Speaker 1: If you want to support the show and get the
episodes early and ad free, head on over to Freemanbeyond
the Wall dot com forward slash Support. I want to
explain something right now. If you support me through substack
or Patreon, you have access to an RSS feed that
you can plug into any podcast sure including Apple, and
you'll be able to listen to the episodes through there.
If you support me through a subscribe, Star, gum Road
or on my website directly, I will send you a
link where you can download the file and you can
listen to it any way you wish. I really appreciate
the support everyone gives me. It keeps the show going.
It allows me to basically put out an episode every
day now, and I'm not going to stop. I'm just
going to accelerate. I think sometimes you see that I'm
putting out two even three a day, and yeah, can't
do it without you, So thank you for the support.
Head on over to Freeman Beyond the Wall dot com,
forward slash support and do it there.
Speaker 2: Thank you.
Speaker 3: Well.
Speaker 1: If you never caught one of my live streams before,
there's the intro to it. I forgot to remove it
before I started recording this, so yeah, I'm a professional. Hey,
hey everyone, how's it going.
Speaker 3: I was about to say that that's a new I've
never heard that before, but man, that sounds that sounds good.
Speaker 1: Actually, yeah, that's the intro from Last Dream. Okay, so
I got Ben Keller in here, I got Stormy Waters here.
This is the way we have to start out this episode.
Total disclaimer. Nothing here is financial advice. People have asked
for an episode like this for a while.
Speaker 2: We're gonna do it.
Speaker 1: Please do not do not click by on anything because
of anything we talk about here now saying that I
know that that's probably not going to happen, but I
have to put the disclaimer out here. Nothing here is
a recommendation or a guarantee that you are going to
make money.
Speaker 2: So that's it. Stormy.
Speaker 1: It feels like I haven't talked to you in like
twenty four hours.
Speaker 2: How are you doing doing good?
Speaker 3: And this is not investment advice?
Speaker 2: So yeah, Ben, how are you doing doing pretty good?
I definitely have to echo that, Like I can't. I
do write a substack obviously focused on investments and all
these different things, but at the end of the day,
like I can't reach through the screen and press the
buy button or sell button for anyone. So to your money,
your responsibility is a way I'll put it.
Speaker 1: Yep, all right, who wants to start giving an overview
of what we're looking at as far as the markets.
Speaker 2: Go, Uh, I'll let Stormy lead off. We can maybe
start specifically with commodities.
Speaker 3: I think that's uh, well, yeah, how about you kicks
off commodities and I'll take it from there.
Speaker 2: Okay. So basically, I think what a lot of people
are missing as far as cycle changes, some of these
different things in markets that typically last ten to fifteen years,
and you see it in bonds, you see it in equity,
you see it across markets with commodities specifically, it's like
ten to fifteen year cycles, and gold specifically tends to
lead those cycles where anywhere from a year to two
years ahead of the rest of the commodities, it'll take
off right and gold is gone from what sixteen seventeen
hundred renounce to like well over three thousand in recent weeks.
So I think that's basically the smoke signal kind of
signifying that something's different where it's not just going to be.
You get to own the SMP and passive invest in
you like automatic twenty percent returns because this is America,
So I think it's going to be a little more
difficult as far as finding opportunities. But I think commodities
are extremely cheap right now. I think energy is extremely
cheap right now. But basically, there's a lot of different
sectors and businesses and different ways to kind of express
that view. Whether it's like you like natural gas or
you like uranium or coal stocks or whatever it is.
There's a lot of different ways to potentially apply the
view that we're probably going to be getting higher interest
rates and other things that'll be very good for a
another five ten year run in some of the different commodities.
Speaker 3: Yeah, I think interest rates is going to be a
component that everyone wants to focus on because it is
going to go contra to pretty much everything that you're hearing.
So much of what you're hearing is at least against
just my perspective. You know, I'm not I'm not bad
at giving predictions, We'll say, all right, but so much
of what you see when you see the dialogue in
the investment media is how do I put it? Now,
Everyone listening to this podcast probably has an inherent distrust
of the media, and that's good, that's important, And the
place that you need to be the most suspicious is
in the financial media. Right, the shilling in the financial
media is going to be much worse than anything else
that you have, probably like it, worse than anything in
the mainstream media. So keep that in mind when you
read stuff about interest rates coming down at any moment,
or Powell going to pivot things like this, These things
aren't going to happen. What you're seeing is financial institutions
that desperately need rates to come down, leaning on policymakers
to make those decisions right. They're trying to quite literally
manifest the market conditions to a very important book. As
much as I hate the man and hope that he
is rotting in hell in the very near future, one
George Soros. George Soros wrote a book called Narrative Markets,
and I think that everyone should read it if they
want to understand basically how to navigate the media environment
when it comes to finance. It's COVID made me really
understand the book because I thought I understood it, but
I didn't. Right, I was like, oh, okay, so what
George is saying is that the market doesn't really care
about fundamentals as much as it may seem. What it
really cares about is stories, and investments have stories, and
it's the story of the investment that are making people
pull the trigger or hold the investment when they otherwise wouldn't.
And I was like, that's a really novel concept. But
then I watched the media be controlled in a way
that I couldn't unsee, Like I knew it was bullshit
most of the time before, but never that was the
first time. So I was too young during nine to
eleven when I actually watched a narrative roll out, like
you got to see the machine turn on and hum,
and I was like, oh shit. He wasn't talking about
taking narratives that exist and trading a security based on
the story about the security and not the fundamentals of
the security. He was talking about making the story and
creating the market. That's what they're doing. So interest rates
are not coming down. In fact, I don't know how
old Ben is, but I can probably say that Pete
is close to me in age, and we will likely
never see interest rates as low as they were in
twenty twenty two or twenty twenty three. Are likely even now,
for the rest of our lifetimes, Pete and I will
be dead before we see a two percent interest rate again. Right,
So interest rates are not coming down, and this makes
leverage very expensive. Right. Leverage costs money because you're basically
getting a line of credit, line of credit at an
interest rate, even if it's only in your trade, Even
if it's only in your e trade portfolio, you are
still paying interest points on it. But since interest rates
have been so low for so long and always going lower,
at least in my entire lifetime right when I was born,
was like peak Vulkar, right, So literally my entire life
since I was born, every quarter or every six months,
you can pretty much set your watch by interest rates
getting lower, which allowed a bunch of bullshit to happen. Right,
First off, I'll explain why Ben is correct in his
assessment of commodities and the future of them, and I'll
have funny enough commodity futures haha. If you're a company
that isn't really fucking good at your job, all right, event,
you would go out of business in the before times, right,
so pre vulgar times you would go out of business, right,
But in the post vulgar times of knowing that the
interest rates are going to come down every single quarter.
What you do is you borrow a bunch of money
and you use that borrowed money to run your business
the operational.
Speaker 2: Costs, or buy backstock.
Speaker 3: Well, that is what for when you have excess cash,
usually don't borrow money to buy you don't usually don't
buy stock back with borrowed money, right because the capital cost.
What you do when you buy backstock is when you
have a bunch of cash on hand and you don't
want to issue a dividend and return that money to shareholders,
which is what you're supposed to do. But if you
spend that money before you have to return it, then
you don't have to return it. And if you know
that most of your shareholders are hedge funds or you know,
money market funds or shit like Blackrock, who care far
more about returns than they do about actually getting dividend
money like physical money back, then you know that they
won't have a problem with this, that they'd much rather
you take the cash on hand and pump the stock
then invest in any long term thing like long term
whether it be new research and development or new facilities,
anything to actually make the business more valuable long term.
They don't really care about the business. It's really just
a like three or four letter combination and then and
then a value number attached to it. They don't give
a fuck what the business does, who it employees, where
it is, like, they don't give a shit.
Speaker 2: It's a trading snardine in the casino.
Speaker 3: Basically, yes, exactly one hundred percent. So they don't really
want you spending any excess money on any long term
growth plans. They would much rather you pump them by
the quarter. But anyways, all these companies that are very
bad at running their business profitably, they borrow a bunch
of money, and what they do next quarter when the
interest rates go lower is they refinance that debt. Right,
this is going to be like, let's say you have
a minimum credit card payment, right, and all of a sudden,
your interest rate lowers for some freakish reason, because that
lowering of interest rates only happens to businesses that never
filters down to you. Maybe if you're getting a mortgage,
but that's about it, right, So it's actually the mortgage
will be better. Let's say your mortgage payment is x
amount of dollars, and you refinance at a lower interest rate,
and now your payment is less, let's say it's twenty
percent less. You had a four thousand dollars payment and
now you have a three thousand dollars payment. Did your
salary go up an extra thousand dollars a month, No,
it did not. Just because you have to pay less
on your mortgage doesn't mean you earned an extra thousand
dollars a month. Just means you have to spend one
thousand dollars less. But that's not what these companies have
been doing. They've been refinancing their debt and the money
that they don't have to pay in interest payments anymore. Right,
the reduction in mortgage by one thousand dollars, they've been
chalking that up as revenue, right, like their business earned
that money. So it'll come to us a surprise for
you to hear that twenty five percent one in four
stocks on the New York Stock Exchange. And this problem
is far more metastasized in European stock markets, up in
these stock markets and Asian stock markets. But we'll just
take the US, which is the best of the bunch.
