Western Standard - Trump, midterms, and the 'Coming Market Sugar Rush'

00:00:00.000 Good evening, Western Standard viewers, and welcome to Hannaford, a weekly politics show.

00:00:21.560 I'm Nigel Hannaford. It is Tuesday, December the 23rd, and my guest today is Peter Pijovic,

00:00:28.400 Calgary-based Senior Portfolio Manager at Wellington Altus Private Wealth Canada.

00:00:34.260 Welcome back to the show, Peter.

00:00:36.660 Good morning, Nigel, and thank you for having me on once again.

00:00:39.780 And as always, it's a pleasure.

00:00:41.320 Well, it's a pleasure for us too, and we learn so much.

00:00:44.620 Peter, this time last year, you said get into hard assets and stay there.

00:00:49.020 Another time you said that, you could buy gold for $2,600 U.S. an ounce.

00:00:53.680 12 months later, what was it this morning on the market?

00:00:58.400 43 50 around there so you're looking up at screens there this is this is like the situation room in

00:01:06.600 the white house you can tell what's going on anywhere in the world oh man i hear a news

00:01:13.200 gathering organization we just envy you that anyway you gave pretty good advice advice there

00:01:18.780 that was what uh 60 percent uh gain in 12 months yeah 60 percent uh-huh peter what else have you

00:01:26.680 got that'll give you 60% in 12 months. Can you explain for us what just happened here?

00:01:34.680 Thank you, Nigel. So we live in what's called a debt-based monetary system. And what that means

00:01:41.380 is that the system creates new money through the issuance of new debt. And most people don't quite

00:01:48.320 fully understand that. And whether that new money is created by the central bank, say Bank of Canada,

00:01:53.960 or at the commercial bank level, say RBC, BMO, TD, et cetera,

00:01:59.400 the end result is that the money is created through debt issuance.

00:02:04.380 It doesn't grow on trees.

00:02:06.020 It's not completely pulled out of thin air.

00:02:09.000 You create a dollar, you need to create a dollar of debt.

00:02:12.340 That's how it's done on very close to a one-to-one basis.

00:02:16.360 So what that means is then the more debt that is created,

00:02:20.700 and of course we all know we have lots of that right now,

00:02:23.060 the more money is created and the more money that's created the less our money is worth i.e

00:02:30.380 its purchasing power through basic dilution just creating more of something it's going to be worth

00:02:36.420 less and then the less that our money is worth the lower its purchasing power and we all know

00:02:42.400 that just by going to the grocery store or trying to maybe go buy even a new car and thus by default

00:02:49.740 the more assets like gold or silver are worth in dollar terms when priced in weaker dollars,

00:02:56.920 if that makes sense. Well, if I put it like this, that it's not that gold has risen,

00:03:05.920 it is that the dollar has fallen. Is that what you're saying here?

00:03:10.320 Yes, especially when averaged out over years, if not even decades. It shouldn't be taken

00:03:16.820 overly literally on a one-for-one basis, like i.e. for every 10% moving gold, the dollar drops by

00:03:22.580 10%. Think of it, you need to smooth that out and average it out over years and decades. But short

00:03:28.000 answer is yes. So I'm now thinking of some of our viewers who may be thinking, well, this sounds

00:03:35.140 like a good thing. I'll take 60% return and they're getting ready to call their brokers.

00:03:43.160 uh but you know historically gold hasn't done 60 increase every year what was different about 2024

00:03:53.320 so it's it's a catch-up so um essentially you know you can go through years uh where an asset

00:04:02.620 is possibly underpriced or even overpriced and in the case of gold uh based on the amount of

00:04:10.100 new money through new debt. And again, lots of money, lots of debt was created during COVID,

00:04:15.620 for example, all over the Western world. And at some point, you know, when one looks at a chart

00:04:22.400 or looks at some statistics out of their local central bank, and they see how much money was

00:04:26.840 created, you basically have a moment when you say, I have to do something, and I need to take

00:04:33.560 some of that newly created money which there's lots of and put it into a long-term solid store

00:04:40.560 of value like gold to preserve your purchasing power going well into the future and that's the

00:04:46.340 key it's you do it to preserve your purchasing power because gold is actually a bit of a constant

00:04:51.560 in terms of purchasing power over not just years but really generations

00:04:56.440 all right well the that does lead to a question about silver that is also done very well but

00:05:07.600 silver more so than gold i'm led to believe has many industrial applications what are the levers

00:05:13.800 and mirrors there yeah so silver is a lot more complex uh than gold um gold is a like i said

00:05:21.320 um it's it's probably the best or if not the best one of the best stores of value you can find

00:05:27.640 anywhere um and uh and silver is very good as well except it's a lot more volatile it's it's a lot

00:05:34.520 more um uh tied to its industrial demand because there is a very heavy industrial demand for silver

00:05:42.120 and it tends to go through bigger uh bigger bubbles when it's in a bubble state and also

00:05:47.640 bigger crashes, you know, when it's in a crash state. So what's happened is actually gold has

00:05:52.360 led silver now for many, many, many years by a wide margin. And just recently this year,

00:06:00.020 silver has begun to catch up. It still hasn't caught up to gold in terms of where its current

00:06:05.380 valuation is at, but it's had a major catch-up year this year, which is what you've witnessed.

