Sick Labor Market To Pop Biggest Stock Bubble Ever Seen? | George Gammon

Summary

• Stock Market Bubble: The current stock market is in one of the largest bubbles ever, with price-to-sales ratios exceeding those seen during the dot-com bubble.
• Economic Slowdown: The economy is showing signs of slowing down, primarily due to a weakening labor market, with significant job revisions indicating a potential recession.
• Federal Reserve Policy: The Fed has begun cutting interest rates and is expected to continue, with potential implications for asset prices and economic growth.
• K-Shaped Economy: The economy is increasingly divided, with the wealthy continuing to spend while the majority face economic challenges, potentially altering perceptions of recession.
• Investment Strategy: Investors should focus on asymmetric bets, seeking opportunities with high upside potential and limited downside risk, such as gold, uranium, and potentially oil.
• Interest Rates and Inflation: Interest rates are expected to decline due to economic slowdown and disinflation, with the long end of the curve reflecting growth and inflation expectations rather than supply dynamics.
• Fiscal Policy Impact: Future economic recovery may rely more on fiscal policy than monetary policy, with government spending potentially leading to economic distortions and affecting the standard of living.
• Market Opportunities: Despite market volatility, opportunities exist in sectors like gold and uranium, which have shown strong performance and favorable trends.

Transcript

I just did a video price to sales or using the price to sales ratio and currently that's right around 3.2ish and the peak of the dot bubble it was 2.87. So there's a lot of metrics that you can use that would say that not only are we in a bubble in the stock market but um it's one of the biggest bubbles we've ever seen. So I don't think that's really debatable as far as the valuations being at nosebleleed levels. But that doesn't mean that it can't triple from here. Like for me, it's a little bit easier to determine what's happening with the economy. And I think it's slowing down. And my main reason for saying that is the labor market. [Music] Welcome to Thoughtful Money. I'm its founder and your host, Adam Tagert. The stock market's back in party mode since zooming back to all-time highs in the wake of the April Liberation Day lows. Now, the Fed just cut its policy rate for the first time this year, and it's guided that more rate cuts likely lie ahead. So, can the bulls remain in charge and keep powering asset prices higher into 2026? Or are the many potential risks, not the least of which is a slowing economy, more likely to bring an end to the party? to discuss. We've got the good fortune to welcome George Gammon back to the program. George is best known for his financial education media endeavors, most notably his George Gammon and Rebel Capitalist YouTube channels. George, thanks so much for joining us today. >> Thanks for having me. I'm super excited to dive in. We got a lot to talk about. >> We do. We do. Uh it's a real pleasure. Um looking forward to seeing you in person in I think just a little bit over a month at New Orleans New Orleans conference. Um, if anybody watching is going there in person, George and I look forward to meeting you guys in the halls there. Um, but George, since it's it's actually been embarrassingly long since I've had you on the program. So, um, I'm sure many viewers are familiar with you, but for those who aren't, um, let's just kick it off with a question that, uh, I I I I used to ask a lot, I ask less recently. I ask less these days, but I think it's important here just to introduce your way of thinking to people. >> Yeah. >> What's your current assessment of the economy in the financial markets? Well, I think those are two different questions, right? Unfortunately, I mean, I wish they were the same question, but they're not. Uh, the stock market should be a reflection of what's happening in the economy, but I think often there's an inverse correlation, uh, which is what I think we're seeing right now. >> Yeah. >> As far as the economy, because the stock market predicting whether it's going to go up or down, I mean, who knows, right? The only thing that we know is it's in a bubble. Uh, I just did a video price to sales or using the price to sales ratio and currently that's right around 3.2ish and the peak of the dot bubble it was 2.87. So there's a lot of metrics that you can use that would say that not only are we in a bubble in the stock market, but um it's one of the biggest bubbles we've ever seen. So I don't think that's really debatable as far as the valuations being at nosebleleed levels. But that doesn't mean that it can't triple from here. Like >> Right. The big question is when when will it matter? If ever. Yeah. >> Right. Exactly. So for me, it's a little bit easier to determine what's happening with the economy. And I think it's slowing down. And my main reason for saying that is the labor market and these I know you've talked about this on your channel, these huge revisions. I mean, it's not just the monthly revisions where June we start off at 147, which headline, okay, everyone's celebrating it, but then you fast forward a few months later and oh, sorry, it's at -3. >> It's negative. Yeah, exactly. >> And then we saw the um the benchmark revisions for April 2024 to March of 2025 and it almost down a million jobs. >> Yeah. And within those benchmark revisions, you had a couple months in 2024 that were negative as well. And I I get the whole immigration argument that uh we don't need more jobs or we don't need as many jobs because we have so many people leaving the country. But I I don't really think that's a valid argument if you look at it through the lens of the economy. Because look, if we have a 100 million people leave the United States and we lose 100 million jobs, okay, that doesn't impact the unemployment rate because the labor force participation goes down by the amount of the job loss. But is that going to impact the economy? Of course it is. >> Absolutely. Yeah, >> of course it is. So, um, I try to look at things in terms of the the job growth, whether that's positive or whether that's negative. And even going back to that immigration argument, I don't know how that would have impacted 2024 because we had negative non-farm payrolls back then uh when you look at the benchmark provisions. So what I did, Adam, is I went back and I went back to the 1970s and I tried to find times when we had a negative non-farm payroll print when we weren't in or around a recession, a >> recession. >> And it's pretty rare. It's pretty rare. And usually what you see is it's a result of some sort of weather event or some sort of massive strike like if uh you know Walmart if if all their employees go on strike, you see a huge drop down to where it's negative and then you see kind of a bounce back right back to where it was after the strike is over. So, what I always say on my channel, and I know you really um not only say this, but I I think a lot of your guests echo this, is there are no certainties that we're dealing with, uh we're dealing with probabilities. But when you look at the the labor market and you look at the revisions, you look at the negative non-farm payrolls, you look at what has happened in history, you combine that with what's happened with the the yield curve, with the inversion, the uninversion, and usually that's when you have a big problem. I think the odds have to lean in favor of an economic slowdown. Um, now whether that's just a slowdown in nominal GDP or whether that's an outright recession, I don't know. We'll see. I mean, my base case would probably be recession, but then you have to rely on the NBER and what they consider a recession. And as far as the average Joe and Jane, you know, having the ability to put food on the table or a roof over their head or their ability to get a job, I don't think they care about what the NBER would uh define as a recession. So that's where I'd start with the economy as far as uh >> and sorry before you get to the markets, I'd love to get your opinion on this given your last point there. Um, so we have had this increasing K-shaped economy, right, which you I'm sure you've heard about, right? >> Um, where the averages still look pretty good, right? But it's because you have the top part of the K who is doing better and and their spending is making up for a drop in spending on the lower half of the K who are doing increasingly worse. Right? And as as time has gone on, the top half of the K has gotten smaller but richer and the bottom half of the K has gotten bigger but poorer. Um, and so I guess my question to you is does the line of recession not not in terms of the technical definition but the terms in which the majority of the populace just feels like hey I'm actually now really struggling. Yeah. >> Um, has that line changed over time >> because we have such an imbalance? Yeah. Absolutely. I I think it has. I mean, I think that's why Trump got elected or one of the reasons why he got elected is because people were sick and tired of their purchasing power going down and just struggling more and more and more. And yes, so the top 1% of the top 5% are propping up the economy with their um addition to aggregate demand that's making up for the lack of aggregate demand for the other 95%. But that really goes back to asset prices >> and that's about the housing market which is deteriorating. That's about the stock market, which it is at all-time highs. You know, how long can that last? Uh I think that goes back to passive investing. You know, I was fortunate enough to spend a week with Mike Green uh about, you know, St. Barts maybe 3 weeks ago or so. >> Oh, great guy. Great place. >> Yeah, that that's right. We were at Hugh's place out there and we we were we had a lunch and we sat there and and talked for about about 3 hours and we were going over, you know, Mike's uh passive the but we were going >> giant mindless robot. My most of my viewers are pretty familiar with his >> Yeah, we really went into a deep dive there and uh I I said, "Mike, do you have any models that would try to predict when we go from net inflows to net outflows?" and he goes, "Yeah, I I actually do." And he it's he says it's all around the the labor market and the unemployment rate. He says once it gets up to maybe five 5.5 that's when I I think it might get concerning. And then we start talking about AI >> and how even if we don't go into a recession, how AI could very well uh in the short term bump that unemployment rate, let's just say up to six or 7%, especially with the white collar jobs. And those are the people who usually would be uh dumping the the largest percentage of their paycheck into the passive flows. So if you see that go up for whatever reason, you could see that passive switch and that's the catalyst there where the stock market goes down and all of a sudden that aggregate demand from the top 5% just evaporates very very quickly. So, I'm not saying that's my base case, but I'm saying I think that's a risk that should be on people's radar. >> Radar. No, to totally agree. Um, I want to talk with you a little bit more about that. I've got that here in my notes because it's such a big driver. Um but but to your earlier point about um you know the the growing frustration I think that an increasing number of the populace is feeling is you know they're being told hey look uh GDP is 3% plus stock market's at all-time highs housing market still all-time highs I mean we're seeing weakness in in an increasing number of markets but still the average and this is sort of my point where if you look at kind of the headline numbers they can tell a story of everything's just fine. But to an increasing amount of the majority, it's like, no, and I'm tired of you telling me that everything's fine. Right. >> I see it in your comments all the time. >> Yeah. And I think it's because that that that line of recession really has moved even though our our technical >> definitions of it haven't. And so more and more people even when things are going a okay are not