Peak Prosperity - Finance U: China Has a Winning Hand While US Consumers Are Tapping Out

Episode Date: June 6, 2025

The China trade wars are anything but over, US consumers are leveraged up, tapped out and rolling over, And Trump is fretting over the huge impact that loss of China’s imports represents.Click Here for Peak Financial InvestingClick Here for the Peak Prosperity Annual Summit

Nothing in this program should be considered investment advice. It is for educational purposes only Please hit pause and read this disclaimer in full It's very prudent to be cautious right now and to be more worried about the return of your capital than return all your capital The following is the audio version of a video released at peak prosperity calm The following is the audio version of a video released at peakprosperity.com. Visit peakprosperity.com to watch the video and to find other insightful content such as articles, discussion forums, and exclusive subscriber only content. Hello, everyone. I am Chris Martinson. Welcome to this episode of Finance U. I'm here again with Paul Kiker of Kiker Wealth Management.

Today we're going to be talking about, well, what's going on with China, the tariff tiffs? They're not over at this point in time. And also there's some weakness in the jobs numbers. We want to look at the dollar and maybe a couple of other things in the credit markets. So we're going to discuss all things market, marketrelated, and they've been perplexing and weird and a little off. Paul, it's a tale of two worlds. The markets keep going up, and the number of people I talk to from all walks of life

and all levels of sophistication aren't buying it. Remember, we talked about the K-Fabie markets a while ago? I'm running into more and more people more people this isn't me leading the witness I just asked like what do you think of these markets and more people are going? I think they're full of s, you know They don't quite get it. Right? So that's right I'm seeing the same thing just in the average individual that I run into they're like hey, this is great My accounts going up, but how can this be unsustainable? Like something doesn't feel right. And this is an area, I think it's all technical, Chris. I think it's technical flows. One thing that Mike Green or Professor Plon, that he's highlighted for quite some time is just passive

investing is just price-insensitive buyers. As long as employment remains, people are into the S&P 500. that's part of it. You've got the options market that's ruling a lot of things and it pins these prices where the market tends to work its way over there. And so I think a lot of this is technical. Now liquidity's easing a little bit around the globe and you know, there's excess optimism,

but everything's changed under the surface compared to where we've been over the past 10 years, really since the great crisis. But yet investors are, are retails near panic buying. We've seen record hedge funds moving in. There's a lot of technical that's taken place while they're not paying attention to what's taking place under the surface of the market. Well, I mean, you know, there's all this hoopla and around. There's always a story, right? And I'm

impressed, Paul, how we jump from one story to the next tulip bulbs, railroads, housing. And now it's AI, all things AI. I think you've probably seen them on zero hedge, these breathless articles by UBS and Citi and all the rest saying that they think that somewhere between 20 and 50 gigawatts of new installed data centers are going in. And so a gigawatt meaning that a billion watts of power is going to be consumed by that data center if it's a gigawatt center. And to put that in context, they were saying, ah, there's about $30 to $50 billion of expenditure that has to go into each gigawatt.

So that means at $50 times $20, I can do the math in my head, that's a trillion dollars. So they're looking at, you know, is it possible for Nvidia to have, you know, tap into a trillion dollar revenue market. I'm still, Paul, I'm that guy, I was that guy in 1997, 98, saying eyeballs? Pets.com, are you sure? Oh, you don't get it, Chris, you don't understand. But I'm still struggling. So Paul, what is the business case?

We spend a trillion dollars taking natural gas, turning it into electrons, making that electrons go into waste heat in a data center, and we get what out of there? We get some information, they say. What do we do with that information that's worth a trillion bucks? How do we how do we get our money back? That I haven't figured out yet. And the ramifications is it trickles down through the economy. If all the jobs are replaced as they're stating that they will be, that's going to hit the most educated class, right? Your plumbers and your construction individuals are going to be in great shape, but how good of shape are they going to be in if you

don't have the wealthy that are building these massive houses and building all these extra rental apartments? It's deflationary by nature, ultimately, if what they're saying is going to occur, occurs. And furthermore, if they're reinvesting all of that back into the building of the infrastructure, they're going to have to redirect some of those dollars potentially from these record stock buybacks, which is support of the markets. I don't know how we get this Goldilocks or cinematic outcome. You know, in the movies where you always get the 1% outcome for the other 999% times that you would have passed away or 99% of

the time that you would have passed away with the calamity. Well, it's official now, even Elon Musk has come forward saying exactly what we said last week that, uh, Trump at all have thrown in the towel on trying to rein in government deficit spending, just gave up the project. And now they're trying to reshape this as, oh, we're going to grow the bottom line, you know, we're going to grow the we're going to grow revenue and make this all okay. And of course, there's a lot of skepticism around that.

But Elon just came out and said that he's he's just aghast. He thinks this spending bill is an abomination because it really seems to throw future growth under the future of the country really under the wheels of the bus. So with that said, you know, government deficit spending is constructive. I'm expecting a pretty hot GDP reading this second quarter because we're not importing as much. We'll get to that data in just a second. And as you know, GDP is supposed to be all this economic activity, but it's exports minus imports, right?

So you take that out. If you're importing less, you don't subtract as much I from the E, the exports minus imports. So there's gonna be less of a subtraction because we're not importing. That gets counted as a positive in the GDP requirement, but you might notice that's fewer people buying and spending, which sounds like economic activity.

So it's kind of a weird thing, you know, how they measure GDP. And also the front of that is it's G plus these other things. That's government. So the government has been spending like drunken sailors, fewer imports. It's going to be a blockbuster GDP report. That's what I think is coming. Yeah.

Well, Atlanta now cash GDP is projecting that it's going to be a great number for this quarter. So not surprising with things rebalancing back around from what we're seeing right now in this fiscal spin stimulus, but back to Elon Musk.. Now, I've been on the fence with Elon Musk for quite some time. Just is he, obviously he's brilliant, he's done some unbelievable things. But is he really genuine? And I like to see the actions over the long term for what happens with someone. The fact that he's this angry, that he's, he's just can't take it anymore. I think he said, I can't stay silent anymore. Isn't that exactly what he said? And he's raging against this tells me that he genuinely

wanted to make a difference to try to steer the direction of this country. He's smart enough to see where this is going. And he's trying to wake people up, it seems. And that gives me hope that at least somebody in a position of power is willing to rage against the machine at this point. Ray Dalio gave us warnings. J Jamie Demon, CEO of JP Morgan gave us warnings. I've seen a lot of heavyweights come out lately and say, hey, hey, hey, hey, this is no good. The bond market's gonna break.

Something's gonna happen. We're not gonna like it you know but I don't see I see only bipartisan support for spending more they're very clear about that no doge savings let's spend more both parties are pretty well in lockstep around that minus three maybe four people in total. You got Massey, Johnson, Paul, you know, you got a few, but, but that's it really. Well, and the problem is Chris is what concerns me. The average person's not going to change their behavior until the pain of changing

or the threat of the pain of changing is easier than the path of staying the same. And for obviously, for all these career politicians that have been in there, have been riding this liquidity wave, the Fed's been able to print, you know, they've had low probability outcomes to, that have been in their benefit, the benefit of them being in power, I just don't see there's not enough pain for them yet to change. I mean, nobody's gone to jail for the decisions of the past. 2008, there weren't any consequences. We haven't seen any of these politicians lay bare for wherever that money was going that Doge has been finding and cutting out of USAID. So what Doge has been finding and cutting out of USAID. So what stick has been delivered to get these politicians to make a difference?

And the problem is, I think they're so disconnected from reality, and they're so narcissistic in their behavior now, and greedy, I guess, in their ability to recirculate these dollars back to them, even if it's just the praise of their constituents Oh, you've gotten me money instead of standing up being a fiduciary and leading this country and The longer this goes on the more painful the ultimate outcome is going to be Agreed and Paul as soon as we come back I want to talk about this I want to talk about the China tariff tiffs.

There's a lot going on here. We'll get back to this just as soon as we return from this message. 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

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Again that's peakfinancialinvesting.com and I'm Dr. Chris Martenson urging you to act now. All right, now we're back. Paul, can we talk about this real quick? Because I think this is still flying under the radar. There's a lot going on. You know, there's Ukraine, drone bombings, there's the, all the political machinations. This hasn't been fixed.

I think people just move on and they're like, oh, didn't Trump rewound tariff amounts with China? We're, that's over, right? It's not over so the most recent data We have first is the number of te use which is a 20 foot Container so that's how they measure them you can see here measuring them in by the millions This is a very low amount so there's in terms of volume not a lot coming over And this is just number of ships vessel count here. Here you can see, what are we, about 35.

