74&W Exclusives: Lobo Tiggre

74&W Exclusives

Lets start early in your story. Obviously, gold and precious metals have been a major focus of your career. How did you first become interested in them? Did you dig for treasure when you were a kid?
In a very roundabout way, yes. I guess you could say I was psychologically attuned when the opportunity arose. I did, in fact, collect coins when I was a kid. I had started collecting pennies as a smaller kid and it just grew from there. I was a paperboy back when the Hunt brothers tried to corner the silver market back in 1980 and we saw that big coincident spike in gold and silver prices. Silver went over 50 bucks an ounce, which, in 1980 dollars, was a lot. I was putting my profits from my paper route into silver coins, and I got wiped out. It was an important early lesson for me.

So you bought when silver was at its peak, and then it crashed?
I didn’t quite buy the top. I didn’t buy at $50. That was pretty rich for me at the time. But I did buy at about halfway up. You know, $25 or so. I had bought at $8, $10, $12, and I had doubled my money. Boy, I was so excited. So I bought again around $25. Then it got expensive… and then it crashed. It was a very quick spike. So I didn’t top-tick it, but I did learn a valuable lesson.  

Do you still have those coins?
I had those coins for a long time. There was no point in selling them after they went down lower than my cost. But many years later, I did have a financial crisis in my life. I was just broke. As a last-ditch thing, I liquidated my coin collection. I happened to have a lot of Mexican silver pesos -- not real silver pesos, but they had some silver in them -- and I happened to be in Mexico at the time this crisis hit. So I went to a pawn shop and I sold my silver pesos for one peso. These were 60-year-old pesos. Now, imagine if I had held paper money. After 60 years’ of 10x and 20x devaluations, it would have been nothing. But those old silver pesos got me one peso each. I had a lot of them, so it added up to a significant sum. I could feed my family that day, and live to fight another day. That’s a real example of precious metals doing what they're supposed to do, being a store of wealth. When everything else went to hell in a handbasket, I was able to liquidate that store of wealth of last resort and get back on my feet.

Gold and silver are not speculation. They’re wealth preservation.

Well, that nicely illustrates something that people might misunderstand about you, which is that while you’re a speculator in this space, what you mainly invest in for speculative purposes is equity in precious metals companies rather than in the metals themselves, right?
Exactly. My mentor Doug Casey teaches us that gold and silver are not speculations. They’re wealth preservation. You buy them for prudence, not because you think the price is going to go up. Precious metals are always valued and liquid, anywhere in the world. There are times, like now, when I do think the price is going to go up, and I can also buy them for speculative reasons. But the fundamental reason is for socking savings away.  

Doug Casey is something of an icon. How did you come to work for him and Casey Research?
I was working for a nonprofit in the free market advocacy space when the opportunity to work with Doug came along. I had recently decided to get serious about money. It’s like that old Zen saying, “When the student is ready, the master will appear.” I had just decided that I wanted to learn about investing and money, something I’d really paid no attention to before. And suddenly Doug and his partner at the time, David Galland, founded Casey Research and they needed a writer, which I was and am. And so it all worked out.  

So you joined them as a writer?
I was very much brought on as an editor. They had a number of geologists and financial types on contract. My initial job was to turn their technical language into easily readable English. The point is that I came to it because I was philosophically attuned. Maybe my childhood experiences prepared me for interest. I also collected rocks as a kid, by the way, and am one of those annoying people who slow down while driving by a road cutting on a highway to look at the rocks. It always fascinated me, like, “How on earth could Mother Nature do that?” And so this opportunity came along where I got to learn what I wanted to learn about finance, and geology which always fascinated me, and I was already philosophically attuned to real money—gold and silver—which Doug also focuses on. 

From that unconventional start, you ended up doing very well, very quickly, at Casey Research, publishing your own material under the pseudonym “Louis James.” Were you surprised by your own success?
This is going to sound horribly arrogant, but no, not really. I know I’m not the dumbest person I’ve ever met. So I expect good things for myself. I have high standards for myself. What was surprising to me at the time was that Doug and David took a chance on me. People now mistake me for a geologist all the time, but I never took a single course in geology. And I had no financial background. I didn’t know what a warrant was when Doug and David hired me. But they figured they could teach me about the rocks and the stocks, and that’s exactly what they did.  

