WEBVTT - Decoding the Debt Crisis & Bitcoin's Future: A Deep Dive with Lyn Alden 0:00:00.080 --> 0:00:01.960 Lynn, I have so much to talk to you about. 0:00:01.960 --> 0:00:03.520 There's so much going on in the world, and I 0:00:03.600 --> 0:00:06.960 have some interesting things that I want to take us into. 0:00:07.240 --> 0:00:08.959 But anyway, thanks for joining me today. 0:00:09.160 --> 0:00:10.600 Happy to be here, Thanks for having me again. 0:00:10.760 --> 0:00:14.320 Yeah, So, a lot of stuff going on in the world, 0:00:14.520 --> 0:00:16.200 and you've been tweeting about a lot of different things, 0:00:16.239 --> 0:00:18.599 and I think you've been sort of recognized in the 0:00:18.600 --> 0:00:23.720 industry as thinking a little bit differently about things. It's 0:00:23.760 --> 0:00:26.239 probably your engineering background that you have. But I want 0:00:26.239 --> 0:00:28.160 to start on some big macro topics and then we'll 0:00:28.160 --> 0:00:30.240 take this down into a couple of different rabbit holes 0:00:30.280 --> 0:00:32.680 that people maybe haven't really heard us discussed before. But 0:00:33.040 --> 0:00:36.080 let's sort of start with like this big broad macro picture. 0:00:36.120 --> 0:00:39.080 I like to think of things in politics, finance, and 0:00:39.159 --> 0:00:42.120 technology and really where these three things converge because it 0:00:42.159 --> 0:00:44.440 gives better context. So I want to get into some 0:00:44.479 --> 0:00:47.239 of those topics, more of the technology stuff. But if 0:00:47.240 --> 0:00:49.800 we start with just like this macro picture. I've seen 0:00:49.840 --> 0:00:51.720 you talking about quite a bit how we're sort of 0:00:51.720 --> 0:00:55.880 going into this period of fiscal dominance, and so I 0:00:55.920 --> 0:00:58.960 recently did a video talking about how really the central 0:00:59.000 --> 0:01:02.160 bank interaction in the market have really changed since two 0:01:02.240 --> 0:01:05.400 thousand and eight. They've been much more involved and really 0:01:05.440 --> 0:01:09.520 been more proactive instead of as reactive as they were. 0:01:09.959 --> 0:01:12.560 And so we can talk about this fiscal dominance, but 0:01:12.800 --> 0:01:15.959 what I kind of want to talk about is a 0:01:16.000 --> 0:01:18.199 lot of assumptions that it seems like we've had about 0:01:18.240 --> 0:01:20.200 the markets have really been challenged in the last year 0:01:20.280 --> 0:01:22.160 or two since the Fed's gone on this tightening cycle, 0:01:22.200 --> 0:01:24.840 and so a lot of things maybe biases or just 0:01:25.120 --> 0:01:28.040 historical assumptions that people make, such as well, when the 0:01:28.120 --> 0:01:30.440 risk free rate goes up, the stocks have to be 0:01:30.440 --> 0:01:34.560 repriced down, but they haven't been. When rates, when mortgage 0:01:34.600 --> 0:01:36.800 rates go up so high, home prices have to come down, 0:01:37.240 --> 0:01:39.360 but they haven't been. So it seems like a lot 0:01:39.400 --> 0:01:42.880 of assumptions have been challenged here, and so I guess 0:01:42.920 --> 0:01:44.920 the bigger question is if we're in this period where 0:01:44.920 --> 0:01:48.080 the FED is fiscal dominance, they're really driving markets, we're 0:01:48.080 --> 0:01:52.200 seeing assumptions being challenged, then the big challenges do the 0:01:52.240 --> 0:01:55.000 markets have to crash? 0:01:55.000 --> 0:01:57.080 So it's a good question. My base case has been 0:01:57.200 --> 0:01:59.760 range bound for a lot of different assets, which which 0:02:00.200 --> 0:02:04.240 points towards not very good real returns over say a 0:02:04.320 --> 0:02:08.919 five plus year period, but not necessarily expecting a crash either. 