US & Canada : Partners in Prosperity

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We explore the potential seismic shift in US-Canada relations following Mark Carney's election as Prime Minister of Canada and the implications for North American economic integration.

• Moving back to centrist economic policies in both the US and Canada
• Canada's competitive advantage in natural resources was ignored under Trudeau
• The historical importance of the proportionality clause in US-Canada trade agreements
• Why Calgary might become an economic powerhouse like Houston or Dallas
• The weaponization of the US dollar against Russia has damaged trust in treasuries
• Gold and Bitcoin emerging as potential anchors in a new monetary system
• Trump's tariff tactics may be positioning for a larger deal on natural resources
• Northern Ontario's rare earth deposits represent critical supply chain opportunity
• Potential deregulation of US banks returning to pre-Dodd-Frank lending conditions
• Investment opportunities in tech, gold, Bitcoin, pipelines, and corporate bonds

The midterm elections will be crucial for determining if Trump can translate executive orders into durable legislation that reshapes the North American economic relationship.

Straight Talk for All - Nonsense for None

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Disclaimer - These podcasts are not intended as investment advice. Individuals please consult your own investment, tax and legal advisors. They provide these insights for educational purposes only.

Episode Transcript

Clem Miller (00:03):
Hello everybody and welcome to Skeptic's Guide to
Investing.
We're here with my partner,steve Davenport, who will be
with us in a moment, and withJames Thorne, who is with
Wellington-Altus asset assetmanagement firm and a former

(00:24):
colleague of Steve's and myselfand a real famous economist
investment economist in Canadaand today we're going to be
talking about a lot of things,but I think the overriding theme
is the fact that we we just hada uh, an election in canada and

(00:49):
um, and in this election, uh,we had mark carney uh become um
officially, uh, the primeminister of canada, uh, or
premier of canada, and and uh,whatever you want to call it,
and uh and uh.
Jim here is going to talk aboutthat uh and talk about relations

(01:13):
between Canada and the UnitedStates, and he I think he's
uniquely qualified to talk aboutthat, being somebody who
bridges between Canada and theUnited States himself personally
.
I'm sure this conversationwill go in a lot of different

(01:33):
directions because you know wehave a lot of discussion on a
personal level that goes in alot of different directions
about what's going on in theglobal economy and finance and
other areas.
So, Jim, why don't I just handit over to you and I may jump in
?
I'm sure Steve, when he comesin, will do so.

(01:53):
Likewise, we'll just come inwith some questions, but you
know, why don't you give us astart and tell us about what
your thoughts are on this, onthis election of Mark Carney?

James Thorne (02:13):
Sure, I think the overriding theme that investors
globally have to get a handle onis that we're moving back to
the center.
Right, we're moving back,whether it's extreme,
progressive right or progressiveleft policies.
We're moving back to the center, and I think you're starting to
see that in Washington,although there is a lot of Trump
derangement syndrome there, Ithink Carney is moving Canada

(02:33):
back to the center.
I think, carney, what he'sgoing to do is he's going to.
You know, two things can beright at the same time, clem.
So we know that he was thefather, or the alleged father of
, you know, carbon credits andtrading and the green initiative
.
But you know, two things can beright at the same time.
Right In the sense that youknow Canada has to embrace,

(02:54):
canada has one competitiveadvantage, which is its natural
resources, and under the Trudeauregime, that was ignored.
And so what had happened, youknow, is ignored.
And so what had happened?
You know?
Per capita GDP droppedprecipitously in Canada, we're
almost going to be going belowthe halfway mark or the
demarcation of the OECD average,and productivity is negative.

(03:16):
Okay, and so you know, in thescheme of things and both of you
guys know we've talked aboutthis, we've been chatting for
decades, you guys.
And so for me, the big themehere is look, canada has to
embrace this.
Natural resources, and Carneyis going to do that.
And can he do that and also betrue to his green initiative, at

(03:40):
the same time where wall street, bay street, which is the
Canadian version of wall Street,and the city of London have
basically abandoned his net zeroinitiative as well?
Resources you know, you needrare earths.
I mean, man, when I was workingwith you guys, we were talking

(04:15):
about all the rare earths inNorthern Ontario.
They were never developed underTrudeau, right, they will get
developed.
Uh, you know, talking aboutmoney coming from the united
states up to canada to helpdevelop the natural resources.
And and then the last thing Iwould say to you, going back to
your big contacts when I had,you know, when I had nice hair

(04:37):
like clem, which I'm dying for.
But if you go back to the 1980sand this is a thing I think
slipping through the cracks,when Mulroney and before
Mulroney and Reagan got together, there were high tariffs
between Canada and the UnitedStates and we had what was up

(04:58):
here called a branch planteconomy, which meant that the
bicycle was made in the UnitedStates.
All the parts were shipped upto Toronto and I had a summer
job putting together all theparts for the bike to be sold in
Canada.
It was called the branch planteconomy, right?
When Reagan and Mulroney signedthe free trade deal, you know,

(05:24):
it became, you know, free tradebetween the two countries.
Well, what did the UnitedStates gain from that?
Right, because President Trumpis absolutely right, we don't
have the size to be able tocompete, right?
So what was it?
It was a continental naturalresource plant.
It was the United Statessecured a constant supply of

(05:50):
natural resources that Canadawas forced to guarantee.
That clause in the free tradeagreement was never touched.
It was called theproportionality clause until
Lighthizer and Friedlandnegotiated the last free trade

(06:11):
agreement under Trump 1.0.
That clause was not renewed.
Now, I don't know.
You guys know me for a longperiod of time.
You know my happy places in aJohn Le Carre novel or reading
James Bond, right, I knowconspiracy, that's my happy
place at the beach, right?

(06:32):
I don't know why it wasn'tsigned, right, but let me give
you an example.
So when you go back and youknow we have C-SPAN up here and,
and you know, let's usealuminum as the reference point.
In 1990, the united states had40 smelters.
You guys got four.

(06:52):
Right, you guys get box site.
You guys got a lot of box sitebut you don't have the smelters
and you don't have the cheaphydro.
Who's got that?
Que Quebec?
The Premier of Quebec comesback from DC, he goes to the
question period and he basicallygets asked which is like what
gives?

(07:13):
This is totally illogical.
What we're being told is notwhat's really going on.
He basically says it's security.
They want security, theAmericans, which is the
proportionality clause.

Steve Davenport (07:27):
So what do I think is going to?

James Thorne (07:28):
happen.
Carney's going to have to sign.
Carney's going to sign a dealwith Trump on, we're going to go
back to a version of the ReaganMulroney deal.
Ok, carney has to cut a dealwith Danielle Smith, the premier
of Alberta.
Imperial Oil, which I worked atas a grad student in the summer

(07:55):
, is one of the preeminent oilcompanies in Canada.
75% of it's owned by ExxonMobil.
Okay, so why do I say thatwe're going to develop?
Canada has more oil than theUnited States.
The Permian Basin is beingdepleted.

(08:17):
You guys are going to have toshift to go over to the
Marcellus, because we know thatthere's sweet.
You know we got the shale oilunder the NAC, gas under the
Marcellus, right?
I suggest to you Trump's let itslip.
He's going to want to build theKeystone.
He's going to want to build abunch of pipelines.

