Transcription
Dellorization is an ideological wish. It's basically, uh, a lot of people that would love for the United States to stop being a world leader and the US dollar to stop being the world reserve currency. Uh, to, uh, they create this, this mirage of an idea that, uh, a bunch of, uh, countries that have been serial defaulters and some of them serial, uh, devaluators, uh, will get together and create a substitute for the US dollar.
What happens is a lot of people don't understand what money is. No. Mhm. The reason why the US dollar is the world reserve currency is not because it's, uh, it's got the biggest, uh, uh, economy or because it's got a big army. It's because the world in general looks at all fiat currencies and sees that there is no alternative in terms of liquidity, in terms of, uh, the deep market, in terms of independent institutions, and in terms of investor and legal security. And a lot of people forget that you need investor and legal security. That you, uh, that you know, if you really think that the yuan is going to offset or or or overtake the US dollar as a world reserve currency, be my guest and have an account in a Chinese bank.
But so the, but the, the point that I'm trying to make is that a lot of the people that defend this concept of dellorization would would never answer correctly the following question. I always say to the people that say that the US dollar is going to end as a world reserve currency, the following thing: Would you accept your wages and your savings in yuan or rubles?
>> Yeah.
>> And I know the answer.
>> Yeah.
>> And I know the answer. I don't need to, I don't even need to get the answer.
So the, the, the, the problem is to understand that the reason why we accept the US dollar as a world reserve currency, or the euro, which is the second largest, is because there are independent institutions, because there is enough level of investor and legal security, and because it's got the level of transparency that you demand in an in a financial system. And that is basically, it's, it's as simple as that. That doesn't mean that the US dollar does not lose, uh, purchasing power. All fiat currencies are losing purchasing power. That does not mean that the US dollar is going to be there forever and that there not, there may not be other differences in other, in other elements. But right now, there is absolutely zero alternative in the world to the US dollar.
Yeah, that's, um, I mean, we can get into just the statistics that back that from a flows perspective, like what, you know, what level of trade, you know, trades in dollars, how many treasuries are there in the world, how many, you know, treasuries do people own in the world in US dollars. We can, I, I think we'd be insulting people's intelligence with that. I think the main problem though with these newsletter writers is that they're, they're solving, they're attempting to solve for what I call like a disease of the mind. Like so many people that are watching this now are so used to the CNBC type retail investing thing or newsletters are loaded with it. They want something to believe that makes sense within the framework of what they should, uh, or could make sense of.
>> So, it's really attractive. It's almost like a magnet, right?
>> I, I think that, I mean, I think there's like complete intellectual dishonesty associated with that, obviously, because like, to your point, like the newsletter writers that write that, their subscriptions are in US dollars.
>> Furthermore, I have never seen anybody that goes around the world giving lectures about dellorization that is taking their fee in any other currency than in US dollars or euro. None of them.
>> Well, may, I mean, I think Zultan Posar or whatever his name is, he's, he's like one of these. Do you know him? I think he used to be a Credit Suisse. He's, he's one of the purveyors of this and Brett and Woods 3, etc., etc. I don't want to waste my time like, you know, again, again, like debunking it. I just want to like have the other side, which is,
>> Daniel and I are serious people who are used to dealing with real books, long short books of money. You have to run it with a view on the dollar all the time. There is no, there's no world that you could survive on a one-way negative bet on the US dollar, uh, in macro, like for a career. Not, there's no world for that, right? There's a world where you can publish at Credit Suisse. Oh, you're damn right there is. You can go to the sell side and yap and tweet and do whatever you want. I don't think Zultan's much of a tweeter, by the way, but but there are other people out there that that's that's how they make their living. And and I wonder like how does that fit for you? Because you're you participate in what I'd call new media, like truthful media, not truth social, truth, truthful media, like rate of change, economic data. What does this data mean? You know, what's going on in the currency market, bond market, not just staring at the stock market, but how does this, um, post-pandemic, let's call it, world of people who buy into narratives, whether they be like fartcoin or dollar, you know, dellorization, I still can't say it.
