You've had a dynamic where money has become freer than free.
You talk about a Fed just gone nuts.
All the central banks going nuts.
So it's all acting like safe haven.
I believe that in a world where central bankers are tripping over themselves to devalue their currency,
Bitcoin wins.
In the world of fiat currencies, Bitcoin is the victor.
I mean, that's part of the bull case for Bitcoin.
If you're not paying attention, you probably should be.
Mel, I'm not going to lie.
I've been pretty disconnected for the last three weeks.
So I'm very excited we're having this conversation because I have a feeling it's going to help
me catapult back into the present day, get caught up with everything that's been going
on.
We had the conference in Vegas a few weeks ago now at this point.
I had a cross-country move between now and then. I had a wedding in Chicago over the weekend,
and I've been sort of out of the loop with what's going on, and I need an update. What are you
seeing out there? No, that's perfect, and I'm getting ready to head out for a few days myself
on Thursday to the Blue Ridge Mountains here in North Carolina. I haven't been there since
the hurricane went through. So interested to see how my old spots are doing. But it's always good
to get away. So happy to bring you up to speed. You know, there's a lot going on. And at the same
time, there's not right that the steady march higher in Bitcoin and equities. Gold has been on,
you know, just a consolidation phase, basically, since it kind of blew up to thirty five hundred.
But given how fast and how strong that move was, it actually is just a sign of strength to me that it's still, you know, holding well above 3000.
I think the days of 2000 something gold are probably over.
I think I think if it ever gets there into five figures again, it's not going to be for long with Bitcoin.
I think this this is a big move.
You know, people are going to look back at 110,000 Bitcoin, just like they look back at 50,000 Bitcoin or 30,000 Bitcoin and say, man, I should have been buying there.
You know, we've broken over the high set, you know, a few months ago.
I think that's now clearly, you know, a floor, you know, support.
And, you know, I think the next upside target for me has always been that 150 range, which I think, you know, I've been thinking 120 this month.
150 is my call by the end of the year.
But really, that's like a base case based on technical analysis I do that that is is a point where I reassess.
And when I reassess it, I have a feeling like I'm going to pretty quickly come out with the target around the one ninety one ninety five as like a next upside target.
And, you know, we'll see when we get there. But so just, you know, I think the best thing you can do, actually, for these markets is turn off your news, because it's like last night I'm flipping between the channels and it's, you know, kerfuffles with Elon and Trump.
It's riots and fires and protests in L.A. It's, you know, U.S. behind the eight ball with rare earths versus China.
You know, terrorists are going to start rolling into the inflation numbers.
Job market only created one hundred and thirty some thousand.
It's weak, which I think is B.S. It's actually was a super strong report.
There's been almost no government job creation since Trump took office.
So you essentially have to look and say, well, if every month under Biden, there was like 40,000 government jobs and now that's not there.
I mean, you take the 139 or whatever it was last week, you add 40, you're up to about 180, you know, which is really what the private sector is creating.
And it's doing that at a time where you have this demographic rollover, where you have literally when you look at the unemployment reports, which they break down, you know, foreign born, native born.
you know, you have native born, you know, people in the workforce declining. And so if you're
creating jobs, I mean, that's why you're seeing, you know, the unemployment rate still 4.2%. So
we've got a super strong job market. We've got a consumer that is as unlevered as it has been in
the last 20 years. You know, you can't look at like credit card delinquencies or something like
that. You have to look at, you know, net worth, you know, yes, is this skewed towards the wealthier,
you know, 50% of America? Sure. I mean, the bottom 50% isn't exactly rolling in the dough,
but the top 20% certainly is, especially when you factor in over $12 trillion of tappable
home equity, which I think is just now beginning to be tapped and will begin getting tapped even
more so once the Fed funds rate goes down. And I think it will exactly how much and how quickly
we can get into that, too. But I mean, basically, I guess where I'm going with all of this is the
doom and gloom you hear about, whether you're scrolling through Twitter or turning on the news
channels is masking what is an incredibly strong economy. We've got an AI like super cycle boom
going on. We've got the blockchain and all of that brings all of what that brings to financial
services. You know, counties or states in New Jersey now putting real estate deeds on the
blockchain, DeFi finally starting to happen in the real world, stablecoin bill, Bitcoin being part of
the institutional investment mindset, people understanding it more. I mean, it just all speaks
to extreme bullishness. And yet when you look at some of the surveys out there, they're still net
bearish. There's different sentiment gauges. We were really, really bearish. We're still net
bearish. We're almost back to that median line, you know, overall. And so we've got just people
that are just doubters, haters. And, you know, which I think is great because it just means,
you know, we've got a lot more to go. Yeah. I'm very happy that you confirmed that
being disconnected is probably the right move. It's felt good not being in the day to day.
Actually, the only day that I was really plugged in, I was on a cross country flight.
And that was when Elon was having his meltdown on X.
But that seems to have been brushed under the rug pretty quickly.
They were like, okay, damage control.
It seems like they want to forget that that happened and pretend like it never did.
But I think diving into your mention this before we hit record, how do rates play into this?
Because looking at the 10-year at 4.47, 30-year at 4.94 up over the last month, but down from their highs intramonth.
And I think a lot of the focus of the doomers, if you will, is the elevated 10-year and 30-year and all the debt that needs to be rolled over.
How do you see that factoring into this outlook?
Yeah.
I mean, I call it the rates boogeyman.
And I think that, you know, you got to break it down in different ways.
I like to actually look at the impact of rates on the three key components of the economy,
which are the government, households and the private commercial industrial center.
So what's really going on, in my opinion, is, you know, when you're looking at something
like a 10 year, what that rate is telling you, it's factoring some sort of expectation
around nominal gross domestic product growth.
And that can be a factor of inflation.
It can be a factor of real growth.
But it's essentially telling you like, you know,
call four and a half percent makes sense as far as nominal GDP over the coming 10 years.
And I think that's probably low.
And I think the inflation component that is being baked into that is probably low.
And so I think ultimately rates need to go higher. A lot of people have said that's going to be a problem. They're looking back. They're looking at 2023 when the 10 year hit 5 percent and that caused a lot of problems in the financial markets.
But I believe that in many ways, equities in particular, Bitcoin as well, of course, they've become immune in a certain sense to a 5% 10 year where it's not going to be as much of a headwind as people think that it is.
And here's why. Like back in 2023, number one, the dollar was much stronger and that has a big impact on things.