0:02:09.040 --> 0:02:11.200 So I've neither been a kind of a you know, 0:02:11.360 --> 0:02:15.200 melts up bowl or a deflationary crash bear. I've been 0:02:15.240 --> 0:02:18.160 more in that range bound camp, which so far has 0:02:18.520 --> 0:02:20.960 been working out both in the housing market in aggregate 0:02:21.120 --> 0:02:24.639 and the stock market in aggregate. Obviously, there are very 0:02:24.680 --> 0:02:27.200 different industries that can be up or down, there are 0:02:27.280 --> 0:02:30.400 very different geographies that can be up or down. But 0:02:30.480 --> 0:02:32.720 overall that's kind of the general path we've been on. 0:02:33.080 --> 0:02:36.119 And if we look back historically, I kind of classify 0:02:36.160 --> 0:02:39.639 the long term debt cycle Ray Dalio's work, for example, 0:02:39.760 --> 0:02:41.680 and then additional work I put into it to kind 0:02:41.680 --> 0:02:43.960 of really flesh out and explore this concept. I know 0:02:44.000 --> 0:02:47.160 you've covered it quite a bit as well. It's basically 0:02:47.200 --> 0:02:50.519 the observation that you go through a number of normal 0:02:50.560 --> 0:02:53.560 business cycles, but you build up instability in the system 0:02:54.200 --> 0:02:57.600 a couple of different ways, including on the public debt side. 0:02:57.919 --> 0:03:01.639 And so if we characterize the past forty years, we 0:03:01.720 --> 0:03:05.880 had ever rising public debts, so whenever we had a recession, 0:03:06.200 --> 0:03:09.880 we would have you know, industries get cut that allows 0:03:10.240 --> 0:03:13.040 higher debt levels and you get you know, lower lows 0:03:13.040 --> 0:03:15.560 and lower highs in indust rates and higher highs and 0:03:15.680 --> 0:03:18.720 higher lows in both private sector and public sector debts 0:03:18.800 --> 0:03:23.680 is a percentage of GDP and that coincided with basically 0:03:23.760 --> 0:03:26.960 the peace dividend, the opening up of the world. You know, 0:03:27.080 --> 0:03:29.160 China opened up to the world in the nineteen eighties, 0:03:29.400 --> 0:03:32.720 Soviet Union fell in the early nineties, and so we 0:03:33.000 --> 0:03:35.440 kind of entered this more connected world for a period 0:03:35.480 --> 0:03:38.800 of time, and we basically brought Western capital together with 0:03:38.920 --> 0:03:42.080 Eastern labor and resources, and that was a very kind 0:03:42.080 --> 0:03:45.400 of productive, disinflationary time. Some people were hurt by it, 0:03:45.560 --> 0:03:47.800 but a lot of people were helped by it, and 0:03:47.840 --> 0:03:49.960 that's kind of been the era we've been and that 0:03:50.040 --> 0:03:52.680 allowed for lower indust rates and when you look at 0:03:52.720 --> 0:03:55.360 the government expenditure, if you have hired higher debt to 0:03:55.400 --> 0:03:58.200 GDP but lower and lower indust rates, your overall interest 0:03:58.280 --> 0:04:03.560 expense remains manageable. And when we had the global financial crisis, 0:04:03.960 --> 0:04:06.640 a lot of things changed there. We had a bank recapitalization, 0:04:07.120 --> 0:04:09.440 We hit the peak in terms of private debt relative 0:04:09.480 --> 0:04:11.920 the GDP, but we push a lot of that debt 0:04:11.960 --> 0:04:15.400 onto the public sector in multiple countries, especially the United States, 0:04:15.920 --> 0:04:19.240 and so when we look back at prior long term 0:04:19.240 --> 0:04:21.200 debt cycles, they do tend to come in a one 0:04:21.279 --> 0:04:24.160 two punt. First you have the private debt bubble kind 0:04:24.160 --> 0:04:27.640 of break apart, which is disinflationary. But then the second 0:04:27.640 --> 0:04:29.960 stage is when all that gets pushed up to the 0:04:29.960 --> 0:04:32.920 public sector and then that becomes more of an inflationary 0:04:32.960 --> 0:04:37.320 type of crisis. So kind of ever since the past 0:04:37.720 --> 0:04:40.760 call it three four years, we've been in that second 0:04:40.760 --> 0:04:44.240 phase of the bubble, and so I think that's one 0:04:44.320 --> 0:04:46.200 of the best ways to look at it from a 0:04:46.320 --> 0:04:48.720 historical lens. But then of course I have to think, okay, 0:04:48.720 --> 0:04:50.920 what is different now in terms of culture, in terms 0:04:50.960 --> 0:04:53.280 of technology, in terms of just the way the world looks, 0:04:53.480 --> 0:04:56.400 you know, what is different? Even though that's a useful baseline, 0:04:56.520 --> 0:05:00.520 and it's you know, these types of periods are all weird, 0:05:00.920 --> 0:05:03.520 and so there's going to be challenging things to navigate 0:05:03.560 --> 0:05:07.719 that you didn't necessarily expect, which is why it's useful 0:05:07.760 --> 0:05:10.520 to have a framework, but to also be very flexible 0:05:10.560 --> 0:05:13.400 with your thinking to see what sort of curveballs might 0:05:13.480 --> 0:05:16.159 or may not come, and then you know, adjust that 0:05:16.360 --> 0:05:17.840 over time based on what's happening. 