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WARNING: Bitcoin & Stocks Are Going MUCH Higher — Transcript

by Anthony Pompliano · 11,310 words · 1,697 segments · language en · Watch on YouTube

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0:00And so you have this powerful tailwind
0:01in for earnings. At the same time,
0:02you're getting uh you have this problem
0:04that keeps requiring policy intervention
0:06um in the form of financial pressure and
0:08monetary debasement. That is a reason
0:10for stocks to be at or near all-time
0:12highs. And it's one of the reasons why
0:13we think stocks will go to make
0:16significant highs from here uh over the
0:18next 12 to 18 months. In our view, we
0:19don't think this bull market is over.
0:21What would stop it? What would stop it?
0:23What's going on guys? Today we got a
0:24great conversation with Darius Dale. In
0:26this conversation, we talk about the
0:27Bessant bluff, the Bessant bazooka,
0:30what's going on with interest rates,
0:31what's going on at the Fed, what's going
0:32on at the Treasury, what's going on in
0:34the economy, how all of this is tied
0:36together, and why so many people are
0:37upset yet so many people are getting so
0:39rich. All of this is tied together in a
0:42way that you probably don't understand,
0:43but if you listen to this conversation,
0:45you will. Here's my latest conversation
0:46with Darius Dale. All right, Darius, I
0:49want to talk about the Bessant bluff.
0:52You like that, huh? You like that? No
0:53one used that one yet. Is he bluffing or
0:56is he got the goods? Can he intervene in
0:58the market and get everyone back on
1:00sides or is it just a bluff? I apologize
1:03in advance, Scott.
1:06Uh you didn't think that was coming,
1:08huh?
1:08>> Oh, no. No. Look, you know, I'm here to
1:10speak my mind and and say what the data
1:12lead me to tell people. And and
1:14ultimately, I think the uh I think your
1:15characterization
1:17is partially accurate. I don't think
1:20it's fully accurate because I I do
1:21believe we're in a fiscal dominance
1:22regime. And ultimately, if the bluff
1:25fails, then he's got backup.
1:27>> And we know what backup looks like. It
1:28can either take the form of an expansion
1:30of reserve management purchases by the
1:32Federal Reserve. Uh we could see we're
1:34pro we're going to see in our opinion a
1:36substantial degree of a relaxation of
1:38bank regulation that will create uh the
1:41balance sheet capacity for them to uh
1:43you know address this kind of supply
1:45demand imbalance in the Treasury bond
1:46market. And if and if that's not the
1:48preferred path or if that a bank
1:50deregulation process takes too long, you
1:53could actually see the Fed come out, you
1:54could see Beston sort of to direct the
1:55Fed uh to come out and essentially say,
1:57"Hey, look, we need to cap yields at a
1:59certain level uh in order to achieve
2:01our, you know, they'll make it up. You
2:03know, they making all the stuff up the
2:04whole time." Uh by the way, uh they'll
2:06make up, you know, this is what we need
2:07to do to achieve our price stability
2:08mandate or our labor mandate or, you
2:10know, or our moderate long-term interest
2:11rate mandate, which by the way, that's
2:12the Fed's third congressionally stated
2:14mandate that no one ever talks about.
2:16So, there's the Bessin bluff, but I
2:19think it's backed up by the Bessant
2:21bazooka.
2:22>> Who? What's the bazooka?
2:24>> That he has unlimited firepower.
2:26>> This man brought a a butter knife to a
2:27gunfight. What are you talking about? $6
2:30billion of buyback skin.
2:31>> Yeah, cuz he cuz he all he's doing he's
2:33just testing. He's like uh I think of it
2:35kind of um people think of the US
2:37government as like uh America's army in
2:40a war. And what we learned over the last
2:4225 years, one, we shouldn't be in
2:44foreign wars. Another topic. Uh but is
2:47the insurgents they understand something
2:50that America had a hard time learning
2:52for a while.
2:53>> Yeah.
2:53>> What they used to do is let's say that
2:54there's a base somewhere in the Middle
2:55East.
2:56>> They would test. So maybe they send one
2:59guy over. He takes a couple shots, runs
3:01away.
3:03>> How'd they react? What' they do? Did
3:05they all of a sudden get up and go full
3:08security? Did they send someone after
3:09him? What weapons did they have? What
3:11vehicles? How many people? the next day
3:14somebody else from a different angle and
3:17they just kept kind of proddding and
3:18proddding and prodd and then they would
3:20learn and then they would start to
3:21understand who they were up against.
3:23>> Yeah.
3:24>> And as Americans we knew what they were
3:25doing. It's not, you know, you're not
3:27that stupid. You're like, "All right,
3:28that guy just shot at me. That guy's got
3:29a camera."
3:30>> Yeah.
3:34>> Audible. Audible.
3:35>> We need to do something differently.
3:36Yeah. So that's kind of to me what
3:39Bessant is doing is he's like, "All
3:41right, if I go here and I say I'm going
3:43to go to six billion, what happens?" But
3:46he knows that he could throw the kitchen
3:49sink, but he kind of doesn't need to do
3:50it yet. And so he could use words. He
3:53could do a little proddding. He's kind
3:55of like trying to figure out where's his
3:56pressure points. But I do think at some
3:58point if the market keeps calling the
4:00bluff, then he's like, "All right, you
4:02guys want to test me?" He's got a lot of
4:05firepower.
4:06He's got a lot of backup firepower to be
4:08clear. Uh and I agree with your your
4:10theory here that he's sort of proddding
4:11the market. Like look, ideally he would
4:13not have this problem set, right?
4:15Ideally, that's the ideal set. You think
4:17that's what he thinks? Yeah, exactly.
4:18Ideally, you wouldn't have to do any of
4:20this. That would be that's the ideal
4:22problem. But since you can't control the
4:23fact that there's a geopolitically
4:24driven supply demand imbalance in the
4:26Treasury bond market, he has to respond
4:27to it with policy intervention uh in
4:29order to do his job. By the way, he's
4:30just doing his job. You know, his 100%
4:32his job to get financing costs down and
4:34and capitalize the US government. He
4:36just just to be clear for folks, I do
4:38think that he is uh one of the most
4:42clearheaded
4:44communicators when it comes to what is
4:46happening.
4:47>> Yep.
4:48>> What are we doing in response?
4:49>> Y
4:50>> and I think what sometimes is taken as
4:52his illreverence for the critics, etc.
4:56>> is actually what we should have had more
4:58from other Treasury secretaries or Fed
4:59chairman. Yeah. Because what it allows
5:02him to really do is he's kind of just
5:03like, "Hey man, here's the game being
5:05played on the field."
5:06>> Yeah.
5:07>> I I think of it as you know what Fisher
5:09chess is.
5:10>> No. What's that?
5:10>> Fisher chess is uh when they mess up the
5:12pieces at the start of the game.
5:14>> Oh, interesting.
5:15>> So, um I know somebody uh who is one of
5:18the top people in the world at one
5:19minute Fisher Chess.
5:20>> Wow.
5:21>> He's excellent. He hates when I bring it
5:22up, so I'm not going to say his name. Uh
5:24Evo. Um, and uh,
5:27the whole idea is when you start the
5:29game, it's just what what is the outlay
5:32of the pieces? Like you got to start
5:33from that point.
5:34>> That's kind of what he's doing, right?
5:35Is he's like, "Look, man, the chess
5:36pieces are where they are. I didn't put
5:37them here,
5:38>> but I got to play the game. I got to
5:40win."
5:41>> Yeah.
5:41>> And that kind of feels like he's the
5:43right guy for the job.
