0:01

All right, and we should be live.

0:03

Welcome to Thawful Money. I'm Thawful

0:05

Money founder and your host Adam

0:08

Taggart here for a special live

0:10

stream interview. Very quickly folks, talking

0:12

to anybody in Wall Street right now, I'll

0:14

tell you it feels to them like the

0:16

world just got turned on its

0:19

head. The once bulletproof market rally

0:21

that we had over the past

0:23

two years has shifted into reverse

0:25

over the past month and a

0:27

half or so, with stocks falling

0:29

for weeks. to oversold levels in

0:31

the short term. And just when

0:33

traders thought that a bounce was

0:35

due, President Trump's liberation day tariffs

0:37

sent the markets plunging by percentages

0:39

not seen since the worst of the

0:41

COVID levels. So what we're here to

0:43

talk about today is what is going

0:46

on and what's most likely to happen

0:48

from here. We're very fortunate to be

0:50

joined for this discussion. by David Hay,

0:52

the up until recently chief investment officer

0:54

in principle at Evergreen Golf Call. He's

0:57

just days into his retirement from that

0:59

role, which means that he's free to

1:01

be a lot more detailed and specific

1:03

with us in his answers because he's

1:05

no longer subject to compliance constraints. So

1:08

I can't wait to hear his thoughts.

1:10

Let me pull him in here. David, it's

1:12

such a pleasure to see you. Thanks so much

1:14

for joining us today. Great to be back,

1:16

Adam. Last time we talked was January

1:18

16th. It seems like that was a

1:20

lifetime ago. It seems like that was

1:23

a lifetime ago. It seems like a

1:25

week was a lifetime ago. It's true.

1:27

At this point. And sometimes there's a

1:29

week when decades happened, that's kind of

1:31

how last week felt. It is. And

1:33

of course, it's still ongoing. So we

1:35

may we may have another decade unfold

1:37

over the course of this week. Look,

1:39

a lot of questions here, a lot

1:41

of ground to cover. If I can,

1:43

maybe, maybe, maybe, maybe let me just.

1:45

start with a question I just mentioned there

1:47

in the intro. What the heck is going on

1:49

today when you expect to happen from here? Well

1:51

I guess you know when you usually start

1:54

these out you say give us an

1:56

assessment of the global economy and financial

1:58

markets you asked me that last when

2:00

I said precarious, which I think turned

2:02

out to be pretty accurate, I would

2:05

say now it's just chaos. And markets

2:07

don't like chaos. I think one of

2:09

the things that's been quite surprising is

2:11

that prior to this utter chaos, we

2:14

had a tremendous amount of uncertainty. And

2:16

markets really don't like uncertainty for obvious

2:18

reasons. And yet it just kept whistling

2:20

past the graveyard up until February 19th.

2:22

and then the bottom fell out. And

2:25

so I think we really had here

2:27

lately, when I haven't heard this term

2:29

used, is that I think we've had

2:31

a crash yet. You know, it's not

2:34

an October 87 crash, which I remember

2:36

vividly, I was in the business on

2:38

our eight years at that point, something

2:40

like that. But we were down 15%

2:42

in two, in about an eighth trading

2:45

sessions, or 12 I guess, but so

2:47

what would it be 13 and 13

2:49

and a half hours, the market went

2:51

down 15%? That's a lot. I went

2:54

back and looked at how many times

2:56

as the market got down 5% and

2:58

two consecutive days, and since World War

3:00

II, there's only been a handful. So

3:02

there was the 2007, 2008, there was

3:05

2020, and then there was this one.

3:07

I think if you went back, there

3:09

was also the 1929 period, but the

3:11

point is those are all really, really

3:14

bad market environments. So we're in a

3:16

pretty tough company with those stats. So

3:18

it's a very unusual time in so

3:20

many ways and we put out a

3:22

letter yesterday saying we thought that there

3:25

would be we did a brief daily

3:27

which was more timely because it got

3:29

out early in the market session I

3:31

had to rewrite my newsletter multiple time

3:34

just right there was so much price

3:36

volatility going on so we didn't get

3:38

it out till almost one o'clock left

3:40

coast time so right before the market

3:42

closed we did our daily early and

3:45

basically said we thought with the Vix

3:47

hit touching 60 and 60 is a

3:49

big number. And that, if you put

3:51

in perspective back in the Great Recession,

3:54

COVID, we cut hit 80-90 during the

3:56

young carry crisis of last, carry trade

3:58

crisis of last summer, hit 60 briefly.

4:00

But you typically get really nice rallies,

4:03

at least short term, when you have

4:05

that kind of a VIX level. I

4:07

think you may even have a visual

4:09

on the CNN fear and greed measure,

4:11

which is also very indicative that a

4:14

rally was likely. There you go. Thank

4:16

you. And so we've had that. I

4:18

mean, this is kind of the classic

4:20

setup for when you get these short-term

4:23

rallies. Now I think what people want

4:25

to know is, is this like last

4:27

summer. where you had that kind of

4:29

flash crash and NASDAQ was down 13%

4:31

in just a few trading days. The

4:34

S&P I think was down 9% at

4:36

the low so not really as much

4:38

as this time. But we had a

4:40

nice rally after that and of course

4:43

that rally really picked up steam starting

4:45

at about early September when the market

4:47

began to discount ironically the Trump election

4:49

to re-election and then it continued right

4:51

up until basically February 19th and there

4:54

was something like six trillion dollars of

4:56

wealth. created during that, what I call

4:58

Trump foria. But I think that Trump

5:00

foria was greatly overdone. And you know,

5:03

you and I, in looking, I have

5:05

my outline from our chat back in

5:07

January, we actually had a number of

5:09

prescient views at that point, including that

5:11

the market was way too complacent about

5:14

tariffs. So I think that was actually

5:16

a pretty pretty good podcast, even though

5:18

I know you got some pushback. A

5:20

lot of your viewers don't like to

5:23

hear any, any words of caution, even

5:25

if they're hedged or balanced. So anyway.

5:27

So anyway. It's I think we're in

5:29

a very pivotal situation and I'm sure

5:31

you'd ask me more questions so I

5:34

don't want to steal your thunder. No

5:36

worries. Well look, it's funny, middle last

5:38

year, it seems that the market just

5:40

fully embraced the no landing scenario and

5:43

worries of recession just disappeared from the

5:45

headlines. All of a sudden now that

5:47

we've been going through this term, this

5:49

crashette. or to mix both your terms

5:51

together, this crashette and trump for you

5:54

that we've experienced. All of a sudden,

5:56

concerns of recession are now front and

5:58

center again. And, you know, if you

6:00

look at things like, you know, copper,

6:03

it's been getting beat up, you feel

6:05

like oil, oil has gotten destroyed, right?

6:07

Tell me about it. What has not

6:09

been fun? I bet. So, I guess,

6:11

let me ask you this provocative question.

6:14

given the uncertainty that's being created by

6:16

this tariffs and you know, even if

6:18

they get resolved at some point, we're

6:20

already hearing reports that companies are canceling

6:23

orders, you know, waiting in their spending

6:25

because of all this uncertainty here. So

6:27

is this becoming a fate accompli? Is

6:29

a recession inevitable at this point? Well,

6:31

inevitable is a very absolute word. I

6:34

would just say it's quite likely getting

6:36

more likely. You know, I notice that

6:38

the Goldman and and JP Morgan have

6:40

been upping their odds. I think Goldman's

6:43

now at 45% and that's a that's

6:45

a two-click, I think they've gone from

6:47

25 to 35 to 45 pretty quickly.

6:49

Seems to me that we're somewhere in

6:51

the 80 to 90% range. I think

6:54

I thought we were actually headed to

6:56

a recession even before this happened, but

6:58

now I think, you know, the reality

7:00

is the US stock market has a

7:03

big impact on economic activity. and certainly

7:05

at the higher end. And it's like

7:07

the higher end generates like 60% of

7:09

consumer spending. Just as a little anecdote,

7:11

I just got an email before we

7:14

started from a client who is planning

7:16

to buy a Porsche and the cost

7:18

of his Porsche has got up 50,000

7:20

or is going to go up 50,000

7:23

because the tariffs. And he's like, well,

7:25

I'm not going to do that. And

7:27

of course, that's just a person, but

7:29

thinking about companies. And so I think

7:31

the ripplele effect of this has barely

7:34

been felt. So I think it's going

7:36

to get tougher. That's why I would

7:38

say that yes, the market was oversold.

7:40

Yes, the market was going to rally.

7:43

But I would not run that rally

7:45

too far. I think there are definitely

7:47

areas of the market that are extremely

7:49

undervalued and have great long-term return potential.

