Peak Prosperity - Equities Are Churning While Bonds Are Burning

Episode Date: July 18, 2025

Stocks are for show, but bonds are for dough. And bonds are screaming in distress at the present moment. Meanwhile, be extremely cautious about private equity in 401Ks, which the Trump administration is planning to make legal.Click Here for Peak Financial Investing

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only content. Hello everyone, welcome to this episode of Finance U. I am your host Dr. Chris Martenson here again with Paul Kiker of Kiker Wealth Management. Hi Paul. Hi Chris, good to see you. Welcome to Fantasyland. Thank you, and it's good to see you smiling because we were just both spitting nails but we'll get into that in just a second. Today if we if we could I want to talk equities just churning sort of churning higher while bonds are burning this is sort of part of my theme and we're gonna talk about

as well private equity going into 401ks so we'll get there. This is the heat map over the last month and you can really see Paul and everybody watching this It's really it's a story of Nvidia up 20% 20.02% in the last month AVG up 11% AMD bright green all this stuff So it's it's all about AI still right, but it's still Nvidia Microsoft Apple Amazon Google Meta, right? So that's a big chunk over the last month Everything else sort of like just sort of sucking wind a Little bit down here, and then you have a little bit of green going on over here in the big banks I'm gonna talk about

Why that is in just a second, but um this is really Paul the video of 20% I heard that it as of today It has the same market cap all by itself as the entire combined stock indices of France and Germany. So one company apparently is worth as much as the combined output of about 110 million people or whatever the number would be. Right. That's amazing. And somebody said it's added an entire Amazon UK division in the past couple of several weeks. Like, it's just insane.

Okay, so this is kind of what stocks have been doing here. You know, they've just sort of been churning and powering higher. But what's a little bit interesting to me is that, well, we've seen, let me see, where do I start? I'll start here. I'll start here. I'll start here on this so our 30 year US Treasury is now spiked back above 5% okay Japan this these aren't their actual interest rates Paul

This is how much the interest rates have gone up on a percentage basis, so you can see these are the 10 I'm sorry the 20 30 40 year bonds, and they're up 150 percent on average 20, 30, 40 year bonds, and they're up 150% on average since July of last year, right? So or 23, I guess even. So yeah, but this is just like unbelievable increase in carrying costs for Japan. That's tremendous. That's huge. And one of the explanations for that is that on Bloomberg they talked about how its liquidity is drying up so Bloomberg's government bond liquidity index hits new

highs which isn't a good thing so this just means that that there's just not that much nobody wants them that's what it means when liquidity is by drawing up people don't really want to buy them so bond movements tend to, I would think big giant moves like that in bonds would put a little caution into equities, but it should not, not a peep. No, it should. You know, and the only reason that it shouldn't is if we're literally on the verge of a hyperinflationary Holocaust, right? Like, like people are looking and saying, hey, I can't afford to own anything on this side. On the bond side, I've got to have equities, even though they're not going to do as, as good as, as what you would expect them to

in retaining the purchasing power compared to commodities and others. It just doesn't make sense with the data that we have right now that that's the answer. Okay, it's just, it's just, it seems to be that the equity markets are garnering all of the assets. I mean, we've seen just massive purchases by retail, uh, fund manager surveys have had the highest, uh, uh, positive surveys since, I believe it was 2003. I've got the chart in here. We can go back and look at it. It's just kind of an all-in moment like there's this Reflexivity and I had to look up the definition of reflexivity that I thought was pretty interesting If I can find it here, I've got it set aside somewhere

But it says is that an actual term not I thought that was something Soros made up but that's a good question Well, it's actual so it's an actual social term, a social event. So I had to look it up, because I've heard reflexivity so many times. So it says, you know, what is reflexivity? In social theory, it refers to the concept that the act of observation influences both the observer and the subject being observed. So, you know, market participants looking in the rear-view mirror and watching the markets. So it ends up being a circular feedback loop, and it highlights how individuals and society shape each other through experiences and interactions.

So the best analogy that I can come up with that I have seen, this is, this would be, you know, there may be some expert out there that's gonna say, Paul, that's the wrong mark. But to help understand for the average person, basically what it's reflecting, you know, in the 1990s, you could buy rental property or buy property and turn around and rent it out for seven year payback. Your rental income was enough to pay it back in seven years.

Well, as asset price inflation and other people joined in there, and by a little bit later, by the time that individual is successful and their kids get up, it's like, hey, buy rental property. So now when the kids are buying the rental property, or their friends are buying rental property, they're buying it, but prices have inflated to the point

that it's a 15-year payoff. And then you go down the road now to where we are, most properties that are being purchased are 30 to 35-year payoffs in the residential rentals. So the reflexivity is, is everybody comes to the belief that they look back, that prices have confirmed their belief that it's going to continue to go up forever, but they don't pay attention to the fundamentals, the launch pad of where we took off from, because everything is cyclical.

Everything is cyclical, unless it's completely different, and all of history doesn't matter, because one of the most important things that we have to consider in the investing process are we investing with something that has withstood the test of time? And a 10 or 20 or 30 year cycle is not necessarily the test of time, because that may be a generational event. You know, you go from where real estate was overpriced in the 1970s and, you know, it

gets overbuilt, so nobody's paying attention to rental properties and that launch pad. You know, I'd buy all the rental property I could right now if I could get a seven-year payoff from the rents that are out there. So I think that's what's taking place in the market. We're in a situation, long-term yields are going up. That's completely different from where we were in 2013 to 2019 when interest rates were zero. And yes, there was inflation, but the inflation wasn't as severe as what it's been here recently.

And you had quantitative easing, you had all this money printing, which just isn't taking place right now. I mean, yes, the money supply is expanding. That may be more of a dollar issue than what it is from central banks expanding their balance sheet. But rates are higher, yields are breaking out, liquidity in the longer bond is essentially non-existent, but yet investors are acting like we're in the same position we were in 2013 and that the Fed is just going to be able to paper us into prosperity. It doesn't make sense right now.

No, it doesn't. And a reflex is an automatic thing, thing right if you hit somebody on the knee and the reflex to your You don't have to think about it your knee kicks, right? So I get it so but but I would actually call that if I was gonna name that term I would call it reflectivity because it's sort of like David That's bad. That's what I would if I was going to I mean the other one You have to define for me and I squint that a little like is that the right word? But reflectivity means well because I'm watching you and I do some things other one you have to define for me, and I squint that a little, and like, is that the right word? But reflectivity means, well, because I'm watching you, and I do some things, and because you see me doing things,

you do those same things, and so I watch you, you watch me, so the market and the observer become, you know, the investor and the market become one in the same thing. The market does this because they're doing that, and they're doing that because the market's doing this. It reflects off of each other, but if you wanna call it reflexivity, that's fine. But that also they're doing that because the market's doing this it reflects off of each other but if we want to call it reflexivity that's fine

but that also means it contained in that idea is this idea of overshooting you know like you go too far when you get caught in one of those loops you know you go way beyond anything that should make any sense which I think is why I think it was Livermore back in the day. Just anyway, the person who said, you know, the market can remain irrational longer than you can remain solvent. Yes. Right. Is that him?

And he paid a price to earn the wisdom to share that quote because he was betting against, you know, what was taking place in the market. And unfortunately, he was a legendary trader for anybody out there. If you, if you want to, there's great wisdom in the reminiscence of a stock operator. Yeah. Yeah. Yeah. So, yeah, it's fascinating, but he, like he might today decide that maybe, no, one company is not worth as much as the combined output of two giant nations and bet against that. But boy, you get your your butt handed to you real quick if you go down that path. Right.

That's right. But there are consequences to all this, Paul. So you mentioned real estate. I just collect the anecdotes. So this is over on Reddit under our slash real estate, the sub Reddit. And this person wrote in said 45 days and not a single showing. We listed our house on the 1st of June in Wellington, Colorado, and the home is just two years old, so they didn't buy it that long ago.

It's five-bedroom, three-bath, three-car garage, 2,718 square feet. There have been many upgrades to the home, even though it's new, they upgraded it anyway. We originally listed the home for $540, we now have it at $525 with a 5K incentive. Can't go any lower than $5. We can't we're losing money We bought the house for 539 plus we have a home that's being built in another state They'll be completed at the end of September and we've put 27k already into this new home We're feeling scared and anxious. We have zero clue what to do or how to get people to come and look. What do we do? end quote

Got a little flavor of 2008 all over again, doesn't it? It sure does. It sure does. The advice is simple. You lower the price. Yeah. I know you can't afford that, but that's a different reality from you have another house in another state being built.

The reason people aren't coming to take a look is because your price is too high. That's always the answer. Right, right. You got to lower the price and you got to get ahead of the rest of the market, because one of the things that's interesting, so my daughter is looking for a house right now in the North Georgia area. They're going to be in that area for about five years and this has been quite the fascinating journey as we've gone through. And, you know, I'm focusing on reality versus hope. And she's, I've spent a lot of time sharing everything that you've shared and educating them.

But it's just amazing the disconnect between, because there's all those buyers out there, prices drop a little bit, they're in such a hurry to move in. Then you've got these other individuals that just can't afford these homes right now. They just can't qualify for the notes because lending's getting a little bit tighter. And then you still have sellers that are just completely unaware of the market.