One in four publicly traded companies pays more in debt services, right,
so it has to pay more in interest then it
earns in top line revenue, right, So that means they're
paying more in interest, they owe more in debt services,
then they make as a business doing business. And if
it wasn't for the ability to refinance this debt every
quarter or every six months, they would be out of
business already. They would have blown up. Right. So the
last gasp of twenty twenty three, like the last you
know bit of COVID gave a lot of these company
is a chance to refinance hard, and they did, but
it doesn't mean their business has got any more profitable,
all right. So that means one in four companies are
basically a ticking time bomb for interest rates to go
up to a point where it cracks the math and
they are no longer able to operate. And since they've
been operating on borrowed money for this long, when they go,
they will go really quickly. So keep that in mind
when you're buying stocks. Just know that you know one
in four companies, one in four of those stock tickers
is a fucking zombie company time bomb that could go
to zero really quickly. All right. With that being said,
the other thing that interest rates do and tying this
back to leverage and why commodity prices have been so
cheap for so long, and why commodity prices are going
to go up more in the near future. In fact,
they are going to go up proportionally to interest rates
going up. Well, Stormy, why is this? Well, because it's
kind of a dirty secret of the Western world that
we take our cheap interest, our cheap money, and we
use this cheap interest, right, This this debt our ability
to borrow tremendous amounts and pay very little for that
borrowing to leverage up futures contracts. Right. So, let's say
you have one hundred dollars and let's say interest rates
are one percent, so inflation's two percent, So that means
that interest is effectively in real terms free, right, So
we have free borrowing capacity. What we're going to do
is we're gonna take our hundred dollars and we're going
to get a ten x leverage from our securities broker.
So even though I have one hundred dollars, I will
be trading with the equivalent of what what is that
ten thousand dollars I'm really dumb today, boys and girls,
so please spare with me. So I have a thousand dollars. Wow,
that was really really dumb. Okay, Anyways, I have a
thousand dollars when I only should have one hundred, So
that means nine hundred of those dollars aren't really real money.
But I'm going to place very real bets on the
futures exchange betting that the price of X commodity goes down. Right,
So when I pile on a bunch of futures contracts
that are basically betting that something is going to go down,
if I pile on enough of those, I will effectively
manifest that reality. Right, a company that is shorted nine
times for every one person that is buying the stock
hoping the company goes up, that stock's fucking going down.
Because markets operate on a little bit of consensus, actually
a lot of bit of consensus, right, everyone just follows
on to what everyone else is doing. So if everyone
is seeing a bunch of shorts pile on and pile
on and pile on, they're going to assume, usually correctly,
that somebody knows something that they don't, and that sounds
like money and they're going to do the exact same thing.
They're going to pile on their shorts and then that
reality or sorry that you a story will become reality
because the price of that thing is going to go
down because of everyone shorting it. We' actively done this
with commodities to keep resource producing countries nice and poor,
because if the commodity price goes up, these countries that
only have natural resources to sell, right, will have a
ton of money sitting around and they may use that
money for industrial production to take those raw materials and
turn them into finish goods to sell into our markets.
And we don't want that. We want them to not
be able to do that, right. We want them to
have no other choice but to sell us the raw materials,
we turn it into finished goods, and we turn around
and sell the finished goods back to them. We do
the value added manufacturing, which is where the money is
not you you up aty, you know, I don't know,
Nicaraguan or whatever. So that only works if interest rates
are very very low. But if interest rates are not
very very low, the cost of that leverage becomes very
very expensive and it becomes no longer worthwhile to do it.
So we've been doing this for nihon I don't know,
thirty fucking years, forty years. So commodities have been artificially
suppressed using cheap credit for about thirty years. So when
that pressure comes off, right, and now that short pressure
goes away, what do you think is going to happen
to those commodities?
Speaker 2: Ben they might go just a little bit higher. I
think to add to your point, when you see something
like oil and you see basically positioning where some of
these large traders are as short as they were in
the COVID like crash cycle, where like, say what you
want about the economy, it's not as chaotic or uncertain
as things were in like March twenty twenty. So when
you see that kind of positioning and oil kind of
just bumping around like sixty sixty five of a barrel
like dip down in the fifties, briefly, like you look
at it and I kind of view it as there's
a whole bunch of kindling waiting for a spark. But
I think you see it across different markets at different
times it gets more extreme, like you kind of see
the pressure release valve being gold and they I think
of kind of taking their thumb off the scale on
gold specifically in the last I don't know a couple
of years, because I think everyone, whether you look at
China and their central bank buying, I think that's a
big driver. And I think basically everyone, as far as
I can tell, except Europe, is totally fine with gold
rising to three thousand and four thousand, five thousand ounce.
I think it'll end a decade significantly higher. But part
of that's obviously currency devaluation and whatnot. But I think,
like you're saying, all these different commodities when you put
your thumb on the scale, and it's basically a constant
headwind when you eventually get to a point where that
you stretch that rubber band far enough and just snaps.
Speaker 3: Yes, gold is also going up for another reason, right,
and that we're going to have to talk about separately.
That'll probably will save that for the end, which is derivatives. Basically,
gold is not an inflation hedge. Right libertarians are wrong, well, really,
libertarians are wrong about pretty much everything, from politics to
economics itself, which is deliciously ironic, as Thomas would say,
because they've turned economics into both politics and religion. Which
is well, it's funny wrong about it.
Speaker 1: You can be right about economics if everything you're doing
is working in theory, because you can just declare, oh,
this is better, this is better than what's happening now
in theory. Okay, well show me how it played out. Well, no,
this is better. You know friedrich List has been proven
as a crank. Oh yeah, who did that? Oh you
mean somebody who's economics is never going to be implemented.
Nice try Betty, nice, try have a nice day, head.
Speaker 3: Pat Yeah, he was disproven in theory, but it is
proven in fact. But go on, I was.
Speaker 2: Just going to say, it's looking at the world the
way it is versus the way you want to be.
I think is basically what you guys are getting at.
Speaker 3: Yes, economics doesn't exist as in economies exist, right, those
exist people buy and sell. I actually did a post
about this recently, and everyone, particularly the Lulberts, got all
retarded on me. So let me use this time to
clarify the difference. Economies are real economics. The academic profession
and study is not, because, like Pete and you Ben
said paraphrasing, they have to operate in a vacuum. Where
the only people inside the vacuum are the buyers and
the sellers. Right, you only got millions and millions of
buyers and millions of millions of sellers, the buyers trying
to get the most value for the least amount of money,
and the sellers trying to get the most amount of
money for coughing up the least amount of value. And
somewhere in this magical process becomes price discovery if there
are no external non economic factors involved, like let's say,
for oil prices, we could say, let's say, like the
geostrategic imperatives of Vladimir Putin's Russia. Ben right, So if
let's say Trump and Saudi Arabia have been keeping oil
prices artificially low via overproduction.
Speaker 2: And narrative like you're talking about earlier.
Speaker 3: M Yes, the recession narrative is very important for oil
prices because and this is the brilliant economics sorry, the
brilliant economics theory associated that, Oh, if GDP backward dates
for two quarters straight, that means recession, and that means
people will be driving less and less goods will need
to be shipped around because the GDP number went backwards
for two quarters in a row. That's that's that sounds retarded,
but that's literally like economics dogma. All right, the correlation
as causation bros. Are just any anyways. But the people
don't know that. People that tout economics as a reality,
as a real thing, there's really no hope. But the
reason I bring that up is because, particularly when it
comes to narratives and versus realities, there is a narrative
amongst libertarians that gold is a hedge against inflation, and
that if we were to just get rid of the
fiat money, then not only will everything magically be right
in our society and our values pete, our values, our
Christian Judeo Christian values will return right, and trannies will
go away, and James Lindsay will have nothing to talk about,
and we will return to the magic, good old times before.
If only we went on gold backed currency, then all
of the other problems in society, from homelessness to drug addiction. Actually,
I think libertarians are largely responsible, at least in their
own part, for drug addiction numbers, because they're fucking stoned
all the time. Anyways. They think that all this will
be fixed if we just go back to gold and
that inflation will go away. In fact, inflation will be impossible.
But this is incorrect because I mean you and Paul
Fahrenheit did a series on the Spanish Empire, and I
believe there was tons of inflation in Europe in the
Middle Ages during periods of time, and there are also
periods of rapid deflation.
Speaker 1: And Spain was flush with gold.
Speaker 3: Yeah, in fact, gold was the only currency any of
those nations ever used. So wait, if not only Spain
was on a gold standard or literally physical gold as currency,
but every other nation they traded with used only gold
as currency. How did all of these nations experienced inflation
or then deflation? How was there any fluctuation whatsoever in
their currency if they used gold as money. Well, my
dear friends, cause a relation are different things because when
something is a commodity, like ben can tell us, a
commodity is itself a hedge against inflation. But when you
use something as money, no longer is it a commodity.
It's now And funny enough, money trades differently than commodity.
If you take a commodity and you make it money,
it no longer trades like a commodity. It trades like
a currency, which can inflate and can deflate. So keep
this in mind. The only thing gold is a hedge
against is government instability. Right, it won't protect you from
inflation as long as any commodity. We could take all
of our money and put it into barrels of oil
and we will be equally as protected from inflation than
we would if they were gold bars or you know,
platinum or palladium or you know timber, all of these things.
