Speaker 1: Coincidentally, COVID hit and gave central banks and governments unprecedented
Speaker 1: excuses to create more debt and print more money, and
Speaker 1: that reinflated the system.
Speaker 2: Trump's new policies could potentially stay that off, or does
Speaker 2: that only exaggerate things?
Speaker 1: His plan is this right. He wants to deregulate, reinstitute
Speaker 1: the tax cuts. He wants to bring investment to the US.
Speaker 1: Just the second derivative change on that is going to
Speaker 1: create a debt. The real economy, the middle class economy, was,
Speaker 1: you could argue, was in a recession in twenty three
Speaker 1: and twenty four. So if you have a global debt problem,
Speaker 1: there's two ways to handle its way out of it.
Speaker 2: Or you ed you said that, You've been saying that
Speaker 2: there's a clock that started on a global debt crisis,
Speaker 2: Like what are you looking at that broke and why
Speaker 2: should anyone listening to right now be preparing for that?
Speaker 1: Well, look, the global debt crisis kind of manifested itself
Speaker 1: in twenty nineteen. There was a lot of synchronized global
Speaker 1: growth slowing and the repo market started blowing up in
Speaker 1: September of twenty nineteen. The plumbing was becoming unwound. Coincidentally,
Speaker 1: COVID hit and gave central banks and governments unprecedented excuses
Speaker 1: to create more debt and print more money, and that
Speaker 1: reinflated the system. So if you have a global debt problem,
Speaker 1: there's two ways to handle it. You inflate your way
Speaker 1: out of it, or you default. And COVID, again, I
Speaker 1: wasn't in the room. We can debate whether it was
Speaker 1: a plan or an accident. Who cares. It saved the
Speaker 1: system temporarily kicked the can down the road, and the
Speaker 1: FED printed and the US government spent. Printing without spending
Speaker 1: doesn't mean anything. So we saw unprecedented growth in the
Speaker 1: money supply. And my partner Carlos Aellegaria, you know in
Speaker 1: his book that he had a revised edition in twenty
Speaker 1: twenty one, predicted that massive inflation was coming, and it came.
Speaker 1: And you know, there's a little bit of a debate
Speaker 1: as to who caused the inflation. I would say what
Speaker 1: they did under the Trump administration with the COVID spending
Speaker 1: and the printing didn't really have an impact until you know,
Speaker 1: twelve to eighteen months later, and that was in the
Speaker 1: Biden administration. So you know, inflation which quote unquote was transitory.
Speaker 1: You know, that's what we were hearing from, you know,
Speaker 1: yelling and Powell was nonsense, because monetary, when you increase
Speaker 1: the money supply without you know, without a commensurate like growth,
Speaker 1: it just gonna inflay prices. And it did. And so
Speaker 1: the FED then responded by going on an unprecedented interest
Speaker 1: rate rapid interest rate increased from basically zero to five
Speaker 1: and a half percent, and m two year over year
Speaker 1: growth unged in the aftermath, and we saw for the
Speaker 1: first time since not you know, the thirties, and two
Speaker 1: year year growth went negative in November twenty two, and
Speaker 1: then unsurprisingly, we had a bunch of bank failures in
Speaker 1: the spring of twenty twenty three. People forget that, and
Speaker 1: the FED plugged the hole. They gave bank term funding program.
Speaker 1: They lent moneies to banks that were underwater to prevent
Speaker 1: a deposit run and that worked because most of the
Speaker 1: most most of the credit that was underwater were you know,
Speaker 1: risk free assets like treasuries because of you know, the
Speaker 1: duration risks that happened when they raised interest rates. So
Speaker 1: what the Fed's not going to do and they've already
Speaker 1: ended the bank term funding program what the Fed's not
Speaker 1: going to do is lend money to bad credit, and
Speaker 1: that's we're getting into the credit cycle of this commercial
Speaker 1: real estate, as we know, is already a problem. That's
Speaker 1: about three to five trillion on banks balance sheets in
Speaker 1: the US. The bigger problem we see is the economy
Speaker 1: having been floated in twenty three and twenty four by
Speaker 1: illegal immigration. A large part of our growth came from
Speaker 1: that whole movement into basically an organized illegal operation that
Speaker 1: you know, we think of a large majority of the
Speaker 1: deficit spending we saw funded that through NGOs and other
Speaker 1: agencies and then direct payments to illegals. So that really
Speaker 1: floated the economy. And that's all coming away. So we
Speaker 1: see a housing crisis coming next. And when we say crisis,
Speaker 1: you know, I don't want people to freak out. I
Speaker 1: mean it's it's needed. I mean, home prices need to
Speaker 1: come down. People can't afford homes and new home supplies.
Speaker 1: You know, at all time record of the world near
Speaker 1: all time record levels, there's no there's no transaction active.
