Fourth Turning To Turn The Dollar Into A Wrecking Ball? | George Gammon

You're in the fourth turning, and it's probably going to get worse before it gets better. And if it gets worse, then that likely means the dollar goes up and starts destroying and being more of a problem for all these other currencies.

Welcome to Thoughtful Money. I'm Thoughtful Money founder and your host, Adam Tagert. Welcome you here for what I think is going to be a great discussion with my friend George Gam, who we haven't had on the program in a while. George, great to see you.

>> Great to see you, too. Thanks for having me.

>> Oh, well, it's a pleasure. It's been too long. Um, so some interesting things to talk about with you, George. Um, first off, uh, happy 250th birthday here to America. We're just a couple days away from it. Um, you live in Puerto Rico. Does that add any spin on it?

>> Medellín.

>> Oh, you're in Medellín? What?

>> Yeah. Yeah. I you know what I mean?

>> Yeah, it does put a different spin on it.

>> I I know. Yeah. You know, I knew that, too. But yeah, of course, it places a completely different spin because nobody cares about America's 250th down there. But you guys have yourselves a new president, right?

>> Yeah. And what's weird is nobody's talking about it. I I hear a couple people just here and there that are kind of neck deep in the macro space, especially in emerging markets, talking about the big shift to the right in, uh, South America. And because it's a big shift. It's not just a regular torch passing.

>> Huge. Yeah. And you see the huge bifurcation, very similar to what you see in the United States, where the political parties are going to the extremes.

>> Mhm.

>> And you see it down here in South America as well. In the case of Colombia, we just had the election last weekend, and the two guys were basically a complete socialist. His father was actually a communist, and I mean, he was absolutely terrible. You're talking about the president who just lost, right?

>> Well, so the president that was there for four years, Pro, he was out regardless.

>> So he was kind of handing the torch to his buddy, which is who was just as much of a socialist, if not more than he was. I mean, he's he's that guy, he was up there with the guy in New York City.

>> He was your man?

>> Probably even further to the left.

>> Okay. And then the other guy was, uh, he had never been in politics before.

>> Yeah. Very similar to Milei. And, um, you know, he's not as libertarian, but he's definitely far right, you know, really tough on crime and all these other things and very pro-business. And, uh, the pro-business guy won, and he'd never been in politics in his life. He's just a former lawyer.

>> So it was kind of like a Manchin versus Trump, uh, candidate for you? I would say Manchin versus Milei.

>> Okay. Um, and, uh, but anyway, so he won. And, uh, this El Alte Gray guy, the guy who won, he's, um, he's more West friend or more US friendly, right?

>> So yeah. Um, yeah. So hopefully this this bodes well for just more, more commerce, more business, more ties between Colombia.

>> Yeah. I mean, you can tell that's the market expectation just through the currency.

>> Yeah. Because as he was gaining in popularity, if you look like Poly Market prior to the election, uh, the currency was appreciating on that.

>> Okay. Because people are sort of expecting Milei-type results from him, I guess, right?

>> Yeah. More, uh, liberty for the central bank to increase interest rates to combat local inflation. So you got interest rate differentials, uh, more friendly United States, more dollars coming in, uh, less deficits. There's a lot of variables in there.

>> Okay. This wasn't what I expected to talk about with you when we jumped on here, but it's actually really interesting, especially in light of the whole kind of Monroe Doctrine 2.0. We want to have, you know, America's looking to have better ties, um, trade and otherwise, with its, um, Western Hemisphere neighbors. And we've seen, you know, we've seen South America, you know, um, increasingly shifting towards kind of regimes that want to work with the US. Colombia's was one of the last ones that was a real holdout that's now tipped, at least it seems. And, uh, I think the last really big one left is Brazil, and they have elections later this year. Do you have any sort of reading of the tea leaves, how that one might go?

>> No, because I only followed Colombia to the extent that I did just because I live here.

>> Okay.

>> And so it it directly impacted me. But outside of that, I I more so focus on the United States. The one thing that I do think is really interesting, and, uh, I I don't know if it will play out in Brazil or not, but this the left is getting further left, and, uh, in a lot of places the right is getting further right, and I think that's a trend that you're going to see for a long time to come, unfortunately. Uh, and, you know, you're going to have the left, uh, win the presidency, and then the next time the right's going to win, they're just going to go back and forth and back and forth, uh, just because the real underlying issues aren't being addressed. And that's the like in the United States, obviously the K-shaped economy, which you refer to all the time. I think you have the AI capex spend that's really propping up the US economy, but it's not impacting that many people. Uh, you have the young people that are finding it tough to afford housing, start a family. Uh, with Gen Z, they're having a tough time dating. I mean, you can see that with, I know the, I forgot what dating app it is, but one of the CEOs came out and said that Gen Z, they're like just non-existent. So, you have a lot of indicators to where the social unrest is is starting to bubble up more and more and more. And when that happens, people just look to politicians, uh, to solve their problems, unfortunately. And the politicians, whether on the left or the right, my view, just make it worse. And so then you just get this kind of pendulum swinging back and forth and back and forth. But each time the pendulum goes this way and that way, it goes further to the right or further to the left.

>> Yeah. And and each new party just spends its time dismantling what was done before and usually doesn't have a chance to get much done before the next election comes and they get kicked out and then it goes back the other way. So it's interesting. So I I was thinking we might kind of build up to this in the discussion, but why don't we just grab it by the throat right now, George. So, um, let's talk about that. So in the U.S., it's a really interesting time in the U.S. Um, because, uh, there's the battle that you're talking about, and the left is definitely going far more extreme now than it has in the before. Like the progressive wing of the Democratic party's really, you know, taken control. Um, they got a lot of confidence now, not just with Manchin, who went in New York, but he just endorsed, um, people for, um, a couple of elections that were just held, uh, and, and all of his endorsed candidates won. So all of a sudden, he's like the new kingmaker on the left, and a lot of the traditional Democrats are freaking out because they feel like they've kind of lost control now to these these new upstarts that have come in. Um, obviously on on the current administration side, we've got the Republicans in charge with Trump. Um, they're trying to say, "Hey, look, you know, we we've actually laid all the groundwork for our, um, the prosperity that we want to build, the direction we want to take the country in, but it's kind of been sidelined by the whole Iran war thing." Um, so there's there's there's just a lot of dust up in the air right now about this, but there's a lot of, um, uh, you know, angst, frustration. And I think I I think the challenge that I see here is even if you put in policies that you think are going to lead to greater prosperity down the road, um, with this K-shaped economy that you mentioned, um, the the momentum that the economy has right now, and the economy is doing fairly okay in the U.S., you know, on average, um, but it's like I asked this question a lot, and I hate asking it this way, but it's like the the bottom leg of the K, it almost doesn't matter how much they're suffering right now as long as the top arm of the K is keeping the averages going well. So you can you can run the economy on that and you can have markets near all-time highs like they are right now, and you can have good economic growth, but along the way, you're just losing more and more people on that bottom leg of the K who are saying, "I got to do something different. This is not working for me. It might be working for the rich guys, but it's not working for me." So it's understandable that there's this movement, especially amongst the young, as you were saying, who just don't have a lot of hope looking at at the current playbook. And so they're saying, "Well, I just got to try something different." And sure, this guy's promising me some free stuff. My my older parents are telling me socialism is not the answer. It's going to suck for all of us, but if I'm, it's already sucks for me now, I may as well go for the guy who's promising free stuff. So I guess the question is, is like, is there a way to kind of write this, um, where we bring a greater part of the the populace along with us, or or is this thing just kind of destined to kind of just break down and then maybe we'll get something better out of the rubble?

>> Well, I think the trend is to the latter.

>> Yeah.

>> And turn it up. I didn't mean break down, but I mean be torn down where just enough of the populace says, "Screw it. I don't have any faith left in the status quo. Let's just break the whole thing and build something new."

>> Yeah. I think what you have to do is start by asking what created the wealth to begin with. And what created the wealth to begin with was not politicians. It wasn't government intervention. It wasn't policy. No, it's free market.

>> That's right. It's free market capitalism. The key, because capitalism, I hate to use that term without free market in front of it, because when you just say capitalism, you know what the young people think is, well, just bailing out Wall Street during the GFC because we're prioritizing, you know, these private entities over the individuals in the real economy, and therefore that's capital. That's not capitalism in any way, shape, or form. Like Milton Friedman said, you know, with capitalism, the loss part is just as important, if not more important, than the profit. You you have to let businesses fail. And that's why I always start by saying free market capitalism, because in a free market, the government isn't intervening and picking winners and losers. So if you understand that that's what made us unique as a country is free market capitalism, that's the answer. So you have to look at the, you know, that's the answer to getting us out of this malaise, let's say. Uh, you have to free things up. You have to let businesses go bust. You have to make sure that there's not this moral hazard. And when you come out the other side, you're going to have a much stronger base to build on, a much stronger foundation. And then you're going to have, you know, banks lending to mid-small-sized businesses, and you're going to have that job creation that's going to give a lot more opportunity to the young people out there. And it's likely going to bring down home prices. It's likely going to bring down asset prices, which negatively impacts the the baby boomers and whatnot, but it, uh, helps the next generation and it sets the stage for generations to come. So whenever you're looking at a government policy, or I'm anyone is looking at a government policy, I always try to look at it through that lens to start with. You know, is this increasing free market capitalism or is it decreasing free market capitalism? Most of what the Democrats want to do, especially with the kid in, uh, New York, is obviously decreasing free market capitalism substantially. But to be fair, a lot of the policies from the Trump administration and the Republicans have decreased free market capitalism as well. If you're taking a a position in Nvidia or in some sort of like, uh, rare earth company, or something like that, that that's not increasing free market capitalism. By definition, that is decreasing free market capitalism.

>> And you mean the government taking a position in those companies?

>> Yeah. I totally agree.

>> Yeah. Yeah. Or, you know, bailing out this entity or bailing out that entity, or bailing out OpenAI, which they might have to do, you know, due to this AI bubble. And, you know, we got to keep up with China. We got to keep up with China. And therefore that's the justification for the government to step in and prop up all these companies that otherwise might might go bust. And then what would happen if the government wouldn't step in? We'll just use OpenAI as an example. And this isn't a prediction, we're just using it for the, the thought experiment here. If, uh, they go to the government, say, "Look, we can't raise any more money for this capex. You know, we've got 20 bucks a month coming in for these, uh, subscribers, but that ain't cutting it. You know, so we need to go hat in hand to the government." If the government would just say, "Pound sand. This is a free market. You chose to make those mistakes. You got to live with it." Then they go bust. But they don't go away. It's not like they just disappear out of the ether. Companies that actually made good decisions in the AI space would take over those assets.