So gold, when you see everybody rushing for gold, particularly
the central banks, they are worried about is governments not
so much their own, partially their own, but primarily counter parties, right,
because governments loan other government's money. And there has been
more central bank gold buying in the last three years
as there has been in the last sixty. So in
the last sixty years, all the gold buying from central
banks that's happened, which there has been a bunch two
almost three times as much of that gold buying has
happened in the last three years. So what does that
tell you. That tells you governments are worried about other
governments going bankrupt or going away, and that is going
to be largely the driving factor of gold because it's
a commodity. Central banks aren't buying it to turn it
into currency. They are buying it right to backstop counterparty risk.
That being said, I think Ben is correct. I think
gold is going to be probably five to six thousand
by the end of twenty twenty seven. So three years
gold will probably three x from where it is now,
and actually sorry, two x from where it is now.
And then you'd be like, oh, well, that's a two
hundred percent return, I'm going to go buy gold. Well
you could do that, but really that isn't all that
great because there's going to be other things that go
up a hell of a lot more, right, So just
park the gold conversation and anyone talking about gold off
to the side, right, have some of your money in gold, Yes,
but no more than twenty percent at the absolute maximum.
Speaker 2: Well, especially after the run it's had, right, and there's
the time to buy these things, and it's generally not
after it's gone vertical like here today. I'd have to
look it up specifically, but it's up to at least
twenty or thirty percent in what four or five months,
So I think there's part of it too, where when
like if you're listening to investing podcasts or different people
talking about it, and everyone's talking about gold and gold
miners and all these different things. When something gets hot,
that's generally not the time to be like piling in. Right,
It doesn't mean you automatically sell either, Right. I think
gold's doing higher. I don't think it's a sell at all,
But I don't think it's somewhere it's made the most
attractive place to be buying. But the thing on gold
I think is interesting too, and it feeds into the GDP.
I don't know if you saw this, but the I
think is people are complaining about key one GDP being
negative because the US imported so much gold, which if
that like doesn't set off alarm bells of GDP and
not having actually anything to do with the economy. I
think that's a it's just interesting that people are saying, oh,
GDP's week. It's like, Okay, what is importing a shitload
of gold actually have to do with the health of
the economy? Like next to nothing? Right, And when you
kind of look at some of these different things in
the narratives and recession narratives of oil and copper and
all these different trades, and like, oh, there's gonna be
supply chain issues and shortages and you're not gonna be
able to get your Chinese whatever from the grocery store,
from Amazon whatever it is because container ships and all
these different things, all the ports are empty, all these
narratives you see on social media, and then you listen
to a guy like I won't claim to be a
shipping expert, but if you go listen to a guy
like Salamarcagliano, like he does daily like or at least
like three or four times a week, he does updates
on what's going on the shipping that's the name of
the channel, and he's basically like, yeah, look, it's not
a it's not business as usual, but it's not like
the end of the world like COVID supply chain shit show.
So I think the narrative and this goes back into
the narrative and flows and some of these different things
that drive markets in general. But I think it's pretty interesting.
I've had a conversations with friends on the phone recently,
like complaining about fake and gay markets, where you kind
of like, look at all this stuff where you have
passive investing like creating massive distortions where I think it's
like fifty to fifty five percent of like passive of
investing is done by passive vehicles. That's like your S
and P five hundred funds, your spy VU, I think
is a Vanguard one. But the point is that, like
it really is as simple as if you give Vanguard money,
they buy, if you take money back right, they sell.
There's no human being like making decisions there. And that
creates distortions where you have like seven or eight tech
companies like the top ten in SMP basically account for
I think it was like forty or forty SMP five hundred.
I could be off on that, but it's even worse
for like the NASDAC and some of these different things
where you have passive disortions. You've got concentration risk in
those index funds, You've got narratives and flows and all
these different things. And at the same time you have
Trump doing his thing with constantly tweeting or putting out narratives.
And my buddy was talking about this. When Trump says
it's a good time to buy stocks, it's a like, obviously,
do your own, make your own decisions here, but he
was like, I'm going to buy and that was like
late last week and then Chinese trade deal or like
when like the WHLL tariff circus was going on in
early April, and he's like, it's probably a pretty good
time to buy stocks, and then they like pump the markets. Basically,
I think when you have Trump doing like tape bombs
like that and like short term trading, like it's really
easy to get chopped to bits trying to like trade
in and out and do all these things. And that's
why I'd rather just buy something that's cheap and hopefully
it has a catalyst and let other people figure it
out later. But I was thinking maybe if I could
redirect here too, and that maybe ask a question of
you story. I think the thing that was I've been
thinking about lately with the economy and some of the
narrative run tax cuts. The question I have is like
everyone's bitching and moaning, like investors are complaining about debt
and death sits and all these things, like it's gonna
be like the sky is falling, it's all over. If
we cut income taxes on people making less than two
hundred thousand a year, like I've been hearing, but I
think the thing that like first order effect, if you
cut income taxes excuse me, income taxes to zero for
that like group of people, doesn't the economy just like
rip in the next three six months? Yes, like is
it just take off again?
Speaker 3: They never so basic. The first to month, the first
two to three weeks of Trump's tariffs were the financial
media's covid right, talk about a deliberate scare campaign because
remember the in remember the institutions that don't want the
trade deals to happen. Every country in the world, all
of their intelligence agencies, right and all of their very
very wealthy people are going to be either funding and
or pressuring media organizations, financial media organizations to basically say,
how this is going to be a disaster. Think about
it this. If Trump the on shoring of US manufacturing
is going to creat China's economy, it's going to creator
a lot of these emerging market economies. But let's just
take China for instance, because they actually have some clout.
The number one priority then of all of the Chinese
intelligence apparatus has one priority now to try and stop
Donald Trump from doing this. Europe, same thing, UK, same
thing So the problem about globalism is when you try
and make national policy decisions that involve economics in any capacity,
you now are in direct conflict with large swaths of
the globe who are going to influence just like US
intelligence influences, just like Israeli intelligence influences. The number one
thing that intelligence agencies like to influence as the fucking media. Right,
Because if you're China, the on shoring of manufacturing and
the application of IFS is now an existential threat, no
different than Ukraine and joining NATO on Russia's border. It's
that big of a deal for you.
Speaker 2: And if I could jump into and add on the
China thing, like when you look at the Chinese economy
and the subsidies and distortions that are going on in manufacturing,
in real estate where it's like, oh yeah, just take
a zero percent loan to start up this electric vehicle company,
and like all these different things. Like I think there's
so many distortions that go on underneath the surface in
manufacturing where if you overinvest in some of these sectors,
it crowds out other areas and it really like, I
think the distortions in their economy because they're basically toggling
switches and monkeying with the controls I think are like
I potentially even more extreme than some of the stuff
you see here in the US.
Speaker 3: Yes, the national socials had the better idea obviously, which
is where the government would give directives like, hey, we're
going to need this in a couple of years, we
want you to go in this direction, right, and businesses
would then go pursue that initiative themselves. China does it
a different way, all right. China's a very transactional society,
and they basically have to straight up have to pay
businesses to achieve any of the the policy needs of
the state. Right, they're not unified in that capacity, right,
Like they're not unified in common purpose because well they're cynical, right,
Like the Chinese people themselves are cynical. Like they don't
give a shit about the Chinese government. You know, it's
not like it is in European countries or you know,
where ideals matter, not ideas ideals. So yeah, they have
to straight up checks to get these things to happen,
which leads to massive distortions like you're talking about, and
massive concentrations of debt risk. So when you're talking about
the distortions and the bubbling out in certain areas. You're
just talking about the capital on one side of it,
but underneath the surface there is a bubble in the
opposite direction, Yeah, which is debt.
Speaker 2: But bubbles create anti bubbles too. Yeah, commodities is like
the anti bubble at least where I see it right now.
Speaker 3: Yes, so, yeah, everything that has happened in the financial
press and the regular press over the last two weeks
has been deliberate scare bullshit to stop Donald Trump from
doing exactly what he's doing. And that's why it is
so divergent from the reality we see. Like literally, the
financial press was like as bad as the regular press
during peak covid as. How fucking shameful.
Speaker 2: It's been.
Speaker 3: So yeah, completely overblown nonsense. But it's understandable why a
lot of these nations are leaning on a lot of
these media organizations, because to them, it really is existential
and this is over the broader thing that we're talking
about that nobody's really going to understand a lot of
people will understand, like if I say globalism is fucking over,
they'll say, oh, okay, that makes sense, but they don't
understand what that practically means in their like reality, right
like at the grocery store or you know, when they
go to buy things or things like that. It's we're
talking about a fucking a shift so great that it's
hard to conceptualize what this actually means making things in
America on shoring US industries like these all sound really good,
but what's happening is going to be profound in a
whole bunch of ways in people's day to day lives
that they're not seeing. And when you get to thinking
on that, when you're thinking about the second and third
order effects, that's when there's opportunity to make money.
Speaker 2: Right.