Speaker 1: And the housing market was really buoyed by the marginal renter,
Speaker 1: which was the illegal alien. That that momentum is all
Speaker 1: going the wrong way and p M I, you know,
Speaker 1: has been a problem for two years. It's been showing
Speaker 1: recessionary signals globally and the only economy that was really
Speaker 1: outstanding was the US economy. And that's all that's all
Speaker 1: going the wrong way. The second derivative government spending, even
Speaker 1: though the Trump administration is really not cutting spending, the
Speaker 1: second derivative is changing. The growth is flattening, and that's
Speaker 1: all you need to cause a softening in the economy.
Speaker 1: And that's what We've put out a report that we're
Speaker 1: selling on January ninth detailing what we were seeing, and
Speaker 1: you can buy it if you want at our website
Speaker 1: Finance Technologies dot com with the pH. So that's kind
Speaker 1: of the brad swathe we're already starting to see indicates
Speaker 1: that the economy is slowly starting to roll over, and
Speaker 1: we'll see if our calls right. We think we're going
Speaker 1: to be right in a very big way.
Speaker 2: Well, thanks for setting the stage on that. Let's let's
Speaker 2: dig into a couple of things on that you said.
Speaker 2: I think I think what you said is after you
Speaker 2: talked about the FED bailing out the banks in twenty
Speaker 2: twenty three through the BTFP, that the FED is not
Speaker 2: going to give money to bad businesses or bad investments anymore.
Speaker 1: I think, well, they're not. They're not. They're not going
Speaker 1: to loan money to Uh. It was easy to provide
Speaker 1: liquidity versus treasury assets. They're underwater. They're not going to
Speaker 1: provide liquidity to bad loan decisions, bad credit decisions. And
Speaker 1: what's going on with the commercial real estate problem?
Speaker 2: Uh?
Speaker 1: And by the way, this all eventually affects lending bank.
Speaker 1: The bank's main function is to choose the economy by lending.
Speaker 1: When you start to accumulate bad debts on your books,
Speaker 1: you you you, you know, you stop lending as much.
Speaker 1: And what's going on with the commercial real estate is
Speaker 1: they've been extending and pretending.
Speaker 2: Uh.
Speaker 1: And the FED put out a report in November of
Speaker 1: twenty twenty four detailing that.
Speaker 2: Uh.
Speaker 1: And I think they're going to start cracking down on banks,
Speaker 1: you know, coincidentally during the Trump administration. That may be
Speaker 1: a political move, who knows, but I mean, this has
Speaker 1: been a problem for well over a year and a half.
Speaker 2: Uh.
Speaker 1: There there's also starting to be uh, you know, indications
Speaker 1: and problems in auto loans, and there's delinquencies and homes arising.
Speaker 1: So we have a credit we have a classic credit
Speaker 1: cycle coming and it's just inevitable and it will cause
Speaker 1: the word deflation to be mentioned temporarily because we know
Speaker 1: that deflation is not allowed under the rules of the bankers.
Speaker 1: So we're predicting inflation CPI headlined to some sometime in
Speaker 1: the next six to twelve months print sub two percent number.
Speaker 1: The biggest component of inflation is shelter. It's about forty
Speaker 1: five percent of the CPI number. That's sticky, it takes
Speaker 1: time to adjust. And so we're expecting a recession. We're
Speaker 1: expecting the Fed to do what it does, lower interest rates,
Speaker 1: and then maybe if if the crisis is you know,
Speaker 1: if it goes if it looks like it's going to
Speaker 1: go systemic, they're going to print a ton of money
Speaker 1: and the government will have to do deficit spending and
Speaker 1: then you know, we're back in you know, the reinflation
Speaker 1: of the bubble if they can do it again.
Speaker 2: So yeah, so you said that if deflation is not
Speaker 2: allowed in bankers terms, it's really not allowed in a
Speaker 2: debt based monetary system.
Speaker 1: Just overall, it's if allowed to go on checked it
Speaker 1: the daisy chain effects are collapse.
Speaker 2: Would you say you mentioned, you know how this actually
Speaker 2: started in twenty nineteen and then the COVID sort of
Speaker 2: excuse came along. Would you say that it actually started
Speaker 2: back in two thousand and eight when we really sort
Speaker 2: of had the first QE. Maybe the FED tried to
Speaker 2: allow the bubble to deflate like they had done in
Speaker 2: previous cycles two thousand, et cetera. But then it became
Speaker 2: too systemic, right, they had to bel out the banks,
Speaker 2: they had to do the quantitative easing. It levered up
Speaker 2: the system to a point now in twenty nineteen, twenty
Speaker 2: twenty showed that they're and even twenty twenty three showed
Speaker 2: there's zero appetite to allow it to sort of deflate
Speaker 2: on its own and they have to keep reinflating.
