Bill Fleckenstein: A Ton of Market Cap Has Been Destroyed and Nobody Has Noticed
Summary
Gold and Miners: The guest is strongly constructive on gold and gold miners, citing central bank buying (non-G7), weak trust in fiat, and rising adoption as portfolio insurance.
Energy Sector: He is evaluating beaten-down energy stocks and sees improving technicals, though oil price uncertainty keeps him cautious with high cash levels.
AI: Skeptical on AI-driven capex with unclear ROI, noting market concern as high-flying software names sell off despite the broader tape holding up.
Passive Investing: Highlights the “passive bid” from 401(k)s/ETFs (Vanguard, BlackRock) as a market floor that distorts price discovery and creates systemic fragility.
Value Rotation: Observes an under-the-surface rotation toward old-economy/value areas (chemicals, energy, miners), reminiscent of post-2000 dynamics.
Bond Market: Warns that longer-dated yields are not fully sanctioning Fed cuts, signaling a potential loss of confidence that could constrain policy support.
Yield Curve Control: Expects potential future YCC (Japan-like) to cap long rates—functionally unlimited QE by another name—given U.S. debt dynamics.
Risk Stance: Maintains 30–40% cash for flexibility amid macro confusion and market structure risks, trimming but still heavily exposed to precious metals.
Transcript
I don't think people really can appreciate how different the market of the last 15 or so years is. When you combine the a Fed that will do QE, take rates to zero, and the passive bid and the market share it's garnered. What we see working and happening in the marketplace in the market today is completely different than anything that's happened in history. Yeah, the human nature side of that of course stays the same, but the behavior and the drivers are totally different right now. >> Bill Fleenstein, founder and president of Fleenstein Capital. It is so wonderful to welcome you back to the show. Great to see you as always, Bill. It's been way too long. >> Well, it's back. It's nice to be back with you again, Julia. How are you? How have you been? I'm doing well and I'm thrilled to have you back on because this audience loves hearing from you and I I don't know, Bill, like I feel like it's been a while since I've even seen an interview with you and maybe you've been a bit more quiet on X lately. So, I want to catch up and um >> a little of both. I mean, I I don't I don't I don't chirp on X unless I have something to say. Mostly I just re respond to stuff and I I don't think I haven't done an interview in a while. So, anyway, here I am. >> Yeah. Well, let's let it rip then since it has been a while. Let's start big picture, macro view, where where we are today, where you see things headed. What do you make of the global economy, domestic economy, even where we are in the markets? What's been on your radar of late? And as you know, Bill, you can take all the time you need to set the table when it comes to that big picture macro view. >> Where I am, Julia, is confused. And anyone who's not slightly confused by the environment we're in, uh, doesn't understand it very well. So, you know, we have the passive bid, which I've talked about a lot and which Mike Green, you know, discovered and exposed to the world and you've had Mike on, so your readers understand that. Then we have the lunatics at the Fed who are, you know, back doing QE again and and and cutting rates. So those two things normally are the most those two things are very important factors. Then we've got this all this disruption in the um uh AI sector. I like to call it artificial imagination just to keep from being too serious about it. And the disruption is really interesting because on the one hand until very recently folks were willing to believe that that the that a handful of companies could something spend something bordering on three quarters or a trillion dollars and consume massive amounts of energy and water and and all of that and and it was all going to work out okay. even though currently there's no sign of where they're going to get any return on investment. And we've gone from people credibly being willing to believe that to to getting now a little concerned about it. A lot of those types of software stocks were getting roughed up because of the capital spend and lack of ROI. And then we've got this full throttle full throttled imagination component where everyone has leapt to the future. AI runs everything. There's no jobs, there's no economy, there's no nothing. Uh, you know, that was the the the big thing that came this weekend, >> the Catrini research piece. Yeah. On Substack. >> Yeah. >> Yeah. And so the the I've I'm used to seeing people's imaginations go wild. You know, we've seen it many times in the last few years. We saw it in the in the uh stock bubble that burst in 2000. We saw it during the real estate bubble that burst in 08. But I've haven't quite seen people's imagination when we're we're not in a really nasty recession and where people are really prone to get paranoid and because they've got a lot of bad data. Now they're prone to get paranoid about how bright the future's not going to be even though they're they're so they're turning their imaginations loose to get concerned. It's a it's a really odd mix. Then of course you've got all the turmoil caused by the nature of how Trump does what he does. Tariffs being an example, but you know that's you know he does this and then there's the taco and then there's you know so there's that level of angst or sorry of disruption. Uh and um so now and and and now you've got a huge contingent of stocks predominantly in the tech and mostly in the software sector, but in other places like private credit issues have hurt like the insurance companies and some of the credit card companies have gotten getting have gotten roughed up and we've seen splat splatterings. That's a technical term for a for a wipeout in in a lot of different companies, but the tape hasn't really been hurt. And beneath the surface, there are the stocks that have been kind of grinding higher have been kind of like the proverbial old economy stocks, chemicals and uh energy a little bit. And of course, the miners are are doing well because gold's doing well. But what's really odd and what I've been trying to piece together in my head about what's happening is that you you you have a you ha you have what appears to be a rotation taking place similar to what happened in 2000 and 2001 after the dot bubble burst. The tech stocks got splattered as they got splattered. It fed on itself. It spooked people, fed back into the economy, and then the the companies that that where the money gravitated to were old economy companies, and everyone knows that, you know, the the um value did so much better, you know, in 2001 to 2003. Now, because of the way that the passive bid operates and because of the things that Mike's explained where the passive is getting the money, the active managers, people like me and other people, uh although I'm not in business of raising capital, um you know, are losing money, uh because it's being taken away from them or their clients are retiring. um it seems impossible to get any kind of a rotation because the passive bid drives everything and and that money goes into the on balance goes into the to the to the big cap weighted stocks. What we've seen though beneath the surface is a lot of these high-f flyers have been blown up, but they haven't blown up in a way where it's been a contagion for the tape. So, my pet working theory about this new environment is that the the passive bid is buying enough of the uh enough stuff still that while people panic out of certain names like just pick Microsoft in enough size that they're blowing through the passive bid, uh they're they're not doing enough damage overall and that money then leaks itself back leaks back into other companies. So, we've got a rotation that's kind of under the surface and and the deterioration that's happened in a lot of these high-f flyers and other companies that that are perceived to be impacted by AI. Uh like I say, banks, credit cards, you know, all the they keep they keep going to other areas and shooting them, you know, based on the AI thesis. Um uh so the those companies are are are are are getting pummeled but the tape holds together and you can find pockets of of like I say old economy you know plain vanilla oriented type businesses and they're doing okay. So it's a it's a really odd mix. So, I'm just wondering if we're seeing a rotation precipitated by the fact that the fact that the facts are changing and people are getting spooked about these, you know, really expensive companies that that no one ever cared about what the multiple was. They're getting sold, but enough passive bid is there to hold the market together. So, the market's not cracking. It's not feeding on itself. It's not causing a big scare. Meanwhile, you've got these other companies doing well. How that finally sorts itself out, it's not clear to me. Does the breakage underneath the surface end up leading to a big undertoe or do we absorb that and the market goes on for a while longer and then then down the road we have another find some new reason to really decline. I don't know. But a lot of mark for a for a market that's only a couple of percent off its all-time high. A tremendous amount of market cap has been destroyed. And then, you know, you see that the the Bitcoin doesn't hunt and it doesn't hunt with the tech sector and all that, but there hasn't been any real collateral damage yet. So, I'm I I I'm I'm trying to lay out for you the things that everyone knows and then I'm talking about some things that maybe people haven't been aware of. And I've just been trying to sort this out in my own head recently because I haven't been able to figure it out and no one I talked to has either. So, there's an even longer answer to your question than I usually give you. >> No, I love it though, Bill. Okay. So, the passive bid is still going and we know a lot of that is 401ks. So, when you have the labor side of things holding up, people still get their 401ks, it goes into the market, it goes into these >> big names um through ETFs mostly. Um so, that's kind of is that that's kind of created like a floor. >> So, let's make it even simpler. as long as the same number of people are employed in cor corporate America or you know or or or you know maybe I don't know where the government 401ks go probably to the same place but um then the money is flowing into passive and then if it's Vanguard they buy stocks according to the waiting in their Vanguard index and Black Rockck has theirs so that money just keeps on chugging in and probably and it can't change that money net can't change unless we have a dimmunition in in hiring or layoffs or enough people that are retiring uh or getting uh um uh older change their mix towards more bonds. Okay. So without that happening, the passive bid's going to stay where it is. >> Uh so unless the passive bid unless inside those accounts they do a rebalancing, but that's a that's a different issue. >> So that there's nothing that's changed there. We we we haven't had enough of a change in employment to really alter that, I don't believe. I mean, obviously Mike's the expert and I read what he says and I talk to him occasionally, but I haven't heard of anything being different there. >> Yeah. And does that just kind of create a bit of a floor then when like you've seen these major cracks or which probably be major cracks um or these draw downs in some of these names, but it's kind of held steady or the like you said the tape of the market has not broken. And is that because of that passive bid? >> Yeah, I think so. Because if if we if we went back to periods before the passive bid existed, >> if you'd have had a handful of these software companies crack up, it would have fed on itself. It would have gotten into the indices, then it would have gotten to other areas. People got it would have gotten spooked by the market going down and it would have all fed on itself and, you know, the tape would be 10, 15, 20% lower. I don't know. And without the passive bid, of course, we'd never be at 7,000 on the S&P, but that's a whole different issue. So with the passive bid, it it keeps the selling pressure from they don't have to go from a stupid price to find a marginal sane buyer, which is a hell of a lot lower. They every day they get to sell some to the passive bid. So it it makes it it slows down the slide and it kind of keeps it contained in certain areas and you don't have the whole market starting to unwind which w which tends to spook people and they tend to declines tend to feed on themselves because then people get scared then they react and it has to run its course. I've been through a number of those periods in my career. >> We haven't seen that in quite a long time. >> Yeah. You've been through Yeah. 40 plus years in the business too. And um so like let me ask you this question cuz all right someone might say oh that sounds like great there's this passive bit it's keeping things like from crashing that sounds like oh maybe that makes it safe but from what I've heard from you over the years and the conversations we've had and like Mike Green is it's actually creating a really dangerous setup. So, do you think it's is it making things even more dangerous like filling up that powder keg where it's going to be like really nasty one day? Because it sounds like maybe it's like the market's not able to like, you know, I guess be like a free market. I don't know how you would describe it, but it sounds like Yeah, >> it is. It is not a It is not a free market. It sorry, it's not a true price discovery market. It's artificially impacted