The Cracks Are Showing Even as Markets Hit Record Highs | George Gammon
Summary
Portfolio Positioning: Guest advocates a core allocation to gold (insurance) and substantial exposure to short-term Treasuries (T-bills) for yield and dry powder.
Digital Assets: Bullish on owning actual Bitcoin for portability and system-outside purchasing power, while avoiding leveraged proxies.
Specific Trades: Highlights a long Bitcoin and short MSTR (MicroStrategy) pair trade that has worked well, emphasizing owning the asset versus the leveraged corporate wrapper.
Equity Shorts: Cites a successful short in KMX (CarMax) hedged with a long S&P 500 position, illustrating current opportunities for pairs trades amid consumer weakness.
Macro Risks: Warns of rising counterparty risk, liquidity stresses in private credit, and an inverted yield curve signaling economic slowdown despite equity highs.
Policy Outlook: Expects rapid fiscal responses (“10x” playbook) in future stress, which may boost assets short term but worsen bifurcation and inflation pressures.
Housing Dynamics: Criticizes proposed 50-year mortgages as vote-buying that props prices without improving affordability, while rent deflation and regional cracks emerge.
Investment Framework: Prefers cash-flowing assets and optionality; holds T-bills now with intent to buy quality assets cheaper if markets reprice.
Transcript
[Music] All right, if you look at the Dow Jones today, you see quite a nice little record high. You see a bit of a party. But if you look at the credit markets, you're starting to see the smart money running for the exits. I mean, Fitch dropped a number that changed the entire narrative, 6.65%. That's the subprime auto delinquency rate. And it's higher than the peak of the 2008 crisis. It's the highest level it's been since 1994. And then look in the background. I mean, the banking plumbing is starting to clog up. I mean, UB UBS, of course, is starting to liquidate some hedge funds. We're less than 3 weeks away from the Federal Reserve officially ending quantitive tightening. It's also worth noting today, silver, gold both back up, too. Gold back over $4,200 an ounce and silver over 53. Welcome back to Kicko News. I'm Jeremy Saffron. Today on the show, we're asking, is the entire system actually breaking or is it just the greatest wealth transfer of our lifetime? Joining me now is the rebel capitalist himself, George Gammon. Welcome back to the program. Good to see you. >> Oh, thanks for having me on. >> Uh quite the macro day. Uh we'll get to that CPI data because we're hearing that it might not even come out at all. But I want to start with the the the news that most people kind of missed because they were watching this Dow Jones make uh new highs. I mean, UBS's Okconor is liquidating two hedge funds because of this first brand's bankruptcy. We're we're talking billions in bad debt just vaporized. But there was one part to the story that was making people's blood boil this morning. We learned that the founder of that bankrupt company, Patrick James, a man accused of siphoning $700 million for private jets and PJs, I guess he just got a judge to unfreeze his personal bank accounts. So, it feels like it's a bit of a rigged game. How close are you keeping an eye on this these corporate bankruptcies? >> Well, I'm I'm keeping a very close eye on the corporate bankruptcies. Not so much the guy buying pajamas or or private jets with the 700 million. Uh I mean that's just kind of what you would expect when the tide is in for so long and then when you start to see the tide go out, you see all the fraud, you see who's swimming naked, you see all the cockroaches, whatever analogy uh or phrase saying that you want to use. I think they're all applicable to where we are right now. The bottom line there, excuse me, is uh when the tide is in this long, you're going to see a lot of this type of activity. And it should come as no surprise. Now, going back to the UBS hedge funds, why I'm paying such close attention to those is because this is eerily similar to 2007 with Bear Sterns. And I know they say history doesn't repeat, but it rhymes. But in this case, it looks like it's repeating to me. Now, I just did a video saying, I don't know if this ends like 2008, but it's indisputable that this is playing out exactly like the middle of 2007. So, let me give you some specific data points. Back then, Bear Sterns had a couple hedge funds that were subprime and they had exposure to subprime mortgage back securities. And by the way, both both of these funds were marketed as high-grade. I don't know if you you saw that. So these high-grade funds that turned out to be not so much high-grade. And the one fund really took a big haircut. And then the people in the other fund, although it didn't take as big of a haircut, it started to get a lot of redemptions because these people are smelling smoke in the movie theater and they don't want to be the last one to the exit. They don't want to be the one holding the bag. So even if that fund isn't taking a big loss, they're going to redeem. So then what happens is you have the underlying asset that's rather illquid, they can't sell it at 100 cents on the dollar. So they sell it at 50 cents on the dollar, they take a hit, and then you just kind of have this doom loop. So at the time, Beer Stern's stock went down quite substantially, but it went down from like 171 or so, which was a high earlier in 2007, I think in January 2007. And it went down to about 120 or 125, but people were saying, "Oh, it's kind of contained. No big deal." And by and I'd like to remind everyone that the stock market hit all-time highs in October >> of 2007. So as this is happening with bear sterns, people are completely blowing it off and the stock market is just going higher and higher and higher and higher. So then what happens is we kind of know how that story ends and how it played out. By the time you get to March or so of 2008, the stock Bear Sterns is trading at 75 and within a few days it's trading at zero. Basically they're they're they're bankrupt. I think JP Morgan bought them for $2 a share or something like that. Down 99% from where they were just 14 months earlier. So, it goes back to what Jamie Diamond, oddly enough, he's got a lot of experience with this uh was just saying that when you see one cockroach, usually that's not the only one. >> And we're just seeing more and more of these cockroaches. So, now getting back to UBS, what just happened? They had two hedge funds that were, let's just say, subprime and they were marketed as the exact same thing. They were marketed as high-grade. So you had one of the funds big exposure to first brands. So they take like a 30% haircut, but then they have to shut down both funds because like Bear Sterns, the people in the other one that didn't see many losses, they look over there, they smell smoke, and they're like, I don't want to be the last guy here. Sell, sell, sell, sell, sell. So that forces them to shut down both of those funds. Now, why is this a big deal? Because most of the people watching this will say, "Oh, this is just contained. There's no systemic risk. This is a big nothing burger." Well, it's not. and bec and it's not if you understand how the monetary system works because the monetary system is basically a network of bank balance sheets. So it's very similar to those old Christmas lights that we used to get when we were a kid. Remember when one light bulb would go out the whole thing wouldn't work and so you'd have to go there and figure out which bulb it was. So it's not that extreme where if one bank balance sheet blows up then the whole system blows up. But that one bank balance sheet, since it's connected in one way or the other to all these other bank balance sheets through the network, it increases counterparty risk, >> right? And regardless of what the Fed's doing, I don't care if they're stopping QT, I don't care if they stop QE. If that counterparty risk remains high, there's going to be a lack of liquidity. And if there's a lack of liquidity, what that's going to do is that's going to force the tide out even further. you're going to see more and more of these cockroaches, which increases the counterparty rich uh risk, excuse me, which decreases the overall liquidity. So, that's basically why I'm watching this so closely. Now, I'm not saying that this plays out like 2008. I am saying that this has played out exactly like 2007. Now, is the endgame a GFC? Quite frankly, I doubt it because the central planners have such a hair trigger right now that even if we do have a a modest decline uh if it was let's say out of order based on the central planners definition then they would step in and I don't know that QE would really do anything but I do think fiscal uh would do a lot and I think we've seen this playbook before right we've seen this during 2020 so if we have another type of event even like we had during the.com bust I think the central planners would come in with, let's just say, you know, I I did a a video the other day and I was joking, but kind of not where I said that the central planners, if we have another like mini crisis or the beginning of one or collapse that they'll call Grant Cardone and Grant Cardone will just say 10x it, 10x, Grant Card, Grant, what should we do with QE? 10X it. What should we do with fiscal 10x it? I think that's probably what we'll see play out if uh some of these red flags come to fruition. >> Okay. Okay. So, another live stream from 42,000 ft. Uh you know, I got to ask you, I mean, the the private credit was supposed to be kind of the safe yield play, right? I mean, floating rate senior secured nonmarkettoarket. I mean, if those assets are freezing up, doesn't that imply that the problem isn't the credit quality, it's the il, you know, the liquidity illusion Wall Street built into the entire system? I mean, if it's true, doesn't the Fed's pause and QT actually make this work because it delays the real price discovery? >> Uh, I don't think so because this implies that bank reserves equal liquidity, >> right? >> And bank reserves in and of themselves don't necessarily equal liquidity. The example I always use to keep it super simple is assume for your viewer they had $10 million to lend >> and let's just say you start a hard money fund for real estate or something like this, but you've got $10 million sitting in the bank and you want to lend it out to get a return. Well, let's say that every single entity that comes to you isn't creditw worthy. Or let's just say that the housing market is crashing and these real estate investors are trying to come to you to get uh you to lend them money for to catch a falling knife. Now, is the problem that you don't have enough money or is the problem that there's just way too much risk? >> The problem is that there's way too much risk. So, you're not going to lend. And if you do lend, you're going to lend at an astronomical interest rate which none of the borrowers can afford because they can't make the math work. So, in my view, when you look at the repo market as an example, and people have been talking about the lack of liquidity there because interest rates are going up with sofur and whatnot, and they point directly to the Fed's balance sheet and say, "Well, it's because we don't have enough bank reserves." Uh, I I don't know. Uh, maybe, but I I think it's more so because of what we're seeing in the shadow banking system, what we're seeing with private credit, and the increase of counterparty risk. So that's why I say even if the Fed comes in and mechanically increases the amount of reserves, if that doesn't decrease the perception of counterparty risk, then it will not increase liquidity, you'll still have the same problem. >> Yeah. Yeah. And it's it's not just I mean one bad actor withricolor, the auto lender, they filed and the allegations are that they're double pledging collateral. I mean how much is phantom collateral is sitting on bank balance sheets right now? If UBS got duped, who else is holding the bag of empty promises? >> That's exactly what I'm talking about. >> Yeah, >> because that just increases the perceived counterparty risk because not only do you have that counterparty, but then you have the collateral that they are posting that you have to be extremely concerned with. And at the beginning of the conversation, we were talking about when the tide is in and the water levels are very high, everyone's out there swimming naked. The entities that are lending, they don't really care about collateral. Like, who cares? Like, we're not you're not going to default on the loan. you're going to pay us back because everyone knows the economy is booming >> and we just watched the last Fed press conference with Jerome Pal and he's assuring us that the economy is strong and resilient >> and we see all of these, you know, rainbows and sunshine because we never look beneath the hood because the idea is we don't have to because everything is doing so well. But then all of a sudden