5:45>> I've been saying this. He's one of the,
5:46you know, certainly in the in the modern
5:48post-war US economy and maybe in the
5:50since the turn of the, you know, the 19
5:52turn of the 20th century, he's probably
5:53the best fit or or Treasury Secretary.
5:55Um, you know, we've seen in in in terms
5:57of his understanding of all these
5:59dynamics. Like a lesser Treasury
6:00Secretary would be either getting
6:03dragged by the market and not
6:05understanding the full scope of the
6:06game. Like it's very clear to me that he
6:07understands that there is a supply
6:09demand imbalance in the Treasury bond
6:10market. Why else would you be
6:12intervening alongside Japan's Ministry
6:14of Finance to defend the yen? He
6:16understands the circular nature of the
6:17all this. The US is a net international
6:19investment deficit economy. We have a
6:21current account deficit of 3 to 4%
6:24annually. We need to find 3 to 4% of our
6:26growing GDP's worth of capital every
6:28year just to have the same level of
6:30economic outcome, let alone growing the
6:31economy. And so, you know, this is a big
6:33problem in the context of foreigners
6:35owning 30% of the market, the private
6:38non-bank sector owning 60% of the
6:39market. now up from 36% in the in end of
6:422021. And so you have all this you have
6:44such a change in the composition of the
6:46treasury ownership that now incremental
6:50units of supply will be met with
6:51incremental requests for higher Xanti
6:53yields. That's essentially the condition
6:55that that's the fisher chess condition
6:57that he's inheriting and he inherited uh
6:59at the start of 2025. And so you know we
7:01can quibble with his communication style
7:04to your point. Um, we can quibble with
7:06what at times seems like a a a touch of
7:08arrogance at some point. Um, but I think
7:10it's coming from a place of saying,
7:12"Look, you guys don't get it. This is a
7:15big problem." He can't come out and say
7:16it's a big problem. By the way, I can
7:17say it's a big problem. It is a big
7:18problem. He could think it. He I know he
7:22thinks it otherwise he wouldn't be
7:23taking the policy action that he's
7:24taken. Uh, but at the end of the day, I
7:26think he is responding to the
7:28appropriate thing to respond to, which
7:29is the supply demand imbalance, the
7:31geopolitically driven supply demand
7:32imbalance. when uh Duck published the uh
7:35OpEd that was AI written um and everyone
7:38freaked out
7:39>> which by the way this is Stan Drunken
7:40Miller. Who cares if he uses AI to write
7:42his is is this is Stan Duck and Miller.
7:44The man did 30% annualized returns with
7:47no down years for 30 years. Go find me
7:49another investor in history who's ever
7:51done that.
7:52>> Bernie Maidoff.
7:53>> Yeah. Exactly. Exactly. Bingo. All
7:55right. Do you think that Bessant and
7:58Duck talked and maybe Bessant encouraged
8:01him to publish it?
8:03That's my standing theory. And the
8:05reason is because everything that was
8:08said in that piece, I believe best in
8:10believes.
8:10>> Yeah. Of course he believes. Yeah.
8:11>> He just can't say it.
8:12>> Of course.
8:13>> So it's very helpful if one of your best
8:14friends says it publicly for you.
8:17>> And then you could take it and it's like
8:18going to the teacher say, "Look,
8:20somebody else said this."
8:21>> Yeah.
8:21>> You know, hey, we we should uh he's
8:24smart.
8:24>> Yeah.
8:25>> The messenger is just as important as
8:26the message.
8:27>> Yep. And if you're drunk, you weren't
8:31going to write that unless maybe you got
8:32a phone call.
8:33>> Yeah.
8:33>> From your friend and you on vacation,
8:36probably somewhere in the Mediterranean.
8:37Hey man, hey Grock, write this for
8:39me.
8:40>> Yeah,
8:40>> right. Let it fly.
8:43>> Let it fly. I love how you think it was
8:45Grock, too, by the way.
8:46>> Yeah. He's like like write this thing
8:48for me. He he literally has it sent to
8:50the, you know, Wall Street Journal or
8:51whatever. And I just imagine him closing
8:53his laptop. Say, "Yeah, well,
8:55>> good luck, guys. See you in a week."
8:57Yeah. Huh. You know, I I try to I'm not
9:01>> I'm a conspiracy theorist in the sense
9:03that a lot of times you do enough
9:04analysis, you just wind up at the
9:06natural conclusion of things. And I feel
9:08like that's kind of what we do in our
9:09research at 42 macro. We just keep
9:10pulling on threads until we can't pull
9:12on the thread anymore because the data
9:14doesn't exist. Um that's kind of the
9:16nature of our research style. Uh and
9:19>> does this did drug you know, here's what
9:22I think. Whether or not Ducken Miller
9:24and and and and Stan or Stan Ducken
9:27Miller and and Treasury Secretary Scott
9:28Pess colluded on that, I think the
9:30outcome would have been the same
9:31regardless, which is
9:34the more the public knows about this,
9:37the more likely it is that the the
9:40politicians in DC who are responsible
9:42for addressing the problem will take the
9:44appropriate action. And so whether or
9:46not you colluded or not, I still think
9:48you two
9:48>> I don't even think I don't think it's
9:49collusion.
9:49>> He wants this outcome. This is a good
9:51outcome.
9:51>> I don't even think it's collusion. Yeah,
9:53>> I think actually my point is uh we've
9:56been talking about Bessant from a
9:59financial like operator standpoint as
10:02the Treasury Secretary. I think this
10:04dude is dialed when it comes to the
10:07political process as well.
10:08>> Yeah, he's he
10:09>> and if there was a conversation before
10:13that op-ed was published and maybe
10:15Besson encouraged it. Yep.
10:18>> This dude understands Washington DC
10:20better than most of the politicians
10:22understand it.
10:22>> Yeah, of course.
10:23>> And so what that then tells me is if he
10:26understands domestic policy and the
10:29political process,
10:31>> he might be the best person we should be
10:32sending to Japan or some of these places
10:36and saying, "Hey, Scott,
10:38>> I think in Trump's words one time, he
10:39said, I get the markets rallied up."
10:41>> Yeah.
10:42>> He gets them to calm down.
10:43>> Yeah. And so now all of a sudden we have
10:46a very unique individual it seems like
10:48who is financial operator, investor,
10:52political operator and a great
10:55communicator. We have not really had
10:57somebody in that seat and he's happens
10:59to be in the seat at a time where like
11:01we kind of need a person like that to
11:03navigate all this. It's fascinating.
11:05>> It's it's beyond fascinating. I think
11:06one of the best things that's happened
11:07in the last few years in American policy
11:09is the downgrading of all the other
11:11voices around President Trump and the
11:13upgrading of of Treasury Secretary Scott
11:15Besson's voice. I mean, you know, I at
11:17the risk of being, you know, sued or
11:19yelled at, I mean, we obviously had a
11:20NEPO baby run in the commerce
11:21department, you know, he his views
11:23needed to get go somewhere else and say
11:26that and do that. Go go go work on this.
11:28We have bigger fish to fry. We have a
11:30massive geopolitically driven like this
11:32this in my opinion the PC1 of all of
11:35global finance is the fact that treasury
11:37bonds are no longer considered to be a
11:39safe haven asset. Now why is that? In my
11:41opinion and I think the opinion of other
11:43you know smart people people much
11:44smarter than me Ray Alio and Neil How
11:47Peter Turchin they would say that you
11:49know America's sick a sick patient
11:51internally and I would argue and I'm
11:53certain Rali would argue uh that
11:56America's a sick patient internally
11:57because we have too much we have such a
12:00high level of public sector debt service
12:02and it's squeezing out income and wealth
12:04accumulation for households small
12:06businesses and interest rate sensitive
12:08sectors on the bottom of the K. And part
12:10of the reason that's happening, that
12:11squeezing dynamic, we talked about this
12:13in previous um in previous uh shows and
12:14discussions where the amount of money
12:17that the US Treasury needs on an annual
12:19basis to either roll over refinance its
12:21existing debt, it's roughly about 12 to
12:2310 trillion over the next year. Uh to
12:25capitalize the new debt in terms of the
12:26budget deficit, that's about 2 trillion
12:28over the next uh year. And then the
12:30amount of money it needs to refinance
12:31into a higher interest rate regime,
12:32that's about 125 billion over the next
12:34year. So you're talking about over 12
12:36trillion that it needs. That's up from
12:37about less than 5 trillion prior to CO.