And listings are continuing to expand. And real estate companies are continuing to play games to where they'll pull them off the market and then put them back so they've been on there for so long. But outside of the Northeast, I'm hearing a lot of individuals out there that I'm talking to across the country, they're like, boy, we got a lot of properties for sale and nothing's moving. That's fascinating. And as we discussed last time, I think it was, or the time before, that now in many, many districts, the cost to rent is half what it is the cost to own, right, because of the mortgage costs, the real estate, and all those other costs, right, the task assignment.

So as soon as you get that to even get close to like par, you're running into trouble. But when it is half as expensive to rent, maybe your daughter's looking into renting, who knows. But I mean, it's all location dependent, but there's whole areas in Texas now where it's much cheaper to rent than own, and that's just brutal for the homeowners who are trying to get out or rent and cash flow something. Paul, we're going to take a quick break. When we come back, I want to talk about the rumors about Jerome Powell being fired and how that plays into all this.

Powell being fired and how that plays into all this. The markets are a ticking time bomb. Volatility is spiking, trade wars have broken out, and most investors are sleepwalking into disaster. Many portfolio strategies perform poorly during times like these. At Peak Financial Investing, however, we don't gamble with your future. Our Registered Investment Advisory connects you with battle-tested wealth managers who reject outdated models and embrace active management, strategies proven to navigate chaos and who aren't afraid to discuss things like the great taking or maybe the importance of protecting your wealth with gold. Without the right approach and with the wrong advisor, you're risking, well, everything.

Don't wait for the crash to act. Visit peakfinancialinvesting.com right now to schedule a free consultation and discuss your particular situation. Take control of your wealth before the markets take it from you. Again, that's peakfinancialinvesting.com and I'm Dr. Chris Martenson urging you to act now. All right, welcome back everybody. We're gonna turn to this.

So here's the connection. We were talking about bonds and bond rates shooting up. Jim Bianco just tweeted out this morning on July 16th, he said, one day tick chart of the 30 year yield reacting to the rumor of Powell getting fired. Just look at that. I'm like, Powell getting fired? That's a bizarre rumor.

That's crazy talk, Jim. Oh no. Looks like, looks like according to Nick Sorter, who's a pretty good journalist, breaking President Trump has already drafted the letter to fire Jerome Powell. I don't know if you can do that. He hopes it's really true. I don't know what his hopes are. And Jim Bianco then tweeted out just after that, says it looks like it might actually

be happening according to White House officials who are now saying Trump is likely to fire Powell soon. Official cautions, no exact timeline for decision on the Fed chair, but Trump has drafted the letter to fire the Fed chair, according to New York Times. So this is confirmed. Paul, I have never experienced a chairman firing. What does this mean? Is that even possible? Can you do it?

I don't know. I don't know. I don't know. I mean, and the bond market is telling you exactly what it thinks of that. I mean, clearly, and just on the rumor, much less if the news comes through, it doesn't make sense to me. And I don't even know if it can be done. But does he even care at this point? No, probably not. But I mean, let's talk this through. So what Trump wants is he's been very clear. He wants Powell to cut rates.

He suggested 300 basis points might be a good starting point. He has some benchmarks. He thinks the United States ought to have a lower rate than other countries. But that's sort of a real estate investor sort of a point of view because it's all about the rate you get But you know from the from the bank side the the interest rate The bank is going to give to a real estate investor depends on a lot of things like how much equity do you have in this? And how much other debt are you carrying and what are the cash flow prospects of these properties and there'll be some variables the United States is not really in a position to compare itself to other countries with another 20 to 30 trillion of new debt coming in and 37 already on the books. It can't just be about the rate. So I always thought that was a little cartoonish by Trump

to think that the rate matters. It's the circumstances that give you the rate that matters, I think. Well, and what good is it going to do if we cut rates 300 basis points, 3%? You said 3%, so what do you want some to be cut, right? That's what you threw out there. And then inflation takes off at 6 to 7. I mean, you're completely going to, you know, and the dollar crumbles, that's not going to be good across the board for the U.S. citizen. It's gonna continue to make the top 1%, 5%, 10% much, much wealthier, but it's also gonna further deteriorate the foundation that's already cracking of the markets and the underlying

economy. And it's not gonna be good from a long-term standpoint from where we are right now. Yes, it may bail out some speculators, it may bail out, it may allow Trump to spend a whole lot more money in the short run from a government debt standpoint, but is that really the answer?

Because that's a hidden tax if they're gonna let inflation run, and inflation is an equal opportunity punisher of all people. I mean, even those that are gonna benefit well from it are gonna lose some purchasing power. What we really need to be doing is let deflation take place, the business cycle come back,

and then those who are on a strong footing and those who have made wise decisions be in a position to wrestle the reins of power. So I just don't understand it. Is this all market oriented? In his first presidency, he was obsessed with the markets, and we thought it was going to be different this time. I mean, it may buy some time. I mean, that's one thing for sure. It may cause this market to run a lot longer. And there is argument that we could be coming into a recession in 2026 because economic data is soft, but it seems to be stabilized right now. We don't have enough

information to be operating at crisis level move at this point. Unless you just want to continue to bow out the speculators and those corporations that have barred themselves into oblivion, this should fail and open up opportunity for creative individuals to step in. As you and I have talked about before, I also have several pieces of data that we could go back through if we needed to that show that markets moved kind of funkadoo, right? Trump was about to announce something like tariffs were about to be announced, that markets moved kind of funkadoo, right?

Trump was about to announce something like tariffs were about to be announced, but minutes, if not whole tens of minutes before the announcement, the markets were moving, telling me there's a little leakiness in that, right? And is that an accidental leak, or somebody phoned in a friend on Wall Street? It's kind of hard to say, but when you combine that idea that maybe some people were getting inside information with this smug picture, it's

it's it's almost too much to take. So Trump tariffs rocks stocks, it was great news for big banks, and I tweeted, I said, well we suspect this was especially true for the insiders who were tipped off before the market moving news was tweeted out, right? So the big banks, wouldn't you know it, they did great with all of that tariff volatility. And of course it's easier to do great if you know when the volatility is about to come and you get pre-positioned for that. Bloomberg was even just a little bit backed up. They're like, yeah, Wall Street banks were optimistic Trump's second term would unleash a deal-making boom.

Instead it delivered a trading bonanzaanza and that's all they would talk about it but is it wrong to think of you know that this is kind of a rigged game at this point that certain insiders have access to information before the rest of us well I mean the evidence, seems to be more than circumstantial, clearly. I mean, it's easy to track in the data and the big moves and how fast they're moving. I mean, if you're wanting to get, if you wanna make sure the markets move positively

on your news, then let everybody that can front run and move quickly and position themselves to benefit from it, to start the momentum, let them know beforehand. And it's just wrong. You know, you add to that, I think you mentioned you're going to get to it in a minute, but I still smile, but I've had to remind myself several times, we have to play the game by the rules that are forced upon us. Because of the fact that I got really upset last week about all the, just the fraud and

the damage that that does to the scams that are out there. But yeah, and this was that piece from last week, how to avoid becoming a victim of financial scammers. And we were talking about long bonds even then, but a lot of people are commenting on it and we had some really good comments. I just wanted to let people know that that exists there. And Paul, anything emerge, post, any more scams come across your desk or people talking to you about it? Well, I've had some conversations, you know, just basically the same thing that they know people. But what I'm so proud of the listeners out there for is I think we've had somewhere in the neighborhood of 60 people that have already reached in and changed,

gotten a special email address for their financial statements and everything. I love hearing that. The team told me they're like, give me a heads up next time before you say something like that. But they've all got it updated and everything in place. And that's great because, you know, that's just an extra level of protection.

That's great. Good. And then we did have some good news that came out. My CPA emailed me yesterday because I called her. I said, Hey, look, I need you to pour through the new tax bill legislation. And she got back to me where I've been going through other areas. And apparently, there is some change in the code that if you are defrauded, it's a high hurdle that you have to go through and explain it. And listeners, I am not an accountant. I'm just going off of what she shared with us. There is some hope in there that if, God forbid, you are scanned. In the past, you weren't able to deduct that or claim a loss on it.

But there's apparently a higher hurdle now that you can claim those losses and deductions on your taxes to at least help offset some of the impact of what has occurred to you. And that goes for the crypto spaces, it goes for some other. You have to prove that it was a legitimate investment that you were trying to make. And and if that's the case, apparently you can get, you know, count those as losses now or before you cut them, which has never made sense to me anyway. Yeah, no, that doesn't make sense, especially when you're responsible for any gains you might get this tree.

Well, speaking of avoiding losses, if we can. This really shocked me when I read this. This came out on July 15th. The headline is White House Readies Order to Bring Private Equity to 401Ks. Paul, you and I have talked about this private equity stuff in the past. I have a bad feeling about this.

Here's what that article in Bloomberg says. It says, quote, the Trump administration is finalizing an executive order. Why does this have to be an executive order? Why don't we get some actual congressional input? At any rate, that would pave the way for 401k retirement savings plans to invest in private equity, according to people familiar with the matter.

The move would be a major win for the industry, by which they just mean Wall Street, which has been lobbying to secure a piece of the roughly 12.5 trillion held in 401ks, but at the bottom it says retirement portfolios are mostly concentrated in stocks and bonds, excuse me, in part because corporate plan administrators are reluctant to venture into illiquid and complex products.

