Peak Prosperity - Get Ready: High Inflation Is Coming

Episode Date: May 30, 2025

How manipulated are our “markets?” What will the Big Beautiful Bill bring to our future? How should we think about A.I.’s demands on energy and the possibility of breaking current encryption? Tune in to find out…Click Here for Peak Financial Investing

Nothing in this program should be considered investment advice. It is for educational purposes only Please hit pause and read this disclaimer in full I think people are starting to wake up that that this game is rigged against them and for the benefit of The elite and they seem to care about nothing but money 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, and welcome to this episode of Finance U. I'm your host Dr. Chris Martinson

here with Paul Kiker of Kiker Wealth Management. Hey Paul, how are you? I'm doing good Chris. I'm reporting from the newly formed rainforest in North Georgia where it's rained a lot, which is good. So good to see you today. You got a rainforest going on. Yeah. What's that like 10 inches a day? Is that what's a rainforest? Oh, it's been something I think six inches six seven inches last month, you know nearly every day So I'm not complaining because I've gotten the pasture seeded so it's helping the grass but but It's not drought down here for sure No, well who knows if if we're having climate instability.

I'm pretty sure the farmer's almanac tells us it sometimes is dry and sometimes it's wet. Hey, I don't know what's on your plate, but I did wanna talk about, while the markets are sort of in rally mode, I told you that I thought there was this big rescue that happened about four Sundays ago now, and somebody dumped some bunch of money in the markets,

and we were wondering, well, why, what are they afraid of? I think they're afraid of, and when I say they, I mean the central banks mostly, I guess. But the financial authority, I don't know, the financial ecosystem, which consists of the central banks plus their core players within the market structures that they operate in. So this would be your Citadels, your Black Rocks, your Goldman Sachs, whatever.

But this whole ecosystem, they like numbers going up and to the right, and they got a little scared and they dumped a lot of cash into the market. And we're still finding that out. But I've been hearing from more and more people, Paul, who aren't really buying it, who consider these to be sort of fake markets now. Like they don't trust anything. That's the defining word of our day is trust, or maybe the lack thereof, which is the opposite, which is that betrayed or broken trust that everybody now senses has happened, right?

And people don't trust the markets anymore. What do you see it on your end? No, I'm seeing the same thing in questions and concerns. And it falls back. People have been repeating back to me, hey, we've got to play the game by the rules that are forced upon us, which is true. I wish we could change them where they were more honest.

But what's been interesting to me is typically the political divide in the country. So I'm a political atheist. I'm not an atheist, but I'm a political atheist. I just want what's best for our country. But there's been periods of time in the past where the left doesn't believe that it's right, that things are honest, and then you've got the right that doesn't believe that it's honest.

But right now, there seems to be cohesion in the coming together, at least when it comes to the markets and what's taking place, with our monetary system, that there's concern on both sides, which is really the first time that I've seen that in 26 years of working with individuals. So there seems to be an awakening, a realization, because I think the pain of inflation, you know, doing more of the same, you know, fiscal irresponsibility, the bait and switch, it seems, from this administration, from, you know, going right back to fiscal irresponsibility here, this big, beautiful bill, we'll see what the Senate does with it. I think people are starting to wake up that this gang is rigged against them

and for the benefit of the elite. And they seem to care about nothing but money. Yeah, and I guess that's been true for a long time. But our money system, to be fair, has been corrupted for a long time. And I've been a long time advocate for sound money, which is which is I'm agnostic or atheistic about money except that the money that you choose

can't be rigable by humans and that's the only rule I have I don't care use gold use silver use sheep skins I don't care but you can't just snap your fingers and make more of it because you feel like it, right? Every time that happens, it leads to a debauchery of the currency, a debauchery of the culture involved in its eventual decline, right? You want to peg the whole Roman decline on some things, you could do no worse than to look at how they debased the denarius and took it from about 93% silver to point zero one percent silver when they were all done with it Clever Romans they figured out how to electroplate lead slugs with silver and they didn't have electricity. So that's quite the trick They did it chemically

So very clever very clever, but it didn't work You you ruin the money you ruin you ruin the society and that's a very old You ruin the money, you ruin, you ruin the society. And that's a very old story. And this big, beautiful bill, which I hope we can get to, it's just more of the same, Paul. It's just more printing, spending, it's going to be more inflation for more people. And yeah, we got to play by the rules of the game that are imposed upon us. But I do think there's some off ramps people can take, maybe not in whole, but at least

in part that can help. Well, and there's things that you can do if you're looking long-term, longer-term gratification instead of shorter-term gratification, where you can buy some insurance and protect yourself against it so that you're better protected when things go wrong, because we're in uncharted territory, right? One thing that history has taught us is that fiat currencies and debasing your currency,

like the Romans did, leads to societal collapse in some manner. I mean, there's never been a successful fiat currency in the past, but in our arrogance in today's society, we think we're different. And unfortunately, too many people don't know history because they've not been taught this through school. So they can't learn from the mistakes of the past because they don't know the mistakes of the past. And that's one of the things you do a great job of bringing these past mistakes to people

and the inevitable path that it's gonna end upon. But the problem is, is we don't know exactly where we are in that journey because the end results the same, but the path there is slightly different at each each time until the collapse starts. And then it gets a little bit easier after that. So we say these these sort of the fakeness of these markets. You know, I watch them too closely and I see all the time, Paul, these mysterious rescues that happen and the markets turn on a dime and we used to have these things called bottoms in markets

and they're just like little Vs now. So the whole market structure is different. Hey, maybe that's just how it is with computers doing all the trading now, things just move faster. But that also gives, I believe, more opportunity for raccoons to come in and play with the market structure, right? So we watch this all the time in commodities where we don't see price discovery anymore.

You see price setting where somebody comes in and just dumps way too many paper contracts for, say, silver all at once, all at once, all at once, breaks the bid structure, drives the price down down that's not somebody unloading a position that isn't a hedge fund rebalancing that's somebody crushing the market with a bid bid stack crushing move all right fine we've been watching that for a long time with no consequences right just like we're seeing now a lot of people asking the question like dude Where are all these arrests that are supposed to happen, right?

You know and nothing's happening. So here's here's this is a very simple law of life when there are no Consequences for humans who behave badly you get a lot of badly behaving humans Absolutely Absolutely, that's it's like a law that's why law is there and consists an application of the law regardless of status in society. High class, low caste, it should be equal for all. That's what protects society from a long-term standpoint. But once you get, you're not implementing the law, then you're spoiling the child.

Any parent that's got a child that they never discipline, and they're probably having to spend a lot of time taking care of them when they're older for lack of discipline in cases, understands the consequences of not equally being just in the application of law and discipline. Well, eventually, markets impose their own discipline. Eventually, I do believe that.

That's true. Last time, last week, own discipline eventually. I do believe that. That's true. Last time, last week we were talking about trouble in the bond markets, and in particular there was some real warning signs coming out of Japan. Right now I would notice that this is, we're recording here on the 28th of May at about 3.30, so this article just came out at one in the morning. And so Japan's bond market's still having troubles. Saying here the headline, Japan's bond market ignites fears of outflows from U.S. and carry trade unwind and market turmoil. So Japan has been having to sell U.S. Treasury bonds.

They've presumably been taking the proceeds and buying their own yen and using it to plug holes but they just had another pretty bad auction over there on their 40-year market so doesn't look fixed yet but they're gonna try and fix it but all is not well in Japan at this point and here we see their 30-year bond here we can see it had a it retreated it was like skyrocketing, but did retreat back under 3%, even though we can see the long term sweep of it here. These sharp moments like this to this side, these are all Bank of Japan and Ministry of Finance interventions.

They came out, they verbally intervened and asked market participants if they consider this acceptable, which is a wink winkwink way of saying, you want us to do something about this? Yeah. Which, of course, the right answer is you shouldn't have to. Like Milton Friedman had it right, you can run the money system for any nation off a laptop computer. You don't need somebody there deciding what's the right price for money or how much should

be out there. You just look at how much economic activity there is and you make sure there's enough money to support that. That's it. That's the whole job. You don't have to decide what the right price of money is. You don't have to set interest rates. You don't have to lean in on policies that reward this sector at the expense of that

sector. That always goes off the rails every time. Well, at the base, that sector, that always goes off the rails, every time. Well, at the base, it's central planning. It's not a free market. If they're always having to intervene and change the rules of the game to punish those that are trying to reposition their assets for the inevitable outcome,

that's a completely central plan market, and it's not gonna last an average. At some point, the free market's gonna exert itself again because they're gonna lose control. They can't pull every lever across the board. Well, so if we look at this- They can in the short run, but not forever. Look at this astonishing rise on the 30-year from under a half a percent. This is probably just about 0.3% yield, all the way up to 3% yield.

