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- [00:03]
A
Mel, can you, can you feel the fall winds blowing into town?
- [00:07]
B
Just slight, ever so slightly down here in North Carolina. But, but it, but it is cooling.
- [00:12]
A
Off a little bit here in the northeast. We've got a, we've got a nice brisk chill in the morning, which I, I welcome. I like the fall feels good. But summer's over, summer doldrums over, Jackson Hole's over. We caught up, I believe in July or late June. And when we last caught up, we said, hey, let's catch up after Labor Day. Here we are three days after Labor Day and it seems like the world is not any less chaotic than it was the last time we talked. Maybe in a good way. You've got a lot of thoughts about what's going on.
- [00:52]
B
Well, I do remember the last time we talked. Let me just check right now. It's funny because I think the closing words were I'm optimistic. There's a lot of stuff going on, there's going to be ups and downs. But when we talk three months later, we're going to have S&P 100 somewhere around 63, 6400. And here we are, S&P 6448. So I mean it's like there's so much noise right now. But like when you step back there are these major trends like whether it's fiat, the basement, whatever it is that are just in place and people are really going nuts about different things or fed independence or long ends are crashing and all this stuff. And it's like at the end of the day I'll make the prediction again right now, in three months from now we'll come back and it'll be, you know, bitcoin will be like have hit 140 and you know, SPX will be at 6,800 and you know like these longer term trends are going on and there's so much noise, which is interesting and you can profit from it. But at the end of the day I think there's just this general fiat debasement trade in place which is long gold, long bitcoin, beneficial for equities. I think the new Fed dynamic that's going on is actually bullish bonds, which is a little anti consensus right now. And I think that we've got a president and an administration that is hell bent on creating an economic boom come hell or high water. He wants housing to soar, he wants lower rates, he wants higher equities and he is going to push, push, push. And I think a lot of people are, you know, Raising their hands in the air saying this is all going to collapse. And I'm not saying that's not impossible, but my bet is that it's actually going to happen and that, you know, a year from now we're going to be at an S and P over 7,000, we're going to be at Bitcoin over 150, we're going to be at gold over 4,000, we're going to have a 10 year with a three handle on it and the economy is going to be booming. And I mean, I just, I, that's what I see coming. And we can get into all of the details of how that works out and all the intrigues. And I'm, I'm just really excited to be here and talk about it with you because I love our conversations and that's generally where I think see things going. So short term there's going to be bumps in the road, but long term, I think the trends continue.
- [03:26]
A
Well, I guess let's break it down piece by piece, starting with the Fed. As I mentioned earlier, we had Jackson Hole a couple of weeks ago. I think it was the first time. And we've seen some dovish comments come out of Jerome Powell's mouth, really moving from focusing on inflation to focusing on the jobs market. At the same time, in parallel, behind the scenes, you have Trump firing a Fed, a Fed governor, because of some mortgage fraud that may have been going on. And I think the thesis that you laid out in December of last year, when we did predictions for 2025, one of which was that you're going to see this sort of merging of the treasury and the Fed and it seems like the moves that have been made, particularly the saber rattling with Jerome Powell and Donald Trump and then Trump firing this Fed governor is signaling that this may be happening in real time.
- [04:31]
B
Yeah, exactly. And I think on net, if you look at the history of the United States, for the most part we have not had an independent central bank. It's kind of an anomaly. And multiple times in the 20th century, we didn't have an independent century bank or central bank. For most of the 18th or, excuse me, 19th century, the 1800s, we did not have a central bank at all. So I think people really need to just chill out about this whole Fed thing. It reminds me of almost talking about Jerome Powell like a pope or what I really think he is is he's more of a Wizard of Oz character. And the wizard of Oz is an amazing allegory. I mean, the yellow brick road is the gold Standard in the book, Dorothy doesn't have ruby slippers, she has silver slippers. And the silver slippers get her home. The modern day equivalent might be bitcoin. I mean, like, if L. Frank Baum was writing the wizard of Oz, now Dorothy would be wearing orange slippers. No doubt about it that, that, that she thinks, you know, that. And it wouldn't be a yellow brick road. She'd be following like the, the emerald brick road, you know, the dollar. And then she'd get to Oz and then she'd find out that Jerome Powell and the Federal Reserv. A bunch of crooks behind the curtain. And I'm not saying Powell's a crook. I mean, don't get me wrong, I'm not trying to impugn anyone's character. But what I am saying is that there is a massive political, either conscious or unconscious bias within the Fed. It is an inherently political organization in the same way that the Supreme Court is an inherently political organization because they are all political appointees. I mean, if you take a bunch of politicians and you have them appoint people into important positions, I mean, it's almost like a transformative law of like geometric, you know, doing proofs, like, you know, like, you're going to get politics. And I could guarantee you that if we were in this situation and the data was coming in the way it was and Kamala Harris was president, I can guarantee you Lisa Cook would be voting for cuts. I could. I mean, there's no question in my mind. And so there is an inherent bias in the Fed. It's never been independent, it never will be independent. It is under the control ultimately of the Treasury. It always has been. Whenever the US Government needs to do something on monetary policy, they tell the Fed what to do and the Fed does it. This happened In World War II, it happened in the 50s. It's just the way it works. The central bank is a servant of, of the government. It was created in 1694. William III, bank of England. We're going to fund a war with France. It's there to serve the sovereign. That's what it's there for. And at the end of the day, I don't care if it's AOC or JD Vance as president in 2029, they're going to keep pushing rates lower. Elizabeth Warren was writing letters to Jerome Powell last year saying, you must lower. This is not political. This isn't about Trump. This is about the U.S. fiscal situation. We cannot afford to keep rates this high. Our interest expense is blowing up. We were at 132% debt to GDP in 2020 and our interest expense as a percent of GDP was 1.49%. We reduced our debt to GDP after the COVID 19 GDP drop ended to 120%. So we dropped debt to GDP by 12% and interest expense as a percent of GDP more than doubled from 1.49% to over 3%. In other words, we're raising these interest rates. We have so much debt. And this is not only for the United States, this is for Europe, this is for Japan, this is what you're seeing in England. And all of these central bankers, they're going to get together in Basel, Switzerland at the bank for International Settlements every two months like they always do, and they're going to say we need to keep rates lower for longer. And the bond market is starting to sniff that out. And I think we recently had perhaps a peak in the long end for especially the U.S. and maybe, you know, gilts and booms, but I think interest rates are going down and like I said, I think we're going to see a three handle on the ten year, if not by the end of the year, early next year. And we're going to have gold up, bitcoin up, stock market up, bonds up. I'm bullish everything.
- [09:11]
A
Well, I think particularly as it pertains to treasury yields, that is a bit contrarian, but we were chatting for a bit before we hit record and I guess let's just dive into the long end, the old curve. I'll pull up the 10 year yield, the 30 year yield and then the chart that you're focused on right now, which is the December futures contract for the 30 year. So as you can see here getting a 20, 25, 10 year, began the year around 4.8, so currently at 4.19. Got the 30 year. The way this is sharing is a bit awkward, but if we go to the 30 year, we'll see it's right at 4.87 right now, peaked at 5.09 in May of this year. And then here's the chart that you really want to look at, which is the December futures contract for the 30 year. And you're saying that despite what's happening on the yield curve of the 30 year, the futures contract is really where the signal is.