Also a very low amount. So this is where it was supposed to have been fixed, but look what's happened the past few weeks here. Right? We're not getting the volumes and it's not coming in. And by the way, you know, they all, China needs us. They need our dollars. You know, I'm like, maybe we, China needs us. They need our dollars. You know, I'm like, maybe we need their stuff more than we, they need our dollars.

Not clear. So this is, the pink stuff is machinery, telecoms, vehicles. It's actually high value added tech include, including semiconductors. And the blue stuff is fuels. These are more complex products heading out to the right on this chart and it's less complex. The U.S. mostly ships fuels to China and a little bit of high-tech stuff, but China mostly sends us very high-tech stuff that is complex manufactured products. So when you look at this, it's kind of like who needs who more? You know, fuels, you can get them anywhere. It's a very, it's just a, it's a fungible

market out there. I was going to say liquid, but that was, that would have been too close. And then last week I read this, that Trump team is pushing for a G call. We need a G call. Hey, you know, hey, can we get a call? Why would Trump want the call? I think because, I think because of this, they're not not shipping stuff This kind of looks intentional to me And by the way, just to put it in perspective in China built more commercial ships in the year of 2024 than the US has built since World War two Their shipbuilding is Unbelievable, right?

Like for instance BYD is starting to eat, you know, a lot of car makers' lunches, and they make a very nice product at a very reasonable price, so they just launched, they launched their own cargo ship for vehicles, and first stop, I guess, they're going to Brazil. So it's the largest car carrier ship in the world, so they just launched that, because they got so many cars to ship, mostly to Europe and South America. And oh, if you do want a 220,000 ton, that's a 24,000 plus TEU container ship, who do you go to? Well, there's only one country building them. In fact, that's the China's Yangjiang shipyard.

That's where you go. And I thought we could just talk about that. Like this is, here, let me turn this off because we won't need the sound on this. But this is just a time lapselapse of China building building a cruise ship so they do it but I every one of those blocks that goes on there Paul every one of those little things that crane just sort of like bleep brings in gets welded on every one of those has to be perfectly engineered it's got wiring it's got plumbing it's got a whole layout everything has to

happen it's just a symphony that has to you know occur In a very very precise order obviously a lot of countries can build ships But this idea that China's just sort of copying people like no no they're way beyond this at this point in time They are building the largest ships, and they're doing it in the fastest pace And they are doing it in really good style, so This is the final fish out finish out here. You got to get the paint on and you know, they're putting all the rooms together because those these this is a cruise ship.

So those are probably pretty nicely tricked out rooms. They'll have everything. They'll get it all done. Um, and hey, there you go. One more cruise ship out on the ocean. See you. there you go one more cruise ship out on the ocean see ya so I thought that was just kind of a fun little thing to put this in context and this is where we're at in the overall China story right now where this is a woman in China at a

store talking about stuff. Hello from China so I'm in a grocery store right now and I wanted to show you how the American Terriers are affecting Chinese customers so it's gonna get some beef Stop. Hello from China. So I'm in a grocery store right now and I wanted to show you how the American terrorists are affecting Chinese customers. So I was going to get some beef for dinner tonight and I saw this. So what used to be here is American beef, but now as you can see it says Australian beef. And I did look around. I couldn't find one single pack of beef from America.

So I guess China just stopped buying beef from America and it went straight to Australia. So the whole idea that China is hurting because of the American typhus, well, they're not. Because they're not as dependent on the US. In fact, only 18% of Chinese imports come from America. And for stuff like beef and soy, they can just go somewhere else easily. So I guess I'm having Australian beef for dinner tonight instead of American beef. And honestly, because of the food quality, I probably trust Australian beef better. And this box of beef right here is 50 RMB, which is about $7 US dollars. So to answer the question, China ain't hurting. And if anything, I think we're probably doing even better because now that we are better beef that tastes better and at a better price so thank you Trump for that

losing markets is bad so this just came in on the today Paul I found this as I was prepping for this Trump apparently is now obsessed about having a call with China's G this week to hammer out a trade deal. And is he obsessed? I think so. I think so because 2.17 in the morning, Trump is obsessively tweeting about President Xi. He says, I like President Xi of China. Always have, always will. But he's very tough and extremely hard to make a deal with.

2.17 in the morning. I think he's got Xi on the mind. That's pretty incredible. I saw that's got Xi on the mind. That's pretty incredible. I saw that tweet, but I didn't realize, I did not catch that it was 2 17 in the morning. And all I could think of was, was he's either trying to negotiate hard and save face for Xi in front of his in front of his own citizenry, or he's realizing that he doesn't quite have as much leverage over China as he thought that he did. Well, if they've already like dialed away from US beef, and again that's an anecdote, it could be one store, don't know.

But I do take something into those macro shipping statistics that those are way down. That speaks to, that's gonna bite on our economy, even though we'll get this Rippon Q2 GDP, it'll look good on the surface, but underneath it, Paul, losing those imports is a negative overall to our economy. And that's just another sign that everything under the surface has changed, but the markets are moving on this technical liquidity, oh, the Fed's gonna save the day,

Trump's gonna save the day, and I hope that it works out. But when you've got one of the most overvalued markets in history, moving on technicalities with investors, breaking record numbers of piling in the market and the hedge funds getting squeezed in is what it looks like. A lot of the market action from the last month was on several days, it looks like what's called a technical stop-in right so price hits a certain level it forces them to buy which gives this illusion in the markets that oh this is gonna work out great that we don't have anything to worry about I don't think that it's clearly not over with China if we have these trade volumes falling off like this I mean

this this affects port activity this affects obviously truckers, but obviously it's gonna affect eventually what's available for sale in stores. And I don't see how it results in more economic activity longer term. But this is really starting to shape up where I don't know if Trump's gonna be able to back down. And like G is basically saying,

we're holding some cards here too and we're willing to take some pain on this at this stage. Do they need our dollars more than we need their high value add manufactured products? That's a good question. I would think not. I don't you know that's a little outside of my realm of expertise but I would think not. I mean in the negotiating and they can build ships like that. Do we have any videos of anything in America outside of technology being built that way? Yes, we're leading in technology, but you still need machines and goods and

transportation capability and God forbid you end up into a war. You've got to be able to produce. And do we have that? Have we graduated the number of engineers? All I could think of when you were showing that video, I was racking my brain about the ship being built, Tom Lantz video. I was racking my brain trying to come up with the numbers and I can't capture the numbers. But I remember somewhere around 2010, 11, and 12, I don't know what the number was, but China was graduating even within the US and within

their country, about tens of thousands of more individuals with engineering degrees than what was happening in the United States. When we're getting liberal arts degrees, we're getting all of these basically worthless degrees. And we're seeing the long-term results of that now with their capabilities with all of these engineers and educated individuals that can produce things that we can't produce in America anymore. Much quicker, much faster, and much more efficient and far cheaper. And you know, so we've dialed it up.

Apparently we caught two Chinese terrorists who were bringing in some sort of a mold. The FBI was all over that. I have to endeavor to point out to people, this wasn't like a mold that's never existed. We have 200 separate genetic subspecies of that mold in the United States already. I'm not sure that this was a weaponized version of this mold, I have no idea.

I don't think it was. But anyway, they made a big deal out of that. We've made a big deal as well, Trump has of making Chinese students feel unwelcome here in the United States, right? And revoking visas at Harvard and things like that. So this came up, this isn't President Xi, this is not actually Xi, he doesn't tweet, okay?

But I thought somebody captured a reasonable sort of a perspective on it, as speaking as if it were President Xi said, quote, President Trump, your diplomacy is a mess. First you hammered the world with random tariffs out of nowhere. We responded fairly. After some back and forth, you went berserk,

so we tuned you out. And when your port sat empty, you panicked and begged to talk. We weren't sure, but your team kept pushing, so we said fine, Genova, since we were on meeting the Europeans anyway. Bascent flew out on a Saturday, actually made sense. We shook on it. Two weeks later, for no reason, your administration administration banned chip exports blocked the EDA sales and started revoking Chinese student visas

So we figured the war is back on cut some minerals now. You're upset. What's wrong with your people, right? So so that's sort of the view is like this it's just sort of feeling I could see from their perspective It's like who are we negotiating with and what what what is the aim here? It's feeling a little random at this point in time To me as an outsider if there's a method to the madness, it's that 3d 4d chest thing and I don't get it but and i'm not a Negotiator of any sort but it does feel Tricky to make plans around And that uncertainty has got that to deliver some damage to the global economy.

