Categories: General Market Commentary- DPC
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Bracing for Double Whammy Recession - Bizarro World 201

Recession fears are now replacing inflation as the market's top concern. We explain what that means in terms of earnings, interest rates, GDP, and unemployment. Plus a close look at various commodities, including gold, copper, lithium, and rare earths, to get a sense of where we are in the overall commodity cycle. 

2:57 Gold Looks Sexy
4:48 Patriot Battery Minute
7:57 Inflation & Recession Update
14:10 Commodities: Up, Down, and Sideways
23:00 Crypto Comments
25:12 Introducing Profit Cycle Pro
28:09 Brazil Post-Election Riots
30:40 Calling Bullshit on All-in Buy Alerts

Gerardo Del Real: I am mining investor and editor of Resource Stock Digest, Gerardo Del Real, along with my partner Mr. Nick Hodge, who's also an investor and the publisher of Daily Profit Cycle. We have some news on that front, by the way. This is the 201st episode of our weekly therapy session that we call Investing in Bizarro World. We talk about the markets. We talk about what we're investing in, and we talk about all the crazy stuff that's going on around the world. We got Brazilian lookalike coup attempts. We have copper surging. We have a precious metals market that's getting real sassy. We have M&A in the lithium space, crypto bottoming. We got conference season kicking up again. A lot to get to before I get into all of that. Mr. Nick Hodge, how are you doing, sir?

Nick Hodge: I'm getting all fat and sassy coming off the holidays. There was a viral YouTube video a couple years ago, this lady who was stuck in a hurricane, and she was getting interviewed by the local news channel. You know how that goes? They always pick the most intelligent, well-dressed person to give a synopsis of what's going on, and she says, "We're just in the house making cakes and breads and pies and getting all fat and sassy."

Gerardo Del Real: That is hilarious. It seems like you're well though. You're smiling. We recently saw each other at the company party. That was a welcome distraction. I think that was a success. It was great to meet half the people that we hadn't yet met in person or that I hadn't yet met, so that was awesome. But how is life other than getting fat and sassy?

Nick Hodge: Oh, life is good. I was in Maryland for three weeks for the holiday, got to see the parents, the in-laws, obviously the grandparents of my three kids and spend time with the aunts and uncles. And then bring the company together for the first time really ever, because last year some people didn't make it. COVID was still a lingering issue, and it's amazing to think that you have a company of 13 or so people and some of them, in fact, most of them hadn't met each other. So we had a great time. We got a lot of drinking done. We got some bowling done, some ax throwing and that was fun. But I feel behind having been out for three weeks, so glad to get back to it. I'm glad the tax loss season is over. Glad to see gold at $1,900 and plenty else to talk about in the market. So I just finished up my monthly issue of Foundational Profits today in fact, so it's all right here. Let's get to it.

Gerardo Del Real: Yeah, let's get right into it. A lot to get to and it definitely feels like we're playing catch up, especially on my end as well. We had the three weeks of holidays and back to back short weeks. And then I had a personal situation that one day I'll share on this podcast that after my mother-in-law passing in April, my dad passing in July, this one was definitely the cherry on top and not a happy one. So I'm glad to have that behind us and thankful that ended positively. So yeah, look, let's get to it. You talked about gold, $1,900. Gold looks sexy.

Gold Looks Sexy

Nick Hodge: Yeah. I mean, we talked last week about if it was sustainable or not, and in December I said it's got to break that $1,800 level psychologically and technically. And it did that in very strong fashion, and now we're sitting at the $1,900 level less than a month later. So gold is looking very strong to me for a couple of reasons that I guess is worth running through. You've got the dollar probing the low end of its reset range down around 102.5 or 103 on the DXY. I think that holds. The bigger thing, and we talked about this in previous podcasts as well, is that 10-year continuing to get soft as we enter the back half of this recession. And so gold is looking really good here. I would say that some of the miners have lagged and have some upside still to go.

Trees don't grow to the sky, of course. I'm not looking for $2,000 quite yet. I was looking at the chart earlier today. It seems like gold needs to get to $1,919 or so, breach that level, hold it, and then we'll talk about the next leg higher. That would likely bring in some momentum traders, some chart chasers and some institutional money, which still has a very small allocation to gold. People forget how small the gold market is. It's worth reminding them from time to time. You've got stocks like Apple with trillion-dollar-plus market caps that are bigger in some cases than the entire TSXV for example. And so just need a little bit of capital to come back into it. And I think you'll see that as gold proves to be that recession hedge that we always know it was. And as we get into the back half of this recession, which is coming and maybe we should spend some time talking about.

