81. How to Profit Safely in Gold with Ravi Sood

Hey, how's it going everybody? So today's guest is Ravee Sood and Ravee is an entrepreneur with a focus on emerging markets. He's the co-founder and former CEO of a Toronto based investment firm and co-founder of various other businesses around the world, including Delani gold LTD, which is a gold producer operating in africa and the United States. Ravi, that's pretty cool. You're probably the first person I talked to. That's an active miner of precious metals, which is really awesome to talk about. So welcome to the show

Thank you. That has been looking forward to being here and we're certainly a rare breed these days.

Awesome. Yeah. So speaking of being a rare breed, I just gave like a small brief background on you, but if you could, can you share a little bit more about yourself, share your story? Like, how did this all get started for you? Why did you start mining gold?

Yeah, absolutely. And it's a long circuitous journey because let me tell you when I started in the professional. I certainly had no interest in precious metals or mining for that matter. I was entering the workforce in the nineties and the go-go days of the.com boom. Really coming from a career path that was, I thought was taking me to academia. I studied mathematics and university and I was accepted into graduate school and fully intended to go had difficulty with figuring out how to fund. And decided to take a one-year pause before starting my master's degree. And I thought, ultimately my PhD in mathematics and pursuing a a career in academia, as I said and that pause landed me in the investment industry. And that's not something. Thought I'd ever get involved with. They had no educational background, frankly, no historical interest in it. And it was really a fluke, a friend of a friend and an introduction to a former physics professor who had turned. For Deutsche bank at that time, the division called Deutsche and Morgan Grenville later Deutsche bank securities. And I spoke to that former professor and I said, look, I don't know anything about economics or accounting or stocks. And he said, don't worry about it. We'll find something productive for you to do. And I fell in love with it. And I guess in for the most part, I never left the investment in. That was the beginning of my career. And I could tell you, in the nineties, when I first started meeting companies and meeting management teams and learning about different industries and carving my path as an investor in developing my own interest in style I saw the odd mining company and the odd gold mining company comes through my office. And I remember thinking. A, what on earth do we need this stuff for anymore? B these guys are all really old and super boring and their presentations were awful. And I just had absolutely zero interest in mining or gold or precious metals in general at that time. And why would you? It was the go-go days of the internet, as they said, and.com was happening in the world was changing. And it was just really a sort of a backward notion to be involved in any of those. Also by the way, the economy was truly booming. The United States was actually reducing its debt as was much of the many other sovereign states around the world. And so the case for gold was really not there. It was that $250 an ounce. So just not something that appeared on my radar and I continued into the two thousands involved in the investment in this. Mostly interested in growth industries got interested in other more defensive type industries post 2001, and post the tech wreck of 2000 and just very much at the end of that sort of bull run, did I start to get interested? Or my interest was peaked on gold and starting to. How does this all end like this game in this sort of a cycle that we ended up in with this continuous issuance of debt, expanding balance sheets of sovereign nations and really this growing debt bubble, it was a mortgage bubble. It was a corporate level debt bubble in the 2007 to 2009. The global financial crisis of course kicked off with subprime, but then touching basically all aspects of capital markets. But now Fast forwarding to now briefly it's a sovereign bubble. It's add a few extra decimal points or move the decimal point, a few notches to the right orders of magnitude, larger bubble. But I really started to get that interest in the mid two thousands. And in 2010 I sold my investment firm. It was at the time I was CEO. I had started that investment firm with backing from a family office in 2001. And that was an opportunity for me to say, what am I going to do as an individual? Where am I going to spend my energy and my, where am I going to achieve joy and interest in life? And where am I also going to hopefully make some money for myself and ultimately other shareholders. And I really had developed a firm belief that we were going to see huge inflation. We are going to see a debt crisis that would make the global financial crisis of 08 look, puny by comparison would really amount to a financial reset of the system as we know. And that real assets real assets can be different things. It can be real estate. It could be lumber. It could be a beanie babies. It could be NFTs now different digital forms of real assets. And could it also be goals that, that sort of a Relic of days of your is there an opportunity in that and after many years on this journey, I have I've become a firm believer that in the monetary system the global monetary system going forward, we will see what amounts to a reset. It might be gradual. It might be sudden but that system needs an anchor and there's some new arguments in recent years convincing arguments, compelling arguments, where it could be a digital assets. And that is a possibility. And that's something that anybody is considering presser, precious metals needs to also consider and wrap their mind around. But even as that sector evolves and becomes more important to the two global capital markets and to individuals and how we conduct our lives. And by the way, I'm a firm believer in active participant. Yes. In those opportunities and hopefully more active in the coming years. I still come back which I can go into in greater detail at some other time. Two goals in particular as an anchor for the financial system and for a long list of reasons. But there's probably a few that are most critical. So just, you asked a very simple question. I give you a bit of a rambling, a overly detailed answer, but for me it was it was really a 15 plus year journey to go from not knowing what gold was. To knowing what its role was in somewhat marking it at least to myself certainly having no interest in it too, getting interested in then ultimately going as far in the other extreme as possible and actually starting a company. And now that owns and operates three gold mines. And really that's my principle investment in precious metals is through that. Although I do have many others that is. That is the primary one. So long journey in going from, I think almost one one bookend to the other in terms of extremes, in terms of interest in gold and precious metals.