I am one of those annoying people who slows down while driving by a road cutting on a highway to look at the rocks in the wall.

Was there a specific moment when you felt like you’d arrived?
I was hired in 2004. By 2008, Doug was asking me for my take on things. I remember an incident where Doug had some money he wanted to deploy, but he could only deploy it in US listings. So he asked for my advice on US-listed companies to put that money into. Today, Doug and I compare notes all the time, but that’s 15 years later. This was just four years in and he asked for my advice. That simple thing, just Doug saying, “What do you think?” to me, that was huge in my mind. My feet didn’t touch the ground that day. 

What made you decide to leave Casey and start your own firm?
There’s a perception out there that after Porter Stansberry took over Casey Research, I had a big blowup with Porter or something. When Porter Stansberry took over a majority interest in Casey Research, he asked me, “What do you need to do the best research you can do?” He basically gave me carte blanche. He gave me an unlimited travel budget, let me hire whatever help I needed. Mr. Marketing, Porter Stansberry, stepped up to the plate and enabled me to do better work than I had ever done before. So that perception is just not true. But what also happened was that I was required to sell all my stocks that were in the newsletter. I was not allowed to buy anything that I wrote about, to prevent conflicts of interest—front-running and that sort of thing. That was in 2015, so I pretty much had to sell right at the bottom. And darned if pretty much everything in my personal portfolio didn’t double or better over the next year.

So you were kind of sidelined from the action.
Yes. I may be wrong, but I really believe that we’re in the early stages of a major resource bull market, and particularly for the precious metals. I didn’t want to just write about it and watch everybody else make money on it. That was a big impetus for me setting up my own shop. I intend to make a ton of money alongside my readers. I couldn’t do that within what Casey Research has become.

So these days you’re publishing your subscription newsletter, The Independent Speculator. Tell us about it.
The whole idea of the flagship newsletter is that it’s about what I’m willing to put my own hard-earned money into. I fully disclose what I own. In fact, it’s not just that I disclose. The premise is basically that if it’s not good enough for my own money, I’m not going to suggest anyone else should either. I have absolute, 100% skin in the game with my readers. This is a full-transparency newsletter. I post screenshots of my trade orders, prices, quantity, date, time stamp, brokerage fees. It’s fully documented there for readers. They know exactly what and when I buy and sell.

When you went independent, you began using your own name instead of continuing to publish under the pseudonym “Louis James.” For the record, we think “Lobo Tiggre” is a much cooler name.
That’s the positive spin on that. Other people are taken aback. “Lobo Tiggre? Are you serious? What kind of name is that? How can we take you seriously?” But it is what it is. And again, the rubric of the newsletter is full transparency. I just couldn’t use a pen name anymore. My name, what’s in my passport and everything, it’s Lobo Tiggre, so I went with it. Some of my mentors advised me not to, by the way. In the end I kept “Louis James” as the name of the company, because that is how I was known for all those years to so many people. I think that was wise not to jettison the pen name entirely. People still call me Louis James, and I still answer to it. I’m also affectionately known as “that jerk from Casey Research” by some of the mining companies. It’s all good.

I have absolute, 100% skin in the game with my readers. This is a full-transparency newsletter. I post screenshots of my trade orders. It’s fully documented.

Let’s delve into your world of speculating in gold equities. One concept that figures largely here is the Lassonde Curve, which people familiar with the mining space will know about but others won’t. In a few words, can you just explain the basic concept of it?

Sure. It’s also called the Life Cycle of an Mining Stock, because it tracks the share price of an exploration company as it becomes a miner. To be clear, this is not a miner at first. It’s a bunch of geologists out there kicking rocks and looking for something valuable. At the beginning of the curve, the share price is very low, obviously, because the company doesn’t have anything. If their exploration is successful, they make a discovery and the stock goes vertical. You see this huge surge. That’s frequently where your 10-baggers are in this field [Ed. Note: “10-bagger” means receiving a 10x return on investment, or 1,000%].