Number two is the speed in which it got there. So we were at one and a half, 2% tenure,
not long before we went to five. And that was so quick and caught so many banks off guard. It caught
investors off guard that it was a little bit of a shock. And even back then, you would hear people
say, well, it's not just what the rate we get to, it's how fast we get there. But you're not hearing
that as much anymore. When I listen to the pundits and the commentators, a lot of them are still
maintaining something magical about this 5% level on a 10 year. And I don't necessarily think we're
going there anytime soon. My case that I'm trying to make is that if we do, the markets will absorb
it because what it's telling you is that markets baking in stronger growth expectations going
forward. And this is going to be very, very positive for earnings. And it's also going to
be very positive for Bitcoin because part of that expectation is going to be an inflationary
component of growth. And I think this big, beautiful bill, which has a lot of spending in it,
which this economy is completely addicted to, is going to fuel that. What I don't think it's
going to do is cause some sort of inflationary death spiral bond vigilante Liz Trust moment
blow up.
I think what it's going to do is it's going to just allow for interest rates to kind of
reflect on the longer end these inflationary and real growth expectations, which are very
strong.
And then on the shorter end, I think what we're seeing, at least, you know, we'll see.
We have an inflation report coming up this week, a CPI.
I think it's going to be relatively benign.
And I think as long as oil prices, which have ticked up, I mean, they got as low as $55
a barrel last month.
Now they're up about 10 bucks from there.
You know, but as long as I mean, when you think about oil, I mean, just think about
how cheap that is, $65 a barrel when you adjust that for inflation.
I mean, we were at one hundred and forty seven dollars a barrel in 2008 when the GFC happened.
You know, if you inflation adjust that, I don't know, it's got to be well over two hundred dollars a barrel.
So in inflation adjusted terms, we're like twenty five percent of the all time high price in oil.
So as long as you've got this cheap energy and this is, you know, Bitcoin is tied to energy.
Energy is the key where I do see energy constraints coming in is with AI.
I think natural gas is going to play a role in that.
So natural gas is probably going to go up. But, you know, we've got we've just got this big seismic change like on the agricultural revolution, industrial revolution type change that's starting to unfold.
And it's going to do things that we can't even imagine yet.
So people are worried about inflation from all this government spending and it is inflationary.
But here's the thing. There's going to be a lot of deflationary forces that this AI brings. Productivity increases. I've heard people talking about we might need to go to a three or four day work week at some point in the future because there's just going to be so much stuff that's able to get done with the help or completely by AI.
And I'm not talking about next year, but in the coming, you know, decades.
And once some of those expectations start getting, you know, recognized, then you are going to see those impact, you know, things like a 30 year bond rate, because people are going to say, whoa, whoa, whoa, you know, and maybe this big inflationary bubble from all this fiscal spending isn't actually going to happen.
And maybe we actually need this fiscal spending to prevent a deflationary collapse.
And once you start getting into that dynamic, I mean, you can just see the light bulbs going
off in the head of equity investors where they're like, oh, my God, the government's
got a green light to run seven, eight percent deficits from here to the moon because of
the deflationary aspects that AI is bringing to the economy.
And what's that going to do to the profit margins when Microsoft and Meta are laying
off employees and their their earnings are still going up because they've got I mean I mean it's
just this to me it's like it makes me giddy and then you you I still see people saying well you
know what we've come back to a level but I just don't see what takes us higher uh you know like
like we had a v-shape because you know these tariffs were overblown and he backed away and
It's the taco trade.
But now we're at fair values and we're at 22 PEs and markets expensive.
22 P is going to look cheap.
110 Bitcoin is going to look cheap.
All this stuff is going to look cheap once people start understanding what this economy
is going to be like in the 2030s and stop thinking about it like it's the 1930s.
Sup freaks.
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It's a beautiful thing.
The AI stuff is fascinating.
I mean we been implementing it here at TFTC on the backend And so what would have probably required me two years ago to hire at least one to two people to build these backend processes I just put it on my ops slash growth
guy and he's handled it himself. And we've created incredible efficiencies that make our jobs
significantly easier and then allow us to go do more. And then to your point about
earnings and margins increasing. I'm not sure if you've been following Jordy Vester,
but I caught one of his shows last week talking about exactly this, AI's impact. And I think he
had a similar idea with rates is like rates can stay elevated because all these companies are
just going to be implementing AI. And despite the fact that they're cutting workforce, their profit
margins are going to either stay stable or potentially increase. And so they can stomach
the higher rates because of the productivity gains they're getting from ai and so on that topic like
how how far into the transition of ai implementation into the economy do you think we are yeah and and
i do follow some of geordie's stuff and he's he's great if people don't um know who he is or or
haven't seen him you know he he does some of his own stuff and he does some stuff with pomp and
stuff and and you know he's he's really more into the ai details and understanding of it than i am
it's something i bake into my thinking um and then i add around it all the other stuff which
i would say my specialty is really kind of a fiscal understanding um understanding why i think
um you know i i'm excited for the monthly treasury statement to come out um i think it comes out
later this week, I believe it's the eighth business day of the month, it comes out where
we can see what the interest expense was last month. Because one thing I noticed in April
was that year over year, interest expense was down for the United States. And a lot of people
are going to scratch their heads and say, how in the heck did the US pay less in interest expense
in April 2025 than they did in 2024 when I tell them that treasuries went from 34 plus trillion
to 36 plus trillion. So treasuries went up about $1.7 trillion. Interest expense went down.
And that was because last year we were just beginning for the market to start to price in
rate cuts, right? Because that first 50 basis points came in September. And so you started
seeing rates on the one year or the two year coming in a little bit. And that trend is going
to continue. And so this is one of the points I make in a piece, an article that I have on X called
the 10 year ain't what it used to be, where I argue that the government is going to be able to
actually increase its debt outstanding and maintain its interest expense at around what it is
currently, which is 3% of GDP, which I went back to say, when was the last time we were paying
3% of GDP and interest expense? And it was a 10-year period from roughly 1985 to 1996.
It was actually an 11-year period where for the entire 11 years, interest expense was around 3%
of GDP, which is exactly what it is right now. And I looked at what did the stock market do?
And it went up over 350 percent. The S&P went from like 170 to 750. And if the S&P were to have a similar move during this period of time, then we're talking about a 20,000 plus S&P, which I think is completely doable over that time frame, which is a 10 year time frame.
And so, you know, why do I why would I think, you know, high interest expense is a good thing?
And it's like you got to realize what is interest expense? It's fiscal stimulus. It's a stimulus payment into the government.
It's there's no difference between sending out covid checks and sending out four and a half percent on a three month bill to a money market account that goes into a baby boomers wallet that they then use to take a ski vacation in Utah.
It's the exact same transition mechanism.
It's the same process.
And so we actually have with a trillion plus interest expense, we have now baked into our
budget a trillion dollar covid stimmy every year, you know, from in perpetuity until this
interest expense goes down, which I don't think is going to happen anytime soon.
And so, you know, this is another one of my kind of contrarian things.
I also I started taking a look at, you know, debt outstanding, who owns it? And, you know, the federal or the foreigners currently own about 25 percent of the outstanding debt.
So that means of that, let's just call it trillion. It's going to be more than that. But of that trillion in interest expense, 750 billion of it is getting paid into the U.S. economy.