7:51

Most of them commodity related because there's

7:54

such a... pervasive belief that with a

7:56

recession coming commodities are going to get

7:58

clobbered. Well they've already been clobbered and

8:00

particularly when it comes to oil you

8:03

know what you're going to see here

8:05

very soon is a supply response where

8:07

producers are going to cut back and

8:09

so it's the classic cure for low

8:12

prices as low prices. But it's going

8:14

to be very I think it's going

8:16

to be very volatile I don't think

8:18

it's going to be a lot of

8:20

fun. I think the odds are pretty

8:23

high that we're going to have a

8:25

true recession like COVID work. You blink

8:27

and you missed it. And I think

8:29

probably along with that, kind of a

8:32

grinding bear market. But not only people

8:34

should be suicidal, I think they should

8:36

just be realistic. And the fact of

8:38

the matter is that some of the

8:40

greatest market rallies of all time happen

8:43

within bear markets and recessions, you just

8:45

have to remember that they are fleeting.

8:47

And when you get these big moves,

8:49

and I think today is just the

8:52

start of it, and I have no

8:54

idea whether it's going to go up.

8:56

10% from the low, you know, S&P

8:58

or maybe 15% for NASDAQ. I do

9:00

think some of these beaten down areas

9:03

are more likely to go up 20,

9:05

30%. But if that happens, even if

9:07

you say, look, I really like Exxon

9:09

long term or EOG or Fang or

9:12

whatever it is, I think you've got

9:14

to take some serious chips off the

9:16

table if you do get this oversold

9:18

rally that carries further than it has

9:21

so far. Okay. is saying that, agreeing

9:23

with you, saying that we're sort of

9:25

in the a seldom rips environment now.

9:27

So, you know, as we potentially have

9:30

these rallies lighten up because the potential

9:32

for lower prices later in the year

9:34

is high enough that you want to

9:37

try to start reducing some of your

9:39

exposure, but try to do it when

9:41

the market's going in your favor. So

9:43

you talked about a grinding bear market.

9:46

I mentioned the intro, Dave, and again,

9:48

congratulations on your newfound retirement. But you

9:50

have had a long and very successful.

9:53

career in investing. You know, a lot

9:55

of people watching here, you know, some

9:57

might be young enough that they really

9:59

haven't experienced a grinding bear market because

10:02

we've had such a, you know, over

10:04

the past decade plus, we've had so

10:06

much intervention that whenever the market would

10:09

get a wobbly, you know, the rescue

10:11

team would come on in. Just explain

10:13

to folks what a grinding bear market

10:15

looks like. And I guess in your

10:18

answer too. Where's the money to be

10:20

made? Is it to be made on

10:22

the short side, which I know comes

10:25

with its own risks? Is it made

10:27

trying to play these rallies that you

10:29

mentioned, which are fast, furious, but fast?

10:31

Or is it made by just surviving,

10:34

keeping your powder dry, and then deploying

10:36

it near the end when you've got

10:38

really good valuations and you can catch

10:41

the next bull rally? Well, I think

10:43

your last scenario is probably the most

10:45

realistic for the bulk of people listening

10:47

to this or watching this or watching

10:50

this. I think the shorting part which

10:52

I do personally I never did for

10:54

clients I mean we use some adverse

10:57

ETFs occasionally very rarely but shorting is

10:59

extremely hazardous it's nice at a time

11:01

like this because you get these you

11:03

know when the market is going up

11:06

you get the capital calls so like

11:08

margin call you have to pony up

11:10

more cash as the market's rising when

11:13

the market comes down particularly when it

11:15

comes down quickly which it so often

11:17

does and you get this. Pornative liquidity

11:19

when most people are lacking liquidity and

11:22

you're able to buy when prices are

11:24

really bombed out So but it's it's

11:26

just such a hazardous area I think

11:29

if you do that Is a lot

11:31

of my readers and some of the

11:33

people maybe that are watching your show

11:35

or also read our newsletter? We're really

11:38

big on breakouts and if you're in

11:40

a stock your short of stock that's

11:42

breaking out to a new Multi-year high

11:45

we use three years is kind of

11:47

the minimum, but the longer it's been

11:49

in a range the more meaningful the

11:51

breakout is You got to cover and

11:54

if you do that if you have

11:56

a if you're shorting around a high

11:58

around a three-year high and it breaks

12:01

out, you're not going to lose very

12:03

much. You have to have some kind

12:05

of cell discipline, which I've learned the

12:07

very hard and expensive way. But again,

12:10

I don't think that's what most people

12:12

should do. I think the problem is

12:14

that for if you look at the

12:17

statistics from say Michael Hartnett and looking

12:19

at the entire population of the Merrill

12:21

Lynch investor set or base, people have

12:23

very little cash. They have very little

12:26

bonds. And what's happened is that we're

12:28

at all-time highs in terms of household

12:30

exposure to equities. and guess what we're

12:33

also at all-time highs in terms of

12:35

age you know like me who's soon

12:37

to be 70 you said I had

12:39

a long career well when I started

12:42

in the business Jimmy Carter was in

12:44

the White House 46 years ago so

12:46

it's a very very long time I've

12:49

you know seen an awful lot of

12:51

cycles but we have to realize that

12:53

if we look back even before that

12:55

if we go to you know say

12:58

a century worth of market data and

13:00

economic data what we've seen the last

13:02

10 years is anomalous This is not

13:05

the way it works. It doesn't work

13:07

where the market goes up almost all

13:09

the time and where you have these

13:11

tremendous federal deficits, you know, year after

13:14

year, which we know that it boosts

13:16

artificially boost economic activity, but are also

13:18

artificially boost corporate profits, which conveniently Wall

13:21

Street strategists have just ignored. You got

13:23

John Hussman, who I know you've had

13:25

on your show, you guys did a

13:27

great podcast, I think last June, right

13:30

before the summer. convulsions and he's been

13:32

on this theme and it's just true.

13:34

I think it's the Levy-Kleki equation that

13:37

goes back about a hundred years that

13:39

that if you have a surge in

13:41

government spending it's it's like rocket fuel

13:43

for corporate profits. But clearly it's unsustainable

13:46

and now we're actually seeing concrete action

13:48

trying to reduce it so far as

13:50

you've probably seen. There's no evidence of

13:53

it. The US federal deficits annualizing the

13:55

last I saw it about 2.8 trillion,

13:57

even higher than last year. Yeah, it's

13:59

when you compare it to the first,

14:02

I can't remember the fiscal year of

14:04

the government, but if you compare it

14:06

to previous. fiscal years when we're just

14:09

far in, I think it's like, I

14:11

don't know, four or five months, we're

14:13

in so far. It's the highest it's

14:15

ever been. Yeah, the fiscal year 2025

14:18

started on October 1st. So you're right.

14:20

We're, you know, someone like five months

14:22

into that. And it's, but you got

14:25

to believe that at some point, these

14:27

cuts are going to bite and we're

14:29

going to see the federal deficit come

14:31

down. So if we are going to

14:34

go into a recession, won't the deficit

14:36

blow out? So you've got all kinds

14:38

of countervailing forces at work. You've got

14:41

these massive tariffs, which I guess on

14:43

China are going to run as high

14:45

as 100% if they're instituted as promised.

14:47

And that will definitely generate some revenue.

14:50

It won't generate nearly as much as

14:52

hoped because what's going to happen, of

14:54

course, is imports will go away down,

14:56

right? The higher the tariff or less

14:59

than imports. So it's kind of like

15:01

raising... marginal tax rate. You don't get

15:03

as much revenue as you think you

15:06

would because it affects behavior. But we're

15:08

very unlikely to see a major decline

15:10

in the deficit, other than maybe temporarily

15:12

before the recession kicks in. But I

15:15

mean, it's possible we could go three

15:17

trillion, three and a half trillion in

15:19

federal red ink during a nasty recession.

15:22

So it's and tax cuts are supposed

15:24

to still happen. It's bizarre. So many

15:26

things are just like... we've never seen

15:28

before. All right, well, look, I want

15:31

to I want to I want to

15:33

stick on the recession for a bit,

15:35

but I also want to ask you

15:38

kind of an optimistic upside question. Before

15:40

I do that, though, I feel I

15:42

got to put up this user comment

15:44

saying you're holding up well at 70,

15:47

Mr. Hay, so. Well, I hope you're

15:49

liking the love from the audience here.

15:51

I appreciate it. All right, so. You

15:54

know, you would send me over some

15:56

chart. and some data. One thing I

15:58

want to show here, if I can

16:00

find it, here we go, challenge your

16:03

job cuts, right? Right. So you can

16:05

see we have this, you know, massive

16:07

spike here in recent months, which, you

16:10

know, there's a pretty good argument to

16:12

be made prior to liberation day, that

16:14

the economy. You mean a beliteration day,

16:16

wasn't that really what it was? Obliteration,

16:19

that might be what it's known as

16:21

going for. But it was a pretty

16:23

good argument to be made before that

16:26

the country was, the economy was slowing

16:28

down and the country was approaching recession

16:30

or the risk of recession was growing,

16:32

right? Obviously liberation day, a lot of

16:35

people feel like that's not even a

16:37

push towards recession. It's like a mighty

16:39

shove, but you know, time will tell.