Speaker 1: Yeah, I would. It's interesting you talked about the Great
Speaker 1: Financial Crisis. That's when a lot of things change. That's
Speaker 1: when we saw unprecedented monetary policy, which now everybody expects
Speaker 1: and it's not as unprecedented. It's a tool in the toolbox.
Speaker 1: And what that did is the real economy, if you
Speaker 1: go back, really kind of died globally and what floated
Speaker 1: the economy for the next fourteen years was precedented monetary
Speaker 1: policy coupled with government spending, and the government as a
Speaker 1: percent of GDP, not only in the US, but in Europe, China,
Speaker 1: you name, it grew its share the pie in GDP,
Speaker 1: and that's changed a lot of you know, what's been
Speaker 1: going on economically. So the closer you are to government
Speaker 1: and government favors and the printing press, the better. After
Speaker 1: you've done so, the economy showed growth, but the problem was,
Speaker 1: over time there was a wealth disparity effect. And that's why,
Speaker 1: you know, if you want to ask yourself why populism
Speaker 1: is on the rise, it's basically because the rich got
Speaker 1: richer and everybody else got poor. And it's been an
Speaker 1: economy of the rich, not of the middle class. And
Speaker 1: Trump was elected primarily because there was minus two percent
Speaker 1: real wage growth going into the election. The last time
Speaker 1: that happened in nineteen eighty, Ronald Reagan swept in and
Speaker 1: it's Bill Clinton ninety two. So you know, well, Trump
Speaker 1: was was going to win no matter what because of
Speaker 1: the economy didn't matter. Got it.
Speaker 2: So if the system structurally fundamentally changed in two thousand
Speaker 2: and eight, got so levered up, you could see twenty nineteen,
Speaker 2: twenty twenty, the response was way faster. Right, two thousand
Speaker 2: and eight, they allowed bear Stearns to go down and
Speaker 2: took seven months to get a bail out. In twenty
Speaker 2: twenty three, it took six days to bail out the banks.
Speaker 2: But you think that now maybe FED, the FED would
Speaker 2: sort of change their tune and say, well, let's just
Speaker 2: let these bad loans go bad and let's see what
Speaker 2: happens with the defaise.
Speaker 1: Well, it depends they can't be seen as bailing out politically,
Speaker 1: it's going to be a lot harder to try to
Speaker 1: bail out the banks. And during twenty.
Speaker 2: Short of like just take the loans on their books
Speaker 2: like they did with the NBS and eight, like, you
Speaker 2: don't think that's politically sustainable.
Speaker 1: They could do it, but they will only do it
Speaker 1: if it's enough pain, So that's why they'll do it.
Speaker 1: But they'll do it after a big correction and people
Speaker 1: are freaking out and begged them to do it. They
Speaker 1: don't want to do it ahead of time. Twenty twenty
Speaker 1: gave them great cover. I mean, they bailed out Citadel Capital.
Speaker 1: You know, they gave them emergency repos during twenty twenty
Speaker 1: and and and there was also and they also basically
Speaker 1: privatized the corporate credit market. They started buying I don't
Speaker 1: know if people remember this, but they started buying under
Speaker 1: their balance sheet apple bonds, So they they basically privatized
Speaker 1: the corporate credit market. The problem with that is it's
Speaker 1: kept corporate spread credit spreads tight, and that's driven a
Speaker 1: massive amount of misallocation of capital, as you would imagine.
Speaker 1: So and the other problem is this, so you know,
Speaker 1: in the dot com boom, we had a corporate fraud cycle,
Speaker 1: and then you know, we had a the FED do
Speaker 1: their easy money after that bus that led to a
Speaker 1: banking fraud cycle. And now we have, fourteen years later,
Speaker 1: a i would say, a central bank government fraud cycle.
Speaker 1: And we're discovering all sorts of frauds, you know, through
Speaker 1: what doge is exposed and whatnot. And it's not so
Speaker 1: much that the FED will become trapped when another central
Speaker 1: bank has a problem. And the Bank of Japan is
Speaker 1: kind of the in the problem right now. They can
Speaker 1: either you know, continue to print money to float the
Speaker 1: yen carry trade or there people will continue to get
Speaker 1: poor and there's a currency crisis. So the release valve
Speaker 1: on the sovereign debt crisis is always was always going
Speaker 1: to be the currency markets, because eventually the currency markets
Speaker 1: will revolt if one country, you know, it's someone to
Speaker 1: if the market's determined no moss, then it's over and
Speaker 1: then the whole thing has a problem. So the FED,
Speaker 1: you know, is the FED going to bail out Japan?
Speaker 1: I mean that right? So this is where we are.
Speaker 1: It's it's very precarious. We don't have a crystal ball.
Speaker 1: But what we do know is there's an economic sloan
Speaker 1: on coming. There's going to be, you know, problem in
Speaker 1: the stock markets, and we're expecting yields to go much lower.
