The Pomp Podcast - #708 Inflation Is Permanent w/ George Gammon

Episode Date: November 1, 2021

George Gammon is an investor, entrepreneur, and real estate expert who teaches macroeconomics and investing. In this conversation, we discuss macro economics, monetary policy, bitcoin, gold, investing, real estate, international markets, and personal freedom.   ======================= Choice is a new self-directed IRA product that I'm really excited about. If you are listening to this, you are likely part of the 7.1 million bitcoin owners who have retirement accounts with dollars in them, but not bitcoin. I was in that situation too. Now you can actually buy real Bitcoin in your retirement account. I'm talking about owning your private keys and using tax-advantaged dollars to do it too. Absolute game changer. https://www.retirewithchoice.com/pomp ======================= Circle is a global financial technology firm that enables businesses of all sizes to harness the power of stablecoins and public blockchains for payments, commerce and financial applications worldwide. Circle is also a principal developer of USD Coin (USDC), the fastest growing, fully reserved and regulated dollar stablecoin in the world. The free Circle Account and suite of platform API services bridge the gap between traditional payments and crypto for trading, DeFi, and NFT marketplaces. Create seamless, user-friendly, mainstream customer experiences with crypto-native infrastructure under the hood with Circle. Learn more at circle.com.

What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Now let's kick this thing off. George Gammon is an investor, entrepreneur, and real estate expert who teaches macroeconomics and investing. In this conversation, we discuss macroeconomics, monetary policy, Bitcoin, gold, investing, real estate, international markets, and personal freedom. I really enjoyed this conversation with George, and I hope you do as well. Before we get into this episode, though, I want to quickly talk about our sponsors. First up is BlockFi.

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building circle is a global financial technology firm that enables businesses of all sizes to harness the power of stable coins and public blockchains for payments commerce and financial applications worldwide circle is also a principal developer of usd coin usdc which is the fastest growing regulated fully reserved dollar stable coin in the world now standing at more than 30 billion dollars of market cap and is adding nearly 300 million dollars of net new digital dollars in circulation every single week i recently had jeremy allaire on the podcast and also on the best business show he's very impressive it's obvious that circle is onto something here They also have a suite of platform API services and a free Circle account that will help you

bridge the gap between traditional payments and crypto for trading DeFi and NFT marketplaces. If you want to learn more, go to Circle.com. Again, Circle.com, global financial technology firm enabling businesses of all sizes to harness the power of stablecoins and public blockchains. Circle.com. All right, let's get in this episode with George. I hope you guys enjoy this one. Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his

personal opinion. This podcast is for informational purposes only. We got a ton to talk about, my friend. Let's first start off with just your background. I think that you've got this incredible story in terms of running a couple of businesses, then semi-retiring and kind of moving into becoming a real estate investor. So maybe walk us just through how you describe your background. Yeah, I retired in 2012, ripe old age of 38. And I knew that I wanted to invest my own money. I've always liked to kind of be in control. I never wanted to delegate that to a financial planner. And I was in Singapore during the summer. And I had about 10 minutes before a dinner date. I was at the Marina Bay

Sands. And ironically, I was on YouTube and I stumbled across some videos from a guy named Milton Friedman. And it was his series Free to Choose, I'm sure you've seen. And that took me right down the rabbit hole. It resonated with me and I just really felt a connection. He was articulating everything that had been in the back of my mind for so long. And that took me to study people like Thomas Sowell and then investors like Jim Rogers, Jim Grant, Jim Rickards. I actually just did a panel discussion with Jim Grant in New Orleans last week. So that was definitely a highlight, something I'll remember for a long, long time. But that kind of got me into that mindset of value investing. And then I kind of studied macro through that lens. And then I just

became obsessed with it. And I was just like all of us, right? Whenever we're in the shower, whenever we're taking a jog or at the gym, we're always just listening to the most recent podcast or audio book or something like that to try to better understand the world around us. In 2012, just fast forward a couple months, I knew that I wanted to buy things when they were cheap and sell them when they were expensive. So at the time, real estate was cheap. So I got involved with real estate in the Midwest. And then I made actually quite a bit of money overseas as an entrepreneur prior to retiring. So once I understood the real estate game here in the U S I thought I could get a little bit better returns overseas. So I went down to South America and

bought some property there. Then in 2015, uh, I wanted to actually go long oil, believe it or not, because it was under 30 a barrel. And, uh, I, but I didn't know, you know, the one thing that I learned very quickly as an entrepreneur that has served me well is you got to know what you don't know. And I knew back then that, okay, I kind of understand this economic stuff, but I don't understand oil. But I do know that it's cheap, just looking at a historic chart adjusted for inflation. So then at the time I was in Ecuador, I said, you know what, the Colombian peso is kind of loosely tied to oil because it's such a large percentage of their exports. So maybe if I buy something denominated in pesos, that's kind of an artificial way of going long oil itself.

And then I said, okay, well, I do know real estate. So if I buy real estate denominated in pesos, then I've got the benefit of knowing what I'm doing. And then also that benefit of kind of my long idea with oil. And so that took me to Medellin, Colombia, and I've been investing in real estate there ever since 2015. In 2019, we were doing so many projects and I had a team. I thought, well, we might as well turn this into a TV show, uh, something like HGTV. So I'd never done that in my life, but, and I don't even know how the hell I did it, but I went down to the local TV station. It's called tele Medellin. And I pitched them on me producing this TV show that included myself and my, I kind of the team that works with me. It's really headed by a

husband and wife team. Angie's my designer and Joaquin is my architect. So we were on the show bottom line they greenlit the project I had to hire all the camera people and editors so we got done with season one everything went well we were kind of in a a delay between we when we start season two so I wanted to keep them busy so I started a YouTube channel initially it was about real estate because I didn't think anyone would want to watch a video on macro but that was my real passion but what ended up happening is when I did whiteboard videos on macro those were the ones that really took off. And that was kind of summer 2019. And the rest is history, I guess. So I want to talk about the macroeconomic picture first, right? We live in a time that

