Stephanie Pomboy: Iran War Creating A Global Scramble For Hard Assets?
Summary
Hard Assets: The guest reiterates a long-term bullish stance on hard assets as protection against ongoing currency debasement and expanding deficits, with the war reinforcing the need for real assets.
Gold Outlook: She explains gold’s recent weakness as largely liquidity-driven (margin calls, select central bank selling) and sees policy responses to credit stress as the catalyst for materially higher gold over time.
Energy & Oil/Gas: She continues to favor energy equities—originally on AI-driven power demand and hard-asset value, not the war—preferring to hold through volatility rather than trade short-term moves.
AI Demand Link: AI is framed as a secular force boosting electricity needs and data center buildouts, indirectly strengthening the case for energy producers over AI equities themselves.
Emerging Markets: She highlights improving EM credit performance, under-ownership, better demographics, and lighter debt loads, suggesting EM exposure for those insisting on “paper” assets.
Credit Risks: Private credit stresses remain masked by fund gating; downgrades rising even in investment grade, and higher refinancing yields against a large maturity wall pose medium-term risk.
Rates & Policy: Markets have largely priced out rate cuts, long-end yields remain elevated, and any oil shock is inflationary near term—leaving a challenging backdrop for leveraged corporates.
Market Sentiment: She views current equity optimism and rising earnings estimates as vulnerable to disappointment, noting indicators like MetLife CDS and widening stress at the lower-quality tiers.
Transcript
And we should be live. Welcome to Thoughtful Money. I'm Thoughtful Money founder and your host, Adam Tagert, welcoming you here for another monthly macro maven mangerie with my great friend, the macro maven herself, Steph Pomboy. Steph, how you doing? >> I'm great. How are you doing? >> Good. I'm not even sure malangeerie is a word, but it's just what came >> it came out, so we're going to run with it. >> All right. All right. Well, look, thank you so much for coming into the studio today to record this with us. Um, we're Sans Willina because you're in the studio. So, sorry everybody. Big wampwamp for that. But, uh, but I'm sure we'll get her again at some point in the future. Um, happy tax day, Steph. >> Oh, gee, thank you so much. I actually have a story about that, but we can talk about it later in the conversation. >> Okay, we'll we'll get there. I was kind of crying tears on uh on X yesterday about it and certainly seems like a lot of other people aren't having a lot of fun this time around. >> Yeah. >> Um but um uh and maybe we can talk a little bit about, >> you know, the country is supposed to be getting record tax refunds now from the >> one big beautiful bill and all that, but maybe they're getting offset by higher oil prices. So we'll we'll talk about that in a moment. Um but there there two things I want to talk with you about here at the start, Steph. Um, and they're both related to the war. Um, and I'll mention both and then we'll maybe hit them in order. Um, so one is I saw you on um, uh, Maria Baromo's show the other day and talking about how I mean you were you were beating the hard asset drum as you normally do and Maria was actually much more >> interested in that than I think they normally are. And so it seems that the war has been um potentially creating this scramble for hard assets. Um, I mean it certainly is with things like oil and helium and whatnot, but this this this war seems to be a really good reminder, one might say wakeup call to the rest of the world that hard assets are finite and you can't always count on current supply chains and um, you know, that that possession is is sort of nine10en of the law as they say and it is better to um, secure your nation's supply of hard assets and I think investors are getting into that space too. So, I want to talk on that theme with you, but I'll mention the second thing I want to talk about with you, which is if you look at the S&P right now, the S&P is essentially saying war's over. >> Yeah. >> You know, uh the entire war discount that was weighing on the market is gone at this point in time. And uh I guess that's a sense, a vote from the market that it thinks this war is going to end relatively quickly and relatively well. So, um, we can tackle those in any order you'd like, but but but maybe let's start with the first one about the hard assets. Um, you have been a champion of them obviously for as long as I've known you, uh, and certainly over the past, you know, year plus. Um, how in your eyes, if at all, has the war changed the game for hard assets? Well, honestly, I think those two questions kind of dubtail nicely because um the hard asset story for me was always about uh current and accelerating monetary, you know, currency debasement. >> Currency debasement. Yeah. >> Basically, so not just here in the US, but globally, especially in the major industrial countries that are the world's reserve currencies. So that has always been sort of my my main interest in hard assets was as a way to pres preserve capital at a time when I thought that the dollar not only was being debased but that that was just barely getting started. That the need to print money would just expand uh geometrically. And I think the war actually underscores that point by, you know, we were hardly five minutes into it before the president came out and said, I want another one and a half trillion dollars for deficit sp for defense spending. So any idea that we were going to somehow restrain spending and you know try to bring our runaway debt and deficits into some kind of um you know universe where we could slowly start to grow into them. Um just went right out the window. Um I think you'll recall when we had the conference in St. Pete, um Tom Hunik was talking about the idea that we'd have this Fed Treasury accord and that the objective would be to get Congress to slow the rate of spending so that the Fed would have the ability to, you know, slowly shrink the balance sheet without creating some unoured situation in the bond market. And I think we all kind of laughed thinking, yeah, so we're relying on Congress to slow spending. That seemed like a a crazy wish. Um but now this war obviously just kind of increases the likelihood that the deficit is absolutely never ever ever going to go lower. Quite the contrary, it's probably going to go higher irrespective of how quickly the US economy is growing. So that's sort of I would answer both of those questions in that in that way. >> All right. You're making me hear that Taylor Swift song in the back of my head, right? The we're never ever ever getting back together. And this is, you know, the deficit is never ever ever uh getting under control here. >> I guess I don't know any Taylor Swift songs. I hate to say, but I'll take your word for it, but no, raise two daughters and you'll definitely have a lot of Taylor Swift. >> Um, okay. So uh what has been interesting through the war g given that right is uh gold has not performed the way that a lot of people assumed it would you know during a global crisis like this. Um I think everybody assumed it would have been the safe haven of choice that the markets would have rushed to and instead the price you know weakened. Now, there was a lot of froth that was coming out of gold from its massive run up to 5,500 or whatever the the the height the top was. Um, and you could maybe argue it held in better than than certainly, you know, than it did once it got to its last blowoff top back in 2011. Um, but a lot of people were scratching their head and saying, "Wow, why is gold going down that up?" Now, it seems like one of the culprits of that in addition to just the froth removal is what I sort of been thinking of is almost like a margin call on a lot of countries where, hey, the price of oil, you know, shot through the roof and they've got to pay for that additional expense of oil with something. And I think you saw a number of countries that basically were kind of forced to sell their gold, which really appreciated to fund the oil here. Um, we've certainly seen things like uh Turkey central bank and I know there have been some other ones as well uh that that had to do it apparently for that reason and also just to to deal with some of the inflation that's going on in their country. Um, a am I interpreting this correctly and b do you see this as to borrow a word from the Fed a transitory issue or is this potentially a reversal of trend of central banks that were buying now becoming net sellers? Well, I guess the the question all depends on how high how long oil prices stay at this level and to what extent they need to continue to, you know, liquidate other dollar positions to uh siphon money toward oil. But honestly in the scheme of things it seemed like the Turkish central bank was a little bit the exception to the rule in that you know broadly speaking other central banks have largely just um continued to accumulate gold albeit probably at a slower uh pace. Um but I also think you had in in general I think about it as just um like you talked about the margin call but not just for central banks but for a variety of players. Um and you did see for example um you know I hate to go into these kind of uh micro statistics but Jane Street for example that has you know big exposure a big player in uh markets that are related to more financial stuff you know private credit etc had apparently a huge exposure to precious metals via various ETFs um and so you know if they're forced we saw this conccomatant situation where you had the strains in private credit really starting to intensify and gold selling off at the same time. And I don't think that was coincidental. Um because if you can't This is why I think you and I talked about this on our last conversation. This is why I'm so focused on the public markets. I I'm aware of the problems and and fully on board with the idea and have been for a long time. I think before a lot of people really thought it was a problem that private credit is far weaker than it's been build, you know, it's been held out as this uh miraculous combination of tremendous yield but safety and you know it just none of it really added up. Um, so but if you can't get your money out of a vehicle that's locked up in these private assets, you have to sell publicly traded securities to raise that that money if you need it. >> You can only sell what's liquid. >> Exactly. And so I think that's why I have said and and I think we saw um that public that public markets will be foggged for the private market sins just because there is no other way to raise capital if you need it. Um and gold turned out to be in that basket. Um and in part as as you noted at the top, you know, it had been sort of the last it's sort of last in first out. So people had just kind of all the Johnny come lately had rushed into gold once it broke 5,000 pushed it immediately up to 5,500 and then when they needed some money all of a sudden, you know, it was a no-brainer to just cut and run from there. So, and then just to continue on this path, um, if you go back and look at how gold performed ahead of and during the great financial crisis, um, in 2007, 8, and 9, I think you're seeing a very similar behavior. And I think this is kind of what you see in most of these financial crises, not just the 2007 89 one, but just going back through history, that gold anticipates the crisis. So it rises well in advance of people recognizing there's a problem. Then when it becomes clear that there's a problem, this unwinding of leverage and the flight to you know the the panicked liquidation of positions leads gold to get dumped in the process. So it then you know gives back some of the gains not all of the gains that it logged on the way up and then it takes off on the policy response to numb the pain of the financial crisis. So I we've seen legs one and two and or we're we've seen one we're in the early phases I think of two and as that credit crisis starts to intensify um the question is you know does gold get foggged even farther or have we reached the point where now the pain will be felt in areas that are more um you know immediately impacted by what's happening with the the private credit stresses. Um, but long term, you know, it's the policy response that is really what's going to drive gold massively higher. >> All right. So, policy response. We um, sorry, >> not at all. I got you all choked up, Adam. Take Do you have some water? Take us >> I do. I do. I've had this cold. I'm on like 10 day day 10 of this cold. It hasn't been terrible, but it's just been lingering and it's now kind of beginning to go from my head into my >> my chest here. So, apologies for the coughing, folks. >> Um, if you see me go off camera briefly, you'll you'll know why. Um, all right. So, in terms of policy response, couple things. Um, one, S&P's now basically back to all-time highs. So, we're probably not going to see a rescue response in the near in the very near future, right? until until things really start to to crack. Secondly, we've got a new sheriff coming into town, Kevin Worsh, >> who, you know, is coming in with marching orders uh from the administration, you know, to get rates down. Um, and we'll see soon how much of an order taker Worsh is and how much of an independent thinker he is. Um but he he from what I understand he is a fan of of using rates much more than balance sheet manipulation. >> Yeah. >> Right. So um we can maybe expect lower rates. I don't know if we can expect as quickly a trigger finger on buying assets in a crisis, but it's all TBD, right? Anyways, I mean this is all these are all words until they're faced with with a crisis here. Um, so my point being is is we have a guy that maybe won't be as as fast off the the block uh to to do QE type of rescuing again. Um, and there's no immediate crisis on the horizon. Yes, folks are watching private credit, but there's a lot of people out there saying, "Ah, it's much smaller. It's like an order of magnitude smaller than the subprime crisis." Um, and um, just because you're gating a fund doesn't mean the fund is at existential risk, right? It's it's it's trying to create, you know, prevent the run on the bank that then could really, you know, force the fund to have to sell assets at big discounts, but maybe with enough time, you know, their balance sheet, their portfolios can heal and and then things go back to normal. All TBD. We'll we'll we'll find out on this. My point is is there doesn't appear to be a credit crisis on our doorstep right now. Um tell me if you feel differently, but um I think a big outstanding question is what is going to be the impact from the oil price shock that the war has created? um even if the war ends relatively soon, is there enough of a shock propagating through the system where high oil prices are causing consumers and you know other other players to with you know pull in their spending and is there going to be as as Lacy Hunt has been fearing yes an immediate inflationary injury but then a disinflation deflationary longer term hangover from this. Do you have a strong opinion on that? >> Well, I guess um you know, I'm I'm still kind of focused on the Kevin Worsh uh we're not going to use the balance sheet, we're going to use the uh interest rate lever. Um as as for oil, >> I guess what I would say is I agree that there's a near-term inflation impulse from that, but it's due to the tax refunds in my view. Like normally if you were to have this kind of shock where one of the things that people absolutely have no choice but to spend money on went up this far this fast. Gasoline prices are up a$1.15 since the war began. So that's a huge increase. They've gone from whatever uh $3 to420 a gallon. Um so it's a big increase. And I think what we've seen shockingly is that weekly retail sales have not only remained robust but have actually picked up. So the consumer apparently has the wherewithal to both fill up his gas tank and buy discretionary items. Um and so that speaks to me to the strength of the tax refunds. And we have seen an increase. Obviously, if you look at the numbers year, you're seeing a pretty significant increase. Not, you know, we're still waiting for the big uh month to unfold, but so far we're running about 40 