Markets Tank As New Fed Chair Chosen, How Long Will Crash Last? | Danielle DiMartino Booth
Summary
Precious Metals: Gold and silver saw a sharp selloff, with the guest framing it as a tourist washout that could be a healthy reset if fundamentals improve.
Industrial Demand: The outlook for silver and related metals hinges on a sustained manufacturing rebound and marginal buyers (e.g., China/India), with restocking visible but renaissance uncertain.
AI Bubble: The guest argues AI spending is increasingly reliant on leverage, with pressure mounting as private credit tightens and examples like Microsoft and parts of the Mag 7 underperform.
Private Credit Risks: UBS’s 13.5% default-rate call highlights stress, especially in software-exposed loans, which could constrain financing for AI and broader growth.
Fed Policy: Anticipated shift toward disinflation management, potential rate cuts under Kevin Warsh, and balance-sheet reduction pose a tightening backdrop despite policy easing signals.
Manufacturing Rebound: ISM popped on restocking, benefiting equipment and machinery, but global PMIs and layoffs abroad temper the case for a durable industrial upcycle.
United States: Despite global concerns, the guest still views the U.S. as the preferred market relative to weak growth elsewhere and recent EM selloffs.
Defensive Positioning: With 2026 framed as a shakeout year, the guest favors defensive stances (e.g., utilities long/financials short) amid rising office delinquencies and tighter financial conditions.
Transcript
2026 is the year of the shakeout. There will be places to hide. It's just they'll be fairly defensive in nature. UBS came out and said private credit could see a 13.5% default rate just [music] today. The the speculation that the AI bubble is not sustainable because it now relies on leverage. The speculation's gotten even more heated. It's going to be much more difficult to access that leverage that's needed to sustain spending in AI. And that's exactly why they took Microsoft to the woodshed last week. We're in the middle of a massive selloff in gold and silver. What is happening right now? What is next? Is this the beginning of a bigger crash still to come? Or is this it? Is this the floor? Gold is now back towards $4,600 an ounce and silver is now $80 an ounce, much lower than its highs just a few days ago. We're also in the middle of a partial government shutdown. So, what's next for the labor market and economic growth? What's next for the funding bill? Kevin Worsh recently was nominated as the next Fed chair by President Trump. So, we'll find out what his next moves are likely going to be on [snorts] his first day of the job. Danielle D. Martino Booth, CEO of QI Research, is here with us to break all of this down and give us her outlook on the economy and markets. This video is sponsored by Kowi. It's a fully regulated platform that lets you trade on real world events from economic data to political outcomes. Sign up and use my code lin link down below or scan the QR code here and new users will get $10 to your account when you trade $10. Traders can put money down on their favorite teams, events, elections, and more in all 50 states, including California and Texas and over 140 countries. And don't forget, this coming February 8th is the Super Bowl. Plenty of opportunities to trade on that event. Welcome back, Danielle. Good to see you. >> It's great to see you again as well. I want to start with uh gold and silver market news first before we talk about the Fed. Uh I know you have a lot of comments about the Fed, so we'll get to that in just a minute. The fact that silver is now trading at $80, down from $100 just a few days ago, it is down exactly 40% since last week. A huge wash out. And gold is down. Yeah, gold's down 15%. >> Uh tell us what's happening. I mean, you kind of called this on my show. You said there may be tourists in the space that were fomoing in at the top. What's happening right now? >> So I I I'm if if I had to guess and again um you know this this was another one of those weekends where we watched where we watched Bitcoin move around not so much because we were concerned about the price of Bitcoin but to get a feel for risk appetite or lack thereof. So seeing it seeing it break down to 76,000 was uh was something else over the weekend. Um, but I think that this could be a healthy long-term development for precious metals. And the only reason I say that is because to the extent that there are tourists, as I like to call them, people who are roving speculators, whether it's um GameStop or or silver, and they're just there to catch the ride, to to play on the momentum. to the extent now that they've been washed out of this trade and that they're going to go look elsewhere, then I think that that could be uh a healthy underpinning for the market. >> And uh you have to recall just previous price action. So this is what happened in 2001. We had silver topping and falling about 40% um and before it plateaued and then went down all the way uh 70%. Uh same thing happened. I mean, 1980 was was a rare one-off case, and it just it just it it just seems like every time this has happened in the past couple times, uh, silver has corrected a lot more than 40%. But we're already there. So, uh, are there any financial indicators you're looking at to maybe gauge where the floor may be? I mean, we're not picking tops and bottoms here, but just sentiment indicators that you may personally follow. Well, I mean, at this point, you back out to at least I do. I you back out to the fundamentals and ask yourself whether there are any fundamental whether whether whether there's fundamental support going forward and and that almost always brings you to the subject of of of the marginal buyers whether you're talking about China or India. uh whether or not there is kind of a substantial enough industrial manufacturing renaissance on a global level that would substantiate that kind of of of demand. Um we're not seeing it yet. We're certainly seeing um some signs of restocking, rebuilding here in the United States, and that's that that's a positive. We've been looking for a green shoot, any green shoot on the fundamental macro level. Uh but again, I'm I'm going to wait to see until we see a little bit more support for why people use uh industrial metals. I'm I'm speaking of silver and its industrials uh the industrial role that it plays. Ditto for copper. And as as for gold, I I think that that brings us actually ironically to the to the discussion of Kevin Worsh. Let yeah we'll talk about the Fed in just a minute but what will drive gold and silver fundamentally this year up or down? >> Well well as I said this this is a remains to be seen kind of a scenario. We we have to wait and see if there's going to be a manufacturing a sustainable escape velocity type of manu manufacturing rebound on on just a global basis, not just because stock stocks have been uh depleted to the to to this um extent that they have here in the United States inventory-wise. I'm speaking >> what do we know about Kevin Walsh? Let's talk about the Fed. Now he any Fed governor or uh chair rather uh incoming chair is going to have to deal with the fact that inflation has been picking up and if they lower rates which is what the Trump administration has suggested that they should do. Let's put it that way. Um they may risk upsetting the Trump administration ironically if inflation goes out of control. How does the Fed combat this this dichotomy here? So I think that given the the the recent movement