Ed Dowd: 'Kooky' Valuations & Weak Economy To Lead To Big Downturn By Midterm Elections

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the valuations are kooky. Uh we are at.com level valuations on the on on the tech stocks and the overall market valuations are high and 10ear forward projected returns are zero. So that doesn't bode well putting new fresh money into that market. Conversely uh you know the economy we think is think for the economy for the middle class is already in recession. eventually uh the K-shaped economy will be overwhelmed by the middle class continuing to have job losses. And so we just think there's going to be a a uh a slowing of economic activity that's just part of the natural cycle. There's too many headwinds and Trump and team can try to stop it. they can try to prevent it, but I think eventually they're going to end up like the Bush administration and likely have some sort of mild to moderately severe downturn manifesting right before the midterms, unfortunately, is our call. Welcome to Thoughtful Money. I'm its founder and your host, Adam Tagert. Change around the world, especially geopolitically, is accelerating as we enter 2026. Depending on your point of view, some of these changes are positive, potentially historically great even, and some of them are much more concerning. Where's the world order headed from here? And more granularly, how are the economy and financial markets likely to perform in 2026? For insight, we're fortunate to welcome back to the program Edward Dow, founder of macroeconomic consulting and research firm Finance Technologies. Ed, thanks so much for joining us today. Thanks for having me on again. Appreciate it. >> Hey, it's a real pleasure. I appreciate you coming back on the program, Ed. We had a great talk on your inaugural appearance here and folks certainly loved it. So, a lot of folks were very excited to hear that you were coming back again here early in 2026. Um, so I got a ton of questions for you. Like I said there in the intro, Ed, there's a lot of change going on in the world right now. Um let's start if we can with your economic and market outlooks for 2026 and um I know you've got a report that's coming out soon uh that's going to kind of go deep into that. Uh and part of that report is going to be sort of you know a postmortem on what you got right and what you got wrong on 2025. So why don't we kind of wrap that all up right here. um what do you see coming for the next year and what about 2025 do you feel you nailed and and and what maybe did you not quite get exactly right? >> Well in 2025 we uh warned of the dangers of a deep world worldwide recession. Uh it hadn't manifested yet in the capital markets but the real world data is getting worse and one of the calls we made was that uh long-term yields would come down. Um, and we suspect that there's a lot uh more room for long-term yields to fall in the Treasury market as we enter our uh our our forecast become more correct, especially in the labor market. But we we we said the tenure uh would go lower. Uh the tenure was at 4.8% when we talked about it in January 25. It's uh come down to around and hovering around 4.16. So that that is a slight win. Uh treasuries did have their first positive year uh which sets the table for what's we think is going to come which is a deflationary scare. We also got oil right. We said in our report in 2025 that oil would go to 30. Uh oil at the time of the issuance of our report was close to 80. It's at 57. Uh what we didn't get right uh but uh was the actual GDP numbers. uh we think those have been distorted by all the trade uh situations the the the the imports and exports and the front running uh we think and and the AI infrastructure spend which has been supporting a lot of the headline GDP numbers. >> We suspect GDP will be a lag and GDP will show recession at some point in 2026. Um the housing uh recession that we called for uh is beginning. It's starting. Uh it's it's a slow it's a slowmoving uh glacial process. It's what we call a white swan event. It's it's totally predictable. Um, and until, you know, you won't hear about it in the mainstream media until we're at some sort of crisis. And, you know, there's an affordability issue in this country and prices need to come down. And, you know, we're seeing, you know, in the beginning of the year a whole host of Trump administration um, policy measures to quote unquote help ease the affordability issue. Um, they're really >> Let's talk about those because I got strong feelings on on many of them. >> Oh, yeah. We'll talk about those. Um there seems they seem to be walking a tight political uh tight rope of trying to make it more affordable while protecting current prices. And I think that's a disaster and it's not going to work. Um home prices, the only way this affordability issue gets corrected is by price. And right now home prices at 35% 30 to 35% overvalued. uh and they need to come down that amount for people to really be incentivized to buy at the current income levels. You also need income levels and jobs to grow to really help home prices and those are all going the wrong way. And uh the real the real economy is struggling. Um you you can see it in the in in the non-informed payrolls. We've had basically all of 2025 revisions down. Um and the the real private economy is losing jobs. Manufacturing uh jobs went down last year uh despite Trump's initiatives. Again, those are longer term uh initiatives that haven't broken ground yet. So, there's been a lot of hype about all the deals he made uh in 2025, but those deals haven't seen capital flow or groundbreaking, you know, manufacturing begin here. So there's going to be a delay. Employment's going the wrong way. Home prices are going to go the wrong way. This is going to drag the uh the economy's growth down eventually. And you know, I personally believe that AI data center spend is peaking. Uh the the constraint now is power. It wasn't Nvidia chips. Now it's power. So you you know why build a data center that you can't have power to plug into >> that you can't get electricity for? Yeah. >> Yeah. So th this is all classic, you know, hype, spend, peak, and then roll over. And we're we're right and we're right at the precipice this precipice of this. Not only uh that, but we have uh you know, we're issuing a China economic report today. Um that is going to show in the very short term their real estate crisis is is is at the risk of going acute in 2026. and their GDP growth which has been slowing and it's now at 5% is probably going to go negative in sometime next year. >> Wow. Negative for China. Okay. Well, we'll get into that too. So, um I want to get to your market outlook as well, but but stay in the economy for a moment. Um so, Ed, let me ask you this. I can easily see and appreciate a lot of the risks that you're talking about and um being totally transparent. Um I I I think for much of the past couple years have have leaned more into okay, I think those are the more likely outcomes. Um but uh I I am I'm keeping an open mind here that um uh first off GDP has remained stronger uh in 2025 than I think a lot of folks who think the way that you and I have uh expected it to. And some of that like you said is because of the trade deals and the AI capex and stuff like that. They've they've they've sort of distorted things a bit. Um but the the administration would say, especially, you know, someone like Secretary Scott Bessant, um hey, we've done a lot in 2025 to kind of lay pipe for economic growth in 2026 and beyond, and you're going to start seeing increasing tailwinds on the economy from these things, from all the provisions and the one big beautiful bill and the deregulation and and the tax cuts um and the tariff revenues and you know onshoring stuff and yes it's going to take a while before those data center jobs are really there um but they're coming. Um so uh you know we can argue about how likely those things are going to be to manifest or whatnot but but seems