0:05:19.480 --> 0:05:22.279 So then if to recap, so your base case isn't 0:05:22.320 --> 0:05:25.080 a big crash, it's sort of just chopping along sideways. 0:05:25.120 --> 0:05:27.520 This crab market, if you will, I think is kind 0:05:27.520 --> 0:05:31.479 of what you said two very similar. You've been talking 0:05:31.520 --> 0:05:33.000 about a lot, and I think it's very helpful to 0:05:33.080 --> 0:05:34.400 kind of look at sort of what we saw in 0:05:34.440 --> 0:05:37.240 the thirties and forties as a better sort of proxy 0:05:37.320 --> 0:05:40.040 or representation of what we're where we're at today as 0:05:40.040 --> 0:05:43.839 opposed to like the seventies era. However, what you're saying 0:05:43.920 --> 0:05:45.960 is that we need to remain flexible. So it's good 0:05:45.960 --> 0:05:48.320 to have some sort of like models that we can 0:05:48.400 --> 0:05:51.279 view the world through, but be flexible because who knows 0:05:51.600 --> 0:05:53.479 right if I frame that up right? 0:05:53.600 --> 0:05:56.320 Yeah, And as an example, you know, back in early 0:05:56.400 --> 0:05:58.440 twenty twenty two, when it became clear that the FED 0:05:58.560 --> 0:06:02.640 was going to be quite hawkish, that was you know, 0:06:02.720 --> 0:06:05.800 my expectation was we'd have a recession by kind of 0:06:05.839 --> 0:06:09.400 later in the year and that it'd be tough to 0:06:09.400 --> 0:06:12.039 get in straights over three percent before you'd have kind 0:06:12.040 --> 0:06:14.839 of those types of problems. And for the most of 0:06:14.880 --> 0:06:18.520 twenty twenty two that was correct. We had slowing economic indicators. 0:06:19.480 --> 0:06:22.320 We had two quarters of negative real GDP growth, even 0:06:22.360 --> 0:06:24.440 though they weren't technically a recession because they didn't have 0:06:24.520 --> 0:06:26.240 like an unemployment spike and stuff. But we had a 0:06:26.240 --> 0:06:28.880 period of softness as the price has had a pretty 0:06:28.880 --> 0:06:34.320 bad time across the board. But then by early twenty 0:06:34.360 --> 0:06:37.400 twenty three, I started to see signs that it was 0:06:37.440 --> 0:06:41.960 playing out differently that basically the fiscal deficits, ironically from 0:06:42.080 --> 0:06:44.640 part of that, the monetary tightening, so the higher interest 0:06:44.640 --> 0:06:48.320 expense from the federal deficits were starting to actually kind 0:06:48.320 --> 0:06:51.839 of balance themselves out. They were becoming kind of inflationary 0:06:51.839 --> 0:06:55.320 and stimulatory. And then when you had the kind of 0:06:55.320 --> 0:06:59.039 the minibanking crisis and the FEDS willingness to reinject some 0:06:59.160 --> 0:07:02.120 liquidity in there to stop contagion, these things really kind 0:07:02.160 --> 0:07:05.920 of added up to a shift in how I viewed things. 0:07:06.040 --> 0:07:09.080 So you know, that's that's an example being flexible, where 0:07:09.120 --> 0:07:12.240 you have a view it starts playing out, but then 0:07:12.400 --> 0:07:14.680 after a certain point it kind of starts being a 0:07:14.680 --> 0:07:18.200 little different. It's almost like if you're very tired and 0:07:18.400 --> 0:07:20.000 you stay up all night and you just kind of 0:07:20.000 --> 0:07:22.679 force yourself through it. Eventually you almost get like another 0:07:22.720 --> 0:07:25.200 burst of being awake. Again right, that that's and that's 0:07:25.280 --> 0:07:28.680 kind of what we saw in markets where they got 0:07:28.760 --> 0:07:31.680 so tight on the on the fiscal side and the 0:07:31.760 --> 0:07:34.240 and the monetary side, they