And is it arrogance, Chris? Is it just that Trump was so arrogant that he believed that, hey, we're just gonna, I'm gonna march right in there and everybody's gonna do exactly what I want them to do? I'm not a very good negotiator. I have to, Holly's about it. When we go to purchase a car, I have my mindset. And if I don't get to that number, I don't buy it because I don't like that back and forth. So I don't know the

art of the deal when it comes to that perspective. But there's, you know, that was a very good perspective. Very clearly clear in its analysis. And I kind of feel the same way when it came to to what he promised as far as this big bloated bill that came out You know hey, we're gonna get spending under control. We're gonna deal with this and and the exact opposite took place Sometimes the simplest explanation is the right one. I think this is just looking a little Shoot from the hip it just feels a little sort of Day by day sort of little make it up as we go along kind of a kind of a vibe

But I think your analysis is right. I think he my guess is Trump believed that the United States could bully anybody We needed to I think you can do that to Canada. I think you can do that to Venezuela Gets a little trickier with Europe, but I don't think you can do that with China They're too proud and they have too many cards in this story and I never bought the idea a lot of people said they need Us more than we need them. You know their system would crumble without the US dollars. I'm like, but US dollars It's just a it's a fiction I mean if you just think you so what if a Chinese bank has US dollars in the system, it's only helpful to them if they need to use them for something outside of their system.

Having dollars in their system doesn't do anything for them. It's just an entry. In fact, they may not even be in their system. They'll be recorded in an Oracle database at the New York Fed saying China owns $736 billion of US Treasuries. That's what it means. Oh, they need us because there's an Oracle database in New York. Right. On a server somewhere that has some zeros and ones on it. What would, what would China do if they didn't have that?

Right. I'm not, I don't track that. Um, well, here's another perspective to Chris. Maybe, maybe that was the case 10 years ago when they could have, when the threat of, hey, we'll lock you out of the SWIFT system, we'll sanction you to death. But one of the things that we've seen that China, Russia, Brazil, South Africa has their issues, but the BRICS nations have done is the foundation for the unit, their own interbanking system. Maybe they're to the point now that they don't have to worry about being locked out of the SWIFT system

because they're close enough to where with a lot less pain, they could implement their own alternative trading system to the dollar because we're already seeing that within their trading partners. And if I had the ability to produce everything like they do, I wouldn't worry so much about the dollars in the bank. Cause if all you have is the dollars in the bank and you don't have the ability to produce,

yeah, you know, and that the purchasing power was attacked, then how are you gonna rebuild the ability to produce things? If we were to hit their pocketbook in some manner, they can find other alternative sources because they don't have to create the foundation to produce the goods that the world's wanting to buy at this point and that the US has to buy.

Yep, so I do think this is probably why Trump's up at 2 17 in the morning tweeting away about Xi being a tough negotiator, meaning he has the point of view and you have one and you're gonna have to come to terms on that. I think that's what tough means. But this is, that's actually pretty dramatic. These are, I mean, yeah, technically they're at all time new lows, but I mean, we're not supposed to be down in this range down here.

We're supposed to be, the normal range ranges between 50 and 70 ships, right? And we're down here at the mid-30s, right? So that's a lot. That's a lot of traffic not happening. And it was pretty intense seeing, you know, we had that big rebound up here through March and middle of April, but then it's just totally tanked ever since. I don't know if that's intentional, if that's people on our side who said we don't need the ships, we're not going to order stuff, or if it's just

uncertainty on both sides, or if it's an act of policy. I'm not clear on that yet. I don't know what's happening here, but I think that's driving the story here. Well, and could it be a combination of two things? You obviously had the terror front running that was taking place in April there, and then you had the slowdown. And what if you had all of that front running to build that inventory, and then all of a sudden you have the economy slowing under the surface that's also reducing some of that demand with them refusing to ship? So we're not really going to understand that completely until we get another six months out to see if it rebounds up But that is that's another thing to be worried about

To worried about to pay attention to to be concerned about Well, let's look at some of the signs this just came out today as well Private sector so ADP does a guess that's the payroll processing firm ADP does a guess usually two to four days in advance of whatever the BLS is going to come out with. So this is an advanced look at what they think private payrolls will be in. They're just $37,000 in May and way below the Dow Jones forecast for $110,000, lowest monthly job total since March of 23, not that long ago. Those are kind of weak, kind of weak right there.

That is weak, especially after the Joltz number came out and surprise to the upside. Yeah. And I really enjoyed the conversations that was around that, the debate around the Joltz number. Are we getting back to a more realistic picture of what hiring actually is or job openings with the lack of illegal immigration coming in? But that's a much lower number and that came out

today you said? I didn't catch that number. So in response to that, President Trump said, he tweeted out, he said, he calls him too late Powell, he said, too late Fed Chair Powell is unbelievable that he's waiting and not cutting rates. He must now lower the interest rate. So that's what he said in response to this. So Trump's now back riding herd on Powell asking him to cut rates.

Make of that what you will. Speaking of cutting rates and where Powell is, I read a pretty interesting, I'm in the middle of the report and I was telling you before we started, I should have read it yesterday because I only got halfway through it. But this analyst was pointing out the fact that, yes, Powell's keeping rates high. And if he's not anticipating where we're going to go, it may hold this liquidity. And higher rates actually is paying savers a lot. The baby boomers are getting more money, so that is extra liquidity that's coming into

the economy. But it's having an impact on housing. It's having an impact in several other areas. But the question is, if he was political in his cuts last, you know, six months ago now, nearly a year ago, coming into the election, if he's actually acting politically at this point and refusing to look at the slowing that's taking place under the surface, the other warnings that are taking place, is he holding them a little higher so that it impacts in 2026 right before the midterm elections.

That's the question that was raised by this analyst. I don't know, I don't know, but if that is the case and they're playing politics and they're going to stay higher for longer, that's one argument. Now, from my standpoint, markets are being very resilient right now. I don't, I would have been upset that they didn't cut rates at the last meeting. I would have been upset that they did cut rates if they had a cut rates.

So, you know, I can't play both sides of the fence there, but I think they need to be ready if the data shows, and we may see some reason later in the year if that's the case. But then you got the bond market that's just refusing to have rates go lower. The bond market's saying we're worried about inflation from a long-term standpoint. And they're demanding a higher premium.

Yeah, everybody's kinda walked from the 30-year bond, as we've said. I'll get to where I think some of the demand for the 10 years, just what we talked about, but Paul as well, notice that last bullet points is regarding wages. The annual pay grew at a 4.5% rate for those remaining in their positions and a 7% rate for job changers. So switch jobs, everybody. And that's a fairly high rate though. So that's gonna bleed into inflation numbers at some point.

So minimum increase of annual wage is 4.5% and then 7% if you are a job jumper. That's a big deal. Well, that's pretty inflationary. Yeah, yeah. And good talent's hard to find. It just is. So there has to be a premium for good talent that's willing to make those moves.

Yep. So this is what the ADP report looks like over time. And so here we're going back to 2021. And here you can see that where the private monthly in November of 2024 was just a little nudge over 200,000 has sort of been bleeding off here ever since. So I don't think this is just some recent weakness. It's sort of been showing up for a while. That's a trend. Probably, yeah, looks like a trend. Doesn't it? It sure does. Looks like a short-term trend. It looks like the slow

trend on mortgage defaults at this point as well is slowly creeping up in the other direction. Now I haven't seen that dated. If you have that, let me know. I've got this from Bravos Research, had a nice thread. There's the thread post down there, the link to it. But they said, hey, credit card debt nearing 1.1 trillion, woo, you know, you have your bumps here. You've got 2000, you've got the great financial crisis. This was coming into COVID, but then we, off it goes, right? So what's the opposite side of having lots and lots of credit card debt? Well, first, it's starting to, the change,

year over year change in credit card debt starting to fall, right? And it typically only ever goes down or below zero for sure in the context of a recession. So it's heading down, people are taking out less and less, just saturated with credit, I get it. And then credit card defaults at record levels. So that fits with your mortgage data for sure.

But the point here is I think we're looking at consumers that feel a little tapped out. It happens at the end of a cycle anyway, right? Everybody's sort of lived beyond their means for a bit. The cycle turns, but people don't adjust their spending and time, right? Everybody sort of lived beyond their means for a bit. The cycle turns, but people don't adjust their spending in time, right? You know, people lose their jobs, maintain their living standards. They don't see that the change is coming, so they just keep sailing along at their current expenditure level and then later have to dial it back, you know, under fire but but this this this pretty clearly says that's record

levels of credit card default I don't know how that just gets buried but it just does I don't either unless there's just enough liquidity and profits in the system right now that can absorb absorb that for the moment. And I did find, let's see, early delinquencies. So this was in the the Mag King's most recent newsletter that I've been working my way through. What I'm showing here, this was updated May the 30th. The black line is autos. You know, nothing major there. You can see that's creeped up over the past year or so. That shows your credit card debt that's increasing. So this isn't the high level, this is the loan type percent. So this is the US New York Fed Equifax flow early to lequency 30 plus by loan type percentage.