by this nature of of how the passive bid uh you know how about how the the vid index funds weight themselves and how they've captured corporate America and all the money goes to one place with the same idea. It used to be the the the pension and profit sharing plans of corporate America or 401ks were were run by a myriad of different firms and there was all different kinds of strategies. And now when so much of this is part of Mike Mike's point is when so much is run in that quote unquote passive nature and it approaches 50% or more which is kind of where we are today then you've you've created an inherently unstable environment that that can't it cannot end well. What we don't know is how long can it go before it ends and what are the real signs going to be? I don't know. I don't know how long it can go. It can it can go till it can't. Obvious. I I believe that Mike thinks if the market share started to get into the 60s somewhere around 65% the distortions would be so wild, you know, maybe it would cave in on itself, but you'd have to really ask him about that. Um, so it I it's an unnatural construct. It it shouldn't be like this, but it is. And it's I always talk about it because if you don't know that and don't understand it, you have no chance of figuring out what kind of risk control measures you need when things start to unwind, which at some point they're going to. It just it's not natural like it used to be. You can't look at things and anticipate, well, this will lead to that like I used to be able to do in my career, particularly when I when I was running a short fund. I mean, that that that was one of the things I had to use. Um, but the markets don't behave like that anymore. So you have to know what the environment is we're in and uh um and and and I would say that means the market is definitely wobbling as these things are happening but so far it's held together. Now I think it's a warning sign that these things are going on but is it a warning sign that danger is coming in 12 months 15 months six months eight months four months I don't know one month it's I don't think it's possible to know that at this juncture. Yeah. Let me ask you this. Um, you just mentioned you used to run a short fund. >> What is short selling like these days? Is it something you still do? Is I Has it been really hard lately? Like what is kind of your take on short selling nowadays? Well, just to back up a sec a step, one of the things I used in trying to determine whether I would um cover a company's stock when they had bad news or cover it and reduce it and wait for it to bounce and then do it again or what or whether I would add to my position. In other words, whether I would cut back or press was what the Federal Reserve did. The macro environment mattered to me in managing the risk and the size of my positions when I was running that short fund. I closed it down because the Fed started QE. I closed it down at the beginning of '09 because I thought QE would make it very difficult for me to run the portfolio as I thought it needed to be run. Now, little did I know that that that little bit of QE they started with was going to morph into several more rounds and and then I got lucky because I had no idea what the passive bid was going to do. But between the Fed and the passive bid, it's made to to me it's made short selling next to impossible. Having said that, you can see all sorts of companies that have blown up recently, but I'm not sure how you would have really captured them all in advance if you're running a whole book. Like I was running a short only fund, right? So all I had was shorts. Um uh pretty much I had a couple other things but uh so I think it's been very difficult. Although recently there plenty of things have been clobbered that you could have got you you sort of you could have caught. Um but um for me I look at oh do I want to short something to try to hedge the moves in the stock prices are so unpredictable and so huge I think it's very hard to control the risk. So, um, I I I dabble in a, you know, an ETF here or there that I'm short, which in the old days I was never short ETFs. I was always short individual names. >> Um, so anyway, I I I think it's rather difficult. If it were to get easy, >> then the market would be going down. I would probably be I would probably be involved then. >> Hey everyone, I hope you are enjoying this interview. If you can take a quick moment and hit that subscribe button, we are on a mission to hit our next goal of 100,000 subscribers and your support could really help us get there. Thank you so much and enjoy the rest of the interview. You also mentioned in this conversation this rotation that's kind of happening under the surface like maybe into more of these plain vanilla names. Um I've had some folks on recently I think it was I want to say it was Ted Oakley who was also talking about this from Oxbow Advisors, but are you um from an investing perspective playing into the rotation? I know you you are an active manager. I know you you said you're not raising capital these days, but are you looking for opportunities in the stock market? >> Well, I have a handful of what I you know, in addition to precious metals and mining companies, which I've been mostly in for the last, you know, seven or eight nine years. I have a few other idiosyncratic ideas. Um, and I've been kind of looking at the energy sector because it's so bombed out. And I have a friend of mine who's a really, really capable energy guy. And uh there's a handful of companies that I I I'm I'm kind of interested in, but I'm so confused about what's happening that I that I don't really want to dip into my I have I have carried a big cash reserve since Trump got elected. And I've pretty much kept it intact, you know, between 30 and 40%, sometimes at the low end, sometimes at the high end. And I just don't feel good about not having that and starting to put it into more equities when the environment is so confusing to me. So, I have things that I've looked at and I have things that I might be willing to do, but not not just yet. >> You mentioned um Precious Metals and I want to say the la Okay. The last time we had you on, it's been a while, Bill. It's probably been like 7 months or so. Um you gold was I believe at 3,300, wasn't it? >> I want to say it was around 3,300. I might be wrong on that, but now today it's north of 51. >> I think that's right. Now we're where are we today? We are north of 5100 today. >> 5,51. Yeah. Yeah. >> Yeah. So, um I have so many questions on gold for you, but um I know you've had a significant portion of your wealth in gold. Um what have you what have you made of the performance and the behavior in gold? Um have have you sold any yet or taken some profits? like to just like let's start big picture on on gold and the tremendous move we have seen um in the last year. >> So what what people what people many of your listeners may not appreciate is that gold was considered an intricate part of people's portfolios until you know the late '7s uh and it was really in the 80s where gold got discredited. Uh gold peaked in 197 early 1980 at around 700 around 800 bucks an ounce and really for the 80s you and really into the mid n into the mid90s you you didn't really need any gold because you know things were on a pretty good path. Stock market was you know the stock market benefited from Vulkar's cracking the uh inflation and interest rates came down from double digits to you know eventually zero. Um but uh so you know there's generations of people that that that never understood what gold was about and didn't perceive any need for it. Um uh and uh I I started uh building a position in gold in the early 2000s. I mean for real I used to trade it but um uh because of what I thought were you know Fed policies that were that were going to lead to trouble. Now, I didn't know that all the different things that were going to happen and here we would be 25 years later and the Fed would still be doing the wrong thing on a regular basis and all of that. But, um, the move in gold that we've seen is come from for several reasons. One, central banks instead of selling it are are are buying it. Mostly nonG7 central banks. Asians, Indians have always been big buyers of gold, but the Chinese have been huge buyers of gold. and the central banks, the Chinese and the Indians have really driven the gold market. It hasn't been Americans leading the charge. Uh and you can see that various different ways. You can see that if you look at the GDF, sorry, the the um GDX, the mining ETF, it has there hasn't been a creation of shares indicating lots of inflows. Um, and even the gold ETF itself is has lower shares outstanding than it did uh several years ago. Not to where it was several years ago was the right price and right amount necessarily, but so there's not really a lot of enthusiasm amongst Americans for gold. I think a lot of people maybe have money in crypto which hasn't been working lately. And so maybe that may leads some others. I mean presumably they own crypto because they understand the financial the predicament that that the USA is in. So eventually they'll own gold. At some point we will see miners do really really well and the public will be in them. It'll be frothy and there will be signs that okay now everyone gets it. It's extended and maybe then it'll be time to do some selling um uh of gold. I don't know. uh my my minor positions I've trimmed because um I just had a ridiculous amount from an exposure standpoint and I no longer felt comfortable having that much in them. I was lucky the companies that I've owned have continued to do really well. So it wasn't like they stumbled. It's just that I thought, you know, I've been heavily exposed to this for a long time. It's a tough business. There's just one variable, i.e. the price of gold in terms of determining how how well you can do for the most part. So, I just felt like reducing my overall exposure, but I still have way more than most people will ever have. Um, and uh, so it's not like I'm I'm I'm negative at all. And I don't think you have to worry about a problem until um, after everyone gets, you know, everyone's involved where, you know, like people like they have people they'll have people on bubble vision gushing about the medals and and they'll all be talking about it. Um, so that's kind of where I think we are. Um, silver's gotten a little wilder because the silver crowd tends to get a little more carried away. Um, you know, I I I I was the lead director at Pan-American Silver for about 14 years. So, I understand the silver sector pretty well. I'm no I'm not I'm just not comfortable with it now, you know, knocking on the door, you know, closer to 100 than, you know, uh, where it used to be. So, I'm not saying it's not going to go up. I'm just saying I'm not interested in owning it right now at these prices. Everything else going on in the world, that doesn't mean I won't change my mind, but and that doesn't mean it's not going higher. I just look, I first started buying silver when it was $4. And uh you know, I um owned a lot of it in the 30s and things like that, but now it's 80. And I I don't feel as comfortable owning gold at 80 as I do gold at 5,000. Let's just say it that way. >> Okay. So, you don't feel comfortable owning silver at 80 as you do as gold at 5,000. Okay, let me ask you this. Um, I saw a piece put out by QTR, quote, the Raven, um, Chris Irons. He's been on this show and he wrote about your experience on financial television. Um, CNBC specifically, an interview from gosh, it was probably a decade ago. Let me is there like today when you look at where gold is today like do you feel vindicated in your call like I don't know if there's I don't even know if that's a good question to ask but >> now it seems like pe people have woken up to the importance at least folks who watch this channel they get it and they love people like you and they understand gold be like >> uh no I not not really because I I would never have taken bubble vision as a source of validation in the first place you know Uh so uh um I mean even when people uh there was a long time while gold was doing well. I mean you got to remember gold was like 400 bucks in 2000. So you know it was around a thousand in 2008 and 10. I mean it's been chugging along for a while. There have been periods where it went sideways and most folks would look look at you if you told them about gold and why you like it. They'd they'd look at you like they felt sorry for you. Oh, that's nice, you know. Um, and but I don't really care about that. Um, so I I didn't feel unvindicated, so there's nothing to feel vindicated about, right? I mean, I'm If you ask me, are you surprised at the path gold took? I would say yeah, because I think it should have been much higher along the way to maybe arriving at 5,000 instead of all of a sudden deciding to basically double in 3 years. But, you know, it's become very apparent to the world that we can't get out of our government debt predicament. The Europeans have a similar problem. Um, you know, you you can't look at the the the governance in the EU EU and feel comfortable. You probably can't look at the governance the way the way the left and the right do well the way the media and and and behaves and the politicians behave in America. And then we've got this massive debt problem. So, I I think people can see that stimulus is kind of the only way out and and that's going to ultimately benefit gold. So, I think the light bulbs gone off and we've had a phase shift from, you know, $2,000 to $3,000 an ounce to five and it all happened at once. You kind of we had this big hockey stick. But if you'd had if you had the same price and it had gone up linearly, then I don't think people