Right on. Yeah. I want dive into that a little bit because, and first of all I liked the answer to that question. It wasn't too much. I liked the detail because it's important to know the background of what, what got you into this position where you're at right now with being interested in mining gold. So that's, looking at everything else that happened. And you're looking at this gradual reset that might come well, it could be gradual. It could be sudden, like you said, but it is very likely to happen, because at the rate, things are going, if it doesn't happen, then we're going to see inflation through the roof, which we're already starting to feel some of that right now. So I want talk to the hot topic nowadays. Is crypto mining, right? So you had brought up, you had also brought up NFTs too, right? And that's very popular in the crypto community. So you were talking about both collectibles as real assets and then also NFTs. With that being said, crypto mining versus, mining gold, right? So crypto mining is like the hot thing, but right now you don't do that. You mine gold. So why gold and not a digital asset such as another cryptocurrency.

Yep. And I'll answer that in a few different ways. First off. I have mine d crypto specifically Bitcoin. I also started a renewable energy company about eight yeah eight years ago now. And in 2018, I, we allocated a part of our energy production and so a hundred percent renewable energy but three quarters of it from wind and most of the restrooms, solar a little bit from hydro. To powering Bitcoin mining and the, as I started to learn about it, casually interested in Bitcoin and those sorts of tech kind of thing and new and cutting edge things. So I had a bit of a casual interest in it, but then as I started to learn more about it being a mathematician by training and also somebody interested in monetary policy, it just was like my, all my world coming together into one magical thing called Bitcoin. And it is just absolutely breathtakingly elegant. And I'm a, both a fan and a critic of Bitcoin. But one part I just can't be critical of is just the blueprint of how it's designed and a lot of it's so many in so many ways, Bitcoin, including the the proof of work aspect to mining Bitcoin. Is it's almost as though it was patterned exactly after gold is. So there's one, one difference where there's a hard cap on the number of Bitcoin that will be mine. That's, it's possible for that to change. But it was designed with that hard cap, whereas gold does have a very slight increase every year in the amounts. That's above ground. It's typically been about 2%. And in recent years, it's dipped below that for a variety of reasons, but the way a Bitcoin grows its supply base, the way it's mind the nature of how the algorithm works or how it plots it out with the difficulties. It really mimics some of the aspects of the gold mining industry and that those aspects or characteristics of gold mining. Aren't something that applied to modern day gold buying. It's probably to gold mining for thousands of years as your monetary base. Expands as your society or economy experiences, inflation. The cost of doing things in that economy go up and gold. Mining's no different. So as a societies or economies grew and evolved, they experienced inflation. That's just, that's been a universal truth for the several thousand years of human. And the cost for industries, including gold mining go up. There are also sticky downwards particular for gold mining. I'll tell you, I'll give you a specific example and we can apply that to Bitcoin as well. And it's very interesting when Bitcoin has these radical moves is a really comes into play. The price of gold in 2000 was a bit, $250 a day. And some gold miners were profitably operating their goals about $71,750 an ounce size of the day of this recording and the profit margins for even the best gold miners, aren't much different than they were when it was $250 an ounce a little bit better. So how on earth is that possible? That was just 20 years ago. What's happened to those gold miners? They're making money at two 50. How are they not making absolute windfall profits at 1,750? The answer is inflation and costs just inflation in everything. And as the price went up in 2011, it hit it went over $1,900. Briefly. Those operating costs specific to that industry. They went up and up faster than the rate of inflation, the broader economy, then the price of the commodity came down and the price cost of production came down a little bit, but it didn't follow it all the way. Certainly didn't plummet it back to $200 an hour. So it was sticky downwards to use the macro economic term and that helped. Reduce the supply of goals when the price is going down helps mimic also the general characteristics of the economy of inflation deflation, and the same is true for Bitcoin mining. So as we saw Bitcoin rallied over $60,000 a coin and then fell off sharply to briefly below 30,000. The, of course, as it's going rocketing up to 60,000 more miners are joining the network, the difficulty rates going up the margins are getting squeezed even as the price is going. And then as the price plummets, a lot of those miners were no longer problem. Because of the cost of production to mine, a Bitcoin had gone up so much exactly mimicking the gold industry, but with on steroids or on nitrous oxide or something because the percentage moves and the magnitude of the moves and Bitcoin are just have just been so dramatic by comparison to anything we've ever seen in precious metals, but he just a tremendous analogy there. So I really think that That Bitcoin and several others, but just the Bitcoin is the standard that everybody looks to. Just absolutely elegantly designed what a creation. But a lot of it has been borrowed from gold mining. It is any gold miner who takes the time to learn how Bitcoin actually works. We would just shake their head and say, Hey, I know this story. This is something I live and breath everyday.

