As The Rich Start To Struggle, Will They Pull Down The Economy? | Danielle DiMartino Booth
Summary
Defensive Rotation: The guest advocates a defensive posture, highlighting rotation reminiscent of 2000 with the Dow holding up while the NASDAQ weakens and favoring dividend-paying sectors.
Utilities vs. Financials: A specific pair trade is proposed—go long utilities and short financials—given elevated credit risks, looming losses, and a continued bankruptcy cycle under higher-for-longer rates.
Precious Metals: Gold and silver have seen century-level volatility; while long-term fundamentals (central bank buying, geopolitical risk) are supportive, the guest urges de-risking and hedging after parabolic moves.
Gold Miners: The guest is bullish on miners, noting potential for explosive margins if spot prices hold, supported by factors like central bank demand and global military buildups.
AI: AI remains a core theme, but capex growth has slowed as firms shift from cash-funded to debt-funded projects; concerns include job displacement, hyperscaler valuation risk, and a potential cooling of AI-driven equity leadership.
Credit Stress: Rising bankruptcy activity, difficulty exiting private credit, downgrades outpacing upgrades, and leveraged loans at year lows signal mounting financial strain, particularly for financials.
Macro & Labor: Expect accelerating disinflation from shelter and goods, while rising unemployment, wage disinflation, and faltering top-10% confidence pose demand risks; anecdotes include corporate layoffs (e.g., Amazon) and severe underemployment among college grads.
Transcript
We've got a real problem on our hands, Adam. If the top 10% even gets nervous. Welcome to Thoughtful Money. I'm thoughtful money founder and your host, Adam Tagert. Welcoming you here for a special interview with my great friend Danielle D. Martino Booth. I can think of very few people, if none, to talk with this morning after yet another uh Federal Reserve um you know, FOMC release. Jerome Pal press Presser. This one, if I'm not mistaken, Danielle, you thought was uh one of the biggest newsfests in a long time. >> It was pretty boring. Um I mean, all the reporters were geared up for for drama and National Enquire headlines and all they got was like buried in like the last section of of the Wall Street Journal. It was just it was a snoozefest. >> Okay. Um well, look, yeah. So, the Fed didn't surprise anybody. There was no change to the uh the policy rate. There was no change to QT. Um Paul bopped and weave to avoid all the questions about the political stuff. Um there was one thing there that that caught my attention. But but before I ask that because it'll be a segue into the next part of our conversation, do you have anything else just in general to say about the Fed right now? whether it's about the, you know, um, uh, the lawsuit that the administration has put against Pal or the Supreme Court case with Lisa Cook or just the constant horse race with who might um, replace Pal. Any of that do you want to comment on or is there not too much to talk about? Um, I mean, I think uh I I think that the administration's deny, deny, deny in terms of their u knowledge of the criminal allegations uh signifies that the administration really hopes that it goes away quickly. Um because it was a huge um it was a huge backfire. >> Okay. >> And sorry to interrupt, but just so you can put this in your answer, like I've been wondering like why do they even do it? Like the clock's almost out on Paul. Like why do something that politically sensitive this late in the game? >> Right. Exactly. And that's why um some um some of the newswires reported that Bill Bill Py had been involved. He denied that. Um the the short answer is I have no idea. Uh because it was again one of the most illtimed to your point and ludicrous by the way. I mean to suggest perjury. Um, we're talking about Jerome Powell Esquire here and somebody who was complying with building codes in Washington DC trying to get asbestos and god knows what else out of a building that was constructed in 1937. This is just asinine Adam. >> Yeah. I don't I mean look Trump already has enough uh suspicion that hey you're trying to put in a Fed chair who's just basically going to be a toad for you. So why stir up con additional concerns about Fed independence again? if you just waited a couple months, the guy would be gone anyways >> or or not because he he refused to answer the other question yesterday when asked whether he was planning to leave and he just >> right >> he brushed that and before this these allegations were made um these charges were brought uh there was a 90% chance that he was leaving and now according to the betting markets because we can bet on everything including the I who knew the return of Jesus Christ in 2025 but according to betting markets Now, the odds of Powell leaving are closer to 60%. So, they've declined and and he refused to answer the question. You know what? Uh, he's playing he's the cat, as I said yesterday, and Trump is the mouse. Now, he's he's playing cat-and- mouse because Trump's hands are tied. You know, Steven Myron's position ends in about oh, I don't know, less than 48 hours. Uh and it and his position on the board could be the only one that Trump can replace if Powell does not leave. >> Right. And and you I think understand Powell the man better than most. Um is he the kind kind of guy who's who's likely to kind of get a little pissed off and say, "Yeah, I'll stick around and I'll kind of be a gadfly for you for the next couple years." If that wasn't, he would have simply answered the Well, he I think he's considering it now, Adam. Let's let's put it that way. I think he's considering it. And I don't think he was considering it before, but I think he understands the reason he brought up Paul Vulkar when asked, "Why did you attend the Supreme Court hearing of Lisa Cook?" >> He brought up the example of Paul Vulkar as having also attended a federated Supreme Court hearing. Paul Vulkar in addition to Mariner Mariner I cannot say his first name Chair Eckles who then became Governor Eckles whose name then went on the building. They're the only two Fed chairs to ever stay on as governors after their chair term ended and he he brought up his his hero's name Vulkar. So I don't know. I think he's considering it and and I think that that's extremely important because he would effectively become the shadow chair that we were worried that Trump was going to install when he first got got into office. It would everything would completely flip on its head because people would always be listening to what Powell had to say, even if it was Governor Powell. >> Okay. um Lisa Cook. Uh I haven't been following that super closely. Um and I don't think the court has ruled on that yet, but correct me if that's wrong. But it seems like that one is also sort of being tamped down like you know what we're to to to replace her would be too great a threat to Fed independence and the Supreme Court seems to be leaning like hey we're just going to deny that. Well, um, go back to the original backfire because there might have been 5050 odds prior to the criminal charges against Powell, but now the Supreme Court really needs to make a stand and uphold its May 2025 ruling that basically carves out Fed officials. >> It's not that old of a decision. Um, and I but again I think I think the backfire with Powell now has increased the odds tremendously that Lisa Cook is given the green flag to stick around until Yeah. >> 2038. Just a little while longer. >> Yeah. So again, kind of another pissed-off Fed governor there. All right. So the odds of future rate cuts have continued to dwindle. Um I think right now the latest market expectation is two quarter point cuts for the rest of the year. Um what what what is your general sense of that? Uh you think that's about right? Would you take the over? Would you take the under? >> Oh, I would I would we have officially as a as as a firm taken the over on that? We do think that given >> um the unprecedented moves in some of the soft survey data. Uh before we started recording, we were talking about the underemployment rate among college graduates. Uh the the continued now that we're deepened earning season parade of layoffs and announcements that by the way affect high income earning Americans, the percentage of the population that's relying on initial jobless claims. I think we've got a pop coming in the unemployment rate. >> Okay. All right. So, this is where I want to go with you. Okay. And and and take take my position as simply we're on the debate team here. So none, this is just an intellectual exercise. Uh, and as you know, Danielle, I have been right there with you for much of the past years tracking the layoffs, uh, looking at the unemployment rate, challenging the the jobs data, which I think we've been validated over time that it was, um, fairly erroneous and skewed to the upside, all that type of stuff. Um, and there have been lots of reasons to be concerned about the economy continuing to slow down. Um, that being said, um, uh, GDP growth, okay, I mean, I'm going to put on my my my pro economy hat here. GDP growth has been pretty good, pretty strong. Um, now there's factors going into the GDP calculation, but GDP growth has been pretty strong. Um, the inflation has been disinflating and seems to continue uh to to be disinflating here at this point in time. Uh yes, there is sort of this parade of layoffs, but the unemployment rate remains historically low. Um I I don't know if it ticked back up again, but but last time or the time before it actually ticked back down. Um the uh job openings uh or sorry, the uh uh initial unemployment claims, you know, continue to be super low right now. So, it's it's a a no hire economy, but it's some are saying it's a no higher no fire economy where we're just sort of trunnling along here. Um, in spite of the uh the the layoffs, you know, there's enough hiring to kind of keep things generally flat. Um, okay. So, then you listen to the administration, Scott Bessant, Howard Lutnick, whatever. And yes, they're going to be cheerleaders for the administration, but these are serious people with personal brands to put on the line. you know, they they don't want to say something that's going to just blow up in their face as blatantly, you know, uh, snowing people. And, you know, they're saying, look, we did a lot in 2025 to lay the groundwork for an economic boom in 2026. And that's really starting to happen now. And that's everything from the passage of the tax cuts to additional tax cuts to uh deregulation to tariff revenues coming in you know tens of billions a month um to uh you know new factory building data center building um you know bringing jobs in having foreign capital come in. So they're saying look we think 5% GDP baked in the cake and you know Lutnik is saying don't get me started cuz I could tell you six or seven and how how those are possible here. So you know essenti and and if you if you talk to like the survey data of consumers has been bad. I mean there's no no getting around that. But if you talk to you know the corporate world you know they're heartened by the deregulation. and they're heartened by more business certainty now that the craziness of the tariffs is largely behind us. Um, so to somebody who who is on that side saying, "Hey, Danielle, I'm taking the over on the economy for all those reasons, you know, that collides obviously with a lot of data that you report." So, so, so tell me what would your answer to them be? Well, my answer would be that um first and foremost, we do not have data in hand yet uh for the Bureau of Economic Analysis to revise downwards its GDP figures. Um that is going to be very lagged. But we do know that for example in the second quarter of 2024, there was a net job loss in the private sector of 77,000 jobs. We have