Brian Hirschmann: $7000 Gold & The Global Debt Contagion Powder Keg

Tom welcomes Brian Hirschman back to the show. Brian is Managing Partner of Hirschmann Partnership which is occasionally referred to as the "World's Most Bearish Hedge Fund."

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Brian discusses how many investors don't know how to value gold in comparison to other assets. He explains how they have a methodology for analyzing the gold price over long times. Currently it's below the fifty year average and that could cause gold to skyrocket in coming years. He explains why gold did quite well during the inflationary period of the 1970s. Gold is the one asset that has no counterparty risk.

Gold has seemingly lagged possibly because bond investors remain confident in their inflation expectations but should that perspective change we will see gold rise. High inflation can be caused by excessive debt which can cause investors to dump that debt. This is especially a problem developing for the United States and some other Western nations.

He discusses the British Empires debt to GDP ratio and how they eventually defaulted on their obligations. He explains how Japan's approach differs but there situation remains precarious. Japanese depositors are now getting negative return when adjusted for inflation which has been increasing. It's possible that depositors might decide to start investing elsewhere to seek returns. This could become a big problem for the Bank of Japan.

Brian explains why global bubbles are worsening and why we could see multiple collapses all at once. Whatever bubble bursts first will take others with it. The situtation has only deteroriated and he expects to see higher inflation again soon.

He gives some targets for where gold and the miners could head as a result of the economic situation that is developing. Brian also talks about why the Mining ETFs and equities have largely not kept up with the gold price.

A.I. will probably improve economic growth but it likely won't be the panacea to get us out of the coming crisis.

Demographics are contributing to the entitlement problems and why the budget looks awful. This also means a general decline in the labor force which is not good for GDP.

Time Stamp References:
0:00 - Introduction
0:30 - Perspectives & Time
5:40 - Golds Recent Performance
8:10 - Inflation Causes & Effects
12:30 - Debt & Avoiding Default
20:10 - Capital Control Contagion
25:00 - Cures & Causation
28:00 - Growing Global Bubbles
37:30 - Gold Price Target
39:30 - Resource Valuations
41:20 - GDXJ Performance
43:10 - A.I. & Inevitable Crisis
45:30 - Demographic Issues
46:55 - Wrap Up

Talking Points From This Episode
- Gold is currently trading below its fifty year average, making it a potential investment opportunity.
- High inflation caused by excessive debt could lead to a gold surge.
- Global bubbles, demographics, and A.I. could all contribute to a coming crisis.

Guest Links:
Twitter: https://twitter.com/HCapitalLLC
Website: https://www.hcapital.llc

Brian Hirschmann, CFA, is the Managing Partner at Hirschmann Partnership (HP) launched in 2014. Since its inception, HP has outperformed its benchmarks by a substantial margin despite being the "World's Most Bearish Hedge Fund," according to ValueWalk.

Previously he was an associate at Goldman Sachs Principal Strategies (GSPS), a multi-billion dollar hedge fund whose alumni include Robert Rubin, Tom Steyer, Daniel Och, and Eddie Lampert. After GSPS, Brian returned to Los Angeles to join Hotchkis and Wiley Capital Management where he was an equity-owner and made over $1 billion in long-term investments.

Brian graduated with distinction from Yale, where Professor Robert Shiller strongly influenced his investment philosophy. Robert is one of the few to predict both the dot-com and housing bubbles. Robert was also influenced by Professor David Swensen, Yale's legendary endowment manager.

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