seems pretty historic. Last year, we had this public health crisis that whipped around the world. We saw governments mandate lockdowns. It ground the global economy basically to a halt. And we had the liquidity crisis of May 2020. They stepped in specifically in the United States, but elsewhere as well. They manipulated interest rates down. They printed a bunch of money, stuffed it in every corner of the financial market. And if we zoom out now and look about 18 months later, asset prices exploded, CPIs at over 5% for multiple months. There's 11 million open jobs in the U.S. economy. Unemployment is over 4.5%. And it feels like there's chaos, there's uncertainty, and nobody knows what's going on, right? It feels like the house is on fire and

nobody's in charge of putting it out. How do you view where we are today? And like, how did we get here? Is that a fair assumption that a lot of what we're seeing now is because of the monetary and fiscal decisions last year? Or is there some more larger trend that gets us here? Well, I think both because when you go back to quantitative easing in 2008, you see that it's just monetary heroin, as our good friend Peter Schiff would say. And in order to keep that heroin addict really high on the drug or functional, you have to give them more and more heroin. And this is why the Fed's balance sheet went from $800 billion in 2008 to $4 trillion. And they tried to backpedal a little bit. That didn't work. And now all of a sudden,

we're up to $8 trillion. And it'll have to go to $10 trillion. It'll have to go to $15 trillion. There's just no way to stop it without that heroin addict going through the withdrawals. And the politicians and the central planners that are in charge right now, they don't have the stomach to do what is necessary to get us back to an economic foundation that is sound. We don't have a Paul Volcker. And even if we did, I don't know that they could do what they did back in, let's say, 1980 or 81, where they jack rates up to 18% and basically cause a recession to get out all the malinvestment and misallocation of resources. But I think what people need to do, they're trying to figure out the probability of what's going to happen in the

future, especially with prices, because I think that's what most people are interested in. What's going to happen with inflation? Is this transitory? Is this something more permanent, like the 1970s? Could this turn into a deflationary bust, like the 1930s, if the government stops this deficit spending, because I believe we've gone from a Fed put to a government put. So in order to figure those things out to the best of our ability, I think we have to understand how dollars are created in the first place. So if we go back prior to 2020, 97% of the dollars that circulate in the real economy, I like to say on the asset side of the balance sheet of the non-bank entities in the real economy, those were created by the commercial banks. Those were

lent into existence. So if you have commercial bank lending go down, you should have a decrease in the amount of dollars that are circulating in the real economy. Now, that doesn't have anything to do with the amount of reserves that are on the balance sheet of the Fed. People get confused there. They think that there's some sort of causal effect when the Fed's balance sheet increases. That also must mean that there are more dollars circulating in the real economy. That isn't necessarily true. But then we've got to fast forward to 2020. And now, all of a sudden, the system changes from the standpoint of the government comes in and deficit spends to the tune of, let's call it $5 trillion. And the majority of those treasuries end up on the

balance sheet of the Fed. So they're directly monetizing the debt. Why is that important? And why is it different? Because now when Janet Yellen spends those STEMI checks, as an example, that is creating additional dollar money supply that didn't exist before. Because if the government were to deficit spend prior to 2020, usually what would happen is they'd sell the bonds and those dollars to buy the bonds would come off the balance sheets of the non-bank entities in the real economy. So when the treasury spent those dollars back into existence on net balance, it was a wash. But what's happening when the Fed buys the debt, It's different because they're printing bank reserves denominated in dollars, liabilities of the Fed, to buy those bonds so the dollars aren't being pulled out of the real economy to begin with.

That's why you saw M2 money supply, although I don't really like that measurement. But that's why you saw it just really skyrocket along with the Fed's balance sheet in 2020. And we're seeing the same thing in 2021. I think that's one of the main reasons we've had this huge spike of inflation. So then to figure out the probabilities of this continuing, if we're just looking at the demand side of the equation, because I think the supply side of the equation is a completely different set of probabilities, and we'll address that in a moment if you want to. But just the demand side, OK, well, if the government is in a stalemate and they can't pass these four or five, eight trillion dollar spending bills that they need to continue this wave of inflation, well, then we could go into an environment where we see disinflation, depending on how much spending they're actually doing. But if that if we get into that mode, especially if it affects the stock market, because I believe the real economy is completely tied to the level of the stock market and housing prices, then I think the Fed or the central planners step in and do everything they can. That's when the Fed, I think, realizes that they're not in control of the dollar and then they need to take action.

And the only way the Fed or any central bank, for that matter, can actually be in charge of the currency or control the currency, the amount of currency units that are circulating, is to have a central bank digital currency. And so I think that's kind of the third system that we move into in the future. We start with the commercial banks creating the dollars. Now we're in a system kind of this hybrid of the commercial banks, the Fed monetizing the debt. In the future, I think we're going to a central bank digital currency. And in that environment, I think the probability is extremely high that inflation remains permanent. OK, so I want to talk about where we are right now in this hybrid model with inflation. The official numbers, 5.4 percent CPI, 4 percent core inflation.

We have spent too much time on this show talking about crazy, crazy parts of the methodology, the data collection. One of our favorite examples is that the CPI rent index still shows about 2 percent rent growth year over year. but when you look at how they calculate it, they like use 1990 census data and they basically call people up and they're like, Hey, what's going on at your, uh, at your place, real realtor.com pegged it at 12%. So 12% apartment.com is at 14 and Zillow's at like eight or 9%. So regardless of whether those guys are right or not directionally, every single, uh, platform that has real time data and more robust data sets is showing something materially higher, 300, 400% or higher than what the CPI rent index shows. And so you can go across the basket of goods,

across many of these CPI metrics and say, hey, there's all kinds of issues, not including also going back to the cost of goods index versus the cost of living index and kind of the manipulation of the data. So what do you think inflation actually is right now? We know what the official numbers are. Where do you kind of peg it? And then how long do you think that this is going to persist? And it sounds like maybe you actually think it's here forever moving forward? OK, so to start, I think probably 10, 12 percent. I think it's very similar to what we saw in the 1970s as far as the real rate of inflation. And I know Kathy Wood just came out and kind of had a rebuttal for for Jack Dorsey, where she was saying that she sees deflation after Christmas.

