Hello reader, welcome to the latest issue of HX Weekly!

Each week we bring you a new edition of HX Weekly that includes three distinct sections.

In the first section, Thoughts on the Market, we'll offer insights into current economic and market news.

In the second section, HX Daily Redux, we'll revisit investing concepts, tactics, and more from past issues of HX Daily.

And in the third section, Market Wizard’s Wisdom, we’ll share thoughts, quotes, and theories from the greatest investing minds of all time.

Now, let's dive in!

Here is another great note from our colleague Sean Ring with Paradigm Press Group. He does a good job of going through the recent struggles in precious metals.

Like Sean, we think this is a great opportunity to buy. You can read the original article here.

Enjoy.

Thoughts on the Market

The War Tax on Hard Money

By Sean Ring

Here's something that shouldn’t happen.

A war breaks out in the Middle East. Oil rockets past $100 a barrel. Inflation jumps to its hottest reading in years. By every rule you were ever taught, that’s rocket fuel for gold and silver.

And yet, since the fighting started in late February, both metals have fallen. As I write this, spot gold is off by just over $1,000 (about 19%) from its closing price on January 28th. Spot silver has dropped harder, down roughly 37% from the same day.

If you own metals, you have a right to feel confused. You did your homework. You bought the inflation hedge. Then the inflation showed up, but your hedge went down.

We weren't wrong. My colleagues, such as Adam Sharp and Matt Badiali, are correct in their analyses. The rules didn't break. But a force bigger than the inflation rule stepped in front of it.

The Rule We Forgot

Gold and silver pay you nothing. No dividend. No coupon. They just sit there and shine.

That's fine when cash and bonds pay nothing either. But the moment safe assets like those start paying real interest, metals have to compete against a steady paycheck, and they can't.

If you’ve ever heard of “Mr. Wonderful” Kevin O’Leary’s $5 million rule, this makes sense. Buying $5 million worth of safe, default risk-free 3-month T-bills yielding 3.7% earns you an annual return of $185,000. Why risk anything, especially in volatile, couponless precious metals, when your baseline income for doing nothing but lending your government money is nearly $200,000?

Follow this chain of reasoning: The Iran war choked the oil supply through the Strait of Hormuz. Then, gasoline prices jumped. In April, wholesale inflation — what producers pay — ran 6% over the year, the hottest since December 2022 and far worse than Wall Street analysts guessed. Consumer prices (CPI) followed at 3.8%, the worst since 2023.

Wholesale prices (PPI) matter more. Producers pass their costs to us, or at least what we, the consumers, let them get away with. So a 6% PPI reading isn't just bad news today. It's telling us more pain is coming down the turnpike.

Hot inflation means the Federal Reserve can't cut interest rates, so it didn't. Traders who spent all winter betting on rate cuts had to rip up those bets. A few are now betting on a rate hike.

Higher-for-longer rates are a tax on anything that doesn't pay you… And metals pay you nothing.

That's the whole trick. The war didn't lift metals. The war lifted oil, which lifted inflation, which killed the rate cuts, which made cash king. Gold and silver got caught in the crossfire.

Finally, central banks (especially Turkey’s and the Gulf states’) are selling gold to cover their governments’ budget shortfalls. The very institutions that started and sustained the gold rally suddenly began selling. It put enormous pressure on the gold price.

And where gold goes, silver goes on steroids.

Why Silver Took the Harder Hit

Notice silver fell almost twice as far as gold. There are a few clean reasons for that, and none of them means your thesis is broken.

As my colleague Nick Riso famously covered, silver’s sell-off began when it was trading like a meme stock… and then fell victim to a vicious unwind of a gamma squeeze.

Silver had run up roughly 150% over the past year. When a crowd is that leveraged and giddy, the exchanges raise margin requirements. That forces some traders to sell whether they want to or not. Selling triggers more selling. The exits get crowded. All that happened in January, just before silver got crushed.

Next, silver isn’t just a monetary metal. Nearly 60% of silver demand comes from industrial applications, such as solar panels, electronics, and wiring. When higher rates raise fears of a slower economy, that industrial half gets marked down. Gold doesn't carry that baggage.

Size-wise, the silver market is tiny. The London gold market trades many times the dollar value of silver. A small market moves fast in both directions. When traders are calm, that's thrilling on the way up. When they panic, it's brutal on the way down.

None of that is a verdict on silver itself. It's the physics of a small, hot, crowded market letting off steam.

What This Is — and What It Isn't

Mechanics are driving this pullback, not a collapse in fundamentals. The difference matters enormously for your wallet… and your sanity.

If anything, the structural case for silver is stronger than it was. The metal has run a supply deficit for 6 straight years. Aboveground stockpiles have been drawn down by hundreds of millions of ounces. About 70% of silver gets mined as a byproduct of other metals, so miners can't simply dig harder when the price rises. And new mines take the better part of a decade to come online. (This is what economists call an inelastic supply.)