>> Where does this run like, you know, in conjunction with MSM? Because it's not really MSM, it's, you know, newsletter writers getting an audience.
>> No, it's, it's, it's, it's basically people wishing that they could sort of re-engineer the world without understanding what the market is. It's, you know, the, the concept of why we use the US dollar is not decided by me or by you. It's decided by the hundreds and thousands, millions of people that when things get tough, as we have seen with the Iran war, as we saw in 2022, etc., when things get tough, what they want is US dollars. That is it. You know, you go, you travel around the world and you understand that a lot of fiat currencies globally are not money.
No, for a, for a currency to be money, it needs to be a reserve of value, unit of measure, and a means of payment. Many, many, many currencies issued by governments globally, from the Cuban peso to the real in Iran, are not money at all for their citizens. They're not. So, so it's super important to understand that if you don't have independent institutions, transparent financial systems, and, uh, investor and legal security, it's impossible to have a fiat currency that will be a global, uh, reserve currency. Period. That, that was success.
>> I think that's why I didn't waste any of. Thank God. I, I've only wasted, uh,
>> What is that? Nine minutes, uh, of my life on this.
>> Um, that's not bad, you know. I mean,
>> Yeah, said person who's selling a newsletter on this and getting paid in US dollars. Do me a favor. Go on a nice vacation with all those subscription dollars that you get that don't make anybody anybody any money. Uh, and go to the Bahamas, have a nice vacation and try to tip, you know, your caddy or, you know, any, anyone, any artisan that you want to pay for something. You know, pull out of your, you go into two pockets. Go in one pocket and pull out some rubles and go in the other pocket and pull out the dollars and tell me. And by the way, also ask them if they prefer those dollars versus their Bohemian currency or whatever it is. What? Wherever you want to go and you're going to get the same answer to Daniel's, you know, very basic human question.
>> Absolutely. You know, I, I, I think it's, you know, at least one of the good things, one of the things that the European Union got right was that if they wanted to have, uh, the euro to be a world reserve currency, they needed to have those three elements that I just mentioned. Um, anybody else just want to create the illusion that you can have a world reserve currency without transparent financial systems, without legal and investor security, be my guest.
>> No, I mean, with all that said, I just shorted the dollar and bought the pound. So, um, you know, again, that has nothing to do with somebody's narrative that has everything.
>> And and and people need to understand also that that doesn't mean that the dollar is going to strengthen relative to other currencies, uh, all the time. People need to understand that the, that the, that every time that we talk about currencies, we're talking about currencies between themselves, dollar, euro, dollar, pound, and that there are dynamics that you that you follow every day and that you show every day in your in your accounts. Uh, that make sense in order to make some money. But that is absolutely has absolutely nothing to do with how much in terms of reserves, how much in terms of the percentage of transaction and how much in the terms of the percentage of volumes traded one currency is.
>> Thank you for educating people. 10 minutes of an education. We didn't waste any time.
>> Yeah, we didn't waste any time there. So let's, let's put this into practical terms. Like we have a lot of hedge fund subscribers that that not only trade foreign currencies but understand the impact on anything else that they trade. Again, if you don't do that, you're a macro tourist. Um, but, you know, let's, let's take it to, okay, we have the USA about to appoint, uh, or, you know, whether it's delayed or not is not the point. Worsh comes in, there'll be pressure for Worsh to cut interest rates, you know, i.e. pressure the dollar lower. Again, I don't have to have a long-term end of the world, you know, thesis to understand that. You know, on the other side, I have, you know, British politicians under pressure. They don't have the same dynamics of pump versus wars. Um, they're going to have an inflation problem accelerating again on my model. Um, so they'd have to address it. You know, the Europeans, if you want to take it there on the euro. The euro for whatever reason, I'm sure you can, you know, give people a healthy, um, you know, view on that. You know, the euro is signaling bullish against the dollar, too. Is that mean that the Europeans are going to raise rates into the next global economic slowdown like they do every time? Probably. I mean, you know, because because when you think about currencies, you have to think about what is the central bank's policy, uh, the pending policy, like what are they most likely to do next? I mean, that's a huge component of my model.