Speaker 1: And obviously, if you believe our call, you want to
Speaker 1: be up to your eyeballs in risk creer assets like
Speaker 1: the US T bills, notes and buys. And I don't
Speaker 1: have anything with the risk any risk asset.
Speaker 2: Let's come back to that. How you see this playing out?
Speaker 2: And uh and I know we'll talk about the report
Speaker 2: that you said you have and how people can get
Speaker 2: a hold of that. Would you say that Trump's new
Speaker 2: policies potentially this mar a Lago accord restructuring the global
Speaker 2: monetary system uh, making America investible again, could potentially stay
Speaker 2: that off or does that only exaggerate things?
Speaker 1: No, Look, his plan is this right. He wants to deregulate,
Speaker 1: reinstitute the tax cuts. He wants to bring investment to
Speaker 1: the US. The bringing investments to the US is going
Speaker 1: to take time. You know, as well as I do.
Speaker 1: Breaking ground, getting getting things going doesn't happen overnight. So
Speaker 1: that's that that that is out in the future. It's
Speaker 1: much like what happened around Ronald Rugg and Renald Reagan
Speaker 1: had a recession and you know eighty I think eighty
Speaker 1: and eight eighty one, he had a double dip recession.
Speaker 1: Trump is facing the same problem. His policies are going
Speaker 1: to take time to to an app The FED is
Speaker 1: too tight at the moment, and his policies are actually
Speaker 1: reversing out the juice to the economy the last two years,
Speaker 1: which was unprecedented deficit spending, a legal immigration, and government
Speaker 1: job hiring. So just the second derivative change on that
Speaker 1: is going to create a dip because the economy, the
Speaker 1: real economy, the middle class economy was you could argue,
Speaker 1: was in a recession in twenty three twenty four.
Speaker 2: So we have eight trillion dollars of commitments to be
Speaker 2: invested in the United States. But to your point, that's
Speaker 2: going to take a while to see that come to fruition.
Speaker 1: Yeah, commitment, commitment, commitments don't translate into money changing hands.
Speaker 1: Yet it does.
Speaker 2: Yeah. Now, he has done quite a few executive orders
Speaker 2: laying the groundwork for like fast tracking these two things,
Speaker 2: coordinating through all the states to get these things through.
Speaker 2: I think it was any investments over a billion dollars
Speaker 2: get sort of rubber stamped through. But even then you're
Speaker 2: still talking years probably before that stuff happening happened, at
Speaker 2: least at least.
Speaker 1: You know, twelve to twenty four months depends, you know,
Speaker 1: And so that's why you know this. We wrote the report.
Speaker 1: His reversal his policies actually will cause a temporary recession
Speaker 1: and then his other policies will bring us out of it.
Speaker 1: But again, there's a timing issue. So there's there's a
Speaker 1: valley before the glory right now, right, it all depends
Speaker 1: on the execution, the timing. If he if the economy
Speaker 1: isn't turning around by twenty twenty six mid terms, we've
Speaker 1: got a problem. So the idea here is you have
Speaker 1: a recession that we think manifests itself pretty soon and
Speaker 1: the stock market's bottom sometime in the first quarter of
Speaker 1: twenty twenty six, and then you have, you know, a recovery.
Speaker 1: That's the ideal situation. And that's why in our report
Speaker 1: we're not we're not. In our report, we don't we're
Speaker 1: not claiming anything it's going to go systemic. We're not
Speaker 1: doom and gloom. It's just, you know, we think it's
Speaker 1: an old fashioned deep recession and hopefully it's quick and
Speaker 1: typically speaking in recessions, like in the dot com recession
Speaker 1: and the Great Financial Crisis, stocks went down fifty percent
Speaker 1: before they recovered. So we're nowhere near down fifty percent yet,
Speaker 1: and we think that's kind of and you know, look,
Speaker 1: it's not the end of the world, right, I mean,
Speaker 1: home price is going down, are you know, well, not
Speaker 1: good for overlevered rich people that are over their skis.
Speaker 1: It's great for like someone who had a first time
Speaker 1: a home buyer. So you know, it's just not people
Speaker 1: just don't like recessions and they think it's the end
Speaker 1: of the world. But it's healthy and it resets things.
Speaker 1: The problem is, you know, the bankers don't like it,
Speaker 1: and they keep reinflating and creating malinvestments. So we're going
Speaker 1: to see what happens in the in the teeth of
Speaker 1: this one. The Fed is behind the eight ball. They
Speaker 1: didn't lower that. You know, I predicted they weren't going
Speaker 1: to lower this Wednesday. They didn't. And we might even
Speaker 1: get some headline inflation reports that look like inflation's accelerating.
