Transcription
[Music] [Music] [Music] Welcome back to the channel. Uh, happy to have all of you here today. We're honored to welcome Mr. Edward Dow, former Black Rock portfolio manager where he oversaw a 14 billion growth equity fund for over a decade, very long time. And he's also the author of Cause Unknown, a fantastic book. I suggest you all pick that up if you get a chance. And he's the founding partner at Finance Technologies. Edward, it's a very real pleasure to have you here. Thank you for joining us today.
Great to be here. One correction, it was a 14 billion portfolio, not 114. I wish that would have been great. Excuse me.
Yes. A $14 billion. That's incredible. Uh, well, yes, good morning, Edward. It is a pleasure to connect with you. We've been following your work for years and we truly respect all your insights. Uh, even through the pandemic eras, you know, especially being able to cut through the narrative and at the same time, you've been exposing all the structural fractures in our financial system. So, let's go ahead and get started.
Um, it's it's obvious at this point that the United States is so reliant on unchecked debt expansion and monetary interventions like QE and so forth. Uh, we just saw the big beautiful spending bill just get passed and that essentially greenlighted um the United States for unlimited borrowing at this point and at the same time I would say the dollar's reserve status is is still being in questioned uh globally but even here at home. So do you think this uh is an intentional strategy here to just inflate the dollar to the point where it collapses as a means of resetting the system overall?
Well, the dollar is an interesting uh reserve currency and and and the dollar has is subject to long cycles. I refer to my friend Tim Wood, the cyclesman, who has identified a four-year cycle in the dollar. And interestingly enough, the dollar's had its worst start ever. Um, and it's coming into a timing band of a low. And as long as that low in the in the next several months holds above 8910, which was the last four-year cycle low, we still have a bullish long-term trend in the dollar. If you pull up the long-term chart, it's been in a a bullish trend since uh 09. Uh, higher highs, higher lows. So, as long as we stay above 8910, which we're I think we're around 97, uh, the bullish uh dollar is is intact long term. And it's it's the the the cleanest shirt in a dirty laundry. And you have to understand there's about 181 17 trillion in uh dollar denominated debt in other countries, both sovereign and via corporates uh issuing dollar denominated bonds. So it's it's really hard for uh these BRICS, there's a lot of chatter to get off the dollar. Getting if you were if a country was to get off the dollar, they'd have a deflationary depression immediately. So it's it's reserve currencies die slowly. I think we're in you know, the death of the dollar, but it's not imminent. And uh, we definitely see that the Trump administration likes a weak dollar, but I think the cyclical forces are going to go the other way on them pretty pretty soon. So, you know, they can they can jawbone things, they can temporarily affect things, but long-term cycles always always uh bite and and and then the the monetary authorities lose control. And generally speaking, when the dollar rises fast, it's an indication that the global credit system is contracting because dollar rising is a dollar shortage and credit destruction. The dollar going down is credit expansion.
Interesting. I'd like to add something to what you just said, Edward. Uh, interestingly, since 2009, the dollar has been in this four-year cycle, you pointed out. Uh, what's fascinating about that is there's a direct inverse correlation between a dollar bottoming and Bitcoin peaking historically. When I overlay the charts, the correlation is very interesting. Uh, because since 2009, they've been on this four-year debt cycle where they refinance the debt every three to five years or four years on average. But every single fourth year for the past since 2009, we've seen this bottoming in the dollar where it weakens on the DXY, and that historically has been the same time Bitcoin has peaked. It's almost 100% um, uh, such a tight correlation, inverse correlation, which is pretty fascinating. Um, but anyway, um, do you have any thoughts on that on the debt refinance cycle that's been going on since '09?
Uh, yeah, so so uh, you know, going into 2019, we had a synchronized global slowdown occurring. There was a a repo crisis, uh, and that's the repo, repos are overnight lending between banks and the Federal Reserve, and that's the plumbing of the system. And that started to become uh, started to unravel in the fall of 2019, and then lo and behold COVID magically came along. And this crisis allowed and and gave central banks and governments license to spend like drunken sailors. So, Federal Reserve printed money and the US government spent that money. Um, again, printing money doesn't really matter until it gets into the system, and that was via the the fiscal deficits that we that exploded and the free money that people got uh during COVID. That created, for the first time, actual inflation. The inflation since 2009, prior to that, was asset inflation. It has created actual goods inflation. And then the Fed, Federal Reserve went on its unprecedented monetary hike cycle, the fastest rate hike cycle we've ever seen. And uh, so here we are. And we need another acceleration of government spending. We got we got we got that in the Biden administration the last two years of their administration as they ramped the illegal immigration activity. We were running crisis deficit spending, 8%. The last time we saw that was in the great financial crisis. You have you have to ask yourself what was going on. I believe, and it's starting to come out, that a lot of that spend was on the uh purposeful logistical operation of bringing in 20 million people into the US, which did affect the economy. It was a new economic variable, and we were wrong on our recession call in '23, end of '23, beginning in '24. We were looking at normal economic cycle indicators that had always worked. This time they didn't work. So we had to ask ourselves, uh, are the laws of fundamental economics changed forever, or is there something else that worked? And what we found was the the, you know, the pig in the python, and that was illegal immigration. That trend is reversing, and it's going to have an impact on the US economy, which is the ille a little unknown thing. The illegal immigration was holding up housing. Housing started to roll in '22, but prices didn't come down because rents were elevated. That's all going away. All our indicators are, everything's rolling. We put out several uh, real estate reports that show all leading indicators rolling, and it just uh, it's just going to be a slow rolling crisis. Eventually, the stock markets will, there, it'll it'll roll into construction activity, layoffs, and whatnot. So, that's it's coming in the next 6 to 12 months.
