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[Music] Mark, thank you very much for joining us today. How are things in Thailand?
>> Uh, everything is fine except the economy and the political situation, but otherwise the country is okay.
>> And what do you mean exactly when you say the climate and the political situation >> at the moment? uh because the the country depends to a large extent on tourism and tourism is down and but the capacities were built over the last two years to accommodate more tourists and so I think that if I go out to hotel lobbies or to bars especially bars they're suffering very badly. They are bars sometimes they don't have a single customer in a night and the girls they don't get the salary they are on commissions of drinks. So if a girl drinks with you say for your beer you would pay say $3 but for the for the drink of the girl you would pay say5 and a half or $6. And that difference is her commission. And so she needs a certain quantity of drinks to survive or she needs to go out with customers and there are plenty of them but at the moment less.
>> That's very interesting. That's an interesting observation because I wonder if this is just a reflection of what's happening across the globe from an economic point of view. uh both the economy in Thailand is particularly bad at the present time. Uh I think has to do with competition from Vietnam in manufacturing and from Cambodia and so forth. And then uh the country borrowed too much money. In other words, people had uh large debt accumulation over the last few years and some of those debts are very high. I mean, I've seen cases of uh people if they go to the bank, they don't get the credit. So, they borrow from the underworld or say informal economy at about between 10% and 20% per months. per months, not per year, per months. So that cannot usually be repaid and accumulates and becomes very burdensome on the people that borrowed.
>> It sounds very analogist to the US economy. So I want to begin our conversation right here. There's been a ton of economic data out of the US in the last couple of weeks. And I want to start with the jobs numbers for the month of July. uh they came in at 73,000 jobs versus expectations of 110,000 jobs. But the big surprise came with the revisions. And for the month of May and June, they were revised down in a big way. May numbers were revised from 144,000 to 19,000. June numbers were revised from 147,000 down to 14,000. And because of these revisions, President Trump said the numbers were rigged and the revisions were concocted. And because of that, he fired the head of the Bureau of Labor Statistics. And I want to start right here because the last time you and I spoke earlier this year, you touched on this very topic and you actually said the Bureau of Labor Statistics publishes lies. So, what are your thoughts on these jobs numbers and the revisions and also the firing of the head of the BLS?
Well, it's it's difficult to analyze an economy because an economy consists of millions of households and each household has a different uh background and different situation. You understand? Some people they may own a house and they may have paid it in full for the house. So, they don't have any mortgages. And some people have a house who is mortgaged but it's fixed. So when interest rates go up, it doesn't hurt them. But others they have a house or is a mortgage that is not fixed. So when the interest rates go up, it hurts them. Or they have credit card debts. Credit card debts are very expensive, but they are easily obtainable. So all these things add to an economy that is very uh differentiated in the sense that some households. You take me I have a business and because of the nature of my business I always hold cash. So when interest rates go up, I benefit because on the cash 5 years ago, I didn't I got less than 1% interest and now I get four four and a half% which makes a huge difference on say a million dollar cash or on $10 million. So some people actually benefited and two uh the interest rates have gone up and that I have to say I don't think anybody understands very clearly what is liquidity because the liquidity has actually increased. There's plenty of money in the system. That's why the stock market is at the new high and the precious metals are high. I mean, relatively speaking, I think they'll go higher. But some people uh the Jeff Pessos of this world, they benefited from the interest rate increase and the increase in stock prices and so forth, whereas other people, they have been hurt. And so the typical household that shops at dollar store or at Walmart and so forth, all these companies they will tell you that uh spending is restrained because of the inability. They don't have the money because the cost of living what usually people call inflation has gone up but the salaries have gone up less than the cost of living. And so they're paying like a tax through what we call inflation. It's an increase in prices that is undesirable. The problem is in a democracy people vote for measures that lead to inflation. You understand? They want benefit. They want child allowances. They want uh social security. They want free health care. They think free health care is free. No, someone has to pay for it and massively because it goes into inflation and it goes into higher taxes. It's like a tariff. They talk about tariffs is a sales tax nothing else. So we have to be very careful. My view is that the economy is weaker than what the statistics suggest because the statistics are GDP gross national product. The problem with the gross national product is that depending on how you input the cost of living increases, it changes a lot in real terms. You understand? I could show you statistic the statistics that would show the GDP is increasing by 5% peranom but if I adjust it differently according to inflation according to price increases I can show you maybe negative growth of 2%. It's just the GDP has increased because of money printing because nominally it went up but in reality it didn't go up and the employment figures are interesting because because one thing they can count reasonably uh reliably and that is employment in manufacturing that is keeps on going down. Now someone will tell me uh Mark employment in manufacturing like in agriculture in the 19th century went down because of productivity improvement but I accept to some extent. Uh today a factory could operate with two or three people. Say a brewery. We could have a brewery and uh with no staff, all automated.
