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Why Wall Street Insiders Are Quietly Worried About This Market | Darius Dale — Transcript

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0:00Your vote does not matter anymore. This
0:03is by design. 1976, we started a
0:06cascading sequence. Basically made it
0:08very easy for the donor class to
0:11purchase political outcomes that support
0:13their income and and consumption at the
0:16expense of your income and consumption.
0:18[music] We in the K1 class have made a
0:20very visible choice to take money from
0:23your guys' family in the W2 class and
0:25put it in our bank accounts. We call it
0:27corporate profits. We call it progress.
0:28We call it innovation. We call it, you
0:29know, S&P 500, but it's it's sick. Those
0:32economies that share that pattern of of
0:34of dynamic, 75% of those societies have
0:37revolution, civil war, or both.
0:39>> So, do you have any plans to potentially
0:41run?
0:41>> Someone who grew up at the very bottom
0:42of the K, homeless many times throughout
0:45my life, food insecurity my entire
0:47childhood, they will put a bullet in my
0:48head before they let me become
0:49president.
0:50>> So, if someone's listening to this and
0:51they're looking for that kind of hope,
0:53they feel more disenfranchised and um
0:55disempowered than ever. Like, what is
0:57that first step that they need to do? Ah
0:59boy, this is the number one thing I
1:01think we need to do as a society.
1:02[music]
1:02>> Set up for this.
1:09>> Hey everyone, welcome back to the show.
1:11Joining me this week in person is Darius
1:14Dale. He is the founder and CEO of 42
1:16Macro. First time on the show. Darius,
1:18I've been following your work for a
1:19while. Thank you for joining me.
1:21>> Likewise. It's a wonderful, wonderful
1:23pleasure to be here. Big fan of yours
1:25and uh very excited.
1:26>> Well, we've got a lot to talk about. I
1:28mean, I feel like there's so much to
1:29talk about in the markets. Um, and I
1:31want to get your take because reading
1:33your work, it seems like you're pretty
1:34bullish, at least in the near term, on
1:36stocks. Maybe long-term there are some
1:38concerns. Um, maybe some overspending on
1:41the AI revolution, but if we zoom out,
1:43can you just kind of summarize what is
1:45your outlook at least in the near term,
1:46maybe 3 to 6 months?
1:48>> Yeah, I'll give you the cliffnotes
1:49version and then we can sort of um to
1:51borrow a phrase, an overused phrase from
1:52the Gen Z cohort, we can double click on
1:54or unpack any of that. So um you know
1:58we're still bullish uh when you take a a
2:00mediumterm outlook for markets which in
2:02our risk management nomenclature is 3 to
2:0412 months. Um we have a core research
2:06belief based on a variety of of of sort
2:09of cascading forces that this market
2:11cycle is likely to peak in the second
2:14half of next year or the first half of
2:162028. We don't think it survives the
2:182028 general election for a variety of
2:19reasons which we can unpack. Um we are
2:22concerned about near-term risks. Um, you
2:24know, we're not in the business of
2:25making short-term calls or really
2:27focusing on short-term market movements.
2:29Um, I mean, we we certainly help clients
2:31with that, but but that's not really,
2:32you know, what we strive to be. But we
2:34are very concerned about the midterm
2:36election risk, if only because no one
2:37else is. Um, we think there's a risk uh,
2:40a growing risk of a politically induced
2:42data center slowdown, a slowdown in data
2:44center construction that could cause
2:46some sort of,
2:47>> I would say, broad drisking across the
2:49global buy side, much like what we saw
2:50in Q4 2018. uh if that risk fails to
2:54come to fruition then it's highly likely
2:56we see something I wouldn't necessarily
2:58say a melt up but certainly something
3:01that could look feel like a meltup from
3:03you know reasonably low level of crowd
3:05bullish positioning given the earnings
3:07dynamics that we see so that's why we're
3:09still bullish when we take a medium-term
3:10outlook but next couple of months could
3:12be choppy volatile if not you know
3:13outright negative
3:14>> well there's been some corrections
3:16recently memory stocks um Google just
3:19fell I think almost 20% um so Do you
3:22think those corrections are near-term
3:23and they'll recover or do you think this
3:25is more structural like maybe memory is
3:27starting to turn over now because it's
3:29typically cyclical?
3:31>> Yeah, I think it's more to do with the
3:32fact that we entered into a riskoff
3:35market regime earlier this summer.
3:37>> And so you think about semiconductors,
3:40you know, it's a very high beta uh
3:42sector, you know, high beta factor in in
3:44financial markets. And so naturally that
3:46when investors when we go into a riskoff
3:47market regime when the risk management
3:48systems of our clients across the global
3:50buy side many of which I help design um
3:53in terms of a lot of these pod shops
3:54that are running you know billions of
3:55dollars uh you know when they see things
3:57certain things in the macro landscape or
3:59certain things from a volatility surface
4:00standpoint that change uh they
4:03ultimately start to take down risk and
4:04then when they take down risk they
4:05usually reach for sell the highest beta
4:07names and so I think that a lot of what
4:09we've seen in the in the semiconductor
4:10space has less to do with you know the
4:12the the you know the earnings earning
4:14cycle and the earnings power of these
4:16companies. Obviously, we saw we got the
4:18numbers from SKH Heinik the other day. I
4:19mean, demand all the way through 2029,
4:222030 in terms of the backlog. So, in our
4:24view, the earning cycle is very clearly
4:25not over for these stocks. But the
4:26reason they've corrected so much in our
4:28opinion is this has to do more with the
4:30fact that we've emerged into a riskoff
4:31market regime, which by the way, we
4:32still have not emerged from. Our systems
4:34are still signaling that we are still in
4:36a riskoff inflation market regime. And
4:37so, that doesn't necessarily mean bad
4:39things have to happen at the index
4:40level, but obviously we've seen a lot of
4:42carnage underneath the surface. If you
4:43look at the Russell 3000,
4:45>> 60% of the stocks in the Russell 3000,
4:47which is the broadest measure of
4:48equities we have in the US market, uh,
4:50have crashed 20%. And so we've seen a
4:53lot of carnage. And so the risk is that
4:55that carnage underneath the surface is a
4:57leading indicator for broad carnage,
4:59much like what we saw in 2018.
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5:58YouTube page. So interesting because I
6:00am seeing tweets of people saying
6:01there's sort of a stealth bare market
6:03and they're naming some of these stocks
6:04down 30%, 40%. But nothing right now.
6:08zooming out to like the S&P 500 which is
6:10hitting all-time highs it feels like
6:12every other week. So is that just
6:13because there's a lot of liquidity in
6:15the system right now?
6:16>> Uh the liquidity cycle is ebbing. There
6:18was yes there on a on a stock basis.
6:20Yes, there is a lot of liquidity. We've
6:22been in a positive uptrend in in the
6:24liquidity cycle I want to say since
6:27late 2024 and that was only a temporary
6:29blip. That obviously you know was a
6:31leading indicator of what we saw in
6:32February through April 2025. Um but
6:36every month since then we've been in a
6:37you know kind of a positive impulse in
6:38the in the in the liquidity. But when
6:40you think about the leading indicators
6:41of liquidity you know term premium in
6:43the bond market the US dollar interest
6:45rates themselves currency volatility you
6:48know some of these more kind of shorter
6:50cycle leading indicators of liquidity
6:52they've all moved in adverse directions
6:54um that would suggest that we could be
6:56heading for something that looks like a
6:57liquidity vacuum. Now again we would
6:59assess the probability of that outcome
7:01as less than 50%.