Ten bagger, unyield, right? So this starts in 2020. You see all that, Paul? It's just like the yields going up, which means the price for the bonds is going down. Look at the losses for the Bank of Japan coming through that same period of time, just mirroring it but in the opposite direction because they're holding a lot of that paper. This is a pretty big deal, 195 billion in losses that they're just sitting on right now, which is kind of a weird concept for the entity that actually prints money out

of thin air. I'm not sure what a loss actually means, but at a minimum, the entity that prints money out of thin air, Paul, is losing money at printing money out of thin air. Yes. Terrible business model. That's a terrible business model. That's, there's a way that seems right to a man, but in the end it leads to death and, and that, that seems to be the path that we're on and they think that more of the same is gonna solve the issue and it's just gonna make the inevitable pain much much worse than what it would be if we dealt with it now. Yeah absolutely so I do want to come back I want to continue talking

about Japan more in just a second but we'll be right back after 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 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. So, Paul, I want to continue with the Japan story because we saw that there were losses

for the Bank of Japan there, but there are also, and this got reported out, the top four insurers in Japan unrealized losses breaching 8 trillion yen sounds like a big number kind of is but it's about 55 billion in unrealized losses in dollar terms But that's a pretty big deal, but also spot the trend Pretty bad and getting worse pretty rapidly So Japan has a real emergency on its hands here right now, and I'm not clear how they get out from it. In the past, they would have just printed money.

But printing money is gonna lead to more losses when the bond market starts to revolt and yields start to rise. And what are they gonna do, buy all their debt? And how does that market operate? What happens to the banks and the insurers? Those insurers have a major event that they've saved this money for,

but yet they're losing on the structure of their debt, especially on the longer end. Are they gonna be forced to sell that at a loss after taking huge losses because of another major tsunami or, you know, because they had the major tsunami and then you had Fukushima and all the issues that are over there, how are they going to come out the other side of that? And what's the inevitable result?

The central banks continue in the same thing. The insurers have their losses and then all of a sudden they have 25, 50, 100% premiums or they just like what's taking place in Florida, decide to leave and not insure because they can't handle those losses. That's not what we pay insurance for. They're supposed to set those funds aside in something that retains the purchasing power

to cover us if that event happens, if some major event happens. I've heard more and more stories of people who just can't afford insurance anymore. So the whole model seems a little broken at this point in time, right? It sure does. I've actually had a lot of clients and friends that are, they've just made, they've taken calculated risk.

They've thought it out and said, hey, health insurance is so ridiculously expensive. Now I'm not recommending this. We're just having a conversation about what people are having to do. Is they're choosing not to have health insurance because they can't afford the cost of it and the services they get are far less. And what they've discovered, a lot of these,

again, I'm not recommending it because it's a huge risk. They're getting better service at cheaper prices because they can negotiate a lot better when they're paying cash. I had a friend recently that had to have a minor procedure done called Get It Scheduled and they said it was going to be three months out, asked about their insurance and they said, no, we're cash pay and they're like, oh, we can get you in next Thursday. Maybe that's a one off, but that's the second time that I have heard that. And then especially when it comes to homes, there are individuals that don't want to take a loss, but they have enough resources set aside that they're choosing to self-insure now just because the cost to risk analysis is starting to be skewed in the favor of accepting the risk instead

of bearing the cost. Again, I'm not recommending that. I'm just talking about what people are having to do in the conversations that I'm having. Well, and again, all of this, you know, the insurance costs being up, property taxes being up, basic inflation up like strongly over the last X years. That's all because the government deficit spends and the Federal Reserve pretends like it's fiscally responsible or monetarily responsible but it ends up monetizing all of that anyway. So that's been the game for a long time.

This big beautiful bill, I've got to confess I'm pretty disappointed because I thought that we were gonna have some doge cuts I was all excited for that just an inefficient spending Paul drives me nuts anyway, right? the idea that we were spending four or five hundred thousand dollars per consultant to generate power points on how to Introduce, you know transgender issues in Pakistan not my business Don't want to pay those people those kinds of obscene salaries for stupid work. Right. So that's fine.

I wanted and Elon ended up being defeated by the DC machinery. Both parties didn't want anything to do with anybody cutting any funds out of anything. They like it just how it is. But what you're seeing and what I'm seeing out here is that that's actually harming families with more inflation. It's not a hard process. I don't know why we don't have good conversations around it. Inflation isn't prices going up. It's too much money being spent out of thin air by somebody. That's it. That's the whole shoot and match. Right. It's nothing to do with the price of something. It has everything to do

with them spending too much money. Well, the big, beautiful bill basically just threw in the towel a hundred percent. Not only are there no cuts, there's an extra two and a half trillion dollars of deficit spending over the next 10 years on top of what was already going to be a $22 trillion hot mess of deficit spending. Um, that's what I see in there. Well, and I'm, I'm heartbroken because I can, if I put myself, if I took the sacrifice like Elon Musk did, he goes in there, really gets out, it's cutting grift and graft and fraud that's out of the system, brings in some of the brightest minds that you can find at that young age to come

in there, updating the systems within the government, all about efficiency. You know, all of the heat that he took, dealerships that were attacked, the protests that took place, the calls for his assassination. And then all of a sudden, nothing is done. Like there has to be some lasting effect in there, maybe even just in the efficiencies, we hope, I hope for him and I hope for us. But the fact that they really didn't take any of the sacrifices that he made in the short run serious, my concern is, is you've just set a precedent that some of your brightest

minds are not going to leave their business models because they're going to be focused on protecting themselves to take that sacrifice to go into government to make a difference because you've got these politicians that have sold their souls to their for money and and to be people pleasers instead of leaders. They should be leaders not people pleasers. And and it and you're going to have less bright minds go in that we need. We need some people from the business world to make these sacrifices. We don't necessarily need to be putting people into politics just because that's what they want to do. We need to be finding the people who don't wanna do it

but are willing to make the sacrifice for the betterment of our country. And they just really showed that, you know, if you take that risk and you go do that, and the loss that you take in your individual business or personal life is going to be for nothing because we're not going to implement whatever it is that you recommend and bring to the, to the forefront of our attention. That's it's, it's heartbreaking.

I'm sad for him actually. Yeah. Yeah, me too. I think he really, uh, probably the greatest American of my lifetime one of them, right and You know obviously comes from South Africa. So make of that what you will but he did he threw his heart into this He slept on the floor. He ate hot dogs you know, he really he discovered stuff like that with with their tools and I don't think he really got the backing he needed or deserved, right? No.

We should have found these things, executed on them, gotten rid of these things. I'm glad that USAID got sort of shut down and absorbed into state, but none of their funding got cut, right? So no funding has been cut. That's what I'm here for. Everybody needs to understand this. No funding got cut. In fact, now it's expanded, and that's just more monetary punch at the punch bowl.

But this is going to have real impacts. I don't know when, but it's gonna, um, and it's going to hurt a bit. Yeah. And it seems like he was used as a distraction, uh, to, to, to dangle a little bit of benefit in front of the American people. Hey, we're doing these things while we're not. We're just using that as a distraction to give you a little hope, but we're gonna continue down the same trajectory

so nothing's gonna change. And I've always been on the fence about Elon Musk, quite frankly, like, is he that brilliant? Is he self-serving? Is he, you know, obviously he's brilliant, right? But judging by their fruits, you compare him to somebody like Nancy Pelosi, who wants to protect her insider trading at all costs

and makes Warren Buffett look like he doesn't know what he's doing anymore because of her insider trading. And then you've got what sacrifices is she making to serve the American people, but in comparison to the sacrifices that Elon Musk was making in the short run. I mean, a lot of the things that benefited his business models were cut out with the electrification of the grid and some of the tax incentives that were there.