- [10:18]
B
Yeah. So for people that don't trade bonds, I don't want to insult any listeners that this is like 101, but there might be some people listening that don't understand this. So bonds, when bonds rally what we mean is their price goes up, which actually means the yield goes down. So that can be a little confusing. So you have to kind of wrap your head around that. So if yields go up, price goes down. And the way most people that are active in trading make bets on the bond market is they do it through futures contracts. And this contract here, ZBZ 25 ZB, that means long bond. Z stands for December, that's the month for expiration, 25 the year. So this is basically the front month, but it's the active month. So futures traders tend to pick a contract and then that's the one that's active and that's where the volume is and liquidity. So right now, if you're a trader and you're trading the long end of U.S. bonds, you're trading ZBZ 25. And if you look at this chart, it is up into the right. It's got higher highs and higher lows. And this goes back to May, right? So as you might remember, in the beginning of the year there was this other big freak out and the US was going to have a Liz Trust moment at that point in time. This was not the front month contract, but people were already trading the December contract. And that was when they took this down below110 to like109. And it's currently at114.27 on my chart. So I just look to the right of my. So we've basically gone up, you know, I don't know, call it 4 or 5% in bonds. That's not bad. But it's up again. It's up and to the right. It's a bullish chart. And so if you look at absolute yields and you say, oh well, absolute yields, you know, we're approaching the highs around 5. Yes, that's true. But if you look at the way practitioners playing the long bond trade, it, you know, it's actually the lows were all the way back in May and then we hit a low in July. And then if you actually drew that line, you drew Marty, based on kind of closing prices instead of intra intra. I mean you'd see like we touched it to the perfection, right? Like, like it basically we, we tapped right down to where we. Yeah, look at that. Yeah, yeah, go down a little bit more. Yeah, like, like it runs right through those closes which are, you know, where those sideways lines are. So like on Tuesday when everybody was flipping out, I literally was on Twitter and I was buying TLT calls for like $0.11 86 calls. These were I bought like a hundred in an account. I forgot I bought about it. I forgot, I forgot I bought it. You know, I spent like a thousand dollars. For me, that's not a big play. I'm like, okay, I'm gonna, I'm gonna put a thousand bet down on 186 TLT calls for tomorrow expiry yesterday. Expiry. They're up 700% yesterday. I mean, like, it was literally like. And I. And I had forgotten about it. And then I. Because I trade a lot of accounts and I went into this account. I'm like, oh, my God, why is this count up so much? I'm like, oh, yeah, I'm up five grand on my TLT calls that I bet a grand on yesterday. And it's like people were flipping out about bonds. And I'm like, this is a bullish chart. This is an up into the right chart. And Lisa Abramowitz and all these people on Bloomberg, they're like, oh my God. And guilts are collapsing. And I'm just so sick of these talking heads on TV getting everything wrong. Tariffs are going to collapse, the stock market, inflation is going to go out of control. And the latest thing that I think is starting to fall apart is these people have been pushing this narrative that there's no problems in the job market, but this could be a whole nother switch into a different time. I think there are issues in the job market. I think that the job market is weaker than people realize. And this is a big deal. And I think that we are literally not just going to get five or six cuts. I think we could get as many as 10 cuts in the next 12 months.
- [15:07]
A
Would that be 10, 25 basis point cuts? So down two and a half percent? Down to around 2%.
- [15:15]
B
Yeah.
- [15:15]
A
FFR. Yeah, I'm pulling it up. I'm trying to pull it up right now, but initial jobs claims, jobless claims came out today. 237,000 was the print expected. Was 230. So more initial jobless claims than expected. Continuing claims a bit lower than expected. But what was the other ADP private payrolls? I think this is the big One, the big miss that people were looking at. 54,000 was the print expected, was 68,000. The last was 106K. So I think this ADP Private Payrolls is probably more signal that takes out the government jobs is well below expectations and well below the last print. This is before revisions.
- [16:06]
B
And yesterday, what helped drive that bond move, I think a lot of it was technicals. I Think we're going to bounce on the long end anyways. But, but, but a big driver of that move yesterday was the Jolts report which showed that for the first time in the last four years there are more people seeking a job than there are jobs. So if people remember like there is a point during the pandemic, the great resignation, people could leave, get a job next week, 20% more that's gone now. We, we were at one point, I think like two, two and a half times job openings relative to unemployed. Look, there's a table that I'm going to be watching very carefully in the next unemployment report which comes out this Friday. It's table A7 in the BOS report. And what it is is it breaks down foreign born versus native born workers. And this has nothing to do with politics or anything like that. I just personally believe that they're on the foreign born side. There's a lot of noise right now which is a lot of people who are pouring across the border filling those types of jobs that foreign born do were flooding the market. And so you had a high, a relatively high unemployment rate of foreign born. And this is how the BLS breaks it down. If nobody's ever like looked up the PDF report that the BLS puts out, it's called the Employment Situation Report, like they have a table A seven and it doesn't break down illegal versus legal or anything like that. Breaks down foreign born versus native born. If you look at foreign born, because the border's been closed, the unemployment rate has been plummeting on foreign born. If you look at native born, the unemployment rate has been really going up and those two have been canceling themselves out. And so what you're seeing when they report the overall unemployment rate is, you know, 4.2, you know, pay no attention to the man behind the curtain. There's nothing to see here. But the truth of the matter is, is that I think looking at the native born is the way to look at it because it cancels out all the noise in the foreign born. It takes away the noise that's going on with visas, it takes away the noise with immigration. If you want to read on what's the real unemployment report, a rate on Friday, go to the BLS, pull up the report, scroll down to table A7, look at the native born unemployment and see what's happening. And it's going up. It was like 3.8 or something like that, 3.7, you know, a year or two ago and now it's like 4.8, like it, it's going up significantly and we're seeing young people having a harder time get a job and where we're really seeing the unemployment because they also break down foreign born, native born and then they do men versus women. And I love to focus on native born women because they tend to be more college educated, they tend to be more in non manufacturing, non construction. So they're a better read on the white collar. They're skyrocketing. The unemployment rate of native born women is skyrocketing in this country. And so what that's telling me and you see in an anecdotal data about layoffs and everything else and AI efficiencies, Jordi Visser does a great job showing like Mag7 is like growing revenues and earnings like crazy and they're not adding any headcount. Like, like we have so many deflationary forces going on right now that I think eventually, once Trump gets his Fed board in place, we like I said 8 to 10 cuts in the next 12 months. I mean I don't think anybody's saying that, but I pride myself on making outrageous calls that come true. Like in December saying emerging markets were going to crush SPY. EEM was going to crush SPY. Right now SPY's up about 10%. Emerging markets are up over 20. I called for a 15, 20% crash in the first half of the year. That was going to have a quick rebound to 7,000. I called for the DXY to crash below 100 very quick. I mean, every call I've made and I made this kind of tongue in cheek post on Twitter the other day calling myself the Goat. I'm the best macro strategist on Twitter. It was a total kind of joke. But the point was to say, look, some of these calls are really dang good. And not many people know me because I didn't do anything until a year ago when my book got published. So I'm kind of out of nowhere. I don't have a 10 year history. I was never on social media my whole life. I never had a Facebook account, Twitter account. I mean, I actually hated social media. I didn't want to be a part of it. It was like not part of my ethos. I was almost a troglodyte. And then I wrote a book and my publisher's like, you should get on social media. And now I love coming on podcasts like this and sharing my views. But all I am, I don't have a research firm, I don't have clients. I'm an investor. I Invest my own capital that I earned throughout my career being a fintech executive. I'm doing very well and I like to share my views and help people. And I'll tell you, some of these calls are really good. And what hurts me a lot is like there's just such this consensus out there that has been leading people astray, telling people markets are collapsing, bonds are collapsing. The truth of the matter is, is we've been in one of the greatest investment environments of my lifetime to be long and a lot of people have been scared because people feed a bunch of, you know, doom and gloom bullshit.
- [21:59]
A
Yeah, it's. And it's easy to see how.
- [22:06]
B
We.
- [22:06]
A
Touched on this last time we talked to. Because you have what's happening in financial markets and you have the real economy. And as you mentioned, with unemployment, it seems like many people are hurting. I mean, I'm sure you've seen it, the memes of. Not Only the memes, TikTok videos of people in their car complaining about grocery bills. I think millennials, younger millennials, Gen Z coming to the realization that real estate may be running away from them. And I think a lot of those anecdotes and the anecdotal data points really drive this dread and then the overarching emergence of AI, everybody becoming fearful that it's coming for their jobs. But you mentioned Jordy Visser, Wired on the show a couple of months ago too. And I think that, I think that's something that we just have to deal with as individuals, as a society, as an economy, is that we are living through this incredible inflection point in many different ways with the multipolar world becoming more multipolar. You have the debt crisis here or that situation here in the United States, geopolitical strife globally with wars and all that. And then you throw AI in the mix. And I think people are just completely uncertain about what's going to happen in the future, particularly with their jobs. And so I guess they have this perceived fear that I'm going to lose my job and I'm not going to have the ability to buy a house. That market has to tank now.
