How to become a master gold investor - Jordan Eliseo, MD, ABC Bullion

Speaker: I'm Peter Switzer, and we're going to be talking to people who have been investing to make money, to develop careers, to develop themselves. End of the day, when you sacrifice the money and the time, there's yours. It's an investment. And I want to know why these successful people have been able to generate a decent return. Joining me today is Jordan Alessio, who used to be a chief economist at ABC bullion. But nowadays he's been kicked upstairs to be general manager of that very successful company. Jordan, thanks for joining us. My pleasure. Peter, real, real honor to, uh, to be invited on. Yeah. Uh, yeah, it's a great it's great to have you here as well. Being a former academic economist. It's always great to see a fellow traveler kicking goals. Golden goals, big time. So, Jordan, why don't you just take us back in time to properly explain why you ended up being an economist and why you're interested in investing? Because clearly, ABC bullion is a gold investor's, um, treasure trove. Thank you. So I guess my sort of interest in precious metals dates back really? Almost twenty five years. Not not quite twenty five years. Um, around two thousand and two, uh, two thousand and three was when I first got into precious metals as an investor. I was still working in traditional asset management and doing my economic studies, you name it at the time. Um, but I was actually on my way from, um, uh, I was working in Sydney. Um, I decided to move to London, traveled fairly extensively through Asia. On my way there, um, saw firsthand how popular gold was in Asia. Uh, people. People buying it. But but probably more importantly, that was also really in the immediate aftermath of the the tech wreck, you know, the sort of two thousand, two thousand and one sort of stock market crash. Uh, and so that had been a real eye opener for me because actually, whilst I was in high school, uh, sorry, I should say, while I was in university and then doing, um, graduate studies and the like, I was working in traditional asset management. I actually spent a little bit of time working at a brokerage firm as well, and there was this real hype and excitement around that, that tech boom. Uh, almost no one sort of saying, hey, this thing's going to come crashing to, you know, to the ground, or at least no one that I had had any exposure to. And so that was a yeah, that was a real sort of eye opening experience for me, you know, adding the, the, the travel through Asia and then lands it in the United Kingdom. And. Yeah, just found myself. Really? I consider myself extremely fortunate that my eyes were open to to gold through reading a few articles and, and some really interesting analysis back then, and it made sense to me that gold was undervalued relative to other assets. And I consider myself a bit of an amateur history fan as well. And so I guess I, you know, did a bit of reading and I was like, well, God, this thing's been money for a long time and been an asset for thousands of years. And yeah, I guess that's where the story started in terms of my interest in gold specifically. Yeah, it's interesting when it comes to, um, uh, what you learn. Um, and I'm sure there's a lot of younger people who are listening to this podcast right now, um, who really didn't experience or understand the dot com crash that you worked in a brokerage. And of course, I was doing financial commentary. This is a time when companies that were listed on the Australian stock market disappeared. They had no value. They were one day valued very highly and next day gone. And that doesn't happen very often. Occasional companies do, but en masse, and particularly in the US, there were some companies that were worth a lot of money that were eventually worth absolutely zero. So how far back do you go in your life to understand why you became interested in investing? Yeah, probably even earlier than that. In terms of my sort of investment investments, I suppose, started quite early in life. I grew up on a, um, a small farm in Adelaide. We still went to school in the city. It was only twenty or thirty kilometres out of the the CBD. That was kind of an extraordinary thing about Adelaide back then. You could, you know, we had fifty acres of property. My parents were both teachers. Um, but it was almost like a hobby farm, for want of a better expression. We had, um, some sheep, some cattle, a few horses and a couple of dogs running around. Um, and my dad was always very, uh, very keen to educate both myself and my brother about the importance of, of a dollar. Um, you know, he had migrated in the aftermath of the Second World War from, from Italy. You know, my my non non non non came out with basically nothing. And you know very fortunately we were able to build something here that myself and my children now all get to enjoy. Um and anyhow uh dad because he, you know, bought the cows and the sheep and all that, he said to my brother and I because we had pocket money and a little bit of cash, and he was pretty clear. He's like, look, if you leave your money in the bank, you'll earn a little bit of interest, but you won't build wealth by leaving it in the bank. And, um, he gave my brother and I the opportunity to, um, invest in a couple of the cows. Um, and he, you know, he told us what they would cost and then what the upkeep would be. Um, and so we we did that. And I'd be lying if I said I remember the exact