Macro

Episode 42: Investing in the “other precious metals”: Palladium & Platinum with Chris Blasi

Ben Lakoff, CFA
April 19, 2021
52
 MIN
Listen to this episode on your favorite platform!

How much of your portfolio do you have allocated to Precious Metals?

Precious Metals include: Gold, Silver, Platinum, and Palladium and each offer different benefits.

In this episode with Chris Blasi we go into Macro Outlook for Precious Metals, and more detail on why investors might want to take a look at Platinum and Palladium.

Chris shares a ton of knowledge on the precious metals market and you won’t want to miss it.

Listen on your Platform of choice:

Check out https://anchor.fm/investinalts for all the listening options (Spotify, Apple, etc.)

Show Notes

0:00:00   Welcome and context

0:02:17   What is your background?

0:08:20   What’s going on with gold and precious metals in 2021?

0:14:15   The use of platinum and palladium

0:19:25   What are the headwinds for precious metals?

0:22:41   What are the returns on platinum and palladium?

0:27:34   What is the product that Neptune Global offers?

0:32:10   What are the risks of holding precious metals?

0:36:00   Other ways to get exposure to precious metals

0:42:30   Digital equivalent of precious metals

0:49:10   Why are these assets so under-owned?

0:52:41   Where can people find out more about you?

Show Links

Neptune Global

Chris on LinkedIn

PMC ounce Calculator

Episode Transcript

Ben: [00:00:00] Welcome to the alt asset allocation podcast, exploring alternative investment opportunities available to the everyday investor. Here’s your host Ben Lakoff.

Hello and welcome to the all to asset allocation podcast. Today’s interview is with Chris Blasi all about precious metals. We’ve talked to him.

A lot about gold and then higher beta plays on the gold narrative, like gold miners, silver, and even Bitcoin. But we haven’t talked a lot about the other precious metals as a category. Precious metals include gold, silver, platinum, and palladium. And each offer different benefits. In this episode with Chris, we go into the macro outlook for precious metals overall, including gold and go into great detail on why investors might want to take a look at platinum and palladium.

How much of your portfolio do you have allocated to precious metals overall? Why would you be interested in owning them and the different methods on how to add them into your portfolio? There’s a lot here before you listen, please don’t forget to like, or subscribe to the podcast or even better leave a review.

If you’re watching this on YouTube, please subscribe to the channel and, or give the video a thumbs up. This really helps more people find the podcast and keeps this thing going in this episode, Chris shares a ton of knowledge on the precious metals. Market overall, and you won’t want to miss it. Enjoy it.

Chris, welcome to the show today.

Chris: [00:01:33] Ben. Great to be on with you.

Ben: [00:01:35] Yeah. Excited to have you on.  we talked a little bit before we started, but you know, on my podcast we’ve talked a ton about gold and then higher beta plays on the gold narrative. So gold miners, even silver and Bitcoin. But with you have this,   knowledge of the precious metal space overall, which.

A lot of people don’t realize it includes other metals, like palladium and platinum. I’m really excited to have this conversation and dive into those lesser mentioned metals in a lot more detail. , . I wanted to start off today just with a little bit of your background and how you ended up in precious metals.

Chris: [00:02:13] Okay. So my background was kind of diverse. I came out of college was actually an internal auditor for a company. Then I went into wall street in the traditional what we’ll call broker dealer username and spend a little time with a a boutique M and a firm. Then I had gone into the world of technology for a while with one of the big tech firms, but I always had a passion for macroeconomics.

Matters. So I always was constantly doing research on my own and following, and I was a big believer, more in identifying a trend and getting in front of that trend as opposed to being the stock picker sort of mentality. Right. I thought that, you know, the trend is your friend. Identify it look for something that’s going to be for the, at least the intermediate a long-term, you know, not short term.

I believe most investors though. It seems like it could be fun to do short-term trading and market timing. I think most, if they’re honest will agree, it ends up, you ended up on the losing it. So with that said, my research in the mid to late nineties saw. A secular bull market for gold coming and precious metals.

But when I refer to gold, it really is meaning the precious metals, but we’ll say, and that bull market would commence the beginning of the new millennium. So I was so convinced of it. I didn’t want to just be a investor. I was always entrepreneurial. And I started a firm. So I started the company in 2001, 2002 started initially trading.

And our initial transaction actually was at $288 an ounce for gold, which, and not to digress, but this is why I really believe it’s imperative that investors understand gold correctly. There’s. Everyone quote unquote, as they call it talks or book, right? When the financial media is as guilty as anyone else as promoting certain asset classes.

Now people claim they just care about the bottom line, right? I’m not looking just to be the industry with the gang, the group I want to make. I want to be the big winner. So to put that in perspective, if you were to, if I was to ask the average person from, what do you think is the state of precious metals?

As far as an investment, you’re going to hear they’re too volatile. You know, stocks are better. And I’m not, it’s not to disparage, but it’s to put things in context. And to that individual, I would submit this since the start of this secular bull market in 2001, gold is up 500, actually a little over 500%, the S and P 500, and the Dow are up 177%.

Now that is not a, that is, that is a mid, more than a material gain. So my position is for all the ink that is spilled for all the promotion. And most people aren’t. I get it. There were certain Fang stocks that have did that, but we know most investors are truly in mutual funds, which generally underperformed the indexes or their index funds.