that we've seen in services disinflation, the weakness we've seen in hotel rates, um plumbing below the 1% line over the weekend in trueflation, TRU, uh I think that that right now the Christopher Waller descent in favor of lowering interest rates is going to prove to have been preient and that that potential chair WH if he's confirmed um will not necessarily be battling inflation, but battling its its evil stepsister, disinflation. Um, and the fact that he wants to try and shrink the Fed's balance sheet at the same time. I think I I think I think David that his challenges are not going to be on the price pressure front, but I think that they're going to be at the opposite end of the spectrum unless we start to see a lot of private sector job creation. And I mean a lot a lot to offset what's happened at the federal and now is beginning to happen at the state and local level of spending here. How likely can we see Kevin Wars repeat Jerome Powell's hesitance hesitancy or reluctance rather to to cut rates? Uh what do we know about him? He's a lecturer at the Stanford Graduate School of Business. He was per uh he was previously um economic adviser uh to the Congressional Budget Office. um he he knows Scott Percent um and he you know he's he's had a career on Wall Street and um maybe just help us figure out what his style is of governance if we want to call it that if we if you were to speculate. >> So I um I like the way that that Kevin Worsh once characterized quantitative easing QE. He once called it reverse Robin Hood and that means that he has a a deep appreciation for what QE does and for whom QE works. So um I I would think that he would come in and lower interest rates. I think that that would be a first order of duty if indeed the the Powell Fed is to stand pat at the March at the at the March meeting. Uh but it's but I I would take it one step further and go to his Wall Street roots that you mentioned and and ask the street, ask investors, ask the economy if they can withstand the um the hybrid form, the um of tightening that you're talking about when he's talking about rationalizing the scent. That's the size of the Fed's balance sheet because markets will perceive that as being a form of tightening and indeed it was the announcement of Kevin Worsh that that that really set off the decline in in the precious metals complex. >> I just want to point something out to you. This is from Koshi as a prediction market and I it just traders are placing a 97% probability that the Fed funds rate after March will stay above 3.25% 25% 90% above 3.5. We're at 3.5 now. Um, is this kind of in line with what you're expecting, Danielle? >> Unless we have something of a calamity and now that we we don't even know when we're going to get the next payroll report, if this Powell Fed sticks to its DS and says, "Boy, gee, we're um we have a deficit of official data on our hands. We're just going to have to sit tight." Then I I I would think that that would that that would be a correct prediction. again, unless we see an end of the earning season with a lot more in the way of announced layoffs. And we did just come through another wave of layoffs in the month of January, and we have yet to get through kind of the second half of this earning season, which is when things can get even diceier. Do you think uh Treasury uh Secretary Scott is going to enact more fiscal stimulus in lie of monetary stimulus if Walsh stays packed with the uh we're you know it keeps the Fed funds rate where it is for for the next couple of months. >> Um I'm not so sure that that there is the ability to push through with with fiscal stimulus. Um I I think that he will hope that that the June meeting will start big with Worsh possibly cutting by 50 basis points for that first move and possibly using his former skills as somebody who sat on the Federal Reserve board um to corral the doves and get enough of a consensus to push through with a with a larger rate cut than what's expected at that June meeting. I think that that could be a good way for him to um for worse to come into office if indeed Powell does stand pat uh through the end of his term. >> Okay. And the fact that traders are uh predicting that Fed funds rate the Fed funds rate isn't going to move much. I suppose that indirectly implies that the stock market isn't going to move much in either direction one way or another or at least if it goes up the Fed uh the Fed funds rate doesn't need to come down. Is that more or less in line with your expectations as well? Yes, absolutely. Because again, if we're talking if if we're talking about pre-POW and after Powell, this is like BC. Um, you know, before Christ and after uh if if you're talking about before Powell leaves, he's certainly been one dimension to to to make mention of easy financial conditions as being um reason for the for the Fed to not be overly loose with monetary policy. And to the extent that we have stocks perched up at or near all-time highs, that is going to be seen by him as as licensed to remain in a holding pattern until Worsh comes into office and says, you know, hopefully hits the heads of the members of the committee up up by the head with a 2x4 and says, you know, we're if if we are if we're beholden to our to both of our mandates, we're certainly failing on the employment one. >> Okay. And then markets are wondering uh how independent the Fed will be generally speaking um under Worsh. So can we can we offer some insight there? Again going back to his Wall Street roos, he also mentored under Draen Miller. Uh what does that tell us? >> This is the um David, you're asking the biggest question. You you are you are you are pointing out the biggest elephant in the room. Um, you know, we're all familiar with the idea of I'll do or say anything to get the job. But then the question becomes one of will he stand firm, will war stand firm and insist that the Fed uh remain independent in its policy as opposed to there being a potential partnership liaison of any kind with the Treasury Department, which would not be considered to be bond friendly. that that that something something of that sort would certainly have the potential to push es especially long-term bond yields up and you know to to the extent that we thought that 4.25% 25% might have been an interim ceiling. We've certainly broken just a few basis points north of that as things stand. >> Well, the yeah, the the the the yield is going up. The yield in Japan has been spiking. By the way, let's talk about Japan for a minute. JGP is at all-time highs. Last week were multi-deade highs. Does that signal anything about what may happen to the US as well? >> You know, it's um it it's hard to say. It's certainly a global reflection and and we must remember that Japan remains a very large holder of US treasuries along with along with China. uh if you aggregate holders outside of the United States of treasuries that's been coming down for years of course and we know that but um but there is the question out there if there's yield at home what does that imply about what we buy abroad and so that's something that we're obviously going to continue to follow closely that being said um the Japanese economy is not fairing very well with inflation where it is and there's going to be a lot of tension between fiscal and monetary policy makers there going forward. >> The uh bond yield on the Japanese JGBs rose partly because uh the prime minister of Japan announced drastically different fiscal measures that may push up the debt and deficit levels of Japan. Some