Investors often prepare for financial uncertainty by trying to anticipate the next crisis. The greater risk may be assuming that yesterday’s strategies will protect tomorrow’s wealth.
For John Rubino, financial resilience begins with recognizing the limits of prediction. Even gold, which he considers a foundation of wealth preservation, is only one component of a portfolio designed to withstand an uncertain future.
Read the transcript below.
Transcript
John Rubino
Most of the mistakes that we’re making will eventually cause the currency to be devalued at an accelerating rate until it becomes unmanageable. Countries have been destroying their currencies since there were currencies. There’s the French Revolution and there’s the Roman Empire’s hyperinflation. It goes on and on. But in every case, governments did really bizarre, frightening things when their currency was collapsing. As the old saying goes, history doesn’t repeat, it rhymes. Every single time, the people who own the gold and silver are the ones who ended up with more capital rather than less when everything hit the fan. You know, you want to have real money as the bedrock of your financial life, and that is gold and silver. What you hope is that 70% of your capital survives the capital controls or the wealth taxes or whatever that’s coming.
Monetary Metals
Welcome back to The Gold Exchange Podcast. My name is Ben Nadelstein with Monetary Metals. I am joined by the one and only Mr. John Rubino. If you haven’t read his Substack, you can just turn this episode off and go read his Substack right now. It’s that great. Jon, welcome back to the show.
John Rubino
Hey, Ben. Good to be back.
The risks John Rubino is watching
Monetary Metals
Jon, I love reading your Substack. There’s very few newsletters where it’s like, no matter what, I got to open it. There’s the money stuff. There’s all these other, but then I see your newsletter and that you always hook me with the subject line. I’m like, okay, I got to read this. So I feel like there’s a 50,000-foot view where everyone’s thinking, okay, it’s all about AI. It’s all about this. It’s all about macro. It’s all about, but it feels like we forgot about all of the previous kind of, if you want to say bugs under the rug.
Whether it was private credit, whether it was inflation, whether it was tariffs, it feels like we kind of have TikTok-ified our brains where the only important issue is the issue of the day, the soup du jour. And today it seems to be AI. But John, you kind of always have these potential, if you want to say, pins that could prick certain bubbles or kind of financial distress that you’ve uncovered. So what are you focusing on, or are you also with the rest of the crowd saying, yes, there are these other issues, but compared to what’s going on with AI, it’s marginal. What keeps John Rubino up at night?
John Rubino
Well, AI might change the world for better or for worse in the next few years. So obviously that’s a huge deal. But, you know, even leaving AI out of it, this is an incredibly complicated world right now. We’ve got stuff going on, any one of which would be consequential on a level with the World Wars or the Industrial Revolution and stuff like that. So this is a very complicated time, and there’s no way to know which of these big consequential issues are gonna dominate the next few years. And AI is totally a possibility, or the end of the fiat currency experiment.
We are in that now. We’re in the death spiral of fiat currencies. And that, you know, if you leave everything else aside, that is a world-changing event. And then there’s all kinds of other technologies. I mean, look at what the longevity researchers are doing right now, you know, and they’re Literally taking old monkeys and making them young monkeys. And now they’re, for the first time ever, doing research with those, those same compounds on humans, you know?
So that right there is a gigantic deal. So, you know, we’ve got financial bubbles, we’ve got a financial crisis coming regardless. And then, oh, and then there’s of course all the geopolitical stuff. We’ve got a lot of people running a lot of countries who are just batshit crazy. And, you know, any one of the things that are going on out there now, I mean, the Iran war could metastasize into something much bigger and more serious. I guess the Ukraine war, the stuff that’s going on in France right now, you know, we’ve got civil unrest in a lot of places because the people in charge of those places made horrendous mistakes.
You know, increasing government spending to the point where debt is 120% of GDP while the border is wide open and you’ve got tens of millions of incompatible people coming in. That’s the kind of thing that Europeans are going to look back on it and think, wow, we committed suicide. We just should have seen this coming and we didn’t, and now we’re not Europe anymore. And the US isn’t that far from that kind of a policy mistake. There was a stretch there. We had 4 straight years just lately of open borders, and we’re currently borrowing $2 trillion a year, and the interest on our debt is $1.6 trillion a year.
And so that’s, that’s the death spiral I was talking about where debt and the interest on that debt are rising parabolically. And there’s nothing we can do to stop it because we’ve got demographics in a place now where we have to to spend a ton of money. And, you know, we have a massive infrastructure deficit and we’ve got a military budget that’s expanding because of all the crazy stuff going on in the world. So we’re going to continue to borrow incredible amounts of money. And then the interest on that debt is going to continue to grow parabolically.