dollars, but, um, I think over the space of two or three years, we, we kind of doubled our money, um, which is a pretty great feeling at any age, but especially when you're, you know, seven or eight years old. Um, but no, it was, it was if I think back on it now, um, you know, it wasn't about the money, per se. It was about dad wanting to teach us, um, the importance of saving, the importance of investing. Um, and you know that that really is the, the key to wealth creation. And it's definitely something that that carried through both. You know, both my brother and I have always been, uh, savers and investors and really owe that to dad and to mum as well. So in many ways, that was a that was a sacred cow that has led you on a road to to being an investor. How do you evaluate an opportunity? That's yeah, that's a that's a that's a great question. I think look from, from from two or three angles. I mean, obviously the space that I work in now, um, and the space that makes up a decent portion of my own portfolio being precious metals is, is in some ways simpler because there are no cash flows and there's no management or balance sheet or anything like that. You can just sort of look at the gold price and, you know, you can compare it to other assets. You can look at the tailwinds that are driving it. You can look at how fast it might have moved in the last six months, twelve months to to get a sense of where the market is and what share of your portfolio, um, you might want to make up, um, when it comes to other assets, you know, equities, for example. And equities equity is a big portion of my portfolio as well. Uh, it's a it's a funny one because it can it can either be quite complicated or it can either be quite simple. Now, as I've gotten older and and had less time as well, I've found the simpler works better. And what I mean by that is I spend very little time now trying to pick specific stocks and spend much more time going. Which segment of the market do I want exposure to and what's the best vehicle to do that? And in today's day and age, it's pretty rare that you find a developed segment of the market that you can't just get exposure to via an ETF. Um, so, you know, emerging markets, US equities, tech, you name it, you know, you obviously can go and and get stock specific and buy them individually if you want to. Um, but there are products that just make it quite simple. So for me my portfolio it's gold. It's some cash and it's and it's a few ETFs that give you that diversified equity market exposure. I don't have any bonds, but that's nothing against bonds. It's just more. I'm in my mid forties, so I don't really see the need to to own them at this point. You're a you're a young thrill seeker. You should be pursuing growth. Not as young as I was or wish I was, but I'm still still on the right side of fifty, I suppose, for a couple years longer. Yeah, I've known you over the years, and we've always talked about, in a sense, the commodity goal. Now, I want you to be honest here. Do you hold any gold companies? Because I know I'll ask that question because a great my mind is a very good Chartist. Uh, many years ago completely got the gold price right, but he went into the wrong gold company. Oh, he went into a specific miner, did he? Or specific miner. And that company had problems? Sure did. Management issues and a good name before he went into it. But and he always said to me, from now on, I'm playing the commodity. Have you. Are you in. Are you in any gold mining companies? Yeah, I am absolutely so. And in many ways that's a legacy is not the right word. But um, if again, if I go back to twenty years when I was first getting invested in precious metals, full stop, um, the data was very clear then, um, that gold mining equities, whilst they bring with them a lot more risk and uncertainty, as it sounds like your friend exhibited firsthand, they also offer asymmetric upside if you've picked the right ones, or perhaps spread your chips around so that you, um, you know, don't concentrate your risk in one particular stock. So yeah, I think if um, and it might surprise, it might surprise people because a lot of people think, oh, if you buy gold, you must be really pessimistic. And, you know, you don't want to own anything, anything else. Um, if I, if I look at myself and I look at most of the clients that I engage with directly at ABC. That's that's not true at all. Most people, you know, again, myself included, we we own gold because we see it as being one of the most liquid and simple ways of protecting wealth, of diversifying a portfolio and and contributing to that portfolio growth. But that doesn't mean you only want gold or silver or platinum in your portfolio. You you know, you want equities, you want other things. And part of that equity basket can be gold mining equities as well. So absolutely I own them in my portfolio. You're when you're investing in stocks I think you're sort of saying that you're an optimist. But when you're investing gold similarly why wouldn't you be an optimist. Sure. There can be pessimists as the the hedge against something going wrong. But yeah, there's a lot of optimists who believe that the gold price can go higher. And they've been right as a consequence. Correct. I must admit, when it comes to to miners and I love companies like BHP, uh, I have no problem with that. I love buying it when the share price is low, but I've always laughed at Mark Twain's view on a miner. He said A