billion ahead of last year. So, it's not an insignificant amount of money. And I think that ability to absorb the higher gasoline prices um therefore allows for it to be more inflationary than it otherwise would be when it would normally crowd out other consumption. Um so that would I would agree with Lacy's sense that in the near term you could have an inflation shock but the give back on the other side when the tax refund season ends if these gasoline prices haven't come down and come down materially will be a problem. But I the other side of it is sort of what it's doing to the interest rate uh you know the the credit market and the outlook for rates. I mean I was looking this morning. Um before the war the market was pricing in essentially two Fed rate cuts this year. It's now pricing in a 50% chance that we get one. So basically it's got 12 basis points of cuts between now and year end. So essentially nothing. Um, and the long end of the yield curve, while everyone's, you know, doing back handsp springsings today because we're below uh 4.3, that's hardly a number to celebrate. You know, this these yields are still extremely elevated. Um, and so, and relatedly, mortgage rates are up. Um, you know, both investment grade and high yield bond yields are up. And so to me that's the bigger problem is um you know oil prices can come back down tomorrow. We could go from $92 to six. You know these these numbers remember we even went negative at one point. So, who knows how quickly the the headline oil price number comes down, but the relief at the pump and the relief on the interest rate front is going to be far slower uh to materialize if it ever materializes um on the interest rate side and I'm not fully convinced that it will. Um so, you know, we can get into that. You you also mentioned in your sorry I'm all I'm doing the weave here but >> well I I I gave a long long return to this. There was a lot in there. >> Um you you uh kind of teased me as to whether I thought we were in a a credit crisis or not. And while we're not in a crisis right now in terms of people's hair are on fire and they think, you know, it's we're selling everything, we're in a panic. Um and you're seeing spreads and yields blow out. There's no question that there is tremendous stress in the credit markets that's being art sort of artificially uh subdued by gating these funds and that if they actually had to mark these assets to market, they'd be getting pennies on the dollar. Um and that that were it to come to light would create the hair on fire thing. So the question is is there a moment is there a point at which in you know this issue that's happening behind the curtain with private credit actually devolves to the broader market. Um and there are two avenues through which that could happen. Um well there are variety but the two areas that are directly impacted by what's happening with private credit are pensions and insurers. >> Yeah. Um and both of those uh entities require a steady stream of income with which to run their various business. You know, if you're a pension, you got to pay out pension payments. And if you're insurer, you're making annuity payments. And if you don't have the income stream with which to do that, you got a problem. So, it could very quickly devolve. And and the insurers are the obvious area. I've been tracking MetLife CDFs and it exploded um on these private credit problems. Um and in the last week as the markets have rallied and everything has been you know everyone's concluded everything's fine um the CDS has cost of insurance against default on life has come down barely but it's still extremely elevated. So, we're by no means out of the woods on this. And again, all the entire private credit problem and the pro and the problem for credit markets more broadly is that they've been waiting for four years for the Fed to cut rates and we're now talking about no rate cuts this year, right? >> So, this, you know, at what point can they not continue to string this along? And and we're really pushing it obviously. So >> yeah, remember when it was survived to 25 and now we're like getting into mid 2026 and relief isn't here yet. Yeah. >> Right. And when we came into 26, the expectation as I said was to rate. So there was relief coming, but now it's gone out the window. And even Scott Bessant said yesterday or the day before he doesn't think the Fed should cut rates. So that you know I know >> I missed that. Wow. So really, so the guy responsible for putting worse in the chair is saying, "I don't think the Fed should cut rates." >> Yeah. I think the point was I I don't remember what the context was. It was in an interview, so maybe he was asked about what's happening with oil prices and the inflationary implications, but the takeaway was this would not be the appropriate time to be cutting rates against this backdrop. Now, do you need to raise rates? No. But, you know, it clearly he didn't think it would be appropriate and I agree when you've got all this tax refund stimulus coming out and you know, all you're doing is monetizing the increase in inflation if you were to do something like that. >> Okay. Um, sorry, sorry to interject, but there is a there's another question I want to get to with you. We don't have to go there directly yet, but I just want to get it out there. Um before the war, you and I had been talking about um everything that the administration had said that it was doing in 2025 to set up the start of the golden age here in 2026. And um you know, I think we were starting to see maybe some green shoots from that. Um one of the big things they were talking about obviously was the the tax refunds that were g going to come. Um then the war happened and everybody got focused on that. Um, question I have sort of the big question I have for you is is do you do you still hold out any optimism for everything that was laid last year to to add tailwinds to the economy this year? Um, and I I do just want to note that it looks like from what you're saying, Bessant was right about the impact of these these large um uh you know, tax returns that that the average tax uh taxpayer is getting um because they seem as you said to be more than making up. I mean, we we can kind of criti like oh my god, what if there wasn't a war and we didn't get the high oil prices and we just got all the the benefit of the the tax returns. Um, so at least it it seems that there's some evidence that they they they they're right at least about the tax returns in terms of having a net, you know, positive stimulus stimulative effect on the economy. Is there reason to be confident about the rest of the year, provided the war ends soon and oil prices come down and all that, that the economy may have some room to actually build up some steam? Well, I think that all comes down then to the employment market because right now, you're totally right. Um, the the tax refunds are supporting the consumer at a time when otherwise the gasoline price would have knocked them out cold. Um, and so that is sustainable only as long as the tax refund season continues. And then after that, we're really left looking at the employment market for clues. And you and I have talked about the labor market at length. Um, and you know, at the risk of further um, put casting myself out on the lunatic fringe here, um, you know, last week the University of Michigan survey came out and it hit an all-time low, >> right? >> And the immediate headline and reaction was, "It's just Democrats, so it's nonsense. Don't look at that number." And you know, was it Michael Jordan who said, uh, Democrats buy, Republicans buy sneakers, too? >> But but yeah, exactly. Yeah. So ultimately I'm very reluctant to throw these indicators out. And what's important to me and again I hate to bore your audience because we've talked about this at nausea but the employment components of both the University of Michigan survey and the and the monthly confidence survey that the conference board puts out are the weakest we've seen almost ever in many cases worse than COVID. Um, and so the the consumer is telling you that the BLS statistics are not reflecting their reality. And it could be due to two things. It could be that the BLS is counting the number of jobs correctly. Maybe it doesn't appear that they are given the massive revisions we see every month. Um but the quality of jobs is abysmal and that actually is reflected in the employment data we see where multiple job holders is near all-time record highs. So you see people who used to be able to work one job and support their families are now working two or three jobs. Um so that could be it or it could be that the numbers are just straight up completely wrong. And um I do this overlay. If you look at the University of Michigan, ask people what do what is your expectation that your income will outpace inflation. And if you overlay their answers to that with the unemployment rate, you find out that when they think their income is unlikely to outpace inflation, um the unemployment rate is generally going up. You can look at these two and the the connection between the two of them, the correlation is mind-bogglingly precise. I mean, I I don't know if you you can see this chart from where you are over there, but this is the chart I'm talking about. There's a blue line and a red line. And >> I I don't know. Can you see it from there? Probably not, but >> I can see the red line. But yeah, folks, these are high-tech graphics here at at >> Yeah, this is this is here. Let me just show but basically so right now their expectation that I've done it the other way that inflation will outpace their income is the highest it's ever been and the unemployment rates all the way down here and as you can see these two lines normally move together. So either they have a totally unrealistic expectation about what their income is going to be or the unemployment rate is wrong. And honestly, I think I'd take the consumer's view about their, you know, the future of their pocketbook over the BLS's statistical massaging nonsense. So this suggests to me that we have and and it's not shouldn't be that radical a suggestion that the perception of the labor market as bad as it is is still wildly more sanguin than the reality on the ground. And if that's the case, we're talking about a setup where these tax refunds are the life support for consumers. And as we get into the second half of the year, >> it becomes challenging. The question then is do companies suddenly decide after we get out of the war okay now we can hire now we can increase wages now maybe um but you know time will tell on that again to use your phrase TBD um but it's hard to imagine you know what what motivates that >> okay so it's so interesting Steph so I mean on so many of these topics you and I have um seen the world really similarly and there have been lots of reasons over the past couple years to be increasingly concerned about things like the employment market and all that stuff. Um what is interesting though is um you know I I I've been hearing from different sources um some surprising data. So for example, I just did an interview. It hasn't launched yet, folks. It's going to release, I think, this Sunday. Um, with um Craig Fuller, who's the CEO of Freight Waves. Um, so this is like the largest company that tracks shipping data of all types and kinds, trucks, >> trains, um, boats, etc. And folks may remember I interviewed him back in early November last year and he was really concerned. Um he said, you know, volumes are really falling off. The economy of real things is like in a recession and getting worse and a lot of it was because of the tariff uncertainty. Um he he really had um a lot of choice words for the president at that point in time of just how how tariffs were handled and and how liberation day kind of freaked the world out and everybody was basically holding on to their budgets because they didn't know what tariffs were going to be. And um he is now singing a totally different tune. And he said it was funny that we actually had the interview when we did because he said within like two weeks of that interview he said it was like the economy of of transport turned on a dime. >> Huh. >> And has just been building steam ever since. And it really is a story about a boom in US manufacturing which is what the administration has been trying to you know set up for a boom. I mean it it's it's apparently beginning to work according to plan. And so um if you are a trucker, if you are in the rail business, volumes are grow have been growing and are growing and it's a real uh it's a real boom. You know, he said, "Look, if you're if you're um in shipping, it's a different story, especially if you are bringing imports to America, but if we're talking about American exports, things getting built here and shipped out, he said it's it's going gang busters." And I was asking him if the war and the higher oil prices were impacting that negatively at all. and he said, "No, actually they're helping." And >> I won't go through the logic now, folks. You can watch the the video to find out about, but kind of concurrent to that in the war, >> you know, one of the one of the outcomes apparently, you know, that we are now seeing in real time of first Iran's um cutting off of the straight of Hormuz and now the US implementing its own blockade is that the world still needs oil to run. So what's the world doing? Well, it's coming to America to buy oil from us. >> So, there there is there does seem to be a domestic boom at least in certain sectors going on right now. Um, and so while I'm concerned about a lot of the things that you've just said, I I I can't ignore those data points. And it sounds like from those at least there will be hiring in US manufacturing, you know, in transport and trucker is like the number one job in the most states around America. Um, obviously the energy patch as long as oil prices remain somewhat elevated and and and if there is incremental demand for both our oil and gas coming, that's going to be hiring a lot of people. And of course, the whole data center buildout stuff is going to be requiring people to at least build those data centers. what they're going to do after the data centers are built. I don't know. But um I I hear you on the concerns about the um the data, the BLS data and the sentiment data, but then I I look at things like that and think, is there an offset going on here? What do you think? >> Yeah. No, I think those are all great points and I don't discount any of that. It's just that as a share of the total economy, we're starting from I mean this is why Trump came in and said we really need to reshore manufacturing and bring back you know revitalize the US economy and rather than outsourcing everything to countries all over Southeast Asia. The reason why is that we hollowed out our manufacturing sector to the point that I believe it's you know 10 or 12% of total GDP and we're a service economy. If you go back and look at the jobs creation, if you take out education and health care, we've added no jobs, you know. So again, it's we it's wonderful that we're starting to reshore manufacturing. That was the objective. And I'm glad to hear that, you know, there's signs that it's already starting to happen. It's crucial. Um, but we're talking about expanding something that's very small and it will take geometric increases for it to offset the shrinkage to use a George Castanza phrase um, in the service side of the economy were that to happen. But, you know, I don't want to sound like a doom and gloom person. I think a lot of what the administration and you and I talked about it when they were rolling out these ideas to um promote investment in the US by companies all around and countries all around the world and reassuring production um and really trying to give consumers a leg up with no tax on tips and you know no tax on social security and that kind of stuff. All wonderful things. um you know the the problems that I struggle with are maybe more secular. So these are are great things to do but we're it's it's not his fault that he took office at a time when the financial markets were sitting at nosebleleed valuation the highest valuations we've seen in our lifetimes. It's not his fault necessarily, although some people would, you know, blame him partially for it that we he came into office and the federal debt was $37 trillion, you know, so it's not his fault necessarily. >> Even if we're starting to fill the hole, the hole was so big, it's going to take a long time before we see positive results. Well, well, my point is that there's some really powerful secular headwinds that it doesn't matter who's in office and what they're trying to do are going to have to face and the delobalization and the higher interest rates and inflation associated with that plus the fiscal situation and the higher interest rates associated with that, you know, uh so there are some really big and then AI as a disruptive technology which over the long haul will probably reap tremendous benefits in terms of growth and reduced inflation and enhanced productivity but in the immediate term might be very costly in terms of supporting people whose jobs are displaced. Um so we don't know but I think these are we're at a time where there are so many really huge secular headwinds and that we I don't recall a time when we've seen so many really major forces happening at the same time. I mean del globalization is very powerful and it's accelerating dramatically the ddollarization associated with that the fiscal dominance not here but all around the globe. Um it it's just a very challenging time and so I struggle because I I agree with you like in when you look at data on a week- toeek basis you see some green shoots and you see some things like that but then I come back to all right but if longdated Treasury yields are never going to come below 4% >> we're eventually going to have a credit problem the stuff behind the private credit curtain you know the if the Fed can't cut rates to zero and it doesn't bring down borrowing costs for the for the corporate sector. >> Yeah. Not to mention the maturity wall that we've talked about forever that continues to roll. >> It's five trillion over the next four years. Um and so and the quality of that paper is not, you know, people look at the uh I'll throw this stat out. They look at uh the 2.7 trillion in cash on on S&P balance sheet. The total S&P 500 cash position is 2.7 trillion. and they say, "Look, uh, corporate sector is healthy. They're flush with cash." Well, the top 10 companies have twice as much cash as the bottom 400 combined. So, you're looking at 10 companies that look great and extrapolating that across the entire country. And it's just it's dangerous, I think. Um, so I guess my point is that our our starting point is fairly fragile to begin with and then we place all these secular headwinds on top of it and we hope that well if we reduce the tax on uh tips or do away with it and you know these things that we're going to be out of the woods you know and I know that's not what you're saying but uh it's just it's easy to get excited about those things in isolation but in the context of some of these bigger themes. I just it's hard for me to uh to have them trump what I see as sort of challenging times ahead. >> Well, I I very much appreciate that answer. And again, folks, just to be super clear, um I'm not trying to cheerlead the administration. I'm just trying to listen to what they're saying to prepare for >> and to to to look at some of these green shoots as we're seeing them and say, should we be altering our our big picture macro outlook or is the big p picture macro outlook, you know, um as what Stephanie is saying here is the trends are so big we're not seeing evidence yet that there's enough to offset them. And I think you just made a really good argument for for that, Stephanie. Um because obviously you listen to the administration, they're saying, "Look, the war is going to end soon. Price of oil is going to, you know, crater and then all these things that we've been doing are gonna, you know, folks just wait until you see the second half of this year, right?" I totally hear you saying, "I'm taking the under on that. I I I I'm going to wait to see it to believe it because there's so many other of these just larger secular trends in the driver's seat that they are much more likely to win out." >> Yeah. And we'll see. I I mean I I keep coming back to this idea of wars coming in and cutting rates and you know sort of tableabling any increase in the balance sheet. Um because and it it sort of now it's really at odds with what Besson just said the other day. we shouldn't cut rates because >> what they've been doing and the whole idea I thought was that Bessant would continue to stop all the issuance at the front end of the alter >> war would cut rates and that would lower the interest expense on the debt which would at least help to bring in the deficit if in the near term but it's a highly risky gambit to finance these massive deficits with T bills um in the hope that someday eventually the long end will come down and you'll be able to extend the debt out. Um I the only thing that makes me feel a little um nervous about pushing this point too far is that the IMF just came out and made the same point >> really yesterday. They just came out with a paper and with the um you know shocking revelation that uh the treasury market was no longer commanding this sort of global uh safe haven premium that it has always commanded and that that was a function of our our debt and and our lack of a clear plan to to grapple with it. And then they went on to point out that, you know, financing all of our deficits for short-term paper created a lot of risks in terms of being able to roll that paper and then our reliance on hedge funds uh increasingly as a source of financing. So I I mean these are all points I've been making for a long time. But now that the IMF has gotten on to it, I'm wondering like either that means that it was obvious five years ago, which is about the time, you know, when you and I first are talking about it. Um or it's not going to be a problem anymore. So I I I'll leave the audience to decide which one of those two. >> Yeah. It's sort of like a little nervous when Jim Kramer says something that you believe, right? Like I don't I don't want to be I don't want to have him on my team. >> Exactly. Exactly. Um, okay. Let me let me I've got a question I'm trying to get to, but let me just ask you this real quickly first. So, uh, yeah, treasuries, um, we've not seen a flood into treasuries, uh, during this war, >> which one might have expected, right? Safe haven asset. Yeah. >> And it could be for the reasons for you just mentioned. Um, but I'm wondering, could it also be for the reasons that gold has been sold? Mhm. >> Could it just be that because of the high oil prices, people are having to sell what they have to afford it? And a lot of these countries have treasuries. >> It could be. And I was actually before we jumped on here, I looked at the Fed's custody account. And since the war, it has declined. I'm trying to remember. I think it was a hundred billion. Uh foreign central banks have reduced their holdings of treasuries at the Fed by 100 billion, which is a substantial amount. Um I think year to date they were down 250 billion. So they had been reducing their position before um but probably accelerated um because of the war either because you know it made them less confident about holding dollars in treasuries or they needed those dollars to purchase higher priced oil. Um so for sure I think that that could be an explanation. Um, interestingly, most people sort of ascribe what happened in terms of the backup in treasuries uh to higher inflation expectations and you know the inflation expectations did pick up but they by no means explain the majority of the increase in yield. So it it is related, I think, more to what you're talking about uh than necessarily some panic concern about inflation hitting, you know, 5% tomorrow, >> right? Um it's probably an unfair question. Feel free to punt on it, but because we're not global geopolitical analysts, but and and what whatever your answer here is, you're going to get flamed by half the people in the comments. So again, great. >> I know. feel free to avoid this, but I'm just wrestling with this question myself, so we'll we'll think out loud here. So, there's there's definitely a school of thought that says, um, wow, America went in and, you know, attacked Iran for a war of choice and, um, you know, our our allies have not wanted to join this train with us. And uh this is making everybody realize that America is a loose cannon and wow I want to be less tied to America and I want to ddollarize and all that stuff, right? >> No. Then there's another school of thought that's saying, "Oh my god, like this this war is is the and I know this is not a popular comment, but this war has been a a phenomenally one-sided um uh battle and and no country has demonstrated the military might that America has uh so far this year, both with taking, you know, a head of state out in Venezuela overnight uh and you know, basically you know, almost completely decimating the capabilities of a of one of the largest militaries in the world. Um, and losing the smallest amount of of people and material than it has in any other conflict um perhaps ever. Um, America is an unbelievable unbelievably strong player here and uh they look to be seeming right now to be bringing Iran to heal if this blockade actually is what gets Iran back to the negotiating table to negotiate a peace settlement. And uh boy uh the American um the the son of American power is rising and I want to be on that guy's side. I don't want to be against him. Um do you have a sense of which way this might be tilting? I mean, I guess I would kind of go on a a tangent, and that is that I think it's much bigger than Iran, and I think this Iran is really just Trump's way of trying to neutralize China and Russia. Yep. You know, I'm again not a geopolitical analyst, but it seems pretty clear that between his action in Venezuela and then immediately on the back of that going into Iran strikes me and this was all, you know, he's about to go and meet she I think they have Yeah. So, it seemed to me like this was the setup. You know, he's all about say whatever you want about him, the art of the deal. and he's going to go and meet she having basically hamstrung them in terms of their access to oil. >> Yeah. Sorry to interrupt but a lot of people think and this is simplistic is hey she you are threatening to basically strangle us with rare earths. I've now got my my fist around your throat of of energy. >> Yeah, it could be. I guess I'm thinking uh about maybe first both their malign intent in terms of be displacing the US as the dominant superpower but related to that uh displacing the US reserve currency status. Um and China has with Russia but mostly China has been leading the charge of those bricks plus nations to ddollarize. And I think if the Trump administration had some ideas about how they were going to try to arrest that trend and hopefully reverse it, but at a minimum arrest it, this might be a way to approach it would be to say, look, we're going to make you guys feeble like China. No one's taking marching orders from China. you know, India is not going to say, "Oh, we got to do what China says about our, you know, dollar reserves." Um, if China's on its back because they now, you know, can't get access to the oil that they were trying to, they've been totally neutralized in terms of their uh global ambitions. Um it's just again I'm not a geopolitical analyst but I'm less focused on Iran specifically than the implications for the whole um bigger picture with Russia and China. And I do think um and perhaps I'm misreading this as well that that was really the intent of the tariffs. You know, Trump originally went in and said, "We're going to do tariffs to, you know, revitalize the US economy and reshore manufacturing and all of that was definitely a part of it." But I think the primary goal was to find a way to force it's like economic warfare. We're basically going to say to China, you're no longer able to just indiscriminately, you know, dump all your goods over here. we're going to make your life really tough um if you continue to act this way and if you don't behave the way we want you to, you're going to face, you know, 100 200% tariffs on your goods, which is economic disaster. And for Xi, that's his life. I mean, literally his his existence depends on their economy being able to remain strong. Um, I a very much appreciate you answering the question and I very much appreciate you you saying that tariffs was was really all about China at the end of the day. Um, because I sort of stuck my neck out back then and and made a similar observation um that you know people were wondering like why why liberation day? Why the big posters? Why do this everywhere to everybody all at once? And my analogy at the time was it was like being at the poker table and believing you had the best hand and forcing everybody to call all at once and basically saying, "Look, we'll strike some deal, but part of a deal is you got to be more on our team versus China." Like it was the fastest way to get everybody to a to a position that that weakened China. And it seems to be that that's the way it's been playing out. Folks, I hope you um I hope you like the fact that sometimes Stephan and I are just happy to think in real time like this with you about some of these big issues. >> If you like it, we'll continue doing it. If you don't like it, let me know and we'll we'll do less. Um but but but I I think it's useful for all of us. >> Um there are a couple questions folks have asked you, Stephanie, that I want to get to, but I want to ask you one last question here. So, um S&P back over 7,000, right? Back to all-time highs. And if you look at the analyst forward earnings estimates for the S&P, they have been rising all throughout uh the war and they've been rising at a faster rate than they than they had been beforehand. >> Obviously, you've got bigger concerns. >> What do you think the disconnect is here? Wh why why why do you think analysts are so sanguin about where things are headed? I mean I I don't know to what extent that reflects this idea that the uh implementation of AI is going to reap some great productivity benefits for these companies. I don't know. I you know I'd have to go sector by sector on that. Um but it's hard to imagine that they think that growth is going to be stronger than it like had we not gone into Iran and they had their forecast you know at the beginning of the year um for whatever percent growth in earnings are they now saying now that we've gone to this war and it's going to end growth is going to be even better I mean that it's just hard to figure out like what happened why having this situation in Iran is suddenly going to make growth in the US faster. Um but especially given the deficit >> financing issue I t you know ramp up in defense spending etc. Um so maybe it's just um you know >> uh dizzy lifting drink or something like that. I don't know. Yeah. Well, well, smoking crack or not, uh do you think do you think that the the markets are setting themselves up for a rug pull or at least disappointment from here with these inflating earnings estimates? >> Well, it seems like the classic situation where you sort of buy on the rumor and sell on the news. So, everyone's buying on the rumor that the war is going to end and you would sell on the news. They're buying on the rumor in the expectation that once the war ends, everything's going to go back to normal and be fine and nothing will be different. Um, or maybe even better. Uh, and in reality, that's probably highly unlikely to prove to be the case. Um, but again, you know, I feel like I sound like such a David Downer, like I'm trying to identify the cloud around the silver lining all the time. Just trying to be a realist. Don't worry. >> Well, but also if the market if if that's what the market's pricing in, then that's not information. We're trying to figure out like where might the markets be wrong. Maybe they're wrong in being less, you know, not optimistic enough. That's a possibility. Or maybe they're wrong in terms of being overly optimistic. And given what I see on the ground, you know, it seemed to me like that's the more likely scenario. I will say, you know, going back to the credit thing because it's such an important part of my doom and gloom scenario here is >> um if you look at corporate ratings downgrades, so far this month, we've seen a huge increase in ratings downgrades