7:03>> Um because you still have this very
7:05positive earning cycle dynamic um and as
7:08long as that positive earning cycle
7:09dynamic is is is at play then the I
7:12would say the the the core bottomup
7:14community I would say the slower moving
7:16investors like the wealth management
7:17kind of community which obviously
7:18commands a tremendous amount of capital
7:20on aggregated basis they're going to
7:22rotate within the market. you would
7:25actually need to see a broad reduction
7:26in liquidity for them to rotate out of
7:28the stock market and we have not seen
7:30that play out yet. But the leading
7:32indicators are suggesting that it might.
7:34Uh and again the catalyst that we think
7:36could you know really accelerate this
7:37process are the midterm elections. Um
7:39everyone thinks the Democrats are going
7:41to take the house. Um you look at
7:42betting markets uh the odds for the
7:45Democrats to take the Senate are, you
7:46know, roughly slightly over 60%. We
7:48don't think they're that high because I
7:49think pigs will fly when the Democrats
7:51take Texas. But uh let's say the
7:53Democrats do take the Senate. What that
7:55ultimately would be a signal of is that
7:57this sort of anti-AII
7:59sentiment among voters is pervasive
8:02enough to cause the Republican members
8:04of Congress who are up for reelection in
8:062028 to go on board with any federal,
8:10you know, kind of anti-AII regulation.
8:12And then obviously we're going to see
8:13more Democratic gubernatorial races and
8:15or wins and and congressional wins at
8:17the state level or state Congress level.
8:20And so you could just get a politically
8:21induced slowdown in data center
8:22construction that would force Wall
8:24Street to take down its 2027 2028
8:27earnings estimates. So that would be a
8:28really negative sign in the context of
8:30leading indicators of liquidity moving
8:32in the adverse direction already. If
8:34that does not happen and again it's hard
8:36to predict this obviously who has
8:38predicted who can predict you know
8:39elections in this in this country at
8:40this point in time but if that does not
8:42happen then I think we're going to be
8:44very right on our call that uh this
8:46market cycle is likely to rip higher
8:48throughout 2027. Okay, that's so
8:50interesting because some of my recent
8:52analysts um including Chem Carson, he
8:55said the exact same thing that basically
8:57we're going to rally into the midterms,
8:59but potentially after the midterms we
9:01could go sideways and they're going to
9:03have to come in, step in with some
9:04facilities, um inject liquidity because
9:06things might start to unwind. If
9:09Democrats do get into office and they
9:11put out all these moratoriums on these
9:12data centers, then you're right. I mean,
9:14what are these companies going to do?
9:17>> Slow the pace of data center
9:18construction. That's what they'll do.
9:19Yeah. I mean, or build them somewhere
9:21else. But again, all like
9:23>> the problem is is the estimates are so
9:25high in that scenario. Um,
9:28>> and I'm a huge fan of of Jim and and you
9:31know, we think about the world similarly
9:32from risk management standpoint, but we
9:33typically use different frameworks to
9:35arrive at similar conclusions. And so um
9:38that's I don't want to say comforting
9:39but it's certainly uh it's a bare
9:41minimum interesting that he's arriving
9:42at a similar conclusion in terms of the
9:44broad market risk and and obviously his
9:46his deep knowledge of the volatility
9:47markets suggests that V markets aren't
9:50priced in a way that would prevent that
9:53outcome. We can see this in our
9:54positioning model as well. I mean it's
9:55very clearly investors are not
9:57positioned for you know carnage in you
10:01know politically induced carnage from a
10:02from a growth expectation standpoint. Um
10:05and so that the you know if they were
10:07then you would ultimately conclude that
10:09you know we're going to see a bunch of
10:10Vanna and charm flows that you know
10:12explode the index higher after the
10:13catalyst. But that's actually not how
10:15it's set up right now. You know that
10:17it's a it's more set up like this is a
10:19speed bump as opposed to a wall. And if
10:21it turns out to be a wall then that's a
10:23big problem for asset markets and you're
10:25going to have to write down you know
10:26consensus is looking at what 1.2 to $1.3
10:29trillion of of of infrastructure data AI
10:32infrastructure build next year graduated
10:35to 1.4 1.5 trillion dollars in 2028. I
10:38mean
10:40you could take those numbers down by a
10:42third if you had a politically induced
10:43slowdown minimally. And so what does
10:45that do to the earnings power of all
10:46these companies that are feeding into
10:48this into this? What does that do to all
10:49these sort of deals that you know you
10:51might see some force majours um um um
10:53brokered and or um um implemented? you
10:56know, it just gets messy in the context
10:57of all the circular financing and and
10:59all the expectations. So, we're very
11:01concerned about the next couple of
11:02months of market risk, but we don't
11:04think that's the end of the market cycle
11:05because ultimately once those estimates
11:07get written down, investors will be able
11:09to rewrite, you know, their positions in
11:11what is very clearly a secular, you
11:12know, kind of thesis.
11:14>> I'm going to take the cynical view. I
11:15mean, even if we were to have [laughter]
11:16cynical
11:17>> No. Well, I mean, if we crash, they're
11:19always ready to step in because this is
11:22so systemically important for our
11:23national security, for um just in
11:27general for our output over the next 10
11:30years. I mean, if we're going to be
11:31competitive, we have to build out these
11:32data centers. So, we we're going to have
11:34to find the money somewhere. And right
11:36now, they're trying to create this
11:37regulatory mode. They're getting very
11:39close with with the government. It seems
11:40like the government might even take
11:42equity stakes. both sides are actually
11:44talking about it, which is fascinating,
11:45right? We have Republicans and Democrats
11:47saying like maybe Americans need a stake
11:49in these companies. And we've already
11:51seen it with other um industries. It's
11:53like, okay, well, we might see a
11:54correction, but ultimately they're going
11:56to print the money to continue kind of
11:59pushing that that torrent of water
12:01forward.
12:01>> Oh, 100%. Yeah. No, when in doubt,
12:04expect them to print. But the problem is
12:05here is we have a booming economy. We
12:07just got the Q3 GDP data today. nominal
12:10GDP x net exports because you have to
12:12subtract net exports to kind of get the
12:13real true sense of the underlying power
12:15of the economy because we're importing
12:16so many capital goods for the data
12:18center construction
12:20>> 9.4%.
12:22I mean has anybody trading risks ever
12:24seen US economy grow 9% on a nom quarter
12:26for quarter annualized basis?
12:28>> Wow.
12:28>> You know real GDPX and export net
12:30exports is 6.7%. I mean, we're like
12:323xing what, you know, 2xing nominal,
12:343xing real in terms of how much we're
12:37growing on a on an underlying, you know,
12:38real private demand uh basis. And so,
12:42you know, they're not going to step in
12:43and print, you know, unless there's a
12:45real threat that, you know, this whole
12:47entire ecosystem is coming unraveled.
12:50And I don't know that, you know,
12:51certainly not with the index, you know,
12:53percent off the all-time highs is this
12:55even a entertaining discussion. you
12:56know, the Fed is, you know, talking
12:57about the pace of rate hikes, you know,
12:59so they're the ones responsible, you
13:00know, for printing. Obviously, if you
13:02got a a divided government, um the
13:04likelihood that we see any sort of
13:05fiscal relief um during a Trump
13:07administration from the Democrats seems
13:09very unlikely, especially in the context
13:10of them campaigning anti-data center.
13:12They're not going to be you won't have a
13:14white knight coming to bail out the data
13:16centers. And so, if we did see a
13:17politically induced slowdown in data
13:19center construction, you have to wonder.