>> Will buy their IP.

>> Yeah.

>> Yeah. And then the whole ecosystem would be much stronger as a result. But what's happened over the course of the last few decades is that we just won't let anyone fail. And if you don't let anyone fail, the system just gets weaker and weaker and weaker. It's very similar to, you know, evolution. And you're out there on the Sahara and you got a a a herd of lions. I think it's a herd, but you got a group of lions. And what happens if one gets

>> Pride of lions, but yeah.

>> Pride. There you go. Thank you. A pride of lions and one gets sick or can't mate or something like that, and they're they're gone, like like their genes are wiped out of existence. And the strong lions, they're the ones that are going to mate, and that makes the the pride or the group of lions in general stronger and stronger and stronger. But what we've done is we don't let the the sickly ones go off to the wayside. We we make them produce more than the ones that are really strong. And so what do you expect to happen to the gene pool? It's going to get worse and worse and worse. And that's what we've seen with the economy.

>> So I'm so glad you you brought it here. And a discussion I've been finding myself having frequently or recently on this channel is, um, you know, I I it's not my job to tell people what to do or how to think or to vote or whatnot. You know, I just, I hopefully give them good information and let them make their decisions. But one area where I do feel I'm in feeling increasingly it's important for me to put my own finger on the thumb is to say, we do have a lot of the system's not perfect. We do have a lot of issues, but I'm pretty positive the answer is not embracing the model that we know has a 0% success track record in economic history, which is socialism, right? Um, and so the effort should be fixing what is not working well right now with capitalism. And I think to your point, and I really like it, I'm going to steal it going forward. I think the key thing to focus on is the free market part, right? So, you know, right now we have what's called, you can call it corporatism, you can call it crony capitalism, whatever. There's just there's a lot of ways in which capitalism has been increasingly captured. Um, and we need to free it from that. And, um, you're nodding on here, but but I I do think, and this is just me opining between you and me, George. Um, maybe the folks watching don't care about this, but I I do feel like maybe this is a little bit of responsibility that guys like you and I who have platforms bear, given the the good, um, fortune that we've had to to build up audiences, is to try to help people realize this. Because I understand the, again, the thinking of the younger generation, just to look at it and say, what you hear a lot is, "Capitalism's failed," right? And it isn't that it's failed. It's just been compromised. So don't throw out capitalism. Don't throw out the model that actually we know can work really well when it's working correctly. Focus on fixing it. Don't abandon it and jump onto something that we know for sure is a total failure.

>> Yeah. And you have to just go back throughout history and look at what's worked. Uh, whether it's the delta between North Korea and South Korea, right? Uh, whether it's, um, you know, Hong Kong and mainland China, you know, 30 years ago or whatever.

>> Old Hong Kong. Yeah.

>> Yeah. Just look at what's Singapore is another great example. Just look at what's worked and what hasn't worked. And to your earlier point, it's hard to find an example without like a boom in commodities or something where socialism really worked well. And it's very easy to find examples where free market capitalism has worked extremely well. Now, the thing is, it's not perfect, but that goes back to what you're saying. And if if we could do one thing as content creators for the younger generation, I think it's turning them on to people like Thomas Sowell. And one of the greatest things I have ever heard Thomas Sowell say, and I repeat it over and over and over again, is, "There are no solutions, there are only trade-offs."

>> And I think one of the big problems with the way human beings tend to think is they look for solutions. So, as an example, if you say, "Okay, well, we need to go in the direction of more free market capitalism." They'll say, "Oh, no, no, no, no, no. We can't do that because that produces inequality." Okay, well, we're not looking for a solution. There is no perfect outcome because we're imperfect human beings in an imperfect world.

>> So, what you have to do is you have to look for the least bad strategy, right? You have to look for the the least bad system. And the least bad system is going to be free market capitalism. That's not saying that it's perfect. That's not saying that it doesn't have flaws. That's just saying that it has a lot fewer flaws than all the alternatives. And that's what Thomas Sowell really tries to get through with that very, very simple saying. "There are no solutions. There are only trade-offs."

>> That is so accurate and wise. And, uh, what what breaks my heart about you're saying, you know, we need to expose them to to folks like Thomas Sowell, is I totally agree. We're not going to have this Thomas Sowell around for for too much longer because he's like what, 95 or something at this point in time?

>> Yeah, he's he's he's probably still writing books, too.

>> He is. And he's written a phenomenal number. But but hopefully we have, you know, future creates some more Thomas Sowells to to pick up the torch.

>> Yeah. I think that's where I'm really positive, Adam, because you now you and I are nowhere close to Thomas Sowell or Milton Friedman or Hayek or any of those guys. Uh, but back then, you know, Milton Friedman, he had a huge, huge influence on people. Uh, you know, he had a dynamic personality, could speak really well, really smart guy. And although there might not be a Milton Friedman or a Thomas Sowell today, there's a lot of little teeny Thomas Sowells, uh, and little teeny Milton Friedmans. And if you want to put you and I in that category, there's a lot of quote unquote influencers out there. So we might not have a Thomas Sowell, but we've got 10,000 little Thomas Sowells that are standing on his shoulders, hopefully repeating the same messages. And and if we do that, then we can make maybe maybe maybe collectively as big of a difference as they made.

>> So I I I certainly hope so. And I would be honored to be on the the JV team, uh, that you're describing. Um, but let me just say too, it's not just you and I. Um, George, it's, it's really everybody watching this video and the folks that watch your videos. We all have the ability as we learn, you know, about how the economic system works and how capitalism should work and it and when it's working well, you know, it it's on us, all of us, to to pass that along to our children, pass it along to folks in our community who are willing to listen, um, and, and to be little repeaters of the message of those great minds that you mentioned.

>> Yeah, absolutely.

>> Okay. All right. Um, super interesting, uh, conversation so far. This was not where I was expecting us to go here, given what I prepared before, but it was great. I'm so glad we hit this vein.

>> Now, let's talk about money. Let's talk about money.

>> Well, let's let's actually talk about money because, no, because you you've actually been talking a lot about this recently. Um, you before we got on here, you know, you said, "Hey, I've got some thoughts about the dollar, especially versus, um, uh, a lot of the Asian currencies that are out there." I guess why don't we start there? Um, it's been an interesting year with the dollar. The dollar has been strengthening this year versus most other currencies. Um, the war definitely kind of, um, you know, added to that dynamic a bit here. Um, it's had a lot of knock-on effects for a number of asset prices, particularly, um, the price of the precious metals and things like Bitcoin. Um, I guess why don't we why don't we start with you laying out your thesis, and then we'll we'll dig into it from there.

>> Yeah. I think what I'd encourage your viewers to do first and foremost is, yes, look at a chart of the DXY, but realize that that's 57% euro and I think 14% yen. And when you actually set that aside and just look at the cross rates between the dollar and like the Indian rupee, uh, the Indonesian rupee, uh, the South Korean won, uh, the Japanese yen, and you look at like a one-year chart or a five-year chart, and it is unbelievable the depreciation of those currencies versus the dollar. And and as Americans, I don't think we appreciate why that matters. And not only why it matters to the global economy, but why it matters to Americans in the United States, because we're like, "Okay, the yen's trading at 162. Who cares?" So what?

>> Right. I think the only thing the average person takes is, "Hey, I hear it's a great time to go travel to Japan. Sounds really cheap."

>> Well, it is if you have dollars. But the problem there is commodities and a lot of the inputs that Japan has to import, they they have to where there's very inelastic demand. They're denominated in dollars. So what you have to realize as an American is we don't have this problem. We're extremely, extremely unique where if we have to bring in import commodities, if we have to import energy, something like that, we don't have to worry about the cross rate between the dollar and XYZ, because that barrel of oil that's coming in is denominated in dollars. But if you're Japan, you have to worry about two things. You have to worry about the price of oil, and you have to worry about your currency versus the dollar. So, as an example, let's say that the barrel of oil is $100 and it stays $100, but the yen goes from 100 to 200. Well, now all of a sudden you need twice as many yen to buy that one barrel of oil. And you say, "Okay, George, I get it, but again, who cares?" Well, let's bring this back to what's happened more recently in the United States. We've had gas prices go up. And when gas goes from whatever it was, $3, up to $5, people freak out. They, and and rightfully so, because they've got to pull spending from discretionary. They've got to pull spending from other areas because that demand for gas is very inelastic. And so, and then obviously that gas goes into transportation, which goes into transport of goods. And so it has this ripple effect through the economy where prices in general, uh, tend to go up. So just think if you're the Japanese person and your yen goes from 100 up to 200, the price of that gallon of gas doesn't go from $3 to $5. It goes to $6. And then if you have the Straits of Hormuz closed down and and oil goes from, let's just say $65 up to $120, you know, it's down to $70 now, but it goes up to $120. You get that big spike. Now all of a sudden you're paying $8 a gallon for gas. So what Japan does is they can't have that because that would lead to the social unrest, uh, that we were talking about, extreme social unrest that we were talking about earlier. So they have to subsidize the wholesalers or the refiners. So what happens is if if they're, you know, if the market price, let's just say, is $2 a gallon, and to sell it at $1, the government has to pay that person the dollar difference, right? So then they have more and more yen that they have to sell back out to the FX market to buy the dollars they need to get the future inputs. You see? And so that's increasing the supply of dollars. That's increasing the demand, or excuse me, increasing the supply of yen. It's increasing the demand for dollars. And then you get the yen going down further and further and further to where the government has to step in and quote unquote defend the currency. And that's what they've been doing at 160. But it's at 162 right now. And you know, because you watch markets, your audience might not know that in the past year or so, year and a half, every time that the yen has got to 160, they the Ministry of Finance or the BOJ comes in and defends the currency. How do they do that? They take their dollar FX reserves, they sell them, kind of the mirror image of what we were talking about. They sell them into the market and buy yen. So that increases the supply of dollars, increases demand for yen. And then you have the, uh, yen briefly, briefly appreciate. So it goes from 160, let's say, down to 140. But eventually it goes back up to the 160 mark. And like I said, we're at 162 right now. And that works until you run out of FX reserves. Now you got a problem. Now you got a big problem. You can sell treasuries. You can sell gold. But at a certain point, you might have to take the only asset that's on your balance sheet, if you're Japan, and that would be yen, to sell to get those dollars that you have to have. And in that case, the yen just, you go into a death spiral, right? And so the the whole, so why does this matter for people in the United States? And why do I think this is so important? And I think it's actually even more important than the dollar versus goods and services in the United States, or, you know, said another way, the inflation rate.