Patriot Battery Minute

Gerardo Del Real: Let's get into it. Before we go on, I have to say because when I had my little crazy week, week and a half here to end the year. From time to time I'll jump on the chat boards and just watch. And my absolute favorite one is most definitely CEO.CA and the Patriot Battery Metals chatroom. I want to say hello to everybody out there and shout them out because they keep me in stitches. Every time Patriot goes down, "I wonder if it's Gerardo's group that's selling." We haven't sold a share, y'all. I personally haven't sold one share. But I want to thank them for the commentary. It's a fun, fun chat room. If you're ever bored, Nick, get on there and go check those guys out. They're funny as all hell, and yeah, it's really entertaining. And look, there's some really quality posting on there with... There's also some not quality posting, but there's some quality posts on there with some really insightful information. So keep up the good work over there, y'all. I love the platform.

Nick Hodge: Well, my shares aren't even clean to be able to sell.

Gerardo Del Real: There you go.

Nick Hodge: I don't believe yours are either. It's interesting though, we talk about the sincerest form of flattery is imitation, and we had the other Patriot company that was listing on the ASX recently. And this week I saw there's a new Ontario lithium company that has named their asset the Patriot asset. And so obviously Patriot along with Frontier were two of the lithium market darlings last year. And it's interesting to see people flattering them by either naming their companies after them or their deposits.

Gerardo Del Real: And then look, I'll give you all my quick take because I know several of you have commented and have written in asking for weekly, at the very least, Patriot update. So yes, this trading's been volatile, but look, the bottom line is if you look at a 12-month chart, it's new all-time highs damn near every month, and December was no exception. I'd like to remind everybody again, December 8th was the last all-time high in the stock. It's January the 12th, the day that we're recording this, the stock looks to be gaining some momentum. It looked like it was going to maybe touch the C$5.00 level, never really breached C$6.00 with any kind of momentum. Man, we're sitting here today looking like we're primed to close above the C$8 level here before the weekend is out. Lots of assay spending. I think there's something like 38 holes. The drill rig has been... The drill rigs, correction, have been mobilized. They're not talking five rigs, now they're talking six by the end of February. There's talks of a PFS.

It's going to be a fun 2023, y'all. So I was wrong about C$20.00 by the end of the year. That was a bit optimistic and hopeful. We did touch double digits. We've been in single digits longer than I thought we'd be. At the end of the day, it's not going to matter. I think we got by far the best lithium discovery in at least a decade or two. And when it's all said and done, I think there's going to be some historic numbers put up by that district. And look, lithium M&A is heating up in the sector. We'll talk about that a little bit later. But all signs point to go happy shareholder who hasn't sold a share. And I've added, I added a little bit as recent as three weeks ago I think. So yeah, that's my take on Patriot.

Inflation & Recession Update

Let's talk the economy, Nick. Let's get right into that. Let's talk about inflation. Let's talk about the recession. You talked about the bond market, which obviously is always top of mind for, I think, any serious investor and speculator. You want to get into all that?

Nick Hodge: Yeah, there's plenty to get into. So as this cycle sort of wears on here, I think you've got the recessionary fears taking the place of the interest rate or the hiking fears. We now know that we're not going to get a pivot, likely going to be a 25 basis point hike here at the next meeting, which ends February 1st. Still a lot of inflation to deal with. The 6.5% CPI that we got this week is still really high inflation, not close to the 2% target that the Fed wants. And so yeah, if you read the minutes from the last meeting that they had in December, every single member of the FOMC says, "Prepare for higher rates for longer. We're not going to pivot in 2023." And don't forget, which a lot of people do, I think they're tightening as well, a quantitative tightening to the tune of $95 billion a month. And that's led to the first ever negative growth in the M2 money supply, right?

Gerardo Del Real: Yes.

Nick Hodge: So there's less liquidity out there. People are feeling less rich, business owners as well. And you've got these earnings that are going to start coming out. We talked about Exxon (NYSE: XOM) in recent podcasts saying they were going to take a $3.7 billion hit to their earnings because oil's down in the $70s as opposed to the $120s, which it was last year. Natural gas has come off significantly. And you've got home builders out there like KB Homes reported or announced this week that Q4 cancellations for homes were 68%, cancellations, up from 13% in the year ago quarter, Q4 2021.

Gerardo Del Real: Good context. Yeah.

Nick Hodge: I'm talking just about the stock market now. You've had volatility come down. If you look at that VIX index, it's back down below 20. It hasn't been there in a bit. And I think people are in for a rude awakening as we slug through this earning season and these companies show their hands. The recession is here, the yield curve is still inverted. Because that 2-year is staying high, while the 10-year has come off. And you can't escape that when the yield curve inverts, you have a recession. Now, we had two consecutive quarters of slow growth last year, negative growth, which by definition is a recession. The Q3 was positive. Something like 3.6% I believe it was. And Q4 will likely be positive as well. But Q1 and Q2 of this year are going to be a rough go for the GDP.