12:40And so that's 40% of global savings, the
12:42flow of global savings over the next
12:43year. That used to be on average 20% of
12:46the flow of global savings prior to CO.
12:49And so we've doubled the the the the
12:51demand for capital. The US Treasury has
12:53doubled its demand for capital. And and
12:55obviously in a world where there's not
12:56an infinite amount of capital, it's
12:58draining resources from the bottom of
13:00the K-shaped US economy. It's obviously
13:01draining resources from around the world
13:03and it's causing more inflation. and we
13:04just have a a persistent supply shock uh
13:07for capital and a persistent demand
13:09shock for that capital from the treasury
13:10and this is causing all sorts of
13:12outcomes.
13:13>> If I said to you, close your eyes and
13:15imagine a world where there is a $100
13:18oil price
13:19>> five uh% 10-year yields,
13:22>> the Fed just raised interest rates for
13:25the first time in a while.
13:27>> And there's still a geopolitical
13:29conflict going on. Mhm.
13:31>> There seems to be a lot of disagreement
13:33or waning support for uh the current
13:36administration going into the midterms
13:38and the entire economy seems to be
13:41propped up by a single sector and AI and
13:43everything else seems to be suffering.
13:45>> Mhm.
13:46>> And I said, "Now decide, are stocks at
13:49all-time highs or below?"
13:52>> You probably would say not at all-time
13:54highs, but we're pretty dang close.
13:58Bitcoin is up in that environment. Many
14:00of these assets are up. How do you
14:02rectify those two things where many of
14:05these data points actually should tell
14:06us like they should be headwinds? Like
14:07assets should be under pressure, but it
14:10kind of feels like investors don't care.
14:11They're just like, eh, I still want to
14:14go buy Nvidia, you know? I still want to
14:16own some Bitcoin. Look, uh uh I
14:18appreciate that thought exercise and and
14:20it was really thoughtful. Uh I will push
14:22back mildly to suggest that uh I would I
14:25would actually argue that stocks would
14:27probably be at all times because of some
14:28of the dynamics you listed. Okay. Uh in
14:30our view, we've been bullish. We've been
14:32structurally bullish since January of
14:342023, say for the 3 months in February
14:36through April of 2025. Uh we saw
14:38paradigm B the the cut the deficit
14:39portion as being negative for the
14:41economy. The markets at the time were
14:42correct on that. Uh but we were also
14:43correct to immediately pivot back to
14:45being bullish, which was where we had
14:46been since Jan 2023 uh when we noticed
14:49the pivot to running the economy hot uh
14:51in in April of last year. The reason I
14:53think that we stocks should be at or
14:54near all-time highs is is for a couple
14:56of reasons. One, there's policy
14:57intervention associated with the supply
14:59demand imbalance. They're not going to
15:00sit idly by. And we've we've long
15:02forecasted that an increasing amount of
15:04policy intervention. Uh whether it be
15:06through extension of dovishnet financing
15:08policy, this is some of the more
15:09dovishnet financing policy we've seen on
15:11record uh for the US Treasury. And it's
15:12only going to get more dovish uh in the
15:14coming years. Uh we've seen uh the
15:16Federal Reserve uh cut interest rates
15:18about 175 basis points with the
15:20inflation, you know, with missing their
15:22inflation target for five consecutive
15:23years, now going on nine consecutive
15:25years. Um in terms of their projections,
15:27uh we've seen the Federal Reserve
15:28monetize US sovereign debt uh in the
15:31middle of a nationwide affordability
15:32crisis. You know, we've seen all sorts
15:33of reactions to this supply demand
15:36imbalance in the Treasury bond market.
15:37And then you have this orthogonal demand
15:39shock called AI. This is massive AI
15:41capex bubble. You're talking $800
15:43billion in hyperscala capex next year
15:45growing to 1.2 1.3 $1.4 trillion uh next
15:48year. And so obviously that creates a
15:50powerful tailwind for earnings. Um and
15:52so you have this powerful tailwind for
15:54earnings. At the same time you're
15:55getting uh you have this problem that
15:57keeps requiring policy intervention um
15:59in the form of financial pressure or
16:00monetary debasement. That is a reason
16:02for stocks to be at or near all-time
16:04highs. And it's one of the reasons why
16:06we think stocks will go to make
16:08significant highs from here uh over the
16:10next 12 to 18 months. In our view, we
16:12don't think this bull market is over.
16:14What would stop it? What would stop it?
16:16Uh a a lack of realization of the policy
16:19intervention required to address the
16:22problem. Like if they wanted to pivot
16:24back to paradigm B and and be serious
16:26about cutting the deficit,
16:27>> which stop again? I don't I think it's a
16:30very low probability bet. If the world's
16:32smartest man and best inventor of all
16:34time and best innovator of all time, if
16:37he couldn't do it, I just I don't know
16:39how like you're not going to get
16:40Congress to do it without a crisis.
16:42>> I I did uh I did a little uh mental uh
16:45gut check.
16:45>> Yep.
16:46>> Uh recently I went back and I was
16:48thinking, okay, at the start of the
16:49Trump administration, what was I excited
16:51about?
16:52>> Balancing the budget was probably the
16:54number one thing. Closing the border was
16:56another thing.
16:56>> He fooled you.
16:57>> Well, he he closed the border.
16:59>> I'm talking about the balance of the
17:00budget. Yeah. So, it bounces the budget
17:02and it and I tried to really think
17:03through like why was I excited? I went
17:05back and I looked at some of the stuff I
17:06read and I tweeted and and was trying to
17:08almost look at it like, okay, what did I
17:10believe? What went wrong? And a big part
17:13of it was actually not the Trump
17:15administration as much as it was the
17:16Trump administration deputizing Elon and
17:19like, dude, this guy's the best in the
17:21world at doing this, right?
17:22>> They're gonna find the fraud, the waste,
17:23the abuse. And as I was looking through
17:24my Twitter feed, I found absolutely
17:28hilarious in hindsight
17:31different data points that we kind of
17:33forget. And the one that I I've talked
17:34about in the past is if you remember, he
17:36was inside of I think it was like the
17:38education building or USA ID where there
17:41was politicians outside banging on the
17:44doors. And if you remember, there was a
17:45video of the security guard and he was
17:47just standing there and they were like,
17:49"Why are you protecting him? He's
17:50killing people." Blah blah. And the
17:52security guy was just like, "I'm just
17:54doing my job, man." Like, you know, he's
17:55just he was like, he was not about it.
17:57>> Yeah.
17:58>> And if we had said if they tried to
18:02balance the budget, could you imagine if
18:03the politicians
18:05>> literally went outside the building and
18:07tried to physically stop them,
18:09>> you'd be like, there's no way they would
18:10ever do that.
18:11>> Yeah, that's true.
18:11>> Right. Like you're just like, of course
18:13the politicians want to balance the
18:14budget.
18:14>> And so, in hindsight, I was naive in the
18:17sense of it's not actually about can you
18:20balance the budget. It's a lack of will
18:23>> wanting to do it.
18:24>> Amen.