and that includes downgrades outpacing upgrades in the investment grade swath. Normally you see, you know, upgrades are always outnumbering downgrades in investment grade and then it's the junk that's where you have the the downgrades overwhelming. Um, but now you're seeing it in in both uh sectors and that I think is an important indicator um of weakness behind the curtain there. And again, you know, we get into this thing where the tripleB swath, that lowest swath of investment grade is more than half of the of the market. So, >> the market >> Yeah. And u so I think that's something to just keep an eye on and I have been and I'm sure I will keep your audience uh grimly posted on going forward. But at a time when the markets seem to be anticipating that everything's about to get better, the the fact that companies are being downgraded um and you are seeing things like some discernment around risk happening at the lowest segments of the market. You know, like the weakest segment of the junk market is underperforming the junk market overall and the weakest segment that tripleB segment of the investment grade market is underperforming that market um indicates that people are not fully confident um around the outlook for those. >> Okay. And related to that, I mean for way too long now, you and I have talked about how credit spreads just have been dead as a doornail. They they are starting to to rise. Correct. Well, they spiked up and then they've given back more than half of that. Um, the problem though again is that it's the yield level that matters for these companies. And like we talked about the maturity wall uh is huge. You know, more than a trillion this year and more than a trillion each year for the next four years. Um, and the rates at which these companies are going to have to roll that paper are in many cases twice what they were paying prior. That's a huge increase. And if you're paying suddenly more on cost of production, if you happen to be in a business that relies on energy to help, you know, run the plants or get the goods to the store. um that's just an added a compounding factor at a time when you're already going to have to pay uh higher interest on your debt. So, it's you know there's there is potential for further turmoil there um notwithstanding the the apparent quiet uh you know picture that we're seeing right now. >> Okay. All right. Um, well, uh, we're going to start beginning to land the plane here. Um, I do want to pull this question in from Josh. It's a two-part question. I'll just pull up this part two here, but he basically says, "I had a pretty large amount of money on the sidelines to invest during the Iran war. I was a little worried if it would get better or worse, so I only invested half." Um, with the second half, and by the way, folks, whatever Stephanie says is not personal financial advice. Um, so obviously, you know, uh, this is only for education purposes. talk to your financial adviser uh to get, you know, accustom for your own specific needs advice. But he says, "For the half I didn't put in the market yet." Um, is it is it a good time to get back in the market in general or should I wait for the wars over honeymoon to subside? Um, I guess the general question is is does is this in your opinion does this seem to be a good time to be deploying new capital or are there reasons that you would you would wait? I mean, I know that you have a fair amount of cash still, I imagine. So, I can't imagine you're super jazzed about going fully invested right now with this market. >> No. And but also the market that I would be buying wouldn't be the market that most people are, you know, I wouldn't be buying paper assets. I'd be >> going back to the hard asset story. Yeah. >> Yeah. I know I'm just a broken record, but yeah, I mean I think rare earths uh you know natural gas I I mean any commodity basket I think will perform better. The other thing that's kind of interesting and I was looking at this morning um the emerging markets have started to outperform a little bit of recent I'm thinking specifically in their credit markets the emerging market high yield has outperformed US high yield. Um so there there seems to be uh a little bit of a interest in expanding the lens a little bit globally and emerging markets generally >> um are underowned and undervalued. So that's that's an area if you really lust for paper you might consider um having that paper be emerging markets. But again, uh like you emphasized at the top, I'm not giving investment advice because emerging markets are perceived to be um risky and so I don't want to uh have any 90 year olds out there taking my advice to go right into >> um let me ask you this about emerging markets. So, you know, there there had been I mean they outperformed um the international markets outperformed the S&P last year and they had at the beginning of this year. I I don't know how they've relatively performed since the war. Maybe you do. But my question for you, Steph, is one would think that an oil price shock would hit the rest of the world a lot harder than the US. And um to the extent that there is going to be a a disinflationary hangover from all these high oil prices um you would expect those markets to suffer more on a relative basis than the US. Um am I thinking about this incorrectly? >> No. um as long as those economies that you're talking about, the non- US economies are not resource-based economies because some of these emerging market economies are heavily resource uh based. So in that case, you know, they may actually be doing quite well. Um so I, you know, it's very hard to generalize and paint it all with one brush. So I I guess I'd encourage people to >> Yeah. I I guess my general question is sort of like, you know, they'd say, you know, when when there's a a global recession, >> it's these companies that these these smaller countries that get hit a lot harder. >> Um and so if we were to sort of shift into sort of a global slowdown, um would you expect the rest of the world to to perform less well on a relative basis than the US? Well, this has always been this, you know, US sneezes and the rest of the world catches a cold uh idea. Um, and I think that that has been rooted in this idea that the US is the largest global trade partner and um you know uh basically the dominant player um in terms of GDP and trade and neither of those are really true anymore. that US isn't the largest global trade partner for the largest countries. Yeah. >> Right. And it's not the largest the emerging markets are much larger in terms of GDP. Um so plus we're now getting back to these secular themes. We're past the Rubicon in terms of this fiscal dominance for the US and the other major industrial countries. um such that we're trying to um you know service obligations to very aging populations that have boosted these debt and deficits and having a a challenging time doing it because our interest rates are so high. Whereas in the emerging markets, most of them have a much younger demographic. They're they're not uh you know inundated with debt. In fact, many of them are creditor nations. So they have a lot of uh benefits that we don't have and yet get sort of thrown out with the bathwater on this idea that you know they can't possibly live without us. Um and as we enter this sort of era of deglobalization after four you know decades of globalization I think you'll see those emerging markets try to you know start to command a little bit more respect. Correct. >> So anyway, >> great. Okay. So, um, in in wrapping up here, and I I know we got to get you out of the studio there. Um, your general, uh, allocation in your own personal um, portfolio um, has been, if I'm remembering correctly, fair amount of gold in there. Probably still a fair amount of of cash, some dry powder, but correct me if I'm wrong there. And then I know you had been increasing your exposure to to energy, particularly oil and gas. Um oil and gas sectors now done really well this year um because of the oil price spike. Um a are you making any big changes to your portfolio in general? And B, even if not, what are you thinking about doing with the oil and gas part? Um, is has it has it become more successful sooner than you thought and therefore it might be time to trim or are you just going to keep building? >> Well, obviously, you know, the reason I got into the energy area was not related to the war in Iran. It was it was Yeah. Um, so it was related to just my love for hard assets in general, but also this AI uh technology and the idea that if you really loved AI, you should be buying energy stocks handover fist. >> And they were they were somewhat depressed, you know, >> extremely cheap, relatively speaking. So, you know, I guess um and it's important for your audience to understand I'm an investor long term. You know, I'm not sitting here trying to figure out, well, if we end the war in Iran, uh, oil prices, yeah, they may come down and the energy stocks will get hit, but the AI thing, uh, and the hard asset story are still barely getting started. So, I'm not going to try to sell, you know, and be cute and time, uh, 20% draw down over the span of a week or two when I can just sit tight. I'm, you know, long term, this is what I want to own. So, I'd rather not try to trade in and out of it so much. It's not good for my emotional health. So, >> totally agree. I'm I'm I'm I mean, everybody's different, right? What works for you might not work for everybody watching, but I'm wired much more like you. >> Okay. Yeah. I just um if I have the long-term conviction, this is one thing my dad said to me and it's always stuck with me. He said, "Never lose position in a bull market." Um, and so it takes some intestinal fortitude to be able to stare down, you know, a 10 or 20% draw down, but if you have conviction in where you're headed, it makes it a hell of a lot easier. >> Not turning on the screen also helps. So, >> yeah, that, you know, I've been saying that a lot recently. Some of the best things you can do as an investor is yeah, just just >> turn off the screens and go live your life. >> Um, all right. So, it sounds like no no material change. In other words, no additional sectors you're falling in love with or or ones you had that you were souring on. >> Not so far, >> but I'll keep you posted. >> All right. Well, in terms of keeping posted, Steph, um, for folks that want to follow you and your work, tell them where they should go. >> Okay. Well, uh, macromavens.com would be the place. Um, on Twitter, espo, although I honestly can't remember the last time I tweeted. I shouldn't say that. I'll I did tweet this morning. >> Reposting what you tweeted. >> Yeah. >> So, but I occasionally, it is true. Occasionally, I go into these Twitter rages where I'll, you know, tweet like 30 things in two days and then I'll have a dry spell for another three months. So, you never know what you might get, >> but it's worth it's worth it for those Twitter Twitter torrent from from staff. >> Um, all right. Fantastic. Anything else going on um either with your business or your that let the audience know about any any big events coming up? >> No big events coming up. Uh nothing new to report. Um but I will keep you posted if there is. Always a pleasure to be here each month. So, I'll look forward to seeing you a month from now and uh hopefully we'll have some more interesting things that will have happened. I'm pretty confident. We'll have a lot to talk about again. >> I am pretty confident, too. And and I will just send a hope out into the world that that maybe maybe we'll be talking about the war having ended by that point in time, >> but we'll see. Um all right, folks. And just in wrapping up here, two bits to let you know about. One, as always, if you would like to get some help uh from a professional financial advisor who understands and takes into account all the macro issues that uh Stephanie and I talk about here, um if you don't already have one that is advising you, um and how to make that actionable, all actionable in your portfolio, feel free to talk to one of the ones that Thoughtful Money endorses. You can do that by filling out the very short form at thoughtfulmoney.com. These are the firms you see with me on this channel week in and week out. Um it's just a service to be helpful to folks. It doesn't cost anything. There's no commitments involved. So, you should really take advantage of that if you can. And then lastly, just a reminder, um this so today is this while we're recording this live is Wednesday. On Saturday, Rick Rule is going to be hosting a um one of his boot camps on copper, all about copper investing. If you didn't watch the video that I released yesterday on that with Rick, um you should go watch it. But more importantly, if you want to go attend the conference, um, go to thoughtfulmoney.comconference and you can go register for it. Then, um, Steph, um, you'll, having talked to Rick, you may want to add copper, uh, to your your lens of hard assets that you're looking at here. Yeah. Um, especially not not from a short-term hit standpoint. This is one of those five to 10year secular tailwinds. But Rick just thinks it's it's in his words um not not even if not even when but it's just inevitable in his mind that given the supply demand imbalance for copper that we're going to be price rationing it going forward and the only way that we're going to be able to to to >> you know throttle the demand back is going to be copper price being substantially higher than it is now. And is that notwithstanding anything that might happen in the housing market? >> Uh yeah, in fact, you didn't even bring up the housing market. Okay. I mean, this really was it sort of a couple different factors, but >> I'm I'm oversimplifying it here, but there was the >> continuation of bringing the remaining 1 to two billion people who live without electricity in the world into the electrical age, right? And that itself is just going to require a ton of copper to happen. Um, and it is happening. I mean, it has been the trend over the past several decades. And then on the other end, it's in the developed nations, US probably being at the top of the list that you know are competing on the AI race that's all about electrical generation production. To increase that production capacity, you have to invest a ton in copper. But also with countries like the US, our electric our electrical grid is so outdated, it pretty much needs to be entirely rebuilt and that is going to require just truckloads of copper, right? So you're kind of getting it from both ends of the the demographic spectrum. >> Cool. Well, I will watch that video. >> All right. Um All right. Well, look, Steph, it is always such a joy. Please give Willamina a scratch for us. Um you look great. Fantastic commentary. uh whatever you're doing in your life, keep on doing it. It's totally working. Such a pleasure to have you on here every month. >> It's my privilege. Thank you, Adam. And hugs to Boston and Bodega. >> Oh, you're so kind. I will give it to them. Uh we actually had a third lab in the mix this past week. Um I think I might have told you about this briefly. Um but um there is a really worthy charity here in um >> Oh, you did? a nonprofit here in Reno um called Liberty Dogs which raises dogs for veterans. >> And so you have these people who raise the dog for like a year and a half and I don't know how they do it because you then have to give the dog away to the to the veteran. I mean it's such for a great cause but it's like giving up your child, right? >> We're not quite ready to do that but what we've started doing is is >> we put ourselves on a list to help the helpers basically. So if they need to go out of town for a week, we'll take their dog. Um, so we had a great yellow lab here named Jake. So we actually kind of had a three dog >> Oh my god. >> Yeah. environment for a week and it was a lot of fun. But >> it sounds like heaven. >> Uh, well hopefully we're just doing our little part, but it's such a great um such a great cause. Yeah. And there's what's not to love about having a puppy around for a week, right? >> Amazing. Amazing. A >> All right. Well, Steph, have a great month and look forward to seeing you in March. May. My goodness. >> May. Yeah. years going fast. >> Crazy. >> All right. All right. And thanks so much, Steph, and everybody else. Thanks so much for watching.