It’s interesting: the legendary, thousand-percent gains that you see in some of these hype-y advertisements and things, that really does happen. Not to every stock. And the odds are pretty long. But it happens to some stocks almost every year. When you go from having nothing to making a discovery of something of value, mathematically, the change in value is almost infinite. So there’s a huge recognition of value in the company’s share price. 

So that’s the first big leap in that curve. What comes next?
After that, then there’s a lot of hard work to be done. Defining the deposit, doing studies of the metallurgy, and what kind of mining method would be best. The stock tends to slump during this “boring engineering phase.” Prices curve back down again and the slump can last years. And then there’s a curve up again as you approach production. “The pre-production sweet spot, or PPSS” we call that. 

What’s happening during that phase, during the “pre-production sweet spot?”
The company builds its first mine. They make the transition from having something they spend money on to something that they make money from. Share prices reflect that addition of value.

And just to make this clear: Depending on which part of the curve you’ve chosen to invest at, there are varying degrees of risk and reward, and varying costs to get in. So what happens after the pre-production sweet spot?
Yes. And to finish off the curve, you have this ramp-up during the pre-production sweet spot and then it’s a question mark. If the company doesn’t find anything else, the nature of mining means that you deplete your asset. So the remaining value in the company goes down the more it mines, unless it makes another discovery. You also don’t know if the mine will actually make money until it’s built—and some don’t. So either the curve goes down after production starts, or it goes up if the company makes money and can discover or acquire more value going forward.  

The average gain from building your first mine is on the order of a double.

So just to put a fine point on it, if you get in really early, while the geologists are still “kicking rocks,” there’s a good chance they won’t find anything and you won’t get your money back – but it’s cheap to get in then, and if they do find something, you stand to make a fortune. The gains to be had in the pre-production sweet spot probably pale next to those to be had at the front of the curve.
It was always assumed that this PPSS would produce reliable gains but they wouldn’t be very big. Everyone always knew who had a mine under construction. It would be priced in with the stock. Doug told me that when I first asked him what the typical PPSS gain was. He said, “I don’t know. It’s probably mostly priced in. Ten, 20%, maybe?” My own contribution to the field—my claim to fame in the mining analyst space, if you will–is that I’m the first one that I know of to publish research on the gains in the pre-production sweet spot. And much to everybody’s surprise, myself included, it was much bigger than anybody thought. I have now been doing this research for a number of years. I’ve increased my sample size to well over 100 examples of first-time mine builders. It doesn’t count if you already have a mine and build another one. We’re talking specifically about companies that make the transition from exploration and development to production for the first time. The average gain on the entire population of PPSS examples I’ve been able to find over the last 30, 40 years, is on the order of a double. It’s not a 10-bagger—but that’s just the global average. The top five average around a 700% gain. That’s not quite a 10-bagger but it’s not too far off.  

That’s huge.
And the best thing of it all is that even in a bear market, the average gains are positive. Making the transition from spending money to making money adds value even in a bear market. That’s not to say they all go up. You can’t just throw darts at the board and anything will do. Due diligence is still required. 

Those are the gains. What about the odds?
About 95% of the companies that set out to build their first mine succeed. That may seem like a no-brainer. Nobody’s going to lend a company hundreds of millions of dollars to build a mine if they don’t think they can build it. But there is some risk there. Some do fail. But 95% success rate is very high. And if the average gain from building your first mine is on the order of a double, that’s a real sweet spot. You have much better odds of significant gains. Maybe it’s not swinging for the bleachers the way betting on the discovery phase is—the early part of the Lassonde Curve—but the odds of that are hundreds to one against. 

So should we presume, then, that that pre-production sweet spot is where you tend to spend most of your time and focus?
PPSS plays are the largest single component of my current portfolio. So it’s very much where I put my own money. And I have more research on this in progress. I’m trying to better understand what makes for those top five. Remember I told you that the top five average gain is seven times greater than the overall average in the data set? Well, I want to be able to predict the next top five. I can't tell you I’ve figured out the formula. But I do have a sense for some of the contributing factors. My current portfolio right now is an experiment in that direction. We’ll see how the averages come out.