Speaker 1: But you know, you get to remember the Great Financial Crisis,
Speaker 1: inflation was accelerating June, July, and August before everything imploded.
Speaker 2: It seems like, you know, when you have basically a
Speaker 2: heads or tails sort of thing where we either continue
Speaker 2: to inflate this bubble and have more inflation, or we
Speaker 2: let a def in To your point, you know, maybe
Speaker 2: that's a good thing to let asset prices, house prices
Speaker 2: come back down, sort of give that that next generation
Speaker 2: a chance. It just seems like if people were given
Speaker 2: a choice like which one's more bearable, most people would
Speaker 2: probably rather see their retirement accounts than their their house
Speaker 2: et cetera go up in value, even if the price
Speaker 2: of gas and food went up a little bit, versus
Speaker 2: you know, all their prices come crashing down, their stock
Speaker 2: retirement accounts, housecounts all come crashing down, their businesses suffer.
Speaker 2: So it seems like maybe if people had to choose,
Speaker 2: and you know, the government having to deal with sort
Speaker 2: of the public's view on this, seems like they would
Speaker 2: probably choose inflation.
Speaker 1: But well, I think it's a generational issue, right, So
Speaker 1: we have the baby boomer generation. It has a lot
Speaker 1: of the wealth in the country who wants to see
Speaker 1: policies that protect themselves. And then it's this is classic
Speaker 1: generational warfare. My partner Carlos Selegri who writes about it
Speaker 1: in his book Economic Cycles, Debt and Demographics. This has
Speaker 1: gone on, you know, many times before in history. So
Speaker 1: we have we have a we have a we have
Speaker 1: what money would call a fourth attorney. I mean, this
Speaker 1: is this is a generational war. You have the young
Speaker 1: people who are locked out of a lifestyle that their
Speaker 1: parents and grandparents experienced and are still holding on to
Speaker 1: and and they and you know, uh, that's why populism
Speaker 1: is rising at the moment. And you can see you know,
Speaker 1: I'm sure you're online a lot. You know, I'm not
Speaker 1: a boomer, I'm a gen exer, but I get called
Speaker 1: the boomer Okay, boomer, you.
Speaker 2: Know, yeah, yeah, yeah, how much of that would you
Speaker 2: say is attributed more to where we're at in technology?
Speaker 2: So for example, right like, the baby boomers had a
Speaker 2: massive middle class because we had the industrial age and
Speaker 2: we had assembly lines, and so smart people and dumb
Speaker 2: people were marginalized and they all did just put their
Speaker 2: their peace on the widget as it went down the
Speaker 2: assembly line. So we got this massive middle class. But
Speaker 2: as we moved to the information age especially and as
Speaker 2: we've accelerated into that now with AI, it's almost more
Speaker 2: of a meritocracy where if I'm smarter, I can just
Speaker 2: use my laptop, I can just get ahead, and that
Speaker 2: middle class sort of goes away and maybe there's no
Speaker 2: returning to that.
Speaker 1: That's what Trump is trying to address by bringing manufacturing
Speaker 1: jobs back. It's a bold move. We'll see if it works.
Speaker 1: The other thing to remember, though, is when you have
Speaker 1: let's say you bring a manufacturing plant to a town,
Speaker 1: I'm talking micro economics, and you hire that just say
Speaker 1: a thousand people, That creates jobs for those people. Those
Speaker 1: people then spend on ancillary services like housing, restaurants, services,
Speaker 1: so there's other jobs that are created by that steady
Speaker 1: base of manufacturing. And you know, that's what we saw
Speaker 1: hopp into a lot of Midwest towns during the outsourcing
Speaker 1: of manufacturing in the US and the nineties and two
Speaker 1: thousands under Clinton, Bush, Obama and and and and and
Speaker 1: and what have you, we saw towns. I mean I drove,
Speaker 1: I drove across the country Midwest towns just like the
Speaker 1: plant left, and they're just shadows of their former selves.
Speaker 1: So Trump, I think I did, idealistically, wants to bring
Speaker 1: back that kind of Whether it works or not, let's
Speaker 1: we'll see. And you're right there, there's been a change
Speaker 1: in the nature of the workforce and unfortunately, I Q
Speaker 1: has a lot to do with it.
Speaker 2: And our education system isn't helping at all.
Speaker 1: You know, our education system is a disaster. It's making
Speaker 1: I mean, look, I went to public school and I
Speaker 1: learned a lot. It was great. And I think that's
Speaker 1: been a lot of people's experience that are my age.
Speaker 1: I hear what's going on in the public school system now,
Speaker 1: and it's it's a disaster.
