①Tom Lee, co-founder and head of research at Fundstrat Global Advisors, an American investment firm, outlined a 'Golden Black Swan' scenario in which the 'disruptor' of the global financial system is not the Federal Reserve, but Elon Musk; ②According to Fundstrat’s research, gold prices may have already 'peaked.'
Cailian Press, February 6 (Editor Huang Junzhi) In a dialogue exploring the intersection of traditional finance and futuristic technology, Tom Lee, known as the 'Oracle of Wall Street' and co-founder and head of research at Fundstrat Global Advisors, an American investment firm, described a wild 'Golden Black Swan' scenario.
In this scenario, the 'disruptor' of the global financial system is not the Federal Reserve, but Elon Musk.
As one of the most accurate forecasters on Wall Street and a steadfast bull, Lee advised investors to buy stocks during the pandemic-induced downturn and accurately predicted the major U.S. stock market rally in 2023. In a recently aired podcast episode, Lee stated that gold is not only a 'Lindy Effect' asset, but also, in his view, tied to a 'demographics' narrative linked to nostalgia.
In the field of investment and commerce, the 'Lindy Effect' refers to the idea that long-established companies (such as Coca-Cola) tend to be more enduring than new ones because their business models or products have withstood the test of time. In business, brands or organizations that align with the Lindy Effect are often more stable and do not need to frequently prove their value.
In addition, Lee identified the risk of a 'Black Swan' event where the world's richest person, Elon Musk, discovers a new 'gold-bearing asteroid,' potentially becoming the governor of the world's central bank.
Demographics and Gold
Lee argued that the price of gold is 'likely related to demographic trends.' He noted that Fundstrat conducted extensive demographic research and found that 'preferences shift across generations.' For example, sales of recreational vehicles (RVs) peak approximately every 50 years. He mentioned that RV sales reached a peak during the pandemic, adding that the last time such strong sales occurred was in the 1950s.
He said, 'Children don’t buy what their parents like, but they do buy what their grandparents liked. Gold was indeed a significant investment for the Baby Boomer generation, while Generation X shifted towards hedge funds and alternative investments.'
Lee stated that the scale of gold is comparable to that of the stock market, and data supports his claim, with the total above-ground valuation of gold estimated between $29 trillion and $34 trillion, compared to the combined market capitalization of the Mag 7, which is around $21 trillion.
"By the way," he added, "all the gold in the world could fit into a single swimming pool."
Is Elon Musk the 'Black Swan'?
Lee further elaborated that gold is a 'Lindy Effect' asset: its function as a store of value has been recognized for many years, and thus it continues to be accepted as such today. 'What would disrupt this? That’s where Elon Musk comes in.'
He further explained, 'The amount of gold underground is a million times greater than the amount above ground, and most of the gold on Earth cannot be mined.' Lee believes that if the price of gold becomes too high, it would create abnormal incentive mechanisms.
"For instance, the 'Mag 7' would definitely enter the gold mining industry directly, right? Because mining gold is more valuable than anything else, why not?" he added.
Lee continued to point out that another key risk is that all gold 'comes from outer space,' meaning that gold originated from meteorite impacts on Earth.
Scientific studies show that the gold on Earth was not entirely produced by the planet itself but was brought here by meteorite impacts millions of years ago. More precisely, the gold on Earth primarily originates from celestial events in the universe and was delivered to the Earth's surface through subsequent meteorite collisions.
In light of this, Lee stated that it means space companies might discover more gold in outer space.
"SpaceX might carry out a Mars mission and encounter an asteroid rich in gold. If Elon Musk... possesses all the gold, he would become the new central bank," he added.
Peak Gold Price
Anyway, Lee emphasized that, according to Fundstrat's research, gold prices may have already 'peaked.'
Fundstrat analyzed the relationship between gold and stock market capitalization over the past 100 years and found that both typically reached a 150% increase before retreating. The company also noted that on January 30, the price of gold fell by 9%. A review of historical data revealed that there were only three instances where gold experienced a single-day drop exceeding 9%, and all three marked the peak of gold prices.
"So I don't know for sure, but if history is any guide, it may have already peaked," he said.
Editor/Rocky