18:25>> And why is there a lack of will? Well,
18:27if you're a politician, it's pretty good
18:30pitch to be, look at all the stuff I
18:32came back from Washington for all of you
18:33constituents with. And so then as I was
18:37going through this extra, I said, "Dude,
18:39there's no way it it is impossible. I I
18:41am now convinced it is impossible. It
18:43doesn't matter who goes in any of that
18:44stuff.
18:46So,
18:48can we ever have a recession?"
18:50>> Mm-m. No. Can we ever have any sort of
18:52prolonged market downturn
18:54>> going forward?
18:56>> Oh, I love and thank you for that that
18:57trip down memory lane and thank you for
18:59your intellectual honesty.
19:00>> Yeah, not a lot of people who do what we
19:02do say we get things wrong.
19:04>> Listen, could could you imagine if uh
19:06they had bounced the budget? That would
19:07have been amazing.
19:08>> That would have been amazing. That's the
19:09best way out of this.
19:10>> On what planet
19:11>> was I or anyone else thinking that the
19:14politicians who quite literally
19:16accumulate power by giving away free
19:18money were ever going to let that
19:19happen? No, they're not.
19:20>> I made the mistake of every human. I
19:22thought that they had good intentions.
19:26>> I thought they actually cared about the
19:27future of the country.
19:29>> Yeah. Yeah.
19:30>> Right. I thought they cared about the
19:31debt that was going to be inherited by
19:33our children.
19:33>> Our own children. Their own children.
19:35Don't even worry about my kids or your
19:36kids. What about your own kids? Like
19:38where do you think we're headed with
19:39this? So, uh, thank you for all that and
19:40I I appreciate again your intellectual
19:42humility and intellectual curiosity are
19:44two things I really admire about you.
19:45Uh, and hopefully I'm I'm following your
19:47footsteps as well there. This episode is
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20:46to get started today. A couple things on
20:48this balance budget. Uh I'm sorry that
20:51you were fooled by Doge uh hoodwinkedked
20:53by Doge. Uh uh I was very on record uh
20:57very loud on record uh in the fall of
20:582024 when we replaced our 30% allocation
21:01to bonds with gold in our in our
21:03flagship uh asset allocation, our KISS
21:05model portfolio. Uh we did it with the
21:08the recognition that neither the
21:10Republican party or the Democrat party
21:12were serious about balancing the budget.
21:14When you looked at the the scoring uh
21:17for Trump's policy proposals, you
21:18couldn't tell the difference. It was
21:20like a Coke versus Pepsi test with
21:21Camela Harris.
21:22>> Well, I uh if I remember correctly, um
21:24and this will show you how good my
21:25long-term memory is despite my loss of
21:27short-term memory. Uh Kabuki Theater, I
21:30think was a phrase that you were using
21:32at the time.
21:32>> It was. It was. I did call it Kabuki
21:34Theater. I said, "That chainsaw is
21:36really dumb. He's going to regret the
21:37chainsaw cuz it's not going to solve the
21:39problem." But but it looked cool. It
21:41looked cool. It made headlines. It did
21:42what it was supposed to do in a in a 25
21:45cycle. Exactly. It did exactly what it
21:46was supposed to do. But those of us who
21:48are serious about tackling these
21:49challenges understand that that was not
21:51going to be the credible path. You
21:52actually need Congress to get on board.
21:54And the probability that Congress would
21:55get on board when both parties were
21:57projecting to expand the budget deficit
21:59to record non-war non-recession wides,
22:02you have to give up the ghost. And so,
22:04um, you know, just on and and one final
22:06thing I'll say on these politicians, uh,
22:07yeah, I'm talking to you all you
22:08politicians in DC. You know, the reason
22:11that the reason they don't care about
22:13the budget deficit is to your point, you
22:15know, one party spends money and gives
22:17it to their constituents to to to stay
22:19in power to get gain power, stay in
22:21power. The other party cuts taxes and
22:23gives and support their constituents
22:24income that way. And I think um you know
22:26this conversation in the country about
22:28you know buying votes if you will. I
22:31think we have to realize that the wealth
22:33pump is on. You and I talked about Dr.
22:35Peter Turchin's you know thesis and his
22:36and his colleagues at the complexity
22:38science hub. Uh they have this term
22:39called the wealth pump. I call it the
22:41reverse Robin Hood effect because it it
22:42makes it easier to for people to figure
22:43out what we're talking about. Uh you
22:45know the rever just imagine what the
22:47Robin Hood effect is in reverse. Like so
22:49that's in my opinion what's happening uh
22:50with Congress. And you can
22:51>> you mean the people who don't have money
22:53have to fund the people who have money?
22:54>> Yes. That's exactly what's happening. In
22:56fact,
22:56>> that's a mind bender.
22:57>> Here's some statistics for this. Uh, so
23:00we see when you break down there's
23:01probably like 700 different line items
23:02in the monthly Treasury budget
23:03statement. So, we had to do uh some data
23:05science to figure out um, you know,
23:07where the money goes. And most of the
23:08money goes to Social Security, Medicare.
23:10We know that it's, you know, it's
23:11probably like 45, you know, percent of
23:12the the outlays. But
23:13>> where's it come from?
23:16>> It's neither here nor there. uh uh but
23:18uh the the point I'm making is is when
23:20you look at the rest of the spending and
23:22you tally up all the money the
23:23government spends on poor people via
23:25means tested programs federal government
23:27uh spends on poor people mean v mean v
23:28mean v mean v mean v mean v mean v mean
23:28v mean v mean vans program somewhere
23:29about 1.2 to$ 1.3 trillion annualized uh
23:32and it's been that it's been you know
23:33these ratios have been roughly the same
23:34over the last you know dozen years or so
23:37uh when you look at the money the
23:38government spends that pretty much winds
23:39up in the pockets of rich people like us
23:41it's about 2.62 6 2.7 trillion uh and
23:45you know about 1.1 trillion of that on
23:46its way to 1.2 trillion is is net
23:48interest on the debt. Obviously, poor
23:49people don't own financial assets, much
23:51less Treasury bonds. Uh and then the uh
23:54another trillion on on defense uh net
23:56defense. And obviously that money
23:57doesn't go to poor people. It's going to
23:58folks who work at SpaceX, Palunteer,
24:00Andrew, you know, all these, you know,
24:02defense suppliers. And so you're talking
24:05about 36% of the money the federal
24:07government spends about almost $8
24:09trillion the federal government spends
24:11is going directly to rich people where
24:13only 17% is going directly to poor
24:15people. Now, that's a that's an issue.
24:17And this has been compounding for for a
24:18long period of time. And so, you know, I
24:20don't know how we get out of this
24:21without more political dysfunction and
24:23and and more just, you know, political
24:25upheaval. Um, but ultimately, I still
24:27think we wind up in a better place
24:28maybe, you know, 5, 10, 15, 20 years
24:30from now.
24:30>> If you go and you look at
24:31>> because it'll get that bad.
24:33>> Of course, it's going to get that bad.
24:34Look at uh social security. Where's the
24:36money come from?
24:36>> Yeah.
24:37>> Young people are funding the old people.
24:40The old people, there's a lot of them.
24:42The young people are not growing as fast
24:44as the older cohort. And therefore you
24:47have quite literally a Ponzi scheme y
24:49that is being run
24:50>> which whether people like it or not
24:53whatever the idea that the young people
24:55are funding the old people
24:57>> is the opposite of what I think people
24:59generally philosophically believe should
25:01be happening is the older generations
25:03should be looking out for the younger
25:04generations. You should be giving a
25:06better future and all this stuff. We
25:08have the opposite happening in this
25:09country. If you look at homes,
25:12there is a very large cohort of people
25:15who do not want home prices to go down.