Ah, Paul, you say illiquid and complex and I say Wall Street profits. Oh yeah, and regional monopolies. I'll tell you a funny story about that. So I walked out to feed some scraps to our chickens and our chicken pasture and paddock, all the goats are in there. So they're running up and I'd already tossed out, I'm kind of looking at my ex-feed. And when I see the news that that had come through, I guess because of the scam issue, I lost my temper. And I yelled at the top of my lungs

like a whole series of expletives, all of the goats fainted. So, I mean, of the goats fainted. So, I mean, all the goats fainted. Well, Holly's in the house. So she comes running out of the house to look and see, because I yelled at the top of my lungs, which I normally don't do. And she comes out to find me bursting out laughing. I'm like, I can't help it, you know,

and I explained the whole deal to her about, you know, like 28 goats just all fell over. So I was quite upset about that because, you know, like 28 goats just all fell over. So I was quite upset about that because, you know, I've already been saying that I'm very worried about private equity and just the sheer advertising that they put out there to try to offload these off to average retail, who is looking in the back and looking in the rear view mirror and saying,

oh, if I had just done this, I mean, oh, if you'd have just done what these major college endowments have done, you would have had these types of returns. But nobody's talking about the fact that they're not able, they don't have the liquidity out there to get rid of them right now. I can't remember who it was. One of your major hedge funds guys was talking about one of the major college institutions is probably really only worth about 40% of what they're stating their private equity is because they don't have liquidity.

And now all of a sudden, you know, they're putting that advertising effort forward. I've had more people call in just giddy about the opportunity to buy some of this private equity. And when I go through it, I'm like, guys, this is a huge risk. I'm not saying they're all bad. Okay? I'm not saying they're all bad. But they're much riskier right now than what they have been.

They're looking for their exit to put that on retail. And obviously, they've had the dollars to get into the ears of the administration. And do they, does he really even understand? Hopefully not. but he should, that this is an exit opportunity for and it's going to provide more resources for them to continue to go around and gobble up small businesses. I mean, I just had somebody that's in the concrete business recently call me and they're like, hey, Paul, you need to get your slab board before September the 1st because concrete

prices are going to go up a lot. And I said, what do you mean they're going to go up a lot? He said, well, the last three times that they've given us these price increases, they've told us how much it was going to go up, but they wouldn't even give us an estimate about how much it's going up. The only thing that the concrete representative says is going up a lot. Well, guess what? Private equity came in and paid these huge multiples for all these private, you know, concrete manufacturing businesses where I don't blame them for selling. I mean, this is a once in a lifetime multiple that you're going to get out of here. They're levered to the hilt. Well, now they control basically all of the driving area where you can bring them in. So they've

effectively monopolized the market. And what are they going to do? Their interest costs have gone up. So they're just going to pass it on to the consumer. So if we don't have some checks and balances in place for this, and this continues further, it's just going to further close the doors for small businesses to be start started up. They're going to lever themselves to the hilt to come in and buy these businesses, economies of scale. They're going to try to sell them to pensions. They're going to try to to the hilt to come in and buy these businesses, economies of scale. They're going to try to sell them to pensions. They're going to try to sell them to endowments.

Oh, by the way, they've already filled their coffers with that. So now they're trying to offload it on retail. It's not going to end well. It may be five years. I may be early on when it, but the point is it's not going to end well. It's just not. And I am so upset that they're considering doing this because your average retail, your average 401k participant, all of the studies show they look at past performance and they make decisions based upon that. So if you can dress that past performance because they don't have to mark to market like traditional equities do, what's going to happen?

How many people are going to buy it based off performance? How many people are gonna get a really fancy presentation and go, hey, if I'd have just done this, not realizing just like real estate, no brainer to buy a property if you can rent it out for seven years and have it paid for. Even with, let's say you get 20, 30% occupancy and you've got to repair some things,

maybe 12, 15 year payoff. But at 35, 40 years payoff and the asset prices, the risk is far greater. So yeah, past performance can give you some indications of the risks and benefits of a strategy, risks and strengths of a strategy, but it's not what you should be making your decisions based upon. You need to look at the information of where you are now and do the analytics and say, hey, this asset class has had a tailwind, but do we have the same tailwind today to

carry it for the next 20 years like we did? And my concern is, hey, they put a tremendous amount of money into advertising. Seems they put a tremendous amount of money into influencing our president to, to, to provide an outlet for offloading their shares or keeping their gang going a little bit longer. That sounds complicated. I have an easier way. When Wall Street says, I got a good deal for you, I run. That's a good point.

Like look, one of two things is true. Wall Street's had a change of heart and Paul, they just want to help. They want to, they've had, they feel like they've had a good, they've had the word enough has occurred to them. They've had a really good run with private equity and you know, like, you know what would be fair here? We would like to share this with the average person. That's one possibility.

The other possibility is they can see the writing on the wall and this they've wrung every drop of beet juice out of this thing they can. And now they're ready to find some bag holders and pass it on. One of these two things is probably true. I'm going with this one. Right. Yeah. going with this one. Right, yeah. And the clear evidence, oh, when they started, when they started this, it was a $5 million minimum

before you could invest, and maybe a million dollar, but it was a huge minimum where it was just for a select group of individuals. But now they've had this success, well, it's a $25,000 minimum. What does that do? It opens up potential supply of people to come in to help provide the liquidity to offload their shares.

It all feels a little late in the game for a lot of different things here. So it's, but look, you know, the larger view here is that we've had this very activist Federal Reserve for a long time and they've just put more and more and more money in and all that. And you and I think that there's some crisis in the future. They'll have to put more money in and it's just how they roll, right? But what that's done, unfortunately is while they've kept the system going because that's their that's their architecture like oh Oh, but think what would happen if the financial system? Well, that's one thing you could think about but you can also think about the next generations and Household cost formation and that actually the whole thing isn't about making money. It's actually about raising good, healthy kids and having stable family structures and

intact communities. So this private equity stuff you're talking about, it's fancy. On business standpoint, yeah, buy all the concrete within a driving range and then the people stuck in that cone of concrete delivery within a driving range and then the people stuck in that cone of, you know, of concrete delivery are your captive audience and then you can just jack prices up on them. That's one thing you could do, yep. But that's just extractive.

It's immoral actually, as far as I'm concerned. We used to have antitrust laws and they would apply to something like that. Those don't apply anymore. No, no. I mean, the laws are on the books. We just don't enforce them ever. Oh, I had a great conversation with our kids over the weekend. Just kind of sitting around talking about economics and business and all of them are, you know, except for Will, he's

at college right now being the workforce soon. And I asked him, I said, did you do you know what a monopoly is? And, and they're like, well, yeah, I mean, isn't that where somebody kind of corners the whole market? I said, yeah, were you educated anything in college or high school about monopolies? Nothing at all. And I was Gen X, and I remember clearly having a lot of discussion about monopolies, how they're not good overall, how we should have checks and balances in place. And then that just disappeared. I don't think people really understand how painful monopolies can be.

And then you hear stories like Mark Andreessen talking about the prior administration when he went in there and they're clearly stating we want monopolies because a few companies are easier to control than and they've effectively done that in the banking business after the 2008 crisis. I mean your your small banks, your community banks that could make decisions in the local community where your centers of decision-making were based in the local community or local region, were making decisions for what best for that region. They were all taken down. The bigger banks were, you know, given the guaranteed protection of asset values to come in and take over those. So they further reduced the supply

in the community banks that are beneficial. So now you have banks that are headquartered where the decision-making center may not even be in the same region of the country that you're in that are making decisions for their best interest and it may not necessarily be for the best interest of the state or city or town that you're in. If anybody is thinking about looking in private equity I don't want to say it's all bad either. But each one, each private equity deal is a deal.

Might come with one or two hundred pages of operating agreement prospectus, very complex. You might spend ten grand just having a competent lawyer sort of tell you what it actually says. That's right. So that would just be my caution is like it there each individual It's not like private equity is like saying I'm buying gold, you know, it's it's not an asset class It's a whole bunch of individual deals that we put a bow around and call private equity and you're right. They're not all bad I recently did some analysis for a client that was looking at at some private equity and And I told him I said look I've looked, you know, 10 deals here in the past

three months. And, you know, and like you said, you've got to read several hundred pages and you've got to read the fine print. It's one of those things where, because they're so dense in information, I'll read them in bursts. I'll read 25 pages, highlight a bunch. I'll set it down for a few minutes. I'll read another 25 pages, just so I'm focused throughout the whole thing, and then go back in your notes. And so you've got to study these things several times over.

And what you gotta look for is what's, how much leverage can they take? What's the risk associated with? What market are they going into? How much flexibility did they have inside of there? And those are defined within those. And one of them actually looked really attractive. I'm like, hey, I can sign off on this.

So they're not all bad, but there's just a lot of risk in them because once you get in them, you're locked in for quite some time and somebody else chooses the exit. And you have to assume that when you want to leave, you cannot. And if you've got some of these big endowments that are wanting to leave their private equity at this point and they're having a hard time doing it, you have to assume that you are too. You know, I have the benefit of back in 2007, 2008, and even afterwards, the Real Estate Investment Trust for this big thing.

Well, they pay some of the highest commissions in the industry for the advisors that are selling these things. So, one, you got to take that into consideration. The second thing, they're illiquid. So I've got one that the client came in in a certain space and they're like, hey, what can we do with this? We've been on the waiting list for six years to try to exit this particular real estate investment trust. I didn't put them in it, somebody else did.