13:20I I we know where the liquidity is going
13:22to come from, but we we're not of the
13:24view that it's going to come quick
13:25enough to prevent, you know, this sort
13:27of, you know, mildly crowded bullish
13:29positioning from getting washed out. And
13:31that's that's kind of where we are. It's
13:32like, you know, this is one of the
13:34weirdest junctures of my career. I've
13:36been doing this for almost 20 years as
13:37an institutional investor. We can very
13:39clearly see a potentially very big
13:42negative catalyst less than a week away,
13:45but Wall Street isn't appropriately
13:46hedging for that because I'm not sure
13:48that anyone on Wall Street is allowed
13:50to, right? like the entire you go across
13:51the street, you know, go down the street
13:52to Park Avenue, everybody scurrying
13:55about in their, you know, vint vineyard
13:56vines and and what's the brand they
13:58wear? Is that vineyard vines or
13:59whatever? Patagonia. Everybody's
14:01scurrying about in their Patagonia vest
14:02with their backpacks on. They're talking
14:04about AI. They're raising capital for
14:06AI. And so, I'm not sure Wall Street's
14:07even allowed to put the trade on. And
14:09so, that's what concerns me. But, you
14:11know, when we think about, you know,
14:12what's likely to happen, let's let's
14:13play this out. Let's say this does
14:14happen. We had politically induced
14:16slowdown in data center construction.
14:17you saw significant revision lower in um
14:21you know kind of just the trajectory of
14:22of AI capbacks the trajectory of
14:24earnings um in terms of slope then
14:26ultimately you're going to have to
14:27you're going to get a liquidity response
14:29from the Treasury and Fed
14:30>> we think that's coming anyway in our
14:32opinion we think that will be just
14:33pulled forward
14:34>> I had Lyn Alden on last week and she
14:37talked about Treasury basically dilution
14:40um so we have interest rates at 5%
14:43sometimes over 5% recently and then the
14:46money supply is growing at 6%. So you're
14:48at a real loss of purchasing power of
14:50about 1% a year, which just I I think
14:52puts into perspective again like where
14:54where how do you allocate because even
14:56though bonds are at two decade highs,
14:59they're not a place where you can res
15:01restore your purchasing power. So you
15:02have to look out into the equities
15:04market, gold has underperformed in the
15:06last couple of months. Um, so how do you
15:08kind of share advice to investors who
15:11are looking out going, "Okay, I need at
15:12least 6% just to keep up with the
15:15dilution of the money supply. I need
15:17something that's like 7 8 10%." But then
15:19you're starting to go out into the risky
15:21areas. So like, how do you advise
15:23people?
15:24>> Yeah, I know. I think we have probably
15:25the best call on Global Wall Street for
15:26this and I'm a huge fan of Lane Alden.
15:27Um but you know we've been we've been
15:30explaining this concept more succinctly
15:32in our opinion as well as anybody
15:33probably with the exception of Ray Dalio
15:35in in recent years. You know our
15:37geopolit our macro risk management
15:38northstar has been that there is a
15:39geopolitically driven supply demand
15:41imbalance in the treasury bond market
15:43and as a function of that the limited
15:45menu of options that the sovereign has
15:47to deal with this situation generally
15:50point to you know currency debasement.
15:52>> Yep. Um and and as a function of that
15:55then you're ultimately going to see
15:56printing and the answering your question
16:00the best thing you can do as an investor
16:02to protect your family's wealth from
16:04this situation is not own the asset that
16:07has the the supply demand imbalance like
16:09that's like step one you know in our
16:11core flagship asset allocation uh which
16:13there's an ETF coming out um um you know
16:15pretty soon uh to track that in our
16:18flagship core asset allocation we've
16:20removed treasury bonds
16:21>> alto
16:22um this is a few years ago uh and
16:24replaced it with gold and that's been a
16:25a really good call uh not not a call
16:28it's a really good just structural you
16:29know business pivot um and and that's
16:31been a you know because gold
16:32historically when you look across cycles
16:34you know hundreds of years of data gold
16:36has actually been one of the better
16:37portfolio diversifiers treasuries are
16:39diversified equities in certain regimes
16:41regimes where inflation is typically
16:42below 3% andor declining andor growth is
16:45is below trend and declining uh but
16:47that's obviously not the economy we have
16:48we're in a booming what we call paradigm
16:50C economy paradigm A which is you know
16:52kind of where we were in 2020 21 which
16:55is creating the debt disease you know
16:57lurching into fiscal dominance um you
16:59know a lot of ill advised stimulus that
17:01kind of got us there um and so now we're
17:03basically back at we are at World War II
17:05levels of of debt uh in this country and
17:07more importantly it's not the level of
17:08debt or or the the nominal amount of of
17:11financing that the government needs to
17:12do or the size of the budget deficit
17:13that matters. What matters is its ratio
17:16to the availability of capital. And so
17:18when you look at the the the approximate
17:20next 12 months market with Treasury debt
17:21supply, which is statistic that we've
17:23maintained for years and and we have
17:24data going back to I want to say the
17:26early 80s for this um it's about 10
17:28trillion in debt that needs to be rolled
17:29over,2 trillion of deficit and another
17:31$200 billion of incremental interest
17:33expense from rep from refinancing into
17:34the higher interest rate regime. So
17:36you're talking about 12 and a half
17:37roughly trillion dollars. That's about
17:3940% of global savings up from 20% prior
17:42to co. So we're the the Treasury needs
17:44twice as much of global savings than it
17:47used to. And so this is obviously
17:49creating a whole host of issues and a
17:50whole host of policy responses issue
17:52K-shaped economy. We're squeezing out
17:54income uh uh from the bottom half of the
17:56K in terms of small businesses low to
17:58median income households and their
17:59consumption uh and their income. But
18:01we're also creating a whole host of
18:02policy responses. We've seen doubish net
18:05financing policy by the Treasury. Uh
18:07recall that uh my fellow Yale Jenny
18:09Yellen when she was in the seat uh as
18:10treasury secretary shifted to uh
18:13Dovishnet financing policy.
18:15>> Our fellow Yale Scott Besset was
18:16blogging about her and at you know fancy
18:18lunches basically saying this is the
18:20worst thing you could be doing. He gets
18:21in the seat he goes oh no wait let's do
18:23this let's keep doing this rubber
18:25stamped it and so that's a very clear
18:26indication that they they they
18:28understand that they cannot issue debt
18:29on the long end of the curve because the
18:31moneyiness of the US uh dollar and
18:32long-term um debt securities has gone
18:34down in this in this scenario. So they
18:36tried paradigm B. Paradigm B was Doge
18:38cut the deficit. Obviously it's failed
18:40spectac spectacularly as we accurately
18:42predicted. Um you know we said it was
18:44Kabuki Theater and it turned out to be
18:45even worse than Kabuki Theater. Uh we
18:47are now in paradigm C. They pivoted to
18:49paradigm C back in April of last year
18:51which is try to grow your way out of
18:52this problem. It will not be successful.
18:54There's no evidence in history that
18:55these sort of large scale Republican tax
18:57cut programs as has created booms uh in
19:00sustainable booms in the economy and and
19:01and reduce um uh uh the debt burden.
19:04There is no evidence of that actually.
19:05Uh we we've done statistical analysis on
19:07that. And so the next stop on this
19:09train, there's only two other stops on
19:10this train that are generally
19:11acceptable. Uh us or sorry, there's only
19:13one other stop on the train that's
19:14acceptable. There three other stops. Two
19:16of them are not acceptable. The next
19:17stop on the train is debasement. Uh
19:19you're going to have to start
19:20debasement. We think we're going to
19:21enter that that regime next year. Uh in
19:23the context of a Fed Treasury Court 2.0,
19:26uh and then ultimately ultimately you
19:28wind up with either default or total
19:29war. And that's that's that's about 500
19:32years of history there. So, I agree with
19:34you and given everything you've said,
19:35given the debt and the debasement, why
19:38isn't gold doing better than it is? I
19:40know it had a high runup and a lot of
19:42people were taking profits, but I mean,
19:43why why don't we see gold at like 6
19:45$7,000 an ounce?
