Chris Whalen: Gold Over $5,000 By End of 2026 – Americans Still Under 1% Allocated
Summary
Market Outlook: Chris Whalen anticipates gold prices could exceed $5,000 by the end of 2026, driven by increased allocations to metals in investment portfolios.
Economic Insights: Despite inflationary pressures, the U.S. economy is experiencing significant liquidity, benefiting asset holders, while low-income households struggle due to inflation.
Investment Themes: There is a growing trend of diversifying out of the dollar into real assets like gold, as central banks and large investors increase their gold reserves.
Company Discussion: Cross Country Mortgage's recent upsized deal highlights strong investor appetite for certain credit markets, despite broader economic uncertainties.
Gold Investment: Whalen suggests that Americans are underallocated in gold, with current allocations under 1% of portfolios, and sees potential for significant price increases if allocations rise.
Federal Reserve Critique: Whalen criticizes past Fed policies, particularly quantitative easing, for distorting the economy and suggests a need for policy normalization focused on currency stability.
Political and Economic Challenges: The U.S. faces challenges with the federal deficit and inflation, with political discourse fragmented and lacking focus on sustainable economic policies.
Real Estate and Inflation: Rising asset prices benefit property owners, but affordability issues persist, particularly in major cities, highlighting the disparity between asset holders and non-holders.
Transcript
Chris Whan, chairman of Whan Global Advisors, author of the institutional risk analyst blog, author of multiple books including inflated money, debt, and the American dream, friend of this show, the very best independent analyst on Wall Street, investment banker, economist. So many different titles. Chris, always great to see you. We just had you on last week, but we cannot get enough of you. Glad to have you back. Well, it's my pleasure, Julia. Thank you. I appreciate the attention. Yeah, normally we do this at the beginning of the month and we always have you on right after the jobs report. I didn't get a jobs report today because of the shutdown. No BLS data coming out. So maybe let's kind of start there. I'm looking at markets hitting new fresh all-time highs. We have a government shutdown. Gold's been on a tear as well. What do you make of what we've just been seeing happen in markets? Does it make sense to you? Well, I think what we're seeing is that the political class keeps looking for problems and the markets are not looking for problems at all. They are really uh enjoying enormous liquidity. Uh we just saw an interesting deal last week for a company you probably never heard of called Cross Country Mortgage. They're a top 10 lender. They are the operator of one of the last retail branch systems and mortgages today. and they went out for $600 million. They actually upsized it to 900 and they priced it inside a 300 bips over the curve. This is a single B plus kind of double B minus credit rated by Fitch and the investors couldn't get enough of it. So when you look at that, you look at all the other activity in the market, Julia, uh look at Dave Solomon who was out on the wire this morning saying that, you know, he thinks the economy is going to accelerate. Uh, I agree with him. The bottom half, the bottom twothirds of this economy is roaring. The bottom quarter, not so much. Um, I think low-income households are getting killed by inflation and they don't have the markets. They don't have investments and homes and other stuff to to provide somewhat of a hedge. But this economy is still quite inflated is the way I look at it. Yeah, I saw the David Solomon headline. Um, also he did he did warn of a stock market draw down where people won't feel good. But you're right though on the economy and feeling really good, especially if you're an asset holder and for that um top tier. I also saw a headline on CNBC too of like that top 1% in the world saw their wealth like reach collectively a record 52 trillion. So yeah, kind of illustrates. Yeah, look at the tech stocks. Let's look at metals. Uh large investors who have been able to diversify out of dollars are doing quite well. And you know remember when gold is going up it's not the dollar is going down the paper currencies are going down and even Bitcoin and the tokens are going down. So it's a fascinating time when you see some of these metal stocks are up double triple digits in the past uh year. That's quite extraordinary. It is extraordinary and um you know it's interesting like where we sit on this show with like various guests because we will often have time oftentimes have folks come on who they will talk a lot about gold and favoring gold and wanting to have that allocation in the portfolio. I often hear folks are saying like you know have a 10% allocation in your portfolio and it seems like historically a lot of people had very small allocations or haven't really had much in the US. Yeah. Um, and then what will happen is in the comment section, people will just say, "Ah, this person's a bear and they're bearish and they're missing out on like record stock gains or whatever." Then I guess on the other side, if you have people who've been exposed to equities, they've done quite well. It just kind of seems like just gold and the stocks don't usually like trade like this, do they? No. And I think also Americans are still uncomfortable with the idea of gold because it implies that our fiat legal tender dollar is not as attractive as it was. You know, for 150 years, it has been the engine of growth in this country. Uh and our government worked very hard to get people not to think about gold. But really 50 years ago, we lost that battle when the US had to stop making a market to other countries for for gold. And then of course Nixon shut the window in 1971. So you know we've come full circle and gold is now the biggest reserve asset in the world. So I think Americans, you saw this recently, Morgan Stanley CIO came out and said he wanted 20% of people's portfolios in metal. That disturbs a lot of Americans, Julia. They're just not ready to have that conversation. But you're right. Look, I've always believed, as you know from my books, you have to arbitrage between real assets like gold and real estate and paper. And obviously, the paper is still very attractive. I agree. I've been doing extremely well in metals. I've been buying some of the junior miners since the summer. Um, and I think there's still a lot more room to go structurally because of what you just said. allocations to metal in the United States are probably less than 1% of AUM across all of the markets. Think about that. If it just doubles to 2%. Imagine what that's going to do to the price of metal. Yeah, still early innings. Um, yeah, I'm looking where is gold today. I'm just curious looking where it is. Let's see. We are 3,900. Yeah, north of 3,900 today. I think when you and I spoke just a week ago, we were probably at what, like 3600 even. Yeah. Okay. Well, I think a lot of the big players are slowing down because they've been buying on volume and the price increases are starting to get people's attention, but then you have the underallocation. So, it's overbought in a sense, in a short-term sense, but it's grotesqually underallocated compared to the amount of metal that you can actually deliver. So, you know, I I think it's it's going to be a confusing time. I'm going to stay long now. I'm long the gold ETFs. I also own a couple of the ETFs uh that focus on the junior miners because they're all going to get bought by the big guys like um one of the ways I'm trying to learn about the minors. I'm definitely not an expert. Um is there's I guess the juniors and there there's what you call the majors or seniors, but the juniors are more speculative. Like it's almost like venture capital. I heard it was like venture capital with a hard hat. They No, they're tiny and you have to have that caveat when you talk