Chris Casey: The U.S. Solvency Crisis Is Now an Existential Threat | 8 Major Predictions Revisited
Summary
US Debt: He frames a growing solvency crisis as an existential threat to the dollar and markets, expecting de facto default via money printing rather than bipartisan reform.
Rising Rates: Long-term rates likely trend higher due to fiscal pressures, posing the primary risk to equities while complacent credit spreads may break late in the cycle.
Inflation Hedges: Precious metals and cryptocurrencies have outperformed and could continue as monetary substitutes amid anticipated future liquidity injections.
Natural Gas: Bullish multi-year view on natural gas producers (E&P equities) driven by power demand from AI/data centers, EVs, crypto mining, and Europe’s reliance.
AI: The AI trend remains early despite stretched valuations; he favors selective exposure and earlier-stage opportunities over high-multiple leaders.
Cryptocurrencies: Potential sovereign fund adoption could catalyze flows; pullbacks are viewed as buying opportunities given the worsening fiscal backdrop.
China: Despite recent market strength, he remains cautious due to debt and malinvestment risks, which could pressure EMs and certain commodities.
Market Outlook: He is defensive on equities with risk of sharp corrections; electricity prices are likely to become a major political issue, reinforcing the natural gas thesis.
Transcript
This is the most important prediction anyone can make or discuss, most important issue out there because it's an existential threat to the dollar. It's an existential threat to US government actually and it's an existential threat to people's portfolios. >> Hello and welcome to Wealth. I'm Maggie Lake and joining me is Chris Casey, founder and managing director of Wind Rock Wealth Management. Hey Chris, it's great to have you back on. >> Yeah, likewise Maggie. Good to see you. So, as we start to close out the end of the year and and right now it looks like it's going to it's sort of a rocky volatile close. Uh we thought it would be good to sort of take stock of 2025, identify some of the trends that have taken hold and sort of give people a framework for looking at their portfolios. Um and and if you're listening to this and you feel like you want to run some stress tests on your investments, you can hit the link in the description and get a free portfolio review from a member of the Windrock team. I I feel like we all need to be reviewing things. So, Chris, back in January, you made some predictions and I'm just wondering what you're feeling confident about and maybe what you're re-examining. And let's start with the US solvency crisis going mainstream. I mean, it's certainly something that's been coming up in in a lot in conversations I'm having. >> Yeah. And first of all, I think it's important to discuss the fact that we're talking about predictions that were made, right? Because most people don't do it. Um, most people make predictions and then there's no accountability, right? No one ever reminds them, hey, you thought the Dow was going to be this, you know, at the end of the year. So, I think it's important. It's important because if we don't do that, then everyone's incentivized to make the most outlandish predictions they can to get the most eyeballs and then nothing there's no repercussions whatsoever. Right? So, I think it is important to do this. This relates to the solveny crisis that I talked about. I do think that's developed or is it developing but it's starting to get mainstream recognition only a few weeks ago. This is probably a bellweather publication but the economist had on its front cover you know that there's a solveny crisis not just in the United States but throughout the world and that's absolutely true. Um I think in talking about solveny crisis that seems like an easy prediction. Well you have 38 trillion in debt at the time we had 36 only you know nine months ago 10 months ago. But I think it's important to put it in a context because most people would say, "Well, that's a no-brainer." But the reality is a lot of people weren't talking about the reality is there was a lot of optimism when Trump was just inaugurated, right? And it was he was talking about things that are never talked about. He was talking about abolishing an income tax, right? He was talking about um a gold standard. He was talking about privatization. By the way, the post office just had reported nine billion in losses on 80 billion in sales. I don't know how we're we're not talking about privatizing them right now, but there was a lot of optimism, a lot of promise, and at the time, probably the biggest prediction I made throughout the year was that nothing would come to pass. And this is the moment when Doge was in there digging through everything, finding waste. I didn't think anything would happen. I thought it'd be akin to the Contract with America 1994. And effectively what the Contract of America did, you remember the House flipped 50 seats for Republicans and they had control of Congress and they ended up doing nothing. Like just some minor tweaks here and there. Um so putting it in context, calling for a solveny crisis or mainstream recognizing a solveny crisis, I don't think was a no-brainer at the time, but it's certainly developing and it's worsening. Right? this one big beautiful bill act. It should be called the one big bloated bill or something like that. Made things worse, not better. We had a limited window here to cut spending. We never did it. We had a limited window to start selling assets, privatizing things, never did it. And so, not only is the solveny crisis developing and getting worse, but I think it's starting to be recognized. And this is the most important prediction anyone can make or discuss, most important issue out there because it's an existential threat to the dollar. It's an existential threat to US government actually and it's an existential threat to people's portfolios. >> Yeah, it's a great point and you know we'd also we've had these debt warnings for a long time and sort of nothing happened. A lot of people who were talking about it is sort of the the boy who cried wolf, right? And so the fact that it's coming home to roost is is not a given as you point out. So since we're all talking about it and I've been thinking about this, I don't have an answer, but I'm curious what you think. Is it a good thing? Because now it will uh if not force at least prioritize a policy response or cut through some of the kind of partisan bickering and get people to move with urgency or is it bad if we're all talking about it because it can create a crisis of confidence. >> Yeah, I don't think it's either. Um it's good in the sense that people are aware of it. It's good in the sense that investors could prepare for it. However, I don't think anything will be done. There is no bipartisan support to do anything. And you're right, there is an aspect of the boy who cried wolf. I in my library. I have uh it's a famous book by Harry Figgy called bankruptcy 1995. I mean there's people have been calling this for a long time. But when you have 38 trillion in debt, which will probably be 39 not too just a few months from now, 38.2 trillion in debt, you take in 5.1 trillion. Even if you had no expenditures whatsoever, it would take you seven and a half years to pay that back. >> If you had a trillion dollar surplus, it would take a lifetime. it take 40 years to pay it back. Um, so no, I don't think there's any going to be any kind of bipartisan support. I don't think anyone's going to do anything. I think the way it plays out is they'll there will be a de facto uh default. Effectively, the Federal Reserve and you you see this right now with the with the Trump administration jawboning the Fed trying to get their way with lower rates and whatnot. >> All