So for those that sat in an index fund, you had a nice return, 177, but if you had a more open. A better understanding of gold and were more open and didn’t follow what we’ll call the mainstream narrative. You’d have a, you would have had at least a portion of your portfolio have a 500% gain. So our reason I have to just bring that out is to kind of say to your listeners, this is why, what you’re doing, and this interview is important for investors.

So that’s the case. So I started the company and we’ve been growing ever since we are not a traditional precious metals dealer. We’re a precious metals platform. We transact make a market in precious metals, and we’ve actually because of my background in technology, we productized the assets in particular, three primary products.

The gold volt account, the silver vault account and the PMC ounce, which I think we’ll cover later. But the reason for this product is aviation is to basically capture the best of both worlds, the benefits of actually owning it, the physical metal of which there’s a lot of them, but also the ease of trade as if you’re trading an ETF and such.

So we believe that we’ve been trying to w what we’ve been successfully coming to market with better ways. That are more comfortable for investors and more to their, what they’re used to, to transact in the precious metals, but not surrender some of the benefits you have when you’ve stripped out certain layers of counterparty risks.

That is the way most investments are set up for precious metals. So the firm has grown organically. Very, yeah, we, we grow over 30% per year. You know, we’re, we’re, we’re really happy about that. Granted, the precious metals, as I said, is in a secular bull market and I’ll just leave on this. So secular bull market for anyone who’s not familiar with that term, they’re cyclical markets and they’re secular, secular are long in duration.

2025 plus years site cycles happen within it. And this secular bull market is playing out. Exactly. Textbook is three legs. First leg up second leg down with a 50% price retracement. And the third leg is the biggest and most explosive in growth. And that’s where we are.

Ben: [00:07:21] Nice, great intro. the precious metals, I think it’s worth noting as well.

Yes. They’re up 500% in, in, in this secular bull market, but they actually, they. They perform very well as a diversifier and a hedge went in downturns as well. It’s rare to find these things that are an accelerated going up and then also a dampener going down. I think they offer both of those, which is, which is quite rare.

And then at the, you know, listeners of the show will know that I I’m a big fan of macro longer-term trends as well. This short-term trading. Yep. I’ll admit it. I never made a lot of money in it. You know, all constantly found I was picking up pennies in front of a steamroller and get wiped out, but it is what it is.

So definitely agree, finding these bigger, longer term trends identifying them jumping in and then not checking the prices daily. And I definitely want to get into the products that you have later because I think they’re fascinating. Oh, offer investors a good option to get involved with these markets, but let’s, let’s start off overall.

Secular bull market since 2001 with gold, but right now 2020, this is being 21, man. This is recorded in January. One of the first funds I’ve had this year, but what’s going on this year. You still,  steadfast with your predictions going forward. Just talk me through precious metals overall.

Chris: [00:08:45] Sure. So the the secular bull market has not run its course yet. So my field, my research, and again, from a technical and fundamental perspective, it’s all being supported. Gold is still in actually the early stages. Despite being at 1900 and change knocking on the door of 2000 old is still in the early stages of like three.

So, you know, you don’t want an investor to, you know, say, well, I missed the boat because it’s really, this is the normal course of a secular bull market. Most investors are not in, in the early stages. Right. They start coming into the later stages. So the, and what’s transpiring, Ben right now is. You had the fundamentals that drive gold and a big mistake a person may do is they’ll listen to a commentator who wants to kind of detract from gold and say, well, you know, it was Corona virus said, well, gold was rising rapidly, you know, a decade before coronavirus, right.

It was rising rapidly before the financial crisis of 2008. So all those excuses that when a person tries to pull something from the news and say, well, the only reason gold went up is because the financial crisis of 2008 or Hirono Bible or whatever, Or one election or the other they’re missing the point.

There are drivers that transcend all those and that’s what’s happening. So to, to waste time for an individual, looking at news stories, trying to figure out it is this macro, this secular bull market has not run its course. And now you’re also starting to see with a lot of investors talking about commodities in general are.

Going to start to rise. So therefore now gold is the monetary play. It’s not the commodity metal, but then the other metals, silver, platinum, and palladium. Those are your commodity metals. They’ve actually been doing tremendously. I mean, so even though other commodities have hit their stride, it’s more being forecast that they’re going to rise.

You take something like palladium palladium is a, you know, astronomically several thousand percent. And there’s. Important reasons behind that. And what’s interesting about the metals is they do not move in lock step. So there was a general trend with the metals, but on the short to intermediate, they don’t move in lock step.

So therefore, even though we can use gold as a proxy for the whole metals, but there are, you can drill down and then start to look. And that’s why it becomes important to understand. You know, if you’re interested in the other metals, what their benefit is and what to possibly expect from them. And then of course, how to construct a portfolio, if you want to kind of diversify across the metals and take the advantage, you know, because we’ve all been trained, that diversification is beneficial to a portfolio.

And I agree with that to a point you know, you could, you could take it to the nth degree and diversify your itself out, but everything offsets each other. So what’s the point. I think people miss that, that I believe that what you do is you, you take meaningful positions, so that, and you allude, you talked about this earlier, that goal can perform as a hedge versus your other positions.