But again, I don't think she really understands how inflation is measured in such a large portion of the CPI is housing. And I realize that we're probably in a tech innovative world, but I don't know how tech brings down the price of a roof over your head, especially if we have government restricting the supply. So I think the probability of us staying in an inflationary environment is extremely high. I think the probability of deflation, meaning prices actually going down as low, but we could go into an environment of disinflation. So let's just say that over 2020, 2021 so far, we've seen the real rate of inflation at 10, 12%. We could go back down to 8% and that would be disinflation, but prices are still compounding on that high water

mark that was set in say 2021. So that's a big problem. So I think what is most likely to happen is we see this 1940s type scenario. And this is something I've discussed with my good friend, Lynn Alden, at great lengths, where when the government comes in and actually agrees on a huge spending program, and then the Fed is most likely pegging the yield curve to get negative real rates, then you see this big spike in inflation. But then what happens is when you have this stalemate, and they're arguing back and forth, they can't decide whether to spend $3 trillion or 4 trillion or 2 trillion or whatever, then you see this kind of disinflation mode for maybe six months or a year. And then they kind of wake up and they're like, oh my gosh, if we don't spend

more money, we're going to have a catastrophe. They come back out, spend more money, you see a big spike. And I think that continues until we have a massive crash in the stock market or in housing prices. Now keep in mind, housing prices take a long time to go down. Even back during the GFC, they peaked out at 2006. And we didn't hit our bottom until about 2012. So it doesn't happen overnight. But I think the stock market, or the real economy, I should say, is so dependent upon the stock market, because the majority of people's purchasing power is in their 401k in aggregate total, that if you have a 20, 30, 40% down move in the stock market, and I'd like to remind people, they say, oh, George, that's impossible in an inflationary environment. That's not true.

If you look at the 1970s from 72 to 74, the stock market went down by 50% in nominal terms. So if that happens again, there's no way the Fed or the government, the central planners can just sit back and say, okay, well, we'll just let all the malinvestment and the misallocation of resources kind of wash itself out of the system. They're going to have to come in and quote, to quote, do something. And I don't think the Fed, their Fed put, if you will, just expanding the size of their balance sheet, I don't think that will work. I think it expired back in March of 2020. Because if you remember, the Fed was supposed to have that meeting on a Wednesday, and they had the emergency meeting the Sunday prior. That's when they came out and announced

QE infinity, and that they'd commit to up to a trillion a day in repo, and they dropped rates down to 0%. What did the market do the next day? It tanked. It was down by, my memory serves me at over a thousand points. And what happened is when the market started to rebound is when they came out with the CARES Act. So that's why I say I think we've gone from this Fed put to a government put. But what happens if the market shrugs that off like they did with the Fed put back in March of 2020? That's when I think they're going to be forced to go to a central bank digital currency. And once they go to a central bank digital currency, like I said earlier, then the Fed controls to a large degree, the number of dollars that are circulating and the velocity for that

matter. And that's when I think you see that persistent inflation because that's what they need to bail out the government. That's the only way they can get out of their 130 percent debt to GDP is by a real default where they say, we're not going to pay you or a covert default, which is the same thing where they say, we're going to pay you, but we're just going to pay you back with devalued dollars. So where does Bitcoin fit into all of this? How do you think about Bitcoin as an asset? How do you think about inflation's relationship to the Bitcoin price? Does inflation push Bitcoin's price up? Just talk to me a little bit about the kind of decentralized digital currency and where that fits into this view of the world. I don't know that it's an

inflation hedge, but inflation would definitely be a tailwind. That's for sure. I think that the best argument for having Bitcoin right now has nothing to do with the price direction. I think that the best argument for having Bitcoin. Now, I'm bullish on the price long term. I've owned Bitcoin for a long time. A lot of people on Fintwit, for some reason, they think I'm a Bitcoin bear. That's not really true. It's just that I've compartmentalized the probabilities of the price of Bitcoin going up and then the probability of Bitcoin becoming global money and replacing all fiat currency. Those are two different sets of probabilities. And people conflate the two. But I think the best reason for having Bitcoin right now is because there is a very real chance that if you value freedom more than you value safety, that you are going to be kicked out of the banking system.

You may be kicked out of society. I mean, we see this happening right now, and I won't go into great detail to keep it YouTube friendly. But we see a specific group in our population that are now not allowed into restaurants or they're not allowed into gyms. And maybe they won't be allowed in grocery stores or on airplanes in the future. So we're getting this segregation of the population. And I think that especially when you start layering on kind of a dehumanizing effect of that group, then I think there's a higher probability than zero that that group gets kind of excommunicated, if you will, from the banking system. And, you know, I was talking to Caitlin Long the other day on my show, and we were talking about how to buy Bitcoin if you were kicked out of the banking system. She says it would be very difficult, if not impossible, to do legally.

So that's why I've been telling people, hey, even if you think the price of Bitcoin is going to go in half, who cares? You got to have some just in case you get kicked out of the banking system because you're someone who has a dissenting view or a view that's contrary to the mainstream narrative. And you need to keep some sort of purchasing power with you as a plan B. I think that's the best argument for having it right now. But then I also think there's a fantastic argument for turning people on to Bitcoin as a way to open people's eyes to the risk of tyranny in our society. We see what's happening in Australia. And I think as Americans, that should be a wake up call, because if that can happen in Australia, it can definitely happen here as well. And so, so many people on my channel, you know, the one that got taken down and reinstated, they always say, because I always say at the end of the videos, you know, we got to stand up and fight for freedom, fight for liberty and free market capitalism.