The more that foreign central banks de-dollarize, meaning the less they want to hold of treasuries, what that means is that even though the treasury supply is going to be increasing, it's going to be held in the United States.
It's going to be held on the balance sheets of banks.
It's going to be bought by baby boomers.
It's going to be in money market funds and stable coins.
And what that's going to do is that's going to recycle that interest expense that I call interest stimulus.
it's going to recycle this interest stimulus into the economy on a continual basis.
And so we've now gotten ourself into a situation where we essentially have a 3% of GDP
stimulus check on autopilot.
We've got, you know, government spending as far as like employees and things, you know,
relatively flat.
But when you look at, you know, the entitlements like that's, you know, there's no stopping
that train, as Lynn Alden likes to say, like that this is this is just going to continue.
So what we have to do is we have to figure out how do we do that without interest expense going
to six or seven percent or getting out of control. And I think ultimately the way you do that is you
you start packing more bonds onto the balance sheet of the Federal Reserve.
I think they have capacity that's, you know, money printing more or less. And that's, you know,
music to the ears of Bitcoin and gold investors. Like that's, you know, that's what, you know,
people are just going to see that writing on the wall eventually. And it's going to go there. And
I actually think it can go there without stoking, you know, 9% inflation. I think we got that high
inflation partly because of the money printing during COVID. But also there was a lot of supply
chain disruptions there was a lot of weird things going in the on in the economy with people moving
because of remote work there was kind of pent-up demand for travel and experiences once the lockups
were lifted and so we had a lot of like stuff and it was also a ton of stimulus very quickly
um that's not what i'm talking about i'm talking about like a drip drip drip of significant
stimulus, not like $5 trillion in one year. So I think this is all going to keep continuing
stoking this and that the fear is going to be the bond vigilantes and this is going to collapse.
And so this is the last thing I'll say on these rates is what they're going to do is they're just
going to continue this policy of issuing a lot of short-end debt. Once either Powell realizes
it's that inflation because of these low oil prices that I've mentioned is relatively contained.
I don't know what the inflation report this week is going to read, but I can tell you
I'm pretty confident of this. If it is hot, which it probably isn't, it's going to be certain line
items in the consumer price index. And that's what it is. It's not an inflation report. I shouldn't
call it that because it doesn't measure monetary inflation and it measures changes in the price
level on a specific basket of goods. Well, sure, if 90 percent of toys are made in China and China's
got a 35 percent tariff or whatever it is, you know, the toy line item is going to go up. OK,
that's not inflation. That's a that's a one time change in the price level. So it's either going
to be cooler than expected because the underlying monetary inflation isn't really there. Or if it's
hotter than expected, it's going to be because of some of these one off type deals with tariffs.
And the overall trajectory, Japan just had their producer price index come out, hit negative 3.5%, like deflation.
So people really don't understand the amount of deflationary impulses that are in this economy and why we're going to be able to run these massive deficits and debts for a long time.
This is not the 1970s where we were beholden to the oil producers in the Middle East.
The U.S. is the largest producer of oil in the world.
We're a net exporter.
Prices at this level are not going to produce a lot of shale production, but if they go up,
they will start to produce shale production.
And so there's a little bit of a cap on it.
And the other really, really big difference between now and the 1970s is the makeup of
the labor market. If you look at the period from like, let's say 1970 to 1980, what was happening?
Baby boomers were turning 15 to 25 years old. Let's say that the people born between 1945 and
1955. In 1970, those people were between 15 and 25 entering the labor market. So throughout the
entire decade of the 70s, you have tens upon millions of baby boomers entering the labor
market. You now have the reverse. Excuse me. You've got tens of millions of baby boomers
leaving the labor market. And so what that's going to do is it's going to allow for all of
these crazy things that economists aren't used to seeing happen, happen. It's going to allow for
massive deficits without massive inflation. It's going to allow for the labor market to grow at
a hundred thousand, you know, jobs a month and the unemployment rate stays low. It's,
it's so these are things that people just aren't used to modeling. They're not used to seeing it
and they haven't really understood it. And so I think AI is a component of it. Like you said,
you know, I think Jordi does great work on that and you mentioned it helping your business. And
so I think that, that was your original question, but that that's going to just come into these
markets. And I think in a way, what might constrain it and this constraint might be a good thing is
the energy consumption that's necessary for compute, because it's going to take time to get
the small modular nuclear reactors going, figure out, you know, natural gas, new plants.
But we are going to see that over time. And so these are like the big, broad themes I see
happening. Now, when you pull back and you say, well, what's going to happen to Bitcoin or equities
in the next six months between now and the end of the year.
I think the march is higher, as I've said.
But I do think there can easily be these news stories that we're probably all better off
ignoring, whether it's ICE raids or maybe Trump needs to tamp down the screws in a tariff
negotiation.
And he announces something that if it actually gets enacted, it would be disastrous.
But at the end of the day, he doesn't actually enact it.
You know, all of these things I think could easily cause at least one, possibly two, five to 10% corrections in the next six months.
But I think just like this big correction we had in the first half of the year was like a V.
I think if we get a five or 10% scare, whether it's because of the rates, you know, like let's say rates really spike, that might cause a five or 10% sell off.
Then the market starts to get used to it, understand these dynamics that I'm talking about.
And then even if rates don't retreat, you know, the equity market starts to march higher.
Bitcoin goes higher.
Yeah, this is very, very contrarian right now because the I mean, not Bitcoin and equity is marching higher, but this whole idea that it's OK.
And I think the demographic part of the conversation is very important to understand that this is not the 1970s anymore.
And the economy is much different in terms of Trump, his administration, their policies.
Obviously, it's been a bit chaotic, but I think everything you said starting at the end of the last year and our multiple conversations throughout the beginning of this year seems to be coming true.
The salsa and sour cream.
Yeah. And I mean, I even said, I said, look, you know, terrorists are going to. And I even mentioned like ice causing maybe some problems. But you'll notice like the markets are shrugging off these these protests slash riots in L.A.
I had suspected that there'd be an ICE raid gone gone bad where maybe like an abuela got killed accidentally.
You know, they go into arrest some bad hombres and somebody pulls out a gun and, you know, ICE returns fire and an innocent gets killed.
And, you know, God forbid that happens.
I'm still worried about something like that happening that then sets off, you know, another summer like we had in 2020.
So that's a total potential flare up issue. But to me, that's like a 5% to 10% V correction move type of an event because at the end of the day, it's like demographics are destiny. And what's happening demographically in the United States, I don't think it can be underestimated.
underestimated. I think I think when you really understand what's happening demographically,
you almost come to the conclusion that the right course of action is to lower Fed funds and run
high fiscal deficits. Like everybody's out there saying this, you know, Elon, U.S. is going to go
bankrupt. I mean, it's bullshit. I mean, the U.S. cannot go bankrupt. I mean, like we have a printing
press, you know, you know, he'll say things like, you know, if I ran, you know, you got to run the
government like a household or like a company. OK, let me I would pose this question to Elon.