(08:38):
He's probably going to want toget, you know, let's say, double
the output from Alberta, andyou guys need the oil.
Why do you need the oil?
Because you haven't upgradedyour refiners.
You need to mix it right thesweet and the sour so you can
refine it.
And guess what happens?
You guys get to keep the marginright.
So, after all these years, whathave Canada not done since

(09:00):
Mulroney and Reagan?
What has Canada not done sinceMulroney and Reagan?
No pipelines built east to west, no refineries built Right.
So that's what's going tohappen Up here.
The existential move is going tobe I think that nobody's
talking about is Calgary isgoing to become an economic
global power.
If Canada becomes a hard powerin resources, which I think is

(09:23):
going to happen, then there'sgoing to be somewhat of a power
shift out of the elite ofMontreal to Calgary.
And same way, think of Calgarylike Houston or Dallas.
It's going to be that importantlast remnants, the death nail

(09:52):
of economic policy in Canadabeing driven by the elite in
Quebec, right.
And so what will be veryinteresting?
So you come back, you have thatRose Garden ceremony, you have
President Trump do what he didon Liberation Day, which to me
was it wasn't really surprisingto me because I've read his book
it was a response.
But having said that, you getthe documentation and what's

(10:13):
interesting is when they get tothe chapter on canada.
All they really want to talkabout is the quebec language law
and the agricultural supplymanagement system, which is code
for Quebec dairy farmers andcheese right.
You know, the monks make thiswonderful cheese at St Benoit de
Lac, which is just over theborder from Vermont.

(10:36):
I taught at Bishop's for threeyears when I finished off my PhD
, and so you're sitting heregoing yeah, really, so President
Trump is doing this forWisconsin cheese.
Really, you really think so?
Do you really think theAmericans?
You think that Trump reallycares about the language law?
No, but Carney has said thatthat's sacrosanct.

(10:56):
So last thing that I'll shut upis don't underestimate the fact
that Mark Carney is Goldman.
Mark Carney was the chairman ofBrookfield.
He moved the head office ofBrookfield from Toronto to New

(11:17):
York, and don't underestimatethe fact that one of the
wheelhouses that Brookfield hasis real estate, is real estate,
and so I think Mark Carney andMr Trump President Trump are
going to work well together.
They're both extremely bright.
They will cut a deal, and Ithink the most interesting thing

(11:41):
about this is the fact thatwhen you look at the uk deal
that was signed, remember, guysuh, the crown is still the head
of state in canada.
Yeah, king is coming over forthe throne speech.
Right, it's called crown land uphere yeah um uk and the united

(12:06):
states signed it for economicsecurity.
We're gonna cut a deal and Ithink we're gonna go back to the
reagan mulroney ish.
You know, security we're gonna.
You know what's the quid quopro going to be?
Yeah, sure you can build somecars, yeah, yeah, you know.
And here's the last thing aboutthe steel industry up here who

(12:29):
do you think owns the steel?
Do you think the steel industryup here is domestically owned?

Clem Miller (12:34):
claim like clefs yeah, and you guys own our steel
industry.

James Thorne (12:38):
So so you start throwing the facts at the wall
and you to sit there and go.
What the heck is going on?
That's what I think's going on.
I think they made a mistake.
I think they realize it, Ithink they're trying to put the
genie back in the bottle and youknow, I think what they really
want is nap gas.
They want the rare earth.
We have a thing in ontariocalled the ring of fire right,

(13:00):
they're signing a deal inukraine, you got it.
In Northern Ontario, have youheard?
It's there, let's develop itNow.
Here's the key, though, andthey're talking about it through
line it's got.
I think it's going to beAmerican capital coming up here
to develop all this stuff.
I really do, I think you know.
I mean the hydroelectric plantin Quebec US money comes in

(13:24):
Right.
The LNG plant, the LNG fieldoff of Newfoundland, right
Developed by American money, yougot.
That's the type of thing that Ithink is going to happen.

Clem Miller (13:34):
So go ahead.
Oh, there's so many questions Icould ask you, jim, so I don't
know where to start, but I'msure I won't get through to all
of them.
But I guess one question I haveis where do the Chinese?
Here are two questions.
Where do the Chinese fit intoall of this?
It would be one question.
And the second question wouldbe, you know, is there enough

(13:59):
support in Alberta forseparating from the rest of
Canada?
I don't necessarily meanjoining the United States, but
you know to what degree is there, you know, independent
sentiment in Alberta?

James Thorne (14:21):
We're at 40 billion in assets at Wellington
Altus right now, growing realfast, just going financial
services in a company.
When we started, I joined whenwe were about 4 billion.
We're at 40 right now, growingreal fast, just growing
financial services company.
We made big inroads intoAlberta.
So I talk to these guys all thetime Carney has to make a deal
because if they don't, they'regoing to leave.

(14:42):
They're done, you understand.
Unless you add Saskatchewan aswell, they're done.
It's over.
Like, for example, quebec getsall these equalization payments
from Alberta okay, because ofthe oil that comes out of the
Grand Intership and the sale ofnatural resources, okay, but you

(15:03):
know that in Quebec they make alot of money through the
hydroelectric power yeah, right,and that money is not
calculated in the equalizationequation.
So everybody.
So what's happening?
And the wonderful thing I thinkabout internet and social media
is everybody knows about this.
Now People are fed up, peopleare totally fed up.

(15:27):
I think what you get is I thinkpeople understand that what I
do is I sit there and I go, andMark Carney is from the West.
His dad was a principal.
He understands that.
That's why I'm a little bitmore emphatic, because if they
don't do this, alberta will havea referendum and leave.

(15:49):
Because when I talk to theseguys all the time, alberta is
done.
Alberta is done with what theycall the Laurentian elite.
Okay, that is the power base inMontreal.
They're done.
So does that mean?
What does that mean?
What are the hand, what are thecards going to be played by the
Demarais family?

(16:10):
You know the Irving family.
You know Canada is just likethe United States.
There are these big familiesthat control large swaths of
factors of production.
Right, have they come to thatbelief that this is what needs
to get done, or are they willingto have Canada break apart?

(16:30):
That's where we're at, and Ithink, when you think about what
President Trump has done byattacking the sovereignty
question, right, it's abrilliant move.
Right, he went right after theAchilles heel of Canada.
Right, it's a brilliant move ingame theory, absolutely
brilliant.

Steve Davenport (16:51):
I'm really interested in your take on
Ontario and the rare earthBecause to me the rare earth
question, as we talk aboutgrowth in AI, all of these
things, and especially inelectrification of cars, it
seems like the rare earth isgoing to constrain us pretty
soon unless we have a lot ofdevelopment.

(17:11):
And I guess I wonder why is itthat Canada didn't jump in front
of China in this rare earthspace and try to become the
leader in the world?
Or like why is it?
Is it because of theenvironmentalism.
That's a part of the governmentor is it because I like?
I like Carney's policy, whichis we're not going to expect the

(17:35):
consumers to do everything interms of environmental solutions
.
We got to expect the people,you know, pulling stuff out of
the earth, where that's wheremost of the damage is coming to
the economy, and out of theearth, where that's where most
of the damage is coming to theeconomy and the environment.
Is there going to be a new typeof rare earth development or is
it simply going to be?

(17:55):
We're doing this in Canada,just like we're doing the
smelting in Canada, and we'lllet that economic and
environmental impact fall ontheir shoulders, versus the
shoulders of China or othercountries.

James Thorne (18:11):
There used to be two decades ago, and I don't
know if it still exists thereused to be a really great global
macro newsletter.
I think it was called 13D.
Yeah Right, Yep, they were allover northern Ontario and rivers
.
Right, it's been.
It's there.
I'm going to go back to, I think, just to skim through, a

(18:35):
question that Clem asked aboutChina.
I think we have to be honest,that I think I think President
Trump is absolutely right tobasically re-engage the Monroe
Doctrine and recognize the factthat maybe that you know,
certain powers to be inWashington DC were asleep at the

(18:56):
switch in terms of allowingChina to get more influence in
this sphere of the globaleconomy, on this side.
Think of Panama, what have you?
Right?
So I think the Chineseinfluence is is a very subtle,

(19:16):
but it's there and it's beengrowing over some decades.
Right, that's one.
Two, the big question, you knowthis is like we're back in
baltimore talking right, whyaren't they developing it?
Why aren't they building a road?
Why aren't they processing it?
Right, you used to have yet oneprocessing plant, and I think

(19:37):
it was an ohio for rearers.
Yeah, right, I mean so this.
So we're going back, I'm goingback, I'm going back to where
you know decades ago.