would be as shocked. And uh that's kind of what B big bull markets do is they go up in a way to get people to get thrown off or not get involved. Like people sell because oh it went up too fast or I was thinking about buying some but it went up and it went up so much they forget about it. So big bull markets do that and that's how they keep people from getting involved if if you if you know what I mean. >> Yeah. as you pointed out earlier too like um it's the nonG7 central banks um Asia that's been buying but not really like the American retail investor do you think >> I mean yeah that's kind of an interesting thought too like I guess early innings or do they think they missed it because of the runup like the hockey stick >> yeah it's all kinds of things I mean people say to me yeah but Costco's selling gold yeah but they're selling a lot of gold but it doesn't move the needle in the gold market right and you can see that it's not a popular idea in America. And there's nothing wrong with it being a popular idea in America. It could be a popular idea in America and go on for several years. My point is until that phase happens, I'm not really going to worry about the price. I'm not going to worry about the bull market ending because we got a whole cadre of people that need to own some and historically would have I'm thinking speaking historically like prior to 40 years ago. I mean and so gold is gaining credibility and adherence and and people to believe that it is a necessary thing to have in your portfolio to protect you against other bad things. Bonds don't people don't feel quite as comfortable about bonds as they used to for all the reasons the Fed and and all of that and and the and the debt situation and the the games the Treasuryy's going to wind up playing to to try to keep rates from going up at the longer end. Um and and oh by the way the bond market hasn't been thrilled with this either in that in this easing cycle over the last say 18 months the short end rates were down what 175 basis points is that the number I can't remember exactly but rates 5 years and out really haven't declined. So it's only the short end of the curve that is that has believed the Fed on this score. So that level of skepticism you see in the bond market spills over and people say well I don't really trust the bonds. I don't trust the currency. You know, you've had this confiscation that we've done, you know, to the Russians. And so, gold's got a whole different class of adherence. And I think there's enough concern from a macro standpoint from a lot of sectors. People can see this that that gold's going to be an important asset to have in the port in your portfolio for the next group of years. Whether that's two, three, or five, I don't know. You know, we'll just have to play it by ear as it goes along. Mhm. Yes. And still, as you put it, he'd rather own gold um than than silver as well. And uh Yeah. You also said um you thought the move would have been bigger. Is that right? >> Yeah. What I mean by that is when I was I've been bullish on gold since like 2000. I mean, I may had a couple of periods where I tactically had cut back because it wasn't, you know, was doing badly. But to me, problems that we had, various problems that we had indicated that you needed to own some gold. Well, there was so along the way from 3,000 to 5,000. That's that's a you know, that's a big change. But if it but but it kind of happened like this and then it did this. And if it would should, you know, I I thought I think it should have been higher all along the way to reflect the nature of the problems, but that didn't happen. Had it gone up gradually like that right now it'd only be up let's say you know the price change would have been a lot less in the last two years and people would look at it differently. The way the price changes impacts people's psychology and then impacts their behavior. So the way the price moves winds up having an impact on how the prospective price moves will go. >> All right, for those wondering about the outfit change here, we had a little bit of a technical difficulty. So we did this interview over two days. Bill, great to see you again as always. >> Well, it's great to be back after 24 hours. >> I know. All right. So, I want to go back to where we were uh having our conversation around gold specifically. And gosh, when I just look at the behavior in the markets, do you think this is also just maybe a repudiation of the fiscal policies here in the US? Is it sniffing that out too? Are we there yet? Well, I think it's a combination of things. It's I mean, nobody knows what the price of gold is really supposed to be. My friend Jim Grant and I have always joked that um gold is is um a function of confidence. And when you don't have confidence in your government or your money or whether it's for your safety or whatever, then people turn to turn to gold. If you have total trust in everything, paper's just fine. And people tend to have trust when things have gone well. There haven't been issues. Some and and usually things turn bad before people wake up to the fact that things have turned. And so we have a situation where uh you know, gold got an extra bid when we sanctioned the Russians and were willing to take their money after they invaded Ukraine. uh we we've demonstrated that we're willing to you know weaponize our financial system. So that would make a foreigner a little less uh sanguin particularly if they weren't you know our best friends and of course we see that countries change allegiances often so that put a bit in gold particularly from central banks uh at least non G7 central banks then the fiscal situation monet in in America in Japan to some degree although they've monetized half their debt already uh and in Europe uh everyone plenty of people can see that these debts are pretty unmanageable and and a recession would be would be horrendous, which doesn't mean we won't have one, but means they're going to fight tooth and nail to not have one. And so all of those things make one feel like there's a danger that the currency may may weaken or there'll be more inflation or or well, I still got to put some money where it's safe. And remember, gold is no one else's liability. every other currency is a liability of someone else, right? Uh I'm a dollar is a liability of the US government. Now, we got lots of, you know, tanks and bombs and stuff to back up certain aspects of that, but it you don't need trust to own gold. Okay? And the other things require a fair amount of trust. So, when confidence starts to wayne, then gold does better. And um you know historically it's been a sound store of value and and now it's become I think a default asset class in that you know people don't really trust you know there's a little there's enough angst where more people are buying gold as we were discussing yesterday uh the US public isn't really in big I think they will be before this is all over but the the the thing about gold is um you know you're not in the financial system, you're not tied to financial assets. Now gold will have different catalysts from time to time where different periods different things move the price but but but no one really knows what the what the actual price is supposed to be. There's no there's no fair value or exact price. So in any case um it is benefiting now from the fact that so many can see that that they need some and so much of it has already been been taken up by the Asians and the central banks. So, when the Americans show up to the party, the price is probably going to go a fair bit higher, and we'll just have to see how much. >> Yeah, I like that. It's no one else's liability. Um, okay. So, I was just looking at the US debt clock, which I like to do from time to time. 37 Oh, sorry, 38.7 trillion and continuing to tick higher. So I guess the question is um I guess at what point like is there a number where there's a breaking point or do you think it's like more of like a slow erosion? >> Well, I don't think I don't I don't think the price of any price of gold automatically means something. Uh, I think a a higher price would come would would would be accompanied by um, you know, news items and and and and facts. We could see that more people were accumulating it. Uh, um, but but uh, I don't think there's any any any signal necessarily being sent. Certainly, the central banks have no no use for I mean sorry, the G7 central banks have no real use for gold. Um, but I I think that the the price it doesn't really tell you all that much other than a higher price means more people are buying it and there must be some reason for that. Now, at some point we may get to a situation where people are buying the price and it's it's the end. But I don't I don't know where that will be. I would point out to you in 1979 the price of gold doubled from about just under 400 to just over 800. from October of 79 till January in 1980. And they did that as Vulkar was was uh was jacking interest rates because they didn't believe him. So if we ever get into a crisis situation or what's perceived to be and gold goes crazy, it might not stop going crazy until long after we've done something prudent. I don't even know how we can begin to contemplate anything prudent with the deficit and the national debt as big as it is and all the contingent liabilities. And I think people are tumbling to that that thought process. So that's that's another reason why gold is done as it what it's done. >> All right. I do want to bring up bonds with you because in our last I think it was our last conversation you had mentioned like bonds is the a big story to understand and also like in the last rate cut cycle >> did see you know bonds on the uh you know longerdated bonds back up despite the rate cut. So, um, what what's the big story to understand as it relates to bonds? >> What I think is interesting and I have I I don't see it discussed all that much is the fact that here, okay, so let's say we're almost 18 months into a rate cutting cycle. Short rates have come down by about 175 basis points. Um, and until recently, uh, all rates five years and longer had gone higher. Normally all rates come down all across the curve. Now the five rate has come five-year rate has now come in recently but so if you go out to seven years and out rates are higher. So thus far the bond market seems to not is does not want to sanction these cuts um uh either because they're worried about more inflation or more supply or the combination of the two. So, so we'll have to see when that starts to be a problem. Um um thus far that fact hasn't bothered anyone and and and really in the last couple of months the the rates out farther than the curve that were up have come down a little bit more. So um uh but still the bond market has not sanctioned this and I think this is one of the longest periods that I can recall certainly since I've been in the business when uh the bond market didn't sanction rate cuts >> like what do you think is is that the bond market like losing trust in the >> Yeah that's the bond Yeah I I think so it could be I mean let's put it this way when when and if the bond market loses confidence in central bank this is what it will start like you know and and you can imagine what what it would look like if the if if the Fed cut rates and longer rates rose now that that's that's really what's happened. It just hasn't it really it just sorry it just hasn't been very much and and and maybe they haven't risen. They have just haven't come down that much. But world the I if that's what's happening at some point maybe when the next rate cut rates might rise and if if if rates rise in in a response to a rate cut it really um um handcuffs the Fed's ability to ride to the rescue when they want to cut rates. That's it's a very bad place to be. I ab I think we'll ultimately get there. I think ultimately, I've said forever that ultimately the bond market's going to take the printing press away from the Fed. I think this is the start of it. Now, now we've had a head fake back the other way. We'll we'll see. I mean, these these bond market uh uh trends move in, you know, decades long moves. So, the opening act of a change could could take three or four years and it wouldn't be unusual. >> Okay, that's interesting. So, do you think the endgame here is that do you think we'll see that money printing era end then? Do you think that's the end game or it'll be like super super early? >> I mean, ultimately it kind of has to end because it's inflationary. It it it debases the currency and it doesn't do that much immediately necessarily, but over time it does. And what we have now done is sensitize people to inflation. And while a lot of the the uh Fed apologists say, well, like the rate of inflation's, you know, back down to two or two and a half or three, yes, but the price level that has gone up is still up there. And so every time people go to the store, yeah, maybe it's only a tiny bit higher, but it's still as high as it has been. And that psychology stays in people's heads. I've talked about this a lot before it happened about inflation psychology and now since it's happened. And in psychology once it changes is very hard to get to go the other way. That's why when Vulkar raised rates 200 basis points on Saturday night in October of 1979 that was o over the next three or four months the price of gold doubled because nobody believed him. >> Nobody believed him. That's psychology at work. Okay. Now uh you've got that same sort of negative psychology beginning. That was the end of it there because what he did finally broke the back of inflation and broke the back of inflation psychology. We are nowhere near that point here in terms of breaking the back of inflation psychology in my opinion regardless