they're going to do is print their way out of it. That's the only thing they can do. there'll never be any kind of, you know, courageous bipartisan package passed that cuts because even if they did have bipartisan support, it's so bad. I don't even know if you could physically do it. Like, you literally would have to cut expenses by 90%. That's never going to happen. >> Yeah. By the way, the UK is facing this very question. These are impossible choices, right? That's why we partially why we why we're here. Uh do you um think that Scott Besson is aware of this? I mean, there you're right. There was so much I think not only optimism around Trump but really around the fact that this is a guy who knows markets. He knows bond markets. He's so aware of this debt problem and they were going to get creative. Do do you think that he's aware of it and you know what sort of influence if any do you think he has here? >> I think they're all aware of it and I think they brea breathe a side of relief when they when they leave office. Um and you saw that with Yellen. I think you saw that Bernaki. I think you're going to see it with him as well. And he plays the part well, right? He's got the stature. He's got the demeanor. He's he he sounds great. But what is he doing about it? Why haven't they sold 50-year bonds? Why haven't they done anything to restructure the debt, let alone reduce it, right? They're not even doing that. So, I think they're fully aware of it. I think there's nothing they can do about it. They feel like there's nothing practically they can do about it. So, they really don't do anything about it. That's I think that's where we're at, unfortunately. >> Yeah. So, the bond market is another uh prediction you made. Did did it react as you thought it would this year on both the government side and the corporate side especially as the other narrative has been unfolding? >> Well, sort of. I actually think the biggest threat to the stock market and obviously the bond markets are higher rates. That ultimately is you talk about recession, you can talk about all these other things, but ultimately is I think long-term rates are on a long-term trend higher because of the fiscal situation. So, no, bond rates haven't increased to the degree I thought they could. Once there's recognition of this crisis, however, not everything's in a vacuum, right? You have to look at what happened, all things being equal, there's other influences. So maybe they are elevated where they but for where they would have been, but for you know the with Fed um lowering rates, everyone expecting lower rates, maybe they're elevated from where they would be, all things being equal. So it's hard to say exactly. Um I would anticipate rates are in a long-term trend though going up. That's that is a big threat that runs investor everyone's portfolio. >> Yeah. Are you surprised that core of the corporate spread has stayed where it is because that's sort of one of the things that's given people some peace of mind like well the yields aren't blowing out. >> That was probably one of the worst predictions I made. I thought by the end of the year we would have credit spreads. Credit spreads being yields on non-government bonds relative to government bonds. I thought they would have widened substantially by now and they're not. There's a lot of complacency in the markets and I think that's part of the reason and you're right that signal for us at least is kind of the last signal you get before a recession happens. So it's something we're acutely aware of and monitor. However, it may be a little bit broken. >> Um you may have people looking past the crisis and assuming because they've been conditioned to do so that once a crisis happens the Fed will jump in immediately and massively. We saw this during the lockdowns. We saw this in '08 and frankly for a lot of people that's their only reference points to how the Fed and the government will react. So it may be a bit of a broken indicator. It hasn't happened like I thought. Um but when it does, everyone should be acutely aware of what may happen next. >> Yeah, good point. What about inflation? In January, you predicted inflation hedges would do well. >> They have done well. I mean, you have gold and silver up 50 to 70% respectively. you have cryptocurrencies that have had a nice run um really prior to this year if mostly I think inflation hedges can and will continue to do well not because the reason you typically see in the media which would be that they're expecting next CPI print to be slightly higher than it really is. I think the inflation hedges will do well and it's handin glove with the fiscal situation. So because the only solution to the fiscal situation is to print more money because it seems like we're headed that way. Money supply has been pretty flat for the last couple years if not negative. Um because we're headed that way. I think people are anticipating not the inflation that could happen from what has happened already. The inflation that can happen from what they anticipate happening in the near future. >> So people looking for a way to kind of preserve their purchasing power. everyone should absolutely do because although you you know three inflation is only 3% right now based on the CPI that I think will change dramatically once we deal with this fiscal crisis by printing dollars in earnest. If you're looking for a simple, secure way to invest and own physical gold and silver, visit our sister company, Hardass Assets Alliance at hardassetsalliance.com. That's hardassallalliance.com. Commodities. So, you mentioned precious metals, but people sort of have been looking at commodities. Little bit of a different story when it comes to energy. A lot of people be kind of wondering why energy has been lagging or behind. Again, not sure for an inflection point, but you you had thought that natural gas, you had identified that as a as a hot sector. How how are you feeling about that prediction? >> Yeah. Well, I like it. The prediction, you can't say, has come true, per se. I mean, natural gas, the commodity itself, we weren't really talking about that. We're talking about the equities. The equities will start spiking recently. They've done pretty well. Natural gas has been flat um for the year. And the thesis though is not that natural gas goes up. it's that the production these equity the the firms that uh that uh uh produce natural gas will do quite well and I think that is on uh on track look at the news every day there's new news whether it's Europe becoming more and more increasingly reliant upon US natural gas there's arbitrage opportunity maybe it's the fact that more and more power plants are starting their natural gas and they're actually now plugging into maybe a coal plant so they could use the infrastructure from the electrical grid period that's already in existence right now. The the reality is natural gas is the only way to solve the electric electricity crisis that's coming to the US. It's a green energy. It's abundant. It's you can quickly manufacture a plant unlike say nuclear which will take 10 plus years if it even gets done when we have a new administration in place. So the natural gas I think thesis is sound. I think the the news and the underlying fundamentals have strengthened over the last year >> and while we haven't seen necessarily the equity returns, this is I think a multi-year play. I think it's a way to be for the long haul. >> Is the energy story and the knock gas story dependent on AI and the AI buildout or do we just see energy demand going up regardless of what happens with AI? >> Well, AI demand certainly is probably the biggest factor. However, there's others, right? you have data center growth apart from AI demand. It's not like data centers just developed in the last couple years, right? They've been