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Speaker 1: What's up, everybody. My name is Joe Brown. This is

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Speaker 1: Financial Heresy. Thanks so much for joining us today, and

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Speaker 1: I've got fantastic guest on the episode for us today,

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Speaker 1: I've got Michael gay Ed.

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Speaker 2: He is a CFA.

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Speaker 1: He publishes the lead Lag Report, massive audience on Twitter

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Speaker 1: as well, constantly pushing out really great insights and research

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Speaker 1: on the markets, macro, the economy, and today specifically, we're

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Speaker 1: going to be talking about a global margin call, a

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Speaker 1: credit event that is coming. There are some massive risks

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Speaker 1: building up across the entire system. So today I've got

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Speaker 1: him on the show to discuss what is that going

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Speaker 1: to look like, what are some of the potential triggers

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Speaker 1: for this, and what should we do about it? What

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Speaker 1: is it going to look like when it plays out,

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Speaker 1: and what can we do to be prepared and to

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Speaker 1: take advantage of this to profit off this when it happens.

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Speaker 1: All right, Michael, Well, thank you so much for joining

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Speaker 1: me today. Really excited to have this interview here. And

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Speaker 1: let's start off with the big question is what is

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Speaker 1: around the corner here? You've been talking about a credit that,

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Speaker 1: a global margin call. What is that and why should

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Speaker 1: we expect something like that to happen when everything's been

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Speaker 1: everything's just been fine.

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Speaker 2: Well, I mean it's fine until it isn't. I mean,

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Speaker 2: I think it's kind of the point. And to be clear, right,

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Speaker 2: like some people accuse me of being a perma bear now,

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Speaker 2: just like they accused me of being a permeable in

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Speaker 2: October when I screamed melt up back then, before warning

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Speaker 2: of December being high risk, before saying melt up pre

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Speaker 2: election year. Dynamics are there, but that there's a credit event,

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Speaker 2: a tail event out there. Okay, so credit event sounds scary,

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Speaker 2: but in reality it's something that's happened plenty of times historically.

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Speaker 2: Credit event basically means a VIC spike inequities, so a

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Speaker 2: vall move that's pretty substantial, likely pretty fast, declining stock markets,

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Speaker 2: and it means a repricing of the fault risk. Now

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Speaker 2: in the bond market, there is duration risk and there's

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Speaker 2: credit risk. Right. What we've had the last year and

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Speaker 2: a half has been a crisis where the very long

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Speaker 2: end of the curve, the parts the bond market which

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Speaker 2: are longer in time, have sold off very substantially. While internally,

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Speaker 2: in terms of the differential between high quality debt and

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Speaker 2: junk debt that spread a stay pretty tight. So, in

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Speaker 2: other words, the bond market has been sending two messages right,

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Speaker 2: one saying that with the inverted yell curve, one saying

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Speaker 2: recessions coming, another one saying, well, maybe not, because the

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Speaker 2: fault risk is not getting priced in. So you have

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Speaker 2: a credit event that means spreads widen, means junk debt

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Speaker 2: suddenly now is at risk, meaning investors starts saying, you

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Speaker 2: know what, this highly levered company, I need to get

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Speaker 2: paid more for providing my capital to that company, because

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Speaker 2: there's a chance that company may not survive, And that

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Speaker 2: in turn has all kinds of ramifications on the real

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Speaker 2: economy beyond just the stock and bond market. Now, most

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Speaker 2: bear markets end with a bang. Most bear markets end

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Speaker 2: with a credit event, and with a volatility spike, and

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Speaker 2: with credit spreads widening, and with junctures like what I

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Speaker 2: think we're likely to see, which is a very kind

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Speaker 2: of shock, decline, capitulation, inequity markets, which again you'd see

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Speaker 2: in the bond market. It's not a situation where I'm

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Speaker 2: arguing that everything breaks and stays that way. Right. Credit

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Speaker 2: events are exactly what are needed to reliquefy, right, I know,

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Speaker 2: it's exactly what you need to have the cycle reassert itself, right. So,

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Speaker 2: and honestly, if you're a long term investor, you want

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Speaker 2: to see a credit event because it means you're buying

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Speaker 2: cheaper essetce.

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Speaker 1: Yeah, yeah, yeah, that makes sense. To clarify, I want

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Speaker 1: to make sure that I understand what you're saying there.

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Speaker 1: The spread between like junk bonds and treasuries is very

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Speaker 1: tight right now, communicating that there's very low risk in

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Speaker 1: corporate debt. And so that's sending the opposite signal that

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Speaker 1: the rising yields on US treasuries has been sending.

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Speaker 2: Is that correct? Right? And if you think about there

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Speaker 2: should be there should be a logic to why they

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Speaker 2: should be connected. Right, So as rates have risen, what

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Speaker 2: does that mean? It means companies that are very levered

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Speaker 2: at some point that debt has to be rolled over

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Speaker 2: into new debt. Right, there's a maturity on that debt.

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Speaker 2: So now you've got these companies that have high debt

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Speaker 2: that then have to roll over that debt. But they're

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Speaker 2: gonna have to roll over the debt into higher interest rates.

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Speaker 2: So now their interest expense is a lot more so

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Speaker 2: at some point that's going to be a real problem,

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Speaker 2: right because a lot of companies living on very thin

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Speaker 2: margins that have been kept alive by is your interest

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Speaker 2: rate policy, low rates in general. Now they're gonna have

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Speaker 2: to pay up right just to maintain business operations. Right now,

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Speaker 2: By the way, you're starting to see that in terms

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Speaker 2: of just bankruptcies. Right in the real economy outside of

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Speaker 2: the bond market, you're seeing bankrucy filings have been picking

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Speaker 2: up this as factual, which is what you would expect.

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Speaker 2: Right Again, higher rates, that's what they do. Suddenly you

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Speaker 2: can't saily keep your business open because you know you

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Speaker 2: can't afford those those higher costs of capital. There's another

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Speaker 2: interesting part of this, which is that you know, most

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Speaker 2: crises are refinancing crises, right. It's not when the dead

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Speaker 2: is locked in, right, it's on the rollover of the

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Speaker 2: debt where things get to be volatile and messy. So

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Speaker 2: you can argue that, well, maybe credit spreads are tight

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Speaker 2: now because you don't have this kind of bulleted rollover

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Speaker 2: just yet. A lot of the corporate loans roll over

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Speaker 2: next year and the year afterwards, so you can argue,

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Speaker 2: maybe the market is only going to worry about it

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Speaker 2: next year or the year after. I'd argue, that's probably

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Speaker 2: not gonna be the case.

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Speaker 1: Right.

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Speaker 2: If you believe markets are discounting mechanisms, then it should

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Speaker 2: start to reflect that sooner than later. Right now, keep

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Speaker 2: in mind that my entire thesis around the credit event

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Speaker 2: at the start of the year was that towards the

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Speaker 2: end of the year, and all this is documented in

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Speaker 2: the lead lagger port and the social media content, that

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Speaker 2: the credit event would happened towards the latter part of

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Speaker 2: the year on the realization that all these corporate loans

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Speaker 2: are going to roll over and there's real refinancing risk.