And so I was writing about a double whammy recession — that's a technical term — where the first whammy was what I just said, the two quarters of negative growth last year. And it's like a sandwich. It's like a recession sandwich. So Q3 and Q4 will be positive, and then Q1 and Q2 will likely be flat or negative. I mean, that's sort of where we are, and it's going to culminate in something breaking. I'm not sure what that's going to be. It's going to be likely something in the credit market. But call it the eye of the storm or eye of the double whammy sandwich. It's not over yet. And then if you look at a chart of the Nasdaq-

Gerardo Del Real: Call it the spit roast recession. Sorry, I couldn't help myself.

Nick Hodge: Put an apple in its mouth.

Gerardo Del Real: Couldn't help it. I was trying to help it. I'm sorry. Y'all know I'm hyper. I apologize, but I'm not really sorry.

Nick Hodge: Oh no, I've entirely lost my train of thought. Oh yeah, I was going to say, you look at the Nasdaq, what happened in 2000, that took sort of two years to play out. And if you look at a Nasdaq chart now, it looks just like it did in the middle of that selloff, like the Nasdaq isn't signaling bottom. And again, I don't see the true capitulation out there. So anyway, all that to say that we still got another couple of quarters of recession and market volatility and downside to work through.

Gerardo Del Real: Yeah, you said the D word, right? Deflationary pressures with quantitative tightening. And I think it's interesting to note because all of us noted when we had double digit trillion negative yielding debt, it's interesting to note that that's gone away over the past 12 months. And so if there's some upside to the Fed hiking and trying to tame the inflation that it unleashed on disproportionately middle class and then lower income class citizens around the world, it's that the negative yielding debt at the very least did actually get tackled. And that's something that I didn't think would happen. So again, I'd like to give Jerome some credit when credit is due because it's not due very often. He was the cause along with his buddies beforehand for that negative yielding debt. But getting that off the books is definitely a positive. And look, it provides future ammunition because the Fed will pivot eventually. When does that happen? I don't know.

Nick Hodge: It happens when the unemployment starts ticking up, which is the last thing. That's the lagging thing in a recession. And we've talked about this before. So recession comes, what does it affect? It affects housing first. And we've seen that. I was just talking about KB Homes. We've seen mortgage refinancings fall off a cliff. Nobody can afford a house at a 7% mortgage. And then it affects orders. And you've seen that with purchasing managers index and the ISM for example. Orders are off, and that cascades then into profits, which we're seeing now. I was just talking about earnings going down, negative earnings growth likely in the S&P for the numbers that we're going to see over the next couple of weeks. And so follow me, it's housing, it's orders, it's profits, and then it's employment. And we haven't really seen that employment, whatever, metastasize yet, that unemployment rather. And you're going to see that later this year, and then that might give the Fed the cover to turn around, but likely not until Q3 or Q4.

Commodities: Up, Down, and Sideways

Gerardo Del Real: Well said. Well said. Got to touch on copper, man. Copper touched $4.20. We talked last week about how good we felt about the midterm and the long term fundamentals for copper. What will be one of my biggest holdings in 2023. Now, I’ll keep that one private because you and I, sir, have a video to record for our paying subscribers here in the coming days. But one of my bigger holdings, it's not one of my bigger ones now, but one that I will be adding to aggressively here in the very near future, controls an entire basin of copper, gold, and silver. I couldn't be more bullish about copper, but honestly this latest move took me even by surprise. The velocity of it was surprising to the upside.

And look, there's some extreme bargains in the copper sector right now, much like the gold miners that haven't really reacted the way you would assume to the higher gold price, there's a lot of copper projects that are world class projects that simply aren’t responding to this move in copper. And look, I think we're in for a heck of a 2023. We'll talk lithium a little bit in a second. We'll definitely have to talk uranium because that had a solid week this week here of trading, the first real week of trading of the year. But I'm loving my copper price action. Nick, what are you seeing technically?

Nick Hodge: I mean, commodities have been interesting, right? Because if you look at the CRB Index, it's not been strong recently, and that's a function of, at least in my opinion, the soft energy space, right? The soft oil prices, the soft gas prices. But you look at other components of it, and they're really strong. So it's actually been kind of tough to figure out given that we are in a recession and there's likely some demand pressures that have to be priced into that. Lumber, for example, you remember in lumber from a year and a half or so ago.

Gerardo Del Real: Yes, I do.

Nick Hodge: "Oh my god, the lumber chart's going straight up." Well, that lumber prices are back down now to below where they were pre-pandemic levels. Meanwhile, as you say, copper is back over $4. Uranium was up like 14% in 2022 and has tacked on another $2 so far this year back near the $50 mark. I'm giving you a non-answer because it's really a mixed bag.

