A 'Very Precarious' Time For Markets: AI Bubble, Credit Risks & Insider Selling | Jesse Felder

Summary

• AI Bubble Concerns: The podcast discusses the potential bursting of the AI bubble, which could have deflationary effects on the economy, counteracting current inflationary pressures.
• Market Outlook: Jesse Felder describes the current economic environment as increasingly stagflationary, with rising inflation and unemployment, making it a precarious time for markets.
• Investment Strategies: Felder suggests diversifying into commodities and real assets, as gold signals a long-term inflationary trend, and highlights opportunities in undervalued sectors like oil and natural gas.
• Credit Market Risks: The discussion highlights deteriorating credit conditions, with recent bankruptcies and insider selling at private equity firms, indicating potential stress in the financial system.
• Insider Selling: Record levels of insider selling suggest that corporate leaders anticipate economic and earnings downturns, reinforcing concerns about market vulnerability.
• Volatility Indicators: An unusual rise in the VIX alongside the S&P 500 suggests underlying market stress, potentially foreshadowing increased volatility or a market correction.
• Long-term Economic Shifts: The conversation touches on the potential for a significant economic shift, with a declining dollar leading to a rotation towards real assets and away from traditional financial assets.
• Socioeconomic Implications: The podcast warns of growing economic inequality and the risk of social unrest if the wealth gap continues to widen, emphasizing the need for fiscal reforms.

Transcript

You also have, you know, the the uh the potential for a bursting of the AI bubble which could be disinflationary as well. And you know, from that downright deflationary, right? Right. I mean, you know, yeah, if if all of this spending reverses and you get a real kind of Yeah. deflationary impulse in the economy, it could easily probably uh counteract the the inflationary forces in the economy. So it's yeah it's like I said so many crossurrens and and uh very precarious time. [Music] Welcome to Thoughtful Money. I'm its founder and your host, Adam Tagger. Wall Street's partying hard right now with stocks at all-time highs. Unless a significant correction happens soon, the S&P will put in its third year of doubledigit returns in a row. But pressures are building. The AI juggernaut which is driving so much of the US economy and the market's rise these days increasingly appears to be in bubble territory. While on the other hand, a large percentage of American consumers are increasingly struggling under the high cost of living. How will these pressures resolve in 2026? Well, to discuss, we welcome back to the program macro analyst Jesse Felder, founder and editor of the respected market research firm, The Felder Report. Jesse, thanks so much for joining us today. Always good to be with you, Adam. Thanks for having me back. Thanks. Oh, it's a pleasure to have you back, Jesse. Lots to talk about. Lots happened since the last time you've been on the program here. Um, I've got a bunch of questions based off of some of your recent um posts there at the Felder Report, but haven't asked this question for a while. So, you're a good guy to ask it to. Uh, it's my general kicking off question, but I just I'd love to get kind of a high level sense of how you're seeing the world right now. So what's your current assessment of the economy and the financial markets? Yeah, I mean it's a it's a great question. I I think that um you know there's so many crossurrens right now. It feels like more than you know there are always uh a number of them but I think right now it feels like it's especially tricky time and we have inflation reacelerating uh and at the same time unemployment rising. So I think the the environment economic environment is getting increasingly stagflationary with uh a weakening labor market and rising price pressures that are partly due to the tariffs but also I think more more probably to do with underlying macro factors such as demographics and uh del globalization and these types of things that I think we've probably talked about every time you've had me on the program. um you know so so we're getting increasingly stagflationary uh but at the same time the economy GDP P figures are holding up well largely due to the AI bubble so you know the the the massive spending in capex going into data centers and all these things is now responsible for a huge uh percentage of of the economic growth which is kind of holding up the economy right now and so I I think you have you know it's a pretty precarious time. Uh if if you think inflation pressures are rising, uh at the same time that unemployment is potentially going to continue to worsen and everything comes back to, you know, uh being dependent on this massive uh AI bubble uh holding the economy up, I I think it's uh yeah, you could argue it's one of the most precarious times for the economy that we've seen in a long time. All right. So, um let me ask you this. Uh you said rising inflation but rising unemployment. Um at what point does rising unemployment become disinflationary, right? We're just more and more people can't afford to pay these prices, so they start constricting their spending. I mean, that's a good question. That's right. I I don't that's way above my pay grade, honestly. I'm not not an economist but you're absolutely right. If if one of the inflationary factors in the economy is this uh is demographics. The fact that the share of the uh the uh population that is among the workforce has been shrinking putting more pressure on fewer workers to deliver the same amount of you know economic production. uh then you know yeah to the extent that the unemployment rate rises and kind of loosens those pressures that could that could help. You also have, you know, the the uh the potential for a bursting of the AI bubble which could be disinflationary as well. And you know, from that downright deflationary, right? Right. I mean, you know, yeah, if if all of this spending reverses and you get a real kind of yeah, deflationary impulse in the economy, it could easily probably uh counteract the the inflationary forces in the economy. So it's yeah it's like I said so many crossurrens and and uh very precarious time. All right. Well we're going to talk about a lot of these in more detail. Let me ask you this. Here you're talking is a thought in my mind that so much of the economy is being driven by the ai capex buildout right now right and yes GDP is GDP is a measurement of spending. So if money is getting spent it's contributing to GDP. Right. and investing in infrastructure. There are a lot worse things to invest in, right? I mean, you're you're hopefully um doing a buildout that's going to be generating uh future incremental value. Um but but right now, what's is what's driving the economy right now in terms of GDP growth really just money coming off of corporate balance sheets? So, in other words, it's it's it's not necessarily sort of like organic value production. It's like a big bet, right? We're like dipping into savings to say, "Okay, I'm going to I'm going to spend on X and I'm going to hope we're going to get more than X going forward, but but right now it's kind of a grand I don't call it a gamble. It's it's not like this is necessarily an unwise thing to do, but we're we're spending truckloads of money that are coming out of corporate balance sheets, and we really don't yet know what we're going to get from it." Yeah. I I I think what's fascinating to me about this is all of the talk of a bubble, right? It seems like every financial media outlet is calling it a bubble. You have Sam Alman, the Titans themselves like Sam Alman coming out and saying, "Yeah, this this is probably a bubble." Mark Zuckerberg, Jeff Bezos was the latest to call it a bubble. Um, and so, you know, it was interesting to hear Mark Zuckerberg even walk through what are the how do how does a bubble work in infrastructure like this, whether it's the railroads or the dotcoms, you see a massive overbuilding um of of the capex that uh leads to a crash um because you know demand for that uh that infrastructure just takes years to materialize even though we overbuild in in the short run. uh in the long term it's it's a good thing for the economy just like you know the internet having all of that dark fiber that was overbuilt in 99200 ended up being a great thing for the internet going forward because it was very very cheap uh to to to light it up when when the time came when when the demand actually materialized and same thing for railroads and and everything. Um, I I I think that's, you know, it's fascinating, like I said, to hear Zuckerberg talk about this because he said, "Yeah, if we overspend by a couple hundred billion dollars, so be it." Well, it sounds like that's kind of what they're planning on. They know this is how this works is that we're going to overbuild and we're going to have a bust because the demand isn't just isn't there for AI. And down the road this will be beneficial to the economy as we you know create more and more productive AI services which just really haven't arrived yet. I mean the revenue AI you know revenues uh you know in the in the tens of billions of dollars and we're pushing trillions in terms of spending on on the on the buildout. So the re revenue is not there to back it up. Uh I think it's pretty clear to everybody involved that there there will be an o there there already is an overbuild and as you mentioned I think it's a really good point. A lot of this has come out of uh corporate free cash flow, right? In the very beginning, it was Microsoft. We're going to use some of our free cash flow. Alphabet, all these companies have been very asset light and cash flow, good cash flow producers. Now, they're completely shifting where they're spending so much cash into capital inensive um you know uh uses. They're changing their business models. At the same time, as a group, they've all run out of cash. there is no more cash left on the balance sheets of the Magnificent 7. And so what do we start to see? We start to see uh the money coming out of uh you know private equity, private capital, private are starting to realize, okay, for this to keep going, we're going to need you know Meta's going to have to rely on Blue Owl and Apollo and these big firms that have too much money burning their holes in. So we're start we're now into well into the debt part of this cycle. Sorry, sorry to interrupt it. just I'm chuckling because you know and then there was the uh recent uh what executive order uh that said um hey let's let's let's enable um retirement funds to start investing in alternative assets like private equity and private credit did that happen in a vacuum or is that tied to what you're talking about I think it's probably the latter yeah absolutely and and you know a lot of these companies have had uh you know the the you know in terms of private equity they haven't had the the cash outs you know that they've they've been looking for and so they need to to find that. But but I think it's it's very telling that we're into the part of the cycle where Meta doesn't want the you know the further capex on their balance sheet. So we're going to create these special purpose vehicles. We're going to use funding from private private credit to to fund it. And so we're now kind of, you know, not only having kind of echoes of the dot bubble, we've got some echoes of the, you know, the the housing bubble and the great financial crisis. We're using offbalance sheet financing to, you know, and special purpose vehicles to get a lot of these deals done. And I think that's all kind of, you know, not to mention the vendor financing and circular finance stuff that, you know, it's to me it's very clear that