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Speaker 2: But you know, this is the thing. I always frame

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Speaker 2: things in terms of conditions, purposely because maybe that's not

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Speaker 2: the real catalyst, right for a credit event. We're seeing

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Speaker 2: now risks with Japan. I'm sure we'll touch on. China

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Speaker 2: looks like a horrible, horrible mess in terms of their economy,

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Speaker 2: their leverage. And that's the thing. It's like, when I

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Speaker 2: keep using this line, when the tinder is dry, it

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Speaker 2: really doesn't take much to start a fuire. It can't

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Speaker 2: come from anything, right, And that's I think where i'd

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Speaker 2: very much argue the bulls are.

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Speaker 1: Wrong in terms of just totally being blinded to those risks. Now,

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Speaker 1: when you talk about the tinder being dry and their

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Speaker 1: big risks kind of spread out and the catalysts could

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Speaker 1: come from anywhere. One of those I would imagine would

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Speaker 1: be the fiscal situation of the United States government. I mean,

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Speaker 1: we're talking about in the next two years refinancing half

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Speaker 1: the national debt. It's probably an average of one and

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Speaker 1: a half or two percent right now, and then all

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Speaker 1: that's getting refinanced to five percent or higher because it's

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Speaker 1: the next two years, so rates could be even higher.

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Speaker 1: And that's you know, assuming they were to balance the budget,

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Speaker 1: which is not going to happen, they'd be sitting at

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Speaker 1: a one and a half trillion dollars of interest expense

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Speaker 1: in two years, which would mean they'd have to cut

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Speaker 1: spending everywhere else. And so it's just an unsustainable situation.

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Speaker 1: Is that an area that you see could be a

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Speaker 1: catalyst for some sort of credit vendor? Is that a

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Speaker 1: little bit more long term of a risk.

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Speaker 2: I am much more lucky to be less annoying than

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Speaker 2: Congress is to actually balance its budget, right, So I

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Speaker 2: don't think that's ever gonna happen, to your point, But

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Speaker 2: but you know, so, yes, it's obviously a concern, but

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Speaker 2: you know, it still goes back to path, right, because

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Speaker 2: all of those trillions of dollars of government debt are

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Speaker 2: not gonna be all rolled over at once. So if

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Speaker 2: you have a prolonged period of higher rates, then yeah,

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Speaker 2: there's no question that becomes an issue. But you know,

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Speaker 2: if you roll over into higher rates and then suddenly

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Speaker 2: rates collapse because of a risk off credit event, because

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Speaker 2: the flight to safety reasserts, okay, that kind of bails

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Speaker 2: out the government, you can argue to some extent, at

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Speaker 2: least for a moment in time, right, And I think

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Speaker 2: that's that's always why this the idea of the king

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Speaker 2: getting kicked down the road is purely a function of

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Speaker 2: the smoothness of the path. Right. So as long as

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Speaker 2: you have these, I'd argue periodic credit events that causes

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Speaker 2: money to flee into treasuries, then whenever they roll over

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Speaker 2: that debt, right, then rates might actually be lower.

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Speaker 1: Right.

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Speaker 2: So, but it is it is interesting where we are now,

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Speaker 2: right because you've got the the Fitch downgrade of US

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Speaker 2: credit quality. Unlike twenty eleven, the response actually was yields rose,

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Speaker 2: which is interesting to me. It's almost like the bomb

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Speaker 2: markets saying the treasury market's saying that, Okay, so now

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Speaker 2: credit quality is worse. Butybe the US conment can't tax

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Speaker 2: us out of it, right, and just kind of tease

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Speaker 2: that out a little bit.

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Speaker 1: Right.

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Speaker 2: So, in twenty eleven, when SMP did that downgrade of

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Speaker 2: US credit quality, the reaction was actually the opposite of

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Speaker 2: what you would think. So SMB downgrads from triple A

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Speaker 2: to double A plus or whatever it was. The initial

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Speaker 2: reaction in the first week of August was treasury prices

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Speaker 2: spiked and treasury yields fell while the stock market fell.

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Speaker 2: Now that doesn't make sense on its surface, because if

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Speaker 2: a credit rating agency is saying the US government is

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Speaker 2: not as credit worthy, you would expect a fault risk

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Speaker 2: to rise, right, expect you'll rite to say if they fell,

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Speaker 2: so why do they fall? In twenty eleven because the

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Speaker 2: response was, well, the US government owns us through taxation,

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Speaker 2: so if their credit quality sucks, our credit quality has

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Speaker 2: to suck, because they're gonna come to us right to

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Speaker 2: foot the bill. This time around, it's a different reaction,

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Speaker 2: right this time around, this down grade and instead yields

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Speaker 2: are actually rising, right, not just in the US, but

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Speaker 2: also globally, as we're seeing in this kind of move

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Speaker 2: the last several weeks. So I look at that and said, asaid, okay,

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Speaker 2: that's interesting. Rights, that's actually a notable chain in the

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Speaker 2: market perception around the government being able to pay off

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Speaker 2: of its debt through US as taxpayers.

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Speaker 1: Right right, Yeah, Seemingly that the only only way out

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Speaker 1: of this for them long term would be to either

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Speaker 1: force rates lower, have something else where rates get lowered

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Speaker 1: because of uh, you know, piling into treasuries, federal reserve,

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Speaker 1: restarting QI, or maybe even yield curve control, trying to

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Speaker 1: follow the japan playbook at some point.

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Speaker 2: Yeah, I mean, good luck with all that, right, I mean,

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Speaker 2: you still stick inflation, right, I mean that's right now.

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Speaker 2: And by the way, that inflation is still largely housing

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Speaker 2: driven and shelter droven, right, I mean, there's some interesting

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Speaker 2: stats to show that outside of shelter inflation is basically collapsed. Right. So, yeah,

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Speaker 2: there's a lot of interesting there's a lot of really

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Speaker 2: interesting cross currents that I think is much deeper than

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Speaker 2: you know, what the headlines would have you think. But

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Speaker 2: the broader point remains the same. It's like, look, I

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Speaker 2: always go back to what is the the condition for

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Speaker 2: major tail events, major crashes. It's leverage. It's always leverage. Yeah,

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Speaker 2: I don't care if it's the South Street Sea bubble.

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Speaker 2: I don't care if it's you know, what's going on

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Speaker 2: with Japan. I don't care if what's going on with China.

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Speaker 2: It's like, it's always about because leverage creates marginles little

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Speaker 2: small changes when you're leverage creates you know, for selling, right,

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Speaker 2: So you apply that to our governments and that's a

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Speaker 2: pretty scary scenario talking about leverage.

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Speaker 1: Let's move over to Japan then, because they're you know,

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Speaker 1: I've highlighted a lot recently the debt to GDP ratio

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Speaker 1: of the US at one twenty, and that's, you know,

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Speaker 1: similar to peak of World War Two. Japan's in a

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Speaker 1: in a whole other league with with that, and you've

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Speaker 1: been talking about the Japan carried trade recently. So let's

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Speaker 1: let's discuss what's going on there.