Some of those commodities are moving up, specifically those that are tied to the energy transition, which I think is an important point. The other important point that I'd like to mention is if you look at the supercycle, if you zoom out on that CRB Commodity Index back to the mid-nineties when the last supercycle started, commodities went up for like a year back then in the early nineties, retraced all the way back to zero round trip, but didn't go negative. The CRB Commodity Index I'm talking about remained in their supercycle, which lasted until essentially the early 2000s, and then sold off all the way until 2020 when the new supercycle began. 

So you could get a retracement and the entire commodity index back to the 2020 levels, and it'd still be in a bullish supercycle, which I firmly believe that we're in. So that was kind of a non-answer. But for me, it's the electric metals, the battery metals, those that are tied to the energy transition, like I said, that are going to do okay. And then the traditional energy commodities not doing as well.

Gerardo Del Real: I think it's important to note that it's a whole heck of a lot easier to speculate in the resource sector, and any sector in particular, when you have a major trend underpinning the fundamentals. And you may get it wrong for a week or for a month, but it becomes a whole lot easier to put up triple digit gains on a consistent basis by riding out the trend, to letting it be your friend. So I think, yeah, well said on the tax loss selling, it's good to see that be done. Price discovery is going to be fun to see in the month of January, given the start that we have in commodities thus far. It'll be interesting to see if that holds. Uranium started the year off very strongly in 2022, tapered off towards the end. That looks like it's got some of the best fundamentals of any commodity out there. And just getting back to Patriot and lithium a little bit. Look, lithium was the top performing commodity for the past two years. Company by the name of Essential Metals, it's an Australian company that's got a small, by most standards, 11.2 million ton asset at 1.16% lithium. They just got to take out for C$136 million. So I'll ask you this, if-

Nick Hodge: That was Tianqi that bought them?

Gerardo Del Real: That is correct. So similar deposit type except much smaller than Patriot's Corvette district. If 11 million tons is worth $136 million Australian, what's 150 million tons worth all in one place? What are 200 million tons worth all in one place? What are three? And now I'm getting ahead of myself. What are 300 million tons worth all in one place? It's not going to take very long to find out just how big this thing can get and, yeah, obviously extremely bullish on that front but very bullish for a lot of other names.

I just had a new recommendation in Junior Resource Monthly to paying subscribers that I think will provide a similar run from cents to dollars in relatively short order. We have the luxury there of being able to add aggressively over the next couple of months because that company won't be drilling its project until the freeze is over. And that won't happen for another couple of months. So we have the luxury of time, we have the luxury of not many people being into that company yet. And I know both you and I are shareholders there. We participated in an earlier financing, but again, looking to add aggressively there and looking to add aggressive copper exposure on my side of it.

Nick Hodge: You mentioned the megatrend. It's worth mentioning the Biden administration this week put out a blueprint to decarbonizing the entire transportation sector.

Gerardo Del Real: By banning our gas stoves.

Nick Hodge: Yeah. That's one of those topics that'll be out of the news by next week.

Gerardo Del Real: It's so funny.

Nick Hodge: The same as the egg prices, right? I've seen a lot of memes and things about eggs and stoves, and gosh, I guess just for a second on the stoves, the study that that agency was citing was... They sealed the room up in plastic. Is your kitchen sealed up in plastic, Gerardo? Come on.

Gerardo Del Real: I asked on Twitter if anybody had ever stuck their head in the oven and closed it.

Nick Hodge: This is that noise that you have to get good at dismissing. And there's a lot of noise out there. I want to talk about some more of it later on in this podcast. It's just like the Republicans voting to ban the income tax this week, right? That's never going to happen.

Gerardo Del Real: It's never going to happen.

Nick Hodge: It's not going to get through the Senate. It's certainly not going to be signed by the president. It's all a dog and pony show and you just got to... But it'll consume an entire day on Twitter. And if you let yourself get consumed by that, then you really take your eye off the ball of what's really going on. But anyway, this blueprint goes all the way out to 2050, and it's multiple agencies, Housing and Urban Development, Department of Energy, et cetera, Department of Transportation. You got Pete Buttigieg in the video. And that's a real thing. And they're talking about literally hundreds of billions of dollars. I go back to those bills that we passed in the past couple of years. The Bipartisan Infrastructure Law, the Inflation Reduction Act. That infrastructure bill by itself had over $600 billion to help the transportation sector transition to zero carbon. And then they were talking about the investment that's coming from the global car community, which is now over half a trillion. And global automakers have committed half a trillion dollars by 2030 to build out battery plans to make...