16:42

You know, we took ahead this blink

16:44

and you miss it recession during COVID.

16:46

And I don't mean to diminish the

16:48

people that lost their jobs during that,

16:51

but then there was a massive scramble

16:53

to hire everybody back and there was

16:55

all the, you know, all the rescue

16:58

efforts that came along with it. I

17:00

get the sense that you feel like

17:02

this recession that we're going into could

17:04

be more like the recessions of old.

17:07

You know, I graduated coming out of

17:09

one in the early 90s, so we

17:11

had one in the early 80s. And

17:14

you probably remember the ones in the

17:16

70s, better than I do. So, you

17:18

know, do you just help people understand

17:20

what that feels like? You know, I

17:23

know you don't know, but is this

17:25

going to be measured in quarters? Is

17:27

it going to be measured in a

17:30

year? Is it going to be measured

17:32

in a year? Is it going to

17:34

be something that people really need to

17:36

kind of hunker down for, meaning if

17:39

you lose your job, you might need

17:41

to expect you might be out of

17:43

work for half a year or a

17:46

year, etc. Before the economy picks back

17:48

up. Is it that type of recession?

17:50

I think so. And again, I want

17:52

to be humble and say, I emphasize

17:55

the think part of that comment. It's,

17:57

you know, none of us know. And,

17:59

you know, a lot of this depends

18:02

on a very mercurial personality in the

18:04

Oval Office. And what if he does

18:06

decide to back off on tariffs? I've

18:08

been listening to your podcast lately. and

18:11

I know you believe he's serious and

18:13

certainly his actions recently vindicate your views

18:15

and you said those before he launched

18:18

into this you know this really unprecedented

18:20

trade war I mean you look at

18:22

the the increase in tariffs that are

18:24

projected I mean they're gonna go above

18:27

what they were in the 1930s with

18:29

smooth holly it's this is big bad

18:31

stuff and it doesn't seem like it's

18:34

just negotiating posture right now there's maybe

18:36

some of that. But I don't, I

18:38

think, I think what you and Brett

18:40

Johnson talked about last fall, he's the

18:43

dollar milkshake guy, right? Yes. And by

18:45

the way, Dave, I just got to

18:47

say, you were a better student of

18:50

my channel than I am. So thank

18:52

you. I'm honored that you watch it

18:54

as much as clearly you do. I

18:56

do. I watch everyone. And he, and

18:59

you guys both said, I think Trump

19:01

is going to. take the pain hard

19:03

and early and that's exactly what's happening.

19:06

I heard another podcast not with you

19:08

was one way or other buddies and

19:10

he this guy that he had on

19:12

there was saying wow I just can't

19:15

believe how fast he's moving it's just

19:17

so chaotic and it seems like it's

19:19

just so chaotic and it seems like

19:22

it's it's uncontrolled or unplanned and you

19:24

know just kind of shooting from the

19:26

hip but I think this is exactly

19:28

what he was intending to do. party

19:31

say try to have things looking better

19:33

before the midterms. And actually there is

19:35

a template for that in terms of

19:38

what Ronald Reagan did. And I think

19:40

a lot of folks forget, again I'm

19:42

old enough to remember I basically just

19:44

started right before Reagan. So he was

19:47

elected in 1980, his policy started kicking

19:49

in 1981 and 1981 was a nasty

19:51

year for the stock market. But then

19:54

by 1982. interest rates were coming down

19:56

the economy was healing the stock market

19:58

launched into its epic bull run that

20:00

you can argue lasted until well maybe

20:03

until February 19th with just a few

20:05

of these flash crashes along the way

20:07

including the crash of 87 which, you

20:10

know, that was a 40% decline, but

20:12

again, it was very over very quickly.

20:14

So to your point, my gut feeling

20:16

is this is going to be a

20:19

longer drawn out process, but you know,

20:21

you look at Argentina and I think

20:23

that Trump is kind of looking at

20:26

the Reagan playbook in the Malay playbook.

20:28

He's the president of Argentina who in

20:30

a year did get things turned around

20:32

pretty quickly. Now they're hitting a few

20:35

roadblocks here. recently, but it could be

20:37

that a year from now things will

20:39

be looking better. And that, but still

20:42

a year is a lot longer than

20:44

what most people are used to in

20:46

terms of tougher times. I don't think

20:48

this is going to be a 1930s

20:51

type of replay where it's basically a

20:53

decade-long depression slash recession with a recovery

20:55

kind of sandwich in between. So it's

20:58

a but it's definitely a very radically

21:00

different environment than what we're we've been

21:02

used to over the last 10 years

21:04

when we've been so unbelievably spoiled at

21:07

Bamford. All right. So I just want

21:09

to let folks know here, given your

21:11

your the probability you put that this

21:14

could be something that's longer than one

21:16

of these blink and you miss it

21:18

recessions like we had during COVID. Folks,

21:20

you may have heard me mention this

21:23

resource. It's totally free. It's a guide

21:25

that I published years ago, but I've

21:27

now updated. And it basically just walks

21:30

you through a number of steps that

21:32

you should be taking now if you

21:34

work for a paycheck before, you know.

21:36

the potentiality of you getting laid off,

21:39

just things you can do to reduce

21:41

your risk of getting laid off or

21:43

to be in a better position in

21:46

case you do get laid off. And

21:48

then it has a bunch of things

21:50

that you should do immediately after getting

21:52

a layoff notice. So hopefully that's a

21:55

useful guide for folks. Hopefully you don't

21:57

need to use it, but just in

21:59

case it's good resource to have in

22:02

advance. All right David. So let me

22:04

ask you this. I'm gonna try to

22:06

pull up a comment I just saw

22:08

here. So Okay, it's simple, idiot orange

22:11

genius has confused tariffs with trade deficit,

22:13

dumbest paint. Let's take the partisan out

22:15

of that for a moment. There's been

22:18

a lot of discussion about, you know,

22:20

Trump's big chart that he pulled up

22:22

and the formula that his economic team

22:24

used to create these quote unquote reciprocal

22:27

tariffs where everybody was expecting it to

22:29

be truly reciprocal tariffs. Okay, country X

22:31

has a tariff of X percent in

22:34

us. Well, we're going to... charge the

22:36

next percent and that was going to

22:38

be it but but the Trump administration

22:40

rolled out this this equation that really

22:43

is sort of stumped a lot of

22:45

people where they're really looking at the

22:47

trade deficit and and basically dividing it

22:50

by half and a lot of people

22:52

are saying look you know by just

22:54

a trade deficit in and of itself

22:56

isn't a negative thing. You can be

22:59

getting screwed if you have a trade

23:01

deficit with the country or it could

23:03

be a very natural outcome of the

23:06

best way for you two countries to

23:08

trade. So I guess the first question

23:10

for you is, do you think that

23:12

Trump or the Trump administration made a

23:15

mistake either in their math or in

23:17

their communication rollout of this in all

23:19

of it or in none of it?

23:22

I think it's a mistake. I don't

23:24

think it's the right way to do

23:26

it. It seems like so many things

23:28

that Trump does is kind of ham-fisted.

23:31

I mean, I get what he's trying

23:33

to do, but it's just, it's too

23:35

indiscriminate in my view. But that's kind

23:38

of his style. And you know, his

23:40

is kind of like, well, I'll, you

23:42

know, I'm just going to hammer people

23:44

or some to negotiating table, we'll pick

23:47

up the pieces later, and, and again,

23:49

come in there later and figure out

23:51

what's worked and what hasn't worked and

23:54

you know he's not your normal politician

23:56

he's not your normal business man even

23:58

he's he's in a very unique class

24:00

and it's got good things and bad

24:03

things I think right now we're kind

24:05

of seeing the dark side of that

24:07

so you know But one thing to

24:10

bring up too that's kind of related

24:12

to this that I think it's overlooked

24:14

from the stock market standpoint is that

24:16

when we run, you know, say a

24:19

trillion dollar trade deficit, which is about

24:21

what it is, we also have to

24:23

have a trillion dollar capital account surplus.

24:26

So in other words, that money that

24:28

we send out and exports comes back

24:30

to the way of reinvestment in this

24:32

country, and it's not going into treasuries

24:35

as you know. what it's been going

24:37

into has been basically the, you know,

24:39

the large cap, make cap, tax, like

24:42

say the magnificence seven and kind of

24:44

the next tier down. So right now

24:46

foreigners own something like $18 trillion of

24:48

US stocks, and if those capital flows

24:51

are going to be impaired or even

24:53

reverse, I think that has negative market

24:55

implications. And you know, we're also used

24:58

to saying the stock market's 20 or

25:00

30% above normal. you know, based on

25:02

PEs or price to sales or GDP

25:04

to market cap. But we're not used

25:07

to the fact that we could actually

25:09

go 20 to 30% below. And that's

25:11

what happens when the conditions go from,

25:13

you know, like way too good to

25:16

not so good or even adverse. So

25:18

in your term there, grinding bear market.