this is kind of late cycle um stuff in terms of this cap capex buildout. So, this this begs a question and and uh while you're answering it, I'm going to try to pull up a article that I saw yesterday which basically sort of quantified how much of the um like Nvidia's revenues are coming from circular recycled flows. And it was it was staggeringly big. I I I I knew it was going on, but I did not realize how big of a percentage um of its revenues was. So, I'll try to bring that up so we can comment on it. But, let let me get to the punch line. I was going to work my way to this in the discussion, but let me just bring it up right here. Um, okay. So, if we're in a bubble, and everybody knows we're in a bubble, and perhaps we're in a bubble because that's just what's called for at this moment in economic history. We need a big buildout. It's got to be financed. There's a ton of long-term money that's going to be made, but to make it, we have to get all this infrastructure built out, and we just know that we're going to overbuild initially. Um, it's almost as if I told you at the beginning of the South Sea bubble, Jesse, how it was going to end. I just couldn't give you the timing, right? I could tell you, Jesse, this is going to go up by, you know, x many zillions of multiples from the the first share price. It's all going to come crashing down at some point, but you know that that mania is ahead of you. How do you play this as an investor? Yeah, it's a great question. I I I think that um it's extremely difficult to try and play it on the long side. I think you know Paul Tudtor Jones was just talking about this today that that it's very clear that we're in a blowoff phase. It feels a lot like 1999. You don't know when it turns. And I think he used the the the term you need to have really happy feet if you're long this market. You need to be ready to get out quickly. And I think a lot of people point out to to you know like to say that you know well so many people are calling it a bubble. too many people are worried about it reversing that that's not what the top of the market looks like. I would say if you if you understand bubbles and you really research them and I don't know a lot of people who have done more research than Robert Schiller um you read his book narrative economics and he talks about these tipping points in these narratives and how when you get um these episodes where history clearly rhymes with a previous period it actually makes the market more vulnerable because everybody knows how this thing reverses. So, as soon as start stock prices start to reflect that, okay, maybe we're we're out of the blowoff phase and now into the bust phase, everybody's going to try and get out at the same time because everybody knows how this thing ends. And so, it's a very, like I said, it's not just very precarious for the economy, it's very precarious in the market right now. And Schiller actually wrote a piece for the New York Times a few years ago, not too long ago, two, three years ago, where he suggested that the risk of a crash was elevated during these times when everybody kind of was starting to to come around to the same to see the same narrative. So I think it's probably more relevant today that everyone is talking about a bubble that actually makes the market more vulnerable to a bursting um you know, a crash type of episode in the market. uh when everybody uh kind of embraces that bubble narrative at the same time. Okay. So, um you earlier mentioned, you know, some signs you're seeing that are sort of classic of late stage. So, um again, kind of getting down to brass tax from an an investor standpoint right now, um what do you think is prudent? Is it is it hey let me get out of the pool and leave stuff on the table. Is it to just work on having really happy feet and I'm still dancing but I'm like right next to the door. Uh is it using hedges? Is it shorting? Is it what what are I'm not I'm guessing there's a lot of It's a great question. There's a lot of that Chuck Prince talk. You know the music still playing. So and I hate to mention it because it it ended out really poorly for Chuck. Yeah. Right. I mean but there's a lot of that kind of talk right now. Well, you know, markets are still going up. you know, they're still responding to these open AI deals with AMD going up 30% in a day. And so music's still playing. We're still, you know, but but when you hear that kind of talk, yeah, it is absolutely reminiscent of the of the Chuck Prince quote that was literally at the top of the the dot bubble before the market rolled over into very painful episode. I would just say there there are actually uh several indicators that I'm watching right now that make me concerned right now for for a potential reversal. One of those, as I mentioned, we're entering into the credit stage of this uh of this um episode, this this capex boom where the companies are turning to private capital to fund a lot of this. Well, go look at the stock prices of KKR, Apollo, Aries, you know, these big private managers stock prices are tanking right now. Why are they tanking? Well, we've had two large bankruptcies um you know over the last couple of weeks in Tricolor, which was a uh used car uh retailer and lender and in um First Brands, which was a auto parts company. Both were massively overleveraged and took on more debt than any of their creditors understood. Probably two to three times more debt. And this is the problem, you know, that Jim Chanus was recently talking about with private capital is there's so many different layers of debt um that, you know, it's it's actually hard to understand how much debt a company has taken on. My point is that if if we're starting to see a turn in the credit cycle, and that's literally what these stock prices are are saying to me right now, then it's going to be uh increasingly difficult for these big capex plays to continue to turn to Apollo and KKR, Blue Owl, etc. for tens of billions of dollars that they're going to need, hundreds of billions of dollars that they're going to need to build out if the credit cycle is turning and these guys are going to start to come under greater pressure. So, that's something I think that people aren't paying attention to. Um, another thing I would say is those guys, those founders at those firms have been some of the largest insider sellers that we've seen over the last two years at a time when insider selling is hitting all-time records. Not just in terms of dollars, but the sell to buy ratio over the last two years, 24 month sell to buy ratio is the highest in my data set. A lot of that is Mark Rowan and you know these guys, these big private equity guys founded these firms are cashing out hundreds of millions of dollars. They're usually good timers of their shares. So that's another sign to me that credit cycle may be turning. But the bigger message from the insider activity is that insiders are really good timers in aggregate as well. So when you have these massive periods of insider selling, it's a really good sign that economic activity and earnings are going to disappoint in the quarters ahead. So it was literally the start of 24 um you know almost two years ago that we really saw this big spike in insider selling that has about a two-year lead on the economy and earnings. So literally that we're we're coming up to that period right now where inside the insider activity is forecast a downturn a steep downturn in earnings that could happen this quarter next quarter potentially in the first quarter but insiders are telling you the economy is going to turn that you know and so and and then the final thing I would say is as the markets keep going up we're seeing a very interesting anomaly in the market where market goes up S&P goes up volatility VIX volatility index goes up right actually last week the S&P 500 was up 1% and the VIX was up 8%. In the same week this is very rare typically right volatility comes down when stock prices go up. The only time the only there's only been two weeks other two other weeks in the last 30 years where we've seen S&P 500 up 1% VIX up 8%. Both of those were in late 2017 in the leadup to Volmageddon before the uh that that those short VIX ETFs ETFs blew up. So I I think you know that points to there's something under the surface in the markets. Um it it could be the dispersion trade. A lot of institutional investors have been uh you know essentially selling in uh index volatility and buying single stock volatility. Um it could be uh the fact that um you know the options investors are just getting a little bit more nervous than equity investors. I I don't know. But the the options market is telling us that there could be a volat another volatility event in the near future. At the same time as you see the big private equity guys stock price is starting to tank and you know the the timing of this insider selling is really going to come to head very soon. So, I'm starting to see these types of signals that say, "Hey, it's time to really h if you're in the market, you better have super happy feet like Paul Tudtor Jones said because once this thing reverses, uh, it could get nasty very quick." Okay. Um, whole bunch to respond to there. Um, I'm glad you brought up insider selling because I was going to ask you about that because you you've mentioned that many times in our recent uh or interviews over the past couple years, but I think it's important to understate what you said there, if I heard you right, which is it tends to sort of have a two-year lag to it. Um, and so you've been seeing, you know, over the past two years as we've been talking the pickup in insider sales and you're now saying we're kind of now entering that time period where we should the lag is now behind us and we should start seeing the actual manifestation of this. I think if I remember correctly, did you say that that was like your um you know there's no one perfect indicator, but if you were going to be if I only had one, it would be that because in aggregate, if you think about it, the the leadership of the Fortune 500 companies, you know, they have their finger on the pulse in aggregate, their finger on the pulse of the economy. they they can see better than anybody else what's going on with uh you know their underlying businesses how how you know people potentially uh overpromised and are going to potentially underperform in the quarters ahead and how the stock prices you know what discount that or not um and I think it's very clear right now the insiders are saying stock prices do not discount what's likely coming in the next six to six to 12 months and as I mentioned, you know, actually one of the charts that I that I um I I highlighted recently to my subscribers is uh you know, how um the insider sell ratio leads uh the ISM composite and the ISM composite has just started to roll over and right in the timing that the insider said it should about you know 18 months ago. So uh so yeah and and ISM composite is a good leading indicator for for corporate earnings. So, so a lot of this uh is is pointing to um you know analysts are forecasting record earnings, record profit margins in the quarters ahead. And I think insiders are telling a very different story. And I'd also just highlight too, this is something I haven't spent a lot of time on uh writing about, but when I looked at it recently, I said, "What what's going on with these these big private capital firms? Why are the stock prices getting hammered?" you see as I as I mentioned the rapid um and surprising bankruptcies of first brands and umricolor that's kind of sent some some shock waves through the markets that maybe there's been too much money chasing too few deals and and uh you know and and uh really uh committing too much capital into um you know the into bad deals. Uh, and when I when you look at it, as I said, you know, these guys have been some of