Speaker 2: My My daughter is a sophomore in high school and
Speaker 2: she she's homeschooling, and she just does she just wants
Speaker 2: to just take her to get out, and I'm like,
Speaker 2: just drop out, like I don't care. There's nothing that
Speaker 2: they're going to teach you at this point that you
Speaker 2: need to know. Like you're already working for me, You're
Speaker 2: already learning more cutting edge marketing stuff than they'll ever
Speaker 2: teach you in that industrial era school. So it's almost
Speaker 2: like people are being still trained in an industrial era
Speaker 2: school system with industrial age tools, and they're being left
Speaker 2: behind because that world no longer exists for them. And
Speaker 2: unless we change that, we're still going to have this
Speaker 2: populist uprising which is going to continue to push things,
Speaker 2: and if inflation continues to rage on, they continue to
Speaker 2: fall further and further behind. So yeah, it's not a
Speaker 2: good fix. I want to ask you, you know, when
Speaker 2: we talk about these debt crisises, I don't believe that
Speaker 2: we'll pay the debt down. I mean, it's more about management.
Speaker 2: It's almost like the medical systems today, right, let's manage
Speaker 2: the symptoms, does not try to cure it. And so
Speaker 2: we have this debt bubble. It's obviously it's a problem
Speaker 2: that TOGP levels are are extreme high. Obviously the interest
Speaker 2: on the debt is is has become a big problem,
Speaker 2: which is why races need to come down. Would you
Speaker 2: also believe that one it can't ever be really repaid.
Speaker 2: So that's not really the goal that we're aiming for.
Speaker 2: But it's more about like a management of it, and
Speaker 2: like as we've seen other nations just like sort of
Speaker 2: muddle along with it for a long periods of time.
Speaker 2: And does that mean it's not as acute as many
Speaker 2: people think it is. It's something that maybe just continues
Speaker 2: to sort of drag the economy down over a long
Speaker 2: period of time.
Speaker 1: Yeah. So so there's there's two charts. As I said,
Speaker 1: inflated away or default. Default is probably not an option.
Speaker 1: So they will inflate and uh this is and and
Speaker 1: and and the will be in stag we're predicting stagflation,
Speaker 1: so paths of inflation with deflation that result stagflation kind
Speaker 1: of this you know read you know this just this
Speaker 1: kind of like roller coaster ride. As the monetary policy
Speaker 1: he has less and less impact. And so the goal
Speaker 1: I think is to try to muddle along. The problem,
Speaker 1: of course is societally what that happens, what happens to
Speaker 1: the popular populations of the globe. And one result is populism.
Speaker 1: If you're in China, China is a you know, a
Speaker 1: communist country that rules from the top down. They fear
Speaker 1: their people the most. When I was a black Rock
Speaker 1: in two thousand and three, our energy guys came back
Speaker 1: from China and every everything they said was all the
Speaker 1: high officials there want to keep max employment so the
Speaker 1: people have food in their belly because they fear their
Speaker 1: people the most China, and China has a demographic problem,
Speaker 1: so china solution to this will be a distraction likely.
Speaker 1: You know, we're mongoring and that's why you know, geopolitically,
Speaker 1: these these debt problems and gender wars, it's kind of classic, right,
Speaker 1: you can't a country is the leadership of a country
Speaker 1: isn't going to take responsibility, so they'll blame someone else.
Speaker 1: So that's we think China's at risk of going kinetic
Speaker 1: sometime in the next you know, five to ten years.
Speaker 1: Europe has a demographic problem, and we we we have
Speaker 1: as as bad as our demographics. We're like the best
Speaker 1: the clean of shirt and a dury laundery. And you know,
Speaker 1: the illegal immigration did help the economy short term. The
Speaker 1: problem is societally, it wrecks the social fabric. So there's
Speaker 1: a trade off, and it's going to be very interesting
Speaker 1: to see what happens over the next five years. I
Speaker 1: don't have a crystal ball, but what I can say
Speaker 1: is volatility and risk are going to continue to be unprecedented.
Speaker 1: I think the days the fourteen years of low volatility
Speaker 1: are over.
Speaker 2: I would agree.
Speaker 1: I saw this quote.
Speaker 2: You know more, Buffett just decided to step down after
Speaker 2: a legendary status over at his company, Berkshire Hathaway. But
Speaker 2: I saw this chart. Over the past forty five years,
Speaker 2: Berkshire has returned three hundred and thirty one thousand percent
Speaker 2: compared to the S and P five hundred and fourteen
Speaker 2: thousand percent. However, during the same time frame, gold basically
Speaker 2: kept even with Berkshire. He didn't really beat that, and
Speaker 2: it really kind of goes into this monetary debasement. And
Speaker 2: he said, the tendency of government to want to debase
Speaker 2: its currency over time, there's no system that beats that.
