The Coming Era Of Rate Cuts: How Will They Affect Asset Prices? | Andy Schectman

**Adam Taggart** (0:01)
Okay, and we should be live here. Welcome to Thoughtful Money. I'm Thoughtful Money Founder and your host, Adam Taggart. Welcoming you back here for our monthly session with precious metals expert, Andy Schectman, who joins me here. Andy, how are you?

**Andy Schectman** (0:16)
Good to see you, Adam. Thanks for having me. I'm great.

**Adam Taggart** (0:18)
All right, Andy, I got to say, I love that new studio. Every time I see it, it's so professional.

**Andy Schectman** (0:24)
Yeah, it's a lot better than my office with the barking dog.
Barking dogs and the FedEx man ringing the doorbell. And it's nice. But thank you. When we brought Michelle McCorry on, we had to level up a little bit to get to her status. So I appreciate it. It's nice. It's nice to have a place to come to. You know, as an aside, since 2020, like everyone else, I was working out of my house for five years and I forgot to so much. I like actually putting on a nice shirt and going somewhere, having a purpose. So it's nice. I appreciate you saying that.

**Adam Taggart** (1:03)
All right. Well, that's good. You know, fortunately, this program forces me to have to put the collared shirt and the suit jacket on. If not, because I have worked from home forever. You folks would see a lot of-

**Andy Schectman** (1:15)
I think people would like you just as much in a tie-dye.

**Adam Taggart** (1:18)
You're very kind. Well, look, until recently, being in Northern California, that probably would have been very appropriate. Well, look, we are going to talk today about the fact that the market is now pricing in several rate cuts before the end of the- or by the end of the year, and then additional rate cuts next year. And obviously, the president is leaning as hard as he can on the Federal Reserve to have them cut. And I think Jerome Powell- he's definitely seeing increasing dissent on the FOMC committee that not everybody agrees that the Fed should still be holding pat. And so Powell is feeling increased pressure and we're seeing increased signs that the economy is continuing to slow. And that gives the Fed additional air cover to say, okay, you know what, we think maybe a cut is appropriate now. So as the odds go right now, we are going to be entering a future of rate cuts starting likely as soon as next month. So I guess first question for you is, what impact is that expectation of rate cuts having on the precious metals on gold and sober so far, if any, as you can see?