of whether or not we're printing you know two two and a half or whatever. I think that's such a good point, Bill. Like, um, I I think people like cheerlead, oh, it's come way down and whatever, but the prices have not really come down. Like, yeah, maybe the rate of change, like you point out, but gosh, I'm probably paying $6 for my latte instead of $4 from just a couple of years ago. >> That reminds you every day. It's expensive. It's expensive. It changes it changes the thought process. And people come to say, well, it's always going to be this way because they don't see how prices are going to go back down. And that's how they get sensitized to it like >> Yes. Exactly. >> Exactly. >> Yeah. Um I wonder if people feel gas lit then. >> Uh no, but it it probably erodess trust. What do you mean? You know, you're man, you're telling me, you know, the old uh uh the old uh Clint Eastwood line from the outlaw Josie Wales and he says, "Don't piss on my back and tell me it's raining." Pardon my crudess, but >> I've never I've never seen that movie, but >> anyway, it's a great line. In other words, people feel a little bit like that. I mean, don't don't try to don't don't tell me that. I I don't believe you. And and what they what they mean to say is I you know, yes, the rate of inflation, the increases come down, but the overall price level is still stuck with. And that's the part that that I think a lot of um people that are like I say you know fans of the Fed and you know say well look that was transitory. Well yes the the rate of change at huge rates was transitory but the consequences of what happened is not transitory. And that's the big part that people miss and that's part of why gold is doing what it's doing because people don't see any way out other than more of the same >> and potentially worse I think. Yeah. Um, from where you sit, like how much does like the Fed, how much does the Fed matter and, um, we obviously got, you know, the Kevin Walsh news, um, Trump's next pick for FOMC chair. Any thoughts there? Like any expectations from the Fed or anything that you're anticipating? >> The Fed matters a lot to financial markets, particularly when they're doing QE. Um, so, uh, I think worse was a very surprising pick. You saw the, you know, the price of gold and silver got smoked for a few days. They were they were due for a reason to decline, but um because I think people perceive him not to be the easy money guy that everyone assumed Trump wanted. So um uh um uh Trump I mean sorry worse has said he wanted to see the Fed's balance sheet, you know, be reduced. That doesn't sound like a guy who wants to do QE, but maybe he's enough of a pragmatist that they'll talk about yield curve control and they'll pretend that it isn't QE. I've always felt that ultimately we were headed for yield curve control again. Japan did it. We did it back in World War II and and after um and uh so I I I felt almost certain that the next Fed chairman would be willing to do that. Uh Worse does not seem like a guy who would want to do that. But on the other hand, I think Trump feels he got burned with Powell and I figured he would have been extra extra careful to get exactly the guy he wants. So worse is a bit of a headscratcher for me. >> He doesn't fit. He doesn't is >> his body of work doesn't seem to indicate he wants to be the guy to do yield curve control. And yet I think they're going to have to resort to that. So maybe my analysis, maybe my opinion is wrong and and or maybe he's going to do it even though he he seems like a guy who doesn't want to do it. I don't know. We're going to have to find out. >> Interesting prediction. Okay. Um that we could be headed toward yield curve control Japan as the model. What for folks watching and listening like what happens in that kind of environment? Well, I mean you monetize I mean sorry you um you say we will buy all bonds such that the seven-year and the seven that rates seven years and out don't go over some price 5% pick a number. So if the market doesn't test them they don't have to buy any. If the market tests them they have it's like unlimited QE potentially. So, and that that way they're going to do most of their funding at the short end of the curve because that's pegged to Fed funds and uh you know they allowed the banks to expand what they can what they can do with their balance sheet. So, they're going to just try to do as much financing as they can at the short end and not test the longer end. So, maybe it won't be for a couple years that this matters. I really don't know. But I mean, like you said, we're 38 trillion and, you know, racking it up at a trillion and a half or two a year, plus contingent liabilities and all of that. It's it I I I just I think it's in our future and I think people that are in the gold market think that something like that has got to be in store for us as well. >> So, is it effectively like QE but by like a different name then? >> Well, yeah, you could call if you called it yield curve control, it is it's unlimited QE. Would you say >> unlimited QE? Yeah, >> because I am going to make sure that rates don't trade above X%. You have to be willing to buy an unlimited amount. Now, maybe you don't have to. I doubt that. And then and then you do it. But but you're you're not calling it QE. See, even though it's the same thing. >> Yeah. Um since we last spoke, we also had the State of the Union address. Did Did you watch last night? I have to admit that I did not. >> I watched half of it and I went to bed. >> I was going to watch it and then I was tied up watching an important sport event. >> A friend of mine is a professional tennis player and he was playing on TV and I was I thought that was more interesting. >> That's cool. Yeah. Okay. >> Um I'm just curious I read I read about it. I mean, you know, you know, it it doesn't matter whatever venue Trump is in, he will say some things that will a lot of people will agree with, a lot of people disagree with, the Democrats will hate on him, and there'll be a food fight no matter what happens. And obviously, there were some real highlights, and I think there were probably some low lightss, but to me, it's a non-event in terms of market action. >> Yeah. Um, I I go to bed after like nine o'clock, so I kind of stayed up for part of it and then I went to bed. Yeah. I don't know. I like to go to bed early. I don't Yeah, I'm a dork. Okay. Um Okay. You also mentioned, Bill, um that you you're like 30 40% in cash. Um you have gold, some miners, some energy mentioned, but um what's one thing that would get you to deploy that cash? Like what are you what are you waiting for? What are you looking for? Um, yeah, just curious. >> Oh, that's a good question. Um, I see I did it mostly because of the volatility that Trump brings to the table and the fact that the market is artificially priced where it is, we know why. And that doesn't mean it's going to change. if I saw a compelling opportunity that I thought I unders could manage the risk on and I felt like the market itself wasn't particularly vulnerable which I don't know why I would think that um then you know if I had a specific idea like I might you know let's let's say gold has a correction and one of the gold stocks I like like Alamos or ECNO or West uh you know backed off a bunch uh then I might buy it you know might I might buy it like for a trade 3 to six month you know trade Um, uh, I if I found a new idea that was super compelling that I felt was impervious to the market, which they're hard to find companies like that. I think I own a few, but that, uh, they've gotten bounced around anyway. Um, it it would just take the right idea, uh, cuz there's nothing in the market structure that that that is going to change and there's nothing about Trump's personality that's going to change. So, it would have to just be a unique opportunity. And even still, I would I would hesitate to get below about 20% cash. I don't own any energy, though, however, although I'm I'm looking at I have a friend of mine who's really really good in that. >> Okay, you're looking. >> And uh and and he he he has been buying. He thinks it's it's time to buy them. They're they're they're acting better from a technical standpoint, so he says, which he's also good at that. So, I'm I'm I'm I'm I'm I'm I'm thinking about it, but hasn't I haven't been compelled yet to uh deploy to part with my cash. Um just because I don't really trust the price of oil either. Uh given all the things that are going on. So, anyway, but probably if I was to buy something, I would buy an energy stock or two and that would that would take take away some of my cash. That that would probably be the most likely opportunity that I would that I would take. >> Okay. What's the biggest risk right now that people aren't really talking about? Like the risk that nobody's talking about? >> Well, you know, I I I I I I really think that most people don't understand the nature of the passive bid, which is why I bring it up every time because what people, anyone who is smart about investing will have read about financial history. I've read uh dozens of financial history books. So, I wanted to understand what happened in the past because human nature never changes. And I don't think people really can appreciate how different the market of the last 15 or so years is. When you combine the a Fed that will do QE, take rates to zero, etc., and the passive bid and the market share it's garnered. what we see working and happening in the marketplace to in the market today is completely different than anything that's happened in history. Yeah, the human nature side of that of course stays the same, but the behavior and the drivers are totally different right now. So, we're at a unique moment in time and that that that sounds like that's going to only last for 2 weeks, but it's a moment in time. Look, I mean, recorded history is quite long, right? And so if you had a period of of something that was bizarre that went 15 or 20 20 years, that's not a big deal. It's a big deal in terms of your life, it seems like forever. But if you and I were sitting around having this interview in 1923 and we were talking about communism in the Soviet Union, we'd say that can't possibly last. That's against human nature. Communism can't work. Socialism can't work because human nature, everyone's not altruistic. Some people will be lazy, then the hard workers won't work. It'll collapse because it always does. we'd agreed that on in 1925 or 1930. Uh and it but then it took another 50 or 60 years for the Soviet Union to collapse. So there was something you could have known that had to happen because that's the way things are and it took that long. So I always like to to remember things like that. So in our lifetimes we always think things should happen faster than they do. But when you when you look back in history, there are periods where crazy things go on for way longer than you would have thought. And so I bring that up as people that think that well I've got a lot of experience. I've been investing for 10 or 15 years. Well, yeah, that's pretty good. But you have to know that this period is not like other periods and this will change too. And when that changes, it's going to be a really big deal. But that doesn't mean it's like we were talking earlier. >> Yes. Yeah. Yeah. It's and that's an important point too, like you don't no one knows the exact timing of these things and I know you pointed out out multiple times in the conversation too. Um, Bill, I have to say I love having you on the show. This audience loves hearing from you. Um, so before I let you go, um, let's leave the audience with some parting thoughts. Um, something to think about. It could be something we've already discussed or maybe something we didn't that you'd like to leave them to think about and then let them know where they can find you, support your work. Um, anything that you'd like to plug. The floor is all yours. And I know you also have a book too. Um, Greenspan's Wubbles. I did not even mention that, but you are an author as well. >> Yeah. Uh uh I wrote the book in um 20ou late 2007 uh to to chronicle this the stock bubble that burst and of course to try to warn about the problems that the Fed created and talk about the impending real estate bubble that I thought was going to burst. I mean I didn't know imminently. Um and I thought that it would be uh useful for people and and and you know if we exposed it maybe the Fed's behavior would change. That was how naive I was. McGra Hill actually came to me and asked me to write the book because I had been so vocal about Greenspan. Any case, if people want to understand how these bubbles worked and how obvious things were, but they how they got denied. I think that's that's something people need to understand is a lot of times problems are really obvious, but they go on long enough to trick you to believe that it's not what you thought. And I think you can learn that lesson in that in in the book. And the book's nice and skinny. It's a quick read. So, um um in any case, uh I have a website, fleekstein capital.com. Um I charge a whopping sum of $130 a year just because I want some people to have some skin in the game. Um and I write a column about the market and things that interest me and I answer questions that people have. Um so that's that's my plug for myself. >> I love it. Bill Fleenstein, founder and president of Fleeinstein Capital. Thank you so much for being so generous with your time, all of your knowledge, your wisdom, helping us all learn and get better. This audience loves you. I really appreciate you and just thank you so much, Bill, for the time. >> Well, you you make it fun and you ask great questions, so I always enjoy myself. Thanks, Julia. Thanks, Bill.
