The Compound and Friends - Wall Street's First Black Millionaire (with Shane White), the Case for Buying Silver (with Peter Boockvar)

Episode Date: February 5, 2021

Josh is doing Black (Financial) History month on the podcast all month long, bringing on historians and authors to discuss some of the most pivotal economic moments for African Americans ever. Black History is AMERICAN history, don't get it twisted. This week, University of Sydney history professor and author Shane White joins to discuss his award-winning book about Wall Street's first black millionaire, 'The Prince of Darkness' Jeremiah G. Hamilton. Before that, a chat with Peter Boockvar (Bleakley Advisory) about the current stock market mania and the investment case for silver and silver stocks. If you're feeling the pod, give us a rating and review. It's how new listeners discover what you already have. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: https://ritholtzwealth.com/podcast-youtube-disclosures/ Hosted on Acast. See acast.com/privacy for more information. Learn more about your ad choices. Visit megaphone.fm/adchoices

I feel like we're in one of these moments where the world is just completely awash in nonsense and there's so much information and disinformation and misinformation all over the place. It's almost impossible not to come across it and even get caught up in it if you're being inconsiderate about the source. Like if you're not thinking about why am I encountering this? Who is the person supplying this information? Why is it spreading so quickly? Why is the guy behind the counter at the pizza place asking me questions about GameStop? GameStop? And why is somebody's 15-year-old nephew asking for my text so they can ask me about silver mines? If you're not asking where the information is coming from and why it's spreading so fast, you're not asking the right question. So let's talk about that. First of all, this idea that there's going to be this message board on the internet that's going to go from stock to stock forever and the crowd is going to follow along as it routinely pumps up and then blows up all of its money in different stocks, I don't think that's really how it's going to play out.

History says it's not going to play out that way. So as I am talking, if you think about what we've seen in the meme stocks over the last week, things have played out pretty much how I thought they would. And it's unfortunate because I definitely had hoped that we would not see this. But here are the percent from high readings on the four most popular. GameStop is down 81% from where it was a week ago. 81%. So if you put in $10,000, you have less than two grand left. AMC is down 61% from a tie. BlackBerry, 54% from a tie. So you cut in half. Bed Bath & Beyond, I almost can't even say the names of these stocks. It's all so ridiculous. Bed Bath & Beyond is down 62% from a tie. This isn't like after six months. This isn't a week. So it's a truism that most of the

money in a pump and dump comes in at the end because that's when the most amount of people have heard about these things. And you have people who have made money early. They bought this at 20 and it went to 200. That's when they're screaming from the rooftops how everyone else has to get in and how smart they are. So it didn't work out well this time. And it doesn't work out well anytime. And a handful of people made a ton of money because they were early and they sold at the right time, but they are in the minority.

That's not the experience that most people with this kind of madness end up with. And now they're talking about executing a short squeeze in silver, which is among the dumbest, most impossible things I've ever heard. So I want to share something with you from Jeff Curry. He's at Goldman Sachs and he's the head of their commodities research and actually knows what he's talking about. because he actually likes it as an investment for regular reasons, not for Reddit reasons. But he brings it up because people on message boards talking about executing a squeeze or a corner in the price of silver really don't understand what would need to be involved in order for that to happen. There are position limits in the silver market. It is not like the early 1980s when the Hunt brothers drove the price up 700% in three weeks, which is a thing that actually happened, by the way. Jeff Curry says, to replicate the same feat now, Wall Street Bets subscribers would need to own roughly 4,600 ounces of silver each and work in a coordinated fashion.

ounces of silver each and work in a coordinated fashion. Think about how ridiculous that is, right? But even then, he goes on, given the current regulations around position limits of 7.5 million ounces to corner the exchange inventory on the COMEX, the position would need to be split 53 ways with each position valued at 217 million. There are not 53 entities that want to buy $217 million worth of silver to try to execute a corner in the market. At least not 53 entities that you could trust to work together and all hold at the same time. That's by design. We don't want to have commodity markets where one player can orchestrate a corner and control the supply, obviously. Why would anyone want that? So this idea that 19-year-olds on Robinhood are going to execute a corner in one of the most widely held and widely traded

precious metals on the planet, it's almost embarrassing if you believe in that kind of thing. Like I almost feel like stop reading message boards and Twitter and start reading books because you're fucking embarrassing yourself. Anyway, Jeff Curry goes on to explain the difference between commodity markets and equities, and I think this is really important. A short position in a commodity future is not equivalent to a short position in an equity. A short position in the equity markets involves

borrowing shares in a company with the promise to return those shares to their owner, usually a long-only asset manager at some agreed date. Let me break. Remember last week, we talked about Piggly Wiggly stock. All right. So that's what he's talking about. You're borrowing the shares and then you're selling them and the idea is you're going to give them back at a certain point. You'll have to buy them to give them back. So you hope you're buying it back lower. Quote, Jeff Curry, the guarantee of a future purchase is the driving mechanism behind the short squeeze. Force a firm to close out their position now,

raising apparent demand and prices in the near term. This is not true for commodity futures. A short position is a promise to deliver the physical underlying commodity at some agreed date. While some shorts are speculative and require covering before expiry, most are driven by industrial producers hedging their forward earnings. That is to say, when commodity short positions are broadly backed by real physical stock, there will be no subsequent buying and no short squeeze. To short squeeze a commodity market, you would need to own a substantial portion of the actual underlying physical market. Having extended short positioning is not enough.

So nobody on message boards is acquiring physical silver. None of this is happening. So I think everyone needs to take a deep breath and get a grip on reality and stop acting like children. And I don't have a problem with trading and speculating and having fun and chatting about it. But there are real people who are coming across this misinformation and acting on it, and they will suffer real world consequences. And these billionaires gaslighting the public on Twitter and on AMAs and whatever. I almost don't understand it. If I ever become a billionaire, there's no danger of that happening. If I ever become a billionaire,

you will never see or hear from me again. I promise. I would never inflict myself on you. Okay? I'm not aiming for that, by the way. I love what I do. I'm very happy being middle class, living on Long Island. I'm in the same house for 12 years. I like what I am, okay? But I'm just saying, this idea, being a billionaire and then needing Twitter likes? What the f*** is that about? I honestly don't understand it. Makes no sense to me, but fine. The point that I want to make is there's free speech and people should be able to say what they want, but there is no billionaire who actually cares about your retirement. Why should they? It's not their fault. They have their own thing going on and they can afford to speculate millions of dollars in trades and buy and sell and lose money and tweet about it and make videos and memes. They can afford to do that. Can you? You're probably not playing the same game that they are, right?

