Market Volatility, Political Drama Increases Yet Metals Slide

Mike Maharrey: Greetings. I'm Mike Maharrey, an analyst and reporter here at Money Metals, and I'm here today with Money Metals CEO, Stefan Gleason, AKA, my boss, and excited to talk to him. How are you doing today?

Stefan Gleason: Hey Mike, I'm great, and we're obviously very thrilled that you're part of our team. You've been cranking out some amazing information and content pretty much on a daily basis.

Mike Maharrey: Well, I appreciate that. I enjoy it. It's fun. It's a learning experience every day. It's interesting to see how things evolve so quickly in the marketplace and in the financial world, in politics. I don't know about you, I didn't have assassination attempt and Biden dropping out on my Bingo card for this month. It's pretty wild.

Stefan Gleason: Yeah, it's been a busy month, for sure.

Mike Maharrey: Well, I wanted to talk to you a little bit about some cool things that are going on here at Money Metals, and probably the biggest thing is we've got a new depository that... Is it open yet or on the verge of opening?

Stefan Gleason: Yeah, we haven't actually made the official formal announcement yet, but we're ready to do that now. We're fully moved into our new depository, which is a massive facility in Idaho. And in fact, it's the largest precious metals depository west of New York. There's nothing quite like it in the country, state-of-the-art, absolute top-notch security, technology and storage of precious metals, and literally twice the size of Fort Knox or twice the size of the US Bullion Depository at Fort Knox, which is fun to say. Of course, we have a lot of silver in our facility. That's part of the reason that the facility has to be so large, whereas there's arguably gold in Fort Knox.

Mike Maharrey: Right.

Stefan Gleason: But the bottom line is we've got about 8,500 square feet in class three vault space, and that's literally the highest class rating for a secure vault. It has to do with the strength of all six sides of the vault and the security systems and so forth. Full-time security team, lots of very interesting and high-tech technology, dozens of armed people, right next to the Sheriff and the County Sheriff and the city police. It's just a beautiful situation and it's really basically driven by the massive and increasing demand for storage of precious metals, which most people, most of our customers will have a ship them, their gold and silver, but a small percentage want it stored and particularly if they have a larger amount. So we're really excited about the opening of that facility and really puts us on another level as a business. It's really exciting for us. So we also have the ability to expand it further. Actually, another 20,000 square feet of vault space, making the total facility over 60,000 square feet.

Mike Maharrey: So with this setup, folks can actually buy and store right there. They don't ever have to necessarily take possession, so to speak. They can do it in one seamless thing, whereas I think most gold companies, if you do want offsite storage, it's going to go somewhere else, if I'm correct there.

Stefan Gleason: Yeah, that's honestly part of our secret is the full integration with the dealer. It's a separate company and there's separate auditing and all that, and we store in segregated containers and in ways that are highly secure, but the integration makes it seamless, at least from the customer standpoint. Literally just going on our website, they can buy, they can have it shipped to them, they can choose to have it stored. It's just mouse clicks. Ultimately they have their login for their storage account, they can sell back to us from the website. All of it happens very seamlessly from the customer standpoint. Obviously, it's very manual from an actual administration standpoint. People have to take out the containers. There's two people involved in every container being opened. It's all done under cameras, dual controls, everything is retested and so forth, but from the customer standpoint, it's totally seamless.

And the idea, that was part of our vision for that because we saw that the other dealers, the other major dealers in the country pretty much all have third party storage, which is very, very burdensome for the customer because they're having to coordinate multiple parties. And some of these depositories aren't really that good, frankly. They're slow, they're difficult to communicate with. They've been around for decades, some of them, and they just haven't really gotten up to speed with what's expected in today's commerce. And so you have a customer who might buy from one of our competitors, who's calling the depository, calling the dealer, maybe there's an IRA company involved as well. And it just ends up being a real mess and slow and frustrating, and we think we've solved all that with what we've been doing. And we've been in the depository business for about eight years, and we had a smaller facility that we just moved out of. So we've already figured out how to run this thing, and it's really just taking it to another level.

Mike Maharrey: So I'm going to play devil's advocate here because I know a lot of people that are precious metals investors are wary of any third party, and we would still be considered a third party, I think. How would you address somebody that comes to you and says, "Hey, Stefan, this vault sounds cool and everything, but I want my gold in my hand?" What advantages might somebody gain by having their precious metal stored on site and how can you assure them that their gold exists and it's safe?