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Speaker 2: Yeah, sent me for the for all the frustration around

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Speaker 2: Powell being late, and no central bank is more late

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Speaker 2: to inflation than the Bank of Japan because they haven't

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Speaker 2: had to deal with it for forty years, right, It's

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Speaker 2: like you know, and so you're talking about literally generations

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Speaker 2: that don't know what inflation's like in Japan. Now, the

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Speaker 2: carry trade is a very well known dynamic. There are

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Speaker 2: some really interesting studies actually that argue that a large

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Speaker 2: part of the bull market, really posts the tech bubble,

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Speaker 2: was actually driven by the leverage created from the carry trade. Right,

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Speaker 2: some people would disagree, but there's a lot of interesting

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Speaker 2: studies on that. So what is the carry trade? Basically,

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Speaker 2: the idea is that because of deflation, Japan's basically kept

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Speaker 2: rates at zero. Okay. So if you're a foreign institutional investor,

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Speaker 2: what do you do. Well, you like getting free debt, right,

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Speaker 2: no interest debt, So you borrow from Japan in the

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Speaker 2: end terms, and then you deploy that all right elsewhere

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Speaker 2: in the globe in higher yield seeking currencies. So now

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Speaker 2: imagine at the margin a good amount of money borrowing

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Speaker 2: from Japan to buy riskier things because there's no cost

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Speaker 2: to that capital from Japan. Okay. So now you have

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Speaker 2: this really interesting situation. You've got inflation going on in Japan,

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Speaker 2: You've got extreme leverage, okay, with Jgb's okay, and against

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Speaker 2: that backdrop, you look at the correlation of the dollar

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Speaker 2: yen to tech stocks and it's almost one this year.

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Speaker 2: So what's happened You can argue, right whether the causation

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Speaker 2: is super clear or not, it is not very obviously

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Speaker 2: you can't really exactly track the flows, but it is

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Speaker 2: a curious correlation where there's been a very strong relations

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Speaker 2: between a rising dollar relative to and tech momentum. So

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Speaker 2: it's very possible. It's I don't think it's impossible to

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Speaker 2: envision what's happened this year. A lot of money basically

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Speaker 2: just barred from Japan and bought tech right now, that

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Speaker 2: creates a really interesting that I have it because if

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Speaker 2: the Bank of Japan gets more aggressive to defend the

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Speaker 2: yen okay, because against verising inflation, oil denominated in yen

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Speaker 2: now gets to be even more expensive as the end

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Speaker 2: is pressured, if the Bank of Japan suddenly has to

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Speaker 2: step in and either really remove yocur control, which is

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Speaker 2: debatable because that's going to be a nasty set up

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Speaker 2: with the bonds, or do something else to tighten monetary conditions, Okay,

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Speaker 2: that can create a forced liquidation of those yen dollars

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Speaker 2: that were deployed into other countries and their risks just

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Speaker 2: an unwind an unwindle thing, and it creates So when

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Speaker 2: I use that term global margin call again, it's not

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Speaker 2: being me being a proper bear. I've somebody wants tweeted

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Speaker 2: to me, showing in the search history of my account saying,

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Speaker 2: you said global margin coal many times, and you've been

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Speaker 2: rolling many times. I said, what are you talking about?

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Speaker 2: Look at the dates every time I said there's a

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Speaker 2: global margin coal. Then you end up having a higher

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Speaker 2: volatility regime and you know, a major stress in the markets.

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Speaker 2: So I'm being very purposeful in that terminology. I'm not

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Speaker 2: saying that it's like the end of the world. What

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Speaker 2: I'm saying is there's a literal I mean quite literal,

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Speaker 2: right that a global margin coal, which I think would

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Speaker 2: em and a from the boj having to defend the end,

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Speaker 2: causing repatriation back into Japan, and that creates force selling

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Speaker 2: and then once selling happens, selling begets selling. Now I

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Speaker 2: could be totally wrong. Maybe that doesn't happen next month,

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Speaker 2: Maybe that happens next year or two years. I don't know, right,

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Speaker 2: But the more that inflation is there for Japan, the

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Speaker 2: more likely it is it's gonna happen. Soitor, But again

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Speaker 2: I go back to, uh, this analogy in a chaotic system,

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Speaker 2: a butterfly flapping. It's when creates a hurricane, right, It's

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Speaker 2: butterfly effects, right that you often movies on this. Okay, Well,

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Speaker 2: Japan is not a butterfly. It's mathra from the from

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Speaker 2: the gods of the movies. It's a big deal, right.

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Speaker 2: I mean, when when you have it doesn't matter how

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Speaker 2: how physically large the surface area of Japan is. It's

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Speaker 2: telling me about you know, currency and how much is

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Speaker 2: flashing around because of what they've tried to do to

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Speaker 2: try to save the system, their own system which now

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Speaker 2: is under attack from all of this monetary stimulus and commodities.

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Speaker 1: All Right, So I'm going to I'm gonna try and

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Speaker 1: summarize this like I'm I'm, you know, a fifth grader,

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Speaker 1: just to make sure that I have I have this

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Speaker 1: whole thing down. So carry trade. That would an example

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Speaker 1: of that that I think most would be familiar with

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Speaker 1: would be like buying a rental property. So you get

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Speaker 1: a you know, a seven percent mortgage, You've got twelve

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Speaker 1: percent return by buying an investment property, the property produces

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Speaker 1: enough to cover the debt service, and you keep the difference.

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Speaker 1: That's an example of a carry trade, right, just definitionally speaking, Yeah,

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Speaker 1: I think so all the.

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Speaker 2: Away from it, right. Yeah.

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Speaker 1: So then with the Japan situation, it would be more like,

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Speaker 1: let's say you've got a brokerage account with the margin

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Speaker 1: feature enabled, and you take out a margin loan inside

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Speaker 1: your brokerage account and you know whatever, it's eight percent,

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Speaker 1: and use that to buy let's say in video stock,

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Speaker 1: and you're getting twenty percent. Well, at some point something happens,

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Speaker 1: maybe maybe interest rates notch up a little bit higher,

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Speaker 1: and you need to make that You need to make

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Speaker 1: that payment. So you sell a little bit of your

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Speaker 1: Nvidia to make that margin payment, and everybody else has

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Speaker 1: to do the same thing, and so then the stock

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Speaker 1: starts to fall a little bit, and then suddenly you

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Speaker 1: get margin called and you have to sell even more

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Speaker 1: of it, and the whole thing can unwind really quickly.

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Speaker 1: Is that kind of similar to the situation that we're

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Speaker 1: describing here, just on a larger, more complex scale. Yeah.

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Speaker 2: No, I think it's a it's a good way to

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Speaker 2: break it down. The speaking about in the video. It is,

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Speaker 2: it is. It's actually it's a really good example because

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Speaker 2: the assumption in the Carria trade, just like the assumption

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Speaker 2: in in video, is that the trade continues, right, that

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Speaker 2: that spread is guaranteed between zero rates with Japan and

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Speaker 2: other assets going up or in the case of the margin,

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Speaker 2: example margin eight percent and in video clipping at ten

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Speaker 2: to fifteen percent, you know monthly. Right. It's like I

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Speaker 2: keep using that line. Opportunity always exists when the crowd

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Speaker 2: thinks it knows an unknowable future, right, So everybody don't

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Speaker 2: the same side of the boat in thinking that in

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Speaker 2: video will keep going up. Then that's no different to

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Speaker 2: me than twenty twenty one, where cryptocurrencies were rising, rising, rising.