>> And you're right about the GDP numbers. There's been a lot of noise this year. Uh the Q1 numbers very weak due to the tariffs. Q2 numbers very strong due to the tariffs. So, we got a lot of movement in these numbers and it's hard to make sense of the of it all. And then we got we have the administration saying saying you cannot believe the jobs numbers. They're all fake. They're rigged. So, as an investor, how do you make sense of all this?
>> You you should never listen to government officials. they all tell you a story and they want to get elected and so forth. Uh the reality is very different but uh I mean just observing what is happening in the world when I travel I can see that ordinary people are struggling. They may you go to Switzerland according to the Swiss statistical office we we have no inflation basically. But then I look at the statistics that compare the cost of living of different cities in the world. Switzerland after of the 10 large the 10 most expensive cities always has three or four cities. It's very expensive. But but they show that inflation doesn't exist. I think that inflation is much higher than what the government says because the 10 years treasury in Switzerland is selling for less than 1%. And the cost of living in my opinion goes up by at least 5% peranom. So we have strongly negative interest rates. But in that environment, you see, I'm an economist, but I'm translating what I observe economically speaking into investment schemes. I'm interested how do you and I and your viewers survive financially in this environment where for the last 40 years or so actually since the Fed was founded in uh 1913 in this environment of money printing and continuous money printing. How do we protect our assets best? And how do we make money in real terms? in real terms means not in nominal terms because since the beginning of the year you made money in the American stock market but the loss of purchasing power of the dollar v say gold or v foreign currencies exceeds the appreciation in dollar terms. are actually measured in Swiss Frank. If you invested in the Dow Jones or in the S&P 500, you lost money. And if you compare the price of the stock market and the price of gold, then the stock market in gold terms has gone down a lot. It's gone up in oil terms. it's gone up say in wheat terms but in gold terms and silver terms it's gone down and my view is that under Mr. Trump, no matter what they say, they're going to print a lot of money, a lot. They have to, otherwise the system collapses. And they do that in every country, not just the US. The US is probably uh more reasonable than other countries. So just because you're talking about inflation, uh I want to do a deeper dive on this. And earlier this year, Stanley Duck and Miller and also Paul Tudor Jones both expressed concern for a reaceleration reaceleration of inflation, especially due to the tariffs. But um inflation has been above the Fed's 2% target now for 52 months, if you can believe that. And it sounds like you're also very concerned about uh inflation. Do you think the Fed has lost control of it?
>> Yes, I think so. I mean, uh, in a capitalistic system, of course, prices will fluctuate. Uh, they'll go up and down depending on demand and supply and so forth. But I give you an example. uh as you know in the US the stock market is selling at high valuation and uh real estate uh let's say we distinguish commercial real estate has collapsed is down I mean in some buildings in some cases by 70% in other cases less but there are buildings They were worth maybe $300 million. Suddenly they're worth 20 million. Nobody nobody moves in there. And I have several examples about that. But the residential real estate in America and other cities around the world and Canada is skyhigh. is much higher than at the previous peak of the real estate bubble in 2007208 and after that real estate residential went down that I think it will go down but the Fed is aware that a significant decline in residential real estate would cause significant harm to the economy Because people they bought a house say 20 years ago they paid $300,000 and suddenly it's worth now a million. So some people can sell it and move into a smaller place and so forth. So or they can borrow money against it and so forth and so on. So the rising asset prices in my opinion have created a wealth effect, a wealth illusion where people feel rich and they spend more. And when these asset prices including stocks and real estate will go down, I think it will have a huge impact on spending. And lately, as you know, retail sales have been okay, but not uh fantastic. And a lot of stores are complaining about uh people being careful in their spending patterns. In my view, this comes about because most people haven't made much money in the stock market in the last 12 months unless they were in the f and related stocks say 10 stocks and real estate is no longer going up. In some areas it's going down actually quite a lot from the peak maybe down 15 20%. So the spending power has diminished in my view and the Fed of course Trump he wants interest rates at 1% but if he cuts interest rates to 1% in my view the dollar will collapse because I I'm happy to hold dollars because I get say four and a half% on 3 months deposit in Thailand I would get maybe 2% peranom that's it so I have an advantage to be investing in dollars also as a Swiss Frank holder in Swiss Frank I hardly get any interest at all and in dollars I get the 4 and a half% so it's not bad it's probably less than inflation but I I think investors must start or begin to think how do I lose the least quantity of money. Not how do I make the most money but how uh do I invest in assets that will go down less than the general price level.