kind of went past the 0:07:34.280 --> 0:07:38.480 looking glass towards actually being so much stimulatory. Because a 0:07:38.480 --> 0:07:42.040 lot of the private sector debt is low and fixed rate, 0:07:42.120 --> 0:07:45.280 especially in the in the household sector and in the 0:07:45.320 --> 0:07:48.680 investment grade corporate sector, so those industries have held up 0:07:48.680 --> 0:07:50.960 pretty well, whereas a lot of the US federal debt 0:07:51.200 --> 0:07:54.440 is short term and so that's been refinanced at at 0:07:54.480 --> 0:07:57.720 much higher rates. And so this the we have like 0:07:57.800 --> 0:08:00.600 two very powerful competing forces here. One is that the 0:08:00.640 --> 0:08:03.320 industrates are putting downward pressure on a number of industrate 0:08:03.360 --> 0:08:06.760 sensitive industries, you know, commercial real estate and small businesses 0:08:06.800 --> 0:08:10.160 and junk rated companies and the like. But the other hand, 0:08:10.320 --> 0:08:13.320 that interest expense is just completely blowing out the deficit, 0:08:13.840 --> 0:08:17.560 which is on its own, and it's a stimulatory inflationary force. 0:08:18.200 --> 0:08:21.160 And in the past year so they've been roughly balanced. 0:08:22.440 --> 0:08:25.280 Yeah. I think maybe it was Joseph Waang or somebody 0:08:25.320 --> 0:08:28.320 said this was something like I'm so bearish on bullish 0:08:28.400 --> 0:08:29.960 kind of a thing, right, So it's like things are 0:08:30.000 --> 0:08:32.320 so bad. It's actually sort of bullish. It's stimulatory, to 0:08:32.360 --> 0:08:34.320 your point. And so we're starting to see more and 0:08:34.320 --> 0:08:36.640 more of the spending being from the government and this 0:08:36.679 --> 0:08:40.880 deficit spending, and so you've talked about extensively, how as 0:08:40.960 --> 0:08:43.240 things continue to get worse, that deficit spending goes up, 0:08:43.240 --> 0:08:45.240 and that's really the sort of main driver of a 0:08:45.280 --> 0:08:47.480 lot of this inflation that we have. I guess it 0:08:47.559 --> 0:08:49.120 is sort of the point that you're sort of making. 0:08:49.160 --> 0:08:52.160 Now you have what I was kind of saying earlier 0:08:52.200 --> 0:08:54.680 in the intro sort of like I charted out sort 0:08:54.679 --> 0:08:57.719 of the change in central bank policy sort of from 0:08:57.760 --> 0:09:01.000 two thousand and eight and so like, for example, in 0:09:01.200 --> 0:09:04.040 two thousand and six, the housing market had started to crash. 0:09:04.080 --> 0:09:06.920 The housing starts went down by twenty six percent, but 0:09:07.000 --> 0:09:10.320 yet it took thirty months before the Fed did anything 0:09:10.360 --> 0:09:13.680 in the markets. From the time bear Stearns went bankrupt, 0:09:13.679 --> 0:09:16.480 it was seven months before they even got a package. 0:09:16.600 --> 0:09:18.600 It was one hundred billion dollars or one hundred million 0:09:18.600 --> 0:09:21.520 dollars that they had ready to go or no, it's sorry, 0:09:21.520 --> 0:09:24.240 one hundred million dollars. But in twenty twenty three, when 0:09:24.240 --> 0:09:27.520 the banks went bankrupt, it was six days, so we 0:09:27.600 --> 0:09:30.040 kind of see the difference. In twenty twenty, the FED 0:09:30.120 --> 0:09:34.000 set up I think it was thirteen different special funding facilities, 0:09:34.000 --> 0:09:36.960 three four letter agencies, and again you know, the BTFP 0:09:37.120 --> 0:09:39.040 was set up in like six days. So it shows 0:09:39.520 --> 0:09:41.880 at least it looks like to me that they're much 0:09:41.960 --> 0:09:45.280 more proactive now they've gone around and set up all 0:09:45.320 --> 0:09:47.880 these swap lines, not just with friendly countries, but now 0:09:47.920 --> 0:09:50.760 even you know what maybe Tier two central banks, et cetera. 