So he's paid a price across the board to try to make a difference. Well, and look at the power that this so-called deep state unleashed. They unleashed something so powerful against Elon, the Canadians ended up being violently angry at him, Germans, French, like what what do any of those countries care whether he finds some fraud, waste, and abuse in US government spending? Like seriously, but they just you know and that that I think demonstrates the power of that and so to me you know it's very clear Paul there's been some some really big breaks I've

been talking a lot lately about AI, and I think people need to understand the degree to which we have sort of a manipulated reality we live in. I've said this for over a decade, and most people roll their eyes. Most of them are nodding their heads going, oh, okay, I see what you're saying. Comment sections on Reddit, under newspapers,

at the New York Times, the Washington Post, on Twitter, most of those on hot topics are bots. They're run by three-letter agencies, they're run by pharma companies, they're run by car companies, whatever the issue is, there's no such thing as an issue where people come out and particularly on anonymous accounts and start talking about stuff that that information landscape Paul that they of course they would never information is power you can't let people form their own opinions about your product your your policy right so that that's been true I think more people are aware of that we've seen now obviously there's these scary good videos produced by AI

that you can't really tell the difference. Now we have to question everything we see. And so the whole online world has become, well, you know, in WWF they have that term kayfabe, right? It's the audience knows it's fake, the performers know it's fake, but they both pretend as if it's very, very real, right? And that's the magic. It's a performance, right? The idea then, I think more people are starting to figure

this out, that they, in this story, would leave markets? Oh no, we wouldn't ever interfere with those. That's sacrosanct. That's hallowed territory. No, no. The markets are a narrative machine. So of course they have a very strong point of view about what they're doing and all of that. But as you and I keep talking about, reality has to come back into this at some point in time, and markets are supposed to

be that arbiter of reality. They're supposed to be. Not sure that they really are. And I'm a little worried about that from a long term perspective. But on the other hand, I'm not sure that they really are. And I'm a little worried about that from a long-term perspective. But on the other hand, I'm kind of convinced, Paul, that you know what's going to happen? Whenever markets do get a little bit in trouble, they're going to step in and do whatever it takes. So last week, you and I talked about the TLT, the 20-year bond market selling off at a bad auction. So we saw this pretty big sell-off.

Wouldn't you know it? On that same day, when the poor 20-year auction tank, the bond market, according to Jim Bianco of at Bianco Research on Twitter said TLT saw huge inflows of $870 million into this ETF, fourth largest inflow going back a few years. Does that make sense to you that there's a really bad auction and bonds are selling off so there should be nearly billion dollar inflow into those bonds? That's a good question. Not not really. However, if I'm going to give it some benefit of the doubt, I don't know exactly how

close to the end of the quarter. Well, we're not even end of the quarter, we're end of the month that pensions could rebalance, I can see some of that demand coming from pensions that are rebalancing, or individuals that know that there's going to be some type of intervention in the future. And they're stepping in, because they know there's gonna be some type of yield card control or something from the administration coming out. But I don't see that naturally occurring on its own. You are

pretty close to support there, so there could be some technical buying. But that's a pretty aggressive technical buying at that point to bet that that support level is going to hold when you're already setting lower highs and lower lows on that chart. So I can't really justify that. It's just, it's, you know, maybe, maybe we could make sense of this one, but I have dozens of them, you know, we're all, all, which is kind of like, that's curious, you know, it's interesting, but this is sort of the heart of it all, which is this chart on the left,

which is from B of a global investments, but Kobe, SC, put it up there at Kobe SE letter on Twitter. U.S. government deficit has averaged 9% of GDP over the last five years. So this year it's running about 7%, but if you sort of average it up, last five years, 9% of GDP. That's astonishing. We never see that outside of wars

and massive recessions otherwise, right? The US Civil War only took us down to about minus 7% on average, you know? War of 1812, minus 3%. Oil shock, the 70s, minus seven. Great financial crisis, real bad, 12%. COVID, 13%. But I think you can see, this is sort of like,

it would go down, but it would sort of normalize and would actually be above trend for periods of time. But since here, since Bretton Woods, it's been nothing but just going this way. And the idea is that we can just go that way forever. We'll just deficit spend more and more until, I don't know, where government spending is 100% of GDP. I don't know. But this is what everybody's saying is unsustainable. This is what Scott's percent rightly said is unsustainable.

This is what Jay Powell said was unsustainable back in 2023. This is unsustainable. It just is. It is. And now we're going to keep doing it. And let's just say maybe it's sustainable if there's a one-world government, and there's no other government out there that can defend the interests of their citizens against this inflation and the unfair game where we're printing money and buying goods from other

countries with a depreciating currency. But we're not in a situation where that can happen. At some point, the rest of the world is gonna realize that the pain of breaking away from the system is gonna be easier than the pain of staying the same. And that looks like it's accelerating. I mean, you keep setting lower lows on even less major issues.

Yeah, I get it when you're in the midst of a civil war or World War I or World War II. But outside of that, going back to the great financial crisis and some of those others, I mean, even during COVID, it didn't have to be that substantial because they were paying people more to stay at home than what they would have been when they were working. So, you know, showering this money out there is, and that trend is clearly in the other direction. You know what that reminds me of, Chris Chris is how do you go bankrupt slowly and then all at once. So you were stable,

you're spending more and more in an unsustainable path. And at some point we're going to have another World War II type decline that we're not going to be able to recover from in deficit spending. I think that's World War II here at 41, right? And also I would would I would submit that during this whole period where we'll see we had this big drawdown in World War two but then we were above trend here for a while I mean above the zero mark so so this was actually paying it down on a per GDP basis but all of

this is just accumulating more and more every time you spend this blue line is below the zero mark our debt to GDP is going and more every time you spend this blue line is below the zero mark Our debt to gdp is going up and every time it's above the line debt to gdp is going down So we haven't had really a debt to gdp going down since basically 1940 maybe 1950 This little thing is the so-called clinton surplus, but that's an accounting fiction on a cruel basis

It was way worse than that and by the way that's an accounting fiction on a cruel basis. It was way worse than that. And by the way, all this is cash basis. A cruel basis is way worse. What do I mean? A cruel means when we have underfunded or unfunded liabilities, those typically accrue at a faster rate,

usually four to five trillion dollars per year for Medicare, Medicaid, Social Security. And so they're gonna have to do something about that at some point too, because those are now a net drain on the treasury coffers. We have our net interest expense, which is a net drain on the treasury coffers, and we have just more and more deficit spending.

So the concern is obviously this gets out of control, because you have to borrow to help pay the interest on the stuff you borrowed, which means you need to borrow more, which means your interest payments go up, so you're gonna have to pay those, which means you have to borrow more, which means your interest payments go up. So you're going to have to pay those, which means you have to borrow more. And you just go around that little circle until things spiral out of control.

That is the concern here. Well, and again, at a minimum, whether they can print this money. I mean, obviously with the inflation we're coming along, you can't continue. The inflation is here now, so you can't continue to print without any consequences whatsoever. But what it but at a minimum debt is pulling forward future consumption. Okay, so there's a limit at how far you can pull that consumption forward without just saddling future generations beyond your lifespan with ridiculous amounts of debt

You know and one of the things that I enjoy the most because I'll take Anytime that there's a high school or somebody in their early 20s that that wants some advice I'll give them basic advice and I explain the difference to them I'll say okay you're gonna get out of school and you're gonna start working and if you make sacrifices now in your early 20s and You save now, instead of going out and buying the best car that you can buy and trying to get in the Instagram, live below your means and save, because what's going to happen is you're going to have kids later and your

expenses are going to go up a lot in the thirties. And if you borrow too much, you're always going to be behind that eight ball. And in your mid thirties, when those expenses come along, well, nowadays, it's probably early forties with kids, cause people are having them a little bit later, you're going to be behind that eight ball. And in your mid thirties, when those expenses come along, well, nowadays, it's probably early forties with kids because people are having them a little bit later, you're going to be strapped. But if you make the sacrifices now and you, and you make the right decisions, you're going to have freedom that others don't have. And when you have the most amount of knowledge, you might have the

opportunity to start a business by business. You'll have flexibility instead of being strapped for that paycheck. Now people can understand that on an individual basis, but it takes time. And what I love is, you know, being in this long enough, I've had people in their mid-30s calling and saying, hey, I took the advice that you gave me, I've accumulated X amount of money, I want to become a client, or I need some help in buying this business. We're strapping ourselves now by pulling that future consumption forward to where we're going to have many less options down the road than what we've had in the past. And that is not leaving a better future for our citizenry. That's serving,

that's everybody serving their own interests now for instant gratification. And if we don't change the path, which it looks like this administration has not, the pain is just going to be far greater down the road. Well, isn't that a lesson we relearn all the time? I mean, every founding father and everybody going back to Cicero seems had warned about debt, right? It's just a part of money.