here and they were already a major trend uh over the last couple years, well before AI was really at the forefront of everyone's mind. There's other factors too. Obviously, electric vehicles play a part. Cryptocurrency mining, which sounds minor, >> but when you're talking one one and a half% electricity grid, that's a that's a big marginal um new source of power. So there are long-term trends worldwide and when you look at US grid which hasn't really changed over the last 20 years um because of efficiencies but things have to change they have to say soon they have to change soon and one of the things I think I talked to you Maggie about a couple maybe a month or so ago is I said it's kind of an interim prediction but I said electricity um when to sell natural gas stocks etc will probably be when you're arguing when there's a major campaign issue about electricity prices. That's going to happen over the next couple years. Electricity prices be a major deal, be a major campaign issue. And again, natural gas, I think, is the only way to solve it. >> Yeah. I mean, we we know we've been experiencing depending on where you live, if you're in a warmer climate, you've seen brownouts and electricity issues and and shortages regardless of the tech story. You know, this sort of all layering on an aging infrastructure. Uh so those those will do well. You like equities and net gas. What about the broader stock market? You expected a severe correction. You know, we saw that wobble in April. I don't know if you thought sort of it all came then and then came back. It's it's it's been a little bit of a roller coaster. How are you feeling about the stock market? >> Yeah. No, the the so-called liberation day tantrum was not what I had in mind exactly, although that was severe, right? You had the S&P 500 down I think around 12% over a 6-day period. I mean, that's a major quick um correction. It's not what I had in mind, but it does go to the nature of the market. I think it shows, it demonstrates how precarious the market is that things could happen. >> Now, a correction be caused by a lot of things, a lot of exogeneous factors, right? Could be caused by war, what have you. But ultimately, when I'm talking about a correction, ultimately when I'm talking about a severe draw down in the markets, I'm talking about interest rates going up. I'm talking about real fundamental things that exist already, but being expressed, being understood, and it plays out in the equity market. So, I am surprised that hasn't happened already. Um, but I would be very defensive in the equity markets regardless based on where we sit today and those underlying issues. >> Yeah, I was going to say year's not up yet and it's it's feeling pretty bad right now. Uh, how are you? Because usually this is a seasonally positive time of the year. Santa Claus rally, whatever you want to call it, year-end performance chasing. Do we get that correction even though you expected it early? Does it look like it might end the year like that? Does it feel like that's what's happening now? >> It's hard to say, but it wouldn't be unprecedented, right? Like you're correct. There's always like people talk about Santa Claus rally, don't worry about in December, but 2018 December, uh, we had Secretaries Treasury Minutuchin calling banks on Christmas Eve, worried about liquidity. Right? By the way, it's a great way to spook the market in general to have that disclosed that you're calling banks on Christmas Eve of all times. So, it's not unheard of to have a dramatic downturn at the end of the year. Can it happen? Sure. Uh, it's possible. I It's not something I'm predicting obviously, but that's absolutely possible. >> Yeah. And we've been having these conversations that there are some concerns about liquidity again. So, what about China? What about that market? Uh, that's another one that you thought was going to struggle. Um, did that play out as you expected? >> No. And that's probably the biggest miss I had all year was um and and let me let me give you some background why I thought China was poised for potential you know big downturn in equity markets or their economy for years Chinese Communist Party has mandated like 7% growth and surprisingly every year they have that right you can look at other factors electricity what have you see corroborate whether or not that's actually happening well then the Chinese government started ratcheting it down it went from 7 to 5 went down to 3% in 202 23. So the trend was definitely there where things were getting worse, worse, and worse. They've taken a a uh they pulled back from that where I think 2024 GDP growth was like 5%. The Hansen index was up a whopping 35% year. So it did did quite well. But remember the Chinese problems are very much like the American problems. Massive debt, but in some ways it's worse. So if the US the problem is that low artificially low interest rates have created malinvestment all these years. various business people have made horrible decisions and and built things they should not have built that'll be expressed in the next recession. Well, the Chinese government's worse because it's not uh various businesses being fooled by interest rates. It's a centrally planned economy, right? So, there there's their malinves even far far worse. Their debt situation is pretty similar. So the Chinese situation um I'm quite concerned about which is the same way reason I'm concerned about emerging markets certain types of commodities think steel stuff like that that's all kind of a play on China. So although that didn't play out this year it's still um a cautionary note on my part. >> Yeah. So why do you think that didn't transpire? Like when you're looking at this what happened that you didn't expect? Is there an explanation or is it just sentiment driven? >> Yeah, I'm I'm not sure. I mean, predicting is difficult, right? It's kind of like investing. Investing, you have to have the theme right, you have to have the security, right? And you have to have the timing right. And predictions are kind of very similar. You have to have the theme correct. You have to have the magnitude right. Right. It has to be significant magnitude. Otherwise, why are we talking about it? And you have to have the timing right. So, I would chalk this up more of unknown. Let's revisit it next year. >> Time and timing. Yeah. So, so it's still an area that you're concerned about. Uh, what about the hot AI trend? Uh, you thought it was going to continue and you were certainly right about that. Um, how are you feeling now? >> Yeah, and again, people would look at it and think, well, that's a no-brainer. You know, it's obviously things were were were going really well. Well, not exactly. You could make a good argument that it was more like, you know, late 1999 as far as the tech bubble than it was, you know, the second inning of a long-term trend. I think it is the latter. I think yes, AI stocks have done quite well. Is it a bubble? Well, the asset prices are highly inflated. I don't know if I call it a bubble because there's some real underlying uh benefits um and and growth because of AI. I think that will continue. I think we're at the early stages, but another cautionary tale, you got to play it right. So, it's not going out and buying necessarily the stock that's got 100 times revenue. Maybe it's looking early stage. Maybe it's looking at venture. Maybe it's doing other things where you're not paying that same amount, but you're in the same sector and we'll get the same results ultimately. >> This one, this next prediction is really interesting uh because you you do look across the hard asset space and uh are active in cryptocurrency and you predicted that sovereign funds would embrace cryptocurrency. Why was that even on your prediction list? That's an interesting one. Yeah, the reason