19:46>> Because real interest rates have
19:47skyrocketed in recent months across the
19:50curve. Turn premiums risen substantially
19:52across the curve. These are things that
19:54make the demand for an asset that
19:56doesn't yield
19:57>> lower at the margins. And so gold should
19:59have had the gold should have correct I
20:01mean don't for start let's not start
20:03gold more than doubled
20:04>> right
20:04>> you know from the time we put it in kiss
20:06um in in in late 2024 so like it's not
20:09supposed to double in like 18 months you
20:11know it's you know supposed to you know
20:13generally keep pace with the money
20:14supply if not slightly faster that's
20:15just that's just the history of the the
20:17time series and so clearly there was a
20:19lot of you know kind of speculative ex I
20:21think a lot of the Bitcoin trade wound
20:23up in gold
20:24>> and then they exited gold and they
20:25realized that when interest rates go up
20:27the gold do goes down and So I think you
20:28know folks my age and below are probably
20:30learning that lesson have learned that
20:31lesson the hard way um if they didn't
20:33have risk management overlays like the
20:34ones we feature in in Kiss and Dr. Mo.
20:36Um so when you think about gold the
20:40longerterm outlook is very bullish
20:41including Bitcoin as well. I mean the
20:43longerterm outlook for Bitcoin is is
20:44very bullish because ultimately there's
20:46no political will to cut which would be
20:48very bearish for gold and Bitcoin and
20:50stocks. there's no, you know, you can't
20:53sustain paradigm C and we're getting
20:55really really benefiting from this sort
20:57of capital investment boom with AI, but
20:59history shows you generally don't
21:00sustain paradigm C and these tax
21:02programs typically don't last in terms
21:04of the sugar high we see. And so
21:06ultimately, you know, if they if they do
21:08start to print, then you're going to
21:09wind up in a much better environment for
21:10gold and pickle.
21:11>> Coin stories is powered by Bitco, the
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21:33protecting your Bitcoin is just as
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22:03pace. Go to the bitcoinway.com/natalie
22:06to get started. I remember my first news
22:08job. I was making like 20some thousand.
22:10I didn't start putting away in my 401k
22:12when I should have. What's your argument
22:14for considering even having an IRA if
22:18you're a Bitcoiner?
22:19>> Taxes. You're going to sell off some
22:20Bitcoin and you're going to move it into
22:21dirty dollars or whatever currency
22:23survives the dollar and there'll be a
22:25taxable event for that liquidation. If
22:27you do it in a Roth, you could turn
22:28$5,000 into a half million and you're
22:30going to take it all out entirely
22:32taxfree.
22:35>> Since you haven't been on the show
22:36before, can you share do you like
22:38Bitcoin? Do you do you think that it's
22:40something that is a good hedge? Do you
22:42see it as something that should be a
22:44certain percentage allocation in
22:45someone's portfolio?
22:47>> We were the first institutional
22:48investment firm on Global Wall Street to
22:49put Bitcoin in our flagship asset out
22:50there.
22:50>> The first?
22:51>> The first.
22:51>> Amazing.
22:52>> Yeah. We were the first institutional
22:54investment firm on Global Wall Street to
22:57have greater than 10%.
22:58>> And that was my year.
22:59>> This was back in January of 2023.
23:01>> And over 10%.
23:02>> No, it's capped at 20%. But yeah, 10% is
23:04pretty high for institutional
23:07investors only have 1 to 2% of gold.
23:08>> Oh my gosh.
23:09>> Of gold, not Bitcoin.
23:10>> Wow.
23:11>> Yeah. U so they they'll catch up
23:12eventually. And that that their flows
23:14will make us rich. That's the whole
23:15point. You [laughter] want to buy before
23:16they do. Um so uh so um yeah, we were
23:20the first uh on the Bitcoin train as an
23:22institutional investment firm. We were
23:23the first on the gold train in terms of
23:24bringing the gold allocation to a re a
23:27high enough level to actually offset the
23:29equity risk in our portfolios. Um uh you
23:31know, a year later. Um and so you know
23:34it's our view we're sort of waiting at
23:35the finish line. We think we are waiting
23:36at the finish line. Obviously we don't
23:37have crystal ball but you know based on
23:39the legions of research we do and and
23:41you know the proven quantitative
23:42techniques and the tremendous amount of
23:43data. We spend half a million dollars of
23:44data half a million dollars a year on
23:46data every year. Um you know based on
23:48all that that research and data, you
23:50know, we think we're waiting at the
23:51finish line as it relates to where my
23:52clients across the street have to have
23:54to go. Uh and so that's you know a
23:56portfolio that largely features you know
23:58features capital assets that have
23:59historically you know outpaced uh
24:01inflation from a currency debasement
24:03perspective. Stocks typically compounded
24:05at minus 8% per year. When you go back
24:07and look you study the cycles since
24:09Nixon abandoned the gold stand
24:10unilaterally abandoned the gold standard
24:12by the way you can cause a lot of damage
24:14by the way with the executive branch.
24:17[laughter]
24:18unilaterally advanced the gold standard
24:20by the way in 1971 the S&P 100 has
24:22compounded about uh the dollar has
24:25compounded about minus 8% panom versus
24:27stocks and gold
24:28>> that's about minus 6% peranom versus
24:30like food and energy minus you know
24:32sorry food and shelter about - 8%
24:34peranom versus energy
24:36>> crazy
24:36>> you know so you need to have assets in
24:37your portfolio that at least the bare
24:40minimum keep up with that you know it's
24:42not about what the government tells you
24:43inflation is we all know that inflation
24:44is not 3% try to buy plane ticket try to
24:47buy healthcare try to uh, you know,
24:48daycare for your kid, try to buy food at
24:50the store, try to buy try to take your
24:51wife or husband on a date or take, guys,
24:54don't don't have your wife pay for the
24:55date, [laughter] take your wife on a
24:56date.
24:58Uh, you know, try to do anything that
25:00human beings need to do. You really
25:02quickly figure out that inflation is not
25:033%.
25:04>> Right?
25:04>> That's $3 on $100. That's not how that's
25:07not inflation. And so clearly the
25:08government's under reporting inflation
25:10relative to those debasement rates. uh
25:11but they're not incentivized at all to
25:13tell you what the real true inflation
25:14rate is because obviously 30 40% of the
25:17budget is indexed to inflation.
25:18>> So what's your outlook on Bitcoin in the
25:20next 10 years? Because some people
25:21especially on Wall Street are concerned
25:23about things like quantum threats or the
25:25risk that AI might break some some type
25:27of cryptography securing wallets. Where
25:29are you at with that?
25:30>> Yeah, I'm I'm a pretty smart guy, but
25:31I'm not smart enough to tell anybody
25:32about anything about quantum computing.
25:33Most people aren't.
25:36Unless you have someone researching
25:37quantum computing, which is like the
25:38most advanced thing we can be doing as a
25:40society that and curing cancer.
25:43I don't know. It's probably a threat.
25:45Yeah. No, I mean that the the network
25:47has been successful against, you know,
25:48hacks previously, but it may not be. But
25:50again, I'm not you I'm not worried about
25:52the 10% of my portfolio that's that
25:54would be potentially allocated to
25:55Bitcoin if it's maxed out. Again, we run
25:57sophisticated responder and overlays to
25:59guide go from 0 to 10 or in Bitcoin, 0
26:02to 30 in gold, 0 to 60 in stocks.