So that's where it could sway up. Credit cards are at the highest. Your total is starting to creep up and accelerate. Of course, you see student loans there. You know, that moratorium that was in place for a while, now that's all of a sudden. But what I've been paying to is mortgage. Now it's not at a high level like we had in late 2007 or, you know, early 2007, but it is starting to creep up back to where we were in 2019. The question is, will that accelerate from this point forward? When you take into consideration right now

how many people locked in the two and a half to three and a half percent mortgage rates, they're not gonna default if they can help that. So this is something, you know, maybe back here you're choosing a little bit more, this is something, the last thing you wanna do is default on a rate that that's low because you may never see rates that low again.

And that's my concern. There's a lot of people out there that are overly aggressive in their housing right now expecting that, hey, rates are going to go lower. I still hear real estate agents saying rates are going to get back down. Go ahead and buy now because when they cut rates, you'll be able to refinance at a lower rate. That may not necessarily be the case. They may go down a little bit,

but it's highly unlikely unless we have an absolute just economic crisis depression that we see them at two and a half percent. Even then it may not be a deflationary recession depression. It could still be inflationary or stagnationary and rates stay higher. Well and if that happens you may or may not want to be sitting on a big mortgage payment regardless of its interest rate. That's right. Well with credit card defaults kind of it at record levels which is a little different than what was on your chart so I wonder what the difference is. But we see too from the Braavos research that savings are

contracting so net saving is a percent of gross national income. It's a big But we see too from the Braavos research that savings are contracting. So net saving is a percent of gross national income. It's a big complicated way they put this statistic together. But it's basically this is like really low. The normal, I mean normal 40s, 50s, 60s, 70s back when we had like high net energy oil and things were expansionary and we had a lot of value add products and services and manufacturing in this country people were able to save about 10% on average over that period of time it's just been steadily eroding and here we see it's basically hovering down near zero and so

if you looked at it this way would say you know excess savings so there was a huge amount of XX savings poured into the system for a kovat That's all this green stuff And then people spent through that all those stimmy checks and then they've been eating into that and so it turns out the excess Savings are are just about gone And so when those are gone, baby, they're gone And I don't see we're not not super so, you know I don't know why that dotted lines is elevated levels elevated to me is four and above but anyway

The point here is is that defaults the rate of defaults on consumer loans is rising like you just said Paul It's rising. I don't think it's it's not nearly where it was back in 08 and all that stuff It's got a long way to go yet, but it's rising. That's the point here It's got a long way to go yet, but it's rising. That's the point here So it is rising kind of a tapped out consumer put too much on the credit card low savings and starting to choke a little On their debt is is not firm footing for a for a big, you know big rally of consumer Expenditures, but maybe the consumer doesn't matter like it used to we used to have an economy Based on consumption now apparently is based on consumption. Now apparently it's based on information. Totally different thing.

And that information has made things more efficient. But again, my question is, let's say it moves faster than what it did during the internet bubble when you were talking about, you know, eyeballs that were on the screen. You go 14 years later, you know, Amazon continued to grow, but investors priced in the impact of those internet companies way too early. It was revolutionary. So let's say it takes seven years from this point, there still has to be some repricing in the interim period. And the question is, is the consumer tapped out? I go back to the 70s, they clearly remembered what happened during the Great Depression a lot

better than what we did here. And they didn't want to be in a position to where they were wiped out through a normal economic recession. So yes, they saved more. Is it arrogance? Part of it, the part of our society is arrogance. They just want to spend everything

because we're in this consumer society. And then you've got another part of our society is the arrogance. They just want to spend everything because we're in this consumer society. And then you've got another part of the society that the inflation has eaten into their disposable income to the point that they don't have any leftover to save. I am seeing, you know, a lot of younger individuals that I'll counsel from time to time that every excess amount of money that they had is going away because of insurance costs going up, repairs going up, the cost of everything that's taking place. So inflation seems to be finally starting to erode the spendable power that people have. And their ability to save. I think the theme that's sort of emerged here is that there's just so much uncertainty because I don't know what's going which way or who's doing what. Mostly, not transparent, and mostly the playgrounds of people who are able to wang them around,

not in the interest of fair and open and legitimate price discovery between buyers and sellers, but because they make money by moving the prices hither and yon. You mentioned before that there might be a big option stack sitting out there that says, listen, I don't care what the news is. I don't care any about anything else. Somebody is going to lose a lot of money unless the mark cash markets settle at that number and they settle at that number, you know, surprise. They work those technical flows and then the liquidity, the global easing cycle that's taking place out there.

The excess continued reckless, foolish fiscal package that we have in this big, big, you know, BBV, big, bloated bill. I can't call it anything else, guys. I know it's the big, beautiful bills, the technical name. But those are technicalities that the market's paying attention to instead of reality. And I think on top of that, Chris, one thing that we've seen time and time again is you've got those of us and the individuals that are really trying to manage money and invest from a long-term standpoint. They are not the most popular by any means at all right now.

from a long-term standpoint. They are not the most popular by any means at all right now because this passive investing and indexing and the marketing by the vanguards, the fidelities, all these companies that are pushing their products out there because they're very profitable for them, that, hey, you've got to beat this arbitrary index. And most people don't know enough about their situation to know what they need to do to be successful.

So of course they're gonna gravitate towards this arbitrary index. So you've got a lot of managers out there that are a smaller minority by far at this point, that they're going to be fired and replaced if they don't keep up with that index. So there's this massive fear of missing out that's taken place when these technical options levels forces these moves in the market and you get this massive bounce that we've had that everybody's forced to pile in. There are very few people that have the wherewithal to take that path less traveled. What concerns me is everybody goes over the cliff at the same time. My concern is risk is going to come back suddenly.

Think about how fast, you know, Liberation Day and the markets just melted down in that 20% period of time, that 20% level just quickly before most people could do anything. That's my concern is we get six or 12 months out from now, and all of a sudden people realize that it's not different this time and I could be wrong in that case. But I can tell you this, it's very prudent to be cautious right now and to be more worried about the return of your capital than return on your capital. I agree that there's two things related to all of these big moving parts for me in all of that Which well one has to be the dollar

I'll pull that up in a second because that's the the other side of this But but I don't know if you've noticed Paul, but but you know gold is very sneakily been been you know going back to been, you know, going back to, it's all time highs, right? It's very close in there. If it closes here, this will be the new all time high weekly close. So it's Wednesday, so we got a couple days left in here, right? But you can see like this, this bar is above any of those other weekly closes right there. And I do have this set, you can see here at the weekly that's the W so so gold is you know that was a in the this is a consolidation this took

a year and a half right this is this was a this was a quarter that was three months of consolidation so that that's that's short if it's going to go on past that. And I think the reason it's going to continue to roll here is because, let me pull the dollar up here real quick. This is on a weekly basis. You and I have talked about this, but we can clearly see it's weak down here. It's below 100. It's below 99. It's 98.79 as of this moment right now.

And if it busts under here, it's going to run somewhere lower. And as I've mentioned before, it seems to hold up at the big round numbers, which would be 96, 98, 96, 94, 92, 90, and so on. I can find you support or resistance at pretty much all the round numbers. Yeah, for what it's worth. But the dollar's weak. So we got a weak dollar.

We got bonds are pretty weak here. And this is the context we're going to throw more deficit spending by the US government. They're going to argue over what's a cut, what's spending, what's not. Listen, it's more money being thrown out the door. With tax cuts, by the way, a lot of the money getting thrown out the door, a lot of the new deficit increases because of tax cuts, by the way, a lot of the money getting thrown out the door, a lot of the new deficit increases because tax cuts, all of these things I think Trump likes makes them feel popular, right? Gasoline is cheap, taxes are going down. And then there's this idea that somehow that leads to a lot of economic growth. And I haven't, I've been stumped,

Paul, I've been looking everywhere like, okay, how? Listen, you don't have to explain it to me. I might be a moron. I miss things all the time. But I'm just like, where? Like which sector? Can we just do a sector? Housing, autos, farming, retail,

metals, like where's our growth gonna come from? I'm just confused by that, you know? And so here was Scott Bessent doing the best he could to sort of get past that. See if you hear your explanation here that settles for you. I'm a fiscal hawk but I am also a realist and the way to think about this is every 300 billion dollars is 1% of GDP and as the clip that you just said or you just showed where I said we didn't get here in a year we're not going to get out of it in a year that we have to bring This down

Gradually because we want to do two things we want to cut and constrain spending and we want to grow the economy and What senator Paul is? Asking for or advocating for I think could cause a sudden stop in the economy. So I'm a deficit hawk, but I'm also a realist. You say he could cause a sudden stop. You're saying that this is too radical to flip the switch like this to cut—I mean, he probably wants to cut a trillion or a couple trillion, right? You say that that would be too dramatic.