Gerardo Del Real: It's right around the corner, and that goes like this.

Nick Hodge: That's right. So you take that half a billion from the global automakers, you take the $600 billion from the infrastructure bill, and you got a trillion dollars right there. I mean, that's significantly underpinning this transition, and that's why these lithium stocks are continuing to hold up. There's some battery stocks that I'm getting very keen on. And that's a multi... I mean, that's a quarter century to 2050. That's 25 years away, I'll take a 25 year bull market in batteries and battery metals.

Gerardo Del Real: You don't have to be the smartest bulb in the box to make a lot of money from those types of trends, y'all. And again, neither I nor Mr. Nick Hodge nor anyone is going to get them all right. But if you can get four or five out of 10 right and then make those triple digit and quadruple digit winners, you're going to be alright. It's going to be a hell of a 10, 15, 20 year run. So one week, one day, one month at a time. But it looks like it's going to be a fun decade or two for us, Nick.

Nick Hodge: Green barons, revenge of the miners.

Crypto Comments

Gerardo Del Real: Yeah. It's been a fun last 10 years. I think the next 10 are going to be excellent. What else do you want to get into, Nick? You want to talk crypto? We got to talk crypto. I mean, crypto looks like it might have a little life left in it. I know that Mr. Chris Curl, we talked about it last week, was able to be real opportunistic and book a couple of thousand percent gain. I'm not sure if he booked it, but I know it ran up that high before a small pull back there. What's your take on crypto? I still haven't bought any of the cryptos yet. No Uniswaps and no mommies and no poppies and no anything.

Nick Hodge: Yeah, he's been selective. He ended up booking a 3X game, which is pretty damn good in this market on that BONK meme coin, which was made by developers of Solana. He bought the related NFT as well that we're still holding in his portfolio. I think crypto's in the middle of the whammy. I think it gets whammied again. It's bottoming but it's not bottomed, if that makes sense.

Gerardo Del Real: Yep.

Nick Hodge: I think you get a shot still at $14,000 Bitcoin. I think there's continued fallout from the FTX scandal. You're seeing some of the related banks really be sold off now. Silvergate (NYSE: SI), for example, I don't know if you've tuned into any of that. One of the interesting things he was writing about was the SWIFT payment systems. I think that story really does have some legs. I forget if we talked about it on this podcast or not, but there's a new standard being adopted this year by SWIFT, which is the global international payments standard.

And there's only certain coins that are approved to be a part of that. So he's dialing in on some of those. Like I say, I don't think we've seen a bottom yet. I'm not rushing headlong into Bitcoin, but nonetheless, Bitcoin's higher now than it's been in weeks if not months. It printed an 18 handle today, if I'm not mistaken. Bitcoin over $18,000 and it's been sort of middling around and $16,000, $17,000 mark. So it'll have its day, but I think it's going to get pushed back down when this volatility starts going back up and these earnings start coming out.

Introducing Profit Cycle Pro

Gerardo Del Real: I mentioned up top about Daily Profit Cycle and new products, and I know something that we're excited to share with everyone, something that we've been working on behind the scenes for quite some time. I'll let you do the honors, Nick, as you are the quarterback here of the operation, sir.

Nick Hodge: Yeah, coming out here soon, we're going to launch a new publication — Profit Cycle Pro it's called. So it's going to be sort of what we would call a feeder pub or a teaser of all our premium publications. We're up to seven or eight.

Gerardo Del Real: Seven.

Nick Hodge: Yeah, exactly, now. And not everybody subscribes to all of them, and they all cover different facets of the market, different risk appetites, different durations, different sectors. And Profit Cycle Pro is going to be a way for you to subscribe at a lower price than our other publications cost and get bits and pieces of all the publications. And you'll get a little bit more than that. It's going to be run by two people who have been with us for a bit now, John Carl and Ryan Stancil. And they'll be taking pieces of the publications that you and I and Chris Curl write and then turning them into a digest of sorts.

They're also going to have their own recommendations that are outside of the recommendations that you and I and Chris make. So you will be getting some value add there, things that you can't get or won't get from our other publications, including some crowdfunding deals for example. And I know John was just out visiting some copper companies, and he's keen on recommending at least one of them. So we're also going to give you some sentiment as far as you know, what we're bullish and bearish on. Are we currently bullish or bearish on the S&P, the Nasdaq, gold, copper for example?

So you can at least know what we're long of and what we're not long of. And then you'll have the opportunity from there to subscribe to the individual publications that you think might benefit you the most after you get to see a taste of them in Profit Cycle Pro. So we'll be walking that out next month. We hope to get the first issue of that out around mid-February. And that'll go first to people who have paid to subscribe to all our services. And then we'll be doing a launch, of course, where other readers can subscribe.