And that’s exactly what it does now. It’s great when it’s also giving you a game. But don’t panic when it’s not, and it’s holding its ground or the other assets are going up because you bought it for a form of financial insurance. I’ll share a real quick story. This is what, you know, a true investor.

Of course I can’t use their name. Very large investor of ours took a very, very substantial position in gold, six, seven years ago. And it said to me, I hope it never goes up now. You’ll never hear that from the average person. But what that tells you, this guy really got it. This is a person had a very, very substantial overrule portfolio.

Understood the role of gold understood the value in having that position. And said because he was being on it. Look, if that goes up, that means everything else is down, but he knew he needed to position for that. Of course he’s been a hundred percent. Right. So so that’s where we’re at. So going forward short answer, the metals are all positioned from both the fundamental from fundamental perspective and overall trends globally to actually have a very good 21.

And I think that will carry beyond 21.

Ben: [00:12:57] Yeah, I agree. And I made commodities and copper and these things have just exploded this year already. They’ve been relatively undervalued. their time has come, I suppose. I think it’s important to note what you had said that these metals move differently.

They serve different functions, so gold store of value. I get it. I think my listeners get it at this point, silver palladium platinum. These are more industrial, a little bit more of a commodity play. But let’s educate myself and my listeners about the uses of it. Let’s focus specifically on palladium and platinum.

I mean, a lot of people know that they’re used in catalytic converters and most of their supply comes from South Africa and Russia and things like this. But like, what does that mean from an investment standpoint?

Chris: [00:13:44] Sure. So first everyone knows about the capital converters, but realize these are indispensable assets when it comes to that, because we know the, especially with an emphasis on green and pollution control.

So regardless of the price movement of. Of let’s say palladium, because palladium is what is in your gas powered engines right now. Your platinum is used for diesel. A palladium is for gas powered. It used to platinum used to have both markets, but even though palladium has gone up from $300, an ounce to 2,400, there is no talk about.

Of taking them out. So the point is it has great pricing power that we are not going to go back to polluting like the 1970s in order to save a couple hundred dollars per vehicle. So it’s very safe. And you said, yes, everyone understands about South Africa and Russia being the sources and you know, and the challenges with those, both those suppliers.

These metals have been in deficit for years on above ground inventories are being burned down. So, and what’s coming out of the, out of the minds cannot satisfy. And this is even during the slowdown from the coronavirus. Nevermind. When things pick up. So the point is. What a lot of people are used to is owning it an asset that truly has a supply demand in that dynamic that can’t be made up by just issuing more shares or buying futures contracts.

Right? So this is the, this is what some folks missing. Why did palladium go up so much? Because then the users of palladium, couldn’t just buy futures, contracts. You know, paper assets at the end of the day, you can’t manufacture a car with a, with a, with a, with a derivative. You need the product. So you want to my perspective, you want to own claim to these indispensable assets.

Now platinum has been lackluster for a number of years. It is, it has been picking up. There was also a, an emerging technology called green hydrogen. Now that’s going to be a little down the road. But that has the promise of being a. Absolutely enormous market. And in that market, platinum is a key catalyst.

So it’s a little early to be the driver for platinum now. But platinum is still rising nicely. I don’t think you’ll be hurt. Especially in a logical, a platinum position, but the upside in the latter part of 21 and 22 is it looks very promising. And again, these are two because these are supply demand issues.

These are the type of things you need to get your hands on and have before the event I’ve as a firm that makes a market and trades. There are times it’s things get scarce back in March, there was a huge demand on physical metals and everything dried up. So it happens. And you know, when that happened, the average retail investor is not at the top of, of the chain for distribution.

Right. So my position is if you believe in the, in the. In the fundamentals and the story, it’s better to take your position now. And it’s not like people have been holding the metals have, and the metals haven’t hit their most explosive stages have not been rewarded along the way. So that’s my position.

So those two metals Are indispensable, rare supply demand is on their side, wind at their back. There are emerging and additional technologies, which will be utilizing those metals. Silver. Yes. Your investor probably know a lot is the quasi industrial metal and a monetary metal. So it sits between.

You know, the gold and and the other and platinum and palladium. It also has a supply demand imbalance it’s used obviously, you know, I’m sure that it’s used in products that are in all the most high growth industries. So it’s not like the buggy whip it’s going out, it’s all in your, your computers and your smartphones and your solar panels.

So, you know, again, and there’s a supply demand imbalance there. So. The the story from the commodity side of the commodity metals is very strong and the, and they’re going to benefit along with all the others and the others will outperform some of the other commodities because of their extreme rarity.

Ben: [00:18:03] Yeah, that makes a lot of sense. Supply constraints can be a, a big driver here, but like you said, I mean, you have to have the demand as well. And it for me, I mean the, the buggy whip comment made me think about this, but let’s talk about headwinds for palladium and platinum. there’s this big move toward electronic vehicles.

If you talk to Tesla shareholders, you know, Gas powered cars are already gone. Well in the valuation certainly says so. Right. But I I’m just thinking through this and if the the price so take palladium, which is gas engines. If the price goes up substantially, say like 10 X from here does that.

Impact the pricing so much of these cars that Excel further accelerates the move toward electronic vehicles.  Are electric vehicles. We have a bit of a ceiling of possibility price appreciation here, or  how do you view these headwinds? Sure.