a-okay. Yeah. >> Yeah. Yeah. And I think it's just Wall Street focuses on those things uh that you mentioned uh the Fed dropping rates, GDP, where the average Joe and Jane I think focuses and has their finger on the pulse much more so on what's happening in the labor market. >> Yeah. And um uh I mean the labor market is the key for all the reasons you just mentioned and you know I'm sure you're familiar with guys like Michael Cananteritz and his hope framework and you know E is that last bull work between uh not recession and recession or growth and recession. Um, so we'll look at it really closely, but but I I think that is what forced Powell to pivot here at Jackson Hole where for all of this year he had been saying, you know, the labor market's cooling, but but that's a good thing. It was it was too hot. And, you know, we see this as normalizing and there's nothing to worry about here. And as time went on, an increasing number of the journalists at his his press conferences would say, "Well, you know, Cher Pal, that's not really measuring what I'm hearing from folks in the real world." and he was like, "No, no, we're we're still not worried." And then all of a sudden on Jackson Hole, it was oops, actually looking like this labor market's weaker than we thought. Right. And I think because at the end of the day, it is that key lynch pin. And then and the we're talking like an hour or so after the FOMC released its guidance uh for August and um the Fed did change and they're saying, "Hey, we now think the balance of risks is that the labor market is going to continue to to worsen from here and therefore we expect to have to do more rate cuts going from here." And I'll mention one last thing and I'll let you resume your course here. Get into the market side of things. Um, if you look at uh the history of rate cuts and I'll see if I can pull up a graph here real quick, George, that'll make this a little clearer for you. >> Sure. >> Um, but if you if you map um uh the unemployment rate to uh recessions uh and then you map the federal funds rate on top of that. So, right here we've got the unemployment rate in blue and the federal funds rate in red. >> Yeah. >> You'll see here that every time the unemployment rate has has trended down and found a bottom and started to increase again, it then shoots up, right? And it shoots up really right into the next recession. And of course, these recession >> as the Fed is cutting by the way. >> Well, that's what I was going to say. So, so first just on the unemployment rate data alone, you see that that once it bottoms out and starts rising, it then tends to spike in the next recession. very similar pattern with the federal funds rate, which is once the Fed goes through a hiking regime, plateaus. Once it starts to cut, it's generally right then where the next recession arrives and the Fed is kind of panic cutting all the way down there. >> So, we can see here right at 2025, >> we're we're kind of right at the cusp of those two trends yet again. And so, you have to ask yourself, what is different about this time that would avoid the same fate that we've seen at almost every other similar cycle in the past 75 years? Yeah. And when I see this chart, I I I I've never really pulled up this chart specifically, but I look at this through the lens of the yield curve because what you're seeing there every single time you see that red line drop is you're seeing the curve go from inverted to uninverted. And you're seeing that happen as a result of a bull steepener. And so it's it's you it would you would see a very similar chart where once the yield curve let's say twos and tens once they uninverted and really started to steepen out you would see the unemployment rate spike right there and that's because it's steepening out because of exactly what you're seeing in the chart is that's because the Fed funds is is dropping. So, I guess my question to you and I'll let you run on is do you see anything this time that is a a convincing candidate to you that uh it's different this time and we're not going to go through that because of X? >> No. Because uh I think the argument that you could have had there for the yield curve was it was all about issuance. So, the only reason the curve was inverted was not because the bond market was predicting or predicting lower nominal GDP growth. uh it was only inverting inverted excuse me because uh they were issuing so little at the long end of the curve >> and it's all about supply or supply expectations or you know however you want to look at it where for me and I'll be getting into this in a moment uh the interest rate especially long on the curve really has very little to do with supply dynamics because in a way supply controls demand where if you have more supply you have more demand Mhm. >> And again, I I'll get into this mechanically in a moment. Um, but I think that what you're seeing there is a direct result of growth in inflation expectations and has nothing to do with the issuance at the long end of the curve because the banks are always going to be the marginal buyer or the banks are always going to be the marginal seller. And if I'm confusing people there, don't worry about it, guys. I've got some charts and we're going to get into it here in just a moment. >> All right. So, let's let's get to that chart real quick, but your your top level thoughts on the the markets, the health of the markets. >> It's not different this time. >> Great. >> It's not different this time. And you know, when we I had a tweet the other day, Adam, when that uh the benchmark revision came out like negative 911,000 and everyone was kind of losing their minds and I said uh there was some headline from CNBC that I retweeted or something. It said like uh you know no one could have seen this coming. Everyone's shocked. And I said yeah everyone is shocked except for people that took 30 seconds and looked at the yield curve over the last year and a half. >> Mhm. >> Like this is not this is not rocket science. You just got to look at interest rates and look at what they're telling you. Look at what they're telling you and understand that what they're telling you about, what they're screaming, what they're shouting is all about nominal GDP and not not necessarily recession, but a decline in nominal GDP growth and inflation. >> All right. Well, look, um, let's get to your charts then because I really want to see your explanation for all this. >> Yeah. So, the the first component there was I think you'll see a decline in the economy. Uh, and therefore, I think you're going to see interest rates go down. and nothing goes down in a straight line. There's always a lot of noise. But I think if we fast forward 6 months or a year, uh you will see lower interest rates pretty much across the curve. And then combined with that, I think that you'll see a return to disinflation, not deflation, not deflation, unless we have some sort of GFC type of liquidity event, but disinflation where, and I know the CPI is a terrible, terrible measurement of uh the inflation rate. And I would agree with pretty much all your viewers that it understates inflation, but the way the reason I use the CPI is just to look at the trend. >> It's just to look at the trend. That's it. And I'm going to guess you're going to think that the Federal Reserve is going to succeed more than they want to in hitting their 2% target. >> Yeah. Yeah. But I don't think it's the Fed succeeding because I don't I don't really think they have a big impact. And we're going to go over why in a moment. >> The way I look at interest rates, Adam, is interest rates don't control the economy. They reflect what's happening in the economy. >> And so if the Fed's dropping rates, I don't >> real quick. Sorry. When you say interest rates, are you do you mean more bond yields? >> Yeah. Yeah. >> Yeah. Okay. >> Yeah. And Fed funds. So if if the Fed is dropping down to 3%. You know, everyone might be cheering that and I know a lot of the people in the housing market might be cheering that because, oh, yay, lower mortgage rates. But you got to be careful what you wish for because you got to ask yourself why the Fed is dropping. And the reason they're dropping is because the unemployment picture or the labor market is getting worse. And if the labor market's getting worse, then I don't know. May maybe that's not great for housing because you you got to take the good with the bad. >> Exactly. >> And and so you've got to ask yourself, what do those lower mortgage rates or lower Fed funds or lower lower tenure, what does that tell me about the health of the underlying economy? And if the economy is getting worse and that's why you're seeing lower interest rates, then I don't know that lower interest rates in and of themselves are are a good thing. That that might be on net that might be worse, >> right? No, totally agree. And have talked a bit about that on this channel before. Yeah, it's all about the reasons why. >> Yeah, there you go. All right. So, I'll go ahead and do a screen share. So, the first thing, Adam, I wanted to go over is just how most people see the interplay between the Fed's balance sheet and the bank's balance sheet or M2 money supply. And a lot of people use the term money printing. I think 99% of the people don't really know what they're talking about uh when they use that term. there there is a 1% there that that they know exactly what they're referring to but um when when people use this term it's it's very loose. So I wanted to first and foremost kind of go over this so everyone because this is our starting point. So we've got the government they issue treasuries. Now if this was more complete the the buyer could be a non-bank entity it could be a bank whatever. But then what the Fed's going to do if they're doing quantitative easing or if they're trying to micromanage the interest rate, this would have been preQE when the Greenspan era. Uh they would have bought this treasury which creates more bank reserves. I'm sure most of your audience realize how that works. And then the idea there, what you read in the textbooks and what you hear in social media, mainstream media is the the amount of bank reserves that are available to the banks. This creates liquidity. This creates uh additional balance sheet capacity for the banking system in aggregate and then they can go ahead and make loans. They can uh you know they can provide credit whatever they can provide quote unquote liquidity and then this often increases M2 money supply as a result of this additional lending. So basically >> the more bank reserve the more banks the bank bank reserves the banks have the more guys like me can come and borrow money from them to start a new business. >> There you go. You got it. That's exactly what I was going to uh end with. So, what we need to understand is this is totally and completely false. That this is not how the system works. And this idea leads to people uh making inaccurate conclusions and therefore setting up their portfolio in a way that's suboptimal. And so now let's go to the next slide here. So Adam, this next chart is a chart of the bank reserves held at the Fed going all the way back to 1940. So what we've done is we've taken uh I have this whole image of the Fed's balance sheet and we've just removed currency in circulation. And so this goes from 1940 to call it 2007. And so what you can see is during this time we go from n let's call it 10 billion the B and we fast forward to 2007 uh and we're at roughly 40. Okay. And then if you look at 1980 we're right around 40. You look at 2007 we're right around 40. Now what's interesting and I'm going to get into this in a moment. In 19 the early 1950s they changed it so they included vault cash in the equation for bank reserves. So prior to the 1950s they did not include vault cash. This was just the electronic reserves or you know back then I don't know if they're electronic just whatever was written in the ledger or something like that. And then fast past the 1950s, that's when we get into the era where we actually had the vault cash that was included in these bank reserves. Now, I like to think about things excluding