Bill Fleckenstein: A Ton of Market Cap Has Been Destroyed and Nobody Has Noticed
Summary
Transcript
I don't think people really can appreciate how different the market of the last 15 or so years is. When you combine the a Fed that will do QE, take rates to zero, and the passive bid and the market share it's garnered. What we see working and happening in the marketplace in the market today is completely different than anything that's happened in history. Yeah, the human nature side of that of course stays the same, but the behavior and the drivers are totally different right now. >> Bill Fleenstein, founder and president of Fleenstein Capital. It is so wonderful to welcome you back to the show. Great to see you as always, Bill. It's been way too long. >> Well, it's back. It's nice to be back with you again, Julia. How are you? How have you been? I'm doing well and I'm thrilled to have you back on because this audience loves hearing from you and I I don't know, Bill, like I feel like it's been a while since I've even seen an interview with you and maybe you've been a bit more quiet on X lately. So, I want to catch up and um >> a little of both. I mean, I I don't I don't I don't chirp on X unless I have something to say. Mostly I just re respond to stuff and I I don't think I haven't done an interview in a while. So, anyway, here I am. >> Yeah. Well, let's let it rip then since it has been a while. Let's start big picture, macro view, where where we are today, where you see things headed. What do you make of the global economy, domestic economy, even where we are in the markets? What's been on your radar of late? And as you know, Bill, you can take all the time you need to set the table when it comes to that big picture macro view. >> Where I am, Julia, is confused. And anyone who's not slightly confused by the environment we're in, uh, doesn't understand it very well. So, you know, we have the passive bid, which I've talked about a lot and which Mike Green, you know, discovered and exposed to the world and you've had Mike on, so your readers understand that. Then we have the lunatics at the Fed who are, you know, back doing QE again and and and cutting rates. So those two things normally are the most those two things are very important factors. Then we've got this all this disruption in the um uh AI sector. I like to call it artificial imagination just to keep from being too serious about it. And the disruption is really interesting because on the one hand until very recently folks were willing to believe that that the that a handful of companies could something spend something bordering on three quarters or a trillion dollars and consume massive amounts of energy and water and and all of that and and it was all going to work out okay. even though currently there's no sign of where they're going to get any return on investment. And we've gone from people credibly being willing to believe that to to getting now a little concerned about it. A lot of those types of software stocks were getting roughed up because of the capital spend and lack of ROI. And then we've got this full throttle full throttled imagination component where everyone has leapt to the future. AI runs everything. There's no jobs, there's no economy, there's no nothing. Uh, you know, that was the the the big thing that came this weekend, >> the Catrini research piece. Yeah. On Substack. >> Yeah. >> Yeah. And so the the I've I'm used to seeing people's imaginations go wild. You know, we've seen it many times in the last few years. We saw it in the in the uh stock bubble that burst in 2000. We saw it during the real estate bubble that burst in 08. But I've haven't quite seen people's imagination when we're we're not in a really nasty recession and where people are really prone to get paranoid and because they've got a lot of bad data. Now they're prone to get paranoid about how bright the future's not going to be even though they're they're so they're turning their imaginations loose to get concerned. It's a it's a really odd mix. Then of course you've got all the turmoil caused by the nature of how Trump does what he does. Tariffs being an example, but you know that's you know he does this and then there's the taco and then there's you know so there's that level of angst or sorry of disruption. Uh and um so now and and and now you've got a huge contingent of stocks predominantly in the tech and mostly in the software sector, but in other places like private credit issues have hurt like the insurance companies and some of the credit card companies have gotten getting have gotten roughed up and we've seen splat splatterings. That's a technical term for a for a wipeout in in a lot of different companies, but the tape hasn't really been hurt. And beneath the surface, there are the stocks that have been kind of grinding higher have been kind of like the proverbial old economy stocks, chemicals and uh energy a little bit. And of course, the miners are are doing well because gold's doing well. But what's really odd and what I've been trying to piece together in my head about what's happening is that you you you have a you ha you have what appears to be a rotation taking place similar to what happened in 2000 and 2001 after the dot bubble burst. The tech stocks got splattered as they got splattered. It fed on itself. It spooked people, fed back into the economy, and then the the companies that that where the money gravitated to were old economy companies, and everyone knows that, you know, the the um value did so much better, you know, in 2001 to 2003. Now, because of the way that the passive bid operates and because of the things that Mike's explained where the passive is getting the money, the active managers, people like me and other people, uh although I'm not in business of raising capital, um you know, are losing money, uh because it's being taken away from them or their clients are retiring. um it seems impossible to get any kind of a rotation because the passive bid drives everything and and that money goes into the on balance goes into the to the to the big cap weighted stocks. What we've seen though beneath the surface is a lot of these high-f flyers have been blown up, but they haven't blown up in a way where it's been a contagion for the tape. So, my pet working theory about this new environment is that the the passive bid is buying enough of the uh enough stuff still that while people panic out of certain names like just pick Microsoft in enough size that they're blowing through the passive bid, uh they're they're not doing enough damage overall and that money then leaks itself back leaks back into other companies. So, we've got a rotation that's kind of under the surface and and the deterioration that's happened in a lot of these high-f flyers and other companies that that are perceived to be impacted by AI. Uh like I say, banks, credit cards, you know, all the they keep they keep going to other areas and shooting them, you know, based on the AI thesis. Um uh so the those companies are are are are are getting pummeled but the tape holds together and you can find pockets of of like I say old economy you know plain vanilla oriented type businesses and they're doing okay. So it's a it's a really odd mix. So, I'm just wondering if we're seeing a rotation precipitated by the fact that the fact that the facts are changing and people are getting spooked about these, you know, really expensive companies that that no one ever cared about what the multiple was. They're getting sold, but enough passive bid is there to hold the market together. So, the market's not cracking. It's not feeding on itself. It's not causing a big scare. Meanwhile, you've got these other companies doing well. How that finally sorts itself out, it's not clear to me. Does the breakage underneath the surface end up leading to a big undertoe or do we absorb that and the market goes on for a while longer and then then down the road we have another find some new reason to really decline. I don't know. But a lot of mark for a for a market that's only a couple of percent off its all-time high. A tremendous amount of market cap has been destroyed. And then, you know, you see that the the Bitcoin doesn't hunt and it doesn't hunt with the tech sector and all that, but there hasn't been any real collateral damage yet. So, I'm I I I'm I'm trying to lay out for you the things that everyone knows and then I'm talking about some things that maybe people haven't been aware of. And I've just been trying to sort this out in my own head recently because I haven't been able to figure it out and no one I talked to has either. So, there's an even longer answer to your question than I usually give you. >> No, I love it though, Bill. Okay. So, the passive bid is still going and we know a lot of that is 401ks. So, when you have the labor side of things holding up, people still get their 401ks, it goes into the market, it goes into these >> big names um through ETFs mostly. Um so, that's kind of is that that's kind of created like a floor. >> So, let's make it even simpler. as long as the same number of people are employed in cor corporate America or you know or or or you know maybe I don't know where the government 401ks go probably to the same place but um then the money is flowing into passive and then if it's Vanguard they buy stocks according to the waiting in their Vanguard index and Black Rockck has theirs so that money just keeps on chugging in and probably and it can't change that money net can't change unless we have a dimmunition in in hiring or layoffs or enough people that are retiring uh or getting uh um uh older change their mix towards more bonds. Okay. So without that happening, the passive bid's going to stay where it is. >> Uh so unless the passive bid unless inside those accounts they do a rebalancing, but that's a that's a different issue. >> So that there's nothing that's changed there. We we we haven't had enough of a change in employment to really alter that, I don't believe. I mean, obviously Mike's the expert and I read what he says and I talk to him occasionally, but I haven't heard of anything being different there. >> Yeah. And does that just kind of create a bit of a floor then when like you've seen these major cracks or which probably be major cracks um or these draw downs in some of these names, but it's kind of held steady or the like you said the tape of the market has not broken. And is that because of that passive bid? >> Yeah, I think so. Because if if we if we went back to periods before the passive bid existed, >> if you'd have had a handful of these software companies crack up, it would have fed on itself. It would have gotten into the indices, then it would have gotten to other areas. People got it would have gotten spooked by the market going down and it would have all fed on itself and, you know, the tape would be 10, 15, 20% lower. I don't know. And without the passive bid, of course, we'd never be at 7,000 on the S&P, but that's a whole different issue. So with the passive bid, it it keeps the selling pressure from they don't have to go from a stupid price to find a marginal sane buyer, which is a hell of a lot lower. They every day they get to sell some to the passive bid. So it it makes it it slows down the slide and it kind of keeps it contained in certain areas and you don't have the whole market starting to unwind which w which tends to spook people and they tend to declines tend to feed on themselves because then people get scared then they react and it has to run its course. I've been through a number of those periods in my career. >> We haven't seen that in quite a long time. >> Yeah. You've been through Yeah. 40 plus years in the business too. And um so like let me ask you this question cuz all right someone might say oh that sounds like great there's this passive bit it's keeping things like from crashing that sounds like oh maybe that makes it safe but from what I've heard from you over the years and the conversations we've had and like Mike Green is it's actually creating a really dangerous setup. So, do you think it's is it making things even more dangerous like filling up that powder keg where it's going to be like really nasty one day? Because it sounds like maybe it's like the market's not able to like, you know, I guess be like a free market. I don't know how you would describe it, but it sounds like Yeah, >> it is. It is not a It is not a free market. It sorry, it's not a true price discovery market. It's artificially impacted by this nature of of how the passive bid uh you know how about how the the vid index funds weight themselves and how they've captured corporate America and all the money goes to one place with the same idea. It used to be the the the pension and profit sharing plans of corporate America or 401ks were were run by a myriad of different firms and there was all different kinds of strategies. And now when so much of this is part of Mike Mike's point is when so much is run in that quote unquote passive nature and it approaches 50% or more which is kind of where we are today then you've you've created an inherently unstable environment that that can't it cannot end well. What we don't know is how long can it go before it ends and what are the real signs going to be? I don't know. I don't know how long it can go. It can it can go till it can't. Obvious. I I believe that Mike thinks if the market share started to get into the 60s somewhere around 