the biggest insider sellers that we've seen over the past couple years. And historically, they're good- timers, right? So, you know, a couple of these guys have, you know, sold a half a billion dollars this year for the f it was the first insider sales since 2021. So, these guys know they know how the cycle works and and they're really good um, you know, obviously financial experts and even more than the Fortune 500, right? they're lending money and giving uh you know investing equity into uh you know a lot of smaller businesses, private companies obviously across America and so and sitting on the boards of those companies again they see what's going on in the economy and they know uh you know better than most um what's you know how things are trending. So, it makes total sense. And I also wonder here, Jesse, you know, one of the things that I've I've um explored in previous interviews with folks is the fact that, you know, private credit has really exploded in terms of a funding source for corporate America and that is not regulated the way that the banking system is, right? And so the the question it raises is is what are the quality of these loans, right? I mean, we we we don't know. And and is this setting up uh the potential for, you know, a surprise to the to the general system where it's like, oh my god, sort of like this to the subprime industry. It's just like, whoa, wait a minute. You know, we we didn't really have transparency into there. We assumed that they were lending rationally, but man, it looks like they gave a lot more loans that they shouldn't have, and now this is becoming a systemic issue because it's not necessarily just those companies balance sheets, right? I mean, aren't the aren't the banks somewhat even though the banks are regulated, I I believe they also have some exposure to the private credit world because in a lot of cases, they're lending to those companies to then lend. Yeah, I think JP Morgan was a big lender toricolor. So there's there's a lot of it, you know, going on where these companies um, you know, take money from the banks and then take money from private capital on top of it and uh, you know, they do do that through um, you know, separate LLC's and things that aren't that aren't, you know, on the surface maybe affiliated with the company, but clearly are going to finance inventory or, you know, whatever they're doing. and and you know there's been no fraud proven at at these two companies but the fact that they imploded in such short time and nobody really understood how much debt they were taking on suggests that there there potentially could be and as Jim Chamos has said that they're probably just the tip of the iceberg here. There's probably been tons of this kind of stuff going on and I think like I said that explains why the stock prices of these guys is starting to to roll over really hard even as the market goes straight up. Yeah. um is well last point I'll just say on this is I I look I I've said for a long time I think the easiest headline to predict is um oh my goodness all these buy now pay later loans are going belly up and who ever could have foreseen this right but I think private credit is is not too far away from that I mean there there's plenty of great loans being made in the private credit space so I'm I'm I'm painting with a really broad brush here but I think when you have a a large fast growing and um opaque uh lending environment. Uh rarely does that work out great in the long run. Yeah. And and I would just point out too, there's been a lot of coverage over the last couple years about the growth in payment in kind lending PIK loans, which is a lot of these companies who've taken on debt from private capital uh are not able to make the interest payments on their debt. And so rather than default them, this is one of the reasons why defaults have been so low in the credit markets. rather than default them. It's in the interest of these private credit companies to say, well, why don't you just add the interest to the your debt balance, you know, every month and we'll just call that payment in kind. You're paying us in more debt. So, that's imagine, you know, if like you never even paid the the minimum payment on your credit card and you just let it, you know, grow exponentially until at some point in the future you're, you know, you're going to be able to pay pay it off. Well, there's been so much PIK loans going on right now, you know, for for so long that I think that that's that's also, you know, a potential problem, too, that at some point they'll be able to have to recognize, okay, these are not going to get paid back. We're going to have to default these guys. Oh, yeah. It's just crazy. I mean, think about the the mal incentive that gives the consumer. Yeah. I just won't pay. I'll I'll build up this massive balloon balance and then I'll just declare bankruptcy and Yeah. You know, the guy's just going to have to eat it, right? Yeah. And because I'm not in default, I can actually go borrow from somebody else in an offbalance sheet arrangement, you know, like it's just it's madness. It it is madness. Okay. Look, um Okay. So, I do want to talk some more about how this could all end up, but but again, in the spirit of pulling things I usually have in the end of the interview to hear. Um so, very precarious time. Um if you're going to be long, you know, have happy feet. Um so, H how does one invest in this market environment? Um I I I know you've had a series of things that you're interested in and I'd be curious to hear how they tie into this like commodities and whatnot, but but what are you looking at right now in terms of an investing approach? Yeah, I mean I think one of the big questions I've been asking myself is is what is gold telling us? Right. Gold price has been going exponentially higher. Um, and you know, some of that is is uh, you know, people just getting more enthusiastic about owning it. Some of that is is probably a message as to the creditworthiness of major sovereign, you know, uh, governments and their ability to pay back debt in in uh, you know, dollars that aren't debased. Um, you know, but I think some of it too is gold is a really good leading indicator of the comm of the broader commodities space. Um, and it leads by about, I don't know, a year to year to two years. And so, if you just overlay that, you know, like the Bloomberg commodity spot index over gold lagged, you know, lagged a year or two, gold does a really good job of telling you where the broader commodities markets are going. So, I I think gold is is saying the biggest message that gold is saying right now is that uh inflation is here to stay. Um, inflation is going to continue to rise. We're four and a half years already above the Fed's Fed's target and it's not going back to target anytime soon. Um, and the next leg of this is likely going to be uh the, you know, the the broader commodities space catching up with gold. I I've been surprised with actually copper strength uh recently. um you know but but the whole broader space you know one of the the things that I look at uh you know that that Garing and Rosenwag has pointed out it's a great way to value commodities it's just re value them rel relative to each other well outside of the 2020 low in the oil price when it went negative oil is cheaper to relative to gold than it's ever been in history um oil is extremely cheap I think that uh you know you could say that about the broader commodity space too so I I I think gold is telling you that in uh we yeah it's already it's already uh discounting an increasingly stagflation environment like I said at the outset how you play that is I think gold's already already discounted that trade the rest of the commodity space has not so I think there's a real opportunity in the broader commodity space to say to own something that's you know essentially historically been the best way to protect yourself from from inflation is through owning energy shares and other commodity you know producers and and the commodities themselves. And so I I think that uh you know that's one way is make sure you're diversified into other asset classes namely real assets namely real assets and and uh you know gold has obviously been the main one that's worked really well but the rest uh are still still I think great viable things even including tips um inflation protected securities. So, but I I think right now there's a real opportunity in commodities gen uh specifically. Okay. And it sounds like I mean this is sort of good news, right? You're you're maybe nervous about stagflation continuing from here and maybe you missed gold's rise. Um you didn't listen to a lot of the folks on this channel, including you over the past years. Um but hey, it's not too late. there's a train that that looks likely to leave the station and and maybe build up speed pretty quickly because it's trying to catch up to gold and that is the greater commodity complex. I was going to ask you about oil so I'm glad you went there. Um I given the opportunity in the precious metals and and specifically in silver which had been lagging gold when silver got to $35 an ounce on X. I don't know if you saw Jesse, but I gave myself silver eyes the way that the Bitcoiners have given themselves, you know, laser. Yeah. And uh and I sort of asking around like, "Anybody else, you know, going to do, you know, interested in doing this?" And um fortunately, I don't always time things well, but I mean, silver futures are what, knocking on $49 an ounce the day we're talking here. So, it it really moved in the way that that I had expected it to. And um somebody else recently asked me, "Well, so what's next?" And I'm thinking, you know, maybe maybe it's time to give myself oil eyes pretty soon. Um, given how undervalued that seems and the potential opportunity that you're talking about. Yeah, I I think that's that's a great place to look. I I think if you look back two, three years ago, it was really hard to be a gold bull, right? You had uh, you know, Fed raising interest rates and we thought, oh, you can't fight the Fed. You know, when Fed's raising interest rates, you can't own gold. and gold disconnected from, you know, the real interest rate models. Everybody thought, oh, gold's going to have to, you know, go back down to a thousand an ounce. But it was it was really hard to be to be bullish and and that was actually a really good sign that it was a great time to be, you know, bullish on the precious metals. Nobody wanted to own them. um they were left for dead despite the fact that uh it's it's very clear today that you know the fiscal situation in all of these major developed economies is continuing to deteriorate and you're seeing this you know play out in the long-term bond market. Look at 30-year yields in in Japan hitting record highs. uh in in the US we're kind of just off the highs, but Germany, France, um you know, we're see UK especially, we're seeing um you know, the bond markets continue to to send signals that okay, we're we're worried about committing 30 years to some of these governments and you know, because of their ability to kind of get their financial house in order. Um you know, that was the bull case for for gold two years ago and it's played out. Um and and people are you know uh people are jumping on that that narrative. Um I you know I think I think oil is where gold was 2 three years ago today where uh the fundamentals are changing in very very bullish way. I don't think people appreciate the fact how much uh all of the major frackers have high-graded their production. We're going to just all we're going to run is our is our most efficient wells and we're going to try we're going to basically run them dry. We're not going we're not drilling. You look at uh drilled but uncompleted wells uh you know have have have dried up and um you know US oil production is potentially