25:17>> Yeah.
25:17>> And it's all the people who own the
25:18homes.
25:20>> Exactly.
25:23>> Because every time you hear
25:24affordability, they hear, "I'm going to
25:27lose money on my home."
25:28>> 100%. And right now, I've actually seen
25:31in the last two weeks or so a number of
25:33articles that are talking about
25:35mortgage rates are ticking up, interest
25:37rates have gone up, home prices are
25:40getting slashed.
25:42If you don't own a home, you don't
25:45really understand there is a full-on
25:47panic in this country of anyone trying
25:48to sell their home because they're like,
25:50"Wait a minute, there's a gridlock.
25:51There's not a lot of home uh transaction
25:52volume happening.
25:54>> And in order for me to sell this home,
25:56I've got to drop the price to such a low
25:58level
26:00>> that I might as well just keep it.
26:01>> Just keep it.
26:02>> And so then they turn and they say,
26:03"Okay, well, could I rent it?"
26:07But one of the things that goes
26:08undisussed is a lot of the boomer
26:11generation, I say as a loving term, they
26:14live in homes that they've lived in for
26:1620 years.
26:17>> Yeah.
26:18>> Young people don't want those homes.
26:20>> Not at all. They don't want the
26:21McMansion in the suburbs. That's a 20,
26:2425, 30 year old home. And so I was
26:27explaining to somebody recently that has
26:29one of these homes and is trying to sell
26:30it. And I've watched them for a year and
26:32a half, two years now.
26:34You have a product that the person who's
26:38supposed to buy does not want and can't
26:41afford.
26:42>> And you have it at a price point where
26:44they quite literally do not have the
26:45money.
26:46>> Yeah. So, even if you were to say, "I'm
26:48going to put new paint or you know what,
26:51like like put lipstick on it,
26:54>> they still can't afford it." So, you
26:56have a choice to make. Either you're the
26:58bag holder and you got to figure out
27:00something to do or
27:02>> rip the band-aid off.
27:04>> Yeah.
27:04>> And that's what's happening across the
27:06economy is people are realizing like,
27:08wait a second. So we have actually young
27:10people are funding older people which
27:12puts immense amount of stress on
27:14government spending
27:15>> 100%.
27:17Man this is a it's an intractable
27:19problem. I love your your analogy that
27:21that makes a lot of sense especially in
27:22the context we were talking about
27:23earlier. The spread between the uh
27:26marginal mortgage rate and the effective
27:28mortgage rate. So the marginal mortgage
27:29rate is what you would you pay if you
27:31bought a got a mortgage today and the
27:32effective mortgage rate is what's the
27:34mortgage on all the existing mortgage
27:35stock of debt in the economy. you know,
27:37it's about 250 basis points, but it's
27:39roughly an all-time widespread. And so
27:41that's obviously contributing to this
27:42lock in effect u that you're you're
27:44essentially alluding to uh as well. And
27:46part of the reason that spread is so
27:47high and part of the reason the spread
27:48between mortgages and treasury bonds is
27:50is is not historically wide. It was
27:52wider a few years ago, but it's still,
27:54you know, structurally wide, you know,
27:55relative to what had been for decades.
27:57Part of the reason that spread is wide
27:58as it is is going back to what we talked
28:00about that 40/20. The government now
28:02needs 40% of the world's savings as
28:04opposed to 20% of the world savings. So,
28:05there's a missing 20% of the world's
28:07savings that used to go to capitalize
28:08our mortgage market, used to go to lend
28:10to small businesses, it used to go to
28:12lend to low to medium income consumers,
28:13it used to go to lots of things that is
28:15no longer going to um and it's really
28:17just I mean it's it's it's a perverse
28:20set of incentives because ironically the
28:23only ways to deal with this this this we
28:25calling the debt disease are three ways
28:28or three acceptable ways. There's
28:29there's there's a fourth there fifth
28:31there's five ways. Two of them are bad.
28:33Uh, one of the acceptable ways is you
28:35can reduce the deficit, you know, try to
28:36cut your way out of the problem. That's
28:37what we call paradigm B. Uh, you can,
28:40right now we're in paradigm C. You can
28:41try to boom the economy, grow your way
28:43out of it, or try to, you know, try to
28:44grow the denominator faster than you're
28:46growing the numerator. Uh, that's what
28:47we're attempting to do. And, and we're
28:49having quite a bit of success with that.
28:50We're growing nominal GDP on the X
28:52government and net exports basis. It's
28:548% in the most recent quarter. That
28:55compares to low a pre-COVID mean of 4%.
28:57So, we're doubling our nominal growth
28:59rate. So, we're succeeding at at
29:00paradigm C. Uh but ultimately the
29:02factors of production will eventually
29:04limit how fast you grow unless you
29:06create more factors production which
29:07obviously what is part of the reason why
29:08they're so gung-ho and u gung-ho and
29:10advancing AI but that's a different
29:12topic.
29:12>> Uh supreme intelligence we call it now.
29:14>> Yeah what obviously whatever y'all want
29:16to call it man
29:17>> we don't like artificial or anything we
29:18like supreme
29:19>> exactly uh and then there's paradigm D.
29:22Typically what happens is you know you
29:23run out of growth uh and then ultimately
29:25you have to start printing the demand
29:26for uh the debt securities. Uh the issue
29:29is is the only path that leads to less
29:31political dysfunction and there's the
29:33other two obviously default and total
29:35war. Uh historically countries when they
29:37needed money they would drum up war and
29:40try to go take money from it. They would
29:42go get it. They would literally go get
29:43it. They cross borders and try to take
29:44money. That's that's that's that's
29:46assume those are less desirable
29:47outcomes. Let's focus on these three.
29:49The only one of these three outcomes,
29:50acceptable outcomes, cut, grow, print,
29:52that actually leads to less political
29:54dysfunction, more societal cohesion is
29:58reducing the deficit is is is because
30:00the other ones lead to eventually
30:02inflation and eventually inflation in an
30:04economy that already has a nationwide
30:06affordability crisis where by the way
30:0870% JP Morgan senior economist said that
30:1070% of Americans live paycheck to
30:12paycheck. That is a heartbreaking
30:14statistic pump. As someone who grew up
30:17barely hoping to live paycheck to
30:19paycheck because we didn't even have
30:20paychecks,
30:22>> the hopelessness you feel as a human
30:24being
30:25>> when you can't accumulate savings and
30:27get ahead and at least aspire to join
30:30the capital class, which is the only
30:31class in this country, in this
30:33capitalism society that allows your life
30:34to get better over time. You need to
30:36have your money making money for you. If
30:38you're just using your labor to your
30:40hand of mouth, you're never going to get
30:41ahead. especially in this in in an
30:43economy where the laws, the regulations,
30:45the monetary policy and the fiscal
30:46policy is designed to support capital
30:48holders, not labor. Uh uh and so and and
30:51that's by design, by the way. It's not
30:52on accident. Um talk about that
30:54>> the craziest part of this whole thing.
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32:12>> The craziest part of this whole thing is
32:14the one technology that can lift all of
32:18these people out of the situation
32:20is the exact technology that a bunch of
32:24rich unemployed kids for the most part
32:27are railing against.
32:29>> Yeah. Which is ironic. Yeah.
32:30>> Right.
32:31>> And you basically have two groups of
32:34people. You have a bunch of nerds who
32:37are saying, "Oo, we created something
32:39that could kill everybody." Okay. And
32:42then you got a bunch of other people who
32:43are saying, "Oh, this AI thing. Don't
32:46use it."
32:47>> Yeah.
32:48>> Don't use it. But if you look at
32:52what does Bitcoin do? It creates all
32:54these computers that work for you to
32:56defend your economic value. You took
32:59what used to be the dream of the richest
33:01person in the world in terms of how it's
33:04an army of compute that is defending
33:07against money printing.