And they can't get out. There's no buyers out there that are wanting to go in. So you have to assume that you're gonna get caught up in something like that and make sure that you provide adequate liquidity across the board because it very well could happen. Good advice and I guess people are lucky to have somebody like you read those all those pages for them.

Because not everybody's willing to do that. No I have to if they're asking my opinion I have to it's not fun. But you know there's a lot of my jobs I love 95% of what I do, and then there's 5% that's real work. And that's real work when you have to get in there and read those. Well, I just learned something today, so I'm very happy that it turns out that not a lot will make a fainting goat faint,

but this will. You can't say a word. Oh. I couldn't help but laugh. I was like, OK, Lord, I'm losing my temper a little too much. Thanks for bringing me back to reality. I'll just come down to your farm, Paul. I'm yelling, private equity in 401Ks. See if they tip over for me.

Hey, you know the worst part about it, Chris, was I had somebody at the house two days before and I pulled out every trick in the book to try to get those goats to faint and I could not get them to faint. So it never crossed my mind. You didn't know about the private equity trick? No, it's the private equity trick. Apparently, I spoke a series of exeggitives so fast it was something the goats couldn't believe they heard before and they rolled over. And it just tipped over? And the worst part is one of them was on on a fairly steep bank so just leg-stiff not only did it fall on its side it literally rolled over once and I felt so but it doesn't hurt them but it but I felt bad for it still yeah all

right well let's think so crazy markets though I mean I just don't want to get overly repetitive, right? But obviously markets are equity markets. Stupid expensive, right? And so we have to believe that there's some whole new paradigm before us. You have to come up with some rationalizations for why this time is different, right? Which is tricky. But you know, if you said the bull case, as far as I understand it, Paul is they won't let it fall The Fed will print as much as necessary Trump will force a rate cut These are all like shenanigans as far as I'm concerned. It's like we're gonna do things To keep this

Expanding in it and extending rather than saying hey, here's we have this new technology. It's called AI Here's how it's going to positively impact both earnings, labor, capital, etc., in a generally positive way. But I haven't seen anybody make the strong case yet except to say, we're back, America's on fire, we're going to have this booming economy. And I'm still looking for the substance of that, because it's one thing to say we're going to bring manufacturing home It's another to explain how Right, so I will tell you as a local resident here in Massachusetts that our rules and regulations are

sufficient that if I was had a choice of Where to set up my new business and I could choose some non-interventionist, non-nanny state, non-overly burdensome technocratic, bureaucratic regulatory environment, maybe even Mexico. You know, I might do that preferentially, right? So I just think that I don't know how you clean up decades of sort of like, um, nimbyism. You know, our country is sort of hated on, on employers, is hated on industry, is hated on certain industries more than others, right? Particularly manufacturing.

They sure has. And it convinced the whole education of individuals that that's not where you want to be. And, and look, I hope we do get manufacturing back here. I mean, we need it from a national security standpoint, but it takes time. It takes time to work through the regulatory process. And as of yet, have you seen any major moves in reducing regulation across the board at this point? I've not seen any news come out. So we're in a situation, and I wouldn't mind sharing this because I like to give credit where credit is due.

And let's see if I try to make this as organized as possible. So this was the, the yen to Zen, his, his most recent and it's really, really good because he puts out, I mean, visually Remy does a great job in his mad king newsletter by the mad king. So this was, uh, his most recent. So let me get through here. There were a couple of things that I want to point out. You know, he's just talking about global demand index. It's slightly in the contraction area right here, if you can see on the right-hand side. I mean, it's stable. So that's good,

but it's slightly weak. You know, he talks about financial conditions are tight right here, but they're showing signs of bottoming, much like they were in 23, 24. But without taking you guys through 40 or 107 pages, he's just talking about the money supply is stagnant. Now, what's interesting is M2 is growing, but he argues in here that this is more of a weaker dollar situation. And the global central balance sheets, so this is the global central balance sheet, year over year percent expansion. And it has started to grow, but you know, it's been slightly negative since 2022

with quantitative tightening and a few other things. So where I'm wanting to jump to is, you know, this is good here. This was something he says in line of the liquidity and everything that's out there, investors aren't just long perfection They're long Crisis liquidity without crisis risk. Yeah, so they're long that the feds gonna print

But they aren't taking any of the other side of that which is well that means they're printing because there's trouble afoot, right? Yes, yes And he goes to argue that you know history shows that's a bet with almost no precedent and with a poor track record when tried. If valuations hinge on liquidity that arrives only during distress, yet markets act as, as if liquidity is already here, the question becomes unavoidable. Is liquidity truly flowing or are we just chasing shadows dressing biases and narrative and that's what I was saying that's the same thing I was saying right then yeah boy he says that's the bull case yeah that's the bull quake

that's the bull case chasing shadows dressing bias and narrative now yeah goes on down here and I like this because he just goes through and he says okay let's look at the consumer so let's let's talk about these signals here. I'll go down and show real quick red is clearly adverse It's recession signal territory. Yellow is Deteriorating or constrained but not yet outright recessionary green is supportive, you know none in the current snapshot Well, I'll be no greens in there no greens, but we go through, OK, let's talk about the consumer. You know, we've got multi-decade lows in affordability for houses, vehicles, and durables.

Right. That's clearly negative. Consumer credit flow, it's stabilizing, but it's running at about a quarter of what a normal expansion would be. So that's weakening. Wage growth is less than 4%. Policy rate's still near seven, which is a real squeeze.

Easing, a real squeeze is easing, but policy restrictive. Look at this, the personal savings rate for the past 12 months has been negative. Households are dissaving to fund spending. Is that because they have to? And that's a tricky one too, because I'm sure he's using the same one I'm familiar

with I would guess, but that's on average. That's not a median, right? So that means that the 1% who can save like crazy are part of that whole thing and the 99% who can't save so much are the ones dragging that all underwater. So that's an interesting one when you take the personal savings rate and you decompose the top 1% you take them out of the picture that things goes bright crimson red you might put two red dots in there. I mean it really looks ugly when you dissolve that into its components a little bit.

So so personal savings which I've been encouraging people build up your savings build your resiliency get you know I'm to the point 24 months is Is an ideal place to be because it just it just makes you more resilient So, you know household net worth growth that's rolled over to low single digits wealth effects fading a little bit Durable good inventories. It's flat year over year after kind of the boom-buzz signaling cautious. It's fading a little bit. Durable good inventories, it's flat year over year after kind of the boom bust, signaling cautious, it's not a crisis. But labor market triggers, claims are edging up, unemployment is turning up from lows.

So this is weak. Now, could all this turn? Absolutely. But this is where we are right now. Now, let's go back to corporate. So the global manufacturing PMI is back in contraction. It's less than 50. US manufacturing has been sub 50 for 24 months, sub 50, the longest slump since the early

80s. So that's clearly a recessionary. I did not know that until his research report. I didn't know that either. So the global demand impulse is anemic exports in real retail sales. You know, when you inflation adjust retail sales, they've gone nowhere for three years. But that's what Paul Harvey used to say the rest of the story. So the policy stands the real 10 years plus 1% real yield still credit headwind. And then financial conditions, they're tight on both price,

spreads and FX basis and quantity. So loan standards, right? Loan standards are increasing a little bit right now. So that tends to be recessionary. The liquidity backdrop, balance sheet growth is flat. Any M2 pop, the growth in M2 he's claiming has to do with the weak dollar more than it does anything. So that's, you know, corporate credit growth, which he's got a good chart in here. It'd be hard for me to find it real quick, but that's less than 2% year over year, which has historically been recessionary territory. And then you've got the US dollar trend, which is rapid weakening and a risk of overshoot of adding volatility. Now this is what I wanted to get to.

So you've got individuals out there that they're calling for a meltup and who knows, maybe it happens, right? But he says, the data is clear. Consumers are strained, corporates are stalling, and macro levers, credit, liquidity, and rates are flashing warnings, not invitations. The US consumer, long the engine of global demand, is now running on fumes. Wage growth is softening.

Savings have flipped negative. Credit excess is tightening, and household net worth is no longer climbing. Cinnamon's fragile. Buying conditions for big ticket items remain near historic lows. And on the corporate side, the picture is just as sobering. Manufacturing is in contraction. Credit growth is recessionary.

Global demand is flattening. And the policy mix remains restrictive with little fiscal or monetary slack to cushion the downside. So this is what I like. This is not fertile ground from which broad-based growth typically emerges. It's classic late cycle setup, one where every incremental gain in asset prices comes not from a shift in fundamentals, but from a narrowing set of speculative assumptions. And yet markets continue to climb. So you know, and this markets continue to climb.

So, you know, and this is a great summary. Hopes of another AI-led boon, soft landing optimism, and a belief that liquidity is just around the corner have fueled a potent but precarious narrative. The question isn't whether things can go up, they already have. Like I sat there and read that like three or four times. That's so clear in his thinking. Yeah, prices have already gone up. The question is,

given the fundamentals, should they have? Or more pointedly, if we stripe out the hype and narratives, does it really make sense to expect a second half melt up? And then he goes into kind of talking about what to look at. And the good thing is, is he gives us some clear signs to look for that. But, but it's truly speculative in nature and what take what's taking place in the market. So he goes on to make one clear statement that I've never thought of from a, from a standpoint.

