July 17, 2025 • 37 mins
In this explosive conversation, I sit down with Edward Dowd—former BlackRock fund manager and founding partner of Phinance Technologies—to dissect the global economic crisis few are prepared for. We discuss the unsustainable debt buildup, why the 2023 banking failures were just the beginning, the silent housing collapse, and what’s really fueling inflation behind the scenes. Ed also reveals why deflation is “illegal” in a debt-based system and outlines the timeline for a potential 2026 market bottom—and beyond.
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Speaker 1 (00:00):
Coincidentally, COVID hit and gave central banks and governments unprecedented
excuses to create more debt and print more money, and
that reinflated the system.
Speaker 2 (00:10):
Trump's new policies could potentially stay that off, or does
that only exaggerate things?
Speaker 1 (00:16):
His plan is this right. He wants to deregulate, reinstitute
the tax cuts. He wants to bring investment to the US.
Just the second derivative change on that is going to
create a debt. The real economy, the middle class economy, was,
you could argue, was in a recession in twenty three
and twenty four. So if you have a global debt problem,
there's two ways to handle its way out of it.
Speaker 2 (00:38):
Or you ed you said that, You've been saying that
there's a clock that started on a global debt crisis,
Like what are you looking at that broke and why
should anyone listening to right now be preparing for that?
Speaker 1 (00:52):
Well, look, the global debt crisis kind of manifested itself
in twenty nineteen. There was a lot of synchronized global
growth slowing and the repo market started blowing up in
September of twenty nineteen. The plumbing was becoming unwound. Coincidentally,
(01:14):
COVID hit and gave central banks and governments unprecedented excuses
to create more debt and print more money, and that
reinflated the system. So if you have a global debt problem,
there's two ways to handle it. You inflate your way
out of it, or you default. And COVID, again, I
(01:36):
wasn't in the room. We can debate whether it was
a plan or an accident. Who cares. It saved the
system temporarily kicked the can down the road, and the
FED printed and the US government spent. Printing without spending
doesn't mean anything. So we saw unprecedented growth in the
money supply. And my partner Carlos Aellegaria, you know in
(01:58):
his book that he had a revised edition in twenty
twenty one, predicted that massive inflation was coming, and it came.
And you know, there's a little bit of a debate
as to who caused the inflation. I would say what
they did under the Trump administration with the COVID spending
and the printing didn't really have an impact until you know,
(02:18):
twelve to eighteen months later, and that was in the
Biden administration. So you know, inflation which quote unquote was transitory.
You know, that's what we were hearing from, you know,
yelling and Powell was nonsense, because monetary, when you increase
the money supply without you know, without a commensurate like growth,
(02:42):
it just gonna inflay prices. And it did. And so
the FED then responded by going on an unprecedented interest
rate rapid interest rate increased from basically zero to five
and a half percent, and m two year over year
growth unged in the aftermath, and we saw for the
(03:05):
first time since not you know, the thirties, and two
year year growth went negative in November twenty two, and
then unsurprisingly, we had a bunch of bank failures in
the spring of twenty twenty three. People forget that, and
the FED plugged the hole. They gave bank term funding program.
(03:28):
They lent moneies to banks that were underwater to prevent
a deposit run and that worked because most of the
most most of the credit that was underwater were you know,
risk free assets like treasuries because of you know, the
duration risks that happened when they raised interest rates. So
(03:48):
what the Fed's not going to do and they've already
ended the bank term funding program what the Fed's not
going to do is lend money to bad credit, and
that's we're getting into the credit cycle of this commercial
real estate, as we know, is already a problem. That's
about three to five trillion on banks balance sheets in
the US. The bigger problem we see is the economy
(04:12):
having been floated in twenty three and twenty four by
illegal immigration. A large part of our growth came from
that whole movement into basically an organized illegal operation that
you know, we think of a large majority of the
deficit spending we saw funded that through NGOs and other
(04:32):
agencies and then direct payments to illegals. So that really
floated the economy. And that's all coming away. So we
see a housing crisis coming next. And when we say crisis,
you know, I don't want people to freak out. I
mean it's it's needed. I mean, home prices need to
come down. People can't afford homes and new home supplies.
(04:53):
You know, at all time record of the world near
all time record levels, there's no there's no transaction active.
And the housing market was really buoyed by the marginal renter,
which was the illegal alien. That that momentum is all
going the wrong way and p M I, you know,
has been a problem for two years. It's been showing
(05:15):
recessionary signals globally and the only economy that was really
outstanding was the US economy. And that's all that's all
going the wrong way. The second derivative government spending, even
though the Trump administration is really not cutting spending, the
second derivative is changing. The growth is flattening, and that's
(05:38):
all you need to cause a softening in the economy.
And that's what We've put out a report that we're
selling on January ninth detailing what we were seeing, and
you can buy it if you want at our website
Finance Technologies dot com with the pH. So that's kind
of the brad swathe we're already starting to see indicates
(06:00):
that the economy is slowly starting to roll over, and
we'll see if our calls right. We think we're going
to be right in a very big way.
Speaker 2 (06:11):
Well, thanks for setting the stage on that. Let's let's
dig into a couple of things on that you said.
I think I think what you said is after you
talked about the FED bailing out the banks in twenty
twenty three through the BTFP, that the FED is not
going to give money to bad businesses or bad investments anymore.
Speaker 1 (06:30):
I think, well, they're not. They're not. They're not going
to loan money to Uh. It was easy to provide
liquidity versus treasury assets. They're underwater. They're not going to
provide liquidity to bad loan decisions, bad credit decisions. And
what's going on with the commercial real estate problem?
Speaker 2 (06:51):
Uh?
Speaker 1 (06:51):
And by the way, this all eventually affects lending bank.
The bank's main function is to choose the economy by lending.
When you start to accumulate bad debts on your books,
you you you, you know, you stop lending as much.
And what's going on with the commercial real estate is
they've been extending and pretending.
Speaker 2 (07:08):
Uh.
Speaker 1 (07:08):
And the FED put out a report in November of
twenty twenty four detailing that.
Speaker 2 (07:14):
Uh.
Speaker 1 (07:14):
And I think they're going to start cracking down on banks,
you know, coincidentally during the Trump administration. That may be
a political move, who knows, but I mean, this has
been a problem for well over a year and a half.
Speaker 2 (07:26):
Uh.
Speaker 1 (07:27):
There there's also starting to be uh, you know, indications
and problems in auto loans, and there's delinquencies and homes arising.
So we have a credit we have a classic credit
cycle coming and it's just inevitable and it will cause
the word deflation to be mentioned temporarily because we know
(07:49):
that deflation is not allowed under the rules of the bankers.
So we're predicting inflation CPI headlined to some sometime in
the next six to twelve months print sub two percent number.
The biggest component of inflation is shelter. It's about forty
five percent of the CPI number. That's sticky, it takes
(08:10):
time to adjust. And so we're expecting a recession. We're
expecting the Fed to do what it does, lower interest rates,
and then maybe if if the crisis is you know,
if it goes if it looks like it's going to
go systemic, they're going to print a ton of money
and the government will have to do deficit spending and
(08:32):
then you know, we're back in you know, the reinflation
of the bubble if they can do it again.
Speaker 2 (08:38):
So yeah, so you said that if deflation is not
allowed in bankers terms, it's really not allowed in a
debt based monetary system.
Speaker 1 (08:46):
Just overall, it's if allowed to go on checked it
the daisy chain effects are collapse.