when they wake up and they say, "Wait a minute here. You just have one bankruptcy, then two bankruptcies, then you have a couple hedge funds go bust." And then all of a sudden they're like, "Whoa, whoa, whoa. Maybe we shouldn't have been doing those loans and maybe we should have looked a little bit harder at the collateral we were taking because we're accepting it at 100 cents on the dollar when maybe it was valued at 50 cents on the dollar or maybe it didn't even exist at all, which is what you're saying." And you're making that great point with the fraud. And quite frankly, that was really the key component of the GFC. It was people think it was a mortgage back security issue or a housing issue. Not really. If you would have had just like subprime blow up, it would have made a dent, right? It it wouldn't have been fun, but it wouldn't have caused a global financial crisis. The reason it did is because the collateral blew up because you had this pie chart of collateral and that goes into the monetary system. That's what banks use to create money, right? Unfortunately, we live in a debt based monetary system. It is what it is. So collateral is a key key component of that. So when you have half the pie chart, just stating this as an example, it's treasuries and half is mortgage back securities and overnight it's like wait a minute, half of that collateral isn't really valued at 100 cents on the dollar. Now it's valued at who knows, right? >> So then half of the collateral in the monetary system just gets wiped out and then you just have a deflationary bust. And so I'm glad you brought up that collateral component of it because that's something that a lot of people just kind of brush over, but it's something that's extremely extremely important. >> You know, I mean, looking at the broader high yield bond market, I mean, this the spreads, they remain tight. I mean, the market at large doesn't seem worried about these. >> Yeah, exactly. >> So, so I mean, is the bond market correct in viewing these as isolated incidents or are they pricing in a Fed put that protects them against this, you know, systemic risk? Well, so I think we have to compartmentalize the bond market. >> Yeah. >> And what you're talking about is corporate credit spreads and that's good. I mean, we should be watching those very, very closely. But I think when you look at the Treasury market, that's telling you a much different story, right? As an example, I was just looking at the yield curve last night and I believe it's the one year through the five-year still trading under Fed funds, meaning it's inverted. That that's that's not a sign of a healthy economy. that that's not a sign that the economy is running on all eight cylinders. That's a huge huge huge red flag. And even if you look out to the 10-year, I mean, I think today the 10-year was trading at maybe 4.08, maybe 4.05, and you figure that's basically right at Fed funds. So, you have a flat yield curve. A lot of it's inverted, but flat going from Fed funds all the way out to the 10-year Treasury. like like that's the marketplace telling you that they are highly highly riskoff. And the marketplace I'm referring to isn't necessarily the stock market, right? >> It's the treasury market. And that's usually the smart money because what's happening there is the banks have a choice. What are you going to do with your balance sheet? Are you going to lend money out into the real economy and if you look out and see everything that's happening with private credit? Probably not. or you're going to be able to lend it at an interest rate that's ownorously high for those people who are trying to borrow the money. So then the only other option you have to expand your balance sheet is to buy treasuries. Yeah. >> The safest and liquid asset. And that's usually why you see the curve flatten out and then actually invert. And that's basically what we're seeing today, which is a signal that uh things are are not what the stock market is leading you to believe. >> Yeah. Yeah. Well said. This is actually perfect because I had it kind of queued up. I mean, there's this hysteria on X on Twitter right now. They're talking, you know, the Fed just announced its QT ends in December 1st. The viral take is the money printer is back. Buy everything. But but you've looked at the numbers. I mean, they're reinvesting entity bills short-term, not coupons, long-term. Is this stimulus? I mean, you know, we I guess we got to get into why they're doing this. It's about the Treasury General account. The government's drained nearly 700 million from the banking system since June, refilled their own checking account. I mean, we talked about those those spikes in sofa rates, the overnight lending. I mean, are we inches away from a repo crisis like 29 where 2019, you know, where where the cash just runs out overnight or is this just a technical glitch? >> Well, we we we could be close to a repo crisis, but I don't think it's a result of too few bank reserves. >> I think it would be a result of counterparty risk. So, let's go back to September 2019 when the repo rate spiked to approximately 10%. What most people thought was, oh my gosh, let's go back to that hard money lender example. So, I think that's something that's easy for everyone to understand. They thought, oh my gosh, the hard money guy just ran out of money. He just ran out of money. He has no money. and therefore the people that need the money, they're willing to pay 5%, 6%, 7% on up to 10% and there's just no money left in the kitty to lend out. Well, that's one view, >> but then there's the other view, like I was saying before, that yeah, he had money, $10 million. It's just no one was creditw worthy, so he just jacked his interest rates up to 10% because the counterparty risk. And it could have been and people have to understand that the repo rate is just an aggregate total. It's in like an average of all the transactions that happened that day in repo. >> You see? So it's not just a rate. So there could have been one or two counterparties where the repo rate was 20%. >> Right? And then the other counterparties were at 3 or 4% and that just made it spike all the way up to 10%. So that's something that we we've got to remember. But if the view of the repo crisis in 2019 being a result of too few bank reserves because that's the argument, then you also have to believe that the Fed controls the amount of money. >> And I don't believe that. Uh through all the videos I've done, all the research I've done, the conclusion to me is very very clear and that's that the banks create money. That banks create or what we consider money. The banks create commercial deposit liabilities. So, and the banks don't need bank reserves to do that. Uh they can settle with interbank credit. So, as an example, let's go back to two uh uh 1980. Back in 1980, there was about 40 billion worth of bank reserves and M2 money supply, just using as a proxy. Keep in mind there's a lot more dollar M2 money supply outside of the United States, but we'll just look at the United States. So, it was around 1.5 trillion. And then we fast forward to 2007 and the amount of M2 money supply again just in the United States was 7.5 trillion. But the amount of bank reserves went up by zero. The amount of bank reserves were the exact same. Now I'd like to remind everyone that during this time frame you had the 1990s. So why is that important? Because as a percentage, the stock market went up more in the 1990s with no QE with the Fed's balance sheet being the exact same at 40 billion while the M2 money supply was going up at an astronomical rate. And you had the stock market going up in percentage terms at a as an uh at an astronomical rate, much more so than you saw saw during QE 1, 2, and 3. So if the stock market went up by higher percentage terms, if the M2 money supply increased by that much without increasing bank reserves, how can you argue that bank reserves actually matter and that bank reserves are the key to global liquidity in the monetary system? I don't think you can. And it goes back to the fact, and this is something I talk about on my videos all the time, that everyone likes to assume the Fed is at the center of the monetary solar system. And I don't think they are. I I think the evidence points to the banks being at the center of the monetary solar system and the Fed just simply revolves around the banks. And so if the the banks can't run out of money, Jeremy, when's the last time you went to a bank or heard of anybody going to a bank that is a great credit risk and applying for a mortgage and the bank saying, you know what, we would make a ton of money on this loan and you are a perfect borrower. But unfortunately, we can't do the loan right now because we just ran out of money >> or we can't do the loan right now because we just ran out of bank reserves. I've never ever in my life heard of any bank saying that. And there's a reason why. It's because the banks create money. They lend it into existence when they extend the credit. And unfortunately or fortunately, they do not need need bank reserves to do that, especially especially outside of the United States in the Euro dollar system. >> Yeah, well said. Uh almost a masterclass there. I mean, we can connect it to to the real economy. That number that I said at the top, that that Fitch number 6.65% that also is the highest since the '9s, since 1994. I mean, that means nearly one in 15 subprime borrowers are are be behind on their car payments. I mean, people need their cars to get to work. If they aren't paying the loan, they're obviously tapped out. Are we seeing, as we hear in the mainstream, you know, this K-shaped reality where the working class is is in a depression, but the asset class owners don't feel a thing. >> Yeah, but unfortunately, what was your last point there? That the asset class holders don't feel a thing. But what happens if asset prices go down? Then all of a sudden your K-shaped recovery or economy turns into a small H >> where everyone is just is this and then everyone's down as opposed to some people are up that hold assets and the other people are down. And when you look at the AI bubble which uh you know who knows how that plays out but you look at everything that's happening in the real economy outside of just the stock market. I mean, let's look at the labor market because when everyone if I meet some guy in a mall or something like that and he recognizes me from my channel and he comes wants a quick tip or something like this, you know, George, how can I determine what's going to happen in the real economy? I always just say just look at the labor market. Just look look at the labor market. And if we look at the labor market and of especially if we combine that with interest rates on treasuries, what is it telling you? It's it it's telling you the economy is extremely sick. So when we see Amazon come out announce these layoffs, when we see Wendy's, I think they just announced that they're shutting down like hundreds of restaurants. When we see CarMax completely tank the other day to the point where they fired their CEO and the stock was down 24% in one day. >> And I know that extremely well because fortunately I was short uh CarMax. And then you you see all these other things. Uh Chipotle, that's another great example. You know, you see all these CEOs saying, "Look, the the consumers tapped out, especially the poor and the middle class, they're completely waving the white flag right now." And I think then that feeds over into what we see withricolor. That feeds over into what we see with uh First Brands. That feeds over into Zion, Western Alliance, and then UBS shutting down these hedge funds. It's all connected. It's all connected. And I think that so many people make the mistake of just looking at the S&P 500 and assuming that everything underneath the hood has to be running on all eight cylinders when we've seen so many times in the past, 2007, that that's not the case. I don't know if I said earlier, but in 2007, the stock market peaked in October, October of 2007. way way after Bear Sterns started to have all these problems, uh, the same problems that we're seeing right now. >> Yeah. Yeah. Well said. And I mean, you know, you're just talking about jobs there. If somebody comes up to you in the grocery store, I mean, do we even know if the the workforce is in trouble? I I got to bring up this this breaking update we just got from the White House. I mean, press secretary Carolyn Levit just admitted that that because of this 43-day shutdown, the date agency stopped collecting statistics. She said that the October jobs and CPI report are unlikely to be released and that the system might be permanently damaged. I mean, if the Fed is officially flying blind, you you heard this, right? I mean, I and I get to the point of what we were talking about before with the Fed or they even control, but I mean, if the Fed is officially flying blind into December and bond traders, you know, are aggressively