Clem Miller (19:46):
I know the answer to the question, and it is.
It's something that I hadresearched for teaching my class
.
So what happens is that rareearths are all over the place.
There are rare earth mineraldeposits, and not just in China
and Northern Ontario and the US,but all over the world,

(20:06):
australia, et cetera.
The problem is with therefining.
Refining rare earths is veryenvironmentally damaging.
Right, it creates a lot ofpollution, and so China was
willing to accept this pollutionbecause it doesn't really care
about its citizenry.
But Canadians and Americans andAustralians and others are very

(20:31):
mindful of the economic or theenvironmental damage, health
damage associated with rareearths, and so that becomes a
constraining factor in terms ofthe refining of rare earths.
Smelting is clean, well, no,well, I think your argument, you

(20:53):
know.

Steve Davenport (20:54):
I think that's the answer.
If they allow smelting, thenwhy?

Clem Miller (20:58):
would they?
That's my understanding.
Yeah, good point.
That's my understanding.
Yeah, good point, but that's myunderstanding as to why rare
earths have not been developedto a greater degree outside of
China.

James Thorne (21:13):
Well, it looks like there's a big sea change.
If the president has justsigned a deal with Ukraine for
the rare earths, right, I mean Ithink it's that's certainly not

(21:38):
going to impact the US citizenstoo widely.
Somebody from Canada that youneed in the room to renegotiate
an agreement, economic agreement, with the United States and
help in, you know, helpingrebuild the structure of the
global economy Bretton Woods 2.0.
He's a guy you'd want him.
Carney is a guy you want in theroom.

(22:00):
Okay, correct.
And then the other one I guy Iwould say that is very
impressive is scott percent.
I mean, we cannot discount thefact that this guy is a
superstar.
We can't discount the fact thathe was with.
I mean, think about this.
I mean, and he explains it.
I mean, okay, so he was ajunior to, to stanley

(22:20):
drunkenmiller, right, and andyou know the set comes up and
you know Bisset comes up andgoes, hey, hey.
You know, let's look at the pegin the UK.
You know, look at this, this isweird, we could attack this,
right.
And then they go to.
You know, george Soros, right,and you know, let's leave his
politics on the table, I meanoff the table.

(22:41):
Generational investor, you'vegot to put them in the same
conversation as Warren Buffett,right, and they took on the you
know, the Bank of England, right, and so you've got to go, and
he teaches history of economicthought at Yale, so he'd fit
right into this conversation,and I would argue that that

(23:04):
Carney would as well.
And so what I'm trying to saythese guys all know what we're
talking about.
It's not like previousadministrations where we would
question the people at the table, if you know what I mean.
I mean, there's a guy inBiden's administration his name
slips me that didn't know whatmodern monetary theory was, and

(23:25):
he was the head of economic.
You had guys in the lastadministration that couldn't
pass a graduate level macrocourse, right?
I mean, in the last bastion ofthat's got to be the Fed, right,
we got people that are aroundDC.
They don't have a clue what'sgoing on.
These guys do, and so you know.

(23:46):
If that's the case, then youknow where are we going to put
the smelter?
Are we going to put it intoCleveland?
How about Buffalo?
They got lots of Niagara Falls.
They got lots of cheap energy.
I don't know where it's goingto go, but as the cent said
cheap energy is the fundamentalrequirement to win the AI war.

(24:09):
And you know Clem, you stilllive in the DC area right
Baltimore.
I mean I'm just reading fromhere up in the great white north
that it's a matter of nationalsecurity, right, yeah, I mean we
need cheap oil, we need cheapnatural gas, we need rare earths
.

Steve Davenport (24:43):
So we're there going on in Scotland, wales,
northern Ireland, and I kind ofwonder if, when you look at
Canada, I mean a separation downthe middle of somewhere around
Saskatchewan and West being onecountry and then Ontario and

(25:07):
Quebec East being a secondcountry, because they really are
very different in terms of that.
But then I look at this Ontarioquestion about the rare earths
and I say, well, if I was in thewest of Alberta and I was going
to you know succeed.
I'd want to be including anatural resource like the rare
earths.
I mean, could Canada, couldEngland be on the force or in

(25:27):
the process of some type of arealignment of borders?
Do you see that reallyhappening in the next four years
?

James Thorne (25:36):
No, and I think what you touch on which is
really interesting, is when yougo down the rabbit hole.
What is interesting aboutSaskatchewan and Alberta is you
really know who settled it, andthis is I'm going to give you a
Ted Cruz.
Ted Cruz was born in Alberta.
Right, saskatchewan and Albertawere really populated by folks

(25:57):
from Texas.
Oh right, so you get that whenyou go there, you get that it
starts in Alberta and starts in.
It starts in Saskatchewan andit's a beautiful province, but
when you get to Alberta, dude,it feels like Houston.
You know the riding the horses.
And so the American influenceout there is prevalent and it's

(26:19):
ingrained in their DNA.
Right, but look no.

Steve Davenport (26:26):
The deal's going to get cut.

James Thorne (26:28):
Well, here's what I say up here If they don't cut
a deal, if Carney does not cut adeal with Alberta and
Saskatchewan, and Carney comesthrough with another four years
of Trudeau-like economicpolicies, then sell everything
in Canada, right, the dollars goon to 60 cents, nobody's going

(26:49):
to care about being up here.
This thing's going to blowapart and as investors, you're
just not going to want to bearound here and the world will
just walk away from us, and thenthey'll come back after the
fact, right?
So, hypothetically speaking, ofcourse, steve, you could have
that happen.
I just when you start listeningto what Carney is saying look,

(27:12):
carney had a call with Smith andshe hit it on her Twitter.
She said we're all good, it wasa great call.
Right Before the election, shecame out with 10 points that had
to be met publicly public gain.
Now she comes out and says it'sall good.
So there's going to be a deal.
It's going to be veryinteresting to see what happens
at the G7 in Alberta.
I think it's in the middle ofJune.

(27:33):
I think Zelensky is going to bethere.
You know, you camp on Carney'sTwitter and he completely
interesting.
Basically, he starts tweetingabout the Ukraine and the, the
peace deal with russia and allthat.
It might as well have been outof the state department, you can

(27:53):
see.
But you know, what happened iseverybody's focused on this.
Right, it just in time, youknow.
You know we're all you know,turning on to cnbc and the and
the latest noise.
And you see, if you just staystill, you can see the pivot
happening.
Right, I'm of the view if wewere back together, guys, and we

(28:17):
were managing money, I mean,the first thing I would say to
you is watch the US dollar.
And we had a managed decline ofthe Dixie down to 100, right,
you know.
Look at the Swiss two-year it'snegative, right.
Look at rates in China.

(28:37):
They've got debt deflation.
Bissette is right, china'sholding a pair of twos.
What is that going to look like?
Look the look at the taiwanesedog.
You can start to see thecurrency market and the global
rate markets outside of theunited states.