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Speaker 2: The narrative was it's a store of value as if

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Speaker 2: it doesn't have risk, all right, and then when the

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Speaker 2: risk manifests, then that becomes cataclysmic.

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Speaker 1: Right. Yeah, So so I want I want to hear

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Speaker 1: a little bit more about well, actually, let's let's let's

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Speaker 1: take a let's shift, because you've you've talked about how

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Speaker 1: debt becomes deflationary once you can't issue any more of it,

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Speaker 1: and it seems like we're near that kind of a

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Speaker 1: kind of kind of a situation right now from a

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Speaker 1: number of different areas. But can you talk about that

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Speaker 1: and how that how that piece of the puzzle kind

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Speaker 1: of fits into what we're talking about right now.

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Speaker 2: You know, and I've said that a couple of times.

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Speaker 2: This idea that debt becomes deflationary you can't issue more

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Speaker 2: of it is because if you can't roll it over, well,

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Speaker 2: now you've got to pay the piper, right, you can't

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Speaker 2: just keep kicking can down ears. It's actually quite little, right,

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Speaker 2: It's like, as long as you can keep on issuing debt,

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Speaker 2: then you have inflation, right, because you're just putting more

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Speaker 2: dollars into the system. But at some point that ends. Now,

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Speaker 2: in theory, there's this thing called mono monetary theory, which

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Speaker 2: argues that debt never matters because when you're a reserve currency,

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Speaker 2: you can buy it up. The Federal Reserve can always

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Speaker 2: print dollars. Is never a risk of that debt not

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Speaker 2: being rolled over because you've got burd right, you've got

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Speaker 2: the money printer, same deal with Japan, right, But what

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Speaker 2: do you do when that dynamic is there? Inflation is

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Speaker 2: you know, is there and you have a situation where

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Speaker 2: it's like every every central bank for itself right out

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Speaker 2: for itself.

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Speaker 1: Right.

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Speaker 2: So, and by the way, you should not none of

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Speaker 2: us should want to see a deflationary depressionary shock, as

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Speaker 2: frustrated as everybody is around the current state of the system,

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Speaker 2: Like that's gonna be really painful, right, it could be coming,

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Speaker 2: but you don't want it to come in your lifetime.

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Speaker 2: I think this is often what's missed by the real

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Speaker 2: aggressive you know, negative permea bears. But this does get

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Speaker 2: to be kind of interesting. Here goes back to the

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Speaker 2: Fitch downgrade and the reaction on the yield side, right

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Speaker 2: in terms of US treasury. So if now the credit

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Speaker 2: quality the United States government has been questioned and the

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Speaker 2: fat can't necessarily step in the way they used to

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Speaker 2: because inflation is still elevated, somebody's got to go, right

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Speaker 2: And to your point about balancing the budget, it ain't

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Speaker 2: gonna be our politicians, right, so speaking about you know,

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Speaker 2: with the average age of one hundred and seventy of Congress,

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Speaker 2: they don't have any incentives to right. So, but that's

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Speaker 2: my point. It's like, that's why this is so much

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Speaker 2: more complicated than people think, and that's why always go

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Speaker 2: back to path matters more than prediction. Now, I am

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Speaker 2: hopeful that treasuries don't keep acting the way they have

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Speaker 2: more recently, okay, which is basically a quasi repeat of

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Speaker 2: what happened last year, what I called my hell. Right,

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Speaker 2: So you know, I put a lot of content out

398
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Speaker 2: just like you. I have my research lead, Laggar portal

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Speaker 2: and stuff. But you know I have these funds that

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Speaker 2: I launched as an entrepreneur, right, so I'm somebody who's

401
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Speaker 2: skinning the game Atax for run Jojo Mutual Fund and

402
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Speaker 2: two ETFs. The rules based meaning if I die tomorrow,

403
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Speaker 2: they're gonna run the exact same way. It's not based

404
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Speaker 2: on you know, my analysis, that's public, right, It's just

405
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Speaker 2: those are more observations. But on the they all rely

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Speaker 2: on treasuries. They all rely on government debt for a

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Speaker 2: moment in time to be the safe haven, to be

408
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Speaker 2: the risk off play. So you can imagine my frustration, right,

409
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Speaker 2: why occur so much on social media? You know, the

410
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Speaker 2: last year, and I have this brutal because that's the

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Speaker 2: way those strategies designed. So I so I say that

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Speaker 2: because I have a bias, Right, My bias is to

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Speaker 2: not want to see the world end, because the world

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Speaker 2: ending means treasuries keep collapsing, these government debt keeps on

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Speaker 2: being ignored, and you'ls keep spiking. I actually want to

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Speaker 2: see the O office. I actually want to see for

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Speaker 2: a moment in time bond yields fall, flight to safety,

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Speaker 2: stocks full to then get back in the stocks at

419
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Speaker 2: lower levels. Right. So that's why I go back to

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Speaker 2: I'm not a perma bear. I don't want to see

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Speaker 2: the world. And problem with being on the end of

422
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Speaker 2: the world is that you don't get paid out for it.

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Speaker 2: But I do want to see at least some normalization, right,

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Speaker 2: And that's the thing that's been lacking, And this is

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Speaker 2: this is uh. One of the thought on that is that, look,

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Speaker 2: everyone is short term and getting even more short term.

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Speaker 2: The reality is environments like this do create opportunities, but

428
00:22:31,040 --> 00:22:35,359
Speaker 2: you've got to have the vision. The kahona is to

429
00:22:35,440 --> 00:22:38,040
Speaker 2: really kind of stick your neck out when it looks

430
00:22:38,080 --> 00:22:40,879
Speaker 2: like a certain relationships that people could rely on in

431
00:22:40,880 --> 00:22:43,960
Speaker 2: the past are broken. That's kind of the very definition

432
00:22:44,000 --> 00:22:46,119
Speaker 2: of being investors actually buying into the relationships that on

433
00:22:46,160 --> 00:22:50,040
Speaker 2: average work, and that relationship is you know, bond countering.

434
00:22:49,720 --> 00:22:55,919
Speaker 1: Socks Hm hmm, yeah, that makes sense. With so the

435
00:22:56,240 --> 00:22:59,520
Speaker 1: kind of the there's always the the phrase, you know,

436
00:22:59,560 --> 00:23:02,199
Speaker 1: like this time is different, and that's used kind of

437
00:23:03,000 --> 00:23:06,440
Speaker 1: in opposite ways sometimes. But if you compare what's going

438
00:23:06,480 --> 00:23:10,560
Speaker 1: on right now to what was happening in let's say

439
00:23:10,600 --> 00:23:14,040
Speaker 1: twenty eighteen, the Fed was trying to make good on

440
00:23:14,080 --> 00:23:20,639
Speaker 1: THEIRS POSTGFC crisis promise to normalize the balance sheet, So

441
00:23:20,680 --> 00:23:24,280
Speaker 1: they're raising interest rates, they were letting assets lead off

442
00:23:24,320 --> 00:23:27,679
Speaker 1: their balance sheet. Markets started crashing, so they pivoted and

443
00:23:27,680 --> 00:23:31,119
Speaker 1: they reversed course. But you've mentioned a couple of times

444
00:23:31,119 --> 00:23:33,880
Speaker 1: now that's not necessarily in a playbook this time because

445
00:23:34,880 --> 00:23:39,679
Speaker 1: inflation and at this point, if they were to do

446
00:23:39,760 --> 00:23:42,000
Speaker 1: something like that, at least right now, it could very

447
00:23:42,000 --> 00:23:47,080
Speaker 1: easily reignite reignite inflation. And that wasn't a concern back

448
00:23:47,119 --> 00:23:52,679
Speaker 1: in twenty eighteen. And so when you're talking about a

449
00:23:52,800 --> 00:23:59,359
Speaker 1: short term opportunity an event here, you see a sufficient

450
00:23:59,520 --> 00:24:03,760
Speaker 1: likelihood that actually it wouldn't necessarily have to be the

451
00:24:03,800 --> 00:24:07,679
Speaker 1: Federal Reserve to step in with QI or YELLO cover control.