going to peak and roll over right now. Uh and you know and so and at the same time demand continues to grow. Um we keep hitting record highs in terms of demand, right? World is still still runs on oil as much as many people would love for that not to be the case. And the and the way that oil goes is in these big cycles where you have a a new producer that comes on and creates a big oil glut market goes into a long-term bare market and then that producer the growth you know their growth you know stagnates or starts to fall off and actually peak and reverse and then you get you set the stage for the next big bull market. So this last uh last big u you know bare market was created by the growth and fracking. Right. Right. The show miracle. Yeah, this this huge new uh growth in supply came on market. We had oil price crash in 2014, 1515, 16, go negative in 2020. And now what's happening to this to to the greatest the single greatest source of of of oil production growth over the last 10, 15 years? Well, it's potentially peaking. It's we're perpetually, you know, past peak production in the US here and we're at least at these prices. But yeah, no, no, no. in terms of the perian is really where all the the rest of the growth is and it's potentially uh you know reach its match max production levels because the future growth in the perian is going to come from less productive wells. all of the good wells and this is what we've seen with every other area uh you know of of of shale you know production is is uh the good wells run dry and then it becomes much much harder to to extract the same amount of oil out of the same number of wells and so the the productivity of those wells declines we're at that point now in terms of the perian which is the last area of growth in the US so you're have you're seeing this you know this this uh major change in terms of production where the single greatest source of of oil production is, you know, entering into kind of its later later stages at the same time, uh, demand growth continues to grow. And I'd even point out too that, you know, all a lot of the estimates for for oil demand were based on the mass adoption of electric vehicles and these types of things. And now we're seeing a huge decline in in the adoption of electric vehicles. And that's not being reflected in demand for oil yet, and it will be. And so I so so I think right now the the future fundamentals for for oil are getting more and more bullish every day and uh investors have literally never been more bearish. You look at the commitment of traders report managed money has its lowest uh you know uh net long position on record. People have never been more bearish on the oil price today and the fundamentals just keep keep setting up longer term more and more bullish. So given that Jesse how are you looking at playing it? Is it the the the largest oil producers? Like you got great brands that are trading at a discount. Is it the commodity itself? Is it the midstream companies? What's most interesting to you right now? Yeah, you know, I I actually owned a lot of the uh midstream um infrastructure companies, pipeline companies. I owned for for the last five years. I'm I'm a lot more interested in the producers today. And where we've seen the most interesting insider buying over the last few months is actually in the offshore um uh equipment companies uh you know which is which is interesting to me. Um you know the big uh offshore companies Trans Ocean and uh Noble Energy and and uh you know a couple others. It's actually been interesting insider buying in in the entire group in the offshore sector. So I I haven't had enough much interest in the you know services companies until now until the last few months when I've saw that kind of big big buying among the offshore companies. But I think generally the producers um are attractive. You can buy accidental petroleum today at a cost basis that's below Buffett's you know right mo most people you know what's what's Warren buying? I want to you know I want to know what Warren was Warren's buying. Uh well you can buy Oxy below his cost basis today. nobody wants to own it. That that's another sentiment sentiment signal for you. So, I'm interested in the in the offshore services companies and uh generally the producers like like accidental. All right. Um super interesting and I sense we'll be talking a lot about this going forward. Um let me ask you another question about energy. Um, so this is less oil related, but um, even if there's an AI bust, um, it it seems like, you know, that that that could that could really crater market prices. Um, but it seems like that the winning the AI race is a top strategic imperative at the sovereign level, right? So, sort of come hell or high water, the US is going to do whatever it takes for the US to have the best AI out there in the world. And that race, as I understand it, is largely going to be won um yes, on software, but also on access to plentiful cheap energy. And uh and specifically electrons. Um, when you I'm sure you've seen the same charts I have, Jesse, about comparing China's electrical production capacity and its growth compared to the US and the US is just flatlined and left in the dust. Well, ch China is almost like a vertical line, right? So, we've got religion around this. Hopefully, we're going to start closing that gap. Um but that just means just gargantuan buildouts in um rebuilding our energy grid um our electric electrical grid. Um what what's the scope of that opportunity and where I mean it's demand for natural gas, right? I mean when you look at uh how are we going to meet this demand for AI? Um you know could potentially come from nuclear uh right? I mean, but but it's going to take a long time under the best case of scenario. Exactly. Nuclear takes a long time to to come online. Um, you can bring on natural gas plants much much faster. In fact, there's there's uh one company that I was studying recently. I can't um remember quite remember the name. I think it was uh New Fortress um Energy and they were building kind of these um almost temporary natural gas fired plants that they could get up and running in, you know, just a few months time. Um and they were going to start uh pitching this, you know, they were already doing this in, you know, kind of for like island nations and things because they're also transporting um natural gas liquids. Um but they were going to start pitching this idea to the to the uh you know data center companies. We can literally we'll build you a power plant your own power in months right next to your data center. Um and and so yeah I I think right because uh you know green energy uh is not an option for a lot of these companies. It's not reliable enough. They can't rely on wind or solar. Um you know I think a lot of these actually big power companies have said hey look one way we can get uh you know approval from the public to um you know allow you to to purchase up all this electricity demand is if we flex it and we say okay when demand gets too high we're going to cut off power to the data center right and uh you know and that that's way we'll kind of keep prices from going crazy for for the rest of our and the data centers say we we can't do that right you can't just shut us down on on short notice and you know so they need uh consistent powers and natural gas is really kind of the most obvious way to get that done and so yeah if you know as I say uh you know production of these these uh fuels is potentially peaking in the US at the same time demand is surging right that I mean that's that's a you couldn't have dream up a more bullish case for the fundamentals for for for a lot of these companies okay there might be some societal ISS to work through, but as an investor, the the imbalance really works to your favor. You know, it's kind of interesting that Nuclear, which personally I'm a huge fan of. Um, that's the horse that bolted out of the barn immediately on this. Um, but of course that's the one that's not going to be realized for a decade plus, whereas the more immediate stuff hasn't really moved that much. I mean, it's it's actually, you know, terrifically ironic, right? We have Plug Power, which is a stock that I've watched for 30 years now, or you know, maybe not that long, but it was a high-f flyier during the dotcom bubble because everybody thought, you know, hydrogen power, we're going to, you know, we're going to need all this hydrogen power. And, you know, boom and bust. 2021, same thing. Um, plug power went to the moon. Stock price is down 99%. in the last, you know, few months, plug power started to take off again because, okay, well, maybe we'll need tons of hydrogen power, you know, to kind of make up, you know, the difference in a lot of this this demand that we need. And yeah, it's just ironic that you get all these alternative things when you have abundant natural gas here in the United States that is the most consistent and easily to deliver to to meet these needs. Uh, but investors haven't haven't quite come around to that uh way of thinking just yet. But as as Jim Jim Grant likes to say, right? You know, successful investing is about having people agree with you later, right? I want people to I want people to like my gold thesis later. I want people to like my energy thesis later. Right now, it's gives me an opportunity when people don't like it to to buy it at at uh unreasonably low levels. Okay. All right. Well, all right, folks. Hopefully, we've given you a lot of really interesting um compelling uh investment opportunities to go consider here. That being said, I want to get back to the AI part of the discussion as well as the cost of living part in the All right, Jesse. So, if things go the way you think they're going to, um I'm I'm resisting asking asking the question as how bad could it get, but maybe, you know, what do you think is more likely than not to happen? um uh as this whatever reckoning needs to happen here materializes. Let me just note one or two things um from stats I pulled off your blog. Uh I guess I'll mention this one. Um uh Julian Garin argues that according to one economic model, the AI bubble is 17 times the size of the dot bubble. Um, now obviously the the economy is bigger than it was during the dotcom days, but it's not 17 times bigger by any stretch. Um, so obviously some sort of material correction in that AI bubble would would have seismic effects, I imagine, on the economy and certainly the financial markets. Yeah, you know, I it's it's right, like I said, I'm not an economist. Way above my pay grade to try and forecast the economy. I will say that one of the interesting things about the.com bubble was NASDAQ went down you know 90%. And we had a relatively uh you know um painless uh recession relative kind of like to the great financial crisis. Right. Which unless you worked in Silicon Valley Yes. Yeah. It was it was a much more painful for the for the broader economy. It was much more painful in 2008 910 than it was in 20012 for for most people. Um and that was because there was kind of a transition, right? We transitioned and I and from um you know kind of the tech bubble into something else and and Alan Greenspan blew a housing bubble to try and to try and uh you know ameilerate the damage from from the tech bubble bursting. But there was also transition from where what what happened in the early 2000s, energy stocks started to do really really well. Precious metal stocks started to do really really well. small caps and value stocks started to do really really well. And so there's this rotation and and behind that was a peak in the dollar, right? The dollar went through an incredible surge through the through the late 90s into the early 2000s. Peaked, rolled over and went into a 10-year bare market in the early 2000s and with that coincided with a uh a lost decade in the stock market, decade