**Andy Schectman** (2:34)
Well, I mean, if the Fed were to cut rates to help growth, as we saw the unemployment numbers, the revision of the unemployment numbers were horrendous.
It's funny too, because when the May and June numbers came out, like 250, 60, 70,000 jobs created each month, the gold went down, the stock market went up, and then quietly in August, they say, no, not the 400, 500,000 that we thought we created, it's actually only about 78,000. I mean, it's something like that. It was a massive reduction. And so you're beginning to see the economy really slow down and layoffs happen. So arguably, this is what they're going to want to do. But this adds more fuel to the inflation side, especially with M2 already at a record. M2 has taken off. So when you have this happen, more inflation without boosting productivity, because I say that to you, because we see the velocity of money at all time lows. So they're trying, it's like pushing on a string. They're trying to get all this money into the system, but the economy is slowing. You can see it through the unemployment numbers. You can see it through the lack of velocity. There's a massive disconnection between the equity market and Main Street. Ultimately, this is all very positive for gold, very, very positive for gold, because you're talking about an environment where gold doesn't just go up because of the currency debasement. It goes up because almost everything else looks worse. That's just the truth of it.
And you add fuel to the fire when you say, since June 1st, the institutionals, the insiders, the traders, they've been selling between $2 and $4 billion a week in stocks. And you have all of the insiders that are selling at a 7-to-1 clip. And you have Jeff Bezos selling $6 billion in Amazon since June 1st. You have the three or four biggest shareholders and board members of NVIDIA doing the same thing and Buffett with $500 billion in cash. At the same time, you have the mainstream or you have the public, mainstream mom and pa, all-time record in equities, all-time record in margin debt, all-time record in option exposure. You're talking all-time levered, risky, all-in in stocks, greater than the great financial crisis, greater than the dot-com bubble. And the insiders are going the opposite way. Now, to your original question. So that tells me the insiders are saying, we're leaving the sinking ship right now, something's coming, and the public is the opposite, all-in. But on the metal side of things, the public doesn't have much exposure at all. But what we have been seeing month over month is extraordinary. Extraordinary in the amount of gold that's coming into this country. The people who are incredibly sophisticated know what's happening. And I want to draw an analogy to say these people typically know what's coming before the rest of us do. They are able to get the playbook. And if you look at the fact that my whole career, which will be 36 years this February, less than 1% of COMEX contracts ever stood for delivery. Now, all of the gold that's coming into COMEX, what we know of over 100 billion since the beginning of the year, and I would argue that a whole bunch more is coming in, not through COMEX. The biggest money in the world is importing gold in the United States at a level that no one has ever seen before. But more crazy than that, and I think this is a bigger indictment. And actually, you got to wonder where the hell is it going and who's doing it, who's the big buyer? I think it's the Treasury, myself, or the Fed. But with all this gold coming in, less than 1% of contracts on COMEX, once they would post, like, okay, they expire August 1st, you can take cash, you can roll it forward, or you can stand for delivery. Less than 1% ever did. Just in the first three days of the August contract, we saw over 2,160,000 ounces of gold stand for delivery, which represented 100% of the 2,160 contracts that stood for delivery that posted. 100% of them stood for delivery. And crazier than that, almost all of it is leaving COMEX. About 90-plus percent of it is actually being offloaded. In years past, when we would see deliveries, people would say, yeah, but it's not really leaving. It's staying in the eligible category. There's eligible, there's registered. Eligible would be bars in the system that are owned by people like my clients in our Brinks JFK vault. We have a set of Brinks facilities around North America. Just one of them is COMEX. It's JFK. And the metal that the thousand-ounce bars that my clients hold there, those are eligible. They could move to registered, which are the bars that back the contracts. But all forever, the bar, when stuff would come in and we would cite deliveries, as you'd see in the comments, yeah, but none of it's leaving. What does it mean? Just goes back and forth. It's almost all leaving now. It's one thing to go into eligible and stay there. It's another thing to go to eligible and registered, which could then be delivered. It's a completely different thing to see it leave out the door. And I want to make one last question. I'm sorry to go on, but I want people to understand that whoever is doing this, they're doing it for a far bigger reason than maybe we can even explain, because in that ecosystem that I have, nine Brinks facilities with one COMEX, I had a client who made an incredibly large order, and she, the silver part of it was all thousand ounce bars and the gold part of it was all kilo bars. Now this is COMEX compliant stuff. And my very dear friend is one of the primary Royal Canadian Mint distributors, and I was securing Royal Canadian Mint gold and silver bars that he stages for companies like mine at Brinks JFK. He has some at the RCM in Canada and some at Brinks JFK. And I said to him, I said, Rob, she wants to store this stuff at Salt Lake City Brinks. He says, no, she doesn't. I'm like, what do you mean? Yes, she does. He's like, no, she doesn't because it will lose COMEX eligibility and would have to be reassayed to go back in. And if you have these thousand ounce bars and you get someone like, you know, Elon Musk says, I'll pay a $50 premium above a spot for anyone who wants to sell silver right now or whatever. She's out of luck. I'm like, let me get this straight. It's sitting in Brinks facility. It gets moved by Brinks truck to bring Salt Lake City. And you're telling me that loses liquidity. I mean, it never left the ecosystem. It left the COMEX ecosystem. And even though Brinks maintained custody of it the entire time to put it back into COMEX, it would need to be reassayed. So moral of the story is when this stuff leaves, it ain't coming back. And that's something people need to understand is that the supplies are slowly being drained. And this is completely bucking the trend. And the people doing this at the first five days of the August contract between gold and silver, almost $15 billion worth of stuff was delivered in five days. It's much more than that now. This was two weeks ago, but it almost all left. Where's it going? Who's buying it? Why do we not know about it? These, to me, that to me signals that people doing this are very wealthy, very sophisticated, know what the hell they're doing, and they wouldn't be doing this if they didn't see where we're going with our fiscal and monetary policy and ultimately where gold and silver are going. So yes, I'm sorry to have belagered the question, which could have been answered much more easily. But yes, this will be very bullish for gold. Very, very bullish, as is the underlying fundamentals right now.