it's important and the reason I even mentioned it is because well, first of all, we just had a bull market in cryptocurrencies, Bitcoin especially. On top of that, there are various sovereign funds around the world um that have slowly started to embrace cryptocurrencies. You could probably count six or so. The biggest one being the Norwegian sovereign fund, but even things like the state of Wisconsin, I heard has like a small Bitcoin exposure, right? When that trend develops, once sovereign funds, which control a vast amount of money, start looking at cryptocurrencies in earnest as legitimate asset class, you could have kind of a run to the exit, right? You're going to have a stampede for everyone to get into it. That could easily transpire. Now, at the time we talked about this, I think we're a month or so prior to Trump uh issuing an executive order about a US sovereign fund, which is kind of a joke, right? There's you have to have savings before you have a fund. And considering the fact that we're $ 38 trillion dollars in debt, we don't really have any kind of savings. Um, but at least they were talking about it and and it wasn't a dumb idea. I mean, El Salvador basically did the same thing. They have quite a bit of debt given their size and yet they started a sovereign fund. They started mining Bitcoin and now it's a decent percentage of their overall debt level. So, it's actually working, right? This asset growth is helping diminish their debt um situation. And it looked like US was going to look start doing this. look like some other uh sovereign funds may do it. I think that is maybe a longer term trend than I expected. >> Um it kind of depends on where cryptocurrencies go. You know, if they're hot for next 18 months, I think you'll start to see it. If things cool down more so than they are now, uh maybe it's more like five years from now, sovereign funds jump it. >> Yeah. Because we have I mean it's this is another market that's seen a big saw a big runup a lot of enthusiasm about the change in the environment in Washington. Uh but it's been tough the last few months here. We've seen a big downturn. It's almost lost all of its gains for the year. Do sovereign we always think of I always think of sovereign funds as sort of longer steadier hands moving into that space. Um do you think that if we do see this pullback those type of investors will see it as a buying opportunity or does it just seem like this is an asset class that still has too much volatility and risk for that sort of institutional sovereign type player? Yeah, I would say that everyone should have view this as a um as a buying opportunity if things pull back from current levels. I mean, the reality is the debt situation is not going away. So, what do you want to do when there's a fiscal deterioration with the United States? You want to look at monetary substitutes, right? So, that's why precious metals have really run. You want to look at cryptocurrencies. You want to look at hard assets like real estate, etc. So I think um various e economic actors beyond that of sovereign funds just look at hedge funds look at various investors across the board look at 401ks eventually they're going to start looking more and more at cryptocurrencies as legitimate asset class. I mean how long do cryptocurrencies have to be around? How long how how large do cryptocurrencies have to be market cap wise before they're viewed as legitimate by everybody? I mean we're well past that point. everyone should be looking at them is a legitimate asset class that's here to stay. >> Yeah, that's super interesting, especially given what we've seen. Are you surprised we're not seeing a little bit more buying on the dip here um as sort of longer term PE or investors or funds with a slightly longer horizon. Uh do you think they've been buying on the way down? It seems like it's been pretty brutal and it seems like it's still acting like a super risky asset class. Yeah, in a way. But I think also I don't know if they've been buying on the on the downside, but the reality is anyone that's followed cryptocurrencies and we we've been following for a long time, right? We wrote our first article in 2014. I think we had some clients in it in 2013. We've been early adopters of >> um adopters of uh cryptocurrencies. Um whether or not they're buying on the downside, I don't know. But if they're not, I guarantee they're familiar with past cycles. We've seen this in the past where Bitcoin has spiked and fallen off 90 plus%. It's happened repeatedly, typically coinciding with their having structure as far as how they mine uh Bitcoin. Um now I would um where it goes from here, you know, I I can't really say, but I think everyone looks at it as a buying opportunity potentially if it falls more. And frankly, it's kind of a different ballgame now. I don't think it's so much based on the having as it is the fiscal situation in the US. Yeah, that's a great point because that is a narrative now coming in as you kind of brings us full circle to your first prediction which is that it's mainstream now. So that could alter the conversation around a lot of different asset classes. Um so are you making based on your sort of you know um taking stock of the predictions and where you are are you making any major adjustments or are most of the ones you got wrong more an issue of timing than you feel like there was something that you just didn't understand about the story or or sort of a new piece of information that came in sounds like the former to me but how are you feeling about it? I think for the most part it is more timing partially because the thesis underlying a lot of these has continued continued to be proven true, right? Like there's you keep saying new stories that that kind of bolster the underlying thesis. So in my mind it's more of a timing issue. Um but who knows? You'll have to wait for the January predictions and we'll see what happens then. >> I was just going to say are you compiling your ne your predictions for January? >> I I already started I mean um at least one thing on there is like I already mentioned it's electricity prices. I think that's absolutely something that will become a a major issue going forward. Um, but we'll have some new ones for you in January as well. >> That's awesome. But again, I think it I think it's fantastic that you do this exercise and that you sort of hold yourself accountable and go back and look at what was right and what was wrong because that's where all the learning is, right? I mean, if you just sort of set and forget, we keep telling people we're not in an environment to do that. But I think this is a a great framework to work off of um taking a look and sort of having an an ongoing accounting of of how you feel and and the things you think are happening. >> Well, that's why even on our website, right, all of our research, whether it's a written article, it's a podcast from day one is posted right there on our website. So, you can see what we were thinking, you know, 10 years ago, you can see what we were thinking right before the downturns in 2020. It's all there to see. um because we try to lead with thought leadership and I think that's important to not only have predictions, not only have thoughts but to be held accountable for them. >> Yeah. No, absolutely. And I think it's a it also underscores that we all have to be nimble. You know, things are moving, things are happening quickly. And so you have to keep going back and looking over um your sort of um the narratives that you're following, the trends and what you think is going to happen and and then also your response to it. Right. >> And challenging yourself. Yeah. Continually challenging your thesis. That's right. >> Right. get out of your echo chamber, too. If you're just talking to people who believe the same thing as you, that's not that's that's probably not a good idea. Um, awesome stuff, Chris. Can't wait to see the January list. Thank you so much. And if you would like a free portfolio review, if you want to take the time to go over, you know, what you're thinking, what happened, and if you need to make any adjustments, are you ready for 2026, you can hit the link in the description or head over to wealthy.comfree uh so that someone from the Windrock uh team, one of the adviserss can sit down with you and take a look. Super necessary right now. Chris, thanks so much. Thanks to all of you for watching. We'll see you again next time. >> Thank you. [Music]