Well, Robert, a trillion would be 3% of GDP. Yeah. And what would that do? I mean, because I think he's a pretty smart guy. I have him on the show a lot. What do you believe that would do? Well, look, what's important here is our debt to GDP, so that if we don't grow, then we won't grow the tax base, and we're not going to grow revenues, we're not going to grow the economy. So we inherited a mess, and we have to constrain spending, cut spending, and then grow our way out of this. So all I heard was he said, look, I know we're a trillion dollars above, above trend because, you know, COVID came along emergency. And

so they tacked two trillion of spending on and, and, and we're way above the normal trend. Like, like, I think it's easy to argue, can we just cut a trillion out and get back to the old levels of spend? Like how bad were things in two thousand nineteen anyway right about that uh... but he's saying if we do that you have to understand that's gonna shave three percent off the gdp which is going to create a technical recession probably we do that so we have to keep government spending up or the gdp is going to take a hit

fix all that we're going to grow the GDP. They never say how, right? It's just tax policy. Is that code that we're, you know, is that another way of saying, we're just going to let inflation run a little bit harder, hotter than normal. And we're going to, I think so road this out? Is that what it is? Because so what if we have a technical recession? Let's go back to 2019. Let's get it in order. And how about we cut regulations? This is interesting Chris. I was shocked yesterday. So I have a friend that spent some time in China and he's probably gonna listen, but he was explaining to me how many...

He felt that it was easier to start businesses and be an entrepreneur in China than it is in the United States because they have the ability to go out without the excessive regulations that we have in the United States, which I would think we're more monopolized through our regulations from my perspective. And I could be wrong on this, but this is just my perspective and seeing what I see and clients having to deal with. And what I deal with in my industry, the regulations we have in the United States are told, we're told that they're for protecting the environment, doing all of this. I think it's to protect the monopolies of the big corporations that are lying in the pockets of our politicians. But I was shocked because he spent quite some time

explaining to me, and I thought about it for two or three days since, can't get it off my mind, of just the cost of their cars were nice cars for a lot more affordable prices that aren't able to be shipped into the United States for whatever reason, but they're shipped to Europe. And that the entrepreneurial, I can't talk today, guys, please forgive me, entrepreneurial abilities are easier in China right now to start businesses because they're not burdened with the regulations that we are. So how about we go back to 2019 spending, get rid of all this ridiculous regulation

that's protecting the monopolies, the larger companies, and allow the entrepreneurial spirit within United States and that creativity to come to the forefront and let's grow out of it that way, instead of telling us we're gonna grow, but not how, which is really, we wanna to inflate this way. Which is going to hurt retirees, it's going to hurt people's purchasing power. It's going to, you know, they're just telling us that's what we're going to do.

Well, over time, our system of governments become very adversarial to private industry citizens, all of that, unless you're on in on the gravy train you know and you're got lots of donation money and all of that other stuff like you got good lobbying firms and and I was shocked I was talking with a friend of mine who's decamped lives over in Dubai said there's almost no taxes to speak of whatsoever obviously they've got oil money to work on, but he said the government agencies, they're quite shocking, took them time to get used to this, are actually helpful. Like that's their job, is to assist you, right?

You can actually call them up and expect to be assisted. And if they're not helping you enough, they will find a way to help you. I was just like, I don't even understand what you're saying. I hear the words, but the concepts, I don't. I don't. That's a foreign concept to me. I could not imagine if I was called planning and zoning. And they were actually helpful instead of attacking.

Could you imagine that? You know, no, we just have to fight, they have to fight the whole thing. So I think I just retweeted this out. I mean, it was just sort of instructive to me. Yeah, from Wall Street Apes here. Same thing. So here outside of San Diego,

they note there's 22 billion gallons of raw sewage. They can't just kind of can't figure it out. So they just, whatever, the city just dumps it into the ocean and off they go, right? Whereas you and I know that if, like I live in a state where the state won't allow me to use gray water, right, the stuff that's left over from washing out of sinks and out of say washing machines, you can't use that total. No, it has to go into a state approved Title 5 installed by a hideously

expensive septic design professional, which means they make holes in the ground the same way I would with an excavator, you know and put a pipe in it Only a cost ten times more once the licensed professional does it right then it would cost you to do it yourself Which would be easy Blah blah so so but it's like it's like if the state wants to do it like ah, well, what are we gonna do? We're gonna have to grant ourselves a mulligan on this one and put 22 billion gallons of raw sewage right into the ocean. Whereas if a private citizen or company tried to do that, of course, that would be a giant nightmare, right?

You'd be put out of business. The mines would bankrupt the company. There's no doubt about it, and depending upon how deep their pockets are. Rules for the... Do you remember that time the EPA polluted like five miles of a river because they were dorking around with their mine

and they accidentally dumped all the waste leachate into that river out west somewhere? Was that the... They investigated themselves and I think they find themselves nothing. They said it happened, you know, it was just, it was an accident. That was outside of Durango, Colorado, wasn't it?

The Animas River? I think it was, accident. That was outside of Durango, Colorado, wasn't it? The Animas River? I think it was, yeah. I had actually fly fished that river the year before that. Had you really? I sure had. So tell me, how bad of a crime was that, that they committed? We hadn't been back there after the impact,

just because we assumed that it just destroyed the trout population for a period of time. And I think it was the Animas River, if I remember correctly, outside of Durango, Colorado. Yep, I think that's right. Yep. So if they do it. Yeah, rules for the, but not for me.

And that's the problem. Our government is supposed to serve the people. Our politicians are supposed to be fiduciaries for the people. They're supposed to be leaders. Leaders in pointing out the right direction and having us endure a little bit of sacrifice now for a better tomorrow. But the problem is these politicians care more about being reelected and

telling people what they want to hear instead of what they need to hear. And that never ends up with a good outcome. And the problem with these decisions, and I think it's hard, is because the markets have papered over everything, the Fed's been able to print like they've been able to print since 2008 because we had all of those deflationary forces. And yes, inflation was there, but we really didn't start seeing the inflation hit, accelerate to the point that the average person really understands the pain of what inflation does just a little bit at this point. That they just think they can continue this forever, but everything has changed under the surface, but their behavior hasn't. So my concern is

the fruit of all of this is going to be very severe, and it's going to hurt a lot of people that are going to be further convinced, you know, by the death as soon as that happens, because at some point, if everything under, if it's not completely different this time, what's changing under the surface? Global trade tensions, global global money flows, de-globalization, the inflationary pressures. We have a risk moment that occurs, you know, in a much faster fashion that if people blink and they, even if they have a risk-managed strategy, if they don't stick to it, if they blink, then they're going to be impacted a lot more severely than they can imagine

at this point. I don't think people are imagining enough the pain of what can unfold in the future because everybody's trying to embrace this optimism. One side, at least, is extremely optimistic that Trump's playing 40 chess and that he's going to be able to pull this off. But what I'm concerned about is he's not following through. He's actually doing some different things than what he told us that he was going to do.

And I had high hopes that he was actually going to do what he said he was going to do. And I don't want us to experience pain, but I've studied enough historical cycles and you have too, that you know the longer we put this off, instead of it being painful, it may be irrecoverable. Yeah.

And I don't like being, I don't like being so negative and I don't want, and I'm not a perma bear by any means at all. I am extremely optimistic because there are unbelievable opportunities out there because of the distortions, especially in the commodity space and the international space. If we've got a week or dollar, international investments are going to be good for those who have the ability to make those adaptations. They're going to protect the purchasing power far better than others. I'm just thinking big picture because we've got kids and you know a grandkid on the way that I want a better future for and I know you and all of the

individuals that are listening, you care about the future of this country. And I don't know how to change it at this point, because it seems like we're getting more of the same. But I'm also very concerned that investors are just gonna be complacent. They're gonna buy into the fact that, you know, passive is the answer from this point forward.

And it has been. But one thing about Wall Street is when you get to the top floor, that's why past performance doesn't guarantee future results. Too many investors are chasing that performance. And they're looking in the rearview mirror, not taking into consideration what happened 10 years ago in that particular strategy was the perfect environment over the following 10 years ago in that particular strategy was the perfect environment over the following 10 years to put them in that position of the number one returns at the top.