yet to see these figures trickle through into GDP in the form of income >> and income is pulled back out of GDP in retrospect when when jobs are revised down and of course we know that that that payrolls continue to see deep revisions and so this has to be backed out of >> retroactively right. Yeah. >> Yes. and and and we've also seen, you know, we we've seen an increase in imports that that is going to push up GDP. And we're going to see going forward, Adam, to your point, we will see companies either rebuild inventory or go out of business. >> Some of them are running at such razor thin levels of stockpiles that they're going to have to buy something or just close shop. One or the other. Make your choice. But my answer to them would be the demand for labor. And though executives are enthusiastic about their pro profit margins, they're enthusiastic about their profit margins because they're propped up by firing people, which is great for their stock price, which means it's great for their bonus. Um, and it's great for their bottom line. >> Yeah. How much of a tailwind Yeah. Sorry to interrupt, but how much of a tailwind do you think AI is to that trend? like will we see a notable less you know lessening of demand for labor as smaller AI benefits start to trickle down to the rest of the corporate fleet? >> Yes. U actually we we um we published on this just a few days ago. So a year ago um AI investment was growing at about 18% year-over-year rate and um that is absolutely collapsed in terms of the year-over-year growth rate of fresh investment in AI. I think this is partially attributable to the fact that a year ago we were seeing companies devote cash flow to invest in AI and now they're blowing up the bond market and issuing bonds and taking on leverage and debt in order to invest in AI. These are two much different dynamics from the perspective of the CFO of companies which is why you're seeing the growth rate of investment in AI absolutely collapse. Um, it's not that there aren't projects planned, but there sure are a lot of projects that have been pulled as well. Um, so what I want to see, Adam, is outside of the AI complex, I want to see the commitments on the part of countries to come in and invest, I want to see those commitments fulfilled. And right now we're only about a third of the way in terms of what's been announced by the administration and what's actually occurring on the ground. We have a lot of cancellations in that realm as well. Um but I want to see these investments occur in the United States and catalyze job creation. I want to start reading about this company's hiring 10,000 new workers. This company's hiring 4,500 new workers unlike Dowo Chemical which fired 4,500 workers today when it reported its earnings. I want to see announcement that private sector job creation is taking off. I do not want to look at a chart that shows me that college age underemployment for those 22 to 27 years of age is at 42%. And that their unemployment rate is at 10%. I want to see people hiring college graduates instead of making them work two jobs as an Uber driver during the day and a Door Dash delivery person at night. >> Um, that is a god uh forsaken number. 42% undermployment. >> Under employment. >> Yeah, underemployment. That that is just that that's so frightening. So, um, and I don't deny we have a massive, well, I think we have a national underemployment problem, but but certainly almost a crisis here with recent college graduates. Let me ask you this, and again, this is just for the the purposes of debating here. >> Um, so, um, I I don't have the list. I'm sure one exists of, um, the companies that are that are hiring people because capital is coming in here, like I said, to build factories or things like that. I don't know how long that list is. Um, but I imagine most of those jobs, not an expert here, but I imagine most of those jobs are kind of trade jobs, right? You know, we're we're building infrastructure here. Um, eventually, you know, there'll be some white collar people that work in these data centers and whatnot, but but right now, I'm imagining the biggest demand is for, you know, people to get their hands dirty actually, you know, constructing this stuff. And I do wonder um you know our college system will save the debate for whether a college degree is really worth today what it was in the past but you know a lot of kids I think I think the vast majority of those graduates are are not looking to weld um you know or to to you know be running an excavator or things like that. So is there just kind of almost an imbalance right now of what college is producing versus what the economy needs? Oh, there is certainly that because the white the vast majority of the jobs that are being lost are take take for example the 16,000 at Amazon those are corporate those are corporate jobs that would have been filled by college graduates. So you're absolutely right. Um, you know, one of the concerns that I have though, Adam, going forward, and you hear this uh from communities where data centers have been um have been constructed and completed is once that construction period is over, these puppies need like one or two guys to keep the lights, >> run it, right? Yeah. The jobs move away from the community. Yeah. They they don't need them anymore. Right. >> And I mean, and I'm also worried about, you know, my mom's generation, so she just turned 79 in November. Um, so she'll call it 80 for the outside layer of the baby boomers. You know, there are a ton of opportunities to be home health aids in the United States. Um, some of the lowest paid nurses just to take care of the boomers as as they age. Um, but what are we going to do with them in 15 years? So all I'm saying is I want to see the productivity revolution that AI is supposed to unleash create all new industries, Adam. >> Right? >> That's what I want to see. I want to see us move up the value creation chain. I want to know why China can produce AI with onetenth of the data centers of the United States. I'd like to know what quantum computing what the effect it's going to have on how many data centers we need. a as well. But I want to see a more dynamic and a wider breath of job creation than what we're seeing right now. >> Yeah. So, okay, turning taking off my debate hat for a second, I completely agree with you. And to be honest, I'm I'm skeptical. I'm I'm put this way. I'm I'm I'm concerned that the rate of job displacement is going to exceed the rate of new job creation in this new economy um for some foreseeable period of time here. And it's going to be it's going to be rough. Um because I think AI to your point is kind of removing the entry level rungs on the job ladder permanently in a lot of cases. Um and so you know it's going to take a while before we figure out okay well if those entry- level jobs aren't there anymore how does a recent college graduate get gainful employment right and I'm a big fan of the trades and I think too many people go pursue a paper college degree for you know for reasons that aren't super useful. But I I am worried about this what I think will be a fairly long transition uh period and I don't I don't see that we have a real strategy for that yet. So anyways, I'm right right on there with you. That doesn't mean that the economy still can't boom in 2026 because what we're talking about here that that that's a bit of a longer thing. Um but let let me ask you this. So um pal yesterday said the down the the upside risks to inflation and the downside risks to employment have moderated and I think that was a big reason why he said and that's why we're standing pat right so to a certain extent even he is saying you know with the data we have we're becoming a little bit less worried to both of the risks to to the risks of both of our mandates here which I would think you know with my debate head on I'd say okay well that's that's an important sign that that that the the you know the powers that are close to the data are feeling a little bit better. Um you don't necessarily need to react to that because we've already I've already sort of asked you that question. But on the inflation side of things um where are you are you are you let me put this way. Are you willing to take the over or the under on the current official inflation estimate? >> Well, so um we've spoken about this in the past. You know that I'm a fan of true inflation. Um, >> I think you're going to take the under, but I just want to give you I want to look impartial when I ask the question. >> No, no, of course not. I I like real-time metrics. Um, and right now I think it's at 1.23. >> So, uh, it's got about a 45day um, lead time. And, uh, and what we're seeing in rents specifically as opposed to home prices, we're seeing a little bit of a bump up in home prices. We know that mortgage rates have come down. Um sellers are relisting their homes at a very very aggressive pace. Um and the reason I bring that up is yes, we've seen mortgage rates come down a bit and yes, we've seen purchases go up a bit and that's provided a nice little bump to home prices. You cannot say the same thing about rents. Go back to that college underemployment rate. Who's going to rent these apartments? Um, and my concern with the massive wave of individuals relisting their homes is that we're going to have price discovery in the housing market, >> right? You'll finally get inventory and that's what you need for true price discovery. Yeah. >> And that the reason we're seeing record high cancellation rates is that buyers are walking away. They understand that just like when quiet quitting was a thing, the employees had the upper hand, now that everybody is so freaked out about losing their job, the employers have the upper hand. In that same way, we've had the dynamic switch. Buyers now have the power and sellers don't. And once that recognition finally comes through, then we're going to see price discovery in housing. And then we're going to see even more disinflation in shelter. >> Got it. Okay. And in the shelter component of CPI, so the reason why shelter is so important to the overall inflation calculation is because it's what like 40% or something like that. I mean it's pay 25 and 40. It's about 25% of PCE. But yes, it's important. >> Okay. Yeah. I think it is the biggest single factor, right? >> It is. And and and if you're talking about inflation at the headline level, however, prices at the pump matter, Adam, and Americans who already feel like they've been knocked down a notch, by the way, are seeing prices at the pump go up because oil prices are rising because we're threatening to attack Iran or whoever we're threatening to attack this week. >> Okay, so I'll get to that in just a second. Um, in terms of the shelter calculation, again, in the headline and CPI, kind of the the big number the media puts out there, it's rents, right? It's not home prices. It's based off. >> It's it's owner's equivalent rent. It you were asked, you queried, >> if you were to rent your home, what would it rent for? >> I mean, it's it's really a a stupid interpolation. It's >> it's a stupid subjective. Yeah. But but but as rents disinflate, that number should come down, right? And it's also based on rents, pure rents. And it's also based on hotel rates, which we are seeing >> decline according to industry metrics at about a 2.7% year-over-year rate. I've got that on the top of my head um because we've just been writing about hotel rates declining and what the implications are, especially because >> hotels 30% of hotels spending is by that top 10% that we're following so closely. >> Right. And I want to I want to ask you about the top 10% in just a second. Um, okay. So, you know, one of the thesis I have is, you know, if rents continue to to to disinflate or actually deflate, I think we're seeing deflation in rent prices now. Um, it almost doesn't matter