(28:59):
Right, um, start to price in.
You know something and put itthis way something is up,
something is of a foot.
Do you understand that?
And and so the smart money inthe credit market and the
currency market are adjustingreal time, whether or not jimmy

(29:23):
kramer and the crew on cnbcpicks up on this, because
they're looking at you know,johnson, and johnson's quarterly
numbers is beyond they'relooking at you know, johnson,
johnson's quarterly numbers isbeyond me.
But I look, you know.
First, to me it's the US dollaris the most important thing and
, yes, us hegemony still exists.
We're going to have to do a newBretton Woods 2.0.

(29:46):
I think it's Bitcoin.
Watch Bitcoin fly.
Oh my God.
I know I wanted to wake you guysup on that Before you go down
that pathway.

Clem Miller (30:02):
My question to you is gold.
Okay, I have a notinsignificant portion of my
portfolio now in gold and I'vebeen using that to offset my uh,
obviously, my stock holdingsduring this uncertain time.
Um, so I don't consider it apermanent, uh part of my
portfolio, um, but still, goldis doing well.

(30:25):
So my question to you, steve,uh, jim, is is you know, what do
you think about gold?
Where does gold you know, inthis whole story that you know
you're relaying, you know thisview of the world, where does
gold fit?

James Thorne (30:39):
I'll go back to the let's go.
Okay, so, so, and we've we'vehad these conversations before,
but let me go back and reviewthe bidding, to use a bridge
term.
Look, there are unintendedconsequences to policy decisions
by the White House.
Ok, I don't care what the worldsays, but the most powerful

(31:03):
economic and financial power isstill the United States, even
though we're moving from aunipolar world to a multipolar
world.
I think the critical mistakethat Biden and Yellen made was
weaponizing the US dollar duringthe Ukraine conflict.
I think they made a criticalmistake in basically going after
the SWIFT payment system andgoing after Russia's holdings of

(31:24):
US treasuries Full stop.
And why do I say that, guys,imagine if we were a team
together and we were consultingthe Middle East or consulting
people around the world and wesaw what Yellen and Biden did to
the I think it was a half atrillion dollars worth of
Russian holdings of UStreasuries, which is a legally

(31:46):
binding contract.
Guys, holdings of US Treasuries, which is a legally binding
contract, guys, biden and Yellenjust destroyed your franchise,
which was the medium of exchangeand the store of value.
Right, they did that, right?
So you and I?
So we are consulting some royalfamily somewhere that has all

(32:07):
of their holdings in UStreasuries, right, because of
the petrodollar world, remember?
Right?
Okay, wouldn't we advise them,given what happened to Russia
during the Ukraine, to do what?
To maybe diversify away fromthe US treasuries, right, I
think, guys?
So I love gold.

(32:28):
I think it's gone too far, toofast.
But, clem, I think gold andBitcoin are the same, are that
are the same story.

Steve Davenport (32:36):
And so that's one.

James Thorne (32:38):
That's one, and I think this is the other
interesting thing that's goingto happen.
Hey guys, we're going toderegulate the US financial
industry again and it's going tobe through the supplemental
leverage ratios, right, we are.
So think about this right now,with the Fed making a completely
and totally stupid decision tohave Fed funds rate at 433.

(33:02):
Jamie Dimon can park all of hismoney at the Fed and make 433
risk-free.

Clem Miller (33:12):
Yeah.

James Thorne (33:12):
Okay, right, when the two year is somewhere like
383, I don't know, it's bouncingaround we need to find a new
buyer of treasuries.
Well, the new buyer oftreasuries will be that they
will revise the supplementalleverage ratio for banks and
they will be able to go back toprop trading of fixed income for

(33:38):
their account and it will notbe charged against their capital
.
Guys, we're going back topre-Dodd-Frank.
Happy days are here again forWall Street.
That's where we're going, butScent talks about it.
We're going to deregulate.
Right, we're going toderegulate, and he said it the

(33:58):
other day, where he said becauseof deregulate, because of you
didn't say it this way, I'msaying it this way Because of
Dodd-Frankd, frank banks,regional and money center don't
lend.
Who's getting all that lending?
It is the private equity guys.
Through what?
Through their businessdevelopment banks in the united

(34:20):
states yeah, yeah right.
So you know this is the weirdthing about where you know this
is the game.
You can see them churning, youcan see Bessette's fingerprints.
He knows exactly what he'sdoing.
So investing wise.
I think regionals are veryimportant.

(34:42):
I think money centered banksare very important, because
lending is going to come backand prop trading is going to
come back, and so if we're goingto have this secular bull
market that I I am presentpresenting to you because of
demographics, us financials arethe place to be and people are

(35:05):
going to freak because I sayderegulation right guys, I'll be
dead and gone by the time thisthing blows up again.
Okay.

Clem Miller (35:14):
You know, jim, I think you may be right About
going back to pre-Dodd-Frank andit may not actually be all that
bad, because now you've hadthis experience Of having better
risk management so it may notexplode as it did in the past.
But the problem I have ininvesting in banks is that you

(35:37):
really and obviously we'veworked for a bank, so I sort of
have this kind of internalizedview of it is, you really don't
know what's going on inside abank.
Somebody who's outside a bankan investor has't know what's
going on inside a bank.
You know somebody who's outsidea bank an investor has no idea
what's going on inside it.
They're black boxes, and sothat's my, my main concern from

(35:57):
an investor standpoint aboutinvesting in banks.

James Thorne (35:59):
Can I, can I blow your?
I just want to throw the catamongst the henhouse right now
the Fox.
So, going back to the Bitcoin,I don't't, I want you to just,
you know, be open-minded.
Be open-minded, think likepretend we're back at university
in the grad lounge having abeer.
Okay, all right, look why mostyeah, no, no, because guess what

(36:24):
happened?
The canadian industry is overit's budweiser.
We got taken over by theamerican watered down beer up
here.
Okay, I mean, I'm teasing, butbut the thing that's, when you
look at, when you look at microstrategy to your point, clint,
do you know what the pristinecapital is that has full
transparency and full and andand full.

(36:47):
You know what it is?
Bitcoin, bitcoin.
Michael Saylor is going toconvert microstrategy into a
bank and use all of the holdingsof Bitcoin as its capital,
which is clean, clear andtransparent, and that is going

(37:10):
to freak Wall Street out.
Now may take some time, butthink about what's happening now
.
All he's doing is arming thefact that he's taking and this
is what you know and everybody'sfreaking out.
It's no different than Tyco.
It's no different than EDS.
It's no different than Tyco.
It's no different than EDS.
It's no different than anyother publicly traded company

(37:33):
that issues stock to buy, to buyback, you know to, to pay a big
dividend that's higher thantheir free cash flow, or pay
down debt.
All he's doing is he's arbingat doing the exact same thing
and buying Bitcoin, which hasperfect scarcity, and the FASB

(37:55):
accounting rules have changed sothat he can mark that to market
.
Ok, so you, now you have morecompanies replicating that.
I am not saying that this isn'tgoing to end well, you can just
see what he's doing.
He's found the weakness in thegame.
He's going to exploit it.

(38:15):
Gamestop's going to do the samething.
But the thing I come back to,which you hit on is, and this is
why I say you go to BrettonWoods and what do do we need?
We need something neutral toanchor the us dollar.
Okay, it could be gold.
Right might be gold.
Well, could be bitcoin.
We got to do something.
We got to go back.

(38:36):
You know, king said bank corp,but because of what yellen and
biden did, we got to dosomething, got to do something
right and there's legislationright now about that.
I think it didn't get throughthe first time because they're,
you know, they're working theirway through it, but I think it's
going to get done so, but thenI sit there and go, clem, what
if you sat there and you had abank and you knew what?

(38:58):
That black box question thatyou talked to me about or you
issued is no longer there.
You know what the capital is.
It is completely now.
It's Bitcoin.
It's Bitcoin.

Steve Davenport (39:11):
It's the clarion, it's not, but you don't
.