Right on. Yeah. I want to touch a little bit more on. Inflation. Cause you're talking about how that affected, what, with the price going from, $250 an ounce up to where it's at now, you said just worried about 1750, right? 1,750 announced right now. You're not seeing these windfall profits and that's thanks to inflation. So with like our current inflation rate, like this year, right now, they're saying we're sitting at 5.4% in the United States, at least. So what sh what does that rate mean to you or essentially any other investor, especially in precious metals? What is, why does that matter? Why does that number matter?

Let me broaden that a little bit is that I think, spend my career speaking to various people, to clients to to, to various media discussing different investment themes. Here's one that we can talk about. That hits absolutely everybody. And it's just an absolutely critical issue. And when I say everybody, it's not just people who own stocks or invest in real estate or have mutual funds. It's everybody. It's 100.0% of people are infected by inflation. Nobody much notices or cares much about inflation when it's a half a point or 1% and inflation. We could argue that the statistics have really underrepresented, actual inflation for many years now, but it's been benign whatever, even the most critical analysis looking back or the last several decades we haven't seen that kind of an or for generations. Really. You have to go back to the seventies to see the kind of inflation that's really worrisome. But when inflation does pop its head up, like it did in the seventies and has at various times throughout his. Repeatedly. It is something that affects everyone and in dramatically. And how has that, so if I'm a a wealthy investor in, I own a number of investments, including a lot of real assets, they tend to benefit from inflation or at least protect me from inflation. If I'm average Joe investor or just average, Joe, take away the investor. I have a salary. That's probably not changing it. Anything like the rate of inflation and the cost of everything in my life is going up dramatically. So the cost of food goes up dramatically. Costs housing goes up dramatically and I'm effectively becoming poor by the minute the 0.1% are becoming wealthier at an accelerating pace. So you cannot ignore this issue. It is the single most important economic issue of our day. And it's something that everybody should be talking about and thinking about how does this affect me and what am I going to do about it?

Yeah, absolutely. Cause if you're not investing in something, some type of vehicle that is at least beating the inflation rate, you're losing money every year. And I appreciate the tie in to, to average Joe there I caught that. Thank you. So yeah. Good stuff. All right.

What, let me add one thing, paradoxically, the, what we generally say what's the safe investment? Where do I put my money? I don't want to take much risk, but I want to grow it over time. You invest in bonds or fixed income instruments they're safe, right. Then,

especially if they're not even going to give you the return, that's going to keep up with inflation.

The most. Exactly. They're actually possibly the single worst investment in the most dangerous investments you can make right now, because you're not, fixed income. You're not going to get back more than what you invested in. You're delegating getting interest now. Pretty close to zero unless you're in a super risky underlying credit risk. And if I'm right about what inflation is going to look like over the next 10 years you're effectively going to lose all your money by owning long-term fixed income investments. So it's paradoxically the worst, and I would argue most dangerous thing to be invested in.

Yeah. Yeah, absolutely. Okay. So yeah speaking on that, right? So we're talking about, you have to, whatever you invest in, it has to beat the inflation rate and, right now it's shown to be this year 5.4% of the, you have to have a significant return, to be able to beat that now. When you're mining gold. So in particular like you, you specifically mined gold now, do you mine it in efforts to sell it to investors and folks that want to buy precious metals? Is that the whole point or are you mining? It is the company mining it for its own investment on. Like investing in your own self because you're mining the gold and you're holding it, or do you mind the golden and you sell it to investors? How does that work?

We were a smaller company and we sell all the gold that we produce. So some larger gold mining companies do keep a percentage of their gold effectively betting on their underlying Unit of economy as well as mining it. But for the most part, gold miners mine, the gold and they sell it and they give investors exposure to gold because their profit margin goes up as gold price goes up. Not one-to-one because you have that inflationary effect that I discussed. And also there's a secondary effect as gold goes in and out of favor of the multiple and gold stocks changes. So as gold is out of favor, you have gold stocks trading at literally three to five times earnings just absolutely miserable multiples. As the gold price goes up. And people start to pile into the sector. Experience shows us that not only do your profit margin increase in that can be quite dramatic, which I'll explain in a second, but the multiples increase. So what's that double whammy there. So let's say you're a gold producer and your average cost of production. Like my company is. $1,100 an ounce gold for the time period from 2013 to 2000 18 spent a lot of time around 1100 to $1,300 an ounce. So at times we were breaking even losing a little bit of money and on the good days, we were making $200 an ounce. And that was our profit margin. Fast forward a couple of years and gold hits $2,000. Now our costs started to creep up maybe $50. But now instead of getting 1100, 1200 or $1,300 an ounce, we're getting 2000. So let's say an average, we had $150 announced the profit margin from 2013 to 2018, we now have $800 of profit margin for the exact same business. So our profits have quadrupled over that time period at the same time. As interesting gold stocks goes from zero to something to very interested. It goes out of favor to, into favor. Your multiple might go from four times earnings to.

So want to ask about that. So how does there's a lot of people that will invest in gold stocks, right? So in a paper asset, but it's not the same as actually buying gold itself. So how does that affect, I guess like the price of the actual precious metal it's. When you have like this I guess paper asset that is tied to a piece of gold. I'm not exactly sure how it maybe as a, is it like, is it similar to a bond? Like H how does that work? Like gold stocks.