to people. But, you know, the industry went through a long period where prices didn't move. So, the majors did not invest. You just saw two CEOs retire at a couple of the big gold majors. And I think the boards of these companies and their bankers are starting to realize that they got to go out and buy some of the smaller players just to get access to production capacity. Uh it's not easy to produce gold. China and the Russians are much bigger than uh than everybody else. You know, if you think about it, US, Mexico, and Canada are kind of almost the size of China to give you a a relative uh ranking. And then the rest of the world produces a lot of metal as well. But the amount that's actually deliverable in institutional size is is really quite constrained. Why? Just the buyers are not selling. Um you know, you look at the major central banks, all of them have been adding to their gold reserves. to diversify out of dollars. That's what it comes down to. Yeah. All right. Let me ask you this. Um, we had a commenter in this comment section from our last interview, which was just when was that? Was that just last week? Time I don't know. Time kind of blends. I feel like Yeah, we just were together last last Friday. That's right. Okay. We were in New York City together. That was so fun. I love the in person. All right. Here's the commenter. They challenged a little bit, Chris. So they said it's irresponsible to suggest the Fed should have cut earlier. 3600 gold directly reflects how easy monetary policy is. Our rates are too low now and cutting further depreciates every American's dollar purchasing power, impoverishing the already struggling lower and middle class of society. Curious your response. No, I think um the short-term rate target that the Fed's had for several years is too high. I'd like to see Fed funds around three. I think that's reasonable given the rest of the yield curve because, you know, the Fed has tried really hard to drag longer term rates up and they just haven't gone. So, the yield curve is essentially saying that your your uh commenters wrong. And I I'm I'm not saying that, you know, I I agree with Trump. He wants, you know, short-term rates down around 1%. Uh, but I think a more modest approach would be to have a normal yield curve again. And then let's remember the long end is going to keep up, Julia. People are worried about the deficit. They're worried about other factors. The Fed is a seller net of mortgage securities now, which they bought during COVID. So all of these factors are tending to widen spreads for the part of the market that has to do with the economy and financing, you know, home mortgages, commercial mortgages, all the rest of it. So, I would argue that they had their opportunity last year. They didn't have to do a lot, but this Fed has been missing it, frankly, since Bernani. Uh, he did too much with quantitative easing, buying all of those securities on the balance sheet. That was the biggest ease anybody's ever seen. So, you know, in a way, your commenters right that they should have held their ground, but the amount of cash, and that's what we're talking about, that's still in this economy is is frightening. So I would like to see Fed policy normalized. And in to Secretary Besson's point in in the article he wrote for international economy, they need to do less. We need to focus this Fed on the stability of the currency as your commenter points out, right? And get them out of all of these other macroeconomic games that they like to play because both Yelen Bernani and Chair Powell, they did too much and they know that. Um, but you know, the Fed today, if you read some of the comments coming from Fed officials, they still can't admit what they did, Julia. It's like dealing with the Catholic Church in the 18th century. It really is. Wait, what do you mean by like they can't admit what they did? Well, when they talk about quantitative easing, the size of the balance sheet, they go on and on about ample reserves, that's nonsense. when Janet Yellen and the rest of the board including Chair Powell uh decided to continue buying securities at the end of COVID that was a deliberate uh monetary policy decision that was really about macroeconomics. It wasn't about interest rates or employment. They were trying to in their minds I think put some sort of insurance policy in the bank and they did the opposite. They've manipulated home prices and you know just horribly distorted the US economy. So we have to put limits I think on the ability of the Fed to act. That to me is one of the big takeaways from the last 5 years. Gold keeps setting new all-time highs, but price appreciation isn't the only way to profit from owning gold. 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Or can you I guess elaborate on that part of the conversation? Well, Franklin Roosevelt seized the gold that was owned by the Federal Reserve system in 1933, and he essentially took that gold away from the member banks that supposedly owned the Fed. Much of the gold that sits in Fort Knox today was stolen from the Federal Reserve banks with very little compensation. In fact, none. So I think that people need to realize that we've gone through a period of social engineering care of our friends in the Democratic party where they tried to convince people not to think of gold, not to want to own it as an investment and that the fiat state would just take care of everything. But as we can see that's not the case. The world is slowly returning more and more to a perspective of diversity in reserve assets, not just holding the dollar. So I think what you're going to see over time is that central banks are going to hold gold as their primary reserve asset and banks too under Basel banks can hold gold now as capital Julia it's a big change and I think that you're going to see the dollar decline as a reserve currency around the world. It's a big deal and it's accelerated by the dysfunction in Washington since we can't get anybody to take, you know, budgeting and oversight seriously. As we discussed with Alex in that interview, we're paying for it because the dollar is falling. Remember, when it's not gold going up, it's a dollar going down. That's a good point. So, I take it you also do you believe that central banks should have gold as part of their portfolios then? They should. Oh, yeah. I I think in fact the Fed should have a little bit of gold in their portfolio and I think they should be aware of it and I think they should include it in their monetary policy um you know deliberations. Yeah, I thought that was an interesting point you made. It's not gold rising, it's the dollar falling. I imagine there are a lot of folks that they kind of just don't want to even recognize that. But if even if you just look at the the rise and fall of currencies going back to like even the Roman Empire, it's just it's kind of been a pattern throughout history. We've seen this movie before, Julia. Mhm. And do you think the Greeks, the Romans, you know, it's an age-old story. Yeah. And they dilute their currency. Money printing, I guess, would be our equivalent of uh diluting. Um there's no like kind of putting it back like the toothpaste back in the tube once you're kind of going down that path. Is there any reversal? Well, no. I think whenever any society becomes large enough and great enough in their own minds that they can um do whatever they want in terms of finance usually because of governmental control. then the um the um you know the tendency is for inflation to take effect because they can't keep up with the demands from society. This is why uh Hayek said that no democracy can ever have sound money and the US has proven that the amount of hubris that we acquired coming out of World War II. We figured we could just legislate economic outcomes and that's not true. So today what are the big problems facing America? inflation number one and and getting that back into the bottle if you will to use your metaphor right is almost impossible because the political backlash of doing that is