But everything's changed under the surface and there's another strategy that rotates up to the top because there are, even in a good economy, there are different cycles that unfold and different strategies benefit from those cycles and that's why it's important to be adaptive. You've had this ability for the government to step in and quantitative easing and operation twist and print and get away with it. This pulled all this money into asset prices.

It's also pulled money from the international markets into the U.S. because they're chasing performance. So your retirees are in general over-weighted to U.S. equities and passive, you know, passively investing. International money flows have been over-weighted to U.S. equities, and at some point that's gonna change. We just don't know when it is. But I think we're a lot closer to that moment

than anybody realizes. Well, maybe exactly, and it's about all those cycles. And hey, cycles come and go, right? So know where you are in the cycle. That's a big portion, I know, of your risk-managed strategy. But I just wanted to, just wanted maybe, I don't know if I have to listen to the whole thing, but you know, Ray Dalio, he's got that book, you know, How Countries Go Broke, and trust me, this isn't Ray saying I got to sell more books. I think he's like the 17th richest guy in the world, so I don't know that a book sale is really what he's after.

He's here to try and help. He's like at the end of his career, and he's like, I just wanna help, and here he is explaining it. You know, very simple terms. The big cycle is like the period from one period of great change and turbulence in which various systems or orders are changed through fighting, typically.

And then through that evolutionary process, there is a process that gets us to another period of breakdown. The last big cycle began in 1945, at the end of World War II. In that world order, there are shorter-term cycles, like the economic and political cycles. The economic cycles have lasted for about six years, from one recession to the next recession.

And they transpire in a way where, you know, the economy is weak. Central banks put a lot of money and credit into it. That causes markets to go up. There's a lot of spending. It gets too hot. Inflation rises. they tighten monetary policy, and that causes the economy to go down into recession. And since 1945, there have been 12.5 of those. And we sometimes don't pay as much attention to the big cycle. When they reach excesses, such as debt excesses, because debts rise relative to incomes like this. If you were to look at a chart of most countries, their debts keep rising relative to their incomes. But

the incomes are needed to pay the debts. And so when you get to a point where the debts are high relative to the incomes and debt service is very expensive and starts to crowd out of the spending. And investors do not want to hold the debt as much because the debt does not provide them the good returns and they start to sell that debt. You begin to have a change in that big debt cycle. And that big debt cycle typically corresponds with the big domestic political and social cycle because wealth and well-being matter to people. And when there's disruption to the wealth and well-being of that, then you have the political disruption such as what we're experiencing now.

And so there's more fighting over wealth and power and so on. And these things come together. Then that creates the new conflicts, the new big conflicts, the changes and breaking down of the old orders, the old monetary orders, the old domestic political order, the geopolitical order and such things, to cause a seismic shift. These periods are periods of great risk. They're great risk for the markets, they're great risk for the society.

It's very important that they're understood. So that is the world order and the changing world order and the big cycle in a nutshell. And so the key to that to me is that, you know, listen, it's just a super cycle where debts rise relative to incomes. And that's really when we're talking Scott Bissett says, don't worry, we're going to pile lots more debts on, but our income is going to magically rise up to meet that. And Ray is saying, dude, we're late stage. We already have 100 trillion slapped on the overall economy

at this stage, right? Consumers, households, state, federal, all added up, 100 trillion, not including IOUs, right? Under funded mandate. So we're already saturated with debt. In order for that to pencil out, incomes really have to come up, and come up strongly. They have to come up strongly. But he's explaining, I mean, he's clearly explaining where we are

in the cycle where everything is starting to change under the surface and now what are our interests on the national debts more than our defense spending still. So, you know, we're at that stage in the cycle where it is certainly the most dangerous. And, and look, you know, one of the things that the young adults, our younger generation is facing right now, they're coming out of college with massive amounts of debt. They're having to take massive amounts of debt to buy homes if they don't have families that can purchase those homes or assist them in some manner, and they're priced out and frozen out because of asset price inflation. And what happens if salaries were to double in the next 12 months?

Okay, that's got to ultimately impact corporate profits. So they've got to navigate this perfectly in a completely different manner than what has been able to be accomplished through historical cycles for us not to experience that pain and conflict that he's warning everybody about. You've got him, you've got Stanley Druckenmiller, you've got Jamie Dimon, you've got all of these individuals that are clearly students of history and have clearly been successful that are warning the citizenry, the governments and individuals, but they're, they're, they're warning individuals, but individuals aren't listening because they're too caught up in the emotions of fear of missing out right now. I think getting rid of government regulations would be great. I can fix it with a single rule.

I'm not against regulations. I think it's good that we don't have, you know, we have clean air and water and all that stuff, right? I think that's fine. But I would implement, I would call up the people at Yelp and I would say, yeah, we have to implement Yelp ratings for all our government employees. Yeah. Okay. And then every year, like clockwork, the bottom 10% performing who have the worst customer service because that's what the purpose of the government You're there to serve the public. So if Eunice down at the DMV is getting one-star Yelp ratings Eunice gets cut next year, right? And so everybody in the government learns you don't want to be in the bottom 10% You got to get your Yelp ratings up next thing, you know, Paul Local planning boards calling you up. Hey Paul, can I help? What's going on?

Anything you need that I can serve? What can I do for you? You need some coffee? What can I, how can we work this out? Right? Well, and make the regulations clear enough. Look, if there's regulations for protecting the environment, you know, could you imagine get a one star review because planning and zoning, you know, fined you and arrested you for dumping used motor oil into the creek, right? That's clear. But that's a great idea, Chris.

I really wish that would be implemented. And that would bring accountability back for the government employees. You've got—I understand the reason for tenure. I understand the reason for protection because you don't want to have a political hiring firings just at a whim, but if you bring it back to serving the people in your Yelp reviews, that would solve that problem. Mm-hmm. Right?

Incentives, incentives. I'm going to mis-paraphrase the paraphrase badly, but you know, because Charlie Munger said you show me the incentive, I'll show you the outcome, but he had a corollary to that, which was if you ever find yourself trying to understand something through a lens other than incentives, you're off track. Yeah, yeah.

And he was an incredibly successful investor because of his ability to see through and make it as simple as possible, but not simpler as what Warren Buffett said. When you bring it back to incentives, it does lead to the outcome, clearly. I mean, that's why the government uses incentives for housing years ago.

Let's try to stimulate this part of the economy through tax deductions and incentives. So I like that idea about Yelp, Chris. That's great. You always have these simplified accountability measures that could be implemented. Well, we would need to turn it back, which is if you're in a public service role, I think how you serve the public matters, right? So why should we have Yelp ratings for waitresses but not DMV employees? What's matters, right? So why should we have Yelp ratings for waitresses, but not DMV employees?

What's different, right? That's right, that's right. I had one other thing, but I can let that go. So. Well, I'd say the biggest thing that's hard right now is we're in the summer doldrums. I say summer doldrums, but we're in the midst of summer. You've got kind of these technical flows that are for the markets.

We can kind of see GDP is going to be really good in this quarter. Everything's pointing in that direction, but you've got just little things that are creeping under the surface. And the question is, what's the data going to look like in the fall? You'd asked me last week, do I think we're going to end up for a recession in the fall? I don't know. It's hard to quantify how all of these moving pieces are gonna unfold in the economy, and it takes some time to get there.

I'll be highly surprised if we're not in a recession by early 26. The question is, is when is the market gonna anticipate that? But that's with the information we have now, and I could be completely wrong because we're gonna have a lot more information come up over the next several months. The one thing I don't want to talk to investors about is really look at your situation, assess

where you are, make sure that you're resilient. You know, I don't think this is a time to be speculating. I don't think this is a time to be and fear of missing out is hard. I've seen what it's done to investors over the years. You got to play the game by the rules that are forced upon you. But this is not a time to be passive in any way whatsoever because we don't know how all of this is going to unfold. What if Z is in a position to where it looks like you've clearly laid out that it looks like Trump's panicking. He's awake at two o'clock in the morning, worried about it for sure that he puts it out there.

Hey, let me save you a little bit of face because I've tried to negotiate aggressively. I've tried to bully a little bit. So hey, can we come back to the table? What happens if China just says, Z just gives the big middle finger and says, we'll take a little bit of pain in the short run because we think our citizens are more resilient than what yours are and we think we're in a better position. And if you weaponize Swift or the dollar against us, then we'll just go ahead and turn the key to the other side and let's see how you like losing the global reserve currency. I'm not saying that's going to happen, but that's

something that we have to be concerned about. So it may be summer, but don't be, you still have to continue to be diligent in the portfolios and the risk management of where you are. Ride this where it is. I'll tell you another thing. I want to go back to gold. Gold has surprised me, Chris. I was expecting a little bit more of a pullback here in the short run after the run, and especially with the markets being, you know, having this major bounce and, you know, all this optimism coming back in again. But gold's telling us, I was really expecting a 5% to 10% pullback in gold. That's the reason why I was really saying, hey, let's average in over the next three to four months.