Speaker 2 (08:52):
Would you say you mentioned, you know how this actually
started in twenty nineteen and then the COVID sort of
excuse came along. Would you say that it actually started
back in two thousand and eight when we really sort
of had the first QE. Maybe the FED tried to
allow the bubble to deflate like they had done in
previous cycles two thousand, et cetera. But then it became
(09:16):
too systemic, right, they had to bel out the banks,
they had to do the quantitative easing. It levered up
the system to a point now in twenty nineteen, twenty
twenty showed that they're and even twenty twenty three showed
there's zero appetite to allow it to sort of deflate
on its own and they have to keep reinflating.
Speaker 1 (09:35):
Yeah, I would. It's interesting you talked about the Great
Financial Crisis. That's when a lot of things change. That's
when we saw unprecedented monetary policy, which now everybody expects
and it's not as unprecedented. It's a tool in the toolbox.
And what that did is the real economy, if you
go back, really kind of died globally and what floated
(09:57):
the economy for the next fourteen years was precedented monetary
policy coupled with government spending, and the government as a
percent of GDP, not only in the US, but in Europe, China,
you name, it grew its share the pie in GDP,
and that's changed a lot of you know, what's been
(10:18):
going on economically. So the closer you are to government
and government favors and the printing press, the better. After
you've done so, the economy showed growth, but the problem was,
over time there was a wealth disparity effect. And that's why,
you know, if you want to ask yourself why populism
is on the rise, it's basically because the rich got
(10:40):
richer and everybody else got poor. And it's been an
economy of the rich, not of the middle class. And
Trump was elected primarily because there was minus two percent
real wage growth going into the election. The last time
that happened in nineteen eighty, Ronald Reagan swept in and
it's Bill Clinton ninety two. So you know, well, Trump
(11:03):
was was going to win no matter what because of
the economy didn't matter. Got it.
Speaker 2 (11:07):
So if the system structurally fundamentally changed in two thousand
and eight, got so levered up, you could see twenty nineteen,
twenty twenty, the response was way faster. Right, two thousand
and eight, they allowed bear Stearns to go down and
took seven months to get a bail out. In twenty
twenty three, it took six days to bail out the banks.
(11:29):
But you think that now maybe FED, the FED would
sort of change their tune and say, well, let's just
let these bad loans go bad and let's see what
happens with the defaise.
Speaker 1 (11:37):
Well, it depends they can't be seen as bailing out politically,
it's going to be a lot harder to try to
bail out the banks. And during twenty.
Speaker 2 (11:46):
Short of like just take the loans on their books
like they did with the NBS and eight, like, you
don't think that's politically sustainable.
Speaker 1 (11:52):
They could do it, but they will only do it
if it's enough pain, So that's why they'll do it.
But they'll do it after a big correction and people
are freaking out and begged them to do it. They
don't want to do it ahead of time. Twenty twenty
gave them great cover. I mean, they bailed out Citadel Capital.
(12:13):
You know, they gave them emergency repos during twenty twenty
and and and there was also and they also basically
privatized the corporate credit market. They started buying I don't
know if people remember this, but they started buying under
their balance sheet apple bonds, So they they basically privatized
the corporate credit market. The problem with that is it's
(12:34):
kept corporate spread credit spreads tight, and that's driven a
massive amount of misallocation of capital, as you would imagine.
So and the other problem is this, so you know,
in the dot com boom, we had a corporate fraud cycle,
and then you know, we had a the FED do
(12:56):
their easy money after that bus that led to a
banking fraud cycle. And now we have, fourteen years later,
a i would say, a central bank government fraud cycle.
And we're discovering all sorts of frauds, you know, through
what doge is exposed and whatnot. And it's not so
(13:16):
much that the FED will become trapped when another central
bank has a problem. And the Bank of Japan is
kind of the in the problem right now. They can
either you know, continue to print money to float the
yen carry trade or there people will continue to get
poor and there's a currency crisis. So the release valve
(13:37):
on the sovereign debt crisis is always was always going
to be the currency markets, because eventually the currency markets
will revolt if one country, you know, it's someone to
if the market's determined no moss, then it's over and
then the whole thing has a problem. So the FED,
you know, is the FED going to bail out Japan?
I mean that right? So this is where we are.
(13:59):
It's it's very precarious. We don't have a crystal ball.
But what we do know is there's an economic sloan
on coming. There's going to be, you know, problem in
the stock markets, and we're expecting yields to go much lower.
And obviously, if you believe our call, you want to
be up to your eyeballs in risk creer assets like
(14:20):
the US T bills, notes and buys. And I don't
have anything with the risk any risk asset.
Speaker 2 (14:26):
Let's come back to that. How you see this playing out?
And uh and I know we'll talk about the report
that you said you have and how people can get
a hold of that. Would you say that Trump's new
policies potentially this mar a Lago accord restructuring the global
monetary system uh, making America investible again, could potentially stay
(14:52):
that off or does that only exaggerate things?
Speaker 1 (14:55):
No, Look, his plan is this right. He wants to deregulate,
reinstitute the tax cuts. He wants to bring investment to
the US. The bringing investments to the US is going
to take time. You know, as well as I do.
Breaking ground, getting getting things going doesn't happen overnight. So
that's that that that is out in the future. It's
(15:18):
much like what happened around Ronald Rugg and Renald Reagan
had a recession and you know eighty I think eighty
and eight eighty one, he had a double dip recession.
Trump is facing the same problem. His policies are going
to take time to to an app The FED is
too tight at the moment, and his policies are actually
(15:38):
reversing out the juice to the economy the last two years,
which was unprecedented deficit spending, a legal immigration, and government
job hiring. So just the second derivative change on that
is going to create a dip because the economy, the
real economy, the middle class economy was you could argue,
was in a recession in twenty three twenty four.
Speaker 2 (16:01):
So we have eight trillion dollars of commitments to be
invested in the United States. But to your point, that's
going to take a while to see that come to fruition.
Speaker 1 (16:09):
Yeah, commitment, commitment, commitments don't translate into money changing hands.
Yet it does.
Speaker 2 (16:15):
Yeah. Now, he has done quite a few executive orders
laying the groundwork for like fast tracking these two things,
coordinating through all the states to get these things through.
I think it was any investments over a billion dollars
get sort of rubber stamped through. But even then you're
still talking years probably before that stuff happening happened, at
least at least.
Speaker 1 (16:33):
You know, twelve to twenty four months depends, you know,
And so that's why you know this. We wrote the report.
His reversal his policies actually will cause a temporary recession
and then his other policies will bring us out of it.
But again, there's a timing issue. So there's there's a
(16:55):
valley before the glory right now, right, it all depends
on the execution, the timing. If he if the economy
isn't turning around by twenty twenty six mid terms, we've
got a problem. So the idea here is you have
a recession that we think manifests itself pretty soon and
(17:18):
the stock market's bottom sometime in the first quarter of
twenty twenty six, and then you have, you know, a recovery.
That's the ideal situation. And that's why in our report
we're not we're not. In our report, we don't we're
not claiming anything it's going to go systemic. We're not
doom and gloom. It's just, you know, we think it's
an old fashioned deep recession and hopefully it's quick and
(17:40):
typically speaking in recessions, like in the dot com recession
and the Great Financial Crisis, stocks went down fifty percent
before they recovered. So we're nowhere near down fifty percent yet,
and we think that's kind of and you know, look,
it's not the end of the world, right, I mean,
home price is going down, are you know, well, not
(18:02):
good for overlevered rich people that are over their skis.
It's great for like someone who had a first time
a home buyer. So you know, it's just not people
just don't like recessions and they think it's the end
of the world. But it's healthy and it resets things.