pretty clear at a minimum we are going to get some pretty big tax breaks or tax uh refunds uh in a couple of months. um they're touting the largest in history. Um we might even get some tariff checks going directly to households. Whether you like that stuff or not, it will be stimulated to the economy if it indeed happens. And so you you pair that with some of the stuff that the administration is now doing. We'll talk about it in more detail in a second, but like the the housing announcements, you know, the the the 200 billion in mortgage back securities that are going to get bought, right? These are things that are, I think, being designed to foam the runway against any potential economic slowdown or goose the economy. Uh, or at least just to keep things from not getting worse and maybe maybe getting a little better in the short term just to window dress for the midterm elections, right? It it seems like the administration's going to do more and more unnatural acts to just try to kind of buy votes, if you will, for for the election. Is that factoring at all in your outlook for 2026? Are you potentially moderating at all the timeline of of the recession and all that type of stuff or do you think that's just too little too too late? >> I think it's too little too late and I think the cycle you can't you can delay the cycle. The Biden administration delayed the cycle by importing 20 million illegal immigrants. The Trump administration has stopped the that border flow >> and that's what's really causing rental, you know, new tenant rents to plummet and rents lead home prices. So the psy the housing cycle is already manifesting and going to continue to get worse. Now these attempts to slow it down or mitigate that price decline with 200 billion in Fanny May and Freddy Mack mortgage purchases is is not going to do it. That's going to tighten mortgage spreads a little bit. Um but it doesn't really ease the affordability crisis. And you got to remember the Federal Reserve bought 1.3 trillion of MBS in in 2020. that really distorted the market and it had zero interest rates. Interest rates aren't >> they kept buying as house home prices were hitting record high 70 days. >> Correct. Correct. >> Way too much for way too long. >> So what really happened? Let's let's be honest. The Federal Reserve distorted and priced many of the middle class out. The the blame lays at the at at at the Federal Reserve's feet right there. And uh that was a distortion and that priced people out. So now we have this slow motion train wreck where the baby boomers are trying to sell their homes as they retire and there's a demographic problem. They're hitting the retirement age. Some of them are downsizing but the millennials don't have the income andor job opportunities to purchase those homes at these prices. And there's also been inflation in uh real estate taxes, insurance, >> right? The cost of ownership has has shot through the roof. Yeah. And also uh part of the problem with housing is electricity prices keep going up as a result of this AI infrastructure spend despite the fact that oil is you know you know nowhere near Yeah. So I I think I think >> now you know so I don't I don't and you know we saw the Bush administration give a lot of stimulus checks in 2008 and that didn't stop what was coming. So, I believe the cycle's locked and I I think there's, you know, something called an 18-year housing cycle since the last recession in housing was 18 years ago. We're here and I think it's going to be very hard for the administration to stop what's coming now. They what you know there's three scenarios, mild, normal, or extreme. We're not predicting an extreme recession. We're not predicting a systemic crisis. We're predicting a stock market bubble. Uh, and by the way, we have unfortunately a housing problem and a stock market bubble. The valuations are off the hook. Forget forget, you know, what's going to trigger the pop. If you buy now in the stock market, 10 year four year for 10 year forward projected returns are zero. Zero >> or or negative depending on whose data source you use. Yeah. >> Yeah. And that that implies a draw down between now and then. So I think and then you know what's going on in China is going to reverberate around the world. So it's kind of all globally sinking up and the China the China piece I think people are underestimating. It also gives us negotiating tools uh when it comes to these trade deals. China does not hold all the cards like a lot of pundits like to say. We hold the cards. They don't. They have a demographic problem that's really starting to manifest. I mean it's a big deal. They're losing 1% of the working force population over the next uh seven years between now and 2032. So, it's a disaster. The real estate crisis is well known, but it's going to start to get acute. And in our report, we identify why. There's been these long live construction projects, they're starting to roll and construction contracts and cement contracts, they're all not they're all rolling over. So, there seems to be a very big problem in China. In addition, we looked at fixed investment in China. the year-over-year change of growth went negative for the first time in forever. >> Okay. So, with China, um, and you know way more about this than I, um, but the I would say kind of the conventional understanding right now is they've had this real estate depression or, you know, balance sheet depression, but largely driven by real estate that they've been stuck in the past couple years. it's been working its way through the system and to get out they're really realizing that they've got to stimulate pretty heavily and they're starting to. So, you know, I've heard I've heard some people on the other side say actually I think China's going to start to um you know, start to pull itself out of the it its hole at a faster rate than it's been doing to date. Um and if anything, it's going to have an inflationary impact on the global economy because of all the stimulus that it's uh you know announcing and planning on doing going forward. You seem to think again too little too late. >> They have a this demographics are so bad. So what they did let's go let's do a little history. Um they really plateaued demographically in 2015. Um >> and and because they were pursuing a one child policy, right? that a lot of old eventually end up a lot of old people and few were younger. Right. >> That that was one reason. The other reason is you become a developed nation the birth rates go down. So they really hit a demographic plateau in 2015. Uh but if you get you have to remember that supposedly they're the hundred-year planners and these demographic numbers are not not unknown to them. They and if you go back to the stimulative measures that they did after the great financial crisis, a lot of it was housing. So they went crazy on on uh housing infrastructure build and to the point >> I interrupt just to note nationally they had [clears throat] very little debt relatively on their national balance sheet. They basically pursued a massive debt funded boom. The problem they have now is they they don't have the ability to do that again because they've got so much damn debt now on their national balance sheet. >> Well well the it's it's located mostly in the private sector. So the government does have some room to expand, but their debt levels actually have grown since COVID. A lot of people's debt levels versus uh GDP have declined. I'm talking relative to GDP. Yeah. So chi China is already in trouble and they spent a massive amount of uh money and they overbuilt their housing. The the housing market bubble in China was not price driven. It was supply driven. So they have decades of housing to uh to work through and >> work through and that's kind of true malinvestment, right? I mean they were building go cities and just I mean these are just depreciating wooden boxes out there by the gazillions. >> Correct. And so what's been going on since uh 2020 when they by the way that was when