Kevin Muir: The Gold Miners are Due For a Bubble

Tom Bodrovics welcomes back Kevin Muir, the author of the Macro Tourist Newsletter and Substack, and co-host of The Market Huddle. Muir discusses market dynamics since the election, emphasizing that volatility has returned due to Trump's unpredictable tweets and policies, particularly regarding tariffs and trade deficits. He argues for acknowledging these shifts rather than denying them.

Muir explains how reducing the US trade deficit could lead to devaluation of US stocks. He attributes globalization over the past two decades to an increase in global profits, but suggests that Trump's efforts to reverse this trend and bring jobs back to the U.S. might result in higher labor costs and less capital flowing into the U.S. financial markets, potentially leading to lower stock prices for the US market compared to others.

Muir criticizes passive flows as the primary cause of high stock valuations and expresses skepticism about certain high-growth companies trading at such high valuations indefinitely. He also discusses potential implications if Trump successfully eliminates the US trade deficit.

Furthermore, Muir shares his belief that Trump could potentially lead to a weak dollar due to tariffs, devaluation of the dollar, and lower interest rates. He expresses uncertainty about Trump's intentions regarding monetary policy and the Federal Reserve, noting potential opposition.

Muir favors investing in resource stocks of Canadian companies and financial assets due to economic challenges faced by future leaders in Canada. He also criticizes President Trump's deregulation efforts and tax cuts, expressing concern over potential inflation or recession depending on public reaction and private sector credit creation.

Muir emphasizes the importance of considering gold trading from a long-term strategic perspective with the People's Bank of China (PBOC) being the most important player due to their vast US dollar reserves and increasing diversification into gold for safety reasons. He advises traders to adopt a similar approach and not be swayed by short-term market fluctuations or technical analysis. Gold may ultimately be chased at the end of the accumulation process, according to Muir.

Time Stamp References:
0:00 - Introduction
2:03 - Volatility & Election
8:16 - Trade Deficits & Equities
13:50 - Valuation Drivers
22:29 - Rates & the Dollar
30:24 - The Fed Vs. Trump
36:17 - Recession Forecasts?
37:42 - Japanese Yen
40:23 - The Canadian Loonies
50:12 - Managing Expectations
57:04 - Change & Openmindedness
1:00:41 - China's Gold Reserves
1:06:10 - Golden Fundamentals
1:11:00 - Outlook For Miners
1:15:04 - Wrap Up

Talking Points From This Episode
- Volatility back in markets due to Trump's unpredictable policies on tariffs and trade deficits.
- Reducing the US trade deficit could lead to devaluation in US equities.
- Trump's actions might result in a weak dollar, lower interest rates, and potential monetary policy opposition from the Federal Reserve.

Guest Links:
Email for Sample Letters: kevin@themacrotourist.com
Substack: https://posts.themacrotourist.com
Website: https://themacrotourist.com
Podcast: https://markethuddle.com/
Twitter: https://twitter.com/kevinmuir

Kevin Muir started as an institutional equity derivative trader for a big Canadian bank in the 1990s. In 2000, Kevin decided that bank-life wasn't for him, so he traded his own account for the next two decades. Along the way, he started writing the MacroTourist newsletter, which he describes as an "almost daily" letter about the markets that still manages to have fun. The MacroTourist newsletter attempts to bring a unique take on a variety of different financial topics. Kevin's tagline is, "All I Bring to the Party is 25 Years of Mistakes."

Kevin Muir is a CFA and a graduate of the University of Toronto economics program.