So, you know, I don’t even know where I started answering this question, you know, but here we are with many, many things going wrong all at the same time. And us as individuals, Trying to figure out how to manage it all. You know, you said that my Substack has a lot of good subject lines, and that’s why there’s so much stuff that people are worried about. That, you know, our, our own health, for instance, we all want to stay healthy as possible because that’s the key to prepping. I mean, if you’re not healthy, it doesn’t matter how many gold coins you’ve got or what else you’re doing, you know?
And if you are healthy, you are resilient enough to manage what’s coming. So you want to be very healthy. And I have a, you know, a health prepping series that seems to get a lot of response. And yeah, look at any aspect of life right now and there something we need to do about it, right? Some kind of a thing we need to fix. And that’s just our world. So, you know, in, in the space that you and I are in, it’s very interesting because there’s an awful lot of stuff that applies to crisis investing and prepping that we should all be taking care of and that people are interested in when they hear what’s going on in that area.
Financial preparation without financial isolation
Monetary Metals
I want to ask you about this idea of crisis investing. To me, in some ways, it’s kind of financial preparation. Hey, listen, If things were to really not work out in sector A or sector B, or, you know, this part of geopolitics or this part of civil unrest actually came to fruition, I want to be prepared. And then there’s other people who maybe you and I would say are a bit lackadaisical where they say, well, I’ll just hold on to 60/40. It’s worked for the last 20 years, so it’s going to work for the next 2,000.
And that’s why maybe someone like me and you feel like, hey, let’s own some gold. We know it’s been around for 5,000 years. If you’re going to bet on some horse, Bet on the turtle that’s been there for 5,000 years. Maybe tech will work out, maybe it won’t. Maybe AI, maybe longevity, maybe all these other things will or will not work out. Maybe they’ll be life-changing, maybe they’ll be fads. But as someone who is a bit more conservative, a little bit more risk-averse, let’s kind of add to our portfolio assets and items that we think not only are going to keep us safe, but will also potentially keep up with either inflation or prices if it turns out we’re totally wrong and everything’s great and we get longevity cures and AI works.
So How do you kind of balance between, hey, I want to be prepared. I don’t want to look back and think, oh my gosh, how did I not own any gold? Or how did I not own any X, Y, and Z? But on the other hand, I don’t want to be the guy who’s retiring with a bunch of gold coins thinking, man, should have had some tech stocks, man, I should have had some S&P 500. So how do you balance that line between financial preparation versus saying financial isolation?
John Rubino
You know, I think basically everything we’ve talked about so far leads you directly to gold and silver because most of the mistakes that we’re making will eventually cause the currency to be devalued at an accelerating rate until it becomes unmanageable. And historically, I mean, we’ve got 3,000 years of history on that subject. Countries have been destroying their currencies since there were currencies. And in every single time, the people who owned the gold and silver and the farmland and a few other real assets are the ones who ended up with more capital rather than less when everything hit the fan.
So obviously, Gold and silver are a key bedrock concept to prepping and crisis investing and whatever other term you want to use for getting ready for extremely potentially disturbing times. You know, you want to have real money as the bedrock of your financial life, and that is gold and silver. From there, you know, you, you can branch out and do other things. Like you can have some of it that you, you lease out and you earn interest on it, like what you guys do. And you can have gold and silver mining shares, you know, the stocks of the companies that have precious metals and copper and a lot of other other commodities in the ground.
They’re very similar in a lot of ways to gold and silver in a vault. You know, they’ve just got it underground instead of a vault in London or Switzerland or someplace. And they, you know, they’ve been really good investments over the last few years, even with the correction that we’re in right now. And they will probably continue to be great investments. So there, you know, there are lots of things you can do. Start with the premise that you want to own real money. And there are lots of things that you can do that are related to the concept of real money that you should be looking at.
You know, we should be diversifying in as many directions geographically and in terms of asset class that we can, because you don’t know exactly how crazy your government’s going to get, you know, and what it’s going to do when a currency is collapsing. Again, historically, there’s the French Revolution and there’s the Roman Empire’s hyperinflation. It goes on and on. But in every case, governments did really bizarre, frightening things when their currency was collapsing. And so you can’t know, as the old saying goes, history doesn’t repeat, it rhymes.
So, you know, governments, governments are going to get crazy, but you don’t know how exactly. Exactly what specific things they’re going to do. So you have to diversify your crisis investing and your financial prepping, both geographically and in terms of what specific things you buy. And what you hope is that 70% of your capital survives the capital controls or the wealth taxes or whatever that’s coming, and that that 70% will be enough to give you a good life going forward and help protect yourself and your friends and your family.
Starting early and rethinking the 60/40 portfolio
Monetary Metals
What do you think about this idea that there are certain, if you want to say, metrics or a canary in the coal mine that investors or just regular everyday people can look and say, okay, when we hit, for example, 120% of GDP, that’s when I should start being a bit more defensive? Or is it just smarter to say, hey, just start with a solid base, maybe have some gold and silver, or maybe earn a return this way and that way, own some farmland, kind of diversify now, because you don’t want to be running for the exits the same time everyone else is.