Gold's story is just as intact. The big banks haven't blinked. UBS still targets $5,600. J.P. Morgan sees a path to over $6,000. One research shop notes that private wealth holds about half as much gold as it did a decade ago. If that gap even partly closes, the buying is enormous.

The reason for the fall is specific, not structural. Over time, specific reasons reverse.

What It Means for You

Don't read a price chart as a vote on whether you were right. In the short run, a war that drives up oil can drive down gold because the path runs through inflation and interest rates, not straight to the metal.

The thing to watch isn't the daily quote. It's the Fed. The day rate cuts come back onto the table, the tax on hard money lifts. Until then, expect a lot of chopping and changing. Right now, gold’s downside target is around $3,980. Silver’s is $58.25.

If you believe the long-term case, weakness is the friend you've been waiting for. Keep some dry powder. Let the crowded traders do the selling for you. Or, if you’re currently out like I am, waiting for the lower price action may be the ticket for you.

Wrap Up

The men who sold gold in a panic in 1980 weren't fools. They simply confused a pause for the end. The world was still a mess. They were right about the disease and wrong about the calendar, and it cost them dearly.

You know more than they did. You know why the metal fell. You know it has nothing to do with whether the case is sound.

So don't flinch at the screen. Read the Fed, not the ticker.

A couple of years ago, we shared this story about a pivotal moment early in my career with John Griffin — one of Julian Robertson’s elite Tiger Cubs and one of the finest investors of his generation.

In the middle of Fed-induced market jitters, John dropped a simple truth that cut through all the noise and has guided us ever since. It’s still just as relevant today as it was then.

HX Weekly Redux

The Federal Reserve Solved!

Many of the readers here at HX Research know a lot about my history and background. 

My career has spanned three decades of professional investing.  Across that time, I have had the opportunity to work with and be influenced by some of the greatest investors of all-time.

In the past few days there has been a tremendous amount of focus on the actions of the Federal Reserve Bank.

Many of you know this but “The Fed” (mostly) controls the monetary policy in our country.  This means how much money is in the economy and how much it costs to access that money via interest rates.

We could write one hundred issues about the role The Fed plays in the economy and stock market but we think the anecdote we are going to talk about today will take care of it all in ONE issue of HX Daily.

Back in 2001, two partners and myself founded a hedge fund called Stadia Capital.  The three of us were very young (I was 29!) and we started with a tiny amount of investor capital.  $585,000 to be exact!

That is everything we could put together from our friends, family and ourselves.  (For the record – think I was able to put in $5000 – ha ha!)

While we didn’t have very much capital to start, we were blessed with some great relationships.  My partners and myself had made quite a few friends in our short time on Wall Street.  One group of contacts that were able to foster was within the group of managers that were (or had been) affiliated with famed hedge fund Tiger Fund Management.

At my old firm, we wrote often and fondly about Tiger and its founder Julian Robertson.  As we move through the rest of this year, we will share many of those pieces.

The wisdom – and its simplicity – of Julian and his disciples is rare and legendary.  It has also produced more wealth out of the investing business than probably any other “family line” out there.

One contact in this network we had built is a man named John Griffin.

Now many (most) of you have likely heard of Julian but far few of you have heard of John.  John was (and is) the best of the best!

He was an early alumni of Tiger and launched one of the very first (maybe even THE first) “Tiger Cub”.  In the next two decades he put together what is still one of the single best track records of investing out there.

The other incredible thing about John is that he is an absolute gentleman.

My partners had met him through our network and asked if he would give us advice about starting our new venture.  He didn’t hesitate for even a single moment!

First words out of his mouth were “Call me anytime guys and will help you as much as I can!”

For a group of rookies with no track record and no capital this was like having Michael Jordan say he would be happy to coach a bunch of eighth-graders at any time.

As I have said many, many times – I have been very blessed in this business.

We are going to write some more about John in the future and try to even get him on the HX Podcast.  Again, he is an absolute legend but also one that is incredibly skilled at distilling his wisdom.

Yesterday, though, we thought of John in the wake of the most recent Fed meeting.

To recap our version of what happened in that meeting…the Fed announced they were doing nothing.  Which was expected.

They also announced their views had not really changed.  Which was expected.

Finally, the Chairman of the Fed (Jerome Powell) got up and spoke and said basically…nothing new.  Which was expected.

Initially, the stock market didn’t do much but as Chairman Powell continued to speak it began to move higher.  Strongly.

This was great…until it wasn’t!

For reasons that no one really knows (nor will ever really know), in the last hour of the day the stock market gave up all of the gains.  It ended the up basically flat but the last hour loss was violent and fast.

There were quite a few commentators out there that noted that it was very rare to see THAT kind of sell-off so fast.  Many felt it must portend something bad for the stock market.

This brings us back to John…

We launched our fund Stadia in March 2001.  Although we started with almost no capital, we did good returns in a difficult stock market and grew.

