Transcription
I've been doing this for 47 years. I've seen a number of big collapses and I can see one coming now. There are so many warning signs, Michelle. I'm expecting a 40 to 60% haircut to this market. I talked about this in '07-'08. I'm talking about it now. I do expect a rather severe meltdown. The Fed itself has really destroyed true capitalism. As we're celebrating this 250th anniversary, it's worth asking what are we celebrating and what are we at risk of losing here? Is that perhaps the biggest risk to our economy and to our markets that the very founding principles of America are being challenged right here in America right now? We are melting down from within with all these socialists with the great reset. And remember, the wealthy want socialism. They benefit from socialism. It keeps all the competition away from them. If you go back to the constitution, the federal government was never meant to be the biggest employer in the world. We all know that all great empires start to fail between two and 300 years. And here we are. And they don't fail from the outside, they melt down from within. And that's exactly what is happening now. The paper gold market, very much like many other things, are more or less a Ponzi scheme. If it were me and I had fresh cash right now, I'd be buying gold and silver.
This is The Real Story with Michelle McCori. Hello, I'm Michelle McCory. Thank you for joining us here on The Real Story, where we go beyond the headlines, beneath the surface, and behind the curtain to show you what is really happening with money, markets, and power. And if you haven't already, please subscribe to the channel and please make sure that you have your notifications turned on. If you enjoy what we do here, please take a second to check that you're subscribed. If not, click that subscribe button. I really appreciate it. And we're also getting close to a major subscriber milestone. So, every subscription makes a difference here. Thank you again for your support. Now, let's get on with the show.
And the economic outlook in the US is getting more complicated. The latest jobs report shows a clear cooling in the labor market. The US economy added just 57,000 jobs in June. That is well below expectations and prior months have also been revised lower. And at the same time, inflation remains very hot and very sticky with the latest readings showing price pressures at the highest levels in years. So, this puts new Fed chair Kevin Walsh in a difficult position. Markets have been trying to decide whether the Fed's next move will be to stay steady, hike rates to fight inflation, or cut rates if the economy starts to crack under strain. But meanwhile, the Dow has pushed to new all-time highs, and there have been concerns that the AI rally is unsustainable and that a market crash is inevitable as the AI bubble bursts. But could we instead see a capital rotation with money moving out of overheated tech and into more defensive parts of the market? Well, here to break all of this down and more is Todd Bubba Orwitz. He's a veteran trader, market strategist, educator, and founder, and chief strategist of bubbrading.com. Bubba has spent more than four decades navigating some of the biggest booms, busts, and turning points in modern market history. He began his career in 1980 as one of the original market makers in the S&P 500 options pit at the Chicago Board Options Exchange before trading across virtually every major Chicago exchange. And he's known for his direct no-nonsense views on markets, macroeconomics, and investor psychology. Todd Bubba, good to see you. Welcome.
Nice to see you again. Michelle, great to be with you. I appreciate you having me on.
All right, Todd, we've got a lot to discuss, but let's start off with a big picture here because you've traded through Black Monday, the dotcom bubble, the global financial crisis, the pandemic, and now we're in a very interesting and unusual macro environment with AI, a new Fed chair, geopolitical tensions. When you step back and look at today's markets, what concerns you the most and what gives you the most confidence? And let's start on the negative side. Let's start with what concerns you the most right now.
There's so many, there are so many warning signs, Michelle, that but I'll start with the overvaluation of the markets in general. The the the overvaluation of AI, the cost of production, the the taxing onto the American people for to pay the energy bills to produce is AI. The housing market is in a lot of trouble. I think we're we're almost in a potential repeat of what happened in 2008. You know, you now are seeing 0% down for housing. Uh no doc loans once again. So, you know, what does that mean? It means that the housing places have too much inventory. They're willing to give them away and they'd rather pass bad paper than make sure they have qualified investors. So, you have a lot of issues that are really going to I think play havoc with this market. Not to mention inflation is not under control. Uh interest rates are going higher. In fact, I would suspect you'll see before the year is out possibly 6% in the 10-year notes, which affects everything else. And of course, then we have production. We have an overwhelming glut of oil in this country. So, when you think about that, a glut of oil, which oil is about 80% of the overall economy from from delivery to production. If we're not using it and we're exporting more than ever, that tells you the economy isn't very good. And then you tie in, of course, they gave a a ridiculous jobs number out again, but of course with the World Cup, there's a lot of extra jobs being done. I think you're going to find out that if we go farther out in the jobs curve, the U6 unemployment is almost 9%. And if you really look at true unemployment, which is working population versus people working, you're going to see that unemployment is well over 10%. So, those are some real concerns that continue to get ignored. We just saw the Dow make a brand new all-time high. Of course, there's a there that's a double-edged sword, but we can get to that later as well.
All right, a lot to unpack there, but you touched on that jobs number, and that is in fact the the latest data point that we have. The US economy added just 57,000 jobs in June. That was well below Wall Street expectations for around 115,000. And that is a sharp slowdown from May's downwardly revised 129,000 jobs. April was also revised lower, meaning that the prior two months saw a combined 74,000 jobs, actually just erased from earlier estimates. And June's job gains were the weakest of the with the exception of February's weather-driven decline. The unemployment rate, according to the official data, ticked down to 4.2% from 4.3%, but that was mostly because more people actually left the labor force. Uh weakness especially visible in leisure and hospitality which shed 61,000 jobs. You mentioned the World Cup. We did have some related hiring there but that boost has faded. Seasonal hiring came in weaker than usual. Professional and business services, social assistance, healthcare did add jobs, but the overall picture is a cooling labor market. Um, Bubba, this is where the Fed's job gets a little tricky here because on the one hand, we've got inflation still running hot, the latest reading at a three-year high. Kevin Walsh has been sounding hawkish, has made it clear that inflation is a burden for the American people. Now, we have this jobs report. What do you think this means for the Fed? You said you see the Fed hiking.