- [23:37]
B
I mean, it's, look, I mean there's some people talk about the fourth turning. People talk about inflection points. I mean, we're there. I mean, look, in the 1860s you had had a run up in essentially wealth inequality and you get these situations periodically throughout history. And frankly, the way a lot of it gets resolved is you cut down on resource demand by killing people. So you have a massive War in Europe and you kill tens of millions of people, all of a sudden, that intense competition for resources gets a lot easier. Right? So this is not what we want to head into. We don't want to have a situation where just this week we had G meeting with Putin, meeting with Kim Jong Un, you know, in China, and Modi with India. Like. Like, we don't want to go down that path. Like. Like, we've done it too many times as a species where you get one side, you get the other side, they start getting competitive. And then the resolution is essentially everybody goes batshit crazy and starts killing each other. Like, that's not a good outcome. Right. And so I think it's important to talk about it. And I think social media, I think, shows like, this, the population, like, it's educated, it's global, and I think we have a shot of actually avoiding World War Three. I think some people are like, oh, this is inevitable. We're going to have, like, a brick side begin to build up, and it's going to be, you know, the cornerstone will be Russia, India, China, and then there'll be the US Eventually, Western Europe will come onto our side because they realize that's where they need to be. Like, I really hope that's not the case, because in history, it's surprising how stuff actually, like, is completely clear to everybody. Like, in the 1930s, it was very clear. Japan was building up their military empire, Germany was building up. Like, it was very clear. Like, we were getting ready to head towards something, and then we went over the cliff. And I think right now we're in a similar situation where, like, China's building all these ships and new submarines and. And there's these new alliances. And it's like, look, guys, you know, open your eyes. We're heading towards something here, which is not a pretty picture. So let's. Let's figure out a way not to kill each other. You know what I mean?
- [26:14]
A
Yeah, I completely know what you mean. That's why I wanted to bring this up outside of the military parade that happened earlier this week. I think, obviously, the geopolitics and the kinetic side of things, but then going back to the monetary. That's why, as you're describing, that want to bring up this chart, which is what I wrote about last night in my newsletter, and I hadn't seen this chart until yesterday, sort of blew my mind. And so what we're looking at is the stock level of gold in China on Warrant. For those who are unfamiliar, what it means to be on Warrant. Essentially, the pboc, or banks, at the behest of the ccp. Financial institutions at the behest of the CCP have gone to the Shanghai Gold vaults and basically registered their gold at the Shanghai Gold Exchange. Be used as collateral or to provide liquidity to gold markets to make the Shanghai Gold Exchange more prominent in gold markets. And I'm looking at this saying they're definitely prepping for something. There's been these. We've all known. I've written about it, and I think people have been observing it for the last 15 years. China's certainly been building up gold inventories at the PBoC. And I think what we're seeing now is they're actually putting those inventories to work by registering them at the Shanghai Gold Exchange.
- [27:41]
B
Well, well, here's the thing, and forgive me for one second, but we have done so many shows. I've never been a shameless promoter of my book quas, but this is so apropos. So what. What are. What you're showing there is. You're showing like, around 2,500 kilograms, up to like 30 plus, right in gold. In quas. This is like part one of the book all that Glitters. I have an introduction and this is what it says. According to official statistics, the largest holder of gold in the world is the United states at over 8,000 metric tons. However, according to unofficial calculation, China holds not the 2,000 tons publicly reported, but closer to 32,000 tons. As of 2007, China has replaced South Africa as the world's largest producer of gold. I wrote that in 2023, this was out there in gold circles. People knew that China had so much more gold than they were reporting. And they're using the Shanghai exchange like, this is what's going on. Like China, the BRICs, I mean, they've obviously decided that holding US treasuries is not where they want to be. Now, I want to counter this because the narrative is like, oh, my God, China doesn't want to have Treasuries. That's a big problem. It's not. Foreign holders of Treasuries are like this, okay? The United States owns Treasuries. Mutual funds, own Treasuries, pension funds, insurance funds, the Federal Reserve, intergovernmental debt. If you look at the percentage, the actual percentage of US treasuries are 36, 37 trillion outstanding that's held by foreign governments. It's 20, 25% tops. The vast majority of US treasuries are held by US individuals, institutions, the government, okay? China owns like 7, 800 billion, right? I mean, the Federal Reserve has rolled off over 2 trillion in treasuries. We could absorb all of China and Russia's and we could absorb all those Treasuries easily. So a lot of people talk about, oh well, China's going to sell. And I'll tell you another thing. If you look at the foreign tick data of who owns Treasuries, you see this really big weird thing which is like Cayman Islands own tons of Treasury. A lot of people assume two things. One, they think it's hedge funds that are located there offshore. The other thing they assume is, and I've talked about this before, is that the Kingdom of Saudi Arabia did not want everybody to know exactly how much Treasuries they held. They worried about being deposed. They. And so the King of Saudi Arabia put a lot of his Treasuries in the Caymans to essentially keep that shielded should anything happen to his family and they need to go into exile. I think there's just a third reason why the Caymans might own a lot of Treasuries. And I think it could be CIA front companies, in other words, Treasury. I have a saying, all is fair in love, war and U.S. treasury management. So, like, I wouldn't be surprised if there's this, a CIA front as hedge funds in the Caymans that they see Treasuries get to a level they don't like and they buy it. And it's like, you know, this is the CIA. I mean, I mean, this is the federal government. This is national security. So this is all fiat. This is not gold. There's no way to check it. Like if the President authorized the Department of Defense to do a secret DOD or CIA operation, feed in through front banks, bogus balances on balance sheets. So it looks like you have the currency in your zeros and ones on the computer and go out and support the treasury market. Who's to stop them from doing that? So, I mean, I think there's so much stuff that goes on in finance that when people start predicting that we're heading for a collapse and yields are going to explode, it's like, don't you think that maybe the CIA might have something to say about yields exploding? Don't you think that's possible? Or are you so naive that you think the US Government is just going to let the bond market trade freely?
- [32:23]
A
Yeah, well, I mean, that's a great point. And because you got to think the Pentagon's war gaming, national security, part of that national security Is financial security like going back to this chart and really pulling on the thread of the sort of fork in the road that you were describing of we could go towards some very volatile kinetic war, economic war, whatever it may be, or avoid World War three. Maybe that's what China is doing here, just signaling like, hey, we have the gold. We're going to exert our influence over spot and futures gold markets by registering our bullion at this Shanghai Gold Exchange. And basically just as like a geopolitical signal, like, hey, let's get to the table and negotiate like peaceful trade deals or something like that.
- [33:15]
B
Yeah, I mean, I mean, what this is, and I credit guys like Lou Groman for being way ahead on this is like China says, okay to Saudi Arabia, we want to buy gold, you want to buy some of our. Or we want to buy oil, you want to buy some of our stuff. But they have a close capital account on the yuan, their currency. So what they say is, what we're going to do is we're going to buy, let's say, $100 billion worth of oil. We'll send you $100 billion worth of yuan. Now, over the course of the next year, you might want to buy $60 billion or 60 billion yuan or whatever from China and you're left with these yuan that you don't want. What you can do is you can go to the Shanghai Gold Exchange and you can take those yuan and you can get bullion and you can bring it back to Riyadh. And this is what we did with Saudi Arabia in the 70s, before 71, we used to fly jet planes full of gold bullion into Riyadh every month, you know, to pay for our oil. Like the Saudis wanted the gold, right. And the USD was convertible by foreign central banks at $35 an ounce. So we used to fly gold into Riyadh and now I think the Chinese are flying gold into rehab. They're not, they're just not doing it through Beijing. They're doing it through the Shanghai Gold Exchange. Yeah, yeah.
- [34:43]
A
And then, then you have, like I told you before, my, my focus has been on China last couple of days. I'm actually recording with Peter Alexander tomorrow. Has been living in China for, for a few decades and has a. He's a Westerner living in China and has his. I don't even know it's theory. He's just telling people that the whole perception of China, how it operates and what their ultimate goals are is completely wrong, particularly in Western circles with the pundits. And so Excited for that conversation, but bringing it back.
- [35:18]
B
What's the thrust of how the pundits are wrong?
- [35:24]
A
Mainly just a misunderstanding of cultural dynamics. Like what, what China's ultimate goal is. Like viewing China as a nation state. Sort of the show notes he sent me is like, we're viewing China as a nation state when it's a society. And when you're trying to work within this Western mental framework of nation state sort of negotiations, it's that, like, that's not how China views things. And I think that's how we end up in these situations where it seems like we're speaking past each other.