Stephanie Pomboy: Iran War Creating A Global Scramble For Hard Assets?
Summary
Transcript
And we should be live. Welcome to Thoughtful Money. I'm Thoughtful Money founder and your host, Adam Tagert, welcoming you here for another monthly macro maven mangerie with my great friend, the macro maven herself, Steph Pomboy. Steph, how you doing? >> I'm great. How are you doing? >> Good. I'm not even sure malangeerie is a word, but it's just what came >> it came out, so we're going to run with it. >> All right. All right. Well, look, thank you so much for coming into the studio today to record this with us. Um, we're Sans Willina because you're in the studio. So, sorry everybody. Big wampwamp for that. But, uh, but I'm sure we'll get her again at some point in the future. Um, happy tax day, Steph. >> Oh, gee, thank you so much. I actually have a story about that, but we can talk about it later in the conversation. >> Okay, we'll we'll get there. I was kind of crying tears on uh on X yesterday about it and certainly seems like a lot of other people aren't having a lot of fun this time around. >> Yeah. >> Um but um uh and maybe we can talk a little bit about, >> you know, the country is supposed to be getting record tax refunds now from the >> one big beautiful bill and all that, but maybe they're getting offset by higher oil prices. So we'll we'll talk about that in a moment. Um but there there two things I want to talk with you about here at the start, Steph. Um, and they're both related to the war. Um, and I'll mention both and then we'll maybe hit them in order. Um, so one is I saw you on um, uh, Maria Baromo's show the other day and talking about how I mean you were you were beating the hard asset drum as you normally do and Maria was actually much more >> interested in that than I think they normally are. And so it seems that the war has been um potentially creating this scramble for hard assets. Um, I mean it certainly is with things like oil and helium and whatnot, but this this this war seems to be a really good reminder, one might say wakeup call to the rest of the world that hard assets are finite and you can't always count on current supply chains and um, you know, that that possession is is sort of nine10en of the law as they say and it is better to um, secure your nation's supply of hard assets and I think investors are getting into that space too. So, I want to talk on that theme with you, but I'll mention the second thing I want to talk about with you, which is if you look at the S&P right now, the S&P is essentially saying war's over. >> Yeah. >> You know, uh the entire war discount that was weighing on the market is gone at this point in time. And uh I guess that's a sense, a vote from the market that it thinks this war is going to end relatively quickly and relatively well. So, um, we can tackle those in any order you'd like, but but but maybe let's start with the first one about the hard assets. Um, you have been a champion of them obviously for as long as I've known you, uh, and certainly over the past, you know, year plus. Um, how in your eyes, if at all, has the war changed the game for hard assets? Well, honestly, I think those two questions kind of dubtail nicely because um the hard asset story for me was always about uh current and accelerating monetary, you know, currency debasement. >> Currency debasement. Yeah. >> Basically, so not just here in the US, but globally, especially in the major industrial countries that are the world's reserve currencies. So that has always been sort of my my main interest in hard assets was as a way to pres preserve capital at a time when I thought that the dollar not only was being debased but that that was just barely getting started. That the need to print money would just expand uh geometrically. And I think the war actually underscores that point by, you know, we were hardly five minutes into it before the president came out and said, I want another one and a half trillion dollars for deficit sp for defense spending. So any idea that we were going to somehow restrain spending and you know try to bring our runaway debt and deficits into some kind of um you know universe where we could slowly start to grow into them. Um just went right out the window. Um I think you'll recall when we had the conference in St. Pete, um Tom Hunik was talking about the idea that we'd have this Fed Treasury accord and that the objective would be to get Congress to slow the rate of spending so that the Fed would have the ability to, you know, slowly shrink the balance sheet without creating some unoured situation in the bond market. And I think we all kind of laughed thinking, yeah, so we're relying on Congress to slow spending. That seemed like a a crazy wish. Um but now this war obviously just kind of increases the likelihood that the deficit is absolutely never ever ever going to go lower. Quite the contrary, it's probably going to go higher irrespective of how quickly the US economy is growing. So that's sort of I would answer both of those questions in that in that way. >> All right. You're making me hear that Taylor Swift song in the back of my head, right? The we're never ever ever getting back together. And this is, you know, the deficit is never ever ever uh getting under control here. >> I guess I don't know any Taylor Swift songs. I hate to say, but I'll take your word for it, but no, raise two daughters and you'll definitely have a lot of Taylor Swift. >> Um, okay. So uh what has been interesting through the war g given that right is uh gold has not performed the way that a lot of people assumed it would you know during a global crisis like this. Um I think everybody assumed it would have been the safe haven of choice that the markets would have rushed to and instead the price you know weakened. Now, there was a lot of froth that was coming out of gold from its massive run up to 5,500 or whatever the the the height the top was. Um, and you could maybe argue it held in better than than certainly, you know, than it did once it got to its last blowoff top back in 2011. Um, but a lot of people were scratching their head and saying, "Wow, why is gold going down that up?" Now, it seems like one of the culprits of that in addition to just the froth removal is what I sort of been thinking of is almost like a margin call on a lot of countries where, hey, the price of oil, you know, shot through the roof and they've got to pay for that additional expense of oil with something. And I think you saw a number of countries that basically were kind of forced to sell their gold, which really appreciated to fund the oil here. Um, we've certainly seen things like uh Turkey central bank and I know there have been some other ones as well uh that that had to do it apparently for that reason and also just to to deal with some of the inflation that's going on in their country. Um, a am I interpreting this correctly and b do you see this as to borrow a word from the Fed a transitory issue or is this potentially a reversal of trend of central banks that were buying now becoming net sellers? Well, I guess the the question all depends on how high how long oil prices stay at this level and to what extent they need to continue to, you know, liquidate other dollar positions to uh siphon money toward oil. But honestly in the scheme of things it seemed like the Turkish central bank was a little bit the exception to the rule in that you know broadly speaking other central banks have largely just um continued to accumulate gold albeit probably at a slower uh pace. Um but I also think you had in in general I think about it as just um like you talked about the margin call but not just for central banks but for a variety of players. Um and you did see for example um you know I hate to go into these kind of uh micro statistics but Jane Street for example that has you know big exposure a big player in uh markets that are related to more financial stuff you know private credit etc had apparently a huge exposure to precious metals via various ETFs um and so you know if they're forced we saw this conccomatant situation where you had the strains in private credit really starting to intensify and gold selling off at the same time. And I don't think that was coincidental. Um because if you can't This is why I think you and I talked about this on our last conversation. This is why I'm so focused on the public markets. I I'm aware of the problems and and fully on board with the idea and have been for a long time. I think before a lot of people really thought it was a problem that private credit is far weaker than it's been build, you know, it's been held out as this uh miraculous combination of tremendous yield but safety and you know it just none of it really added up. Um, so but if you can't get your money out of a vehicle that's locked up in these private assets, you have to sell publicly traded securities to raise that that money if you need it. >> You can only sell what's liquid. >> Exactly. And so I think that's why I have said and and I think we saw um that public that public markets will be foggged for the private market sins just because there is no other way to raise capital if you need it. Um and gold turned out to be in that basket. Um and in part as as you noted at the top, you know, it had been sort of the last it's sort of last in first out. So people had just kind of all the Johnny come lately had rushed into gold once it broke 5,000 pushed it immediately up to 5,500 and then when they needed some money all of a sudden, you know, it was a no-brainer to just cut and run from there. So, and then just to continue on this path, um, if you go back and look at how gold performed ahead of and during the great financial crisis, um, in 2007, 8, and 9, I think you're seeing a very similar behavior. And I think this is kind of what you see in most of these financial crises, not just the 2007 89 one, but just going back through history, that gold anticipates the crisis. So it rises well in advance of people recognizing there's a problem. Then when it becomes clear that there's a problem, this unwinding of leverage and the flight to you know the the panicked liquidation of positions leads gold to get dumped in the process. So it then you know gives back some of the gains not all of the gains that it logged on the way up and then it takes off on the policy response to numb the pain of the financial crisis. So I we've seen legs one and two and or we're we've seen one we're in the early phases I think of two and as that credit crisis starts to intensify um the question is you know does gold get foggged even farther or have we reached the point where now the pain will be felt in areas that are more um you know immediately impacted by what's happening with the the private credit stresses. Um, but long term, you know, it's the policy response that is really what's going to drive gold massively higher. >> All right. So, policy response. We um, sorry, >> not at all. I got you all choked up, Adam. Take Do you have some water? Take us >> I do. I do. I've had this cold. I'm on like 10 day day 10 of this cold. It hasn't been terrible, but it's just been lingering and it's now kind of beginning to go from my head into my >> my chest here. So, apologies for the coughing, folks. >> Um, if you see me go off camera briefly, you'll you'll know why. Um, all right. So, in terms of policy response, couple things. Um, one, S&P's now basically back to all-time highs. So, we're probably not going to see a rescue response in the near in the very near future, right? until until things really start to to crack. Secondly, we've got a new sheriff coming into town, Kevin Worsh, >> who, you know, is coming in with marching orders uh from the administration, you know, to get rates down. Um, and we'll see soon how much of an order taker Worsh is and how much of an independent thinker he is. Um but he he from what I understand he is a fan of of using rates much more than balance sheet manipulation. >> Yeah. >> Right. So um we can maybe expect lower rates. I don't know if we can expect as quickly a trigger finger on buying assets in a crisis, but it's all TBD, right? Anyways, I mean this is all these are all words until they're faced with with a crisis here. Um, so my point being is is we have a guy that maybe won't be as as fast off the the block uh to to do QE type of rescuing again. Um, and there's no immediate crisis on the horizon. Yes, folks are watching private credit, but there's a lot of people out there saying, "Ah, it's much smaller. It's like an order of magnitude smaller than the subprime crisis." Um, and um, just because you're gating a fund doesn't mean the fund is at existential risk, right? It's it's it's trying to create, you know, prevent the run on the bank that then could really, you know, force the fund to have to sell assets at big discounts, but maybe with enough time, you know, their balance sheet, their portfolios can heal and and then things go back to normal. All TBD. We'll we'll we'll find out on this. My point is is there doesn't appear to be a credit crisis on our doorstep right now. Um tell me if you feel differently, but um I think a big outstanding question is what is going to be the impact from the oil price shock that the war has created? um even if the war ends relatively soon, is there enough of a shock propagating through the system where high oil prices are causing consumers and you know other other players to with you know pull in their spending and is there going to be as as Lacy Hunt has been fearing yes an immediate inflationary injury but then a disinflation deflationary longer term hangover from this. Do you have a strong opinion on that? >> Well, I guess um you know, I'm I'm still kind of focused on the Kevin Worsh uh we're not going to use the balance sheet, we're going to use the uh interest rate lever. Um as as for oil, >> I guess what I would say is I agree that there's a near-term inflation impulse from that, but it's due to the tax refunds in my view. Like normally if you were to have this kind of shock where one of the things that people absolutely have no choice but to spend money on went up this far this fast. Gasoline prices are up a$1.15 since the war began. So that's a huge increase. They've gone from whatever uh $3 to420 a gallon. Um so it's a big increase. And I think what we've seen shockingly is that weekly retail sales have not only remained robust but have actually picked up. So the consumer apparently has the wherewithal to both fill up his gas tank and buy discretionary items. Um and so that speaks to me to the strength of the tax refunds. And we have seen an increase. Obviously, if you look at the numbers year, you're seeing a pretty significant increase. Not, you know, we're still waiting for the big uh month to unfold, but so far we're running about 40 billion ahead of last year. So, it's not an insignificant amount of money. And I think that ability to absorb the higher gasoline prices um therefore allows for it to be more inflationary than it otherwise would be when it would normally crowd out other consumption. Um so that would I would agree with Lacy's sense that in the near term you could have an inflation shock but the give back on the other side when the tax refund season ends if these gasoline prices haven't come down and come down materially will be a problem. But I the other side of it is sort of what it's doing to the interest rate uh you know the the credit market and the outlook for rates. I mean I was looking this morning. Um before the war the market was pricing in essentially two Fed rate cuts this year. It's now pricing in a 50% chance that we get one. So basically it's got 12 basis points of cuts between now and year end. So essentially nothing. Um, and the long end of the yield curve, while everyone's, you know, doing back handsp springsings today because we're below uh 4.3, that's hardly a number to celebrate. You know, this these yields are still extremely elevated. Um, and so, and relatedly, mortgage