I do. I think that they first of all, they have to hike. You know, if we go back in history a little bit, Ben Bernanke destroyed the Fed. Alan Greenspan started the bubble building. Bernanke, especially with the his decision in '08, destroyed the the average American. And of course, Yellen kept it going. I think finally you might have a guy who's got some cooler head here, Wars, which I think his initial press conference was very solid and very good, but he clearly stated that interest rates need to rise. And I agree that they do need to rise because of inflation because we've built an economy almost like a house of cards. We don't have a we have a K-shaped economy which means that the the people that are prospering are getting less and less if it looks like the design of a K. The the problem is is that the worker, the average American is not working. And those jobs numbers that you were quoting, I know you're reading just what the numbers are, but they're totally ridiculously wrong. Which is why every month you come out, you see a revision. And if the month before was good, it gets revised lower. We have a real problem because there's many, many layoffs that continue, you know, between Meta, between Amazon, between uh other companies, and we have, of course, small business drying up. The entrepreneurial spirit is really no longer affordable for somebody to try to go into business for themselves. So, they're really destroying the overall middle class and they're not being able to benefit. And the only way that we can see some change is to get some price stability and and reduce the the actual price of goods. And the only way they can do that right now because of what they've done to get here is to raise rates, take the big hit because it's going to be a big hit when they when rates hit six percentage, which I think they will, that's going to be a big hit to the market. And I am expecting at some point, and I I can't give you an exact timing, but I am expecting a 40 to 60% haircut to this market. Okay? So, when that happens, it'll it'll they have to bite the bullet. They've really, the Fed itself has really destroyed true capitalism because the free market of interest rates tells you that the Fed's interest rate is too cheap. It only allows the banks to bank money because what we're talking about when we talk about the Fed funds rate so everybody understands that is only the money that the banks borrow from the Fed. What the banks lend to you at, they're now making a wider spread and making bigger profits. So, not only do we get the privilege of bailing out the banks when they fail, now we get the privilege of paying them a lot more money because just because the Fed funds rate comes down does not mean the interest rate that you're going to pay, the mortgage you're going to pay, the car loan you're going to pay is going to come down as well. So, this is a problem that was created over the last 40 years. Hopefully, we have to bite the bullet and get back to true capitalism because if you look at interest rates at like peer-to-peer lenders, Prosper, Kabbage, those lenders, they're well north of 10% for the average loan. So, think about that. Farmers are paying north of 10% because they're risk capital. You have to bite the bullet, let those that can't survive go out and have hopefully new business will come and replace it.
Okay, Bubba, I don't necessarily disagree with the sentiment. I don't even necessarily disagree with with the facts. Uh I'm pretty sure that the data that we're getting on employment is not accurate to put it mildly. But let me push back on this. Can the Fed actually afford to raise rates considering we have all this debt that needs to be serviced? I mean, just servicing the debt alone at $39 trillion is uh more than the annual defense budget. So the thinking is that they can't afford, we've got fiscal dominance. They can't afford to raise rates and yes, it's nice that Kevin Worsh has come and made some big statements and he's got these task forces that are going to be looking at things including the data and he says price stability, you know, is is the objective here. Uh but at the same time, he was a Trump nominee. President Trump has made it very clear that he wants rates cut. Now, technically, the president should not be telling the Fed what to do, but uh I don't think that Kevin Walsh would be in that position if he was adamant about raising rates. Uh there's also some speculation that he's going to come and change the way that inflation is calculated. He's come up with this new theory which takes out the the spikes and could reconfigure inflation, you know, to to look a lot better, allowing the Fed to justify a rate cut. I'm not saying that's what they should do, but you really think that given all of this, the Fed will actually raise rates? Wouldn't that just break everything even if they did that? Even if that was the right thing to do and we bite the bullet and maybe it helps with inflation, doesn't it not only impact the sovereign debt, but also all of the levels of debt funding on the economy right now? They can't take that level of stress. Do you really think that's going to happen?
I do. Look, I again I'll go back to and I and I understand all your points and I agree, but I'll go back to that you know you want to get out of debt then get then reduce the budget. Quit spending and giving away so much of the money. I mean, there's there's a real point when you look at the overall picture. We can't borrow our way out of debt. We cannot tax our way out of debt. We can't lower interest rates out of debt because if they lower the rates, what what does that create? It creates more borrowing because rates are cheaper. The real problem is in government, you know, government doesn't make anything but debt. Whether you're a Republican or a Democrat, they all make a lot of debt. And somebody's got to step up and say, "Cut the debt." And the only way to solve this problem is to let a number of businesses go out. You know, again, we go back to the Fed funds rate. The Fed funds rate, if you look at the calculation that's being priced in at the Chicago Market Exchange, there's a 70% chance that there's going to be at least one to two rate hikes this year. And I can completely agree with it because we're led down a bad path of what is really going on. And including President Trump, and I'm a fan of President Trump, but him telling us that the economy is great is is total a total bunch of hogwash. The economy is horrible for the average American. The average American is struggling. We are losing jobs at record paces and they're not coming back. The jobs are being replaced by AI are never coming back. And that's another problem that we have because yes, this is like an industrial revolution, but the industrial revolution that we had initially was one that anybody could participate. AI and technology is not one that anybody can participate. So those jobs are gone. Those people aren't going to work. And of course, the unemployment number doesn't count people who stop looking for work. So we have a lot of problems that bring that out. And I think the only way to get to true capitalism is to let things fail. Okay? To bail out of the banks in 2008 was ridiculous and silly. And I think that it it was it was a bad idea. You want to bail out somebody, you bail out the depositors, not the banks. Because I guarantee you the banks are going to run into the same problem once again. They're overleveraged. And now with these zero do loans again and everything else, they're going to be much further overleveraged. And we're going to get that same speech. We get it all the time. How strong are the banks? I don't think they're very strong. We the the stress test is fine. They can tell me that they're strong, but when I we'll see the real numbers when we really get a market collapse. Let's see how the banks do then. Very much as in '08. And listen, I can go back to the 1987 collapse. The same issues occur. Too much debt, too many problems, not enough of the right action.
Again, I don't disagree with the sentiment. Right? I don't disagree with the approach. I am just pushing back on whether this is something that they should do. Yes. But will they do it? That's a whole other conversation. Before we unpack that and and your forecast for the market, you mentioned uh housing that you see housing as a problem. Now, we've been hearing AI bubbles. We've been hearing private credit as issues of concern. Um, we did have one guest, Eddie Doubt, who did mention that we're going to start to see issues with the housing markets earlier this year, but what are you seeing in the housing market that leads you to believe we could have a repeat, as you said, of '08?