severe. Look at Malay in Argentina. He's been trying very hard to get their inflation under control. He wanted to dollarize Argentina at one point, but the legislature wouldn't go along with that because of the deflation that that entails. Be very painful. So, you know, every society always has more demands than they have resources and income and the way they fudge the difference is inflation by debasing a currency. Yeah. Um, just kind of speaking of sound money, um, maybe more of the role of gold in monetary systems, do you think is there a path back to some sort of form of a gold standard? Um, or is the fiat currency kind of here to stay? I think with most nations the fiat uh currency is here to stay as a means of exchange but the question is are people going to use it as a store of value long term. If you think about ancient times, they would use silver coins as an exchange medium and then gold coins meant, you know, really a big store of value, much more value per weight, right? So today, I think you'll see the same thing. Gold and other physical commodities and real estate too are going to be your check if you will in terms of inflation. And then the fiat currency is always going to lose ground. It's just a function. You know, if you borrow as much money as we do here in the United States, you know that the value of the dollar is going to go down. And this is a very cruel reality. It means that the average person who doesn't have investments, they don't own real estate, they don't own other things that will rise in an inflationary environment, they're going to get screwed. And that's why the politics are getting to be so severe. You know, you have candidates in New York City talking about affordable housing. You can't make New York affordable. There's just no way. The cost of acquiring and building new housing in New York City is exorbitant. So, the idea that a, you know, a medium or lower income household could ever afford that without public subsidy is ridiculous. But we continue to have these political conversations that never quite get there. You know, they never actually say that. I've always said we should be, you know, evacuating lower income families from New York City and re resettle them in other parts of New York. They would live much better. When we moved out of New York, Julia, in 2021, we cut our expenses more than in half. I believe we live in Westchester County, which is one of the most affluent communities in the country. So, think about that. I mean, how can anybody below a certain income level even think about living in New York? And the answer is it's it's really difficult. Yep. Yep. I moved out of New York City five years ago and I remember even just moving like even getting your Starbucks is a lot cheaper outside of New York City. It's just it's true though. I'm like my my last my Starbucks in New York City is over $6 and down here it's like just under five bucks. But you know it's even going out to eat like it's hard. It's hard. You're dry clean dry cleaning is expensive. It's so much cheaper down here in North Carolina. Like there's a lot of savings outside of the city. You you live in the real America. I mean the big cities on the coasts have uh problems in terms of affordability that are really insoluble. The only way you could change that would be to have a period of severe deflation. But the politics of that are are quite horrific as well. Yeah. All right. You brought up a point that was interesting is you talked about like the average person, they don't own real estate. They're probably not benefiting from like the asset price increases we've seen. they're going to continue to get screwed. But like even if you look at the levels we're at today, it's it's almost getting even more and more unattainable for them. Is that where the the the direction is headed then? Oh yeah. You know, unless you had a willingness on the part of the government to severely constrain spending so you stop borrowing so much money. Uh that's the first thing because ultimately the Fed has to monetize that issuance. you know, they will eventually be forced, regardless of who's in the White House, to buy uh Treasury bonds and essentially give the Treasury back their money. Uh that's what we call financial repression. That means investors are going to be earning less than the actual rate of inflation in the US and that's why people are buying gold and silver. They're trying to escape that. So, you know, in a funny way, we can see what the problem is, but the politics are such that they're never going to talk about it. You know, Mr. Mundami, for example, here in New York wants to freeze rent, but is the cost of operating those buildings going to go down the next day? No. So, the only thing that'll happen is all of that physical infrastructure will eventually be abandoned and people are going to have to find somewhere else to live. But the politicians don't want to have that conversation. Uh it's a really dramatic difference between say Chicago, New York politics and what you see down in the Carolinas where you live. Yeah. Let me ask you about the Mum Donnie thing. Like I I'll open up like my Instagram and people I know from New York are like, "Oh man, they were cheerleading him and like the freezing of the rent and stuff and I'm like what are you guys doing?" Um what do you think happens? I seems like I mean I could check the betting markets. He's probably I'm definitely he's definitely pulling whatever probably going to win I imagine. Do you think he's Do you think he's going to win? Um I don't see any the likelihood that the other candidates are going to catch him. Uh Eric Adams dropped out although he will still be on the ballot. Uh he's not particularly That's right. So he will still get votes. Uh you have Curtis Leewa the Republican, you know, with his beret. Uh so it's a it's a surreal situation. We had a mess politically anyway with Adams and now coming into this uh election. You had this state legislator just kind of pop up out of nowhere and decide that we're going to freeze Rand. He's anti-Israel. He has a lot of other very left-wing uh perspectives. And I think in New York it's going to be a mess. Everybody on the other side of the equation politically is going to fight this guy every day. So that's what we'll see. Do you think we'll see people? The state may have to get involved. No, but I think Governor Hokll may end up having to take control of the city again. You know, remember going back to the 70s, the state of New York and the governor have enormous power over the city. And if they decide that things are uh going in a direction that they cannot uh actually accept, then they can exercise that power. Hm. I almost wonder if the pendulum has to swing so far that it'll go back the other way. I mean, yeah. Well, who knows? I mean, Kathy Hokll endorsing Mundami u really did not help her. She didn't have much of a base anyway politically. She was lieutenant governor to Cuomo. Yeah. Yeah. So, you know, we we could see a Republican governor in New York. Incredible as that may seem. Yeah. Stranger things. Um Yeah. I'm just wondering. I was thinking like, oh, people are going to move out of the city and they're going to make North Carolina housing prices go up. No, they're moving in. Listen, the developers have to develop, Julia. If they're not developing, then they have to restructure. And restructuring is not that much fun. Look, I was talking about this with Alex Pollock in our interview. The fact that you see developers piling into Chicago, which is one of the most inhospitable and unattractive markets in the country, but they're going to ignore the politics and build more apartment buildings. That's what they do. Uh, but I got to tell you, I I don't like the credit. I wouldn't want to see anybody I was involved with getting into that. Yeah. Um, okay. I want to explore another topic that I've heard often in our conversations around this idea of like Americans love inflation. It's America's favorite pastime. Can you explain that? And what do you mean by Americans love