Speaker 3: So, for instance, I've been accumulating a bunch of I
won't say the specific stock, but let's just say there's
a bunch of publicly traded junk yards. They have super
low debt, almost none, so that means all the revenue
is not getting eaten up by interest payments and basically
credit card payments. So that means they have a ton
of cash on hand. And if they ever needed to
rapidly expand let's say that credit is available to them,
they can go get debt because they're not in debt
when they need it. And why would I be buying
junk yard stock that sounds retarded. Well, making things in
America is going to be very, very difficult when it
comes to who has been making your auto parts? Right,
and who has been making your automobiles. Well, there's something
called and this is something that you should think of,
ben when you're allocating, is how long the country has
been really not just the country, just the entire global
economy has operated on planned obsolescence. Planned obsolescence is something
very important to think about because businesses got well, they
got fucking lazy, rather than come up with a new
technology that's going to do new things that's risky. Who
knows if it pays off. Maybe it does, maybe it doesn't,
who knows. If only we could figure out a way
to get these schmucks on a subscription plan where you know,
they're basically renting that shit for me every single year,
you know, and they're upgrading every year like a cell phone. Well,
how do I make sure or your cell phone gets upgraded? Well,
isn't it funny how your fucking iPhone all of a
sudden commits ritual suicide every time a new iPhone comes
out all of a sudden, this motherfucker is breaking in
every single way that it's probably it becomes the worst,
Isn't that funny?
Speaker 2: For dishs and like laundry.
Speaker 3: Machines, dishwashers machines for years. But if I get refrigerator
from the thirties, it still works.
Speaker 2: Yeah, my grandma still has one from like forties, fifties.
Speaker 3: Literally, just I think everyone that's listening should be taking
what money that they have available, not in your investing money,
not your IRA money, whatever I'm talking about, like spare
cash you have, and buying old appliances, buying old power tools.
These things matter because, like Ben just said, his grandmother
has a refrigerator that has stayed running perfectly fucking fine
without ever breaking since nineteen forty. But any refrigerator that
you've bought in the last thirty years will not last
more than four years without something breaking, because the goal
isn't to sell you a working refrigerator. The goal is
to keep you buying new refrigerators. The price of globalization
didn't drive prices down, right, planned OPSI lescens drove things
down because they were able to sell you shittier stuff
and to build it will it lasts forever? Cost more? Right? So, really,
what you think is globalization and cheaper manufacturing places lowering
the cost of goods, Like any fucking libertarian open borders
faggot will tell you all just the larger we make this,
everything gets cheaper. No, things have just gotten cheaper in
the last thirty years. And you're looking at that like
it's the fucking rule and that if we just replicate
certain societal changes, this will happen in every instance. But
they're wrong about what the actual cause of things getting
cheaper is. It's not manufacturers being able to manufacture wherever
they want and in places without regulation, like none of
that is real. Prices went down, yes, exactly, Prices went
down because they're selling you shit like literal pieces of
trash that won't work for more than two years. When
before to sell you refrigerator, I would have to sell
you some shit that would last eighty years like your
grandma's and that shit's expensive. So buy here's.
Speaker 2: A one hundred percent here's a little detour and a
business idea. If there's any mechanical engineers that have to
be listening or people that want to actually manufacture stuff,
like if you have the skills to go out and
build a refrigerator, a washing machine, launcher machine, all these appliances,
and they're indestructible, bulletproof. And on top of that, you said, yeah,
it's gonna cost you a small fortune, but it's gonna
last forever, and we'll come out and repair it like
free charge in the future if it does break. If
you can like line up an idea like that, I
think there's there would be plenty of people that would
pay for it. But that's a project for the future
maybe if someone has that area of expertise. But I
think there's something to be said for the subscription model,
Like you got to have revenue coming in all the time,
and people get caught up in like it's the same,
Like it really is the same deal if you're.
Speaker 3: That only matters if your business is this needs to
be steady because you owe a lot of money and debt.
Subscription models become necessary for companies that are borrowing.
Speaker 2: A lot trying to throw their way out. Yeah, but yeah,
with with the like it really is no different than Netflix.
If you're like like laundry machine, if that ship breaks
every three to five years, I mean, it's a one
like one time, big ticket purchase in theory, but if
you're doing it every five years like clockwork, it really
is no different than ten bucks a month for Netflix,
whatever it is. But I think it is one of
those things where like this is where I think there's
other disortions that I think are really interesting. Because you
have private equity, you've got private credit, you have all
these endowments that are locked up in I think it's
like sixty or seventy percent of Harvard's endowment. Don't don't
call me on exact numbers, but a whole shitload of
endowments are in investments that are very liquid. And you
see all these different firms like launching a oh here's
a private credit and a private equity ETF. We're gonna
launch this all liquid garbage, toxic sludge to public investors.
And like I said, we said no investing advice at
the beginning, Please do not buy private equity, private credit
ETF junk from these people that are trying to dump
on retail, Like at least if you want to, if
you really have to, like know exactly what you're buying.
And when you have some of these other distortions, private
equity private credit, and these guys that can't survive on
I mean they're struggling at like four or five percent rates.
And if we go like oh, six seven, like I
think we're headed for double digit interest rates over a
long enough period of time, and you look at what
that does to a whole bunch of different industries. Like
that's where the balance sheet of different companies becomes important,
and like the cash flows of what the business actually
does is going to be tied to inflation, Like is
there debt rates, like are they fixed or variable? Interest rates?
How long you're like, what are the maturities when like
all these different things that kind of when you're looking
at different businesses. This is one of the advantages of
actually doing the CPA and public accounting as you get
to see a whole different variety of companies and sectors.
And when you see I'll give a personal example, I
think the Statute of Limitations probably passed, but when you
see I think it was Apollo. It's either pollow or
areas and they go and buy value Village and they
levered up to the tits and they're trying to dump
it on public markets and ipo it and it is
like the balance sheet is just stuff of nightmares, and
they're trying to like dump it on public markets just
like just avoid that. Right. So, I think there's a
whole bunch of things where if you know, like it's
it's pretty easy to back into some of these things
where if you know, okay, I need to avoid X,
Y and Z, and one of those things is crappy
balance sheet. And one of those things is like bubbly
evaluations or it's something that is very hot in news
and I'm going to go buy ai AI stocks or
quantum computing or like some of these things where if
everyone's talking about it and the stocks up like fifty
sixty seventy five percent in like the last couple of months,
like the chances like that opportunity has passed for the
most part. So the one one question I had too
and wanted to see what you thought in this stormy
with the rate side of things, It's amazing to me
that people think rates are going down significantly from here
because you don't have interest rate cycles where you get
forty years to the declining rates and then like we
go up for five years roughly and we come down
a little bit. But we're gonna be going down some
more from here. Like long term, I think rates are
going way higher, but like forty years of the declining
rates doesn't lead to five years a rising rates and
then that cycle's over. But correct me if I'm wrong.
Speaker 3: No, like I said, I think we're going to see
double digit interest rates by the end of twenty twenty eight,
I think we'll probably see it. I think we'll probably
see and this is Fed funds rate, not mortgage rate.
I think you will probably see an eight to ten
percent Fed funds rate by the end of twenty twenty
seven mid twenty twenty eight. But back to what we
were saying about things that are so Basically, people are
not going to be able to just go buy a
new car every year. Right. The dealerships make their money
on car repair. They don't make their money from selling
you the car. They make money on you having to
service it, right, And that's why it's so expensive. People
are going to begin to have to repair things because
new ones every ten seconds. Right, whenever this one gets
dirty or you know, it's warranty is over, I have
to sell this car. I'm gonna, you know, sell this
car that I bought because it's warranty is about to expire,
and that means I'm gonna have to pay to repair it. Right, Well,
if you can't get replacement parts very easily because they're
all made in China, then that makes repairing that a
big problem. So buying a brand new car will mean
that there will not be a lot of replacement parts
available if all of a sudden they are flooding in
from China and then no longer flooding in from China. Right,
So if people have to repair their own things and
the repair parts become very scarce, then things like junk
yards right selling what do they call it, refurbished parts
are going to be a huge deal. They're going to
be vital. And those parts that those junk yards are
sitting on right that they got for virtually nothing. Right,
they're buying total cars for pennies from the insurance companies, right,
those are going to be like, you know, thirty forty
foot tall towers of gold, because every single part that
makes up those cars are parts that are very very
hard to get. And to what you were saying about,
you know that anybody that knows anything a little bit
of engineering might want to start thinking about making parts. Well,
I'm going to give you this example. I'm on Facebook
marketplace for Detroit, Michigan right now, right, this is in
reading Michigan. I'm sorry, this is actually reading Pennsylvania, another
place I did like a five hundred mile radius of Detroit,
which is crazy. But right I am looking at, you know,
reading Pennsylvania, another one of these former manufacturing hubs that
because of the politics and the taxes that these Blue
states have, it has effectively become impossible to run a
manufacturing business of any kind out of Michigan, out of Illinois,
or anywhere in New England, including Pennsylvania. The economics don't
make sense because of the governance policies and the amount
of taxes. So all these manufacturing businesses are going to go,
are going out of business and likely never recovered after
COVID if they were already barely hanging on. So I'm
looking at a decal Mahoe, which is fps five hundred
m NC CNC milling machine. It is a four axis
C and C milling machine manufactured in Germany. Particular machine
that I'm looking at is seven years old, which in
industrial equipment is not allot at all. And this machine
new costs roughly about a quarter of a million dollars.