say that is foreshadowing what may happen to the US 10-year and 30-year. If the long end of the curve rises, can we expect the Fed to institute some sort of yield curve control? >> You know, I mean, nothing is out of the realm of possibilities. I don't know how easy this Congress is going to be given the razor thin majorities that they have. I don't know that this Congress is going to be amanable to pushing through any sort of major fiscal stimulus ahead of these midterm elections. That is a that is a huge factor um in 2026. That's something that that the Democrats are going to be very cognizant of, not not not throwing any kind of a bone to the GOP to make it to make the midterms easier for them. So, um it really does, I think, hinge on the outcome of the midterm elections. And of course, that's something we won't know until much closer to November. >> Well, let's talk about uh we've already discussed inflation. Let's talk about the labor market. This is a oped from the Hill. Uh, for years I opposed universal basic income, but as a headline suggests, the author thinks that the US is headed for mass unemployment. Something fundamental has shifted, pretending otherwise is nothing short of denial. The AI revolution is here and it's gutting entire sectors with hurricane force. So, this author is pinning uh more unemployment on AI. That's not really a new narrative, but can you offer any new insight that could potentially support what the author is suggesting? >> So, David, I'll say this much. Um, you know, I've read so many versions of the effect of AI on the workforce. I'm I'm spinning. >> Um, I will say that there was a Harvard Business Review article that came out over the weekend alongside that Hill OpEd, which I did read that said um that said many companies are hiding behind AI to push through layoffs that they needed to push through regardless. And the the potential is certainly there, but we have to get past now and then. And companies have to actually learn how to use a to use AI as opposed to just saying we're going to they there's there's there's a gulf between adoption and execution that we have to get to. And otherwise, you see these bizarre, surreal headlines that say, "We slash this many jobs because of AI, but we're rehiring because we, you know, we can't keep the lights on." So if if we continue, David, to see layoffs rise, if there is with the government shutdown, to make just one example, if we continue to introduce new and fresh sources of uncertainty into the operating environment for corporate America, then the CEOs and the CFOs will continue to look for ways to cut costs. And as things stand right now, that is the danger. Again, I go back to the drum that I beat constantly. We must see private sector job creation, which means that the first step is to to finish seeing private sector job destruction. And regardless of the cause, if we get there, then we're going to have a sustainable escape velocity US economy. If we don't get there, then we're talking about the next presidential election. And the idea of something like a univers universal basic income and stimulus that was as of the same magnitude as what we saw postco that indeed ignites inflation inflation that's very difficult to control that I hope is is a fate that we're not discussing anytime too soon. >> Now what is just segueing here what is generally your view on universal bas basic income support? Don't support. >> Well I I live in Venezuela so I would have to say a great big don't support. >> [laughter] >> Fair enough. But but the issue >> socialism does not work because you eventually run out of somebody else's money to spend. So I mean uh but but my my point to you from putting on my dismal scientist hat, speaking as an economist, David, I think the risk there is that the pendulum swings too far in the 2028 presidential election and that we end up with something like a universal basic income. uh that that does change the backdrop for good of interest rates and interest rate policy that does set a much higher floor on on what inflation is going to be going forward. And again, I I really hope we we don't have to have too many serious discussions about this because it scares it scares me to death. >> This is well, this is just some futurist talking here. Elon Musk said that in 10 to 20 years, work will be optional. Okay, we're not here to [laughter] Maybe he's right. Maybe he isn't. But if he is right, Danielle, would there be a time in which you look at the labor force participation rate differently? In other words, maybe a much lower labor force participation rate or perhaps even a higher unemployment rate if people are seeking jobs in that environment may not signal economic growth. Could that be possible? >> I mean, could have, should have, would. I um >> would you would you look at other stats to gauge employment health or labor market health in that scenario? >> No, David. Actually, I think the labor force participation rate is one of the um is and should always remain your go-to gauge of economic dynamism. I don't foresee a world in which the United States remains the quote unquote economic superpower at the same time that we have the labor force participation rate theoretically go under 50%. I I just I I don't see how we have uh how we maintain our global economic supremacy under such a scenario. >> Okay. You published the daily feather earlier today. I encourage everyone to check out the daily feather substack. just walk us through some of these charts on on the manufacturing stats here that uh the charts show and uh what's what kind of trends you're following right now. >> So the bottom line on our feather today is uh we were in front of and predicting a pop in the ISM manufacturing report which which is indeed exactly what we saw. We'd seen uh we we had seen a d kind of a divergence between current levels of inventory and the need to restock, the need to rebuild inventory and the gulf that had opened up between them suggested that either the companies were going to go out of business or rebuild their inventory. If you're making things, if you're making nuts, bolts, the things we used to call widgets, and and you see that you've depleted your resources, your stockpiles to the extent that your production line is going to stop, you have to rebuild. And so the question then becomes one of is this going to be, as I said, a restock or a renaissance. And of course, we preferred that there would be some massive industrial renaissance. That's not what the underemployment especially figures are telling us at this juncture. But again, we may see several months of of green shoots in the factory sector in the United States. And indeed, if you looked inside of the ISM report itself, it was industrial metals. Um it it was equipment and and machinery manufacturers. Those were the kinds of areas that we were seeing growth uh at a at at a subindustry specific level to suggest to you that manufacturers were no longer able to manufacture whatever it was that they're that they do manufacture and that they simply had to rebuild. Indeed, customer inventories within the ISM report which popped above the 50 line were south of 40 38.7. That's a very very low customer inventory level. meaning we we're going to have to get back get get that back up to a at least a normalized level. But again, the question is, is this sustainable into the second and third quarters? Remains to be seen. >> Going back to your disinflationary comments earlier in the interview, have you noticed in the past a relationship between