THEN the events of September 11 hit!  Those were terrible times but our strategies have always been ones that were built for the worst and most difficult markets.

Our fund did very well.

A few months later, my partners and I had a meeting scheduled with John.

There was no particular agenda.  John didn’t spend much time thinking about the “macro” side of investing and was very focused on individual stocks.

We loved going over there and hearing what he and his team were working at the time.  They did incredible work. 

Would like to think the same could be said about our team.  John and his analysts appreciated our ideas and research.  It was a good mutually beneficial relationship.

Our fund was doing ok at the time but we were still in start-up phase and very stressed out.  We were young with this small fund and business and we felt every tick of the stock market.

Our meeting was for 2pm on that day. 

Earlier that morning the stock market was quite volatile.  It turns out – like this last Wednesday – that this was the day that the Fed was going to make its latest interest rate announcement and give their outlook.

My partners and myself were very nervous about all of it.

We didn’t have a particular view on what the Fed was going to say.  Nor did we have any stock positions (or the portfolio overall) that was particularly vulnerable to what was going to happen.

Despite all of this, I put a call into John and politely told him that we would like to move the meeting to another day.  Always like to be upfront and said we were nervous about the Fed meeting and thought it would be best to find another.

John – the consummate gentlemen – said “Of course, no problem guys.  Am always available.”

Then, however, he said something else.  Something so powerful that – as I said in the beginning – can distill a hundred (or a thousand) articles of Fed analysis into one simple view.

He said…

Mic drop…

Those words hit me like a thousand bricks all at once.  I hesitated for a few seconds (which is rare for me) and the in some stumbling manner said to John…”Umm, yes.  Ok – we will see you at 2pm.”

Of course, we did the meeting and continued to learn from John for many years.

That 10 second phrase, though, taught me everything I would need to know about the Fed for the two decades!

Market Wizard’s Wisdom

The NEXT Warren Buffett

This week’s title is a big claim and one that has been made many times. Most of them self-proclaimed.

After recently attending our first Berkshire Hathaway annual meeting and completing a book about Charlie Munger, we have had a lot of time to think and reflect about Warren and his career. Especially as it is entering its twilight phase with him turning 96 years old later this year…

One of our reflections is on the man who made the first presentation we saw this year at the annual meeting - Pershing Square Capital Management Founder and CEO, Bill Ackman.

Full disclosure – Bill and I are on friendly terms. We are not at all close but have had several nice conversations over the years off the introduction from my former colleague, Whitney Tilson.

Bill is a little bit older than me, but we started our hedge fund careers around the same time. He founded Gotham Partners in 1992 and its successor firm (Pershing Square) in 2004.

We are not going to spend a lot of time on Bill’s background but we will jump right into WHY we think he can be the NEXT Warren Buffett.

Here is why in my view…

First, Warren is one of the smartest people out there. Everyone who has ever met him has said it. Bill is the same. Super sharp.

Second, Warren combines his intelligence with a strong dose of common sense. This sounds like it should be the norm, but trust me when I say it is by far the EXCEPTION. Again, Bill is the same. His “common sense” comes in the form of logic, but they achieve the same end result.

Third, persistence and patience. These are defining traits of both Buffett and Munger. Charlie was one of the most persistent people on Earth. Warren is one of the most patient people. Bill has both.

Fourth, and finally, CAPITAL STRUCTURE.

The personality traits listed above are keys to Warren’s success. Without the right capital structure – long-term investment capital that can be patient and compound – those traits would mean nothing.

Bill has been working on replicating this structure for the last decade. He has a clear playbook to go off of with Berkshire Hathaway. One that he can even improve upon.

Bill recently has taken several steps to build this structure. They include:

• Acquiring a controlling stake in real estate holding company Howard Hughes Holdings Inc. (HHH) in May 2025.

• Howard Hughes then looking to purchase insurance company Vantage Group Holdings in December 2025.

• Most recently, his closed-end fund vehicle Pershing Square USA (PSUA) raising $5 billion.

These moves have brought onboard an additional $10 billion of long dated (or permanent capital) to go alongside the $20 billion in his hedge fund.

We think he is JUST getting started.

Considering that Bill just turned 60 years old earlier this month, we think he has a long runway ahead of him.

For some perspective, Bill has achieved an almost +16% annual return since inception in 2004. Since he began raising permanent capital in 2018, that return has been almost +23%.

Let’s say he can keep it up and generate +20% returns for the next 25 years.

That would turn $1000 invested today into almost $100,000. That sounds very “Berkshire-ian” to us!

With his investment track record so far, the Berkshire blueprint and his recent moves, we truly think that Bill has the chance to be the next Warren Buffett.

We hope that you’ve enjoyed this week’s issue of HX Weekly…

Do you have any thoughts, questions, or feedback? Tell us more in the comment section or at [email protected].