Chris Casey: The U.S. Solvency Crisis Is Now an Existential Threat | 8 Major Predictions Revisited
Summary
Transcript
This is the most important prediction anyone can make or discuss, most important issue out there because it's an existential threat to the dollar. It's an existential threat to US government actually and it's an existential threat to people's portfolios. >> Hello and welcome to Wealth. I'm Maggie Lake and joining me is Chris Casey, founder and managing director of Wind Rock Wealth Management. Hey Chris, it's great to have you back on. >> Yeah, likewise Maggie. Good to see you. So, as we start to close out the end of the year and and right now it looks like it's going to it's sort of a rocky volatile close. Uh we thought it would be good to sort of take stock of 2025, identify some of the trends that have taken hold and sort of give people a framework for looking at their portfolios. Um and and if you're listening to this and you feel like you want to run some stress tests on your investments, you can hit the link in the description and get a free portfolio review from a member of the Windrock team. I I feel like we all need to be reviewing things. So, Chris, back in January, you made some predictions and I'm just wondering what you're feeling confident about and maybe what you're re-examining. And let's start with the US solvency crisis going mainstream. I mean, it's certainly something that's been coming up in in a lot in conversations I'm having. >> Yeah. And first of all, I think it's important to discuss the fact that we're talking about predictions that were made, right? Because most people don't do it. Um, most people make predictions and then there's no accountability, right? No one ever reminds them, hey, you thought the Dow was going to be this, you know, at the end of the year. So, I think it's important. It's important because if we don't do that, then everyone's incentivized to make the most outlandish predictions they can to get the most eyeballs and then nothing there's no repercussions whatsoever. Right? So, I think it is important to do this. This relates to the solveny crisis that I talked about. I do think that's developed or is it developing but it's starting to get mainstream recognition only a few weeks ago. This is probably a bellweather publication but the economist had on its front cover you know that there's a solveny crisis not just in the United States but throughout the world and that's absolutely true. Um I think in talking about solveny crisis that seems like an easy prediction. Well you have 38 trillion in debt at the time we had 36 only you know nine months ago 10 months ago. But I think it's important to put it in a context because most people would say, "Well, that's a no-brainer." But the reality is a lot of people weren't talking about the reality is there was a lot of optimism when Trump was just inaugurated, right? And it was he was talking about things that are never talked about. He was talking about abolishing an income tax, right? He was talking about um a gold standard. He was talking about privatization. By the way, the post office just had reported nine billion in losses on 80 billion in sales. I don't know how we're we're not talking about privatizing them right now, but there was a lot of optimism, a lot of promise, and at the time, probably the biggest prediction I made throughout the year was that nothing would come to pass. And this is the moment when Doge was in there digging through everything, finding waste. I didn't think anything would happen. I thought it'd be akin to the Contract with America 1994. And effectively what the Contract of America did, you remember the House flipped 50 seats for Republicans and they had control of Congress and they ended up doing nothing. Like just some minor tweaks here and there. Um so putting it in context, calling for a solveny crisis or mainstream recognizing a solveny crisis, I don't think was a no-brainer at the time, but it's certainly developing and it's worsening. Right? this one big beautiful bill act. It should be called the one big bloated bill or something like that. Made things worse, not better. We had a limited window here to cut spending. We never did it. We had a limited window to start selling assets, privatizing things, never did it. And so, not only is the solveny crisis developing and getting worse, but I think it's starting to be recognized. And this is the most important prediction anyone can make or discuss, most important issue out there because it's an existential threat to the dollar. It's an existential threat to US government actually and it's an existential threat to people's portfolios. >> Yeah, it's a great point and you know we'd also we've had these debt warnings for a long time and sort of nothing happened. A lot of people who were talking about it is sort of the the boy who cried wolf, right? And so the fact that it's coming home to roost is is not a given as you point out. So since we're all talking about it and I've been thinking about this, I don't have an answer, but I'm curious what you think. Is it a good thing? Because now it will uh if not force at least prioritize a policy response or cut through some of the kind of partisan bickering and get people to move with urgency or is it bad if we're all talking about it because it can create a crisis of confidence. >> Yeah, I don't think it's either. Um it's good in the sense that people are aware of it. It's good in the sense that investors could prepare for it. However, I don't think anything will be done. There is no bipartisan support to do anything. And you're right, there is an aspect of the boy who cried wolf. I in my library. I have uh it's a famous book by Harry Figgy called bankruptcy 1995. I mean there's people have been calling this for a long time. But when you have 38 trillion in debt, which will probably be 39 not too just a few months from now, 38.2 trillion in debt, you take in 5.1 trillion. Even if you had no expenditures whatsoever, it would take you seven and a half years to pay that back. >> If you had a trillion dollar surplus, it would take a lifetime. it take 40 years to pay it back. Um, so no, I don't think there's any going to be any kind of bipartisan support. I don't think anyone's going to do anything. I think the way it plays out is they'll there will be a de facto uh default. Effectively, the Federal Reserve and you you see this right now with the with the Trump administration jawboning the Fed trying to get their way with lower rates and whatnot. >> All they're going to do is print their way out of it. That's the only thing they can do. there'll never be any kind of, you know, courageous bipartisan package passed that cuts because even if they did have bipartisan support, it's so bad. I don't even know if you could physically do it. Like, you literally would have to cut expenses by 90%. That's never going to happen. >> Yeah. By the way, the UK is facing this very question. These are impossible choices, right? That's why we partially why we why we're here. Uh do you um think that Scott Besson is aware of this? I mean, there you're right. There was so much I think not only optimism around Trump