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I think America is as polarized as it's ever been in its history, with a possible, an ominous exception of the 1850s. In the Civil War, the Union went about 1/3 debt, 1/3 taxes, and 1/3 inflation. In a real emergency, inflation is never a problem. It's a solution. It's a tool.
Going to a fourth turning is going to reset a lot of that, which is going to be frustrating for people who are not ready for that. Let's Can we talk a little bit about going to a fourth turning? Is it survival or is it just anticipating how we need to navigate this and prepare for what's what's yet to come?
It's both. Yes, I'm an optimist long term, but I'm a realist short term. Remember that the process that creates community is not a painless one. And to some extent, each generation has to rediscover these truths for themselves. You know, protecting your your net worth during this period is a challenge. You have to think not just what markets will do, but what the community at large, government will do on top of that.
Neil, great to have you on today. I know that you and your late collaborator William Strauss, you changed the way a lot of us think about history with your work in the fourth turning. Uh, at its core, your work really suggested that history doesn't move in a straight line. Uh, it moves in long cycles, roughly the length of a human lifetime, you know, 80, 80 plus years, give or take. Within each of those cycles, or or called seculum, society's pass through four distinct phases as you have outlined: um, periods of rebuilding, awakening, unraveling, and then what you call the fourth turning, which is the crisis, uh, the winter, if we talk about seasons, a crisis era when institutions that once worked, they no longer work, trust breaks down, and the existing order that we've been used to gets really tested under under real strain.
What struck many people looking back is how early that you and Bill suggested the next uh fourth turning would arrive. You wrote the classic book, The Fourth Turning, in, I think, about 1997, if I got that date correct. Yeah. And you so you were predicting at that point somewhere around late 2000s, then intensifying into the 2010s, and then in the where we are today. That's where we've been in the midst of this forth turning. And here we are today, living through deep depolarization, institutional distrust, economic distortions, and really a growing sense that the old rules aren't holding the way they used to. In your more recent book, the the update, if you will, The Fourth Turning Is Here. Uh, you said plainly that we're no longer approaching this turning. Uh, we're in it. We're in this crisis. So, to start us off, I'd like to hear you reflect on this. How has the fourth turning actually unfolded compared to what you and Bill envisioned nearly three decades ago? What feels familiar to you from those writings? And what has surprised you, if anything, with where we are today?
Uh, well, David, first of all, thank you for having me on. Uh, I'm honored to be here. And, um, I, I will say, yes, uh, some things have, uh, turned out as expected. Some things are surprising. I, I would say the single biggest, uh, shift is that when we wrote the book, um, uh, the, the real, you know, climax of of any kind of forth turning was was 20 years at least. I mean, it was way into the future. So a lot of what we were focused on is just the emergence of a new millennial generation as, uh, still as, um, as teenagers, you know, at that time.
Um, uh, this would have been, uh, more like what we were going through, you know, just around the time of World War I, sort of the previous cycle, or maybe the early 1920s. So it, it, we were really focused on the unraveling, you know, the fall season at that time. We really weren't looking. I mean, the, the winter was way out there. And we did know what it would be comparable to. We did say it would be comparable to one of those great gates of history, the late 17th century, a period of of rebellion and revolution in the colonies, uh, the American Revolution, the Civil War, Great Depression, World War II. And, and we said, look, it's, this is going to be the same generational time length. Everyone who went through the last crisis will be out of the way. We will no longer have their guidance. We will no longer have their wisdom. We will no longer have their moderation, their behavior patterns. We're going to be governed by people who grow up completely in the aftermath. Right? And we know historically what that leads to, right? That's what, that's how you gain wisdom by looking at how generations evolve, uh, depending on what they came of age with or what they did not come of age with. Right? So, so we knew kind of what we would, uh, see.
I would say in my more recent book, uh, 2023, uh, The Fourth Turning Is Here, is where we focused, or I should say I focused. Phil Strauss passed away about 10 years ago, but where I focused a lot more on the fourth turning itself, uh, and really looked at what are the paradigmatic, uh, patterns that fourth turnings take. And in that book, I think I stressed three challenging, uh, processes we're going to go through, right? One is the complete collapse of trust in notions of collective security, international law, and all the rest of it, right? That, and that's going to be the outbreak of, uh, of great power war. We, we've seen that repeatedly in for turnings around the world. The other is the breakdown of trust internally, right? And the prospect of political collapse and civil war. Uh, so I discussed that, and we certainly see both of those today. And the other, which has been an aspect of previous worth turnings, is a collapse of, uh, trust in market value, right? >> The idea of a financial crash. >> And, um, I looked at that, particularly the idea of setting in, setting in place how an emergency set in place certain tendencies that that are typically unleashed, uh, for example, inflation, uh, that is used for a purpose by forth turning regimes. So I spent a lot of time really looking at that and examining that and applying that to what we currently see.