33:08>> Yeah. 100%.
33:09>> Incredibly valuable that you give it to
33:11and you democratize access to the
33:13average individual. AI all it does is it
33:17says okay you're one person. What if we
33:20got you higher level of intelligence? So
33:22you're hiring someone who's 150 IQ and
33:25then let's just multiply. Like you could
33:26have a hundred of these people working
33:28for you at all times. Now there are
33:31still people who are lazy who don't want
33:32to do anything. I I love when people are
33:34like, "Oh, most consumers don't want to
33:35be productive." Like actually they just
33:36want to like go into snooze mode and
33:38just watch TV.
33:39>> That's their right by the way. Yeah,
33:40>> 100%. But this technology now is giving
33:45them access to, you know, go to an
33:48extreme. When Bill Gates was running
33:50Microsoft in the '9s, how many people
33:52did he have? How much intellectual
33:54horsepower was inside of Microsoft?
33:56>> Yeah.
33:57>> In 30 years, have we now given the same
34:00amount of productivity power to the
34:03average human that Bill Gates had in the
34:05'90s?
34:05>> Yeah.
34:06>> Maybe people maybe people are like,
34:08"Okay, not that extreme.
34:10>> But okay, if we go back to the 50s for
34:12sure,
34:12>> yeah,
34:14>> give it 12 more months, 24 more months."
34:15It's like you're going to have more
34:17resources available to you than Bill
34:19Gates did when he was running Microsoft
34:21in the9s in terms of intellectual
34:22horsepower.
34:24Well, like that dude did pretty well for
34:26himself 100%.
34:27>> And so we're discouraging people from
34:29using the one technology that actually
34:32can help them escape the problem that
34:34they're in.
34:36>> Yeah. Uh I completely agree with
34:38everything you said. The one thing I
34:39would my caveat would be I don't think
34:43>> we're never going to have like a a
34:44classless society. There have been
34:46classes since the beginning of time. I
34:48mean, you read the Holy Bible and a lot
34:50of what we see today in terms of the
34:52cyclical pattern of human behavior, you
34:54know, the the the cohesion, the the move
34:56towards cohesion, the move away from
34:57cohesion, the move towards community,
34:59the move away from community, um the
35:01move towards selfishness, the move
35:02towards selflessness. there's these all
35:04these cyclical patterns you can see
35:05across, you know, millennia of time, you
35:07know, tens of thousands of years of time
35:08when you read the Bible. And, you know,
35:10so we're we're trapped in that same saga
35:12today because we're humans and we're,
35:13you know, we're born sinners. And so on
35:16this point of of of classism, like we're
35:18always going to have different classes.
35:19That's why I've been saying, you know,
35:21we need to turn the K-shaped economy to
35:23an E-shaped economy because not
35:24everybody wants to climb the social
35:26economic ladder or will is willing to do
35:28what it takes to cl to take the tools
35:29and and climb the social economic
35:31ladder. you know, we should create an
35:33economy and in a society where everyone
35:36feels like they're moving in the same
35:37direction.
35:38>> That's that to me is the underlying
35:40issue. Like we can't create we're never
35:42going to be able to create a society
35:43where everyone is rich by definition.
35:44Like it's like just by definition you
35:46can't do that. Uh and so once we move
35:48away from that kind of fallacy, you can
35:50start to you know you can start to
35:51create
35:52>> Don't tell socialists.
35:53>> Well, I won't I don't listen to anybody
35:54but themselves obviously.
35:56And I'll say the same thing about the
35:58the staunch capitalist. I'm on my way to
36:00to our friends at Fox uh business this
36:02afternoon and I'll say the same thing to
36:04them. Both both extremes only listen to
36:06themselves cuz they think they have all
36:07the solutions. But the reality is none
36:09of us have all the solutions. We all
36:10need to work together to solve these
36:12intractable problems because otherwise
36:13they're not going to get fixed.
36:14>> Mhm. The um the thing I do find
36:16interesting is when you look at um
36:19economic mobility and you were to score
36:21countries, America is still probably the
36:23leader if not one of the top leaders for
36:24sure in economic mobility. If you then
36:27go and you look at
36:28>> the problem is it's going down. That's
36:29the issue.
36:30>> Well, if other places are going down as
36:32well, but America almost has so much of
36:35a lead that has further to like fall
36:38like it can accelerate, right? It's kind
36:39of like, you know, the higher up you
36:40are, the faster the acceleration. Now,
36:42>> the second piece though is if you look
36:43at social mobility and I actually think
36:46that we everyone focus on economic
36:47mobility for obvious reasons. The social
36:49mobility, we have a very interesting
36:51dynamic in this country. If you go on
36:53Instagram, you see some people who
36:56appear to have socially been very
36:58mobile.
36:58>> Yeah.
36:59>> Hey, I knew that kid in high school.
37:00>> Yeah.
37:01>> He wasn't the smartest. He wasn't the
37:02richest. He wasn't whatever. He got a
37:04Ferrari now.
37:05>> Yeah.
37:06>> The appearance almost becomes more
37:08important than the truth.
37:09>> Yeah. But that same person, and I know
37:11some of these people um there are a
37:13couple people I've met in the last two
37:14or three years that uh turned to me or
37:18people that are close to me and were
37:20like, "Hey, I need help with XYZ,
37:22thinking through from a personal finance
37:24standpoint." Great.
37:26And I would know how much money they
37:28made, how much money they had in their
37:30bank account, and we're and trying to
37:32help them think through their life. And
37:33then they'd be like, "Yo, I'm hitting
37:36the eject button. I'm going to Italy for
37:382 weeks.
37:40And you would just be like, yo, there's
37:43no way you got the money to do that. And
37:46they would figure out a way. Like to
37:47their point, they're almost
37:48entrepreneurial about it, right? They
37:49they would find a way somehow.
37:51>> They would just try harder to
37:52>> like credit cards, what it's kind of
37:54like, you know, in school, I spend more
37:55time trying not to do the homework than
37:56I should have just done the homework,
37:58right?
37:58>> But hey, you know, whatever. You feel
37:59like you're making progress. You're just
38:01running in, you know, quicksand.
38:02>> But you see this and you're like,
38:04>> "Oh, wait a minute. there's some
38:05financial education issues, but also
38:08there's something about uh the human
38:10nature of like keeping up with the
38:11Jones.
38:12>> And I think that actually the
38:14administration understands in a very
38:16weird way this problem better than most
38:19and they never talk about it.
38:21>> But it does feel like there's something
38:23about the respectability of the American
38:26citizen
38:26>> and they don't just want to quote
38:29unquote get rich. They want to feel like
38:33they have something to stand on.
38:36>> Yeah. Agree.
38:37>> And
38:38>> dignity.
38:39>> Dignity. You know, you're like the
38:40farmers in Iowa. They're like, "Look,
38:42man. I don't need to be the next
38:44Rockefeller.
38:45>> I just want to be able to have a place
38:46where I can build a living, have my
38:48family, do all this kind of stuff."
38:50And so it always is hilarious to me that
38:54like the dude with gold toilets in
38:55Manhattan somehow understood that plight
38:59of those people.
39:01>> And now you have this very weird faction
39:03where you have you look at the
39:05Republican party as one example. You
39:06have people who don't have a lot and you
39:08got people who got a hell of a lot.
39:09>> Yeah.
39:10>> And somehow they've created this like
39:11alliance in the MAGA movement.
39:13>> If you look at the Democrat party, you
39:16actually have a very similar thing. You
39:17have very academic kind of elite wealthy
39:19type audience.