the ISM and uh manufacturing index and inflation CPI? Well, you could certainly see uh pricing power in the industrials complex, which is what we were very specific to point out. So, you could have a a a a period of time when the people selling raw materials, if you will, gain the upper hand with pricing because there their their customers simply need what they have to sell. But again, I will go back to follow through and whether or not it is sustained. I know I sound like a broken record or even worse an economics professor, but it has to be a sustained move and I don't know looking at every other country on earth that are that also reported a PMI today and we had global PMIs reported all the way around the world. The the look of sustainable global manufacturing rebound is simply not there yet. We had Bosch over the weekend or maybe it was Friday. Bosch ma massive German manufacturer report 20,000 layoffs a large Italian industrial um report large layoffs this morning. This this all has to stop in order for me to right now we we we've said we're saying this is a green shoot and it could last for a few months maybe even a quarter but we have to see it sustained into the second half of the year. So this brings me to my next question on American assets overall. Looking at assets and market performance around the world and economic data from around the world like you just talked about. Is America still the go-to place for investors? Do you think this article from CNBC earlier in the month January 20th says this is sell America US dollar treasury prices tumble? Gold spikes. This was before gold and silver had this massive sell off that we talked about. And so people were writing about how the US is no longer a reliable trading partner. investors are seeking yields elsewhere because of this lack of reliability. Is America, this is my question to you, is America still the pre-minent investor location jurisdiction do you think? >> I I think for the moment the answer is yes. >> I do. >> Okay. Especially compared to the data that you talked about elsewhere. >> That is correct. We're not seeing um a surge of growth in other developed economies. Uh and in fact there was there was a big sell-off in the emerging markets that accompanied that of the United States. It still appears that when the United States sneezes the rest of the world gets a cold. >> Yes. And just going back to uh markets and um your your your portfolio allocation now to finish off. uh you had told me previously that you expect 2026 to uh uh focus well investors to focus on equal weighted S&P and dividend stocks um and the AI bubble uh you spoke to me about last time required unsustainable borrowing. Can you just comment on these trends and whether or not you still believe that the AI bubble is unsustainable? So, um, there's there's certainly been a lot. In fact, you we're recording this today on a day when private credit is getting absolutely clobbered, especially private credit that's exposed to software. Um, so the the spec the speculation that the AI bubble is not sustainable because it now relies on leverage since we last spoke is the speculation's gotten even more heated. And in fact, we're seeing continued underperformance in some of the MAG in in some of the MAG 7 compared to uh kind of your equal weighted S&P type of candidates. So, we're certainly still seeing evidence of that. And the questions in fact are multiplying because of some of the bloodshed. I think UBS came out and said private credit could see a 13.5% default rate just today. um if if these things come to pass, then it's going to be much more difficult to access that leverage that's needed to sustain spending in AI. And that's exactly why they took Microsoft to the woodshed last week. >> Um any assets you're particularly excited about this year that you think 2026 could be the breakout year for? Well, look, um, you know, if the United States is going to be investing billions and billions and billions of dollars in rare earths and we're going to be supporting technology to get those rare earths out of the ground without destroying the environment and and and we're going to be making an investment in that, I think that that's certainly a place to be. That $1 13 billion investment today was a nice little headline. Um, but but I I kind of stand by the idea of becoming more defensive in your posture. kind of that idea of utilities at one end, long and financials at the other, short. We're seeing huge increases in commercial real estate transaction volumes. That's why TRE today announced that office the office delinquency rate had risen to a record high um in the month of January. So, we have to pay very close to what we're seeing on the ground. And if 2026 is the year of the shakeout, there will be places to hide. It's just they'll be fairly defensive in nature. And the major investment theme for 2026, for example, in 2025, I spoke to uh the conference board, for example. Their survey uh for investors and CEOs alike highlighted that 2025 was the year of uncertainty that dominated sentiment and headlines, uncertainty about trade, geopolitical risk, uh the AI trade and so on. Um I'm talking about global trade. Uh so what will happen for 2026? Will those themes still be remain dominant or are you looking at something else? Well, I mean, the flip side is that we could see certainty that we're all going to hell in a hand basket going going into the US midterms. I hope that's not the case. Um, but I um in other words, uh, and hope is not a strategy. But one would hope to see a little bit more functionality as opposed to dysfunctionality in Washington DC. If that doesn't end, then I think the uncertainty will continue to paralyze corporate America and that's not a good thing. Well, can can we expect maybe a um divided government after the midterms, which some economists argue may actually be better for growth, not worse? >> Potentially that's the case, but it's certainly not going to get you the kind of stimulus spending you would have to have as a backdrop to launch universal basic income. You know, make UBI great again. >> Uh no. And I I as a fiscal conservative, I would certainly agree that that maybe gridlock would be the best thing in 27 and 28. I don't think we'll get UBI in Trump's term personally because he remember he promised us $2,000 ter uh tariff dividends and then he said he forgot he said that. So I I don't I don't I don't think that's coming. Anyway, Danielle, where can we follow you? Tell us what you're working on next. >> Um I'm writing a thesis on going to hell in a hand basket in 2026. I'm kidding. [laughter] I not writing that at all. >> I wouldn't be surprised if that was the title. That's a catchy title, by the way. >> That is that is a catchy catchy title. from uncertainty to certainty. Uh, no. Uh, please come to dartinab booth.stack.com. We publish every day. If you're an institution and you run money, come to Qi Research. We publish eight times a week. We've got a hop and Bloomberg chat room. Love to have you join. Uh, and if you don't follow me on the platform formerly known as Twitter, please do so at D Martino Booth. >> Got it. Thank you very much. We'll put the links down below and uh, feel free to follow Danielle in the links down there. Thank you very much once again. I hope to speak with you again soon. Take care for now. Thanks for watching. Don't forget to like and subscribe. Follow Danielle on the links down below. And don't forget to use my code lin when you sign up to Koshi. New users will get $10 when you trade $10.