26:04Obviously 6030 10 when it's maxed out
26:06could be 100% cash. And so if the threat
26:07from quantum computing has us at 0%
26:09Bitcoin ahead of that threat you know
26:11materializing that'd be great. But if it
26:12doesn't then it's 10% of our portfolio
26:15uh at at most. Um
26:18you know I I I honestly don't know and
26:20and and by the way it's okay to say I
26:21don't know. You don't know. Nobody knows
26:23everything. People get on here with
26:24their fancy suits and fancy ties and
26:26fancy shoes and whatnot but like come on
26:28we don't know everything. We This is
26:30always a distribution. Sorry. always a
26:32distribution of probable outcomes and
26:34sometimes the distribution is wider than
26:36we actually have data to to to actually
26:38you know ascertain what the shape of it
26:39is that's called uncertainty but we have
26:41to focus on the risk that we can
26:42actually see manage and ultimately
26:43forecast as investors and so I I don't
26:46know but I I I tell you right now if we
26:48have a threat to Bitcoin the Bitcoin
26:50network which has proven to be one of
26:51the most durable networks in human
26:52history uh and the most unhackable
26:54networks in human history if quantum
26:56computing breaks down Bitcoin you think
26:58you're going to log into your Charles
26:59Schwab account and trade Nvidia
27:01you. They're not going to go after the
27:03$2 trillion in the crypto asset class.
27:05They're going to go after the $300
27:06trillion in all the other asset classes.
27:08Come on, guys. Think about it. Have you
27:10seen the tweets of people saying that
27:12there's going to be some kind of like
27:13electrical infrastructure scare that a
27:16cyber attack could be coming and you
27:17have to stockpile on supplies kind of
27:20like the CO area. Have you seen some of
27:21that or been following that?
27:23>> Yeah,
27:24guys, this is already happening. Go to
27:26Europe. They're attacking grocery
27:28stores. They're attacking hospitals.
27:30They're attacking dams. They're
27:31attacking critical infrastructure like
27:32electricity grids, street lights. This
27:36is already happening in Europe. And
27:37probably because maybe because they have
27:38worse cyber defense than we do, but
27:40again, at some point, the cyber defense,
27:42the cyber offense, you know, may exceed
27:44the cyber defense because if only
27:46because there's more will to to cause
27:48damage. You know, think about state
27:49sponsored actors like Russia, Iran,
27:52Yemen, maybe there's some would say
27:55China, you know, I hope I hope I don't
27:57get embedded by saying that.
27:59>> [laughter]
28:00>> Sorry, Mate. Uh, you know, uh, again,
28:04there might be more will for those
28:06countries in terms of sponsoring
28:08terrorism to create these negative
28:10outcomes in the west, if only to sow
28:11political dysfunction and break apart
28:14the alliance that is NATO. You break
28:16apart the alliance that is NATO, you
28:18ultimately start to eat away at the
28:19dollar hedgeimonyy that's been
28:20determining uh, you know, been driving
28:21global capital markets and really the
28:23global economy since since Brent Woods.
28:25Uh, and so [sighs]
28:27I don't know. I I would look I if
28:29there's we have a core belief we talked
28:31about paradigm D which is default via
28:32debasement. The other two outcomes are
28:35actual default which we're not going to
28:36do because we print dollars and total
28:38war.
28:39>> This I mean this is now the total war
28:40part is literally tens of thousands of
28:43years of history human is basically all
28:44of human history is we we go to war when
28:46we need resources. Um and so you know
28:50the history suggests based on these you
28:52know the current pattern that we have
28:53from a cleodnamic perspective if you
28:55look at you know Peter Turin his elite
28:57over production framework uh you look at
28:59Ray Dallio the domestic the domestic
29:01political disintegration the
29:03geopolitical disintegration you look at
29:05Neil how my former colleague friend and
29:07mentor uh his fourth turning framework
29:09three different like totally different
29:11frameworks obviously looking at a lot of
29:13the same historical data but just
29:14arriving at the basically similar
29:16conclusions is that we are marching
29:18towards war. And so to answer your
29:19question, if you're a fiduciary of other
29:22people's wealth, if you're head of a
29:24household, please have a plan. And I
29:28hope you never have to use the plan, but
29:30I would stock up on, you know, some
29:32weeks worth of non-p perishable food,
29:34have water, you know, in case things do
29:36happen. Um, just have a plan. Have a
29:38plan. Have a have some physical gold.
29:40Have a plan. And and I don't exercise
29:43your second amendment rights if you know
29:45what I mean because if things get scary
29:47and hairy, you need to protect your
29:49family and make sure your family and
29:50your and your clients that you fiduciate
29:52you have refuge responsibility for are
29:54safe. And again, I hope the plan never
29:56materialized. I'm a Christian. I don't
29:58want war. That's a terrible idea.
29:59Everyone loses in war. But it's my job
30:02as a risk manager
30:03>> to help our clients understand this
30:06historical pattern and say we are here
30:09on the historical pattern and if we keep
30:11going, you know those things in the uh
30:12airport where you walk and you walk
30:13faster, it's like a flat escalator,
30:16we're on one of those
30:17>> and so we could stand still and slow it
30:19down, but we're still going to move
30:20forward on this on this path. Uh but
30:22we're actually not standing still. The
30:23deficit continues to widen. you know the
30:25political disintegration continues to
30:27dis accelerate or sorry political
30:29disintegration continues to accelerate
30:31the geopolitical disintegration
30:32continues to accelerate so we're like
30:34walking on one of those you know flat
30:36escalators towards paradigm E which is a
30:38major political realignment and total
30:40war and this you know obviously the case
30:41shaped economy dynamic is contributo to
30:43that
30:44>> all the strategies that you're putting
30:45out there for people to accumulate
30:47assets and to really protect themselves
30:50they're really only um being used it
30:52seems like by the few by that by the top
30:54part of the K and the majority of people
30:57are being impoverished by the
30:58destruction of the purchasing power and
31:00the money printing and they're the ones
31:02that are going to I think usher in the
31:04candidates that are like oh yes we'll
31:06promise you all the free things but
31:07really we're taking total control and
31:09that's what kind of worries
31:10off [laughter] the current
31:11president
31:13>> yeah I said it the current president
31:15>> it [laughter] it worries me like in
31:16terms of where we're headed for the
31:17majority of people like majority of
31:19people not realizing that they do need
31:21to protect themselves by investing as
31:23opposed to just saving in their, you
31:25know, wages and income. So, like this is
31:27the part where I'm like, what is society
31:29at large going to do? Because yes, the
31:31people we're speaking to, they have
31:32investment portfolios, but what do you
31:34do about the majority of people who
31:36don't own stocks, who have, you know,
31:38regular wages as their income, they
31:40don't have a lot of capital. Those are
31:42the people that I'm really concerned
31:44about as this K-shaped economy continues
31:46to widen because I think it's going to
31:47widen.
31:48>> It's going to widen. And again, the the
31:50primary driver of the K-shaped economy,
31:52PC1 in this whole equation is the
31:54squeezing of income from the the
31:56siphoning of resources to the federal
31:58government. The federal government is
31:59still the general government, the state
32:00and local governments are are big, too.
32:02And so, as long as that dynamic
32:03continues and if we don't do paradigm B,
32:05it's going to continue and actually get
32:06worse over time. Um, you can make the
32:08case that global savings could probably
32:10go down, should probably go down in a
32:12world where everyone's building supply
32:13chain redundancy. And so, the the
32:15marginal supply of savings is
32:16decreasing. At the same time, the
32:17marginal demand for capital by the
32:19government is increasing. And so, who's
32:21the loser in that scenario? It's the
32:22folks on the bottom of the K. And so,
32:24you said something that I thought was
32:25very insightful, but unfortunately, I'm
32:27not entirely sure that it's it's
32:28particularly helpful if if you don't
32:30mind me saying. Uh, and the reason I say
32:32this, someone who grew up at the very
32:33bottom of the K,
32:34>> homeless many times throughout my life,
32:37you know, food insecurity my entire
32:38childhood, you know, housing insecurity
32:40obviously being homeless many for many
32:43years. Um, you know, as someone who went
32:45through that,
32:47there's not a person I knew back then
32:49who had savings. There were nobody had
32:51savings. You know, it cost, let's say,
32:53$100 to live. You know, you have a
32:55family of four or whatever. They're just
32:56using a typical American household. You
32:58had a family of four, it cost $100 for
32:59you to live. And every year on a real
33:02basis, your income is less than that.