>> It's because we have to realize that although we import a lot of stuff into to the United States, we export a lot as well, and we're exporting to those countries who are getting decimated by by the dollar going higher and higher and higher. So, at a certain point, the dollar is destroying our trading partners. The dollar is destroying our customers. And I think that only goes so far into the point where you get like a Plaza Accord 2.0, because it it doesn't serve the the dollar. We'll just use a DXY as a proxy. The dollar going to 105 or 120 or even higher, that doesn't do anyone any good, you know, on net balance. Uh, it's bad for the United States. It's bad for all these other countries. And so that's when I think they might have to come in and intervene. And you say, well, what if the dollar goes down? The way it's structured, it's very difficult for the dollar to go down to, you know, 80, 85, as we've seen. It goes down to 97, it goes down to 96. But you kind of trade in a range there where the way that the dollars were created, the way the monetary system is set up, it creates a constant bid for the dollar for dollars.

>> That's right. Because those dollars are lent into existence. And what if we, if your audience could take one thing away from this conversation that I think would give them an edge in investing and figuring out, you know, how the dollar works in currencies, is to understand that dollars aren't just an asset on a balance sheet. Dollars are simultaneously a liability on a balance sheet. And because they're a liability, that means there's future demand for every almost every single dollar that exists right now. So, as an example, if I'm a bank and I give you a mortgage, Adam, let's say you want to buy a house for $500,000 or something, those dollars didn't exist. You know, people think that I'm taking dollars from over here and giving them to you. That's not what happens with the banks. They're creating brand new dollars that didn't exist. They're giving them to you. But think about what we've done. Those dollars are now an asset. So, if you give those dollars to the seller of the house you're buying, it's on their balance sheet. It's an asset. But remember, those dollars are still on your balance sheet as a liability, because at some point in the future, probably monthly, you're going to have to find dollars in order to pay back that loan. And that is a bid. That's constant demand for dollars. And so again, I think a great takeaway from this conversation, if people just want one, would be when you're looking at the dollar, you have to realize that it's not just an asset, but it's a liability. And that liability represents a constant demand or constant, uh, bid for the dollar.

>> All right. So I guess where to just to make it, you know, relevant for folks. So where does this go? Um, and let's say, where does this go looking out across the rest of the year, right? Um, is is, you know, I can listen to what you say, George, and say, "Okay, so as these countries struggle under the rising dollar versus their currency, especially while we still have high, well, I mean, oil prices are coming down, but, you know, we still have things that are both the nominal increase in the dollar cost plus the dollar relative to your currency going in the wrong direction for these countries." Um, it's sort of like the, when the US catches a cold, the rest of the world, you know, gets the flu or whatever. US gets the sniffles, rest of the world gets the flu. Um, dollars rising here. Um, they are increasingly not able to buy our exports, right? So we start seeing our exports, uh, come down or get compromised or not grow the way that we want. Maybe if they get really, uh, in trouble, as you said earlier, they have they start having to sell their assets, and there's a lot of foreign capital in US markets, right? So if if those foreigners are having to start to sell those capital, those assets just to just to get by, these are things that all of a sudden, it's not their problem, it's our problem too. So do you expect some of that to happen going forward, or do you expect a different outcome?

>> Uh, I would expect it with commercial real estate. I'd expect it maybe private credit. I don't know that I'd expect it in the Treasury market.

>> And the reason I wouldn't expect it in the Treasury market is because the the marginal buyer and seller there is going to be the banks.

>> Mhm.

>> Um, and we've gone into that in the past, so I won't go into it here. Um, but you don't have that that that banking bid, you know, if the spread gets too high above nominal GDP for private credit. And so, you know, let me use an example I used on a recent video for people to I think understand this a little bit better. We'll use Toyota as just a proxy for all of Japan. And so Toyota, they've got multiple ways to get those dollars they need that, uh, we were referring to. And number one is sell Toyotas to the United States, because if you're selling those Toyotas to the United States, you're getting the dollars and hopefully you're getting enough dollars. But again, that depends on the ratio of yen to dollar, right? And and the price of oil. But let's assume that you're getting enough dollars that you need to go ahead and buy those inputs. The problem here, Adam, is if the global economy slows down.

>> Mhm.

>> And then you're not selling as many Toyotas. And if you're not selling as many Toyotas, you're not, you don't have as many dollars coming in. And that puts you into a real, real compromising position. So this what we're saying here with this kind of dollar death spiral going up, not down, it is reversible, but you would have to believe that the global economy is going to have to start doing better and better and better. So the trade and the circulation of those dollars is going to increase. And, you know, I, if you look at the polarization, if you look at all of these countries, you know, if you look at the Fourth Turning, if you look at it through that lens,

>> Yeah.

>> I I don't know that there's an extremely high probability that the global economy just starts to, uh, come together again and just start growing quickly. And I think we have to realize that it's not just about the supply of dollars, it's about the circulation. So a lot of people in the macro space always talk about, well, there's a shortage of dollars in India. There's a shortage of dollars in XYZ. And people struggle with that because, like, what do you mean there's a shortage of dollars? There's, you know, $75 trillion dollars outside of the United States, let's say. It's not necessarily that they're saying there's a shortage of dollars, but there's a shortage of circulation of dollars. So, if the dollars are just all hidden, you know, under your Adam Tagert's bed, then sure, there could be $75 trillion of them, but it's not going to be doing any good and the whole system's going to blow up because those dollars aren't circulating to pay off that dollar-denominated debt. So, I think it's very important that people look at the probabilities through the lens of what do you think is going to happen with the global economy? Is it going to speed up or is it going to slow down? Because that tells you what's likely going to happen with the circulation of those dollars, the cash flow that's needed to service the debt.

>> Okay. So, based on your best outlook for, again, let's say the rest of this year, are the trends going in the right way or the wrong way?

>> I think the trends are going in the wrong way.

>> Um, and part of the reason is because I think we've had this shiny object called the Middle East for quite some time. And that's got everyone focused on short-term inflation, because obviously we've seen the PCE go up. We've seen the CPI go up. So everyone's focused on now, you know, Worsh comes out and he's talking hawkish and he's trying to be Paul Volcker and all these things. And so now you get the two-year Treasury, which kind of bakes in Fed funds a little bit. You know, it's kind of a mix between market and Fed funds. You've got the two-year Treasury trading at like 4.15 with Fed funds at like 3.5, you know. So what that means is the market has gone from expecting a Fed rate cut to likely expecting a Fed rate hike in the next, who knows, in the next couple quarters or something like that.

>> Yeah. I think the last I thought I think they thought the first hike was going to be in September. They moved it up from December to September.

>> Yeah. And it's because of what you're seeing that spike in oil, really filtering through to a spike in the CPI. So then the market's expecting the Fed to look at that hawkishly, because, you know, they've got that balancing act between the unemployment rate and the CPI or the inflation. And you've got the unemployment rate that's pegged, you know, 4.3, it's been for quite some time. And so to air, or you want to focus on the inflation and to the degree to which they can. So that's what the market is predicting. But I think that's just, we've got this shiny object, but now that shiny object isn't really there anymore. So we're going to go back over and focus on what we were focusing on prior to the Middle East. And what we were focusing on prior to the Middle East was private credit.

>> Right.

>> Right.

>> Which has been surprisingly out of the headlines for the past month or so, month or more.

>> Right. Because but but but it's been getting worse. It's it hasn't been getting better. So, just because it's it hasn't really been out in the headlines, the trend is going in the exact same direction. Even with BlackRock, they came out the other day and said that they've got another fund that they're halting redemptions on. And so, I hear a lot of people say, "Oh, well, that's a nothing burger because private credit is only $3 trillion versus whatever the mortgage-backed security market was in '08 at $60 trillion." But that is that's not understanding how the system works, because the system, the monetary system, it really works on confidence. And if and it has to have dollars circulating, you know, globally, and that's based on risk and, you know, counterparty risk and perceived counterparty risk. So if you have an event where perceived counterparty risk increases, uh, tremendously,

>> Yeah.

>> It doesn't matter whether it's a a $3 trillion asset or a $60 trillion asset. The net result is still the same, and that's the circulation of money and credit slows down. And that just exacerbates the problem we were just talking about with Japan. That means fewer dollars going in. That means more pressure on the yen. That means more pressure on their economy. That's more downward pressure on that customer of the United States.

>> Okay. So, when you look at the rest of the year, it sounds like you you see this trend of of ex-US countries, um, particularly big net importers, um, continuing to struggle for the the exchange reasons you were talking about. But even,

>> Yeah. And if they're, I to your earlier point, I forgot to mention that, but if if they do continue to struggle, then that means they're selling dollar assets, and that could be Treasuries. That could be gold. That could be private credit. That could be, you know, a commercial real estate fund. Uh, there was a lot of reach for yield, um, you know, with a quote unquote carry trade. And because of that carry trade unwinding, you know, or them having to bring back or sell those dollar assets in order to get those dollars they need for whatever reason they need it, you know, then that puts downward pressure on those asset prices in the United States.

>> Okay. So when you're when you're in the US and you're dealing with people starting to get much more concerned about counterparty risk, perhaps because the private credit issue is starting to really begin to scare people, um, one of the last things you want to have happen at that point in time is asset prices start going down materially, because it just makes them even more scared and they tighten the the reins even even more, and it kind of becomes this vicious cycle. Correct.

>> Yeah. So, who's circulating the money and credit that's necessary for the economy, the oil in the car engine, if you will? That would be the banking system.

>> You'd be the banking system. Exactly.

>> So, you got to just put yourself in their position, right? You have an inside look at what's really happening with private credit and that black box. So, if you're one of these banksters, you you know what you can tell reality from the marketing spin you see on CNBC from Larry Fink. So, you're like, "Hell no. There's no way that I'm going to go out there and, you know, lend into the real economy or or lend here, circulate money in credit, because I think the risk is getting higher and higher and higher, and the reward just isn't there. So, I'm just going to park my money in Treasuries and sit back and wait to see how this plays out." But, unfortunately, that doesn't, uh, circulate like we need, and that exacerbates the problem, especially when you have a lot of these private credit funds where their problem is liquidity. If it's not circulating, by definition, liquidity is being reduced.

>> Right. Right. Um, and of course, as, um, uh, banks tighten lending standards, well, then all sorts of parties that depend on on getting loans can't get them or get fewer of them. Uh, and therefore, there's less economic growth and less ability for people to buy and afford assets, which starts to pull them down even further. And again, it becomes a sort of vicious cycle. And then you got to get price discovery on those assets that are inside the black box.