plus. I think we're we're at a very similar time now where the dollar has had a great run until very recently until this year. Um it's had a 10-year plus, you know, bull market. It's potentially, you know, already peaked and rolling over into a longerterm bare market driven by fundamentals, right? The dollar is dramatically overvalued. This is a lot of what, you know, Donald Trump wants to try and address is the undervalued, especially Asian currencies against the dollar. So I I do believe that we're in a in a early one you know year or two of a of a longer term bare market in the dollar and that is precipitating will precipitate a rotation out of financial assets and part of that will be potentially a bursting of the AI bubble but also you know will be uh you know h have to force investors to invest in things you know what does well when the dollar's declining well it's not stocks and bonds it's real assets it's gold it's these types things. That's another message that gold is sending right now is is officially the dollar bull market is over and we're now entering a different phase, a different a different type of cycle. And so so I I think that dollar um you know bare market means that we're probably going to see a rotation towards uh you know the the the uh old economy value stocks these types of things that did well in that period from 2001 to till you know 200 uh 8 n 10 11 you know when the precious metals peaked and so uh yeah so from that from an investing standpoint I think the the key is you know I don't really know what the economy is going to do but I because you know there's too many wild cards right the the AI thing could be disinflationary but the Fed could print money and you know we could see uh you know fiscal dominance and all kinds of different things but a lot of those things uh all point to one investment thesis and that is own things that do well when the dollar is in a long-term bare market and and that is you know these types of commodities um and uh you know real assets. So I think that's the shift that that's ahead and that's the the the best way I can think of to kind of prepare yourself for however this you know the the do the AI bubble you know plays out. Okay. Um that's all very helpful. Let me let me transition to let me put it this way. Um is it is it safe to say that if there is a material repricing in the AI uh space, in other words, um folks begin to realize that you know what, we're we're not going to realize any of of this uh or we're not going to realize nearly as much uh of this value on the timeline that markets are currently pricing in. uh that you know stop folks start believing the Sam Alman's of the world and say you know what I I got to I got to discount this stuff right so if there's pick a number 25% 30% 40% repricing in those stocks it's probably going to there's going to be a tremendous negative wealth effect from that simply because those make up so much of a huge percent of the current market capture you're nodding as I'm saying this so so if that were to happen no guarantees if it were we would expect that would that would hurt uh the um affluent part of society that's that's really kind of keeping everything looking fine right now. You know, the averages look fine, consumer spending and all that type of stuff. But as we know, it's largely coming from that sort of top 10%, maybe top 20%. Everybody else is feeling increasingly pinched, which we're going to talk about in just a second. But those folks are going to feel it because they've been riding the asset price inflation that uh has been you know turbocharged with all the um first monetary and then fiscal stimulus coming out of co the fiscal spigots are still running strong. Um so you know they're the ones who are going to really take that and that's probably going to crimp their spending right and so that'll that'll have an impact on the economy. How much? We don't know the everybody else won't be in injured that way, but they will be injured to the extent that a slower economy means layoffs, right? Um but maybe that might bring the wealth gap a little bit closer in the end. And even though no one's going to be feeling great, maybe maybe that's the silver lining there. whether or not that happens. Let's flip to the other side of the of the coin here, which is um if you don't have assets, all you really have is the increased cost of living, and that only gets worsened the more the dollar weakens from here, right? Um how concerned are you about that? You had a whole bunch of charts. I don't necessarily need to bring them up here, um to make this point. Um but that uh you know the the the bottom I'm going to say 80% is getting increasingly um left behind disadvantaged. Um we're seeing you know all sorts of things like um uh you know Google searches for consumers under distress. Right. Right. you know, um, uh, and I, you know, I have no idea what kind of a timing mechanism that is, but it's certainly showing that people are increasingly feeling it's hard to make ends meet. Um, and, uh, the the kind of the the key uh, kicker in the article that you wrote about this topic, you quoted Peter Atwater, and he's the one who coined the term a K-shaped economy. Um he basically says it's not hard to see if left unaddressed the feelings that accompany uh extreme economic inequality can foster revolution. And this is you know Stephen talks about or sorry Peter talks about the four Fs. Um, and I forget all of them, but the the the last one is e f it, right? It's just where people just kind of throw. They're like, look, you know, anything that was restraining me before is gone. You know, all bets are off now, right? And and of course, this is history shows moments when the populace does that out of frustration. Usually very bad things tend to ensue next. So what are your what are your thoughts about kind of the the trajectory here of this this underclass of say the bottom 80% and uh do you see this trajectory changing in any way that prevents us from getting to an effort moment like that? Yeah. You know I think I I love Peter's work. I I think it's just Yeah. He he coined the the term the K-shaped economy. And I really should have brought that up at the outset because as you point out one, it's not just the AI capex bubble that's that's holding up the economy. It's the wealth effect. You know, it's driven by those AI stock prices that are making the wealthy feel even wealthier and we can go spend and and so it's holding up spending uh consumer spending to an to a degree, too. So, it's it's having an even bigger impact than than we'd like. And and the fact that uh you know, the the economy is probably more dependent on that wealth effect than it has ever been before is absolutely um you know, very concerning. Um and so and so I I think that yeah that that uh it's it's very important to to kind of keep that in in mind that um yeah that the lower shape of the the lower half of the K essentially all the consumers that don't own assets are really really struggling. You know, this this kind of brings to mind too that this, you know, when Warren Buffett first wrote introduced his Buffett indicator back in 1999 2000, he highlighted the fact that corporate profit margins at the time were elevated. And he said that cannot persist for very long without creating political problems, right? the the lower half of the K is not going to accept the labor share essentially a smaller share of the economic pie for very long before people get pissed off and and rebel against against the status quo. So when you look at a lot of these things that are that are going on in the economy right now, one of the other things that's holding up the economy is this massive fiscal deficit, right? We have never run a fiscal deficit essentially this large outside of recession. And so we're we're running and outside of wartime. Yeah. Yeah. We're running this massive fiscal deficit in when the economy is still growing. Like what the heck is going on? That huge deficit manifests in corporate profits, right? And so I think people, you know, will start, you know, how do you fix a lot of these things? Well, they all kind of point back to the same thing. They point back to fiscal, right? Uh, you know, the debt markets are starting to worry about fiscal. we have uh the lower half of the K is starting to get pissed off that all this fiscal stimulus is going is manifesting in corporate profits. They don't know it. They don't think about it that way, but that's how it works. And so, how do you fix this? Well, you got to you got to fix fiscal. And what does fixing fix fixing fiscal look like? Means dramatic spending cuts, raising taxes on the wealthy, combination of of those two things is really the only way you fix it. That, you know, is a huge bullseye on corporate profits. corporate profitability, right? You cannot fix fiscal without re without re you know jiggering that that slice of the pie and uh you know which you know means more is going to go to the boat in the lower half because corporate profits are going to come down and so I I think yeah we're we're kind of coming back you know full circle to a lot of these things that we were talking about. So that's down the road somewhere. I don't know what it's going to take to get there. It could take, you know, a crisis in the bond market um before something like that happens. But the people who are are looking at price to earnings ratios today and saying, you know, 25 26 times earnings, maybe maybe it's not that bad. When you look at it, yes, it's at the highest, you know, essentially range it's ever been and it's built on record profit margins. You're assuming those record profit margins are sustainable indefinitely into the future. that assumes that the lower half of the K is never going to get upset enough to say, "No, no, no, no. This needs to be rebalanced. We need to we need to do so." A lot of these things kind of point back to the same thing. If you do get a some type of a rebellion, I mean, we're not talking about like, you know, uh, you know, physical violence, but it could just be a political, right? It could it could be a President Mandami, right? People vote for a redistribution, right? um in some respect that is a huge bullseye as I said on corporate profits. So you know that that's likely coming down down the road is there's going to be re redistribution somehow. Um and the longer it goes on that the lower half of the K suffers with inflation and they don't benefit from assets the the greater that risk becomes. And that's probably something that uh most people aren't paying enough attention to attention to. Um I think more and more people are especially those on the the bottom half of the K or as I've been saying and I and I have traded um DMs with Peter on this um I I I've said we're at risk of of the K-shaped economy metastasizing into a lowercase I-shaped economy where you have a dot at the top that's the affluent few who are doing fantastic and then everybody else is the stick of the eye just getting left increasingly behind. Yeah. And I don't know if we, you know, if if the political revolution comes before we fully get to that lowercase I or not, but I feel like the closer we get to it, the higher the probability for, you know, some type of um increasingly disruptive, you know, social push back becomes. Yeah. Yeah. And there's been so much great work written, I mean, you know, the fourth turning and and things about, you know, how these things go in cycles. Ray Dalio's written about it mostly from a from an economic standpoint, how, you know, you get the 80-year debt cycle and at the end of that, you get a, you know, we're seeing a lot of what happens at the end of of a major debt cycle, at the end of a of a long-term, you know, at the end of a fourth turning. And so, yeah, these are these are risks um that are not being reflected in in markets at