33:04So, you started at $99. So, you you
33:06don't you have a negative savings rate.
33:08You need the government to supplement
33:09you. You have now you have $95 after
33:11inflation. Now, you need more. you need
33:13$5 just to get back to that same level
33:14of consumption or you have to you know
33:16shrink your level of consumption. And so
33:18that's what's actually happening. And so
33:19as much as these folks should will
33:20benefit would benefit from having assets
33:23like Bitcoin and you know that could
33:24protect their purchasing power, the
33:26reality is they don't have assets. We
33:28don't have assets though. I think the
33:29most money my mom and dad ever had in my
33:31entire you know 18-year childhood was
33:33like two grand from like a you know
33:35income tax refund or something or earned
33:37income tax credit or something. two
33:39grand like like the most money at any
33:41point in time on any point of the X-axis
33:43was like two grand and so you're not
33:45going to protect your purchasing power
33:46with with that kind of you know such a
33:48low level of assets and so this is why
33:49it's so this is why big government is so
33:52insidious you know you know the founding
33:54fathers had it right when you include
33:56Abraham Lincoln there's no been no
33:58better system of of economic
34:00organization of of socioeconomic
34:02organization than small government plus
34:04free emphasis on free market capitalism
34:06obviously what we've been practicing for
34:08the last 40, 50 years is not free market
34:10capitalism. It's it's socialism for
34:11companies. It's socialism for rich
34:13people, folks like me in the K1 class.
34:15>> How did you pull yourself out of that
34:16situation?
34:17>> I didn't.
34:18>> Yes, you did.
34:19>> No, I didn't. Jesus Christ. Coaches,
34:21teachers, mentors, lots of people
34:25rallied around me and helped me go from
34:27point A to point B. I I would never take
34:29credit for that. That's that's that' be
34:30rude and disrespectful to all the time
34:32and energy they poured into into
34:34supporting me. So, if someone's
34:35listening to this and they're looking
34:36for that kind of hope or they know
34:38someone that needs that kind of hope and
34:39they they feel more disenfranchised and
34:42um disempowered than ever, like what is
34:44that first step that they need to do? Ah
34:47boy, this is the number one thing I
34:48think we need to do as a society, as a
34:50society. And I set up for this.
34:55[snorts]
34:56Your vote does not matter anymore.
35:01This is by design.
35:031976
35:05we started a cascading sequence of
35:08election reform election dere election
35:11campaign finance deregulation
35:13deregulation that culminating with
35:16Citizens United in 2010 and I think
35:18McCutchen via FEC in 2014 u basically
35:22made it very easy for the donor class to
35:26purchase political outcomes that support
35:29their income and and consumption at the
35:32expense of your income and consumption.
35:36There's no accident why labor share of
35:37national income has gone from the top
35:39left of the chart to the bottom right of
35:41the chart and is accelerating to the
35:42downside. There's no it's not an
35:45accident that corporate profits as a
35:47percent of income have gone from the
35:49bottom left of the chart to the top
35:51right of the chart and accelerating and
35:53jumping off the top of the page. It's no
35:55accident that the S&P 500 has been doing
35:57just like that, just been looking just
35:58like that uh uh uh uh as a reason. And
36:01so the emiseration that you know the
36:03median American household feels and this
36:05is not American it's a western this is a
36:07western society dynamic. Uh it's it's
36:09more acute in the in in in America
36:11because we've allowed this to go we've
36:12allowed these dynamics to run a muck in
36:14terms of campaign reform. The number one
36:16thing we need to do as a society is claw
36:19back our vote and the power of our
36:21democracy. We no longer live in a
36:24democracy. At best it's a kletocracy. At
36:26worst it's a putoaucracy. Some would
36:28prefer it to be a monarchy, but
36:30obviously hopefully we still have the
36:31the court system to to prevent that. And
36:33we've seen a few uh court decision,
36:35we've seen some some courage by the
36:36Supreme Court in recent recent months to
36:38prevent that outcome. But this is not
36:40what the founding fathers had in mind.
36:42The founding fathers did not design a
36:44system whereby my income as someone in
36:46the K1 class is taxed at significantly
36:49lower rates than the income of the
36:50people I employ.
36:51>> Does make I mean what does what sense
36:52does that make? You know, the founding
36:54fathers did not design a system whereby
36:57we kick everyone off defined benefit
36:59pensions and then not pay them enough to
37:01save money and force them into defined
37:03contribution systems.
37:04>> Founding fathers didn't didn't didn't
37:06vote. That's not that's not what they
37:07wanted.
37:08>> You know, the founding father, you go
37:09back to the French Revolution, Liberty A
37:11was I can't pronounce it. Egalate. Yeah,
37:14exactly. Like this is not what they had
37:16in mind. They didn't have in mind the
37:17ability for Elon Musk to put people in
37:19the Senate, put people in the White
37:20House, put people in the wherever they
37:22need to be in state legislators to
37:23create laws that benefit his income. But
37:26that's what we have now. And and it's
37:28not just Elon Musk. I'm not calling out.
37:29This is on both sides of the aisle. Your
37:31favorite politician is part of the the
37:33game. And so you need to start voting
37:35for people who say what I just said out
37:37loud because that'll tell you that
37:39they're not bought and paid for by
37:40someone who's paying for them to go
37:42legislate, you know, policies and
37:44regulation on their behalf instead of
37:46yours as an American citizen. No
37:47American citizen would vote for a labor
37:49share of national income to be cascading
37:50down off the bottom of the chart. But
37:53these are, you know, the explicit these
37:54are the results of very explicit
37:55policies um that have been profered by
37:57both sides of the aisle for decades. And
37:59so the the first step in this process
38:01and I'm not sure that we we might have
38:02be past a point of no return
38:04unfortunately. First step in this
38:05process is we need to put people in
38:06Congress state and state governments
38:09that understand what I do believe in
38:11that believe that you know political
38:12influence shouldn't be purchased. You
38:14know it should be earned by by the
38:15people. You know it should earn the
38:16respect and and admiration of the
38:18people. Well
38:19>> I was going to say do you even have hope
38:20that that's possible anymore? Because it
38:22seems like no matter which side you vote
38:24for we continually see the cost of
38:26living increasing. the asset holders
38:28benefiting and accumulating more wealth
38:30and life for the average person in
38:32America feeling like it wasn't as easy
38:34as it was 30 40 years ago.
38:35>> It's definitely not. I mean, raise your
38:37hand if you're a family of four and you
38:39can afford to raise a family of four
38:40with one income.
38:42>> 40, 50 years ago, that was true.
38:43>> Yep.
38:44>> Now you you need both mom and dad
38:46working 10our shifts, picking up extra
38:48shifts. God knows where the kids are.
38:51[laughter] You know what I mean? like
38:52what what family of four can afford to
38:55live comfortably like they did you know
38:5740 50 years ago none and that's not
38:59that's again it's by design we're
39:00squeezing we not we I guess we I guess
39:02I'm part of the problem in the K1 class
39:03but I obviously don't vote for this
39:04stuff I don't believe in it it's sick
39:06but we in the K1 class have made a very
39:09visible choice to take money from your
39:12guys' family in the W2 class and put it
39:14in our bank accounts
39:15>> and we've done that and they we call it
39:17corporate profits we call it progress we
39:18call it innovation we call it you know
39:19S&P 500 but it's it's sick And so,
39:24do I have faith that this process can
39:26get overrun? Yeah, it will get overrun.
