Tom welcomes Lawrence Lepard from Equity Management Associates to discuss the many things that have changed in just the past few months.
The actions of Russia will likely begin driving the price of gold. We’ve reached a tipping point not unlike when Charles de Gaulle began demanding gold in the 70s. Putin is hitting back economically. The seizure (theft) of reserves was a clear warning to many countries. The Ukraine/Russia conflict is equally an economic one.
Lawrence discusses the low valuations in commodities and the lack of capital investment in resources. Inflation appears to now be the norm.
The dollar could go higher because it’s still the best of the worst. The trend in purchasing power will continue to decline. He says, “Their drunk and they can’t stop drinking.”
Europe needs Russia’s oil and Putin is forcing a seat at the table. The West has ignored and treated Russia like a second-class citizen for too long. The arrogance of those in power is stunning, and Putin is not stupid. They are not used to someone standing up to them and winning. We are on the verge of another move higher in gold.
Margins and multiples in equities are going to come down and holding general stocks now makes no sense. “A huge trend change is coming… and you want to be on the right side of this. If you’re not investing in the right areas it’s going to be a very painful experience.”
Front running may be part of the equation for inflation. Wages aren’t likely to keep up, and it’s difficult to assess all the various parts of the inflation picture. It takes time to solve supply chain issues and find good workarounds. He states, “A capital system based on the correct allocation of capital will make more stuff for less. We need productivity.”
A crackup boom is a possibility and so is hyperinflation. A crackup boom occurs when the majority realize that government will never stop printing. People change their spending habits and will buy stuff they don’t need to sell it later. Another sign is a stock market that continues shooting up relentlessly.
Lawrence expects the problems we see with nickel markets to also occur with other commodities. The LME changed the rules, breaking prior trades, and screwed a bunch of traders.
Lastly, he discusses how miners remain an excellent buying opportunity. They will provide multiples in leverage over the performance of the metal.
Time Stamp References
0:00 – Introduction
1:01 – Russia’s Moves
6:12 – Dedollarizing
9:52 – Dollar Appreciation?
12:04 – Undermining Davos
18:05 – Capital Rotation
21:48 – Supply Chains & PPI
24:50 – Should’ves & Could’ves
28:57 – Crack-Up Boom
32:33 – Feds Final Pivot
37:57 – Stocks Over Bonds
40:49 – Nickel Markets & LME
45:25 – Bitcoin & Metals
49:38 – Biden Tax Hikes?
53:20 – Miner Performance
55:15 – Wrap Up
Talking Points From This Episode
Lawrence W. Lepard is the Founder and Managing Partner of Equity Management Associates. He has spent his entire 38-year career as an investor, principally focusing on venture capital opportunities.
Before co-founding EMA, Mr. Lepard spent 13 years at Geocapital Partners, in Fort Lee, NJ. There he was one of two Managing General Partners and was responsible for several venture capital funds. Before Geocapital, Mr. Lepard spent seven years at Summit Partners in Boston and California, where he was a General Partner at Summit I and Summit II.
Mr. Lepard received his BA in Economics from Colgate University, and he received an MBA with Academic Distinction from Harvard Business School.