So I don't want to be a scold. I don't want to tell people what to do, how to act. But like, just be aware that things that you do and say reverberate and other people follow you, other people listen to you. So you really want to just be cognizant of how memes spread and how message board chatter turns into real life losses. And it's not going to be pretty. So now they're going to investigate this kid who I think he was like a financial advisor at an insurance company, the first kid to start posting about GameStop. And I don't think his expectation was to launch this worldwide movement of pros versus Joes.

That's not what it seems like he was trying to do. He genuinely thought the stock was cheap and that short sellers would be wrong and that investors would be right. And that was the story for a while. And then it turned into something much more than I think he intended. But they're going to climb up his ass now with a magnifying glass to see if he was stoking this madness that it ended up turning into. And you could understand why. So now he might even get called in front of Congress. The CEO from Robinhood is going to testify. I think it's February 18th. I'll be watching.

I'm sure he'll be watching. This is going to be one of the more entertaining things that you've ever seen. But to get back to my original premise, I don't think that this is going to be a long-term phenomenon where we're watching message board short squeezes and stocks every week. So I know a lot of people are like, it's a new era and the retail traders demand to be heard and they've been unleashed. I think in the end, retail traders are just going to want to make themselves money more so than they're going to want to be part of a movement, especially a movement that's being led by false prophets and false promises. I think what we're going to end up with out of this whole phenomenon is a lot of young people who get really wise, really fast about the ways of the world,

and they start looking out for themselves. And I actually think the silver lining will be having this experience when you're young and you don't have a lot of money to lose is really great. It's really great. I blew myself up when I was in my early 20s. I don't know what I was doing. Nothing wrong with that. That's when you should blow up. You don't want to blow up at 50. You don't want to blow up when it's your kid's college tuition when you're 38 years old and then you have five years to replace that before they start going to college or whatever it is. This is the right time to do crazy stuff and experiment and learn most importantly. So I think it's like on balance, it's okay.

So that's what I wanted to say about the situation this week. I want to get into one other thing here, which I also think is important just for like long-term investing and 2021. And I promise we're done with the GameStop stuff for now. So let's get into earnings this year. My friend, Tony Dwyer, friend of the show, you guys have heard him on here before, put out something about expectations for this year. And I think it's worth repeating because this is the environment that we're now in. By the way, we just got earnings reports from all the big tech companies. And I don't even know why I call them tech anymore. They're just the companies at this point. These are the most dominant businesses in our lives. Amazon, Apple,

Microsoft, Alphabet, PayPal, one after another, they're just smashing expectations and raising guidance. It's actually incredible to watch. And these stocks have been up for a long time. And there's a reason they've been up. And when they report these results, you see that reason. So it actually makes a lot of sense that there's been a huge rally in the market when you consider how dominant these companies are. And then they report their results and you go, oh, that's why PayPal has been compounding at 40% a year since it spun off from eBay in 2015.

Oh, that's why. Because they have almost 400 million users and they're doing billions of dollars, $20 billion in revenue. That makes sense to me now, right? So those are the types of reports we got. And here's Tony talking about the outlook for the whole S&P 500. And he put this out in the middle of the week. Quote, of the 203 S&P 500 companies that have reported Q4 earnings, 83.7% have reported above analyst estimates, and only 12.8% have reported below analyst estimates. So more than eight in 10 companies are saying things are actually even better than what Wall Street's analysts had expected. Quote, this is significantly higher than the average 65% beat rate in a typical quarter

since 1994. He points out that fourth quarter 2020 earnings per share growth is estimated to be down 1.2% by the time we get through this earnings season. But when the quarter first started, the estimates were for earnings to be down 10.3%. So we thought the S&P 500 would have earnings drop by 10% year over year, Q4 20 versus Q4 2019. Actually, they're about flat, it turns out. So much better than expected. And then Tony goes on to say, quote, even periods of higher volatility and market uncertainty, it is important to remember

that over time, the market is driven by earnings, which are just beginning to turn higher. We continue to believe the combination of three forms of stimulus, monetary, fiscal, and interest expense should cause our above consensus 2021 S&P 500 operating earnings estimate of $176 per share to be overly conservative. It's also important to remember that while the valuation of the market remains high, it's based on trough earnings and should come down as a result of the earnings per share rebound, similar to the post 20092009 valuation spike. Okay, so valuations are misleading because stocks are trading versus trough earnings, as bad as things can get, they got last year. And we are just now seeing the liftoff of earnings

versus 19, which was the last normal year we had. So that's where we stand for this year. In the meantime, there's no expectation that Jerome Powell touches overnight rates until at least the first quarter of 2022. And 10-year yields are higher, which is why bank stocks, financials are exploding. Industrials are exploding. Commodities are rallying. Emerging markets are far outperforming the S&P this year. Everything cyclical is working out beautifully right now. There's a good reason for that. There's a good reason for that. The yield curve is expanding. There's an interest rate again. Oh my God, on a 10-year treasury, 1.1, 1.2%, nothing to get excited about, but not headed towards zero,

no inverted yield curve, okay? And you could see a GDP print of 6%, 7%, 8% this year. Remember, this is a comp over last year. Remember what last year was like. I know you won't forget. So I wanted to just point out that's where we stand. I think that stuff's important. Okay. On the show today, no GameStop shit. Again, I promise you. First things first, we're going to talk to my friend, Peter Buchvar. Peter's a friend of the show. You've heard him on here before as well. And Peter makes the fundamental case for silver. So again, not the pump and dump case, but actually why silver could work its way higher this year. And I'm not going to say much more on that. I think you'll really enjoy just hearing from Peter. We're also going to talk about stock market manias and such. So stick around for that. And

then afterward, we have a very special treat. I'm doing Black History Month all month long on The Compound Show. It's actually black financial history. And black history is American history. Do not get it twisted. So we're going to talk about some of the most pivotal moments in American history in terms of African Americans and wealth and the markets and the economy. And my first guest this week is Shane White. Shane White's a professor. He is a professor of history in the Department of History at the University of Sydney in Australia. And Shane's research and area of expertise include US history, African American history. He's become an expert in the history of New York City. He spent thousands of hours

studying these topics, sitting in dusty libraries, poring over old newspapers and original sources from these times. And Shane wrote an award-winning book called The Prince of Darkness. And it chronicles the life and times of one of the most fascinating figures in the history of American finance and Wall Street named Jeremiah G. Hamilton. And Hamilton was the first black millionaire on Wall Street. He might've been the first millionaire African-American in the whole country. So just to set things up, Hamilton was active in the 1820s, 30s, 40s, and 50s. And the story is amazing. And Shane's going to tell it to us. So I'm really excited about that. So we'll hear from Peter. We'll hear from Professor Shane White.