Speaker 2: You can pick dictators, you can pick representatives, you can
Speaker 2: do anything, but there will always be a push towards
Speaker 2: weaker currencies. The natural course of government is to make
Speaker 2: the currency worth less over time. He seemed to sort
Speaker 2: of make the case for bitcoin even though he hates
Speaker 2: bitcoin and he hates gold. I'm curious your take, as
Speaker 2: you said, sort of this volatile nature that we're going
Speaker 2: into markets potentially looking very risky risk assets. You called
Speaker 2: that as this world sort of goes through this sort
Speaker 2: of breakup, if you will, do you see like a
Speaker 2: rush to gold and bitcoin assets really kind of taken over.
Speaker 1: Well, let's talk about gold first. What's interesting about gold
Speaker 1: is they're making it money again. If you've been following
Speaker 1: Basil three and July first of this year, it's going
Speaker 1: to be instituted in the US. Gold will be considered
Speaker 1: tier one capital and not paper gold, so not the
Speaker 1: ETFGLD or futures, physical gold. And so banks are going
Speaker 1: to start and already have been acquiring gold because you
Speaker 1: can lend against it, you can create money from it.
Speaker 1: In seventy one, when we DEALNK from gold, they turn
Speaker 1: it into a commodity. They're making it money. Yeah, and
Speaker 1: so gold, interestingly enough is being re liquefied as money.
Speaker 1: And I think that's why gold is doing what it's doing. Slowly,
Speaker 1: I think physical gold I want to I don't want
Speaker 1: to encourage people to buy paper gold, physical gold. Bitcoin.
Speaker 1: Bitcoin is a legitimate asset, the only and I missed it,
Speaker 1: so you know, I'll just say that I did. I
Speaker 1: did not get involved. Bitcoin at the moment is very volatile,
Speaker 1: and if you're looking at it as a hedge against
Speaker 1: a coming recession, just be careful because I'm a math guy,
Speaker 1: and it's very highly correlated to the nasdack and the
Speaker 1: NAS deck is a risk asset, so you know, think
Speaker 1: of it as a part of your portfolio. And you
Speaker 1: never should have all your eggs in one basket. You know,
Speaker 1: you shouldn't be one hundred percent gold one hundred percent.
Speaker 1: But bitcoin so and cash is also an asset temporarily
Speaker 1: because if things are going to deflate. Even though cash
Speaker 1: traditionally held over long periods of time, it's not a
Speaker 1: good idea. Look at what Warren Buppet's doing right now.
Speaker 1: He's hold he's holding he owns four point six percent
Speaker 1: of the t boll market. Uh, that's cash. Effectively, he's
Speaker 1: earning four percent on it, four point three percent, and
Speaker 1: he's making the bet that cash is a good trade
Speaker 1: at the moment because he's going to pick up bargains
Speaker 1: in in a in a dislocation. So so cash is
Speaker 1: also an assets. But but you know, if if someone
Speaker 1: had to put a gun in my head, and I've
Speaker 1: been telling people, look, uh, just have some dry powder
Speaker 1: to take advantage of the volatility that's coming. Don't be
Speaker 1: don't be over levered, and don't be one hundred percent
Speaker 1: any risk asset. Yeah.
Speaker 2: I was just thinking again sort of looking at Buffett's
Speaker 2: record and again gold sort of keeping up with what
Speaker 2: Berkshire did and to the point that you're making, uh
Speaker 2: maybe with the recession in front of us, but then
Speaker 2: probably a big uh stimulus print on the back end
Speaker 2: and not just the US, China, et cetera. And then
Speaker 2: you think about as the world continues to break apart
Speaker 2: and do they want to trust US treasuries and so
Speaker 2: then maybe those are the tailwind sort of catalysts for
Speaker 2: for bitcoin and gold. But that's that's more longer term.
Speaker 2: You guys are focused a little bit more shorter term.
Speaker 1: Yeah. Yeah, Look, if if bitcoin could prove to me
Speaker 1: mathematically it was delinking from risk assets, that would be interesting.
Speaker 1: But you know, we need time to you know, see
Speaker 1: that right now, it's not historically, it's it's it acts
Speaker 1: like a risk asset, and that's that's fine. You know,
Speaker 1: it keeps printing new highs over time. But you know,
Speaker 1: if you're gonna, if you think of receptions coming and
Speaker 1: you put all your money in bitcoin hoping to avoid uh,
Speaker 1: you know, preserving your capital, I'd be lary of that.
Speaker 1: That's that's all I'm saying. And maybe bitcoin de couples
Speaker 1: during this recession and holds its value that yet, you know,
Speaker 1: you know, that could prove me wrong. But historically the
Speaker 1: correlation is it's a risk asset. So until that changes,
Speaker 1: it is what it is.
Speaker 2: Yeah, well, what about I mean in it seems like
Speaker 2: in times of high inflation, those assets tend to get correlated,
Speaker 2: which is why like the sixty to forty bond, you know,
Speaker 2: stock portfolio is dead. They're sort of moving into unison
Speaker 2: right now. And you know, in twenty eight and twenty twenty,
Speaker 2: when the markets plunged, gold also crashed along with those.