the vault cash because the bank reserves like we said earlier are all about interbank settlement and banks aren't really using vault cash uh to settle these huge interbank transactions. So, as an example, if you're Bank of America and I'm Wells Fargo and I'm sending you on any given day, let's say a hundred uh billion dollars or whatever or 500 million of uh deposit liabilities because customers are transferring money from my bank to your bank, then I have to send you an offsetting asset. And so then I'm going to go ahead and send you those uh you know the uh equivalent amount 500 million let's say in bank reserves and that's going to be the offsetting asset for that liability I sent you. That's one way to do it. So this is uh a a chart exclusively of the bank reserves minus currency and circulation. But now what I want to do is look at this same chart but look at it in terms of only electronic reserves. only electronic reserves because again that's really the only thing that was available for the banking system in aggregate for those interbank settlements that would lead to the let's just say additional liquidity or additional M2 if if the banks actually used bank reserves and that's kind of the punch line but let's get to the next slide so this is a a chart of uh or a spreadsheet here of the this is the F excuse me H3 data Adam and this is from 2007. Now the column I have highlighted is the bank reserves minus vault cash. So these these are the electronic reserves that we were talking about earlier and these are the reserves that the banks have uh available to go ahead and settle those transactions. So you can see that our at our highest point in 2007 we were at 10 billion 10 11 billion. >> Mhm. And so now what's really interesting is if you go all the way back to 1940 and you ask the question, well all right, well how many bank reserves it just an applesto apples comparison were in the system back then compared to 2007 and you get the exact same number. >> So and we had some fluctuations here. I smoothed it out just to just to make >> but make a point which is they haven't really changed much in the past century close to >> almost zero almost zero. So now let's think about this. If banks are actually using these bank reserves or the Fed's balance sheet to settle well we know that it's been pretty much flat since 1940 going back and again this excludes QE but uh the concept is is what we're focused on here. So now let's go over and look at what has happened since then with global GDP and with global M2 understanding that a large percentage of those two numbers are going to be dollars. And then we can go ahead and think about that in terms of the bank reserves really not going up at all during this time frame. So now I'm just going to go to some of my tabs here, Adam. So you have to it's it's amateur hour, I know, but >> it's all good. >> It's kind of how I roll on my channel. So this is a chart of nominal GDP, global nominal GDP. And we can see going back to 1960, we're at 1.3 trillion. And if you fast forward to 2007208, we're right around 60 trillion. And let's keep in mind that the majority of the the currency units, let's say, are going to be dollars because the dollar was the world reserve currency. And we can look at global M2, which will be the next chart here. And you can see that just from 1971, it was very, very low and it just skyrockets all the way up to, let's just call it $60 trillion in u 2007. So I don't know what global M2 was in 1940, but I know it wasn't 60 trillion. >> Yeah, >> it was a lot less than that. In fact, I if we had uh in 1960, if it was 1.3 trillion, then I think it would be safe to assume that in 1940 it was less than 1 trillion. So we go from less than 1 trillion all the way up to 60 trillion with the majority of that being dollars and we saw a zero zero increase to the amount of bank reserves. So the question becomes how how how are the banks doing this? If they have no other uh let's say settlement assets in the form of bank reserves, the conclusion you have to come to is that the banks were doing this off the Fed's balance sheet. They they were not using Fed liabilities. They were settling these transactions amongst themselves on their own balance sheets. How are they doing that? Actually quite simple. It was just interbank credit. just interbank credit. So let's go back to the example we used >> probably on a net basis. So Wells Fargo and JP Morgan had a bunch of transactions between them for the day, but we're going to settle for the net and IUX type of deal. >> And keep in mind what I'm talking about right now is is mostly outside of the United States. So outside of the purview of the Fed, we're talking about the Euro dollar market. So if we go back to that example we use a two bank settling instead of Wells Fargo and BFA let's just use um you know some Cayman Island banks or something right? So if I send you 500 million in uh liabilities then we can just go ahead and settle up by you issuing me credit for the 500 million and then that loan from you to me becomes the offsetting asset on your balance sheet or you have an account with me and that's my liability. So, if I send you that $500 million liability, I just simply add $500 million to your, let's say, checking account uh uh that's on my balance sheet, and that's how we settle. >> Mhm. And so what really determines the amount of uh loan growth, credit growth, liquidity, M2 money supply is not the Fed's balance sheet, but it's really risk risk because if there is very low perceived counterparty risk, then the banks are going to do this all day long because it makes sense for them and they're going to make money. Uh now if there's an increase in counterparty risk, you're going to see this maybe not decline in in uh in total, but you're going to see this slow down to a significant degree regardless of whether or not the Fed is doing QE or QT >> because now we fast forward to today and you're like, "Wow, George, they got 3.5 trillion, let's say, in in in bank reserves on their balance sheet, the Fed." And okay, that's fine. But if we can safely assume that the banks don't have to settle on the Fed's balance sheet by looking at this data, it's obvious they don't. And obviously that there was some reason they weren't settling. And I think it was because it was costly and because it was cumbersome. And those two things exist today. Because you got to think about the number of pipes that are going to the Fed's balance sheet. Every single bank uh does not have a pipe going to the Fed's balance sheet. But uh many more banks have pipes going to primary dealers outside of the United States. So therefore that interbank credit settlement uh in a correspondent banking relationship is actually something that's far more efficient. So the punch line there is if they didn't have to use bank reserves, if they chose not to use bank reserves before, then if the Fed increases the amount of bank reserves by let's say 200 billion or decreases the amount of bank reserves by 200 million, should that have a mechanical impact on the entire system? The answer is no. The answer is absolutely unequivocally no. Now, there's one more thing I'm going to show you and then I'm going to tie this in to my view on interest rates because when you think about interest rates, uh, a lot of people think about them in terms of growth in inflation expectations or nominal GDP like we talked about earlier, >> but they also combine that with supply side dynamics or demand as far as foreigners dumping treasuries or it's all about the debt. It's all about the deficits. And Adam, we know that the debt and the deficits are going to continue to explode into the future. That means more supply of treasuries. At the same time, when the Chinese and everyone else and their grandmother is dumping treasuries and therefore, if we have nominal GDP in the United States at 4%, we should still expect to see long-term interest rates go up to 7 8 9 a total loss of control at the long end of the curve, which would prompt the Fed to come in and start doing yield curve control. And the release valve is going to be the dollar. that that's the argument that you hear over and over and over and over and over again. >> I've heard it a lot. Yeah. >> Yeah. So, that's the the the supply argument is what I like to call it. But let's do one more thing here and then we're going to look at the relationship between nominal GDP and interest rates. And then we're going to circle back and then try to answer mechanically why these correlations exist because that's I think the component that so many experts and I I wouldn't call myself an expert but I think so many experts actually leave out and I think it would help really connect the dots for most of your viewers. Okay, so the next thing now Adam we're back at the the PowerPoint here. I'll just do this quickly. And prior to quantitative easing, if you read a textbook on how Alen Greenspan manages the Fed funds rate, what it would tell you is that because these banks need these bank reserves, then if they want the interbank uh rate to go down, then they would add bank reserves. And then if they wanted the the inner bank rate or the Fed funds rate, we'll say, to go up, then they would simply subtract bank reserves. So it just it makes sense, right? The more bank reserves in the system, then you have more supply, then the price is going to go down, those yields are going to go down. That's why I've got reflected here. And this more cheaply. Yep. >> Yeah. And then, you know, fewer bank reserves equals a higher interest rate. This is what you hear in the textbooks, right? So let's go ahead and look at this through the lens of what actually happened in history. Okay. So Adam, now let's quickly go back to this chart of the amount of uh bank reserves in the system and we'll even include vault cash. But we can see from 1980 to 2007 we did not have an increase. We kind of went up, we went back down, but on net we had no increase in the amount of bank reserves. So this would imply that the Fed funds rate was the exact same and that would imply that M2 money supply didn't go up. Because think about it, if banks have this constant demand for bank reserves as the settlement asset, as M2 money supply goes up, then even to keep the interest rate the same, you would need more bank reserves. And then if you want the interest rate to actually go down, then you would really need a lot more bank reserves. but we saw zero. So now let's go over what actually happened. And we look at the Fed funds rate, which you can see goes straight from, let's just call it uh what are we here 18% roughly or 19%. And as we all know, it went from 19% down to where it is today at uh roughly well here it was 5.26% in 2007. So, we had a decrease in the Fed funds rate by 14%. 