This is a very special episode to me. Put a lot of time and effort into putting this together. Hope you love it. And if you do, all I ask is you give me a rating and a review, whatever platform you listen to this on, Apple, Spotify, whatever, that stuff helps new people discover what you've already discovered. And if you do that, it goes a long way. So all right, let's get on with the show. Duncan, hit the thing. Let's go. Welcome to The Compound Show with downtown Josh Brown. Josh is the CEO of Ritholtz Wealth Management. All opinions expressed by Josh or any podcast guest are solely their own opinions and do not reflect the opinion of Ritholtz Wealth Management. This podcast is for informational purposes only and should not be relied upon for investment

decisions. Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast. Hey, guys, I'm here with Peter Bukvar. Peter, I read every word that you write, as you know, and you're talking about manias and you're referencing one of my favorite books and one of the most important books that all investors should read, which is Manias, Panics and Crashes, Charles Kindleberger. This is now a 50-year-old book, give or take? Yeah, late 70s. So close, yeah. Yeah, late 70s. So close. Yeah. Okay. So it's obvious what we're seeing right now is a mania. I think the only debate is,

is it a mania so big that it affects the entire market? Or is it kind of cordoned off into its own world and not necessarily representative of like a historic bubble for everyone? What's your take on that? Right. No, that's an important question. I mean, as long as human nature is human nature, we're always going to have, as Charles's book is called, manias, panics, and crashes. We're always going to have that because human nature just doesn't change. It gets very excited about certain things, gets very depressed about certain things. And at least in the names you mentioned, it's getting excited. And I'm all for people getting interested in the stock market and learning about different companies and investing and trading and so on and so on. But we know that human nature takes certain things to an extreme.

And what this means for the broader market, we know at least for a couple of weeks, it mattered in the sense, just from a positioning standpoint, where people trim the size of their books, both long and short. So that's just a positioning thing. The broader picture is, we'll have to see, we just don't know. But you know, there is some tinder to, you know, speculation. And you know, I've about this, about Fed Reserve and easy money, and that just sort of stokes a certain level of behavior. But whether this is the beginning of something, we just don't know. We'll just have to see. Okay. So Kindleberger describes the word mania in this context. This is you quoting him. The word mania in the chapter title connotes a loss of touch with reality or rationality,

even something close to mass hysteria or insanity. It is used continuously in economic history, which is replete with canal manias, railroad manias, joint stock company manias, land manias, and a host of others. So he didn't live long enough to see Reddit mania or even dot-com mania or any of the manias that we've experienced during our careers. He wrote his book way before then. So where does the Reddit mania stand in the pantheon of manias that you've seen and or read about? On an individual stock basis, you look at GameStop going from 17 to almost 500. I mean, that's up there.

And you see some of the other names that got caught up in this. Koss, for example, considering where it was prior to its Reddit exposure and where it went at the peak. So they're similar. What's happening now, it seems like it's happening in such a short period of time. Like the bubble is not necessarily in parabolic move is not spread out to the same extent. But on a percentage move, these are some of the great meanies we've ever seen. But again, concentrated in a few stocks.

And to your point earlier, we don't know whether this is a symptom of something bigger or this is just isolated situations. Right. It's not systemic. I keep hearing this thing like Wall Street is dead. No, it really isn't. Actually, Wall Street's making a lot of money from this is the first thing. Tulip mania literally took over a country. It literally took over the entire country was speculating in tulip bulbs before that ended. The South Sea Company basically took over the entirety of the civilized world. This is like 10 stocks that nobody in real life actually owns. They're not meaningful in the indexes. They're not affecting people's retirement.

If GameStop went to $1,000 and then fell to $50 a share, I don't think that would stop more than 10 people from retiring. So that's, to me, worth pointing out. Right. At least now, these are just isolated situations that are certainly front-page news and made its way to the White House and Jay Powell getting asked in one of the first or second questions of his press conference last week. So no question. But what it means broader, you know, it's not it's not going to change the analysis of Apple and how many iPhones they're going to sell in 2021. We'll have to see whether it changes the multiple that people may want to pay on Apple if there's a change in risk aversion, but that remains to be seen.

Yeah. Actually, to me, one of the more obvious consequences that will come out of this is that a lot of people are going to have their first experience in the stock market buying into something that collapses by 90%. And what does that mean for sentiment six months from now versus like right at this moment? And that could actually serve as an anti-mania. this moment? And that could actually serve as an anti-mania. Shorts are an important part of a two-way market. Some people are going to bet a stock is going up because the company's prospects are improving and others are going to take the other side and short it because they think otherwise. So shorts are sort of a lubricant to a two-way market. Now, most of the time, the markets usually go up.

So being short generally is not really a great strategy. But heavily shorted stocks in individual difficult company situations usually end up being right. We know GameStop will end up with the same fate, better or worse, regardless of where the stock went prior to the spike, the spike and whatever comes next. So my only concern is, is that if we sort of take out a short base, because all these hedge funds are now freaked out, like they can't be short individual stocks, and then they reduce their long exposure. And that's not just a temporary thing. That is sort of a rework of their portfolio construction. And if we've scared off a lot of shorts and a lot of different underlying names, then

maybe that natural bid to a falling market, which are the shorts covering, may not be there. And maybe we do have more vacuums in trading and maybe air pockets because that short side and that short natural bid is lessened. I think that's one of the things that is most absent from the discussion among amateur investors on message boards who think the shorts are their enemy. The shorts are your friend if you end up being right. They're the buyer. And in some cases, if you end up being wrong, they're still your friend because they're going to buy the decline and lessen it as you ride a stock lower. They're sometimes the only buyer there. Right. And some of the things, any successful