And if I go to you know, any of these
manufacturing equipment wholesaling companies, they will sell me the same
machine with roughly fifteen or twenty thousand hours on it
for about eighty thousand euros, which right now is you know,
about one hundred grand. So this machine is worth about
one hundred thousand dollars used. This Facebook marketplace ad is
for nine thousand dollars because this man has gone out
of business. Nine thousand dollars for four access C and
C machine and a very very nice German one at
that I got to go down the list. Here is
a Mitsubishi or thirty thousand dollars, thirty thousand dollars, thirty
nine thousand dollars, sorry, in Detroit, Michigan. Right, they're twenty
ten machines, so they're not the latest. Five access These
are or four access C and C machines, which are
more than enough to make all types of parts. But
I can buy five of them, five C and C
machines for forty thousand dollars because this guy in Detroit, Michigan,
he's out of business. What about this other one? Here's
a C and C lathe twelve thousand dollars. That's a
big that's very large. It's a very large machine. If
you wanted to make really large parts, that's what you
would need. And because these states and their politics have
made it impossible to run a manufacturing business, all of
these poor business owners are going out of business. Here's
a plasma CNC machine, I'm sorry, a plasma table NCNC machine.
So that means you can do the CNC milling and
also do the plasma cutting all in the same place
for whopping fifteen thousand dollars. Here's a five access C
and C machine. Five access is important because that's where
you get in the really really kind of what's the
word high precision manufacturing that you would need for like
aerospace stuff. All right, it's a twenty nineteen and it's
sixty thousand dollars in this machine new also German retails
for about three hundred and ninety thousand dollars. So come on, guys,
all of you engineers, maybe the best thing that you
could be investing in is yourself. And if you know
that the nation is going to be short on parts
and it's going to take a very long time for
all these big companies, because a big company is a
lot like a battleship or a cruise ship. When it
wants to turn around and change direction, it takes literally years.
Speaker 2: Just the giant bureaucracy yep.
Speaker 3: And then it's got to build new factories and facilities
here in America and that's going to take time, right,
So these supply chain issues might not get sorted out
for six or seven years. Well, that's going to create
quite a part shortage, is it not? Demand piling up
for six years with no new increase in supply. You
don't need to be a libertarian economics person to figure
out what the fuck happens there. So it's a very
risky time at a very uncertain time, and unfortunately a
time where startup capital is going to be virtually nonexistent
because everyone knows that a bunch of bad things are
coming down the pike and a lot of uncertainty is happening.
The idea of you getting an angel investor or a
VC to come throw you a bunch of money for
a hardware business is going to be very low, next
to zero, and because of the credit market, like Ben
and I have been saying is going to be very
very tight because not only is interest rates going up.
If interest rates go up, that means more people are
going to default on their loans, right, And if more
people are defaulting on their loans, that means lending becomes
a lot riskier, which means banks are going to be
more hesitant to lend. So if you can't get bank
startup money and angel investors and venture capitalist types right,
their pocketbooks are going to be really tight. Well, if
you're really clever and you're willing to drive a bit,
you can accomplish the same goal with very very very
small amounts of money. In comparison, there's still going to
be a bunch of technical know how you're gonna need. Right,
These machines like people go to school to learn how
to use them. I'm sure they're not fucking rocket science.
But this may be something you want to invest in,
if for no other reason than your own capabilities to
make things for people in your community. Right. Don't get
me wrong, You're not going to be like a megaparts
supplier supplying things all around the world or sorry, all
around the country, but you may be. But no matter what,
you will have the capacity to make the things that
your community is going to need. So it may not
make you mega rich, but capital equipment is capital. It's
worth money. So right now, because of the asymmetry in
regulatory environments capital equipment, the price of capital equipment is
artificially low, and we know that the need and demand
for things that is manufactured by this equipment is going
to increase exponentially in the near future. This makes a
huge pricing mismatch.
Speaker 2: When you say, Ben, yeah, I think the thing I'll
add too is when like what you're really saying and
what I'm hearing is as far as like what you're
investing in or looking at or considering, I think from
where we are now, moving forward in the next five to
ten years, maybe longer, like you're going to want to
be looking at things that tied to the real economy,
tied to stuff that can't be printed, tied to businesses
that produce stuff that can't be printed, oil, gas, coal,
like agricultural commodities, whatever, like whatever it is. I think
there's different strategies and ways to apply it. But I
think what Stormy is saying is important, where like you're
probably not going to want to own something that is
built on a mountain of leverage on basically the status
quo continuing as it is. Whether that's like looking at
certain banks or certain financial institutions that might be a
dumpster fire and they might have like off bound sheet
derivatives like some of the European banks, where it's just
a complete shit show, right, And I've been hearing about
people saying the European banks are cheap and those stocks
are cheap, and it's like they've gone up a lot,
like great, fantastic, But if you have systemic shit happening,
like I think the banks for the first to go,
it's like there's certain things where if you can narrow
it down to like know what you want to avoid,
know generally the areas you want to look, right, there's
going to be different ways to go about doing that,
whether it's right buying C and C machines or buying
uranium producers or buying like natural gas stocks, whatever it is.
So I think that's at least the way I kind
of look at where things are headed is you want
to be tied the real economy production of real goods
or commodities or services, and not just something that is
financial wizardry, you know, yep.
Speaker 3: And that's not necessarily a bad thing since we're talking
about euro the Eurozone, right if you own if you're
buying any of this bullshit about because Ben can probably
tell you. When I get set on an idea and
I know my thesis, basically, I know that I'm right,
and I know without a doubt that I'm right, and
I set my positions, I stop looking at the financial press.
I don't give a shit because nothing that is going
to be printed in that news is going to make
me not right. You know.
Speaker 2: Yeah, once you know something cold, there's no surprises left exactly.
Speaker 3: But I do know that over the last couple of weeks,
there has been a lot of hype in financial media
talking about European companies and they're going under, they're going
through a boom, and you need to take your money,
and you need to invest in European defense companies like
Ryan Metal and stuff, because they're going to get this
huge stimulus and all this stuff, and Europe's got to
rearm and all these things. If you put a dollar
into Europe, you're a fucking idiot.
Speaker 2: If I could jump in for a sec Ryan Metal
up two hundred thirty percent in the last year, one
hundred and seventy seven percent since the start of this year,
and trading at almost one hundred times last year's earnings.
Speaker 3: So can you explain what that means to people?
Speaker 2: Basically? There, let me pull up there. We've got a
screener here if you give me a second. So basically,
like right now, the US traded version of the stock
is like seventeen eighteen hundred bucks. If you have pe
of one hundred, then their earnings per share over the
last year is like twenty bucks. So you're paying eighteen
hundred dollars for twenty dollars of earnings, which if you say,
how had a rental property, I guess the simplest way
to put it, and you basically had like one percent
cap rate? Is the way, Like it take you one
hundred years to year money out right if earnings can
grow or something didn't happen. So, and that's a company
that is eighty seven billion dollars, so it's not some
small company. It's going to grow or at least can't
grow the sky, So it's I would avoid it. Basically,
I always said, not advice, but they're a better place
to be I'll leave it at.
Speaker 3: That, Yes, exactly, that's what I said. Like just I
can't say a specific investment, but I can say like
I wouldn't put a dollar in the Eurozone because if
you know anything about the news and economy, particularly their
energy costs, then you know that there is no case,
there is no bullish case for the European economy period.
And if you see central banks all rushing to gold,
remember I said about counterparty risk, and that's what they're like,
gold is a hedge against governments. At a personal level,
gold holding is a hedge against your own When banks
do it, it's a hedge against other governments. So if
you see all of these nations central banks rushing to
buy gold, and remember it's worried. They're worried about counter
party risk. Right, So like if I lend Ben a
bunch of money, right, Ben is now my counterparty risk. Right,
Ben's ability to pay his bills is now risk on
my balance sheet. So if you see all of these
nations running to cover counterparty risk and one group of
nations not running to cover counter party risk, which one
do you think is the one that's that full well
knows it's not gonna be able to pay its bills.
The one that's not buying a bunch of gold, huh,
because they already know if they're basically the person that
pissed in the pool, all right, the person who isn't
like the place that you know, those pools that turn
like blue or red when somebody peas in them. The
person standing in the middle of the fucking red is
the person that peed in the pool. The person not
running to buy gold is the one that is the
counterparty risk that the other nations central banks are running
to cover. So yeah, Europe is a whole different thing.
If you're a European listener, you can hop on a
train and go to Switzerland. And this is an investment advice,
this is banking advice, which I any asshole can give.
I strongly recommend you hop on a train, and to
my British friends, I recommend you hop on the train
that goes under the Channel tunnel and then take another
train to get to Switzerland. If you don't want to fly,
and you set up a bank account, and that bank
account is going to be denominated in Swiss Franks, all right,
they will hold euros for you. You can have euro deposits,
or you could deposit euros to the bank and have
the bank deposit Swiss francs into your Swiss account. Right,
You're not like hiding from taxes. It can be under
your name. You're not doing any of that. But your
money is outside of the European Union's dis you know,
their outside of their purview.
Speaker 2: Right.
Speaker 3: The European Union cannot you know, set monetary policy and
fiscal policy for Switzerland, nor can the UK. So if
you are a British citizen with British bank accounts and
you're a European citizen with European Union bank accounts at
European banks, you need to get your money out of
euros and out of pounds as fast as humanly possible
and into Swiss francs if dollars are not an option
or crypto is too complicated for you. This is of
the ut utmost imperative. And I've put my money where
my mouth is on this because I've borrowed against my
entire portfolio, all of my like all of my liquid
net worth, I've leveraged and I've borrowed in euro So
I've taken the entire value of my portfolio and borrowed
the same amount of money, right, except for I borrowed
that money in euros. Why would I do that?