>> Yeah. So what we're describing there, I mean, really what we're describing there is what happened in 2008.

>> Um.

>> It's all the same because it's a credit cycle.

>> Exactly. So do you expect,

>> Sort of something of of similar magnitude coming this time around?

>> I don't know. I I don't know the magnitude. I don't know the timing. I just know that cycles are going to cycle. And whether it's the business cycle, whether it's the credit cycle, these things always play out the same way, right? Warren Buffett talked about it when he was talking about the tide going in and out. You know, the tide was in for a long time, Adam, as we all know. The tide, there's an argument that the tide, you know, has gone out a little, but it hasn't gone out to the degree to which it needs to in order for us to see who's swimming naked. And the longer the tide has is in, the more and more and more people that are swimming naked, because there's an incentive to do so, because you know what's the downside? Yeah. They're going to continue on forever. The problem with that is once the cycle starts going in reverse, and that's in my view what started back, what, six months ago. Um, you know, Blue Owl comes out, and then you get, you know, and it's supposed to be a no big deal. Oh, we just sweep it under the rug. But then you get Blackstone, but then you get BlackRock, and then you get all these other funds, and you see that it just gets worse and worse and worse. Now, we're not at the point where everything has completely seized up, but we may be getting closer to that point. And I would point to SpaceX. It seems like, I mean, for the viewers, it probably sounds like we're bouncing all over the place here, but it's actually all tied into the same topic, and that's the circulation of money and credit. In this case, dollars, right? Because when you look at SpaceX, it had, you know, one of two major ways that it could go. Number one, it just, no pun intended, but it rockets higher and it just stays, you know, up at the 220s, at the 230s, at the 250s, or it rockets higher and it starts coming back.

down to the point where it is today, maybe 150 or so, which is very near, if not below the IPO price. And so then what this is telling you is that appetite for risk and the amount of capital that's out there to chase these speculative assets may be decreasing.

And then you see that with Anthropic and OpenAI, you know, calling time out on their IPO and saying maybe we're going to hold off until 2027. Maybe we're going to hold off until later. That's an indication in and of itself that you're starting to see liquidity, if you want to use that term, uh, really dry up. And if we're only in inning five or six of this credit cycle, which I think everything would point to, then you got to assume that that liquidity is going to decrease uh before it starts increasing again.

Where do you think the odds are that we'll look back in years from now and say that SpaceX sort of top-ticked the uh, the speculative era? I mean, the odds, um, I, I'd say over 50, but I wouldn't be confident enough to say like 75 or anything because I think really what it boils down to is the labor market. And so why the labor market is so important is for the passive bid, just like our friend Mike Green talks about all the time, right? And as long as you've got that passive bid, which I think is obviously correlated to the unemployment rate, um, it's really hard for the S&P 500 to go down. Um, it's, it's, you know, it's like Michael Saylor buying Bitcoin every single week. It, it's hard. Well, I guess in that case, the price did go down, but it's uh, much harder for the S&P 500 to go down if you have that massive passive bid that's still in place. So, as far as top-ticking the market, um, I think that depends a lot on the underlying economy and the unemployment rate. And if we're at the point in the credit cycle where it does start to impact the unemployment rate, then you have the passive bid turning into a passive sell. Uh, then for sure it would uh, I think top-tick because now you've got the headwind as opposed to the tailwind and, you know, look, it's been a, a tailwind passive for the last what, 25 years?

I was going to say two decades at least. Yeah. So I don't know why it couldn't be a headwind for 20 years, especially when you look at demographics.

What? Okay, that's exactly the next question I was going to ask you. So, um, just this morning, I was looking at a stat that said that uh, the baby boomer generation has 90 trillion in assets or 90 trillion in net worth, right? Um, but the baby boomer generation also at this point in time is, is they're almost all retired. Yeah. Um, and so this was in, in context of the savings rate, right? So, the personal savings rate's gone down and it's kind of plumbing pretty much like record lows at this point in time. And, um, I shouldn't say record lows. It's gone negative in the past, but, but, but kind of on an average like this. And, um, uh, the conventional reaction to that is, oh, this is really bad. You know, savings rate, personal savings rate's really low and it's continuing to go down. That must mean a lot of financial household distress. Well, not necessarily because as these boomers retire, well, they're not earning anymore, so they're not saving, right? And now they're sitting on 90 trillion in net worth. They're going to be spending a lot of that and that's actually going to be a stimulant to the economy. Um, and

It depends on how much they have to spend that. See, that's the problem with the passive bid because if the passive bid is no longer there, what's the bid, right?

Right. So,

Here, here's my point, which is, um, and we can talk about the distribution of that 90 trillion, which is not even, right? It's, there's a few very rich households and the median boomer doesn't have all that much. I think like less than a quarter million in retirement savings, but, um, but, but they're, they're not, um, they're not working anymore. So they're not putting money into the market anymore. Right? So that their contribution to the bid, the passive bid is now ending. And they're going to be spending, right? So, they're going to be selling assets to do that. So, that should be a very big demographic decelerant to the passive bid. It should, it, it should be really increasingly weighing on it just from a demographic standpoint, no matter what happens in the economy. So, and I've talked to Mike about this and he agrees. He, he said, "I don't know exactly when we're going to tip, cross the tipping point, but in his mind, I think the last time I talked to him, he's like, I don't think we're super far away from it at this point."

Yeah, and that's the point that I was trying to make that if you have, let's just assume for a moment that the S&P 500 is where it is due to net inflows, due to passive, right? Uh, to your point, if the demographic shift turns those passive inflows into passive outflows, then my point is that 90 trillion on the balance sheet, that ain't 90 trillion anymore.

It's not a huge budget for us. Yeah.

Because that's 90 trillion on paper, but that's those are unrealized gains. So, if you have a stock that's trading at a hundred bucks a share, and there's no bid till you get to 50, we'll take it to an extreme, right? Because all the, the, the actual discretionary money won't touch it at 90. They won't touch it at 80. They won't touch it at, you know, SpaceX or something. They won't, they won't, they'll start buying at 50. So now all of a sudden your 90 trillion in purchasing power goes down to 45 trillion.

And then you don't think they're going to rush to sell? I mean, if you're a baby boomer, you're 85 years old or whatever it is and you just lost half your life savings. You see your nest egg vaporizing. Yeah. Sell more. Get me out of the rest. Yeah. That's right. Absolutely.

And that just, and sorry, interrupting, just to add to this so you can react to it. So, let's assume that scenario happens, right? The, the, the, the passive flows go negative. We start having big corrections here. What's the rest of the world going to do? Right? So, you take Japan, right? They're already in not a great position right now, right? Uh, but they've got a ton of US-based assets. Yeah. Right? They're going to sell those, too. So, you're going to have two really big selling mechanisms there. Just the, the, the US-based giant mindless robot going into the direction, but then you're going to have the rest of the world saying, "Well, I got to get my stuff out of there, too."

Yeah. I mean, it's interesting because you talked about demographics and the baby boomers, but Japan could be in the same boat as, as the baby boomer. Like, they need that money for more important purposes like we were talking about earlier, and therefore they've got to sell. Like I said, I think that I think that's one of the main reasons why gold went down. Uh, I don't know if it's at a bottom now or, you know, who knows? We could talk about that. But, uh, yeah, I mean, S&P 500, obviously there's a lot of foreigners, a lot of huge pension funds that own, you know, the AI, the, the Mag 7 or whatever they're calling it, and they could need those dollars a hell of a lot more than they need those shares in the Mag 7. And that could just exacerbate what you're talking about domestically with these baby boomers retiring and then needing those dollars, uh, more than they need those shares of the Mag 7.

I wouldn't be worried about treasuries. Uh, maybe in the short term, you know, it, it impacts the rate here and there, but at the end of the day, like we were say, like we've talked about in other videos, is uh, that's really going to be predicated upon growth and inflation expectations. Uh, and, you know, it's not deficits, unfortunately. It's, it's not the, although it's counterintuitive, it's really about growth and inflation. And so I don't know that growth and inflation would be directly impacted by what we're talking about. If anything, you know, you get a bid for treasuries.

Yeah. Yeah. Um, no, I, I totally agree with that. Also, too, you know, you've got some other big parties that would be trying to put a bid under treasuries as well. The banks. The banks would because they're just pocketing the spread and if, uh, there's a big spread between what the 10-year is paying and what, let's just say nominal GDP in the United States, uh, you know, they're going to take that all day long.

Oh, yeah. So I just did an interview the other day with Louis Gau, um, who I'm sure you know, but big international investor, lives internationally, so great guy to get kind of an ex-US perspective from. And he's quite concerned about this, um, potential for kind of the rest of the world to start sucking its capital out of the US. And, and there are, there's already some precedent, recent precedent where countries are, are, are providing incentives to their their populace to do this. So, I think in South Korea, I think he was saying, uh, they have made it such that, um, you can bring your assets back into the country, um, and they will not charge capital gains on them. So, it's capital gains free. So, if you, if you sell your US assets and bring the capital home, you don't pay any capital gains, right? So, not only might this just happen for the reasons that we talked about, but it might actually happen, you know, there might be a lot of carrots to do that from your local government that's trying to get, you know, capital back into its borders.

Okay, so let me get this straight. Are they saying that you can sell your, whatever, SPY, and you can bring that, that those dollars back into the country and then you won't be charged capital gains?

I believe so. Yeah.

Yeah. So, you know why they're doing that? Because they need the dollars.

They need the dollars. Yeah. Like you said, exactly.

And I'm not talking about the people selling. I'm talking about the government.

The country. The country needs the dollars.

No. No. I, I get it. Right. But, but I mean, again, this just, it turns up the suction on that vacuum, that potential vacuum.

Yeah. Yeah. Absolutely. Um, it, it's again, the way that you reverse this, assuming this is a trend or a slow-moving death spiral with the dollar going up, is you've got to have the global economy really start to pick up and you would have, instead of deglobalization, we would have to get back to globalization. And, um, you know, all of these kind of, uh, policies that we have like protectionist type of policies, although they may be good for the individual country, they're not good for for trade, they're not good for circulation of money and credit, which exacerbates the problem that we're talking about.

Right. I, I just personally, I, I don't see the odds of everybody trusting each other, even, you know, more. I don't see trust increasing amongst players here to go back to some sort of more globalized model.