Patience is a position. And we're going to have a lot of information that's going to be revealed in the next 90 days when we get into the September, October timeframe. And I don't believe that this is a time that you should let fear of missing out grab hold of you. I believe that this is a time, like I've said before, that return of capital may be more important than return on your capital.

And think of patience as a position. There's no way I'd short this market right now. There's no way. I mean, that's like stepping in front of a high-speed railway, not knowing when the schedule is. But this is a time to still be cautious. Warren Buffett clearly states, hey, be greedy when others are fearful. Be fearful when others are greedy.

And I just don't see much on Wall Street right now that tells me that there's any fear out there whatsoever. There's a full belief, as you say, reflective is better than the word reflexivity. He used it in that report. That's the reason why I focused on that. But forget about the past. Look at where we are right now.

Take the risks into consideration. And are you really willing to put your life savings on the line over a narrative that's not necessarily supported by fundamentals and that has never stood the test of time? I mean, in all historical periods, we talked about that last time with John Hussman. And I've got that chart. I can show it again. In every period of time historically that we've been here, John Hussman does a phenomenal job of laying out the 12-year returns following were negative. There's not been one exception in the past, and maybe it is different this time, but that's a big bet. You're betting against, you know, look, we trust artificial intelligence,

which is built off of all of the accumulated human knowledge and language that we have out there. And we want to trust that to give us an answer. But we don't want to look back over history and go, hey, bad things have happened when the market valuations have been this big. Bad things have happened when investors are speculating on a perfect outcome, because it could take one major earthquake. It could take something out of the it could take, you know, something out of the blue that nobody's prepared for, and then all of a sudden

that panic, fear of missing out reverts into everybody heading for the exits at the same time. So I'm very concerned that we're headed for a Wile E. Coyote moment, for those of you who know the analogy cartoon character At some point in the future if something doesn't change under the surface Well, you mentioned Buffett. Oh, let me slide this over a little bit more We talked about the Buffett indicator before ball. It just hit new all-time all-time highs like it's it's higher It's a new all-time all-time all-time highs It's now at whatever it is now 210% or something so again like all of this period that my cursor is on this is Fed intervention starting in 2009 they freaked out there

was another freak out in 11 13 15 most people don't know this Paul but 2019 things the reels almost came off I'm gonna put this in a really perverse terms but the Fed got lucky that COVID came along and gave it an excuse to throw five trillion into the markets. Things were really spicy there in September of 2019 with the repo crisis. So, and that this was that repo crisis coming, but this is all just constant Fed intervention, just throwing that up there. Now that's fine. They've kept the markets stitched together. I don't don't know what would happen paul if they hadn't been interventionist maybe we'd all be living in caves eating crickets i don't know that's their argument i don't buy it i think

creative destruction is a good thing not a bad thing but that's the argument but what's inarguably happened while they've been saving the system is they've preferentially printed up money that's helped people with access to financial markets at the expense of the people who don't Right. So those who work for a living live off of paychecks save what you know, the output productive output of their labor Theirs get hosed in this story. So that's a that's kind of a picking winners and losers kind of a thing You know like all the Fed has to be independent, you know, that'd be terrible if Trump fired Powell You know like all the Fed has to be independent, you know, that'd be terrible if Trump fired power Like well not if the feds not being independent and they're picking winners and losers

Right. These people win these lose this generation wins that generation loses. Those are big decisions They shouldn't be left to unelected bureaucrats who only care about money What's that saying you're so good at remembering quotes and and I'll think of it just as soon as we finish the podcast exactly what it is. But it's like I stood by while they came for you. And you know, they came for all these other individuals and all of a sudden I stood by and said nothing. And then all of a sudden they came for me. I guess I could Google search it and find it. But that's the problem of where we are. If they continue this, yeah, it's somebody else. It's the poor people. They don't work hard, right? But it's not coming for me. And then all of a sudden, it's gonna work its way up the chain and there's gonna be,

I mean, the middle class has been eviscerated. And we've set up a society already to where if you make a mistake, a major mistake, I mean a major fraud mistake cannot be recovered from in a market environment like this where asset inflation continues to take off. You know, ultimately it gets to the point where that last 1% owns everything and the rest are just serving at the potential generosity of the 1% and the 10% will end up in the same position of everybody else if we don't go back to sustainable long-term fundamentals. Indeed and that was that reverend who said you know first

they came for the gypsies and I said nothing. And then finally when they came for me, there was no one left to speak for me. There was no one left to speak, yes. So Ron Butler does a good job, the mortgage guy, and he opined on exactly this topic just today, so it's jogged my memory. I said, well, let's go take a look at this. He says, here, ask yourself why asset appreciation constantly outpaces income growth. That's what we're talking about, right? He said, well, because when money supply

is amped up by government assets, by government, assets do better than people. That's it. You know? So, you know, when you look at all these, you know, asset prices, they just do better than people, than income. Right? So, so that's why I look at all these, you know, asset prices, they just do better than people, than income. Right? So that's why I was kind of hopeful when Trump came in that, you know, we could finally get—and I think this is why a lot of people voted for him—is we're tired of this, we being all the people who work for a living out there in the world—farmers, ranchers, and plumbers, and everybody else.

I mean, that thought maybe would be great if people could do good for a while, right? So that's why I'd be hugely in support of eliminating property taxes, which are fundamentally abusive, and income taxes. Just get rid of them. Just, you know, all done. And then, you know, then you have a choice.

Like, you replace all of that with a national sales tax, kind of like the VAT in Europe or something. That's fine. But then you have a choice like you replace all of that with a national sales tax kinda like it you know the vat in europe or something that's fine but then you have the choice right you can choose i'm gonna by this car and i'm really expensive cars gonna i'm gonna have to pay more in taxes on that right or or less of our but you have the choice between spending in consuming

and then you actually have economic freedom, you have power and control back. All that this stuff we're talking about, print the money and then tax people on it. You know, Trump just said, you know, maybe the government is an act of beneficence, would eliminate the gains tax on selling your home. Like, dude, almost all of that gains on a home is government-created inflation in the first place. So you're creating the inflation and then taxing me to kick back some of the inflation you created. Of course it's abusive and wrong.

It's terrible. It's completely immoral. At a minimum, at a minimum, all investments should be inflation-adjusted. And then the government now has a little skin in the game, because if they create a lot of inflation, their tax haul in the future falls, not grows. That's a great idea. And if you've said that before, I haven't picked up on it,

but that's a great idea. And then even if you did that, even at the ridiculous government CPI number, which you know, I wish we did it off of John Williams' shadow stats number, right? But if you did that, that would be incredibly beneficial for the average American. It would be incredibly beneficial. You have to get the incentives on the same side of the table as the decisions, you know. So that would be great. But point is, through all this, Paul, talking to my kids,

talking with friends of theirs, talking with young people, there's a lot of people really struggling to understand even what the game, like how are they supposed to play this game? Home ownership has now been completely locked out for a whole group of people. Completely locked out. So not yours, you don't get to play that game,

which often factors into, am I to have a family or not? Because it's one thing to have a house and you can think entertain ideas of having kids and all that entails. And of course, you know, you know, this is a young parent. You need your space. Kids are crying at two in the morning and you can't have somebody yelling at you from above and below in the apartment complex you live in. It's just easier and all that. But they don't know how to get ahead. And we've talked about the insurance, right, costs now that are going through the roof and nobody's saying nothing.

And of course property taxes going through the roof, you know. What are you, what are you, everybody shrugs, what are you going to do? But the whole system is going off the rails on that front. So I think we need, I think we need some kind of a, we do need a, I was kind of hoping we were going to get a reset on this and we didn't. We're going to get more spending and the story I'm supposed to buy into is that we'll make it up on the denominator. We're going to have more growth. So there'll be more jobs and therefore more income. So people will be able to afford all this inflation that's about to come as well because

What happens when you deficit spend right? Yeah, I like to take anything if you continue it to the extreme. What's the end result? Did anybody enjoy the hyperinflation of Weimar Republic in Germany their citizenry didn't it was catastrophic Zimbabwe all the others I think Israel's about the only one that's pulled it off successfully from anything that I've studied in the past, but it was a short burst of period of time. But you know, you look at the end result, it's just not sustainable from a long-term standpoint. And, but you know, the average person, and Chris, going further than that, if you're young now, child care costs are so ridiculous. I mean, they are so ridiculous.

We had gotten together with some business owners in the local community here several years ago, and just trying to find a way, there were a group of Christian individuals, how can we get back into the community? And I brought up the topic that one of the largest challenges that most families have is the cost of childcare. It just, I mean, it's ridiculously expensive to find a safe place. So we all have the bright idea. Let's get together.