39:27I mean, this is again, this is why I'm
39:29so concerned and why you see me on
39:30Twitter
39:31>> tweeting things that, you know, most
39:32people will think I'm crazy for
39:33tweeting,
39:34>> but they probably thought you they'll
39:36think Peter Church is crazy. They'll
39:37think, you know, Neil Dalia's crazy,
39:39they think Neil House's crazy until
39:40until the people in the W2 class flip
39:42over the monopoly board as they've done
39:44time and time again throughout history.
39:46You know I want to say uh 75% so um back
39:50in 2023 when Peter church wrote end
39:52times they had built this database sess
39:54which essentially monitors cleodnamic
39:58information across all these societies.
39:59Cleonamis is the study of how and why
40:03societies rise and fall civilizations
40:05rise and fall. Um it's a very complex
40:07study requires political science,
40:08statistics, mathematics, biology like
40:11it's basically like the the pity science
40:14hub in Vienna basically pulled together
40:15all the smartest people in the world to
40:16figure this stuff out. It's a you know
40:18emerging field and and in and research
40:20and so when they back in they had tagged
40:23basically 100 societies you know from
40:26China to the Middle East ancient Middle
40:28East to to the you know American
40:29revolution you know French revol they
40:31had tagged 100 societies at that point
40:32where they had the best data and the
40:34first 100 societies they tagged said
40:36economies that have basically the US's
40:38current properties from a you know a
40:40lead over production standpoint from a
40:42K-shaped economy standpoint from a
40:44political disintegration standpoint
40:46those economies that share that pattern
40:47of of of dynamic. 75% of those societies
40:51have revolution, civil war, or both. 75
40:54out of 100. We're two of them, American
40:57Revolution and Civil War. And so, I do
41:00have a lot of faith that we're going to
41:01fix this big problem, this insidious
41:03problem of rich people paying for
41:04political influence that harms poor
41:06people and median income people.
41:09>> That is a problem. That is the number
41:10one problem in this country. And I'm not
41:12sure that our votes can fix that. So
41:14historically violence is the answer.
41:16>> You know overthrow the government is the
41:18answer. And so I am very optimistic over
41:21the long term that you know we will get
41:23to a better outcome. I'm just concerned
41:25about the path that it that we have to
41:26take to get there. It will be very
41:28disruptive for financial markets. You
41:29know financial markets are not priced
41:31for you know any sort of widespread
41:34conflict or US political dysfunction
41:38now. Try civil war. Try try global war.
41:41you know, the the world the global
41:43economy doesn't function. It's not set
41:45up for that outcome. You know, anytime
41:47you have significant change relative to
41:49what consensus is expects to be true in
41:52financial markets, you typically have
41:53secular bare markets. And so that that
41:55to me is the is my big concern as a risk
41:57manager is that getting to the rainbow
41:59of a more egalitarian society, a more,
42:02you know, society where people actually,
42:04you know, were were, you know, an
42:05E-shaped economy, not a K-shaped
42:07economy, an E-shaped economy where
42:08everyone's moving in the same direction,
42:09not a, you know, different directions.
42:11Getting to an E-shaped economy will
42:12happen. I just fear that it's going to
42:14be violent.
42:15>> Well, it seems like you've got some
42:16vision around this. So, do you have any
42:18plans to potentially run, throw your hat
42:21in the ring?
42:22>> Yeah. Um, yes and no. Uh, I would prefer
42:26not to. I I would prefer not to. Um,
42:28>> because we need more politicians who
42:30understand things the way that you do.
42:32People who are economically literate,
42:33who understand what money printing
42:35actually does, who understand what
42:36creates the K-shaped economy, and we
42:38don't have a lot of those. But the
42:39problem is how expensive it is to run.
42:41>> They will put a bullet in my head before
42:43they let me become president. They put a
42:45bullet in Dr. Martin Luther King's head
42:46for saying black people and white people
42:48should eat at the same Diner. you know,
42:51for they put a bullet in JFK's head for
42:52saying the same thing. You think they
42:54wouldn't put a bullet in my head for
42:55saying the the this system is rigged and
42:57the rich people who rigged the system
42:59for in in their favor in their behalf?
43:00You know, they they will absolutely kill
43:02me. Um you know, they've killed people
43:03for for less. And so, uh do I want to
43:06run? No. Um I have a family.
43:09>> Do I will I be compelled to run if this
43:11doesn't get fixed? Yeah, because I have
43:12a duty. I'm a patriot. Uh I'm a
43:15Christian. I want good outcomes for
43:16everyone. Again, including rich people,
43:18by the way. I don't think we need to
43:19siphon income and wealth from poor
43:21people. I think we can innovate and
43:23create and and and work hard and and and
43:25have great lives for ourselves. We don't
43:27need to rig the system. We don't need to
43:28rig the tax code. We don't need to rig
43:30monetary policy in favor of ourselves
43:32and at the expense of people who don't
43:34have capital assets. We don't need to do
43:36that. We are just choosing to do that
43:37because we're greedy. We the K1 class.
43:40If you could serve in either of these
43:43positions as president of the United
43:45States or as the head of the Federal
43:47Reserve or Treasury, which one would you
43:49choose and what would you do?
43:50>> President,
43:51>> what would you do?
43:52>> President because you have the most
43:54influence over the the discussion. Not
43:56only can you appoint to treasury, Fed,
43:59Fed chair, Fed governors, president, you
44:01can control the narrative. Like right
44:03now, I don't really see too many
44:04national politicians that are saying
44:05similar things. Pete Buddhaj is saying
44:07similar things that he's in fact he's
44:09the only mainstream politician I've
44:11heard that said you know the rich have
44:12hacked our elections and that's going to
44:15cost him campaign finance
44:17>> and you know it's probably is going to
44:18ruin his career but he you know I'm glad
44:20that someone has the courage to stand up
44:22and say it. Most politicians don't have
44:25the courage to stand up and say it
44:26because this is how they get paid. You
44:27know there's a principal agent problem
44:29here and so my fear is that this doesn't
44:31get solved without uh revolution. But
44:33going back to answer your question, you
44:35know, again, I'd rather not, you know,
44:37I'd rather stay alive and and be a good
44:39dad and a good husband, but if I have
44:40to, as an American patriot and as a
44:42Christian, you know, throw my hat in the
44:43ring, I will. Um I will once my kids are
44:46out of high school. Um and so, yeah, I
44:49guess that's answer your question.
44:50>> Fair enough. All right. Well, as we
44:51start to wrap up, um let's speak to the
44:53the two sides of the K-shaped economy.
44:56For those who are really trying to work
44:58hard, they're earning a wage, maybe it's
45:00it's just difficult to make ends meet,
45:02what is one piece of advice you can give
45:04them in terms of economically empowering
45:05themselves with what little they have?
45:08And then on the flip side, for those
45:09doing very very well, what advice do you
45:11have for them?
45:12>> The advice I would say to my former
45:15self, uh, people, you know, I grew up
45:17with is
45:20AI can be a a pl. So, education is
45:23always the path. you know, I I figured
45:25out at a very young age, if only because
45:26I was, you know, we were homeless um um
45:30heading into my third grade year and we
45:32got until we were living in this
45:33homeless shelter, my mom, my brother and
45:34I. And so we got to go to this um the
45:37way the zoning worked in St. Louis at
45:38the time. We got to go I we got to go to
45:40Delmare Harvard, which was like this,
45:42you know, college preparatory school. It
45:43was like a basically they zoned by um by
45:46uh distance, not by, you know, income
45:48stratosphere. So it was a real blessing
45:50in disguise. It was not blessing. The
45:52homelessness was a blessing in disguise
45:53living in that homeless shelter because
45:54I got to go to Delmar Harbor for that
45:56one year. And that one year of education
45:58in third grade basically put me on a
46:00trajectory relative to my peers all the
46:02way through high school. And so I
46:03obviously went to Yale and and and did
46:05well at Yale and and I was well on Wall
46:07Street. And so I would say education is
46:09very clearly the path to getting out of
46:10there. But the problem with education is
46:12that we have such crappy schools where
46:13we're from in the inner city. We have
46:15such, you know, we just don't have the
46:16resources to have good education
46:18relative to the kinds of places that I
46:19send my son now, you know, and so you
46:21know, you're going to have to use AI to
46:24level the playing field of your
46:25education relative to what you can
46:27actually acquire from the government uh
46:29in these resources. So, if I can give
46:30one piece of advice is you need to be
46:33better at AI than the people on the top
46:35of the game.