what's going on with the rest of the the CPI basket. I mean, it does, but but um >> well, you're already seeing goods. You're already seeing the effect of tariffs. Powell said yesterday they're already working their way through goods inflation services disinflation as he said was ongoing. So when you goods services shelter you get um you get to a big chunk of it and yet grocery prices are stubbornly high and prices at the pump are going up. >> Yeah. Um, so but but I guess and this is just sort of the question I want to get to is is as the year goes on this trend of of most things deflating, do you see that stopping or do you see that that continuing? >> I see that accelerating because I do see the unemployment rate rising, >> right? Consumer demand will will weaken. >> And we are seeing wage inflation disinflate. >> Okay. And of course that's the most important thing is you know what's happening with people's earning power. Um all right so uh I had a really nice conversation with our mutual friend Peter Atwater yesterday and you know Mr. K-shaped economy and um uh you know we talked about how uh the two legs of the K very different sizes right way few people in fewer people in the top part of the K but they punch way above their weight when it comes to uh their their spending. And you know, I had seen the the metric most people have seen that the top 10% are responsible for about 50% of consumer spending. Peter said actually I think it's closer to 60%. Um but the point there being is is even though the the bottom half of the K or bottom leg of the K, which is much larger population-wise, is not doing so hot, um the averages have been kept okay um by the spending of the top 10%. So in your research, where do you see the top 10% going this year? I mean, the S&P just hit 7,000 the other day, so, you know, they're still benefiting from from asset prices. Do you see that largely hanging in there for 2026, or do you see something that could could constrain their spending, whether it's a slowing economy or whether it's just a market correction that has a negative wealth effect and they start pulling in their spending? So, you know, I I've been watching very closely whether it's conference board, University of Michigan, um the confidence of the highest income earners and that has begun to falter. >> That should raise an eyebrow. >> That would be very important, I would think. Yeah, >> it would be very important. Uh I I think your average top 10enter, if you will, uh might know what a price to earnings ratio is if they were to be quizzed on the street. Um I I think that they're highly aware of um the fact that they are the CEOs of companies who are firing people. >> Um and I I think that they're highly aware that their profit margins have been whacked. So, um, when you add all this together, you start to say, well, maybe they see something over the horizon because they're creating what's over the horizon at the same time that the stock market valuation is something that they can articulate and explain >> because right now the Cape Schiller PE is at 41 and I guess it hit 44 in 2000. So at this point, you know, we're just about there on that last final valuation measure, which has nothing to do with timing, but again, and they know it has nothing to do with timing, but they're seeing what's happening in the bankruptcy courts, which is a lot of activity. They took a little break. They all went to Davos. Minute Davos ended, they came back. Now we're back to multi-billion dollar bankruptcy filings. They see what's happening in the credit markets. They see what's happening in private credit. um they see the inability to exit private credit. Um they know if they want to make a merger acquisition to grow that other compan stock prices are inflated. So um we've got a real problem on our hands, Adam, if the top 10% even gets nervous. >> And it sounds like from what you just told me, I don't know if they're freaking out, but >> they're not freaking out. I mean, they don't need to freak out because they can jump on their private jet and go wherever they want to go if they freak out. >> But but it doesn't sound like they're getting increasingly optimistic. It sounds like they're getting a little bit concerned. >> They are. In fact, we saw CEO confidence in the first quarter take one of the biggest declines uh in in in history. And um I think that's because they knew that Amazon round four was around the corner followed by all the other companies that will follow suit. >> Mhm. >> Because you don't need as many people to run companies as you did before which I mean and the irony there is if I could just push back, you know, AI is not the end all be all when it comes to replacing employees. You actually have to teach them how to use it first, >> right? >> Um it's just a suggestion. I but I digress. No, because I was actually just about to ask you about that. So, um I would say the top 10enter is probably much more attuned to what's happening with the hyperscaler stocks, right, which have been driving the market for the past bunch of years. Um we're we're getting to the part of the story where invest, you know, Wall Street is is not just going to trade based on hype alone. um where there's enough data for it to start saying okay given all that huge capital expend expenditure you did what incremental new revenues uh are you getting from this and um curious to know if you have an opinion strong opinion one way the other as to how the AI trade is going to do this year but I assume that if the bloom comes off it um and and there's a material correction in the the stock prices of the hyperscalers because they've been inflated so much um that is going to really impact the um you know the the the sentiment of the top 10% because it's going to be their portfolios that are going to be taking the vast brunt of the uh the pain. >> And I think that there is something to be said. I'm looking over where we're filming when my my eyes going up to the NASDAQ being down 2% and the Dow being basically flat. Uh to answer your question, Adam, this is a phenomenon that we witnessed in the year 2000. >> Sure. We saw rotation into safety utilities. We saw the Dow outperforming the NASDAQ. Um it was on those particular days it kind of raised a little yellow flag saying you know the dotcom bubble may be deflating. Warning warning. Um, but we're seeing a a a greater number of days where we're seeing the MAG 7 underperform what we would consider to be something defensive. >> And of course, >> and I mentioned that the S&P just said 7,000, but it's gone the the hyper I mean, the S&P really hasn't gone anywhere since what, October? I mean, it really does seem to be >> potentially plateauing here, right? >> It does. I think there's a lot of grind right now, and I think there there's a lot of rotating right now. I and and we have to remember that at the same time, you know, I'll bring mom back into the conversation. 11,000 plus US baby boomers retiring every day. Uh the Fed has not cut rates a lot, but they used to be making 5% on their cash. They're not anymore. Um so they're going to to the extent that they can rotate into dividend paying stocks as well to look for income in what has been a falling interest rate environment. >> Okay. So, um, we are, uh, it's a great segue into my next topic and and the day we're recording has been a very volatile day for gold and for silver. Um, uh, and they've had >> the most volatile day in in in in a century. >> It's in my Bloomberg chat right now. >> Really? In a century? Okay. So, it's been such a crazy ride. Uh, and look, you know, I've been saying at some point there's going to be a pullback because things just don't go vertical forever. But uh you you mentioned your mom in that generation. So um the for the past you know number of decades um you know there's been what's been called the 60/40 portfolio um 60% equity 40% bonds and >> on an increasing basis now you're seeing a lot of Wall Street luminaries and you know Wall Street um houses themselves you know start to say well you know bonds had a fantastic run over the past 40 years but we don't think they're going to have a similar run going forward. And you know, for those of you who are looking for sort of, you know, balance to your portfolio here, well, maybe you should take some of that 40% of bonds and put that in gold. And um this the the imbalance of size between the bond market and the precious metals market is pretty tremendous. So, if that were indeed to happen, that really should be favorable for the gold price from here. A, do you think that's going to happen? And B, has it started? And if so, what kind of what ending are we in? >> Well, I certainly think that um that the sellside waking up to the shine of precious metals um a I find it to be highly poetic and ironic. Um but but b it it certainly would explain fundamental allocations to gold. Mhm. >> Um, but by the same token, when oil prices went negative because of margin calls, uh, I don't think anybody thought we were going to stop filling up our cars with gasoline, >> right? >> And yet oil prices still went negative. So, my biggest concern about the precious metals complex right now is the fact that a New York City taxi cab driver yesterday asked me if I was he was dropping me off at Bloomberg. He said, "Oh, are you going on TV?" I said, "Oh, yes." He said, "Oh, is gold going to 15,000?" And that's my that's my concern right now, Adam. >> Okay. So, did the shoe showing boy redo? >> It is. Yes, it is. And and you've got people who are logically holding on to gold like me, like you. We both own gold. We know this. >> Um but you also have people who are taking on leverage in order to get into it because it is acting like GameStop on steroids. >> I know. I know. I personally am not so sure how much of it's really being driven by retail at this moment except maybe, you know, in China. the China retail buying there has apparently just been >> we know silver is dominated right now by retail >> okay so um uh but what but whatever like I said earlier you know vertical price action doesn't sustain right so there's there's definitely going to be volatility and and we're seeing it today so just on the morning we're talking here Daniel right before we got on um I woke up and embarrassed to admit this but I was tweeting from the bed and uh silver had just hit 120 and I said oh remember way back when 5 days ago when silver had hit $100 now for the first time. Well, now it's 20% higher than that. About 25 minutes later, I sent another tweet saying, "Remember way back 25 minutes ago when silver was $120. Now it's now 108, right? Um so, you know, just just massive volatility here." And again, that that was to be expected. Um I think the big question on people's mind is okay, we've seen two really big vertical spikes in gold and silver before. Um and each time when that that spike corrected it was a massive catastrophic event down 80 plus percent and then the metal was dead money for a decade or more. So I think people have been wondering oh is that going to happen again this time or fundamentally are there different reasons why yes it'll be volatile there'll be some big pullbacks but the price will be better supported here because of reason X central bank buying massive investor demand in China the western investor waking up to this uh capital from bonds moving into to gold you know so do you have an opinion one way or the other on that >> I certainly um I tell you what I'm not going to answer your question but I am going to answer your Okay, >> whatever you like. >> In the year 2000, I was speaking to somebody who had let's just say a 20 million odd dollar position in Cisco Systems. >> Okay. >> And um my suggestion was to at the very least um remove his cost basis. Yes. removed his investment and just let the profits ride >> play with how >> so that he could always say I never lost