but really around the fact that this is a guy who knows markets. He knows bond markets. He's so aware of this debt problem and they were going to get creative. Do do you think that he's aware of it and you know what sort of influence if any do you think he has here? >> I think they're all aware of it and I think they brea breathe a side of relief when they when they leave office. Um and you saw that with Yellen. I think you saw that Bernaki. I think you're going to see it with him as well. And he plays the part well, right? He's got the stature. He's got the demeanor. He's he he sounds great. But what is he doing about it? Why haven't they sold 50-year bonds? Why haven't they done anything to restructure the debt, let alone reduce it, right? They're not even doing that. So, I think they're fully aware of it. I think there's nothing they can do about it. They feel like there's nothing practically they can do about it. So, they really don't do anything about it. That's I think that's where we're at, unfortunately. >> Yeah. So, the bond market is another uh prediction you made. Did did it react as you thought it would this year on both the government side and the corporate side especially as the other narrative has been unfolding? >> Well, sort of. I actually think the biggest threat to the stock market and obviously the bond markets are higher rates. That ultimately is you talk about recession, you can talk about all these other things, but ultimately is I think long-term rates are on a long-term trend higher because of the fiscal situation. So, no, bond rates haven't increased to the degree I thought they could. Once there's recognition of this crisis, however, not everything's in a vacuum, right? You have to look at what happened, all things being equal, there's other influences. So maybe they are elevated where they but for where they would have been, but for you know the with Fed um lowering rates, everyone expecting lower rates, maybe they're elevated from where they would be, all things being equal. So it's hard to say exactly. Um I would anticipate rates are in a long-term trend though going up. That's that is a big threat that runs investor everyone's portfolio. >> Yeah. Are you surprised that core of the corporate spread has stayed where it is because that's sort of one of the things that's given people some peace of mind like well the yields aren't blowing out. >> That was probably one of the worst predictions I made. I thought by the end of the year we would have credit spreads. Credit spreads being yields on non-government bonds relative to government bonds. I thought they would have widened substantially by now and they're not. There's a lot of complacency in the markets and I think that's part of the reason and you're right that signal for us at least is kind of the last signal you get before a recession happens. So it's something we're acutely aware of and monitor. However, it may be a little bit broken. >> Um you may have people looking past the crisis and assuming because they've been conditioned to do so that once a crisis happens the Fed will jump in immediately and massively. We saw this during the lockdowns. We saw this in '08 and frankly for a lot of people that's their only reference points to how the Fed and the government will react. So it may be a bit of a broken indicator. It hasn't happened like I thought. Um but when it does, everyone should be acutely aware of what may happen next. >> Yeah, good point. What about inflation? In January, you predicted inflation hedges would do well. >> They have done well. I mean, you have gold and silver up 50 to 70% respectively. you have cryptocurrencies that have had a nice run um really prior to this year if mostly I think inflation hedges can and will continue to do well not because the reason you typically see in the media which would be that they're expecting next CPI print to be slightly higher than it really is. I think the inflation hedges will do well and it's handin glove with the fiscal situation. So because the only solution to the fiscal situation is to print more money because it seems like we're headed that way. Money supply has been pretty flat for the last couple years if not negative. Um because we're headed that way. I think people are anticipating not the inflation that could happen from what has happened already. The inflation that can happen from what they anticipate happening in the near future. >> So people looking for a way to kind of preserve their purchasing power. everyone should absolutely do because although you you know three inflation is only 3% right now based on the CPI that I think will change dramatically once we deal with this fiscal crisis by printing dollars in earnest. If you're looking for a simple, secure way to invest and own physical gold and silver, visit our sister company, Hardass Assets Alliance at hardassetsalliance.com. That's hardassallalliance.com. Commodities. So, you mentioned precious metals, but people sort of have been looking at commodities. Little bit of a different story when it comes to energy. A lot of people be kind of wondering why energy has been lagging or behind. Again, not sure for an inflection point, but you you had thought that natural gas, you had identified that as a as a hot sector. How how are you feeling about that prediction? >> Yeah. Well, I like it. The prediction, you can't say, has come true, per se. I mean, natural gas, the commodity itself, we weren't really talking about that. We're talking about the equities. The equities will start spiking recently. They've done pretty well. Natural gas has been flat um for the year. And the thesis though is not that natural gas goes up. it's that the production these equity the the firms that uh that uh uh produce natural gas will do quite well and I think that is on uh on track look at the news every day there's new news whether it's Europe becoming more and more increasingly reliant upon US natural gas there's arbitrage opportunity maybe it's the fact that more and more power plants are starting their natural gas and they're actually now plugging into maybe a coal plant so they could use the infrastructure from the electrical grid period that's already in existence right now. The the reality is natural gas is the only way to solve the electric electricity crisis that's coming to the US. It's a green energy. It's abundant. It's you can quickly manufacture a plant unlike say nuclear which will take 10 plus years if it even gets done when we have a new administration in place. So the natural gas I think thesis is sound. I think the the news and the underlying fundamentals have strengthened over the last year >> and while we haven't seen necessarily the equity returns, this is I think a multi-year play. I think it's a way to be for the long haul. >> Is the energy story and the knock gas story dependent on AI and the AI buildout or do we just see energy demand going up regardless of what happens with AI? >> Well, AI demand certainly is probably the biggest factor. However, there's others, right? you have data center growth apart from AI demand. It's not like data centers just developed in the last couple years, right? They've been here and they were already a major trend uh over the last couple years, well before AI was really at the forefront of everyone's mind. There's other factors too. Obviously, electric vehicles play a part. Cryptocurrency mining, which sounds minor, >> but when you're talking one one and a half% electricity grid, that's a that's a big marginal um new source of power. So there are long-term trends worldwide and when you look at US grid which hasn't really changed over the last 20 years um because of efficiencies but things have to change they have to say soon they have to change soon and one of the things I think I talked to you Maggie about a