Well, I I for example, I live in Las Vegas, which is a very hot area of growth or was. Now, in Las Vegas, they're offering zero down payment. They're offering no stated income, not proven income. You're seeing that in Florida, which has seen a big problem, and in Texas, okay, and in Arizona. And those are four very advantageous states for taxes. So when those things start occurring, when you the reason that people give you, for example, in a stock, the reason they give you a bigger dividend, the reason that they give you 0% financing on cars, the reason that they give you a deal on housing is because they have too much inventory and they're trying to reduce their inventory. So they're trying to get rid of the paper and pass on. They don't care if it's good paper or bad paper. Somebody's going to end up eating it. But at the end of the day, those are as clear of a warning sign as you can ever get because they are telling you that they're over inventoried, which is why they're making deals and why prices are starting to come down in the housing market because of all of those reasons. So to me, that signals another big warning sign. I talked about this in '07-'08. I'm talking about it now because it's it's almost an instant replay because we're too fast and free with the money and that's partially due to the Federal Reserve because if Wars changes policies and I hope he does because if we look at when the Fed started the Fed and the Model T started the same year, 1913, right? Look at what's happened to cars. The Fed is still working on their stupid dot plots. So once again, they don't keep up with the cost with the pace and the fact is is they should not be playing with the interest rate market. The interest rate market will price itself. Assets price themselves by price discovery. Buyers and sellers meet at a level and I assure you that nobody's borrowing money at three and a half%. And other than the banks are borrowing from the Federal Reserve. That's the only ones we're getting that kind of rate.
All right. So let's focus on what you said about the the equity markets here. You are warning that there could be a 40 to 60% well it's more than a correction but uh a pullback, a dump, a tank. The markets could tank by 40 to 60%.
Is is that a warning? When do you see this happening? What is the trigger here?
I'm sorry. You can't time that. I'm it'll show up right. What's going to happen? You know, I think it's starting to show up now. Okay. First thing we're seeing now is we're seeing more strength in the Dow Jones Industrial Average. It's really not industrial average anymore, but that is more still considered the safer index between that and the S&P. Although the S&P is bigger. So, you've seen the Dow made a new high. The S&P is struggling. But now, they're still high. Again, they're still going up. It's not like we're having a crisis. But you weigh in all of these things that are going on. You take in the massive amount of debt from the from the people. Forget about government debt. Now, let's go to the people. 14% of Americans are 90 days past due on their credit cards. Okay? 7% are in default on their car loans and 6% are in default on their home loans. That is not a pretty picture because all that's going to happen there is it's going to get worse as more people lose their jobs, as more AI takes over. So, not only do we get the pleasure of paying higher utility bills because the cost of electricity is going way up, you know, when Bitcoin came out, they all cried and moaned about how much power and energy it took. Well, AI at this point takes a hundred times the power that it took to to to mine a Bitcoin and grows every single day. So, it's it's not good. It's good in concept, but right now in the given time, it is costing Americans and people around the world too many jobs. And how are the people going to feed their family? Are we going to go into government? Is there going to be universal basic income coming down the road? Those are not good signs for for growth or for capitalism or for the American people.
Before we continue my conversation with Bubba, just a quick thank you to you for watching this channel. Please subscribe and please share our content. I really appreciate you helping us grow this community. And a big thank you to my partners at Miles Franklin Precious Metals, one of the most respected and trusted names in precious metals for nearly four decades. If you're looking to diversify your portfolio and protect your purchasing power, Miles Franklin has a team of very experienced advisers and brokers that can help you evaluate your options and make informed decisions based on your individual goals. So contact them at info@milesfranklin.com. And now back to my conversation with Bubba. Uh definitely not a fan of universal basic income and and I hear your concerns about uh the the impact here on the American people and there is a growing view that the market has become too concentrated in AI and in megacap technology and that much like investors piled into stocks in the late 1990s or meme stocks or crypto in 2021. Um, there's an argument though that as capital has flooded into these companies and the AI trade, profitable businesses across sectors like financials, healthcare, industrials, consumer staples have largely been overlooked. Um, you mentioned the Dow Jones, the Dow Jones Industrial Average did just hit another record close even as the NASDAQ is lagging and semiconductors continue to come under pressure. Um, but the thinking is is that we could be seeing the early stages of meaningful rotation out of AI and into those neglected areas of the market. Um, you know, does does a broadening market perhaps make you less bearish or do you still think that the broader index is vulnerable because of valuations and debt on rates? Like if this is a rotation, right? Um, is it potentially averting a crash? Uh, maybe a a decline, a major decline in one sector, but averting an overall crash because the capital is rotating into another sector. Or do you think this is simply another head fake before a bigger broader sell-off? Anyway.
I think it's a bigger head fake. Let's look at it the the big picture. The whole market was driven by the mag seven. Okay, we got to these levels based on that. JP Morgan and a lot of financials participated, maybe not at the same level, but many participated. But what you've started to see when the weakness comes, okay, it comes and it comes in big waves. And as these AI, you know, Nvidia is now starting to be in a little bit of trouble. It's down about 20% or 25% from its high. A lot of the lower-end AI companies that were big benefits that were up, they're down 60 or 70% from their highs now. When the margin calls come, when the bill comes due, and people are forced out, which they will be, I believe, as as always happens, they sell everything. Okay? And typically, unfortunately, for most investors, and you know, I I can speak from both sides because as an investor, I'm prepared for a 40 to 60% haircut because I'm hedged against my overall portfolio. I am always 100% long and invested in the market, but I am also always 100% hedged using derivatives so that I know that in any given period of time, the max risk I'm taking is 5 to 6%. But as a trader, I want I can't wait to find a good level to get short this market because I do see this coming. I watched it happen. I watched it unfold in '87. I watched it unfold in '01. I watched it unfold in '08. And the same warning signs are unfolding now. But it's not going to be a one-day wonder. What you're going to see is you're going to see suddenly the NASDAQ flying along and suddenly it drops a thousand points in two days. Now there'll probably be a rally maybe tomorrow with that half a day. Uh we're not going straight down. You know, those days of the the 1987 collapse don't happen anymore because of circuit breakers and because of market hours. And of course, we're extending market hours again. And in fact, in September, they're going to go to 2:45. That's to smooth out the volatility. But you'll see the panic as we saw what happened with gold and silver, right? When the market started to sell off and gold and silver were charging higher, suddenly people needed to meet margin calls and they panicked out and sold their gold, sold their silver, and gold took a 30% haircut. Silver took a 50% haircut because people search for money because most people that trade in the markets are overleveraged to begin with. So they have to search for places to sell to hold off those margin calls. So that that's one of the reasons that you'll see part of it along to go along with a very economy that's in very very bad shape in my opinion.