a penny. >> Yeah. >> So all I'm saying is if you feel like maybe century high volatility is problematic, which you should, then maybe you should take a middle position and simply take some profits. >> Okay. Well, just so you know, Danielle, I've been pretty vocal um in in past weeks on increasing basis just encouraging people to consider d-risking. You know, whether that means doing exactly what you said, selling and playing with house money. Uh my case, I've been I've been personally looking at um just hedging um because philosophically I don't want to for many reasons I don't want to sell my ounces, but I don't just want to eat 100% of whatever price correction there might be. But you're nodding as I'm saying this, so we're we're definitely of like mind there. All right. So, we're we're getting close on time here. Um, okay. So, if if I have a sort of generally accurate sense of of your view of 2026, uh, you think it's going to be not a super fun year. Uh, the economy will probably likely continue to to sort of slow down. Um, I think you're worried that that we could really start to see the jobs market start to unwind here. Um, presumably whether it's AI or whether it's for some of the other reasons we talked about, I don't get a sense that you're calling for another blockbuster year in the markets, which I keep reminding people would be statistically really aarent anyways to have four years of 20 plus% returns. Um, so I kind of detect a note of caution from you. Hey, be a little bit cautious going into this year. What type of investment strategies or assets uh do you think are appropriate to consider for that type of of market forecast? if if I got your position correct. >> So again, I think being defensively postured and following what the it never hurts to follow the markets. So if markets are be becoming more defensive, then um then become more defensive with markets. We're also seeing a lot of deal activity occur whether you're talking about commercial real estate um and in the private realm we're seeing we're seeing private investments that are publicly traded get shellacked. Um leverage loan prices are down at their lowest of the year. Uh, so I think there's a a disconnect right now. I think I think if if you were to consider a pair trade, if you will, and then apply that philosophically, I'd say go long utilities, go short financials. Um, because it looks like losses are finally going to be realized. Um, and in that environment, especially with the Fed on hold, >> which is going to keep the bankruptcy cycle going whether we like it or not. um because right now a lot of companies need zero interest rate policy just to get enough oxygen to take their next breath but it it you know we're not going to see that we've got one more year yet of too high interest rates and that's going to have its own implications so I would I would just say to be be hedged be defensively postured and again if you want to play with house money do so >> do so but you got to take your your house money. You got to take your original investment off the table first to be able to play with the house money. So, totally agree with that. >> Preservation of capital. Yes. >> Okay. Um All right. So, on on uh your point about the financials, we haven't even talked there's so much we talked about in the past, it's hard to cram into one interview here, but um we've talked a lot in the past about the debt maturity wall, right, over the past years about all this corporate debt that's coming up for refinancing. And it was always about survive to 25, right? which hopefully by that time the Fed will have brought interest rates down and we'll all be able to refinance again at at rates similar to what we took out our loans at. That calvary has not arrived as you've said. Uh and the Fed isn't cutting for the time being. Um so uh how how concerned are you about um a wave of uh if not outright bankruptcies, just a lot of compromised debt as as companies roll over? And then on the consumer side as well, you know, once all the COVID debt moratoria had been passed, we've seen, especially once the student loans went back in repayment, we've seen an explosion in delinquencies, which are basically just pre-defaults, right? So, we've got that working its way through the system, too. Yeah. >> Yes. And and the consumer bankruptcy cycle always lags that of the corporate bankruptcy cycle. But no, just S&P reported just a few days ago that the number of of potential downgrades is growing faster. than the number of potential upgrades. So, and distressed debt exchanges are just going gang busters right now. And that's that's a polite way of saying we're bankrupt, but we're not going to declare bankruptcy. Um, so um uh no, I I do indeed expect especially given the Fed's stance. Um I' I've got my eye on on credit. I've got my eye on financials. >> Okay. Um I'm sure you saw the same headlines I did. Uh, did you get as as nauseated uh as I did reading the headline that um pretty soon you're going to be able to start paying your rent with buy now pay later programs? >> Oh, Adam, please do we have to talk about this? Yes. Um, the fastest growing area of buy now pay later, however, is medical and dental bills. >> I mean, I can understand that, I guess, because you're just desperate. You need to have the the procedures. But um >> if your kid if if your kids got a cavity that they've got got to have filled, you've got to do that. And and um and another popping area is paying your utilities with buy now pay later. >> By now pay later. Well, I mean as as as much of that further nauseates me doesn't nause nauseate me as much as you know learning how many people buy their Chipotle burrito uh with buy now pay. I mean totally non-essential non-necessary. Yeah. Um, >> and we're seeing, you know, we're seeing the Gen X and millennials, a lot of that generation, they've never seen repercussions. They've never experienced consequences. They've been warned about them. They hate me on Twitter, but but they've never experienced them, >> right? >> So, they're like, I'm going to Cabo and I'm going to put it on buy now pay later. >> But, but I'm guessing you see that as a very late stage indicator of like, >> you know, we are scraping the bottom of the bottom of the barrel here creditwise. >> Absolutely. In fact, payments put out an interesting statistic that individuals who um do use buy now pay later, their credit card balances on average are $1,000 higher than individuals who do not use buy now pay later. >> Okay. Okay. Now I need to get the bucket. Okay. Um All right. Last question for you, then we'll wrap up. Um so, as we talked about earlier, the precious metals have I mean, they've just been on fire, right? Um I mean they you've been bullish on them. I've been bullish on them. I don't think in our wildest dreams a year ago we could have imagined this I don't think we could imagine these prices 2 3 months ago Danielle um so great you know as you've said look you know if you've had this phenomenon be grateful take some off the table um or hedge or whatever um the mining stocks have moved but but they haven't especially in the past couple of months they haven't moved in the um the leverage that one expects And so my question is is um I mean we're going to we're going to start getting over the next couple of presuming that prices even just kind of hold in this general range we're going to start getting profit uh earnings calls from these companies where the profit margins are just going to be >> explosive >> I mean yeah uh so do you do you see an opportunity right now in the miners? Uh >> that was one of our big we had 10 calls coming into the year at Qi Research and um we are definitely bullish on the miners especially on a long-term basis when you're watching military buildups around the world um central banks buying gold etc. So um yes we are we are bullish on the miners >> and is that bullishness just reserved for the precious metals miners or do you also look at the other commodity producers and and you know think that they'll do well? Um, you know, there is an under supply of uh there's definitely an under supply of copper in the world. Um, so pick >> you mentioned oil is going back up. I mean, is there a lot of people saying, "Hey, there's a commodity super cycle that's underway here." Curious if you feel >> about super cycle, but super cycle requires demand. Yes. And and that's something that China's telling us is not there yet. >> So I'd be very careful about using the term super cycle. But no, there are places and I I think that that companies that are in the business of extracting rare earths with less environmental damage, I mean, there are a lot of places to look to park your money. >> Places like Greenland to uh look for >> We're not going there, Adam. No, that was your last question. I'm not talking about >> I have some Danish friends. >> Okay, that's a great point. Let's not go there in the last seconds here. Um, but I have saved the most important question for last, which is for folks that really enjoyed this conversation and would love to follow you and your work, Danielle, where should they go? >> So, come to dartinoboot.substack.com. Uh, we we publish the daily feather every day just like it sounds like every trading day of the year. Uh, and if you're an institutional investor, if you run money, come to Qi Research and I'm happy to talk to you. And if you don't already follow me on the platform formerly known as Prince, I mean Twitter, please do so at Dartino Booth. >> All right, fantastic. And Danielle, as usual, when I edit this, I will put up the links to all those uh resources. Folks, the links will also be in the description below the video so you can get there with one click. All right. Well, in wrapping up, folks, please uh join me in expressing your gratitude for Danielle coming on and giving us so much of her time and expertise when she's got such a busy schedule. do that by hitting the like button and then clicking on the subscribe button below if you haven't already, including that little bell icon right next to it. Uh, and to Danielle's point about um hedging, uh, a year of defense, um, a year of just, you know, potentially preparing for, you know, some of the the the headwinds that she sees ahead. Um, if you'd like to get some, um, help from a good professional financial adviser in figuring out how to position your portfolio for all that, um, well, if you've got a good one who's already working with you, great. stick with them. Don't mess with success. But if you don't or you'd like a second opinion from one, particularly one that takes into account all the macro issues that Danielle and I talked about here, then consider scheduling a free consultation with one of the financial adviserss that Thoughtful Money endorses. These are the firms you see with me on this channel week in and week out. Uh to do that, just fill out the very short form at thoughtfulmoney.com. Uh these consultations are totally free. Uh there's no commitments involved. It's just a service that these firms offer to help as many people as possible. And just a quick reminder too on the precious metals um uh the offer that Andy Sheckchman uh CEO of Miles Franklin, Thoughtful Money's um precious metals solutions provider, uh has offered to this audience um of being able to buy junk silver from his firm for 99 cents above spot uh while supplies last. Supplies are still lasting. So, if you'd like to take advantage of that, just fill out the very short form at thoughtfulmoney.com/bygold. Danielle, again, I can't thank you enough. It's always such a privilege to have you on. Again, thank you so much for squeezing us in when you've got such a busy schedule there. >> Thank you for having me, Adam. It's always a pleasure. >> All right. Well, thanks so much, Danielle. Um, look forward to seeing you soon. And everybody else, thanks so much for watching.