Obviously, so much of what we see resembles the past. I mean, the, we, we now see this is really the, the seventh realigning election in America, the re-election period. We've had seven great realigning elections in America since the since the Constitution. They occur about every 40 years, and in our nomenclature, they always occur during crisis or awakening periods. Right? We're in a forth turning, and we've had another one. It's basically 2016 through 2024. It's a realignment of the two parties. Every time we see a realignment, and this most recent realignment has been the movement of, um, uh, you know, college-educated Democrats, uh, I should say college-educated toward the Democratic party, and non-college educated working class toward the Republican party. This is a huge shift in how the two parties are behaving and of obviously the gathering of these two parties into mega parties, uh, uh, tribes, really, with completely mutually exclusive views of America's future. They differ on everything, you know, attitudes toward authority, toward family, toward nation, toward tradition, to whatever it is they differ, right? And so this raises the prospect of internal problems. Um, I think America is as polarized as it's ever been in its history, with the possible, an ominous exception of the 1850s. And it also, as we see, we see from the headlines, the growing prospect of geopolitical conflict. And interestingly enough, as for markets, we are unusual in the unusual position of having extremely overvalued markets in the middle of all of this, right? And that creates another real potential problem, right? I mean, what if these markets, uh, suddenly reverted to the valuations, and I'm going by, you know, Schiller's CAPE or any of these popular valuation measures, but what if we go back to the valuation that we had in early 1943, for example, or early 1942, just after Pearl Harbor? Um, well, we could talk about where that would take markets, but it would not be pretty at all, David. Um,
>> Yeah. So, so this is what's on my mind. I would say on your question about surprises, what's different? Um, I would say one thing that has been apparent is that the turnings are dilating somewhat. In other words, becoming slightly longer. Um, you know, we originally had things sort of, you know, maybe a a crisis climaxing in the early 2020s. Now, I'm looking more at the late 2020s, early 2030s. And I think the reason is is that, um, and this was spelled out actually in our very first book, Generations, which came out in 1991. The length of a generation, it's determined by its, uh, uh, the length of a phase of life. >> Uh, that is to say, the time that it takes between being born and fully coming of age as an adult. That's probably the most important phase of life, and then other phases of life after that. And one thing you see recently, post 1970s, >> is that the phases of life are dilating. It takes a lot more time now for an adult to be, for someone to become an adult. I mean, you imagine, you know, getting married, having kids, having a permanent job, owning a home. These are now occurring, >> five, six, seven years later than they used to. >> Running for political office is occurring about five or six years later. My God, you know, the, the highest, you know, being a senior leader at the highest position of leadership, uh, needless to say, right? We have people [clears throat] >> Exactly. >> People in their 80s. >> So, this actually slows down, uh, the generational cycle, and, and we, we've seen this happen before. I, I would say that's an interesting new development. Uh, and, and obviously, I guess the only other thing to add is all the particulars. I mean, we had no idea about Trump, you know, what I mean? Uh, we knew about him even back in the late 70s. We all knew about him. Um, but we, we had no idea that that would be the boomer who would be, uh, uh, who would be, you know, sort of the gray champion, as we put it at the time. This really would galvanize this kind of change.
>> Well, just, I'll just, I'll just take that little piece right there. I want to come back to some, you [clears throat] laid out a great construct here, but let's just take that little piece there. Is, is perhaps the, uh, Trump, Trump, um, position 2016 and then back again here in 2024, is that have to do with some of the loss of trust in institutions? Uh, an outsider coming coming in, uh, who is not part of any particular political party, who's been, uh, a, a capitalist entrepreneur, not in the political arena per se, and he comes from the outside and says, hey, if, if, if y'all are tired of what you've been doing, you know, I'm your guy. Is there, is there something there that he brought to the table that?
>> Absolutely. I mean, I, I think he explicitly, that's his proposition, as he announced in his first inaugural address. >> Um, uh, what we did is not working. I'm here for the forgotten man and woman of this country. Right. Uh, we've had the elites take over. Uh, they have, they have enriched themselves. They've done nothing for this country. And he went down a list to kind of a litany of things that was, uh, you know, hollowing out the middle class, the problem with globalization, and problem with China, and problem with immigrant, and, you know, what I mean? I don't, no need to rehash over the headlines again, but I, but I think it's all fundamentally based on a betrayal of the elites. And this is the classic populist proposition. And the other thing that's that's classic about populism is that populist parties almost over always always favor a single person, right? A single person who can come in and take over because the, the entrenched, it's the only way to defeat the entrenched elites. Um, you know, the original populists, you know, back in the late Roman Republic, they had their Julius Caesar. I mean, that was the strong man. And Julius Caesar, and who did he oppose? He opposed the optimates, the good people, right? And they weren't a group, you know, they were all entrenched. They were the finest families. They all had their privileges and so on. But the people and his legions, [laughter] they backed Caesar. Now, the problem with Caesar is he was a little bit too direct. You know, he actually wanted to put a little purple there. He kind of, you know, like the whole king thing. And, right? >> Octavian, his nephew, finally figured it out, right? Take the power but retain the image of just being first among equals. >> Yeah. >> And if, if Trump ever makes mistakes, I think that he might be a little bit too eager to to actually put on the >> the pomp and ceremony of of of of leadership, inappropriate in in a republic like the United States. Right.