Again, just to play devil's advocate here. Um, what about the whole mentality of, you know, buy the dip? I get that leverage brings a lot of positions down. I get that when it's a massive sell-off, you have to liquidate. That's bad for everything, including your safe havens like gold. But what about this mentality that we have? The market tanks, we buy the dip. You mentioned at the top of the show how the Fed has distorted markets. Uh the Fed put arguably started with Greenspan when he stepped in after that October crash and provided liquidity to the markets. Markets have come to rely on that that the Fed will step in and and save the day. Again, I'm not saying it's right, but that is what the markets have come to expect. So, we've got the buy the dip mentality. We've got the Fed put and then you layer on top of that this passive investing revolution. You know, every month hundreds of billions of dollars automatically flow into index funds, uh, through 401ks, through pensions, through target date funds. They're not even looking at what they're buying. It's just an automatic deduction. They're going into these index funds and and those are weighted. So, it just, you know, keeps going. On top of that, we just had uh, you know, President Trump um announcing that the the Trump accounts are going to be officially launched on July 4th. That's giving what $1,000 to newborns in the Trump administration and they can only invest in um funds tracking low-cost index funds tracking the US stock market. So that's added liquidity just going in there. So again, I'm not saying that the fundamentals aren't pointing towards uh what should be a pullback, but when you have these artificial factors in place, does that make a 40 to 60% drop in the broader market still possible?
I think almost I would I can't guarantee it, but I would say it's a high probability. Let's let's look at the picture. Okay? And the case that you're making. We have money that has floated in. The stock market has gone up eight and a half percent year-over-year since the inception of time. It has gone up 10% year-over-year since 1950. We've always had this money flowing in. There is money that comes in, which is why the bias to the market is to go higher. And I have no problem with that portion of it. But what's going to happen with all these 401k money and all this money that people that go in blindly, which is great because you should. If you have a 401k and you're not taking advantage of it, shame on you. But what's going to happen when the consumer says, you know what, I could use that 5% money now. I can't pay my bills, so I can't no longer fund my 401k right now. You don't think that's a real possibility? I think that's a real possibility because a lot of people don't take advantage of it to begin with. So now if it starts coming to making the house payment or going to your 401k, you're going to pay the house payment. Otherwise, you're going to lose the house. So again, we talk about the dramatic amount of debt from the consumer side. Forget the government side for now, the consumer side. We already know, the markets already know that what Trump is going to do. They've already priced in what his thing is, which may may account for the the rally in the Dow Jones. Okay? Because that would be the index that he would be more talking about, you know, safer safer beta risk. But at the end of the day, okay, markets have to have sell-offs. It sell-offs are healthy for markets. And when a market is controlled basically by six or seven stocks and you're talking about thousands of stocks, but the whole index is based on six or seven, that is not a very healthy environment and that is really a a bad benefit and and we'll see. Again, I can't guarantee anything, but it wouldn't I've watched I've been doing this for 47 years. I've seen a number of big collapses and I can see one coming now. And that's the way that I'll be playing it, right or wrong.
And that is exactly why we have you on the show because you have had so much uh experience with all of these markets through their booms and busts. Again, my style is just to push back. I'm not saying I necessarily agree or disagree with you. So, if you're managing a portfolio, you got some fresh cash today. What are you doing with it?
Well, I think if it's, you know, if you're if you're trying to go with some fresh cash, you have to I have to, you know, what's your portfolio like? Do you I mean, if I if it were me and I had fresh cash right now, I'd be buying gold and silver. Okay? I'd be buying the physical assets right now because I think they have seen their lows. I think they've come down to that fact. You want equities. The average investor in my opinion right now if you're looking to put in new money to the markets I would use the index funds until we get the wash out that I'm looking at that I'm looking for before I looking at individual names. I think individual individual names can be very dangerous. But if you do do want individual names, certainly tech is listen at some point the QQQ despite my opinion and despite what happened today is going to overpass or surpass the spot, right? So again, we are in the technology era that is what you want to buy. But I think in this given time, if you're going to put new money to work, I think for now it belongs in probably equally weighted between the SPY NASDAQ or SPY Q's and IWM. That's that's what I am putting my money in right now, my new money that I'm investing. That's where I'm going right now. I'm not looking for any individual stocks right now because I do expect a rather severe meltdown. Uh, I I think and again if you're a little bit more of a risk taker, I would look into some of the the Bitcoin play stocks, the Bitcoin play ETFs because again I think that Bitcoin is legit and real as well. I expect that to bounce. But number one, I'd be buying gold and silver. Number two, I'd be buying the indexes. Number three, I'd do a little investing in Bitcoin.
Interesting. Uh if we do see this uh big market crash, does that take gold down with it as as it has in the past?
Probably. I mean, you're gonna money is going to have to come from somewhere. But when cooler heads finally come back and prevail. Remember, let's look at the history of gold. Gold has gone up year-over-year as well, right? It continues to grow. When I first started trading, I think gold was $80 an ounce. Okay? I think the Dow was when I first started, the Dow was 800. Gold was 80, I believe. Okay. So, now we've got gold at $4,300. Okay. Or $4137 right now. Uh we've got a a market that you know is I think found a nice basis. It could go lower. Sure it could go lower. Any market could go lower when listen when there's panic and they're shrieking in the streets, right? And especially today because you have people at home with their own computers that start pushing the button. They want to sell. There's no stopping them. There's no reasoning with those kind of people when they get when they start to panic. We have not had a good old-fashioned panic since well you know a year ago in April you had a two-day panic and then but going back to COVID and going back then back to Black Christmas, you know, those markets all rallied back and I'm not saying that again I I am not expecting it to be a one day I'm expecting an extended bare market that when it winds down very much like in '08 we end up down 40 to 60% from top to bottom before we find a need. Now again, investors should not worry about that. Investors should not try to time the market because timing the market is a foolish thing to do unless you're a trader and you're willing to get out and take your losses. The biggest problem that most people have is they're afraid to take the loss. So, more often than not, they'll hold a bad asset, a bad piece of stock or whatever it is, and sell something that was good to finance something that was bad that they're trying to get even. What they don't understand is that it's the overall value of your portfolio, not any individual issue inside that portfolio. That's what you have to work on. So, if you're going to start to sell, you sell the garbage first and then work your way up the line if you have to keep selling.