- [35:57]
B
Yeah, many times. I, I agree. And I do think there's a difference in China. I think China, there is this Western, Eastern divide. You know, I majored in philosophy as an undergrad, and, you know, the Western philosophy has a thrust to it, and Eastern philosophy is different. The Eastern mind is different. And it's. It's sophisticated in its own way, as is the Western mind. But, but. But it almost has different first principles. And so sometimes when Western leaders look at China and try to analyze it through their first principles, they kind of miss the boat because it's a little bit. A lot of people think the. The Great Wall of China was built to keep invaders out. It was built to keep the population in. So China historically is actually, you know, essentially a. A fiefdom of dominated groups. So it's not like one people ethnically. And everybody knows there's two major languages, you know, Mandarin. Like, essentially there. There's a elite in China that has dominated different areas and brought them in under their empire. And historically, China has wanted to keep complete dominance over whatever that empire is. And that was why they built the Great Wall, was to say, look, we're really not interested in the outside world. We want to have complete dominion over these internal groups that we dominate. And so it is a little bit of a different mindset. It's not kind of like a British Empire type mindset. So there's. I think that'll be a fascinating conversation I'd love to hear. I'm not a China expert, but I know a little bit about Chinese history and, and how that country kind of came to be and what it is. They also love precious metals, just like India does, and they love silver, too. At one point, silver traded one for one. There's this huge arbitrage, silver, gold, between, like, the Portuguese and Spanish, Europe, China, like, you know, they'd mine silver in South America, ship it to China, get it one for one, for Gold move it back to South America and then back over to Europe. And, you know, precious metals, I mean, they've just been a part of this for so long. And it's like, I mean, people got to realize like this whole fiat thing, I was born in 75, like 71 is when we went off of gold, right? Like, so basically you have from like long before Jesus Christ existed until a couple years before I was born, gold and silver. And then you have this short little period essentially in my lifespan where gold and silver aren't money. And what you're seeing is that gold and silver are money again. And that's just happening. And that's why gold is going to blow out. I saw like somebody on CNBC yesterday showing a chart like maybe gold's hitting a peak because the copper gold ratio, look, gold's going to go up relative to every other commodity. Gold's going to go up relative to copper, it's going to go up relative to oil. It's going to go up to everything because it's becoming money again. Gold should be the same as platinum. Gold should be less than platinum. Platinum is a rarer metal. Platinum is a higher, denser metal. But gold is the monetary metal. So when people talk about bitcoin and this is where gold and bitcoin are the exact same, it's about the belief in a sense that this is money because it's not like gold is some special metal like platinum. Like I said, it's less abundant in the earth's crust. There's been less platinum ever mined. Platinum is much more rare than gold, yet it trades at less than half of the value. Most of gold's value is this monetary premium that people assign to it. Bitcoin is the new gold in that sense, but gold with a different set of stripes, different drivers of, you know, movements and different things. It's kind of a next gen gold that, you know, could very well be in place for another thousand years. I mean, we will see. But I think that there's only two, in my opinion, there's only two stores of value right now. There's gold and there's bitcoin and that's it. And ether can make its moves, but ether, ultimately the case for ether even that Tom Lee makes is this is a utilitarian case that ether is going to drive stuff. Maybe it's Solana drives stuff better and then eth is done. The beauty of bitcoin, the beauty of gold is the case is simply that this is money. This is what is value. It's not about how can we power the best, quickest transaction mechanisms. I'd love to see Bitcoin more involved in transaction mechanisms, but that's what not. That's not what's driving Bitcoin's value. What's driving Bitcoin's value is it's the first, the ultimate, the decentralized, the cryptocurrency that represents store value in the same way that gold is the precious metal, even though it's less precious than platinum, even though, you know, silver is more ubiquitous and easier to transact. Like, all these things are there to threaten gold, but gold is gold. Bitcoin's Bitcoin. They are the two stores of value. In the long run, that's where you want to be. That's the anchor of my portfolio. And then I trade around it with all these other viewpoints, but nothing's going to change to the fiat debasement narrative.
- [41:48]
A
Yeah. And I think something you said there is very prescient, something particularly Americans overlook is that China's been around for millennia. The United States as a country. We're about to have our 250th birthday next year, Hank. And not that I'm a China expert by any means, but from what I can tell, their culture, as we described, is very different and very seeped in history, dynastic history, specifically, they think in centuries, not quarters, like we do over here in the United States. And so your point that China is just reverting to a monetary standard that existed for most of its existence just makes sense.
- [42:31]
B
Yeah. And I mean, China, I mean, they have what they call the century of humiliation, which is essentially where they were dominated by the British, the opium. I mean, all this stuff. They don't want to go back there. I think you can look at Germany and you. And you see how Germany, out of all major European countries, they have the lowest debt to gdp. Like, the German people are scarred by the Weimar Republic and the hyperinflation. The Chinese people are scarred by this humiliation of being dominated by some small island off the coast of Europe called Britain. And so they're scarred by that. And their main thing is, like, we're never going to let this happen again. And I actually think that the main driver of Chinese military buildup is, like, they just want to dominate their region. The thing is, is that the United States does not want China to be an age in hegemon. Like after World War II, we defeated the Japanese, we were the Asian hegemon, just like we were and still are the European Hegemon in charge of it, you know, and so it took us a while in Europe because we had to overcome the Soviet Union, but eventually we got there and in Asia, we've been the hegemon since 1945, since we dropped the bombs. So we've been in charge of Asia. And I think ultimately Americans can get comfortable with living in a peaceful world, having a higher standard of living. But this might be heresy. Let China be the Asian hegemon. You know, like, like, why do we need to control Asia? Like, like, why do we need to be the dominant force in the Philippines and Indonesia? Like, I know there are corporate interests that want that, but me, as in a personal, as an American, like, I don't want that. I don't feel I need that. I don't feel I need America to be the Asian hegemon. And I don't think that there's any threat to the United States from China. I don't think, like, Red dawn is going to happen, right? And then they're going to send over troops and invade Coma. Like, like, we've got guns in every house. We've got like 10x nuclear weapons that China has. Like, we've got an amazing navy. Like, China's not going to invade and take over the United States and neither is Russia. So who cares? Let Russia run Europe. Let what it threatens is the corporate elites. And I think, like, to me, like, let's focus on America. Let's focus on the Western hemisphere. Let's actually bring more of these Latin countries, which Americans seem to get along great with. Latinos, I mean, I never mentioned this before, but personally I speak Spanish. My wife is a Colombian immigrant. I love South America, I love Latinos, I love Latin America. Let's just make Western hemisphere great again and let Russia worry and Britain and Germany and let China deal with Indonesia and Thailand. I mean, who gives a damn? Let's build up some Western hemisphere, like super power that we have all the resources. Europe and Asia are overcrowded. We've got oil, we've got gas, we've got people. We've got everything that we need here. Let's forget about these old world, let's forget about Europe, let's forget about Asia and let's just make the Americas great again. Would be my pitch if I was a politician. And I would just be like, you know what? I really don't care what happens in Europe. You know, Germany, Starmer, you guys want to fight Russia, go ahead. Ukraine, you want to collapse, go ahead. China, like, let's give up this American global empire dream. Because what we can do is we can make the average life for the average American a lot better if we just focus on making what we have here work a lot better.
- [46:35]
A
And I don't think that's insane or contrarian at all. I think that is what people MAGA specifically voted for last November. I mean that's a make America great again. It's like let's focus on the homeland and making sure that the average American has a higher quality of life because it's certainly been on the decline for, for many decades now. And I don't think that's insane at all. And it's something that I would like to see too. Like why do we need to be the global hegemon? It seems like it's steep state foreign.
- [47:08]
B
Policy people at the State Department Council Foreign Relations.
- [47:12]
A
Well, at the end of the day it comes back to just simple information systems and scaling things. You can't organize and coordinate things at that scale. It's literally impossible. It's going to collapse in it of itself. And it seems like that may be happening and tying up this conversation on China pulled up the gold on warrant chart. Seems like they're making moves there to assert themselves like hey, we have the gold, we're going to use it in commerce and international trade through the Shanghai Gold Exchange. But then you have on the tech side like open source AI, I think they're signaling over the last year specifically like hey, we can compete at the tech level now too, at the software level with these open source models and really throw a wrench in the American Western sort of AI dominant players plans by launching these open source models that completely work their walled garden closed source models. And I think one way to read both those things, the gold on Warrant and sort of launching deep seek and investing heavily in tech advancement is hey, we're here to compete. And not necessarily in a nefarious way but like let's just build things and cooperate with each other. Let us dominate our part of the world or steward our part of the world. I think that's a better word. And you guys steward your part of the world and let's engage in trade when it makes sense.