mine, a mine is a no. A miner is a man standing outside a hole who's a inveterate liar. Yeah, I, I have I have heard that one. Uh, and, and of course, very unfair. But Mark Twain often was very When you look at, um, yourself and, and this is something a lot of people are good at. But you mean the game a long time come from a very good background. How do you personally define and manage your risk? It's a it's a good question. Um, so again, I always try and bring it back to keeping it simple and trying to learn from the mistakes that you make along the way, which is an inevitable part of the process. So, um, I'd say one of the first things try to do is not to overtrade. Um, and, you know, when I look at it, the more I trade, the more I've got to spend in brokerage fees or spreads, the more tax events I'm likely to be creating. Um, so the less I can, the less I trade, the better as a general rule. And then try and keep um, and have asset allocation guidelines and, and stock specific guidelines. So if you do own a specific stock and you've invested in it's five percent of your portfolio, you know, if it goes to ten you probably want to have a look. Right. Like is that still you know, it might still be a great story. Um, but it might not be a bad idea to do some disciplined profit taking. Again, that's not advice that you should follow in each and every circumstance, because the story for that stock may be it might even be better at the ten percent mark than it was at the five percent mark, if that makes sense. But to me, it's all about Acknowledging signposts and having those signposts where you should review a particular investment or a particular asset class, and then making another decision. And that decision, a lot of the time might be to do nothing, but at least you've made the At least you've you've considered it. So at the risk of sounding contradictory, um, whilst I don't like to trade too much, and I don't like to realize tax events through selling unnecessarily, you know, if you get to a point where, um, a certain assets gone up too much or it's become too big a part of your portfolio, you might want to do it. Like I'll give you a side story because it was only a small part of my portfolio. But and but it's probably interesting because of the the link to gold, everyone would think being in the gold business that I don't like Bitcoin, but that's not true at all. And I've owned bitcoin in the past, but there was a point in twenty twenty one where it just went absolutely bananas. And I was like, look, I've just got to take a profit here. Like I can't like every disciplined rule of investing says you have to take some money off the table. So I'm going to do it. It'll probably keep going higher. And in fact it has gone higher since then. But I think it was still the right call. Um, do you have do you run your super through a self-managed super fund? I do, and I have for, for many years. Yes. So, so one of the routines or habits that help you stay informed and grounded, I think you've covered the grounded one, that you obviously have a discipline when something becomes too big a part of the portfolio from where it started, you at least ask the question, should I persist with it or should I take profit? But what other habits have you, um, used to stay informed about your investments? Yeah, look, I don't I don't know that there's any secret sauce to it. It's it's trying to. And being disciplined about reading and staying on top of of what's happening. And that's, that's probably less about the market cycle or the news cycle from one twenty four hour period to the other. Um, and it's much more about reading interesting and informative research from, you know, various funds management, brokerage, investment houses that are, you know, that are publishing research, could be on any number of topics, could be on where commodities are sitting right now, could be on, um, you know, the the CapEx that's going into AI could be on profitability within the Mag seven or, you know, one of the things that I think is really interesting right now is just how strongly the United States has outperformed the rest of the world in terms of equity markets. Um, I'm going to throw one out there. This will probably get me, um, this will probably get me, uh, hate mail in terms of people saying, oh, Peter, that guy hasn't got any idea what he's talking about. But one of the things I I'll take a bet that I think he's wrong on is, um, you know, Warren Buffett always talks about how, you know, you should never bet against America. And and I'm not saying he's wrong on that, but the eighty, ninety years that he's been alive in is a period in which the United States, for example, their equity market has gone from being smaller than the United Kingdom's to now being fifty percent of the global equity market. Now, my guess would be in the next fifty years, the United States share of global equity markets is going to shrink. And that's not I'm not saying that's because the US is going to suffer a depression or But to me, the bigger growth and better growth will come from emerging markets. And so, you know, when I look around at some of the things to stay informed on, you know, you want to look at the growth that's happening in China and in India, in other parts of the Middle East, in the subcontinent, like there are enormous growth stories that are transpiring that are evolving in front of us. And I think that's probably where some pretty good opportunities