rates are up. Um, you know, both investment grade and high yield bond yields are up. And so to me that's the bigger problem is um you know oil prices can come back down tomorrow. We could go from $92 to six. You know these these numbers remember we even went negative at one point. So, who knows how quickly the the headline oil price number comes down, but the relief at the pump and the relief on the interest rate front is going to be far slower uh to materialize if it ever materializes um on the interest rate side and I'm not fully convinced that it will. Um so, you know, we can get into that. You you also mentioned in your sorry I'm all I'm doing the weave here but >> well I I I gave a long long return to this. There was a lot in there. >> Um you you uh kind of teased me as to whether I thought we were in a a credit crisis or not. And while we're not in a crisis right now in terms of people's hair are on fire and they think, you know, it's we're selling everything, we're in a panic. Um and you're seeing spreads and yields blow out. There's no question that there is tremendous stress in the credit markets that's being art sort of artificially uh subdued by gating these funds and that if they actually had to mark these assets to market, they'd be getting pennies on the dollar. Um and that that were it to come to light would create the hair on fire thing. So the question is is there a moment is there a point at which in you know this issue that's happening behind the curtain with private credit actually devolves to the broader market. Um and there are two avenues through which that could happen. Um well there are variety but the two areas that are directly impacted by what's happening with private credit are pensions and insurers. >> Yeah. Um and both of those uh entities require a steady stream of income with which to run their various business. You know, if you're a pension, you got to pay out pension payments. And if you're insurer, you're making annuity payments. And if you don't have the income stream with which to do that, you got a problem. So, it could very quickly devolve. And and the insurers are the obvious area. I've been tracking MetLife CDFs and it exploded um on these private credit problems. Um and in the last week as the markets have rallied and everything has been you know everyone's concluded everything's fine um the CDS has cost of insurance against default on life has come down barely but it's still extremely elevated. So, we're by no means out of the woods on this. And again, all the entire private credit problem and the pro and the problem for credit markets more broadly is that they've been waiting for four years for the Fed to cut rates and we're now talking about no rate cuts this year, right? >> So, this, you know, at what point can they not continue to string this along? And and we're really pushing it obviously. So >> yeah, remember when it was survived to 25 and now we're like getting into mid 2026 and relief isn't here yet. Yeah. >> Right. And when we came into 26, the expectation as I said was to rate. So there was relief coming, but now it's gone out the window. And even Scott Bessant said yesterday or the day before he doesn't think the Fed should cut rates. So that you know I know >> I missed that. Wow. So really, so the guy responsible for putting worse in the chair is saying, "I don't think the Fed should cut rates." >> Yeah. I think the point was I I don't remember what the context was. It was in an interview, so maybe he was asked about what's happening with oil prices and the inflationary implications, but the takeaway was this would not be the appropriate time to be cutting rates against this backdrop. Now, do you need to raise rates? No. But, you know, it clearly he didn't think it would be appropriate and I agree when you've got all this tax refund stimulus coming out and you know, all you're doing is monetizing the increase in inflation if you were to do something like that. >> Okay. Um, sorry, sorry to interject, but there is a there's another question I want to get to with you. We don't have to go there directly yet, but I just want to get it out there. Um before the war, you and I had been talking about um everything that the administration had said that it was doing in 2025 to set up the start of the golden age here in 2026. And um you know, I think we were starting to see maybe some green shoots from that. Um one of the big things they were talking about obviously was the the tax refunds that were g going to come. Um then the war happened and everybody got focused on that. Um, question I have sort of the big question I have for you is is do you do you still hold out any optimism for everything that was laid last year to to add tailwinds to the economy this year? Um, and I I do just want to note that it looks like from what you're saying, Bessant was right about the impact of these these large um uh you know, tax returns that that the average tax uh taxpayer is getting um because they seem as you said to be more than making up. I mean, we we can kind of criti like oh my god, what if there wasn't a war and we didn't get the high oil prices and we just got all the the benefit of the the tax returns. Um, so at least it it seems that there's some evidence that they they they they're right at least about the tax returns in terms of having a net, you know, positive stimulus stimulative effect on the economy. Is there reason to be confident about the rest of the year, provided the war ends soon and oil prices come down and all that, that the economy may have some room to actually build up some steam? Well, I think that all comes down then to the employment market because right now, you're totally right. Um, the the tax refunds are supporting the consumer at a time when otherwise the gasoline price would have knocked them out cold. Um, and so that is sustainable only as long as the tax refund season continues. And then after that, we're really left looking at the employment market for clues. And you and I have talked about the labor market at length. Um, and you know, at the risk of further um, put casting myself out on the lunatic fringe here, um, you know, last week the University of Michigan survey came out and it hit an all-time low, >> right? >> And the immediate headline and reaction was, "It's just Democrats, so it's nonsense. Don't look at that number." And you know, was it Michael Jordan who said, uh, Democrats buy, Republicans buy sneakers, too? >> But but yeah, exactly. Yeah. So ultimately I'm very reluctant to throw these indicators out. And what's important to me and again I hate to bore your audience because we've talked about this at nausea but the employment components of both the University of Michigan survey and the and the monthly confidence survey that the conference board puts out are the weakest we've seen almost ever in many cases worse than COVID. Um, and so the the consumer is telling you that the BLS statistics are not reflecting their reality. And it could be due to two things. It could be that the BLS is counting the number of jobs correctly. Maybe it doesn't appear that they are given the massive revisions we see every month. Um but the quality of jobs is abysmal and that actually is reflected in the employment data we see where multiple job holders is near all-time record highs. So you see people who used to be able to work one job and support their families are now working two or three jobs. Um so that could be it or it could be that the numbers are just straight up completely wrong. And um I do this overlay. If you look at the University of Michigan, ask people what do what is your expectation that your income will outpace inflation. And if you overlay their answers to that with the unemployment rate, you find out that when they think their income is unlikely to outpace inflation, um the unemployment rate is generally going up. You can look at these two and the the connection between the two of them, the correlation is mind-bogglingly precise. I mean, I I don't know if you you can see this chart from where you are over there, but this is the chart I'm talking about. There's a blue line and a red line. And >> I I don't know. Can you see it from there? Probably not, but >> I can see the red line. But yeah, folks, these are high-tech graphics here at at >> Yeah, this is this is here. Let me just show but basically so right now their expectation that I've done it the other way that inflation will outpace their income is the highest it's ever been and the unemployment rates all the way down here and as you can see these two lines normally move together. So either they have a totally unrealistic expectation about what their income is going to be or the unemployment rate is wrong. And honestly, I think I'd take the consumer's view about their, you know, the future of their pocketbook over the BLS's statistical massaging nonsense. So this suggests to me that we have and and it's not shouldn't be that radical a suggestion that the perception of the labor market as bad as it is is still wildly more sanguin than the reality on the ground. And if that's the case, we're talking about a setup where these tax refunds are the life support for consumers. And as we get into the second half of the year, >> it becomes challenging. The question then is do companies suddenly decide after we get out of the war okay now we can hire now we can increase wages now maybe um but you know time will tell on that again to use your phrase TBD um but it's hard to imagine you know what what motivates that >> okay so it's so interesting Steph so I mean on so many of these topics you and I have um seen the world really similarly and there have been lots of reasons over the past couple years to be increasingly concerned about things like the employment market and all that stuff. Um what is interesting though is um you know I I I've been hearing from different sources um some surprising data. So for example, I just did an interview. It hasn't launched yet, folks. It's going to release, I think, this Sunday. Um, with um Craig Fuller, who's the CEO of Freight Waves. Um, so this is like the largest company that tracks shipping data of all types and kinds, trucks, >> trains, um, boats, etc. And folks may remember I interviewed him back in early November last year and he was really concerned. Um he said, you know, volumes are really falling off. The economy of real things is like in a recession and getting worse and a lot of it was because of the tariff uncertainty. Um he he really had um a lot of choice words for the president at that point in time of just how how tariffs were handled and and how liberation day kind of freaked the world out and everybody was basically holding on to their budgets because they didn't know what tariffs were going to be. And um he is now singing a totally different tune. And he said it was funny that we actually had the interview when we did because he said within like two weeks of that interview he said it was like the economy of of transport turned on a dime. >> Huh. >> And has just been building steam ever since. And it really is a story about a boom in US manufacturing which is what the administration has been trying to you know set up for a boom. I mean it it's it's apparently beginning to work according to plan. And so um if you are a trucker, if you are in the rail business, volumes are grow have been growing and are growing and it's a real uh it's a real boom. You know, he said, "Look, if you're if you're um in shipping, it's a different story, especially if you are bringing imports to America, but if we're talking about American exports, things getting built here and shipped out, he said it's it's going gang busters." And I was asking him if the war and the higher oil prices were impacting that negatively at all. and he said, "No, actually they're helping." And >> I won't go through the logic now, folks. You can watch the the video to find out about, but kind of concurrent to that in the war, >> you know, one of the one of the outcomes apparently, you know, that we are now seeing in real time of first Iran's um cutting off of the straight of Hormuz and now the US implementing its own blockade is that the world still needs oil to run. So what's the world doing? Well, it's coming to America to buy oil from us. >> So, there there is there does seem to be a domestic boom at least in certain sectors going on right now. Um, and so while I'm concerned about a lot of the things that you've just said, I I I can't ignore those data points. And it sounds like from those at least there will be hiring in US manufacturing, you know, in transport and trucker is like the number one job in the most states around America. Um, obviously the energy patch as long as oil prices remain somewhat elevated and and and if there is incremental demand for both our oil and gas coming, that's going to be hiring a lot of people. And of course, the whole data center buildout stuff is going to be requiring people to at least build those data centers. what they're going to do after the data centers are built. I don't know. But um I I hear you on the concerns about the um the data, the BLS data and the sentiment data, but then I I look at things like that and think, is there an offset going on here? What do you think? >> Yeah. No, I think those are all great points and I don't discount any of that. It's just that as a share of the total economy, we're starting from I mean this is why Trump came in and said we really need to reshore manufacturing and bring back you know revitalize the US economy and rather than outsourcing everything to countries all over Southeast Asia. The reason why is that we hollowed out our manufacturing sector to the point that I believe it's you know 10 or 12% of total GDP and we're a service economy. If you go back and look at the jobs creation, if you take out education and health care, we've added no jobs, you know. So again, it's we it's wonderful that we're starting to reshore manufacturing. That was the objective. And I'm glad to hear that, you know, there's signs that it's already starting to happen. It's crucial. Um, but we're talking about expanding something that's very small and it will take geometric increases for it to offset the shrinkage to use a George Castanza phrase um, in the service side of the economy were that to happen. But, you know, I don't want to sound like a doom and gloom person. I think a lot of what the administration and you and I talked about it when they were rolling out these ideas to um promote investment in the US by companies all around and countries all around the world and reassuring production um and really trying to give consumers a leg up with no tax on tips and you know no tax on social security and that kind of stuff. All wonderful things. um you know the the problems that I struggle with are maybe more secular. So these are are great things to do but we're it's it's not his fault that he took office at a time when the financial markets were sitting at nosebleleed valuation the highest valuations we've seen in our lifetimes. It's not his fault necessarily, although some people would, you know, blame him partially for it that we he came into office and the federal debt was $37 trillion, you know, so it's not his fault necessarily. >> Even if we're starting to fill the hole, the hole was so big, it's going to take a long time before we see positive results. Well, well, my point is that there's some really powerful secular headwinds that it doesn't matter who's in office and what they're trying to do are going to have to face and the delobalization and the higher interest rates and inflation associated with that plus the fiscal situation and the higher interest rates associated with that, you know, uh so there are some really big and then AI as a disruptive technology which over the long haul will probably reap tremendous benefits in terms of growth and reduced inflation and enhanced productivity but in the immediate term might be very costly in terms