No, neither do I. I think it's forth-turning. You're in the forth-turning and it's probably going to get worse before it gets better. And if it gets worse, then that likely means the dollar goes up and starts destroying and and being more of a problem, uh, for all these other currencies, which I think, you know, it's not going to happen overnight. It's not going to happen in the next six months, but in the next five years, I think I'd be pretty surprised if we didn't see something that resembled, uh, a Plaza Accord 2.0, you know, or, I mean, at the very least, swap lines. But the, the problem with the swap lines is that's still debt, right? You're getting the dollars, but you owe, you, you have to pay them back.

You have to pay them back with interest.

Yeah. So, I'd be surprised in the next five years if we didn't get a Plaza Accord 2.0.

Okay. All right. Well, George, look, this has been fantastic. We're coming up on the hour here. There's one last topic I want to try to squeeze in. Yeah. And I apologize for not giving you enough time to, to, to really flesh it out, but, um, we were talking about this before we turned the, um, the camera on, but it's related to this whole international money flow dynamic we're talking about. Um, there's a lot of similarities between what's happening right now with with MicroStrategy, right? Michael Saylor's, uh, company, and Bitcoin, where I, I'll let you flush it out, but basically, MicroStrategy is becoming, becoming under more and more pressure as the price of Bitcoin goes down. And part of that is because the company's liability, just like these foreign countries, the company's liabilities are in dollars. That's right. So, even though it loves Bitcoin, um, it's got to actually service the dividends that it owes, uh, in dollars. And right now, Bitcoin is going down versus the dollar.

Yeah. I mean, they're a perfect example of what we've been talking about this whole video, or almost this whole video, with whether you like it or not, if you're in Japan, you have to have dollars to get that oil, or you have to have dollars to service your dollar-denominated debt. And you can hate the dollar, you can hate Trump, you can hate the United States, but that doesn't change the reality. And, you know, the, the poster child for hating the dollar is MicroStrategy. You know, the dollar is going to crash out there buying Bitcoin, the future of money, the future of currency, you know, HODL, hold. So, you're kidding me. Yeah. Yeah, that's right. Mortgage your house, do all these things. But we've saw, we saw today, just as we speak, the, uh, MicroStrategy is coming out saying that they're going to have to start selling Bitcoin. And not just 32. They're gonna have to start selling probably billions of dollars worth of Bitcoin. Uh, why? Because they have to have dollars because their liabilities are denominated in dollars. They're basically the exact, in the exact same position as Japan, or they're in the exact same position as India or South Korea. And it's just, uh, I think an ironic

Problem is they don't make Toyotas to sell.

Yeah, that's right. And, you know, another thing that I was thinking, now this is a total hypothesis, Adam, and so I haven't really, I don't have any proof of any of this, but I do wonder if a lot of these private credit guys don't have stretch on their balance sheet. And I, I understand that, you know, they're private credit and therefore, you know, they shouldn't be buying preferreds or, but it's a black box. And I, would you trust these guys? Like, seriously, I would ask your audience right now, would you trust these private credit guys? Would you trust Larry Fink that every single component of his black box is actually credit and it wasn't, uh, stretch preferred? Because if you go back six months, right, when they're having all of these, uh, redemption requests, and you look at your balance sheet that you're, you know, trying to hide, and you're like, "These guys aren't paying me. These guys aren't paying me. These guys aren't paying me. I've got no money coming in because this whole thing is like a sinking ship. But I have to pay out 5% every single quarter, whatever it is at the time. If Stretch is paying, you know, or is at 100 cents on the dollar, which it was for a long, long time, and if you have a guarantee from Saylor that he's going to keep it at, uh, 100 cents on the dollar, 11% dividend solves a lot of your problems, right? A lot of your problems. And especially if you use a little leverage to to boost that up to maybe 20%. Yeah. So, this is just kind of a conspiracy theory I have. But, you know, now that Stretch is trading, I think today it got up to 80 or 85, but you're still at a 15% discount to par. Uh, I wouldn't be surprised in the next six months if you see a lot of these private credit, uh, funds that really have even more problems because, or at least pension funds, because of their exposure to Stretch, assuming that Stretch, uh, stays below par.

Got it. Yeah. And just for folks listening that don't know exactly what Stretch is, Stretch is basically a preferred security that MicroStrategy, Michael Saylor's firm, has issued and it pays this really big, fat, tasty dividend. Um, and of course, you know, a lot of people have said, "How are they going to be able to do that sustainably?" And, well, as long as the price of Bitcoin rises, they'll be fine. But obviously, the price of Bitcoin has not been rising and it's getting to the point where it's trading below par and there's a lot of concern about its ongoing viability.

Yeah. Yeah. And if that was your, you got big problems. You got big problems in that black box, Larry Fink.

You, you glitched right there, George. Make that point again.

I said, "And if that's your Hail Mary, if your Hail Mary for one of these private credit funds is Stretch and your Hail Mary is trading at 80 cents on the dollar, uh, if you're Larry Fink, you got a lot of problems."

You got a lot of problems. Yeah. That's like the pilot who's like, "The plane's starting to go down. He's like, 'Well, at least I got a parachute.'" Then you open it up and there's like an anvil in there.

Yeah. Like the cartoons. Yeah. That that could be what we see in the next six months.

All right. Right. Well, George, look, um, this has just been, as, as expected, uh, such a great, um, wide-ranging but, but really fascinating and, and really enjoyable conversation, as it always is with you. Thanks so much for coming on and doing this. For folks who would like to follow you and your work, where should they go?

They just go to YouTube and just type in George Gammon. That's my whiteboard videos. Or you can just type in Rebel Capitalist and those are the daily videos I do, often daily, where I talk about the exact same things that we've been discussing on this interview.

All right, great. George, as usual, when I edit this, I'll put up the links on the screen. Folks, the links will be in the description below the video, too, so you can go, uh, to check both those out with one click. Uh, you definitely should. They're great channels. Um, I forgot to ask this, so I'm going to just try to shoehorn it in here right at the end. George. Um, given your whole outlook here, are there any potential strategies or specific assets that you kind of favor right now in this environment?

Yes. Yes. Thank you for asking that. I actually wrote that down, uh, to discuss on a more positive note because, and this isn't investing advice, but I can tell your viewers what has worked really, really, really well for me over the last at least nine months to a year. I may have discussed it last time, but I think it's worth discussing again because a lot of your viewers, I'm sure, are like, well, they're, they probably don't like treasuries. They more so like gold. They're like, I don't know if it's bottoming. You know, silver's down to 58 bucks. You know, S&P's in a massive bubble. Uh, who knows what happens with passive? What on earth do I do?

So, what I've been doing is something called a pairs trade. So, let me, I'll explain it using a specific example in my portfolio that's worked really, really well. Is I don't like housing, uh, for a lot of the reasons that you talk about on your channel with, with Mel, with Melody.

Melody, right? Sure. Yeah.

Um, I, I don't like housing. You know, if interest rates go up, that's not really great for housing. Interest rates go down, that tells you the economy is getting worse. Yeah. And that ain't great for housing. So, I wanted to short LAR, which is, uh, ticker LEN. The problem there is,

Sorry, folks, LAR is a big home builder if you're not familiar with LAR.

Yeah. And the problem there is how do you know that the market isn't just going to go higher and higher and higher and higher and higher and we have just this, you know, blow-off top or melt-up or whatever it is. And so you always have that risk. So I don't want to short anything outright. It's, it's too risky. Yeah. So, what I did is let's just say I bought, I shorted $10,000 worth of LAR. I just go ahead and offset that with a $10,000 long position in the S&P with just SPY. So then what happens is you're really not taking a directional bet on the S&P or LAR. You're just taking the delta. So, you're just saying that, okay, if LAR goes up, then the S&P 500 will probably go up more.

And if the S&P goes down, LAR will probably go down even more. And that's, you know, you have days where LAR goes up a little bit more or kind of goes against you. But, I mean, for the last nine months, I mean, it's worked really, really well. I don't know the exact numbers, but I'm probably up maybe 40 or 50% uh, on that trade. And again, the reason I love it is because you're not taking a directional bet on the S&P 500 because so many people, I'm sure, that watch your channel, they know it's in a bubble. We all know it's in a bubble, but it's been in a bubble for 20 years for heaven's sakes, and it just keeps going higher. And I have so many people on my channel, they're like, "Oh, I know it's in a bubble. I'm going to go ahead and buy puts on the S&P 500." And they just get wrecked, right? They get wrecked every single time because they're trying to short this market. So instead of doing that, if you got a bearish view like I do, take the bearish view on the individual stock, but then take a bullish view to offset that as a hedge, if you want to look at it that way, on the S&P 500. And it's, it's not a sure way to make money. You got to be very, very careful because you can get a short squeeze and whatnot, but that's something that's worked really, really well for me in the in the past.

I, so much appreciate you sharing that with us. Congratulations on the success of that so far. And, um, I know you know the, um, the guys from New Harbor Financial, the financial advisors I have on this channel. Um, I'm going to talk about that with them when they're on next.

Great. Yeah, because I'd like to hear what they have to say because I love your show.

All right. All right. Um, well, right back at you, brother. George, can't thank you enough. Um, you're always such a great educator and so generous with your knowledge. Um, let's do this again soon, buddy.

Absolutely. Can't wait.

All right. All right. Well, now is the time of the program where we bring in the lead partners from New Harbor Financial, one of the endorsed financial advisory firms by Thoughtful Money. I'm joined as usual by lead partners Mike Preston and John Loer. Gentlemen, thanks so much for joining us. Sure you have a lot to say. Mike, why don't we start with you? What were some of your key takeaways from the discussion there with George?