Yeah, you've raised a really subtle issue here. So I'll distinguish, there's two things. There's bold socks. And there you have specific company risks. So for example, my company operates in Botswana and so Africa, which are in both in Africa and New Mexico, obviously in the United States. So we have risks specific to each of those jurisdictions. We have risks inherent to the geology, Vermont. We have HR risks. COVID all those sorts of things, a bar of gold itself has none of these risks. It's riskless, it's just a bar of gold and 10,000 years from now, if less sitting on your desk, it will still be the exact same bar of gold with absolutely no physical or chemical change, a appreciable change. So that's different. You're investing in a company that calls out company specific risks and there's manifold risks and investing in any company investing in a bar of gold. You have no particular upside. The bar will just going to be in the bar of gold. You're doing that to hedge your risks to other factors. Hopefully protect your wealth and perhaps even grow it on a relative basis. If you believe that gold is going to go up in value in us dollar or whatever your prevailing currency terms are, the issue. I think it's really important. One that you've touched upon is what about buying paper goals? Not so much stocks. That's a totally different beast. Like my money company, for example, there are various ETFs and instruments that are listed on exchanges are available through whatever broken. That gives you exposure to gold. And some of these are literally direct exposure. They have one for one, the exact same amount of gold sitting in a vault. They don't lend it out. They don't borrow against it. They don't do any, they fight financial chicanery or a skullduggery derivatives and options and all that sort of stuff around it. And those are really good ways to get exposure to it. You still have the fatalist would say you still have risks because you hold those shares in a brokerage account. And if the world explode that brokerage may go bankrupt and you may never get those shares, you certainly won't get that goals. But that's a pretty good way to participate in gold. If you don't believe the world, go into thermonuclear war there are many other goals, instruments issued by reputable entities. ETFs and different tracking instruments, which actually don't hold any goals. They just hold more paper instruments to mimic goals. And those are particularly dangerous because a lot of the reason you own goal presumably, is you think there are issues with the financial system, monetary policy, the world in general. And if it really hits the fan. Those paper instruments. You may have a Lehman brothers type situation. Lehman brothers, actually, by the time it was finally liquidated years later was worth a lot more than it was before it encountered any. But what happened in between it was a liquidity crisis caused by counterparty risk and the liquidation value or the mark to market value of those assets went to negative for some period of time, which was the issue you have that kind of issue again. Maybe your counterparty on your gold, your paper instruments inside your gold investment vehicle is the next Lehman brothers. And you may never see any return from you may have been just absolutely bang on and did the right thing, but you bought the wrong piece of paper. So that's another, it's a very subtle point you brought up, but it's extremely important when talking about goal, which is, it comes back to gold is interesting for catastrophic circumstances. And if there's catastrophic circumstances, you've got to think about catastrophic thing. Like maybe a bank doesn't exist that exists today. It may not be there tomorrow. And does my investments still exist then?

I don't like thinking about stuff like that, man. That's scary stuff, but yeah, no that's a very good point. that's why I wanted to ask that question. So I guess there's essentially three different ways, right? Is one you can invest in the metal itself and actually buy physical gold. Two is investing in a gold company, like a gold mining company, right? Buying the paper stocks of that particular company. Then three is buying actual certificates, right? Like you said, like the ETFs that have. Pieces like that have gold in it, like they own gold. And that's part of it. So three different ways to do it. Probably the safest way though, is to buy the actual metal itself, get those bars and you don't have to worry about if the world ends, those bars will still be there. Unless like an asteroid hits the planet and it's so hot and melts it all down and we're all dead. Anyway. So

at that point, W we've also seen it's happened. It's happened in in living memory. I might get my dates wrong, but I'm going to say 1933, the United States confiscated all citizens gold. You had to turn it in. They gave you money for it. They gave you the fair price, prevailing price, but they took everybody's goals. And you're really going to be victimized most easily if you have those paper instruments in that scenario. Having some silver Eagles or some some Krugerrands or other physical gold instrument great gift, a great store of value. And culturally, it's not something that people in Western Europe or in north America, if every really had, but for much of the world majority of the world and Ohio highlight India in particular, it has been for thousands of years and is still a storage unit of storage of well, and it's, that's why it's a wedding gift. That's why it's something that every, everybody keeps is some amount of gold. Or if you can't have gold, then it's silver. And if you can't have silver at some other metals or something of value,

it's the gold standard.

It's the gold. That's why we have the expression.