What if Tesla had a U.S. dollar printing machine at its, you know, gigafactory somewhere and it
could produce as many dollars as it wanted? What would he do? I can tell you what he would do.
He would start expanding, which is what the government does, into all areas of the economy.
And that needs to be guarded against because, you know, free markets do a better job than government.
Governments, you know, waste money.
That's why I think tax cuts are a good thing.
But what we doing with interest expense is we providing stimulus into the private sector for the private sector to then allocate that trillion dollars in interest expense in the most efficient way that the private sector sees fit So we essentially juicing the private sector balance sheet
Then, you know, the one thing we are doing is we're paying, you know, the health care costs.
And the one part of the market all year that I've been bearish on has been like health care and pharma.
Because I do think that when you look at where the government spending has gone haywire and where we're not as a society getting a great return is in in the health care spending.
And that's not that I mean, it's not important to keep people healthy.
It's that, you know, if we've got the government sending out twenty thousand dollar checks to Pfizer for some drug that, you know, costs them fifty dollars to produce like, you know, and they say, well, we need to charge this because we're subsidizing, you know, the drug production around the world.
We're subsidizing drug research for the world. You know, like these types of things are probably unsustainable in the long run.
And so I'm not someone who's been trying to buy a dip on UnitedHealth.
That's for sure.
You know, I don't know what's going to happen with that stock, but I wouldn't touch that
with a 10 foot pole because I don't like that sector.
There's too many great things to invest in.
Sure, it could bounce back.
But I just think there's too many opportunities out there to waste time on trying to pick
a bottom in UnitedHealth or something like that.
So I do think there's things in the economy that are going to change and there's going
to be winners and there's going to be losers and there's going to be corrections and there's
going to be volatility. But I think the path higher is the four key assets that I think about,
which are, you know, Bitcoin, gold, stocks and real estate are all going to do well.
And the dollar and bonds, you know, are not. And it's not any more complicated than that. And it's
just a matter of the demographics, the trajectory of economy, AI, government balance sheet,
fiscal stimulus. And all of this is going to start to produce things that just don't like these MAGA
accounts, like kids getting $1,000. The stock market now plays a completely different role in
the economy than it did in the 1930s. It can no longer be allowed to have a depression type
behavior where it goes down 80% and stays down for 20 years. If that happened, you think these
riots in LA are bad. I mean, it would be out of control because of how much the stock market
supports, not just in, you know, people taking out wealth and then spending it into the economy,
but also tax receipts. And so we've got this, you know, really woven together economy in such a way
that, you know, it's going to react and behave differently than it did in, say, the early parts
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You said one thing earlier that is just interested for you to expand on, which is the inability of the energy infrastructure to expand at the pace that AI is demanding right now could actually be a good thing.
Do you think that's for social reasons?
People have time to adjust to the changes that are happening.
Yeah, exactly.
Because, you know, Luke Romans talked about this where, you know, like a productivity miracle could help things out, but it has to happen at just the right pace.
And I think that that makes sense.
It's like if if all of a sudden you got artificial general intelligence and it was able to essentially eliminate, you know, in the matter of a 24 month period, 50 percent of the white collar jobs.
Right. I mean, like but but you know what would happen?
I mean, that would be deflationary. And then you get into these Orwellian situations, right, where you start saying, well, we don't need you to work, but because of these deflationary aspects, we can print money and now we're going to start universal basic income.
You know, we start getting into this, you know, whole WEF, you're going to own nothing, be happy type thing. And I think that's not what we want. What we want is for AI to come in at a pace that allows for maybe a reduction in the work week, maybe a reduction in the day's work, maybe people work four days, 35 hour weeks, you know, who knows what what happens.
Um, but where, you know, the benefits as they come in, there's also going to be this need
for all this other stuff that, you know, physically has to happen that I think we're still a long
ways away from robots being able to build bridges or, you know, like, like, it's just not going to
make sense to have a robot, you know, um, you know, I don't know, doing a basic thing that you
could pay somebody, you know, 25 hours, $25 an hour to do. And so there's going to be,
there's going to be, at least in the beginning, right? Because these things are going to be so
expensive. It needs to be very high value work. Once, once it gets nailed out and eventually like
you're, you're rolling humanoid robots off the line for, you know, $5,000 instead of 500,000 or
whatever these prototypes are costing, sure, then you can start having the robots mow the grass or
whatever. But so we do have in this country a huge need for infrastructure, you know, whether it's,
you know, potholes in the street, bridges collapsing, airports that need refurbishing.
um we need homes built uh you know we we we have all these things that
you know still need people you know moving the physical objects around to do it and i think
eventually the the humanoid robots get there but that's like a 20 30 year down the road type thing
where i think a lot of the the things of like i forget who it was some famous investors did
something about like AI can basically do an S1, you know, IPO perspectives in like a matter of
minutes or hours where it used to take a team of people weeks to put together. And, you know,
so those things are going to happen. I mean, I've used it to the same way where, you know, I'll,
I'll, I'll use AI, I'll, I'll search for a legal document, find one, tell the AI, you know,
my uniqueness compared to this legal document, you know, recrafted for me, what have you.
And then send that off for a final review to an attorney instead of going to an attorney,
telling the needs and having them spend 20 hours.
They spend two hours in the billing hours.
And and, you know, law firms, you know, these are examples of things that are going to be
hit.
Right.
I mean, the AI is going to get start getting into these professional services areas in
the ways that outsourcing and machinery took away manual labor in past decades.
So this has to happen at the right speed and the right pace.
And I think that the amount of compute power that's needed for some of these applications
is huge.
And the grid that we have currently just cannot handle it.
And so it'll act as a constraint.
and it'll act as a bottleneck from this getting rolled out too fast.
Yeah, it seems like it could be a classic case of people tend to overestimate
what can happen in the short term and not underestimate what can happen in the long term.
A lot of people were like, AGI is right around the corner,
and then you had Apple drop that paper earlier this week saying,
not really, it doesn't seem like it.
Yeah, or quantum.
I mean, my book, Quaz, Quantum Oz is what it's saying.
It's about quantum computers merging with artificial predictive intelligence as opposed to generative intelligence.
And essentially, just sapping volatility out of the stock market where the AI models are so good that the VIX goes to four.
And when you get this like super low vol, you know, people start saying, OK, now you should be at a 35 or 40 multiple because you basically have bond or less than bond volatility in equities.
You know, like like these things are completely, I think, possible, but we're still quite quite a ways away from them.
where I do think things are starting to seep in. And that's why I'm hopeful that this AI is going
to come in at a pace that can improve margins, improve productivity, but not so fast that it
creates some sort of a deflationary collapse. And we're already seeing it with certain companies
that probably would have hired more people, but they're not firing people, but they're just not
hiring people. And, you know, that type of situation, if it was the 1970s, would be unsustainable
because we have tens of millions of people entering the labor market. But in this situation
where we have millions of people leaving the labor market, that's a completely sustainable
situation, kind of a steady, steady state number of jobs. We don't even need to increase jobs and
we can keep the unemployment rate flat if if there were, you know, no immigrations or no visas.