And Bubba, another point you made is you think Bitcoin is a buying opportunity right now. Wouldn't that also tank if we have uh a market sell-off? Listen, I I could see I'll give you some numbers. I could see Bitcoin going to $45,000. Okay, it's 62 now. I could see gold still going down. I think the bottom's under $4,000, but I could see gold going down to about $3570. I could see silver going down to $50, but I'm willing at these prices as an investor and as a trader to buy here. I think $60,000 is a pretty good floor in Bitcoin. We got went dipped below it, but we came right back above it and held it. I think $4,000 is a pretty good floor in gold. Again, they could fail. Listen, one thing about investing, it it's the intestinal fortitude and the psychology that people have to take with this. You know, you want big returns. And the only way that you can perform and outperform inflation is to be invested in in an asset that outperforms inflation, which is the stock market or gold. Okay? But nothing goes straight up. Let's let's look what happened with SpaceX when it first came out. It went to 250 like it was nothing and then two days later it was 150. So again, people have to learn to stop chasing the shiny keys and become solid investors. And again, trading is another whole another world. So I don't want to compare the two. From an investor, I think those are good buys right here. You may have to take some heat. And I give I'll give you the exact advice I gave my daughter. She wanted to buy some Bitcoin. I said, "How much you want to buy?" I said, "Take half and buy half now and you can buy half lower because I think it may go a little bit lower or you can buy a little bit more higher." But what's the difference? If it's going to go in your favor, you'll it's it's always better to get involved with the train when it's going in the direction you're trying to go instead of trying to catch the falling knife as it's coming down.
Do you have a narrative that you see puts Bitcoin back into rally mode? Do you have a catalyst to trigger? Is it quantitative easing? Is it more liquidity when the Fed eventually does come in to rescue this markets at some point? What all of a sudden turns things around for Bitcoin?
Well, I think first of all, it's, you know, Bitcoin is more generational, right? It's, you know, old people like me don't really understand it all that well. I understand how to trade it, but I miss the overall narrative when it first came out. But now, many people, especially, let's say, I don't know, under 30, okay, they don't they don't only know digital. They like digital. And of course, then you tie into the overwhelming government debt created by the Federal Reserve. Well, Bitcoin, Etherum, they don't have the same issues that are controlled by government because they're not controlled. Then you add in into it the now acceptance of the government, the acceptance of the SEC into these assets. And now you add one more thing to this Bitcoin story, right? Bitcoin was the first market to trade 24/7. July 24th, guess what's going to happen? Gold and crude oil are going to start trading 24/7.
Okay.
Yeah. Yeah. You you've made my uh transition to my next question for me, Bubba, because that's exactly what I want to talk about. And as you quite rightly pointed out, uh the CME has launched 24/7 trading for its 1-ounce gold futures that begins uh later this month. The Chicago Mercantile Group offering 24 hours, 7 days a week trading not just for gold but also for smaller crude oil futures. The new oil-linked contract uh is set to be one-tenth the size of the existing micro WTI futures contract that will debut August 30th. Um, and trading in 1-ounce gold futures will begin July 26th. I believe the oil and gold contracts will be cash settled and listed on IMAX and COMEX respectively. And the CME says that traders increasingly want the ability to manage risk whenever news breaks, particularly in today's geopolitical environment. So Bubba, perfect question for you because you are someone that has traded commodities, that has traded futures for decades. Does this around-the-clock trading improve price discovery because markets can respond immediately to news? Does it simply create more volatility? Does it simply create more opportunities for speculative trading and perhaps for manipulation? What is your reaction to this 24/7 trading?
As it stands today, I think it's going to create a little bit of more volatility as it stands today. But the the theory and the story behind 24/7 trading is to accommodate Australia, South Korea among other nations, but those are two big players in the markets. And of course, we're open when they're asleep. So if they open, if they access them 24/7, if we get the volume and we get the trade that they're suspecting to get, then I think it smooths it out. The more hours that a market is open, the less overall volatility is involved in the market. I mean, there might be quick bursts, you know, for 20 minutes or 30 minutes, but in general, it's a much smoother transition. You know, when when we go back to 1980, the average VIX or volatility index trading was over 30. Okay, now everybody has a heart attack when it goes over 20. Okay, I mean the the real solid areas between 15 and 20 is still reasonable volatility. So as volume increases, which is why the contracts are going to be so small to start out with, right? You know, 1-ounce gold, 10 barrels of oil. Uh but as they increase and see if they get what they're looking for, you know, you have to remember the exchanges are used to be nonprofit when I started. Now they're for profit. It doesn't cost them any more money to keep them open 24/7. They've already got all the technology in place. So, if it works, then it may make the markets more efficient. It may create more opportunities because I'm telling you, starting in September, more than likely, equities and options will be 24/5 and next year they're going to be 24/7 with options. So, every market will be 24/7.
Is it going to work?
I don't know. And and and I want to get into the other markets, but let's just focus on gold specifically right now. Do you think this continuous trading makes the gold market more efficient? Because you could make the case that it could make it easier for large players to um manipulate prices, push prices around, especially when it comes to paper gold as we have seen some shenanigans from uh the CME uh particularly during thinner overnight trading. Does it make it easier to manipulate gold prices in this paper market when it's 24/7?
I I hate to use the word manipulate because I always yell at everybody who uses the word manipulate. But I understand the point. Okay. Can they push it around a little bit? Yes. But but let's remember let's remember there's two sides to the market, right? Price has to be discovered. So if if somebody wants to push the price down for their own benefit and there's they have to have buyers. It goes down further. Okay? So they're going to have to find buyers. You know, going coming from a floor trading environment, which is where I grew up in, people would walk away if they didn't like the action in the pit. They would walk out of the pit and make the markets thinner by themselves. So, yes, you can have some like you call shenanigans, I think it was a word, but there can be a lot of things that go on, but the contract size is small, which is why they're starting small. And if somebody is willing to push the market way up or way down, somebody else can benefit from that game, right? That that they're doing because it's it's got to take a buyer and a seller to create the overall trade. So we come back to the price discovery and asset classes price themselves. Yes, there are some things you can do. Listen, we did things as market.