their demographically they started to decline 2020 was the they plateaued and they started declining in 2020 coincident coincidentally with COVID pandemic. Um they uh they their growth rate so their internal consumption is is is plummeting. So that's so what did they do? they started amping up their exports especially in in higher tech areas like autos and and uh and electronics. So they're exporting their way out of it that they're trying to do what Japan did. Japan hit a demographic wall uh in the 90s and then they became an export nation. That was fine because there Japan was a tenth the size and that's how they kind of you know went sideways for a couple years and you know they lost decades. China's problems worse because because of their size, they're running into problems uh you know globally and that's why we're having trade wars. So China's GDP growth since 2020 has been from exports and believe it or not uh China's GDP growth as priced in US dollars before 2020 uh GDP was 80% of of the US. Go forward to now it's it's gone backwards. priced in US dollars it's 60% of of of the US GDP and if you price their economic growth which is running around 5% in US dollars it's been zero >> so price China is struggling mightily and exports have been carrying the uh you know the weight of the uh the deal for now but their construction their long live construction projects that even though the real estate market started declining start started declining in uh 2020 down 70%. Construction is only down 15 to 20%. And we think that's going to accelerate and that means job losses, more internal consumption problems and potentially an acute systemic crisis temporarily. They'll they'll do something, but it's going to it's going to choke off economic economic activity in Asia. And a lot of Asia, you know, supplies raw materials to China. >> Yeah. Okay. So, um I'm going to ask you a longer term question, but I guess in the near term, meaning 2026, it sounds like you expect China at best to be a disinflationary force on the on the global economy. Uh maybe even a downright deflationary one. >> Well, they're already exporting deflation that it's going to get worse and they're going to struggle mightily. And uh you know, they're they're they're pretending uh you know, look, they there's a lot of negotiations going on between the Trump administration and China. uh they're putting forth a, you know, a a brave face. I think the Trump administration probably knows what we know in our report. If they don't, they can talk to us, but we hold more cards than they do. >> Okay. Um Okay. I I want to build off of this on on a lot of the change that's going on elsewhere in the world, too. But but let me ask you this. So, I think you used the word an acute systemic crisis uh at some point. Um you know China's governance has largely been at least since the communist party came to control there has largely been we got to we got to keep the masses you know above a certain level of happiness or else >> we get we get you know there's the risk that they turn on us and and forcibly remove us from power. When you say acute systemic crisis, do you anticipate getting anywhere near that type of of outcome? >> Well, so it has potential to go systemic in in China. But the good news for China is there a creditor nation. So there won't be a run on the bank in China from external, you know, forces like, you know, like we've seen other countries get into trouble on the hedge funds raid and there's a you know, a flight of capital. uh China can pay off all ex external debt given their reserves. So this is going to be an internal restructuring that tends to be more painful. So I suspect there'll be um geopolitical consequences because as as this gets acute uh there'll be more and more displeasure from the populace. Um they're going to need to jin up distractions and that's why I think Taiwan will be talked more about. They need to create an enemy. we are the enemy. Uh there'll be more social control, more uh you know kind of you know squashing any kind of disscent. So it's going to get it's going to get kind of ugly in China next year. Um it'll be internal. We won't see or hear a lot about it, but it's definitely going to affect uh you know trade in Asia which will eventuallyffect affect global trade and a slowdown. When if China it used to be if the if the US caught a cold the world the world went into recession. >> Yeah. I think China's uh the size of their economy now is at the point where they get into trouble, it'll be a problem for the rest of us as well. >> Okay. And certainly the rest of Asia because you said earlier, they're the suppliers. Um >> Okay. So, uh let's look at the other parts of the the global chess board and and what's going on there. So, as we're recording this, Ed, uh there's a potential people's revolution going on in Iran. Um and this was kind of why I was asking like, you know, uh who knows how it's going to end up. um you know highly oppress oppressive regime and and again on the day we're talking it it looks like the internet's been shut down in Iran and uh and who knows what's going on there but people are suspecting that you know maybe there's widespread you know execution of protesters or something like that to try to quash this thing but the regime there is all of a sudden finding itself kind of fighting for its life. Um it it sounds like from what you said with China, you think things are going to get pretty dicey there next year, but but probably not to that stage. Am I reading you correctly? >> Yeah. No, China's got a pretty good I mean, there's 7 million communist red carding members who have a good handle on the situation. They're anticipating this. Uh and again, it's going to be a brutal internal restructuring and they have they have tricks in their bag to distract the population. So, but it's gonna it's going to get, you know, it's going to get bad for a brief period of time. Um, what's going on in Iran, you know, Adam, uh, I'm I'm increasingly be finding it more difficult to get the truth out there. There's a lot of fake stuff going on. So, uh, I'm I I used to be quick, you know, back in the day when you and I were coming up in the world, it was you you got props for finding information before anybody else and putting it out there. But now you have to be careful because you don't know how true it is, right? >> So I'm I I I pause now when I see things like >> if it's even reality based if it's not just AI created. Yeah. >> Yeah. Yeah. And and sometimes it's propaganda and it doesn't have to be AI. And so when I see events happening, I pause before I start to like have any hot takes. Um the one thing I think you I think you commented in one of my posts I put out a couple days ago. you know, what we're seeing uh from Venezuela and then the subsequent chatter from Trump on Cuba, Mexico, um Colombia, the the question is why now? Why why all at once? There's something going on geopolitically that I don't think we're seeing. There seems to be a new reordering of the world and it's kind of alarming. Uh you know, and there's the silver situation. Uh there's all this chatter about you can't print atoms, you know, right? So so there seems >> difference between atoms and bits. Yeah. >> Yeah. So there seems to be this sudden uh and again you watch what people do not know what they this sudden scramble for resources and it it's it's a little alarming and worrying and uh you know I'm I'm sure you know you're familiar with Martin Armstrong's work. I you know we don't do have we don't do a lot of geopolitical analysis um but he seems to think the war uh talk is going to pick up in 2026. >> So let let me ask you this. This is kind of how I prepared the questions here. Um Trump just announced that he wants to or or is I don't know if he's got to get approval or not but um wants to increase the military budget now to 1 a.5 trillion. Um, so he's basically kind of calling an audible saying, "Hey, look, I think we need more money for the military than we initially