And they always say, George, well, how do we do that? How do we do that? We don't have a channel with hundreds of thousands of subscribers. We don't have a big reach like you did. I remind them that I had zero reach back in 2019. But also I say what you can do is just simple things. First, you've got to isolate your friends and family members into three different groups. It's just like sales, where you're going to have a third of the group that's going to be receptive to your message. You're going to have a third of the group that will just completely ignore you no matter what you say. You could have a cure for cancer and they won't listen to you. And then you have that third in the middle that may be your average CNN viewer, but may at least have an open mind. And that's the group that you want to focus on.

Now, I think the wrong way to do that is just beat them over the head with memes on Facebook as to how they're stupid or why they shouldn't be watching CNN or how Biden sucks or something. I think a better way to do that, a more tactical approach is to maybe just start sharing some videos like yours or maybe Ron Paul. I always like to use Ron Paul because he's such a nice guy. And you can tell by just listening to one of his YouTube videos for five minutes that he is someone who is principled and trustworthy, even if you don't agree with what he is saying. So I said, start sharing some of those. But then the next thing I tell them is, hey, just introduce them to Bitcoin or introduce them to gold. Right now, I actually like Bitcoin better because unfortunately, the way we're hardwired as human beings is we just want to get rich fast. And I'm sure so many people, the average Joe and Jane, that really don't understand why Bitcoin

is special. They don't understand the philosophy behind it, but they're attracted to it just because they hear it on CNBC every 30 seconds. Or they see the price go from, let's say, $40,000 up to $60,000. And like, holy cow, how do I, you know, they kind of get FOMO. But see, that's a great opportunity. Because even if that FOMO, which I think is kind of negative, but regardless, if it sinks the hook, and it gets them to understand why Bitcoin is interesting from a philosophical standpoint, then they get introduced to Austrian economics. Then they get introduced to the freedom and liberty movement. And see, then what you've done by enticing them by the price of Bitcoin going up is three months later, you talk to them. And now all of a sudden,

they are also standing up for freedom and liberty and fighting this aggressive movement towards tyranny that we have in the United States. And so talk to me a little bit more about this idea of Bitcoin being able to fight back or expose tyranny, the idea of Bitcoin being for freedom, right? I think that there are some core ethos that are baked into the technology itself. Obviously, the ideas of self-sovereignty, the ideas of censorship resistance. And sound money. Sound money, decentralization, right? I mean, there's a bunch of these. There is this weird element where those in the developing world almost understand the need and

importance of this more so than those in the developed world. There's definitely this like American ignorance to some degree that it can't happen here. Right. America is a capitalistic society. It's a free democracy. And I think your point about Australia is a great point. But also, as I've talked to people, there's many people who watch this show. Actually, people don't know this, but more than 50 percent of the people who watch this show are not in the United States. And what they say over and over again is I live in a place like Venezuela or I live in an African country or I live in somewhere in Southeast Asia, et cetera. Like I've seen this happen, right? I understand what the impact is of undisciplined monetary decisions. I understand

what happens when a government starts to overreach and it becomes a slippery slope. And so is there a situation where people in the developed world actually begin to learn about this without having to experience it firsthand? Or is it kind of the old adage that like the best way to learn is the firsthand experience and that's just going to be the unfortunate reality? Like how do you balance the developed and developing world and the different knowledge bases or experiences? Well, I think in the developed world, the average Joe and Jane is going to be pushed to considering something more and more by the central banks and the central planners. And the reason I say that is because let's just say inflation is going up at 10 or 12%. Well,

you could say, okay, well, I've got a 401k, or maybe a portfolio, it's a mix of 60% stocks, maybe 40% bonds. And although your stock portfolio may be going up, I think we get to a point in time very quickly where the prices of what you're buying on a daily basis are going up a lot faster than your stock portfolio. And people just usually tend to see things just in nominal terms. So they think that if their stock portfolio goes up by 10% or their house goes up by 10%, then they're getting richer. But I think soon they will realize, like they did in the 1970s, that even if their stock portfolio goes up by 10%, if the prices of goods and services goes up by 20%, you are losing purchasing power. So what does that do? That pushes people further out the risk

curve, or it incentivizes them to explore other options and something that could actually increase purchasing power relative to the rate of inflation. And right now, that's cryptocurrency. So I'm not saying that that environment is a good thing, because I wish we had a deflationary environment like we did in the 1800s. So people just park their dollars in a bank and get a 7% real rate of return. I think the world would be a much, much better place. But I think whether it's good or bad. I think people will be forced into cryptocurrency because it's the only thing that's out there that will be able to keep up or exceed the rate of inflation to maintain your purchasing power. They'll be pushed into it through necessity. I think that's what I'm trying

to say, which creates a very interesting dynamic if the Fed and the government right now are in the position where they have to prop up the stock market because that's where everyone's purchasing power is or the housing market? How does it work when everyone's purchasing power is in cryptocurrency? And now all of a sudden, we go from the real economy revolving around what's happening in the stock market and the housing market to the real economy revolving around what's happening with cryptocurrency. And I'm not saying that's good or bad. I'm saying it's an observation that I think we should all be cognizant of because it is a probability that's higher than zero. And then ask yourself the question, what does the Fed do then? What is

the central planner, the federal government? Do they come in and bail out cryptocurrency if it crashes by 50%? Because that would impact the real economy so dramatically. I don't know. When you think about the life cycle you've had from an investing and entrepreneurship standpoint, you own businesses, there's cash flow, you have had equity exposure to the businesses you owned, You then had a bunch of real estate, both from just kind of buying and holding as a passive capital appreciation, but also from passive income. And now you've started to also own Bitcoin. You assume own gold as well. How do you think about the portfolio construction today in this environment? Can you kind of break us down on a percentage basis, how you're allocated?