You know, if you look at, you know, the existing native born and I use native born because that's the way they break out the statistics in the Bureau of Labor Statistics employment reports, foreign born versus labor born.
They don't do illegals for citizens. You know, the the the native born labor market, it's just it's just not growing.
And so the whole, you know, part of this immigration clampdown, it's very interesting because during Biden's time, we had this massive labor shortage and we had the immigration hit, you know, kind of when the economy needed it a little bit because of the inflationary impulses in the economy.
And now when we have this labor market kind of being more on even keel, we don't have the demand for more labor as much as we did a few years ago.
And so in a weird way, it makes sense that now is a good time to clamp down on the border just from a completely apolitical economic mindset.
It's like, OK, maybe an open border help the economy a little bit.
But I mean, you got to be careful there because the amount of services that that get paid out and so on are pretty expensive.
So in the long run, that's still questionable. But my point is basically that, you know, we're at a point where a lot of people had predicted, well, if the border gets shut down, it's going to be massively inflationary because who's who's going to have the jobs?
And the truth of the matter is, is like we're not growing jobs as quickly as we were. And so therefore, with the border clamped down, we're able to have 120,000 new jobs and the unemployment rate stay at 4.2%.
What do you think all this means for the wealth gap, which is obviously still a big topic of conversation here in the United States since 2008?
It's been an ongoing discussion.
Obviously, we know that money printing, debt expansion typically benefits asset holders at the expense of those who don't hold the assets.
They get beaten up by inflation.
like with these AI forces, potential deflationary aspects and pockets of the economy? Do you see
this problem persisting, increasing something socially throw a wrench in all this?
Yeah. I mean, it does concern me and I try to think about it and I always try to be a little
bit of an optimist half full guy. And I am on aggregate economic data and, you know, financial
asset prices. But just from a human perspective, it's like, well, what would be a great way for
this to work out to help the struggling Americans that are not part of that, you know, top 40 or
30 percent that are at least doing OK. Right. I mean, I think once you once obviously the top
five or 10% are doing very well. Top 20% pretty well, maybe top 30, 40. Now you're like, okay,
you've got a good life, but it's still financial times get tight a little bit. And once you get
into the bottom 50, 60%, you know, it's kind of tough. And I think it's toughest on probably
from like that 60th percentile to the 20th percentile. Cause when you get below the 20th
percentile, what you're really talking about there is people below the poverty line that,
That are, I think a lot of the times, you know, they have, you know, either mental health or there's addiction problems or there's things in their family history that had led them down a road.
And they're kind of, unfortunately, like, you know, almost wards of the state where they're living off of the state.
And so, you know, I think the people that are in the toughest position are those people that are working.
They're trying to do the right thing.
They're trying to live the American dream.
They're trying to graze a family.
they've got a job and yet they're falling behind. And how do you, how do you help those people? And,
you know, it's tough for me, what I think needs to happen. And it almost pains me to say it
because I do kind of like, you know, free market, you know, stuff, but like a lot of what we need
is the type of job that you don't need a master's degree for. We need a lot more people in elder
care, you know, and a lot of the times what happens in this economy is an immigrant will work for
$15 an hour cash or $12 an hour cash, and they'll help take care of grandpa, you know, and it's like,
how do we get those jobs to be $30 an hour with benefits without bankrupting people, right?
And bankrupting the system. How do we build the bridges that I talked about and redo the roads
and fix up the airports and build the power plants? How do, you know, we need to do all of that. And so
So we've got the jobs.
What we need to do is actually make sure that those jobs are a livable wage.
And if you do that, you'll help those people out.
The problem is, is that will be inflationary, right?
Because now all of these things that are happening in the economy like senior care is expensive enough You know if you take off out cheap foreign labor it only going to go up Construction is expensive enough
If you take out cheap foreign labor, it's only going to go up.
But I think that's a price that society needs to pay in order to, you know, have a cohesive
middle class and help to tamp down on some of this social unrest.
because I think a lot of the people that are kind of Marxist, socialist, you know, some of them are
just wacko ideologues, but a lot of them, they're just drawn to it because they're frustrated with
the economic system in front of a lot of the people, same people that were getting drawn to
Bernie Sanders could have just as easily been drawn to Donald Trump because they're in the same
kind of mess. And I don't know if the deflationary AI forces will be strong enough to be able to allow
for some of these jobs, particularly in elder care and construction, to have those prices go up
so that, you know, people can actually make a living again. And I think, you know, where the
free market can come into this is in deregulation. You know, the actual cost to build a house, like
you look at some of the lumber tariffs on Canada, you look at the red tape it takes to build housing
in cities. When you look at all of the federal land, especially out west, that is just beautiful,
open federal land, millions upon millions of acres. Like we're not talking about ruining
Yosemite here. We're just talking about, you know, take some BLM land and open it up somewhere or
some national forest land that's adjacent to a city. And once you start opening up some of this
land and you start, you know, if you remove some of these, I think, tariffs on goods that are
important to us, like like lumber from Canada, which is a tariff that doesn't really necessarily
make sense to me. I think you I think you can address the housing costs without collapsing the
housing market, because that would be a disaster. But where you start building supply and some of it,
again, demographics is destiny. Some of this is going to take care of itself as the baby boomers
die off. And so, you know, it's there's just a lot of fortunate accidents in the demographics
that could help with a lot of these problems. And, you know, hope isn't a great strategy.
So I don't want to just be like, oh, I just hope that the baby boomers die soon enough so that,
you know, the housing prices become affordable again. You know, that that's not the way to think
about it. So I do think steps need to be taken to address these situations. But we've got some
nice tailwinds. We've got deflationary tailwinds. We've got demographic tailwinds that I think
could help the less fortunate groups in our society who are trying to do the right things,
but they're just not able to make it. And there might be a role for the government to play in
some of that, you know, paying for trade schools, paying for people to learn how to, you know,
you don't need a four-year RN degree. My mother never graduated from bachelor's degree, but she
worked in healthcare her whole life. She was an RT, a radiological technician. You know, she,
she basically went x-rays were the new thing. You know, she learned how to take x-rays in the 1940s
or excuse me, as in the 1950s. She was born in 43. So she graduated high school right around,
you know, 1960 and, you know, learned how to take x-rays and did that for 35 years. So
these are not jobs where you need master's degrees and, you know, AI and different things
are going to allow people to do things that you don't need to be a nurse to do anymore. Right. You,
you know, you don't, you don't need to be a PA is I believe what they call it. Physician's
assistant. Like somebody is going to be able to go in there with a iPad and some sensors and
diagnose and treat somebody in the same way that a highly educated PA or MD is now currently doing.