Chris: [00:19:00] I do not see palladium going up 10 X, you know, it could double over the next couple of years, which of course would be a tremendous return.

But I don’t see that sort of move, like a lot of technologies that have come out through the years. You know, the, the zealots get ahead of themselves. Oh, we’re all going to go to electric vehicles and therefore you know, I get talk about when open systems came out, verse mainframes, they said the mainframe computer would die.

If you go to all the big banks, brokerage houses, the key, the key apps, all still sit on mainframe, right? The computer and the disc was going to get rid of paper, never happened. Right. So. The point is if we’re looking at platinum and palladium, or let’s just say palladium for the for the intermediate term, meaning four or five, six years, it is, it is safe.

Electric vehicles are not going to take that market down in a significant way. You have to be realistic on two parts. There is the infrastructure globally for people to be using electric vehicles. It doesn’t exist. Right. The power grid in a California, can’t have everyone start plugging into it. Just doesn’t handle it.

Secondly, the cost of an electric vehicle versus a inexpensive you know, internal combustion engine. A vehicle is tremendous you’re and the emerging markets like India and China, these people are going to be buying low cost cars, which for a number of years, more than enough for investors to do quite well in platinum palladium, those will be gas powered engines.

They are not going to buy $50,000 Teslas in India and China, the port, they will be buying, you know, $7,000 and under. Internal combustion engines. So, you know, again, this is what happened, you know, as you’re older, you’ve heard this every day. Any time people get way in front of themselves. Yes. Many years down the road, many, because again, it’s, it’s just like the demise of paper because of the computer and the demise of the mainframe because of open systems they all end up, they never ended up completely going away.

And again, and you don’t even know what sort of technologies will continue to emerge on, on the internal combustion engine.

Ben: [00:21:12] Absolutely. I mean, these things never seem to move as quickly as people think. Let’s talk about returns. Investors look at palladium platinum as a hedge, like gold or censor, so tied to economic growth that it’s viewed differently.

And what sort of investors should be most interested in adding these other precious metals to their portfolio?

Chris: [00:21:33] Sure. So platinum and palladium with, I would never look at like gold. I mean, gold is unique. It’s money, you know, does it have use in industry? Yeah, a little bit in jewelry, but it’s really a alternative money or it’s the ultimate model of which all other monies are exchanged.

So. But just the way gold will go up because the currency is being devalued like the U S dollar. So will all hard commodities go up because they’re real, they’re tangible, there’s an expense to pull them out of the ground. And if you’re going to base your currency by just creating it out of thin air, of course, a person that has something that’s rare and finite will say, I want more of those dollars or yen or.

Where you were asked for it. So, you know, they will benefit from inflation or destruction of currencies, just like gold and silver, but they’re going to perform differently. They will perform more on news and trends as far as the, you know the global economy. But. You know, they, they suffered a little bit for the last 10 months, but you know, not really, I mean, platinum actually was going up.

So they’ve actually risen above that. I think there’s a lot of anticipation because everyone knew at some point the global economy will be picking up steam. So these industrial metals are going to be, you know, are going to be back in demand. Now, these metals, I will step back. They are very volatile, right?

Silver is a very volatile metal, right? People love to talk about silver or gold. Silver. Will probably outperform gold on a percentage basis by the end of this secular bull market, but it’s going to be a much bumpier ride, right? Like we have a chart on our home pages shows since 2008 and you see silver spiking way up and then it coming back down.

So the point is, you know, the old thing is, you know, buckle up. If you’re going to be a silver investor, buckle up, you know, be prepared. Well, platinum and palladium are similar to that. So. One thing an investor should never do. And it’s not just with the metals. It’s when NDF asset class, you don’t go all in on one.

I mean, you can kind of go all in on gold and say, all right, that’s fine, but you don’t do it on something like a platinum or palladium. And I would even be concerned about someone who goes only all in on silver. But platinum and palladium makes sense. As I say, if you, if you allocate them as a percentage of your precious metals portfolio and just, you know, look at it logically, and if you add it intelligently, You know what it means by waiting as such, they will help you outperform and outperform on a risk adjusted return basis.

And that’s something that we’ve spent many years developing actually productizing something for that. So we did it so that instead of someone trying to recreate the wheel you know, we put something, a trading vehicle together and asset together that gives that instant diversification. And it proves because we on our homepage.

If, you know, if you get an opportunity and you might have already, we show the performance of this diversified position, which. The investor owns gold, silver, platinum, and palladium, and it does provide a better risk adjusted return. And for, for folks to understand that doesn’t mean every year will outperform an individual medal, right.

Even though right now, it has, except for palladium. The palladium is not on the chart because as, and if anyone asks I’ll, I’ll get in front of that. The growth in palladium over the last several years has been so outrageous that it actually makes the chart look, look foolish. And there aren’t many people who really just invest in palladium anyway, but the point is the better risk adjusted return means you’re going to have a smoother ride.

And for the amount of risk you’re taking in the asset, you know, the return outperform something that would be very volatile and volatile means. Yeah, you may be way up one year, but then you’re going to be way down the next. And for most investors that is not a prudent path to take that something that’s highly volatile because that would infer that they could work at time.

And I’ve yet to meet someone that can work at time, especially with precious metals. I’ve been doing this 18 years and I wouldn’t eat, I don’t even try to do it. It’s a sure way to the poorhouse.