>> Absolutely. Absolutely. That is absolutely critical. What is the central bank going to do next relative to what people expect? And, uh, expectations right now. Uh, I assume that the ECB is not going to raise rates and that the UK will not raise rates. The likelihood that the UK does raise rates is higher. For what you just mentioned, is that inflationary pressures in the UK have been significantly higher than in the rest of the developed economies way before there was any impact from higher oil prices coming from the Iran war. Uh, the, the, the problem of the risk of stagflation in the UK is, uh, probably the, the most evident out of developed economies, aside from, from Canada, probably. And I think that that's, but that is coming from before the, the, uh, aggressive moves in, in, in oil prices. In the case of the, of the ECB, I, I completely understand why you would take a, a relatively bullish position on the euro relative to the US dollar in the next months, predicated on three things. Number one is that the big unwinding of shorts on the US dollar has already reversed. We saw that the dollar strengthened with oil, which is a, which is intellectually an anomaly for a lot of people, but made all sense when you understood how markets were positioned. Um, but also because we all have to remember that if the euro area slows down economically, which is likely to happen as we have seen in the latest estimates, but the trade surplus continues to be very elevated, that is positive for the euro. And if, on top of that, the ECB keeps or even hikes rates, then that obviously could could generate some move upwards for the euro relative to the US dollar. While in the United States, the already evident slowdown in terms of employment should dictate the decision of the Fed to at least keep or lower rates. And I think that that is what we need to look at. No, rates of change is keep or hike or keep or lower. Maybe they, maybe the Fed keeps them and the others keep them as well. But there's, there's a, there's a higher level of of probability that the UK and the ECB take, uh, restrictive actions, uh, in an environment in which they were earlier at cutting rates and elevating liquidity.
>> Yeah, it's, it's, it's like to you and I, it's, um, I wouldn't call it a foregone conclusion. I'd call it an ongoing analysis. Like when, when you say it's clear, guys pop up, slide 26, where we show our quad model in the G20. We can do emerging markets if Daniel wants to go there as well, but if you go to the right side where it says inflation, you know, the right third of the page, if, if you go all the way down to the UK, I mean, they're accelerating already to 3.6, six plus percent headline inflation in the in the coming, in the second quarter, right? Yeah. So, our team's trying to like zoom in on that. I mean, one, these are very proprietary models. Two, I don't know how so many people believe or want to believe people that have no models. Okay. So, when I say like, it's like it's an, it's an ongoing measurement. That's the job. Like you have to have models. You have to have accurate models. Yeah.
>> Where do you think we're at on that, divi? I would have thought with AI,
>> that and all that has become technological evolution expediting, you know, getting the market, finding the the economic truth.
>> I would have thought that at least we'd have, you know, some competitors. You try to speak like about currencies, inflation, growth rates, pending policies associated with in inflation, growth rates up or down. I would have thought that they'd at least have an accurate model, never mind no model, but we have not seen much on Wall Street on this front.
>> A lot of the, a lot of the things that I read about currencies and about, uh, inflationary, inflation expectations tend to be very ideologically based, biased.
>> Very ideologically biased. For example, um, you, when in the UK, you had a conservative government, immediately everybody was throwing all kinds of of of crazy views about inflationary pressures and the, and the, and the bank of England should do this or that. While right now, it seems that there is some sort of, I would say, mainstream desire to sort of sell the narrative that with a labor government, inflationary pressures are going to be lower. There's a lot of that. If you think about it, a lot of the, uh, aggressive positioning that we have seen that were did not come from people thinking that, um, that it was a trade surplus or, uh, or, or money supply growth or a money velocity growth type of situation. There's another thing, and that, and the reason why I believe it's ideological is that a lot of people don't want to believe that inflationary pressures come with very aggressive government in government spending policies, which is printing money. No. So, in the case of the UK, what was already higher inflation than in comparable countries, what, uh, you find on top of that is a very aggressive government spending and deficit spending program, that means more money printing, but also means higher velocity of money.