Absolutely. I always call it a 10-80-10 portfolio. So for me, and that's why I really don't understand the people that get in arguments about Bitcoin and gold, because philosophically, we're all coming from the same place. And to me, they are not competing assets at all. They serve completely different purposes in my portfolio. So that first 10%, for me, I just consider insurance. So that would just be physical gold for me. And then the 80% of the portfolio, I would consider investments. Now, I define that as things that pay you to own them. So dividend paying stocks, positive cash flowing real estate, whether it's in the United States or maybe it's outside the United States, that would be an example of things that pay you to own them. And I like that for 80% because I'm not that smart. So it's that KISS strategy, you know, keep it simple, stupid. And I think that if I can have the majority of my portfolio that makes sense or that works from day one, that really limits my downside. You see, because if I buy a house, let's say in Colombia, in Medellin, Colombia, and I'm getting a 10% return on that based on the rents from the past three years, nothing needs to happen in order for that to work out.

It just has to keep doing what it's doing. But if I go out there and buy a cryptocurrency or a gold miner, which I think would be great speculations, something actually has to happen in order for that investment to work out. So that's how I kind of limit my downside. Now that said, I'm in a different position than probably a lot of your viewers and they're in different, everyone's different, right? And we all have different objectives. And my objective with my own portfolio

is really my number one priority is to maintain my purchasing power. If I was 20 years old or if I was 25 years old and it was prior to retiring, I may have different priorities and therefore I'd set up my portfolio differently. And then the last 10%, I kind of mentioned it earlier, that would be the speculative side of my portfolio. And for me, that's not a derogatory term. It just means that I see good asymmetry there, but it might not pay me to own it. So an example of this would be March of 2020. I bought a lot of uranium. I bought a lot of coal. And that was because I thought they were good speculations. Bitcoin would be, I think, perfect for that side of my portfolio. So that's kind of how I set things up to achieve my objectives.

But again, my objectives are probably different than maybe a lot of people watching. You mentioned that Bitcoin and gold are not competing assets. They're kind of served two different purposes. Elaborate on that. I just think that gold is insurance and Bitcoin is a good speculative play. So you're not going to get rich off Bitcoin, or excuse me, you're not going to get rich off gold. I mean, you got to, and I'm probably going to piss off a lot of gold bugs here, but,

and I'm a huge fan of gold. I think everyone should own it. But let's think about this. If gold goes up to 10,000 an ounce, but only goes up with the rate of inflation, you haven't increased your purchasing power. And the problem is when you go to sell the gold, now you've got to pay capital gains. So if the gold goes up just in real terms, or if the gold just goes up with the same rate of inflation, then you sell. Now, all of a sudden, you've got a loss of purchasing power, even if the gold went up to $10,000 an ounce, where Bitcoin, you can see it could go from $40,000 to $60,000 in a week, in a day, maybe. and there you're actually increasing your purchasing power above and beyond the rate of inflation so even if you did have to sell and pay that capital gain you've got an increase in your actual purchasing power and i i think that's one of the main reasons they're just two completely separate asset classes now on on gold side as a benefit i think there's less uh risk that it's

going to be here long term and you know so a lot of people say well why not just own bitcoin why on Bitcoin. I talked to people that said this at the New Orleans Investment Conference. So I pissed off the gold bugs. Now let me piss off the Bitcoin guys. And I said, the reason I think gold is insurance is because ask yourself a question. If you had to bet 100% of your net worth as to what will exist, what will exist in 100 years, gold or Bitcoin, what would you bet 100% of your net worth on right now. You always kind of get the, well, that's not fair. I'm like, it's gold. I mean, come on. No matter how bullish you are on Bitcoin, and I would be one of those people, you got to admit, the probability of Bitcoin not being here may be extraordinarily low,

but I don't think it's as low as gold not being here. So when you start to think about your investing strategy, one of the folks that I find absolutely fascinating in the kind of professional investing world is Mark Spitznagel. I don't know if you're familiar with him or not. But Mark comes from the Austrian School of Economics from a philosophy or thought process. And he essentially loses money all year long, every year. And he bets on these tailwind kind of risk events, uh, like in March, 2020. And he returned in, I believe it was February, March of 2020, like 4,400%. Right. And so best performing hedge fund for that period of time. But before that, basically he's serving as insurance. So people know that they're going to

lose very small amounts of money. He's buying out of the money options. Um, and he's written a book, uh, the Dow of capital that I've read. And what is shocking to me is that much of the philosophy of what he is doing, is he is essentially betting over long periods of time on highly asymmetric events occurring that have drastically, you know, kind of ridiculous payoffs when they do happen. And he's willing to kind of endure the pain year after year after year after year between these events. And so if you think about, you know, in kind of a generalized way, the global financial crisis, the next one was March of 2020. So you went almost a decade or maybe even a little more than a decade between these events, but then you get the best performing hedge fund. And so what

ends up taking away for me from that story and his strategy in that book is it feels like when there's high levels of inflation, when asset prices are exploding, when it feels like everyone around you is getting richer, there is a lack of long-term plan. Like the art of thinking long-term is almost lost because there's this constant competition. Who can get more? Who can do more? who can do whatever. One of my brothers here is 25 years old and him and I laugh all the time. He actually is quite educated, understands a lot of this stuff. And he has his friends and we talk about what his friends invest in. And he once said to me last year, he said, my friends never invest in a single asset unless they think it's going to go up 10x. But why? But you have to ask

why? Because of the Fed. Yeah, because I'm serious. Because when you have inflation that's created by the Fed or the government, and that's their mandate, even if it's going up 2%, 3% compounded since 1913, that means that the dollar loses 97% of its value. So if the dollar is losing 97% of the value, and we've gone decades where we have negative real rates, whether it's conscious or subconscious, and I would argue with your brother's buddies, it's probably subconscious, but they realize that if they put their money in a bank, they're going to lose purchasing power. They have to do something with it. They have to go out and speculate. They have to buy NFTs. They have to buy Shibu Inu because it's gone up a thousand percent in the last 10 minutes. You know, they have to do something with it. And that's why I always say the Fed and the central planners, they push people further and further out the risk curve. But unfortunately, what happens is all those people that get pushed out the risk curve, usually they don't really know what they're doing. They're not going to have diamond hands, if you will, because they're not going to understand the philosophy behind why they're buying what they're buying and what they own in their portfolio. And when we do have that 10 year event, they're the ones that get wiped out.