Ben: [00:25:31] Oh yeah. No, that makes sense. And I’ll link your website in the show notes for sure. It’s Neptune Neptune global.com, but yeah, I mean, you can see the basket, the PMC outperforming these individual assets with the exception of palladium that has been astronomical returns.

Talk to me about the product what it is.  Obviously it offers you this instant diversification, you’re buying a basket of these precious metals, how it’s weighted, how you determine those weightings. Are they adjusted? Yeah, just. Pitch me on it. Let’s hear it.

Chris: [00:26:04] Okay. So let’s call it the PMC ounce, Ben, and that means precious metals composite, because it’s a composite of the four metals.

So it incorporates gold, silver, platinum, and palladium. The weighting never changes because if it changed, then a PMC out sold five years ago is a different configure, a different product than one today. So we spent many years, or I spent many years determining the prop proper waiting for this product.

And. And you have to look at it from two sides. There’s the physical waiting. And then there’s the, how many dollars are going to each based on the current market price and just, you know, we’ve put tools on the website. If you go to our website, two important things are you look at that chart and you see how the PMC assets outperformed.

But below that there’s a tool called the precious metals calculator. It lets you do a simulated trade of the PMC ounce. So you put in how many PMC ounces you buy. It shows you, you know, the price per ounce is not what’s important. It shows you how much gold, silver, platinum, and palladium you have now acquired now.

So physically it’s 3.5% gold. Now a person may say, well, that’s not much, but that’s because gold has always been a high priced item, right? So you have three, you’re buying 3.5% of something. That’s 20 $1,900 where gold, silver is a much larger physical waiting, but silver, in order to be meaningful in your portfolio, you need to buy a lot.

It’s a $27 item, right. And this was always the case. Over the years there’s times when something like palladium, which at the time when the BMC ounce was created was, you know, a 300, $250 per ounce item that has now $2,400. So, but that weighting will never change. And in time, if the other metals catch up, you know, they’d all comes together.

But yeah. If you, when you, again, you look at that chart, it, no matter what their price changes are, it gives a superior risk adjusted return because to try any other way is to try to market time. So we kept it simple. You buy the PMC ounce. Forget about market timing. It’s a logically intelligently weighted position in all four metals, and you can sit for it for the intermediate to long term and you don’t have to, there’s no adjustment to be neat to be made.

You’re not, you’re not likely to out perform at trying to adjust on your own with your own basket. So it’s price efficient. It trades in real time and all the metals are actually they’re all there. It is 100% physically allocated in a non-bank depository. Right. So there is no that doesn’t have the counter party risk of an exchange traded product or fund, and the actual, the ownership.

Of the metal. So if Ben was to buy, becoming an investor in the PMC ounce then is recorded at the depository level as the owner of those specific quantities of gold, silver, platinum, and palladium. And we actually do have a conversion option where a person, if they want to convert the holding and the volt to metals for delivery we do, I mean, we don’t incur if your intention is to have metals delivered.

You should just do that out of the gate. Right. But the point is we put that there because the metals are there and we want people to be comfortable that, Hey, you know, if five years down the road, the situation of the world becomes such that they’re that concerned then, you know, then convert and deliver.

And we offer delivery options into different sized bars and coins.

Ben: [00:29:33] That makes sense.  If I ever want to get a couple bars of palladium and platinum delivered to my house, I can, I can do it through you, which. All right. Cool.

Chris: [00:29:42] And just to be clear, we deal in all the regular, what you would call all the, the traditional precious metal products.

So I mean, our clients have, you know, the own, the PMC ounce but they’ll also buy maybe additional gold or silver in different bar point form. And we either couldn’t deliver or we can make delivery. Anyway, we have a very competitive insured storage program with our partner depository. We are not the depository.

That’s an important point in our perspective, you would never want your dealer to be your depository. We are separate organizations with, with no ownership crossover. So,

Ben: [00:30:13] gotcha. That was the next question is thinking through the risks.  You’re acting like a broker in this. Instance or dealer.

And then the depository is the one you need to worry about. They’re the one that you need to make sure that they have these assets allocated to you as soon as you buy them. And if somebody like that would go, go away, go bankrupt, disappear. Then that would be a big issue for these investors through that platform.

Right.

Chris: [00:30:40] Sure. So so this is a, it’s a makeup you’re bullying depository, but it’s a non-bank depository. That is important. I think if a lot of folks did the research, you don’t want to use a, you know, a bank as your depository. So these are just pure plays. And what means, you know, banking, hat, bank, depositories have deal desks and they lease gold and do all sorts of things.

Right. These non-bank depositories. All they perform is storage services, insured stores, everything is insured. They don’t have a deal desk. They don’t buy and sell precious metals. They are just there to perform the services for storage. So it’s not a mom and pop shop. They’re quite large. The one we, we use our primary one nothing gets mom and pop, but you know, we, we want the heft.

And it’s actually. Approved by all the exchanges of the world, like LBMA ice Comax meaning. So they’re just qualified for that chain of custody. And if you want it to hold metals there, that would be backing and used in the night, LVMH or Colmex, they’re qualified. So, you know, they’re, they’re heavily they’re regulated and audited.