thought." And, you know, he's trying to sell away. That's a good thing. Um, but it seems pretty clear that um the age of globalization um has flipped into reverse and it's now be quickly becoming a much more multi-polar world as you were just saying there. The question to you is, is do you think that that is a still the word from the Fed? Is this a transitory era or is globalization over? >> I I think globalization peaked and I think I made some comments about that during co that given what they tried to do with the co and the you know the coordinated health measures. Uh that was kind of peak globalism and I think as a trend it's going the wrong way and now we're seeing it manifest into actual real world reality. When Trump says we need a $1.5 trillion dollar military budget, a 50% increase, you know, either he's smoking crack or he knows something that we don't know. And I I think it's signal, not noise. It's a wartime economy footing. >> Yep. Yep. Yep. Okay. So, um, with with Trump specifically, he has said uh that he essentially is pursuing a modern-day version of the Monroe Doctrine. Tongue and cheek. He's calling it the Donroe Doctrine. Um, but put putting aside good or bad for a moment, um, uh, just from a kind of purely mercenary point of view or mercantalist point of view, um, you know, is is is is that a pathway for America to to win here? I mean, is that is that is if we were to really focus on the Western Hemisphere, clean it up the way that he's talking about and starting to do, it looks like, you know, removing Maduro, kind of getting everybody else to kind of get in line, maybe even going, you know, finding a way hopefully uh with their approval to to purchase Greenland or at least get the strategic installations for America and Greenland that he wants, maybe even protect it with a Golden Dome missile shield that has been talked about. um if that could be affected the way that that it's sort of being sold, does that give America an even greater strategic position in this new multipolar world? >> Yeah. Again, I like what you said. Let's let's take out the judgment call of whether it's right or wrong. Let's just analyze it. I'm trying to do that more and more now. Like >> we're we're looking at the risk board and just trying to predict who's going to win. We're not saying we want them to win or not. Yeah. >> Yeah. and and you know the morality of it you know so if you're an American and globalization is over what does that mean so globalization peaked now and we you know through our globalization efforts that 25 year trend where we shipped out US industries to Asia and China >> at our manufacturing base yeah >> yeah you made China a net creditor nation that's now powerful uh and uh there's a global sovereign debt problem and demographic problems and the degrowth uh situation coming on on the globe. We have demographic issues in Europe, China, uh South Korea, Japan and the US. >> Yeah. >> And uh so um this this this uh this is going to cause growth problems and and and and debt issues and currency issues globally. So the peak globalization means we need to rebalance everything. That's what the trade uh tariffs are all about. re rebalancing trade, bringing manufacturing back to the US. Clearly, globalizations has wiped out and hauled out the middle class. There's an angry uh sub50 population that doesn't really care whether it's communism or capitalism. That's scary. Uh they just feel like they they've been ripped off. So, we have to deal with our own internal issues. We have to rebalance trade. And so when I think about what that means, that means we're going to be in conflict with a lot of our neighbors as the as the global pie shrinks because of demographic issues and debt [clears throat] issues. What's going on is bigger than a lot of us. It's cycles. It's it's just cycles. And so if you're an American, uh these moves that Trump's making are not necessarily bad moves if you want to be selfish for your own people and preserve the dollar the dollar as the world reserve currency because I want people to understand if the dollar ever is not the world reserve currency, our lifestyle changes overnight and and and our country changes overnight. So selfishly uh you know without any like you know you know how fast or you know like is Trump doing it too fast and is this does he have the authority? I think these moves need to be done. Now you know there's there's obviously like how you do it and how you message it. I'm not always a fan of the messaging of the Trump administration but these moves kind of need to be done. There seems to be if globalization is is over and peaked and now we're you know going to a more decentralized globe that means uh regional blocks that means new new uh new alliances new strategic uh footings getting resources because resources and atoms matter in the world of reality rather than the paper world. >> Yep. Um, okay. So, uh, you had said earlier that, uh, and you referenced the exchange that we had. I mean, I was just commenting on some good questions you were asking. Uh, but you you're saying, hey, there's there's an urgency going on here and I'm I'm trying to figure out sort of what's all behind it. I mean, could it potentially just be as simple as as America having this new game plan and saying, "Look, we just we need to execute it faster than everybody else." And also maybe even as I was saying internally, maybe some of the uh the urgency here in the current administration is saying, "Look, it may be harder for me to kind of force some of these things through if if we lose the midterm elections. So, let me try to get as many of this stuff laid out before then as possible." >> It could be that. It could be that the Trump is worried about getting impeached after the midterm, so he's rucking it. So that that's one possibility. The other possibility is there are things going on behind the scenes. We're not in the room, >> right? There's always that. Yeah, >> there's always that. So that's why I asked the question because it it you know when you see one like Venezuela, that was a one-off. Okay, understood. Duro. Okay. You know, and forget about why they said they did it. That's just one country. But now rapid fire, he's signaling we're going to do these others. And then, you know, he said, I think yesterday or the night before, uh, that there there's going to be land, uh, targets in in Mexico now. Um, there's ob there's all this, you know, taking of tankers in in the open seas. So, I see this kind of activity and it just it's it's alarming. And again, without judgment as to the merits of it or whether the, you know, Trump can do it or whether it's the red team or blue team's. It's like, why is this happening? Obviously, he's not a mad man. Something must be going on that we don't see. >> Yeah. Well, and so it's kind of the nature of the Game of Thrones that you're talking about here, right? Which is when everybody sort of stops sharing, which sort of the era of globalization, it becomes much more of a game of musical chairs where you got to scramble for the chairs you want, right? And so potentially that's just what's going on here too. Um, we'll see. And and and look, I'm like you, I'm really trying to talk about this in w without without putting judgment one way or the other, but just to try to help us all figure out what is happening so we can all hopefully see things a little more clearly and then take more informed action. um you know the Maduro thing um the there are potential long-term benefits if it gets pulled off the way that the administration is sort of telling us that they'd like uh for it to do so. A lot of those benefits are going to be well into the future. It's going to take for a long time to increase the oil output there and stuff like that. And there's a lot of ifs between now and then. But one thing it does do is it sends a message, right? um similar to Trump taking out Iran's nuclear facility, right? Where it's sort of like the sleeping giant is not going to be sleeping so much anymore. And