In the United States, you have stable, slightly declining money velocity, depending on what people are expecting out of investment and credit. Uh, in the Euro area, you have stable on both sides, but in the UK, you have the, the combination of money velocity and, uh, government spending, and that is a challenge. So, I think that there's a lot of that. It's basically just that people don't want to hear good news about the countries where the governments are not the ones that they support.
>> Yeah, it, it's, it's a fascinating. I, I've used that word twice in three days because I, I don't use it loosely like mainstream media, you know, journalists do. They find anything fascinating, like the milkshake or whatever, you know, that's all just fascinating. No, no. What's fascinating is that the machine, you know, the machine, the global market machine is constantly recalculating using all the AI tools embedded therein. What is the pending rate of change, GDP growth rate, inflation growth rate, you know, what are the odds of the central bank understanding that those are going up now on inflation instead of going down, which they were pre the war. Like, you know, if you look at the bottom of that page again, if you just take the G20, I mean, you have global inflation reacelerating into a global quad three. We call that global stagflation. You know, that's a global thing. You have to, it's, I, I don't, I don't see like, now let's get into Iran on that too. I mean,
>> that that happened.
>> Right. Yeah.
>> If, if you look, just, just look at our CPI nowcast tracker, guys, on like, our CPI now is actually tracking up to where UK inflation is, which is a major problem. Interestingly, on the prior page, do a little, you, if you're really good at macro, you can be like the guy who's running our, our TV studio here. You can flip back and forth between these numbers all the time. Go back to that UK one now. Look at him. He's going USA, UK. He's going all over the place. But I got all these people trading currencies out there that don't have any of these numbers. It's an amazing and fascinating thing to to attempt to do. But that said, you know, this, this has had fractal impact.
>> Right. You just took up the inflation curve after it had been going down for six months.
>> Yeah. Basically, um, first, we need to understand that a lot of the inflationary pressures globally were already, uh, in place coming from a massive increase in global money supply growth.
Global money supply growth is running at the fastest pace since 2021. That obviously was already a warning sign, but most of it is directed to higher government spending in most developed and also in, uh, emerging economies, which means that money velocity rises faster and therefore that creates higher inflationary pressure. So that's one thing. On top of that, you get now the effect of, obviously, what was the biggest driver of disinflation in the past 14 months. Energy. Energy. If you look at all of the, all of the developed economies, the big driver of disinflation came from natural gas being down. Uh, oil prices ended the year 2025 at around, I believe, minus 25%. All of that. So all of that has gone from being a shock absorber to a shock amplifier. No. And I think that that is one of the elements why globally you could have a level of inflation of 6%, 6.2, 6.3% in 2026, while at the same time you have a reduction in real GDP growth to about 2%. So it would be the lowest level of growth since 2020. And at the same time, you would have, uh, the highest level of inflation year on year move since 2019.
>> Yeah, it, it's, um, and and and lo and behold, at least they're consistent, right? You have at, in the US, you have this guy Steven Moran or Moran or what he can't pronounce my name. It doesn't matter if I can't pronounce his. He's irrelevant to me other than, uh, front-running where the Fed is going to be wrong again.
>> Right. So, so you have the only dent, you know, on, on no rate cut, you know, essentially is using a pre-war model.
>> No model, to be clear, no model,
>> a pre-war ideological opinion on, on what the Fed should do so that he gets appointed by Trump to be who he is now, right? That's what it really is. But as you go out in time, is there any way? Like, can you think of any way? I can think of a couple. Um, can you think of any way where what you and I agree on, we're hooking out up, we're instead of going towards 2%, just to simplify it, instead of going towards 2%, the target of the Fed, we're now going towards three and a half to 4%. You know, instead of going down, we're going up.