What questions do you guys have? Hey, George. Nice to meet you. Thanks for joining us. So my question would be kind of off of that topic a little bit, which is we have a lot of younger people that watch this show and you've built businesses, scaled businesses. You obviously understand the macro environment really well. You understand the content space on the internet really well, obviously.

So my question would be like, if you were back in your 20s, right, early 20s, and you had to start all over again, is there a specific space or industry that you would focus on now that you're excited about? Let me give you an answer from right field here. Because I thought about this a lot. I thought about, you know, if I had to start over, what would I do? And I think the best thing young people can do to make money quickly in order to invest in that business. And I think they should all look at doing an online business so they can have the freedom of mobility first and foremost, because I think in the future, you know, at the end of the day, it doesn't matter how much Bitcoin you have, how much gold you have, how much real estate. If you haven't got

freedom, you got nothing. Right. And if someone has a business where they can just pick up their laptop and go to Mexico or Columbia or Sweden or whatever area has, you know, a degree of freedom, that's going to be their biggest asset. You can, let's go back to Australia. Right. So I think that needs to be kind of the end game for most young people who are comfortable with that lifestyle, maybe comfortable with that type of business. I know it's not for everybody, but in order to get that seed capital, what I do is it's kind of like a Gary V thing. You got to learn to flip stuff. You got to learn to add value. And when I was 2017, my younger brother got very ill where I needed to come back to the United States and help him out and care

for him for about a year. And so I moved him down to Tucson and long story short, I was just bored out of my mind. And so I started buying RVs, these Airstreams as kind of just an investment store value, keeping them in storage. But then I also started buying these trucks and I noticed that some of the trucks I'd sell, I didn't want, I'd make a really good return on them. And so I, you know, buy them low miles and I, a specific group of trucks, they're 95 to 2002 Fords with a seven, three power stroke engine. They're, they're very, believe it or not, they're extremely high value truck. They're in high demand for kind of those truck guys that like that. But what I do is I'd buy them off Craigslist from someone who didn't really know what they were doing or someone

in California that had to pay five bucks a gallon for gas. And then I'd fix them up and make them look good. And then I'd flip them. I'd put them on eBay at a national market. And I, I mean, I'd have 7,000 into a truck and you'd sell it on eBay for 14, 15,000. I mean, you double your money like almost monthly. So the reason I say that is because although it sounds kind of crazy, I mean, you could do that with very low seed capital. And if you know what you're doing, and it doesn't have to be trucks and it doesn't have to be cars. It doesn't, it could be anything. I mean, Gary Vee, I think he's done it with like sneakers and baseball cards. You just have to be an expert at something.

You've got to study it nonstop obsessively for like two or three months. So you know where there's there's value and where there's a spread. And then you go ahead and you buy that and, you know, you you sell it to someone. You buy it at a local level and you learn how to negotiate. And then you sell it at a national level pocket the spread. And then that gives you your 20, 30, 40, 50 grand that you need to go ahead and start that online business that is kind of the end game goal that will give you maximum amount of freedom. Another neat thing about that process is you learn the fundamentals of entrepreneurship that apply to running a business or investing in real estate. And that is you've got to know how to manage people, first and foremost.

And very few people do. But if you buy a couple of trucks and you got to hire an auto body shop, you got to hire a guy for the interior, you got to hire a guy to do the electric or the tires, or you have to learn how to manage people. And that's a skill set that you can use in your business, or it's a skill set, the exact same skill set you'd have to use if you're running a huge real estate portfolio. You know, I was just on a flight with my good buddy, Kenny McElroy. We were speaking in Dallas at the Sovereign Man event. we were flying back with Kiyosaki. And Kenny manages over a billion dollars in real estate with his funds. And he uses the same things, the same techniques that a young person would use if they were just learning how to flip cars or tennis shoes or anything else. And that goes back

to managing people. It also involves being ambitious and a self-starter because you're not getting a paycheck and no one's going to be there to make sure that you're clocking in on time. You've got to do all that yourself. But then also third, you've got to be a problem solver. You have to be able to solve problems in a decisive manner. So if you've got those three things, then most likely it's just going to be a numbers game. You're going to do well and you're going to succeed in business. But I think that's kind of a process that a young person could go through where they'll find themselves at 30 years old and a very good position financially with a great skillset that's applicable to almost anything. And then a good nest egg and a good

portfolio that they can invest. Yeah. And anyone flipping used cars over the last year has probably done pretty well. Well, I've got, I still keep a bunch of trucks, those old trucks in storage, and it would blow your mind how much they've gone up in price. I actually see those as a good store of value, a little bit like the insurance and, uh, and gold as well. But, uh, I, again, I know it sounds crazy, but if you think about the concepts behind what I'm saying, I think it'll, it'll make sense. Well, George, the average, uh, used car, right? The index is up like 40% year over year. So if you're buying the right ones, uh, obviously they're probably up more than 40%, which is pretty good investment. John, what questions do you have? Yeah. Hi,

George. Nice to meet you. Um, so can we talk about that, how you kind of construct your portfolio, you have that 10, 80, 10 strategy with 10% insurance, 8% kind of cashflow assets, and then 10% speculative bets. Can you talk about that 80% a little bit more? What businesses do you like? What stocks do you like specifically? And then kind of like what you look for in real estate investments? Okay. So with real estate investments, I'm really looking for what I call a 1% RV ratio. And I get that term from my buddy, Jason Hartman. So that's, we have a little bit different definition, but it's basically your monthly rent relative to your cost basis. So if I'm $100,000 on a property, I want to get at least $1,000 a month for rent.