14%. Now, I'd like to point out that we had an increase in M2 money supply that went from in 1980 roughly 1.5 trillion. Now, this is the domestic economy, by the way. And this goes straight up to almost 7.5 trillion during the exact same time frame. So again, you tell me how on earth were banks using bank reserves and how on earth was the Fed able to take the interest rate from 19% all the way down to 5% while the supposed demand for those bank reserves should have gone parabolic and they did absolutely nothing to their balance sheet. In other words, they didn't increase the amount of bank reserves at all. Mhm. >> So if you take those two things, I I don't know how you come to the conclusion that at least prior to the QE that the banks were actually using these reserves. So that's kind of the punchline here. So now let's move on to the uh the nominal GDP and what we were talking about earlier with interest rates. And the main takeaway there from what we just discussed is the banks in order to expand their balance sheet, the banks don't need bank reserves. They can do that during QT. It's all about the risk. It's all about the risk and reward. And if the riskreward makes sense, they're going to expand their balance sheet. It doesn't matter what the Fed is doing with their bank reserves. Okay. >> Yeah. So just to underscore so for for for for banks to lend uh the way that they want to do they are essentially independent of the Fed >> not only to lend but also to settle those interbank transactions >> because they can lend and that just creates a deposit liability and then it creates a loan on their balance sheet. That's the offsetting asset. But most of the push back that you'll get is people saying, "Okay, well, I understand that, but then when they go to settle with another bank, now all of a sudden they're going to need bank reserves to go ahead and send that deposit liability and settle up with bank B or C." >> Got it. Okay. So again, but the the key point here is just they don't need the Fed for that. And so to a certain extent um it sort of you know makes the case that a lot of Fed policy might not really be all that relevant here >> at least mechanically >> I would psychologically it absolutely is but mechanically it's not and and the main takeaway there that I I would like to have your viewers uh really think about is the fact that this shows us that banks balance sheets are I wouldn't say infinite but the banks the that the balance sheet capacity for the banking system especially outside of the United States and the Euro dollar system is is not constrained by what the Fed is doing. >> It's not constrained by the Fed. Yeah. I get that's the key punch line I was coming to that plus your point about risk which I'm sure we'll talk about in a bit. >> Yeah. So now let's go ahead and look at uh this kind of debate where is the 10-year Treasury yield we'll use that a proxy for the long of the curve. Is this about growth in inflation expectations or another way to look at that is nominal GDP or is this about the amount of supply that's coming online? So, you know, Scott Bent is going to dump 5 trillion of 10-year treasuries on the market that's going to make the interest rate skyrocket regardless of what nominal GDP is because there's just not enough buyers. Another way to say that is there's not enough balance sheet capacity or not enough willing buyers. But let's put that to the test. So, we have nominal GDP is this um kind of light blue line and the dark blue line is the 10-year Treasury yield. And you can see that the 10-year Treasury yield and this goes back to 1962. So, even when rates were going up, even when rates were going down, >> you can see that the 10-year Treasury yield curve, it it's basically just a smoothed out nominal GDP. That's all it is. Now let's think about 1980 to uh today or to 2020 or something like that when you had the uh the US 10-year Treasury going down. What was happening to the US debt? The amount of debt, the supply of treasuries. Now we can go to let's see the next chart I have and we're going to look at this a few different ways. Adam going. >> Yeah. First and foremost, we're going to look at this through through uh the framework of the debt to GDP. So debt to GDP in 1980 was roughly 30%. Today it's right around call it 120%. Okay? So on that metric debt has exploded. Uh but that's not the only metric. We look at the actual deficits as a percentage of GDP and we go back to 1980 and they're right around 2.4%. 4% which I would I'm sure back then they were screaming and yelling about which they should have but for different reasons. And now we look at it and we're not even in a a wartime uh economy. We're not even in a recession or at least NBER isn't admitting to it. But yet the deficit to GDP is at 6.2%. >> Yep. >> And it's just getting worse and worse and worse. So on that metric it's gotten way way worse. Now, let's look at the overall debt. And what I did here is I just have a chart of the uh federal debt going back to 1980. And then I've got a chart of the 10-year Treasury yield. So, you show me the correlation between the two, Adam. >> Yeah, inverse correlation >> at this point. >> That's right. There's an inverse correlation at least during this time frame. And again, if we go back to that chart of nominal GDP and the 10-year Treasury yield, you can see, I'm just guessing, probably an 80 85% correlation. >> Yeah. So, there is no debate that in the past, that doesn't necessarily mean it's going to hold true in the future, but at least in the past, the 10-year Treasury has moved almost entirely on growth in inflation expectations and nominal GDP, if you want to look at it that way. And it has and the impact of the additional supply of treasuries that went from let's just call it a trillion in uh 1980 to 36 trillion today. Uh there was literally zero impact on yields if not a negative correlation maybe even a negative impact on yields. So now the question becomes okay well why why does this happen mechanically because that's key because you can't just say that oh it's worked this way in the past and therefore it's just going to work this way indefinitely into the future and when I when I make this argument a lot of people think that's my claim and it's absolutely not. So now let's think about this in terms of uh mechanically Adam what's happening here uh behind the scenes. This is just a very simple uh oversimplified bank balance sheet here. We got assets on the left uh liabilities on the right. So let me start by asking you a question. I'll ask your viewers as well. And this pretty much explains almost entirely the mechanics behind why the 10-year Treasury really is all about growth and inflation expectations and not about supply. And you remember at the beginning of the conversation I was talking about how the what's really weird about the Treasury market is the supply to a certain degree actually impacts demand. So the higher the supply, the higher the demand is. And I'll I'll explain why in a moment here. So, what the banks are doing is they're just pocketing a spread between their liabilities and their assets. That's it. That's it. And this is a lot different than you and I because we're not pocketing a spread between our liabilities and our assets. What we're doing is taking our hard-earned cash and going out there and potentially buying a 10-year Treasury at, let's say, 4% and we have to hope and pray that inflation doesn't exceed that 4% or else we're losing purchasing power. But >> that's not how the banks work. That's not how the banks work. So, let me ask you a question, Adam. If I over the next year, let's say if I gave you money monthly and over the course of the next year I gave you let's say $100 million, would you take that? >> Yes, absolutely. You probably never hear from me again. >> Okay, cool. All right. Now, but let me let me throw you a curveball here. Let me throw you a curveball. So, you would take the $und00 million, but what if I told you that the inflation rate in the United States was going to go up to 6%. Would you still take it? >> Is this a loan I got to pay you back? >> No, this I'm just giving you money. >> Well, yeah. >> Okay. Let me throw another Let me throw another curveball. What if I told you that during this time frame when I'm giving you a hund00 million over the next year that the debt in the United States, in other words, supply of treasuries is going to go from 36 trillion to 50 trillion. Would you still take the 100 million? >> I mean, I would think so. Yes. >> The answer is yes, because it's free money. It's it's it's it's free money. And so what people have to understand, >> I keep looking for the catch here, but yeah, it's just free money. >> No, but this is what the banks are doing because they're not using their money, they're using your money or they're using money in the form of dollar credit that they themselves create. >> Yeah. >> So if they're paying, let's just go to this bottom one where we see deposit liabilities. So, I actually did a video the other day, Adam, where I looked at the interest rate that banks in the Cayman Islands are or were paying their depositors for dollar deposits. And it was right around 1.5%. 1.5%. >> Mhm. >> So, they're getting money that they have to pay 1.5% for. But at the time, they could go out and buy a 10-year Treasury, let's just say for 4.5%. or they could buy a 2-year Treasury for, let's just say, 4%. And so, they're going to pocket the spread between the 1.5 and the four. They're going to do that all day long. >> All day long. And if there's nothing constraining their balance sheet, then the more Scott Bent issues, the more they're going to be like, great, more free money. More free money. Now, what would incentivize them not to buy or what would incentivize them to actually sell those treasuries? Well, it's if they see they look out in the global economy and they see a lot less risk and they see the global economy growing. And now it's a completely different equation because they're going to increase the size of their balance sheet by taking on dollar assets, whether that's in the form of a treasury or in the form of a loan. And it's got to match up with dollars because they're not going to take the FX risk. And they're also going to try to match up maturity uh we call it duration risk. And what's interesting about most of the deposits outside of the United States in the Euro dollar system is they're actually time deposits. They're they're not demand deposits. So it's much much easier for banks to go ahead and match up that uh that duration. >> That's right. So now let's uh say this bank looks out to the global economy like, "Oh, wow. Everything's looking great, everything's looking rosy. Um, now it's a different decision because I could sit there and get the 4% or whatever it was from a two-year Treasury. Or what I can do is take that balance sheet capacity, lend into the real economy, and make 6%. >> Right? >> Well, if there's a lot less risk, the riskreward favors lending into the real economy. Now, I'm going to make that decision. I'm going to I'm not going to buy those treasuries. and the interest rate is likely going to go up. What I'm saying here is the banks in the Euro dollar system are the marginal buyer. They are the marginal seller. So if you have, let's just say nominal GDP in the United States is using as a proxy. We're using as a proxy for overall risk. Let's just say that's trending right around 4% or that's hovering around 4%. Okay. Well, if interest rates at the long end of the curve go up to 10%. Because Scott Bent issues all these treasuries, now all of a sudden instead of the 1.5% or the 2% spread or whatever they 2.5% spread they had before, now all of a sudden, Adam, they've got a an 8.5% spread. But but but the risk for lending is still very very high because the the the nominal growth, let's say that proxy for risk is still right around 4%. So what are they going to do? They're they're going to buy I mean if they're buying when they're pocketing a 2.5% spread, what are they going to do when it's an 8.5% spread? They're going to buy by the the demand is going to skyrocket. And over time, what's going to happen? And it doesn't happen overnight, but over time, what's going to happen is that interest rate is going to go from whatever it was on the 10-year, bam, bam, bam, bam, bam, bam, bam, bam, bam, bam, bam, all the way down to where it's roughly around what growth and inflation expectations are. And it's the exact same side with or it's the exact same thing on the opposite. You know, a lot of people come out with stable coins argument. Well, there's going to be demand for treasuries with stable coins. Okay. Well, let's just assume again that our bogey is 4%. And the interest rate on the 10-year goes down to 2%. Let's say because of all of this demand from these new stable coins that are being issued. Okay. Well, now the bank looks at that. It's like the riskreward doesn't make sense. There's no way I'm going to buy a 10-year Treasury if nominal GDP is or I think it's going to be at four and that the 10ear is trading at 2%. No way. I'm not going to buy that treasury. In fact, I'm probably going to sell treasuries on my balance sheet. And then what's going to happen to the interest rate? It's it's going to go back up to to to where it is roughly, you know, roughly with that 80% um correlation >> correlation to nominal GDP. Yeah. >> Yeah. So, this is these are the mechanics behind what's happening. So, is this going to continue into the future? The