As The Rich Start To Struggle, Will They Pull Down The Economy? | Danielle DiMartino Booth
Summary
Transcript
We've got a real problem on our hands, Adam. If the top 10% even gets nervous. Welcome to Thoughtful Money. I'm thoughtful money founder and your host, Adam Tagert. Welcoming you here for a special interview with my great friend Danielle D. Martino Booth. I can think of very few people, if none, to talk with this morning after yet another uh Federal Reserve um you know, FOMC release. Jerome Pal press Presser. This one, if I'm not mistaken, Danielle, you thought was uh one of the biggest newsfests in a long time. >> It was pretty boring. Um I mean, all the reporters were geared up for for drama and National Enquire headlines and all they got was like buried in like the last section of of the Wall Street Journal. It was just it was a snoozefest. >> Okay. Um well, look, yeah. So, the Fed didn't surprise anybody. There was no change to the uh the policy rate. There was no change to QT. Um Paul bopped and weave to avoid all the questions about the political stuff. Um there was one thing there that that caught my attention. But but before I ask that because it'll be a segue into the next part of our conversation, do you have anything else just in general to say about the Fed right now? whether it's about the, you know, um, uh, the lawsuit that the administration has put against Pal or the Supreme Court case with Lisa Cook or just the constant horse race with who might um, replace Pal. Any of that do you want to comment on or is there not too much to talk about? Um, I mean, I think uh I I think that the administration's deny, deny, deny in terms of their u knowledge of the criminal allegations uh signifies that the administration really hopes that it goes away quickly. Um because it was a huge um it was a huge backfire. >> Okay. >> And sorry to interrupt, but just so you can put this in your answer, like I've been wondering like why do they even do it? Like the clock's almost out on Paul. Like why do something that politically sensitive this late in the game? >> Right. Exactly. And that's why um some um some of the newswires reported that Bill Bill Py had been involved. He denied that. Um the the short answer is I have no idea. Uh because it was again one of the most illtimed to your point and ludicrous by the way. I mean to suggest perjury. Um, we're talking about Jerome Powell Esquire here and somebody who was complying with building codes in Washington DC trying to get asbestos and god knows what else out of a building that was constructed in 1937. This is just asinine Adam. >> Yeah. I don't I mean look Trump already has enough uh suspicion that hey you're trying to put in a Fed chair who's just basically going to be a toad for you. So why stir up con additional concerns about Fed independence again? if you just waited a couple months, the guy would be gone anyways >> or or not because he he refused to answer the other question yesterday when asked whether he was planning to leave and he just >> right >> he brushed that and before this these allegations were made um these charges were brought uh there was a 90% chance that he was leaving and now according to the betting markets because we can bet on everything including the I who knew the return of Jesus Christ in 2025 but according to betting markets Now, the odds of Powell leaving are closer to 60%. So, they've declined and and he refused to answer the question. You know what? Uh, he's playing he's the cat, as I said yesterday, and Trump is the mouse. Now, he's he's playing cat-and- mouse because Trump's hands are tied. You know, Steven Myron's position ends in about oh, I don't know, less than 48 hours. Uh and it and his position on the board could be the only one that Trump can replace if Powell does not leave. >> Right. And and you I think understand Powell the man better than most. Um is he the kind kind of guy who's who's likely to kind of get a little pissed off and say, "Yeah, I'll stick around and I'll kind of be a gadfly for you for the next couple years." If that wasn't, he would have simply answered the Well, he I think he's considering it now, Adam. Let's let's put it that way. I think he's considering it. And I don't think he was considering it before, but I think he understands the reason he brought up Paul Vulkar when asked, "Why did you attend the Supreme Court hearing of Lisa Cook?" >> He brought up the example of Paul Vulkar as having also attended a federated Supreme Court hearing. Paul Vulkar in addition to Mariner Mariner I cannot say his first name Chair Eckles who then became Governor Eckles whose name then went on the building. They're the only two Fed chairs to ever stay on as governors after their chair term ended and he he brought up his his hero's name Vulkar. So I don't know. I think he's considering it and and I think that that's extremely important because he would effectively become the shadow chair that we were worried that Trump was going to install when he first got got into office. It would everything would completely flip on its head because people would always be listening to what Powell had to say, even if it was Governor Powell. >> Okay. um Lisa Cook. Uh I haven't been following that super closely. Um and I don't think the court has ruled on that yet, but correct me if that's wrong. But it seems like that one is also sort of being tamped down like you know what we're to to to replace her would be too great a threat to Fed independence and the Supreme Court seems to be leaning like hey we're just going to deny that. Well, um, go back to the original backfire because there might have been 5050 odds prior to the criminal charges against Powell, but now the Supreme Court really needs to make a stand and uphold its May 2025 ruling that basically carves out Fed officials. >> It's not that old of a decision. Um, and I but again I think I think the backfire with Powell now has increased the odds tremendously that Lisa Cook is given the green flag to stick around until Yeah. >> 2038. Just a little while longer. >> Yeah. So again, kind of another pissed-off Fed governor there. All right. So the odds of future rate cuts have continued to dwindle. Um I think right now the latest market expectation is two quarter point cuts for the rest of the year. Um what what what is your general sense of that? Uh you think that's about right? Would you take the over? Would you take the under? >> Oh, I would I would we have officially as a as as a firm taken the over on that? We do think that given >> um the unprecedented moves in some of the soft survey data. Uh before we started recording, we were talking about the underemployment rate among college graduates. Uh the the continued now that we're deepened earning season parade of layoffs and announcements that by the way affect high income earning Americans, the percentage of the population that's relying on initial jobless claims. I think we've got a pop coming in the unemployment rate. >> Okay. All right. So, this is where I want to go with you. Okay. And and and take take my position as simply we're on the debate team here. So none, this is just an intellectual exercise. Uh, and as you know, Danielle, I have been right there with you for much of the past years tracking the layoffs, uh, looking at the unemployment rate, challenging the the jobs data, which I think we've been validated over time that it was, um, fairly erroneous and skewed to the upside, all that type of stuff. Um, and there have been lots of reasons to be concerned about the economy continuing to slow down. Um, that being said, um, uh, GDP growth, okay, I mean, I'm going to put on my my my pro economy hat here. GDP growth has been pretty good, pretty strong. Um, now there's factors going into the GDP calculation, but GDP growth has been pretty strong. Um, the inflation has been disinflating and seems to continue uh to to be disinflating here at this point in time. Uh yes, there is sort of this parade of layoffs, but the unemployment rate remains historically low. Um I I don't know if it ticked back up again, but but last time or the time before it actually ticked back down. Um the uh job openings uh or sorry, the uh uh initial unemployment claims, you know, continue to be super low right now. So, it's it's a a no hire economy, but it's some are saying it's a no higher no fire economy where we're just sort of trunnling along here. Um, in spite of the uh the the layoffs, you know, there's enough hiring to kind of keep things generally flat. Um, okay. So, then you listen to the administration, Scott Bessant, Howard Lutnick, whatever. And yes, they're going to be cheerleaders for the administration, but these are serious people with personal brands to put on the line. you know, they they don't want to say something that's going to just blow up in their face as blatantly, you know, uh, snowing people. And, you know, they're saying, look, we did a lot in 2025 to lay the groundwork for an economic boom in 2026. And that's really starting to happen now. And that's everything from the passage of the tax cuts to additional tax cuts to uh deregulation to tariff revenues coming in you know tens of billions a month um to uh you know new factory building data center building um you know bringing jobs in having foreign capital come in. So they're saying look we think 5% GDP baked in the cake and you know Lutnik is saying don't get me started cuz I could tell you six or seven and how how those are possible here. So you know essenti and and if you if you talk to like the survey data of consumers has been bad. I mean there's no no getting around that. But if you talk to you know the corporate world you know they're heartened by the deregulation. and they're heartened by more business certainty now that the craziness of the tariffs is largely behind us. Um, so to somebody who who is on that side saying, "Hey, Danielle, I'm taking the over on the economy for all those reasons, you know, that collides obviously with a lot of data that you report." So, so, so tell me what would your answer to them be? Well, my answer would be that um first and foremost, we do not have data in hand yet uh for the Bureau of Economic Analysis to revise downwards its GDP figures. Um that is going to be very lagged. But we do know that for example in the second quarter of 2024, there was a net job loss in the private sector of 77,000 jobs. We have yet to see these figures trickle through into GDP in the form of income >> and income is pulled back out of GDP in retrospect when when jobs are revised down and of course we know that that that payrolls continue to see deep revisions and so this has to be backed out of >> retroactively right. Yeah. >> Yes. and and and we've also seen, you know, we we've seen an increase in imports that that is going to push up GDP. And we're going to see going forward, Adam, to your point, we will see companies either rebuild inventory or go out of business. >> Some of them are running at such razor thin levels of stockpiles that they're going to have to buy something or just close shop. One or the other. Make your choice. But my answer to them would be the demand for labor. And though executives are enthusiastic about their pro profit margins, they're enthusiastic about their profit margins because they're propped up by firing people, which is great for their stock price, which means it's great for their bonus. Um, and it's great for their bottom line. >> Yeah. How much of a tailwind Yeah. Sorry to interrupt, but how much