investor, it's always good to hear the other side. We may like a company, love their products, their management, whatever, but there's always somebody out there that may have a difference of an opinion. And it's always good to hear what the other side is here. Yes, you want to hear the pros, but it's good to hear the cons. So you take like someone like Jim Chinos, who whose livelihood is focused on the short side. And it's it's always good because when he says something negative about a company, it's worth putting an antenna. Now, he's not right all the time, but he is right a bunch of times when it comes to Enron. And it's always good to hear these things. If you scare out guys like Chanos and the short side,

it doesn't lead to necessarily, like I said, a more healthier two-way market. And it definitely lessens the debate on a particular company, both good and bad. Yeah. I think when it's your first year or two in the market, you just assume that somebody has the opposite trade on from you. You just assume like your job is to hurt them or they're your enemy. I think that's a very immature way to think about the markets. But then I also understand from a populist perspective when you think the people on the other side of the trade from you are also people who have had a lot of unfair advantages conferred upon them, either by virtue of the fact that they were born into wealthy

families and sent to Ivy League schools or otherwise. So I think that we're mixing up a lot of class warfare, class resentment stuff in market mechanics. And people are just so excited that they're not trying to understand the difference. They just, if you're short and I'm long, you're dead. I'm coming for you. It's very internet-y, I think. It's not the way people actually behave in the markets in real life. For sure. And I guess you would do the same. We encourage people to buy a stock based on what they think about the company. Now, if they're technical analysts, yeah, you can look at a chart and this is right up your alley and you'll ride the momentum.

But don't let your, just as we say, don't let your politics influence your investing. Don't let your anger influence your investing. Don't let your anger influence your investing. I mean, you're buying a stock. It's not a long versus getting angry at a short. It's you versus the company. If you're right on the company, the stock will go up. If you're wrong on the prospects of the company, the stock will go down. That's who you should be focused on is the prospects of that business. If you're a fundamental based investor, if you're a chartist, well, you're going to look at a chart and the chart will take you wherever it will take you. Now, one of the issues here is, first of all, I should point out in the interest of full

disclosure, I'm actually a level three meme lord who's been creating and distributing memes, investing related memes for like over 10 years. So one of the problems with investing based on a meme, we shouldn't call it investing, speculating because of a meme is that memes go in and out of style or frequently they go out of style and don't come back. And so there are memes that were being shared very widely even six months ago that are now considered passe on Imgur, on Reddit, on TikTok, on Twitter, like dance crazes. It's hot. Now it's not. GameStop might already be yesterday's news.

Who knows where this thing ends up this week? In my view, GameStop can end this week at $50 or at $700. And you could convince me of either outcome. But these things are not – memes are not built to capture our attention for long. So if we're trading on that – GameStop made it on Saturday Night Live. Right. What's left?

That's it. So it made on Saturday Night Live and then you know you're close. That's right. At this point, everyone is now aware of that. And so this is the next thing I want to talk to you about. So now everyone's looking for the next thing to do. And they've seized upon an area of the market that you are fundamentally bullish on. And now you have company.

So you wrote up the case for silver last week. I posted on the reform broker. I agree with everything that you said. I bought some SLV, which is the silver ETF. And I bought Pan American silver, which I hadn't heard of until like the day before, because I'm very fundamentally oriented with my trading. But so anyway, you laid out a case for silver being a worthwhile investment. Why don't you lay that out for us now and then we'll talk about what's happening

this week. Well, Pan American, just to mention that quickly, that is probably the leading silver company. So if you wanted a pure play, that is the right company. Oh, look how smart I am. Yeah. So silver is interesting in that it's a little different from gold in that gold is predominantly a precious metal. It's a currency and has very little in industrial uses. So every ounce of gold that's ever been mined still exists in some fashion, whether it's something you hold in your hand in a coin or a bar, or it's jewelry, or it's a tooth. Silver has about half the demand is industrial. So you have the jewelry, and then you have the

investment monetary demand on one side. And then the other side is for industrial uses. Now, on one side and then the other side is for industrial uses now when we had cameras old school cameras it was a big important raw material in in film obviously that went away and they've used it for other different things but electronics and technology products and electric vehicle batteries and solar panels so that in addition copper, copper is now also a very important raw material for this sort of new age economy, that silver has this interesting dynamic of having demand coming from two different angles. And silver peaked in the late 70s, early 80s at about $9.50, had a 20-year bear market, bottomed in late 99, early 2000, peaked again in 2011 at 50. And now the front month future is about 30. So you're still talking about an asset that's

almost 70% below where it was 10 years ago. And there aren't many that can say that. So you have an economy that should continue to improve this year with the vaccine getting rolled out, the global economy. So that will hopefully improve the demand for silver. Then you have obviously the renewable demand for silver. And then you have still the monetary demand, which I think will remain strong as long as we have negative interest rates, zero interest rates, QE, and central banks that are going to remain very easy with policy. And then if you do get higher inflation, which I do think we are in the midst of seeing, that will then all come together and I think lead silver to higher prices from here. So I think silver is going to touch its old high. Gold did last year. And silver and gold actually

trade more closely together than silver trades with the other industrial metals. In fact, gold and silver are two of the worst performing commodities over the last six months. We've had huge runs in agriculture, the softs. We've had huge runs in the industrial stuff. Copper comes to mind. And gold and silver have kind of been in a downtrend until like this last week. I've been in a downtrend since August. So I don't think that that case you've laid out for silver is appreciated yet by the market. That industrial case for silver, it's certainly not in the price yet. They're not running that up with the other industrial metals. So if anything, if that ends up being correct,

and electric vehicles and solar, and that demand starts to become appreciated by the market, that's the slingshot. That's how the trade works. Agreed. And to define the relationship with gold, if you go back to the mid-1970s, that gold, silver, and this is just a rule of thumb. There's nothing mathematical and complicated about it. Going back to the mid-70s, gold has averaged 60 times the price of silver. It's gotten as high as over 100 that we saw in March 2020. It's been as low as 20. So if you say, okay, gold goes to 3,000 60 times, that gets you silver 50. So it's not crazy talk to say that gold, which is just back to where it was 10 years ago, can have a run to 3,000 and silver just on its historical price relationship with gold.