>> Going towards double the target. Is there a world like what are the, what would be the, the, what would be the scenario analysis on the Fed cutting rates in that scenario with Worsh, you know, in his new seat?
>> Uh, the only way would be if there would be a, a massive slump in employment. No, I would think if you get,
>> If you get that kind of inflation, what would lead to a rate cut would be a, a monster job destruction. No, because obviously the Fed is allegedly has two mandates. No,
>> inflation and growth. So that the fact that they put employment first, but how would you get to that level of 4% on a, on a consistent, uh, consistent level? You would basically need a more than debatable, uh, transfer of the impact of, uh, energy, oil, in everything else, and very, very quickly. Also, remember that for the United States, it's a very different world than for the UK. Why? Because in the UK, gas, natural gas prices are up 52%. In the United States, natural gas prices year to date are down 20. So that is also important. The energy component, the energy component is not only oil. So, in order to get to that, if you got to that level of inflation,
>> the risk would be a crisis, not necessarily anything else. No. Uh, so I would, I would imagine that it would, the only reason why they would cut rates would be the reason why they did the same thing in other, uh, moments in which the, the inflation rate was above target, which is that, that the, that the job market would be in absolute shambles. And I'm talking about absolute shambles, not the current situation.
>> Yeah. That, that echoes too. There's this year called 2008, right? I mean, you had oil, oil go to 140.
>> And they're cutting interest rates. I mean,
>> The thing is, and that is very important for people to understand, because
>> oil going to, uh, we, first have to remind people that oil is very, very far away from those levels because in nominal terms, it is at 100, but in real terms, it is much, much lower. Uh, but I think that what is important is to remind people that the, the biggest risk of so many of the things that we are talking about right now is not necessarily that you would have a stagflation environment, but you would have a crisis. So you may have one, one view that is that this is going to be temporary, that the, that the impact on oil and natural gas prices is going to come down rather abruptly, and then everything will be back to printing money and continuing with this increase in GDP that we have seen so far, or there is a crisis. But it's, but I don't see where you get to an environment in the United States in which oil prices go to that level, inflation goes to that level, and there is not a crisis environment. Therefore, that's why I think that the, you have to work with basically, I don't know, two outcomes, no tail risks, no, one is either that the, that what markets seem to be discounting right now, which is a, a quick solution to all of this and then things getting back to normal rather rapidly, or, or a crisis. And I'm, and that's what I, I'm more concerned about. So you always have to keep that 10, 15% of your, of your portfolio geared toward, uh, the risk of a crisis, not the risk of, let's say, uh, of just, uh, 2022, 2023 type of inflation.
>> Yeah. It's, um, Jim Biano, who, who you know, uh, yesterday, he's like, well, look, you, the market got its flation.
>> And then and then you're, you don't know when it's going to get its stag, and the stagflation, the commensurate growth slowdown, the, you know, the problem in the jobs market, etc. If you actually think about this in context, we had, we do have, you know, the decade of the 1970s is instructive where, you know, you can get a Federal Reserve person, like I, like I said, I could think of a couple scenarios. One, the jobs market is that bad. Two, Worst just does it anyway because he's been completely hired like a sock puppet to do it. The minute he said he wasn't a sock puppet, we gave him a new nickname. So, it's perfect. Um, but, uh, if you go to slide 118, guys, I mean, the interest rate peak, the reason why interest rates always peak, um, following the oil shock is not that complicated. If you go back to the 1970s, right? If you look at that, I don't know if you could see that, Daniel, you wrote a book on it, so I'm pretty sure you're well aware.
>> Yeah, I'm seeing it right now. Yeah, just right now.
>> Yeah, but I mean, whether it's, it's not 1990, Gulf War, this, you know, if you thought it was going to be two weeks or a month, that's that's. So let's just use 8 to 13 months. I mean, what typically happens is that long-term yields peak on a lag to that shock.
>> And that's mainly in the 1970s because growth kept slowing again on a lag.