- [48:50]
B
Yeah, no, definitely. And I think, you know, there was a, there's a guy, Brent Johnson, who's known for his like dollar milkshake theory and I saw something, you know, he was talking about the other day and it's just basically like, you know, we are in the midst of a little bit of a, of a fourth turning and I don't think that we need to kind of go over the edge. But what he said was a lot of people think the fourth turning means we're going to turn the chapter and we're going to break through to something new. And he said his dark fear is we're going to break through to something worse. I don't know if it's like a fascism, authoritarianism, whatever, but essentially, I think we're at a pivotal point, a pivotal point where it's like, do we want to essentially go down a path where America tries, with 330 million people, to desperately hold on to some sort of global hegemony over 7 billion that will, in my opinion, I think this was Brent's worry, could lead to an authoritarian. Or basically he was equating the collapse of the Roman Republic that was then replaced by the Roman Empire. Right. So for people that don't know, like before Julius Caesar, like Roman was a republic, it was run by the Senate and eventually it was run by an emperor. And it lasted for like 400 years, you know, so it was a whole, it wasn't a short time. And that maybe America could be, the republic is falling and we're heading into a period of empire. And that's what I think, people, the narrative is on the left, like Donald Trump's, the beginning of this. I think that's bullshit. I don't think that's going to happen. That was the same narrative, by the way, in the 1830s with Andrew Jackson. Andrew Jackson was the country's first populist president. He was populist or he's seventh president in the 1830s, had a huge fight with the nation's central bank at the time, which was called the Second bank of the United States. His whole election, everything was dominated by a fight between Andrew Jackson and the central bank. Andrew Jackson hated the central bank. It was run by a guy named Nicholas Biddle. Jackson called him Czar Nicholas because he lorded over interest rates. And Jackson said, you're keeping interest rates too high, you're killing small business. You need to lower interest rates and I'm going to get rid of you as a central bank. Because they had a 20 year charter. And that charter was not up until after Jackson's first term. Jackson's main political enemy was a guy named Henry clay in the U.S. senate. Henry Clay said, you know what, we're going to ruin Jackson. We're going to pass a bill that renews the central bank charter for another 20 years. If Jackson vetoes it, he's going to be dead. The Senate, which was opposition controlled, as was the House, they pass a bill, new 20 year charter for the central bank, they send it to Jackson's desk. Jackson vetoed it. Clay thinks, okay, we got him. He just vetoed the central bank economies and then collapsed. We got him. People loved it. The people wanted the central bank gone and the central bank was gone and Jackson was reelected. So these types of things have happened many times in American history. And ultimately what happened was there was economic difficulties after Jackson got rid of the second central bank, but state banks took it up and it became more decentralized and then we had a boom period. So there was no need to have a central bank and there is no need to have a central bank. And any discussion that there's like, oh, if you don't have an independent central bank, you can't have an efficient economy. Well, the second largest economy in the world is China. And by statute in Chinese law, the head of the PBoC reports to Xi Jinping. So the second largest economy in the world has absolutely no independence. So anybody that comes on CNBC or Bloomberg and tells you that if you don't have an independent central bank, you're doomed as a national economy is basically full of shit. The second largest economy in the world is China. No independence.
- [53:18]
A
Yeah, it is, it is insane that that has been sort of psyoped into the mainstream acceptance that you. That we need.
- [53:30]
B
Yeah, it's just all BS man. I listen to it all day and I literally am like these people are nuts. Like these people are just. There's such a propaganda machine, it's ridiculous. I mean, and I'm not saying they're even doing it consciously. I'm not here to impugn people's characters. I think that there is something embedded in the American psyche. Maybe it's a non understanding of history. Maybe people think that the Federal reserve existed since 1776 and it's always been there and that's just the way that we need to be. But we have a history of an evolving, you know, in, in the 1970s we, we did Humphrey Hawkins and we literally passed a bill where we told con, we told the Fed what to do and we said, here's your target. 3% unemployment, 3% inflation. The only inflation target Congress and the President have ever given to The Fed is 3%. And within that bill they said if they come in conflict and you're struggling to get unemployment down to 3%, disregard your inflation mandate and focus on employment. And that was in the bill. It was the 1978 Economic Growth act or some name commonly known as Humphrey Hawkins. People can look at my expos that's what Congress said. 3% unemployment, 3% inflation. If they come in conflict, focus on unemployment. And it was put into law. But the problem was they put a five year sunset period on it. So that's gone. And then all of a sudden the Fed says, oh well, the bank of New Zeal said 2% is the right inflation target. So we're going to do that. Well, the last time Congress gave the Fed a mandate it was 3% unemployment, 3% inflation coming, conflict, go with reducing unemployment. That's what the people have said. That's democracy.
- [55:23]
A
It's like time. It's a flat circle because it's not explicit. There's been no congressional act passed to mandate this. But I think that implicitly behind the scenes is what Trump has been trying to do. Too late. Powell not worried about inflation. More worried about the job market than in Jackson Hole. That was the big pivot from Powell was sort of explicitly saying we're not going to worry about inflation as much as we are employment.
- [55:47]
B
Now Matt, we need to worry about employment. I mean what we need to do right now is like, and I think this is going to happen is unemployment is weakening. We're recording this on Thursday at 10. I have no idea what the employment report is going to be tomorrow morning. It could surprise us all and be 200,000. I don't know. The longer term trend in the data is there's some weak thing in the unemployment. Right. And if you have that weak thing, you're not going to get systemic inflation. Tariffs are not inflation. Milton Friedman said inflation is always and everywhere a monetary phenomenon. You know what tariffs are? They're baking into the price index as a tax. It's like how could you think that if a tire costs $100 and then next month that tire actually costs 95 but there's a 15% tax, so it's actually 110 to the consumer that tire prices went up. That's not inflation. It's a one time price increase. And these things like CPI and ppi, they're not inflation reports. It's not consumer price inflation. The name of CPI is Consumer Price Index. It's an index of prices. And if prices go up because there's a tariff which is basically an embedded tax, that's not monetary inflation. Milton Friedman, no free market economist is going to tell you that if the United states throws a 15% tax on tires and the price of tires goes up, we're experiencing inflation, we're experiencing a one time increase. This is what Waller says. And all this junk from Powell, which is totally political because literally he comes out in September, last year, cut rate 50 basis points. October, cut rate 25. December, post election, we're cutting 25. But here's the message to the market, we're done. Market tanks on December 18, 2024, 3%, something like that. When Powell came out, I mean, it looks so political whether it is or not. I mean that just looks so political, like the election's in November, he cuts 50 in September, the next month in October, he cuts 25 the next month in December almost to kind of conceal the fact that he's political. He's like, I'm doing 25, but I'm coming out on this presser, hawkish as hell. Market tanks. And he doesn't cut since then. I mean, this discussion that the Fed is some independent. I mean, I think it's ridiculous. I think Powell, people look at him and I understand he looks like your nice grandpa. He looks like he's very focused on things, but he's just not acting that way. He said last year I'm data dependent. All the data was coming in and he's like, I'm going to focus on that. Then all of a sudden Trump gets in office and he's like, all the data is saying we should cut, but I'm forecasting that we're going to get inflation in coming months because of tariffs. So therefore I'm not. No, if it wasn't for tariffs, I'd be cutting. So now all of a sudden, I'm not data dependent. Now all of a sudden I'm a great forecaster. I'm the wizard of Oz. I know that inflation is coming. Everything's telling me in the data to cut, but I'm not because I think inflation, it's all bullshit. And people that want to try to defend Lisa Cook if she committed mortgage fraud, I'm sorry, I own investment houses. You know damn well when you get a mortgage what you're declaring that as, and you know, you get a much better mortgage, a lower down payment if you say it's a primary residence. If she did that two or three times, she needs to be gone. And she will be gone. If Lisa Cook is still on the board of governors a year from now, I mean, I'll shave my head.