of a tailwind do you think AI is to that trend? like will we see a notable less you know lessening of demand for labor as smaller AI benefits start to trickle down to the rest of the corporate fleet? >> Yes. U actually we we um we published on this just a few days ago. So a year ago um AI investment was growing at about 18% year-over-year rate and um that is absolutely collapsed in terms of the year-over-year growth rate of fresh investment in AI. I think this is partially attributable to the fact that a year ago we were seeing companies devote cash flow to invest in AI and now they're blowing up the bond market and issuing bonds and taking on leverage and debt in order to invest in AI. These are two much different dynamics from the perspective of the CFO of companies which is why you're seeing the growth rate of investment in AI absolutely collapse. Um, it's not that there aren't projects planned, but there sure are a lot of projects that have been pulled as well. Um, so what I want to see, Adam, is outside of the AI complex, I want to see the commitments on the part of countries to come in and invest, I want to see those commitments fulfilled. And right now we're only about a third of the way in terms of what's been announced by the administration and what's actually occurring on the ground. We have a lot of cancellations in that realm as well. Um but I want to see these investments occur in the United States and catalyze job creation. I want to start reading about this company's hiring 10,000 new workers. This company's hiring 4,500 new workers unlike Dowo Chemical which fired 4,500 workers today when it reported its earnings. I want to see announcement that private sector job creation is taking off. I do not want to look at a chart that shows me that college age underemployment for those 22 to 27 years of age is at 42%. And that their unemployment rate is at 10%. I want to see people hiring college graduates instead of making them work two jobs as an Uber driver during the day and a Door Dash delivery person at night. >> Um, that is a god uh forsaken number. 42% undermployment. >> Under employment. >> Yeah, underemployment. That that is just that that's so frightening. So, um, and I don't deny we have a massive, well, I think we have a national underemployment problem, but but certainly almost a crisis here with recent college graduates. Let me ask you this, and again, this is just for the the purposes of debating here. >> Um, so, um, I I don't have the list. I'm sure one exists of, um, the companies that are that are hiring people because capital is coming in here, like I said, to build factories or things like that. I don't know how long that list is. Um, but I imagine most of those jobs, not an expert here, but I imagine most of those jobs are kind of trade jobs, right? You know, we're we're building infrastructure here. Um, eventually, you know, there'll be some white collar people that work in these data centers and whatnot, but but right now, I'm imagining the biggest demand is for, you know, people to get their hands dirty actually, you know, constructing this stuff. And I do wonder um you know our college system will save the debate for whether a college degree is really worth today what it was in the past but you know a lot of kids I think I think the vast majority of those graduates are are not looking to weld um you know or to to you know be running an excavator or things like that. So is there just kind of almost an imbalance right now of what college is producing versus what the economy needs? Oh, there is certainly that because the white the vast majority of the jobs that are being lost are take take for example the 16,000 at Amazon those are corporate those are corporate jobs that would have been filled by college graduates. So you're absolutely right. Um, you know, one of the concerns that I have though, Adam, going forward, and you hear this uh from communities where data centers have been um have been constructed and completed is once that construction period is over, these puppies need like one or two guys to keep the lights, >> run it, right? Yeah. The jobs move away from the community. Yeah. They they don't need them anymore. Right. >> And I mean, and I'm also worried about, you know, my mom's generation, so she just turned 79 in November. Um, so she'll call it 80 for the outside layer of the baby boomers. You know, there are a ton of opportunities to be home health aids in the United States. Um, some of the lowest paid nurses just to take care of the boomers as as they age. Um, but what are we going to do with them in 15 years? So all I'm saying is I want to see the productivity revolution that AI is supposed to unleash create all new industries, Adam. >> Right? >> That's what I want to see. I want to see us move up the value creation chain. I want to know why China can produce AI with onetenth of the data centers of the United States. I'd like to know what quantum computing what the effect it's going to have on how many data centers we need. a as well. But I want to see a more dynamic and a wider breath of job creation than what we're seeing right now. >> Yeah. So, okay, turning taking off my debate hat for a second, I completely agree with you. And to be honest, I'm I'm skeptical. I'm I'm put this way. I'm I'm I'm concerned that the rate of job displacement is going to exceed the rate of new job creation in this new economy um for some foreseeable period of time here. And it's going to be it's going to be rough. Um because I think AI to your point is kind of removing the entry level rungs on the job ladder permanently in a lot of cases. Um and so you know it's going to take a while before we figure out okay well if those entry- level jobs aren't there anymore how does a recent college graduate get gainful employment right and I'm a big fan of the trades and I think too many people go pursue a paper college degree for you know for reasons that aren't super useful. But I I am worried about this what I think will be a fairly long transition uh period and I don't I don't see that we have a real strategy for that yet. So anyways, I'm right right on there with you. That doesn't mean that the economy still can't boom in 2026 because what we're talking about here that that that's a bit of a longer thing. Um but let let me ask you this. So um pal yesterday said the down the the upside risks to inflation and the downside risks to employment have moderated and I think that was a big reason why he said and that's why we're standing pat right so to a certain extent even he is saying you know with the data we have we're becoming a little bit less worried to both of the risks to to the risks of both of our mandates here which I would think you know with my debate head on I'd say okay well that's that's an important sign that that that the the you know the powers that are close to the data are feeling a little bit better. Um you don't necessarily need to react to that because we've already I've already sort of asked you that question. But on the inflation side of things um where are you are you are you let me put this way. Are you willing to take the over or the under on the current official inflation estimate? >> Well, so um we've spoken about this in the past. You know that I'm a fan of true inflation. Um, >> I think you're going to take the under, but I just want to give you I want to look impartial when I ask the question. >> No, no, of course not. I I like real-time metrics. Um, and right now I think it's at 1.23. >> So, uh, it's got about a 45day um, lead time. And, uh, and what we're seeing in rents specifically as opposed to home prices, we're seeing a little bit of a bump up in home prices. We know that mortgage rates have come down. Um sellers are relisting their homes at a very very aggressive pace. Um and the reason I bring that up is yes, we've seen mortgage rates come down a bit and yes, we've seen purchases go up a bit and that's provided a nice little bump to home prices. You cannot say the same thing about rents. Go back to that college underemployment rate. Who's going to rent these apartments? Um, and my concern with the massive wave of individuals relisting their homes is that we're going to have price discovery in the housing market, >> right? You'll finally get inventory and that's what you need for true price discovery. Yeah. >> And that the reason we're seeing record high cancellation rates is that buyers are walking away. They understand that just like when quiet quitting was a thing, the employees had the upper hand, now that everybody is so freaked out about losing their job, the employers have the upper hand. In that same way, we've had the dynamic switch. Buyers now have the power and sellers don't. And once that recognition finally comes through, then we're going to see price discovery in housing. And then we're going to see even more disinflation in shelter. >> Got it. Okay. And in the shelter component of CPI, so the reason why shelter is so important to the overall inflation calculation is because it's what like 40% or something like that. I mean it's pay 25 and 40. It's about 25% of PCE. But yes, it's important. >> Okay. Yeah. I think it is the biggest single factor, right? >> It is. And and and if you're talking about inflation at the headline level, however, prices at the pump matter, Adam, and Americans who already feel like they've been knocked down a notch, by the way, are seeing prices at the pump go up because oil prices are rising because we're threatening to attack Iran or whoever we're threatening to attack this week. >> Okay, so I'll get to that in just a second. Um, in terms of the shelter calculation, again, in the headline and CPI, kind of the the big number the media puts out there, it's rents, right? It's not home prices. It's based off. >> It's it's owner's equivalent rent. It you were asked, you queried, >> if you were to rent your home, what would it rent for? >> I mean, it's it's really a a stupid interpolation. It's >> it's a stupid subjective. Yeah. But but but as rents disinflate, that number should come down, right? And it's also based on rents, pure rents. And it's also based on hotel rates, which we are seeing >> decline according to industry metrics at about a 2.7% year-over-year rate. I've got that on the top of my head um because we've just been writing about hotel rates declining and what the implications are, especially because >> hotels 30% of hotels spending is by that top 10% that we're following so closely. >> Right. And I want to I want to ask you about the top 10% in just a second. Um, okay. So, you know, one of the thesis I have is, you know, if rents continue to to to disinflate or actually deflate, I think we're seeing deflation in rent prices now. Um, it almost doesn't matter what's going on with the rest of the the CPI basket. I mean, it does, but but um >> well, you're already seeing goods. You're already seeing the effect of tariffs. Powell said yesterday they're already working their way through goods inflation services disinflation as he said was ongoing. So when you goods services shelter you get um you get to a big chunk of it and yet grocery prices are stubbornly high and prices at the pump are going up. >> Yeah. Um, so but but I guess and this is just sort of the question I want to get to is is as the year goes on this trend of of most things deflating, do you see that stopping or do you see that that continuing? >> I see that accelerating because I do see the unemployment rate rising, >> right? Consumer