Stefan Gleason: Well, first of all, we always suggest that every customer take some personal possession of their precious metals. It's not the main push. We're not saying, "Hey, you got to store your metals." Honestly, 97%, 98% of the orders that are placed with our company are shipped out to the customer through various postal and FedEx and so forth. There's no substitute for that. You shouldn't have all your precious metals somewhere else. You need to have direct access to them. I think a lot of people from the very beginning are wanting to hold their precious metals. It's part of the reason they buy precious metals. They don't want a third party involved in anything. They want to have the money in their own hand, and the idea of if you don't hold it, you don't own it. That's all very valid and we strongly encourage people to take possession of some of their precious metals, but there are situations where it's necessary or at least seriously convenient to have it in a facility.

For one, if you do it in an IRA, the IRS will consider it a distribution if you take personal possession of the metal. So you can't do that without potentially running into issues with the IRS. So IRA storage is certainly part of what we do and needs to be in the hands of a third party depository, but you get into a lot of extra value and you want to have all that in your house. Some people are comfortable with that, but there's a point where you don't want to have it all in one place to begin with, and certainly not all of it in your house if you have a lot, or if you live in an area where you're more concerned about that, but there's other things you can do. For one, keep your mouth shut. Don't talk about what you own to your neighbors and casual friends. A couple of trusted people, of course, but family members, but there are many situations.

Another thing is, frankly, with silver, if you're selling silver or any precious metals, obviously you need to deliver it to the buyer. So if you're selling back to a dealer, you got to get it to them. And in the case of silver, some people don't like having to go down to the Post Office and ship a box of silver back to someplace like Money Metals. They might want to sell it locally instead. But unfortunately, really, local dealers don't pay very well when you sell back to them. They really low ball people, and sometimes they then turn and sell it to us for more because we pay more. So I think the convenience of having the metal in the facility already allows you to have much more quick access to liquidity if you want to sell your metals. And so that's a convenience factor.

The other thing is security and storage fees and insurance is all wrapped up. It's generally less than 50 basis points a year, about half a percent or less per year. IRA storage is way less actually, at Money Metals Depository. And if you want insurance on precious metals in your house, well, that could cost you 1%. If you go to your insurance company and say, "I have gold in my safe," they're probably going to charge you about 1% in insurance. So there's an economical aspect to having it in a third party depository.

In terms of controls and auditing and so forth, Money Metals Depository does annual auditing, internal auditing. We have third parties come in. The State of Idaho actually has a regulatory regime that has oversight over precious metals depositories in Idaho. For what that's worth, I'm not saying that government regulators are good at what they do or that you should lean on them, but many are reassured that in Idaho, that there is that extra layer of oversight over private depositories like ours.

So it's not for everybody, but for some people it makes a lot of sense. If you're going to use it as collateral for a loan, which is something else we do, obviously we need to have possession of those metals because that's the security for the loan. We can't lend against gold that's in somebody's home safe. So that's another reason that somebody might want to store it if they're wanting a business line of credit against their gold, which is something we do, or silver. So there are reasons, but most people, again, don't want to do that, and that's absolutely fine. And frankly, as I said, we recommend that everybody has at least some of their precious metals in their possession.

Mike Maharrey: Yeah, yeah, absolutely makes sense. I'm curious about the whole idea of a gold loan. I could definitely see the advantage of that. I know people have used whole life insurance as a bank. In a sense, you're serving as your own bank. Can you give a little bit more how that works? What kind of percentage rates are we talking about here? How does it compare to a commercial loan, stuff like that?

Stefan Gleason: Yeah, so of course, a bank is not going to give you a loan against your gold. First of all, they view gold as kryptonite, the banking system to begin with.

Mike Maharrey: Right.

Stefan Gleason: The second, they don't know how to verify it, they don't know how to store it, they don't know how to liquidate it. They're absolutely not a source for borrowing against your gold. They're perfectly comfortable giving a loan against real estate like a home equity line, but not gold. So there's very, very, very few options to do this in the US. We are really the best option, but it's not going to be as quite as cheap, as I say, a home equity line of credit, but it's the same concept. Basically, you're tendering your collateral, which is gold and silver that we know, that exists. It's in our facility, we verified it, we know it's real, we're willing to buy it from you.

You may have bought it from us in the first place, and we lend... Initially, it has to be for a business or investment purpose. We're not a consumer lender, although technically, in California we are, and we advance 75% against the value of the metal at the time of the loan. And literally, it's just a home equity. It's like a line of credit facility. It's revolving, meaning you can pull it out, pay it down, pull it out again, pay it down. You only get charged interest on what the balance is. It's interest only. We don't require principal payments. It's not a fully amortized loan until maturity, when of course the loan has to be paid back, but we can just roll it over and that's what we do. It's a one-year revolving line of credit, and people generally will roll it over to the next year if they want, or they'll pay it down to zero and leave it open so they can pull money out if they need it.