00:06:12.180 Well, now, in your business, one of the stock products that you have to offer the investor

00:06:17.020 is government bonds.

00:06:21.220 I suspect I know what you're going to say,

00:06:23.820 but look, you just explained that silver is volatile.

00:06:27.960 We know that gold is self-evidently on a catch-up,

00:06:31.980 but is it going to go to a new plateau?

00:06:35.120 What do you say to people who say,

00:06:36.860 no, I still like government bonds?

00:06:39.540 Yeah, so I believe you may have a chart

00:06:42.900 of the last 26 years now,

00:06:45.800 just about since the beginning of the decade uh the relative performance of government bonds uh

00:06:50.840 as measured through u.s treasuries and in this case i'm using um actually it's not that one there

00:06:55.680 it's the one but there's only two lines um so um i don't know if you can that's this is like yeah

00:07:03.400 that's the one right there um like we can talk more about the other chart too but uh you know

00:07:08.920 it's hard to see there but at the very bottom there that's the performance of government bonds

00:07:13.780 and the yellow line is the performance of gold and you asked the question earlier about I believe

00:07:21.340 about why you know say China is you know buying gold and other central banks are buying gold as

00:07:27.200 a reserve asset as opposed to government bonds and basically a picture says a thousand words and

00:07:33.300 all you have to do is look at that picture and you pretty much answered your question as to why

00:07:38.100 and central banks would be doing this.

00:07:41.060 So what is the timescale?

00:07:43.580 Like how many weeks, months, years does that chart represent?

00:07:47.680 That's just about 26 years.

00:07:49.600 So that's from January 1st, 2000, right at the beginning of the decade.

00:07:53.920 Yes.

00:07:54.440 Well, okay, this actually takes us back to an earlier question.

00:07:59.260 That yellow line is the price of gold.

00:08:02.360 26 years ago, it was, you know, I can't even read it on the chart.

00:08:07.280 it's so low down, but clearly

00:08:09.400 it picked up and then

00:08:10.780 it was about $300 or $400

00:08:13.720 roughly.

00:08:15.560 And now it's

00:08:16.940 on its way to Mars over there

00:08:19.520 at the right hand.

00:08:20.820 Right.

00:08:23.580 As you track that through

00:08:25.480 the, let's see,

00:08:27.380 26 years ago, all year 2000,

00:08:29.600 so you have 9-11, you have

00:08:31.640 the 2008

00:08:33.720 recession,

00:08:36.140 which

00:08:36.940 was actually over very quickly by the time we started taking action on it it was already the

00:08:43.300 natural correctors were already in there but what triggered that very sharp increase that you see on

00:08:51.580 the right hand of the chart uh most recently so um i guess so on the very right hand that would be

00:08:58.540 basically post-covid so uh you can kind of see where 20 there's 20 uh 2020 is right kind of

00:09:04.780 three quarters of the way over. And, um, and, uh, and then basically a significant amount of debt

00:09:11.480 was created over the past few years, whether it's the, you know, the Trudeau government to Canada

00:09:15.400 or the Biden government in the U S and, um, and then essentially we have an upwards correction

00:09:21.440 where, uh, the, uh, the value of gold looks like it's going up, but really I would argue that

00:09:27.760 what's really happening is that the purchasing power of the dollar in, and its ability to buy

00:09:33.920 the gold has corrected to the downside to basically make up for all the money that was

00:09:41.260 created over the last five years. Well, now, the federal government's response in its last budget

00:09:46.820 was to create more debt. Right. What was it, 200, a promise of nearly a quarter of a trillion over

00:09:53.660 the next four years? Right. Now, that's just Canada. We're not a huge player on the world scene.

00:10:00.200 I mean, we matter, but we don't matter that much.

00:10:03.440 Or do we?

00:10:06.320 It's not just a Canadian phenomenon.

00:10:08.780 It's obviously happening in the U.S. and in the U.K.