When you see the big number and they announce, hey everyone, we’re minting the platinum coin, for example, now’s the time to start buying gold and silver. Are you someone who thinks, hey, it’s better to start a bit early rather than be a bit late?
John Rubino
Well, I think you should always just on principle have some real money. You know, prepping isn’t something you do in response to a specific crisis. It’s a lifestyle and it’s basically how Successful people have lived forever. You know, look at what our grandparents and great-grandparents did. You know, they, they probably had a garden. They, they probably did have some gold and silver, you know, and they probably owned some land otherwise. And, and, uh, so in a lot of ways, people who have lived through the last 50 years in the US and other rich countries have drifted way far away from these basic prepping principles. And now we’re kind of drifting back.
We’re becoming more and more like our grandparents in our lifestyle. So I, yeah, I think no matter what you think about what’s imminent, you know, what happens in the next couple of years, you should own some gold and silver. You should own enough land to grow some food on and, you know, all the other stuff that the preppers have always done. But as far as, you know, what metric we should be looking at, we’ve passed all of them. We’ve passed all the crisis investing metrics and we’re in the death spiral part of this now. I mean, 120% or debt, 120% of GDP is way beyond what used to be considered scary. You know, 90% used to be the number that, that people looked at and went, okay, that’s when things start destabilizing.
Well, we’re at 120% and we’re accelerating into higher numbers. Now you look at the money supply, you look at the Buffett indicator. I don’t, I don’t know if you’re familiar with that, but it’s the sum total of equity market cap versus GDP. And when equity’s market cap gets beyond a certain point, Then that means you’ve got a crash coming in. We are way beyond record levels in the Buffett indicator. And Warren Buffett himself now has more cash on the sidelines than he’s ever had in a 60-year investing career. So, you know, we’re there, we’re already in the death spiral. And if you’ve been stacking for the last 20 years, you’re probably about where you want to be.
But if you’re just getting into stuff like that, you’re just hearing this story and wondering whether you should feel a sense of urgency. The answer is yeah. You know, you should never jump with both feet into something in a single day because somebody online said to do it. But in this case, you ought to have a sense that your 60/40 portfolio is at risk because if the currency tanks, then the bonds in your 60/40 portfolio depend on the value of the currency for their value are going to have a very hard time. Bonds are no longer the, the safe place to put your money.
And if you’re in that kind of a situation, you’ve had a 60/40 portfolio for 40 years and it’s made you a fortune and you feel rich and everything, it’s probably really hard to get your head around the fact that that might not work forever because it has worked for such a long time. But we are heading into a period when the bond part of a 60/40 portfolio won’t work. And even, you know, even some Wall Street investment banks are now talking about a 60/20/20 portfolio where it’s 60% equities, 20% bonds, and 20% gold. And, you know, if that becomes normal, There isn’t enough gold available in the world to satisfy the demand that would flow from it.
So, and, and it, you know, now we kind of have Wall Street on our side in, in the gold bug community. And I think that’s another sign of the end times because gold is not something that Wall Street appreciates. You know, it, from their point of view, it doesn’t pay interest and, you know, it, it doesn’t generate any kind of cash flow that you can use on a spreadsheet or anything. It just sits there. So they have to be pulled kicking and screaming into recommending gold to their clients. And the reason that they’re doing it is because gold has gone up. It’s doubled basically in the last 3 years.
So all their clients are coming to them and going, okay, this thing, this rock outperformed the S&P 500. Why am I not in this thing? All you had to do is blah, blah, blah. And then end up, so a lot of money managers are dreading that conversation. So they’re adding gold, just, you know, even if they don’t believe in it, they’re adding it to head off the complaints that they’re going to get if they don’t add it. When you look at the amount of investable capital that exists in the world gold makes up maybe 1 to 2% of that.
So if just a couple more percentage points of investable capital flows out of tech stocks and into gold, that would potentially double the investment demand for gold and send it through the roof. And we’re already at the point where that is happening now. So this isn’t really a multi-decade thing that we’re talking about now. It’s possibly a multi-year thing and maybe a decade at the very outside. But I think things are happening a lot faster than maybe a lot of people understand.
Monetary Metals
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Stablecoins, gold and the dollar
Monetary Metals
What do you think about this idea that the next kind of monetary factor that will be the most important, maybe for the next decade, will be this distribution of stablecoins, whether they’re gold-backed stablecoins or Denominated stablecoins—hey, this is backed 1 to 1 by an ounce of gold in a bar in London or in a jewelry lease—or the dollar stablecoin where they say, hey, this is backed 1 to 1 by a Treasury bill or cash in a bank somewhere. Do you think that those are kind of the 2, if you want to say, final competitors in this monetary race?
