchases.
Matthew Piepenburg argues that gold is emerging as the new trusted collateral, replacing sovereign bonds like the US 10-year treasury. He points to increasing global debt (over $300 trillion) and the weaponization of the US dollar and treasuries as reasons for the decline in trust for government debt.
Matthew Piepenburg highlights that central banks have been significantly increasing their gold reserves, with a five-fold increase since the start of the Ukrainian war and consistent quarterly buying of over 200 tons. This trend, coupled with China's substantial gold purchases (160 tons in May), indicates a clear preference for gold as collateral amidst global de-dollarization efforts.
Matthew Piepenburg asserts that gold is now trusted more than government debt, including US treasuries, to function as collateral. He notes that central banks now hold more gold than US treasuries, a reversal from five years ago, and that the Bank for International Settlements (BIS) has designated gold as a tier-one asset.
Andrew Cheung, an expert in quantum computing and founder of Zero One Quantum, states that the rapid advancement of quantum computing presents a significant risk to the security of cryptocurrencies. He explains that quantum computers could potentially compromise the private keys used for signing crypto transactions, leading to the loss of digital assets.
Andrew Cheung believes the market is not fully accounting for the imminent threat quantum computing poses to cryptocurrencies. He highlights that while 'Q day' (when quantum computers can break encryption) is still some years away, hackers can already be collecting data, like public keys, to decrypt later.
A Forbes article cited in the discussion highlights a Google white paper indicating that breaking Bitcoin's elliptic curve cryptography might require fewer than 500,000 physical qubits. While current quantum computers are not capable of this, a late co-author estimates a 10% chance of a private key being recovered by 2032.
Andrew Cheung discusses solutions for 'harvest now, decrypt later' threats, including a 'quantum vault' developed by his company, Zero One Quantum. This quantum-safe, multi-signature vault aims to provide an additional layer of security for digital assets.
Andrew Cheung advises banks and financial institutions that they must begin migrating their systems to become quantum-safe, affecting everything from communication to data storage. He emphasizes that this transition is complex and requires proactive planning and investment in quantum-safe solutions.
Andrew Cheung identifies advancements in quantum error correction as the most significant development impacting quantum computing's threat to cryptography. He explains that improved error correction means fewer physical qubits are needed to perform complex tasks, making the threat more immediate.
Rick Rule expresses significant concern about the potential for a 'run on the bank' scenario triggered by high-yield ETFs. He explains that if investors begin to sell these ETFs due to credit concerns, the illiquid nature of the underlying assets could force managers into distress sales, leading to a cascade effect.
Rick Rule anticipates a 'very soft' second half of 2026 for investors, citing two main reasons. He believes the US Fed will face less pressure to lower interest rates, leading to a relatively strong US dollar and weaker gold prices. Additionally, he suggests that the recent conflict in the Gulf acted as a tax, draining liquidity and likely resulting in economic weakness.
Rick Rule argues that the Federal Reserve's ability to intervene in a financial crisis is significantly diminished compared to 2008 due to the ballooning US national debt. He points out that with debt-to-GDP at 120%, the Fed might be forced to print money if intervention is required, leading to high inflation.
Rick Rule believes the gold stock market presents an attractive opportunity, stating that gold stocks are 'fairly priced' relative to the gold price, a condition he has only seen twice before in his career. He expects the gold price to be 'markedly higher' over the next decade and sees value in acquiring high-quality companies at current prices.
Rick Rule estimates that approximately 85% of the 3,000 junior mining companies globally are 'valueless.' He emphasizes the need for investors to be diligent students of the market, capable of filtering out the vast majority of companies to focus on the top tier.
Rick Rule expresses a particular willingness to invest in Canadian oil and gas, citing his understanding of their valuations. He differentiates this from American investors who may need to assess their tolerance for 'country risk.' He believes the oil and gas market is currently a better opportunity than other natural resource stocks.
Rick Rule observes that market sentiment in the mining sector has significantly declined, even though gold prices remain relatively stable. He attributes this disconnect to human emotional responses rather than rational analysis, noting that people often opt for easier emotional reactions over thoughtful consideration.
Harry Dent, founder of HS Dent, forecasts a significant market downturn, predicting stocks could fall 50-60% within three months and 80-90% over the next two years. He attributes this to an "everything bubble" inflated by government stimulus since 2008, which he believes is on the verge of cracking.
Harry Dent warns that the real estate market is in a bubble significantly worse than in 2006, driven by easy lending. He predicts a collapse of 50-70%, which will wipe out wealth for many property owners, particularly impacting baby boomers whose wealth is heavily tied to housing.
Harry Dent explains his market cycle thesis by referencing generational spending cycles with a 46-year lag and technology cycles with a 45-year clock. He notes that developed countries' demographics are plateauing or shrinking, contrasting with emerging markets, and this disconnect is contributing to market overvaluation.