In terms of rates, it's prime plus 2.5%. That's our current rate. It's been consistently that. Of course, prime is a variable rate in the market. So right now, I guess prime is 8.5%. So that means our rate is 11%, but prime is about to fall because it's directly connected to the Fed funds rate. So we have been seeing a lot more loan demand come in the last few months as people, number one, have gotten accustomed to the higher rate structure that we've seen, and also know or are pretty confident the Fed is not going to be raising rates further and probably will be slashing them dramatically, maybe in a panic, but ultimately, rates are probably heading down. And so anybody who's borrowing against us, their rate heads down in tandem with that. There's no origination fee.

So it's very user-friendly, and we have several 100 borrowers. But again, this is an accommodation. It's not a big core offering like the buying and selling from Money Metals or even the storage. This is just another thing that we offer as part of our overall services.

Mike Maharrey: It shows a little bit of faith in your product. Right? There's always a risk in accepting collateral that the value could go down significantly. And by offering this, I think you're signaling that, "Hey, we're pretty confident that gold is going to hold up in its value," right?

Stefan Gleason: We're 100% confident that it's gold and that it's liquid, and we know how... If there's ever a situation of somebody having to be liquidated, which really doesn't happen because there's plenty of buffer, it's sold at full market value and the loan principle gets paid down, but you get the rest of your money back. It's not that kind of situation. You're really just offering essentially cash as collateral, except it's better than cash. It's gold. There's some price fluctuation, so obviously we have to monitor the value of the collateral, but unless it floats up above 85% loan to value, you're fine. You don't have to take any action. You don't have to pay down your loan. There's no risk of any kind of small amount being liquidated to pay the loan. So it's a pretty cool option for people. We have a lot of real estate investors, small business people. There's various situations that come up where it makes sense.

And one thing that's interesting, if you think about it, if you want liquidity from your gold and silver, you have to sell it and selling it could incur a capital gain. And a capital gain, unfortunately, because of the discriminatory high tax treatment or tax rates of the IRS on gold, that's a 28% capital gains tax rate. And so when you're borrowing against your gold, you're not selling it. So there's no capital gains tax event. So that's another reason that maybe somebody might want to borrow instead of sell because they don't want to trigger tax. But again, this is a very small percentage of people that even do this at all, and that's fine.

Mike Maharrey: I always want to avoid taxes in any way possible.

Stefan Gleason: Legally. Legally minimize.

Mike Maharrey: Exactly.

Stefan Gleason: Absolutely.

Mike Maharrey: Let's pivot a little bit and talk a little bit about the retail market more generally. You have a front porch view of what's going on out there in the retail market. What do you see right now in terms of the market, especially here in the US?

Stefan Gleason: Well, it's really a tale of two cities in terms of the West, the Western world, and the east. Of course, I think the whole world a few years ago was on the same page. Certainly the West, there was a lot of demand in the West during COVID in the last two or three years. Pretty much everything that was happening was another reason to buy gold and silver, whether it was COVID and martial law or the silver squeeze event or inflation or election turmoil. Most recently last year was that big bank crisis, early last year. That was the last big retail situation where there was just overwhelming demand at the retail level. I would say that since last summer and certainly since last fall, it really has cooled off in the US, and by all reports also in Europe, in terms of retail demand.

And of course, people inherently think, "Okay, gold prices are at all-time highs," pretty much, 2,400 plus per ounce. Obviously that's a representation of demand coming from somewhere, but it's not retail US demand. It's not retail European demand. It's central banks and it's Asia, both retail and government, that are causing that higher price. So it's easy to lose sight of this is a global market and what's happening with US retail, it does not necessarily drive what's happening with the gold price or maybe totally different than what's happening in Asia. And that's certainly the case right now. We know there's very high demand right now in Asia. There's a craze developing around gold beans and these one-gram gold. If Asians are in Vietnam and India and China are buying a gram each whenever they can, that's been happening. So there's been a big retail demand push. There's obviously been central bank buying at record levels the last two or three years, including this year, it seems. You've been writing about this. It still seems to be very strong, although China took a little breather, but in the US, it's been cooled off lately.