are going to be in the years to come. Mhm. So, um, have you, have you expose yourself to emerging economies? Yeah, absolutely. So both directly through, um, through through stocks that are operating there or businesses that are there. Um, but also as well, you know, I think if you look at developed market equities, you know, having a distinct commodity exposure is to me sort of like a proxy emerging markets play as Because you, you know, if you think of well, where's all the demand for iron ore come from. Where does the demand for coal and gas. And you know, where will nuclear or hopefully nuclear might even come in here in the developed world as well. But the commodity story is an emerging market story right now for, for for developed market equities as well. So yeah, I think those are all things that are people should be keeping an eye on the things I keep an eye on. I you know, I may be wrong, but there's certainly things that I find interesting, uh, and worth monitoring. So, Jordan, how long have you worked for ABC? Um, I've been with the group, um, in total, uh, about about about thirteen years. Okay. And you went away for a short time, did you? and came back. I did, I did indeed. Now, in that time, have you read stuff about people predicting what's going to happen to gold? And you said, ah, that is absolute BS. That person knows nothing about gold, because I would presume that you at least have tried to become as good an expert on gold as you possibly can. And I know I, I try to do the same with stocks, and it doesn't mean I, I know, I know everything. I, I there's always something I can learn from somebody else. But sometimes I and that's why I got in trouble on Twitter some time ago when I kept telling people, no, we're not going to go into recession. And they hated that to the people. To me, what is there a memorable story where someone has said something about gold and you said that person has no idea, and they proved to be wrong? Well, yeah. I mean, all right. And you learned something from Well, I think I can definitely think of the guys that were that were right. Um, and, and articles that and information that really helped me. Uh, one I remember reading and this is going back over twenty years ago. Um, and this gentleman wrote an article on the Dow gold ratio. And, and at the time, uh, obviously, you know, this was at the start of the bull market in gold in the year two thousand. And this article was basically it was if you had a trade of the decade, it would be to sell the Dow and buy gold because the Dow had been going up forever. Gold had been falling for ages. And I mean that that gentleman absolutely nailed that call. Um, you know, at the same time, I could remember being extremely bearish people, being extremely bearish gold in twenty fifteen, um, which was the end of the kind of cyclical correction those ones didn't get, you know, weren't timed so badly. But at the same time, there were also people in the gold space that were extremely bearish on the stock market in twenty eleven saying, oh, the stock market will keep crashing and only gold will go up. That obviously wasn't that Harry dent here. Yeah, that obviously wasn't true either. So yeah, I mean people I think there are good and bad analysts in every asset class. And I think, you know, you said it yourself in terms of Twitter and the like, um, it almost feels like you you need to be extreme in terms in to at least speak to one side of the church, if you know what I mean. You know, hyper bullish, hyper bearish. You and I both know the truth is somewhere in the middle. My favorite, um, um, revelation of all time was when the GFC was worse. Everyone was panicking, the market was down fifty percent, and uh, Warren Buffett went on TV and left Goldman Sachs a couple of billion or something like that, and it was the greatest sign. And that's when he actually used yeah, can't go wrong investing in America. And yeah, the negativity had got so great it needed a circuit breaker. And it was wasn't going to be George W Bush or the incoming President Obama, um, who both tried their best and and no one's going to listen to Jamie Dimon because he was there when stuff was going wrong anyway, despite the fact that, you know, he put his bank behind, uh, America's banking system, the bottom line was someone who had a lot of credibility, put his money on the line. I think he got ten percent on that money because that was he did it as a coach, right? Goldman Sachs had to pay. But it was a terrific turning point. So this leads me to your next question. Because, you know, obviously when you came to, uh, precious Metals, you weren't a gold expert, but you you could easily be called a gold expert because you've lived and breathed the stuff for a long time, and you might even have self doubt about that, but I don't think you should. What is the the best book or the best gold thinker that you've read that's deeply influenced your understanding of investing in gold? Yeah, that's a very tough question in terms of just picking out one. Um, actually, I would say that the, the, the people that have most impressed me about gold in terms of the, the way that they have spoken about it, analyzed it actually haven't been, uh, let's call them gold centric It's been people from more mainstream finance, um, and in fact, even Buffett. And to maybe flesh out my comments from before, I mean, people should listen to absolutely everything that guy says, um, for for obvious reasons and in