452
00:24:07,840 --> 00:24:09,520
Speaker 1: It's kind of like the market would do that as

453
00:24:09,600 --> 00:24:12,240
Speaker 1: kind of a flight to safety measure, bailing bailing out

454
00:24:12,280 --> 00:24:14,840
Speaker 1: treasuries you know themselves.

455
00:24:14,400 --> 00:24:17,760
Speaker 2: Are so yeah, there's exactly right. And I also, you

456
00:24:17,800 --> 00:24:21,640
Speaker 2: know in March when the regional bank in quote crisis

457
00:24:21,720 --> 00:24:24,840
Speaker 2: was happening, because I said credit event in January and

458
00:24:24,880 --> 00:24:27,520
Speaker 2: then you know, as the regional banks for playing out,

459
00:24:27,560 --> 00:24:30,159
Speaker 2: I have people posting to me, tweeting me saying, well,

460
00:24:30,200 --> 00:24:32,200
Speaker 2: there's your credit event, Congress, and I said, no, that's

461
00:24:32,200 --> 00:24:35,080
Speaker 2: not the credit event. A credit event has to be

462
00:24:35,160 --> 00:24:37,880
Speaker 2: something that in quotes, they and by they I mean

463
00:24:37,880 --> 00:24:42,400
Speaker 2: policymakers can't easily preempt in control. So the region bank

464
00:24:42,400 --> 00:24:45,560
Speaker 2: crisis they control, okay, right, like it was it was easy, right, mean,

465
00:24:45,560 --> 00:24:46,919
Speaker 2: they basically fixed on the over the weekend and that

466
00:24:46,960 --> 00:24:49,120
Speaker 2: was it, at least, you know, as a stop gap.

467
00:24:49,440 --> 00:24:52,800
Speaker 2: So it really has to be something that is bigger

468
00:24:52,840 --> 00:24:57,200
Speaker 2: than the money printer in terms of the transmission mechanism. Right,

469
00:24:57,280 --> 00:24:58,679
Speaker 2: That's why I keep going mac. I think it's going

470
00:24:58,720 --> 00:25:00,600
Speaker 2: to be more Japan, or maybe even but I think

471
00:25:00,680 --> 00:25:04,560
Speaker 2: still more in Japan. The other part of this is

472
00:25:04,600 --> 00:25:08,000
Speaker 2: that think about it from the FED perspective, which nobody

473
00:25:08,040 --> 00:25:12,200
Speaker 2: ever wants to do, right, But you know, so there's

474
00:25:12,240 --> 00:25:16,200
Speaker 2: some kind of crisis, but inflation is still coming out hot,

475
00:25:16,240 --> 00:25:20,560
Speaker 2: which is a lagging dynamic. The last thing Powell wants

476
00:25:20,600 --> 00:25:25,200
Speaker 2: is to be whipsawed himself. So I don't think they're

477
00:25:25,240 --> 00:25:27,320
Speaker 2: going to be that quick to lower rates and reliquefy

478
00:25:27,440 --> 00:25:30,520
Speaker 2: unless you have something really really severe with some duration

479
00:25:30,720 --> 00:25:33,400
Speaker 2: in time, because the optics are going to look really bad.

480
00:25:33,800 --> 00:25:35,480
Speaker 2: It goes back to Okay, so wait, now we're stuck

481
00:25:35,520 --> 00:25:38,639
Speaker 2: with inflation and now you're bailing out Wall Street. It's

482
00:25:38,920 --> 00:25:41,000
Speaker 2: I mean, it's like occupy Wall Street, you know, times

483
00:25:41,040 --> 00:25:44,200
Speaker 2: ten right under that scenario. So it's a really nasty spot,

484
00:25:44,320 --> 00:25:46,480
Speaker 2: you know, under the situation. Now it is interesting, you know.

485
00:25:46,560 --> 00:25:50,760
Speaker 2: I I floated this idea out there and I'm curious.

486
00:25:50,760 --> 00:25:52,280
Speaker 2: Actually hear your thoughts on this too. But it's like

487
00:25:53,160 --> 00:25:56,040
Speaker 2: Biden coming out and saying China is a ticking time bomb.

488
00:25:57,520 --> 00:25:59,920
Speaker 2: It's like, that's really interesting timing for him to say that,

489
00:26:01,080 --> 00:26:03,080
Speaker 2: Like I do, I don't know, Maybe this isn't me

490
00:26:03,119 --> 00:26:05,119
Speaker 2: being conspiracy theorists. I don't believe that's the case, but

491
00:26:05,200 --> 00:26:07,840
Speaker 2: you know, because various theorists say that. But I mean,

492
00:26:07,880 --> 00:26:10,639
Speaker 2: I wonder if they Biden administration knows something that is

493
00:26:10,640 --> 00:26:14,000
Speaker 2: coming where the risk actually is from China and not Japan.

494
00:26:14,080 --> 00:26:16,520
Speaker 2: And you know, just as the case is the case

495
00:26:16,560 --> 00:26:19,000
Speaker 2: with any politician, they always want to find a scapegoat.

496
00:26:19,160 --> 00:26:20,960
Speaker 2: It's a lot easier to blame a credit event on

497
00:26:20,960 --> 00:26:24,720
Speaker 2: outside forces than based on reckless monetary policy.

498
00:26:24,760 --> 00:26:28,280
Speaker 1: Sure, yeah, I mean there is a lot of stuff

499
00:26:28,359 --> 00:26:31,040
Speaker 1: recently in the last it seems like in the last

500
00:26:31,080 --> 00:26:37,200
Speaker 1: week to two weeks, news about big risks coming out

501
00:26:37,200 --> 00:26:41,080
Speaker 1: of China has been has been really accelerating. Do you

502
00:26:41,160 --> 00:26:46,200
Speaker 1: see that as as legitimate or or maybe just a distraction?

503
00:26:47,840 --> 00:26:48,560
Speaker 1: It's a good question.