The problem is, you know, the bankers don't like it,
and they keep reinflating and creating malinvestments. So we're going
(18:24):
to see what happens in the in the teeth of
this one. The Fed is behind the eight ball. They
didn't lower that. You know, I predicted they weren't going
to lower this Wednesday. They didn't. And we might even
get some headline inflation reports that look like inflation's accelerating.
But you know, you get to remember the Great Financial Crisis,
inflation was accelerating June, July, and August before everything imploded.
Speaker 2 (18:48):
It seems like, you know, when you have basically a
heads or tails sort of thing where we either continue
to inflate this bubble and have more inflation, or we
let a def in To your point, you know, maybe
that's a good thing to let asset prices, house prices
come back down, sort of give that that next generation
a chance. It just seems like if people were given
(19:09):
a choice like which one's more bearable, most people would
probably rather see their retirement accounts than their their house
et cetera go up in value, even if the price
of gas and food went up a little bit, versus
you know, all their prices come crashing down, their stock
retirement accounts, housecounts all come crashing down, their businesses suffer.
So it seems like maybe if people had to choose,
(19:30):
and you know, the government having to deal with sort
of the public's view on this, seems like they would
probably choose inflation.
Speaker 1 (19:37):
But well, I think it's a generational issue, right, So
we have the baby boomer generation. It has a lot
of the wealth in the country who wants to see
policies that protect themselves. And then it's this is classic
generational warfare. My partner Carlos Selegri who writes about it
in his book Economic Cycles, Debt and Demographics. This has
(19:57):
gone on, you know, many times before in history. So
we have we have a we have a we have
what money would call a fourth attorney. I mean, this
is this is a generational war. You have the young
people who are locked out of a lifestyle that their
parents and grandparents experienced and are still holding on to
(20:19):
and and they and you know, uh, that's why populism
is rising at the moment. And you can see you know,
I'm sure you're online a lot. You know, I'm not
a boomer, I'm a gen exer, but I get called
the boomer Okay, boomer, you.
Speaker 2 (20:34):
Know, yeah, yeah, yeah, how much of that would you
say is attributed more to where we're at in technology?
So for example, right like, the baby boomers had a
massive middle class because we had the industrial age and
we had assembly lines, and so smart people and dumb
people were marginalized and they all did just put their
(20:55):
their peace on the widget as it went down the
assembly line. So we got this massive middle class. But
as we moved to the information age especially and as
we've accelerated into that now with AI, it's almost more
of a meritocracy where if I'm smarter, I can just
use my laptop, I can just get ahead, and that
middle class sort of goes away and maybe there's no
returning to that.
Speaker 1 (21:13):
That's what Trump is trying to address by bringing manufacturing
jobs back. It's a bold move. We'll see if it works.
The other thing to remember, though, is when you have
let's say you bring a manufacturing plant to a town,
I'm talking micro economics, and you hire that just say
(21:34):
a thousand people, That creates jobs for those people. Those
people then spend on ancillary services like housing, restaurants, services,
so there's other jobs that are created by that steady
base of manufacturing. And you know, that's what we saw
hopp into a lot of Midwest towns during the outsourcing
(21:56):
of manufacturing in the US and the nineties and two
thousands under Clinton, Bush, Obama and and and and and
and what have you, we saw towns. I mean I drove,
I drove across the country Midwest towns just like the
plant left, and they're just shadows of their former selves.
(22:18):
So Trump, I think I did, idealistically, wants to bring
back that kind of Whether it works or not, let's
we'll see. And you're right there, there's been a change
in the nature of the workforce and unfortunately, I Q
has a lot to do with it.
Speaker 2 (22:32):
And our education system isn't helping at all.
Speaker 1 (22:35):
You know, our education system is a disaster. It's making
I mean, look, I went to public school and I
learned a lot. It was great. And I think that's
been a lot of people's experience that are my age.
I hear what's going on in the public school system now,
and it's it's a disaster.
Speaker 2 (22:53):
My My daughter is a sophomore in high school and
she she's homeschooling, and she just does she just wants
to just take her to get out, and I'm like,
just drop out, like I don't care. There's nothing that
they're going to teach you at this point that you
need to know. Like you're already working for me, You're
already learning more cutting edge marketing stuff than they'll ever
teach you in that industrial era school. So it's almost
(23:13):
like people are being still trained in an industrial era
school system with industrial age tools, and they're being left
behind because that world no longer exists for them. And
unless we change that, we're still going to have this
populist uprising which is going to continue to push things,
and if inflation continues to rage on, they continue to
fall further and further behind. So yeah, it's not a
(23:36):
good fix. I want to ask you, you know, when
we talk about these debt crisises, I don't believe that
we'll pay the debt down. I mean, it's more about management.
It's almost like the medical systems today, right, let's manage
the symptoms, does not try to cure it. And so
we have this debt bubble. It's obviously it's a problem
(23:58):
that TOGP levels are are extreme high. Obviously the interest
on the debt is is has become a big problem,
which is why races need to come down. Would you
also believe that one it can't ever be really repaid.
So that's not really the goal that we're aiming for.
But it's more about like a management of it, and
like as we've seen other nations just like sort of
(24:19):
muddle along with it for a long periods of time.
And does that mean it's not as acute as many
people think it is. It's something that maybe just continues
to sort of drag the economy down over a long
period of time.
Speaker 1 (24:29):
Yeah. So so there's there's two charts. As I said,
inflated away or default. Default is probably not an option.
So they will inflate and uh this is and and
and and the will be in stag we're predicting stagflation,
so paths of inflation with deflation that result stagflation kind
(24:52):
of this you know read you know this just this
kind of like roller coaster ride. As the monetary policy
he has less and less impact. And so the goal
I think is to try to muddle along. The problem,
of course is societally what that happens, what happens to
the popular populations of the globe. And one result is populism.
(25:17):
If you're in China, China is a you know, a
communist country that rules from the top down. They fear
their people the most. When I was a black Rock
in two thousand and three, our energy guys came back
from China and every everything they said was all the
(25:37):
high officials there want to keep max employment so the
people have food in their belly because they fear their
people the most China, and China has a demographic problem,
so china solution to this will be a distraction likely.
You know, we're mongoring and that's why you know, geopolitically,
(25:57):
these these debt problems and gender wars, it's kind of classic, right,
you can't a country is the leadership of a country
isn't going to take responsibility, so they'll blame someone else.
So that's we think China's at risk of going kinetic
sometime in the next you know, five to ten years.
(26:19):
Europe has a demographic problem, and we we we have
as as bad as our demographics. We're like the best
the clean of shirt and a dury laundery. And you know,
the illegal immigration did help the economy short term. The
problem is societally, it wrecks the social fabric. So there's
(26:42):
a trade off, and it's going to be very interesting
to see what happens over the next five years. I
don't have a crystal ball, but what I can say
is volatility and risk are going to continue to be unprecedented.
I think the days the fourteen years of low volatility
are over.
Speaker 2 (27:01):
I would agree.
Speaker 1 (27:02):
I saw this quote.
Speaker 2 (27:03):
You know more, Buffett just decided to step down after
a legendary status over at his company, Berkshire Hathaway. But
I saw this chart. Over the past forty five years,
Berkshire has returned three hundred and thirty one thousand percent
compared to the S and P five hundred and fourteen
thousand percent. However, during the same time frame, gold basically
(27:29):
kept even with Berkshire. He didn't really beat that, and
it really kind of goes into this monetary debasement. And
he said, the tendency of government to want to debase
its currency over time, there's no system that beats that.