50 is not, again, not crazy talk. Okay. So just from my perspective, these are trades. They're not investments, even though they can be multi-year trades, they're commodities in the end, subject to boom-bust cycles. There is no cash flow. Yes. There are times to own these. There are times not to own these things. And I think that now, and I've said this for a couple of years, this is time to own these things. Right. So directionally, if you're right on the trade, silver challenging the old highs, then the equities will work to varying degrees,

depending on the company. The ETF that owns the metal, SLV will work. The futures should work if you know what you're doing in that market. I don't. I don't know how your preferred method of playing this kind of thing is. Like, what are your thoughts on that? They'll all go up. Yeah, I mean, I prefer the ETFs and the physical individual stocks. I mean, the margin potential on an individual company,

you have to keep in mind, like take Pan American Silver. I can't off the top of my head know what their exact all in cost is, but let's just say it's $10 an ounce, pulling it out of the ground and you throw in all the corporate overhead and this and that, and the break even is 10. Well, if silver goes from 20 to 30, their cost is still about $10. 50% increase.

their cost is still about $10. 50% increase. Right. So that leverage, that's why owning the miners, the leverage there is greater than the physical. Here's the only problem. Here's the only problem with that. And why historically that hasn't worked out well for the gold miners.

Problem with that is that these guys, they're humans like everyone else. And when the metal gets really hot, they get really bullish and And their cost actually expands because they start drilling new mines and hiring people. And they start feeling themselves because they go through a couple of quarters with that margin expansion that you're describing, and they become really profitable. And all of a sudden, there's all this new cash. And they don't just sit there and say, we got lucky.

The price went up. They say, we need to plan for the price to be significantly higher. And of course, when it busts, they've made huge investments. They've acquired other miners, et cetera, et cetera. So that's why I always look at these things like a trade. I can't think of one that's been a good long-term hold. Mining is a terrible business. And gold and silver miners, no industry has destroyed more capital than this industry over the past 20, 30 plus years.

Yeah. I'm not supposed to repeat this, but I was told by a portfolio manager at First Eagle. So I am going to repeat it. It was a long time ago. From First Eagle Global, gigantic asset management firm, famous for having big stakes in gold miners over the years. in the gold and silver companies, unlike every other sector of the economy, is that if you drop an executive from Coca-Cola into a gold mine, he'll probably find a way to do well and make money, or an executive from Microsoft or whatever. If you take a gold mining CEO and drop him into any other kind of company, he'll probably run it into the ground within a year. They are very

much a cloistered industry. It's mostly Canadians. They all know each other. They all recycle each other. And they're not particularly good at running companies, but they're very good at promoting gold finds and mines. Yeah. What's normal X mining is growing your earnings faster than your share count. That's how you grow earnings per share, doubling. Miners have found a way to grow their share count faster than their asset value. Most companies have, and that's where the destruction of capital has taken place. Now, we'll have to see whether the last couple of years, some of them have got religion and they claim that they're focused on their balance sheet and shareholders and so on. We'll see. Because if gold does go to $3,000, silver goes to $50,000, and you start to see mining CEOs paying outrageous prices for other companies,

then you know that they haven't learned any lessons. But hopefully we're in a sweet spot where that lesson is going to be learned until it's not, and there'll be room for the miners to catch up to the price of the underlying physical. Because again, not only is it tough to get the stuff out of the ground, but then you're reliant on a price you can't control. So it's just a tough business. So to your point about trading and investing, yeah, it's a better rent a stock, trade a stock versus buy it, close your eyes and forget about it. Warren Buffett's last 13F disclosed the holding in Barrick Gold. And he is notoriously, I don't want to say pessimistic. I think he outright hates the idea of gold as an

investment. He understands gold's use in the economy and how it's used. He just doesn't think it's a worthwhile asset, but he bought Barrick. Barrick's interesting because they pay you a dividend in dollars. So it's not quite for gold bugs. And allegedly, it's one of the better run miners. Yeah. Mark Bristow, who runs Barrick, and full disclosure, I own the stock as well. He's one of the best managers out there. So when you talk about shareholder value in the mining sector, which hasn't been used in many decades, he understands that. So if you want a manager to run a gold mining company, it's Mark Bristow. Yeah. I bought a little bit of that too,

just because I saw Buffett buy it. And I said, if he's buying a gold miner for this management, then he must really love what this guy's capable of doing. Yeah, absolutely. No coincidence. He'll buy in a factory, but he bought a bunch of airlines. He didn't go out and buy a bunch of miners. He bought one. And I think it was because- That's right. Right. It's not a sector bet, at least not yet. We'll see what his next 13F says, but it was a company bet. Yes. And I think that's okay. All right. I'm not going to keep you any longer. Peter Bookvar is able to be found at pbookvar on Twitter. And the book report is still going, right? The blog? Yep. Okay.

I get your stuff via email, but check out the book report, but that's B-O-O-C-K report.com. And that's your blog. And that's where you're putting all your thoughts and you do an outstanding job. I like that I'm in the silver trade with you. It'll be a trade for me, hopefully a trade for you, not an investment.

Yeah, I look forward to the day when I sell it. All right. And are you now making memes to get out of any positions or? No, no, no. I'll leave that to you. I'll make you some. All right, Peter, we'll talk to you soon. Thanks, dude. Thank you, Josh. I appreciate it. I am here with Professor Shane White. Shane White is the Chalice Professor of History in the Department of History at the University of Sydney, Australia. And White's research and area of expertise include U.S. history, African-American history, and the history of New York City. Shane, I read that right off your website.

Did I do that right? I got everything? Yeah, you got it right off your website. Did I do that right? I got everything? Yeah, you got it. You got it. I live 10,000 miles away, but I fell in love with New York before I got there. And I've spent 40 years researching, reading about and writing about New York City history. Yeah. So that's actually the first thing I wanted to ask you, but let me tell people about your book quickly. I wanted to ask you about how you track down all of these sources. And it sounds like you spend a lot of time in New York libraries. But your book won a whole bunch of awards. It's a fairly recent book. It's called The Prince of Darkness. it looks at the life and times of one of the most fascinating, but also one of the most unknown figures in the history of American finance and Wall Street. The main focal point of your book is Jeremiah G. Hamilton, who is the first black millionaire on Wall Street. He might be the first

black millionaire in America, but you'll tell me if that's correct. But just to set things up, You'll tell me if that's correct. But just to set things up, Hamilton's period of activity in business as a broker, a trader, a business person is the 1820s through the 1850s. Being both a black man and a broker on Wall Street is basically like being a unicorn. There is nobody like him at all. Do I have that right, Shane? As far as I know, yes, that's absolutely right. Until well into the 20th century, the only African-Americans you'd find on Wall Street

were elevator operators. The idea of them actually being at the heart of it, buying and selling shares, totally blew me away when I found out about it. Yeah, and his history is very obscure. They certainly don't teach you about him when they talk about the early days of Wall Street. And I don't think they're teaching a lot about him during traditional Black History Month school lessons here in the States. So why is he so obscure? Why don't we know more about him?