Let's see if we can pull some resources and let's try to find something that just covers the cost, right? If we don't need it to be profitable, just covers the cost. We'll try to find some good people to come in there. The regulations, the risks, the insurance costs, the blowback risks that were there, and yes, you have to make sure that the right people are there, okay? I mean, horrible things can happen

if they're not taking care of the kids. But the regulations and the barriers to entry are so high that all of us with a sad heart said, we can't do this unless we're running this thing completely ourselves there in day in and day out. And it's just atrocious what families are having to face. The cost of childcare, the cost of a home, unless they're in a situation where they have family that can help catapult them

to the next situation, the barriers that they have to climb are so ridiculously large and the amount of sacrifice that they have to make in the short term, which is hard in today's society. You know, one of the things I spend a lot of time telling my kids is if you'll sacrifice now and you'll live below your standard of living, what's going to happen is you're going to look at your friends and they're going to be way ahead of you. But by the time you hit your mid-30s, you're going to start getting the skate velocity and you're going to have freedom when you need it the most so that you can be there

for your kids when they're teenagers, so that you can, you know, help provide some opportunity for them, but you're going to have to make sacrifices now to do it. Well, I educate them. Most people don't know to educate them. They're just fighting tooth and nail to try to get by, and society's moving so fast that they don't really understand a lot of these things that have been taking place, because the education system hasn't given them the knowledge. I think, what is it? There's a scripture in the Bible that says, my people die for lack of knowledge. We're not educating people with the skills that they need to be able to sustain and keep our government from doing the things that they're doing.

And as bad as I hate to say it, it just looks like the large majority of our politicians use the position as a stepping stool to build their own wealth for bragging rights more so than actually going and serving the American people. Because in no way should liability only for a 16-year-old be $4,500 a year to get a car, which is worth more than what the car is. That should not be. So the insurance commissioners and whoever it is at the federal level is not focusing on serving the American people.

They're doing whatever they can do to allow these large insurance companies to transfer their losses to the average citizens. And that's what we've got set up right now. Most of the regulations that I see, especially in my industry, are raising the barrier to protect the big firms. So that, so that individuals like myself, you know, unless you're willing to fight something for that independence and go out to be free to do what's right for your clients, you know, they've raised that barrier to entry to the point that

you pay a huge sacrifice to step away. And, you know, I mean, everybody knows discipline is hard. Everybody wants the outcome that discipline will bring about, but nobody wants to do the work in the short term to get there. There are people, but en masse, most people don't. Or they don't know what sacrifices they need to make. And it's just hard

I mean, I just I'm trying to find somebody to do some landscaping across the street and I had I got a guy like him a lot But the answer was well The liability insurance alone is a couple grand then there's the workman's comp stuff, right? And then I'm gonna have to take out workers comp insurance Which I don't understand why you need two of these things and then of course you got to do the liability shielding so you got to start an LLC right in this state that's a $500 filing fee plus whatever your lawyer fees were the point is before you can

push a lawnmower you might be out ten grand the state has taken its nibbles right and it says all right we will let you operate some landscaping equipment but we're gonna need ten grand up front how is this, but we're going to need 10 grand upfront. How is this not like we're in the lower Bronx and veto is telling us the laws of open and a bodega, you know, it feels the same to me. It's just a different mob. That's all, but it really inhibits a formation capital formation, starting out all that is to it's hard.

That is hard. And if you're, if you're a pharmaceutical company, you can do pretty much whatever you want. You can't you have no liability. If you're a big corporation, you've got a team of lawyers go tie it up in court long enough to where nobody can afford to fight you. It's stacked against the small business, the individual, you know, and that's just another sign that that that our our government's not serving the people which is what they should be

Well, I agreed and I had hoped that this one was gonna serve the people. Well, I think that there's this probably explains a lot of let me see if I can pull this up real quick of The there's a lot of anger out there right now about what's going on around the Epstein stuff and all that I know it's not directly market related, but to me it's instructive, Paul, because the level of like fight, it's starting to boil over, right? I'm starting to see people both sides of the aisle like this, like this thing transcends. This isn't left right anymore. This is up down.

These are people who are morally outraged versus those who just wish it could just go away for reasons, you know? And I think that that's what happens. You know, so listen, this goes on long enough and you just sort of give people no opportunities. JFK said those who would make peaceful revolution impossible make violent revolution inevitable. And I would consider that New York City's considering electing a openly Marxist mayor is a form of violence, in essence. It's going to be very violent for the small businesses there, for capital formation, for

people of means fleeing, leaving behind an increasingly destitute thing. But that's what you get. When you just throttle too hard, you end up with a demagogue, a populist, a Marxist, you come up with some reaction that says, we don't feel like there's any other way out of this, you've left us no options, we'll take the Marxist, you know? Unfortunately, that pendulum swings the other way. It swings too far the other way,

because there's been enough, because there's generations that have experienced the pain of the other side. They've read it in the books But it's one thing there's a difference between theory and reality. It's one thing to watch somebody else go through something painful It's another thing to go through it yourself The Chris I do believe that the Epstein thing matters to markets and in our society in general because if you're not if you do not have a love of truth, and you allow deception to reign, and you protect predators in that area, no matter how you justify it. Okay, I've heard the justification, somebody's like, well, it would be a market calamity. Because, you know, if it's true,

worst case scenario, all these CEOs are carted out of these major corporations when the stocks are going to collapse? Well, no. Corporations have succession plans in place. That's what vice president is for. It may not be the person that you know that you feel that comfortable in, and yeah, probably going to have some market impact. Does it mean the death of a corporation if they've done what they need to do, if the CEO walks out the door?

For whatever reason, no. It's a surprise it's a shot that markets don't like. But if you're going to accept deception, and, and no justice in one area, then how's that any different than nobody went to jail for what happened during the 2008 crisis at the big banks that preyed upon the individuals. If we don't love the truth, we're not going to have a society that stands the test of time because it's operated on deception.

And deception means that as an investor and as an individual, you're not walking in the light where you can see what's taking place. You're walking in the dark, and there's a great possibility that somebody's swinging a baseball bat in your direction, and you're never going to see it coming. So I do believe that it matters because it's a core part of the morality of our society. And one of the things that has caused the U.S. to be great is we were trusted. Our word mattered on a global scale. Our rule of law mattered. But that doesn't seem to matter anymore. And there's no way America is going to continue to be

great if the rule of law doesn't matter. And if there's... Yeah, this goes way beyond just the issue of, yes, we need some consequences for these predators, right? We should, right? Otherwise, but then there's the law, justice has to have both the appearance and the reality, right? And you don't have either when you have a two-tier justice system when there's a certain class of people that do whatever they want, get away with it every single time, right?

And that leads to resentment and frustration. But the market impact of this that I wanted to talk with you about, because I think everything connects to everything in my world, so maybe I overconnect things, but it's how I think. I don't know if he's right or not, but Steve Bannon, you know,

he's a pretty decent political insider and smart guy, obviously, but who knows if his predictions are better than anybody else's, but he thinks that the GOP could lose 35 to 40 house seats if they Don't get on top of this Epstein thing by fully releasing the files That would have some pretty dramatic market impacts

Wouldn't you think because a lot of the market is kind of depending on Trump being able to get his program through if that happens I would submit to you the Trump agenda is dead Nothing happens from that point forward I would submit to you the Trump agenda is dead. Nothing happens from that point forward. Um, and, and you know, it's just two years of stagnation till the next presidential election, we'll see what happens then. I mean more, uh, impeachment. I mean, it'll absolutely deadlock everything.

Now there are some, uh, who was it? I can't think of the individual that claims that, that, Hey, just because the big, beautiful bill passed that locked in everything that Trump wanted to accomplish and the rest of it's just dressing up around the edges. But I would assume if that political pendulum swings far enough in the other direction, you can upend everything that's been done right now. So I don't understand. And it wouldn't surprise me.

I mean, there's no way that I can support anybody that that voted for to not release those files so hopefully somebody else that I can support will step up and run against them because I think they're gonna have a really good shot of replacing them as they should too by the way yeah so but this this is starting to get you know again to your point from the Mad King, this, we're priced for perfection. I see some possible imperfections. And I was like, hmm, this could be a little awkward, right?

But we're priced for this, everything working exactly as it should and very, very smoothly. And we're at a very awkward political juncture here right now. And this is, this is really bipartisan. I don't know if you saw this, but the Rasmussen guy was saying that, and I love Mark Mitchell, but the Rasmussen reports, they do the best polling out there. I trust them the most out of anybody. Two-thirds of every political category, that's 68% of Democrats, 66% of Republicans, 69% of independents or unaffiliated voters Reject the idea that Epstein case is closed only 16% of America thinks the case is closed

two-thirds across the aisle even Stephen say That there are dozens of powerful and wealthy offenders who need to face justice That's a startling the poll right there. That is real political Kryptonite right there, that is real political kryptonite right there. This is, this is potent. This has real legs on it because it's a moral issue, it's an up down issue, it's not left right anymore. And then as you've seen, Trump has been working really hard to make it into a left-right thing by saying, oh this is just a hoax put together by the left, but the left isn't buying it, the middle

isn't buying it, the right isn't buying buying it and I've never seen him be this politically tone-deaf before it's kind of shocking how far off of the Political tone he is at this point in time Yeah, there must be somebody in his ear that's hiding all of those bowls from him at this point and keeping him from reading the room because. Yeah, not getting in front of an audience. Yeah.

Yeah. I mean, you're right. And that's something that people can come together on, right? I mean, they can play us against each other all they want, but there's going to be something and this may be the thing that brings people together at this point, right? It's so frustrating. I mean, I hope that this administration was going to come through and follow through, get spending under control. You know, the short-term pain for long-term gain, because short-term pain for long-term gain is true.

I mean, that's why those of you who have been able to accumulate assets to worry about having to invest it, you made short-term sacrifices to save that money you did without lifestyle in the short run so that you're in a better position in the future. But yeah, all of a sudden that wants to be thrown out the window. Those lessons that history have taught us are no longer valid. I mean, it just doesn't make sense. And then, you know, taco. I mean, when somebody first said that, I was like, nah, he's not going to chicken out.