And that's a housing crisis, correct? And this is the deep recession that you published a report on.
Yeah. Yeah. It's a housing. And interestingly enough, in our report we put out in January, the big report that's the most expensive, we looked at the global real estate market, and it's starting to roll as well. Interestingly enough, in the last month, uh, we're really seeing a synchronization. Japan had bad numbers in housing this month, UK, and the US. So, it seems like it's it's it's global and it's synchronized at the moment. It's really not in the headlines of the mainstream media, nor will it be until it starts to affect the hard data and the stock markets finally give up the ghost.
And even um um the stocks and companies for homebuilders aren't performing that well as of as of the end of last year as I recall.
Correct. They hit a low in April. They've had a counter-trend rally. They're nowhere near all-time highs. And uh, today uh, the XHB, which is a home builder ETF, is down almost 3%. Uh, I think we're going to see new lows in the home builder, home builders over the next couple months, which will be a leading indicator for, you know, housing. Uh, the stocks are going to figure this out pretty, they've already figured it out, but they're going to go to new lows, we think soon.
So how low do you see the market taking a hit in terms of percentage? Um, because of course these things don't happen overnight. They're kind of gradual. You start to see signals beforehand if you're paying attention like like you are. Um, and then it starts to tip over and you see the effects roll over into the market. So are you thinking um housing crisis as in a 40, 30, 50% crash in markets um accelerated by a few different you know, variance such as um unemployment, initial claims, but how do you see that unfolding in real time, like how could that manifest?
Let's look at stock valuations. Uh, they're at valuations like the 2000 bubble. And if you look at uh, the dividend yield on the S&P versus uh, bonds at the at these current levels, the 10-year projected return on equities is not good. If you if you if you put all your money into stocks right here, right now, uh, your 10-year forward returns are abysmal. So, we're at record valuations. If you look at the actual, you know, components of the stock market, it's a very narrow market. It's driven by very big cap tech stocks. Nvidia is a $4 trillion dollar company. It's a semiconductor company uh, which are cyclical companies, and it's priced as if it's never going to have the cycle again. So, we have unfortunately, and we don't really don't talk about this much, but it's going to be part of the problem. We have a housing crisis coming, and again, we don't know how deep it's going to be. It could be moderate, could be shallow, could be severe, but it's going to happen. And then you have a tech bubble slash stock bubble. So, you could have a stock bubble bursting and a housing crisis. So, think of like 2000 and 2008 combined. The good news is in housing, the consumer isn't as leveraged as they were in the uh, 2008 housing crisis, but still, it's going to be a problem. We don't know what what the um, the uh, the daisy chain effects are going to be to the banking system. So that that remains to be seen.
So what would stocks do? Anywhere between 30 and 50%. The last two recessions, this you that the big recessions we had was the dot-com bubble recession. Stocks went down 50% over a two-year time frame. Uh, according to the indices, and in the great financial crisis, we went down 50%. So, I'd say anywhere between 30 and 50%. You'll get a Federal Reserve response and a fiscal response, and then we have to see, you know, from there, you know, what what's going to happen. But, you know, people are always predicting doom and gloom. We don't think it's doom and gloom. It's just it's actually corrections are not necessarily bad. They give younger people who aren't in the markets an opportunity to buy a home or invest in stocks. Right now, if you invest in stocks, you're not going to make a lot of money. Expect to probably lose money over the next 10 years.
Yeah, I agree with you on that. Um, it's very interesting, I think, how they're just continuously kicking the can down the road, but at the same time, you know, central banks are hoarding uh metals quietly, um stockpiling them, and they're also promoting a digital future. So it it seems like while while the world is just overall accelerating towards digital finance, tokenized assets, blockchain-based settlement systems and so forth, while they're also accumulating physical gold, and that gold is certainly being suppressed by the COMEX and LME. Um, it's it's very contradictory what they're doing here. They're they seem to just be putting band-aids and band-aids so people are also distracted uh from the bigger things happening underneath. Um, how long can this illusion go on?