So you know, we did our research many, many years ago and you know, they, they perform excellent and provide excellent services. So this, this triangle between client. Where the dealer, right? We are, the trades are all being executed for us. The metals are delivered it to there. Then going into the client’s name they will you know, it’s been working very well for, for many years, w well, over a decade.

And we also have what they call the golden silver bolt accounts, which are function like the PMC aunts, but they’re just a pure play on gold and silver. And your question to be well, why, why would someone buy the volt account versus individual bars? The price per ounce is more aggressive. It’s all backed by.

LBMA approved ares, which are the highest quality bars in the world, but because the bars are larger, that’s backing everything up the price per ounce, and you don’t get caught up in say you’re only able to buy nine ounces of gold. And you know that if you buy individual bars, A larger bar has a lower price per ounce and a small bar.

So you don’t have enough to buy 10 ounce, a 10 ounce floor. So you have to buy nine one ounce bars. So you’re going to pay a little bit more. Well, the bolt account has that lower price per ounce. So you’re getting that pricing efficiency. Again, it has a delivery option too, and these are actually products that are in IRAs because a lot of people in their only assets are in the IRAs.

And we work with certain IRA administrators that there’s, there’s also inventories just specific for them because by law, an IRA administrator and meet needs their own unique inventory. We’re all using the same depository, but it’s all segmented into different accounts. So we’ve been very very focused on always making sure everything’s as transparent as possible.

And knowing what’s important to investors and, you know, a lot of confidence goes into firms like us, and we’re here, we’re here to help educate productize and make a market. And in a market segment that we believe is so unique, it’s beneficial to be a specialist in it. As opposed to kind of a generalist, right.

Broker-dealer wealth management firm. Where there isn’t, we’ll say the appreciation and the depth of what we consider understanding of these markets to really serve the investor best.

Ben: [00:33:51] Awesome Chris? , it sounds like a, sounds like a really great product. And there’s certainly a lot of benefits, but I’m curious, there’s other ways for investors to get these precious metal exposure in their portfolio.

And we’ve had people talking about the difference between ETFs, something like GLD versus physical ownership versus, you know, through some custody, some other custody. Physical ownership for you, but I’d be curious to get your thoughts on other ways to get this, these precious metals exposure in your portfolio.

Chris: [00:34:24] Okay. So ETFs obviously I would call them the w you know, one of the major competitors to what we offer, right. And just to set some things clear our products, the beauty of them is we’ve stripped out the exchange and counter party risk associated with something that is. Being securitized, like an ETF now, all ETFs are not created equal.

And what I mean by that is, unfortunately, most people do not read their papers, but if they were, they would see extreme differences. And also what I would consider levels of risk that I don’t think are acceptable, which certain. And that’s something that’s a determination, a person needs to make on their own, but in the times we’re in.

And I believe we’re in very interesting times. Also with this, the general chaos that is kind of unfolding, you know, that’s where something like gold will also shine. So I think if you’re going to take a position in it, you know, really do your research, you know, they’re expedient. ETFs. They are, if you pressure your wealth advisor for, to go into gold, it’s the easiest way, because you know, all right, it’s another exchange rate product, but you know, they, they are competitors, but so if you go that route.

Then look at which one you’re going to use. Now they’re generally full just into gold and silver. There are some that you can do by Playdium or platinum. No one has done anything like that. Like we’ve done with the PMC ounce, not just from the, the physical construct of it, and the fact that we stripped out the counterparty risk, but also this logical weighting where it’s a diversified portfolio of precious metals within each PMC ounce.

So from that perspective also, I believe we’ve we, we brought more to the table. For investors. So, you know, you can try to construct something using NATF you know, buying with different metals. There’s not many choices when it comes to just platinum and palladium. But it’s there. And I would also share this bent the unique thing about the metals or it’s one of the only assets you can truly own.

Right? Even the other commodities you can say I’m going to participate in the commodity market like oil. But the point is there are none you can actually own, right? You can order, you can buy, you know, publicly traded companies that are operating companies like Exxon, you can buy futures, contracts, or options, but you’re not going to take, you know, a silo of oil in your backyard.

Right. So, because of that unique benefit, I don’t, I think it’s best for investors to realize you do you that’s part of diversification in your portfolio. Do you, you know, when people talk about diverse line between bond stocks and commodities, you know, there’s also things like exchange traded, exchange, traded, non exchange traded, right?

That, I mean, when we talk about truly diversifying for what may come that needs to be considered. So I would say, you know, the only. Asset that really allows for that is precious metals. Now we can also say real estate. Real estate is great. It’s not the easy investment that is championed, right?

It, it there’s a lot of costs to it. It’s completely non divisible. Right. And now when you’re learning, when people thought you could never lose in real estate, in New York and downtown Philadelphia and such. It’s not so much the case, right? So it’s not it’s that real estate. Isn’t good, but it’s not a hard asset.

The way the metals are, the metals are portable, the diverse they can they’re divisible. You can actually take them into your possession. I will even take the argument. I didn’t mean to digress, but I I’d love. To really talk things through. Do you really even own real estate? I submit you don’t. As long as your real estate can be taken from you, if you fail to pay taxes to the local municipality or city, I submit you don’t really own it.

You know, you’re using land that you do not really own. So, you know, great. I know that a lot of money can be made in it, but it doesn’t have the ease of trade transparency, liquidity that the metals have. So again, yeah. ETFs are alternative. The other alternative across mining shares. I believe that we spoke earlier, right?