A major hallmark of your work is intense due diligence. Is it really true that you’ve traveled more than a million miles to perform due diligence on your investments?
That’s correct. And that’s only what I can track on the major airlines based on frequent-flyer miles. I can’t really tell you what the total mileage is if we include smaller airlines in Africa and the like. And of course there’s the number of miles bumping across the countryside in a 4X4 or on a horse or a mule. It’s much fewer miles but more hours. That million-mile number is just a starting point.

I have literally ridden a burro up the Andes to look at rocks. Sometimes we’d have to leave the burro behind because it turns into vertical jungle. 

You started doing that when you were at Casey Research, right?
Doug Casey is a big guy. He’s six foot two, or whatever he is. And I’m a little Mexican guy. So I can fit in those old colonial tunnels better without bashing my head in. He was delighted to turn the rock-kicking over to me. As soon as he could see that I could tell schist from Shinola, he was happy to let me run with it. 

Mules and 4x4s, colonial tunnels. It sounds like a lot of adventure.
Well, the reality is that the less adventure it is, the better it is from an investment perspective. I mean, if you can drive up a paved highway to the drill rig where they're exploring, that’s obviously better for a possible future mine. There’s probably a power line over the highway. Access to employees nearby. Water. All these other things are better. Honestly, Bilbo Baggins was right: adventures are inconvenient. The less of them the better. That’s before the dragon, of course. If you do find the dragon’s hoard way off in the hinterland on a lonely mountain, you can make a fortune. That makes the rougher stuff worthwhile. And it can be pretty wild.  

Which takes us back to the beginning of the Lassonde Curve.
Yes. And there is a contrarian case for going far off the beaten path. If you look off the side of the road there in Nevada, everybody else is looking there too. You’re likely to pay a pretty full price for getting into a play like that in a safe mining jurisdiction with great infrastructure, good rule of law. All this stuff tends to add to a company’s valuation even before they make a discovery. If you're willing to go farther afield, somewhere in the hinterland in Africa or South America, you do add risk. But you also can buy at a discount, potentially increasing profit. That’s why I have literally ridden a burro up the Andes to look at rocks way up there. Sometimes we’d even have to leave the burro behind, because it turns into vertical jungle and the burro can’t make it to the rocks exposed high up in the mountains.

People treat precious metals as just another commodity, like pork bellies or coffee. But gold and silver are not pork bellies. They're not like coffee. They are money.

Let’s talk a bit about gold as a commodity. One of the fascinating things about commodities is how complex their pricing can be because of so many different factors – weather, geopolitics, seasons, the costs of other commodities. Gold pricing is affected by interest rates, inflation, market sentiment and other factors. You wrote a piece recently in which you stated that, while gold prices and the value of the US dollar usually move in inverse relationship with each other, lately they’ve been spiking together. Why is that significant?
Well, in the first place, gold is priced in dollars. So on that very basic level, it makes sense for gold and the dollar to move opposite to each other. In the second place, the correlation between gold and other commodities writ large is very high—on the order of 85 to 90 percent. Not only is gold priced in dollars, most commodities are priced in dollars. They tend to have that same inverse relationship. Most of the time, people treat precious metals as just another commodity, like pork bellies or coffee or whatever. But gold and silver are not pork bellies. They're not like coffee. They are money. And in times of systemic stress, in times of fear, they are treated as a safe haven more than as a commodity.

You’re suggesting, then, that a strengthening dollar is occurring alongside a sense of stress or fear in the market.
Yes. And so the relationship between the dollar and the price of gold changes. This is one reason why it’s so difficult when people try to analyze the driving forces for gold. Is it interest rates? Is it inflation? The reason why it’s so hard to come up with good, solid predictors is that the relationship changes. When it’s treated as a commodity, certain factors tend to drive. And when it’s treated as a safe haven, other factors tend to drive. When there’s systemic fear out there, the price of gold is really a fear barometer. It has nothing to do with what commodities are doing, or mine supply, or jewelry demand in India. For now, when fear is in the driver’s seat, flight to safety puts people into gold and dollars at the same time. But that could and would change if people were fearful and lost confidence in the dollar at the same time.