And then basically every other currency or commodity or asset that maybe once thought, hey, maybe we’ll be the next currency, maybe we’ll be the next money, It’s basically out of the running. If you’re the yuan, you’re the yen, you’re the local currency in Botswana or Uruguay, it’s like, I already don’t know your name. Why would I keep you in my, if you want to say, digital wallet when I have so many better choices? Either I can go to the US dollar, which is kind of the king of the currencies, or I can go to physical gold, which is the king of, if you want to say, the real assets or money. So do you think this basically is, if you want to say, the kind of final chapter for all of these smaller or tertiary currencies?
John Rubino
Yeah, technology is playing a role now going forward. Stablecoins, you know, stablecoins are not cryptocurrencies strictly speaking. A stablecoin, I mean, if it’s done right, starts with a risk-free or near risk-free asset stored in a very safe place. And then you got a token, a stablecoin that trades on a blockchain but is backed by something real. Unlike, say, Bitcoin, which is not a real thing.
You know, I have trouble getting my mind around something that literally doesn’t have a physical existence. But a vault full of gold with something that trades in an allocated way based on that gold, you know, okay, I can see how that could be a real thing. And if it’s treasury bonds instead of gold, that’s less of a real thing, but it’s something that could work. It could increase the demand for Treasury bills going forward. But okay, leaving aside the gold thing, the gold stablecoin looks interesting.
You know, even though there’s still counterparty risk because somebody has that gold stored in a vault and they have to make sure it’s still there. But as far as currencies go, gold stored in a vault is better than Treasury bonds stored in a vault. And the Treasury bond stablecoin might increase the demand for Treasury bills and it might strengthen the dollar relative to other currencies in the short run, but it doesn’t fix fiscal policy in the US.
We’re still borrowing insane amounts of money, which requires the creation of a lot of new currency, which also then requires the value of the dollar to fall. And, you know, unless demand for stablecoins exceeds our deficit, which would be a pretty amazing thing if it did, but highly unlikely. So, you know, the dollar’s value is still going to decline relative to real stuff. In other words, its purchasing power will decline while the dollar might go up versus other currencies.
So there, I mean, we have this thing going now where People are saying, well, the dollar is the strong currency, even though, you know, we’ve lost 25% of the dollar’s purchasing power since the year 2020. Okay. But that’s better than the euro did and better than the yen did, you know? So some people just look at currency trading relative to each other and, and conclude that the dollar is strong, but it’s actually losing value at an accelerating rate. And there’s nothing that can be done to stop that. There’s no way that we can get our spending under control without, you know, making the kind of civil unrest that’s happening in France. Look like kid stuff.
You know, the boomers would never accept, we will never accept cuts in our social programs. Okay. And, you know, we’re still a big enough voting bloc and potentially, you know, a civil unrest generator. You know, you see the, a lot of the protests in the US right now, it looks like ’60s hippies have come back to protest again. It’s all boomers out in the street, you know? And so, so we won’t allow the government to scale back spending. in a serious enough way that it would stop the depreciation of the dollar. So anyhow, long answer, gold-backed stablecoins are interesting and you might lead to a dramatic increase in, in demand for gold. So gold-backed stablecoins are probably another reason to own gold. And the gold-backed or the dollar-backed stablecoins are a mixed bag. I’m not sure how that plays out.
Monetary Metals
What do you think about this idea of having portfolio allocation between gold and silver. So some people say, oh, I’m a gold bug, but they basically don’t invest in silver at all. Some people say, oh, I love silver, but gold, you know, is not for me. Some people say, hey, I have whatever, 50/50 gold and silver. What do you think about just personally, how should someone be thinking about allocating between gold and silver? If they say, well, listen, this guy, John Rubino, he sounds smart. I’m going to get some real assets on hand. Okay, obviously I’ve got the monetary metals, gold and silver. What should they be thinking about when it comes to, if you want to say, personal portfolio allocation?
John Rubino
Gold and silver are related. They have always been, because silver has historically been money, though it isn’t so much now. The gold has definitely historically been money, and they trade in relation to each other. There’s a gold-to-silver ratio, how many ounces of silver it takes to buy an ounce of gold. And if you’re trying to figure out what to buy next, you know, which of those precious metals you want to put some money into, look at the gold-to-silver ratio. If it takes 20 silver ounces to buy an ounce of gold, then that means silver is historically overvalued.
But if it takes 120 ounces of silver to buy an ounce of gold, then silver is super cheap relative to gold. And you want to focus on silver. And, you know, you can pull up a chart of the gold-to-silver ratio and you see all these buy and sell points in recent history where, you know, silver got very, very cheap and then it got very expensive and then it got cheap again. So you can use that chart as a guide to how much of one precious metal versus the other you want to invest in. But I, you know, I would say that in most times you should just be stacking.
