We Study Billionaires - The Investor’s Podcast Network - TIP 116 : The 35 Year Bond Bubble w/ Grant Williams (Business Podcast)

Starting point is 00:00:00 We study billionaires, and this is episode 116 of The Investors Podcast. Broadcasting from Bel Air, Maryland. This is the Investors Podcast. They'll read the books and summarize the lessons. They'll test the waters and tell you when it's cold. They'll give you actionable investing strategies. Your host, Preston Pish, and Sting Broderson. All right.

Starting point is 00:00:30 How's everybody doing out there? there. This is Preston Pishan. I'm your host for The Investors Podcast. And as usual, I'm accompanied by my co-host, Stig Broderson, out in Seoul, South Korea. And today we have a guest that I know everybody is going to enjoy listening to because it's the one and only Grant Williams from Real Vision TV. Grant comes with just a wealth of information. He's been at it for close to, what, 30 years now, Grant? Just over, I'm afraid. I hate to admit it. But Grant has worked everywhere in the world. He has worked over in Tokyo. He was actually there for the 1989 colossal collapse. I don't know how else you would describe it, Grant, but I'm sure it was

Starting point is 00:01:12 pretty insane to experience. He was in the U.S. during the 2000 crash. I mean, he's been interviewing literally the smartest and most profound investors around the world through real vision. We are just pumped to have you here. It's easy to sit in the chair and have every conversation that you have in your life with someone who's smarter than you. It works a charm for me. And here we are today. That's perfect. All right.

Starting point is 00:01:40 So Grant, I really want to kind of kick off the show here with just probably the hardest question that I think anyone could ask. And so I want to start off with this idea that Ray Dalio, billionaire Ray Dalio from Bridgewater, has a quote. And he literally came out with this quote just this month. And he said, we think that there's a significant likelihood that we have made the 30-year top in bond prices. So first, what do you think about that insanely bold claim? And what do you think are some of the key metrics for saying such a thing? Okay. So you want to kick this off with making me disagree with Ray Delio?

Starting point is 00:02:19 Okay. Thank you. I do disagree with Ray in part. Anyway, I think certainly it looks like that. We've seen the kind of downward move in bond markets that we have. haven't seen for such a long time now, it's got a lot of people spooked, and I can completely understand that. At the moment, we're in this kind of weird post-Trump euphoria stage. Who could have seen that going in the election if someone had told you who was going to win?

Starting point is 00:02:41 But we had a market, and I've said this a few times to people recently, we had a market, take equities, for example, it went down 5% and up 6% on the same news in 15 hours. And that's an inherently unstable market. So I think any of the moves that we see here are not necessarily long. term moves, it's instability. It's a sudden reintroduction of volatility into these markets. Our friend Rao made a great point about this recently. If you go back to 1994, which was by far the worst year we've had in the bond market, we saw a similar move. We saw a backup in bonds. We saw yields back up and it look really ugly. But when you step back and look at it in the trend

Starting point is 00:03:17 channel, it didn't actually break that channel. And if you look at that channel now, the 10-year yield could go to 3%. We could still remain in this secular downtrend. Now, when I said I disagree with in part, I think perhaps we've seen the top in the corporate bond market. I think that's where you might see the stress continue. I think everybody's looking through a recession in the US. The talk of a recession seems to have gone off the table now. For some reason, I don't understand if people think whatever Trump's going to do, he's going to be able to get it done before the US goes into recession. And I think when that recession happens, and let's face it, we're long overdue. I think there's one more big panic to come into bonds. And I think it'll be violent given what we've

Starting point is 00:03:56 seen recently. But this time, what I suspect will happen is, whereas we've seen this desire on the partner investors to buy sovereign bonds because the central banks have their back, I think this time around we're going to start to see it become a qualitative issue and people are going to want treasuries. They're not going to want negative yielding French sovereign debt or Spanish sovereign debt or Italian sovereign debt. So I think that's just going to increase the desire for treasuries. And who knows, you might even, for the first time in many years, be able to fund that by shorting some of the less solid credits, which would be a welcome return, in my opinion. So I understand what Ray's saying. He's a smarter man than I'll ever be, but I have to disagree to empower,

Starting point is 00:04:35 particularly on the treasury market. I guess from my vantage point, the thing that I'm just kind of amazed by, especially on the equity side of the house, is you're having interest rates go up because everyone expects more inflation because of fiscal spending that they think Trump's going to do. Whether that's true or not, I don't think it really matters. The thing that I think that matters here is how are people justifying taking equity prices higher as interest rates are going up and the expectation is they're only going to go higher because inflation and everything else? I can't wrap my head around it. I'm just totally like, what is going on?

Starting point is 00:05:08 It's a great point. And this is, I think this is fundamental for people to understand. And that is that these markets, they're not behaving rationally. And bizarrely, I think a lot of the reason for that is the increasing introduction and increasing reliance on passive strategies. You would think the more artificial intelligence you put in, the more rationally these markets would act, but it seems to be happening the other way. And I think a lot of that is to do with the fact that the market's going in one direction. And so the longer they've gone in one direction, and we know that big reason for that

Starting point is 00:05:38 has been this central bank backstop. And we haven't seen a market that's really turned and gone lower. And so you know we are reaching the inflection point where you are going to need an active manager more than you've ever needed it before, because these markets are are incredibly difficult to navigate. So Grant, this is where your past experience over in Japan in the late 80s there is really going to come into play for this question because when I think about how crazy can things get and you know that the PE in Japan during that period of time was close to 100 and we're right now at a Schiller Cape of call it 27 or 26 somewhere around in that.