inflation? cuz I we we we whine about it a lot. But uh what do you mean by it that we love it? A little bit of inflation makes everybody's assets go up and and also to some degree they can increase their prices. When it gets too high though, it suddenly becomes a problem. So for example, when you sell your house, you want a higher price than what you paid for it, right? We haven't had a real correction in real estate, god, 20 years that that would result in people losing money on their homes when they sell it. You're starting to see some weakness around the country as we've discussed, right? Especially down south and in the southwest as well. But by and large, you know, both residential and commercial real estate benefited from the fact that prices would go up a couple of points every year. They could refinance every seven years to cash out, right? and it made the industry go forward. When you see the industry having to deal with falling prices though, that makes life much more difficult. So, do Americans like inflation? Yeah, they love to see the stocks go up, but that doesn't help everybody. That's a very, very, you know, exclusive club. So, own a home, get a higher price, own stocks, get a higher price. That's where the positive of inflation comes in. where it kills you is the cost of living. And I think that's the predominant problem now in the US. Your lower half of most households today are just losing ground to inflation. And it's because of the federal deficit. So if we can't have a political discussion about that, then you got to live with higher inflation. That's the bottom line. But then on the deficit side in our our debt situation, it seems like no one's really had that conversation or really made meaningful action. Nope. No, we're worried about the midterm election. That's what this government shutdown is about. They're all trying to posture and see if they can get traction in, you know, whatever streaming media uh that they focus on. But know the the conversation in the US is so fragmented now that it's really kind of hard to know what the net net is of a lot of this stuff. Most people in the country aren't paying attention to the shutdown because it hasn't impacted them yet, right? But if they don't get paid, you know, soldiers for example, that's going to start to have a very serious impact. If Trump lays off hundreds of thousands of federal workers and he's not going to rehire them, right? That's going to have an impact. So, you know, we'll see what the politics are. I'm not sure how this is going to fall out. To that point, though, like those it seems like we've had so many shutdowns over the years that I wonder if we're almost kind of just like h whatever, they'll figure it out. Is there is the risk at some point this one's different, you think, from all the other ones? Ideologically, you know, the Trump administration is much better prepared this time than they were in Trump one. And they have an agenda to roll back a lot of aspects of government and the shutdown is perfectly suited for that because they are going to just get rid of the employees. They want new people in government. They want to get rid of the old people because of their thinking. And you know, it's it's a cultural change that Trump is really trying to achieve here. So when you shut the government down, you give them the opportunity to lay people off, they're going to take it. You know, the OM head Russ Vod is a very conservative, almost radical uh player in all of this. And that agency controls the government. OM and office management and budget and treasury are the two most important parts of the US government. How do you think it how when you start to think about the scenarios like how do you think it plays out? Is it just too unclear at this point to speculate? But no, I think you give this another week and the pain point for the Democrats is going to get so intense that they're going to have to fold again. And this is particularly Chuck Schumer. But if Schumer does that, you know, his term goes through to 2029, then he's done politically. He's going to get challenged, isn't he? Oh, yeah. AOC is going to go after him in the in the Senate race. You don't think she would wait and try for president or No, she's not viable outside of New York City. She She has to do something that allows her to leverage the the left-wing population in New York City uh and overcome the rest of the state, which tends to be pretty Republican. Uh I think on a national basis, she would do worse than Camala Harris because she's no better able to communicate than Harris was. If you've ever actually listened to what AOC has to say, it's just a jumble of uh disorganized concepts one after another. Uh it's it's not impressive. You know, Donald Trump is a much better communicator than she is. And I think you're going to have some pretty strong Republican candidates coming out of this administration. JD Vance, I think a lot of people think he's going to be the next. Yeah. Yeah. I I mean, imagine him and the rest of the country versus AOC. AOC is a socialist from, you know, Queens, New York. She's not gonna I imagine the Republicans might they might like that as like bring it on. Yeah. Um Chris, I always have so much fun talking to you. I can't wait to do more in-person ones. Um before I let you go, and this will air as a Saturday special, which is so fun. Um let's leave this audience with some parting thoughts. Anything that you'd like to leave them to think about? Anything you want to plug? We can link to some books. Um, if you have any more Stan Middleman signed copies, some folks got some. I don't know if there any left, but the floor's all yours. We got rid of most of them. Thank you very much, Julia. Um, yeah, I you know, I am not in the doom and gloom camp. Everybody keeps waiting for this kind of cataclysmic uh uh selloff. I don't think that's what's going to happen. Uh we may see some credit stresses next year. uh and I anticipate that that you know the amount of activity in the markets uh with a lot of funds and everything else is certainly of concern but the rest of it is kind of a snoozer. So I think you know this economy is going to keep roaring along and it probably means Republicans are going to do reasonably well in the midterm elections. So, uh, the Democrats have to figure out a strategy and a set of real talking points that are going to get them in front of the average American, not Americans in New York City or Chicago because I think the Democrats keep looking at that lens and that's not going to take them to a winning position. It's it's way too far left. So, you know, I I don't anticipate a lot of changes next year to be honest with you, Julia. Yeah, Chris, I bet you gold will be higher. Still early innings then. Oh, please. I'm sorry. Where do you think? Okay, give me a price target. Where do you think gold's going? I think we could be over 5,000 by the end of next year. Wow. Cuz think about it. The allocation in the US right now is less than 1% of portfolios. Imagine it goes to 2%. You've got people in the business roaming around saying, "Oh, you know, you should have 10% of your portfolio in metals." That's a big change. There isn't a lot of supply out there when you talk about gold. So, that's that's kind of where I am. I I know that some of the bigger central banks are certainly pausing after several years of aggressive buying, but you know, if if we see a shift in American attitudes towards metal, I think it's going to have a big difference. I have a really dumb question, quote unquote. Is it taxed differently like when you go to sell it? I actually don't know. No, it's capital appreciation like everything else. Okay. Just like just like your stocks. Yep. Okay. All right. Cool. I just didn't know. Um interesting. Cool. Um well, I really appreciate you, Chris. Um you have been such an amazing friend of this show and I just love talking to you. Pleas truly. Chris Whan, chairman of Whan Global Advisors. Thank you so much and have a wonderful weekend and I look forward to seeing you soon.