demand will will weaken. >> And we are seeing wage inflation disinflate. >> Okay. And of course that's the most important thing is you know what's happening with people's earning power. Um all right so uh I had a really nice conversation with our mutual friend Peter Atwater yesterday and you know Mr. K-shaped economy and um uh you know we talked about how uh the two legs of the K very different sizes right way few people in fewer people in the top part of the K but they punch way above their weight when it comes to uh their their spending. And you know, I had seen the the metric most people have seen that the top 10% are responsible for about 50% of consumer spending. Peter said actually I think it's closer to 60%. Um but the point there being is is even though the the bottom half of the K or bottom leg of the K, which is much larger population-wise, is not doing so hot, um the averages have been kept okay um by the spending of the top 10%. So in your research, where do you see the top 10% going this year? I mean, the S&P just hit 7,000 the other day, so, you know, they're still benefiting from from asset prices. Do you see that largely hanging in there for 2026, or do you see something that could could constrain their spending, whether it's a slowing economy or whether it's just a market correction that has a negative wealth effect and they start pulling in their spending? So, you know, I I've been watching very closely whether it's conference board, University of Michigan, um the confidence of the highest income earners and that has begun to falter. >> That should raise an eyebrow. >> That would be very important, I would think. Yeah, >> it would be very important. Uh I I think your average top 10enter, if you will, uh might know what a price to earnings ratio is if they were to be quizzed on the street. Um I I think that they're highly aware of um the fact that they are the CEOs of companies who are firing people. >> Um and I I think that they're highly aware that their profit margins have been whacked. So, um, when you add all this together, you start to say, well, maybe they see something over the horizon because they're creating what's over the horizon at the same time that the stock market valuation is something that they can articulate and explain >> because right now the Cape Schiller PE is at 41 and I guess it hit 44 in 2000. So at this point, you know, we're just about there on that last final valuation measure, which has nothing to do with timing, but again, and they know it has nothing to do with timing, but they're seeing what's happening in the bankruptcy courts, which is a lot of activity. They took a little break. They all went to Davos. Minute Davos ended, they came back. Now we're back to multi-billion dollar bankruptcy filings. They see what's happening in the credit markets. They see what's happening in private credit. um they see the inability to exit private credit. Um they know if they want to make a merger acquisition to grow that other compan stock prices are inflated. So um we've got a real problem on our hands, Adam, if the top 10% even gets nervous. >> And it sounds like from what you just told me, I don't know if they're freaking out, but >> they're not freaking out. I mean, they don't need to freak out because they can jump on their private jet and go wherever they want to go if they freak out. >> But but it doesn't sound like they're getting increasingly optimistic. It sounds like they're getting a little bit concerned. >> They are. In fact, we saw CEO confidence in the first quarter take one of the biggest declines uh in in in history. And um I think that's because they knew that Amazon round four was around the corner followed by all the other companies that will follow suit. >> Mhm. >> Because you don't need as many people to run companies as you did before which I mean and the irony there is if I could just push back, you know, AI is not the end all be all when it comes to replacing employees. You actually have to teach them how to use it first, >> right? >> Um it's just a suggestion. I but I digress. No, because I was actually just about to ask you about that. So, um I would say the top 10enter is probably much more attuned to what's happening with the hyperscaler stocks, right, which have been driving the market for the past bunch of years. Um we're we're getting to the part of the story where invest, you know, Wall Street is is not just going to trade based on hype alone. um where there's enough data for it to start saying okay given all that huge capital expend expenditure you did what incremental new revenues uh are you getting from this and um curious to know if you have an opinion strong opinion one way the other as to how the AI trade is going to do this year but I assume that if the bloom comes off it um and and there's a material correction in the the stock prices of the hyperscalers because they've been inflated so much um that is going to really impact the um you know the the the sentiment of the top 10% because it's going to be their portfolios that are going to be taking the vast brunt of the uh the pain. >> And I think that there is something to be said. I'm looking over where we're filming when my my eyes going up to the NASDAQ being down 2% and the Dow being basically flat. Uh to answer your question, Adam, this is a phenomenon that we witnessed in the year 2000. >> Sure. We saw rotation into safety utilities. We saw the Dow outperforming the NASDAQ. Um it was on those particular days it kind of raised a little yellow flag saying you know the dotcom bubble may be deflating. Warning warning. Um, but we're seeing a a a greater number of days where we're seeing the MAG 7 underperform what we would consider to be something defensive. >> And of course, >> and I mentioned that the S&P just said 7,000, but it's gone the the hyper I mean, the S&P really hasn't gone anywhere since what, October? I mean, it really does seem to be >> potentially plateauing here, right? >> It does. I think there's a lot of grind right now, and I think there there's a lot of rotating right now. I and and we have to remember that at the same time, you know, I'll bring mom back into the conversation. 11,000 plus US baby boomers retiring every day. Uh the Fed has not cut rates a lot, but they used to be making 5% on their cash. They're not anymore. Um so they're going to to the extent that they can rotate into dividend paying stocks as well to look for income in what has been a falling interest rate environment. >> Okay. So, um, we are, uh, it's a great segue into my next topic and and the day we're recording has been a very volatile day for gold and for silver. Um, uh, and they've had >> the most volatile day in in in in a century. >> It's in my Bloomberg chat right now. >> Really? In a century? Okay. So, it's been such a crazy ride. Uh, and look, you know, I've been saying at some point there's going to be a pullback because things just don't go vertical forever. But uh you you mentioned your mom in that generation. So um the for the past you know number of decades um you know there's been what's been called the 60/40 portfolio um 60% equity 40% bonds and >> on an increasing basis now you're seeing a lot of Wall Street luminaries and you know Wall Street um houses themselves you know start to say well you know bonds had a fantastic run over the past 40 years but we don't think they're going to have a similar run going forward. And you know, for those of you who are looking for sort of, you know, balance to your portfolio here, well, maybe you should take some of that 40% of bonds and put that in gold. And um this the the imbalance of size between the bond market and the precious metals market is pretty tremendous. So, if that were indeed to happen, that really should be favorable for the gold price from here. A, do you think that's going to happen? And B, has it started? And if so, what kind of what ending are we in? >> Well, I certainly think that um that the sellside waking up to the shine of precious metals um a I find it to be highly poetic and ironic. Um but but b it it certainly would explain fundamental allocations to gold. Mhm. >> Um, but by the same token, when oil prices went negative because of margin calls, uh, I don't think anybody thought we were going to stop filling up our cars with gasoline, >> right? >> And yet oil prices still went negative. So, my biggest concern about the precious metals complex right now is the fact that a New York City taxi cab driver yesterday asked me if I was he was dropping me off at Bloomberg. He said, "Oh, are you going on TV?" I said, "Oh, yes." He said, "Oh, is gold going to 15,000?" And that's my that's my concern right now, Adam. >> Okay. So, did the shoe showing boy redo? >> It is. Yes, it is. And and you've got people who are logically holding on to gold like me, like you. We both own gold. We know this. >> Um but you also have people who are taking on leverage in order to get into it because it is acting like GameStop on steroids. >> I know. I know. I personally am not so sure how much of it's really being driven by retail at this moment except maybe, you know, in China. the China retail buying there has apparently just been >> we know silver is dominated right now by retail >> okay so um uh but what but whatever like I said earlier you know vertical price action doesn't sustain right so there's there's definitely going to be volatility and and we're seeing it today so just on the morning we're talking here Daniel right before we got on um I woke up and embarrassed to admit this but I was tweeting from the bed and uh silver had just hit 120 and I said oh remember way back when 5 days ago when silver had hit $100 now for the first time. Well, now it's 20% higher than that. About 25 minutes later, I sent another tweet saying, "Remember way back 25 minutes ago when silver was $120. Now it's now 108, right? Um so, you know, just just massive volatility here." And again, that that was to be expected. Um I think the big question on people's mind is okay, we've seen two really big vertical spikes in gold and silver before. Um and each time when that that spike corrected it was a massive catastrophic event down 80 plus percent and then the metal was dead money for a decade or more. So I think people have been wondering oh is that going to happen again this time or fundamentally are there different reasons why yes it'll be volatile there'll be some big pullbacks but the price will be better supported here because of reason X central bank buying massive investor demand in China the western investor waking up to this uh capital from bonds moving into to gold you know so do you have an opinion one way or the other on that >> I certainly um I tell you what I'm not going to answer your question but I am going to answer your Okay, >> whatever you like. >> In the year 2000, I was speaking to somebody who had let's just say a 20 million odd dollar position in Cisco Systems. >> Okay. >> And um my suggestion was to at the very least um remove his cost basis. Yes. removed his investment and just let the profits ride >> play with how >> so that he could always say I never lost a penny. >> Yeah. >> So all I'm saying is if you feel like maybe century high volatility is problematic, which you should, then maybe you should take a middle position and simply take some profits. >> Okay. Well, just so you know, Danielle, I've been pretty vocal um in in past weeks on increasing basis just encouraging people to consider d-risking. You know, whether that