Gerardo Del Real: A lot to be excited for. I know it's another leg of information that we're going to be able to share with subscribers that we're excited to share. It's always good to have a diverse set of opinions. You and I tend to agree on most things somehow, but it's good to bring on people that have different ideas. And I know you cover a lot more sectors than I do, Nick, but it'll be nice to have another set of eyes out there. And I'm excited myself to get to read some of the recommendations on the inside. It's always good stuff.

Nick Hodge: Yep.

Brazil Post-Election Riots

Gerardo Del Real: I like it. I like it. Are we going to talk Brazil real quick and the Trump people that stormed the capital in Brazil? I’m calling them the Trump people. It wasn't Trump people, y'all. Just pissing the Trump people off for kicks. You guys get triggered so much. Yeah, we got to talk about it. Oh, Trump had nothing to do with this, but you got to say they probably got the idea from the January 6th debacle here last year, right? So in Brazil's capital this past Sunday, thousands, thousands of protestors attacked the government institutions. They stormed the capital, and look, Brazil's not playing. Brazil's arresting everybody immediately. Not just the people that stormed the capital, the officers that let them in, unlike here in America. The top officials that incited this stuff, they went after them and picked them up. And look, I love the Brazilian people. The culture is beautiful. I haven't been to the country, but I've seen some videos that it looks absolutely spectacular.

But Brazil isn't exactly like a bastion of stability when it comes to democracy. So I'm not encouraging that we just willy-nilly decide to go arrest whatever official we don't like. I'm not encouraging that. But also, I mean, if you incite some of this stuff, I do like to see some accountability, not just with the average everyday Brazilian that decided to participate in this, but also some accountability for the top officials that helped incite some of this. And they can have their day in court, whatever that looks like there. That's obviously a Brazilian problem. They'll deal with that the way they dealt with that, but I was encouraged by the fact that they arrested some top people and not just the everyday people because in America, as you know, most times, most times it's just the people that were either on the ground and, yeah, sure, maybe there were some chaos, but there were a lot of people, very high up elected people that were encouraging the stuff that happened here in America.

If anything happened for those people, their poll numbers went up and they ended up being able to fundraise off the fact that they were trying to protect democracy or whatever the tagline was. So yeah, those are my thoughts. Nothing consequential to us. But it was interesting to see not just what happened, which has echoes of Fourth Turning, right? That has Fourth Turning echoes all over the place. But the fact that they actually went after some of the top officials and said, "No, you're getting arrested too, you're going with them. We'll figure it out later."

Nick Hodge: Rule of law is important. You and I have at least one major investment in Brazil, and hopefully that country can get some stability because that's important for the resource sector for sure.

Calling Bullshit on All-in Buy Alerts

Gerardo Del Real: I like it. I like it. We want to talk about all-in buy alerts and trades of the decade you put on there, Nick. So for everybody that thinks we have a process for this, five minutes before we start talking and I start rambling and Nick gives you a smart insight, we put stuff on a piece of paper just so that we don't forget, and that's how the topics get dished out. So I say that to say, this includes my friends at CEO.CA, y'all have a topic that you want us to talk about and you're really passionate about it, the Patriot chat board's the one that I'm on the most because it amuses me the most because y'all are really emotional over there. I love the passion. So put some stuff on there or better yet, click on our Bizarro World video, hit the comment section, let us know some topics that you want us to touch on because at the end of the day, we're just kind of talking the stuff that comes easiest to us and that we're curious about. But we have opinions on probably everything. You probably won't like our opinions on most things, but if you want to hear them, we'll give them to you.

Nick Hodge: That actually reminds me, we should talk about rare earths for a second.

Gerardo Del Real: Let's do it.

Nick Hodge: Because somebody was asking for that in the comments last week, but before that, all-in buy alerts and trades of the decades. So you'll remember that for the past couple of months I've been talking about all these predictions about the end of lithium and these new batteries taking over.

Gerardo Del Real: The battery water that you drink and you become limitless.

Nick Hodge: Which is just nonsense. If you look at Benchmark Mineral Intelligence or you look at the deals that are actually getting done or the gigafactories that are actually being built. I've gone through all that. It's lithium for at least the next decade. There's no recycling. There's no battery that's going to magically drop into the global supply chain that I just told you the automakers are committing half a trillion dollars to in the next seven years. That's all lithium based, right?

So as an extension of that, I've been seeing some newsletter marketing that is... It's all about getting the attention and the clicks. So I've been seeing some that are "All-in buy alerts," and I've seen them for multiple things and I was wondering a couple of things. Like how many all-in buy alerts can you make? If you make one, aren't you already all-in? How often can you make an all-in buy alert, right? I mean, if you're all-in on something, like how many times can you go all-in? Two, going all-in on anything is not the way to invest, right? It's about portfolio construction and diversification and making sure you don't get wiped out if one of your positions goes the wrong way.