So you mentioned the Fed and we had a meeting recently and interest rates were unchanged and as you mentioned the president wants to get interest rates lower for many reasons but uh during that last Fed meeting Powell was very hawkish and we also had two dissenters and the last time we saw that was 30 years ago and so I want to get your thoughts on the comments from Powell but do you think Powell is being political?
Actually, uh, personally, I think he eased, uh, a little and cut interest rates last October. I think at that time he was probably political. I don't think he's political at the present time. In fact, I think he wants to prove the world that the Fed is actually independent. I don't think they're independent, but in this particular instance, and I never thought over the last 40 years that I would ever say anything nice about the Fed, but in this case, I think they're doing the right thing, namely not cut rates. Because look, the stock market is at an all-time high. The gold market is near high and silver as well. And there are price pressures also because of the tariffs. I mean, it's very clear that department stores say Walmart they sell goods probably around 80% are imported goods. from foreign countries with the tariffs. All these prices will have to be increased somewhat, not all that much because say if you buy a Nike shoe, uh the tariffs don't touch say the 80 or $150 you pay in the store, they touch the price of the shoe that comes out of China or Vietnam. So that would be say $12 a pair. The rest is all added wholesale, retail and so forth. But the tariffs for sure they will increase the the prices. That is clear because the government says we collected last month say $18 billion or $30 billion and so forth. That is paid by the American consumer by nobody else. And so when you talk about uh PAL, you think Pal's doing a good job. He's staying the course. He's not cutting rates. Uh he's doing so because he's very concerned about inflation, I guess, heating up, right? And he doesn't know what the impact is of these tariffs.
>> Well, he's doing a good job for in this particular instance. I agree with him not to cut rates. But uh as I said the problem is that they increased interest rates but the liquidity increased as well. And I think nowadays with so many instruments and credit cards and cryptocurrencies and so forth, I'm not entirely sure that people know what money is anymore. For me it's very clear what it is. It's gold and silver that is say the store of value but the monetary aspect say a bank note how much is it worth that I don't know and a cryptocurrency what is the value I don't know I suppose the value is not very high because it can be dup duplicated it. But the Bitcoin fans and the postals and so forth, they will tell me I'm wrong that bitcoins because of this and that has this value. But we don't know because quantum computing will change many things.
>> I want to dive deeper into cryptocurrencies, but before we do that, I want to stick to the US economy. And I read some recent research on the housing market and Goldman Sachs just came out and they said they expect the back half of the year to be the GDP to be weak and they think housing is going to drag it down for numerous reasons. The slowing in demand also higher mortgage rates.
>> Moody's also came out uh expressing similar concerns thinking saying housing is going to be a big headwind for the US economy. Do you have any thoughts on residential housing?
Yes, I'm I hinted earlier on. I think it will weaken partly also the prices are simply too high. Let's say we can measure affordability. We take the median house price in America and the median income. When I grew up and when I started to work, my salary was high relative to real estate. Real estate was at that time cheap in the early '70s. The stock market was also cheap. You know, at the time you could have bought an S&P for 20 hours of work. Now you need something like 150 or so. So assets are high and wage is relatively low. The '70s it was the opposite. Wages were high and assets were cheap. But uh the real estate in my view is very vulnerable. I think it will have to come down by at least 30% especially condo prices. And if this happens the the wealth's impact on consumption in my view will be dramatic. Much other economists they don't think so. They they think the wealth impact is not that uh important. But in my view when asset prices go up people have the illusion of wealth they feel rich and they spend more and the US economy is driven by mostly consumption by consumer spending. If that comes to an end, I think the price I mean the economy will be very bad and then as you know huge uh quantity of money is being channeled into artificial intelligence. These are huge investments. Will they all be rewarding? Most unlikely. I I say when new technologies come up is like with mining 90% is fails 10% succeeds or not even 10%. So I'm actually negative for the US economy and that's why to the surprise of many people I'm not wildly bullish about bonds but I think you can make some money in bonds in treasury bonds say five to 10 year bonds
>> so
>> because the the Fed will cut rates that I have no doubt about that they'll cut rates and so the bond market will be supported. Having said that, I don't think that 10 years US Treasury at a slightly higher rate than 4% is a very is is an attractive investment. I don't think so. But it may be the investment that is the least unattractive. In other words, it may It may be supported by weak economic figures but in general we foreigners and we own something like 30% of all treasuries outstanding. Of course we watch the position of the US dollar. If we believe that the US dollar will go down uh say by 3% peranom for the next 10 years or 5% peranom then we want an interest on the bonds that compensate us for this depreciation of the dollar. So I don't think that bonds will rally dramatically but the short position in bonds in the futures market is garanu and I mean huge and so I think we could squeeze the hedge funds. They all heavily short treasury bonds as you said Paul the Jones he was right but since he spoke bonds went down first but lately they've been rallying so he hasn't made all that much money on bonds unless he traded them in and out but the idea but long term he's of course right I I think long term if you look at the next 20 years we could easily see in 10 20 years interest rates around 20% 30% peranom I mean rising tendency they interest rates move in long cycles we had a downward cycle since 1981 when they peaked out they bottomed out in May August 2020. Since then, we're in a rising wave of inflation and interest rates.