Yeah, that's a good question. Uh, you know, gold is very interesting. Um, gold gold does have cycles, so it could get a pullback in a in a in a global margin call, but I would look at that as a buying opportunity. So, don't, you know, don't sell your gold if it starts to go down. And don't be leveraged. Don't don't be in gold futures up to your eyeballs and leverage. But uh, long-term gold is is is going higher. And why do I say that? Uh, because like you said, there's this focus on digital currencies, but they made uh uh bank uh they made gold, excuse me, tier one capital again, and that that came into effect in the US this July. So they've been quietly accumulating gold ahead of this uh, you know, this going into effect because physical gold is now tier one capital at a bank, which means they can lend against it. In the '70s, when we went off the gold standard, they made it a commodity. So they're they're kind of remonetizing gold. So you have to ask the question why. Uh, and you know, central banks have been quietly accumulating gold. Um, you know, there was this talk to audit Fort Knox, and that's been, you know, quietly uh, not done. I had a thesis that, and I think if we ever audit, it'll be proven right, that there's more gold in Fort Knox than we know. Not the most, you know, um, conspiracy theory is that there's less gold. I think there's more gold.
Yeah. I mean, they can just print the money out of nowhere, so they can just go buy it back at a higher price. They don't really care. Um, it shows that they're terrible investors when it comes to gold, but I mean, they have to hedge themselves. If I may say this, it it would seem that if you look around, even Texas now legalized gold and silver for legal tender, which is pretty cool, I would say.
I have a follow-up question to what I asked over there. Um, with distributed ledger technologies, there's one specific one called XRP. I think it's a very interesting one. It seems to be gaining a lot of quiet traction. It's not as talked about on the mainstream news or by most economists these days, even though I think it's playing such a critical role in where this is going for cross-border settlement rails. Do you think there's some sort of uh strategic plan to uh bridge hard assets like gold for instance with these digital networks?
Yeah, there's there's a lot of talk of tokenization, and there are people trying to tokenize gold and other assets, and it's going to be interesting to see how that works. The term smart contracts, what have you. XRP has the wrap of being the banker's crypto, you know, you got to you got you got to look at that with a uh, a little skepticism, but there's definitely this um, uh, notion that we're going to tokenize everything. Uh, you can debate whether that's good or bad. I will say this, uh, tokenization and smart contracts, uh, they're trying to do it in the gold market. I've had some discussions with people trying to do it, and what they're saying is no one wants to do it because they like doing business the way that they're doing business, because tokenization will take out a lot of middlemen, and the middlemen are are are not happy about being taken out. So, it's it's it's a slow process. I don't think it's going to happen overnight, but it's beginning.
Yeah. Similar to the dot-com bubble where it played out and then regulations came in after they positioned themselves and then there was that moment where they kind of used the technologies to fix some of the problems that we have today. Something like that maybe.
Yeah. I look at I look at the dot-com bubble as uh, you know, it was a uh, lot of investment, a lot of hype, a lot of excitement, and then that investment went to zero. But it created a boom for the internet 2.0 companies like Facebook, uh, Google, Apple, because all that bandwidth that we invested in at high prices, uh, was by the pennies on the dollar, and that's why we have the internet and, you know, the, you know, the streaming capabilities we have today is because of that overinvestment. I see the same thing with AI. Huge AI bubble, no revenue streams yet, uh, you know, to justify that, and eventually the markets will care because, you know, people are not going to keep throwing good money after bad, and then there'll be a repricing of, uh, of AI infrastructure, and then the boom, I think the AI boom comes after the, you know, the the bubble bursts, the real companies that we want to care about. But, you know, I don't know what they are yet. Maybe maybe there's one that currently exists. It's not going to be Nvidia. Nvidia is, you know, semiconductors are a commodity, and it will get commoditized at some point. $40,000 GPUs don't last forever.
Good point. Good point. Yes, it's true. We have a similar uh uh theory on the crypto market as well. Um, based on our research over the years, uh, we really feel Edward that, uh, the crypto market is, um, really, uh, it's like the wild west. Okay. Um, but we're seeing similar patterns if we compare it to the dot-com era. Um, and we believe that 99% of these cryptocurrency currencies and companies are going to go to zero. And we feel like there's going to be a handful or maybe a little more that are that are going to emerge because of their real-world use case, utility, and um the trillion-dollar issues they're actually tackling in the real world. And um, we think that would be the case for crypto as well. And um, we even believe that um, it's the whole market is designed to give people this illusion of um complete decentralized finance outside of the, you know, cabal banking system. And we think that's uh designed as this um libertarian movement to lure people into this centralized system being built out tied to the blockchain. Um, do you have any opinion on that? Because we don't look at what they're saying on the news and the narratives. We look at the Bank for International Settlements, the documents, the World Bank Group, their publications, and they talked about XRP and XLM as stable coins in 2022. Um, so we're looking at those things, trying to connect the dots here. But what do you see going on with this market?
Well, you know, crypto, uh, I'm not a crypto expert, but it's an asset class that I follow. And you know, if you look at the correlations, and you you pointed out one of them, when the dollar goes up, crypto tends not to do as well, I believe, is what you said.
Correct?