James Thorne (39:12):
You don't.
It's not just the capital.
What's the beautiful thingabout this?
What's the beautiful thingabout business development banks
?
They don't have any leverage,but at least you can go through
their filings and know whattheir loans are.

Clem Miller (39:22):
We don't know what the book.

James Thorne (39:23):
We don't know what JP Morgan's book is right.
We have no clue, do we?
We don't know what thecounterpoint risks are right.
We don't know right, james.

Steve Davenport (39:34):
I think this is the part of the call where
we're going to go our separateways.
I think you're wrong about alot of the presumptions of
everything being figured out andeverything going to work out
perfectly.
I look at what Trump did whenhe came into office first time
Trump 1.0.
He started attacking Obamacareand he wasted a year or a year

(39:55):
and a half of his capital onObamacare.
And now I agree with you.
All of the things he could dowith Canada and energy would
make the US stronger.
Rare minerals all of that is awonderful idea.
My question to you is why startwith tariffs if what you really

(40:18):
want is deregulation of energy?
Why not start with the thingthat's the easiest to do?
Why not start with somethingthat you could get almost
international agreement on?
Yes, developing Canada, rareearth puts them in the hands of
a friendly neighbor versus anunfriendly.
So it all makes sense whatyou're saying about the Canada

(40:41):
relationship.
But my question to you, james,is, if it's so easy and so clear
, why would you take tariffs andcreate all of this kerfuffle
over something?
And then you know, my questionis still I don't think the big
beautiful bill passes.

(41:01):
I think there's too manyproblems that are going to be
involved with the conservativeRepublicans, problems that are
going to be involved with theconservative Republicans.
So if the big beautiful billdoesn't pass, we don't ever get
to this world relationshipbetween the US and Canada that
you're dreaming of.
And if we don't get there, Ithink your secondary scenario of

(41:22):
Canada becoming irrelevantbecause people don't want to
invest I think that's whatbecomes more likely.

James Thorne (41:30):
So I think you're not talking to, you're not
talking to David Rosenberg,you're not talking to the end of
the world.
Guys, no joking so here let me,let me so.
So here's look at, it's a great, it's a great point.
And remember guys, look at youknow what I do is it's
behavioral finance, right, right.
And if you go back to kahneman,pervert, toversky's working

(41:50):
paper, it's, it's on prospecttheory.
I suggest you read it yeah uh,what they talk about is that
they have an example in thewhite paper 1986 I think it is,
and they talk about these, these, these mountain climbers in in
the french alps.
They get, you know, avalancheor a blizzard comes and they
work their way to a safe houseand they get found five days

(42:13):
later and they say, how did youget to the safe house?
And they said, well, we had amap.
And then they looked at the mapand they said it was a map of
the Pyrenees, not the map of theAlps.
And then Kahneman and Traverskysay is go, yeah, but you had a
map, you had a narrative.
So what I'm doing is I know mynarrative's wrong, stephen, you
understand, I know it's wrong.

(42:34):
It's, you know, is it 60% right?
Is it 70% right?
If I'm having a narrative.
Then we can push off, you know,using a Canadian metaphor of
push off the dock and we can goon our canoe trip knowing that
there's going to be stuffhappening along the way.
So let me just give you thingsthat don't add up to me.

(42:55):
Look, a tariff is a tax.
I don't know if you taught that, clem, when you talked to your
class.
Who has the power of the purse?
The White House does not havethe power of the purse.
The white house does not havethe power of the purse wayne one
of the reasons we could argueabout what happened with fannie
and freddie during the networksweep was the fact that obama

(43:18):
couldn't get his tax so that youcould basically subsidize
obamacare right.
So what trump is doing rightnow is unconstitutional.
Oh, yeah, and what is he doing?
He's saying oh my gosh, it's amatter of national security.
Quebec cheese is not a matterof national security, dude.

Steve Davenport (43:40):
No, we're too numb, you guys are too numb.

James Thorne (43:43):
right, I'm just teasing, of course, but why
isn't anybody calling him on?
So here's the point, steve.

Clem Miller (43:49):
Well they are.
There are some lawsuits rightnow saying that none of this
tariff stuff should be done.

James Thorne (43:54):
I know, but hold on.
So let's play it out.
Let's play it out.
The big deal is the midtermelections.
The big deal is he needs to geta super majority.
If there is a time to do it,it's now, because the Democrats
are in such dis when you havethe Democrat leader, it's Bernie

(44:18):
Sanders and AOC O-M-G Okay.

Clem Miller (44:25):
I agree with that my problem is-.

James Thorne (44:27):
It's a hypothetical guys.
If there's a time that they canrun the table, right, if this
is the time to take your shotdown the field, right.
And so what I would suggest ishappening he's front-loading all
of the chaos right, walkingstuff back, and the bigger

(44:48):
question is does he get what heneeds in the midterms?
And then, if he does, does he,can he convert the EOs, the
executive orders, into law?
That is what I think is theplay in theory.

Steve Davenport (45:06):
In theory, what you're saying works, james.
It all works in theory.
The problem I see is that hecould have started with
infrastructure in 2016.
And if he would have got aninfrastructure bill he would
have won the midterms and hewould have probably had a better
chance with Obamacare.
My feeling is his tempest in ateapot attitude about he's going

(45:28):
to solve this problem.
And you look at the US budgetand you say 13% are exports and
11% are import.
You know we don't have a tradedeficit.
That is cataclysmic.

James Thorne (45:44):
So you're not, as you're not.
The United States is not.
First off, it's for's, for youknow, imports are 14, direct
imports from china, 1.5.
So so the point I'm going tomake to you is maybe they're
creating a situation where theywant chaos.
That's my point.
Right, because it does.
The facts don't suggest thatthat's what you would lead with.
I completely agree with whatyou're doing, but to sit there,

(46:07):
and you can sit there, go.
There's one.
It's the gang that couldn'tshoot straight.
Got it Right?
If I hear Trump is a dumb as abox of rocks, okay, I get it.
But what if he knows what he'sdoing?
And if he knows what he's doing, why is he creating the chaos
that he's creating right now?
The chaos that he's creatingright now, what is up?

(46:32):
And then, what I say to thefolks up here is just be still.
We're playing a game in theschoolyard where the teacher is
saying making the rules up asthey go along, and there are
kids responding to everystatement as opposed to.
Why don't we just stay still?
Why don't we watch what happens?
Let's see where this goes, doyou understand?
Let's see how this plays out andrecognize the fact that

(46:57):
President Trump does not havethe power of the purse and what
he is leading with.
Once you strip out the securityproblem, it's unconstitutional.

Steve Davenport (47:08):
So look I get that.

James Thorne (47:10):
They want to and they should.
The lesson from COVID is tobring critical industries back
to the United States in case ofa crisis.
And when you listen to Besanttalk, that's what he says.
And then you listen to whatNavarro says and who's the guy

(47:31):
from Cantor?

Clem Miller (47:33):
Ludnick, ludnick.

James Thorne (47:36):
And they're all over the place.
And then you throw in StephenMoore and you're just banging
your head against the wall.

Steve Davenport (47:43):
Right.

James Thorne (47:43):
So if there was a, I don't want to, but I look at
the market goes up 75% of thetime.
I do not think there's going tobe a recession.
And you've got to sit there andsay to yourself what the heck
is going on, because that Rosegarden ceremony was a joke, it
was a high school play.
Right, they got the responsethat they wanted.

(48:06):
So what's the end game?
And to me, the end game isthey're going to try to
circumvent the four-year cycle,which the four-year cycle is
economic slowdown in 26 and asignificant market correction in
26.
If you have all that happeningin 25, you get oil down.
Gasoline at the pump is below$2 a gallon in 26.