65% the distortions would be so wild, you know, maybe it would cave in on itself, but you'd have to really ask him about that. Um, so it I it's an unnatural construct. It it shouldn't be like this, but it is. And it's I always talk about it because if you don't know that and don't understand it, you have no chance of figuring out what kind of risk control measures you need when things start to unwind, which at some point they're going to. It just it's not natural like it used to be. You can't look at things and anticipate, well, this will lead to that like I used to be able to do in my career, particularly when I when I was running a short fund. I mean, that that that was one of the things I had to use. Um, but the markets don't behave like that anymore. So you have to know what the environment is we're in and uh um and and and I would say that means the market is definitely wobbling as these things are happening but so far it's held together. Now I think it's a warning sign that these things are going on but is it a warning sign that danger is coming in 12 months 15 months six months eight months four months I don't know one month it's I don't think it's possible to know that at this juncture. Yeah. Let me ask you this. Um, you just mentioned you used to run a short fund. >> What is short selling like these days? Is it something you still do? Is I Has it been really hard lately? Like what is kind of your take on short selling nowadays? Well, just to back up a sec a step, one of the things I used in trying to determine whether I would um cover a company's stock when they had bad news or cover it and reduce it and wait for it to bounce and then do it again or what or whether I would add to my position. In other words, whether I would cut back or press was what the Federal Reserve did. The macro environment mattered to me in managing the risk and the size of my positions when I was running that short fund. I closed it down because the Fed started QE. I closed it down at the beginning of '09 because I thought QE would make it very difficult for me to run the portfolio as I thought it needed to be run. Now, little did I know that that that little bit of QE they started with was going to morph into several more rounds and and then I got lucky because I had no idea what the passive bid was going to do. But between the Fed and the passive bid, it's made to to me it's made short selling next to impossible. Having said that, you can see all sorts of companies that have blown up recently, but I'm not sure how you would have really captured them all in advance if you're running a whole book. Like I was running a short only fund, right? So all I had was shorts. Um uh pretty much I had a couple other things but uh so I think it's been very difficult. Although recently there plenty of things have been clobbered that you could have got you you sort of you could have caught. Um but um for me I look at oh do I want to short something to try to hedge the moves in the stock prices are so unpredictable and so huge I think it's very hard to control the risk. So, um, I I I dabble in a, you know, an ETF here or there that I'm short, which in the old days I was never short ETFs. I was always short individual names. >> Um, so anyway, I I I think it's rather difficult. If it were to get easy, >> then the market would be going down. I would probably be I would probably be involved then. >> Hey everyone, I hope you are enjoying this interview. If you can take a quick moment and hit that subscribe button, we are on a mission to hit our next goal of 100,000 subscribers and your support could really help us get there. Thank you so much and enjoy the rest of the interview. You also mentioned in this conversation this rotation that's kind of happening under the surface like maybe into more of these plain vanilla names. Um I've had some folks on recently I think it was I want to say it was Ted Oakley who was also talking about this from Oxbow Advisors, but are you um from an investing perspective playing into the rotation? I know you you are an active manager. I know you you said you're not raising capital these days, but are you looking for opportunities in the stock market? >> Well, I have a handful of what I you know, in addition to precious metals and mining companies, which I've been mostly in for the last, you know, seven or eight nine years. I have a few other idiosyncratic ideas. Um, and I've been kind of looking at the energy sector because it's so bombed out. And I have a friend of mine who's a really, really capable energy guy. And uh there's a handful of companies that I I I'm I'm kind of interested in, but I'm so confused about what's happening that I that I don't really want to dip into my I have I have carried a big cash reserve since Trump got elected. And I've pretty much kept it intact, you know, between 30 and 40%, sometimes at the low end, sometimes at the high end. And I just don't feel good about not having that and starting to put it into more equities when the environment is so confusing to me. So, I have things that I've looked at and I have things that I might be willing to do, but not not just yet. >> You mentioned um Precious Metals and I want to say the la Okay. The last time we had you on, it's been a while, Bill. It's probably been like 7 months or so. Um you gold was I believe at 3,300, wasn't it? >> I want to say it was around 3,300. I might be wrong on that, but now today it's north of 51. >> I think that's right. Now we're where are we today? We are north of 5100 today. >> 5,51. Yeah. Yeah. >> Yeah. So, um I have so many questions on gold for you, but um I know you've had a significant portion of your wealth in gold. Um what have you what have you made of the performance and the behavior in gold? Um have have you sold any yet or taken some profits? like to just like let's start big picture on on gold and the tremendous move we have seen um in the last year. >> So what what people what people many of your listeners may not appreciate is that gold was considered an intricate part of people's portfolios until you know the late '7s uh and it was really in the 80s where gold got discredited. Uh gold peaked in 197 early 1980 at around 700 around 800 bucks an ounce and really for the 80s you and really into the mid n into the mid90s you you didn't really need any gold because you know things were on a pretty good path. Stock market was you know the stock market benefited from Vulkar's cracking the uh inflation and interest rates came down from double digits to you know eventually zero. Um but uh so you know there's generations of people that that that never understood what gold was about and didn't perceive any need for it. Um uh and uh I I started uh building a position in gold in the early 2000s. I mean for real I used to trade it but um uh because of what I thought were you know Fed policies that were that were going to lead to trouble. Now, I didn't know that all the different things that were going to happen and here we would be 25 years later and the Fed would still be doing the wrong thing on a regular basis and all of that. But, um, the move in gold that we've seen is come from for several reasons. One, central banks instead of selling it are are are buying it. Mostly nonG7 central banks. Asians, Indians have always been big buyers of gold, but the Chinese have been huge buyers of gold. and the central banks, the Chinese and the Indians have really driven the gold market. It hasn't been Americans leading the charge. Uh and you can see that various different ways. You can see that if you look at the GDF, sorry, the the um GDX, the mining ETF, it has there hasn't been a creation of shares indicating lots of inflows. Um, and even the gold ETF itself is has lower shares outstanding than it did uh several years ago. Not to where it was several years ago was the right price and right amount necessarily, but so there's not really a lot of enthusiasm amongst Americans for gold. I think a lot of people maybe have money in crypto which hasn't been working lately. And so maybe that may leads some others. I mean presumably they own crypto because they understand the financial the predicament that that the USA is in. So eventually they'll own gold. At some point we will see miners do really really well and the public will be in them. It'll be frothy and there will be signs that okay now everyone gets it. It's extended and maybe then it'll be time to do some selling um uh of gold. I don't know. uh my my minor positions I've trimmed because um I just had a ridiculous amount from an exposure standpoint and I no longer felt comfortable having that much in them. I was lucky the companies that I've owned have continued to do really well. So it wasn't like they stumbled. It's just that I thought, you know, I've been heavily exposed to this for a long time. It's a tough business. There's just one variable, i.e. the price of gold in terms of determining how how well you can do for the most part. So, I just felt like reducing my overall exposure, but I still have way more than most people will ever have. Um, and uh, so it's not like I'm I'm I'm negative at all. And I don't think you have to worry about a problem until um, after everyone gets, you know, everyone's involved where, you know, like people like they have people they'll have people on bubble vision gushing about the medals and and they'll all be talking about it. Um, so that's kind of where I think we are. Um, silver's gotten a little wilder because the silver crowd tends to get a little more carried away. Um, you know, I I I I was the lead director at Pan-American Silver for about 14 years. So, I understand the silver sector pretty well. I'm no I'm not I'm just not comfortable with it now, you know, knocking on the door, you know, closer to 100 than, you know, uh, where it used to be. So, I'm not saying it's not going to go up. I'm just saying I'm not interested in owning it right now at these prices. Everything else going on in the world, that doesn't mean I won't change my mind, but and that doesn't mean it's not going higher. I just look, I first started buying silver when it was $4. And uh you know, I um owned a lot of it in the 30s and things like that, but now it's 80. And I I don't feel as comfortable owning gold at 80 as I do gold at 5,000. Let's just say it that way. >> Okay. So, you don't feel comfortable owning silver at 80 as you do as gold at 5,000. Okay, let me ask you this. Um, I saw a piece put out by QTR, quote, the Raven, um, Chris Irons. He's been on this show and he wrote about your experience on financial television. Um, CNBC specifically, an interview from gosh, it was probably a decade ago. Let me is there like today when you look at where gold is today like do you feel vindicated in your call like I don't know if there's I don't even know if that's a good question to ask but >> now it seems like pe people have woken up to the importance at least folks who watch this channel they get it and they love people like you and they understand gold be like >> uh no I not not really because I I would never have taken bubble vision as a source of validation in the first place you know Uh so uh um I mean even when people uh there was a long time while gold was doing well. I mean you got to remember gold was like 400 bucks in 2000. So you know it was around a thousand in 2008 and 10. I mean it's been chugging along for a while. There have been periods where it went sideways and most folks would look look at you if you told them about gold and why you like it. They'd they'd look at you like they felt sorry for you. Oh, that's nice, you know. Um, and but I don't really care about that. Um, so I I didn't feel unvindicated, so there's nothing to feel vindicated about, right? I mean, I'm If you ask me, are you surprised at the path gold took? I would say yeah, because I think it should have been much higher along the way to maybe arriving at 5,000 instead of all of a sudden deciding to basically double in 3 years. But, you know, it's become very apparent to the world that we can't get out of our government debt predicament. The Europeans have a similar problem. Um, you know, you you can't look at the the the governance in the EU EU and feel comfortable. You probably can't look at the governance the way the way the left and the right do well the way the media and and and behaves and the politicians behave in America. And then we've got this massive debt problem. So, I I think people can see that stimulus is kind of the only way out and and that's going to ultimately benefit gold. So, I think the light bulbs gone off and we've had a phase shift from, you know, $2,000 to $3,000 an ounce to five and it all happened at once. You kind of we had this big hockey stick. But if you'd had if you had the same price and it had gone up linearly, then I don't think people would be as shocked. And uh that's kind of what B big bull markets do is they go up in a way to get people to get thrown off or not get involved. Like people sell because oh it went up too fast or I was thinking about buying some but it went up and it went up so much they forget about it. So big bull markets do that and that's how they keep people from getting involved if if you if you know what I mean. >> Yeah. as you pointed out earlier too like um it's the nonG7 central banks um Asia that's been buying but not really like the American retail investor do you think >> I mean yeah that's kind of an interesting thought too like