Why aren't more people aware that he even existed? He doesn't fit into the normal pattern. The way African-American history of New York usually goes is there was slavery, and then there was poverty, and then there's the Harlem Renaissance in the 1920s. So much of the 19th century is sort of waiting for the Harlem Renaissance in Harlem to happen. And he also, he didn't associate with the black middle class, the black civil rights leaders. He pretty much carved out his own way. His best friends were white.

He married a white woman. And he had nothing to, he didn't write checks for the civil rights like other prominent blacks, like Thomas Downing, who owned an oyster house on the corner of Broad Street and Wall Street, was the other really rich black. He wrote checks for the civil rights movement. Hamilton wasn't, that wasn't him. So he was very easy to forget, and Americans did forget him.

So he was mentioned in print four times in the entire 20th century, and three of those times are incorrect. In history books, in other history books, you're saying? In any shape, form, or, you know, he is totally and utterly forgotten, basically. Right. So no one, even the mentions of him, one guy says he's actually white and got a suntan in the West Indies, which fooled people into thinking he was black. So he defies expectations. So people say he can't exist.

Right. So New York in the 1830s, the financial markets, the business culture of that era, they're all scoundrels. Like the bankers are scoundrels. The lawyers are the traitors. So Hamilton is not a civil rights leader or a preacher or someone that you necessarily want to associate with. He himself is a scoundrel. But I think you do a really good job of explaining that he had no choice but to be sharp elbowed and aggressive and play fast

and loose because that was just what New York financial markets were like back then. Could you explain that a little bit for the listeners? The New York Stock Exchange is by this stage has been going for 30 or 40 years and it's still very, very embryonic. There is almost no regulation. It is the free market completely untrammeled by laws, regulations or anything. It's dog-eat-dog. It's just utterly ruthless.

It's full of people who today they'd be doing 20 years in prison for some of the things they were doing. The thing I like about Hamilton is that if you think of black pioneers, and he is a black pioneer, you think of someone like Jackie Robinson, his handlers make him be as gentle as he possibly can. He had to be constantly restrained from saying what he thought and doing what he wanted, also not to upset whites.

But the thing about Hamilton is that he was, if you hit him, he hit you back and added 10%. He retaliated. He is ruthless and aggressive, and he paid absolutely no attention to the fact that he was black or worried about such things. Like, you went for him, he went back to you. It's Malcolm X rather than Martin Luther King, if you like.

Right. Now, he's not coming in to Wall Street and saying, I am desegregating Wall Street. He almost never acknowledges that he's black or African-American. In fact, he doesn't even come clean about where he's originally from. So half the sources think he's from Virginia, and the other half think he's from somewhere in the Caribbean. And that seems to be by design. He almost doesn't want anyone to nail him down as being anything. Is that that's the sense that you took away from what you've seen? Yeah, absolutely.

You're absolutely right. Interestingly, New York in the 1830s, like slavery only ends in New York in 1827. Right. And New York City, the black population is expanding actually and there's a lot of runaway slaves from the south. There's a lot of African-Americans who don't want people asking where they came from. Right.

So he's not alone in this. It's not polite to say where do you come from and push it too hard to any African-American in New York in the 1830s and 1840s. So that wasn't that unusual. And he used his past. He'd sort of hint that he comes from here or there, depending on the circumstances, and it becomes part of his arsenal of tricks to get where he wants to get. So we first meet Jeremiah Hamilton, by which I mean the first sources

that you can find documenting his existence. We first meet him. He's on his way down to Haiti, which only recently had won its independence. And it's an environment where it's a little bit of a anything goes kind of environment. There are interests from the United States and from France surrounding Haiti and Port-au-Prince. And we meet Hamilton. He's on his way there, it looks like, to counterfeit and to pass either fake coins or fake banknotes and circulate them amongst the currency and in doing so, effectively steal from the government of Haiti. So that's him as, I guess, a young man, and he gets caught,

but he doesn't quite own up to the fact that he did something at all wrong. It's a lot of bluster in his defense. Yeah, he would have been 20 years old. And a consortium of New York merchants arranged for him to go to Haiti, to Port-au-Prince, and to shove is the term used to get rid of counterfeit coin, shove counterfeit coin. Now, Haiti is the black republic. It's a place that is, for African-Americans,

is a beacon of hope because they've abolished slavery and it's run by blacks. For everyone else in America, like people like Thomas Jefferson or what have you, it's a threat. It's seen as a place where the slaves revolted. It's the thing that scares the living daylights out of whites most. So this black man is involved in subverting the black republic. So this means this puts him out of line with black opinion in New York.

People are horrified that he's involved in doing this. And Haiti has been totally and utterly screwed by France and has to pay a huge amount of compensation for ending slavery. And this is what's going to bankrupt Haiti and take it from being the richest place in the world to being a third world country? Let's stop there for a second. Haiti is producing more sugar than anywhere else in the world at the time of the slave revolt. And that's how it becomes the richest island in the world and one of the most strategically important in the Western

hemisphere, right? Yes, it's mostly sugar, a little bit of coffee. It is staggeringly rich. It's what made, you know, if you travel through France and go to places like Bordeaux and they they'll give you tours and say this mansion or chateau was built in the 18th century, it was slave money from Saint-Domingue, which becomes Haiti, that paid for it. It's the richest place in the world in terms of production. And that gets disrupted by the revolution and it's struggling economically. So this idea of counterfeit coin is, interestingly,

it wasn't illegal to manufacture counterfeit coin in America and send it to other places. There's a whole bunch of places around New Jersey in the 1830s that specialise in counterfeiting coin and sending it off to various places in South America. It's only, I think, in the late 1830s that they start making it illegal. So Hamilton comes back and the newspapers pick up on what he had been accused of doing. And then what happens? what he had been accused of doing.