That's true. Uh, so, and the NASDAQ also likes a weak dollar. And uh, the NASDAQ and the and and Bitcoin have a high correlation. So, if there is a uh, risk-off trade, which I believe is coming, crypto has an opportunity to deflate quite a bit. And agrees and and and and and that will be, you know, another buying opportunity for the right cryptos. But you're right, there there's 99% of these coins are going to go to zero. Uh, these meme coins crack me up. Uh, I I don't even understand, you know, it seems like it's a rigged system to me and venture capitalists. Yeah. And if I was buying a meme coin once it's offered to me, I'm I'm I'm pretty sure I'll lose money if I hold it for any length of time. So I haven't bought any meme coins. Uh, the Trump coins were a disaster. You know, first day, I mean, what's that? The first day he got in office, he rug-pulled his own voters.
I know. I I saw that and I said that was the I think it was like the day before the inauguration and I said, this is the biggest unforced error I've ever seen. Uh, so, you know, I think like anything, uh, in a pullback in the rubble, there'll be a gem. So you guys are probably on to something that in the pullback that I think is coming on a lot of risk assets, there'll be some gems, and you guys are the experts, and hopefully you find some invest and then become, you know, multi-millionaires.
Yeah, hopefully we'll see what happens. Um, do you hold it, do you hold any crypto or are you looking at the market from a risk-on perspective?
I'm bearish on everything. So, I'm not a whole I'm in most. Look, I'm not here to give investment advice, but, you know, I think Warren Buffett is not a dummy. He was two years early, like we were, because I don't think he saw the immigration uh, and deficit spending floating the economy for another. Again, it's a new economic variable that's going the other way. I I I'm a believer that cash mostly is an asset you don't want to hold, but there are times when you want to hold it because it's going to be dry powder. And that's where I that, you know, it, if you're someone out there listening to this, I'm not suggesting to you do anything with your portfolio other than accumulate some dry powder and the percentage you want. That's up to you. So that you have an opportunity to buy low. Uh, that's how people make generational wealth is buying when everyone's selling. And there'll be a, they'll, you know, I suspect there'll be a giant risk-off trade. The headlines will be really, really bad, and that's when you want to buy when quote unquote, the world is quote supposedly ending, which it won't.
Exactly. I I agree with you, Edward. Um, very uh, well said words of wisdom. Um, I do have a follow-up question. So since there is a lot of signals pointing towards the economy heading that direction, um, it's very clear we we do 100% agree with you. We believe that is coming. Um, we wanted to get your take and your opinion on this. Do you think that interest rate cuts would happen before that, or do you see the Fed waiting for panic to ensue and reacting late as they usually do at the last minute? Kind of like a few years ago. Um, do you think they're gonna wait through panic?
I think the Fed is doing uh something somewhat of a disservice to the economy. Every other central bank is lowering interest rates because their economic numbers are rolling over. We are keeping ours steady. So, real interest rates are 2%. And the longer they remain at 2%, the worse the problem is going to become. And when I what I mean by that is the the the cheapest way to get rid of 2% rates or 2% real rates themselves because they created economic slowdown, monetary contraction, which we're seeing signs of. Velocity of money started started rolling over in the first quarter after rising when Biden got in there, and we think a lot of that velocity of money was due to the illegal immigrants coming in and spending. That's all rolling over. So the Fed, I think is going to, and again, this is political, could be political. Uh, Trump and Powell don't get along, and uh, the Fed also has been looking at data we think has been flawed. The labor market data is garbage. The non-farm payroll number is now garbage. I talked to other economists that are more uh, you know, academically inclined than I am, and have been doing this a long time. One of my friends, Dr. Lacy Hunt, has shown that the the labor market is, you know, wrong to the tune of a million plus jobs over the last 20, last 12 months. Daniel D. Martino said the same thing. So, we're looking, the Fed has been looking at bad data, and I think magically at some point, there'll be there'll come this payroll number that just blows everyone's mind away, and they're they're going to ask themselves what happened, and I think that's coming. And so the Fed, the Fed isn't completely to blame because they've been they've been they've been uh, looking at bad uh, uh, non-farm payroll data. And uh, that's gonna, it's going to be interesting to watch. And, you know, that's that's what scares me right now is with the recent rally in the stock markets and yields trying to bottom, that when this does occur, it's going to happen fast, and everyone's on the wrong side of the boat, and they're going to have to adjust their portfolios quickly, and that's going to cause everyone to kind of have this aha moment and start selling at the same time. So, this could be phenomenally fast and dangerous.
Um, go ahead. Go ahead. Go ahead.
Oh, well, I was going to say, um, no, I I agree with you, Edward, and you make a very good point. Um, do you think this could kind of ripple over and create this ripple effect that, um, for banking consolidations?