It’ll seem crazy, right? Sometimes money will flow into gold and dollars at the same time and out of stocks and other risk assets. And other times, you’ll see gold and the stock market move in the same direction, as though gold were suddenly a risk asset. That’s really when it’s behaving more like a commodity and commodities are in favor at that time.

Even just these handful of variables we’ve discussed makes for a fairly large matrix of different possible driving-force combinations at any given time. The reason is that there’s more than one thing going on, or more than one paradigm. And the rules change, depending on the paradigm. 

So what does this say to you about the near future? Do you see this state of fear continuing? Do you see the drivers of that fear going away, or worsening?
You know, if you listen to the talking heads on financial media, it seems like there’s always a crisis. Everybody always thinks things are the worst they’ve ever been. You can even look back at – I think it was Pliny the Elder in ancient Rome — who was complaining about the young people and how everything was going to hell in a handbasket. It seems like every generation always thinks the same. That makes me cautious about saying, “Things are the worst ever, and yes, the big meltdown is coming.” That having been said, I do believe that nothing that has been done since the global financial crisis has actually resolved any of the issues that caused it. If anything, they’ve made it worse. We could have a long conversation about why that is. But the Fed incenting excess reserves is one important reason out of many. And I do think that when the piper has to be paid, it’s going to get really ugly. I’m not going to promise that that’s about to happen, but I do think that will happen.

There is a significant risk of much greater downside than people in the mainstream appreciate. 

What specific global economic issues are worrying you?
A big concern is that we see all the red signs pointing towards recession in the US right now, and the global economy is clearly decelerating. The trouble in Germany, the heart of the EU, is really serious. We have China slowing as well. I don’t think that’s just because of the trade war, although that exacerbates it. There are a lot of signals right now indicating a downturn. Of course, the talking heads on mainstream financial media say, “Oh, it’ll just be a mild recession. Unemployment is at a 50-year low in the US. It’s just going to be a small thing.” I don’t think these people appreciate just how fragile the global economy and financial system are, in the post-Lehman Brothers, post-GFC world.  

Just how bad do you think things could get?
I’m not promising a Mad Max scenario in the next couple years. I want to be very clear on that. But I am saying that there is a significant risk of much greater downside than people in the mainstream appreciate. So I do think that everybody – even people on Main Street – should own some gold and silver. That’s for prudence. I don’t think anybody can afford to fail to protect themselves with some precious metal. And I do mean gold and silver, not palladium and platinum, which are largely industrial metals. On top of the general slow-down, there’s potential for near-term explosive events. There are a lot of black swans out there, circling closer and closer. So I think it makes sense to do the prudent thing with gold and silver, but also add a little bit of speculative sauce to that goose with some of the related stocks. Make the right picks, and you could do quite well while everybody else is suffering during a major downturn.

You’ve made no secret of the fact that you think the days of paper money are numbered. Can you briefly make the case for why you think that is so?
Look at the sweep of history. People think of paper money as the way things are and must be in the universe. That’s just not true. Paper money is a recent experiment. All past paper monies in that experiment have ended in disaster. There’s no reason to think that any of the current crop—including the US dollar or the euro—would be exempt. The onus should be on other people to prove to us why their favorite paper currency is going to be exempt from everything that history tells us about something that can be mass-produced without limit at no cost. That’s the basic case. On top of that, you could add current economics. I mean, just look at all the crazy things that have been done since the global financial crisis of 2008.

How do you feel when people call you a gold bug?
I love Richard Russell’s response: “I’m not a gold bug, you guys are dollar bugs.” Why on earth would anyone cling to this paper dinosaur that’s destined to sink into the La Brea Tar Pits of financial history?

All paper monies have ended in disaster. There’s no reason to think the US dollar or the euro or any current currency would be exempt. 