Speaker 2: Well, because they use can collapse by twenty thirty, That's
exactly why if not sooner and so not only do
I get the trade with twice the amount of money
and have twice the amount of returns.
Speaker 3: Just nice. I enjoy it. It's good. But at the
end of the day, there's gonna be no one for
me to pay that loan back to. And before that
day happens, when the currency is in free fall, which
it will be, one dollar will be worth several hundred euros.
So if I did want to pay them back before
it all goes hits up, it will probably cost me
a couple hundred bucks to pay back the amount of euros. Yeah,
got to keep those tokens. So I am that confident.
Speaker 1: Just to give you an idea how bad it's going
to be here, Starmer has announced today that they will
be closing the borders and going to digital ID.
Speaker 2: Well, they go ahead, good, yeah, no.
Speaker 1: This is this is beneficial. It's been getting blasted ever
since we uh we started. But why would you why
would you close the borders and go to a digital
ID especially for your for your diaspar around the world.
If things are getting better, Well, why would he why
would he do that specifically?
Speaker 2: There?
Speaker 1: I know why we would do I know why we
would close the borders.
Speaker 2: Yeah, I mean you look at some of these policies.
You hear talk about a European Union talks.
Speaker 3: They rolled it out in October. What are you talking
about that? Central Bank said that last week. It's not
in talks anymore. It rolls out in October.
Speaker 2: No, I understand. I'm just saying all for some of
these things, as far as actually successfully rolling it out,
I'll believe it when I see it, Like it's definitely
an agenda plan. I'm just saying there are certain things where.
Speaker 3: You're saying what you're saying, are you able to roll
it out? As in like will the rollout be such
a ship show that it'll be really embarrassing and all?
Fuck up? Yes?
Speaker 2: Are they so incompetent that's possible?
Speaker 3: So how scared are they about what's going to happen
to the existing euro and the existing financial system for
them to take that risk, right, Because it's not like a.
Speaker 2: Well scared enough to be threatening more Corussia right, you
see something.
Speaker 3: Whether the rollout becomes an absolute ship show doesn't matter.
If the regular euros and free fall does it, then
the ship show rollout will still be better. Exactly. So
if you notice, the person that's been flogging digital ID
is mister Tony Blair and the Tony Blair Institute. First
the digital ID was how they tackle COVID. We need
digital i D because we need vaccine passports. Well, then
COVID went away, and then you heard Tony Blair switch
to immigration. Right, we can stop illegal immigration with digital ID.
So if you notice, it doesn't really matter what the
problem is that he says he's trying to solve. What
seems to really matter is getting the government to adopt
digital ID, right, because it's apparently a magic solution to
every problem, which means it's a solution to no problems
that they're telling you about, but as a solution to
something else that they're scared to tell you about, because
if they weren't scared to tell you about it, they
would tell you what this solution, what the problem is
that this is actually a solution for, rather than changing
the problem every ten minutes. So who funds the Tony
Blair Institute. Ah, the usual subspecial suspects. Yes, that is correct. Anyways,
So you need why do you need central bank digital currency?
And why do you need digital I D. Why do
these things matter? Because currency controls are coming. Central bank
digital currency does a lot of things that allows them
to literally spin up money instantaneously, right. But this would
be a huge problem because the exchange rates of these
currencies would collapse. China figured out a way around that,
and they have Pete. I think you and I have
talked about this before, I think privately. For that they
have the onshore one and the offshore one. They have
a separate currency for people that are inside the country,
and it's illegal for you to have that other type
of currency that they use to transact with nations because
when you transact with another nation, you can't give them
you know, chuck e cheese tokens. They need, you know,
real currency. The digital ID is for the people, not
the institutions. Is is Barclay's going to get a digital ID?
No they're not, No, because they're an institution. Yeah, that's
just that's The digital idea is for you, the person.
The CBDC is for you the person, and that means
capital controls. So unless you get your money out of
these economic zones before this becomes policy and put into place,
you will never get it out. And that means you
get to ride the fun all the way down to
the bottom. Take a look at Chile. I think it
was Zimbabwe, you know, find our Germany, take your pick. So, yeah,
go to fucking Switzerland.
Speaker 2: Like there's a reason. There's a reason gold's coming to
the US. Right, that's not a fluke? And in size?
Speaker 3: How much size?
Speaker 2: Right? I'd have to go. Look, but like I was
saying earlier, enough to distorts.
Speaker 3: Basically of England has had to It's gold has been
its gold holdings have been exhausted, and right now it
is borrowing gold from other gold banks. Because there are
banks that only deal in gold in the UK, it
has to borrow from them. So if the central bank
of your country is out of gold and has to
borrow it, how is that possible? Does that mean that
the central bank has promised more gold than a passion?
Speaker 2: Yeah, isn't like one hundred to one or something. I've
heard rumors aboute hundred and one and.
Speaker 3: That's an open secret. So you imagine I mean that
lets you know that it's actually way worse. So anyways, yes,
like the scenario because again, like they use those paper
gold coupons the same way as you know the US
has used derivatives. Right, So the whole purpose of both
of these things is to lever up futures contracts to
suppress the price of commodities so you can buy them
cheaper than they're actually worth. So the same reason the
gold is leaving Ben is also the same reason why
your commodity supercycle is coming one and the same. All right,
So what not to invest in? Let's talk about that
for a little bit. What would you not invest in
ben that everyone else is investing in?
Speaker 2: I mean I kind of mentioned private equity, private credit?
Speaker 3: How would somebody How would somebody deal with that? As in,
like they're only looking at stocks things like that, They're
probably going to read and check up other places because
they're definitely not going to fucking make investment decisions on
what we say, So they're probably going to do a
lot of research afterwards. So how are they going to
know like what tickers and stuff, private credit and private
or P and PC is.
Speaker 2: Yeah, that's going to be your big name firms at
least on Wall Street from I think it's Apollo Aries.
KKR is one. I don't know the tickers exactly the
top of my head, but I'm just listening off the
biggest ones I can think of. But I think Blackrock
and is more asset management than private equity. Blackstone's another one.
As far as private credit, I think they're basically rolled
up into a lot of the same companies as far
as I know, Like all the big guys have private
equity and private credit and a whole bunch of other crap,
but those are like the public tickers. I think there's
like there's basically going to be problems with that whole
business model an idea with rates being where they are,
and it basically with the way things have seemingly frozen up.
Like the whole thing is they can't even send distributions
out to investors without basically telling them, hey, you have
to re up and invest in the next fund. Like
that's why I've heard is going on. It's like basically
you're either locked in or like you get extended, is
what I've been here.
Speaker 3: You know, Yeah, they're trying to extend and pretend is
the terminology which tells you something else is happening now,
let's talk Yeah, nothing good?
Speaker 2: Nothing good though?
Speaker 3: What about tech? What about the mag seven? What about nvideo?
Speaker 2: Oh? Fuck no, if you look at some of these industries,
I'll give a free book recommendation out for anyone that
wants to understand markets and the way these cycles typically
tend to work. It's called capital returns by Edward Chanceller,
I believe is his name. But if you look at
what happens when like all this money crowds into one
area of the market, whether it's big tech and our example, right,
it literally drives the returns down moving forward, and it
starves capital out of places where like that's where your
money should be going. And like that's what I'm talking
about with commodities and these other things. But when everyone
crowded into big tech, like by definition, right, even just
from a market dynamic perspective, there's fear and fewer buyers
at these higher prices. And you go look at like Nvidia, Microsoft, Apple,
like their valuations on basically any way you slice it,
it's really hard to see a way they go up
other than narratives and flows and passive distortions, which we've
been right talking about for a bit, right, So I'm
not saying, like, go out and sell all your positions
if you have any tech companies. But what I will
say is it's really hard to build a bowl case
save for Apple at let me pull it up. I
haven't even looked in long ass time. Apple's close to
thirty times earnings and it's close to a three trillion
market cap. Is it going to ten trillion? Are they
going to buy back twenty percent of stock over the
next five years? Right? Like what are you pricing in
really at some of these valuations, Like it could go
out for the next three months or six months or
twelve months, right, if the money keeps coming in and
you've got all these retirement plans that every two weeks
pile into the SMP and all these different things that
it's the cycle that reinforces itself and makes markets less
efficient really if you think about it. But like on
an actual business return perspective, right, Apple thirty times Arnie
is not a great idea Microsoft wherever it's at, Like,
it's the same basically across the board. I know some
people like Google because the evaluations relatively cheap, but I mean,
just know you're investing basically in the NSA CIA. Let
me pick your government agency alphabet soup agency at that point.
But I think as far as big tech and avoiding
that specifically, you're going to want to be looking in
other places where like maybe there are some technology companies
that are small caps and undercovered and you find something
where like, hey, this is a real business and it's
trading at like twelve or thirteen times earnings whatever it is,
but it's growing like top and bottom line, like revenue
and earnings like twenty five percent a year. Like there
are going to be real businesses in the technology sector.
But just crowding in with the herd into big tech
I think is a sucker's bet.
Speaker 1: So what are the sectors that I guess this is
where you have to be careful because you can start
making recommendations that people start jumping on. So going forward
and everything we're seeing with the with the Trump era
and everything that's happening, what are the sectors that you
know you think you both think we'll be making money
in the in the near future.