and maybe I'll use a better analogy. It's sort of like the biggest guy in the prison yard, right? Where he's got along with everybody. Uh and and people start thinking like, well, you know, maybe I can get away with more stuff than than I could have in the past. But if that guy gets up and all of a sudden Dex's the next biggest guy in in in in the the prison yard, everybody starts saying, "Oh my god, I don't want to get on his bad side. He tells me to do something. I'm going to do it." And it's it's kind of like how the Fed became this super powerful global entity uh because its decisions impacted everybody. And so the Fed could could jawbone a lot of its policy, right? it could just talk and move markets without actually having to change the interest rates. So, I'm wondering if that's part of the the strategy here, which is Trump's done a couple targeted things just so if I start talking about something in the future, people are going to start doing it. You know, if I want Mexico to start cleaning up its cartels or whatever, right? It's it's I I'm making the investment now in the kinetic action so that I don't have to make as much of it in the future. I'm just guessing here, but does that make any sense to you? >> That makes perfect sense. I mean, one of the things that I thought about watching the Biden administration was their disastrous foreign policy. One of which, uh, one of the things they were doing was to violate a longheld, uh, um, you know, gentleman's agreement, you don't steal other nations money. Even during World War II, we didn't steal other people's money. Uh there was this chatter about stealing Russia's money because the assets were frozen and using to to to um pay for the Ukraine war. Now Europe's talking about that. That is a surefired way to lead to a bricks discussion. So the bricks chatter took off under the Biden administration. He weakened the dollar reserve currency's credibility. And what really backs the dollar is military might and keeping the sea lanes and trade open. And when Trump demonstrates power, reminds these these countries why you use dollars. Simple as that. >> Okay. All right. Well, look, I could keep peeling this onion for you, but I got to get to your market outlook real quick. Um because one of your one of your forecasts is that oil is going to oil prices are going to go even lower um potentially to 30. Um just bear with me here for a second. Um let's assume the following happens. um we we we do things with Venezuela go the way that we hope and we start rebuilding their infrastructure and and we start exporting more Venezuelan oil. There is a populist regime change in Iran and Iran starts become starts replugging into the global economy, right? The sanctions go away. It's a west friendly regime that comes into place. The uh there's there's peace in the Ukraine, right? That war gets ended. Russia no longer a pariah. They start plugging back into the global economy. Their oil isn't sanctioned anymore. Um all those things to me sort of suggest whoa like oil could be really cheap for a really long time. Do you see it similarly? >> Uh you know there people are saying oh what's going on in Venezuela could be bullish for oil because there's conflict and conflict creates uncertainty. I agree with you. Uh there's a lot of things that well and primarily because I have a viewpoint on China going into an acute crisis. China is one of the biggest users of oil, >> right? I mean I didn't even talk about a drop in economic demand but yeah. >> Yeah. So so so everything's pointing towards oil going lower. And what's interesting uh even during the inflationary period of uh 21 22 and 23 oil priced in you know real dollars is extremely cheap. It's amazing that even oil is at this price. So, there's something going on. And I I suspect a lot of it has to do with the over I mean, if you remember back going into the great financial crisis, oil was like 180 bucks a barrel at one point. Um, and a lot of that was driven by China's growth. China in 2007 had 25% GDP growth. They're now at five. So, China >> also we hadn't really tapped shale at that point. >> Yeah. No shale yet. And that that's the other thing people people forget is that you know Trump talked about drill baby drill in our 25 economic outlook. We analyzed that and the Biden administration believe it or not under the Biden administration oil production went up. It went up and so we already had drill baby drill and that's one of the things that we were mystified by the Biden administration didn't point that out to the American people but it would go against their base because the base hates oil. So right. So we are we have we're a wash in oil and especially with the demand problems in in China and the demographic. I mean they're going from 900 million working age population to 750 million over seven years. They're losing 150 million people uh in the peak earning years. So demand >> and they're not a big immigrant you know immigration country. >> No. No. So 150 million people is half the US. That's huge. So that's that's so I think I think oil I'm not we're not bullish on oil uh until it goes a lot lower. That's that sort of call and it'll and if the and if the US economy finally uh the reality finally catches up and we do get a housing correction that starts to you know happen in earnest and a stock market bubble burst there'll be an acceleration of layoffs and a temporary stay in the use of uh oil in the US. You know you know driving will will drop temporarily. It always always bounces back. So oil our our view on oil is not not bullish. >> Okay. Um I we don't have time to to do this justice, but I want to earmark Ed the next time you come on I do want to spend some time digging in with you um more into the this global demographic issue, but specifically in the US and the impact you think it's going to have in the US and what you think the US should do about it today. Um because we are facing our own version of this. Um, it's going to be it'll have implications for everything, right? I mean, you're gonna you're going to have 10,000 boomers a day being forced to sell their homes for the next 20 years, um, as they go off to the the nursing home or the or the cemetery. Um, so there's all sorts of knock-on impacts from that, but I want to do that topic justice, so I don't want to force you to just summarize it in 30 seconds here. >> Yeah. No. Okay, that sounds great. I'd love to come back on and talk about that. >> Okay. All right. So in the the last half here of the discussion um let's get to your market outlook for 2026. Economic outlook not great markets in the economy while often correlated don't have to. You can have years with a good economy and a bad market or a bad economy but the market does okay. We've had several years of that. Um or you know they can both head in the same direction. So what are you what are you thinking? Well, let's let's let's look at this uh risk assets versus safe assets and let's look at volatility historically and credit spreads historically. Forget forget the economy just looking at math and in our US 2026 outlook volatility is historically low. Equity volatility is historically very low. >> Yeah. And >> multiples are very high. >> Multiples are very high. And you know when you look at uh you know where we are and we put it in our report where we are standard deviation wise on volatility and valuations mathematically speaking valuations are going to come down and volatility is going to rise that and that's just over time where that's going to happen because we're we're so far uh in in in a low volatility regime and in a value in a high valuation regime that just you know mean reverts at some point. So we think there's some c you know obviously we think the uh slowing global real estate uh economy and China and the US is going to be the catalyst for that timing is you know whatever but what we do know about the econ the stock market is it's still being driven by 35% 7 to 10 names um that doesn't you know that kind of