answer is it depends. As long as the monetary system is set up like this, this is our future. Unfortunately, and I hate to say that, Adam, because the price that we have to pay for proflegate government spending is not in the bond market. I wish it was because that would put a constraint on the government spending. >> It's on the purchasing power of the currency. Is that where you're going? >> No, it it's on the effects of the into the real economy because that government spending, what it represents is economic distortions. because of the misallocation of resources, because of malinvestment. So when you have the the government with basically a free credit card with no limit, they're going to spend spend spend. And I don't care if it's Trump, I don't care if it's Obama, I don't care if it's Camala, I don't care if it's Biden. The amount they're going to spend, just like our good friend Lynn Alden says, is going to go straight up. Nothing stops this train. But the price that we have to pay for that isn't in the bond market. Unfortunately, it's in the real economy through the economic distortions that are created by that government spending to begin with. >> Okay. So, help me help me understand that. So, I can I can follow you to okay, a lot more government spending, a lot of malinvestment. Um, somebody might say, but hey, if they can just spend forever and it doesn't send bond yields to the moon, well, George, why isn't that a bad thing? Why is that a bad thing? So what would you put on the list besides things like um you know growing wealth inequality >> the standard of living the standard of living for society at large it's going to deteriorate and >> I mean there's a a great example Japan Adam perfect example >> because you look at their debt to GDP you look at what they've done and they it's just government debt government debt government debt and um uh who's a gentleman I I I think he's great but he uh this is where I first started to go over this concept and think it through in my own mind. Um, great friends with uh with uh Oh jeez, I'm uh Bill Fleckman. Fleenstein Bill Fleckenstein who edit that out. >> Yeah, Bill Fleenstein. I actually heard him on a podcast with Grant Williams. This is probably five years ago. and he came up with this thought experiment that I found fascinating where he said what if because at the time I think the BOJ owned 60% of the outstanding outstanding sovereign debt uh JGBs and he said what if they just did a uh a debt jubilee like it's only two balance sheets like would anyone even know and I got to thinking about that I'm like no there there's if they didn't announce it how would anyone even know >> and what impact would that have on anything the answer is it most likely wouldn't. So then does that mean there's a free lunch? And is what what you're saying there? And the answer is no. Absolutely not. Because the price was already paid by the Japanese people. their standard of living lowered or at least was a lot lower than it otherwise would have been because of the government spending that led to the JGBs in the first place being completely out of control and creating those uh that malinvestment and the misallocation of resources which creates uh really uh uh stagnation to say the least. that creates economic stagnation which again that lowers the standard of living uh disproportionately by the way to the poor middle class. >> Okay. So I I totally get all that. Um so I had jumped to uh what pays the price is the purchasing power the currency and and and you went more towards the defformation of of the economic system. Um I'm still sort of seeing them as as tied there. Right. So when you >> I don't know that it's the that the the cur it could be, but I I don't know that it is because what that implies is that the Fed is going to have to buy the long end of the curve and that's going to create more M2 money supply and more currency units chasing goods and services. And if it's not really about the supply of treasuries, I don't know that they would necessarily have to do yield curve control. I don't know that they actually would need to expand the size of their balance sheet to keep interest rates at the end of the curve right around nominal GDP. And so I I I don't know. Now, this is not to say that I don't think uh prices are going to be higher in the United States in 5 years. I I I absolutely do. And I think that uh that this decade, we're going to look back on this, the 2020s, and it's going to be similar to the 1940s in the sense that it is on net an inflationary decade. Absolutely. But I I don't know that that will, at least mechanically, it wouldn't have to come from the Federal Reserve doing yield curve control. I I think it probably would come more so with what we saw during COVID. And it isn't necessarily about just the massive uh expansion of the money supply, but it's more so about the destruction of the amount of goods and services that we have available to us where it's a supply shock. And I know a lot of people are probably saying, "But George, in, you know, from 2020 to 2022, M2 went up by 25%." Uh that that's true, but I don't know how much of that contributed to the 9% CPI that we saw. Definitely a component, but I would say a bigger component of that inflation was the supply shock. >> The supply shock, you think? Okay. Um All right. Well, look, um I I don't want to interrupt you if you still have more slides to get through, but I have some kind of big, you know. Okay. So, what's what does all this mean? Uh >> yeah, what this means is I I think that interest rates are going to go lower because I think we are going to have a slowdown in the economy because of the labor market and I also think that we are because of that slowdown I think that's going to lead to disinflation and if we get disinflation that's going to be lower growth and inflation expectations and that's why I say from a mechanical standpoint why I say that my base case looking out six months or a here is that we have lower interest rates across the curve. >> Got it. Okay. And look, I So, first off, fascinating um framework and and data walk through here, George. Um I learned a lot and um you know, one man's opinion. Um this confirms sort of my default assumptions of where I think things are headed here. I agree with you. I think disinflation, slowing economy more likely. Do we go into recession or not? Too early to tell here. I think you say the same thing, but but wouldn't surprise you, right? I I don't know if it's recession because then we're dependent on the NBER announcing recession, but what I would say is I expect lower nominal GDP growth, >> right? And I'm guessing you would say and it will feel less fun to people a year from now than it does today. >> Yeah. Unfortunately. Yeah. >> Now, a lot of people are going to say um well, let me put this two questions for you. There's a lot of people who would say, "All right, George, but what about the reaction function of the central planners? And if it gets painful enough, they're going to send QE to the moon and they're going to do all this other stuff again. So, a do you expect something like that to then potentially, you know, boost us out of recession? And and separate from that, which which also might be concurrent, is um the new administration is pursuing a lot of business stimulative policies >> that, you know, will take quarters to be felt. But if indeed, you know, we we've we've been able to lock in the the lower tax uh make the tax cuts permanent. We've added some additional tax relief on top of that. We're deregulating. We're striking these new trade deals and whatever. So, do you expect as well to be there there to be as well some boost to the economy at some point later 2026, 2027 from those policies as well if they're able to be affected as as intended? >> Yeah. So basically, we don't know what the end result is, but it would be a tailwind to economic growth. >> Mhm. >> So, so I'm not trying to simplify it, but but you sort of see like a dip in the economy over the next 12 months, but but then a potential rebound either from those policies providing tailwinds and or some sort of aggressive central plan or reaction function. Yeah, I I think to take it uh in sequence, if we get a dip in the economy and it depends on how dramatic it is and it depends on how dramatic if we do have a a decline in the stock market, it depends on how quick it depends if we have like a liquidity event like a GFC type thing or if it's a garden variety recession and balance sheet recession like.com. If it's balance sheet, >> let's start with garden variety just because nobody can really predict a GFC type of thing. >> Yeah, I think you just have a kind of a slow grind lower. I don't know. I mean, the Fed would probably come in with uh some QE. Uh they would definitely drop rates obviously. Um that's kind of what I'm expecting, but I don't know that that would really make a big difference because again, those interest rates are going to be a reflection of the economy. They're not going to control the economy. I think what would get us out of uh any type of malaise or what would make it a lot worse than it otherwise would have been would be fiscal. It would absolutely be fiscal. And if you look at what happened in March of 2020, Adam, you'll probably remember when the Fed came out with their emergency meeting on that Sunday. It was they were supposed to have the meeting on Wednesday. They dropped interest rates all the way down to zero. They announced uh up to I think a trillion dollars a day in repo. They basically announced QE infinity and the market the next day went down by I think 1,500 points. >> Mhm. >> It just kept going down. The market didn't care. It's like the Fed put was expired. Done. And so what turned the market around was actually the announcement of the car's act. So it was fiscal. And so that's really really what did it. So I I think if that is going to be an outcome then I would focus more on the fiscal and a lot less on the monetary policy especially considering you know what we were talking about mechanically before where it just doesn't have an impact because the banks don't need those reserves. Um, but it does have a psychological impact. And I want to be very clear, just because I'm saying the Fed's balance sheet really doesn't matter to liquidity in normal times, that's not to say that's not to say that the Fed's balance sheet doesn't matter when they're bailing out the banks. That's a whole other different can of worms. And obviously, uh, they can bail out and that makes a difference. But I don't know that that would be inflationary. Uh, I think that would be anti-deflationary. and and those two things are different. So it all depends >> stabilizing when is Yeah. >> Yeah. It all depends on the fiscal component there and then it also depends on uh you know the supply of goods and services. If we break down global supply chains as a result of the fiscal response, then that could lead to the supply shock or a type of supply shock like we saw during uh CO that could see a huge huge uh price increase overall and again very similar to what we saw in the 1940s uh when they had price controls. uh they lifted the price controls and then boom you just saw I think the CPI went to 19% and then two years later it was negative -2 >> and that that was that wasn't really a a result of M2 money supply growth uh it was more so a supply of the government distortions uh we were talking about earlier and I don't know how to predict that now going to the next part of your question about is there going to be some economic tailwinds once we come out the other side. I think that depends on regulation because if you're just doing all of these progrowth measures, but you're not reducing regulations or you're increasing the amount of regulations, then I don't think it moves the needle because look, if you take my tax rate from 30% down to 25%, but you increase the regulatory burden, I I'm not going to grow my business. Uh there there's no way. And a lot of that also depends on the consistency of the policies themselves. And I don't know how it's going to be in the future. But we do know that since January, the