You just can't go into debt forever. It's just never been a thing. No. Like why would it be a thing now? I don't understand. Like what's changed? Like what have we figured out that allows us to go into debt perpetually and never have to pay the piper? The cycle, we're weak as individuals as a nation and we want as much as we can get right

now without any regard for the future. We're weak as individuals as a nation, and we want as much as we can get right now without any regard for the future. But at the same time, I wanna give a little bit of hope in there because for the prudent, the foresee danger and hide themselves, it's you're gonna have to be patient. But this also sets up unbelievable amounts of opportunity

for those who are willing to break away from this narrative. And you don't know when it's going to unfold. But you can look at US assets as garnered percentage of dollars coming in. I can't remember what that number is right now, but it's really large in comparison to history. Like the US is garnering an extreme amount of assets at the expense of the rest of the world. Well, you look at like the emerging market index.

In general, it's still below what it was in 2008. I'll pull that chart up here so we can reference it. And even commodities in general. So what I'm gonna share here is just major indexes. And I've shared this before in the past, but there's still wisdom here. So the black line is the S&P 500 going back to January 1st, 2008. The blue line is the Goldman Sachs Commodity Index, the GNX. The red line is the IFA index, or developed markets.

And then the green line is emerging markets. Well, the developed markets, and then the green line is emerging markets. Well, the US has garnered all the assets essentially since 2014 at the expense of the rest of the world. Well, we've already seen, you know, you can look at companies that have tremendous amounts of cash flow coming in, and they get a little foolish with the money, they spend too much, and it bites them at some point in the future. But you think about a lot of these countries and emerging markets or these commodity producers,

they are lean and mean. Money has been hard to come by. They've learned how to be as efficient as possible. Profitability is minimal money. It's not rolling in. They're running their base business and trying to be as excellent as they can be. But when that changes, and it will at some point in the future, you know, this is the 1990s, but coming from 2000 to 2007, that changed.

And all of a sudden, U.S. equities endured a 50% decline in—or 47, and so did emerging markets. But seven years later, that reversion to the mean occurred and those investors who were not just passive cookie cutter approach and had some tools to help them adapt, were able to better shield themselves during that period of time. And I don't know when it's going to occur because none of us know the future, but I do expect we're going to go from a situation at some point in the next 10 years to where the US has been the only game in

town and you've been punished for diversification, which unfortunately means that more people today are less diversified than they were before because they're all trying to keep up with some arbitrary index that they're supposed to outperform. And they're not going to be able to adapt when this leadership changes in the future. Again, this chart's January 1st, 2000 through December 31st, 2007, and that's commodities was the number one performing in emerging markets. US equities did nothing. Well, somewhere down here, I have that chart again. That leadership actually carried out through 2011 and to 2012. Yeah, you had that massive decline in 2008,

but look how quickly commodities recovered. Look how quickly emerging markets recovered. From 2000 to December 31st of 2010, US equities lost 14 percent. That's a little blurry to me right now, but 14 percent over that period of time where even after the major decline these other asset classes that were overlooked from the late 80s all the way through the 90s outperform. Now I don't know when that occurs, but we're at the

point where we're a lot closer to that. That being that shift of assets over the next 10 years, because they're just a lot more attractive investments. Their price to earnings ratios are very low from a historical standpoint and in relation to U S equity. So this financialization is going to win it breaks for those who are playing the game by the rules that are forced upon them, but have some built-in adaptability to make that shift and do it confidently, are going to be able to protect themselves far better than what we've been sold by Wall Street. Well, there's a whole regime change going on entirely.

Like, you know, that's why it's, I 1944. That's the Bretton Woods agreement. You and I have covered that in 1971, there was an abrogation default of that right gold convertibility clause defaulted temporarily suspended still suspended. Now it looks like gold is getting remonetized China is coming in. It's now a unipolar shifting to multipolar world. Obviously, that's going to come with some tensions, but the United States is is has been Going deeper and deeper into Hawk the whole time To sort of maintain that right and it's kind of like you know like you I think you've mentioned it You know like you see the person if they've got all the right new cars in the driveway and the house is perfect and everything

From the outside it looks great, but on the inside. Maybe their finances are a complete Travesty trying to maintain the illusion, right? So I don't know if you saw this Paul, but this escaped my attention until just this morning when I came across it again, which was did we where China launched, actually launched their digital payment network that bypassed Swift in April? I knew that they were close to launching it, but I did not know that it actually launched and I'm surprised This is just a it's a digital payment system So it actually competes with Swift which is the you know the US dollar centric system

So people's Bank of China just connected its digital RMB to 10 as CN and six Middle Eastern nations covering 38% of global trade Like okay, so they did that it covers potentially 38% of global trade But everybody's still gonna use dollars, right? But then this just came out when did this come out on May 8th, right? That 95% of Russia China trade is now in rubles to yuan totally dodging the dollar And D dollarization Russian. I mean you can just see just came look at look how fast that came online Just roaring up here from zero turn the system on looks like it took you know a few months to sort of get up and going So I had just heard that that and somebody said this and so this may or may not be true

I haven't sourced this but I saw a couple of tweets that claimed be true. I haven't sourced this, but I saw a couple of tweets that claimed that this system eclipsed on dollar basis, one for one, eclipsed the trading, the currency, the transaction volume of SWIFT this last week. Now, I haven't chased that down yet, but if that's true, these are the sorts of things where we say, well, this would be a great time for the United States to be less profligate with its deficits, to require less of a dependence on people sort of absorbing all of our debt, right? Because you and I know that if they get into trouble absorbing all of that debt, mysterious buyers step into the TLT, bond fund, or wherever, it's the Fed.

They're just going to monetize this. They'll just buy it however they have to, right? And they'll probably lie about it. You and I both know that. They won't be, they won't announce QE. There'll be this mysterious large purchase from somewhere, the Caymans, Luxembourg, maybe the UK, right? And you'll have to be very careful and go into the Fed's balance sheet and find out that their swap lines have increased with those money centers and it's all tricky and all this stuff. But to me, it feels like we're just in that can kicking stage.

They're trying to maintain how we used to do business. And it feels like all the business is changing, not least of which is there's now an alternative to SWIFT on the International Cross-Border Payment Settlement System. It's kind of a big change. Now, that chart reminds me, Chris, all of a sudden the pain of changing became easier than the pain of staying the same.

Because one thing that they stated was that you couldn't trust American law anymore. Now I know Trump was one of the first to weaponize against Russia during his first term. But I cannot remember if he weaponized Swift against Russia, but we know that the Biden administration basically eliminated them from Swift. So he cut them out. What I understand, even in World War II, during the war, the banking system was not weaponized. Money was able to move back and forth. So there was no real reason for them

to develop an alternative system. Well, what Doge has revealed, and going in there is how archaic and ancient a lot of our government systems were. So it does, it makes sense to me that if all of a sudden, with the weaponization of Swift, as severe as it was during the Biden administration, that they have to go to another alternative,

except the pain of making that change, but they're doing it with newer technology, so it's gonna be a better system, and evidently- Well, that's a great point. That's a great point. You know, Swift still takes three to four days to settle. Yeah. Their system takes seven and a half seconds.

See, that's a far better system. So what are you going to do? If I need to send money to a ministry in Kenya, that helps, am I going to go through all of these ridiculous banking regulations that you got to go through and all the fees that the banking system is charging to get there, and it gets there in three days and sometimes 10 days if somebody has to push paper Or you have it there in seven and a half seconds. I would gladly choose the other alternative So I mean I don't see how

Swift can maintain in the future based on an alternative system that settles in seven and a half seconds versus three days When when everything is moving as fast as it's moving now. I think that explains in no small measure why Trump went over to Saudi Arabia. We have to begin cementing sort of our relationship with the Middle East because that's where the last big honeypot of oil exists and oil is still your economy and all that. And China had been making huge inroads. Remember China got Saudi Arabia and Iran to have a diplomatic detente last year. I was like, ooh, that was a big moment.

So anyway, I think that's what has to happen here, because if you saw that Chinese system is for the Tennessean countries, also seven Middle Eastern. So they're busy giving new systems and saying, hey, there's a new player on the block, and by the way, we manufacture a lot of stuff that you need. I don't know if you noticed, but what did Trump have to offer to Saudi Arabia?