0:09:51.040 --> 0:09:52.760 So it seems like their fingers on the trigger and 0:09:52.800 --> 0:09:54.959 they're ready to go. And so, you know, if you 0:09:55.040 --> 0:09:57.480 understand that we're in this debt based monetary system and 0:09:57.520 --> 0:10:00.680 the debt is the asset, it's the collateral on more debt, 0:10:01.040 --> 0:10:04.959 they have to keep that system from unraveling. But then 0:10:05.000 --> 0:10:08.080 you might have somebody like a Jeff Snyder who says, well, 0:10:08.120 --> 0:10:10.840 but really the Fed has no control because it's really 0:10:10.880 --> 0:10:14.480 the euro dollar market overall. So are they able to 0:10:14.559 --> 0:10:17.480 sort of have this dominance where they can continue to 0:10:17.720 --> 0:10:20.240 keep these things elevated with these special funding facilities and 0:10:20.280 --> 0:10:23.280 these swap lines and the fiscal side can continue to 0:10:23.320 --> 0:10:26.200 spend or are we sort of like in this period 0:10:26.240 --> 0:10:28.000 where maybe there's this out of control beasts that we 0:10:28.000 --> 0:10:28.680 can't control. 0:10:28.800 --> 0:10:31.040 So there's been this narrative for several years that they 0:10:31.080 --> 0:10:35.160 can't create inflation, that the markets are too deflationary to 0:10:35.320 --> 0:10:37.400 them to do it. And I wrote an article back 0:10:37.440 --> 0:10:39.680 in twenty nineteen where I said, are bonds in a 0:10:39.679 --> 0:10:42.360 bubble or is this a new normal? And the conclusion 0:10:42.360 --> 0:10:45.400 of the article was it is a bubble, and I 0:10:45.480 --> 0:10:46.839 talked about how I was like, look, a lot of 0:10:46.840 --> 0:10:51.920 things look disinflationary, but if in the next downturn, central banks, 0:10:52.640 --> 0:10:54.400 you know, they can completely change the rules and they 0:10:54.400 --> 0:10:57.440 can work with physical authorities and just have massive monetized 0:10:57.440 --> 0:11:00.120 physical deficits. There's almost eerie. You know, I didn't talk 0:11:00.160 --> 0:11:02.200 about a pandemic in that article, but it's almost eerie 0:11:02.200 --> 0:11:04.480 what happened less than a year after that article came out. 0:11:04.520 --> 0:11:07.920 It was just completely, you know, completely the rules were changed. 0:11:09.240 --> 0:11:12.360 And that's what we've seen. And the reason I had 0:11:12.400 --> 0:11:14.920 that view is because that's when you get towards a 0:11:15.080 --> 0:11:18.840 sovereign debt kind of cycle nearing its its sort of completion, 0:11:19.760 --> 0:11:21.840 and a completion can take a decade. It doesn't mean 0:11:21.840 --> 0:11:24.040 a completion like this six months. I mean like this era, 0:11:26.000 --> 0:11:30.600 the rules change, the cycles get tighter. Similarly, during March 0:11:30.640 --> 0:11:33.000 twenty twenty, I wrote an article called why this isn't 0:11:33.040 --> 0:11:35.880 like the Great Depression, And that was like just an 0:11:35.960 --> 0:11:39.920 early sign of seeing somebody stimulus. And so my view is, no, no, 0:11:39.960 --> 0:11:42.880 this is not going to be disinflationary. This is likely 0:11:42.920 --> 0:11:47.200 going to be inflationary because the cavalies response time is quicker, 0:11:47.640 --> 0:11:52.840 and because it's more like the forties, not like the thirties. 0:11:53.080 --> 0:11:55.040 So I would consider the two thousand and eight crisis 0:11:55.080 --> 0:11:57.040 to be very similar to the nineteen twenty nine crisis. 0:11:57.040 --> 0:12:01.080 That was all the hallmarks of a private debt bubble unwinding. 0:12:01.800 --> 0:12:03.360 But I think we're past that now. I think now 0:12:03.360 --> 0:12:05.960 we're towards the sovereign debt bubble. And the closer you 0:12:05.960 --> 0:12:10.960 get to the sovereign, the quicker the trigger finger is 0:12:11.360 --> 0:12:13.160 to come in with any sort of thing, because it 0:12:13.240 --> 0:12:17.400 starts to potentially make the treasure market get illiquid. So 0:12:17.440 --> 0:12:20.680 if you looked last year during the twenty twenty two 0:12:21.240 --> 0:12:25.480 guilt market blow up, right, so it's September of last year, 0:12:25.840 --> 0:12:27.920 the UK guilt market blew up and the Bank of 0:12:27.960 --> 0:12:31.240 England had to come in and do emergency QE for 0:12:31.280 --> 0:12:33.439 a number of weeks, even though they had ten percent 