>> Yeah. Well, we, we've also seen the uprising, as, as you said, young people who are, I think the millennials, you know, Gen Z, disillusioned today, right? Because because of of the era that they're coming into with high amounts of personal debt and education debt, uh, no, no relevant jobs, um, you know, can't buy a house, aren't starting families, as you said, everything's being delayed, delayed, and they feel very hopeless. And, and we have, again, I'm not being political here, I'm just saying what we know is we have, uh, you know, more socialists, determined socialists like Mandami, who is, you know, now mayor of New York City. And, and what's he promising? Well, I'm, I'm going to equalize everything. You know, I'm going to, we're going to, we're going to make things affordable for you. We're going to fix the transit problem, fix the the housing. So, this is all part of a fourth turning, is it not?
>> It absolutely is. And, and this impetus toward equality is a very important part and a powerful part of a fourth turning. It has been every time. Um, uh, and, you know, everyone thinks about FDR as being, you know, the creator of the New Deal and this new principle of equality in American life. He saw himself as the moderate who saved capitalism because there were people way out in front of him. There was Hugh Elilon, Share the Wealth. I mean, they were demagogues way out in front of FDR. So the, the point is, is that this, uh, disenchantment with the growing gap between rich and poor in this country is shared by both MAGA and the left. And, and by the way, this idea that you need to, to, to socialize certain aspects of the economy to make a better life for for working-class people is, is embraced by Trump as well. I mean, you know, Mandami might be might be, uh, taking over a few grocery stores, but Trump is taking over Intel. I mean, he's buying, you see real socialism, right? With we are hoarding resources, becoming a regional power. We are, >> using government as an instrument, right, to improve the people. We're not leaving it in the hands of the market again. And I think, I think that part of MAGA is, is very powerful, and, and expresses the same, the same impetus. I will tell you, long term, that for turnings move the country by the time we're over it, as to say, after the crisis itself. Now, remember, and, and I'm sure you recall this from our writing, that the climax involves conflict because in conflict, always throughout history, and I go back, I discuss all the great sociologists, they all agree on that, including Robert Putnam, who's, you know, our current, you know, Bowling Alone, you know, the great man of sociology today in America, is that the incubator of community is conflict, right? That's always been true. >> And what are we going to On the other side of the fourth turning, we're going to see much more community in America. We're going to see much more authority, trust in authority. We're going to see much more equality. And we're going to see much more focus on the future. And we're going to see a much more conventional culture. These are things we've always seen after every fourth turning, right? We saw it the late 40s and 50s after World War II. We saw it after the Civil War. We, you know, I've, I've been, I've been through all these parallels. That's what we're going to see on the other side, David. And it's going to please and displease different people, you know, depending on which aspect of that they look at.
>> Sure. Sure. Well, Neil, in looking at going through a fourth turning, you're, you're, you're very optimistic that the reset, the restructuring will will be a overall net positive once we get through this. And so, the fourth turning is not really something that we have to survive necessarily, but it's really something that is going to redistribute, uh, opportunity and and agency. Agency is another thing I want to talk about because it's something that you also have a strong tenant toward towards agency in the fact that we become as a society very complacent when when we're, you know, I guess, you know, coming up to a forth turning, when when institutions, uh, have, have had our back, when when the Federal Reserve comes to the rescue, when the the markets start to drop and they, the fiscal and monetary policy pumps everything back up again. So it's like, well, I don't have to worry about anything because someone else is going to take care of it for me. And going through a fourth turning is going to reset a lot of that, which is going to be frustrating for people who are not ready for that. Let's, can we talk a little bit about about going through a fourth turning? Is it survival or is it just anticipating so that we understand as individuals, as heads of families, as heads of businesses, how we need to navigate this and prepare for what's what's yet to come?