Speaker 2: So is everything somewhat kind of correlated and tied together
Speaker 2: at this point?
Speaker 1: No gold gold gold also, I mean, let's not forget
Speaker 1: during the Great Financial Crisis, gold went down fifty percent
Speaker 1: when when the when Lehman crisis hit, primarily because you know,
Speaker 1: in a in a margin call that's global, you sell
Speaker 1: what you can, not what you want too, so everything
Speaker 1: gets hit, especially if it's on leverage. So but interestingly enough,
Speaker 1: gold recovered quite quickly once you're a new high. The
Speaker 1: US stock markets took longer, uh to do that. So
Speaker 1: you know, that's why Warren Buffett is probably in T
Speaker 1: bills because you know, in a dislocation like that where
Speaker 1: everything goes down, T bills don't go down, and then
Speaker 1: you you know, you know you have dry powder and
Speaker 1: then you start scooping up everything.
Speaker 2: Yeah, yeah, I think I saw you probably know better.
Speaker 2: I think it was just off of the treasury allocation.
Speaker 2: He's making twelve or fourteen billion a year, I think
Speaker 2: some crazy number like that.
Speaker 1: Yeah. No, basically he's getting paid to sit to wait
Speaker 1: what he's he's determined that risk assets are too expensive.
Speaker 1: He's not trying to time the market, but he's decided
Speaker 1: he'll wait for a correction and then he'll go back.
Speaker 1: That's basically what he's telling you.
Speaker 2: All Right, So in your report, you're projecting, and we'll
Speaker 2: link to that down below. I people want to check
Speaker 2: that out. But you're projecting that there's some big recession
Speaker 2: coming up, you know this year, probably in twenty twenty five,
Speaker 2: sort of lay that out what people should be watching,
Speaker 2: paying attention to, and sort of what you think from
Speaker 2: a big picture, their sort of life raft is through
Speaker 2: that moment.
Speaker 1: Well, you know, again it's structural, it's endogenous to the
Speaker 1: US economy being it's a cycle. It's going to happen,
Speaker 1: and housing is going to be the one that leads it.
Speaker 1: Interestingly enough, housing has eighteen year cycles. The last one
Speaker 1: was two thousand and seven. Carlos in his book in
Speaker 1: twenty twenty one wrote about a housing crisis appearing sometime
Speaker 1: in twenty five twenty six, And as we wrote the report,
Speaker 1: we're seeing it, you know, we're seeing it in real time.
Speaker 1: It's early indicators that lead new permit. New permits started
Speaker 1: collapsing in twenty two. That's a leading indicator. So what
Speaker 1: we're seeing our completions. Once the completions dry up, that's
Speaker 1: an indication there's no demand. And we're starting to see
Speaker 1: that new tenant rents have been coming down. That's probably
Speaker 1: due to the illegals either self deporting or the stop
Speaker 1: of the flow. And new tenant rens lead all tenant
Speaker 1: rents which lead home prices, and so it's just a cycle.
Speaker 1: Government spending is on the margin being cut and that's
Speaker 1: going to affect the economy and consumption, and we're expecting
Speaker 1: this to become apparent sometime in the fall. The stock market. Unfortunately,
Speaker 1: we have a housing problem and a AI bubble, so
Speaker 1: we're going to have a deflation of both. We think
Speaker 1: the AI bubble has already popped and is in process
Speaker 1: of popping. We think we saw peak spend in Q
Speaker 1: one and it's downhill from there. And it's it's just
Speaker 1: classic second derivative stuff and there'll be you know, credit contraction.
Speaker 1: The money supply I will come down, velocity of money
Speaker 1: will come down, and it will cause a deflationary scare.
Speaker 1: And if that'll come in and do what it does,
Speaker 1: and stock prices will revolt and people will blame Trump people,
Speaker 1: people will blame tariffs. But it's just a classic cycle.
Speaker 1: And we go into our reports eighty five pages. We
Speaker 1: have also a video of us going over an executive presentation,
Speaker 1: which we also provide, so it comes with three components report,
Speaker 1: executive presentation, and an hour long video of Carlos and
Speaker 1: I going over it and It's on our website at
Speaker 1: finance technologies dot com. It's stilled with a pH and
Speaker 1: if you buy the report, you'll get free updates as
Speaker 1: we track this and when we think the bottom is in,
Speaker 1: we'll get If you buy this report, you'll get that
Speaker 1: report for free.
Speaker 2: All right, Well, that's a compelling case. I appreciate you
Speaker 2: sharing that with us.
Speaker 1: We'll wait and see.
Speaker 2: I'm hopeful, but we'll wait and see see how this
Speaker 2: all plays out.
Speaker 1: Thanks a lot, Mark,