Starting point is 00:06:17 So to think that we could go even to 35 or 4. Is that in the realm of possible or is this thing really kind of hit in its last leg? That's where I think I have the biggest concern. I think everybody else out there has the biggest concern is, is it just going to only get crazier? Or is there no way of knowing? Like, how do you look at that? It's a great question, Preston. Going back to those days, a couple of things come to mind.

Starting point is 00:06:44 Firstly, Japan was the economy was performing well. We had a real estate bubble that was perhaps even more in some. and the equity market bubble. I remember very clearly exactly where it was when I was told that supposedly the land under the Empress Palace in Tokyo was worth more than the state of California. And even as a young guy, when I heard that, I just knew, you know, okay, this is unsustainable. This is not going to work out well. If you look back at what happened in Japan, you know, it's strange. The market never really crashed. The market basically stopped going up on December the 31st, 1989, and I was standing on my desk, clapping along with all my colleagues in the office in Tokyo.

Starting point is 00:07:21 And it just kind of stopped going up and just went down. And if you look at the charts of Japan, you'll see a few reasonably big down days, but you won't see a crash. But what triggered this, interestingly enough, given what we're talking about, was a turning interest rate cycle in Japan. So, you know, when you look at what happened over there, we saw equities explode to these crazy valuations. But the rest of the world wasn't choking on credit. Japan was very much in a vacuum at the time. and I don't want to say this time is different because I don't think it ever is. But yeah, looking back to Japan, we never had a crash.

Starting point is 00:07:56 We just had a rising rate cycle which just popped the bubble. And, you know, Japan's been going down for 25 years with a few countercyclical rallies. And people look at what's happening now with quantitative easing and they talk about Japan and say, hey, look, you know, the Japanese have managed to do this for 20 years. There's no reason why the US can't do it, Europe can't do it. You know, to that I would say that that's true. Japan has done it for that amount of time, but for the first 15 of those, it was doing it in a vacuum. It was the only country doing it.

Starting point is 00:08:25 And despite it being second biggest economy in the world, as I said, the rest of the world could carry Japan doing that because we had 12% growth in China. We had 10% growth in India. There was real organic growth in the background that could kind of cushion the blow of a sort of failing Japan. We don't have that now. Not only do we not have it, but if we do enter an interest rate cycle, That's not going to help us find it. And I think everything that's being done is essentially an attempt to deny the fact that the world is about to enter or has entered a slowdown phase. And these happens.

Starting point is 00:08:59 It's a cyclical phenomenon. And trying to stop that happening simply because you've built up too much credit in the system over the length of what has been an incredibly long cycle doesn't necessarily mean you're going to win out. To me, it just compounds the problems. Really interesting discussion, Grant. And I can just see, like, all the listeners out there are thinking, yep. We knew that Staking Preston, they were always bear on the market, and now they pulled someone in there was even more negative about the future's prospect. So where is this going to go?

Starting point is 00:09:28 So in a minute, I'd like to talk about the opportunities that we do see in the markets. And, Grant, the interesting about you is that I've really heard you're talking about a lot of different opportunities. I heard you're talking about shorting Amazon, going along in gold, betting on the interest rate. Now, having your insights to pull the trigger on so many different areas of the financial markets, before we talk about perhaps potential opportunities out there, how do you size your positions in the current mind conditions? Carefully.

Starting point is 00:09:57 Very, very carefully. I can't stress enough. To people listening out there who aren't people that do this for a living, it's an incredibly dangerous time to be investing in markets because to me the biggest mistake any investor can make is to suffer a big draw. down. I mean, that's the hardest thing to recover from. And the chance of a sharp drawdown is extremely high. So for me, cash is the most underpriced call option in the world. And people say, well, if you hold cash, you're guaranteed a loss. Well, yeah, if you buy an option,

Starting point is 00:10:31 essentially you have to write that premium off when you buy it. To me, owning cash right now, and if you say it's going to cost me 1% over a year, I'm okay paying a 1% premium for a call option on anything on the planet. Somebody once said to me a long time ago, and it's one of those pieces of eyes that stuck with me forever. You make all your money when you buy a stock, not when you sell it. And I think that's the single best advice I was ever given. If you buy something at the right price, you don't really have to worry so much about

Starting point is 00:10:58 the market. In 1982, for example, anyone that bought US equities in 82, yielding 5, 6%, and on six times earnings, you didn't have to worry about the 87 crash. you didn't have to worry about 99. I mean, you made your money just by buying and sitting. And, you know, Jesse Livermore said the same thing. He said, I make all my money by sitting. It's a very tough thing to do.

Starting point is 00:11:20 And so I don't see those opportunities right now. I don't see anything priced where I feel I can buy it and just own it with the exception of gold. I think people need to be very careful. The position sizes, I wouldn't have a big bet on anything right now because I just think the uncertainty level is way, way too high. I'm watching treasuries. I think, as I said before,

Starting point is 00:11:39 there's going to be a buying opportunity in treasuries. I think Asian equities, if the dollar continues to rally, Asian equities will look interesting, as well Asian corporate debt, but you have to be very, very careful there. And I think there's going to be a great chance to short the S&P. But all this kind of keys around the continued strength or otherwise at the dollar. And I think that's the one thing that everybody has to not only pay attention to, but really understand right now. You know, it's interesting how you were referring to cash as the optionality of it, because we heard almost the identical same thing. when we were out at the shareholders meeting this past year, that's what they were saying as well.