>> Well, it, it's, it's both. So, it's both surviving it, because the news may get very bad, right? I mean, what, what have we been talking about here? Great power war. Are you kidding? >> And remember this, David, we no longer are protected in the homeland, right? Um, you got malware that's embedded in all of our scatter systems, you know, electricity systems, our, our water systems. >> We've got anti-satellite technology that both the Russians and the Chinese have. I could go down the list. You have all those drones. You remember late 2024. Turns out most of those drones, the military thinks, were were from China. They were kind of testing it out. But my point is, we are no longer protected in the homeland. And I think if one thing that Americans should realize is that they've been, uh, babyed by history, right? Yeah. I mean, there, there's nothing in our ancestral experience with, um, except maybe the South, right, with being conquered and invaded by an enemy. And I've been over to Europe and I look at Europe right now, right? Well, they're looking at Russia, okay? And you, you don't believe in in Europe. They are they are rebuilding all those, uh, shelters that they built during the during the Cold War. Sending out packets to every family, how much cash to have, how much, all these survival information. >> They have enormous civil defense plans. What do we have in this country? We disbanded our civil defense years ago. We have nothing. And as I often tell some people, you know, you remember, um, during the 12-day war between Iran and and Israel, you know, there, the two images, right? Tel Aviv, all the shelters were well marked, the texts went out, everyone found the shelters, the drones were all shot down, and then you had Tyrron, right? No shelters, no texts, just people crowded on all the roads trying to get out, and nothing was shot down. >> I hate to tell you, David, we have more in common in America, >> with, with Tyrron than with Tel Aviv. >> We have nothing to shoot down drones. In fact, the head of US Northcom admitted as much. No, we can't really track them. They're too small. They change direction to you. Remember all that discussion after the, uh, flying over military bases? We have no built civil defense anymore. We have no shelters. We have, we have nothing in this country. And we just simply assume because we're America, we're safe. Well, we're not necessarily safe. And people need to think about that. So, in other words, what I want to say is, yes, I'm an optimist long term, >> but I'm a realist short term. >> And remember that the process that creates community is not a painless one. Right. It's not like everyone's going to suddenly come together and just on a on a nice sunny day say, "Yeah, let's all be friends." And I often tell people because younger people often ask me, "Why was there so much community America in the late 1940s and 1950s?" And, and it was true. People did leave their doors unlocked. People borrowed lawnmowers, and people lived in identical looking houses. >> Yeah. >> That all look the same, and they enjoyed it. No one really wanted to stick out as being different. >> Why were people happy with that? And I said, you cannot understand the late 40s and 50s unless you understand the Great Depression and World War II. You know what I mean? It would not, one would not have existed without the other. And, and this gets us back into the whole process of generational formation. David, it was not until you had a generation that didn't remember that period. I'm talking about our generation, David. >> Yeah. >> Right. That said in the late 60s and 70s, to hell with all that similarity and all those, all the, you know, Pleasant Valley Sunday, charcoal burning everywhere. You remember that? I mean, let's get rid of it. We can't stand all that standardization and homogenization. Yes, sir. No, ma'am. >> No, get rid of all that. Let different strokes for different folks. And in my opinion, boomers were very tolerant of inequality, >> because we were very tolerant of diversity, just in general, >> right? >> And we have been very tolerant as a generation of, whether both on the left and the right, >> of encouraging a great deal of diffusion and dispersion and and no, no integrity at all of community, right? And that's where boomers have taken us in this world, right? Yeah. And now millennials, who were in young adulthood, they see an America where nothing simple works again. >> I mean, I, I play for them sometimes that song by Melvina Reynolds, you know, little boxes all made out of ticky tacky, and they all look just the same, you know, different little colors. And, and a lot of young people say, "Those look wonderful. Why don't we have any of them?" >> Yeah. >> And I tell them because boomers destroyed them all. We hated that idea. Right. But, but in other words, everything becomes clear in retrospect, and to some extent, each generation has to rediscover these truths for themselves.
>> So, so we're going to go through, as you said, uh, some a painful period. And we started to talk a little, you started talking a little bit about, um, the, the, the markets and where inflation comes into play. And I, I, I totally agree with with you that I think long term, we have to have, we're going to have inflation. But you, you talk about inflation is, is a, it's a, it's a tool that the government will use, but it's also a tool in part of the reset. Can you explain to the audience how inflation fits in? Because we're going to have, we have these bubbles right now. So, we're going to have some, some deflation or disinflation of certain assets, but in the long run, there's going to be inflation. And how does the wealth redistribution, the, uh, make, bring us back to more standardization of more equality come into play during this period of havoc where where things are upheaval, where I'm, I'm trying to understand through your lens and your experience and your study of history, demography, when we go through these crises, crisis periods, we, we've, we've seen riots on the street for different reasons in the last few years. Uh, but when, when general population is unhappy, or they're not getting their entitlements, or they're not getting shelter over their head because not provided by Section 8 or SNAP benefits, uh, or are reduced or taken away, the government is not going to let that happen. Printing, we keep quantitative easing, we keep. So, the, we have the inflation problem. I know I brought a lot, lot of things to the table, but maybe you can sort them out a little bit so we can kind of see where does this go over the next two, three, five, seven, 10 years? I mean, think of a of a rather modest example of this, which is COVID, right? >> Where suddenly, you know, a lot of people unemployed and, and the sudden disruption. Well, >> right. >> Here's what happens as society gets more and more populist and less and less trusting of its institutions to handle things, right? What