Chris Whalen: Gold Over $5,000 By End of 2026 – Americans Still Under 1% Allocated
Summary
Transcript
Chris Whan, chairman of Whan Global Advisors, author of the institutional risk analyst blog, author of multiple books including inflated money, debt, and the American dream, friend of this show, the very best independent analyst on Wall Street, investment banker, economist. So many different titles. Chris, always great to see you. We just had you on last week, but we cannot get enough of you. Glad to have you back. Well, it's my pleasure, Julia. Thank you. I appreciate the attention. Yeah, normally we do this at the beginning of the month and we always have you on right after the jobs report. I didn't get a jobs report today because of the shutdown. No BLS data coming out. So maybe let's kind of start there. I'm looking at markets hitting new fresh all-time highs. We have a government shutdown. Gold's been on a tear as well. What do you make of what we've just been seeing happen in markets? Does it make sense to you? Well, I think what we're seeing is that the political class keeps looking for problems and the markets are not looking for problems at all. They are really uh enjoying enormous liquidity. Uh we just saw an interesting deal last week for a company you probably never heard of called Cross Country Mortgage. They're a top 10 lender. They are the operator of one of the last retail branch systems and mortgages today. and they went out for $600 million. They actually upsized it to 900 and they priced it inside a 300 bips over the curve. This is a single B plus kind of double B minus credit rated by Fitch and the investors couldn't get enough of it. So when you look at that, you look at all the other activity in the market, Julia, uh look at Dave Solomon who was out on the wire this morning saying that, you know, he thinks the economy is going to accelerate. Uh, I agree with him. The bottom half, the bottom twothirds of this economy is roaring. The bottom quarter, not so much. Um, I think low-income households are getting killed by inflation and they don't have the markets. They don't have investments and homes and other stuff to to provide somewhat of a hedge. But this economy is still quite inflated is the way I look at it. Yeah, I saw the David Solomon headline. Um, also he did he did warn of a stock market draw down where people won't feel good. But you're right though on the economy and feeling really good, especially if you're an asset holder and for that um top tier. I also saw a headline on CNBC too of like that top 1% in the world saw their wealth like reach collectively a record 52 trillion. So yeah, kind of illustrates. Yeah, look at the tech stocks. Let's look at metals. Uh large investors who have been able to diversify out of dollars are doing quite well. And you know remember when gold is going up it's not the dollar is going down the paper currencies are going down and even Bitcoin and the tokens are going down. So it's a fascinating time when you see some of these metal stocks are up double triple digits in the past uh year. That's quite extraordinary. It is extraordinary and um you know it's interesting like where we sit on this show with like various guests because we will often have time oftentimes have folks come on who they will talk a lot about gold and favoring gold and wanting to have that allocation in the portfolio. I often hear folks are saying like you know have a 10% allocation in your portfolio and it seems like historically a lot of people had very small allocations or haven't really had much in the US. Yeah. Um, and then what will happen is in the comment section, people will just say, "Ah, this person's a bear and they're bearish and they're missing out on like record stock gains or whatever." Then I guess on the other side, if you have people who've been exposed to equities, they've done quite well. It just kind of seems like just gold and the stocks don't usually like trade like this, do they? No. And I think also Americans are still uncomfortable with the idea of gold because it implies that our fiat legal tender dollar is not as attractive as it was. You know, for 150 years, it has been the engine of growth in this country. Uh and our government worked very hard to get people not to think about gold. But really 50 years ago, we lost that battle when the US had to stop making a market to other countries for for gold. And then of course Nixon shut the window in 1971. So you know we've come full circle and gold is now the biggest reserve asset in the world. So I think Americans, you saw this recently, Morgan Stanley CIO came out and said he wanted 20% of people's portfolios in metal. That disturbs a lot of Americans, Julia. They're just not ready to have that conversation. But you're right. Look, I've always believed, as you know from my books, you have to arbitrage between real assets like gold and real estate and paper. And obviously, the paper is still very attractive. I agree. I've been doing extremely well in metals. I've been buying some of the junior miners since the summer. Um, and I think there's still a lot more room to go structurally because of what you just said. allocations to metal in the United States are probably less than 1% of AUM across all of the markets. Think about that. If it just doubles to 2%. Imagine what that's going to do to the price of metal. Yeah, still early innings. Um, yeah, I'm looking where is gold today. I'm just curious looking where it is. Let's see. We are 3,900. Yeah, north of 3,900 today. I think when you and I spoke just a week ago, we were probably at what, like 3600 even. Yeah. Okay. Well, I think a lot of the big players are slowing down because they've been buying on volume and the price increases are starting to get people's attention, but then you have the underallocation. So, it's overbought in a sense, in a short-term sense, but it's grotesqually underallocated compared to the amount of metal that you can actually deliver. So, you know, I I think it's it's going to be a confusing time. I'm going to stay long now. I'm long the gold ETFs. I also own a couple of the ETFs uh that focus on the junior miners because they're all going to get bought by the big guys like um one of the ways I'm trying to learn about the minors. I'm definitely not an expert. Um is there's I guess the juniors and there there's what you call the majors or seniors, but the juniors are more speculative. Like it's almost like venture capital. I heard it was like venture capital with a hard hat. They No, they're tiny and you have to have that caveat when you talk to people. But, you know, the industry went through a long period where prices didn't move. So, the majors did not invest. You just saw two CEOs retire at a couple of the big gold majors. And I think the boards of these companies and their bankers are starting to realize that they got to go out and buy some of the smaller players just to get access to production capacity. Uh it's not easy to produce gold. China and the Russians are much bigger than uh than everybody else. You know, if you think about it, US, Mexico, and Canada are kind of almost the size of China to give you a a relative uh ranking. And then the rest of the world produces a lot of metal as well. But the amount that's actually deliverable in institutional size is is really quite constrained. Why? Just the buyers are not selling. Um you know, you look at the major central banks, all of them have been adding to their gold reserves. to diversify out of dollars. That's what it comes down to. Yeah. All right. Let me ask you this. Um, we had a commenter in this comment section from our last interview, which was just when was that? Was that just last week? Time I don't know. Time kind of blends. I feel like Yeah, we just were together last last Friday. That's right. Okay. We were in New York City together. That was so fun. I love the in person. All right. Here's the commenter. They challenged a little bit, Chris. So they said it's irresponsible to suggest the Fed should have cut earlier. 