46:36>> You need to you need to be the
46:37disruptor.
46:38>> Um you need to disrupt the the legacy
46:39and and and obviously not everyone's
46:41going to be able to do that, but that
46:42that would be the best piece of advice I
46:43can give you because obviously hoping
46:45that the government solves your problems
46:46is is a it's you're going to be waiting
46:47for a long time. the advice I would give
46:50to people in the top of the K and this
46:51is why I think God put me here. I think
46:53God,
46:56you know, got me through everything that
46:58I've been through, child abuse,
47:00homelessness, food insecurity,
47:03to have the compassion,
47:06but also the intellect and the technical
47:08ability to speak to Wall Street, to
47:10speak to the capital class, to tell them
47:13that what you're doing to the labor
47:15class is wrong.
47:17and the the rooms I'm in. I mean, if I
47:19told you where I'm going this afternoon,
47:21you would not believe me.
47:23>> Max 7 Company, one of the biggest
47:24companies in the world. I'm on their
47:26portfolio advisory committee. They don't
47:28make large scale changes in their
47:29portfolio without consulting me and and
47:31a few other people on the sell side
47:33first. Um, I mean, they do, but yeah,
47:35I'm making myself too important. But
47:38again, it's only six people in that
47:40room. And so, this is one of the largest
47:42portfolios, one of the largest companies
47:43in the world. I feel like God put me
47:46here to speak to them, to speak to the
47:50capital class to say, "Hey, we need to
47:52we need to we need not tone it down. We
47:54need to reverse this before before you
47:56know we we see, you know, significant
47:58significant negative consequences in our
48:00society."
48:01>> I mean, after this conversation, I just
48:03respect your work even more, Darius.
48:04Thank you so much for joining me. Any
48:06parting thoughts?
48:07>> Yeah, I mean, just bringing it back to
48:08markets. [laughter]
48:10Sorry for the the hard left turn there.
48:12No, I appreciate it. Great. Yeah. Thank
48:14you. Um, bringing it back to markets,
48:20we do we do think this market cycle ends
48:23in a secular bare market. You know, a
48:26few reasons why we think that one, the
48:28AI or not AI capex bubble is highly
48:30likely to precede a secular bare market
48:31because every other capex bubble we've
48:33seen in history and this is by far the
48:34biggest one preceded a secular bare
48:36market. So that's that's the base rate.
48:37You would have to argue me away from the
48:39base rate uh in order for that not to be
48:40true. probably not till like 2028ish.
48:44>> And and the reason we think 2028 is such
48:45a catalyst is because we don't think the
48:47reason we don't think the market cycle
48:48survives the secular bull market which
48:50began, you know, when my career began,
48:51you know, back in the late year of the
48:53GFC.
48:54We don't think the secular liable
48:56market, you know, survives contact with
48:58the general election. It's because we
49:00think significant redistributive
49:01policies are on the ballot. And so when
49:03you talk about redistributive policies,
49:05you're talking about wealth taxes.
49:07>> You're talking about just higher taxes
49:08in general for folks like me. And so
49:10ultimately that causes asset sales. It
49:12reduces the expected return of capital
49:14assets. It'll probably cause asset sales
49:17and reduce the expected return of
49:18capital assets at a time where
49:19everyone's very long capital assets. we
49:21have a historic concentration in um in
49:24you know to to to AI and in US and
49:27global financial markets when you look
49:28at stock um the the share of of like
49:31equity market cap that's techcom
49:32services you look at the share of
49:35incremental debt financing investment
49:36grade that's that's tech companies and
49:38then we have a lot of concentrations
49:39just equities in general as a society
49:41you know all-time high ratio of stocks
49:43as a percentage of financial assets and
49:45as a percent of total assets higher than
49:46what we saw in the do bubble higher than
49:48what we saw in the everything bubble the
49:50GFC didn't reach those those heights and
49:52then we have you know very dangerous
49:54levels not levels but dangerous growth
49:55rates of retail margin debt dangerous
49:57ratios of retail margin debt that have
49:58historically preceded secular bare
50:00markets. So you you put together the
50:01capex bubble in of itself is going to
50:03cause problems in terms from an expected
50:04return standpoint, timing of expected
50:06return, timing of adoption standpoint.
50:08You got the concentration, you got the
50:10overallocation, and then you got the the
50:12fact that China might win the AI race.
50:14In our opinion, we think China's going
50:15to win the AR race. Um, and we can we
50:17have we'll talk about that next time on
50:18your program. Um, we think China's going
50:19to win the IRS. And then you have just
50:21have this this this overhang of
50:22significant redistributed policies and
50:24you could see trust busting as well. You
50:25know, we've seen this before, we've seen
50:26this movie play out before here in this
50:27country. And so you put all those
50:29factors together, in our opinion, we
50:31think we could have a historic like
50:33historic secular bare market. The worst
50:35secular bare market in history
50:37>> in the US history, you know, we have
50:39data back to 1800 is the secular bear
50:41market that preceded the New Deal.
50:43>> Well, I I think your information is more
50:46valuable than ever because people really
50:48do need to prepare no matter what their
50:49income source is. Um, they need to be
50:52expecting some of these changes and the
50:54changes from emerging technologies like
50:55AI. So Darius, this was wonderful to
50:57have you. We've got to do it again.
50:59Thank you so much. And where do you want
51:00to send people?
51:01>> Uh uh so Darius Dell42 on Twitter,
51:04Darius Stale on LinkedIn, but obviously
51:05come check us out at 42mmro.com. Um I
51:08don't care what part of the income, the
51:09reason we started our company. The
51:11reason I said I was making a ton of
51:13money on Global Wall Street. I went to
51:14making zero dollars to start this
51:16company and I'm obviously surpassed the
51:18ton of money I used to be making but I
51:20went from ton of money to zero dollars
51:21to start this company so that regular
51:23people can benefit from the types of
51:25risk management that we our clients
51:27across the global buy side benefit from
51:30we built systems for regular people to
51:32manage things like secular bare markets
51:34to make sure that they don't lose 30 to
51:3650 to 60% of their hard-earned life
51:38savings uh in these types of events and
51:40so that's why we started 42 micro that's
51:42our paid service but we put out a ton of
51:43free content on our platform
51:4542mmacro.com on on our on our websites.
51:48And I just want to say Natalie, thank
51:50you.
51:52This conversation needs to be had. It
51:53needs to be seen by many people. Um I
51:56can't have the I'm going to be on
51:57Bloomberg tomorrow morning. I can't have
51:58this conversation on Bloomberg.
51:59>> Well, I appreciate that. This is why we
52:01do what we do. Um I'm sure a lot of
52:03people will love this conversation and
52:04I'm going to link your work below uh in
52:06the show notes. So, thanks so much for
52:07joining me, Darius.
52:08>> No, it's a real blessing to be here.
52:09Thank you.
52:10>> Thank you so much for checking out this
52:11episode. If you haven't already, make
52:13sure to subscribe and hit that
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52:17new content. This show is for
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52:20only. Nothing should constitute as
52:22official investment advice, and you
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