Hello, Adam. Good to see you and thanks for having us today. U we always like to see George Gammon. George Gammon is pretty legendary. A lot of people follow him. He's got an alternative viewpoint on markets and the economy like we do too. I'd say the main theme in his talk was that a strong US dollar, um, is is a risk. It's the biggest macro risk. In fact, he thinks it's a bigger risk than inflation. I think listening to the talk, um, talks about dollar shortages. Uh, he talked about what I think is the Eurodollar system. He talked about the fact that global, uh, dollar-denominated debt is a thing that creates a constant demand for dollars. And yeah, I looked up. Nobody really knows how much of this is out there, the Eurodollar, uh, economy or the Eurodollar system, but, uh, AI says it's between 13 and 20 trillion, which sounds about right. And it is, there's a lot of people out there talk that have talked about this over the years. I think a lot of us don't understand how big of a deal that is. When we are concerned about a collapse of the dollar or a replacement of the world reserve currency, yes, those are those are some concerns, but I don't think a collapse is very likely because of the fact that the world needs that to be there. There's no other place to park a bunch of dollars. Now, doesn't mean that we can't have headwinds for the next 10 or 20 years or more in the dollar, and we probably will, but, um, he's thinking that there's a constant demand for dollars. In fact, he's a proponent of a strong dollar. I don't know if I agree with that or if we agree with that long term. Brent Johnson, who you've had on the program, Dollar Milkshake Theory, certainly thinks that the dollar will be strong, certainly early days of a crisis. I think we agree with that. I think we would be in the camp of thinking that the dollar is going to face a headwind over the next bunch of years, 10 or 20 years. But I would expect many decades down the road, the dollar will still be here. May be worth less. Maybe it's something like the British pound declining over the last hundred years. I don't know. But the global denominated debt, uh, that causes this Eurodollar system is a big deal. Um, George spends a lot of time in Medellin, Colombia, a place that I've often been and it's, Colombia is a great place and all of LatAm or Latin America is really interesting. He talked about, I think, what's a sweeping move towards pro-business leadership in Latin America. We just saw that Latin America, uh, elected a very conservative pro-business president, La Espraia, La Esprella, depends upon how you want to pronounce it, but he was, uh, he was not the pick of the, the, the president that was leaving, Pro. He was, he's basically the pro, uh, business candidate and he won by like 1%. And he was, it's odd because President Trump endorsed him before the election, which is really odd and very unusual. So, but I, I think I'd say to be friends with the US president is a great thing for Colombia and it's a good thing for Latin America. I believe also the Mexican president that was elected recently, the first female president ever elected in Mexico is pro-business. So, you've had other people on the program too, I'm thinking people like Tavi Costa that talked a lot about investing in Latin America and, um, I would think that there's going to be wind at the back for these Latin American countries. Mexico, Colombia, Brazil, Chile, I think, are the are the four big ones that are

Add Argentina to the list because Milei is very tight with the Trump administration and with Brazil. That's, that's the last really big one is George and I were talking about and Tavi obviously big fan of Brazil. It's where he's originally from and he sees a lot of the opportunity there. But I think Tavi thinks that, you know, if the elections later this year, uh, go similarly as all those other countries you just listed, that's going to unlock a lot of opportunity both inside Brazil, but for investors outside the country that want to invest there, too.

I hope so. Those four countries, I know, are the ones that Tavi mentioned, and that's because the index is dominated by those four. But, uh, certainly a lot of those other countries might offer opportunities, too. I mean, there's a lot of other things going on in South America besides those, those countries. And, um, they're energy and commodity rich, too, uh, which is a theme that we're bullish about over the next decade plus. So, I think it's something to be thinking about. Uh, um, George also talked about countries like Japan, South Korea, and India. Um, they've got a real double burden because of their weak currencies. They've got to deal with this dollar, the strong dollar, and if George is right and the dollar gets a lot stronger in the next couple years, it's only going to get worse. Um, just something to think about. He talked about risks, other risks besides the risks in those countries. He talked about private credit. That's an obvious risk. We don't really want to dive too much into here, but it's an elephant in the room. No one knows exactly what's going to come of it yet. Talks about risk assets. They could struggle. I think these, you know, leaning negative on US markets. Certainly from a valuation standpoint, I think we would agree. And he thinks that US treasuries could benefit during periods of stress. I do agree with that, too. If we had a stressful downturn in the market, I think money would flow into the dollar, into US treasuries, you know, which is one of the reasons why we have, uh, US treasuries in our model. Just a one or two other things and I think that I'll just take a, a break. He talked about a pair trade, which I think I'll leave to you to ask a little bit later. Um, but one more risk and, and then I'll pause is that retiring baby boomers. Um, you know, the, the mindless robot that another one of your, um,

Guess this Mike Green. Yeah. The mindless robot. The retiring baby boomers that just plow their money. Some people call them Bogleheads, you know, index investors. And it's, it's not meant to be critical. It's just, it is the giant mindless robot. They're retiring, drawing down on assets at a time where the valuations are probably three times long-term norms. You know, what's going to be the catalyst? Nobody knows. But, uh, so George is like us is also very, very concerned about the risks out there.

All right. So, um, sees the world, you know, quite similar as you guys. Um, wait, let me zip over to you, John. Anything you want to add to Mike's, uh, list there before we get into some other specific questions?

Yeah, I guess I, uh, Mike did a really good job, I think, encapsulating it. I'll just touch upon the dollar and, uh, I think you obviously, you and your viewers and our clients certainly have come to know us as being, um, very much proponents of hard currencies, especially precious metals for the big picture forth-turning, big cycle kind of, uh, phase of the market and global cycle that we're in right now. We remain, you know, very much long-term bulls on precious metals. We'll talk about precious metals in a moment. I'm sure they've been quite weak of late and you could say there's actually been some meaningful technical damage. But, um, here's the thing. I, as bullish and as proponent of we have have been, uh, for for dollar debasement type of of positions, we never consider an either or. It's an and, right? Um, our clients are real people that live. They got to spend. They, they live in US dollars. Um, so that's the first thing I want to make very clear that, um, this is not an environment, uh, now or never, frankly, that it's either or. Um, look at, look at the, uh, history of global reserve currencies. You know, it was, uh, Dutch, it was, um, Portugal, it was Spain, then France and Great Britain, and most recently US, and arguably the US dollar is under attack and maybe will be supplanted in a, in a more meaningful way at some point. But all those currencies still exist. I granted the euro has has risen for for many cases, but the British pound doesn't cease to exist. It doesn't cease to have utility in the daily lives of, of Brits, right? So, it's never been about, uh, anti-dollar for us, nor do we think it should be for most investors, but it's about the and. And George talked about the cyclical swings, uh, that it's, it's, you know, there's a, there's been a quite a range where, you know, the policymakers come in and defend it for the big picture reasons that he's talked about. So, we have seen a recent, um, surge in the dollar and I, I can certainly share some charts in that, but and, and in a vacuum, things like precious metals have struggled, but it's never been about an and or, uh, neither or, it's, it's been about an and, right? Um, you know, one thing I want to, you know, we just, we're recording this on July 1st. I think, you know, we're not big calendar year, you know, days of the calendar year kind of, uh, milepost folks, you know, we don't keep score by the end of the year or mid-year, but it's something that obviously is in the media. So, I thought I'd just share a quick chart just to kind of take a little scorecard for where we are in markets. Um, this is a chart that, uh, Bloomberg and the World Gold Council put together, just showing the returns of different asset classes over the last 12 months and they broke it into the second half of 2025 and first half of 2026 as as shaded. Um, so you can see that some of the themes that have been playing out over the last year have been rather persistent. Look, for example, non-US stocks, both emerging markets and developed non-US stocks, that that has been a trend that has been very strong, uh, last half of last, second half of last year, as well as this year, both, both that, you know, this year included, been very strong, even stronger than US. So investors should be thinking the US market is not the only game in town. It's the most overvalued market on the planet, but it's not the only market in, in, only game in town. And we actually have, uh, of our 50% equity weighting right now in our core portfolio, we have, uh, 20% uh, 20 of the 50, or you know, 30% in US, 20% in non-US. We have a meaningful allocation to non-US. So the first thing I think investors should be asking themselves, if you're not, um, outside of the US, uh, stock market, why not? And what kind of systems are you using to kind of give you, give yourself a guidance in that regard? Uh, gold has has been still over the last year, one of the best performers. Now, of course, it stands out like a sore thumb that it, you know, first half of this year, it's been a negative performer, uh, as compared to all these other asset classes. Um, so commodities still have been a very strong performer, even with the pullback in, in oil, the pullback in, in, uh, in gold. So, just wanted to kind of zoom folks out. There's a lot of noise in the day-to-day. Um, and, you know, as, as much as we are, um, certainly acknowledging that that precious metals, gold has has suffered some technical, uh, damage. This, this chart was put out by Sentiment Trader. Uh, it's basically a look at the seasonality of gold. This goes back to 2005 and we're entering the phase of the year which historically tends to be strong, seasonally strong for gold, precious metals. Uh, 71% of the years in that time frame have been positive during that, that period. Now, I'm not a big fan of averages because there's always the, you know, outliers from the averages, but it is a factor that I think, uh, is is something to to keep in mind. It's not the reason to enter gold right now or or stay in it, but it's one factor that that is, um, that is, uh, relevant. You know, let's talk about the, um, I remember we did a video, uh, with you to follow up, Darius Dale, Adam, back, I think it was maybe a couple months ago, and we, we both had concluded that our systems, as different as they might be, um, you know, went on a major bullish signal, um, in early April. The, you know, here we are, we just finished the quarter, second quarter, and pretty much the whole quarter has been a very much a risk-on in the stock market, anyways, kind of environment. Now, there's been some sectors like semiconductors and AI that, uh, you know, have have stolen the show, so to speak, at least in the headlines, but it's been a very, very strong broad market. And we'll talk in a moment about some broadening, um, but, you know, I want to talk about, you know, where we are. This is, this is actually a chart that, um, was put out by, um, Yardeni, Ed Yardeni, who you've had on your program, and it basically shows the, um, five-year, um, forward consensus, uh, long-term earnings growth, uh, forecast by the consensus. And it's basically the P, the annualized percent forecast for earnings growth. This, as of June 18th, um, the consensus was projecting 23% year-over-year earnings growth for the next five years. It doesn't take, uh, you know, a rocket scientist to see how much of an outlier that is on this chart. Here we were in the tech bubble, and if there's one takeaway in major market tops, it's always, almost always the analysts are are uber bullish about the earnings prospects. It's the story. It's why this time is different. And there's all kinds of rationalization, but in, in whatever manifestation that that holds, it always has some element of projecting just runaway earnings to almost to support the the overvaluations or make them feel like they're not as extreme. So, we, you know, we very much are in the camp with, I think George and others that, you know, we are in a very, very extended market, very overvalued, and there's probably a lot of, um, ill-placed opium in not only the valuations but in the underlying fundamentals, the earnings that, um, that underlie these forecasts. You know, I'll, you know, some of the hyperscalers like, uh, Microsoft had one of its worst, I think, quarters or halves since the 2000. Um, you know, this is interesting because the whole franchise of these, these MAG 7s was all about they had their own moat, you know, whether it was search or, uh, web services, or they each had kind of their own moat, almost almost like a monopolistic moat. And now they're all chasing after the same, you know, holy grail of AI, right? And what that speaks to me is is what used to be a moat supporting these, you know, defensible companies is suddenly they're all swimming in the same pool that's ultimately going to be a commodity as prices come down for, um, tokens and, and, um, you know, it really, I think, just compounds the the likely error in, in such hopeful forecasts for for earnings.