You’re a fan and they are, they’re good, but they’re not a substitute for the physical metals. Right. They are still operating companies and, you know, we know that they can be. Serve as a leverage play, right? If they have big reserves under the ground and the metals go up, and those, those reserves at a certain price, you have a leverage play there, but you also have location problems with possible nationalization.

You have labor problems and such again, it doesn’t mean it’s not a good investment, but not to conflate owning physical metals is not owning a mining share is not owning an exchange traded product. So.

Ben: [00:39:12] Okay. Yeah. Great information. I think it’s very important to think through all of these things when making these investment decisions, because there’s pros, cons of both, right?

If I just want to quickly swing into a palladium trade, it’s pretty tough to beat these ETFs, but you know, longer-term holdings, physical ownership. These are clearly some of the benefits of going a different route would offer. Hearing the word like leveraged play and physical ownership, transferability divisible and then, you know, conference skateable I can’t help, but to ask you on your thoughts on digital equivalent of these sorts of things.

It’s not quite. Physical or physical, tangible something I can grab onto, but it’s something that is unconference skateable that I can remember some words in my head and carry with me. It’s this is being recorded on January 7th. Bitcoin is touching. $38,000, which is just crazy bonkers. I mean, there was up like 60% just in December.

I’d be remiss if I didn’t ask you your opinion on the digital equivalent, perhaps of these precious metals, something like Bitcoin.

Chris: [00:40:19] Okay. So my position would be, they are quite obviously fascinating what’s happening in those markets. They are being accepted obviously by a A lot of individuals as a alternative investment.

I will not say, I think it’s very incorrect to call them the new gold. They’re very different items. I actually believe they are better served as two additions to a portfolio, not one versus the other. There is getting a wider acceptance of the metals. I know personally from our business, that institutionally they’re being you know, they’re starting to get more diversification and Esther interest, which obviously can only be good for them.

I do believe so. There, there are, there are. Risks to them that are easily overlooked because you can get caught up in the euphoria much, like when we talked about the ed, the electric vehicle, you know, the zealots of a Tesla that right. Everyone’s going to have an electric vehicle next January 7th.

There’ll be no internal combustion engines. That’s not going to happen. They will, the Bitcoin will not eliminate the precious metals market. Obviously especially not the commodity ones, but just really gold because that will be its competitor. Gold will, will be here. The amount of, I would, I would look at it from this positive perspective, then I’m not quite sure of where the digitals are going only because of possible regulatory issues.

Right. And that’s a wild card that cannot be. Ignored. I mean, governments do not want someone competing with them as a form of money. Right. And if the cryptos look like they’re encroaching on that too much, I would find it hard to believe there. Isn’t going to be an official response. And I’m not one to believe that the internet is so free that you can just circumvent the powers that be.

By using the internet. I think that’s a lack of understanding about how the functionality of how the internet works. Right. And what can be stopped. So that said, I see investors taking positions and I think that’s I’m, I’m not a, I’m not a detractor. The market is what it is. I could see starting to build a position in the cryptos because.

This could be a very real asset class going forward, but I think it’s a mistake to take the zealots position that it’s the new gold and gold has done. Not the case at all. Again, I think the real, I think. The flip side should be the, or a different position. I think it should be more of a threat to the stock market.

The stock market is very overvalued in a lot of assets, a lot of money in companies that have not only do they not make money, but don’t even have anything in their business plan where they ever turn a profit and the, the, the vast amount of money in. Unpayable debt that people own, right. And stocks. And if you look at the size of the gold market and the Bitcoin market, I look at it this way, you have this much of overinflated assets, and if just a tiny bit of that comes, there’s more than enough to come really propel golden Bitcoin.

To tremendous numbers. So I think it’s having a very small view of, or understanding the market to think that the amount of, of money looking for alternatives to are probably very big bubble markets, like, you know equities and fixed income to think that there’s not enough for both Bitcoin and gold.

Ben: [00:43:51] Yeah. I, I agree with a lot of those. I mean Bitcoin’s at half a trillion dollar.  Gold’s like $10 trillion. It’s just tiny. And, and. The valuations are super reasonable on all asset classes right now. It’s I think at this point, like Bitcoin has gotten too big and too important to completely not own any Bitcoin.

I mean, you put 1% of your portfolio in it. If it goes to zero, like a big whoop, right. And if you’re. Doing this as a levered, like gold play, and maybe you have 5% in gold as well. Like, well, one of them probably will do okay. And offset the loss of the other. But the chances of this thing, just overtaking gold market, you know, it’s a 20 X from here.

Does it go in a straight line? Probably not. Does it pull back to a half of where it is right now? Probably, but like it’s a, it just seems, seems like too great of an opportunity just to, just to sit on the sidelines at this point.

Chris: [00:44:48] And I concur. Right. I concur. That’s why I said it’s not one versus the other it’s I would say the it’s Bitcoin, is it an emerging asset that needs to be seriously considered and I in a proponent to start to build a moderate, modest position in it.

And as you said, if 1% of a portfolio went into it, And it went to zero, which is not likely that what’s the difference of having, you know, 10% in the stock market or, you know, 50% of the stock market and it going down 1% or under 2%. So, you know, you, you, you wouldn’t call that the end of the world. So again, you know, that’s why you have to.