concentration risk doesn't bode well Nvidia is not going to grow forever. It's a five trillion market cap company. It's a semiconductor company. What what do we know about semiconductor companies? For forget about you know the AI hype. They're cyclical. And uh that you know I will I will say this. I don't think it would take much for Nvidia's market cap to get cut in half and that would be a problem for tech stocks. Um Bitcoin is also already signaling something's going on in in in the liquidity of the market. Bitcoin tends to be a early warning indicator. Bitcoin peaked in October and is struggling to resume its uh its once glorious highs. Um typically speaking, Bitcoin would lead the NASDAQ by a couple weeks. It's been there's been a disconnect. The NASDAQ's continued to rise a little bit. So, who's right? Is Bitcoin right or is the NASDAQ right? I we'll find out soon enough. Um so, that's just the valuations are kooky. uh we are at.com level valuations on the on on the tech stocks and the overall market valuations are high and 10 year forward projected returns are zero. So that doesn't bode well putting new fresh money into that market. Conversely uh you know the economy we think is think for the economy for the middle class is already in recession. Eventually, uh, the K-shaped economy will be overwhelmed by the middle class continuing to have job losses. If you look at the job report that just came out, we've had revisions down every month this year. And the the 12-month moving average of payroll numbers is we're it it usually is at the beginning of recession. So, we're on the precipice, I think, of job losses, uh, synchronized global slowing, and we'll see what the what the credit markets do. At some point, the credit markets are going to, uh, spreads are going to widen on on a lot of, uh, tripleB credit. They haven't yet, but we think they will. Private credit is under problems, as you know. First, uh, first Brands, Triricolor, Primal Lend all had issues. There seems to be problem in the private private credit part of the market. it's freezing and there's not a lot of truth being told about the marks. So the these these uh when we have the velocity of money going down because credit new credit's not being issued, it causes problems. And so we just think there's going to be a a uh a slowing of economic activity that's just part of the natural cycle. There's too many headwinds and Trump and teen can try to stop it. they can try to prevent it, but I think eventually they're going to end up like the Bush administration and likely have some sort of mild to moderately severe downturn manifesting right before the midterms, unfortunately, is our call. >> Okay. Um, >> and look, we the Trump administration is inheriting a mess from the Biden administration. So, I'm not blaming them, but you know, when I try to warn people, a lot of MAGA people get all mad at me. It's like, well, look, I'm just trying to tell you my opinion. It's there's no reflection on Trump. >> Well, so I think one of Trump's biggest mistakes of of this administration, the second one so far, is and I' I've said this many times in this program, um he should have come out of the gates guns blazing. um you know, right when he made the o oath of office again and and just delivered exactly that message. Hey folks, you know what? I'm inheriting just a complete disaster. This is going to take a couple of years to turn around. Good news for you that I'm here. I've got this great plan. I've got this great team. We're going to do all these things, but it's going to take a year and a half, two before you really start seeing and bring the the the public along with him. Right? Instead, he started off with that and they were they were saying it's Main Street's time. It's not Wall Street's time. They talked about a I can't remember Besson's exact words, but like a detox period or something like that where they were letting people know things might get a little rough. But then they very quickly turned I think it was kind of around Labor Day when the markets, I think, surprised them by their negative reaction to the the big poster board there. And it it became about well, Wall Street and Main Street can go, you know, do it fine. and and Trump started wrapping his arms around the S&P as a scorecard to measure him by. And I was just like, "Oh, you're just setting yourself up for a big disappointment [laughter] or you're setting the public up for a big disappointment." Uh, unless you can really juice the economy early enough in 2026 that people really feel it before the midterm elections. Clearly, you don't think that's going to be the case. So, I think that was a big PR blender on that side. >> I think it was a big PR blunderer. And then at the end of uh November, December, he made a bunch of statements that the golden age has arrived. And you know, people did not receive that well. >> The the bottom half of the K, which is 80 plus percent of people don't feel like it's arrived for them yet. >> Yeah. And so and so a lot of people felt like he was gaslighting them and in many ways he was because it's going to take time for the economy to restructure it. you just can't make he he kept emphasizing I I brought 21 trillion dollars of investment into the US this year. Well, those are announced deals. They will unfold over decades. It's not all coming at once. And some of your deals that you've uh gotten with Japan and Europe have not even been ratified by their parliaments yet. So, there's just not a lot of things happening right now. >> You got 21 trillion in verbal commitments, but that's correct kind of what it's worth. Yeah. >> Yeah. So, the messaging was was bad and you know, honestly, uh, our call at the beginning of the year was that if they pick up deportations and and and and find a lot of fraud and shut it down, you're going to get a nice correction because [clears throat] the economy was floated on, you know, immigration fraud, other fraud. >> Yeah. It's it's a form of stimulus. Yeah. >> Yeah. And so, but what what I think happened, Doge ended, Elon left, the cuts that they promised never came. Uh, they, you know, they've shut down the border. So, the flow, the second derivative of the flow is has stopped. That's bringing rents down, but the deportations uh are not really where they need to be. And I think there was a realization that if we collapse the deficit too quickly, the economy will go into shock. That was that I think there was an understanding of that. And >> so so do you think Homeland Security got kind of a slow your roll message from the >> Well, they well also they needed to get funding approved. So like that that that takes time. So there there's there's there there's a lot of of stuff going on. But one of the bigger risks for next year is if Trump really amps up the deportations and they can actually get some serious numbers. Uh that's going to be uh that's going to have a you know a detrimental effect on rents and home prices which is needed. Honestly, if you want to correct the house the the housing affordability issue, let the cycle play out and then we renew and then people then people buy homes and they buy furniture and we the cycle begin. You know, it's like >> you're preaching to the choir with me here, Ed. Just let natural market forces take over. They so clearly want to deflate. It's prices, as you said earlier, not anything else that's going to matter at the end of the day. Just let it clear and then we'll be able baseline. Yeah. >> Let it clear. And we think we think if you let it clear, it won't go systemic. The banks are in way better shape than they were in the 2008 crisis. So, won't go systemic. There'll be some losses. to be some consolidation of regional banks, but generally speaking, you reset the home prices of this country, we'll have a boom for like five years. >> Yeah. And and and you'd finally give somebody under 30 a reason to vote, you know, to to not vote for a socialist. >> Correct. >> Because you made house you made you made shelter more