Chief Analyst Tom Lee on Gold’s Black Swan Risks: Elon Musk Has Become the ‘New Central Bank’

In a conversation exploring the collision between traditional finance and future technology, Wall Street chief strategist Tom Lee charts a runaway “black swan” scenario, in which the global financial system is turned upside down not by the Federal Reserve, but by Elon Musk.

Speaking on a live recording of SoFi The important part podcast at WNYC, Fundstrat’s co-founder and head of research raised an eyebrow and offered different thoughts on the asset, wowing the audience and drawing smiles and laughs from co-panelist Michael Lewis, author of The big shortand podcast host Liz Thomas, head of investment strategy at SoFi. Not only is gold an asset of the Lindy Effect, Lee said, but it is also a “demographic” story that, in Lee’s view, has to do with nostalgia. All this, and he sees the “black swan” risk that involves Musk, the richest man in the world, discovering a new asteroid and becoming the governor of the world’s central bank.

In Lee’s view, gold “may be a demographic story,” noting that Fundstrat has done a lot of demographic research and found that “preferences transcend a generation.” For example, every 50 years you get another peak in RV or RV sales. Pointing to the peak in RV sales during the pandemic, he said the last time sales were so strong was during the peak of the 1950s. I love Lucy.

“Children don’t buy what their parents like, they buy what their grandparents like,” he said. He concluded that gold was “a really great investment for baby boomers,” while Gen X I went into hedge funds and alternatives.

Gold is similar in size to the stock market, Lee said, with data backing it up, with gold totaling “above ground.” With a value ranging from $29 trillion to $34 trillionwhich is comparable to the Magnificent 7’s Nearly $21 trillion market capitalization.

He added: “By the way, all this fits in a swimming pool, all the gold in the world.”

Louis commented that his palms were starting to sweat, “just imagining” the idea. “The saliva starts coming to your mind,” he said.

Lee went on to say that gold is an asset of the “Lindy Effect”: something that, because it has been agreed upon as a store of value for many years, is still accepted in that way. What could disrupt this? This is where it gets to the point.

Black swan scenarios for gold

One of the main risks for gold is the above ground aspect.

“There is a million times more gold underground than there is above ground today,” Li estimated as he nodded It is estimated that most of the gold on Earth is inaccessible. If gold becomes too expensive, he said, that will create perverse incentives. “Like, literally, Mag 7 is going to get into gold mining, right? Because you might just be mining gold. It’s more valuable than anything else.”

Another major risk, he added, is that the gold is “entirely extraterrestrial,” referring to where the gold comes from. Meteorites collide with Earth. He said this indicates that space companies could discover more gold floating in space. “SpaceX “He might do a mission to Mars and then crash into a gold asteroid,” Lee told the audience. “And Elon Musk, if he owned all the gold, he would become the new central bank.”

When asked about manufactured gold, Lee agreed that this was the third danger: chemistry.

However, gold may have “peaked” based on Fundstrat research, Lee added. Fundstrat looked at 100 years of gold to equity market capitalization and it typically reaches 150% before pulling back. Noting its 9% drop on January 30, Fundstrat looked back and found only three other times that gold fell in a single day by more than 9%, and all three times were peaks.

“So I don’t know, but if history is any guide, he probably made it to the top,” he said.

Lewis then revealed how he got a share in the gold business, very profitably, through an old poker friend from New Orleans.

Old poker friend

“When I have it, I think I’ll be afraid for a long time,” Lewis said of the yellow metal. “It’s business Armageddon.”

Lewis revealed that although he is a proponent of passive investing in index funds, he amassed a large position in gold after a conversation with a former poker friend turned fund manager, with whom he lost touch for many years before reconnecting while reporting. The big short. Lewis remembers seeing his friend’s collection of ancient Roman coins.

“He showed me the way the emperors devalued the currency over time. The silver content was less and less. Then he gave me a long argument for buying gold,” he recalls. “And it was very convincing. Like, I don’t do that. I don’t buy gold. It’s crazy. It’s like crazy. But I couldn’t get it out of my head.”

Finally, three years ago, Lewis said, “he bought a bunch of gold.”

“The prices got higher and higher,” Lewis said, adding that he felt guilty and wouldn’t advise anyone to do it either, but decided to invest that money back into his friend’s fund.

He added: “And what he does, and he’s smarter than me about this, is he buys gold mining stocks.” “It’s a cheaper way to buy gold.”

Lewis cited the “unstable political situation” and general global concern as the primary motivations for his hold on the metal.

“I see no reason not to be afraid,” Lewis admitted. “And I guess fear isn’t a bad thing to live for a long time now.”

This story originally appeared on Fortune.com