Yep. Absolutely. Okay. So I want to talk a little bit about, like, how do you personally feel about like the traditional stock market about paper assets, especially being a gold miner? What's your thoughts on, somebody who's just investing solely in stocks

I think let me go back to my thesis is that we have so much debt in the system. Yeah. In particular at the sovereign level that I'll use a word from my mathematician days. It's an intractable problem. There is no solution to this. So there is no plausible way to grow our economy and our economy means a rural economy and it applies in particular to China, Japan, Europe and in north America, in terms of the sovereign states with this amount of. That any plausible growth scenario? There's no way to pay that down. And do I expect the United States to therefore or the EU or Japan to say, okay, sorry, we're not making our interest payment on our treasuries. Apologize. We'll get back to you when we can. No, that would be the system. The planes would be falling from the sky and that scenario, it just it's it can't happen. Do I expect the United States to default on entitlements such as government pensions or other programs that people really don't ascribe any risk to receiving those benefits? In future years, I don't expect that either. It's politically completely. Unpalatable. It won't happen. The road route out is not through default it's through inflation. And if you want to see what the playbook is for the elites and for the powers that be in governments in power, and even on an elected officials. And I'm talking about things like the federal reserve who voted for them by the way. If you want to figure out what their playbook is. They're telling us, they tell us what their playbook is. And for the last several years, they said they've targeted higher inflation. And to have that higher inflation rate for longer. And if you look at what they do and what they've done, the policies they've enacted, it matches exactly what they said. Now they've temporary and say this inflation was very high, but privately and I, but it's transitory. So don't worry about it too much. But all the actual actions that they've taken are supportive of continued in very high levels of inflation and it's, again, it matches what they've seen. There are actions are more important than their words in the short term. And it is the path out of this debt load. So just let's put some numbers on it. Let's say we're at 140%. Debt to GDP, the ratio of the total amount of federal debt in the United States to the size of the economy, the GDP, and the economists would tell you're past the point of no return at that. You're hit escape, velocity index with a spiral out of control. How do you get that back to something sustainable, say let's make the math easier and say, let's say we're at 150% debt to GDP and we want to get to 50% that's GDP. You're not going to do it through austerity. You're not going to cut, spending so dramatically that you could have spent to pay off a $30 trillion of debt. And that's literally the numbers then that are at stake. It's impossible. Politically in powder would just be impossible. You're not going to. That fast, like legitimate growth, you can have all the productivity gains from the internet that we saw now, AI robotics, machine learning, all sorts of great things are happening. They are driving real productivity gains. You can't grow that fast. It's just not possible. But if you had inflation, if you had huge inflation so you're just growing the denominator. That debt number is relatively fixed. If you can keep borrowing on these incredibly incredibly miserly terms, paying a percent interest or 2% interest or less for short-term instruments, and you're growing your GDP number through inflation, you can get it back. So let's say you have a, I'll put it in very real terms. That's it costs you $1 million today and you say, I can keep my $1 million of cash, to buy this house for a million dollars. And I have this huge amount of inflation going on in the economy and the central bankers and the powers that be are driving us to this long trend of inflation. And in 10 years, they've succeeded. We've had huge inflation and now. My one friend decided to keep his million dollars and put it in T-bills he now has $1 million and 50 bucks or whatever. It was some nominal amount of interest earned over those 10 years. Almost nothing. We still still has a million bucks. The other friend took that million dollars and bought a house and enjoy living in it for those 10 years. And that same house. I had a nicer house. It's not on a better street. It's exactly the same house that it was 10 years older, but same house they bought today is now where $3 million is that person who has a $1 million house. That's now worth $3 million. That person richer, probably not. If that growth was caused by inflation, but they've protected their wealth. What about the person who had the million dollars in T-bills and now has the million dollars in a hundred dollars interest. They still have their million dollars. They're legitimately poor. They've lost two thirds of their wealth. That's been wiped out through inflation. Inflation is slowly robbing everybody's wealth. Every single day. It's robbing your it's shrinking your salary and it's robbing you of your savings. Day by day. The only way to protect yourself is with real assets that mimic or participate in inflation. And maybe if you do a really good job of it, you can actually beat in place. And participate in inflation in a lever way and actually grow your way.

Yeah. I'm a big fan of real assets. It's why I'm a big fan of real estate because it's a tangible asset. It's something that's a need. There'll always be a need. Somebody will always need a place to live. And it's a, it's something that does go up in value over time. Like perfect example that you gave there, with the person that bought the million dollar home 10 years later, it's worth 3 million. Sure. You have appreciation. But the thing is, did that appreciation keep up with inflation, but most of the time like an in pretty good markets, you're going to see like the appreciation between two and a half to 3%, which is around the target inflation. But then you look at years, like right now where inflation's at 5.4% for this year. And if you appreciated, 3% while you actually lost 2.4% of value, realistically, when you compare it to what the inflation rate looks like. And I think a lot of people don't really look at it that way, but especially with like, when you look at your, if you're a salary worker, especially federal workers like myself right now. Cost of living. We get cost increases every year. We get our pay raises in January, and it's typically between two and a half to 3%, sometimes as low as one and a half percent. I've seen sometimes now I think this year, this January, we're getting a 3.1% or something like that. But as you can see, that does not equate to 5.4%. So we are slowly. Getting less money as the years go on. So yes, totally understand that. And so I'm trying to explain it in a way that if somebody who's a little bit confused while they're listening, that's just, one of the ways to just show how like Ravi was saying you're slowly getting robbed of your wealth, slowly getting robbed of your wages and your salary and things of that nature. So it's important that no matter. What asset class year you're in that you're beating that inflation rate that you're beating that this year 5.4% who knows what next year could be. It could be higher, maybe lower, who knows. But, that is one of the ways to to keep up. And I guess for the the government to buy back some of their debt, in, in that way. But

They're shrinking their debts in real terms by by bike driving that inflation that's how you shrink it in. It's just a, masterstroke like if all goes according to Hoyle, And if you bought a piece of real estate that trust just matched inflation, but you did it with the reasonable amount of leverage and you're able to lock in rates at today's prevailing rates for a long enough period of time. You can really do dramatic things for yourself financially.