Markets Tank As New Fed Chair Chosen, How Long Will Crash Last? | Danielle DiMartino Booth
Summary
Transcript
2026 is the year of the shakeout. There will be places to hide. It's just they'll be fairly defensive in nature. UBS came out and said private credit could see a 13.5% default rate just [music] today. The the speculation that the AI bubble is not sustainable because it now relies on leverage. The speculation's gotten even more heated. It's going to be much more difficult to access that leverage that's needed to sustain spending in AI. And that's exactly why they took Microsoft to the woodshed last week. We're in the middle of a massive selloff in gold and silver. What is happening right now? What is next? Is this the beginning of a bigger crash still to come? Or is this it? Is this the floor? Gold is now back towards $4,600 an ounce and silver is now $80 an ounce, much lower than its highs just a few days ago. We're also in the middle of a partial government shutdown. So, what's next for the labor market and economic growth? What's next for the funding bill? Kevin Worsh recently was nominated as the next Fed chair by President Trump. So, we'll find out what his next moves are likely going to be on [snorts] his first day of the job. Danielle D. Martino Booth, CEO of QI Research, is here with us to break all of this down and give us her outlook on the economy and markets. This video is sponsored by Kowi. It's a fully regulated platform that lets you trade on real world events from economic data to political outcomes. Sign up and use my code lin link down below or scan the QR code here and new users will get $10 to your account when you trade $10. Traders can put money down on their favorite teams, events, elections, and more in all 50 states, including California and Texas and over 140 countries. And don't forget, this coming February 8th is the Super Bowl. Plenty of opportunities to trade on that event. Welcome back, Danielle. Good to see you. >> It's great to see you again as well. I want to start with uh gold and silver market news first before we talk about the Fed. Uh I know you have a lot of comments about the Fed, so we'll get to that in just a minute. The fact that silver is now trading at $80, down from $100 just a few days ago, it is down exactly 40% since last week. A huge wash out. And gold is down. Yeah, gold's down 15%. >> Uh tell us what's happening. I mean, you kind of called this on my show. You said there may be tourists in the space that were fomoing in at the top. What's happening right now? >> So I I I'm if if I had to guess and again um you know this this was another one of those weekends where we watched where we watched Bitcoin move around not so much because we were concerned about the price of Bitcoin but to get a feel for risk appetite or lack thereof. So seeing it seeing it break down to 76,000 was uh was something else over the weekend. Um, but I think that this could be a healthy long-term development for precious metals. And the only reason I say that is because to the extent that there are tourists, as I like to call them, people who are roving speculators, whether it's um GameStop or or silver, and they're just there to catch the ride, to to play on the momentum. to the extent now that they've been washed out of this trade and that they're going to go look elsewhere, then I think that that could be uh a healthy underpinning for the market. >> And uh you have to recall just previous price action. So this is what happened in 2001. We had silver topping and falling about 40% um and before it plateaued and then went down all the way uh 70%. Uh same thing happened. I mean, 1980 was was a rare one-off case, and it just it just it it just seems like every time this has happened in the past couple times, uh, silver has corrected a lot more than 40%. But we're already there. So, uh, are there any financial indicators you're looking at to maybe gauge where the floor may be? I mean, we're not picking tops and bottoms here, but just sentiment indicators that you may personally follow. Well, I mean, at this point, you back out to at least I do. I you back out to the fundamentals and ask yourself whether there are any fundamental whether whether whether there's fundamental support going forward and and that almost always brings you to the subject of of of the marginal buyers whether you're talking about China or India. uh whether or not there is kind of a substantial enough industrial manufacturing renaissance on a global level that would substantiate that kind of of of demand. Um we're not seeing it yet. We're certainly seeing um some signs of restocking, rebuilding here in the United States, and that's that that's a positive. We've been looking for a green shoot, any green shoot on the fundamental macro level. Uh but again, I'm I'm going to wait to see until we see a little bit more support for why people use uh industrial metals. I'm I'm speaking of silver and its industrials uh the industrial role that it plays. Ditto for copper. And as as for gold, I I think that that brings us actually ironically to the to the discussion of Kevin Worsh. Let yeah we'll talk about the Fed in just a minute but what will drive gold and silver fundamentally this year up or down? >> Well well as I said this this is a remains to be seen kind of a scenario. We we have to wait and see if there's going to be a manufacturing a sustainable escape velocity type of manu manufacturing rebound on on just a global basis, not just because stock stocks have been uh depleted to the to to this um extent that they have here in the United States inventory-wise. I'm speaking >> what do we know about Kevin Walsh? Let's talk about the Fed. Now he any Fed governor or uh chair rather uh incoming chair is going to have to deal with the fact that inflation has been picking up and if they lower rates which is what the Trump administration has suggested that they should do. Let's put it that way. Um they may risk upsetting the Trump administration ironically if inflation goes out of control. How does the Fed combat this this dichotomy here? So I think that given the the the recent movement that we've seen in services disinflation, the weakness we've seen in hotel rates, um plumbing below the 1% line over the weekend in trueflation, TRU, uh I think that that right now the Christopher Waller descent in favor of lowering interest rates is going to prove to have been preient and that that potential chair WH if he's confirmed um will not necessarily be battling inflation, but battling its its evil stepsister, disinflation. Um, and the fact that he wants to try and shrink the Fed's balance sheet at the same time. I think I I think I think David that his challenges are not going to be on the price pressure front, but I think that they're going to be at the opposite end of the spectrum unless we start to see a lot of private sector job creation. And I mean a lot a lot to offset what's happened at the federal and now is beginning to happen at the state and local level of spending here. How likely can we see Kevin Wars repeat Jerome Powell's hesitance hesitancy or reluctance rather to to cut rates? Uh what do we know about him? He's a lecturer at the