3600 gold directly reflects how easy monetary policy is. Our rates are too low now and cutting further depreciates every American's dollar purchasing power, impoverishing the already struggling lower and middle class of society. Curious your response. No, I think um the short-term rate target that the Fed's had for several years is too high. I'd like to see Fed funds around three. I think that's reasonable given the rest of the yield curve because, you know, the Fed has tried really hard to drag longer term rates up and they just haven't gone. So, the yield curve is essentially saying that your your uh commenters wrong. And I I'm I'm not saying that, you know, I I agree with Trump. He wants, you know, short-term rates down around 1%. Uh, but I think a more modest approach would be to have a normal yield curve again. And then let's remember the long end is going to keep up, Julia. People are worried about the deficit. They're worried about other factors. The Fed is a seller net of mortgage securities now, which they bought during COVID. So all of these factors are tending to widen spreads for the part of the market that has to do with the economy and financing, you know, home mortgages, commercial mortgages, all the rest of it. So, I would argue that they had their opportunity last year. They didn't have to do a lot, but this Fed has been missing it, frankly, since Bernani. Uh, he did too much with quantitative easing, buying all of those securities on the balance sheet. That was the biggest ease anybody's ever seen. So, you know, in a way, your commenters right that they should have held their ground, but the amount of cash, and that's what we're talking about, that's still in this economy is is frightening. So I would like to see Fed policy normalized. And in to Secretary Besson's point in in the article he wrote for international economy, they need to do less. We need to focus this Fed on the stability of the currency as your commenter points out, right? And get them out of all of these other macroeconomic games that they like to play because both Yelen Bernani and Chair Powell, they did too much and they know that. Um, but you know, the Fed today, if you read some of the comments coming from Fed officials, they still can't admit what they did, Julia. It's like dealing with the Catholic Church in the 18th century. It really is. Wait, what do you mean by like they can't admit what they did? Well, when they talk about quantitative easing, the size of the balance sheet, they go on and on about ample reserves, that's nonsense. when Janet Yellen and the rest of the board including Chair Powell uh decided to continue buying securities at the end of COVID that was a deliberate uh monetary policy decision that was really about macroeconomics. It wasn't about interest rates or employment. They were trying to in their minds I think put some sort of insurance policy in the bank and they did the opposite. They've manipulated home prices and you know just horribly distorted the US economy. So we have to put limits I think on the ability of the Fed to act. That to me is one of the big takeaways from the last 5 years. Gold keeps setting new all-time highs, but price appreciation isn't the only way to profit from owning gold. 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Or can you I guess elaborate on that part of the conversation? Well, Franklin Roosevelt seized the gold that was owned by the Federal Reserve system in 1933, and he essentially took that gold away from the member banks that supposedly owned the Fed. Much of the gold that sits in Fort Knox today was stolen from the Federal Reserve banks with very little compensation. In fact, none. So I think that people need to realize that we've gone through a period of social engineering care of our friends in the Democratic party where they tried to convince people not to think of gold, not to want to own it as an investment and that the fiat state would just take care of everything. But as we can see that's not the case. The world is slowly returning more and more to a perspective of diversity in reserve assets, not just holding the dollar. So I think what you're going to see over time is that central banks are going to hold gold as their primary reserve asset and banks too under Basel banks can hold gold now as capital Julia it's a big change and I think that you're going to see the dollar decline as a reserve currency around the world. It's a big deal and it's accelerated by the dysfunction in Washington since we can't get anybody to take, you know, budgeting and oversight seriously. As we discussed with Alex in that interview, we're paying for it because the dollar is falling. Remember, when it's not gold going up, it's a dollar going down. That's a good point. So, I take it you also do you believe that central banks should have gold as part of their portfolios then? They should. Oh, yeah. I I think in fact the Fed should have a little bit of gold in their portfolio and I think they should be aware of it and I think they should include it in their monetary policy um you know deliberations. Yeah, I thought that was an interesting point you made. It's not gold rising, it's the dollar falling. I imagine there are a lot of folks that they kind of just don't want to even recognize that. But if even if you just look at the the rise and fall of currencies going back to like even the Roman Empire, it's just it's kind of been a pattern throughout history. We've seen this movie before, Julia. Mhm. And do you think the Greeks, the Romans, you know, it's an age-old story. Yeah. And they dilute their currency. Money printing, I guess, would be our equivalent of uh diluting. Um there's no like kind of putting it back like the toothpaste back in the tube once you're kind of going down that path. Is there any reversal? Well, no. I think whenever any society becomes large enough and great enough in their own minds that they can um do whatever they want in terms of finance usually because of governmental control. then the um the um you know the tendency is for inflation to take effect because they can't keep up with the demands from society. This is why uh Hayek said that no democracy can ever have sound money and the US has proven that the amount of hubris that we acquired coming out of World War II. We figured we could just legislate economic outcomes and that's not true. So today what are the big problems facing America? inflation number one and and getting that back into the bottle if you will to use your metaphor right is almost impossible because the political backlash of doing that is severe. Look at Malay in Argentina. He's been trying very hard to get their inflation under control. He wanted to dollarize Argentina at one point, but the legislature wouldn't go along with that because of the deflation that that entails. Be very painful. So, you know, every society always has more demands than they have resources and income and the way they fudge the difference is inflation by debasing a currency. Yeah. Um, just kind of speaking of sound money, um, maybe more of the role of gold in monetary systems, do you think is there a path back to some sort of form of a gold standard? Um, or is the fiat currency kind of here to stay? I think with most nations the fiat uh currency is here to stay as a means of exchange but the