couple maybe a month or so ago is I said it's kind of an interim prediction but I said electricity um when to sell natural gas stocks etc will probably be when you're arguing when there's a major campaign issue about electricity prices. That's going to happen over the next couple years. Electricity prices be a major deal, be a major campaign issue. And again, natural gas, I think, is the only way to solve it. >> Yeah. I mean, we we know we've been experiencing depending on where you live, if you're in a warmer climate, you've seen brownouts and electricity issues and and shortages regardless of the tech story. You know, this sort of all layering on an aging infrastructure. Uh so those those will do well. You like equities and net gas. What about the broader stock market? You expected a severe correction. You know, we saw that wobble in April. I don't know if you thought sort of it all came then and then came back. It's it's it's been a little bit of a roller coaster. How are you feeling about the stock market? >> Yeah. No, the the so-called liberation day tantrum was not what I had in mind exactly, although that was severe, right? You had the S&P 500 down I think around 12% over a 6-day period. I mean, that's a major quick um correction. It's not what I had in mind, but it does go to the nature of the market. I think it shows, it demonstrates how precarious the market is that things could happen. >> Now, a correction be caused by a lot of things, a lot of exogeneous factors, right? Could be caused by war, what have you. But ultimately, when I'm talking about a correction, ultimately when I'm talking about a severe draw down in the markets, I'm talking about interest rates going up. I'm talking about real fundamental things that exist already, but being expressed, being understood, and it plays out in the equity market. So, I am surprised that hasn't happened already. Um, but I would be very defensive in the equity markets regardless based on where we sit today and those underlying issues. >> Yeah, I was going to say year's not up yet and it's it's feeling pretty bad right now. Uh, how are you? Because usually this is a seasonally positive time of the year. Santa Claus rally, whatever you want to call it, year-end performance chasing. Do we get that correction even though you expected it early? Does it look like it might end the year like that? Does it feel like that's what's happening now? >> It's hard to say, but it wouldn't be unprecedented, right? Like you're correct. There's always like people talk about Santa Claus rally, don't worry about in December, but 2018 December, uh, we had Secretaries Treasury Minutuchin calling banks on Christmas Eve, worried about liquidity. Right? By the way, it's a great way to spook the market in general to have that disclosed that you're calling banks on Christmas Eve of all times. So, it's not unheard of to have a dramatic downturn at the end of the year. Can it happen? Sure. Uh, it's possible. I It's not something I'm predicting obviously, but that's absolutely possible. >> Yeah. And we've been having these conversations that there are some concerns about liquidity again. So, what about China? What about that market? Uh, that's another one that you thought was going to struggle. Um, did that play out as you expected? >> No. And that's probably the biggest miss I had all year was um and and let me let me give you some background why I thought China was poised for potential you know big downturn in equity markets or their economy for years Chinese Communist Party has mandated like 7% growth and surprisingly every year they have that right you can look at other factors electricity what have you see corroborate whether or not that's actually happening well then the Chinese government started ratcheting it down it went from 7 to 5 went down to 3% in 202 23. So the trend was definitely there where things were getting worse, worse, and worse. They've taken a a uh they pulled back from that where I think 2024 GDP growth was like 5%. The Hansen index was up a whopping 35% year. So it did did quite well. But remember the Chinese problems are very much like the American problems. Massive debt, but in some ways it's worse. So if the US the problem is that low artificially low interest rates have created malinvestment all these years. various business people have made horrible decisions and and built things they should not have built that'll be expressed in the next recession. Well, the Chinese government's worse because it's not uh various businesses being fooled by interest rates. It's a centrally planned economy, right? So, there there's their malinves even far far worse. Their debt situation is pretty similar. So the Chinese situation um I'm quite concerned about which is the same way reason I'm concerned about emerging markets certain types of commodities think steel stuff like that that's all kind of a play on China. So although that didn't play out this year it's still um a cautionary note on my part. >> Yeah. So why do you think that didn't transpire? Like when you're looking at this what happened that you didn't expect? Is there an explanation or is it just sentiment driven? >> Yeah, I'm I'm not sure. I mean, predicting is difficult, right? It's kind of like investing. Investing, you have to have the theme right, you have to have the security, right? And you have to have the timing right. And predictions are kind of very similar. You have to have the theme correct. You have to have the magnitude right. Right. It has to be significant magnitude. Otherwise, why are we talking about it? And you have to have the timing right. So, I would chalk this up more of unknown. Let's revisit it next year. >> Time and timing. Yeah. So, so it's still an area that you're concerned about. Uh, what about the hot AI trend? Uh, you thought it was going to continue and you were certainly right about that. Um, how are you feeling now? >> Yeah, and again, people would look at it and think, well, that's a no-brainer. You know, it's obviously things were were were going really well. Well, not exactly. You could make a good argument that it was more like, you know, late 1999 as far as the tech bubble than it was, you know, the second inning of a long-term trend. I think it is the latter. I think yes, AI stocks have done quite well. Is it a bubble? Well, the asset prices are highly inflated. I don't know if I call it a bubble because there's some real underlying uh benefits um and and growth because of AI. I think that will continue. I think we're at the early stages, but another cautionary tale, you got to play it right. So, it's not going out and buying necessarily the stock that's got 100 times revenue. Maybe it's looking early stage. Maybe it's looking at venture. Maybe it's doing other things where you're not paying that same amount, but you're in the same sector and we'll get the same results ultimately. >> This one, this next prediction is really interesting uh because you you do look across the hard asset space and uh are active in cryptocurrency and you predicted that sovereign funds would embrace cryptocurrency. Why was that even on your prediction list? That's an interesting one. Yeah, the reason it's important and the reason I even mentioned it is because well, first of all, we just had a bull market in cryptocurrencies, Bitcoin especially. On top of that, there are various sovereign funds around the world um that have slowly started to embrace cryptocurrencies. You could probably count six or so. The biggest one being the Norwegian sovereign fund, but even things like the state of Wisconsin, I heard has like a small Bitcoin exposure, right? When that trend develops, once sovereign funds, which control a vast amount of money, start looking at cryptocurrencies in earnest as legitimate asset class, you could have kind of a run to the