25:21

given what I do for a living,

25:23

I talk to a lot of guys

25:25

like you who have had fairly long

25:27

careers, and they generally tend to say

25:29

like a true bear market only ends

25:32

when nobody wants to buy stocks anymore,

25:34

right? Where they've just taken so much

25:36

pain, they've had these these bear market

25:38

rallies that then fade, right? And they

25:40

just decide, you know what, stocks are

25:42

losing game now, I didn't want to

25:44

own these things anymore. Do you feel

25:46

we'll hit that capitulation point at some

25:48

point as this progresses from here? It's

25:51

probable. I mean, that's what happens after lengthy

25:53

bear markets. I mean, with these short ones,

25:55

even if they go deep, even if it's

25:57

40%, but it only lasts for a few

25:59

weeks. that just doesn't really impact people too

26:02

much it almost like reinforces the idea that

26:04

okay well even if we go down 40%

26:06

then we're right back up it's like well

26:08

what's to be afraid of it that but

26:11

when the market stays down because you just

26:13

got get kind of a sequence of bad

26:15

news bad news upon bad news you know

26:17

that certainly happened prior to I started my

26:20

career in 79 but in the say the

26:22

1973 to 74 period and we'd gone that

26:24

was prior to it was the nifty 505050

26:26

so it was a very frothy market market

26:28

environment very narrow similar to what we had

26:31

now and then it we had now and

26:33

then it It was probably a year and

26:35

a half, maybe close to 20 months of

26:37

bad times. And you got a recovery, it

26:40

wasn't much a recovery, and then another down,

26:42

and it was just, it was a very

26:44

choppy period. You probably were from 1966 to

26:46

1982. The stock market went nowhere. Actually, nowhere.

26:49

Down, went down from, because it got close

26:51

to 1,000 and 66. It was about 800

26:53

in 1982. So in real terms, it just

26:55

got slaughtered. And that was kind of a

26:57

stagflationary environment. And it came out of boom

27:00

times in the 60s, better boom times, healthier

27:02

boom times than what we've had here recently.

27:04

And that was one of the things you

27:06

and I talked about back in January was

27:09

the possibility that we were going stag, that

27:11

we would have stagflation. And I think that

27:13

we had whiffs of that before, but with

27:15

these tariffs, I mean, I think that's where

27:17

you can get at least temporarily. of some

27:20

kind of lasting stagplation. And I'm sympathetic to

27:22

the view of people like Daniel D. Martino

27:24

Booth and David Rosenberg that you're going to

27:26

see a recession which will eventually lower prices,

27:29

but I mean, that really doesn't take into

27:31

account this tariff playbook, which for a while

27:33

is going to drive prices up significantly. And

27:35

you can say, well, it's really kind of

27:38

a stealth tax. And as long as the

27:40

Fed doesn't monetize, doesn't print money, then that

27:42

will pinch. So if people have to pay

27:44

more to pay more to import that. portion

27:46

that I was talking about earlier, then they're

27:49

going to spend less on other other things.

27:51

So that's why it could end up being

27:53

contractionary and eventually actually lead to fairly steep

27:55

fall in inflation. But early on, I think

27:58

we are looking at some stagflation. All

28:01

right, so it's interesting because in that

28:03

word's been kicked around for I don't

28:05

know past year well past couple years

28:07

as inflation started to Spike and I've

28:10

asked this question on this channel a

28:12

lot about you know with the danger

28:14

of stagflation and clearly we haven't entered

28:16

it yet over the past couple years

28:18

but sounds like you think odds of

28:21

it are now increasing primarily because of

28:23

the tariff structure right which will artificially

28:25

keep prices up and potentially trigger the

28:27

recession. Yeah I say that's the number

28:30

one driver but I think there were

28:32

some stagflationary impulses before I mean clearly

28:34

the Fed has not been successful in

28:36

getting its target right down to 2%

28:38

so it's been kind of maybe mild

28:41

stagflation. So it's I think the tariffs

28:43

are the number one problem for the

28:45

low inflation thesis, but I think it's

28:47

just delaying it. I think ultimately we

28:49

will see inflation come down to a

28:52

relatively low level if the recession is

28:54

lasting and relatively severe. Can I make

28:56

a positive comment about the market? Yeah,

28:58

real quick. Sorry, just to mention this

29:01

too, so you can conclude it in

29:03

your answer. So, you know, I find

29:05

with stagflation. folks sometimes would have different

29:07

definitions of it. And I know Lance

29:09

Roberts, when it could have his requirements,

29:12

is high unemployment. And that's something we

29:14

haven't had yet, at least not in

29:16

the official data. But I get the

29:18

sense from you, you think that that

29:21

will be, there's good probability that that

29:23

will start kicking in if indeed we

29:25

have the recession that you think may

29:27

lie ahead. Yes. And one of the

29:29

things, you know, I made a big

29:32

deal about range expansion with the stocks

29:34

and sectors and the overall market, but

29:36

if you were to put that challenger,

29:38

survey backup, you would see that there

29:40

has there is clearly a multi-year breakout

29:43

going on with that. And that's actually

29:45

true of some of the other charts.

29:47

So you can see that there was

29:49

kind of this fairly tight range. This

29:52

goes back. This is kind of the

29:54

time frame we're talking about about three

29:56

years. So just coincidentally. It's right. I

29:58

see this so often with macroeconomic data,

30:00

which is why I'm kind of like

30:03

believing that these breakouts are almost like

30:05

fractals in nature. There's something that kind

30:07

of says it's something that kind of

30:09

repeats throughout human experience. And we'll see

30:11

some other things in those charts that

30:14

look a lot like this. So. I

30:16

think there is a major breakout to

30:18

the upside, which in this case is

30:20

not good and things like this. So

30:23

yes, and yet the most recent jobs

30:25

number was again, you know, relatively healthy.

30:27

And I know Anna Wong from Bloomberg,

30:29

who you had on here recently, she's

30:31

kind of skeptical of these jobs numbers,

30:34

and she should be. And she understands

30:36

that there's a lot of manipulation and

30:38

assumptions, and then you get these revisions

30:40

which have been consistently downward. And as

30:42

you well know, it's kind of an

30:45

arcane factoid, but the birth death model.

30:47

that the Bureau of Labor Statistics uses

30:49

to estimate business closures and openings is

30:51

distorting these numbers, especially when the economy

30:54

is turning down because it's still assuming

30:56

that you're forming businesses when you're actually

30:58

closing businesses and then the numbers get

31:00

revised. And really the fact of the

31:02

matter is, and I don't know Anna

31:05

talked about this, is that a big

31:07

reason, the biggest reason the economy has

31:09

avoided recession, even though there was an

31:11

industrial recession, it's still ongoing, there was

31:13

a brief earnings recession. But there hasn't

31:16

been a true recession and who's to

31:18

be surprised when you had this massive

31:20

amount of fiscal stimulus? You know, basically

31:22

$2 trillion a year of red ink,

31:25

which makes it very difficult to have

31:27

a recession. But if that's going to

31:29

come down hard, which, you know, I

31:31

know that if a recession happens, that

31:33

pushes it back up so you get

31:36

this push, push you pull me kind

31:38

of thing going on. But still, I

31:40

just don't see how we can continue

31:42

to sustain two trillion dollar annual deficits.

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41:50

tremendous number of questions I have left

41:53

and trying to see which ones we

41:55

can pull in with the time we

41:57

have left. Let me ask you this

41:59

just on a optimistic side for a

42:01

moment. So. So obviously, the Trump administration

42:03

is saying, hey, look, we've got, we've

42:05

got a big goal we're going after

42:08

that we think is going to revitalize

42:10

the American economy and is going to

42:12

make whatever pain we're going through here

42:14

in the short term worth it. And,

42:16

you know, it's interesting. I've been listening

42:18

really close to the Trump administration and,

42:20

you know, I kind of made my,

42:23

my, point the other day about, I

42:25

think that they're approaching this sort of

42:27

like a World War II, try to

42:29

work commitment and I think that's only

42:31

been reiterated by his cabinet's public statements

42:33

since and Trump's himself. But A, you

42:35

know, one, could this be worth it?

42:38

And could, you know, could these policies,

42:40

many of which borrow a lot from,

42:42

you know, Reagan and whatnot? I mean,

42:44

could they create a great opportunity for

42:46

investors? a year, two years down the

42:48

road where we get through the depths

42:50

of whatever might lie ahead of us,

42:52

but then there's good values to buy

42:55

in at, and then we have a

42:57

big economic growth tailwind. Love to hear

42:59

your thoughts on the potentiality of that.