And these are these are things that, you know, again, I like I try to think of the best case
scenario. How could things go right? Everybody a lot of times is so focused on how can things go
wrong? And I'm thinking like, you know what? Things can actually go right sometimes. And
And and maybe AI in a weird way can help level that playing field where you don't need all that training and three hundred thousand dollars in student loan to be able to do something valuable from a medical perspective, you know, and that could help drive down health care costs and that could help drive down, you know, government expenditures.
And so like these positive things are out there. I mean, hey, you know, good things happen. I mean, you know, you look at the railroads, you look at car, you look at how society has evolved over the centuries and it's had its wars and its calamities and its famines.
but yet like just when we kind of tend to need something, we tend to get something and it does
sort of work out that way. And, um, you know, like when the population really started exploding,
look at how we figured out how to grow all this food. I mean, when I was a kid, you know, I think
when I was born, the global population was 2 billion something, you know, now it's 7 billion.
I mean, people back then were like, well, we're never going to be able to feed 7 billion people,
You know, like it's just not going to be possible.
How are we ever going to do it?
I mean, I don't even think there's a concern anymore about food capacity.
Like, I think we figured out how to how to feed the population.
The only reason people starve is because warlords confiscate aid or, you know, for political reasons, food sources get cut off to countries.
It's not for lack of food production.
In fact, we produce every year more than enough food to feed every human being on the planet.
it's just inefficiencies and and wars and things that that that stop the food from getting to hungry
people is why we still have starving people it's not because we're not growing enough food
yeah it is funny i mean i'm guilty of it it's becoming consumed by the doomerism but i think
actually in recent years become incredibly more optimistic overall but to your point i mean the
long arch of human history is up and to the right in terms of progress like why you recently
And finally the last ones to continue that progress.
And I think if we're objectively looking at how society has progressed over the course of our lives, obviously there's been terrible wars and financial crises.
But I'm sitting in a room hundreds, if not thousands of miles away from you looking at a camera.
We're having a conversation that was not possible the year I was born.
No, it's incredible.
And I mean, I've seen it all.
I was born in 75.
I was the last class in my high school to tape typewriting, you know, with IBM Select
Trek and, you know, hit the center button and count out, you know, okay, my title has
12 characters.
So I hit the backspace six times.
And that's where I started typing to say, like, like these skills that I was learning,
you know, like, you know, really kind of ridiculous skill sets, um, looking back on it, but like
that, that's how much has changed.
You know, when I was born, five person family, three bedroom home, one bathroom, you know, people used to have smaller houses, you know, houses were more affordable back then.
But, you know, people did not have all the, you know, central air conditioning was, you know, for the rich people.
We didn't have that.
You know, you had the window unit in the air conditioning in the summer.
me and my younger brother, we'd come home from school and go to the bathroom at the same time
and have sword fights, we'd call it, because there's one toilet in the house. I mean, you know,
like, yeah, you live differently, right? You live differently back then, but it was more affordable.
But the point I'm making, and, you know, we had a TV and we had a radio and we had a record player
that had an eight track. And, you know, that was pretty much the extent of tele and a telephone
with a rotary dial. And that was kind of the extent, you know, then certain things started to
creep up, you know, a remote control was invented, you know, different things that,
you know, we've just come so far. And that's just in my lifetime. And I'm only 49 years old.
I mean, and my father is born 39. I mean, what he's seen, my grandmother who's passed away,
was born in 1911, you know, when women couldn't even vote. And I mean, just the change that has
happened just in the last two or three generations. You know, 1911, that was only a few years after
the Wright brothers invented the airplane. Like, I think the human mind, we're often limited where
we look at some of these trends of what's going to happen. And then we're trying to solve for it
with the solution sets that we already have. And it's like these problems are going to be solved
by solution sets that we haven't even imagined yet. And mother is the necessity of invention.
And these things do eventually get worked out. And a lot of these problems that we're dealing
with, they're very similar problems. I listened a little while ago to like an interview with
Eleanor Roosevelt, and it was from the 1950s. And they were talking about like the challenges
that was facing America and the threat from the Soviet Union. And they talked about it in the
exact same way that we're talking about China right now. They talked about the lack of American
leadership. They were bemoaning that current American leaders weren't the leaders that FDR
was or Eisenhower was and who was going to step up to the plate. I just read an amazing book,
which I would recommend to all your readers called Three Days at Camp David, the secret
meeting that changed the global economy that focuses in on the 1971 Nixon shock,
where he took the U.S. off the gold standard. And what were all the concerns and how did Nixon
attempt to address it? And a lot of people don't realize that when he did that August 15th, 1971
speech, which is available on YouTube, it's an 18 minute speech. You can watch Nixon delivered it
Sunday night at nine o'clock Eastern time, cut off Bonanza, which a lot of people weren't happy
about. But basically, I mean, he didn't just close the gold window. He also put on 10 percent
sweeping across the board tariffs. He announced that they were going to do spending cuts,
something like a doge. He did a tax tax cuts. He did. It wasn't immediate government expensing,
which they're currently talking about doing, but it was government tax credit. So if you'd invest
a million dollars, you got a 10% tax credit. He also talked about when they were talking about
reducing government spending, the main thing he wanted to cut was foreign aid. And he was arguing
that the US was shouldering too much of the burden of NATO and that Germany needed to start picking
up its defense spending. Like this is before I was 55 years ago. It's like the exact same things.
The 70s didn't work out that great. But for what we talked about in the beginning of the show, I think we've got a completely different demographic destiny. And I think it's the demographics as well as, you know, the oil differences between the 70s and now that I think are going to allow this situation to work out differently than the 70s.
and kind of skip over some of those bad parts and look a lot more like the 80s where things,
you know, really started kind of rebounding and growing because of deregulation that got started
under Carter, actually, but then really took place under Reagan and and just opened up the
floodgates. And we had, like I said, between 1985 and 1996, you know, 360 percent S&P growth.
you know, do we have inflation? Yeah, we inflation average somewhere between two and a half and four
and a half percent during that time. And I think that's probably what we're looking at during this
time. So I think, you know, even with all this fiscal spending, even with the AI deflationary
impacts at the end of the day, there's probably no getting around this increase in the money supply
that's going to happen. There's going to be a little bit of inflation, but I don't think it's
going to be eight, nine, 10%. I think it's going to be a little higher than central bankers would
like, but it's going to be, um, sustainable. It's going to be, and I think real wages are going to
be able to, to keep up with it. Um, because of the, uh, demographic, uh, labor shortage.
And this time around we have Bitcoin too. So if you are looking out and you're expecting that
inflation, just make sure you're shoveling some of your savings into the scarcest asset we've
ever seen, which I think should play a pivotal part in this transition.
Yeah, I was thinking through like a Bitcoin world in my mind this week, like just trying
to imagine, like, let's just imagine the world totally run.