00:10:11.200 and essentially all over the world,

00:10:13.040 where there's so much debt in the system

00:10:16.580 that's creating a significant amount of interest.

00:10:20.820 And that interest is becoming colossal.

00:10:23.460 So, for example, in the United States,

00:10:24.940 the interest on the debt in the United States

00:10:27.200 has now exceeded $1 trillion.

00:10:29.420 dollars, which is more than the totality of their military budget. If you can just imagine how big

00:10:35.660 the U.S. military is and the Navy and the Marines and the Army and the Air Force, all that spending

00:10:40.980 doesn't amount or equal the spending simply on interest. And what most people don't quite

00:10:46.960 understand is that to create the money to pay that interest, which in this case is over a trillion,

00:10:54.100 not including personal debt or corporate debt, of course, then the number will be much higher,

00:10:58.320 um the that amount of money needs to be created to pay that interest over the course of that year

00:11:07.020 um and uh and and and and that is done through issuance of debt so the more debt equals the

00:11:15.860 more interest which equals more money creation which equals more debt which then equals more

00:11:21.160 interest and on and on and on brince and repeat um it essentially creates a bit of a vicious cycle

00:11:27.140 Well, it certainly does. And speaking particularly of Canadians who are watching their grocery prices soar, I mean, the government tries to tell you that's not so, but anybody who actually visits the supermarket and has to present the credit card, used to be the debit card, now it's the credit card, right?

00:11:55.820 right so anybody who goes through that transaction on a weekly or daily basis knows that what the

00:12:04.220 government is telling you is very i was going to call it propaganda but let's just be generous and

00:12:10.460 say that they present the story in the best way they can yes very good right okay so we know that

00:12:17.580 stuff that you actually have to have yes is going up sharply uh you're eating steak today

00:12:25.180 what are you going to be eating in in a year or two years time meanwhile you still yeah meanwhile

00:12:32.720 um what is is there anything you can do to protect yourself yes yes there is um so for starters you

00:12:44.800 know have some gold uh i mean it's what the central banks are doing so this is not just a

00:12:48.700 phenomenon for um for people who buy groceries uh this is uh this is at a national level and a

00:12:55.700 country level all over the world so for example if you're china um you need to feed your people

00:13:01.020 and you need to be able to buy food into the future like wheat and so forth um you need to

00:13:05.380 buy energy to to fuel your economy you need to buy metals and minerals again to fuel your economy

00:13:10.860 um well how are you going to buy that yeah you have to store your wealth somehow

00:13:15.020 and their go-to of late has been to store their wealth in gold. Why? Because gold over the

00:13:24.540 generations is a monetary constant and they know that if they store their funds in gold that that

00:13:32.300 will afford them the ability to buy the oil, to buy the food, to buy the metals and minerals well

00:13:38.260 into the future. Whereas if they store their wealth in money, i.e. treasuries, nominally it

00:13:45.900 may look like it's not moving or secure or not doing anything. But in real terms, real terms

00:13:51.860 meaning what you can buy after monetary inflation has taken hold of your money, you know, in real

00:13:58.360 terms, that wealth would decline. And I'll raise that quick point here with regards to the

00:14:06.060 dozens and dozens of articles I've seen the last few months

00:14:09.780 out of Canadian news media outlets basically defending the Bank of

00:14:14.120 Canada's decision to rid itself of all gold

00:14:18.140 reserve assets back in

00:14:20.980 leading up to 2015 when Trudeau was elected.

00:14:26.420 That includes actually Mark Carney when he was the governor

00:14:30.140 of Bank of Canada. And they're defending it as

00:14:34.140 if that was somehow a good thing or you don't need gold.

00:14:36.900 And, and, and I would say that virtually every other central bank in the world,

00:14:41.820 major central bank would disagree with them because their balance sheets look

00:14:45.780 much different and they own a lot more gold.

00:14:48.200 Whereas Canada in this case owns not.

00:14:52.740 Well, we could have a really good conspiracy theory discussion on that.

00:14:57.520 Peter, perhaps right now.

00:15:02.880 You know, I have a friend who is very much, he's your original gold bug.

00:15:11.100 Of course, he's looking pretty good now, but the thing is, it breaks his heart to actually sell and cash in.

00:15:18.080 And so he still lives like he did 20 years ago.

00:15:22.060 Anyway, that's a nice problem to have, which were us.

00:15:26.420 Look, there are bigger pictures at play here.

00:15:29.420 And I want to turn your thoughts to the American midterm elections.

00:15:33.740 I know we live in Canada and what they do down there, gosh, we don't even like them

00:15:37.320 anymore, do we?

00:15:38.040 So, you know, who cares?