You know, Trump always chickens out. And that's, especially when it comes to the market or whoever's in his ear, whatever they're telling the catastrophic outcome is going to be, if it's going to be a catastrophic outcome now that we deal with it, it's going to be far more catastrophic in the future the longer we kick this can down the road because there's what's the exit Chris? I mean, what is the exit? I mean, if we keep doing more of the same and expecting different results, I just don't

see where the exit comes. No, I don't. You know, this is, you know, we're talking about here to take, well, you know, there's markets as money, but there's this other axis too, which is morality. And you know, you and I are people of high integrity and we'd prefer to live in a world of high integrity. I think 95% of people want to live in that world. And there's just a few percent of people that can really make things bad for everybody.

And it's just, that's how it is. And they tend to float, unfortunately, through politics. It's a thing. It's always been a thing. But, you know, to me, Paul, yeah, you know, I can talk monetary policy, but it's a moral abomination that the Federal Reserve has destroyed an entire generation.

It's not a financial issue, it's not a monetary issue. I don't care about system stability. I care about the fact that young people today can't get a leg up and can't get started. This whole thing with Epstein is just exposing, it's a moral issue again. It's like, no, you can tell us that you lost the data or somebody else destroyed it, but don't tell me it doesn't matter, because it does. Moral issues matter, Of course they do.

Of course you can't say they don't matter or it's too old or that was then and tomorrow will be a better day. Without consequences, how's that gonna be? And then beyond that, this idea of moral hazard, you know what I'd like to see before I shuffle off this mortal coil? I would like to see the prudent

and those who've made good decisions rewarded Instead of the people who gamed the system and broke it Because that's what every bailouts been in my entire career the people who did the damage Also got the rewards of the bailout and the people who made the right decisions Maybe didn't buy houses because they saw they were overvalued or step back from the market because they saw it was like overvalued or just were making prudent decisions. The system has said invariably we're going to punish you. Right.

Right. It has. What kind of message is that? It's a whittling away. It's a control. First, what was it Thomas? Was it Thomas Jefferson? Thomas Jefferson said if you give the

control of your money over to a central bank first by inflation, then by deflation, they will rob you of all your wealth because they know when the deflation is coming. But you're right. I mean, I think it was talking about, I think it's actually more than a couple percent. Jordan Peterson stated, if I remember correctly, 10% of society is psychopaths or sociopaths? I can't remember the definition of psychopath and sociopath. Sociopath has no feelings, right? But they have no regard for others. And his argument is, out of that 10%,

a just law system keeps them in check. Because when one of them does something that capitalizes immoral on others, you have to have a legal system that delivers consequences for that. So that some of that 10 percent looks and says, I would do that, the consequences are too severe. We've got to go back to that. Unfortunately, that pendulum has to swing the other way.

It has to go from the elite have enough money to buy these attorneys to get out of everything or buy their way out of it to where they're treated exactly like everybody else within the system. Because I'll tell you one thing about the court system. If you're poor and you get into a situation know, one of our areas up here has a drug court, which has been absolutely phenomenal in its outcome of keeping people out of jail and giving them a chance to become sober. Right. But once you get into that system, the fees that you have to pay, the cost that you're having to pay are exorbitant. Right. I mean, it hinders them for the rest of their life as expensive as everything else is. But yet, if you're connected in the right places and you've got the money for your parents

or you yourself to pay enough attorneys to get out of it, then you can get out of these things. Yeah, you pay a little bit of a price, but it's not catastrophic overall. And it's got to get back to the point where justice reigns again, and that pendulum is going to have swing in the other direction. There needs to be severe consequences for praying upon the American people and praying on the elderly and praying on others. There has to be there, but right now there doesn't appear to be any at all.

Not from what I'm seeing. I mean, scams and frauds are continuing to increase, and we don't have the, I mean, yes, they're good. There's legal systems in place, but they're not hunting these people down and making them pay the consequences en masse. They're catching some of them, but they're not catching all of them. And why don't we use,

if it's coming out of these other countries because of technology, and they're able to get into these local, into the households that they would never get into before. The one thing the Trump administration did use was the sanctions or tariffs against other countries to try to stop the fentanyl flow, which is a great thing. Well, let's stop other things that are coming in from other countries and give them a reason to make sure that they're not praying and scamming our individuals. And when we have citizens within our country that are scamming individuals, let's make the consequences so severe that everybody stands in awe and says, you know, I'm not going to do that.

I might be inclined to do it, but I'm not doing it because the consequences are more severe than the reward that I might get in the short run. Yeah, indeed. I never understood why, you know, like a horse thief, they would hang them. I'm like, that seems pretty severe. But to me, a horse is something you sort of hobby around on. But back in the day when they were doing these things, if you stole a man's horse, you might have killed him as good as killed him, right?

Because that was his only way of making a living or getting through the winter or whatever, right? So, so it was sort of an eye for an eye. Like, wow, you put this person at risk of death, you get death, right? So at any rate, then I sort of understood it, but the consequences have to match in some way, shape, or form, you know? And I remember a guy told me, this could be an apocryphal story, I don't know, but he said he had a friend who was wealthy enough that it was the only guy he'd ever been with who just didn't care about speeding tickets or parking tickets. They were just sort of this friction in his life. So for him,

he like never sweated. He's like, oh, there's parking everywhere. You know, we'd worry about like trying to get to a game where you're going to park and you got to find this guy would just double park somewhere. There would be a ticket. He paid. It was just for him. It was just like there was sort of like a rich person's approach to, oh, yeah, for me, parking's everywhere for you. I understand. It sounds like a real challenge, you know. Yeah.

That's a pretty good analogy of what society has become at this point, really. Yeah. Well, that that's of course all enabled by our activist fed. So if Jerome gets fired, I don't really care. I actually think that feds should be ended as a concept. I don't think we need them and I honestly think that our own government should be issuing its own money. We don't need an intermediary a middleman who ends up charging us through his banking cartel buddies. 1.2 trillion that's how much the US government's gonna pay for the privilege

of borrowing money from the banking system. So it's a 1.2 trillion, that's how much the US government's going to pay for the privilege of borrowing money from the banking system. So it's a $1.2 trillion service fee. It seems a little steep. I bet you could administer the whole thing off a laptop these days in a little AI. I bet you could. Let the free market reign. I know I'm going back to this theme, but what's AI? It has the ability to gather all of known language and publications and everything that's out there, all the information that we have.

Yeah. And it's incredible in its outcome and ability to calculate, do mathematics and problem solve and look at different scenarios. So what's different than the free market when you've got investors that have real money in the game and let them set interest rates in the short term? Long term, right? There wouldn't be any difference to the Fed coming in. It's central planning. Isn't that what communism is, is central planning? Am I wrong in that? It's a whole idea. A small group of unelected people know better than everybody else. Right, right. But that brings me back to the point.

We can fuss about this all we want. And if there's anything that I could do to change it, I would. And hopefully talking to people and having conversations, we're having more conversations where people are speaking out and I encourage them. Call your representatives. Let them know. If you don't let them know, because what's happened,

big money's getting in their ear. Okay? So big money's paying people to be in their ear all the time. I know you have to take time out of your day. Reach out. It may not make a difference. Maybe it does. But if there's enough of us that are constantly in their ear and they don't do anything, then that's going to help enough of us go out and find people that don't want to be there

that will make the sacrifice for future generations to go in to try to make a difference and then we try to hold them accountable. So the thing is we want to change this but at the same time we got to play the game by the rules that are forced upon us. The thing that I can say right now is is we've got to do you've got to have a strategy in place you've got to choose or know your strategy. If you're gonna be be passive, stay there, but at least understand the consequences of failure if we don't get the Goldilocks in perfection from this point forward, because it is true speculation in the eyes of history that we're going to come out of this perfect. Now, do we go two more years? The

timing is impossible. Okay, when you've distorted all of the signals that have helped people step aside the timing is gonna be impossible And you're gonna have to have volatility But understand the strengths and weaknesses of your strategy if you want to be passive, that's fine At least understand that if the market goes down 50% you're gonna go down 50% if John Husman and And what he put out in the last conversation that we had about the data from history, and no period of time have we been anywhere close to this from an overall expense ratio of the market or valuation level. And anytime that we've been close, there have been negative returns over the next 12 years of the S&P 500. Why is it 12 years? Because just like Jesse Livermore stated,

you know, especially in the short run, the market can stay irrational longer than you can stay solvent. I wouldn't short this market. I believe that you could get wiped out in the short run. But this is a period of time where if you've got a strategy that's risk managed, it's not going to be perfect. You're going to have some volatility, especially if you're playing the game by the rules that are forced upon you. But at the same time, missed opportunity is a lot easier to make up for than lost capital. And let's say we're on the verge of a hyperinflationary holocaust and asset prices are going to go up dramatically. The reality is it may not necessarily be those stocks that are doing good right now that are going to be the best performers over the next five to six to seven

years because if we have a hyperinflationary holocaust you're going to want to own the things that you have to have, the commodities that are out there. If we have a currency crisis, emerging markets, big commodity producers that are producing all the things that we need are so ridiculously undervalued right now from a long-term standpoint, they may be better places to be. So just as an investor, we have a strategy. Make sure you understand your strategy. No, you know, if you don't know why you own it, at least make sure your advisor knows why you own it. And that the reason you own it is more than the fact that it's just a popularity contest.