Starting point is 00:12:13 They were saying we look at it as optionality. And I mean, if you look at his balance sheet right now, he's sitting on, what is it, 70 billion? Is it more than that? He's sitting in 70 billion dollars of cash and cash equivalence right now. So I think he sees it the exact same way as you, Grant. I think I see it the same way as here, but I'm sorry. I'm sorry. Yes, you're right. So, Grant, the thing that I find interesting when you start getting into this cash discussion, the other thing that almost is immediately followed by that is gold. Everyone wants to talk about cash and gold. So I've listened to so many your interviews where you're talking to different people and gold always comes up.

Starting point is 00:12:50 Gold always comes up. Every single person is saying gold is going to be a good play. And I think that I think where sometimes people say gold, they're not referencing their time frame. So they're saying gold is going to be a good investment in a five to 10 year period, maybe not in the next six months. And I think that's where it gets a little convoluted for a lot of people when they're trying to understand whether they should put gold on or not. But the question I got for you is immediately after the election, we had billionaire Stanley Drunken Miller say that he completely sold out of his heavy gold position. And Drunken Miller is not a big Trump fan or a Clinton fan, but he did say this after the election in addition to his comments about selling out of all of his gold. he says, all the reasons I've owned gold for the last couple of years, it seems to me they are

Starting point is 00:13:38 ending. And by the way, they're ending globally. So how in the world is a person to interpret that? For me, I look at that as Drunken Miller talking about the short term and not necessarily maybe a five or 10 year horizon, but other people might see it differently. I'm really curious to hear your thoughts on that. Stan is one of the best investors who's ever walked this planet, frankly. I think he's wrong on this, although I think he's wrong for different reasons, perhaps.

Starting point is 00:14:02 but I think it's important to understand, to my knowledge, Stan never actually owned gold. He bought the ETF. He bought GLD. And that to me tells me he was looking either for a trade that he thought was going to go higher over the medium term perhaps, or he was looking to position himself in something that would perform well or hedge him in certain certain circumstances. I guess he kind of feels that right now, post the election with what's happened, he has better places to deploy that capital right now. And that I completely understand. You know, as you said, gold is not a trade.

Starting point is 00:14:36 I never understand why people focus so much on the gold price because if you want to buy something at 1,200, because you think I can get out of it at 1,300, make a nice profit. Why the hell would you do that in the most volatile, emotional asset on the planet? There are plenty of shares you can buy that will creep their way towards 1,300,

Starting point is 00:14:51 and never give you a heart attack. You know, if Stan had owned physical gold, that, to me, would have told a different story about his reasons for owning it. The way I look at it is this. I think we're at the end of a credit super cycle here. And when that happens, big changes tend to occur. You know, secular changes when you get real trend reversals. And Stan has been a guy over his career who's made a fortune and a reputation of ignoring the turns in market. He's happy to give up the first 20%, the last 20% of a move to capture the middle 60%. To me, we are at the end of something and the beginning. as something else. Personally, I don't want to own gold to make a few bucks on the trade. I think better vehicles to do that. And I don't want it wholly to protect me for inflation, though, to a certain degree it will. For me, I want a currency, and I want a hard currency that can't be printed,

Starting point is 00:15:45 and that I know is money good and has been money good for a long time. Now, the short-term action in gold, you know, it's always choppy. I mean, this year alone, it's moved more than 20% in both directions. I mean, amongst a group of assets where nothing's seen that kind of volatility. And that's what you get with gold, short-term volatility. But if you look at the long-term trend, I think the reasons for owning gold are still intact. And if you go back to the last bull market, we saw it in gold back in the 70s, and we saw a tremendous spike in gold from 35 bucks up to 800 bucks. And at that time, this was a time when Asia as a continent was incredibly poor. And the buyers of physical gold have traditionally always been from the east.

Starting point is 00:16:27 It's the way that they store money and they have done for centuries down the generations. Back in the 80s, when we saw that run, there wasn't any real disposable wealth in Asia. The wealthy was still wealthy, and we didn't have that demand from Asia. And what we've seen this time around is incredibly strong demand from China, from India,

Starting point is 00:16:44 and that's the subject perhaps we can expand on a little bit later on. And so I think there is a real desire to own physical gold. And I think as central banks reach the end of their credibility window and we've seen even them talking about that that they need to raise rates in December for example to maintain their credibility to me the reasons to own gold

Starting point is 00:17:03 get stronger and not weaker as Stan says could we get real organic growth returning we could it's highly unlikely but I watch it very closely to see signs of it and then you get onto inflation and deflation I mean the problem with higher inflation as far as gold is concerned is obviously it tends to

Starting point is 00:17:20 lead to higher interest rates which negates the case for owning gold but when you look at the debt situation, the chance of interest rates going to places that would seriously dent the reasons to own gold, giving the reasons that rates were going higher is essentially impossible because if rates go to those kind of levels, the US is spending about 300% of its tax receipts on debt service. And deflation, you know, gold always does well in a sharp deflation environment. So, yeah, I like owning it. I'm a huge fan of Stan. You know, in the long run, you'd buy a lot more money

Starting point is 00:17:52 back at him than me, but with this one, I respectfully disagree with him. Let's take a quick break and hear from today's sponsors. All right. I want you guys to imagine spending three days in Oslo at the height of the summer. You've got long days of daylight, incredible food, floating saunas on the Oslo Fjord, and every conversation you have is with people who are actually shaping the future. That's what the Oslo Freedom Forum is. From June 1st through the 3rd, 2026, the Oslo Freedom Forum is entering its 18th year bringing together activists, technologists, journalists, investors, and builders from all over the world, many of them operating on the front lines of history.