Yeah. So, people forget this, but we we were close to a banking crisis in 2023. Again, the the unprecedented deficit spending prevented that. Plus the Federal Reserve doing bank term funding loans against the held to maturity accounts of the banks, which is, you know, these banks over the previous 14 years before the rate hikes were buying very low yielding treasuries and corporate credit. Uh, when with the interest rate hikes, they lost money on paper. That started a bank run in March of 2023. Silicon Valley Bank went away. a couple others just disappeared overnight. So, the the the Federal Reserve put the finger in the dike and stopped that. And actually, I applauded that. You don't want a bank run. You don't need a bank run. So that that stopped it. But what's we're at the part of the cycle where credit is going the wrong way, and the Federal Reserve is not going to lend money against bad credit. So, we got commercial real estate, we got housing loans are going to start to sour, and then we have this other private credit debacle. Uh, because banks, even though they haven't been make, you know, they're not, that's why private credit is private credit. It's not done by banks, but they're the ones backing a lot of the private credit loans. They give these these these firms loans to then go make loans. Now they they have less risk than a lot of others because they're the tier one lender, meaning they get, you know, the claim against the assets, but there's been a lot of Ponzi finance in the private credit markets. Shadow bank, another shadow banking phenomenon that we'll be talking about a lot. Private credit will be in the headlines at the bottom of the cycle. But, you know, that's that's what I see. And then we'll see uh, uh, regional bank consolidation as they get into trouble, and the big banks will get bigger because the Federal Reserve will force some marriages like they did during the financial crisis, and big the, you know, and if you want to introduce a central bank digital currency, it's much easier to do when there's fewer banks.
Exactly. Exactly. You're right. So you see a banking crisis unfolding and wiping out more regional banks.
That's hard to call, but it it'll it'll it'll look. I don't know if we're going to have a systemic crisis like we did in '08, but, you know, there could be whiffs of that. Uh, there's a lot more tools in the Federal Reserve's uh, tool belt. So, we're not calling for a systemic crisis, but bank stocks won't do well. You know, there they'll they'll be a scare. And if there is a systemic crisis, well, you know, Taty barred the door because last time the central banks were the backstop. Who's going to backstop central banks if there's a systemic crisis? That'll be interesting to watch.
Yeah. Well, they just also uh put out that rule enhanced uh supplemental leverage ratio with the big banks. It's basically like saying, "All right, big players take on more risk, lend more, be more aggressive, and hold less reserves, safe reserves." Basically, right?
I think what's going on there is that that is designed to allow them to buy more US government debt treasuries.
I agree.
Right. They need to create demand for it. Yeah. So what they're going to do is they're they loosened the leverage ratios in anticipation anticipation of a crisis, knowing that they're, you know, and also have trade wars going on. So people don't realize Japan and and China have been selling US treasuries, net sellers for a couple years. So, what we're going to see is we're going to see who's going to buy the US debt. We are our banks and ourselves. And they're going to make it so that we have to buy it. That's how this works. Yeah. We're going to fund our own deficits. The the the days of the foreigner funding our deficits is coming to an end.
Well, um, if I may add something to that, I I've done some very deep analysis and research and I've written articles about this on X about how they're doing this to create um, demand for dollars still. Um, if you look at uh, you're familiar with the stable coin, Tether, I'm sure you.
Oh, yeah.
That that's what that that that seems to be what they hope will uh, you know, continue the the bid for treasuries, right? And and that's why I find it very interesting and I write so much about it. And I'm not telling people not to go long on Bitcoin. I say go long on Bitcoin because it has become such a politicized asset. And if you if you look at under the hood of it, it's it's almost like a new form of oil, you could say. And with all the institutional support, you see political lobbying behind this stuff, you see a lot of regulatory capture. Behind the scenes though, there is a revolving door of capital that is uh capital inflows that are tied directly to Tether, and I think that's uh it's operating like a shadow bank to create demand for dollars, but at the same time, and also they're buying up all the treasuries. Um, but it's inflating Bitcoin's market cap with uh questionable reserves. You could say almost like monopoly money.
Yeah, that's that's an interesting analysis. And so the people who own the the libertarian mindset of Bitcoin may not own what they think they own.
Yeah, true. We agree with you. Well, there's something else to this as well. And that's why um when I look at the geopolitical landscape, I I know there are a lot of people out there who don't um necessarily believe that the BRICS are strong enough to accomplish whatever they're saying they're going to. And they may be right, they may be wrong. We don't really know. But when I look at the information, I get most of my news from outside of the United States. And if you do look outside of the United States and not just the propaganda, but what the journalists are putting out, you see a lot of nations already starting to settle trade outside of the dollar. Um, and they're they're gradually doing this. And we're talking about Russia, China, some of the BRICS nations. Um, even other players that are not part of the BRICS nations, Saudi Arabia for instance. And um, this is where it gets interesting because why is the US so involved in all these global conflicts that demand massive financial and military commitments? So my question to you is like, what extent do you think the US involvement in all these proxy wars, Ukraine, Israel, even, is about defending the geopolitical utility of the dollar as a world reserve currency, or do you think there's some deeper agenda behind all of it?
Uh, you know, this is the realm of conspiracy theory, but I think there's a lot of merit to it. The dollar reserve status is key to the military-industrial complex, and they will defend the dollar's hegemony as long as possible. And a lot of these wars have nothing to do with, you know, promoting democracy. The dollar will ultimately collapse just like Rome collapsed when we call the legions back. Rome collapsed when they could no longer control their outer empire. That's something we need to watch. If we start closing bases and pulling the troops back, because a lot of people use the dollar because we de facto defend all the trade routes, and if we stop doing that, there's no need to use the dollar. But that doesn't seem to be happening anytime soon. Trump is uh increasing the DoD budget, and it seems to me that it's the same old military-industrial complex actually pulling the strings.