You can essentially beat inflation.

Exactly. It's very hard for all of us today to wrap our heads around the concept of inflation, because we haven't seen it. Unless you were a homeowner are trying to raise a family in the 1970s. You've never experienced real significant or you're in Venezuela or Zimbabwe or some other, a country that's experienced the inflation at levels that we just haven't ever experienced. It's hard for us, but the other thing that to wrap your head around is a term negative real rates. And your real rate is your your interest rate that you're getting and you got to subtract inflation from it. So if you're getting 2% on your fixed income investment, whether it's T-bills or corporate bonds or what other investments. Yeah. But inflation is. 12%, then you have a negative 10% real return. You still earning a positive return in absolute terms, but your real return is actually negative. And we saw a deeply negative real yields during world war II. We also saw during the civil war although the data is harder to really accept to given the the timeline involved there, but certainly rates went wildly negative there negative double digits during world war II. And that's how the United States got out of debt to GDP in excess of 100%. In that time. We had several other tail back then too, coming out of world war II. He had a legitimate peace dividends were coming out of a world war against COVID now, but there's no real peace dividend. We're just going back to normal, hopefully, maybe. And you also had a demographic tailwind there yet, a huge the baby boom. We don't have that. Certainly not in any of the major economies right now. We don't have this big demographic, boom, that's driving consumption and driving economic growth. In fact, in several key economies, China and Japan, most notably you have a demographic contraction and you have a real tailwind there. The only path out of this otherwise intractable situation is inflation. So we have the policy makers telling us they want inflation. We have the policymakers enacting policy that creates inflation and continuing to. And mathematically, the only path forward is inflation. So I think we should inspect, expect continued inflation and try to invest accordingly.

Yeah, no I agree with that. I think that's solid advice because, again, you. You really can't say this too much. Like the that's the goal to beat, no matter what the inflation rate is, pay attention to that, because that is what you want to strive to beat no matter what you're investing in, no matter what your vehicle is in. Like you're saying, there, there are safer assets to invest in like real assets that will last, if something happens and then, you have your paper assets where you do run risk. If something was to happen to the company or anything like that, which is why. It is super important. We talk about on this show a lot is diversification and making sure that you're not, you don't have all your money dipped into one pot, right? You don't have all your eggs in one basket because if you drop that basket and they all crack, or you're just left with one, then you're down a whole lot of eggs and people are going to be hungry. It's important to definitely diversify, no matter what route you go, but again I like what you're talking about too, with having these real assets it's super important. And so speaking of real assets, I want when you talked about collectibles earlier you had lumped in NFTs with those and you were talking about them as real assets. I'm curious as to why you think an NFT could be considered a real asset.

I'm changing the definition of a real asset. So somebody might just say like in that's not a real asset, the digital asset, but I think what we really meant when the term was defined, certainly it meant something physical. You could wrap your arms around when the term was coined and that's why it's a real asset. But it's really something that. So let's start with the basic markers, like a bar goals. So at the same bar gold in 10 years, a piece of real estate okay. A building does depreciate and change over time. But a building now is a building in 10 years. Maybe it's appreciated. Maybe it's not still building a piece of land, still a piece of land NFT, still an animal. That doesn't mean they're good investments and they won't be wildly volatile. They may be great investments. There's going to be some disastrous ones. I suspect most of the energy is created now in this sort of experimental growth space are going to be disasters minus into, a hundred percent kind of thing. But. Fast forward 10 years from now. I think we'll see all sorts of things that you know unitized as NFTs that are real assets. Some of them actually won't be real assets either, but collectibles it's it's creating a whole new genre of collectible. Like I can say. Ken Griffey Jr. Rookie card, or insert your favorite sports team Canadian. So Wayne Gretzky rookie card that is that a real absence that's pre piece of paper? How is that worth? Hundreds of thousands of dollars. It is because somebody is willing to pay for it. And it's Wayne Gretzky rookie cards. So if I have an annex of the first tweet from Atlanta, That I think that's pretty cool. I'd love to own that. If I was a crazy zillionaire, I'd love to own a few of those things. Like those are worth something and I have no idea what will be worth in the future, but it's also immediately, it's not, if I'm right in the denominators changing and we have this wild inflation and it's somebody is willing to pay a million dollars for it today. Maybe in 10 years, there'll be willing to pay 10 million or 20 million for it. And maybe in, in a hundred years it might be absolutely priceless. So I think I think there's a whole new genre of real assets in this sort of definition of the term is going to change with the advent of a digital way of capturing real immutable asset.