And then what happens? There's a big fuss in the newspapers because although people are terrified of Haiti, they're also trading with Haiti and they're all worried that the reputation of America is going to go down the tubes and is going to disrupt trade. So there's a big flare up. The first black newspaper ever is Freedom's Journal

and the editors of that just hate Hamilton and make it abundantly clear what they think of him. So there's a big fuss. Then it just sort of blows over and Hamilton disappears. With Hamilton's career, every little while you get a flare-up, some incident or other, and then he disappears. So he disappears really until the 1830s. The way you describe newspapers reminds me a lot of Twitter and blogs today.

You've got six-penny papers, and then there are cheaper versions. The one-penny papers arrive, and this is effectively the new technology whereby everyone in the city is reading the same opinions from the same editors who are putting these things out and their advertisements, of course. But these – the editors seem to have these extraordinary rivalries between each other almost to the point of violence or maybe to the point of violence. And these are your primary sources. So you must have a lot of fun digging through these 150-year-old journals and reading the contempt they had for each other. Yes, you're absolutely right. The penny press starts in 1833 and New York is the centre, it's the centre pretty much of the world, I'd argue. I tend to be New York-centric. And there are dozens of newspapers taking off.

Most of them, unlike Twitter, where you can be all around the world, they're all concentrated in about 10 blocks down in New York City and they all tend to go to the same bars for lunch and stuff like that and they all dislike one another. And it's a terrible thing to confess, but I really love sitting in a New York City library reading an original newspaper and just reading it. Every now and again I'll just burst out laughing as the

invective between the editors and uh as they shaft one another uh they were very sharp it's a turf war right because there's only so many people who are buying the newspaper each day and they're on the same corners absolutely uh and these newspapers they come and they go. Again, it's a dog-eat-dog world. There are virtually no rules. So a newspaper editor would threaten to publish a story about a stockbroker visiting a prostitute unless the stockbroker paid up. It's blackmail. There's an element of extortion, which you could argue still exists

in some newspapers today, but there's this element of extortion to it that has this incredible liveliness in the 1830s and the 1840s because it's, as in social media today, it's new, and people are still working out what the boundaries are and going this way and that way. So as I'm reading about Jerry Hamilton and the way he deals with the press and the way he's constantly in court, it seems as though he spent his entire life either as the plaintiff or the defendant in a lawsuit of some sort. And he uses the press as a tool and he befriends some of the papers while having lifelong enemies editing the other papers.

And I hate saying this out loud, but it's almost Trump esque the way he manipulates the newspapers to his purposes and fights with them alternatingly. Do you see it that way? Yeah. I, I too, purposes and fights with them alternatingly do you see it that way yeah um i i too steer clear of that like just for a start he's got a whole lot better taste uh than trump he wouldn't use uh fluorescent flashing lights on his real estate uh building and stuff like that um but yes he is very adept at manipulating this sort of stuff.

His best friend is Benjamin Day, who, along with James Gordon Bennett, are the two most innovative newspaper men of the 19th century, if you ask me. One is the Sun, the New York Sun, and the other is… Yeah, Benjamin Day creates the New York Sun, which is the first penny newspaper, and James Gordon Bennett starts the New York Herald, which

becomes the most important newspaper. It starts at 1935. It's the most important newspaper down to the end of the 19th century. Right. Okay. So he befriends Day, though, and that irks the other guy, it seems. That's enough to irritate some of the other newspaper guys.

That's a red rag to a bull. But he actually writes articles for the New York Sun. There are various pieces he writes for the Sun and is in the Sun offices every day there, which becomes damaging for Benjamin Day. The fact that he's going around arm in arm, literally when they're coming home from the pub, arm in arm with a black man. I want to talk about the racism of the time. My assumption had always been that in the antebellum New York City scene, of course, it was not as it is today. But I never imagined it was as racist as it turned out to have been.

Just reading your descriptions of how segregated New York City was and all of the things that African-Americans in Manhattan weren't able to do, like ride the train. And even you mentioned Thomas Downing, who was one of the other wealthy African-Americans in lower Manhattan. He operated the most popular restaurant, an oyster house, and he had white politicians and white businessmen there. He would not serve African-Americans in his own restaurant. He would not serve African-Americans in his own restaurant. So that environment, I think, gives you a clue as to why someone who was in business at the level that Jeremiah Hamilton was. I think it gives you a clue as to why he didn't want to be seen as a black broker. He wanted to be seen as a broker and not have that association.

Do you see it that way? You mentioned Thomas Downing. He's a good example of the problems of New York City in this time because he's often known as the richest or the second richest black man in the city. He owns a lot of money. He runs a prominent restaurant. He helps the civil rights movement. He writes checks, basically, for the civil rights movement. But in his own establishment, he can't serve black people. The only blacks in there were waiters, which, again- You say can't, because it would put them out of business, effectively. Yeah. Whites would stop going there.

Right. So that's the way Downing saw it. Now, some people, some African-Americans will probably argue the point with him and say he should have been more of a pioneer. But the realities were he couldn't do that. York City at this time is really one of the very first places in the world to have to try and sort out how African-Americans are going to be treated once slavery ends. It's one of the first substantial places to end slavery, and slavery has been the basis for race relations

for a couple of centuries everywhere in the New World, and it has to work out how you're going to treat blacks and so there's this sort of pushing and shoving and as this is has worked out in some ways there were lots of optimistic signs and all sorts of stuff is coming going backwards and forwards between blacks and whites whites are paying attention to blacks. This is the time that tap dancing, for example, is invented in New York City in the 1820s and the 1830s in these underground dance cellars. Whites are paying attention to black culture.

But what's actually going to happen as more and more migrants come into New York City is this period of sort of possibility is going to shut down by the 1850s and the 1860s. And so by the time you get to 1863 with the draft right, that probably signals the closing down of the possibility of African-Americans getting ahead. But for a while, it sort of worked. possibility of African Americans getting ahead. But for a while, it sort of worked. Now, there's the constant threat of violence for any African American, particularly anyone who's getting ahead, who dresses well, wouldn't particularly want to be seen walking down the street late at night by himself. Right. And you do have this kind of subculture in the five points, which is, you know, most,

most people would be familiar with Scorsese's movie gangs of New York, but you've got basically this mixing pot of poor people from Ireland and Germany and, and the Netherlands and all over the place. And you've got African, African Americans in the, in the mix as well. But you're saying that doesn't, that doesn't quite last and things break down again.