504
00:26:48,600 --> 00:26:52,160
Speaker 2: I So I've had a number of you know, people

505
00:26:52,200 --> 00:26:55,359
Speaker 2: on spaces right that I host on my own podcast

506
00:26:55,440 --> 00:26:57,960
Speaker 2: on lead like Live, and you know, I had just

507
00:26:58,000 --> 00:27:01,320
Speaker 2: today as we're speaking against Nordvig talking purely about China,

508
00:27:01,680 --> 00:27:03,879
Speaker 2: and his view, which I don't disagree with, is you know,

509
00:27:03,960 --> 00:27:07,240
Speaker 2: this is a command economy right in terms of monetary policy,

510
00:27:07,320 --> 00:27:10,679
Speaker 2: so they can somewhat control it. Just like Evergrand ended

511
00:27:10,720 --> 00:27:13,560
Speaker 2: up being a nothing burger. You know, maybe what's going

512
00:27:13,600 --> 00:27:16,760
Speaker 2: on now becomes a nothing burger. But I don't know,

513
00:27:17,480 --> 00:27:19,280
Speaker 2: do you going back to that point about this time

514
00:27:19,359 --> 00:27:22,720
Speaker 2: is different? I mean, this time on China is purposely

515
00:27:22,800 --> 00:27:27,880
Speaker 2: not showing what youth unemployment is, so who knows, right,

516
00:27:27,920 --> 00:27:30,439
Speaker 2: maybe it's gonna be something coming from China Again, I

517
00:27:30,480 --> 00:27:32,760
Speaker 2: go back to the story of China. The story of

518
00:27:32,840 --> 00:27:35,320
Speaker 2: Japan is not that different from the story of Europe

519
00:27:35,320 --> 00:27:38,760
Speaker 2: and the story of the US. It's just slightly different timeframes.

520
00:27:38,840 --> 00:27:44,639
Speaker 2: This is what happens when people constantly want more without

521
00:27:44,680 --> 00:27:48,359
Speaker 2: thinking about how it gets paid, and politicians doing what

522
00:27:48,440 --> 00:27:50,880
Speaker 2: politicians do. I don't care if it's she, I don't

523
00:27:50,880 --> 00:27:54,159
Speaker 2: care if it's any other. Whether it's a dictator or

524
00:27:54,200 --> 00:27:57,040
Speaker 2: an elected official, every single person in power has the

525
00:27:57,040 --> 00:28:01,280
Speaker 2: same incentive keep the population distracted. Keep the population distracted

526
00:28:01,480 --> 00:28:04,960
Speaker 2: by giving them more stuff which can never be paid for.

527
00:28:05,240 --> 00:28:06,840
Speaker 2: This is just the history of civilization.

528
00:28:08,920 --> 00:28:12,320
Speaker 1: Yeah, yeah, I certainly. Up until about a year ago,

529
00:28:12,359 --> 00:28:14,959
Speaker 1: I was pretty bullish on China, and the more I

530
00:28:15,000 --> 00:28:18,840
Speaker 1: started seeing it seemed like like their demographic situation really

531
00:28:18,880 --> 00:28:22,200
Speaker 1: shifted in the last couple of years. So long term,

532
00:28:22,240 --> 00:28:24,840
Speaker 1: I'm a lot less I'm a lot less bullish on

533
00:28:24,960 --> 00:28:27,520
Speaker 1: China long term, but you never know with the in

534
00:28:27,600 --> 00:28:30,399
Speaker 1: the moment, the short term stuff. Like you said, with

535
00:28:30,440 --> 00:28:32,760
Speaker 1: Evergrand it turned out to be a big nothing burger

536
00:28:32,800 --> 00:28:34,400
Speaker 1: in at the time it seemed like it could be.

537
00:28:34,640 --> 00:28:38,560
Speaker 2: It could be huge. All right, So.

538
00:28:40,240 --> 00:28:43,600
Speaker 1: Last question here, let's talk about the results of this.

539
00:28:43,720 --> 00:28:46,160
Speaker 1: So for the average person, they're looking at this and

540
00:28:46,200 --> 00:28:52,000
Speaker 1: they're thinking, okay, this you know, the markets have been

541
00:28:52,040 --> 00:28:56,160
Speaker 1: moving up, but when you measure it against inflation, you

542
00:28:56,160 --> 00:29:01,480
Speaker 1: know the real return has been nothing. And so and

543
00:29:01,520 --> 00:29:04,920
Speaker 1: then you talk about also how credit events or bear

544
00:29:05,000 --> 00:29:08,400
Speaker 1: markets end with a bang. So this would potentially just

545
00:29:08,560 --> 00:29:10,480
Speaker 1: like signal the end of the bear market, meaning an

546
00:29:10,480 --> 00:29:14,360
Speaker 1: opportunity to jump in. So in your in your best guess,

547
00:29:14,400 --> 00:29:16,840
Speaker 1: what do you think this looks like a kind of

548
00:29:16,840 --> 00:29:20,640
Speaker 1: a flash crash, short term stock market crash, flight to treasuries,

549
00:29:20,880 --> 00:29:24,040
Speaker 1: opportunity to buy into equities. Then at that point shift

550
00:29:24,080 --> 00:29:26,680
Speaker 1: a little bit to value. Maybe what is kind of

551
00:29:26,720 --> 00:29:30,600
Speaker 1: your you know, no timeframes here, but what do you

552
00:29:30,640 --> 00:29:32,240
Speaker 1: what do you think this plays out like for the

553
00:29:32,240 --> 00:29:33,040
Speaker 1: average investor.

554
00:29:33,880 --> 00:29:35,680
Speaker 2: Yeah, and by the way, I'm glad you mentioned that

555
00:29:35,720 --> 00:29:39,600
Speaker 2: point about real return. It's like this is what kills me.

556
00:29:39,640 --> 00:29:42,480
Speaker 2: It's like, so everyone screams new bull market. Look at

557
00:29:42,520 --> 00:29:45,160
Speaker 2: small cash, Look at ross two thousand on any chart,

558
00:29:45,600 --> 00:29:47,920
Speaker 2: does not look like a new bull market. Look at

559
00:29:47,960 --> 00:29:50,880
Speaker 2: emerging market socks on any chart does not look like

560
00:29:50,880 --> 00:29:55,280
Speaker 2: a new bull market. Look at moderate allocation portfolios, right,

561
00:29:55,320 --> 00:29:58,840
Speaker 2: So financial advisors they're managing money and simply manage accounts

562
00:29:58,840 --> 00:30:01,640
Speaker 2: for their clients. They're xies right, sixty to forty type

563
00:30:01,640 --> 00:30:05,280
Speaker 2: of mixed stock bonds. Yeah, I mean after inflation, they're

564
00:30:05,280 --> 00:30:07,680
Speaker 2: they're back to twenty twenty levels. So they printed all

565
00:30:07,680 --> 00:30:10,000
Speaker 2: these trillions of dollars. The rich got right here, and

566
00:30:10,040 --> 00:30:12,160
Speaker 2: everyone else ended up going nowhere, even though it looks

567
00:30:12,240 --> 00:30:14,560
Speaker 2: nominally wise. And just look at the sp as if

568
00:30:14,600 --> 00:30:18,160
Speaker 2: all things are back to normal, you will market nonsense. Okay,

569
00:30:19,080 --> 00:30:22,080
Speaker 2: So what's the what's the end result or what's the

570
00:30:22,200 --> 00:30:26,560
Speaker 2: what do you do about all this? Okay? Timeframe to

571
00:30:26,600 --> 00:30:30,080
Speaker 2: your point is always tricky, Okay, I think I think

572
00:30:30,080 --> 00:30:32,520
Speaker 2: the risk is actually pretty high in September. Okay. Now,

573
00:30:32,800 --> 00:30:36,440
Speaker 2: that's not a suggestion to short which does not work

574
00:30:36,480 --> 00:30:38,480
Speaker 2: over time. That's not a suggestion of going to cash,

575
00:30:38,480 --> 00:30:41,280
Speaker 2: which does not work over time. But you know, it

576
00:30:41,320 --> 00:30:43,600
Speaker 2: does seem like from the intermarket analysis that I do,

577
00:30:44,160 --> 00:30:46,280
Speaker 2: that the conditions are kind of ripe in that period.