You can pick dictators, you can pick representatives, you can
do anything, but there will always be a push towards
weaker currencies. The natural course of government is to make
the currency worth less over time. He seemed to sort
(27:53):
of make the case for bitcoin even though he hates
bitcoin and he hates gold. I'm curious your take, as
you said, sort of this volatile nature that we're going
into markets potentially looking very risky risk assets. You called
that as this world sort of goes through this sort
of breakup, if you will, do you see like a
(28:15):
rush to gold and bitcoin assets really kind of taken over.
Speaker 1 (28:20):
Well, let's talk about gold first. What's interesting about gold
is they're making it money again. If you've been following
Basil three and July first of this year, it's going
to be instituted in the US. Gold will be considered
tier one capital and not paper gold, so not the
ETFGLD or futures, physical gold. And so banks are going
(28:46):
to start and already have been acquiring gold because you
can lend against it, you can create money from it.
In seventy one, when we DEALNK from gold, they turn
it into a commodity. They're making it money. Yeah, and
so gold, interestingly enough is being re liquefied as money.
And I think that's why gold is doing what it's doing. Slowly,
(29:10):
I think physical gold I want to I don't want
to encourage people to buy paper gold, physical gold. Bitcoin.
Bitcoin is a legitimate asset, the only and I missed it,
so you know, I'll just say that I did. I
did not get involved. Bitcoin at the moment is very volatile,
(29:34):
and if you're looking at it as a hedge against
a coming recession, just be careful because I'm a math guy,
and it's very highly correlated to the nasdack and the
NAS deck is a risk asset, so you know, think
of it as a part of your portfolio. And you
never should have all your eggs in one basket. You know,
you shouldn't be one hundred percent gold one hundred percent.
(29:56):
But bitcoin so and cash is also an asset temporarily
because if things are going to deflate. Even though cash
traditionally held over long periods of time, it's not a
good idea. Look at what Warren Buppet's doing right now.
He's hold he's holding he owns four point six percent
of the t boll market. Uh, that's cash. Effectively, he's
(30:18):
earning four percent on it, four point three percent, and
he's making the bet that cash is a good trade
at the moment because he's going to pick up bargains
in in a in a dislocation. So so cash is
also an assets. But but you know, if if someone
had to put a gun in my head, and I've
(30:39):
been telling people, look, uh, just have some dry powder
to take advantage of the volatility that's coming. Don't be
don't be over levered, and don't be one hundred percent
any risk asset. Yeah.
Speaker 2 (30:54):
I was just thinking again sort of looking at Buffett's
record and again gold sort of keeping up with what
Berkshire did and to the point that you're making, uh
maybe with the recession in front of us, but then
probably a big uh stimulus print on the back end
and not just the US, China, et cetera. And then
you think about as the world continues to break apart
(31:15):
and do they want to trust US treasuries and so
then maybe those are the tailwind sort of catalysts for
for bitcoin and gold. But that's that's more longer term.
You guys are focused a little bit more shorter term.
Speaker 1 (31:29):
Yeah. Yeah, Look, if if bitcoin could prove to me
mathematically it was delinking from risk assets, that would be interesting.
But you know, we need time to you know, see
that right now, it's not historically, it's it's it acts
like a risk asset, and that's that's fine. You know,
it keeps printing new highs over time. But you know,
(31:50):
if you're gonna, if you think of receptions coming and
you put all your money in bitcoin hoping to avoid uh,
you know, preserving your capital, I'd be lary of that.
That's that's all I'm saying. And maybe bitcoin de couples
during this recession and holds its value that yet, you know,
you know, that could prove me wrong. But historically the
(32:12):
correlation is it's a risk asset. So until that changes,
it is what it is.
Speaker 2 (32:17):
Yeah, well, what about I mean in it seems like
in times of high inflation, those assets tend to get correlated,
which is why like the sixty to forty bond, you know,
stock portfolio is dead. They're sort of moving into unison
right now. And you know, in twenty eight and twenty twenty,
when the markets plunged, gold also crashed along with those.
So is everything somewhat kind of correlated and tied together
(32:41):
at this point?
Speaker 1 (32:42):
No gold gold gold also, I mean, let's not forget
during the Great Financial Crisis, gold went down fifty percent
when when the when Lehman crisis hit, primarily because you know,
in a in a margin call that's global, you sell
what you can, not what you want too, so everything
gets hit, especially if it's on leverage. So but interestingly enough,
(33:05):
gold recovered quite quickly once you're a new high. The
US stock markets took longer, uh to do that. So
you know, that's why Warren Buffett is probably in T
bills because you know, in a dislocation like that where
everything goes down, T bills don't go down, and then
(33:26):
you you know, you know you have dry powder and
then you start scooping up everything.
Speaker 2 (33:30):
Yeah, yeah, I think I saw you probably know better.
I think it was just off of the treasury allocation.
He's making twelve or fourteen billion a year, I think
some crazy number like that.
Speaker 1 (33:46):
Yeah. No, basically he's getting paid to sit to wait
what he's he's determined that risk assets are too expensive.
He's not trying to time the market, but he's decided
he'll wait for a correction and then he'll go back.
That's basically what he's telling you.
Speaker 2 (34:02):
All Right, So in your report, you're projecting, and we'll
link to that down below. I people want to check
that out. But you're projecting that there's some big recession
coming up, you know this year, probably in twenty twenty five,
sort of lay that out what people should be watching,
paying attention to, and sort of what you think from
a big picture, their sort of life raft is through
that moment.
Speaker 1 (34:22):
Well, you know, again it's structural, it's endogenous to the
US economy being it's a cycle. It's going to happen,
and housing is going to be the one that leads it.
Interestingly enough, housing has eighteen year cycles. The last one
was two thousand and seven. Carlos in his book in
twenty twenty one wrote about a housing crisis appearing sometime
(34:43):
in twenty five twenty six, And as we wrote the report,
we're seeing it, you know, we're seeing it in real time.
It's early indicators that lead new permit. New permits started
collapsing in twenty two. That's a leading indicator. So what
we're seeing our completions. Once the completions dry up, that's
(35:04):
an indication there's no demand. And we're starting to see
that new tenant rents have been coming down. That's probably
due to the illegals either self deporting or the stop
of the flow. And new tenant rens lead all tenant
rents which lead home prices, and so it's just a cycle.
Government spending is on the margin being cut and that's
(35:25):
going to affect the economy and consumption, and we're expecting
this to become apparent sometime in the fall. The stock market. Unfortunately,
we have a housing problem and a AI bubble, so
we're going to have a deflation of both. We think
the AI bubble has already popped and is in process
of popping. We think we saw peak spend in Q
(35:49):
one and it's downhill from there. And it's it's just
classic second derivative stuff and there'll be you know, credit contraction.
The money supply I will come down, velocity of money
will come down, and it will cause a deflationary scare.
And if that'll come in and do what it does,
and stock prices will revolt and people will blame Trump people,
(36:11):
people will blame tariffs. But it's just a classic cycle.
And we go into our reports eighty five pages. We
have also a video of us going over an executive presentation,
which we also provide, so it comes with three components report,
executive presentation, and an hour long video of Carlos and
I going over it and It's on our website at
(36:33):
finance technologies dot com. It's stilled with a pH and
if you buy the report, you'll get free updates as
we track this and when we think the bottom is in,
we'll get If you buy this report, you'll get that
report for free.
Speaker 2 (36:47):
All right, Well, that's a compelling case. I appreciate you
sharing that with us.