00:15:39.320 Well, I think we need to care and I think we need to speculate if we are interested

00:15:46.320 in wealth preservation about how the US government may behave in the next year as the ruling

00:15:54.280 Party tries to make things as good for themselves as they can be on November the 3rd, when the

00:16:03.960 midterm elections are held. Unpack that for us from your perspective.

00:16:10.740 Yeah, very good question, Nigel. So, I mean, if you look at history, I mean, there's obviously

00:16:16.700 many of these midterm election cycles that have happened in many, many years past. And there's

00:16:22.980 A pattern certainly emerges during that year, which is now coming up in 2026, early November.

00:16:31.940 And the pattern is something like this.

00:16:34.040 The incumbent party wishes to win, and they know that their odds of winning decline precipitously

00:16:42.540 if the economy is bad, if we have high unemployment, if the stock market is down, and so on.

00:16:51.260 that people will be unhappy if they're unemployed and if they don't have money in their pockets.

00:16:57.640 But the opposite is also true if everybody's got a job and if the stock market's up and people have

00:17:05.340 money in their pockets and Las Vegas is busy and thriving. So typically the playbook would suggest

00:17:13.220 that there will be a lot of money created over the course of the next number of months,

00:17:18.760 Um, you know, quite possibly interest rates, you know, may come down and the stock market

00:17:25.560 may go up and, uh, just general money supply would go up, um, you know, with, um, with

00:17:32.780 again, further debt issuance to essentially, uh, make everything look about as good as

00:17:38.780 it could look, you know, come November.

00:17:40.880 Uh, and of course, as we've just discussed, you know, more money creation equals more

00:17:45.660 debt equals more dollar devaluation, which probably means assets like gold should be higher

00:17:53.940 at this time next year, but probably not just gold. You know, you can also, you know,

00:17:59.680 extrapolate that into the stock market and other assets as well. Well, okay. I'm not going to ask

00:18:09.160 you to speculate how much the stock market will rise or gold or silver or anything because quite

00:18:17.520 frankly i don't think that you but at this time last year when we talked would have predicted what

00:18:24.980 has happened during i don't think you'd have been brave enough to predict how thing the increases

00:18:30.240 that we've seen in 2025.

00:18:33.260 So who knows what 2026 will bring.

00:18:37.240 However, there is also the possibility of disaster.

00:18:45.620 What could go wrong?

00:18:49.760 Although at this point, I would say it's not likely.

00:18:54.960 What could go wrong is very simply a recession.

00:18:58.240 And there is some evidence of this slowdown occurring.

00:19:04.100 There has been a recent trend of jobs numbers and jobs data in the U.S. and in Canada as well being revised downwards.

00:19:13.220 So they would post a certain number, say, for August.

00:19:16.060 And then a few months later, they go, nah, that was wrong.

00:19:18.580 You know, it's actually much lower.

00:19:19.800 And then they post a certain number for September.

00:19:21.720 And a few months later, they go, nah, it's actually way lower than that.

00:19:24.520 We actually start to lose, start to shed jobs.

00:19:27.240 So, you know, this really cannot continue, you know, into 2026 if the incumbents wish to be re-elected.

00:19:40.080 So I would expect that there would be a tremendous effort, you know, put forth over the next number of months to reverse that,

00:19:49.000 because you don't want a high unemployment going into an election.

00:19:52.760 I wouldn't want to be cynical, but when you deport or persuade people to leave the country,

00:20:00.520 two million of them, wouldn't that be a positive correction in employment numbers?

00:20:08.260 Which then might give you some evidence towards motive over the course of the next few months.

00:20:16.840 Now, again, these things are announced, but they really take months, if not even years, to come to fruition.

00:20:22.760 So the deportations would, on net, improve employment numbers over the course of the next number of months,

00:20:35.220 which maybe then tells you that had there not been deportations over the last few months

00:20:40.840 and the jobs numbers are still being revised downward,

00:20:44.120 that if those deportations did not occur, the jobs numbers would have been far worse.