43:01

But in the short term, could all

43:03

of this current angst like reverse really

43:05

quickly? if Trump were to come out

43:07

and say, hey look, we've just struck

43:10

a whole bunch of deals here and

43:12

we, you know, surprise, surprise, we just

43:14

struck a big deal with China and

43:16

we got what we wanted. I mean,

43:18

is there the potential that this crazy

43:20

4D chess power move he just made,

43:22

you know, maybe works out in the

43:25

near term? Yes, I think that could

43:27

happen. I would say that if it

43:29

does happen, where will you get the

43:31

best returns? And I think that the

43:33

good news is you can get the

43:35

best returns from those securities, those sectors

43:37

of the market, which have been most

43:40

pummeled over the last couple of years.

43:42

And that would lead me back to

43:44

a lot of real assets. assets, hard

43:46

assets. Personally, I think that it's going

43:48

to be no matter, if your scenario

43:50

turns out to be true, which I

43:52

hope it is, then we're still left

43:55

with this massive debt situation. And maybe

43:57

you could say, well, the deficit's going

43:59

to not be increasing it two trillion,

44:01

maybe it'll be a trillion, but we

44:03

still have all this accumulated debt that

44:05

is a big problem. I mean, the

44:07

difference between Trump and Reagan is that

44:10

Reagan back in the early 80s had

44:12

a very low debt to GDP, it

44:14

was about. 30% versus now we're 130%

44:16

so we got a one in front

44:18

of the 30. So it's how do

44:20

you get from out from under that?

44:22

And I think the only way you

44:25

can do that is with unless you're

44:27

going to go through years and years

44:29

of you know kind of like what

44:31

Greece went through you know back in

44:33

the 2000 teens where they had basically

44:35

a decade long depression but they finally

44:37

got their finances restored. I don't think

44:39

Americans will put up with that. I

44:42

think that the politicians are going to

44:44

resort to some kind of inflation to

44:46

you know, if you run the economy

44:48

hot so that you have a nominal

44:50

GDP growing well above the interest costs,

44:52

so you gradually, that's actually happened to

44:54

this country after World War II. You

44:57

know, we had about at the same

44:59

kind of debt levels at that point

45:01

that we do now, and by the

45:03

end of, by 1952, we'd gotten them

45:05

down to about 70% so big debt

45:07

pay down from 1945 to 1952, and

45:09

it was inflation that did it. So

45:12

it's not without precedent. And it's maybe

45:14

not a bad outcome. I think it's

45:16

a pretty good outcome for younger people.

45:18

I think who loses in that is

45:20

the older generation like me, particularly those

45:22

people that don't recognize the situation and

45:24

it gets stuck with a lot of

45:27

bonds that get, you know, basically, you

45:29

don't lose in nominal terms, but you

45:31

lose in real terms, which is certainly

45:33

what's been going on for five years.

45:35

It's been one of the worst bare

45:37

markets for bonds ever in real terms,

45:39

even in nominal terms. So I think

45:42

you just have to be cognizant of

45:44

the environment. That's why I think that

45:46

these hard assets and unfortunately there's copper

45:48

but even silver's gotten hit hard here.

45:50

Gold's kind of the only one that

45:52

has been hanging up there. I mean

45:54

Platinum, remember when Platinum used to trade

45:57

at a premium to gold that's why

45:59

you got a credit card, Platinum card,

46:01

gold card is lower than Platinum card.

46:03

Well Platinum's around a thousand gold three

46:05

times that price. Palladium and there's just

46:07

so many of these things that are

46:09

on the bargain counter. You know back

46:12

in September as you know I actually

46:14

sent you one of my pieces that

46:16

was bullish on natural gas and the

46:18

The venerable Doberg agreed with me at

46:20

that time that gas had the upside

46:22

oil was not looking as good and

46:24

gas prices have doubled. But they're still

46:27

cheap compared to the rest of the

46:29

world. Anyway, I think that if you're

46:31

looking at a lot of these resource-based

46:33

companies that have been absolutely, well, talking

46:35

about being nuked, how about uranium? Uranium

46:37

has been absolutely nuked. I just listened

46:39

to a great podcast yesterday and with

46:41

a uranium expert. The demand supply mismatch

46:44

is like nothing ever. And then you

46:46

put in the... the pricing where the

46:48

price of the spot market is so

46:50

far below the real market the contract

46:52

market so there's bargains galore out there

46:54

right now but they tend not to

46:56

be I mean you look at some

46:59

of these big cap stocks you go

47:01

yeah they come down that yeah they

47:03

sort of look good but really is

47:05

Costco a great buy whatever 45 times

47:07

earnings I don't think so it's a

47:09

great company but you know there's a

47:11

difference between a great company and great

47:14

stock I know you get more questions

47:16

I should show up no no no

47:18

actually you're taking a right where I

47:20

want to which is you know, where

47:22

the rubber meets the road, what should

47:24

we investors be, you know, considering doing

47:26

with our wealth here? And I'll let

47:29

you say whatever you want, but I

47:31

guess you would, you would say, well,

47:33

look, defense is probably not a bad

47:35

strategy, right? Try to preserve that dry

47:37

powder, as you said earlier. So, you

47:39

know, presumably, T bills, while they're still

47:41

paying for something, you know, and interesting

47:44

that they had a three handle the

47:46

other day. And if you want to

47:48

comment on that in any way, please

47:50

do. So I imagine, you know, it

47:52

never hurts just to sit in safety

47:54

and wait for the dust to settle.

47:56

But yeah, seems like you do see

47:59

some really good opportunity in. a lot

48:01

of the hard assets, these ones that

48:03

have really pre-crashed here. I don't have

48:05

the chart here, but I think most

48:07

people have seen the chart of, I

48:09

think Tavicasta puts it out there, which

48:11

is the ratio of equities to to

48:13

commodities and it's at like multi, it

48:16

has been at multi-decade loads. I haven't

48:18

seen it actually in the past couple

48:20

weeks, maybe it's ticked up a little

48:22

bit, given that equities probably crashed harder

48:24

than most commodities right now, but I

48:26

don't know. Please not most commodity stocks,

48:28

commodities have not gotten in as much

48:30

as the stocks now. Look at Freeport.

48:32

I mean, copper's not down there much,

48:35

but Freeport's been crushed. Yeah. So I

48:37

guess with those stocks right now, do

48:39

you see them as good stocks right now,

48:41

do you see them as companies that have

48:43

kind of pre-crashed so if there is downside

48:45

risk still to the general market these companies

48:47

will decline less than the average stock because

48:49

they've already been beaten up but but you

48:51

know so maybe maybe like a dollar cost

48:54

averaging going forward is a good way to

48:56

get into these things and even if they still

48:58

go down for a while well you're accumulating at

49:00

lower values and then when the turn comes you've

49:02

got your position. Absolutely I'm so glad you brought

49:05

up the term which is I think most people

49:07

have forgotten dollar cost averaging. And I've

49:09

even written that I think it was

49:11

Einstein said that compound interest was the

49:13

eighth one of the world and I

49:15

said, well, if that's the case, then dollar

49:17

cost averages the ninth one of the world.

49:19

I may be getting his numbers off a

49:21

little bit, but it is a great tool

49:24

as long as you use it judiciously

49:26

because there is always the risk

49:28

when you're using individual securities that

49:30

you dollar cost average into the

49:32

next enter on or world comp. Or,

49:34

well, we're the enter whatever the. What

49:36

was the one that that electric thing

49:38

that went down to Trevor? Anyway, when

49:40

you pick individual companies, Nico, there you

49:43

go. Thank you. Rivian's still going for

49:45

now. So that's the danger with individual

49:47

securities. Now you can use the three

49:49

year support rule to kind of mitigate

49:51

that. That's actually, you can't lose big

49:53

money if you follow that rule. But

49:55

the other way to just focus on

49:58

ETFs. You know, we're getting a lot of. So

50:00

you're buying a sector, you're buying a

50:02

style, or you're buying the market and

50:04

dollar cost. But how few people do

50:06

that really? I mean, almost everybody does

50:09

the opposite. And the same is true

50:11

on the sell side. I mean, dollar

50:13

cost averaging on the sell side is

50:15

very important. You get a big winner,

50:18

typically keeps going, take some more off.

50:20

What most people do is, oh my

50:22

God, I've made a big mistake by

50:24

selling that first batch. I better buy

50:27

it back. So now they're buying it

50:29

higher and higher and higher and higher

50:31

prices. So you're exactly right. I think

50:33

that in an especially an environment like

50:35

this, this is a time to be

50:38

buying, but buying slowly and judiciously don't

50:40

buy something just because it's down a

50:42

lot because it could have been 100%

50:44

overvalued and now it's 50% overvalued. I

50:47

like that buy but buy slowly and

50:49

obviously the dollar cost averaging. Yeah, you

50:51

know, there are programs out there like

50:53

one of the ways in which I've

50:55

bought a fair amount of my precious

50:58

metals is just this monthly ACH, right?