we do is we liquidate everything, right? We want to make sure that no one loses anything. We make sure the stock market stays up, that the bondholders, you know, keep what they have. All the employers keep what they have. All the employees, all the workers are going to get something. Everyone gets something. No one loses. And you remember that huge surge in inflation we had for several years, right? >> Yes. >> Uh, and, and a much greater indebtedness for our country that we God knows when we'll pay off. We're obviously not paying it off. We're just adding more to it, right? >> So that's what you pay. But here's the thing. In an emergency, you're interested in the short term. And when no one trusts institutions, you get more and more short-term focused, right, until your back is really up against the wall. Now, there are two scenarios, David. One is imagine you have an emergency like war, right, where you suddenly have to allocate huge new resources to people right away. Consider America after Pearl Harbor Sunday, right? >> Right. Um, well, one way you can do that, I mean, there are various ways you can do that. You can tax, you can, um, uh, borrow, you know, just issue a lot of bonds, have bond drives, you know, try to, you know, go out to patriotic Americans, get them to buy bonds, >> or you can inflate. You just print money. >> Yeah. >> Now, that's been done in various ways, but inflation is the fastest. It's the simplest, and it's the easiest. And what it does is it, it, it cancels out the real claims of bondholders. >> I mean, [clears throat] who cares about them? I mean, they're wealthy. They're financial institutions. You know, they're going to suffer, but that's okay. You actually want them to suffer because you want to cancel out their consumption claims on the economy so that you can actually new wealth toward equipping soldiers or paying them or, you know, what I mean, getting young people or other people to do things that you really need done for the country right now, >> getting actual productivity and not financialization. Right? We're getting back to back to the Bay Street boots on the ground, actually getting stuff done. >> Yeah. You, you reset everything by taking out everyone's nominal wealth claims, is essentially what you do. >> I mean, if we all woke up tomorrow with our wages and income and everything 100% higher than yesterday, we'd essentially be all the same, except my God, you know, um, uh, my my house, I could get a refi really easily. You know, I wouldn't be as much burdened by mortgages. And obviously, anyone who holds fixed income loans as as assets would be ruined by that, right? You imagine all the banks, all the bondholders, all the, but that's the idea. And this has been done and again and again. And this is why in a real emergency, inflation is never a problem. It's a solution. It's a tool.
>> And this has happened again and again. This is why virtually every war you've ever seen, you see massive inflation. No one says, "Oh no, let's, uh, let's make sure workers don't have any nominal. Let's, you know, let's keep inflation absolutely down to 0% while we impose all these massive debts." No, everyone lets inflation go because that's one of the burden sharing arrangements you do. >> Um, and we've done that obviously in all of our wars. The, the American Revolution, you remember the Continental, not worth a continental. I mean, by the end of it, these were worthless, of course, until after the war when Alexander Hamilton came in and decided to pay all these back. In the Civil War, the Union went about one-third debt, one-third taxes, and one-third inflation. There's a lot of inflation. And by the way, inflation helps you. It helps you not have to actually cut the nominal wages of workers to cut their real wages. You understand what I mean? >> I mean, that's what's great about it. During the Civil War, working men, people in manufacturing in New York City and Philadelphia had actually less real wages by the end of the war, but their nominal wages went up. Why? Because we had inflation. So, in other words, that's perfect. So, you get, you didn't have, no one had to cut their wages. It's everyone knows that wages are very sticky downward. We discovered that during the Great Depression. Now, the same thing. You know, in the South, as you know, they almost did nothing but print money, and the, the Confederate dollar became worthless. We did the same thing during World War II, and, and we merged it with something called financial repression, which is you, you have inflation, but on top of that, you put price controls, you put profit controls, you start nationalizing industries. Uh, a lot of people don't know this, but all of the, the manufacturing sector in America by the end of World War II was slightly more than half owned by the federal government. All the capital improvements were basically paid for by the federal government, and they assumed a huge equity share in Ford and General Motors and in Kaiser, the building the ships and all these companies. Right? Now, that was sold off in the years right after the war. But the point is, everything becomes socialized. And in, I mean, when when you're facing survival, you socialize everything. You know what I mean? I mean, that's, that's where we go when that happens, right? And in World War II, America felt like it was facing survival. It looked very dark in the early months of of 1942. And by the, you know, by early 1943, I think we only had one carrier left, the Saratoga, in the Pacific. Uh, we, uh, we were, most a lot of our shipping was getting torpedoed by the Germans. We didn't know how the invasion of Russia would work. No need to go through all the history, David, but things looked very dark. We were willing to do anything at that point, and we did. And, and after that, uh, we went on to do a lot of this burden sharing, and obviously, we had a very strong union movement coming after World War II. We continued to have financial repression, which, it's interesting, not only did we have this inflation, but we kept bond rates on 10-year fixed at 2.5 all the way up until 1954. You remember with the with the Fed Treasury Accord. So we had this huge inflation, which is, you know, throughout the late 40s, it was, you know, seven, eight, nine percent. So these guys are getting ripped, right? >> Yeah. >> Um, so, so you have to prepare for that. It's not just preparing for a financial crash. It's preparing for the things, and not just preparing for the inadvertent things that might happen like deflation or inflation. It's really preparing for the advertent things, what government will need to do in a period of resurgent community when the survival of the country could be at stake. And this, this is why, um, um, you know, protecting your your net worth during this period is, um, is a challenge. You have to think not just what markets will do, but what the community at large, government will do on top of that.