Gerardo Del Real: To money heaven.

Nick Hodge: Exactly. And then as an extension of that, I've been seeing, "Trade of a decade, this is the one thing you got to do." And it's like, "Wait, there's only one trade for the decade?"

Gerardo Del Real: That's it.

Nick Hodge: We're only three years into it. There's a lot of decade left.

Gerardo Del Real: This reminds me of a George Carlin skit, right? The seven words you can't say and how stupid it fucking was.

Nick Hodge: They must be getting opens because I see them repeatedly, which speaks to the client base a little bit. So a couple of things. One, just wanted to call that out. Two, a warning to those of you who read the newsletters, that you shouldn't be responding to or having the fear of missing out when someone's issuing an all-in buy alert. Because one, they're definitely not all-in. They're all-in on marketing that to you, but they're not all-in on whatever position they're pitching to you. And two, there is no trade of the decade. There might be a megatrend of the decade, but there's no one single stock that's like the trade of the decade. So just some caveat emptor stuff that I wanted to get off my chest.

Gerardo Del Real: And if you believe there's only one trader of the decade, technically you're not even a trader. So there is no... I mean, what the fuck are we doing, people? Come on, everybody. Anyhow, back to what I was saying, you guys should all go to DailyProfitCycle.com/subscribe to get all the updates, get the podcast, get the market commentary, give us your commentary, positive, negative, insightful. Everybody likes nice words, but, hey, sometimes it's helpful to hear some of the not so nice stuff that you guys have to say. You wanted to talk about rare earths.

Nick Hodge: Yes. Well, you talk about rare earths. I mean, you have a history in rare earths. I might have a couple of things to add. You go ahead and start talking, and I'll find out exactly what the question was, but he was basically asking us to talk about rare earths for a second.

Gerardo Del Real: Yeah, look. I've long been a supporter of developing a critical metal supply chain, this dating back to about 2008, 2009. I was really fortunate during those years to be mentored, you and I were both mentored, but to become friends with and then be mentored by somebody that helped finance what ended up becoming rare earth mania, right? And back then there were companies like Flinders Resources and Tasman Metals and Quest Rare Minerals and Rare Element Resources. And these were companies that I bought at 16-cents, and they got as high as $18. And not all of us rode it all the way to $18, but trust me, especially for me just getting going in the market in 2009-ish, 2010 in a serious way, those kinds of returns absolutely helped open the door for me. So I say all that to say that rare-earths are the things that are essential, and they have been forever and China's dominated that supply chain and the production of it. They control… I haven't checked the numbers lately, but it's over 90% of the refining that goes into getting these types of rare-earths. There's two types. There's the light type, and then there's the heavies. And the heavies are the ones that are going into your electric vehicles, our missile systems, our satellites, our aircraft-

Nick Hodge: Lasers.

Gerardo Del Real: Right. Lasers, all the things that are essential for modern warfare. All the things that are essential for the transformation of our electrical grid, the transformation of our infrastructure. None of this happens without having an abundant supply of rare earths and specifically the heavy ones because those are, and pardon the cheesy pun, more critical. So there's been a push, and a lot of it was taught for many, many years, Europe, United States. There was a lot of yapping about how important it was and how strategic it was. And frankly it wasn't backed for a long time by any real capital. The kind of capital, for example, that now is coming into the market for a lot of these critical commodities like uranium, like lithium, like the rare earths. And so there's very few quality deposits outside of China that are worth actually investing in. More and more are being developed. There's a few companies that have some great assets. Defense Metals has a very good asset. Leading Edge Materials, which I've been a longtime-frustrated shareholder of, has what I think is one of the best undeveloped rare-earth assets, specifically well endowed in the heavies, and hasn't seen any kind of reward from the market for it for over three years for many reasons. Some of that was corporate structuring, and some of that was just lack of marketing and some permitting issues that were at hand.

But there are some opportunities out there to do very, very well, though I think because the sector is so small and opaque, it tends to get less attention and the attention comes in bursts. So you'll have an incident off the coast of Japan, and it'll trigger an international scrap between China and Japan. And next thing you know, China's threatening to cut off the rare earth supply, which is exactly what happened back in 2010, 2011, and then that's where those gains came from. It was just this global scare. "Well, what are we going to do now if China cuts us off?" Well, we're still pretty much in that predicament. We're not much better off than we were 13 years ago, but at least there's some goodwill backed by real capital and bipartisan support to develop these critical metals chains, these rare earth metal chains that I think are going to be just very, very important to keep an eye on.