question is are people going to use it as a store of value long term. If you think about ancient times, they would use silver coins as an exchange medium and then gold coins meant, you know, really a big store of value, much more value per weight, right? So today, I think you'll see the same thing. Gold and other physical commodities and real estate too are going to be your check if you will in terms of inflation. And then the fiat currency is always going to lose ground. It's just a function. You know, if you borrow as much money as we do here in the United States, you know that the value of the dollar is going to go down. And this is a very cruel reality. It means that the average person who doesn't have investments, they don't own real estate, they don't own other things that will rise in an inflationary environment, they're going to get screwed. And that's why the politics are getting to be so severe. You know, you have candidates in New York City talking about affordable housing. You can't make New York affordable. There's just no way. The cost of acquiring and building new housing in New York City is exorbitant. So, the idea that a, you know, a medium or lower income household could ever afford that without public subsidy is ridiculous. But we continue to have these political conversations that never quite get there. You know, they never actually say that. I've always said we should be, you know, evacuating lower income families from New York City and re resettle them in other parts of New York. They would live much better. When we moved out of New York, Julia, in 2021, we cut our expenses more than in half. I believe we live in Westchester County, which is one of the most affluent communities in the country. So, think about that. I mean, how can anybody below a certain income level even think about living in New York? And the answer is it's it's really difficult. Yep. Yep. I moved out of New York City five years ago and I remember even just moving like even getting your Starbucks is a lot cheaper outside of New York City. It's just it's true though. I'm like my my last my Starbucks in New York City is over $6 and down here it's like just under five bucks. But you know it's even going out to eat like it's hard. It's hard. You're dry clean dry cleaning is expensive. It's so much cheaper down here in North Carolina. Like there's a lot of savings outside of the city. You you live in the real America. I mean the big cities on the coasts have uh problems in terms of affordability that are really insoluble. The only way you could change that would be to have a period of severe deflation. But the politics of that are are quite horrific as well. Yeah. All right. You brought up a point that was interesting is you talked about like the average person, they don't own real estate. They're probably not benefiting from like the asset price increases we've seen. they're going to continue to get screwed. But like even if you look at the levels we're at today, it's it's almost getting even more and more unattainable for them. Is that where the the the direction is headed then? Oh yeah. You know, unless you had a willingness on the part of the government to severely constrain spending so you stop borrowing so much money. Uh that's the first thing because ultimately the Fed has to monetize that issuance. you know, they will eventually be forced, regardless of who's in the White House, to buy uh Treasury bonds and essentially give the Treasury back their money. Uh that's what we call financial repression. That means investors are going to be earning less than the actual rate of inflation in the US and that's why people are buying gold and silver. They're trying to escape that. So, you know, in a funny way, we can see what the problem is, but the politics are such that they're never going to talk about it. You know, Mr. Mundami, for example, here in New York wants to freeze rent, but is the cost of operating those buildings going to go down the next day? No. So, the only thing that'll happen is all of that physical infrastructure will eventually be abandoned and people are going to have to find somewhere else to live. But the politicians don't want to have that conversation. Uh it's a really dramatic difference between say Chicago, New York politics and what you see down in the Carolinas where you live. Yeah. Let me ask you about the Mum Donnie thing. Like I I'll open up like my Instagram and people I know from New York are like, "Oh man, they were cheerleading him and like the freezing of the rent and stuff and I'm like what are you guys doing?" Um what do you think happens? I seems like I mean I could check the betting markets. He's probably I'm definitely he's definitely pulling whatever probably going to win I imagine. Do you think he's Do you think he's going to win? Um I don't see any the likelihood that the other candidates are going to catch him. Uh Eric Adams dropped out although he will still be on the ballot. Uh he's not particularly That's right. So he will still get votes. Uh you have Curtis Leewa the Republican, you know, with his beret. Uh so it's a it's a surreal situation. We had a mess politically anyway with Adams and now coming into this uh election. You had this state legislator just kind of pop up out of nowhere and decide that we're going to freeze Rand. He's anti-Israel. He has a lot of other very left-wing uh perspectives. And I think in New York it's going to be a mess. Everybody on the other side of the equation politically is going to fight this guy every day. So that's what we'll see. Do you think we'll see people? The state may have to get involved. No, but I think Governor Hokll may end up having to take control of the city again. You know, remember going back to the 70s, the state of New York and the governor have enormous power over the city. And if they decide that things are uh going in a direction that they cannot uh actually accept, then they can exercise that power. Hm. I almost wonder if the pendulum has to swing so far that it'll go back the other way. I mean, yeah. Well, who knows? I mean, Kathy Hokll endorsing Mundami u really did not help her. She didn't have much of a base anyway politically. She was lieutenant governor to Cuomo. Yeah. Yeah. So, you know, we we could see a Republican governor in New York. Incredible as that may seem. Yeah. Stranger things. Um Yeah. I'm just wondering. I was thinking like, oh, people are going to move out of the city and they're going to make North Carolina housing prices go up. No, they're moving in. Listen, the developers have to develop, Julia. If they're not developing, then they have to restructure. And restructuring is not that much fun. Look, I was talking about this with Alex Pollock in our interview. The fact that you see developers piling into Chicago, which is one of the most inhospitable and unattractive markets in the country, but they're going to ignore the politics and build more apartment buildings. That's what they do. Uh, but I got to tell you, I I don't like the credit. I wouldn't want to see anybody I was involved with getting into that. Yeah. Um, okay. I want to explore another topic that I've heard often in our conversations around this idea of like Americans love inflation. It's America's favorite pastime. Can you explain that? And what do you mean by Americans love inflation? cuz I we we we whine about it a lot. But uh what do you mean by it that we love it? A little bit of inflation makes everybody's assets go up and and also to some degree they can increase their prices. When it gets too high though, it suddenly becomes a problem. So for example, when you sell your house, you want a higher price than what you paid for