Yeah, you make a good point that I really appreciate. On central bank digital currencies, we want to ask you about this. So there's over 80% of the central banks that are already developing or already have a central bank digital currency um at least working on them globally. Um, a lot of people have said, "Oh, it's not going to happen." But look, if you look at what's actually happening, it's happening. So um, they're moving in that direction, setting up rails, you know, uh blockchain technology, adoption of it behind the scenes, but it's all unfolding gradually. And um, we we agree with what you said earlier, how it would be much easier to roll it out if you have less banks, some big players. So, do you see us still going in that direction?
Yeah. So a couple years ago, I was saying uh in an economic crisis or global economic crisis and a lot of fear and loathing and unemployment that would be the ideal time to introduce central bank digital currency. Uh, what we got wrong again was the illegal immigration and kicking the can down the road. So my call then is still the same. In an economic crisis, which we we believe will be global, uh, there'll be a lot of fear, a lot of panic, and that's the idea, and and then, you know, you have bank consolidation. That would be the time to roll it out. That would be the time.
Yeah. Um, that's what we were thinking. We we just wanted your take on that because, um, yeah, a lot of people say, "Oh, it's not going to happen. You have, you know, people in place preventing it." Okay. But the truth is when you really look at what's going on, look at their actions, not just what they're saying. Um, they're setting up that system. They're preparing it now already, and they have been for a long time. Uh, the BIS is very outspoken about of about this, the um, the IMF as well, International Monetary Fund, and all these uh superpower players that oversee the entire monetary system. They've been very clear on what their vision is, and um, just wanted to get your take on that.
Um, yeah, no, absolutely. And I think people need to understand something. The the the bankers have always understood that control of monetary policy, a blunt force instrument. You know, you you lower interest rates, you raise interest rates, it takes 18 months to get into the economy. And they don't control the velocity of money. The animal spirits, that's something that they want control over. If you have a central bank digital currency, you could dial velocity of money to anything you wanted. You could say, "Hey, you know what? Your wages that got into the your bank account, you have to spend them within a month, or they're going to disappear." I mean, that's what that's the ultimate control they want. Bankers want to control every aspect of the economy, and central bank digital currency gives them vast ability to do to do so, and that's the scary part of this whole thing. And then of course, controlling behaviors, uh, you know, quotas on meat, meat consumption because of some green uh, you know, politician wanting to, you know, keep the methane farts down or something stupid like that. But yeah, it's serious.
No, this this is where it all goes. And, you know, the um, we've all seen that video of the very, I forget his name, the BIS gentleman several years ago, yeah, talking about how you could basically, you know, control the world with this. And, you know, he wasn't exactly a slim man, and he, you know, just you could make a meme out of that. Yeah. Yeah. Telling us what to eat and what not to eat. And, you know, we should just reciprocate the favor to be honest.
Yeah, it's comical. I know. Edward, uh, there's something I've been writing about and I I I follow Palantir very closely and a lot of these AI companies and the disruptive nature of what they're doing here. There's something that I I wrote about recently um called autonomous economies. Have you heard anything similar to that before? An autonomous economy for AI models.
I have not heard that term. I I think I know what it means, but why don't you tell me what what it means?
Absolutely. So, um, I came to the conclusion after a lot of research with some of the blockchain protocol technologies we teach here at Black Swan Capitalist. And it turns out what they're building for this complete control digital grid system is something at the heart of it all that stands to be called protocol ownership. And when uh, we we try to filter out the noise in the crypto space for our clients and whatnot, it's not like owning speculative nature tokens, right? You're controlling access points, gateways to the new digital economy. Um, so protocol owners, that would be some of us as investors, would be the true gatekeepers um in this emerging autonomous economy who would determine basically who participates when value flows through machine-to-machine interoperability. So, what my point to all of this, and I know it sounds a little uh complex here, is that it's fundamentally changing the way we earn income because the old model is what we've been doing now, and it's not really working anymore. Most people trade time for money, and that is it seems to be becoming obsolete with AI. And in the new economy, what I believe is that income is going to be generated from those who participate in these digital ecosystems simply by owning the protocols, for instance, for this machine-to-machine value transfer. You essentially become like a toll booth when regulations are in place, very similar to Visa and Mastercard. When you swipe your card, somebody's earning on that. It would be the same thing for um some of these digital assets in in a digital economy that is AI-driven, of course. So, I think that's where they're the trajectory is going to take us maybe in the next 10, 15 years. I don't know, but um, it would seem that's what they're doing, actually. They seem to be building something along those lines.
Yeah, there's there's a lot of speculation and it sounds like what what you're talking about is getting somewhere in a in a toll booth rent seeking situation, which, you know, obviously I'm not a big fan of rent seeking, but if you can do it, more power to you.
Yeah, honestly, just the whole AI space really scares me. It, you know, I think it can empower us to a degree, but if you look around, it doesn't seem to be really empowering too many people. It's already doing a lot of the thinking for people. So, uh, overall, what are your thoughts on AI? Do you think it's more disruptive?