betting today that the 10-year will crash below four, are the the bond vigilantes kind of seeing a recession that the government data is conveniently missing? I mean, what's the real story here? Well, I don't think it's it's it's the opposite of of the bond vigilantes. I I think it's the economic vigilantes. They're the ones that are actually buying the long end of the curve or making those interest rates go down. But I think, you know, look, we're you say that the Fed is flying blind, but are they? I mean, we just had the challenger survey come out the other day and they said that corporations are announcing, I think it was 151,000 layoffs or job cuts just in October. That was the worst October reading going all the way back to 2003. And I mean, we look at the ADP numbers, those were negative. And last ADP number we got was a beat, but it was only like 42,000. And people like to wave their hands and cheer at 42,000. That's still a terrible, terrible, terrible number. So I think when you look at all the data objectively and realize that the economy is not the stock market >> and the stock market isn't the economy and then you just solely focus on the economic data that we see, I don't know how you can come to any other conclusion other than the economy is slowing down. Now, do we go into a recession? Do we go into uh a collapse or crisis? I don't know. There are no certainties. There are only probabilities. All I know is that when you look at these cycles and the way they play out and how they've played out in the past, it usually progresses in these exact same steps. >> This connects to housing, too. I mean, not to get so drab, I mean, you know, since the consumer is broke, I mean, FHFA director Bill Py confirmed that the administration is working on this 50-year mortgage. Uh, critics obviously call it this the the debt surf. Um, you pay forever to own nothing. George, uh, be honest. I mean, is the 50-year mortgage about helping buyers? Is it about protecting bank collateral and helping home prices stay artificially high? >> Yeah, it's just simply about buying votes. that that's that's it's it's throwing the consumer and the average American under the bus >> just to buy votes. That that's literally what it's all about. And by the way, if the economy is running on all eight sons, if the economy is rocking and rolling, then why on earth do we need a 50-year mortgage? >> Yeah. >> And by the way, if the economy is doing great and the average Joe and Jane is just loving life, then why on earth do we need a $2,000 stimulus check? >> Yeah. And to your point, I mean, what what about the cracks in in Florida and Texas? I mean, inventory is spiking there due to insurance costs. If we have a 6.65% auto default rate, I mean, doesn't that eventually force a wave of home selling in 26 or does the shadow inventory just keep piling up? >> No, I also did a video, in fact, just today on deflation in rents, >> right? And this is something that I didn't even realize that rents in a lot of the uh submarkets in the United States have gone down dramatically month over month over the last like four or five months. And so and as you know that's a key component of the CPI which hopefully the Fed looks at. I don't know if they'd get the data, but they should be able to figure that out as far as the realtime rents that we're seeing from like apartments.com declining uh precipitously now that it is a result of over supply. But remember just a year ago, what was the whole narrative around housing, not just with single family, but multif family is that it's a supply shortage, right? We have a housing shortage, a housing shortage, a housing shortage. Well, a lot of the housing shortage is dependent on demand. like if if demand plummets then there isn't really a housing shortage is there? There might be a housing glut and I think that we're seeing that right now at the multif family space. Now to your point does that start to impact the single family. Um maybe it definitely has in places like Austin. It has in places uh many markets in Florida. In fact, I did another video the other day on LAR and I was shocked. I was actually doing a live stream, so it wasn't edited. And during the live stream, I just haphazardly went over to the LAR website just to check out the homepage. And I could not believe my eyes. Almost every single house that they had for sale had a huge discount. And I'm not talking about a huge discount like 10 grand. I'm talking like a discount 50, 60, $75,000. Like almost 80% Wow. of the houses on their homepage. And keep in mind, this is after they're doing the interest rate buy down, which effectively lowers the price. So, this is a price cut on top of a price cut. And so, when does that start filtering through to actually housing prices of people selling? Um, I don't know. But going back to your K-shaped economy uh example, which is right on the money, I think that if a large component of people's net worth or the people's net worth who's actually spending money that's propping up the economy is in their 401k, therefore in the S&P 500, and another huge percentage of it is in their home equity. >> Mhm. >> I don't know. I mean, we could see that home equity, it might not evaporate, but it might go down. And then what does that do to aggregate demand, right? And then if you if you throw in there a 50year mortgage, I mean, the reason that's there's there's countless reasons why that's a bad idea, but one of the main reasons that you hit on earlier was that you you don't even build equity. Like I did a a study on this the other day, right? >> Exactly. you're a renter because it you know I think you had I think the example I used cuz I had a mortgage calculator and I did like the average home $400,000 whatever and based on today's rates your payment was about $2,000 a month like with a 50-year mortgage. So, your payments annually about $24,000. And right off the bat, like for the first 10 years, like $1,000 a year, a year was going to equity all the way out into like 2035. And uh I mean, it's just insanity. And then the idea here, the way this is being pitched is it will lower mortgage um uh payments, right? So, it'll make housing quote unquote more affordable. That's not what's going to happen because assume that we don't have a crash, we don't have a crisis, all else being equal, that's going to increase home prices >> because now all of a sudden the person that can afford the, you know, $2,000 a month payment or $2,200 a month payment, now they're in the market and they're going to go ahead and bid up the prices to the point where people can't afford it anymore. So the net result is that the monthly payments don't go down even if the interest rates stay the same. But you lock people into surfom real. It's like real estate surfom. And so that's just a few of the reasons why this is a bad idea. You have to ask yourself why on earth a 30-year fixed rate mortgage is not a market product >> like that. That's people Americans might not realize that that's subsidized by the government. Like there is no way a bank would ever ever ever do a 30-year fixed rate loan. That that that wouldn't happen unless the government came in. And by the way, who's backstopping that? It's going to be the consumer. It's going to be the average Joe and Jane that supposedly this is supposed to help. So, they're going to do these 50-year mortgages. If it comes to fruition, the banks are going to get that off their balance sheet before the ink's dry. It's going to go to Fanny and Freddy and then they're going to package it up into some sort of mortgage back sausage that Wall Street's going to pawn it off on a pension fund until those people just hand in the keys like they did last time and the whole thing blows up which disproportionately impacts the poor middle class negatively the exact people that the politicians or the central planners say that this is supposed to help. And it's just it's like Ron Paul says, whenever you want to know the actual result of a law passed by politicians, just look at the name and it'll do the complete opposite. So, in this case, it's intended to drop mortgage uh payments and I guarantee you it'll not only raise mortgage payments, it'll make the America it'll make us as Americans poorer um on net balance over the long run. It's the way these things always work out. just hope people are watching getting smarter because I mean if you're talking about that isn't just policy it's politics those $2,000 checks at 50 your mortgage I mean do you see this is the next evolution of stimulus where fiscal policy becomes a permanent election tool I mean what's the real cost of that kind of populism in an already debt saturated system >> well you and I before we went live were talking about the New Orleans investment conference >> and unfortunately you weren't able to attend would have loved to have seen you there I'm sure I'll see you there next year but I was there and I was on a panel and they asked me what my biggest concern was and this was right after the the kid got elected in New York City, Ma Mami or whatever his name is, the socialist kid. >> Yeah. >> And um cuz everybody there was talking about how dangerous this is and how bad this is that the Democrats are moving more and more towards socialism. And I said my biggest concern wasn't necessarily the Democrats because this is exactly what I expect from them. Like like They're they're openly socialist, meaning that they're open about wanting to tax business and give people free money, and they're open about wanting to expand the role of government in the real economy. But the my biggest concern is that now there's no check and balance because when Biden was in office, at least the Republicans would take the position of a free market libertarian, >> right? That oh, you you've got to tap the brakes here on the deficit. You got to tap the brakes on the free money, right? You've got to lower you've got to lower taxes for businesses. But now the Republicans are doing the exact same thing. They're wanting to expand the role of government in the economy. They're wanting to do things that uh will increase the deficit. They're wanting to increase business taxes through tariffs. And then they also want to give free money. So now there's no check and balance. It's like you have a uni party that the marketing is a little bit different, but they all want the exact same thing. And that's big government socialism. >> Yeah. >> So, I think that's something that we really need to be cognizant of. That's probably my biggest um that's probably my big, like I said, that's my biggest concern, I think, moving into 2026. >> Yeah. Interesting. Okay. I mean, isn't that exactly what what voters are rewarding? I mean, every time there's a downturn, the party that spends the most wins the polls. I mean, isn't this just democracy kind of converging with socialism? The political incentive to keep printing until confidence breaks. But I I guess like, you know, if both parties are now addicted to spinning, is sound money, gold, Bitcoin, hard assets, the only real form of protest left? >> Yeah. Well, that's a good question. I'm not sure to be honest with you because gold usually does different things based on a recession that involves a credit event. And I I don't know if if we're going to have a credit event. Uh if we do and the price of gold goes down, that's usually a great buying opportunity. Um but is that the way to unplug from the system completely? I wish the answer was yes, but unfortunately I don't think it is. And here's why. Because the more videos I do, the more I realize that true wealth isn't about how much gold you have. It's not about how much how many dollars you have. It's it's really about the access to goods and services, >> right? And I think the the we all lived through this during what I call the surveys sickness. So during 2020 and during that time we were all locked in a cage and you'd go to the grocery store and half the shelves would just be barren and you if you wanted to travel you couldn't. So your freedom was really restricted and the amount of goods and services that you had access to decreased massively. >> But for most of us for me as an example my my portfolio like doubled. So during 2020, my portfolio is doubling, but my personal freedom and the amount of goods and services I have access to is plummeting. Absolutely plummeting. So at the end of 2020, was I richer or was I poorer? You see, my argument would be I was poorer. It's a lot like living on a deserted island and you have a a treasure chest full of gold bars. >> Right. >> Right. But all you have access to are coconuts and some salt water. So, are you rich or are you poor? I think the argument would be that you're poor. So that's the real problem here is if we don't fix things in the real economy through deregulation and free market capitalism and smaller government for heaven's sake smaller government. If we don't go that path, if we continue to expand the role of government, you get more