>> Interesting. Neil, I know your work with Hedgeye over the last decade. Recently, you've opened, and I'm just kind of going into the arena of, you know, how do we protect our wealth? How do we hedge within inflation that we're looking at? And you've got a new ETF. It's actually a Hedgeye Fourth Turning HFT, I believe. Can you give me just a little bit of of what that's about and, and why that came about in the last few months, and, and what your focus is, uh, for, for those who are looking to be aware of their assets during the fourth turning, and, and what you provide in this, this respect?
>> Yeah, sure. Um, uh, after, uh, that book came out, The Fourth Turning Is Here, uh, the single question that was asked most by readers that they basically say, Neil, I agree with you. This is where America is going. This is where history is heading. You know, we see the rise of these, uh, of these, uh, kind of ethnosentric authoritarian regimes all over the world now, which is, which is what we kind of predicted. Their question was, okay, I get it. What do I do? What do I do to protect myself? Right? And, um, and that's led to two things. One is a book, uh, a subsequent book I'm doing with Simon and Schuster on, you know, how to prepare for this kind of, you know, not necessarily the end of the world, but ne maybe maybe temporarily the end of our world, you know, what I mean, and the, and the rebirth of a new world. So that's one thing I'm doing. But in that, in that book, I'm going to be talking a little bit about wealth management. But also, I decided to start with, uh, the company that I've worked for for many years, Hedgeye, to actually start an ETF, which we launched, uh, just before Thanksgiving, uh, which, yes, is called Hedgeye Fourth Turning HFT. Um, first of all, I love the concept of an ETF. First of all, it's extremely tax-efficient. Uh, you know, it's, it's everything is in and out in kind. So, you know, you really get taxed much on capital gains. The other is it's open to everyone. I like that. You know, you don't need to be a qualified investor, and the holdings are there every day at the end of the day. You can go on and see HF, in any EF, uh, ETF, what we hold, right? So, there's no mystery there. Now, the, the premise of this is, is basically for those who are kind of interested in how portfolios are constructed, is that it, it is in one respect, it's a 150/50 fund. So I can, you know, we can go 50% short, right, on, on, 150% long. So it can be slightly levered, but the idea mainly behind it is to put our long equity, our net long equity position, David, >> it to pair it not with what funds usually do is pair it with bonds, >> uh, long-term bonds, which I think are just losers for the reason I'm talking about, talking about nominal long-term bonds, >> and instead pairing it with commodities and commodity futures. I've done a lot of work on the history of those, and going back to the late 19th century, they performed very well relative to equities, particularly during periods of of high, and more relevant to our age, um, uh, trending higher inflation. Um, that's the first thing. Uh, the second thing is that I have in there, uh, uh, optionality on the downside, right? Uh, which is the idea, you know, using options, and using, you know, the availability of cash. I mean, the first optionality that everyone should think about in their portfolio is is Warren Buffett's, >> yes, >> you know, solution, which is simply keep a lot of your money in cash. That's an option. The market goes down, your cash is unchanged value. You go in and buy stuff. You know, Warren Buffett's old maxim, right? >> When the world is greedy, be fearful, and then when the world is fearful, be greedy. And that's exactly how you do it, right? Moving cash in and out. And finally, in our long portfolio, I'll go along the things that are going to do well in in forth turning climax. Everything from defense, power, energy, industries, anything not just in the defense, but also stuff that's going to help us produce our way out of this. We have massive deficits to the rest of the world. Not just massive public deficits, about 100% of GDP, but also massive deficit in what the United States owes the rest of the world versus what they owe us. It's about 100% of GDP. Ultimately, we're going to have to produce more than we consume. >> Yeah. >> Right. That's, that's the process. Well, we're wildly the other way right now, right? >> And so, we need to think about that. Um, so we're long those things, obviously, uh, long, you know, on the commodity side. Already talked about that. Precious metals have obviously done very well recently. Um, but, but I would say if we're, if we're short stuff, it's mainly short the most leveraged, outlandish, or unsustainable consumption tickers. So that's kind of, I don't know if that gives you an overall view, but that's sort of what we're about.