And, you know, dollar cost averaging is one way to avoid having to make a decision where you just put an X amount of money each month into gold and silver. You know, it could be 3 quarters for gold, 1 quarter for silver, or whatever, you know, whatever you feel like. And then just if when one of them is down, that same amount of dollars buys you extra ounces and then vice versa. And over time you end up with a average price for both gold and silver.
So it really depends on, you know, your timeframe. If you’re going to be doing it for the next 30 years, then dollar cost averaging is a restful way to do it. You know, just set up the program and then revisit in a decade or whatever. But if you want to build a gold and silver portfolio within the next few years, then you want to pay attention to gold-silver ratio and use that to tell you what to do in the short run.
Monetary Metals
What do you think about someone who says, I only do gold, or I only do silver, or I just love land? Are you someone who Well, stick with what you know. If you know gold, if you know silver, if you know real estate, if you know land, if you know, I don’t know, farmland, stick with what you know. And yeah, maybe dabble and diversify a little bit, but really focus in, put all your eggs in the basket that you can really watch. And then the other stuff, you know, add on the margin where you feel comfortable.
Or do you think, hey, listen, you just got to take the time and figure out what it means to have gold as part of your assets, have silver as part of your assets, Do you think that people should just say, hey, listen, take the time that it’s going to take to understand what gold means historically or in a portfolio? Or do you think, listen, if you’re a farmland guy, be a farmland guy, add gold as you can?
John Rubino
Well, if you’re an expert on one thing, like if you’re an oil guy and you’re in the Permian Basin, then you, you know, you could probably get away with throwing most of your money at wells that you understand better than anybody else. Same thing with nuclear power. You, you know, you can do that with uranium. You can do that with natural gas in other places, whatever, you know, or land.
Of course, if you are a successful farmer, and you have some extra money, buying some more farmland is probably fine because you know exactly what you’re buying. If you’re a regular person though, if you’re somebody like me who has a general understanding of how the different commodities and, and real assets work, you want to diversify. Because I have a pretty good understanding of gold and silver and feel confident that I, I know what I’m doing with them.
But, you know, oil and gas stocks and farmland and things like that, I’m very comfortable with owning them conceptually, but I wouldn’t want to throw everything I’ve at them, you know, and I would want to seek out expert advice and then diversify across the universe of real assets and commodities. And so it depends on who you are and what your expertise is.
Monetary Metals
We’ve brought up this idea of real assets in this interview and also before in previous interviews, this idea of real assets. Let’s just be super explicit. What do we mean by real assets? Obviously we’ve mentioned gold, we’ve mentioned silver, What in your John Rubino universe are the real assets versus the, if you want to say unreal or maybe more artificial assets?
John Rubino
Well, something the government can’t create more of out of thin air. So they can create more dollars, as many more dollars as they want to, and just dump them into the market. So the dollar is not a hard or real asset. It’s not a real thing. It’s just a notional thing. You know, pay, it’s funny money, paper money, whatever. Whereas An oil well that contains X amount of oil is real. You know, it has a physical existence and the government can’t just go press send with a mouse click and make more oil.
And so as, as far as money goes, that is the distinction between fiat currencies like the dollar and the euro and the yen and real money like gold and silver, because they have a physical existence. And the government, you know, as much as it would like to, just can’t go out and conjure 1,000 tons of gold into existence. There is as much there is, and that’s all there is to it. So if that’s your money, you have to live within the constraint of a limited amount of it. So, or if you’re running an economy, you have to live with the, the amount of uranium that’s available and oil that’s available and farmland that’s available. So those things are real or hard, and fiat currencies are the opposite.
Now, when you get to cryptocurrencies, that’s where it gets interesting, because there are those who say Bitcoin is hard money. Yeah. Sound money. And, you know, like I said before, I have, I have trouble getting my mind around something that doesn’t have a physical existence, but that doesn’t mean I’m right. It just means that it could be that I’m, you know, it’s 1890 and I’m in a horse-drawn carriage and I see the first car driving by and I say, that’ll never work. It just doesn’t make sense. And that maybe the ideal crypto ends up being the bedrock asset in the next monetary system. I don’t see that. Yeah. But, you know, as old as I am, I recognize that maybe I just, I’m from the wrong generation to really understand something like that.
How age changes your approach to risk
Monetary Metals
I want to ask you specifically on that point about the different generations. So I’m 27, you’re maybe 28, and obviously, you know, someone would give different advice to someone saying, hey, listen, I heard this John Rubino podcast. I want to start getting into gold or real assets. And that guy’s a 55-year-old dentist versus a guy who’s 25 years old versus a guy who’s 75 years old. So how does this advice change between someone who’s maybe later in their life, they’re retired, versus someone who’s brand new to investing and is saying, listen, I don’t want to lose my shirt in AI? Is there a difference between how these people should be conceptually thinking about financial preparation or real assets?