and more economic distortions, even if people do have quote unquote free money, which leads to an environment where the amount of stuff that we have access to decreases. So, by definition, we are all poorer. >> Yeah. Interesting. That's an interesting take. Haven't heard it. I mean, if if that's the final warning what what does 2026 look like when the system finally tests the difference between financial wealth and and this real wealth you're talking about? I mean, you know, what happens to the average saver if if access to real assets defines wealth now? I mean, are we kind of heading towards a tier a two-tier kind of economy, the asset owing class versus anyone else holding a digital IOU? What's your thoughts? Unfortunately, yeah, that's my base case is that you see more and more social unrest. So this K-shaped economy that you're referring to, I think it could likely turn into a small H economy like we were saying earlier, but then the central planners come in and try to prop up the system just very, you know, they call Grant uh Grant Cardone and he says 10x everything and then you get an outcome very similar uh to what we saw in 2021 and into 2022 where for a couple years everyone feels great. uh the government came in and saved the day. But then what happens is prices go like this and incomes go like that. And what happens is the delta is usually filled with UBI free money. You don't have to pay your student loan. You don't have to pay your mortgage. You don't have to pay your rent. Whatever. And therefore the pain really isn't felt. But then when that starts to subside because you got the CPI going up to 9% or 10% whatever. So they have to pull back the reinss on all the stimulus. Then that spread between the income and the prices start to show up and people really start to feel it and that's when their purchasing power decreases to the point where their their incomes might be higher today than they were in 2019 but their purchasing power is less. And that goes right back to that graphic that you showed at the beginning of the video where subprime auto loans, the delinquencies are at an all-time high. Why is that? Well, it's easy. It's this. Because prices go up, incomes stay the same, and while the free money's gone, you're left with this really, really big problem. So my view is if they 10x the fiscal, if they 10x the monetary, whatever it is that they 10x, the results will probably be 10x what we saw in 2021 and 2022, which has led to the bifurcation of the economy. So I don't know why that would >> get any better. I don't know why that would change. I think it if we keep doing the exact same things but just more of it that created the bifurcation, I don't know how you can argue the bifurcation doesn't get worse. >> Yeah. Yeah. I mean, some would say that the counterpoint is that governments won't let the breakdown happen. They'll respond with universal basic income, you know, some subsidies, price controls. Doesn't that just deepen the spiral to your point though, turning short-term relief into long-term depend like where where do we stop? People have to realize that go back to what we were just saying there. It it's not about having more money. Like I always use the example of communist Russia. When I was a kid, you would always see these black and white pictures of people in Russia just waiting in line for like 4 hours just to get a loaf of bread. And when I was a kid, I always assumed that they were poor. I always assumed that they meaning that they didn't have money. >> They didn't have enough money for the bread. But in reality all of them had money. They all had enough money for the bread. There was just no bread. You see? So my point there is even if people are pressured and they don't have their purchasing power has declined because of what we are talking about and even if the government steps in and says okay well we'll solve this we'll just do UBI. If it doesn't increase the amount of goods and services, it's not going to increase the purchasing power because the price of the stuff is just going to increase with the amount of money that people are getting. It It's just like remember California came out when uh the gas prices were skyhigh and Gavin Newsome wanted to do like a what is it like a gas something like that. He wanted to give people like $500 a month to afford the higher gas prices. What's that going to do if you don't increase the amount of gas? This is going to make the gas expensing power is the exact same if not lower because usually when you do that wages and incomes don't keep up. And so it's not you we can't make people richer by giving them currency units. It I wish we could but we can't. The only way we can make people richer is if we create more goods and services. Period. End of story. >> Yeah. Quality of life. Interesting byproduct of it. Okay. Well, I our time always goes too fast. But I what you're really saying here, George, is that this isn't just a market cycle. It's a societal one. I mean, we've built that economy where paper wealth exploded. Real asset, I guess, real world access to to food and housing and stability collapse. We saw it in 2020, as you said, if that's a warning shot and 2026 maybe is the moment the illusion breaks. I mean, if you bring it home for investors in a in a world where governments are printing to survive, inflation really never dies and social stability is fraying. What's the smart move now? I mean, where does the capital that actually protects freedom and purchasing power go next? Is it gold, Bitcoin, commodity, something completely entirely different? >> Well, I think everyone has to own gold. I mean, >> yeah, >> I can't give anyone personal investing advice, of course, but what I do is whatever portfolio I have, I always start with 10% gold, always. And it's just an insurance policy, and it helps me sleep well at night. And then what I do is I say, okay, well, the vast majority of the portfolio, I would like to have some sort of asset that pays me to own it. So, I've got cash flow, cash flow, cash flow. So now this could be real estate, this could be commodities, uh commodity producers that pay a good dividend. Uh this also I I mean I know this is blasphemous to to say but in certain times it can be actual treasuries like short-term treasuries where you don't have a lot of interest rate risk. So right now I would say probably 10% of my portfolio is gold. Um and that was like 40 or 50%. Because gold went up so much. Uh, but then I sold it to bring it down to 10%. And then probably 60 or so percent is just T- bills, short-term T- bills that I'm just rolling over. Now, is that a long-term strategy? Absolutely not. Absolutely not. But what I'm expecting, if the yield curve plays out the same way that it always does and these cycles play out, is that I'm going to be able to buy some stuff on the cheap in the future, very similar to what you were able to do during March of 2020. Yeah. >> And so until that time, I'm happy just to collect the whatever 3 or 4% and then with the other 30% of the portfolio, I'm taking more speculative bets. So that would be where I would have maybe a speculative bet on Bitcoin. Let me give an example of this. So right now I'm long Bitcoin, but I've got an offset to the long position in Bitcoin with a short position in Micro Strategy. And this is something that Chainos talked about like probably a year ago. So I don't want to seem like I'm the guy that thought of this and he uh recently I think covered the position, but that's a position I've had on for probably 3 or 4 months. And that's an example of what I'm doing with that 30% of the portfolio. And that position has worked extremely extremely well. Another one, like I said earlier, was short CarMax, but an offset to the short Carmax position was a long position in the S&P 500. believe it or not. And it wasn't because I'm bullish on the S&P 500. It was just a hedge for that uh that CarMax position uh position, excuse me. And that worked extremely well. So, I think there's a lot of opportunities out there for people right now uh as we speak. But you've got to mix up the strategies based on the environment that we have. You know, you've got to play the hand you're dealt. you you can't play the hand that you wish you had. And so I think that right now it's based on the yield curve and what we're seeing in the labor market and the deterioration of the economy. It's a great time to do I think what they call pairs trade, but it's also a great time to own gold and it's a great time to own things that uh that pay you uh to own them. And then the composition of that portfolio for me will change quite dramatically if we have the S&P 500 go down by say you know 40 or 50% like we saw during the.com bust or the GFC >> right little haircut little correction. Okay. So you're long Bitcoin short micro strategy. So your bet is on the asset itself not the leverage built around it. It kind of fits into your broader theme right? Own what's real not what's what's financialized. Uh gold is insurance cash flowing asset is your base. Bitcoin is what? asymmetric upside and and stay away from the leverage and paper claims pretending to be wealth. What's your your outlook here? I mean, you think Bitcoin is not worrying around this $100,000 mark, any of this uh getting people nervous. >> I don't know. I I don't know what the price of bit I I I could give you a great argument >> Yeah. >> as to why it would go to 100 thou or excuse me, 200,000 >> in the next year. And I can give you a great argument as to why it would go to 50. Uh I I I just don't know. I just believe that again not investing advice but I think everyone should own some Bitcoin but own Bitcoin like like actually own the Bitcoin. Don't own a leverage play on Bitcoin cuz the whole point is to have purchasing power outside of the system. Like I don't know if you saw the series I did where I tried to drive across Argentina using nothing but gold, silver, and Bitcoin. And uh >> I caught a couple of them. I did. I did. Yeah, people. I actually live streamed it, believe it or not, >> and it was very revealing as to, believe it or not, kind of how the the monetary system works, whatnot. But the the main takeaway here is that when I was flying down there, you know, part of the decision-m process or part of the the uh you know, just the preparation was, okay, how are we going to get the gold down there when we're carrying it? You know, how can we make sure that we're not too obvious to where we're not getting robbed? you know, should we really live stream this because then everyone from point A to point B that's watching this is going to know that we've got this gold or silver and they can come just hold us up at gunpoint. There was a lot of thought that went into that. >> But with the Bitcoin, there was nothing there. There was absolutely nothing like how am I going to take this on the plane? Easy. I've just got it on the you know, however you have it. You got your keys or you got it on a an app. I had Blue Wallet at the time. And you you get to thinking about, okay, well, if I had to really bounce, if I had to get out of the United States cuz the stuff was really hitting the fan, very similar to to to co, you know, how would I take that million dollars, let's say, of purchasing power that I needed to get me by over the next 3 years, the next 5 years when I moved down to hang out with Doug Casey in Argentina, how would I actually get that down to Argentina from the United States? And the the answer is really Bitcoin. I mean, you could use Tether as well, but of course, you've got some counterparty risk there, but you don't have the fluctuation fluctuation in the price, excuse me. Um, but I like the decentralization of Bitcoin. And, um, really, it's it's just the obvious answer. With gold, good luck. Good luck getting a million dollars worth. Silver, there's no chance unless you have your own jet or something like that. I don't know how much that would weigh, but that for me, that's the value in Bitcoin. It's to it's to give people purchasing power outside of the system. Now, as far as going back to your question with the price, uh, I don't know. Some things that are rather concerning are you've got all this buying that we saw a few months ago due to these Bitcoin treasury companies and you've got Micro Strategy buying like billions of dollars worth of Bitcoin every single week, but yet the price doesn't go up. >> So, that to me that's that's not a real good sign uh for the price shortterm. Now, does that make a difference over the next two or three years? Probably not. But I think for most people when they talk about the price of Bitcoin, they they're really trying to get your prediction for the next 6 months. And quite frankly, it could go down to 50. It could go up to 200. I have no idea. >> Yeah. Yeah. Well said. All right, George C. We'll leave it at that. We're always at 50 minutes. Good job, man. You can check out everything he's got going on over at the Rebel Capitalist. Also, some really great shows live uh streaming on X right now, too. you have been lately. Hey, >> everything. I'm overexposed. Overexposed. >> Keep it up, buddy. All right. Powerful perspective as always. Thanks for joining us, making the time. >> Thanks for having me. >> Thanks, George. And thank you for watching. Now, the data is clear. 6.65% default hedge fund liquidations in sovereign funds pivoting to real assets. Now, if you want to follow where the money is going and to stay ahead of these trends, make sure to subscribe right here to Kitco News. I'm Jeremy Saffron. We'll see you next time. Heat. [Music] Heat. Heat. [Music] Heat. [Music]