Stanford Graduate School of Business. He was per uh he was previously um economic adviser uh to the Congressional Budget Office. um he he knows Scott Percent um and he you know he's he's had a career on Wall Street and um maybe just help us figure out what his style is of governance if we want to call it that if we if you were to speculate. >> So I um I like the way that that Kevin Worsh once characterized quantitative easing QE. He once called it reverse Robin Hood and that means that he has a a deep appreciation for what QE does and for whom QE works. So um I I would think that he would come in and lower interest rates. I think that that would be a first order of duty if indeed the the Powell Fed is to stand pat at the March at the at the March meeting. Uh but it's but I I would take it one step further and go to his Wall Street roots that you mentioned and and ask the street, ask investors, ask the economy if they can withstand the um the hybrid form, the um of tightening that you're talking about when he's talking about rationalizing the scent. That's the size of the Fed's balance sheet because markets will perceive that as being a form of tightening and indeed it was the announcement of Kevin Worsh that that that really set off the decline in in the precious metals complex. >> I just want to point something out to you. This is from Koshi as a prediction market and I it just traders are placing a 97% probability that the Fed funds rate after March will stay above 3.25% 25% 90% above 3.5. We're at 3.5 now. Um, is this kind of in line with what you're expecting, Danielle? >> Unless we have something of a calamity and now that we we don't even know when we're going to get the next payroll report, if this Powell Fed sticks to its DS and says, "Boy, gee, we're um we have a deficit of official data on our hands. We're just going to have to sit tight." Then I I I would think that that would that that would be a correct prediction. again, unless we see an end of the earning season with a lot more in the way of announced layoffs. And we did just come through another wave of layoffs in the month of January, and we have yet to get through kind of the second half of this earning season, which is when things can get even diceier. Do you think uh Treasury uh Secretary Scott is going to enact more fiscal stimulus in lie of monetary stimulus if Walsh stays packed with the uh we're you know it keeps the Fed funds rate where it is for for the next couple of months. >> Um I'm not so sure that that there is the ability to push through with with fiscal stimulus. Um I I think that he will hope that that the June meeting will start big with Worsh possibly cutting by 50 basis points for that first move and possibly using his former skills as somebody who sat on the Federal Reserve board um to corral the doves and get enough of a consensus to push through with a with a larger rate cut than what's expected at that June meeting. I think that that could be a good way for him to um for worse to come into office if indeed Powell does stand pat uh through the end of his term. >> Okay. And the fact that traders are uh predicting that Fed funds rate the Fed funds rate isn't going to move much. I suppose that indirectly implies that the stock market isn't going to move much in either direction one way or another or at least if it goes up the Fed uh the Fed funds rate doesn't need to come down. Is that more or less in line with your expectations as well? Yes, absolutely. Because again, if we're talking if if we're talking about pre-POW and after Powell, this is like BC. Um, you know, before Christ and after uh if if you're talking about before Powell leaves, he's certainly been one dimension to to to make mention of easy financial conditions as being um reason for the for the Fed to not be overly loose with monetary policy. And to the extent that we have stocks perched up at or near all-time highs, that is going to be seen by him as as licensed to remain in a holding pattern until Worsh comes into office and says, you know, hopefully hits the heads of the members of the committee up up by the head with a 2x4 and says, you know, we're if if we are if we're beholden to our to both of our mandates, we're certainly failing on the employment one. >> Okay. And then markets are wondering uh how independent the Fed will be generally speaking um under Worsh. So can we can we offer some insight there? Again going back to his Wall Street roos, he also mentored under Draen Miller. Uh what does that tell us? >> This is the um David, you're asking the biggest question. You you are you are you are pointing out the biggest elephant in the room. Um, you know, we're all familiar with the idea of I'll do or say anything to get the job. But then the question becomes one of will he stand firm, will war stand firm and insist that the Fed uh remain independent in its policy as opposed to there being a potential partnership liaison of any kind with the Treasury Department, which would not be considered to be bond friendly. that that that something something of that sort would certainly have the potential to push es especially long-term bond yields up and you know to to the extent that we thought that 4.25% 25% might have been an interim ceiling. We've certainly broken just a few basis points north of that as things stand. >> Well, the yeah, the the the the yield is going up. The yield in Japan has been spiking. By the way, let's talk about Japan for a minute. JGP is at all-time highs. Last week were multi-deade highs. Does that signal anything about what may happen to the US as well? >> You know, it's um it it's hard to say. It's certainly a global reflection and and we must remember that Japan remains a very large holder of US treasuries along with along with China. uh if you aggregate holders outside of the United States of treasuries that's been coming down for years of course and we know that but um but there is the question out there if there's yield at home what does that imply about what we buy abroad and so that's something that we're obviously going to continue to follow closely that being said um the Japanese economy is not fairing very well with inflation where it is and there's going to be a lot of tension between fiscal and monetary policy makers there going forward. >> The uh bond yield on the Japanese JGBs rose partly because uh the prime minister of Japan announced drastically different fiscal measures that may push up the debt and deficit levels of Japan. Some say that is foreshadowing what may happen to the US 10-year and 30-year. If the long end of the curve rises, can we expect the Fed to institute some sort of yield curve control? >> You know, I mean, nothing is out of the realm of possibilities. I don't know how easy this Congress is going to be given the razor thin majorities that they have. I don't know that this Congress is going to be amanable to pushing through any sort of major fiscal stimulus ahead of these midterm elections. That is a that is a huge factor um in 2026. That's something that that the Democrats are going to be very cognizant of, not not not throwing any kind of a bone to the GOP to make it to make the midterms easier for them. So, um