>> Yeah. Well, that gives a good flavor for Neil. Yeah. Thank you for that. Well, let's, let's kind of land things here today, and we could, it'd be fun to go on and do this for hours, but we don't have hours, so let's, let's land this here. Um, I want to go back to, um, community. So you said, uh, it takes a crisis to create community. What, what are some tangible things that that individuals can do? And are we talking about, and you talked about community at large, government, but let's, let's take it down to community. You talked about neighborhoods back in the in the 50s where people knew each other and left their doors open. What tangibly should people be thinking about intentionally before a real crisis hits? Or is, or will people even act? Or you just have to wait for the crisis and then people finally come together and they fall to their knees and say, "Oh, we need to help each other now." Like, "Who are you?" My neighbor, I waved to you, but I don't even know your name. Well, now I need to know your name, right? I mean, seriously, what, what, what should we be thinking about here?
>> Investing upfront in any of these things is hugely important and often makes the difference between, you know, working through a fourth turning successfully and failing. And I, I want to be really honest, David. Uh, a forth turning does not necessarily mean we will enter it, exit it successfully. >> America has in the past, but we know of nations that have been destroyed in, >> right. >> So we should never just assume, well, I can just kind of ride along here. Uh, I, I do think that investing at things upfront. For instance, there are associations, uh, uh, built in many communities, many counties actually set up originally, uh, by the federal government, to respond to emergencies. A lot of these things are complete, a lot of these organizations are completely lacking in citizen participation. They would love people to join that are experts on anything, you know, whether it's medical care, or whether it's dealing with an electrical emergency, or any of these things. In other words, the, the, the ability to volunteer and galvanize that within your own community, just to go out and meet people, meet your neighbors. If something happens, I mean, you, here, my my advice is, you start with small stuff. >> If the electricity were out for two weeks, who would you get help from? Well, where's your water going to come from? What if food is short? You know, are you going to talk to these people in advance? Maybe introducing yourself in advance would be a good idea. You know what I mean? And, and beginning to think about what, what would I do? Do I have cash on hand? What if, what if a grid failure, which is actually one of the things we have to worry about most? Uh, we have a huge, decrepit, you know, electrical grid, and it's very vulnerable to all kinds of, uh, um, uh, you know, attacks, right? Different ways of attacking it. I think you want to go out and find out, well, what would we do? Um, and, and who in my community do I know? Who do I know? Who can I get to know? And, and you can do deeper things. Well, as David is like, you know, and I often ask this of of young adults today, particularly millennials who are living in cities. Uh, do you have any idea what's underneath the hood of your car? Do you know where your water comes from? Would you know how to repair a pipe? Do you know what that circuit breaker is for? That box? Do, do you know anything about AC? And, and the three polar, you know, do you know anything about it? And most of them haven't, in the slightest idea. It's just this big system always works. The problem isn't just the emergency date. >> It's our incredible dependence on infrastructure that nobody understands, right? Where does food come from? The typical thing that you eat in America has traveled 1500 miles to get to you. And in supermarkets, they no longer have storerooms, right? It's just-in-time delivery to the shelves. >> I mean, that's going to be gone in like 8 hours. So, where do you go from there? >> And I'll tell you an interesting aspect of this. >> Um, a bunch of scholars did an investigation about six or seven years ago looking at the likelihood of you knowing your next-door neighbor. And they looked at this by zip code level. So a very detailed analysis of America, uh, with the use of C survey instruments. And amazingly, David, they found that the likelihood of knowing your next-door neighbor is exactly and inversely proportional to the population density of where you live. So if you live in a big urban building and you've got a whole bunch of people just yards from you, you have no idea who they are. But if you live like I do, I mean, I live in West Virginia out here. My next-door neighbors, you know, a quarter of a mile down the road. Anyone like that absolutely knows who their next-door neighbor is. You see what I mean? >> Well, yeah. Paradoxical, >> right? Yeah, it is paradoxical. So, so I, yeah, I can, I can imagine that if you live in a in a densely populated area, there's just there's so many people, you think, well, there's no sense in me trying to meet all these people because there's too many. But when you're when you have, um, separation, as, as you do in West Virginia, then a neighbor is a good thing, and there's, you're friendly, and you wave, and you stop, and you, you take time to chat a little bit. >> It's, it's, it's more than that. It's that if you live in an urban area, you've socialized all the infrastructure so much. I mean, the garbage gets automatically taken. The police service is automatic. You have a, you might even have a doorman. I mean, like everything's automatic. I don't have to worry about anything. I just am, you know, when I go down the street, I got my headphones on, I'm looking. >> I don't have to think about anything. I don't even have to look at people, >> right? >> Whereas, if you live in a rural area, you're much more responsible for stuff. Local government costs a lot less. I can vote for that because I used to live [laughter] I used to live in the big cities of the Northeast, right? Um, but that's the tradeoff, right? Um, and so a lot of these things we will have to relearn from people who learned a lot of this stuff from scratch. But the point is that in a crisis, at the same time we are trying to strengthen and trying to regrow national community to deal effectively with national problems, people at their own individual life will hugely benefit by relearning what is necessary to run their own lives in the micro. Right? Because they might be on their own for a while to do that. And so relearning community at the small scale is going to be absolutely vital, >> as well as investing in things upfront. And this is where time makes all the difference. And let me just add this because I think this is a lesson we can all learn from. You know, one of the things that's commonly known is that if a war breaks out in the Western Pacific, we're probably out of missiles in about a week. I mean, all the land batteries, all the, you know, we just, we just never thought about all, you know, all our wars are kind of wham bang, you know, that's
it right, and then it's over. And then, uh, then Rathon can take five more years to stock up the inventory. This is not how you prepare for a large emergency.