The Cracks Are Showing Even as Markets Hit Record Highs | George Gammon
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[Music] All right, if you look at the Dow Jones today, you see quite a nice little record high. You see a bit of a party. But if you look at the credit markets, you're starting to see the smart money running for the exits. I mean, Fitch dropped a number that changed the entire narrative, 6.65%. That's the subprime auto delinquency rate. And it's higher than the peak of the 2008 crisis. It's the highest level it's been since 1994. And then look in the background. I mean, the banking plumbing is starting to clog up. I mean, UB UBS, of course, is starting to liquidate some hedge funds. We're less than 3 weeks away from the Federal Reserve officially ending quantitive tightening. It's also worth noting today, silver, gold both back up, too. Gold back over $4,200 an ounce and silver over 53. Welcome back to Kicko News. I'm Jeremy Saffron. Today on the show, we're asking, is the entire system actually breaking or is it just the greatest wealth transfer of our lifetime? Joining me now is the rebel capitalist himself, George Gammon. Welcome back to the program. Good to see you. >> Oh, thanks for having me on. >> Uh quite the macro day. Uh we'll get to that CPI data because we're hearing that it might not even come out at all. But I want to start with the the the news that most people kind of missed because they were watching this Dow Jones make uh new highs. I mean, UBS's Okconor is liquidating two hedge funds because of this first brand's bankruptcy. We're we're talking billions in bad debt just vaporized. But there was one part to the story that was making people's blood boil this morning. We learned that the founder of that bankrupt company, Patrick James, a man accused of siphoning $700 million for private jets and PJs, I guess he just got a judge to unfreeze his personal bank accounts. So, it feels like it's a bit of a rigged game. How close are you keeping an eye on this these corporate bankruptcies? >> Well, I'm I'm keeping a very close eye on the corporate bankruptcies. Not so much the guy buying pajamas or or private jets with the 700 million. Uh I mean that's just kind of what you would expect when the tide is in for so long and then when you start to see the tide go out, you see all the fraud, you see who's swimming naked, you see all the cockroaches, whatever analogy uh or phrase saying that you want to use. I think they're all applicable to where we are right now. The bottom line there, excuse me, is uh when the tide is in this long, you're going to see a lot of this type of activity. And it should come as no surprise. Now, going back to the UBS hedge funds, why I'm paying such close attention to those is because this is eerily similar to 2007 with Bear Sterns. And I know they say history doesn't repeat, but it rhymes. But in this case, it looks like it's repeating to me. Now, I just did a video saying, I don't know if this ends like 2008, but it's indisputable that this is playing out exactly like the middle of 2007. So, let me give you some specific data points. Back then, Bear Sterns had a couple hedge funds that were subprime and they had exposure to subprime mortgage back securities. And by the way, both both of these funds were marketed as high-grade. I don't know if you you saw that. So these high-grade funds that turned out to be not so much high-grade. And the one fund really took a big haircut. And then the people in the other fund, although it didn't take as big of a haircut, it started to get a lot of redemptions because these people are smelling smoke in the movie theater and they don't want to be the last one to the exit. They don't want to be the one holding the bag. So even if that fund isn't taking a big loss, they're going to redeem. So then what happens is you have the underlying asset that's rather illquid, they can't sell it at 100 cents on the dollar. So they sell it at 50 cents on the dollar, they take a hit, and then you just kind of have this doom loop. So at the time, Beer Stern's stock went down quite substantially, but it went down from like 171 or so, which was a high earlier in 2007, I think in January 2007. And it went down to about 120 or 125, but people were saying, "Oh, it's kind of contained. No big deal." And by and I'd like to remind everyone that the stock market hit all-time highs in October >> of 2007. So as this is happening with bear sterns, people are completely blowing it off and the stock market is just going higher and higher and higher and higher. So then what happens is we kind of know how that story ends and how it played out. By the time you get to March or so of 2008, the stock Bear Sterns is trading at 75 and within a few days it's trading at zero. Basically they're they're they're bankrupt. I think JP Morgan bought them for $2 a share or something like that. Down 99% from where they were just 14 months earlier. So, it goes back to what Jamie Diamond, oddly enough, he's got a lot of experience with this uh was just saying that when you see one cockroach, usually that's not the only one. >> And we're just seeing more and more of these cockroaches. So, now getting back to UBS, what just happened? They had two hedge funds that were, let's just say, subprime and they were marketed as the exact same thing. They were marketed as high-grade. So you had one of the funds big exposure to first brands. So they take like a 30% haircut, but then they have to shut down both funds because like Bear Sterns, the people in the other one that didn't see many losses, they look over there, they smell smoke, and they're like, I don't want to be the last guy here. Sell, sell, sell, sell, sell. So that forces them to shut down both of those funds. Now, why is this a big deal? Because most of the people watching this will say, "Oh, this is just contained. There's no systemic risk. This is a big nothing burger." Well, it's not. and bec and it's not if you understand how the monetary system works because the monetary system is basically a network of bank balance sheets. So it's very similar to those old Christmas lights that we used to get when we were a kid. Remember when one light bulb would go out the whole thing wouldn't work and so you'd have to go there and figure out which bulb it was. So it's not that extreme where if one bank balance sheet blows up then the whole system blows up. But that one bank balance sheet, since it's connected in one way or the other to all these other bank balance sheets through the network, it increases counterparty risk, >> right? And regardless of what the Fed's doing, I don't care if they're stopping QT, I don't care if they stop QE. If that counterparty risk remains high, there's going to be a lack of liquidity. And if there's a lack of liquidity, what that's going to do is that's going to force the tide out even further. you're going to see more and more of these cockroaches, which increases the counterparty rich uh risk, excuse me, which decreases the overall liquidity. So, that's basically why I'm watching this so closely. Now, I'm not saying that this plays out like 2008. I am saying that this has played out exactly like 2007. Now, is the endgame a GFC? Quite frankly, I doubt it because the central planners have such a hair trigger right now that even if we do have a a modest decline uh if it was let's say out of order based on the central planners definition then they would step in and I don't know that QE would really do anything but I do think fiscal uh would do a lot and I think we've seen this playbook before right we've seen this during 2020 so if we have another type of event even like we had during the.com bust I think the central planners would come in with, let's just say, you know, I I did a a video the other day and I was joking, but kind of not where I said that the central planners, if we have another like mini crisis or the beginning of one or collapse that they'll call Grant Cardone and Grant Cardone will just say 10x it, 10x, Grant Card, Grant, what should we do with QE? 10X it. What should we do with fiscal 10x it? I think that's probably what we'll see play out if uh some of these red flags come to fruition. >> Okay. Okay. So, another live stream from 42,000 ft. Uh you know, I got to ask you, I mean, the the private credit was supposed to be kind of the safe yield play, right? I mean, floating rate senior secured nonmarkettoarket. I mean, if those assets are freezing up, doesn't that imply that the problem isn't the credit quality, it's the il, you know, the liquidity illusion Wall Street built into the entire system? I mean, if it's true, doesn't the Fed's pause and QT actually make this work because it delays the real price discovery? >> Uh, I don't think so because this implies that bank reserves equal liquidity, >> right? >> And bank reserves in and of themselves don't necessarily equal liquidity. The example I always use to keep it super simple is assume for your viewer they had $10 million to lend >> and let's just say you start a hard money fund for real estate or something like this, but you've got $10 million sitting in the bank and you want to lend it out to get a return. Well, let's say that every single entity that comes to you isn't creditw worthy. Or let's just say that the housing market is crashing and these real estate investors are trying to come to you to get uh you to lend them money for to catch a falling knife. Now, is the problem that you don't have enough money or is the problem that there's just way too much risk? >> The problem is that there's way too much risk. So, you're not going to lend. And if you do lend, you're going to lend at an astronomical interest rate which none of the borrowers can afford because they can't make the math work. So, in my view, when you look at the repo market as an example, and people have been talking about the lack of liquidity there because interest rates are going up with sofur and whatnot, and they point directly to the Fed's balance sheet and say, "Well, it's because we don't have enough bank reserves." Uh, I I don't know. Uh, maybe, but I I think it's more so because of what we're seeing in the shadow banking system, what we're seeing with private credit, and the increase of counterparty risk. So that's why I say even if the Fed comes in and mechanically increases the amount of reserves, if that doesn't decrease the perception of counterparty risk, then it will not increase liquidity, you'll still have the same problem. >> Yeah. Yeah. And it's it's not just I mean one bad actor withricolor, the auto lender, they filed and the allegations are that they're double pledging collateral. I mean how much is phantom collateral is sitting on bank balance sheets right now? If UBS got duped, who else is holding the bag of empty promises? >> That's exactly what I'm talking about. >> Yeah, >> because that just increases the perceived counterparty risk because not only do you have that counterparty, but then you have the collateral that they are posting that you have to be extremely concerned with. And at the beginning of the conversation, we were talking about when the tide is in and the water levels are very high, everyone's out there swimming naked. The entities that are lending, they don't really care about collateral. Like, who cares? Like, we're not you're not going to default on the loan. you're going to pay us back because everyone knows the economy is booming >> and we just watched the last Fed press conference with Jerome Pal and he's assuring us that the economy is strong and resilient >> and we see all of these, you know, rainbows and sunshine because we never look beneath the hood because the idea is we don't have to because everything is doing so well. But then all of a sudden when they wake up and they say, "Wait a minute here. You just have one bankruptcy, then two bankruptcies, then you have a couple hedge funds go bust." And then all of a sudden they're like, "Whoa, whoa, whoa. Maybe we shouldn't have been doing those loans and maybe we should have looked a little bit harder at the collateral we were taking because we're accepting it at 100 cents on the dollar when maybe it was valued at 50 cents on the dollar or maybe it didn't even exist at all, which is what you're saying." And you're making that great point with the fraud. And quite frankly, that was really the key component of the