51:00

I mean, I don't even really think

51:02

about it, but it's just happening like

51:04

clockwork, right? And I'm trying to be

51:07

better too about some of these asset

51:09

classes where, again, it's just a, okay,

51:11

it's the first of the month, I'm

51:13

just going to put in, right, and

51:15

I'm not trying to overthink it, I'm

51:18

not trying to get too sexy, I'm

51:20

just trying to let that force of

51:22

nature as Einstein, well, well, as you

51:24

mentioned, well, All right, David, I'm looking

51:27

at the charts that you had sent

51:29

over and I'm realizing we haven't gone

51:31

through all that many of them, and

51:33

we don't have to go through them

51:35

all, but I'm just curious, before we

51:38

run out of time, are there any

51:40

in particular you'd like to talk to?

51:42

Well, I want to put them up,

51:44

please, and we'll put them up, please,

51:47

we can go through, we can go

51:49

through, we can go through them all,

51:51

but I'm just curious, And you can

51:53

see there's been a major breakout to

51:55

the upside with credit card delinquencies. And

51:58

then if we go to consumer loans,

52:00

kind of looks to the. same thing.

52:02

Yeah, I don't have the consumer loan

52:04

data here. Okay, that's all right. Okay,

52:07

so let's. But to this point, and

52:09

I'm glad you brought this one up

52:11

because we did say we wanted to

52:13

talk about this, in that recent interview

52:15

that I did within a long, a

52:18

really interesting piece of the puzzle that

52:20

she brought to the table there, right,

52:22

was this this concept of kind of

52:24

great inflation that has occurred with credit

52:27

scores, and she says, you know, a

52:29

lot of lenders. haven't been that worried

52:31

because they're saying, well, credit scores aren't

52:33

in the danger zone that they got

52:35

to back, you know, right before 2008.

52:38

And from the work that she's been

52:40

looking at, she's saying, well, you know,

52:42

there's actually been some great inflation. So

52:44

if you actually discount for that, they're

52:47

actually not that different from where they

52:49

were in 2008. And one of the

52:51

big problems that opens that opens up

52:53

is right now there's information asymmetry. with

52:55

a borrower has a truer sense of

52:58

their credit worthiness than the lender does.

53:00

So the borrower can go out and

53:02

say, look, I'm not doing that well,

53:04

so I'm going to go out and

53:07

get another on hearing. I'm going to

53:09

borrow as much as they're willing to

53:11

give me and they're willing to give

53:13

me because the credit score quote, quote,

53:15

look good. Right. At some point, she

53:18

believes that the industry is going to

53:20

start really waking up to this at

53:22

scale, and then they're going to start

53:24

tighteningening their lending their lending standards and

53:27

that this is going to that could

53:29

bring on a recession. Again, this was

53:31

a worry pre-obliteration day, pre-tariffs. And so

53:33

it's just one more potential, you know,

53:35

sizable shoe to drop here, which is

53:38

that all of a sudden the consumer,

53:40

the stressed consumer, and we're seeing all

53:42

sorts of signs, and you just put

53:44

up the credit card delinquencies there, that

53:47

the consumer is starting to tap out,

53:49

and if they can't get access to

53:51

credit anymore. then that really could start

53:53

impairing consumer spending and we're a 70

53:55

plus percent consumer spending GDP economy and

53:58

so you know so when and so

54:00

when it starts spiraling down. So how

54:02

worried are you about this? Well like

54:04

you said there's a lot of things,

54:07

a lot of shoes dropping and I

54:09

would say, you know, another way to

54:11

phrase that is straws in the wind,

54:13

many, many straws in the wind. And

54:15

so I think we're getting closer and

54:18

closer to our Wizard of Oz moment

54:20

where, you know, the tornado hits and

54:22

the house gets lifted off and it's,

54:24

yeah, there's, those things that you can't

54:27

see anymore. You're, you're soon to get

54:29

relocated and maybe a few states away,

54:31

but, and maybe to a not very

54:33

happy state. The consumer really had a

54:35

high-end consumer confidence levels, they're plunging. And

54:38

that's what has been consistently holding up,

54:40

is that high-end consumer. And you know,

54:42

you've already seen the trade-down effect that

54:44

where you get the wealthier people have

54:47

been shopping at Walmart and the people

54:49

at Walmart went to Dollar Tree, the

54:51

next level down, and then the people

54:53

that had been at a dollar tree,

54:55

you're just not buying anymore, which is

54:58

why the dollar stores stores are struggling.

55:00

There's just tons and tons of evidence

55:02

of consumers being under stress and really,

55:04

you know, even prior to obliteration day.

55:07

So I totally agree with Anna Wong,

55:09

she's, to me, sounded quite cautious. I

55:11

think she's even talking about a potential

55:13

30% drawdown at stocks. But it will

55:16

be a straight line. There will be,

55:18

there will be rallies. Yeah, well, let's

55:20

ask you about this. So here's your

55:22

chart here showing that stocks are to

55:24

record 29% of US household financial financial

55:27

assets. So, yeah, basically at an all-time

55:29

all-time high, right. You mentioned this earlier.

55:31

Now, there's some overlap here. You know,

55:33

stocks are unequally owned. Depending on who

55:36

stat you use, it's somewhere between, you

55:38

know, the top 10% own somewhere between

55:40

88% to 93% of all financial assets,

55:42

right? And the boomers as a generation

55:44

own a disproportionate amount of them relative

55:47

to younger generations. Right. So to your

55:49

point, the affluent. consumer has really kind

55:51

of been keeping the average retail spending.

55:53

right? And I don't know if you

55:56

saw my interview with Wolf Richter, who

55:58

has said, look, this was pre liberation

56:00

day, but he said, look, I'm with

56:02

everybody else. I think we deserve a

56:04

recession, but he said, I'm just, I

56:07

keep watching the data and I'm just

56:09

not quite seeing yet. He said, my

56:11

big worry is that there's going to

56:13

be a big market correction because stocks

56:16

were way too overvalued and that could

56:18

then trigger the recession, because it would,

56:20

it would cause this negative wealth effect.

56:22

amongst the affluent consumer, they would constrain

56:24

their spending enough that that would start

56:27

slowing things down. I think that's true.

56:29

My guess is you think that's the

56:31

same and maybe we're starting to see

56:33

the beginnings of that, but also to

56:36

that that point about being at record

56:38

levels of stock ownership, a lot of

56:40

that is in the boomer generation, a

56:42

generation that in the past did not

56:44

have nearly this much exposure to stocks

56:47

as a percentage of their wealth, right?

56:49

And so that could really create a

56:51

big... negative wealth effect because these are

56:53

people who are getting injured late in

56:56

the game, right? So, you know, if

56:58

I'm 45 and my stock portfolio gets

57:00

hit by 20%, yeah, it hurts me,

57:02

but I figure I still got two

57:04

more decades or so to make up

57:07

for this. if you're 70 and this

57:09

happens, you got to start cutting right

57:11

away because you just, you don't know

57:13

if careful, careful. That's not till October,

57:16

but it's exactly right. It's what I

57:18

was saying is that it's alarming enough

57:20

that the households, U.S. households are so

57:22

exposed to equities, but when you age

57:24

adjusted, age weighted, it's just like, wow,

57:27

this is really dangerous. You remember the

57:29

old rule of thumb that you take

57:31

your age away from 100 and that's

57:33

what you should have in stock so

57:36

it's just a heuristic but say you

57:38

know he's 70 and you should only

57:40

have 30% stocks and instead it's more

57:42

like 60 70 80% and it's great

57:44

you know when you have the market

57:47

mostly rising and you have these very

57:49

brief you know flushouts but that's where

57:51

this grinding bare market becomes I think

57:53

a systemic risk because there is absolutely

57:56

we're kind of going with that earlier

57:58

that there's such a pull-through between how

58:00

people feel about their portfolios, and especially

58:02

those with wealth. And again, that's where

58:04

the majority of spending happens is with

58:07

the wealthy, even though they're a relatively

58:09

small cohort. And you've also probably seen

58:11

these linkages between the S&P and government

58:13

tax revenues. So if you get the

58:16

S&P down hard, then that's another thing

58:18

that hurts government tax revenues, which is

58:20

the last thing they need right now.

58:22

Right. Especially like at the state level,

58:24

right, like state like mine, California, it's

58:27

heavily dependent upon. capital gains taxes and

58:29

already running huge deficits. Right. And that

58:31

was actually since you brought that up,

58:33

that was one of the things that

58:36

I got from Vincent Delaware here recently

58:38

that if you looked at state spending

58:40

was running very hot last year or

58:42

something like up 13% it's now gone

58:44

negative, it's now gone negative already. Yeah,

58:47

we're so that was state and local,

58:49

we're so focused on federal, but there's

58:51

a real reversal happening at the state

58:53

and local level as well. And things

58:56

like Doge probably aren't going, you know,

58:58

you know, you know, you know, you

59:00

know, you know, you know, you know,

59:02

you know, you know, you know, you

59:04

know, you know, you know, Good point.