So, my my partner, uh, Carlos, is a genius, a PhD in physics and finance. He's done some, uh, he's we put out some free resource pieces on AI. Uh, AI isn't ready for prime time yet. It's really a large language model. Uh, it it's got a 25% hallucination rate. So, any any company that's employing it as a customer service representative is going to regret that. Um, you know, general intelligence, artificial general intelligence is not here. It's probably coming. But I think again, this reminds me of the the dot-com boom when, you know, we were promised all this stuff. And I remember, you know, I was an analyst at uh Independence Investments, a tech analyst, and I saw everything as being like uh, you know, overbuilt, uh, financed by junk bonds, and the technology wasn't ready for prime time. We had we had cell phones, but we didn't have smartphones yet. We had uh, WAP, and it was we used to joke, WAP is crap. Uh, and I think so I'm here to say AI is coming, but it's not ready yet. So the the fear is misplaced at the moment, and there'll be opportunities in the rubble, but general AI, not here. This is a large language model. If you you know, you could you if you I use Grok, I can prompt Grok to like give me the answer I want if it's controversial by just prompting it. So it's not definitive. It's basically, you know, regurgitating stuff. I don't care what Elon just said about, you know, the new Grok being so great. It's it's it's just more of the same. And it it doesn't solve problems like finding the truth or finding inflection points or thinking. And the new trend on on X is annoying. I put out, you know, a three-sentence tweet that should be uh, a reading comprehension that anybody can understand, and then people go, "Grok, Grok, what does this mean?" They can't even think for themselves. They have to ask Grok. So, we are literally in potentially the beginnings of idiocracy.
I agree. I agree. It's dumb.
Yeah. Um, because that did happen to me recently. Somebody in the comments of one of my videos, and I can tell you, I, Vendel, and I, we do very good research before we put out a statement. We we think these things thoroughly because we don't want to look stupid either, right? And I put out a statement and somebody said, "Well, Grok said this." And I said, "Well, why are you using Grok to critically think for yourself? Why don't you use your own brain?" So, I see it being more disruptive as far as the general sense of the the youth and where this is all going. So to your point, idiocracy, but 2.0, maybe AI right now is nothing more than consensus thought. In markets, great fortunes are made by being out of consensus at the right time. Obviously, you know, you got to get the timing right. But just look at stock markets. There are consensus beliefs that are wrong. And when they're wrong, and everyone realizes that, a lot of money is made by those poor souls that were, you know, flailing against the consensus. Like Michael Bur for two years before the great financial crisis. He saw it coming, and he was told by every idiot on the street, uh, home prices never go down. Well, all you had to do was look, all you had to do was look at a long-term chart to see that home prices did go down. The last time they went down was 50 years ago, but they do go down. So, this is the kind of thing that AI is going to create, you know, a bunch of morons that regurgitate what AI is telling them. And currently, AI still thinks the magic juice is fine.
Exactly. Exactly. It's it's programmed, you know.
Yeah, it it is. Yeah, it's it's all nonsense. I mean, you could use it as a tool to enhance your work, or it could use you and dumb you down, and it seems to be it's it's dumbing people down, and that's exactly what they want. There's a book by Henry Kissinger on it. It's true.
Yeah. I use I use it as a tool, and I think it's it's better it's better than search because in search, you put in a a term that you want to like get some information, but then you have to sift through all the nonsense that Google spits out, a lot of which is paid advertising and sponsorship. They've ruined their own search engine. But, you know, the way I use Grok is this. I ask Grok a question. It'll give me a summary, but then I want to go to some of the links they provide, you know, to make sure it's right. I don't believe it at face value. I want to, you know, I want to check some, you know, actual sources that they provide. So, you have to be very careful spitting back what Grok tells you because it's often wrong.
Yeah. Yeah. You got to exercise good judgment. I try not to use it. And if I do use uh AI, I specifically use it um for headlines for my videos and sometimes to concise information that I put together like a description, but I always make sure to ex uh to keep it authentic because I like my own words to be out there, you know, not something else.
Yeah. We don't we don't use AI when we write our reports. We use the old human noodle.
Yeah. Yeah. We we love that. Um, takes more time, but it's it's a lot better done, and you can actually enjoy it. Um, so I had had, sorry.
Go ahead.
Well, uh, you know, I did want to ask you one more thing, and I'll let my brother finish. Um, wrap it up. Did you, you're familiar with this whole um, uh, Elon Musk talking about a third political party and it not trying to go too far off the deep end here, but if you read the UN playbook, they did talk about creating enough distrust in the public with any form of government. Um, I talk a lot about this with Gregory Mannarino and
Uh, you know, it seems that nobody trusts the left. And with all this new material resurfacing right now, um, a lot of people from the MAGA group are losing trust for the other side too now.
Um, so it seems like this whole divide and conquer strategy, even between the two-party system, is getting stronger, I would say. And it seems like they're paving the, uh, the way for a new kind of party. Whether it succeeds or not is irrelevant, but as far as the narrative, putting it out there, you plant the seed and it can grow. It really could. What do you think?