GFC. It was people think it was a mortgage back security issue or a housing issue. Not really. If you would have had just like subprime blow up, it would have made a dent, right? It it wouldn't have been fun, but it wouldn't have caused a global financial crisis. The reason it did is because the collateral blew up because you had this pie chart of collateral and that goes into the monetary system. That's what banks use to create money, right? Unfortunately, we live in a debt based monetary system. It is what it is. So collateral is a key key component of that. So when you have half the pie chart, just stating this as an example, it's treasuries and half is mortgage back securities and overnight it's like wait a minute, half of that collateral isn't really valued at 100 cents on the dollar. Now it's valued at who knows, right? >> So then half of the collateral in the monetary system just gets wiped out and then you just have a deflationary bust. And so I'm glad you brought up that collateral component of it because that's something that a lot of people just kind of brush over, but it's something that's extremely extremely important. >> You know, I mean, looking at the broader high yield bond market, I mean, this the spreads, they remain tight. I mean, the market at large doesn't seem worried about these. >> Yeah, exactly. >> So, so I mean, is the bond market correct in viewing these as isolated incidents or are they pricing in a Fed put that protects them against this, you know, systemic risk? Well, so I think we have to compartmentalize the bond market. >> Yeah. >> And what you're talking about is corporate credit spreads and that's good. I mean, we should be watching those very, very closely. But I think when you look at the Treasury market, that's telling you a much different story, right? As an example, I was just looking at the yield curve last night and I believe it's the one year through the five-year still trading under Fed funds, meaning it's inverted. That that's that's not a sign of a healthy economy. that that's not a sign that the economy is running on all eight cylinders. That's a huge huge huge red flag. And even if you look out to the 10-year, I mean, I think today the 10-year was trading at maybe 4.08, maybe 4.05, and you figure that's basically right at Fed funds. So, you have a flat yield curve. A lot of it's inverted, but flat going from Fed funds all the way out to the 10-year Treasury. like like that's the marketplace telling you that they are highly highly riskoff. And the marketplace I'm referring to isn't necessarily the stock market, right? >> It's the treasury market. And that's usually the smart money because what's happening there is the banks have a choice. What are you going to do with your balance sheet? Are you going to lend money out into the real economy and if you look out and see everything that's happening with private credit? Probably not. or you're going to be able to lend it at an interest rate that's ownorously high for those people who are trying to borrow the money. So then the only other option you have to expand your balance sheet is to buy treasuries. Yeah. >> The safest and liquid asset. And that's usually why you see the curve flatten out and then actually invert. And that's basically what we're seeing today, which is a signal that uh things are are not what the stock market is leading you to believe. >> Yeah. Yeah. Well said. This is actually perfect because I had it kind of queued up. I mean, there's this hysteria on X on Twitter right now. They're talking, you know, the Fed just announced its QT ends in December 1st. The viral take is the money printer is back. Buy everything. But but you've looked at the numbers. I mean, they're reinvesting entity bills short-term, not coupons, long-term. Is this stimulus? I mean, you know, we I guess we got to get into why they're doing this. It's about the Treasury General account. The government's drained nearly 700 million from the banking system since June, refilled their own checking account. I mean, we talked about those those spikes in sofa rates, the overnight lending. I mean, are we inches away from a repo crisis like 29 where 2019, you know, where where the cash just runs out overnight or is this just a technical glitch? >> Well, we we we could be close to a repo crisis, but I don't think it's a result of too few bank reserves. >> I think it would be a result of counterparty risk. So, let's go back to September 2019 when the repo rate spiked to approximately 10%. What most people thought was, oh my gosh, let's go back to that hard money lender example. So, I think that's something that's easy for everyone to understand. They thought, oh my gosh, the hard money guy just ran out of money. He just ran out of money. He has no money. and therefore the people that need the money, they're willing to pay 5%, 6%, 7% on up to 10% and there's just no money left in the kitty to lend out. Well, that's one view, >> but then there's the other view, like I was saying before, that yeah, he had money, $10 million. It's just no one was creditw worthy, so he just jacked his interest rates up to 10% because the counterparty risk. And it could have been and people have to understand that the repo rate is just an aggregate total. It's in like an average of all the transactions that happened that day in repo. >> You see? So it's not just a rate. So there could have been one or two counterparties where the repo rate was 20%. >> Right? And then the other counterparties were at 3 or 4% and that just made it spike all the way up to 10%. So that's something that we we've got to remember. But if the view of the repo crisis in 2019 being a result of too few bank reserves because that's the argument, then you also have to believe that the Fed controls the amount of money. >> And I don't believe that. Uh through all the videos I've done, all the research I've done, the conclusion to me is very very clear and that's that the banks create money. That banks create or what we consider money. The banks create commercial deposit liabilities. So, and the banks don't need bank reserves to do that. Uh they can settle with interbank credit. So, as an example, let's go back to two uh uh 1980. Back in 1980, there was about 40 billion worth of bank reserves and M2 money supply, just using as a proxy. Keep in mind there's a lot more dollar M2 money supply outside of the United States, but we'll just look at the United States. So, it was around 1.5 trillion. And then we fast forward to 2007 and the amount of M2 money supply again just in the United States was 7.5 trillion. But the amount of bank reserves went up by zero. The amount of bank reserves were the exact same. Now I'd like to remind everyone that during this time frame you had the 1990s. So why is that important? Because as a percentage, the stock market went up more in the 1990s with no QE with the Fed's balance sheet being the exact same at 40 billion while the M2 money supply was going up at an astronomical rate. And you had the stock market going up in percentage terms at a as an uh at an astronomical rate, much more so than you saw saw during QE 1, 2, and 3. So if the stock market went up by higher percentage terms, if the M2 money supply increased by that much without increasing bank reserves, how can you argue that bank reserves actually matter and that bank reserves are the key to global liquidity in the monetary system? I don't think you can. And it goes back to the fact, and this is something I talk about on my videos all the time, that everyone likes to assume the Fed is at the center of the monetary solar system. And I don't think they are. I I think the evidence points to the banks being at the center of the monetary solar system and the Fed just simply revolves around the banks. And so if the the banks can't run out of money, Jeremy, when's the last time you went to a bank or heard of anybody going to a bank that is a great credit risk and applying for a mortgage and the bank saying, you know what, we would make a ton of money on this loan and you are a perfect borrower. But unfortunately, we can't do the loan right now because we just ran out of money >> or we can't do the loan right now because we just ran out of bank reserves. I've never ever in my life heard of any bank saying that. And there's a reason why. It's because the banks create money. They lend it into existence when they extend the credit. And unfortunately or fortunately, they do not need need bank reserves to do that, especially especially outside of the United States in the Euro dollar system. >> Yeah, well said. Uh almost a masterclass there. I mean, we can connect it to to the real economy. That number that I said at the top, that that Fitch number 6.65% that also is the highest since the '9s, since 1994. I mean, that means nearly one in 15 subprime borrowers are are be behind on their car payments. I mean, people need their cars to get to work. If they aren't paying the loan, they're obviously tapped out. Are we seeing, as we hear in the mainstream, you know, this K-shaped reality where the working class is is in a depression, but the asset class owners don't feel a thing. >> Yeah, but unfortunately, what was your last point there? That the asset class holders don't feel a thing. But what happens if asset prices go down? Then all of a sudden your K-shaped recovery or economy turns into a small H >> where everyone is just is this and then everyone's down as opposed to some people are up that hold assets and the other people are down. And when you look at the AI bubble which uh you know who knows how that plays out but you look at everything that's happening in the real economy outside of just the stock market. I mean, let's look at the labor market because when everyone if I meet some guy in a mall or something like that and he recognizes me from my channel and he comes wants a quick tip or something like this, you know, George, how can I determine what's going to happen in the real economy? I always just say just look at the labor market. Just look look at the labor market. And if we look at the labor market and of especially if we combine that with interest rates on treasuries, what is it telling you? It's it it's telling you the economy is extremely sick. So when we see Amazon come out announce these layoffs, when we see Wendy's, I think they just announced that they're shutting down like hundreds of restaurants. When we see CarMax completely tank the other day to the point where they fired their CEO and the stock was down 24% in one day. >> And I know that extremely well because fortunately I was short uh CarMax. And then you you see all these other things. Uh Chipotle, that's another great example. You know, you see all these CEOs saying, "Look, the the consumers tapped out, especially the poor and the middle class, they're completely waving the white flag right now." And I think then that feeds over into what we see withricolor. That feeds over into what we see with uh First Brands. That feeds over into Zion, Western Alliance, and then UBS shutting down these hedge funds. It's all connected. It's all connected. And I think that so many people make the mistake of just looking at the S&P 500 and assuming that everything underneath the hood has to be running on all eight cylinders when we've seen so many times in the past, 2007, that that's not the case. I don't know if I said earlier, but in 2007, the stock market peaked in October, October of 2007. way way after Bear Sterns started to have all these problems, uh, the same problems that we're seeing right now. >> Yeah. Yeah. Well said. And I mean, you know, you're just talking about jobs there. If somebody comes up to you in the grocery store, I mean, do we even know if the the workforce is in trouble? I I got to bring up this this breaking update we just got from the White House. I mean, press secretary Carolyn Levit just admitted that that because of this 43-day shutdown, the date agency stopped collecting statistics. She said that the October jobs and CPI report are unlikely to be released and that the system might be permanently damaged. I mean, if the Fed is officially flying blind, you you heard this, right? I mean, I and I get to the point of what we were talking about before with the Fed or they even control, but I mean, if the Fed is officially flying blind into December and bond traders, you know, are aggressively betting today that the 10-year will crash below four, are the the bond vigilantes kind of seeing a recession that the government data is conveniently missing? I mean, what's the real story here? Well, I don't think it's it's it's the opposite of of the bond vigilantes. I I think it's the economic vigilantes. They're the ones that are actually buying the long end of the curve or making those interest rates go down. But I think, you know, look, we're you say that the Fed is flying blind, but are they? I mean, we just had the challenger survey come out the other day and they said that corporations are announcing, I