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Starting point is 00:21:48 sign up for your $1 per month trial today at Shopify.com slash WSB. Go to Shopify.com slash WSB. That's Shopify. com slash WSB. All right. Back to the show. I really wish that he had his time horizon into that. I think that would help people out a lot.

Starting point is 00:22:12 Yeah, because the next thing I would like to talk about is really the concept of cutting out all the noise. And I think it's so important right now that we're seeing so much irrational behavior in the migrants. And I saw this video with you, Grant, when you talked about something you called the duck test. And for everyone out there that hasn't heard about the test, it's actually a very simple concept.

Starting point is 00:22:34 Basically, the logic is if it quacks like a duck, swims like a dog, and walks like a duck, Well, it's probably a duck. And it's a test that you can use to step out of the noise and look at the world more objectively. So, Grant, I've got to ask you, looking at the current chaotic mild conditions, which macroeconomic situation do you suggest is the most pressing to use the duck test on today and why? I think this belief in a hiking cycle is just crazy. I mean, just step back, ignore everything the Fed says, which really is. I mean, that's about as noisy as it gets in these markets,

Starting point is 00:23:11 listening to all these guys at various luncheons and symposiums talking across purposes. If you strip all that noise out, you look at the practicality of how far rates could rise, it just doesn't work. The math doesn't work. And as much as we've watched these guys rewrite laws and change articles and do all these things they've done

Starting point is 00:23:32 to first get tarp through and then in Europe, get all kinds of stuff through that would never have gone through without any kind of crisis, the one set of laws that these guys are never going to be able to rewrite the laws of mathematics. And when you have this kind of debt, first of all, you know that deflation is a killer. So you need inflation. You cannot stand rates at 2%, 3%, 4%, forget it. The long-term average is about 6. I mean, it's unsustainable. It just does, the math doesn't work. So I think if you look at the mathematics of this, yes, the Fed might hike in December. I think it desperately want to, but it's for the wrong reasons. It's because of this credibility issue they

Starting point is 00:24:11 have. And so if they get it to 50 basis points, does it make a difference? No, it doesn't. To make a meaningful difference, they have to somehow, without anybody realizing it, get it to two. So they've got a little bit of room. But at 2%, the math just starts to get really sticky. So for me, if you want to strip the noise away from everything, there's nothing noisier than will, they won't raise rates. If you strip that noise away and look at the numbers, it just doesn't work. And so that to me would be the simplest place, I think, to apply the duct test right there. So, Grant, this is a little bit of a different direction than we normally go. But, you know, when you're talking about these interest rates and how the Fed is just backed into such a corner in any kind of decision making that they can do.

Starting point is 00:24:54 And then I look at real estate, particularly here in the U.S. And how all these housing prices, commercial real estate prices, everything is dependent on these rates staying low for people. to basically protect their net worth because I think the majority of people out there, their entire net worth is really how much equity they have in their house for most people. So if these rates would start going in the opposite direction, that's going to have a drastic, I mean, catacalismic event for the value of these homes that are out there, for all this real estate that's out there. the typical American can't afford to take the bath that they took back in 08 where housing prices

Starting point is 00:25:38 went down 40% across the board. I mean, if that happens again, I just think you're going to be in a situation that is much, much worse than anything that we've seen in our lifetimes. Would you agree with that you think that the Fed is pushed into such a corner that they're going to break this thing before they allow those rates to start normalizing and going higher? Absolutely. I've been talking about this for a while.

Starting point is 00:26:01 I mean, I couldn't agree with you more pressing me. If you think about what's happened here, we have not even a recovery, really. I mean, it's been a recovery from what was the Second Great Depression, essentially. So it would be tough to not recover from that, but it's been the most anemic economic recovery in history. And it's been anemic recovery that has been wholly predicated upon historically low interest rates, I mean, all-time low interest rates. And so, you know, if you take those away, absent the real growth that you would, of hope to get by now. And I think the Fed will be forced to into QE4 far before we get rates at any

Starting point is 00:26:38 kind of meaningful level. Because as you said, to your point, they're going to have to do that. They don't have a choice now. And I think the one thing that, not just the Fed, but the ECB and the Bank of Japan and all these guys, the one thing they have done over the last state years, but more aggressively over the last sort of three or four, is they have very consciously taken ownership of the outcome. but they own the outcome now. And so if this thing does go down, it's going to go down on their watch, on their shoulders. And so they're all human beings.

Starting point is 00:27:08 It's in their vested interest, not to be the guy who history books are writing about in 200 years. This was the guy who tipped the avocado over. Legacy is important to these people. I really think it is. I mean, you don't spend your life building a career and ending up in the public eye without being concerned about your legacy.