of supporting people whose jobs are displaced. Um so we don't know but I think these are we're at a time where there are so many really huge secular headwinds and that we I don't recall a time when we've seen so many really major forces happening at the same time. I mean del globalization is very powerful and it's accelerating dramatically the ddollarization associated with that the fiscal dominance not here but all around the globe. Um it it's just a very challenging time and so I struggle because I I agree with you like in when you look at data on a week- toeek basis you see some green shoots and you see some things like that but then I come back to all right but if longdated Treasury yields are never going to come below 4% >> we're eventually going to have a credit problem the stuff behind the private credit curtain you know the if the Fed can't cut rates to zero and it doesn't bring down borrowing costs for the for the corporate sector. >> Yeah. Not to mention the maturity wall that we've talked about forever that continues to roll. >> It's five trillion over the next four years. Um and so and the quality of that paper is not, you know, people look at the uh I'll throw this stat out. They look at uh the 2.7 trillion in cash on on S&P balance sheet. The total S&P 500 cash position is 2.7 trillion. and they say, "Look, uh, corporate sector is healthy. They're flush with cash." Well, the top 10 companies have twice as much cash as the bottom 400 combined. So, you're looking at 10 companies that look great and extrapolating that across the entire country. And it's just it's dangerous, I think. Um, so I guess my point is that our our starting point is fairly fragile to begin with and then we place all these secular headwinds on top of it and we hope that well if we reduce the tax on uh tips or do away with it and you know these things that we're going to be out of the woods you know and I know that's not what you're saying but uh it's just it's easy to get excited about those things in isolation but in the context of some of these bigger themes. I just it's hard for me to uh to have them trump what I see as sort of challenging times ahead. >> Well, I I very much appreciate that answer. And again, folks, just to be super clear, um I'm not trying to cheerlead the administration. I'm just trying to listen to what they're saying to prepare for >> and to to to look at some of these green shoots as we're seeing them and say, should we be altering our our big picture macro outlook or is the big p picture macro outlook, you know, um as what Stephanie is saying here is the trends are so big we're not seeing evidence yet that there's enough to offset them. And I think you just made a really good argument for for that, Stephanie. Um because obviously you listen to the administration, they're saying, "Look, the war is going to end soon. Price of oil is going to, you know, crater and then all these things that we've been doing are gonna, you know, folks just wait until you see the second half of this year, right?" I totally hear you saying, "I'm taking the under on that. I I I I'm going to wait to see it to believe it because there's so many other of these just larger secular trends in the driver's seat that they are much more likely to win out." >> Yeah. And we'll see. I I mean I I keep coming back to this idea of wars coming in and cutting rates and you know sort of tableabling any increase in the balance sheet. Um because and it it sort of now it's really at odds with what Besson just said the other day. we shouldn't cut rates because >> what they've been doing and the whole idea I thought was that Bessant would continue to stop all the issuance at the front end of the alter >> war would cut rates and that would lower the interest expense on the debt which would at least help to bring in the deficit if in the near term but it's a highly risky gambit to finance these massive deficits with T bills um in the hope that someday eventually the long end will come down and you'll be able to extend the debt out. Um I the only thing that makes me feel a little um nervous about pushing this point too far is that the IMF just came out and made the same point >> really yesterday. They just came out with a paper and with the um you know shocking revelation that uh the treasury market was no longer commanding this sort of global uh safe haven premium that it has always commanded and that that was a function of our our debt and and our lack of a clear plan to to grapple with it. And then they went on to point out that, you know, financing all of our deficits for short-term paper created a lot of risks in terms of being able to roll that paper and then our reliance on hedge funds uh increasingly as a source of financing. So I I mean these are all points I've been making for a long time. But now that the IMF has gotten on to it, I'm wondering like either that means that it was obvious five years ago, which is about the time, you know, when you and I first are talking about it. Um or it's not going to be a problem anymore. So I I I'll leave the audience to decide which one of those two. >> Yeah. It's sort of like a little nervous when Jim Kramer says something that you believe, right? Like I don't I don't want to be I don't want to have him on my team. >> Exactly. Exactly. Um, okay. Let me let me I've got a question I'm trying to get to, but let me just ask you this real quickly first. So, uh, yeah, treasuries, um, we've not seen a flood into treasuries, uh, during this war, >> which one might have expected, right? Safe haven asset. Yeah. >> And it could be for the reasons for you just mentioned. Um, but I'm wondering, could it also be for the reasons that gold has been sold? Mhm. >> Could it just be that because of the high oil prices, people are having to sell what they have to afford it? And a lot of these countries have treasuries. >> It could be. And I was actually before we jumped on here, I looked at the Fed's custody account. And since the war, it has declined. I'm trying to remember. I think it was a hundred billion. Uh foreign central banks have reduced their holdings of treasuries at the Fed by 100 billion, which is a substantial amount. Um I think year to date they were down 250 billion. So they had been reducing their position before um but probably accelerated um because of the war either because you know it made them less confident about holding dollars in treasuries or they needed those dollars to purchase higher priced oil. Um so for sure I think that that could be an explanation. Um, interestingly, most people sort of ascribe what happened in terms of the backup in treasuries uh to higher inflation expectations and you know the inflation expectations did pick up but they by no means explain the majority of the increase in yield. So it it is related, I think, more to what you're talking about uh than necessarily some panic concern about inflation hitting, you know, 5% tomorrow, >> right? Um it's probably an unfair question. Feel free to punt on it, but because we're not global geopolitical analysts, but and and what whatever your answer here is, you're going to get flamed by half the people in the comments. So again, great. >> I know. feel free to avoid this, but I'm just wrestling with this question myself, so we'll we'll think out loud here. So, there's there's definitely a school of thought that says, um, wow, America went in and, you know, attacked Iran for a war of choice and, um, you know, our our allies have not wanted to join this train with us. And uh this is making everybody realize that America is a loose cannon and wow I want to be less tied to America and I want to ddollarize and all that stuff, right? >> No. Then there's another school of thought that's saying, "Oh my god, like this this war is is the and I know this is not a popular comment, but this war has been a a phenomenally one-sided um uh battle and and no country has demonstrated the military might that America has uh so far this year, both with taking, you know, a head of state out in Venezuela overnight uh and you know, basically you know, almost completely decimating the capabilities of a of one of the largest militaries in the world. Um, and losing the smallest amount of of people and material than it has in any other conflict um perhaps ever. Um, America is an unbelievable unbelievably strong player here and uh they look to be seeming right now to be bringing Iran to heal if this blockade actually is what gets Iran back to the negotiating table to negotiate a peace settlement. And uh boy uh the American um the the son of American power is rising and I want to be on that guy's side. I don't want to be against him. Um do you have a sense of which way this might be tilting? I mean, I guess I would kind of go on a a tangent, and that is that I think it's much bigger than Iran, and I think this Iran is really just Trump's way of trying to neutralize China and Russia. Yep. You know, I'm again not a geopolitical analyst, but it seems pretty clear that between his action in Venezuela and then immediately on the back of that going into Iran strikes me and this was all, you know, he's about to go and meet she I think they have Yeah. So, it seemed to me like this was the setup. You know, he's all about say whatever you want about him, the art of the deal. and he's going to go and meet she having basically hamstrung them in terms of their access to oil. >> Yeah. Sorry to interrupt but a lot of people think and this is simplistic is hey she you are threatening to basically strangle us with rare earths. I've now got my my fist around your throat of of energy. >> Yeah, it could be. I guess I'm thinking uh about maybe first both their malign intent in terms of be displacing the US as the dominant superpower but related to that uh displacing the US reserve currency status. Um and China has with Russia but mostly China has been leading the charge of those bricks plus nations to ddollarize. And I think if the Trump administration had some ideas about how they were going to try to arrest that trend and hopefully reverse it, but at a minimum arrest it, this might be a way to approach it would be to say, look, we're going to make you guys feeble like China. No one's taking marching orders from China. you know, India is not going to say, "Oh, we got to do what China says about our, you know, dollar reserves." Um, if China's on its back because they now, you know, can't get access to the oil that they were trying to, they've been totally neutralized in terms of their uh global ambitions. Um it's just again I'm not a geopolitical analyst but I'm less focused on Iran specifically than the implications for the whole um bigger picture with Russia and China. And I do think um and perhaps I'm misreading this as well that that was really the intent of the tariffs. You know, Trump originally went in and said, "We're going to do tariffs to, you know, revitalize the US economy and reshore manufacturing and all of that was definitely a part of it." But I think the primary goal was to find a way to force it's like economic warfare. We're basically going to say to China, you're no longer able to just indiscriminately, you know, dump all your goods over here. we're going to make your life really tough um if you continue to act this way and if you don't behave the way we want you to, you're going to face, you know, 100 200% tariffs on your goods, which is economic disaster. And for Xi, that's his life. I mean, literally his his existence depends on their economy being able to remain strong. Um, I a very much appreciate you answering the question and I very much appreciate you you saying that tariffs was was really all about China at the end of the day. Um, because I sort of stuck my neck out back then and and made a similar observation um that you know people were wondering like why why liberation day? Why the big posters? Why do this everywhere to everybody all at once? And my analogy at the time was it was like being at the poker table and believing you had the best hand and forcing everybody to call all at once and basically saying, "Look, we'll strike some deal, but part of a deal is you got to be more on our team versus China." Like it was the fastest way to get everybody to a to a position that that weakened China. And it seems to be that that's the way it's been playing out. Folks, I hope you um I hope you like the fact that sometimes Stephan and I are just happy to think in real time like this with you about some of these big issues. >> If you like it, we'll continue doing it. If you don't like it, let me know and we'll we'll do less. Um but but but I I think it's useful for all of us. >> Um there are a couple questions folks have asked you, Stephanie, that I want to get to, but I want to ask you one last question here. So, um S&P back over 7,000, right? Back to all-time highs. And if you look at the analyst forward earnings estimates for the S&P, they have been rising all throughout uh the war and they've been rising at a faster rate than they than they had been beforehand. >> Obviously, you've got bigger concerns. >> What do you think the disconnect is here? Wh why why why do you think analysts are so sanguin about where things are headed? I mean I I don't know to what extent that reflects this idea that the uh implementation of AI is going to reap some great productivity benefits for these companies. I don't know. I you know I'd have to go sector by sector on that. Um but it's hard to imagine that they think that growth is going to be stronger than it like had we not gone into Iran and they had their forecast you know at the beginning of the year um for whatever percent growth in earnings are they now saying now that we've gone to this war and it's going to end growth is going to be even better I mean that it's just hard to figure out like what happened why having this situation in Iran is suddenly going to make growth in the US faster. Um but especially given the deficit >> financing issue I t you know ramp up in defense spending etc. Um so maybe it's just um you know >> uh dizzy lifting drink or something like that. I don't know. Yeah. Well, well, smoking crack or not, uh do you think do you think that the the markets are setting themselves up for a rug pull or at least disappointment from here with these inflating earnings estimates? >> Well, it seems like the classic situation where you sort of buy on the rumor and sell on the news. So, everyone's buying on the rumor that the war is going to end and you would sell on the news. They're buying on the rumor in the expectation that once the war ends, everything's going to go back to normal and be fine and nothing will be different. Um, or maybe even better. Uh, and in reality, that's probably highly unlikely to prove to be the case. Um, but again, you know, I feel like I sound like such a David Downer, like I'm trying to identify the cloud around the silver lining all the time. Just trying to be a realist. Don't worry. >> Well, but also if the market if if that's what the market's pricing in, then that's not information. We're trying to figure out like where might the markets be wrong. Maybe they're wrong in being less, you know, not optimistic enough. That's a possibility. Or maybe they're wrong in terms of being overly optimistic. And given what I see on the ground, you know, it seemed to me like that's the more likely scenario. I will say, you know, going back to the credit thing because it's such an important part of my doom and gloom scenario here is >> um if you look at corporate ratings downgrades, so far this month, we've seen a huge increase in ratings downgrades and that includes downgrades outpacing upgrades in the investment grade swath. Normally you see, you know, upgrades are always outnumbering downgrades in investment grade and then it's the junk that's where you have the the downgrades overwhelming. Um, but now you're seeing it in in both uh sectors and that I think is an important indicator um of weakness behind the curtain there. And again, you