I guess early innings or do they think they missed it because of the runup like the hockey stick >> yeah it's all kinds of things I mean people say to me yeah but Costco's selling gold yeah but they're selling a lot of gold but it doesn't move the needle in the gold market right and you can see that it's not a popular idea in America. And there's nothing wrong with it being a popular idea in America. It could be a popular idea in America and go on for several years. My point is until that phase happens, I'm not really going to worry about the price. I'm not going to worry about the bull market ending because we got a whole cadre of people that need to own some and historically would have I'm thinking speaking historically like prior to 40 years ago. I mean and so gold is gaining credibility and adherence and and people to believe that it is a necessary thing to have in your portfolio to protect you against other bad things. Bonds don't people don't feel quite as comfortable about bonds as they used to for all the reasons the Fed and and all of that and and the and the debt situation and the the games the Treasuryy's going to wind up playing to to try to keep rates from going up at the longer end. Um and and oh by the way the bond market hasn't been thrilled with this either in that in this easing cycle over the last say 18 months the short end rates were down what 175 basis points is that the number I can't remember exactly but rates 5 years and out really haven't declined. So it's only the short end of the curve that is that has believed the Fed on this score. So that level of skepticism you see in the bond market spills over and people say well I don't really trust the bonds. I don't trust the currency. You know, you've had this confiscation that we've done, you know, to the Russians. And so, gold's got a whole different class of adherence. And I think there's enough concern from a macro standpoint from a lot of sectors. People can see this that that gold's going to be an important asset to have in the port in your portfolio for the next group of years. Whether that's two, three, or five, I don't know. You know, we'll just have to play it by ear as it goes along. Mhm. Yes. And still, as you put it, he'd rather own gold um than than silver as well. And uh Yeah. You also said um you thought the move would have been bigger. Is that right? >> Yeah. What I mean by that is when I was I've been bullish on gold since like 2000. I mean, I may had a couple of periods where I tactically had cut back because it wasn't, you know, was doing badly. But to me, problems that we had, various problems that we had indicated that you needed to own some gold. Well, there was so along the way from 3,000 to 5,000. That's that's a you know, that's a big change. But if it but but it kind of happened like this and then it did this. And if it would should, you know, I I thought I think it should have been higher all along the way to reflect the nature of the problems, but that didn't happen. Had it gone up gradually like that right now it'd only be up let's say you know the price change would have been a lot less in the last two years and people would look at it differently. The way the price changes impacts people's psychology and then impacts their behavior. So the way the price moves winds up having an impact on how the prospective price moves will go. >> All right, for those wondering about the outfit change here, we had a little bit of a technical difficulty. So we did this interview over two days. Bill, great to see you again as always. >> Well, it's great to be back after 24 hours. >> I know. All right. So, I want to go back to where we were uh having our conversation around gold specifically. And gosh, when I just look at the behavior in the markets, do you think this is also just maybe a repudiation of the fiscal policies here in the US? Is it sniffing that out too? Are we there yet? Well, I think it's a combination of things. It's I mean, nobody knows what the price of gold is really supposed to be. My friend Jim Grant and I have always joked that um gold is is um a function of confidence. And when you don't have confidence in your government or your money or whether it's for your safety or whatever, then people turn to turn to gold. If you have total trust in everything, paper's just fine. And people tend to have trust when things have gone well. There haven't been issues. Some and and usually things turn bad before people wake up to the fact that things have turned. And so we have a situation where uh you know, gold got an extra bid when we sanctioned the Russians and were willing to take their money after they invaded Ukraine. uh we we've demonstrated that we're willing to you know weaponize our financial system. So that would make a foreigner a little less uh sanguin particularly if they weren't you know our best friends and of course we see that countries change allegiances often so that put a bit in gold particularly from central banks uh at least non G7 central banks then the fiscal situation monet in in America in Japan to some degree although they've monetized half their debt already uh and in Europe uh everyone plenty of people can see that these debts are pretty unmanageable and and a recession would be would be horrendous, which doesn't mean we won't have one, but means they're going to fight tooth and nail to not have one. And so all of those things make one feel like there's a danger that the currency may may weaken or there'll be more inflation or or well, I still got to put some money where it's safe. And remember, gold is no one else's liability. every other currency is a liability of someone else, right? Uh I'm a dollar is a liability of the US government. Now, we got lots of, you know, tanks and bombs and stuff to back up certain aspects of that, but it you don't need trust to own gold. Okay? And the other things require a fair amount of trust. So, when confidence starts to wayne, then gold does better. And um you know historically it's been a sound store of value and and now it's become I think a default asset class in that you know people don't really trust you know there's a little there's enough angst where more people are buying gold as we were discussing yesterday uh the US public isn't really in big I think they will be before this is all over but the the the thing about gold is um you know you're not in the financial system, you're not tied to financial assets. Now gold will have different catalysts from time to time where different periods different things move the price but but but no one really knows what the what the actual price is supposed to be. There's no there's no fair value or exact price. So in any case um it is benefiting now from the fact that so many can see that that they need some and so much of it has already been been taken up by the Asians and the central banks. So, when the Americans show up to the party, the price is probably going to go a fair bit higher, and we'll just have to see how much. >> Yeah, I like that. It's no one else's liability. Um, okay. So, I was just looking at the US debt clock, which I like to do from time to time. 37 Oh, sorry, 38.7 trillion and continuing to tick higher. So I guess the question is um I guess at what point like is there a number where there's a breaking point or do you think it's like more of like a slow erosion? >> Well, I don't think I don't I don't think the price of any price of gold automatically means something. Uh, I think a a higher price would come would would would be accompanied by um, you know, news items and and and and facts. We could see that more people were accumulating it. Uh, um, but but uh, I don't think there's any any any signal necessarily being sent. Certainly, the central banks have no no use for I mean sorry, the G7 central banks have no real use for gold. Um, but I I think that the the price it doesn't really tell you all that much other than a higher price means more people are buying it and there must be some reason for that. Now, at some point we may get to a situation where people are buying the price and it's it's the end. But I don't I don't know where that will be. I would point out to you in 1979 the price of gold doubled from about just under 400 to just over 800. from October of 79 till January in 1980. And they did that as Vulkar was was uh was jacking interest rates because they didn't believe him. So if we ever get into a crisis situation or what's perceived to be and gold goes crazy, it might not stop going crazy until long after we've done something prudent. I don't even know how we can begin to contemplate anything prudent with the deficit and the national debt as big as it is and all the contingent liabilities. And I think people are tumbling to that that thought process. So that's that's another reason why gold is done as it what it's done. >> All right. I do want to bring up bonds with you because in our last I think it was our last conversation you had mentioned like bonds is the a big story to understand and also like in the last rate cut cycle >> did see you know bonds on the uh you know longerdated bonds back up despite the rate cut. So, um, what what's the big story to understand as it relates to bonds? >> What I think is interesting and I have I I don't see it discussed all that much is the fact that here, okay, so let's say we're almost 18 months into a rate cutting cycle. Short rates have come down by about 175 basis points. Um, and until recently, uh, all rates five years and longer had gone higher. Normally all rates come down all across the curve. Now the five rate has come five-year rate has now come in recently but so if you go out to seven years and out rates are higher. So thus far the bond market seems to not is does not want to sanction these cuts um uh either because they're worried about more inflation or more supply or the combination of the two. So, so we'll have to see when that starts to be a problem. Um um thus far that fact hasn't bothered anyone and and and really in the last couple of months the the rates out farther than the curve that were up have come down a little bit more. So um uh but still the bond market has not sanctioned this and I think this is one of the longest periods that I can recall certainly since I've been in the business when uh the bond market didn't sanction rate cuts >> like what do you think is is that the bond market like losing trust in the >> Yeah that's the bond Yeah I I think so it could be I mean let's put it this way when when and if the bond market loses confidence in central bank this is what it will start like you know and and you can imagine what what it would look like if the if if the Fed cut rates and longer rates rose now that that's that's really what's happened. It just hasn't it really it just sorry it just hasn't been very much and and and maybe they haven't risen. They have just haven't come down that much. But world the I if that's what's happening at some point maybe when the next rate cut rates might rise and if if if rates rise in in a response to a rate cut it really um um handcuffs the Fed's ability to ride to the rescue when they want to cut rates. That's it's a very bad place to be. I ab I think we'll ultimately get there. I think ultimately, I've said forever that ultimately the bond market's going to take the printing press away from the Fed. I think this is the start of it. Now, now we've had a head fake back the other way. We'll we'll see. I mean, these these bond market uh uh trends move in, you know, decades long moves. So, the opening act of a change could could take three or four years and it wouldn't be unusual. >> Okay, that's interesting. So, do you think the endgame here is that do you think we'll see that money printing era end then? Do you think that's the end game or it'll be like super super early? >> I mean, ultimately it kind of has to end because it's inflationary. It it it debases the currency and it doesn't do that much immediately necessarily, but over time it does. And what we have now done is sensitize people to inflation. And while a lot of the the uh Fed apologists say, well, like the rate of inflation's, you know, back down to two or two and a half or three, yes, but the price level that has gone up is still up there. And so every time people go to the store, yeah, maybe it's only a tiny bit higher, but it's still as high as it has been. And that psychology stays in people's heads. I've talked about this a lot before it happened about inflation psychology and now since it's happened. And in psychology once it changes is very hard to get to go the other way. That's why when Vulkar raised rates 200 basis points on Saturday night in October of 1979 that was o over the next three or four months the price of gold doubled because nobody believed him. >> Nobody believed him. That's psychology at work. Okay. Now uh you've got that same sort of negative psychology beginning. That was the end of it there because what he did finally broke the back of inflation and broke the back of inflation psychology. We are nowhere near that point here in terms of breaking the back of inflation psychology in my opinion regardless of whether or not we're printing you know two two and a half or whatever. I think that's such a good point, Bill. Like, um, I I think people like cheerlead, oh, it's come way down and whatever, but the prices have not really come down. Like, yeah, maybe the rate of change, like you point out, but gosh, I'm