exit, right? You're going to have a stampede for everyone to get into it. That could easily transpire. Now, at the time we talked about this, I think we're a month or so prior to Trump uh issuing an executive order about a US sovereign fund, which is kind of a joke, right? There's you have to have savings before you have a fund. And considering the fact that we're $ 38 trillion dollars in debt, we don't really have any kind of savings. Um, but at least they were talking about it and and it wasn't a dumb idea. I mean, El Salvador basically did the same thing. They have quite a bit of debt given their size and yet they started a sovereign fund. They started mining Bitcoin and now it's a decent percentage of their overall debt level. So, it's actually working, right? This asset growth is helping diminish their debt um situation. And it looked like US was going to look start doing this. look like some other uh sovereign funds may do it. I think that is maybe a longer term trend than I expected. >> Um it kind of depends on where cryptocurrencies go. You know, if they're hot for next 18 months, I think you'll start to see it. If things cool down more so than they are now, uh maybe it's more like five years from now, sovereign funds jump it. >> Yeah. Because we have I mean it's this is another market that's seen a big saw a big runup a lot of enthusiasm about the change in the environment in Washington. Uh but it's been tough the last few months here. We've seen a big downturn. It's almost lost all of its gains for the year. Do sovereign we always think of I always think of sovereign funds as sort of longer steadier hands moving into that space. Um do you think that if we do see this pullback those type of investors will see it as a buying opportunity or does it just seem like this is an asset class that still has too much volatility and risk for that sort of institutional sovereign type player? Yeah, I would say that everyone should have view this as a um as a buying opportunity if things pull back from current levels. I mean, the reality is the debt situation is not going away. So, what do you want to do when there's a fiscal deterioration with the United States? You want to look at monetary substitutes, right? So, that's why precious metals have really run. You want to look at cryptocurrencies. You want to look at hard assets like real estate, etc. So I think um various e economic actors beyond that of sovereign funds just look at hedge funds look at various investors across the board look at 401ks eventually they're going to start looking more and more at cryptocurrencies as legitimate asset class. I mean how long do cryptocurrencies have to be around? How long how how large do cryptocurrencies have to be market cap wise before they're viewed as legitimate by everybody? I mean we're well past that point. everyone should be looking at them is a legitimate asset class that's here to stay. >> Yeah, that's super interesting, especially given what we've seen. Are you surprised we're not seeing a little bit more buying on the dip here um as sort of longer term PE or investors or funds with a slightly longer horizon. Uh do you think they've been buying on the way down? It seems like it's been pretty brutal and it seems like it's still acting like a super risky asset class. Yeah, in a way. But I think also I don't know if they've been buying on the on the downside, but the reality is anyone that's followed cryptocurrencies and we we've been following for a long time, right? We wrote our first article in 2014. I think we had some clients in it in 2013. We've been early adopters of >> um adopters of uh cryptocurrencies. Um whether or not they're buying on the downside, I don't know. But if they're not, I guarantee they're familiar with past cycles. We've seen this in the past where Bitcoin has spiked and fallen off 90 plus%. It's happened repeatedly, typically coinciding with their having structure as far as how they mine uh Bitcoin. Um now I would um where it goes from here, you know, I I can't really say, but I think everyone looks at it as a buying opportunity potentially if it falls more. And frankly, it's kind of a different ballgame now. I don't think it's so much based on the having as it is the fiscal situation in the US. Yeah, that's a great point because that is a narrative now coming in as you kind of brings us full circle to your first prediction which is that it's mainstream now. So that could alter the conversation around a lot of different asset classes. Um so are you making based on your sort of you know um taking stock of the predictions and where you are are you making any major adjustments or are most of the ones you got wrong more an issue of timing than you feel like there was something that you just didn't understand about the story or or sort of a new piece of information that came in sounds like the former to me but how are you feeling about it? I think for the most part it is more timing partially because the thesis underlying a lot of these has continued continued to be proven true, right? Like there's you keep saying new stories that that kind of bolster the underlying thesis. So in my mind it's more of a timing issue. Um but who knows? You'll have to wait for the January predictions and we'll see what happens then. >> I was just going to say are you compiling your ne your predictions for January? >> I I already started I mean um at least one thing on there is like I already mentioned it's electricity prices. I think that's absolutely something that will become a a major issue going forward. Um, but we'll have some new ones for you in January as well. >> That's awesome. But again, I think it I think it's fantastic that you do this exercise and that you sort of hold yourself accountable and go back and look at what was right and what was wrong because that's where all the learning is, right? I mean, if you just sort of set and forget, we keep telling people we're not in an environment to do that. But I think this is a a great framework to work off of um taking a look and sort of having an an ongoing accounting of of how you feel and and the things you think are happening. >> Well, that's why even on our website, right, all of our research, whether it's a written article, it's a podcast from day one is posted right there on our website. So, you can see what we were thinking, you know, 10 years ago, you can see what we were thinking right before the downturns in 2020. It's all there to see. um because we try to lead with thought leadership and I think that's important to not only have predictions, not only have thoughts but to be held accountable for them. >> Yeah. No, absolutely. And I think it's a it also underscores that we all have to be nimble. You know, things are moving, things are happening quickly. And so you have to keep going back and looking over um your sort of um the narratives that you're following, the trends and what you think is going to happen and and then also your response to it. Right. >> And challenging yourself. Yeah. Continually challenging your thesis. That's right. >> Right. get out of your echo chamber, too. If you're just talking to people who believe the same thing as you, that's not that's that's probably not a good idea. Um, awesome stuff, Chris. Can't wait to see the January list. Thank you so much. And if you would like a free portfolio review, if you want to take the time to go over, you know, what you're thinking, what happened, and if you need to make any adjustments, are you ready for 2026, you can hit the link in the description or head over to wealthy.comfree uh so that someone from the Windrock uh team, one of the adviserss can sit down with you and take a look. Super necessary right now. Chris, thanks so much. Thanks to all of you for watching. We'll see you again next time. >> Thank you. [Music]