39:21Yeah. And then you almost have this uh
39:23>> the way we technically are.
39:25>> Yeah. But but then you have this like uh
39:27upright like kind of the the Democrat
39:29socialist of America, right? And they
39:30and they have an alliance and and maybe
39:32it's not, you know, uh both of sides of
39:35this are not like, hey, we're perfectly
39:36aligned, but definitely they lean
39:38similar.
39:40But when you see this rising up, I think
39:43the question is ultimately going to
39:44become if you want the US economy to
39:47grow and you actually want to use those
39:50factors to improve people's lives, you
39:53have to produce things.
39:54>> Yes.
39:55And in a very weird way, we're entering
39:58a world where one side is producing a
40:00lot of theories and academic ideas and
40:04the other side, like if you go look at
40:05the re-industrial movement and you know
40:07all this kind like that is coming pretty
40:09much from one group of people.
40:10>> Yeah.
40:12>> They're in conflict with each other cuz
40:14one thinks policy can solve problems,
40:16the other thinks that action can solve
40:18problems.
40:18>> Yeah.
40:19>> Public sector versus private sector,
40:21right? like like this battle is not new,
40:24but we're actually watching it play out
40:25now and we're saying to ourselves, hold
40:27on. If we can't get any sort of
40:30alignment or like a strategy
40:32ain't going to get fixed. We're actually
40:34going to pull further apart and you're
40:36going to have the halves and have nots
40:37and like the K gets wider.
40:39>> Yeah.
40:40>> Bad situation.
40:41>> That's a great thesis. I That's a Yeah,
40:44that's a fantastic thesis. Uh, I don't
40:46know that I would characterize the uh
40:49the Republicans as having more solutions
40:51than the Democrats as the right
40:54characterization. I think Donald Trump
40:56has more solutions than the Democrats.
40:57>> I I don't think that they even it's like
40:59solutions. I actually think I'm talking
41:01more about go and um look at
41:03re-industrialization use as an example.
41:05How many of those folks tend to lean
41:08according to the current political
41:09parties although these you know kind of
41:10move all the time, right? the current
41:12political parties they probably lean
41:13more right and they are less like hey we
41:16need to go do a bunch of like political
41:18stuff instead it is more let's go and
41:21actually just build and let's go build
41:24you know whatever the company is
41:25>> let's not slow down AI right let's
41:28accelerate this stuff versus you know
41:31kind of the quintessential example right
41:33now is like the EA movement everyone's
41:35freaking out about
41:37>> that's more like intellectual ideas and
41:39all now to their credit like they built
41:41anthropic Y
41:42>> right. So like there is action
41:43happening. It's just that the approaches
41:46are very different. And so it's
41:47fascinating to think about like the
41:48political overlay on what's happening
41:49economically.
41:50>> Yeah. Well, one side one side
41:52understands that it's means to power.
41:56I'm talking about the Democrats is by
41:58pretending to care about poor people but
42:01not really doing the things that make
42:02their lives better. Uh cuz they don't
42:04really have to deliver the service. You
42:05just have to promise to deliver the
42:06service to get elected. um andor say
42:09this guy is such a bad guy you can't
42:11elect them and elect me which has been
42:12their strategy for a long time which
42:13obviously has been a failing strategy
42:14and it's an inc it's an increasingly
42:16failing strategy or um the other side um
42:21you know I this is why I say Donald
42:23Trump is brilliant you know I'm not
42:24obviously not a Trump supporter u you
42:26know you can take a lot of offense to
42:29the who he is as a man and what he's
42:30been accused of and whatnot and we don't
42:32have to go there but he is a brilliant
42:34person for understanding that cut print
42:38is really the only solutions. And he's
42:40basically, in my opinion, for what I can
42:41tell, in terms of his policy platform
42:43and re-industrializing, uh, America, uh,
42:46um, uh, in terms of putting up the
42:48tariff wall and then taking, um, you
42:49know, in infrastructure commitments, uh,
42:52you know, public private partnerships. I
42:54think he understands the value of
42:56paradigm C. If there's no political will
42:58to do paradigm B, which is cut the
42:59deficit, he understands that paradigm C
43:01is actually a much better outcome. Grow.
43:04Yeah. It's a significantly better
43:05outcome than winding up in paradigm D
43:08which is default via the basement. You
43:09know, starting to use the actual money
43:11printer cuz the big, you know, the
43:12government needs its money. It's got to
43:14capitalize itself. And so ultimately,
43:15they will eventually wind up using some
43:17form of the money printer, whether it be
43:18through relaxing bank regulation and
43:20allowing them to print the money or, you
43:22know, some form of yield curve control,
43:23reserve match purchase expansion. I
43:24don't know. Who cares? It's all money
43:26printing. Uh but to your point, you
43:27know, I I do think he's he's wise to
43:30understand that, you know, paradigm C is
43:31the best choice. Let's go back to
43:33something you said. I think we need to
43:35um unpack this a little bit further
43:36because I don't think it's talked about
43:38enough and you and I have enough, you
43:40know, cache with our audiences and and
43:42and and confidence and and and and and
43:45datadriven analysis to make the kind of
43:47con arrive at the kind of conclusions
43:49publicly that we arrive at uh without
43:50fear of being torn down because people
43:52trust us and trust us having done the
43:54research. My analysis of on this this
43:57dynamic of the politics of it all is
43:59that there are now four political
44:01parties in America,
44:02>> four distinct political parties. You
44:03know, you got the the the socialist wing
44:05of the Democrat party. You got your old
44:06traditional blue dog Democrats. Um the
44:08whole part has been obviously been
44:09pulled leftward over time. Then you have
44:11your traditional core Republican party
44:14um which is kind of dying in some in
44:15some respects because so much of the
44:17winning strategy for Republicans even if
44:19they were initially part of that core
44:20Republican party was to pander to Trump.
44:22And so obviously that's the mega the
44:24mega wing of the party.
44:25>> My fear uh and also ultimately my hope
44:28because I think we do need great crisis
44:30to bring on great solutions that will
44:31ultimately be lasting and really
44:32beneficial for society and mankind. My
44:35fear in terms of going towards the great
44:37crisis is that paradigm C will
44:39eventually run out. Um whether maybe AI
44:42is a capital misallocation, you could
44:44just see I don't know there's a lot of
44:46things that could cause paradigm C to
44:47run out. I doubt it's running out
44:48anytime soon. Our research suggests it's
44:50going to continue at least to 2020,
44:51probably 2028, maybe even beyond that.
44:53Um,
44:55if if they run out of paradigm C, the
44:57growth phase, you wind up in the print
44:59phase from a starting point of already
45:01having a nationwide affordability crisis
45:03where 70 out of 10 people households in
45:06this country live paycheck to paycheck
45:08that currently feel like they're not
45:10getting ahead that are watching all
45:12kinds of stuff on TV and Instagram and
45:14wondering why they're not part of the
45:15American dream. That's seven out of 10
45:16households in this country. Um, so folks
45:19like us in the three out of the 10, you
45:20know, we need to take hold of how dire
45:23and desperate uh the situation is, the
45:25lack of dignity that so many of our
45:27fellow Americans feel. If you trying to
45:29default via debasement paradigm D with
45:31that as the starting point, you're going
45:33to wind up with a major political
45:35realignment. I think total war is a high
45:37probability outcome in that scenario as
45:39well. And here's how you can get major
45:41political realignment. Most people think
45:43of politics as on a left right spectrum.
45:45you know, the so DSA on the far left,
45:48Democrats in the mid left, Republicans
45:50mid right, you know, the traditional GOP
45:52in the mid right, and the NAGO on the on
45:53the far right. I think of it more as a a
45:56circle, like it's a it's a it's a it's a
45:58it's a circle, like, you know, it's like
46:00um uh it's like a proton or something
46:03like, you know, it's constantly moving
46:04around um you know, a field. If you
46:07think about it as a circle, like a 360°
46:10circle, MAGA and DSA are really
46:12technically back to back to each other.