And one thing that FDR did, and I, I want to give this as an example, was the big shift in American opinion going into World War II was not what a lot of people assume occurred around Pearl Harbor Sunday. American opinion had already shifted. And what shifted American opinion was the fall of France. It really, if you look at all the opinion polls, the real shift happened in May, June of 1940. Everyone expected France would stand up to Hitler for years, and when it fell as fast as Belgium fell, and then suddenly Britain was under attack, right? A blitz. Yeah, huge changes in American opinion, and suddenly everyone thought, my God, we're the only democracy left. I mean, you have Japan on the rampage in Asia, and and and so suddenly everything shifted. FDR declaring that America had to be the arsenal of democracy went to Congress, and he proposed more than doubling the size of the US Navy. This was called the Two Ocean Navy Act, and he laid the keels for all the battleships and all the Essex class aircraft carriers that would, you know, benefit us later on. And he went to, uh, Congress in July. It's an enormous bill. I mean, single-handedly, this bill helped pull America out of the Great Recession because it was so enormous. And of course, it was all deficit spending, and it passed Congress without a single dissenting vote. And the Republicans who were kind of into, kind of, you know, America First, we don't want to get involved in Europe, they ran, um, uh, you know, their candidate, Wendell Willkie, was an internationalist, actually agreed with FDR on the need to to fight fascism. This is when everything changed.
But the reason I bring up this that investment, uh, was crucial because it allowed these big capital ships to show up in the Pacific by the summer of 1943. If we had not made that investment, we, it would have been '45, '46. The war might have gone on for another couple years in the Pacific. We would not have had the capital in place. I, there are other examples in history you could think of, but I, I think these are the things we have to think about. Some things we can rise to the occasion, but they're occasionally things both in public life, like the the Two Ocean Navy Act, but also in our private lives, like getting to know your neighbors and getting to know before something happens, right? That where investments really accrue to your advantage, you know, when when times get rough.
Yeah. No, that that's so well said. It's so interesting that those moments in history, uh, had such a a deep effect on on the future. Well, let me, let me just layer this last last piece on. So, Neil, when people look back on this period 20 years from now, what do you think that we misunderstood the most while we were going through this Fourth Turning? If if you could project back and and and we're looking back 20 years and like, what do you think maybe we've missed in trying to fair our way through the the Fourth Turning? If if there's anything you could focus on. I, mean, how are we going to see this in long retrospect?
Yeah. How how we see it in retrospect, you know, uh, hopefully hopefully we're we're still around and we we've gone through the Fourth Turning and we're we're we're at the next high and we're looking back and like, what, what do you, what do you think that possibly we we missed in in looking as we went through this period of time as we're going through right now?
Well, uh, you know, one thing that that that's always true about looking back at a period, and that is, uh, we know how it's all came out, right? And by the way, I think that's the the the origin of all nostalgia, right? Uh, the past looks nostalgic. Why we have sort of the semieet, you know, pain and and fondness for the past? Because we know how it turned out. We feel safe there. We know how it turned out. At the time, no one feels nostalgic, you know, uh, uh, and and that will be the difference when we look back. I suspect, or at least I should say I hope, because I think I just said we don't know in the end, exact, you know, for sure how the Fourth Turning is going to turn out. But I hope that we look back on it upon a time which we we achieved, uh, these these things which I think most Americans want right now, and which they feel desperately in need of, uh, the things I mentioned early on, which is the pattern for a first turning following a fourth turning, namely that we reach achieve community, equality, uh, trust in authority, um, a refocus on the future, and, um, a certain conventionality or a certain kind of standard in the culture that we that we trust. Right? So these are these are things that we, these are things I think we can look forward to and look back upon.
Very good. Neil, how such a pleasure. Thank you for all the deep work that you've done over the decades, and we look forward to following through and, uh, hopefully we'll, you'll have another, you'll have another book that's coming out, uh, crisis, uh, preparedness. Is that what, what is it?
We don't know. I don't know what it's going to be called yet, but it's, it's going to be how, how to, how to be prepared for, uh, for, um, you know, all the all the stuff we're worried about.
Okay. Well, we'll, we'll try, try to get it out soon [laughter] so we can get ahead. Uh, all right. Thank you, David. It was great.
All right. Take care, Neil.
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