Speaker 1 (36:53):
We'll wait and see.
Speaker 2 (36:54):
I'm hopeful, but we'll wait and see see how this
all plays out.
Speaker 1 (36:58):
Thanks a lot, Mark,
Coincidentally, COVID hit and gave central banks and governments unprecedented
excuses to create more debt and print more money, and
that reinflated the system.
Speaker 2 (00:10):
Trump's new policies could potentially stay that off, or does
that only exaggerate things?
Speaker 1 (00:16):
His plan is this right. He wants to deregulate, reinstitute
the tax cuts. He wants to bring investment to the US.
Just the second derivative change on that is going to
create a debt. The real economy, the middle class economy, was,
you could argue, was in a recession in twenty three
and twenty four. So if you have a global debt problem,
there's two ways to handle its way out of it.
Speaker 2 (00:38):
Or you ed you said that, You've been saying that
there's a clock that started on a global debt crisis,
Like what are you looking at that broke and why
should anyone listening to right now be preparing for that?
Speaker 1 (00:52):
Well, look, the global debt crisis kind of manifested itself
in twenty nineteen. There was a lot of synchronized global
growth slowing and the repo market started blowing up in
September of twenty nineteen. The plumbing was becoming unwound. Coincidentally,
(01:14):
COVID hit and gave central banks and governments unprecedented excuses
to create more debt and print more money, and that
reinflated the system. So if you have a global debt problem,
there's two ways to handle it. You inflate your way
out of it, or you default. And COVID, again, I
(01:36):
wasn't in the room. We can debate whether it was
a plan or an accident. Who cares. It saved the
system temporarily kicked the can down the road, and the
FED printed and the US government spent. Printing without spending
doesn't mean anything. So we saw unprecedented growth in the
money supply. And my partner Carlos Aellegaria, you know in
(01:58):
his book that he had a revised edition in twenty
twenty one, predicted that massive inflation was coming, and it came.
And you know, there's a little bit of a debate
as to who caused the inflation. I would say what
they did under the Trump administration with the COVID spending
and the printing didn't really have an impact until you know,
(02:18):
twelve to eighteen months later, and that was in the
Biden administration. So you know, inflation which quote unquote was transitory.
You know, that's what we were hearing from, you know,
yelling and Powell was nonsense, because monetary, when you increase
the money supply without you know, without a commensurate like growth,
(02:42):
it just gonna inflay prices. And it did. And so
the FED then responded by going on an unprecedented interest
rate rapid interest rate increased from basically zero to five
and a half percent, and m two year over year
growth unged in the aftermath, and we saw for the
(03:05):
first time since not you know, the thirties, and two
year year growth went negative in November twenty two, and
then unsurprisingly, we had a bunch of bank failures in
the spring of twenty twenty three. People forget that, and
the FED plugged the hole. They gave bank term funding program.
(03:28):
They lent moneies to banks that were underwater to prevent
a deposit run and that worked because most of the
most most of the credit that was underwater were you know,
risk free assets like treasuries because of you know, the
duration risks that happened when they raised interest rates. So
(03:48):
what the Fed's not going to do and they've already
ended the bank term funding program what the Fed's not
going to do is lend money to bad credit, and
that's we're getting into the credit cycle of this commercial
real estate, as we know, is already a problem. That's
about three to five trillion on banks balance sheets in
the US. The bigger problem we see is the economy
(04:12):
having been floated in twenty three and twenty four by
illegal immigration. A large part of our growth came from
that whole movement into basically an organized illegal operation that
you know, we think of a large majority of the
deficit spending we saw funded that through NGOs and other
(04:32):
agencies and then direct payments to illegals. So that really
floated the economy. And that's all coming away. So we
see a housing crisis coming next. And when we say crisis,
you know, I don't want people to freak out. I
mean it's it's needed. I mean, home prices need to
come down. People can't afford homes and new home supplies.
(04:53):
You know, at all time record of the world near
all time record levels, there's no there's no transaction active.
And the housing market was really buoyed by the marginal renter,
which was the illegal alien. That that momentum is all
going the wrong way and p M I, you know,
has been a problem for two years. It's been showing
(05:15):
recessionary signals globally and the only economy that was really
outstanding was the US economy. And that's all that's all
going the wrong way. The second derivative government spending, even
though the Trump administration is really not cutting spending, the
second derivative is changing. The growth is flattening, and that's
(05:38):
all you need to cause a softening in the economy.
And that's what We've put out a report that we're
selling on January ninth detailing what we were seeing, and
you can buy it if you want at our website
Finance Technologies dot com with the pH. So that's kind
of the brad swathe we're already starting to see indicates
(06:00):
that the economy is slowly starting to roll over, and
we'll see if our calls right. We think we're going
to be right in a very big way.
Speaker 2 (06:11):
Well, thanks for setting the stage on that. Let's let's
dig into a couple of things on that you said.
I think I think what you said is after you
talked about the FED bailing out the banks in twenty
twenty three through the BTFP, that the FED is not
going to give money to bad businesses or bad investments anymore.
Speaker 1 (06:30):
I think, well, they're not. They're not. They're not going
to loan money to Uh. It was easy to provide
liquidity versus treasury assets. They're underwater. They're not going to
provide liquidity to bad loan decisions, bad credit decisions. And
what's going on with the commercial real estate problem?
Speaker 2 (06:51):
Uh?
Speaker 1 (06:51):
And by the way, this all eventually affects lending bank.
The bank's main function is to choose the economy by lending.
When you start to accumulate bad debts on your books,
you you you, you know, you stop lending as much.
And what's going on with the commercial real estate is
they've been extending and pretending.
Speaker 2 (07:08):
Uh.
Speaker 1 (07:08):
And the FED put out a report in November of
twenty twenty four detailing that.
Speaker 2 (07:14):
Uh.
Speaker 1 (07:14):
And I think they're going to start cracking down on banks,
you know, coincidentally during the Trump administration. That may be
a political move, who knows, but I mean, this has
been a problem for well over a year and a half.
Speaker 2 (07:26):
Uh.
Speaker 1 (07:27):
There there's also starting to be uh, you know, indications
and problems in auto loans, and there's delinquencies and homes arising.
So we have a credit we have a classic credit
cycle coming and it's just inevitable and it will cause
the word deflation to be mentioned temporarily because we know
(07:49):
that deflation is not allowed under the rules of the bankers.
So we're predicting inflation CPI headlined to some sometime in
the next six to twelve months print sub two percent number.
The biggest component of inflation is shelter. It's about forty
five percent of the CPI number. That's sticky, it takes
(08:10):
time to adjust. And so we're expecting a recession. We're
expecting the Fed to do what it does, lower interest rates,
and then maybe if if the crisis is you know,
if it goes if it looks like it's going to
go systemic, they're going to print a ton of money
and the government will have to do deficit spending and
(08:32):
then you know, we're back in you know, the reinflation
of the bubble if they can do it again.
Speaker 2 (08:38):
So yeah, so you said that if deflation is not
allowed in bankers terms, it's really not allowed in a
debt based monetary system.
Speaker 1 (08:46):
Just overall, it's if allowed to go on checked it
the daisy chain effects are collapse.
Speaker 2 (08:52):
Would you say you mentioned, you know how this actually
started in twenty nineteen and then the COVID sort of
excuse came along. Would you say that it actually started
back in two thousand and eight when we really sort
of had the first QE. Maybe the FED tried to
allow the bubble to deflate like they had done in
previous cycles two thousand, et cetera. But then it became
(09:16):
too systemic, right, they had to bel out the banks,
they had to do the quantitative easing. It levered up
the system to a point now in twenty nineteen, twenty
twenty showed that they're and even twenty twenty three showed
there's zero appetite to allow it to sort of deflate
on its own and they have to keep reinflating.