What are your thoughts on cryptocurrencies? Do you think that there’s a chance that they will come to replace the dollar?
Could be. Philosophically, I’m very pro-crypto or anything else that the market wants to throw out there to compete with governments on their legal monopolies on currency. I think markets should determine the price of money, interest rates and all these things that central banks like to interfere in. I think the government should be out of the money business. Private money would be better and more realistic. The prices of the various kinds of money competing in the marketplace would reflect what real people are willing to exchange for those things. So, sure. Bitcoin, Ripple, whatever you like—more power to them. I don’t, however, see them as alternatives to gold. I don’t see anything that isn’t physical—that I can’t hold in my hand—as in any way being a safe haven like gold. I mean, there are physical limitations to how much gold you can produce. The bitcoin people will tell you there are mathematical limitations to how much bitcoin can be produced. But I’d rather have a physical limitation than a mathematical limitation. I also am concerned about the security. They say crypto networks are uncrackable, un-hackable. But Moore’s Law applied to quantum computing could completely change that. And then even if Bitcoin itself really does remain secure forever, there’s bitcoin 2, bitcoin 5, bitcoin 27. There’s no limit to the number of cryptos that could be created. So I’m skeptical of the scarcity argument for cryptos. That said, I’m not pooh-poohing them, either. I'm just saying they're not the same thing as gold or silver. But I would love to see them succeed. I’d love to see anything succeed that the market comes up with as an alternative to government fiat currencies. You know, take those fiat currencies out behind the woodshed and give them the thrashing they so much deserve. 

Last we checked, gold was at $1480 or so per ounce. Several months ago, you said you were looking for sustained pricing above $1400. While you don’t like making stark predictions, you’ve said a couple of times that you feel like we’re really headed into a bull, here. What kinds of expectations do you have for the next few years for gold?
I always feel a little nervous about this, because it strikes me as a little hype-y to paint these rosy pictures. There are a lot of people saying “$5,000 an ounce,” “$10,000 an ounce,” “$20,000 an ounce,” whatever. There are, however, relevant facts here. One is, if you look at where we are now, just under $1500, the leap from here to nominal highs -- $1900 back in 2011 -- is only about a 30% increase. We’re not talking about gold doubling overnight, nor quadrupling the way it did from 2001 to 2011. We’re just talking about a 30% increase to reach new nominal highs. And that will attract a lot of attention. That’s not too far-fetched. The reason I chose that $1400 number is because it was significantly above the range where gold and silver had been trapped for years. The breakout wasn’t just a peak. Gold is now holding well above where gold had been for six years. I’m not a technical analyst, but clearly, the appetites in the market have changed. That’s a very strong signal about a new reality in the marketplace measured in actual prices we can track.

We’re not talking about gold doubling overnight. We’re just talking about a 30% increase to reach new nominal highs. And that will attract a lot of attention.

That goes for the price of the commodity. What about for equity in these companies?
Breaking above $1400 was great, but we’ve been actually closer to $1500 for most of the last quarter. And earnings season is coming. Most mining companies don’t adjust their guidance on a quarter-by-quarter basis. So I think that a lot of the gold and silver mining companies achieved materially higher sales pricing than forecast for Q3. They're going to beat. Management of some companies might fall on their faces, spending tons of money so they don’t deliver to the bottom line. Or a company could get hit with higher taxes. Or an endangered mosquito could shut down a company’s mine. Bad stuff happens. But most of miners should beat. I think that’ll get a lot of attention—and in the near term. If the precious metals sector as a whole is beating when other areas are not doing so well, that’s the kind of thing that not only attracts the attention of individual investors, but the robots as well. The algos are looking for alpha. You’re right; I don’t like making promises and bold predictions. But I do think there’s potential here for sector rerate. And that could also impact the prices of the gold and silver themselves, as more speculative buying comes in. Remember, it’s only 30% or so from where we are to new nominal highs. And that could really light a fire under things.

This has been a fascinating discussion. Is there anything else you’d like to add?
I do want to stress that even though I don’t like making predictions, you pried some forward-looking statements out of me. But I’m not one of these talking heads on media for whom there’s no consequence if I’m wrong. I’m putting my own hard-earned money into exactly what I’m telling you and your audience. And if I’m wrong, I will personally pay a significant financial price. I have skin in the game here. I really believe that’s essential.

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Lobo Tiggre is the founder and CEO of Louis James LLC, and the principal analyst and editor of IndependentSpeculator.com. He researched and recommended speculative opportunities in Casey Research publications from 2004 to 2018, writing under the name “Louis James.” While with Casey Research, he learned the ins and outs of resource speculation from the legendary speculator Doug Casey.

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