Especially as I mentioned last week as we progressed this Cold War with China, which is very real and it's very behind the scenes, but believe you me, they want to be the number one financial superpower in the world by the 2030s. And believe you me, the US isn't just going to relinquish that, though you wouldn't know that by listening to the dumb shit our politicians do every day, but that's another story for another day. So anyhow, have some exposure to rare earths in the portfolio. I know you've had some good exposure and success, Nick, in the past in your portfolio. Would love to hear your take. That's my rare-earth rant.

Nick Hodge: So the question is this from Robert M, "Happy New Year to you both. Any chance of a review of rare earth's marketplace with some dives into companies gearing up as world players." He talks about Lynas, RareX, and ACA. I'm not entirely familiar with those last two companies there, and I look more to the domestic players being a US citizen. So I'll talk my own book for a second. There's a company called MP Materials (NYSE: MP) that has the Mountain Pass asset in California. That was Molycorp back in the day that had its own struggles and eventually went belly up. I believe was sold to the Chinese and then came back into US hands. That's been a really good success story. It's already in my Foundational Profits portfolio. I am a shareholder so I'm biased, but they're making a foray into the next two phases of their expansion, which I think is going to be really important for them. So they've got the mine up and running, but now they're building two facilities.

You talked about the light rare earths and the heavy rare earths. They're building a processing facility for light rare earths. They're building a processing facility for the heavy rare-earths. One of them is in your state of Texas, and they've gotten money directly from the government to do that, specifically from the Department of Defense to build those processing facilities because of that Cold War that you mentioned. The government is finally getting serious about onshoring or reshoring some of these critical supply chains.

And so I think that's going to be a real catalyst for MP Materials to have additional success. So not only do we already own it, it's below what we call our buy under price now. So I was just writing in the January issue that it's worth taking a look at again, and then I've got a limited order in to buy some more myself. The other one that I don't own but that I look at all the time is Energy Fuels (NYSE: UUUU)(TSX: EFR), which has the White Mesa Mill, which processes some of these rare earths. And so, hey, uranium's had a good start to the year. I was looking at that Energy Fuels, and it's gotten away from me again. 

Gerardo Del Real: Same. You and I both have been eyeballing that thing. We're trying to find the bottom on it. We keep missing the bounce.

Nick Hodge: I know. But those would be two that I look at that specifically address that processing side of things that China controls.

Gerardo Del Real: Yeah. And again, and I don't own it, but I do own it in the portfolio, Leading Edge Materials (TSX-V: LEM)(OTC: LEMIF) is one that I think provides excellent, excellent exposure to not just rare earths but also graphite. And I think we're going to see some pretty important exploration work in Romania finally. This is three years in the making of securing permits and licenses. And these are past-producing uranium, nickel, copper projects that are within a pretty substantial land holding. They should be getting into the adits here within the next couple of months. And I think, look, it's going to be easy pickings once they get in there and just trace the mineralization. So much was left behind and then there's so much historical work that they're going to be able to sift through to really identify the most compelling target.

So been saying it for a few years, I've been dead wrong. I think Leading Edge Materials finally breaks out this year and gets its just due. And look, again, I've had stocks in the past that I've held for too long for two or three years, and I'm sitting there and I'm down 30%, but I still really love the asset and then all of a sudden there's one hole and I'm up a thousand percent. This stuff happens, or I'm up 100% or 200%. So if I know the asset is topnotch, if I think it can deliver in time, I'm willing to eat crow for a couple of years and do so publicly as long as the end game gives me triple digit gains and above. Because if we can get a triple digit gain every two, three years with all your stuff or after stuff, again, you're going to do pretty well in this market.

Nick Hodge: Good stuff. Probably a good transition to wrap up here is some of those companies we just talked about will be at the Vancouver Resource Investment Conference that's coming up this month, January 29th and 30th. I will be up there talking to portfolio companies, looking for potential new portfolio companies. And so if you're in the area, please do reach out. Some of you have already and if you're not, you might want to consider going. I know it's kind of late notice, but that's here in about two and a half weeks or so, coming up really fast. And there's that other conference going on that I'm not going to like the Metals Investor Forum. So plenty of events to attend in Vancouver that week. And not a bad restaurant scene either.

Gerardo Del Real: Not bad at all. I don't know what it is about Vancouver that keeps me away. Every time I plan on going, something pops up, so I won't be able to make it. But Nick will absolutely be there holding down the fort. That's all I got, everybody. I am Gerardo Del Real along with Mr. Nick Hodge. This was our weekly therapy session that we call Investing in Bizarro World, number 201. Mr. Hodge, you want to send us off?

Nick Hodge: Go all in on clicking that subscribe button below. See ya.

Gerardo Del Real: Trade of the decade.