least. Okay, I've got a final question for you on that, but but let me wrap things up here first because we're at the end of the hour, and Jesse, thank you. It it it's always so fun and fascinating and talking to you and today has been absolutely no exception. Um key question. So for folks that would like to follow you and your work in between now and the next time you come on this channel, where should they go? So the felderreport.com is my website. Um I put up as you mentioned a free blog post there once a week highlighting usually five of the most interesting things that I found during the week. So a lot of time that's an article like you know Peter Atwaters. um it's a chart or two. Uh it could be an interview. Um but a lot of it is kind of you know these that's you know based on the research that I do to kind of track a lot of these narratives and themes that I write about um you know for the for the the rest of my subscribers. I have a premium and a pro product too where I actually highlight trade ideas and and a lot of these macro themes in much more depth. Um so yeah the felderreport.com is my website and there's a number of resources there to take a look at. All right. and it is an excellent resource. Um, Jesse, when I edit this, I will put up the link, uh, there on the screen. Last question for you, Jesse. Um, so, uh, you know, you you just talked about sort of this knife's edge. I I I guess that we're sort of walking as a society here of trying to keep the party going. Um, where we have a lot of sustainability concerns about that. Um, just again on on on what's what's driving society, the AI side and all that type of stuff that we talked about on the other side is the fact that the more we succeed at pushing the status quo, the more of the population we push into the dispossessed side of things and that that has its own flash point at some point in the future. um for the people who are watching this video. You know, part of this channel is to just give them a sense of exactly what's going on here, good, bad, and ugly. Uh but to hopefully make sure that they no matter how this unfolds in the future, they end up on on the best side of that possible. So, any parting bits of advice for that person that is wrestling with these um you know, maybe more short-term market things that we've talked about, these more longer term macro things that we've talked about, but but how would you kind of counsel them to to try to survive as best they can at this moment in history? I you know I I think that there's been you know from a from a big picture level there's been a long-term bare market in diversification right the the less diversified you've been in recent years the better you've done and that's encouraged people to uh you know go from you know okay I'm going to have an asset ass allocation model to okay I'm going to have a 60/40 okay now I'm just going to have stocks okay now I'm just going to have the S&P 500 okay now I'm just going to buy the magnet significance 7. Okay, now I'm just going to buy the triple levered Nvidia ETF and get narrow narrow narrow narrow the diversification down, right? I I think we're going to uh we're on the cusp of a of a bull market in diversification where it's going to make a lot of sense to uh to own a lot of different things and not be overexposed to any one theme, any one area of the market, any one asset class. And so what that looks like is, okay, if you want to still own some equities and you still want to play the upside dirt, fine. Own some other things, too, that are going to protect you if the AI bubble bursts. Um, you know, we mentioned a ton of them during during this uh during this last hour. Um, but I would just say diversification, diversification, diversification. Own uncorrelated things. gold is is a is a is sending a message in that right now like look you don't have to own these you know be 100% in AI stocks to do well in the markets. Um and that message is going to be reinforced I think by a number of different asset classes globally uh over the years ahead. All right, great answer. I'm I'm gonna uh I'm gonna squeak in one last question here even though I said I wouldn't. With gold, gold has had a phenomenal year. um you know it is probably sending it's the messenger of an important message as you've said here in terms about the dollar. Um gold could very well have a pullback here given how far and fast it is has moved. Um, beyond just the short term, do you think the message that gold is telling is over or do you still are you still relatively optimistic about the the longer term outlook for gold? And by longer term, let's say the next, you know, one to four years. Yeah. No, I I I'm still optimistic. I, you know, I'm not as heavily overweight gold as I was. And that's just largely due to, as I said, that that oil to gold ratio and other indicators that suggests there's better value in other areas. But I don't want to be out of gold. I don't think we're near a longer term peak just yet. I you don't have all the signs in place yet that suggest that retail has jumped on board. I mean, you go to CNBC and they don't even have one story on the gold price. So, you do see them at other places in the Financial Times and whatnot, but I don't think we've seen the the signs of of uh you know, that you'd see at a 2011 type uh you know, early 80s um bull market high in the precious metals. We'll probably get there before it's all said and done. So, you know, I I want to own some, but I think there's better value in other areas. All right. Thank you so much. Really appreciate it. Sorry for slipping that qu last question in there, but it occurred to me that there a lot of people who, including myself, who wanted to hear your answer to it. Anyways, Jesse, been fantastic as always. Thanks so much for coming on. Look forward to having you back on soon. Always great to talk to you, Adam. Thanks. Appreciate it. All right. Well, now is the time on the program we bring in the lead partners from New Harbor Financial. Uh, I'm joined today by Mike Preston. Um, we're recording this a day after I recorded with Jesse, as you can tell by my different shirt. Um, John Lodra has the week off. Mike, how you doing? Really good, Adam. Thank you. Good to see you. Good to see you, too, buddy. Um, all right. Well, thanks for going solo this week. Um, so Jesse, uh, one of the just such guys who's such a joy to interview because he's he's so smart. He's so articulate. He lays it out in a way that that I think just the regular person can understand. as he was talking I was thinking all right I think New Harbor is going to have a lot of agreement with Jesse here what were some of your key takeaways from the conversation you really just started at the beginning of the the talk the question you always ask about the outlook on the economy and the markets Jesse said this is one of the most precarious times for markets really characterized by a couple different things he talked about stagflation he talked about the AI bubble that's a big hot topic right now we'll talk a little bit about that later and he said that in multiple warning signs, late cycle indicators are starting to suggest that we're approaching a market reversal. And in that camp, I would put things like, you know, rising unemployment uh rates is, you know, it's definitely a lagging indicator, but it's something something to think about. I know that other people, including um I believe your guest last week said that unemployment is actually bullish for the market, particularly midcap. So, right, Mike Canterowitz, Mike Canowitz said that. So, take that one with a grain of salt. But other late cycle indicators that you might expect are things like this. Obscene valuations. It's been that way for years. I completely agree. But also, you know, a thinning of the market. We're still driven by the top seven or even top three stocks here. Our internal indicators are showing a narrow market. Now, that's not having us go to cash or short the market or run for the hills. We're still 45% on equities. But I have to say, you know, we're in this market really kind of uh um holding our nose, so to speak, with all of the other things that we're seeing in terms of valuations and narrowing of the market. We're thinking that maybe we get a blowoff top here and the market broadens, but we don't see any of those signs yet. In fact, um on Tuesday, we had our our portfolio, our long portfolio meeting. We looked at all the indicators again and really we're tilted towards towards defense here towards the bearish side and we're not seeing big breakouts yet even though the market has been relentless absolutely relentless going up almost every day and staying well above the 21-day moving average for many weeks here. So it really seems like we're ripe for a breather in the S&P and ripe for a breather in metals markets. We can dive into some charts later, but we've learned I've learned not to anticipate markets. You know, we anticipate markets maybe just by being lower in equity allocation. That's how we handle the fact that none of this really makes sense at these levels fundamentally and the data doesn't make sense. But as far as the actual exact turn, it's impossible to know. So, all you can do is have a plan in place, sometimes some hedges in place based on where we're at on the cycle, and then react to what actually happens. If we're lucky enough to get what we think might be coming, which is a squeeze, a vertical parabolic move higher, that'll be ideal because then we'll be able to reduce equity exposure into that ramp and then hopefully not give back much of anything on the ultimate turn that we think is coming. So, if I could just make a couple more points about the uh the video, I think that um I'll just like to recap the rest and then maybe pause after that. The credit market is starting to deteriorate a little bit. Um there's been some recent bankruptcies. I think thatricolor and first brands were mentioned and private equity firms like KKR and Aries and others stock prices have been not tanking but they've been trending downwards when the S&P has been going up and there's been a lot of insider selling there. So these are all just you know anecdotal data points in and of themselves don't mean a lot but these are just storm clouds gathering type things. insider selling across all S&P companies, as Felder said, was the highest over the last two years. And volatility, too. You know, this is something that I didn't pick out until he said it. It's pretty interesting. The S&P um over the last week up 1%, VIX up 8%. Right? So, usually when VIX goes up, the market goes down. It can also mean that there's some other volatility coming and it could even mean a crash up. So, who knows? we can't really I don't think we can anticipate there either but we can say that the market is sensing some type of stress and then you know he talks a little bit or you mentioned a person who said that the AI bubble is 17 times bigger than the dot bubble I've got some charts that can talk about that if we want to dive into that I don't think we need to quite yet but the AI bubble is huge that technology is real I'm using AI it it it probably saves me many hours per week so if you multiply apply that across 300 million or 200 and something million working people in the country. You got to imagine that that actually means something, right? But does it really justify where we are with the a AI bubble? Probably not. So, just in in in wrapping up here, a couple other things and and you can tell me what you want to dive into out of these things. He talked about what to own, commodities, energy, gold, natural gas. He thought we were in a dollar bare market. we actually disagree near-term like between now and two years from now we think that we're actually going to see a dollar bull market and he talked about after years of concentration paying off and just going