(48:31):
He works that down, theeconomy's humming, the stock
market's humming, and he's got ashot at getting a big majority
and then he can pivot.
And then the real risk to Clemand Steve and you guys is the
fact that now he's got enoughpower to make all this into law
law, not these silly EOs, right?

(48:51):
That is going to be veryenticing and interesting if we
do cross that bridge.
But you're absolutely right,steve, it might be all ephemeral
, it might be.

Steve Davenport (49:01):
He has no clue what's going on right now.
I question my enemies and lookat everybody as the art of war.
We're battling here in thismarket to try to determine
what's best for our clients andultimately it's about investing
and ultimately it's aboutputting capital to work in

(49:22):
places that you trust willpreserve your capital and grow
it at a reasonable rate.
That's what I'm trying to do.
I love the ideas of energy,especially Exxon, because I have
a large client with Exxon, so Ilove that concept of what
you're talking about withimperial oil.
I believe that Canada should beone of our greatest allies.

(49:45):
I agree with you know all ofyour premises on actualizing
Canada's true potential.
I don't know how, as a country,they can go so far to hating
everything about energy, to nowturn and go.
We're going to centralize andmake ourselves a natural
resource provider to the UnitedStates.

(50:07):
It would seem like some of thethings that have been said about
being a 51st state andeverything else would
potentially make us, you know,have worse relations with Canada
and worse probability of any ofthis coming to fruition.
But Steve.

James Thorne (50:24):
Steve, the only reason why Carney got in was
because of Montreal and Toronto,the bourgeois socialists right
from Marx and Engel right.
The only reason that the twolittle areas of the country that
look like upper you know, upperManhattan, you know Manhattan
Upper East Side put him in.
The rest of the country is blueright.
The rest of the country isconservative, and all Carney did

(50:46):
was basically, you know, takePolyev's platform of you know, a
business focused platform, andso what I think he's going to do
is he's going to, you know,this is this is hoteling's lemma
Right, where you know.
If you're going to, you know,you know where do you want to
position the ice cream?
Where do you want to positionyour ice cream cart?

(51:07):
On a beach, when everything isin it's evenly distributed to
maximize sales?
Right, right in the center.
Who is going to be upset?
Are you kidding me?
Of course, the extreme left,right, but they've got no other
way to go because you know whatthe extreme left did they
abandoned the NDP, right?

(51:28):
They?
abandoned, which is a which is aextreme left party that makes
Chuck Schumer look extreme, farright.
Okay, guys, when I lived in theStates, I was Democrat.
I am viewed as being a staunchconservative, and I say I'm a
moderate Democrat.
So the point I'm trying to maketo you is I think the people

(51:51):
that are going to get upsetabout this are going to be the
extreme left in Canada, andguess what?
Their party just lost officialparty status up here because of
their strategic voting.
So they don't have a horse.
They're done for five years,done, wow All right they're done
for five years done, wow, allright, you know you don't want

(52:11):
it.
You want to know who theofficial opposite after, after
the, the, the conservatives,it's the bloc, the separatist in
quebec, party, quebecois, butbut you know, I it when you,
when you look at it, when youlook at it, you know that's what
you do.
You know, in strategy, you, youset a course and you come up

(52:32):
with an idea to the best case,you know.
I mean, you know I was in NewYork talking about you know, why
is the Fed at 433?
Right?
When you know, why are theyignoring their beige book, when
it's the beige book is moredovish than it was in September
and they're cutting 50?
Right?
Why?

(52:53):
Why do they think that tariffsare inflationary, where, if you
were at Georgetown teaching aneconomics 101 course, you know
that tariffs are a tax and theyadjust the relative prices.
They're not inflationary, right?
I mean, this is basic stuff,right?
I don't know.
So, steve, I don't know whyeverybody's doing what they're

(53:14):
doing, right?
But the objective here is tobasically come up with a
narrative.
That so, and my narrative isthis we're going to go, we're
going to cut these deals Right,the market is offside and go
back to our institutional days.
Guys, all right, the retailinvestor bought the debt, the

(53:36):
institutional guys didn't.
What happens in September,after Labor Day, when you're 700
basis points behind yourbenchmark Because we give
Steve's narrative right and theCIO walks in and says Steve and
Clem, you guys got to get thisclose right, you got to get this

(53:57):
close, or we, you know yourfunds closing Right.
So, and that's so, when youlook at the book of where we are
, the institutional people theydidn't buy the debt, retail
investors did.
There is huge risk at the end ofthis year For institutional

(54:22):
investors in the four.
I think the fourth quarter thisyear is going to be crazy.
Clem, your gold is going to goabsolutely bonkers in the fourth
quarter.
Absolutely bonkers, bonkers,upper, bonkers, upper, bonkers
up.
You're going to have to go.
What you need to do is startlooking at, get Steve to start

(54:43):
looking at some Vancouver we'regoing to get into these.
There's a property in arizonathat was staked out in 19.
You know 05 and you know whatthey, we, we got the claim and
we're raising money and we'regonna drop up you know we're
gonna.

Clem Miller (55:01):
I don't, I don't, I don't do that crap, I just uh,
I just in the gold we're goingto get the fever?

Steve Davenport (55:07):
I think you should write a call at 4000 on
the GLD, and that would be whereI would try to make some money,
because I think you're right, Ithink gold will take off.
My only adjustment to yourscenario is look, when Trump
tells you to buy the market,it's going to rock it up.
I call that a George Costanzamoment.

(55:29):
George Costanza, with anydecision he made, he always did
the opposite because he knewthat would be right.
And if Trump is saying, to putyour money in now, it's going to
rock it up.
I'm not sure whether that meansI should just sell everything
now or I should sell half.

James Thorne (55:48):
No, no, you go on to chat GBT and find out what
happened last time in Trump 1.0,when he said that, and what the
market did.
Okay, and I can say to you thegame is not this the game is the
midterms.
The game is is he needs to?
If he's going to have thislegacy, he's got to start

(56:09):
putting things into law and notexecutive because the next
person who comes in the nextadministration can come in, can
wipe out his legacy in a, in aswipe of a pen, if he could.
If he could and this is a big ifget significant, you know a
significant amount of majoritythat he could start pushing
these things through in law.
Right, right then you couldn'thave these activist judges doing

(56:32):
this and that, right, and so I,I'm.
So I'm with you, steve, but I'msitting here going what's the
game?
And it's not that he's stupidand he doesn't know what he's
doing.

Steve Davenport (56:43):
I don't think he is, but I also think that his
timing and his pushing ofissues that may not be central
and making those central when hehas goodwill capital he used up
a lot of goodwill capital withall of those tech people who
lost money.

James Thorne (57:01):
Oh, I agree.
So did he make the mistake likein, anything can happen.
Did he make the mistake of,when the cabinet was meeting,
that he listened too much toPeter Navarro?

Steve Davenport (57:13):
Correct.

James Thorne (57:13):
Did he make that mistake?
Because this looks like themove that was made was a move.
Miller, when you have reallysmart people coming out that are
legends, that are saying a 10%across the board terror, we can

(57:34):
handle.
That's what you know.
Stanley said on the record.
Why he did this other stuff isbeyond me.
And then I say, is it, is it,is it Navarro?

Clem Miller (57:46):
Yeah, it is Navarro .
It's Navarro because Navarrowent to jail for him.
No, seriously.

Steve Davenport (57:55):
I think that this is you know, it is going to
be a classic year.
I think that all of the pointsyou make are great in terms of
giving us better perspective forthe economics and the histories
of the individuals involved,especially Carney.
I love your comments about howhe was running Brookfield and
how he was from Goldman and Iagree there is a lot of

(58:19):
potential for a great deal ofgood things to happen between US
and Canada.
My only question has been he'sgot one goal and that is win the
midterms and not blow up, andhe's not behaving as an
individual and as administrationto do that.
If he can get this bill passedin the month of May.