I was trying to find that husband chart, but well, Oh, I got it right here. Let me pull it up because I got it just in case we'd use it. Well, oh, I got it right here. Let me pull it up because I got it just in case we'd use it. Okay, so I'm going to go back up here and we'll lay the basis. So this is, Huswin goes back to 1926 over here on the left bottom axis and on the top here is 2.8. This is the Great Depression over here on the far left. And this is non-financial market capitalization divided by non-financial corporate gross value added. Anyway, this evaluation metric without going all the details from that. So this shows where we are right now in the graph throughout history, but then he goes

down and he puts together a scatter plot. Now these things sometimes take a lot of time to read, but each of these little blue dots is of valuation metrics here. So this little blue dot right here was a valuation of let's just say 0.9. Okay, the subsequent 12 year return and let me let me highlight that the subsequent 12 year return from that dot was 18% a year. Okay. So what this clearly shows us is in all of these starting points throughout history,

the lower the valuation, the higher the return. Okay? Now, if we get down to where we are right here, we're right here. That's the most expensive throughout history where he's looking at. And if we draw this over, sorry, let me go back on that—if we draw this—okay, I'm really messing this up here, Chris. That's an anticipated negative 6% a year return

over the next 12 years. Here's the zero point, okay? That zero right there. I'm butchering this whole chart. But if you look at this zero return, every one of these other actual historical plots has had subsequent negative returns for the following 12 years. So let me back some of this stuff out of here. This is where we are. Should we be speculating? And is the market speculating? Because if you look at the weight of the evidence, what is it? You know, people that are really good gamblers, they know

the statistics on the hand that they have, they can control everything, but they know the statistics on the hand that they have. You know, so if you don't even have any face cards, or not even a pair, are you going to go all in? I mean, that's basically the hand that we have right now in the economy. You don't even have a good hand. But you're gonna call everybody else on the table blind because we've got an unknowable future.

So you have no clue what the hands are for the rest of the people at the table. And I will tell y'all, I'm butchering gambling because I'm the easiest person to read at the table. So I'll play blackjack, but I will not get into poker because I have no poker face. I mean, I can put glasses on. I have to, you know, I can go in the other room and maybe do good, but that's about it. So that shows where we are, and that's that negative zero line right there. So

valuations are stacked against us. Even look at this. So this is out here on the range. Okay, that was expensive But the market in the subsequent 12 year period of time only did 2% a year Yeah, and and by the way Just let me just really believe her the point that that's thing. You've circled in the lower right quadrant down there That that worst time ever If you know what if there was some debate to be had Paul It's some other point one of the dot a dot with that equivalent reading which is what 2.8 or 3 3 something I can't really see let me back that out because I can't read it out 3.4 6

Okay, just draw a dot anywhere straight vertically up there somewhere. Just doesn't matter. Like, there would be a dot up there somewhere, right? Yeah. There'd be a dot up there. We'd say, okay, well, here's how it worked, and we could go study that dot and say, okay, why in 1948 did it also have this crappy three-point whatever reading? But the returns were positive. There are zero dots up there. There are none.

None. So that means something has to fundamentally be different. The only thing I can think that's truly different right now, because it's really is very disruptive, is AI. You want to know the funny part of this story, Paul? You can go to AI. And by the way, Grok 4 Heavy is the bomb. It is really unbelievably impressive. But that said, go ahead and ask Grok or chat GPT4, either one of them, and say, hey, tell me about the most likely outcome of AI becoming dominant within our economy, and they'll all give you the same answer, highly deflationary.

It takes jobs away, right? It doesn't create more jobs. It doesn't create more prosperity for more people. It does the opposite of that. It more hyper-concentrates the wealth to those who are the operators of that new AI digital universe, and it has a lot of losers in it that frankly we already know how we deal with losers in our culture we're like oh yeah I guess you should learn to do something else right like we have no compassion there's no

heart right you know they just would pass a law that you can't sell raw milk and all the raw milk farmers are gonna have to go figure out something else to do right they don't care so so I would just counsel people that this idea that it is different this time and there's this really bright future, go ask AI about that and see what you come up with. I'd be interested to see if somebody, maybe, maybe Grok just tells me what it thinks I want to hear. I don't think it's doing that, but maybe, you know, it's not that I want to hear this, but I've already deductively sort of run through this idea that if AI can do the same job that a person could

do, but it will do it tirelessly and better, it's going to take that person's job. Yeah. Cause that's just the world I live in. Right. So, yeah, it sure puts that what was it? The, uh, what was the organization that that had an advertising campaign several years ago That says it's 2030 you will own nothing and you will be happy. Oh, that's the WEF

WEF that's right. Yeah, we can own it for them. Yeah Hey, you know, and that's one of the reasons why I got my goats. I got my you know Sharpening working on my soil not everybody can do that, but everybody can do it in some manner. I will say, because of time this year and some of the things that we had going on the family, we did like our tomatoes and some raised beds. We've had some asparagus and even lettuce. Like Holly and I had the six foot by four foot raised bed.

We ate lettuce from, you know, in the fall and in the spring that we grew and it's, you know, I'd hate to have to do that to live. I watch these shows with people on Alaska that live off the land. They're brilliant, Chris. I mean, they work hard, but they're brilliant. And so, but I'm, you know,

hopefully we don't have to use those skills, but those are skills that I believe that, you know, if you're inclined to it at all, learn them. And that's what community is about. You know, it may bring us back to community to where everybody's going to have skill sets that we're going to have to rely upon if this comes worst case scenario in the interim period. What we can do with the resources we have is try not to get caught up in the narrative. have is try not to get caught up in the narrative. Remember, how many people that are out there that now that they have the information from the COVID era and all the propaganda that was put upon us, right? That would have made different decisions if they had the information that we have today.

Okay? So the markets are no different. It's just that we all buy into them because fear missing out, the belief that's there, the pressure that we're feeling. You have to control those emotions of fear. Don't make decisions out of fear. Try to control that. Sit there, pray about it. I'm big, just pray. Bible tells us, I don't know how many times, a ridiculous number of times, that should stand out. Do not fear. Okay? We got to make the best decision that we can make from a long-term how many times, a ridiculous number of times that should stand out, do not fear, okay?

We gotta make the best decision that we can make from a long-term standpoint with the information we have today, and I don't believe that there's gonna be any one asset class that's gonna save us. You're gonna have to be diversified in there. There's some that I feel ridiculously comfortable over-weighting, but I'm not gonna rely upon one particular asset class that's going to be my savior for

me. I may overweight it, but I'm also going to be looking at other areas to diversify because we don't know what the future is. We don't know how things are going to change. We just have to take the information we have today. We have to have a strategy in place that can help us adapt in a consistent manner to an ever-changing environment as the years ahead unfold. Well, you know, Paul, the story is as old as Wall Street.

You know, there's times for fear, times for greed. Sometimes you want to be overweight in growth. Sometimes you rotate over to value. And sometimes you rotate into consumer, you know, cyclical staples and things like that. But you should also, there is one asset class you can really rely on you should rotate also into fainting goats obviously They're a blessing from the Lord to make you chuckle whenever whenever you get really upset about something So that's the one asset class you can count on it will save you

Under certain circumstances when no other asset class will perform quite as well. So I'll tell you another funny story about those goats. This is a good one. So it was last winter and I was actually listening to you and I had because the goats were loud and they're talking to me the whole time the chickens are there. I had it on noise canceling and I'm feeding them and watering and kind of petting the cats and just, you know, like sitting there in my own little moment, oblivious to anything that's going on

around me outside the animals. And I'm just like thanking the Lord that I've got this life here on the farm and just enjoying it. And, you know, this was just great to watch them and name. And I've got one that I call Joseph because he's multic multicolored. And all of a sudden I'm kind of sitting there and they just all, they fall over. And I hit pause, I'm like, what did I do? And in the background, faintly, I can hear Holly Kaplan. She's laughing as hard as she can possibly laugh. And it was as simple as this.

She had one of these Columbia ankle length, long, bright red coats, because it was cold that day. And she came down there. And when she walked around the corner, you know, this red creature pops out and all the goats faint. And, you know, you never know what's going to cause them to faint. I would have never imagined that that did, but it made us chuckle at that time too. Well, for everybody who wants to talk to Paul and his wonderful team, just go to peakfinancialinvesting.com. There's a very simple form to fill out. And

within 48 business hours, somebody will be back in touch with you from Paul's team to schedule an appointment. Come on in, give them a ring. And I will say, I love going through the plans because it's beneficial to everybody that we run into one way or another. At least gives them the peace of mind to know where they are. And half of making good decisions is knowing where you are. Do you need to speculate? Do you need to gamble? Can you afford to give up a little bit of opportunity in the short run? You know, and it helps you understand where you are instead of feeling like you have to chase some arbitrary index. And then don't get me wrong, it's a benchmark,

it's important. I'd love to beat the S&P every point from this point forward. Impossible, but would love to. But more importantly, when you know where you are, it gives you the ability to make wiser decisions. That's why I say the wisdom is in the planning. All right, well for everybody, I hope you enjoyed this. We went a little off the reservation, but

sometimes you have to go a little off territory to get it back. Good look at the land you're on. So with that, Paul, thanks so much. We'll see you next week. Sounds good, Chris. Look forward to it. you