fact, even his views on gold. And he's quite right when he says it's, you know, it's not income producing, it's not a productive assets like stocks are, you name it. But he's also very clear that, you know, dollars are designed to lose value. And so you need to put money into other things. Um, there's another gentleman that, um, you know, called Grant Williams who wrote, uh, or who published for many years, um, not just on gold, but on, on a variety of financial topics, um, who I've found to be, you know, very much worth paying attention Um, and the gentleman that wrote the sell, sell gold, sell the Dow, buy gold was a gentleman by the name of Bill Bonner. So I traditionally read what he had to say, and he wasn't always, you know, his trades of the decade haven't always been gold centric. Um, he got very bullish on Japanese equities. I remember, you know, and then they went and had a, had a, had a tear. So, um, yeah, I've found the best people to talk about gold aren't just they're not in the weeds of gold. They're financial system analysts who recognize what gold is, if that makes sense. Totally. What do you believe, uh, you hold about investing that most you think would disagree with. A belief I hold about investing that most would disagree with. Um, you say nothing if you want Yeah, I think it's it's a difficult one. I mean, I think most people probably there are things that I think are true that I suspect most people probably would like. You know, it's sensible to diversify your wealth if you want steady but not spectacular If you do want your wealth to to really magnify, you've got to occasionally swing for the fences. Um, mate, maybe the one that I'd say is the most. Well, at least it wouldn't be consensus thinking amongst traditional asset allocators. And that would be my one would be that at least if we take the next ten years looking forward, I think the idea that defensive asset exposure should come through fixed income securities, I'm not sure about that. In a in a world where rates are low and inflation is still problematic. And we had a forty year bull market in bonds. I. I'm not convinced that that they will provide the kind of defensive qualities in the, in the next decade that they did in the previous forty. Maybe that would be my my observation. Fair, fair call. I really wish term deposits were always five percent, so I don't have to go looking for other defensive assets for my financial planning clients. But I don't have as much confidence in. So yeah, I understand bonds can be difficult to play. They're not straightforward. What mindset shift would you recommend to someone wanting to get better at investing? I think the key one would be an acknowledgment that it is not easy to to meaningfully outperform the market and reliably outperform the market. Um, that wealth does take a long time to build unless you, you know, lottery ticket, you know, obviously with an individual stock or an individual crypto or whatever. But as a general rule, you know, there's a reason why the majority of wealthy people and again, Buffett's a great example. If you look at his wealth, something like ninety nine percent of his wealth was built after the age of fifty, you know, and that's because there was thirty years of foundation that was laid. And then from there it started to grow very, very significantly. And I think there are there are there is no cheating those rules of investing without taking the kinds of risks that can end up blowing your portfolio up. So I think that's just a just a reality that people should acknowledge. One last one before you go. And that is. If this bull run on the stock market should eventually end up in a crash for whatever reason, you know, overestimation of AI I creates unemployment bigger than we expect and that sort of stuff. If the stock market crashes, what happens to gold prices? I suspect if history is any guide, Peter, that gold would do very well, uh, especially in a, on a relative basis. So, you know, in a world where the stock market drops fifty percent, if the gold price just stays static, well, gold now buys you twice as many stocks as it used to. Um, so I think in the in, in the extreme short term, gold might even come off a little bit because it's so liquid that people can use it to fund margin calls and the like chasing cash dollars. But I think, you know, if you as that sort of let's call it crash cycle plays out, I think gold would do pretty well in in nominal terms and it would do exceptionally well in relative terms. And indeed, you know, if something like that were to happen and, you know, in my own And gold became an even bigger share because my equities fell in value. And so therefore, by definition, my gold's gone up. I'd certainly be looking at that going, well, great, I can I can buy some more income producing assets with this bullion that's held or in relative terms, even increased in value. Yeah, just as you say that, it's interesting because probably during that period after the GFC and that was March two thousand and nine, that's when the stock market started to roll back. And probably people who were safe in gold started taking their profit in gold to buy stocks that were smashed and crashed and had an enormous rebound. I must look into that. I've never looked into that as a topic, but a very interesting one to have a look at. Absolutely. Great stuff. My pleasure Peter, really enjoyed the chat. Me too. Jordan Alicia, general manager, ABC bullion. Thanks, mate.