That's fair. Yeah. I just, I want to get a better understanding. Cause when you said that I kinda, I wrote that down too. I was like, wait a second. He sees it NFTs. And he's tying that in with real assets. I want, I I wanna get down to the nitty gritty of this what's he talking about here? That, that makes perfect sense. That makes perfect sense. That it's something that will you know, It could just continue to retain a value, right? Maybe not the same value. It'll probably go up in value, especially with, as years go on and it becomes a little more rare or more of a historical piece, as we start to age just like we look at precious artwork and the way artwork is traded nowadays, right? You can look at NFTs the, in the same. Kind of light, I guess you could say,

Give me some rare piece of art. And it is going to be worth a huge amount of money and it is not worth that on any sort of traditional economic measure. There's no NPV or discounted cashflow that says the Mona Lisa is worth $500 million, but it may actually be worth $500 million because there'll be a lineup of people willing to pay. Because they know that in a hundred years it'll be worth $500 billion or, in certain higher price here, similarly is an NFT of a tweet or of a moment. In time or a video, whatever, is that any less real than a painting or a Spiderman number one comic or what's the difference? It's not a piece of land, but a there's real, there are real assets that have utility, like land or a building. And they're real assets that are effectively collectible that are really the, something that people are owning because they know there'll be somebody who's interested in buying. In 10 50 or a thousand years and NFT, you can certainly check that box.

Absolutely. No, that's awesome. I appreciate that explanation too. Because when you think about that, it's just something that, any type of collectible, like you had mentioned the Wayne Gretzky card and things like that. I remember as a kid, like that was the biggest thing, like when we were trading like baseball cards and. And and basketball cards and stuff like that. That was always like the big thing, trying to make sure, try to get the rookie cards, try to get Michael Jordan's rookie card or Shaq's rookie card and things like that. And that was like always the big thing to try to get, or like a college card, and some of those things are worth like a ridiculous amount of money. I used to play this game back in high school called magic, the gathering. And I used to have this set this one card and I sold it a long time ago for 900 bucks or whatever, but. Today can get you six figures. It's absolutely insane. And I'm really disappointed that I don't have that anymore, but so there's things like that, that just the value goes up because they're rare. They're, there's less of them around. And then as time goes by, there's even less of those pieces because they start to dissipate, get damaged, ruined whatever, or, they just start to disappear and. So I guess you could look at, NFT is the same way and there's multiple things that can be looked at that way. It doesn't just have to be NFTs. Like we talked about artwork and other things yeah so real assets not just has to be tangible, not something you can hold and touch, but just real assets in general is something that's gonna, keep you safe from, I guess end of world events or catastrophic events if you survive and things like that. Or, economic meltdowns or companies going bankrupt and things like that. There's other emergency things that don't have to be so dark. Like I I keep bringing up, you talk about companies going bankrupt that talk about an asteroid, destroying the planet, it's so yeah, I guess I know where my mind's at right now. I don't know, but at least you're keeping it within the the finance realm. And I'm just talking about the end of the days. It's crazy. But, Hey man, this is super cool. I was definitely interested in learning like how do this and why mining gold versus mining Bitcoin and and then you did it too. So you also mined Bitcoin. Was there any other cryptos that you mind just curious?

No. The specifics to mining it's like any other industry it's really institutionalized. Of course, when you have these price spikes, anybody can make money at it. But I'd say to be consistently profitable in crypto mining. Now you have to have laser beam focused on being in a jurisdiction where you have stable, low cost power. You have to have access and the liquidity to buy. The hardware required and continuously replenish that because the life of it is very short. Your chips get out at your mining equipment becomes obsolescent very quickly. And so you really need to also have the liquidity to keep buying it and replacing it, even though the price of your underlying coins might be low because the price of that hardware tracks. With with leverage the price of the underlying point. So if you're trying to buy the coin mining hardware with Bitcoins at $66,000 a coin, you are going to be paying through the nose and you will be very hard-pressed to cover your costs if you're just continuously buying it, whether Bitcoin's at 10,000 or at 60,000. You can do that. So you have to have all these things working for you and have laser beam focused on it. Of course, the large-scale miners have diversified that you have, some capacity dedicated towards different coins, different strategies, and that's the right way to. My, my dalliance Intuit extended only to Bitcoin. And I unfortunately I could say I started mining Bitcoin when it was in the mid teens and then it attracted to sub 10,000 and I found that I could not earn a positive margin with the operating costs that. I wasn't able to do it. So I had to stop mining Bitcoin or otherwise continue incurring losses of interest. And this was about three months old. I looked at restarting the equipment that I had in 2008. And was no longer profitable with operating at. And if I, while Bitcoin moved up, sharply can restart mining capital expenditure for new mining equipment. And I worked out a, an operating cost of $120,000 per Bitcoin. And this was when Bitcoin was at about $40,000 on the way up. So what had happened there is my equipment was just so old, it was about 36 months old that it was no longer competitive in that's a calculation on a piece of paper. Would I actually have one any blocks? It probably would have been zero blocks, one due to a variety of issues. So I would have noted, but if it all goes on, according to the calculation, it still would have been a huge money losers. Underscoring the point that to be competitive in it, like any other industry that's matured and grown up you've gotta be low cost. You gotta be laser beam focused on it. You have to have critical mass and scale, and you have to have costs that are competitive on a global basis. It's a truly a global industry. And and so again, long answer to a very simple question. No, that was just focused on Bitcoin. Didn't try any other coins. So similar argument applies to all of them, but I only ever ventured to the Bitcoin.