Speaker 1 (09:35):
Yeah, I would. It's interesting you talked about the Great
Financial Crisis. That's when a lot of things change. That's
when we saw unprecedented monetary policy, which now everybody expects
and it's not as unprecedented. It's a tool in the toolbox.
And what that did is the real economy, if you
go back, really kind of died globally and what floated
(09:57):
the economy for the next fourteen years was precedented monetary
policy coupled with government spending, and the government as a
percent of GDP, not only in the US, but in Europe, China,
you name, it grew its share the pie in GDP,
and that's changed a lot of you know, what's been
(10:18):
going on economically. So the closer you are to government
and government favors and the printing press, the better. After
you've done so, the economy showed growth, but the problem was,
over time there was a wealth disparity effect. And that's why,
you know, if you want to ask yourself why populism
is on the rise, it's basically because the rich got
(10:40):
richer and everybody else got poor. And it's been an
economy of the rich, not of the middle class. And
Trump was elected primarily because there was minus two percent
real wage growth going into the election. The last time
that happened in nineteen eighty, Ronald Reagan swept in and
it's Bill Clinton ninety two. So you know, well, Trump
(11:03):
was was going to win no matter what because of
the economy didn't matter. Got it.
Speaker 2 (11:07):
So if the system structurally fundamentally changed in two thousand
and eight, got so levered up, you could see twenty nineteen,
twenty twenty, the response was way faster. Right, two thousand
and eight, they allowed bear Stearns to go down and
took seven months to get a bail out. In twenty
twenty three, it took six days to bail out the banks.
(11:29):
But you think that now maybe FED, the FED would
sort of change their tune and say, well, let's just
let these bad loans go bad and let's see what
happens with the defaise.
Speaker 1 (11:37):
Well, it depends they can't be seen as bailing out politically,
it's going to be a lot harder to try to
bail out the banks. And during twenty.
Speaker 2 (11:46):
Short of like just take the loans on their books
like they did with the NBS and eight, like, you
don't think that's politically sustainable.
Speaker 1 (11:52):
They could do it, but they will only do it
if it's enough pain, So that's why they'll do it.
But they'll do it after a big correction and people
are freaking out and begged them to do it. They
don't want to do it ahead of time. Twenty twenty
gave them great cover. I mean, they bailed out Citadel Capital.
(12:13):
You know, they gave them emergency repos during twenty twenty
and and and there was also and they also basically
privatized the corporate credit market. They started buying I don't
know if people remember this, but they started buying under
their balance sheet apple bonds, So they they basically privatized
the corporate credit market. The problem with that is it's
(12:34):
kept corporate spread credit spreads tight, and that's driven a
massive amount of misallocation of capital, as you would imagine.
So and the other problem is this, so you know,
in the dot com boom, we had a corporate fraud cycle,
and then you know, we had a the FED do
(12:56):
their easy money after that bus that led to a
banking fraud cycle. And now we have, fourteen years later,
a i would say, a central bank government fraud cycle.
And we're discovering all sorts of frauds, you know, through
what doge is exposed and whatnot. And it's not so
(13:16):
much that the FED will become trapped when another central
bank has a problem. And the Bank of Japan is
kind of the in the problem right now. They can
either you know, continue to print money to float the
yen carry trade or there people will continue to get
poor and there's a currency crisis. So the release valve
(13:37):
on the sovereign debt crisis is always was always going
to be the currency markets, because eventually the currency markets
will revolt if one country, you know, it's someone to
if the market's determined no moss, then it's over and
then the whole thing has a problem. So the FED,
you know, is the FED going to bail out Japan?
I mean that right? So this is where we are.
(13:59):
It's it's very precarious. We don't have a crystal ball.
But what we do know is there's an economic sloan
on coming. There's going to be, you know, problem in
the stock markets, and we're expecting yields to go much lower.
And obviously, if you believe our call, you want to
be up to your eyeballs in risk creer assets like
(14:20):
the US T bills, notes and buys. And I don't
have anything with the risk any risk asset.
Speaker 2 (14:26):
Let's come back to that. How you see this playing out?
And uh and I know we'll talk about the report
that you said you have and how people can get
a hold of that. Would you say that Trump's new
policies potentially this mar a Lago accord restructuring the global
monetary system uh, making America investible again, could potentially stay
(14:52):
that off or does that only exaggerate things?
Speaker 1 (14:55):
No, Look, his plan is this right. He wants to deregulate,
reinstitute the tax cuts. He wants to bring investment to
the US. The bringing investments to the US is going
to take time. You know, as well as I do.
Breaking ground, getting getting things going doesn't happen overnight. So
that's that that that is out in the future. It's
(15:18):
much like what happened around Ronald Rugg and Renald Reagan
had a recession and you know eighty I think eighty
and eight eighty one, he had a double dip recession.
Trump is facing the same problem. His policies are going
to take time to to an app The FED is
too tight at the moment, and his policies are actually
(15:38):
reversing out the juice to the economy the last two years,
which was unprecedented deficit spending, a legal immigration, and government
job hiring. So just the second derivative change on that
is going to create a dip because the economy, the
real economy, the middle class economy was you could argue,
was in a recession in twenty three twenty four.
Speaker 2 (16:01):
So we have eight trillion dollars of commitments to be
invested in the United States. But to your point, that's
going to take a while to see that come to fruition.
Speaker 1 (16:09):
Yeah, commitment, commitment, commitments don't translate into money changing hands.
Yet it does.
Speaker 2 (16:15):
Yeah. Now, he has done quite a few executive orders
laying the groundwork for like fast tracking these two things,
coordinating through all the states to get these things through.
I think it was any investments over a billion dollars
get sort of rubber stamped through. But even then you're
still talking years probably before that stuff happening happened, at
least at least.
Speaker 1 (16:33):
You know, twelve to twenty four months depends, you know,
And so that's why you know this. We wrote the report.
His reversal his policies actually will cause a temporary recession
and then his other policies will bring us out of it.
But again, there's a timing issue. So there's there's a
(16:55):
valley before the glory right now, right, it all depends
on the execution, the timing. If he if the economy
isn't turning around by twenty twenty six mid terms, we've
got a problem. So the idea here is you have
a recession that we think manifests itself pretty soon and
(17:18):
the stock market's bottom sometime in the first quarter of
twenty twenty six, and then you have, you know, a recovery.
That's the ideal situation. And that's why in our report
we're not we're not. In our report, we don't we're
not claiming anything it's going to go systemic. We're not
doom and gloom. It's just, you know, we think it's
an old fashioned deep recession and hopefully it's quick and
(17:40):
typically speaking in recessions, like in the dot com recession
and the Great Financial Crisis, stocks went down fifty percent
before they recovered. So we're nowhere near down fifty percent yet,
and we think that's kind of and you know, look,
it's not the end of the world, right, I mean,
home price is going down, are you know, well, not
(18:02):
good for overlevered rich people that are over their skis.
It's great for like someone who had a first time
a home buyer. So you know, it's just not people
just don't like recessions and they think it's the end
of the world. But it's healthy and it resets things.
The problem is, you know, the bankers don't like it,
and they keep reinflating and creating malinvestments. So we're going
(18:24):
to see what happens in the in the teeth of
this one. The Fed is behind the eight ball. They
didn't lower that. You know, I predicted they weren't going
to lower this Wednesday. They didn't. And we might even
get some headline inflation reports that look like inflation's accelerating.