think it was 151,000 layoffs or job cuts just in October. That was the worst October reading going all the way back to 2003. And I mean, we look at the ADP numbers, those were negative. And last ADP number we got was a beat, but it was only like 42,000. And people like to wave their hands and cheer at 42,000. That's still a terrible, terrible, terrible number. So I think when you look at all the data objectively and realize that the economy is not the stock market >> and the stock market isn't the economy and then you just solely focus on the economic data that we see, I don't know how you can come to any other conclusion other than the economy is slowing down. Now, do we go into a recession? Do we go into uh a collapse or crisis? I don't know. There are no certainties. There are only probabilities. All I know is that when you look at these cycles and the way they play out and how they've played out in the past, it usually progresses in these exact same steps. >> This connects to housing, too. I mean, not to get so drab, I mean, you know, since the consumer is broke, I mean, FHFA director Bill Py confirmed that the administration is working on this 50-year mortgage. Uh, critics obviously call it this the the debt surf. Um, you pay forever to own nothing. George, uh, be honest. I mean, is the 50-year mortgage about helping buyers? Is it about protecting bank collateral and helping home prices stay artificially high? >> Yeah, it's just simply about buying votes. that that's that's it's it's throwing the consumer and the average American under the bus >> just to buy votes. That that's literally what it's all about. And by the way, if the economy is running on all eight sons, if the economy is rocking and rolling, then why on earth do we need a 50-year mortgage? >> Yeah. >> And by the way, if the economy is doing great and the average Joe and Jane is just loving life, then why on earth do we need a $2,000 stimulus check? >> Yeah. And to your point, I mean, what what about the cracks in in Florida and Texas? I mean, inventory is spiking there due to insurance costs. If we have a 6.65% auto default rate, I mean, doesn't that eventually force a wave of home selling in 26 or does the shadow inventory just keep piling up? >> No, I also did a video, in fact, just today on deflation in rents, >> right? And this is something that I didn't even realize that rents in a lot of the uh submarkets in the United States have gone down dramatically month over month over the last like four or five months. And so and as you know that's a key component of the CPI which hopefully the Fed looks at. I don't know if they'd get the data, but they should be able to figure that out as far as the realtime rents that we're seeing from like apartments.com declining uh precipitously now that it is a result of over supply. But remember just a year ago, what was the whole narrative around housing, not just with single family, but multif family is that it's a supply shortage, right? We have a housing shortage, a housing shortage, a housing shortage. Well, a lot of the housing shortage is dependent on demand. like if if demand plummets then there isn't really a housing shortage is there? There might be a housing glut and I think that we're seeing that right now at the multif family space. Now to your point does that start to impact the single family. Um maybe it definitely has in places like Austin. It has in places uh many markets in Florida. In fact, I did another video the other day on LAR and I was shocked. I was actually doing a live stream, so it wasn't edited. And during the live stream, I just haphazardly went over to the LAR website just to check out the homepage. And I could not believe my eyes. Almost every single house that they had for sale had a huge discount. And I'm not talking about a huge discount like 10 grand. I'm talking like a discount 50, 60, $75,000. Like almost 80% Wow. of the houses on their homepage. And keep in mind, this is after they're doing the interest rate buy down, which effectively lowers the price. So, this is a price cut on top of a price cut. And so, when does that start filtering through to actually housing prices of people selling? Um, I don't know. But going back to your K-shaped economy uh example, which is right on the money, I think that if a large component of people's net worth or the people's net worth who's actually spending money that's propping up the economy is in their 401k, therefore in the S&P 500, and another huge percentage of it is in their home equity. >> Mhm. >> I don't know. I mean, we could see that home equity, it might not evaporate, but it might go down. And then what does that do to aggregate demand, right? And then if you if you throw in there a 50year mortgage, I mean, the reason that's there's there's countless reasons why that's a bad idea, but one of the main reasons that you hit on earlier was that you you don't even build equity. Like I did a a study on this the other day, right? >> Exactly. you're a renter because it you know I think you had I think the example I used cuz I had a mortgage calculator and I did like the average home $400,000 whatever and based on today's rates your payment was about $2,000 a month like with a 50-year mortgage. So, your payments annually about $24,000. And right off the bat, like for the first 10 years, like $1,000 a year, a year was going to equity all the way out into like 2035. And uh I mean, it's just insanity. And then the idea here, the way this is being pitched is it will lower mortgage um uh payments, right? So, it'll make housing quote unquote more affordable. That's not what's going to happen because assume that we don't have a crash, we don't have a crisis, all else being equal, that's going to increase home prices >> because now all of a sudden the person that can afford the, you know, $2,000 a month payment or $2,200 a month payment, now they're in the market and they're going to go ahead and bid up the prices to the point where people can't afford it anymore. So the net result is that the monthly payments don't go down even if the interest rates stay the same. But you lock people into surfom real. It's like real estate surfom. And so that's just a few of the reasons why this is a bad idea. You have to ask yourself why on earth a 30-year fixed rate mortgage is not a market product >> like that. That's people Americans might not realize that that's subsidized by the government. Like there is no way a bank would ever ever ever do a 30-year fixed rate loan. That that that wouldn't happen unless the government came in. And by the way, who's backstopping that? It's going to be the consumer. It's going to be the average Joe and Jane that supposedly this is supposed to help. So, they're going to do these 50-year mortgages. If it comes to fruition, the banks are going to get that off their balance sheet before the ink's dry. It's going to go to Fanny and Freddy and then they're going to package it up into some sort of mortgage back sausage that Wall Street's going to pawn it off on a pension fund until those people just hand in the keys like they did last time and the whole thing blows up which disproportionately impacts the poor middle class negatively the exact people that the politicians or the central planners say that this is supposed to help. And it's just it's like Ron Paul says, whenever you want to know the actual result of a law passed by politicians, just look at the name and it'll do the complete opposite. So, in this case, it's intended to drop mortgage uh payments and I guarantee you it'll not only raise mortgage payments, it'll make the America it'll make us as Americans poorer um on net balance over the long run. It's the way these things always work out. just hope people are watching getting smarter because I mean if you're talking about that isn't just policy it's politics those $2,000 checks at 50 your mortgage I mean do you see this is the next evolution of stimulus where fiscal policy becomes a permanent election tool I mean what's the real cost of that kind of populism in an already debt saturated system >> well you and I before we went live were talking about the New Orleans investment conference >> and unfortunately you weren't able to attend would have loved to have seen you there I'm sure I'll see you there next year but I was there and I was on a panel and they asked me what my biggest concern was and this was right after the the kid got elected in New York City, Ma Mami or whatever his name is, the socialist kid. >> Yeah. >> And um cuz everybody there was talking about how dangerous this is and how bad this is that the Democrats are moving more and more towards socialism. And I said my biggest concern wasn't necessarily the Democrats because this is exactly what I expect from them. Like like They're they're openly socialist, meaning that they're open about wanting to tax business and give people free money, and they're open about wanting to expand the role of government in the real economy. But the my biggest concern is that now there's no check and balance because when Biden was in office, at least the Republicans would take the position of a free market libertarian, >> right? That oh, you you've got to tap the brakes here on the deficit. You got to tap the brakes on the free money, right? You've got to lower you've got to lower taxes for businesses. But now the Republicans are doing the exact same thing. They're wanting to expand the role of government in the economy. They're wanting to do things that uh will increase the deficit. They're wanting to increase business taxes through tariffs. And then they also want to give free money. So now there's no check and balance. It's like you have a uni party that the marketing is a little bit different, but they all want the exact same thing. And that's big government socialism. >> Yeah. >> So, I think that's something that we really need to be cognizant of. That's probably my biggest um that's probably my big, like I said, that's my biggest concern, I think, moving into 2026. >> Yeah. Interesting. Okay. I mean, isn't that exactly what what voters are rewarding? I mean, every time there's a downturn, the party that spends the most wins the polls. I mean, isn't this just democracy kind of converging with socialism? The political incentive to keep printing until confidence breaks. But I I guess like, you know, if both parties are now addicted to spinning, is sound money, gold, Bitcoin, hard assets, the only real form of protest left? >> Yeah. Well, that's a good question. I'm not sure to be honest with you because gold usually does different things based on a recession that involves a credit event. And I I don't know if if we're going to have a credit event. Uh if we do and the price of gold goes down, that's usually a great buying opportunity. Um but is that the way to unplug from the system completely? I wish the answer was yes, but unfortunately I don't think it is. And here's why. Because the more videos I do, the more I realize that true wealth isn't about how much gold you have. It's not about how much how many dollars you have. It's it's really about the access to goods and services, >> right? And I think the the we all lived through this during what I call the surveys sickness. So during 2020 and during that time we were all locked in a cage and you'd go to the grocery store and half the shelves would just be barren and you if you wanted to travel you couldn't. So your freedom was really restricted and the amount of goods and services that you had access to decreased massively. >> But for most of us for me as an example my my portfolio like doubled. So during 2020, my portfolio is doubling, but my personal freedom and the amount of goods and services I have access to is plummeting. Absolutely plummeting. So at the end of 2020, was I richer or was I poorer? You see, my argument would be I was poorer. It's a lot like living on a deserted island and you have a a treasure chest full of gold bars. >> Right. >> Right. But all you have access to are coconuts and some salt water. So, are you rich or are you poor? I think the argument would be that you're poor. So that's the real problem here is if we don't fix things in the real economy through deregulation and free market capitalism and smaller government for heaven's sake smaller government. If we don't go that path, if we continue to expand the role of government, you get more and more economic distortions, even if people do have quote unquote free money, which leads to an environment where the amount of stuff that we have access to decreases. So, by definition, we are all poorer. >> Yeah. Interesting. That's an interesting take. Haven't heard it. I mean, if if that's the final warning what what does 2026 look like when the system finally tests the difference between financial wealth and and this real wealth you're talking about? I mean, you know, what happens to the average saver if if access to real assets defines wealth now? I mean, are we kind of heading towards a tier a two-tier kind of