- [59:29]
A
Well, whether or not she should be there in the first place was a whole other discussion. I think the Sluice did a lot of digging and it doesn't seem like her resume is as stellar as it may need to be if you're going to be a Federal Reserve Board governor.
- [59:44]
B
Well, look, now we start to get into all kinds of other stuff about Biden and what he did and how he literally had lists that were restricted to black women for the Supreme Court, for the federal. This gets into a whole other political stuff. But, like, regardless of all of that, if she lied on her mortgages and she's literally on the board of governors of the largest bank regulator in the United States, and people are saying this shouldn't be happening, I mean, she needs to be gone. I mean, there's no question about it. And I'll tell you what, if she's not gone, and we'll see what the courts say, they make this point that if Powell doesn't do something about it, he could be fired for cause. And I think that there's a part of the Trump administration, this is another kind of contrarian view. There's a part of the Trump administration that wants to ruin Fed Independence, that wants to just expose them as this big political organization because they don't want to deal with them anymore. Other people have talked about this too. Darius Dale, Bren Johnson emerging of Fed and Treasury. I've been talking about it for over a year. This is the ultimate goal. This is going back to the wartime footing. Because in my mind, Trump sees us on a wartime footing. He sees us on a wartime footing with China. It. It's in my book Quas. I say it's not a cold war, it's a gold war. And I think that we're on this wartime footing economically with the other major powers. And I think any time in history, whether you're talking about Abraham Lincoln, George Washington, Ulysses S. Grant, fdr, Democrat, Republican, Whig, whatever. When presidents feel they're in a wartime footing and national defense is at stake, they will do whatever is necessary. Andrew Jackson, when he was fighting the central bank, the Supreme Court came out against it and said, Andrew Jackson's response, well, the Supreme Court has ruled. Let them see if they can enforce it. And so this is the history in the United States. The executive has immense power. This is what Steve Bannon talks about, where we're heading towards a constitutional crisis, because there is an element in the MAGA Party that truly believes the executive has immense power. The executive is the only person in the Constitution that is named. The president is the executive. And Lincoln did this. All these other presidents did it. And so there's a lot of American historical precedent for incredible presidential power. And a lot of people feel Trump is looking to push these boundaries, and they're gonna be national garden cities. And this is what we talked about a year ago. I said, markets are not gonna like everything that Trump does. I said, Trump's gonna be more extreme than markets realize. And so just to bring this all back to the markets, I do think that there's potential for volatility and big drops and that the Trump administration could pull some stuff that people think they wouldn't dare, and I think they will dare. Like, I think there's some crazy stuff these guys could pull in the next three years.
- [63:00]
A
What are a couple examples or one example?
- [63:04]
B
Okay, maybe things don't work out the way they want. Lisa Cook, he goes after Jerome Powell, maybe with the National Guard in Chicago. He starts having, you know, pushback on that and starts deploying the military in a larger way nationwide. When it comes to tariffs, we've seen him go big, but then back off, I think, on the side of the Federal Reserve and the. And the. Essentially the monetary control. If he makes an attack at Jerome Powell, perhaps purposely, even before his term is up, because Jerome Powell holds a trump card, and Trump doesn't like that. Jerome Powell's trump card is that his term as governor is not up until 2028. And so Jerome Powell can threaten Trump and say, if you keep pushing so hard against the Federal Reserve, I'm not going to resign when my term as chair is up, and you're not going to be able to replace me. And there's only one other Federal Reserve chairman who did not resign after his term. So what happens is people get appointed governors, then they get appointed chair. Their chair terms end before their governor terms. Governor terms are 14 years. They're long terms. And so Powell's term as a governor goes until 2028 to, like, the end of the Trump presidency. So he doesn't have to leave the Board of Governors in May. He could say, I'm going to stay. And this could turn into a huge fight where basically Trump says, okay, Jerome, you want to stay? I'm going to fire you from the Board of Governors because you let Lisa Cook continue to have access to the Eccles Building. And that was my point. The only other Fed chairman who stayed on as governor after he lost his chairmanship was Eccleston, which is the name of the headquarters building that is in the news these days regarding the Federal Reserve. So I think we could have, like, really, like, out now dogfights at the Federal Reserve, like governors back and Forth fights over presidents, like just turn it into a clown show and essentially ruin the reputation. And this is, I think Mohamed El Erian's point where he says, Jerome just resigned because if you keep trying to fight Trump, he's not going to back down. And what you're going to wind up doing is you're actually going to be wind up destroying the Fed's integrity. So for people that know Mohamed El Erian, famous analyst, he basically came out and said, Jerome Powell, you should resign. Because if you keep trying to stay independent and fight Trump, you're only going to degrade the Fed's independence. And I think a part of the Trump administration wants to degrade Fed independence.
- [66:04]
A
Yeah, I think that's pretty obvious. And one person we haven't mentioned yet, we should probably touch on is Scott Besant. What do you think his the key?
- [66:14]
B
He's the key. Yeah, he's the key. I mean, it was three months ago. I said, cometh the hour, cometh the man. I said, Scott Besant is. And he totally took over from Lutnick and Navarro on the tariff stuff. And Trump really trusts him. I think Trump would love to appoint him as Fed Chair, but I think he wants to stay in Treasury. I think there's even a small chance that he appoints him as Fed Chair but does not remove him from treasury, which would be the true merge. Right. Let's say that this gets so crazy between the battle between the administration, an Andrew Jackson type battle, like it was between Czar Nicholas Biddle at the Second bank of the United States and they called him King Andrew. So it was the same stuff where the opposition called the president a king. They called him King Andrew, Andrew Jackson. So, like if we get back into that type of a situation in 1830s type situation. Yeah, I mean, Bessen is, to me, he has this unique ability to be firm with kind of MAGA policies, but not come off as a jerk, not come off as insensitive, not come off as bombastic. I think a lot of Trump's lieutenants, the mistake they make is they think that if they act like Trump, Trump will respect them. I don't think Trump wants people to act like Trump. I think Trump wants people to get results. Besant gets results. Navarro and Lutnick come out there and they talk bombastically like Trump does, but they don't get results, they just hurt the matter. Besant comes out there, he's very considered, he's well thought. He, he understands markets and he's, he's running the show. So Bessen is extremely important. And I think the treasury is with the treasury, buyback programs are increasing. The treasury has control over the dollar. They have different funds available to them explicitly. They might have hidden funds in the Caymans, as we talked about earlier. I think the treasury is going to continue to exert their influence because one last thing, I know I'm rambling a little, but I remember seeing a Scott Besson interview right after he got sworn in with Brett Baer. He was on Fox News. Bread Bear was at the office of the treasury. And Scott Besson said, you know, one thing I'm really surprised at as treasury secretary is how much this role involves national security. And so they bears a huge. And again, Luke Ruben, I mentioned there's a huge national security component to everything this, this administration is doing. And that's why I honestly believe, like I said earlier, I don't care if it's J.D. vance or AOC or whoever is president in 2029, they're going to continue these policies. Low interest rates, keep interest expense down, tariffs like this is all being driven by the national security fiscal situation. And everybody's trying to put this political spin on it. And I think it's the same thing where Biden comes into office and doesn't get rid of the Trump tariffs on China. And it's going to be the same thing if a Democrat comes into office in 2029. You think they're going to be trying to appoint governors that want to raise rates? Oh, yeah, I just became president. Let's raise interest rates. No, that's not happening now.
- [69:42]
A
And it seems like digging into his hand too. It seems like he's perfectly suited for the role considering things happening outside the US Too. I think positioning the United States versus China, Russia and getting into these trade negotiations, pulling his sleeves up and getting his hands dirty with the trade negotiations directly is really important. He's really impressive. It's basically all I'll say about that is I think I'm not big on politics. I don't like intervention in markets from the Fed or the treasury specifically. But you're handed a shit shamwich and you got to deal with it. And I think he's the right man to deal with these particular problems that we're facing.