46:14They're on both far ends of this like
46:16circular spectrum. And so all it would
46:18take is more economic hardship to cause
46:22them to say to turn around and greet
46:24each other and say, "Actually, we're
46:26just all poor. The rich people aren't
46:28taking care of us enough." And that's my
46:29core thesis. And that's not a captive
46:31socialist thing to say, and I'll shut up
46:32after this. My core thesis is
46:36we've gotten so good at creating profits
46:39in this society that we've probably
46:42overdone it. us in the K1 capital class,
46:44we we've created too many profits
46:47because what it ultimately means is it's
46:48less income for for the folks in the W2
46:50class. It's less wealth accumulation.
46:53It's less savings. It's less social
46:54mobility, upper mobility. It's inability
46:56for them to buy homes, inability for
46:58them to pay for their kids to go to
46:59college. It's an inabil it's it's a it's
47:01an increase in their demand for public
47:02goods, for public services. And so we've
47:04created so many profits that we no
47:07longer have a stable functioning
47:09society. And so the last thing I'll say
47:10is to your point earlier about
47:12reindustrializing,
47:13we obviously need to reindustrialize to
47:15sustain paradigm C, the growth phase.
47:18>> If we do reindustrialize,
47:21who's going to eat the additional cost
47:23of goods and services, is it going to be
47:27the K1 class via margin compression or
47:30is it going to be the K the W2 class via
47:32higher inflation? That is a big question
47:35we need to answer as a society. if
47:37somebody has to eat it. I think the the
47:39promise, which I don't know if it's
47:40gonna happen, but the promise would be
47:42well actually use Tesla maybe as an
47:45example. Cars made outside the United
47:47States, they have the margin they have.
47:50Tesla's able to make a car in America
47:52using robotics and drive down the price.
47:54And so therefore, they can keep margin,
47:56but also nobody has to eat that, you
47:58know, kind of uh that that disappearance
48:00of margin.
48:02He's oneonone, man.
48:05Right. How many other businesses are
48:07going to be able to do that?
48:08>> Yeah.
48:09>> Now, maybe robotics gets so amazing and
48:12it's kind of like, you know, any dummy
48:14off the street can just plug the
48:15robotics in and all of a sudden you get
48:17the same benefit. But it's pretty clear
48:19there's not many businesses that have
48:20been able to build something as complex
48:22as a car using robotics, get the price
48:24down. And people forget that Tesla
48:26started at like $120,000 or something
48:28like that. The the original, you know,
48:29kind of sports cares, it was over 100
48:31grand if I remember correctly.
48:33You can go buy one of these cars now for
48:35like 40 grand.
48:36>> Yeah, but how does the person who used
48:37to work at the car manufacturing plant
48:39buy the car?
48:40>> So this goes into that business is able
48:43to offer this lower price, they do it
48:46through automation. So now the question
48:48is where do those people go? What do
48:50they do? Right? And and I don't have all
48:53the answers for it, but it's almost like
48:55what you're doing is you're you're
48:57playing whack-a-ole in the economy.
48:59>> Okay, cool. We need to get prices down.
49:01So you whack that. Well, how do you get
49:02prices down? You use automation. Okay.
49:04Well, what happens to those people? They
49:05like pop up somewhere else. Now there's
49:07another problem. And so you got like,
49:08well, now we got to retrain these people
49:09to do something else. So you go whack
49:11that down. And then you're like, oh, but
49:12wait, like there's, you know, not enough
49:14companies or there's too many people or
49:16you and you're just constantly trying to
49:17figure this out. And so I think actually
49:19that's one of the reasons why people are
49:20drawn to the politics stuff is because
49:22they're like intellectually stimulated
49:23by these problems or they're power
49:25hungry.
49:26>> Like there's one or two reasons. We need
49:28more of the people who are
49:28intellectually stimulated and problem
49:30solving and less of the power hungry
49:31people. My big takeaway from meeting
49:33tons of these people, you never know who
49:35you're dealing with. They're all
49:36chameleons.
49:38>> You never know.
49:38>> That's sad,
49:39>> right? Like uh some of them I think have
49:42good intentions.
49:43>> Well, most of them don't.
49:44>> There's good neuroscience on on power
49:46and how it actually corrupts the brain.
49:48It's basically people who attain power
49:51have very similar brain uh function
49:54dynamics as people who have traumatic
49:56brain injuries. And no, I'm I'm I'm not
49:58even joking. Like this is like written
49:59about in in neuroscience. You know,
50:01>> it doesn't surprise me. Just absolutely
50:03ridiculously true. Like they study it's
50:05like this looks like this person had a
50:06traumatic brain injury. And so what
50:07ultimately happens is like you have like
50:09more impulsivity uh more selfishness.
50:13You start uh downplaying uh other
50:16people's points of views and you
50:17highlight uh you aggrandize your own
50:19point of view. Um uh and ultimately you
50:21start thinking of the world and
50:23stereotypes uh as opposed to analyzing
50:26um you know case by case data. Uh and so
50:28ultimately they turn out to become kind
50:30of
50:31>> on this like conveyor belt of more and
50:33more power seeking and aggrandization of
50:35themselves relative to what could have
50:38been their original starting goals. And
50:40so power does corrupt. And so you have
50:41to have someone who you know not only is
50:43intellectually stimulated by solving the
50:45problem but has an uncorruptible heart.
50:47And in my opinion, and this is a, you
50:49know, my opinion, the only way to have
50:51an unccorruptible heart is to have, you
50:52know, firm faith in God and and and and
50:54a firm foundation spiritually. Um, and
50:57that's to find someone with enough
50:59intellectual capability to help solve
51:01these problems with a with a firm
51:03foundation and an uncorruptible heart.
51:05That's not a long list of human beings,
51:06unfortunately.
51:08>> Unfortunately, not.
51:09>> Let's end there. I think that's a great
51:11way to end. Yeah.
51:12>> Where can we be able to find 42 macro?
51:14>> Yeah. So, in my actual day job, I'm
51:17actually uh a day or crunch numbers all
51:20day. Uh uh thank God for technology. Our
51:22tech is as good as it's ever been. Um
51:24and so, you know, I would say real
51:25quick, you know, uh I love talking about
51:28this stuff with you. Um you know, this
51:30stuff to me is more important than
51:31trying to figure out where Bitcoin or
51:32S&P is going to be 6 months from now,
51:34year from now. I think we do that really
51:36well. We do that so well that I can
51:38spend a lot of time thinking about these
51:39big problems. Um and so check us
51:41outro.com. I would say our our primary
51:43specialty is risk management, full cycle
51:46risk management, making sure that in
51:47bull markets, you know, you stay
51:49invested long enough to to maximize
51:50upside capture and in bare markets, you
51:53stay uninvested long enough to not blow
51:54up your portfolio. That's our core
51:56competency. We're very good at that. We
51:57have many of the top institutions across
51:59Global Wall Street who are clients and
52:01customers of mine, current treasury
52:03secretaries, a former uh client of mine
52:05um who are relying on our on our
52:06product. So, uh check us outro.com if
52:08that can be helpful for you guys. And
52:10then check me out on Twitter on our
52:11YouTube channel, Derry Stale42 on
52:13Twitter, Dairy Stale on LinkedIn, 42
52:15Macro on YouTube if you just want to
52:16kind of hear my thoughts on on this kind
52:17of stuff.
52:18>> I think you do a great job.
52:19>> I think you do. Thank you. See you guys
52:21next time.

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