But the information is slowly saying, gold may have cooled off a little bit, but it's still got enough strength to where it didn't need of, at least at this point, a five to 10% pullback to gain enough strength to continue. So maybe the bull market in gold is gonna continue a lot quicker than any of us anticipate

So it's still telling us and the VIX is also stubbornly high It's pulled off a little bit volatility index in the market is still telling us that the all-clear Isn't it? You know it the future path does not look as clear as what the equity markets from the S&P 500 seems to be telling that's going to be right now. And that doesn't mean that we don't technically hit new highs. We could by July. These technical flows are going to continue to be a tell-win for the markets, at least for now, is what it looks like. Yeah.

But can I confess, it's, I've talked about this before, Paul, that looks like the S&P, but it's not. That's the German DAX. So I don't, it's kind of, there's a global something going on here that I don't understand. Of all the places, Germany is sucking wind right now. I understand some of these represents companies that do a lot of international business happen to be housed in the German DAX index. I get that. But all of that said, this is fundamentally a German set of industries here and I can't I can't

explain this you know I can't either I've really tried to look and see the justification for that and there are a lot of countries that I can justify but not what's taking place in Germany now from a geopolitical standpoint economic political actual internal politics, it's just kind of a, it's kind of a hot mess right now. You'd think some of that would factor into the pricing. And one thing we didn't talk about, Chris, too, that I don't necessarily want to extend it for the sake of extending it, but here's another risk that's popped up. I mean, there was a major drone attack in Russia, clear escalation by Zelensky.

Did the Trump White House know about it? I don't know. But the market's ignoring all of this at this point. And at what time does Putin's patience wear out and he strike back in a severe manner? I don't know. But that's another risk that the market's just absolutely ignoring. And it's been trained to ignore that. So I'm not saying to sit around and worry all day long, but I don't necessarily do that.

But I am concerned because I'm paying very close attention to what's taking place, and I do not want to be complacent right now. And there are a few areas that we've sold into the rally here in the past week just to lower that risk just a little bit. And I believe it's the right thing to do. And if I'm wrong, I'm not going to be wrong for long. I'm certainly not confused. I may be wrong on how this outcome, it may be navigated perfectly, but the risks are continuing to escalate under the surface. And the market seems to be more and more

complacent just because of technical flows or calls in the markets to work themselves higher So be diligent. Yep, as I've mentioned before I Consider this to be highly risky that whether we're talking about the Dow the S&P or the Nikkei That look look at the difference in the S&P and the Nikkei look just sort of blur your eyes there they might as well be one market right Japan is facing a very different set of circumstances from the US right now I can't think of a

single reason why tick for tick we should their stocks ought to trade just like the United States I mean it's just tick for tick right if I strip the legends off and scrambled those up you know it would take a real expert to sort them all out again. You know, you couldn't remember that a small caps were doing better than Japan last week because there's no difference. It's the same market. It's the same. It's operating the same. It's all one. So it's a big borg of a market. And I don't know how it got that way. That's that'll be one for future history books and regulators to ponder. But but it's a big borg of a market and and I don't know how it got that way That's that'll be one for future history books and regulators to ponder but but it's one market and that means it's gonna trade like one

Market which to me means if anything goes wrong in any one of those markets, let's say Germany crosses the line Russia's red line next thing, you know Russia decides that's it Germany You're part of this fight and next thing, you know, our Resnick's are raining down on some German drone factory, you know part of this fight and Dexino or Reschnitz are raining down on some German drone factory, you know, or tourist missile factory. If that happens and the German stock market starts to tank, do the rest of them go? That's a good question. Looks like it.

I think they're all one market. They're all moving the same. For whatever reason, are they interconnected to that point? I don't know why, but that makes it harder for diversification standpoint. Where are you going to be to be protected? And if you don't have any gold and something like that takes place, who knows whether gold is going to hold up in the interim period because it can be pulled down in a liquidity sell-off. But if I had to choose one asset as a protective asset class, and again, not a recommendation because I can't do that, I'm just speaking hypothetically, the gold will be something that is a good insurance piece to have.

And silver sure is, sure is trying hard to break resistance. That's something I'm hoping my next week we'll have some, the ability to talk about because it's been consolidating for some time. And if it breaks out, we may have the second leg of the precious metals bull market underway. You know Paul, back at Peak Resperity I've been tracking the energy. I'm an energy guy at heart. So both oil, you know now we know shale oil is past peak, right, but we now also know that shale gas is for whatever reason a little tight right now and This is what I found just astonishing so I did find it here

So UBS comes out there like yay, you know, it's gonna be a little bullish for natural gas I think it's gonna be bad for us consumers who have to pay for natural gas in their household for heating and cooling They add it all up this is astonishing They say that by 2027 Enough data centers are going to be installed to would require 50 nuclear plants to operate so 50 gigawatts of new base load power by 2027 50 gigawatts, okay, so Denver uses about 800 megawatts, Denver, the whole city.

So that's 50 to 60 Denvers by 2027. By 2027. So the first question ought to be, where's all that electricity going to come from? It's not like we have a whole lot of spare capacity just kicking around, you know, we'll just make the plants run a little harder. We're already kind of at capacity. So it turns out Nat gas is the most practical reliable cheapest power but I calculated it if we turned all 50 gigawatt net need into from natural gas we're gonna need another 8 billion cubic feet per day in

two years. We have the exact same number of billions of cubic feet coming out of the ground for the past two years. So we've had zero increase. The only way we get more natural gas coming out of the ground, Paul, is if that it doubles in price, like from three and a half to seven, and stays there long enough for drillers to get excited about that. So I think we've got a very, very bullish case for natural gas coming. And it's because I don't know that we're really looking at this from a national level appropriately at this point. I hope somebody is but I don't get the sense that that's happening.

They're just like, yeah, it's going to come from natural gas. Like, okay, your next question ought to be which fields, which pipelines? Show me the source for that because 7 billion cubic feet a day is a big number, right? So Alaska is going to put in this new like, I forget, 42, 48 inch pipe, whatever, from the North Shore, they're talking about it hideously expensive, because it's Alaska and it's got like, you know, permafrost

and all that other junk to deal with. But anyway, $44 billion for this big giant pipeline operating at 2,000 PSI, and it's gonna come down, and that's gonna be 3.3 billion cubic feet per day. So two Alaska projects would be required to make that sentence happen. That's fine. I just want to know where are they? Which ones? Is it the Permian Basin? Is it coming out of the Bakken? Are we gonna tap the Marcellus a little harder? Is it a Gulf project? Somebody ought to know. I can't find any answer to that question yet.

Everybody sort of shrugs And you're on top of it. So you would know if that came out So how and how does that how is that not inflationary? From a supply-to-man standpoint to to the average citizen because what are the utilities gonna do? How much of that's gonna be passed down to the average citizen and that extra cost because of lack of? Poor planning. Did you say 50 nuclear reactors, right? How much of that's going to be passed down to the average citizen and that extra cost because of lack of poor planning Did you say 50 nuclear reactors, right? So so what was it Trump said it was?

2032 or 2035 that he would hit the target that they wanted from the small nuclear Small modular reactors that they're trying to get going. Is that correct? Yeah, but that would just be for the first wave of installs so So between here and there there's there's zero new nukes well I mean there's some small ones that got started many many years ago that are coming up I think we have seven eight hundred megawatts of new power coming on mostly small But that's it well. There's two big ones in Georgia, but I don't know if those are ever gonna get finished big ones in Georgia, but I don't know if those are ever going to get finished. They're already like 4x over budget and it's just, it's just a, it's a thing, right? Yeah. Well, they passed down the huge mistake on that nuclear reactor or nuclear plant several

years ago to the, to the customers of a Southern company. So curious to see how that goes again. to the customers of southern company, so Curious to see how that goes again. I was quite upset about that by the way Yeah, you just did they just like did your electricity rates just get jacked up? It wasn't a tremendous amount, but there was a special assessment for for that plant and the whole fiasco if I remember correctly I can't remember all the details. It was several years back, but just came to mind. But there was a fiasco with the development of it, and it wasn't able to go through, and they just passed that down.