>> In that case, the Fed, Arthur Burns would cut rates, and he has his own legacy. Um, you know, and, and, and, and history remembers it that way. So, what do you think about that?
Well, let's start from why I don't think that there will be a crisis in the United States because this is a very different scenario than in 2008. Right now, the United States is the biggest oil exporter in the world, and it's the biggest exporter of natural gas relative to 2008 when it was the biggest importer. Number two is that unlike in 2008, the dollar is rising when oil prices are rising, which is disinflationary for imported products into the United States. No. Um, the other obviously is that the, the combination of technology versus, uh, services has shifted almost basically, uh, uh, to, to the opposite in that period. No. Uh, but what I think is that, um, it's very difficult today to get the type of crisis that we got in 2008 or something or 2001 when the biggest shift in the global economy is that the United States has gone from being the largest importer of energy and therefore a shock expanser, a shock amplifier, to being a shock absorber. That's what I think. Uh, my opinion about the, what we were just, just showing is that, um, in the next, uh, few months, it is very likely that what we saw in the IMF revisions happens again, is that we see that the impact on the US economy is relatively smaller than the impact on the Euro area, which is going to be ginormous, in the, in the UK, which is very large, and similar economies that have not, let's say, created that shock absorption opportunity.
>> Mhm. Yeah. Like you said, they have net short positions in oil. They have, you know, they have their currencies going down. I mean, the Japanese are pretty much, I mean, they're got, they got a new run it hot policy and they have, you know, they've been relatively tight for the Japanese, which is crazy to say, but it's on a relative basis to what their own policy, they've been hawkish. Actually very hawkish.
>> So,
>> Absolutely.
>> So, the currency market's figuring that out too. I mean, the yen is is probably the only remaining large short I'd have on, um, against the US dollar. And you're going to have like these things that just go on and on and on because you, the, and maybe let's just go there because we haven't actually gone there yet, and I know you've done a lot of work on it, like the history of Iran, the structural impact, just, just the geographic reasoning of the Straits of Hormuz, like how you think of how long that's going to last and how long the problem would remain potentially for these countries that are net short of oil.
>> Yeah. Well, it's going to be very challenging, obviously. I, I think we have to separate oil from natural gas. It's going to be very challen.
>> Yeah. Going to be very, very challenging for the European Union countries that need to inject natural gas in the worst possible moment when natural gas prices have gone through the roof. When you have the challenges at Qatar and all these things. But the interesting thing, the, you know, when I was in the oil industry, uh, Iran threatened with the shutdown of the, of the Strait of Hormuz five times. I was 10 years in the oil industry, five times they always do the same thing until what we realize, and I think that this is what has happened right now, that the one that depends the most on the Strait of Hormuz is Iran. No, 25% of its GDP goes through the Strait of Hormuz. 60% of its government revenues go through the Strait of Hormuz. 90% of its exports. So the one that is currently being the most negatively impacted is Iran. And the difference now from the five times in which I remember them threatening with the shutdown is that the economy in Iran was already in an absolute disaster. Yes. In, uh, in 2025 and beginning of 2026. We're talking 68, 69% inflation. We're talking about an economy that is completely demolished. And more importantly, a lot of people don't talk about this, but these people, this, this regime, this evil regime has decided to shut down the internet. And that costs the Iranian economy. Every single small shop that that that that sold things now, it's costing the the economy around $40 million a day on top of the $500 million that they're losing. No. So, what is the point that I'm trying to get to? I'm trying to get to the point for people to understand that each day that passes, the Strait of Hormuz means less for the global economy. 80% of the volumes that go through the Strait of Hormuz have already been either offset or rerouted. And, um, the more that we get into this situation, more, and, and so it's going to be a question of price, not a question, not, not a question of of availability, except in the European Union because of jet fuel and LNG. Those two are very, very tight. Those two are very tight. The other element is China. No, the other element is China. 90% of the volumes that go through the Strait of Hormuz are not going to Europe or to the United States. That is less than 4%. They're going to to to Asia. No. And every day that passes for the Chinese economy, this means that instead of getting virtually free oil from Iran, apart from losing the free oil from Venezuela that they were getting, they will have to purchase oil and refined products, etc., at massive premiums. We have seen right now the largest premium I have seen in my entire life of Arabian Light. So I think that all those things will play out very, very quickly and abruptly, and we will likely see a conclusion faster than for example, the Ukraine war. Remember that in any case, global supply chains are a lot more flexible than what people anticipate. When the Ukraine war started, I remember reading that we were going to run out of grain, that we were going to run out of cereals, apart from oil and natural gas. And, by the end of 2022, oil and natural gas prices and grain prices and coal prices were below the levels prior to the, to the, to the Ukraine war. And four years into it, we have still not seen any of those elements that were viewed as the biggest, biggest risk. So, so without, without saying that everything is going to be rosy, obviously, and I think that is that is pretty clear that we are not saying that, what I'm trying to say is that the world moves much faster to generate the solution than what people in markets or in media are able to come with, uh, with a, with a problem.