policies have been, let's say, haphazard to say the to say the least. So, if you're a business owner and you don't know what your tax rate or you don't know what the tariffs are going to be like tomorrow, you don't know any of this stuff, you don't have a huge incentive to grow your business. And if you're thinking about, let's say, spending$ two billion dollars on building a factory in the United States based on where the tariffs are today, I don't know that you're going to pull that trigger when you don't know where they're going to be tomorrow or that factory is going to take you 5 years to build and by that time Trump's out of office. So to me, it's all about the regulations. And if you reduce regulations and you do those progrowth strategies they're talking you're talking about assuming they are progrowth then yeah I could see that being a significant tailwind for the US economy that could uh be hugely beneficial to the poor and middle class. You know, the I know you love uh kind of analogies, Adam, so I'll give you one that I always use on my channel. >> And that um one thing I don't like about tariffs is that we're trying to combat central planning with just more central planning with like, okay, we can't out, you know, we can't beat the Chinese because they have all this awesome central planning. So, we just need central planning of our own that's just better and that's the only way we're going to beat them. And for me, I always looked at that like, let's say you are going up against Shaquille O'Neal in a game of one-on-one basketball, and you're like, "Okay, well, who can we get, you know, out of the history of the NBA? Let's say, well, who's the guy that we can get to go up against Shaquille O'Neal? We really need to beat him in this game of one-on-one." Well, what we're doing is we're saying, "Okay, well, we have to start by getting a guy that's at least 7 foot2. And the next step, we got to get a guy that's, you know, as the 22 size shoe." And then we got we basically have to get a clone or maybe a little bit better Shaquille O'Neal where I'm saying we don't need Shaquille O'Neal. We've got the greatest basketball player of all time. His name's Michael Jordan. Now, is he 7 foot2? No, he's not. Is he as strong as Shaquille O'Neal? No, he's not. But you know what? He's a hell of a lot faster and he's a lot better. So instead of more central planning to try to compete with the central planners of China, I think we should just have more free market capitalism. In other words, we should just take Michael Jordan who literally has a ball and chain around his ankles right now in the form of regulation and just take off that ball of uh that ball and chain and then just say go get him, Michael. And I can almost assure you that Michael Jordan is going to beat Shaquille O'Neal even though he's not 7 foot2. Just like I can almost assure you that if we reduced regulations in the United States and created all these incentives, then we our economy with free market capitalism would be able to beat the communism for heaven's sakes, the central planning of the Chinese. >> Yeah, I I I I don't disagree with that sentiment. And if you haven't interviewed him, you should talk to um Art Laugher. Um he I probably applaud everything you just said there. Um full disclosure to Art. He he says he doesn't necessarily mind tariffs as a threat, but actually the implementation of them he doesn't like. He's a big free market free trade guy just like you. Um but anyways, I totally get what you're saying is it depends upon, you know, how the chips actually fall with regulation and and everything they're trying to do. And again, I I I don't know if it's these things are going to work out. I'm I'm just saying uh I know that is the administration's intent and if they are successful in that, could it have a tailwind? I think your answer is is yes, provided all the caveats that you just put in there. >> Yep. >> Um and let's actually hope so because uh your your logic is pretty compelling that uh things are probably not going to be so fun for the next 12 months and when we're there a year from now, we're going to be looking for something to pull us out of that. >> Yeah. which which unfortunately even in the United States now our default is central planning. >> Yeah. Well, >> government spending, you know, that's like the cure for for everything. And at the end of the day, that's the problem. >> Well, so here here's a worry that I had, you know, I'm sure you had the same one um you know, starting a couple years ago, which was >> when we let the genie out of the bottle and we said, you know what, we're going to do fiscal direct to household fiscal stimulus, >> right? Um >> the the worry is that that's now in the tool that tool is now in the toolbox. >> Y >> and that the next time there's a downturn, the policy makers are going to say, "Well, yeah, let's do it. We did it last time. It actually is super way more stimulative than monetary stimulus, so let's do it." Right? And of course, the populace is going to say, "Hey, you did it last time. Why are you not doing it this time? In fact, give me more this time." Right? And I I mean, sadly, we're gonna too few people, I think, tie the huge spike we had in inflation to the direct to household fiscal stimulus. It's much more, in my opinion, much more inflationary than monetary stimulus. >> Absolutely. >> Uh and so that's going to be to the extent it was in people's brains, they're going to push it out when the pain comes and they're just going to say, "Look, I don't care. I got bills to pay this month. Give me a check." Right? Um, now granted we have an administration that might be more reluctant to do that than the previous administration, but I think that's open for debate. How worried are you about the precedent that's been set there? >> Very worried, especially with AI. I mean, you look at what AI is doing right now, and it's as it's as bad as it's ever going to be. It's it's the worst it's ever going to be right now. It's only going to get better. And I think a big reason why we're seeing >> You mean the quality of the uh AI performance is the worst it's ever going to be right now. Yes. >> And I think a big reason why we're seeing such a high unemployment rate with college graduates, especially the white collar jobs is be because of AI. >> And so I I think and now that's not to say I'm I'm bearish on it or I don't think we should have it. I think longer term it's going to create a lot more jobs uh on net. But >> I hope you're right. I'm I I haven't been sold on that. Just FYI, but I'm open-minded to it. >> Yeah. Well, I think we can both agree that getting from A to B is going to be rough. It it's going to be very very rough because of the speed at which things are changing. So what you're talking about there as far as uh inflation is all about the velocity of money. So even if we don't have an increase in the money supply, if the government is taking savings and turning it into checking, which is how I think about it in my mind, >> okay? >> And then you're going to it doesn't matter if the number of currency units don't increase, especially if the if the supply is decreasing, velocity increases, you're going to have a big big spike in inflation. And you're talking about UBI basically. And I absolutely think that's where we're headed. Now, will we be there in six months if we have a severe recession? Uh, probably start with the STEMIs and then I think it's just going to be more and more permanent and especially if we have a large spike in the unemployment rate due to, you know, AI taking all the jobs or however you want to say it. And that could lead to the 1940s, you know, that we're talking about. Now, in that scenario, would I still be bullish on bonds? Absolutely not. Absolutely not. But I I would I would uh I would change my prediction, let's say, from lower yields to much much higher yields, especially at the long end of the curve. But keep in mind, I wouldn't change my opinion based on supply dynamics. I would not change my opinion based on the fact that the deficits are blowing out or the debt is increasing. I would change my opinion based on growth and inflation expectations. >> Okay. All right. Um George, super fascinating and I've got like a zillion questions. I'd still love to drill down with you further on this, but um let me get to the the super rubber meets the road. Um you know, for viewers just to make this super practical. Okay, so George Gammon um expects that the economy is going to slow further from here. The unemployment rate is is likely going to rise. Are we going to go into recession within the next 12 months? Don't know, but wouldn't surprise you. Basically, life's going to get harder for more the majority of people over the next 12 months. The stock market is currently in a bubble while that's happening. >> Yeah. So, at some point, presumably along this journey here, Wall Street's going to have to say, "Look, we've been a little bit too aggressive in our earnings expectations given the slowing economy. We're going to have to repric things downwards from here." And that's that's kind of a garden variety repricing. Now, there could be some other things that might happen. You know, if unemployment rate gets high enough that the passive bid starts getting I mean, there's a huge number of things that could happen, but let's let's not worry about that stuff just yet. uh how are you thinking about investing as we enter this next 6 to 12 months that you're looking at? >> Great question because when I talk about the stock market being in a bubble as an example, everyone says, "Well, George, if you weren't invested in the stock market this year, you would have missed out on all those gains." I I I hear that. I hear that non-stop. As if it's a binary decision, >> right? as if the only decision you have is to be fully invested in an S&P index fund or have 100% cash. Those are your only two options, Adam. But what's great is you look at Oh, I don't know. Gold. I mean, what what's gold up this year? You got You probably know better than I would, but it's up a hell of a lot more than the stock market. >> Close to 40%. >> 40%. Okay. I think the stock market's up maybe 10 12% something like that year to date. Uh let's look at GDX or excuse me GDXJ which is something that I have just full disclosure uh I have in my own portfolio and that's up >> good for you. No more than that. Yeah, GDX is up over 100. I'm I'm guessing GDXJ is up by more. >> Yeah. Uh let's talk about another uh thing I have in my portfolio. URA, which is a proxy for uranium. You know, it's more the the uranium miners in there. Um that is up. I I I don't I would say I should pull up a chart, but editor, help me out here. Throw throw up a chart. And I'm guessing it's up uh probably over 50% this year. URA and way way way more than the stock market. And I could go I could go on and on and on about these things. And it's not just Adam that they're up a lot more than the S&P 500. It's that the downside risk to begin with was a lot lower than it is right now when the price to sales for the S&P 500 is trading at all-time highs and when the the Buffett indicator is at what plus 200% when Buffett himself has got 330 or 50 million or billion excuse me in cash and he has a bigger cash position as a percentage of the portfolio than he's ever had. When you look at the cape ratio, Adams did at 39 for heaven's sakes. 