That has in some ways been good. Certainly, it's not as great for the bullion dealer, but it's good for the investor in the sense that the premiums have come down, meaning the amount that people have to pay over the spot price has come down quite a bit, and part of the reason that's the case is because there's actually been more people selling than usual the last six to 12 months because of the high prices. And so gold and silver products have been coming back into the dealers, and of course, these are usually pristine and great resalable things. And so there's lots of inventory suddenly, which was not the case a year ago. And so that has caused the premiums to fall. It's been tough for mints, which we're making a mint, frankly, figuratively and literally, two or three years ago. Mints are really struggling right now because the inventory that they sell is actually higher than most of the inventory out there on the secondary market, and the premiums have come down.

And so it's a great time from the standpoint of cost efficiency to get gold and silver because the premiums are way back down to pre-COVID levels, if not lower. And so some people are taking advantage of that. I don't think there's been the broad awakening of the public yet, and I think that's when we're going to see the next wave. And it probably will coincide with higher prices in the actual metal where people just realize, "Okay, the gold prices all-time highs keeps going higher." Silver, maybe silver finally gets over $35 and runs towards $50. That will attract a lot of attention in the West. And I think at some point, people will start chasing it and we'll see a lot of demand come in because the bottom line is still today, it's probably less than 2% of US people, US citizens, have any gold or silver, other than maybe some jewelry. And it may be even less than 2%, but it's a very under-owned asset.

And I think that will change as people become more aware of the role that gold and silver play and the performance last 20 years has been phenomenal, frankly, compared to other assets. Still hasn't gotten the attention. Stockbrokers are still poo-pooing it, not recommending it for reasons that often have to do with their own incentives and not what's best for their clients. But I think with higher prices, with inflation continuing to be a big problem, more turmoil politically, geopolitical conflict, there's so many reasons, and I do think that we've seen more people come in, but I think we're going to see really, at some point a mania, but we're nowhere near that right now. And when that happens, premiums will rise and it won't be the best time, frankly, for people to position themselves.

Mike Maharrey: I wrote an article this morning about the increase of gold buying in Africa, and this is primarily central banks and policies. There's this gold rush going on over there, and one of the things that they're hedging against is geopolitical risk. And I think most people, if you ask the average person on the street that's at all educated and cognizant about investing, they'll tell you, "Oh yeah, gold and silver are great safe havens," and yet people buy the safe haven after the crisis. And I said in an article today, that's like buying your fire insurance when your house is on fire, which obviously you can't actually do that, but that's the mentality. And really, if you do believe that gold and silver are a hedge, you need to have the hedge before the crisis and not be trying to hedge during the crisis, or you'll end up with... It's interesting because a lot of folks in Asia, they're still buying despite high premiums and high prices, which a lot of analysts have pointed out, it's pretty unusual. So you wonder what do they know that we don't? Right?

Stefan Gleason: Yeah. And of course, the powers that be in our world seem to be promoting paper assets, promoting stock investments, bonds, financial instruments. It's this modern innovation, I guess, of the Western world. But in Asia and Africa and other parts of the world, they've seen so many bad cycles of government and economic distress and so forth that they just culturally, they still really understand what is real value and what isn't, and I think that's very telling.

But again, I do think that people are opening their eyes here in the West, but the downside seems to be very low. And with insurance, you just pay a premium and every year, you keep paying it. With gold, you have that as a tangible asset you own and have possession of, and it serves a financial insurance function, but it also... There could be a profit opportunity. It's always going to have value. It's a no-brainer, but it's not something people have really grasped. People are comfortable buying insurance. Everybody has insurance, but they don't have financial insurance in the form of gold and silver. And I think part of it is, again, that the people that they're supposed to be able to trust are not telling them to do it and might even be actually telling them not to do it.

Mike Maharrey: Speaking of paper assets, I think the ultimate paper asset is the dollar, and Money Metals is a big supporter of sound money, supports the Sound Money Defense League, and has really been involved in public policy in terms of trying to promote and incentivize and create an environment where we can have sound money. What's the motivation behind this? I'm sure a cynical person would say, "Oh, it's just because gold and silver is their business," but I know that it goes much deeper than that. Can you give folks a little insight on that?

Stefan Gleason: Yeah. Well, I personally have a political or public policy background. Before I launched Money Metals, I was at a public policy group, a conservative free market group called National Right to Work, and I was there for 15 years. I've always been interested in advocating for more individual liberty, freedom, limited government. And so that's part of who I am. And so when I launched Money Metals, of course, in the initial few years, I was focused on building the business, but then I realized there's some significant policy problems here that we can help with. And using my background with grassroots organizing and legislation and public policy in general, promotion in general, I realized my customers really would want some things done. For one, remove sales taxes. Not only is that wrong ideologically, but it directly impacts my customers.