578
00:30:46,280 --> 00:30:49,280
Speaker 2: And by the way, seasonality favors that by September anyway,

579
00:30:49,320 --> 00:30:52,160
Speaker 2: is the worst month on average right for the stock market.

580
00:30:52,680 --> 00:30:55,120
Speaker 2: It's curious, right, all this stuff is happening, you know

581
00:30:55,160 --> 00:30:58,320
Speaker 2: what seems like pretty big changes just as we enter anyway,

582
00:30:58,320 --> 00:31:01,640
Speaker 2: a seasoning week period, right, the worst month. So it's

583
00:31:01,640 --> 00:31:03,400
Speaker 2: like the simplest answer is probably the right one. September

584
00:31:03,440 --> 00:31:07,640
Speaker 2: is probably gonna be high risk. Maybe, Okay. Now, whenever

585
00:31:07,640 --> 00:31:11,479
Speaker 2: you think about portfolio construction, I'd argue the best thing

586
00:31:11,520 --> 00:31:16,160
Speaker 2: to do is consider allocating to imperfect hedges. Okay, so

587
00:31:16,200 --> 00:31:19,600
Speaker 2: what does that mean? Imperfect hedges? Well, let's take that side.

588
00:31:19,680 --> 00:31:22,320
Speaker 2: What's a perfect hetch A perfect hedge is shorting. It's

589
00:31:22,320 --> 00:31:24,960
Speaker 2: a directional bet. Okay. What's the problem. What's the problem

590
00:31:24,960 --> 00:31:27,400
Speaker 2: with the perfect hedge? Well, if you're wrong, you lose money.

591
00:31:27,760 --> 00:31:29,200
Speaker 2: If you have no chance to make money, you're making

592
00:31:29,200 --> 00:31:29,840
Speaker 2: a directional bet.

593
00:31:30,040 --> 00:31:30,360
Speaker 1: Okay.

594
00:31:30,640 --> 00:31:34,320
Speaker 2: What's also a perfect edge cash for a moment in time? Well,

595
00:31:34,360 --> 00:31:36,520
Speaker 2: what's the problem with cash? Cash doesn't give you a

596
00:31:36,560 --> 00:31:38,760
Speaker 2: chance to compound either. Yeah, you've got some yield, but

597
00:31:38,920 --> 00:31:40,680
Speaker 2: if you're about a high risk period, it's only to

598
00:31:40,680 --> 00:31:42,400
Speaker 2: be if you know, several weeks or a couple of months.

599
00:31:42,440 --> 00:31:44,560
Speaker 2: It's not gonna be something persistent where you really get

600
00:31:44,560 --> 00:31:47,720
Speaker 2: some real return. There, so no real momentum there, which,

601
00:31:47,760 --> 00:31:50,280
Speaker 2: by the way, is why all the studies show, which

602
00:31:50,280 --> 00:31:54,520
Speaker 2: I agree with, market timing doesn't work because the thing

603
00:31:54,560 --> 00:31:57,560
Speaker 2: that you're timing is the asset class against cash. So

604
00:31:57,600 --> 00:32:00,400
Speaker 2: if you're wrong, you're gonna lag and you're gonna lose

605
00:32:01,000 --> 00:32:04,760
Speaker 2: over time. Better to do imperfect hedges, which are in

606
00:32:04,800 --> 00:32:08,480
Speaker 2: other words, are things which can benefit from higher volatility,

607
00:32:08,480 --> 00:32:12,280
Speaker 2: and equities can benefit from risk off sequences. But even

608
00:32:12,320 --> 00:32:14,520
Speaker 2: if you're wrong in your timing, you still have a

609
00:32:14,640 --> 00:32:20,440
Speaker 2: chance at making money, a chance over time that's still compounding, right, right,

610
00:32:20,640 --> 00:32:23,400
Speaker 2: So I always emphasize this point. The four ways to

611
00:32:23,440 --> 00:32:26,680
Speaker 2: play defense, to play risk off, right is when you're

612
00:32:26,720 --> 00:32:30,360
Speaker 2: in the moment. Right is treasuries because there's a yield. Again,

613
00:32:30,440 --> 00:32:33,360
Speaker 2: I get it, they're still acting like equities, but you

614
00:32:33,400 --> 00:32:35,080
Speaker 2: still have a chance because yields are higher than they

615
00:32:35,080 --> 00:32:37,520
Speaker 2: were last year, for treasuries to be wrong and still

616
00:32:37,520 --> 00:32:38,920
Speaker 2: make money in your timing. If you're gonna be out

617
00:32:38,960 --> 00:32:43,840
Speaker 2: of equities, utilities, defensive sectors like you, utilities, tables, healthcare,

618
00:32:43,960 --> 00:32:47,720
Speaker 2: just lower your beta. Gold does act like a safe haven,

619
00:32:47,800 --> 00:32:50,920
Speaker 2: non correlated. And then the dollar itself, which was the

620
00:32:50,960 --> 00:32:53,080
Speaker 2: real beneficiary last year. So those are your kind of

621
00:32:53,080 --> 00:32:56,360
Speaker 2: four ways of really playing defense in that they are imperfect.

622
00:32:56,400 --> 00:32:58,720
Speaker 2: They can do well when there's a real risk off period,

623
00:32:58,760 --> 00:33:00,560
Speaker 2: but they can also at least maybe make money if

624
00:33:00,600 --> 00:33:03,280
Speaker 2: you're wrong in your timing. Now coming out of this,

625
00:33:03,840 --> 00:33:06,520
Speaker 2: if I'm right, there's a credit event again, big if

626
00:33:07,520 --> 00:33:11,760
Speaker 2: there's gonna be some really good opportunities in junk debt. Yeah,

627
00:33:11,840 --> 00:33:13,520
Speaker 2: it's like, this is the thing. It's like you should

628
00:33:13,520 --> 00:33:14,920
Speaker 2: want to see that. Everybody should want to see a

629
00:33:14,920 --> 00:33:16,720
Speaker 2: credit event because what does that mean. It totally means

630
00:33:16,760 --> 00:33:20,960
Speaker 2: that high yield junk debt will overreact in capitulation, which

631
00:33:20,960 --> 00:33:24,200
Speaker 2: is always what happens, right, especially in something it's not

632
00:33:24,240 --> 00:33:26,400
Speaker 2: very liquid, it ends up being mispricing. Is that one