>> Yeah, that's what I love. That's why all my models are based on what the market's, you know, current pricing of that is. I mean, I don't, and I think that that's like a key going back to the, to the introduction of this conversation or, or the beginning of it. Um, that is, if you, you're to separate like how Daniel, you and I look at the world versus how these purveyors of these, these salespeople of newsletters, one in particular who's like the dollar guy. He's, he's like former like Cleveland something research sales guy. I mean, it's like they don't have models, they don't have the same process. They never traded macro markets. They're, it's like the opposite. It's not.
>> It's not an insult. It's just you do it differently. So your perspective is totally different. I mean, yeah, when we look at, you know, we, I, you can tell me what you believe, but I believe,
>> that I have, I have no idea, Daniel,
>> what positions I'm going to have in three to six months.
>> But I know exactly how to get to those positions. And that's by having the humility of taking the last price of the market within my framework, within the signal to quad framework,
>> and having the humility to say, I don't know.
>> If I had to send you a newsletter on this,
>> it would have three words. I don't know. And, and you're not going to pay anything for that.
>> Yeah. This is what's what's most important. A lot of people hearing us will say, "I disagree." Fair enough. That's the market. Beautiful. No problem whatsoever. Just understand where you're going to get from where you are to whatever changes without losing money. No.
>> Um,
>> Right now, uh, it's, if you want to to short everything and go and go crazy and and and think that the world is going to collapse, there's a market for that. But I think that it's more important that when we talk about things that are uncertain, we, a, make an analysis of what can make what can lead us to that point where it's a tipping point that leads to a crisis. I think we're very far away because of all the actors that are being hurt in that process. The second is, it doesn't even matter if I'm right or if I'm wrong. Just take it point by point to where it's going to get to. When the, uh, war started, I said to everybody, I have never seen Iran shut down the Strait of Hormuz. Guess, guess what? You know what I have never seen in my life? The United States shut down the Strait of Hormuz. So my point is, of course, I don't know. What I know is what I know is that once I have that piece of information, then I can take a decision for the next months. And you cannot take a decision for the next three years. You need to take a decision for the next months because that is what is going to lead you to understand whether that 3.6% that you have, and I think you're right about the UK inflation is going to get to 4.2 too.
>> Yeah,
>> that is the point. That is what, and that is the tipping point, by the way. That is what makes you have to make a massive 180 degree move in bonds or not in 2022. The obstinacy of so many of our colleagues and and competitors out there of saying, no, no, no, no, inflation is not going to be persistent, led to the monster losses in bonds that have not recovered yet from the 2022 slump. No. So the key is to go point by point and then assess whether those incredible things that you guys put, that I absolutely love, which are the different, uh, scenarios start to be, uh, confirmed or denied. And that's, and that's the thing.