So it wasn't much, but it was spread across all the customer base instead of the profits of the company. A situation like that, I'd much rather see the executives take a big cut instead of passing it down to the customers. That's the way it should be. Yeah. So, but that's my question. Is that going to be highly inflated? Is that the next wave of inflation that comes for us as a citizenry, as much higher utility prices to fund these projects? I don't know. Are they going to pay for it completely themselves well they'll just say oh free markets Paul so you know the data centers will have

infinite money so if they have to pay 20 30 40 cents a kilowatt hour equivalent they'll just do that but for somebody's used to living on 15 cents a kilowatt hour and suddenly gets a gas bill that shoots their electric bill up to 30 cents a kilowatt hour it it's going to be quite shocking. And we'll say, oh, that's the markets at work. Like, no, no, no, no, no, no, that's bad planning at work. That's what that is. That's bad planning at work.

Let's just be clear about that. I will say a natural gas bull, it will not be good for those that are having to purchase it, but for those that have the ability to participate in it. I remember the last one that occurred in early, you know, in 2000, what, 2000, 2010, it came apart around 2000, in 2008. That was a fun one. Yeah. Yeah, that one shot way up.

But again, that was because from 2007 up through the second quarter of 2008, we'd had out of six quarters of production, five of them were just slightly below what we needed. So demand exceeded supply, just slightly, not a lot, but we were eating into reserves. Now, what normally happens in that situation, Paul, is prices are very inelastic, they shoot up like crazy because you can't tolerate that.

Perversely, this past four quarters we've seen the lowest levels of inventory for oil in the in the series in a long time, like way down at the bottom of the five, ten year range is like really down. And pricing has been weak. It's a very odd combo. And price got hit hard yesterday with OPEC statement. I didn't get a chance to read the statement about they were going to produce more oil, right? You know, Trump went over there. Next thing you know, Saudi Arabia is announcing how much more oil is going to be coming out

of the ground. Like weekly, if not daily, right? Have you checked on the strategic petroleum reserves? Have those been refilled? Not refilled. they are climbing again, very slowly and steadily, but not refilled. This was on Art Berman's blog. This just came out, I think, this morning or yesterday.

So we have two things here on this chart. This is the spot price for West Texas Intermediate going up the left axis. And then here we have comparative inventory along the y-axis, zero is right here in the center. So comparatively we might have 50 million barrels or 100 or so on stretching out to the right or we might have minus 50, minus 100, et cetera.

So it's supply and demand, right? You know, we got, I mean, price and supply. So how much you got and what's the price. And normally you see these things adhere pretty, pretty tightly to this curve, right? We got off this curve pretty far for COVID cause that was total whack a doodle. Right? So prices were lower given how much inventory we had and all that stuff. But down here is weird. These are the most recent dots for the red here for 2025.

This is a, this, this departure is as significant as the kovat and the kovat was the biggest shock to the system ever, right? We suddenly stopped flying we stopped driving They had like remember oil actually went negative forty dollars a barrel at one key point in the middle of that because it was still Coming out of the ground, but we weren't using it. So there was literally nowhere to put it They'd pay you forty bucks to take the barrel away because it was about to slosh over onto the ground and cost him 200 to Clean it up right so whatever it was a crazy moment We're as crazy as the craziest moment ever right now. That's how crazy it is How did we get this crazy?

That's a good question That's a really good question That's a good question. That's a really good question. But it also presents a very interesting opportunity as well whenever those dynamics start working themselves back towards the trend. That's very interesting. What's your explanation, Chris? Well, to not be conspiratorial about it, it would be that there's just a lot of uncertainty and that, you know, Trump's

jawboning it down and you just sort of get this narrative structure in place that's just like just sort of self reinforcing, right? So everybody short oil because everybody short oil and it confirms itself because every time oil seems to lift up, it gets shorted again and it goes down. So those things tend until they go the other direction, right? You know, you were mentioning like 2015, here we had a false rally there. You know, those big giant spikes you were talking about are all back, are all contained in here.

But otherwise, you should be right on this line for the most part. Very tiny departures. This is max pessimism in 2016. We were way down off that line. This is is bad as it gets me that's as far from line so that the answer is we're gonna get back to the line but if we just in two thousand twenty five went back to line we would go straight north and we'd be about ninety dollars a barrel

we're currently not sixty so that's not insignificant that's a fifty percent increase were about fifty percent off of what history says we ought to be at so the conspiratorial view is that somehow government has figured out in cahoots with some trading firms how to keep things like silver and gold suppressed and oil too, right? You just work with your buddies at some big CTA, commodity trading advisory firm, and wink, wink, nudge, nudge, and you have them slam oil because you want it to be cheaper for some reason. It would work ridiculously well in this environment from that standpoint because momentum strategies

are really capped. That's the large majority of what's winning in the markets right now. So everybody's kind of on that same bandwagon of momentum. If you can, if they've done it and with gold prices, I mean, there've been judgments throughout the courts with JP Morgan traders that we're manipulating that price. So if they're doing that in the oil markets, that's short term gain for long-term pain, a short-term benefit for a lot more pain from a long-term standpoint. So go back and think about what oil gold prices did for quite some time. If that was taking place

and that's where they learned it over there and how quickly the gold prices move, what's that going to do to the economy and inflationary pressures if at some point in the future oil follows that same chart after being artificially low for an extended period of time because that's gonna reduce investment because it's less profitable to tap in even if they're out there. You're gonna drill with prices this low? You've talked about that before, Chris.

Mm-hmm. So Art says comparative inventory offers a useful perspective. We just looked at that chart down there, but said for most of the past decade, oil prices tracked inventory levels along stable yield curves dash blue line in figure three, that one, which we were looking at there.

He says that pattern has unraveled since 2023 price discovery excursions away from the line have become more pronounced. And in 2025, all those red circles we were looking at volatility has rivaled the COVID collapse only now it stems not from a single shock, but from chronic systemic uncertainty. Today's market isn't just responding to fundamentals, it's groping for meaning. Inventories are well below five-year averages, offering little cushion, and rather settling back to trend, prices now swing widely in response to shocks. Geopolitical, structural, narrative-driven. So, sounds a little chaotic.

I think it represents opportunity, but that's me. Yes. Well, not a recommendation. I'm itching for the moment that we get to allocate towards the energy space. And I don't know when that'll be, but there's a tremendous amount of opportunity there, especially as the rebalancing occurs. One thing that may happen is money may just shift from one area to the other. If it shifts from the popular themes now to some of the under-priced themes like energy and others, for those that have the ability to adapt and shift their portfolio to benefit from that will be

better protected than otherwise Well, you know if you could have picked where the gold mines were that would have been great back in the day Or you could have just sold picks and shovels, right? To the gold miners so it's a pick how you like to play the game I'm more of a picks and shovels guy when it comes to this story I don't know which data centers and which AI system. I don't know. I don't know. I don't even know what it's gonna do. But I'm positive that the company's selling the HVAC, the chips, and the gas needed for the power into

that. They're all gonna make money. Guaranteed. Because that investment is gonna continue. Yep. All right. Well, with that, Paul, any last lasty last words or? No, that's it. I threw enough wrenches in there for the day. All right. Very good. Well, thanks everybody for listening. By the way, you will see Paul and I at our Peak Prosperity Annual Summit, which is September

12th, 13th, 14th, Lake Winnipesaukee, New Hampshire. You are invited as long as you love truth and you would like to meet Paul, myself, Evie, and a whole bunch of other cast of characters who are going to be presenting. It's a great time. It's a really, it's a good fun time. It's kind of feels like family, like the family you always wanted to have. And it's, it's just a wonderful environment. So you're invited, go to peakprosperity.com, check out the summit if you're interested in coming. Tickets fill up pretty fast we

sell out every year so if you're interested it they've just gone on sale. Paul, otherwise people if you want to talk to Paul and or his team go to peak financial investing dot com. There's a simple form there very easy to find click a button fill it out and within 48 business hours, somebody from Paul's office will call you, set up a time to talk. So again, peakfinancialinvesting.com, and hope you take advantage of that because Paul and his team do amazing work for people. Even if you don't end up working with him and his team, you will get a lot out of the consultation and the planning

that Paul puts into every single person. It's so rewarding because so many people understand the reality of their situation. And that best sells worth the time to go through it each time. Before you close, I will say this. Your annual summit is one of the most enjoyable events that I ever go to because of the conversations. I mean, people who care, they're seeking truth. It's unbelievable.

So for those of you that have not been, I'm just gonna encourage you to go because you'll meet wonderful people and you'll be encouraged about how many people that actually care about knowing the truth and the future and the solutions that you can better prepare yourself for. It's a great event, Chris.

Thank you. I'm super looking forward to it myself. Always am. All right, with that, thanks everybody. We'll be back next time. I hope you enjoyed this and please trade safe and make sure that you are resilient and protected and ready for whatever may come.

Until next time, bye for now.