it really does, I think, hinge on the outcome of the midterm elections. And of course, that's something we won't know until much closer to November. >> Well, let's talk about uh we've already discussed inflation. Let's talk about the labor market. This is a oped from the Hill. Uh, for years I opposed universal basic income, but as a headline suggests, the author thinks that the US is headed for mass unemployment. Something fundamental has shifted, pretending otherwise is nothing short of denial. The AI revolution is here and it's gutting entire sectors with hurricane force. So, this author is pinning uh more unemployment on AI. That's not really a new narrative, but can you offer any new insight that could potentially support what the author is suggesting? >> So, David, I'll say this much. Um, you know, I've read so many versions of the effect of AI on the workforce. I'm I'm spinning. >> Um, I will say that there was a Harvard Business Review article that came out over the weekend alongside that Hill OpEd, which I did read that said um that said many companies are hiding behind AI to push through layoffs that they needed to push through regardless. And the the potential is certainly there, but we have to get past now and then. And companies have to actually learn how to use a to use AI as opposed to just saying we're going to they there's there's there's a gulf between adoption and execution that we have to get to. And otherwise, you see these bizarre, surreal headlines that say, "We slash this many jobs because of AI, but we're rehiring because we, you know, we can't keep the lights on." So if if we continue, David, to see layoffs rise, if there is with the government shutdown, to make just one example, if we continue to introduce new and fresh sources of uncertainty into the operating environment for corporate America, then the CEOs and the CFOs will continue to look for ways to cut costs. And as things stand right now, that is the danger. Again, I go back to the drum that I beat constantly. We must see private sector job creation, which means that the first step is to to finish seeing private sector job destruction. And regardless of the cause, if we get there, then we're going to have a sustainable escape velocity US economy. If we don't get there, then we're talking about the next presidential election. And the idea of something like a univers universal basic income and stimulus that was as of the same magnitude as what we saw postco that indeed ignites inflation inflation that's very difficult to control that I hope is is a fate that we're not discussing anytime too soon. >> Now what is just segueing here what is generally your view on universal bas basic income support? Don't support. >> Well I I live in Venezuela so I would have to say a great big don't support. >> [laughter] >> Fair enough. But but the issue >> socialism does not work because you eventually run out of somebody else's money to spend. So I mean uh but but my my point to you from putting on my dismal scientist hat, speaking as an economist, David, I think the risk there is that the pendulum swings too far in the 2028 presidential election and that we end up with something like a universal basic income. uh that that does change the backdrop for good of interest rates and interest rate policy that does set a much higher floor on on what inflation is going to be going forward. And again, I I really hope we we don't have to have too many serious discussions about this because it scares it scares me to death. >> This is well, this is just some futurist talking here. Elon Musk said that in 10 to 20 years, work will be optional. Okay, we're not here to [laughter] Maybe he's right. Maybe he isn't. But if he is right, Danielle, would there be a time in which you look at the labor force participation rate differently? In other words, maybe a much lower labor force participation rate or perhaps even a higher unemployment rate if people are seeking jobs in that environment may not signal economic growth. Could that be possible? >> I mean, could have, should have, would. I um >> would you would you look at other stats to gauge employment health or labor market health in that scenario? >> No, David. Actually, I think the labor force participation rate is one of the um is and should always remain your go-to gauge of economic dynamism. I don't foresee a world in which the United States remains the quote unquote economic superpower at the same time that we have the labor force participation rate theoretically go under 50%. I I just I I don't see how we have uh how we maintain our global economic supremacy under such a scenario. >> Okay. You published the daily feather earlier today. I encourage everyone to check out the daily feather substack. just walk us through some of these charts on on the manufacturing stats here that uh the charts show and uh what's what kind of trends you're following right now. >> So the bottom line on our feather today is uh we were in front of and predicting a pop in the ISM manufacturing report which which is indeed exactly what we saw. We'd seen uh we we had seen a d kind of a divergence between current levels of inventory and the need to restock, the need to rebuild inventory and the gulf that had opened up between them suggested that either the companies were going to go out of business or rebuild their inventory. If you're making things, if you're making nuts, bolts, the things we used to call widgets, and and you see that you've depleted your resources, your stockpiles to the extent that your production line is going to stop, you have to rebuild. And so the question then becomes one of is this going to be, as I said, a restock or a renaissance. And of course, we preferred that there would be some massive industrial renaissance. That's not what the underemployment especially figures are telling us at this juncture. But again, we may see several months of of green shoots in the factory sector in the United States. And indeed, if you looked inside of the ISM report itself, it was industrial metals. Um it it was equipment and and machinery manufacturers. Those were the kinds of areas that we were seeing growth uh at a at at a subindustry specific level to suggest to you that manufacturers were no longer able to manufacture whatever it was that they're that they do manufacture and that they simply had to rebuild. Indeed, customer inventories within the ISM report which popped above the 50 line were south of 40 38.7. That's a very very low customer inventory level. meaning we we're going to have to get back get get that back up to a at least a normalized level. But again, the question is, is this sustainable into the second and third quarters? Remains to be seen. >> Going back to your disinflationary comments earlier in the interview, have you noticed in the past a relationship between the ISM and uh manufacturing index and inflation CPI? Well, you could certainly see uh pricing power in the industrials complex, which is what we were very specific to point out. So, you could have a a a a period of time when the people selling raw materials, if you will, gain the upper hand with pricing because there their their customers simply need