allin diversification matters here. So we would agree with that as very much don't go all in on anything. Don't go all in long the market. Don't go all in short the market. Don't go all in on silver or gold. It's really hard. I mean, a lot of times these days, we're talking to people that are all in on gold and silver or miners, and it's hard to get them to start moving out even then, even though we're believers in those markets. We really think people should start selling and open up their mental flexibility. So, thanks for the opportunity to recap, Adam. I'll hand it back to you. All right. So, um I want to pull up some articles here on the front page of Yahoo Finance the day that we're uh recording this, Mike. Um so first is you know Yahoo Finance is it it's mainstream financial media right um and uh the main story title here is very speculative very frothy Wall Street frets on risks to rally stocks are near records but sentiment gauges show growing euphoria a potential warning sign so um you know the market has been in just massive party mode um uh you know S&P you can see here on the chart it's uh 6,750 as of the time of this recording. Um you know 7,000 is not that far away at this point in time right and that that creates a very strong psychological pull towards that big round number. Um, but the fact that you're starting to see some questions being raised in the the traditional mainstream financial media which has been doing nothing but cheering on uh this this uh you know great third year in a row that we're having in the markets. Um that's an interesting sign to me that that even the cheerleaders are saying whoa may maybe the party is getting a little bit too out of control here. Uh, I want you to respond to that, but before you do, um, just because we'll go to this, I'm sure, soon after, I want to highlight this article here, uh, about gold where it says, quote, "Debbasement trade continues as gold soarses to new heights." And I I put out a a tweet on X this morning saying, "Oh, okay. I I I guess we know the answer now. It's it takes 4,000 an ounce gold um before the the traditional financial media wakes up to the fact that fiat currencies may actually be being debased um by government policy. Um so there's this new term that they're now coining for gold here, which is the debasement trade, and I'm sure Bitcoin would be under that same trade as well. Um, so that's interesting to me as well that the traditional financial media that generally ignores gold certainly doesn't seem to give any ink to the loss of purchasing power of of our fiat currencies is now kind of waking up to it and and calling it the debasement trade. So anyways, Mike, I'd love to get your reaction to both of those. Well, the first one is this very speculative, very frothy Wall Street frets. Well, you know, I think that probably a, you know, a cynic would say something like, well, markets always climb a wall of worry, so that's actually a bullish sign. Or a contrarian would say that, I guess, is probably more accurately put. But we are not in a normal market. We're in a hyper overvalued market near the end of what I think is this money printing error and in the last 5 years of a fourth turning. So, we're in an all-in moment. And and you know talking about the the basement trade absolutely I think it is different in terms of of this bull market in gold and we have we have just exceeded the 1980 top inflation adjusted terms in gold price and you know how generals always fight the last war and you know even even me even even we have to think about um our own biases right because the last time in 2011 we had a big bull market everyone was all And there was gold buying parties that people had in their homes. There was all kinds of advertising for back buying back gold. That ended up being the top and there was a minus 40% bare market and it took over 10 years to come back to even. And so none of us wants to go through that again. But I think that where we are in the cycle here makes it different makes it different and unlikely to collapse again after like it did after the 1980s top and after the 2011 top. Having said that, the short term the short termness of all of this is getting really really hot. It's getting hot in here with this trade. And so you should be expecting some near-term rapid reversals to shake people out. I wouldn't say it would necessarily be the top. But really, if you're too long here and you're too overconentrated, you got to think about your own emotions and your own greed factor at this point. So yeah, I think that the the debasement trade is real for those that doubt it. Um, I think there's probably a number of years left in in that whole trade, but don't be afraid to rebalance a little bit here and there. Think about maybe 10% of your investment assets, gold, precious metals, and crypto all together if you because we really view those as all the same thing. You know, non dollar, gold, silver, minor, crypto, sleeve. We would put all of those things and do put all of those things into one category in our own systems and our own thinking. So you you got two headlines there. One I think is real, the debasement trade. The other one the the skeptic kind of putting the red flag or the yellow flag out there. Yeah, I think that we could have a a big pullback at any time. But I don't think at this point we're going to end this cycle without some type of euphoric move. It's I can just feel the pressure building, you know, and maybe that's why the VIX is up while the market's up. You maybe it's signaling a parabolic move higher. Uh that would be welcome again in a way because it would signal to us that we're getting close to the turn. So most normal people don't have to worry about this that much. When I say normal people, everyday people because even if we do go to 7,000, and I think we will, by the way, that's only about seven that's only about three uh 3% above here. You know, the charts look like we should get to at least 7,500. What is that? 800 points above here. That's like Well, that's what I was going to ask. If if this thing sort of has the blowoff top that you think it might, you know, what are you thinking? Is it is it 7500? Is it 8,000? Is it 10,000? Like what? Just realize that there's some gut feel in my response here through, you know, I guess which almost 30 years almost 30 years experience now and having been through the other bubbles. I what I'm looking for is like 500 points or more up in short period of time, say two weeks. So that would be like 8% in two a couple weeks. So that would be the signal that we're getting real close. So if that happened, it would bring us up from here to about 7,300. You got to think you'd go a little higher than there. So 75ish 7 7500 or so could be a target, but who knows? When you you know, we're at at the end of such a big cycle, it could go on. I don't think for the average person it makes sense to hold on for the last few percent. Um, we're as as we keep saying, we're at 45% and that's probably our max no matter what happens here on the upside. Um, because we got exposure in some other things that are doing really well. But yeah, look for that. Look for if if we're lucky enough to get that, it'll be a rapid squeeze higher, 500 points or more on the S&P in a short period of time. Okay? And and you would expect if you saw that that would be uh a peak. Um, you know, look, there are no guarantees, folks. So, I got to I got to caveat all this, but would you think of that as sort of a peak like we saw putting in a peak like we saw at the peak of the dotcom bubble or the peak at some of these other historical bubbles we've seen, meaning dramatic shoot up at but then followed by a pretty painful percentage correction. Yes, I think I think that um I think that I think the fourth turning is is a real theory that has real use here and I really believe that all of the signposts say that we're in that and we're in the fi final five years. I think the crisis part of it uh which is the second to last step of the fourth turning will be kicked off by a market drop and then the climax which is the final part of the fourth turning comes a couple years later. the cl between the crisis and the climax is you know potentially a minus 60% minus twothirds on the stock market you know and unlike other times where the tech bubble was reinflated by Bernanki/greenspan and the and the housing bubble which was reinflated by um I guess it was Bernanki yellen Powell etc um that's not going to be able to happen again because what I'm thinking is going to happen is a loss of confidence in this sh central banking shenanigans Right. So this peak I think we go down 2/3 or more and it stays there for more than 10 years. That's what I think. Wow. Okay. So down there meaning meaning sort of like a loss that one one a painful correction but then a potential lost decade in terms of returns or two you know it could last 10 or 20 years. So just think about that. I mean and John Husman is is potentially right. He talks about it a lot in his writings and we mention his name here a lot of times because we have a lot of respect for him. you know, he's I remember many years ago he wrote a piece called, you know, we're going nowhere in an interesting way potentially. He too doesn't make exact predictions, but we could lose twothirds of the market and then take 10 years clawing back to even. Got it. And again, just to make sure folks know, if that were to happen, and of course, lots of unknowns here. Um, Mike's sort of talking about measuring from the beginning of the decade to the end of the decade, doesn't mean that things couldn't go up and down a lot in the interim. Um, and the point there being is if if that's the case, then that's where an active investing strategy is going to be much much more superior than a passive one. And of course, we have trained the past 20 plus years of investors that passive is the way to go. So, it's going to be really interesting should that happen to see how everybody is basically going to have to throw their current playbook out the window and adopt a new one. Yeah, it's very generational. It's a big cycle and this is just unlike other times in the last, I guess, 80 years. fourth turning come around every 80 years, but close to 80 to 100 years, we haven't seen a cycle as dangerous as this one. It's no surprise that the buy and hold crowd is more emboldened and more allin than they've ever been before. That's what happens in a bubble. I've certainly learned in my lifetime and in my career that calling the very top of any market is near impossible. So, I've certainly made the mistakes along the way. Learned a lot. Um, and I'm still admitting today that there's some guesswork because nobody knows the future, right? Well, and it's when the the party's raging, um, those who, you know, the old husman again, bubble markets force you to make a choice, look like an idiot now or look like an idiot later, right? And, um, those that that don't want to look like an idiot later, um, meaning you're the collateral damage once the the bubble bursts, um, they get out early, right? And and there's a lot of wisdom to that, right, to sidest stepping all the carnage. But to your point, Mike, nobody really knows the timing, right? There were lots of worry signs in like 97 that the market was I think Greenspan's irrational exuberance was back in 96 or 97. 