59:07

A lot of the federal largeness did

59:09

flow to the states. So I know

59:11

you're a financial markets guy David, but

59:13

just real quick thoughts on where the

59:16

housing market plugs into all this because

59:18

obviously that could that's on shaky grounds.

59:20

Yeah, great question. It just amazed me.

59:22

That was one of my more embarrassing

59:24

personal short positions last year was XHB,

59:27

but when it broke out, so there

59:29

was a good example, it had a

59:31

multi-year breakout, I've learned, okay, don't argue

59:33

with it, just let it go, covered

59:36

almost all my shorts, it went nuts,

59:38

and I thought, okay, this is crazy.

59:40

It was like, they were at all

59:42

top, way, way, above all time highs

59:45

when affordability had collapsed, and it just

59:47

didn't make sense. So now reality is

59:49

set in and these things have been

59:51

clobbered. Housing prices have started to have

59:53

started to And I think so take

59:56

a huge interest rate decline, which I

59:58

think will be difficult to get the

1:00:00

kind of interest rate decline you need

1:00:02

to revive the housing market. I did

1:00:05

see a recent transcript that was a

1:00:07

summary of Ivy Zelman, who I know

1:00:09

you've had on. And she was saying,

1:00:11

although you've had more, I think, Melanie

1:00:13

right, but you know, she's very negative

1:00:16

on the housing market. She is, and

1:00:18

I'm trying to get out of you

1:00:20

back on, her dance card's pretty busy,

1:00:22

but just folks, so you know, I

1:00:25

do have an active invite into her.

1:00:27

She's a popular lady, but she was

1:00:29

saying she thought housing prices needed to

1:00:31

come down 25% and she didn't say

1:00:33

when. So I, yeah, I don't think,

1:00:36

I mean, now you could say the

1:00:38

building stocks have come down so far

1:00:40

that maybe they're decent buys. I think

1:00:42

they're back to this kind of fairly

1:00:45

valued, maybe somewhat overvalued, but I think

1:00:47

housing's got a problem. And, you know,

1:00:49

there's no question, you hear this all

1:00:51

the time, but this has been my

1:00:53

big argument with the housing bulls, and

1:00:56

say there's, there's like a three or

1:00:58

four million unit shortage of homes in

1:01:00

America, there needs to be more homes,

1:01:02

the builders of a building because the

1:01:05

margins there aren't very good. Right. And

1:01:07

just to be super clear, and this

1:01:09

is a little bit more of my

1:01:11

bias, but I've asked it of enough

1:01:13

housing experts that I think enough of

1:01:16

them agree with me, I'm not sure.

1:01:18

I don't think that we necessarily have

1:01:20

a unit shortage. Like if you look

1:01:22

at just units per capita in the

1:01:25

country, what we have is an ownership

1:01:27

distribution issue where you have a lot

1:01:29

of people, you know, mom and pop

1:01:31

landlords, but also short-term rental, rental, rental.

1:01:33

landlords and increasingly institutional landlords who have

1:01:36

bought up a lot of the inventory,

1:01:38

right? So that if that inventory were

1:01:40

to come on the market, if those

1:01:42

holders were to start selling it, right,

1:01:45

and they become available to just average

1:01:47

retail buyers who want to live in

1:01:49

the home, that actually could close the

1:01:51

gap a lot pretty quickly. And we're

1:01:53

already beginning to see that in key

1:01:56

markets like Texas and Florida and now

1:01:58

to a certain extent, California. So I

1:02:00

would just caution people by thinking, well,

1:02:02

prices can't come down because we have

1:02:05

this three to four million shortfall. It's

1:02:07

like, well, now if inventory comes on

1:02:09

because these landlords start dumping the properties,

1:02:11

that could change things real quick. That's

1:02:13

a very good point. And I've been

1:02:16

frankly surprised it hasn't kicked in yet.

1:02:18

I mean, I know people were talking

1:02:20

about the air B&B effect a couple

1:02:22

of years ago that, you know, they

1:02:25

were putting these things out on air

1:02:27

B&B and they weren't renting and that

1:02:29

they were going to and the rates

1:02:31

and moved up and they would start

1:02:33

feeling the pain to start feeling the

1:02:36

pain to start deaf at all these

1:02:38

homes, but it really hasn't happened. And

1:02:40

they would start feeling the pain and

1:02:42

moved up and they would start feeling

1:02:45

it as one of them. Okay, but

1:02:47

anyways, if we, I guess we're going

1:02:49

with this is if the housing market

1:02:51

actually does start to roll over, that's

1:02:53

yet another shoe here that, you know,

1:02:56

potentially could really create a national negative

1:02:58

wealth effect, right? Because as I mentioned,

1:03:00

stocks, the concentration of stocks is really

1:03:02

shoved into the top echelon. Housing is

1:03:05

much more widely owned, right? It's many

1:03:07

people's biggest asset. Absolutely. That's what made

1:03:09

the great recession great. was severe problems

1:03:11

in housing. And as you know, in

1:03:13

many instances, I mean, if you look

1:03:16

at most of these valuation charts or

1:03:18

affordability, it's worse now than it was

1:03:20

back in 2007. Right. You get into

1:03:22

the housing collapse. Well, and that's where

1:03:25

Anna's concerns come into play, where she

1:03:27

feels that the repayment of student loans

1:03:29

now, which is sort of the last

1:03:31

moratorium to have been removed, right? That

1:03:33

could actually kind of be a trigger

1:03:36

of credit contagion going forward from here.

1:03:38

So she's not predicting a 2008 style

1:03:40

like the credit markets just sees up,

1:03:42

but that, okay, I think there's 30

1:03:45

to 40 million student borrowers. And she

1:03:47

says there's about 10 million of them

1:03:49

that are now entering the danger zone

1:03:51

where, you know, their loans have gone

1:03:53

into repayment, their delinquencies are spiking. It

1:03:56

just doesn't look like they're going to

1:03:58

be able to pay them. That's then

1:04:00

going to trigger the lenders to start.

1:04:02

you know, realizing, hey, people are less

1:04:05

credit worthy than we thought, they're going

1:04:07

to start tightening credit standards, and then

1:04:09

that's going to spillover. I'm already beginning

1:04:11

to see it spillover into their credit

1:04:14

card debt, into auto loan debt, and

1:04:16

into paying off their mortgages, right? So

1:04:18

we could see this rolling contagion of

1:04:20

increasing defaults across sort of all consumer

1:04:22

credit products, and that that could potentially

1:04:25

create a real issue here. Ryan

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Reynolds here for Mint Mobile.

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look folks as we wrap up here.

1:12:01

First, by the way, Adam, I'll be

1:12:03

writing some of those up. You went

1:12:05

there on mute there, Dave. I've got

1:12:07

the dogs are getting riled up or

1:12:10

something, but yeah, I will. So when

1:12:12

you have Stephanie on, she's only got.

1:12:14

Well, I mean, one dog can't worry

1:12:16

about it. I've got two hundred fifty

1:12:18

pounds of dogs. I should have these

1:12:20

doors closed, but I had some anyway

1:12:22

long story, but but the, what was

1:12:24

I going with that? I was gonna

1:12:26

say something about the portfolio. You said

1:12:29

you're writing up. Oh, and I will

1:12:31

be writing up. I'm doing a screen

1:12:33

right now for companies with very high

1:12:35

levels of earnings predictability and then looking

1:12:37

for those that have recently broken. but

1:12:39

are mindful of the recession risk? Okay,

1:12:41

well it's looking here from the chat

1:12:43

that folks are quite interested in this

1:12:45

Dave, so let's try to get you

1:12:47

back on again soon to do this.

1:12:50

All right folks, we'll look in wrapping

1:12:52

up here. One of the things that

1:12:54

Dave, you know, is a big fan

1:12:56

of his hard assets. We didn't get

1:12:58

to talk too much about the precious

1:13:00

metal specifically, but just want to remind

1:13:02

folks, we have yet another free guide

1:13:04

in addition to the layoff guide I

1:13:06

mentioned. If you haven't. Go to thoughtful

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1:13:15

to learn all the different options that

1:13:17

are available to you, that guide is

1:13:19

just a primer. It just sort of

1:13:21

walks you through all that it's just

1:13:23

a nice educational resource for folks. And

1:13:25

of course, you know, trying to put

1:13:27

all this stuff into practice. If you're

1:13:30

a DIY guy, great. If you feel

1:13:32

confident in your ability to navigate this

1:13:34

type of market we have. Fantastic. I

1:13:36

get to feel that there are relatively

1:13:38

few professionals, you know, of David's caliber

1:13:40

and tenure who have the experience in

1:13:42

the seasoning to really navigate this well.