I, I guess I, before you pull that chart up again, just for a second. Um, I, I think it's a really interesting chart. One, for all the reasons that you're mentioning, right? Like this, it shows here that we're at an extreme. In fact, we're at the greatest extreme in this data set, which goes back, what, 40 years?

85. 1985.

Um, so, uh, you know, that in itself says, hey, probably a time to, to be cautious, as you were saying. But I want to point out the shading here, the pink shading versus the blue shading.

Mhm.

Um, so the pink shading are the bare markets and the blue shading is the, um, uh, corrections. But basically, look at the pink shadings.

Um.

Uh, presumably everything that's not pink is a bull market for the S&P 500, right? Um, so a lot more white on the screen than there is pink, right? And I want to contrast this with a chart that you put up recently, John, a different prior interview,

Mhm.

which showed the periods of time that were bare markets and bull markets, um, for the S&P 500 over the past century.

Mhm.

And when you add those up, it's about 60% of the time it was in bare market. Right. And so we've just had this, the reason why that feels so strange to us is because in our, in, in recent living experience, and by recent, I mean the past couple decades, or you could even say the past, you know, 30 years here, um, bare markets have been pretty rare. And so we've kind of gotten to this point where we just assume they're going to be rare going forward, where historically they've actually been the norm. And if there's a reversion of the mean in that data set, which there should be, just mathematically, um, we're probably due for more of these these pink shaded sections going forward, and probably longer ones than we've had here. Um, and that's just something I want to make, make people aware of because again, most of the viewers of this channel are 50 or older.

Don't just assume that the past, the next 25 years of your life are going to look like the past 25 years here. They may have a lot more pink in them.

Yeah, Adam, just, uh, your point is very well placed. That chart that you're referring to is a chart that GMO, Grantham, Mayo, Van Otterloo, put out, and it basically was, uh, what they described as lost decades from a standpoint of an inflation-adjusted return for a 60/40 stock bond portfolio. And 60 to 70% of those years going back to 1900 were in fact in these lost decades. Now, to be fair, uh, those weren't synonymous with bare markets, but the bare markets that happened within those, those decades, so to speak, were so damaging that they, they caused the lost decades. So, for example, in the last decades from 2000 to roughly 2010 or thereabouts, there were two huge bare markets, the tech bubble and the housing bubble, right? The, the two ones you can really see on this chart. Yeah. Each of which, you know, it was only the tech bubble was essentially two years, almost to the day, I think, March of 2000 to March of 2002. And the housing bubble was, um, October peaked to trough, October '07 to March of of '09. So, not, you know, maybe 15 months, so those, not even 48 months of that 10 years were the bare markets, but they were so damaging that it made the whole decade essentially a lost decade. Um, they're usually pretty acute. They feel like they're forever when you're in the middle of these bare markets, but they're usually pretty acute enough so that, uh, it could really wipe out years, if not decades worth of of progress. So, they're, they're nothing to be ignored, is another way to put it.

Okay. And, and thanks for clarifying the last decade versus the bare market, but, but the, the message is the same, which is a lot of shareholder wealth gets lost or just doesn't grow for a very prolonged period of time. And most people who are watching this who are 50 or older,

Yeah.

I don't think they can look, I don't think they're looking at their personal situation and saying, "I'm not sure, you know, if that were to happen from here, I'm not sure if I'm going to be able to hit all my retirement goals as a result." And, and just because you mentioned GMO,

Uh, the founder of that company, or one of the founders of that company, um, uh, Jeremy Grantham, um, legendary, uh, investor, kind of right up there on the level of Buffett. Um, he doesn't do too many interviews and folks just know I have been trying for years to get Jeremy on this program. I have been able to get a few folks from GMO on and we'll continue to do so and I'm going to continue to go after Jeremy. But he has come out relatively recently and given a couple of high-profile interviews and I don't know if you've watched him, John, but

Yeah, Adam, and I, I'm glad you raised that. I saw him on CNBC last week, right? And I think this is, uh, important in of itself. Not just that he came out and gave a, a pretty long interview, but he absolutely got raked over the coals by the the anchors of CNBC. It was a very, let's pounce on Jeremy because he's, he's an uber bear. He's been impossibly bearish through this amazing rally since the GFC. And it's, there's some truth in that. He's, his, his value-based discipline has been really out of favor, right? Um, but I think it's also a sentiment indicator as

To how how ridiculed he was, uh, by the the the hosts. And and that very much might be a a marker of closer to a top than than anything else.

Yeah. And and he's and Jeremy is is acknowledges that, but but has been through a number of these cycles where he says, "Yeah, you know, you you you look wrong until you're proven right." And uh he said, "Yeah, to a certain extent being early is is being wrong, but but at the end of the day, missing out on the crazy party, but maintaining your capital and having that dry capital to deploy after the correction, he says, way more than makes up for chasing the the mania."

Yeah, Adam, let me while I while I have you, I'm going to bring up another chart. This is Bank of America put put out just recently their um they've got these 10 factors that they check the box as to major market tops. And you know, basically the the the punchline here is seven out of the 10 of those major factors they look at, and some of them are sentiment, some are valuations, some are macro, seven out of the 10 are are checking the box right now. And you can see some major peaks here, the, you know, July of 1990, the tech bubble peak, the housing market peak, you know, the Jan 2022 peak. You know, 2022 was a very bad year in markets. Um, you know, we're we're firmly in the area, at least on on these metrics that, hey, the ingredients are in place. Doesn't mean it happens today or tomorrow or anything like that. But the ingredients are in place. And it hearkens back Chuck Prince, you know, you know, dance while the music or dance while the music is playing, but stand really close to the exits. Um, we're we're we're there.

I will note that, you know, it's interesting that some of the sentiment indicators that typically we'll check in some of the major major u you know, market peaks are not present right now. So you might say that, and this probably speaks more to the K-shaped economy than anything, Adam, that right. You know, there truly is reason for negative sentiment. It's not just the wall of worry that so stock market needs to climb. It's like there's a bifurcation in our our our society, and I think that's what that's saying more than anything.

Right. And sorry to interrupt, but but the day we're recording this, a few hours before I released a video with Stephanie Pomboy where she and I talked quite a bit about whether sentiment indicators are as as useful today as they've been in the past. Um, because there's a lot of there's a lot of mud in that water. Now, to your point, John, you've got the two extreme ends of the K that have very different sentiment, right? Um, and then also you've got a lot of methodology issues with a number of these indicators, you know, particularly with like the University of Michigan. We're just like people aren't responding to it the way that they used to. The sample size is collapsing. There's a lot of partisan bias in there. They're there certainly haven't acted as leading indicators like they used to over the past couple years. The the leading indicator ability is really diminished. So, I would take those ones on that chart of BFA with a with a fairly decent grain of salt because I'm not sure they're as effective as they were.

I agree. I agree. And, you know, as as many of these boxes are checked, there's there's there's also some really encouraging encouraging rotation going on in markets. You know, uh, we we kind of poked fun or a little bit of holes at the opium in in the whole AI trade and the earnings forecast, but, you know, we're starting to see some really meaningful um relative strength in small caps versus large caps. Uh, and and these are the kinds of things that guide how we tactically allocate for clients. It's not just buy the S&P and and call it a day. It's try to pick the areas of the market that are showing relative favor or disfavor to either overweight or underweight. But small caps have made very meaningful um progress relative to large caps. No one's really talking about that. On a sector level, um, financial stocks have been pretty much the lagards or financials and healthcare, for example, had been lagards the second half of last year into this year, this year, and we've seen a tremendous rebound in relative strength in in both financials, especially banks, not not necessarily Wall Street money money center banks, but regional banks. We actually added a a sector uh holding in in um regional banks a few weeks ago. Uh, so banks have started to perk up. Um, healthcare has made some very notable uh progress. We have a allocation to biotech, which has been super strong, almost a little too strong, too quick. Um, but even places like, and this maybe gets a little bit at odds with I think George Gam talked about commercial real estate maybe been one area that continues to struggle. Um, we're actually starting to see some early improvements in in real estate. Um, I'm not talking about housing necessarily, but commercial real estate. Too early that we, you know, we haven't seen enough of our weight of evidence to say, hey, time to allocate to that, but, um, it's important to keep an open mind and realize that there's a broader landscape there, not only outside the US, but also you don't have to be in the semis, you don't have to be in all the things that the the news is talking about every day.

Right. And this is, I mean, something that we've talked about a lot in the past, but, you know, the fact that we are likely entering an era where active investor investing is going to deliver superior returns to to passive investing. And there are a lot of green shoots like you're talking about there in some of these other sectors, many of which have been long kind of beaten down. You know, small caps being a great example. But, um, you know, I I will say I'm still quite nervous about the collapsing breath of uh the trade that has powered this market higher, right? I mean, it was really kind of the whole MAG7 trade that carried the markets for many years. Now they're starting to slouch, but within that AI sector, the torch has been passed, you know, to the semis right now, which have been white hot. And so they've kept the market propped up. But in the best case scenario, that's a very cyclical sector. At some point, it's going to rotate down. And there's probably a ton of froth in there right now that also needs to come out.

It's cyclical, always has been, but there's pundits out there saying they're no longer cyclical. They're they're now basically a public utility.

Which is what you hear, right? This is the kind of stuff you hear at the end of these things. So, I'm just wondering like, you know, look, if if you're you're eventually you're going to run out of people to pass that torch to. And so, you could have that sector go undergo a big correction that would bring the indices down with it just because these companies make up such a huge percentage of the the indices. But even with that going on, you can have other parts of the market do well, right? Like some of the sectors that John just mentioned. And so folks, I think this is again why um, you know, an active approach certainly has the potential to to do well even if there's a general market correction that ends up happening at some point this year.

Um, okay, uh, we got to start wrapping it up here. I do want to note just to your point, John, um, I was just listening to uh uh one of the White House economic advisers talking about how um they are we are building a record number of factories in America this year. So he cited the sort of 19 trillion of foreign commitments uh of bringing capital into the US, which, you know, these sort of trade deals have been trying to secure. I don't know if that 19 trillion is all going to materialize, folks. But certainly there's enough of it that between US producers and foreign investors. Um, we're at a point here where we're building the most number of factories that have ever been built in this country. And that is a good thing for the economy. It's a good thing for jobs. And it's one of the reasons why I still right now, barring some unforeseen, you know, catastrophe like things going kinetic again with Iran or oil prices spiking back up. Um, or a big market correction. Um, it's why I still think that the odds for GDP growth are to surprise to the upside this year. Um, and we'll keep tracking that going forward. Just a caveat again, economic growth and market performance, while they tend to be quite correlated and they have been for a good long while, they don't have to be. And so my scenario doesn't necessarily mean I think the stock market's going to have a barn burner end of the year, uh, if the if the overall economy still surprises to the upside.