(58:41):
If he doesn't get it passed andhe goes into the summer recess
and he starts to run up againstthe debt ceilings, the ability
of the Democrats to bedisruptors goes up and as they
go up, I think, the market goesdown.
So my belief isn't a fourthquarter problem.

(59:02):
My belief is it's a thirdquarter problem and he's going
to have it because he hasn'tfocused on the right things.
I could be wrong, but that'smy—.

James Thorne (59:15):
Right.
So if Trump does run the tablea hypothetical and I think you
need—is it 67 votes in theSenate constitutional amendment,
what do you think the responseof the United States would be if
he gets enough votes so that hecould change it, so he could

(59:36):
run for a third term?

Clem Miller (59:39):
that's never going to happen, because he needs
three quarters of the states too.

James Thorne (59:42):
He needs the states as well, yes, then why is
Bannon out there basicallysaying he's going to get a third
term?
He needs three quarters of thestates too.

Steve Davenport (59:45):
He needs the states as well.

James Thorne (59:46):
Yes, Then why is Bannon out there basically
saying he's going to get a thirdterm?
What does Bannon know that wedon't?

Steve Davenport (59:55):
There's some way that he could potentially be
the VP on Vance's ticket andVance would get elected, and
then Vance would resign.

James Thorne (01:00:03):
Oh, that's kind of like what happened in Russia
with Putin.
And what's the guy Medvedev?
Yeah, they did that in Russia,didn't they?

Steve Davenport (01:00:11):
Yes, they did so that's one scenario, and
another scenario is something todo with him not completing his
second term.
So you're allowed to have twoterms and so, because he didn't
complete his second term, hewould appeal to the Supreme
Court for why he is stillentitled to be reelected.

James Thorne (01:00:33):
And so you think that Judge Roberts and Amy Comey
are going to basically vote forthat.

Steve Davenport (01:00:38):
Are you kidding me?
No, that's why I think thatscenario is less likely than the
Vance scenario.

Clem Miller (01:00:43):
No, neither of those two things.
If you read very carefully,neither of those two things can
actually happen because it hasto do with being elected twice.
It's not whether they serve twoterms or whether he's elected
as a vice president versus apresident.
If he's elected twice, then hecan't.

James Thorne (01:01:04):
He can't do it oh, is there, is there, is there,
in, in.
Blow your mind out, click.
Is there a possible road to himgetting another term other than
go and basically attacking theresults of the 2020 election?

Clem Miller (01:01:22):
you mean like doing that again?
No, trump, like how Trump?

James Thorne (01:01:25):
Why are these people out there saying he's
going to get another term?

Steve Davenport (01:01:27):
I don't understand.
So what are they hanging theirhat on?

James Thorne (01:01:32):
What are they doing?
What's banning smoking?
Is that the question I'm askingBARRY PRICE?
He's just creating a fog MIKEGREEN.

Steve Davenport (01:01:38):
That's right BARRY PRICE.
Everybody wants this fog to getbigger and thicker and we're
going to forget all thedifferent things that are going
on.
Are we forgetting that he saidon day one I'm going to call
putin and ukraine's going to beover.
I remember hearing that.

Clem Miller (01:01:51):
See, here's the thing, here's the thing maga
maga is a personality cult.
So if you take away, if youtake away the personality,
there's no cult left and there'sno support anymore.

James Thorne (01:02:03):
So you.
So whoa, whoa, whoa.
You don't think, you don't, soyou, I, I'm, I'm.
So if you go back to Brentonwoods, right Kane said that
there would be this rise ofpopulism.
Isn't MAGA just the rise ofpopulism?
That always happens and is?
Is MAGA just not amanifestation of Occupy Wall
Street and what happened inJapan and what happened in

(01:02:25):
Europe, and what happened inEurope and Trump?

Clem Miller (01:02:33):
you know, president Trump jumped on the bandwagon
and exploited that for his ownRight.
It's a it's a populistcoalition that could have
existed anyway without Trump.
But you're right, trump didseize it and he turned it into a
personality cult.
So it was a populist movementand now it's a personality cult.
It's been changed.

James Thorne (01:02:53):
So then?
So help me out here.
What happened to JD Vance tomake him go from hating Trump to
becoming his VP?

Clem Miller (01:03:03):
He wanted to be VP.

James Thorne (01:03:04):
So it's power.

Steve Davenport (01:03:06):
I think it is Entire's power.
I think it is.

Clem Miller (01:03:07):
Entirely power.

Steve Davenport (01:03:08):
I think it's potential to be the future of
the party.

Clem Miller (01:03:09):
So everybody has a price.

Steve Davenport (01:03:12):
Right, I think we got to wrap this up, so I'm
going to ask everybody, giventhe scenarios that we all
believe in, which could be rightor wrong, wrong what assets
should we be buying for ourclients for the next six to 12
months that we think will be theplace to be as we see the

(01:03:33):
policies of US and Canada moveforward?
They can be Canadian assets,they can be US assets, they can
be international assets.
Maybe we want to own some Swissfranc.
I had a client send me a textabout should I be in the Swiss
bank.
I think that we have to look atthings overall and make
decisions for our clients.
If you had a client, $10million or a million dollars

(01:04:02):
what would you tell them to dowith that 20% that you're
concerned about in the marketright now?
Stick it out, try somethingelse, or sell and go to cash.
I mean, give me your scenariofor that 20%, starting with
James and then going to Clem,and then I'll give you mine.

James Thorne (01:04:21):
Okay.
So the environment we're goinginto is slowing growth, right,
we're not going to have arecession because the US economy
is 70% service, okay.
So the only time we've evergone into a recession is after a
shock, right, 9-11, 08.
I don't think the tariff thingis a shock.
We're going to have a slowgrowth environment and we're

(01:04:42):
going to start to see liquiditybe pumped in.
I would ask you guys to go lookat the Hong Kong overnight
market right now.
It's dropping like a stone.
They're injecting liquidityeverywhere in the world, but the
United States M2 is growing.
So, in a slow growthenvironment globally where we're
increasing liquidity, historysays, or the data says, it's

(01:05:04):
really simple you buy seculargrowth.
I like the companies that havebeen absolutely smoked this year
.
So I think large cap tech inthe United States is the place
to be.
I love.
I think gold is a place to be.
I think it.
I just don't like the paraboliccharts gone too far, too fast
and I think Bitcoin is going togo and they're going to run hard
.
So that would be and if you goback.

(01:05:26):
So I am of the view that we'regoing back to a pre-COVID world
where we're going to havesecular stagnation and inflation
is going to go below 2 percent.
You know, pushing on a stringliquidity trap that would be my
view.
I am not believing the move inGermany.
That is a head fake, ok.
And then in Canada I would buythe pipelines.

(01:05:47):
I think that's an interesting.
I think the pipelines in theUnited States are very
interesting and you know, Idon't think you want to buy
energy names oil because youknow the correlation.
I think you're going to have todrill, drill, baby drill.
One area that I think is veryinteresting.
That hasn't been reflected inthe stock.
But you know, natgas has had areally good run here and we need

(01:06:11):
NatGas for AI, so NatGas ishaving a good.
You know, the commodity ishaving a great run.
The stocks sink.
The stocks haven't reflected it, which means that the street
doesn't believe the move.
Do you know what I mean If theybelieve a recession is?

Steve Davenport (01:06:25):
coming, then they don't believe that move.
You know what I mean.