Well, what about spoofing? You know, we we've seen spoofing in the metals markets where you create the illusion of uh buyers or sellers out of your own books as
They do it. They do it every day. All you have to do is look at the at the price ladders. You It happens all the time. Okay? That's why the average trader, now we're going to go to the trader. Investor should never look at any of this stuff, right? This is too This is too risky and too much for the average investor. From a trading standpoint, you have to learn how to take benefit of what they're trying to do. Because listen, me as a professional trader, when I was on the floor, we didn't know whose stops were where, but we knew we knew what were about where they were sitting. And not because we were told, you can see the pattern of the market and how the markets were trading. So, you can but you can create the illusion and and it's done all the time. It's done all the time by the big banks. Okay, I will give you one more example. The the big banks used to have a buy broker and a sell broker in a live pit. And the pit was so big that the buy broker would go on one side of the pit if they wanted to create a stir and get people to start buying. But the real big order was on the other side of the pit, which was a sell order. So they were spoofing the crowd to create that action. So this goes back way back in the time and it's no different than the housing market. And you know, listen, people paying over for housing. People are spoofing everything. It's a part of life. It's a part of business. It's for you, the trader, the investor, or the buyer or seller to rank what you see in the market and what you can prove based on what the price action is telling you. Because I no matter what they're doing, the price action of the market is still what it is and it still goes and follows that map of the market, which is the charts that they trade off of.
Well, I mean, again, shenanigans, spoofing, manipulating, you could, you know, all sort of group those terms together. There was a lot of hope shall we say um from some of the metals investors with the increase in uh physical delivery
taking place with the comx and these exchanges, especially with the opening of exchanges uh in the east in Asia. How does this 247 trading picture impact the whole physical delivery side? Ultimately, is this good for long-term gold investors? I don't think personally. I don't think paper gold or paper futures or GLD or any of those are good at all. Okay, from from investing because, in my opinion, there's not enough gold in the world or silver in the world to cover the amount of paper that's written on it. Okay, if everybody wanted to exercise their rights and take delivery of their gold right now, there's not enough gold in the world, in my opinion. I I'm not saying I'm right. I'm saying that that's my opinion. But like many other things that we do, things get a little bit too carried away, and and and the the hope is very much like Bernie Maid off. Okay. The hope is that the bottom never falls out. Well, we're going to find out if people really start to go after that physical medal, and we get a reason to go after it. You're going to find out if I'm right. And I think I believe that I'm right because I think that the paper gold market, very much like many other things, are more or less a Ponzi scheme of just pushing money back and forth because they don't ever have to deliver.
>> Well, I mean, yeah, I guess I guess that's a question if this 247 trading just exacerbates that problem. But, you know, the bigger trend, as you quite rightly said, crypto trades 247, forex trades 247. Uh, this isn't happening in isolation. You touched on this idea that the NASDAQ is working towards 24-hour weekday trading for US equities. Uh that may become 245, that may become 24/7. And if we have tokenized stocks becoming mainstream, well then 24/7 trading could just eventually become the norm, right? So I mean, we're maybe witnessing the end of the traditional trading day. Are markets actually healthier when there's time for investors to step back, digest the information, let emotions settle before the next trading session? I mean, I know you're a big one when it comes to investor behavior. How does this impact investor behavior?
>> As much as it pains me, it's much better for the average investor. It's much better. Yeah. Because the the longer the markets are open, the longer is the liquidity, you you don't get the pent up energy or the pent up fear. You know, think about a market closing on a Friday under pressure. Okay? And you know, there's no trading until well, now in this case, Sunday night, but back in my day, it didn't start till Monday morning. Okay? So, you get all that pent up energy and people were actually lining up at their brokers to sell their securities. When you make the hours longer, okay, you don't get it closed. So people don't have energy. They don't have the time to get as nervous about it. They can think about a little bit longer. And that is also that was the first original. If you remember when we went to the circuit breakers, okay, the circuit breakers were to to say, "Hey, take a deep breath, think about what you're doing here, and make sure that that's what you want to do because we don't need you to panic." And that that's why you've seen a lot less of real panics. I mean, you know, everybody gets excited. Today the NASDAQ was down 500 points. That's only one and a half percent. It's not like it's, you know, in 1987 it was 22%. Okay, you're talking about one and a half percent. The numbers are so big and people are baffled by the big numbers. But I think you've seen a lot less volatility which is actually proven by a chart of the VIX. You know, in n in 2008, the VIX spiked as high as 80. We've never come near near there ever again. And I don't think you'll ever get there ever again either because again, when they smooth out time and they give people a chance to catch their breath and don't have to pull the trigger so fast, it will you'll still see some short-term spikes like when we saw a couple weeks ago, we saw gold drop down from like 43 to 4,100 and and a tick, but over that but after that again, I think it'll smooth out the volatility of the market.
>> But Bobby, you're not you're not going to have that time to sit back and and reflect if it's 247.
>> No. Right. But you're not going to be fearful as the markets are trading. The the biggest sell-offs come when the pent up energy of a closed market and there's no liquidity to go to. Okay.
>> Okay.
>> You know, I'll give you another just another quick example.
>> Many companies report earnings. Some report after the close, some report before the opening. Okay?
>> When they switch, there are times when a company will say, "You know what? We're going to switch from after the close to before the open this time." You know what they're telling you? They're telling you that there's a problem and because there's no liquidity in the aftermarket as there is going into an open market. So, you're going to have a market that hopefully will have constant liquidity. Now, we're going to find out pretty quickly how this is going to work, but that's why the contract size is so small, right? That's they're starting out with very small contracts and we're going to find out. But when the markets are open, there's a lot less panic going on because you have a chance to kind of trade your way out of it or work your way out of it. And that's the difference from when a market closes and you have nothing to do. Okay, that's
>> you know.
>> So ultimately, you think this is a positive development and it will smooth out volatility in the long run.
>> I do. I I don't like it, but I do.