We get segregation before things get better. Yeah. So, in fact, segregation you think of, Jim Crow segregation, you think of the South, it's actually pretty much invented in New York. Right. It's a New York export. It's in the 1830s as you get the first public transit getting started, blacks get segregated into separate carriages

are not allowed on at all. And there are several violent incidents as the process of segregation is being sort of worked out. It's sort of typical New York in that sometimes it's enforced, other times blacks are getting on and just being treated normally, but every now and again there's an incident or there's a clampdown and segregation is enforced. It's sort of, that was in fact a problem because you could say

you could catch the train up to 14th Street, seven days, and on one of those days you'd get threatened, but on the other six no one would say anything. And so particularly for the black middle class, there's this constant threat that things could go horribly, horribly wrong. Right. And it's almost like it's the luck of the draw when something might go wrong. So it's hard to live your life on that basis.

Jeremiah Hamilton, that enabled him to get involved in buying real estate, handling bank notes, trading, being involved with stocks? Is it sheer audacity? So I know he's got some peculiarities physically. He shaves his head and wears a wig with long black hair that you've referenced before. What is it about him that enabled him to just kick the door down and say, I'm doing these things? I've written a book on Jeremiah Hamilton, but it's completely different from most biographies in that if you write about Thomas Jefferson, you can use his diary. You get his words and thoughts. My book is almost entirely from the

outside. The only time I can quote Jeremiah Hamilton is a couple of sentences in court cases and stuff like that so I'm constantly having to guess at what Jeremiah Hamilton thought I can say what he did but why he did it I have to speculate and I think you hit it on the head. I think it was audacity. I think he was raised to expect to be the best. Like it's the sort of pat answer you get from, you know, any young person, sports star or whatever, you know, they expect to be the best baseball player, the best this. He saw the life and he thought he could do that and he could do it better

than most white people around the place and he went out and did it. He gets into real estate when real estate, America is in the middle of a huge boom of real estate. The whole world's gone nuts in 1837, 1836, 1837. Real estate prices are sort of doubling every six months. From Florida to Maine, the whole place has just gone insane, and particularly in and around New York City. So he can see everyone else getting into real estate, and he gets into real estate, and he buys about two weeks before the crash, before the top of the market.

This was a disaster for him. Yeah, so he ends up losing money. Now, what is he doing? He's buying up Brooklyn, he's buying up Queens, and he's buying Poughkeepsie on the Hudson, and he runs out of money effectively because the stock market bursts. The bubble in stocks bursts first, right?

Yeah, and what does him in is not so much him going down. It's someone else he's paid money he owes to going down, and that's what drags. I tend to think it's not his fault. He would have been all right if it hadn't been for another person going bankrupt and dragging him down. We call that counterparty risk. That's what brings everyone down. Who did you lend money to?

Yeah. Well, yeah. So I actually just found a new item about Jeremiah Hamilton just the other day, actually doing some research or something else. And, again, there's always this element of fraud associated with Jeremiah Hamilton and his purchases. So he's bought up half of Poughkeepsie, including the wharf, and just as things go south, there's a fire on the wharf at sort of two o'clock in the morning.

And it's one of those fires that you probably have in America. We have them here, whereby the buildings on either side are not touched by the fire. But the insurance claim is already written out inside the building that's on fire. claim is already written out inside the building that's on fire. And by that stage, he's black banned by insurance companies in New York City. So it was a Hartford insurance company, and it was for $250 a claim. But that was his way of an insurance fire was his way of trying to stop the slide down in 1838, 39.

Right. So how does, how does he get the name Prince of darkness? That's, that's something that he originally gets in a derogatory way, I think from a newspaper editor. Is that right? Yeah.

It's James Gordon Bennett of the Herald. I spoke about earlier. He's in a big front page story. The big disaster in New York, the huge disaster, is the fire in December 1835, which burns down 700 buildings from Wall Street, around Wall Street. And it's a disaster. Now, what had happened was by this stage,

Hamilton has been making a reputation for himself and four white people, this is a few months before, had gone to see Hamilton and had given him $25,000 to invest. $25,000 is huge. There's millions today. Yeah. It's millions today. Yeah. It's a staggering sum of money. And so, but he's getting good returns.

So whites are trying to use him and are sort of scrabbling to get him to deal with their money and invest their money, which he takes their money. And then there's the fire on December 8th or 9th, and then afterwards the four white guys are totally ruined. Their buildings are destroyed, as is all of their paperwork. And so they go along to see Hamilton and say, we're utterly, utterly ruined, but at least we've got the $25,000

we left with you. And he sort of looks up from behind his desk and says, what, $25,000? Right. And he walks away with their money, and that's the money he invests in Poughkeepsie Real Estate in the boom then. So there's almost no law regulation on what have you but even by the standards of new york in the 1830s he pushes it um because that's basically robbery and the same with um the other way he made money maybe a couple of years earlier was over insuring a ship and then arranging to sink the ship with no loss of life and then claiming

on the insurance company and making money. Now, even today, if someone fiddles their insurance claim, no one worries too much about that. But over-insuring a boat and then arranging to sink it in the Gulf of Mexico, that's going further than most people would go. Yeah, I would agree. We have about a minute or so left, and I just want to get to the end of his story. So he ends up marrying a white woman, which at the time is highly taboo in New York City. How do things end up going for him? And is that a clue as to why

he ended up being so obscure in the literature thereafter? In the 1830s, he marries a woman who's, he gets pregnant, a white woman who's 14 years old. You think you know how this is going to go. And what I love about him, it doesn't go that way. It becomes a long lived relationship and they have eight or nine children and she lives on past him. He becomes respectable sort of in his old age, in the 1860s and the 1870s. There's sort of references to other people talking to him, asking him investment advice and stuff like that. And by the time he dies in 1875 or six, he's reputed to be worth $2 million,

which is the equivalent of a couple of $100 million today. Yeah. He does get a happy ending and he quiets down. Yes. It's a New York story. Yes, for sure. Shane, I want to say thank you so much for joining us and telling us all about the book.

And here's my copy. I've read it twice now. And I just love all the little anecdotes in addition to the main story. So thank you so much. And we'll send everybody over to the link at Amazon. They could buy a copy for themselves. Terrific. Thank you very much for having me.

It's been a pleasure. Absolutely, sir. Have a great day. Thanks for listening. Check us out at thecompoundnews.com for daily investing and market insights. You can watch all of our videos at youtube.com slash thecompoundrwm. Talk to you next week.