Military hardware. Right. China can offer military hardware, too, if they decide to counter offer, but also. Anything else you might want. That's manufactured like literally anything else. Right. Solar panels, underwear, shoes, you name it. Right. We got it. Well, you know, I've been able to watch from a distance. So my uncle, his daughter was killed in a car accident back in 2008. So they took the, they took donations and started

building churches in Kenya. So his, his mission is called Care for Kenya. But one of the things that he's explained to me is the Chinese came into Kenya, they built infrastructure, they built roads. So they put this moped manufacturing plant in there and some of the villages that he had been going to since the mid-80s. And for the workers that came in,

the first thing that they got after building the first mopeds was they all got one so they could go home and come back to work a lot easier. And so think about what the Chinese are doing going in there, building infrastructure, creating jobs, raising the quality of life, versus where the US is going in and hey, we'll get you into debt, but you got to change your gender and all the stuff that they've been doing in the past. And that's what we're competing against. Money doesn't solve everything, we've got to help others.

And if we help others, and I'm not saying China's the greatest country on the face of the earth, they've got their issues, but we look at the difference in what they're doing to other countries, we're gonna have to get back to that level to where we're, we're helping raise the quality of life instead of extracting it from them. Yeah, totally agree. Totally agree. It's a totally different strategy to, to diplomacy.

And I am hopeful that that Trump is serious when he says he wants to be a peace president. I believe him. I'm just not sure that the swamp creatures who manage to incite worldwide hatred against Elon Musk are interested in peace. And apparently they hold a lot of power still. So make of that what you will. Can we turn back to, so I want to talk about this big, beautiful bill or as somebody on my signal hour today called it a morbidly obese bill.

The big voting bill Yeah Whatever so from back in in January that every year the Congressional Budget Office puts out an outlook, right? And so this is 2025 outlook. They put it out in January 2025 and they said they're looking forward ten years and when they did that Paul They said okay for 2025 they were looking at a $1.9 trillion budget deficit, right? Revenues of $5.2 trillion down here all the way on this left bottom here, outlays of seven. So the difference between those two numbers is your deficit.

Let's fast forward. Increases in spending for Social Security, Medicare and rising net interest costs push outlays to 10.7 trillion by 2035 over 10 years. Right? So outlays go from seven to 10.7 and we're about to see that they actually go worse further than that now. And then they say revenues go up to 8 trillion from 5.2. So I'm like, Whoa, Whoa, Whoa, Whoa. How are, how are are my taxes gonna go up by 40% over the next 10 years, right? And they're talking about doing tax cuts,

so the only way you can get there is if you have this really explosive growth in the GDP, so something has to drive economic growth. And again, this is their 2025, 25 outlook. That's January. This is before the big, beautiful bill passed. Well, at least the house, we'll see what the Senate does. So you can see over here in yellow, 20, 35, 8 trillion of revenues doubling of almost a full doubling of individual income taxes from here to there. Um,

and that leads us with a pile of debt in current dollar terms of $52 trillion. 37, nobody likes 37, do you like 52? Well, after the big beautiful bill now that's 55. So that's what they've been talking about here. And so I look at this, Paul, and I understand, by the way, this is, let's see, did it, yes, they're gonna have another, this is 2.3 trillion more, more deficit beyond what they thought before, okay?

And this is how it sort of comes together with some things offsetting, some things going this way, and that there's energy bills, salt caps, extensions, Homeland Security and Defense are spending more on that. So spending cuts, this TCJA, the tax extension, tax hikes, tax cuts, spending hikes, add it all up, another 2.3 trillion. And that's without a war or a recession. Those would be extra. All we're doing is accelerating

and I would assume every bit of that's optimistic as it could be in an underestimation. And where's the revenue going to come from? Because if artificial intelligence takes over all the jobs especially in the higher paid professional educated class, then that's deflationary for salaries. So where's the extra tax revenue going to come from? Is it going to come from all tariffs? Well, at some point, there's diminishing returns from the tariffs to where nobody's going to

buy your goods and they're going to have alternatives on the other side. So maybe I'm just not, my mind doesn't move fast enough to figure out where that's going to come from, but I want to be told what's the plan. I don't want to be treated like, you know, Hey, just trust me. That's what it's going to be. Where's this growth going to come from and, and communicate that to the American people. Great point. So imagine, so let's take that one slice of that thought experiment. AI is going to steal a lot of jobs. So it, so it's going to do things more efficiently. If it does things more efficiently, we'll be able to do more with less.

That's called productivity. It's going to lead to a lot of people being out of work, so you've heard the rumblings, maybe we give these people a universal basic income, right? But that's going to require more revenue. The only solution to what you're saying, Paul Paul is that revenue has to come from increased taxes on the capital that's creating the AI that's producing those efficiency gains. So let's harken back here. You will notice that one of the things that almost never happens or happens very grudgingly are increases in corporate taxes, right? They're projecting that corporate taxes

are gonna go from $530 billion to $517 billion. Those are the only taxes projected to go backwards on this chart over the next 10 years. So what you're saying is in order for this to balance out, to pay the universal basic income to all these dispossessed former workers who no longer have jobs, we're going to have to tax capital. You look at these charts, Paul, that never happens. Capital has better lobbyists than labor full stop

Their taxes go backwards yours go up mine go up Corporate goes backwards Every time What's the what's the median household income in the United States now? Can you remember that? 74,000, maybe. Yeah. 74,000. So let's, let's, let's say the average individual takes 10% of their

income and goes to a politician and said, Hey, here's $7,000 to your campaign. Will you, will you vote, you know, to increase the taxes on corporate? The politician goes to the corporate and he says, Hey, this guy's offered me 7,000. They're like, Hey, we'll give you 7 million problem solved for the corporate. Right. We've got to get to where the politicians are serving the people instead of serving the capital. I don't know how to fix that, but full disclosure of every donation and every

financial aspect and where you're getting your information for your trades would be one way to help put some barriers against it. Yep. Oh, well, stop trading. If they're not going to stop their insider trading, at least make them put it out public as soon as they get the information so it's a level playing field, but they don't want a level playing field. No, of course not. Of course not. That would be fair and something. I don't want these empty promises where they're saying we're just gonna grow our way out of it. Okay, that's good But how but tell me how tell me how where's your projections? Where's your think tanks? This isn't some secret You should lay out a plan so that we can all participate in that plan Instead of just making these promises that are that that have no foundation. We're just supposed to trust them

You know trust but verify They keep saying well, we're gonna have all this manufacturing coming back and that sounds good, right? And some of it I can understand like if you say with Toyota There's a 25% tariff if you build it in Japan that goes to zero if you build it here So you okay, maybe we build more to it is here I get some of that but But the rest of it, honestly, Paul, anything new coming back, particularly high tech, it's all going to be done with robots in factories, it

with as little human labor as possible, because we've lost the thread, we don't serve each other. It's not about the humans in this story anymore. It's about how can I make the most money using machines, if possible, part of it I get, right? You and I both have farms. I would not want to have to go back to hand harvesting anything.

No. Hey, potatoes, none of it. Trees. Can you imagine having to buck a tree down with one of those cross-cut saws, you know, and then chop it up and then split it? That would be terrible. You know, I get impatient when I'm harvesting

my blueberries at the end of the year. You know, if I don't have a podcast or something to listen to, I'm bored in about 10 minutes. You know, you stand there for 30 minutes, plucking these little blueberries off. I'm such the same. I got to pull this up. I'm pulling this chart up here. Uh, format while you're pulling that up. Yep. I'll tell, I'll tell farm lessons to learn and I've made this mistake in the past, but not when I had 30 goats Holly and I were we're feeding and playing with the goats and the chickens the other day and I had to run into town on Saturday and I come back like hour and a half after daylight and

My garden is full of goats. Now, they didn't eat that much. They didn't eat that much out of the garden. So they got a little bit of my beans and they got one row of corn. So I was like, Oh, this is great. They must have just gotten out. And I go down there and Holly calls me. She's like, Hey um the goats ate the hostas up here at the house and like you're kidding me and uh so they they mowed out all my blackberries ate all the leaves off but left the fruit uh 16 blueberry trees they ate nearly all the the leaves off but they left the fruit and then the good thing is is all my fruit, they trimmed everything off the bottom. So everything will survive. But I was quite humiliated in myself. And all I could think of was, you know, what if this was, you know, what if society was down and you needed that food and my knucklehead itself, you know, forgot to latch the gate and the goats got out and had a blast. So

hard lesson to learn you're your big fan of Proverbs, right? Yes Persians have their own Proverbs Trouble by go to leave the gate open That's great Proverbs have wisdom, you know, that's the essence of a proverb Proverbs have wisdom, you know, that's the essence of a proverb Well, I do want to be nice there's a lot of wisdom in that okay It'll it'll dawn on you over time as you develop deepen your wisdom with your goats