means doing exactly what you said, selling and playing with house money. Uh my case, I've been I've been personally looking at um just hedging um because philosophically I don't want to for many reasons I don't want to sell my ounces, but I don't just want to eat 100% of whatever price correction there might be. But you're nodding as I'm saying this, so we're we're definitely of like mind there. All right. So, we're we're getting close on time here. Um, okay. So, if if I have a sort of generally accurate sense of of your view of 2026, uh, you think it's going to be not a super fun year. Uh, the economy will probably likely continue to to sort of slow down. Um, I think you're worried that that we could really start to see the jobs market start to unwind here. Um, presumably whether it's AI or whether it's for some of the other reasons we talked about, I don't get a sense that you're calling for another blockbuster year in the markets, which I keep reminding people would be statistically really aarent anyways to have four years of 20 plus% returns. Um, so I kind of detect a note of caution from you. Hey, be a little bit cautious going into this year. What type of investment strategies or assets uh do you think are appropriate to consider for that type of of market forecast? if if I got your position correct. >> So again, I think being defensively postured and following what the it never hurts to follow the markets. So if markets are be becoming more defensive, then um then become more defensive with markets. We're also seeing a lot of deal activity occur whether you're talking about commercial real estate um and in the private realm we're seeing we're seeing private investments that are publicly traded get shellacked. Um leverage loan prices are down at their lowest of the year. Uh, so I think there's a a disconnect right now. I think I think if if you were to consider a pair trade, if you will, and then apply that philosophically, I'd say go long utilities, go short financials. Um, because it looks like losses are finally going to be realized. Um, and in that environment, especially with the Fed on hold, >> which is going to keep the bankruptcy cycle going whether we like it or not. um because right now a lot of companies need zero interest rate policy just to get enough oxygen to take their next breath but it it you know we're not going to see that we've got one more year yet of too high interest rates and that's going to have its own implications so I would I would just say to be be hedged be defensively postured and again if you want to play with house money do so >> do so but you got to take your your house money. You got to take your original investment off the table first to be able to play with the house money. So, totally agree with that. >> Preservation of capital. Yes. >> Okay. Um All right. So, on on uh your point about the financials, we haven't even talked there's so much we talked about in the past, it's hard to cram into one interview here, but um we've talked a lot in the past about the debt maturity wall, right, over the past years about all this corporate debt that's coming up for refinancing. And it was always about survive to 25, right? which hopefully by that time the Fed will have brought interest rates down and we'll all be able to refinance again at at rates similar to what we took out our loans at. That calvary has not arrived as you've said. Uh and the Fed isn't cutting for the time being. Um so uh how how concerned are you about um a wave of uh if not outright bankruptcies, just a lot of compromised debt as as companies roll over? And then on the consumer side as well, you know, once all the COVID debt moratoria had been passed, we've seen, especially once the student loans went back in repayment, we've seen an explosion in delinquencies, which are basically just pre-defaults, right? So, we've got that working its way through the system, too. Yeah. >> Yes. And and the consumer bankruptcy cycle always lags that of the corporate bankruptcy cycle. But no, just S&P reported just a few days ago that the number of of potential downgrades is growing faster. than the number of potential upgrades. So, and distressed debt exchanges are just going gang busters right now. And that's that's a polite way of saying we're bankrupt, but we're not going to declare bankruptcy. Um, so um uh no, I I do indeed expect especially given the Fed's stance. Um I' I've got my eye on on credit. I've got my eye on financials. >> Okay. Um I'm sure you saw the same headlines I did. Uh, did you get as as nauseated uh as I did reading the headline that um pretty soon you're going to be able to start paying your rent with buy now pay later programs? >> Oh, Adam, please do we have to talk about this? Yes. Um, the fastest growing area of buy now pay later, however, is medical and dental bills. >> I mean, I can understand that, I guess, because you're just desperate. You need to have the the procedures. But um >> if your kid if if your kids got a cavity that they've got got to have filled, you've got to do that. And and um and another popping area is paying your utilities with buy now pay later. >> By now pay later. Well, I mean as as as much of that further nauseates me doesn't nause nauseate me as much as you know learning how many people buy their Chipotle burrito uh with buy now pay. I mean totally non-essential non-necessary. Yeah. Um, >> and we're seeing, you know, we're seeing the Gen X and millennials, a lot of that generation, they've never seen repercussions. They've never experienced consequences. They've been warned about them. They hate me on Twitter, but but they've never experienced them, >> right? >> So, they're like, I'm going to Cabo and I'm going to put it on buy now pay later. >> But, but I'm guessing you see that as a very late stage indicator of like, >> you know, we are scraping the bottom of the bottom of the barrel here creditwise. >> Absolutely. In fact, payments put out an interesting statistic that individuals who um do use buy now pay later, their credit card balances on average are $1,000 higher than individuals who do not use buy now pay later. >> Okay. Okay. Now I need to get the bucket. Okay. Um All right. Last question for you, then we'll wrap up. Um so, as we talked about earlier, the precious metals have I mean, they've just been on fire, right? Um I mean they you've been bullish on them. I've been bullish on them. I don't think in our wildest dreams a year ago we could have imagined this I don't think we could imagine these prices 2 3 months ago Danielle um so great you know as you've said look you know if you've had this phenomenon be grateful take some off the table um or hedge or whatever um the mining stocks have moved but but they haven't especially in the past couple of months they haven't moved in the um the leverage that one expects And so my question is is um I mean we're going to we're going to start getting over the next couple of presuming that prices even just kind of hold in this general range we're going to start getting profit uh earnings calls from these companies where the profit margins are just going to be >> explosive >> I mean yeah uh so do you do you see an opportunity right now in the miners? Uh >> that was one of our big we had 10 calls coming into the year at Qi Research and um we are definitely bullish on the miners especially on a long-term basis when you're watching military buildups around the world um central banks buying gold etc. So um yes we are we are bullish on the miners >> and is that bullishness just reserved for the precious metals miners or do you also look at the other commodity producers and and you know think that they'll do well? Um, you know, there is an under supply of uh there's definitely an under supply of copper in the world. Um, so pick >> you mentioned oil is going back up. I mean, is there a lot of people saying, "Hey, there's a commodity super cycle that's underway here." Curious if you feel >> about super cycle, but super cycle requires demand. Yes. And and that's something that China's telling us is not there yet. >> So I'd be very careful about using the term super cycle. But no, there are places and I I think that that companies that are in the business of extracting rare earths with less environmental damage, I mean, there are a lot of places to look to park your money. >> Places like Greenland to uh look for >> We're not going there, Adam. No, that was your last question. I'm not talking about >> I have some Danish friends. >> Okay, that's a great point. Let's not go there in the last seconds here. Um, but I have saved the most important question for last, which is for folks that really enjoyed this conversation and would love to follow you and your work, Danielle, where should they go? >> So, come to dartinoboot.substack.com. Uh, we we publish the daily feather every day just like it sounds like every trading day of the year. Uh, and if you're an institutional investor, if you run money, come to Qi Research and I'm happy to talk to you. And if you don't already follow me on the platform formerly known as Prince, I mean Twitter, please do so at Dartino Booth. >> All right, fantastic. And Danielle, as usual, when I edit this, I will put up the links to all those uh resources. Folks, the links will also be in the description below the video so you can get there with one click. All right. Well, in wrapping up, folks, please uh join me in expressing your gratitude for Danielle coming on and giving us so much of her time and expertise when she's got such a busy schedule. do that by hitting the like button and then clicking on the subscribe button below if you haven't already, including that little bell icon right next to it. Uh, and to Danielle's point about um hedging, uh, a year of defense, um, a year of just, you know, potentially preparing for, you know, some of the the the headwinds that she sees ahead. Um, if you'd like to get some, um, help from a good professional financial adviser in figuring out how to position your portfolio for all that, um, well, if you've got a good one who's already working with you, great. stick with them. Don't mess with success. But if you don't or you'd like a second opinion from one, particularly one that takes into account all the macro issues that Danielle and I talked about here, then consider scheduling a free consultation with one of the financial adviserss that Thoughtful Money endorses. These are the firms you see with me on this channel week in and week out. Uh to do that, just fill out the very short form at thoughtfulmoney.com. Uh these consultations are totally free. Uh there's no commitments involved. It's just a service that these firms offer to help as many people as possible. And just a quick reminder too on the precious metals um uh the offer that Andy Sheckchman uh CEO of Miles Franklin, Thoughtful Money's um precious metals solutions provider, uh has offered to this audience um of being able to buy junk silver from his firm for 99 cents above spot uh while supplies last. Supplies are still lasting. So, if you'd like to take advantage of that, just fill out the very short form at thoughtfulmoney.com/bygold. Danielle, again, I can't thank you enough. It's always such a privilege to have you on. Again, thank you so much for squeezing us in when you've got such a busy schedule there. >> Thank you for having me, Adam. It's always a pleasure. >> All right. Well, thanks so much, Danielle. Um, look forward to seeing you soon. And everybody else, thanks so much for watching.