Starting point is 00:27:26 And, you know, I think the legacy of these guys collectively is really not going to be too good. And I think more books will be written about this period than any point since World War II. So good luck with that. But I think you're absolutely right. They have no choice now, but to continue doing what they're doing. And that is reducing interest rates at the first time of any weakness now. If you show me a 4% GDP print in the US, hey, okay, fine.

Starting point is 00:27:53 Maybe there is some room to move rates. I don't see that coming. If you show me a return to double figures in China, okay, maybe there's a chance that it's not happening. And higher rates are only going to kill that. Yeah. And I want the audience to know, like, whenever I say that I agree with Grant in reference to the value thing that the bond prices have reached their top, I'm looking at this more from a long-term perspective. I'm looking at this from a five-year perspective. I think that the Fed, yeah, rates here coming soon, you know, we've heard from a lot of people, they're going to go up in December. That's

Starting point is 00:28:24 what we're hearing. Whether they go up again or the Fed tries to raise them another quarter of a percent, moving into 2017. Who knows what they're going to do. But I think in the short term, yeah, rates might go up a little bit. But whenever that recession eventually does occur, they have to go back to this zero rate policy. They have to keep these things pressed lower. They have to take the long duration, the 30-year bonds,

Starting point is 00:28:48 and they've got to start pushing those down if they want to keep this thing afloat. I guess that's more of where I'm coming at it. I'm assuming you're the exact same way. Yeah, it's ironic to me. When you think about, if you go back to the, 1987 and the crash, which a lot of people have forgotten about, I'd only been in a business for a couple of years at that point. And, you know, I look back and I remember it as a really bad day at the office, right? The stock market lost a quarter of its value in a single day,

Starting point is 00:29:12 but it fell, it reprised to a clearing price where they were buyers. And we had some volatility around that drop. But if you look at it, it was a one and done. The market did all the work. And when you look at what central bankers are trying to do in, we saw this in January, February this year when markets got wobbly. And ironically, that happened just long enough past the 25 basis point hike in December that people forget that. They kind of don't associate it to. And I'm absolutely certainly it was very much that, their belief in a timing cycle.

Starting point is 00:29:44 It started out. But as soon as it fell 5, 6, 7%, they jumped in. Now, we are at all-time highs on the S&P. if we gave up, let's say 20%, it would take us back for a couple of years, maybe, maybe three years. Is that the end of the world? No, it's not. In fact, it's a price where you will get real long-term money coming in, looking for equities that are valued for the long term. But they can't allow there to be a stock market. And I've had the belief for a long time that the reason this is troubled central banker so much is that the man in the street, whether he be investing his 401k or trading a few stocks or not even look at the stock market at all.

Starting point is 00:30:29 Nobody writes a headline on the New York Post that says bond market crashes. That's not a headline. People don't really understand it. But you bet your bottom dollar, if there's a stock market crash, that's the headline in every newspaper. And people that don't even understand investing, don't look at the markets. If they see the headline stock market crash, they panic because that's what you're supposed to do when there's a stock market crash. So I understand the bind they're in, but I think allowing some air out of this by stepping aside and saying, you know, we're not going to jump in to protect the stock market. Explicitly saying that, it'd be very interesting to see where the market reprises, but I guarantee it will reprise at a level where there are genuine buyers who see value.

Starting point is 00:31:12 And the only problem with that, obviously, we don't know where that value is. Is it down 10%? Is it down 20? Is it down 30 or 40%? We don't know. but whatever price it is, it's a real market once again. So, Grant, I was watching an interview with Doug Nolan and yourself, and Doug said something to me that was really fascinating. And he was talking about the typical business cycle that, you know, we're accustomed to the seven to 10 year business cycle and how it's a redistribution of wealth where, you know, you basically have this rebalancing of money from the people that bought at the top to the people that are buying at the bottom and basically buying up all this equity very cheap, whether it's bonds or stocks or whatever. Then he said something that I had never heard before and that really kind of made me start thinking. And he was saying that something very similar plays out between countries as well. So I'm curious if you can tell our audience a little bit about who Doug is and then also

Starting point is 00:32:05 describe this idea that he was talking to you about on Real Vision. Yeah. Doug, this is such a brilliant man and a lovely guy. And he's, that's one of the most astute observers of the credit cycle out there. He's been watching credit markets forever and just Google Doug Nolan and you'll find his blog. And you know what we were talking about, as you said, was this idea that there's this transfer of wealth required. And it absolutely is required. We've seen it happening on a stealth basis. We've seen it happening right around the world. But it's going to have to move out into the mainstream

Starting point is 00:32:37 now. And when Doug talks about this happening, not just between the rich and the poor, but between countries, he's absolutely right. Again, if you go back through history and you look at, there was a study done and they looked at the world's economic center of gravity. And if you go back to sort of 1,000 AD, the center of the world's gravity was in China. That was where the bulk of the economic activities happened. As you go through time, you see that. It's a beautiful chart, and the center of gravity flows from east to west. By the 1930, it's on the eastern fringes of Europe. By 1940, it's smack bang in the middle of Europe, and it kind of peaks in 1950, bizarrely enough, over Greenland. But from 1950, that center of economic activity has kind of reversed. So we've

Starting point is 00:33:23 had 60 years now of that going in the opposite direction. By the 1980s, it was kind of Finland and moving back over Russia. That's not to say this is the country where the epicenter is, but it gives you a sense. And in 2010, it was kind of in Russia, i.e. way, way further to the east, with forecast that by 2025 it would be basically in Beijing again. And so as that economic eccentric gravity shifts and moves and it has over time, so the wealth is transferred. And I think going back to our discussion about the gold markets is a very interesting part of this, because physical gold for the last several years has been moving very, very rapidly from the west to the east. And if you look at JP Morgan saying, gold is money, everything else is credit. Gold is wealth.