John Rubino
Well, there’s a huge difference in how much risk you can legitimately take on at different ages. You know, if you’re 70, you don’t want to roll the dice on tech stocks because, you know, maybe they work out in 10 years. But within that next 10 years, you’re going to need some of that money, presumably. So you don’t want to roll the dice with money you’re going to need. But if you’re 25, I mean, you got potentially forever to, to take a risk and then dig yourself out of a hole if the upside of what you’re doing is a 10-bagger or something like that.
So, you know, the older you are, the more conservative and more diversified you should be, generally speaking. And as the younger you are, the more willing you should be to roll the dice. Yeah. And, you know, there’s a term that young kids use called YOLO, you only live once, you know, and that’s a verb now. I have a son who uses that as a verb. He says, I’ll YOLO this, you know, which means he’s just going to roll the dice and see how it goes. Yeah. If you’re 25, do that.
And then your losses, which will be inevitable and maybe horrific, you count that as tuition in trading school, you know, and you have to have that. People don’t come of age, don’t turn 25, and automatically understand risk. So you have to make stupid mistakes early in life to prevent you from making stupid mistakes later on when you have some real money at risk, you know? So if you’re 25 and you buy a bunch of tech stocks and they tank, yeah, you lost some money, but you learned an incredibly important lesson that, you know, when you’re throwing millions of dollars around later in life is going to save you from a horrific. So yeah, I think roll the dice when you’re young and learn what you’re going to learn, and then get more conservative as you get older.
Building a real asset portfolio
Monetary Metals
This is a perfect setup because you’ve spent literally decades literally writing the book on how to kind of financially prepare your wealth for all these different types of scenarios. So now I want to give you a couple scenarios. Let’s say someone’s listening to this podcast, they go, you know what, I’m convinced. I like this guy Ben and Jon Rubino. I’m going to get some gold with Monetary Metals.
Maybe I’ve already got some land out in Washington, but they have different portfolios. One person says, I got $100,000 that I feel comfortable, the wife won’t be mad if I take out $10,000, we buy some gold and it doesn’t work out because I don’t know, they make gold in a nuclear reactor or something. And oh, I can’t believe I listened to this guy Rubino, but he’s got $100,000 and he feels like, you know what, I feel comfortable hiding this as my real asset portfolio.
Then you’ve got another guy who says, listen, I really like what these guys are talking about. I have a lot more wealth that I want to protect. I have a million dollars that I want to protect in this kind of real asset framework. And then you’ve got someone who says, I’ve got $10 million, I’ve made it, I’m good, but I want this to be a generational asset for my family. I want to protect my wealth with real assets. What type of advice or what portfolio allocation, what assets would you suggest looking into for that $100,000, million-dollar, and $10 million portfolio?
John Rubino
Well, I would say the same assets with just smaller amounts of each. You want to start with real money because, I mean, in a world where the, you could trust the Currencies that you were operating in, then that advice would be you want to build up some cash to start with, and because that’s liquidity and that’s risk-free, you know, and that’s not today. Today, the liquid risk-free thing would be gold. So you want to start there. That is the cash equivalent. In another life, it would be $100 bills. But now that we’re destroying our currencies, it should be gold. And from there, you branch out into other kinds of real things.
And again, if you, you feel like you understand oil or farmland, you maybe put a little bit more emphasis on them. And then you just look at what else is out there. You know, there’s mining stocks, there are services like you provide where you pay interest on someone’s gold. And, you know, educate yourself about them before you do them, or do a little bit of one of those things. And then, then you’ve got some skin in the game you’re worried about losing, and that’s an incentive for you to learn more about that subject. But whatever, don’t do anything in a big way until you understand it.
But start small and use that as an incentive to gain more understanding so you get smarter and smarter and better able to take the risks that are involved in a big portfolio going forward. And, you know, trust but verify is one of the most basic things that you need to start with where you’ve got gold stored in a vault, let’s say. That somebody’s managing for you, you make sure that they are auditing that vault and that they’re doing everything that they should be doing to make sure that what they say is there is really there.
And, you know, if you’re looking at a gold mining stock or something like that, make sure that the people in charge of it have been around, are respected in the field, have been there, done it before, and who are, you know, who have a reputation for straight shooting, for telling the truth, and have made money for their investors in the past. You know, make sure that’s true before you put any money with them, no matter how great the story sounds. And don’t expect to get rich in 6 months or a year.
You know, that’s just not how it’s going to work for you. The harder you try to get rich quick, the more likely you are to be very, very poor, you know, for the rest of your life. So always be cautious and be diversified and, you know, start small and get bigger. And then as the decades go on, you’ll get surprisingly big. You’ll, you’ll end up with more money than you expected to have or you could conceive of having when you started out. And that’s when you start doing the really good things, you know, the really fun stuff where you have enough money to take chances, but educated chances because you know enough to be able to do that successfully.