economy, the asset owing class versus anyone else holding a digital IOU? What's your thoughts? Unfortunately, yeah, that's my base case is that you see more and more social unrest. So this K-shaped economy that you're referring to, I think it could likely turn into a small H economy like we were saying earlier, but then the central planners come in and try to prop up the system just very, you know, they call Grant uh Grant Cardone and he says 10x everything and then you get an outcome very similar uh to what we saw in 2021 and into 2022 where for a couple years everyone feels great. uh the government came in and saved the day. But then what happens is prices go like this and incomes go like that. And what happens is the delta is usually filled with UBI free money. You don't have to pay your student loan. You don't have to pay your mortgage. You don't have to pay your rent. Whatever. And therefore the pain really isn't felt. But then when that starts to subside because you got the CPI going up to 9% or 10% whatever. So they have to pull back the reinss on all the stimulus. Then that spread between the income and the prices start to show up and people really start to feel it and that's when their purchasing power decreases to the point where their their incomes might be higher today than they were in 2019 but their purchasing power is less. And that goes right back to that graphic that you showed at the beginning of the video where subprime auto loans, the delinquencies are at an all-time high. Why is that? Well, it's easy. It's this. Because prices go up, incomes stay the same, and while the free money's gone, you're left with this really, really big problem. So my view is if they 10x the fiscal, if they 10x the monetary, whatever it is that they 10x, the results will probably be 10x what we saw in 2021 and 2022, which has led to the bifurcation of the economy. So I don't know why that would >> get any better. I don't know why that would change. I think it if we keep doing the exact same things but just more of it that created the bifurcation, I don't know how you can argue the bifurcation doesn't get worse. >> Yeah. Yeah. I mean, some would say that the counterpoint is that governments won't let the breakdown happen. They'll respond with universal basic income, you know, some subsidies, price controls. Doesn't that just deepen the spiral to your point though, turning short-term relief into long-term depend like where where do we stop? People have to realize that go back to what we were just saying there. It it's not about having more money. Like I always use the example of communist Russia. When I was a kid, you would always see these black and white pictures of people in Russia just waiting in line for like 4 hours just to get a loaf of bread. And when I was a kid, I always assumed that they were poor. I always assumed that they meaning that they didn't have money. >> They didn't have enough money for the bread. But in reality all of them had money. They all had enough money for the bread. There was just no bread. You see? So my point there is even if people are pressured and they don't have their purchasing power has declined because of what we are talking about and even if the government steps in and says okay well we'll solve this we'll just do UBI. If it doesn't increase the amount of goods and services, it's not going to increase the purchasing power because the price of the stuff is just going to increase with the amount of money that people are getting. It It's just like remember California came out when uh the gas prices were skyhigh and Gavin Newsome wanted to do like a what is it like a gas something like that. He wanted to give people like $500 a month to afford the higher gas prices. What's that going to do if you don't increase the amount of gas? This is going to make the gas expensing power is the exact same if not lower because usually when you do that wages and incomes don't keep up. And so it's not you we can't make people richer by giving them currency units. It I wish we could but we can't. The only way we can make people richer is if we create more goods and services. Period. End of story. >> Yeah. Quality of life. Interesting byproduct of it. Okay. Well, I our time always goes too fast. But I what you're really saying here, George, is that this isn't just a market cycle. It's a societal one. I mean, we've built that economy where paper wealth exploded. Real asset, I guess, real world access to to food and housing and stability collapse. We saw it in 2020, as you said, if that's a warning shot and 2026 maybe is the moment the illusion breaks. I mean, if you bring it home for investors in a in a world where governments are printing to survive, inflation really never dies and social stability is fraying. What's the smart move now? I mean, where does the capital that actually protects freedom and purchasing power go next? Is it gold, Bitcoin, commodity, something completely entirely different? >> Well, I think everyone has to own gold. I mean, >> yeah, >> I can't give anyone personal investing advice, of course, but what I do is whatever portfolio I have, I always start with 10% gold, always. And it's just an insurance policy, and it helps me sleep well at night. And then what I do is I say, okay, well, the vast majority of the portfolio, I would like to have some sort of asset that pays me to own it. So, I've got cash flow, cash flow, cash flow. So now this could be real estate, this could be commodities, uh commodity producers that pay a good dividend. Uh this also I I mean I know this is blasphemous to to say but in certain times it can be actual treasuries like short-term treasuries where you don't have a lot of interest rate risk. So right now I would say probably 10% of my portfolio is gold. Um and that was like 40 or 50%. Because gold went up so much. Uh, but then I sold it to bring it down to 10%. And then probably 60 or so percent is just T- bills, short-term T- bills that I'm just rolling over. Now, is that a long-term strategy? Absolutely not. Absolutely not. But what I'm expecting, if the yield curve plays out the same way that it always does and these cycles play out, is that I'm going to be able to buy some stuff on the cheap in the future, very similar to what you were able to do during March of 2020. Yeah. >> And so until that time, I'm happy just to collect the whatever 3 or 4% and then with the other 30% of the portfolio, I'm taking more speculative bets. So that would be where I would have maybe a speculative bet on Bitcoin. Let me give an example of this. So right now I'm long Bitcoin, but I've got an offset to the long position in Bitcoin with a short position in Micro Strategy. And this is something that Chainos talked about like probably a year ago. So I don't want to seem like I'm the guy that thought of this and he uh recently I think covered the position, but that's a position I've had on for probably 3 or 4 months. And that's an example of what I'm doing with that 30% of the portfolio. And that position has worked extremely extremely well. Another one, like I said earlier, was short CarMax, but an offset to the short Carmax position was a long position in the S&P 500. believe it or not. And it wasn't because I'm bullish on the S&P 500. It was just a hedge for that uh that CarMax position uh position, excuse me. And that worked extremely well. So, I think there's a lot of opportunities out there for people right now uh as we speak. But you've got to mix up the strategies based on the environment that we have. You know, you've got to play the hand you're dealt. you you can't play the hand that you wish you had. And so I think that right now it's based on the yield curve and what we're seeing in the labor market and the deterioration of the economy. It's a great time to do I think what they call pairs trade, but it's also a great time to own gold and it's a great time to own things that uh that pay you uh to own them. And then the composition of that portfolio for me will change quite dramatically if we have the S&P 500 go down by say you know 40 or 50% like we saw during the.com bust or the GFC >> right little haircut little correction. Okay. So you're long Bitcoin short micro strategy. So your bet is on the asset itself not the leverage built around it. It kind of fits into your broader theme right? Own what's real not what's what's financialized. Uh gold is insurance cash flowing asset is your base. Bitcoin is what? asymmetric upside and and stay away from the leverage and paper claims pretending to be wealth. What's your your outlook here? I mean, you think Bitcoin is not worrying around this $100,000 mark, any of this uh getting people nervous. >> I don't know. I I don't know what the price of bit I I I could give you a great argument >> Yeah. >> as to why it would go to 100 thou or excuse me, 200,000 >> in the next year. And I can give you a great argument as to why it would go to 50. Uh I I I just don't know. I just believe that again not investing advice but I think everyone should own some Bitcoin but own Bitcoin like like actually own the Bitcoin. Don't own a leverage play on Bitcoin cuz the whole point is to have purchasing power outside of the system. Like I don't know if you saw the series I did where I tried to drive across Argentina using nothing but gold, silver, and Bitcoin. And uh >> I caught a couple of them. I did. I did. Yeah, people. I actually live streamed it, believe it or not, >> and it was very revealing as to, believe it or not, kind of how the the monetary system works, whatnot. But the the main takeaway here is that when I was flying down there, you know, part of the decision-m process or part of the the uh you know, just the preparation was, okay, how are we going to get the gold down there when we're carrying it? You know, how can we make sure that we're not too obvious to where we're not getting robbed? you know, should we really live stream this because then everyone from point A to point B that's watching this is going to know that we've got this gold or silver and they can come just hold us up at gunpoint. There was a lot of thought that went into that. >> But with the Bitcoin, there was nothing there. There was absolutely nothing like how am I going to take this on the plane? Easy. I've just got it on the you know, however you have it. You got your keys or you got it on a an app. I had Blue Wallet at the time. And you you get to thinking about, okay, well, if I had to really bounce, if I had to get out of the United States cuz the stuff was really hitting the fan, very similar to to to co, you know, how would I take that million dollars, let's say, of purchasing power that I needed to get me by over the next 3 years, the next 5 years when I moved down to hang out with Doug Casey in Argentina, how would I actually get that down to Argentina from the United States? And the the answer is really Bitcoin. I mean, you could use Tether as well, but of course, you've got some counterparty risk there, but you don't have the fluctuation fluctuation in the price, excuse me. Um, but I like the decentralization of Bitcoin. And, um, really, it's it's just the obvious answer. With gold, good luck. Good luck getting a million dollars worth. Silver, there's no chance unless you have your own jet or something like that. I don't know how much that would weigh, but that for me, that's the value in Bitcoin. It's to it's to give people purchasing power outside of the system. Now, as far as going back to your question with the price, uh, I don't know. Some things that are rather concerning are you've got all this buying that we saw a few months ago due to these Bitcoin treasury companies and you've got Micro Strategy buying like billions of dollars worth of Bitcoin every single week, but yet the price doesn't go up. >> So, that to me that's that's not a real good sign uh for the price shortterm. Now, does that make a difference over the next two or three years? Probably not. But I think for most people when they talk about the price of Bitcoin, they they're really trying to get your prediction for the next 6 months. And quite frankly, it could go down to 50. It could go up to 200. I have no idea. >> Yeah. Yeah. Well said. All right, George C. We'll leave it at that. We're always at 50 minutes. Good job, man. You can check out everything he's got going on over at the Rebel Capitalist. Also, some really great shows live uh streaming on X right now, too. you have been lately. Hey, >> everything. I'm overexposed. Overexposed. >> Keep it up, buddy. All right. Powerful perspective as always. Thanks for joining us, making the time. >> Thanks for having me. >> Thanks, George. And thank you for watching. Now, the data is clear. 6.65% default hedge fund liquidations in sovereign funds pivoting to real assets. Now, if you want to follow where the money is going and to stay ahead of these trends, make sure to subscribe right here to Kitco News. I'm Jeremy Saffron. We'll see you next time. Heat. [Music] Heat. Heat. [Music] Heat. [Music]