And now if we're talking about Americans right now, they're in a very unique situation because number one, the housing market's in a massive bubble, but number two, they can actually secure 30-year fixed rate debt. Most Americans don't understand. That's rare. That's subsidized by the government. Most countries don't have that. So what's interesting about that is, and I'll probably go off on a tangent here, so you have to bring me back in in a moment.

But I think if someone is looking at real estate in the United States right now, they have to look at their balance sheet the opposite of the way they used to when we were in a quote unquote normal real estate market. So what I mean by that is, let's say the 1990s, the 1980s, someone would buy a house and that would be an asset on their balance sheet. Well, if they had to take out a mortgage to buy the house, that would be a liability on their balance sheet. Today, I think it's reversed. I think the property is actually the liability because prices are so high. But the debt, the 30 year fixed rate mortgage is the asset. And so why were people willing to take that bet, if you will, back in the 80s and 90s and going all the way back to 1900, 100 years, 200 years? Because they felt as though, although they were going to lose purchasing power, paying back the debt with interest, they would gain more than that with the purchasing power, with the asset appreciating in value. All right. So I think, again, it's the opposite today where you may lose purchasing power on the asset because you're buying prices when they're at all time highs. But yet you might make or you probably will make even more purchasing power by paying back that debt with devalued dollars in the future.

See, because it's a fixed rate loan. So I think that's if someone is considering buying rental property in the United States or even buying a home that they live in, I think that if they go into it with that mindset, they're going to make much better decisions. So now moving back to the original question. So I start with that metric. And although I don't really think you can get that very often in the United States, there are other countries where that is very realistic. Now, let me warn your viewers, going in and buying real estate in Medellin, Colombia, there's a 99% chance that you get your butt handed to you. 99% chance you lose a lot of money.

But if you are a local expert, if you go down there, if you do the homework, if you do the boots on the ground research, there is a massive amount of opportunity because the real estate market in those other countries is so inefficient, right? They have very little debt in the system. They don't have an MLS. Most people sell houses in Medellin by just putting up a for sale sign in their window, literally. And so you can really get your cost basis down relative to your rents. So that's what I look for first and foremost. Also, especially with the United States, I would look for your political risk. So if I was buying residential rental properties, there is no way I would do it in California. There's no way I'd do it in Illinois. There's no way I'd do it in New York. I would really exclusively look at areas like Arizona, maybe, although it's kind of a little

on the fence now, but especially Texas, Florida, if you could get a good cash flowing rental property there where you had positive cash flow, that's the key. I don't want to imply that you get that 30-year fixed rate mortgage. And because that's such a great asset, you're being paid to short the dollar, basically, that you could have a negative carry. You still have to have good, solid, positive cash flow. It needs to be in the right neighborhood. All those things need to be aligned before I would consider it for my own portfolio. Now, as far as what other things pay you to own them, I think a great example of that, just to give you an actual name would be Rio Tinto. Now it's not something that I own.

It's not something that I'm buying, but it's definitely on my watch list. You know, we could talk about China and Evergrande, Fantasia, what's happening there with the residential real estate market, which is 30% of their GDP and how they could very likely, or it's very likely that they go into a recession. But the bottom line is they, China, equaled about 50% of global demand for iron ore. So you have the price of iron ore has really collapsed. Now it's still up relative to its 20-year average adjusted for inflation, but it's gone down significantly over the last, call it two months. So Rio Tinto, a large percentage of their revenue is iron ore, but they've also got a little nickel, they've got copper, they've got assets that are hard assets.

They're backed with real stuff that we're going to need, especially if we go into like a green new deal type of situation. So then you look at how safe their dividend is, and it's pretty safe based on the cash on their balance sheet. But then you look at their price, it's come down so far because of what's happened in China and iron ore that they're paying a 10% dividend yield. So, and I'm not saying that that's 100% safe or anything, and I'm not suggesting that as an investment, but that's just an example of something that's on my watch list that I find interesting right now. And an example of that 80% of my portfolio that I would consider an investment that's defined by something that pays me to own it. George, before we let you go, the one thing

that I want to talk about with Bitcoin is in one of your recent videos, you talked about Bitcoin potentially being purchased by either the Federal Reserve or the US government. We've obviously seen El Salvador go ahead and kind of plug into the network, right? They've set up a bunch of ATMs, they've created a fund, they're handing Bitcoin to people who sign up for their Bitcoin wallet that they've created. And they seem to really kind of be pushing it forward in a way that no other nation state has done. What are your thoughts in terms of the U.S. government's relationship with Bitcoin? Should they buy it? Will they buy it? How do you think about it? Very difficult. You know, are we saying that Bitcoin is still a digital kind of asset or

like a reserve asset, a store of value? Or is it money? Is it competing with the dollar? because then I think the Fed or the central planners do different things. Also, is the stock market crashing and or is have we gotten to a point in the United States where the economy is so dependent upon cryptocurrency or maybe asset prices in general and a good portion of that would be crypto? I'm thinking three years down the road as an example. Would they need to step in and actually buy stocks? Would they need to step in? mean they're already buying mortgages obviously to prop up that market but would they need to buy cryptocurrency to prop up those markets so there there wasn't a decrease in aggregate demand

because they're all keynesians at the end of the day so that's their nightmare is that aggregate demand somehow goes down and if that's the only way to maintain aggregate demand that may incentivize them to do that now as far as taking it onto their balance sheet um as a reserve asset potentially, but I don't think they would if Bitcoin is competing against the dollar directly in their eyes, in their eyes. I think they may be incentivized and especially other central banks may be incentivized to do that if they continue to see Bitcoin exclusively as just a digital reserve asset. So without opening a can of worms, two of the countries that I could easily see uh, being very interested in who have publicly stated that they'd like to get off the dollar

system, uh, but who have ultimately failed to do it up until now is Russia and China. Uh, do you think that it's more likely that maybe an, uh, a competitor to America, uh, would do it? Or do you think it's more likely that the U S like, like I'm very fascinated by this idea of like the global game theory. And when somebody like El Salvador was six and a half million people does it, I think there's some people who say, well, like that, that's an inflection point. That that's interesting. There's a lot of other people who just say, hey, they got six and a half million people. There's kind of consolidated power. You essentially have a president and his brothers who are younger. They're forward thinking from a technology