39. So again, the point there is it's not just that you had a better return, but you had a lot more or a lot less, excuse me, downside risk to begin with. And I think that's the main takeaway for the retail investor as far as strategy is you always have to make asymmetric bets. Asymmetric where the upside is a lot greater than the downside. And if you do that, that's the first key to success. But you cannot be a successful investor unless you have that asymmetry. And I I don't know how you can argue that you have that asymmetry in the S&P 500 right now. >> Yeah, I don't I just saw a chart earlier today um and if if it's if what I say is wrong, I'll I'll come back when I edit and pull it out. But I think it was the percent of the of S&P companies trading S&P 500 companies trading above 10 times price to sales >> and it was like over 30%. >> I there's only been one other time in history where we're close to that. Um and these are two huge outliers but I mean isn't that amazing? >> Yeah. Yeah. We remember in the docom era with Scott McNeely's famous rant about when Sun was trading by 10 times price to sales and he was like >> investors in my company, you're all idiots. You're all paying way too much for it. Yeah. >> Yeah. And it and it's not that the stock market can't go up. It I have no idea where it's going to go. I mean maybe it doubles from here uh going into the end of the year, but the question isn't necessarily is it going to go up or down. It's it's what are the probabilities and what's the riskreward? What's your upside downside? I always use the example of blackjack because it's a game that that most everyone knows and and most everyone has played. Well, let's say that you have a 19 and you have the option of hitting. Is anyone in their right mind going to hit on a 19? The answer is no. Absolutely not. Because the odds are against you. But that doesn't mean that if you do hit, you can't get 21. You can still get a two, Adam, but just because you can get a two and you get and you get 21, it doesn't necessarily mean that the odds were in your favor. And that was a good decision. The S&P 500 right now is basically hitting on a 19. >> That you told me, you mentioned that I love analogies, which I do. That is a great one, and I'm going to steal it from here if you don't mind. I'll I'll give you attribution, but uh that's a great one. >> Um, okay. So, a asymmetric bets. So, couple questions for you. So, where do you see asymmetric bets right now? Um, I'll let you comment on gold because there's a lot of people that are saying, you know, sure, it's up 40%, but but this is the start of the whole repricing and it's going to go way higher from here. But I'm I'm guessing that energy, maybe even potentially oil right now, maybe has your attention given how um unloved that sector is in general. Plus, it's just still an essential commodity and it is cyclical and, you know, presumably it'll it'll have an upcycle at some point here. >> Yeah, I I'm I'm definitely I like trends. I I like the trend is your friend. I mean, I I really like I I've had the wonderful opportunity to meet a lot of very very very successful investors and hedge fund managers in my life. And the the best ones always are, whether they know it or not, are trend followers. And if you think about value investing, the guys and gals who really make money in value investing are the people that look for that deep value, but they always have to have a catalyst before they buy. They never ever buy something just because it's cheap. >> Just because it's cheap. They want to see it starting to to move. >> That's right. And and what are they doing? They're just trend following, basically. So, I always like looking at the trend. And if the trend is in my favor, uh uh it might um well, if the trend is in my favor, I'm going to be much more likely to buy that if it's already on my watch list than something that's on my watch list where there might not be a catalyst yet or I don't see it in the charts. And so oil right now, I'm I'm I I've got it on the watch list. I love it for sure. Same thing with silver, >> but due to my base case with an economic slowdown, I'm I'm hesitant. I'm very >> And that makes that makes total sense. Okay, get that. Yeah, but it is on your watch list. >> Absolutely. So, I would and obviously uranium, but through the miners. Um, another thing, you know, I like >> I like the long end of the curve. I've got a position in the 30-year Treasury right now, just full disclosure, uh, that I've had for a couple weeks that I'm I did it through futures. >> And you're already up on, right? >> Way up. I mean, I'm up probably 50%. Um but but I I don't know. Again, this is not investment advice and I'm not saying go out and do this because uh I could sell tomorrow and I might >> I very much following you on this. It very much was this was a trade that you were making. Yeah, >> that was absolutely a trade. Yeah. Would I take would I buy a 30-year Treasury right now and hold on to it for the next 10 years? Absolutely. Unequivocally no. there's no chance even though I'm I'm bullish, let's just say, over the uh the next six months or so. >> Okay. Um I want to get I got one more question on investing to get to, but but real quick, thoughts on gold and even you mentioned you're still excited about silver. Um but but you know, both have done great. Um silver uh still has some catching up to do based on historical ratios. Miners have obviously done great. Um, so some may argue, I've already hit a lot of discussions this week about, hey, if you're sitting on big gains, maybe you want to lighten up a little bit and just re, you know, rebalance and that type of stuff, which maybe you would agree with, but in terms of the the trend and and how much legs this has, what you're what you're thinking. >> It's got a lot further to go. >> Trend is your friend. Look at the trend. Look at just pull up a chart. Uh, I'm just talking to your viewers. Pull up a chart of gold and that a year to date. That is a trend. That is a gorgeous trend. That is a phenomenal phenomenal looking chart. Same thing. In fact, the GDXJ uh is probably even better. Uh that that's a sensational looking chart. Now, you could have a pullback here. You know, we may we may be way overbought. We probably are. Um but I I I'm not a seller here. There's no way I'm a seller here. And I I get this in uh I have a subscription service called Robo Capitalist Pro. And I I get this with our members all the time. They're like, "I'm so I'm made this much money on on the miners. I'm I'm this far up on gold. Should I sell? Should I sell?" And I'm like, "I can't tell you what to do." But I can tell you that I'm looking at the chart. The trend seems intact and I'm not I'm not selling. Now, when would you sell? You would sell if your argument if your fundamental analysis changed. >> It changed. And I I think the fundamental analysis for owning gold has a has not changed and b I think there's an even better argument for for owning gold and the gold miners. And I would say the same thing for uh uranium or however you want to play that. And over the short term or the short term maybe the next six months I would say that it's probably the same for the long end of the curve. But just take that all with a grain of salt, guys, because I'm an amateur just like all of you, and I'm just trying to figure this stuff out. >> All right. Um, look, last last question on investing, then we'll wrap it up. Um, so you expect, um, uh, yields to come down. um both for the mechanical rationale that you walked us through but also because the Fed is is likely on the short end uh rates will come down because the Fed is likely to be cutting from here, right? >> Yeah. But that could again it depends on growth and inflation because the Fed cut 100 basis points at the end of 2024 and the 10-year Treasury went up by 100 basis points. >> So why was that? I I think because the labor market was pretty solid back then. And remember in December we had like a blowout headline number of like 330,000 jobs. And I think the market looks at that and says, "Oh my gosh, that the Fed is cutting into a booming economy and a booming labor market." But now it's the complete opposite in the labor market. Uh you have an obvious deterioration. And so I don't know that if we see big Fed cuts that we will see the long end go up. Although although we could uh that's just it's definitely not uh it's definitely not my base case. And one one thing I'd like to add, Adam, is because a lot of the push back I get on this thesis is well even if the unemployment rate goes up, we could be in stagflation. >> We could be in stagflation implying that we could have the unemployment rate go up, we could go into a recession while at the same time the CPI, just using as a proxy is accelerating to the up upside. So, it's not just higher than than the Fed target, but it's going from, let's say, 2.9 to 4 to 5 to 6, boom, boom, like this, right? >> And I would strongly encourage your viewers to look at a chart of the inflation rate, the CPI in the 1970s and compare that with the unemployment rate. And what you find is uh like we'll just use the recession of 7475. And during that time you had uh you know the CPI going up up up up but as soon as that unemployment rate Adam spiked straight up it just >> it just went down >> the inflation rate just now we didn't go to deflation but we had massive disinflation. >> Yeah. And that's because we're we're a huge majority uh consumer spending driven economy. Right. >> That's a that's a lot of it. And it's the exact same thing. So whenever you look at a recession when we have that big unemployment spike you always always always see disinflation even in the 1970s and that the one push back I get there is well George but now we've had all this M2 money supply growth you know from 2020 to 2025 and what's fascinating Adam is if you actually pull up a chart of M2 money supply from uh 1970 to 75 it went up by a higher percentage than it has from 2020 to 2025. Okay. So, one thing we didn't talk about and I don't want to get too sidetracked on it because I still have a key question I want to ask you before we wrap up, but we haven't really talked much about tariffs, but I think most I think a lot of people will say, well, hey, the one of the reasons why bond yields have been elevated on the long end of the curve is because everybody's worried about the inflationary aspects of tariffs. And we we we've been waiting to see the details on it. And I'm I you know we we don't know the full story yet, but I think it's becoming increasingly clear that they are not as inflationary as the market initially feared coming out of liberation day. And I think for the Fed to to change in its wording today that um uh you know, we now think the balance of risks is to a weaker labor market versus inflation remaining higher than we want. Um it seems to the Fed themselves are even beginning to say, "Okay, we're starting to get a little bit less worried about inflation." So, um, uh, uh, you know, I guess unless and until tariffs really prove themselves to be marketkedly inflationary here, that's another reason why rates may come down in the or might might not go higher on the the longer end. >> Yeah, I think there's two components there. Uh, number one, if you have a deteriorating labor market, then even if you do have prices of XYZ or let's just say the price of oil, that's a good example because oil is an input to almost everything. uh you just get to a point where you're robbing Peter to pay Paul. >> Yeah. >> So you're just okay, you've got so much in your paycheck, your paycheck is not going up. And if the price of the stuff you need is going up, then you have to allocate a higher percentage of your paycheck to that and a lower percentage >> to somewhere else >> to somewhere else. And that's going to kind of have a balancing effect. And then also if you look at the data and you can start by looking at import prices which do not include tariffs. This is very interesting. So if you look at import prices, you see that they have not gone down, which which tells you that the foreigners are not paying the tariffs. They are not paying the tariffs because since the uh the import prices do not include the tax, then in order for those foreigners to eat the tariff, so to speak, they would have to drop prices. >> Prices. Yeah. >> And they're not dropping prices. So are we seeing it come out in the CPI? Not really. Not really. a little bit in goods because we see disinflation in services still. But who's eating the tariffs are actually the US importers. They're the ones. So let's just say they had a 20% margin going into this. Now they've got a 10% margin and they're just trying as hard as they can not to increase those prices and pass them on to the consumer because they know that the demand's not there. >> And if they increase the price, demand is going to fall off a cliff