what they have to sell. But again, I will go back to follow through and whether or not it is sustained. I know I sound like a broken record or even worse an economics professor, but it has to be a sustained move and I don't know looking at every other country on earth that are that also reported a PMI today and we had global PMIs reported all the way around the world. The the look of sustainable global manufacturing rebound is simply not there yet. We had Bosch over the weekend or maybe it was Friday. Bosch ma massive German manufacturer report 20,000 layoffs a large Italian industrial um report large layoffs this morning. This this all has to stop in order for me to right now we we we've said we're saying this is a green shoot and it could last for a few months maybe even a quarter but we have to see it sustained into the second half of the year. So this brings me to my next question on American assets overall. Looking at assets and market performance around the world and economic data from around the world like you just talked about. Is America still the go-to place for investors? Do you think this article from CNBC earlier in the month January 20th says this is sell America US dollar treasury prices tumble? Gold spikes. This was before gold and silver had this massive sell off that we talked about. And so people were writing about how the US is no longer a reliable trading partner. investors are seeking yields elsewhere because of this lack of reliability. Is America, this is my question to you, is America still the pre-minent investor location jurisdiction do you think? >> I I think for the moment the answer is yes. >> I do. >> Okay. Especially compared to the data that you talked about elsewhere. >> That is correct. We're not seeing um a surge of growth in other developed economies. Uh and in fact there was there was a big sell-off in the emerging markets that accompanied that of the United States. It still appears that when the United States sneezes the rest of the world gets a cold. >> Yes. And just going back to uh markets and um your your your portfolio allocation now to finish off. uh you had told me previously that you expect 2026 to uh uh focus well investors to focus on equal weighted S&P and dividend stocks um and the AI bubble uh you spoke to me about last time required unsustainable borrowing. Can you just comment on these trends and whether or not you still believe that the AI bubble is unsustainable? So, um, there's there's certainly been a lot. In fact, you we're recording this today on a day when private credit is getting absolutely clobbered, especially private credit that's exposed to software. Um, so the the spec the speculation that the AI bubble is not sustainable because it now relies on leverage since we last spoke is the speculation's gotten even more heated. And in fact, we're seeing continued underperformance in some of the MAG in in some of the MAG 7 compared to uh kind of your equal weighted S&P type of candidates. So, we're certainly still seeing evidence of that. And the questions in fact are multiplying because of some of the bloodshed. I think UBS came out and said private credit could see a 13.5% default rate just today. um if if these things come to pass, then it's going to be much more difficult to access that leverage that's needed to sustain spending in AI. And that's exactly why they took Microsoft to the woodshed last week. >> Um any assets you're particularly excited about this year that you think 2026 could be the breakout year for? Well, look, um, you know, if the United States is going to be investing billions and billions and billions of dollars in rare earths and we're going to be supporting technology to get those rare earths out of the ground without destroying the environment and and and we're going to be making an investment in that, I think that that's certainly a place to be. That $1 13 billion investment today was a nice little headline. Um, but but I I kind of stand by the idea of becoming more defensive in your posture. kind of that idea of utilities at one end, long and financials at the other, short. We're seeing huge increases in commercial real estate transaction volumes. That's why TRE today announced that office the office delinquency rate had risen to a record high um in the month of January. So, we have to pay very close to what we're seeing on the ground. And if 2026 is the year of the shakeout, there will be places to hide. It's just they'll be fairly defensive in nature. And the major investment theme for 2026, for example, in 2025, I spoke to uh the conference board, for example. Their survey uh for investors and CEOs alike highlighted that 2025 was the year of uncertainty that dominated sentiment and headlines, uncertainty about trade, geopolitical risk, uh the AI trade and so on. Um I'm talking about global trade. Uh so what will happen for 2026? Will those themes still be remain dominant or are you looking at something else? Well, I mean, the flip side is that we could see certainty that we're all going to hell in a hand basket going going into the US midterms. I hope that's not the case. Um, but I um in other words, uh, and hope is not a strategy. But one would hope to see a little bit more functionality as opposed to dysfunctionality in Washington DC. If that doesn't end, then I think the uncertainty will continue to paralyze corporate America and that's not a good thing. Well, can can we expect maybe a um divided government after the midterms, which some economists argue may actually be better for growth, not worse? >> Potentially that's the case, but it's certainly not going to get you the kind of stimulus spending you would have to have as a backdrop to launch universal basic income. You know, make UBI great again. >> Uh no. And I I as a fiscal conservative, I would certainly agree that that maybe gridlock would be the best thing in 27 and 28. I don't think we'll get UBI in Trump's term personally because he remember he promised us $2,000 ter uh tariff dividends and then he said he forgot he said that. So I I don't I don't I don't think that's coming. Anyway, Danielle, where can we follow you? Tell us what you're working on next. >> Um I'm writing a thesis on going to hell in a hand basket in 2026. I'm kidding. [laughter] I not writing that at all. >> I wouldn't be surprised if that was the title. That's a catchy title, by the way. >> That is that is a catchy catchy title. from uncertainty to certainty. Uh, no. Uh, please come to dartinab booth.stack.com. We publish every day. If you're an institution and you run money, come to Qi Research. We publish eight times a week. We've got a hop and Bloomberg chat room. Love to have you join. Uh, and if you don't follow me on the platform formerly known as Twitter, please do so at D Martino Booth. >> Got it. Thank you very much. We'll put the links down below and uh, feel free to follow Danielle in the links down there. Thank you very much once again. I hope to speak with you again soon. Take care for now. Thanks for watching. Don't forget to like and subscribe. Follow Danielle on the links down below. And don't forget to use my code lin when you sign up to Koshi. New users will get $10 when you trade $10.