- [70:34]
B
Yeah. And none of the comments that I've made, I don't think this whole time are really like, what I think should happen or like in my ideal world, like, all I'm trying to do is like, paint the picture of what I see happening. Right. And you know, this happens to Me on Twitter sometimes is where I'll post like, oh, I think they're going to keep rates down. And people are like, well, that's great that you want that to juice your portfolio by 2% and say, I'm not posting that. I think they're going to keep rates down because I want them to. Hey, that might happen, which would be great. What I'm trying to do is just express my opinion on what I see happening. Right. It's like, here's what I see happening. I see an administration hell bent on controlling every aspect of this economy, creating a massive boom ahead of the 2026 elections. I think the Federal Reserve is not out of bounds. I think all this stuff is going on. That's what I see happening. I'm not saying, you know, I. I'm cheering it on. Like, I'm not raising the pom poms, like, let's destroy the Fed. I'm just trying to paint the picture of what I see happening and where I see things going. Yeah.
- [71:40]
A
And you were tweeting about it yesterday. Probably something we should touch on as well. Obviously glossed over it earlier in the conversation. But the housing market seems to be top of mind for everybody in the administration, American citizens. And you were tweeting, it seems like Bill Pulte has been cryptically sending messages to the market that something may happen this fall as it pertains to the housing market and the Trump administration's influence over it. What do you think's happening there?
- [72:11]
B
Yeah, I mean, housing is huge. Housing is like 16, 20% of GDP, like, directly or indirectly, there is more untapped home equity right now. And people can argue and say, oh, these prices shouldn't be where they are. But the facts are the facts, like, a bank's going to send out an appraiser and they're going to look at a house. They're going to say, this house is a million. They're going to say, you owe 300 grand on your mortgage. They're going to say, you have 700 equity. They're going to say, we can refinance you and cash you out. Like, there's so much money that could pour into this economy, Juice this economy, if rates were lower. And then there's also this big dissatisfaction with people that don't own homes, that want access. So I think one way or another, I've talked about this months ago. Like, I don't know what they're going to do. I wouldn't be surprised if they came up with something called, like, a maga mortgage where they're like we're going to like they've been talking about declaring a housing emergency and now what we're going to do is it's a housing emergency. We want to get first time home buyers in. You know you see a lot of people talk about how the, the home builders are doing well because they're able to buy down mortgages. But we might get like a federal government like buying down mortgages, like trying to get people into homes. We could get people, you know, they've talked about getting rid of capital gains on sales which would help people to be more open to selling their homes. Because if you own a home and it's an investment property, there's no deduction, right? I mean if you bought a home for 200 grand and it's worth 500 grand and it's an investment property and you go to sell it, now you got a 300 grand gain. It's only your primary residence that gets an exclusion. And there's a lot of people that bought their homes for 150 and now they're worth 800 and they're past the exclusion even if they're married couples. So there's a lot of people. It's not only the high mortgage rates that they sell but they're going to get a huge tax bill, right? And so the federal government's going to figure out a way around this. There was a post by this guy Citrini, he's kind of a guy on X talking about ways that the GSEs, which Bill Pulte is the chairman of the board of, could figure out ways to start buying mbs which is essentially be the treasury via the Housing Authority doing QE and buying mortgage backed securities to keep rates down. Because there is this really big spread, an unprecedented spread between like the 10 year and the 30 year mortgage. And normally those are pretty close because you know it's a 30 year mortgage but there's prepayment. So the duration of a 30 year MBA is similar to a duration of a 10 year. So those yields should be pretty similar because they're both government guaranteed. And there's a big spread. I mean we're at 4.2 or so about on the 10 year and a mortgages are like 200 basis points higher. Like that's a huge spread. That's not the normal spread. So I think they're going to get the mortgage spread down, they're going to get rates down and I think people are going to, there's going to be somebody next year who gets a 4% mortgage? Yeah, I mean, I think it's happening. People have said those days are gone. And I'm not saying it's 4.0, I'm saying a 4 handle by the end of next year there's going to be an ability. It might just be limited to first time home buyers with a income amount or whatever, fha. But people are going to start getting mortgages with four handles again next year and this is going to unlock housing and this is a huge amount of equity. And this is part of this boom that this president is trying to force through hell or high water. And I think people that bet against it, I saw Darius Dale say, look, you want to argue against this on the golf course or at your cocktails, that's fine, but don't argue against it with your portfolio. Right. Like, I mean if you want to just stand against all this and stand against the treasury and the Supreme Court which is right leaning and you want to stand against all of it and say it's all wrong and ideologically I'm opposed to it and therefore I'm going to place these bets in my portfolios aligned with this ideological view. I mean, be my guest. I think you're going to get slaughtered.
- [76:28]
A
Yeah, that's why I love talking to and bring back sober analysis. I find myself drifting in and out of doomerism. Optimism, mainly optimism. I think you have to be optimistic too. And it's just about positioning yourself correctly. And I think you mentioned it, Bitcoin gold are going to be the winners in all this because as they attempt to really open up the markets and, and let people, or enable people to buy houses and stoke the economy, there will be probably some, what's the word I'm looking for stimulus involved in one way or another, some money printing involved in one way or another. And inflation may have to go higher, but I guess the hope is that real wages go up and you fix the job market to a certain extent where people aren't as perturbed by increase in prices as they were under the Biden administration.
- [77:28]
B
The golden age, Marty. I mean, why not? Like, why not, man? I, I actually remember the 1980s. I remember well, Reagan was my president as a kid and I'm telling you this country was not in a good place in the late 1970s. This country was depressed. This country felt we were getting killed by the Japanese. This country felt the Soviets were going to take us over. This was the era of Rocky III and they had the robotic guys that were gonna kill us and like Somehow we got through it. And I'm not saying it's because we're Americans and we're the best and everything like that, but, like, have a little faith in us. Like, like, like maybe we could do. Like, a lot of people, they just want to talk about how amazing China is or something. And it's like, I don't know, man. I mean, we've done pretty well. And it's like, have a little faith. Like, maybe this could all work if all these people on the left that hate Donald Trump would just stop trying to fight him every step of the way so goddamn much. And if Donald Trump would stop being so antagonistic, and I don't think he needs to be, and he hurts himself. I'm not a Trump sick of fan. He makes mistakes. I'll give an example. I think that we had a chance for Canada to come to a right leaning Prime Minister, and by him hammering on Trudeau and calling them the 51st state, I think he drove the Canadian populace insane. And they put in, you know, a Trudeau 2.0. Yeah, yeah, exactly. And I think he ruins it. Like, I think Trump makes mistakes. He's a human being. He, he has this, like, he's wired a certain way. And one of those things he's wired for is not to, like, put his pride in his back pocket. I remember one time I was like 11 years old, I was on the south side of Chicago and like, I was doing something and some, like, young kid came up to me and I was doing it and like, I was almost going to get into a fight with somebody and the kid said, don't do it with those guys, man. Sometimes you got to put your pride in the back pocket. And I didn't get in a fight. And for some reason I've always remembered that my whole life is like, sometimes you got to put your pride in the back. Like, Trump doesn't have that in his DNA. Trump doesn't know how to put his pride in his back pocket sometimes for his own good. And he gets himself into trouble sometimes. We could probably have Canada with that conservative guy that was almost winning before Trump went full bowl. Yeah, I mean, that would make us so much stronger. Like, he makes mistakes. I mean, his family's involved in crypto in many ways. I mean, I'm sure there's.
- [80:02]
A
That's one of his biggest mistakes.
- [80:04]
B
Shady dealings there. I mean, like, I'm not here to. A lot of people think I'm like a maga, like Trump is God. But no, no, no, no, no, no. Not at all like Trump, his family, what he does, his personality. Look, he's a leader. We got. I think he's a better leader than Kamala would have been for sure. But he's not a saint and he's not perfect. And let's root him on. Let's hope he wins. Let's not be like most of these people on the media that literally want to see the economy collapse and the US Fail just so they can point the finger and say, see, we told you not to vote that guy as president. Yeah.
- [80:42]
A
It is crazy that we've come this far as a country goes both ways, too. I mean, when Biden was president, some people are doing the same thing on the, on the right, hoping that he would fail.
- [80:56]
B
Yeah. Not me. I was bullish. I'm like, his fiscal spending's good. Like, market's good. Like, we're not collapsing. Like, yeah, people let their politics. Sorry to interrupt you, but, but, but that's the point about my analysis. I'm not political about it. I wasn't like, oh, we're doomed because of, you know, leftist policies in 2023. And I'm not being like, you know, we're doomed now because of Trump.
- [81:19]
A
Yeah. I'm just looking for one last chart I want to get your thoughts on. Just trying to steel, man, our arguments here during this conversation today. Is there what are the biggest potential hiccups that could see?