But you know, you get to remember the Great Financial Crisis,
inflation was accelerating June, July, and August before everything imploded.
Speaker 2 (18:48):
It seems like, you know, when you have basically a
heads or tails sort of thing where we either continue
to inflate this bubble and have more inflation, or we
let a def in To your point, you know, maybe
that's a good thing to let asset prices, house prices
come back down, sort of give that that next generation
a chance. It just seems like if people were given
(19:09):
a choice like which one's more bearable, most people would
probably rather see their retirement accounts than their their house
et cetera go up in value, even if the price
of gas and food went up a little bit, versus
you know, all their prices come crashing down, their stock
retirement accounts, housecounts all come crashing down, their businesses suffer.
So it seems like maybe if people had to choose,
(19:30):
and you know, the government having to deal with sort
of the public's view on this, seems like they would
probably choose inflation.
Speaker 1 (19:37):
But well, I think it's a generational issue, right, So
we have the baby boomer generation. It has a lot
of the wealth in the country who wants to see
policies that protect themselves. And then it's this is classic
generational warfare. My partner Carlos Selegri who writes about it
in his book Economic Cycles, Debt and Demographics. This has
(19:57):
gone on, you know, many times before in history. So
we have we have a we have a we have
what money would call a fourth attorney. I mean, this
is this is a generational war. You have the young
people who are locked out of a lifestyle that their
parents and grandparents experienced and are still holding on to
(20:19):
and and they and you know, uh, that's why populism
is rising at the moment. And you can see you know,
I'm sure you're online a lot. You know, I'm not
a boomer, I'm a gen exer, but I get called
the boomer Okay, boomer, you.
Speaker 2 (20:34):
Know, yeah, yeah, yeah, how much of that would you
say is attributed more to where we're at in technology?
So for example, right like, the baby boomers had a
massive middle class because we had the industrial age and
we had assembly lines, and so smart people and dumb
people were marginalized and they all did just put their
(20:55):
their peace on the widget as it went down the
assembly line. So we got this massive middle class. But
as we moved to the information age especially and as
we've accelerated into that now with AI, it's almost more
of a meritocracy where if I'm smarter, I can just
use my laptop, I can just get ahead, and that
middle class sort of goes away and maybe there's no
returning to that.
Speaker 1 (21:13):
That's what Trump is trying to address by bringing manufacturing
jobs back. It's a bold move. We'll see if it works.
The other thing to remember, though, is when you have
let's say you bring a manufacturing plant to a town,
I'm talking micro economics, and you hire that just say
(21:34):
a thousand people, That creates jobs for those people. Those
people then spend on ancillary services like housing, restaurants, services,
so there's other jobs that are created by that steady
base of manufacturing. And you know, that's what we saw
hopp into a lot of Midwest towns during the outsourcing
(21:56):
of manufacturing in the US and the nineties and two
thousands under Clinton, Bush, Obama and and and and and
and what have you, we saw towns. I mean I drove,
I drove across the country Midwest towns just like the
plant left, and they're just shadows of their former selves.
(22:18):
So Trump, I think I did, idealistically, wants to bring
back that kind of Whether it works or not, let's
we'll see. And you're right there, there's been a change
in the nature of the workforce and unfortunately, I Q
has a lot to do with it.
Speaker 2 (22:32):
And our education system isn't helping at all.
Speaker 1 (22:35):
You know, our education system is a disaster. It's making
I mean, look, I went to public school and I
learned a lot. It was great. And I think that's
been a lot of people's experience that are my age.
I hear what's going on in the public school system now,
and it's it's a disaster.
Speaker 2 (22:53):
My My daughter is a sophomore in high school and
she she's homeschooling, and she just does she just wants
to just take her to get out, and I'm like,
just drop out, like I don't care. There's nothing that
they're going to teach you at this point that you
need to know. Like you're already working for me, You're
already learning more cutting edge marketing stuff than they'll ever
teach you in that industrial era school. So it's almost
(23:13):
like people are being still trained in an industrial era
school system with industrial age tools, and they're being left
behind because that world no longer exists for them. And
unless we change that, we're still going to have this
populist uprising which is going to continue to push things,
and if inflation continues to rage on, they continue to
fall further and further behind. So yeah, it's not a
(23:36):
good fix. I want to ask you, you know, when
we talk about these debt crisises, I don't believe that
we'll pay the debt down. I mean, it's more about management.
It's almost like the medical systems today, right, let's manage
the symptoms, does not try to cure it. And so
we have this debt bubble. It's obviously it's a problem
(23:58):
that TOGP levels are are extreme high. Obviously the interest
on the debt is is has become a big problem,
which is why races need to come down. Would you
also believe that one it can't ever be really repaid.
So that's not really the goal that we're aiming for.
But it's more about like a management of it, and
like as we've seen other nations just like sort of
(24:19):
muddle along with it for a long periods of time.
And does that mean it's not as acute as many
people think it is. It's something that maybe just continues
to sort of drag the economy down over a long
period of time.
Speaker 1 (24:29):
Yeah. So so there's there's two charts. As I said,
inflated away or default. Default is probably not an option.
So they will inflate and uh this is and and
and and the will be in stag we're predicting stagflation,
so paths of inflation with deflation that result stagflation kind
(24:52):
of this you know read you know this just this
kind of like roller coaster ride. As the monetary policy
he has less and less impact. And so the goal
I think is to try to muddle along. The problem,
of course is societally what that happens, what happens to
the popular populations of the globe. And one result is populism.
(25:17):
If you're in China, China is a you know, a
communist country that rules from the top down. They fear
their people the most. When I was a black Rock
in two thousand and three, our energy guys came back
from China and every everything they said was all the
(25:37):
high officials there want to keep max employment so the
people have food in their belly because they fear their
people the most China, and China has a demographic problem,
so china solution to this will be a distraction likely.
You know, we're mongoring and that's why you know, geopolitically,
(25:57):
these these debt problems and gender wars, it's kind of classic, right,
you can't a country is the leadership of a country
isn't going to take responsibility, so they'll blame someone else.
So that's we think China's at risk of going kinetic
sometime in the next you know, five to ten years.
(26:19):
Europe has a demographic problem, and we we we have
as as bad as our demographics. We're like the best
the clean of shirt and a dury laundery. And you know,
the illegal immigration did help the economy short term. The
problem is societally, it wrecks the social fabric. So there's
(26:42):
a trade off, and it's going to be very interesting
to see what happens over the next five years. I
don't have a crystal ball, but what I can say
is volatility and risk are going to continue to be unprecedented.
I think the days the fourteen years of low volatility
are over.
Speaker 2 (27:01):
I would agree.
Speaker 1 (27:02):
I saw this quote.
Speaker 2 (27:03):
You know more, Buffett just decided to step down after
a legendary status over at his company, Berkshire Hathaway. But
I saw this chart. Over the past forty five years,
Berkshire has returned three hundred and thirty one thousand percent
compared to the S and P five hundred and fourteen
thousand percent. However, during the same time frame, gold basically
(27:29):
kept even with Berkshire. He didn't really beat that, and
it really kind of goes into this monetary debasement. And
he said, the tendency of government to want to debase
its currency over time, there's no system that beats that.