know, we get into this thing where the tripleB swath, that lowest swath of investment grade is more than half of the of the market. So, >> the market >> Yeah. And u so I think that's something to just keep an eye on and I have been and I'm sure I will keep your audience uh grimly posted on going forward. But at a time when the markets seem to be anticipating that everything's about to get better, the the fact that companies are being downgraded um and you are seeing things like some discernment around risk happening at the lowest segments of the market. You know, like the weakest segment of the junk market is underperforming the junk market overall and the weakest segment that tripleB segment of the investment grade market is underperforming that market um indicates that people are not fully confident um around the outlook for those. >> Okay. And related to that, I mean for way too long now, you and I have talked about how credit spreads just have been dead as a doornail. They they are starting to to rise. Correct. Well, they spiked up and then they've given back more than half of that. Um, the problem though again is that it's the yield level that matters for these companies. And like we talked about the maturity wall uh is huge. You know, more than a trillion this year and more than a trillion each year for the next four years. Um, and the rates at which these companies are going to have to roll that paper are in many cases twice what they were paying prior. That's a huge increase. And if you're paying suddenly more on cost of production, if you happen to be in a business that relies on energy to help, you know, run the plants or get the goods to the store. um that's just an added a compounding factor at a time when you're already going to have to pay uh higher interest on your debt. So, it's you know there's there is potential for further turmoil there um notwithstanding the the apparent quiet uh you know picture that we're seeing right now. >> Okay. All right. Um, well, uh, we're going to start beginning to land the plane here. Um, I do want to pull this question in from Josh. It's a two-part question. I'll just pull up this part two here, but he basically says, "I had a pretty large amount of money on the sidelines to invest during the Iran war. I was a little worried if it would get better or worse, so I only invested half." Um, with the second half, and by the way, folks, whatever Stephanie says is not personal financial advice. Um, so obviously, you know, uh, this is only for education purposes. talk to your financial adviser uh to get, you know, accustom for your own specific needs advice. But he says, "For the half I didn't put in the market yet." Um, is it is it a good time to get back in the market in general or should I wait for the wars over honeymoon to subside? Um, I guess the general question is is does is this in your opinion does this seem to be a good time to be deploying new capital or are there reasons that you would you would wait? I mean, I know that you have a fair amount of cash still, I imagine. So, I can't imagine you're super jazzed about going fully invested right now with this market. >> No. And but also the market that I would be buying wouldn't be the market that most people are, you know, I wouldn't be buying paper assets. I'd be >> going back to the hard asset story. Yeah. >> Yeah. I know I'm just a broken record, but yeah, I mean I think rare earths uh you know natural gas I I mean any commodity basket I think will perform better. The other thing that's kind of interesting and I was looking at this morning um the emerging markets have started to outperform a little bit of recent I'm thinking specifically in their credit markets the emerging market high yield has outperformed US high yield. Um so there there seems to be uh a little bit of a interest in expanding the lens a little bit globally and emerging markets generally >> um are underowned and undervalued. So that's that's an area if you really lust for paper you might consider um having that paper be emerging markets. But again, uh like you emphasized at the top, I'm not giving investment advice because emerging markets are perceived to be um risky and so I don't want to uh have any 90 year olds out there taking my advice to go right into >> um let me ask you this about emerging markets. So, you know, there there had been I mean they outperformed um the international markets outperformed the S&P last year and they had at the beginning of this year. I I don't know how they've relatively performed since the war. Maybe you do. But my question for you, Steph, is one would think that an oil price shock would hit the rest of the world a lot harder than the US. And um to the extent that there is going to be a a disinflationary hangover from all these high oil prices um you would expect those markets to suffer more on a relative basis than the US. Um am I thinking about this incorrectly? >> No. um as long as those economies that you're talking about, the non- US economies are not resource-based economies because some of these emerging market economies are heavily resource uh based. So in that case, you know, they may actually be doing quite well. Um so I, you know, it's very hard to generalize and paint it all with one brush. So I I guess I'd encourage people to >> Yeah. I I guess my general question is sort of like, you know, they'd say, you know, when when there's a a global recession, >> it's these companies that these these smaller countries that get hit a lot harder. >> Um and so if we were to sort of shift into sort of a global slowdown, um would you expect the rest of the world to to perform less well on a relative basis than the US? Well, this has always been this, you know, US sneezes and the rest of the world catches a cold uh idea. Um, and I think that that has been rooted in this idea that the US is the largest global trade partner and um you know uh basically the dominant player um in terms of GDP and trade and neither of those are really true anymore. that US isn't the largest global trade partner for the largest countries. Yeah. >> Right. And it's not the largest the emerging markets are much larger in terms of GDP. Um so plus we're now getting back to these secular themes. We're past the Rubicon in terms of this fiscal dominance for the US and the other major industrial countries. um such that we're trying to um you know service obligations to very aging populations that have boosted these debt and deficits and having a a challenging time doing it because our interest rates are so high. Whereas in the emerging markets, most of them have a much younger demographic. They're they're not uh you know inundated with debt. In fact, many of them are creditor nations. So they have a lot of uh benefits that we don't have and yet get sort of thrown out with the bathwater on this idea that you know they can't possibly live without us. Um and as we enter this sort of era of deglobalization after four you know decades of globalization I think you'll see those emerging markets try to you know start to command a little bit more respect. Correct. >> So anyway, >> great. Okay. So, um, in in wrapping up here, and I I know we got to get you out of the studio there. Um, your general, uh, allocation in your own personal um, portfolio um, has been, if I'm remembering correctly, fair amount of gold in there. Probably still a fair amount of of cash, some dry powder, but correct me if I'm wrong there. And then I know you had been increasing your exposure to to energy, particularly oil and gas. Um oil and gas sectors now done really well this year um because of the oil price spike. Um a are you making any big changes to your portfolio in general? And B, even if not, what are you thinking about doing with the oil and gas part? Um, is has it has it become more successful sooner than you thought and therefore it might be time to trim or are you just going to keep building? >> Well, obviously, you know, the reason I got into the energy area was not related to the war in Iran. It was it was Yeah. Um, so it was related to just my love for hard assets in general, but also this AI uh technology and the idea that if you really loved AI, you should be buying energy stocks handover fist. >> And they were they were somewhat depressed, you know, >> extremely cheap, relatively speaking. So, you know, I guess um and it's important for your audience to understand I'm an investor long term. You know, I'm not sitting here trying to figure out, well, if we end the war in Iran, uh, oil prices, yeah, they may come down and the energy stocks will get hit, but the AI thing, uh, and the hard asset story are still barely getting started. So, I'm not going to try to sell, you know, and be cute and time, uh, 20% draw down over the span of a week or two when I can just sit tight. I'm, you know, long term, this is what I want to own. So, I'd rather not try to trade in and out of it so much. It's not good for my emotional health. So, >> totally agree. I'm I'm I'm I mean, everybody's different, right? What works for you might not work for everybody watching, but I'm wired much more like you. >> Okay. Yeah. I just um if I have the long-term conviction, this is one thing my dad said to me and it's always stuck with me. He said, "Never lose position in a bull market." Um, and so it takes some intestinal fortitude to be able to stare down, you know, a 10 or 20% draw down, but if you have conviction in where you're headed, it makes it a hell of a lot easier. >> Not turning on the screen also helps. So, >> yeah, that, you know, I've been saying that a lot recently. Some of the best things you can do as an investor is yeah, just just >> turn off the screens and go live your life. >> Um, all right. So, it sounds like no no material change. In other words, no additional sectors you're falling in love with or or ones you had that you were souring on. >> Not so far, >> but I'll keep you posted. >> All right. Well, in terms of keeping posted, Steph, um, for folks that want to follow you and your work, tell them where they should go. >> Okay. Well, uh, macromavens.com would be the place. Um, on Twitter, espo, although I honestly can't remember the last time I tweeted. I shouldn't say that. I'll I did tweet this morning. >> Reposting what you tweeted. >> Yeah. >> So, but I occasionally, it is true. Occasionally, I go into these Twitter rages where I'll, you know, tweet like 30 things in two days and then I'll have a dry spell for another three months. So, you never know what you might get, >> but it's worth it's worth it for those Twitter Twitter torrent from from staff. >> Um, all right. Fantastic. Anything else going on um either with your business or your that let the audience know about any any big events coming up? >> No big events coming up. Uh nothing new to report. Um but I will keep you posted if there is. Always a pleasure to be here each month. So, I'll look forward to seeing you a month from now and uh hopefully we'll have some more interesting things that will have happened. I'm pretty confident. We'll have a lot to talk about again. >> I am pretty confident, too. And and I will just send a hope out into the world that that maybe maybe we'll be talking about the war having ended by that point in time, >> but we'll see. Um all right, folks. And just in wrapping up here, two bits to let you know about. One, as always, if you would like to get some help uh from a professional financial advisor who understands and takes into account all the macro issues that uh Stephanie and I talk about here, um if you don't already have one that is advising you, um and how to make that actionable, all actionable in your portfolio, feel free to talk to one of the ones that Thoughtful Money endorses. You can do that by filling out the very short form at thoughtfulmoney.com. These are the firms you see with me on this channel week in and week out. Um it's just a service to be helpful to folks. It doesn't cost anything. There's no commitments involved. So, you should really take advantage of that if you can. And then lastly, just a reminder, um this so today is this while we're recording this live is Wednesday. On Saturday, Rick Rule is going to be hosting a um one of his boot camps on copper, all about copper investing. If you didn't watch the video that I released yesterday on that with Rick, um you should go watch it. But more importantly, if you want to go attend the conference, um, go to thoughtfulmoney.comconference and you can go register for it. Then, um, Steph, um, you'll, having talked to Rick, you may want to add copper, uh, to your your lens of hard assets that you're looking at here. Yeah. Um, especially not not from a short-term hit standpoint. This is one of those five to 10year secular tailwinds. But Rick just thinks it's it's in his words um not not even if not even when but it's just inevitable in his mind that given the supply demand imbalance for copper that we're going to be price rationing it going forward and the only way that we're going to be able to to to >> you know throttle the demand back is going to be copper price being substantially higher than it is now. And is that notwithstanding anything that might happen in the housing market? >> Uh yeah, in fact, you didn't even bring up the housing market. Okay. I mean, this really was it sort of a couple different factors, but >> I'm I'm oversimplifying it here, but there was the >> continuation of bringing the remaining 1 to two billion people who live without electricity in the world into the electrical age, right? And that itself is just going to require a ton of copper to happen. Um, and it is happening. I mean, it has been the trend over the past several decades. And then on the other end, it's in the developed nations, US probably being at the top of the list that you know are competing on the AI race that's all about electrical generation production. To increase that production capacity, you have to invest a ton in copper. But also with countries like the US, our electric our electrical grid is so outdated, it pretty much needs to be entirely rebuilt and that is going to require just truckloads of copper, right? So you're kind of getting it from both ends of the the demographic spectrum. >> Cool. Well, I will watch that video. >> All right. Um All right. Well, look, Steph, it is always such a joy. Please give Willamina a scratch for us. Um you look great. Fantastic commentary. uh whatever you're doing in your life, keep on doing it. It's totally working. Such a pleasure to have you on here every month. >> It's my privilege. Thank you, Adam. And hugs to Boston and Bodega. >> Oh, you're so kind. I will give it to them. Uh we actually had a third lab in the mix this past week. Um I think I might have told you about this briefly. Um but um there is a really worthy charity here in um >> Oh, you did? a nonprofit here in Reno um called Liberty Dogs which raises dogs for veterans. >> And so you have these people who raise the dog for like a year and a half and I don't know how they do it because you then have to give the dog away to the to the veteran. I mean it's such for a great cause but it's like giving up your child, right? >> We're not quite ready to do that but what we've started doing is is >> we put ourselves on a list to help the helpers basically. So if they need to go out of town for a week, we'll take their dog. Um, so we had a great yellow lab here named Jake. So we actually kind of had a three dog >> Oh my god. >> Yeah. environment for a week and it was a lot of fun. But >> it sounds like heaven. >> Uh, well hopefully we're just doing our little part, but it's such a great um such a great cause. Yeah. And there's what's not to love about having a puppy around for a week, right? >> Amazing. Amazing. A >> All right. Well, Steph, have a great month and look forward to seeing you in March. May. My goodness. >> May. Yeah. years going fast. >> Crazy. >> All right. All right. And thanks so much, Steph, and everybody else. Thanks so much for watching.