it, right? We haven't had a real correction in real estate, god, 20 years that that would result in people losing money on their homes when they sell it. You're starting to see some weakness around the country as we've discussed, right? Especially down south and in the southwest as well. But by and large, you know, both residential and commercial real estate benefited from the fact that prices would go up a couple of points every year. They could refinance every seven years to cash out, right? and it made the industry go forward. When you see the industry having to deal with falling prices though, that makes life much more difficult. So, do Americans like inflation? Yeah, they love to see the stocks go up, but that doesn't help everybody. That's a very, very, you know, exclusive club. So, own a home, get a higher price, own stocks, get a higher price. That's where the positive of inflation comes in. where it kills you is the cost of living. And I think that's the predominant problem now in the US. Your lower half of most households today are just losing ground to inflation. And it's because of the federal deficit. So if we can't have a political discussion about that, then you got to live with higher inflation. That's the bottom line. But then on the deficit side in our our debt situation, it seems like no one's really had that conversation or really made meaningful action. Nope. No, we're worried about the midterm election. That's what this government shutdown is about. They're all trying to posture and see if they can get traction in, you know, whatever streaming media uh that they focus on. But know the the conversation in the US is so fragmented now that it's really kind of hard to know what the net net is of a lot of this stuff. Most people in the country aren't paying attention to the shutdown because it hasn't impacted them yet, right? But if they don't get paid, you know, soldiers for example, that's going to start to have a very serious impact. If Trump lays off hundreds of thousands of federal workers and he's not going to rehire them, right? That's going to have an impact. So, you know, we'll see what the politics are. I'm not sure how this is going to fall out. To that point, though, like those it seems like we've had so many shutdowns over the years that I wonder if we're almost kind of just like h whatever, they'll figure it out. Is there is the risk at some point this one's different, you think, from all the other ones? Ideologically, you know, the Trump administration is much better prepared this time than they were in Trump one. And they have an agenda to roll back a lot of aspects of government and the shutdown is perfectly suited for that because they are going to just get rid of the employees. They want new people in government. They want to get rid of the old people because of their thinking. And you know, it's it's a cultural change that Trump is really trying to achieve here. So when you shut the government down, you give them the opportunity to lay people off, they're going to take it. You know, the OM head Russ Vod is a very conservative, almost radical uh player in all of this. And that agency controls the government. OM and office management and budget and treasury are the two most important parts of the US government. How do you think it how when you start to think about the scenarios like how do you think it plays out? Is it just too unclear at this point to speculate? But no, I think you give this another week and the pain point for the Democrats is going to get so intense that they're going to have to fold again. And this is particularly Chuck Schumer. But if Schumer does that, you know, his term goes through to 2029, then he's done politically. He's going to get challenged, isn't he? Oh, yeah. AOC is going to go after him in the in the Senate race. You don't think she would wait and try for president or No, she's not viable outside of New York City. She She has to do something that allows her to leverage the the left-wing population in New York City uh and overcome the rest of the state, which tends to be pretty Republican. Uh I think on a national basis, she would do worse than Camala Harris because she's no better able to communicate than Harris was. If you've ever actually listened to what AOC has to say, it's just a jumble of uh disorganized concepts one after another. Uh it's it's not impressive. You know, Donald Trump is a much better communicator than she is. And I think you're going to have some pretty strong Republican candidates coming out of this administration. JD Vance, I think a lot of people think he's going to be the next. Yeah. Yeah. I I mean, imagine him and the rest of the country versus AOC. AOC is a socialist from, you know, Queens, New York. She's not gonna I imagine the Republicans might they might like that as like bring it on. Yeah. Um Chris, I always have so much fun talking to you. I can't wait to do more in-person ones. Um before I let you go, and this will air as a Saturday special, which is so fun. Um let's leave this audience with some parting thoughts. Anything that you'd like to leave them to think about? Anything you want to plug? We can link to some books. Um, if you have any more Stan Middleman signed copies, some folks got some. I don't know if there any left, but the floor's all yours. We got rid of most of them. Thank you very much, Julia. Um, yeah, I you know, I am not in the doom and gloom camp. Everybody keeps waiting for this kind of cataclysmic uh uh selloff. I don't think that's what's going to happen. Uh we may see some credit stresses next year. uh and I anticipate that that you know the amount of activity in the markets uh with a lot of funds and everything else is certainly of concern but the rest of it is kind of a snoozer. So I think you know this economy is going to keep roaring along and it probably means Republicans are going to do reasonably well in the midterm elections. So, uh, the Democrats have to figure out a strategy and a set of real talking points that are going to get them in front of the average American, not Americans in New York City or Chicago because I think the Democrats keep looking at that lens and that's not going to take them to a winning position. It's it's way too far left. So, you know, I I don't anticipate a lot of changes next year to be honest with you, Julia. Yeah, Chris, I bet you gold will be higher. Still early innings then. Oh, please. I'm sorry. Where do you think? Okay, give me a price target. Where do you think gold's going? I think we could be over 5,000 by the end of next year. Wow. Cuz think about it. The allocation in the US right now is less than 1% of portfolios. Imagine it goes to 2%. You've got people in the business roaming around saying, "Oh, you know, you should have 10% of your portfolio in metals." That's a big change. There isn't a lot of supply out there when you talk about gold. So, that's that's kind of where I am. I I know that some of the bigger central banks are certainly pausing after several years of aggressive buying, but you know, if if we see a shift in American attitudes towards metal, I think it's going to have a big difference. I have a really dumb question, quote unquote. Is it taxed differently like when you go to sell it? I actually don't know. No, it's capital appreciation like everything else. Okay. Just like just like your stocks. Yep. Okay. All right. Cool. I just didn't know. Um interesting. Cool. Um well, I really appreciate you, Chris. Um you have been such an amazing friend of this show and I just love talking to you. Pleas truly. Chris Whan, chairman of Whan Global Advisors. Thank you so much and have a wonderful weekend and I look forward to seeing you soon.