Gold, silver and rapid-fire questions
Monetary Metals
That was great. I want to get into a rapid-fire round with you. So I’m going to ask you questions from all over the map. We can answer as short or as long as you want. So let’s start with the gold-to-silver ratio. If you had to say, this is John Rubino’s kind of standard for what he thinks is something like what the gold and silver ratio should be, if you want to use those What’s the gold-to-silver ratio that you use as John Robina?
John Rubino
Well, historically, 70 is about where things change. You know, if it goes above that, then silver’s getting cheap. If it goes below that, then gold is relatively cheap. And, you know, when it departs dramatically from 70, then you’ve got an interesting trade.
Monetary Metals
Next question for you. Of these major hubs for gold, which do you think is going to be the most important going forward? We’ve got either A, Dubai, B, Shanghai, or C, Mumbai. Which of these gold hubs do you think will be most important going forward?
John Rubino
Probably Shanghai, just because China is becoming a powerhouse in gold and they’re doing it purposefully. The Chinese central bank is buying gold aggressively and the government is encouraging citizens to invest in gold aggressively. So I think China’s going to be a powerhouse in the gold market. Now, the flip side of that is how much are you going to trust the Chinese government at any given time to behave? And so that’s just something that, you know, it’s going to change over time and you have to pay attention and make sure that you’re not betting on a really untrustworthy entity. And when you’re making that choice, then, you know, maybe it’s Singapore, maybe some other place by that time. So just pay attention to who’s doing what and then use your judgment in the All right,
Monetary Metals
next rapid-fire question for you. Obviously, central banks have been loading up on physical gold as part of their reserves. Do you ever see a world where central banks load up on other assets like silver or Bitcoin or 1,000 other things? And if they do load up on these other assets outside of gold, do you think that actually matters to the price, or is it more kind of a public relations stunt?
John Rubino
No, governments can create money out of thin air, which means they can be massive players in any market they want to be in. At least for now. You know, you had the Japanese government buying the Japanese stock market during the, the Great Recession, and it wouldn’t surprise me in the least to see the US doing the same thing pretty soon here, where the government via the Fed just steps in and starts buying a lot of US stocks.
So in the short run, that’s good for the thing that the government is buying with unlimited amounts of newly created currency, but it’s bad for the currency. So that’s a wild card out there. If governments start buying financial assets, That’s an admission of defeat on the part of the government, but it still might make you some money in the short run if you’re trading stocks based on the idea that you hope the government comes in. So I, I don’t know. That’s, that’s a sign of a dysfunctional world when stuff like that starts happening, but it could easily happen when things get really crazy.
Monetary Metals
All right. Next question for you. What’s something that American or Western investors miss or don’t understand about investing in gold?
John Rubino
Well, you know, the smart American investors do understand almost everything, you know, and regular people tend to just extrapolate the short run into the long run. And I see a lot of friends and family doing that sometimes. And that could be a lesson that just relatively new investors, Americans or otherwise, have to learn and, you know, learn very painfully. And I see a lot of that out there. So that’s one thing that a lot of American investors and all other investors don’t seem to get yet, that, you know, what happened in the last 2 years is not the reality of the next decade necessarily.
Monetary Metals
Next question for you. Obviously we’ve talked about dollar cost averaging, we’ve talked about getting a kind of real asset portfolio, but what are some things that you recommend in terms of just financial health? Or maybe as someone who is a day trader, say, hey, don’t trade back and forth all What are some financial kind of, if you want to say tips or financial hygiene that you recommend if someone isn’t doing right now that they should look into?
John Rubino
You know, we’ve covered the dollar cost averaging thing, which I think is big, and diversification, which I think is really big. And I don’t know what to say beyond that. You know, just, oh, and continuing to learn. You know, use your investments as an incentive to learn more about them before you get any deeper into something. So I would say You know, do those things and don’t expect to be incredibly successful right away. Expect to be a beginner who makes beginner’s mistakes, and don’t let that break your spirit.
Monetary Metals
Next rapid-fire question for you is about this idea of stablecoins, tokenization, crypto. If this is to be successful, you, John Rubino, what would you have to see to say, wow, I really like these? If you say tokenized gold products or these other crypto products. What would you have to be to say, yep, I like these, these are going to be successful, I want them as part of my portfolio, versus where you say, hey, you should really stay away from these. I think these are maybe financial products that shouldn’t be a part of your portfolio, might be dangerous to your financial health.
John Rubino
No matter what, they should only be part of your portfolio after you’ve got the basics down. In other words, you know, real money and then some things you understand that are related to sound assets in some way. And then you branch out into this new But I think what would give them legitimacy is if the acceptance of them gets broader and broader.