Speaker 2: As far as public markets, I think the best place
to look are going to be broadly commodities. Gold. I
think we talked about this a little bit, but there's
a lot of reason to believe that it's going to
four thousand and five thousand right over time, it's going higher,
as my opinion, and I think that's probably a pretty
durable trend there's been, right, we kind of talked about
the problem with is the run up it's had over
the last and really year and a half, but especially
at the start of this year. So it's in favor.
All the commodity guys are talking about it like they
love the gold mining stocks. They're talking about like, look
it out cheap. These things are, like I think you
probably get a chance. I'm not making specific recommendations, but
if you go look up the gold miners ETF which
is GDX, right, just the full basket of everything, the good,
the bad, the ugly, like the whole nine. Right. If
you go look up like that basket, what you're really
doing is you're basically making a long gold and short
energy short oil trade with some of these businesses because
of how big of an expense the energy input costs
are for all these businesses. So if gold's ripping like
and oil's flat like it is now, these things print money.
If oil's ripping and gold's flat. Like, that's bad news
for those businesses. If they're both going up. Gold's going faster. Right,
there's all these different inputs you can toggle, but if
you kind of like, I don't really find gold miner's
all that attractive either, because for the most part, they're
really crappy businesses, Like you really have to hit a
top tier mine and find one of those deposits or
one of those things that separates it to make the
miners really attractive. And that's most commodity businesses in the
first place. There's a lot of pitfalls in the commodity
sector in general with some of these businesses. But I
think there are a couple of mining sectors that are
pretty interesting. And it goes back a little bit to
energy but also to steal and we kind of talked
about the reindustrialization of the country and some of the
things that are going to be happening, where a lot
of people don't know this, but like seventy percent of
the world steel production relies on coal, and it's not
going to come from electric arc ferences, is going to
come from what's called metallurgical coal. And there are companies
out there that produce this stuff even here in the US,
and they're pretty cheap. A lot of them have very
good balance sheets, Like there are a couple that can
think of where I think one of them is basically
like pull it up just to make sure that yeah,
they effectively have no doubt. Right, So the stuff that
Stormy is talking about where like some of these companies
are going to be fine. And what's happening right now
in the whole coal sector is like twenty four and
twenty five has been rough, and so all these stocks
have been getting cheaper and cheaper and cheaper and just
taken out to the woodshed over the last year, but
really last couple of years, and so the last year
and a half, give or take. But when you look
at some of these things, when coal prices start moving,
especially if you think steel cycle and all these other
commodities are going to move to right, coal is a
very interesting way to play it, especially with some of
these the way some of these companies are valued. If
you want, you can just go look up what some
of these coal stocks did from twenty twenty to like
twenty twenty four. Like some of the numbers they put
up is like thousands of percent, So not a recommendation,
but like they got that hated and that cheap where
everyone thought they're going bankrupt. It was all over Sky's falling,
and then sure enough it wasn't. It's capital cycle. They're
all starved a capital commidity. Prices have to go up
and then they print money for however long it might be.
And so I think we're at or nearing the trough
in thermal coal, which is for electricity and metallurgical coal.
I think there are definitely companies in that area that
are worth a look. They're you're basical gonna end up
looking at Australian companies or US companies for the most part,
like you're not going to find I think there's like
a couple companies in Mongolia and other places, maybe in
h South America. But point is like for most of
the big names that like you'll find first, they're going
to be in the US and Australia, And depending on
where you look at Australia, you're gonna get posed on
their royalty regime. So I would just be aware that,
like there's other factors too. It's not just like go
buy coal stocks because like coals cheap, right there's different
nuances for each of them. But I think that's pretty
interesting and pretty hated, pretty out of favor, and all
the commodity guys like they're all busy talking about other things.
The one that I find interesting right now specifically is
in energy, but the whole energy sector in general, I
think is like we were talking about oil and talking
about what goes on with features and the number of
paper contracts that are floating around and up there if
I remember right I was reading a book or listening
to podcasts, that the paper contracts traded is depending on
the time, I think it's thirty to fifty times the
volume of what actually like the physical market trades, right,
So there's a whole bunch of extra basically people that
are short paper barrels versus like actual producers that are
hedging or whatever it may be. So I think when
you have what's going on in oil getting manipulated down
through narrative and paper markets whatnot and conveniently timed OPEC
announcements that where it's like Trump like definitely made a
deal with the Saudi's where on the tariff like April
second tariff day or whatever, it was like, oh, here's
our here's our list of tariffs and percentages on all
these different countries. And then same day OPEC was like, yep,
we're increasing supply faster and expected. So oil pukes like
fifteen bucks in like two weeks, like mission accomplished for
Trump admin. Which I think is actually a serious policy mistake,
but I'm not gonna get derailed on that. But as
soon as oil goes down sub sixty, what you basically
do to the energy sector here in the US is
you're going to see capex cuts in the Permian basin
in Texas because it's high cost, high decline rate. You're
not going to drill your best wells at sixty dollars
a barrel. And there's some talk that's a geological decline
where it's like Permian and US supply has peaked, it's
rolling over. The US is never going to produce as
much oil again as like thirteen point four million barrels
a day, which if you look at other shale basins,
whether it's North Dakota or other places in the US,
like they've already peaked, Like there's no no doubt if
you look at those production charts. So if the Permian's peaking,
and that's like six million barrels a day of production.
That is a very big problem for oil supply because
that's been effectively the entire world's growth for oil production
over the last fifteen years. So the problem is like,
they don't make any money at sixty, they really don't
make a whole lot at seventy, and they might be
able to raise production at eighty eighty five ninety, But
how much I have no idea, So I don't think
it's that much. I think there's maybe something to be
said for the geological argument that all the best stuff
is gone when you see I'll just I'll give you
an anecdote so you get an idea of what's going
on the Permian. When Pioneer Resources sold to Exxon in
twenty twenty three, I believe I remember reading a tweet,
and this was from like two thousand and eight, where
a couple guys like field hands, like guys working in
the oil sector, and they knew Sheffield, who's the CEO
of Pioneer. They basically said, okay, Permian and the shales
peaking within two years of that CEO selling, because Pioneer
was all Permian production, and so he sells in twenty
twenty three. It's twenty twenty five now, and he was
on CNBC recently talking about, Okay, we're going to be
out of tier one production or tier one acreage in
twenty eight and out of tier two by twenty thirty
two in the Permian. So I think there's somebody said,
for like, the Permian is not going to be the
best place to be if you're looking for energy companies
unless you are very excited about natural gas because those
those wells are getting gasser over time and some of
these different things that are basically have an impact. So
that's I think maybe U so somewhere to be cautious.
I would say, I don't know if you have any
thoughts on that specifically, Stormy.
Speaker 3: Not really on on energy, but I'm gonna have to
bow out because I I've well, I've kind of overshot
actually my hard stop by a little bit.
Speaker 1: But yeah, no worries, Oh yeah, I know you have
another you have another commitment, so.
Speaker 3: I have to bounce. But lastly, if I have to
leave anybody with anything, I would say get out. I
would put very little in the mag seven as little
as possible. I mean, I've been short the mag particularly
in video, and really the whole AI thing. I think AI,
the AI hype is bullshit. And not that it's bullshit.
AI you know, exists whatever, but as far as it
creating economic value, it doesn't seem to be materializing to
any of the companies making trillions of dollars in fucking Capex, sorry,
investing trillions of dollars in data centers for AI hard
or for you know, Nvidia GPUs to be everywhere. Yeah,
but if anybody that knows about AI is all the
iteration of AI gets smaller and lighter and smaller and
lighter and smaller and lighter. The different big difference between
chat GPT and what you might call it the deep
seek is that deep seek required I think, less than
half of the amount of GPU usage. All right, So
if AI is getting smaller and smaller, then about the
worst thing you could do as a company is invest
hundreds of billions of dollars in data centers full of
GPUs for your AI future, because any AI future would
involve way less, right, So the AI of the future
future will be small enough to run on your phone locally.
Speaker 2: Have you, I know, you have to go, but I'll
ask you a quick question. Have you heard of the
it's not floating point multiple I can't remember what it
is called off to look it up maybe after and
send it to you. But basically, there are chips out
there that can run these algorithms, and they're like ninety
five percent more efficient as far as energy and none
of the well.
Speaker 3: That may or may not be possible. I have I
have some investments in chip cooling in particular, but I
haven't heard of that particular company. Now, generally, when I
hear figures that like that, I become a little skeptical,
and I would have to I would then go, like
tap people in my network that you know, know about
chip manufacturing things like that. So when I hear claims
like that, I talk to people. I don't when you
hear stuff like that, if you sector exactly like, I
won't reading after When I see something like that that
looks exciting and looks a little too good to be true,
but you know, very very good if true, that's when
I stop reading and I start asking, Yeah, I think.
Speaker 2: They're called elmol is versus floating point multiplication. It's like
a difference.
Speaker 3: So what I would structures I would invest like I
would if I could give people an idea what to do,
just broadly, I would probably have no more than twenty percent,
preferably like ten percent of your money in gold and
an equal amount in bitcoin. It just bitcoin, no fucking
all coins or other dumb stuff.
Speaker 2: Now I don't like.