>> Okay. All right. Uh, you know, Baba, one of the reasons you have a lot of retail investing is because Americans feel, you know, like they're falling behind, like they can't make ends meet. You were making this point uh earlier in the show and uh it was articulated mathematically by billionaire investor Ron Baron recently. He was on CNBC and he laid out what he calls the silent math destroying our purchasing power. And his point is simple but powerful. If the value of your money is falling by 4% or 5% a year because of inflation, assuming that's the correct data anyway, and then the economy is growing around 2% a year, then asset prices, wages, and the cost of living are compounding at a pace that makes it hard and hard for the average person to keep up. So everything can double in price over time while the value of your money is quietly cut in half. And he says it means you have to earn twice as much in 15 years just to stay even. Let's let's take a listen to how he phrased it himself.
>> What happened is the value of your money falls in falls four or 5% a year. That's inflation falls four or 5% a year and the economic growth has been about 2% a year. So it's about 7% a year growth and that means everything doubles in 10 years. The value of your money falls in half every 15 years. So you got to make twice what you're making today in 15 years to stay even. And so stock market, you know, so Bitcoin's been amazing, obviously. Uh,
>> so I what do you make of that, Baba? How does one keep up with that?
>> He's 100% right. Okay. How does one keep up with it? Again, you have to invest your money in an asset. And because holding with the cost, and I'm going to give you one example. 1985, the average American income was $25,000. The average house was 75,000. Today the average income is 75,000. The average house is north of 500,000. Okay? So do the math. You went from three times value to now almost eight times value. It's not a good not a good calculation. And of course, every month they come out with the PCE and other things. And somehow you're always spending more than you're making. So, you better figure out a way to get your money to work for you, right? That's the the Warren Buffett school. That's the movie Money Never Sleeps because money doesn't sleep. And if you sit on it, if you sit on cash, the paper becomes worth less and less and less. It has to be in an asset that is performing. And yeah, sometimes you're going to lose, but it has to be an asset that has a history of performing because if you don't keep up with the cost of inflation, then you're never going to be able to retire. You're never going to be able to to live. And it's only you're if you're if your things are tight for you now, three years from now they're going to be worse because you have to keep making more money. And and that's the problem with the Federal Reserve that created this bubble. That's the problem with what they do. It's the problem with the debt. There's there's so many things that make it up the mess that we have. And the only way to treat this mess, which will never happen in my lifetime, is to have the government stop spending. That's the first part of it. Because of course the burden of the taxpayer, we get taxed like crazy. You know, if you live in California, you're still paying, even with oil coming down 50%, you're still paying $6 or $7 a gallon for gasoline. It's very hard for the average American to live and pay those prices.
>> Baba, has it become easier or harder to make money in today's markets than when you started four decades ago? What is one lesson from the trading pits that you think today's generation of investors desperately needs to learn?
>> It's it's much it's much harder. Trading electronically is much harder than trading face to face. You know, trading face to face. You get the view and you get to see either the panic or the FOMO in people's eyes. The chart you have to be, you're not really trading. You're really investing for a short period of time. The style of trade that you make, you know, as a floor charter, you might be in a trade for two minutes. You might be a trade for a minute and make a lot of money. Here, you have to be much more careful and you have to get much bigger profits because the cost of of trades even with lower commissions, the slippage that you don't get because you're a retail trader. The discipline is the is the biggest thing. This it always comes back to psychology and and people need to learn how to look at the map of the market. The market is laying out of a out a map for you. It is showing you the direction that it wants to go. Is it always going to be right? No. But there is enough evidence that by looking at the map, forget about the economic news because what I'm talking about may happen start happening next week. It might start happening in six months. But every day the market leaves a footprint that allows you to trade it. But you have to be able to trade it and look at it with emotion and say this chart is indicating to me that it wants to go higher. So I want to look for a spot to be a buyer, or this chart wants to go lower. Now anybody wants to look at this, you can look at a Dow chart. It's a little bit extended, but it still looks like it wants to still go higher. So there'd be no reason if I were going to look to get short that I would short the Dow here. But certainly if I looked at Nvidia, I would certainly be looking to short Nvidia here because it looks like it wants to go lower. And I think that's what you have to learn at the market. What direction? What is the path of least resistance that is being indicated by the map of the market that's left by the footprint it puts out there for you?
>> A a lot of lessons that we need to learn. Um, you know, Bubba, as America is celebrating its 250th anniversary, you talk about taxes, uh, that's that's kind of what started this whole thing in the first place, right? Um, but as as America celebrates Fourth of July, the 250th anniversary. I think it's a good time to reflect on the economic principles that helped build the country, the entrepreneurship, free enterprising, free enterprise rather, capitalism. You know, you've spent your entire career watching markets reward innovation, risktaking, and and wealth creation. And as we're celebrating this 250th anniversary, it's worth asking, what are we celebrating, and what are we at risk of losing here? Because the US was founded on principles of liberty, individual rights, private property, free enterprise, limited government, and those ideas made America the most dynamic economy in the world. Um, and now we're at a point where a lot of us feel like those very values are being challenged. I mean, you look at New York, for example, the capital of capitalism, the financial center of global capitalism. Um those principles are growing under attack right over there. We New York City has a a Democratic socialist mayors or on Mumani. Um his political influence appears to be expanding. There were just primaries in June in New York and all of the socialistbacked candidates scored a series of major victories there. Uh is this a sign of a much broader ideological uh a change here? A much broader ideological shift? We have the city that became synonymous with Wall Street, entrepreneurship, private capital, wealth creation, now effectively becoming a testing ground for for socialism. You can call it democratic socialism, but for socialism, what does this tell you as we're celebrating this 250th anniversary? What what are the lessons that you think we need to look at here? Is is that perhaps the biggest risk to our economy and to our markets? That the very founding principles of America are being challenged right here in America right now.