1:13:44

And so I just think that translates

1:13:46

into there are that many DIY investors

1:13:49

were on the retail side who you

1:13:51

know have a lot of experience with

1:13:53

this and it's it's it's not a

1:13:55

shortcoming to say you know what I

1:13:57

might be entering waters that I'm not

1:13:59

I might not be the best captain

1:14:01

of my ship for right if you

1:14:03

can be and you've got a good

1:14:05

track record and you've got all the

1:14:07

qualifications fantastic keep doing it I'm all

1:14:10

for it but if not you know

1:14:12

this may be a time especially that

1:14:14

looks like it's going to get pretty

1:14:16

rough going forward going forward potentially to

1:14:18

leverage, you know, a professional captain who's

1:14:20

got experience doing this. And if you

1:14:22

want some help, if you don't already

1:14:24

have a good financial advisor, you can

1:14:26

play that role for you. Then, you

1:14:29

know, consider scheduling a free consultation with

1:14:31

one of the financial advisory firms that

1:14:33

thoughtful money endorses. These are the firms

1:14:35

you see with me on this channel

1:14:37

week in and week out. And if

1:14:39

you want to do that, just go

1:14:41

to thoughtful money. Come, fill out the

1:14:43

short form there. It only takes you

1:14:45

a couple seconds. And set up one

1:14:48

of these free consultations. Totally free. There's

1:14:50

no commitment to work with these firms.

1:14:52

They'll just sit down with you, hear

1:14:54

about your personal situation, and give you

1:14:56

their best advice, and you can do

1:14:58

whatever you want with it. Just a

1:15:00

free public service they offer. There's really

1:15:02

no downside. So. Anyways good to that

1:15:04

if that you feel that would be

1:15:06

a positive next step for you and

1:15:09

David I'm curious just your thoughts on

1:15:11

this because you know you've dealt with

1:15:13

investors for decades There definitely tends to

1:15:15

be a hubris. I think that develops

1:15:17

when times are going right that that

1:15:19

old John Husman You said bubble markets

1:15:21

fortune to make a decision look like

1:15:23

a genius now or look like a

1:15:25

genius later, right and everybody feels like

1:15:28

a genius when the bulls are running,

1:15:30

right? Well yes and there's an old

1:15:32

old axiom probably goes back to the

1:15:34

1920s never confused brains with a bull

1:15:36

market and I think people do that

1:15:38

way too often so yes you're right

1:15:40

and I do think there are a

1:15:42

handful of people that really they've developed

1:15:44

some good trading systems I think they

1:15:46

have things like you know they'll look

1:15:49

at Fibonacci they'll look at you know

1:15:51

250 day moving averages they'll look I

1:15:53

found very few people look at breakouts

1:15:55

and breakdown which is why I like

1:15:57

to acknowledge it you know with service,

1:15:59

but nobody really, it just seems too

1:16:01

simple, but it just keeps working. And

1:16:03

for somebody like me that has lost

1:16:05

a lot of money shorting companies that

1:16:08

were breaking out and have finally learned

1:16:10

when that happens, you just cover. No,

1:16:12

no questions asked. It's, and no questions

1:16:14

asked. And as I said, it happens

1:16:16

with a wide range of data. But

1:16:18

I think to your point, very few

1:16:20

people have the ability to do what

1:16:22

we just said. I think it's very

1:16:24

critical to acknowledge your weaknesses. And I

1:16:27

would also say, as you've talked about

1:16:29

before, that when you get into the

1:16:31

income world, it gets even more difficult.

1:16:33

It's very, very hard for individuals to

1:16:35

even buy a lot of these bonds.

1:16:37

And then when you start mixing an

1:16:39

emerging market bonds and pipelines and things

1:16:41

like that, I really do think it

1:16:43

makes sense to hire and, you know,

1:16:45

I can say this unbiased now because

1:16:48

I'm no longer an employee of Evergride.

1:16:50

I still like evergreen and they do

1:16:52

read my information so if we have

1:16:54

any evergreen clients listening as you know

1:16:56

they're still reading my dailies they read

1:16:58

everything I put out so I'm still

1:17:00

influencing their thinking but you know at

1:17:02

this point they if they don't like

1:17:04

what I say they can feel free

1:17:07

to ignore it and I'm sure they

1:17:09

will at times. Well you know last

1:17:11

point on this is that Where was

1:17:13

it going to go with this? Yeah,

1:17:15

it's kind of my brain. But oh,

1:17:17

no, that's what it was, which is,

1:17:19

you know, when I find one of

1:17:21

the biggest benefits that a good professional

1:17:23

advisor can bring, is simply just the

1:17:25

framework and the discipline of doing some

1:17:28

of the things that you were talking

1:17:30

about earlier, David, right, which is, you

1:17:32

know, the position sizing, the rebalancing. the

1:17:34

dollar cost average, all these things that's

1:17:36

normal people, we just get too busy

1:17:38

with life to really stay on top

1:17:40

of. And even that alone, right, has

1:17:42

a ton of value, right? And obviously

1:17:44

a lot of these people, you know,

1:17:47

like. you do and you did it

1:17:49

evergreen is you have these frameworks where

1:17:51

you may feel really emotionally strongly about

1:17:53

a trade but if it's not ticking

1:17:55

all the boxes of the framework that

1:17:57

you set up in advance that's a

1:17:59

discipline that's a constraint that keeps you

1:18:01

just from going with your gut on

1:18:03

everything right and if you've got a

1:18:05

good framework over time it's gonna win

1:18:08

more than it loses right so it's

1:18:10

just that sort of discipline and again

1:18:12

being super transparent for folks the vast

1:18:14

majority of my net worth is managed

1:18:16

by financial advisors. I don't do it

1:18:18

myself because I'm honestly too busy. I'm

1:18:20

too busy, you know, talking with guys

1:18:22

like you every day, Dave. I buy

1:18:24

stuff and then I forget why I

1:18:27

bought it and I look at it,

1:18:29

you know, a couple quarters later and

1:18:31

I'm like, why is this in my

1:18:33

portfolio still? And to be honest and

1:18:35

I'll be really transparent about this. I

1:18:37

interviewed people who are wicked smart, way

1:18:39

smarter than me and they don't always

1:18:41

agree. dead certain that we're going to

1:18:43

have higher inflation going forward the next

1:18:46

couple years and I can I can

1:18:48

be convinced by that and then the

1:18:50

next day I can talk to somebody

1:18:52

like a lacy hunt who says now

1:18:54

look it's going to be disinflation a

1:18:56

deflation all the way baby and I'm

1:18:58

convinced by that and I'm convinced by

1:19:00

that and I'm convinced by that and

1:19:02

it's very easy to get whipside by

1:19:04

this so I need to have somebody

1:19:07

who's got a framework that doesn't get

1:19:09

emotionally influenced like that. Folks again, if

1:19:11

you've enjoyed this, please let us know

1:19:13

in the live chat and in the

1:19:15

comments and of course we'll have David

1:19:17

come back Again in the future as

1:19:19

much as his schedule allow And I

1:19:21

do like these live streams. We've been

1:19:23

doing a fair amount of them recently

1:19:26

to react in real time to what's

1:19:28

going on But folks if you do

1:19:30

just like the live stream format in

1:19:32

general I might just start doing more

1:19:34

that anyways because it is fun to

1:19:36

get the real-time feedback from folks and

1:19:38

being able to take your life Q&A

1:19:40

when time allows. David, can't take you

1:19:42

enough my friend. I'll let you have

1:19:44

the parting last word here to the

1:19:47

audience. Well, I just want to say

1:19:49

thank you, Adam, and I think you're

1:19:51

the best in the business. You really

1:19:53

are. And I mean that absolutely sincerely.

1:19:55

I congratulate you on the success of

1:19:57

your channel and I think the reason

1:19:59

you're so popular is because you are

1:20:01

so balanced and you are so affable

1:20:03

and you just bring out the best

1:20:06

of your guests and thank you that

1:20:08

I'm one of them. You're the kindest

1:20:10

man. There's a fresh baked loaf of

1:20:12

sourdome on its way to you now

1:20:14

David. Love it. But no thank you.

1:20:16

And look, the only thing I'll say

1:20:18

in response to that is is All

1:20:20

I try to do is is own

1:20:22

my role as the avatar for the

1:20:25

person who's watching this video. I just

1:20:27

try to think what would they want

1:20:29

to ask if they were sitting in

1:20:31

my seat. I'm just the guy who's

1:20:33

lucky enough to be able to do

1:20:35

it. So anyways, I very much appreciate

1:20:37

both kind words, but also your support

1:20:39

of this channel by being willing to

1:20:41

come on it. Dave, I know you've

1:20:43

got a lot of choices of different

1:20:46

places to be and I really appreciate

1:20:48

you being here on thoughtful. Very kind

1:20:50

man. All right, well folks, look, please

1:20:52

let Dave know how much you appreciate

1:20:54

him. Please hit that like button and

1:20:56

then click the subscribe button below as

1:20:58

well as that little bell icon right

1:21:00

next to it. Dave, it's been just

1:21:02

an absolute honor and privilege. Thank you

1:21:05

so much. Everybody else. Thanks so much

1:21:07

for watching.