affordable. >> I mean, so this this is uh this is correctable. And again, I don't I'm not a doomer. A recession isn't a bad thing. in a recession will take care of a lot of the social strife going on and >> it's it's a necessary healthy part of the economic cycle, but we treat it like it's the apocalypse. >> Yeah. The end of the world. And you know, I guess it is the end of the world for some Wall Street banker types that are overlevered, but who cares? I mean, >> I mean, and I think that's the thing that that honestly is is the danger is when you announce policies like the, hey, we're going to buy 200 billion in uh in uh mortgage back securities. It it just sounds like we're here to prop up the banks and the existing system and it just makes everybody who is who is angry and feeling the economic pinch just enraged. >> I agree. But you know one good thing I saw today is that they are uh proddding home builders to increase construction so that you know one another way to get prices down is to you know build more supply. >> Yeah. Yeah. Um, and I agree with that. I'm I'm resisting the urge to go into another favorite topic of mine, which is I don't even know if we really have a um an inventory shortage in terms of actual units out there. I do. >> Yeah. I I think we have a shortage of available inventory um that is not owned by investors um you know, mom or pop Airbnbers or or or big institutions. Um and and and I personally think that needs to be addressed. I get into problems when I start talking about this because the libertarians and free marketers come out of which I am very like-minded with. But I I I so I don't want us to necessarily rat hole on that that right here. But um uh yes, building more uh homes will will take some of the pressure off and some some markets that makes a ton of sense. But I think a really big question that needs to be addressed is does it make sense for all this inventory to be locked up away from the average aspiring family home buyer who just wants a roof over their head? >> Well, I will tell you this. uh the all the institutional investors that bought single family homes, I think they they're not that while headline wise it gets a lot of people I rate. I think it's what 1 to 4% of the of the of the outstanding market. >> It's a small amount of the of the city market, but it it plays >> the marginal buyer. It's the marginal buyer. So, you're getting rid of the marginal buyer. I suspect um they were going to take they were going to start to unload these properties anyways because they're going to because they're they're going to start losing money as the >> and that's why it was so dumb to let them in because we knew that if they got distressed they could dump a crap ton of properties in a very short period of time and crater the market >> and I think that's that's probably likely to happen unless there's some backroom dealing and that this you know shutting them out of the market is then we again I said it on on I said on the the proposal yesterday, the devil's in the details, but politically it's smart. If there's some sort of deal where this is a backdoor bailout for these guys, that's a problem. I have a problem. We don't know that yet. I'm not saying that's happening, but that I'm already starting to be conspiratorial. >> But but I don't even think it's conspiratorial. I think it just makes sense. These guys finding themselves underwater on a large percent of properties, they go to the administration and say, "Look, we're going to dump these things unless you cut a deal with me." Right? And and again, I'm just like, this is the deal you made with the devil by letting it in in the first place. >> Correct. And and the uh Airbnb folks, um they that was a that that I live on Maui and that's been a problem. Yeah. >> For lot, you know, a lot a lot of people buy them and rent them out. Locals have to compete with that and they can't find affordable housing. >> The cycle takes care of them, too. uh you know the economy goes down, they can't cover their mortgage, their costs are rising, they you know the rents are declining. We're hearing the stories of Airbnb properties becoming distressed. So the market gets rid of them too. Uh you know, >> that's why I'm saying let it clear. >> Let it clear. Let them out. Yeah. >> All these people who bought uh you know, investment properties uh in vacation areas, let them lose money. Let them sell, you know, down 50%. So, a local Hawaiian can buy a house that's not, you know, that's really worth 600,000 that they're listing for 1.2 million. Yep. Let's go, guys. Let's let the cycle happen. >> Yeah. All right. Well, it seems like you and I are real clear on that. I'm sure some people watching may have differences of opinions. And folks, I am going to do I I am going to do a show at some point in time to do a deep dive into this topic. I know maybe I'm grabbing a third rail or whatever, but it's it's something needs to happen there. the the current status quo uh is is is not working, I think, in the interests of the people that we care about most, which are the people who need to live in these ho houses. So, we'll like it or not, I'm I I'm I'm I'm going to do a show on this at some point soon. Um all right. Um Ed, well, look, we're we're up here at the hour. Um it's always such a great discussion with you. Thank you so much for coming on. Before we start wrapping up, is there anything else that's really burning brightly on your mind that I haven't been smart enough to ask you about yet? >> Uh, no. I just uh I'm one thing I'd like to address is the lack of data due to the government shutdown. Uh, this has been annoying us. Um, I don't want to get conspiratorial, but you know, we just looked at some data today on the housing market starts and they still don't have November and December data. They the last data point is October. So, >> we're we're wondering why this is such a problem to get the data. Uh, it's really it's a little concerning and they they a lot of the data that was supposed to come out this week has been pushed out till next week >> or February. I'm just I I just think the government needs to be more transparent on the data because what we don't want is all of a sudden we're rolling through into February and all of a sudden the markets all at once realize the data has been really bad but we didn't know it and then you know we have we have we have a real velocity volatility problem that can crack markets hard. It's better to have markets discount problems over time than all at once. >> Yeah. Um and I think you noted that uh every employment report that we've had over the past year has been revised downwards afterwards, >> right? So there is a real risk there. You go through a blackout period measured in months or a quarter, whatever, and then you get the quote unquote >> adjusted numbers and everyone realizes, oh my god, it's way worse than we thought. >> Yeah. So that that's one thing that's been a I'm a stickler for, you know, looking at government data. we did during COVID and when there's less data, it annoys me and it makes me not trust what's going on. That's all. >> Okay. All right. Um well, look, um I'll I'll try to resist sort of the conspiratorial part of it yet. Honestly, uh when it comes to government reporting, especially the BLS, I I I am kind of in the camp of like unless they prove it's nefarious, I think it's just incompetence. Um but we'll see. Statistically, it's incompetence for sure. >> Yeah. Yeah. Um, all right. Well, Ed, like I said, fantastic discussion. Oh, and by the way, as the new data comes in, obviously we'll have you back on the program here, and you can you can give us the audible updates as you learn more. >> Yeah, absolutely. I I I last year I did I did a lot of podcasts, but I I spread them out because things don't change that quickly, >> and I don't, you know, want to talk about something I just talked about last week. But I suspect 2026 there'll be a lot of fastmoving variables we need to talk about. I expect my podcasting to go up just