and on net balance they're going to be worse off. So that's what's happening right now and I don't know how we get to a point where those uh importers are able to pass on >> the higher prices even though they might try just due to necessity but then I think it it creates less a lot less economic output because of that robbing Peter to pay Paul dynamic we talked about. And let's remember that if they're robbing Paul then Paul is going to fire workers. Well, that's what I was going to say. So, even if they determine they can't pass on uh the the tariffs to the end consumer, the longer this goes on and the profit margins get squeezed, they have to start firing people. >> Yep. >> And that that is going to depress consumer spending um and you know make uh uh well decrease demand which would then bring yields down. >> It's a feedback loop. >> Yeah. Okay. So, uh, here's the question I was working up to here, which is, um, if the Fed is indeed in a cutting era now, um, and assume for a moment here, it it it ends up cutting, I don't know, let's say 150, 200 basis points by the time all is done, the T- bill and chill trade largely starts to go away. >> Yeah. >> What do those investors do? >> It it depends on what asset prices are. I mean, I have no way of knowing that the the the best advice I I guess again it's not advice, but I can tell you what I do. And I don't know if I've ever told you this story, but um have you met my sister? >> No. >> I don't know if you've ever met her at a conference or something like that. >> No, I've not had the pleasure. >> Okay. I'm trying to twist her arm to go to New Orleans, so hopefully you have the opportunity to meet her. She's she's my uh she's 10 years older than I am, and she is literally the best investor I've ever seen in my life. Adam. Uh, I I would put her up against Standen Miller. And I'm not And I'm not joking. I'm not joking. So, what's interesting is my sister uh she's >> Why isn't she presenting at New Orleans then? >> Exactly. She She should be. She should be. But what she used to do is she's always been very stingy with money or or actually I shouldn't say stingy, I should say prudent with money. And yeah, she she's been uh she's made a lot of money in her life and so is her husband and she usually managed the the the finances. But what she used to do when uh both her and her husband were making a lot of money and she had two daughters uh they were in school at the time is she would never ever buy them clothes during the year. Never. Not even one pair of Levis's. What she would do is she would just put make a list on the refrigerator of all the things they needed and then Black Friday she would wake up with the girls at like I'm not kidding 3:00 in the morning and she wouldn't even go to the mall. She go to the outlet mall just so she could get a better price >> and then she would take her watch list and she would just buy everything that she wanted to buy or what that she needed that was on sale. She does the exact same thing with her portfolio, Adam. So, what she'll do is she'll just sit there and make a list of all these things that she wants to buy and she won't buy any of them unless they get down to a price that she likes that she thinks is on sale and then she'll go ahead and buy. So, that's what that's what I'm doing right now. That's what I again I can't give advice but I would suggest your listeners consider uh a strategy like that because we just don't know how this is going to play out. We don't know what the price of oil is going to be in 6 months. We don't know what the price of gold is going to be. We don't know the price of S&P. We don't know what real estate in Miami is going to be. So it it just all depends on where you can get the good deals. >> All right. Um, you're reminding me of something I I like to remind this audience from time to time. Um, you you've you you probably heard about um the science of hitting Ted Williams or he would analyze the batters box and he knew exactly where within the batter box what his um batting average was, you know, anywhere within there. And so what he would basically do is say, I my job was just to wait >> just to wait for a pitch to get into my sweet spot in the batters box and that's when I would swing. And the challenge that he had is that um he could strike out, right? So eventually he would have to swing he would have he would sometimes have to swing at a non-perfect ball just because it was close enough it would be a strike, right? >> So Warren Buffett talks a lot about that. Warren Buffett says, "No, that's the right approach." But in investing, he's like, I don't have the strike limit. >> So I can let I can let a thousand pitches go by. I only need the swing when it is right exactly in my sweet spot. And so you're reminding people of that in general, but also that the fact that we have a better than average we could maybe agree on probability of some corrective event in the market there. So, you know, just just wait and hopefully the market's going to serve you something that you really are interested that's on your watch list hopefully at the price you want and then you swing. >> Yeah. And especially if if the macro environment is conducive to what is on your watch list. I always have that macro overlay, but it goes back to what our good friend Jim Rogers always says. He he is he's been my favorite investor since I started to get into investing. And I remember I've read his interview in Market Wizards probably a thousand times, Adam. I I mean I I almost know it word for word. And remember in the interview he said he was talking to Jack Schwagger about how most retail investors, they just always feel like they have to do something. They always got to be doing something. And he says, "No, you don't." He says, "You don't have to do anything." He says, "What you do is just sit in your chair and wait for a big pile of money to show up in the corner and when you see the big pile of money, just go over and pick it up." >> And that's basically what we're saying. Wait for the big pile of money. And the pile of money with the S&P is not there right now. >> And it's so funny because human nature, we just always feel this pressure to do something, right? Yeah. >> And we get ourselves more often than not, I think, into trouble with doing way too much versus just waiting. This is potentially somewhat apocryphal, but you hear the stories of the the studies that like Fidelity did where the people who had the best performances were the people who were dead or who forgot they had accounts and they just didn't touch them and they ended up doing just fine, right? >> Yeah. >> Yeah. Um All right. Well, look, George, this has been fantastic. Um, thank you so much. Uh, well, I'm I'm sorry it has been so long since we've done this. Um, I'll I'll definitely commit to doing it uh more frequently in the future. Um, I really appreciate you putting together all the slides and walking us through those important um, sort of system mechanics. I think it's really going to help me uh, for sure uh, know how to think about, you know, kind of just sort of systemically how things will work going forward. Um, most important question of the interview. Um, for folks that have really enjoyed this, maybe for a few it's their first exposure to you, where can they go to follow you and your work? >> YouTube. They can just type in George Gammon and you're going to get the George Gammon channel which is exclusively whiteboard videos where I do >> phenomenal by the way. >> Thank you. I do my very best to explain this stuff. And then my other channel is the Rebel Capitals channel which are just talking head videos kind of with my background here and I usually do them live. So they're just live streams on me kind of riffing what's happening in the financial media during that day. So today I'm going to do a live stream on the Fed's interest rate decision and kind of you whether it was dovish and all that stuff. So it's either George Gammon Rebel Capitalist channel or I've got a channel like yours. Uh I'm just trying to um you know use you as an example. It's not as good as your channel, but it's uh it's called Rebel Capitalist Interviews. And those are the three main channels. >> All right, great. So, George, when I um edit this, I will put up the links to um all three of those channels here on the screen so folks know where to go. Folks, the links will also be in the description below this video as well. Um I I was smiling when you were talking about going to do your live stream because literally when I get off of here, I'm going to go do my live stream without reacting to that info. So, it's fun to talk to somebody in the exact same trade here. >> Yeah. Yeah. >> All right. Right. Well, look, um, folks, um, if if you have enjoyed this, uh, discussion with George, even half as much as I have, um, please let him know that by hitting the like button and then clicking on the subscribe button below as well as that little bell icon right next to it. Um, George has given us an awful lot to think about in terms of both the direction of the economy, what could happen in markets, and how to think about potentially how to invest uh, for the environment that's coming, especially if it unfolds the way that George thinks it might. If you think you might want some help from a professional financial adviser in trying to look at your particular situation and figure out um you know the best course of action might be for you um I highly recommend you should do that. Um get that advice from a good financial adviser. Importantly, one who takes into account all the macro issues that George has talked about with us here. To be honest, when you put that last requirement on the universe of of good financial adviserss who understand and take that info into account shrinks pretty quickly. Um, but if you've got a good one who's who's already, you know, doing a good job of of both putting a strategy together for you and then executing on you for executing on it for you, great. Don't mess with success. But if you don't have one or you'd like a second opinion from one who does meet those requirements, then consider scheduling a free consultation with one of the financial adviserss that thoughtful money endorses. To do that, just fill out the very short form at thoughtfulmoney.com. These consultations are totally free. There's no commitment to work with the firms. It's just a free service they offer to try to help as many people as possible position as prudently as possible for what may be coming ahead. Lastly, um just want to remind everybody that the thoughtful money fall online conference is coming up now in just it's just a month away, Saturday, October 18th. Don't worry if you can't watch live. Everybody who registers will get sent a replay of the entire event, all the presentations, all the live Q&As's. Um it is a fantastic year this year. The faculty is the best we've ever had. In fact, the only way I think we can make the faculty better next time is to have George Gammon join it. So, George, George, I'll I'll be reaching out with an invite to you for that. Um, but folks, if you haven't bought your ticket yet, go to thoughtfulmoney.com/conference. You can buy your ticket there. And if you move quickly, you can still buy it at the early bird price discount that we're offering, which is the lowest price we're going to be able to offer. I want everybody to get that lowest price who can. And lastly, if you're a premium subscriber to our Substack, look for the code I sent you. You can get an additional $50 off of that early bird price. George, um like I said, it's just been a joy. Thanks so much. I think the future is going to be serving up a lot of um you know, interesting curveballs along the way, even despite our >> a lot of opportunity as well. >> Yeah. And a lot of opportunity. But I' I'd like to invite you to come back on the channel anytime something's really burning bright on your radar, you know, after you've told your followers about it. love to have you come back here and and let my viewers know as well. >> Absolutely. >> All right. It's been such a pleasure, my friend. Everybody else, thanks so much for watching.