>> Yeah. It's called being, that's why Daniel Laya is called a good Bayesian boy. It's called having a Bayesian inference process. Every time you get more information, you keep going where your higher probability bets are. It's interesting. I have one more question for you before we have to go, but the, um, on that, like, I don't know, and like you said, you got to trade the next thing. I trained my son, interned here, he was 17 years old last summer, and I gave, he's the only person that has my signaling models on because I didn't want them to get stolen. Um, and so one day he'll get those. But I said, "Okay." Okay. So, I taught him how to use it, and, uh, on the eve of of the bombs dropping,
>> I g I said, "Jack,
>> like, check this out. Make sure you have the dashboard up like today at school. Check it out when you're on your break, and we'll talk about when you get home." Because I just wanted, I wanted him to to see what he thought the impact of a war would be and what the prices would be. And the first thing he, he comes home, he's like, cuz he, he could, he can't see everything in my account, but he's like, "Dad, why didn't you buy German gas?"
>> Yeah.
>> And I'm like, "What?" And he, because he has every commodity that ticks, right? He, so he doesn't read other people's narratives. He doesn't have a Bloomberg. He has no experience. Yeah,
>> but he had the best answer to the question by just observing what the market said,
>> which both he said, "Why don't you buy TTF, which is, you know,
>> European gas or German gas." Um, and, and I was like,
>> "I don't know."
>> But I should have.
>> It doesn't, but it doesn't even matter. You're not there to get every. This is another thing that you and I, you've said this beautifully in your book. It's not about getting every idea right. It's about getting the majority of your ideas right and more importantly, not being stubborn with your the ones that you get wrong. You get it wrong, you move on. That's not a problem. That is not a problem. You
>> see, it's, it's staying wrong that's a problem. Last question, just we only a couple minutes from that. You've written about this, and it's a really good example of this. Like, you know, my 17-year-old would say, "Okay, you go buy defense stocks because the bombs are dropping." How did that play up?
>> Oh my god. Yeah. Defense stocks, not a good idea. Why? Because you see what happens. That's why you have to be very, very careful about, you know, you have to be careful and, and, and see whether the the thesis plays out in defense stocks. What happened was that one, they had run too fast. Two, start, people started, and rightly so, started to think, hey, these governments are not going to be able to spend what they said that they are going to spend on defense. B, these governments are going to find more expensive their debt in the next months. Therefore, that may hurt, uh, defense stocks. So, on the one hand, you had a valuation problem. Everybody talks about, uh, everybody talks about the valuations of tech companies, but we had a European defense company, a German one. I'm not going to say the name, that traded at 90 times PE, 90 based on, based on the Rearm Europe program. I mean, seriously, even if the Germans decide to go gonzo on military expense, hopefully that's not going to happen. Uh, but even if they did, they, that, it's never going to achieve that the level of earnings growth that that 90 times PE, uh, assumes. So, so defense stocks have proven that you have to be very, very careful about running with a theme, uh, into both earnings and into government spending. Careful with oil companies. You don't want to be, uh, in European integrated oil companies into earnings one, when people are assuming that $100 a barrel oil goes to $100 into their accounts, which it doesn't. No, that kind of thing. Simply, simply play along with the, with the, with the themes without, without, uh, without forgetting that if interest rates go higher, that if sovereign debt is more expensive, and if the global macroeconomic situation is getting worse, it's obvious that European governments are not going to spend that much in, in, in terms of defense, and that's what happened with defense stocks. Very good answer to a question that's on a lot of people's minds, and now you know, uh, unfortunately, we're out of time. But now everyone knows Daniel, why you and I, uh, love talking with each other because we can go anywhere, but not have to be everywhere. You know, it's, it's, it's a real special, uh, relationship that I'm, I'm, I'm blessed to have. So thank you. Uh, thanks for spending the time with me.
>> Same here. Always, always a great, great pleasure. Fantastic conversation and keep the good work. Thank
>> Thank you for watching this video. Please subscribe to my channel, like my videos, leave your comments below, and keep defending freedom.