>> I I I don't think we have anything to really celebrate other than we've existed for 250 years. I I think that they've destroyed, you know, the if you go back to the Constitution, the federal government was never meant to be the biggest employer in the world. Okay? The government is supposed to be run city, county, state, and the fed was supposed to be an overseer. They were not supposed to be the employer of of everybody. So, not only they continue to raise taxes, okay, certainly in New York, I can't understand people in New York, nor Chicago, nor California, okay, they got they're all pretty much turning into socialists because they built that that free money that and we know it's not free, but the things that they give away to those people that got them to to vote that way. It started out with AOC. I mean, think about, you know, AOC getting elected. But so now you've given up freedom of speech. Very, very little freedom of speech left, especially if you're an online presence. You get you get but knocked off of sites. You've got contingent battle of the Second Amendment. You've got a content battle of of of higher taxes. And they continue to raise taxes for the home I own. They continue to raise taxes. And it's and it's funny. I have a good example for you. I have two houses are, let's say, identical. In one place I pay 30,000 a year in property tax and the other place I pay 10,000 in property tax. I shouldn't have to pay any property taxes my tax. But why is 130 and 110? Okay. So we don't have the same freedom. We don't have the same ability for the entrepreneur because the government has spent and spent this into such a gigantic hole. And of course listen, you can blame either side. I'm a libertarian. Uh certainly my views are very conservative from a fiscal responsibility and we are far from it including President Trump who is far from being fiscally responsible. Somebody at some point's got to put their foot down and stop the stealing out of our government from the Congress and the Senate. Where else can you take a a million dollars and walk out worth a hundred million dollars? Ask Nancy Pelosi. Ask all those. Again, they've got we got to stop or drain the swamp, which is what President Trump originally promised. And we have not done a very good job at getting rid of that because our costs continue to rise, our taxes continue to rise, and yet America's debt continues to grow. So, we don't have freedom. We don't have money. You don't have the ability for us. A small mom and pop store. Now, again, I'm not talking about small cap size. I'm talking about back in the day, you could go open up a small store, a little grocery store where you can make a living. Can't do that anymore. They cannot compete. Okay? So, everything is big box and and and when is it going to be when it's only going to be Walmart and Amazon in the retail space. When is it going to be, you know, you're already seeing many restaurant chains going out of business. So we have all these problems and what should be flourishing but we all know that all great empires start to fail between two and 300 years and here we are and they don't fail from the outside they melt down from within and that's exactly what is happening now we are melting down from within with all the socialists with the with the great reset with only the top and remember the wealthy want socialism they benefit from socialism. It keeps all the competition away from them. That is the problem. You people who want socialism in this country, they prevent you from doing from getting to the next level. And the wealthy are all for it. That's why Apple and Google and Meta went to the government to put on special restrictions so that they would not have competition to be able to come after them. So, I don't think there's anything to really celebrate other than that we've made it 250 years.
Well, uh, that is a bleak answer than even I was expecting. I would still like to think that there is something to celebrate. I would still like to remain hopeful here. I mean, granted, the system is flawed in many, many ways, but it's still the best system that there is.
>> 100%.
>> I I agree with it. I agree with America is the best, but we continue to take pieces away from it. Okay.
>> Yeah. And and I think when you continue to take the good away, I mean, I'm happy. I love being an American. I can I could live anywhere. I love being an American and I'm a big supporter of our troops and our soldiers. I'm for them independence. Thank you.
>> But when it comes to what's going on in this country, I think it I think it's a pretty bleak picture. My opinion, again, I could be wrong. I hope I'm wrong. I don't I don't want to be right. It will have no major effect on me personally one way or the other. Okay. But it will affect my kids. It will affect my grandchildren. It'll affect your kids if you have them, if you're going to have them, whatever. Again, it's going to affect future generations because you cannot continue to tax yourself and think that you're taxing yourself out of debt. And you cannot borrow your way out of debt, which is the biggest problems that we've created in this country.
Look, I I sadly agree with a lot of what you say, especially as we have these entitlement issues, these socialist principles, and a lot of the values of America being eroded. Um, I'd still like to remain hopeful that this can somehow be turned around. I'm not sure how, but I I'd like to still remain hopeful here, Bubba. Uh, while still protecting my own wealth, my own sovereignty as best I can. That's why personally I like assets like precious metals, like Bitcoin. Um, but yeah, I I do think that there's still something to celebrate provided we can try and turn things around. And again, many many flaws with uh the government, with the system, even with this administration,
>> we can celebrate hope.
>> Let's celebrate hope.
>> That's what we can celebrate, the hope that we have and that we hope that people wake up and it gets better. Okay? Look, I don't want to be the Grinch and it's not even Christmas yet. I want to be I wake up every day happy and ready to go. But then we start talking about the things that are going on and it
>> look it it's very disconcerting. It's very disconcerting when you see what's going on in a city like New York where the mayor is telling people what temperature they can have their air conditioning on, you know. Um, but we started off this interview. So I asked you what you are most concerned about and I asked you what gives you hope and what gives you confidence and I said we would circle back to that. So let's try and end on on a positive optimistic note. What are you confident about when you look at the markets when you look at the economy when you look at the general state of the world? What does give you reason to to smile and be hopeful? Bubble.
Well, I'm I'm confident well by my family gives me hope and happiness, but I'm confident that if we resolve the issues that we've created that the markets will continue to outperform and continue to do well despite the fact that I know that there's a selloff coming, but again, we have to look at history. We've gone up year-over-year. So if we can get through this tough time and get through things that are going for example the Iran war you know they need to do something okay we don't need another statute another you know what's going on in Russia and Ukraine these are issues that should have been resolved long ago so I think we can we can look for hope we can look to resolve it but the bottom line is is the people that have to resolve it are really the voters it has to start with a movement of the people which if you go back 250 is who started the movement? The people started the movement and that's where we have to go.
>> Yeah, it does come back to the voters, the people. A big debate right now about birthright citizenship in this country. Uh as you know with the recent Supreme Court decision, but uh hopefully the people, the patriots um still managed to get things back on track. Baba, happy Fourth of July nonetheless. Thank you so much for joining Happy Fourth of July. And I don't want anybody to think I'm I'm I love America. I'm an American. I'm proud to say I'm an American, but for everybody else who's going through it, I want you to have better than I had. I'm tired of watching him kick the can down the road. Thank you so much, Michelle. I appreciate it.
>> Todd Baba Horovitz, thank you so much. And a big thank you to you, our viewers, as always for watching. We love to hear from you. So, please leave us your comments. We read them. We take them to heart. We take your guest suggestions to heart as well. As I always like to say, feel free to praise, whine, or just opine. For me, Michelle McCrory and the rest of the team, thank you for watching. We will see you next time. Until then, stay sovereign. This is the real story with Michelle McCory.