633
00:33:26,440 --> 00:33:29,720
Speaker 2: can take advantage of the buy into So yeah, sure,

634
00:33:29,760 --> 00:33:32,240
Speaker 2: I mean if junk debts yielding fifteen, twenty, even twenty

635
00:33:32,240 --> 00:33:34,240
Speaker 2: five percent in the most extreme, you know, real end

636
00:33:34,240 --> 00:33:37,160
Speaker 2: of the world type scenario, there might be some defaults,

637
00:33:37,160 --> 00:33:39,480
Speaker 2: but that's some pretty good yield to cover that. Like,

638
00:33:39,520 --> 00:33:42,160
Speaker 2: that's gonna be actually where I think a lot of

639
00:33:42,160 --> 00:33:45,280
Speaker 2: money can be can be made. It's not again, I

640
00:33:45,320 --> 00:33:47,440
Speaker 2: have to keep strengthening. I'm not arguing that the world

641
00:33:47,520 --> 00:33:50,360
Speaker 2: is ending and this stuff breaks down. What I'm arguing

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00:33:50,400 --> 00:33:53,320
Speaker 2: is that you had the fastest rate hike cycle in history,

643
00:33:53,760 --> 00:33:55,880
Speaker 2: which hits the economyne with a nine to twelve month

644
00:33:56,000 --> 00:33:59,840
Speaker 2: lag with the stock market, which is now right, it's

645
00:33:59,880 --> 00:34:04,720
Speaker 2: like and just because Nvidia has gone parabolic, and just

646
00:34:04,760 --> 00:34:07,520
Speaker 2: because the entire stock market is now being driven by

647
00:34:07,640 --> 00:34:11,520
Speaker 2: one single stock, as I keep saying, which, by the way,

648
00:34:11,600 --> 00:34:14,359
Speaker 2: it's like that behavior ow Nvidia is no different than

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00:34:14,400 --> 00:34:17,280
Speaker 2: cryptocurrencies in twenty twenty one. The narratives are no different

650
00:34:17,280 --> 00:34:22,479
Speaker 2: than cryptocurrencies in twenty twenty one. The overconfidence is no different.

651
00:34:22,640 --> 00:34:25,080
Speaker 2: It's like, we've seen this before, and it's like it's

652
00:34:25,080 --> 00:34:27,279
Speaker 2: not even like it was that long ago, and yet

653
00:34:27,320 --> 00:34:32,760
Speaker 2: people forget right. So bottom line is, don't be afraid

654
00:34:33,000 --> 00:34:35,600
Speaker 2: if you're gonna believe in the analysis on the off

655
00:34:35,719 --> 00:34:39,200
Speaker 2: chance that maybe the event happens. Doesn't mean short doesn't

656
00:34:39,239 --> 00:34:42,160
Speaker 2: mean cash, It just means diversifying the right way within

657
00:34:42,200 --> 00:34:46,160
Speaker 2: perfect hedges. And don't be overly confident because nobody knows tomorrow,

658
00:34:46,320 --> 00:34:46,880
Speaker 2: including me.

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00:34:48,320 --> 00:34:54,600
Speaker 1: Yeah, now that's perfect. I really like that. That's you know,

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00:34:54,760 --> 00:34:59,040
Speaker 1: cost effective risk mitigation. You know you talk about that

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00:34:59,120 --> 00:35:04,600
Speaker 1: perfect hedge. Ultimately, if you're wrong, you're not making money,

662
00:35:04,600 --> 00:35:07,839
Speaker 1: and so we don't want to ever be so directionally

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00:35:07,880 --> 00:35:12,799
Speaker 1: biased that we don't allow ourselves the opportunity to make

664
00:35:12,840 --> 00:35:15,879
Speaker 1: money if we're wrong, because ultimately, being right or wrong

665
00:35:16,200 --> 00:35:18,359
Speaker 1: is the last thing any investor should care about the

666
00:35:18,360 --> 00:35:21,640
Speaker 1: only thing we should care about is maximizing our wealth

667
00:35:21,760 --> 00:35:22,360
Speaker 1: long term.

668
00:35:22,400 --> 00:35:22,839
Speaker 2: That's it.

669
00:35:22,880 --> 00:35:25,319
Speaker 1: That's the only measure that matters in investing. And so

670
00:35:25,440 --> 00:35:29,239
Speaker 1: you have to give yourselves opportunities to make money if

671
00:35:29,280 --> 00:35:31,239
Speaker 1: you're wrong, because there's no crystal ball.

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00:35:32,080 --> 00:35:32,640
Speaker 2: So I love that.

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00:35:33,280 --> 00:35:37,440
Speaker 1: I for anybody who wants to learn more, follow what

674
00:35:37,480 --> 00:35:41,799
Speaker 1: you're doing. The up to date best research to lead

675
00:35:41,880 --> 00:35:46,960
Speaker 1: LAG report is the way to do that right aspect

676
00:35:47,239 --> 00:35:49,800
Speaker 1: Twitter and YouTube and everything like that. But through substack

677
00:35:49,840 --> 00:35:52,400
Speaker 1: your report that you publish, and you've hooked up my

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00:35:52,440 --> 00:35:56,240
Speaker 1: listeners with a discount for the lead LAG Report.

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00:35:56,280 --> 00:35:56,799
Speaker 2: I've got that.

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00:35:57,200 --> 00:36:02,319
Speaker 1: Linked in the show notes. So for anybody listening, look

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00:36:02,600 --> 00:36:04,520
Speaker 1: click open up the show notes. If you don't see it,

682
00:36:04,560 --> 00:36:06,200
Speaker 1: you can click that to expand and you'll final link

683
00:36:06,239 --> 00:36:08,960
Speaker 1: in there. You may have to copy and paste. Thank

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00:36:09,040 --> 00:36:12,720
Speaker 1: you so much for joining us today and on Twitter.

685
00:36:12,719 --> 00:36:14,279
Speaker 1: For anybody who wants to follow you on Twitter. What

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00:36:14,400 --> 00:36:15,560
Speaker 1: is your Twitter handle again?

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00:36:15,680 --> 00:36:19,640
Speaker 2: Yes, it's lead Laggerport on their Instagram YouTube, all the

688
00:36:19,760 --> 00:36:23,440
Speaker 2: kind of major ones. Apparently there's a lot of impersonators.

689
00:36:23,480 --> 00:36:26,080
Speaker 2: I know you have some of yours as well. Yeah,

690
00:36:26,080 --> 00:36:30,520
Speaker 2: but people that are as good looking as you and

691
00:36:30,600 --> 00:36:32,320
Speaker 2: not as good looking as me, or hard to replicate,

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00:36:33,680 --> 00:36:36,440
Speaker 2: so off and imitated, never duplicated.

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00:36:37,440 --> 00:36:41,160
Speaker 1: Yeah perfect. Hey, well, thank you so much for giving

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00:36:41,239 --> 00:36:44,000
Speaker 1: us some of your time. Really appreciate it. Valuable insights

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00:36:44,040 --> 00:36:45,480
Speaker 1: here and we'll have to do this again soon now.

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00:36:45,520 --> 00:36:46,480
Speaker 1: I appreciate it. Good work.

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00:36:46,640 --> 00:36:47,080
Speaker 2: Appreciate