0:12:33.480 --> 0:12:36.360 inflation at the time, and they had to cancel a 0:12:36.480 --> 0:12:38.599 speech about bounce sheet reduction they were going to have 0:12:38.640 --> 0:12:41.760 the next day, because you literally had a vicious cycle 0:12:41.920 --> 0:12:44.200 of more bond selling and at the same time, the 0:12:44.320 --> 0:12:47.680 US treasure market was like one step behind. It was 0:12:47.720 --> 0:12:50.800 like very I liquid bond auctions were not going well. 0:12:50.840 --> 0:12:53.680 It was looking very wildly and he started to see 0:12:53.679 --> 0:12:56.880 the treasury offset the Fed, so you know, the Fed 0:12:56.960 --> 0:12:59.720 was still being somewhat tight. The treasure started drawing down 0:13:00.160 --> 0:13:02.959 it's treasurey generally count and taking other measures. That was 0:13:03.040 --> 0:13:07.640 kind of the part of the reversal. So basically my 0:13:07.800 --> 0:13:10.199 view is that when push comes a shove, and when 0:13:10.200 --> 0:13:13.520 it gets closer to the sovereign, inflationary forces can always 0:13:13.520 --> 0:13:18.600 be used to override the various debt driven disinflationary driven 0:13:18.679 --> 0:13:21.960 forces in the economy, and so I will generally always 0:13:21.960 --> 0:13:25.760 air towards that inflationary outcome while risk managing it along 0:13:25.800 --> 0:13:30.040 the way and basically having a realistic timeframe and diversification. 0:13:30.960 --> 0:13:33.520 Yeah, yes, you know, something that I was thinking about 0:13:33.520 --> 0:13:35.920 in regards to that too, is like sure, so maybe 0:13:35.920 --> 0:13:38.200 the FED doesn't have total control, but sure to your point, 0:13:38.200 --> 0:13:41.320 the fiscal the government could do that spending or increase that, 0:13:41.360 --> 0:13:43.280 and so a couple things. So, like you mentioned some 0:13:43.280 --> 0:13:45.079 of these things that are more interest rate sensitive, sort 0:13:45.080 --> 0:13:48.520 of like the commercial real estate market, specifically the mortgage 0:13:48.520 --> 0:13:51.120 bond market in the real estate sector is two point 0:13:51.200 --> 0:13:54.040 nine trillion dollars of debt that could potentially blow up, 0:13:54.040 --> 0:13:56.480 and people look at that as like this big you know, 0:13:57.080 --> 0:13:58.800 maybe not a black swan but a gray squand that 0:13:58.840 --> 0:14:02.800 could sing things. But like the FED could just take 0:14:02.840 --> 0:14:05.320 all that under their books. They've done that before, Like 0:14:05.400 --> 0:14:07.240 why wouldn't they. So when you go through a lot 0:14:07.280 --> 0:14:09.040 of these things, at least for me, I'm like, okay, 0:14:09.080 --> 0:14:11.679 sure that's bad, but like we've seen before that they 0:14:11.679 --> 0:14:13.280 could just take that on their books and just sort 0:14:13.280 --> 0:14:15.120 of put that over on the side. So when you 0:14:15.160 --> 0:14:18.520 start look at these things. Also we saw I think 0:14:18.559 --> 0:14:21.840 some of the banks in Europe were guaranteeing banks loans, 0:14:22.200 --> 0:14:24.680 So banks don't want to loan money out because they're 0:14:24.720 --> 0:14:27.640 afraid that you know, the market's you know, shaky, there's 0:14:27.640 --> 0:14:29.320 a recession there, so the banks don't want to loan 0:14:29.320 --> 0:14:31.240 the money out, but the government just says, hey, we'll 0:14:31.280 --> 0:14:33.160 just backstop your loans like go ahead, and so then 0:14:33.200 --> 0:14:35.360 the banks well of course will loan if there's no risk. 0:14:35.600 --> 0:14:38.520 So there's lots of things. I guess when I look 0:14:38.560 --> 0:14:40.080 at some of these people that I've been studying for 0:14:40.080 --> 0:14:42.120 a long time, like Harry Dent Junior, I've probably read 0:14:42.120 --> 0:14:43.960 five of his books. I love his research. I think 0:14:44.000 --> 0:14:48.280 his research is correct. But trying to continue to time 0:14:48.440 --> 0:14:50.800 when this crash is going to happen is obviously failed 0:14:50.800 --> 0:14:52.320 for him, and I think a lot of it is 0:14:52.360 --> 0:14:54.640 we just continue to fail. How many more tricks they 0:14:54.640 --> 0:14:57.000 have up their sleeve? Would you say that. 0:14:57.280 --> 0:14:59.680 When they change they unit up account, it's like changing 0:14:59.680 --> 0:15:02.120 the rule. It's a kobyashi maru, right, You just change 0:15:02.120 --> 0:15:04.440 the rules of the test is basically what they do. 0:15:05.360 --> 0:15:08.560 And so you know, a country that controls its own 0:15:08.600 --> 0:15:11.680 unit of account is when a push comes to shove, 0:15:11.720 --> 0:15:15.080 they print. And I'd be careful that doesn't mean fully 0:15:15.160 --> 0:15:17.840 risk on because for example, you know the FED right 0:15:17.880 --> 0:15:20.120 now under Drone Pale, his legacy is on the line. 0:15:20.160 --> 0:15:23.640 He is serious about tightening and it's one of those 0:15:23.640 --> 0:15:25.160 things where he doesn't you know, if the stock market 0:15:25.240 --> 0:15:28.520 drops twenty percent. He's not going to care if credit 0:15:28.560 --> 0:15:31.280 markets have problems, if there's a big cycle of commercial 0:15:31.320 --> 0:15:35.480 real estate bankruptcy, he's not going to care. If anything, 0:15:35.520 --> 0:15:37.720 they're good that he that thinks he'd probably like to 0:15:37.720 --> 0:15:41.960 see the markets where they jump in quickly. Are bank 0:15:42.040 --> 0:15:47.360 contagion anything adjacent to that, like ripo spikes like they 0:15:47.360 --> 0:15:50.120 did in twenty nineteen, or the tragy market itself, right, 0:15:50.160 --> 0:15:52.960 those are those are the cores of the system that 0:15:53.040 --> 0:15:56.600 I You know that they're very unlikely to let struggle 0:15:56.640 --> 0:15:59.720 for long periods of time, whereas almost anything else you 0:15:59.760 --> 0:16:01.560 do it be quite careful of. That's part of why 0:16:01.560 --> 0:16:03.880 I don't expect and for a while I have not 0:16:04.000 --> 0:16:09.280 expected good stock or or broad real estate returns, especially 0:16:09.280 --> 0:16:11.720 on a real basis. You know, when you're comparing that 0:16:11.760 --> 0:16:13.680 to CPI, or when you're comparing that's what you can 0:16:13.680 --> 0:16:17.320 get on a T bill and things like that. The 0:16:17.560 --> 0:16:21.680 the overall risk of those markets remains pretty high. But 0:16:22.680 --> 0:16:24.200 you know, another way of looking at as you mentioned 0:16:24.240 --> 0:16:27.320 two point nine trillion in debt, but it's like we 0:16:27.360 --> 0:16:30.800 have one point seven trillion annual physical deficits, right, It's 0:16:30.840 --> 0:16:33.200 like there's a fire hose of depthits going to the market. 0:16:33.480 --> 0:16:36.560 So you can have trillion dollar bankruptcies that are kind 0:16:36.560 --> 0:16:41.440 of offset by trillion dollars just ongoing physcal injections. And 0:16:41.520 --> 0:16:43.440 so even if the FED doesn't come to the rescue there, 0:16:43.880 --> 0:16:47.600 it's just that one industry is suffering, you know, arguably 0:16:47.680 --> 0:16:49.720 right sizing, I mean, commercial real estate does have to 0:16:49.760 --> 0:16:53.200 go through a repurposing, and you know it's a change 0:16:53.280 --> 0:16:56.920 because we've changed, our technologies changed, our locations have changed. 0:16:57.360 --> 0:16:59.120 But the other hand, you know, I don't think you're 0:16:59.080 --> 0:17:02.640 gonna see like restaurants sales go bust because the people 0:17:02.680 --> 0:17:05.040 that go to restaurants a lot of them are on 0:17:05.080 --> 0:17:08.600 the receiving side of these very large physical deficits. And 0:17:08.680 --> 0:17:11.560 so it's a very kind of industry by industry market 0:17:11.800 --> 0:17:14.880 and I think the overall aggregate is this is kind 0:17:14.920 --> 0:17:18.000 of stagflationary, range bound type of thing where it's a 0:17:18.160 --> 0:17:21.240 very some people feel like what recession. I don't see recession, 0:17:21.400 --> 0:17:23.720 and other people are racking up credit card debt to 0:17:23.720 --> 0:17:25.960 get by because for them it already is a recession. 