Starting point is 00:34:15 and a lot of people don't understand it and I understand why they don't understand it. If you don't understand the concept, it's a shiny piece of yellow metal and I totally get that. Real wealth, real physical, solid, tangible wealth being exchanged for dollars and exchange for fiat currencies

Starting point is 00:34:33 and it's all moving in one direction. I think that's the best example you can possibly see of what Doug's talking about, a real transfer of wealth between nations. And, you know, the same way that we've seeing power being transferred now, for example. Nobody's thought that power was something that would transfer. And it's not transferring from east to west yet, or west to east, rather, but it is transferring from the establishment and it's being taken away from them. Now,

Starting point is 00:35:01 I suspect a transfer of wealth would seem even less likely than a transfer of power. But nobody saw Trump coming, nobody saw Brexit coming. And these are very real examples of a transfer, a transfer that no one could have foreseen. And to think that that won't happen with wealth is, I think, misguided. Let's take a quick break and hear from today's sponsors. No, it's not your imagination. Risk and regulation are ramping up and customers now expect proof of security just to do business. That's why VANTA is a game changer. Vantza automates your compliance process and brings compliance, risk, and customer trust together on one AI powered platform. So whether you're prepping for stock to or running an enterprise GRC program, VANTA keeps you secure and keeps your deals moving.

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Starting point is 00:38:37 at fundrise.com slash income. This is a paid advertisement. All right. Back to the show. You know, that's one of the things that Dahlia is really big on is understanding credit cycles and understanding monetary baseline versus money that is credit in the system and how that influences the way that these markets perform. And you're exactly right. Doug Noland is a master on understanding this difference between how credit cycles work, monetary baseline, all that stuff. So we're going to have a link in the show notes to Doug's site and highly encourage people to go read as much about this stuff as possible because this is what really gives, in my opinion, people just an unbelievable understanding of how this stuff works.

Starting point is 00:39:22 Grant, another thing I'm really excited about talking about that now you're on your show. That's gold and we already talked about it a few times. So I would like to revert to this because we have had the pleasure of interviewing Jim Ricketts twice here on the Investors podcast. And Jim is always fascinating to speak to, and for us, he's one of the leading global currency experts and experts in gold. And I just want to give a quick shout-up to the new case for gold if anyone is thinking, what is Grant talking about with gold and something with China?

Starting point is 00:39:54 And I think the very best piece of literature I read about this, that was in the new case for gold, and where you can actually see what China is doing right now, partly Russia, but mainly China is doing in the physical gold market. It's a very, very interesting discussion. Perhaps we will briefly touch upon some of that because one of the most profound ideas I got from speaking with Jim and reading his books is the idea of a single currency, whether it's effectively backed by SDRs, gold, or perhaps even a combination. So, Grant, I know that you too are skeptic about the current behavior of central banks and governments. So let me ask you, Which type of currency system or systems would, in your opinion, be optimal for the global economy and why?

Starting point is 00:40:39 Well, I have a great question. Jim is, as you said, and it's a great book who we should read it for sure, and he is the master of this stuff. I mean, I had the pleasure of talking to him too, and it's just fascinating listening to his thoughts on this. What Jim's talking about essentially is a reset. And if you go back through history, resets happen all the time, all the time they happen. And we're in fact, we're long overdue one. But you get this, it's human nature to extrapolate the past into the future. And we don't like change until change is forced upon us. And then obviously when you get these big changes, they cloud your entire way of looking at the water.

Starting point is 00:41:14 Anyone that went through the Great Depression, there's a reason those guys saved all their money. They just didn't want to have any credit. There's a reason why the millennials who've grown up on credit don't have any savings. This is human nature. But the one thing that's been constant throughout recorded history are resets. And they're incredibly volatile. They're incredibly destabilizing. But they happen all the time.

Starting point is 00:41:37 You know, the last one we really had. I guess the last big one was Bretton Woods after World War II. Then we had Nixon going off the gold standard in 71. But, you know, what's interesting, if you go back at 200 years, go back the history of the United States, for example, and you'll find that the world has been on a gold standard of some sort more than it's been off one. We happen to have lived through a 40-year period that's been pure fear, which I don't think to happen certainly in our lifetimes and going way back, if at all. And so that's what people are used to. So the idea of having a gold standard of sorts is something people struggle to get their heads around.

Starting point is 00:42:15 But generally these resets happen when you get stresses on the system because of an oversupply of credit. And the antidote to too much credit tends to be sound money. People lose faith in money because of what happens at the end of a credit cycle and the amount of wealth that just vanishes, even though it may have just been paper wealth, it just goes away because of that reset in the credit markets. And so there's this need, this desire to own something that is solid and there's money. And that's why gold tends to be at the center of these systems. And I think that'll happen again this time too. I don't think it'll be a hard gold standard, but I'm convinced that gold will play some part. it has to be something like gold at the center

Starting point is 00:42:56 because can you have faith in fiat currency? I mean, there isn't a single fiat currency in history that hasn't, as Voltaire said, gone to its intrinsic value, which is paper, zero. And there's no reason to believe that it's going to be any different this time. The dollar has been the world's reserve currency for our lifetimes.