You can pick dictators, you can pick representatives, you can
do anything, but there will always be a push towards
weaker currencies. The natural course of government is to make
the currency worth less over time. He seemed to sort
(27:53):
of make the case for bitcoin even though he hates
bitcoin and he hates gold. I'm curious your take, as
you said, sort of this volatile nature that we're going
into markets potentially looking very risky risk assets. You called
that as this world sort of goes through this sort
of breakup, if you will, do you see like a
(28:15):
rush to gold and bitcoin assets really kind of taken over.
Speaker 1 (28:20):
Well, let's talk about gold first. What's interesting about gold
is they're making it money again. If you've been following
Basil three and July first of this year, it's going
to be instituted in the US. Gold will be considered
tier one capital and not paper gold, so not the
ETFGLD or futures, physical gold. And so banks are going
(28:46):
to start and already have been acquiring gold because you
can lend against it, you can create money from it.
In seventy one, when we DEALNK from gold, they turn
it into a commodity. They're making it money. Yeah, and
so gold, interestingly enough is being re liquefied as money.
And I think that's why gold is doing what it's doing. Slowly,
(29:10):
I think physical gold I want to I don't want
to encourage people to buy paper gold, physical gold. Bitcoin.
Bitcoin is a legitimate asset, the only and I missed it,
so you know, I'll just say that I did. I
did not get involved. Bitcoin at the moment is very volatile,
(29:34):
and if you're looking at it as a hedge against
a coming recession, just be careful because I'm a math guy,
and it's very highly correlated to the nasdack and the
NAS deck is a risk asset, so you know, think
of it as a part of your portfolio. And you
never should have all your eggs in one basket. You know,
you shouldn't be one hundred percent gold one hundred percent.
(29:56):
But bitcoin so and cash is also an asset temporarily
because if things are going to deflate. Even though cash
traditionally held over long periods of time, it's not a
good idea. Look at what Warren Buppet's doing right now.
He's hold he's holding he owns four point six percent
of the t boll market. Uh, that's cash. Effectively, he's
(30:18):
earning four percent on it, four point three percent, and
he's making the bet that cash is a good trade
at the moment because he's going to pick up bargains
in in a in a dislocation. So so cash is
also an assets. But but you know, if if someone
had to put a gun in my head, and I've
(30:39):
been telling people, look, uh, just have some dry powder
to take advantage of the volatility that's coming. Don't be
don't be over levered, and don't be one hundred percent
any risk asset. Yeah.
Speaker 2 (30:54):
I was just thinking again sort of looking at Buffett's
record and again gold sort of keeping up with what
Berkshire did and to the point that you're making, uh
maybe with the recession in front of us, but then
probably a big uh stimulus print on the back end
and not just the US, China, et cetera. And then
you think about as the world continues to break apart
(31:15):
and do they want to trust US treasuries and so
then maybe those are the tailwind sort of catalysts for
for bitcoin and gold. But that's that's more longer term.
You guys are focused a little bit more shorter term.
Speaker 1 (31:29):
Yeah. Yeah, Look, if if bitcoin could prove to me
mathematically it was delinking from risk assets, that would be interesting.
But you know, we need time to you know, see
that right now, it's not historically, it's it's it acts
like a risk asset, and that's that's fine. You know,
it keeps printing new highs over time. But you know,
(31:50):
if you're gonna, if you think of receptions coming and
you put all your money in bitcoin hoping to avoid uh,
you know, preserving your capital, I'd be lary of that.
That's that's all I'm saying. And maybe bitcoin de couples
during this recession and holds its value that yet, you know,
you know, that could prove me wrong. But historically the
(32:12):
correlation is it's a risk asset. So until that changes,
it is what it is.
Speaker 2 (32:17):
Yeah, well, what about I mean in it seems like
in times of high inflation, those assets tend to get correlated,
which is why like the sixty to forty bond, you know,
stock portfolio is dead. They're sort of moving into unison
right now. And you know, in twenty eight and twenty twenty,
when the markets plunged, gold also crashed along with those.
So is everything somewhat kind of correlated and tied together
(32:41):
at this point?
Speaker 1 (32:42):
No gold gold gold also, I mean, let's not forget
during the Great Financial Crisis, gold went down fifty percent
when when the when Lehman crisis hit, primarily because you know,
in a in a margin call that's global, you sell
what you can, not what you want too, so everything
gets hit, especially if it's on leverage. So but interestingly enough,
(33:05):
gold recovered quite quickly once you're a new high. The
US stock markets took longer, uh to do that. So
you know, that's why Warren Buffett is probably in T
bills because you know, in a dislocation like that where
everything goes down, T bills don't go down, and then
(33:26):
you you know, you know you have dry powder and
then you start scooping up everything.
Speaker 2 (33:30):
Yeah, yeah, I think I saw you probably know better.
I think it was just off of the treasury allocation.
He's making twelve or fourteen billion a year, I think
some crazy number like that.
Speaker 1 (33:46):
Yeah. No, basically he's getting paid to sit to wait
what he's he's determined that risk assets are too expensive.
He's not trying to time the market, but he's decided
he'll wait for a correction and then he'll go back.
That's basically what he's telling you.
Speaker 2 (34:02):
All Right, So in your report, you're projecting, and we'll
link to that down below. I people want to check
that out. But you're projecting that there's some big recession
coming up, you know this year, probably in twenty twenty five,
sort of lay that out what people should be watching,
paying attention to, and sort of what you think from
a big picture, their sort of life raft is through
that moment.
Speaker 1 (34:22):
Well, you know, again it's structural, it's endogenous to the
US economy being it's a cycle. It's going to happen,
and housing is going to be the one that leads it.
Interestingly enough, housing has eighteen year cycles. The last one
was two thousand and seven. Carlos in his book in
twenty twenty one wrote about a housing crisis appearing sometime
(34:43):
in twenty five twenty six, And as we wrote the report,
we're seeing it, you know, we're seeing it in real time.
It's early indicators that lead new permit. New permits started
collapsing in twenty two. That's a leading indicator. So what
we're seeing our completions. Once the completions dry up, that's
(35:04):
an indication there's no demand. And we're starting to see
that new tenant rents have been coming down. That's probably
due to the illegals either self deporting or the stop
of the flow. And new tenant rens lead all tenant
rents which lead home prices, and so it's just a cycle.
Government spending is on the margin being cut and that's
(35:25):
going to affect the economy and consumption, and we're expecting
this to become apparent sometime in the fall. The stock market. Unfortunately,
we have a housing problem and a AI bubble, so
we're going to have a deflation of both. We think
the AI bubble has already popped and is in process
of popping. We think we saw peak spend in Q
(35:49):
one and it's downhill from there. And it's it's just
classic second derivative stuff and there'll be you know, credit contraction.
The money supply I will come down, velocity of money
will come down, and it will cause a deflationary scare.
And if that'll come in and do what it does,
and stock prices will revolt and people will blame Trump people,
(36:11):
people will blame tariffs. But it's just a classic cycle.
And we go into our reports eighty five pages. We
have also a video of us going over an executive presentation,
which we also provide, so it comes with three components report,
executive presentation, and an hour long video of Carlos and
I going over it and It's on our website at
(36:33):
finance technologies dot com. It's stilled with a pH and
if you buy the report, you'll get free updates as
we track this and when we think the bottom is in,
we'll get If you buy this report, you'll get that
report for free.
Speaker 2 (36:47):
All right, Well, that's a compelling case. I appreciate you
sharing that with us.
Speaker 1 (36:53):
We'll wait and see.
Speaker 2 (36:54):
I'm hopeful, but we'll wait and see see how this
all plays out.
Speaker 1 (36:58):
Thanks a lot, Mark,
Host
Mark Moss
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