B understand diversification and and look at things like it wouldn’t be a total loss. If Bitcoin went to zero, you look at the CA the whole overall portfolio. Right. And that’s what intelligent portfolio management is. So I agree with you, Ben.

Ben: [00:45:43] Yeah. just backing up a bit.  Physical ownership, these things, precious metals, we’ve made the bull case for all of them, but across investors’ portfolios.

These things are very extremely under owned under allocated. And this is partially as a result of every other asset being pumped to the gills. But I mean, why is this investors don’t understand the prospects of owning things like this? Like what, in your opinion, why, why are these assets so under owned when compared to other assets?

Chris: [00:46:17] So it is, in my opinion, it is a clear case of just, I mean, training Look, the financial services industry is a massive industry. It’s there to sell, right? There’s a reason they call themselves ideal at right. Their job, their goal is, you know, have you ever heard a time when you should not be buying more stocks?

Right. I mean, every news is good. You know, every, the news is always on positively to buy stocks. Right. And they take the same story. And so the point is, investors are basically. In all honesty have been drummed in their head stock, stock stocks for the long run. I mean, people will claim they do their homework, they claim no-no, you know I don’t want to make it such to the point about peer pressure, but you know, when they go to the barbecue with their friend or out for drinks, everyone wants to talk about what their, their we’ll end it together and a stock market.

Right. And then the guy says, well, I’m in gold and they look at them like, gee, that’s weird. Right. And the point is, if they were truly honest, And the other, the guy who went into gold in 2001, who’s up 500% by the guy who bought the index fund, who’s up 177. Who’s really the smart guy. But the point is people are hurt.

That’s a herd mentality. This is why people buy low and sell high. That’s why it takes a lot to step away and say, you know, I understand there’s an agenda. I understand the hurt is never there. The hurt does not win. Requires in some respects, investing is somewhat of a zero sum game. Right? It’s moving there’s winners and losers.

Right. And, and that’s just a fact, right. And, and, you know, affirm or advisors could say anything they want to the investor and their job is to keep them in exchange traded products because that’s what their book carries. Right. Investors need to. Basically, you got to do it on your own, right? You need to do your research.

You need to listen to alternative voices like yourself and then have the you know, basically to say, you know what, you’re right. This makes sense. The, you know, a, a normal companion question is how much should be in the metals. I’m not going to give a number. The people will give a number, but just because it’s nice textbook way of saying here’s a way to see, you know, CYA.

I will just say this. If you’re buying say gold or precious metals to be, to hedge a portfolio and, and also realize the games that are big from because of the fundamental that are going to probably drive to continue to drive these metals, that position needs to be at least material enough where it helps you.

I mean, w if a person goes, I have 1% of precious metals have 99% in the stock market, right. In 2000, and you know, after 2008, right. When the stock market was getting hammered and gold was going up, that would be great. But you know what, 1% isn’t going to carry 99% moving in the opposite direction.

Right. I didn’t, I did not say any numbers. I just said, you need to at least have a material enough position where the items that you’re using to, to offset. Some of your others can materially help you, right? Again, that’s where I’m not an investment advisor, but things to consider.

Ben: [00:49:23] No great, great advice.

Hashtag not financial advice, but great. Good. Thank you for that.

Chris: [00:49:30] Those two guys.

Ben: [00:49:31] Yeah, exactly. Chris. Hey, I really enjoyed this conversation and really appreciate you spending all of this time today and talking us through these precious metals in general, and specifically about palladium and platinum.

I think these are very important. Other assets. I’m obviously bullish on alternative assets.  For people to take a look at, so where do you want to send my listeners? Where can they find out more about you or Neptune, Neptune global. Where do you want to send them?

Chris: [00:49:57] Okay. Well thanks Ben. And it was a lot of fun to be on your show.

I would encourage everyone to start off with our website, Neptune global.com. Obviously there’s. You can contact, we have phone numbers and you can use obviously the email contact, but also we have tools there, which I think are helpful. As I mentioned before. If anyone’s interested in the PMC ounce, we have the PMC calculator, which when you scroll down on the homepage, it lets you go through mock trades and you actually see what you’re owning.

That tool has been very helpful because sometimes just, you know, verbally trying to explain it is a, is a little difficult. We have a page on products that also gives a written description of the PMC ounce, but the calculator kind of really brings it altogether. Also you’ll see all the different products we carry and we are a full service dealer.

We are a platform company, but we also function as a dealer with all the services and products that traditional ones offer. And you know, and we work with investors from, you know, moderate investors, small to moderate, to very large institutional and family office. So we, we run the whole scope and the gamut and you know, again, appreciate the opportunity to kind of talk hope, you know, we can help people to understand.

The metal is a little bit better and see if it’s something that’s going to benefit them.

Ben: [00:51:11] Awesome really appreciate it. Chris, have a great 2021. We’re off to a great start so far

there you have it. Thank you for listening. Really appreciate your support. Show notes, transcript links, and more can be found on our [email protected]

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Ben Lakoff is an entrepreneur and finance professional. He has developed strong global finance experience through 10 years of international assignments in the US, Brazil, Afghanistan, Southeast Asia, Czech Republic and through the award of his Chartered Financial Analyst (CFA) certification.