Everything is Bitcoin.
Right.
And thinking about what would that mean?
Right.
So but where I think Bitcoin gets super interesting to me is it works in an inflationary world
and it works in a deflationary world.
And the fiat system we have to me,
it doesn't work well,
but it can kind of function in an inflationary world.
The fiat system kind of falls apart
in a deflationary world.
Bitcoin, if we ever get beyond this hump
or we get to this total abundance,
I mean, it's kind of the perfect asset for that.
Like, and here's what I was thinking.
I was thinking about like, okay,
in a world where population is growing,
Like, and let's just say everybody used nothing but Bitcoin.
If I go to buy a house when I'm 30 years old, I should expect that house to go down in value,
right?
So like, let's say there's 100 million people in the United States.
I know there's 300 some now, but I'm just using an example.
100 million people in the United States over the course of my life, that's going to go
to 200 million.
And so, you know, the number of houses that exist, let's say are going to double, but
let's say the Bitcoin doesn't double, right?
Because the Bitcoin is set.
So maybe I pay 1.2 Bitcoins for my house, but because now houses are doubled, there's
not enough Bitcoin for people to be paying 1.2 Bitcoin for a house.
So now houses cost 0.8 Bitcoin or 0.7 Bitcoin.
And so, you know, the thing about a scarce asset like Bitcoin is it can work in that
inflationary world where, you know, as you know, your home price in Bitcoin goes down as it goes
up in dollars, but it can also work. And let's say we're in a deflationary world. Let's say
population peaks. Let's say we're at 200 million people. And now we're on our path like a Japan
on a path to 150 million people. And now there's a bunch of houses, but we don't need all these
houses, you know, you the the the way that Bitcoin reacts in that environment is now your
house can maybe stay flat in Bitcoin prices.
So instead of going down in Bitcoin prices.
in an expanding world, in a contracting world, it stays flat and it conserves your value that way.
So it's kind of an interesting thought experiment to think about if fiat,
any other payment system did not exist, if every single transaction and every single
thing had to be handled in Bitcoin, what would that world look like? What would prices do over
time in a Bitcoin world? And it would be a deflationary world. And so it's very interesting
to me. And I think Bitcoin, I don't think people really get fully grasped, you know, the importance
of it as a as a replacement, you know, store of value asset. I think people have come to to
understand now that the dollar is constantly going to lose its value. But I think that's fine. I think
I think people just need to have in their mind the dollar is a transactional mechanism. You know,
Bitcoin is your store of value. As Bitcoin gets more integrated into payments, that's fine if that happens. I don't know if that necessarily needs to happen. I think it can happen because you can always pay with your store of value asset.
But the fact that it's given us this digital store of value asset with all of these attributes and all of these strengths where gold has weaknesses, I do believe gold has certain strengths where Bitcoin might have certain weaknesses.
But that all of these things are extremely important and that they're just going to be more and more endemic to the economy.
I think that the younger generations get it and understand it and believe in it.
And it's only going to grow. It's only going to expand.
You know, I'm I'm super I've always said I think Bitcoin's the best going to be the best performing asset over any extended period of time frame for the foreseeable future.
So while I'm bullish on equities, I'm bullish on gold, I'm less bullish on real estate, you know, on a percentage basis, I think the Bitcoin run is, you know, just getting started in the way that the AI run is just getting started.
mel you're you're making me bullish making me more bullish than i already am and more optimistic too
i mean and and on that note i think another big topic of discussion we're first five and a half
six months into trump too and there's already people saying with the optics of what's going
on with immigration in the mainstream at least not a good look the tariff quote-unquote
fumble, the tariff negotiations fumble that many are pointing out. People are already basically
saying we're screwed at midterms and we're going to get president AOC in 2028. Do you think that
that is just short-sighted misreading of what's happening? And how do you see this economic
recovery in the pace at which everything has happened in the economy and the job market
affecting midterms in the election in 2028. Yeah. I mean, we'll see. I mean, I think
if, if, I mean, I think that first of all, I, I think that if things go really well and we're,
we have turned this corner by, you know, let's say summer next year, then there is a chance for,
you know, Republicans to pick up seats in the House. I don't know if they'll be able to take
the Senate. But, you know, we go down that path. If we if we have, say, a traditional midterm where,
you know, like I believe happened last time with Trump, I think it happened with Obama.
You know, Obama passed Obamacare and then lost the midterms. You know, maybe Trump gets his big,
beautiful bill passed and does some of this stuff and then loses the midterms.
You know, I still I still think the major trajectory, which is the mandated fiscal demands combined with the larger demographic and technology technology trends remain in place.
And so when you look at the budget and you look and you say, OK, there's entitlements, there's interest expense, there's veterans affairs, like there's defense.
And then you get rid of all of that. You're left with like eight hundred billion dollars.
So, I mean, how much can they really move and change around?
And and so what what could that happen Well I think probably the Democrats have learned a little bit of a lesson of having a completely wide open border
So I think even if the Democrats come in, while they're not going to be as aggressive, obviously, on the border as this administration is, they're not going to be as completely wide open as as they were under Biden.
And I think that was a particular time, a particular moment.
I also think we had a labor shortage.
And so in a weird way, I think a lot of corporations were behind it, you know, like being supportive
of this open border.
I think if, you know, that type of a scenario comes in where let's just say we got a red
sweep in the midterms and then President AOC in 28, like what is she really going to be
able to do and get through Congress?
I think what they're going to do is they're probably going to put in more government spending along the lines of some of these programs I've talked about, more money for health care, more money for elder care, more money for construction and infrastructure projects.
And so what they're going to do is a lot of the stuff that I think the Trump administration wants the private sector to do and what he wants to incentivize done through, you know, immediate depreciation, through deregulation, through tax cuts.
And so I think at the end of the day, you either get the government sector doing a greater percentage of the same things that you have under Trump being hopefully done more by the private sector.
And then you still have all those core fiscal technology trends in place in the background.
And so I think it becomes six of one, half a dozen of the other.
It's perfect fodder for X.
It's perfect fodder for the media.
It's a bunch of stuff, different stuff for the market to get worried about.
But I think the long term trajectory marches on.
And at the end of the day, it might not be as radically different when it comes to economic
fundamentals as people think.
It might be more different from a cultural perspective, but we might wind up in a similar
place, whether we have President Vance or President AOC, as crazy as that might sound.
such a fascinating world.
The, um, yeah, it just, I don't know how to describe it, but I think having played with the
AI tools and just looking out at the world when I unplug from the internet and hang out with my
family and friends, everybody seems to be doing pretty, pretty well, relatively and pretty happy.
And it seems like even though the mainstream media and the algorithm on X is feeding you a bunch of doomerism and fear porn, I think last week or two weeks ago was the autonomous drones, that attack on Russia by Ukraine deep into their territory.
and you begin to project forward, like, okay, if autonomous drone warfare is upon us,
like how chaotic does the world get?