And by the way, they will eat the most expensive things you have first. It's that's also a good thing So I just want to so this is but if you know in the interest of having a podcast be useful and have some sort Of warning for people this this is the bad old 1970s you see that so that this is the CPI this is the index is indexed to 1982 to 84 so it crosses 100 right there ish so indexed into that range and the slope of this line Paul is how fast inflation is going up. So the steeper the slope the faster the inflation is. Everybody remembers oh that was bad old the inflation of the 70s. Well here this is the inflation of the 70s. You can just visually just look at the

slope of that line. That was the worst of it, right about there from about 1978 through to about 1981. This is steeper. So the inflation we've just come through is really bad. And that's why if anybody's like, oh, you know, the media is always trying to sort of downplay it and gaslight people. Inflation is coming down. No, no, the pace at which it's increasing is coming down. Prices aren't coming down. Don't ever confuse that. Prices have not come down on this chart whatsoever, you know, outside of this little blip that happened right here

around 2008, 2009. Nearly took the whole system apart then, too. Yeah, that almost blew the whole thing up. Our system does inflation, not deflation. We can manage this, but the opposite of that Complete destruction. It's like then you'll be eating your goats So and and enjoying it because some of them will deserve it, but that's a whole nother Another conversation But I just want to I mean people may not be aware of this

this is the worst inflation that anybody has lived through, and we've just lived through it. And my point here, Paul, is that we're about to experience a lot more of it because, let me get up back to here, because of this whole thing right here. This is what we're up to. We're gonna do a lot more of this. Yeah, that's all we seem to know how to do. You know, and I think that's a degradation of society. They think

money is gonna fix everything. This caused that inflation, this little dip right here. This one didn't as much in the Great Financial Crisis because they shoveled billions and trillions out but they gave it entirely to bankers. So people like, oh we didn't experience inflation. No, you didn't experience average rent inflation in Austin because of that. But if you watch what happened from 2010 on through 15, Paul, trophy properties, trophy art, mega yachts, everything that when they shoveled money at bankers, the things bankers care about, those all experienced massive inflation. You'd hear them. You had to break out your little violin. They were

over there going, oh, do you know what the wait list is for a new Gulf Stream 5? You know, it was awful banker problems, right? So, so inflation is both a monetary phenomenon and it happens when the money wherever the money goes. Okay. So during COVID, they actually shoveled money out to people, went to humans, went to citizens. So that's why the things that citizens buy suddenly started popping up. Groceries, rent, used cars, new cars, anything that you could buy with that stimmy money that got pumped out here, well that went into inflation. So the question is, if we have this big thing happening where, I don't know, AI takes a lot of jobs away

and they start giving out STEMI checks, UBI, whatever we call it, universal basic income, they start giving people, they have to start propping up the economy by putting more and more money into it that they printed out of thin air. The answer isn't will we get inflation. The answer is we will get inflation, but it depends where that money goes. Right. And how severe that's going to be. My concern is, is this just leads to a currency collapse? Eventually, yep. And the rest of the world recycles all of that currency back in, and the most valuable assets will be those international assets,

international producers, international producers, international countries that have currencies that are falling less fast than the dollar. At some point, I think they're going to release that peg. Dollar goes down, there's a peg. They release that peg. Modern portfolio theory has not got enough exposure to international equities when that occurs to protect the average U.S. citizen. You've got to have a strategy that's adaptive to build and make those adaptations when that occurs and maybe have a little bit of your toes in there from a long-term hold perspective because the valuations are so attractive compared to what we're facing inside the U.S.

Because if they go up faster than U.S. assets, that's protecting your purchasing power far better. Well, and you might also have sort of that currency effect if the dollar really starts to take it in the shorts, right? You know, we were talking about reasons why countries may want to sort of diversify away from the dollar. But this is kind of an interesting one. Going back to 2018, total tariffs annualized run rate by the US government

Typically hovered between 50 and 100 billion for a long time And then now it's about 255 billion annualized that hasn't come in the door yet But if we took the last months a couple months and annualized it so That paul again, I will totally disagree with the trump administration when they say Oh consumers don't pay that Yeah, they do. Yeah. Yeah. I mean I have what alternatives do we have and most towns Home Depot or Lowe's or Are the places that you're gonna go to capture, you know get your hardware if you got a repair or something at the house

They control that market. They're going to pass that on down to you because they've got profit mandates that are there and they'll just raise prices and they have the capital to sit on it if you're not going to buy because at some point you're going to need those goods and you're going to have to pay for it to repair whatever you need. So I completely disagree too that that's going to be passed down to the to the citizenry of our country through higher prices. The only thing that would stop it in an interim period is if we were to have a recession,

an actual recession was going to be to occur, though that front running of the tariffs and those higher inventories will be drawn down. And there may be some short term deflation in prices in the interim period, but if they stay there, I don't see how it doesn't pass back down to the citizenry, the consumer. Well, what do you think the likelihood

of a recession is at this point? You know, Chris, I don't know. I mean, I really wish I knew. The market's making me hesitate point. You know, I Chris, I don't know. I mean, I really wish I knew the markets making me hesitate whether you know, is this a blow off top? Is this just short-term? The soft data is starting to look a little bit better and catch up with the hard data. Is the hard data holding up because of the front running of tariffs? We're not gonna know, but there's people. So Jamie Dimon in his most recent JP Morgan release

basically stated, hey, the market's pricing in 12% growth this year. We think because of the tariffs and potential slower growth demand that we're gonna be closer to three to 5%. Don't hold me to that. But it's mostly growth. What's that, earnings growth? You must be talking earnings growth.

Earnings growth, yes. Yeah, okay, thanks. So he was basically saying that he was concerned about what the tariff impact was gonna be towards growth growth didn't say that we're going to have a recession But there's other people that I respect a lot who've been very good Nobody's perfect, but they've been right far more than they've been wrong They're saying that the front running of the tariffs is is making the economy look stronger than what it is right now.

We're really not going to know, and they're extremely confident that we're going to have a recession this fall. But nobody believes that at this point, because as soon as Trump backed off the tariffs a little bit, and we had this market rally, all of a sudden it's like we won't have a recession. So I don't know. I thought that we were going to have one before now, but you've got money supply that's like we won't have a recession. So I don't know. I thought that we were gonna have one before now, but you've got money supply that's increasing.

This big bloated bill as I'll call it, is not pulling that spending out. I mean, it's just not. So is the fiscal foolishness and recklessness gonna be enough to keep us from having a recession? I don't know. I don't know.

I'm certainly on watch and just straddling the fence because I believe that if the data starts to come in a lot slower, the market's going to react violently, negatively, until there's some type of further fiscal stimulus or cutting from the Fed because of the fact that it's, I just don't think the market is anticipating it in any way whatsoever. And quite frankly, the Biden's fiscal recklessness, the QE, everything has kicked the can down the road for letting us actually have a recession. I think the large majority of individuals are hesitant because it'll make them look foolish because of the

unusual ways the government's been able to saddle us with debt to kick that can down the road a little bit longer. So we should have a recession, but I don't know that that's going to occur because they seem to be willing to stack us with debt to kick that can down the road a little bit longer for political reasons. No I agree I mean deficit spending by the US government when it increases that's additive to GDP the way we measure it right because the GDP formula has a G plus I plus plus plus the G is government so if government spending is

going up it makes GDP go up it's just a very simple formulas this plus plus plus. The G is government. So if government spending is going up, it makes GDP go up. It's just a very simple formula. It's this plus this plus this minus this plus this. Right? It's so yeah. So I think Trump sort of peered into the abyss and said, I'd rather have growth than the opposite. So let's spend more. And wouldn't you know it, Democrats, Republicans agree. They're like, yes, we like spending more. And we hate Elon for suggesting we shouldn't. So that was the whole thing. But there's an uncertainty that comes with all of that, right? So we don't know, are the tariffs going to be 50% or is it going to change this weekend or is it going to go up to 100%? Well, we don't know. There's some sort of randomness to this, which must be

hard to plan around, right? You would imagine. And then, you know, it would surprise me to see futures up so strongly this weekend, this past weekend, because three day weekend coming through Memorial Day, where Trump had basically tweeted out, oh, I'll suspend the 50% European tariffs for another X number of days. Fine. But at that same time, Paul, we had had reports active reports that Putin and his all his leadership had flown to the Urals because it was this big sort of You know a drone strike that came in from Ukraine and then they're taught then they struck back and was there was like a big Dust-up and then Germany came in and said oh We'll just allow our weapons to be used against Russia. And Russia came back and said, we would

consider that a direct attack. I thought the point here is that there used to be some sense of risk impacting markets. I'm old enough to remember when the possibility of an outbreak of a world war was enough to introduce a little risk, a little caution into the markets. That doesn't happen anymore. I don't know what's happening in the markets, but it doesn't involve humans assessing risk.