00:20:48.700 I mean, I think President Trump was motivated in the first place just by a simple fashion that

00:20:55.420 if you've got to have a country, you've got to have a border. And a lot of people felt the same

00:21:00.540 way. So the political drive to deport was pretty obvious. But I wonder if that's even a factor in

00:21:11.100 their thinking, that by removing people who shouldn't be here anyway, you actually do

00:21:17.020 create or leave more jobs open for people who want them while i don't have yeah i mean i don't

00:21:24.220 have a direct answer but it's well you know that that's that trillion dollar debt that uh i i think

00:21:30.860 you're all to worry about like how does that go wrong and ever leave everybody with uh with uh

00:21:37.020 sad sad faces and blushing at their incompetence there the the debt in the u.s at the government

00:21:46.540 level is $38 trillion currently with interest payments in excess of $1 trillion. So that is

00:21:52.600 certainly a problem, but they do have multiple solutions that they could enact or maybe are even

00:21:59.100 in the process of enacting that we just don't know about yet. But one of them could be, for example,

00:22:04.880 what they've done four other times in history, and that is a gold revaluation. And that's a fairly

00:22:11.560 simple transaction. And they've done it four other times. Like I said, it was 73, 72, 1934,

00:22:19.700 and I believe 1834, if I'm not mistaken. And if the US says they have 8,100 tons of gold,

00:22:28.100 and I'm just going to assume for the second that they do, but obviously there'll be viewers in

00:22:33.840 your out there that may doubt that. But anyways, that's what they say. If that gold,

00:22:41.560 8,100 tons of gold is currently on the books at the treasury department at $42.22 an ounce.

00:22:49.320 Whereas the current price of gold, as we just discussed, is well over 4,300 an ounce.

00:22:55.000 Certainly doing a gold revaluation where they revalue that gold on the books at a higher price.

00:23:03.560 And then one may then speculate, would they revalue it at 4,300 or where they do what they

00:23:08.440 did in years past which is actually go much further and and and revalue it at a much higher

00:23:13.480 level than what it's currently uh trading at to say 5 000 or maybe 10 000 an ounce or more

00:23:19.320 and um the reason they would do that is really quite simple we just were discussing earlier how

00:23:26.360 money is typically created through debt issuance but not in this case essentially if they revalue

00:23:33.080 it at a higher price from $42.22 an ounce, that's $42.22 an ounce, they could create

00:23:42.440 money essentially out of thin air through gold, backed by gold, to the tune of a trillion

00:23:49.580 dollars or trillions of dollars if they used a higher price.

00:23:53.680 And if they created trillion or more dollars, they can use that money to pay interest on

00:23:59.800 the debt or possibly pay down the debt and essentially, at least to some extent, get

00:24:06.260 themselves out of a pickle, at least for a while, until the next pickle.

00:24:11.220 Well, if they revalued gold like that, there's a lot of people who would be, would be, have

00:24:16.960 their own gold revalued, I guess, couldn't hurt.

00:24:20.600 That's right.

00:24:21.240 And that's maybe a reason why they might be hesitant to do it.

00:24:24.140 They're not maybe worried about the gold, say, that I have in my business, say, for

00:24:28.160 example, being revalued upwards, I think they're possibly worried about, well, if they revalue

00:24:32.900 gold, that means, well, China's got a lot of gold and Russia has a lot of gold and India has a lot

00:24:37.620 of gold and Europe has a lot of gold. So basically everybody else out there all of a sudden, you know,

00:24:43.240 becomes very, very wealthy. And there might be some interests in the United States that

00:24:48.820 might be reticent to allow that to happen. So we don't know. I'm not saying that this will happen,

00:24:55.280 uh but it certainly could happen and um and there's precedent in years past uh where it's

00:25:00.480 happened before peter we're almost out of time uh i'm going to give you the last word as we look

00:25:06.640 forward to 2026 are you optimistic i i am for the reasons we uh we just discussed so um you know

00:25:17.120 we're going into a midterm election year cycle. Typically, that bodes well for risk assets. It's

00:25:25.440 not a guarantee, of course. There's no guarantees in life that risk assets will perform in 2026.

00:25:32.000 But at this point in time, given the incentives, let's just say, to win that next election,

00:25:38.800 history would suggest that risk assets typically perform well. Where that might reverse actually

00:25:45.920 might be post midterms and going into 2027 where if we look even further ahead that typically

00:25:55.840 could end up being a problematic year if what we just said about risk assets in 26 comes true

00:26:04.320 okay well we'll leave it there and you can expect us to ask you back every six months to just

00:26:10.160 Just check your predictions anyway.

00:26:13.720 Ladies and gentlemen, that was Peter Piovic from Wellington Altus

00:26:19.960 talking about the economic future of Canada, the world, and the United States.

00:26:25.860 And as he goes into Christmas and the new year, he is cautiously optimistic.

00:26:32.460 That's right.

00:26:33.080 Peter, Merry Christmas.

00:26:35.760 Merry Christmas to you, Nigel.

00:26:37.060 Thank you.

00:26:37.860 For the Western Standard, I'm Nigel Hannaford.

00:26:40.160 Music

Western Standard - December 24, 2025

Trump, midterms, and the 'Coming Market Sugar Rush'

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