You know, if 5 years from now you can go into Walmart and pay with Bitcoin or with a stablecoin or something like that, and millions of people start doing it, and then the cash flow numbers start to really rise for those things, then maybe it, it’s time to start thinking of them as something that you can add on and then you can use for convenience and stuff like that. We’re not there yet. But some of the stablecoins, maybe Bitcoin, who knows, in the next few years they might enter that territory and start gaining enough acceptance that regular people who would normally be in physical gold and silver and mining stocks and oil stocks and things like that could start looking at them as a diversification.
Exploring a more optimistic outlook
Monetary Metals
Obviously, John, you and I don’t want gold to go to $10,000 or $15,000 or God forbid any higher. Because in a way, that means that the world around us, the value of the currency, the bond market is potentially in trouble, or there’s financial crisis or geopolitical crisis. So usually gold prices are responding to bad things happening in the world, whether geopolitical or financial or with the currency or monetarily. So obviously, we don’t want to see those things happen.
So outside of the doom and gloom, what is a world where, you know, hey, actually, they turn around these fiscal issues, Maybe AI helps us. Maybe there’s new longevity drugs. What is maybe the positive case where you and I look and go, oh my gosh, this gold stuff is so silly and worthless. How did we ever think that this was going to be worthwhile? What’s the kind of positive case, the bull case for the people who say you don’t need financial preparation, it’s all going to work out because of what?
John Rubino
Well, no, I think we’re past the point where there’s a fix for the financial problems we’ve created, but it doesn’t have to be the end of the world if you have a currency reset. So the optimistic scenario is that the, just using the dollar as an example, the value of the dollar starts to fall and interest rates start to go up. Then we, we start to feel really financially destabilized. The economy looks like it’s at real risk to rising inflation and spiking interest rates. But the, the government then steps in and does the currency reset, puts us back on some kind of a gold standard. And commits to it.
Comits to controlling its spending, because a gold standard is basically a set of very strict controls on what governments can spend. So you know we make the cuts, we adopt the fiscal policy that we need in order to maintain a gold standard, and then we’re basically okay. We have a few years of civil unrest and financial turmoil as we’re getting there, but we do get there, and that that’s the optimistic scenario. Now meanwhile, AI can contribute to that by making a lot of entities a lot more productive, and so that. That’s the good scenario for AI.
The bad scenario is that we, we’ve created a bunch of demons who extinguish the human race. But assuming that it goes the way we hope it goes and the AIs are aligned with human flourishing, then they can be incredibly powerful tools for fixing a lot of our problems. And at the same time, you know, the US is actually in great shape geographically and demographically. Yeah. If we just recognize what’s in our best interest, because, you know, we’ve got these big oceans protecting us on either side, and we’ve got Mexico with a great workforce and Canada with massive natural resources above us, and we’ve got the, the technology and the finance and everything.
So we could be a phenomenally successful economic bloc here in North America. And so that could all happen. You know, we get our financial house in order, AI makes us a lot more productive. We recognize that it’s in our interest to be friends with Canada and Mexico. And, and work together with them. And so let’s say that’s 15 years from now. Things could be great for us. The rest of the world has demographic issues and financial issues and geopolitical issues that are not solved by anything I just said, but could be great for us. And so that’s a completely feasible scenario.
But in that scenario, oil becomes more valuable, uranium becomes more valuable, gold and silver do great. And, you know, so we, we could easily have—to go back on a gold standard, we have to devalue the dollar versus gold. Right. So we might have to go back. The guys who’ve run the numbers say that the price for gold in that scenario is $15,000 or $20,000 an ounce. So we could see that horrendously high price of gold, and it could cause some civil unrest when people realize they’ve been impoverished because they trusted the government. But we can get through it. And the, the gold bugs make out big time in that scenario because their, their main asset is going to triple in Or quadruple in price, and they become the suppliers of capital for the next version of the US economy.
Where to find John Rubino
Monetary Metals
For those interested in learning a bit about that shadow gold price idea, they can check out my interview with Taylor McKenna of Kopernick Global Investors. Okay, Mr. Rubino, let’s ask you one more rapid-fire question. We’ll end on a happy note. What’s the best gift you’ve ever received?
John Rubino
Oh, My sons. Thanks to my wife for that.
Monetary Metals
Good answer. Okay. As we exit the rapid-fire answers, I want to now ask you, what’s a question I should be asking all the future guests who come onto the Gold Exchange Podcast?
John Rubino
I’m going to pass on that one because there are a lot of questions and you actually, you asked a lot of good questions here, so you might have gotten through them all in this interview.
Monetary Metals
All right, John, then we get to our final question, which is where can people find more John Rubino? If they’re not subscribed to the Substack, they got to do that right now. You should hit that button so hard it hurts your finger. Obviously keep your health intact. But John, where can people find more John Rubino?
John Rubino
I’m at rubino.substack.com, and the newsletter I publish there is all about what we talk about here and how you respond to it to gain resiliency.
Monetary Metals
John, as always, it’s a pleasure getting to interview you. Everyone else, we’ll see you on the next episode. Stay happy and stay healthy.