I, I, I don't, I don't think it's going to be successful, but the point is taken. It's a seed. And I said, you know, three years ago that what happened during the magic juice era, the, the COVID pandemic, uh, was designed to destroy all faith in all institutions. And that's what it did. And that's where we are. And now we're seeing the new administration, um, uh, getting in there. Uh, and look, I'm, I'm gonna give them a little out, not much of an out, but, you know, they get in there, these bureaucracies are big. Uh, running, you know, when you drop into an institution as the head of a department, it takes you time to understand the institutional knowledge, how things actually work, and h, and how to affect change. The ticks, the apparat ticks, the deep state administrative state are still there. They haven't gone anywhere, and they're thwarting a lot of these efforts. And it, it presents to the American public as, oh, you're betraying us. And some, there will be some actual betrayals, but a lot of it is just inertia. And, uh, you know, I look at an, an institution like the FDA, it needs to be, you know, everybody needs to be fired and it needs to be built from the ground up again. That, that does seem, you know, we just approved, uh, a new magic juice, uh, uh, candidate a couple, a couple weeks ago. So, this is a problem. And I think to your point, you know, whether Elon, uh, realizes it or not, he's touched on a, a, a, a lack of trust that the general public, uh, has. And, you know, look, Elon reads the room well. He was a liberal, uh, subsidy taker under Obama and Biden. Uh, not, not, not, and, and so he read the room and he, and, you know, he bought X. And, uh, also I think he was legitimately scared about the future of the country, but he, he reads the room well, and now he's reading the room the other way.
Yeah. Yeah. Thank you for clarifying that. I really appreciate that your take, Edward. I've been following you as far as, uh, what you've been talking about the magic juice for many years now. So thank you for everything.
Yeah. Um, last question, and we're gonna wrap it up, Edward. So knowing what you know in the direction the world is moving to this digital economy, central bank digital currencies, the debasing of, you know, fiat currency, and everything shifting, it's essentially, it, it's a, uh, transition of the financial system. How are you, um, how are you approaching this? How are you going to protect yourself and what are you doing basically?
Well, you know, look, that's, that's, it's a difficult question, but you need to have the mindset that, um, you can't, you, you can't attach yourself to things anymore. You have to build up your own, um, peace with the world and understand that so much is out of our control that when something does come that's out of your control, try not to react to it emotionally with fear. Try to understand that you're going to be all right. And in this, you know, chaos, there will be opportunity. I don't know what it is yet, but there will be opportunity. So, you got to keep your own self in check emotionally. You got to keep yourself healthy, and you got to basically keep those around you healthy as well. And have a team of friends, uh, family that you can rely on, and they rely on you when the, when the times get tough. So, I'm, I'm more into relationships than I am into accumulating digital assets at the moment. I mean, I, you know, I want to do that, but I'm not relying on that. You know, building yourself a fort on, uh, you know, in the wilderness may not be the best solution.
Yeah. Yeah. Um, thank you for sharing that. Well, um, yeah, it's been an absolute pleasure, Edward. Um, do you have any last words before we part ways? Um, so thankful to have you on.
Uh, no, my last words are this. Um, there's, in times of stress and chaos, like I just said, there's opportunity. So try not to get, you know, in fear. Keep, keep fear and anxiety off the table. Understand that, you know, if you live in the present moment, nothing's as bad as it seems. If you go out too far into the future, you can scare yourself to death. So don't do that. I'd also like to, uh, you know, promote my website financetchechnologies.com with a ph. We have multiple reports for sale that, uh, indicate what's coming. And, uh, I'm also found on X, Dow, Edward, and Getter at Edward Dow. And, you know, like, I'm just trying to be a, we're just trying to be a financial guidepost in, in a, a sea of chaos. And we try to tell the truth and we call balls and strikes. And I'm not a, a cult follower. I'm not a MAGA head, and I'm not, uh, a woke, uh, liberal. I'm, I'm just a guy that's into common sense and trying to figure it out.
Absolutely. And that's what we love about you, Edward. You're, you're so rational, grounded, and you look at everything from an unbiased perspective. Uh, very logical and rational. Um, yeah. Yeah, it's amazing. I would say you have a lot of courage too in exposing a lot of the deeper mechanics behind everything. I've been following you again for years. So, um, you know, thank you for everything you do.
Yeah. Thank you. Look, I just, I'm just one of the, when I was at Black Rock, I used to be the guy telling the truth. You know, when I knew the housing crisis was coming, people thought I was crazy. And, you know, I just, that's just my nature. I, I call BS when I see it.
I agree. And that's, that's what we do here, too. And that's why we have so much respect for you. We really do. Thank you, Edward.
Yeah. Edward. It's been great. And, um, yeah, one message to our audience. You know, I hope this conversation gave everyone a clear understanding of the forces. Please be sure to follow the links in the description below and follow Edward's work very closely. He knows what he's talking about. Thank you, everyone. Thank you. Have a wonderful day, everybody. Thank you. Thank you, Edward. Thank you, guys.