All right, with that being said, Mike, let's come to you. Uh, if you don't mind, let's do a quick check-in on the precious metals. You know, John had put up there that chart that showed that we're entering what is typically a seasonally strong uh position for gold. Um, but I I I'm particularly interested to hear your your thoughts here on the latest technicals because uh Stephanie and I in in the video that just released a few hours ago, we both are becoming increasingly optimistic uh about gold's prospects here. And um, some people potentially even me have been starting to say I think I think the bottom might be in here, and I'm curious if you think so. Bottom calling is very dangerous, but uh curious to see what you think because I know you were you were still pretty nervous last time we talked.

Yeah, bottoms are a process. You could tell if I'm a little nervous. Um, not that I'm nervous, I'm just acknowledging that it's a long long drawn out base here. Um, there's there's some constructive stuff over the last week. The best thing I can say uh versus when we talked to you a week ago, Adam, is that nothing worse has happened. We haven't continued down. That that's for sure. I'm going to show you a chart here. We've basically got three waves down, three moves down in gold and silver. Silver is a little worse than gold. Silver's down. I mean, gold's down maybe um, I think it was 28% something like that, close to 30%. Silver's down almost exactly 50%. These are big moves, but not unheard of in the context of of history. There was big down moves uh before. In gold we or silver I should say is a bigger down move historically between '72 and '74. I think silver lost half, but then went on to to have huge move later on. And then during the great financial crisis too, we saw almost, I think, almost a 50% decline and then a big move up into 2011. So historically, there's not a lot of examples, I admit, but historically, it's not completely unusual. And I think the thing that's really concerning a lot of people is they don't know. Go to the monthly chart on gold here for a minute. They don't know if this pullback here is the top or if it's a 2011 or or or if this is a if this is a 2011 moment, i.e. the top, or is this just a healthy pullback within a big bull market? I think it's probably a big pullback and a healthy bull market. But the problem is you don't know until it's over. You just don't know until it's over.

Let's take a look at the daily chart here, which I just had up. So, gold has just been down, down, down, down, down. We have three waves down. It's under the 50 and 200 day moving average. Depending upon which moving average you use, if you use the simple moving average, I think it just registered a death cross, the 50 over the 200. I think I just read that yesterday. These are exponential. Didn't really register a death cross yet. And normally that would be a quote unquote bad thing. I got to tell you though, there's so many of these technical indicators that don't really work anymore. Back in the 70s or 80s maybe, but uh a lot of times the market will just kind of ignore those things and in reverse or have all kind of psychological reverse moves and things like that. The only thing that matters is price. The moving averages don't matter that much. Price. So, here we are just walking along down here and look what's happened over the last week. You might call a lot of people call that a bear flag. Okay, I guess it could be a bear flag if it breaks to the downside. It's almost agonizingly slow in both gold and silver. And I can tell with the people that we're talking to that they're getting tired, too. Um, you know, you just really have to punish the latecomers here and you have to question the resolve. And so there's some element of belief in here, which is a very dangerous thing, I guess, in investing. The word belief or faith or hope, all of those words. All I can say is if you have the right percentage or the right allocation, just sit with it. You know, if you sold some a little bit on the way up, that's good. If you didn't, that's okay too, as long as you have the the the proper allocation, 10% maybe, maybe up to 20% for some people that have a higher risk tolerance. So there's gold. What we really need to see is it move above this blue line, get back above this breakdown.

You know, and that would be about Oh, what would that be? That's about uh $100. $100 $125 higher in gold. I think we're just about 4,000 here on spot. So maybe 414,200. We'll start to question whether or not we're starting to see some healing and some repair. I'm almost afraid to really call it that right now until we get a big follow-through day. You want to see a big big up bar. You know, there's not a lot of them on this chart, but you want to see a big move. Doesn't have to be one day, but maybe over a couple days. And then just go into silver really quickly. Looks similar, but more severe. Here's this downtrend that this line that I've been hoping that silver would get above. It just hasn't. It's been walking below it. And then two weeks ago there was the gut shot really ripping people's hearts out, I think, based on on conversations we've had and and just sentiment out there was really bad in this last leg down. And it has this little handle up just like gold does. It has to get above this this line, which is 57 SLV, maybe about 65 spot, and above this downtrend. So, I hope when we talk next week, it'll do that. But watching cautiously because I don't want to I don't want to call it because it's this this particular chart has humbled a lot of people, including me. So, you know, just don't want to be overexposed. I still believe we're going higher, but I believe we're still at one of the biggest biggest historical examples of a pullback that we've seen that has then subsequently gone on to an all-time high. So we can breathe easier once we get above here.

So when it comes to New Harbor's positions and precious metals related instruments, are you guys holding, accumulating, or selling at this point in time?

We're holding. I mean, about a month or so ago, we trimmed slightly on some technical breakdowns. We were at 12.5% in our in our allocation between miners and metals. We let 2.5% of gold bullion go, so we're at 10% now. 5% miners and 5% bullion, and that's split between two uh gold and silver. Two and a half gold bullion, two and a half silver bullion is what our model has. So a 10% allocation is something that we should be able to hold through volatility. Even then, it doesn't feel good when it's down in the dumps like it is right now. And if we if we see further weakness, we may take slight further protective measures. We do have a fundamental belief in this group. So, I don't really think that we're going to um uh substantially reduce this this this bucket, if you will, but maybe trim it a little bit. We want to hold on to some piece of it for the long term. We've been holding on to a piece of it for a lot of years already, and that's the major thing or one of the major things that contributed to our success last year. We had a great year. And so, again, it all comes down to this. Is this was that the top? Is it a 2011 moment back in January, or is this uh just a real big test and a good time to add if you don't already have it? I think it is the latter. So that's it. We're going to stick with 10% right now and we'll see where we are next week and and hopefully we are we're starting to build from there.

Okay. Not personal financial advice, folks, but I am continuing my regular every 15 days dollar cost averaging in here. Uh, and I'm I'm I'm It's It takes some of the sting off of the price declines that we've had because the upside is is I'm hopefully buying in at a good price relative to where it'll be in the future, which I think will be higher.

Um, all right. U, thanks so much, Mike. We're going to start wrapping things up, but John, I just remembered, let me let me come back to you for the last question here. Uh, George had talked about a pair trade that had been working out quite well for him. Um, where he was uh shorting Lenar, one of the big homebuilders, because he he thinks that the prospects for the homebuilders, you know, haven't been great. Um, but he wanted to um, you know, offset that uh to make sure that if the market kept powering higher that he wasn't just going to be getting his face ripped off and so he would be short LAR but long the S&P. Um, and I I mentioned to him I'd get your guys' feedback on on, you know, say what you want about that specific pair trade, but just pair trades in general.

Yeah. Well, I'll start by saying there are many right or good ways to invest, right? And investors shouldn't feel like they have to be in every right ways to invest. Pair trading can be um a very interesting and decent way to invest. Um, you know, uh, you got to get uh the sides right though, right? There there certainly could be a scenario where, and this is not to you know, criticize George's call there, but theoretically speaking, there's absolutely a possibility that Lenar and the homebuilders move higher while the S&P goes down. In fact, we are seeing some broad technical improvement in the homebuilders, not enough that we would want to add to that sector, but it doesn't look as a broad sector to us that's uh a layup for a short position, right? So uh we generally don't short the market. Um, in fact, I I can't think of any time in in uh recent memory where we've been net short. Uh, there might have been a couple times in our our our long career as a as a business. But that is generally not our prescription to be net short, nor even um, you know, there have been times where we've had pair trades like that, for example, long US or short US, long foreign stocks. Um, but it's important to these are usually thesis driven and one challenge that we have seen in ourselves and and investors that pursue this is a dogmatic belief in the thesis and they tend to get stuck in a trade, right? And again, this is not to to say George is of this type, it's just a general caution about this style. I will say one thing um, so we custody our client assets at Charles Schwab and Schwab and and several of the other custodians, I think Fidelity as well, have um limited the margin um uh capacity of long short strategies. They actually have institutionally some concerns about the proliferation of long short strategies. So that speaks a little bit to the the overall maybe it's it's a little bit too uh uh as a broad strategy being adopted too too easily and and therefore potentially uh ripe for a a contrarian move that that hurts those positions. But um, there there's it's a sound strategy if you have good systematic ways to manage it. If if it's based upon a thesis, I would challenge folks to really check their thesis because that likely leads to getting stuck in a trade when one leg is not behaving or both legs are not behaving like you thought that thought it would. It could be you can get hurt on both sides. It's not always a layup even though sometimes it feels like it. So that's all all I got to say about that.

Okay, great. And uh I'll talk how about people can do this in just a minute, but if you want to get some professional help, folks, in finding ways to manage risk um in your portfolio, um you there's a zillion ways to do it and that's a real key competency of the team there at New Harbor. Um, so obviously if a good financial advisor who's experienced in risk management, great. Leverage their expertise, but if you don't, feel free to talk to an expert like the guys there at New Harbor.

Um, all right, folks. Um, so John, Mike, thanks so much. We got to wrap things up here, but um, folks, if you enjoyed this discussion, the whole discussion, but if you'd like to see George Gam come back on again on the channel in the near future where he's got something else important to update us on, let us know by hitting the like button, then clicking on the subscribe button below, as well as that little bell icon right next to it. We're getting close to our 200,000 goal, but we still need to get there. So, please, if you are watching and haven't uh subscribed yet, do hit that subscribe button. Um, and again, if you'd like to get some professional help from one of the financial advisors that Thoughtfulmoney endorses, it's super easy to do so. You just fill out the very short form at thoughtfulmoney.com. Only takes you a couple seconds to fill that out. These consultations are totally free. There's no commitments involved. Um, it's just a service that these firms offer to be as helpful to as many investors as possible. Thanks so much, John and Mike. Um, interesting times we live in. It's a, you know, a new month. Uh, we just passed the midpoint of the year. Hopefully, we'll have even brighter skies ahead, but no matter what happens, you guys will be here making sense of it all for us week after week. So, I'll see you guys next week.

Thanks, Adam. Great to be here. We'll see you next week.

Thank you, Adam. See you next week. Appreciate it.

All right. And everybody else, thanks so much for watching.