96. Yeah. So if you hopped out then because oh my gosh, the chair of the Federal Reserve is saying that the markets are too euphoric, right? I mean, there was then four more years of of unbelievable returns that you missed out on, right? So you you have to be you have to weigh the probability. So to your you know position there at New Harbor, Mike, where you're managing client capital and you've got these concerns about what could happen. You still are in the game to a certain extent, right? Well, we have to be really I mean it's it's it's there are alternatives. Okay, we'll say that straight out. One-year T bills, Treasury bills are still around 4%. We've got 20 plus percent in there. So, you know, for a lot of a lot of your viewers, I think, are 100% in uh the T- billill and chill trade. I can't criticize that. And at this point, I would just stay there and wait for the crash. But yeah, we are in as active managers. We're 45% in. We have some hedges. We s we sold a lot of covered calls this week on some of our, you know, our positions. Um we sold calls on the other day. We sold calls on utilities. We sold calls in international stock ETF as well because we think the market will likely keep going higher, but we don't know when we're going to get a rapid reversal and we want to be able to reduce that risk, bring income into the account and options give us a really neat way, a really cool way to start selling hedges into a decline. So when the ultimate reversal comes, we can hopefully really defay that deductible on the turn. And if it keeps going higher, we can participate. And we're happy to not be 100% in. I mean, if this market went up 50% from here, it would be almost S&P uh 10,000, I guess, because we're at 6,800. And we would probably we would definitely underperform at 45% because we're probably not going to get more in as it goes higher. But we still have to be okay with our decisions. And we would be then looking for the ultimate turn. And that ultimate turn, if I'm right, about a half or a twothird decline would bring us well below where we are today. That's what happens when you mess with financial markets. They get dangerous, generationally dangerous. And that's what central banks have done. I think they think they won the game many times. To me, it feels like they've won the game because they've controlled every minutia of the market and economy for all this time and got away with it, right? and all the bankers from back in 2008, they got away with it. Nobody went to jail. Everything's smiles and, you know, peaches and cream and the 401ks are up and the real estate markets are up and everything's up up up up up up and it has to be because if it's not, then the whole debt pile falls apart. But there's a price to be there's a price that's coming. We're trying to play the game. You know, I'm not saying that we can be perfect and we can time it perfect, but um we're doing it the best that we know how given our experience. Okay. And you know, I think the key part underscoring what you're saying, Mike, is you're doing what you're doing to try to get the maximum. You're trying to find the efficient frontier of getting prudent gains while having prudent risk management in place, right? Um that's right. So, what's interesting is, you know, so just wrapping things up here. Um there are lots of reasons to be concerned as Jesse shared with us and and you've just reinforced. Um, what's interesting is there are an I'm starting to see an increasing number of the experts that I mentioned here. There's still a minority, but they're beginning to say, you know, I'm actually beginning to become a little bit more optimistic about what's coming ahead, right? And that's folks like Canitz and Anna Wong and and I just interviewed um Ed Yardi who's generally been a bull for a good while, but but he's quite optimistic about where things are headed, too. So, you know, there there is this sense of people that are saying, "Hey, look, you know, I I I think this party's got a long long ways to go still." And of course, this is what makes a market, right? And I'm not here to tell folks which way is the exact right way because nobody knows. But what you want to do is take in a ton of information, listen to a lot of these experts and figure out, you know, whose arguments you find the most persuading and then place your bets accordingly. But I think the important thing to do no matter what side you pick, the bullish or the bearish side, um, is that you are trying to find that efficient frontier of prudent returns versus risk management, right? And so as an individual, if you're a DIY investor, that's really what I think your your priority should be. Um, and if you don't feel like that's something you got a lot of experience with or a lot of confidence in doing yourself, that's why I think you should be working with a good financial adviser and one that really understands trying to find that optimal balance. Um, all right, Mike. Well, um, uh, you know, so basically folks if they if they want to, they can obviously reach out to talk to you and your firm there at at New Harbor, uh, during, you know, in one of those free consultations I mentioned on this channel all the time, uh, and say, "Hey, look, this is how I feel. I'm more bullish, more bearish." And you can obviously help them figure out how to craft a portfolio strategy to support that, right, Mike? Absolutely. We offer a free consultation anyone that wants to reach out. We're blessed to have that opportunity thanks to you and your audience. Uh we have so many great conversations with really good people out there. Please do go to thoughtfulmoney.com and fill out the form and and reach out to us. You're doing my work for me. Thank you, buddy. And uh we would be happy to have, you know, a brief 30-minute conversation. It's all about giving giving good advice. All right. Well, thank you. And folks, if if you feel so inclined, definitely go ahead and do that. Um, but the other reason as well that folks should maybe consider talking to a financial adviser right now, Mike, is just seasonality, right? So, we're getting to that time of the year where there are steps that um if you if you're going to take them, you want to take them before the end of the calendar year because you can't take them after that, right? Some of this is port, you know, um uh tax loss selling. Uh some of this is related to uh retirement accounts and distributions and things like that. So, um, uh, that that that is correct, right? I mean, there there's regardless whether you're bullish or you're bearish, there's there's oftentimes just times of the year where you have to just look at your personal situation and say, "Okay, what housekeeping do I need to do before these end of the year limitations come up, right?" Yeah. Right now, we're coming up on October 15th. This video will be out um well before then. the October 15th is crunch time for tax preparers because this is the final tax filing deadline for those on extensions. And so we're getting some calls from people like that, particularly with self-employed retirement plans. I know that my partner John mentioned this in previous weeks. Um you have up until tax filing time plus extensions. This is for self-employment retirement plans. You can make contributions up until that point. So, there's a little bit of a mini crunch going on here about that. But, as we go into the end of the year, the final two months, it's really all about charitable giving, gifting to children. And I think we're up to 19,000 this year. I have to double check that, but I think the gift tax exemption is 19,000 this year. Now, and that's per parent, right? Per parent per child. So, if you're a married couple, you can give 38,000 away to to each child without filing any tax documentation. And if that child is married, then I guess it goes up to 78,000 because it could be to each of those uh the children plus the spouse. So a lot of people have bigger and bigger estates. The you know that the the exclusion is way up there in the teens on the uh 13 or might have just jumped actually 16 million here recently. And um I can't actually remember because things changed so quickly, but it's you talking about estate tax? The estate tax exemption, I think, might be up to 16 if I remember, but it's at least 13. We don't really run into it that often with clients, but it's way up there. So, people don't have to think about it that much generally. Some people do, and they should be using that this gifting strategy to get down below that limit, but just a gifting strategy in general makes sense if you want to help out your children during your own lifetime and see the fruits of your cash working in their life. Now, it's something that we tell a lot of people to do. So, gifting, charitable giving between now and the end of year, both of those, and then gain and loss projections. It's been a really good year for just about anybody in the market. It's been a really good year year for us at New Harbor. We're well up into the teens for a on average for our model in terms of gains. And so most people have either short and or long-term capital gains if you have any losers in the portfolio, which hopefully you don't, but if you do, you really should be going through there and farming through and taking those losses to help reduce your tax burden before year end. Okay. All right. Um well, look, we'll leave it at that. So, yeah, folks, if you've got um any of those things that Mike just dialed through that you'd like to get some help with, again, highly recommend you reach out and talk to a good professional financial adviser. And if you've got one who's doing that well for you, great. Don't mess with success. Um, but if you don't, you'd like a second opinion from another firm that's experienced in these issues, and consider talking to one of the financial adviserss that Thoughtful Money endorses. Perhaps you'd like to talk to Mike uh and his team there at New Harbor Financial. So again, to set those up, uh, just fill out the very short form at thoughtfulmoney.com. And again, these are totally free. There's no commitments involved. Uh, they're just going to do what they can do to be as helpful as possible to you. Um, all right, folks. Um, and again, we are getting real close now to Thal Money's fall online conference that's coming up uh a week from this coming Saturday. It's going to be Saturday, October 18th. If you can't watch live, don't worry. Everybody who buys a ticket will get sent replay videos of the entire event, all the presentations, all the live Q&A. I can tell you it is coming along fantastic right now. Um, I just had an experience uh planning for it that I'll I'll talk about later after the conference and you'll understand why. just a just just a a phenomenal personal moment for me with one of the um uh the the great faculty members we have and and again I know I say this every year but this is the best most august faculty we've ever assembled and I think it could not be more timely given all the crosscurrens and all the uncertainty that's swirling out there right now as we head into 2026. So if you haven't bought your ticket yet um run don'twalk to thoughtfulmoney.com/conference and buy it there. It is still available for the next couple of days at the last chance to save price. You missed the lowest early bird price discount, but um there still is a bit of a discount before tickets go to full price in the final week. And I'd love for everybody to not have to pay full price. And of course, if you're a premium subscriber to our Substack, look for the code I've emailed you that gives you an additional $50 off of that ticket price. Um all right, Mike. Can't thank you enough, folks. Please let Mike you appreciate him going solo here this week by hitting the like button then clicking on the subscribe button below as well as that little bell icon right next to it. Uh look forward to seeing you again next week, Mike. I think you're going to be solo again next week, too, because John's going to be away for a couple weeks. Um but no matter what happens in the market between now and then, we'll talk about it with you next week. I will be here solo next week. And we appreciate the opportunity to be here, Adam, and we we appreciate your viewers tuning in as well. Until next week, we'll see you soon. All right. Thanks so much, Mike, and everybody else. Thanks. So much for watching.