Starting point is 00:43:13 But before that, it was the pound. At one point, it was the Portuguese scooter. I mean, Portugal, having a reserve currency to the world, Holland, all these countries that seem incredibly unlikely were once the owner of the world of reserve currency. So the dollar, the day it became the reserve currency was on borrowed time. It's been going 40 years. Could it go another 10, 15, 20?

Starting point is 00:43:31 Sure, it could. But at some point, a reset will happen. And if you look at what's happening now, the signs of stress are clearly there that it may not be too far away. That's not to say it'll happen tomorrow. And Jim's very good at communicating this. But it'll happen and it'll happen without too much warning. And when it does, it doesn't matter what piece of.

Starting point is 00:43:52 paper you have. I mean, speak to anyone in Venezuela. It won't help you. So, Grant, I'm really curious about your thoughts of who will orchestrate this new monetary system because the institution that we have today, and I'm primarily thinking about IMF, in the past that have been resourceful, at least to some extent, especially during a crisis in the East Asia and the 90s, they've been very important. But when I look at what's happening right now, what's happening through the past decade, you see this huge foreign exchange reserves building are primarily in China, Japan, Taiwan, South Korea, China being the big player, they've always been opposed to IMF, even though they're slightly beginning to back it now.

Starting point is 00:44:32 They've always been against IMF because it's primarily a Western organization. And I'm just thinking with this new monetary system that might be backed by gold. It was going to be back with it must reflect the new economic realities, which means that it's probably not going to be the same Western organization as IMF is. and how it was founded. So what are your thoughts on that? Who will be managing the new monetary system? Well, it's a great question, Stig.

Starting point is 00:45:00 If you think back to the last time we had one of these resets, which was Bretton Woods, well, guess what? They set up the IMF to deal with it. The IMF didn't exist before Bretton Woods, and it was established to do this. So, you know, it may be that we're all looking in the wrong place. Will it be the IMF?

Starting point is 00:45:15 Will it be the World Bank? Will it be the IS? Who knows? It could be something completely different that's set up. You look at the Asian investment infrastructure bank. That came out of nowhere. It has become a very, very powerful player on the world stage. It could be something led by the east.

Starting point is 00:45:33 So I don't know is the answer, but somebody will be charged with the responsibility of instituting this, and it may be a completely new organization. So, Grant, I'm going to change gears here a little bit. You had a really profound interview with a gentleman called Don Yeager. Oh, yeah. And I was listening to this interview and I was just like, this is some of the best advice I think I've ever heard somebody give. And I want you to share this advice with our audience and tell the audience a little bit about Don to they might not be familiar with Don.

Starting point is 00:46:05 Tell them a little bit about Don and then say what this advice was. Yeah, it was fascinating. It was one of my favorite interviews. And I only had 25 minutes of Don's time, unfortunately. I could have talked to him for hours. Don was an associate editor of Sports Illustrated. He's written either a nine. maybe 10 New York Times bestselling books.

Starting point is 00:46:22 And he talks about athletes and motivation and how athletes do what they do. And it was incredible conversation. And I'm guessing the advice to which you refer to was about the people you surround yourself with. Yes, yeah. Yeah, I mean, I think he got that from Coach Wooden, from UCLA. And the guy said, look, go home,

Starting point is 00:46:42 sit down and write a list of the five people that you spend the most amount of time with in your life. So once you've written that down, work out what those people bring to your life. How do they make you smarter? How do they make you better? How do they advance your life? And if the answer is they don't, you really need to cut those people out of your life and replace them with people.

Starting point is 00:47:02 On first glance, you listen to that, you think, wow, that's pretty harsh. But in the cold light of day, it makes so much sense. I mean, we're all the product of the people around us. If you surround yourself with smart, bright, intelligent, thoughtful people, it will improve you as a person. There's no doubt about that. And listen to talking to Don about this, the parallels between successful athletes and successful investors to me were,

Starting point is 00:47:28 even though I kind of instinctively knew them, to hear him talking about them, was really, really interesting to me. You realize that it's the same things to drive, being able to deal with failure, compartmentalize it, and move on without letting it affect your next game, your next investment decision. You know, there was so many nuggets in that interview that have stuck with me.

Starting point is 00:47:49 I did that interview as part of a year ago now. It was fascinating. But yeah, that advice, I went home and did that. I don't want to mention any names, but if you haven't heard from me since May, you know why. Poor Raoul, he hasn't been talked to for a year. No, so I loved this. And I think that this is so important for a lot of people because doing that audit and looking at who are the five people that I spend most of my time with because, you know, we study Connemon, we study Robert Chaldeen

Starting point is 00:48:18 and the psychology part of things. And what I think a lot of people don't realize in their life is how much they're actually influenced by their environment and the people that they interact with. I think it's so much more than they actually realize. I think a lot of people go through life and think, well, I'm making all my conscious decisions. I'm choosing to do this and that. And deep down inside, I think that that inner circle of people that are constantly talking to you, constantly putting ideas in your mind or influencing you far more than you could ever imagine. And so doing this audit is so important. And I think the other thing that is important to this too is say there's a person you wish was in your inner circle. Maybe it's somebody famous.