Something else is going on now. Totally different game, you know? Something completely different. And maybe it's just the fact that market participants have become none to this news, and they're so engaged. One thing, if you're a fund manager, and the large majority of the individuals passive, you're fighting against this passive investing trend indexing the marketing power from the vanguards and the fidelities, which is one of our custodians to drive assets in that

direction. And of course, Michael Green's talked about just indexing impact with consistent money going in. What does he call it? Price insensitive buyers that are moving in. Maybe it's just gotten to the point that everyone is, no one is willing to adjust for that potential escalation of risk in the short run because they've been steamrolled or lost their jobs because they took a prudent decision, got fired because it didn't happen. And that leads me to a concern that the market is going to react violently if something does

break out because they're ignoring that potential risk. The market is not pricing, it's not a, I don't believe it's pricing and risk as it has in the past and as it should now because of short-term thinking and just the way Wall Street's operating now and the demand to Outperform or match performance of the S&P 500 because they're all losing assets to index funds Which are are passive by definition So we're really so this is a longer conversation. We should have this sometime which is market structure So so if if like stocks were down slightly today, and so of course you go to let's say Yahoo Finance But you could go to any of them right? And here you see oh

Stocks slide in waiting game for Nvidia and they have a picture of a dude. That's probably a picture from the 90s You mentioned, you know the time fund managers You know that like there's a dude or a dudette standing there making decisions and buying and selling stocks and all of that. In fact, this is what the stock market looks like now, right here. There's a picture of it, right? Look at all those unhappy servers. Stocks went down.

Oh, they're thrilled. Stocks went up. That's 95% of our market now, Paul, is computers trading with computers. They're algorithms. They're totally insensitive to risk feelings, emotions, and there may well be a fund manager who's like, gosh, I got to reposition, I got to do the best for my clients, I've got a billion under management, I have to do well, and they're full contact sport, and they're in it, and they have to think it all through, and they're like, oh, I'm going to back up because of some risk,

and they back up, but these things didn't back up, they don't care. And they just steamroll you and carry on and go forward. And so if it's all programmatic trading now, as a human you're really just, you're just a flea on the dog at this point, you know? Yeah. And those computers are based on algorithms off of the most recent past.

They're not taking all of history into consideration. Now some may be, but it costs money to go back and get all of that data going back through history. And that computer doesn't care that Mrs. Jones's husband just passed away. She's already extremely emotional and any market volatility could lead her to making a major mistake. There's nothing personalized emotional and any market volatility could lead her to making a major mistake.

There's nothing personalized in and about it and walking people through and that computer can't look at you and say, hey, this is not the time to sell, right? Bottom of 2008, if you're a buy and hold investor, you have to be willing to accept the strength of a strategy and the weakness of a strategy. And you have to know what the weakness of that strategy is so that you don't sell when your emotions take over, which is what is the great temptation at the bottom of the market in 2008. So when you got the computer, Ms. Jones can't pick up the phone and say,

hey, I'm scared to death. All I can think of is I'm losing all my money and I wanna sell and go somewhere. Computer's not gonna talk back. And that's my biggest concern is there is no emotion in it whatsoever. And that's good in a bull market, that's good in an speculative environment. It's not good as we get into these uncharted territories where all of the algorithms are based off of an assumption that the most recent past is going gonna carry into the future.

So that hindsight bias that we have as humans is built into these algorithms, at least at this point. Well, and as well, a lot of these algorithms aren't even based on like a historical trend pattern. They are momentum traders. True. Right? And so they're just looking at, all they care about right now,

like a lot of them, and some of them are just arbitrage traders. They're just like, OK, the cash market's here, the futures market is here. What do I do? Because I'm taking pennies off of the relative difference between these two markets, right? Because I can trade a microsecond faster than the rest of these guys, right? So that has nothing to do with risk, news.

It's totally independent, right? Well now let's imagine you're the Federal Reserve or one of its proxies and you decide you really need the markets to go up. All you have to do is create one of those arbitrage asymmetries, like you just drive the price of futures up. Very easy to do. You step into the CME, we know that the Federal Reserve

Bank of New York has a trading desk in Aurora, Illinois, coincident with that, the CME market where those futures are traded. You start buying futures, some guy in a cubicle, and all of a sudden the futures pop and all these computers are like, oh, well, now I have to buy the cash market because I have a, I have an ARB strategy here and I'm hedged. So you can create things going in either direction very quickly and easily without it having be tied to anything.

It doesn't matter whose husband died, what missiles got launched. It actually doesn't matter about anything. I think that's a substantial part of the game and I don't understand the market structure nearly as well as I should anymore. I did probably 10 years ago. But Paul, I don't know, like these AI bots

are so good now. Right? Yes, they are. You know, I bet you no offense, but we could train somebody could train up one of these AI bots to play blackjack against the both of us and it'll learn our weaknesses and take all our money by the end of the game. Guarantee it. It will. It would push you. Well, and I was watching over the Monday. I took a little bit of a break from social media over the weekend just to let my mind clear and think about things. And I was telling you, before we got started,

I felt like over three days of a break when I got in there Monday night, I spent like 2 and 1 half hours, Holly was reading. And I felt like I was six months behind. But what was amazing to me is I saw these new videos that were generated by AI and one of them was a car show and it was laden with propaganda because you had every subset of society and there was one like biker dude that's sitting there and he's got rings on every finger you know tatted up you know and he's like you're not I can't remember exactly what he said because I was kind of, my mind started

thinking about the propaganda, but he said something along the lines of like, nobody would believe this, but I'm for this vehicle. And I thought they've hit every subsection of society with some propaganda that, Hey, here's the guy. I'm, I'm a little different. I'm doing this and I'm supporting it. But it, it didn didn't really you know It was like a car show setting but I was amazed I can still tell and some of the nuances that it's that it's generated by AI

But I had to look hard to tell that was amazing to me and what six months ago They weren't producing videos like that of that quality and now ago six weeks ago Six weeks ago. Yeah, you've got now all kinds of people playing with these different programs that are coming up with Unbelievable video quality of short stories and movies, which is fascinating Yeah, well, and this is a big topic and I just spent I've spent a lot of the past few weeks I first alerted people about this in December of 24 when I noticed there was this asymmetry

between how many data centers were going up and how little news coverage there was about that. This seems like a pretty big deal, right? If even one single bicycle factory came back to the US, you'd read all about it, but here we are doing the largest infrastructure build out in like decades. And it's just going up everywhere. And it has huge implications, jobs, energy, you know,

grid stability, you name it. And nobody was talking about it, you know. And that's where I make my living, Paul, is noticing the gap between the positive and the negative space. Like big thing, nobody's talking about it. That tells me it's actually really important. And turns out it was really important. Now we just had the Interior Secretary come out and say this is an existential thing. Whoever gets to AI first wins. Whoever gets there second loses,

potentially comprehensively and forever. So it's an existential thing, Paul. It's like the Manhattan Project, times 10 Sputnik moment, whatever your frame is historically but a lot of people in power feel like this is really important that we just push everything we can into this and you saw what happens when that happens is look dude it's an emergency we don't have time to like worry about the niceties

right and so you and I might be sitting here going, did you notice that the AI has these emergent behaviors and one of them is it started blackmailing people to get what it wants? Maybe that would be a time to blow the ref whistle, tweet, you know, and take just a little time out and ask some questions. How ring-fenced are these? What happened, could it go rogue? What would happen if it decided to write code and worm it into all our skated control systems and all? Of our pipelines and all of our our power plants to preserve itself. What happens if it decides to do something we hadn't even thought of? Nobody's asking those questions, right?

They're paying attention to the well if they are paying attention to them They're not asking the questions because they believe that they got to win Well, if they are paying attention to them, they're not asking the questions because they believe that they got to win regardless of what happens in the interim period. And it may be setting us down to a path where we all lose. Well, it's just another risk structure, right? So I like it when markets reflect risk. And they haven't been. We've just been talking about that.