Awesome. Yeah, so it reminds me of every time you hear about when the gold rush happened in California, everything like that. And everybody was like, so focused on getting gold, but the guy who really made the money was the guy, someone shovels and pickaxes. So it's a, having those supplies. So it brings me back to it was actually a couple of weeks ago I was driving to work. And when I drove by best buy, there was like this line out the door tents, like people can't. I was like, what game came out? Or What's coming out right now. That is and they were selling GPU's right. And and I guess there were these systems that they were selling for 1500 bucks. And then next thing you know, you see them all for sale, like on the local marketplace, on Facebook and local groups for 2,500 plus. And it's oh my goodness. And people were buying them, like buying them up because they were using that for mining. And it's just absolutely mind boggling, especially out here in Hawaii where electric prices are pretty high. But a lot of. Places out here, like including my house, I have solar power and stuff like that. So it's definitely something you want to have out here, but yeah I couldn't believe it. I was like, what the heck of it? What's going on? I was asking somebody at work and they said, oh yeah, they were selling GPU's today. And they were selling them at this price. And this is what I was like, oh my goodness. So yeah, it definitely reminds me of the whole like gold rush thing with the, the shovels and the pickaxes versus who was actually out there mining it. And then you had to dig in the right spot. You had to find the right spot to find the gold and you see the same thing in crypto right now, too. If you're not doing it the right way, you're not gonna find anything. You're not going to get your coins. And it's a lot of work. It's a lot more work than people think it is. I'm glad you pointed that out. So Ravi, this is, this has been awesome. I feel like I learned so much today. I got a whole page of notes here. I really appreciate you educating me and educating our listeners on, gold mining and how it works and why it's important to have these real assets to, to combat you know what we're combating right now with inflation. Think it's super important topic for people to understand it and learn. With that being said, do you have any last tips or tricks that you would recommend to somebody who is, they just got themselves out of debt and they want to start investing and they want to play it safe and start investing in maybe precious metals and gold and things like that. What kind of recommendations would you have for somebody.

Yeah, I'll broaden that to a real asset investing that can protect you and maybe even grow your wealth during a, this what I expect to be a long period of inflation real estate investment trusts. So not every investor can By their own investments, their own real estate directly. It's a big numbers game. Even if you're making a personal level of real estate investments, bigger numbers than many people can handle. So real estate investment trusts by investing in something, and can understand buying something that's like a. A strip mall, real estate investment trust. Maybe that's not a good idea. There's obviously going to be sub sector. Who've been real estate that are going to get disrupted and Amazon effect and different things happening. But generally speaking real estate investment trusts can be a great opportunity to get that fractional ownership in real estate. That's going to pay you a return and participate in inflation. Buying a basket of gold mining shares by buying an ETF that. That's a good way to participate without having so much one company specific company risks. I like to think my company is great, but again, every company has its own risks. And if you're a new investor, you've got to diversify as much as possible. It's very hard to do that with shares yourself very easy to do it. So gold mining ETF is a great opportunity there. And the last one is. Get some American Eagles get it, get a few coins. And Anybody. I know who's done that. Nobody's regretted. As long as you, you can park that you can put in a safe or safety deposit box and be comfortable with that investment. Particularly if you can have access to just that, for those of the people are who are, who seem the, seen them and held it in their hand, it's a great feeling and it's going to be a great investment for people. So that'd be my my final recommendation for people to dip their toe in the water.

.Yeah. Great advice. I definitely appreciate that. So I've got one more question I have to ask you. This is a pretty important one, right? Especially for the listeners that are, listening and saying, Hey, I want to know more about Ravi and where can I find out more information about them? So with that said where can people find more information about you? Do you have a website and you can share with us any social media people can follow in and check you out

I'm pretty invisible on social media with the exception of LinkedIn where I'm quite active. And I point out to people with my renewable energy company as an example I think we've done six acquisitions in our eight years of existence, but one of them makes up about 50% of the business. And the idea for that originally came through a cold outreach through LinkedIn. You just got to keep showing up. So I love when people reach out with ideas sure. A lot of them are crazy. Some of them are scans in fact, but a lot of great stuff happened over those connections. So I love to hear from people that way. And and of course my company Golani gold you can find out more about us at our website, but the best way to interact near or anything, I'm doing LinkedIn.

All right. Fantastic. So I'll make sure we have a link to your website and your LinkedIn and the show notes. So everybody can go and check that out and get connected with you and have those conversations. I agree. LinkedIn's a powerhouse. Absolutely love it. I've actually found podcasts guests on there and it's just been, it's been super fun to just interact and network with people there, because that is definitely one of those social media apps where you build a network that is more towards building your net worth versus, like all the stuff on Instagram and Facebook and all that other stuff. LinkedIn's a whole different animal. And it's all about professional being professional and professionalism and I really enjoy it. So definitely a powerhouse to check out if you're not on there, definitely get on there. But Ravi it's been an absolute pleasure having you on the show. I really appreciate you taking some time to chat with me today. Thank you so much.

It's been great.