James Thorne (01:06:26):
And for clem leave , a recession is coming, yeah,
and my favorite is buy the gdx jjust for clem because he's a
gold bug.
Buy the, buy the junior goldminers.
I like gold, but I, I, I.
Right now my favorite play is Ithink Bitcoin and crypto

(01:06:47):
derivative plays are.
You're getting into thewheelhouse and that's going to
run to the end of the year and Ilike secular growth there.

Steve Davenport (01:06:54):
So at 100, you buy Bitcoin, beg your pardon.
At 100, it's kind of run up,hasn't it?

James Thorne (01:06:59):
Oh yeah, Dude, it's gone.
It's gone.
I mean, think about it.
We've never had an asset thathas perfect scarcity, right, and
so you know it's.

Steve Davenport (01:07:13):
I think that what Trump's doing with using
the assets that have been seizedas the first way to start it is
very creative you get a Bitcoinreserve.

James Thorne (01:07:23):
That's where August comes.
We get a Bitcoin reserve wherethe government starts buying 250
coins a year.
You think that maybe the smartmoney will start trying to front
run it.
And here's the other thingabout it is that if it's and
this is just you know what we'velearned what is it?
It's not.
Fundamentals don't rule, andwe've had this.

(01:07:45):
It's funny.
I tell this story all the timeand it's not.
It hasn't happened up here.
When the when the SEC came intous and basically looked at our
asset allocation program, I goback to M&T and Wilmington trust
, right, and they said that youcouldn't have proprietary, you
couldn't have proprietaryproduct.
Have proprietary, you couldn'thave proprietary product right

(01:08:08):
In your asset allocation program.
What did we do?
Right, etfs, right.
So we're in an environmentright now where it's flows
matter and liquidity matters.
You know target date fundsmatter.
If you go in there and you're ayoung person working at an
institution that's got a 401kand you've got a 2070 fund, you

(01:08:29):
drop it in Every paycheck.
You're basically buying theRussell.
You know the NASDAQ 100, aren'tyou?
So to me, it's flows andliquidity.
We're about to get through ahuge liquidity period, the
four-year credit cycle.
We have to refinance the creditright.
The Fed will cut, there won'tbe a financial crisis and so an

(01:08:55):
asset like gold or Bitcoinbenefit from increase in
liquidity, and then they don'thave the problem of dealing with
the cyclicality of theirearnings.
It's a complete emotionalmomentum liquidity play.

Steve Davenport (01:09:11):
I like that Clem what are you doing?

Clem Miller (01:09:15):
So, as you know, as a lot of our listeners know,
I'm approaching this from astandpoint of trying to have
lower beta right now, lowerforward peg, so I know there's
more attractive relativevaluations and also lower short
interest, which implies lessspeculation stocks that have

(01:09:40):
less speculation.
So I look at a combination ofthose three factors.
I'm less thematic in mythinking, you know.
That being said, you know I dohave, I am kind of fundamentally
attracted to, to, you know,some of the AI, some of the Mag7

(01:10:02):
, not all of them and I'm slowlyramping that back up again.
But, you know, because therewas a, I think, a good buying
opportunity in mid April inorder to do that.
But I'm still well below one,you know, more like 0.7 or 0.8

(01:10:22):
average portfolio average betaon my portfolio, something
around 1.8.

Steve Davenport (01:10:28):
Give us a buy from club.
Give us a buy.

Clem Miller (01:10:33):
I would still say I would say staples, uh,
insurance, um, I those.
Those are the two things that Iwould say uh, are and gold,
okay, that I would say are andgold, okay, staples gold, and
keep a significant portion alsoin cash.
But you know also, like I said,I'd say in the tech realm I

(01:11:00):
would say Microsoft, amazon andGoogle.
You know the alphabet, but stayaway from tesla, and and I'd
stay away also from um, fromapple, I'm also.
I'm in nvidia as well.
Okay, I'm going to go a littlebit different.

Steve Davenport (01:11:33):
I believe that we are going to create, or there
is going to be, a crisis aroundtreasuries, and I think that
that crisis around treasuries isgoing to be because, just like
James has talked about, when weweaponize SWIFT, I think we will
weaponize treasuries, and Ithink what's going to happen is
we're going to create people orentities that are going to not

(01:11:58):
be allowed to receive treasuryinterest payments, and so there
will be the haves and thehave-nots.
We will have a treasury thatwill decide all Chinese
purchases of treasuries willremain principal assets, but
we'll have no payment to them.
So we will cause treasuries tobe weaponized, and I think we'll

(01:12:22):
go towards corporate bonds.
So I like LQD.
I like corporate bonds because Ithink their balance sheets and
their ability to pay are goingto continue to go up as we see
deregulation, and I think thatwe're going to see governments
and the amount of debt.
We have become a bigger andbigger question, as I think

(01:12:42):
there will be a blow up aroundthe debt ceiling and the fact
that we don't get a deal passedon the big beautiful bill.
So I would buy your LQDs andsay I own the balance sheets of
the best companies in the worldand therefore they're going to
survive when governments aregoing to shoot themselves in the
foot Everybody.

(01:13:04):
One last word, last word, james.
What do you think?

James Thorne (01:13:10):
To channel Mr Buffett be greedy when people
are fearful and be fearful wheninvestors are greedy.
I still think people are toofearful right now.
I think there will be a timewhen you want to get
significantly more defensive.
I just think it's later.

(01:13:32):
I think it's after the midtermelections.

Steve Davenport (01:13:35):
Okay.

Clem Miller (01:13:36):
Plum last word.
I think it's smart to besomewhat defensive right now, so
I would disagree with that.
I was interested in your LQDcomment because I would think
that if there were significantdisruptions in the underlying
treasury market it would alsoaffect LQD.

(01:13:58):
So basically I stay away frombonds altogether.
I'm not a big, I mean, despitehaving some background in asset
allocation.
Really I'm sort of an equitiesplus cash and plus gold recently
guy.

Steve Davenport (01:14:19):
After our meeting last time with Steve
Gattuso talking about thenational debt, I believe the
problems there are much biggerand much deeper and much more
difficult to solve.
If we had a great governmentwho was on top of everything and
ran things extremely well, Iwould feel good about our
addressing the national debt.

(01:14:40):
We're not doing anything andall we're talking about is
adding to it with $4 trillionmore from this big beautiful
bill.
I don't think that's thesolution for us.
I don't think 50 or 100 basispoints from the Fed is going to
do anything, because I think wehave too much debt at the
federal level.

James Thorne (01:15:01):
Steven, we need negative rates and rates are
negative.
Real rates are negative inSwitzerland.
They're going to become real.
We're going to get realnegative rates in the United
States.
We've got to get thatsustainable and then I know you
guys are going to love what I'mgoing to say.

Clem Miller (01:15:22):
Then we're going to grow our way out of it, which
is what we've always done.
Yeah, we're going to need a lotmore immigration into the
United States in order to dothat, though.

Steve Davenport (01:15:33):
Sure I think there's another episode there in
three or six months.
So I appreciate everybodylistening on the Skeptic's Guide
and I appreciate our guest,james Thorne PhD.
I always have something tothink about after talking to you
and I appreciate your insightson Canada and the US and all
that you do for the investmentpublic.

(01:15:54):
I think everybody should followyou on LinkedIn and read some
of your market commentators OnTwitter as well.

James Thorne (01:16:02):
Dr J strategy and everybody.
Make sure that we treat mothersgreat.
This weekend it's Mother's Dayweekend.

Steve Davenport (01:16:10):
Altus Wellington is looking to have
you.
Happy Mother's Day, everybody,and let's be good to each other,
all right.

James Thorne (01:16:18):
Take care guys, bye-bye, bye.