But I think, like you, I like to think positively and optimistically
and hopefully we can thread the needle.
And like you said, these unique tailwinds that we have at this particular point in time
with demographics and the productivity growth that we're already experiencing
and that's about to increase.
I like to think that can create the conditions
for the incentive structure to move towards cooperation.
Why not cooperate?
Why are we going to war?
Why are we doing all this when we have all these tools
and this technology at our fingertips to go do good in the world?
So that's one thing I've been wondering about
in the last couple of months, particularly with all the saber rattling.
between China, the U.S., Russia, Ukraine, Israel, Iran, whatever it may be.
Like, do we get enough productivity growth and technological advancement to the point where people are just become too busy building cool stuff that going to war doesn't even make sense?
Yeah, definitely.
I mean those geopolitical concerns you know I I think in a way it reminiscent of the 70s as well where Nixon went to China So Nixon kind of reached out to China as kind of a counterbalance to the Soviet Union I think Trump is kind of trying right now to reach out to Russia as a counterbalance to China So China become the new Soviet Union and Russia become the new China
and the war that Nixon wanted to end at the time was Vietnam. And that's when he got what he was
trying to do. And he titled that speech in 1971 when he closed the gold window,
the challenges of peace. And he started off by talking about like, we're going to end this war
in Vietnam. And we've never been able to have full employment in this country since World War II,
you know, during peacetime and and talking about the challenges of how are we going to
keep the economy going in a peacetime environment. So I do think that, you know,
these similarities are there. And I think that Trump is trying to do this with Nixon,
like in the Ukraine war, i.e. in the Vietnam War, belly up a little bit to Russia in the way that
Nixon bellied up to China as a thwart against Soviet Union. So, you know, we'll see how it all
works out. It all kind of generally worked out last time without World War Three. And I don't
think that's really in anybody's interest. You know, I mean, it's like, what is China going to
gain by, you know, sending a bunch of troops to invade Taiwan? I mean, it's just a disaster.
And as I mentioned, they've got deflation in China right now. They've got their own economic
problems. And this whole thing with Putin and Zelensky, you know, it's in a way it's unsustainable.
But at the other hand, you know, it could go on. The Russian economy now has become mobilized for
war. It's used to it. I think it's going to be a lot harder to end than to be, you know,
just like the Vietnam War was a lot harder to end than Nixon thought. This war is a lot harder for
Trump to end, but eventually it did end. And, and so I think, I think these things will get worked
out, but, you know, in the meantime, could a flare up cause a correction and things? Sure.
And, you know, gold and Bitcoin, I think actually in geopolitical uncertainties are, are only going
to do, do better. And that's why, you know, I always have believed in those two assets as my
biggest positions and then stocks because, you know, they just they do different things and they can they can be there for you,
even if some of these bad things do have some episodes.
Yeah, this has been great.
What what should we leave the freaks with?
Anything we didn't touch on that people should be aware of paying attention to?
but maybe something in the next three months that's on your radar that you're paying attention to.
Obviously, you said CPI later this week.
Are you looking for anything out of FOMC meetings or in regards to tariffs?
Yeah.
Well, I mean, ironically, I think the Fed not cutting might be helping things a little bit right now,
even though they probably should be.
Like, I think that's helping keep a little bit of a lid on those rates, like from going too high.
I think that cutting would actually make people think that growth and inflation are going to be even stronger and therefore the long end would go up.
So I think a lot of people may be thinking like cuts on the short end, you know, would be good for rates are completely wrong.
I think that we do need the Fed funds rate to come down because that's also going to reduce the government borrowing costs because of how much debt is being issued at the short end.
And so, you know, what we're doing is we're rolling the we're rolling the longer maturities out of relevance where the U.S. isn't really issuing any new net long end debt.
It's maintaining whatever 30 years it has or whatever, but it's not adding to it.
if anything, it's adding to the bills. And so I say in that interest rates piece that, you know,
people are going to be able to unlock that $12 trillion of home equity if Fed funds goes down,
not from mortgage refinances, but from HELOCs, home equity lines of credit, which are tied to
short end rates. They're floaters on short end rates. And corporations, unlike the federal
government, also have the option to issue floating rate debt instead of fixed debt, which is tied to
short rates. So the Fed funds rate to me is now the key rate in the economy, not the 10 year.
And so we got to watch what the FOMC is going to do But I do think that whether you know it Powell this year which it probably will be by the end of the year or it Trump new appointee
eventually that rate is going to go down. I think the way that you control the rates on the long end
is you get the Federal Reserve to add to its balance sheet. So I'll end with this.
A lot of people think the Federal Reserve balance sheet has really exploded,
But as a percentage of outstanding debt, it hasn't. It's the same place it was in the 40s and the 50s and the 60s. The Federal Reserve has consistently held around 13% of outstanding U.S. Treasury debt. It currently holds about 13% of outstanding Treasury debt.
And so there is room on the Federal Reserve balance sheet to to to claim that they need to increase reserves.
And that's why they're going to resume a limited amount of bond purchases.
And that's going to help contain things on the long end once the front end starts coming down.
So I think just keep an eye on all of that.
Be aware that Trump's probably going to have to do some threatening as these tariffs start to expire.
and that could easily be a 5-10% trigger.
More of this ICE riot flare-ups this summer,
another 5%, 10% trigger.
But don't get scared out of your positions.
You know, use them as opportunities to add
if you have cash.
And, you know, if you want to protect yourself,
you know, buy some puts
once we get the VIX back down around 15,
you know, as some protection
because we're heading in that direction.
Awesome.
Well, maybe we'll catch up at the end of the summer
and see how all this is playing out.
We'll see.
I'm guessing we might have had one of those
many corrections by the next time we talk,
but that will be higher than we are.
We'll be well on our way.
We'll be in the 6,300, 6,400 range
and we'll be marching higher.
All right.
Well, let's catch up at the end of the summer.
You go enjoy your trip to the mountains.
in North Carolina this week. And as always, thank you so much for your time, Mel. I think your
analysis over the last nine months, since we began talking, was it nine months ago? Or did we talk
like this time last year first? I think it might've been this time last year first.
Yeah, it's been about a year, I think, probably since the first one. I don't know if this is our
third or fourth meeting, but they've always been good ones. And I think this is our fourth overall,
but it's our third since kind of my first prediction one,
which was kind of an end of the year,
December one,
where I talked about a 15,
20% decline in the first half,
V-shape recovery,
Bitcoin 150,
S&P 7,000 by end of the year.
And I think we're still on track for that.
Yeah.
Well,
you've quickly become a fan favorite in the TFTC universe.
So we'll,
we'll keep this conversation going throughout the month.
So go enjoy the mountains,
enjoy your summer,
and we'll catch up maybe end of August, early September.
Perfect. Looking forward to it.
All right. Peace and love, Freaks.
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