because there's going to be more to talk about. That's my prediction. >> Okay. Well, I I kind of selfishly hope for that only because I really enjoy talking with you. Um and I think I did this last time, but just do it again here. You've got an open invitation to come on here, Ed. So, as this the situation in real time unfolds to the extent that you see something and you really want to get the message out on it, you know, I'm going to reach out to you periodically, but in between those those outreaches, feel free to ping me and say, "Hey, I got something to say." And you can come on anytime. >> All right, Ed. Well, look, um, like I said, I always enjoy talking with you. Looking forward to talking with you more in the future as events develop. Um, we're now at the most important question of the discussion. For people who would like to follow you and your work in between now and your next appearance on this channel, where should they go? >> You can follow my daily commentary on X at Dowed Edward. Also, if you are interested in buying some of our research, economic research reports, especially the China one we just released today, it's at financologies.com and uh we have a product page. And secondly, and thirdly, I guess I should say, uh, if things get really weird and there's there's talks of banning X in the UK and Australia, I have a personal website and we can stay in touch that way, eddow.com. >> All right, fantastic. And Ed, um, when I edit this, I will put up your exhandle and the, um, the websites that you just mentioned there, folks. I'll also put the links in the description below this video so you can get there in one click as well. Um, all right, Ed. Uh, well, look, um, really look forward to having you back on again soon. Folks, please show your appreciation for um, Ed sharing both his insights um, so specifically and so generously with us. Uh, so to to help me thank him for that, please hit the like button, then click the subscribe button below as well as that little bell icon right next to it. Um, if you would like to get um, some professional help in u, figuring out how to position your financial portfolio for the type of year that Ed sees coming. Um, highly recommend you get that help from a good professional financial adviser and very importantly one who takes into account the macro considerations that Ed and I have talked about. A lot of them don't. Um, if you don't have a good one who's already doing that, consider talking to one of the financial adviserss that thoughtful money endorses. These are the firms you see with me in this channel week in and week out. Uh, so to schedule a free discussion with them, just fill out the very short form at thoughtfulmoney.com. Only takes you a couple seconds to fill out. These consultations are totally free. There's no commitments involved. It's just a service these firms offer to be as helpful as they can to as many people as possible. Uh, last reminder and then Ed, I I this is reminding me of a question I didn't ask you that I'd like to squeeze in here at the end. Um Andy Sheckchman's very generous offer to this audience of selling junk silver for just $1.35 above spot while supplies last is still going on. Supplies are still lasting, at least for the time being. If you haven't taken advantage of that yet and would like to talk to Andy and his team about potentially doing so or about any other precious metals purchasing questions you might have, just fill out the very short form at thoughtfulmoney.com/bygold. So Ed, I know that you have talked a lot recently about the movement in the precious metals. I know we're right here at the very end of the conversation. I apologize for not asking this sooner. Sort of parting words to the audience here. What do you think is driving it? And do you think the momentum is going to continue into 2026? >> You know, a lot of people think it's inflation driving it. Is it when we were inflating gold kind of went sideways and so didn't do anything? It's when uh I think there's fear of systemic issues that are brewing that smart money and the mark the gold and silver start to discount deflation actually and we saw that going into the 20089 crisis and we're seeing that again there seems to be a distrust of paper assets and uh sovereign obligations especially uh in in you know Japan and Europe. So gold and silver are telling you there's trust issues and that there's a demand for real atoms rather than paper. And uh I suspect that's why we have such a dire forecast going forward for the next two years is that inflation like we saw the money printing we saw the credit creation we saw the now investment that we saw usually ends up in some sort of deflationary bust and it happens quick. I I want people to be reminded that uh oil and commodities and inflation were ripping up into the uh August time frame of 2008 before everything collapsed. I mean there oil peaked in June of08. Uh you know inflation was showing plus you know three, four, five, six% going into August and then it all went deflationary. That's what happens. It can happen quick. >> Okay. So, just in terms of what that means for precious metals prices, um, here's sort of what I'm taking away. You tell me if I'm taking away the right things. Um, probably likely to be volatile in 2026 just because it's a volatile asset class anyways, but you also expect more volatility. >> Um, the trust issues probably going to get worse, meaning people are probably going to want something more that they can trust uh, even more and they're going to prefer atoms over bits. So price momentum probably on average going to continue throughout 2026, but be wary that if indeed there is a big assetbased draw down, they'll likely go down with it. Um, as they have in previous crises, largely because I mean if it happens quick and violently, you get margin calls and you're just just force selling of anything that has value. Now in in the GFC oil stayed down for a good time but um the precious metals got whacked but then they recovered pretty quickly. >> Yeah. >> Do you expect the same thing here? >> Yeah, I expect the same thing. So what I if there is a if there is some sort of dislocation we have what we think is coming a stock market correction and global uh repricing of assets. Again it's not the end of the world. Gold may and gold and silver may have a correction but they will go to new all-time highs. The long-term price target we have for gold is 10,000 by 2030. Uh so there may be a draw down. So the key to gold and silver is own the physical. Don't be levered. Don't have you don't employ leverage. Don't employ futures. Just own it and hold >> and if it goes down you know 25 30 40% in any kind of you know systemic margin call buy more. Uh that's kind of her advice. But you don't don't get shaken out of your your atoms. the atoms are going to be part of the new monetary system that we don't think comes this round, but maybe five to 10 years from now. It you can tell gold and silver are going to be part of the new system because the central bankers are telling you that they made money gold again. It's tier one capital. So, I don't think that the crypto guys are going to be so happy with that. I think, you know, the pet rocks are making a huge comeback. [laughter] >> All right. Well, thanks so much. Uh again, I'm sorry for squeezing that into the end. And next time you come on, Ed, if there's more you want to talk about in that topic, I'll give you a lot more time, right? >> But thanks so much. And again, folks, if that's inspiring you to want to get into the precious metals if you're not in them yet, or to add to your current positions, uh again, feel free to talk to uh Andy's team at Miles Franklin. And to do that, you just fill out the very short form at thoughtfulmoney.combygold. Uh Ed, can't thank you enough. Uh, happy new year and uh, look forward to seeing you when you're back on soon hopefully on this channel. >> Happy New Year. Thank you so much, Adam. >> All right, and everybody else, thanks so much for watching.