probably paying $6 for my latte instead of $4 from just a couple of years ago. >> That reminds you every day. It's expensive. It's expensive. It changes it changes the thought process. And people come to say, well, it's always going to be this way because they don't see how prices are going to go back down. And that's how they get sensitized to it like >> Yes. Exactly. >> Exactly. >> Yeah. Um I wonder if people feel gas lit then. >> Uh no, but it it probably erodess trust. What do you mean? You know, you're man, you're telling me, you know, the old uh uh the old uh Clint Eastwood line from the outlaw Josie Wales and he says, "Don't piss on my back and tell me it's raining." Pardon my crudess, but >> I've never I've never seen that movie, but >> anyway, it's a great line. In other words, people feel a little bit like that. I mean, don't don't try to don't don't tell me that. I I don't believe you. And and what they what they mean to say is I you know, yes, the rate of inflation, the increases come down, but the overall price level is still stuck with. And that's the part that that I think a lot of um people that are like I say you know fans of the Fed and you know say well look that was transitory. Well yes the the rate of change at huge rates was transitory but the consequences of what happened is not transitory. And that's the big part that people miss and that's part of why gold is doing what it's doing because people don't see any way out other than more of the same >> and potentially worse I think. Yeah. Um, from where you sit, like how much does like the Fed, how much does the Fed matter and, um, we obviously got, you know, the Kevin Walsh news, um, Trump's next pick for FOMC chair. Any thoughts there? Like any expectations from the Fed or anything that you're anticipating? >> The Fed matters a lot to financial markets, particularly when they're doing QE. Um, so, uh, I think worse was a very surprising pick. You saw the, you know, the price of gold and silver got smoked for a few days. They were they were due for a reason to decline, but um because I think people perceive him not to be the easy money guy that everyone assumed Trump wanted. So um uh um uh Trump I mean sorry worse has said he wanted to see the Fed's balance sheet, you know, be reduced. That doesn't sound like a guy who wants to do QE, but maybe he's enough of a pragmatist that they'll talk about yield curve control and they'll pretend that it isn't QE. I've always felt that ultimately we were headed for yield curve control again. Japan did it. We did it back in World War II and and after um and uh so I I I felt almost certain that the next Fed chairman would be willing to do that. Uh Worse does not seem like a guy who would want to do that. But on the other hand, I think Trump feels he got burned with Powell and I figured he would have been extra extra careful to get exactly the guy he wants. So worse is a bit of a headscratcher for me. >> He doesn't fit. He doesn't is >> his body of work doesn't seem to indicate he wants to be the guy to do yield curve control. And yet I think they're going to have to resort to that. So maybe my analysis, maybe my opinion is wrong and and or maybe he's going to do it even though he he seems like a guy who doesn't want to do it. I don't know. We're going to have to find out. >> Interesting prediction. Okay. Um that we could be headed toward yield curve control Japan as the model. What for folks watching and listening like what happens in that kind of environment? Well, I mean you monetize I mean sorry you um you say we will buy all bonds such that the seven-year and the seven that rates seven years and out don't go over some price 5% pick a number. So if the market doesn't test them they don't have to buy any. If the market tests them they have it's like unlimited QE potentially. So, and that that way they're going to do most of their funding at the short end of the curve because that's pegged to Fed funds and uh you know they allowed the banks to expand what they can what they can do with their balance sheet. So, they're going to just try to do as much financing as they can at the short end and not test the longer end. So, maybe it won't be for a couple years that this matters. I really don't know. But I mean, like you said, we're 38 trillion and, you know, racking it up at a trillion and a half or two a year, plus contingent liabilities and all of that. It's it I I I just I think it's in our future and I think people that are in the gold market think that something like that has got to be in store for us as well. >> So, is it effectively like QE but by like a different name then? >> Well, yeah, you could call if you called it yield curve control, it is it's unlimited QE. Would you say >> unlimited QE? Yeah, >> because I am going to make sure that rates don't trade above X%. You have to be willing to buy an unlimited amount. Now, maybe you don't have to. I doubt that. And then and then you do it. But but you're you're not calling it QE. See, even though it's the same thing. >> Yeah. Um since we last spoke, we also had the State of the Union address. Did Did you watch last night? I have to admit that I did not. >> I watched half of it and I went to bed. >> I was going to watch it and then I was tied up watching an important sport event. >> A friend of mine is a professional tennis player and he was playing on TV and I was I thought that was more interesting. >> That's cool. Yeah. Okay. >> Um I'm just curious I read I read about it. I mean, you know, you know, it it doesn't matter whatever venue Trump is in, he will say some things that will a lot of people will agree with, a lot of people disagree with, the Democrats will hate on him, and there'll be a food fight no matter what happens. And obviously, there were some real highlights, and I think there were probably some low lightss, but to me, it's a non-event in terms of market action. >> Yeah. Um, I I go to bed after like nine o'clock, so I kind of stayed up for part of it and then I went to bed. Yeah. I don't know. I like to go to bed early. I don't Yeah, I'm a dork. Okay. Um Okay. You also mentioned, Bill, um that you you're like 30 40% in cash. Um you have gold, some miners, some energy mentioned, but um what's one thing that would get you to deploy that cash? Like what are you what are you waiting for? What are you looking for? Um, yeah, just curious. >> Oh, that's a good question. Um, I see I did it mostly because of the volatility that Trump brings to the table and the fact that the market is artificially priced where it is, we know why. And that doesn't mean it's going to change. if I saw a compelling opportunity that I thought I unders could manage the risk on and I felt like the market itself wasn't particularly vulnerable which I don't know why I would think that um then you know if I had a specific idea like I might you know let's let's say gold has a correction and one of the gold stocks I like like Alamos or ECNO or West uh you know backed off a bunch uh then I might buy it you know might I might buy it like for a trade 3 to six month you know trade Um, uh, I if I found a new idea that was super compelling that I felt was impervious to the market, which they're hard to find companies like that. I think I own a few, but that, uh, they've gotten bounced around anyway. Um, it it would just take the right idea, uh, cuz there's nothing in the market structure that that that is going to change and there's nothing about Trump's personality that's going to change. So, it would have to just be a unique opportunity. And even still, I would I would hesitate to get below about 20% cash. I don't own any energy, though, however, although I'm I'm looking at I have a friend of mine who's really really good in that. >> Okay, you're looking. >> And uh and and he he he has been buying. He thinks it's it's time to buy them. They're they're they're acting better from a technical standpoint, so he says, which he's also good at that. So, I'm I'm I'm I'm I'm I'm I'm thinking about it, but hasn't I haven't been compelled yet to uh deploy to part with my cash. Um just because I don't really trust the price of oil either. Uh given all the things that are going on. So, anyway, but probably if I was to buy something, I would buy an energy stock or two and that would that would take take away some of my cash. That that would probably be the most likely opportunity that I would that I would take. >> Okay. What's the biggest risk right now that people aren't really talking about? Like the risk that nobody's talking about? >> Well, you know, I I I I I I really think that most people don't understand the nature of the passive bid, which is why I bring it up every time because what people, anyone who is smart about investing will have read about financial history. I've read uh dozens of financial history books. So, I wanted to understand what happened in the past because human nature never changes. And I don't think people really can appreciate how different the market of the last 15 or so years is. When you combine the a Fed that will do QE, take rates to zero, etc., and the passive bid and the market share it's garnered. what we see working and happening in the marketplace to in the market today is completely different than anything that's happened in history. Yeah, the human nature side of that of course stays the same, but the behavior and the drivers are totally different right now. So, we're at a unique moment in time and that that that sounds like that's going to only last for 2 weeks, but it's a moment in time. Look, I mean, recorded history is quite long, right? And so if you had a period of of something that was bizarre that went 15 or 20 20 years, that's not a big deal. It's a big deal in terms of your life, it seems like forever. But if you and I were sitting around having this interview in 1923 and we were talking about communism in the Soviet Union, we'd say that can't possibly last. That's against human nature. Communism can't work. Socialism can't work because human nature, everyone's not altruistic. Some people will be lazy, then the hard workers won't work. It'll collapse because it always does. we'd agreed that on in 1925 or 1930. Uh and it but then it took another 50 or 60 years for the Soviet Union to collapse. So there was something you could have known that had to happen because that's the way things are and it took that long. So I always like to to remember things like that. So in our lifetimes we always think things should happen faster than they do. But when you when you look back in history, there are periods where crazy things go on for way longer than you would have thought. And so I bring that up as people that think that well I've got a lot of experience. I've been investing for 10 or 15 years. Well, yeah, that's pretty good. But you have to know that this period is not like other periods and this will change too. And when that changes, it's going to be a really big deal. But that doesn't mean it's like we were talking earlier. >> Yes. Yeah. Yeah. It's and that's an important point too, like you don't no one knows the exact timing of these things and I know you pointed out out multiple times in the conversation too. Um, Bill, I have to say I love having you on the show. This audience loves hearing from you. Um, so before I let you go, um, let's leave the audience with some parting thoughts. Um, something to think about. It could be something we've already discussed or maybe something we didn't that you'd like to leave them to think about and then let them know where they can find you, support your work. Um, anything that you'd like to plug. The floor is all yours. And I know you also have a book too. Um, Greenspan's Wubbles. I did not even mention that, but you are an author as well. >> Yeah. Uh uh I wrote the book in um 20ou late 2007 uh to to chronicle this the stock bubble that burst and of course to try to warn about the problems that the Fed created and talk about the impending real estate bubble that I thought was going to burst. I mean I didn't know imminently. Um and I thought that it would be uh useful for people and and and you know if we exposed it maybe the Fed's behavior would change. That was how naive I was. McGra Hill actually came to me and asked me to write the book because I had been so vocal about Greenspan. Any case, if people want to understand how these bubbles worked and how obvious things were, but they how they got denied. I think that's that's something people need to understand is a lot of times problems are really obvious, but they go on long enough to trick you to believe that it's not what you thought. And I think you can learn that lesson in that in in the book. And the book's nice and skinny. It's a quick read. So, um um in any case, uh I have a website, fleekstein capital.com. Um I charge a whopping sum of $130 a year just because I want some people to have some skin in the game. Um and I write a column about the market and things that interest me and I answer questions that people have. Um so that's that's my plug for myself. >> I love it. Bill Fleenstein, founder and president of Fleeinstein Capital. Thank you so much for being so generous with your time, all of your knowledge, your wisdom, helping us all learn and get better. This audience loves you. I really appreciate you and just thank you so much, Bill, for the time. >> Well, you you make it fun and you ask great questions, so I always enjoy myself. Thanks, Julia. Thanks, Bill.