>> So, you are very concerned about the US economy. You don't think the GDP is growing as strong as we're led to believe it is. Uh you also express concern about the US housing market. So, but if I take the other side of this, Mark, and I say, well, look, the S&P and the NASDAQ are trading at or near all-time highs. We have Nvidia just went through $4 trillion in terms of market value. I look at the bank stocks like JP Morgan that's trading at or near all-time highs. Goldman Sachs. And when I look at JP Morgan especially because that serves both residential or or retail investors and also commercial uh clients. But I would say that's a reflection of what's happening within the economy and yet the stock is trading at a near all-time high. What would be your argument to that?
My argument would be is it a reflection of what is happening in the broad economy or is it a reflection of excessive liquidity that actually flows into financial assets? That is the big question. You know I understand your argument uh which you may hold or may not hold but for argument's sake if someone comes to me and say look stock market is at an all-time high because the outlook is so favorable. I can live with that view is not my view but that someone would argue that way I could uh accept. However, my view is that we must distinguish in inflationary times about the relative value of assets. So they print money visually. It's done through computers nowadays and so but money hits the earth. What happens is the money doesn't touch everything at the same time with same int intensity. It's like a rain. Some some areas in the world have light rain and some will have very heavy rain. And so the money will flow where there's heavy uh money flows and the money flows now they flow mostly into through the banking system and through the investment process. they flow into speculative investments and that's why Nvidia is at the $4 trillion market cap not because it reflects brilliant out outlook. It's like in 1929 you could have argued Mark the stock market is so high because the outlook is so good and I could have told you at the time well the outlook is maybe uh right now good but it will turn bad so we don't know but I would uh be cautious and make the mistake not to make too much money but to be prepared for some unexpected very bad news because the stock market will top out when everything looks good and it bottoms out. That's why I spoke briefly about Thailand at the beginning. Everything looks like s horrible. The economy is bad. The political situation is bad. Tourism is bad. everything is negative but the stock market is relatively low and again here I have to clarify I'm saying relatively I don't think stocks are that cheap but they're very cheap compared to say Singapore stocks or they're very cheap compared to European stocks or very cheap compared you talk to banks in America I don't think that banks are very cheap But I recommended banks and was very interested in banks in 2020. They were dirt cheap, but nobody bought them. I wrote many times about City Group and so was and about JP Morgan. Uh they were very very inexpensive. Bank of America, Wells Fargo, all these stocks, they've gone up multiple times since then. But now in my view uh they're not that cheap and some technical models suggest uh that the financial stocks are weakening. I would subscribe to that view. I think financial stocks are weakening u and this is a very negative sign for the stock market. In a bull market, you want financial stocks to run up, which they've done in many cases around the world. I also own banks. Do I feel very comfortable by owning city? No. Do I feel very comfortable by owning the Thai banks? I think they're good value, but I don't feel as comfortable as holding uh physical gold. You understand? But physical gold is not that cheap anymore. And two, it has no cash flow. Where's the dividends on the financials in Asia? You can buy perfectly healthy banks in Singapore yielding a dividend yield of around 5%. And when you say investors should expect some negative new news that will take this market significantly lower, what might that be? We don't know. But believe me, throughout history, news has fluctuated from favorable news and developments that exceed expectations and disappointing news where expectations are not met. Now, you ask me, what could that be? I think the geopolitical situation isn't good. I'm also looking at one of the things that really stands out to me is the level of speculation that's going on here in the last five years. It's just unprecedented. And I'm looking at the various bubbles that we've seen in the last 5 years and ICOs, spaxs, NFTts, the metaverse, you mentioned cryptocurrencies, there's thousands of them even
>> And one play options.