0:17:26.359 --> 0:17:31.280 And it's just very industry specific, individual specific, and the 0:17:31.320 --> 0:17:33.800 overall range is that kind of murky sideways action. 0:17:34.640 --> 0:17:36.760 Yeah, in two thousand and eight, I was in southern 0:17:36.840 --> 0:17:41.040 California developing real estate. Orange Scanty, California was like the 0:17:41.040 --> 0:17:44.040 epicenter of the mortgage industry, and we got hit really, 0:17:44.040 --> 0:17:45.840 really hard. But there was plenty of other industries that 0:17:45.840 --> 0:17:47.800 didn't really feel that recession as much, Right, So that's 0:17:47.840 --> 0:17:50.840 sort of an example. And to your point about the restaurants, 0:17:50.880 --> 0:17:53.080 you know, we also have, like, for example, the baby 0:17:53.080 --> 0:17:56.119 boomers sitting on tens of trillions of dollars worth of 0:17:56.160 --> 0:17:57.720 wealth and they're like they're gonna die, so like I 0:17:57.800 --> 0:17:59.280 might as just go to spend my money. So they're 0:17:59.280 --> 0:18:00.840 not really a sense of tip to those things. And 0:18:00.840 --> 0:18:03.199 so there's a lot of plays here, or a lot 0:18:03.240 --> 0:18:05.480 of things in play. I guess to kind of wrap 0:18:05.520 --> 0:18:09.160 this up back to so one, the market doesn't have 0:18:09.240 --> 0:18:15.120 to crash. It doesn't have to Potentially the maybe shorter term, 0:18:15.240 --> 0:18:18.560 maybe the next twelve months, is more uncertain. It seems 0:18:18.600 --> 0:18:23.000 to me the longer term is more certain. Because of 0:18:23.040 --> 0:18:25.280 the debt based montary system that we have, we need 0:18:25.280 --> 0:18:28.679 more inflation and most likely asset prices will be higher 0:18:28.760 --> 0:18:31.200 over the next three to five years. Maybe we don't know, 0:18:31.240 --> 0:18:33.280 the next six to twelve months. That's sort of my 0:18:33.320 --> 0:18:35.359 base case. Would you agree with that or no? 0:18:35.520 --> 0:18:38.960 Yeah, generally, and I think, you know, crash, it helps 0:18:38.960 --> 0:18:41.520 to define it specifically, right, So I mean the fact 0:18:41.520 --> 0:18:43.399 that we had like a twenty percent draw down and 0:18:43.400 --> 0:18:45.800 then a partial retrace and then we're having like another 0:18:45.880 --> 0:18:48.719 draw down, now you know that's to be expected. I mean, 0:18:48.760 --> 0:18:50.960 you could have a ten to twenty percent move with 0:18:51.320 --> 0:18:53.840 not much of a problem, especially over a multi month 0:18:53.920 --> 0:18:54.919 period or over the course for you. 0:18:55.240 --> 0:18:57.280 And you might even consider that a healthy pullback after 0:18:57.320 --> 0:18:57.600 the run. 0:18:57.600 --> 0:19:00.359 That I wouldn't consider that a crash. I think, I 0:19:00.400 --> 0:19:02.639 think a useful models to look at emerging markets when 0:19:02.680 --> 0:19:05.400 they go through recessions or just in general, when they're 0:19:05.440 --> 0:19:08.080 kind of in a malaise. Often the stock market's not 0:19:08.200 --> 0:19:13.480 going down big in nominal currency terms. It's kind of 0:19:13.560 --> 0:19:16.800 it's doing bad in dollar terms, but it's usually doing 0:19:16.840 --> 0:19:19.720 fine in nominal local currency terms. And I think that 0:19:19.960 --> 0:19:24.480 basically when when developed countries go through sovereign debt crises 0:19:24.640 --> 0:19:27.399 or things like we're having now, it's basically like a 0:19:27.480 --> 0:19:31.399 developed market with emerging market characteristics. And so either, like 0:19:31.600 --> 0:19:33.800 you know, I use the nineteen forties analog a lot, 0:19:34.600 --> 0:19:37.560 but potentially more accessible analog for people. Just look at 0:19:37.600 --> 0:19:40.600 emerging markets, you know, not I'm not saying the absolute 0:19:40.640 --> 0:19:44.560 basket case ones, but just like the standard quintessential merging market, 0:19:44.600 --> 0:19:47.119 what do their recessions look like? What are their stock 0:19:47.160 --> 0:19:50.600 markets doing in nominal terms versus say, compared to dollars 0:19:50.640 --> 0:19:53.359