Starting point is 00:48:59 Maybe it's some blogger that you really like. Just because that person's not communicating with you directly doesn't mean that you can. can't take an hour every day and read their information and bring them into your circle and treat them as if you want that person to be one of those top five for you. And I think that it can help people out so much. I just love this interview and it was so profound for me. I really appreciated it. Yeah. I'm hoping to get some more time we're done to carry on that conversation because I could have talked to them all day. It was absolutely fascinating. So, Grant, this is my final question. Could you give us a hand-off to your favorite investment book and also to a block

Starting point is 00:49:39 or a person that had a significant impact on your investment approach today? I can't recommend reading books enough. You know, there's plenty that will teach you how to be a better trader, et cetera. Me, I'm a great student history. I think all the answers are there in history if you look at them. I do believe in cyclicality. And so I'll cheat and give you two because one's more recent history and one's more distant history. And the first one is the Lords of Finance by Leiaquat Ahmed, which is an account of the four big central bankers in the world back in the early 1900s. It's a phenomenal historical account. It's incredibly well written, very readable. And page after page, you turn and you just change the names to the guys

Starting point is 00:50:19 today. And it's extraordinary how many lessons you'll learn about not in what's happening, but there's a chance to see the future there. It's an extraordinary book. I've read it three times. I went read again this year and I can't recommend that highly enough. And then, For a slightly more modern take, Sir Mervyn King's The End of Alchemy, which was published, I think, either early this year or late last year, which is his account of the 2008 crisis as governor of the Bank of England. And again, it's a fantastic piece of work. It restored some of my crumbling faith in central bankers. Those two books, I think, are not only incredibly informative, that they're actually easy and enjoyable to read. All right, Grant, we can't thank you enough

Starting point is 00:50:57 for coming on the show. Just such a pleasure to watch you on Real Vision. And that Now that have you here is just really exciting for us. We wanted to throw it off to you to give our audience a handoff. What's going on with Real Vision right now as well? Well, I mean, lots always. It's crazy. We're actually just about to launch our second product, which I think is going to be really interesting. We're trying to reinvent financial research and really democratize financial intelligence.

Starting point is 00:51:24 What we've tried to do is bring together a group of incredible thought leaders, guys like Raoul, Jesse Felder, Stephanie Pomboy of Macro Mavens, really give the public access to the kind of financial insight that really has only been available to professionals up to this point. And we've built a platform that we think is going to make people sharper, smarter, and much better investors by just bringing all these financial minds and elite market thinkers to one place. We're going to publish 100 plus investment reports a year

Starting point is 00:51:53 from about 30 different financial thought leaders. They're going to have clear, actionable investors. advice and cover every asset class. We don't think there's anything out there quite like this. So we're really excited to launch that in the next couple of weeks. So just so I can kind of understand it a little better. So Stephanie Pomboi, who you mentioned, I've watched the interviews that you've had with her. She's insanely intelligent.

Starting point is 00:52:16 Crazy. Absolutely crazy intelligent. And, you know, one of the nicest people who ever meet your life. And so, like, she would be writing different reports or how would this work? Yeah. So, I mean, Steph publishes something called Macromavens, which is one of the best pieces. a research out there, in my opinion. She publishes it weekly, and it goes to an incredibly high level of institutional investors, hedge funds, some of the biggest name money managers in the

Starting point is 00:52:38 world, read Steph stuff voraciously. And so she will be on this platform, and there'll be pieces of her work for people to read. And it's not six months or a year old. It'll be up to date current. And alongside Steph, as I said, you know, guys like Jesse Felder and Julian Brickdon, who Julian in's case, really, again, the top echelon of finance have access to Julia. and we want to bring him to a much wider audience and let people really see some of the guys that make a difference at top level investment institution and to, as I said, try and democratize this information. Wow, that sounds fantastic. All right, Grant. Thank you so much for coming on the show.

Starting point is 00:53:15 We'll have some links to Grant, things that make you go home. We'll have links to Real Vision TV, as always people know on our show that we're big fans of Real Vision. But just great to have you here, Grant. So thank you so much for your time. It's been a real pleasure. Thanks so much for having me. Okay, guys, so just before letting you go, I just have a quick announcement. So we've been talking about the TAP event with the Bank of England, and unfortunately, this had to be postponed due to security issues.

Starting point is 00:53:43 So we're really, really sorry about that, and we hope we can do that another time. We'll still be having an event in London, and I'll be going the 28th of January, so not the 27th, but the 28th of January. It will just be a small event, and it will be... probably around 8 or 8.30, so after dinner, in London. Also, remember, we had the event in Manila, Philippines, 27 December, and the event in Tokyo, Japan, 27 February. So, guys, I hope to see you there.

Starting point is 00:54:12 This was all that we have for this week's episode. We'll see each other again next week. Thanks for listening to The Investors Podcast. To listen to more shows or access to the tools discussed on the show, be sure to visit www. www.com. questions or request a guest appearance to the investors podcast by going to www. www. asktheinvestors.com. If your question is answered during the show, you will receive a free autographed copy of the Warren Buffett Accounting Book. This podcast is for entertainment

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We Study Billionaires - The Investor’s Podcast Network - TIP 116 : The 35 Year Bond Bubble w/ Grant Williams (Business Podcast)

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