>> Yeah. Yeah. Yeah. Exactly. And but what are your thoughts on this and how is it all going to end? And I guess it goes back to what you said about the
>> it will end very very badly. But before it ends very very badly. Uh the Treasury and the Federal Reserve and Trump is basically all one. They will print money. This is the easiest solution. And Trump, whether he does it by purpose or inadvertently because of his lack of knowledge, he basically misleads people. You know, like statements, we're going to when I become president, the war in there and there will be finished in one week. Nothing has happened. Nothing. And um he grossly overestimates himself. grossly. He doesn't realize it because that's a characteristic of a narcissist that they don't realize their own lies, their illusion. But basically uh he will he has no other options but to print and uh the printing will arise because they have to finance the debt. And uh the debt in my view under him will go up not down as a percent of the economy. And so it will end badly. But if I said to you it will end badly, I would have said the same 20 years ago. And we still here you understand it at the higher level. It can end very badly and in nominal terms everything goes up. But in reality, in real terms, me measured against gold, everything goes down. In gold terms, the world is uh poorer today than 20 years ago. For sure.
>> So, you mentioned earlier that you see long-term interest rates going to, I think you said, 20 to 30%. Okay. Inflation's going to be just out of control. It's going to be double digits. Um how do how do investors protect themselves in such a economic environment?
>> That is the question I tried to answer and I said you know that in my view uh precious metals will protect you to some extent but other commodities may do better. Last year coffee did better and two years ago cocoa did better. Uh so the money that is printed flows here and flows there and in cryptos and in day trades. Uh most of the money gets stuck by the people that get the money first. Wall Street they they are the beneficiary of money printing. I guarantee you they all pray that power and the Fed lives a long time and prints money that makes the profit go up. Corporate profits are very strong. But you go to the typical US household and you tell them, you know, this is the land of opportunity. Most people would disagree with it. Yeah, I'm one of those guys. And to your point about the amount of wealth that's been created in the last 10 years, okay, 10 years ago, Mark, there were 500 billionaires in the US. Now there's 2500. Okay, just think about that growth. In the town of Aspen, okay, which is like a resort town in Colorado, there's over 100 billionaires.
>> How's that for wealth creation?
We will go into this is actually funny book. It's called the penniles billionaires. You know these are billionaires in Zimbabwe dollar or in African currency terms also in in Bath where I live in Thailand and many billionaires but it's not worth a lot. So this is where we're going to go towards some and you know in the economics of inflation in every case we have a polarization of wealths very few people make a ton of money. It's like in war times. We know very well who they are. The people who benefit from war, from trouble, from chaos. The profits are huge, including at the American defense industry. Anyway, I I think we don't know how the world will look like. I recommend to be diversified. I think that bonds are okay the treasury market but long not long term. I think for a trade of 3 months or 6 months you from here on to the end of the year to be in treasuries should be okay.
>> Okay. Hey Mark, before we wrap it up, I want to get your views on Canada where I'm based and uh you mentioned a couple of times that you're a social observer. So I want to get your observations on what's happening in Canada now that we have a prime new prime minister in Mark Carney.
>> Yes, a huge progress. the new prime minister. From a totally evoke uh personality, we have now the perfect man from Davis. The man from Davis, a typical uh politician who believes in absurd in ideas of globalizations and so forth. I wouldn't trust him for very long, but it's an improvement over Justin Trudeau. It's an improvement, but not not a huge improvement.
>> Yeah, I I will say he's a lot more professional than Justin Trudeau was, and he's brought a a sense of professionalism to the PMO. And um I did not vote for him. I thought the Liberals were in power for 10 years. They accomplished virtually nothing. So it was time for a change. But the majority of Canadians did. So I will uh support those people that voted for Carney. And I hope he does a great job. Well,
>> he is intelligent. Don't misunderstand me. He's an intelligent man.
>> Got a great resume.
>> Who is organized and he knows how to think clearly. I wouldn't have voted for him either. But is an improvement over what you had.
>> Well, you were talking about the weakness that you're experiencing in Thailand, and we're experiencing the same thing in Canada. Our nationwide unemployment rate is 7%. In the province of Ontario, where I reside, 15 million people, it's 8%. And in the city of Toronto, it's approaching 10% if you can believe that. Youth unemployment across the country is 14%. Can you believe those numbers?
>> Real estate is far too expensive and should go down uh meaningfully meaningfully.
>> Well, Mark, I want to thank you very much for spending time with us today. You're always so gracious with your time. If somebody would like to learn more about you and about your research and the services that you offer, where can they go?
>> Uh we have a website gloomboomdoom.com all in one word. I repeat gloomboomdoom.com and uh I mean it's going to be more volatile and uh I'm a large asset holder but but I think uh we'll all have less assets in say three years than we have now. That would be my view. Hopefully not by 90%.
>> Well, Mark, once again, thank you.
>> Stay well.
>> Byebye. Take care. [Music] [Music]