Speaker 3: So that's twenty percent of your money or thirty depending
on how much you take my advice or Yeah. Anyways,
So then we're going to take forty percent of your
money and we're going to keep it on the side
in cash. I'll explain why you want to do that
in second. Right. So if I got forty percent and
thirty percent, that means I should only be investing in stocks, bonds, whatever, right,
liquid tradable securities. No more than thirty maximum forty percent, right,
So I want to have as as close to forty
or fifty percent of my money free and ready to
go in liquid cash or treasury. I mean when I
say liquid cash, I mean treasuries, right, because this way
you're actually you're just pacing inflation. But if you stick
it in literally cashing your mattress, right, you're getting eaten
alive because the inflation rate in reality Boys and Girls
is like ten to fifteen percent, Right, It's not five
percent or whatever fucking dumb number the Fed is trying
to get you to believe. Yeah, now, the real inflation
number is probably closer to ten. Right, So treasuries at
least forty percent of your money because you're going to
need that because you're going to see opportunities. Right, So
all of the investment ideas I could give you, Ben
can give you, they're not going to be as good
as seeing. Like, let's say, if interest rates continue to
climb and no one can afford to buy a new house, right,
there are people that still need to sell their house.
So if nobody wants to sell their house because they
can't go buy in a new house, and nobody wants
to go buy eventually, that is that's unsustainable, right, So
the people prices will get checked off. So what's going
to happen is the housing demand is going to remain consistent, right,
but buyers won't be spending more money, and sellers can
only hold the line for so long. Right. Yeah, I
don't want to sell because I can't sell up. Maybe
I could sell across. But one thing that we haven't
talked about is a lot of people are going to
get laid off, and they've already started to get laid off.
Layoffs have been massive, all right. A lot of these companies,
like the tech the five tech companies were talking about
the Fang stocks, right, cumulatively, they've laid off almost half
a million people in the last two years. That's a lot.
That's a lot of three four hundred, five hundred thousand
dollars a year. Jobs don't exist anymore. There's a lot
of mortgage payments. I can't afford to get paid anymore.
And that's just in five stocks. Right. There's going to
be a lot of people that are going to lose
their jobs during this chaos in melee. And that's going
to be a lot of people that need to sell
their homes regardless, and they can't wait, right, So what's
going to happen if nothing else happens? If nothing else,
we are going to see rapid deflation in asset price
is right, and that'll actually mute a lot of the
commodity in the growth and commodities will be masked, right,
It'll be disguised for a little bit by the deflation
and asset prices written large right, So I don't know
if anybody is in the market for a boat or
a plane. I have been looking and to say, well,
let's just compared to like twenty twenty one or twenty
twenty two, we're like fifty percent less sixty percent. So
in the really high end stuff, the big expensive stuff,
things are already half as expensive. Right, things have dropped
fifty percent price, forty percent price in anything used. Obviously,
if you want to go buy a new bucking plane,
that's your goddamn business. Right, then it's going to start
moving to homes, and you're already starting to see it, right,
Because anybody that has a million, two million, three million
dollars or ten million dollars fifteen million dollars for a
house has the ability to wait, right, they don't have
to buy something. They're not in a position like somebody
that's buying a half a million dollar house or a
four hundred thousand dollars house. That person is buying because
they have to buy a house, right because if their
family is growing, because they have to move, right because
renting is no longer an option financially, it's just not feasible. Right,
that person has to buy A person with a five
million dollar house, ten million dollar house, even a three
million dollar house, two million dollar house, depending on the area.
The people that buy that house have money already they
can afford to wait. So that means if anything looks
dicey at all, all any uncertainty, they're just going to
go ahead and wait. And that means those were the
people that were the biggest buyers, right. The big money
stuff dries up fast, right, because when rich people buy things,
they buy a lot, and they'll all buy the very
trend oriented and very trend sensitive. Right. So twenty twenty
to twenty twenty two, twenty twenty three, that was when
they were all buying and everyone, every rich guy you know,
bought a new thing where there's a new house, a
new boat, things like that. But when things get uncertain
and sketchy, they.
Speaker 2: Stop to keep over with the Joneses.
Speaker 3: But the market is still putting homes like that on
the market, still building homes for that, you know, then
the five ten million dollar mark, but all of a sudden,
overnight it stops. So first you're going to see the
falling and I mean falling of prices in those categories.
I've been looking at houses recently. I won't say where,
but I mean, in the last three months, I'm seeing
price cuts of two hundred and fifty thousand, three hundred thousand,
some of them half a million.
Speaker 2: Dollar price cuts, big chunks.
Speaker 3: Right, So if you're dropping your price half a million
dollars and you've only had it on the market for
two months, what does that tell me? That tells me
I'm probably the only fucking person looking at it. Right,
So it starts at the top and then it works
its way down, and market's always overcorrect. Right. If housing
prices need to come down thirty percent or forty percent
to reach an equilibrium, that means they're going to go
down sixty plus percent and then they're going to slowly
work their way back up twenty more percent to where
they should have been. Right. So, if a market needs
to be at fifty and it's currently at one hundred,
it's going to go down to thirty overshoot and then
come back up. And that overshoot is why you need
to have forty percent of your money in cash, right,
Because the good deal, the fucking real game changer deal,
the real game changing investment doesn't exist yet. You can't
see it yet. But it damn sure is there. If
you're patient and you're observant, and you have money locked
and loaded ready to go, that you can move very quickly, right,
because other people won't have cash money ready to go
and can move quickly. So that forty percent that you
have in treasuries, it isn't uninvested. It's waiting for the
right investment, and it will generate returns far more than
any of the other shit you put your money in.
So forty percent off to the side, twenty percent, fifteen
percent right, gold and then twenty eight to fifteen percent
and bitcoin. Right, the stuff that you should have in
the stock market should be like thirty percent of your
ink of your net worth, maximum forty percent because that's
where we're going to see the most volatility. Gold, bitcoin,
it's not moving right. In fact, volatility and uncertainty increases
the price of both of those, don't they right, So
you want to be hedged against that volatility. So that's
your gold and that's your bitcoin. So at no point
in time any of the conversations that Pete and I
and Ben have had, do you need to put anything
even remotely approaching half of your money into anything? And
on that. I'll leave you guys until next time. Pete.
Speaker 2: Yeah, good, good chat with you guys.
Speaker 3: Don't Ben's got to show Sable offshore.
Speaker 2: Yeah No, I was just gonna say, I'm like, no,
leave that, leave that for later. But I was gonna say, yeah,
if it doesn't work out, looking forward to uh having.
Speaker 3: Happy to do it, man, happy to do it. So Pete,
thank you for your hospitality. Ben, thank you for joining me.
Speaker 2: All right, Yeah, of course one.
Speaker 1: Ben, I'm gonna do you have anything you want to
wrap with we can. Let let's leave this open to
do another one.
Speaker 2: Yeah.
Speaker 1: Soon, we'll talk about some different things, I mean, because
really only really only hit the the large overview of
everything today.
Speaker 2: So I think when I was talking about energy there,
I think the last that I'll add to that is
when you really like dumb it down to base level,
Like energy is the economy. All this stuff that oil
goes into. It's not just going in people's gas tanks, right,
it's in plastics and close and shoot. Like the amount
of different products that oil and petroleum products end up
in I think is something most people just aren't aware of.
And if you look at what's uh I think is
going to be a significant imbalance in supplying demand for oil,
for natural gas, for the energy commodities, for coal, for uranium,
for these things that like really drive what an economy
can actually produce, especially if we are going to reindustrialize
and do all these things that we talked about. I
think energy is going to be if you're looking at
equities specifically, I think energy is going to be one
of the sectors to be in commodities broadly. I think
is my fair pond deficient? I guess is the way
I'll put it. And if you guys like follow my
substack or listen to my podcast, like I haven't made
it any secret, like what my favorite pick is right now,
But if you guys are interested enough to go and
look at my substack or listen to podcasts like I
talk about investment ideas, what's going with oil, energy, all
these different topics, and feel free to reach out if
you have any questions, Like I don't want people to
just see one name and do zero research and buy
it and then stock goes down the next day and
they're like, look, I have no way to tell you
what stocks are going to do short term, whether it's
stuff and energy, stuff, in SMP, like, I have no idea.
I like to think that over the next twelve to
eighteen months, some of these like trends will become apparent
with different commodities, different parts of the market, and like,
I'm happy to talk with anybody about out different ideas
and different trends of the market, different commodities, different individual stocks,
and like, feel free to reach out either via Twitter.
You can just look up contring corner with two k's.
I was on Matt Matt Erickson's podcast, I think six
months ago or something, and he was like, you're one
k short, but the if you look up contraying corner,
either on any of your podcast apps or substack or Twitter,
like you'll find me. Just look for that with two
k's and you'll be able to probably pick my brain
on what's my favorite idea. It's not a it's not
exactly a mystery, but I know we don't want, don't
need to run more than a couple hours, so.
Speaker 1: Well, yeah, I was just gonna say, what's the name
of the substack?
Speaker 2: The substack is also conturing corner, So if you look
up controlling with a K, it'll be one of the
first search results on Twitter, on Google or on basically
in the podcast apps. So excellent.
Speaker 1: I appreciate it.
Speaker 2: Ben. We'll do it again real soon. Thank you. Yeah,
thanks for having me.
Speaker 3: M