And so having to collect tax and remit it to government tax bagmen across the country has really been not a fun thing to have to do. And so back in 2015, we decided, "Let's start promoting repeal of sales tax." And at that time, there were about 32 or 33 states that had exempted gold and silver. Now there's 45 and virtually all of those are projects of my efforts and our efforts at Money Metals and the Sound Money Defense League. And also, frankly, the involvement of our customers who have actually been out there, prompted by us. We alert people via our email list, phone calls and so forth, and letters of pending legislation, who to contact in their state, what to say, what bill number, and our people, our customers are the grassroots activists that are making this happen.

And at the state level, that has been very powerful because they're not used to seeing that kind of organizing. They may be at the federal level, the politicians, they see a lot of activism, maybe they try to tune it out, but at the state level, it's really impactful and we have thousands, if not tens of thousands of customers in every single state. And so we've been using our abilities to communicate to get those folks involved, and that's really put some of these projects over the finish line. We moved to removing the income tax. We're encouraging states to hold gold in reserve. Several states now are doing that or have passed bills to do that. There's other public policies, but the most primary area is the taxes, because if gold and silver is going to be remonetized, you have to get rid of the friction around the buying and the selling or the trading or the exchanging, which is really what the dollar had.

There's no friction there because everything's denominated in dollars. The dollar's going down in value, you're forced to pay capital gains on some other asset measured in those dollars, but you don't get to deduct the capital losses on the dollar that you have in purchasing power. And so it's an unfair privileged position against everything else, especially gold and silver, which is really the money that the founders put and provided for in the US Constitution. And so really for us, it's about aligning ourselves with our customers. It's about promoting the idea of sound money. It's the reason we were investors, my business partners and I in the first place, in gold and silver before we launched the business. It's the reason that we obviously love what we do and believe in what we do, but it's also just as simple as just helping our customers remove taxes and making it clear that we're advocating for them. And so we're pleased to do that.

I also would say that the lack of sound money in the US is part of the reason we have not just a debt problem, but a big government problem. And that policy, restoring sound money is part of the solution to many of the problems that we see, the infringements on our liberty, the runaway growth and cost of government and so forth. And so it really just aligns very much with my belief system and really, the belief system of many of our customers. I wouldn't say that most of our customers are ideological, but they do tend to be in this alignment with us.

Mike Maharrey: Yeah, well, I certainly am. It's one of the things that attracted me to doing work for you folks, or for us, I guess I should say-

Stefan Gleason: Yes.

Mike Maharrey: Because I recognize the very same things. I say all the time, if you're concerned about the welfare state or if you're concerned about the warfare state, both of those things are really a function of the government's ability to borrow and spend, which is a function of fiat money and ultimately money printing.

Stefan Gleason: It's enabled by it.

Mike Maharrey: And we have to, I think, give a shout-out to Jp Cortez over at the Sound Money Defense League because he is absolutely fantastic at what he does. I've been around a lot of folks in the activism world, and he's one of the best-

Stefan Gleason: For sure.

Mike Maharrey: And it's exciting to see what he's done. I'm going to get you out on this one, and this doesn't have anything to do with gold or silver. So just a personal question. What are you reading right now, if anything?

Stefan Gleason: Wow, it seems like most of the reading that I'm doing is the things that we're writing and that you're writing. So I actually don't have a book at the moment, but I tend to read... Honestly, I personally focus on current events and libertarian-leaning public policy stuff. So I would say, honestly, I don't have a book for you that I'm actually reading at the moment, but I am reading every day and doing a lot of editing every day, so I know that I'm interacting with copy quite a bit.

Mike Maharrey: Yeah, reading Maharrey is a great answer.

Stefan Gleason: Yes, exactly. And there's a lot to read, honestly. It's amazing how much you crank out, pretty much daily. You're writing multiple articles, your podcasts. I'm thrilled, and not just because of the messaging, but just the quality, and also frankly, the recognition that others in the industry and the Gold Sites and Zero Hedge and all over the place are really picking up your stuff and running with it. We were told that their readers have been won over by your writings and your content and the other stuff that we published, but it's really gratifying to be part of a publishing operation with just incredible writers like you involved.

Mike Maharrey: Well, I really do appreciate that, and I return the kudos and the thanks because it's a great fit for me, both from an ideological standpoint and from just being part of a really high quality team. And if there's folks out there listening, if you're thinking about investing in precious metals, I can't recommend Money Metals Exchange more because that quality of people runs all the way through from the top down to the dealers and everybody that you interact with.

We probably ought to stop patting each other on the back, and I know you're a busy man. So I'm going to let you go, but I do appreciate you taking time out of your busy day to join us here.

Stefan Gleason: Thank you, Mike. It's a pleasure.