Harry Dent suggests China's economic growth might be peaking due to its one-child policy leading to a lack of young people and high debt levels. He points to 22% empty housing and offices as indicators that the country may not be able to drive a future boom, especially without infrastructure investment.
In a major financial crisis, U.S. Treasury bonds are expected to act as a safe haven, similar to their performance in 2008. Gold is not considered a reliable safe haven during such events.
On July 2nd, the Nasdaq fell 1.5% and the S&P 500 dropped 0.64% as investors rotated out of tech stocks, particularly those tied to the AI theme. Sam Roman, portfolio manager at Hedge I Asset Management, observed a divergence from risk-off assets like gold and Bitcoin, suggesting a potential shift away from tech into undervalued assets. Money is moving out of tech into sectors like healthcare, consumer staples, and financials.
Contrary to expectations, the Mega-Cap 7 stocks have been the laggards within the tech sector year-to-date, according to Sam Roman. Instead, semiconductor and memory stocks, crucial for data center build-outs, have been the primary outperformers. Stocks like Micron, Sandisk, and Applied Materials have significantly contributed to the index's performance.
The Korean Kospi index experienced a significant drop of 7.89% today, previously being the top-performing index year-to-date. This decline was reportedly triggered by Meta's announcement to focus more on cloud computing, which investors interpreted as a potential decrease in demand for semiconductors. Foreign investors net sold over 5 trillion won on the Kospi, exacerbating the sell-off.
Semiconductor stocks, including memory, GPUs, and CPUs, represent a significant portion of data center construction costs, driven by capital expenditures. Sam Roman believes Meta's announcement regarding its cloud business is more of an excuse than a primary reason for the recent sell-off in Korean and US tech stocks. He suggests Meta is searching for a new strategy, likening it to a search for another 'unicorn'.
Meta has shifted its focus from the metaverse, which proved to be a money loser, to artificial intelligence (AI), aiming to build large language models (LLMs) and meta compute. Sam Roman argues that Meta faces an existential risk from AI agents, which could reduce user engagement on social media platforms. This potential decline in engagement poses a significant threat to Meta's advertising business.
Chris Galipeau, Head Market Strategist at Franklin Templeton, discusses a shift in the market where small and mid-cap stocks are outperforming large-cap stocks. This trend, ongoing for about a year and a half, is attributed to broadening earnings power across the US economy.
Chris Galipeau anticipates a strong Q2 earnings season, expecting over 15% year-over-year growth, exceeding the consensus of 20%. He believes companies across sectors will highlight the use of AI to boost productivity and profitability, a theme consistent with previous quarters.
Chris Galipeau identifies the semiconductor sector as the most speculative and potentially overvalued. He notes the parabolic moves in these stocks, driven by factors like leveraged ETFs and margin debt, suggest a need for unwinding and a pullback.
Chris Galipeau believes that significant tech capital expenditures, largely driven by AI, will continue to fuel the economy and stock market for at least a couple more years. He points to companies like Amazon and Google demonstrating the positive impact of CapEx on revenue acceleration.
Chris Galipeau suggests that 'Mag 7' stocks are becoming attractive due to their valuations trading below their 10-year average. He notes that despite underperforming the S&P 500 over the past 16 months, these companies still offer solid earnings growth stories, and reduced stock prices also lower ownership risk.
Chris Galipeau advises that evaluating a company like SpaceX for investment requires a long-term commitment (5-10 years) and strong belief in its vision, such as orbital data centers and Starlink. He highlights the difficulty in building a reliable financial forecast due to the company's nascent stage and reliance on Elon Musk's leadership.
Chris Galipeau observes a significant trend in asset management towards offering retail investors access to private markets and direct indexing. Franklin Templeton is actively involved in both areas, with their direct indexing product named Candice, indicating strong client interest.
Chris Galipeau asserts that geopolitical events, while causing short-term market reactions, do not significantly influence long-term stock market performance. He argues that earnings are the fundamental driver, citing historical data where the S&P 500 has averaged a 12% gain over 12 months following geopolitical events.
Binance CEO Richard Teng believes that while institutional interest in Bitcoin is strong and growing, the traditional four-year cycle, influenced by halving events and mining costs, remains relevant. He notes that the influx of institutional investors brings greater diversity to the market.
Richard Teng observed that Binance's user base has evolved from primarily retail investors to a more diverse mix including institutions, corporations, and even sovereigns. This shift has led to a more robust and healthier marketplace with varied investment strategies and horizons.
Richard Teng agrees that capital flows between asset classes, noting that periods of high interest in tech can lead to temporary liquidity shifts away from crypto. He cites research showing correlation between S&P and Nasdaq all-time highs and crypto outflows, attributing this to natural market reassessments of valuation and growth potential.
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