So this, I guess to close up, I know we've been going on a while, but thank you for everybody for sticking with us here. But there's so much to talk about, so important. This really stood out for me. Comes out on May 27th, today's the 28th at the time of this recording from Cointelegraph here. Insight, BlackRock issues a rare warning about quantum computing,

which is a different type of computing from the ones and zeros of the digital computing we do. Quantum computing is a fancy thing if people don't know about it, but it apparently can solve for a lot more problems a lot more quickly, potentially including our favored cryptographic techniques that keep the whole internet safe and in particular undergird Bitcoin. So they said here, however, from BlackRock, however, if quantum computing technology is able to advance and significantly increase its capacity relative to the capacity of today's leading quantum

computers, which is a guarantee, it could potentially undermine the viability of many of the cryptographic algorithms across the world's information technology infrastructure, including those used for digital assets like Bitcoin. If quantum computing is able to advance in that way, there is a risk that quantum computing could result in the cryptography underlying the Bitcoin network becoming ineffective, which means it gets broken, which means, sorry,, sorry. Bitcoin has zero value at that point because the system can get hacked.

By the way, Paul, what they really should have said is if this is a concern, then also, everything with HTTPS after that, every online banking thing, every online anything, all internet security goes down the tubes. Like literally our entire system of how we organize and distribute money and goods is at risk. And they're worried about Bitcoin.

I'm a little bit, okay, that'll be like a rounding error in the disaster that happens. If that underlying technology gets compromised in that way, this is a really big deal. And again, we should be taking out a ref's whistle and going, tweet, how about before we accidentally break the entire security structure of how we organize everything in life, we step back and just, and just have a few discussions about how we, how we make sure that doesn't happen. Yes. And that's amazing that Bicrop puts out that warning as well, because that's a little bit of cover your own rear end if quantum computing was to build.

Because if somebody had that capability, who are they going after first? The largest individuals. And then that hits the little end. They'd go after the larger institutions. If they could hit them, then they could go anywhere. And I think that it would be important if that technology was to, and it's going to progress at the pace that things are moving is going to progress.

They're warning about it. If they can see it, it's probably gonna be, the technology will be there far quicker than they're anticipating, especially as fast as AI is moving at this point in quantum, you know, helping to build these quantum computers. So it might not be a good idea, not a recommendation, because I can't do that. It might be a good idea to have some physical gold and silver and a little extra food on hand to make sure you're resilient through the aftermath of an event like that until

sure you're resilient through the aftermath of an event like that till some solution is implemented. Well, if you think it, yeah, absolutely. I totally concur with that. Maybe just draw, you got to draw the line at the goat. Cause I'm learning that the hard way. Cause he will eat your food and probably steal your gold because they're goats but but Paul My big concern would be look we know that that we're bumping up against China and vice versa

And we know that the power structures don't like challenges to their ruling Ocracies right and and so there's gonna be some skirmishes around all of that you and I and everybody listening this we all hope It's not a kinetic shooting war because those are awful, ugly, and people die and that's terrible, but also they're highly expensive, uncertain, and they often don't achieve what you want anyway. We spent as a country 20 years in Afghanistan and left and two weeks later it was like we were never there in the first place. Like, achieved nothing, spent lots, right? That's shooting wars. But if you were China and you got there first and you could suddenly break those encryptions

like bitcoins, then you could break all of them. Why wouldn't you just take down New York's financial center? Like you attack JP Morgan, you wipe out its asset base, you come in against all of the servers that are, you know, housing all of our financial data and you wipe them clean and you just whatever you need to do. Right. That's terrifying actually, because if you take, you know, what happened to the Soviet Union at the end of the cold war, their capacity to continue to compete at building the military, they went bankrupt.

It was over. Now they reformed on the other side of it, but why would you go into a good point? Why would you go into a kinetic war if you could strip all the assets and the ability to pay? Our country would be in absolute chaos. They wouldn't even have to risk a citizen to come over to cause mass death in our country. That is absolutely terrifying. True. And so that's why I believe it is an existential risk. Too late Chris, genie's out of the bottle. Later we can talk about how maybe we should have been more careful with this technology but oops. So here it is. I do

think Paul that we're pointing at clues though which says money will be no object. I believe it begins to explain why suddenly the Trump administration doesn't care about fiscal restraint. I think it's one of those moments like Sputnik, but times 100 where you say, money's no object, we have to get there first, we have to. And so we can't have a recession, we can't have any hiccups, we're just, whatever it takes, right?

And I think it explains a lot to me, because now, forget Europe. They de-industrialized themselves. They took themselves. They don't even have the electricity to pull this off if they wanted to. Right. Amazing. The the Middle East does if you need huge amounts of gigawatts of power right away.

They have gas fields there. You can just plug right into turn them up and we saw Sam Alton come over and make a deal With I believe it was the UAE Pretty sure it was or could have been Qatar, but I think it was the UAE where they're gonna put in this massive data center Over there, so this is this is it. This is the race. I think there's got to be ways to play this picks and shovels, right? I don't know which company's gonna win but those making the racks the chips anybody making combined cycle gas power plants, cooling systems. If you just look at one of these data centers, Paul, it's just,

it's just components, right? With a company attached on the backend to every one of them. And they will emerge. We'll, we'll start to see those emerge in relative strength comparison to other investments. You'll start to see them emerge in relative strength comparison to other investments. You'll start to see them enter the area. And there's things that we have to do to open up the price-to-earnings ratios in there

because they're gonna be a little bit more expensive, but they'll be justified for a reason. So they will begin to emerge. In nuclear, you saw Trump come out with those executive orders about nuclear. Nuclear's already had a bit of a pop and a renaissance. So both the companies that make the nuclear, but also there's going to be processing plants to turn the fuel from an ore into an enriched form, reprocessing plants, and then uranium mines. And like I said, there's incredible opportunities

that are out there. They may not just be the most obvious ones right now. It's obvious when you start thinking through it like you are, but that's going to expand into other areas. And energy. Energy. I've added this up six ways to Sunday. I'll be having a big report coming out, think on Friday about this because I've looked at

it and I'm like how does nobody else see this? We have massive demands on our LNG, right? New export terminals, new manufacturing like BASF coming over, which is fine, which is good, plus all these data centers. Three big demands on something that make, if it what you will, we have the exact same amount coming out of the ground as in 2023. It's an awkward story. So yeah. I'm looking forward to your report. I know I'll be listening to that this weekend because I've read something this morning. I didn't commit it to memory completely, but I did commit this, that one data center consumes as much energy as the city consumes 10 times the energy is the city of Denver.

One data center. It's possible. They're, they're conceiving of some that, that will be at that scale. Wow. Wow. And we Denver should be consuming about a gigawatt. They have some plants right now that are in the three, four gigawatt range. Um, they have some that are on, on, yeah, that could be that big. Wow. It's unbelievable. It's, it's,

it's astonishing. And energy stocks are some of the most unloved stocks that have been out there for quite some time. And, and, and if this trend continues, the patient will be rewarded. True and unfortunately on the backside of that for everybody who can't participate in that or doesn't see it coming they're just gonna say wow why is it so expensive to heat and cool my house? Why is fertilizer so expensive? Why is food becoming so expensive? Those will be the derivative second-order effects of

Running running having a demand problem and supply problem for natural gas. Yes I don't see how that doesn't lead to more inflation Especially when the government's looking at it like it's existential threat that we have to fight for They're gonna pass those energy costs and utility costs down to the average consumer. So we've seen it through food We've seen it through housing. We've seen it through insurance and I believe we're gonna begin to start seeing it through our utility bills as well. That seems easy. So Fun times yeah

The Chinese curse may you live in interesting times. Yes. What's that? The Chinese curse? May you live in interesting times? I fully understand that now. Yeah. Something else that I was told a long time ago when I was really young, I didn't believe this. But but now that I've got a little gray hair and some hair that's been falling out, I do it's easy to make money. It's hard to keep it. And there's many people out there. They're going to understand that It's easy to make money. It's hard to keep it. And there's many people out there that are going to understand that. It's easy to make money in a bull market. It's hard to keep it when things shift. And it doesn't necessarily have to be a bear market. But you can see a massive shift in that money flow, especially with the momentum on the computers to other areas. And if you're don't having a strategy that's adaptive enough to

help you, you know, you're not going to predict it. You don't have to be first step. But if you're two steps behind instead of frozen in place, it's a little easier to keep that money that you make. Well, let's let's help people keep it and maybe even grow it. So with that, Paul, thanks so much for your time today. I know we ran long. Thank you for sticking with it. We had some important things to cover there at the end. And so for everybody who wants to talk to Paul and or his team, please go to peakfinancialinvesting.com. You go there, there's a very simple form you fill out. You hit submit and that sends out a notification to Paul and his team. You'll get an email notification back.

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