- [81:39]
B
There are big hiccups. Yeah.
- [81:41]
A
And one. I'm just going to pull up this chart while we bring up this part of the conversation, because this is something I've read about the other night, too, and does tie into inflation, but I think it's even more important than inflation broadly. But it's like electricity prices in the United States if you're looking at average kilowatt per hour. I don't know why this is zoomed in so much, but.
- [82:05]
B
Me.
- [82:07]
A
If you look at this chart, it's just, I mean, electricity, energy is the base input of everything we do in the economy. And I knew electricity prices were elevated, but if you look at sort of what's happening, this trend here, it's not looking great. It looks like we're going up into the right. Like, do you see energy as a sector specifically being a potential hurdle that needs to be overcome?
- [82:35]
B
Yeah, yeah, definitely. No, that. That's the perfect chart to pull up because that's the problem. You know, energy drives inflation. I think in the pre AI world, the key factor for energy was looking at oil. I think in the AI world, the key factor for looking at inflation as driven by energy is to look at electricity per kilowatt hour, just like you're showing. And this is inflationary. This is not like tariffs. This isn't a one time price increase based on a tax. This is the input for everything is starting to go up. Right? Because if you need to spend more to heat or cool your retail stores, to run your manufacturing plants, to power your factories, if everything is going up because of that. So this is massive. I mean, I'm bullish on copper, I'm bullish on what we need to do to build out this grid and we need to do it. And, and I actually think Trump is, is starting to backstep a little bit away from his anti solar. I think he's anti wind all the way because wind really is kind of the worst. But I think he's going to come back into solar a little bit because you got to look at what China does. They did the roadmap, right? Huge solar, huge coal fields, we need to do it all. Maybe wind's not part of it because it's just not very efficient. But solar, coal, nuclear, we need to get the grid up. And that's the AI constraint. That's the big constraint. And I think eventually what's going to happen is there's going to be a very separate pricing for residential customers and commercial customers on electricity, but that's still going to be inflationary. And so we need to develop the grid. I mean, that's a huge bump. I think other bumps on the road are that this AI thing hits the labor market a little strong and that it, it starts to feed into itself. And you know, we see weakness in the labor market that makes people think my job's not safe, therefore I need to pull back on spending. And we know we have a 70%, you know, consumer driven economy. Maybe that trip to, you know, hike in the Sierras or, you know, up to Boston for the weekend, I'm going to pull back on that because I don't want to spend that money because I'm worried about my job. So I do think we're going to probably see some weakness in the labor market, but I don't think it's going to fall off the cliff. I think that's a threat, Electricity is a threat. But generally speaking, I think that these are bumps on the road and I don't think that they're going to collapse the overall narrative. If at some point I turn truly bullish, I'll say I'm truly bullish. I think hey, man, we've peaked. Get out of risk assets. I just think that these are going to be obstacles that could spring out of nowhere. And all of a sudden you get a 3,4% decline in equities, you get a 10% drop in Bitcoin, you get a 10% drop in gold. And it just happens. And you're like, what the hell just happened? And then the longer term trend continues. So like, we closed out the call last quarter and I said, we'll be back in three months and we'll probably be at SPX 63, 6400. And right now we're at 6466. I'm going to drop back and say we'll probably have this call in December and we'll be somewhere 6,860, 900, you know, knocking on 7,000. And I think bitcoin had a really good August. I think a lot of people thought it wasn't, but it made a higher high. It made a higher low. It never broke below the July low. It held in there. I think September is going to be good and all year. My original forecast I made in December was we hit 150 by year end. I wasn't like, you know, some crazy guy saying, you know, we're going to hit 500 grand this year and maybe we will, who knows? But I've been steadfast with that 150, which is simply based on we hit 66 high in 2021. On a monthly close, we dropped down to about 16. There's like a $44,000 differential. You added 44 or no, excuse me, 62 was the monthly close and high in, in, in 2021. 62 plus 44, you know, took you to 106,000. 106 was my initial target last year. We hit 108. We dropped back. You add another 44,000 to that 106, you get 150. Like I think 150 is the next stop on bitcoin. And you know, the, the potential is unlimited, but let's get to 151st and, and then I'll talk about a new price target. But you know, that's been my end of year price target. And I still think we're easily going to hit 150 by, by new Year's. That might be.
- [87:52]
A
You're very accurate with your calls. And it seemed like, I mean, this is somebody who's been around Bitcoin for 12 years. Definitely could see it getting crazy this fall. But it does seem like we're in a different regime. With the emergence of the ETFs, Bitcoin treasury plays and things seem much more.
- [88:12]
B
Controlled in terms of the volatility suppression. I was looking at Bitcoin futures versus platinum futures. Platinum futures have higher volatility now than Bitcoin. So, you know, bitcoin is becoming a, sorry to say it, a tradfi security instrument and it's getting Trad 5 all. And that's just what's happening. Like it's, it's NGU, but it's, it's, it's no longer like a bunch of people with their own wallets do it like you got options, you got futures, you got iBay, you got the ETFs. All of this is volatility suppressing and it's also return suppressing because there's a relationship between volatility and return. Now, if you think like, oh, people, oh yeah, Bitcoin's going to go up 100% every year. No, to me, when Bitcoin was 100 or less and I'm calling for it to be 150 by the end of the year. And I'm like a 50% increase. I mean, that's massive. That's huge. Anybody that's disappointed in bitcoin this year, I think this needs to reset what Bitcoin has become. And you don't have to like it, but it is what it is. Bitcoin is becoming a part of the financial infrastructure of the United States. Bitcoin is going to be key to this whole Trump administration plan. Part of what has happened is when you get these interest rates low by the Federal Reserve, you create financial asset inflation. And what's happened is that asset inflation has flowed into stocks and homes. The problem with that is that stocks should have some sort of relative valuation to cash flow. And homes need to be affordable gold and bitcoin don't need to be affordable gold and Bitcoin because they're not used in the real economy to build houses. That's a feature, not a bug. They can go to whatever price is necessary to be the release val for the financial asset inflation that's coming from these hyper lower rates that I think are going to be put in place. So I think that gold and bitcoin are going to be the premier assets for the next decade. Bitcoin's going to outperform gold over the next decade on a percentage basis with a bit more volatility, but they're both going to be doing exceptional. And the stock market's going to do well, too. And this is what bitcoin is. I mean, they've talked about it. It was either Trump or Besson who talked about bitcoin's going to help us keep control of inflation. There's something that they talked about. They know what bitcoin's going to do. Bitcoin is going to absorb wealth. It's going to suck it up so that it doesn't all have to go into housing and stocks and drive those things to ridiculous levels. So bitcoin's going to be the inflation release valve. And I just think for short periods of time, utilitarian coins like Ether Solana can have their moments. But in the long run, there's only two stores of value in the world right now, and it's bitcoin and gold.
- [91:11]
A
Yeah, this was an incredible conversation. December, let's, let's prep here. Maybe we do mid to late December. Maybe between Christmas and New Year's we do our 2026 predictions.
- [91:24]
B
Oh, that's going to be a fun one. Yeah, I want to really think about that one. And maybe we could come on and do, do the whole thing and talk about what I got right, what I got wrong with 2025 and what I see coming for 2026 and do a, do a show, something like that. What do you think?
- [91:41]
A
Yeah, do a little retrospective and then a forward looking.
- [91:46]
B
Yeah.
- [91:47]
A
First half, retrospective, second half, what's coming next.
- [91:50]
B
I like that quick retrospective. Just, just take a look what I got wrong, why I think I got it wrong, which could be informative and then more importantly, like what's coming.
- [92:00]
A
Awesome. Well, I can't wait for that. Yeah, I'm gonna enjoy my fall Christmas, Thanksgiving. But then very much looking forward to the end of the year discussion. Mil.
- [92:12]
B
Yeah, me too, man. I love our conversations, I think because we've been doing them every quarter, like it's building on it. And if there are listeners who like this, there's one about every three months. You can go back and, and see where we're coming from. So really appreciate it. Thanks for having.
- [92:28]
A
Yeah, we're building up the receipts now. It's. You can go, you can go check the receipts. Freaks. They're out there. We'll be back in December for retrospective on 2025. And I look forward to 2026, Mel. I hope you enjoy your day, sir. Peace and love, freaks.