Submitted by QTR's Fringe Finance
Friend of Fringe Finance Lawrence Lepard released his most recent investor letter this week. Larry is one of my favorite market analysts to follow and he gets little coverage in the mainstream financial media, so I’m happy to bring you his thoughts.
Larry was kind enough to allow me to share his thoughts heading into Q1 2025. The letter has been edited ever-so-slightly for formatting, grammar and visuals.
This is Part 1 of his letter, part two will be published later this week.
OVERVIEW
The fourth quarter was a disappointing quarter for the Fund. While October was strong, the November 5th election of Donald Trump was a big positive for the stock market and therefore a big negative for gold stocks. Recall that gold stocks compete with all other stocks for investment dollars. Trump’s election led investors to believe that his business-friendly policies would solve the Federal Government’s problems and it sparked one month rallies of 6.7% in the S&P 500 and 10.7% in the NASDAQ 100. Concurrently, the gold stock indexes got hit hard.
Specifically, Trump announced a plan to form a new governmental department called The Department of Government Efficiency (DOGE) headed by Elon Musk and Vivek Ramaswamy, tasked with the job of cutting government waste and balancing the budget. Musk made some outrageous claims about how they could solve the budget deficit and generate $2 Trillion in savings. If deficits and inflation are going to abate who needs gold and gold stocks?
Our reaction is: not so fast. We will dig deeper into this in a minute, but DOGE cannot come anywhere near achieving what Musk is promising.
There are several other interesting take aways from the Quarter and Year.
Gold and silver bullion outperformed regular stocks and gold stocks. This is a rare occurrence and a clue to what is happening.
Bitcoin, a good barometer of monetary debasement and inflation had a stellar Q4 and Year, up 47% and 121%, respectively. (Note the Fund’s publicly marked Bitcoin investments now equal 15% of total fund value, and private Bitcoin investments represent an additional 6% weight).
10-year UST note and the dollar index (DXY). The U.S. 10-year bond yield jumped 21% to a yield of 4.57% and the dollar index was up 7.6% to 108.5. Both of these moves are highly unusual in an environment where the Fed is cutting rates. This suggests to us that the bond market investors are worried about future monetary debasement. We consider it to be a very good sign that the gold price has hung in near its recent high despite these interest rates rising.
FISCAL DOMINANCE
The biggest story of the quarter and the year was the way in which the Federal Government spending continued to grow at a break-neck pace. This led to a stronger than expected economy with GDP growth of 3.0% and record highs in the US Stock market, which were achieved in early December.
In our last quarterly report, we presented the following chart which we have updated to show September, October and November.
While the fiscal 2024 deficit of $1.8 trillion was quite large, the first two months of the new 2025 fiscal year accelerated the pace of spending. Some of this was driven by a Democrat Administration doing everything possible to try to win the election and remain in power. How bad were these two months? The answer is pretty bad. Have a look at the next chart which shows the October and November spending for the past 14 years. The $624 billion deficit in those two months was 64% bigger than the prior year and even exceeded the 2020 COVID year deficit by a large measure. Growth in spending of 64% year over year is out of control!
As the next chart shows the Federal Debt continues to grow dramatically and the problem is getting worse...(READ THIS FULL LETTER HERE).
QTR’s Disclaimer: Please read my full legal disclaimer on my About page here. This post represents my opinions only. In addition, please understand I am an idiot and often get things wrong and lose money. I may own or transact in any names mentioned in this piece at any time without warning. Contributor posts and aggregated posts have been hand selected by me, have not been fact checked and are the opinions of their authors. They are either submitted to QTR by their author, reprinted under a Creative Commons license with my best effort to uphold what the license asks, or with the permission of the author.
This is not a recommendation to buy or sell any stocks or securities, just my opinions. I often lose money on positions I trade/invest in. I may add any name mentioned in this article and sell any name mentioned in this piece at any time, without further warning. None of this is a solicitation to buy or sell securities. I may or may not own names I write about and are watching. Sometimes I’m bullish without owning things, sometimes I’m bearish and do own things. Just assume my positions could be exactly the opposite of what you think they are just in case. If I’m long I could quickly be short and vice versa. I won’t update my positions. All positions can change immediately as soon as I publish this, with or without notice and at any point I can be long, short or neutral on any position. You are on your own. Do not make decisions based on my blog. I exist on the fringe. The publisher does not guarantee the accuracy or completeness of the information provided in this page. These are not the opinions of any of my employers, partners, or associates. I did my best to be honest about my disclosures but can’t guarantee I am right; I write these posts after a couple beers sometimes. I edit after my posts are published because I’m impatient and lazy, so if you see a typo, check back in a half hour. Also, I just straight up get shit wrong a lot. I mention it twice because it’s that important.
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Securities shall not be offered or sold in any jurisdiction in which such offer or sale would be unlawful unless the requirements of the applicable laws of such jurisdiction have been satisfied. Any decision to invest in securities must be based solely upon the information set forth in the applicable offering materials, which should be read carefully by prospective investors prior to investing. An investment in EMA not suitable or desirable for all investors; investors may lose all or a portion of the capital invested. Investors may be required to bear the financial risks of an investment for an indefinite period of time. Investors and prospective investors are urged to consult with their own legal, financial and tax advisors before making any investment.
The statements contained in this presentation are made as of the date printed on the cover, and access to this presentation at any given time shall not give rise to any implication that there has been no change in the facts and circumstances set forth in this presentation since that date. These presentation materials may contain forward-looking statements within the meaning of US securities laws. The forward-looking statements are based on EMA’s beliefs, assumptions and expectations of its future performance, taking into account all information currently available to it, and can change as a result of known (and unknown) risks, uncertainties and other unpredictable factors. No representations or warranties are made as to the accuracy of such forward-looking statements. EMA does not undertake any obligation to update any forward
looking statements to reflect circumstances or events that occur after the date on which such statements were made. Historical data and other information contained herein, including information obtained from third-party sources, are believed to be reliable but no representation is made to its accuracy, completeness, or suitability for any specific purpose.
No representation is being made that any investment will or is likely to achieve profits or losses similar to those shown. Past performance is not indicative of future results. This report is prepared for the exclusive use of EMA investors and other persons that EMA has determined should receive these presentation materials. This presentation may not be reproduced, distributed or disclosed without the express permission of EMA