perspective. And so, you know, it kind of makes sense. It's very different if the rumors around Brazil potentially doing something. We've seen some legislation kind of presented or if the United States was to do it or Russia or China and some of these like large, large countries with hundreds of millions of people. And so how do you just think about, you know, I guess like the the competition among the superpowers, the people who actually have very large citizen bases and frankly, have just large economies that this isn't such a simple decision. It's just like, hey, we're going to buy some, we're going to give $30 to everyone who downloads the wallet. And if we screw it up, well, we're a dollarized country and it may not be as kind of big of an

issue, given that we wouldn't really be risking our own currency. How do you think about that? Well, if you've got a Brazil, and so you're talking about the central bank taking it onto their balance sheet, uh, just simply as a reserve asset, like they would gold or something like that. Is that what you're referring to? Yeah, I think. And again, some of this is just like, we don't know exactly what they're doing, but if you look at like Russia, Russia has openly said, they're going to be a net seller, uh, of dollars for sure. They want to get rid of their dollar assets. Uh, in some cases, I think it was maybe a year or two ago, uh, central banks around the world were net sellers of gold for one quarter. So not kind of a persistent thing, but, but they

basically for the first time in a long time had become a net seller. And so you start to think about, OK, that would lead me to believe that they're at least evaluating what are the assets that are in the reserves and then what are the assets that we could potentially move to? And there's some reallocation that goes on. It feels like, you know, there's some threshold. I don't think it's at a trillion dollars, but is it at five trillion dollar market cap, 10 trillion, 20 trillion? You know, where's that threshold where eventually Bitcoin becomes so big and it does have enough of a track record where one of the large central banks says, hey, We're not going to use this as a medium of exchange or a threat to our kind of reserve currency of our economy.

But we are going to use it as a reserve asset in our central bank, just like we would gold or anything else. I think it's interesting, especially if the country had a tendency to be short dollars, like in Argentina. So I think there's a good argument why they would buy Bitcoin and keep it on their balance sheet. So the price of Bitcoin goes to, let's say, $500,000. Now, all of a sudden, they can sell that reserve asset and get a lot of dollars that they wouldn't otherwise have access to and infuse that into the commercial banking system to kind of paper over any dollar shortfalls they had because of the amount of debt that's denominated in dollars outside of the United States. So let me give you a specific example. I don't know if you guys saw the news last week, but China issued $4 billion in bonds denominated in dollars.

So you got to think, okay, why the hell are they doing that? And I actually had this conversation with Brent Johnson. We had dinner in New Orleans and we were talking about this. And you look at Evergrande and you look at Fantasia or these other real estate companies, they have a lot of dollar denominated debt. and so if they don't have the dollar cash flow coming in to service that debt which it seems like they do not then what what is their option well they'll most likely have to roll the debt over well that would mean going back to the bank and saying hey we need another loan to pay off

this loan that is that is coming due well if the the chinese bank doesn't have the dollars and i don't i want to say this carefully because i'm not implying that they would actually lend the the dollars to um evergrand because a bank loan creates new dollars or money fiat currency that did not exist before but they would need some sort of dollar denominated asset to transfer to the other bank if they had to transfer the liability that they had just created as a loan to evergrand in the first place and i know like it's really confusing but the bottom line there is if if these banks didn't have those dollars as reserve assets then they wouldn't be able to issue and extend more loans in a fractional reserve type of way you know lever up and therefore those

corporations wouldn't have access to the dollar liquidity they needed right so the dollars you know at the end of the day although they're slowly declining as far as percentage of world trade they still equal like 50 or 60 percent of transactions and uh and really how they're um how they're settled so i think if you're an argentina going back to that example if you had a bitcoin and it went up to 100 or 200 or 500 and then you've got access to so many more dollars that you didn't have before that could bail out your corporations or bail out your banks that had taken on way way way too much dollar denominated debt and they didn't have the cash flows to service it yeah it's fascinating to kind of think about how uh everyone is scrambling in

some way some are doing it for longer term purposes some are doing it for shorter term purposes um before uh we let you go where can we send people to uh find you on the internet or find some of the content you're putting out we we know you got your youtube channel back which uh which which is great. Uh, I feel like you and I are going to say for the time being, you can come here. I was going to say you and I are walking on edge shells. I feel like we need to, uh, we're the bad boys of YouTube or something over here. Uh, where can we send people? Oh, they can just Google my name. It's just George typical spelling. Last name is G A M M O N. Uh, yeah, that's the, the George. Oh, I guess that's me on Twitter right there. Uh, but it's the same name on YouTube

and, uh, all social media. It's my name. Awesome, man. Well, listen, thank you so much for, uh, for taking that time to do this. Anyone who, uh, who hasn't come across your content previously is, uh, is missing out. So make sure that you go. And I think you have two YouTube channels, right? You have, uh, the one that's under your name and then you have the rebel capitalist, uh, as well. Yeah. The rebel capitalist was the one that had, uh, issues yesterday. It was taken down by YouTube. And then, uh, thanks to people like you and other, uh, influence influential people on Fintwit like Joe Rogan and others. They reinstated it last night at midnight. So we're going to be keeping up the good fight on the George Gammon channel.

I interview people, a lot of macro topics, entrepreneurs, liberty, freedom. I do whiteboard videos. And then on the Rebel Capitalist channel, we do five, six, seven live streams a day just talking about the news events from a framework of liberty, freedom, and free market capitalism. Awesome, man. Well, anyone who is not subscribed to those channels, please go subscribe. Go follow them on Twitter. I appreciate taking the time to do this. And just behave yourself on YouTube.

I'll do the same and we'll be good to go. All right, buddy. Thanks for having me on. All right. Thank you.